EXHIBIT 10.14
POOLING AND SERVICING AGREEMENT
Dated as of May 31, 1998
Marine Midland Bank
(Trustee)
and
FIRST NATIONAL BANK OF NEW ENGLAND
(Seller and Servicer)
First National Bank of New England
SBA Loan-Backed Adjustable Rate
Certificates, Series 1998-1, Class A and Class B
TABLE OF CONTENTS
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Section Page
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ARTICLE I
DEFINITIONS
Definitions......................................................................................... I-1
ARTICLE II
SALE AND CONVEYANCE OF THE TRUST FUND
2.01 Sale and Conveyance of Trust Fund............................................................ II-1
2.02 Possession of SBA Files...................................................................... II-1
2.03 Books and Records............................................................................ II-1
2.04 Delivery of SBA Loan Documents............................................................... II-2
2.05 Acceptance by Trustee of the Trust Fund; Certain Substitutions; Certification by Trustee;.... II-5
2.06 [Intentionally Omitted]...................................................................... II-7
2.07 Authentication of Certificates............................................................... II-7
2.08 Fees and Expenses of the Trustee............................................................. II-7
2.09 Sale and Conveyance of the Subsequent SBA Loans.............................................. II-7
2.10 Optional Repurchase of Defaulted SBA Loans................................................... II-10
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.01 Representations of the Bank.................................................................. III-1
3.02 Individual SBA Loans......................................................................... III-4
3.03 Purchase and Substitution of Defective SBA Loans............................................. III-10
ARTICLE IV
THE CERTIFICATES
4.01 The Certificates............................................................................. IV-1
4.02 Registration of Transfer and Exchange of Certificates........................................ IV-1
4.03 Mutilated, Destroyed, Lost or Stolen Certificates............................................ IV-9
4.04 Persons Deemed Owners........................................................................ IV-9
(i)
ARTICLE V
ADMINISTRATION AND SERVICING OF SBA LOANS
5.01 Duties of the Servicer...................................................................... V-1
5.02 Liquidation of SBA Loans.................................................................... V-5
5.03 Establishment of Principal and Interest Accounts; Deposits in Principal and Interest
Accounts................................................................................ V-6
5.04 Permitted Withdrawals From the Principal and Interest Account............................... V-7
5.05 [Intentionally Omitted]..................................................................... V-9
5.06 Transfer of Accounts........................................................................ V-9
5.07 Maintenance of Hazard Insurance............................................................. V-9
5.08 [Intentionally Omitted]..................................................................... V-10
5.09 Fidelity Bond............................................................................... V-10
5.10 Title, Management and Disposition of Foreclosed Property.................................... V-11
5.11 [Omitted.].................................................................................. V-12
5.12 Collection of Certain SBA Loan Payments..................................................... V-12
5.13 Access to Certain Documentation and Information Regarding the SBA Loans..................... V-12
ARTICLE VI
PAYMENTS TO THE CERTIFICATEHOLDERS
6.01 Establishment of Certificate Account; Deposits in Certificate Account; Permitted
Withdrawals from Certificate Account.................................................... VI-1
6.02 Establishment of Spread Account; Deposits in Spread Account; Permitted Withdrawals from
Spread Account.......................................................................... VI-2
6.03 Establishment of Expense Account; Deposits in Expense Account; Permitted Withdrawals from
Expense Account......................................................................... VI-4
6.04 Pre-Funding Account and Capitalized Interest Account........................................ VI-5
6.05 [Intentionally Omitted]..................................................................... VI-7
6.06 Investment of Accounts...................................................................... VI-7
6.07 Distributions............................................................................... VI-8
6.08 [Omitted]................................................................................... VI-10
6.09 Statements.................................................................................. VI-10
6.10 Advances by the Servicer.................................................................... VI-13
6.11 Compensating Interest....................................................................... VI-14
6.12 Reports of Foreclosure and Abandonment of Mortgaged Property................................ VI-14
(ii)
ARTICLE VII
GENERAL SERVICING PROCEDURE
7.01 [Omitted]................................................................................... VII-1
7.02 Satisfaction of Mortgages and Collateral and Release of SBA Files........................... VII-1
7.03 Servicing Compensation...................................................................... VII-2
7.04 Annual Statement as to Compliance........................................................... VII-3
7.05 Annual Independent Public Accountants' Servicing Report..................................... VII-3
7.06 SBA's and Trustee's Right to Examine Servicer Records and Audit Operations.................. VII-3
7.07 Reports to the Trustee; Principal and Interest Account Statements........................... VII-4
7.08 Premium Protection Fee and Servicing Fee.................................................... VII-4
ARTICLE VIII
REPORTS TO BE PROVIDED BY SERVICER
8.01 Financial Statements........................................................................ VIII-1
ARTICLE IX
THE SERVICER
9.01 Indemnification; Third Party Claims......................................................... IX-1
9.02 Merger or Consolidation of the Servicer..................................................... IX-2
9.03 Limitation on Liability of the Servicer and Others.......................................... IX-3
9.04 Servicer Not to Resign...................................................................... IX-3
ARTICLE X
DEFAULT
10.01 Events of Default........................................................................... X-1
10.02 Trustee to Act; Appointment of Successor.................................................... X-3
10.03 Waiver of Defaults.......................................................................... X-5
10.04 Control by Majority Certificateholders and Others........................................... X-5
ARTICLE XI
TERMINATION
11.01 Termination................................................................................. XI-1
11.02 Accounting Upon Termination of Servicer..................................................... XI-2
(iii)
ARTICLE XII
THE TRUSTEE
12.01 Duties of Trustee........................................................................... XII-1
12.02 Certain Matters Affecting the Trustee....................................................... XII-2
12.03 Trustee Not Liable for Certificates or SBA Loans............................................ XII-4
12.04 Trustee May Own Certificates................................................................ XII-4
12.05 Servicer To Pay Trustee's Fees and Expenses................................................. XII-5
12.06 Eligibility Requirements for Trustee........................................................ XII-5
12.07 Resignation and Removal of the Trustee...................................................... XII-6
12.08 Successor Trustee........................................................................... XII-7
12.09 Merger or Consolidation of Trustee.......................................................... XII-8
12.10 Appointment of Co-Trustee or Separate Trustee............................................... XII-8
12.11 Authenticating Agent........................................................................ XII-10
12.12 Tax Returns and Reports..................................................................... XII-10
12.13 Protection of Trust Fund.................................................................... XII-11
12.14 Representations, Warranties and Covenants of Trustee........................................ XII-12
ARTICLE XIII
MISCELLANEOUS PROVISIONS
13.01 Acts of Certificateholders.................................................................. XIII-1
13.02 Amendment................................................................................... XIII-1
13.03 Recordation of Agreement.................................................................... XIII-2
13.04 Duration of Agreement....................................................................... XIII-2
13.05 Governing Law............................................................................... XIII-2
13.06 Notices..................................................................................... XIII-2
13.07 Severability of Provisions.................................................................. XIII-3
13.08 No Partnership.............................................................................. XIII-3
13.09 Counterparts................................................................................ XIII-3
13.10 Successors and Assigns...................................................................... XIII-3
13.11 Headings.................................................................................... XIII-3
13.12 Paying Agent................................................................................ XIII-4
13.13 Notification to Rating Agency............................................................... XIII-4
13.14 Third Party Rights.......................................................................... XIII-5
(iv)
EXHIBIT INDEX
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EXHIBIT A Contents of SBA File
EXHIBIT B-1 Form of Class A Certificate
EXHIBIT B-2 Form of Class B Certificate
EXHIBIT C Principal and Interest Account
Letter Agreement
EXHIBIT D [Omitted]
EXHIBIT E Wiring Instructions Form
EXHIBIT F-1 Initial Certification
EXHIBIT F-2 Final Certification
EXHIBIT G [Omitted]
EXHIBIT H SBA Loan Schedule
EXHIBIT I Request for Release of Documents
EXHIBIT J Form of Liquidation Report
EXHIBIT K Form of Delinquency Report
EXHIBIT L Servicer's Monthly Computer Diskette Format
EXHIBIT M Multi-Party Agreement
EXHIBIT N Spread Account Agreement
EXHIBIT O-1 Form of Transferee Letter
EXHIBIT O-2 Form of Rule 144A Certification
EXHIBIT P List of SBA Loans with lost SBA Notes
(v)
Agreement dated as of May 31, 1998, between Marine Midland Bank, as
trustee (the "Trustee"), First National Bank of New England, as Seller (in such
capacity, the "Seller") and as Servicer (in such capacity, the "Servicer", and
collectively or in another capacity, the "Bank"):
PRELIMINARY STATEMENT
The Seller, in the ordinary course of its business, originates and
acquires SBA (S) 7(a) Loans (the "SBA (S) 7(a) Loans") to small businesses in
compliance with the provisions of the Small Business Act and the rules and
regulations thereunder and certain loans originated in connection with such
loans, which SBA (S) 7(a) Loans are evidenced by the SBA Notes in favor of the
Seller.
Pursuant to and in accordance with the provisions of the Small
Business Act and the Loan Guaranty Agreement, a portion of each SBA (S) 7(a)
Loan has been guaranteed by the Small Business Administration (the "SBA").
The Seller has previously sold the Guaranteed Interest (as defined
herein) in the SBA (S) 7(a) Loans to certain Registered Holders pursuant to SBA
Form 1086 Agreements between such Registered Holders, the SBA and the Seller.
The parties hereto acknowledge that the SBA is the party in interest with
respect to the Guaranteed Interest.
Pursuant to and in accordance with policies of the SBA, the Servicer
is required to retain a portion of the interest received on the Guaranteed
Interest of each SBA (S) 7(a) Loan sold to the Trust Fund (such portion, the
"Premium Protection Fee").
To facilitate the sale of the Unguaranteed Interest (as defined
herein) in the SBA (S) 7(a) Loans, net of the Servicing Fee, and the servicing
of the SBA Loans by the Servicer, the Bank is entering into this Agreement with
the Trustee. The Seller is transferring the SBA Loans to the Trustee for the
benefit of the SBA and the Certificateholders under this Agreement, pursuant to
which Certificates are being issued, denominated on the face thereof as First
National Bank of New England SBA Loan-Backed Adjustable Rate Certificates,
Series 1998-1, Class A and Class B, representing in the aggregate a 100%
undivided beneficial ownership interest in the right to receive the principal
portion of the Unguaranteed Interests of the SBA Loans together with interest
thereon at the then applicable Class A or Class B Remittance Rate, as the case
may be. The Unguaranteed Interest of the Initial SBA Loans have an aggregate
outstanding principal balance of $19,901,728.97 as of May 31, 1998 (the "Cut-Off
Date"), after application of payments received by the Seller on or before such
date.
The parties hereto agree as follows:
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ARTICLE I
DEFINITIONS
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Whenever used herein, the following words and phrases, unless the
context otherwise requires, shall have the following meanings. This Agreement
relates to a Trust Fund evidenced by First National Bank of New England SBA
Loan-Backed Adjustable Rate Certificates, Series 1998-1, Class A and Class B.
Unless otherwise provided, all calculations of interest pursuant to this
Agreement including, but not limited to, the Class A and Class B Interest
Distribution Amounts, are based on a 360-day year and twelve 30-day months.
ACCOUNT: The Certificate Account, the Pre-Funding Account and the
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Capitalized Interest Account established by the Trustee for the benefit of the
Certificateholders; the Expense Account established by the Trustee for the
benefit of the Trustee; and the Spread Account held by the Spread Account
Custodian pursuant to the Spread Account Agreement. The Trustee's obligation to
establish and maintain the Certificate Account is not delegable.
ACCOUNT NUMBER: The number assigned to each SBA Loan by the Seller,
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as set forth in Exhibit H hereto.
ACCOUNT PROPERTY: has the meaning set forth in Section 3 of the Spread
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Account Agreement.
ADDITION NOTICE: With respect to the transfer of Subsequent SBA Loans
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to the Trust Fund pursuant to Section 2.09 herein, notice, which shall be given
not later than three Business Days prior to the related Subsequent Transfer
Date, of the Seller's designation of Subsequent SBA Loans to be sold to the
Trust Fund and the aggregate Principal Balance of such Subsequent SBA Loans.
ADDITIONAL FEE: With respect to each Additional Fee SBA Loan, the fee
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payable to the SBA by the Seller equal to 40 basis points or 50 basis points per
annum, as the case may be, on the outstanding balance of the Guaranteed Interest
of such Additional Fee SBA Loan.
ADDITIONAL FEE SBA LOAN: An SBA (S) 7(a) Loan sold in the secondary
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market on or after September 1, 1993 (unless the related SBA (S) 7(a) Loan was
approved by the SBA on or after October 12, 1995), for which the related
Additional Fee is 40 basis points per annum, or an SBA (S) 7(a) Loan approved by
the SBA on or after October 12, 1995 (regardless of whether it was sold
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in the secondary market), for which the related Additional Fee is 50 basis
points per annum.
ADJUSTED CLASS A INTEREST DISTRIBUTION AMOUNT: With respect to each
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Remittance Date, the product of (A) the aggregate amount of interest payable
with respect to the Unguaranteed Interest of each SBA Loan in accordance with
its terms, net of the Servicing Fee allocable to such SBA Loan, the Extra
Interest and the Annual Expense Escrow Amount allocable to such interest (plus,
for the Remittance Dates occurring in August and September 1998, any amounts
transferred from the Pre-Funding Account and the Capitalized Interest Account
for such Remittance Date to be applied as a payment of interest on the
Certificates) and (B) a fraction, the numerator of which is the amounts set
forth in clauses (i) and (ii) of the definition of Class A Interest Distribution
Amount with respect to such Remittance Date, and the denominator of which is the
sum of the amounts set forth in clauses (i) and (ii) of the definition of Class
A Interest Distribution Amount and the amounts set forth in clauses (i) and (ii)
of the definition of Class B Interest Distribution Amount, each with respect to
such Remittance Date.
ADJUSTED CLASS B INTEREST DISTRIBUTION AMOUNT: With respect to each
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Remittance Date, the product of (A) the aggregate amount of interest payable
with respect to the Unguaranteed Interest of each SBA Loan in accordance with
its terms, net of the Servicing Fee allocable to such SBA Loan, the Extra
Interest and the Annual Expense Escrow Amount allocable to such interest (plus,
for the Remittance Dates occurring in August and September 1998, any amounts
transferred from the Pre-Funding Account and the Capitalized Interest Account
for such Remittance Date to be applied as a payment of interest on the
Certificates) and (B) a fraction, the numerator of which is the amounts set
forth in clauses (i) and (ii) of the definition of Class B Interest Distribution
Amount with respect to such Remittance Date, and the denominator of which is the
sum of the amounts set forth in clauses (i) and (ii) of the definition of Class
A Interest Distribution Amount and the amounts set forth in clauses (i) and (ii)
of the definition of Class B Interest Distribution Amount, each with respect to
such Remittance Date.
ADJUSTED SBA LOAN REMITTANCE RATE: With respect to any SBA Loan, a
---------------------------------
percentage per annum equal to the sum of (i) the then applicable weighted
average Class A and Class B Remittance Rates and (ii) .06% per annum, relating
to the Annual Expense Escrow Amount.
ADJUSTMENT DATE: The first Business Day of each Interest Accrual
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Period, commencing August 15, 1998.
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AGGREGATE CLASS A CERTIFICATE PRINCIPAL BALANCE: As of any date of
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determination, the Original Class A Certificate Principal Balance less the sum
of all amounts previously distributed to the Class A Certificateholders in
respect of principal.
AGGREGATE CLASS B CERTIFICATE PRINCIPAL BALANCE: As of any date of
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determination, the Original Class B Certificate Principal Balance less the sum
of all amounts previously distributed to the Class B Certificateholders in
respect of principal.
AGREEMENT: This Pooling and Servicing Agreement and all amendments
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hereof and supplements hereto.
ANNUAL EXPENSE ESCROW AMOUNT: The product of .06% per annum and the
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Pool Principal Balance, which is computed and payable on a monthly basis and
represents the estimated annual Trustee's fees and Trust Fund expenses.
ASSIGNMENT OF MORTGAGE: With respect to those SBA Loans secured by a
----------------------
Mortgaged Property, an assignment of the Mortgage, notice of transfer or
equivalent instrument sufficient under the laws of the jurisdiction wherein the
related Mortgaged Property is located to reflect of record the transfer of the
related SBA Loan to the Trustee subject to the Multi-Party Agreement.
AUTHENTICATING AGENT: Initially, Marine Midland Bank and thereafter,
--------------------
any successor appointed pursuant to Section 12.11.
AVAILABLE FUNDS: With respect to each Remittance Date, the sum of (i)
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the Unguaranteed Percentage of all amounts received from any source by the
Servicer or any Subservicer during the preceding calendar month (or with respect
to the "Remittance Date" in August 1998, the two preceding calendar months) with
respect to principal and interest on the SBA Loans (net of the Servicing Fee
allocable to such SBA Loan), (ii) advances by the Servicer, (iii) amounts to be
transferred from the Pre-Funding Account and the Capitalized Interest Account
with respect to the Remittance Dates in August and September 1998, and (iv)
amounts in the Spread Account.
BANK: First National Bank of New England, in its individual capacity
----
or in its capacities as Seller and Servicer hereunder.
BIF: The Bank Insurance Fund, or any successor thereto.
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I-3
BUSINESS DAY: Any day other than (i) a Saturday or Sunday, or (ii) a
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day on which banking institutions in the States of New York or Connecticut are
authorized or obligated by law or executive order to be closed.
CAPITALIZED INTEREST ACCOUNT: As described in Section 6.04.
----------------------------
CAPITALIZED INTEREST REQUIREMENT: With respect to the Remittance
--------------------------------
Dates in August and September 1998, the excess, if any, of (i) 30 days' interest
(or, with respect to the Remittance Date in August 1998, the actual number of
days from the Closing Date to but not including such Remittance Date) calculated
at the weighted average Class A and Class B Remittance Rates on the excess of
(a) the Aggregate Class A and Class B Certificate Principal Balances for such
Remittance Date over (b) the aggregate Principal Balances of the SBA Loans for
such Remittance Date over (ii) any Pre-Funding Earnings to be transferred to the
Certificate Account on such Remittance Date pursuant to Section 6.04(d). With
respect to the Special Remittance Date, accrued interest calculated at the
weighted average Class A and Class B Remittance Rates on the amount to be
transferred on the Special Remittance Date from the Pre-Funding Account to the
Certificate Account pursuant to Section 6.04(c).
CERTIFICATE: Any Class A or Class B Certificate executed by the
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Servicer and authenticated by the Trustee or the Authenticating Agent
substantially in the form annexed hereto as Exhibits B-1 and B-2.
CERTIFICATE ACCOUNT: As described in Section 6.01.
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CERTIFICATEHOLDER or HOLDER: Each Person in whose name a Class A or
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Class B Certificate is registered in the Certificate Register, except that,
solely for the purposes of giving any consent, waiver, request or demand
pursuant to this Agreement, any Certificate registered in the name of the
Seller, the Servicer, any Subservicer or any affiliate of any of them, shall be
deemed not to be outstanding and the undivided Percentage Interest evidenced
thereby shall not be taken into account in determining whether the requisite
percentage of Certificates necessary to effect any such consent, waiver, request
or demand has been obtained.
CERTIFICATE REGISTER: As described in Section 4.02.
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CERTIFICATE REGISTRAR: Initially, Marine Midland Bank, and
---------------------
thereafter, any successor appointed pursuant to Section 4.02.
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CLASS A CARRY-FORWARD AMOUNT: The amount, if any, by which (i) the
----------------------------
Class A Principal Distribution Amount with respect to any preceding Remittance
Date exceeded (ii) the amount of the actual principal distribution to the Class
A Certificates on such Remittance Date.
CLASS A CERTIFICATE: A Certificate denominated as a Class A
-------------------
Certificate.
CLASS A CERTIFICATEHOLDER: A holder of a Class A Certificate.
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CLASS A INTEREST DISTRIBUTION AMOUNT: With respect to each Remittance
------------------------------------
Date, the sum of (i) the interest accrued for the related Interest Accrual
Period at the then applicable Class A Remittance Rate on the Aggregate Class A
Certificate Principal Balance outstanding immediately prior to such Remittance
Date and (ii) the amount of the shortfall, if any, of any interest that the
Class A Certificates were entitled to receive on a preceding Remittance Date but
did not receive plus interest thereon at the then applicable Class A Remittance
Rate compounded monthly; provided, however, that on each Remittance Date the
Class A Interest Distribution Amount will be increased or decreased, as the case
may be, to equal the Adjusted Class A Interest Distribution Amount for such
Remittance Date.
CLASS A PERCENTAGE: With respect to each Remittance Date, 89.9979%,
------------------
representing the beneficial ownership interest of the Class A Certificates in
the Trust Fund.
CLASS A PRINCIPAL DISTRIBUTION AMOUNT: With respect to each
-------------------------------------
Remittance Date, the Class A Percentage multiplied by the sum of, without
duplication, (i) the Unguaranteed Percentage of all payments and other
recoveries of principal of an SBA Loan (net of amounts reimbursable to the
Servicer pursuant to this Agreement) received by the Servicer or any Subservicer
in the related Due Period, excluding amounts received relating to SBA Loans
which have been delinquent 24 months or have been determined to be
uncollectible, in whole or in part, by the Servicer to the extent that the Class
A Certificateholders have previously received the Class A Percentage of the
Principal Balance of such SBA Loans; (ii) the principal portion of any
Unguaranteed Interest actually purchased by the Servicer or the Seller and
actually received by the Trustee as of the related Determination Date; (iii) any
Substitution Adjustments deposited in the Principal and Interest Account and
transferred to the Certificate Account as of the related Determination Date;
(iv) the Unguaranteed Percentage of all losses on SBA Loans which were finally
liquidated during the applicable Due Period; (v) the Unguaranteed Percentage of
the then outstanding principal balance
I-5
of any SBA Loan which, as of the first day of the related Due Period, has been
delinquent 24 months or has been determined to be uncollectible, in whole or in
part, by the Servicer; and (vi) the amount, if any, released from the Pre-
Funding Account on the August and September 1998 Remittance Dates.
CLASS A REMITTANCE RATE: During the initial Interest Accrual Period
-----------------------
6.50% per annum. During each subsequent Interest Accrual Period, the Prime Rate
in effect on the preceding Adjustment Date minus 2.00% per annum.
CLASS B CARRY-FORWARD AMOUNT: The amount, if any, by which (i) the
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Class B Principal Distribution Amount with respect to any preceding Remittance
Date exceeded (ii) the amount of the actual principal distribution to the Class
B Certificates on such Remittance Date.
CLASS B CERTIFICATE: A Certificate denominated as a Class B
-------------------
Certificate.
CLASS B CERTIFICATEHOLDER: A holder of a Class B Certificate.
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CLASS B INTEREST DISTRIBUTION AMOUNT: With respect to each Remittance
------------------------------------
Date, the sum of (i) the interest accrued for the related Interest Accrual
Period at the then applicable Class B Remittance Rate on the Aggregate Class B
Certificate Principal Balance outstanding immediately prior to such Remittance
Date and (ii) the amount of the shortfall, if any, of any interest that the
Class B Certificates were entitled to receive on a preceding Remittance Date but
did not receive plus interest thereon at the then applicable Class B Remittance
Rate compounded monthly; provided, however, that on each Remittance Date the
Class B Interest Distribution Amount will be increased or decreased, as the case
may be, to equal the Adjusted Class B Interest Distribution Amount for such
Remittance Date.
CLASS B PERCENTAGE: With respect to each Remittance Date, 10.0021%,
------------------
representing the beneficial ownership interest of the Class B Certificates in
the Trust Fund.
CLASS B PRINCIPAL DISTRIBUTION AMOUNT: With respect to each
-------------------------------------
Remittance Date, the Class B Percentage multiplied by the sum of, without
duplication, (i) the Unguaranteed Percentage of all payments and other
recoveries of principal of an SBA Loan (net of amounts reimbursable to the
Servicer pursuant to this Agreement) received by the Servicer or any Subservicer
in the related Due Period, excluding amounts received relating to SBA Loans
which have been delinquent 24 months or have been determined to be
uncollectible, in whole or in part, by the
I-6
Servicer to the extent that the Class B Certificateholders have previously
received the Class B Percentage of the Principal Balance of such SBA Loans; (ii)
the principal portion of any Unguaranteed Interest actually purchased by the
Seller for breach of a representation and warranty or other defect and actually
received by the Trustee as of the related Determination Date; (iii) any
Substitution Adjustments deposited in the Principal and Interest Account and
transferred to the Certificate Account as of the related Determination Date;
(iv) the Unguaranteed Percentage of all losses on SBA Loans which were finally
liquidated during the applicable Due Period; (v) the Unguaranteed Percentage of
the then outstanding principal balance of any SBA Loan which, as of the first
day of the related Due Period, has been delinquent 24 months or has been
determined to be uncollectible, in whole or in part, by the Servicer; and (vi)
the amount, if any, released from the Pre-Funding Account on the August and
September 1998 Remittance Dates.
CLASS B REMITTANCE RATE: During the initial Interest Accrual Period
-----------------------
7.50% per annum. During each subsequent Interest Accrual Period, the Prime Rate
in effect on the preceding Adjustment Date minus 1.00% per annum.
CLOSING DATE: June 30, 1998
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CODE: The Internal Revenue Code of 1986, as amended, or any successor
----
legislation thereto.
COLLATERAL: All items of property (including a Mortgaged Property),
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whether real or personal, tangible or intangible, or otherwise, pledged by an
Obligor or others to the Seller (including guarantees on behalf of the Obligor)
to secure payment under an SBA Loan.
COMMERCIAL PROPERTY: Real property (other than agricultural property
-------------------
or Residential Property) that generally is used by the Obligor in the conduct of
its business.
COMPENSATING INTEREST: As defined in Section 6.11.
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CONFIDENTIAL PLACEMENT MEMORANDUM: The Confidential Private Placement
---------------------------------
Memorandum dated June 29, 1998 prepared by the Seller in connection with the
offer and sale of the Class A Certificates.
CORPORATE TRUST OFFICE: The principal office of the Trustee at which
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at any particular time its corporate trust business shall be administered which
office at the date of the execution of this Agreement is located at Marine
Midland Bank, 000 Xxxxxxxx, Xxx Xxxx, Xxx Xxxx 00000, 12/th/ Floor, Attention
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Corporate Trust Department or at any other time at such other address as the
Trustee may designate from time to time by notice to the parties hereto.
CURTAILMENT: With respect to an SBA Loan, any payment of principal
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received during a Due Period as part of a payment that is in excess of five
times the amount of the Monthly Payment due for such Due Period and which is not
intended to satisfy the SBA Loan in full, nor is intended to cure a delinquency.
CUT-OFF DATE: May 31, 1998.
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DEFAULTED SBA LOAN: Any SBA Loan as to which the Obligor has failed
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to make payment in full of three or more consecutive Monthly Payments.
DELETED SBA LOAN: An SBA Loan replaced by a Qualified Substitute SBA
----------------
Loan.
DEPOSITORY: The Depository Trust Company and any successor Depository
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hereafter named.
DESIGNATED DEPOSITORY INSTITUTION: With respect to the Principal and
---------------------------------
Interest Account or items of Account Property held in deposit accounts, an
entity which is an institution whose deposits are insured by either the BIF or
SAIF administered by the FDIC, the unsecured and uncollateralized long-term debt
obligations of which shall be rated A2 or better by Moody's, and which is either
(i) a federal savings association duly organized, validly existing and in good
standing under the federal banking laws, (ii) an institution duly organized,
validly existing and in good standing under the applicable banking laws of any
state, (iii) a national banking association duly organized, validly existing and
in good standing under the federal banking laws, or (iv) a principal subsidiary
of a bank holding company, in each case acting or designated by the Servicer as
the depository institution for the Principal and Interest Account or the Spread
Account Depositor with respect to items of Account Property, as the case may be.
DETERMINATION DATE: That day of each month which is the third
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Business Day prior to the Remittance Date.
DIRECT PARTICIPANT: Any broker-dealer, bank or other financial
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institution for which the Depository holds Certificates from time to time as a
securities depository.
DUE DATE: The day of the month on which the Monthly Payment is due
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from the Obligor on an SBA Loan.
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DUE PERIOD: With respect to each Remittance Date, the calendar month
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preceding the month in which such Remittance Date occurs.
ERISA: The Employee Retirement Income Security Act of 1974, as
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amended, or any successor legislation thereto.
EVENT OF DEFAULT: As described in Section 10.01.
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EXCESS PAYMENTS: With respect to a Due Period, any amounts received
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on an SBA Loan in excess of the Monthly Payment due on the Due Date relating to
such Due Period which does not constitute either a Curtailment or a Principal
Prepayment or payment with respect to an overdue amount. Excess Payments are
payments of principal for purposes of this Agreement.
EXCESS PROCEEDS: As of any Remittance Date, with respect to any
---------------
Liquidated SBA Loan, the excess, if any, of (a) the Unguaranteed Percentage of
the total Net Liquidation Proceeds, over (b) the Principal Balance of such SBA
Loan as of the date such SBA Loan became a Liquidated SBA Loan plus 30 days
interest thereon at the then applicable Adjusted SBA Loan Remittance Rate;
provided, however, that such excess shall be reduced by the amount by which
interest accrued on the advance, if any, made by the Servicer at the related SBA
Loan Interest Rate(s) exceeds interest accrued on such advance at the then
applicable weighted average Class A and Class B Remittance Rates.
EXPENSE ACCOUNT: The expense account established and maintained by
---------------
the Trustee in accordance with Section 6.03 hereof.
EXTRA INTEREST: With respect to each SBA Loan, for each Remittance
--------------
Date the product of (i) the principal portion of the Unguaranteed Interest of
such SBA Loan for such Remittance Date and (ii) one-twelfth of the Extra
Interest Percentage.
EXTRA INTEREST PERCENTAGE: With respect to each SBA Loan, the excess
-------------------------
of (i) the SBA Loan Interest Rate that would be in effect for such SBA Loan as
of the Cut-Off Date without giving effect to any applicable lifetime floors or
caps over (ii) the sum of the rates used in determining the Servicing Fee and
the Annual Expense Escrow Amount and 6.6% per annum (i.e., the initial weighted
----
average Class A and Class B Remittance Rates without giving effect to any
applicable lifetime floors or caps on the SBA Loans).
FDIC: The Federal Deposit Insurance Corporation and any successor
----
thereto.
I-9
FHLMC: The Federal Home Loan Mortgage Corporation and any successor
-----
thereto.
FIDELITY BOND: As described in Section 5.09.
-------------
FNMA: The Federal National Mortgage Association and any successor
----
thereto.
FORECLOSED PROPERTY: As described in Section 5.10.
-------------------
FORECLOSED PROPERTY DISPOSITION: The final sale of a Foreclosed
-------------------------------
Property acquired in foreclosure or by deed in lieu of foreclosure or of
Repossessed Collateral acquired by legal process. The proceeds of any
Foreclosed Property Disposition constitute part of the definition of Liquidation
Proceeds.
FTA: Xxxxxx Services Corp., in its capacity as the Fiscal and
---
Transfer Agent of the SBA under the Multi-Party Agreement, or any successor
thereto appointed by the SBA.
FUNDING PERIOD: The period commencing on the Closing Date and ending
--------------
on the earliest to occur of (i) the date on which the amount on deposit in the
Pre-Funding Account is less than $100,000, (ii) the date on which an Event of
Default occurs or (iii) at the close of business on September 10, 1998.
GLOBAL CERTIFICATE: Any Certificate registered in the name of the
------------------
Depository or its nominee, beneficial interests of which are reflected on the
books of the Depository or on the books of a Person maintaining any account with
such Depository (directly or as an indirect participant in accordance with the
rules of such Depository).
GUARANTEED INTEREST: As to any SBA (S) 7(a) Loan, the right to
-------------------
receive the guaranteed portion of the principal balance thereof together with
interest thereon at the then applicable SBA Loan Interest Rate.
Certificateholders have no right or interest in the Guaranteed Interest.
INDIRECT PARTICIPANT: Any financial institution for whom any Direct
--------------------
Participant holds an interest in any Certificate.
INDIVIDUAL CERTIFICATE: Any Certificate registered in the name of a
----------------------
holder other than the Depository or its nominee.
INITIAL SPREAD ACCOUNT DEPOSIT: A deposit of $807,051.87 required to
------------------------------
be made by the Spread Account Depositor into the Spread Account on the Closing
Date, such deposit being equal to 3.0% of the sum of (i) the Original Pool
Principal Balance and (ii) the Original Pre-Funded Amount.
I-10
INITIAL SBA LOANS: THE SBA Loans listed on Exhibit H hereto and
-----------------
delivered to the Trustee on the Closing Date.
INSTITUTIONAL ACCREDITED INVESTOR: Any Person satisfying the
---------------------------------
definition of "Accredited Investor" within the meaning of Rule 501(a)(1), (2),
(3) or (7) of Regulation D under the Securities Act.
INSURANCE PROCEEDS: Proceeds paid by any insurer pursuant to any
------------------
insurance policy covering an SBA Loan, Collateral, Repossessed Collateral or
Foreclosed Property, including but not limited to title, hazard, life, health
and/or accident insurance policies.
INTEREST ACCRUAL PERIOD: With respect to each Remittance Date, the
-----------------------
period commencing on the 15th day of the month preceding such Remittance Date
and ending on the 14th day of the month of such Remittance Date. However, for
the Remittance Date occurring in August 1998, the period commencing on the
Closing Date and ending on August 14, 1998.
LIQUIDATED SBA LOAN: Any defaulted SBA Loan, Repossessed Collateral
-------------------
or Foreclosed Property as to which the Servicer has determined that all amounts
which it reasonably and in good faith expects to recover have been recovered
from or on account of such SBA Loan.
LIQUIDATION PROCEEDS: Cash, including Insurance Proceeds, proceeds of
--------------------
any Foreclosed Property Disposition, revenues received with respect to the
conservation and disposition of a Foreclosed Property or Repossessed Collateral,
and any other amounts received in connection with the liquidation of defaulted
SBA Loans, whether through trustee's sale, foreclosure sale or otherwise.
LOAN GUARANTY AGREEMENT: Collectively, one or more Loan Guaranty
-----------------------
Agreements (Deferred Participation) (SBA Form 750), between the SBA and the
Servicer, as such agreements may be amended from time to time, or such Loan
Guaranty Agreement as applicable to a successor to the Servicer, as the case may
be.
LOAN-TO-VALUE RATIO OR LTV: With respect to any SBA Loan, (a) the sum
--------------------------
of (i) the original principal amount of such SBA Loan as of origination and (ii)
the principal balance of any Prior Lien as of the date of origination of the
related SBA Loan, divided by (b) the total discounted net collateral value (as
determined by the Seller in accordance with its underwriting criteria) of the
primary and secondary Collateral securing such SBA Loan at the time of
origination.
I-11
MAJORITY CERTIFICATEHOLDERS: The Holder or Holders of Class A and
---------------------------
Class B Certificates evidencing an Aggregate Class A Certificate Principal
Balance and Aggregate Class B Certificate Principal Balance in excess of 50% of
the Aggregate Class A Certificate Principal Balance and Aggregate Class B
Certificate Principal Balance.
MONTHLY ADVANCE: An advance made by the Servicer pursuant to Section
---------------
6.10 hereof.
MONTHLY PAYMENT: The monthly payment of principal and/or interest
---------------
required to be made by an Obligor on the related SBA Loan, as adjusted pursuant
to the terms of the related SBA Note.
MOODY'S: Xxxxx'x Investors Service, Inc. or any successor thereto.
-------
MORTGAGE: The mortgage, deed of trust or other instrument creating a
--------
lien on a Mortgaged Property.
MORTGAGED PROPERTY: The underlying real property, if any, securing an
------------------
SBA Loan, consisting of a Commercial Property or Residential Property and any
improvements thereon.
MULTI-PARTY AGREEMENT: That certain Multi-Party Agreement dated as of
---------------------
May 31, 1998 among the Seller, the Trustee, the SBA and the FTA, substantially
in the form of Exhibit M hereto, as amended from time to time by the parties
thereto.
NET LIQUIDATION PROCEEDS: Liquidation Proceeds net of (i) any
------------------------
reimbursements to the Servicer made therefrom pursuant to Section 5.04(b) and
(ii) amounts required to be released to the related Obligor pursuant to
applicable law.
OBLIGOR: The obligor on an SBA Note.
-------
OCC: The Office of the Comptroller of the Currency.
---
OFFICER'S CERTIFICATE: A certificate delivered to the Trustee signed
---------------------
by the Chairman of the Board, the President, an Executive Vice President, a Vice
President, an Assistant Vice President, the Treasurer, the Secretary, or one of
the Assistant Secretaries of the Bank as required by this Agreement.
OPINION OF COUNSEL: A written opinion of counsel, who may, without
------------------
limitation, be counsel for the Bank, reasonably acceptable to the Trustee and
experienced in matters relating thereto.
I-12
ORIGINAL CLASS A CERTIFICATE PRINCIPAL BALANCE: $24,211,000.00.
----------------------------------------------
ORIGINAL CLASS B CERTIFICATE PRINCIPAL BALANCE:$2,690,728.97.
----------------------------------------------
ORIGINAL POOL PRINCIPAL BALANCE: $19,901,728.97.
-------------------------------
ORIGINAL PRE-FUNDED AMOUNT: $7,000,000.00, representing the amount
--------------------------
deposited in the Pre-Funding Account on the Closing Date.
OVERFUNDED INTEREST AMOUNT:
--------------------------
With respect to each Subsequent Transfer Date occurring in August
1998, the difference between (i) two-months' interest on the aggregate Principal
Balances of the Subsequent SBA Loans acquired by the Trust Fund on such
Subsequent Transfer Date, calculated at the weighted average Class A and Class B
Remittance Rates, and (ii) two-months' interest on the aggregate Principal
Balances of the Subsequent SBA Loans acquired by the Trust Fund on such
Subsequent Transfer Date, calculated at the rate at which Pre-Funding Account
moneys are invested as of such Subsequent Transfer Date.
With respect to each Subsequent Transfer Date occurring in September
1998, the difference between (i) one-month's interest on the aggregate Principal
Balances of the Subsequent SBA Loans acquired by the Trust Fund on such
Subsequent Transfer Date, calculated at the weighted average Class A and Class B
Remittance Rates, and (ii) one-month's interest on the aggregate Principal
Balances of the Subsequent SBA Loans acquired by the Trust Fund on such
Subsequent Transfer Date, calculated at the rate at which Pre-Funding Account
moneys are invested as of such Subsequent Transfer Date.
PAYING AGENT: Initially, Marine Midland Bank, and thereafter, any
------------
other Person that meets the eligibility standards for the Paying Agent specified
in Section 13.12 hereof and is authorized by the Trustee to make payments on the
Certificates on behalf of the Trustee.
PERCENTAGE INTEREST: With respect to a Class A or Class B
-------------------
Certificate, the portion of the Trust Fund evidenced by such Class A or Class B
Certificate, expressed as a percentage, the numerator of which is the
denomination represented by such Class A or Class B Certificate and the
denominator of which is the Original Class A Certificate Principal Balance or
Original Class B Certificate Principal Balance, as the case may be. The
I-13
Certificates are issuable only in the minimum Percentage Interest corresponding
to a minimum denomination of $100,000 and integral multiples of $1,000 in excess
thereof, except for one Certificate of each Class which may be issued in a
different denomination to equal the remainder of the Original Class A
Certificate Principal Balance or Original Class B Certificate Principal Balance,
as the case may be.
PERMITTED INSTRUMENTS: As used herein, Permitted Instruments shall
---------------------
include the following:
(i) direct general obligations of, or obligations fully and
unconditionally guaranteed as to the timely payment of principal and
interest by, the United States or any agency or instrumentality thereof,
provided such obligations are backed by the full faith and credit of the
United States, FHA debentures, Federal Home Loan Bank consolidated senior
debt obligations, and FNMA senior debt obligations, but excluding any of
such securities whose terms do not provide for payment of a fixed dollar
amount upon maturity or call for redemption;
(ii) federal funds, certificates of deposit, time deposits and
banker's acceptances (having original maturities of not more than 365 days)
of any bank or trust company incorporated under the laws of the United
States or any state thereof, provided that the short-term debt obligations
of such bank or trust company at the date of acquisition thereof have been
rated Prime-1 or better by Moody's;
(iii) deposits of any bank or savings and loan association which has
combined capital, surplus and undivided profits of at least $3,000,000
which deposits are held only up to the limits insured by the BIF or SAIF
administered by the FDIC, provided that the unsecured long-term debt
obligations of such bank or savings and loan association have been rated A3
or better by Moody's;
(iv) commercial paper (having original maturities of not more than
365 days) rated Prime-1 or better by Moody's;
(v) debt obligations rated Aaa by Moody's (other than any such
obligations that do not have a fixed par value and/or whose terms do not
promise a fixed dollar amount at maturity or call date);
(vi) investments in money market funds rated Aaa or better by
Moody's, the assets of which are invested solely in instruments described
in clauses (i)-(v) above
I-14
(including, without limitation, any fund which the Trustee or an affiliate
of the Trustee serves as an investment advisor, administrator, shareholder,
servicing agent and/or custodian or sub-custodian, notwithstanding that (a)
the Trustee or an affiliate of the Trustee charges and collects fees and
expenses from such funds for services rendered, (b) the Trustee charges and
collects fees and expenses for services rendered pursuant to this
Agreement, and (c) services performed for such funds and pursuant to this
Agreement may converge at any time (the parties hereto specifically
authorizes the Trustee or an affiliate of the Trustee to charge and collect
all fees and expenses from such funds for services rendered to such funds,
in addition to any fees and expenses the Trustee may charge and collect for
services rendered pursuant to this Agreement));
(vii) guaranteed investment contracts or surety bonds providing for
the investment of funds in an account or insuring a minimum rate of return
on investments of such funds, which contract or surety bond shall:
(a) be an obligation of an insurance company or other corporation
whose debt obligations or insurance financial strength or claims
paying ability are rated "Aaa" by Moody's; and
(b) provide that the Trustee may exercise all of the rights of
the Seller under such contract or surety bond without the necessity of
the taking of any action by the Seller;
(viii) A repurchase agreement that satisfies the following criteria:
(a) Must be between the Trustee and a dealer bank or securities
firm described in 1. or 2. below:
1. Primary dealers on the Federal Reserve reporting dealer
list which are rated "Aa" or better by Moody's, or
2. Banks rated "Aa" or better by Moody's.
(b) The written repurchase agreement must include the following:
1. Securities which are acceptable for the transfer are:
I-15
A. Direct U.S. government securities, or
B. Securities of Federal Agencies backed by the full
faith and credit of the U.S. government (and FNMA &
FHLMC),
2. the term of the repurchase agreement may be up to 60
days,
3. the collateral must be delivered to the Trustee or third
party custodian acting as agent for the Trustee by
appropriate book entries and confirmation statements
must have been delivered before or simultaneous with
payment (perfection by possession of certificated
securities),
4. Valuation of collateral:
The securities must be valued weekly, marked-to-
market at current market price plus accrued
interest. The value of the collateral must be equal
to at least 104% of the amount of cash transferred
by the Trustee or custodian for the Trustee to the
dealer bank or security firm under the repurchase
agreement plus accrued interest. If the value of
securities held as collateral slips below 104% of
the value of the cash transferred by the Trustee
plus accrued interest, then additional cash and/or
acceptable securities must be transferred. If,
however, the securities used as collateral are FNMA
or FHLMC, then the value of collateral must equal at
least 105%; and
(ix) any other investment acceptable to the Rating Agency, written
confirmation of which shall be furnished to the Trustee prior to any such
investment.
