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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
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For the fiscal year ended December 31, 1999
Commission file no. 0-22861
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FIRST INTERNATIONAL BANCORP, INC.
(Exact name of registrant as specified in its charter)
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Delaware 06-1151731
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
280 Trumbull Street
Hartford, CT 06103
(Address of principal executive offices) (Zip Code)
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Registrant's telephone number, including area code: (860) 727-0700
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Securities Registered Pursuant to Section 12(b) of the Act:
None
Securities Registered Pursuant to Section 12(g) of the Act:
(Title of each class)
Common Stock, par value $.10 per share
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes /X/ No__
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
or Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. /X/
As of March 23, 2000, the aggregate market value of the voting stock held by
non-affiliates of the Registrant, based on the closing price of the common stock
as reported by the Nasdaq Stock Market of $7.0625 was approximately $24,197,100.
As of March 23, 2000, the Registrant had 8,264,318 shares of Common Stock
outstanding.
DOCUMENTS INCORPORATED BY REFERENCE:
Part II, items 5, 6, 7, 7A and 8 are incorporated by reference to First
International Bancorp's, Inc. 1999 Annual Report to Shareholders which is
included as an exhibit hereto.
Part III, items 10, 11, 12 and 13 are incorporated by reference to First
International Bancorp, Inc.'s definitive proxy statement to stockholders which
will be filed with the Securities and Exchange Commission no later than 120 days
after December 31, 1999.
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TABLE OF CONTENTS
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PART 1 Page No.
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ITEM 1. BUSINESS 1
ITEM 2. PROPERTIES 25
ITEM 3. LEGAL PROCEEDINGS 25
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY
HOLDERS 25
PART II
ITEM 5. MARKET FOR THE COMPANY'S COMMON STOCK AND
RELATED STOCKHOLDER MATTERS 26
ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA 26
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS 26
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK 26
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 26
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE 26
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT 27
ITEM 11. EXECUTIVE COMPENSATION 27
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT 27
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS 27
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND
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REPORTS ON FORM 8-K 27
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PART 1
ITEM 1: BUSINESS
GENERAL
Overview
First International Bancorp, Inc., a Delaware corporation, is a one bank holding
company incorporated in 1985 and regulated by the Board of Governors of the
Federal Reserve System. Its principal asset and subsidiary is First
International Bank (the "Bank"), a Connecticut state bank and trust company. The
Bank was established in 1955 as a national bank and converted to a state bank in
July 1999. The Bank is regulated by the State of Connecticut Department of
Banking ("CDB") and the Federal Deposit Insurance Corporation ("FDIC"). The Bank
changed its name from First National Bank of New England on February 1, 1999 to
more closely reflect the markets it serves. Since 1998, the Bank has established
six special purpose subsidiaries to facilitate loan securitizations and sales to
commercial paper conduits.
The Bank solicits commercial loans in New Jersey through its wholly-owned
subsidiary, First International Capital Corp. of New Jersey and operates in
various other states under the trade name First International Capital.
In September 1997, the Company completed an underwritten public offering whereby
1,955,000 shares of common stock were issued for net proceeds of $23.8 million.
On March 26, 1999, the Company sold its last retail branch and its checking,
savings and money market accounts. The Company retained its certificates of
deposit and continues to offer certificates of deposit to retail and brokered
depositors. (See "Changes in Funding Sources" for further discussion of the
funding sources used by the Company.)
The Company specializes in providing credit, trade and financial solutions to
small and medium size industrial companies located in the United States and in
international emerging markets. The Company serves its target market by offering
flexible and attractive terms to borrowers and manages its credit risk through
the combined utilization of commercial loan guarantee programs made available by
three U.S. federal agencies: the U.S. Small Business Administration (the "SBA"),
the U.S. Department of Agriculture (the "USDA"), and the Export-Import Bank of
the U.S. ("Ex-Im Bank"), as well as through the use of private credit insurance
policies.
For the federal fiscal year ending September 30, 1999, the Company was the
country's largest Ex-Im Bank lender measured by number of transactions; the
largest USDA Business and Industry lender measured by dollar volume; and the
tenth largest SBA 7(a) lender measured by dollar volume (and the largest in New
England). The Company maintains preferred status for government guaranteed
lending programs in several jurisdictions.
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Changes in Funding Sources
During 1999 and 1998, the Company completed transactions that effected changes
in the manner in which the Company obtains funding for its lending business.
These transactions included:
* the sale of the Company's last branch in March 1999, including checking,
savings and money market accounts which requires the Company to provide funding
by alternative sources;
* establishment of two warehouse loan and sale facilities pursuant to which up
to an aggregate of $75 million is available to the Company (based upon the
contractual advance rates against the qualifying principal balance of the loans
pledged to secure the facilities; the pledged loans consist of equipment loans,
working capital term loans and loans secured by mortgages on commercial real
estate);
* establishment of a commercial paper conduit facility pursuant to which up to
$60 million is available to the Company (based upon the contractual advance
rates against the qualifying principal balance of the loans pledged to secure
the facility; the pledged loans consist of the unguaranteed portion of loans
guaranteed by the SBA);
* the increase from $65 million to $95 million of availability of a second
commercial paper conduit facility, pursuant to which the Company has the right
to sell up to $95 million in commercial revolving lines of credit and other
qualifying loans during the term of the facility;
* loan securitization and sales transactions pursuant to which the Company
securitized and sold in the aggregate approximately $140 million of asset backed
loans, including $49 million of the unguaranteed portions of loans originated by
the Company that were guaranteed in part by the SBA; and
* establishment of agreements with five national brokers which provide a source
for brokered certificates of deposits used for fundings of one year or less.
The Company expects to continue to obtain funding for its operations
from retail and brokered certificates of deposit, warehouse lines of credit, the
sale of loans on a loan-by-loan basis, through private placement securitizations
and from the sale of loans to commercial paper conduits and sale facilities.
Loan Originations
Management believes that the specialized market knowledge and experience of the
Company's lending officers, combined with a broad range of commercial and
international financing products, enable the Company to satisfy the needs of its
small and medium size industrial clients. Brand recognition for the Company is
maintained by incorporating the servicemark Financing Manufacturers
Worldwide(R) in its logos. The Company's domestic and international lending
relationships generally range from $150,000 to $5.0 million.
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The Company's Commercial business units underwrite lines of credit, term loans,
industrial mortgages and trade financing for businesses primarily located in the
Northeast, Mid-atlantic, and Midwest regions of the United States. Commercial
lenders operate from the Company's Hartford, Connecticut headquarters, as well
as from regional representative offices located in Boston and Springfield,
Massachusetts; Providence, Rhode Island; Morristown, New Jersey; Pittsburgh and
Philadelphia, Pennsylvania; Rochester, New York; Washington D.C.; Detroit,
Michigan; St. Louis, Missouri; and Cleveland, Ohio. The Company plans to
continue its U. S. expansion in 2000 by opening additional representative
offices in the Southern and Western regions of the U. S. The Company's domestic
loan officers are trained to understand the specific financial needs of small
and medium size industrial companies, and to use government guaranteed and other
commercial loan products to respond to those needs. Domestic loan officers
participate in industrial trade organizations representing the Company's target
market and conduct other marketing activities to reach potential borrowers.
The Company's International business units underwrite Ex-Im Bank guaranteed and
insured and private sector insured short and medium term loans to small and
medium size industrial companies located in various international emerging
markets. The International business units also underwrite Ex-Im Bank guaranteed
revolving lines of credit to U.S. manufacturers and, in 1998, began offering
privately insured loans to U.S. importers of foreign-made goods. See
"International Lending Services and Products." International lending activities
support trade flows between the United States and emerging markets. The
Company's International business units operate from its Hartford, Connecticut
headquarters and are assisted in their efforts by contractual international
marketing representatives, or "master agents", many of whom are actively
involved in providing financial, accounting, consulting and/or engineering
services to industrial companies in their home countries. Contractual marketing
arrangements have been established with professionals in Argentina, Brazil,
Central America, Egypt, India, Indonesia, Korea, Mexico, North Africa,
Philippines, Poland, South Africa, Turkey and West Africa. The Company has
formally established "representative offices" in certain countries in accordance
with local regulations. The Company began lending internationally in 1994 and
has increased these loan originations to $60.9 million in 1997, $110.4 million
in 1998 and $182.1 million in 1999.
Underwriting
The Company's underwriting activities are initiated from each of its lending
offices and supported and approved at the Hartford, Connecticut headquarters.
Commercial lending officers analyze the creditworthiness of proposed borrowers
and evaluate each borrower's financial statements, credit reports, business
plans and other data to determine if the credit and proposed collateral satisfy
the Company's specific lending standards and policies. All credit memoranda are
reviewed by an independent credit officer and may require additional approval
depending on the particular circumstances of the financing package. Domestic and
international loans undergo a substantially identical approval process.
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Loan Sales and Securitizations
The Company seeks to achieve high returns while meeting the growing credit needs
of its target market by selling a portion of its commercial and international
loans on a non-recourse, servicing-retained basis. A separate Capital Markets
business unit directs its resources toward identifying secondary loan markets to
sell loans originated by the Company to generate non-interest income and as a
further means of mitigating credit risk, leveraging capital and replenishing
liquidity.
In 1998, the Company began securitizing and selling certain whole loans and the
unguaranteed portions of certain government guaranteed loans that it originates,
and selling commercial revolving lines of credit, other commercial loans and the
unguaranteed portions of SBA loans to commercial paper conduits. In these
securitization and commercial paper transactions, the Company sells a pool of
loans to a trust, which in turn issues certificates representing beneficial
ownership interests in the trust or which issues notes and sells these
securities through private placement transactions. In order to provide credit
enhancement for the certificates or notes, the Company generally retains
subordinated certificates or notes and establishes a cash reserve account. The
Company also records an interest-only strip in connection with the transactions.
For all securitizations and sales, the Company is the servicer of the underlying
loans.
BUSINESS STRATEGY
The Company's strategy is to serve small and medium size industrial companies
through the following key activities:
Domestic Loan Origination Activities. Commercial business units currently
operate from the Hartford, Connecticut headquarters, as well as from regional
loan production or "representative" offices located in Boston and Springfield,
Massachusetts; Providence, Rhode Island; Pittsburgh and Philadelphia,
Pennsylvania; Morristown, New Jersey; Rochester, New York; Washington D.C.;
Detroit, Michigan; St. Louis, Missouri; and Cleveland, Ohio. The Company intends
to continue to expand into new markets by opening additional representative
offices throughout the U.S. as marketing diligence is completed.
Financing Trade with International Emerging Markets. The International business
units operating from the Hartford, Connecticut headquarters are assisted in
their efforts abroad by contractual relationships with international master
agents in Argentina, Brazil, Central America, Egypt, India, Indonesia, Korea,
Mexico, North Africa, Philippines, Poland, South Africa, Turkey and West Africa.
The master agents are actively involved in providing professional financial
services to small and medium size industrial companies in their home countries.
The Company also provides working capital to U.S. manufacturers who export to,
and in 1998 the Company began financing U.S. imports from, international
emerging markets.
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LENDING ACTIVITIES AND POLICIES
The Company's distribution of domestic and international commercial loan
originations are detailed below:
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FOR THE YEARS ENDED
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DECEMBER 31, 1999 DECEMBER 31, 1998
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Loan Originations Principal Percentage Principal Percentage
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Domestic:
SBA loans................................ $142,089 26% $122,178 31%
USDA loans............................... 53,723 10% 45,162 12%
Other commercial loans................... 172,964 31% 113,888 29%
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Total domestic banking................ 368,776 67% 281,228 72%
International:
Ex-Im working capital lines.............. 64,035 12% 37,276 10%
Ex-Im medium term loans.................. 46,874 8% 48,248 12%
Other international loans................ 71,175 13% 24,925 6%
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Total international banking........... 182,084 33% 110,449 28%
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Total commercial loan originations.... $550,860 100% $391,677 100%
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MARKETING
Domestic Lending
The Company originates domestic loans through its 56 commercial lenders in
twelve offices who seek to establish long-term relationships with their clients.
The Company believes it is uniquely positioned to serve its domestic market
through an ability to provide clients with a flexible combination of lines of
credit, term loans and mortgages for industrial property and trade financing.
The Company generally utilizes the SBA, USDA, Ex-Im Bank and/or privately
insured loan guarantee and insurance programs as a part of a financing package
in light of an applicant's particular situation. The Company's participation in
these programs enables it to provide clients with longer loan terms than are
typically available to small and medium size industrial companies.
Commercial loan officers are responsible for marketing, underwriting, servicing,
monitoring and collecting payments on their portfolio of loans. The Company
believes that this broad range of responsibilities enables the commercial loan
officers to establish strong working relationships with both existing and
prospective clients and promotes strong client service and prudent loan
portfolio management. Commercial loan officers are encouraged to keep apprised
of market conditions through frequent contact with clients and potential
borrowers, to develop specific knowledge of their clients' businesses, and to
offer flexible structuring of loan products. In consultation with the borrower,
a commercial loan officer will evaluate the financing needs of the business and
then recommend the best way to structure the lending transaction to fit the
client's unique needs.
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The marketing efforts by commercial loan officers include participation in trade
associations serving the needs of small and medium size industrial companies;
contacting accountants, attorneys and other professionals known by the Company
to have contact with businesses in need of financing; personal visits; direct
mail solicitations; and referrals from existing clients. Since the target client
of both domestic and international loan officers is often the same, there is an
active cross-selling effort between these two areas.
Strategic Alliances
In addition to the marketing efforts of the Bank's domestic lending officers,
the Bank seeks to market its domestic loan products through marketing agreements
with various trade and cooperative associations. In 1998, the Bank entered into
such agreements ("Strategic Alliances") with the National Rural Utilities
Cooperative Finance Corporation, and with various regional chapters of the
National Tooling & Machining Association. The Marketing Agreements provide,
among other things, for the applicable trade or cooperative association to
develop and implement a marketing plan pursuant to which the Bank has
implemented an expedited and streamlined credit application and approval process
for association members who desire commercial term loans from the Bank. The Bank
retains the sole discretion as to the credit standards to be applied and as to
whether or not to make any particular loan. The Marketing Agreements further
provide for the Bank to pay quarterly and annual compensation to such trade and
cooperative associations based upon the amount of loans made by the Bank to the
members of the associations.
International Lending
The Company has six international lenders in the Trade Finance business unit who
target U.S. exporters eligible for trade financing programs, including those
supported by Ex-Im Bank. These loan officers market pre-export working capital
lines of credit. This International business unit also targets U. S. buyers of
goods from certain international emerging markets. As with the domestic lending
relationships, the Trade Finance business unit is responsible for marketing,
underwriting, servicing, monitoring and collecting payments on its portfolio of
loans.
The Company has sixteen international lenders in its Americas and
Asia/Africa/Europe business units who target foreign purchasers of U. S. goods
eligible for short and medium term financing supported by Ex-Im Bank guarantees
and insurance and by private sector insurance. These International business
units are also responsible for marketing, underwriting, servicing, monitoring
and collecting payments on their portfolios of loans.
Internationally, the Company has established contractual marketing relationships
with professional firms in twelve emerging markets who, in the course of
conducting their primary business, have frequent contact with local industrial
companies who require financing to purchase U.S. goods or are manufacturing or
distributing goods for export to the U. S. Prior to entering into relationships
with these "Master Agents," the Company conducts due diligence, including
visiting the prospective representative and conducting local diligence
concerning their business reputation and legal status. The Company also requires
that each Master Agent be
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trained on the Company's products and services at the Hartford, Connecticut
headquarters. Each Master Agent markets, on behalf of the Company, Ex-Im Bank
guaranteed and insured short and medium terms loans and privately insured export
loans in its respective market. The Master Agent will develop a lead with a
potential borrower and may aid in the transaction by obtaining required
financial or operational data from borrowers and providing assistance in the
loan origination and closing process. The Master Agents work with the Company's
U.S.-based loan officer who completes the application underwriting and closing
process. The Master Agent receives a negotiated fee when a loan referral made to
the Company has been underwritten and closed. The Master Agent assists the loan
officer in obtaining certain information from the applicant and in responding to
inquiries of the applicant, but does not have any direct underwriting
responsibilities. All decisions with respect to referrals of Master Agents are
made by the Company, which retains full control over international loan
originations.
The Company's Import Finance Business Unit has two lenders who seek to finance
goods imported by U. S. industrial companies throughout the country under a
private sector insurance policy and to cross sell SBA guaranteed and other
commercial loans to the companies.
Marketing efforts of these International business units include visits to, and
direct mail solicitation of, U.S.-based exporters and importers of capital
goods, direct mail solicitation of foreign-based manufacturers and industrial
trade organizations, and in-country marketing by the Company's network of Master
Agents. The Company has also entered into contractual strategic alliances with
Panalpina, Inc., a leading international freight forwarding company, the
Association for Manufacturing Technology, and the Korean Federation of Small
Business to provide access to additional trade finance opportunities.
DOMESTIC LENDING SERVICES AND PRODUCTS
Loan Products and the Origination Process
The commercial loans originated by the Company include industrial mortgage loans
(i.e., loans to businesses collateralized by industrial real property),
equipment term loans and revolving lines of credit to manufacturers, wholesalers
and distributors, many of which are exporters. The typical commercial borrower
is a privately owned and operated company with annual sales of $1 million to $50
million, employing 10-500 workers, which has been in business for at least three
years. A number of the Company's borrowers have a proprietary product line,
export their products and/or have a geographically diverse client base. The
Company is typically the borrower's primary lender and provides loans which are
collateralized by assets of the borrower.
The Company originates loans to a variety of industries; however, in the future
based upon its loss experience and economic forecasts, the Company may decide to
de-emphasize certain industries from time to time.
The interest rates accruing on the Company's commercial loans are typically
Prime-based, changing monthly or quarterly when the Prime Rate changes. The
Company also makes fixed rate loans from time to time. The Company originates
certain loans for sale through loan
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purchase programs pre-established with investors. The term of a loan depends
upon whether the loan is guaranteed or is underwritten for a loan purchase
program. Government guarantee programs give clients access to longer term
financing and slower amortization than otherwise available. A government
guaranteed mortgage loan has a maximum term and amortization of up to 30 years,
while the term and amortization of an unguaranteed mortgage loan typically does
not exceed 15 years. Equipment loans are underwritten to correspond to the
useful life of the equipment and generally range from 5-15 years. SBA guaranteed
working capital term loans range from 7-10 years, while unguaranteed working
capital revolving lines of credit have one-year terms. Medium term loans are
generally fully amortizing.
The primary collateral sought by the Company for commercial loans consists of
liens which are generally first liens, on owner-occupied industrial real estate,
equipment, inventory and/or accounts receivable, although additional collateral
may include junior liens on residential properties. The Company generally
requests the personal guarantee of the principals of a business because the
Company believes this induces the guarantor to facilitate repayment of the loan.
In striving to meet the credit needs of its clients, the Company utilizes
government guarantee loan programs which allow it to offer longer-term loans
while mitigating the credit risk to the Company through the government
guarantee. The two government guarantee loan programs utilized by the Company's
Commercial business units to provide financing to its niche market are discussed
below.
SBA Guaranteed Loan Originations
The Company utilizes the SBA's 7(a) loan program for eligible borrowers. The
Company has Preferred Lender status in twenty-one SBA "districts." Preferred
Lender status allows the Bank to approve loans on behalf of the SBA, with the
national SBA processing center's concurrence that the applicant meets the SBA
eligibility requirements. The SBA generally completes its eligibility review
within 24 hours of submission. The Company has Certified Lender status in
twenty-two districts. Certified Lender status entitles the Bank to 72-hour
turnaround from local SBA district offices for approval of loan applications. In
other districts where the Company does not have either Preferred or Certified
Lender Status, applications may be submitted with a 7-day turnaround from the
local SBA district office.
The SBA's 7(a) loan program provides for a guarantee equal to 75% of the
principal balance, up to a maximum guarantee of $750,000 per borrower.
The Company makes SBA loans to businesses which qualify under agency regulations
as a "small business." The primary operative SBA eligibility criterion for the
Bank's targeted market are privately-owned manufacturers employing fewer than
500 workers. Loans may generally be used for the acquisition or refinancing of
plant and equipment, working capital and debt consolidation.
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In the event of default, the SBA and Company share in any collections or
collateral on a pari passu basis. For example, if a loan carries a 75%
guarantee, the SBA receives 75% of all collections while the Company receives
25% of such amounts, beginning with the initial recovery. The SBA also
reimburses the Company's collection costs on a similar basis.
If the SBA establishes that any resulting loss is attributable to a failure by
the Company to comply with SBA policies and procedures in connection with the
origination, documentation or funding of a loan, the SBA may decline to pay the
guaranteed amount, or if the guaranty has already been paid, may seek recovery
of funds from the Company. With respect to guaranteed SBA loan participations
which have been sold, the SBA will first honor its guarantee and then seek
compensation from the Company in the event that a loss is deemed to be
attributable to a failure to comply with SBA policies and procedures.
USDA Guaranteed Loan Originations
The Company utilizes the Business and Industry Program ("B&I Program") of the
USDA when applicable based on an applicant's geographical location and other
characteristics. The B&I Program generally provides for 80% guarantees on loans
with principal balances up to $5 million and 70% guarantees on loans with
principal balances up to $10 million and, therefore, enables the Company to
provide to eligible borrowers a greater amount of financing than the Company
would otherwise be able to provide under the SBA program and on an unguaranteed
basis due to legal lending limits. The stated purpose of this program is to
support industry, employment and general economic and environmental conditions
in rural communities, which are defined as towns with fewer than 50,000
inhabitants. These loans may be utilized for acquisition, improvement or
refinancing of plant, equipment, working capital and debt consolidation
purposes.
Loans to be guaranteed under the B&I Program are submitted to the USDA district
office and, depending on that office's loan authority, may be required to be
forwarded to the national USDA for approval. The USDA approved the Company as a
Certified Lender in 1997, making it one of the first USDA Certified Lenders
nationally. As a Certified Lender, the Company is recognized as a "Subject
Matter Expert" and is able to reserve funds, which facilitates the processing of
USDA loans.
The guarantee of the USDA also provides for pari passu recovery of collection
proceeds, and for recourse to the Company similar to that discussed above for
SBA loans in the event the Company is found to have been negligent in the
origination, documentation or funding of USDA loans.
DOMESTIC UNDERWRITING
For the Company's domestic underwriting process, the Company's staff seeks to:
(i) analyze borrowers' credit profiles; (ii) assess the collateral underlying a
loan; (iii) assure compliance with eligibility requirements for inclusion under
any applicable guarantee programs; and (iv) obtain or provide appropriate
documentation for the transaction.
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Domestic lending officers receive and assemble initial applications, analyze the
creditworthiness of proposed borrowers, prepare credit memoranda and, aided by
staff, prepare any required government guarantee loan application forms and
conduct credit and trade reference checks. In the course of analyzing the
creditworthiness of prospective borrowers, commercial lending officers evaluate
each applicant's and any guarantors' financial statements, credit reports,
appraisals and other information regarding the value of collateral, the
experience, strength and continuity of the borrower's management business plans
and other data to determine if the credit and collateral satisfy the Company's
standards and compliance with any applicable government guaranteed loan program
requirements. These standards may include debt service coverage ratios, or other
financial ratios, reasonableness of the borrower's projections (when submitted),
the experience, strength and continuity of the borrower's management, the
financial condition of individual guarantors, the value of collateral, and
compliance with government guarantee loan program requirements. The originating
officer performs on-site inspections to determine the condition of a borrower's
facility, the manner in which business is being conducted, the condition and
maintenance of assets, the existence of environmental issues, and other market
conditions.
Originating lending officers have no authority to approve a loan on their own.
Subject to approval by the Credit Policy Officer, the business manager of each
commercial business unit and the Company's Division Executives have lending
authority in accordance with their experience. Loans above certain levels
require the additional approval of the Chief Credit Officer and any loan
requests above $6 million must be further approved by the Company's Chief
Executive Officer. All loans to a borrower and its affiliates are aggregated to
determine whether they are within an individual's lending authority.
Upon initial approval by a business manager, the credit memorandum must be
approved by the Credit Policy Officer, who reports to the Chief Credit Officer.
The Credit Policy Officer reviews the memorandum and supporting file for
compliance with internal Company policy as well as applicable government
guarantee requirements. If additional approvals are required, the credit
memorandum is forwarded to the appropriate parties as noted above. If the
financing package includes a government guaranteed loan, the application is
forwarded to the applicable government agency as required.
The Company performs a credit analysis on all applications, considering the type
and value of the assets collateralizing a loan, the characteristics of the
borrower, the borrower's industry, and the anticipated debt service ratio. The
Company generally requires that a borrower's most recently completed fiscal year
financial statements demonstrate historical debt service coverage ratio of at
least 1.25 to 1. If requested funding is for plant or line of business
expansions, consideration may also be given to projected results and, therefore,
certain loans may be granted when historical debt service coverage is less than
1.25 to 1.
Real property taken as primary collateral for a loan is valued by an independent
appraiser in accordance with federal banking regulations, and the appraisal is
then subject to an internal review in accordance with these regulations.
Equipment serving as primary collateral for a loan
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is generally valued by an independent equipment appraiser. The Company will
generally obtain a Phase I environmental report completed in accordance with the
standards of the American Society for Testing and Materials on any commercial
real property to be mortgaged. Additional environmental reporting and
remediation are required prior to closing if environmental issues either exist
or are suspected.
The Company's standard underwriting criteria details the maximum advance rates
which are utilized for each type of collateral. Commercial property is generally
given a collateral value for underwriting purposes equal to 80% of the appraised
value; finished goods and raw material are generally valued at 50% of book
value; trade accounts receivable under 90 days are generally valued at 75% of
book value.
Although the maximum prescribed collateral values are generally utilized in the
Company's analyses, there may be instances where the maximum values are reduced
or, due to the borrower's situation, special consideration may be given to
applications exceeding the general standards. Proposed exceptions to the
Company's loan policy are reviewed by the approving officers. Decisions to
approve these loans are made on a case-by-case basis and depend upon the overall
creditworthiness of the applicant. The overall trends in underwriting exceptions
are monitored by the Chief Credit Officer and the Company's Loan Committee.
INTERNATIONAL LENDING SERVICES AND PRODUCTS
The Company's International business units underwrite revolving lines of credit
to U.S. manufacturers, short and medium term loans to foreign buyers of U.S.
goods, short term loans to U.S. buyers of foreign goods, and letters of credit
issued in connection with such facilities.
The International lending business units include the following:
<TABLE>
BUSINESS UNITS/TERRITORY PRODUCTS USED DESCRIPTION
- ------------------------ ------------- -----------
<S> <C> <C>
TRADE FINANCE (principally the Working capital line of credit; 90% One year revolving line of credit
Northeast, Mid-atlantic and Midwest Ex-Im guaranteed; indexed to U.S. to U.S. manufacturers
U.S.) Prime, variable daily; U.S. dollar collateralized by export accounts
denomination receivable and inventory
IMPORT FINANCE (entire U.S.) 90-360 day U.S. import term loan; Financing of accounts receivable
discount note; 95% privately insured due from U.S. manufacturer
purchasing goods from international
emerging markets; unsecured
</TABLE>
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<TABLE>
<S> <C> <C>
AMERICAS (principally Short and medium term loan; 1 to 5-year term loans to
Argentina, Brazil, Central 100% guaranteed by Ex-Im Bank foreign purchasers of quali-
America, Mexico) or privately insured (generally fied U.S. made inventory and
ASIA/AFRICA/EUROPE 95%); indexed to 6-month equipment; unsecured or
(principally Egypt, India, LIBOR, variable semi-annually; secured by equipment
Indonesia, Korea, North U.S. dollar denominated
Africa, Philippines, Poland,
South Africa, Turkey and
West Africa)
</TABLE>
Ex-Im Bank is an independent agency of the U.S. whose mission is to facilitate
export financing of U.S. goods and services by neutralizing the effect of export
credit subsidies from other governments and absorbing credit risks that the
private sector will not accept. The Company utilizes the Ex-Im Bank's loan
guarantee and insurance programs designed to support small and medium size U.S.
exporters. In 1997 the Company received Ex-Im Bank's annual "Small Business Bank
of the Year" award.
International Lending - United States
Export Working Capital and U.S. Import Loan Products and the Origination Process
The typical U.S. client for the Company's international products is a U.S.-based
manufacturer with sales of $1 million to $50 million and export or import
financing needs. The Trade Finance business unit handles clients who are
exporting while the Import Finance Business Unit handles U.S. importers. The
target profile of these clients is generally the same as for the Company's other
domestic clients.
The one-year revolving Ex-Im Bank working capital lines of credit are indexed to
WSJ Prime and adjust daily. The primary collateral for these loans includes
export-related accounts receivable and inventory. The accounts receivable are
generally insured under an Ex-Im Bank insurance policy, a private export credit
insurance policy or an acceptable letter of credit. Open accounts receivable may
qualify as collateral if approved in advance by the Company and Ex-Im Bank.
Borrowers must submit borrowing base certificates to the Company to evidence the
availability of acceptable collateral when an advance is requested, and monthly
thereafter.
The Company is a "AA Level Delegated Authority" lender with respect to Ex-Im
Bank's working capital loan guarantee program and, therefore, has authority to
approve working capital lines up to $5 million per borrower, up to an aggregate
portfolio of $75 million, without Ex-Im Bank approval.
In the event of a loan default, the Company and Ex-Im Bank share in all loan
recovery proceeds on a pari passu basis in accordance with the 90%
guaranteed/10% unguaranteed ratio. The Company also has the responsibility to
ensure that loans are underwritten, documented and funded in accordance with
Ex-Im Bank polices and procedures in order to avoid loss of the guarantee.
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The loans made by the Company to finance the purchase by U.S. manufacturers of
goods from international emerging markets are unsecured loans which are
discounted at origination to yield a market rate. The Company has obtained a
credit risk policy from a private sector insurance company to insure loans made
under this program. In the event of a loan default, the insurance company will
pay the Company, subject to certain deductibles, 95% of the principal balance,
plus accrued interest. The Company has the responsibility to ensure that loans
are underwritten, documented and funded in accordance with the insurance policy
in order to avoid loss of the insurance.
International Lending - Emerging Markets
Short and Medium Term Loan Products and the Origination Process
Emerging market-based clients of the Company's Americas and Asia/Africa/Europe
business units are typically small and medium size industrial companies
requiring financing to purchase equipment, components and raw materials from the
U.S.
The Company primarily uses Ex-Im Bank guarantee and insurance programs to
mitigate its credit risk to the borrower. In 1998, as an alternative to the
Ex-Im Bank product, the Company obtained a credit risk insurance policy for
short and medium term loans to industrial companies in certain international
emerging markets from a private sector insurance company. The underwriting
criteria is substantially the same under both the Ex-Im Bank and privately
insured programs, although Ex-Im Bank imposes U.S. content measurements.
The Ex-Im Bank guarantee or insurance provides 100% coverage on the medium term
loans and generally 95% coverage on the short-term loans. The private sector
insurance policy generally insures 95% of the short and medium term loans. With
the private sector insurance policy, the Company has discretionary credit
approval authority for loans up to $750,000 which meet the underlying criteria
of the private sector insurance policy. The Company tends to utilize the private
sector insurance policy for smaller dollar requests to facilitate approval time.
Medium term loans are generally 3-5 years in term, and finance the acquisition
of qualified U.S.-made capital goods. The Ex-Im Bank program allows the
financing of up to the lower of 85% of purchase price or 100% of U.S. content.
Certain other U.S. content and product requirements must also be met. The loans
range in size from $150,000 to $10 million and are U.S. dollar-denominated.
Although the purchase of the equipment is being financed, the Ex-Im Bank loans
are unsecured; the Company relies on the borrower's cash flow and the 100% Ex-Im
Bank guarantee or Ex-Im Bank insurance. The Company does obtain a security
interest in the equipment being underwritten pursuant to the private sector
insurance policy.
International lending officers are responsible for marketing, underwriting,
servicing, monitoring and collecting their portfolios of loans. Because the
medium term loans are fully amortizing with semi-annual payments, there is less
post-closing analysis required for performing loans than for other types of
loans made by the Company.
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In the event of default, the Company will work with Ex-Im Bank to handle the
workout and collection of Ex-Im Bank guaranteed medium and short term loans and,
in the event a claim is filed, Ex-Im Bank will pay the Company 100% of the
guaranteed or insured principal balance, plus accrued interest. See "Delinquency
and Collection Activities."
INTERNATIONAL UNDERWRITING
International lending officers receive and assemble initial applications,
analyze the creditworthiness of proposed borrowers, prepare memoranda and, aided
by staff, prepare the required Ex-Im Bank and private sector insurance loan
application forms and conduct credit and trade reference checks. For short and
medium term loans, in-country Master Agents, where applicable, aid in the
transaction by obtaining required financial or operational data from borrowers
and by providing general assistance in the loan origination and closing process.
The Company's international lending officers will often visit the prospective
U.S. borrower's place of business and perform on-site inspections. The Company
will generally instruct its in-country Master Agents to make these inspections
of foreign prospective borrowers. Although certain of the international loans
are unsecured, site inspections are conducted in most cases because this
information is helpful in assessing a borrower's operations.
The approval process is substantially similar to that followed by the commercial
lending officers. The Credit Policy Officer reviews the memorandum and
supporting file for compliance with internal Company policies as well as
applicable Ex-Im Bank or private insurer program parameters. As with the
domestic lending, exceptions to the Company's and Ex-Im Bank's loan policies are
entertained on a case-by-case basis by the approving loan officers, and
acceptance of exceptions depends upon the overall creditworthiness of the
applicant.
Working capital lines of credit are collateralized by export-related inventory
and accounts receivable less than 90 days old; this collateral has maximum
prescribed collateral values of 75% and 90%, respectively. As is the case with
respect to domestic loans, the collateral value required to support a loan is
based on the borrower's individual circumstances, and applications exceeding the
Company's general standards may receive special consideration.
For short and medium term loans, debt service coverage and operating history are
reviewed in the underwriting process. The lending officer also considers the
availability to the borrower of U.S. dollars and other "hard" currency revenue
sources from sales to the U.S. and other stable currency markets.
While most working capital lines of credit are within the Company's "AA
Delegated Authority", applications which do not comply with and/or are above the
Company's authority, and all Ex-Im Bank short and medium term loans, require
Ex-Im Bank approval. U.S. import loans in excess of $500,000, and short and
medium term loans in excess of $750,000, require approval from the private
sector insurance company if they are to carry that insurance.
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<PAGE> 18
CAPITAL MARKETS AND LOAN SERVICING
Capital Markets Activities
The Capital Markets business unit was established in July 1996 to assume
responsibility for the non-recourse, servicing-retained sale of SBA, USDA and
Ex-Im Bank government guaranteed loans and to identify markets for the sale of
non-guaranteed mortgage, term and revolving loans on a non-recourse,
servicing-retained basis. Since 1998, the Capital Markets business unit has
completed four securitizations of the unguaranteed portions of SBA loans and
certain whole commercial loans, and has sold revolving lines of credit to
commercial paper conduits. These capital markets activities allow the Company to
leverage capital, replenish liquidity and mitigate the risk of balance sheet
exposure to any single borrower.
The guaranteed portions of SBA and USDA loans are generally sold during the
quarter of origination on a single loan basis to established brokers. Brokers
generally pool the SBA guaranteed portions. USDA loans are individually sold.
The guaranteed portions of Ex-Im Bank loans and lines of credit are sold to
various parties, including the Private Funding Export Funding Corporation
("PEFCO"). PEFCO is a private corporation established with the support of the
United States Treasury and Ex-Im Bank to assist in financing exports of U.S.
goods and services by making direct loans to foreign importers of U.S. made
goods, and to provide liquidity support for private sector lending utilizing
Ex-Im Bank programs. The Company is a 1% shareholder and one of among
approximately 50 PEFCO shareholders, with a common stock investment of $987,000
at December 31, 1999.
SBA and USDA regulations permit the Company to sell or participate,
respectively, a portion of the unguaranteed amount of loans originated under
their respective programs. In accordance with SBA and USDA regulations, the
Company is required to retain a 5% interest in the unguaranteed portion of the
loan. Current SBA regulations require that the Company hold retained interests
in the unguaranteed portion of securitized loans equal to a minimum of 2% of the
transaction. Upon the sale of any guaranteed portions, the Company, if holding
an unguaranteed portion, shares in the payment stream and collateral on a pari
passu basis with all (guaranteed and unguaranteed) investors, beginning with the
initial recovery. If the Company is holding an investment in a subordinated
interest following a securitization, the application of the cash flows is
determined in accordance with the applicable pooling and servicing agreement.
The Capital Markets business unit has developed a list of potential buyers of
non-guaranteed mortgage loans, term loans and revolving lines of credit and
devotes substantial resources to the identification of these and other buyers. A
primary objective in the negotiation and sale of these loans is the Company's
retention of sole responsibility for borrower contact. Investors meet with
borrowers only in rare circumstances, and generally rely on the Company to
prudently service and monitor lending relationships. The Company believes that
this is important to maintain client relationships and also reflects investor
confidence in its servicing ability and reputation.
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<PAGE> 19
Loan Servicing Activities
At December 31, 1999, the total loan portfolio managed by the Company was $1.1
billion as compared to $779.1 million at December 31, 1998.
The Company services substantially all of the loans it originates, whether
securitized, sold individually to investors or held in portfolio. Servicing
includes collecting payments from borrowers and remitting applicable payments
and required reports to any investors; accounting for principal, interest and
any real estate taxes or other escrow receipts and payments; contacting
delinquent borrowers; supervising foreclosures; and liquidating collateral when
required. Other than tasks performed by the assigned lending officers, loan
servicing functions are centralized in the Hartford, Connecticut headquarters.
The Company receives servicing fees on loans serviced for others in varying
amounts, as determined under the particular terms of the sale. Management
believes that servicing most loans originated enhances the Company's
relationship with borrowers. This contact allows the Company to continue to
offer its loan products to clients who may need additional financing. Further,
these servicing arrangements provide an additional and profitable revenue stream
that is less cyclical than the business of originating and selling loans
themselves.
After a loan is closed, the Loan Servicing business unit reviews the loan files
to confirm that loans were originated in accordance with any applicable
government guarantee program guidelines and Company policies. Thereafter, the
loan officers and the Loan Review business unit conduct periodic reviews of the
borrower's financial condition.
DELINQUENCY AND COLLECTION ACTIVITIES
The assigned loan officer retains responsibility for routine collection of loans
in his or her portfolio. The Company attempts to collect all loans on a 30-day
basis. An officer's initial collection efforts generally begin when an account
is 15 days past due. At 20 days past due, a reminder notice is sent to the
borrower and the officer again attempts to contact the borrower to determine the
reason for the delinquency and if the account will be brought current.
If a borrower is unable to make a payment within 30 days of the due date as of
month-end, and has not made acceptable alternative arrangements with the
Company, the officer issues a past due letter requiring the borrower to make the
required payment within 10 business days by certified or cashiers check. If
payment is not remitted on time, the account is transferred to the Company's
Asset Recovery business unit for consideration of additional collection
procedures, including issuance of a demand letter and possible liquidation of
collateral.
The Asset Recovery business unit is responsible for contacting the borrower and
analyzing its current and projected financial condition, the reasons leading to
the delinquency and the value of the collateral available to the Company. The
Asset Recovery Officer then proposes a workout plan to the Chief Credit Officer
and other involved members of senior management. The Asset
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Recovery business unit will also provide any required notices and generally seek
to comply with applicable government guarantee program or investor requirements.
If a modification of loan terms or other acceptable workout cannot be achieved
within a reasonable time frame, the Company will liquidate the collateral
securing the loan. The Company prefers not to take title to real property or
equipment unless required to facilitate the collection process. The Company
solicits assistance from the principals of the delinquent borrower to effect the
liquidation of any property, with title remaining in the borrower's name,
thereby avoiding a lengthy foreclosure or repossession process and exposure to
the Company regarding environmental or other liability issues. The Company has
generally found principals of borrowers to be cooperative in assisting the
Company in liquidating collateral efficiently. The Company follows the same
general workout procedures for substantially all of the loans serviced.
If a loan carries an SBA guarantee, the responsible SBA District Office will be
notified of the delinquency and will be presented with a liquidation plan within
60-90 days of such delinquency. Unless the SBA objects, the Company will carry
out the terms of the liquidation plan. As a Preferred Lender, the Bank has
responsibility and authority over liquidation procedures on all SBA guaranteed
loans serviced. Any loss after liquidation of collateral is allocated pro rata
between the guaranteed and unguaranteed portions of an SBA Loan. After an SBA
loan becomes 60-90 days past due, the SBA, at the Company's request, will
repurchase the guaranteed portion of the principal balance of the loan at par
from the secondary market investor, together with accrued interest covering a
period of up to 120 days.
USDA procedures require that the Company file a liquidation plan when it is
believed action should be taken on a delinquent loan, which is generally when
the loan is 60-90 days delinquent. The USDA has 30 days to review the plan. The
Company will then execute the approved plan or work with the USDA to arrive at a
mutually acceptable plan. Any loss after liquidation of collateral is allocated
pro rata between the guaranteed and unguaranteed portions of the USDA loan. The
holder of the guaranteed portion may request that the USDA repurchase the
guaranteed portion at any time, or the Company will request repayment on that
holder's behalf when liquidation is complete. The USDA does not impose any
restrictions on the number of days for which interest will be paid on the
guaranteed portions.
The liquidation of delinquent working capital and medium and short term Ex-Im
Bank loans is handled in conjunction with Ex-Im Bank. If deemed appropriate, the
Company may submit a plan to Ex-Im Bank to approve a workout plan to provide
additional time for the borrower to repay the loan. The Company may submit a
claim for repurchase at any time between 30 and 120 days after a delinquency
occurs, but at no time may such claim be made more than 150 days after the
delinquency unless properly extended in the event of a workout plan. Ex-Im Bank
will make payment under its guarantee within 30 days after acceptance of the
Company's request.
In the event of default on a private sector insured loan, the Company handles
the liquidation of the loan during a 150-day waiting period. At the end of the
waiting period, subject to certain deductibles being satisfied, the private
sector insurance company pays the Company 95% of the principal balance, plus
accrued interest and may ask the Company to continue to handle the
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liquidation of the loan. The Company may also seek approval of a workout plan
from the insurance company if deemed appropriate.
The Company retains responsibility for the proper documentation and servicing of
all loans serviced for others, and may incur losses related to these loans if it
is found to be negligent by a guaranteeing agency, insurer or investor in
carrying out these duties.
Unguaranteed and uninsured loans or unguaranteed and uninsured portions of loans
held by investors are subject to negotiated servicing agreements, which in some
cases, provide investors with the option of assuming responsibility for all
collection efforts after a loan becomes 60-90 days delinquent. If the Company is
contractually responsible for collection efforts, the servicing agreements
generally require that the investor pre-approve liquidation actions.
CREDIT RISK MANAGEMENT
The Chief Credit Officer has primary responsibility for credit risk management,
ensuring the appropriateness of underwriting criteria and application thereof,
the implementation of RISCOPE(sm) (the Company's proprietary commercial credit
scoring and risk assessment model), and the independent analyses of loans by the
Loan Review business unit.
The Credit Policy Officer, who reports to the Chief Credit Officer, reviews all
credit memoranda for compliance with the requirements of government guarantee
programs and Company credit policies. If, based on particular facts and
circumstances, policy exceptions are proposed by lending officers, the Credit
Policy Officer will ensure that all appropriate policy exceptions are documented
and approved by the authorized party. The Company's management Asset Quality
Committee evaluates the nature and trends of these exceptions monthly. The Chief
Credit Officer reports these exceptions to the Board of Directors' Loan
Committee quarterly.
The Bank "risk rates" its loan portfolio by monitoring changes in the financial
condition of borrowers, assessing overall economic trends, and assigning
numerical ratings to individual loans. The Company applies a nine tiered risk
rating system. The rating system, in conjunction with other available
quantitative and qualitative data, is utilized to assist management in its
quarterly evaluation of the adequacy of the Allowance for Loan Losses.
The assigned lending officer has primary responsibility for risk ratings, and
that officer's decisions are periodically reviewed by the Loan Review business
unit. Risk ratings are based on the borrower's operating cash flow, industry,
product line, earnings, assets, liability, management experience, debt capacity,
and prior credit history with the Company.
The Company has developed a proprietary credit scoring and risk analysis model,
RISCOPE(sm), used in the initial underwriting, post-closing loan monitoring and
on-going rating process by lending officers and the Loan Review business unit.
RISCOPE(sm) assists the Company in quantifying the credit risk of commercial
clients. The model takes into account quantitative and qualitative factors and
is designed to analyze the Company's primary client base: small and
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medium size industrial companies. Additionally, the model facilitates an
efficient completion of the underwriting process and, once loans are originated,
helps management identify weaknesses in loans earlier than might otherwise be
done if payment default were their only manifestation.
The Loan Review business unit reviews the loan portfolio to evaluate the
appropriateness of officer risk ratings and overall trends in the portfolio.
Loan Review results are reported to the Loan Committee of the Board quarterly.
COMMUNITY FINANCE
The Company's Community Finance business unit, formerly named "Private Banking,"
provided funding for the Company by managing its deposit base, which consisted
of demand deposits, money market accounts and time certificates of deposits, by
targeting the commercial depository accounts of small and medium size industrial
companies, as well as the personal accounts of their principals, and by offering
a full array of financial products. Subsequent to the sale of the Company's
checking, savings and money market accounts in March 1999, the unit solicited
retail certificates of deposit. Currently, retail certificates of deposit are
solicited by an officer in the Finance business unit.
In November 1999, the efforts of the Community Finance officers were directed to
the solicitation of loans to businesses located in the greater Hartford area. As
a federally-insured depository, the Bank must comply with the Community
Reinvestment Act ("CRA") regulations by offering lending, investment and other
financial services to its "assessment area" as determined under the CRA. The
Company believes that the lending to be offered by the Community Finance
business unit in conjunction with other loans offered by the Hartford-based
Commercial lenders will enable it to meet its obligations under the CRA.
COMPETITION
The Company competes for clients with other commercial and savings banks,
finance companies, mutual funds, insurance companies, brokerage and investment
banking firms and certain other nonfinancial institutions, many of whom are able
to devote far greater resources than the Company to market, underwrite and
service loans to the same client base. The Company competes by emphasizing its
expertise and knowledge of its clients' businesses, commitment to service, and
flexibility in structuring financial transactions. Through the combined
utilization of government guaranteed loan programs, the Company is able to
provide flexible longer-term financing than would otherwise be available to
borrowers.
REGULATION AND SUPERVISION
Financial Services Modernization
On November 12, 1999, President Clinton signed into law The Gramm-Leach-Bliley
Act ("Gramm-Leach") which significantly altered banking laws in the United
States. Gramm-Leach enables combinations among banks, securities firms and
insurance companies beginning
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March 11, 2000. As a result of Gramm-Leach, many of the depression-era laws
which restricted these affiliations and other activities which may be engaged in
by banks and bank holding companies, were repealed. Under Gramm-Leach, bank
holding companies are permitted to offer their customers virtually any type of
financial service that is financial in nature or incidental thereto, including
banking, securities underwriting, insurance (both underwriting and agency) and
merchant banking.
In order to engage in these new financial activities, a bank holding company
must qualify and register with the Federal Reserve Board as a "financial holding
company" by demonstrating that each of its bank subsidiaries is "well
capitalized," "well managed," and has at least a "satisfactory" rating under the
CRA.
These new financial activities authorized by Gramm-Leach may also be engaged in
by a "financial subsidiary" of a national or state bank, except for insurance or
annuity underwriting, insurance company portfolio investments, real estate
investment and development and merchant banking, which must be conducted in a
financial holding company. In order for the new financial activities to be
engaged in by a financial subsidiary of a national or state bank, Gramm-Leach
requires each of the parent bank (and its sister-bank affiliates) to be well
capitalized and well managed; the aggregate consolidated assets of all of that
bank's financial subsidiaries may not exceed the lesser of 45% of its
consolidated total assets or $50 billion; the bank must have at least a
satisfactory CRA rating; and, if that bank is one of the 100 largest national
banks, it must meet certain financial rating or other comparable requirements.
Gramm-Leach establishes a system of functional regulation, under which the
federal banking agencies will regulate the banking activities of financial
holding companies and banks' financial subsidiaries, the U.S. Securities and
Exchange Commission will regulate their securities activities and state
insurance regulators will regulate their insurance activities. Gramm-Leach also
provides new protections against the transfer and use by financial institutions
of consumers' nonpublic, personal information.
Holding Company Regulation
The Company is registered as a bank holding company and regulated and subject to
periodic examination, by the Board of Governors of the Federal Reserve System
("FRB") under the Bank Holding Company Act ("BHCA").
Although the Company may meet the qualifications for electing to become a
financial holding company under Gramm-Leach, the Company has elected to retain
its pre-Gramm-Leach status for the present time under the BHCA.
The Company is currently limited to the business of owning, managing or
controlling banks and engaging in certain other bank-related activities,
including those activities that the FRB determines from time to time to be
closely related to banking. The BHCA requires, among other things, the prior
approval of the FRB if a bank holding company proposes to (i) acquire all or
substantially all of the assets of a bank, (ii) acquire direct or indirect
ownership or control of
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more than 5% of the outstanding voting stock of any bank (unless it already owns
a majority of such bank's voting shares) or (iii) merge or consolidate with any
other bank holding company.
As a bank holding company, the Company is required by the FRB to act as a source
of financial strength and to take measures to preserve and protect the Bank. As
a result, the Company may be required to inject capital in the Bank if that need
arises. The FRB may charge a bank holding company such as the Company with
unsafe and unsound practices for failure to commit resources to a subsidiary
bank when required.
To be considered regulatory capital, loans from the Company to the Bank must be
on terms subordinate in right of payment to deposits and to most other
indebtedness of the Bank.
The FRB, FDIC and, in the case of a Connecticut state bank and trust company,
the CDB, collectively have extensive enforcement authority over bank holding
companies and Connecticut state banks. This enforcement authority, initiated
generally for violations of law and unsafe and unsound practices, includes,
among other things, the ability to assess civil money penalties, to initiate
injunctive actions and to terminate deposit insurance in extreme cases.
INTERSTATE BANKING
The Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994, as
amended (the "Interstate Banking Act") generally permits bank holding companies
to acquire banks in any state, and preempts all state laws restricting the
ownership by a bank holding company of banks in more than one state. The
Interstate Banking Act also permits a bank to merge with an out-of-state bank
and convert any offices into branches of the resulting bank if both states have
not opted out of interstate branching; permits a bank to acquire branches from
an out-of-state bank if the law of the state where the branches are located
permits the interstate branch acquisition; and permits banks to establish and
operate de novo interstate branches whenever the host state opts-in to de novo
branching. Bank holding companies and banks seeking to engage in transactions
authorized by the Interstate Banking Act must be adequately capitalized and
managed.
Connecticut has allowed interstate mergers and acquisitions, the establishment
of Connecticut-chartered banks by foreign bank holding companies and interstate
de novo branching since 1995, subject to certain reciprocity requirements.
Connecticut law also places a minimum permissible age of five years on the
target bank and a 30% limit on concentration of deposits in both interstate and
intrastate acquisitions. Legislation was enacted in 1996 which expressly permits
an out-of-state bank to merge or consolidate with or acquire a branch of another
out-of-state bank which has a branch in Connecticut.
REGULATION OF THE BANK
General
As a Connecticut-chartered bank and trust company, the deposits of which are
insured by the FDIC, the Bank is subject to regulation and supervision by both
the Connecticut Department of
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Banking and the FDIC. This regulation and supervision is intended primarily to
protect depositors and the FDIC's Bank Insurance Fund, not stockholders.
The Connecticut Department of Banking regulates the Bank's internal organization
as well as its deposit, lending and investment activities. The approval of the
Connecticut Banking Commissioner (the "Commissioner") is required for the
establishment of branch offices and business combination transactions. The CDB,
through its Bank Examination Division, conducts periodic examinations of the
Bank. The FDIC also regulates many of the areas regulated by the Department.
Under Connecticut banking law, no person may acquire beneficial ownership of
more than 10% of any class of voting securities of a Connecticut-chartered bank,
or any bank holding company of such a bank, without prior notification of, and
lack of disapproval by, the Commissioner. Similar restrictions apply to any
person who holds in excess of 10% of any such class and desires to increase
these holdings to 25% or more of such class.
Connecticut banking laws grant banks broad lending authority. Subject to certain
limited exceptions, however, total secured and unsecured loans made to any one
obligor pursuant to this statutory authority may not exceed 25% of the Bank's
equity capital and the allowance for loan losses.
Federal law also imposes additional restrictions on the Bank with respect to
loans and credit to certain related parties and transactions with the Company's
principal stockholders, officers, directors and affiliates. Extensions of credit
to such persons (i) must be made on substantially the same terms (including
interest rates and collateral) as, and follow credit underwriting procedures not
less stringent than, those prevailing for comparable transactions with members
of the general public, and (ii) must not involve more than the normal risk of
repayment or present other unfavorable features.
Capital Adequacy
The federal bank regulatory authorities have adopted risk-based capital
guidelines to which the Bank is subject. The guidelines establish a systematic
framework that makes regulatory capital requirements more sensitive to
differences in risk profile among banking organizations, takes off-balance sheet
exposures into explicit account in assessing capital adequacy, and minimizes
disincentives to holding liquid, low-risk assets. These risk-based capital
ratios are determined by allocating assets and specified off-balance sheet
financial instruments into four weighting categories, with higher levels of
capital required for the categories perceived as representing greater risk.
Under these guidelines, a banking organization's capital is divided into two
tiers. The first tier ("Tier 1") includes common equity, perpetual preferred
stock (excluding auction rate, money market or remarketable issues) and minority
interests held by others in a consolidated subsidiary, less goodwill and any
disallowed intangibles. Supplementary ("Tier 2") capital includes, among other
items, cumulative and limited-life preferred stock, mandatory convertible
securities,
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subordinated debt and the allowance for loan and lease losses, subject to
certain limitations and less required deductions as provided by regulation.
Banking organizations are required to maintain a risk-based capital ratio of
total capital (Tier 1 plus Tier 2) to risk-weighted assets of 8%, of which at
least 4% must be Tier 1 capital. Federal bank regulatory authorities may,
however, set higher capital requirements when a banking organization's
particular circumstances warrant. As a general matter, banking organizations are
expected to maintain capital ratios well above the regulatory minimums.
