SALE AND SERVICING AGREEMENT
Dated as of November 1, 1999
Between
BLC FUNDING TRUST
(Trust)
and
BUSINESS LOAN CENTER, INC.
(Seller and Servicer)
BLC FUNDING TRUST NOTES
TABLE OF CONTENTS
Section Page
ARTICLE I
DEFINITIONS
Section 1.01 Definitions................................................2
Section 1.02 Use of Words and Phrases...................................2
Section 1.03 Captions; Table of Contents................................2
ARTICLE II
SALE AND CONVEYANCE OF THE TRUST FUND
Section 2.01 Sale and Conveyance of Trust Fund..........................3
Section 2.02 Possession of Business Files...............................3
Section 2.03 Books and Records..........................................3
Section 2.04 Delivery of SBA Loan Documents.............................4
Section 2.05 Acceptance by Trustee of the Trust Fund;
Certain Substitutions; Certification by
Indenture Trustee .........................................6
Section 2.06 [Reserved].................................................7
Section 2.07 [Reserved].................................................7
Section 2.08 Fees and Expenses of the Owner Trustee
and the Indenture Trustee..................................8
Section 2.09 Transfer and Conveyance of the SBA Loans...................8
Section 2.10 Optional Repurchase or Substitution of SBA Loans...........9
Section 2.11 Subsequent Sales..........................................10
ARTICLE III
REPRESENTATIONS AND WARRANTIES
Section 3.01 Representations of the Seller.............................11
Section 3.02 Individual SBA Loans......................................13
Section 3.03 Purchase and Substitution of Defective SBA Loans..........18
ARTICLE IV
ADMINISTRATION AND SERVICING OF SBA LOANS
Section 4.01 Duties of the Servicer....................................21
Section 4.02 Liquidation of SBA Loans..................................24
Section 4.03 Establishment of Principal and Interest
Accounts; Deposits in Principal and Interest
Accounts..................................................25
(i)
Section 4.04 Permitted Withdrawals From the Principal
and Interest Account......................................26
Section 4.05 [Intentionally Omitted]...................................27
Section 4.06 Transfer of Accounts......................................27
Section 4.07 Maintenance of Hazard Insurance...........................28
Section 4.08 [Intentionally Omitted]...................................28
Section 4.09 Fidelity Bond.............................................28
Section 4.10 Title, Management and Disposition of
Foreclosed Property.......................................29
Section 4.11 [Intentionally Omitted]...................................29
Section 4.12 Collection of Certain SBA Loan Payments...................30
Section 4.13 Access to Certain Documentation and
Information Regarding the SBA Loans.......................30
ARTICLE V
PAYMENTS TO THE NOTEHOLDERS
Section 5.01 Establishment of Note Distribution Account;
Deposits in Note Distribution Account;
Permitted Withdrawals from Note
Distribution Account......................................31
Section 5.02 Establishment of Spread Account;
Deposits in Spread Account; Permitted
Withdrawals from Spread Account...........................32
Section 5.03 Establishment of Expense Account;
Deposits in Expense Account; Permitted
Withdrawals from Expense Account .........................33
Section 5.04 Funding Account...........................................34
Section 5.05 [Intentionally Omitted]...................................34
Section 5.06 Investment of Accounts....................................34
Section 5.07 Distributions.............................................35
Section 5.08 [Intentionally Omitted]...................................36
Section 5.09 Statements................................................36
Section 5.10 Reports of Foreclosure and Abandonment....................38
ARTICLE VI
GENERAL SERVICING PROCEDURE
Section 6.01 [Intentionally Omitted]...................................39
Section 6.02 Satisfaction of Mortgages and Collateral
and Release of SBA Files..................................39
Section 6.03 Servicing Compensation....................................40
Section 6.04 Annual Statement as to Compliance.........................41
Section 6.05 Annual Independent Public Accountants'
Servicing Report..........................................41
Section 6.06 SBA's and Indenture Trustee's Right to
Examine Servicer Records and Audit Operations.............41
Section 6.07 Reports to the Indenture Trustee;
Principal and Interest Account Statements.................41
Section 6.08. Premium Protection Fee and Servicing Fee..................42
(ii)
ARTICLE VII
REPORTS TO BE PROVIDED BY SERVICER
Section 7.01 Financial Statements......................................43
ARTICLE VIII
THE SERVICER
Section 8.01 Indemnification; Third Party Claims.......................44
Section 8.02 Merger or Consolidation of the Servicer...................45
Section 8.03 Limitation on Liability of the Servicer
and Others................................................45
Section 8.04 Servicer Not to Resign....................................45
ARTICLE IX
SERVICER TERMINATION
Section 9.01 Servicer Termination Events...............................47
Section 9.02 Trustee to Act; Appointment of Successor..................49
Section 9.03 Waiver of Defaults........................................50
Section 9.04. Control by Majority Noteholders...........................51
ARTICLE X
TERMINATION
Section 10.01 Termination...............................................52
Section 10.02 Accounting Upon Termination of Servicer...................52
ARTICLE XI
MISCELLANEOUS PROVISIONS
Section 11.01 Acts of Noteholders.......................................54
Section 11.02 Amendment.................................................54
Section 11.03 Recordation of Agreement..................................54
Section 11.04 Duration of Agreement.....................................55
Section 11.05 Governing Law.............................................55
Section 11.06 Notices...................................................55
Section 11.07 Severability of Provisions................................55
Section 11.08 No Partnership............................................56
Section 11.09 Counterparts..............................................56
Section 11.10 Successors and Assigns....................................56
Section 11.11 Headings..................................................56
Section 11.12 Notification to Administrative Agent......................56
Section 11.13 Inconsistencies...........................................56
Section 11.14 Limitation of Liability...................................56
(iii)
APPENDIX A Definitions and Usage
EXHIBIT INDEX
EXHIBIT A Contents of SBA File
EXHIBIT B [Intentionally Omitted]
EXHIBIT C Principal and Interest Account
Letter Agreement
EXHIBIT D [Intentionally Omitted]
EXHIBIT E [Intentionally Omitted]
EXHIBIT F Initial Certification
EXHIBIT F-1 Final Certification
EXHIBIT G [Intentionally Omitted]
EXHIBIT H SBA Loan Schedule
EXHIBIT I Request for Release of Documents
EXHIBIT J [Intentionally Omitted]
EXHIBIT K Form of Delinquency Report
EXHIBIT L Servicer's Monthly Computer Tape Format
EXHIBIT M Form of Multi-Party Agreement
(iv)
Sale and Servicing Agreement dated as of November 1, 1999, between BLC
Funding Trust (the "Trust"), and Business Loan Center, Inc., as Seller (the
"Seller") and as Servicer (the "Servicer").
PRELIMINARY STATEMENT
The Trust was formed for the purpose of issuing asset backed notes and
asset backed certificates secured by the Unguaranteed Interests in the SBA
Loans. The Issuer has entered into a trust indenture, dated as of November 1,
1999 (the "Indenture"), between the Trust and the Indenture Trustee, pursuant to
which the Trust intends to issue from time to time its BLC Funding Notes in an
aggregate principal amount not to exceed $75,000,000 (the "Notes"). Pursuant to
the Indenture, as security for the indebtedness represented by the Notes and any
Hedging Agreements, the Issuer is and will be pledging to the Indenture Trustee,
and granting the Indenture Trustee a security interest in, among other things,
the Unguaranteed Interests in the SBA Loans and its rights under this Agreement.
The parties desire to enter into this Agreement to provide, among other
things, for the servicing of the SBA Loans by the Servicer. The Servicer
acknowledges that, in order further to secure the Notes and any Hedging
Agreements, the Trust is and will be granting to the Indenture Trustee a
security interest in, among other things, its rights under this Agreement, and
the Servicer agrees that all covenants and agreements made by the Servicer
herein with respect to the SBA Loans shall also be for the benefit and security
of the Indenture Trustee and the Secured Parties. For its services hereunder,
the Servicer will receive a Servicing Fee (as defined herein) with respect to
each SBA Loan serviced hereunder.
ARTICLE I
DEFINITIONS
Section 1.01 Definitions. For all purposes of this Agreement,
capitalized terms used herein shall have the meanings set forth in Appendix A,
unless the context clearly indicates otherwise.
Section 1.02 Use of Words and Phrases. "Herein", "hereby", "hereunder",
"hereof", "hereinbefore", "hereinafter" and other equivalent words refer to this
Agreement as a whole and not solely to the particular section of this Agreement
in which any such word is used.
Section 1.03 Captions; Table of Contents. The captions or headings in
this Agreement and the Table of Contents are for convenience only and in no way
define, limit or describe the scope and intent of any provisions of this
Agreement.
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ARTICLE II
SALE AND CONVEYANCE OF THE TRUST FUND
Section 2.01 Sale and Conveyance of Trust Fund.
(a) On the terms and conditions hereinafter set forth, from time to
time prior to the Termination Date, the Seller may, at its option, transfer to
the Trust, without recourse, and for the benefit of the SBA, the Noteholders the
Certificateholders and the Hedge Counterparties, subject to the terms of the
Basic Documents, all of the right, title and interest of the Seller in and to
the Unguaranteed Interests in the SBA Loans and all other assets included or to
be included in the Trust Fund. In consideration for its transfer of such
Unguaranteed Interests in the SBA Loans, on each Transfer Date the Seller shall
receive from amounts deposited into the Funding Account the amount determined
pursuant to Section 2.09(a)(ii).
(b) The rights of the Noteholders, Certificateholders and the Hedge
Counterparties to receive payments with respect to the SBA Loans in respect of
the Notes, the Certificates and the Hedging Agreement, and all interests of the
Noteholders and Certificateholders in such payments, shall be as set forth in
the Basic Documents. The Servicing Fee and the Premium Protection Fee shall not
constitute part of the Trust Fund and the Noteholders, Certificateholders and
the Hedge Counterparties shall have no interest in, and are not entitled to
receive any portion of, the Servicing Fee or the Premium Protection Fee.
Section 2.02 Possession of Business Files.
(a) Upon the transfer of the Unguaranteed Interest in each SBA Loan,
the ownership of each SBA Note, the Mortgage, if applicable, and the contents of
the related SBA File will be vested in the Trust for the benefit of itself and
the SBA, as their interests may appear.
(b) Pursuant to Section 2.04, on each Transfer Date, the Seller will
deliver or cause to be delivered, each SBA Note relating to an SBA Loan to the
FTA.
Section 2.03 Books and Records.
The transfer of the Unguaranteed Interest of each SBA Loan shall be
reflected on the Seller's balance sheet and other financial statements as a sale
of assets by the Seller and the 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 reflect the ownership of the
Unguaranteed Interest of each SBA Loan by the Trust for the benefit of the SBA,
the Noteholders, the Certificateholders and the Hedge Counterparties, as their
interests may appear.
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Section 2.04 Delivery of SBA Loan Documents.
Two days prior to each Transfer Date the Seller will deliver or cause
to be delivered to the Indenture Trustee, or with respect to the SBA Notes
relating to the SBA ss. 7(a) Loans being delivered pursuant to paragraph (a)
below, to the FTA, each of the following documents for each SBA Loan:
(a) The original SBA Note, endorsed by means of an allonge as follows:
"Pay to the order of First Union Trust Company, National Association, and its
successors and assigns, not in its individual capacity but solely as Owner
Trustee under that certain Trust Agreement dated as of November 1, 1999, for the
benefit of the Certificateholders and the United States Small Business
Administration, 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 (such allonge shall bear a legend stating "HSBC Bank USA,
as Indenture Trustee, has a security interest in the Unguaranteed Interest in
this 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: "HSBC Bank USA, ("Assignee") its successors and assigns, as indenture
trustee under the Indenture dated as of November 1, 1999 subject to the
Multi-Party Agreement dated as of November 1, 1999" 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 Indenture 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;
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(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, such assignment shall be in the name of HSBC
Bank USA, its successors and assigns, as indenture trustee under the Indenture
dated as of November 1, 1999 subject to the Multi-Party Agreement dated as of
November 1, 1999;
(h) For all SBA Loans, irrevocable powers of attorney of the
Seller and the Issuer to the Indenture Trustee to execute, deliver, file or
record and otherwise deal with the Collateral for the SBA Loans in accordance
with this Agreement. The powers of attorney will be delegable by the Indenture
Trustee to the Servicer and any successor servicer and will permit the Indenture
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
Indenture Trustee, as assignee of the Trust, 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 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 related Transfer Date (or within two
years of the related Transfer Date if the public recording office is at fault in
delivering the appropriate documents), deliver or cause to be delivered to the
Indenture Trustee: (i) the original recorded Mortgage in those instances where a
copy thereof certified by the Seller was delivered to the Indenture Trustee;
(ii) the original recorded Assignment of Mortgage from the Seller to the
Indenture Trustee, which, together with any intervening assignments of Mortgage,
evidences a complete chain of title from the originator to the Indenture Trustee
in those instances where copies thereof certified by the Seller were delivered
to the Indenture Trustee; and (iii) any intervening assignments of Mortgage in
those instances where copies thereof certified by the Seller were delivered to
the Indenture 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, the Seller shall be deemed to have
5
satisfied its obligations hereunder upon delivery to the Indenture 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 Indenture Trustee or the
FTA, as the case may be, as to each SBA Loan are referred to herein as the
"Indenture 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 in 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 Trust Fund a first priority perfected security interest in all of
the Seller's right, title and interest in, to and under the Unguaranteed
Interests in the SBA Loans and other assets in the Trust Fund, 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 Indenture Trustee of the Trust Fund; Certain
Substitutions; Certification by Indenture Trustee.
(a) The Multi-Party Agreement provides for the FTA to deliver an
acknowledgement of receipt for each SBA Note in accordance with the terms and
conditions of the Multi-Party Agreement. The Indenture Trustee agrees, for the
benefit of the SBA, the Noteholders and the Certificateholders, to review each
Indenture Trustee's Document File (with the exception of the SBA Notes held by
the FTA) on or prior to the applicable Transfer Date (or, with respect to any
Qualified Substitute SBA Loan, on or prior to the assignment thereof), and to
deliver to the Seller and the Servicer a certification in the form attached
hereto as Exhibit F on or prior to such Transfer Date (or, with respect to any
Qualified Substitute SBA Loan, on or prior to the assignment thereof). Within
360 days after each Transfer Date (or, with respect to any Qualified Substitute
SBA Loan, within 360 days after the assignment thereof), the Indenture Trustee
shall deliver to the Servicer, the Seller, the SBA, and any Noteholder who
requests a copy from the Indenture Trustee a final certification in the form
attached hereto as Exhibit F-1 evidencing the completeness of the Indenture
Trustee's Document Files with respect to the SBA Loans being transferred on such
Transfer Date.
(b) If the Indenture Trustee during the process of reviewing the
Indenture Trustee's Document Files finds any document constituting a part of an
Indenture 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 Indenture
Trustee shall promptly so notify the Seller and the Servicer. In performing any
such review, the Indenture Trustee 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 Indenture Trustee's review of the SBA Files is
limited solely to confirming that the documents listed in Section 2.04 have been
6
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 document constituting part of an SBA File of which it is so notified
by the Indenture Trustee. If, however, within 60 days after the Indenture
Trustee'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 sum of the applicable Interest Rate and Program Fee as
of the next succeeding Determination Date, plus any accrued unpaid Servicing
Fees and Servicing Advances reimbursable to the Servicer with respect to such
SBA Loan, which purchase price shall be deposited in the Principal and Interest
Account on the next succeeding Determination Date.
(c) Upon receipt by the Indenture Trustee 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 Indenture Trustee
shall release to the Servicer for release to the Seller the related Indenture
Trustee's Document File and the Indenture Trustee and the Trust 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 Indenture 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
Indenture Trustee a certificate to such effect in the form attached as Exhibit I
hereto. The Servicer shall comply with the SBA Rules and Regulations in
connection with such action, including the giving of any necessary notice. Upon
receipt of such certification, the Indenture Trustee shall deliver to the
Servicer the requested documentation and the Indenture 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 Indenture Trustee
shall deliver to the Seller, and the Servicer a certification detailing all
transactions with respect to the SBA Loans for which the Indenture Trustee holds
an Indenture Trustee's Document File pursuant to this Agreement during the prior
calendar year. Such certification shall list all Indenture Trustee's Document
Files which were released by or returned to the Indenture Trustee or the FTA
during the prior calendar year, the date of such release or return and the
reason for such release or return.
Section 2.06 [Reserved].
Section 2.07 [Reserved].
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Section 2.08 Fees and Expenses of the Owner Trustee and the Indenture
Trustee.
The fees and expenses of the Owner Trustee in its individual capacity
and the Indenture Trustee including (i) the annual fees of the Owner Trustee in
its individual capacity and the Indenture Trustee and (ii) any other fees and
expenses to which the Owner Trustee in its individual capacity and the Indenture
Trustee are entitled shall be paid from the Expense Account in the manner set
forth in Section 5.03 hereof; provided, however, that the Seller shall be liable
for any expenses of the Trust Fund incurred prior to the Closing Date. The
Servicer, the Indenture Trustee and the Trust hereby covenant with the
Noteholders, the Certificateholders and the Hedge Counterparties that every
material contract or other material agreement entered into by the Trust, the
Indenture Trustee, or the Servicer, acting as attorney-in-fact for the Indenture
Trustee or the Trust, on behalf of the Trust Fund shall expressly state therein
that no Noteholder, Certificateholder or Hedge Counterparty shall be personally
liable in connection with such contract or agreement.