PERSON: Any individual, corporation, partnership, limited liability
------
company, joint venture, association, joint-stock company, trust, national
banking association, unincorporated organization or government or any agency or
political subdivision thereof.
I-16
POOL PRINCIPAL BALANCE: The aggregate Principal Balances as of any
----------------------
date of determination.
PRE-FUNDED AMOUNT: With respect to any date of determination, the
-----------------
amount on deposit in the Pre-Funding Account.
PRE-FUNDING ACCOUNT: The Pre-Funding Account established in accordance
-------------------
with Section 6.04 hereof and maintained by the Trustee.
PRE-FUNDING EARNINGS: With respect to the Remittance Date in August
--------------------
1998, the actual investment earnings earned during the period from the Closing
Date through the Business Day immediately preceding the Determination Date in
August 1998 (inclusive) on the Pre-Funded Amount. With respect to the
Remittance Date in September 1998, the actual investment earnings earned during
the period from the Determination Date in August 1998 through the Business Day
immediately preceding the Determination Date in September 1998 (inclusive), on
the Pre-Funded Amount.
PREMIUM PROTECTION FEE: As to any SBA Loan and any date of
----------------------
determination, an amount equal to 0.60% per annum of the then outstanding
principal balance of the related Guaranteed Interest.
PRIME RATE: With respect to any date of determination, the lowest
----------
prime lending rate published in the Money Rate Section of The Wall Street
---------------
Journal, on the next succeeding Business Day.
-------
PRINCIPAL AND INTEREST ACCOUNT: The principal and interest account
------------------------------
established by the Servicer pursuant to Section 5.03 hereof.
PRINCIPAL BALANCE: With respect to any SBA Loan or related Foreclosed
-----------------
Property or Repossessed Collateral, at any date of determination, (i) the
Unguaranteed Percentage of the principal balance of the SBA Loan outstanding as
of the Cut-Off Date (or applicable Subsequent Cut-Off Date with respect to
Subsequent SBA Loans), after application of principal payments received on or
before such date, minus (ii) the sum of (a) the Unguaranteed Percentage of the
principal portion of the Monthly Payments received during each Due Period ending
prior to the most recent Remittance Date, which were distributed pursuant to
Section 6.07 on any previous Remittance Date, and (b) the Unguaranteed
Percentage of all Principal Prepayments, Curtailments, Excess Payments,
Insurance Proceeds, Released Mortgaged Property Proceeds, Net Liquidation
Proceeds and net income from a Foreclosed Property or Repossessed Collateral to
the extent applied by the Servicer as recoveries of principal in
I-17
accordance with the provisions hereof, which were distributed pursuant to
Section 6.07 on any previous Remittance Date. The Principal Balance of any
Liquidated SBA Loan or any SBA Loan that has been paid off will equal $0.
PRINCIPAL PREPAYMENT: Any payment or other recovery of principal on
--------------------
an SBA Loan equal to the outstanding principal balance thereof, received in
advance of the final scheduled Due Date which is intended to satisfy an SBA Loan
in full.
PRIOR LIEN: With respect to any SBA Loan secured by a lien on a
----------
Mortgaged Property or on other Collateral which is not a first priority lien,
each lien relating to the corresponding Mortgaged Property or other Collateral
having a prior priority lien.
QUALIFIED INSTITUTIONAL BUYER: As used herein, has the meaning
-----------------------------
ascribed to such term in Rule 144A under the Securities Act.
QUALIFIED SUBSTITUTE SBA LOAN: An SBA loan or SBA loans substituted
-----------------------------
for a Deleted SBA Loan pursuant to Section 2.05 or 3.03 hereof, which (i) has or
have an SBA Loan interest rate or rates of not less than (and not more than two
percentage points more than) the SBA Loan Interest Rate for the Deleted SBA
Loan, (ii) substantially relates or relate to the same type of Collateral as the
Deleted SBA Loan, (iii) matures or mature no later than (and not more than one
year earlier than) the Deleted SBA Loan, (iv) has or have a Loan-to-Value Ratio
or Loan-to-Value Ratios at the time of such substitution no higher than the
Loan-to Value Ratio of the Deleted SBA Loan at such time, (v) has or have a
principal balance or principal balances relating to an unguaranteed interest or
unguaranteed interests (after application of all payments received on or prior
to the date of substitution) equal to or less than the Principal Balance of the
Unguaranteed Interest or Unguaranteed Interests as of such date of the Deleted
SBA Loan, (vi) has or have the same Unguaranteed Percentage at the time of
substitution as the Deleted SBA Loan; (vii) was or were originated under the
same program type as the Deleted SBA Loan; and (viii) complies or comply as the
date of substitution with each representation and warranty set forth in Section
3.02.
RATING AGENCY: Xxxxx'x.
-------------
RATING AGENCY CONDITION: With respect to any specified action, that
-----------------------
the Rating Agency shall have notified the Servicer and the Trustee, orally or in
writing, that such action will not result in a reduction or withdrawal of the
rating assigned by the respective Rating Agency to either Class of Certificates.
I-18
RECORD DATE: With respect to any Remittance Date, the close of
-----------
business on the last day of the month immediately preceding the month of the
related Remittance Date. With respect to the Special Remittance Date, August
31, 1998.
REGISTERED HOLDER: With respect to any SBA (S) 7(a) Loan, the Person
-----------------
identified as such in the applicable SBA Form 1086, and any permitted assignees
thereof.
REIMBURSABLE AMOUNTS: As of any date of determination, an amount
--------------------
payable to the Bank, in its capacity as either Seller or Servicer, with respect
to (i) the Monthly Advances and Servicing Advances reimbursable pursuant to
Section 5.04(b), (ii) any advances reimbursable pursuant to Section 9.01 and not
previously reimbursed pursuant to Section 6.03(c)(i), and (iii) any other
amounts reimbursable to the Seller or Servicer pursuant to this Agreement.
RELEASED MORTGAGED PROPERTY PROCEEDS: As to any SBA Loan secured by a
------------------------------------
Mortgaged Property, proceeds received by the Servicer in connection with (a) a
taking of an entire Mortgaged Property by exercise of the power of eminent
domain or condemnation or (b) any release of part of the Mortgaged Property from
the lien of the related Mortgage, whether by partial condemnation, sale or
otherwise, which are not released to the Obligor in accordance with applicable
law, the SBA or the Registered Holder in accordance with the SBA Rules and
Regulations, the Servicer's customary SBA loan servicing procedures and this
Agreement.
REMITTANCE DATE: The 15th day of any month or if such 15th day is not
---------------
a Business Day, the first Business Day immediately following, commencing in
August 1998.
REO PROPERTY: Real Estate property owned by the Trust Fund as a
------------
result of foreclosure on an Obligor's SBA Loan.
REPOSSESSED COLLATERAL: Items of Collateral owned by the Trust as a
----------------------
result of legal action enforcing the lien on the Collateral resulting from a
default on the related Obligor's SBA Loan.
RESIDENTIAL PROPERTY: Any one or more of the following, (i) single
--------------------
family dwelling unit not attached in any way to another unit, (ii) row house,
(iii) two-family house, (iv) low-rise condominium, (v) planned unit development,
(vi) three- or four-family house, (vii) high-rise condominium, (viii) mixed use
building or (ix) manufactured home (as defined in the
I-19
FNMA/FHLMC Seller-Servicers' Guide) to the extent that it constitutes real
property in the state in which it is located.
RESPONSIBLE OFFICER: When used with respect to the Trustee, any
-------------------
officer assigned to the Corporate Trust Office, including any Vice President,
Assistant Vice President, any Assistant Secretary, any trust officer or any
other officer of the Trustee customarily performing functions similar to those
performed by any of the above designated officers and also, with respect to a
particular matter, any other officer to whom such matter is referred because of
such officer's knowledge of and familiarity with the particular subject. When
used with respect to the Bank, the President, any Vice President, Assistant Vice
President, or any Secretary or Assistant Secretary.
RULE 144A CERTIFICATION: A letter substantially in the form attached
-----------------------
hereto as Exhibit O-2.
SAIF: The Savings Association Insurance Fund, or any successor
----
thereto.
SBA: The United States Small Business Administration, an agency of
---
the United States Government.
SBA FILE: As described in Exhibit A.
--------
SBA Form 1086: The Secondary Participation Guaranty and Certification
-------------
Agreement on SBA Form 1086, pursuant to which investors purchase the Guaranteed
Interest.
SBA LOAN: An individual loan, the Unguaranteed Interest of which is
--------
transferred to the Trust Fund pursuant to this Agreement, together with the
rights and obligations of a holder thereof and payments thereon and proceeds
therefrom, the SBA Loans originally subject to this Agreement being identified
on the SBA Loan Schedule as set forth on Exhibit H. Any loan which, although
intended by the parties hereto to have been, and which purportedly was,
transferred and assigned to the Trust Fund by the Seller (as indicated by the
SBA Loan Schedule), in fact was not transferred and assigned to the Trust Fund
for any reason whatsoever, including, without limitation, the incorrectness of
the statement set forth in Section 3.02(h) hereof with respect to the loan,
shall nevertheless be considered an "SBA Loan" for all purposes of this
Agreement. For the purposes of this Agreement, references to SBA Loans are
equivalent to references to SBA (S) 7(a) Loans.
SBA LOAN INTEREST RATE: With respect to any date of determination,
----------------------
the then applicable annual rate of interest borne
I-20
by an SBA Loan, pursuant to its terms, which, as of the Cut-Off Date, is shown
on the SBA Loan Schedule.
SBA LOAN SCHEDULE: The schedule of SBA Loans listed on Exhibit H
-----------------
attached hereto and delivered to the Trustee on the Closing Date or Subsequent
Transfer Date, as the case may be, such schedule identifying each SBA Loan by
address of the related premises, and the name of the Obligor and setting forth
as to each SBA Loan the following information: (i) the Principal Balance as of
the close of business on the Cut-Off Date, (ii) the Account Number, (iii) the
original principal amount of the SBA Loan, (iv) the SBA Loan date and original
number of months to maturity, in months, (v) the SBA Loan Interest Rate as of
the Cut-Off Date or Subsequent Cut-Off Date, as the case may be, and guaranteed
rate payable to the Registered Holder and the FTA, (vi) when the first Monthly
Payment was due, (vii) the Monthly Payment as of the Cut-Off Date or Subsequent
Cut-Off Date, as the case may be, (viii) the remaining number of months to
maturity as of the Cut-Off Date or Subsequent Cut-Off Date, as the case may be,
(ix) the Unguaranteed Percentage, (x) the SBA loan number, (xi) the margin which
is added to the Prime Rate to determine the SBA Loan Interest Rate or, in the
case of fixed rate SBA Loans, the rate of interest specified in the related SBA
Note, and (xii) the lifetime minimum and maximum SBA Loan Interest Rates, if
applicable.
SBA NOTE: The note or other evidence of indebtedness evidencing the
--------
indebtedness of an Obligor under an SBA Loan.
SBA RULES AND REGULATIONS: The Small Business Act, as amended,
-------------------------
codified at 15 U.S.C. 631 et. seq., all rules and regulations promulgated from
--------
time to time thereunder, the Loan Guaranty Agreement and SBA Standard Operating
Procedures and official notices as from time to time are in effect.
SBA (S) 7(a) LOAN: An SBA Loan originated pursuant to Section 7(a) of
-----------------
the SBA Rules and Regulations. For purposes of this Agreement, references to
SBA (S) 7(a) Loans are equivalent to references to SBA Loans.
SECURITIES ACT: The Securities Act of 1933, as amended.
--------------
SECURITIES LEGEND: "THIS CERTIFICATE HAS NOT BEEN AND WILL NOT BE
-----------------
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"),
OR UNDER ANY STATE SECURITIES OR BLUE SKY LAW OF ANY STATE. THE HOLDER HEREOF,
BY PURCHASING THIS CERTIFICATE, AGREES THAT THIS CERTIFICATE MAY BE REOFFERED,
RESOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY IN COMPLIANCE WITH THE SECURITIES
ACT AND OTHER APPLICABLE LAWS AND ONLY (1) (A)
I-21
PURSUANT TO RULE 144A UNDER THE SECURITIES ACT ("RULE 144A") TO A PERSON THAT
THE HOLDER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE
MEANING OF RULE 144A (A "QIB"), PURCHASING FOR ITS OWN ACCOUNT OR A QIB
PURCHASING FOR THE ACCOUNT OF A QIB, WHOM THE HOLDER HAS INFORMED THAT THE
REOFFER, RESALE, PLEDGE OR OTHER TRANSFER IS BEING MADE IN RELIANCE ON RULE
144A, OR (B) IN CERTIFICATED FORM TO AN INSTITUTIONAL "ACCREDITED INVESTOR"
(WITHIN THE MEANING OF RULE 501(a)(1)-(3) OR (7) UNDER THE SECURITIES ACT)
PURCHASING FOR INVESTMENT AND NOT FOR DISTRIBUTION IN VIOLATION OF THE
SECURITIES ACT, IN EACH CASE, SUBJECT TO (X) THE RECEIPT BY THE TRUSTEE OF A
LETTER SUBSTANTIALLY IN THE FORM PROVIDED IN THE AGREEMENT AND (Y) THE RECEIPT
BY THE TRUSTEE OF SUCH OTHER EVIDENCE ACCEPTABLE TO THE TRUSTEE THAT SUCH
REOFFER, RESALE, PLEDGE OR TRANSFER IS IN COMPLIANCE WITH THE SECURITIES ACT AND
OTHER APPLICABLE LAWS OR IN EACH CASE IN ACCORDANCE WITH ALL APPLICABLE
SECURITIES LAWS OF THE UNITED STATES AND SECURITIES AND BLUE SKY LAWS OF ANY
STATE OF THE UNITED STATES AND ANY OTHER APPLICABLE JURISDICTION, (2) PURSUANT
TO ANOTHER EXEMPTION AVAILABLE UNDER THE SECURITIES ACT AND IN ACCORDANCE WITH
ANY APPLICABLE STATE SECURITIES LAWS, OR (3) PURSUANT TO A VALID REGISTRATION
STATEMENT. "
SELLER: First National Bank of New England, and its successors and
------
assigns as Seller hereunder.
SERIES: 1998-1.
------
SERVICER: First National Bank of New England, and its successors and
--------
assigns as Servicer hereunder.
SERVICER'S CERTIFICATE: The certificate as defined in Section 6.09.
----------------------
SERVICING ADVANCES: All reasonable and customary "out-of-pocket"
------------------
costs and expenses incurred in the performance by the Servicer of its servicing
obligations, including, but not limited to, the cost of (i) the preservation,
restoration and protection of the Mortgaged Property or other Collateral, (ii)
any enforcement or judicial proceedings, including foreclosures, (iii) the
management and liquidation of the Foreclosed Property or Repossessed Collateral,
(iv) compliance with the obligations under clause (iv) of Section 5.01(a) and
Sections 5.02 and 5.07, which Servicing Advances are reimbursable to the
Servicer to the extent provided in Section 5.04(b) and (v) in connection with
the liquidation of an SBA Loan, expenditures relating to the purchase or
maintenance of any Prior Lien, for all of which costs and expenses the Servicer
is entitled to reimbursement thereon up to a maximum rate per annum equal to the
related SBA Loan Interest Rate, except that any amount of such interest accrued
at a rate in excess of the weighted average Class A and Class B Remittance
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Rates with respect to the Remittance Date on or prior to which the Unguaranteed
Percentage of the Net Liquidation Proceeds will be distributed shall be
reimbursable only from Excess Proceeds.
SERVICING FEE: As to each SBA Loan, the annual fee payable to the
-------------
Servicer. Such fee shall be calculated and payable monthly from the amounts
received in respect of interest on the Guaranteed Interest and the Unguaranteed
Interest of such SBA Loan, shall accrue at the rate of 0.40% per annum of the
entire principal balance of such SBA Loan and shall be computed on the basis of
the same principal amount and for the period respecting which any related
interest payment on an SBA Loan is computed. The Servicing Fee is payable
solely from the interest portion of related (i) Monthly Payments, (ii)
Liquidation Proceeds or (iii) Released Mortgaged Property Proceeds collected by
the Servicer, or as otherwise provided in Section 5.04. The Servicing Fee
includes any servicing fees owed or payable to any Subservicer.
SERVICING OFFICER: Any officer of the Servicer involved in, or
-----------------
responsible for, the administration and servicing of the SBA Loans whose name
appears on a list of servicing officers furnished to the Trustee by the Servicer
on the Closing Date hereof and as such list may from time to time be amended.
SPECIAL REMITTANCE DATE: September 15, 1998.
-----------------------
SPECIFIED SPREAD ACCOUNT REQUIREMENT: The maximum amount of Spread
------------------------------------
Account Balance required to be on deposit at any time in the Spread Account
which, with respect to any Remittance Date, shall be equal to the sum of (i) the
then outstanding Principal Balance with respect to all SBA Loans 180 days or
more delinquent and (ii) the greater of (a) 7.0% of the then outstanding Pool
Principal Balance or (b) 2.0% of the Original Pool Principal Balance; provided,
however, that for purposes of clauses (i) and (ii)(a), there shall be excluded
the Principal Balance of SBA Loans which have been delinquent 24 months or have
been determined to be uncollectible, in whole or in part, by the Servicer, to
the extent that the Certificateholders have previously received the Principal
Balance of such SBA Loans; provided, however, that in no event shall the Spread
Account Balance exceed the then outstanding Pool Principal Balance.
SPREAD ACCOUNT: The Spread Account established in accordance with the
--------------
terms of the Spread Account Agreement and maintained by the Spread Account
Custodian for distribution in accordance with the provisions of Section 6.02
hereof.
SPREAD ACCOUNT AGREEMENT: The Agreement dated as of June 30, 1998 by
------------------------
and among the Spread Account Depositor and the
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Spread Account Custodian, substantially in the form attached hereto as Exhibit
N, as amended from time to time by the parties thereto.
SPREAD ACCOUNT CUSTODIAN: Marine Midland Bank, in its capacity as
------------------------
Spread Account Custodian under the Spread Account Agreement, or any successor
thereto.
SPREAD ACCOUNT DEPOSITOR: FNBNE SBA Holdings, Inc., a wholly-owned
------------------------
subsidiary of the Bank.
SPREAD ACCOUNT BALANCE: As of any date of determination, the sum of
----------------------
the aggregate amount then on deposit in the Spread Account.
SPREAD ACCOUNT EXCESS: As defined in Section 6.02(b)(iii).
---------------------
SUBSEQUENT CUT-OFF DATE: The beginning of business on each date
-----------------------
specified in a Subsequent Transfer Agreement with respect to those Subsequent
SBA Loans which are transferred and assigned to the Trust Fund pursuant to the
related Subsequent Transfer Agreement.
SUBSEQUENT SBA LOANS: The SBA Loans sold to the Trust Fund pursuant
--------------------
to Section 2.09, which shall be listed on the Schedule of SBA Loans attached to
the related Subsequent Transfer Agreement.
SUBSEQUENT TRANSFER AGREEMENT: Each Subsequent Transfer Agreement
-----------------------------
dated as of a Subsequent Transfer Date executed by the Trustee and the Seller,
by which Subsequent SBA Loans are sold and assigned to the Trust Fund.
SUBSEQUENT TRANSFER DATE: The date specified as such in each
------------------------
Subsequent Transfer Agreement.
SUBSERVICER: Any person with whom the Servicer has entered into a
-----------
Subservicing Agreement and who satisfies any requirements set forth in Section
5.01(b) hereof in respect of the qualification of a Subservicer.
SUBSERVICING AGREEMENT: Any agreement between the Servicer and any
----------------------
Subservicer relating to subservicing and/or administration of certain SBA Loans
as provided in Section 5.01(b), a copy of which shall be delivered, along with
any modifications thereto, to the Trustee and the SBA.
SUBSTITUTION ADJUSTMENT: As to any date on which a substitution
-----------------------
occurs pursuant to Sections 2.05 or 3.03, the amount
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(if any) by which the aggregate unguaranteed portions of the principal balances
(after application of principal payments received on or before the date of
substitution) of any Qualified Substitute SBA Loans as of the date of
substitution are less than the aggregate of the Principal Balance of the related
Deleted SBA Loans.
TAX RETURN: The federal income tax return to be filed on behalf of
----------
the Trust Fund together with any and all other information reports or returns
that may be required to be furnished to the Certificateholders or filed with the
Internal Revenue Service or any other governmental taxing authority under any
applicable provision of federal, state or local tax laws.
TERMINATION PRICE: The price defined in Section 11.01
-----------------
hereof.
TRANSFEREE LETTER: A letter substantially in the form attached hereto
-----------------
as Exhibit O-1.
TRUST FUND: The segregated pool of assets subject hereto,
----------
constituting the trust created hereby and to be administered hereunder,
consisting of: (i) the Unguaranteed Interest of such SBA Loans as from time to
time are subject to this Agreement, together with, subject to the Multi-Party
Agreement, the SBA Files relating thereto and all proceeds thereof, (ii) the
Unguaranteed Interest of such assets (including any Permitted Instruments) as
from time to time are identified as Foreclosed Property, Repossessed Collateral
or are deposited in or constitute the Certificate Account, (iii) the
Unguaranteed Interests of any Insurance Proceeds under all insurance policies
with respect to the SBA Loans required to be maintained pursuant to this
Agreement, (iv) the Unguaranteed Interest of any Liquidation Proceeds and (v)
the Unguaranteed Interest of any Released Mortgaged Property Proceeds, including
all earnings thereon and proceeds thereof. Amounts deposited in the Principal
and Interest Account, Spread Account, Pre-Funding Account and Capitalized
Interest Account shall be held by the Trustee or the Spread Account Custodian,
as the case may be, but shall not constitute part of the Trust Fund. Also,
neither the Servicing Fee nor the Premium Protection Fee shall constitute part
of the Trust Fund.
TRUSTEE: Marine Midland Bank, or its successor in interest, or any
-------
successor trustee appointed as herein provided.
TRUSTEE'S DOCUMENT FILE: The documents delivered pursuant to Section
-----------------------
2.04.
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UNGUARANTEED INTEREST: That portion of an SBA Loan not guaranteed by
---------------------
the SBA pursuant to the SBA Rules and Regulations.
UNGUARANTEED PERCENTAGE: With respect to any SBA (S) 7(a) Loan, the
-----------------------
quotient, expressed as a percentage, the numerator of which shall be the
principal portion of the Unguaranteed Interest of such SBA (S) 7(a) Loan as of
the Cut-Off Date (or, in the case of a Subsequent SBA Loan, as of the Subsequent
Cut-Off Date) and the denominator of which shall be the sum of the principal
portion of the Unguaranteed Interest and the principal portion of the Guaranteed
Interest of such SBA (S) 7(a) Loan as of the Cut-Off Date (or, in the case of a
Subsequent SBA Loan, as of the Subsequent Cut-Off Date).
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ARTICLE II
SALE AND CONVEYANCE OF THE TRUST FUND
-------------------------------------
Section 2.01 Sale and Conveyance of Trust Fund.
---------------------------------
(a) The Seller hereby sells, transfers, assigns, sets over and
conveys to the Trustee without recourse and for the benefit of the SBA and the
Certificateholders, as their interests may appear, subject to the terms of this
Agreement and the Multi-Party Agreement, all of the right, title and interest of
the Seller in and to the Unguaranteed Interests of the Initial SBA Loans and the
Subsequent SBA Loans and all other assets included or to be included in the
Trust Fund.
(b) The rights of the Certificateholders to receive payments with
respect to the SBA Loans in respect of the Certificates, and all ownership
interests of the Certificateholders in such payments, shall be as set forth in
this Agreement. The Servicing Fee shall not constitute part of the Trust Fund
and Certificateholders shall have no interest in, and are not entitled to
receive any portion of, the Servicing Fee.
Section 2.02 Possession of SBA Files.
-----------------------
(a) Upon the issuance of the Certificates, the ownership of each SBA
Note, the Mortgage and the contents of the related SBA File relating to the
Initial SBA Loans is, and upon each Subsequent Transfer Date the ownership of
each Mortgage Note, the Mortgage and the contents of the related Mortgage File
relating to the applicable Subsequent SBA Loans will be, vested in the Trustee
for the benefit of the SBA and the Certificateholders, as their interests may
appear.
(b) Pursuant to Section 2.04, with respect to the Initial SBA Loans,
the Seller has delivered or caused to be delivered, and, on each Subsequent
Transfer Date, the Seller will deliver or cause to be delivered, each SBA Note
relating to an SBA (S) 7(a) Loan to the FTA.
Section 2.03 Books and Records.
-----------------
The sale of the Unguaranteed Interest of each SBA Loan shall be
reflected on the Seller's balance sheets and other financial statements as a
sale of assets by the Seller and Seller shall respond to any third-party inquiry
that such transfer is so reflected as a sale. The Seller shall be responsible
for maintaining, and shall maintain, a complete set of books and records for
each SBA Loan which shall be clearly marked to
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reflect the ownership of the Unguaranteed Interest in each SBA Loan by the
Trustee for the benefit of the Certificateholders.
Section 2.04 Delivery of SBA Loan Documents.
------------------------------
The Seller, (i) contemporaneously with the delivery of this Agreement,
has delivered or caused to be delivered to the Trustee or, with respect to the
SBA Notes relating to the SBA (S) 7(a) Loans being delivered pursuant to (a)
below, to the FTA, each of the following documents for each Initial SBA Loan and
(ii) on each Subsequent Transfer Date, will deliver or cause to be delivered to
the Trustee, or with respect to the SBA Notes relating to the SBA (S) 7(a) Loans
being delivered pursuant to paragraph (a) below, to the FTA, each of the
following documents for each Subsequent SBA Loan:
(a) The original SBA Note, endorsed by means of an allonge as
follows: "Pay to the order of Marine Midland Bank, and its successors and
assigns, as trustee under that certain Pooling and Servicing Agreement dated as
of May 31, 1998, for the benefit of the United States Small Business
Administration and holders of First National Bank of New England SBA Loan-Backed
Certificates, Series 1998-1, Class A and Class B, as their respective interests
may appear, without recourse" and signed, by facsimile or manual signature, in
the name of the Seller by a Responsible Officer, with all prior and intervening
endorsements showing a complete chain of endorsement from the originator to the
Seller, if the Seller was not the originator; provided, however, that in lieu of
-------- -------
the original SBA Note relating to one SBA Loan, with an aggregate Principal
Balance as of the Cut-Off Date of approximately $136,997.25, as identified in
the list delivered to the Trustee by the Seller on the Closing Date and set
forth on Exhibit P hereto, the Seller may deliver a lost note affidavit and, if
a copy exists, a copy of the original SBA Note.
(b) With respect to those SBA Loans secured by Mortgaged Properties,
either: (i) the original Mortgage, with evidence of recording thereon, (ii) a
copy of the Mortgage certified as a true copy by a Responsible Officer of the
Seller where the original has been transmitted for recording until such time as
the original is returned by the public recording office or duly licensed title
or escrow officer or (iii) a copy of the Mortgage certified by the public
recording office in those instances where the original recorded Mortgage has
been lost.
(c) With respect to those SBA Loans secured by Mortgaged Properties,
either: (i) the original Assignment of Mortgage from the Seller endorsed as
follows: "Marine Midland Bank, ("Assignee") its successors and assigns, as
trustee under the Pooling and Servicing Agreement dated as of May 31, 1998
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subject to the Multi-Party Agreement dated as of May 31, 1998" with evidence of
recording thereon (provided, however, that where permitted under the laws of the
jurisdiction wherein the Mortgaged Property is located, the Assignment of
Mortgage may be effected by one or more blanket assignments for SBA Loans
secured by Mortgaged Properties located in the same county), or (ii) a copy of
such Assignment of Mortgage certified as a true copy by a Responsible Officer of
the Seller where the original has been transmitted for recording (provided,
--------
however, that where the original Assignment of Mortgage is not being delivered
-------
to the Trustee, such Responsible Officer may complete one or more blanket
certificates attaching copies of one or more Assignments of Mortgage relating to
the Mortgages originated by the Seller);
(d) With respect to those SBA Loans secured by Mortgaged Properties,
either: (i) originals of all intervening assignments, if any, showing a
complete chain of title from the originator to the Seller, including warehousing
assignments, with evidence of recording thereon if such assignments were
recorded, (ii) copies of any assignments certified as true copies by a
Responsible Officer of the Seller where the originals have been submitted for
recording until such time as the originals are returned by the public recording
officer, or (iii) copies of any assignments certified by the public recording
office in any instances where the original recorded assignments have been lost;
(e) With respect to those SBA Loans secured by Mortgaged Properties,
either: (i) originals of all title insurance policies relating to the Mortgaged
Properties to the extent the Seller obtained such policies or (ii) copies of any
title insurance policies or other evidence of lien position, including but not
limited to Policy Insurance Record of Title ("PIRT") policies, limited liability
reports and lot book reports, to the extent the Seller obtains such policies or
other evidence of lien position, certified as true by the Seller;
(f) With respect to those SBA Loans secured by other items of
Collateral, the original or a certified copy of all filed UCC financing
statements securing such Collateral naming the Seller as "Secured Party;"
(g) For all SBA Loans, blanket assignment of all Collateral securing
the SBA Loan, including without limitation, all rights under applicable
guarantees and insurance policies;
(h) For all SBA Loans, irrevocable power of attorney of the Seller to
the Trustee to execute, deliver, file or record and otherwise deal with the
Collateral for the SBA Loans in accordance with the Agreement. The power of
attorney will be delegable by the Trustee to the Servicer and any successor
II-3
Servicer and will permit the Trustee or its delegate to prepare, execute and
file or record UCC financing statements and notices to insurers; and
(i) For all SBA Loans, blanket UCC-1 financing statements identifying
by type all Collateral for the SBA Loans in the SBA Loan Pool and naming the
Trustee as "Secured Party" and the Seller as the "Debtor". The UCC-1 financing
statements will be filed promptly following the Closing Date in Connecticut and
will be in the nature of protective notice filings rather than true financing
statements.
The Seller shall, within ten Business Days after the receipt thereof,
and in any event, within one year of the Closing Date (or with respect to the
Subsequent SBA Loans, within one year of the related Subsequent Transfer Date),
unless such documents have been lost, deliver or cause to be delivered to the
Trustee: (i) the original recorded Mortgage in those instances where a copy
thereof certified by the Seller was delivered to the Trustee; (ii) the original
recorded Assignment of Mortgage from the Seller to the Trustee, which, together
with any intervening assignments of Mortgage, evidences a complete chain of
title from the originator to the Trustee in those instances where copies thereof
certified by the Seller were delivered to the Trustee; and (iii) any intervening
assignments of Mortgage in those instances where copies thereof certified by the
Seller were delivered to the Trustee. Notwithstanding anything to the contrary
contained in this Section 2.04, in those instances where the public recording
office retains the original Mortgage, Assignment of Mortgage or the intervening
assignments of the Mortgage after it has been recorded, or if such document has
been lost, the Seller shall be deemed to have satisfied its obligations
hereunder upon delivery to the Trustee of a copy of such Mortgage, Assignment of
Mortgage or assignments of Mortgage certified by the public recording office to
be a true copy of the recorded original thereof. All SBA Loan documents held by
the Trustee or the FTA, as the case may be, as to each SBA Loan are referred to
herein as the "Trustee's Document File."
Although it is the intent of the parties to this Agreement that the
conveyance of the Seller's right, title and interest in and to the Unguaranteed
Interests of the SBA Loans and other assets in the Trust Fund pursuant to this
Agreement shall constitute a purchase and sale and not a loan, in the event that
such conveyance is deemed to be a loan, it is the intent of the parties to this
Agreement that the Seller shall be deemed to have granted, and hereby does
grant, to the Trustee a first priority perfected security interest in all of the
Seller's right, title and interest in, to and under the Unguaranteed Interests
of the SBA Loans and other assets in the Trust Fund,
II-4
and that this Agreement shall constitute a security agreement under applicable
law.
All recording required pursuant to this Section 2.04 shall be
accomplished by and at the expense of the Servicer.
Section 2.05 Acceptance by Trustee of the Trust Fund; Certain
------------------------------------------------
Substitutions; Certification by Trustee.
---------------------------------------
(a) The SBA shall cause the FTA to execute and deliver on the Closing
Date (or, with respect to the Subsequent SBA Loans, on the related Subsequent
Closing Date), for each SBA (S) 7(a) Loan, an acknowledgment of receipt of the
SBA Note by the FTA in the form attached as Exhibit 1 to the Multi-Party
Agreement, and declares that the FTA will hold such documents and any
amendments, replacements or supplements thereto, as agent for the benefit of the
SBA and the Certificateholders. The Trustee agrees, for the benefit of the SBA
and the Certificateholders, to review each Trustee's Document File within 90
days after the Closing Date or Subsequent Closing Date, as the case may be (or,
with respect to any Qualified Substitute SBA Loan, within 45 days after the
assignment thereof), and to deliver to the Certificateholders, the Seller, the
Servicer and the SBA a certification in the form attached hereto as Exhibit F-1.
Within 360 days after the Closing Date (or, with respect to any Qualified
Substitute SBA Loan, within 360 days after the assignment thereof), the Trustee
shall deliver to the Seller, the Servicer, the SBA, the Rating Agency and any
Certificateholder who requests a copy from the Trustee a final certification in
the form attached hereto as Exhibit F-2 evidencing the completeness of the
Trustee's Document Files.
(b) If the Trustee or the SBA, as the case may be, during the process
of reviewing the Trustee's Document Files finds any document constituting a part
of a Trustee's Document File which is not properly executed, has not been
received, is unrelated to an SBA Loan identified in the SBA Loan Schedule, or
does not conform in a material respect to the requirements of Section 2.04 or
the description thereof as set forth in the SBA Loan Schedule, the Trustee or
the SBA, as the case may be, shall promptly so notify the Seller and the
Servicer. In performing any such review, the Trustee or the SBA, as the case
may be, may conclusively rely on the Seller as to the purported genuineness of
any such document and any signature thereon. It is understood that the scope of
the Trustee's and the SBA's review of the SBA Files is limited solely to
confirming that the documents listed in Section 2.04 have been executed and
received and relate to the SBA Loans identified in the SBA Loan Schedule. The
Seller agrees to use reasonable efforts to remedy a material defect in a
II-5
document constituting part of an SBA File of which it is so notified by the
Trustee or the SBA, as the case may be. If, however, within 60 days after the
Trustee's or the SBA's notice to it respecting such material defect the Seller
has not remedied the defect and such defect materially and adversely affects the
value of the related SBA Loan, the Seller will (i) substitute in lieu of such
SBA Loan a Qualified Substitute SBA Loan in the manner and subject to the
conditions set forth in Section 3.03 or (ii) purchase the Unguaranteed Interest
of such SBA Loan at a purchase price equal to the Principal Balance of such
Unguaranteed Interest as of the date of purchase, plus 30 days' interest on such
Principal Balance, computed at the Adjusted SBA Loan Remittance Rate as of the
next succeeding Determination Date, plus any accrued unpaid Servicing Fees,
Monthly Advances and Servicing Advances reimbursable to the Servicer, which
purchase price shall be deposited in the Principal and Interest Account on the
next succeeding Determination Date.
(c) Upon receipt by the Trustee and the SBA of a certification of a
Servicing Officer of the Servicer of such purchase and the deposit of the
amounts described above in the Principal and Interest Account (which
certification shall be in the form of Exhibit I hereto), the Trustee and the SBA
shall release to the Servicer for release to the Seller the related Trustee's
Document File and the Trustee and the SBA shall execute, without recourse, and
deliver such instruments of transfer necessary to transfer such SBA Loan to the
Seller. All costs of any such transfer shall be borne by the Servicer.
(d) If in connection with taking any action the Servicer requires any
item constituting part of the Trustee's Document File, or the release from the
lien of the related SBA Loan of all or part of any Mortgaged Property or other
Collateral, the Servicer shall deliver to the Trustee and the SBA a certificate
to such effect in the form attached as Exhibit I hereto. Upon receipt of such
certification, the Trustee or the SBA, as the case may be, shall deliver to the
Servicer the requested documentation and the Trustee shall execute, without
recourse, and deliver such instruments of transfer necessary to release all or
the requested part of the Mortgaged Property or other Collateral from the lien
of the related SBA Loan.
On the Remittance Date in March of each year, the Trustee shall
deliver to the Seller, the SBA and the Servicer a certification detailing all
transactions with respect to the SBA Loans for which the Trustee holds a
Trustee's Document File pursuant to this Agreement during the prior calendar
year. Such certification shall list all Trustee's Document Files which were
released by or returned to the Trustee or the FTA during the
II-6
prior calendar year, the date of such release or return and the reason for such
release or return.
Section 2.06 [Intentionally Omitted]
Section 2.07 Authentication of Certificates.
------------------------------
The Trustee acknowledges the assignment to it on behalf of the Trust
Fund of the Unguaranteed Interests in the SBA Loans and the delivery to the
Trustee and the FTA of the Trustee's Document Files and, concurrently with such
delivery, has authenticated or caused to be authenticated and delivered to or
upon the order of the Seller, in exchange for the Unguaranteed Interests in the
SBA Loans, the Trustee's Document Files and the other assets included in the
definition of Trust Fund, Certificates duly authenticated by the Trustee in
authorized denominations.
Section 2.08 Fees and Expenses of the Trustee.
--------------------------------
The fees and expenses of the Trustee including (i) the annual fees of
the Trustee, payable quarterly in advance, and subject to rebate to the Servicer
as additional servicing compensation hereunder for any fraction of a calendar
quarter in which this Agreement terminates, (ii) any other fees and expenses to
which the Trustee is entitled pursuant to this Agreement or its written
agreement with the Seller, and (iii) reimbursements to the Servicer for any
advances made by the Servicer to the Expense Account pursuant to Section 6.03
hereof, shall be paid from the Expense Account in the manner set forth in
Section 6.03 hereof; provided, however, that the Seller shall be liable for any
-------- -------
expenses of the Trust Fund incurred prior to the Closing Date. The Servicer and
the Trustee hereby covenant with the Certificateholders that every material
contract or other material agreement entered into by the Trustee, or the
Servicer, acting as attorney-in-fact for the Trustee, on behalf of the Trust
Fund shall expressly state therein that no Certificateholder shall be personally
liable in connection with such contract or agreement.
Section 2.09 Sale and Conveyance of the Subsequent SBA Loans.
-----------------------------------------------
(a) Subject to the conditions set forth in paragraph (b) below, in
consideration of the Trustee's delivery on the related Subsequent Transfer Dates
to or upon the order of the Seller of all or a portion of the balance of funds
in the Pre-Funding Account, the Seller shall on any Subsequent Transfer Date
sell, transfer, assign, set over and otherwise convey without recourse, to the
Trustee all right, title and interest of the Seller in and to the Unguaranteed
Interest of each Subsequent SBA
II-7
Loan listed on the SBA Loan Schedule delivered by the Seller on such Subsequent
Transfer Date, all their right, title and interest in and to principal collected
and interest accruing on the Unguaranteed Interest of each such Subsequent SBA
Loan on and after the related Subsequent Cut-Off Date and all their right, title
and interest in the Unguaranteed Interest in all insurance policies; provided,
--------
however, that the Seller reserve and retain all their right, title and interest
-------
in and to principal (including Principal Prepayments) collected and interest
accruing on each such Subsequent SBA Loan prior to the related Subsequent Cut-
Off Date. The transfer by the Seller of the Unguaranteed Interest of the
Subsequent SBA Loans set forth on the SBA Loan Schedule to the Trustee shall be
absolute and shall be intended by all parties hereto to be treated as a sale by
the Seller.
Although it is the intent of the parties to this Agreement that the
conveyance of the Seller's right, title and interest in and to the Unguaranteed
Interests of the SBA Loans and other assets in the Trust Fund pursuant to this
Agreement shall constitute a purchase and sale and not a loan, in the event that
such conveyance is deemed to be a loan, it is the intent of the parties to this
Agreement that the Seller shall be deemed to have granted, and hereby does
grant, to the Trustee a first priority perfected security interest in all of the
Seller's right, title and interest in, to and under the Unguaranteed Interests
of the SBA Loans and other assets in the Trust Fund, and that this Agreement
shall constitute a security agreement under applicable law.
The amount released from the Pre-Funding Account shall be one-hundred
percent (100%) of the aggregate Principal Balances as of the related Subsequent
Transfer Date of the Subsequent SBA Loans so transferred.
(b) The Seller shall transfer to the Trustee the Unguaranteed
Interest of the Subsequent SBA Loans and the other property and rights related
thereto described in paragraph (a) above only upon the satisfaction of each of
the following conditions on or prior to the related Subsequent Transfer Date:
(i) the Seller shall have provided the Trustee with a
timely Addition Notice and shall have provided any information
reasonably requested by it with respect to the Subsequent SBA Loans;
(ii) the Seller shall have delivered to the Trustee a duly
executed written assignment (including an acceptance by the Trustee)
that shall include SBA Loan Schedules, listing the Subsequent SBA
Loans and any other exhibits listed thereon;
II-8
(iii) the Seller shall have deposited in the Principal and
Interest Account all collections in respect of the Subsequent SBA
Loans received on or after the related Subsequent Cut-Off Date;
(iv) as of each Subsequent Transfer Date, the Bank was not
insolvent nor will it have been made insolvent by such transfer nor is
it aware of any pending insolvency;
(v) such addition will not result in a material adverse
tax consequence to the Trust Fund or the Holders of the Certificates;
(vi) the Pre-Funding Period shall not have terminated;
(vii) the Seller shall have delivered to the Trustee an
Officer's Certificate confirming the satisfaction of each condition
precedent specified in this paragraph (b) and in the related
Subsequent Transfer Agreement;
(viii) the Seller shall have delivered to the Rating Agency
and the Trustee, Opinions of Counsel with respect to the transfer of
the Subsequent SBA Loans substantially in the form of the Opinions of
Counsel delivered to the Trustee on the Closing Date (bankruptcy,
corporate and tax opinions); and
(ix) the FTA shall have delivered, pursuant to Section
2.05(a) hereof, an acknowledgment of receipt of the SBA Note relating
to such SBA (S) 7(a) Loan in the form attached as Exhibit 1 to the
Multi-Party Agreement.