In addition, federal bank regulatory authorities have established guidelines for
a minimum leverage ratio (Tier 1 capital to average total assets). These
guidelines provide for a minimum leverage ratio of 3% for banking organizations
that meet certain specified criteria, including excellent asset quality, high
liquidity, low interest rate exposure and the highest regulatory rating. Banking
organizations not meeting these criteria or which are experiencing or
anticipating significant growth are required to maintain a leverage ratio which
exceeds the 3% minimum by a least 100 to 200 basis points. The risk based
capital and leverage ratios of the Bank as of December 31, 1999 and December 31,
1998 are set forth in Note 8 to the Company's Consolidated Financial Statements.
Federal banking agencies must take "prompt corrective action" with respect to
depository institutions that do not meet minimum capital requirements. Federal
bank regulatory authorities have adopted regulations setting forth a five-tiered
system for measuring the capital adequacy of the depository institutions they
supervise. Under these regulations, a depository institution is classified in
one of the following capital categories: "well capitalized," "adequately
capitalized," "undercapitalized," "significantly undercapitalized" and
"critically undercapitalized." Based on the Bank's current regulatory capital
position, management believes that the Bank is "well capitalized."
The Bank is generally prohibited from making any capital distribution (including
payment of a cash dividend) or paying any management fees to the Company if the
Bank would thereafter be undercapitalized. Undercapitalized depository
institutions are subject to growth limitations and are required to submit a
capital restoration plan acceptable to federal banking agencies. If a depository
institution fails to submit an acceptable plan, it is treated as if it is
"significantly undercapitalized."
Failure to meet applicable capital guidelines could subject a bank or bank
holding company to a variety of enforcement remedies available to the federal
bank regulatory authorities, including limitation on the ability to pay
dividends, the issuance of a capital directive to increase capital and, in the
case of a bank, the termination of deposit insurance by the FDIC or (in severe
cases) the appointment of a conservator or receiver.
Federal bank regulatory authorities have recently proposed amendments to current
risk based capital regulations that may require the Company to set aside
additional risk based capital for loans securitized or sold that meet certain
criteria. The Company is currently evaluating the implications of such proposal.
23
<PAGE> 27
Dividends
The Bank is subject to legal limitations on the frequency and amount of
dividends that can be paid to the Company. The FDIC and CDB, in general, also
have the power to prohibit the payment of dividends by the Bank which would
otherwise be permitted under applicable regulations if the agencies determine
that these dividends would constitute an unsafe or unsound practice.
CDB approval is required for the payment of dividends by the Bank in any
calendar year if the total of all dividends declared by the Bank in that year
exceeds the current year's net income combined with the retained net income of
the two preceding years. "Retained net income" means the net income of a
specified period less any common or preferred stock dividends declared for that
period. Moreover, no dividends may be paid by a state bank in excess of its
undivided profits account. In addition, the FRB and the FDIC have issued policy
statements which provide that, as a general matter, insured banks and bank
holding companies may pay dividends only out of current operating earnings.
There are also statutory limits on other transfers of funds to the Company and
any other future non-banking subsidiaries of the Company by the Bank, whether in
the form of loans or other extensions of credit, investments or asset purchases.
These transfers by the Bank generally are limited in amount to 10% of the Bank's
capital and surplus to the Company and any such future subsidiary of the
Company, or 20% in the aggregate to the Company and all such subsidiaries.
Furthermore, these loans and extensions of credit are required to be fully
collateralized in specified amounts depending on the nature of the collateral
involved.
Community Reinvestment Act
The Federal and State of Connecticut Community Reinvestment Acts require the
FDIC and CDB to evaluate the Bank's performance in helping to meet the credit
needs of the community. The Bank defines its CRA marketplace as Hartford County.
This definition is not intended to restrict the availability of credit services
throughout the Bank's general service area, but represents a special commitment
the Bank has made to provide lending and depository services to the community.
As a part of the CRA program, the Bank is subject to periodic examinations by
the FDIC and CDB and maintains comprehensive records of its CRA activities for
this purpose. Following its most recent examination in March 1998 by its former
primary regulator, the Comptroller of the Currency, the Bank received a rating
of "Satisfactory." The Bank has recently filed a CRA Strategic Plan with the
FDIC and CDB. The Plan details the manner and level of performance to be
achieved to obtain a satisfactory or an outstanding rating in each of the
lending, investment and service categories as specified in the CRA. The
Company's CRA Strategic Plan has been approved by the FDIC and is still under
consideration by the CDB.
24
<PAGE> 28
The Bank is specifically interested in making financing available to small and
medium size businesses in its defined lending area. The Bank evaluates credit
applications without regard to race, color, religion, national origin, gender,
marital status or age, and does not discriminate against any loan applicant
whose income may come entirely or in part from any public assistance program, or
against any applicant who has exercised in good faith any right under the
Consumer Protection Act. The Company maintains preferred status with the SBA,
USDA and Ex-Im Bank which enables it to provide access to credit products that
might otherwise be unavailable.
ITEM 2. PROPERTIES
The Company leases approximately 50,000 square feet in Hartford, Connecticut to
house its headquarters and lending and support staff. The Company maintains
leased space for representative offices in Boston and Springfield,
Massachusetts; Providence, Rhode Island; Morristown, New Jersey; Rochester, New
York; Philadelphia and Pittsburgh, Pennsylvania; Washington, D.C.; Detroit,
Michigan; St. Louis, Missouri; and Cleveland, Ohio. The Company's leases
generally provide for two five-year renewal options and options on additional
space. Management believes that its existing facilities are adequate for their
present and proposed uses and that suitable facilities will be available on
reasonable terms for any additional space required.
ITEM 3. LEGAL PROCEEDINGS
Because the nature of the business of the Company involves the collection of
numerous accounts, the validity of liens and compliance with state and federal
laws, the Company is subject to claims and legal actions in the ordinary course
of its business. While it is impossible to estimate with certainty the ultimate
legal and financial liability with respect to these claims and actions, the
Company believes that the ultimate resolution of these actions is unlikely to
have a material adverse effect on the financial position, results of operations
or cash flows of the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted during the fourth quarter of 1999 to a vote of
security holders through solicitation of proxies or otherwise.
25
<PAGE> 29
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Information required by this item may be found on the inside back cover of the
Company's 1999 Annual Report to Shareholders, which is incorporated herein by
reference and is filed as Exhibit 13.1 hereto.
ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA
Information required by this item may be found on page 4 of the Company's 1999
Annual Report to Shareholders, which is incorporated herein by reference and is
filed as Exhibit 13.1 hereto.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Information required by this item may be found on pages 5 through 22. of the
Company's 1999 Annual Report to Shareholders, which is incorporated herein by
reference and is filed as Exhibit 13.1 hereto.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Information required by this item may be found on pages 19 through 21 of the
Company's 1999 Annual Report to Shareholders, which is incorporated herein by
reference and is filed as Exhibit 13.1 hereto.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Information required by this item may be found on pages 23 through 46 of the
Company's 1999 Annual Report to Shareholders, which is incorporated herein by
reference and is filed as Exhibit 13.1 hereto.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
26
<PAGE> 30
PART III
ITEMS 10 - 13
Information required by these items may be found in the Company's proxy
statement for its Annual Meeting of Shareholders, which will be filed by the
Company within 120 days of the end of its most recent fiscal year.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS ON FORM 8-K
A. The following documents are filed as a part of this report:
1. Financial Statements set forth on pages 23 through 46 of the
1999 Annual Report to Shareholders which is filed herewith as
Exhibit 13.1.
(i) Report of Independent Accountants
(ii) Consolidated Balance Sheets as of December 31, 1999
and 1998
(iii) Consolidated Statements of Income for the Years Ended
December 31, 1999, 1998 and 1997
(iv) Consolidated Statements of Changes in Stockholders'
Equity for the Years Ended December 31, 1999, 1998
and 1997
(v) Consolidated Statements of Cash Flows for the Years
Ended December 31, 1999, 1998 and 1997
2. Financial Schedules:
None required.
3. Exhibits:
Exhibit
Number Description
------ -----------
3.1 Amended and Restated Certificate of Incorporation of
the Registrant.*
3.2 Amended and Restated By-laws of the Registrant.*
10.1 Employment Agreement among Registrant, First National
Bank of New England and Brett N. Silvers dated April
15, 1994; as amended by Letter Agreement dated July
3, 1997.*
10.1.1 Letter dated March 31, 1999, to amend the Employment
Agreement among the Registrant, First International
Bank, N.A. and Brett N. Silvers.***
27
<PAGE> 31
10.1.2 Letter dated March 15, 2000, to amend the Employment
Agreement among the Registrant, First International
Bank and Brett N. Silvers.
10.1.3 Registration Rights Agreement by and among First
International Bancorp, Inc. and Nancy W. Silvers and
The Silvers Family Trust, dated March 31, 1999.***
10.1.4 Letter Agreement dated October 27, 1999, between
Brett N. Silvers and First International Bancorp,
Inc. regarding temporary restrictions on the transfer
and voting of 200,000 shares sold to Mr. Silvers.
10.2 Promissory Note of Brett N. Silvers, payable to the
Registrant, dated June 30, 1994, as amended.*
10.2.1 Promissory Note of Brett N. Silvers, payable to the
Registrant dated March 31, 1999.
10.3 Stock Pledge Agreement, dated June 30, 1994, between
the Registrant and Brett N. Silvers, as amended.*
10.3.1 Stock Pledge Agreement dated March 31, 1999, between
the Registrant and Brett N. Silvers.
10.4 Amended and Restated 1996 Stock Option Plans.
10.5 1994 Incentive Stock Option Plan, as amended.*
10.6 401(k) Plan.
10.7 Lease between Cambridge One Commercial Plaza, LLC
and the Bank dated June 1, 1997.*
10.8 First Amendment of Lease between Cambridge One
Commercial Plaza, LLC and the Bank dated November 30,
1998.****
10.9 Second Amendment of Lease between Cambridge One
Commercial Plaza, LLC and the Bank dated as of March
26, 1999.****
10.10 Employment Agreement between the Bank and Leslie A.
Galbraith dated March 15, 2000.
10.11 Employment Agreement between the Bank and Shaun P.
Williams dated March 6, 2000.
10.12 Revolving Commercial Loan Warehouse and Security
Agreement among Prudential Securities Credit
Corporation, First National Bank of New England and
First International Bancorp, Inc., dated as of
December 4, 1998.****
10.12.1 First Amendment among Prudential Securities Credit
Corporation, First International Bank and First
International Bancorp, Inc., dated as of June 30,
1999.
10.12.2 Second Amendment among Prudential Securities Credit
Corporation, First International Bank and First
International Bancorp, Inc., dated as of January 12,
2000.
10.13 Amended and Restated Loan Purchase and Servicing
Agreement among FNBNE Funding Corp., First
International Bank, Variable
28
<PAGE> 32
Funding Capital Corporation, First Union Capital
Markets Corp., First Union National Bank and HSBC
Bank USA, dated September 24, 1999.
10.13.1 Amendment No. 1 to Amended and Restated Purchase and
Servicing Agreement among FNBNE Funding Corp., First
International Bank, Variable Funding Capital
Corporation, First Union Securities, Inc., First
Union National Bank and HSBC Bank USA, dated November
23, 1999.
10.14 Pooling and Servicing Agreement between Marine
Midland Bank and First National Bank of New England,
dated as of May 31, 1998.****
10.15 Sale and Servicing Agreement between FNBNE Business
Loan Trust 1998-A and First National Bank of New
England, dated as of December 1, 1998.****
10.15.1 Pooling and Servicing Agreement between HSBC Bank USA
and First International Bank, National Association
for the SBA Loan-Backed Series 1999-1 dated as of May
31, 1999.
10.15.2 Sale and Servicing Agreement between FIB Business
Loan Trust 1999-A and First International Bank, dated
as of September 1, 1999.
10.16 Revolving Commercial Loan Warehouse and Security
Agreement between Prudential Securities Credit
Corporation and FIB Holdings, Inc., dated as of
December 1, 1999.
10.17 Commercial Loan Sale Agreement between First
International Bank and FIB Holdings, Inc., dated as
of December 1, 1999.
10.18 Guaranty from First International Bancorp, Inc. in
favor of Prudential Securities Credit Corporation,
dated as of December 1, 1999.
10.19 Sale and Servicing Agreement between FIB Funding
Trust and First International Bank dated as of
October 1, 1999
10.20 Note Purchase Agreement among FIB Funding Trust,
First International Bank, Variable Funding Capital
Corporation, First Union Securities, Inc. and First
Union National Bank dated as of October 1, 1999
10.21 Guaranty from First International Bank in favor of
First Union Securities, Inc. dated as of October 1,
1999
13.1 1999 Annual Report to Shareholders.
21.1 Subsidiaries of Registrant.
23.1 Consent of PricewaterhouseCoopers LLP.
27.1 Financial Data Schedule for the Year Ended December
31, 1999.
99 Agreement for Purchase and Sale of Assets and
Assumption of Liabilities between First National Bank
of New England and Hudson United Bank, dated as of
December 31, 1998.**
29
<PAGE> 33
* Denotes an exhibit which has previously been filed as an
exhibit to the Company's Registration Statement on Form S-1, Commission File No.
333-31339.
** Denotes an exhibit which has previously been filed as an
exhibit to the Company's Report on Form 8-K, Commission File No. 0-22861.
*** Denotes an exhibit which has previously been filed as an
exhibit to the Company's Report on Form 10-Q, Commission File No. 0-22861.
**** Denotes an exhibit which has previously been filed as an
exhibit to the Company's Report on Form 10-K, Commission File No. 0-22861.
B. Reports on Form 8-K.
The Company did not file any Current Reports on Form 8-K during the
quarter ended December 31, 1999.
30
<PAGE> 34
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
Date: March 29, 2000
First International Bancorp, Inc.
By:/s/ Brett N. Silvers
-----------------------
Brett N. Silvers
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1934, this report has been
signed below by the following persons on behalf of the registrant and in the
capacities and on the dates indicated:
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Brett N. Silvers Director and March 29, 2000
- --------------------------------- Chief Executive Officer
Brett N. Silvers
/s/ Michael R. Carter Director March 29, 2000
- ---------------------------------
Michael R. Carter
/s/ Arnold L. Chase Director March 29, 2000
- ---------------------------------
Arnold L. Chase
/s/ Cheryl A. Chase Director March 29, 2000
- ---------------------------------
Cheryl A. Chase
/s/ Frank P. Longobardi Director March 29, 2000
- ---------------------------------
Frank P. Longobardi
/s/ Leslie A. Galbraith Executive Vice President March 29, 2000
- --------------------------------- and Secretary
Leslie A. Galbraith
/s/ Shaun P. Williams Executive Vice President, Chief March 29, 2000
- --------------------------------- Financial Officer and Treasurer
Shaun P. Williams
</TABLE>
31
<PAGE> 1
Exhibit 10.1.2
March 15, 2000
Mr. Brett N. Silvers
61 Ledyard Road
West Hartford, CT 06117
Dear Brett:
Reference is made to that certain Employment Agreement (the "EMPLOYMENT
AGREEMENT") dated as of April 15, 1994 among Brett N. Silvers ("SILVERS"), First
International Bancorp, Inc. ("FIB") and First National Bank of New England (now
known as First International Bank) ("FIRST INTERNATIONAL"), as amended by those
certain letter agreements (collectively, the "LETTER AGREEMENTS") dated July 3,
1997 and March 31, 1999 among Silvers, FIB and First International.
Silvers, FIB and First International agree that the first sentence in
Section 2.1 of the Employment Agreement, as amended by the Letter Agreements, is
deleted in its entirety and the following is substituted in its place:
""Term of Employment" shall mean the period commencing as of April 1,
1994 and ending June 30, 2001."
Except to the extent expressly amended herein, the Employment
Agreement, as amended by the Letter Agreements, remains unmodified and in full
force and effect in accordance with its terms.
Please sign in the space provided below to indicate your acceptance of
the foregoing, whereupon the provisions of this letter shall take effect.
Very truly yours,
FIRST INTERNATIONAL BANCORP, INC.
By:/s/Leslie A. Galbraith
-------------------------
Leslie A. Galbraith
Its Executive Vice President
<PAGE> 2
-2-
FIRST INTERNATIONAL BANK
By:/s/Leslie A. Galbraith
-------------------------
Leslie A. Galbraith
Its President
Agreed to and Accepted this 17th day of March, 2000.
/s/Brett N. Silvers
- ---------------------
Brett N. Silvers
<PAGE> 1
Exhibit 10.1.4
[BRETT N. SILVERS LETTERHEAD]
October 27, 1999
First International Bancorp, Inc.
280 Trumbull Street
Hartford, Connecticut 06103
Attention: Leslie A. Galbraith, Executive Vice President
Ladies and Gentlemen:
As you know, in connection with the recent amendment of my employment
agreement, First International Bancorp, Inc. (the "Company") agreed to sell to
me, and I agreed to purchase from the Company, 200,000 shares of common stock of
the Company (the "Shares") at an aggregate purchase price of $2,000,000. As
payment of the purchase price for the Shares, I delivered to the Company,
$20,000 in cash and a promissory note (the "Note") for the balance of the
purchase price. In addition, I executed and delivered a pledge agreement (the
"Pledge Agreement") pursuant to which I pledged the Shares to the Company to
secure my obligations under the Note. Subsequent to the sale, as the Company is
aware, I made certain estate planning transfers of the Shares to members of my
immediate family (subject to the Pledge Agreement). As of the date hereof, all
of the Shares are owned by members of my immediate family.
The Company has informed me that in order to ensure full compliance
with the rules and regulations of the Nasdaq-AMEX Stock Market, the Company
intends to submit to the stockholders of the Company (the "Company
Stockholders") for their consideration and approval at the next meeting of the
Company Stockholders, the sale of the Shares to me on the terms set forth above.
Furthermore, I have agreed to enter into this letter agreement by which I am
agreeing to certain temporary restrictions on the transfer and voting of the
Shares.
Based on the foregoing, while this letter agreement is in effect:
1. I acknowledge and agree on behalf of myself and any immediate family
members to whom I have transferred the Shares, that the Shares shall not be
voted on any matter, whether by proxy, at a special or regularly scheduled
meeting of the Company Stockholders or by any unanimous
<PAGE> 2
First International Bancorp, Inc.
October 27, 1999
Page 2
consent or similar vote or consent of the Company Stockholders, which may be
called or requested by the Company.
2. I agree on behalf of myself and any immediate family members to whom
I have transferred the Shares, that I will not sell, assign, transfer or
otherwise dispose of or permit to be sold, assigned, transferred or otherwise
disposed of, any of the Shares, excepting however, any transfer by operation of
law, and in a conversion into cash or securities of another issuer upon
consummation of a merger or similar transaction to which the Company is a party.
3. I represent that I have the complete and unrestricted power and the
unqualified right to enter into and perform the terms of this letter agreement.
I further represent that this letter agreement constitutes a valid and binding
agreement, enforceable against me in accordance with its terms, except as
enforcement may be limited by general principles of equity whether applied in a
court of law or a court of equity and by bankruptcy, insolvency and similar laws
affecting creditors' rights and remedies generally. I represent that either I or
immediate family members to whom I have transferred the Shares, beneficially own
the Shares, free and clear of any liens, claims, charges or other encumbrances
or restrictions of any kind whatsoever, other than pursuant to the Pledge
Agreement referred to above or the Securities Act of 1933, as amended or the
Securities Exchange Act of 1934, as amended, and have sole and otherwise
unrestricted, voting power with respect to such Shares.
4. The agreements contained herein shall remain in full force and
effect until such time as the Company Stockholders shall have approved the sale
of the Shares to me in accordance with the first paragraph of this letter
agreement, at which time, the agreements contained herein shall automatically
terminate and be of no further force and effect without any action on my or the
Company's part. In the event that the Company Stockholders shall have failed to
approve the sale of the Shares to me after taking a vote on such matter at the
next meeting of the Company Stockholders to be held after the date hereof, I
agree that the sale of the Shares to me shall be rescinded. In such event, I and
the Company agree to take all necessary actions to effect such rescission.
<PAGE> 3
First International Bancorp, Inc.
October 27, 1999
Page 3
5. The Company hereby agrees that it will use its best efforts to cause
the sale of the Shares to me to be included in any proxy materials prepared and
delivered to the Company Stockholders by the Company in connection with the next
meeting of the Company Stockholders to be held after the date hereof.
6. I have signed this letter agreement intending to be bound thereby. I
expressly agree that this letter agreement shall be specifically enforceable in
any court of competent jurisdiction in accordance with its terms against me. All
of the covenants and agreements contained in this letter agreement shall be
binding upon, and inure to the benefit of, the respective parties and their
permitted successors, assigns, heirs, executors, administrators and other legal
representatives, as the case may be.
7. This letter agreement may be executed in one or more counterparts,
each of which will be deemed an original but all of which together shall
constitute one and the same instrument.
8. This letter agreement is deemed to be signed as a sealed instrument
and is to be governed by the laws of the State of Connecticut, without giving
effect to the principles of conflicts of laws thereof. If any provision hereof
is deemed unenforceable, the enforceability of the other provisions hereof shall
not be affected.
If the foregoing accurately reflects your understanding of the subject
matter intended to be contained herein, please confirm our agreement by signing
this letter where indicated below.
Very truly yours,
/S/ Brett N. Silvers
--------------------
ACCEPTED AND AGREED
AS OF THE DATE FIRST
ABOVE WRITTEN.
FIRST INTERNATIONAL BANCORP, INC.
By: /S/ Leslie Galbraith
- ------------------------
Name: Leslie Galbraith
Title: Executive Vice President
<PAGE> 1
Exhibit 10.2.1
PROMISSORY NOTE
$1,980,000 March 31, 1999
FOR VALUE RECEIVED, the undersigned Brett N. Silvers (hereinafter
called "MAKER") promises to pay to the order of First International Bancorp,
Inc. (hereinafter called "PAYEE") at its address at 280 Trumbull Street,
Hartford, Connecticut, or at such other place as the holder hereof (including
the Payee, hereinafter referred to as "HOLDER") may designate in lawful money of
the United States, the principal sum of One Million Nine Hundred Eighty Thousand
Dollars ($1,980,000), together with interest on the unpaid balance of this note,
beginning as of the date hereof, at an interest rate of seven (7%) percent per
annum, together with all expenses, including reasonable attorneys' fees,
incurred in any action to collect this note.
The principal of this note, together with accrued interest, shall be
due and payable in full on April 1, 2002. Such interest shall be calculated as
simple interest, rather than being compounded; however, notwithstanding the
interest rate and payment of interest and principal required above, no interest
or principal shall be payable under this note upon the occurrence of a Change of
Control (as defined in that certain Employment Agreement dated as of April 15,
1994 among Maker, Payee and First National Bank of Connecticut (now known as
First International Bank, National Association) ("FIRST INTERNATIONAL"), as
amended by those certain letter agreements dated July 3, 1997 and March 31, 1999
among Maker, Payee and First International).
Maker agrees that (i) if Maker shall fail to pay any sum due under this
note within ten (10) days after receiving notice from the Holder that such
amount is due; or (ii) if Maker shall suffer or permit the filing by or against
it of any petition for adjudication, arrangement, reorganization or the like
under any bankruptcy or insolvency law or make an assignment for the benefit of
creditors, and if, in the case of an involuntary petition, such petition is not
dismissed within thirty (90) days of the filing thereof (each of the events and
circumstances in (i) and (ii) being events of default), then, upon the happening
of any of such event, the entire indebtedness with accrued interest thereon (if
any) due under this note shall be immediately due and payable at the option of
the Holder.
<PAGE> 2
Maker may prepay any amounts on account of principal at any time
without the imposition of any fee or penalty.
Notwithstanding any other provision hereof, in enforcing the provisions
hereof, the Holder shall not have the right to attach or execute upon any asset
of Maker unless and until the Holder shall have exhausted its remedies pursuant
to the Stock Pledge Agreement entered into between the Maker and the Payee this
day (that is, unless and until all of the shares of Payee Common Stock, par
value $.10 per share, pledged by Maker as collateral for this note have been
sold, and the proceeds thereof have been applied to the obligations of Maker set
forth in this note).
This note shall be governed by and construed in accordance with the
laws of the State of Connecticut.
Dated this 31st day of March, 1999.
/s/ Brett N. Silvers
--------------------------------
Brett N. Silvers
<PAGE> 1
EXHIBIT 10.3.1
STOCK PLEDGE AGREEMENT
AGREEMENT dated this 31st day of March, 1999, by and between BRETT N.
SILVERS, of West Hartford, Connecticut ("PLEDGOR"), and FIRST INTERNATIONAL
BANCORP, INC., a Delaware corporation ("PLEDGEE").
W I T N E S E T H:
WHEREAS, Pledgor is indebted to Pledgee pursuant to a Promissory Note
dated March 31, 1999, in the principal amount of $1,980,000 (the "NOTE"); and
WHEREAS, such indebtedness is being incurred by Pledgor in connection
with Pledgor's purchase from Pledgee of 200,000 shares of Common Stock of
Pledgee (the "STOCK"); and
WHEREAS, Pledgor has agreed to pledge the Stock to Pledgee as
collateral for the Note, on the terms set forth herein.
NOW, THEREFORE, it is hereby agreed as follows:
1. Pledge. As collateral for the Note and any substitutions or
replacements for the Note (collectively, the "OBLIGATIONS"), Pledgor hereby
pledges, assigns and delivers to the Pledgee and grants to Pledgee a first lien
security interest in the Stock. The Pledgor will deliver or cause to be
delivered to Pledgee, as soon as it is received by Pledgor or becomes available
to Pledgor from the issuer or any transfer agent for the issuer, a certificate
evidencing the ownership of the Stock. Contemporaneously herewith, Pledgor is
delivering to Pledgee a stock power executed in blank with respect to the Stock.
The Pledgee shall hold the Stock as security for the payment of and performance
of the Obligations and Pledgor shall not encumber, assign or dispose of the
Stock except in accordance with the provisions of this Agreement and except that
Pledgor shall have the right to transfer the Stock, subject to the first lien
security interest granted in this Agreement, to one or more family members of
Pledgor and/or trusts as to which the sole beneficiaries are Pledgor and/or
family members of Pledgor. However, Pledgor shall have the right at any time or
times to sell all or any of the Stock, free and clear of the lien of Pledgee, so
long as the proceeds of such sale are applied first to reduce the balance, if
any, of the Obligations.
2. Dividends And Other Rights. If the Pledgor becomes entitled to
receive or receives cash dividends or any other distribution with respect to the
Stock, Pledgor shall be entitled to retain all of such dividend or distribution.
<PAGE> 2
3. Representation. The Pledgor warrants and represents that (i) the
Stock is duly and validly pledged to the Pledgee; and (ii) Pledgor has good
title to all the Stock, free and clear of all pledges and other encumbrances.
4. Stock Adjustments or Additions. In the event that during the term of
this pledge any stock dividend is declared or made, or if any reclassification,
readjustment or other change is made in the capital structure of the Company
(collectively, "STOCK DIVIDEND OR CHANGE"), 100% of all new, substituted and
additional shares or securities of the Company issued to or acquired by Pledgor
by reason of such Stock Dividend or Change shall be forthwith delivered to the
Pledgee to be held by it under this Agreement, and the term "STOCK" shall be
deemed to include such shares or securities.
5. Term. The pledge shall terminate upon payment of and performance of
all Obligations. Upon termination of this pledge, any Stock still held hereunder
shall be delivered forthwith to the Pledgor.
6. Default. The Pledgee shall have all of the rights and remedies with
respect to the Stock subject to the Uniform Commercial Code in force in
Connecticut on the date hereof (the "CODE"). Upon the occurrence of an event of
default under the Note, and during the continuation thereof, the Pledgee may (i)
cause all or any part of the Stock to be transferred into its name or into the
name of its nominee or nominees, and (ii) apply the Stock against the payment or
performance of the Obligations. Pledgor agrees that because of the Securities
Act of 1933, as amended, or any other laws or regulations, and for other
reasons, there may be legal and/or practical restrictions or limitations
affecting Pledges in any attempts to dispose of certain portions of the Stock
and for enforcement of its rights. For these reasons, Pledgee is hereby
authorized by Pledgor, but not obligated, in the event of the occurrence of an
event of default under the Documents, to sell all or any part of the Stock at
private sale, subject to investment letter or in any other manner which will not
require the Stock, or any part thereof, to be registered in accordance with the
Securities Act of 1933, as amended, or the rules and regulations promulgated
thereunder, or any other law or regulation, at a commercially reasonable price
obtainable by Pledgee at any such private sale or other disposition in the
manner mentioned above. Pledgee is also hereby authorized by Pledgor, but not
obligated, to take such actions, give such notices, obtain such consents, and do
such other things as Pledgee may deem to be required or appropriate in the event
of sale or disposition of any of the Stock. Pledgee may in its discretion
approach a restricted number of potential purchasers and Pledgor acknowledges
that a sale under such circumstances may yield a lower price for the Stock, or
any part or parts thereof, than would otherwise be obtainable if same were
either offered to a large number of potential purchasers, or registered and sold
in the open market. Pledgor agrees (a) that in the event Pledgee shall upon the
occurrence of an event of default under the Documents (an "EVENT OF DEFAULT"),
sell the Stock, or any portion thereof, at such private sale or sales, Pledgee
shall have the right to rely upon the advice and opinion of any member firm of a
national securities exchange as to the commercially
<PAGE> 3
reasonably price obtainable upon such a private sale thereof, and (b) that such
reliance shall be conclusive evidence that Pledgee handled such matter in a
commercially reasonable manner under the Code.
7. Voting. Until the occurrence of an event of default under the Note,
Pledgor shall have the exclusive right to vote the Stock, at any and all
meetings of the shareholders of the Company. Following the occurrence of an
event of default under the Note, and during the continuance thereof, Pledgee
shall have the right, after either giving written notice thereof to Pledgor that
it intends thereafter to do so or after transferring the shares into the name of
Pledgee or its nominee, at its sole discretion and without liability therefor,
to cause such shares not to be voted.
8. Duty of Care. Beyond the exercise of reasonable care to assure the
safe custody of the certificates evidencing Stock while held hereunder, the
Pledgee shall have no duty or liability to collect any sums due in respect
thereof or to protect or preserve rights pertaining thereto, and shall be
relieved of all responsibility for the Stock upon surrendering the same to the
Pledgor.
9. Remedies Not Exclusive. The rights and remedies herein provided are
cumulative and are in addition to, and not exclusive of, any rights or remedies
provided by law, including without limitation, the rights and remedies of a
secured party under the Uniform Commercial Code in force in Connecticut on the
date hereof and as may be amended from time to time.
10. Effect. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and assigns.
11. Applicable Law. This Agreement shall be governed by and construed
according to the laws of the State of Connecticut and may not be amended except
in writing.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and delivered on the date first above written.
FIRST INTERNATIONAL BANCORP, INC.
By:/s/ Leslie A, Galbraith
------------------------------
Leslie A. Galbraith
Its Executive Vice President
/s/ Brett N. Silvers
---------------------------------
Brett N. Silvers
<PAGE> 1
Exhibit 10.4
FIRST INTERNATIONAL BANCORP, INC.
AMENDED AND RESTATED 1996 STOCK OPTION PLANS
1. Purpose of the Plan. The purpose of the 1996 Stock Option Plans is to
attract and retain the best available personnel for positions of substantial
responsibility, to provide additional incentive to certain key Directors and
officers of FIRST INTERNATIONAL BANCORP, INC. and any subsidiaries which FIRST
INTERNATIONAL BANCORP, INC. presently owns or controls or may hereafter organize
or acquire, and to promote the success of the business.
2. Definitions. As used herein the following definitions shall apply.
(a) "Bank Holding Company" shall mean FIRST INTERNATIONAL
BANCORP, INC. or any direct or indirect subsidiary now owned or hereafter
acquired by Bank Holding Company.
(b) "Board" shall mean the Board of Directors of FIRST
INTERNATIONAL BANCORP, INC.
(c) "Cause" means any of the following: (a) insubordination or
other refusal or failure to carry out the instructions or policies of the Board
or the board of directors of any of the Bank Holding Company's subsidiaries or
the officers to whom the Optionee reports; (b) dishonesty, crime or action
involving moral turpitude, or any other conduct that is illegal, immoral or
materially injurious to the Bank Holding Company or any of its subsidiaries; or
(c) breach of Optionee's covenants or obligations under any agreement with the
Bank Holding Company or any of its subsidiaries; or (d) non-performance in the
performance of Optionee's duties, evaluated primarily with reference to the Bank
Holding Company's or any of its subsidiaries' credit and organization policies
and with reference to the goals and budgets approved by the Board or the board
of directors of any of the Bank Holding Company's subsidiaries, and, if such
non-performance referred to in this clause (d) is capable of being corrected,
continuation of such non-performance for 30 days after the Bank Holding Company
or any of its subsidiaries, as the case may be, gives notice to the Optionee
describing such non-performance.
(d) "Code" shall mean the Internal Revenue Code of 1986, as
amended.
(e) "Common Stock" shall mean the Common Stock of the Bank
Holding Company.
(f) "Directors" means Directors of First International Bancorp,
Inc. or of any direct or indirect subsidiary now owned or hereafter acquired by
First International Bancorp, Inc.
(g) "Employee" shall mean a regular, salaried full-time
("full-time" as used herein is defined as an employee working 20 or more hours
per week) employee (as the term
<PAGE> 2
"employee" is used in Section 422 of the Code) of the Bank Holding Company or
one of its subsidiaries, as the term "subsidiary corporation" is defined in
Section 424 of the code.
(h) "Option" shall mean a stock option granted pursuant to the
Plan.
(i) "Option Price" shall mean the price determined by the Board
pursuant to the Plan.
(j) "Optioned Stock" shall mean the stock subject to an Option
granted pursuant to the Plan.
(k) "Optionee" shall mean an Employee who received an Option.
(l) "Plan" or "Plans" shall mean collectively the Amended and
Restated 1996 Stock Option Plans. Although the Plans shall be subject to the
same terms and conditions except as otherwise expressly stated herein, they
shall be deemed to be two Plans. One of the Plans encompasses Options granted to
the Directors, while Options will be granted on the terms set forth herein
without discretion by the Board with respect thereto; the other Plan encompasses
Options granted to persons other than Directors, which Options will be granted
as and when determined by the Board.
(m) "Share" shall mean a share of Common Stock of the Bank
Holding Company as adjusted in accordance with Section 12 of the Plan.
3. Stock Subject to the Plan. Subject to the provisions of Section 12 of
the Plan, the maximum aggregate number of Shares which may be optioned and sold
under the Plan is Two hundred thousand three hundred sixteen (200,316) of Common
Stock of the Bank Holding Company. Such Shares may be authorized but unissued
shares.
If an option should expire or become unexercisable for any reason
without having been exercised in full, the unpurchased Shares which were subject
thereto shall, unless the Plan shall have been terminated, become available for
other Options under the Plan.
4. Administration of the Plan.
(a) Procedure. The Plan shall be administered by the Board. The
Board may act hereunder through a Committee of two or more Directors (a
"Committee"). References herein to the granting of Options by the Board, the
authority of the Board, and the decisions, determinations and interpretations of
the Board are intended to include any Options granted by the Committee, exercise
of authority by the Committee, and any decisions, determinations and
interpretations by the Committee.
(b) Powers of the Board. Subject to the provisions of the Plan,
the Board shall have the authority: (i) to grant to any officer who is an
Employee an Option to purchase Shares of the Bank Holding Company, which shall
be conditioned on the execution by such
2
<PAGE> 3
officer of a Stock Option Agreement substantially in the form of Exhibit A
hereto (with such modifications as the Board may desire, within the terms of
this Plan and within the requirements of the law); (ii) to determine the Option
Price for any Shares to be issued pursuant to an Option granted under the Plan,
the officer to whom, and the time or times at which, Options shall be granted,
and the number of Shares to be represented by each Option, the time or times at
which Options may be exercised, and the term of each Option which in no event
shall be more than ten (10) years from the date of the grant of the Option;
(iii) to interpret the Plan; (iv) to prescribe, amend and rescind rules and
regulations relating to the Plan; (v) to determine the terms and provisions of
each Option granted under the Plan (which need not be identical) and, with the
consent of the holder thereof, to modify or amend each Option; (vi) to authorize
any person to execute on behalf of the Bank Holding Company any instrument
required to effectuate the grant of an Option previously granted by the Board;
and (vii) to make all other determinations deemed necessary or advisable for the
administration of the Plan. Options shall be granted to members of the Board of
Directors of the Company only pursuant to section 4(e) below.
(c) Effect of Board's Decision. All decisions, determinations and
interpretations of the Board shall be final and binding on all Optionees and any
other holders of any Options granted under the Plan.
(d) Minimum Grants to Officers. The grants of Options pursuant to
Section 4(b) above shall include the following (in addition to any other Options
that may be granted):
(i) Each Vice President, Senior Vice President, and
Executive Vice President of the Company employed by the Bank Holding
Company prior to January 1, 1996 shall receive, on the date that this
Plan is adopted by the Board, an Option to purchase the number of shares
by which the Applicable Initial Option exceeds the sum of (A) the number
of Shares that each such person had the option to buy from the Bank
Holding Company immediately prior to the adoption of this Plan by the
Board, plus (B) the number of Shares purchased by such Employee from the
Bank Holding Company at any time prior to the adoption of the Plan
pursuant to the exercise of a stock option (regardless of whether such
existing or previous options were granted pursuant to an option plan and
regardless of whether such existing options were vested or immediately
exercisable). For the purposes of this Plan, the "Applicable Initial
Option" shall be the number of Shares obtained by (A) taking the
Compensation Percentage Amount of each such person's aggregate (i.e.,
cumulative) base salary since the date of such person's employment by
the Bank Holding Company, and (B) dividing such Compensation Percentage
Amount by the fair market value of each Share, as determined by the
Board on the date that this Plan is adopted by the Board, and the
"Compensation Percentage Amount" is 5% of such cumulative base salary
for Vice Presidents, 10% of such cumulative base salary for Senior Vice
Presidents, and 20% of such cumulative base salary for Executive Vice
Presidents.
(ii) Each Vice President, Senior Vice President, and
Executive Vice President of the Bank Holding Company shall receive, at
such time as the Board shall determine during the first 4 months of each
fiscal year of the Company while such person
3
<PAGE> 4
continues to hold such position, an option to purchase the number of
Shares equal to their Applicable Additional Option. For the purposes
hereof, the "Applicable Additional Option" shall be the number of
shares obtained by (A) taking the Compensation Percentage Amount (as
defined in clause (i) above) of each such person's annual base salary
as of the end of the immediately preceding fiscal year of the Company,
and (B) dividing such Compensation Percentage amount by the fair market
value of each Share, as determined by the Board on the date that the
Options are granted.
(e) Grants to Directors.
(i) Options to Directors shall be granted only pursuant to
this Section 4(e). Immediately subsequent to the annual meeting of
shareholders of the Company each year during the term of the Plan (the
"Director Option Date"), commencing with the 1998 Director Option Date,
each Director who was a Director immediately prior to such annual
meeting and who physically attended at least 80% of the sum of (A) the
meetings of the board of directors of the Bank Holding Company (if such
person is a Director of the Bank Holding Company) and (B) the meetings
of any subsidiary thereof of which such person is a Director (including
for such purpose meetings of committees of which such person is a
member) since the previous year's annual meeting (or, if such person
became a Director after the previous year's annual meeting, during the
time that such person was a Director) shall receive an Option to
purchase 1,000 Shares of Common Stock. Each Director who was not a
Director immediately prior to such annual meeting shall also receive an
Option to purchase 1,000 Shares of Common Stock. Each Option granted to
a Director under this paragraph shall remain outstanding for a term of
ten years. Each such Option shall vest and become exercisable 25% one
year after the granting of the option; 50% two years after the granting
of the option; 75% three years after the granting of the option; and
100% four years after the granting of the option; by way of example, if
12% of the option is exercised between one year and two years after the
granting of the option, an additional 38% of the option may be exercised
after two years. If a person is a director of more than one entity, such
Director nevertheless may only receive one 1,000 share Option in any
year under this paragraph.
(ii) The Option Price for Options granted hereunder to
directors shall be the fair market value of the Shares on the applicable
Director Option Date. If the Shares are traded on a stock exchange on
the applicable Director Option Date, the fair market value for Options
granted to directors shall be the closing price on the primary stock
exchange on which the Shares are traded; if the Shares are not traded on
a stock exchange but are publicly traded, the fair market value for
Options granted to directors shall be the average of the closing bid and
asked prices on such date; if the Shares are not publicly traded, the
fair market value shall be such price per Share as is determined by a
disinterested Committee of the Board or by an independent appraiser
retained by the Board.
4
<PAGE> 5
5. Eligibility. Options under the Plan may be granted only (a) to
members of the Board of Directors of the Bank Holding Company, or (b) to
officers who are Employees and who have been appointed as a Vice President or a
higher position with the Bank Holding Company as the Board shall select. An
officer or Director who has been granted an Option may, if such officer or
Director is otherwise eligible, be granted an additional Option or Options.
6. Term of Plan. The Plan shall become effective upon its adoption by
the Board; subject, however, to approval by the holders of at least two-thirds
of the outstanding stock of each class of the Bank Holding Company within twelve
(12) months thereafter. The exercise of any Option granted prior to such
shareholder approval shall be conditioned on such shareholder approval. The Plan
shall continue in effect for a term of ten (10) years unless sooner terminated
under Section 14 of the Plan.
7. Term of Option. The term of each Option granted under the Plan shall
be no greater than ten (10) years from the date of grant thereof.
8. Option Price. The Option Price for the Shares to be issued pursuant
to any such Option granted under the Plan (except for Options granted to
Directors) shall be any price determined by the Board; provided, however, such
Option Price shall in no event be less than one hundred percent (100%) of the
fair market value per share of the Bank Holding Company's Common Stock at the
date of the grant of the Option, as determined by the Board.
9. Vesting. Except as the Board may otherwise provide in an Optionee's
written Stock Option Agreement and except for Options granted hereunder to
Directors, the Option shall be 25% vested one year after the granting of the
option; 50% vested after two years; 75% vested after 3 years; and 100% vested
after 4 years. An Option may not be exercised for a number of shares (including
previous exercises under such Option) that is greater than the percentage of the
Option that has vested.
10. Exercise of Option.
(a) Procedure for Exercise. Any Option granted hereunder shall be
exercisable on such terms and conditions as are set forth in the Stock Option
Agreement entered into between the Bank Holding Company and the Optionee with
respect to the grant of such Option. The Option Price of the Shares as to which
an Option shall be exercised shall be paid in full at the time of exercise, at
the election of the Optionee, in cash or currency of the United States of
America, certified check or bank cashier's check.
An Option shall be exercised when written notice of such exercise
has been given to the Bank Holding Company in accordance with the terms of the
Optionee's Stock Option Agreement by the person entitled to exercise the Option
and payment as described above for the Shares with respect to which the Option
is exercised has been received by the Bank Holding Company accompanied by any
other representations or agreements required by the terms of this Plan or the
Optionee's Stock Option Agreement granted hereunder.
5
<PAGE> 6
(b) Termination of Employment or Cessation of Directorship. If an
Optionee ceases to be a Director or an Employee of the Bank Holding Company for
any reason, whether voluntary or involuntary, including without limitation
retirement (but not including termination without Cause or due to death or
permanent disability (as such term is used in Section 22(e)(3) of the Code), the
Option will automatically expire as of the date of the termination of such
Optionee's directorship or employment as the case may be. The Plan shall not
confer upon any Optionee any right with respect to continuation of directorship
or employment by the Bank Holding Company, nor shall it interfere in any way
with such Employee's right or the Bank Holding Company's right to terminate such
Director's term or Employee's employment at any time. If the Optionee's
directorship or employment is terminated without Cause or due to the Optionee's
death or permanent disability, the Option will automatically expire as of the
date 90 days after the termination of such Optionee's directorship or
employment, as the case may be.
11. Non-Transferability of Options. Except to the extent expressly
provided in Section 10(b) above, the Option may not be sold, pledged, assigned,
hypothecated, transferred or disposed of in any manner and may be exercised,
during the lifetime of the Optionee, only by the Optionee.
12. Adjustment Upon Changes in Capitalization. In the event there is any
change in the Common Stock through the declaration of stock dividends, or
through recapitalization resulting in a stock split, or combination or exchange
of Shares, or otherwise, the Board shall appropriately adjust the number of
class of Shares covered by any Option but which are unexercised, as well as the
price to be paid therefor so as to equal the same number of Shares that a record
holder of an equal number of Shares immediately prior to such event would own or
be entitled to receive after the happening of such event. Any such adjustment
shall be determined by the Board as to Options other than those held by
Directors, but Options held by Directors shall be adjusted in the same manner.
In the event of any such change in the outstanding Common Stock, the Board shall
appropriately adjust the aggregate number and class of shares available under
the Plan.
In the case of any such change in the Common Stock, the aggregate
option price in each Optionee's Stock Option Agreement of all the Shares covered
thereby prior to such change, shall be the aggregate option price for all the
shares or other securities substituted for such shares or to which such shares
are adjusted, and the Option Price per share after such change shall be
determined accordingly.
In the case of any consolidation of the Bank Holding Company
with, or merger of the Bank Holding Company into, any other corporation (other
than a consolidation or merger in which the Bank Holding Company is the
continuing corporation), or in case of any sale or transfer of all or
substantially all of the assets of the Bank Holding Company, and, in particular,
in the event of the acquisition of the majority of the Common Stock of the Bank
Holding Company by a holding company, the corporation formed by such
consolidation or the corporation into which the Bank Holding Company shall have
been merged or the corporation which shall have acquired such assets or Common
Stock, as the case may be (the "Acquiring Corporation"), shall execute and
deliver to each Optionee a supplemental stock option agreement
6
<PAGE> 7
providing that the Holder of each Option then outstanding shall have the right,
during the period such Option shall be outstanding pursuant to its terms, to
exercise such Option (to the extent vested) as to the kind and amount of shares
of stock receivable upon such acquisition, consolidation, merger, sale or
transfer by a holder, immediately prior to such acquisition, consolidation,
merger, sale or transfer, of the total number of shares subject to the Option.
Such supplemental stock option agreement shall provide for adjustments which
shall be as nearly equivalent as may be practical to the adjustments provided
for in this Article. The provisions of this Section shall similarly apply to
successive acquisitions, consolidations, mergers, sales or transfers. The
supplemental stock option agreement shall also provide for the exercise of
Options using stock of the corporation which is the subject of the Option.
No fractional Shares of the Common Stock shall be issuable on
account of any action aforesaid, and the aggregate number of Shares into which
Shares then covered by the Option when changed as a result of such action shall
be reduced to the largest number of whole shares resulting from such action,
unless the Board (or in the event of an acquisition, consolidation, merger, sale
or transfer as described above, the Board of Directors of the Acquiring
Corporation), in its discretion, shall determine to issue scrip certificates. In
such event, the scrip certificates shall be in a form and have such terms and
conditions as the Board (or the Board of Directors of Acquiring Corporation, as
the case may be) in its discretion shall prescribe.
13. Time of Granting Options. The date of grant of an Option under the
Plan other than Options granted to Directors shall, for all purposes, be the
date on which the Board makes the determination granting such Option. Notice of
the determination shall be given to each Employee to whom an Option is so
granted within a reasonable time after the date of such grant. Options to
Directors shall be granted at the times provided for in Section 4(e) above.
14. Amendment and Termination of the Plan.
(a) Amendment. The Board, without approval of the shareholders,
may amend the Plan from time to time in such respects as the Board may deem
desirable; provided, however, the Board may not extend the term of the Plan,
increase or decrease the aggregate number of Shares subject to the Plan (except
as provided in Section 12 of the Plan), or alter the class of employees eligible
to receive Options without the approval of the Bank Holding Company's
shareholders; and further provided that the Board may not amend Sections 4(e)
and 9 more than once every six months, other than to comport with changes in the
Code, the Employee Retirement Income Security Act, or the rules thereunder.
(b) Termination. The Board, without approval of the shareholders,
may at any time terminate the Plan.
(c) Effect of Amendment or Termination. Any such amendment or
termination of the Plan shall not affect Options already granted and such
Options shall remain in full force and effect as if this Plan had not been
amended or terminated and shall be deemed to incorporate the terms of this Plan
as it existed on the dates the Options were granted.
7
<PAGE> 8
15. Conditions Upon Issuance of Shares. Shares shall not be issued with
respect to an Option granted under the Plan unless the exercise of such Option
and the issuance and delivery of such Shares pursuant thereto shall comply with
all relevant provisions of law, including, without limitation, the Securities
Act of 1933, as amended, the Securities Exchange Act of 1934, as amended, the
rules and regulations promulgated thereunder, the requirements of any stock
exchange upon which the Shares may then be listed, and the applicable counsel
for the Bank Holding Company with respect to such compliance.
As a condition to the exercise of an Option, the Bank Holding
Company may require a person exercising such Option to represent and warrant at
the time of any such exercise that the Shares are being purchased only for
investment and without any present intention to sell or distribute such Shares
if, in the opinion of counsel for the Bank Holding Company such a representation
is necessary or desirable under any of the aforementioned relevant provisions of
law.
16. Reservation of Shares. The Bank Holding Company, during the term of
this Plan, will at all times reserve and keep available, the number of Shares as
shall be sufficient to satisfy the requirements of the Plan.
Inability of the Bank Holding Company to obtain from any
regulatory body having jurisdiction such as authority as is deemed by the Bank
Holding Company's counsel to be necessary for the lawful issuance and sale of
any shares hereunder shall relieve the Bank Holding Company of any liability
with respect of the non-issuance or sale of such Shares as to which such
requisite authority shall not have been obtained.
17. Use of Proceeds. All proceeds received by the Bank Holding Company
under the Plan shall be used for its general corporate purposes.
18. Tax Withholding Requirement. The Board may require the Optionee, in
the Optionee's Stock Option Agreement, to agree to remit to the Bank Holding
Company any amount of federal, state or local taxes required to be withheld by
the Bank Holding Company in connection with the issuance of the Shares.
Amended and restated as of the 24th day of January, 2000.
8
<PAGE> 1
Exhibit 10.6
NON-STANDARDIZED PROFIT SHARING/THRIFT PLAN WITH 401(k) FEATURE
ADOPTION AGREEMENT NUMBER 001-03
This Adoption Agreement, when executed by the Employer and accepted by the Plan
Administrator, and the Trustee, if applicable, and accepted by Connecticut
General Life Insurance Company, establishes the Employer's Plan and Trust, if
applicable, for the benefit of its eligible Employees and their Beneficiaries.
The terms of the Connecticut General Life Insurance Company Defined Contribution
Plan are expressly incorporated therein and shall form a part hereof as fully as
if set forth herein except that if more than one election is provided, only that
election made by the Employer shall be so incorporated. The terms of the Plan so
incorporated together with the terms of this Adoption Agreement shall constitute
the sole terms of the Employer's Plan and Trust, if applicable, and no further
trust instrument or other instrument of any nature whatsoever shall be required.
The Employer's participation under the Plan shall be subject to all the terms
set forth therein and in this Adoption Agreement.
- -> Note: Section 414(d) governmental plans and section 414(e) nonelecting
church plans that do not wish to provide ERISA-required benefits should not
adopt this document.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
PLAN DOCUMENT
SECTION GENERAL INFORMATION
- --------------------------------------------------------------------------------
<S> <C>
Legal Name of Employer: First International Bancorp, Inc.
Address: 280 Trumbull Street
City: Hartford State: CT Zip: 06103
Plan Name: First International Bancorp, Inc. 401(k) Plan
Plan Number: 002
-> To be assigned by the Employer. For example: 001, 002, and so on.
Employer's EIN: 06-1151731
Classification of Business:
[X] C Corporation [ ] S Corporation [ ] Partnership
[ ] Sole Proprietorship [ ] Tax-Exempt/Nonprofit Organization
[ ] Other: __________________________________________________
</TABLE>
-1-
<PAGE> 2
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
PLAN DOCUMENT
SECTION GENERAL INFORMATION
- --------------------------------------------------------------------------------
<S> <C>
Employer Tax Status:
Tax Year Ends (MM/DD): December 31
Tax Basis: [ ] Cash [X] Accrual
1.20 Effective Date:
The adoption of the CONNECTICUT GENERAL LIFE INSURANCE COMPANY Non-Standardized Profit Sharing/Thrift Plan with
401(k) Feature shall:
[ ] A. Establish a new Plan effective as of (MM/DD/YY): _______________.
[X] B. Constitute an amendment and restatement in its entirety of a previously
established Qualified Plan of the Employer which was effective October 1, 1990 (hereinafter
called the "Effective Date"). The effective date of this amendment and restatement is July 1, 1999.
Merger Data:
This Plan includes funds from a prior or coincidental merger of a:
[ ] A. Money Purchase Plan
[ ] B. Target Benefit Plan
[X] C. Not Applicable
Sponsoring Organization:
Connecticut General Life Insurance Company
P.O. Box 2975
Hartford, CT 06104
860.534.2298
</TABLE>
-2-
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
ARTICLE PAGE
<S> <C>
I. Nontrusteed, Trust, and Trustee.............................................. 4
II. Plan Administrator........................................................... 4
III. Plan Year.................................................................... 5
IV. Compensation................................................................. 6
V. Highly Compensated Employee.................................................. 7
VI. Service...................................................................... 8
VII. Eligibility Requirements..................................................... 10
VIII. Entry Date................................................................... 13
IX. Vesting...................................................................... 15
X. Contributions................................................................ 18
XI. Contribution Period.......................................................... 28
XII. Allocation of Contributions.................................................. 29
XIII. Limitations on Allocations................................................... 31
XIV. Investment of Participant's Accounts......................................... 32
XV. Life Insurance............................................................... 32
XVI. Employer Stock............................................................... 33
XVII. Withdrawals Preceding Termination............................................ 34
XVIII. Loans to Participants, Beneficiaries and Parties-in-Interest................. 38
XIX. Retirement and Disability.................................................... 39
XX. Distribution of Benefits..................................................... 40
XXI. Qualified Preretirement Survivor Annuity..................................... 41
XXII. Amendment of the Plan........................................................ 41
XXIII. Top-Heavy Provisions......................................................... 42
XXIV. Other Adopting Employer...................................................... 44
</TABLE>
-3-
<PAGE> 4
- --------------------------------------------------------------------------------
PLAN DOCUMENT
SECTION I. NONTRUSTEED, TRUST, AND TRUSTEE
- --------------------------------------------------------------------------------
- -> The Plan must have a Trustee if the Employer has elected Employer Stock,
Loans, investment in Life Insurance, and/or any investment other than through a
contract with Connecticut General Life Insurance Company.