Section 2.09 Transfer and Conveyance of the SBA Loans.
(a) (i) Subject to the conditions set forth in paragraph (b) below, in
consideration of the Indenture Trustee's delivery on the related Transfer Date
to or upon the order of the Seller of the amount in the Funding Account
determined pursuant to Section 2.09(a)(ii) below, the Seller shall on any
Transfer Date contribute, transfer, assign, set over and otherwise convey
without recourse, to the Trust all right, title and interest of the Seller in
and to the Unguaranteed Interest in each SBA Loan listed on the SBA Loan
Schedule delivered by the Seller on such Transfer Date, all its right, title and
interest in and to principal collected and interest accruing on the Unguaranteed
Interest in each such SBA Loan on and after the related Transfer Date and all
its right, title and interest in and to the Unguaranteed Interest in all
insurance policies; provided, however, that the Seller reserves and retains all
its right, title and interest in and to principal (including Principal
Prepayments) collected and interest accruing on the Unguaranteed Interest in
each such SBA Loan prior to the related Transfer Date. The transfer by the
Seller of the Unguaranteed Interest in each of the SBA Loans set forth on the
SBA Loan Schedule to the Trust shall be absolute and shall be intended by all
parties hereto to be treated as a contribution by the Seller.
(ii) The amount released from the Funding Account shall be the lesser
of (i) the product of (A) 100% minus the Minimum Subordination Percentage and
(B) the aggregate Principal Balances as of the related Transfer Date of the
Unguaranteed Interest in each of the SBA Loans so transferred, or (ii) the
amount such that immediately after such release the Subordination Percentage
equals the Minimum Subordination Percentage.
(b) The Seller shall transfer to the Trust the Unguaranteed Interest in
each of the 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 Transfer Date:
8
(i) the Seller shall have provided the Indenture
Trustee and the Administrative Agent with a timely Addition
Notice and shall have provided any information reasonably
requested by them with respect to the SBA Loans;
(ii) the Seller shall have delivered to the Indenture
Trustee a duly executed written assignment (including an
acceptance by the Indenture Trustee) that shall include an SBA
Loan Schedule, listing the SBA Loans being transferred and any
other exhibits listed thereon;
(iii) as of each Transfer Date, neither the Seller
nor the Servicer was insolvent nor will either of them have
been made insolvent by such transfer nor is either of them
aware of any pending insolvency;
(iv) the Termination Date shall not have occurred;
(v) the Seller shall have delivered to the Indenture
Trustee an Officer's Certificate confirming the satisfaction
of each condition precedent specified in this paragraph (b)
and in Sections 3.1 and 3.2 of the Note Purchase Agreement;
and
(vi) the FTA shall have delivered to the Indenture
Trustee, pursuant to the Multi-Party Agreement, an
acknowledgment of receipt of the SBA Note relating to such SBA
ss. 7(a) Loan in the form attached as Exhibit 1 to the
Multi-Party Agreement.
(c) In connection with the transfer and assignment of the Unguaranteed
Interests in the SBA Loans, the Seller agrees to satisfy the conditions set
forth in Sections 2.02, 2.03, 2.04 and 2.05.
Section 2.10 Optional Purchase or Substitution of SBA Loans.
The Seller shall have the right, but not the obligation, to purchase,
or substitute for, any Defaulted Unguaranteed Interest or Charged-Off
Unguaranteed Interest. In the case of a purchase, the Seller shall deposit in
the Principal and Interest Account, on the next succeeding Determination Date,
an amount equal to the Principal Balance of the related Unguaranteed Interest as
of the date of such purchase plus accrued interest thereon at the applicable SBA
Loan Interest Rate. In the case of a substitution, the Seller shall deliver to
the Trust one or more Qualified Substitute SBA Loans and any required
Substitution Adjustment. Any such substitution shall be made in accordance with
the provisions of Section 3.03. On the date of such substitution, the Seller
shall deliver to the Deal Agent a certificate stating that such SBA Loan is a
Qualified Substitute SBA Loan. In no event, however, may the aggregate Principal
Balance of the Unguaranteed Interests of all SBA Loans purchased or substituted
for pursuant to this Section 2.10 exceed, on any date of purchase or
substitution 15% of the aggregate Principal Balance as of the applicable
Transfer Dates, of the SBA Loans then held by the Trust. Further, the Seller may
not cure an Event of Default (or an event which with the giving of notice or the
9
passage of time, or both, would constitute an Event of Default) by substituting
a Qualified Substitute SBA Loan for a Deleted Unguaranteed Interest or a
Charged-Off Unguaranteed Interest.
Section 2.11 Subsequent Sales.
If in connection with a Subsequent Sales the Notes are being redeemed
pursuant to Section 10.01(b) or (c) of the Indenture, on the closing date of
such Subsequent Sale the Trust shall sell to the party designated by the Seller
with the consent of the Administrative Agent and the SBA the Unguaranteed
Interests in those SBA Loans then held by the Trust. Concurrently with such
sale, the Servicer shall cause an amount equal to the Redemption Price to be
deposited into the Note Distribution Account. The Servicer and the Trust will
execute and deliver such instruments, consents or other documents and perform
all acts reasonably requested by the Seller in order to effect the transfer and
release of any of the Trust's interests in such Unguaranteed Interests in such
SBA Loans.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES
Section 3.01. Representations of the Seller.
The Seller hereby represents and warrants to the Indenture Trustee, the
Owner Trustee, the Certificateholders, the Noteholders and each Hedge
Counterparty as of each Transfer Date:
(a) The Seller is a corporation duly organized, validly existing and in
good standing under the laws of the jurisdiction of its incorporation 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 Seller and perform its obligations hereunder; the Seller has all requisite
power and authority to execute and deliver this Agreement and each other Basic
Document to which it is a party and to perform in accordance herewith and
therewith; the execution, delivery and performance of this Agreement and each
other Basic Document to which it is a party (including all instruments of
transfer to be delivered pursuant to this Agreement) by the Seller and the
consummation of the transactions contemplated hereby and thereby have been duly
and validly authorized by all necessary corporate action; this Agreement and
each other Basic Document to which it is a party evidence the valid, binding and
enforceable obligations of the Seller; and all requisite corporate action has
been taken by the Seller to make this Agreement and each other Basic Document to
which it is a party valid, binding and enforceable upon the Seller in accordance
with its respective 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 Unguaranteed Interests in the SBA Loans by the Trust.
(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 Seller makes no such representation or warranty), that
are necessary or advisable in connection with the purchase and sale of the Notes
and the execution and delivery by the Seller 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 the consummation of the transactions contemplated by this
Agreement and each other Basic Document to which it is a party and the other
documents on the part of the Seller and the performance by the Seller of its
obligations under this Agreement and the other Basic Documents to which it is a
party;
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(c) The consummation of the transactions contemplated by this Agreement
and the other Basic Documents to which the Seller is a party will not result in
the breach of any terms or provisions of the certificate of incorporation or
by-laws of the Seller 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 Seller or its property is subject, or
result in the violation of any law, rule, regulation, order, judgment or decree
to which the Seller or its property is subject;
(d) Neither this Agreement or any other Basic Document to which the
Seller is a party nor any statement, report or other document furnished or to be
furnished pursuant to this Agreement or any other Basic Document to which the
Seller is a party 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 Seller 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 or any other Basic Document to which the Seller is a party;
(f) There is no action, suit, proceeding or investigation pending or,
to the best of the Seller's knowledge, threatened against the Seller 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 Seller or in any material impairment of the right or ability of
the Seller to carry on its business substantially as now conducted, or in any
material liability on the part of the Seller or of any action taken or to be
taken in connection with the obligations of the Seller contemplated herein, or
which would be likely to impair materially the ability of the Seller to perform
under the terms of this Agreement or any other Basic Document to which the
Seller is a party or (ii) which would draw into question the validity of this
Agreement or any other Basic Document to which the Seller is a party or the SBA
Loans;
(g) The Trust will not constitute an "investment company" within the
meaning of the Investment Company Act of 1940, as amended;
(h) The Seller 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 adversely affect the condition (financial or other) or operations of the
Seller or its properties or might have consequences that would materially and
adversely affect its performance hereunder;
(i) The Seller is Well Capitalized;
(j) The transfer, assignment and conveyance of the SBA Notes and the
Mortgages by the Seller pursuant to this Agreement are not 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;
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(k) The origination and collection practices used by the Seller with
respect to each SBA Note and Mortgage have been in all material respects legal,
prudent and customary in the SBA loan origination and servicing business and
comply with the Credit and Collection Policy;
(l) Each SBA Loan was selected from among the existing SBA loans in the
Seller's portfolio at the related Transfer Date, in a manner not designed to
adversely affect the Noteholders or the Certificateholders;
(m) The Seller received fair consideration and reasonably equivalent
value in exchange for the sale of the Unguaranteed Interests in the SBA Loans;
(n) Neither the Seller nor any of its affiliates sold any interest in
any SBA Loan with any intent to hinder, delay or defraud any of their respective
creditors;
(o) The Seller is solvent, and the Seller will not be rendered
insolvent as a result of the transfer of the Unguaranteed interests in the SBA
Loans to the Trust or the sale of the Notes;
(p) The chief executive office and legal name of the Seller is as set
forth on the respective UCC-1 financing statement filed on behalf of the Seller
pursuant to Section 2.04, such office is the place where the Seller 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 Seller has changed in the past four months;
(q) The Seller has no trade names, fictitious names, or "doing business
as" names, except for "Business Loan Center;"
(r) The Seller will treat the transfer of the SBA Loans as a sale for
accounting purposes; and
(s) To the best of Seller's knowledge, all tax returns have been filed
on a timely basis.
Section 3.02 Individual SBA Loans.
The Seller hereby represents and warrants to the Indenture Trustee, the
Noteholders, the Owner Trustee, the Certificateholders and each Hedge
Counterparty, with respect to each SBA Loan as of the related Transfer Date:
(a) The information with respect to each SBA Loan set forth in the SBA
Loan Schedule is true and correct;
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(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 Indenture Trustee on the Transfer 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;
(d) Each SBA Loan was originated and underwritten, or purchased and
[re-underwritten] by the Seller and each SBA Loan is being serviced by the
Seller, in each case in accordance with the Credit and Collection Policy;
(e) Each SBA Loan is an SBA ss.7(a) Loan;
(f) The SBA Loan Interest Rate for each SBA Loan is either a fixed rate
or adjusts monthly or quarterly to equal the then applicable prime rate plus the
margin (if applicable) set forth in the related SBA Note. Each SBA Note will
provide for a schedule of Monthly Payments (which, for adjustable rate SBA
Loans, will adjust monthly or quarterly) payable in United States dollars 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 Seller held good and indefeasible title to, and was the sole
owner of, the Unguaranteed Interest of each SBA Loan conveyed by the Seller
subject to no liens, charges, mortgages, encumbrances or rights of others except
liens which will be released simultaneously with such transfer and assignment;
and immediately upon the transfer and assignment herein contemplated, the Trust
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 the interests of the SBA or liens which will be released simultaneously
with such transfer and assignment;
(i) No SBA Loan is more than 30 days delinquent in payment;
(j) To the best of the Seller's knowledge, there is no delinquent tax
or assessment lien on any Mortgaged Property which is the primary Collateral for
the related SBA Loan, and 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
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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 its
Transfer 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) There is only one originally signed SBA Note for each SBA Loan,
which SBA Note has been delivered to the FTA;
(n) Pursuant to the SBA Rules and Regulations, the Seller 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 4.07;
(o) Pursuant to the SBA Rules and Regulations, the Seller 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 4.07;
(p) Each SBA Note, any related Mortgage and any other agreement
pursuant to which Collateral is pledged to the Indenture Trustee 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 action in equity or
at law), 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 Seller 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 Indenture Trustee and the Owner 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 Indenture Trustee or the Seller, 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 Seller (or, subject to Section 2.04 hereof, are in the process
of being recorded);
(s) No SBA Loan has an original term to maturity exceeding 306
months;
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(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, the
Noteholders, the Certificateholders and each Hedge Counterparty and which has
been delivered to the Indenture Trustee;
(u) To the best of Seller's knowledge 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;
(w) At the time of origination of 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 related Transfer
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 Seller to make future advances thereunder
and the Guaranteed Portion of the SBA Loan has been sold in the Secondary Market
pursuant to SBA Form 1086. 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 Seller or any other party
(except for any guarantor of an SBA Loan) to make Monthly Payments in addition
to those made by the Obligor;
(z) To the best of Seller's knowledge no statement, report or other
document signed by the Seller 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;
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(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 Noteholders, the Certificateholders
and/or any Hedge Counterparties 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
jurisdiction identified in the SBA Loan Schedule and the collateral securing
each SBA Loan is located in the United States;
(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) To the best of Seller's knowledge 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 Seller, 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) Including the Unguaranteed Interest in such SBA Loan in the Trust
will not cause the Concentration and Mix Criteria to be violated;
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(jj) 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;
(kk) Each SBA Loan is secured by one or more items of Collateral and at
the time the related SBA Loan was originated, the aggregate value of all
Collateral securing such SBA Loan was at least equal to the original principal
amount of the related SBA Loan and all Prior Liens securing the related
Collateral;
(ll) To the best of Seller's knowledge, there are no governmental
proceedings or investigations pending or threatened which would adversely affect
payment on the SBA Loans;
(mm) Each SBA Loan is personally guaranteed by a principal of the
Obligor; and
(oo) Each SBA Loan qualifies to be guaranteed by the SBA.
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 Notes to the
Noteholders and the Certificates to the Certificateholders. Upon discovery by
the Servicer, any Subservicer, a Responsible Officer of the Owner Trustee or the
Indenture 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 Noteholders, the Certificateholders, the SBA or any Hedge
Counterparty therein or which materially and adversely affects the interests of
the Noteholders, the Certificateholders, the SBA or any Hedge Counterparty 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 Seller'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 Seller shall (a) promptly cure such breach in all material
respects, (b) purchase the Unguaranteed Interest in such SBA Loan by depositing
in the Principal and Interest Account, on the next succeeding Determination
Date, an amount in the manner specified in Section 2.05(b), or (c) 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.
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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 Indenture Trustee a certification in the form attached hereto
as Exhibit I, executed by a Servicing Officer, and shall also deliver to the
Indenture Trustee, the documents constituting the Indenture 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 portion thereof required to be paid to
the related Registered Holder, the FTA's Fee, the Premium Protection Fee and the
Servicing Fee with respect to each SBA Loan and the Additional Fee with respect
to each Additional Fee SBA Loan). 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 Indenture 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 Seller shall indemnify and hold harmless the
Trust, the Indenture Trustee, the Noteholders, the Certificateholders and any
Hedge Counterparty 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 Seller's representations and warranties
contained in this Agreement. It is understood and agreed that the obligations of
the 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 Noteholders, the
Certificateholders, the Indenture Trustee, the Owner Trustee and any Hedge
Counterparty as provided in Sections 2.04, 2.05 and 3.03 constitute the sole
remedies of the Indenture Trustee, the Noteholders, the Certificateholders, the
Owner Trustee and any Hedge Counterparty, respecting a breach of the foregoing
representations and warranties.
Any cause of action against the 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 Indenture 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 Indenture Trustee for all amounts payable
hereunder in respect of such SBA Loan.
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ARTICLE IV
ADMINISTRATION AND SERVICING OF SBA LOANS
Section 4.01 Duties of the Servicer.
(a) 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, the Credit and Collection Policy, the Multi-Party Agreement
and the SBA Rules and Regulations. The Servicer may enter into Subservicing
Agreements for any servicing and administration of SBA ss. 7(a) Loans with any
entity approved with prior written consent by the SBA and the Administrative
Agent. Any such Subservicing Agreement must be approved by the SBA and 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 ss.
7(a) Loans or enter into a Subservicing Agreement with a successor Subservicer
which qualifies hereunder.
(b) 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
Indenture Trustee, for itself and on behalf of the Noteholders, the SBA, the
Certificateholders and any Hedge Counterparty 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.
(c) 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 Indenture Trustee, the SBA and
Noteholders 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 4.01(d). Notwithstanding the foregoing, the
Servicer shall (i) at its expense and without reimbursement, deliver to the
Indenture Trustee and the SBA a copy of each Subservicing Agreement and (ii)
provide notice of termination of any Subservicer within a reasonable time after
such Subservicer's termination to the Indenture Trustee and the SBA.
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(d) In the event the Servicer shall for any reason no longer be the
Servicer, the Servicer at its expense and without right of reimbursement
therefor, shall, upon request of the Indenture Trustee, deliver to the successor
servicer 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.