(c) The obligation of the Trust Fund to purchase the Unguaranteed
Interest of a Subsequent SBA Loan on any Subsequent Transfer Date is subject to
the requirement, as evidenced by a certificate from a Responsible Officer of the
Seller, that such Subsequent SBA Loan conforms in all material respects to the
representations and warranties concerning the individual Initial SBA Loans set
forth in Sections 3.01 and 3.02 (except that any reference therein to the Cut-
Off Date shall be deemed a reference to the applicable Subsequent Cut-Off Date)
and that the inclusion of all Subsequent SBA Loans being transferred to the
Trust Fund on such Subsequent Transfer Date will not change, in any material
respect, the characteristics of the Initial SBA Loans, in the aggregate, set
forth in Sections 3.01 and 3.02 or in the
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Confidential Placement Memorandum under the headings "Summary of Terms -- The
SBA Loan Pool" and "The SBA Loan Pool." Further, each Subsequent SBA Loan must
be an SBA (S) 7(a) Loan.
(d) In connection with the transfer and assignment of the Subsequent
SBA Loans, the Seller agrees to satisfy the conditions set forth in Sections
2.01, 2.02, 2.03, 2.04 and 2.05.
(e) In connection with each Subsequent Transfer Date, on the
Remittance Dates in August and September 1998 and the Special Remittance Date,
the Seller shall determine, and the Trustee shall cooperate with the Seller in
determining (i) the amount and correct dispositions of the Capitalized Interest
Requirements, Overfunded Interest Amounts, and Pre-Funding Earnings and (ii) any
other necessary matters in connection with the administration of the Pre-Funding
Account and of the Capitalized Interest Account. If any amounts are incorrectly
released to the Seller from the Capitalized Interest Account, the Seller shall
immediately repay such amounts to the Trustee.
Section 2.10 Optional Repurchase of Defaulted SBA Loans.
------------------------------------------
The Servicer shall have the right, but not the obligation, to
repurchase the Unguaranteed Interest of any Defaulted SBA Loan for a purchase
price equal to the Principal Balance of such Unguaranteed Interest as of the
date of repurchase, plus 30 days' interest on such Principal Balance, computed
at the Adjusted SBA Loan Remittance Rate as of the next succeeding Determination
Date, plus any accrued unpaid Servicing Fees, Monthly Advances and Servicing
Advances reimbursable to the Servicer, which purchase price shall be deposited
in the Principal and Interest Account on the next succeeding Determination Date.
Any such repurchase shall be accomplished in the manner specified in Section
2.05(b). In no event shall the aggregate Principal Balance of the Unguaranteed
Interests of all Defaulted SBA Loans purchased pursuant to this Section 2.10
exceed 5% of the sum of (i) the Original Pool Principal Balance and (ii) the
Original Pre-Funded Amount.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES
------------------------------
Section 3.01 Representations of the Bank.
----------------------------
The Bank hereby represents and warrants to the Trustee and the
Certificateholders as of the Closing Date:
(a) The Bank is a nationally chartered bank duly organized and
validly existing under the laws of the United States and has all licenses
necessary to carry on its business as now being conducted and is licensed and
qualified in each state where the laws of such state require licensing or
qualification in order to conduct business of the type conducted by the Bank and
perform its obligations hereunder; the Bank has all requisite power and
authority to execute and deliver this Agreement and to perform in accordance
herewith and therewith; the execution, delivery and performance of this
Agreement (including all instruments of transfer to be delivered pursuant to
this Agreement) by the Bank and the consummation of the transactions
contemplated hereby and thereby have been duly and validly authorized by all
necessary corporate action; this Agreement evidences the valid, binding and
enforceable obligation of the Bank; and all requisite corporate action has been
taken by the Bank to make this Agreement valid, binding and enforceable upon the
Bank in accordance with its terms, subject to the effect of bankruptcy,
insolvency, reorganization, moratorium and other similar laws relating to or
affecting creditors' rights generally or the application of equitable principles
in any proceeding, whether at law or in equity, none of which will affect the
ownership of the SBA Loans by the Trustee, as trustee.
(b) All actions, approvals, consents, waivers, exemptions, variances,
franchises, orders, permits, authorizations, rights and licenses required to be
taken, given or obtained, as the case may be, by or from any federal, state or
other governmental authority or agency (other than any such actions, approvals,
etc., under any state securities laws, real estate syndication or "Blue Sky"
statutes, as to which the Bank makes no such representation or warranty), that
are necessary or advisable in connection with the purchase and sale of the
Certificates and the execution and delivery by the Bank of the documents to
which it is a party, have been duly taken, given or obtained, as the case may
be, are in full force and effect on the date hereof, are not subject to any
pending proceedings or appeals (administrative, judicial or otherwise) and
either the time within which any appeal therefrom may be taken or review thereof
may be obtained has expired or no review thereof may be obtained or appeal
therefrom taken, and are adequate to authorize
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the consummation of the transactions contemplated by this Agreement and the
other documents on the part of the Bank and the performance by the Bank of its
obligations under this Agreement and such of the other documents to which it is
a party;
(c) The consummation of the transactions contemplated by this
Agreement will not result in the breach of any terms or provisions of the
articles of association or by-laws of the Bank or result in the breach of any
term or provision of, or conflict with or constitute a default under or result
in the acceleration of any obligation under, any material agreement, indenture
or loan or credit agreement or other material instrument to which the Bank or
its property is subject, or result in the violation of any law, rule,
regulation, order, judgment or decree to which the Bank or its property is
subject;
(d) Neither this Agreement nor any statement, report or other
document furnished or to be furnished pursuant to this Agreement or in
connection with the transactions contemplated hereby and thereby contains any
untrue statement of material fact or omits to state a material fact necessary to
make the statements contained herein or therein not misleading in light of the
circumstances under which they were made;
(e) The Bank does not believe, nor does it have any reason or cause
to believe, that it cannot perform each and every covenant contained in this
Agreement;
(f) There is no action, suit, proceeding or investigation pending or,
to the best of the Bank's knowledge, threatened against the Bank which, either
in any one instance or in the aggregate, may (i) result in any material adverse
change in the business, operations, financial condition, properties or assets of
the Bank or in any material impairment of the right or ability of the Bank to
carry on its business substantially as now conducted, or in any material
liability on the part of the Bank or of any action taken or to be taken in
connection with the obligations of the Bank contemplated herein, or which would
be likely to impair materially the ability of the Bank to perform under the
terms of this Agreement or (ii) which would draw into question the validity of
this Agreement or the SBA Loans;
(g) The Trust Fund will not constitute an "investment company" within
the meaning of the Investment Company Act of 1940, as amended;
(h) The Bank is not in default with respect to any order or decree of
any court or any order, regulation or demand of any federal, state, municipal or
governmental agency, which default might have consequences that would materially
and
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adversely affect the condition (financial or other) or operations of the
Bank or its properties or might have consequences that would materially and
adversely affect its performance hereunder;
(i) The statements contained in the Confidential Placement Memorandum
which describe the Bank or the SBA Loans or matters or activities for which the
Bank is responsible in accordance with the Confidential Placement Memorandum,
this Agreement and all documents referred to therein or herein or delivered in
connection therewith or herewith, or which are attributable to the Bank therein
or herein are true and correct in all material respects, and the Confidential
Placement Memorandum does not contain any untrue statement of a material fact
with respect to the Bank or the SBA Loans and does not omit to state a material
fact necessary to make the statements contained therein with respect to the Bank
or the SBA Loans not misleading in light of the circumstances under which they
were made. The Bank is not aware that the Confidential Placement Memorandum
contains any untrue statement of a material fact or omits to state any material
fact necessary to make the statements contained therein not misleading in light
of the circumstances under which they were made. There is no fact peculiar to
the Bank or the SBA Loans and known to the Bank that materially adversely
affects or in the future may (so far as the Bank can now reasonably foresee)
materially adversely affect the Bank or the SBA Loans or the ownership interests
therein represented by the Certificates that has not been set forth in the
Confidential Placement Memorandum;
(j) No Certificateholder is subject to Connecticut state licensing
requirements solely by virtue of holding the Certificates;
(k) The transfer, assignment and conveyance of the SBA Notes and the
Mortgages by the Bank pursuant to this Agreement are not or, with respect to the
Subsequent SBA Loans, will not be, subject to the bulk transfer laws or any
similar statutory provisions in effect in any applicable jurisdiction and do not
violate the SBA Rules and Regulations;
(l) The origination and collection practices used by the Bank with
respect to each SBA Note and Mortgage relating to the Initial SBA Loans have
been, and the origination and collection practices to be used by the Bank with
respect to each SBA Note and Mortgage relating to the Subsequent SBA Loans will
have been, in all material respects legal, proper, prudent and customary in the
SBA loan origination and servicing business;
(m) Each Initial SBA Loan was, and each Subsequent SBA Loan will be,
selected from among the existing SBA loans in the
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Bank's portfolio at the date hereof or, in the case of the Subsequent SBA Loans,
at the related Subsequent Cut-Off Date, in a manner not designed to adversely
affect the Certificateholders;
(n) The Bank received fair consideration and reasonably equivalent
value or, in the case of the Subsequent SBA Loans, will have received fair
consideration and reasonably equivalent value, in exchange for the sale of the
Unguaranteed Interest of the SBA Loans evidenced by the Certificates;
(o) Neither the Bank nor any of its affiliates sold or, in the case
of the Subsequent SBA Loans, will have sold any interest in any SBA Loan
evidenced by the Certificates with any intent to hinder, delay or defraud any of
their respective creditors;
(p) The Bank is solvent, and the Bank will not be rendered insolvent
as a result of the transfer of the SBA Loans to the Trust Fund or the sale of
the Certificates; and
(q) The chief executive office and legal name of the Bank is as set
forth on the respective UCC-1 financing statement filed on behalf of the Bank
pursuant to Section 2.04(h), such office is the place where the Bank is
"located" for the purposes of Section 9-103(3)(d) of the Uniform Commercial Code
as in effect in the State of New York, and neither the location of such office
nor the legal name of the Bank has changed in the past four months.
Section 3.02 Individual SBA Loans .
--------------------
The Bank hereby represents and warrants to the Trustee, and the
Certificateholders, with respect to each Initial SBA Loan originated or acquired
by the Bank, as of the Closing Date, and with respect to each Subsequent SBA
Loan originated by the Bank, as of the related Subsequent Transfer Date:
(a) The information with respect to each SBA Loan set forth in the
SBA Loan Schedule is true and correct;
(b) All of the original or certified documentation set forth in
Section 2.04 (including all material documents related thereto) has been or will
be delivered to the Trustee or the FTA, on behalf of the Trustee, on the Closing
Date or as otherwise provided in Section 2.04;
(c) Each Mortgaged Property serving as the primary Collateral for an
SBA Loan is improved by a Commercial Property or a Residential Property and does
not constitute other than real property under state law;
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(d) Except for Initial SBA Loans (and up to 10 Subsequent SBA Loans)
that were purchased and reunderwritten by the Bank, each SBA Loan has been
originated by the Bank, in its capacity as Seller and each SBA Loan is being
serviced by the Bank, in its capacity as Servicer;
(e) Each SBA Loan is an SBA (S) 7(a) Loan;
(f) Except for 3 Initial SBA Loans that bear fixed rates of interest,
the SBA Loan Interest Rates adjust monthly to equal the then applicable Prime
Rate plus the margin set forth in the related SBA Note. Each adjustable rate SBA
Note will, with respect to principal payments, adjust monthly to provide for a
schedule of Monthly Payments which are, if timely paid, sufficient to fully
amortize the principal balance of such SBA Loan on its respective maturity date;
(g) With respect to those SBA Loans secured by a Mortgaged Property,
each Mortgage is a valid and subsisting lien of record on the Mortgaged Property
subject only to any applicable Prior Liens on such Mortgaged Property and
subject in all cases to such exceptions that are generally acceptable to banking
institutions in connection with their regular commercial lending activities, and
such other exceptions to which similar properties are commonly subject and which
do not individually, or in the aggregate, materially and adversely affect the
benefits of the security intended to be provided by such Mortgage;
(h) Immediately prior to the transfer and assignment herein
contemplated, the Bank held good and indefeasible title to, and was the sole
owner of, the Unguaranteed Interest of each SBA Loan conveyed by the Bank
subject to no liens, charges, mortgages, encumbrances or rights of others except
as set forth in Sections 3.02(g) or 3.02(kk) or other liens which will be
released simultaneously with such transfer and assignment; and immediately upon
the transfer and assignment herein contemplated, the Trustee will hold good and
indefeasible title, to, and be the sole owner of, each SBA Loan subject to no
liens, charges, mortgages, encumbrances or rights of others except (i) as set
forth in Sections 3.02(g) or 3.02(kk), (ii) the interests of the SBA or (iii)
other liens which will be released simultaneously with such transfer and
assignment;
(i) As of the Cut-Off Date (or, with respect to any Subsequent SBA
Loan, as of the related Subsequent Cut-Off Date), no SBA Loan is more than 30
days delinquent in payment;
(j) To the best of the Bank's knowledge, there is no delinquent tax
or assessment lien on any Mortgaged Property, and
III-5
each Mortgaged Property is free of material damage and is in good repair;
(k) No SBA Loan is subject to any right of rescission, set-off,
counterclaim or defense, including the defense of usury, nor will the operation
of any of the terms of the SBA Note or any related Mortgage, or the exercise of
any right thereunder, render either the SBA Note or any related Mortgage
unenforceable in whole or in part, or subject to any right of rescission, set-
off, counterclaim or defense, including the defense of usury, and no such right
of rescission, set-off, counterclaim or defense has been asserted with respect
thereto;
(l) Each SBA Loan at the time it was made complied and, as of the
Closing Date complies, in all material respects with applicable state and
federal laws and regulations, including, without limitation, usury, equal credit
opportunity, disclosure and recording laws and the SBA Rules and Regulations;
(m) Each Initial SBA Loan was (and each Subsequent SBA Loan will be)
originated and underwritten or purchased and reunderwritten by the Bank in
accordance with the underwriting criteria set forth in the Confidential
Placement Memorandum; provided, however, that without the prior written consent
of the SBA, no more than 10 Subsequent SBA Loans may have been purchased by the
Bank from a third party;
(n) Pursuant to the SBA Rules and Regulations, the Bank requires that
the improvements upon each Mortgaged Property are covered by a valid and
existing hazard insurance policy with a generally acceptable carrier that
provides for fire and extended coverage representing coverage described in
Section 5.07;
(o) Pursuant to the SBA Rules and Regulations, the Bank requires that
if a Mortgaged Property is in an area identified in the Federal Register by the
Federal Emergency Management Agency as having special flood hazards, a flood
insurance policy is in effect with respect to such Mortgaged Property with a
generally acceptable carrier in an amount representing coverage described in
Section 5.07;
(p) Each SBA Note, any related Mortgage and any other agreement
pursuant to which Collateral is pledged to the Bank is the legal, valid and
binding obligation of the maker thereof and is enforceable in accordance with
its terms, except only as such enforcement may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting the
enforcement of creditors' rights generally and by general principles of equity
(whether considered in a proceeding or
III-6
action in equity or at law), none of which will prevent the ultimate realization
of the security provided by the Collateral or other agreement, and all parties
to each SBA Loan had full legal capacity to execute all SBA Loan documents and
convey the estate therein purported to be conveyed;
(q) The Bank has caused and will cause to be performed any and all
acts reasonably required to be performed to preserve the rights and remedies of
the Trustee in any insurance policies applicable to the SBA Loans including,
without limitation, in each case, any necessary notifications of insurers,
assignments of policies or interests therein, and establishments of co-insured,
joint loss payee and mortgagee rights in favor of the Trustee or the Bank,
respectively;
(r) Each original Mortgage was recorded, and all subsequent
assignments of the original Mortgage have been recorded in the appropriate
jurisdictions wherein such recordation is necessary to perfect the lien thereof
as against creditors of the Bank (or, subject to Section 2.04 hereof, are in the
process of being recorded);
(s) Each SBA Loan conforms, and all such SBA Loans in the aggregate
conform, to the description thereof set forth in the Confidential Placement
Memorandum;
(t) The terms of the SBA Note and the related Mortgage or other
security agreement pursuant to which Collateral was pledged have not been
impaired, altered or modified in any respect, except by a written instrument
which has been recorded, if necessary, to protect the interest of the SBA and
the Certificateholders and which has been delivered to the Trustee;
(u) There are no material defaults in complying with the terms of any
applicable Mortgage, and all taxes, governmental assessments, insurance
premiums, water, sewer and municipal charges, leasehold payments or ground rents
which previously became due and owing have been paid, or an escrow of funds has
been established in an amount sufficient to pay for every such item which
remains unpaid and which has been assessed but is not yet due and payable;
(v) There is no proceeding pending or threatened for the total or
partial condemnation of any Mortgaged Property, nor is such a proceeding
currently occurring, and such property is undamaged by waste, fire, earthquake
or earth movement, windstorm, flood, tornado or other casualty, so as to affect
adversely the value of the Mortgaged Property as security for the SBA Loan or
the use for which the premises were intended;
III-7
(w) At the time of origination for an SBA Loan, in all instances
where commercial real property serves as the primary collateral for such SBA
Loan, the related Mortgaged Property was free of contamination from toxic
substances or hazardous wastes requiring action under applicable laws or is
subject to ongoing environmental rehabilitation approved by the SBA, and as of
the Cut-Off Date, the Seller has no knowledge of any such contamination from
toxic substances or hazardous waste material on any Mortgaged Property unless
such items are below action levels or such Mortgaged Property is subject to
ongoing environmental rehabilitation approved by the SBA;;
(x) The proceeds of the SBA Loan have been fully disbursed, and there
is no obligation on the part of the Bank to make future advances thereunder.
Any and all requirements as to disbursements of any escrow funds therefor have
been complied with. All costs, fees and expenses incurred in making or closing
or recording the SBA Loans were paid;
(y) There is no obligation on the part of the Bank or any other party
(except for any guarantor of an SBA Loan) to make Monthly Payments (except for
Monthly Advances) in addition to those made by the Obligor;
(z) No statement, report or other document signed by the Bank
constituting a part of the SBA File contains any untrue statement of a material
fact or omits to state a material fact necessary to make the statements
contained therein not misleading in light of the circumstances under which they
were made;
(aa) With respect to each Mortgage constituting a deed of trust, a
trustee, duly qualified under applicable law to serve as such, has been properly
designated and currently so serves and is named in such Mortgage, and no fees or
expenses are or will become payable by the Certificateholders to the trustee
under the deed of trust, except in connection with a trustee's sale after
default by the Obligor;
(bb) No SBA Loan has a shared appreciation feature, or other
contingent interest feature;
(cc) With respect to each SBA Loan secured by a Mortgaged Property or
other Collateral and that is not a first priority lien, either (i) no consent
for the SBA Loan is required by the holder of any related Prior Lien or (ii)
such consent has been obtained;
(dd) Each SBA Loan was originated to a business located in the State
identified in the SBA Loan Schedule;
III-8
(ee) All parties which have had any interest in the SBA Loan, whether
as mortgagee, assignee, pledgee or otherwise, are (or, during the period in
which they held and disposed of such interest, were) (1) in compliance with any
and all applicable licensing requirements of the laws of the state wherein any
Mortgaged Property is located, and (2)(A) organized under the laws of such
state, or (B) qualified to do business in such state, or (C) federal savings and
loan associations or national banks having principal offices in such state, or
(D) not doing business in such state;
(ff) Any related Mortgage contains customary and enforceable
provisions in accordance with the SBA Rules and Regulations which render the
rights and remedies of the holder thereof adequate for the realization against
the Mortgaged Property of the benefits of the security, including, (i) in the
case of a Mortgage designated as a deed of trust, by trustee's sale, and (ii)
otherwise by judicial foreclosure. There is no homestead or other exemption
available to the Mortgagor which would materially interfere with the right to
sell the Mortgaged Property at a trustee's sale or the right to foreclose the
Mortgage;
(gg) There is no default, breach, violation or event of acceleration
existing under the SBA Note and no event which, with the passage of time or with
notice and the expiration of any grace or cure period, would constitute a
default, breach, violation or event of acceleration; and the Bank, in its
capacity as either Servicer or Seller, has not waived any default, breach,
violation or event of acceleration;
(hh) All parties to the SBA Note and any related Mortgage or other
document pursuant to which Collateral was pledged had legal capacity to execute
the SBA Note and any such Mortgage or other document and each SBA Note and
Mortgage or other document have been duly and properly executed by such parties;
(ii) The SBA Loan was not selected for inclusion under this Agreement
from the Bank's portfolio of comparable SBA loans on any basis which would have
a material adverse affect on a Certificateholder;
(jj) All amounts received after the Cut-Off Date (or, with respect to
the Subsequent SBA Loans, after the related Subsequent Cut-Off Date) with
respect to the SBA Loans have been, to the extent required by this Agreement,
deposited into the Principal and Interest Account and are, as of the Closing
Date (or with respect to the Subsequent SBA Loans, as of the related
III-9
Subsequent Closing Date), in the Principal and Interest Account; and
(kk) With respect to those SBA Loans secured by Collateral other than
a Mortgaged Property, the related SBA Note, security agreements, if any, and
UCC-1 filed with respect to such Collateral creates a valid and subsisting lien
of record on such Collateral subject only to any Prior Liens, if any, on such
Collateral and subject in all cases to such exceptions that are generally
acceptable to lending institutions in connection with their regular commercial
lending activities, and such other exceptions to which similar Collateral is
commonly subject and which do not individually, or in the aggregate, materially
and adversely affect the benefits of the security intended to be provided by
such SBA Note, security agreement and UCC-1.
Section 3.03 Purchase and Substitution of Defective SBA Loans.
------------------------------------------------
It is understood and agreed that the representations and warranties
set forth in Sections 3.01 and 3.02 shall survive delivery of the Certificates
to the Certificateholders. Upon discovery by the Servicer, any Subservicer or
the Trustee of a breach of any of such representations and warranties which
materially and adversely affects the value of the SBA Loans or the interest of
the Certificateholders or the SBA therein or which materially and adversely
affects the interests of the Certificateholders and the SBA in the related SBA
Loan in the case of a representation and warranty relating to a particular SBA
Loan (notwithstanding that such representation and warranty was made to the
Bank's best knowledge), the party discovering such breach shall give prompt
written notice to the others. Within 60 days of the earlier of its discovery or
its receipt of notice of any breach of a representation or warranty, the Bank,
in its capacity as Seller shall (a) promptly cure such breach in all material
respects, (b) purchase the Unguaranteed Interest of such SBA Loan by depositing
in the Principal and Interest Account, on the next succeeding Determination
Date, an amount and in the manner specified in Section 2.05(b), or (c) if within
two years of the Closing Date, remove such SBA Loan from the Trust Fund (in
which case it shall become a Deleted SBA Loan) and substitute one or more
Qualified Substitute SBA Loans. Any such substitution shall be accompanied by
payment by the Seller of the Substitution Adjustment, if any.
As to any Deleted SBA Loan for which the Seller substitutes a
Qualified Substitute SBA Loan or Loans, the Servicer shall effect such
substitution by delivering to the Trustee and the FTA a certification in the
form attached hereto
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as Exhibit I, executed by a Servicing Officer, and shall also deliver to the
Trustee and the FTA, as applicable, the documents constituting the Trustee's
Document File for such Qualified Substitute SBA Loan or Loans.
The Servicer shall deposit in the Principal and Interest Account the
Unguaranteed Percentage of all payments of principal received in connection with
such Qualified Substitute SBA Loan or Loans after the date of such substitution
together with all interest (net of the Servicing Fee allocable to such Qualified
Substitute SBA Loan or Loans). Monthly Payments received with respect to
Qualified Substitute SBA Loans on or before the date of substitution will be
retained by the Seller. The Trust Fund will own all payments received with
respect to the Unguaranteed Interest on the Deleted SBA Loan on or before the
date of substitution, and the Seller shall thereafter be entitled to retain all
amounts subsequently received in respect of such Deleted SBA Loan. The Servicer
shall give written notice to the Trustee that such substitution has taken place
and shall amend the SBA Loan Schedule to reflect the removal of such Deleted SBA
Loan from the terms of this Agreement and the substitution of the Qualified
Substitute SBA Loan or Loans. Upon such substitution, such Qualified Substitute
SBA Loan or Loans shall be subject to the terms of this Agreement in all
respects, including Sections 2.04 and 2.05, and the Seller shall be deemed to
have made with respect to such Qualified Substitute SBA Loan or Loans, as of the
date of substitution, the covenants, representations and warranties set forth in
Sections 3.01 and 3.02. On the date of such substitution, the Seller will remit
to the Servicer, and the Servicer will deposit into the Principal and Interest
Account an amount equal to the Substitution Adjustment.
In addition to the cure, purchase and substitution obligation in
Sections 2.04, 2.05 and 3.03, the Bank shall indemnify and hold harmless the
Trust Fund, the Trustee and the Certificateholders against any loss, damages,
penalties, fines, forfeitures, reasonable legal fees and related costs,
judgments and other costs and expenses resulting from any claim, demand, defense
or assertion based on or grounded upon, or resulting from, a breach of the
Bank's representations and warranties contained in this Agreement. It is
understood and agreed that the obligations of the Bank, in its capacity as
Seller set forth in Sections 2.04, 2.05 and 3.03 to cure, purchase or substitute
for a defective SBA Loan and to indemnify the Certificateholders and the Trustee
as provided in Sections 2.04, 2.05 and 3.03 constitute the sole remedies of the
Trustee and the Certificateholders respecting a breach of the foregoing
representations and warranties.
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Any cause of action against the Bank, in its capacity as either
Servicer or the Seller, relating to or arising out of the breach of any
representations and warranties made in Sections 2.05, 3.01 or 3.02 shall accrue
as to any SBA Loan upon (i) discovery of such breach by any party and notice
thereof to the Seller and or notice thereof by the Seller to the Trustee, (ii)
failure by the Seller to cure such breach or purchase or substitute such SBA
Loan as specified above, and (iii) demand upon the Seller by the Trustee for all
amounts payable hereunder in respect of such SBA Loan.
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ARTICLE IV
THE CERTIFICATES
----------------
Section 4.01 The Certificates.
----------------
The Class A and Class B Certificates shall be substantially in the
forms annexed hereto as Exhibits B-1 and B-2 and shall, upon original issue, be
executed and delivered by the Servicer to the Trustee for authentication and
redelivery to or upon the order of the Seller, upon receipt by the Trustee and
the FTA of the documents specified in Section 2.04. All Certificates shall be
executed on behalf of the Servicer by a Responsible Officer, in the
denominations specified in the definition of Percentage Interest, and shall be
authenticated on behalf of the Trustee by one of its Responsible Officers.
Certificates bearing the signatures of individuals who were at the time of the
execution or authentication of the Certificates a Responsible Officer of the
Servicer or a Responsible Officer of the Trustee, as the case may be, shall bind
the Servicer or the Trustee, as the case may be, notwithstanding that such
individuals or any of them have ceased to hold such offices prior to the
delivery of such Certificates or did not hold such offices at the date of such
Certificates. All Certificates issued hereunder shall be dated the date of
their authentication.
Section 4.02 Registration of Transfer and Exchange of Certificates.
-----------------------------------------------------
(a) The Trustee shall cause to be kept at the office of the
Certificate Registrar, in New York, New York, a Certificate Register in which,
subject to such reasonable regulations as it may prescribe, it shall provide for
the registration of Certificates and of transfers and exchanges of Certificates
as herein provided. The Certificate Register shall contain the name, remittance
instructions, Class and Percentage Interest of each Certificateholder, as well
as the Series and the number in the Series. Marine Midland Bank is initially
appointed Certificate Registrar for the purpose of registering Certificates and
transfers and exchanges of Certificates as herein provided.
(b) Each Class of Certificates shall be issued in minimum
denominations of $100,000 original principal amount and integral multiples of
$1,000 in excess thereof, except that one Certificate of each Class may be in a
different denomination so that the sum of the denominations of all outstanding
Class A and Class B Certificates shall equal the Original Class A and Class B
Certificate Principal Balance, respectively. On the Closing Date, the Trustee
will execute and authenticate (i) one or more Global Certificates and/or (ii)
Individual Certificates all in an
IV-1
aggregate principal amount that shall equal the Original Class A and Original
Class B Certificate Principal Balances.
The Global Certificates (i) shall be delivered by the Seller to the
Depository or, pursuant to the Depository's instructions, shall be delivered by
the Seller on behalf of the Depository to and deposited with the Depository's
custodian, and in each case shall be registered in the name of Cede & Co. and
(ii) shall bear a legend substantially to the following effect:
"Unless this certificate is presented by an authorized
representative of The Depository Trust Company, a New York corporation
("DTC"), to the Certificate Registrar or its agent for registration of
transfer, exchange or payment, and any certificate issued is registered in
the name of Cede & Co. or in such other name as is requested by an
authorized representative of DTC (and any payment is made to Cede & Co. or
to such other entity as is requested by an authorized representative of
DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR
TO ANY PERSON IS WRONGFUL inasmuch as the registered owner hereof, Cede &
Co., has an interest herein."
The Global Certificates may be deposited with such other Depository as
the Seller may from time to time designate, and shall bear such legend as may be
appropriate; provided that such successor Depository maintains a book-entry
--------
system that qualifies to be treated as "registered form" under Section 163(f)(3)
of the Code.
The Seller and the Trustee are hereby authorized to and shall execute
and deliver a Letter of Representations, in the form provided by the Depository,
with the Depository relating to the Certificates.
(c) With respect to Certificates registered in the Register in the
name of Cede & Co., as nominee of the Depository, the Seller, the Servicer and
the Trustee shall have no responsibility or obligation to Direct or Indirect
Participants or beneficial owners for which the Depository holds Certificates
from time to time as a Depository and the Trustee and its agents, employees,
officers and directors may treat the Depository as the absolute owner of the
Certificates for all purposes whatsoever. Without limiting the immediately
preceding sentence, the Seller, the Servicer and the Trustee shall have no
responsibility or obligation with respect to (a) the accuracy of the records of
the Depository, Cede & Co., or any Direct or Indirect Participant with respect
to the ownership interest in the Certificates, (b) the delivery to any Direct or
Indirect Participant or any other
IV-2
Person, other than a registered Holder of a Certificate, (c) the payment to any
Direct or Indirect Participant or any other Person, other than a registered
Holder of a Certificate as shown in the Register, of any amount with respect to
any distribution of principal or interest on the Certificates or (d) the making
of book-entry transfers among Direct and Indirect Participants of the Depository
with respect to Certificates registered in the Register in the name of the
nominee of the Depository. No Person other than a registered Holder of a
Certificate as shown in the Register shall receive a certificate evidencing such
Certificate.
(d) Upon delivery by the Depository to the Trustee of written notice
to the effect that the Depository has determined to substitute a new nominee in
place of Cede & Co., and subject to the provisions hereof with respect to the
payment of distributions by the mailing of checks or drafts to the registered
Holders of Certificates appearing as registered Owners in the Certificate
Register on a Record Date, the name "Cede & Co." in this Agreement shall refer
to such new nominee of the Depository.
(e) In the event that (i) the Depository or the Servicer advises the
Trustee in writing that the Depository is no longer willing or able to discharge
properly its responsibilities as nominee and depository with respect to the
Certificates and the Servicer is unable to locate a qualified successor or (ii)
the Servicer at its sole option elects to terminate the book-entry system
through the Depository, the Certificates shall no longer be restricted to being
registered in the Register in the name of Cede & Co. (or a successor nominee) as
nominee of the Depository. At that time, the Servicer may determine that the
Certificates shall be registered in the name of and deposited with a successor
depository operating a global book-entry system, as may be acceptable to the
Servicer, or such depository's agent or designee but, if the Servicer does not
select such alternative global book-entry system, then upon surrender to the
Certificate Registrar of the Global Certificates by the Depository, accompanied
by the registration instructions from the Depository for registration, the
Trustee shall at the Servicer's expense authenticate Individual Certificates.
Neither the Servicer nor the Trustee shall be liable for any delay in delivery
of such instructions and may conclusively rely on, and shall be fully protected
in relying on, such instructions. Upon the issuance of Individual Certificates,
the Trustee, the Certificate Registrar, the Servicer, any Paying Agent and the
Seller shall recognize the Holders of the Individual Certificates as
Certificateholders hereunder.
(f) Notwithstanding any other provision of this Agreement to the
contrary, so long as any Certificates are
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registered in the name of Cede & Co., as nominee of the Depository, all
distributions of principal and interest on such Certificates and all notices
with respect to such Certificates shall be made and given, respectively, in the
manner provided in the Letter of Representations.
(g) Subject to the preceding paragraphs, upon surrender for
registration of transfer of any Certificate at the office of the Certificate
Registrar and, upon satisfaction of the conditions set forth below, the Servicer
shall execute in the name of the designated transferee or transferees, a new
Certificate of the same Percentage Interest and dated the date of authentication
by the Trustee. The Certificate Registrar shall notify the Servicer and the
Trustee of any such transfer.
At the option of the Certificateholders, Certificates may be
exchanged for other Certificates in authorized denominations of a like Class and
aggregate Percentage Interest, upon surrender of the Certificates to be
exchanged at such office. Whenever any Certificates are so surrendered for
exchange, the Servicer shall execute the Certificates which the
Certificateholder making the exchange is entitled to receive. Every Certificate
presented or surrendered for transfer or exchange shall be accompanied by wiring
instructions, if applicable, in the form of Exhibit E.
(h) No service charge shall be made for any transfer or exchange of
Certificates, but prior to transfer the Certificate Registrar may require
payment by the transferor of a sum sufficient to cover any tax or governmental
charge that may be imposed in connection with any transfer or exchange of
Certificates.
All Certificates surrendered for transfer and exchange shall be marked
canceled by the Authenticating Agent and retained for one year and destroyed
thereafter.
(i) By acceptance of an Individual Certificate, whether upon original
issuance or subsequent transfer, each holder of such a Certificate acknowledges
the restrictions on the transfer of such Certificate set forth in the Securities
Legend and agrees that it will transfer such Certificate only as provided
herein. In addition to the provisions of Section 4.02(n), the following
restrictions shall apply with respect to the transfer and registration of
transfer of an Individual Certificate to a transferee that takes delivery in the
form of an Individual Certificate:
(i) The Certificate Registrar shall register the transfer of an
Individual Certificate if the requested
IV-4
transfer is being made to transferee who has provided the Certificate
Registrar with a Rule 144A Certification.
(ii) The Certificate Registrar shall register the transfer of
any Individual Certificate (other than the initial delivery of the
Class B Certificates to the Spread Account Depositor) if (x) the
transferor has advised the Certificate Registrar in writing that the
Certificate is being transferred to an Institutional Accredited
Investor; and (y) prior to the transfer the transferee furnishes to
the Certificate Registrar a Transferee Letter, provided that, if based
upon an Opinion of Counsel to the effect that the delivery of (x) and
(y) above are not sufficient to confirm that the proposed transfer is
being made pursuant to an exemption from, or in a transaction not
subject to, the registration requirements of the Securities Act and
other applicable laws, the Certificate Registrar may as a condition of
the registration of any such transfer require the transferor to
furnish other certifications, legal opinions or other information
prior to registering the transfer of an Individual Certificate.
(j) Subject to Section 4.02(n), so long as the Global Certificate
remains outstanding and is held by or on behalf of the Depository, transfers of
beneficial interests in the Global Certificate, or transfers by holders of
Individual Certificates to transferees that take delivery in the form of
beneficial interests in the Global Certificate, may be made only in accordance
with this Section 4.02(j) and in accordance with the rules of the Depository.
(i) In the case of a beneficial interest in the Global
Certificate being transferred to an Institutional Accredited Investor,
such transferee shall be required to take delivery in the form of an
Individual Certificate or Certificates and the Certificate Registrar
shall register such transfer only upon compliance with the provisions
of Section 4.02(i)(ii).
(ii) In the case of a beneficial interest in the Global
Certificate being transferred to a transferee that takes delivery in
the form of an Individual Certificate or Certificates, except as set
forth in clause (i) above, the Certificate Registrar shall register
such transfer only upon compliance with the provisions of Section
4.02(i)(i).
IV-5
(iii) In the case of an Individual Certificate being transferred
to a transferee that takes delivery in the form of a beneficial
interest in a Global Certificate, the Certificate Registrar shall
register such transfer if the transferee has provided the Certificate
Registrar with a Rule 144A Certification.
(iv) No restrictions shall apply with respect to the transfer or
registration of transfer of a beneficial interest in the Global
Certificate to a transferee that takes delivery in the form of a
beneficial interest in the Global Certificate.
(k) Subject to Section 4.02(n), an exchange of a beneficial interest
in the Global Certificate for an Individual Certificate or Certificates, an
exchange of an Individual Certificate or Certificates for a beneficial interest
in the Global Certificate and an exchange of an Individual Certificate or
Certificates for another Individual Certificate or Certificates (in each case,
whether or not such exchange is made in anticipation of subsequent transfer,
and, in the case of the Global Certificate, so long as such Certificate remains
outstanding and is held by or on behalf of the Depository) may be made only in
accordance with this Section 4.02(k) and in accordance with the rules of the
Depository.
(i) A holder of a beneficial interest in the Global Certificate
may at any time exchange such beneficial interest for an Individual
Certificate or Certificates.
(ii) A holder of an Individual Certificate may exchange such
Certificate for a beneficial interest in the Global Certificate if
such holder furnishes to the Registrar a Rule 144A Certification.
(iii) A holder of an Individual Certificate may exchange such
Certificate for an equal aggregate principal amount of Individual
Certificates in different authorized denominations without any
certification.
(l) (i) Upon acceptance for exchange or transfer of an Individual
Certificate for a beneficial interest in the Global Certificate as provided
herein, the Certificate Registrar shall cancel such Individual Certificate and
shall (or shall request the Depository to) endorse on the schedule affixed to
the applicable Global Certificate (or on a continuation of such schedule affixed
to the Global Certificate and made a part thereof) an appropriate notation
evidencing the date of such
IV-6
exchange or transfer and an increase in the certificate balance of the Global
Certificate equal to the certificate balance of such Individual Certificate
exchanged or transferred therefor.
(ii) Upon acceptance for exchange or transfer of a beneficial
interest in the Global Certificate for an Individual Certificate as
provided herein, the Certificate Registrar shall (or shall request the
Depository to) endorse on the schedule affixed to the Global
Certificate (or on a continuation of such schedule affixed to the
Global Certificate and made a part thereof) an appropriate notation
evidencing the date of such exchange or transfer and a decrease in the
certificate balance of the Global Certificate equal to the certificate
balance of such Individual Certificate issued in exchange therefor or
upon transfer thereof.
(m) The Securities Legend shall be placed on any Individual
Certificate issued in exchange for or upon transfer of another Individual
Certificate or of a beneficial interest in the Global Certificate.
(n) Subject to the restrictions on transfer and exchange set forth in
this Section 4.02, the holder of any Individual Certificate may transfer or
exchange the same in whole or in part (in an initial certificate balance equal
to the minimum authorized denomination or any integral multiple of $1,000 in
excess thereof) by surrendering such Certificate at the Corporate Trust Office,
or at the office of any transfer agent, together with an executed instrument of
assignment and transfer satisfactory in form and substance to the Certificate
Registrar in the case of transfer and a written request for exchange in the case
of exchange. The holder of a beneficial interest in a Global Certificate may,
subject to the rules and procedures of the Depository, cause the Depository (or
its nominee) to notify the Certificate Registrar in writing of a request for
transfer or exchange of such beneficial interest for an Individual Certificate
or Certificates. Following a proper request for transfer or exchange, the
Certificate Registrar shall, within five Business Days of such request made at
such Corporate Trust Office, cause the Trustee to authenticate and the
Certificate Registrar to deliver at such Corporate Trust Office, to the
transferee (in the case of transfer) or holder (in the case of exchange) or send
by first class mail at the risk of the transferee (in the case of transfer) or
holder (in the case of exchange) to such address as the transferee or holder, as
applicable, may request, an Individual Certificate or Certificates, as the case
may require, for a like aggregate Percentage Interest and in such authorized
denomination or denominations as may be requested. The presentation for
transfer
IV-7
or exchange of any Individual Certificate shall not be valid unless made at the
Corporate Trust Office by the registered holder in person, or by a duly
authorized attorney-in-fact.
(o) No transfer of any Certificate shall be made unless such transfer
is exempt from the registration requirements of the Securities Act and any
applicable state securities laws or is made in accordance with said Act and
laws. In the event of any such transfer, unless such transfer is made in
reliance upon Rule 144A under the Securities Act and except for the initial
issuance of the Class B Certificates to the Spread Account Depositor, (i) the
Trustee may require a written Opinion of Counsel (which may be in-house counsel)
acceptable to and in form and substance reasonably satisfactory to the Trustee
that such transfer may be made pursuant to an exemption, describing the
applicable exemption and the basis therefor, from said Act and laws or is being
made pursuant to said Act and laws, which Opinion of Counsel shall not be an
expense of the Trustee, the Seller, the Servicer or the Trust Fund and (ii) the
Trustee shall require the transferee to execute a Transferee Letter certifying
to the Seller and the Trustee the facts surrounding such transfer, which
Transferee Letter shall not be an expense of the Trustee, the Seller, the
Servicer or the Trust Fund. The holder of a Certificate desiring to effect such
transfer shall, and does hereby agree to, indemnify the Trustee, the Seller and
the Servicer against any liability that may result if the transfer is not so
exempt or is not made in accordance with such federal and state laws. None of
the Seller, the Servicer, the Trustee or the Trust Fund intends or is obligated
to register or qualify any Certificate under the Securities Act or any state
securities laws.
(p) No Certificate may be acquired directly or indirectly, for or on
behalf of an employee benefit plan or other retirement arrangement subject to
ERISA, and/or Section 4975 of the Code, (collectively, a "Plan"). No transfer
of a Certificate representing an Individual Certificate shall be made unless the
Trustee shall have received a certification from the transferee of such
Individual Certificate, acceptable to and in form and substance satisfactory to
the Trustee and the Servicer, to the effect that such transferee is not
acquiring a Certificate, directly or indirectly, for or on behalf of a Plan.
Notwithstanding anything else to the contrary herein, in the event any purported
transfer of any certificate representing an Individual Certificate is made
without delivery of the certification referred to above, such certification
shall be deemed to have been made by the Transferee by its acceptance of such
Individual Certificate. In addition, any purported transfer of a Certificate
representing an Individual Certificate directly or indirectly to or on behalf of
a Plan shall be void and of no
IV-8
effect. The acquisition of a Certificate representing an interest in a Global
Certificate shall be deemed a representation by the acquirer that it is not
acquiring a Certificate, directly or indirectly, for or on behalf of a Plan.