- -> If the Plan is trusteed, the Employee must apply for a Trust Tax
Identification Number, unless the Trust already has obtained one, even if CG
Trust Company has been appointed as the Plan's Trustee.
The Plan is:
1.39 [] A. Nontrusteed.
1.73, 1.74 [] B. Trusteed and Trustees are:
Trustee(s) Name(s): ___________________________________
Address: ______________________________________________
City: ___________________ State: ________ Zip: ______
Trust EIN: _______________
1.73, 1.74 [X] C. Trusteed and CG Trust Company has been appointed as the
Plan's Trustee:
Trust Name: CG Trust Company
Address: 525 West Monroe Street, Suite 1900
Chicago, IL 60661-3629
Employer's Trust EIN: TBD
- --------------------------------------------------------------------------------
PLAN DOCUMENT
SECTION II. PLAN ADMINISTRATOR
- --------------------------------------------------------------------------------
1.50 The Plan Administrator is:
Name: First International Bancorp, Inc.
Address: 280 Trumbull Street
City: Hartford State: CT Zip: 06103
-4-
<PAGE> 5
- --------------------------------------------------------------------------------
PLAN DOCUMENT
SECTION III. PLAN YEAR
- --------------------------------------------------------------------------------
1.51 A. The Plan Year will mean:
[ ] 1. The 12-consecutive-month period commencing on
(MM/DD/YY) and each anniversary thereof except that
the first plan year will commence on (MM/DD/YY).
This election may be made only for new plans.
[X] 2. The 12-consecutive-month period commencing on
(MM/DD/YY) January 1, 1999 and each anniversary
thereof.
-5-
<PAGE> 6
- --------------------------------------------------------------------------------
PLAN DOCUMENT
SECTION IV. COMPENSATION
- --------------------------------------------------------------------------------
-> (i) Election of options 1-6 below does not require a
separate nondiscrimination test.
-> (ii) If option 1, 2 or 3 is elected, you must elect the
same definition of Compensation in Section XIII,
Limitations on Allocations.
-> (iii) Options 1-6 include lump sum amounts and/or cash
bonuses. These amounts are included in compensation
in the year in which paid.
-> (iv) Options 4-9 may not be elected by a plan that uses an
integrated allocation formula.
-> (v) This compensation definition is for purposes of
allocating contributions under the Plan. For
nondiscrimination testing, the Employer may use any
definition of compensation that is based upon Code
section 414(s) or 415(c)(3). Use of options 7, 8 or 9
for nondiscrimination testing requires that the
employer satisfy a separate compensation
nondiscrimination test.
A. Indicate the number of the Compensation definition that will
be used for allocating each type of contribution.
Elective Deferral Contributions: 9
Matching Contributions: 9
Nonelective Contributions: 9
Employee Contributions:
1.12 For purposes of allocating contributions, Compensation means:
1.12(a) 1. Wages, Tips and Other Compensation Box on Form W-2.
1.12(b) 2. Section 3401(a) wages.
1.12(c) 3. 415 safe-harbor compensation
1.12(d) 4. Modified Wages, Tips, and Other Compensation Box on Form W-2
1.12(e) 5. Modified section 3401(a) wages
1.12(f) 6. Modified 415 safe-harbor compensation.
1.12(g) 7. Regular or base salary or wages.
1.12(h) 8. Regular or base salary or wages plus [ ] OVERTIME and/or
[ ] BONUSES
1.12(i) 9. A "reasonable alternative definition of Compensation," as
that term is used under Code section 414(s)(3) and the
regulations thereunder.
The definition of Compensation is: W-2 wages excluding
bonuses, taxable fringe benefits & moving expenses
-> Lump sum amounts and/or cash bonuses may be excluded only
if specified in this definition. Also see note (v) above.
-6-
<PAGE> 7
- --------------------------------------------------------------------------------
PLAN DOCUMENT
SECTION IV. COMPENSATION
- --------------------------------------------------------------------------------
1.12 B. Compensation shall be determined over the following
determination period:
[X] 1. The Plan Year
[ ] 2. A 12-consecutive-month period beginning on (MM/DD)
________ and ending with or within the Plan Year. For
Employees whose date of hire is less than 12 months
before the end of the designated 12-month period,
Compensation will be determined over the Plan Year.
[ ] 3. The Plan Year. However, for the Plan Year in which an
Employee's participation begins, the applicable
period is the portion of the Plan Year during which
the Employee is eligible to participate in the Plan.
1.12 C. Compensation SHALL/SHALL NOT include Employer contributions
made pursuant to a salary reduction agreement, which are not
includable in the gross income of the Employee under Code
Section 125, 402(e)(3), 402(h)(1)(B) or 403(b).
[X] SHALL [ ] SHALL NOT
1.12 D. The highest annual Compensation to be used in determining
allocations to a Participant's Account shall be:
$ __________
-> Enter an amount if less than the $150,000 (as indexed)
limitation on compensation.
- --------------------------------------------------------------------------------
PLAN DOCUMENT
SECTION V. HIGHLY COMPENSATED EMPLOYEE
- --------------------------------------------------------------------------------
1.29 A. Highly Compensated Employees shall be determined using:
1.29(a) [X] 1. The Traditional Method.
1.29(b) [ ] 2. The Simplified Method for Employers in more than one
geographical area.
1.29(c) [ ] 3. The alternative Simplified Method.
1.29(d) [ ] 4. The alternative Simplified Method with Snapshot Day
basis.
The Snapshot Day is ________ (fill in).
-7-
<PAGE> 8
- --------------------------------------------------------------------------------
PLAN DOCUMENT
SECTION V. HIGHLY COMPENSATED EMPLOYEE
- --------------------------------------------------------------------------------
1.29(a) B. If A.1 or A.2 is chosen above, the Look-Back Year shall be:
[ ] 1. The 12-month period immediately preceding the
Determination Year.
[X] 2. The calendar year ending with or within the
Determination Year.
-> If B.2. is selected and the Determination Year (Plan
Year) is the calendar year, then the Look-Back Year
is the same 12-month period as the Determination
Year. This avoids having to look back at data from a
prior year.
-> However, if the Determination Year is not the
calendar year, the Determination Year calculation
must be made on the basis of a lag period (the period
running from the end of the Look-Back Year to the end
of the Determination Year), with the applicable
dollar amounts adjusted on a pro rata basis for the
number of months in the lag period.
- --------------------------------------------------------------------------------
PLAN DOCUMENT
SECTION VI. SERVICE
- --------------------------------------------------------------------------------
- -> Check off appropriate basis for determining service.
2A.3, 2A.9 A. Hours of Service or Elapsed Time
1. Years of Service shall be determined on the following
basis:
<TABLE>
<S> <C> <C>
A. Eligibility: [X] Hours of Service [] Elapsed Time
B. Vesting: [X] Hours of Service [] Elapsed Time
C. Allocation of Contributions: [X] Hours of Service [] Elapsed Time
</TABLE>
2. If service is based on Hours of Service, Hours shall be
determined on the basis of:
[X] A. Actual hours for which paid or entitled to payment.
[ ] B. Days Worked (10 Hours of Service).
[ ] C. Weeks Worked (45 Hours of Service).
[ ] D. Semimonthly payroll periods (95 Hours of Service).
[ ] E. Months Worked (910 Hours of Service).
-> For options b, c, d and e: If the Employee would be
credited with 1 Hour of Service during the period, the
Employee shall be credited with the number of Hours of Service
indicated in parentheses.
-8-
<PAGE> 9
- --------------------------------------------------------------------------------
PLAN DOCUMENT
SECTION VI. SERVICE
- --------------------------------------------------------------------------------
B. Service with other employers.
1.24 1. Service with members of the Employer's controlled group
of corporations, affiliated service group, or group of
business under common control ("controlled group").
-> Service for an employer while the employer is part
of the controlled group must be taken into account.
a. Service with a member of the controlled group prior
to it becoming part of the controlled group will be
included for all purposes.
[ ] YES [X] NO
2A.5 2. Service with a predecessor organization.
-> Service with a predecessor organization of the
Employer must be taken into account if the Employer
maintains the Plan of the predecessor organization.
a. Service with a predecessor organization will be
included for all purposes even if the Employer
does not maintain the plan of the predecessor
organization.
[X] YES [ ] NO
2A.5 3. Service with the following subsidiary(ies) or affiliated
organization, not related to the Employer under the
rules of Code sections 414(b), (c) or (m), shall be
considered Service for all purposes of this plan:
________________________________________________________
________________________________________________________
________________________________________________________
-> Service credited under 1.a, 2.a and 3 must apply to all
similarly situated Employees, must be credited for a
legitimate business reason, and must not by design or
operation discriminate significantly in favor of Highly
Compensated Employees.
-9-
<PAGE> 10
- --------------------------------------------------------------------------------
PLAN DOCUMENT
SECTION VII. ELIGIBILITY REQUIREMENTS
- --------------------------------------------------------------------------------
- -> Check or fill out appropriate requirements for each type of contribution
in the Plan.
- --------------------------------------------------------------------------------
2A.5(a), 2B.1 A. Eligibility Requirements
1. If Employer is a Partnership or Sole Proprietorship:
Self-Employed Individuals are eligible to participate in
the Plan.
[ ] YES [ ] NO
2. Immediate Participation.
-> No age or service requirement
[ ] Elective Deferral Contributions
[ ] Matching Contributions
[ ] Nonelective Contributions
[ ] Employee Contributions
3. Service Requirement
-> Not to exceed 1 year if graded vesting; not to exceed 2
years if 100% immediate vesting. Not to exceed 1/2 year
if graded vesting or 1 1/2 years if 100% immediate
vesting if annual Entry Date is chosen in Section VIII
"Entry Date." Not to exceed 1 year for Elective Deferral
Contributions.
[X] Elective Deferral Contributions: 1/2 indicate
number of years)
[X] Matching Contributions: 1 (indicate number
of years)
[X] Nonelective Contributions: 1 (indicate
number of years)
[ ] Employee Contributions: ______ (indicate
number of years)
-> Fill in the blank(s) above with the amount of
service required. Any service requirement not in units
of whole years requires service for eligibility to be
determined based on elapsed time (see Section VI.A.1.a).
4. Age Requirement.
-> Not greater than 21 years. If annual entry date is
chosen in Section VIII "Entry Date," not greater than
20 1/2 years.
[ ] Elective Deferral Contributions: ______
(indicate minimum age)
[ ] Matching Contributions: ______ (indicate
minimum age)
[ ] Nonelective Contributions: ______ (indicate
minimum age)
[ ] Employee Contributions: ______ (indicate
minimum age)
5. Employees who were employed on or before the initial
Effective Date of the Plan or the Effective Date of the
amendment and restatement of the Plan, as indicated on
page 2, SHALL/SHALL NOT be immediately eligible without
regard to any Age and/or Service requirements specified
in 2 or 3 above.
[ ] SHALL [X] SHALL NOT
-10-
<PAGE> 11
- --------------------------------------------------------------------------------
PLAN DOCUMENT
SECTION VII. ELIGIBILITY REQUIREMENTS
- --------------------------------------------------------------------------------
2B.1
B. Job Class Requirements
An Employee must be a member of one or more of the following
selected classifications:
1. No Job Class Requirements:
[X] Elective Deferral Contributions
[X] Matching Contributions
[X] Nonelective Contributions
[ ] Employee Contributions
2. Salaried:
[ ] Elective Deferral Contributions
[ ] Matching Contributions
[ ] Nonelective Contributions
[ ] Employee Contributions
3. Hourly:
[ ] Elective Deferral Contributions
[ ] Matching Contributions
[ ] Nonelective Contributions
[ ] Employee Contributions
4. Clerical:
[ ] Elective Deferral Contributions
[ ] Matching Contributions
[ ] Nonelective Contributions
[ ] Employee Contributions
5. Employees whose employment is governed by a collective
bargaining Agreement represented by the following
union:_________________________________
[ ] Elective Deferral Contributions
[ ] Matching Contributions
[ ] Nonelective Contributions
[ ] Employee Contributions
6. Other: (fill in):______________________
[ ] Elective Deferral Contributions
[ ] Matching Contributions
[ ] Nonelective Contributions
[ ] Employee Contributions
-> "Part-time" Employees may not be excluded.
-11-
<PAGE> 12
- --------------------------------------------------------------------------------
PLAN DOCUMENT
SECTION VII. ELIGIBILITY REQUIREMENTS
- --------------------------------------------------------------------------------
2B.1 C. Additional Requirements
An Employee must be in the following designated division(s)
of the Employer:
___________________________________________________________
___________________________________________________________
___________________________________________________________
[ ] Elective Deferral Contributions
[ ] Matching Contributions
[ ] Nonelective Contributions
[ ] Employee Contributions
2B.1 D. An Employee must not be a member of any one of the following
groups:
1. Union.
-> Employees who are members of a union are defined as:
Employees included in a unit of Employees covered by a
collective bargaining agreement between the Employer and
employee representatives, if retirement benefits were
the subject of good faith bargaining and if two percent
or less of the employees of the Employer who are covered
pursuant to that agreement are professional employees as
defined in section 1.410(b)-9 of the regulations. For
this purpose, the term "employee representatives" does
not include any organization more than half of whose
members are Employees who are owners, officers, or
executives of the Employer, unless the collective
bargaining agreement provides for coverage under the
Plan.
[X] Elective Deferral Contributions
[X] Matching Contributions
[X] Nonelective Contributions
[ ] Employee Contributions
2. Nonresident aliens (within the meaning of Code section
7701(b)(1)(B)) who receive no earned income (within the
meaning of Code section 911(d)(2)) from the Employer
that constitutes income from sources within the United
States (within the meaning of Code section 861(a)(3)).
[X] Elective Deferral Contributions
[X] Matching Contributions
[X] Nonelective Contributions
[ ] Employee Contributions
-12-
<PAGE> 13
- --------------------------------------------------------------------------------
PLAN DOCUMENT
SECTION VII. ELIGIBILITY REQUIREMENTS
- --------------------------------------------------------------------------------
3. Employees covered by the following designated qualified
employee benefit plans:
________________________________________________________
________________________________________________________
________________________________________________________
[ ] Elective Deferral Contributions
[ ] Matching Contributions
[ ] Nonelective Contributions
[ ] Employee Contributions
1.15 E. The Plan covers Employees whose conditions of employment are
mandated under the Davis-Bacon Act
[ ] YES [X] NO
- --------------------------------------------------------------------------------
PLAN DOCUMENT
SECTION VIII. ENTRY DATE
- --------------------------------------------------------------------------------
-> Check the appropriate requirement for Entry Date.
1.25 A. Immediately.
[ ] Elective Deferral Contributions
[ ] Matching Contributions
[ ] Nonelective Contributions
[ ] Employee Contributions
1.25 B. The first day of any month.
[X] Elective Deferral Contributions
[X] Matching Contributions
[X] Nonelective Contributions
[ ] Employee Contributions
1.25 C. Quarterly (that is, three months apart) on each:
(MM/DD) ____________, or (MM/DD) ____________ or
(MM/DD) ____________, or (MM/DD) ____________.
-> Fill in dates.
[ ] Elective Deferral Contributions
[ ] Matching Contributions
[ ] Nonelective Contributions
[ ] Employee Contributions
-13-
<PAGE> 14
- --------------------------------------------------------------------------------
PLAN DOCUMENT
SECTION VIII. ENTRY DATE
- --------------------------------------------------------------------------------
1.25 D. Semiannually (that is, six months apart) on each:
(MM/DD) ____________, or (MM/DD) ____________.
-> Fill in dates.
[ ] Elective Deferral Contributions
[ ] Matching Contributions
[ ] Nonelective Contributions
[ ] Employee Contributions
1.25 E. Annually, on each (MM/DD) ____________.
-> Fill in date.
[ ] Elective Deferral Contributions
[ ] Matching Contributions
[ ] Nonelective Contributions
[ ] Employee Contributions
1.25 F. The first day nearest to the date(s) selected in B, C, D,
or E above, whether before or after that date, that the
Participant meets the Eligibility Requirements.
[ ] Elective Deferral Contributions
[ ] Matching Contributions
[ ] Nonelective Contributions
[ ] Employee Contributions
-> Allows retroactive entry into the Plan. This may have an
effect on various nondiscrimination tests for the Plan.
-14-
<PAGE> 15
- --------------------------------------------------------------------------------
PLAN DOCUMENT
SECTION IX. VESTING
- --------------------------------------------------------------------------------
1.76 A. Vesting Percentage
The Vesting Schedule, based on number of Years or Periods of
Service, shall be as indicated below. Indicate the number of
the vesting schedule that applies to any Nonelective
Contributions, Matching Contributions, and Prior Employer
Contributions.
The vesting schedules are depicted in 1 through 8, below.
Nonelective Contributions are subject to vesting
schedule: 3
Matching Contributions are subject to vesting
schedule: 3
Prior Employer Contributions are subject to vesting
schedule:
<TABLE>
<S> <C> <C>
1. Immediately = 100%
2. 0-3 Years = 0%
3 Years = 100%
3. 1 Year = 20%
2 Years = 40%
3 Years = 60%
4 Years = 80%
5 Years = 100%
4. 0-3 Years = 0%
3 Years = 20%
4 Years = 40%
5 Years = 60%
6 Years = 80%
7 Years = 100%
5. 0-2 Years = 0%
2 Years = 20%
3 Years = 40%
4 Years = 60%
5 Years = 80%
6 Years = 100%
6. 0-5 Years = 0%
5 Years = 100%
7. 1 Year = 25%
2 Years = 50%
3 Years = 75%
4 Years = 100%
</TABLE>
-15-
<PAGE> 16
- --------------------------------------------------------------------------------
PLAN DOCUMENT
SECTION IX. VESTING
- --------------------------------------------------------------------------------
8. Other. Must be at least as liberal as #4 or #6 above.
<TABLE>
<S> <C> <C>
--------- = ---------
--------- = ---------
--------- = ---------
--------- = ---------
--------- = ---------
--------- = ---------
--------- = ---------
</TABLE>
2A.5(b) B. The vesting computation period shall be based on the
Employee's service in the:
[X] PLAN YEAR [ ] EMPLOYMENT YEAR
2A.7, 2A.10 C. Excluded Years or Periods of Service.
The vesting percentage shall be based on all Years of Service
(i.e., completing 1000 hours of Service) or Periods of Service
(i.e., Elapsed Time), EXCEPT that the following shall be
excluded:
Years or Periods of Service:
[ ] 1. Prior to the time the Participant attained age 18.
[ ] 2. During which the Employer did not maintain the plan
or predecessor plan.
[ ] 3. During which the Participant elected not to
contribute to a plan which required Employee
Contributions.
[ ] 4. Rule of Parity (Elapsed Time).
-> Rule of Parity (Elapsed Time): In the event a
reemployed Employee has no vested interest in
Employer Contributions at the time the break
occurred, and has since incurred 5 consecutive
1-year Breaks-in-Service, and has a Period of
Severance which equals or exceeds his prior Period
of Service, such prior Service may be disregarded.
[ ] 5. Rule of Parity (Hours of Service).
-> Rule of Parity (Hours of Service): Years of Service
prior to a Break-in-Service may be disregarded if the
participant had no vested interest in Employer
Contributions at the time the break occurred, and the
Participant has since incurred 5 consecutive 1-year
Breaks-in-Service, and the number of consecutive 1-year
Breaks-in-Service is at least as great as the Years of
Service before the break occurred.
[ ] 6. Prior to any 1-Year Break-in-Service until the
Employee completes a Year of Service following
reemployment.
[X] 7. None of the above.
-16-
<PAGE> 17
- --------------------------------------------------------------------------------
PLAN DOCUMENT
SECTION IX. VESTING
- --------------------------------------------------------------------------------
3D.1, 3D.2, D. Forfeitures.
2A.7, 2A.10
1. Forfeitures will occur:
[X] A. Immediately
[ ] (1) Optional Payback Method
[X] (2) Required Payback Method
[ ] B. Upon a 1-Year Break-in-Service
[ ] (1) Optional Payback Method
[ ] (2) Required Payback Method
[ ] C. Upon 5 consecutive 1-Year Breaks-in-Service
2. Forfeitures will be:
[X] A. Used as an Employer Credit
[ ] B. Reallocated to Participants' Accounts
[ ] C. Used as an Employer Credit and then, to the
extent any Forfeitures remain, reallocated to
Participants' Accounts.
-> If choice IX.D.2.b or c is selected and the Plan
provides Matching Contributions, the Actual Contribution
Percentage (ACP) Test will
be affected.
-17-
<PAGE> 18
- --------------------------------------------------------------------------------
PLAN DOCUMENT
SECTION X. CONTRIBUTIONS
- --------------------------------------------------------------------------------
2C.1(k)(1) A. Elective Deferral Contributions
1. Availability/Amount
[ ] Not Available under the Plan.
[X] Available under the Plan (complete the following).
Each Participant MAY elect to have his Compensation
actually paid during the Plan Year reduced by:
[ ] A. __________ %
[ ] B. up to __________ %
[X] C. from 1% to 15%
[ ] D. up to the maximum percentage allowable, not to
exceed the limits of Code sections 402(g)
and 415.
-> Lump sum amounts and/or cash bonuses must be subject
to the salary deferral election unless the definition of
compensation in Section IV.A.9 has been elected and
these amounts have been specifically excluded from that
compensation definition. Lump sum amounts and cash
bonuses are deferred upon and tested in the Plan Year in
which paid.
2. Modification
A Participant may change the amount of Elective Deferral
Contributions the Participant makes to the Plan
(complete a and b):
[X] a. twelve per calendar year (may be less frequent
than one).
[X] b. As of the following date(s) (MM/DD):
at any time
-18-
<PAGE> 19
- --------------------------------------------------------------------------------
PLAN DOCUMENT
SECTION X. CONTRIBUTIONS
- --------------------------------------------------------------------------------
B. Required Employee Contributions
2C.1(b) 1. Availability/Amount
[X] Not Available under the Plan.
[ ] Available under the Plan and must be made as a
condition of receiving an Employer Contribution
-> Required Employee Contributions are NOT AVAILABLE
unless Elective Deferral Contributions are available.
Required Contributions shall be in the amount of:
[ ] a. ______ % of Compensation actually paid during the
Contribution Period.
2C.1(k)(1) [ ] b. Not less than _______ % nor more than _______ %
of Compensation actually paid during the
Contribution Period.
2. Modification
A Participant may suspend Required Employee
Contributions for a minimum period of:
[ ] a. 1 month
[ ] b. 2 months.
[ ] c. 3 months.
-> The suspension period may be of indefinite duration.
A Participant's reentry into the Plan shall be as of the
first Entry Date following the end of the suspension
period.
-19-
<PAGE> 20
- --------------------------------------------------------------------------------
PLAN DOCUMENT
SECTION X. CONTRIBUTIONS
- --------------------------------------------------------------------------------
2C.1 C. Matching Contributions
Availability/Amount
[ ] Not Available under the Plan.
[X] Available under the Plan (elect one from option 1 and,
if applicable, elect one from option 2).
1. [ ] a. Matching Contributions SHALL be based upon
a percentage of Considered Net Profits
[X] b. Matching Contributions SHALL NOT be based
upon a percentage of Considered Net Profits.
2. Partnership Plans.
[ ] a. The Employer SHALL make Matching
Contributions to Partners
-> Matching Contributions to Partners are
treated in all respects as Elective Deferral
Contributions
[ ] b. The Employer SHALL NOT make Matching
Contributions to Partners.
For each $1.00 of either Elective Deferral Contributions
or Required Employee Contributions, as selected above,
the Employer will contribute and allocate to each
Participant"s Matching Contribution Account an amount
equal to:
[ ] 1. $ __________ (e.g., $.50).
[X] 2. A discretionary percentage, to be determined by
the Employer.
-> If option 2 is elected, the amount of the
discretionary percentage should be determined by
an annual Board of Directors resolution setting
the percentage.
[ ] 3. Graded Match.
-> If a or b is elected, the minimum and maximum
percentages must be within the parameters of the
Elective Deferral election in Section X.A or the
Required Employee Contribution election in Section
X.B of this Adoption Agreement.
-> Percentage for higher amounts must be lower than
the percentages for lower amounts. For example: 100%
of the first $500, plus 75% of the next $500, plus
50% of the next $500.
[ ] a. Graded based upon the dollar amount of
each Participant"s Elective Deferral
Contributions or Required Employee
Contributions as follows:
________ % of the first $________ plus
________ % of the first $________ plus
________ % of the first $________ plus
________ % of the first $________.
-20-
<PAGE> 21
- --------------------------------------------------------------------------------
PLAN DOCUMENT
SECTION X. CONTRIBUTIONS
- --------------------------------------------------------------------------------
[ ] b. Graded based upon the percentage of
Compensation of each Participant's
Elective Deferral Contribution or
Required Employee Contribution as
follows:
_________ % of the first $________ plus
_________ % of the next $_________ plus
_________ % of the next $_________ plus
_________ % of the next $_________.
-> If 3.a or b is elected, additional testing
will be required to prove that the different
contributions are available on a discriminatory
basis.
[ ] 4. Separate specific dollar amounts for different
employees (e.g., employees in different job
classifications):
-> This option is available only for Plans
covering Employees whose conditions of
employment are mandated under the Davis-Bacon
Act.
<TABLE>
<S> <C>
$ __________ (e.g., $.50) to employees in __________ (fill in)
$ __________ (e.g., $.50) to employees in __________ (fill in)
$ __________ (e.g., $.50) to employees in __________ (fill in)
$ __________ (e.g., $.50) to employees in __________ (fill in)
$ __________ (e.g., $.50) to employees in __________ (fill in)
</TABLE>
Additional Formulas (fill in below):
-> Formulas must be the same type as above.
_______________________________________________
_______________________________________________
_______________________________________________
-> If 4 is selected, additional testing will be
required to prove that the different
contributions are available on a
nondiscriminatory basis.
-21-
<PAGE> 22
- --------------------------------------------------------------------------------
PLAN DOCUMENT
SECTION X. CONTRIBUTIONS
- --------------------------------------------------------------------------------
[ ] 5. Different graded matches for different employees
(e.g., employees in different job classifications,
divisions, organizations, members of a controlled
group of corporations, etc.):
-> This option is available only for Plans covering
Employees whose conditions of employment are
mandated under the Davis-Bacon Act.
-> Percentages for higher amounts must be lower
than the percentages for lower amounts. For example:
100% of the first $500, plus 75% of the next $500,
plus 50% of the next $500.
[ ] a. Graded based upon the dollar amount of
Elective Deferral Contributions or Required
Contributions of each Participant as
follows:
Employees in __________ (fill in)
__________ % of the first $__________ plus
__________ % of the next $__________ plus
__________ % of the next $__________ plus
__________ % of the next $__________ .
Employees in __________ (fill in)
__________ % of the first $__________ plus
__________ % of the next $__________ plus
__________ % of the next $__________ plus
__________ % of the next $__________ .
Employees in __________ (fill in)
__________ % of the first $__________ plus
__________ % of the next $__________ plus
__________ % of the next $__________ plus
__________ % of the next $__________ .
Additional Formulas (fill in below):
-> Formulas must be the same type as above.
___________________________________________
___________________________________________
___________________________________________
-22-
<PAGE> 23
- --------------------------------------------------------------------------------
PLAN DOCUMENT
SECTION X. CONTRIBUTIONS
- --------------------------------------------------------------------------------
[ ] b. Graded based upon the percentage of
compensation of the Elective Deferral
Contributions or Required Contributions of
each Participant as follows:
-> This option is available only for Plans
covering Employees whose conditions of
employment are mandated under the
Davis-Bacon Act.
-> Matching percentages for higher
compensation percentages must be lower than
matching percentages for lower compensation
percentages. For example: 100% for the first
3%, plus 75% of the next 2%, plus 50% of the
next 2%.
Employees in __________ (fill in)
__________ % of the first $__________ plus
__________ % of the next $__________ plus
__________ % of the next $__________ plus
__________ % of the next $__________ .
Employees in __________ (fill in)
__________ % of the first $__________ plus
__________ % of the next $__________ plus
__________ % of the next $__________ plus
__________ % of the next $__________ .
Employees in __________ (fill in)
__________ % of the first $__________ plus
__________ % of the next $__________ plus
__________ % of the next $__________ plus
__________ % of the next $__________ .
Additional Formulas (fill in below):
-> Formulas must be the same type as above.
__________________________________________
__________________________________________
__________________________________________
-> If 5.a or b is selected, additional testing will be
required to prove that the different contributions are
available on a nondiscriminatory basis.
-23-
<PAGE> 24
- --------------------------------------------------------------------------------
PLAN DOCUMENT
SECTION X. CONTRIBUTIONS
- --------------------------------------------------------------------------------
The Elective Deferral or Required Employee Contributions, upon
which Matching Contributions are made by the Employer, shall not
exceed:
[ ] 1. $ __________ for the Plan Year.
[X] 2. 6% of the Participant"s Compensation for the
Contribution Period.
[ ] 3. N/A.
True-Up Contributions:
The Employer MAY/MAY NOT contribute a True-Up Contribution for
each Participant at the end of the Plan Year so that the total
Matching Contribution for each Participant is calculated on an
annual basis.
[ ] MAY [X] MAY NOT
Additional Matching Contributions:
In addition, at the end of the Plan Year, the Employer may
contribute Additional Matching Contributions to be allocated in
the same proportion that the Matching Contribution made on
behalf of each Participant during the Plan Year bears to the
Matching Contribution made on behalf of all Participants during
the Plan Year.
[ ] YES [X] NO
-24-
<PAGE> 25
- --------------------------------------------------------------------------------
PLAN DOCUMENT
SECTION X. CONTRIBUTIONS
- --------------------------------------------------------------------------------
2C.1 D. Nonelective Contributions
-> If you choose to make a Nonelective Contribution, each
Employee eligible to participate in the Plan and who
satisfies the Annual Allocation Requirement of Section XII.A
or XII.B MUST be given an allocation, regardless of whether
they make Elective Deferral Contributions.
Availability/Amount
[ ] Not Available under the Plan.
[X] Available under the Plan (complete the following).
The Contribution for each Contribution Period shall be:
[ ] 1. _________ % of Considered Net Profits.
[ ] 2. _________ % of Compensation of each Participant.
[ ] 3. The Employer will contribute an amount equal to
$ _________ for each Participant.
[X] 4. Discretionary.
-> If option 4 is elected, the amount of the
discretionary contribution should be determined by an
annual Board of Directors resolution setting a fixed
amount of contribution or a formula by which a fixed
amount can be determined.
[ ] 5. The Employer will contribute an amount equal to
$___________________/hour or unit of each Participant
(indicate dollar or cents amount).
-> Option 5 may be chosen ONLY for Employees who are
subject to a Collective Bargaining Agreement.
<TABLE>
<S> <C>
[ ] 6. __________ % of Considered Net Profits to __________ (fill in)
__________ % of Considered Net Profits to __________ (fill in)
__________ % of Considered Net Profits to __________ (fill in)
__________ % of Considered Net Profits to __________ (fill in)
__________ % of Considered Net Profits to __________ (fill in)
</TABLE>
-> Fill in job classification
-25-
<PAGE> 26
- --------------------------------------------------------------------------------
PLAN DOCUMENT
SECTION X. CONTRIBUTIONS
- --------------------------------------------------------------------------------
Additional Formulas (fill in below):
_______________________________________________
_______________________________________________
_______________________________________________
-> Formulas must be the same type as above.
<TABLE>
<S> <C>
[ ] 7. __________ % of Considered Net Profits to __________ (fill in)
__________ % of Considered Net Profits to __________ (fill in)
__________ % of Considered Net Profits to __________ (fill in)
__________ % of Considered Net Profits to __________ (fill in)
__________ % of Considered Net Profits to __________ (fill in)
</TABLE>
-> Fill in job classification
Additional Formulas (fill in below):
-> Formulas must be the same type as above.
_______________________________________________
_______________________________________________
_______________________________________________
-> Options 6 and 7 may be selected ONLY when a
Plan covers Employees whose conditions of
employment are mandated under the Davis-Bacon
Act.
-> If option 6 or 7 is selected, subsection A.1
(Compensation to Compensation allocation) MUST
be chosen in Section XIII, "Allocation of
Contributions."
-> If options 6 or 7 is selected, additional
testing will be required to prove that the
different contributions are available on a
nondiscriminatory basis.
Nonelective Contributions SHALL / SHALL NOT be based on
Considered Net Profits.
[X] SHALL [ ] SHALL NOT
-> "Shall" must be chosen if option 1 is selected.
-26-
<PAGE> 27
- --------------------------------------------------------------------------------
PLAN DOCUMENT
SECTION X. CONTRIBUTIONS
- --------------------------------------------------------------------------------
2C.1(b) E. Voluntary Employee Contributions
Availability/Amount
[X] Not Available under the Plan.
[ ] Available under the Plan (complete the following).
[ ] Voluntary Employee Contributions SHALL be permitted
up _________ % of Compensation actually paid during
the Plan Year.
[ ] Voluntary Employee Contributions made in a Lump Sum
SHALL be permitted.
-> Voluntary Employee Contributions are NOT AVAILABLE
unless Elective Deferral Contributions are available
2C.3 F. Rollover Contributions
Availability
[x] 1. Rollover Contributions out of the Plan are always
available.
[X] Cash only.
[ ] Cash and Loan Notes from this and/or a prior
plan.
[x] 2. Rollover Contributions into the Plan.
[ ] Not Available under the Plan.
[X] Available under the Plan (complete the
following).
Cash Only or Cash and Loan Notes.
[X] Cash only.
[ ] Cash and Loan Notes from prior plan.
Rollover contributions into the Plan may be made by:
[X] Both eligible Employees and Employees who
would be eligible except they do not yet
meet the Plan's age and/or service
requirement.
[ ] Eligible Employees only.
-27-
<PAGE> 28
- --------------------------------------------------------------------------------
PLAN DOCUMENT
SECTION X. CONTRIBUTIONS
- --------------------------------------------------------------------------------
7B.8, 7B.9 G. Transfers of Account Balances
Availability
[X] 1. Transfers of Account Balances out of the Plan are
always available.
[X] 2. Transfers of Account Balances into the Plan.
[ ] Not Available under the Plan.
[X] Available under the Plan.
- --------------------------------------------------------------------------------
PLAN DOCUMENT
SECTION XI. CONTRIBUTION PERIOD
- --------------------------------------------------------------------------------
1.14 A. The regular Contribution Period (by contribution type) shall
be:
-> For 1 and 2 below, "Other" Contribution Period may not be
longer than annual, but may be shorter than 4-weekly.
-> For 3 below, "Other" Contribution Period may not be longer
than monthly, but may be shorter than 4-weekly.
1. Matching Contributions:
[ ] Annual [ ] 4-Weekly
[ ] Monthly [X] Other (specify) bi-weekly.
2. Nonelective Contributions:
[X] Annual [ ] 4-Weekly
[ ] Monthly [ ] Other (specify) _______________.
3. Elective Deferral Contributions, Required Employee
Contributions, and/or Voluntary Employee Contributions:
-> Annual contribution period is not available for
contributions in option 3.
[ ] Monthly [X] 4-Weekly
[ ] Other (specify) _______________.
-28-
<PAGE> 29
- --------------------------------------------------------------------------------
PLAN DOCUMENT
SECTION XII. ALLOCATION OF CONTRIBUTIONS
- --------------------------------------------------------------------------------
2C.1(f) A. Allocation Formula for Nonelective Contribution
Complete the following ONLY if Section X.D is 1, 4, 6 or 7.
-> If Section X.D is 6 or 7, the Compensation to
Compensation allocation formulas (1 below) must be chosen.
The Nonelective Contribution will be allocated to
Participants who meet the requirements of Section XII.B or C
as follows:
[ ] 1. Compensation to Compensation:
In the same ratio as each Participant's Compensation
bears to the total Compensation of all Participants.
[X] 2. Integrated with Social Security:
a. Choose one of the following methods:
[ ] Step-Rate Method
For each Plan year, the Employer will
contribute an amount equal to __________ %
of each Participant's Compensation up to the
Social Security Integration Level, plus
__________ % of each Participant's
Compensation in excess of the Social
Security Integration Level. However, in no
event will the Excess Contribution
percentage exceed the amount specified in
Section 2C.1(f)(2)(B) of the Plan.
[X] Maximum Disparity Method
For each Plan Year, the Employer's
Nonelective Contribution shall be allocated
in the manner stated in Section 2C.1(f)(3)
of the Plan in order to maximize permitted
disparity.
b. Social Security Integration Level:
[ ] i. $ __________ (not to exceed the Social
Security Taxable Wage Base).
[X] ii. The Social Security Taxable Wage Base
in effect on the first day of the Plan
Year.
[ ] iii. __________ % of the Social
Security Taxable Wage Base (not to
exceed 100%).
-29-
<PAGE> 30
- --------------------------------------------------------------------------------
PLAN DOCUMENT
SECTION XII. ALLOCATION OF CONTRIBUTIONS
- --------------------------------------------------------------------------------
2C.1(g) B. Annual Allocation Requirements
An allocation of the annual Nonelective Contribution, annual
Matching Contribution, and/or Additional Matching
Contribution made by the Employer will be made to each
Participant who:
[ ] 1. Is a Participant on ANY day during the Plan Year
regardless of Service credited during the Plan Year.
[X] 2. Is credited with a Year of Service in the Plan Year
for which the contribution is made.
[ ] 3. Is a Participant on the last day of the Plan Year.
[ ] 4. Is credited with a Year of Service in the Plan Year
for which the contribution is made and is a
Participant on the last day of the Plan Year.
In addition, an allocation will be made by the Employer on
behalf of any Participant who retires, dies or becomes
disabled during the Plan Year, regardless of the number of
Hours of Service credited to such Participant and regardless
of whether such Participant is a participant on the last day
of the Plan Year.
Annual Nonelective Contribution [X] YES [ ] NO
Annual Matching Contribution [ ] YES [ ] NO
Additional Matching Contribution [ ] YES [ ] NO
2C.1(g) C. Nonannual Allocation Requirement
An allocation of the nonannual Matching Contribution or
nonannual Nonelective Contribution made by the Employer will
be made to each Participant who:
[X] 1. Is a Participant on any day of the Contribution
Period.
[ ] 2. Is a Participant as of the last day of the
Contribution Period.
In addition, an allocation will be made by the Employer on
behalf of any Participant who retires, dies, or becomes
disabled during the Contribution Period, regardless of
whether such Participant is a Participant as of the last day
of the Contribution Period.
Nonannual Nonelective Contribution [ ] YES [ ] NO
Nonannual Matching Contribution [X] YES [ ] NO
-30-
<PAGE> 31
- --------------------------------------------------------------------------------
PLAN DOCUMENT
SECTION XIII. LIMITATION ON ALLOCATIONS
- --------------------------------------------------------------------------------
4B A. If any Participant is covered by another qualified
defined contribution plan maintained by the Employer,
other than a Master or Prototype plan:
-> Complete part A if you: (1) maintain, or at any
time maintained, another qualified retirement plan in
which any Participant in this Plan is, was, or could be,
a participant; or (2) maintain a Code section 415(l)(2)
individual medical account, for which amounts are
treated as Annual Additions for any Participant in this
Plan.
[X] 1. N/A. The Employer has no other defined
contribution plan(s).
[ ] 2. The provisions of Section 4B.5 of the Plan will
apply, as if the other plan were a Master or
Prototype plan.
[ ] 3. The plans will limit total Annual Additions to
the Maximum Permissible Amount, and will reduce
any Excess Amounts in a manner that precludes
Employer discretion, in the following manner:
________________________________________________
________________________________________________
________________________________________________
4B B. If any Participant is or ever has been a Participant in
a qualified defined benefit plan maintained by the
Employer:
-> Complete part B if you maintain, or at any time
maintained, another qualified retirement plan in which
any Participant in this Plan is, was, or could be a
participant.
[X] 1. N/A. The Employer has no defined benefit plan(s).
[ ] 2. In any Limitation Year, the Annual Additions
credited to the Participant under this Plan may
not cause the sum of the Defined Benefit Plan
Fraction and the Defined Contribution Fraction
to exceed 1.0. If the Employer contributions
that would otherwise be allocated to the
Participant's account during such year would
cause the 1.0 limitation to be exceeded, the
allocation will be reduced so that the sum of
the fraction equals 1.0. Any contributions not
allocated because of the preceding sentence will
be allocated to the remaining Participants
according to the Plan's allocation formula. If
the 1.0 limitation is exceeded because of an
Excess Amount, such Excess Amount will be
reduced in accordance with Section 4B.4 of the
Plan.
[ ] 3. Provide the method under which the Plan involved
will satisfy the 1.0 limitation in a manner that
precludes Employer discretion
________________________________________________
________________________________________________
________________________________________________
-31-
<PAGE> 32
- --------------------------------------------------------------------------------
PLAN DOCUMENT
SECTION XIII. LIMITATION ON ALLOCATIONS
- --------------------------------------------------------------------------------
C. Compensation will mean all of each Participant's:
-> Everyone must complete Section C. If option 1, 2, or 3 was
selected in Section IV.A., you must make the same selection
here.
4B.1(b)(1) [X] 1. Wages, Tips, and Other Compensation Box on Form W-2.
4B.1(b)(2) [ ] 2. Section 3401(a) wages.
4B.1(b)(3) [ ] 3. 415 safe-harbor compensation
4B.1(h) D. The Limitation Year shall be:
-> Everyone must complete Section D.
[ ] 1. The Calendar Year.
[X] 2. The 12-month period coinciding with the Plan Year.
[ ] 3. The 12-month period beginning on (MM/DD): _________
- --------------------------------------------------------------------------------
PLAN DOCUMENT
SECTION XIV. INVESTMENT OF PARTICIPANT'S ACCOUNTS
- --------------------------------------------------------------------------------
5A.1 A. The Participant SHALL/SHALL NOT have the authority to
direct the Investment of Contributions made by the Employer.
[X] SHALL [ ] SHALL NOT
5A.1 B. If SHALL is elected above, complete the following:
Those having authority to direct the investment of the
Participant's Account are (choose all that apply):
[X] 1. Participants who are active Employees.
[X] 2. Participants who are former employees and continue
to maintain an account in the Plan or Trust.
[X] 3. Beneficiaries.
[X] 4. Alternate Payees.
- --------------------------------------------------------------------------------
PLAN DOCUMENT
SECTION XV. LIFE INSURANCE
- --------------------------------------------------------------------------------
5B.1 A. Available as a Participant investment:
[ ] YES [X] NO
-32-
<PAGE> 33
- --------------------------------------------------------------------------------
PLAN DOCUMENT
SECTION XV. LIFE INSURANCE
- --------------------------------------------------------------------------------
B. If yes is elected above, Life Insurance shall be available to:
[ ] 1. All Participants.
[ ] 2. Only to the specified group of Participants (fill
in below):
__________________________________________________
__________________________________________________
__________________________________________________
-> If subsection 2 is checked, separate nondiscrimination
testing will be required.
- --------------------------------------------------------------------------------
PLAN DOCUMENT
SECTION XVI. EMPLOYER STOCK
- --------------------------------------------------------------------------------
- -> Before electing Employer Stock as an investment option, you should consult
your legal counsel on any federal or state securities law requirements arising
from offering Employer Stock as an investment option under your Plan and whether
use of this document is appropriate for you under those laws. Neither
Connecticut General Life Insurance Company nor any of its employees can advise
you on these matters.
1.45 A. Investment in Employer Stock is:
[X] Permitted
[ ] Not Permitted
-> You must complete the following subsections B and C if
investment in Employer Stock is permitted and Participants
have the authority to direct the investment of Employer
Contributions.
1.45 B. Investment in Employer Stock within the Plan by officers or
directors of the Employer or by an individual who owns more
than 10% of the Employer's Stock is:
[X] Permitted
[ ] Not Permitted
1.45 C. The Trustee:
[ ] 1. Will vote the shares of the Employer Stock.
[X] 2. Will vote the shares of the Employer Stock in
accordance with any instructions received by the
Trustee from the Participant.
-> Option 2 must be selected if CG Trust Company
is the Trustee.
[ ] 3. May request voting instructions from the
Participants.
-33-
<PAGE> 34
- --------------------------------------------------------------------------------
PLAN DOCUMENT
SECTION XVII. WITHDRAWALS PRECEDING TERMINATION
- --------------------------------------------------------------------------------
- -> Complete only the sections for the type of contributions in your plan.
3E.1(a) A. Withdrawal of Required Employee Contributions.
-> Withdrawal may be for any reason.
[X] Not Available under the Plan.
[ ] Available under the Plan.
If available, Required Employee Contributions may be
withdrawn:
[ ] Once each 6 months.
[ ] Once each 12 months.
[ ] Other (specify): _______________.
The Contribution suspension period following a
withdrawal of Required Employee Contributions shall be:
-> You must choose one of the suspension periods shown.
Related Employer Contributions will be suspended for the
same period.
[ ] 6 months.
[ ] 12 months.
[ ] 24 months.
3E.1(b) B. Withdrawal of Voluntary Employee Contributions.
-> Withdrawal may be for any reason.
[X] Not Available under the Plan.
[ ] Available under the Plan.
If available, Voluntary Employee Contributions may be
withdrawn:
[ ] Once each 6 months.
[ ] Once each 12 months.
[ ] Other (specify): _______________.
-34-
<PAGE> 35
- --------------------------------------------------------------------------------
PLAN DOCUMENT
SECTION XVII. WITHDRAWALS PRECEDING TERMINATION
- --------------------------------------------------------------------------------
C. Withdrawal of Elective Deferral Contributions.
[ ] Not Available under the Plan.
[X] Available under the Plan.
If available, select the conditions for withdrawal:
3E.2 [X] Withdrawal upon Participant"s attainment of
age 59 1/2.
3E.5 [X] Withdrawal for Serious Financial hardship.
-> If a Participant makes a withdrawal of Elective
Deferral Contributions due to a Serious Financial
Hardship, the Participant must be suspended from making
any additional Elective Deferral Contributions for a
period of 12 months.
D. Withdrawal of Employer Contributions (Matching, Nonelective
and/or Prior Employer Contributions).
[ ] Not Available under the Plan.
[X] Available under the Plan.
-> If Prior Employer Contributions are money purchase plan
contributions, they may not be withdrawn.
If available, select the conditions for withdrawal:
3E.3 [X] 1. Withdrawal upon Participant"s attainment of
age 59 1/2
Available from:
[X] a. Matching Contributions.
[X] b. Nonelective Contributions.
[ ] c. Prior Employer Contributions
-35-
<PAGE> 36
- --------------------------------------------------------------------------------
PLAN DOCUMENT
SECTION XVII. WITHDRAWALS PRECEDING TERMINATION
- --------------------------------------------------------------------------------
3E.3 [ ] 2. Withdrawals to active Participants who have been
Participants for a minimum of 60 consecutive
months.
Available from:
[ ] a. Matching Contributions.
[ ] b. Nonelective Contributions.
[ ] c. Prior Employer Contributions
Frequency of withdrawal:
[ ] Once each 6 months.
[ ] Once each 12 months.
[ ] Other (specify) _______________ .
Suspension Period following withdrawal:
[ ] N/A.
[ ] 6 months.
[ ] 12 months.
[ ] 24 months.
3E.4 [ ] 3. Withdrawal for Serious Financial Hardship.
Available from:
[ ] a. Matching Contributions.
[ ] b. Nonelective Contributions.
[ ] c. Prior Employer Contributions
Prior Employer Contributions are
contributions made to the Plan by the
Employer prior to the Plan's original
and/or retirement on _______________
(fill in date).
-36-
<PAGE> 37
- --------------------------------------------------------------------------------
PLAN DOCUMENT
SECTION XVII. WITHDRAWALS PRECEDING TERMINATION
- --------------------------------------------------------------------------------
3E.6 E. Withdrawal of Rollover Contributions:
[ ] Not Available under the Plan.
[X] Available under the Plan.
If available, Rollover Contributions may be withdrawn:
[ ] Once per Plan Year.
[ ] Every 6 months.
[ ] Every 3 months.
[ ] Every month.
[X] Anytime.
3E.6 F. Withdrawal of Qualified Voluntary Employee Contributions
(QVEC Contributions)
-> Applicable only if this is a readoption of an existing
plan. If selected, Contributions may be withdrawn for any
reason.
[X] Not Available under the Plan.
[ ] Available under the Plan.
If available, Qualified Voluntary Employee Contributions
may be withdrawn:
[ ] Once per Plan Year.
[ ] Every 6 months.
[ ] Every 3 months.
[ ] Every month.
[ ] Anytime.
-37-
<PAGE> 38
- --------------------------------------------------------------------------------
PLAN DOCUMENT
SECTION XVII. WITHDRAWALS PRECEDING TERMINATION
- --------------------------------------------------------------------------------
3E.1(c) G. Withdrawal of Prior Required Employee Contributions
-> Withdrawal may be for any reason.
[X] Not Available under the Plan.
[ ] Available under the Plan.
If available, Prior Required Employee Contributions may
be withdrawn:
[ ] Once each 6 months.
[ ] Once each 12 months.
[ ] Other (specify) _______________.
Prior Required Employee Contributions are posttax contributions
made by Employees in order to receive an Employer contribution
and which were made before the Plan's original conversion and/or
restatement on __________ (fill in date).
3E.1(d) H. Withdrawal of Prior Voluntary Employee Contributions:
-> Withdrawal may be for any reason and may be taken at any
time.
[X] Not Available under the Plan.
[ ] Available under the Plan.
Prior Voluntary Employee Contributions are voluntary
contributions made by Employees prior to these types of
contributions being eliminated as a plan option on
_______________ (fill in date)
- --------------------------------------------------------------------------------
PLAN DOCUMENT XVIII. LOANS TO PARTICIPANTS, BENEFICIARIES AND PARITIES-IN-
SECTION INTEREST
- --------------------------------------------------------------------------------
5C A. Loans are permitted.
[X] Yes
-> If Yes, Plan must be trusteed
[ ] No
-38-
<PAGE> 39
- --------------------------------------------------------------------------------
PLAN DOCUMENT XVIII. LOANS TO PARTICIPANTS, BENEFICIARIES AND PARITIES-IN-
SECTION INTEREST
- --------------------------------------------------------------------------------
5C B. Loans are available only from the following sources:
-> Qualified Voluntary Employee Contributions (QVEC
Contributions) may not be taken in a loan.
[X] All Sources.
[ ] List Sources:
________________________________________________________
________________________________________________________
________________________________________________________
- --------------------------------------------------------------------------------
PLAN DOCUMENT
SECTION XIX. RETIREMENT AND DISABILITY
- --------------------------------------------------------------------------------
1.40 A. Normal Retirement Age is:
[X] 1. The date the Participant attains age 65 (not to
exceed 65).
[ ] 2. The later of:
a. The date the Participant attains age
__________ (not to exceed 65), or
b. The __________ (not to exceed 5th)
anniversary of the Participation
Commencement Date
-> Note regarding 2.b above: If, for Plan
Years beginning before January 1, 1988, Normal
Retirement Age was determined with reference to
the anniversary of the Participation
Commencement Date (more than 5 but not to
exceed 10 years), the anniversary date for
Participants who first commenced participation
under the Plan before the first Plan Year
beginning on or after January 1, 1988 shall be
the earlier of (A) the tenth anniversary of the
date the Participant commenced participation in
the Plan (or such anniversary as had been
elected by the Employer, if less than 10) or
(B) the fifth anniversary of the first day of
the first Plan Year beginning on or after
January 1, 1988. The Participation Commencement
Date is the first day of the first Plan Year in
which the Participant commenced participation
in the Plan.
-39-
<PAGE> 40
- --------------------------------------------------------------------------------
PLAN DOCUMENT
SECTION XIX. RETIREMENT AND DISABILITY
- --------------------------------------------------------------------------------
1.18 B. Early Retirement by Participants:
1. Early Retirement by Participants is:
[X] a. Not Permitted.
[ ] b. Permitted. Subject to the following conditions:
[ ] i Age __________ (not to exceed 65).
[ ] ii Years of Service __________.
[ ] iii Age __________ (not to exceed 65) and
__________ Years of Service.
[ ] iv Age __________ (not to exceed 65) and
__________ Years of Participation.
1.16 C. Disability
1. The Employer SHALL/SHALL NOT make contributions on
behalf of disabled Participants who are Nonhighly
Compensated Employees on the basis of the Compensation
each such Participant would have received for the
Limitation Year if the Participant had been paid at the
rate of Compensation paid immediately before becoming
permanently and totally disabled.
[ ] SHALL [X] SHALL NOT
-> All such contributions are 100% vested and nonforfeitable
when made.
- --------------------------------------------------------------------------------
PLAN DOCUMENT
SECTION XX. DISTRIBUTION OF BENEFITS
- --------------------------------------------------------------------------------
3A.1 A. Distribution of benefits should be in the form of (check all
that apply):
[X] 1. Single Sum.
[ ] 2. Life Annuity.
[X] 3. Installment Payments.
[ ] 4. Installment Refund Annuity.
[X] 5. Employer Stock, to the extent the Participant is
invested therein.
B. Distribution Timing
[ ] 1. All Participants may elect to defer their
distributions.
[X] 2. Participants who terminate employment and whose
account balances never exceeded $3,500 shall receive
an immediate, lump sum cash distribution.
-40-
<PAGE> 41
- --------------------------------------------------------------------------------
PLAN DOCUMENT
SECTION XX. DISTRIBUTION OF BENEFITS
- --------------------------------------------------------------------------------
C. Expenses - Deferred Participants.
1. Participants who elect to defer distribution of their
benefits SHALL/SHALL NOT pay for all fees associated
with administration of their deferral payment.
[X] SHALL [ ] SHALL NOT
- --------------------------------------------------------------------------------
PLAN DOCUMENT
SECTION XXI. QUALIFIED PRERETIREMENT SURVIVOR ANNUITY
- --------------------------------------------------------------------------------
3C.4 The Qualified Preretirement Survivor Annuity shall be:
-> 100% is required for Plans allowing only single sum
distributions.