(e) 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, the
Noteholders and any Hedge Counterparty, 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 4.12), 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 Noteholders 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 Indenture Trustee, the Owner Trustee,
the SBA, each Noteholder, each Certificateholder and each Hedge Counterparty,
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, the Indenture Trustee, on behalf of the Trust, shall
furnish 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 Indenture Trustee, on
behalf of the Trust, 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 and prudent lending standards,
and in accordance with the SBA Rules and Regulations, giving due consideration
to the Noteholders' and the SBA's reliance on the Servicer.
(f) The Servicer shall, upon request of the Indenture Trustee but at
the expense of the Servicer, deliver to any successor servicer all documents and
21
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.
(g) The Servicer shall perform the duties of the Issuer and the Owner
Trustee under the Basic Documents. In furtherance of the foregoing, the Servicer
shall consult with the Owner Trustee as the Servicer deems appropriate regarding
the duties of the Issuer and the Owner Trustee under the Basic Documents. The
Servicer shall monitor the performance of the Issuer and the Owner Trustee and
shall advise the Owner Trustee when action is necessary to comply with the
Issuer's or the Owner Trustee's duties under the Basic Documents. The Servicer
shall prepare for execution by the Owner Trustee or shall cause the preparation
by other appropriate Persons of all such documents, reports, filings,
instruments, certificates and opinions as it shall be the duty of the Issuer or
the Owner Trustee to prepare, file or deliver pursuant to the Basic Documents.
(h) In addition to the duties of the Servicer set forth in this
Agreement or any of the Basic Documents, the Servicer shall perform such
calculations and shall prepare for execution by the Issuer or the Owner Trustee
or shall cause the preparation by other appropriate Persons of all such
documents, reports, filings, instruments, certificates and opinions as it shall
be the duty of the Issuer to prepare, file or deliver pursuant to state and
federal tax and securities laws. In accordance with the directions of the Issuer
or the Owner Trustee, the Servicer shall administer, perform or supervise the
performance of such other activities in connection with the Issuer as are not
covered by any of the foregoing provisions and as are expressly requested by the
Issuer or the Owner Trustee and are reasonably within the capability of the
Servicer.
(i) Notwithstanding anything in this Agreement or any of the Basic
Documents to the contrary, the Servicer shall be responsible for promptly
notifying the Owner Trustee and the Paying Agent in the event that any
withholding tax is imposed on the Issuer's payments (or allocations of income)
to a Noteholder, a Certificateholder or Hedge Counterparty. Any such notice
shall be in writing and specify the amount of any withholding tax required to be
withheld by the Owner Trustee or the Paying Agent pursuant to such provision.
(j) The Servicer shall prepare and file, on behalf of the Issuer, all
tax returns tax elections, financial statements and such annual or other reports
of the Issuer as are necessary for the preparation of tax reports as provided in
the Trust Agreement or required by applicable law. All tax returns will be
signed by the Servicer on behalf of the Issuer.
(k) The Servicer shall maintain appropriate books of account and
records relating to services performed under this Agreement, which books of
account and records shall be accessible for inspection by the Owner Trustee at
any time during normal business hours.
(l) The Servicer shall furnish to the Administrative Agent from time to
time such additional information regarding the Issuer or the Basic Documents as
the Administrative Agent shall reasonably request.
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(m) Without the prior written consent of the Administrative Agent,
which consent will not be unreasonably withheld, the Servicer shall not agree or
consent to, or otherwise permit to occur, any amendment, modification, change,
supplement or recission of or to the Credit and Collection Policy, in whole or
in part, in any manner that could have a material adverse effect on the SBA
Loans; provided that the consent of the Administrative Agent shall not be
required if any such amendment, modification, change, supplement or recission
was mandated by the Servicer's regulators including, but not limited to, the
SBA.
(n) The Servicer shall furnish to the Administrative Agent written
notice of any change to (i) the Credit and Collection Policy within three (3)
Business Days of such change and (ii) any change to its accounting policy within
three (3) Business Days of such change.
Section 4.02 Liquidation of SBA Loans.
In the event that any payment due under any SBA Loan and not postponed
pursuant to Section 4.01 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 in accordance with the SBA Rules and Regulations
shall take such action as it shall deem to be in the best interests of the
Noteholders and the SBA. With respect to any such SBA ss. 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 Indenture
Trustee shall, upon written direction of the Servicer, deliver to the SBA or its
designee all or any portion of the Indenture Trustee's Document File relating to
such SBA ss. 7(a) Loan and the Indenture Trustee shall execute such documents,
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 Note Distribution
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 ss. 7(a) Loans for
which the related SBA ss. 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 4.10. In connection with such
foreclosure or other conversion and any other liquidation action, 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 with respect to its
own affairs, in accordance with prudent servicing standards, and in accordance
with the applicable SBA Rules and Regulations. Prior to undertaking foreclosure
of any Mortgaged Property, the Servicer must investigate environmental
conditions, including, if the Servicer deems necessary or if required by the SBA
Rules and Regulations the performance of a Phase I and/or Phase II environmental
site assessment, to ascertain the actual or potential presence of any hazardous
material on or under such property. For purposes of this Agreement, the term
hazardous material includes (1) any hazardous substance, as defined by the
Comprehensive Environmental Response, Compensation and Liability Act of 1980, as
amended by the Superfund Amendments and Reauthorization Act of 1986, 42 U.S.C.
9601-9675, and (2) petroleum (as that term is defined at 42 U.S.C. ss. 6991)
including any derivative, fraction, by-product, constituent or breakdown product
thereof, or additive thereto. In the event that the environmental investigation
23
determines the existence of any hazardous material on or under the Mortgaged
Property in excess of minimum action levels established by relevant regulatory
agencies, title to such property shall not be taken without prior written
approval from the SBA.
Section 4.03 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 Eligible Deposit Accounts,
wherein the moneys therein are invested in Permitted Instruments, titled
"Business Loan Center, Inc., as Servicer, in trust for the registered holders of
BLC Funding Trust Notes." All funds in 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 Indenture
Trustee, the Owner Trustee and, upon request, the SBA, any Noteholder,
Certificateholder or Hedge Counterparty.
(b) The Servicer and each Subservicer shall deposit without duplication
(within four Business Days of receipt thereof during the Revolving Period and
within two Business Days of receipt thereof during the Amortization Period) in
the applicable Principal and Interest Account and retain therein:
(i) the Unguaranteed Percentage of all payments
received on or after the applicable Transfer Date on account
of principal on the SBA Loans, including all Principal
Prepayments and Curtailments;
(ii) all payments received after the Transfer Date on
account of interest on the SBA Loans (net of the portion
thereof required to be paid to the related Registered Holders,
the Premium Protection Fee, the FTA's Fee and the Servicing
Fee with respect to each SBA Loan, the Additional Fee with
respect to each Additional Fee SBA Loan, and other servicing
compensation payable to the Servicer as permitted herein);
(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 the Credit and Collection
Policy);
(v) the Unguaranteed Percentage of all Released
Mortgaged Property Proceeds and any other proceeds from any
other Collateral securing the SBA Loans;
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(vi) any amounts paid in connection with the purchase
or repurchase of the Unguaranteed Interest of any SBA Loan and
the amount of any Substitution Adjustment received pursuant to
any provision of this Agreement;
(vii) any amount required to be deposited in the
Principal and Interest Account pursuant to Section 4.04 or
4.10; 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 to be paid to the Registered Holders, the Premium Protection
Fee, the FTA's Fee and the Servicing Fee, with respect to each SBA Loan, and
additionally 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, may 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 Indenture
Trustee pursuant to Section 4.04(a). Any reference herein to amounts on deposit
in the Principal and Interest Account shall refer to amounts net of such
investment earnings.
Section 4.04 Permitted Withdrawals From the Principal and Interest
Account.
The Servicer shall withdraw funds from the Principal and Interest
Account for the following purposes:
(a) to effect the remittance to the Indenture Trustee on each
Determination Date for deposit into the Note Distribution Account of the
Available Funds for the related Remittance Date (net of amounts then on deposit
in the Spread Account);
(b) to reimburse itself for any accrued unpaid Servicing Fees and
Premium Protection Fees allocable to the SBA Loans 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 Premium Protection Fees and, except
as provided in the following, Servicing Advances shall be limited to Liquidation
Proceeds, Released Mortgaged Property Proceeds, Insurance Proceeds and such
25
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 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; provided, however, that the
Servicer's right to such reimbursement pursuant hereto shall be subordinate to
the rights of the Noteholders;
(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 4.03(d), interest paid in respect of Permitted
Instruments or by an Eligible Deposit Account on funds deposited in the
Principal and Interest Account;
(e) to withdraw any funds deposited in the Principal and Interest
Account that were not permitted or required to be deposited therein or were
deposited therein in error;
(f) to pay itself servicing compensation pursuant to Section 6.03
hereof; and
(g) to clear and terminate the Principal and Interest Account upon the
termination of this Agreement in accordance with Section 10.01.
So long as no default or Servicer Termination Event shall have occurred
and be continuing, and consistent with any requirements of the Code, the
Principal and Interest Accounts shall either be maintained with an Eligible
Deposit Account as an interest-bearing account meeting the requirements set
forth in Section 4.03(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 "Business
Loan Center, Inc., as Servicer, in trust for the registered holders of BLC
Funding Trust Notes." 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 4.05 [Intentionally Omitted]
Section 4.06 Transfer of Accounts.
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The Servicer may, upon written notice to the Indenture Trustee, the SBA
and the Administrative Agent, transfer any Principal and Interest Account to a
different Eligible Deposit Account.
Section 4.07 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 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 Credit and Collection Policy,
on Foreclosed Property constituting real property, fire and hazard insurance in
the amounts described above and liability insurance. The Unguaranteed Percentage
of 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 4.04. 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 4.08 [Intentionally Omitted].
Section 4.09 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
Indenture Trustee and the Owner Trustee, their respective 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 4.09 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 Indenture Trustee, the Owner
Trustee, the SBA or any Noteholder, Certificateholder or Hedge Counterparty, the
Servicer shall cause to be delivered to the Indenture Trustee, Owner Trustee,
the SBA or such Noteholder or such Certificateholder a certified true copy of
27
such fidelity bond and insurance policy. The current issuer of such fidelity
bond and insurance policy is [Lloyds of London].
Section 4.10 Title, Management and Disposition of Foreclosed Property.
In the event that title to a Mortgaged Property or other Collateral is
acquired in foreclosure or by deed in lieu of foreclosure or by other legal
process (a "Foreclosed Property"), the deed or certificate of sale, or the
repossessed Collateral shall be taken in the name of the Trust for the benefit
of the Noteholders, the Certificateholders, the SBA and the Hedge
Counterparties, as their interests may appear under the Multi-Party Agreement
dated the date of this Agreement (or such other name as the SBA may direct).
Unless the servicing of a Foreclosed Property or item of Repossessed
Collateral relating to an SBA Loan is assumed by the SBA pursuant to the SBA
Rules and Regulations, the Servicer, subject to Sections 4.01 and 4.02 hereof,
shall manage, conserve, protect and operate each Foreclosed Property or other
Repossessed Collateral for the SBA, the Noteholders, the Certificateholders and
any Hedge Counterparty 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, the Noteholders, the Certificateholders and any Hedge Counterparty.
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, the Noteholders,
the Certificateholders and any Hedge Counterparty. 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 4.04, reimburse itself for
any related unreimbursed Servicing Advances and unpaid Servicing Fees, and the
Servicer shall deposit in the Principal and Interest Account the net cash
proceeds of such sale to be distributed to the Noteholders in accordance with
Section 5.07 hereof.
Section 4.11 [Intentionally Omitted].
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Section 4.12 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 or the Premium Protection 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.
Section 4.13 Access to Certain Documentation and Information Regarding
the SBA Loans.
The Servicer shall provide to the Owner Trustee, the Indenture Trustee,
the SBA, the FDIC, the OCC, the Federal Reserve, the Office of Thrift
Supervision and the supervisory agents and examiners 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 V
PAYMENTS TO THE NOTEHOLDERS
Section 5.01 Establishment of Note Distribution Account; Deposits in
Note Distribution Account; Permitted Withdrawals from Note Distribution Account.
(a) No later than the Closing Date, the Indenture Trustee will
establish and maintain with itself in its trust department a trust account,
which shall not be interest-bearing, titled "Note Distribution Account, HSBC
Bank USA, as Indenture Trustee for the registered holders of BLC Funding Notes"
(the " Note Distribution Account"). The Indenture Trustee shall, promptly upon
receipt, deposit in the Note Distribution Account and retain therein:
(i) the Available Funds (net of the amount then on
deposit in the Spread Account);
(ii) the proceeds received upon the sale of the
Unguaranteed Interests in connection with a Subsequent Sale
pursuant to Section 2.11;
(iii) amounts transferred from the Spread Account
pursuant to Section 5.02(b)(i);
(iv) amounts required to be paid by the Servicer
pursuant to Section 5.06(e) in connection with losses on
investments of amounts in the Accounts; and
(v) any payments received from any Hedge Counterparty
pursuant to any Hedge Transaction or Hedging Agreements.
(b) Amounts on deposit in the Note Distribution Account shall be
withdrawn on each Remittance Date by the Indenture Trustee, or the Paying Agent,
on its behalf, to effect the distribution described in Section 5.07(b) and
thereafter by the following parties in no particular order of priority:
(i) by the Indenture Trustee, to invest amounts on
deposit in the Note Distribution Account in Permitted
Instruments pursuant to Section 5.06;
(ii) by the Indenture 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 Indenture Trustee, to withdraw any
amount not required to be deposited in the Note Distribution
Account or deposited therein in error; and
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(iv) by the Indenture Trustee, to clear and terminate
the Note Distribution Account upon the termination of this
Agreement in accordance with the terms of Section 10.01
hereof.
Section 5.02 Establishment of Spread Account; Deposits in Spread
Account; Permitted Withdrawals from Spread Account.
(a) No later than the Closing Date, the Indenture Trustee will
establish and maintain with itself in its trust department a trust account,
which shall not be interest bearing, titled "Spread Account, HSBC Bank USA, as
Indenture Trustee for the registered holders of BLC Funding Notes" (the "Spread
Account"). If on any Determination Date the Subordination Percentage is less
than the Minimum Subordination Percentage, the Indenture Trustee shall, promptly
upon receipt, deposit in the Spread Account the amounts transferred from the
Note Distribution Account pursuant to Section 5.07(b)(vi).
(b) Amounts on deposit in the Spread Account shall be withdrawn by
Indenture Trustee for distribution on each Remittance Date in the following
order of priority:
(i) to deposit in the Note Distribution Account for a
principal payment on the Notes in the amount, if any, needed
to increase the Subordination Percentage to the Minimum
Subordination Percentage; and
(ii) During the Revolving Period, to the extent that
the Subordination Percentage equals or exceeds the Minimum
Subordination Percentage after giving effect to all required
transfers from the Spread Account to the Note Distribution
Account on such Remittance Date, the remainder of the amounts
on deposit in the Spread Account shall be, by Issuer Request
(x) transferred to the Funding Account, (y) transferred to the
Note Distribution Account or (z) transferred to the
Certificate Account;
and also, in no particular order of priority:
(iii) to invest amounts on deposit in the Spread
Account in Permitted Instruments pursuant to Section 5.06;
(iv) to withdraw any amount not required to be
deposited in the Spread Account or deposited therein in error;
and
(v) to clear and terminate the Spread Account upon
the termination of this Agreement in accordance with the terms
of Section 10.01.
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Section 5.03 Establishment of Expense Account; Deposits in Expense
Account; Permitted Withdrawals from Expense Account
(a) No later than the Closing Date, the Indenture Trustee will
establish with itself an account (the "Expense Account"). The Expense Account
shall not constitute part of the Trust Fund and is for the benefit of the
Indenture Trustee and the Owner Trustee in its individual capacity to pay their
fees and expenses related to the Trust. The Indenture Trustee shall deposit into
the Expense Account:
(i) on each Remittance Date from the amounts on
deposit in the Note Distribution Account an amount equal to
the fees and expenses of the Indenture Trustee and the Owner
Trustee in its individual capacity then due and owing;
provided, however, that such amounts shall not exceed $15,000
per annum without the prior written consent of the Servicer
and the Administrative Agent; and
(ii) upon receipt, amounts required to be paid by the
Servicer pursuant to Section 5.06(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 Accounts shall be
insufficient to pay in full the fees and expenses of the Indenture Trustee and
the Owner Trustee in its individual capacity then due, the Indenture Trustee and
the Owner Trustee in its individual capacity shall make demand on the Seller to
pay the amount of such insufficiency, and the Seller shall promptly pay such
amount.
(b) The Indenture Trustee may invest amounts on deposit in the Expense
Accounts in Permitted Instruments pursuant to Section 5.06 hereof, and the
Indenture Trustee shall withdraw amounts on deposit in the Expense Accounts to:
(i) pay the Indenture Trustee's and Owner Trustee's
(in its individual capacity) 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 Accounts 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 10.01.