(q) Notwithstanding any other provision of this Agreement to the
contrary, on the Closing Date, the Trustee shall authenticate in the name of,
and deliver to, the Spread Account Depositor, the Class B Certificate in the
form of a single Individual Certificate in an aggregate principal amount equal
to the Original Class B Principal Balance. The Class B Certificate may not be
sold, pledged, transferred, assigned or otherwise conveyed, in whole or in part,
without the prior written approval of the SBA and a copy of such approval shall
be furnished to the Trustee. A legend to such effect shall be placed on the
Class B Certificate.
Section 4.03 Mutilated, Destroyed, Lost or Stolen Certificates.
-------------------------------------------------
If (i) any mutilated Certificate is surrendered to the Certificate
Registrar, or the Trustee and the Certificate Registrar receives evidence to its
satisfaction of the destruction, loss or theft of any Certificate, and (ii)
there is delivered to the Servicer, the Trustee and the Certificate Registrar
such security or indemnity as may be required by each of them to save each of
them harmless, then, in the absence of notice to the Servicer, the Trustee and
the Certificate Registrar that such Certificate has been acquired by a bona fide
purchaser, the Servicer shall execute and deliver, and the Trustee shall
authenticate, in exchange for or in lieu of any such mutilated, destroyed, lost
or stolen Certificate, a new Certificate of like Class, tenor and Percentage
Interest, but bearing a number not contemporaneously outstanding. Upon the
issuance of any new Certificate under this Section 4.03, the Servicer and the
Trustee may require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto and any other
expenses connected therewith. Any duplicate Certificate issued pursuant to this
Section 4.03 shall constitute complete and indefeasible evidence of ownership in
the Trust Fund, as if originally issued, whether or not the mutilated,
destroyed, lost or stolen Certificate shall be found at any time.
Section 4.04 Persons Deemed Owners.
---------------------
Prior to due presentation of a Certificate for registration of
transfer, the Servicer, the Seller, the Trustee, the Paying Agent and the
Certificate Registrar may treat the Person in whose name any Certificate is
registered as the owner of such Certificate for the purpose of receiving
remittances
IV-9
pursuant to Section 6.07 and for all other purposes whatsoever, and the Seller,
the Servicer, the Trustee and the Certificate Registrar shall not be affected by
notice to the contrary.
IV-10
ARTICLE V
ADMINISTRATION AND SERVICING OF SBA LOANS
-----------------------------------------
Section 5.01 Duties of the Servicer.
----------------------
(a) The Servicer covenants and agrees that it shall act as agent (and
the Servicer is hereby appointed to act as agent) on behalf of the Trust Fund
and that, in such capacity, it shall: (i) prepare and file, or cause to be
prepared and filed, in a timely manner, any Tax Return required to be filed by
the Trust Fund; (ii) prepare and forward, or cause to be prepared and forwarded,
to the Trustee, the Certificateholders and to the Internal Revenue Service and
any other relevant governmental taxing authority all information returns or
reports as and when required to be provided to them in accordance with any
provision of federal, state or local income tax laws; (iii) to the extent that
the affairs of the Trust Fund are within its control, conduct such affairs at
all times that any Certificates are outstanding so as to maintain the status of
the Trust Fund as a grantor trust under any applicable federal, state and local
laws; (iv) pay the amount of any and all federal, state, and local taxes,
imposed on the Trust Fund when and as the same shall be due and payable (but
such obligation shall not prevent the Servicer or any other appropriate Person
from contesting any such tax in appropriate proceedings and shall not prevent
the Servicer from withholding payment of such tax, if permitted by law, pending
the outcome of such proceedings); (v) ensure that any such returns or reports
filed on behalf of the Trust Fund are properly executed by the appropriate
person; and (vi) represent the Trust Fund in any administrative or judicial
proceedings relating to an examination or audit by any governmental taxing
authority, request an administrative adjustment as to any taxable year of the
Trust Fund, enter into settlement agreements with any governmental taxing
agency, extend any statute of limitations relating to any item of the Trust Fund
and otherwise act on behalf of the Trust Fund in relation to any tax matter
involving the Trust Fund. The Servicer shall indemnify the Trustee and the
Trust Fund for any liability it may incur in connection with this Section
5.01(a), which indemnification shall survive the termination of the Trust Fund;
provided, however, that the Servicer shall not indemnify the Trustee for the
-------- -------
Trustee's negligence, willful misconduct or bad faith.
(b) The Servicer, as independent contract servicer, shall service and
administer the SBA Loans and shall have full power and authority, acting alone,
to do any and all things in connection with such servicing and administration
which the Servicer may deem necessary or desirable and consistent with the terms
of this Agreement and the Multi-Party Agreement and the SBA
V-1
Rules and Regulations. The Servicer may enter into Subservicing Agreements for
anyservicing and administration of SBA (S) 7(a) Loans with any entity approved
with prior written consent by the SBA. Any such Subservicing Agreement shall be
consistent with and not violate the provisions of this Agreement and the Multi-
Party Agreement. The Servicer shall be entitled to terminate any Subservicing
Agreement in accordance with the terms and conditions of such Subservicing
Agreement and to either itself directly service the related SBA (S) 7(a) Loans
or enter into a Subservicing Agreement with a successor Subservicer which
qualifies hereunder.
(c) Notwithstanding any Subservicing Agreement, any of the provisions
of this Agreement relating to agreements or arrangements between the Servicer
and a Subservicer or reference to actions taken through a Subservicer or
otherwise, the Servicer shall remain obligated and primarily liable to the
Trustee, for itself and on behalf of the Certificateholders, the SBA and the
Certificateholders for the servicing and administering of the SBA Loans in
accordance with the provisions of this Agreement and the Multi-Party Agreement
and the SBA Rules and Regulations, without diminution of such obligation or
liability by virtue of such Subservicing Agreements or arrangements or by virtue
of indemnification from the Subservicer and to the same extent and under the
same terms and conditions as if the Servicer alone were servicing and
administering the SBA Loans. For purposes of this Agreement, the Servicer shall
be deemed to have received payments on SBA Loans when any Subservicer has
received such payments. The Servicer shall be entitled to enter into any
agreement with a Subservicer for indemnification of the Servicer by such
Subservicer, and nothing contained in this Agreement shall be deemed to limit or
modify such indemnification.
(d) Any Subservicing Agreement that may be entered into and any
transactions or services relating to the SBA Loans involving a Subservicer in
its capacity as such and not as an originator shall be deemed to be between the
Subservicer and the Servicer alone, and the Trustee, the SBA and
Certificateholders shall not be deemed parties thereto and shall have no claims,
rights, obligations, duties or liabilities with respect to the Subservicer
except as set forth in Section 5.01(e).
(e) In the event the Servicer shall for any reason no longer be the
Servicer (including by reason of an Event of Default), the Trustee or its
designee shall, subject to Section 10.02 hereof and the Multi-Party Agreement,
thereupon assume all of the rights and obligations of the Servicer under each
Subservicing Agreement that the Servicer may have entered into, unless the
Trustee is then permitted and elects to terminate any Subservicing Agreement in
accordance with its terms. The
V-2
Trustee, its designee or the successor servicer for the Trustee shall be deemed
to have assumed all of the Servicer's interest therein and to have replaced the
Servicer as a party to each Subservicing Agreement to the same extent as if the
Subservicing Agreements had been assigned to the assuming party, except that the
Servicer shall not thereby be relieved of any liability or obligations under the
Subservicing Agreements. The Servicer at its expense and without right of
reimbursement therefor, shall, upon request of the Trustee, deliver to the
assuming party all documents and records relating to each Subservicing Agreement
and the SBA Loans then being serviced and an accounting of amounts collected and
held by it and otherwise use its best efforts to effect the orderly and
efficient transfer of the Subservicing Agreements to the assuming party.
(f) So long as it is consistent with the terms of this Agreement and
the Multi-Party Agreement, the SBA Agreement (as defined in the Multi-Party
Agreement) and the SBA Rules and Regulations, the Servicer may waive, modify or
vary any term of any SBA Loan or consent to the postponement of strict
compliance with any such term or in any manner grant indulgence to any Obligor
if in the Servicer's determination such waiver, modification, postponement or
indulgence is not materially adverse to the interests of the SBA and the
Certificateholders, provided, however, that (unless (x) the Obligor is in
-------- -------
default with respect to the SBA Loan, or such default is, in the judgment of the
Servicer, imminent and (y) the Servicer determines that any modification would
not be considered a new loan for federal income tax purposes) the Servicer may
not permit any modification with respect to any SBA Loan that would change the
SBA Loan Interest Rate, defer (subject to Section 5.12), or forgive the payment
of any principal or interest (unless in connection with the liquidation of the
related SBA Loan), or extend the final maturity date on such SBA Loan without
the consent of the SBA, if such consent is then required by the SBA Rules and
Regulations. The Servicer may exercise all unilateral servicing actions
permitted by participating lenders in accordance with the SBA Rules and
Regulations. No costs incurred by the Servicer or any Subservicer in respect of
Servicing Advances shall for the purposes of distributions to Certificateholders
be added to the amount owing under the related SBA Loan. Without limiting the
generality of the foregoing, so long as it is consistent with the SBA Rules and
Regulations, the Servicer shall continue, and is hereby authorized and empowered
to execute and deliver on behalf of the Trustee, the SBA and each
Certificateholder, all instruments of satisfaction or cancellation, or of
partial or full release, discharge and all other comparable instruments, with
respect to the SBA Loans and with respect to any Mortgaged Properties or other
Collateral. If reasonably required by the Servicer, each Certificateholder
and/or the Trustee shall furnish
V-3
the Servicer, within 5 Business Days of receipt of the Servicer's request, with
any powers of attorney and other documents necessary or appropriate to enable
the Servicer to carry out its servicing and administrative duties under this
Agreement. Any such request to the Trustee shall be accompanied by a
certification in the form of Exhibit I attached hereto signed by a Servicing
Officer.
The Servicer, in servicing and administering the SBA Loans, shall
employ or cause to be employed procedures (including collection, foreclosure and
Foreclosed Property and Repossessed Collateral management procedures) and
exercise the same care that it customarily employs and exercises in servicing
and administering SBA Loans for its own account, in accordance with the SBA
Rules and Regulations and giving due consideration to the Certificateholders'
and the SBA's reliance on the Servicer.
(g) On and after such time as the Trustee receives the resignation of,
or notice of the removal of, the Servicer from its rights and obligations under
this Agreement, and with respect to resignation pursuant to Section 9.04, after
receipt of the Opinion of Counsel required pursuant to Section 9.04 addressed to
the SBA and the Trustee, the Trustee or its designee shall assume all of the
rights and obligations of the Servicer, subject to Section 10.02 hereof and the
Multi-Party Agreement. The Servicer shall, upon request of the Trustee but at
the expense of the Servicer, deliver to the Trustee all documents and records
(including computer tapes and diskettes) relating to the SBA Loans and an
accounting of amounts collected and held by the Servicer and otherwise use its
best efforts to effect the orderly and efficient transfer of servicing rights
and obligations to the assuming party.
(h) For so long as any of the Certificates are outstanding and are
"restricted securities" within the meaning of Rule 144(a)(3) of the Securities
Act, (1) the Servicer will provide or cause to be provided to any holder of such
Certificates and any prospective purchaser thereof designated by such a holder,
upon the request of such holder or prospective purchaser, the information
required to be provided to such holder or prospective purchaser by Rule
144A(d)(4) under the Securities Act; and (2) the Servicer shall update such
information from time to time in order to prevent such information from becoming
false and misleading and will take such other actions as are necessary to ensure
that the safe harbor exemption from the registration requirements of the
Securities Act under Rule 144A is and will be available for resales of such
Certificates conducted in accordance with Rule 144A.
V-4
Section 5.02 Liquidation of SBA Loans.
------------------------
In the event that any payment due under any SBA Loan and not postponed
pursuant to Section 5.01 is not paid when the same becomes due and payable, or
in the event the Obligor fails to perform any other covenant or obligation under
the SBA Loan, the Servicer shall take such action in accordance with the
applicable SBA Rules and Regulations as it shall deem to be in the best
interests of the Certificateholders and the SBA. With respect to any such SBA
(S) 7(a) Loan for which the SBA has expressed to the Servicer the SBA's desire
to assume servicing of such SBA Loan consistent with the SBA Rules and
Regulations, the Trustee shall, upon written direction of the Servicer, deliver
to the SBA or its designee all or any portion of the Trustee's Document File
relating to such SBA (S) 7(a) Loan and the Trustee shall execute such documents,
including but not limited to an endorsement of the related SBA Note and an
assignment of the related Mortgage, as the Servicer or the SBA shall request.
Expenses incurred in connection with any such action shall be the responsibility
of the Servicer and shall not be chargeable to the Principal and Interest
Account or the Certificate Account. Subject to the SBA Rules and Regulations
and with the prior written consent of the SBA (if required by the SBA Rules and
Regulations), the Servicer shall foreclose upon or otherwise comparably effect
the ownership of Mortgaged Properties or other Collateral relating to defaulted
SBA (S) 7(a) Loans for which the related SBA (S) 7(a) Loan is still outstanding,
as to which no satisfactory arrangements can be made for collection of
delinquent payments in accordance with the provisions of Section 5.10. In
connection with such foreclosure or other conversion, the Servicer shall
exercise collection and foreclosure procedures with the same degree of care and
skill in its exercise or use as it would exercise or use under the circumstances
in the conduct of its own affairs. The Unguaranteed Percentage of any amounts
advanced in connection with such foreclosure or other action shall constitute
"Servicing Advances." The Servicer shall take into account the existence of any
hazardous substances, hazardous wastes or solid wastes on Mortgaged Properties
in determining whether to foreclose upon or otherwise comparably convert the
ownership of such Mortgaged Property, and will not foreclose on a Mortgaged
Property where it has cause to believe such substances exist unless it has
received an environmental report and such report reveals no environmental
problems, or such Mortgaged Property is subject to an environmental
rehabilitation for which the Seller is not responsible.
After an SBA Loan has become a Liquidated SBA Loan, the Servicer shall
promptly prepare and forward to the Trustee and the SBA and upon request, any
Certificateholder, a Liquidation
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Report, in the form attached hereto as Exhibit J, detailing the Liquidation
Proceeds received from the Liquidated SBA Loan, expenses incurred with respect
thereto, and any loss incurred in connection therewith.
Section 5.03 Establishment of Principal and
------------------------------
Interest Accounts; Deposits in
------------------------------
Principal and Interest Accounts.
---------------------------------
(a) The Servicer shall cause to be established and maintained one or
more Principal and Interest Accounts, in one or more Designated Depository
Institutions, in the form of time deposit or demand accounts, which may be
interest-bearing or such accounts may be trust accounts wherein the moneys
therein are invested in Permitted Instruments, titled "First National Bank of
New England, in trust for the registered holders of First National Bank of New
England SBA Loan-Backed Adjustable Rate Certificates, Series 1998-1, Class A and
Class B." Such Principal and Interest Accounts shall be insured by the BIF or
SAIF administered by the FDIC to the maximum extent provided by law. The
creation of any Principal and Interest Account shall be evidenced by a letter
agreement in the form of Exhibit C hereto.
A copy of such letter agreement shall be furnished to the Trustee, the
SBA and, upon request, any Certificateholder.
(b) The Servicer and each Subservicer shall deposit without
duplication (within two Business Days of receipt thereof) in the Principal and
Interest Account and retain therein:
(i) the Unguaranteed Percentage of all payments received after
the Cut-Off Date on account of principal on the SBA Loans, including
the Unguaranteed Percentage of all Excess Payments, Principal
Prepayments and Curtailments collected after the Cut-Off Date, the
Unguaranteed Percentage of all Insurance Proceeds (other than amounts
to be applied to restoration or repair of any related Mortgaged
Property, or to be released to the Obligor in accordance with
customary servicing procedures) and the Unguaranteed Percentage of all
Released Mortgaged Property Proceeds;
(ii) all payments received after the Cut-Off Date on account of
interest on the Unguaranteed Interest of the SBA Loans (net of the
Servicing Fee allocable to such SBA Loans and other servicing
compensation payable to the Servicer as permitted herein);
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(iii) the Unguaranteed Percentage of all Net Liquidation
Proceeds;
(iv) the Unguaranteed Percentage of all Insurance Proceeds
(other than amounts to be applied to restoration or repair of any
related Mortgaged Property, or to be released to the Obligor in
accordance with customary servicing procedures);
(v) the Unguaranteed Percentage of all Released Mortgaged
Property Proceeds;
(vi) any amounts paid in connection with the repurchase of the
Unguaranteed Interest of any SBA Loan and the amount of any
Substitution Adjustment received pursuant to Sections 2.05 and 3.03;
(vii) any amount required to be deposited in the Principal and
Interest Account pursuant to Section 5.04 or 5.10; and
(viii) the amount of any losses incurred in connection with
investments in Permitted Instruments.
(c) The foregoing requirements for deposit in the Principal and
Interest Account shall be exclusive, it being understood and agreed that,
without limiting the generality of the foregoing, payments with respect to the
Guaranteed Interest, and the Servicing Fee (to the extent received and permitted
by Section 7.03), with respect to each SBA Loan and the Additional Fee with
respect to each Additional Fee SBA Loan, together with the difference between
any Liquidation Proceeds and the related Net Liquidation Proceeds, need not be
deposited by the Servicer in the Principal and Interest Account.
(d) Any interest earnings on funds held in the Principal and Interest
Account paid by a Designated Depository Institution shall be for the account of
the Servicer and may only be withdrawn from the Principal and Interest Account
by the Servicer immediately following its monthly remittance to the Trustee
pursuant to Section 5.04(a). Any reference herein to amounts on deposit in the
Principal and Interest Account shall refer to amounts net of such investment
earnings.
Section 5.04 Permitted Withdrawals From the
------------------------------
Principal and Interest Account
------------------------------
The Servicer shall withdraw funds from the Principal and Interest
Account for the following purposes:
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(a) to effect the remittance to the Trustee on each Determination Date
for deposit in the Certificate Account, the portion of the Available Funds for
the related Remittance Date that is separate from Compensating Interest, Monthly
Advances and amounts then on deposit in the Spread Account;
(b) to reimburse itself for any accrued unpaid Servicing Fees
allocable to the SBA Loans, unreimbursed Monthly Advances and for unreimbursed
Servicing Advances to the extent deposited in the Principal and Interest Account
(and not netted from Monthly Payments received). The Servicer's right to
reimbursement for unpaid Servicing Fees and, except as provided in the following
sentence, Servicing Advances and Monthly Advances shall be limited to
Liquidation Proceeds, Released Mortgaged Property Proceeds, Insurance Proceeds
and such other amounts as may be collected by the Servicer from the Obligor or
otherwise relating to the SBA Loan in respect of which such unreimbursed amounts
are owed. The Servicer's right to reimbursement for Servicing Advances and
Monthly Advances in excess of such amounts shall be limited to any late
collections of interest received on the SBA Loans generally, including
Liquidation Proceeds, Released Mortgaged Property Proceeds, Insurance Proceeds
and any other amounts;
(c) to withdraw any amount received from an Obligor that is
recoverable and sought to be recovered as a voidable preference by a trustee in
bankruptcy pursuant to the United States Bankruptcy Code in accordance with a
final, nonappealable order of a court having competent jurisdiction;
(d) (i) to make investments in Permitted Instruments and (ii) to pay
to itself, as permitted by Section 5.03(d), interest paid in respect of
Permitted Instruments or by a Designated Depository Institution on funds
deposited in the Principal and Interest Account;
(e) to withdraw any funds deposited in the Principal and Interest
Account that were not required to be deposited therein or were deposited therein
in error;
(f) to pay itself servicing compensation pursuant to Section 7.03
hereof or interest as permitted under the definition of Excess Proceeds; and
(g) to clear and terminate the Principal and Interest Account upon the
termination of this Agreement.
So long as no default or Event of Default shall have occurred and be
continuing, and consistent with any requirements of the Code, the Principal and
Interest Account shall either be
V-8
maintained with a Designated Depository Institution as an interest-bearing
account meeting the requirements set forth in Section 5.03(a), or the funds held
therein may be invested by the Servicer (to the extent practicable) in Permitted
Instruments, as directed in writing by the Servicer. In either case, funds in
the Principal and Interest Account must be available for withdrawal without
penalty, and any Permitted Instruments must mature not later than the Business
Day immediately preceding the Determination Date next following the date of such
investment (except that if such Permitted Instrument is an obligation of the
institution that maintains such account, then such Permitted Instrument shall
mature not later than such Determination Date) and shall not be sold or disposed
of prior to its maturity. All Permitted Instruments must be held by or
registered in the name of "First National Bank of New England, in trust for the
registered holders of First National Bank of New England SBA Loan-Backed
Adjustable Rate Certificates, Series 1998-1." All interest or other earnings
from funds on deposit in the Principal and Interest Account (or any Permitted
Instruments thereof) shall be the exclusive property of the Servicer, and may be
withdrawn from the Principal and Interest Account pursuant to clause (d) above.
The amount of any losses incurred in connection with the investment of funds in
the Principal and Interest Account in Permitted Instruments shall be deposited
in the Principal and Interest Account by the Servicer from its own funds
immediately as realized without reimbursement therefor.
Section 5.05 [Intentionally Omitted]
Section 5.06 Transfer of Accounts.
--------------------
The Servicer may, upon written notice to the Trustee and the SBA,
transfer any Principal and Interest Account to a different Designated Depository
Institution.
Section 5.07 Maintenance of Hazard Insurance.
-------------------------------
The Servicer shall comply with the SBA Rules and Regulations
concerning the issuance and maintenance of fire and hazard insurance with
extended coverage customary in the area where the Mortgaged Property is located.
If at origination of an SBA Loan, to the best of the Servicer's knowledge after
reasonable investigation, the related Mortgaged Property is in an area
identified in the Federal Register by the Flood Emergency Management Agency as
having special flood hazards (and such flood insurance has been made available)
consistent with the SBA Rules and Regulations, the Servicer will require the
related Obligor to purchase a flood insurance policy with a generally acceptable
insurance carrier, in an amount representing coverage not less than the least of
(i) the full insurable value of the Mortgaged
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Property, or (ii) the maximum amount of insurance available under the National
Flood Insurance Act of 1968, as amended. The Servicer shall also maintain, to
the extent such insurance is available, and required by the SBA Rules and
Regulations and the Servicer's policies, on Foreclosed Property constituting
real property, fire and hazard insurance in the amounts described above and
liability insurance. Any amounts collected by the Servicer under any such
policies (other than amounts to be applied to the restoration or repair of the
Mortgaged Property, or to be released to the Obligor in accordance with the SBA
Rules and Regulations) shall be deposited in the Principal and Interest Account,
subject to withdrawal pursuant to Section 5.04. It is understood and agreed that
no earthquake or other additional insurance need be required by the Servicer of
any Obligor or maintained on Foreclosed Property, other than pursuant to such
applicable laws and regulations as shall at any time be in force and as shall
require such additional insurance. All policies required hereunder shall be
endorsed with standard mortgagee clauses with losses payable to the Servicer or
its affiliates.
Section 5.08 [Intentionally Omitted]
Section 5.09 Fidelity Bond.
-------------
The Servicer shall maintain with a responsible company, and at its own
expense, a blanket fidelity bond and an errors and omissions insurance policy,
in a minimum amount equal to $1,500,000, and a maximum deductible of $100,000,
if commercially available, with coverage on all employees acting in any capacity
requiring such persons to handle funds, money, documents or papers relating to
the SBA Loans ("Servicer Employees"). The fidelity bond shall insure the
Trustee, its officers and employees against losses resulting from forgery,
theft, embezzlement or fraud by such Servicer Employees. The errors and
omissions policy shall insure against losses resulting from the errors,
omissions and negligent acts of such Servicer employees. No provision of this
Section 5.09 requiring such fidelity bond and errors and omissions insurance
shall relieve the Servicer from its duties as set forth in this Agreement. Upon
the request of the Trustee, the SBA or any Certificateholder, the Servicer shall
cause to be delivered to the Trustee, the SBA or such Certificateholder a
certified true copy of such fidelity bond and insurance policy. The current
issuer of such fidelity bond and insurance policy is the ITT Hartford Group,
located in Hartford, Connecticut.
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Section 5.10 Title, Management and Disposition
---------------------------------
of Foreclosed Property
----------------------
In the event that title to a Mortgaged Property or other Collateral is
acquired in foreclosure, by deed in lieu of foreclosure or by other legal
process(a "Foreclosed Property"), the deed or certificate of sale or the
Repossessed Collateral may be taken in the name of the Trustee on behalf of the
Trust for the benefit of the Certificateholders and the SBA, as their interests
may appear.
Unless the servicing of a Foreclosed Property or item of Repossessed
Collateral relating to an SBA (S) 7(a) Loan is assumed by the SBA pursuant to
the SBA Rules and Regulations, the Servicer, subject to Sections 5.01 and 5.02
hereof, shall manage, conserve, protect and operate each Foreclosed Property or
other Repossessed Collateral for the SBA and the Certificateholders solely for
the purpose of its prudent and prompt disposition and sale. The Servicer shall,
either itself or through an agent selected by the Servicer, manage, conserve,
protect and operate the Foreclosed Property or other Repossessed Collateral in
the same manner that it manages, conserves, protects and operates other
foreclosed or repossessed property for its own account, and in the same manner
that similar property in the same locality as the Foreclosed Property or other
Repossessed Collateral is managed. The Servicer shall attempt to sell the same
(and may temporarily rent the same) on such terms and conditions as the Servicer
deems to be in the best interest of the SBA and the Certificateholders.
The Servicer shall cause to be deposited in the Principal and Interest
Account, no later than five Business Days after the receipt thereof, the
Unguaranteed Percentage of all revenues received with respect to the
conservation and disposition of the related Foreclosed Property or other
Repossessed Collateral net of Servicing Advances.
The disposition of Foreclosed Property or other Repossessed Collateral
shall be carried out by the Servicer at such price, and upon such terms and
conditions, as the Servicer, with SBA concurrence (if required by the SBA Rules
and Regulations), deems to be in the best interest of the SBA and the
Certificateholders. The Unguaranteed Percentage of the proceeds of sale of the
Foreclosed Property or other Repossessed Collateral shall promptly, but in no
event later than two Business Days after receipt, be deposited in the Principal
and Interest Account as received from time to time and, as soon as practicable
thereafter, the expenses of such sale shall be paid. The Servicer shall,
subject to Section 5.04, reimburse itself for any related unreimbursed Servicing
Advances, unpaid Servicing
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Fees and unreimbursed Monthly Advances, and the Servicer shall deposit in the
Principal and Interest Account the Unguaranteed Percentage of the net cash
proceeds of such sale to be distributed to the Certificateholders in
accordance with Section 6.07 hereof.
In the event any Mortgaged Property or other Repossessed Collateral is
acquired as aforesaid or otherwise in connection with a default or imminent
default on an SBA Loan, the Servicer shall dispose of such Mortgaged Property or
other Repossessed Collateral within two years after its acquisition unless the
Servicer and the Trustee shall have received an Opinion of Counsel also
addressed to the SBA to the effect that such longer retention will not cause the
Trust Fund to be subject to Federal income tax.
Section 5.11 [Intentionally Omitted.]
Section 5.12 Collection of Certain SBA
-------------------------
Loan Payments.
-------------
The Servicer shall make reasonable efforts to collect all payments
called for under the terms and provisions of the SBA Loans, and shall cause the
Obligor under the SBA Loan, to the extent such procedures shall be consistent
with this Agreement, to comply with the terms and provisions of any applicable
hazard insurance policy. Consistent with the foregoing and the SBA Rules and
Regulations, the Servicer may in its discretion waive or permit to be waived any
fee or charge (other than the Servicing Fee, without the written consent of the
SBA) which the Servicer would be entitled to retain hereunder as servicing
compensation and extend the due date for payments due on an SBA Note for a
period (with respect to each payment as to which the due date is extended) not
greater than 180 days after the initially scheduled due date for such payment
provided that the Servicer determines such extension would not be considered a
new mortgage loan for federal income tax purposes. In the event the Servicer
shall consent to the deferment of the due dates for payments due on an SBA Note,
the Servicer shall nonetheless make payment of any required Monthly Advance with
respect to the payments so extended to the same extent as if such installment
were due, owing and delinquent and had not been deferred, and shall be entitled
to reimbursement therefor in accordance with Section 5.04(b) hereof.
Section 5.13 Access to Certain Documentation and
-----------------------------------
Information Regarding the SBA Loans.
-----------------------------------
The Servicer shall provide to the Trustee, the SBA, the FDIC, and the
OCC, and the supervisory agents and examiners of
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each of the foregoing access to the documentation regarding the SBA Loans
required by applicable local, state and federal regulations, such access being
afforded without charge but only upon reasonable request and during normal
business hours at the offices of the Servicer designated by it.
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ARTICLE VI
PAYMENTS TO THE CERTIFICATEHOLDERS
----------------------------------
Section 6.01 Establishment of Certificate Account; Deposits in
-------------------------------------------------
Certificate Account; Permitted Withdrawals from
-----------------------------------------------
Certificate Account.
-------------------
(a) No later than the Closing Date, the Trustee will establish and
maintain with itself in its trust department a trust account, which shall not be
interest-bearing, titled "Certificate Account, Marine Midland Bank, as trustee
for the registered holders of First National Bank of New England SBA Loan-Backed
Adjustable Rate Certificates, Series 1998-1, Class A and Class B" (the
"Certificate Account"). The Trustee shall, promptly upon receipt, deposit in
the Certificate Account and retain therein:
(i) the Available Funds (net of the amount of Monthly Advances
and Compensating Interest deposited pursuant to subclause (ii) below
and amounts then on deposit in the Spread Account) remitted by the
Servicer;
(ii) the Compensating Interest and the portion of the Monthly
Advance remitted to the Trustee by the Servicer;
(iii) amounts transferred from the Spread Account pursuant to
Section 6.02(b)(i);
(iv) amounts required to be paid by the Servicer pursuant to
Section 6.06(e) in connection with losses on investments of amounts in
the Certificate Account; and
(v) amounts transferred from the Pre-Funding Account and the
Capitalized Interest Account on the Special Remittance Date pursuant
to Sections 6.04(c) and (h), respectively.
(b) Amounts on deposit in the Certificate Account shall be withdrawn
on each Remittance Date by the Trustee, or the Paying Agent, on its behalf, to
effect the distribution described in Section 6.07(b) and thereafter by the
following parties in no particular order of priority:
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(i) by the Trustee, to invest amounts on deposit in the
Certificate Account in Permitted Instruments pursuant to Section 6.06;
(ii) by the Trustee, to pay on a monthly basis to the Servicer
as additional servicing compensation interest paid and earnings
realized on Permitted Instruments;
(iii) by the Trustee, to withdraw any amount not required to be
deposited in the Certificate Account or deposited therein in error;
and
(iv) by the Trustee, to clear and terminate the Certificate
Account upon the termination of this Agreement in accordance with the
terms of Section 11.01 hereof.
Section 6.02 Establishment of Spread Account; Deposits in Spread
---------------------------------------------------
Account; Permitted Withdrawals from Spread Account.
--------------------------------------------------
(a) No later than the Closing Date, the Trustee will establish with
the Spread Account Custodian an Account in accordance with the terms of the
Spread Account Agreement (the "Spread Account"). The Spread Account shall be
the property of the Spread Account Depositor, subject to the terms hereof and of
the Spread Account Agreement, and the funds held therein may be invested in
Permitted Instruments. The Spread Account shall not constitute part of the
Trust Fund. The Trustee or the Spread Account Custodian, as the case may be,
shall, promptly upon receipt, deposit into the Spread Account or, in the case of
the Trustee, transfer to the Spread Account Custodian for deposit in the Spread
Account:
(i) on the Closing Date, the Initial Spread Account Deposit
made by the Spread Account Depositor;
(ii) on each Remittance Date, that portion of the Available
Funds, if any, required to be deposited into the Spread Account
pursuant to Section 6.07(b)(vi) until the Spread Account Balance
equals the then applicable Specified Spread Account Requirement; and
(iii) amounts required to be paid by the Servicer pursuant to
Section 6.06(e) in connection with losses on investments of amounts in
the Spread Account.
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(b) Amounts on deposit in the Spread Account shall be withdrawn by
the Spread Account Custodian and transferred to the Trustee for distribution in
the manner set forth in subclause (c) below on each Remittance Date in the
following order of priority:
(i) to deposit in the Certificate Account an amount by which
(a) the sum of the Class A and Class B Interest Distribution Amounts,
the Class A and Class B Principal Distribution Amounts and the Class A
and Class B Carry Forward Amounts exceeds (b) the Available Funds for
such Remittance Date (but excluding from such definition of Available
Funds, amounts in the Spread Account);
(ii) to deposit in the Certificate Account the amount, if any,
required to make the full distribution to the Expense Account pursuant
to Section 6.07(b)(v); and
(iii) to the extent that the amount then on deposit in the
Spread Account after giving effect to all required transfers from the
Spread Account to the Certificate Account on such Remittance Date then
exceeds the Specified Spread Account Requirement as of such Remittance
Date (such excess, a "Spread Account Excess"), an amount equal to such
Spread Account Excess shall be distributed by the Spread Account
Custodian to the Spread Account Depositor;
and also, in no particular order of priority:
(iv) to invest amounts on deposit in the Spread Account in
Permitted Instruments pursuant to Section 6.06;
(v) to withdraw any amount not required to be deposited in the
Spread Account or deposited therein in error; and
(vi) to clear and terminate the Spread Account upon the
termination of this Agreement in accordance with the terms of Section
11.01.
(c) Any amounts which are required to be withdrawn from the Spread
Account pursuant to paragraph (b) above shall be withdrawn from the Spread
Account in the following order of priority: (i) first, from any uninvested
-----
funds therein, and (ii) second, from the proceeds of the liquidation of any
------
investments therein pursuant to Section 6.06(b).
VI-3
(d) Any amounts which are distributed by the Spread Account Custodian
to the Spread Account Depositor pursuant to paragraph (b) above will not be
required to be refunded, regardless of whether there are sufficient funds on a
subsequent Remittance Date to make a full distribution to holders of the
Certificates on such Remittance Date.
Section 6.03 Establishment of Expense Account; Deposits in Expense
-----------------------------------------------------
Account; Permitted Withdrawals from Expense Account
---------------------------------------------------
(a) No later than the Closing Date, the Trustee will establish with
itself an account for the benefit of the Trustee to pay its fees and expenses
related to the Trust Fund (the "Expense Account"). The Expense Account shall
not constitute part of the Trust Fund and is for the benefit of the Trustee and,
on a subordinate basis, for the benefit of the Servicer as described in (b)(ii)
and (c) below. The Trustee shall deposit into the Expense Account:
(i) on each Remittance Date from the amounts on deposit in the
Certificate Account an amount equal to one-twelfth of the Annual
Expense Escrow Amount; and
(ii) upon receipt, amounts required to be paid by the Servicer
pursuant to Section 6.06(e) in connection with losses on investments
of amounts in the Expense Account.
If, at any time the amount then on deposit in the Expense Account shall be
insufficient to pay in full the fees and expenses of the Trustee then due, the
Trustee shall make demand on the Servicer to advance the amount of such
insufficiency, and the Servicer shall promptly advance such amount to the
Trustee. Thereafter, the Servicer shall be entitled to reimbursement from the
Expense Account for the amount of any such advance from any excess funds
available pursuant to subclause (c)(ii) below. Without limiting the obligation
of the Servicer to advance such insufficiency, in the event the Servicer does
not advance the full amount of such insufficiency by the Business Day
immediately preceding the Determination Date, the amount of such insufficiency
shall be deposited into the Expense Account for payment to the Trustee pursuant
to Section 6.07(b)(v), to the extent of available funds in the Certificate
Account.
(b) The Trustee, at the direction of the Servicer, may invest amounts
on deposit in the Expense Account in Permitted Instruments pursuant to Section
6.06 hereof, and the Trustee shall withdraw amounts on deposit in the Expense
Account to:
VI-4
(i) pay the Trustee's fees and expenses as described in
Section 2.08 hereof;
(ii) pay on a monthly basis to the Servicer as additional
servicing compensation interest paid and earnings realized on
Permitted Instruments;
(iii) withdraw any amounts not required to be deposited in the
Expense Account or deposited therein in error; and
(iv) clear and terminate the Expense Account upon the
termination of this Agreement in accordance with the terms of Section
11.01.
(c) On the twelfth Remittance Date following the Closing Date, an
on each twelfth Remittance Date thereafter, the Trustee shall determine that all
payments required to be made during the prior twelve month period pursuant to
subclauses (b)(i), (b)(ii) and (b)(iii) above, have been made, and, if all such
payments have been made, from the amounts remaining in the Expense Account, the
Trustee shall (in the following order of priority):
(i) reimburse the Servicer and/or the Seller, for reimbursable
advances made pursuant to Section 9.01;
(ii) reimburse the Servicer for advances made by it pursuant to
the last paragraph of subclause (a) above; and
(iii) remit to the Servicer as additional servicing compensation
any amounts remaining in the Expense Account after payments made
pursuant to subclauses (b)(i), (b)(ii), (b)(iii), (c)(i) and (c)(ii),
above.
Section 6.04 Pre-Funding Account and Capitalized Interest Account.
----------------------------------------------------
(a) No later than the Closing Date, the Seller shall establish and
maintain with the Trustee in its trust department a trust account, which shall
not be interest-bearing, titled "First National Bank of New England SBA Pre-
Funding Account 1998-1" (the "Pre-Funding Account"). The Pre-Funding Account
shall not constitute part of the Trust Fund. The Seller shall be deemed the
owner of the Pre-Funding Account for Federal income tax purposes. The Trustee
shall, promptly upon receipt, deposit into
VI-5
the Pre-Funding Account and retain therein the Original Pre-Funded Amount from
the proceeds of the sale of the Certificates.
(b) On each Subsequent Transfer Date, the Seller shall instruct the
Trustee to withdraw from the Pre-Funding Account an amount equal to 100% of the
aggregate Principal Balances of the Subsequent SBA Loans as of the related
Subsequent Cut-Off Date sold to the Trust Fund on such Subsequent Transfer Date
and pay such amount to or upon the order of the Seller with respect to such
transfer.
(c) If at the end of the Funding Period amounts still remain in the
Pre-Funding Account, the Servicer shall instruct the Trustee to withdraw from
the Pre-Funding Account on the immediately following Remittance Date and deposit
such amounts in the Certificate Account. However, if at the close of business
on September 10, 1998, amounts still remain in the Pre-Funding Account, the
Servicer shall instruct the Trustee to withdraw from the Pre-Funding Account on
the Special Remittance Date and deposit in the Certificate Account any Pre-
Funded Amount then remaining in the Pre-Funding Account, and then the Pre-
Funding Account shall be closed.
(d) On the Remittance Dates occurring in August and September 1998,
the Trustee shall transfer from the Pre-Funding Account to the Certificate
Account, the Pre-Funding Earnings, if any, applicable to each such Remittance
Date.
(e) No later than the Closing Date, the Seller shall establish and
maintain with the Trustee in its trust department a trust account, which shall
not be interest-bearing, titled "First National Bank of New England SBA
Capitalized Interest Account 1998-1" (the "Capitalized Interest Account"). The
Capitalized Interest Account shall not constitute part of the Trust Fund. The
Seller shall be deemed the owner of the Capitalized Interest Account for Federal
income tax purposes. The Trustee shall, promptly upon receipt, deposit into the
Capitalized Interest Account $71,750.36. If prior to the end of the Funding
Period the funds on deposit in the Pre-Funding Account are invested in a
guaranteed investment contract, repurchase agreement or other arrangement
acceptable to the Rating Agency, that constitutes a Permitted Instrument, the
Trustee shall, within one Business Day of its receipt of notification of
satisfaction of the Rating Agency Condition, withdraw from the Capitalized
Interest Account and pay to the Seller the amount set forth in such
notification.
(f) On each Subsequent Transfer Date the Seller may instruct the
Trustee to withdraw from the Capitalized Interest Account and pay on such
Subsequent Transfer Date to the Seller
VI-6
the Overfunded Interest Amount for such Subsequent Transfer Date, as calculated
by the pursuant to Section 2.09(e) hereof.
(g) On the Remittance Dates occurring in August and September 1998
the Trustee shall transfer from the Capitalized Interest Account to the
Certificate Account, the Capitalized Interest Requirement, if any, for such
Remittance Dates.
(h) On the Special Remittance Date, the Trustee shall transfer from
the Capitalized Interest Account to the Certificate Account the Capitalized
Interest Requirement, if any, for such Special Remittance Date. Any amounts
remaining in the Capitalized Interest Account after taking into account such
transfer shall be paid on such Special Remittance Date to the Seller, and the
Capitalized Interest Account shall be closed.
Section 6.05 [Intentionally Omitted]
Section 6.06 Investment of Accounts.
----------------------
(a) So long as no default or Event of Default shall have occurred and
be continuing, and consistent with any requirements of the Code, all or a
portion of any Account which is not by the terms of this Agreement to be held
uninvested by the Trustee or the Spread Account Custodian shall be invested and
reinvested by the Trustee or the Spread Account Custodian, as directed in
writing by the Servicer, in one or more Permitted Instruments in the name of the
Trustee or the Spread Account Custodian, as the case may be, bearing interest or
sold at a discount. No such investment in the Certificate Account, the Pre-
Funding Account, the Capitalized Interest Account and the Spread Account shall
mature later than the Business Day immediately preceding the next Remittance
Date and no such investment in the Expense Account shall mature later than the
Business Day immediately preceding the date such funds will be needed to pay
fees or premiums; provided, however, the Trustee or any affiliate thereof, may
-------- -------
be the obligor on any investment which otherwise qualifies as a Permitted
Instrument and any investment on which the Trustee is the obligor may mature on
such Remittance Date or date when needed, as the case may be.
(b) If any amounts are needed for disbursement from any Account held
by the Trustee or the Spread Account Custodian and sufficient uninvested funds
are not available to make such disbursement, the Trustee or the Spread Account
Custodian, as the case may be, shall cause to be sold or otherwise converted to
cash a sufficient amount of the investments in such Account. Neither the
Trustee nor the Spread Account Custodian shall be liable for any investment loss
or other charge resulting therefrom.
VI-7
(c) Subject to Section 12.01 hereof, neither the Trustee nor the
Spread Account Custodian shall in any way be held liable by reason of any
insufficiency in any Account held by the Trustee or the Spread Account Custodian
resulting from any investment loss on any Permitted Instrument included therein
(except to the extent that the Trustee is the obligor thereon).
(d) The Trustee and the Spread Account Custodian shall invest and
reinvest funds in the Accounts held by the Trustee or the Spread Account
Custodian, to the fullest extent practicable, in such manner as the Servicer
shall from time to time direct in writing, but only in one or more Permitted
Instruments.