[X] 100% to the surviving spouse.
[ ] 50% to the surviving spouse.
- --------------------------------------------------------------------------------
PLAN DOCUMENT
SECTION XXII. AMENDMENT TO THE PLAN
- --------------------------------------------------------------------------------
7B A. The party having the authority to amend the Adoption Agreement is
the:
[ ] 1. Trustee(s).
-> Trustee(s) cannot be chosen if the Trustee is the CG Trust.
[ ] 2. Plan Administrator.
[X] 3. Plan Committee.
[ ] 4. Designated Representative of the Employer.
-41-
<PAGE> 42
- --------------------------------------------------------------------------------
PLAN DOCUMENT
SECTION XXIII. TOP-HEAVY PROVISIONS
- --------------------------------------------------------------------------------
7A.1(i) A. Method to be used to avoid duplication of Top-Heavy Minimum
benefits when a non-Key Employee is a Participant in both this
Plan and a defined benefit plan maintained by the Employer
(select one response):
[X] 1. N/A. The Employer has no other plan(s).
[ ] 2. Single Plan Minimum Top-Heavy Allocation. A
minimum Top-Heavy contribution will be allocated
to each non-Key Employee's Participant Account in
an amount equal to:
[ ] a. The lesser of 3% of Compensation or the
highest percentage allocated to any Key
Employee.
[ ] b. ____ % of Compensation (must be at least
3%).
[ ] 3. Multiple Plans Top-Heavy Allocation. In order to
satisfy Code sections 415 and 416, and because of
the required aggregation of multiple plans, a
minimum Top-Heavy contribution will be allocated
to each non-Key Employee in an amount equal to:
[ ] a. Not Applicable. No other plan was in
existence prior to the Effective Date of
this Adoption Agreement.
[ ] b. 5% of Compensation, to be provided in a
defined contribution plan of the Employer.
[ ] c. 72% of Compensation, to be nonintegrated,
and provided in this Plan.
-> If c is chosen, for all Plan Years in which this
Plan is Top-Heavy (but not Super Top-Heavy), the
Defined Benefit and Defined Contribution fractions
shall be computed using 125%.
[ ] 4. Enter the name of the plan(s) and specify the method
under which the plan(s) will provide Top-Heavy
Minimum Benefits to non-Key Employees [include any
adjustments required under Code section 415(e)]:
-> If 4 is selected, the method specified must preclude
Employer discretion and inadvertent omissions.
-42-
<PAGE> 43
- --------------------------------------------------------------------------------
PLAN DOCUMENT
SECTION XXIII. TOP-HEAVY PROVISIONS
- --------------------------------------------------------------------------------
7A.1 B. Present Value: In order to establish the present value to
compute the Top-Heavy Ratio, any benefit shall be discounted
only for mortality and interest, based on:
-> Complete B only if response to A is 2,3 or 4. Fill in
all blanks.
[ ] 1. Interest Rate __________%.
[ ] 2. Mortality Table Rate __________.
[ ] 3. Valuation Date __________.
7A.2 C. Where a non-Key Employee is a Participant in this and another
defined contribution plan(s) of the Employer, choose which
plan will provide the minimum Top-Heavy contribution:
[X] 1. N/A. The Employer has no other plan.
[ ] 2. The minimum allocation will be met in this Plan.
[ ] 3. The minimum allocation will be met in the other
defined contribution plan.
Enter the name of the plan:________________________
___________________________________________________
7A.3 D. Top-Heavy Vesting Schedule. In the event the plan becomes
Top-Heavy, the vesting schedule shall be:
-> Must meet one of the schedules below and must be at least
as liberal as the vesting schedule elected in Section IX.A.
[ ] 1. 100% vesting after __________ (not to exceed 3)
years of Service.
[ ] 2. __________% vesting after 1 Year of Service.
__________% (not less than 20) vesting after 2 Years
of Service.
__________% (not less than 40) vesting after 3 Years
of Service.
__________% (not less than 60) vesting after 4 Years
of Service.
__________% (not less than 80) vesting after 5 Years
of Service.
100 % vesting after 6 Years of Service.
[X] 3. Same vesting schedule(s) as elected in Adoption
Agreement Section IX (already means Top-Heavy
minimum vesting requirements).
-> If the vesting schedule under the Plan shifts into the
above schedule for any Plan Year because of the Plan's
Top-Heavy status, such shift is an amendment to the vesting
schedule and the election provisions in Section 7B.1 of the
Plan shall apply.
-> The Top-Heavy vesting schedule will remain in effect even
if the Plan ceases to be Top Heavy.
-43-
<PAGE> 44
- --------------------------------------------------------------------------------
PLAN DOCUMENT
SECTION XXIV. OTHER ADOPTING EMPLOYER
- --------------------------------------------------------------------------------
6E.1, 6E.2 A. The following Adopting Employer(s) also adopt this plan and
have executed this Adoption Agreement:
-> Fill in below the names and the Employer Identification
Numbers (EINs) of Adopting Employers.
-> Must meet requirements of Plan definition of Employer,
Plan Section 1.24.
First International Bank
Employer Identification Number: 06-0703598
-44-
<PAGE> 45
The Employer hereby adopts the Connecticut General Life Insurance Company
Defined Contribution Prototype Profit Sharing/Thrift Plan with 401(k) Feature,
including all elections made in this Non-Standardized Adoption Agreement, and
the Employer agrees to be bound by all the terms of the Plan and by all the
terms of this Adoption Agreement and of the Annuity Contract. The Employer
further agrees that it will furnish promptly all information required by the
Trustee, if applicable, the Plan Administrator and the Insurance Company in
order to carry out their functions. The Employer shall notify the Trustee, if
applicable, the Plan Administrator and the Insurance Company promptly of any
changes in the status of the Employer which might affect the Employer's duties
and responsibilities hereunder.
The elections under this Adoption Agreement may be changed by the Employer from
time to time by a written instrument signed by the Employer, the Plan
Administrator and the Trustee, if applicable, and accepted by the Plan Sponsor.
The Employer consents to the exercise by the Plan Sponsor of the right to amend
the Plan and the Annuity Contract from time to time as it may deem necessary or
advisable.
By signing this Adoption Agreement, the Employer specifically acknowledges that
the Insurance Company has no authority: (1) to answer legal questions and that
all such questions shall be answered by legal counsel for the Employer; and (2)
to make determinations involved in the administration of the Plan and that all
such determinations shall be answered by the Employer's Plan Administrator or
other designated representative.
Upon execution of this Adoption Agreement by the Employer, the Plan shall be
effective with respect to that Employer as of the Effective Date specified
herein, provided the Plan Administrator and the Trustee, if applicable, shall
then or thereafter execute this Adoption Agreement to signify their acceptance
of their duties and responsibilities hereunder and provided further, the Plan
Sponsor will indicate its acceptance of the Employer in accordance with its
usual rules and practices.
The Adopting Employer may not rely on an opinion letter issued by the National
Office of the Internal Revenue Service as evidence that the Plan is qualified
under Internal Revenue Code section 401. In order to obtain reliance with
respect to plan qualification, the Employer must apply to the appropriate key
district office for a determination letter.
Connecticut General Life Insurance Company will inform the Employer of any
amendments made to the Plan or of the discontinuance or abandonment of such
Plan.
CAUTION: You should very carefully examine the elections you have made in this
Adoption Agreement and discuss them with your legal counsel. Failure to properly
fill out the Adoption Agreement may result in disqualification of your plan.
This Adoption Agreement may only be used in conjunction with Basic Plan Document
Number 03.
(Note: The Employer, Plan Administrator and Trustee, if applicable, must all
sign below.)
Executed at Hartford, CT , this 13th day of September, 1999.
Employer's Exact Name: First International Bancorp, Inc.
Witness: /s/ Leona M. Rapelye By: /s/ Leslie A. Galbraith
Title: Executive Vice President
Additional Adopting Employer's Exact Name:__________________________
Witness: ____________________ By:___________________
Title:___________________
-45-
<PAGE> 46
Additional Adopting Employer's Exact Name:___________________
Witness: ____________________ By:___________________
Title:___________________
Additional Adopting Employer's Exact Name:___________________
Witness: ____________________ By:___________________
Title:___________________
Additional Adopting Employer's Exact Name:___________________
Witness: ____________________ By:___________________
Title:___________________
ACCEPTED this 13th day of September, 1999.
Witness: /s/ Connie Perrine By (Plan Administrator): /s/ Leona M. Rapelye
Witness:__________________________ By (Trustee): C G Trust Company
Witness:__________________________ By (Trustee):________________________________
Witness:__________________________ By (Trustee):________________________________
ACCEPTED this ______________ day of _____________________, ____.
CONNECTICUT GENERAL LIFE INSURANCE COMPANY
By (Authorized Representative): _________________
-46-
<PAGE> 1
Exhibit 10.10
March 15, 2000
Leslie A. Galbraith
53 Collie Brook Road
East Hampton, CT 06424
Dear Leslie:
This agreement is intended to set forth the basic terms under which you ("YOU"
or the "EMPLOYEE") will continue to be employed by First International Bank (the
"BANK") and, therefore, to constitute an employment agreement between us. We
have agreed with you that:
1. Nature and Term of Employment. You will continue to be employed as
President and Chief Operating Officer of the Bank (or equivalent title)
in accordance with the terms and conditions in this agreement, and you
accept such employment and agree to serve in such capacity. The term of
employment under this agreement will extend from the date set forth
above through June 30, 2001 (the "TERM"). Nothing in this agreement
will prohibit the continuation of employment beyond the Term if and as
agreed by the Bank and Employee.
2. Performance of Duties. While employed by the Bank, you will apply, in
good faith and on a full-time basis, all of your skill and experience
to the performance of your duties in such employment. You will have
such responsibilities and authority as are designated (and as may be
revised from time to time) by the Chairman and Chief Executive Officer
and the Board of Directors of the Bank.
3. Base Compensation. Commencing upon your acceptance of this agreement,
the Bank will pay or cause to be paid to you during your employment a
salary at the rate of $225,000 per annum. Your salary will be paid at
such times as the salaries of other salaried officers of the Bank are
generally paid.
4. Benefits. During your employment, the Bank shall provide health,
dental, disability, life insurance and retirement benefits for you and
your dependents comparable to such coverage as is provided for officers
of the Bank generally. In addition, during your employment provided
that you are insurable at standard rates, the Bank shall sponsor and
pay for (a) an individually-owned supplemental term life insurance
policy on your life in the amount of $2,000,000, and (b) an
individually-owned supplemental disability income insurance policy with
a benefit to you of approximately $4,000 per month. The insurance
policies shall remain in full force and effect during the term of this
agreement, shall provide for such persons as you may designate to be
the beneficiaries of the benefits thereof, and shall be portable. You
agree to be available for such medical and other examinations and
inquiries as the insurance carriers may request.
<PAGE> 2
5. Bonuses. You will be eligible to receive cash bonuses in 2000 and 2001,
which bonuses shall be determined by the Chairman and Chief Executive
Officer and Board of Directors of the Bank (or a committee of the Board
of Directors of the Bank) in their discretion based upon your
performance as evaluated primarily with reference to the policies and
budgets approved by the Bank's Board.
6. Supplemental Option. As further compensation for the services to be
provided by you hereunder, First International Bancorp, Inc. (the
"HOLDING COMPANY") is granting to you today pursuant to the Holding
Company's Amended and Restated Stock Option Plans (the "PLANS") an
additional option to purchase 25,000 shares of the Common Stock of the
Holding Company for the price and on the other terms set forth in a new
stock option agreement that you are entering into with the Holding
Company on the date hereof (the "SUPPLEMENTAL OPTION"). Notwithstanding
any option agreements between you and the Holding Company dated before
the date hereof, all stock options held by you before the date hereof
to purchase Common Stock of the Holding Company will be vested
immediately. Any additional stock options granted to you pursuant to
the Plans after the date hereof but prior to June 30, 2001 to purchase
Common Stock of the Holding Company would be vested as of the earliest
of (a) June 30, 2001, (b) a Change in Control (as defined in paragraph
7 below), and (c) any termination by the Bank without Cause (as defined
in paragraph 8(c) below) of Employee's employment hereunder.
7. Change in Control Provisions. A "CHANGE IN CONTROL" will have occurred
if the Chase Family and the Silvers Family cease, in the aggregate, to
beneficially own at least 25% of the outstanding Common Stock of the
Holding Company or any successor thereto or to have the right to
exercise, directly or indirectly, at least 25% of the aggregate voting
power of the Bank or of any successor thereto. As used in this
paragraph, "CHASE FAMILY" means Arnold Chase, Cheryl Chase, Rhoda L.
Chase, David T. Chase and the parents, other family members, affiliates
and personal representatives and heirs of each of them, "SILVERS
FAMILY" means Brett N. Silvers, Nancy W. Silvers, their children and
any trusts or other entities as to which the beneficiaries or owners
are Brett N. Silvers, Nancy W. Silvers and/or their children. As
described above, any additional stock options granted to you pursuant
to the Plans after the date hereof to purchase common stock of the
Holding Company will be vested immediately upon the occurrence of a
Change in Control.
<PAGE> 3
8. Termination Provisions.
(a) Voluntary Termination - If Employee quits Employee's employment
hereunder (except as otherwise provided in the next paragraph), dies or
is terminated due to disability, as defined under the Bank's then
current long-term disability policy, whether before or after a Change
in Control, Employee will receive Employee's base salary through the
date as of which Employee's employment ceases (net of any amounts owed
by Employee to the Bank) plus accrued vacation time, but will not
receive any severance, bonuses or other benefits.
(b) Termination Without Cause - If Employee (i) is fired without
"Cause", as defined below or (ii) quits Employee's employment hereunder
within three months after a Change in Control that results in a
reduction in Employee's title, responsibilities, compensation and/or
benefits, or a change of more than 40 miles in Employee's place of
employment (any of the foregoing reasons being "GOOD REASONS"),
Employee will receive, as Employee's sole remedy for such firing or
quitting for Good Reason (in addition to any vesting of stock options
provided for in paragraph 6 above), a lump sum cash payment equal to
the Employee's then existing base salary (net of any amounts owed by
Employee to the Bank) for one year. The Bank may, as a condition to
being required to pay the severance payments provided for in this
agreement, require the Employee to execute a general release of any
claim (other than the obligation of the Bank to make such severance
payments) or cause of action that Employee may have against the Bank,
the Holding Company, or any of their officers, directors, employees,
agents, or representatives.
(c) Termination With Cause - If Employee is fired for "Cause", Employee
will receive Employee's base salary through the date as of which
Employee's employment is terminated (net of any amounts owed by
Employee to the Bank and any costs incurred by the Bank due to such
"Cause") plus accrued vacation time, but will not receive any
severance, bonuses or other benefits. "CAUSE" means any of the
following: (a) insubordination or other refusal or failure to carry out
the instructions or policies of the Board or the officers to whom the
Employee reports; (b) dishonesty, crime or action involving moral
turpitude, or any other conduct that is illegal, immoral or materially
injurious to the Bank; (c) breach of Employee's covenants or
obligations under this agreement, or (d) non-performance in the
performance of Employee's duties, evaluated primarily with reference to
the Bank's credit and organizational policies, and with reference to
the goals and budgets approved by the Bank's Board of directors, and,
if such non-performance referred to in this clause (d) is capable of
being corrected, continuation of such non-performance for 30 days after
the Bank gives notice to the Employee describing such non-performance.
9. Covenant Not to Compete. During the time that Employee is employed by
the Bank, and if Employee's employment terminates at any time during
the Term (regardless of whether the termination is voluntary or
involuntary, with or without Cause or Good Reason) for a period of 12
months from the date of such termination, Employee shall not (a) become
engaged directly in a management, lending, financial or consulting
capacity in the
<PAGE> 4
origination, processing, purchasing or selling of SBA, USDA or Ex-Im
Bank loans, or (b) seek to cause any employee or customer of the Bank,
the Holding Company or any direct or indirect Subsidiary of either of
them to cease, reduce or change in a manner adverse to the business or
interests of the Bank, the Holding Company or any direct or indirect
Subsidiary of either of them, such employee's or customer's employment
by or relationship with the Bank, the Holding Company or any direct or
indirect Subsidiary of either of them. As used herein, (i) "SUBSIDIARY"
means any corporation, association, limited liability company, trust,
or other business entity of which the Bank or the Holding Company shall
at any time own directly or indirectly through a Subsidiary or
Subsidiaries at least a majority (by number of votes) of the
outstanding Voting Stock, and (ii) "VOTING STOCK" means stock or other
equity interests, of any class or classes (however designated), the
holders of which are at the time entitled, as such holders, to vote for
the election of a majority of the directors, managers or trustees (or
persons performing similar functions) of the corporation, association,
limited liability company, trust or other business entity involved,
whether or not the right so to vote exists by reason of the happening
of a contingency.
10. Exclusivity of Services: Confidentiality.
(a) In addition to the more specific provisions of paragraph 9 above,
you agree that during the Term of this agreement, you will not, without
the prior written approval of the Chairman and Chief Executive Officer
and the Board of Directors of the Bank, directly or indirectly engage
or participate in, or become an owner, partner, officer of, director
of, or become employed by, or render advisory, consulting or other
services to or in connection with, any other business enterprise during
the time that you are employed by the Bank; provided, however, that you
may hold outside directorships which may, from time to time, require
minor portions of time, but which shall not interfere or be
inconsistent with your duties hereunder.
(b) You also acknowledge that any information and documentation
relating to the Bank or the Holding Company, including but not limited
to their products, programs, business strategies, clients, employees,
forms, financial matters, and matters discussed by the Board of
Directors of the Bank and the Holding Company, are the sole property of
the Bank and the Holding Company and are strictly confidential; and you
agree that you will not, at any time before, during or at any time
after your employment by the Bank (regardless of whether the
termination of your employment is voluntary or involuntary, with or
without Cause or Good Reason), disclose any of such information or
documentation to any person or entity for any purpose whatsoever,
except for your use of such information and documentation in the course
of carrying out your duties during the time that you are employed by
the Bank and except to comply with requirements of law or regulatory
authorities with jurisdiction over the Bank and the Holding Company and
except to counsel or independent auditors for you, the Bank or the
Holding Company. The foregoing sentence does not, however, prohibit the
disclosure by you of information that (i) is generally available to the
public other than as a result of a disclosure of such information
directly or indirectly by you, or (b) becomes available to you on a
non-confidential basis from a source other than the Bank, the Holding
Company and their
<PAGE> 5
officers, directors, employees, representatives and advisors, provided
that such source is not known by you to be bound by any obligation of
secrecy to the Bank or the Holding Company or another party.
(c) You also agree that you will not discuss or disclose any of the
terms or provisions of this agreement, either before, during or at any
time after the Term of this agreement, with any other employee of the
Bank or the Holding Company, except for your superior officers, members
of the Operating Committee of the Bank, the Chairman and Chief
Executive Officer of the Bank, and the Board of Directors of the Bank
and the Holding Company.
11. Equitable Relief. You acknowledge that any violation of Section 9 or 10
above will cause the Bank and the Holding Company irreparable harm and
that, in addition to any other remedy that they may have, the Bank and
the Holding Company will have the right to obtain such injunctive or
other equitable relief as they may deem to be necessary or appropriate.
12. Tax Withholding Requirement. The amounts paid by the Bank to you
hereunder will have withheld and deducted therefrom any taxes required
to be withheld by the Bank under any federal, state or local law.
13. Regulatory Limitation. Notwithstanding any other provision of the
Agreement, the Bank shall not be obligated to make, and the Employee
shall have no right to receive, any payment, benefit or amount under
this Agreement which would violate any law, regulation or regulatory
order applicable to the Bank to the Holding Company at the time such
payment, benefit or amount is due (a "PROHIBITED PAYMENT"). If an
amount payable hereunder is not paid because it is a Prohibited
Payment, Employee shall continue to be bound by all of Employee's
obligations and agreements hereunder and the Bank shall make or provide
to the Employee the payment, benefit or other amount (or such portion
thereof the making of which ceases to be a violation) that is the
subject of the Prohibited Payment at such later date, if any, as the
applicable law, regulation or regulatory order no longer would be
violated by the Bank's making or providing such payment, benefit or
amount to the Employee.
14. Limitation on Benefits. It is the intention of the Employee and Bank
that no payments by Bank to or for the benefit of Employee under this
agreement or any other agreement or plan pursuant to which Employee is
entitled to receive payments or benefits shall be nondeductible to Bank
or any other payor by reason of Section 280G of the Internal Revenue
Code of 1986, as amended (the "Code") and subject to a tax pursuant to
Section 4999 of the Code, as a result of payments that would constitute
"parachute payments". Accordingly, such payments shall be reduced in
such amounts as are required to reduce the aggregate "present value"
(as the term is defined in Section 280G(d)(4) of the Code) of such
payments to one dollar less than an amount equal to three times the
Employee's "base amount" (as the term is defined in Section
280G(b)(3)(a) and (d)(1) and (2) of the Code), to the end that the
Employee is not subject to tax pursuant to Section 4999 and no
deduction is disallowed to the Bank by reason of Section 280G(a). The
determination as to the
<PAGE> 6
amount of the reduction of such payments, if any, shall be made by the
Bank's independent certified public accountants.
15. Notices. All notices under this agreement shall be in writing and shall
be deemed effective when delivered in person or by recognized overnight
delivery service to you or to the Bank, or if mailed, postage prepaid,
registered or certified mail, addressed, in the case of you, to your
last known address as carried on the personnel records of the Bank and,
in the case of the Bank, to its corporate headquarters, attention of
the Chairman and Chief Executive Officer, or to such other address as
the party to be notified may specify by notice to the other party
pursuant to this paragraph.
16. Successors and Assigns. The rights and obligations of the Bank under
this agreement shall inure to the benefit of and shall be binding upon
the successors and assigns of the Bank, including, without limitation,
any corporation, individual or other person or entity which may acquire
all or substantially all of the assets and business of the Bank or with
or into which the Bank may be consolidated or merged.
17. Arbitration. Any dispute which may arise between the parties hereto
shall be settled by binding arbitration in accordance with the National
Rules for the Resolution of Employment Disputes of the American
Arbitration Association. The parties shall mutually agree in writing
upon an arbitrator. If the parties shall fail to agree upon an
arbitrator within 5 days after a written demand, delivered as provided
for notices hereunder, for arbitration hereunder is made, each party
shall have the right within the succeeding 10 days to select an
arbitrator (the failure by either party to exercise such right within
said 10 days will be equivalent to a consent to the selection of the
other party's arbitrator by mutual agreement); within 20 days after
such selection, if 2 arbitrators are selected, the 2 arbitrators shall
select a third arbitrator. The arbitrator or arbitrators shall have at
least 5 years of experience in employment law. Any claim or dispute
arising hereunder shall be decided by the arbitrator or arbitrators
based upon the rights and obligations of the parties set forth in this
agreement. The decision of the arbitrator or of the majority of the
arbitrators, as the case may be, shall not include any award for
punitive damages or penalties, but the arbitrator or majority of
arbitrators may award or prorate attorneys fees in accordance with his
or their judgment as to who is the prevailing party in the arbitration.
An arbitration award rendered in accordance with this agreement shall
be binding and conclusive upon the parties, and may be entered in any
court of competent jurisdiction. The costs of arbitration shall be
borne equally, except that each party shall bear the cost of their own
counsel and experts, if any. Venue for any arbitration proceedings
hereunder shall be in Hartford, Connecticut.
18. Severability. If any of the terms or conditions of this agreement shall
be declared void or unenforceable by any court or administrative body
of competent jurisdiction, such term or condition shall be deemed
severable from the remainder of this agreement, and the other terms and
conditions of this agreement shall continue to be valid and
enforceable.
<PAGE> 7
19. Construction. This agreement sets forth the entire agreement of the
Bank, the Holding Company and the Employee regarding the employment of
the Employee by the Bank, and this agreement supersedes any prior or
contemporaneous oral or written agreement with respect to the
Employee's employment or any other matter set forth herein. This
agreement shall be construed under the laws of the State of Connecticut
and may not be amended except by a writing signed by the Employee and
the Bank. Section headings are for convenience only and shall not be
considered a part of the terms and provisions of this agreement.
If this agreement is acceptable to you, please sign below.
Very truly yours,
FIRST INTERNATIONAL BANK
By:/s/Brett N. Silvers
----------------------
Brett N. Silvers
Its Chairman and Chief Executive Officer
Agreed to:
/s/Leslie A. Galbraith
- ----------------------
NAME: Leslie A. Galbraith
The undersigned hereby agrees to be bound by the provisions of this
agreement with respect to stock options and the exercise thereof.
FIRST INTERNATIONAL BANCORP, INC.
By:/s/Brett N. Silvers
----------------------
Brett N. Silvers
Its Chairman and Chief Executive Officer
<PAGE> 8
Exhibit 10.11
March 6, 2000
Shaun P. Williams
162 Tavern Circle
Middletown, CT 06456
Dear Shaun:
This agreement is intended to set forth the basic terms under which you ("YOU"
or the "EMPLOYEE") will continue to be employed by First International Bank (the
"BANK") and, therefore, to constitute an employment agreement between us. We
have agreed with you that:
1. Nature and Term of Employment. You will continue to be employed as
Executive Vice President and Chief Financial Officer of the Bank (or
equivalent title) in accordance with the terms and conditions in this
agreement, and you accept such employment and agree to serve in such
capacity. The term of employment under this agreement will extend from
the date set forth above through February 28, 2002 (the "TERM").
Nothing in this agreement will prohibit the continuation of employment
beyond the Term if and as agreed by the Bank and Employee.
2. Performance of Duties. While employed by the Bank, you will apply, in
good faith and on a full-time basis, all of your skill and experience
to the performance of your duties in such employment. You will have
such responsibilities and authority as are designated (and as may be
revised from time to time) by the Chairman and Chief Executive Officer
and the Board of Directors of the Bank.
3. Base Compensation. Commencing upon your acceptance of this agreement,
the Bank will pay or cause to be paid to you during your employment a
salary at the rate of $155,000 per annum, with the amount increasing by
not less than 2% during 2000 and increasing by not less than 2% during
2001. Your salary will be paid at such times as the salaries of other
salaried officers of the Bank are generally paid.
4. Benefits. During your employment, the Bank shall provide health,
dental, disability, life insurance and retirement benefits for you and
your dependents comparable to such coverage as is provided for officers
of the Bank generally. In addition, during your employment provided
that you are insurable at standard rates, the Bank shall sponsor and
pay for (a) an individually-owned supplemental term life insurance
policy on your life in the amount of $1,500,000, and (b) an
individually-owned supplemental disability income insurance policy with
a benefit to you of approximately $4,000 per month. The insurance
policies shall remain in full force and effect during the term of this
agreement, shall provide for such persons as you may designate to be
the beneficiaries of the benefits thereof, and shall be portable. You
agree to be available for such medical and other examinations and
inquiries as the insurance carriers may request.
<PAGE> 9
5. Bonuses. You will be eligible to receive cash bonuses in 2000, 2001 and
2002, which bonuses shall be determined by the Chairman and Chief
Executive Officer and Board of Directors of the Bank (or a committee of
the Board of Directors of the Bank) in their discretion based upon your
performance as evaluated primarily with reference to the policies and
budgets approved by the Bank's Board.
6. Supplemental Option. As further compensation for the services to be
provided by you hereunder, First International Bancorp, Inc. (the
"HOLDING COMPANY") is granting to you today pursuant to the Holding
Company's 1994 Incentive Stock Option Plan and the Amended and Restated
1996 Stock Option Plans (the "PLANS") additional options to purchase
11,500 shares of the Common Stock of the Holding Company for the price
and on the other terms set forth in new stock option agreements that
you are entering into with the Holding Company on the date hereof (the
"SUPPLEMENTAL OPTION"). The Supplemental Option will be in addition to
the option to purchase 3,500 shares of the Common Stock of the Holding
Company that would otherwise be made to you during 2000 in accordance
with the Bank's present compensation policies and Plans.
Notwithstanding any option agreements between you and the Holding
Company dated before the date hereof, the Supplemental Option and all
stock options held by you before the date hereof to purchase Common
Stock of the Holding Company will be vested immediately. Any additional
stock options granted to you pursuant to the Plans after the date
hereof but prior to February 28, 2002 to purchase Common Stock of the
Holding Company would be vested as of the earliest of (a) February 28,
2002, (b) a Change in Control (as defined in paragraph 7 below), and
(c) any termination by the Bank without Cause (as defined in paragraph
8(c) below) of Employee's employment hereunder.
7. Change in Control Provisions. A "CHANGE IN CONTROL" will have occurred
if the Chase Family and the Silvers Family cease, in the aggregate, to
beneficially own at least 25% of the outstanding Common Stock of the
Holding Company or any successor thereto or to have the right to
exercise, directly or indirectly, at least 25% of the aggregate voting
power of the Bank or of any successor thereto. As used in this
paragraph, "CHASE FAMILY" means Arnold Chase, Cheryl Chase, Rhoda L.
Chase, David T. Chase and the parents, other family members, affiliates
and personal representatives and heirs of each of them, "SILVERS
FAMILY" means Brett N. Silvers, Nancy W. Silvers, their children and
any trusts or other entities as to which the beneficiaries or owners
are Brett N. Silvers, Nancy W. Silvers and/or their children. As
described above, any additional stock options granted to you pursuant
to the Plans after the date hereof to purchase common stock of the
Holding Company will be vested immediately upon the occurrence of a
Change in Control.
<PAGE> 10
8. Termination Provisions.
(a) Voluntary Termination - If Employee quits Employee's employment
hereunder (except as otherwise provided in the next paragraph), dies or
is terminated due to disability, as defined under the Bank's then
current long-term disability policy, whether before or after a Change
in Control, Employee will receive Employee's base salary through the
date as of which Employee's employment ceases (net of any amounts owed
by Employee to the Bank) plus accrued vacation time, but will not
receive any severance, bonuses or other benefits.
(b) Termination Without Cause - If Employee (i) is fired without
"Cause", as defined below or (ii) quits Employee's employment hereunder
within three months after a Change in Control that results in a
reduction in Employee's title, responsibilities, compensation and/or
benefits, or a change of more than 40 miles in Employee's place of
employment (any of the foregoing reasons being "GOOD REASONS"),
Employee will receive, as Employee's sole remedy for such firing or
quitting for Good Reason (in addition to any vesting of stock options
provided for in paragraph 6 above), a lump sum cash payment equal to
the Employee's then existing base salary (net of any amounts owed by
Employee to the Bank) for one year. The Bank may, as a condition to
being required to pay the severance payments provided for in this
agreement, require the Employee to execute a general release of any
claim (other than the obligation of the Bank to make such severance
payments) or cause of action that Employee may have against the Bank,
the Holding Company, or any of their officers, directors, employees,
agents, or representatives.
(c) Termination With Cause - If Employee is fired for "Cause", Employee
will receive Employee's base salary through the date as of which
Employee's employment is terminated (net of any amounts owed by
Employee to the Bank and any costs incurred by the Bank due to such
"Cause") plus accrued vacation time, but will not receive any
severance, bonuses or other benefits. "CAUSE" means any of the
following: (a) insubordination or other refusal or failure to carry out
the instructions or policies of the Board or the officers to whom the
Employee reports; (b) dishonesty, crime or action involving moral
turpitude, or any other conduct that is illegal, immoral or materially
injurious to the Bank; (c) breach of Employee's covenants or
obligations under this agreement, or (d) non-performance in the
performance of Employee's duties, evaluated primarily with reference to
the Bank's credit and organizational policies, and with reference to
the goals and budgets approved by the Bank's Board of directors, and,
if such non-performance referred to in this clause (d) is capable of
being corrected, continuation of such non-performance for 30 days after
the Bank gives notice to the Employee describing such non-performance.
9. Covenant Not to Compete. During the time that Employee is employed by
the Bank, and if Employee's employment terminates at any time during
the Term (regardless of whether the termination is voluntary or
involuntary, with or without Cause or Good Reason) for a period of 12
months from the date of such termination, Employee shall not (a) become
engaged directly in a management, lending, financial or consulting
capacity in the
<PAGE> 11
origination, processing, purchasing or selling of SBA, USDA or Ex-Im
Bank loans, or (b) seek to cause any employee or customer of the Bank,
the Holding Company or any direct or indirect Subsidiary of either of
them to cease, reduce or change in a manner adverse to the business or
interests of the Bank, the Holding Company or any direct or indirect
Subsidiary of either of them, such employee's or customer's employment
by or relationship with the Bank, the Holding Company or any direct or
indirect Subsidiary of either of them. As used herein, (i) "SUBSIDIARY"
means any corporation, association, limited liability company, trust,
or other business entity of which the Bank or the Holding Company shall
at any time own directly or indirectly through a Subsidiary or
Subsidiaries at least a majority (by number of votes) of the
outstanding Voting Stock, and (ii) "VOTING STOCK" means stock or other
equity interests, of any class or classes (however designated), the
holders of which are at the time entitled, as such holders, to vote for
the election of a majority of the directors, managers or trustees (or
persons performing similar functions) of the corporation, association,
limited liability company, trust or other business entity involved,
whether or not the right so to vote exists by reason of the happening
of a contingency.
10. Exclusivity of Services: Confidentiality.
(a) In addition to the more specific provisions of paragraph 9 above,
you agree that during the Term of this agreement, you will not, without
the prior written approval of the Chairman and Chief Executive Officer
and the Board of Directors of the Bank, directly or indirectly engage
or participate in, or become an owner, partner, officer of, director
of, or become employed by, or render advisory, consulting or other
services to or in connection with, any other business enterprise during
the time that you are employed by the Bank; provided, however, that you
may hold outside directorships which may, from time to time, require
minor portions of time, but which shall not interfere or be
inconsistent with your duties hereunder.
(b) You also acknowledge that any information and documentation
relating to the Bank or the Holding Company, including but not limited
to their products, programs, business strategies, clients, employees,
forms, financial matters, and matters discussed by the Board of
Directors of the Bank and the Holding Company, are the sole property of
the Bank and the Holding Company and are strictly confidential; and you
agree that you will not, at any time before, during or at any time
after your employment by the Bank (regardless of whether the
termination of your employment is voluntary or involuntary, with or
without Cause or Good Reason), disclose any of such information or
documentation to any person or entity for any purpose whatsoever,
except for your use of such information and documentation in the course
of carrying out your duties during the time that you are employed by
the Bank and except to comply with requirements of law or regulatory
authorities with jurisdiction over the Bank and the Holding Company and
except to counsel or independent auditors for you, the Bank or the
Holding Company. The foregoing sentence does not, however, prohibit the
disclosure by you of information that (i) is generally available to the
public other than as a result of a disclosure of such information
directly or indirectly by you, or (b) becomes available to you on a
non-confidential basis from a source other than the Bank, the Holding
Company and their
<PAGE> 12
officers, directors, employees, representatives and advisors, provided
that such source is not known by you to be bound by any obligation of
secrecy to the Bank or the Holding Company or another party.
(c) You also agree that you will not discuss or disclose any of the
terms or provisions of this agreement, either before, during or at any
time after the Term of this agreement, with any other employee of the
Bank or the Holding Company, except for your superior officers, members
of the Operating Committee of the Bank, the Chairman and Chief
Executive Officer of the Bank, and the Board of Directors of the Bank
and the Holding Company.
11. Equitable Relief. You acknowledge that any violation of Section 9 or 10
above will cause the Bank and the Holding Company irreparable harm and
that, in addition to any other remedy that they may have, the Bank and
the Holding Company will have the right to obtain such injunctive or
other equitable relief as they may deem to be necessary or appropriate.
12. Tax Withholding Requirement. The amounts paid by the Bank to you
hereunder will have withheld and deducted therefrom any taxes required
to be withheld by the Bank under any federal, state or local law.
13. Regulatory Limitation. Notwithstanding any other provision of the
Agreement, the Bank shall not be obligated to make, and the Employee
shall have no right to receive, any payment, benefit or amount under
this Agreement which would violate any law, regulation or regulatory
order applicable to the Bank to the Holding Company at the time such
payment, benefit or amount is due (a "PROHIBITED PAYMENT"). If an
amount payable hereunder is not paid because it is a Prohibited
Payment, Employee shall continue to be bound by all of Employee's
obligations and agreements hereunder and the Bank shall make or provide
to the Employee the payment, benefit or other amount (or such portion
thereof the making of which ceases to be a violation) that is the
subject of the Prohibited Payment at such later date, if any, as the
applicable law, regulation or regulatory order no longer would be
violated by the Bank's making or providing such payment, benefit or
amount to the Employee.
14. Limitation on Benefits. It is the intention of the Employee and Bank
that no payments by Bank to or for the benefit of Employee under this
agreement or any other agreement or plan pursuant to which Employee is
entitled to receive payments or benefits shall be nondeductible to Bank
or any other payor by reason of Section 280G of the Internal Revenue
Code of 1986, as amended (the "Code") and subject to a tax pursuant to
Section 4999 of the Code, as a result of payments that would constitute
"parachute payments". Accordingly, such payments shall be reduced in
such amounts as are required to reduce the aggregate "present value"
(as the term is defined in Section 280G(d)(4) of the Code) of such
payments to one dollar less than an amount equal to three times the
Employee's "base amount" (as the term is defined in Section
280G(b)(3)(a) and (d)(1) and (2) of the Code), to the end that the
Employee is not subject to tax pursuant to Section 4999 and no
deduction is disallowed to the Bank by reason of Section 280G(a). The
determination as to the
<PAGE> 13
amount of the reduction of such payments, if any, shall be made by the
Bank's independent certified public accountants.
15. Notices. All notices under this agreement shall be in writing and shall
be deemed effective when delivered in person or by recognized overnight
delivery service to you or to the Bank, or if mailed, postage prepaid,
registered or certified mail, addressed, in the case of you, to your
last known address as carried on the personnel records of the Bank and,
in the case of the Bank, to its corporate headquarters, attention of
the Chairman and Chief Executive Officer, or to such other address as
the party to be notified may specify by notice to the other party
pursuant to this paragraph.
16. Successors and Assigns. The rights and obligations of the Bank under
this agreement shall inure to the benefit of and shall be binding upon
the successors and assigns of the Bank, including, without limitation,
any corporation, individual or other person or entity which may acquire
all or substantially all of the assets and business of the Bank or with
or into which the Bank may be consolidated or merged.
17. Arbitration. Any dispute which may arise between the parties hereto
shall be settled by binding arbitration in accordance with the National
Rules for the Resolution of Employment Disputes of the American
Arbitration Association. The parties shall mutually agree in writing
upon an arbitrator. If the parties shall fail to agree upon an
arbitrator within 5 days after a written demand, delivered as provided
for notices hereunder, for arbitration hereunder is made, each party
shall have the right within the succeeding 10 days to select an
arbitrator (the failure by either party to exercise such right within
said 10 days will be equivalent to a consent to the selection of the
other party's arbitrator by mutual agreement); within 20 days after
such selection, if 2 arbitrators are selected, the 2 arbitrators shall
select a third arbitrator. The arbitrator or arbitrators shall have at
least 5 years of experience in employment law. Any claim or dispute
arising hereunder shall be decided by the arbitrator or arbitrators
based upon the rights and obligations of the parties set forth in this
agreement. The decision of the arbitrator or of the majority of the
arbitrators, as the case may be, shall not include any award for
punitive damages or penalties, but the arbitrator or majority of
arbitrators may award or prorate attorneys fees in accordance with his
or their judgment as to who is the prevailing party in the arbitration.
An arbitration award rendered in accordance with this agreement shall
be binding and conclusive upon the parties, and may be entered in any
court of competent jurisdiction. The costs of arbitration shall be
borne equally, except that each party shall bear the cost of their own
counsel and experts, if any. Venue for any arbitration proceedings
hereunder shall be in Hartford, Connecticut.
18. Severability. If any of the terms or conditions of this agreement shall
be declared void or unenforceable by any court or administrative body
of competent jurisdiction, such term or condition shall be deemed
severable from the remainder of this agreement, and the other terms and
conditions of this agreement shall continue to be valid and
enforceable.
<PAGE> 14
19. Construction. This agreement sets forth the entire agreement of the
Bank, the Holding Company and the Employee regarding the employment of
the Employee by the Bank, and this agreement supersedes any prior or
contemporaneous oral or written agreement with respect to the
Employee's employment or any other matter set forth herein. This
agreement shall be construed under the laws of the State of Connecticut
and may not be amended except by a writing signed by the Employee and
the Bank. Section headings are for convenience only and shall not be
considered a part of the terms and provisions of this agreement.
If this agreement is acceptable to you, please sign below.
Very truly yours,
FIRST INTERNATIONAL BANK
By:/s/Brett N. Silvers
----------------------
Brett N. Silvers
Its Chairman and Chief Executive Officer
Agreed to:
/s/Shaun P. Williams
- ------------------------
NAME: Shaun P. Williams
The undersigned hereby agrees to be bound by the provisions of this
agreement with respect to stock options and the exercise thereof.
FIRST INTERNATIONAL BANCORP, INC.
By:/s/Brett N. Silvers
----------------------
Brett N. Silvers
Its Chairman and Chief Executive Officer
<PAGE> 1
Exhibit 10.11
March 6, 2000
Shaun P. Williams
162 Tavern Circle
Middletown, CT 06456
Dear Shaun:
This agreement is intended to set forth the basic terms under which you ("YOU"
or the "EMPLOYEE") will continue to be employed by First International Bank (the
"BANK") and, therefore, to constitute an employment agreement between us. We
have agreed with you that:
1. Nature and Term of Employment. You will continue to be employed as
Executive Vice President and Chief Financial Officer of the Bank (or
equivalent title) in accordance with the terms and conditions in this
agreement, and you accept such employment and agree to serve in such
capacity. The term of employment under this agreement will extend from
the date set forth above through February 28, 2002 (the "TERM").
Nothing in this agreement will prohibit the continuation of employment
beyond the Term if and as agreed by the Bank and Employee.
2. Performance of Duties. While employed by the Bank, you will apply, in
good faith and on a full-time basis, all of your skill and experience
to the performance of your duties in such employment. You will have
such responsibilities and authority as are designated (and as may be
revised from time to time) by the Chairman and Chief Executive Officer
and the Board of Directors of the Bank.
3. Base Compensation. Commencing upon your acceptance of this agreement,
the Bank will pay or cause to be paid to you during your employment a
salary at the rate of $155,000 per annum, with the amount increasing by
not less than 2% during 2000 and increasing by not less than 2% during
2001. Your salary will be paid at such times as the salaries of other
salaried officers of the Bank are generally paid.
4. Benefits. During your employment, the Bank shall provide health,
dental, disability, life insurance and retirement benefits for you and
your dependents comparable to such coverage as is provided for officers
of the Bank generally. In addition, during your employment provided
that you are insurable at standard rates, the Bank shall sponsor and
pay for (a) an individually-owned supplemental term life insurance
policy on your life in the amount of $1,500,000, and (b) an
individually-owned supplemental disability income insurance policy with
a benefit to you of approximately $4,000 per month. The insurance
policies shall remain in full force and effect during the term of this
agreement, shall provide for such persons as you may designate to be
the beneficiaries of the benefits thereof, and shall be portable. You
agree to be available for such medical and other examinations and
inquiries as the insurance carriers may request.
<PAGE> 2
5. Bonuses. You will be eligible to receive cash bonuses in 2000, 2001 and
2002, which bonuses shall be determined by the Chairman and Chief
Executive Officer and Board of Directors of the Bank (or a committee of
the Board of Directors of the Bank) in their discretion based upon your
performance as evaluated primarily with reference to the policies and
budgets approved by the Bank's Board.
6. Supplemental Option. As further compensation for the services to be
provided by you hereunder, First International Bancorp, Inc. (the
"HOLDING COMPANY") is granting to you today pursuant to the Holding
Company's 1994 Incentive Stock Option Plan and the Amended and Restated
1996 Stock Option Plans (the "PLANS") additional options to purchase
11,500 shares of the Common Stock of the Holding Company for the price
and on the other terms set forth in new stock option agreements that
you are entering into with the Holding Company on the date hereof (the
"SUPPLEMENTAL OPTION"). The Supplemental Option will be in addition to
the option to purchase 3,500 shares of the Common Stock of the Holding
Company that would otherwise be made to you during 2000 in accordance
with the Bank's present compensation policies and Plans.
Notwithstanding any option agreements between you and the Holding
Company dated before the date hereof, the Supplemental Option and all
stock options held by you before the date hereof to purchase Common
Stock of the Holding Company will be vested immediately. Any additional
stock options granted to you pursuant to the Plans after the date
hereof but prior to February 28, 2002 to purchase Common Stock of the
Holding Company would be vested as of the earliest of (a) February 28,
2002, (b) a Change in Control (as defined in paragraph 7 below), and
(c) any termination by the Bank without Cause (as defined in paragraph
8(c) below) of Employee's employment hereunder.
7. Change in Control Provisions. A "CHANGE IN CONTROL" will have occurred
if the Chase Family and the Silvers Family cease, in the aggregate, to
beneficially own at least 25% of the outstanding Common Stock of the
Holding Company or any successor thereto or to have the right to
exercise, directly or indirectly, at least 25% of the aggregate voting
power of the Bank or of any successor thereto. As used in this
paragraph, "CHASE FAMILY" means Arnold Chase, Cheryl Chase, Rhoda L.
Chase, David T. Chase and the parents, other family members, affiliates
and personal representatives and heirs of each of them, "SILVERS
FAMILY" means Brett N. Silvers, Nancy W. Silvers, their children and
any trusts or other entities as to which the beneficiaries or owners
are Brett N. Silvers, Nancy W. Silvers and/or their children. As
described above, any additional stock options granted to you pursuant
to the Plans after the date hereof to purchase common stock of the
Holding Company will be vested immediately upon the occurrence of a
Change in Control.
<PAGE> 3
8. Termination Provisions.
(a) Voluntary Termination - If Employee quits Employee's employment
hereunder (except as otherwise provided in the next paragraph), dies or
is terminated due to disability, as defined under the Bank's then
current long-term disability policy, whether before or after a Change
in Control, Employee will receive Employee's base salary through the
date as of which Employee's employment ceases (net of any amounts owed
by Employee to the Bank) plus accrued vacation time, but will not
receive any severance, bonuses or other benefits.
(b) Termination Without Cause - If Employee (i) is fired without
"Cause", as defined below or (ii) quits Employee's employment hereunder
within three months after a Change in Control that results in a
reduction in Employee's title, responsibilities, compensation and/or
benefits, or a change of more than 40 miles in Employee's place of
employment (any of the foregoing reasons being "GOOD REASONS"),
Employee will receive, as Employee's sole remedy for such firing or
quitting for Good Reason (in addition to any vesting of stock options
provided for in paragraph 6 above), a lump sum cash payment equal to
the Employee's then existing base salary (net of any amounts owed by
Employee to the Bank) for one year. The Bank may, as a condition to
being required to pay the severance payments provided for in this
agreement, require the Employee to execute a general release of any
claim (other than the obligation of the Bank to make such severance
payments) or cause of action that Employee may have against the Bank,
the Holding Company, or any of their officers, directors, employees,
agents, or representatives.
(c) Termination With Cause - If Employee is fired for "Cause", Employee
will receive Employee's base salary through the date as of which
Employee's employment is terminated (net of any amounts owed by
Employee to the Bank and any costs incurred by the Bank due to such
"Cause") plus accrued vacation time, but will not receive any
severance, bonuses or other benefits. "CAUSE" means any of the
following: (a) insubordination or other refusal or failure to carry out
the instructions or policies of the Board or the officers to whom the
Employee reports; (b) dishonesty, crime or action involving moral
turpitude, or any other conduct that is illegal, immoral or materially
injurious to the Bank; (c) breach of Employee's covenants or
obligations under this agreement, or (d) non-performance in the
performance of Employee's duties, evaluated primarily with reference to
the Bank's credit and organizational policies, and with reference to
the goals and budgets approved by the Bank's Board of directors, and,
if such non-performance referred to in this clause (d) is capable of
being corrected, continuation of such non-performance for 30 days after
the Bank gives notice to the Employee describing such non-performance.
9. Covenant Not to Compete. During the time that Employee is employed by
the Bank, and if Employee's employment terminates at any time during
the Term (regardless of whether the termination is voluntary or
involuntary, with or without Cause or Good Reason) for a period of 12
months from the date of such termination, Employee shall not (a) become
engaged directly in a management, lending, financial or consulting
capacity in the
<PAGE> 4
origination, processing, purchasing or selling of SBA, USDA or Ex-Im
Bank loans, or (b) seek to cause any employee or customer of the Bank,
the Holding Company or any direct or indirect Subsidiary of either of
them to cease, reduce or change in a manner adverse to the business or
interests of the Bank, the Holding Company or any direct or indirect
Subsidiary of either of them, such employee's or customer's employment
by or relationship with the Bank, the Holding Company or any direct or
indirect Subsidiary of either of them. As used herein, (i) "SUBSIDIARY"
means any corporation, association, limited liability company, trust,
or other business entity of which the Bank or the Holding Company shall
at any time own directly or indirectly through a Subsidiary or
Subsidiaries at least a majority (by number of votes) of the
outstanding Voting Stock, and (ii) "VOTING STOCK" means stock or other
equity interests, of any class or classes (however designated), the
holders of which are at the time entitled, as such holders, to vote for
the election of a majority of the directors, managers or trustees (or
persons performing similar functions) of the corporation, association,
limited liability company, trust or other business entity involved,
whether or not the right so to vote exists by reason of the happening
of a contingency.
10. Exclusivity of Services: Confidentiality.
(a) In addition to the more specific provisions of paragraph 9 above,
you agree that during the Term of this agreement, you will not, without
the prior written approval of the Chairman and Chief Executive Officer
and the Board of Directors of the Bank, directly or indirectly engage
or participate in, or become an owner, partner, officer of, director
of, or become employed by, or render advisory, consulting or other
services to or in connection with, any other business enterprise during
the time that you are employed by the Bank; provided, however, that you
may hold outside directorships which may, from time to time, require
minor portions of time, but which shall not interfere or be
inconsistent with your duties hereunder.
(b) You also acknowledge that any information and documentation
relating to the Bank or the Holding Company, including but not limited
to their products, programs, business strategies, clients, employees,
forms, financial matters, and matters discussed by the Board of
Directors of the Bank and the Holding Company, are the sole property of
the Bank and the Holding Company and are strictly confidential; and you
agree that you will not, at any time before, during or at any time
after your employment by the Bank (regardless of whether the
termination of your employment is voluntary or involuntary, with or
without Cause or Good Reason), disclose any of such information or
documentation to any person or entity for any purpose whatsoever,
except for your use of such information and documentation in the course
of carrying out your duties during the time that you are employed by
the Bank and except to comply with requirements of law or regulatory
authorities with jurisdiction over the Bank and the Holding Company and
except to counsel or independent auditors for you, the Bank or the
Holding Company. The foregoing sentence does not, however, prohibit the
disclosure by you of information that (i) is generally available to the
public other than as a result of a disclosure of such information
directly or indirectly by you, or (b) becomes available to you on a
non-confidential basis from a source other than the Bank, the Holding
Company and their
<PAGE> 5
officers, directors, employees, representatives and advisors, provided
that such source is not known by you to be bound by any obligation of
secrecy to the Bank or the Holding Company or another party.
(c) You also agree that you will not discuss or disclose any of the
terms or provisions of this agreement, either before, during or at any
time after the Term of this agreement, with any other employee of the
Bank or the Holding Company, except for your superior officers, members
of the Operating Committee of the Bank, the Chairman and Chief
Executive Officer of the Bank, and the Board of Directors of the Bank
and the Holding Company.
11. Equitable Relief. You acknowledge that any violation of Section 9 or 10
above will cause the Bank and the Holding Company irreparable harm and
that, in addition to any other remedy that they may have, the Bank and
the Holding Company will have the right to obtain such injunctive or
other equitable relief as they may deem to be necessary or appropriate.
12. Tax Withholding Requirement. The amounts paid by the Bank to you
hereunder will have withheld and deducted therefrom any taxes required
to be withheld by the Bank under any federal, state or local law.
13. Regulatory Limitation. Notwithstanding any other provision of the
Agreement, the Bank shall not be obligated to make, and the Employee
shall have no right to receive, any payment, benefit or amount under
this Agreement which would violate any law, regulation or regulatory
order applicable to the Bank to the Holding Company at the time such
payment, benefit or amount is due (a "PROHIBITED PAYMENT"). If an
amount payable hereunder is not paid because it is a Prohibited
Payment, Employee shall continue to be bound by all of Employee's
obligations and agreements hereunder and the Bank shall make or provide
to the Employee the payment, benefit or other amount (or such portion
thereof the making of which ceases to be a violation) that is the
subject of the Prohibited Payment at such later date, if any, as the
applicable law, regulation or regulatory order no longer would be
violated by the Bank's making or providing such payment, benefit or
amount to the Employee.
14. Limitation on Benefits. It is the intention of the Employee and Bank
that no payments by Bank to or for the benefit of Employee under this
agreement or any other agreement or plan pursuant to which Employee is
entitled to receive payments or benefits shall be nondeductible to Bank
or any other payor by reason of Section 280G of the Internal Revenue
Code of 1986, as amended (the "Code") and subject to a tax pursuant to
Section 4999 of the Code, as a result of payments that would constitute
"parachute payments". Accordingly, such payments shall be reduced in
such amounts as are required to reduce the aggregate "present value"
(as the term is defined in Section 280G(d)(4) of the Code) of such
payments to one dollar less than an amount equal to three times the
Employee's "base amount" (as the term is defined in Section
280G(b)(3)(a) and (d)(1) and (2) of the Code), to the end that the
Employee is not subject to tax pursuant to Section 4999 and no
deduction is disallowed to the Bank by reason of Section 280G(a). The
determination as to the
<PAGE> 6
amount of the reduction of such payments, if any, shall be made by the
Bank's independent certified public accountants.
15. Notices. All notices under this agreement shall be in writing and shall
be deemed effective when delivered in person or by recognized overnight
delivery service to you or to the Bank, or if mailed, postage prepaid,
registered or certified mail, addressed, in the case of you, to your
last known address as carried on the personnel records of the Bank and,
in the case of the Bank, to its corporate headquarters, attention of
the Chairman and Chief Executive Officer, or to such other address as
the party to be notified may specify by notice to the other party
pursuant to this paragraph.