(c) On the twelfth Remittance Date following the Closing Date, and on
each twelfth Remittance Date thereafter, the Indenture 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
Accounts, the Indenture Trustee shall remit to the Servicer as additional
servicing compensation any amounts remaining in the Expense Account.
Section 5.04 Funding Account
(a) No later than the Closing Date, the Indenture Trustee shall
establish and maintain in its trust department a trust account, which shall not
be interest-bearing, titled "BLC Funding Trust Funding" (the "Funding Account").
The Funding Account shall constitute part of the Trust Fund. The Indenture
Trustee shall, promptly upon receipt, deposit in the Funding Account and retain
therein:
(i) all amounts paid by a Purchaser in connection
with a Purchase made pursuant to Section 2.2 of the Note
Purchase Agreement; and
(ii) amounts transferred from the Note Distribution
Account pursuant to Section 5.07(b)(iv).
(b) On each Transfer Date, the Servicer shall instruct the
Indenture Trustee to withdraw from the Funding Account the amount determined
pursuant to Section 2.09(a)(ii) and pay such amount to or upon the order of the
Seller with respect to such transfer.
(c) If on the Termination Date amounts still remain in the
Funding Account, the Servicer shall instruct the Indenture Trustee to withdraw
from the Funding Account on the immediately following Remittance Date and
deposit such amounts in the Note Distribution Account.
32
Section 5.05 [Intentionally Omitted]
Section 5.06 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 held by the Indenture Trustee shall be invested by the
Indenture Trustee, as directed in writing by the Servicer, in one or more
Permitted Instruments in the name of the Indenture Trustee, bearing interest or
sold at a discount. No such investment in any Account shall mature later than
the Business Day immediately preceding the next Remittance Date; provided,
however, the Indenture 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 Indenture 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 Indenture Trustee and sufficient uninvested funds are not available to make
such disbursement, the Indenture Trustee shall cause to be sold or otherwise
converted to cash a sufficient amount of the investments in such Account. The
Indenture Trustee shall not be liable for any investment loss or other charge
resulting therefrom.
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(c) The Indenture Trustee shall not in any way be held liable by reason
of any insufficiency in any Account held by the Indenture Trustee resulting from
any investment loss on any Permitted Instrument included therein (except to the
extent that the Indenture Trustee is the obligor thereon).
(d) The Indenture Trustee shall invest and reinvest funds in the
Accounts held by the Indenture Trustee 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 Indenture Trustee shall be deposited in such Account, immediately on
receipt, and the Indenture Trustee shall notify the Servicer of any loss
resulting from such investments. The Servicer shall remit the amount of any such
loss from its own funds, without reimbursement therefor, to the Indenture
Trustee 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 5.07 Distributions.
(a) The rights of the Noteholders, Certificateholders and Hedge
Counterparties 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) By 11:00 A.M. New York time, on each Remittance Date the Indenture
Trustee shall withdraw from the Note Distribution Account an amount equal to (A)
that portion of the Available Funds received from the Servicer pursuant to
Section 5.01(a)(i), (ii) and (iv), and (B) the amounts deposited therein
pursuant to Section 5.02(b)(i), and make distributions thereof in the following
order of priority:
(i) first, to any Hedge Counterparty under any
Hedging Agreement or Hedge Transaction all amounts due other
than termination payments;
(ii) second, to the Expense Account, the amount of
unpaid fees and expenses required to be paid to the Indenture
Trustee and the Owner Trustee in its individual capacity;
(iii) third, to the Noteholders, the aggregate
Interest Distribution Amount, Program Fee, Facility Fee and
Breakage Costs due for such Remittance Date;
(iv) fourth, (A) during the Revolving Period, to the
Funding Account, the amount, if any, set forth in an Issuer
Request and to the Noteholders, as a payment of principal on
the Notes, the amount, if any, set forth in an Issuer Request
(provided, however, that such amount must be at least equal to
$1,000,000 and integral multiples of $100,000 in excess
thereof) and (B) during the Amortization Period, to the
Noteholders, as a payment of principal on the Notes until the
Outstanding Amount of the Notes is reduced to zero;
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(v) fifth, to any Hedge Counterparty under any
Hedging Agreement or Hedge Transaction, all amounts due, if
any, as Hedge Breakage Costs;
(vi) sixth, if the Subordination Percentage is less
than the Minimum Subordination Percentage, to the Spread
Account until the Subordination Percentage equals the Minimum
Subordination Percentage;
(vii) seventh, to the Paying Agent under the Trust
Agreement, for distribution to the Certificateholders, any
excess.
(c) Notwithstanding the foregoing, in connection with a
Subsequent Sale, the Indenture Trustee shall withdraw from the Note Distribution
Account the amount received pursuant to Section 2.11 and distribute such amount
to the Noteholders.
(d) All distributions made to the Noteholders will be made on a pro
rata basis among the Noteholders of record on the next preceding Record Date
based on the Percentage Interest represented by their respective Notes, and
shall be made by check or, upon request by a Noteholders, by wire transfer of
immediately available funds to the account of such Noteholders at a bank or
other entity having appropriate facilities therefor, and, in the case of wire
transfers, at the expense of such Noteholder unless such Noteholder shall own of
record Notes which have initial principal balances aggregating at least
$1,000,000.
Section 5.08 [Intentionally Omitted].
Section 5.09 Statements.
Each month, not later than 12:00 noon New York time on the
Determination Date, the Servicer shall deliver to the Administrative Agent and
the Indenture Trustee, by telecopy, for distribution to the Noteholders, the
receipt and legibility of which shall be confirmed telephonically, with hard
copy thereof and the Servicer's Monthly Computer Tape in the form attached
hereto as Exhibit L (both in hard copy and in computer tape 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), 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 Note Principal Balance as reported
in the prior Servicer's Certificate pursuant to subclause (xi)
below, or, in the case of the first Determination Date, the
original Aggregate Note 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 Unguaranteed Interests or Charged-Off Unguaranteed
Interests purchased or substituted for during the Due Period;
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(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 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 net of the FTA's Fee,
the Additional Fee and the Servicing Fee attributable to the
Unguaranteed Interest;
(vii) The delinquency and foreclosure information set
forth in the form attached hereto as Exhibit K;
(viii) The Interest Distribution Amounts for the
Remittance Date;
(ix) The amount available in the Spread Account as of
the related Record Date and the amount, if any, to be
transferred from the Spread Account to the Note Distribution
Account pursuant to Section 5.02(b)(i);
(x) The amount, if any, of principal to be
distributed to the Notes on the Remittance Date;
(xi) The Aggregate Note Principal Balance after
giving effect to the distribution to be made on the Remittance
Date;
(xii) The weighted average maturity and weighted
average SBA Loan Interest Rate;
(xiii) The Servicing Fees and amounts to be deposited
to the Expense Account;
(xiv) The amount of all payments and reimbursements
to the Servicer;
(xv) During the Revolving Period, the aggregate
Principal Balance of the Unguaranteed Interests in the SBA
Loans purchased during the prior Due Period and the amount on
deposit in the Funding Account as of the end of such Due
Period;
(xvi) The aggregate Principal Balance of the
Unguaranteed Interests in the SBA Loans removed from the Trust
during the prior Due Period;
(xvii) The following information for such
Determination Date (a) the Portfolio Yield, (b) the Default
Ratio and the Average Default Ratio, (c) Net Loss Ratio and
the Average Net Loss Ratio, (d) the Portfolio Net Loss Ratio
and the Average Portfolio Net Loss Ratio;
(xviii) The aggregate Principal Balance of all
Eligible Loans and all Ineligible Loans;
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(xix) The following information for such
Determination Date (a) the Minimum Subordination Percentage,
(b) the Subordination Percentage, (c) the amount in the Spread
Account over or under the Minimum Subordination Percentage and
(d) the amount in the Note Distribution Account over or under
the Minimum Subordination Percentage; and
(xx) Such other information as the Indenture Trustee,
the Noteholders and the Certificateholders or the
Administrative Agent may reasonably require.
The Indenture Trustee shall forward such report to the Noteholders, the
Certificateholders, the Owner Trustee and any Hedge Counterparty on the
Remittance Date, together with a separate report indicating the amount of funds
deposited in the Note Distribution Account pursuant to Section 5.01(a)(iv); and
the amounts which are reimbursable to the Servicer or the Seller (all reports
prepared by the Indenture Trustee of such withdrawals and deposits will be based
in whole or in part upon the information provided to the Indenture 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 Indenture Trustee
shall be entitled to rely upon the telecopy.
(a) Upon reasonable advance notice in writing, the Servicer will
provide to each Noteholder 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 Noteholder to comply with
applicable regulations of the Office of Thrift Supervision or other regulatory
authorities with respect to investment in the Notes.
(b) The Servicer, at its expense, shall furnish to each Noteholder,
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 Noteholder 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 Noteholder may reasonably require. The Administrative Agent shall receive
copies of any such reports or information furnished to the Noteholders.
Section 5.10 Reports of Foreclosure and Abandonment of Mortgaged
Property
Each year the Servicer shall make the reports of foreclosures and
abandonment 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 Indenture Trustee with an Officer's Certificate
certifying that such report has been filed.
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ARTICLE VI
GENERAL SERVICING PROCEDURE
Section 6.01 [Intentionally Omitted].
Section 6.02 Satisfaction of Mortgages and Collateral and Release of
SBA Files.
The Servicer shall maintain the Fidelity Bond as provided for
in Section 4.09 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, the receipt by the Servicer
of a notification that payment in full will be escrowed in a manner customary
for such purposes or the deposit into the Principal and Interest Account of the
purchase price of any SBA Loan acquired by the Seller, the Servicer or another
Person pursuant to this Agreement, or any other Basic Document, the Servicer
will immediately notify the FTA and the Indenture 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 4.03 or the Note Distribution Account
pursuant to Section 5.01 have been or will be so deposited) of a Servicing
Officer and shall request delivery to it of the Indenture Trustee's Document
File. The Multi-Party Agreement provides for release by FTA of the related SBA
Note in accordance with the terms of the Multi-Party Agreement. Upon receipt of
such certification and request, the FTA and the Indenture Trustee shall release,
within 3 Business Days, the related Indenture Trustee's Document File to the
Servicer. Expenses incurred in connection with any instrument of satisfaction or
deed of reconveyance shall be payable by the Servicer and shall not be
chargeable to the Principal and Interest Account or the Note Distribution
Account.
Subject to the Multi-Party Agreement, from time to time and as
appropriate for the servicing or foreclosure of any SBA Loan and the Indenture
Trustee shall, upon request of the Servicer and delivery to the Indenture
Trustee of a certification in the form of Exhibit I attached hereto signed by a
Servicing Officer, release the related Indenture Trustee's Document File to the
Servicer within 3 Business Days, and the Indenture Trustee shall execute such
documents as shall be necessary to the prosecution of any such proceedings. The
Multi-Party Agreement provides for release by FTA of the related SBA Note in
accordance with the terms of the Multi-Party Agreement. The Servicer shall
return the Indenture Trustee's Document File to the FTA and the Indenture
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 Indenture Trustee for deposit in the Note
Distribution 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 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 Indenture
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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 relating to such SBA Loan shall be released by the Indenture Trustee to
the Servicer.
The Indenture 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 Indenture Trustee a
certificate of a Servicing Officer requesting that such pleadings or documents
be executed by the Indenture Trustee and certifying as to the reason such
documents or pleadings are required and that the execution and delivery thereof
by the Indenture 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 Indenture
Trustee shall, upon receipt of a written request from a Servicing Officer,
execute any document provided to the Indenture 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 Indenture 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
Indenture Trustee's receipt of such certificate or documents. Such certificate
or documents shall establish to the Indenture 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 6.03 Servicing Compensation.
As compensation for its services hereunder, the Servicer shall be
entitled to retain from interest payments on the SBA Loans or withdraw from the
Principal and Interest Account (to the extent deposited therein) the Servicer's
Servicing Fee and the Premium Protection Fee and, in accordance with Section
4.04(b), any accrued but unreimbursed Premium Protection Fees and Servicing
Fees. 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 5.03(c) and late payment charges shall be
retained by or remitted to the Servicer to the extent not required to be
remitted to the Indenture Trustee for deposit in the Note Distribution 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.
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Section 6.04 Annual Statement as to Compliance.
The Servicer will deliver to the Indenture Trustee, the SBA and the
Administrative Agent on or before March 31 of each year beginning March 31,
2001, an Officer's Certificate stating that (i) the Servicer has fully complied
with the provisions of Articles IV, V, VI 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 6.05 Annual Independent Public Accountants' Servicing Report.
On or before September 30 of each year beginning September 30, 2001,
the Servicer, at its expense, shall cause one of the "big five" accounting
firms, Xxxxxxx X. Xxxxxx & Company LLP or another accounting firm acceptable to
the Administrative Agent to furnish a letter or letters to the Indenture Trustee
and the Administrative Agent 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 6.06 SBA's and Indenture Trustee's Right to Examine Servicer
Records and Audit Operations.
The SBA, the Indenture Trustee and the Administrative Agent 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. No amounts payable in respect of the foregoing shall be paid from the
Trust Fund.
Section 6.07 Reports to the Indenture Trustee; Principal and Interest
Account Statements.
Not later than 20 days after each Record Date, the Servicer shall
forward to the Indenture Trustee, the Administrative Agent 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 4.03, the aggregate of withdrawals from the Principal and
Interest Account for each category of withdrawal specified in Section 4.04 and
the aggregate amount of permitted withdrawals not made in the related Due
Period.
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Section 6.08. 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 and the Servicing Fee
for each SBA Loan. Neither the Premium Protection Fee nor the Servicing Fee
shall constitute part of the Trust Fund and Noteholders and Certificateholders
shall have no interest in, and are not entitled to receive any portion of,
either the Premium Protection Fee or the Servicing Fee. If the Seller 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.
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ARTICLE VII
REPORTS TO BE PROVIDED BY SERVICER
Section 7.01 Financial Statements.
(a) The Servicer shall furnish to the Administrative Agent (i)
promptly, copies of any material and adverse notices (including, without
limitation, notices of defaults, breaches, potential defaults or potential
breaches) given to or received from its lenders, (ii) immediately, notice of the
occurrence of any Event of Default or Servicer Termination Event or of any
situation which the Servicer reasonably expects to develop into an Event of
Default or Servicer Termination Event, (iii) copies of the Servicer's parent's
annual and quarterly financial statements reflecting any public filings made to
the Securities and Exchange Commission, provided that any annual Form 10-K
filing shall be furnished no later than 90 days after each year-end and any
quarterly Form 10-Q filing shall be furnished no later than 45 days after each
quarter end, and (iv) annual audited financial statements 90 days after each
year-end.
(b) The Servicer also agrees to make available on a reasonable basis to
any Noteholder and the Administrative Agent 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 BLC Financial Services, Inc. and any successor thereto)
and to permit any Noteholder and the Administrative Agent to inspect the
Servicer's servicing facilities during normal business hours for the purpose of
satisfying such Noteholder and the Administrative Agent that the Servicer has
the ability to service the SBA Loans in accordance with this Agreement.
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ARTICLE VIII
THE SERVICER
Section 8.01 Indemnification; Third Party Claims.
(a) The Servicer agrees to indemnify, defend, and hold the Indenture
Trustee (as such and in its individual capacity), the Owner Trustee (as such and
in its individual capacity), the SBA and each Noteholder, Certificateholder and
any Hedge Counterparty harmless from and against any and all claims, losses,
penalties, fines, forfeitures, legal fees and related costs, judgments, and any
other costs, fees and expenses that the Indenture Trustee, the Owner Trustee (as
such or in its individual capacity) the SBA, and any Noteholder,
Certificateholder or Hedge Counterparty 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. Notwithstanding the foregoing
subject to any other obligation of the Servicer to the SBA, (i) the Servicer
shall not indemnify the Indenture Trustee, the Owner Trustee, the SBA or any
Noteholder, Certificateholder or Hedge Counterparty if such acts, omissions or
alleged acts constitute fraud, gross negligence, willful misconduct or breach of
fiduciary duty by such Person and (ii) the Servicer shall not indemnify any such
Person, for any taxes, including without limitation any federal, state or local
income or franchise taxes or other taxes, imposed on or measured by income
received by such Person (or any interest or penalties with respect thereto or
arising from a failure to comply therewith) that are required to be paid by such
Person in connection herewith to any taxing authority. The Servicer shall
immediately notify the Indenture Trustee, the Owner Trustee and the SBA if a
claim is made by any party with respect to this Agreement, and the Servicer
shall assume (with the consent of the indemnified party) the defense of any such
claim and pay all expenses in connection therewith, including reasonable counsel
fees, and promptly pay, discharge and satisfy any final judgment or decree which
may be entered against the Servicer, the Indenture Trustee, the Owner Trustee
(as such or in its individual capacity), the SBA, and/or a Noteholder,
Certificateholder and any Hedge Counterparty in respect of such claim.