(e) All income or other gain from investments in any Account held by
the Trustee or the Spread Account Custodian shall be deposited in such Account,
as the case may be, immediately on receipt, and the Trustee or the Spread
Account Custodian shall notify the Servicer of any loss resulting from such
investments. The Servicer shall remit the amount of any such loss, to the
extent that such investment was made at the direction of the Servicer, from its
own funds, without reimbursement therefor, to the Trustee or the Spread Account
Custodian, as the case may be, for deposit in the Account from which the related
funds were withdrawn for investment by the next Determination Date following
receipt by the Servicer of such notice.
Section 6.07 Distributions.
-------------
(a) The rights of the Certificateholders to receive distributions
from the proceeds of the Trust Fund, and all ownership interests of the
Certificateholders in such distributions, shall be as set forth in this
Agreement.
(b) On each Remittance Date the Trustee shall withdraw from the
Certificate Account the sum of (A) that portion of the Available Funds received
from the Servicer pursuant to Section 6.01(a)(i), (ii) and (iv),and (B) the
amounts deposited therein pursuant to Section 6.02(b)(i) and make distributions
thereof in the following order of priority:
(i) First, to the Class A Certificates in an amount up to the
Class A Interest Distribution Amount;
(ii) Second, to the Class B Certificates in an amount up to the
Class B Interest Distribution Amount;
(iii) Third, to the Class A Certificates in an amount up to the
sum of (a) the Class A Principal
VI-8
Distribution Amount and (b) the Class A Carry Forward Amount;
(iv) Fourth, to the Class B Certificates, in an amount up to
the sum of (a) the Class B Principal Distribution Amount and (b) the
Class B Carry Forward Amount;
(v) Fifth, to the Expense Account in an amount up to one-
twelfth of the Annual Expense Escrow Amount plus any amount required
to be paid to the Trustee pursuant to Section 6.03(a) resulting from
insufficiencies in the Expense Account;
(vi) Sixth, to the Spread Account, any remaining Available
Funds unless and until the amount therein equals the Specified Spread
Account Requirement;
(vii) Seventh, to the Servicer in an amount up to the
Reimbursable Amounts; and
(viii) Eighth, to the Spread Account Depositor, any amounts in
excess of the Specified Spread Account Requirement.
Notwithstanding the foregoing, the Servicer shall not be entitled to
receive Reimbursable Amounts pursuant to clause (vi) above until the first
Remittance Date on which the Spread Account Balance equals the then applicable
Specified Account Requirement.
Additionally, on the Special Remittance Date, the Trustee shall
withdraw from the Certificate Account the amount, if any, deposited therein
pursuant to Section 6.01(a)(v) and make distributions thereof as follows: (i)
from amounts transferred from the Pre-Funding Account, distributions of
principal to the Class A and Class B Certificates pro rata based upon the Class
A and Class B Percentages and (ii) from amounts transferred from the Capitalized
Interest Account, distributions of interest to such Class A and Class B
Certificates equal to the applicable Capitalized Interest Requirement.
(c) All distributions made to the Certificateholders of a particular
Class will be made on a pro rata basis among the Certificateholders of record of
the applicable Class on the next preceding Record Date based on the Percentage
Interest represented by their respective Certificates on such date, and shall be
made by check or, upon request by a Certificateholder, by wire transfer of
immediately available funds to the account of
VI-9
such Certificateholder at a bank or other entity having appropriate facilities
therefor, and, in the case of wire transfers, at the expense of such
Certificateholder unless such Certificateholder shall own of record Certificates
which have initial Certificate Principal Balances aggregating at least
$5,000,000.
Section 6.08 [Intentionally Omitted]
Section 6.09 Statements.
----------
Each month, not later than 12:00 noon New York time on the
Determination Date, the Servicer shall deliver to the Trustee, by telecopy, for
distribution to the Certificateholders, the receipt and legibility of which
shall be confirmed telephonically, with hard copy thereof and the Servicer's
Monthly Computer Diskette in the form attached hereto as Exhibit L (both in hard
copy and in computer diskette form) to be delivered on the Business Day
following the Determination Date, a certificate signed by a Servicing Officer (a
"Servicer's Certificate") stating the date (day, month and year), the Series
number of the Certificates, the date of this Agreement, and, as of the close of
business on the Record Date for such month:
(i) Available Funds for the related Remittance Date;
(ii) The Aggregate Class A Certificate Principal Balance, the
Aggregate Class B Certificate Principal Balance and the Pool Principal
Balance as reported in the prior Servicer's Certificate pursuant to
subclause (xii) below, or, in the case of the first Determination
Date, the Original Class A and Class B Certificate Principal Balance
and the Original Pool Principal Balance;
(iii) The number and Principal Balances of all SBA Loans which
were the subject of Principal Prepayments during the Due Period and
the number and Principal Balances of all Defaulted SBA Loans purchased
by the Servicer during the Due Period;
(iv) The product of the Unguaranteed Percentage multiplied by
all Curtailments which were received during the Due Period;
(v) The product of the Unguaranteed Percentage multiplied by
all Excess Payments and the product of the Unguaranteed Percentage
multiplied by
VI-10
all Monthly Payments in respect of principal received during the Due
Period;
(vi) The aggregate amount of interest received on the
Unguaranteed Interest of each SBA Loan;
(vii) The amount of the Monthly Advances to be made on the
Determination Date and the Compensating Interest payment to be made on
the Determination Date;
(viii) The delinquency and foreclosure information set forth in
the form attached hereto as Exhibit K;
(ix) The product of the Unguaranteed Percentage multiplied by
the amount of any losses realized on a Liquidated SBA Loan;
(x) The Class A and Class B Interest Distribution Amounts and
Principal Distribution Amounts for the Remittance Date with the
components thereof stated separately;
(xi) The amount stated in dollars and as a percentage of the
current aggregate Principal Balance of the Class A and Class B
Certificates of the funds available in the Spread Account as of the
related Record Date in cash and from liquidation of Permitted
Instruments and the amount, if any, to be transferred from the Spread
Account to the Certificate Account pursuant to Section 6.02(b)(i);
(xii) The Aggregate Class A Certificate Principal Balance,
Aggregate Class B Certificate Principal Balance and the Pool Principal
Balance after giving effect to the distribution to be made on the
Remittance Date;
(xiii) The Spread Account Balance and the Specified Spread
Account Requirement with respect to such Remittance Date;
(xiv) The weighted average maturity and weighted average SBA
Loan Interest Rate;
(xv) The Servicing Fees and the Annual Expense Escrow Amount
and other amounts to be deposited to the Expense Account;
VI-11
(xvi) The amount of all payments and reimbursements to the
Servicer pursuant to Section 5.04 (b), (c), (d)(ii), (e) and (f);
(xvii) The Class A and Class B Remittance Rates with respect to
such Remittance Date;
(xviii) During the Funding Period, the aggregate Principal
Balance of the Subsequent SBA Loans purchased during the prior Due
Period and the amount on deposit in the Pre-Funding Account as of the
end of such Due Period; and
(xix) Such other information as the Trustee, the
Certificateholders or the Rating Agency may reasonably require;
provided, however, that the Servicer shall have no obligation to
distribute such information directly to any Certificateholder.
The Trustee shall forward such report to the Certificateholders and
the Rating Agency on the Remittance Date, together with a separate report
indicating the amount of funds deposited in the Certificate Account pursuant to
Section 6.01(a)(iv); and the amounts which are reimbursable to the Servicer or
the Seller pursuant to Sections 6.03(c)(i), 6.03(c)(ii) and 6.07(b)(vii) (all
reports prepared by the Trustee of such withdrawals and deposits will be based
in whole or in part upon the information provided to the Trustee by the
Servicer).
To the extent that there are inconsistencies between the telecopy of
the Servicer's Certificate and the hard copy thereof, the Trustee shall be
entitled to rely upon the telecopy. In the case of information furnished
pursuant to subclauses (ii), (iii), (iv), (v), (x) and (xii), above, the amounts
shall be expressed in a separate section of the report as a dollar amount for
each Class per $1,000 original dollar amount as of the Cut-Off Date.
Additionally, on the Special Remittance Date the Trustee shall, based
upon information received from the Servicer, forward to the Certificateholders
and the Rating Agency a report setting forth the amount of principal and
interest, if any, being paid to each Class of Certificates on the Special
Remittance Date.
(a) Within a reasonable period of time after the end of each calendar
year, the Servicer shall furnish to the Trustee for distribution to each Person
who at any time during the calendar year was a Certificateholder such
information as is
VI-12
reasonably necessary to provide to such Person a statement containing the
information set forth in subclauses (vi), (x), and (xiv), above, aggregated for
such calendar year or applicable portion thereof during which such Person was a
Certificateholder. Such obligation of the Servicer shall be deemed to have been
satisfied to the extent that substantially comparable information shall be
provided by the Servicer pursuant to any requirements of the Code as from time
to time are in force.
(b) Upon reasonable advance notice in writing, the Servicer will
provide to each Certificateholder which is a savings and loan association, bank
or insurance company certain reports and access to information and documentation
regarding the SBA Loans sufficient to permit such Certificateholder to comply
with applicable regulations of its regulatory authorities with respect to
investment in the Certificates.
(c) The Servicer shall furnish to each Certificateholder, during the
term of this Agreement, such periodic, special, or other reports or information,
whether or not provided for herein, as shall be necessary, reasonable, or
appropriate with respect to the Certificateholder or otherwise with respect to
the purposes of this Agreement, all such reports or information to be provided
by and in accordance with such applicable instructions and directions as the
Certificateholder may reasonably require; provided, that the Servicer shall be
entitled to be reimbursed by such Certificateholder for the Servicer's actual
expenses incurred in providing such reports if such reports are not producible
in the ordinary course of the Servicer's business. The Rating Agency shall
receive copies of any such reports or information furnished to the
Certificateholders.
Section 6.10 Advances by the Servicer.
------------------------
Not later than the close of business on each Determination Date, the
Servicer, may in its sole discretion, if it determines such amount is
recoverable, remit to the Trustee for deposit in the Certificate Account an
amount (as indicated in the Servicer's Certificate prepared pursuant to Section
6.09), to be distributed on the related Remittance Date pursuant to Section
6.07, equal to the amount by which (i) 30 days' interest (or with respect to the
first Remittance Date, 45 days' interest) at a rate equal to the then applicable
Adjusted SBA Loan Remittance Rate on the aggregate Class A and Class B Principal
Balances immediately prior to the related Remittance Date (plus or minus the
difference, if any, between (A) the sum of the Class A and Class B Interest
Distribution Amounts and (B) the sum of the Adjusted Class A and Adjusted Class
B Interest Distribution Amounts for the related Remittance Date) exceeds (ii)
the amount
VI-13
received by the Servicer as of the related Record Date in respect of interest on
the Unguaranteed Interest of the SBA Loans minus the Servicing Fee allocable to
the Unguaranteed Interest (plus, for the Remittance Dates in August and
September 1998, the sum of (i) all funds to be transferred to the Certificate
Account from the Capitalized Interest Account for such Remittance Date pursuant
to Section 6.04(g) and (ii) the Pre-Funding Earnings for the applicable
Remittance Date), such excess being defined herein as the "Monthly Advance." The
Servicer may reimburse itself for Monthly Advances made pursuant to Section
5.04. Notwithstanding the foregoing, the Servicer shall not be required to make
a Monthly Advance with respect to an SBA Loan if it determines, in good faith,
that such advance would be nonrecoverable from amounts received in respect of
the SBA Loans.
Section 6.11 Compensating Interest.
---------------------
The Certificateholders shall be entitled to a full month's interest on
the principal portion of the Unguaranteed Interest of each SBA Loan at the then
applicable Class A or Class B Remittance Rate, as the case may be. Not later
than the close of business on each Determination Date, with respect to each SBA
Loan for which a Principal Prepayment or Curtailment was received during the
related Due Period, the Servicer shall remit to the Trustee for deposit in the
Certificate Account from amounts otherwise payable to it as servicing
compensation, an amount (such amount required to be delivered to the Trustee is
referred to herein as "Compensating Interest") (as indicated in the Servicer's
Certificate prepared pursuant to Section 6.09) equal to the difference between
(a) 30 days' interest (or with respect to the first Remittance Date 45 days'
interest) at the Adjusted SBA Loan Remittance Rate on the Principal Balance of
each such SBA Loan as of the beginning of the Due Period applicable to the
Remittance Date on which such amount will be distributed, and (b) the amount of
interest actually received on the Unguaranteed Interest of each such SBA Loan
for such Due Period net of the Servicing Fee allocable to the Unguaranteed
Interest and the fees and expenses of the Trustee allocable to such interest
and, with respect to each Additional Fee SBA Loan, the Additional Fee.
Section 6.12 Reports of Foreclosure and Abandonment of Mortgaged
---------------------------------------------------
Property
--------
Each year the Servicer shall make the reports of foreclosures and
abandonments of any Mortgaged Property required by Section 6050J of the Code.
Promptly after filing each such report with the Internal Revenue Service, the
Servicer shall provide the Trustee with an Officer's Certificate certifying that
such report has been filed.
VI-14
ARTICLE VII
GENERAL SERVICING PROCEDURE
---------------------------
Section 7.01 [Intentionally Omitted]
Section 7.02 Satisfaction of Mortgages and Collateral and Release of
-------------------------------------------------------
SBA Files
---------
The Servicer shall maintain the Fidelity Bond as provided for in
Section 5.09 insuring the Servicer against any loss it may sustain with respect
to any SBA Loan not satisfied in accordance with the procedures set forth
herein.
Upon the payment in full of any SBA Loan, or the receipt by the
Servicer of a notification that payment in full will be escrowed in a manner
customary for such purposes, the Servicer will immediately notify the FTA and
the Trustee by a certification in the form of Exhibit I attached hereto (which
certification shall include a statement to the effect that all amounts received
or to be received in connection with such payment which are required to be
deposited in the Principal and Interest Account pursuant to Section 5.03 have
been or will be so deposited) of a Servicing Officer and shall request delivery
to it of the Trustee's Document File. Upon receipt of such certification and
request, the FTA and the Trustee shall release, within 3 Business Days, the
related Trustee's Document File to the Servicer. Expenses incurred in
connection with any instrument of satisfaction or deed of reconveyance shall be
payable only from and to the extent of servicing compensation and shall not be
chargeable to the Principal and Interest Account or the Certificate Account.
Subject to the Multi-Party Agreement, from time to time and as
appropriate for the servicing or foreclosure of any SBA Loan, the FTA and the
Trustee shall, upon request of the Servicer and delivery to the FTA and the
Trustee of a certification in the form of Exhibit I attached hereto signed by a
Servicing Officer, release the related Trustee's Document File to the Servicer
within 3 Business Days, and the Trustee shall execute such documents as shall be
necessary to the prosecution of any such proceedings. The Servicer shall return
the Trustee's Document File to the FTA and the Trustee when the need therefor by
the Servicer no longer exists, unless the SBA Loan has been liquidated and the
Unguaranteed Percentage of the Liquidation Proceeds relating to the SBA Loan has
been deposited in the Principal and Interest Account and remitted to the Trustee
for deposit in the Certificate Account or the SBA File or such document has been
delivered to an attorney, or to a public trustee or other public official as
required by law, for purposes
VII-1
of initiating or pursuing legal action or other proceedings for the foreclosure
of the Mortgaged Property or repossession of other Collateral either judicially
or non-judicially, and the Servicer has delivered to the FTA and the Trustee a
certificate of a Servicing Officer certifying as to the name and address of the
Person to whom such SBA File or such document was delivered and the purpose or
purposes of such delivery. Upon receipt of a certificate of a Servicing Officer
stating that such SBA Loan was liquidated, the servicing receipt shall be
released by the Trustee to the Servicer.
The Trustee shall execute and deliver to the Servicer any court
pleadings, requests for trustee's sale or other documents provided to it
necessary to the foreclosure or trustee's sale in respect of a Mortgaged
Property or other Collateral or to any legal action brought to obtain judgment
against any Obligor on the SBA Note or Mortgage or other agreement securing
Collateral or to obtain a deficiency judgment, or to enforce any other remedies
or rights provided by the SBA Note or Mortgage or other agreement securing
Collateral or otherwise available at law or in equity. Together with such
documents or pleadings, the Servicer shall deliver to the Trustee a certificate
of a Servicing Officer requesting that such pleadings or documents be executed
by the Trustee and certifying as to the reason such documents or pleadings are
required and that the execution and delivery thereof by the Trustee will not
invalidate or otherwise affect the lien of the Mortgage or other agreement
securing Collateral, except for the termination of such a lien upon completion
of the foreclosure or trustee's sale. The Trustee shall, upon receipt of a
written request from a Servicing Officer, execute any document provided to the
Trustee by the Servicer or take any other action requested in such request, that
is, in the opinion of the Servicer as evidenced by such request, required by any
state or other jurisdiction to discharge the lien of a Mortgage or other
agreement securing Collateral upon the satisfaction thereof and the Trustee will
sign and post, but will not guarantee receipt of, any such documents to the
Servicer, or such other party as the Servicer may direct, within five Business
Days of the Trustee's receipt of such certificate or documents. Such
certificate or documents shall establish to the Trustee's satisfaction that the
related SBA Loan has been paid in full by or on behalf of the Obligor and that
such payment has been deposited in the Principal and Interest Account.
Section 7.03 Servicing Compensation.
----------------------
As compensation for its services hereunder, the Servicer shall be
entitled to withdraw from the Principal and Interest Account or to retain from
interest payments on the SBA Loans the Servicer's Servicing Fee in accordance
with Section
VII-2
5.04(b). Additional servicing compensation in the form of assumption and other
administrative fees, interest paid on funds on deposit in the Principal and
Interest Account, interest paid and earnings realized on Permitted Instruments,
amounts remitted pursuant to Section 6.03(c)(iii) and late payment charges shall
be retained by or remitted to the Servicer to the extent not required to be
remitted to the Trustee for deposit in the Certificate Account. The Servicer
shall be required to pay all expenses incurred by it in connection with its
servicing activities hereunder and shall not be entitled to reimbursement
therefor except as specifically provided for herein.
Section 7.04 Annual Statement as to Compliance.
---------------------------------
The Servicer will deliver to the Trustee, the SBA and the Rating
Agency on or before March 31 of each year beginning March 31, 1999, an Officer's
Certificate stating that (i) the Servicer has fully complied with the provisions
of Articles V and VII, (ii) a review of the activities of the Servicer during
the preceding calendar year and of performance under this Agreement has been
made under such officer's supervision, and (iii) to the best of such officer's
knowledge, based on such review, the Servicer has fulfilled all its obligations
under this Agreement throughout such year, or, if there has been a default in
the fulfillment of any such obligation, specifying each such default known to
such officers and the nature and status thereof and the action being taken by
the Servicer to cure such default.
Section 7.05 Annual Independent Public Accountants' Servicing Report
-------------------------------------------------------
On or before March 31 of each year beginning March 31, 1999, the
Servicer, at its expense, shall cause one of the "big six" accounting firms to
furnish a letter or letters to the Trustee and the Rating Agency to the effect
that such firm has with respect to the Servicer's overall servicing operations
examined such operations in accordance with the requirements of the Uniform
Single Audit Program for Mortgage Bankers, and stating such firm's conclusions
relating thereto.
Section 7.06 SBA's and Trustee's Right to Examine Servicer Records
-----------------------------------------------------
and Audit Operations
--------------------
The SBA and the Trustee shall have the right upon reasonable prior
notice, during normal business hours and as often as reasonably required, to
examine and audit any and all of the books, records or other information of the
Servicer, whether held by the Servicer or by another on behalf of the Servicer,
which may be relevant to the performance or observance by the Servicer of the
terms, covenants or conditions of this Agreement.
VII-3
No amounts payable in respect of the foregoing shall be paid from the Trust
Fund.
Section 7.07 Reports to the Trustee; Principal and Interest Account
------------------------------------------------------
Statements.
----------
Not later than 20 days after each Record Date, the Servicer shall
forward to the Trustee and the SBA a statement, certified by a Servicing
Officer, setting forth the status of the Principal and Interest Account as of
the close of business on the preceding Record Date and showing, for the period
covered by such statement, the aggregate of deposits into the Principal and
Interest Account for each category of deposit specified in Section 5.03, the
aggregate of withdrawals from the Principal and Interest Account for each
category of withdrawal specified in Section 5.04, the aggregate amount of
permitted withdrawals not made in the related Due Period, and the amount of any
Monthly Advances or payments of Compensating Interest, in each case, for the
related Due Period.
Section 7.08 Premium Protection Fee and Servicing Fee.
----------------------------------------
Pursuant to and in accordance with the policies of the SBA and SBA
Form 1086, the Servicer shall retain the Premium Protection Fee where the
Guaranteed Interest has been sold and the Servicing Fee for each SBA (S) 7(a)
Loan. The Premium Protection Fee and the Servicing Fee shall not constitute
part of the Trust Fund and Certificateholders shall have no interest in, and are
not entitled to receive any portion of, the Premium Protection Fee and the
Servicing Fee. If the Servicer is replaced as servicer pursuant to any
provision of this Agreement, it shall no longer be entitled to the Premium
Protection Fee and the Servicing Fee but, instead, the successor servicer shall
be entitled thereto.
VII-4
ARTICLE VIII
REPORTS TO BE PROVIDED BY SERVICER
----------------------------------
Section 8.01 Financial Statements.
--------------------
The Servicer understands that, in connection with a transfer of the
Certificates, Certificateholders may request that the Servicer make available to
prospective Certificateholders the annual audited financial statements of the
Servicer's parent (First International Bancorp, Inc., and any successor thereto)
for one or more of the most recently completed five fiscal years for which such
statements are publicly available, which request shall not be unreasonably
denied.
The Servicer also agrees to make available on a reasonable basis to
any prospective Certificateholder a knowledgeable financial or accounting
officer for the purpose of answering reasonable questions respecting recent
developments affecting the Servicer or the financial statements of the Servicer
and its parent (First International Bancorp, Inc. and any successor thereto) and
to permit any prospective Certificateholder to inspect the Servicer's servicing
facilities during normal business hours for the purpose of satisfying such
prospective Certificateholder that the Servicer has the ability to service the
SBA Loans in accordance with this Agreement.
VIII-1
ARTICLE IX
THE SERVICER
------------
Section 9.01 Indemnification; Third Party Claims.
-----------------------------------
(a) The Servicer agrees to indemnify and hold the Trustee, the SBA,
and each Certificateholder harmless against any and all claims, losses,
penalties, fines, forfeitures, legal fees and related costs, judgments, and any
other costs, fees and expenses that the Trustee, the SBA, and any
Certificateholder may sustain in any way related to the failure of the Servicer
to perform its duties and service the SBA Loans in compliance with the terms of
this Agreement. The Servicer shall immediately notify the Trustee, the SBA and
each Certificateholder if a claim is made by any party with respect to this
Agreement, and the Servicer shall assume (with the consent of the Trustee) the
defense of any such claim and pay all expenses in connection therewith,
including reasonable counsel fees, and promptly pay, discharge and satisfy any
judgment or decree which may be entered against the Servicer, the Trustee, the
SBA, and/or a Certificateholder in respect of such claim. The Trustee may
reimburse the Servicer from the Expense Account pursuant to Section 6.03(c)(i)
for all amounts advanced by it pursuant to the preceding sentence except when
the claim relates directly to the failure of the Servicer to service and
administer the SBA Loans in compliance with the terms of this Agreement.
(b) The Seller agrees to indemnify and hold the Trustee, the SBA and
each Certificateholder harmless against any and all claims, losses, penalties,
fines, forfeitures, legal fees and related costs, judgments, and any other
costs, fees and expenses that the Trustee, the SBA, and any Certificateholder
may sustain in any way related to the failure of the Servicer, if it is an
affiliate thereof, or the failure of the Seller to perform its respective duties
in compliance with the terms of this Agreement and in the best interests of the
SBA and the Certificateholders. The Seller shall immediately notify the
Trustee, the SBA, and each Certificateholder if a claim is made by a third party
with respect to this Agreement, and the Seller shall assume (with the consent of
the Trustee) the defense of any such claim and pay all expenses in connection
therewith, including reasonable counsel fees, and promptly pay, discharge and
satisfy any judgment or decree which may be entered against the Servicer, the
Seller, the Trustee, the SBA and/or a Certificateholder in respect of such
claim. The Trustee may reimburse the Seller from the Expense Account pursuant
to Section 6.03(c)(i) for all amounts advanced by them pursuant to the preceding
sentence except when the claim relates directly to the Seller's indemnification
pursuant to Section 2.05 and
IX-1
Section 3.03 or to the failure of the Servicer, if it is an affiliate of the
Seller, to perform its obligations to service and administer the Mortgages in
compliance with the terms of this Agreement, or the failure of the Seller to
perform its duties in compliance with the terms of this Agreement and in the
best interests of the SBA and the Certificateholders.
Section 9.02 Merger or Consolidation of the Servicer; Assignment of
------------------------------------------------------
the Servicer's Duties.
---------------------
The Servicer will keep in full effect its existence, rights and
franchises as a corporation, bank or association and will obtain and preserve
its qualification to do business as a foreign entity in each jurisdiction
necessary to protect the validity and enforceability of this Agreement or any of
the SBA Loans and to perform its duties under this Agreement.
Any Person into which the Servicer may be merged or consolidated, or
any Person resulting from any merger, conversion or consolidation to which the
Servicer shall be a party, or any Person succeeding to all or substantially all
of the business of the Servicer, shall be an established mortgage loan servicing
institution that has a net worth of at least $15,000,000 and shall be an
approved SBA guaranteed lender in good standing, operating pursuant to an
effective Loan Guaranty Agreement, and shall be the successor of the Servicer,
hereunder, without the execution or filing of any paper or any further act on
the part of any of the parties hereto, anything herein to the contrary
notwithstanding. The Servicer shall send notice of any such merger or
consolidation to the Trustee, the Rating Agency and the SBA.
Subject to the receipt of approval from the SBA, the Servicer is
permitted to assign its rights and duties hereunder to, and such rights and
duties can be assumed by, an affiliate of the Servicer having a net worth of at
least $15,000,000 and which is an approved SBA guaranteed lender in good
standing, operating pursuant to an effective Loan Guaranty Agreement (the
"Assignee") (in which case all of the provisions of this Agreement shall, to the
same extent as they apply to the Servicer hereunder, apply to the Assignee
rather than the Servicer), without the execution or filing of any paper or any
further act on the part of any of the parties hereto, anything herein to the
contrary notwithstanding. The Servicer shall send notice of any such assignment
to the Trustee, the Rating Agency and the SBA.
IX-2
Section 9.03 Limitation on Liability of the Servicer and Others.
--------------------------------------------------
The Servicer and any director, officer, employee or agent of the
Servicer may rely on any document of any kind which it in good faith reasonably
believes to be genuine and to have been adopted or signed by the proper
authorities or persons respecting any matters arising hereunder. Subject to the
terms of Section 9.01 herein, the Servicer shall have no obligation to appear
with respect to, prosecute or defend any legal action which is not incidental to
the Servicer's duty to service the SBA Loans in accordance with this Agreement.
Section 9.04 Servicer Not to Resign.
----------------------
The Servicer shall not resign from the obligations and duties hereby
imposed on it except (i) by mutual consent of the Servicer, the SBA, the Trustee
and the Majority Certificateholders, or (ii) in connection with a merger,
conversion or consolidation permitted pursuant to Section 9.02 and with the
consent of the SBA (in which case the Person resulting from the merger,
conversion or consolidation shall be the successor of the Servicer), or (iii) in
connection with an assignment permitted pursuant to Section 9.02 and with the
consent of the SBA (in which case the Assignee shall be the successor of the
Servicer), or (iv) upon the determination that the Servicer's duties hereunder
are no longer permissible under applicable law or administrative determination
and such incapacity cannot be cured by the Servicer. Any such determination
permitting the resignation of the Servicer shall be evidenced by a written
Opinion of Counsel (who may be counsel for the Servicer) to such effect
delivered to the Trustee, the SBA and to each Certificateholder, which Opinion
of Counsel shall be in form and substance acceptable to the Trustee. No such
resignation shall become effective until a successor has assumed the Servicer's
responsibilities and obligations hereunder in accordance with Section 10.02.
IX-3
ARTICLE X
DEFAULT
-------
Section 10.01 Events of Default.
-----------------
(a) In case one or more of the following Events of Default by the
Servicer shall occur and be continuing, that is to say:
(i) (A) the failure by the Servicer to make any required
Servicing Advance, to the extent such failure materially and adversely
affects the interests of the Certificateholders; (B) the failure by
the Servicer to make any required Monthly Advance to the extent such
failure materially and adversely affects the interests of the
Certificateholders; (C) the failure by the Servicer to remit any
Compensating Interest to the extent such failure materially and
adversely affects the interests of the Certificateholders; or (D) any
failure by the Servicer to remit to Certificateholders, or to the
Trustee for the benefit of the Certificateholders, any payment
required to be made under the terms of this Agreement which continues
unremedied after the date upon which written notice of such failure,
requiring the same to be remedied, shall have been given to the
Servicer by the Trustee or to the Servicer and the Trustee by any
Certificateholder; or
(ii) failure by the Servicer or the Seller duly to observe or
perform, in any material respect, any other covenants, obligations or
agreements of the Servicer or the Seller as set forth in this
Agreement, which failure continues unremedied for a period of 60 days
after the date on which written notice of such failure, requiring the
same to be remedied, shall have been given to the Servicer or the
Seller, as the case may be, by the Trustee or to the Servicer, or the
Seller, as the case may be, and the Trustee by any Certificateholder;
or
(iii) a decree or order of a court or agency or supervisory
authority having jurisdiction for the appointment of a conservator or
receiver or liquidator in any insolvency, readjustment of debt,
marshaling of assets and liabilities or similar proceedings, or for
the winding-up or liquidation of its affairs, shall have been entered
against the Servicer and such decree
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or order shall have remained in force, undischarged or unstayed for a
period of 60 days; or
(iv) the Servicer shall consent to the appointment of a
conservator or receiver or liquidator in any insolvency, readjustment
of debt, marshaling of assets and liabilities or similar proceedings
of or relating to the Servicer or of or relating to all or
substantially all of the Servicer's property; or
(v) the Servicer shall admit in writing its inability to pay
its debts as they become due, file a petition to take advantage of any
applicable insolvency or reorganization statute, make an assignment
for the benefit of its creditors, or voluntarily suspend payment of
its obligations;
(b) then, and in each and every such case, so long as an Event
of Default shall not have been remedied, and in the case of clause (i) above
(except for clause (i)(B)), if such Event of Default shall not have been
remedied within 30 days after the Servicer has received notice of such Event of
Default, (x) with respect solely to clause (i)(B) above, if such Monthly Advance
is not made earlier than 4:00 p.m. New York time on the Determination Date, the
Trustee shall give immediate telephonic notice of such failure to a Servicing
Officer of the Servicer and, unless such failure is cured, either by receipt of
payment or receipt of evidence (e.g., a wire reference number communicated by
----
the sending bank) that such funds have been sent, by 12:00 Noon New York time on
the following Business Day, the Trustee shall immediately assume, pursuant to
Section 10.02 hereof, the duties of a successor servicer; and (y) in the case of
clauses (i)(A), (i)(C), (i)(D), (iii), (iv) and (v), the Majority
Certificateholders, by notice in writing to the Servicer (except with respect to
(iii), (iv) and (v) for which no notice is required) may, in addition to
whatever rights such Certificateholders may have at law or equity including
damages, injunctive relief and specific performance, in each case immediately
terminate all the rights and obligations of the Servicer under this Agreement
and in and to the SBA Loans and the proceeds thereof, as Servicer. Upon such
receipt by the Servicer of a second written notice from the Majority
Certificateholders stating that they or it intend to terminate the Servicer as a
result of such Event of Default, all authority and power of the Servicer under
this Agreement, whether with respect to the SBA Loans or otherwise, shall,
subject to Section 10.02 and the Multi-Party Agreement, pass to and be vested in
the Trustee and the Trustee is hereby authorized and empowered to execute and
deliver, on behalf of the Servicer, as attorney-in-fact or otherwise, any and
all documents and other instruments and do or
X-2
cause to be done all other acts or things necessary or appropriate to effect the
purposes of such notice of termination, including, but not limited to, the
transfer and endorsement or assignment of the SBA Loans and related documents.
The Servicer agrees to cooperate with the Trustee in effecting the termination
of the Servicer's responsibilities and rights hereunder, including, without
limitation, the transfer to the Trustee for administration by it of all amounts
which shall at the time be credited by the Servicer to each Principal and
Interest Account or thereafter received with respect to the SBA Loans. The
Trustee shall provide notice to the SBA of any Event of Default hereunder.
Section 10.02 Trustee to Act; Appointment of Successor
----------------------------------------
On and after the time of the Servicer's immediate termination, or the
Servicer's receipt of notice if required by Section 10.01, or at any time if the
Trustee receives the resignation of the Servicer evidenced by an Opinion of
Counsel pursuant to Section 9.04 or the Servicer is removed as Servicer pursuant
to this Article X, the Trustee shall be the successor in all respects to the
Servicer in its capacity as Servicer under this Agreement and the transactions
set forth or provided for herein and shall be subject to all the
responsibilities, duties and liabilities relating thereto placed on the Servicer
by the terms and provisions hereof; provided, however, that the Trustee shall
not be liable for any actions of any Servicer prior to it, and that the Trustee
shall not be obligated to make advances or payments pursuant to Sections 6.03,
6.10, 6.11, 5.10 or 5.14 but only to the extent the Trustee determines
reasonably and in good faith that such advances would not be recoverable, such
determination to be evidenced with respect to each such advance by a
certification of a Responsible Officer of the Trustee. As compensation
therefor, the Trustee shall be entitled to all funds relating to the SBA Loans
which the Servicer would have been entitled to receive from the Principal and
Interest Account pursuant to Section 5.04 if the Servicer had continued to act
as Servicer hereunder and shall be entitled to the Servicing Fee and the Premium
Protection Fee, together with other servicing compensation in the form of
assumption fees, late payment charges or otherwise as provided in Sections 7.01
and 7.03.
Notwithstanding the above, the Trustee shall, if it is unable to so
act or if the SBA so requests in writing to the Trustee, appoint, or petition a
court of competent jurisdiction to appoint, any established servicing
institution acceptable to the SBA and satisfying the Rating Agency Condition
that has a net worth of not less than $15,000,000, and which is an approved SBA
guaranteed lender in good standing, operating pursuant to an effective Loan
Guaranty Agreement, as the successor to the
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Servicer hereunder in the assumption of all or any part of the responsibilities,
duties or liabilities of the Servicer hereunder. Any collections received by the
Servicer after removal or resignation shall be endorsed by it to the Trustee and
remitted directly to the Trustee or, at the direction of the Trustee, to the
successor servicer. The compensation of any successor servicer (including,
without limitation, the Trustee) so appointed shall be the aggregate Servicing
Fees and Premium Protection Fees and other servicing compensation in the form of
assumption fees, late payment charges or otherwise. In the event the Trustee is
required to solicit bids as provided herein, the Trustee shall solicit, by
public announcement, bids from banks and mortgage servicing institutions meeting
the qualifications set forth above. Such public announcement shall specify that
the successor servicer shall be entitled to the full amount of the aggregate
Servicing Fees and Premium Protection Fees as servicing compensation, together
with the other servicing compensation in the form of assumption fees, late
payment charges or otherwise. Within thirty days after any such public
announcement, the Trustee shall negotiate and effect the sale, transfer and
assignment of the servicing rights and responsibilities hereunder to the
qualified party submitting the highest qualifying bid. The Trustee shall deduct
from any sum received by the Trustee from the successor to the Servicer in
respect of such sale, transfer and assignment all costs and expenses of any
public announcement and of any sale, transfer and assignment of the servicing
rights and responsibilities hereunder and the amount of any unreimbursed
Servicing Advances and Monthly Advances. After such deductions, the remainder of
such sum shall be paid by the Trustee as a servicing fee to the SBA at the time
of such sale, transfer and assignment to the Servicer's successor. The Trustee
and such successor shall take such action, consistent with this Agreement, as
shall be necessary to effectuate any such succession. The Servicer agrees to
cooperate with the Trustee and any successor servicer in effecting the
termination of the Servicer's servicing responsibilities and rights hereunder
and shall promptly provide the Trustee or such successor servicer, as
applicable, all documents and records reasonably requested by it to enable it to
assume the Servicer's functions hereunder and shall promptly also transfer to
the Trustee or such successor servicer, as applicable, all amounts which then
have been or should have been deposited in the Principal and Interest Account or
Spread Account by the Servicer or which are thereafter received with respect to
the SBA Loans. Neither the Trustee nor any other successor servicer shall be
held liable by reason of any failure to make, or any delay in making, any
distribution hereunder or any portion thereof caused by (i) the failure of the
Servicer to deliver, or any delay in delivering, cash, documents or records to
it, or (ii) restrictions imposed by any regulatory authority having jurisdiction
over the Servicer hereunder. No
X-4
appointment of a successor to the Servicer hereunder shall be effective until
written notice of such proposed appointment shall have been provided by the
Trustee to each Certificateholder and the SBA and the Trustee and the SBA shall
have consented thereto. The Trustee shall not resign as servicer until a
successor servicer reasonably acceptable to the SBA has been appointed.
Pending appointment of a successor to the Servicer hereunder, the
Trustee shall act in such capacity as hereinabove provided. In connection with
such appointment and assumption, the Trustee may make such arrangements for the
compensation of such successor out of payments on SBA Loans as it and such
successor shall agree; provided, however, that no such compensation shall be in
excess of that permitted the Servicer pursuant to Section 7.03 or otherwise as
provided in this Agreement. The Servicer, the Trustee and such successor shall
take such action, consistent with this Agreement, as shall be necessary to
effectuate any such succession.
Section 10.03 Waiver of Defaults.
------------------
The SBA may, or the Majority Certificateholders may on behalf of all
Certificateholders and subject to the consent of the SBA, which consent may not
be unreasonably withheld, and satisfaction of the Rating Agency Condition, waive
any events permitting removal of the Servicer pursuant to this Article X;
provided, however, that the Majority Certificateholders or the SBA may not waive
a default in making a required distribution on a Certificate without the consent
of the holder of such Certificate. Upon any waiver of a past default, such
default shall cease to exist, and any Event of Default arising therefrom shall
be deemed to have been remedied for every purpose of this Agreement. No such
waiver shall extend to any subsequent or other default or impair any right
consequent thereto except to the extent expressly so waived.
Section 10.04. Control by Majority Certificateholders and Others.
-------------------------------------------------
The SBA may, or the Majority Certificateholders with the consent of
the SBA may, direct the time, method and place of conducting any proceeding
relating to the Trust Fund or the Certificates or for any remedy available to
the Trustee with respect to the Certificates or exercising any trust or power
conferred on the Trustee with respect to the Certificates or the Trust Fund
provided that:
-------- ----
(i) such direction shall not be in conflict with any rule of law
or with this Agreement;
X-5
(ii) the Trustee shall have been provided with indemnity
satisfactory to it; and
(iii) the Trustee may take any other action deemed proper by the
Trustee which is not inconsistent with such direction; provided,
--------
however, that the Trustee, as the case may be, need not take any
-------
action which it determines might involve it in liability or may be
unjustly prejudicial to the Certificateholders not so directing.
X-6
ARTICLE XI
TERMINATION
-----------
Section 11.01 Termination.
-----------
This Agreement shall terminate upon notice to the Trustee of the
earlier of the following events: (a) the final payment or other liquidation of
the last SBA Loan or the disposition of all property acquired upon foreclosure
or deed in lieu of foreclosure of any SBA Loan and the remittance of all funds
due thereunder, or (b) mutual consent of the Servicer and all Certificateholders
in writing; provided, however, that in no event shall the Trust Fund established
by this Agreement terminate later than twenty-one years after the death of the
last surviving lineal descendant of Xxxxxx X. Xxxxxxx, late Ambassador of the
United States to the Court of St. Xxxxx, alive as of the date hereof.
The Servicer may, at its option, terminate this Agreement on any date
on which the Pool Principal Balance is less than 5.0% of the sum of (i) the
Original Pool Principal Balance and (ii) the Original Pre-Funded Amount by
purchasing, on the next succeeding Remittance Date, all of the Unguaranteed
Interests in the SBA Loans and Foreclosed Properties at a price equal to the sum
of (i) 100% of the then outstanding Aggregate Class A and Class B Certificate
Principal Balances, and (ii) 30 days' interest thereon at the then applicable
Class A and Class B Remittance Rates, as the case may be (the "Termination
Price"). Notwithstanding the prior sentence, if at the time the Servicer
determines to exercise such option the unsecured long-term debt obligations of
the Servicer are not rated at least Baa3 by Xxxxx'x, if such Rating Agency is
still rating the Certificates, the Servicer shall give such Rating Agency prior
written notice of the Servicer's determination to exercise such option and shall
not exercise such option, without the consent of each such Rating Agency, prior
to furnishing each such Rating Agency with an Opinion of Counsel, in form and
substance reasonably satisfactory to each such Rating Agency, that the exercise
of such option would not be deemed a fraudulent conveyance by the Servicer.
Notice of any termination, specifying the Remittance Date upon which
the Trust Fund will terminate and that the Certificateholders shall surrender
their Certificates to the Trustee for payment of the final distribution and
cancellation shall be given promptly by the Servicer by letter to
Certificateholders mailed during the month of such final distribution before the
Determination Date in such month, specifying (i) the Remittance Date upon which
final payment of
XI-1
the Certificates will be made upon presentation and surrender of Certificates at
the office of the Trustee therein designated, (ii) the amount of any such final
payment and (iii) that the Record Date otherwise applicable to such Remittance
Date is not applicable, payments being made only upon presentation and surrender
of the Certificates at the office of the Trustee therein specified. The Servicer
shall give such notice to the Trustee therein specified. The Servicer shall give
such notice to the Trustee at the time such notice is given to
Certificateholders. Any obligation of the Servicer to pay amounts due to the
Trustee shall survive the termination of this Agreement.
In the event that all of the Certificateholders shall not surrender
their Certificates for cancellation within six months after the time specified
in the above-mentioned written notice, the Servicer shall give a second written
notice to the remaining Certificateholders to surrender their Certificates for
cancellation and receive the final distribution with respect thereto and shall
at the expense of the Trust Fund cause to be published once, in the national
edition of The Wall Street Journal notice that such money remains unclaimed. If
-----------------------
within six months after the second notice all of the Certificates shall not have
been surrendered for cancellation, the Trustee may take appropriate steps, or
may appoint an agent to take appropriate steps, to contact the remaining
Certificateholders concerning surrender of their Certificates and the cost
thereof shall be paid out of the funds and other assets which remain subject
hereto. If within the period then specified in the escheat laws of the State of
New York after the second notice all the Certificates shall not have been
surrendered for cancellation, the Seller shall be entitled to all unclaimed
funds and other assets which remain subject hereto and the Trustee upon transfer
of such funds shall be discharged of any responsibility for such funds and the
Certificateholders shall look to the Seller for payment.