16. Successors and Assigns. The rights and obligations of the Bank under
this agreement shall inure to the benefit of and shall be binding upon
the successors and assigns of the Bank, including, without limitation,
any corporation, individual or other person or entity which may acquire
all or substantially all of the assets and business of the Bank or with
or into which the Bank may be consolidated or merged.
17. Arbitration. Any dispute which may arise between the parties hereto
shall be settled by binding arbitration in accordance with the National
Rules for the Resolution of Employment Disputes of the American
Arbitration Association. The parties shall mutually agree in writing
upon an arbitrator. If the parties shall fail to agree upon an
arbitrator within 5 days after a written demand, delivered as provided
for notices hereunder, for arbitration hereunder is made, each party
shall have the right within the succeeding 10 days to select an
arbitrator (the failure by either party to exercise such right within
said 10 days will be equivalent to a consent to the selection of the
other party's arbitrator by mutual agreement); within 20 days after
such selection, if 2 arbitrators are selected, the 2 arbitrators shall
select a third arbitrator. The arbitrator or arbitrators shall have at
least 5 years of experience in employment law. Any claim or dispute
arising hereunder shall be decided by the arbitrator or arbitrators
based upon the rights and obligations of the parties set forth in this
agreement. The decision of the arbitrator or of the majority of the
arbitrators, as the case may be, shall not include any award for
punitive damages or penalties, but the arbitrator or majority of
arbitrators may award or prorate attorneys fees in accordance with his
or their judgment as to who is the prevailing party in the arbitration.
An arbitration award rendered in accordance with this agreement shall
be binding and conclusive upon the parties, and may be entered in any
court of competent jurisdiction. The costs of arbitration shall be
borne equally, except that each party shall bear the cost of their own
counsel and experts, if any. Venue for any arbitration proceedings
hereunder shall be in Hartford, Connecticut.
18. Severability. If any of the terms or conditions of this agreement shall
be declared void or unenforceable by any court or administrative body
of competent jurisdiction, such term or condition shall be deemed
severable from the remainder of this agreement, and the other terms and
conditions of this agreement shall continue to be valid and
enforceable.
<PAGE> 7
19. Construction. This agreement sets forth the entire agreement of the
Bank, the Holding Company and the Employee regarding the employment of
the Employee by the Bank, and this agreement supersedes any prior or
contemporaneous oral or written agreement with respect to the
Employee's employment or any other matter set forth herein. This
agreement shall be construed under the laws of the State of Connecticut
and may not be amended except by a writing signed by the Employee and
the Bank. Section headings are for convenience only and shall not be
considered a part of the terms and provisions of this agreement.
If this agreement is acceptable to you, please sign below.
Very truly yours,
FIRST INTERNATIONAL BANK
By:/s/Brett N. Silvers
----------------------
Brett N. Silvers
Its Chairman and Chief Executive Officer
Agreed to:
/s/Shaun P. Williams
- ------------------------
NAME: Shaun P. Williams
The undersigned hereby agrees to be bound by the provisions of this
agreement with respect to stock options and the exercise thereof.
FIRST INTERNATIONAL BANCORP, INC.
By:/s/Brett N. Silvers
----------------------
Brett N. Silvers
Its Chairman and Chief Executive Officer
<PAGE> 1
Exhibit 10.12.1
EXECUTION COPY
FIRST AMENDMENT, dated as of June 30, 1999 (this "Amendment")
to the REVOLVING COMMERCIAL LOAN WAREHOUSE AND SECURITY AGREEMENT, dated as of
December 4, 1998 (as the same may be further amended or otherwise modified from
time to time, the "Agreement"), among PRUDENTIAL SECURITIES CREDIT CORPORATION,
a Delaware corporation, having an office at One Seaport Plaza, New York, New
York 10292 (the "Lender"), and FIRST INTERNATIONAL BANK, (formerly known as
First National Bank of New England), a Connecticut bank and trust company,
having its principal office at 280 Trumbull Street, Hartford, Connecticut 06103
(the "Borrower"), and its parent, FIRST INTERNATIONAL BANCORP, INC., a Delaware
corporation, having its principal office at 280 Trumbull Street, Hartford,
Connecticut 06103 (the "Guarantor").Terms not otherwise defined in this
Amendment shall have the meanings ascribed to such terms in the Agreement.
W I T N E S S E T H :
WHEREAS, the parties wish to extend the Maturity Date of the
Loan from December 3, 1999 to June 30, 2000;
WHEREAS, the Engagement Letter is simultaneously being amended
to reflect that PSI will have the right of first refusal, but not the
obligation, to serve in the Manager Role with respect to up to $300,000,000 in
Securitizations; and
WHEREAS, the parties to the Agreement desire to execute this
Amendment to provide for such amended terms;
NOW, THEREFORE, in consideration of the premises and mutual
agreements herein contained, it is hereby agreed as follows:
ARTICLE 1. AMENDMENTS
1.1 Amendment to Second Recital. The second recital of the
Agreement is hereby deleted in its entirety and the following is substituted in
lieu thereof:
WHEREAS, the Lender's Affiliate, Prudential Securities
Incorporated ("PSI"), will have the right of first refusal, but not the
obligation, to act as the sole manager (such role as sole manager, the
"Manager Role") on any securities issuances ("Securitizations")
sponsored by the Borrower or one of its Affiliates relating to up to
$300,000,000 of the Commercial Loans, on the terms and under the
conditions set forth in the Engagement Letter, dated as of December 4,
1998, as amended by the First Amendment, dated as of June 30, 1999,
among PSI, the Borrower and the Guarantor (as the same may be further
amended or otherwise modified from time to time, the "Engagement
Letter"). Such Securitizations shall be structured in a manner as shall
be consented to by PSI.
<PAGE> 2
1.2 Extending Maturity Date. Section 1(c) of the Agreement is
hereby deleted in its entirety and the following is substituted in lieu thereof:
The Loan shall mature on June 30, 2000, as such date may be
extended by means of a Credit Increase Confirmation and Note Amendment
(the "Maturity Date"), pursuant to the terms of Section 1(f) below.
1.3 Extending Other Dates. Section 1(h) of the Agreement is
hereby amended by replacing the date December 3, 2000 appearing in clause (v)(x)
thereof with the date June 30, 2001.
ARTICLE 2 MISCELLANEOUS
2.1 Limited Effect. Except as expressly amended hereby, all of
the provisions , covenants, terms and conditions of the Agreement shall continue
to be, and shall remain, in full force and effect in accordance with its terms.
2.2 Guarantor Consent. The Guarantor hereby consents to this
Amendment and agrees that the Guaranty shall remain in full force and effect.
2.3 Governing Law. THIS AMENDMENT AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES HERETO SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO THE
CONFLICT OF LAW PRINCIPLES THEREOF.
2.4 Counterparts. This Amendment may be executed by one or
more of the parties on any number of separate counterparts, and all of said
counterparts taken together shall be deemed to constitute one and the same
instrument.
2
<PAGE> 3
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be duly executed and delivered by their respective proper and duly
authorized officers as of the day and year first above written.
FIRST INTERNATIONAL BANK
By: /s/Theodore J. Horan
-----------------------------------
Name: Theodore J. Horan
Title: Senior Vice President
FIRST INTERNATIONAL BANCORP, INC.
By: /s/Leslie Galbraith
-----------------------------------
Name: Leslie Galbraith
Title: Executive Vice President
PRUDENTIAL SECURITIES CREDIT
CORPORATION
By: /s/Jeffrey K. French
-----------------------------------
Name: Jeffrey K. French
Title: Senior Vice President
3
<PAGE> 1
Exhibit 10.12.2
SECOND AMENDMENT, dated as of January 12, 2000 (this
"Amendment"), to the REVOLVING COMMERCIAL LOAN WAREHOUSE AND SECURITY AGREEMENT,
dated as of December 4, 1998 (as the same may be further amended or otherwise
modified from time to time, the "Agreement"), among PRUDENTIAL SECURITIES CREDIT
CORPORATION, a Delaware corporation, having an office at One New York Plaza, New
York, New York 10292 (the "Lender"), and FIRST INTERNATIONAL BANK, (formerly
known as First National Bank of New England), a Connecticut bank and trust
company, having its principal office at 280 Trumbull Street, Hartford,
Connecticut 06103 (the "Borrower"), and its parent, FIRST INTERNATIONAL BANCORP,
INC., a Delaware corporation, having its principal office at 280 Trumbull
Street, Hartford, Connecticut 06103 (the "Guarantor").Terms not otherwise
defined in this Amendment shall have the meanings ascribed to such terms in the
Agreement.
W I T N E S S E T H :
WHEREAS, the parties entered into a First Amendment, dated as
of June 30, 1999 (the "First Amendment"), to the Agreement; and
WHEREAS, the parties wish to extend the Maturity Date of the
Loan from June 30, 2000 to December 28, 2000;
WHEREAS, the Engagement Letter is simultaneously being amended
to reflect that PSI will have the right of first refusal, but not the
obligation, to serve in the Manager Role with respect to up to $340,000,000 in
Securitizations; and
WHEREAS, the parties to the Agreement desire to execute this
Amendment to provide for such amended terms;
NOW, THEREFORE, in consideration of the premises and mutual
agreements herein contained, it is hereby agreed as follows:
ARTICLE 1. AMENDMENTS
1.1 Amendment to Second Recital. The second recital of the
Agreement is hereby deleted in its entirety and the following is substituted in
lieu thereof:
WHEREAS, the Lender's Affiliate, Prudential Securities
Incorporated ("PSI"), will have the right of first refusal, but not the
obligation, to act as the sole manager (such role as sole manager, the
"Manager Role") on any securities issuances ("Securitizations")
sponsored by the Borrower or one of its Affiliates relating to up to
$340,000,000 of the Commercial Loans, on the terms and under the
conditions set forth in the Engagement Letter, dated as of December 4,
1998, as amended by the First Amendment, dated as of June 30, 1999, and
the Second Amendment, dated as of January 12, 2000, among PSI, the
1
<PAGE> 2
Borrower and the Guarantor (as the same may be further amended or
otherwise modified from time to time, the "Engagement Letter"). Such
Securitizations shall be structured in a manner as shall be consented
to by PSI.
1.2 Aggregating Loans. Section 1(a)1 of the Agreement is
hereby amended by inserting the following after the phrase "up to $75,000,000,":
less any amounts outstanding under any loans from Lender to the
Borrower's subsidiary, FIB Holdings, Inc.
1.3 Extending Maturity Date. Section 1(c) of the Agreement is
hereby deleted in its entirety and the following is substituted in lieu thereof:
The Loan shall mature on December 28, 2000, as such date may
be extended by means of a Credit Increase Confirmation and Note
Amendment (the "Maturity Date"), pursuant to the terms of Section 1(f)
below.
1.4 Extending Other Dates. Section 1(h) of the Agreement is
hereby amended by replacing the date June 30, 2001 appearing in clause (v)(x)
thereof (which was added by the First Amendment) with the date December 28,
2001.
ARTICLE 2 MISCELLANEOUS
2.1 Limited Effect. Except as expressly amended hereby, all of
the provisions , covenants, terms and conditions of the Agreement shall continue
to be, and shall remain, in full force and effect in accordance with its terms.
2.2 Guarantor Consent. The Guarantor hereby consents to this
Amendment and agrees that the Guaranty shall remain in full force and effect.
2.3 Governing Law. THIS AMENDMENT AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES HERETO SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO THE
CONFLICT OF LAW PRINCIPLES THEREOF.
2.4 Counterparts. This Amendment may be executed by one or
more of the parties on any number of separate counterparts, and all of said
counterparts taken together shall be deemed to constitute one and the same
instrument.
[Remainder of Page Intentionally Left Blank]
2
<PAGE> 3
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be duly executed and delivered by their respective proper and duly
authorized officers as of the day and year first above written.
FIRST INTERNATIONAL BANK
By: /s/ Theodore J. Horan
----------------------------------
Name: Theodore J. Horan
Title: Senior Vice President
FIRST INTERNATIONAL BANCORP, INC.
By: /s/Leslie Galbraith
----------------------------------
Name: Leslie Galbraith
Title: Executive Vice President
PRUDENTIAL SECURITIES CREDIT
CORPORATION
By: /s/Jeffrey K. French
----------------------------------
Name: Jeffrey K. French
Title: Senior Vice President
3
<PAGE> 1
Exhibit 10.13
================================================================================
$65,000,000
AMENDED AND RESTATED LOAN PURCHASE AND
SERVICING AGREEMENT
Dated as of September 24, 1999
Among
FNBNE FUNDING CORP.
as the Seller
FIRST INTERNATIONAL BANK
as the Servicer
the INVESTORS
named herein
VARIABLE FUNDING CAPITAL CORPORATION
as a Purchaser
FIRST UNION CAPITAL MARKETS CORP.
as the Deal Agent
FIRST UNION NATIONAL BANK
as the Liquidity Agent
and
HSBC BANK USA
as the Collateral Custodian and Backup Servicer
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE I DEFINITIONS.................................................................................... 1
Section 1.1 Certain Defined Terms............................................................. 1
Section 1.2 Other Terms....................................................................... 27
Section 1.3 Computation of Time Period........................................................ 27
ARTICLE II THE PURCHASE FACILITY......................................................................... 27
Section 2.1 Purchases of Asset Interests...................................................... 27
Section 2.2 The Initial Purchase and Incremental Purchases.................................... 28
Section 2.3 Reduction of the Purchase Limit................................................... 28
Section 2.4 Determination of Yield............................................................ 28
Section 2.5 Percentage Evidenced by Asset Interest............................................ 28
Section 2.6 Dividing or Combining Asset Interests............................................. 29
Section 2.7 Settlement Procedures............................................................. 29
Section 2.8 [Reserved]........................................................................ 31
Section 2.9 Substitution of Loans............................................................. 31
Section 2.10 Collections and Allocations....................................................... 32
Section 2.11 Payments, Computation, Etc........................................................ 33
Section 2.12 Optional Repurchase............................................................... 33
Section 2.13 Fees.............................................................................. 34
Section 2.14 Increased Costs; Capital Adequacy; Illegality..................................... 34
Section 2.15 Taxes............................................................................. 35
Section 2.16 Assignment of the Purchase Agreement.............................................. 37
ARTICLE III CLOSING; CONDITIONS OF CLOSING AND PURCHASES................................................. 38
Section 3.1 Conditions to Closing and Initial Purchase........................................ 38
Section 3.2 Conditions Precedent to All Purchases and Remittances of Collections.............. 38
ARTICLE IV REPRESENTATIONS AND WARRANTIES................................................................ 39
Section 4.1 Representations and Warranties of the Seller...................................... 39
Section 4.2 Representations and Warranties of Seller Relating to the Agreement and the Loans.. 43
Section 4.3 Representations and Warranties of the Seller Relating to the Purchase Limit and
Capital Limit..................................................................... 45
ARTICLE V GENERAL COVENANTS OF THE SELLER................................................................ 45
Section 5.1 General Covenants................................................................. 45
Section 5.2 Covenants of Seller............................................................... 45
Section 5.3 Release of Lien................................................................... 50
Section 5.4 Hedge Agreement................................................................... 50
Section 5.5 Retransfer of Ineligible Loans.................................................... 51
Section 5.6 Retransfer of Assets.............................................................. 52
Section 5.7 Year 2000 Compatibility........................................................... 53
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C>
ARTICLE VI ADMINISTRATION AND SERVICING OF LOANS......................................................... 53
Section 6.1 Appointment and Acceptance; Duties................................................ 53
Section 6.2 Duties and Responsibilities of the Servicer and the Collateral Custodian.......... 53
Section 6.3 Authorization of the Servicer..................................................... 57
Section 6.4 Collection of Payments............................................................ 58
Section 6.5 Servicer Advances................................................................. 59
Section 6.6 Realization Upon Defaulted Loans.................................................. 60
Section 6.7 Representations and Warranties of Backup Servicer and Collateral Custodian........ 60
Section 6.8 Maintenance of Insurance Policies................................................. 62
Section 6.9 Representations and Warranties of Servicer........................................ 62
Section 6.10 Covenants of Servicer............................................................. 64
Section 6.11 Covenants of Backup Servicer and Collateral Custodian............................. 65
Section 6.12 Servicing Compensation............................................................ 65
Section 6.13 Custodial Compensation............................................................ 66
Section 6.14 Payment of Certain Expenses by Servicer........................................... 66
Section 6.15 Reports........................................................................... 66
Section 6.16 Annual Statement as to Compliance................................................. 67
Section 6.17 Annual Independent Public Accountant's Servicing Reports.......................... 67
Section 6.18 Adjustments....................................................................... 67
Section 6.19 Merger or Consolidation of the Servicer........................................... 68
Section 6.20 Limitation on Liability of the Servicer and Others................................ 68
Section 6.21 Indemnification of the Seller, the Deal Agent, the Liquidity Agent and the Secured
Parties........................................................................... 69
Section 6.22 The Servicer and Backup Servicer Not to Resign.................................... 70
Section 6.23 Access to Certain Documentation and Information Regarding the Loans............... 70
Section 6.24 Backup Servicer................................................................... 70
Section 6.25 Identification of Records......................................................... 73
Section 6.26 Servicer Termination Events....................................................... 73
Section 6.27 Appointment of Successor Servicer................................................. 74
Section 6.28 Notification...................................................................... 75
Section 6.29 Protection of Right, Title and Interest in Assets................................. 75
Section 6.30 Release of Loan Files............................................................. 75
ARTICLE VII EARLY AMORTIZATION EVENTS.................................................................... 76
Section 7.1 Early Amortization Events......................................................... 76
ARTICLE VIII INDEMNIFICATION 78
Section 8.1 Indemnities by the Seller......................................................... 78
ARTICLE IX THE DEAL AGENT AND THE LIQUIDITY AGENT........................................................ 80
Section 9.1 Authorization and Action.......................................................... 80
Section 9.2 Delegation of Duties.............................................................. 81
Section 9.3 Exculpatory Provisions............................................................ 81
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <C>
Section 9.4 Reliance.......................................................................... 82
Section 9.5 Non-Reliance on Deal Agent, Liquidity Agent and Others............................ 83
Section 9.6 Reimbursement and Indemnification................................................. 83
Section 9.7 Deal Agent and Liquidity Agent in their Individual Capacities..................... 83
Section 9.8 Successor Deal Agent or Liquidity Agent........................................... 84
ARTICLE X ASSIGNMENTS; PARTICIPATIONS.................................................................... 84
Section 10.1 Assignments and Participations.................................................... 84
ARTICLE XI MISCELLANEOUS 88
Section 11.1 Amendments and Waivers............................................................ 88
Section 11.2 Notices, Etc...................................................................... 88
Section 11.3 [Reserved.]....................................................................... 88
Section 11.4 No Waiver, Rights and Remedies.................................................... 88
Section 11.5 Binding Effect.................................................................... 89
Section 11.6 Term of this Agreement............................................................ 89
Section 11.7 GOVERNING LAW; CONSENT TO JURISDICTION; WAIVER OF OBJECTION TO VENUE........... 89
Section 11.8 WAIVER OF JURY TRIAL.............................................................. 89
Section 11.9 Costs, Expenses and Taxes......................................................... 90
Section 11.10 No Proceedings.................................................................... 90
Section 11.11 Recourse Against Certain Parties.................................................. 91
Section 11.12 Protection of Ownership Interest; Appointment of Deal Agent as Attorney-in-Fact... 92
Section 11.13 Confidentiality................................................................... 92
Section 11.14 Execution in Counterparts; Severability; Integration.............................. 93
</TABLE>
iii
<PAGE> 5
EXHIBITS
<TABLE>
<S> <C>
EXHIBIT A Form of Notice of Sale
EXHIBIT B Form of Lock-Box Notice
EXHIBIT C "Limited Purpose" Provisions
EXHIBIT D Form of Assignment and Acceptance
EXHIBIT E Form of Monthly Report
EXHIBIT F Form of Servicer's Certificate
EXHIBIT G Credit and Collection Policies
EXHIBIT H Form of Purchase Certificate
EXHIBIT I Form of Hedging Agreement (including Schedule and Confirmation)
EXHIBIT J Form of Officer's Certificate as to Solvency
EXHIBIT K Form of Officer's Closing Certificate
EXHIBIT L Form of Power of Attorney
</TABLE>
SCHEDULES
<TABLE>
<S> <C>
SCHEDULE I Conditions Precedent
SCHEDULE II Concentration and Mix Requirements
SCHEDULE III Tradenames, Fictitious Names and "Doing Business As" Names
SCHEDULE IV List of Loans
SCHEDULE V Locations of Loan Documents
SCHEDULE VI Lock-Box Banks and Lock-Box Accounts
</TABLE>
iv
<PAGE> 6
THIS LOAN PURCHASE AND SERVICING AGREEMENT (the "Agreement") is made as
of September 24, 1999, among:
(1) FNBNE FUNDING CORP., a Delaware corporation, as borrower (the
"Seller"):
(2) FIRST INTERNATIONAL BANK (f/k/a First National Bank of New
England), a Connecticut bank and trust company ("FIB"), as servicer (the
"Servicer");
(3) the financial institutions listed on the signature pages of this
Agreement under the heading "Investors" and their respective successors and
assigns (the "Investors");
(4) VARIABLE FUNDING CAPITAL CORPORATION, a Delaware corporation
("VFCC");
(5) FIRST UNION CAPITAL MARKETS CORP. ("FCMC"), as deal agent (the
"Deal Agent");
(6) FIRST UNION NATIONAL BANK ("First Union"), as liquidity agent (the
"Liquidity Agent"); and
(7) HSBC BANK USA (f/k/a Marine Midland Bank) ("HSBC"), as collateral
custodian (the "Collateral Custodian") and as backup servicer (the "Backup
Servicer").
WHEREAS, the Seller, First National Bank of New England, the Investors,
VFCC, FCMC, First Union and Marine Midland Bank entered into a Loan Purchase and
Servicing Agreement, dated as of December 23, 1998 (the "Original Agreement"),
which Original Agreement the parties hereto desire to amend and restate to make
certain modifications as set forth herein.
IT IS AGREED as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1 CERTAIN DEFINED TERMS.
(a) Certain capitalized terms used throughout this Agreement are
defined above or in this Section 1.1.
(b) As used in this Agreement and its exhibits, the following terms
shall have the following meanings (such meanings to be equally applicable to
both the singular and plural forms of the terms defined).
1
<PAGE> 7
Addition Date: With respect to any Additional Loans, the date on which
such Additional Loans become Pool Assets.
Additional Loans: All Loans that become Pool Assets after the Closing
Date (or, if no Purchase is made on the Closing Date, then on the date of the
initial Purchase hereunder).
Adjusted Eurodollar Rate: On any day, an interest rate per annum equal
to the quotient expressed as a percentage and rounded upwards (if necessary), to
the nearest 1/100 of 1%, obtained by dividing (i) the LIBOR Rate, as applicable,
on such day by (ii) the decimal equivalent of 100% minus the Eurodollar Reserve
Percentage on such day.
Administration Agreement: That certain Amended and Restated
Administration Agreement executed between VFCC and FCMC as the same may be
amended, supplemented, or otherwise modified from time to time.
Adverse Claim: A lien, security interest, pledge, charge, encumbrance
or other right or claim of any Person.
Affected Party: As defined in Section 2.14(a).
Affiliate: With respect to a Person means any other Person controlling,
controlled by or under common control with such Person. For purposes of this
definition, "control" when used with respect to any specified Person means the
power to direct the management and policies of such Person, directly or
indirectly, whether through the ownership of voting securities, by contract or
otherwise; and the terms "controlling" or "controlled" have meanings correlative
to the foregoing.
Aggregate Outstanding Loan Balance: As of any date of determination,
the sum of the Outstanding Loan Balances of all Eligible Loans included as part
of the Asset Pool on such date.
Aggregate Unpaids: At any time, an amount, equal to the sum of all
Yield (accrued and to accrue), Capital and all other amounts owed hereunder,
under any Hedging Agreement (including, without limitation, payments in respect
of the termination of any such Hedging Agreement) or under any fee letter
delivered by the Originator to the Deal Agent and the Purchasers and outstanding
at such time (whether due or accrued).
Agent's Account: A special account (account number 0l 41 96 47) in the
name of the Deal Agent or, so long as VFCC is the sole Purchaser hereunder, in
the name of VFCC, at Bankers Trust Company.
Agreement: This Amended and Restated Loan Purchase and Servicing
Agreement, dated as of September 24, 1999, as amended, modified, supplemented or
restated from time to time.
2
<PAGE> 8
AIG: National Union Fire Insurance Company of Pittsburgh, PA, which is
a member company of American International Group, Inc.
AIG 2 Loans: Loans to an Obligor that are Inventory Buyer Program Loans
or Equipment Buyer Program Loans, a portion of the Outstanding Balance of which
is insured by the AIG Policy 2.
AIG Loan: A Loan to an Obligor that is a short term import loan, with a
term of 360 days or less and with interest and principal payable at maturity, a
portion of the Outstanding Loan Balance of which is insured by the AIG Policy.
AIG Policy: That policy no. 649-8512, dated July 28, 1998, of AIG in
favor of FIB, which insures the AIG Loans, as such policy or successor policy
may be replaced or renewed from time to time, so long as the Deal Agent, as
agent for the Secured Parties, is (i) named as a loss payee, or as an additional
insured, on such policy and on such renewal or replacement policy or (ii)
otherwise satisfied that the AIG Policy inures to its benefit.
AIG Policy 2: That policy no. 649-8471, dated April 17, 1998, of AIG in
favor of FIB, which insures the AIG 2 Loans, as such policy or successor policy
may be replaced or renewed from time to time, so long as the Deal Agent, as
agent for the Secured Parties is (i) named as loss payee, or as an additional
insured, on such policy and on such renewal or replacement policy or (ii)
otherwise satisfied that the AIG Policy 2 inures to its benefit.
Amortization Period: The period beginning on the Termination Date and
ending on the Collection Date.
Asset: All right, title and interest of the transferring party to and
under any and all of the following:
(i) the Transferred Loans, and all monies due or to become due
in payment of such Loans on and after the related Transfer Date;
(ii) any Related Property securing the Transferred Loans
including all proceeds from any sale or other disposition of such
Related Property;
(iii) the Loan Documents;
(iv) the Lock-Box Account, all funds held in such account, and
all certificates and instruments, if any, from time to time
representing or evidencing the Lock-Box Account or such funds;
(v) the Cash Collateral Account, all funds held in such
account, and all certificates and instruments, if any, from time to
time representing or evidencing the Cash Collateral Account or such
funds;
3
<PAGE> 9
(vi) the Collection Account, all funds held in such account,
and all certificates and instruments, if any, from time to time
representing or evidencing the Collection Account or such funds;
(vii) all Collections and all other payments made or to be
made in the future with respect to such Loans or by the Obligor
thereunder and under any guarantee or similar form of credit
enhancement with respect to such Loans, including but not limited to
Export-Import Bank guarantees, the Ex-Im Policy, the AIG Policy and the
AIG Policy 2;"
(viii) all payments received pursuant to any Hedging Agreement
or Hedge Transaction; and
(ix) all income and Proceeds of the foregoing.
Asset Interest: At any time, an undivided variable percentage ownership
interest in all Assets. Each Asset Interest shall be calculated in accordance
with Section 2.5. The undivided percentage interest of an Asset Interest shall
equal
C+R
----
AOLB
where:
C = equals the Capital in respect of such Asset Interest.
R = equals the aggregate Reserves in respect of such Asset Interest.
AOLB = equals the Aggregate Outstanding Loan Balance.
Asset Pool: At any time, all then outstanding Assets.
Assignment and Acceptance: An assignment and acceptance entered into by
an Investor and an Eligible Assignee, and accepted by the Deal Agent, in
substantially the form of Exhibit D hereto.
Available Collections: As defined in Section 2.7 hereof.
Average Default Ratio: For any Determination Date, the arithmetic
average of the Default Ratios, expressed as percentages, for the three (3)
Collection Periods ended on such date, except that (i) in the case of the first
Determination Date following the Closing Date, the "Average Default Ratio" shall
be the Default Ratio for the Collection Period ended on such date, and (ii) in
the case of the second Determination Date following the Closing Date, the
"Average
4
<PAGE> 10
Default Ratio" shall be the arithmetic average of the Default Ratios for the
two (2) Collection Periods ended on such date.
Average Net Loss Ratio: For any Determination Date, the arithmetic
average of the Net Loss Ratios, expressed as percentages, for the three (3)
Collection Periods ended on such date, except that (i) in the case of the first
Determination Date following the Closing Date, the "Average Net Loss Ratio"
shall be the Net Loss Ratio for the Collection Period ended on such date, and
(ii) in the case of the second Determination Date following the Closing Date,
the "Average Net Loss Ratio" shall be the arithmetic average of the Net Loss
Ratios for the two (2) Collection Periods ended on such date.
Backup Servicer: HSBC Bank USA, and its permitted successors and
assigns.
Backup Servicer Fee: As set forth in the Backup Servicer and Collateral
Custodian Fee Letter.
Backup Servicer and Collateral Custodian Fee Letter: The letter, dated
as of the Closing Date, among FNBNE, the Seller, the Backup Servicer, the
Collateral Custodian, the Deal Agent and First Union, setting forth among other
things the Backup Servicer Fee and the Collateral Custodian Fee.
Bankruptcy Code: The Federal Bankruptcy Code, as amended from time to
time (Title II of the United States Code).
Base Rate: On any date, a fluctuating rate of interest per annum equal
to the higher of (a) the Prime Rate or (b) the Federal Funds Rate plus one-half
of one percent (0.5%).
Benefit Plan: Any employee benefit plan as defined in Section 3(3) of
ERISA in respect of which the Seller or any ERISA Affiliate of the Seller is, or
at any time during the immediately preceding six years was, an "employer" as
defined in Section 3(5) of ERISA.
Breakage Costs: Any amount or amounts as shall compensate a Purchaser
for any loss, cost or expense incurred by such Purchaser (as determined in such
Purchaser's sole discretion) as a result of a prepayment by the Seller of
Capital or Yield pursuant to the terms hereof.
Business Day: Any day of the year other than a Saturday or a Sunday on
which (a) banks are not required or authorized to be closed in New York City,
Charlotte, North Carolina, and Hartford, Connecticut, and (b) if the term
"Business Day" is used in connection with the Adjusted Eurodollar Rate, means
the foregoing only if such day is also a day of year on which dealings in United
States dollar deposits are carried on in the London interbank market.
Capital: The sum of the amounts paid to the Seller for the initial
Purchase and in connection with each Incremental Purchase pursuant to Section
2.2, reduced from time to time by Collections and other payments received and
distributed to Purchasers on account of such Capital
5
<PAGE> 11
pursuant to Section 2.7; provided, however, that such Capital shall not be
reduced by any distribution of any portion of Principal Collections if at any
time such distribution is rescinded or must be returned for any reason.
Capital Limit: At any time the sum of (i) the Aggregate Outstanding
Loan Balance for all Eligible Loans that are Commercial Loans multiplied by the
Purchase Rate with respect to Commercial Loans, (ii) the Aggregate Outstanding
Loan Balance for all Eligible Loans that are AIG Loans multiplied by the
Purchase Rate with respect to the AIG Loans, (iii) the Aggregate Outstanding
Loan Balance for all Eligible Loans that are AIG 2 Loans multiplied by the
Purchase Rate with respect to the AIG 2 Loans and (iv) the Aggregate Outstanding
Loan Balance for all Eligible Loans that are Ex-Im Loans or Ex-Im 2 Loans
multiplied by the Purchase Rate with respect to the Ex-Im Loans or Ex-Im 2
Loans.
Cash Collateral Account: As defined in Section 6.4(g).
Casual Loss: With respect to any item of Related Property, the loss,
theft, damage beyond repair or governmental condemnation or seizure of such item
of Related Property.
Change in Control: The date on which (i) any Person or "group" acquires
any "beneficial ownership" (as such terms are defined under Rule 13d-3 of, and
Regulation 13D under, the Securities Exchange Act of 1934, as amended), either
directly or indirectly, of membership interests or other equity interests or any
interest convertible into any such interest in the Originator having more than
fifty percent (50%) of the voting power for the election of directors of the
Originator, if any, under ordinary circumstances, or (ii) (except in connection
with any Securitization or in connection with the sale of Assets under the
Purchase Agreement) the Originator sells, transfers, conveys, assigns or
otherwise disposes of all or substantially all of the assets of the Originator;
provided, however, it shall not be a Change in Control for any one or more of
the following Persons, individually or collectively, to gain more than fifty
percent (50%) of such voting power: Arnold Chase, Cheryl Chase, Rhoda L. Chase,
David T. Chase, Brett N. Silvers, Nancy W. Silvers, and any family members,
Affiliates, and heirs of any of the foregoing (collectively, the "Permitted
Owners"), and any trusts, partnerships or other entities as to which the sole
beneficiaries are any of the Permitted Owners.
Charged-Off Loan: Any Loan (i) for which an Insolvency Event has
occurred with respect to the related Obligor, (ii) for which the related Obligor
has suffered any other change which materially and adversely affects its
viability as a going concern, or (iii) which is or otherwise should be written
off as uncollectible by the Servicer in accordance with the Credit and
Collection Policies.
Closing Date: December 23, 1998.
Code: The Internal Revenue Code of 1986, as amended.
Collateral Custodian: HSBC Bank USA, and its permitted successors and
assigns.
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<PAGE> 12
Collateral Custodian Fee: As set forth in the Backup Servicer and
Collateral Custodian Fee Letter.
Collection Account: As defined in Section 2.10.
Collection Date: The date following the Termination Date on which the
aggregate outstanding Capital has been reduced to zero, the Purchasers have
received all Yield and other amounts due to the Purchasers in connection with
this Agreement each Hedge Transaction has been terminated and each Hedge
Counterparty has received all amounts owing to it under its respective Hedging
Agreement and the Deal Agent has received all amounts due to it in connection
with this Agreement.
Collection Period: Each calendar month, except in the case of the first
Collection Period, the period beginning on the Closing Date to and including the
last day of the calendar month in which the Closing Date occurs.
Collections: With respect to any Transferred Loan, all cash collections
or other cash proceeds of such Loan received by the Servicer, Originator or
Seller from or on behalf of any Obligor in payment of any amounts owed in
respect of such Loan, including, without limitation, any Interest Collections,
any Principal Collections, Deemed Collections, Insurance Proceeds, interest
earnings in the Collection Account, all recoveries on Charged-Off Loans, and all
payments received pursuant to any Hedging Agreement or Hedge Transaction.
Commercial Line of Credit: A revolving line of credit Loan to an
Obligor that is not an Ex-Im Loan, an Ex-Im 2 Loan, an AIG Loan or an AIG 2
Loan.
Commercial Loans: All of the Commercial Lines of Credit and the
Commercial Term Loans.
Commercial Term Loan: A term loan to an Obligor that is not an Ex-Im
Loan, an Ex-Im 2 Loan, an AIG Loan, or an AIG 2 Loan.
Commercial Paper Notes: On any day, any short-term promissory notes
issued by VFCC with respect to financing its purchase of any Asset Interest
hereunder.
Commitment: For each Investor, the commitment of such Investor to
purchase Asset Interests from the Seller in an amount not to exceed the amount
set forth opposite such Investor's name on the signature pages of this
Agreement, as such amount may be modified in accordance with the terms hereof.
Commitment Fee: As defined in Section 2.13(a) hereof.
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<PAGE> 13
Commitment Termination Date: December 23, 2001 or such later date to
which the Commitment Termination Date may be extended (if extended) in the sole
discretion of VFCC and each Investor in accordance with the terms of Section
2.1(b).
Conversion: As defined in Section 2.1(c).
Cost of Funds Adjustment: The difference by which the CP Rate exceeds
the Adjusted Eurodollar Rate.
CP Rate: For any Fixed Period, the per annum rate equivalent to the
weighted average of the per annum rates paid or payable by VFCC from time to
time as interest on or otherwise (by means of interest rate hedges or otherwise)
in respect of the promissory notes issued by VFCC that are allocated, in whole
or in part, by the Deal Agent (on behalf of VFCC) to fund or maintain the Asset
Interest during such period, as determined by the Deal Agent (on behalf of VFCC)
and reported to the Seller and the Servicer, which rates shall reflect and give
effect to (i) the commissions of placement agents and dealers in respect of such
promissory notes, to the extent such commissions are allocated, in whole or in
part, to such promissory notes by the Deal Agent (on behalf of VFCC), (ii) any
incremental carrying costs associated with the issuance of such promissory notes
maturing on dates other than those dates on which funds are received by VFCC,
and (iii) other borrowings by VFCC, including, without limitation, borrowings to
fund small or odd dollar amounts that are not easily accommodated in the
commercial paper market; provided, however, that if any component of such rate
is a discount rate, in calculating the "CP Rate," the Deal Agent shall for such
component use the rate resulting from converting such discount rate to an
interest bearing equivalent rate per annum.
Credit and Collection Policies: Those credit, collection, customer
relation and service policies of the Originator and the Servicer as of the date
hereof relating to the Loans and related Loan Documents, set forth in Exhibit G,
as the same may be amended or modified from time to time in accordance with
Section 6.10(e).
Deal Agent: FCMC, as Deal Agent hereunder, together with its successors
and assigns.
Deemed Collections: On any day, an amount equal to the unpaid balance
(including any principal and accrued interest thereon) of any Loan included in
the Asset Pool if on such day (a) the Deal Agent, as agent for the Secured
Parties, does not have a valid perfected security interest in such Loan and any
Related Property, or (b) a Warranty Event has occurred with respect to such
Loan.
Default Ratio: For any Collection Period, the percentage equivalent of
a fraction, the numerator which is the Outstanding Loan Balance of Defaulted
Loans at the end of such Collection Period, and the denominator of which is the
Aggregate Outstanding Loan Balance at the end of such Collection Period.
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<PAGE> 14
Defaulted Loan: As of any day of determination, a Loan (i) as to which
the Obligor thereof has failed to make any payment, or part thereof, required to
be made thereunder for 60 days following the due date thereof, or (ii) that is a
Charged-Off Loan.
Delinquent: On any day with respect to any Loan and any specified time
period any payment, or portion thereof, due with respect thereto, has not been
made by the Obligor of such loan for the specified time period from the due date
of such payment.
Derivatives: Any exchange-traded or over-the-counter (i) forward,
future, option, swap, cap, collar, floor, foreign exchange contract, any
combination thereof, whether for physical delivery or cash settlement, relating
to any interest rate, interest rate index, currency, currency exchange rate,
currency exchange rate index, debt instrument, debt price, debt index,
depository instrument, depository price, depository index, equity instrument,
equity price, equity index, commodity, commodity price or commodity index, (ii)
any similar transaction, contract, instrument, undertaking or security, or (iii)
any transaction, contract, instrument, undertaking or security containing any of
the foregoing.
Determination Date: With respect to any Payment Date, the last day of
the immediately preceding Collection Period.
Early Amortization Event: As defined in Section 7.1.
Eligible Assignee: A Person whose short-term rating is at least A-1
from S&P and P-1 from Moody's, or whose obligations under this Agreement are
guaranteed by a Person whose short-term rating is at least A-1 from S&P and P-1
from Moody's and is satisfactory to VFCC and the Deal Agent.
Eligible Loan: On any date of determination, each Loan (a) that is a
Transferred Loan and identified on the list of Loans delivered by the Seller to
the Collateral Custodian as part of a Notice of Sale, (b) that is a Commercial
Loan, an AIG Loan, an AIG 2 Loan, an Ex-Im Loan or an Ex-Im 2 Loan and (c) that
satisfies each of the following requirements (unless otherwise agreed to in
writing by the Deal Agent in its sole discretion):
(i) the Loan is evidenced by a promissory note which has been
duly authorized and which, together with the related Loan Documents, is
in full force and effect and constitutes the legal, valid and binding
obligation of the Obligor of such Loan to pay the stated amount of the
Loan and interest thereon, and the related Loan Documents are
enforceable against such Obligor in accordance with their respective
terms;
(ii) the Loan was originated and maintained in accordance with
the terms of the Credit and Collection Policies and arose in the
ordinary course of the Originator's business from the loaning of money
to the Obligor thereof;
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<PAGE> 15
(iii) the Loan is not a Defaulted Loan or a Charged-Off Loan
or a Loan any payment or portion thereof is more than 30 days
Delinquent;
(iv) the Obligor of such Loan is an Eligible Obligor and has
executed all appropriate documentation including documentation relating
to its collateral required by the Originator;
(v) the promissory note which evidences the Loan is an
"instrument" and is not a "general intangible," an "account," or
"chattel paper" as such terms are defined and used in the UCC of all
jurisdictions which govern the perfection of the security interest
granted therein;
(vi) all material consents, licenses, approvals or
authorizations of, or registrations or declarations with, any
Governmental Authority required to be obtained, effected or given in
connection with the making of such Loan have been duly obtained,
effected or given and are in full force and effect and the Loan was
otherwise originated in accordance with all federal and state
governmental consumer and other applicable laws and regulations;
(vii) The Loan is denominated and payable only in United
States dollars in the United States and the collateral securing such
Loan is located only in the United States unless otherwise consented to
in writing by the Deal Agent upon completion of any necessary credit
approval, including receipt and review of due diligence conducted by
FIB; provided, however, no written consent will be required from the
Deal Agent with respect to AIG Loans, AIG 2 Loans, Ex-Im Loans or Ex-Im
2 Loans in which the collateral securing such Loans is located in a
foreign country approved under the AIG Policy, AIG Policy 2, Ex-Im
Guarantee or Ex-Im Policy as long as the Deal Agent is given prior
written notice of any such Loans that the Seller proposes to sell and
assign Asset Interests in and provided the Deal Agent receives evidence
satisfactory to it concerning the approval of the foreign country under
the AIG Policy, AIG Policy 2, Ex-Im Guarantee or Ex-Im Policy prior to
such Loan being included as part of the Asset Pool.
(viii) [Reserved]
(ix) the Loan, together with the Loan Documents related
thereto, does not contravene in any material respect any laws, rules or
regulations applicable thereto (including, without limitation, laws,
rules and regulations relating to usury, truth in lending, fair credit
billing, fair credit reporting, equal credit opportunity, fair debt
collection practices and privacy) and with respect to which no party to
the Loan Documents related thereto is in material violation of any such
law, rule or regulation in any respect;
(x) the Loan, together with the related Loan Documents, is
fully assignable;
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<PAGE> 16
(xi) the Loan was documented and closed in accordance with the
Originator's policies and procedures, including the relevant opinions
and assignments, and only one current original promissory note with
respect to such Loan, which promissory note has been delivered to the
Collateral Custodian, duly endorsed for transfer under this Agreement;
(xii) except for Permitted Liens, the Loan and all Related
Property are free of any Liens; and all filings and other actions
required to perfect the security interest of the Deal Agent as agent
for the Secured Parties in the Assets related thereto have been made or
taken;
(xiii) the Required Loan Documents relating to such Loan are
in the possession of the Collateral Custodian;
(xiv) [Reserved]
(xv) no right of rescission, set off, counterclaim, defense or
other material dispute has been asserted with respect to such Loan;
(xvi) the Loan was made under the existing Loan Documents,
which Loan Documents have not been modified in any respect or such Loan
extended as a result of any adverse credit reason (including, without
limitation, rescheduling of installment payments);
(xvii) any Related Property with respect to such Loan is
insured in accordance with the Credit and Collection Policies;
(xviii) the Loan Documents with respect to such Loan are
complete in accordance with the Credit and Collection Policies;
(xix) the Obligor with respect to such Loan is an Eligible
Obligor;
(xx) the Loan has an Eligible Risk Rating of 3.0 or better and
was approved according to the Originator's Credit and Collection
Policies; provided, however, an AIG Loan, an AIG 2 Loan or an Ex-Im 2
Loan constituting either an Inventory Buyer Program Loan or Equipment
Buyer Program Loan shall have an Eligible Risk Rating of 4.0 or better
and shall have been approved according to the Originator's Credit and
Collection Policies;
(xxi) if a Loan is a Commercial Line of Credit, (i) interest
is due and payable monthly, (ii) the initial term of the Loan does not
exceed 12 months, with all outstanding principal and interest due at
the end of 12 months, and (iii) its respective Loan
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<PAGE> 17
Documents provide that if it is not renewed it shall be amortized over
a period not to exceed 36 additional months;
(xxii) [Reserved]
(xxiii) if a Loan is a Commercial Term Loan, (i) the first
Scheduled Payment on such Loan is due within 45 days after its Purchase
Date, (ii) its term does not exceed 25 years, and (iii) its Schedule of
Payments has equal payments of principal and interest except for the
final payment which may be less than the other payments; and
(xxiv) if a Loan is either an AIG Loan or an AIG 2 Loan (i)
its term to maturity does not exceed 3 years and such term may not be
extended unless approved by AIG, (ii) the Obligor thereunder qualifies
as a covered "Buyer" under the AIG Policy or AIG Policy 2, as
applicable, and is not on the "Excluded Buyer List" provided for under
the AIG Policy or AIG Policy 2, as applicable, and a portion of such
Loan is supported by AIG Insurance pursuant to the AIG Policy or AIG
Policy 2, as applicable, (iii) it qualifies as an "Insured Transaction"
under the AIG Policy or AIG Policy 2, as applicable, (iv) AIG's
corporate unsecured debt rating is at least AA by S&P and Aa2 by
Moody's and (v) either the pledge of the FIB Bond is in full force and
effect or amounts sufficient to cover the deductible amount of the AIG
Policy or AIG Policy 2 are on deposit in the Cash Collateral Account.
Eligible Obligor: Any Obligor which satisfies each of the following
requirements at all times:
(i) the Obligor is not in the gaming, nuclear waste, bio-tech,
oil and gas or real estate industries;
(ii) the Obligor is a legal operating entity, duly organized
and validly existing under the laws of its jurisdiction of
organization;
(iii) the Obligor is not the subject of any Insolvency Event;
(iv) the Obligor is not an Affiliate of any of the parties
hereto;
(v) the Obligor is not the Obligor of any Loan, any payment or
portion thereof is more than 30 days Delinquent or any Charged-Off
Loans;
(vi) the Obligor is not a Governmental Authority;
(vii) the Obligor is in compliance with all material terms and
conditions of its Loan Documents;
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<PAGE> 18
(viii) the Obligor's principal office and any Related Property
are located in (i) the United States or any other country or territory
of the United States, or (ii)(a) any country approved under the AIG
Policy or AIG 2 Policy for FIB's Inventory Buyer Program Loans or
Equipment Buyer Program Loans, or (b) any country approved by the Deal
Agent upon receipt and review of satisfactory legal due diligence,
Rating Agency discussions and credit approval.
(ix) the Obligor has an Eligible Risk Rating of 3.0 or better
and was approved according to the Originator's Credit and Collection
Policies; provided, however, an AIG Loan, an AIG 2 Loan or an Ex-Im 2
Loan constituting either an Inventory Buyer Program Loan or an
Equipment Buyer Program Loan shall have an Eligible Risk Rating of 4.0
or better and shall have been approved accordingly to the Originator's
Credit and Collection Policies.
Eligible Risk Rating: As of any date of determination, with respect to
a designated Loan or Obligor, a risk rating of "1.0," "2.0," "3.0," or, in the
case of AIG 2 Loans or Ex-Im 2 Loans, "3.5," "4.0," as determined by or should
have been determined by, the Servicer in accordance with the Credit and
Collection Policies or as designated by the Originator.
Equipment Buyer Program Loan: A loan originated under FIB's equipment
buyer program.
ERISA: The U.S. Employee Retirement Income Security Act of 1974, as
amended from time to time, and the regulations promulgated and rulings issued
thereunder.
ERISA Affiliate: (a) Any corporation which is a member of the same
controlled group of corporations (within the meaning of Section 414(b) of the
Code) as the Seller; (b) a trade or business (whether or not incorporated) under
common control (within the meaning of Section 414(c) of the Code) with the
Seller; or (c) a member of the same affiliated service group (within the meaning
of Section 414(m) of the Code) as the Seller, any corporation described in
clause (a) above or any trade or business described in clause (b) above.
Eurodollar Disruption Event: The occurrence of any of the following:
(a) a determination by a Purchaser that it would be contrary to law or to the
directive of any central bank or other governmental authority (whether or not
having the force of law) to obtain United States dollars in the London interbank
market to make, fund or maintain any Purchase, (b) the failure of one or more of
the Reference Banks to furnish timely information for purposes of determining
the Adjusted Eurodollar Rate, (c) a determination by a Purchaser that the rate
at which deposits of United States dollars are being offered to such Purchaser
in the London interbank market does not accurately reflect the cost to such
Purchaser of making, funding or maintaining any Purchase or (d) the inability of
a Purchaser to obtain United States dollars in the London interbank market to
make, fund or maintain any Purchase.
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Eurodollar Reserve Percentage: For any day, that percentage (expressed
as a decimal) which is in effect from time to time under Regulation D of the
Board of Governors of the Federal Reserve System (or any successor), as such
regulation may be amended from time to time or any successor regulation, as the
reserve requirement (including, without limitation, any basic, supplemental,
emergency, special, or marginal reserves) applicable with respect to
Eurocurrency Liabilities as that term is defined in Regulation D (or against any
other category of liabilities that includes deposits by reference to which the
LIBOR Rate is determined), whether or not the Purchasers have any Eurocurrency
Liabilities subject to such reserve requirement at that time. All Capital whose
Yield is computed by reference to the Adjusted Eurodollar Rate shall be deemed
to constitute Eurocurrency Liabilities and as such shall be deemed subject to
reserve requirements without benefits of credits for proration, exceptions or
offsets that may be available from time to time to a Purchaser. The Adjusted
Eurodollar Rate shall be adjusted automatically on and as of the effective date
of any change in the Eurodollar Reserve Percentage.
Ex-Im Guarantee. That guarantee no. 0079, dated as of October 3, 1995,
in favor of FIB, which guarantees the Ex-Im Loans and Ex-Im 2 Loans, as such
guarantee or successor guarantee may be replaced or renewed from time to time.
Ex-Im Loan: A Loan to an Obligor that is a revolving line of credit,
90% of the Outstanding Loan Balance of which is guaranteed through the
Export-Import Bank.
Ex-Im 2 Loans: Loans to an Obligor that are either Inventory Buyer
Program Loans or Equipment Buyer Program Loans, a portion of the Outstanding
Balance of which is insured or guaranteed through the Export-Import Bank.
Ex-Im Policy: Those certain policies in favor of FIB that insure the
Ex-Im 2 Loans, as such policy or successor policy may be replaced or renewed
from time to time, so long as the Deal Agent, as agent for the Secured Parties,
is (i) named as loss payee or as an additional insured, on such policy and on
such renewal or replacement policy or (ii) otherwise satisfied that the Ex-Im
Policy inures to its benefit.
Export-Import Bank: The Export-Import Bank of the United States.
Facility: This Amended and Restated Loan Purchase and Servicing
Agreement, dated as of September 24, 1999, as amended, modified, supplemented or
restated from time to time.
Federal Funds Rate: For any period, a fluctuating interest rate per
annum equal for each day during such period to the weighted average of the
federal funds rates as quoted by First Union and confirmed in Federal Reserve
Board Statistical Release H.15(519) or any successor or substitute publication
selected by First Union (or, if such day is not a Business Day, for the
preceding Business Day), or, if, for any reason, such rate is not available on
any day, the rate determined, in the sole opinion of First Union, to be the rate
at which federal funds are being offered for sale in the national federal funds
market at 9:00 A.M. Charlotte, North Carolina time.
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<PAGE> 20
Fee Letter: The letter, dated as of the Closing Date, among the Seller,
the Servicer, the Deal Agent and First Union setting forth, among other things,
the Commitment Fee rate.
FIB Existing Account: Account No. 2005 maintained at FIB for the
purpose of receiving Collections.
FIB Security: A corporate bond that FIB or an Affiliate of FIB will
pledge to the Deal Agent, as agent for VFCC, or that FIB or an affiliate of FIB
will sell to the Seller for Seller to pledge to the Deal Agent, as agent for
VFCC, at any time AIG Loans or AIG 2 Loans are outstanding; provided, however,
such FIB Bond will in no event be less than the amount at least equal to the
amount of any deductible under both the AIG Policy or the AIG Policy 2,
provided, further, however, that if the deductible is drawn down, the FIB Bond
need only be in the amount of the deductible remaining under the AIG Policy or
AIG Policy 2, as applicable, provided, further, however, that the FIB Bond shall
not be pledged unless the Deal Agent has received such Opinion of Counsel
regarding true sale and non-consolidation acceptable to it and its counsel as it
shall request.
First Union: First Union National Bank, in its individual capacity, and
its successors or assigns.
Fixed Period: For any Payment Date the period beginning on, and
including the sixteenth day of the immediately preceding calendar month (or,
with respect to the first Fixed Period, the Closing Date) and ending on, and
including the fifteenth day of the calendar month in which such Payment Date
occurs.
GAAP: Generally accepted accounting principles as in effect from time
to time in the United States.
Governmental Authority: Any nation or government, any state or other
political subdivision thereof, any entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to government
and any court or arbitrator having jurisdiction over such Person.
H.15: Federal Reserve Statistical Release H.15.
Hedge Breakage Costs: For any Hedge Transaction, any amount payable by
the Seller for the early termination of that Hedge Transaction or any portion
thereof.
Hedge Counterparty: Any entity which (a) on the date of entering into
any Hedge Transaction (i) is an interest rate swap dealer that is either a
Purchaser or an Affiliate of a Purchaser, or has been approved in writing by the
Deal Agent (which approval shall not be unreasonably withheld), and (ii) has a
long-term unsecured debt rating of not less than "A" by S&P and not less than
"A-2" by Moody's ("Long-term Rating Requirement") and a short-term unsecured
debt rating of not less than "A-1" by S&P and not less than "P-1" by Moody's
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<PAGE> 21
("Short-term Rating Requirement"), and (b) in a Hedging Agreement (i) consents
to the assignment of the Seller's rights under the Hedging Agreement to the Deal
Agent pursuant to Section 5.4(a) and (ii) agrees that in the event that Moody's
or S&P reduces its long-term unsecured debt rating below the Long-term Rating
Requirement, it shall transfer its rights and obligations under each Hedging
Transaction to another entity that meets the requirements of clause (a) and (b)
hereof and has entered onto a Hedging Agreement with the Seller on or prior to
the date of such transfer.