(b) The Seller agrees to indemnify, defend, and hold the Indenture
Trustee (as such an in its individual capacity), the Owner Trustee (as such and
in its individual capacity), the SBA and each Noteholder, Certificateholder and
any Hedge Counterparty 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 Indenture Trustee, the Owner Trustee (as such
or in its individual capacity), the SBA and any Noteholder, Certificateholder or
Hedge Counterparty may sustain in any way related to 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, the Noteholders, the Certificateholders and any Hedge
Counterparty. Notwithstanding the foregoing subject to any other obligation of
the Servicer to the SBA, (i) the Seller shall not indemnify the Indenture
Trustee, the Owner Trustee, the SBA or any Noteholder, Certificateholder or
Hedge Counterparty if such acts, omissions or alleged acts constitute fraud,
gross negligence, willful misconduct or breach of fiduciary duty by such Person,
(ii) the Seller shall not indemnify any such Person as to any losses resulting
from the credit risk of the Obligors of the SBA Loans, including without
limitation losses incurred as a result of a Defaulted Unguaranteed Interest and
43
(iii) the Seller shall not indemnify any such Person, any taxes, including
without limitation any federal, state or local income or franchise taxes or
other tax imposed on or measured by income received by such Person (or any
interest or penalties with respect thereto or arising from a failure to comply
therewith) that are required to be paid by such Person in connection herewith to
any taxing authority. The Seller shall immediately notify the Indenture Trustee,
the Owner Trustee and the SBA, if a claim is made by a third party with respect
to this Agreement, and the Seller shall assume (with the consent of the
indemnified party) the defense of any such claim and pay all expenses in
connection therewith, including reasonable counsel fees, and promptly pay,
discharge and satisfy any final judgment or decree which may be entered against
the Servicer, the Seller, the Indenture Trustee, the Owner Trustee (as such or
in its individual capacity), the SBA and/or a Noteholder, Certificateholder or
Hedge Counterparty in respect of such claim.
Section 8.02 Merger or Consolidation of the Servicer.
The Servicer will keep in full effect its existence, rights and
franchises as a corporation, bank or association and if required by applicable
law 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 except as may be otherwise required by the SBA Rules and
Regulations and the Multi-Party Agreement. The Servicer shall send notice of any
such merger, consolidation, conversion, or succession to the Indenture Trustee,
the Owner Trustee, the Administrative Agent and the SBA.
Section 8.03. 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 8.01 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 8.04. Servicer Not to Resign.
The Servicer shall not assign this Agreement nor resign from the
obligations and duties hereby imposed on it except (i) by mutual consent of the
Servicer, the SBA, the Indenture Trustee and the Majority Noteholders and the
44
Administrative Agent, or (ii) in connection with a merger, conversion or
consolidation permitted pursuant to Section 8.02 and with the prior written
consent of the SBA and the Administrative Agent (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 8.02 and with the consent of the SBA and the Administrative Agent (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 Indenture Trustee, the
SBA and the Administrative Agent, which Opinion of Counsel shall be in form and
substance acceptable to the Indenture Trustee, the Administrative Agent and the
SBA. No such resignation shall become effective until a successor approved in
writing by the SBA has assumed the Servicer's responsibilities and obligations
hereunder in accordance with Section 9.02.
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ARTICLE IX
SERVICER TERMINATION
Section 9.01 Servicer Termination Events.
(a) In case one or more of the following events (each a "Servicer
Termination Event") 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
Noteholders; or (B) any failure by the Servicer to remit to
Noteholders and Hedge Counterparties, or to the Indenture
Trustee for the benefit of the Noteholders, or to the Owner
Trustee for the benefit of the Certificateholders, any payment
required to be made under the terms of the Basic Documents
which continues unremedied for one Business Day after such
payment was required to be made; 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 the Basic Documents, which failure
continues unremedied for a period of 30 days (if such failure
can be remedied) after the earlier to occur of (A) 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 Indenture Trustee or to the
Servicer, or the Seller, as the case may be, and the Indenture
Trustee by any Noteholder, Certificateholder or Hedge
Counterparty or (B) the date a Responsible Officer of the
Servicer receives actual knowledge of such failure; 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 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; or
46
(vi) without the prior written consent of the
Administrative Agent, which consent shall not be unreasonably
withheld, the Servicer agrees or consents to, or otherwise
permits to occur, any amendment, modification, change,
supplement or recision of or to the Servicer or the Credit and
Collection Policy, in whole or in part, in any manner that
could have a material adverse effect on the SBA Loans;
provided that the consent of the Administrative Agent shall
not be required if any such amendment, modification, change,
supplement or recision was mandated by the Servicer's
regulators including, but not limited to, the SBA; or
(vii) without the prior written consent of the
Administrative Agent, a Change in Control occurs with respect
to the Servicer; or
(viii) the Servicer fails to maintain an active Loan
Guaranty Agreement with the SBA; or
(ix) the Servicer fails to provide an estimate of the
unrecoverable portion of any SBA Loan that is 180 days or
greater past due and reserve against that estimated portion of
the SBA Loan consistent with the Servicer's historical
recovery rate and/or the Credit and Collection Policy;
Notwithstanding the foregoing, a delay in or the failure of performance referred
to in Section 9.01(a)(i), (ii) or (ix) for a period of three (3) Business Days,
in each case in addition to any grace period specified in such sections, shall
not constitute a Servicer Termination Event if such delay or failure could not
have been prevented by the exercise of reasonable diligence by the Servicer and
such delay or failure was caused by an act of God or public enemy, acts of
declared or undeclared war, public disorder, rebellion, riot or sabotage,
epidemics, landslides, lightening, fire, hurricanes, tornadoes, earthquakes,
nuclear disasters or meltdowns or floods. The preceding sentence shall not
relieve the Servicer from using its best efforts to perform its obligations in a
timely manner in accordance with the terms of this Agreement.
(b) then, and in each and every such case, so long as a
Servicer Termination Event shall not have been remedied, the Majority
Noteholders, 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 Noteholders may have at law or equity including damages, injunctive
relief and specific performance, in each case, with the consent of the SBA
(which may be withheld in its sole discretion) 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
written notice from the Majority Noteholders (accompanied by the consent of the
SBA) stating that they or it intend to terminate the Servicer as a result of
such Servicer Termination Event, all authority and power of the Servicer under
this Agreement, whether with respect to the SBA Loans or otherwise, shall,
subject to Section 9.02 and the Multi-Party Agreement, pass to and be vested in
the Indenture Trustee and the Indenture 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 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
47
endorsement or assignment of the SBA Loans and related documents. The Servicer
agrees to cooperate with the Indenture Trustee in effecting the termination of
the Servicer's responsibilities and rights hereunder, including, without
limitation, the transfer to the Indenture 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 Indenture Trustee shall provide written notice to the SBA of any
Servicer Termination Event of which a Responsible Officer of the Indenture
Trustee has knowledge and any actual termination of the Servicer hereunder.
Section 9.02 Indenture Trustee to Act; Appointment of Successor
On and after the time of the Servicer's termination, or the Servicer's
receipt of notice if required by Section 9.01, or at any time if the Indenture
Trustee receives the resignation of the Servicer evidenced by an Opinion of
Counsel pursuant to Section 8.04 or the Servicer is removed as Servicer pursuant
to this Article IX, the Indenture 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 Indenture
Trustee shall not be liable for any actions of any Servicer prior to it, and
that the Indenture Trustee shall not be obligated to make advances or payments
pursuant to Sections 4.03, 4.10 or 5.03 but only to the extent the Indenture
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 Indenture Trustee. As
compensation therefor, the Indenture 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 4.04 if the Servicer
had continued to act as Servicer hereunder, together with other servicing
compensation in the form of assumption fees, late payment charges or otherwise
as provided in Sections 5.01 and 5.03 and shall be shall be entitled to the
Servicing Fee and the Premium Protection Fee.
Notwithstanding the above, the Indenture Trustee shall, if it is unable
to so act or if the SBA requests in writing to the Indenture Trustee, appoint,
or petition a court of competent jurisdiction to appoint, any established
servicing institution acceptable to the SBA including but not limited to the SBA
and, except for the SBA, satisfactory to the Administrative Agent, that has a
net worth of not less than $50,000,000, and which is an approved SBA guaranteed
lender in good standing, operating pursuant to an effective Loan Guaranty
Agreement, as the successor to the 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 Indenture Trustee and remitted directly to the
Indenture Trustee or, at the direction of the Indenture Trustee, to the
successor servicer. As compensation, any successor servicer (including, without
limitation, the Indenture Trustee) so appointed shall be entitled to receive 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 4.04 if the
Servicer had continued to act as Servicer hereunder, together with any other
servicing compensation in the form of assumption fees, late payment charges or
otherwise as provided in Section 6.03 and shall be entitled to the Servicing Fee
48
and the Premium Protection Fee. In the event the Indenture Trustee is required
to solicit bids as provided herein, the Indenture 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 Indenture 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 Indenture
Trustee shall deduct from any sum received by the Indenture 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. After such deductions, the remainder of
such sum shall be paid by the Indenture Trustee as a Servicing Fee to the SBA at
the time of such sale, transfer and assignment to the Servicer's successor. The
Indenture 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 Indenture Trustee and any successor
servicer in effecting the termination of the Servicer's servicing
responsibilities and rights hereunder and shall promptly provide the Indenture
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 Indenture 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 Indenture 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 appointment of a successor to the Servicer
hereunder shall be effective until written notice of such proposed appointment
shall have been provided by the Indenture Trustee to the SBA and each Noteholder
and Certificateholder and the Indenture Trustee, the SBA and the Administrative
Agent shall have consented thereto. The Indenture Trustee shall not resign as
servicer until a successor servicer acceptable to the SBA and the Administrative
Agent has been appointed.
Pending appointment of a successor to the Servicer hereunder, the
Indenture Trustee shall act in such capacity as hereinabove provided. In
connection with such appointment and assumption, the Indenture 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 6.03 or otherwise as provided in this Agreement. The Servicer, the
Indenture Trustee and such successor shall take such action, consistent with
this Agreement, as shall be necessary to effectuate any such succession.
Section 9.03. Waiver of Defaults.
49
The SBA may, or the Majority Noteholders may, on behalf of all the
Noteholders Certificateholders and any Hedge Counterparty and subject to the
consent of the SBA, which consent may not be unreasonably withheld, waive any
events permitting removal of the Servicer pursuant to this Article IX; provided,
however, that the Majority Noteholders or the SBA may not waive a default in
making a required distribution on a Note without the consent of the holder of
such Note. 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 9.04. Control by Majority Noteholders.
The SBA may, or the Majority Noteholders with the consent of the SBA
may, direct the time, method and place of conducting any proceeding relating to
the Trust or the Notes or for any remedy available to the Indenture Trustee or
the Owner Trustee with respect to the Trust or exercising any trust or power
conferred on the Indenture Trustee or the Owner Trustee with respect to the
Trust provided that:
(i) such direction shall not be in conflict with any
rule of law or with this Agreement;
(ii) the Indenture Trustee shall have been provided
with indemnity satisfactory to it; and
(iii) the Indenture Trustee or the Owner Trustee may
take any other action deemed proper by the Indenture Trustee
or the Owner Trustee which is not inconsistent with such
direction; provided, however, that the Indenture Trustee or
the Owner Trustee, as the case may be, need not take any
action which it determines might be unlawful, violate the
Trust Agreement, or involve it in personal liability or may be
unjustly prejudicial to the Holders not so directing.
50
ARTICLE X
TERMINATION
Section 10.01. Termination.
This Agreement shall terminate upon notice to the Indenture Trustee of
the earlier of the following events: (a) the final payment on or the disposition
or other liquidation by the Trust 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 written
consent of the Servicer and the Administrative Agent.
The Servicer may, at its option, terminate this Agreement on
any date (the "Optional Termination Date") on which the aggregate Principal
Balance of the Unguaranteed Interests is less than 10% of the Facility Limit 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 and Aggregate Note Principal Balance, (ii)
the Interest Distribution Amount, (iii) the Program Fee, (iv) any Breakage Costs
and (v) any amounts owed to any Hedge Counterparty under any Hedging Agreement
or Hedge Transaction (including Hedge Breakage Costs) (the "Termination Price").
Notice of any termination, specifying the Remittance Date upon which
the Trust Fund will terminate and that the Noteholders shall surrender their
Notes to the Indenture Trustee for payment of the final distribution and
cancellation shall be given promptly by the Servicer by letter to Noteholders
and the Administrative Agent 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 the Notes will be made upon presentation and
surrender of Notes at the office of the Indenture 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 Notes at the office of the
Indenture Trustee therein specified. The Servicer shall give such notice to the
Indenture Trustee and the SBA at the time such notice is given to Noteholders.
Any obligation of the Servicer to pay amounts due to the Indenture Trustee shall
survive the termination of this Agreement.
Section 10.02. Accounting Upon Termination of Servicer
Upon termination of the Servicer under Article IX hereof, the Servicer
shall:
(a) deliver to its successor or, if none shall yet have been appointed,
to the Indenture Trustee the funds in any Principal and Interest Account;
(b) deliver to its successor or, if none shall yet have been appointed,
to the Indenture Trustee all SBA Files and related documents and statements held
by it hereunder and an SBA Loan portfolio computer diskette;
51
(c) deliver to its successor or, if none shall yet have been appointed,
to the Indenture Trustee and to the Administrative Agent a full accounting of
all funds, including a statement showing the Monthly Payments collected by it
and a statement of monies held in trust by it for the payments or charges with
respect to the SBA Loans; and
(d) execute and deliver such instruments, consents or other documents
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.
52
ARTICLE XI
MISCELLANEOUS PROVISIONS
Section 11.01 Acts of Noteholders.
Except as otherwise specifically provided herein, whenever Noteholder
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 Noteholders if the Majority Noteholders agree to
take such action or give such consent or approval.
Section 11.02 Amendment.
(a) This Agreement may be amended from time to time by the Servicer and
the Trust with the consent of the Indenture Trustee, the SBA and the
Administrative Agent, without notice to or consent of the Noteholders,
Certificateholders or any Hedge Counterparty, 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 Indenture Trustee and the SBA, adversely
affect the interests of any Noteholder, Certificateholder or any Hedge
Counterparty 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 Note or
Certificate without the consent of the Holder of such Note or Certificate, or
change the rights or obligations of any other party hereto or any Hedge
Counterparty without the consent of such party.
(b) This Agreement may be amended from time to time by the Servicer and
the Trust with the consent of the Indenture Trustee, the SBA and the
Administrative Agent, and the consent of the Majority Noteholders, 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 Note without the consent of the Holder of such Note 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 Notes and
Certificates affected thereby.
Section 11.03. 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 Noteholders' expense on direction of the Majority Noteholders,
but only when accompanied by an Opinion of Counsel to the effect that such
53
recordation materially and beneficially affects the interests of the Noteholders
or is necessary for the administration or servicing of the SBA Loans.
Section 11.04. Duration of Agreement.
This Agreement shall continue in existence and effect until terminated
as herein provided.
SECTION 11.05. GOVERNING LAW.
EXCEPT TO THE EXTENT INCONSISTENT WITH FEDERAL LAW, IN WHICH CASE
FEDERAL LAW WILL GOVERN, 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 11.06. 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 Servicer and the Seller, Business Loan Center, Inc., 000 Xxxxxxx
Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, Attention: Xxxxxx Xxxxxxxxxxxx, or such other
addresses as may hereafter be furnished to the Noteholders in writing by the
Seller and the Servicer, (ii) in the case of the Indenture Trustee, HSBC Bank
USA, 000 Xxxxxxxx, Xxx Xxxx, Xxx Xxxx 00000, 12th Floor, Attention: Corporate
Trust Department, (iii) in the case of the Owner Trustee, First Union Trust
Company, National Association, One Xxxxxx Square, 000 Xxxx Xxxxxx, Xxxxxxxxxx,
Xxxxxxxx 00000, Attention Corporate Trust Administration (iv) in the case of the
Noteholders, as set forth in the Note Register, (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 and (vi)
in the case of the Administrative Agent, to First Union Securities, Inc., Xxx
Xxxxx Xxxxx Xxxxxx, XX0, Xxxxxxxxx, Xxxxx Xxxxxxxx 00000, Attention: Conduit
Administration. 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 Noteholders shall be effective upon mailing or personal delivery.
Section 11.07. 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.
54
Section 11.08. 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 Noteholders.
Section 11.09. 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 11.10. Successors and Assigns.
This Agreement shall inure to the benefit of and be binding upon the
Seller and the Servicer, the Indenture Trustee and the Noteholders and their
respective successors and assigns.
Section 11.11. 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.
Section 11.12. Notification to Administrative Agent.
The Indenture Trustee shall give prompt notice to the Administrative
Agent of the occurrence of any of the following events of which it has received
notice: (1) any modification or amendment to this Agreement, (2) any change of
the Indenture Trustee, the Servicer or Paying Agent, (3) any Event of Default or
Servicer Termination Event, and (4) the final payment of all the Notes. The
Servicer shall promptly deliver to the Administrative Agent a copy of each of
the Servicer's Certificates.
Section 11.13 Inconsistencies.
If any provision of this Agreement is inconsistent with any provision
in the Multi-Party Agreement, the provision of the Multi-Party Agreement shall
control.