Section 11.02 Accounting Upon Termination of Servicer
---------------------------------------
Upon termination of the Servicer under Article X hereof, the Servicer
shall:
(a) deliver to its successor or, if none shall yet have been
appointed, to the Trustee the funds in any Principal and Interest Account;
(b) deliver to its successor or, if none shall yet have been
appointed, to the Trustee all SBA Files and related
XI-2
documents and statements held by it hereunder and a SBA Loan portfolio computer
diskette;
(c) deliver to its successor or, if none shall yet have been
appointed, to the Trustee and, upon request, to the Certificateholders a full
accounting of all funds, including a statement showing the Monthly Payments
collected by it and a statement of moneys held in trust by it for the payments
or charges with respect to the SBA Loans; and
(d) execute and deliver such instruments and perform all acts
reasonably requested in order to effect the orderly and efficient transfer of
servicing of the SBA Loans to its successor and to more fully and definitively
vest in such successor all rights, powers, duties, responsibilities, obligations
and liabilities of the Servicer under this Agreement.
XI-3
ARTICLE XII
THE TRUSTEE
-----------
Section 12.01 Duties of Trustee.
-----------------
The Trustee, prior to the occurrence of an Event of Default and after
the curing of all Events of Default which may have occurred, undertakes to
perform such duties and only such duties as are specifically set forth in this
Agreement. If an Event of Default has occurred and has not been cured or waived,
the Trustee shall exercise such of the rights and powers vested in it by this
Agreement, and use the same degree of care and skill in its exercise as a
prudent person would exercise or use under the circumstances in the conduct of
such person's own affairs.
The Trustee, upon receipt of all resolutions, certificates,
statements, opinions, reports, documents, orders or other instruments furnished
to the Trustee which are specifically required to be furnished pursuant to any
provision of this Agreement, shall examine them to determine whether they
conform to the requirements of this Agreement, provided, however that the
Trustee shall not be responsible for the accuracy or content of any resolution,
certificate, statement, opinion, report, document, order or other instrument
furnished by the Servicer or the Seller hereunder. If any such instrument is
found not to conform to the requirements of this Agreement in a material manner,
the Trustee shall take action as it deems appropriate to have the instrument
corrected, and if the instrument is not corrected to the Trustee's satisfaction,
the Trustee will provide notice thereof to the Certificateholders and the
Servicer.
No provision of this Agreement shall be construed to relieve the
Trustee from liability for its own negligent action, its own negligent failure
to act or its own willful misconduct or bad faith; provided, however, that:
(a) Prior to the occurrence of an Event of Default, and after the
curing of all such Events of Default which may have occurred, the duties and
obligations of the Trustee shall be determined solely by the express provisions
of this Agreement, the Trustee shall not be liable except for the performance of
such duties and obligations as are specifically set forth in this Agreement, no
implied covenants or obligations shall be read into this Agreement against the
Trustee and, in the absence of bad faith on the part of the Trustee, the Trustee
may conclusively rely, as to the truth of the statements and the correctness of
the opinions expressed therein, upon any certificates or opinions
XII-1
furnished to the Trustee and conforming to the requirements of this Agreement;
(b) The Trustee shall not be personally liable for an error of
judgment made in good faith by officers of the Trustee, unless it shall be
proved that the Trustee was negligent in ascertaining the pertinent facts;
(c) The Trustee shall not be personally liable with respect to any
action taken, suffered or omitted to be taken by it in good faith in accordance
with the direction of the Majority Certificateholders, relating to the time,
method and place of conducting any proceeding for any remedy available to the
Trustee, or exercising any trust or power conferred upon the Trustee, under this
Agreement;
(d) In the absence of actual knowledge of an officer of the Trustee
in its Corporate Trust Office of an Event of Default, the Trustee shall not be
required to take notice or be deemed to have notice or knowledge of any default
or Event of Default unless the Trustee shall be specifically notified in writing
by the Servicer or any of the Certificateholders. In the absence of actual
knowledge or receipt of such notice, the Trustee may conclusively assume that
there is no default or Event of Default; and
(e) The Trustee shall not be required to expend or risk its own funds
or otherwise incur financial liability for the performance of any of its duties
hereunder or the exercise of any of its rights or powers if there is reasonable
ground for believing that the repayment of such funds or adequate indemnity
against such risk or liability is not reasonably assured to it.
Section 12.02 Certain Matters Affecting the Trustee.
-------------------------------------
(a) Except as otherwise provided in Section 12.01:
(i) The Trustee may request and rely and shall be protected in
acting or refraining from acting upon any resolution, Officer's
Certificate, certificate of auditors or any other certificate,
statement, instrument, opinion, report, notice, request, consent,
order, appraisal, bond or other paper or document believed by it to be
genuine and to have been signed or presented by the proper party or
parties;
(ii) The Trustee may consult with counsel and any opinion of
counsel shall be full and complete authorization and protection in
respect of any action
XII-2
taken or suffered or omitted by it hereunder in good faith and in
accordance with such opinion of counsel;
(iii) The Trustee shall be under no obligation to exercise any
of the trusts or powers vested in it by this Agreement or to
institute, conduct or defend by litigation hereunder or in relation
hereto at the request, order or direction of the Certificateholders,
pursuant to the provisions of this Agreement, unless such
Certificateholders shall have offered to the Trustee reasonable
security or indemnity against the costs, expenses and liabilities
which may be incurred therein or thereby; nothing contained herein
shall, however, relieve the Trustee of the obligation, upon the
occurrence of an Event of Default (which has not been cured), to
exercise such of the rights and powers vested in it by this Agreement,
and to use the same degree of care and skill in its exercise as a
prudent person would exercise or use under the circumstances in the
conduct of such person's own affairs;
(iv) The Trustee shall not be personally liable for any action
taken, suffered or omitted by it in good faith and reasonably believed
by it to be authorized or within the discretion or rights or powers
conferred upon it by this Agreement;
(v) Prior to the occurrence of an Event of Default hereunder
and after the curing of all Events of Default which may have occurred,
the Trustee shall not be bound to make any investigation into the
facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, consent, order,
approval, bond or other paper or document, unless requested in writing
to do so by Holders of Certificates evidencing Percentage Interests
aggregating not less than 25% provided, however, that if the payment
within a reasonable time to the Trustee of the costs, expenses or
liabilities likely to be incurred by it in the making of such
investigation is, in the opinion of the Trustee, not reasonably
assured to the Trustee by the security afforded to it by the terms of
this Agreement, the Trustee may require reasonable indemnity against
such expense or liability as a condition to taking any such action.
The reasonable expense of every such examination shall be paid by the
Servicer or, if paid by the Trustee, shall be repaid by the Servicer
upon demand from the Servicer's own funds;
XII-3
(vi) The right of the Trustee to perform any discretionary act
enumerated in this Agreement shall not be construed as a duty, and the
Trustee shall not be answerable for other than its negligence or
willful misconduct or bad faith in the performance of such act;
(vii) The Trustee shall not be required to give any bond or
surety in respect of the execution of the trust created hereby or the
powers granted hereunder;
(viii) The Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by or
through agents or attorneys; and
(ix) In the event that the Trustee is also acting as Paying
Agent, Registrar or Spread Account Custodian, the rights and
protections afforded to the Trustee shall be afforded to such Paying
Agent, Registrar or Spread Account Custodian.
Section 12.03 Trustee Not Liable for Certificates or SBA Loans.
------------------------------------------------
The recitals contained herein and in the Certificates (other than the
certificate of authentication on the Certificates) shall be taken as the
statements of the Servicer, and the Trustee assumes no responsibility for their
correctness. The Trustee makes no representations as to the validity or
sufficiency of this Agreement or of the Certificates or of any SBA Loan or
related document. The Trustee shall not be accountable for the use or
application by the Servicer of any of the Certificates or of the proceeds of
such Certificates, or for the use or application of any funds paid to the
Servicer in respect of the SBA Loans or deposited in or withdrawn from the
Principal and Interest Account by the Servicer. The Trustee shall not be
responsible for the legality or validity of the Agreement or the validity,
priority, perfection or sufficiency of the security for the Certificates issued
or intended to be issued hereunder.
Section 12.04 Trustee May Own Certificates.
----------------------------
The Trustee in its individual or any other capacity may become the
owner or pledgee of Certificates with the same rights it would have if it were
not Trustee, and may otherwise deal with the parties hereto.
XII-4
Section 12.05 Servicer To Pay Trustee's Fees and Expenses.
-------------------------------------------
The Servicer covenants and agrees to pay to the Trustee from time to
time, and the Trustee shall be entitled to, reasonable compensation (which shall
not be limited by any provision of law in regard to the compensation of a
trustee of an express trust) for all services rendered by it in the execution of
the trusts hereby created and in the exercise and performance of any of the
powers and duties hereunder of the Trustee, and the Servicer will pay or
reimburse the Trustee upon its request for all reasonable expenses,
disbursements and advances incurred or made by the Trustee in accordance with
any of the provisions of this Agreement (including the reasonable compensation
and the expenses and disbursements of its counsel and of all persons not
regularly in its employ) except any such expense, disbursement or advance as may
arise from its negligence or bad faith, provided that the Trustee shall have no
lien on the Trust Fund for the payment of its fees and expenses. To the extent
that actual fees and expenses of the Trustee exceed the amount available for
payment thereof on deposit in the Expense Account as of the date such fees and
expenses are due and payable, the Servicer shall reimburse the Trustee for such
shortfall out of its own funds without reimbursement therefor, except as
provided in Section 6.03. The Trustee and any director, officer, employee or
agent of the Trustee and the Spread Account Custodian and any director, officer,
employee or agent of the Spread Account Custodian shall be indemnified by the
Servicer and held harmless against any loss, liability or expense (i) incurred
in connection with any legal action relating to this Agreement or the
Certificates, other than any loss, liability or expense incurred by reason of
willful misfeasance, bad faith or negligence in the performance of duties
hereunder or by reason of reckless disregard of obligations and duties
hereunder, and (ii) resulting from any error in any tax or information return
prepared by the Servicer. The obligations of the Servicer under this Section
12.05 shall survive payment of the Certificates, and shall extend to any co-
trustee appointed pursuant to this Article XII.
Section 12.06 Eligibility Requirements for Trustee.
------------------------------------
The Trustee hereunder shall at all times be (i) a national banking
association or banking corporation or trust company organized and doing business
under the laws of any state or the United States of America, (ii) authorized
under such laws to exercise corporate trust powers, (iii) having a combined
capital and surplus of at least $30,000,000, (iv) having unsecured and
unguaranteed long-term debt obligations rated at least Baa3 by Xxxxx'x or such
other rating as is acceptable to the SBA, (v) is subject to supervision or
examination by federal
XII-5
or state authority, (vi) is an approved SBA guaranteed lender in good standing,
operating pursuant to an effective Loan Guaranty Agreement, and (vii) is
reasonably acceptable to the SBA. If such banking association publishes reports
of condition at least annually, pursuant to law or to the requirements of the
aforesaid supervising or examining authority, then for the purposes of this
Section its combined capital and surplus shall be deemed to be as set forth in
its most recent report of condition so published. In case at any time the
Trustee shall cease to be eligible in accordance with the provisions of this
Section, the Trustee shall (a) give prompt notice to the SBA and each
Certificateholder that it has so ceased to be eligible to be the Trustee and (b)
resign, upon the request of the SBA or the Majority Certificateholders, in the
manner and with the effect specified in Section 12.07.
Section 12.07 Resignation and Removal of the Trustee.
--------------------------------------
The Trustee may at any time resign and be discharged from the trusts
hereby created by giving written notice thereof to the Servicer, the SBA, and to
all Certificateholders. Upon receiving such notice of resignation, the Servicer
shall with the consent of the SBA promptly appoint a successor trustee by
written instrument, in duplicate, which instrument shall be delivered to the
resigning Trustee and to the successor trustee. A copy of such instrument shall
be delivered to the Certificateholders by the Servicer. Unless a successor
trustee shall have been so appointed and have accepted appointment within 60
days after the giving of such notice of resignation, the resigning Trustee may
petition any court of competent jurisdiction for the appointment of a successor
trustee. If the resigning Trustee fails to petition an appropriate court, the
SBA may, after such 60 day period, petition any court of competent jurisdiction
for the appointment of a successor trustee.
If at any time the Trustee shall cease to be eligible in accordance
with the provisions of Section 12.06 and shall fail to resign after written
request therefor by the Servicer, or if at any time the Trustee shall become
incapable of acting, or shall be adjudged bankrupt or insolvent, or a receiver
of the Trustee or of its property shall be appointed, or any public officer
shall take charge or control of the Trustee or of its property or affairs for
the purpose of rehabilitation, conservation or liquidation, then the Servicer
may remove the Trustee and appoint, subject to the approval of the SBA, a
successor trustee by written instrument, in duplicate, which instrument shall be
delivered to the Trustee so removed and to the successor trustee. A copy of such
instrument shall be delivered to the Certificateholders and the SBA by the
Servicer.
XII-6
The Majority Certificateholders with the consent of the SBA, which
consent will not be unreasonably withheld, and upon satisfaction of the Rating
Agency Condition, or the SBA may at any time remove the Trustee and appoint a
successor trustee by written instrument or instruments, in triplicate, signed by
such Holders or their attorneys-in-fact duly authorized, one complete set of
which instruments shall be delivered to the Servicer, one complete set to the
Trustee so removed and one complete set to the successor Trustee so appointed.
Any resignation or removal of the Trustee and appointment of a
successor trustee pursuant to any of the provisions of this Section shall become
effective upon acceptance of appointment by the successor trustee as provided in
Section 12.08.
Section 12.08 Successor Trustee.
-----------------
Any successor trustee appointed as provided in Section 12.07 shall
execute, acknowledge and deliver to the Servicer and to its predecessor trustee
an instrument accepting such appointment hereunder, and thereupon the
resignation or removal of the predecessor trustee shall become effective and
such successor trustee, without any further act, deed or conveyance, shall
become fully vested with all the rights, powers, duties and obligations of its
predecessor hereunder, with the like effect as if originally named as trustee
herein. The predecessor trustee shall deliver to the successor trustee all SBA
Files and related documents and statements held by it hereunder, and the
Servicer and the predecessor trustee shall execute and deliver such instruments
and do such other things as may reasonably be required for more fully and
certainly vesting and confirming in the successor trustee all such rights,
powers, duties and obligations.
No successor trustee shall accept appointment as provided in this
Section unless at the time of such acceptance such successor trustee shall be
eligible under the provisions of Section 12.06.
Upon acceptance of appointment by a successor trustee as provided in
this Section, the Servicer shall mail notice of the succession of such trustee
hereunder to all Holders of Certificates at their addresses as shown in the
Certificate Register. If the Servicer fails to mail such notice within 10 days
after acceptance of appointment by the successor trustee, the successor trustee
shall cause such notice to be mailed at the expense of the Servicer.
XII-7
Section 12.09 Merger or Consolidation of Trustee.
----------------------------------
Any Person into which the Trustee may be merged or converted or with
which it may be consolidated or any corporation or national banking association
resulting from any merger, conversion or consolidation to which the Trustee
shall be a party, or any corporation or national banking association succeeding
to the business of the trustee, shall be the successor of the Trustee hereunder,
provided such corporation or national banking association shall be eligible
under the provisions of Section 12.06, without the execution or filing of any
paper or any further act on the part of any of the parties hereto, anything
herein to the contrary notwithstanding. The Trustee shall send notice of any
such merger or consolidation to the Rating Agency.
Section 12.10 Appointment of Co-Trustee or Separate Trustee.
---------------------------------------------
Notwithstanding any other provisions hereof, at any time, for the
purpose of meeting any legal requirements of any jurisdiction in which any part
of the Trust Fund or property securing the same may at the time be located, the
Servicer and the Trustee acting jointly shall have the power and shall execute
and deliver all instruments to appoint one or more Persons approved by the
Trustee and the SBA pursuant to the procedure set forth below, to act as co-
trustee or co-trustees, jointly with the Trustee, or separate trustee or
separate trustees, of all or any part of the Trust Fund, and to vest in such
Person or Persons, in such capacity, such title to the Trust Fund, or any part
thereof, and, subject to the other provisions of this Section 12.10, such
powers, duties, obligations, rights and trusts as the Servicer and the Trustee
may consider necessary or desirable. If the Servicer shall not have joined in
such appointment within 15 days after the receipt by it of a request so to do,
or in case an Event of Default shall have occurred and be continuing, the
Trustee alone shall have the power to make such appointment. No co-trustee or
separate trustee hereunder shall be required to meet the terms of eligibility as
a successor trustee under Section 12.06 hereunder. No notice to Holders of
Certificates of the appointment of co-trustee(s) or separate trustee(s) shall be
required under Section 12.08 hereof. The Trustee shall notify the SBA prior to
the appointment of any co-trustee(s) or separate trustee(s) and the SBA shall
have ten Business Days from its receipt of such notice to notify the Trustee
whether it, in its
XII-8
reasonable judgment, disapproves of such co-trustee(s) or separate trustee(s).
If the SBA does not notify the Trustee within such time frame, it will be deemed
to have approved such co-trustee(s) or separate trustee(s). If the SBA notifies
the Trustee within such time frame that it, in its reasonable judgment,
disapproves of such co-trustee(s) or separate trustee(s) (which notice shall be
accompanied by the name(s) of the SBA's alternative proposed co-trustee(s) or
separate trustee(s)), such appointments shall not be effective.
In the case of any appointment of a co-trustee or separate trustee
pursuant to this Section 12.10, all rights, powers, duties and obligations
conferred or imposed upon the trustee shall be conferred or imposed upon and
exercised or performed by the Trustee and such separate trustee or co-trustee
jointly except to the extent that under any law of any jurisdiction in which any
particular act or acts are to be performed (whether as Trustee hereunder or as
successor to the Servicer hereunder), the Trustee shall be incompetent or
unqualified to perform such act or acts, in which event such rights, powers,
duties and obligations (including the holding of title to the Trust Fund or any
portion thereof in any such jurisdiction) shall be exercised and performed by
such separate trustee or co-trustee at the direction of the Trustee.
Any notice, request or other writing given to the Trustee shall be
deemed to have been given to each of the then separate trustees and co-trustees,
as effectively as if given to each of them. Every instrument appointing any
separate trustee or co-trustee shall refer to this Agreement and the conditions
of this Article XII. Each separate trustee and co-trustee, upon its acceptance
of the trusts conferred, shall be vested with the estates or property specified
in its instrument of appointment, either jointly with the Trustee or separately,
as may be provided therein, subject to all the provisions of this Agreement,
specifically including every provision of this Agreement relating to the conduct
of, affecting the liability of, or affording protection to, the Trustee. Every
such instrument shall be filed with the Trustee.
Any separate trustee or co-trustee may, at any time, constitute the
Trustee, its agent or attorney-in-fact, with full power and authority, to the
extent not prohibited by law, to do any lawful act under or in respect of this
Agreement on its behalf and in its name. The Trustee shall not be responsible
for any action or inaction of any such separate trustee or co-trustee. If any
separate trustee or co-trustee shall die, become incapable of acting, resign or
be removed, all of its estates, properties, rights, remedies and trusts shall
vest in and be exercised by the Trustee, to the extent permitted by law, without
the appointment of a new or successor trustee.
XII-9
Section 12.11 Authenticating Agent.
--------------------
Upon the request of the Servicer, the Trustee shall appoint an
Authenticating Agent, initially, Marine Midland Bank, with power to act on the
Trustee's behalf and subject to its direction in the authentication and delivery
of the Certificates in connection with transfers and exchanges under Section
4.02, as fully to all intents and purposes as though the Authenticating Agent
had been expressly authorized by that Section to authenticate and deliver
Certificates. For all purposes of this Agreement, the authentication and
delivery of Certificates by the Authenticating Agent pursuant to this Section
shall be deemed to be the authentication and delivery of Certificates by the
Trustee. Such Authenticating Agent shall at all times be a Person meeting the
requirements for the Trustee set forth in Section 12.06.
Any corporation or national banking association into which any
Authenticating Agent may be merged or converted or with which it may be
consolidated, or any corporation or national banking association resulting from
any merger, consolidation or conversion to which any Authenticating Agent shall
be a party, or any corporation or national banking association succeeding to the
corporate trust business of any Authenticating Agent, shall be the successor of
the Authenticating Agent hereunder, if such successor corporation or national
banking association is otherwise eligible under this Section, without the
execution or filing of any further act on the part of the parties hereto or the
Authenticating Agent or such successor corporation.
Any Authenticating Agent may at any time resign by giving notice of
resignation to the Trustee and the Servicer. The Trustee may at any time
terminate the agency of any Authenticating Agent by giving written notice of
termination to such Authenticating Agent and the Servicer. Upon receiving such a
notice of resignation or upon such a termination, or in case at any time any
Authenticating Agent shall cease to be eligible under this Section, the Trustee
shall promptly appoint a successor Authenticating Agent and shall give written
notice of such appointment to all Certificateholders as their names and
addresses appear on the Certificate Register. The Servicer agrees to pay to the
Authenticating Agent from time to time reasonable compensation for its services.
The provisions of Sections 4.04 and 12.03 shall be applicable to any
Authenticating Agent.
Section 12.12 Tax Returns and Reports.
-----------------------
The Trustee, upon request, will furnish the Servicer with all such
information as may be reasonably required in
XII-10
connection with the Servicer's preparation of all Tax Returns of the Trust Fund
and, upon request within five (5) Business Days after its receipt thereof, shall
(i) sign on behalf of the Trust Fund any Tax Return that the Trustee is required
to sign pursuant to applicable federal, state or local tax laws, and (ii) cause
such Tax Return to have been returned to the Servicer for filing.
The Servicer shall prepare and file or cause to be filed with the
Internal Revenue Service Federal tax information returns with respect to the
Trust Fund and the Certificates containing such information and at the times and
in the manner as may be required by the Code or applicable Treasury regulations,
and shall furnish to each Holder of Certificates at any time during the calendar
year for which such returns or reports are made such statements or information
at the times and in the manner as may be required thereby. The Trustee shall
sign all tax information returns filed pursuant to this Section and any other
returns as may be required by the Code, and in doing so shall rely entirely
upon, and shall have no liability for information provided by, or calculations
provided by, the Servicer.
Section 12.13 Protection of Trust Fund.
------------------------
(a) The Trustee will hold the Trust Fund and such other assets as may
from time to time be deposited with it hereunder in trust for the benefit of the
Holders and the SBA and at the request of the Seller or the SBA will from time
to time execute and deliver all such supplements and amendments hereto pursuant
to Section 13.02 hereof and all instruments of further assurance and other
instruments, and will take such other action upon such request as it deems
reasonably necessary or advisable, to:
(i) more effectively hold in trust all or any portion of the
Trust Fund or such other assets;
(ii) perfect, publish notice of, or protect the validity of any
grant made or to be made by this Agreement;
(iii) enforce any of the SBA Loans; or
(iv) preserve and defend title to the Trust Fund and the rights
of the Trustee, and the ownership interests of the Certificateholders
represented thereby, in such Trust Fund against the claims of all
Persons and parties.
XII-11
The Trustee shall send copies of any request received from the Seller
or the SBA to take any action pursuant to this Section 12.13 to the Holders.
(b) Subject to Article X hereof, the Trustee shall have the power to
enforce, and shall enforce the obligations of the other parties to this
Agreement by action, suit or proceeding at law or equity, and shall also have
the power to enjoin, by action or suit in equity, any acts or occurrences which
may be unlawful or in violation of the rights of the Holders; provided, however,
that nothing in this Section 12.13 shall require any action by the Trustee
unless the Trustee shall first (i) have been furnished indemnity satisfactory to
it and (ii) when required by this Agreement, have been requested to take such
action by the Majority Certificateholders, the SBA or the Seller in accordance
with the terms of this Agreement.
(c) The Trustee shall execute any instrument required pursuant to
this Section so long as such instrument does not conflict with this Agreement or
with the Trustee's fiduciary duties.
Section 12.14 Representations, Warranties and Covenants of Trustee.
----------------------------------------------------
The Trustee hereby makes the following representations, warranties and
covenants on which the Seller, the Servicer, the SBA and the Certificateholders
shall rely:
(a) The Trustee is a banking corporation and trust company duly
organized, validly existing and in good standing under the laws of the State of
New York.
(b) The Trustee has full power, authority and legal right to execute,
deliver and perform this Agreement, and shall have taken all necessary action to
authorize the execution, delivery and performance by it of this Agreement.
(c) The execution, delivery and performance by the Trustee of this
Agreement shall not (i) violate any provision of any law or any order, writ,
judgment or decree of any court, arbitrator or governmental authority applicable
to the Trustee or any of its assets, (ii) violate any provision of the corporate
charter or By-laws of the Trustee or (iii) violate any provision of, or
constitute, with or without notice or lapse of time, a default under, or result
in the creation or imposition of any lien on any properties included in the
Trust Fund pursuant to the provisions of, any mortgage, indenture, contract,
agreement or other undertaking to which it is a party, which violation, default
or lien could reasonably be expected to materially and
XII-12
adversely affect the Trustee's performance or ability to perform its duties
under this Agreement or the transactions contemplated in this Agreement.
(d) The execution, delivery and performance by the Trustee of this
Agreement shall not require the authorization, consent or approval of, the
giving of notice to, the filing or registration with or the taking of any other
action in respect of any governmental authority or agency regulating the banking
and corporate trust activities of the Trustee.
(e) This Agreement has been duly executed and delivered by the
Trustee and constitutes the legal, valid and binding agreement of the Trustee,
enforceable in accordance with its terms, subject to the effect of bankruptcy,
insolvency, reorganization, moratorium and other similar laws relating to or
affecting creditors' rights generally or the application of equitable principles
in any proceeding, whether at law or in equity. The Trustee hereby agrees and
covenants that it will not at any time in the future, deny that this Agreement
constitutes the legal, valid and binding agreement of the Trustee.
(f) The Trustee shall not take any action, or fail to take any
action, if such action or failure to take action will materially interfere with
the enforcement of any rights of the SBA or the Certificateholders under this
Agreement or the Certificates.
(g) The Trustee will comply at all times with the provisions of the
SBA Rules and Regulations in respect of its activities concerning the SBA Loans,
and will at all times hold an effective Loan Guaranty Agreement.
XII-13
ARTICLE XIII
MISCELLANEOUS PROVISIONS
------------------------
Section 13.01 Acts of Certificateholders
--------------------------
Except as otherwise specifically provided herein, whenever
Certificateholder action, consent or approval is required under this Agreement,
such action, consent or approval shall be deemed to have been taken or given on
behalf of, and shall be binding upon, all Certificateholders if the Majority
Certificateholders agree to take such action or give such consent or approval.
Section 13.02 Amendment.
---------
(a) This Agreement may be amended from time to time by the Seller,
the Servicer and the Trustee by written agreement, upon the prior written
consent of the SBA, without the notice to or consent of the Certificateholders,
to cure any ambiguity, to correct or supplement any provisions herein, to comply
with any changes in the Code, or to make any other provisions with respect to
matters or questions arising under this Agreement which shall not be
inconsistent with the provisions of this Agreement; provided, however, that such
action shall not, as evidenced by an Opinion of Counsel delivered to the
Trustee, adversely affect the interests of any Certificateholder or any other
party and further provided that no such amendment shall reduce in any manner the
amount of, or delay the timing of, any amounts received on SBA Loans which are
required to be distributed on any Certificate without the consent of the Holder
of such Certificate, or change the rights or obligations of any other party
hereto without the consent of such party.
(b) This Agreement may be amended from time to time by the Seller,
the Servicer, the Trustee and the Majority Certificateholders, upon the prior
written consent of the SBA, for the purpose of adding any provisions to or
changing in any manner or eliminating any of the provisions of this Agreement or
of modifying in any manner the rights of the Holders; provided, however, that no
such amendment shall reduce in any manner the amount of, or delay the timing of,
any amounts which are required to be distributed on any Certificate without the
consent of the Holder of such Certificate or reduce the percentage of Holders
which are required to consent to any such amendment without the consent of the
Holders of 100% of the Certificates affected thereby and, provided further, that
no amendment affecting only one class of Certificates shall require the approval
of Holders of Certificates of the other Class.
XIII-1
(c) It shall not be necessary for the consent of Holders under this
Section to approve the particular form of any proposed amendment, but it shall
be sufficient if such consent shall approve the substance thereof.
Section 13.03 Recordation of Agreement.
------------------------
To the extent permitted by applicable law, this Agreement is subject
to recordation in all appropriate public offices for real property records in
all of the counties or other comparable jurisdictions in which any or all of the
properties subject to the Mortgages are situated, and in any other appropriate
public recording office or elsewhere, such recordation to be effected by the
Servicer at the Certificateholders' expense on direction of the Majority
Certificateholders, but only when accompanied by an Opinion of Counsel to the
effect that such recordation materially and beneficially affects the interests
of the Certificateholders or is necessary for the administration or servicing of
the SBA Loans.
Section 13.04 Duration of Agreement.
---------------------
This Agreement shall continue in existence and effect until terminated
as herein provided.
SECTION 13.05 GOVERNING LAW.
-------------
THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF NEW YORK AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES
HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS, WITHOUT GIVING
EFFECT TO PRINCIPLES OF CONFLICTS OF LAW.
Section 13.06 Notices.
-------
All demands, notices and communications hereunder shall be in writing
and shall be deemed to have been duly given if personally delivered at or mailed
by overnight mail, certified mail or registered mail, postage prepaid, to (i) in
the case of the Bank, First National Bank of New England, Xxx Xxxxxxxxxx Xxxxx,
Xxxxxxxx, Xxxxxxxxxxx 00000, Attention: Xxxxxx Xxxxxxxxx, or such other
addresses as may hereafter be furnished to the Certificateholders in writing by
the Bank, (ii) in the case of the Trustee, Marine Midland Bank, 000 Xxxxxxxx,
Xxx Xxxx, Xxx Xxxx 00000, 12th Floor, Attention: Corporate Trust Department,
(iii) in the case of the Certificateholders, as set forth in the Certificate
Register, (iv) in the case of Moody's, to Xxxxx'x Investors Service, ABS
Monitoring Department, 00 Xxxxxx Xxxxxx,
XIII-2
0xx Xxxxx, Xxx Xxxx, Xxx Xxxx 00000, and (v) in the case of the SBA, the United
States Small Business Administration, 000 Xxxxx Xxxxxx, X.X., Xxxxxxxxxx, X.X.
00000, Attention: Associate Administrator for Financial Assistance. Any such
notices shall be deemed to be effective with respect to any party hereto upon
the receipt of such notice by such party, except that notices to the
Certificateholders shall be effective upon mailing or personal delivery.
Section 13.07 Severability of Provisions .
--------------------------
If any one or more of the covenants, agreements, provisions or terms
of this Agreement shall be held invalid for any reason whatsoever, then such
covenants, agreements, provisions or terms shall be deemed severable from the
remaining covenants, agreements, provisions or terms of this Agreement and shall
in no way affect the validity or enforceability of the other covenants,
agreements, provisions or terms of this Agreement.
Section 13.08 No Partnership.
--------------
Nothing herein contained shall be deemed or construed to create a co-
partnership or joint venture between the parties hereto and the services of the
Servicer shall be rendered as an independent contractor and not as agent for the
Certificateholders.
Section 13.09 Counterparts.
------------
This Agreement may be executed in one or more counterparts and by the
different parties hereto on separate counterparts, each of which, when so
executed, shall be deemed to be an original; such counterparts, together, shall
constitute one and the same agreement.
Section 13.10 Successors and Assigns.
----------------------
This Agreement shall inure to the benefit of and be binding upon the
Seller and the Servicer, the Trustee and the Certificateholders and their
respective successors and assigns.
Section 13.11 Headings.
--------
The headings of the various sections of this Agreement have been
inserted for convenience of reference only and shall not be deemed to be part of
this Agreement.
XIII-3
Section 13.12 Paying Agent.
------------
The Trustee hereby appoints Marine Midland Bank as Paying Agent. The
Trustee may appoint one or more other Paying Agents or successor Paying Agents
meeting the eligibility requirements of a Trustee set forth in Section 12.06
(i), (ii), (iii), (iv), (v) and (vii) hereof.
Each Paying Agent, immediately upon such appointment, shall signify
its acceptance of the duties and obligations imposed upon it by this Agreement
by written instrument of acceptance deposited with the Trustee.
Each such Paying Agent other than the Trustee shall execute and
deliver to the Trustee an instrument in which such Paying Agent shall agree with
the Trustee, subject to the provisions of Section 6.06, that such Paying Agent
will:
(a) allocate all sums received for distribution to the Holders of
Certificates for which it is acting as Paying Agent on each Remittance Date
among such Holders in the proportion specified by the Trustee; and
(b) hold all sums held by it for the distribution of amounts due with
respect to the Certificates in trust for the benefit of the Holders entitled
thereto until such sums shall be paid to such Holders or otherwise disposed of
as herein provided and pay such sums to such Persons as herein provided.
Any Paying Agent other than the Trustee may at any time resign and be
discharged of the duties and obligations created by this Agreement by giving at
least sixty (60) days written notice to the Trustee. Any such Paying Agent may
be removed at any time by an instrument filed with such Paying Agent signed by
the Trustee.
In the event of the resignation or removal of any Paying Agent other
than the Trustee such Paying Agent shall pay over, assign and deliver any moneys
held by it as Paying Agent to its successor, or if there be no successor, to the
Trustee.
Upon the appointment, removal or notice of resignation of any Paying
Agent, the Trustee shall notify the Certificateholders by mailing notice thereof
to their addresses appearing on the Certificate Register.
Section 13.13 Notification to Rating Agency.
-----------------------------
The Trustee shall give prompt notice to the Rating Agency of the
occurrence of any of the following events of which
XIII-4
it has received notice: (1) any modification or amendment to this Agreement, (2)
any change of the Trustee, the Servicer or Paying Agent, (3) any Event of
Default or waiver of an Event of Default, (4) that any superior lienholder has
accelerated or intends to accelerate the obligations secured by a Prior Lien,
and (5) the final payment of all the Certificates. The Servicer shall promptly
deliver to the Rating Agency a copy of each of the Servicer's Certificates.
Further, the Servicer shall give prompt notice to the Rating Agency if the
Servicer or any of its affiliates acquire any Certificates.
Section 13.14 Third Party Rights
------------------
The Trustee, the FTA, the Spread Account Custodian and the Servicer
agree that the SBA shall be deemed a third-party beneficiary of this Agreement
entitled to all the rights and benefits set forth herein as fully as if it were
a party hereto.
XIII-5
IN WITNESS WHEREOF, the Bank and the Trustee have caused their names
to be signed hereto by their respective officers thereunto duly authorized as of
the day and year first above written.
FIRST NATIONAL BANK OF NEW ENGLAND,
as Seller and Servicer
By:______________________________
Name:
Title:
MARINE MIDLAND BANK,
as Trustee
By:______________________________
Name:
Title:
XIII-6
Acceptance of Marine Midland Bank
---------------------------------
Marine Midland Bank hereby accepts its appointment under the within
instrument to serve as initial Authenticating Agent, Certificate Registrar and
Paying Agent. In connection therewith, Marine Midland Bank agrees to be bound
by all applicable provisions of such instrument.
MARINE MIDLAND BANK, as initial Authenticating
Agent, Certificate Registrar and Paying Agent
By:______________________________
Name:
Title:
XIII-7
STATE OF NEW YORK _____________)
: ss.:
COUNTY OF NEW YORK ____________)
On the ____ day of June, 1998 before me, a Notary Public in and for
said State, personally appeared ____________________ known to me to be an
officer of the Trustee, the trust company that executed the within instrument,
and also known to me to be the person who executed it on behalf of said banking
corporation, and acknowledged to me that such banking corporation executed the
within instrument.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
official seal the day and year in this certificate first above written.
__________________________________
Notary Public
My Commission expires ___________
STATE OF __________ )
: ss.:
COUNTY OF __________)
On the ____ day of June, 1998 before me, a Notary Public in and for
said State, personally appeared ___________ known to me to be the
_______________ of First National Bank of New England, the corporation that
executed the within instrument as seller and servicer, and also known to me to
be the person who executed it on behalf of said corporation, and acknowledged to
me that such corporation executed the within instrument.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
official seal the day and year in this certificate first above written.
__________________________________
Notary Public
My Commission expires ___________
EXHIBIT A
CONTENTS OF SBA FILE
With respect to each SBA Loan, the SBA File shall include a copy of
any of the following items delivered to the Trustee or, with respect to 1 below
for the SBA (S) 7(a) Loans, the FTA:
1. The original SBA Note, endorsed by means of an allonge as
follows: "Pay to the order of Marine Midland Bank, and its
successors and assigns, as trustee under that certain Pooling and
Servicing Agreement dated as of May 31, 1998, for the benefit of
the United States Small Business Administration and holders of
First National Bank of New England SBA Loan-Backed Adjustable
Rate Certificates, Series 1998-1, Class A and Class B, as their
respective interests may appear, without recourse" and signed, by
facsimile or manual signature, in the name of the Seller by a
Responsible Officer, with all prior and intervening endorsements
showing a complete chain of endorsement from the originator to
the Seller, if the Seller was not the originator; provided,
--------
however, that in lieu of the original SBA Note relating to one
SBA Loan, where the original SBA Note has been lost the Seller
may deliver a lost note affidavit and, if a copy exists, a copy
of the original SBA Note;
2. With respect to those SBA Loans secured by Mortgaged Properties,
either: (i) the original Mortgage, with evidence of recording
thereon, (ii) a copy of the Mortgage certified as a true copy by
a Responsible Officer of the Seller where the original has been
transmitted for recording until such time as the original is
returned by the public recording office or duly licensed title or
escrow officer or (iii) a copy of the Mortgage certified by the
public recording office in those instances where the original
recorded Mortgage has been lost;
3. With respect to those SBA Loans secured by Mortgaged Properties,
either: (i) the original Assignment of Mortgage from the Seller
endorsed as follows: "Marine Midland Bank, ("Assignee") its
successors and assigns, as trustee under the Pooling and
Servicing Agreement dated as of May
A-1
31, 1998 subject to the Multi-Party Agreement dated as of May 31,
1998" with evidence of recording thereon (provided, however, that
where permitted under the laws of the jurisdiction wherein the
Mortgaged Property is located, the Assignment of Mortgage may be
effected by one or more blanket assignments for SBA Loans secured
by Mortgaged Properties located in the same county), or (ii) a
copy of such Assignment of Mortgage certified as a true copy by a
Responsible Officer of the Seller where the original has been
transmitted for recording (provided, however, that where the
-------- -------
original Assignment of Mortgage is not being delivered to the
Trustee, each such Responsible Officer may complete one or more
blanket certificates attaching copies of one or more Assignments
of Mortgage relating to the Mortgages originated by the Seller);
4. With respect to those SBA Loans secured by Mortgaged Properties,
either: (i) originals of all intervening assignments, if any,
showing a complete chain of title from the originator to the
Seller, including warehousing assignments, with evidence of
recording thereon if such assignments were recorded, (ii) copies
of any assignments certified as true copies by a Responsible
Officer of the Seller where the originals have been submitted for
recording until such time as the originals are returned by the
public recording officer, or (iii) copies of any assignments
certified by the public recording office in any instances where
the original recorded assignments have been lost;
5. With respect to those SBA Loans secured by Mortgaged Properties,
either: (i) originals of all title insurance policies relating
to the Mortgaged Properties to the extent the Seller obtained
such policies or (ii) copies of any title insurance policies or
other evidence of lien position, including but not limited to
PIRT policies, limited liability reports and lot book reports, to
the extent the Seller obtains such policies or other evidence of
lien position, certified as true by the Seller;
6. With respect to these SBA Loans secured by other items of
Collateral, the original or certified copy of all filed UCC
financing statements
A-2
securing such Collateral naming the Seller as "Secured Party;"
7. For all SBA Loans, blanket assignment of all Collateral securing
the SBA Loan, including without limitation, all rights under
applicable guarantees and insurance policies;
8. For all SBA Loans, irrevocable power of attorney of the Seller to
the Trustee to execute, deliver, file or record and otherwise
deal with the Collateral for the SBA Loans in accordance with the
Agreement. The power of attorney will be delegable by the
Trustee to the Servicer and any successor servicer and will
permit the Trustee or its delegate to prepare, execute and file
or record UCC financing statements and notices to insurers; and
9. For all SBA Loans, blanket UCC-1 financing statements identifying
by type all Collateral for the SBA Loans in the SBA Loan Pool and
naming the Trustee as Secured Party and the Seller as the Debtor.
The UCC-1 financing statements will be filed promptly following
the Closing Date in New York and Connecticut and will be in the
nature of protective notice filings rather than a true financing
statement.
X-0
XXXXXXX X-0
[FORM OF CLASS A CERTIFICATE]
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE CERTIFICATE
REGISTRAR OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND
ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER
NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS
MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
THIS CERTIFICATE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR UNDER ANY STATE SECURITIES OR
BLUE SKY LAW OF ANY STATE. THE HOLDER HEREOF, BY PURCHASING THIS CERTIFICATE,
AGREES THAT THIS CERTIFICATE MAY BE REOFFERED, RESOLD, PLEDGED OR OTHERWISE
TRANSFERRED ONLY IN COMPLIANCE WITH THE SECURITIES ACT AND OTHER APPLICABLE LAWS
AND ONLY (1) (A) PURSUANT TO RULE 144A UNDER THE SECURITIES ACT ("RULE 144A") TO
A PERSON THAT THE HOLDER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER
WITHIN THE MEANING OF RULE 144A (A "QIB"), PURCHASING FOR ITS OWN ACCOUNT OR A
QIB PURCHASING FOR THE ACCOUNT OF A QIB, WHOM THE HOLDER HAS INFORMED THAT THE
REOFFER, RESALE, PLEDGE OR OTHER TRANSFER IS BEING MADE IN RELIANCE ON RULE
144A, OR (B) IN CERTIFICATED FORM TO AN INSTITUTIONAL "ACCREDITED INVESTOR"
(WITHIN THE MEANING OF RULE 501(A)(1)-(3) OR (7) UNDER THE SECURITIES ACT)
PURCHASING FOR INVESTMENT AND NOT FOR DISTRIBUTION IN VIOLATION OF THE
SECURITIES ACT, IN EACH CASE, SUBJECT TO (X) THE RECEIPT BY THE TRUSTEE OF A
LETTER SUBSTANTIALLY IN THE FORM PROVIDED IN THE AGREEMENT AND (Y) THE RECEIPT
BY THE TRUSTEE OF SUCH OTHER EVIDENCE ACCEPTABLE TO THE TRUSTEE THAT SUCH
REOFFER, RESALE, PLEDGE OR TRANSFER IS IN COMPLIANCE WITH THE SECURITIES ACT AND
OTHER APPLICABLE LAWS OR IN EACH CASE IN ACCORDANCE WITH ALL APPLICABLE
SECURITIES LAWS OF THE UNITED STATES AND SECURITIES AND BLUE SKY LAWS OF ANY
STATE OF THE UNITED STATES AND ANY OTHER APPLICABLE JURISDICTION, (2) PURSUANT
TO ANOTHER EXEMPTION AVAILABLE UNDER THE SECURITIES ACT AND IN ACCORDANCE WITH
ANY APPLICABLE STATE SECURITIES LAWS, OR (3) PURSUANT TO A VALID REGISTRATION
STATEMENT.