Hedge Notional Amount: For any Purchase, the aggregate notional amount
in effect on any day under all Hedge Transactions entered into pursuant to
Section 5.4(a) for that Purchase.
Hedge Transaction: Each interest rate swap transaction between the
Seller and a Hedge Counterparty which is entered into pursuant to Section 5.4(a)
and is governed by a Hedging Agreement.
Hedging Agreement: Each agreement between the Seller and a Hedge
Counterparty which governs one or more Hedge Transactions entered into pursuant
to Section 5.4, which agreement shall consist of a "Master Agreement" in a form
published by the International Swaps and Derivatives Association, Inc., together
with a "Schedule" thereto substantially in the form of Exhibit I hereto or such
other form as the Deal Agent shall approve in writing, and each "Confirmation"
thereunder confirming the specific terms of each such Hedge Transaction.
Increased Costs: Any amounts required to be paid by the Seller to an
Affected Party pursuant to Section 2.14.
Incremental Purchase: Any Purchase that increases the aggregate
outstanding Capital hereunder.
Indebtedness: With respect to any Person at any date, (a) all
indebtedness of such Person for borrowed money or for the deferred purchase
price of property or services (other than current liabilities incurred in the
ordinary course of business and payable in accordance with customary trade
practices) or which is evidenced by a note, bond, debenture or similar
instrument, (b) all obligations of such Person under capital leases, (c) all
obligations of such Person in respect of acceptances issued or created for the
account of such Person, (d) all liabilities secured by any Lien on any property
owned by such Person even though such Person has not assumed or otherwise become
liable for the payment thereof, and (e) all indebtedness, obligations or
liabilities of that Person in respect of Derivatives.
Indemnified Amounts: As defined in Section 8.1.
Indemnified Party: As defined in Section 8.1.
Industry: The industry of an Obligor as determined by reference to the
four digit standard industry classification codes.
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<PAGE> 22
Insolvency Event: With respect to a specified Person, (a) the filing of
a decree or order for relief by a court having jurisdiction in the premises in
respect of such Person or any substantial part of its property in an involuntary
case under any applicable Insolvency Law now or hereafter in effect, or
appointing a receiver, liquidator, assignee, custodian, trustee, sequestrator or
similar official for such Person or for any substantial part of its property, or
ordering the winding-up or liquidation of such Person's affairs, and such decree
or order shall remain unstayed and in effect for a period of 60 consecutive
days; or (b) the commencement by such Person of a voluntary case under any
applicable Insolvency Law now or hereafter in effect, or the consent by such
Person to the entry of an order for relief in an involuntary case under any such
law, or the consent by such Person to the appointment of or taking possession by
a receiver, liquidator, assignee, custodian, trustee, sequestrator or similar
official for such Person or for any substantial part of its property, or the
making by such Person of any general assignment for the benefit of creditors, or
the failure by such Person generally to pay its debts as such debts become due,
or the taking of action by such Person in furtherance of any of the foregoing.
Insolvency Laws: The Bankruptcy Code of the United States and all other
applicable liquidation, conservatorship, bankruptcy, moratorium, rearrangement,
receivership, insolvency, reorganization, suspension of payments, or similar
debtor relief laws from time to time in effect affecting the rights of creditors
generally.
Insurance Policy: With respect to any Loan included in the Asset Pool,
an insurance policy covering physical damage to or loss to any assets or Related
Property of the Obligor securing such Loan.
Insurance Proceeds: Any amounts payable or any payments made, to the
Servicer under any Insurance Policy.
Interest Collections: Any and all amounts received in respect of any
interest, fees or other similar charges on a Loan from or on behalf of any
Obligors that are deposited into the Collection Account, or received by the
Servicer, Originator, or Seller in respect of Loans, in the form of cash,
checks, wire transfers, electronic transfers or any other form of cash payment
(net of any payment owed by the Seller to, and including any receipts from, any
Hedge Counterparties).
Inventory Buyer Program Loan: A loan originated under FIB's inventory
buyer program.
Investment: With respect to any Person, any direct or indirect loan,
advance or investment by such Person in any other Person, whether by means of
share purchase, capital contribution, loan or otherwise, excluding the
acquisition of assets pursuant to the Purchase Agreement and excluding
commission, travel and similar advances to officers, employees and directors
made in the ordinary course of business.
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Issuer: VFCC and any other Investor whose principal business consists
of issuing commercial paper or other securities to fund its acquisition and
maintenance of receivables, accounts, instruments, chattel paper, general
intangibles and other similar Assets.
Jurisdiction: Delaware and Connecticut.
LIBOR Rate: For a Fixed Period, an interest rate per annum equal to the
average (rounded upward to the nearest one-sixteenth (1/16) of one percent) per
annum rate of interest determined by First Union at its the principal office in
Charlotte, North Carolina as its LIBOR Rate (each such determination, absent
manifest error, to be conclusive and binding) as of two Business Days prior to
the first day of the applicable Fixed Period, as the rate at which deposits in
immediately available funds in U.S. dollars are being, have been, or would be
offered or quoted by First Union to major banks in the applicable interbank
market for Eurodollar deposits at or about 11:00 a.m. (Charlotte, North Carolina
time) on the Business Day which is the second Business Day immediately preceding
the first day of the applicable Fixed Period, for delivery on the first day of
such Fixed Period, for a term comparable to such Fixed Period and in an amount
approximately equal to the requested Capital. If no such offers or quotes are
generally available for such amount, then the LIBOR Rate shall be the rate
appearing on the Telerate Page 3750 as of 11:00 A.M. (London time) on the
Business Day which is the second Business Day immediately preceding the first
day of such Fixed Period for a term comparable to such Fixed Period.
Lien: With respect to any Asset, (a) any mortgage, lien, pledge, charge
security interest or encumbrance of any kind in respect of such Asset or (b) the
interest of a vendor or lessor under any conditional sale agreement, financing
lease or other title retention agreement relating to such Asset.
Liquidation Expenses: With respect to any Defaulted Loan, the aggregate
amount of all out-of pocket expenses reasonably incurred by the Servicer
(including amounts paid to any subservicer) in connection with the repossession,
refurbishing and disposition of any related assets securing such Loan including
the attempted collection of any amount owing pursuant to such Loan.
Liquidity Bank: Each liquidity bank that is a party to the Liquidity
Purchase Agreement.
Liquidity Purchase Agreement: The Liquidity Purchase Agreement, dated
as of December 23, 1998, among VFCC, the Deal Agent, the Liquidity Agent, and
First Union, as an investor, and each other liquidity bank a party thereto.
Loan: A secured commercial loan arising from the extension of credit to
an Obligor by the Originator or one of its subsidiaries in the ordinary course
of the Originator's business including, without limitation, all Commercial
Loans, all Ex-Im Loans, all AIG Loans and all AIG 2 Loans, which loan is secured
by accounts receivable, inventory, machinery and equipment or real property or
all Ex-Im 2 Loans that are not secured; and such term further includes all
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monies due or owing and all Interest Collections, Principal Collections and
other amounts received from time to time with respect to such loan receivable
and all Proceeds.
Loan Document: With respect to any Loan, (i) the related original
promissory note, (ii) any related loan agreement, (iii) any security agreement,
(iv) where real property serves as the primary Collateral for the Loan, the
mortgage, if any, related thereto, (v) any assignment of leases, and (vi) any
other documents, instruments, certificates or assignments (including amendments
or modifications thereof) executed by the Obligor thereof or by another Person
on the Obligor's behalf in respect of such Loan and related promissory note,
including, without limitation, general or limited guaranties, and any power of
attorney.
Lock-Box: A post office box to which Collections are remitted for
retrieval by a Lock-Box Bank and deposited by such Lock-Box Bank into a Lock-Box
Account.
Lock-Box Account: An account maintained for the purpose of receiving
Collections at a bank or other financial institution which has executed a
Lock-Box Notice for the purpose of receiving Collections, but specifically
excluding the FIB Existing Account.
Lock-Box Bank: Any of the banks or other financial institutions holding
one or more Lock-Box Accounts.
Lock-Box Notice: A notice, in substantially the form of Exhibit B,
among the Seller, the Originator (if applicable) and a Lock-Box Bank.
Minimum Net Portfolio Yield: 2.0%.
Monthly Report: As defined in Section 6.15(a).
Moody's: Moody's Investors Service, Inc., and any successor thereto.
Multiemployer Plan: A "multiemployer plan" as defined in Section
4001(a)(3) of ERISA which is or was at any time during the current year or the
immediately preceding five years contributed to by the Seller or any ERISA
Affiliate on behalf of its employees.
Net Loss Ratio: For any Collection Period, the product of (a) the
percentage equivalent of a fraction, the numerator which is the Outstanding Loan
Balance of Charged-Off Loans during such Collection Period, and the denominator
of which is the Aggregate Outstanding Loan Balance at the end of such Collection
Period and (b) 12.
Net Portfolio Yield: For any Fixed Period, the difference between the
Portfolio Yield for such Fixed Period and the Yield for such Fixed Period.
Notice of Sale: A notice, substantially in the form of Exhibit A
hereto, delivered pursuant to Section 2.2.
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Obligor: With respect to any Loan, the Person or Persons obligated to
make payments pursuant to the respective Loan Documents, including any guarantor
thereof (but not including Export-Import Bank or AIG). For purposes of
calculating any of the concentration and mix criteria set forth on Schedule II,
all Loans in the Asset Pool or to be transferred to the Asset Pool, the Obligor
of which is an Affiliate of another Obligor, shall be aggregated with all Loans
of such other Obligor. For example, if Obligor A is an Affiliate of Obligor B,
and the aggregate Outstanding Loan Balance of all of Obligor A's Loans in the
Asset Pool constitutes 5% of the Aggregate Outstanding Loan Balance, and the
aggregate Outstanding Loan Balance of all of Obligor B's Loans in the Asset Pool
constitutes 5% of the Aggregate Outstanding Loan Balance, then the Obligor
concentration for Obligor A would be 10% and the Obligor concentration for
Obligor B would also be 10%.
Officer's Certificate: A certificate signed by any officer of the
Seller or the Servicer, as the case may be, and delivered to the Deal Agent.
Officer's Certificate as to Solvency: A certificate signed by any
officer of the Seller or FIB, as the case may be, and delivered to the Deal
Agent in the form of Exhibits J-1 and J-2 attached hereto.
Officer's Closing Certificate: A certificate signed by any officer of
the Seller or FIB, as the case may be, and delivered to the Deal Agent in the
form of Exhibits K-1 and K-2.
Opinion of Counsel: A written opinion of counsel, who may be counsel
for the Seller or the Servicer and who shall be reasonably acceptable to the
Deal Agent.
Originator: FIB.
Originator Assets: Any Asset that was transferred to the Seller by the
Originator.
Outstanding Loan Balance: With respect to any Loan, the then
outstanding principal balance thereof.
Payment Date: The twenty-first (21st) day of each calendar month or, if
such day is not a Business Day, the next succeeding Business Day, commencing
with January 21, 1999.
Permitted Investments: Any one or more of the following types of
investments:
(a) marketable obligations of the United States, the full and
timely payment of which are backed by the full faith and credit of the
United States and which have a maturity of not more than 270 days from
the date of acquisition;
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(b) marketable obligations, the full and timely payment of
which are directly and fully guaranteed by the full faith and credit of
the United States and which have a maturity of not more than 270 days
from the date of acquisition;
(c) bankers' acceptances and certificates of deposit and other
interest-bearing obligations (in each case having a maturity of not
more than 270 days from the date of acquisition) denominated in dollars
and issued by any bank with capital, surplus and undivided profits
aggregating at least $100,000,000, the short-term obligations of which
are rated A-1 by S&P and P-1 by Moody's;
(d) repurchase obligations with a term of not more than ten
days for underlying securities of the types described in clauses (a),
(b) and (c) above entered into with any bank of the type described in
clause (c) above;
(e) commercial paper rated at least A-1 by S&P and P-1 by
Moody's; and,
(f) demand deposits, time deposits or certificates of deposit
(having original maturities of no more than 365 days) of depository
institutions or trust companies incorporated under the laws of the
United States or any state thereof (or domestic branches of any foreign
bank) and subject to supervision and examination by federal or state
banking or depository institution authorities; provided, however that
at the time such investment, or the commitment to make such investment,
is entered into, the short-term debt rating of such depository
institution or trust company shall be at least A-1 by S&P and P-1 by
Moody's.
Permitted Liens: Liens in favor of the Deal Agent as agent for the
Secured Parties created pursuant to this Agreement.
Person: An individual, partnership, corporation (including a business
trust), limited liability company, joint stock company, trust, unincorporated
association, sole proprietorship, joint venture, government (or any agency or
political subdivision thereof) or other entity.
Pool Assets: On any day any and all Assets in the Asset Pool.
Portfolio Rate: On any day, with respect to any Collection Period, the
annualized percentage equivalent of a fraction, the numerator of which is equal
to all Interest Collections deposited in the Collection Account for such
Collection Period, and the denominator of which is equal to the Capital of the
last day of such Collection Period.
Portfolio Yield: As of any date of determination, the excess, if any,
of (a) the Rolling Three Month Portfolio Rate on such day over (b) the Yield
Rate plus the Program Fee for such day.
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Power of Attorney: A power of attorney signed by any officer of the
Seller in the form of Exhibit L hereto.
Prepaid Loan: Other than Commercial Lines of Credit which may be
prepaid but for which the commitment to make advances thereunder is still in
effect, any Loan that has terminated or been prepaid in full prior to its
scheduled maturity date (including because of a Casualty Loss), other than a
Defaulted Loan.
Prime Rate: The rate announced by First Union from time to time as its
prime rate in the United States, such rate to change as and when such designated
rate changes. The Prime Rate is not intended to be the lowest rate of interest
charged by First Union in connection with extensions of credit to debtors.
Principal Collections: Any and all amounts received in respect of any
principal due and payable under any Loan from or on behalf of Obligors that are
deposited into the Collection Account, or received by the Servicer, Originator,
or Seller in respect of Loans, in the form of cash, checks, wire transfers,
electronic transfers or any other form of cash payment.
Proceeds: With respect to any Pool Asset, whatever is receivable or
received when such Pool Asset is sold, collected, liquidated, foreclosed,
exchanged, or otherwise disposed of, whether such disposition is voluntary or
involuntary, and includes all rights to payment with respect to any insurance
relating to such Pool Asset.
Program Fee: As defined in the Section 2.13(b).
Purchase: A purchase by a Purchaser of an undivided interest in the
Assets from the Seller pursuant to Article II, including a reinvestment under
Clause ELEVENTH of Section 2.7.
Purchase Agreement: The Purchase and Sale Agreement dated as of the
Closing Date between the Originator and the Seller, as amended, modified,
supplemented or restated from time to time.
Purchase Date: The Closing Date (or, if a Purchase is not made on the
Closing Date, then the date of the initial Purchase after the Closing Date), and
as to any Incremental Purchase, any Business Day that is (i) at least one (1)
calendar week following the immediately preceding Purchase Date and (ii) five
(5) Business Days immediately following the receipt by the Deal Agent of a
written request by the Seller to sell an Asset Interest, such notice to be in
the form of Exhibit A hereto.
Purchase Limit: At any time, $65,000,000, on or after the Termination
Date, the "Purchase Limit" shall mean the aggregate outstanding Capital.
Purchase Rate: (i) With respect to Commercial Loans, 85%, (ii) with
respect to either AIG Loans or AIG 2 Loans, a fraction expressed as a percentage
the numerator of which is the
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portion of the Outstanding Loan Balance of such AIG Loans or AIG 2 Loans, as
applicable, which is insured by an AIG Policy or AIG Policy 2, as applicable,
and the denominator of which is the Outstanding Loan Balance of such AIG Loans
or AIG 2 Loans, as applicable, (iii) with respect to Ex-Im Loans, 100% of the
guaranteed portion of the Outstanding Loan Balance of such Ex-Im Loans which is
guaranteed through the Export-Import Bank and (iv) with respect to Ex-Im 2
Loans, 100% of the guaranteed or insured portion of the Outstanding Loan Balance
of such Ex-Im 2 Loans that is guaranteed or insured through the Export-Import
Bank.
Purchasers: Collectively, VFCC, First Union, and the Investors and any
other Person that agrees, pursuant to the pertinent Assignment and Acceptance,
to purchase an Asset Interest pursuant to this Agreement.
Qualified Institution: As defined in Section 6.4(d).
Rating Agency: Each of S&P, Moody's and any other rating agency that
has been requested to issue a rating with respect to the commercial paper notes
issued by the Issuer.
Recoveries: With respect to a Defaulted Loan, proceeds from the sale of
the Related Property, proceeds of any related Insurance Policy and any other
recoveries with respect to such Defaulted Loan and the related Equipment and
related property, and other amounts representing late fees and penalties net of
Liquidation Expenses and amounts, if any, so received that are required to be
refunded to the Obligor on such Loan.
Records: With respect to any Loans, all documents, books, records and
other information (including without limitation, computer programs, tapes,
disks, punch cards, data processing software and related property and rights)
maintained with respect to any Pool Asset and the related Obligors, other than
the Loan Documents.
Register: As defined in Section 10.1(c).
Related Property: With respect to a Loan, any property or other assets
of the Obligor thereunder pledged as collateral to the Originator to secure such
Loan.
Replaced Loan: As defined in Section 2.9.
Reporting Date: The date which is two Business Days after the end of
the Fixed Period.
Required Investors: At a particular time, Investors with Commitments
equal to or in excess of 66 2/3 % of the Purchase Limit.
Required Loan Documents: The documents described in clause (i), (ii),
(iii) and (iv) of the definition of Loan Document.
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Required Reports: Collectively, the Monthly Report, the Servicer's
Certificate and the financial statements of the Servicer required to be
delivered to the Deal Agent pursuant to Section 6.12(c) hereof.
Requirements of Law: For any Person shall mean the certificate of
incorporation or articles of association and by-laws or other organizational or
governing documents of such Person, and any law, treaty, rule or regulation, or
order or determination of an arbitrator or Governmental Authority, in each case
applicable to or binding upon such Person or to which such Person is subject,
whether Federal, state or local (including, without limitation, usury laws, the
Federal Truth in Lending Act, and Regulation Z and Regulation B of the Board of
Governors of the Federal Reserve System).
Reserve Percentage: The percentage that is 100% minus the applicable
Purchase Rate.
Reserves: As to any Asset Interest on any day, an amount equal to the
Reserve Percentage multiplied by the Capital of such Asset Interest as of the
close of business of the Collateral Custodian on such day.
Responsible Officer: As to any Person, any officer of such Person with
direct responsibility for the administration of this Agreement and also, with
respect to a particular matter, any other officer to whom such matter is
referred because of such officer's knowledge of and familiarity with the
particular subject.
Retransfer Amount: As defined in Section 5.6.
Retransfer Date: As defined in Section 5.6.
Revolving Period: The period commencing on the Closing Date and ending
on the day immediately preceding the Termination Date.
Rolling Three-Month Portfolio Rate: For any day, the percentage
equivalent of a fraction the numerator of which is equal to the sum of the three
(3) most recent Portfolio Rates and the denominator of which is equal to three
(3).
S&P: Standard & Poor's, a division of The McGraw-Hill Companies, Inc.
and any successor thereto.
Scheduled Payment: With respect to a date on which a payment is due
under a Loan, the periodic payment (exclusive of any amounts in respect of
insurance or taxes and reflecting any adjustment for any partial prepayment) set
forth in the applicable Loan Documents as due from the Obligor.
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Secured Party: (i) Each Purchaser and (ii) each Hedge Counterparty that
is either a Purchaser or an Affiliate of a Purchaser if that Affiliate executes
a counterpart of this Agreement agreeing to be bound by the terms of this
Agreement applicable to a Secured Party.
Securitization: A disposition of Loans in one or a series of structured
finance securitization transactions.
Seller: FNBNE Funding Corp., or any permitted successor thereto.
Servicer: FIB and its permitted successors and assigns.
Servicer Advance: An advance of Scheduled Payments made by the Servicer
pursuant to Section 6.5.
Servicer Assignee: As defined in Section 6.19.
Servicer Termination Event: As defined in Section 6.23.
Servicer's Certificate: As defined in Section 6.12(b).
Servicing Duties: As defined in Section 6.1.
Servicing Fee: As defined in Section 2.13(c).
Servicing Fee Rate: As defined in the Fee Letter.
Servicing Records: All documents, books, records and other information
(including, without limitation, computer programs, tapes, disks, data processing
software and related property rights) prepared and maintained by the Servicer
with respect to the Loans and the related Obligors.
Solvent: As to any Person at any time, having a state of affairs such
that all of the following conditions are met: (a) the fair value of the property
owned by such Person is greater than the amount of such Person's liabilities
(including disputed, contingent and unliquidated liabilities) as such value is
established and liabilities evaluated for purposes of Section 101(31) of the
Bankruptcy Code; (b) the present fair saleable value of the property owned by
such Person in an orderly liquidation of such Person is not less than the amount
that will be required to pay the probable liability of such Person on its debts
as they become absolute and matured; (c) such Person is able to realize upon its
property and pay its debts and other liabilities (including disputed, contingent
and unliquidated liabilities) as they mature in the normal course of business;
(d) such Person does not intend to, and does not believe that it will, incur
debts or liabilities beyond such Person's ability to pay as such debts and
liabilities mature; and (e) such Person is not engaged in business or a
transaction, and is not about to engage in a business or a transaction, for
which such Person's property would constitute unreasonably small capital.
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Structuring Fee: The structuring fee agreed to between the Seller and
the Deal Agent in the Fee Letter.
Substitute Loan: As defined in Section 2.9.
Successor Servicer: As defined in Section 6.27(a).
Taxes: Any present or future taxes levies, imposts, duties, charges,
assessments or fees of any nature (including interest, penalties, and additions
thereto) that are imposed by any Government Authority.
Termination Date: The earliest to occur of (a) the date of the
occurrence of an Early Amortization Event pursuant to Section 7.1, (b) the
Commitment Termination Date, (c) the termination of the Purchase Limit pursuant
to Section 2.3, and (d) the occurrence of an Insolvency Event with respect to
either FIB or the Seller.
Termination Notice: As defined in Section 6.26.
Transaction: As defined in Section 3.2.
Transaction Documents: This Agreement, the Purchase Agreement, the
Liquidity Purchase Agreement, the Hedge Agreement, dated as of the date hereof
among the Seller, the Servicer and the Deal Agent, and any additional document
the execution of which is necessary or incidental to carrying out the terms of
the foregoing documents.
Transfer Date: As defined in the Purchase Agreement.
Transferred Loans: Each Loan that is sold by the Originator to the
Seller under the Purchase Agreement.
Trigger Event: Any of the Early Amortization Events described in
clauses (n), (o), (p) and (u) of Section 7.1, without regard to any applicable
cure period.
UCC: The Uniform Commercial Code as from time to time in effect in the
specified jurisdiction.
United States: The United States of America.
Unreimbursed Servicer Advances: At any time, the amount of all previous
Servicer Advances (or portions thereof) as to which the Servicer has not been
reimbursed as of such time pursuant to Section 2.7 and which the Servicer has
determined in its sole discretion will not be recoverable from Collections with
respect to the related Loan.
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Warranty Event: As to any Loan included as part of the Asset Pool, the
occurrence and continuance of a material breach of any representation or
warranty relating to such Loan and such breach is not cured within the relevant
cure period.
Yield: For each Asset Interest for any Fixed Period, the products (for
each day during such Fixed Period) of:
YRxCx 1
---
360
where:
C = the Capital of such Asset Interest, and
YR = the Yield Rate applicable on such day;
provided, however, that (a) no provision of this Agreement shall require the
payment or permit the collection of Yield in excess of the maximum permitted by
applicable law and (b) Yield shall not be considered paid by any distribution if
at any time such distribution is rescinded or must otherwise be returned for any
reason.
Yield Rate: With respect to any Fixed Period and for each Asset
Interest purchased by a Purchaser for each day during such period, a per annum
rate equal to the Adjusted Eurodollar Rate; provided, however, that if the CP
Rate is greater than the Adjusted Eurodollar Rate on any day during such Fixed
Period, then the "Yield Rate" for that day will include a Cost of Funds
Adjustment; and provided, further, that if any portion of the Capital is funded
under the Liquidity Purchase Agreement by the Investors, then the "Yield Rate"
for such portion shall be a rate equal to (i) the Adjusted Eurodollar Rate, or
(ii) the Base Rate if the relevant Investor shall have notified the Deal Agent
that a Eurodollar Disruption Event has occurred.
SECTION 1.2 OTHER TERMS.
All accounting terms not specifically defined herein shall be construed
in accordance with GAAP. All terms used in Article 9 of the UCC in the States of
New York and Connecticut, as applicable, and not specifically defined herein,
are used herein as defined in such Article 9.
SECTION 1.3 COMPUTATION OF TIME PERIOD.
Unless otherwise stated in this Agreement, in the computation of a
period of time from a specified date to a later specified date, the word "from"
means "from and including" and the words "to" and "until" each mean "to but
excluding."
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ARTICLE II
THE PURCHASE FACILITY
SECTION 2.1 PURCHASES OF ASSET INTERESTS.
(a) On the terms and conditions hereinafter set forth, the Seller may
on any Purchase Date during the period from the date hereof to but not including
the Termination Date, at its option, sell and assign Asset Interests to the
Purchasers. The Deal Agent may act on behalf of and for the benefit of the
Purchasers in this regard. VFCC may, in its sole discretion, purchase, or if
VFCC shall decline to purchase, the Liquidity Agent shall purchase on behalf of
the Investors, Asset Interests from time to time during the period from the date
hereof to but not including the Termination Date. Under no circumstances shall
any Purchaser make the initial Purchase or any Incremental Purchase if, after
giving effect to such Purchase or Incremental Purchase, the aggregate Capital
outstanding hereunder would exceed the lesser of (i) the Purchase Limit or (ii)
the Capital Limit. Each Asset Interest purchased by any Purchaser hereunder is
subject to the interests of the Hedge Counterparties under Sections 2.7(a)(i)
and (x) of this Agreement.
(b) The Seller may, within 60 days, but no later than 45 days, prior to
each one year anniversary of the Closing Date, by written notice to the Deal
Agent, make written request for VFCC and the Investors to extend the Commitment
Termination Date for an additional period of one year following the then
existing Commitment Termination Date. The Deal Agent will give prompt notice to
VFCC and each of the Investors of its receipt of such request for extension of
the Commitment Termination Date. VFCC and each Investor shall make a
determination, in their sole discretion and after a full credit review, not less
than 15 days prior to such anniversary date, as to whether or not it will agree
to extend the Commitment Termination Date; provided, however, that the failure
of VFCC or any Investor to make a timely response to the Seller's request for
extension of the Commitment Termination Date shall be deemed to constitute a
refusal by VFCC or the Investor, as the case may be, to extend the Commitment
Termination Date. The Commitment Termination Date shall only be extended upon
the consent of both (i) VFCC and (ii) 100% of the Investors.
(c) Notwithstanding the foregoing Section 2.1(b), upon the proposed
conversion of FIB from a regulated bank to a commercial finance company (the
"Conversion"), which is otherwise subject to the provisions of this Agreement,
the Commitment Termination Date shall be the date that is the earlier of (i) the
date that is 364 days after the date of the Conversion, or (ii) the then
Commitment Termination Date, unless the Deal Agent and 100% of the Investors,
upon appropriate due diligence and credit approvals agree that the then
Commitment Termination Date should not be accelerated.
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SECTION 2.2 THE INITIAL PURCHASE AND INCREMENTAL PURCHASES.
(a) Subject to the conditions described in Section 2.1, the initial
Purchase and each Incremental Purchase shall be made in accordance with the
procedures described in Section 2.2(b). After the Collection Date has occurred,
each of the Purchasers and the Deal Agent, in accordance with their respective
interests, shall assign and transfer to the Seller their respective remaining
interest in Asset Interests without any representation or warranty, express or
implied and without recourse of any kind.
(b) The initial Purchase and each Incremental Purchase shall be made
pursuant to the terms of a Purchase Certificate in the form of Exhibit H hereto,
after receipt by the Purchaser of a Notice of Sale delivered by the Seller to
the Deal Agent (with a copy to the Collateral Custodian) at least one (1)
Business Day prior to the Closing Date in the case of the initial Purchase and
at least two (2) Business Days prior to such proposed Purchase Date in the case
of any Incremental Purchase.
SECTION 2.3 REDUCTION OF THE PURCHASE LIMIT.
The Seller may, upon at least five Business Days' notice to the Deal
Agent, terminate in whole or reduce in part the portion of the Purchase Limit
that exceeds the sum of the aggregate Capital and Yield accrued and to accrue
thereon, and the Commitments of the Investors shall be reduced proportionately;
provided, however, that each partial reduction of the Purchase Limit shall be in
an aggregate amount equal to $1,000,000 or an integral multiple of $l00,000 in
excess thereof. Each notice of reduction or termination pursuant to this Section
2.3 shall be irrevocable.
SECTION 2.4 DETERMINATION OF YIELD.
The Deal Agent shall determine the Yield (including unpaid Yield, if
any, due and payable on a prior Payment Date) to be paid on each Payment Date
for the Fixed Period and shall advise the Servicer thereof on the first Business
Day after the Fixed Period.
SECTION 2.5 PERCENTAGE EVIDENCED BY ASSET INTEREST.
The variable percentage represented by an Asset Interest shall be
initially computed on its date of purchase. Thereafter, until the Termination
Date, each Asset Interest shall be automatically recomputed (or deemed to be
recomputed) on each day prior to the Termination Date. The variable percentage
represented by an Asset Interest as computed (or deemed recomputed) as of the
close of business on the day immediately preceding the Termination Date shall
remain constant at all times after the Termination Date. The variable percentage
represented by the Asset Interest shall become zero when its Capital and Yield
has been paid in full.
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SECTION 2.6 DIVIDING OR COMBINING ASSET INTERESTS.
The Deal Agent may, with the consent of a Purchaser, take any of the
following actions at the end of such Fixed Period with respect to any Asset
Interest: (i) divide the Asset Interest owned by such Purchaser into two or more
portions of Asset Interests having aggregate Capital equal to the Capital of
such divided Asset Interest, (ii) combine one portion of an Asset Interest of
such Purchaser with another portion of an Asset Interest of such Purchaser with
a Fixed Period ending on the same day, creating a new portion of an Asset
Interest having Capital equal to the Capital of the two portions of Asset
Interest combined or (iii) combine the Asset Interest of such Purchaser with the
Asset Interest to be purchased on such day by such Purchaser, creating a new
Asset Interest having Capital equal to the Capital of the two Asset Interests
combined; provided, that an Asset Interest of VFCC may not be combined with an
Asset Interest of the Investors.
SECTION 2.7 SETTLEMENT PROCEDURES.
(a) On each Payment Date, the Servicer shall pay to the following
Persons, from (i) the Collection Account, to the extent of available funds
including interest earnings on the Collection Account, (ii) a Servicer Advance
if made or required pursuant to Section 6.5, and (iii) amounts received in
respect of any Hedge Agreement during the applicable Collection Period (the sum
of such amounts described in clauses (i), (ii) and (iii) being the "Available
Collections") the following amounts in the following order of priority:
(A) FIRST, pro rata to each Hedge Counterparty, any
amounts, including any Hedge Breakage Costs, owing that Hedge
Counterparty under its respective Hedging Agreement in respect
of any Hedge Transaction(s) (other than payments in respect of
Termination of any Hedging Agreement), for the payment
thereof;
(B) SECOND, to the Servicer, but only out of proceeds
on the AIG Policy, AIG Policy 2 or Ex-Im Policy or Ex-Im
Guarantee that were paid with respect to such AIG Loan, AIG 2
Loan, Ex-Im Loans or Ex-Im 2 Loans, as applicable, in an
amount equal to any Unreimbursed Servicer Advances with
respect to an AIG Loan, AIG 2 Loan, Ex-Im Loans or Ex-Im 2
Loans, as applicable, for the payment thereof;
(C) THIRD, to the Servicer, but only out of Interest
Collections, in an amount equal to any Unreimbursed Servicer
Advances, for the payment thereof;
(D) FOURTH, to the Servicer, in an amount equal to
its accrued and unpaid Servicing Fees to the end of the
preceding Collection Period;
(E) FIFTH, to the extent not paid for by FIB, to the
Backup Servicer, in an amount equal to any accrued and unpaid
Backup Servicer Fee, for the payment thereof;
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(F) SIXTH, to the extent not paid for by FIB, to the
Collateral Custodian, in an amount equal to any accrued and
unpaid Collateral Custodian Fee, for the payment thereof;
(G) SEVENTH, to the Deal Agent for the ratable
payment to each Purchaser, in an amount equal to any accrued
and unpaid Yield for such Payment Date;
(H) EIGHTH, to the Deal Agent for the ratable payment
to each Purchaser in an amount equal (I) to the extent not
paid by FIB, to any accrued and unpaid Commitment Fees and
(II) to any accrued and unpaid Program Fees;
(I) NINTH, to the Deal Agent, in the amount of unpaid
Increased Costs and/or Taxes, for payment to the Purchasers in
respect thereof;
(J) TENTH, so long as any AIG Loans or AIG 2 Loans
are outstanding, to the Cash Collateral Account, to the extent
that the balance in such account is less than the lesser of
(i) an amount sufficient to cover the deductible amount of the
AIG Policy and/or AIG Policy 2 or (ii) the Aggregate
Outstanding Loan Balance of AIG Loans and AIG 2 Loans on such
Payment Date; provided, however, that if the FIB Bond is
pledged, no such amounts need to be deposited in the Cash
Collateral Account;
(K) ELEVENTH, to the extent that funds are available,
any remaining amounts may be reinvested in Eligible Loans;
provided, however, that if the aggregate Capital exceeds the
lesser of (i) the Capital Limit or (ii) the Purchase Limit, an
amount equal to such excess shall be paid to the Deal Agent to
pay down Capital outstanding;
(L) TWELFTH, pro rata to each Hedge Counterparty, any
amounts owing that Hedge Counterparty under its respective
Hedging Agreement in respect of the termination of such
Hedging Agreement;
(M) THIRTEENTH, to the extent funds are available to
satisfy any unpaid Indemnified Amounts, amounts required to be
paid by the Seller pursuant to the indemnification provisions
of Section 8.1 and any other amounts due hereunder; and
(N) FOURTEENTH, (A) if such Payment Date occurs
during the Revolving Period, any remaining amount shall be
distributed to the Seller, and (B) if such Payment Date occurs
during the Amortization Period, to the Deal Agent in reduction
of the outstanding Capital to zero and the payment in full of
the Aggregate Unpaids.
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(b) On each Business Day during the Revolving Period, the Servicer may,
to the extent of any Principal Collections on deposit in the Collection Account
as of the last day of the related Collection Period, use such funds toward the
Purchase of Eligible Loans pursuant to item ELEVENTH in subsection (a) above.
(c) Notwithstanding anything to the contrary contained in this Section
2.7 or any other provision in this Agreement, if on any Business Day during the
Revolving Period the aggregate outstanding amount of Capital shall exceed the
lesser of (i) the Purchase Limit or (ii) the Capital Limit, then the Seller
shall remit to the Deal Agent, prior to any reinvestment of funds as set forth
in item ELEVENTH of Section 2.7(a) and in any event no later than the close of
business of the Deal Agent on the next succeeding Business Day, a payment (to be
applied by the Deal Agent to outstanding Capital) in such amount as may be
necessary to reduce outstanding Capital to an amount less than or equal to the
lesser of (i) the Purchase Limit or (ii) the Capital Limit.
(d) On each Business Day occurring during the Amortization Period, all
Principal Collections on deposit in the Collection Account as of such Business
Day shall be paid to the Deal Agent in reduction, to zero, of the outstanding
Capital and repayment in full of the Aggregate Unpaids.
SECTION 2.8 [RESERVED]
SECTION 2.9 SUBSTITUTION OF LOANS.
On any day prior to the occurrence of an Early Amortization Event, the
Seller may, and upon the request of the Deal Agent shall, subject to the
conditions set forth in this Section 2.9, replace any Loan subject to a Warranty
Event or in respect of which the Obligor thereunder has requested the rewriting
and/or restructuring of such Loan with one or more other Loans (each, a
"Substitute Loan"), provided that no such replacement shall occur unless each of
the following conditions is satisfied as of the date of such replacement and
substitution:
(a) the Loan to be replaced (i) is a Defaulted Loan, (ii) has suffered
a credit rating downgrading below 3 in accordance with the Servicer's internal
credit scoring system, or (iii) has experienced a decline in its fair market
value at least 25% compared to its Purchase Price;
(b) the Seller has previously recommended to the Deal Agent (with a
copy to the Collateral Custodian) in writing that the Loan to be replaced should
be replaced (each a "Replaced Loan");
(c) each Substitute Loan is an Eligible Loan on the date of
substitution having an approximate Outstanding Loan Balance equal to that of the
Replaced Loan (with any difference paid in cash);
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(d) after giving effect to any such substitution, the aggregate of all
outstanding Capital does not exceed the lesser of the (i) Purchase Limit and
(ii) the Capital Limit;
(e) the aggregate Outstanding Loan Balance of such Substitute Loans
shall be equal to or greater than the lesser of (i) the aggregate Outstanding
Loan Balance of the Replaced Loans and (ii) the amount necessary to prevent the
occurrence of a Trigger Event;
(f) all representations and warranties of the Seller contained in
Sections 4.1 and 4.2 shall be true and correct as of the date of substitution of
any such Substitute Loan;
(g) the substitution of any Substitute Loan does not cause an Early
Amortization Event to occur; and
(h) the Seller shall deliver to the Deal Agent on the date of such
substitution a certificate of a Responsible Officer certifying that each of the
foregoing is true and correct as of such date.
In connection with any such substitution, the Deal Agent as agent for
the Secured Parties shall, automatically and without further action, be deemed
to transfer to the Seller, free and clear of any Lien created pursuant to this
Agreement, all of the right, title and interest of the Deal Agent as agent for
the Secured Parties in, to and under such Replaced Loans, and the Deal Agent as
agent for the Secured Parties shall be deemed to represent and warrant that it
has the corporate authority and has taken all necessary corporate action to
accomplish such transfer, but without any other representation and warranty,
express or implied. The Deal Agent, as agent for the Purchasers, shall, at the
sole expense of the Servicer execute such documents and instruments of transfer
as may be prepared by the Servicer on behalf of the Seller and take other such
actions as shall reasonably be requested by the Seller to effect the transfer of
such Replaced Loan pursuant to this Section. Any right of the Deal Agent as
agent for the Secured Parties to substitute any Loan in the Asset Pool pursuant
to this Section 2.9 shall be in addition to, and without limitation of, any
other rights and remedies that the Deal Agent as agent for the Secured Parties
or any Secured Party may have to require the Seller or the Servicer, as
applicable, to substitute for, or accept retransfer of; any Loan pursuant to the
terms of this Agreement.
SECTION 2.10 COLLECTIONS AND ALLOCATIONS.
The Servicer shall promptly (but in no event later than two (2)
Business Days after the receipt thereof) identify any Collections received by it
as being on account of Interest Collections or Principal Collections and deposit
all such Interest Collections or Principal Collections received directly by it
into the Collection Account (the "Collection Account"). The Servicer shall make
such deposits or payments by wire transfer, in immediately available funds.
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SECTION 2.11 PAYMENTS, COMPUTATION, ETC.
(a) Unless otherwise expressly provided herein, all amounts to be paid or
deposited by the Seller or the Servicer hereunder shall be paid or deposited in
accordance with the terms hereof no later than 11:00 A.M. (Charlotte, North
Carolina time) on the day when due in lawful money of the United States in
immediately available funds to the Agent's Account. The Seller shall, to the
extent permitted by law, pay to the Secured Parties interest on all amounts not
paid or deposited when due hereunder at 1% per annum above the Base Rate,
payable on demand; provided, however, that such interest rate shall not at any
time exceed the maximum rate permitted by applicable law. Such interest shall be
retained by the Deal Agent except to the extent that such failure to make a
timely payment or deposit has continued beyond the date for distribution by the
Deal Agent of such overdue amount to the Secured Parties, in which case such
interest accruing after such date shall be for the account of, and distributed
by the Deal Agent to, the Secured Parties. All computations of interest and all
computations of Yield and other fees hereunder shall be made on the basis of a
year of 360 days for the actual number of days (including the first but
excluding the last day) elapsed.
(b) Whenever any payment hereunder shall be stated to be due on a day other
than a Business Day, such payment shall be made on the next succeeding Business
Day, and such extension of time shall in such case be included in the
computation of payment of Yield, interest or any fee payable hereunder, as the
case may be.
(c) If any Purchase or Incremental Purchase requested by the Seller and
approved by a Purchaser and the Deal Agent pursuant to Section 2.2, is not, for
any reason whatsoever related to a default or nonperformance by the Seller, made
or effectuated, as the case may be, on the date specified therefor, the Seller
shall indemnify such Purchaser against any reasonable loss, cost or expense
incurred by such Purchaser, including, without limitation, any loss (including
loss of anticipated profits, net of anticipated profits in the reemployment of
such funds in the manner determined by such Purchaser), cost or expense incurred
by reason of the liquidation or reemployment of deposits or other funds acquired
by such Purchaser to fund or maintain such Purchase or Incremental Purchase, as
the case may be, during such Fixed Period.
SECTION 2.12 OPTIONAL REPURCHASE.
At any time following the Termination Date when the Aggregate Outstanding
Loan Balance is less than ten percent of the Aggregate Outstanding Loan Balance
as of the Termination Date, the Servicer may notice the Deal Agent in writing of
its intent to purchase all remaining Assets in the Asset Pool, provided that all
Hedge Transactions have been terminated. On the Payment Date next succeeding any
such notice, the Servicer shall purchase all such Assets for a price equal to
the sum of the Aggregate Unpaids, including for illustrative purposes but not in
limitation, all Yield accrued and to accrue, as reasonably determined by the
Deal Agent, and all accrued and unpaid Commitment Fees, Backup Servicer Fees,
Custodial Fees, Increased Costs, Taxes, Hedge Breakage Costs, Breakage Costs and
any other amounts payable by the Seller hereunder or under or with respect to
any Hedging Agreement, and the proceeds of
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such purchase will be deposited into the Collection Account and paid in
accordance with Section 2.9(b).
SECTION 2.13 FEES.
(a) FIB, in its individual capacity, shall pay to the Deal Agent from its
own funds on each Payment Date, monthly in arrears, a fee (the "Commitment
Fee"), as set forth in the Fee Letter.
(b) The Seller shall pay to the Deal Agent, on each Payment Date, monthly
in arrears, a Program Fee (the "Program Fee"), as set forth in the Fee Letter.
(c) The Servicer shall be entitled to receive out of Interest Collections a
fee (the "Servicing Fee"), monthly in arrears in accordance with Section 2.7(a),
which fee shall be equal to the product of (i) the Servicing Fee Rate and (ii)
the Aggregate Outstanding Loan Balance as of the close of business on the
immediately preceding Determination Date.
(d) The Backup Servicer shall be entitled to receive the Backup Servicer
Fee in accordance with Section 2.7(a).
(e) The Collateral Custodian shall be entitled to receive the Custodial Fee
in accordance with Section 2.7(a).
(f) The Seller shall pay to the Deal Agent, on the Closing Date, the
Structuring Fee (net of any amounts previously paid) in immediately available
funds.
SECTION 2.14 INCREASED COSTS; CAPITAL ADEQUACY; ILLEGALITY.
(a) If either (i) the introduction of or any change (including, without
limitation, any change by way of imposition or increase of reserve requirements)
in or in the interpretation of any law or regulation or (ii) the compliance by a
Purchaser or any Affiliate thereof (each of which, an "Affected Party") with any
guideline or request from any central bank or other governmental agency or
authority (whether or not having the force of law), (a) shall subject an
Affected Party to any Tax (except for Taxes on the overall net income of such
Affected Party), duty or other charge with respect to an Asset Interest, or any
right to make Purchases hereunder, or on any payment made hereunder or (b) shall
impose, modify or deem applicable any reserve requirement (including, without
limitation, any reserve requirement imposed by the Board of Governors of the
Federal Reserve System, but excluding any reserve requirement, if any, included
in the determination of Yield), special deposit or similar requirement against
assets of, deposits with or for the amount of, or credit extended by, any
Affected Party or (c) shall impose any other condition affecting an Asset
Interest or a Purchaser's rights hereunder, the result of which is to increase
the cost to any Affected Party or to reduce the amount of any sum received or
receivable by an Affected Party under this Agreement, then within ten days after
demand by such Affected Party (which demand shall be accompanied by a statement
setting forth the basis
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for such demand), the Seller shall pay directly to such Affected Party such
additional amount or amounts as will compensate such Affected Party for such
additional or increased cost incurred or such reduction suffered.
(b) If either (i) the introduction of or any change in or in the
interpretation of any law, guideline, rule, regulation, directive or request or
(ii) compliance by any Affected Party with any law, guideline, rule, regulation,
directive or request from any central bank or other governmental authority or
agency (whether or not having the force of law), including, without limitation,
compliance by an Affected Party with any request or directive regarding capital
adequacy, has or would have the effect of reducing the rate of return on the
capital of any Affected Party as a consequence of its obligations hereunder or
arising in connection herewith to a level below that which any such Affected
Party could have achieved but for such introduction, change or compliance
(taking into consideration the policies of such Affected Party with respect to
capital adequacy) by an amount deemed by such Affected Party to be material,
then from time to time, within ten days after demand by such Affected Party
(which demand shall be accompanied by a statement setting forth the basis for
such demand), the Seller shall pay directly to such Affected Party such
additional amount or amounts as will compensate such Affected Party for such
reduction.
(c) If as a result of any event or circumstance similar to those
described in clauses (a) or (b) of this section, and not in duplication of any
payments made under those clauses, any Affected Party is required to compensate
a bank or other financial institution providing liquidity support, credit
enhancement or other similar support to such Affected Party in connection with
this Agreement or the funding or maintenance of Purchases hereunder, then within
ten days after demand by such Affected Party, the Seller shall pay to such
Affected Party such additional amount or amounts as may be necessary to
reimburse such Affected Party for any amounts paid by it.
(d) In determining any amount provided for in this section, the Affected
Party may use any reasonable averaging and attribution methods. Any Affected
Party making a claim under this section shall submit to the Seller a certificate
as to such additional or increased cost or reduction, which certificate shall be
conclusive absent demonstrable error.
(e) If a Purchaser shall notify the Deal Agent that a Eurodollar Disruption
Event as described in clause (a) of the definition of "Eurodollar Disruption
Event" has occurred, the Deal Agent shall in turn so notify the Seller,
whereupon all Capital in respect of which Yield accrues at the Adjusted
Eurodollar Rate shall immediately be converted into Capital in respect of which
Yield accrues at the Base Rate.
SECTION 2.15 TAXES.
(a) All payments made by an Obligor in respect of a Loan and all payments
made by the Seller or the Servicer under this Agreement will be made free and
clear of and without deduction or withholding for or on account of any Taxes,
unless such withholding or deduction is
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required by law. If withholding or deduction is required by law, the Obligor,
Seller, or Servicer (as the case may be) shall pay to the appropriate taxing
authority any such Taxes required to be deducted or withheld and the amount
payable to each Purchaser or the Deal Agent (as the case may be) will be
increased (such increase, the "Additional Amount") such that every net payment
made under this Agreement after deduction or withholding for or on account of
any Taxes (including, without limitation, any Taxes on such increase) is not
less than the amount that would have been paid had no such deduction or
withholding been deducted or withheld. The foregoing obligation to pay
Additional Amounts, however, will not apply with respect to net income or
franchise taxes imposed on a Purchaser or the Deal Agent, respectively, with
respect to payments required to be made by the Seller or Servicer under this
Agreement, by a taxing jurisdiction in which such Purchaser or Deal Agent is
organized, conducts business or is paying taxes as of the Closing Date (as the
case may be). If a Purchaser or the Deal Agent pays any Taxes in respect of
which the Seller is obligated to pay Additional Amounts under this Section
2.15(a), the Seller shall promptly reimburse such Purchaser or Deal Agent the
amount of such Additional Amounts.
(b) The Seller will indemnify each Purchaser and the Deal Agent for the
full amount of Taxes in respect of which the Seller is required to pay
Additional Amounts (including, without limitation, any Taxes imposed by any
jurisdiction on such Additional Amounts) paid by such Purchaser or the Deal
Agent (as the case may be) and any liability (including penalties, interest and
expenses) arising therefrom or with respect thereto; provided, however, that
such Purchaser or the Deal Agent, as appropriate, making a demand for indemnity
payment shall provide the Seller, at its address set forth under its name on the
signature pages hereof, with a certificate from the relevant taxing authority or
from a responsible officer of such Purchaser or the Deal Agent stating or
otherwise evidencing that such Purchaser or the Deal Agent has made payment of
such Taxes and will provide a copy of or extract from documentation, if
available, furnished by such taxing authority evidencing assertion or payment of
such Taxes. This indemnification shall be made within ten days from the date the
Purchaser or the Deal Agent (as the case may be) makes written demand therefor.
(c) Within 30 days after the date of any payment by the Seller of any
Taxes, the Seller will furnish to the Deal Agent, at its address set forth under
its name on the signature pages hereof, appropriate evidence of payment thereof.
(d) If a Purchaser is not created or organized under the laws of the United
States or a political subdivision thereof; such Purchaser shall, to the extent
that it may then do so under applicable laws and regulations, deliver to the
Seller with a copy to the Deal Agent (i) within 15 days after the date hereof,
or, if later, the date on which such Purchaser becomes a Purchaser hereof two
(or such other number as may from time to time be prescribed by applicable laws
or regulations) duly completed copies of IRS Form 4224 or Form 1001 (or any
successor forms or other certificates or statements which may be required from
time to time by the relevant United States taxing authorities or applicable laws
or regulations), as appropriate, to permit the Seller to make payments hereunder
for the account of such Purchaser, as the case may be, without deduction or
withholding of United States federal income or similar Taxes and (ii) upon the
obsolescence of or after the occurrence of any event requiring a change in, any
form or certificate
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previously delivered pursuant to this Section 2.15(d), copies (in such numbers
as may from time to time be prescribed by applicable laws or regulations) of
such additional, amended or successor forms, certificates or statements as may
be required under applicable laws or regulations to permit the Seller to make
payments hereunder for the account of such Purchaser, without deduction or
withholding of United States federal income or similar Taxes.
(e) For any period with respect to which a Purchaser or the Deal Agent has
failed to provide the Seller with the appropriate form, certificate or statement
described in clause (d) of this section (other than if such failure is due to a
change in law occurring after the date of this Agreement), the Deal Agent or
such Purchaser, as the case may be shall not be entitled to indemnification
under clauses (a) or (b) of this section with respect to any Taxes.
(f) Within 30 days of the written request of the Seller therefor, the Deal
Agent and the Purchasers, as appropriate, shall execute and deliver to the
Seller such certificates forms or other documents which can be furnished
consistent with the facts and which are reasonably necessary to assist the
Seller in applying for refunds of Taxes remitted hereunder, provided, however,
that the Deal Agent and the Purchasers shall not be required to deliver such
certificates forms or other documents if in their respective sole discretion it
is determined that the deliverance of such certificate, form or other document
would have a material adverse effect on the Deal Agent or any Purchaser and
provided further, however, that the Seller shall reimburse the Deal Agent or any
such Purchaser for any reasonable expenses incurred in the delivery of such
certificate, form or other document.
(g) If, in connection with an agreement or other document providing
liquidity support, credit enhancement or other similar support to the Purchasers
in connection with this Agreement or the funding or maintenance of Purchases
hereunder, the Purchasers are required to compensate a bank or other financial
institution in respect of Taxes under circumstances similar to those described
in this section then within ten days after demand by the Purchasers, the Seller
shall pay to the Purchasers such additional amount or amounts (without
duplication) as may be necessary to reimburse the Purchasers for any amounts
paid by them.
(h) Without prejudice to the survival of any other agreement of the Seller
hereunder, the agreements and obligations of the Seller contained in this
section shall survive the termination of this Agreement.
SECTION 2.16 ASSIGNMENT OF THE PURCHASE AGREEMENT.
The Seller hereby represents, warrants and confirms to the Deal Agent that
the Seller has assigned to the Deal Agent, for the ratable benefit of the
Secured Parties hereunder, all of the Seller's right and title to and interest
in the Purchase Agreement. The Seller confirms that following an Early
Amortization Event the Deal Agent shall have the sole right to enforce the
Seller's rights and remedies under the Purchase Agreement for the benefit of the
Secured Parties, but without any obligation on the part of the Deal Agent, the
Purchasers or any of their respective Affiliates, to perform any of the
obligations of the Seller under the Purchase Agreement. The
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Seller further confirms and agrees that such assignment to the Deal Agent shall
terminate upon the Collection Date; provided, however, that the rights of the
Deal Agent and the Secured Parties pursuant to such assignment with respect to
rights and remedies in connection with any indemnities and any breach of any
representation, warranty or covenants made by the Originator pursuant to the
Purchase Agreement, which rights and remedies survive the termination of the
Purchase Agreement, shall be continuing and shall survive any termination of
such assignment.
ARTICLE III
CLOSING; CONDITIONS OF CLOSING AND PURCHASES
SECTION 3.1 CONDITIONS TO CLOSING AND INITIAL PURCHASE.
The initial Purchase hereunder is subject to the conditions precedent
listed in Schedule I, each of which shall have been satisfied or waived, in the
Deal Agent's and the Purchasers' sole discretion, on or before the Closing Date
(unless otherwise indicated), in form and substance satisfactory to the Deal
Agent and the Purchasers.
SECTION 3.2 CONDITIONS PRECEDENT TO ALL PURCHASES AND REMITTANCES OF
COLLECTIONS.