Section 11.14 Limitation of Liability.
Notwithstanding any other provision herein or elsewhere, this Agreement
has been executed and delivered by First Union Trust Company, National
Association (the "Trust Company"), not in its individual capacity, but solely in
its capacity as Owner Trustee of the Trust, in no event shall the Trust Company
or the Owner Trustee have any liability in respect of the representations,
warranties, or obligations of the Trust hereunder or under any other Basic
Document, as to all of which recourse shall be had solely to the assets of the
Trust, and for all purposes of this Agreement and each other Basic Document, the
55
Owner Trustee and the Trust Company shall be entitled to the benefits of the
Trust Agreement.
[remainder of page intentionally blank]
56
IN WITNESS WHEREOF, the Seller, the Servicer and the Trust have caused
their names to be signed hereto by their respective officers thereunto duly
authorized as of the day and year first above written.
BUSINESS LOAN CENTER, INC.
as Seller and Servicer
By: ________________________________
Name:
Title:
BLC FUNDING TRUST,
By: First Union Trust Company,
National Association, not in its
individual capacity but solely as
Owner Trustee on behalf of the
Trust
By: ________________________________
Name:
Title:
57
Accepted and Agreed to:
HSBC BANK USA, not in its individual
capacity, but solely as Indenture
Trustee
By:___________________________________
Name:
Title:
58
STATE OF ____________ )
: ss.:
COUNTY OF ____________ )
On the ___th day of December, 1999 before me, a Notary Public
in and for said State, personally appeared __________________ known to me to be
an officer of First Union Trust Company, National Association, 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 ____th day of December, 1999 before me, a Notary Public
in and for the State of ________, personally appeared ______________ known to me
to be the ________________________ of Business Loan Center, Inc., one of the
corporations that executed the within instrument 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 Indenture Trustee or, with respect to 1
below, the FTA:
1. The original SBA Note, endorsed by means of an allonge as
follows: "Pay to the order of First Union Trust Company, National
Association, and its successors and assigns, not in its
individual capacity but solely as Owner Trustee under that
certain Trust Agreement dated as of November 1, 1999 for the
benefit of the Certificateholders and the United States Small
Business Administration, 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 (such allonge shall bear a legend
stating "HSBC Bank USA, as Indenture Trustee, has a security
interest in the Unguaranteed Interest in this 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: "HSBC Bank USA, ("Assignee") its successors
and assigns, as Indenture Trustee under the Indenture dated as of
November 1, 1999 relating to BLC Funding Trust, subject to
Multi-Party Agreement dated as of November 1, 1999" 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 Indenture 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);
A-1
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 Policy
Insurance Record 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;
6. With respect to these SBA Loans secured by other items of
Collateral, the original or certified copy of all filed UCC
financing statements 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 Indenture 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 Indenture Trustee to the Servicer and any
successor servicer and will permit the Indenture 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 Indenture 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 will be in the nature
of protective notice filings rather than a true financing
statement.
A-2
EXHIBIT B
[INTENTIONALLY OMITTED]
B-1
EXHIBIT C
PRINCIPAL AND INTEREST ACCOUNT LETTER AGREEMENT
(date)
To:
(the "Depository")
As "Servicer" under the Sale and Servicing Agreement, dated as
of November 1, 1999, relating to the BLC Funding Trust Notes (the "Agreement"),
we hereby authorize and request you to establish an account, as a Principal and
Interest Account pursuant to Section 4.03 of the Agreement, to be designated as
"Business Loan Center, Inc., as Servicer, in trust for the registered holders of
BLC Funding Trust Notes." 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.
BUSINESS LOAN CENTER, INC.
By:___________________________________
Name:
Title:
C-1
The undersigned, as Depository, hereby certifies that the
above described account has been established under Account Number _____________,
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.
____________________________
(Name of Depository)
By:________________________
Name:
Title:
X-0
XXXXXXX X
[Xxxxxxxxxxxxx Xxxxxxx]
X-0
EXHIBIT E
[INTENTIONALLY OMITTED]
E-1
EXHIBIT F
FORM OF INITIAL CERTIFICATION
____________,
[Seller]
[Servicer]
Re: Sale and Servicing Agreement BLC
Funding Trust Notes, dated
as of November 1, 1999 between BLC
Funding Trust and Business
Loan Center Inc., as Seller and Servicer
Gentlemen:
In accordance with Section 2.05 of the above-captioned Sale
and Servicing Agreement (the "Agreement"), the undersigned, as Indenture
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 (other than the
original SBA Notes relating to the SBA Loans, which are to be delivered to the
FTA, for which the Indenture Trustee has received an acknowledgement of receipt
from the FTA) with respect to each SBA Loan listed in the SBA Loan Schedule and
the documents contained therein appear to bear original signatures. Capitalized
but undefined terms have the meanings set forth in the Sale and Servicing
Agreement.
The Indenture Trustee has made no independent examination of
any such documents beyond the review specifically required in the
above-referenced Sale and Servicing Agreement.
F-1
The Indenture 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.
HSBC BANK USA,
as Indenture Trustee
By:______________________________
Name:
Title: Assistant Vice President
F-2
EXHIBIT F-1
FORM OF FINAL CERTIFICATION
[date]
[Servicer]
[Seller]
Re: Sale and Servicing Agreement dated as of November 1, 1999 between
BLC Funding Trust and Business Loan Center, Inc., as Seller and
Servicer, relating to BLC Funding Trust Notes
_________________________________________________________________
Gentlemen:
In accordance with Section 2.05 of the above-captioned Sale
and Servicing Agreement, the undersigned, as Indenture 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 Sale 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 Indenture Trustee has made no
independent examination or inquiry of such documents beyond the review
specifically required in the above-referenced Sale and Servicing Agreement.
The Indenture Trustee makes no representations as to: (i) the
validity, legality, enforceability or genuineness of any such documents
contained in each or any of the SBA 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.
HSBC BANK USA,
as Indenture Trustee
By:____________________________________
Name:
Title: Assistant Vice President
F-1-1
EXHIBIT G
[INTENTIONALLY OMITTED]
G-1
EXHIBIT H
SBA LOAN SCHEDULE
[TO BE PROVIDED BY BLC]
H-1
EXHIBIT I
REQUEST FOR RELEASE OF DOCUMENTS
To: HSBC Bank USA
Corporate Trust Administration
000 Xxxxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
Re: Sale and Servicing Agreement relating to BLC
Funding Trust Notes, dated as of November 1, 1999
In connection with the administration of the pool of SBA Loans
held by you, we request the release, and acknowledge receipt, of the (Indenture
Trustee's SBA File/[specify document]) for the SBA Loan described below, for the
reason indicated.
Obligor's Name, Address & Zip Code:
Loan Number:
Reason for Requesting Documents (check one)
____ 1. SBA Loan Paid in Full
(Servicer hereby certifies that all amounts
received in connection therewith will be credited to
the Principal and Interest Account and will be
remitted to the Indenture Trustee for deposit into
the Note Distribution Account pursuant to the Sale
and Servicing Agreement upon receipt of funds from an
attorney's escrow account or a title insurance
company account.)
____ 2. SBA Loan Liquidated
(Servicer hereby certifies that all proceeds of
foreclosure, insurance or other liquidation will be
received and credited to the Principal and Interest
Account and will be remitted to the Indenture Trustee
for deposit into the Note Distribution Account
pursuant to the Sale and Servicing Agreement upon
receipt of funds from an attorney's escrow account or
a title insurance company account.)
____ 3. SBA Loan in Foreclosure
_____4. SBA Loan Repurchased Pursuant to Section 10.01
of the Sale and Servicing Agreement.
I-1
_____5. SBA Loan Repurchased or Substituted Pursuant to Article II or
III of the Sale 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 Indenture Trustee for deposit into the Note
Distribution Account pursuant to the Sale and Servicing
Agreement.)
____6. Collateral Being Released Pursuant to Section 4.01(f) of the
Sale 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
Indenture Trustee's Document 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.
BUSINESS LOAN CENTER, INC.,
As Servicer
By:____________________________
Name:
Date:
Documents returned to Indenture Trustee:
HSBC Bank USA
Indenture Trustee
By:
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) ________
2. Servicing 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 AND FORECLOSURE INFORMATION
Total
Ranges Total Gross Unguaranteed
Series (in days) Acct Loan Amount Interest Amount Ungtd Pct
________________________________________________________________________________
1 TO 30 Days
31 TO 60 Days
61 TO 90 Days
91 TO 180 Days
181 to 360 Days
361 and Over
Forclosure
REO Property
Total Delinquency
Outstanding by
Category
K-1
EXHIBIT L
SERVICER'S MONTHLY COMPUTER TAPE FORMAT
The computer tape to be delivered to the Indenture Trustee
pursuant to Section 5.09 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 the holder of the Guaranteed Interest, the
Premium Protection Fee, the FTA's Fee and if applicable,
the Additional Fee); (b) interest payable to the holder
of the Guaranteed Interest and FTA's Fee; (c) principal
received; (d) Curtailments received; and (e) Principal
Prepayments received.
5. The SBA Loan principal balance at the beginning and end
of the period.
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 a Charged-Off SBA Loan or
otherwise determined to be uncollectible, a "Foreclosure
Flag" noting that the SBA Loan is the subject of
foreclosure proceedings.
9. For any SBA Loan that is not a Charged-Off SBA Loan or
otherwise determined to be uncollectible, an "REO Flag"
noting that the Mortgaged Property or Repossessed
Collateral has been acquired.
L-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
Indenture Trustee.
L-2
BUSINESS LOAN CENTER, INC.
SERVICER'S AGREEMENT
Determination Date
Reporting Date
Payment Date
In accordance with Section 5.09 of the Sale and Servicing Agreement dated as of
October 1, 1999, Business Loan Center, Inc. reports the following information
pertaining to VFCC
Facility Balance
Beginning Balance 0
New Advance Purchases 0
Principal Paydowns 0
Collection Period Ending Balance 0
Yield Calculation
Days: From: To: Rate Days Balance Interest
0/0/00 0/0/00 0 #Value! 0 #Value!
0/0/00 0/0/00 0 #Value! 0 #Value!
0/0/00 0/0/00 0 #Value! 0 #Value!
0/0/00 0/0/00 0 #Value! 0 #Value!
0/0/00 0/0/00 0 #Value! 0 #Value!
Total: #Value!
COF Adjustment: 0
Total: #Value!
Pool Balance
Principal - Recap of Servicer's Activity
A. Prior Collection Period Ending Balance 0
New Pool Advance Purchases: 0
Principal Payments Collected: 0
B. Prepayments (term loans)
No. of loans 0
Dollar Amount 0
C. Early Amortization
No. of loans 0
Dollar Amount 0
D. Current Collection Period Ending Balance 0
Interest
Interest Payments for the Current Collection Period 0
Servicer Advances
A. Due to Projected Billing Shortfall 0
B. Due to Delinquent Payments Advances 0
C. Other Advances 0
Total Services Advances: 0
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ACCOUNT ACTIVITY
Principal Interest
Collection Collection
Account Account
No. 000000000 No.00000000
Beginning Balance
Deposit of Collections and Other Amounts
Collections during the Collections Period
I scheduled payments 0 0
II recoveries on defaulted loans 0 0
III unscheduled principal payments 0 0
IV prepayments 0 0
V casualty prepayments 0 0
VI servicer advances 0 0
VII additional amounts - transfer from (to) 0 0
Less:Excluded Amounts (taxes, late fees, etc.) 0 0
Less:Advance Payments purchased during
Collection Period 0 0
Less:Principal paydowns to purchase facility 0 0
Add: Proceeds from the sale of assets (residuals) 0 0
Add: Advance Payments received in prior periods
due in current period 0 0
Add: Investment earnings (Interest on intra-
month account balances) 0 0
Sum of Principal and Interest accounts 0 0
Sum of Month's activity
Amount available for Distribution
Total in all accounts 0
L-4
EARLY AMORTIZATION REPORT Report Date 10/25/1999
Eligible Loans
--------------
I. Aggregate Outstanding Loan Balance, beg. of
Collection Period 0
II. Collections 0
III. Delinquent Loans 0
IV. Charged-Off Loans 0
V. Aggregate Outstanding Loan Balance, end of __________
Collection Period 0
__________
VI. Number of Loans in Pool, end of Collection Period 0
Default Ratio
-------------
I. Aggregate Principal balance of Defaulted
Unguaranteed Interests for Due Period 0
II. Aggregate Principal balance of all Unguaranteed
Interests for Due Period 0
III. I/II = Default Ratio
IV. Default Ratio for prior Due Period 0
V. Default Ratio for month before prior Due Period 0
VI. Average Default Ratio must be less than
or equal to 4.0% 0
Net Loss Ratio
----------------
I. Aggregate Principal balance of Charged-Off
Unguaranteed Interests for Due Period 0
II. Aggregate Principal balance of all Unguaranteed
Interests for Due Period 0
III. I/II = Net Loss Ratio
IV. Net Loss Ratio for prior Due Period 0
V. Net Loss Ratio for month before prior Due Period 0
VI. Average Net Loss Ratio must be less than
or equal to 2.0% 0
Portfolio Net Loss Ratio
--------------------------
I. Aggregate Principal balance of Charged-Off
Unguaranteed Interests in Servicer's 0
Portfolio for Due Period 0
II. Aggregate Principal balance of all Unguaranteed
Interests in Servicer's Portfolio for Due Period 0
III. I/II = Portfolio Net Loss Ratio
IV. Portfolio Net Loss Ratio for prior Due Period 0
V. Portfolio Net Loss Ratio for month before prior Due Period 0
VI. Average Portfolio Net Loss Ratio must be less than
or equal to 2.0% 0
Portfolio Yield
--------------------------
X. Xxxxx Collections on SBA Loans
Interest payable to Registered Holders + Premium 0
II. Protection Fee + FTA's Fee + Additional Fee + 0
III. Average Aggregate Principal balance of all Unguaranteed
Interests for Due Period 0
IV. (I/II)/III = Portfolio Yield. Must be greater than
or equal to 4.0%
Hedging Requirement
-------------------------- ----------
I. Hedging 75% with respect to Advances 10/25/99
II. Required Notional Amount 0
III. Advances 0
IV. II/III must be greater than 75%
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CONCENTRATION CRITERIA
Geographic Loan Value % Limit Compliance
CT 0 35%
FL 0 35%
MA 0 35%
MD 0 35%
MI 0 35%
NC 0 35%
NH 0 35%
NJ 0 35%
NY 0 35%
OH 0 35%
PA 0 35%
RI 0 35%
TN 0 35%
VA 0 35%
WI 0 35%
WV 0 35%
Total 0
Industry
Largest SIC Code
(must be less
than 30%) 0 0 30%
Single Unguaranteed
Interest* 0 NA $1,000,000
Largest Five
Unguaranteed
Interests* 0 NA $5,000,000
Unguaranteed
Interests risk
rated 3W 0 0 20%
*Applicable for the
first six months
only
L-6
FACILITY AGING REPORT
Current 0
1-30 Days Past Due 0
31-60 Days Past Due 0
61-90 Days Past Due 0
91-120 Days Past Due 0
121-180 Days Past Due 0
181-360 Days Past Due 0
361 + Days Past Due 0
Aggregate Outstanding Loan Balance 0
SUBSTITUTION CALCULATION
Substitutions for defaulted and charged-off unguaranteed interests
shall not exceed 15% of the Facility Limit.
*List Loan (including all items listed on loan list) to be released
from Collateral and Loan to be added to Collateral
L-7
WATERFALL SCHEDULE
Payments on Payment Date (During Revolving Period)
1 All amounts due other than termination payments to the
Hedge Counterparty 0
2 Amount of unpaid fees and expenses to the Expense Account
required to be paid to the Indenture Trustee and the
Owner Trustee 0
3 Aggregate Interest Distribution Amount to the Noteholders,
Facility Fee and Breakage Costs due for such Remittance Date 0
4 Any amount to the Funding Account set forth in an Issuer
Request and to the Noteholders as a payment of principal
on the notes 0
5 All amounts due as termination payments to any counterparty
under the Master Hedge Agreement 0
6 Any amount to the Spread Account to make Subordination
Percentage no less than the Minimum Subordination Percentage 0
7 Any excess to the Owner Trustee for distribution to the
Certificateholders 0
Payments on Payment Date (During Amortization Period)
1 All amounts due other than termination payments to the
Hedge Counterparty 0
2 Amount of unpaid fees and expenses to the Expense Account
required to be paid to the Indenture Trustee and the
Owner Trustee 0
3 Aggregate Interest Distribution Amount to the Noteholders,
Facility Fee and Breakage Costs due for such Remittance Date 0
4 Payment of principal to the Noteholders on the Notes until
the Outstanding Amount of the Notes is reduced to Zero 0
5 All amounts due as termination payments to any counterparty
under the Master Hedge Agreement 0
6 Any amount to the Spread Account to make Subordination
Percentage no less than the Minimum Subordination Percentage 0
7 Any excess to the Owner Trustee for distribution to the
Certificateholders
L-8
CASH RECONCILIATION REPORT
Xxxxxxxx
Total of Billed Principal 0
Total of Billed Interest 0
Total Billed Interest and Principal 0
Collections
Total Collections on Principal 0
Total Collections on Interest 0
Total Collections on Other 0
Total Collections 0
Difference in Collections and Xxxxxxxx* 0
* Please provide explanation reconciling difference in xxxxxxxx and actual
collections.