B-1-1
THIS CERTIFICATE IS NOT GUARANTEED OR INSURED BY ANY GOVERNMENTAL AGENCY OR
INSTRUMENTALITY OR BY ANY OTHER PERSON.
THIS CERTIFICATE MAY NOT BE ACQUIRED FOR OR ON BEHALF OF (1) AN EMPLOYEE BENEFIT
PLAN OR RETIREMENT ARRANGEMENT SUBJECT TO THE EMPLOYEE RETIREMENT INCOME
SECURITY ACT OF 1974, AS AMENDED, AND/OR SECTION 4975 OF THE INTERNAL REVENUE
CODE OF 1986, AS AMENDED, OR (2) ANY ENTITY, THE ASSETS OF WHICH WOULD BE DEEMED
PLAN ASSETS UNDER THE DEPARTMENT OF LABOR REGULATIONS SET FORTH AT 29 C.F.R.
(S)2510.3-101.
THE RIGHTS OF THE HOLDERS OF THE CLASS B CERTIFICATES TO RECEIVE DISTRIBUTIONS
WITH RESPECT TO INTEREST AND PRINCIPAL WILL BE SUBORDINATED TO SUCH RIGHTS OF
THE HOLDERS OF THE CLASS A CERTIFICATES TO THE EXTENT DESCRIBED IN THE POOLING
AND SERVICING AGREEMENT REFERRED TO HEREIN.
X-0-0
XXXXX XXXXXXXX XXXX XX XXX XXXXXXX
SBA LOAN-BACKED ADJUSTABLE RATE CERTIFICATES
Series 1998-1 Original Class A Certificate
Class A Principal Balance:
No. 1 $24,211,000
Original Dollar Amount as
of the Cut-Off Date
Represented by this
Certificate:
$24,211,000
Remittance Rate: Percentage Interest of
Variable the Class A Certificates
Evidenced by this
Certificate: 100%
Date of Pooling and Servicer:
Servicing Agreement First National Bank
and Cut-Off Date: of New England
May 31, 1998
First Remittance Date: Latest Maturity Date:
August 17, 1998 September 15, 2024
CUSIP No.: 32110F AC 0
Closing Date: Trustee:
June 30, 1998 Marine Midland Bank
First National Bank of New England certifies that CEDE & CO. is the
registered owner of a percentage interest (the "Percentage Interest") in a trust
consisting of certain Unguaranteed Interests in a pool of loans partially
guaranteed by the U.S. Small Business Administration (the "SBA Loans") and
serviced by First National Bank of New England (hereinafter called the
"Servicer," in its capacity as the Servicer, and the "Seller," in its capacity
as Seller, which terms include any successor entity under the Pooling and
Servicing Agreement referred to below). The SBA Loans were originated or
purchased by the Seller. The SBA Loans will be serviced pursuant to the terms
and conditions of that certain Pooling and Servicing Agreement dated as of May
31, 1998 (the "Pooling and Servicing Agreement") between First National Bank of
New England, as Seller
B-1-3
and Servicer, and Marine Midland Bank, as trustee (the "Trustee"), certain of
the pertinent provisions of which are set forth herein. To the extent not
defined herein, the capitalized terms used herein have the meanings assigned in
the Pooling and Servicing Agreement. This Certificate is issued under and is
subject to the terms, provisions and conditions of the Pooling and Servicing
Agreement, to which Pooling and Servicing Agreement the holder of this
Certificate by virtue of the acceptance hereof assents and by which such holder
is bound.
On each Remittance Date, commencing on August 17, 1998, the Trustee or
Paying Agent shall distribute to the Person in whose name this Certificate is
registered at the close of business on the last day of the month next preceding
the month of such distribution (the "Record Date"), an amount equal to the
product of the Percentage Interest of the Class A Certificates evidenced by this
Certificate and the amount required to be distributed to Holders of Class A
Certificates on such Remittance Date pursuant to Section 6.07 of the Pooling and
Servicing Agreement.
During the initial Interest Accrual Period, this Certificate will bear
interest at the rate of 6.50% per annum. During each subsequent Interest
Accrual Period, this Certificate will bear interest at a per annum rate equal to
the Prime Rate in effect on the preceding Adjustment Date minus 2.00% per annum,
subject to the limits described in the Pooling and Servicing Agreement.
Distributions on this Certificate will be made by the Trustee or
Paying Agent by check mailed to the address of the Person entitled thereto as
such name and address shall appear on the Certificate Register or, upon written
request to the Trustee, by wire transfer of immediately available funds to the
account of the Person entitled thereto as shall appear on the Certificate
Register without the presentation or surrender of this Certificate or the making
of any notation thereon, at a bank or other entity having appropriate facilities
therefor, and, in the case of wire transfers, at the expense of such Person
unless such Person shall own of record Certificates which have initial
Certificate Principal Balances aggregating at least $5,000,000.
Notwithstanding the above, the final distribution on this Certificate
will be made after due notice by the Trustee of the pendency of such
distribution and only upon presentation and surrender of this Class A
Certificate at the office or agency maintained for that purpose by the
Certificate Registrar in New York, New York.
B-1-4
This Certificate is one of a duly authorized issue of Certificates
designated as First National Bank of New England SBA Loan-Backed, Adjustable
Rate Certificates, Series 1998-1, Class A and Class B (herein called the
"Certificates") and representing undivided ownership in the right to receive the
principal portion of the Unguaranteed Interests of the SBA Loans together with
interest thereon at the then applicable Class A or Class B Remittance Rate, as
the case may be.
Neither the Certificates nor the SBA Loans represent an obligation of,
or an interest in, the Servicer and are not insured or guaranteed by the Federal
Deposit Insurance Corporation, the Small Business Administration, the Government
National Mortgage Association or the Veterans Administration or any other
governmental agency. The Certificates are limited in right of payment to
certain collections and recoveries respecting the SBA Loans, all as more
specifically set forth herein and in the Pooling and Servicing Agreement. In
the event Servicer funds are advanced with respect to any SBA Loan, such advance
is reimbursable to the Servicer from late recoveries of interest on the SBA
Loans generally.
As provided in the Pooling and Servicing Agreement, deposits and
withdrawals from the Certificate Account, the Spread Account and the Expense
Account may be made by the Trustee from time to time for purposes other than
distributions to Certificateholders, such purposes including reimbursement to
the Servicer of advances made, or certain expenses incurred, by it, and
investment in Permitted Instruments.
Subject to certain restrictions, the Pooling and Servicing Agreement
permits the amendment thereof with respect to certain modifications (a) by the
Seller, the Servicer and the Trustee without the consent of the
Certificateholders and (b) by the Seller, the Servicer and the Trustee with the
consent of the Majority Certificateholders. The Pooling and Servicing Agreement
permits the Majority Certificateholders to waive, on behalf of all
Certificateholders, any default by the Servicer in the performance of its
obligations under the Pooling and Servicing Agreement and its consequences,
except in a default in making any required distribution on a Certificate. Any
such consent or waiver by the Majority Certificateholders shall be conclusive
and binding on the holder of this Certificate and upon all future holders of
this Certificate and of any Certificate issued upon the transfer hereof or in
exchange herefor or in lieu hereof whether or not notation of such consent is
made upon this Certificate.
As provided in the Pooling and Servicing Agreement and subject to
certain limitations therein set forth, the transfer of
B-1-5
this Certificate is registrable in the Certificate Register upon surrender of
this Certificate for registration of transfer at the offices or agencies
maintained by the Certificate Registrar in New York, New York, duly endorsed by,
or accompanied by a written instrument of transfer in form satisfactory to, the
Trustee, duly executed by the holder hereof or such holder's attorney duly
authorized in writing, and thereupon one or more new Certificates in authorized
denominations evidencing the same aggregate undivided Percentage Interest will
be issued to the designated transferee or transferees.
The Certificates are issuable only as registered Certificates. As
provided in the Pooling and Servicing Agreement and subject to certain
limitations therein set forth, the Certificate is exchangeable for a new
Certificate evidencing the same undivided ownership interest, as requested by
the holder surrendering the same.
No service charge will be made for any such registration of transfer
or exchange, but the Certificate Registrar may require payment of a sum
sufficient to cover any tax or other governmental charge payable in connection
therewith.
The Servicer, the Seller, the Trustee and the Certificate Registrar,
and any agent of any of the foregoing, may treat the person in whose name this
Certificate is registered as the owner hereof for all purposes, and none of the
foregoing shall be affected by notice to the contrary.
Except for certain obligations of the Servicer to the Trustee, the
obligations created by the Pooling and Servicing Agreement shall terminate upon
notice to the Trustee of the later of the following events: (i) the final
payment or other liquidation of the last SBA Loan or the disposition of all
property acquired upon foreclosure, deed in lieu of foreclosure or other legal
process of any SBA Loan and the remittance of all funds due thereunder or (ii)
mutual consent of the Servicer and all Certificateholders in writing; provided,
however, that in no event shall the Trust Fund established by the Agreement
terminate later than twenty-one years after the death of the last surviving
lineal descendant of Xxxxxx X. Xxxxxxx, late Ambassador of the United States to
the Court of St. Xxxxx, alive as of the date of the Agreement.
B-1-6
IN WITNESS WHEREOF, the Servicer has caused this Certificate to be
duly executed.
FIRST NATIONAL BANK OF NEW ENGLAND,
Servicer
By::__________________________
Name:
Title:
This is one of the
Certificates referred
to in the within-
mentioned Agreement.
MARINE MIDLAND BANK,
as Trustee
By:______________________
Authorized Signatory
or
MARINE MIDLAND BANK
as Authenticating Agent
By:______________________
Authorized Signatory
X-0-0
XXXXXXX X-0
[FORM OF CLASS B CERTIFICATE]
THIS CERTIFICATE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR UNDER ANY STATE SECURITIES OR
BLUE SKY LAW OF ANY STATE. THE HOLDER HEREOF, BY PURCHASING THIS CERTIFICATE,
AGREES THAT THIS CERTIFICATE MAY BE REOFFERED, RESOLD, PLEDGED OR OTHERWISE
TRANSFERRED ONLY IN COMPLIANCE WITH THE SECURITIES ACT AND OTHER APPLICABLE LAWS
AND ONLY (1) (A) PURSUANT TO RULE 144A UNDER THE SECURITIES ACT ("RULE 144A") TO
A PERSON THAT THE HOLDER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER
WITHIN THE MEANING OF RULE 144A (A "QIB"), PURCHASING FOR ITS OWN ACCOUNT OR A
QIB PURCHASING FOR THE ACCOUNT OF A QIB, WHOM THE HOLDER HAS INFORMED THAT THE
REOFFER, RESALE, PLEDGE OR OTHER TRANSFER IS BEING MADE IN RELIANCE ON RULE
144A, OR (B) IN CERTIFICATED FORM TO AN INSTITUTIONAL "ACCREDITED INVESTOR"
(WITHIN THE MEANING OF RULE 501(A)(1)-(3) OR (7) UNDER THE SECURITIES ACT)
PURCHASING FOR INVESTMENT AND NOT FOR DISTRIBUTION IN VIOLATION OF THE
SECURITIES ACT, IN EACH CASE, SUBJECT TO (X) THE RECEIPT BY THE TRUSTEE OF A
LETTER SUBSTANTIALLY IN THE FORM PROVIDED IN THE AGREEMENT AND (Y) THE RECEIPT
BY THE TRUSTEE OF SUCH OTHER EVIDENCE ACCEPTABLE TO THE TRUSTEE THAT SUCH
REOFFER, RESALE, PLEDGE OR TRANSFER IS IN COMPLIANCE WITH THE SECURITIES ACT AND
OTHER APPLICABLE LAWS OR IN EACH CASE IN ACCORDANCE WITH ALL APPLICABLE
SECURITIES LAWS OF THE UNITED STATES AND SECURITIES AND BLUE SKY LAWS OF ANY
STATE OF THE UNITED STATES AND ANY OTHER APPLICABLE JURISDICTION, (2) PURSUANT
TO ANOTHER EXEMPTION AVAILABLE UNDER THE SECURITIES ACT AND IN ACCORDANCE WITH
ANY APPLICABLE STATE SECURITIES LAWS, OR (3) PURSUANT TO A VALID REGISTRATION
STATEMENT.
THIS CERTIFICATE MAY NOT BE ACQUIRED FOR OR ON BEHALF OF (1) AN EMPLOYEE BENEFIT
PLAN OR RETIREMENT ARRANGEMENT SUBJECT TO THE EMPLOYEE RETIREMENT INCOME
SECURITY ACT OF 1974, AS AMENDED, AND/OR SECTION 4975 OF THE INTERNAL REVENUE
CODE OF 1986, AS AMENDED, OR (2) ANY ENTITY, THE ASSETS OF WHICH WOULD BE DEEMED
PLAN ASSETS UNDER THE DEPARTMENT OF LABOR REGULATIONS SET FORTH AT 29 C.F.R.
(S)2510.3-101.
THIS CERTIFICATE IS NOT GUARANTEED OR INSURED BY ANY GOVERNMENTAL AGENCY OR
INSTRUMENTALITY OR BY ANY OTHER PERSON.
B-2-1
THE RIGHTS OF THE HOLDERS OF THE CLASS B CERTIFICATES TO RECEIVE DISTRIBUTIONS
WITH RESPECT TO INTEREST AND PRINCIPAL WILL BE SUBORDINATED TO SUCH RIGHTS OF
THE HOLDERS OF THE CLASS A CERTIFICATES TO THE EXTENT DESCRIBED IN THE POOLING
AND SERVICING AGREEMENT REFERRED TO HEREIN.
SO LONG AS THIS CLASS B CERTIFICATE IS REGISTERED IN THE NAME OF FNBNE SBA
HOLDINGS, INC., THIS CLASS B CERTIFICATE MAY NOT BE SOLD, PLEDGED, TRANSFERRED,
ASSIGNED OR OTHERWISE CONVEYED, IN WHOLE OR IN PART, WITHOUT THE PRIOR WRITTEN
APPROVAL OF THE UNITED STATES SMALL BUSINESS ADMINISTRATION.
THE RIGHTS OF THE HOLDERS OF THE CLASS B CERTIFICATES TO RECEIVE DISTRIBUTIONS
WITH RESPECT TO INTEREST AND PRINCIPAL WILL BE SUBORDINATED TO SUCH RIGHTS OF
THE HOLDERS OF THE CLASS A CERTIFICATES TO THE EXTENT DESCRIBED IN THE POOLING
AND SERVICING AGREEMENT REFERRED TO HEREIN.
X-0-0
XXXXX XXXXXXXX XXXX XX XXX XXXXXXX
SBA LOAN-BACKED ADJUSTABLE RATE CERTIFICATES
Series 1998-1 Original Class B Certificate
Class B Principal Balance:
No. 1 $2,690,728.97
Original Dollar Amount as
of the Cut-Off Date
Represented by this
Certificate:
$2,690,728.97
Remittance Rate: Percentage Interest of
Variable the Class B Certificates
Evidence by this
Certificate: 100%
Date of Pooling and Servicer:
Servicing Agreement First National Bank of
and Cut-Off Date: New England
May 31, 1998
First Remittance Latest Maturity Date:
Date: September 15, 2024
August 17, 1998
CUSIP NO.: 32110F AD 8
Closing Date: Trustee:
June 30, 1998 Marine Midland Bank
First National Bank of New England certifies that FNBNE SBA HOLDINGS, INC.
is the registered owner of a percentage interest (the "Percentage Interest") in
a trust consisting of certain Unguaranteed Interests in a pool of loans
partially guaranteed by the U.S. Small Business Administration and, to the
extent delivered pursuant to the Pooling and Servicing Agreement referred to
below, certain loans originated in connection with such loans (the "SBA Loans")
and serviced by First National Bank of New England (hereinafter called the
"Servicer," in its capacity as the Servicer, and the "Seller," in its capacity
as Seller, which terms include any successor entity under the Pooling and
Servicing Agreement referred to below). The SBA Loans were originated or
purchased by the Seller. The SBA Loans will be serviced pursuant to the terms
and conditions of that certain Pooling and Servicing Agreement dated as of May
31, 1998 (the "Pooling and Servicing Agreement") between First National
B-2-3
Bank of New England, as Seller and Servicer and Marine Midland Bank, as trustee
(the "Trustee"), certain of the pertinent provisions of which are set forth
herein. To the extent not defined herein, the capitalized terms used herein have
the meanings assigned in the Pooling and Servicing Agreement. This Certificate
is issued under and is subject to the terms, provisions and conditions of the
Pooling and Servicing Agreement, to which Agreement the holder of this
Certificate by virtue of the acceptance hereof assents and by which such holder
is bound.
On each Remittance Date, commencing on August 17, 1998, the Trustee or
Paying Agent shall distribute to the Person in whose name this Certificate is
registered at the close of business on the last day of the month next preceding
the month of such distribution (the "Record Date"), an amount equal to the
product of the Percentage Interest of the Class B Certificates evidenced by this
Certificate and the amount required to be distributed to Holders of Class B
Certificates on such Remittance Date pursuant to Section 6.07 of the Pooling and
Servicing Agreement.
During the initial Interest Accrual Period, this Certificate will bear
interest at the rate of 7.50% per annum. During each subsequent Interest
Accrual Period, this Certificate will bear interest at a per annum rate equal to
the Prime Rate in effect on the preceding Adjustment Date minus 1.00% per annum,
subject to the limits described in the Pooling and Servicing Agreement.
Distributions on this Certificate will be made by the Trustee or
Paying Agent by check mailed to the address of the Person entitled thereto as
such name and address shall appear on the Certificate Register or, upon written
request to the Trustee, by wire transfer of immediately available funds to the
account of the Person entitled thereto as shall appear on the Certificate
Register without the presentation or surrender of this Certificate or the making
of any notation thereon, at a bank or other entity having appropriate facilities
therefor, and, in the case of wire transfers, at the expense of such Person
unless such Person shall own of record Certificates which have initial
Certificate Principal Balances aggregating at least $5,000,000.
Notwithstanding the above, the final distribution on this Certificate
will be made after due notice by the Trustee of the pendency of such
distribution and only upon presentation and surrender of this Certificate at the
office or agency maintained for that purpose by the Certificate Registrar in New
York, New York.
B-2-4
This Certificate is one of a duly authorized issue of Certificates
designated as First National Bank of New England SBA Loan-Backed, Adjustable
Rate Certificates, Series 1998-1, Class A and Class B (herein called the
"Certificates") and representing undivided ownership in the right to receive the
principal portion of the Unguaranteed Interests of the SBA Loans together with
interest thereon at the then applicable Class A or Class B Remittance Rate, as
the case may be.
Neither the Certificates nor the SBA Loans represent an obligation of,
or an interest in, the Servicer and are not insured or guaranteed by the Federal
Deposit Insurance Corporation, the Small Business Administration, the Government
National Mortgage Association or the Veterans Administration or any other
governmental agency. The Certificates are limited in right of payment to
certain collections and recoveries respecting the SBA Loans, all as more
specifically set forth herein and in the Pooling and Servicing Agreement. In
the event Servicer funds are advanced with respect to any SBA Loan, such advance
is reimbursable to the Servicer from late recoveries of interest on the SBA
Loans generally.
As provided in the Pooling and Servicing Agreement, deposits and
withdrawals from the Certificate Account, the Spread Account and the Expense
Account may be made by the Trustee from time to time for purposes other than
distributions to Certificateholders, such purposes including reimbursement to
the Servicer of advances made, or certain expenses incurred, by it, and
investment in Permitted Instruments.
Subject to certain restrictions, the Pooling and Servicing Agreement
permits the amendment thereof with respect to certain modifications (a) by the
Seller, the Servicer and the Trustee without the consent of the
Certificateholders and (b) by the Seller, the Servicer and the Trustee with the
consent of the Majority Certificateholders. The Pooling and Servicing Agreement
permits the Majority Certificateholders to waive, on behalf of all
Certificateholders, any default by the Servicer in the performance of its
obligations under the Pooling and Servicing Agreement and its consequences,
except in a default in making any required distribution on a Certificate. Any
such consent or waiver by the Majority Certificateholders shall be conclusive
and binding on the holder of this Certificate and upon all future holders of
this Certificate and of any Certificate issued upon the transfer hereof or in
exchange herefor or in lieu hereof whether or not notation of such consent is
made upon this Certificate.
As provided in the Pooling and Servicing Agreement and subject to
certain limitations therein set forth, the transfer of
B-2-5
this Certificate is registrable in the Certificate Register upon surrender of
this Certificate for registration of transfer at the offices or agencies
maintained by the Certificate Registrar in New York, New York, duly endorsed by,
or accompanied by a written instrument of transfer in form satisfactory to, the
Trustee, duly executed by the holder hereof or such holder's attorney duly
authorized in writing, and thereupon one or more new Certificates in authorized
denominations evidencing the same aggregate undivided Percentage Interest will
be issued to the designated transferee or transferees.
The Certificates are issuable only as registered Certificates. As
provided in the Pooling and Servicing Agreement and subject to certain
limitations therein set forth, the Certificate is exchangeable for a new
Certificate evidencing the same undivided ownership interest, as requested by
the holder surrendering the same.
No service charge will be made for any such registration of transfer
or exchange, but the Certificate Registrar may require payment of a sum
sufficient to cover any tax or other governmental charge payable in connection
therewith.
The Servicer, the Seller, the Trustee and the Certificate Registrar,
and any agent of any of the foregoing, may treat the person in whose name this
Certificate is registered as the owner hereof for all purposes, and none of the
foregoing shall be affected by notice to the contrary.
Except for certain obligations of the Servicer to the Trustee, the
obligations created by the Pooling and Servicing Agreement shall terminate upon
notice to the Trustee of the later of the following events: (i) the final
payment or other liquidation of the last SBA Loan or the disposition of all
property acquired upon foreclosure, deed in lieu of foreclosure or other legal
process of any SBA Loan and the remittance of all funds due thereunder or (ii)
mutual consent of the Servicer and all Certificateholders in writing; provided,
however, that in no event shall the Trust Fund established by the Agreement
terminate later than twenty-one years after the death of the last surviving
lineal descendant of Xxxxxx X. Xxxxxxx, late Ambassador of the United States to
the Court of St. Xxxxx, alive as of the date of the Agreement.
B-2-6
IN WITNESS WHEREOF, the Servicer has caused this Certificate to be
duly executed.
FIRST NATIONAL BANK OF NEW ENGLAND,
Servicer
By: ___________________________
Name:
Title:
This is one of the
Certificates referred
to in the within-
mentioned Agreement.
MARINE MIDLAND BANK,
as Trustee
By:_____________________
Authorized Signatory
or
MARINE MIDLAND BANK,
as Authenticating Agent
By:_____________________
Authorized Signatory
B-2-7
EXHIBIT C
PRINCIPAL AND INTEREST ACCOUNT LETTER AGREEMENT
(date)
To: Marine Midland Bank
000 Xxxxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 0000 (the "Depository")
As "Servicer" under the Pooling and Servicing Agreement, dated as of
May 31, 1998, First National Bank of New England SBA Loan-Backed Adjustable Rate
Certificates, Series 1998-1 Class A and Class B (the "Agreement"), we hereby
authorize and request you to establish an account, as a Principal and Interest
Account pursuant to Section 5.03 of the Agreement, to be designated as "First
National Bank of New England, in trust for the registered holders of First
National Bank of New England SBA Loan-Backed Adjustable Rate Certificates,
Series 1998-1." All deposits in the account shall be subject to withdrawal
therefrom by order signed by the Servicer. You may refuse any deposit which
would result in violation of the requirement that the account be fully insured
as described below. This letter is submitted to you in duplicate. Please
execute and return one original to us.
FIRST NATIONAL BANK OF NEW ENGLAND
By:_______________________________
Name:
Title:
C-1
The undersigned, as Depository, hereby certifies that the above
described account has been established under Account Number 10-875345, at the
office of the depository indicated above, and agrees to honor withdrawals on
such account as provided above. The amounts deposited at any time in the
account will be insured to the maximum amount provided by applicable law by the
Federal Deposit Insurance Corporation.
MARINE MIDLAND BANK
-------------------
(Name of Depository)
By:______________________________
Name:
Title:
C-2
EXHIBIT D
[OMITTED]
D-1
EXHIBIT E
WIRING INSTRUCTIONS FORM
_______________,19__
[Paying Agent]
[Trustee]
________________________
________________________
________________________
Re: First National Bank of New England SBA Loan-Backed
Adjustable Rate Certificates, Series 1998-1,
[Class A] [Class B] Number ____
------------------------------------
Dear Sir:
In connection with the sale of the above-captioned Certificate by
___________________________________ to ___________________________________,
("Transferee") you, as Paying Agent, are instructed to make all remittances to
Transferee as Certificateholder as of ____________, 19__ by wire transfer. For
such wire transfer, the wiring instructions are as follows:
___________________________
___________________________
___________________________
________________________________
Transferee
Certificateholder's mailing address:
Name:
Address:
E-1
EXHIBIT F-1
FORM OF INITIAL CERTIFICATION
___________, 1998
[Seller]
[Servicer]
[SBA]
Re: Pooling and Servicing Agreement
First National Bank of New England SBA
Loan-Backed Adjustable Rate Certificates, Series 1998-1, dated as
of May 31, 1998 between First National Bank of New England and
Marine Midland Bank, as Trustee
----------------
Gentlemen:
In accordance with Section 2.05 of the above-captioned Pooling and
Servicing Agreement (the "Agreement"), the undersigned, as Trustee, hereby
certifies that, except as noted on the attachment hereto, if any (the "Loan
Exception Report"), it has received each of the documents required to be
delivered to it pursuant to Section 2.04 of the Agreement (not including the
original SBA Notes relating to the SBA (S) 7(a) Loans, which are to be delivered
to the FTA) with respect to each [Initial] [Subsequent] SBA Loan listed in the
SBA Loan Schedule and the documents contained therein appear to bear original
signatures.
The Trustee has made no independent examination of any such documents
beyond the review specifically required in the above-referenced Pooling and
Servicing Agreement.
F-1-1
The Trustee makes no representations as to: (i) the validity,
legality, sufficiency, enforceability or genuineness of any such documents or
any of the SBA Loans identified on the SBA Loan Schedule, or (ii) the
collectibility, insurability, effectiveness or suitability of any such SBA Loan.
MARINE MIDLAND BANK,
as Trustee
By:______________________________
Name:
Title:
F-1-2
EXHIBIT F-2
FORM OF FINAL CERTIFICATION
[date]
[Servicer]
[Seller]
[SBA]
Re: Pooling and Servicing Agreement
First National Bank of New England SBA
Loan-Backed Adjustable Rate Certificates, Series
1998-1, dated as of May 31, 1998 between First
National Bank of New England and Marine Midland
Bank, as Trustee
----------------
Gentlemen:
In accordance with Section 2.05 of the above-captioned Pooling and
Servicing Agreement, the undersigned, as Trustee, hereby certifies that, except
as noted on the attachment hereto, as to each SBA Loan listed in the SBA Loan
Schedule (other than any SBA Loan paid in full or listed on the attachment
hereto) it has reviewed the documents delivered to it pursuant to Section 2.04
of the Pooling and Servicing Agreement and has determined that (i) all such
documents are in its possession, (ii) such documents have been reviewed by it
and have not been mutilated, damaged, torn or otherwise physically altered and
relate to such SBA Loan and (iii) based on its examination, and only as to the
foregoing documents, the information set forth in the SBA Loan Schedule
respecting such SBA Loan is correct. The Trustee has made no independent
examination or inquiring of such documents beyond the review specifically
required in the above-referenced Pooling and Servicing Agreement.
F-2-1
The Trustee makes no representations as to: (i) the validity,
legality, enforceability or genuineness of any such documents contained in each
or any of the Loans identified on the SBA Loan Schedule, (ii) the
collectibility, insurability, effectiveness or suitability of any such SBA Loan,
or (iii) the compliance by such documents with statutory or regulatory
guidelines.
MARINE MIDLAND BANK,
as Trustee
By:______________________________
Name:
Title:
F-2-2
EXHIBIT G
[OMITTED]
G-1
EXHIBIT H
SBA LOAN SCHEDULE
[SEE TAB 8]
H-1
EXHIBIT I
REQUEST FOR RELEASE OF DOCUMENTS
To: [Trustee]
[FTA]
Re: Pooling and Servicing Agreement
First National Bank of New England SBA
Loan-Backed Adjustable Rate Certificates,
Series 1998-1, dated as of May 31, 1998,
between First National Bank of New England and
Marine Midland Bank, as Trustee
--------------------------------
In connection with the administration of the pool of SBA Loans held by
you, we request the release, and acknowledge receipt, of the (Trustee's SBA
File/[specify document]) for the SBA Loan described below, for the reason
indicated. Please execute the attached documents, if any, for the described SBA
Loan for the reasons indicated.
Obligor's Name, Address & Zip Code:
----------------------------------
SBA Loan Number:
---------------
Reason for Requesting Documents (check one)
-------------------------------
____ 1. SBA Loan Paid in Full
(Servicer hereby certifies that all amounts received in
connection therewith have been credited to the Principal and
Interest Account and remitted to the Trustee for deposit into the
Certificate Account pursuant to the Pooling and Servicing
Agreement.)
____ 2. SBA Loan Liquidated
(Servicer hereby certifies that all proceeds of foreclosure,
insurance or other liquidation have been finally received and
credited to the Principal and Interest Account and remitted to
the Trustee for deposit into the Certificate Account pursuant to
the Pooling and Servicing Agreement.)
____ 3. SBA Loan in Foreclosure or other Legal Process
I-1
_____4. SBA Loan Repurchased Pursuant to Section 11.01 of the Pooling and
Servicing Agreement.
_____5. SBA Loan Repurchased or Substituted Pursuant to Article II or III of
the Pooling and Servicing Agreement (Servicer hereby certifies
that the repurchase price or Substitution Adjustment has been
credited to the Principal and Interest Account and/or remitted to
the Trustee for deposit into the Certificate Account pursuant to
the Pooling and Servicing Agreement.)
____ 6. Collateral Being Released Pursuant to Section 5.01(f) of the Pooling
and Servicing Agreement.
____ 7. SBA Loan Collateral being substituted or subordinated.
If box 1 or 2 above is checked, and if all or part of the Trustee's
SBA File was previously released to us, please release to us our previous
receipt on file with you, as well as any additional documents in your possession
relating to the above specified SBA Loan.
If box 3, 4, 5, 6 or 7 above is checked, upon our return of all of the
above documents to you, please acknowledge your receipt by signing in the space
indicated below, and returning this form.
FIRST NATIONAL BANK OF NEW ENGLAND,
as Servicer
By:__________________________
Name:
Title:
Date:
____________________________________________________________
Documents returned to Trustee:
MARINE MIDLAND BANK, as Trustee
By:__________________________
Name:
Title
Date:
I-2
EXHIBIT J
FORM OF LIQUIDATION REPORT
Customer Name:
Account number:
Original Principal Balance:
1. Unguaranteed Percentage of Liquidation Proceeds
Principal Prepayment $________
Property Sale Proceeds ________
Insurance Proceeds ________
Other (Itemize) ________
Unguaranteed Percentage of
Total Proceeds $________
2. Servicing Advances $________
Monthly Advances ________
Total Advances $________
3. Net Liquidation Proceeds $________
(Line 1 minus Line 2)
4. Principal Balance of the SBA
Loan on date of liquidation $________
5. Realized (Loss) or Gain $________
(Line 3 minus Line 4)
J-1
EXHIBIT K
FORM OF DELINQUENCY REPORT
DELINQUENCY, REO PROPERTY AND FORECLOSURE INFORMATION
Total
Ranges Total Gross Unguaranteed
Series (in days) Acct Loan Amount Interest Amount Ungtd Pct
----------------------------------------------------------------------------------------------
1 to 29 Days
30 to 59 Days
60 to 89 Days
90 to 179 Days
180 to 719 Days
720 and Over
Foreclosure
REO Property
Total Delinquency
Outstanding by Category
K-1
EXHIBIT L
SERVICER'S MONTHLY COMPUTER DISKETTE FORMAT
The computer diskette to be delivered to the Trustee pursuant to Section
6.09 shall contain the following information for each SBA Loan as of the related
Record Date:
1. Name of the Obligor, address of the Mortgaged Property, if
applicable, and Account Number.
2. The SBA Loan Interest Rate.
3. The Monthly Payment.
4. The dates on which the payments were received for the applicable
Due Period and the amount of such payments segregated into the
following categories; (a) total interest received (including
Servicing Fee, interest payable to holder of the Guaranteed
Interest, the Premium Protection Fee, FTA's Fee, Extra Interest
and, if applicable, Additional Fee); (b) interest payable to the
holder of the Guaranteed Interest and FTA's Fee; (c) principal and
Excess Payments received; (d) Curtailments received; and (e)
Principal Prepayments received.
5. The SBA Loan principal balance.
6. The SBA Loan date and original term to maturity.
7. A "Delinquency Flag" noting that the SBA Loan is current or
delinquent. If delinquent, state the date on which the last
payment was received.
8. For any SBA Loan that is not either 24 months delinquent or
otherwise determined to be uncollectible, a "Foreclosure Flag"
noting that the SBA Loan is the subject of foreclosure proceedings
or other legal process.
9. For any SBA Loan that is not either 24 months delinquent or
otherwise determined to be uncollectible, an "REO Flag" noting that
title to the Mortgaged Property or Repossessed Collateral has been
acquired.
K-1
10. A "Liquidated SBA Loan Flag" noting that the SBA Loan is a
Liquidated SBA Loan and the Net Liquidation Proceeds received in
connection therewith.
11. Any additional information reasonably requested by the Trustee.
K-2
EXHIBIT M
MULTI-PARTY AGREEMENT
AMONG FIRST NATIONAL BANK OF NEW ENGLAND, MARINE MIDLAND BANK, XXXXXX SERVICES
CORP. AND SBA
This Multi-Party Agreement is entered into as of May 31, 1998 (this
"Agreement"), by and among First National Bank of New England (the "SBA
Lender"), Marine Midland Bank, not in its individual capacity but solely as
Trustee (the "Trustee"), Xxxxxx Services Corp. ("FTA"), and the United States
Small Business Administration ("SBA").
The SBA Lender has made and intends to continue to make loans to small
businesses under the Small Business Act, as amended.
SBA guarantees a portion of each SBA Lender Loan in accordance with 13
C.F.R. Part 120 and one or more Small Business Administration Loan Guaranty
Agreements (SBA Form 750), between SBA and the SBA Lender (the "SBA
Agreements").
Because SBA guarantees a portion of each SBA Lender Loan, SBA has an
interest in the SBA Lender Loans, the underlying collateral, and the Loan
Documents.
The SBA Lender has entered into certain Secondary Participation
Guaranty Agreements on SBA Form 1086 (each, a "Participation Agreement") with a
purchaser (each, a "Guaranteed Holder"), SBA and FTA. Under the Participation
Agreements, the SBA Lender has sold the guaranteed portion (the "Guaranteed
Interest") in certain SBA Lender Loans.
SBA has caused FTA to issue a certificate to each Guaranteed Holder which
entitles the Guaranteed Holder to receive the payments and other recoveries of
principal relating to the Guaranteed Interest on the related SBA Lender Loans,
together with interest on the Guaranteed Interest at a per annum rate in effect
from time to time in accordance with the Participation Agreement.
The SBA Lender and the Trustee have entered into a Pooling and
Servicing Agreement, dated as of May 31, 1998 (the "Pooling and Servicing
Agreement"), which establishes a trust (the "Trust"). Under the Pooling and
Servicing Agreement, the SBA Lender will convey the Conveyed Interest to the
Trust. The Trust will issue certificates (the "Certificates") evidencing the
right to receive the Unguaranteed Interest in the SBA Lender Loans together with
interest.
13 C.F.R. Section 120.420 and the SBA Agreements require the SBA
Lender to obtain SBA's written consent before it sells the Unguaranteed
Interest.
The SBA Lender, the Trustee and SBA want to assure consistency between
the SBA Agreements and the Pooling and Servicing Agreement and clarify the
respective rights of the parties.
The SBA Lender, the Trustee, FTA and SBA agree as follows:
1. Definitions. In this Agreement, the following terms have the
-----------
following meanings:
a. "Conveyed Interest": the Unguaranteed Interest of each
SBA Lender Loan.
b. "Event of Default": as defined in the Pooling and
Servicing Agreement.
c. "Loan Documents": all Notes, mortgages, deeds of trust,
security deeds, security agreements, instruments of
hypothecation, guarantees and other agreements and
documents that relate to the SBA Lender Loans.
d. "Notes": the notes evidencing the SBA Lender Loans.
e. "Premium Protection Fee": 0.60% per annum of the then
outstanding principal balance of the Guaranteed Interest.
f. "SBA Lender Loan Debtor": any debtor obligated under an
SBA Lender Loan.
g. "SBA Lender Loans": the loans listed on Exhibit H of the
Pooling and Servicing Agreement (including any Subsequent
SBA Loans (as defined in the Pooling and Servicing
Agreement)) and any other loans included in the Trust
Fund (as defined in the Pooling and Servicing Agreement).
h. "SBA Rules and Regulations": the Small Business Act, as
amended, the SBA Agreements, all rules and regulations
promulgated from time to time under the Small Business
Act, and SBA Standard Operating Procedures and official
Notices as from time to time in effect.
i. "Servicer": The "Servicer" (as defined in the Pooling and
Servicing Agreement) and, if applicable, any Subservicer
(as defined in the Pooling and Servicing Agreement).
j. "Servicing Fee": 0.40% per annum of the then outstanding
principal
balance of the entire SBA Lender Loan.
k. "Spread Account Excess": as defined in the Pooling and
Servicing Agreement.
l. "Unguaranteed Interest": the portion of each SBA Lender
Loan not guaranteed by SBA.
2. SBA's Guaranteed Interest. The SBA Lender, the Trustee (on
-------------------------
behalf of itself and the holders of the Certificates) and FTA acknowledges
SBA's interest in the Guaranteed Interest of all SBA Lender Loans, together
with the collateral securing the SBA Lender Loans and the Loan Documents,
and in all payments and recoveries with respect to the SBA Lender Loans and
the collateral, including insurance proceeds, and agree to recognize and
uphold such interest under SBA Rules and Regulations. The SBA Lender and
the Trustee will execute any release, assignment, endorsement or other
document that SBA may from time to time reasonably request with respect to
the Guaranteed Interest. The SBA Lender and the Trustee will remit funds
received in respect of the Guaranteed Interest in the SBA Lender Loans to
FTA or SBA, as appropriate. If SBA purchases the Guaranteed Interest in
any SBA Lender Loan, any recoveries from the SBA Lender Loan Debtor or
the collateral securing the SBA Lender Loan will be distributed pro rata to
SBA as holder of the Guaranteed Interest and to the Trustee as holder of
the Unguaranteed Interest.
3. Unguaranteed Interest. SBA acknowledges that it has no
---------------------
interest in the Unguaranteed Interest, the Servicing Fee or the Premium
Protection Fee. SBA further acknowledges that it has no interest in any
collateral that secures any SBA Lender Loan or any Loan Document, except to
the extent the collateral secures or a Loan Document relates to the
Guaranteed Interest. The collateral for an SBA Lender Loan secures the
Guaranteed Interest and the Unguaranteed Interest pari passu and all
recoveries from insurance or any other source will be shared pro rata. If
SBA receives any amount in respect of the Conveyed Interest, SBA will remit
the sum to the Trustee for the credit of the SBA Lender, provided that in
no event will SBA have any obligation to pay any amount not owed by SBA
under SBA Rules and Regulations. If SBA receives any amount in respect of
the Servicing Fee or the Premium Protection Fee, SBA will remit the sum to
the SBA Lender for distribution to itself, or, if the SBA Lender is not the
Servicer, the Servicer, provided that the Trustee shall have given FTA and
SBA 15 days prior written
notice under this Agreement of the change in Servicer. This Agreement
constitutes a notice of claims assignment for the full term of the Pooling
and Servicing Agreement under the Federal Assignment of Claims Act of 1940,
as amended, 31 U.S.C. Section 3727, with respect to any right to payment of
any Unguaranteed Interest or the Servicing Fee or the Premium Protection
Fee.
4. SBA Consent to Pooling and Servicing Agreement.
-----------------------------------------------
(a) SBA consents to the SBA Lender's execution and
performance of the Pooling and Servicing Agreement and the transactions
contemplated in it including, but not limited to, the sales of
Certificates, other than the Class B Certificates (as defined in the
Pooling and Servicing Agreement).
(b) Notwithstanding anything to the contrary contained in
the Pooling and Servicing Agreement, a default by the SBA Lender under
another agreement or a default by an entity other than the SBA Lender under
another agreement may not be an event of default under the Pooling and
Servicing Agreement. The Trustee waives any rights it may have, including
rights of set-off and banker's liens, to any account of the SBA Lender into
which payments from SBA Lender Loan
Debtors are received and the Principal and Interest Account (as defined in
the Pooling and Servicing Agreement).
(c) It will be a condition precedent to the effectiveness
of this Agreement that the SBA receives opinions of counsel stating that
the Multi-Party Agreement is enforceable against the Trustee and the SBA
Lender.
5. SBA Lender to Retain Ultimate Risk of Loss. As required by 13
------------------------------------------
C.F.R. Section 120.420(b)(2), the SBA Lender must retain an economic risk
in and bear the ultimate risk of loss on the Unguaranteed Interest. The
SBA Lender will establish the Spread Account under the Pooling and
Servicing Agreement and cause a wholly owned subsidiary of the SBA Lender,
or a wholly-owned subsidiary of such other entity succeeding to the
business of SBA Lender relating to originating and servicing SBA Loans as
may be approved by SBA in its sole discretion, to be and remain the Spread
Account Depositor (as defined in the Pooling and Servicing Agreement). The
Trust will issue the Class B Certificates to a wholly owned subsidiary of
the SBA Lender, which will retain legal and beneficial ownership thereof in
accordance with Section 11 hereof.
Such wholly owned subsidiary will retain the Spread Account Excess.
6. Premium Protection Fee and Servicing Fee. The SBA Lender
-----------------------------------------
will retain the Premium Protection Fee and the Servicing Fee with respect
to all its SBA Lender Loans.