Each Purchase (including the Initial Purchase) from the Seller by a
Purchaser, the right of the Servicer to remit Collections to the Seller pursuant
to Section 2.7(b) and each Incremental Purchase (each, a "Transaction") shall be
subject to the further conditions precedent that (a) with respect to any
Purchase (including the Initial Purchase) or Incremental Purchase, the Servicer
shall have delivered to the Deal Agent, at least one (1) Business Day prior to
the initial Purchase and at least five (5) Business Days prior to the date of
any Incremental Purchase in form and substance satisfactory to the Deal Agent,
(i) a Purchase Notice (Exhibit A), (ii) a Purchase Certificate (Exhibit H), and
(iii) a Certificate of Assignment (Exhibit A to the Purchase Agreement)
including Schedule I thereto and such additional information as may be
reasonably requested by the Deal Agent; (b) on the date of such Transaction the
following statements shall be true and the Seller shall be deemed to have
certified that:
(i) The representations and warranties contained in Sections 4.1 and
4.2 are true and correct on and as of such day as though made on and as of
such date;
(ii) No event has occurred and is continuing, or would result from
such Transaction, that constitutes an Early Amortization Event;
(iii) on and as of such day, after giving effect to such Transaction,
the outstanding Capital does not exceed the lesser of (x) the Purchase
Limit, or (y) the Capital Limit;
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(iv) on and as of such day, the seller and the servicer each has
performed all of the agreements contained in this Agreement to be performed
by such person at or prior to such day;
(v) no law or regulation shall prohibit, and no order, judgment or
decree of any federal, state or local court or governmental body, agency or
instrumentality shall prohibit or enjoin, the making of such Purchase,
remittance of Collections or Incremental Purchase by the Purchaser in
accordance with the provisions hereof;
(vi) no servicer termination event shall have occurred;
(c) The Commitment Termination Date shall not have occurred;
(d) There shall have been no material adverse change in the condition
(financial or otherwise), business, operations, results of operations, or
properties of the Originator or the Seller since the preceding Purchase; and
(e) The Originator and Seller shall have taken such other action, including
delivery of approvals, consents, opinions, documents, and instruments to the
Purchasers and the Deal Agent as each may reasonably request.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.1 REPRESENTATIONS AND WARRANTIES OF THE SELLER.
The Seller represents and warrants as follows:
(a) Organization and Good Standing. The Seller is a corporation organized,
validly existing, and in good standing under the laws of the jurisdiction of its
formation, and has full corporate power, authority and legal right to own or
loan its properties and conduct its business as such properties are presently
owned or loaned and such business is presently conducted, and to execute,
deliver and perform its obligations under this Agreement and the Purchase
Agreement.
(b) Due Qualification. The Seller is duly qualified to do business and is
in good standing as a corporation, and has obtained or will obtain all necessary
licenses and approvals, in each jurisdiction in which the nature of its business
requires it to be so qualified.
(c) Due Authorization. The execution and delivery of this Agreement and the
Purchase Agreement and the consummation of the transactions provided for herein
and therein have been duly authorized by the Seller by all necessary corporate
action on the part of the Seller.
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(d) No Conflict. The execution and delivery of this Agreement and the
Purchase Agreement, the performance by the Seller of the transactions
contemplated hereby and thereby and the fulfillment of the terms hereof and
thereof will not conflict with or result in any breach of any of the material
terms and provisions of, and will not constitute (with or without notice or
lapse of time or both) a default under, any indenture, contract, agreement,
mortgage, deed of trust, or other instrument to which the Seller is a party or
by which it or any of its property is bound.
(e) No Violation. The execution and delivery of this Agreement and
the Purchase Agreement, the performance of the transactions contemplated hereby
and thereby and the fulfillment of the terms hereof and thereof will not
conflict with or violate, in any material respect, any Requirements of Law
applicable to the Seller.
(f) No Proceedings. There are no proceedings or investigations pending or,
to the best knowledge of the Seller, threatened against the Seller, before any
Governmental Authority (i) asserting the invalidity of this Agreement or the
Purchase Agreement, (ii) seeking to prevent the consummation of any of the
transactions contemplated by this Agreement or the Purchase Agreement or (iii)
seeking any determination or ruling that could reasonably be expected to be
adversely determined, and if adversely determined, would materially and
adversely affect the performance by the Seller of its obligations under this
Agreement or the Purchase Agreement.
(g) All Consents Required. All approvals, authorizations, consents, orders
or other actions of any Person or of any Governmental Authority required in
connection with the execution and delivery by the Seller of this Agreement and
the Purchase Agreement, the performance by the Seller of the transactions
contemplated by this Agreement and the Purchase Agreement, and the fulfillment
of the terms hereof and thereof by the Seller, have been obtained, unless the
failure to obtain such shall not materially and adversely affect the Seller's
performance of its obligations under this Agreement or under the Purchase
Agreement.
(h) Bulk Sales. The execution, delivery and performance of this Agreement
do not require compliance with any "bulk sales" law by Seller.
(i) Solvency. The transactions under this Agreement and Purchase Agreement
do not and will not render the Seller not Solvent.
(j) Selection Procedures; Credit and Collection Policies. No procedures
believed by the Seller to be materially adverse to the interests of VFCC or the
Purchasers were utilized by the Seller in identifying and/or selecting the Loans
that are in the Asset Pool. In addition, each Loan shall comply in all respects
with the Credit and Collection Policies.
(k) Taxes. The Seller has filed or caused to be filed all Tax returns
which, to its knowledge, are required to be filed. The Seller has paid or made
adequate provisions for the payment of all Taxes and all assessments made
against it or any of its property (other than any
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amount of Tax the validity of which is currently being contested in good faith
by appropriate proceedings and with respect to which reserves in accordance with
generally accepted accounting principles have been provided on the books of the
Seller), and no Tax lien has been filed and, to the Seller's knowledge, no claim
is being asserted, with respect to any such Tax, fee or other charge.
(l) Agreements Enforceable. This Agreement and the Purchase Agreement
constitute the legal, valid and binding obligation of the Seller enforceable
against the Seller in accordance with their respective terms, except as such
enforceability may be limited by Insolvency Laws and except as such
enforceability may be limited by general principles of equity (whether
considered in a suit at law or in equity).
(m) Exchange Act Compliance. No proceeds of any Purchase will be used by
the Seller to acquire any security in any transaction which is subject to
Section 13 or 14 of the Securities Exchange Act of 1934, as amended.
(n) No Liens. Each Asset, together with the Loan Documents related thereto,
shall, at all times, be owned by the Seller free and clear of any Adverse Claim
except as provided herein, and upon each Purchase, Incremental Purchase or
remittance of Collections, the relevant Secured Party shall acquire (subject to
recordation where necessary) a valid and perfected first priority undivided
ownership interest in each Asset then existing or thereafter arising and
Collections with respect thereto, free and clear of any Adverse Claim except as
provided hereunder. No effective financing statement or other instrument similar
in effect covering any Asset or Collections shall at any time be on file in any
recording office except such as may be filed in favor of the Deal Agent relating
to this Agreement.
(o) Reports Accurate. No Monthly Report (if prepared by the Seller, or to
the extent that information contained therein is supplied by the Seller),
information, exhibit, financial statement, document, book, record or report
furnished or to be furnished by the Seller to the Deal Agent or a Purchaser in
connection with this Agreement is or will be inaccurate in any material respect
as of the date it is or shall be dated or (except as otherwise disclosed to the
Deal Agent or such Purchaser, as the case may be, at such time) as of the date
so furnished.
(p) Location of Offices. The principal place of business and chief
executive office of the Seller and the office where the Seller keeps all the
Records is located at the address of the Seller referred to in Section 11.2
hereof (or at such other locations as to which the notice and other requirements
specified in Section 5.2(1) shall have been satisfied).
(q) Tradenames. Except as described in Schedule III, the Seller has no
trade names, fictitious names, assumed names or "doing business as" names or
other names under which it has done or is doing business.
(r) Purchase Agreement. The Purchase Agreement is the only agreement
pursuant to which the Seller purchases Assets.
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(s) Value Given. The Seller shall have given reasonably equivalent value to
the Originator in consideration for the transfer to the Seller of the Assets
under the Purchase Agreement, no such transfer shall have been made for or on
account of an antecedent debt owed by the Originator to the Seller, and no such
transfer is or may be voidable or subject to avoidance under any section of the
Bankruptcy Code; no event or circumstance has occurred that would constitute an
Early Amortization Event.
(t) Special Purpose Entity. The Certificate of Incorporation of the Seller
includes substantially the provisions set forth on Exhibit C hereto, and the
Originator has confirmed in writing to the Seller that, so long as the Seller is
not "insolvent" within the meaning of the Bankruptcy Code, the Originator will
not cause the Seller to file a voluntary petition under the Bankruptcy Code or
any other Insolvency Laws. Each of the Seller and the Originator is aware that
in light of the circumstances described in the preceding sentence and other
relevant facts, the filing of a voluntary petition under the Bankruptcy Code for
the purpose of making the assets of the Seller available to satisfy claims of
the creditors of the Originator would not result in making such assets available
to satisfy such creditors under the Bankruptcy Code.
(u) Accounting. The Seller accounts for the transfers to it from the
Originator of interests in Assets and Collections under the Purchase Agreement
as sales of such Asset Interests in its books, records and financial statements,
in each case consistent with GAAP and with the requirements set forth herein.
(v) Separate Entity. The Seller is operated as an entity with assets and
liabilities distinct from those of the Originator and any Affiliates thereof
(other than the Seller), and the Seller hereby acknowledges that the Deal Agent
and the Purchasers are entering into the transactions contemplated by this
Agreement in reliance upon the Seller's identity as a separate legal entity from
the Originator and from each such other Affiliate of the Originator.
(w) Security Interest. The Seller has granted a security interest (as
defined in the UCC) to the Deal Agent, as agent for the Secured Parties, in the
Assets and Collections, which is enforceable in accordance with applicable law
upon execution and delivery of this Agreement. Upon the making of each Purchase,
the Deal Agent, as agent for the Secured Parties, shall have acquired a first
priority perfected security interest in Assets and Collections as may be
perfected under the UCC by filing a financing statement or the delivery of
possession (except for any Permitted Liens). All filings (including, without
limitation, such UCC filings) as are necessary in any Jurisdiction to perfect
the interest of the Deal Agent as agent for the Secured Parties, in the Assets
and Collections have been (or prior to the applicable Purchase will be) made.
(x) Investments. The Seller does not own or hold directly or indirectly,
any capital stock or equity security of, or any equity interest in, any Person.
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(y) Business. Since its formation, the Seller has conducted no business
other than the sale of Assets from the Originator under the Purchase Agreement,
the sale of Assets under this Agreement and such other activities as are
incidental to the foregoing.
(z) Investment Company Act.
(i) The Seller represents and warrants that the Seller has never been,
is not now, and will not in the future be operated in such a manner as to
cause the Seller to be an "investment company," as such term is defined in
Section 3 of the Investment Company Act of 1940, as amended (the "1940
Act");
(ii) The Seller represents and warrants that the business and other
activities of the Seller, including but not limited to, the sale of the
Asset Interests to the Purchasers the application and use of the proceeds
thereof by the Seller and the consummation and conduct of the transactions
contemplated by the Transaction Documents to which the Seller is a party
(a) do now and will in the future comply in all respects with the
provisions of Rule 3a-7 promulgated under the 1940 Act; and (b) do not now
and will not in the future result in a violation by the Seller, the
Servicer or any other person or entity of the 1940 Act or the rules and
regulations promulgated thereunder.
(aa) Lock-Boxes. The names and addresses of all the Lock-Box Banks,
together, with the account numbers of the Lock-Box Accounts of the Seller at
such Lock-Box Banks and the names, addresses and account numbers of all accounts
to which Collections of the Assets outstanding before the initial Purchase
hereunder have been sent, are specified in Schedule VI (which shall be deemed to
be amended in respect of terminating or adding any Lock-Box Account or Lock-Box
Bank upon satisfaction of the notice and other requirements specified in respect
thereof).
(bb) FIB Existing Account. All Collections in the FIB Existing Account are
free and clear of any Adverse Claim. As long as any Collections are held
therein, no effective financing statement or other instruments similar in effect
shall at any time be on file in any recording office with respect to the FIB
Existing Account except such as may be filed in favor of the Deal Agent relating
to this Agreement.
(cc) Accuracy of Representations and Warranties. Each representation or
warranty by the Seller contained herein or in any certificate or other document
furnished by the Seller pursuant hereto or in connection herewith is true and
correct in all material respects.
The representations and warranties set forth in this section shall survive
the transfer of the Assets to the Deal Agent as agent for the Secured Parties.
Upon discovery by the Seller, the Servicer, any Secured Party, the Liquidity
Agent or the Deal Agent of a breach of any of the foregoing representations and
warranties, the party discovering such breach shall give prompt written notice
to the others.
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SECTION 4.2 REPRESENTATIONS AND WARRANTIES OF SELLER RELATING TO THE
AGREEMENT AND THE LOANS.
The Seller hereby represents and warrants to the Deal Agent, each Secured
Party, the Liquidity Agent and each Investor that, as of the Closing Date and as
of each Purchase Date:
(a) Binding Obligation, Valid Transfer and Security Interest.
(i) This Agreement and the Purchase Agreement each constitute legal,
valid and binding obligations of the Seller, enforceable against the Seller
in accordance with its respective terms, except as such enforceability may
be limited by Insolvency Laws and except as such enforceability may be
limited by general principles of equity (whether considered in a suit at
law or in equity).
(ii) This Agreement constitutes either (A) a valid transfer to the
Deal Agent as agent for the Secured Parties of all right, title and
interest of the Seller in, to and under all Assets in the Asset Pool to the
extent of the Asset Interest, and such transfer will be free and clear of
any Lien of any Person claiming through or under the Seller or its
Affiliates, except for Permitted Liens, or (B) a grant of a security
interest in all Assets in the Asset Pool to the Deal Agent as agent for the
Secured Parties. In connection with the foregoing clause (B), upon the
filing of the financing statements described in Section 6.9(c) the Deal
Agent as agent for the Secured Parties shall have a first priority
perfected security interest in such Assets in the Asset Pool as may be
perfected under the UCC by filing a financing statement or the delivery of
possession, subject only to Permitted Liens. Neither the Seller nor any
Person claiming through or under the Seller shall have any claim to or
interest in the Collection Account, except, if this Agreement is deemed to
grant a security interest in such property, for the interest of the Seller
in such property as a debtor for purposes of the UCC.
(b) Eligibility of Loans. As of the later of the Closing Date or the
initial Purchase Date, (i) Schedule IV to this Agreement and the information
contained in the Notice of Sale and Purchase Certificate delivered pursuant to
Section 2.2 is an accurate and complete listing in all material respects of all
the Loans that are in the Asset Pool as of such date and the information
contained therein with respect to the identity of such Loans and the amounts
owing thereunder is true and correct in all material respects as of such date,
(ii) each such Loan is an Eligible Loan, (iii) each such Loan and the Related
Property is free and clear of any Lien of any Person (other than Permitted
Liens) and in compliance with all Requirements of Law applicable to the Seller
and/or the Originator and (iv) with respect to each such Loan, all consents,
licenses, approvals or authorizations of or registrations or declarations with
any Governmental Authority required to be obtained, effected or given by the
Seller in connection with the transfer of an interest in such Loan and the
Related Property to the Deal Agent, as agent for the Secured Parties, have been
duly obtained, effected or given and are in full force and effect. On each
Purchase Date, the Seller shall be deemed to represent and warrant that (i)
Additional Loan referenced on the related Seller Notice delivered pursuant to
Section 2.2 is an Eligible Loan, (ii) each such Loan and the
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related Property is free and clear of any Lien of any Person (other than
Permitted Liens) and in compliance with all Requirements of Law applicable to
Seller and/or the Originator, (iii) with respect to each such Loan, all
consents, licenses, approvals, authorizations, registrations or declarations
with any Governmental Authority required to be obtained, effected or given by
the Seller in connection with the addition of such Loan and the Related Property
to the Asset Pool have been duly obtained, effected or given and are in full
force and effect and (iv) the representations and warranties set forth in
Section 4.2(a) are true and correct with respect to each Loan transferred on
such day as if made on such day.
(c) Notice of Breach. The representations and warranties set forth in this
Section 4.2 shall survive the transfer of an interest in the respective Assets
to the Deal Agent as agent for the Secured Parties. Upon discovery by the
Seller, the Servicer, any Secured Party, the Deal Agent, the Liquidity Agent of
any Investor of a breach of any of the foregoing representations and warranties,
the party discovering such breach shall give prompt written notice to the
others.
SECTION 4.3 REPRESENTATIONS AND WARRANTIES OF THE SELLER RELATING TO THE
PURCHASE LIMIT AND CAPITAL LIMIT.
The Seller is hereby deemed to represent and warrant that on each day prior
to the Termination Date, the amount of Capital outstanding on such day shall not
exceed the lesser of (x) the Purchase Limit or (y) the Capital Limit.
ARTICLE V
GENERAL COVENANTS OF THE SELLER
SECTION 5.1. GENERAL COVENANTS.
Until the date on which all Aggregate Unpaids have been indefeasibly paid
in full, the Seller hereby covenants that it will comply in all material
respects with all applicable laws, rules, regulations and orders and preserve
and maintain its corporate existence, rights, franchises, qualifications and
privileges the loss of which rights, franchises, qualifications and privileges
would have a material adverse effect on the Seller.
SECTION 5.2. COVENANTS OF SELLER.
The Seller hereby covenants that:
(a) Security Interests. Except as contemplated in this Agreement, the
Seller will not sell, pledge, assign or transfer to any other Person, or grant,
create, incur, assume or suffer to exist any Lien on any Loan or Related
Property that is in the Asset Pool, whether now existing or hereafter
transferred hereunder, or any interest therein, and the Seller will not sell,
pledge, assign or suffer to exist any Lien on its interest, if any, hereunder.
The Seller will promptly notify the
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Deal Agent of the existence of any Lien on any Loan or Related Property that is
in the Asset Pool and the Seller shall defend the right, title and interest of
the Deal Agent as agent for the Secured Parties in, to and under any Loan and
the Related Property that is in the Asset Pool, against all claims of third
parties, provided, however, that nothing in this Section 5.2(a) shall prevent or
be deemed to prohibit the Seller from suffering to exist Permitted Liens upon
any Loan or any Related Property that is in the Asset Pool.
(b) Delivery of Collections. The Seller agrees to pay to the Servicer
promptly (but in no event later than two Business Days after receipt) all
Collections (including any Deemed Collections) received by Seller in respect of
the Loans that are in the Asset Pool.
(c) Compliance with the Law. The Seller hereby agrees to comply in all
respects with all Requirements of Law applicable to the Seller, the Loans that
are in the Asset Pool and the Related Property, if the failure to do so would
have a material adverse effect on the Seller, the Loans that are in the Asset
Pool or the Related Property.
(d) Activities of Seller. The Seller shall not engage in any business or
activity of any kind, or enter into any transaction or indenture, mortgage,
instrument, agreement, contract, lease or other undertaking, which is not
authorized by or related to the transactions contemplated by the Transaction
Documents.
(e) Indebtedness. The Seller shall not create, incur, assume or suffer to
exist any Indebtedness or other liability whatsoever, except (i) obligations
incurred under this Agreement or the Purchase Agreement and instruments related
thereto, or under any Hedging Agreement required by Section 5.4(a), or (ii)
liabilities incident to the maintenance of its corporate existence in good
standing.
(f) Guarantees. The Seller shall not become or remain liable, directly or
indirectly, in connection with any Indebtedness or other liability of any other
Person, whether by guarantee, endorsement (other than endorsements of negotiable
instruments for deposit or collection in the ordinary course of business),
agreement to purchase or repurchase, agreement to supply or advance funds, or
otherwise.
(g) Investments. The Seller shall not make or suffer to exist any loans or
advances to, or extend any credit to, or make any investments (by way of
transfer of property, contributions to capital, purchase of stock or securities
or evidences of indebtedness, acquisition of the business or assets, or
otherwise) in, any Person except for purchases of Loans and other Assets
pursuant to the Purchase Agreement, or for investments in Permitted Investments
in accordance with the terms of this Agreement.
(h) Merger Sales. The Seller shall not enter into any transaction of merger
or consolidation, or liquidate or dissolve itself (or suffer any liquidation or
dissolution), or acquire or be acquired by any Person, or convey, sell, lease or
otherwise dispose of all or substantially all of its property or business,
except as provided for in this Agreement.
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(i) Distributions. The Seller may, provided it is in compliance with any
applicable State laws and no Early Amortization Event has occurred or will occur
as a result thereof, declare or pay, directly or indirectly, any dividend or
make any other distribution (whether in cash or other property) with respect to
the profits, assets or capital of the Seller or any Person's interest therein,
or purchase, redeem or otherwise acquire for value any of its capital stock now
or hereafter outstanding.
(j) Agreements. The Seller shall not become a party to, or permit any of
its properties to be bound by, any indenture, mortgage, instrument, contract,
agreement, lease or other undertaking, except this Agreement, the Purchase
Agreement and any Hedging Agreement or amend or modify the provisions of its
operating agreement, without the consent of the Deal Agent, or issue any power
of attorney except to the Deal Agent or the Servicer.
(k) Separate Corporate Existence. The Seller shall:
(i) Maintain its own deposit account or accounts, separate from those
of any Affiliate, with commercial banking institutions. The funds of the
Seller will not be diverted to any other Person or for other than corporate
uses of the Seller.
(ii) Ensure that, to the extent that it shares the same officers or
other employees as any of its stockholders or Affiliates, the salaries of
and the expenses related to providing benefits to such officers and other
employees shall be fairly allocated among such entities, and each such
entity shall bear its fair share of the salary and benefit costs associated
with all such common officers and employees.
(iii) Ensure that, to the extent that it jointly contracts with any of
its stockholders or Affiliates to do business with vendors or service
providers or to share overhead expenses, the costs incurred in so doing
shall be allocated fairly among such entities, and each such entity shall
bear its fair share of such costs. To the extent that the Seller contracts
or does business with vendors or service providers when the goods and
services provided are partially for the benefit of any other Person, the
costs incurred in so doing shall be fairly allocated to or among such
entities for whose benefit the goods and services are provided, and each
such entity shall bear its fair share of such costs. All material
transactions between Seller and any of its Affiliates shall be only on an
arm's length basis.
(iv) Maintain a principal executive and administrative office through
which its business is conducted separate from those of its Affiliates. To
the extent that Seller and any of its stockholders or Affiliates have
offices in the same location, there shall be a fair and appropriate
allocation of overhead costs among them, and each such entity shall bear
its fair share of such expenses.
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(v) Conduct its affairs strictly in accordance with its Certificate of
Incorporation and observe all necessary, appropriate and customary
corporate formalities, including, but not limited to, holding all regular
and special stockholders, and directors' meetings appropriate to authorize
all corporate action, keeping separate and accurate minutes of its
meetings, passing all resolutions or consents necessary to authorize
actions taken or to be taken, and maintaining accurate and separate books,
records and accounts, including, but not limited to, payroll and
intercompany transaction accounts.
(vi) Take or refrain from taking, as applicable, each of the
activities specified in the "non-consolidation" opinion of Bingham Dana LLP
delivered on the Closing Date, upon which the conclusions expressed therein
are based.
(l) Location of Seller Records Instruments. The Seller (x) shall not move
the location of its principal executive office, without 30 days' prior written
notice to the Deal Agent and (y) shall not move, or consent to the Servicer or
Collateral Custodian moving, the Loan Documents without 30 days' prior written
notice to the Deal Agent and (z) will promptly take all actions required of each
relevant jurisdiction in order to continue the first priority perfected security
interest of the Deal Agent as agent for the Secured Parties (except for
Permitted Liens) in all Assets in the Asset Pool, including delivery of an
opinion of counsel acceptable to the Deal Agent.
(m) ERISA Matters. The Seller will not (a) engage or permit any ERISA
Affiliate to engage in any prohibited transaction for which an exemption is not
available or has not previously been obtained from the United States Department
of Labor; (b) permit to exist any accumulated funding deficiency, as defined in
Section 302(a) of ERISA and Section 412(a) of the Code, or funding deficiency
with respect to any Benefit Plan other than a Multiemployer Plan; (c) fail to
make any payments to a Multiemployer Plan that the Seller or any ERISA Affiliate
may be required to make under the agreement relating to such Multiemployer Plan
or any law pertaining thereto; (d) terminate any Benefit Plan so as to result in
any liability; or (e) permit to exist any occurrence of any reportable event
described in Title IV of ERISA.
(n) Originator Assets. With respect to each Asset acquired by the Seller,
the Seller will (i) acquire such Asset pursuant to and in accordance with the
terms of the Purchase Agreement, (ii) take all action necessary to perfect,
protect and more fully evidence the Seller's ownership of such Asset, including,
without limitation, (a) filing and maintaining, effective financing statements
(Form UCC-l) against the Originator in all necessary or appropriate filing
offices, and filing continuation statements, amendments or assignments with
respect thereto in such filing offices and (b) executing or causing to be
executed such other instruments or notices as may be necessary or appropriate,
(iii) perform in accordance with those terms of the Assets requiring performance
thereof by the Seller, and (vi) take all additional action that the Deal Agent
may reasonably request to perfect, protect and more fully evidence the
respective interests of the parties to this Agreement in the Assets and interest
therein represented by the Asset Interests.
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(o) Transactions with Affiliates. The Seller will not enter into, or be a
party to, any transaction with any of its Affiliates, except (i) the
transactions permitted or contemplated by this Agreement, the Purchase Agreement
and any Hedging Agreements and (ii) other transactions (including, without
limitation, the lease of office space or computer equipment or software by the
Seller to or from an Affiliate) (A) in the ordinary course of business, (B)
pursuant to the reasonable requirements of the Seller's business, (C) upon fair
and reasonable terms that are no less favorable to the Seller than could be
obtained in a comparable arm's-length transaction with a Person not an Affiliate
of the Seller, and (D) not inconsistent with the factual assumptions set forth
in the "non-consolidation" legal opinion letter issued by Bingham Dana LLP and
delivered to the Deal Agent as a condition to the initial Purchase, as such
assumptions may be modified in any subsequent opinion letters delivered to the
Deal Agent pursuant to Section 3.2 or otherwise. It is understood that any
compensation arrangement for officers shall be permitted under clause (ii)(A)
through (C) above if such arrangement has been expressly approved by the board
of directors of the Seller.
(p) Change in the Purchase Agreement. The Seller will not amend, modify,
waive or terminate any terms or conditions of the Purchase Agreement, without
the consent of Deal Agent.
(q) Amendment to Certificate of Incorporation. The Seller will not amend,
modify or otherwise make any change to its Certificate of Incorporation which
would delete or otherwise nullify or circumvent the provisions set forth on
Exhibit C hereto.
(r) Credit and Collection Policies. The Seller shall take all actions
necessary to comply with the terms of the Credit and Collection Policies, and
the Seller shall not cause or permit any changes to be made to the Credit and
Collection Policies in any manner that would materially and adversely affect the
collectibility of the Loans that are in the Asset Pool without the prior written
consent of the Deal Agent.
(s) Accounting of Purchases. Other than for federal, state and local income
tax purposes, the Seller will not account for or treat (whether in financial
statements or otherwise) the transactions contemplated hereby in any manner
other than as the sale, or absolute assignment, of Assets by the Seller to a
Purchaser. The Seller will not account for or treat (whether in financial
statements or otherwise) the transaction contemplated by the Purchase Agreement
in any manner other than as the sale, or absolute assignment, of the Originator
Assets by the Originator to the Seller, as the case may be.
(t) AIG Policy, AIG 2 Policy and Ex-Im Policy. If any AIG Loans, AIG 2
Loans, or Ex-Im 2 Loans are outstanding, (i) on or before the expiration of the
then existing AIG Policy, AIG Policy 2 or Ex-Im Policy, as applicable, the
Seller will deliver to the Deal Agent a copy of a renewal or replacement AIG
Policy, AIG Policy 2 or Ex-Im Policy, as applicable, showing the Seller as an
insured and the Deal Agent as loss payee, and the Seller will notify the Deal
Agent on or before such expiration date of any Obligor under an AIG Loan, AIG 2
Loan or Ex-Im 2 Loan, as applicable, that has been excluded from policy coverage
upon such renewal or replacement; (ii) the Seller will comply with all
warranties, covenants and agreements of the
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"Insured" under the AIG Policy, AIG Policy 2 or Ex-Im Policy, as applicable;
(iii) the Seller will cooperate with the Servicer and take all actions
reasonably required by the Servicer to collect amounts due under the AIG Policy,
AIG Policy 2 or Ex-Im Policy, as applicable and (iv) either (a) the FIB Bond
will have been pledged to the Deal Agent to cover the deductible under the AIG
Policy and AIG Policy 2 or (b) amounts sufficient to cover the deductible amount
of the AIG Policy or AIG Policy 2 will be on deposit in the Cash Collateral
Account, as applicable.
(u) FIB Existing Account/Establishment of Lock-Box Account. As long as any
Collections are held therein, the Seller will not grant, create, incur or suffer
to exist any Adverse Claim with respect to the Collections in the FIB Existing
Account. The Seller will promptly notify the Deal Agent of the existence of any
Adverse Claim with respect to any Collections in the FIB Existing Account and
the Seller shall defend the right, title and interest of the Deal Agent as agent
for the Secured Parties in such Collections against all claims of third parties.
Upon the request of the Deal Agent, the Seller shall cause a Lock-Box Account to
be established within five (5) Business Days and shall promptly transfer all
Collections in the FIB Existing Account into such Lock-Box Account.
SECTION 5.3 RELEASE OF LIEN.
At the same time as (i) any Loan in the Asset Pool expires by its terms
and all amounts in respect thereof have been paid by the related Obligor and
deposited in the Collection Account or (ii) any Loan becomes a Prepaid Loan and
all amounts in respect thereof have been paid by the related Obligor and
deposited in the Collection Account, the Deal Agent as agent for the Purchasers
will, to the extent requested by the Servicer, release its interest in such Loan
and Loan Documents.
SECTION 5.4 HEDGE AGREEMENT.
(a) On or prior to each Purchase Date for any Purchase, the Seller shall
enter into one or more Hedge Transactions for that Purchase, provided that each
such Hedge Transaction shall:
(i) be entered into with a Hedge Counterparty and governed by a
Hedging Agreement;
(ii) have monthly payment periods the first of which commences on the
Purchase Date of that Purchase and the last of which ends on the last
Scheduled Payment due to occur under the Loans to which that Purchase
relates;
(iii) have an amortizing notional amount such that the Hedge Notional
Amount in effect during any monthly payment period shall be equal to at
least seventy-five percent (75%) but not more than one hundred percent
(100%) of the aggregate Capital outstanding of Commercial Loans hereunder;
provided, however, that the above percentage shall increase to one hundred
percent (100%) for any period during which the
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difference between the Portfolio Yield and the Adjusted Eurodollar Rate is
less than 2%; and
(iv) provide for two series of monthly payments to be netted against
each other, one such series being payments to be made by the Seller to a
Hedge Counterparty (solely on a net basis) by reference to a fixed interest
rate, and the other such series being payments to be made by the Hedge
Counterparty to the Deal Agent (solely on a net basis) by reference to the
money market yield of the rate set forth in Federal Reserve Statistical
Release H.15 (519) under the caption "Commercial Paper-Nonfinancial" for a
30-day maturity as in effect on the first day of each monthly payment
period, the net amount of which shall be paid into the Collection Account
(if payable by the Hedge Counterparty) or from the Collection Account to
the extent funds are available under Section 2.7 or 2.9 of this Agreement
(if payable by the Seller).
(b) As additional security hereunder, Seller hereby assigns to the Deal
Agent, as agent for the Secured Parties, all right, title and interest of Seller
in each Hedging Agreement, each Hedge Transaction, and all present and future
amounts payable by a Hedge Counterparty to Seller under or in connection with
the respective Hedging Agreement and Hedge Transaction(s) with that Hedge
Counterparty ("Hedge Collateral"), and grants a security interest to the Deal
Agent, as agent for the Secured Parties, in the Hedge Collateral. Seller
acknowledges that, as a result of that assignment, Seller may not, without the
prior written consent of the Deal Agent, exercise any rights under any Hedging
Agreement or Hedge Transaction, except for Seller's right under any Hedging
Agreement to enter into Hedge Transactions in order to meet the Seller's
obligations under Section 5.4(a) hereof. Nothing herein shall have the effect of
releasing the Seller from any of its obligations under any Hedging Agreement or
any Hedge Transaction, nor be construed as requiring the consent of the Deal
Agent or any Secured Party for the performance by Seller of any such
obligations.
SECTION 5.5 RETRANSFER OF INELIGIBLE LOANS.
In the event of a breach of any representation or warranty set forth in
Section 4.2 with respect to a Loan in the Asset Pool (each such Loan, an
"Ineligible Loan") which breach results in a Trigger Event, or would result in a
Trigger Event at the next Determination Date or other date of determination, no
later than thirty (30) days after the earlier of (i) knowledge by the Seller of
such Loan becoming an Ineligible Loan and causing a Trigger Event or prospective
Trigger Event, and (ii) receipt by the Seller from the Deal Agent or Servicer of
written notice thereof, the Seller shall either (a) accept the retransfer of
each such Ineligible Loan, and the Deal Agent as agent for the Purchasers shall
convey to the Seller, without recourse, representation or warranty, all of its
right, title and interest in such Ineligible Loan; or (b) subject to the
satisfaction of the conditions in Section 2.9, substitute for such Ineligible
Loan a Substitute Loan; provided, however, that no such retransfer shall be
required to be made with respect to such Ineligible Loan (and such Loan shall
cease to be an Ineligible Loan) if, on or before the expiration of such 30-day
period, the representations and warranties in Section 4.2 with respect to such
Loan shall be made true and correct in all material respects with respect to
such Loan as if such Loan had been
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transferred to the Purchasers on such day. Notwithstanding anything contained in
this Section 5.5 to the contrary, in the event of breach of any representation
and warranty set forth in Section 4.2, with respect to any interest in each Loan
and the Related Property having been conveyed to the Purchasers free and clear
of any Lien of any Person claiming through or under the Seller and its
Affiliates (other than Permitted Liens) and in compliance in all material
respects, with all Requirements of Law applicable to the Seller, immediately
upon the earlier to occur of the discovery of such breach by the Seller or
receipt by the Seller of written notice of such breach given by the Deal Agent,
the Seller shall repurchase and the Deal Agent on behalf of the Secured Parties
shall convey, free and clear of any Lien created pursuant to this Agreement, all
of its right, title and interest in such Ineligible Loan, and the Deal Agent
shall, in connection with such conveyance and without further action, be deemed
to represent and warrant on behalf of the Secured Parties that it has the
corporate authority and has taken all necessary corporate action to accomplish
such conveyance, but without any other representation or warranty, express or
implied. In any of the foregoing instances, the Seller shall accept the
retransfer of each such Ineligible Loan, and the Aggregate Outstanding Loan
Balance shall be reduced by the Outstanding Loan Balance of each such Ineligible
Loan and, if applicable, increased by the Outstanding Loan Balance of each such
Substitute Loan. On and after the date of retransfer, the Ineligible Loan so
retransferred shall not be included in the Asset Pool and, as applicable, the
Substitute Loan shall be included in the Asset Pool. In consideration of such
retransfer without substitution of a Substitute Loan, the Seller shall, on the
date of retransfer of such Ineligible Loan, make a deposit to the Collection
Account (for allocation pursuant to Section 2.7) in immediately available funds
in an amount equal to the Outstanding Loan Balance of such Ineligible Loan (to
the extent that the Deemed Collections with respect to such Ineligible Loan have
not already been deposited in the Collection Account), plus interest thereon
from the last day of the immediately preceding Fixed Period to and including the
date of repurchase at a rate per annum equal to the weighted average of the
Yield Rates. Upon each retransfer to the Seller of such Ineligible Loan, the
Deal Agent, as agent for the Purchasers, shall automatically and without further
action be deemed to transfer, assign and set-over to the Seller without
recourse, representation or warranty, all the right, title and interest of the
Deal Agent, as agent for the Purchasers, in, to and under such Ineligible Loan
and all monies due or to become due with respect thereto, and all proceeds of
such Ineligible Loan and Recoveries and Insurance Proceeds relating thereto and
all rights to Related Property and other security for any such Ineligible Loan,
and all proceeds and products of the foregoing. The Deal Agent, as agent for the
Purchasers, shall, at the sole expense of the Servicer execute such documents
and instruments of transfer as may be prepared by the Servicer on behalf of the
Seller and take other such actions as shall reasonably be requested by the
Seller to effect the transfer of such Ineligible Loan pursuant to this
subsection.
SECTION 5.6 RETRANSFER OF ASSETS.
In the event of a breach of any representation or warranty set forth in
Section 4.2 hereof which breach could reasonably be expected to have a material
adverse effect on the rights of the Secured Parties or the Deal Agent, as agent
of the Secured Parties, or on the ability of the Seller to perform its
obligations hereunder, by notice then given in writing to the Seller, the Deal
Agent
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may direct the Seller to accept the retransfer of all of the Assets, in which
case the Seller shall be obligated to accept retransfer of such Assets on a
Payment Date specified by the Seller which date shall be at least thirty (30)
days after the date of such notice (such date, the "Retransfer Date") and to
terminate all Hedge Transactions prior to the Retransfer Date; provided,
however, that no such retransfer shall be required to be made if, on or before
expiration of such applicable period, the representations and warranties
contained in Section 4.2 shall then be true and correct in all material
respects. The Seller shall deposit on the Retransfer Date an amount equal to the
deposit amount provided below for such Assets in the Collection Account for
distribution to the Secured Parties in accordance with Section 2.7. The deposit
amount (the "Retransfer Amount") for such retransfer will be equal to (a) the
Aggregate Unpaids minus (b) the amount, if any, available in the Collection
Account on such Payment Date. On the Retransfer Date, provided that the full
Retransfer Amount has been deposited into the Collection Account, the Assets
shall be transferred to the Seller; and the Deal Agent as agent for the Secured
Parties shall, at the sole expense of the Servicer, execute and deliver such
instruments of transfer, in each case without recourse, representation or
warranty, as shall be prepared and reasonably requested by the Servicer on
behalf of the Seller to vest in the Seller, or its designee or assignee, all
right, title and interest of the Deal Agent as agent for the Secured Parties in,
to and under the Assets. If the Deal Agent gives a notice directing the Seller
to accept such a retransfer as provided above, the obligation of Seller to
accept a retransfer pursuant to this Section 5.6 shall constitute the sole
remedy respecting a breach of the representations and warranties contained in
Section 4.2 available to the Secured Parties and the Deal Agent on behalf of the
Secured Parties.
SECTION 5.7 YEAR 2000 COMPATIBILITY.
The Seller shall take all action necessary to assure that, prior to January
1, 2000, the Seller's computer system is able to operate and effectively process
data including dates on and after January 1, 2000. At the request of the Deal
Agent, the Seller shall provide assurance acceptable to the Deal Agent of the
Seller's Year 2000 compatibility.
ARTICLE VI
ADMINISTRATION AND SERVICING OF LOANS
SECTION 6.1 APPOINTMENT AND ACCEPTANCE; DUTIES.
The Seller hereby appoints FIB as Servicer pursuant to this Agreement. FIB
accepts such appointment and agrees to act as the Servicer pursuant to this
Agreement to service the Transferred Loans and to serve in such capacity until
the termination of its responsibilities pursuant to Section 6.26. HSBC is hereby
appointed as Backup Servicer and Collateral Custodian pursuant to this
Agreement. HSBC accepts the appointment and agrees to act as the Backup Servicer
and Collateral Custodian pursuant to this Agreement.
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SECTION 6.2 DUTIES AND RESPONSIBILITIES OF THE SERVICER AND THE COLLATERAL
CUSTODIAN.
(a) The Servicer shall conduct the servicing, administration and collection
of the Transferred Loans and shall take, or cause to be taken, all such actions
as may be necessary or advisable to service, administer and collect Transferred
Loans from time to time on behalf of the Purchasers. The Servicer will perform
its servicing duties with reasonable care, using that degree of skill and
attention that a prudent person engaging in such activities would exercise, but
in any event shall not act with less care than the Servicer exercises with
respect to all comparable loans that it services for itself or others. Neither
the Secured Parties, the Deal Agent nor the Collateral Custodian shall have any
obligation or liability with respect to any Transferred Loans, nor shall any of
them be obligated to perform any of the obligations of the Servicer hereunder.
(b) The duties of the Servicer, as the Purchasers' agent, shall include,
without limitation:
(i) preparing and submitting of claims to, and post-billing liaison
with, Obligors on Transferred Loans;
(ii) maintaining all necessary Servicing Records with respect to the
Transferred Loans and providing such reports to the Liquidity Agent and the
Deal Agent in respect of the servicing of the Transferred Loans (including
information relating to its performance under this Facility) as may be
required hereunder or as the Liquidity Agent or the Deal Agent may
reasonably request;
(iii) maintaining and implementing administrative and operating
procedures (including, without limitation, an ability to recreate Servicing
Records evidencing the Transferred Loans in the event of the destruction of
the originals thereof) and keeping and maintaining all documents, books,
records and other information reasonably necessary or advisable for the
collection of the Transferred Loans (including, without limitation, records
adequate to permit the identification of each new Transferred Loan and all
Collections of and adjustments to each existing Transferred Loan);
(iv) promptly delivering to the Deal Agent, from time to time, such
information and Servicing Records relating to the Transferred Loans
(including information relating to its performance under this Facility) as
the Deal Agent may from time to time reasonably request;
(v) identifying each Transferred Loan clearly and unambiguously in its
Servicing Records to reflect that such Transferred Loan is owned by the
Purchasers;
(vi) complying in all material respects with the Credit and Collection
Policies in regard to each Transferred Loan;
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(vii) complying in all material respects with all applicable laws,
rules, regulations and orders with respect to it, its business and
properties and all Transferred Loans and Collections with respect thereto;
(viii) preserving and maintaining its existence, rights, franchises
and privileges as a bank and trust company organized under the laws of the
State of Connecticut and qualifying to and remaining authorized to perform
obligations as Servicer (including enforcement of collection of Transferred
Loans on behalf of the Secured Parties) in each jurisdiction where the
failure to preserve and maintain such existence, rights, franchises,
privileges and qualification would materially adversely affect (a) the
rights or interests of the Secured Parties in the Transferred Loans, (b)
the collectibility of any Transferred Loan, or (c) the ability of the
Servicer to perform its obligations hereunder;
(ix) immediately, but not later than three (3) Business Days after
such occurrence, notifying the Liquidity Agent and the Deal Agent of the
occurrence of an Early Amortization Event (including, without limitation, a
material adverse change in the financial condition of the Originator);
(x) notifying the Liquidity Agent and the Deal Agent of any material
action, suit, proceeding, dispute, offset deduction, defense or
counterclaim that is or may be (1) asserted by an Obligor with respect to
any Transferred Loan; or (2) reasonably expected to have a material adverse
effect on the Loans as a whole or on the ability of the Servicer or the
Originator to perform its obligations under the Transaction Documents or on
the Servicer or the Seller or any of their respective property; and
(xi) notifying the Deal Agent of any change in the Credit and
Collections Policies.
(c) Disposition Upon Defaulted Loan. Upon any Loan in the Asset Pool
becoming a Defaulted Loan, the Servicer will use commercially reasonable efforts
in accordance with the Credit and Collection Policies to dispose of any Related
Property. Without limiting the generality of the foregoing, to the extent
provided by law, the Servicer may dispose of any such Related Property by
purchasing such Related Property or by selling such Related Property to any of
its Affiliates for a purchase price equal to the fair market value thereof, any
such sale to be evidenced by a certificate of a Responsible Officer of the
Servicer delivered to the Deal Agent setting forth the Loan, the Related
Property, the sale price of the Related Property and certifying that such sale
price is the fair market value of such Related Property.
(d) Further Assurances. The Deal Agent will, at the sole expense of the
Servicer, furnish the Servicer 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.
(e) Custodial Duties. The Collateral Custodian shall take and retain
custody of the Required Loan Documents delivered by the Seller in accordance
with the terms and conditions of
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this Agreement, all for the benefit of the Purchasers and subject to the Lien
thereon in favor of the Deal Agent as agent for the Secured Parties. Within five
Business Days of its receipt of any Required Loan Document, the Collateral
Custodian shall review the related Required Loan Documents to verify that such
Required Loan Documents have been executed and have no missing or mutilated
pages and to confirm that such Loan is referenced on the related list of Loans
delivered in connection with the related Purchase Certificate. In order to
facilitate the foregoing review by the Collateral Custodian, in connection with
each delivery of Required Loan Documents hereunder to the Collateral Custodian,
the Servicer shall provide to the Collateral Custodian an electronic file (in
EXCEL or a comparable format) that contains the related list of Required Loan
Documents or which otherwise contains the Loan number and the name of the
Obligor with respect to each related Loan. If, at the conclusion of such review,
the Collateral Custodian shall determine that such Required Loan Documents are
not executed or in proper form on its face, or that the respective Loan is not
referenced on such list of Required Loan Documents, the Collateral Custodian
shall promptly notify the Seller and the Deal Agent of such determination by
providing a written report to such Persons setting forth, with particularity,
the lack of execution of such Required Loan Documents, that such Required Loan
Documents have missing or mutilated pages, or the fact that such Loan was not
referenced on the related list. In addition, unless instructed otherwise in
writing by the Seller or the Deal Agent within 10 days of the Collateral
Custodian's delivery of such report, the Collateral Custodian shall return any
Required Loan Documents not referenced on such list of Loans to the Seller.
Other than the foregoing, the Collateral Custodian shall not have any
responsibility for reviewing any Required Loan Documents.
In taking and retaining custody of the Required Loan Documents, the
Collateral Custodian shall be deemed to be acting as the agent of the Deal Agent
as agent for the Purchasers and Secured Parties, provided, however, that the
Collateral Custodian makes no representations as to the existence, perfection or
priority of any Lien on the Required Loan Documents or the instruments therein,
and provided, further, that the Collateral Custodian's duties as agent shall be
limited to those expressly contemplated herein. All Required Loan Documents
shall be kept in fireproof vaults or cabinets at the locations specified on
Schedule V attached hereto, or at such other office as shall be specified to the
Deal Agent by the Collateral Custodian in a written notice delivered at least 45
days prior to such change. All Required Loan Documents shall be placed together
in a separate file cabinet with an appropriate identifying label and maintained
in such a manner so as to permit retrieval and access. All Required Loan
Documents shall be clearly segregated from any other documents or instruments
maintained by the Collateral Custodian. The Collateral Custodian shall clearly
indicate that such Required Loan Documents are the sole property of the
Purchasers and that the Seller has granted an interest therein to the Deal Agent
on behalf of the Secured Parties. In performing its duties, the Collateral
Custodian shall use the same degree of care and attention as it employs with
respect to similar contracts which it holds as Collateral Custodian.
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(f) Concerning the Collateral Custodian.
(i) The Collateral Custodian may conclusively rely on and shall be
fully protected in acting upon any certificate, instrument, opinion,
notice, letter, telegram or other document delivered to it and which in
good faith it reasonably believes to be genuine and which has been signed
by the proper party or parties. The Collateral Custodian may rely
conclusively on and shall be fully protected by in acting upon (a) the
written instructions of any designated officer of the Deal Agent (and shall
provide a copy thereof to the Seller) or (b) the verbal instructions of the
Deal Agent, which the Collateral Custodian shall promptly confirm in
writing (and shall provide a copy thereof to the Seller).
(ii) The Collateral Custodian may consult counsel satisfactory to it
and the written advice or opinion of such counsel shall be full and
complete authorization and protection in respect of any action taken,
suffered or omitted by it hereunder in good faith and in accordance with
the advice or opinion of such counsel.
(iii) The Collateral Custodian shall not be liable for any error of
judgment, or for any act done or step taken or omitted by it, in good
faith, or for any mistakes of fact or law, or for anything which it may do
or refrain from doing in connection herewith except in the case of its
willful misconduct or grossly negligent performance or omission.
(iv) The Collateral Custodian makes no warranty or representation and
shall have no responsibility (except as expressly set forth in this
Agreement) as to the content, enforceability, completeness, validity,
sufficiency, value, genuineness, ownership or transferability of the Loans,
and will not be required to and will not make any representations as to the
validity or value (except as expressly set forth in this Agreement) of any
of the Loans. The Collateral Custodian shall not be obligated to take any
legal action hereunder which might in its judgment involve any expense or
liability unless it has been furnished with an indemnity reasonably
satisfactory to it.
(v) The Collateral Custodian shall have no duties or responsibilities
except such duties and responsibilities as are specifically set forth in
this Agreement and no covenants or obligations shall be implied in this
Agreement against the Collateral Custodian.
(vi) Except for overhead and general administrative expenses, the
Collateral Custodian shall not be required to expend or risk its own funds
in the performance of its duties hereunder.
(vii) It is expressly agreed and acknowledged that the Collateral
Custodian is not guaranteeing performance of or assuming any liability for
the obligations of the other parties hereto or any parties to the Loans.
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SECTION 6.3 AUTHORIZATION OF THE SERVICER.
(a) Each of the Originator, the Seller and the Deal Agent on behalf of the
Secured Parties and each Hedge Counterparty hereby authorizes the Servicer
(including any successor thereto) to take any and all reasonable steps in its
name and on its behalf necessary or desirable and not inconsistent with the sale
of the Transferred Loans to the Purchasers, in the determination of the
Servicer, to collect all amounts due under any and all Transferred Loans,
including, without limitation, endorsing any of their names on checks and other
instruments representing Collections, executing and delivering any and all
instruments of satisfaction or cancellation, or of partial or full release or
discharge, and all other comparable instruments, with respect to the Transferred
Loans and, after the delinquency of any Transferred Loan and to the extent
permitted under and in compliance with applicable law and regulations, to
commence proceedings with respect to enforcing payment thereof, to the same
extent as the Originator could have done if it had continued to own such Loan.
The Originator, the Seller and the Deal Agent on behalf of the Secured Parties
and each Hedge Counterparty shall furnish the Servicer (and any successors
thereto) with any powers of attorney and other documents necessary or
appropriate to enable the Servicer to carry out its servicing and administrative
duties hereunder, and shall cooperate with the Servicer to the fullest extent in
order to ensure the collectibility of the Transferred Loans. In no event shall
the Servicer be entitled to make any Secured Party, any Hedge Counterparty, the
Collateral Custodian or the Deal Agent a party to any litigation without such
party's express prior written consent, or to make the Seller a party to any
litigation (other than any routine foreclosure or similar collection procedure)
without the Deal Agent's consent.
(b) After an Early Amortization Event has occurred and is continuing, at
the Agent's direction the Servicer shall take such action as the Deal Agent may
deem necessary or advisable to enforce collection of the Transferred Loans;
provided, however, that the Deal Agent may, at any time that an Early
Amortization Event has occurred and is continuing, notify any Obligor with
respect to any Transferred Loans of the assignment of such Transferred Loans, to
the Deal Agent and direct that payments of all amounts due or to become due to
any other party thereunder be made directly to the Deal Agent or any servicer,
collection agent or lockbox or other account designated by the Deal Agent and,
upon such notification and at the expense of the Seller, the Deal Agent may
enforce collection of any such Transferred Loans and adjust, settle or
compromise the amount or payment thereof.
SECTION 6.4 COLLECTION OF PAYMENTS.
(a) Collection Efforts, Modification of Loans. The Servicer will make
reasonable efforts to collect all payments called for under the terms and
provisions of the Loans included in the Asset Pool as and when the same become
due, and will follow those collection procedures which it follows with respect
to all comparable Loans that it services for itself or others; provided,
however, that so long as FIB or the Servicer Assignee is the Servicer the
Servicer shall collect all payments in accordance with the Credit and Collection
Policies. The Servicer may not waive, modify or otherwise vary any provision of
a Loan that is included in the Asset Pool other than as permitted in the Credit
and Collection Policies or as permitted by the Deal Agent. The
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Servicer may in its discretion waive any late payment charge or any other fees
that may be collected in the ordinary course of servicing any Loan included in
the Asset Pool.
(b) Prepaid Loan. The Servicer may not permit a Loan in the Asset Pool to
become a Prepaid Loan (which shall not include a Loan that becomes a Prepaid
Loan due to a Casualty Loss), unless (x) the Servicer provides an Additional
Loan or (y) such prepayment will not result in the Collection Account receiving
an amount (the "Prepayment Amount") less than the sum of (a) the Outstanding
Loan Balance on the date of such prepayment, (b) any outstanding Servicer
Advances thereon, (c) all Hedge Breakage Costs owing to the relevant Hedge
Counterparty for any termination of one or more Hedge Transactions, in whole or
in part, as required by the terms of any Hedging Agreement as the result of any
such Loan becoming a Prepaid Loan, and (d) any accrued and unpaid Yield thereon
and all Breakage Costs arising as a result of such prepayment. After an Early
Amortization Event has occurred, the Servicer may not permit a Loan in the Asset
Pool to become a Prepaid Loan (which shall not include a Loan that becomes a
Prepaid Loan due to a Casualty Loss), unless the Servicer collects an amount
equal to the sum of (a) the Outstanding Loan Balance on the date of such
prepayment, (b) any outstanding Servicer Advances thereon, (c) all Hedge
Breakage Costs owing to the relevant Hedge Counterparty for any termination of
one or more Hedge Transactions, in whole or in part, as required by the terms of
any Hedging Agreement as the result of any such Loan becoming a Prepaid Loan,
and (d) any accrued and unpaid Yield thereon and all Breakage Costs arising as a
result of such prepayment.
(c) Acceleration. The Servicer shall accelerate the maturity of all or any
Scheduled Payments under any Loan included in the Asset Pool under which a
default under the terms thereof has occurred and is continuing (after the lapse
of any applicable grace period) promptly after such Loan becomes a Defaulted
Loan; provided, however, that so long as FIB or the Servicer Assignee is the
Servicer the Servicer shall collect all Defaulted Loans in accordance with the
Credit and Collections Policies.
(d) Taxes and other Amounts. To the extent provided for in any Loan
included in the Asset Pool, the Servicer will use its best efforts to collect
all payments with respect to amounts due for taxes, assessments and insurance
premiums relating to such Loans or the Related Property and remit such amounts
to the appropriate Governmental Authority or insurer on or prior to the date
such payments are due.