L-9
Exhibit M
MULTI-PARTY AGREEMENT
AMONG BUSINESS LOAN CENTER, INC., BLC FUNDING TRUST,
HSBC BANK USA, XXXXXX SERVICES CORP. AND SBA
This Multi-Party Agreement is entered into as of November 1, 1999 (this
"Agreement"), by and among Business Loan Center, Inc. (the "SBA Lender"), BLC
Funding Trust (the "Trust"), by First Union Trust Company, National Association,
not in its individual capacity but solely as Owner Trustee (the "Owner
Trustee"), HSBC Bank USA, not in its individual capacity but solely as Indenture
Trustee (the "Indenture 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 (as defined herein) 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 (as
amended, supplemented or replaced from time to time, the "SBA Agreements").
Because SBA guarantees a portion of each SBA Lender Loan (as defined
herein), SBA has an interest in the SBA Lender Loans, the underlying collateral,
and the Loan Documents (as defined herein).
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 all SBA Lender Loans. SBA has caused FTA to issue a certificate to
M-1
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 Trust have entered into a Sale and Servicing
Agreement, dated as of November 1, 1999 (the "Sale and Servicing Agreement"),
under which the SBA Lender will transfer all its right, title and interest in
and to the Unguaranteed Interests transferred on each Transfer Date and all
other assets included or to be included in the Trust Fund (as defined below) to
the Trust, a Delaware business trust formed pursuant to a Trust Agreement dated
November 1, 1999 (the "Trust Agreement") between SBA Lender and the Owner
Trustee. The Trust will issue notes (the "Funding Notes") pursuant to an
Indenture dated as of November 1, 1999 (the "Indenture") between the Trust and
the Indenture Trustee. The Trust will issue certificates (the "Certificates")
pursuant to the Trust Agreement evidencing a beneficial ownership interest in
the Trust and the right to receive the portion of the Unguaranteed Interest in
the SBA Lender Loans not paid to the Notes.
13 C.F.R. Section 120.424 requires the SBA Lender to obtain SBA's
written consent before it securitizes the Unguaranteed Interests.
The SBA Lender, the Trust, the Indenture Trustee and SBA want
to assure consistency between SBA Rules and Regulations, the Sale and Servicing
Agreement, the Trust Agreement, the Indenture and the Note Purchase Agreement
and clarify the respective rights of the parties.
M-2
(..continued)
The SBA Lender, the Trust (on behalf of itself and the
Certificateholders), the Indenture Trustee (on behalf of itself and the holders
of Funding Notes), FTA and SBA agree as follows:
1. Definitions. In this Agreement, the following terms have the
following meanings:
a. "Certificates": as defined in Appendix A to the Sale and
Servicing Agreement.
b. "Conveyed Interest": the Unguaranteed Interest plus the
amount by which the interest collected by the Servicer on
the principal portion of the Guaranteed Interest of each
SBA Lender Loan exceeds the sum of (a) the interest
payable to the Guaranteed Holder, (b) the fees payable to
FTA, (c) the Servicing Fee, (d) the Premium Protection
Fee and (e) with respect to Additional Fee SBA Loans, the
Additional Fee (each as defined in Appendix A to the Sale
and Servicing Agreement).
c. "Event of Default": as defined in Appendix A to the Sale
and Servicing Agreement.
d. "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.
e. "Loss Rate": At any time of determination, the aggregate
principal amount of the SBA Lender's 7(a) Loans
M-3
determined uncollectable by SBA for the most recent
10-year period, excluding SBA's current fiscal year
activity, divided by the aggregate original principal
amount of 7(a) Loans disbursed by the SBA Lender during
the period. SBA will determine the Loss Rate in effect on
the date of the parties' execution and delivery of this
Agreement. Thereafter, solely for purposes of the
transactions contemplated by the Transaction Documents,
SBA Lender will be responsible for calculating the Loss
Rate in effect at any time, subject to SBA's
determination that the Loss Rate is different than that
calculated by SBA Lender. SBA Lender will deliver to SBA
on each anniversary of the Closing Date, and at any other
time SBA requests, a certificate showing its calculation
of the Loss Rate then in effect. SBA will work with SBA
Lender to verify the accuracy of the data used to make
the Loss Rate calculation.
f. "Notes": the notes evidencing the SBA Lender Loans.
g. "Premium Protection Fee": 0.60% per annum of the then
outstanding principal balance of the Guaranteed Interest.
h. "pro rata": according to the ratio of (i) the Guaranteed
Interest's percentage of the principal portion of the
entire SBA Lender Loan to (ii) the Unguaranteed
Interest's percentage of the principal portion of the
entire SBA Lender Loan.
i. "SBA Lender Loan Debtor": any person or entity, including
a guarantor, obligated under an SBA Lender Loan.
M-4
j. "SBA Lender Loans": the loans listed on Exhibit H, as
amended or supplemented from time to time, of the Sale
and Servicing Agreement (as defined in Appendix A to the
Sale and Servicing Agreement).
k. "SBA Rules and Regulations": the Small Business Act, as
amended, the SBA Agreements, all legislation binding on
SBA with respect to financial transactions, all rules and
regulations promulgated from time to time under the Small
Business Act, all Participation Agreements relating to
any SBA Lender Loan and all SBA Standard Operating
Procedures and official Notices as from time to time in
effect.
l. "Servicer": the "Servicer" (as defined in Appendix A to
the Sale and Servicing Agreement) and, if applicable, any
Subservicer (as defined in Appendix A to the Sale and
Servicing Agreement).
m. "Servicing Fee": 0.40% per annum of the then outstanding
principal balance of the entire SBA Lender Loan.
n. "Transaction Documents": the Trust Agreement, the Sale
and Servicing Agreement, the Indenture and the Note
Purchase Agreement, each as amended in accordance with
its terms and as permitted hereunder.
o. "Transfer Date": as defined in Appendix A to the Sale and
Servicing Agreement.
M-5
p. "Trust Fund": as defined in Appendix A to the Sale and
Servicing Agreement.
q. "Unguaranteed Interest": the portion of each SBA Lender
Loan not guaranteed by SBA.
r. "7(a) Loans": as defined in 13 C.F.R. ss. 120.420(a).
2. SBA's Guaranteed Interest. The SBA Lender, the Trust and the
Indenture Trustee (on behalf of itself and the holders of the Funding Notes)
acknowledge SBA's interest in the Guaranteed Interest in all SBA Lender Loans,
together with the collateral securing the SBA Lender Loans and the Loan
Documents, and in all payments and other recoveries with respect to the SBA
Lender Loans and the collateral or any other source, including insurance
proceeds and recoveries from guarantees, and agree to recognize and uphold SBA's
interests under SBA Rules and Regulations. The SBA Lender, the Trust and the
Indenture 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, the Trust and the Indenture Trustee will
remit funds received in respect of the Guaranteed Interest in the SBA Lender
Loans to FTA or SBA, as appropriate. Any party who receives payments on any SBA
Lender Loan will remit all amounts required to be remitted to FTA pursuant to
any Participation Agreement with respect to such SBA Lender Loan prior to making
any other distributions.
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 the Unguaranteed Interest's pro
rata share of any collateral that secures any SBA Lender Loan or in any Loan
Document or any recovery from insurance, guarantees or any other source. The
M-6
collateral for an SBA Lender Loan secures the Guaranteed Interest and the
Unguaranteed Interest pari passu and all recoveries from insurance, guarantees
or any other source will be shared pro rata.
4. SBA Consent to Securitization of Unguaranteed Interests and
Transaction Documents.
(a) (i) Subject to the conditions set forth in Section 4(a)(ii),
SBA consents to the securitization of Unguaranteed Interests by SBA Lender as a
securitization involving multiple lenders pursuant to a series of transactions
entered into by other SBA lenders which are substantially similar to those
contemplated by the Transaction Documents. In connection with its consent to the
SBA Lender's securitization of Unguaranteed Interests, SBA consents to the SBA
Lender's execution and performance of the Transaction Documents and the
transactions contemplated therein, including, but not limited to, the sales of
Funding Notes.
(ii) SBA's consent to the SBA Lender's securitization of
Unguaranteed Interests is subject to the following: (A) SBA Lender must be in
compliance with the provisions of 13 C.F.R. ss. 120.425(a) on each Transfer
Date; (B) the provisions of 13 C.F.R. ss. 120.425 (c) will apply; (C) (I) SBA
Lender may never receive more than the amount set forth in Section 2.09(a)(ii)
of the Sale and Servicing Agreement in connection with the transfer of any
Unguaranteed Interest; provided that SBA may modify this requirement in
connection with transfers of Unguaranteed Interests in 7(a) Loans located in a
region affected by a severe economic downturn if SBA determines that failure to
modify this requirement might exacerbate the adverse economic conditions in the
region; (II) transfers to the Certificate Account and distributions to the
Paying Agent (both as defined in Appendix A to the Sale and Servicing Agreement)
M-7
for distribution to Certificateholders will be restricted as set forth in
Sections 5.02(b)(ii) and 5.07(b) of the Sale and Servicing Agreement; and (III)
compliance with the provisions of Section 5 of this Agreement. If any of the
conditions set forth in clause (ii)(C) are not complied with, the provisions set
forth in 13 C.F.R. ss. 120.426 with respect to transfer of a subordinated
tranche prior to the termination of the holding period will apply.
(b) Notwithstanding anything to the contrary contained in the
Transaction Documents, (i) the Indenture Trustee may not have a security
interest in and waives any rights it may have in and to, including rights of
set-off, recoupment and banker's liens, any account of the SBA Lender into which
payments from SBA Lender Loan Debtors are received (other than the Principal and
Interest Account, as defined in Appendix A to the Sale and Servicing Agreement,
provided, that Indenture Trustee will have no lien on or other rights to or
claim on any amounts in the Principal and Interest Account which were not
permitted to be deposited in the Principal and Interest Account) or any funds or
property in the possession of FTA, (ii) a default by the SBA Lender or the Trust
under an agreement other than the Transaction Documents or any default by an
entity other than the SBA Lender or the Trust under any agreement may not be an
event of default under the Transaction Documents, (iii) the Unguaranteed
Interests may not secure any obligations other than the obligations of the
Issuer under the Indenture and the other Basic Documents (as defined in the Sale
and Servicing Agreement), (iv) except for payments made to a Servicer after
termination of SBA Lender as servicer, all payments made by SBA Lender Loan
Debtors will be made directly to SBA Lender, (v) all assignments or
endorsements, if any, to the Trust of any interests in SBA Lender Loans, any
Note, any collateral for SBA Lender Loans, any Loan Documents or any other
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documents or rights relating to SBA Lender Loans will indicate that the
assignment is for the benefit of SBA and the Trust as their interests appear
under this Agreement, (vi) all assignments or endorsements to Indenture Trustee
of any interest in SBA Lender Loans, any Notes, any collateral for SBA Lender
Loans, any Loan Documents or any other documents or rights relating to SBA
Lender Loans will be collateral assignments and not absolute assignments and
will be endorsed as set forth in Section 8(f); as used in this Section and in
Section 9(a), the term "assignment" refers to a document executed and delivered
to Indenture Trustee primarily for the purpose of providing Indenture Trustee a
document which may be recorded in the applicable public records, rather than a
document intended to evidence the grant of a security interest, and (vii)
Indenture Trustee will have no claim, by means of a security interest or
otherwise, to the Servicing Fee, the Premium Protection Fee or any amount
required to be forwarded to FTA pursuant to any Participation Agreement.
(c) Unless it becomes the Servicer, under no circumstances,
including an Event of Default, may Indenture Trustee take any action regarding
any SBA Lender Loan (including servicing), any SBA Lender Loan Debtor, any Note,
any collateral securing any SBA Lender Loan or any Loan Document without SBA's
prior written consent, including any action pursuant to any power of attorney
granted to it by SBA Lender or the Trust except for the limited purpose of
executing and filing or recording financing statements under the Uniform
Commercial Code or other documents required to perfect or evidence the grant of
a security interest or lien to Indenture Trustee to the extent required by the
Indenture and not executed by the SBA Lender or Owner Trustee. Other than its
remedy of foreclosure under Section 9-504 of the Uniform Commercial Code (or any
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successor section, including any change in numbering of sections) Indenture
Trustee may not, without SBA's prior written consent, exercise any remedies it
may have upon the occurrence of an Event of Default against the SBA Lender
Loans, any Note any collateral for the SBA Lender Loans or the SBA Lender Loan
Debtors or under any Loan Document, whether such remedies arise under the
Transaction Documents, the Uniform Commercial Code, any other applicable law or
otherwise. Indenture Trustee must give 10 days written notice to SBA of any
action to foreclose, but no consent other than SBA's and the Administrative
Agent's (as defined in the Transaction Documents) consent to the proposed
transferee is required to foreclose. Indenture Trustee may not transfer any
interest in any SBA Lender Loan in a foreclosure sale or otherwise without SBA's
prior written consent to the proposed transferee. The proposed transferee must
be an SBA participating lender, operating under a current 750 Agreement, and
must be acceptable to SBA in its sole discretion. Upon consenting to any
proposed transfer, SBA will give FTA prompt written notice of its consent. Any
transferee must agree to be bound by this Agreement and must enter into any
other agreement SBA requires in connection with transfer of any interests in any
SBA Lender Loan.
(d) No Unguaranteed Interest in any SBA Lender Loan with respect to
which the Guaranteed Interest has not been sold in the secondary market may be
sold to the Trust.
5. SBA Lender or Wholly-Owned Subsidiary to Retain Certificates. The
SBA Lender, or its wholly owned subsidiary, must retain the legal and beneficial
interest in the Certificates for 6 years after the date of issue of the
Certificates. The Certificates will bear a legend indicating that they may not
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be transferred without SBA's prior written consent prior to 6 years after the
date of issuance. Upon initial issuance, the Certificates will be issued to and
registered in the name of BLC Funding Corp., a wholly owned subsidiary of the
SBA Lender ("Funding"), which will retain legal and beneficial ownership of the
Certificates until it receives SBA's written consent to transfer the
Certificates or until after the 6th anniversary of the date of issuance. The SBA
Lender agrees that unless it receives the prior written consent of SBA (i)
Funding will remain a wholly owned subsidiary of SBA Lender and (ii) Funding
will not sell, pledge, transfer, assign, sell participations in or otherwise
convey, in whole or in part, the Certificates prior to the 6th anniversary of
the date of issuance.
6. Premium Protection Fee and Servicing Fee. The SBA Lender, or if SBA
Lender is not the Servicer, the Servicer, will retain the Premium Protection Fee
and the Servicing Fee with respect to all the SBA Lender Loans and will deduct
the Servicing Fee and the Premium Protection Fee prior to making any
distributions other than remitting amounts required to be remitted to FTA
pursuant to any Participation Agreement.
7. Covenants of SBA Lender. SBA Lender hereby covenants to SBA that so
long as SBA Lender is the Servicer, all payments received by SBA Lender from or
on behalf of SBA Lender Loan Debtors with respect to the SBA Lender Loans will
be deposited by SBA Lender into a general account of SBA Lender prior to
depositing the Unguaranteed Interest in such payments in the Principal and
Interest Account.
8. FTA To Hold Original SBA Lender Notes. (a) Prior to each Transfer
Date (as defined in Appendix A to the Sale and Servicing Agreement), SBA Lender
will deliver to FTA all original Notes evidencing the SBA Lender Loans
transferred to the Trust and pledged by the Trust to Indenture Trustee on that
Transfer Date, accompanied by a receipt in the form of Exhibit 1 completed for
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each Note. Within two business days after receiving a Note accompanied by a
completed receipt, FTA will send to the Indenture Trustee by overnight mail (at
the expense of SBA Lender) the original executed receipt for the Note and will
send a copy of the receipt to SBA Lender by regular mail. If any Note is
amended, SBA Lender will deliver the original executed amendment to FTA within
two business days after the SBA Lender Loan Debtor delivers the executed
amendment to SBA Lender. Any amendment will indicate on its face the applicable
SBA loan number.
(b) The Notes are being delivered to FTA for the purpose of
protecting SBA's, the Noteholder's and the Certificateholder's respective
interests. SBA appoints FTA as its fiscal and transfer agent and its agent to
hold the Notes and FTA will hold the Notes as agent for SBA. Indenture Trustee
hereby notifies FTA that it has a security interest in each Note SBA Lender
delivers to FTA pursuant to this Agreement. FTA will hold the Notes as bailee
for the Trust for the purpose of accepting delivery of the Notes and as bailee
for Indenture Trustee for the purpose of perfecting Indenture Trustee's security
interest in the Notes. FTA does not and will not during the term of this
Agreement have any interest in the SBA Lender Loans or the related Loan
Documents. The Notes may not be endorsed, but may bear a legend on the first
page stating HSBC Bank USA, as Indenture Trustee, has a security interest in an
interest in the Unguaranteed Interest in this Note."