7. Restriction on Use of SBA Lender Loans. The SBA Lender will
---------------------------------------
not use the SBA Lender Loans or the collateral supporting the SBA Lender
Loans for any borrowing or other financing not related to financing of the
guaranteed or unguaranteed portions of the SBA Lender Loans.
8. FTA To Hold Original SBA Lender Notes; Possession of Loan
---------------------------------------------------------
Documents. (a) The SBA Lender will deliver all original Notes or in the
---------
case of a lost note, a lost note affidavit (the "Affidavit") relating to
the Initial SBA Loans (as defined in the Pooling and Servicing Agreement)
to FTA prior to the issuance of the Certificates and the SBA Lender will
deliver all original Notes relating to the Subsequent SBA Loans (as defined
in the Pooling and Servicing Agreement) to FTA prior to each Subsequent
Transfer of the Subsequent SBA Loans. Each Note will be endorsed by means
of an allonge (an endorsement of the Note constituting a separate piece of
paper) as follows: "Pay to the order
of Marine Midland Bank, and its successors and assigns, as trustee under
the Pooling and Servicing Agreement dated as of May 31, 1998, for the
benefit of the United States Small Business Administration and the holders
of First National Bank of New England SBA Loan Backed Certificates, Series
1998-1, Class A and Class B as their respective interests may appear,
without recourse." Upon receiving the Note or Affidavit, and if a copy
exists, a copy of the SBA Note, FTA will deliver to the SBA Lender and the
Trustee a receipt for such Note or Affidavit in the form of Exhibit 1.
(b) The Notes and Affidavit are being delivered to FTA for the
purposes of protecting SBA's and the Certificateholders' respective
interests. SBA appoints FTA as its fiscal and transfer agent and each of
SBA and the Trustee appoint FTA as its agent to hold the Notes and
Affidavit. FTA does not and will not during the term of this Agreement
have any interest in the SBA Lender Loans in the Loan Pool or the related
Loan Documents.
(c) FTA will not release any Note or Affidavit to either the SBA
Lender or any other person except (i) upon receipt from the SBA Lender of a
Request for Release of Note in the form of Exhibit 3, along with a
confirmation of release from the Trustee,
or (ii) with SBA's prior written consent. Upon receipt of the required
request and confirmation or consent, FTA will release, within 3 Business
Days, the related Note or Affidavit. The Servicer will return the Notes or
Affidavit to FTA in accordance with the appropriate provisions of the
Pooling and Servicing Agreement and when the Notes are returned to FTA, FTA
will issue a receipt in the form of Exhibit 1 hereto. SBA will notify
Xxxxx'x Investors Service, Inc. if FTA releases any Note solely upon the
instructions of SBA.
(d) Upon reasonable notice to FTA, SBA will have the right
during normal business hours to inspect the original Notes or Affidavit at
FTA's office.
(e) The SBA Lender will deliver to the Trustee the Loan
Documents and assignments of Loan Documents in accordance with the Pooling
and Servicing Agreement. All instruments of assignment will assign the
applicable collateral to "Marine Midland Bank, ("Assignee") its successors
and assigns, as trustee under the Pooling and Servicing Agreement dated as
of May 31, 1998, subject to the Multi-Party Agreement dated as of May 31,
1998." All financing statements will name the Trustee as secured party.
Any power of attorney from the SBA Lender to the Trustee must require the
Trustee to deal with the collateral in
accordance with the terms of the Pooling and Servicing Agreement and this
Agreement.
(f) If the Servicer or SBA must be the record owner or secured
party with respect to any Note or any collateral securing any Note for any
purpose including, without limitation, to liquidate (including by any
judicial means) or otherwise pursue remedies against any SBA Lender Loan
Debtor or any collateral securing any Note, the Trustee will assign such
Note or collateral to the Servicer, or SBA, as necessary.
9. Servicing of SBA Lender Loans. The Servicer will service
------------------------------
the SBA Lender Loans in the Loan Pool. Any servicing actions required of
the Servicer under the Pooling and Servicing Agreement or this Agreement
may be performed by a Subservicer, but performance by such Subservicer will
not limit or reduce the Servicer's obligations or liabilities as Servicer
under the Pooling and Servicing Agreement or this Agreement. The Servicer
will remit funds to which the Guaranteed Holders or SBA is entitled in
accordance with the terms of the Participation Agreements, and will remit
to the Trustee funds which are required to be remitted to the Trustee in
accordance with the terms of the Pooling and Servicing Agreement. The
Servicer must proceed with all collection, enforcement of
remedies and liquidation actions against SBA Lender Loan Debtors in default
in accordance with SBA Rules and Regulations. The Servicer must perform all
servicing activities in accordance with SBA Rules and Regulations, the
Participation Agreements and, to the extent there is no conflict, the
Pooling and Servicing Agreement. Property acquired through foreclosure or
deed in lieu of foreclosure will be titled in the name of the Trustee for
the benefit of SBA and the holders of the Certificates, as their interests
may appear, subject to the terms of this Agreement. The Servicer will
continue to administer such property and will be responsible for its
disposition in accordance with the SBA Rules and Regulations and, to the
extent there is no conflict, the terms of the Pooling and Servicing
Agreement. The Servicer will distribute disposition proceeds to SBA, as
party in interest with respect to the Guaranteed Interest, and to the
Trustee in respect of the Unguaranteed Interest, pro rata. SBA may, at its
--- ----
option, assume servicing of any SBA Lender Loan in accordance with SBA
Rules and Regulations. Unless Trustee becomes the Servicer, the Trustee
will not take (i) any action regarding the servicing of any SBA Lender Loan
or (ii) any action with respect to any SBA Lender Loan Debtor or any
collateral securing any SBA
Lender Loan. Any actions required of SBA Lender under the Pooling and
Servicing Agreement or this Agreement may be performed by or through a
subservicer approved by SBA under an agreement approved by SBA, but any
such subservicing arrangement will not limit or reduce the SBA Lender's
obligations or liabilities as servicer under the Pooling and Servicing
Agreement or this Agreement.
10. Default Under Pooling and Servicing Agreement. The Trustee
---------------------------------------------
will give SBA prompt written notice of an Event of Default and prompt
written notice of any termination of the Servicer, as Servicer under the
Pooling and Servicing Agreement. Upon an Event of Default and termination
of the Servicer, as Servicer in accordance with the terms of the Pooling
and Servicing Agreement, the Trustee may be substituted as Servicer so long
as the Trustee is then an approved SBA participating lender in good
standing, operating under a current Small Business Administration Loan
Guaranty Agreement (Deferred Participation) (Form 750). If the Trustee
does not meet that condition or is otherwise unable to act or if SBA
requests in writing, the Trustee will appoint another Servicer in
accordance with the Pooling and Servicing Agreement. Any successor
Servicer must agree to be bound by the terms
of this Agreement and must execute an agreement in the form of Exhibit 2.
Any substitute Servicer will be entitled to receive the Servicing Fee and
the Premium Protection Fee.
11. Transferees. Other than the issuance of the Certificates,
-----------
the Trustee will not sell, participate, pledge, hypothecate, enter into any
repurchase agreement with respect to, or otherwise transfer any of its
interest in any SBA Lender Loan or any Note without SBA's prior written
consent. The proposed transferee must be an approved SBA participating
lender in good standing, operating under a current Small Business
Administration Loan Guaranty Agreement (Deferred Participation) (Form 750)
and must be acceptable to SBA. Upon consenting to any proposed transfer,
SBA will give FTA prompt written notice. Any transferee must agree to be
bound by the terms of this Agreement. Upon initial issuance, the Class B
Certificates will be issued to and registered in the name of FNBNE SBA
Holdings, Inc., a wholly owned subsidiary of the SBA Lender ("Holdings"),
which will retain legal and beneficial ownership of the Class B
Certificates. Holdings will remain a wholly-owned subsidiary of the SBA
Lender or a wholly-owned subsidiary of such other entity succeeding to the
business of SBA Lender relating to originating and servicing SBA Loans as
may be approved by SBA in its sole discretion. The SBA Lender agrees that
Holdings may not pledge, transfer, assign or otherwise convey, in whole or
in part, the Class B Certificates without the prior written consent of SBA.
12. SBA Lender Acknowledgment of Continuing Obligation; No
------------------------------------------------------
Assumption of Liabilities. No action taken by the Trustee, SBA or the
--------------------------
Servicer under this Agreement, the SBA Agreements, or the Pooling and
Servicing Agreement will release or relieve the SBA Lender of any of its
obligations to SBA or to the Trustee. None of SBA, the Trustee, FTA or the
Servicer will incur any liability or obligation to the SBA Lender by reason
of any reasonable or customary action taken in carrying out the provisions
of this Agreement. Neither the execution of this Agreement, nor the taking
of any action by the Trustee, SBA, FTA or the Servicer under this
Agreement will be an assumption by the Trustee, SBA, FTA or the Servicer of
any liabilities or obligations of the SBA Lender. The provisions of this
Section will survive termination of this Agreement.
13. FTA's and SBA's Limited Liability and Expenses. (a) FTA may
----------------------------------------------
rely upon any signature, notice, certificate, or other document reasonably
believed by
it to be genuine and to have been signed by the party purporting to sign
it. The SBA Lender will assume liability for and indemnify, protect, and
hold harmless FTA from any liabilities or losses arising out of this
Agreement, except in the case of FTA's gross negligence or willful
misconduct. The SBA Lender will reimburse FTA for all expenses, taxes, and
other charges that FTA incurs in administering this Agreement. The SBA
Lender will pay FTA its standard fee for its services under this Agreement.
In performing its obligations under this Agreement, FTA will not follow
instructions from any party other than SBA or, pursuant to Section 8(c),
upon the request of the SBA Lender and concurring instructions of the
Trustee. The SBA Lender will not hold FTA liable for any action taken in
accordance with such instructions.
(b) SBA may rely on any signature, notice, certificate, request
or other document reasonably believed by it to be genuine and to have been
signed by the party purporting to sign it. The SBA Lender will assume
liability for and indemnify, protect and hold harmless SBA from all
liabilities or losses arising out of this Agreement, except in the case of
gross negligence or willful misconduct. Upon request by SBA, SBA Lender
will reimburse SBA for all reasonable
expenses and other charges that SBA incurs in connection with this
Agreement.
(c) The provisions of this Section 13 will survive any
termination of this Agreement.
14. Counterparts. This Agreement may be executed in any number
------------
of counterparts each of which will be an original.
15. Inconsistencies. If any provision of this Agreement is
---------------
inconsistent with any provision in any other agreement, including but not
limited to the Pooling and Servicing Agreement, the provision of this
Agreement controls. The Pooling and Servicing Agreement and any agreements
entered into in connection with such agreement are amended to the extent
necessary to give effect to the prior sentence. The SBA Agreements are
amended to provide that FTA will hold the Notes that are transferred
pursuant to the Pooling and Servicing Agreement and that the Trustee may
hold the Loan Documents as provided in this Agreement.
16. Amendment and Term. This Agreement may not be terminated or
------------------
amended without the prior written consent of the parties. Neither the SBA
Agreements nor the Pooling and Servicing Agreement may be amended in any
manner that would impair the respective rights of
SBA or the Trustee under this Agreement without the prior written consent
of the party so affected.
17. GOVERNING LAW. THIS AGREEMENT WILL BE INTERPRETED AND
-------------
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT
REFERENCE TO ITS CONFLICT OF LAWS RULES.
18. Successors and Assigns. This Agreement binds and benefits
----------------------
the parties and their respective successors and assigns.
19. Section Headings. The section headings in this Agreement
----------------
are for convenience only, and are without substantive meaning or content.
20. Severability. Any provision of this Agreement which is
------------
prohibited or unenforceable in any jurisdiction will be given no effect and
shall not invalidate any other provision of this Agreement.
21. Notices and Deliveries. Except as otherwise expressly
----------------------
provided in this document, all notices or deliveries under this Agreement
will be given by actual delivery to the parties at the addresses below or
to such other addresses that any party may designate for itself by written
notice to each of the other parties. All notices will be effective upon
receipt by the applicable party.
If to SBA Lender, at:
First National Bank of New England
Xxx Xxxxxxxxxx Xxxxx
Xxxxxxxx, Xxxxxxxxxxx 00000
Telecopy No.: 000-000-0000
Attention: Xxxxxx Xxxxxxxxx
If to the Trustee, at:
Marine Midland Bank
000 Xxxxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Corporate Trust Administration
If to FTA, at:
Xxxxxx Services Corp.
000 Xxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn.: President
If to SBA, at:
U.S. Small Business Administration
000 0xx Xxxxxx, X.X.
Xxxxxxxxxx, X.X. 00000
Attn.: Associate Administrator for Financial Assistance
Additionally, SBA Lender will provide SBA with a copy of (i) the
SBA Loan Schedule included as Exhibit H to the Pooling and Servicing
Agreement, along with any amendments thereto delivered to the Trustee, and
(ii) each delinquency and foreclosure report prepared in accordance with
clause (viii) of Section 6.09 of the Pooling and Servicing Agreement. Such
Schedules and reports will be sent (to the extent practicable, in
electronic format) to Xx. Xxxxx Xxxxxxxxxx, Director of Secondary Market
Sales (xxxxx.xxxxxxxxxx@xxx.xxx).
In witness whereof the SBA Lender, the Trustee, FTA, and SBA have
executed this Agreement below.
FIRST NATIONAL BANK OF NEW ENGLAND
By: _______________________________________
Name:
Title:
MARINE MIDLAND BANK , not in its individual capacity
but solely as Trustee
By: _______________________________________
Name:
Title:
UNITED STATES SMALL BUSINESS ADMINISTRATION
By: _______________________________________
Name: Xxxx Xxxxxxxxx Xxxxxx
Title: Acting Associate
Administrator for Financial Assistance
XXXXXX SERVICES CORP.
By: _______________________________________
Name:
Title:
EXHIBIT 1
---------
ACKNOWLEDGMENT OF RECEIPT OF NOTE OR LOST NOTE AFFIDAVIT
___________, 1998
In accordance with Section 8 of the Multi-Party Agreement, dated as of
May 31, 1998, by and among First National Bank of New England, Marine Midland
Bank, as trustee, Xxxxxx Services Corp. ("Xxxxxx") and the United States Small
Business Administration ("SBA"), Xxxxxx, as agent for SBA, hereby acknowledges
receipt of the SBA guaranteed Note or with respect to a lost SBA Note, a lost
note affidavit and if a copy exists, a copy of the original SBA Note described
below with respect to the following:
MAKER:
ORIGINAL PRINCIPAL AMOUNT:
DATE OF NOTE:
SBA LOAN NUMBER (GP NUMBER):
ACCOUNT NUMBER:
XXXXXX SERVICES CORP.,
AS AGENT FOR THE UNITED STATES
SMALL BUSINESS ADMINISTRATION
By: ___________________________
Name:
Title:
INSTRUCTIONS TO XXXXXX SERVICES CORP. One original executed copy of this receipt
should be made available for pick-up at the office of Xxxxxx or delivered to
Marine Midland Bank, as trustee, 000 Xxxxxxxx, 00xx Xxxxx, Xxx Xxxx, Xxx Xxxx
00000, and a copy First National Bank of New England, Xxx Xxxxxxxxxx Xxxxx,
Xxxxxxxx, Xxxxxxxxxxx, 00000, Attention: Xxxxxx Xxxxxxxxx.
M-1-1
EXHIBIT 2
---------
The undersigned consents and agrees to be bound as successor Servicer
by the terms of foregoing Multi-Party Agreement, dated as of May 31, 1998 among
First National Bank of New England, Marine Midland Bank, as trustee, Xxxxxx
Services Corp. and the United States Small Business Administration.
___________________________________
By:________________________________
Name:
Title:
M-2-1
EXHIBIT 3
---------
REQUEST FOR RELEASE OF NOTE
_____________, 199__
Xxxxxx Services Corp.
As Agent for the United States
Small Business Administration
000 Xxxxxx Xxxxxx
Xxx Xxxx, XX 00000
In accordance with Section 8(c) of the Multi-Party Agreement dated as
of May 31, 1998 by and among First National Bank of New England, Marine Midland
Bank, as trustee, Xxxxxx Services Corp. ("Xxxxxx") and the United States Small
Business Administration ("SBA") and, subject to your receipt of concurrence from
Marine Midland Bank, as trustee, First National Bank of New England hereby
requests release of the Note described below:
OBLIGOR'S NAME AND ADDRESS:
SBA LOAN NUMBER (GP NUMBER):
Reason for Requesting Note
(ONE OF THESE MUST BE CHECKED)
____1. SBA Loan Paid in Full
____2. SBA Loan Liquidated
____3. SBA Loan in Foreclosure or other Legal Process
____4. SBA Loan repurchased pursuant to Section 11.01 of the Pooling and
Servicing Agreement, dated as of May 31, 1998, relating to First National
Bank of New England SBA Loan-Backed Adjustable Rate Certificates, Series
1998-1 (The "Pooling and Servicing Agreement")
____5. SBA Loan repurchased or substituted pursuant to Article II or Article
III of the Pooling and Servicing Agreement
M-3-1
____6. Collateral being released pursuant to Section 5.01(f) of the Pooling and
Servicing Agreement
____7. SBA Loan Collateral being substituted or subordinated
FIRST NATIONAL BANK OF NEW ENGLAND
By: ___________________
Name:
Title:
M-3-2
EXHIBIT N
SPREAD ACCOUNT AGREEMENT
This Spread Account Agreement is dated as of June 30, 1998 (the
"Agreement") among FNBNE SBA Holdings, Inc., a Delaware corporation, as Spread
Account Depositor (the "Spread Account Depositor"), Marine Midland Bank, as
trustee (the "Trustee"), and Marine Midland Bank, in its capacity as custodian
hereunder (the "Spread Account Custodian"). All capitalized terms used but not
otherwise defined herein shall have the meanings set forth in the Pooling and
Servicing Agreement referred to below.
WHEREAS, First National Bank of New England (in its capacity as the
"Seller") and Marine Midland Bank, in its capacity as Trustee, have entered into
a Pooling and Servicing Agreement, dated as of May 31, 1998 (the "Pooling and
Servicing Agreement"), in connection with the establishment of a Trust (the
"Trust") and the issuance of First National Bank of New England SBA Loan-Backed,
Adjustable Rate Certificates, Series 1998-1, representing an undivided
beneficial ownership interest in the Trust;
WHEREAS, the Spread Account Depositor wishes to establish the Spread
Account (the "Account") with the Spread Account Custodian, to be used in
accordance with the provisions of Section 6.02 of the Pooling and Servicing
Agreement; and
WHEREAS, the Spread Account Custodian herein agrees to maintain the
Account in accordance with the terms of this Agreement and the Pooling and
Servicing Agreement.
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements herein contained, the parties hereto agree as follows:
Section 1. Definitions. In addition to those terms defined in the
-----------
Pooling and Servicing Agreement and otherwise herein, the following words and
phrases, unless the context otherwise requires, shall have the following
meanings:
"Account" has the meaning set forth in the second WHEREAS clause
hereof.
"Account Property" has the meaning set forth in Section 3 hereof.
N-1
"Certificated Securities" has the meaning set forth in Section 8-
102(4) of the UCC.
"Clearing Corporation" has the meaning set forth in Section 8-
102(5) of the UCC.
"Delivery" when used with respect to Account Property means:
(a) with respect to bankers' acceptances, commercial paper,
negotiable certificates of deposit and other obligations that constitute
instruments and are susceptible of physical delivery ("Physical Property"):
(i) transfer of possession thereof to the Spread Account
Custodian, endorsed to, or registered in the name of, the Spread
Account Custodian or its nominee or endorsed in blank;
(b) with respect to a certificated security:
(i) delivery thereof in bearer form to the Spread Account
Custodian; or
(ii) delivery thereof in registered form to the Spread Account
Custodian and
(A) the certificate is endorsed to the Spread Account
Custodian or in blank by effective endorsement; or
(B) the certificate is registered in the name of the Spread
Account Custodian, upon original issue or registration of transfer by
the issuer;
(c) with respect to an uncertificated security:
(i) the delivery of the uncertificated security to the Spread
Account Custodian; or
(ii) the issuer has agreed that it will comply with instructions
originated by the Spread Account Custodian without further consent by
the registered owner;
(d) with respect to any security issued by the U.S. Treasury that is
a book-entry security held through the Federal Reserve System pursuant to
Federal book-entry regulations:
N-2
(i) a Federal Reserve Bank by book entry credits the book-entry
security to the securities account (as defined in 31 CFR Part 357) of
a participant (as defined in 31 CFR Part 357) which is also a
securities intermediary; and
(ii) the participant indicates by book entry that the book-entry
security has been credited to the Spread Account Custodian's
securities account;
(e) with respect to a security entitlement:
(i) the Spread Account Custodian becomes the entitlement holder;
or
(ii) the securities intermediary has agreed that it will comply
with entitlement orders originated by the Spread Account Custodian
without further consent by the entitlement holder;
(f) for the purpose of clauses (b) and (c) hereof "delivery" means:
(i) with respect to a certificated security:
(A) the Spread Account Custodian acquires possession
thereof;
(B) another person (other than a securities intermediary)
either acquires possession thereof on behalf of the Spread Account
Custodian or, having previously acquired possession thereof,
acknowledges that it holds for the Spread Account Custodian; or
(C) a securities intermediary acting on behalf of the Spread
Account Custodian acquires possession thereof, only if the certificate
is in registered form and has been specially endorsed to the Spread
Account Custodian by an effective endorsement;
(ii) with respect to an uncertificated security:
(A) the issuer registers the Spread Account Custodian as the
registered owner, upon original issue or registration of transfer; or
(B) another person (other than a securities intermediary)
either becomes the registered owner thereof on behalf of the Spread
Account Custodian or,
N-3
having previously become the registered owner, acknowledges that it
holds for the Spread Account Custodian;
(g) for purposes of this definition, except as otherwise indicated,
the following terms shall have the meaning assigned to each such term in the
UCC:
(i) "certificated security"
(ii) "effective endorsement"
(iii) "entitlement holder"
(iv) "instrument"
(v) "securities account"
(vi) "securities entitlement"
(vii) "securities intermediary"
(viii) "uncertificated security"
(h) in each case of Delivery contemplated herein, the Spread Account
Custodian shall make appropriate notations on its records, and shall cause the
same to be made on the records of its nominees, indicating that securities are
held in trust pursuant to and as provided in this Agreement.
"Depositary" has the meaning set forth in 31 C.F.R. 306.118 or
similar federal regulations governing the transfer of securities
issued by the United States Treasury which are maintained in book-
entry form.
"Securities Intermediary" has the meaning set forth in Section 8-
102(a)(14) of the UCC.
"Instruments" has the meaning set forth in Section 9-105(l)(ii)
of the UCC but excludes any "instruments" that are "certificated
securities" as defined in Section 8-102(l) (a) of the UCC.
"Physical Property" has the meaning set forth in clause (i) of
the definition of "Delivery" in this Section 1.
"UCC" means the New York Uniform Commercial Code.
N-4
"Uncertificated Security" has the meaning set forth in Section 8-
102(a)(18) of the UCC.
Section 2. Appointment of Spread Account Custodian. The Spread
---------------------------------------
Account Depositor and the Trustee hereby appoint Marine Midland Bank as their
agent under this Agreement to act on their behalf in accordance with the terms
of this Agreement with respect to their interests in the Account and all amounts
and investments deposited therein or credited thereto. Marine Midland Bank
hereby accepts and acknowledges its appointment as agent on behalf of the Spread
Account Depositor and the Trustee.
Section 3. Pledge of Security Interest. The Spread Account Depositor
---------------------------
hereby assigns, sells, conveys and transfers to the Spread Account Custodian and
its successors and assigns, and grants thereto a security interest in, all of
its right, title and interest in and to all amounts payable to the Spread
Account pursuant to Section 6.02 of the Pooling and Servicing Agreement, the
Account, all amounts deposited therein or credited thereto, from time to time,
and all proceeds of the foregoing, including, without limitation, all other
amounts and investments held from time to time in the Account (whether in the
form of deposit accounts, Physical Property, book-entry securities,
Uncertificated Securities, or otherwise) (all of the foregoing, collectively,
the "Account Property"), to have and to hold all the aforesaid property, rights
and privileges unto the Spread Account Custodian, its successors and assigns, in
trust for the benefit of the Trustee and the Certificateholders, subject to the
terms and provisions, set forth in this Agreement. The Spread Account Custodian
hereby acknowledges such transfer and, upon receipt, shall hold and distribute
the Account Property in accordance with the terms and provisions of this
Agreement.
Section 4. Establishment of the Account. The Spread Account
----------------------------
Depositor hereby establishes and shall hereafter maintain with the Spread
Account Custodian the Account as a separate trust account to include the money
and other property deposited and held therein pursuant hereto. The Account
shall be a segregated trust account maintained in New York and initially
established with the Spread Account Custodian and maintained with the Spread
Account Custodian in the Corporate Trust Department of the Spread Account
Custodian. The Spread Account Custodian acknowledges the interest of the
Trustee in the Account, as set forth herein and in Article VI of the Pooling and
Servicing Agreement. The Spread Account Custodian further acknowledges and
agrees that (i) any deposits to the Account shall be made solely by the Servicer
or the Trustee in accordance with Section 6.02(a) of the Pooling and Servicing
Agreement; (ii) any withdrawals from the Account shall be made by the Spread
Account Custodian solely upon instructions
N-5
therefor given by the Trustee as specifically set forth in Section 6.02(b) of
the Pooling and Servicing Agreement; and (iii) the Seller and the Servicer and
the Spread Account Depositor shall have no rights to receive any amounts in the
Account other than as specifically set forth herein and in Section 6.02(b) of
the Pooling and Servicing Agreement.
Section 5. Delivery of Account Property. With respect to the Account
----------------------------
Property, the Spread Account Depositor and the Spread Account Custodian agree
that:
(a) any Account Property that is held in deposit accounts shall
be held solely with a Designated Depository Institution; and each such
deposit account shall be subject to the exclusive dominion and control
of the Spread Account Custodian, and the Spread Account Custodian
shall have sole signature authority with respect thereto;
(b) any Account Property that is Physical Property shall be
delivered to the Spread Account Custodian in accordance with paragraph
(a) of the definition of "Delivery" and shall be held, pending
maturity or disposition, solely by the Spread Account Custodian or a
securities intermediary (as such term is defined in Section 8-
102(a)(14) of the Relevant UCC);
(c) any Account Property that is a "certificated security" under
Article 8 of the Relevant UCC shall be delivered to the Spread Account
Custodian in accordance with paragraph (b) of the definition of
"Delivery" and shall be held, pending maturity or disposition, solely
by the Spread Account Custodian or a securities intermediary (as such
term is defined in Section 8-102(a)(14) of the Relevant UCC);
(d) any Account Property that is an "uncertificated security"
under Article 8 of the Relevant UCC shall be delivered to the Spread
Account Custodian in accordance with paragraph (c) of the definition
of "Delivery" and shall be maintained by the Spread Account Custodian,
pending maturity or disposition, through continued registration on the
books and records of the issuer thereof of the ownership of such
security by the Spread Account Custodian (or its nominee) or a
securities intermediary (as such term is defined in Section 8-
102(a)(14) of the Relevant UCC);
N-6
(e) any Account Property that is a book-entry security held
through the Federal Reserve System pursuant to Federal book-entry
regulations shall be delivered to the Spread Account Custodian in
accordance with paragraph (d) of the definition of "Delivery" and
shall be maintained by the Spread Account Custodian, pending maturity
or disposition, through continued book-entry registration of such
Account Property in the name of the Spread Account Custodian or a
securities intermediary (as such term is defined in Section 8-
102(a)(14) of the Relevant UCC); and
(f) any Account Property held through a securities intermediary
(as such term is defined in Section 8-102(a)(14) of the Relevant UCC)
shall be held in a securities account (as such term is defined in
Section 8-501(a) of the Relevant UCC) that is established by such
securities intermediary in the name of the Spread Account Custodian
for which the Spread Account Custodian is the sole entitlement holder
(as defined in Section 8-102(a)(7) of the Relevant UCC).
Section 6. Investment. Amounts held in the Account shall be invested
----------
in Permitted Instruments in accordance with the provisions of Section 6.06 of
the Pooling and Servicing Agreement. All such investments shall be made in the
name of the Spread Account Custodian or its nominee, and all income and gain
realized thereon shall be retained in the Account until withdrawals are
permitted under Section 6.02(b)(iii) of the Pooling and Servicing Agreement.
Section 7. Statement of Account. On or before each Determination
--------------------
Date, the Spread Account Custodian shall deliver to the Trustee, the Servicer
and the Spread Account Depositor an account statement of the Spread Account
Custodian setting forth, as of such date, (i) the amount on deposit in the
Account, (ii) the activity in the Account for the preceding month and (iii) the
amount of any income or gain (or loss) on amounts held in the Account.
Section 8. Termination. This Agreement shall terminate upon the
-----------
termination of the Pooling and Servicing Agreement in accordance with their
terms. Upon termination of this Agreement, any amounts on deposit in the
Account shall be paid by the Spread Account Custodian to the Spread Account
Depositor in accordance with the terms of the Pooling and Servicing Agreement.
N-7
Section 9. Amendment. This Agreement may be amended by the Spread
---------
Account Depositor and the Spread Account Custodian with the consent of the
Trustee. The parties hereto agree to make any changes to this Agreement
required by Xxxxx'x in order to obtain an investment-grade rating.
Section 10. Counterparts. This Agreement may be executed in one or
------------
more counterparts and by the different parties hereto on separate counterparts,
each of which, when so executed, shall be deemed to be an original; such
counterparts, together, shall constitute one and the same Agreement.
SECTION 11. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED IN
-------------
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AND THE OBLIGATIONS, RIGHTS
AND REMEDIES OF THE PARTIES UNDER THIS AGREEMENT SHALL BE DETERMINED IN
ACCORDANCE WITH SUCH LAWS WITHOUT GIVING EFFECT TO PRINCIPLES OF CONFLICTS OF
LAW.
Section 12. Notices. All demands, notices and communications upon or
-------
to the Spread Account Depositor, the Servicer, the Spread Account Custodian or
the Trustee under this Agreement shall be in writing, personally delivered or
mailed by certified mail, return receipt requested, and shall be deemed to have
been duly given upon receipt (a) in the case of the Spread Account Depositor,
the Servicer and the Trustee, at the addresses therefor set forth in Section
13.06 of the Pooling and Servicing Agreement; (b) in the case of the Spread
Account Custodian, at 000 Xxxxxxxx, Xxx Xxxx, Xxx Xxxx 00000, 12th Floor,
Attention: Corporate Trust Department; and (c) in the case of the Spread Account
Depositor, c/o First National Bank of New England, Xxx Xxxxxxxxxx Xxxxx,
Xxxxxxxx, Xxxxxxxxxxx 00000, Attention: Xxxxxx Xxxxxxxxx.
Section 13. Severability of Provisions. If any one or more of the
--------------------------
agreements, provisions or terms of this Agreement shall be for any reason
whatsoever held invalid, then such agreements, provisions or terms shall be
deemed severable from the remaining agreements, provisions or terms of this
Agreement and shall in no way affect the validity or enforceability of the other
provisions of this Agreement.
Section 14. Assignment; Benefit of Agreement. Notwithstanding
--------------------------------
anything to the contrary contained herein, this Agreement may not be assigned by
the Spread Account Depositor Spread Account Custodian without the prior written
consent of the Trustee. Subject to the foregoing, this Agreement will inure to
the benefit of and be binding upon the parties hereto and the Trustee and their
respective successors and permitted assigns.
N-8
IN WITNESS WHEREOF, the Trustee, the Spread Account Depositor and the
Spread Account Custodian have caused this Spread Account Agreement to be duly
executed by their respective officers as of the day and year first above
written.
MARINE MIDLAND BANK,
not in its individual capacity
but solely as Trustee
By_____________________________
Name:
Title:
MARINE MIDLAND BANK,
as Spread Account Custodian
By_____________________________
Name:
Title:
FNBNE SBA HOLDINGS, INC.,
as Spread Account Depositor
By_____________________________
Name:
Title:
N-9
EXHIBIT O-1
FORM OF TRANSFEREE LETTER [NON-RULE 000X]
Xxxxx Xxxxxxxx Xxxx xx Xxx Xxxxxxx
as Servicer
Xxx Xxxxxxxxxx Xxxxx
Xxxxxxxx, Xxxxxxxxxxx 00000
Attention: Xxxxxx Xxxxxxxxx
Marine Midland Bank, as Trustee
000 Xxxxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Corporate Trust Administration
__________, 199__
Re:First National Bank of New England
SBA Loan-Backed Adjustable Rate
Certificates, Series 1998-1, Class [A] [B]
--------------------------------------------
Ladies and Gentlemen:
In connection with our acquisition of the above-captioned
Certificates, we certify that (a) we understand that the Certificates are not
being registered under the Securities Act of 1933, as amended (the "Act"), or
any state securities laws and are being transferred to us in a transaction that
is exempt from the registration requirements of the Act and any such laws, (b)
we are an institutional "Accredited Investor," as defined in the Pooling and
Servicing Agreement pursuant to which the Certificates were issued (the
"Agreement"), and have such knowledge and experience in financial and business
matters that we are capable of evaluating the merits and risks of investments in
the Certificates, (c) we have had the opportunity to ask questions of and
receive answers from the Seller concerning the purchase of the Certificates and
all matters relating thereto or any additional information deemed necessary to
our decision to purchase the Certificates, (d) we are acquiring the
Certificates for investment for our own account and not with a view to any
distribution of such Certificates (but without prejudice to our right at all
times to sell or otherwise dispose of the Certificates in accordance with clause
(f) below), (e) we have not offered or sold any Certificates to, or solicited
offers to buy any Certificates from, any person, or otherwise approached or
negotiated with any person with respect thereto, or taken any other action which
would result in a violation of Section 5 of
O-1-1
the Act, (f) we will not sell, transfer or otherwise dispose of any Certificates
unless (1) such sale, transfer or other disposition is made pursuant to an
effective registration statement under the Act or is exempt from such
registration requirements, and if requested, we will at our expense provide an
opinion of counsel satisfactory to the addressees of this Certificate that such
sale, transfer or other disposition may be made pursuant to an exemption from
the Act, (2) the purchaser or transferee of such Certificate has executed and
delivered to you a certificate to substantially the same effect as this
certificate if required by the Agreement, and (3) the purchaser or transferee
has otherwise complied with any conditions for transfer set forth in the
Agreement and (g) the purchaser is not acquiring a Certificate, directly or
indirectly, for or on behalf of: (i) an employee benefit plan or other
retirement arrangement subject to the Employee Retirement Income Security Act of
1974, as amended, and/or Section 4975 of the Internal Revenue Code of 1986, as
amended, or (ii) any entity, the assets of which would be deemed plan assets
under the Department of Labor regulations set forth at 29 C.F.R. (S)2510.3-101.
Very truly yours,
___________________________________
Print Name of Transferee
By:________________________________
Authorized Officer
O-1-2
EXHIBIT O-2
FORM OF RULE 144A CERTIFICATION
First National Bank of New England
as Servicer
Xxx Xxxxxxxxxx Xxxxx
Xxxxxxxx, Xxxxxxxxxxx 00000
Attention: Xxxxxx Xxxxxxxxx
Marine Midland Bank, as Trustee
000 Xxxxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Corporate Trust Administration
__________, 199__
Re: First National Bank of New England
SBA Loan-Backed Adjustable Rate
Certificates, Series 1998-1, Class [A] [B]
--------------------------------------------
Ladies and Gentlemen:
In connection with our acquisition of the above Certificates we
certify that (a) we understand that the Certificates are not being registered
under the Securities Act of 1933, as amended (the "Act"), or any state
securities laws and are being transferred to us in a transaction that is exempt
from the registration requirements of the Act and any such laws, (b) we have had
the opportunity to ask questions of and receive answers from the Seller
concerning the purchase of the Certificates and all matters relating thereto or
any additional information deemed necessary to our decision to purchase the
Certificates, (c) we have not, nor has anyone acting on our behalf offered,
transferred, pledged, sold or otherwise disposed of the Certificates, any
interest in the Certificates or any other similar security to, or solicited any
offer to buy or accept a transfer, pledge or other disposition of the
Certificates, any interest in the Certificates or any other similar security
from, or otherwise approached or negotiated with respect to the Certificates,
any interest in the Certificates or any other similar security with, any person
in any manner, or made any general solicitation by means of general advertising
or in any other manner, or taken any other action, that would constitute a
distribution of the Certificates under the Act or that would render the
disposition of the Certificates a violation of Section 5 of the Act or require
registration pursuant thereto,
nor will act, nor has authorized or will authorize any person to act, in such
manner with respect to the Certificates, (d) we are a "qualified institutional
buyer" as that term is defined in Rule 144A under the Act and have completed the
form of certification to that effect attached hereto as Annex 1 and (e) we are
not acquiring a Certificate, directly or indirectly, for or on behalf of: (i) an
employee benefit plan or other retirement arrangement subject to the Employee
Retirement Income Security Act of 1974, as amended, and/or Section 4975 of the
Internal Revenue Code of 1986, as amended, or (ii) any entity, the assets of
which would be deemed plan assets under the Department of Labor regulations set
forth at 29 C.F.R. (S)2510.3-101. We are aware that the sale to us is being made
in reliance on Rule 144A. We are acquiring the Certificates for our own account
or for resale pursuant to Rule 144A and further, understand that such
Certificates may be resold, pledged or transferred only (i) to a person
reasonably believed to be a qualified institutional buyer that purchases for its
own account or for the account of a qualified institutional buyer to whom notice
is given that the resale, pledge or transfer is being made in reliance on Rule
144A, or (ii) pursuant to another exemption from registration under the Act.
Very truly yours,
_______________________________
Print Name of Transferee
By:____________________________
Authorized Officer
O-2-2
ANNEX 1 TO EXHIBIT O-2
----------------------
[FORM OF CERTIFICATION]
[Date]
First National Bank of New England
as Servicer
Xxx Xxxxxxxxxx Xxxxx
Xxxxxxxx, Xxxxxxxxxxx 00000
Attention: Xxxxxx Xxxxxxxxx
Marine Midland Bank, as Trustee
000 Xxxxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Corporate Trust Administration
Re: First National Bank of New England
SBA Loan-Backed Adjustable Rate
Certificates, Series 1998-1, Class [A] [B]
(the "Confidentially Offered Securities")
-----------------------------------------
Ladies and Gentlemen:
In connection with our purchase of Confidentially Offered Securities,
the undersigned certifies to each of the parties to whom this letter is
addressed that it is a qualified institutional buyer (as defined in Rule 144A
under the Securities Act of 1933, as amended (the "Act")) as follows:
1. It owns and/or invests on a discretionary basis eligible securities
(excluding affiliate's securities, bank deposit notes and CD's, loan
participations, repurchase agreements, securities owned but subject to a
repurchase agreement and currency, interest rate and commodity swaps), as
described below:
Amount:/1/ $_________________; and
2. The dollar amount set forth above is:
a. greater than $100 million and the undersigned is one of the following
entities:
___________________
/1/ Must be calculated using only securities which the undersigned beneficially
held as of the date below.
O-2-3
(1) [_] an insurance company as defined in Section 2(13) of the
Act;* or
(2) [_] an investment company registered under the Investment
Company Act or any business development company as defined
in Section 2(a)(48) of the Investment Company Act of 1940 or
as defined in Section 202(a)(22) of the Investment Advisers
Act of 1940; or
(3) [_] a Small Business Investment Company licensed by the U.S.
Small Business Administration under Section 301(c) or (d) of
the Small Business Investment Act of 1958; or
(4) [_] a plan (i) established and maintained by a state, its
political subdivisions, or any agency or instrumentality of
a state or its political subdivisions, the laws of which
permit the purchase of securities of this type, for the
benefit of its employees and (ii) the governing investment
guidelines of which permit the purchase of securities of
this type; or
(5) [_] a corporation (other than a U.S. bank, savings and loan
association or equivalent foreign institution), partnership,
Massachusetts or similar business trust, or an organization
described in Section 501(c)(3) of the Internal Revenue Code;
or
(6) [_] a U.S. bank, savings and loan association or equivalent
foreign institution, which has an audited net worth of at
least $25 million as demonstrated in its latest annual
financial statements as of a date not more than 16 months
preceding the date of sale in the case of a U.S. institution
or 18 months in the case of a foreign institution.; or
* A purchase by an insurance company for one or more of its separate accounts,
as defined by section 2(a)(37) of the Investment Company Act of 1940, which
are neither registered nor required to be registered thereunder, shall be
deemed to be a purchase for the account of such insurance company.
O-2-4
date of sale in the case of a U.S. institution or 18
months in the case of a foreign institution.; or
(7) [_] an investment adviser registered under the Investment
Advisers Act; or
b. [_] greater than $10 million, and the undersigned is a broker-dealer
registered with the SEC; or
c. [_] less than $10 million, and the undersigned is a broker-dealer
registered with the SEC and will only purchase Rule 144A
securities in riskless principal transactions (as defined in Rule
144A); or
d. [_] less than $100 million, and the undersigned is an investment
company registered under the Investment Company Act of 1940,
which, together with one or more registered investment companies
having the same or an affiliated investment adviser, owns at
least $100 million of eligible securities; or
e. [_] less than $100 million, and the undersigned is an entity, all the
equity owners of which are qualified institutional buyers.
The undersigned further certifies that it is purchasing Confidentially
Offered Securities for its own account or for the account of others that
independently qualify as "Qualified Institutional Buyers" as defined in Rule
144A. It is aware that the sale of the Confidentially Offered Securities are
being made in reliance on its continued compliance with Rule 144A. It is aware
that the transferor may rely on the exemption from the provisions of Section 5
of the Act provided by Rule 144A. The undersigned understands that the
Confidentially Offered Securities may be resold, pledged or transferred only to
a person reasonably believed to be a Qualified Institutional Buyer that
purchases for its own account or for the account of a Qualified Institutional
Buyer to whom notice is given that the resale, pledge or transfer is being made
in reliance in Rule 144A.
O-2-5
The undersigned agrees that if at some time before the expiration of
the holding period described in Rule 144 it wishes to dispose of or exchange any
of the Confidentially Offered Securities, it will not transfer or exchange any
of the Confidentially Offered Securities to a Qualified Institutional Buyer
without first obtaining a letter in the form hereof from the transferee and
delivering such certificate to the addressees hereof.
IN WITNESS WHEREOF, this document has been executed by the undersigned
who is duly authorized to do so on behalf of the undersigned Qualified
Institutional Buyer on the _____ day of ___________, 1998.
Name of Institution
Signature
Name
Title**
________________________
** Must be President, Chief Financial Officer, or other executive officer.
O-2-6
EXHIBIT P
LIST OF SBA LOANS WITH LOST SBA NOTES
[SEE TAB 38]
P-1