(c) Upon reasonable notice to FTA, SBA, Owner Trustee and Indenture
Trustee will have the right to inspect the original Notes at FTA's office during
normal business hours.
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(d) Within three business days following the later of receipt from
SBA Lender of a certificate in the form of Exhibit 2 and a written consent to
release from Indenture Trustee, FTA will release to SBA Lender the Note
identified in the certificate. The Servicer will return the Notes to FTA in
accordance with the appropriate provisions of the Sale and Servicing Agreement.
When the Notes are returned to FTA, accompanied by a receipt completed for each
applicable Note in the form of Exhibit 1 hereto, FTA will issue a receipt in the
form of Exhibit 1 hereto in accordance with the instructions of Exhibit 1
hereto.
(e) Except as set forth in Section 8(d), FTA will not release any
Note to Indenture Trustee, Owner Trustee, SBA Lender or any other person without
SBA's prior consent or instructions, and, in the case of release of any Note to
any person other than SBA, Indenture Trustee's prior written consent. SBA will
have no obligation to notify or obtain the consent of Indenture Trustee or any
other person in connection with a release of any Note to SBA. Upon one business
day's prior written notice to Indenture Trustee, SBA may deliver any Note
released to it pursuant to this Agreement to any person for the purpose of
servicing, including liquidating any collateral. Notice to Indenture Trustee
will be effective upon SBA's sending it to Indenture Trustee by facsimile: (212)
658-6425, Attn: Corporate Trust Administration (or such other facsimile number
or person to whose attention such notice should be sent as Indenture Trustee may
designate by prior written notice to SBA pursuant to the notice provisions of
this Agreement; provided that SBA has confirmed in writing to Indenture Trustee
that SBA has received such notice). SBA will not deliver any Note released to it
M-13
by FTA pursuant to this Agreement to any person for any purpose other than
servicing, including liquidating any collateral, without the prior written
consent of Indenture Trustee, which consent may not be unreasonably withheld.
SBA will submit any request for Indenture Trustee's consent by sending such
request by the same method as set forth above for delivery of notice of delivery
of a Note for servicing and Indenture Trustee will respond to SBA's request
within five business days. If Indenture Trustee fails to respond within five
business days, Indenture Trustee will be deemed to have consented to such
delivery. Indenture Trustee hereby notifies SBA that Indenture Trustee has a
security interest in the Unguaranteed Interest in all Notes SBA Lender delivers
to FTA pursuant to this Agreement. Solely for the purpose of continuing the
perfection of Indenture Trustee's security interest in such Notes, SBA will hold
any Notes released to it by FTA pursuant to this Agreement and in its actual
possession as bailee for Indenture Trustee. SBA will have no duties or
obligations with respect to any Notes released to it by FTA pursuant to this
Agreement other than those specifically set forth in this Section 8(e) and no
further duties or obligations will arise by implication or otherwise. SBA will
not be liable to Indenture Trustee, any Noteholder, Owner Trustee, any
Certificateholder, SBA Lender or any other person or entity for any acts or
omissions under this Section 8(e), except in the case of gross negligence or
willful misconduct.
(f) The SBA Lender will deliver to the Indenture Trustee the Loan
Documents and assignments of Loan Documents in accordance with the Sale and
Servicing Agreement. All instruments of assignment will assign the applicable
collateral to "HSBC Bank USA, ("Assignee") its successors and assigns, as
Indenture Trustee under the Indenture dated as of November 1, 1999, subject to
the Multi-Party Agreement dated as of November 1, 1999." All financing
statements will name the Indenture Trustee as secured party. Any power of
M-14
attorney from the SBA Lender to the Indenture Trustee must require the Indenture
Trustee to deal with the collateral in accordance with the terms of the
Transaction Documents and this Agreement.
(g) If the Servicer or SBA must be the record owner or secured
party with respect to any Note or any collateral securing any Note or any Loan
Document 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 or any other source, the Indenture
Trustee will assign such Note, collateral or Loan Document to the Servicer, or
SBA, as necessary.
9. Servicing of SBA Lender Loans. The Servicer will service the SBA
Lender Loans. Any servicing actions required of the Servicer under the Sale and
Servicing Agreement or this Agreement may be performed by a Subservicer (as
defined in the Annex A to the Sale and Servicing Agreement) approved by SBA
under an agreement approved by SBA, but performance by such Subservicer will not
limit or reduce the Servicer's obligations or liabilities as Servicer under the
Sale 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 this Agreement, and, to the extent there is no
conflict, will remit to the Indenture Trustee funds which are required to be
remitted to the Indenture Trustee in accordance with the terms of the Sale and
Servicing Agreement. The Servicer must proceed with all collection, enforcement
of remedies and liquidation actions against SBA Lender Loan Debtors in default
and against any collateral securing any SBA Lender Loan or against any other
source of payment in accordance with SBA Rules and Regulations and prudent
M-15
servicing standards. 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 Sale and Servicing Agreement. Property
acquired through foreclosure or deed in lieu of foreclosure or other action
enforcing a lien on the property will be titled in the name of the Trust for the
benefit of SBA or such other name as SBA may direct, the holders of the Funding
Notes and the Certificates and the Hedge Counterparties (as defined in the
Transaction Documents), 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 Sale and
Servicing Agreement. The Servicer will distribute disposition proceeds to SBA,
as party in interest with respect to the Guaranteed Interest, and to SBA Lender
for the benefit of the Trust, 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 the Indenture Trustee becomes the
Servicer, the Indenture 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 Sale 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 Sale and
Servicing Agreement or this Agreement.
M-16
10. Servicer Termination Event Under Sale and Servicing Agreement. The
Indenture Trustee will give SBA written notice within 3 business days after it
becomes aware of a Servicer Termination Event (as defined in Appendix A to the
Sale and Servicing Agreement) and written notice within 3 business days before
any written notice of any termination of the then current Servicer, as Servicer
under the Sale and Servicing Agreement. Upon a Servicer Termination Event and
termination of the Servicer, as Servicer in accordance with the terms of the
Sale and Servicing Agreement, the Indenture Trustee may be substituted as
Servicer so long as the Indenture 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) and SBA has not
requested otherwise in writing. SBA may object to the substitution of Indenture
Trustee as substitute Servicer in its sole discretion. If the Indenture Trustee
does not meet that condition or is otherwise unable to act or if SBA requests in
writing, the Indenture Trustee will appoint another Servicer in accordance with
the Sale and Servicing Agreement. Any successor Servicer must be approved by
SBA, which approval may be withheld in its sole discretion, and must agree to be
bound by the terms of this Agreement and must execute an agreement in the form
of Exhibit 3. Any substitute Servicer will be entitled to receive the Servicing
Fee and the Premium Protection Fee.
11. Transferees. Other than the issuance of the Funding Notes and the
Certificates, neither the Trust nor the Indenture Trustee will 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
M-17
SBA participating lender, operating under a current 750 Agreement, and must be
acceptable to SBA in its sole discretion. Upon consenting to any proposed
transfer, SBA will give FTA prompt written notice of its consent. Any transferee
must agree to be bound by this Agreement and must enter into any other agreement
SBA requires in connection with transfer of any interests in any SBA Lender
Loan.
12. No Assignment by Trust, Certificateholders, Indenture Trustee or
Noteholder. Neither Indenture Trustee, any Noteholder, the Trust nor any
Certificateholder will assign its rights under any Transaction Document (other
than any assignment by Trust to Indenture Trustee of its rights under the Sale
and Servicing Agreement) or sell, participate, pledge, hypothecate, enter into
any repurchase agreement with respect to, or otherwise transfer any of its
interest in the Funding Notes or (other than by foreclosure after an Event of
Default and in accordance with this Agreement) the SBA Lender Loans, the Notes,
any collateral for the SBA Lender Loans or the Loan Documents without SBA's
prior written consent.
13. SBA Lender's Acknowledgment of Continuing Obligation; No Assumption
of Liabilities; Standard of Care. (a) No action taken by the Indenture Trustee,
the Trust, FTA, SBA or the Servicer under this Agreement, the SBA Agreements, or
the Sale and Servicing Agreement will release or relieve the SBA Lender of any
of its obligations to SBA, FTA or to the Indenture Trustee. Neither the
execution of this Agreement, nor the taking of any action by the Indenture
Trustee, SBA, FTA or the Servicer under this Agreement will be an assumption by
the Indenture Trustee, SBA, FTA or the Servicer of any liabilities or
obligations of the SBA Lender.
M-18
(b) Neither SBA, FTA nor Indenture Trustee will have any duties or
obligations under this Agreement other than those specifically set forth in this
Agreement and no further duties or obligations shall arise by implication or
otherwise. Neither SBA, FTA nor Indenture Trustee will be liable for its acts or
omissions hereunder except as may result from its gross negligence or willful
misconduct.
(c) The provisions of this Section 13 will survive termination of
this Agreement.
14. FTA's and SBA's Limited Liability and Expenses. (a) FTA shall be
entitled to rely upon any notice, document, correspondence, request or directive
received by it, including facsimile transmissions and electronic correspondence,
that it reasonably believes to be genuine and to have been signed by the party
purporting to sign it or transmitted by the party purporting to transmit it. FTA
will not be obligated to inquire as to the authority or power of any person
executing or transmitting any such documents or as to the truthfulness of any
statements therein. 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(d), upon the request of the SBA
Lender and concurring instructions of the Indenture Trustee. FTA will not be
liable for any actions taken in accordance with instructions from SBA.
M-19
(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 or transmitted by the party purporting to
transmit it. SBA will not be obligated to inquire as to the authority or power
of any person executing or transmitting any such documents or as to the
truthfulness of any statements therein. 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 expenses
and other charges that SBA incurs in connection with this Agreement.
(c) The provisions of this Section 14 will survive any termination
of this Agreement. 15. Counterparts. This Agreement may be executed in any
number of counterparts each of which will be an original.
16. Inconsistencies. If any provision of this Agreement is inconsistent
with any provision in any other agreement, including but not limited to
Transaction Documents, the provision of this Agreement controls. The Transaction
Documents and any agreements entered into in connection with such agreements 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 Sale and Servicing Agreement and that the Indenture
Trustee may hold the Loan Documents as provided in this Agreement.
17. 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 Transaction Documents may be amended in any manner that would impair the
M-20
respective rights of SBA, the Owner Trustee or the Indenture Trustee under this
Agreement or the rights of SBA under the Transaction Documents without the prior
written consent of the party so affected.
18. Conditions Precedent. It is a condition precedent to the
effectiveness of this Agreement that SBA receive (a) opinions of counsel to the
effect that (i) the Multi-Party Agreement is enforceable against the Indenture
Trustee , the Trust and the SBA Lender, (ii) the Transaction Documents are
enforceable against the parties thereto and (iii) in an insolvency or similar
proceeding with respect to the SBA Lender, the sale of the Unguaranteed
Interests to the Trust would be considered a true sale and not a financing and
(b) a certificate from an officer of SBA Lender stating that SBA Lender is "well
capitalized" as defined in Appendix A to the Sale and Servicing Agreement.
19. GOVERNING LAW. EXCEPT TO THE EXTENT INCONSISTENT WITH FEDERAL LAW,
IN WHICH CASE FEDERAL LAW WILL GOVERN, 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.
20. Successors and Assigns. This Agreement binds and benefits the
parties and their respective successors and assigns.
21. Section Headings. The section headings in this Agreement are for
convenience only, and are without substantive meaning or content.
M-21
22. Severability. Any provision of this Agreement which is prohibited
or unenforceable in any jurisdiction will be given no effect and will not
invalidate any other provision of this Agreement.
23. 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:
Business Loan Center, Inc.
000 Xxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telecopy No. 000-000-0000
Attention: Xxxxxx Xxxxxxxxxxxx
If to the Trust, at:
BLC Funding Trust
c/o First Union Trust Company, National Association, as Owner Trustee
One Xxxxxx Square
000 Xxxx Xxxxxx
Xxxxxxxxxx, Xxxxxxxx 00000
Attention: Corporate Trust Administration
Telecopy No. (000) 000-0000
If to the Indenture Trustee, at:
HSBC Bank USA
000 Xxxxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Corporate Trust Administration
If to FTA, at:
Xxxxxx Services Corp.
000 Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn.: President
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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 Sale and Servicing Agreement as
amended or supplemented from time to time, along with any amendments thereto
delivered to the Indenture Trustee, and (ii) each delinquency and foreclosure
report prepared in accordance with clause (vii) of Section 5.09 of the Sale and
Servicing Agreement. Such Schedules and reports will be sent (to the extent
practicable, in electronic format) to Xx. Xxxxx Xxxxxxxxxx, Director, Secondary
Market Sales (xxxxx.xxxxxxxxxx@xxx.xxx) or his successor.
M-23
IN WITNESS WHEREOF the SBA Lender, the Trust, the Indenture
Trustee, FTA, and SBA have executed this Agreement below.
BUSINESS LOAN CENTER, INC.
By:
------------------------------------------------
Name: Xxxxxx Tannenhuaser
Title: Chief Executive Officer
BLC FUNDING TRUST
By: FIRST UNION TRUST COMPANY,
NATIONAL ASSOCIATION, not in its
individual capacity but
solely as Owner Trustee
By:
---------------------------------------
Name:
Title:
HSBC BANK USA, not in its individual
capacity but solely as Indenture Trustee
By:
---------------------------------------
Name:
Title:
UNITED STATES SMALL BUSINESS ADMINISTRATION
By:
---------------------------------------
Name: Xxxx Xxxxxxxxx Xxxxxx
Title: Associate Administrator for
Financial Assistance
XXXXXX SERVICES CORP.
By:
---------------------------------------
Name: Xxx X. Xxxxxxx, Xx.
Title: Executive Vice President
M-24
EXHIBIT 1
ACKNOWLEDGMENT OF RECEIPT OF NOTE
-----------, ------
In accordance with Section 8 of the Multi-Party Agreement,
dated as of November 1, 1999, by and among Business Loan Center, Inc., BLC
Funding Trust, HSBC Bank USA, as indenture trustee, Xxxxxx Services Corp.
("Xxxxxx") and the United States Small Business Administration (the "Multi-Party
Agreement"), Xxxxxx hereby acknowledges receipt of the note described below:
MAKER:
ORIGINAL PRINCIPAL AMOUNT:
DATE OF NOTE:
SBA LOAN NUMBER (GP NUMBER):
ACCOUNT NUMBER:
XXXXXX SERVICES CORP.,
By: __________________________
Name:
Title:
One original executed copy of this receipt will be sent by Xxxxxx by overnight
mail (at the expense of Business Loan Center, Inc.) to HSBC Bank USA, 000
Xxxxxxxx, 00xx Xxxxx, Xxx Xxxx, Xxx Xxxx 00000, Attention: Corporate Trust
Administration, and a copy will be sent by regular mail to Business Loan Center,
Inc., 000 Xxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, Attention: Xxxxxx
Xxxxxxxxxxxx.
THE ORIGINAL NOTE DELIVERED AGAINST THIS RECEIPT IS TO BE HELD PURSUANT TO THE
MULTI-PARTY AGREEMENT UNTIL SUCH TIME AS WRITTEN NOTICE AUTHORIZING RELEASE IS
RECEIVED PURSUANT TO SECTION 8(d) OF THE MULTI-PARTY AGREEMENT OR FROM THE
UNITED STATES SMALL BUSINESS ADMINISTRATION
1-1
EXHIBIT 2
REQUEST FOR RELEASE OF NOTE
-------------, -----
Xxxxxx Services Corp.
000 Xxxxxxxx
Xxx Xxxx, XX 00000
In accordance with Section 8(d) of the Multi-Party Agreement dated as
of November 1, 1999 by and among Business Loan Center, Inc., BLC Funding Trust,
HSBC Bank USA, as indenture trustee, Xxxxxx Services Corp. ("Xxxxxx") and the
United States Small Business Administration ("SBA") and, subject to your receipt
of concurrence from HSBC Bank USA, as indenture trustee, Business Loan Center,
Inc. 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
____4. SBA Loan repurchased pursuant to the Sale and Servicing Agreement.
____5. SBA Loan repurchased or substituted pursuant to Article II or
Article III of the Sale and Servicing Agreement.
BUSINESS LOAN CENTER, INC.
By:________________________________
Name:
Title:
2-1
HSBC Bank USA hereby consents
to the foregoing request
HSBC BANK USA
By:
-----------------------------------
Title:
Date:
----------------------------------
2-2
EXHIBIT 3
The undersigned consents and agrees to be bound as successor
Servicer by the terms of foregoing Multi-Party Agreement, dated as of November
1, 1999 among Business Loan Center, Inc., BLC Funding Trust, HSBC Bank USA, as
indenture trustee, Xxxxxx Services Corp. and the United States Small Business
Administration.
-----------------------------------
By:__________________________________
Name:
Title:
3-1