(e) Payments to FIB Existing Account and Lock-Box Account. On or before
each applicable Purchase Date, the Servicer shall have instructed all Obligors
to make all payments in respect of the Loans in the Asset Pool to the FIB
Existing Account; provided, however, notwithstanding the foregoing, upon the
establishment of a Lock-Box Account pursuant to Section 5.2 hereof, the Servicer
shall promptly instruct all Obligors to make all payments in respect of the
Loans in the Asset Pool to a Lock-Box or directly to a Lock-Box Account.
(f) Establishment of the Collection Account. The Servicer shall cause to be
established, on or before the Closing Date, and maintained in the name of the
Deal Agent, with a "Qualified Institution" (as hereinafter defined) the
Collection Account. A "Qualified Institution"
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shall be a depository institution or trust company that at all times shall be
organized under the laws of the United States or any one of the States thereof
or the District of Columbia (or any domestic branch of a foreign bank), (i) (a)
which has either (1) a long-term unsecured debt rating of A- or better by S&P
and A3 or better by Moody's or (2) a short-term unsecured debt rating or
certificate of deposit rating of A-l or better by S&P or P-l or better by
Moody's, (b) the parent corporation of which has either (1) a long-term
unsecured debt rating of A- or better by S&P and A3 or better by Moody's or (2)
a short-term unsecured debt rating or certificate of deposit rating of A-l or
better by S&P and P-1 or better by Moody's or (c) is otherwise acceptable to the
Deal Agent and (ii) whose deposits are insured by the Federal Deposit Insurance
Corporation.
(g) Establishment and Maintenance of the Cash Collateral Account. During
the time any AIG Loans or AIG 2 Loans are outstanding, the Servicer shall cause
to be established and maintained in the name of the Deal Agent, with a
"Qualified Institution" (as defined in subsection (f) above) the Cash Collateral
Account (the "Cash Collateral Account") unless the FIB Bond is pledged as
described herein.
SECTION 6.5 SERVICER ADVANCES.
For each Collection Period, if the Servicer determines that any Scheduled
Payment (or portion thereof) which was due and payable pursuant to a Loan in the
Asset Pool during such Collection Period was not received prior to the end of
such Collection Period, the Servicer may make an advance in an amount up to the
amount of such delinquent Scheduled Payment (or portion thereof); in addition,
if on any day there are not sufficient funds on deposit in the Collection
Account to pay accrued Yield on any Asset Interest the Fixed Period of which
ends on such day, the Servicer shall make an advance in the amount necessary to
pay such Yield (in either case, any such advance, a "Servicer Advance").
Notwithstanding the preceding sentence, (i) the Servicer shall be required to
make a Servicer Advance with respect to any Loan if, and only if, the Servicer
determines (such determination to be conclusive and binding) in good faith that
such Servicer Advance will ultimately be recoverable from future collections on,
or the liquidation of, the Asset Pool and payments by one or more Hedge
Counterparties under one or more Hedging Agreements, (ii) the Servicer's
obligation to make a Servicer Advance for any Loan shall cease on the day such
Loan becomes a Defaulted Loan or a Charged-Off Loan and (iii) any successor
Servicer, including the Backup Servicer, will not be obligated to make any
Servicer Advances. The Servicer will deposit any Servicer Advances into the
Collection Account on or prior to 11:00 a.m. (Charlotte, North Carolina time) on
the related Payment Date, in immediately available funds.
SECTION 6.6 REALIZATION UPON DEFAULTED LOANS.
The Servicer will use reasonable efforts to repossess or otherwise
comparably convert the ownership of any Related Property with respect to a
Defaulted Loan and will act as sales and processing agent for Related Property
which it repossesses. The Servicer will follow such other practices and
procedures as it deems necessary or advisable and as are customary and usual in
its servicing of loans and other actions by the Servicer in order to realize
upon such Related
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Property, which practices and procedures may include reasonable efforts to
enforce all obligations of Obligors and repossessing and selling such Related
Property at public or private sale in circumstances other than those described
in the preceding sentence, provided, however, that so long as FIB or the
Servicer Assignee is Servicer the Servicer shall follow the practices and
procedures with respect to the servicing of loans and the realization upon any
Related Property as are set forth in the Credit and Collection Policies. Without
limiting the generality of the foregoing, the Servicer may sell any such Related
Property with respect to the Servicer or its Affiliates for a purchase price
equal to the then fair market value thereof, any such sale to be evidenced by a
certificate of a Responsible Officer of the Servicer delivered to the Deal Agent
setting forth the Loan, the Related Property, the sale price of the Related
Property and certifying that such sale price is the fair market value of such
Related Property. In any case in which any such Related Property has suffered
damage, the Servicer will not expend funds in connection with any repair or
toward the repossession of such Related Property unless it reasonably determines
that such repair and/or repossession will increase the Recoveries by an amount
greater than the amount of such expenses. The Servicer will remit to the
Collection Account the Recoveries received in connection with the sale or
disposition of Related Property with respect to a Defaulted Loan.
SECTION 6.7 REPRESENTATIONS AND WARRANTIES OF BACKUP SERVICER AND
COLLATERAL CUSTODIAN.
Each of the Backup Servicer and the Collateral Custodian represents and
warrants to the Deal Agent, as agent for the Secured Parties, and the Secured
Parties that, as of the Closing Date and on each Purchase Date, insofar as any
of the following affects the Backup Servicer's or the Collateral Custodian's, as
the case may be, ability to perform its obligations pursuant to this Agreement
in any material respect:
(a) Organization and Good Standing. HSBC is a New York banking corporation
duly organized, validly existing and in good standing under the laws of the
State of New York with all requisite corporate power and authority to own its
properties and to conduct its business as presently conducted and to enter into
and perform its obligations pursuant to this Agreement.
(b) Power and Authority. Each of the Backup Servicer and the Collateral
Custodian has the corporate power and authority to execute and deliver this
Agreement and to carry out its terms. Each of the Backup Servicer and the
Collateral Custodian has duly authorized the execution, delivery and performance
of this Agreement by all requisite corporate action.
(c) No Violation. The consummation of the transactions contemplated by, and
the fulfillment of the terms of, this Agreement by the Backup Servicer and the
Collateral Custodian will not (i) conflict with, result in any breach of any of
the terms or provisions of, or constitute a default under, the charter or bylaws
of the Backup Servicer or the Collateral Custodian, or any term of any material
agreement, indenture, mortgage, deed of trust or other instrument to which the
Backup Servicer or the Collateral Custodian is a party or by which it or any of
its property is bound, (ii) result in the creation or imposition of any Lien
upon any of its properties pursuant to
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the terms of any such indenture, agreement, mortgage, deed of trust or other
instrument, or (iii) violate any law, regulation, order, writ, judgment,
injunction, decree, determination or award of any Governmental Authority
applicable to HSBC or any of its properties that might (in the reasonable
judgment of the Backup Servicer or the Collateral Custodian, as the case may be)
materially and adversely affect the performance by the Backup Servicer or the
Collateral Custodian of its obligations under, or the validity or enforceability
of, this Agreement.
(d) No Consent. No consent, approval, authorization, order, registration,
filing, qualification, license or permit (collectively, the "Consents") of or
with any Governmental Authority having jurisdiction over the Backup Servicer or
the Collateral Custodian or any of its respective properties is required to be
obtained by or with respect to the Backup Servicer or the Collateral Custodian
in order for the Backup Servicer or the Collateral Custodian, as the case may
be, to enter into this Agreement or perform its obligations hereunder (except
with respect to performance only, such Consents as the Backup Servicer or the
Collateral Custodian, as the case may be, may need to obtain prior to the
commencement of its performance of its duties hereunder in the certain
jurisdictions outside of New York, provided that in lieu of obtaining for itself
the requisite Consents, the Backup Servicer or the Collateral Custodian, as the
case may be, may and shall be permitted to delegate the performance of its
duties to parties having the requisite Consents in such jurisdictions; provided,
however, in the case of such delegation of performance the Backup Servicer or
the Collateral Custodian, as the case may be, shall not be relieved of their
responsibility under this Agreement with respect to such duties).
(e) Binding Obligation. This Agreement constitutes a legal, valid and
binding obligation of HSBC, enforceable against the Backup Servicer and the
Collateral Custodian in accordance with its terms, except as such enforceability
may be limited by (i) applicable Insolvency Laws and (ii) general principles of
equity (whether considered in a suit at law or in equity).
(f) No Proceeding. There are no proceedings or investigations pending or,
to the best of its knowledge, threatened, against the Backup Servicer or the
Collateral Custodian, before any Governmental Authority (i) asserting the
invalidity of this Agreement, (ii) seeking to prevent the consummation of any of
the transactions contemplated by this Agreement or (iii) seeking any
determination or ruling that might (in the reasonable judgment of the Backup
Servicer or the Collateral Custodian, as the case may be) materially and
adversely affect the performance by the Backup Servicer or the Collateral
Custodian of its obligations under, or the validity or enforceability of, this
Agreement.
SECTION 6.8 MAINTENANCE OF INSURANCE POLICIES.
The Servicer will require that each Obligor with respect to a Loan included
in the Asset Pool maintains an Insurance Policy with respect to each Loan and
the Related Property, in accordance with the Credit and Collection Policies. In
connection with its activities as Servicer, the Servicer agrees to present, or
to require the Obligor to present, on behalf of the Deal Agent as agent for the
Secured Parties, claims to the insurer under each Insurance Policy and any such
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liability policy, and to settle, adjust and compromise such claims, in each
case, consistent with the terms of each related Loan.
SECTION 6.9 REPRESENTATIONS AND WARRANTIES OF SERVICER.
The Servicer represents and warrants to the Deal Agent, as agent for the
Secured Parties, each Secured Party, the Liquidity Agent and each Investor that,
as of the Closing Date and on each Purchase Date:
(a) Organization and Good Standing. The Servicer is a bank and trust
company organized under the laws of the State of Connecticut duly organized and
validly existing with all requisite corporate power and authority to own its
properties and to conduct its business as presently conducted and to enter into
and perform its obligations pursuant to this Agreement.
(b) Due Qualification. The Servicer is qualified to do business, is in good
standing, and has obtained all licenses and approvals as required under the laws
of all jurisdictions in which the ownership or lease of its property and or the
conduct of its business (other than the performance of its obligations
hereunder) requires such qualification, standing, license or approval, except to
the extent that the failure to so qualify, maintain such standing or be so
licensed or approved would not have a material adverse effect on the interests
of the Seller or of the Purchasers. The Servicer is qualified to do business, is
in good standing, and has obtained all licenses and approvals as required under
the laws of all states in which the performance of its obligations pursuant to
this Agreement requires such qualification, standing, license or approval and
where the failure to qualify or obtain such license or approval would have
material adverse effect on its ability to perform hereunder.
(c) Power and Authority. The Servicer has the corporate power and authority
to execute and deliver this Agreement and to carry out its terms. The Servicer
has duly authorized the execution, delivery and performance of this Agreement by
all requisite corporate action. The execution, delivery and performance of this
Agreement does not contravene the Servicer's Certificate of Incorporation or
by-laws.
(d) No Violation. The consummation of the transactions contemplated by, and
the fulfillment of the terms of, this Agreement by the Servicer (with or without
notice or lapse of time) will not (i) conflict with, result in any breach of any
of the terms or provisions of, or constitute a default under, the certificate of
incorporation or by-laws of the Servicer, or any term of any agreement,
indenture, mortgage, deed of trust of other instrument to which the Servicer is
a party or by which it or any of its property is bound, (ii) result in the
creation or imposition of any Lien upon any of its properties pursuant to the
terms of any such indenture, agreement, mortgage, deed of trust or other
instrument, or (iii) violate any law, regulation, order, writ, judgment,
injunctions, decree, determination or award of any Governmental Authority
applicable to the Servicer or any of its properties.
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(e) No Consent. No consent, approval, authorization, order, registration,
filing, qualification, license or permit of or with any Governmental Authority
having jurisdiction over the Servicer or any of its properties is required to be
obtained by or with respect to the Servicer in order for the Servicer to enter
into this Agreement or perform its obligations hereunder.
(f) Binding Obligation. This Agreement constitutes a legal, valid and
binding obligation of the Servicer, enforceable against the Servicer in
accordance with its terms, except as such enforceability may be limited by (i)
applicable Insolvency Laws and (ii) general principles of equity (whether
considered in a suit at law or in equity).
(g) No Proceeding. There are no proceedings or investigations pending or
threatened against the Servicer, before any Governmental Authority (i) asserting
the invalidity of this Agreement, (ii) seeking to prevent the consummation of
any of the transactions contemplated by this Agreement or (iii) seeking any
determination or ruling that might (in the reasonable judgment of the Servicer)
materially and adversely affect the performance by the Servicer of its
obligations under, or the validity or enforceability of, this Agreement.
(h) Reports Accurate. No Servicer Certificate, information, exhibit,
financial statement, document, book, Servicer Record or report furnished or to
be furnished by the Servicer to the Deal Agent or a Secured Party in connection
with this Agreement is or will be inaccurate in any material respect as of the
date it is or shall be dated or (except as otherwise disclosed to the Deal Agent
or such Secured Party, as the case may be, at such time) as of the date so
furnished.
(i) Investment Company Act.
(i) The Servicer represents and warrants that the Servicer has never
been, is not now, and will not in the future be operated in such a manner
as to cause the Servicer to be an "investment company," as such term is
defined in Section 3 of the 1940 Act; and
(ii) The Servicer represents and warrants that the business and other
activities of the Servicer, including but not limited to, the consummation
and conduct of the transactions contemplated by the Transaction Documents
to which the Servicer is a party do not now and will not in the future
result in a violation by the Servicer, the Borrower, or any other person or
entity of the 1940 Act or the rules and regulations promulgated thereunder.
SECTION 6.10 COVENANTS OF SERVICER.
The Servicer hereby covenants that:
(a) Compliance with Law. The Servicer will comply with all laws and
regulations of any Governmental Authority applicable to the Servicer or the
Loans included in the Asset Pool and Related Property and Loan Documents or any
part thereof.
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(b) Obligations with Respect to Loans; Modifications. The Servicer will
duly fulfill and comply with all obligations on the part of the Seller to be
fulfilled or complied with under or in connection with each Loan included in the
Asset Pool and will do nothing to impair the rights of the Deal Agent as agent
for the Secured Parties or of the Secured Parties in, to and under the Assets.
The Servicer will perform its obligations under the Loans included in the Asset
Pool and will not change or modify such Loans other than as permitted in the
Credit and Collection Policies or as approved by the Deal Agent.
(c) Preservation of Security Interest. The Servicer will execute and file
such financing and continuation statements and any other documents which may be
required by any law or regulation of any Governmental Authority to preserve and
protect fully the interest of the Deal Agent as agent for the Secured Parties
in, to and under the Assets.
(d) No Bankruptcy Petition. Prior to the date that is one year and one day
after the payment in full of all amounts owing in respect of all outstanding
commercial paper issued by VFCC, the Servicer will not institute against the
Seller or VFCC, or join any other Person in instituting against the Seller or
VFCC, any bankruptcy, reorganization, arrangement, insolvency or liquidation
proceedings or other similar proceedings under the laws of the United States or
any state of the United States. This Section 6.10(d) will survive the
termination of this Agreement.
(e) Amendments to Credit and Collection Policies. The Servicer, without the
prior written consent of the Deal Agent, will not agree or consent to or
otherwise permit to occur any amendment, modification, change, supplement, or
recission of the Credit and Collection Policies in whole or in part or in any
manner that could have a material adverse effect upon the Loans or the interests
of the Deal Agent or the Secured Parties.
(f) Year 2000 Compatibility. The Servicer shall take all action necessary
to assure that, prior to January 1, 2000, the Servicer's computer system is able
to operate and effectively process data including dates on and after January 1,
2000. At the request of the Deal Agent, the Servicer shall provide assurance
acceptable to the Deal Agent of the Servicer's Year 2000 compatibility.
(g) Backup Servicer and Collateral Custodian Fee Letter. The Servicer will
not amend, modify, waive or terminate any terms or provisions of the Backup
Servicer and Collateral Custodian Fee Letter without the prior written consent
of the Deal Agent.
SECTION 6.11 COVENANTS OF BACKUP SERVICER AND COLLATERAL CUSTODIAN.
Each of the Backup Servicer and the Collateral Custodian hereby covenants
that:
(a) Loan Files. The Collateral Custodian will not dispose of any documents
constituting the Loan Files in any manner which is inconsistent with the
performance of its
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obligations as the Collateral Custodian pursuant to this Agreement and will not
dispose of any Loan Files except as contemplated by this Agreement.
(b) Compliance with Law. Each of the Backup Servicer and the Collateral
Custodian will comply with all laws and regulations of any Governmental
Authority applicable to the Backup Servicer and the Collateral Custodian.
(c) No Bankruptcy Petition. Prior to the date that is one year and one day
after the payment in full of all amounts owing in respect of all outstanding
commercial paper issued by VFCC, neither the Backup Servicer nor the Collateral
Custodian will institute against the Seller or VFCC, or join any other Person in
instituting against the Seller or VFCC, any bankruptcy, reorganization,
arrangement, insolvency or liquidation proceedings or other similar proceedings
under the laws of the United States or any state of the United States. This
Section 6.11(c) will survive the termination of this Agreement.
(d) Location of Loan Files. The Loan Files shall remain at all times in the
possession of the Collateral Custodian at the address set forth herein unless
notice of a different address is given in accordance with the terms hereof.
(e) No Changes in Backup Servicer and Collateral Custodian Fee. The Backup
Servicer and Collateral Custodian will not make any changes to the fees set
forth in the Backup Servicer and Collateral Custodian Fee Letter without the
prior written approval of the Deal Agent.
(f) Year 2000 Compatibility. The Backup Servicer and Collateral Custodian
shall take all action necessary to assure that, prior to January 1, 2000, the
Backup Servicer and Collateral Custodian's computer system is able to operate
and effectively process data including dates on and after January 1, 2000. At
the request of the Deal Agent, the Backup Servicer and Collateral Custodian
shall provide assurance acceptable to the Deal Agent of the Backup Servicer and
Collateral Custodian's Year 2000 Compatibility.
SECTION 6.12 SERVICING COMPENSATION.
As compensation for its servicing activities hereunder and reimbursement
for its expenses, the Servicer shall be entitled to receive a servicing fee (the
"Servicing Fee") in respect of each Collection Period (or portion thereof) equal
to one-twelfth of the product of (a) the Servicing Fee Rate and (b) the
Aggregate Outstanding Loan Balance as on the most recent Determination Date,
such Servicing Fee to be payable monthly in arrears on each Payment Date to the
extent of funds available therefor pursuant to the provisions of Section 2.7.
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SECTION 6.13 CUSTODIAL COMPENSATION.
As compensation for its custodial activities hereunder and reimbursement
for its expenses, the Collateral Custodian shall be entitled to receive a
custodial fee (the "Custodial Fee") as provided in the Backup Servicer and
Collateral Custodian Fee Letter.
SECTION 6.14 PAYMENT OF CERTAIN EXPENSES BY SERVICER.
The Servicer will be required to pay all expenses incurred by it in
connection with its activities under this Agreement, including fees and
disbursements of legal counsel and independent accountants, Taxes imposed on the
Servicer, expenses incurred in connection with payments and reports pursuant to
this Agreement, and all other fees and expenses not expressly stated under this
Agreement for the account of the Seller, but excluding Liquidation Expenses. The
Servicer will be required to pay all reasonable fees and expenses owing to any
bank or trust company in connection with the maintenance of the FIB Existing
Account, the Collection Account and the Lock-Box Account. The Servicer shall be
required to pay such expenses for its own account and shall not be entitled to
any payment therefor other than the Servicing Fee.
SECTION 6.15 REPORTS.
(a) Monthly Report. With respect to each Determination Date and the related
Collection Period the Servicer will provide to the Seller and the Deal Agent and
the Backup Servicer, on the related Reporting Date, a monthly statement (a
"Monthly Report"), signed by a Responsible Officer of the Servicer and
substantially in the form of Exhibit E.
(b) Servicer's Certificate. Together with each Monthly Report, the Servicer
shall submit to the Seller, the Deal Agent and the Backup Servicer a certificate
(a "Servicer's Certificate"), signed by a Responsible Officer of the Servicer
and substantially in the form of Exhibit F.
(c) Financial Statements. The Servicer will submit to the Deal Agent,
within 45 days of the end of each of the Servicer's fiscal quarters, commencing
March 31, 1999 unaudited consolidated financial statements of the Servicer (or,
so long as FIB or the Servicer Assignee is the Servicer, First International
Bancorp, Inc.) (including an analysis of delinquencies and losses for each
fiscal quarter) as of the end of each such fiscal quarter. The Servicer shall
submit to the Deal Agent, within 90 days of the end of the Servicer's fiscal
year, commencing December 31, 1999, annual consolidated audited financial
statements of the Servicer (or, so long as the Originator is the Servicer, First
International Bancorp, Inc.) as of the end of such fiscal year.
SECTION 6.16 ANNUAL STATEMENT AS TO COMPLIANCE.
The Servicer will provide to the Deal Agent, on or prior to March 31 of
each year, commencing March 31, 1999, an annual report signed by a Responsible
Officer of the Servicer certifying that (a) a review of the activities of the
Servicer, and the Servicer's performance
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pursuant to this Agreement, for the period ending on the last day of the
preceding fiscal year has been made under such Person's supervision and (b) the
Servicer has performed or has caused to be performed in all material respects
all of its obligations under this Agreement throughout such year and no Servicer
Termination Event has occurred and is continuing (or if a Servicer Termination
Event has so occurred and is continuing, specifying each such event, the nature
and status thereof and the steps necessary to remedy such event, and, if a
Servicer Termination Event occurred during such year and no notice thereof has
been given to the Deal Agent, specifying such Servicer Termination Event and the
steps taken to remedy such event).
SECTION 6.17 ANNUAL INDEPENDENT PUBLIC ACCOUNTANT'S SERVICING REPORTS.
The Servicer will cause a firm of nationally recognized independent public
accountants (who may also render other services to the Servicer) to furnish to
the Deal Agent, on or prior to March 31 of each year, commencing March 31, 1999,
(i) a report relating to the previous fiscal year to the effect that (a) such
firm has reviewed certain documents and records relating to the servicing of the
Loans included in the Asset Pool, and (b) based on such examination, such firm
is of the opinion that the Monthly Reports for such year were prepared in
compliance with this Agreement, except for such exceptions as it believes to be
immaterial and such other exceptions as will be set forth in such firm's report
and (ii) a report covering the preceding fiscal year to the effect that such
accountants have applied certain agreed-upon procedures to certain documents and
records relating to the servicing of Loans under this Agreement, compared the
information contained in the Servicer's Certificates delivered during the period
covered by such report with such documents and records and that no matters came
to the attention of such accountants that caused them to believe that such
servicing was not conducted in compliance with this Article VI of this
Agreement, except for such exceptions as such accountants shall believe to be
immaterial and such other exceptions as shall be set forth in such statement.
SECTION 6.18 ADJUSTMENTS.
If (i) the Servicer makes a deposit into the Collection Account in respect
of a Collection of a Loan included in the Asset Pool and such Collection was
received by the Servicer in the form of a check which is not honored for any
reason or (ii) the Servicer makes a mistake with respect to the amount of any
Collection and deposits an amount that is less than or more than the actual
amount of such Collection, the Servicer shall appropriately adjust the amount
subsequently deposited into the Collection Account to reflect such dishonored
check or mistake. Any Scheduled Payment in respect of which a dishonored check
is received shall be deemed not to have been paid.
SECTION 6.19 MERGER OR CONSOLIDATION OF THE SERVICER.
The Servicer shall not consolidate with or merge into any other Person or
convey or transfer its properties and assets substantially as an entirety to any
Person, unless the Servicer is the surviving entity and unless:
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(i) the Servicer has delivered to the Deal Agent and the Backup
Servicer an Officer's Certificate and an Opinion of Counsel each stating
that any consolidation, merger, conveyance or transfer and such
supplemental agreement comply with this Section 6.19 and that all
conditions precedent herein provided for relating to such transaction have
been complied with and, in the case of the Opinion of Counsel, that such
supplemental agreement is legal, valid and binding with respect to the
Servicer and such other matters as the Deal Agent may reasonably request;
(ii) the Servicer shall have delivered notice of such consolidation,
merger, conveyance or transfer to the Deal Agent; and
(iii) after giving effect thereto, no Early Amortization Event or
event which with notice or lapse of time would constitute an Early
Amortization Event shall have occurred.
Notwithstanding anything to the contrary contained herein, so long as the
Servicer and the Originator are the same Person, the Servicer is permitted as
part of a Conversion to assign its rights hereunder to, and the Servicer's
obligations hereunder can be assumed by, another wholly-owned subsidiary of
First International Bancorp, Inc. (the "Servicer Assignee") (in which case all
of the provisions of this Agreement shall, to the same extent as they apply to
the Servicer hereunder, apply to the Servicer Assignee rather than to the
Servicer) on the condition that (a) the Servicer Assignee acquires substantially
all of the Servicer's assets relating to its commercial lending business, (b)
the Servicer Assignee assumes substantially all of the Servicer's liabilities
relating to its commercial lending business, but expressly excluding the
Servicer's deposits, (c) Deal Agent receives such documents evidencing (a) and
(b) above as Deal Agent shall reasonably request, and (d) the Servicer Assignee
executes and deliver to Deal Agent such amendments to this Agreement and such
opinions of counsel as Deal Agent may deem necessary including, but not limited
to opinions to evidence that the Servicer Assignee has assumed all of the
Servicer's rights and obligations, and is bound by all of the Servicer's
agreements, set forth herein. Upon such conversion, the Commitment Termination
Date may be accelerated pursuant to the provisions of Section 2.1(c).
SECTION 6.20 LIMITATION ON LIABILITY OF THE SERVICER AND OTHERS.
Except as provided herein, neither the Servicer nor any of the directors or
officers or employees or agents of the Servicer shall be under any liability to
the Deal Agent, the Secured Parties or any other Person for any action taken or
for refraining from the taking of any action pursuant to this Agreement whether
arising from express or implied duties under this Agreement; provided, however,
that this provision shall not protect the Servicer or any such Person against
any liability which would otherwise be imposed by reason of its willful
misfeasance, bad faith or gross negligence in the performance of duties or by
reason of its willful misconduct hereunder.
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SECTION 6.21 INDEMNIFICATION OF THE SELLER, THE DEAL AGENT, THE LIQUIDITY
AGENT AND THE SECURED PARTIES.
The Servicer shall indemnify and hold harmless the Seller, the Deal Agent,
the Liquidity Agent and each Secured Party and their respective officers,
directors, employees and agents (collectively, the "Indemnified Persons") from
and against any loss, liability, expense, damage or injury suffered or sustained
by any Indemnified Person by reason of any acts, omissions or alleged acts or
omissions of the Servicer, including, but not limited to any judgment, award,
settlement, reasonable attorneys' fees and other costs or expenses incurred in
connection with the defense of any actual or threatened action, proceeding or
claim, but excluding allocations of overhead expenses of any such Indemnified
Party or other non-monetary damages of any such Indemnified Party.
Notwithstanding the foregoing, the Servicer shall not indemnify an Indemnified
Person if such loss, liability, expense, damage or injury results or arises (i)
as a result of fraud, gross negligence or willful misconduct by any Indemnified
Person; and (ii) under any federal, state or local income or franchise taxes or
any other Tax imposed on or measured by income (or any interest or penalties
with respect thereto or arising from a failure to comply therewith) required to
be paid by the Seller, the Deal Agent, the Liquidity Agent or the Secured
Parties in connection herewith to any taxing authority. The provisions of this
indemnity shall run directly to and be enforceable by an injured party subject
to the limitations hereof. If the Servicer has made any indemnity payment
pursuant to this Section 6.21 and such payment fully indemnified the recipient
thereof and the recipient thereafter collects any payments from others in
respect of such Indemnified Amounts, the recipient shall repay to the Servicer
an amount equal to the amount it has collected from others in respect of such
indemnified amounts.
If for any reason the indemnification provided above in this Section 6.21
is unavailable to the Indemnified Person or is insufficient to hold an
Indemnified Person harmless, then Servicer shall contribute to the amount paid
or payable by such Indemnified Person as a result of such loss, claim, damage or
liability in such proportion as is appropriate to reflect not only the relative
benefits received by such Indemnified Person on the one hand and Servicer on the
other hand but also the relative fault of such Indemnified Person as well as any
other relevant equitable considerations.
The parties hereto agree that the provisions of this Section 6.21 shall not
be interpreted to provide recourse to the Seller against loss by reason of the
bankruptcy or insolvency (or other credit condition) of, or default by, related
Obligor on, any Loan.
Any indemnification pursuant to this Section shall not be payable from the
Assets.
Any indemnification pursuant to this Section shall not be in duplication of
any other indemnification for the same loss under Section 8.1.
The obligations of the Servicer under this Section 6.21 shall survive the
resignation or removal of the Deal Agent and the Liquidity Agent, and the
termination of this Agreement.
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SECTION 6.22 THE SERVICER AND BACKUP SERVICER NOT TO RESIGN.
Neither the Servicer nor the Backup Servicer shall resign from the
obligations and duties hereby imposed on it except upon such Person's
determination that (i) the performance of its duties hereunder is or becomes
impermissible under applicable law and (ii) there is no reasonable action which
such Person could take to make the performance of its duties hereunder
permissible under applicable law. Any such determination permitting the
resignation of the Servicer or Backup Servicer shall be evidenced as to clause
(i) above by an Opinion of Counsel to such effect delivered to the Deal Agent.
No such resignation shall become effective until a Successor Servicer shall have
assumed the responsibilities and obligations of the Servicer in accordance with
Section 6.27, or a successor Backup Servicer shall have assumed the
responsibilities and obligations of the Backup Servicer, respectively.
SECTION 6.23 ACCESS TO CERTAIN DOCUMENTATION AND INFORMATION REGARDING THE
LOANS.
The Servicer shall provide to the Deal Agent access to the Loan Documents
and all other documentation regarding the Loans included in the Asset Pool and
the Related Property in such cases where the Deal Agent is required in
connection with the enforcement of the rights or interests of the Secured
Parties, or by applicable statutes or regulations, to review such documentation,
such access being afforded without charge but only (i) upon two Business Days
prior written request, (ii) during normal business hours and (iii) subject to
the Servicer's normal security and confidentiality procedures. Prior to the
Closing Date and periodically thereafter at the discretion of the Deal Agent,
the Deal Agent may review the Servicer's collection and administration of the
Loans in order to assess compliance by the Servicer with the Servicer's written
policies and procedures, as well as with this Agreement and may conduct an audit
of the Loans, Loan Documents and Records in conjunction with such a review. Such
review shall be reasonable in scope and shall be completed in a reasonable
period of time. The Seller shall bear the cost of up to four of such audits per
calendar year in an amount not to exceed $5,000 per audit.
SECTION 6.24 BACKUP SERVICER.
(a) On or before the date on which the initial Purchase occurs, until the
receipt by the Servicer of a Termination Notice, the Backup Servicer shall
perform, on behalf of the Deal Agent and the Secured Parties, the following
duties and obligations:
(i) On or before the Closing Date, the Backup Servicer shall accept
from the Servicer delivery of the information required to be set forth in
the Monthly Reports in hard copy and on computer tape; provided, however,
the computer tape is in an MS-DOS, PC readable ASCII format or format to be
agreed upon by the Backup Servicer and the Servicer on or prior to closing.
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(ii) Not later than 12:00 noon New York time two Business Days prior
to each Reporting Date, the Backup Servicer shall accept delivery of tape
from the Servicer, which shall include but not be limited to the following
information: the name, number and name of the related Obligor for each
Loan, the collection status, the contract status, the principal balance and
the Aggregate Outstanding Loan Balance (the "Tape").
The Servicer shall provide the Tape on each Reporting Date as described
above.
(b) On or before the date on which the initial Purchase occurs, and until
the receipt by the Servicer of a Termination Notice, the Backup Servicer shall
perform, on behalf of the Secured Parties and the Deal Agent, the following
duties and obligations:
(i) Prior to the related Payment Date, the Backup Servicer shall
review the Monthly Report to ensure that it is complete on its face and
that the following items in such Monthly Report have been accurately
calculated, if applicable, and reported: (a) the Aggregate Outstanding Loan
Balance, (b) the Backup Servicing Fee, (c) the Loans that are 30-60 days
past due, (d) the Loans that are 61-90 days past due, (E) the Loans that
are 90+ days past due, (F) the Loans that are Defaulted Loans, (G) the
Average Default Rate, and (H) the Average Net Loss Ratio. The Backup
Servicer shall notify the Deal Agent and the Servicer of any disagreements
with the Monthly Report based on such review not later than the Business
Day preceding such Payment Date to such Persons.
(ii) If the Servicer disagrees with the report provided under
paragraph (i) above by the Backup Servicer or if the Servicer or any
subservicer has not reconciled such discrepancy, the Backup Servicer agrees
to confer with the Servicer to resolve such disagreement on or prior to the
next succeeding Determination Date and shall settle such discrepancy with
the Servicer if possible, and notify the Deal Agent of the resolution
thereof. The Servicer hereby agrees to cooperate at its own expense, with
the Backup Servicer in reconciling any discrepancies herein. If within 20
days after the delivery of the report provided under paragraph (i) above by
the Backup Servicer, such discrepancy is not resolved, the Backup Servicer
shall promptly notify the Deal Agent of the continued existence of such
discrepancy. Following receipt of such notice by the Deal Agent, the
Servicer shall deliver to the Deal Agent, the Secured Parties, and the
Backup Servicer no later than the related Payment Date a certificate
describing the nature and amount of such discrepancies and the actions the
Servicer proposes to take with respect thereto.
With respect to the foregoing, the Backup Servicer, in the performance of
its duties and obligations hereunder, is entitled to rely conclusively, and
shall be fully protected in so relying, on the contents of each Tape, including,
but not limited to, the completeness and accuracy thereof, provided by the
Servicer.
(c) After the receipt of an effective Termination Notice by the Servicer in
accordance with this Agreement, all authority, power, rights and
responsibilities of the Servicer, under this
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Agreement, whether with respect to the Loans or otherwise shall pass to and be
vested in the Backup Servicer, subject to and in accordance with the provisions
of Section 6.27, as long as the Backup Servicer is not prohibited by an
applicable provision of law from fulfilling the same, as evidenced by an Opinion
of Counsel.
(d) Any Person (i) into which the Backup Servicer may be merged or
consolidated, (ii) which may result from any merger or consolidation to which
the Backup Servicer shall be a party, or (iii) which may succeed to the
properties and assets of the Backup Servicer substantially as a whole, which
Person in any of the foregoing cases executes an agreement of assumption to
perform every obligation of the Backup Servicer hereunder, shall be the
successor to the Backup Servicer under this Agreement without further act on the
part of any of the parties to this Agreement.
(e) As compensation for its back-up servicing obligations hereunder, the
Backup Servicer shall be entitled to receive the Backup Servicing Fee in respect
of each Monthly Period (or portion thereof) until the first to occur of the date
on which the Backup Servicer becomes a Successor Servicer, resigns or is removed
as Backup Servicer or termination of this Agreement.
(f) The Backup Servicer may be removed without cause by the Deal Agent by
notice then given in writing to the Servicer, the Seller and the Backup
Servicer. In the event of any such removal, the Backup Servicer may be replaced
by (i) the Servicer, acting with the consent of the Deal Agent or (ii) if no
such replacement is appointed within 30 days following such removal or
resignation, by the Deal Agent.
(g) The Backup Servicer undertakes to perform only such duties and
obligations as are specifically set forth in this Agreement, it being expressly
understood by all parties hereto that there are no implied duties or obligations
of the Backup Servicer hereunder. Without limiting the generality of the
foregoing, the Backup Servicer, except as expressly set forth herein, shall have
no obligation to supervise, verify, monitor or administer the performance of the
Servicer. The Backup Servicer may act through its agents, attorneys and
custodians in performing any of its duties and obligations under this Agreement,
it being understood by the parties hereto that the Backup Servicer will be
responsible for any misconduct or negligence on the part of such agents,
attorneys or custodians acting on the routine and ordinary day-to-day operations
for and on behalf of the Backup Servicer. Neither the Backup Servicer nor any of
its officers, directors, employees or agents shall be liable, directly or
indirectly, for any damages or expenses arising out of the services performed
under this Agreement other than damages or expenses which result from the gross
negligence or willful misconduct of it or them or the failure to perform
materially in accordance with this Agreement.
(h) The Backup Servicer shall not be liable for any obligation of the
Servicer contained in this Agreement or for any errors of the Servicer contained
in any computer tape, certificate or other data or document delivered to the
Backup Servicer hereunder or on which the Backup Servicer must rely in order to
perform its obligations hereunder, and the Seller, Secured Parties, Deal Agent,
Liquidity Agent, Collateral Custodian and Backup Servicer, shall look only
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to the Servicer to perform such obligations. The Backup Servicer and the
Collateral Custodian shall have no responsibility and shall not be in default
hereunder or incur any liability for any failure, error, malfunction or any
delay in carrying out any of their respective duties under this Agreement if
such failure or delay results from the Backup Servicer acting in accordance with
information prepared or supplied by a Person other than the Backup Servicer or
the failure of any such other Person to prepare or provide such information.
SECTION 6.25 IDENTIFICATION OF RECORDS.
The Servicer shall clearly and unambiguously identify each Loan that is in
the Asset Pool and the Related Property in its computer or other records to
reflect that the Asset Interests in such Loans and Related Property have been
transferred to and are owned by the Purchasers and that the Deal Agent has the
interest therein granted by the Seller pursuant to this Agreement.
SECTION 6.26 SERVICER TERMINATION EVENTS.
(a) If any one of the following events (a "Servicer Termination Event")
shall occur and be continuing on any day:
(i) any failure by the Servicer to make any payment, transfer or
deposit on or before the date occurring two (2) Business Days after the
date such payment, transfer or deposit is required to be made, or any
failure by the Servicer to give instructions or notice to the Deal Agent as
required by this Agreement or to deliver any Required Reports hereunder and
such failure continues unremedied more than two (2) Business Days after
notice thereof to the Servicer.
(ii) any failure on the part of the Servicer duly to observe or
perform in any material respect any other covenants or agreements of the
Servicer set forth in this Agreement or any other Transaction Document
which continues unremedied for a period of 30 days after the first to occur
of (i) the date on which written notice of such failure requiring the same
to be remedied shall have been given to the Servicer by the Deal Agent and
(ii) the date on which the Servicer becomes aware thereof;
(iii) any representation, warranty or certification made by the
Servicer in this Agreement or in any certificate delivered pursuant to this
Agreement shall prove to have been incorrect when made, and which continues
to be unremedied for a period of 30 days after the first to occur of (i)
the date on which written notice of such incorrectness requiring the same
to be remedied shall have been given to the Servicer by the Deal Agent and
(ii) the date on which the Servicer becomes aware thereof;
(iv) the Servicer shall fail in any material respect to service the
Loans in accordance with the Credit and Collection Policies;
(v) an Insolvency Event shall occur with respect to the Servicer; or
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(vi) (x) the Servicer ceases to be a wholly-owned subsidiary of First
International Bancorp., Inc., or (y) the Servicer's principal place of
business and chief executive office ceases to be located in the United
States, without the prior written consent of the Deal Agent, VFCC and the
Required Investors.
Notwithstanding anything herein to the contrary, so long as any such Servicer
Termination Events shall not have been remedied at the expiration of any
applicable cure period, the Deal Agent, by written notice to the Servicer (a
"Termination Notice"), may, subject to the provisions of Section 6.27, terminate
all of the rights and obligations of the Servicer as Servicer under this
Agreement. The Seller shall pay all reasonable set-up and conversion costs
associated with the transfer of servicing rights to the Successor Servicer.
SECTION 6.27 APPOINTMENT OF SUCCESSOR SERVICER.
(a) On and after the receipt by the Servicer of a Termination Notice
pursuant to Section 6.26, the Servicer shall continue to perform all servicing
functions under this Agreement until the date specified in the Termination
Notice or otherwise specified by the Deal Agent in writing or, if no such date
is specified in such Termination Notice or otherwise specified by the Deal
Agent, until a date mutually agreed upon by the Servicer and the Deal Agent. The
Deal Agent may at the time described in the immediately preceding sentence in
its sole discretion, appoint the Backup Servicer as the Servicer hereunder, and
the Backup Servicer shall on such date assume all obligations of the Servicer
hereunder, and all authority and power of the Servicer under this Agreement
shall pass to and be vested in the Backup Servicer (the Backup Servicer or such
other successor, the "Successor Servicer"); provided, however, that the
Successor Servicer shall not be responsible or liable for any past actions or
omissions of the outgoing Servicer. In the event that a Successor Servicer has
not been appointed and has not accepted its appointment at the time when the
Servicer ceases to act as Servicer, the Deal Agent shall petition a court of
competent Jurisdiction to appoint any established financial institution having a
net worth of not less than U.S. $25,000,000 and whose regular business includes
the servicing of Loans as the Successor Servicer hereunder.
(b) Upon its appointment, the Backup Servicer (subject to 6.27(a)) or the
Successor Servicer, as applicable, shall be the successor in all respects to the
Servicer with respect to servicing functions under this Agreement and shall be
subject to all the responsibilities, duties and liabilities relating thereto
placed on the Servicer by the terms and provisions hereof, and all references in
this Agreement to the Servicer shall be deemed to refer to the Backup Servicer
or the Successor Servicer, as applicable.
(c) All authority and power granted to the Servicer under this Agreement
shall automatically cease and terminate upon termination of this Agreement and
shall pass to and be vested in the Seller and, without limitation, the Seller is
hereby authorized and empowered to execute and deliver, on behalf of the
Servicer, as attorney-in-fact or otherwise, all documents and other instruments,
and to do and accomplish all other acts or things necessary or appropriate to
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effect the purposes of such transfer of servicing rights. The Servicer agrees to
cooperate with the Seller in effecting the termination of the responsibilities
and rights of the Servicer to conduct servicing with respect to the Loans
included in the Asset Pool.
(d) Upon the Backup Servicer receiving notice that it is required to serve
as Servicer hereunder pursuant to the foregoing provisions of this Section 6.27,
the Backup Servicer will promptly begin the transition to its role as Servicer.
SECTION 6.28 NOTIFICATION.
Upon the Servicer becoming aware of the occurrence of any Servicer
Termination Event, the Servicer shall promptly give written notice thereof to
the Deal Agent.
SECTION 6.29 PROTECTION OF RIGHT, TITLE AND INTEREST IN ASSETS.
The Servicer shall cause this Agreement, all amendments hereto and/or all
financing statements and continuation statements and any other necessary
documents covering the right, title and interest of the Deal Agent as agent for
the Secured Parties and of the Secured Parties to the Assets to be promptly
recorded, registered and filed, and at all times to be kept recorded, registered
and filed, all in such manner and in such places as may be required by law fully
to preserve and protect the right, title and interest of the Deal Agent as agent
for the Secured Parties hereunder to all property comprising the Asset Pool. The
Servicer shall deliver to the Deal Agent file-stamped copies of, or filing
receipts for, any document recorded, registered or filed as provided above, as
soon as available following such recording, registration or filing. The Seller
shall cooperate fully with the Servicer in connection with the obligations set
forth above and will execute any and all documents reasonably required to
fulfill the intent of this Section.
SECTION 6.30 RELEASE OF LOAN FILES.
The Seller may, with the prior written consent of the Deal Agent (such
consent not to be unreasonably withheld), require that the Collateral Custodian
release each Loan File (a) delivered to the Collateral Custodian in error, (b)
for which a Substitute Loan has been substituted in accordance with Section 2.9,
(c) as to which the lien on the Related Property has been so released pursuant
to Section 5.3, (d) which has been retransferred to the Seller pursuant to
Section 5.5 or 5.6, or (e) which is required to be redelivered to the Seller in
connection with the termination of this Agreement, in each case by submitting to
the Collateral Custodian and the Deal Agent a written request (signed by both
the Seller and the Deal Agent) specifying the Loans to be so released and
reciting that the conditions to such release have been met (and specifying the
section or sections of this Agreement being relied upon for such release). The
Collateral Custodian shall upon its receipt of each such request for release
executed by the Seller and the Deal Agent promptly, but in any event within 5
Business Days, release the Loan Files so requested to the Seller.
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ARTICLE VII
EARLY AMORTIZATION EVENTS
SECTION 7.1 .EARLY AMORTIZATION EVENTS.
If any of the following events (each, an "Early Amortization Event") shall
occur and be continuing:
(a) the Seller or the Servicer shall default in the payment of any amount
required to be made under the terms of this Facility and such failure continues
unremedied for a period of three (3) Business Days after written notice thereof
shall have been given by the Deal Agent or the Collateral Custodian to the
Seller or Servicer; or
(b) the amount of outstanding Capital shall exceed the Capital Limit for
more than three (3) Business Days; or
(c) (i) the Seller or the Originator shall fail to perform or observe in
any material respect any other covenant or other agreement of the Seller or the
Originator set forth in this Facility, or (ii) the Originator shall fail to
perform or observe in any material respect any term covenant or agreement of
such Originator set forth in the Purchase Agreement, in each case when such
failure continues unremedied for more than thirty (30) days after the earlier of
(x) the date written notice thereof shall have been given by the Deal Agent or
the Collateral Custodian to such Person or (y) the date of actual knowledge
thereof by the Seller; or
(d) any representation or warranty made or deemed made hereunder shall
prove to be incorrect in any material respect as of the time when the same shall
have been made, and such incorrect representation or warranty shall not have
been eliminated or otherwise cured within a period of thirty (30) days after
written notice thereof shall have been given by the Deal Agent or the Collateral
Custodian to the Seller; or
(e) an Insolvency Event shall occur with respect to the Seller or the
Originator; or
(f) a Servicer Termination Event occurs; or
(g) any Change in Control of the Seller or Originator occurs; or
(h) the Seller or the Originator defaults in making any payment required to
be made under any material agreement for borrowed money to which either is a
party and such default gives the relevant lender a right to accelerate the
Seller's or Originator's obligations thereunder and is not cured within the
relevant cure period; or
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(i) the Deal Agent, as agent for the Secured Parties, shall fail for any
reason to have a valid and perfected first priority security interest in any of
the Assets; or
(j) (i) a final judgment for the payment of money in excess of $5,000,000
shall have been rendered against the Originator or $1,000,000 against the Seller
by a court of competent jurisdiction and, if such judgment relates to the
Originator, the Originator shall not have either: (1) discharged or provided for
the discharge of such judgment in accordance with its terms, or (2) perfected a
timely appeal of such judgment and caused the execution thereof to be stayed (by
supersedes or otherwise during the pendency of such appeal or (ii) the Seller,
shall have made payments of amounts in excess of $100,000 in settlement of any
litigation; or
(k) the Seller or Originator agrees or consents to, or otherwise permits to
occur, any amendment, modification, change, supplement or recission of or to the
Credit and Collection Policies in whole or in part that could have a material
adverse effect upon the Loans or interest of any Purchaser, without the prior
consent of the Deal Agent or the Purchaser; or
(l) any failure to comply with Section 5.4 and such failure continues for a
period of fifteen (15) days; or
(m) on any Determination Date, the Net Portfolio Yield does not equal or
exceed the Minimum Net Portfolio Yield and such failure continues for a period
of fifteen (15) consecutive days; or
(n) As of any Determination Date, the Average Default Ratio is greater than
four percent (4.0%); or
(o) As of any Determination Date, the Average Net Loss Ratio is greater
than one and one-half percent (1.5%); or
(p) [Reserved]
(q) the Originator ceases to be a wholly-owned subsidiary of First
International Bancorp., Inc.; or
(r) the Seller ceases to be a "bankruptcy-remote entity" under customary
criteria; or
(s) the Seller shall become an "investment company" within the meaning of
the 1940 Act; or
(t) the noncompliance at any time of the composition of the Asset Pool with
the concentration and mix requirements set forth on Schedule II hereof and such
noncompliance is not cured within five (5) Business Days; or
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(u) the business and other activities of the Seller or the Servicer (if the
Originator is the Servicer), including but not limited to, the Purchases made by
the Purchasers, the application and use of the proceeds thereof by the Seller
and the consummation and conduct of the transactions contemplated by the
Transaction Documents to which the Seller or Servicer is a party do not now and
will not in the future result in a violation by the Servicer, the Seller, or any
other person or entity of the 1940 Act or the rules and regulations promulgated
thereunder,
then, and in any such event, the Deal Agent shall, at the request, or may with
the consent, of the Required Investors, by notice to the Seller declare the
Termination Date to have occurred, without demand, protest or future notice of
any kind, all of which are hereby expressly waived by the Seller, and all
Aggregate Unpaids and all other amounts owing by the Seller under this Facility
shall be accelerated and become immediately due and payable, provided, that in
the event that the Termination Event described in subsection (f) herein has
occurred, the Termination Date shall automatically occur, without demand,
protest or any notice of any kind, all of which are hereby expressly waived by
the Seller.
ARTICLE VIII
INDEMNIFICATION
SECTION 8.1 INDEMNITIES BY THE SELLER.
Without limiting any other rights which the Deal Agent, the Liquidity
Agent, any Secured Party or its assignee, or any of their respective Affiliates
may have hereunder or under applicable law, the Seller hereby agrees to
indemnify the Deal Agent, the Liquidity Agent, any Secured Party or its assignee
and each of their respective Affiliates and officers, directors, employees and
agents thereof (collectively, the "Indemnified Parties") from and against any
and all damages, losses, claims, liabilities and related costs and expenses,
including reasonable attorneys' fees and disbursements (all of the foregoing
being collectively referred to as "Indemnified Amounts") awarded against or
incurred by, any such Indemnified Party or other non-monetary damages of any
such Indemnified Party any of them arising out of or as a result of this
Agreement, excluding, however, Indemnified Amounts to the extent resulting from
gross negligence or willful misconduct on the part of any Indemnified Party.
Without limiting the foregoing, the Seller shall indemnify the Indemnified
Parties for Indemnified Amounts relating to or resulting from:
(i) any Loan treated as or represented by the Seller to be an Eligible
Loan which is not at the applicable time an Eligible Loan;
(ii) reliance on any representation or warranty made or deemed made by
the Seller, the Servicer (or one of its Affiliates) or any of their
respective officers under or in connection with this Agreement, which shall
have been false or incorrect in any material respect when made or deemed
made or delivered;
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(iii) the failure by the Seller or the Servicer (or one of its
Affiliates) to comply with any term, provision or covenant contained in
this Agreement or any agreement executed in connection with this Agreement,
or with any applicable law, rule or regulation with respect to any Loan
comprising a portion of the Assets Pool, the Related Property, or the
nonconformity of any Loan, the Related Property with any such applicable
law, rule or regulation or any failure by the Originator, the Seller or any
Affiliate thereof to perform its respective duties under the Loans included
as a part of the Assets;
(iv) the failure to vest and maintain vested in the relevant Purchaser
or to transfer to such Purchaser, an undivided ownership interest in the
Assets, together with all Collections, free and clear of any Adverse Claim
whether existing at the time of any Purchase or at any time thereafter;
(v) the failure to file, or any delay in filing, financing statements
or other similar instruments or documents under the UCC of any applicable
jurisdiction or other applicable laws with respect to any Asset whether at
the time of any Purchase or at any subsequent time and as required by the
Transaction Documents;
(vi) any dispute, claim, offset or defense (other than the discharge
in bankruptcy of the Obligor) of the Obligor to the payment of any Loan
included in the Asset Pool which is, or is purported to be, an Eligible
Loan (including, without limitation, a defense based on the Loan not being
a legal, valid and binding obligation of such Obligor enforceable against
it in accordance with its terms);
(vii) any failure of the Seller or the Servicer (if the Originator or
one of its Affiliates) to perform its duties or obligations in accordance
with the provisions of this Agreement or any failure by the Originator, the
Seller or any Affiliate thereof to perform its respective duties under the
Loans;
(viii) any products liability claim or personal injury or property
damage suit or other similar or related claim or action of whatever sort
arising out of or in connection with merchandise or services which are the
subject of any Loan included in the Asset Pool or the Related Property
included in the Asset Pool;
(ix) the failure by Seller to pay when due any Taxes for which the
Seller is liable, including without limitation, sales, excise or personal
property taxes payable in connection with the Assets Pool;
(x) any repayment by the Deal Agent, the Liquidity Agent or a Secured
Party of any amount previously distributed in reduction of Capital or
payment of Yield or any other amount due hereunder or under any Hedging
Agreement, in each case which
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amount the Deal Agent, the Liquidity Agent or a Secured Party believes in
good faith is required to be repaid;
(xi) any investigation, litigation or proceeding related to this
Agreement or the use of proceeds of Purchases or in respect of any Loan
included in the Asset Pool or the Related Property included in the Asset
Pool;
(xii) any failure by the Seller to give reasonably equivalent value to
the Originator in consideration for the transfer by the Originator to the
Seller of any Loan or the Related Property or any attempt by any Person to
void or otherwise avoid any such transfer under any statutory provision or
common law or equitable action, including, without limitation, any
provision of the Bankruptcy Code;
(xiii) the failure of the Seller, the Originator or any of their
respective agents or representatives to remit to the Servicer or the Deal
Agent, Collections on the Pool Assets remitted to the Seller or any such
agent or representative; or
(xiv) the failure to maintain, as of the close of business on each
Business Day prior to the Termination Date, an amount of Capital
outstanding which is less than or equal to the lesser of (x) the Purchase
Limit on such Business Day, or (y) the Capital Limit on such Business Day.
Any amounts subject to the indemnification provisions of this Section 8.1 shall
be paid by the Seller solely pursuant to the provisions of Sections 2.7 and 2.9
hereof as the case may be to the Deal Agent within two Business Days following
the Deal Agent's demand therefor.
Any indemnification pursuant to this Section 8.1 shall not be in
duplication of any other indemnification for the same loss under Section 6.21.
ARTICLE IX
THE DEAL AGENT AND THE LIQUIDITY AGENT
SECTION 9.1 AUTHORIZATION AND ACTION.
(a) Each Secured Party hereby designates and appoints the Deal Agent as
Deal Agent hereunder, and authorizes the Deal Agent to take such actions as
agent on its behalf and to exercise such powers as are delegated to the Deal
Agent by the terms of this Agreement together with such powers as are reasonably
incidental thereto. The Deal Agent shall not have any duties or
responsibilities, except those expressly set forth herein, or any fiduciary
relationship with any Purchaser, and no implied covenants, functions,
responsibilities, duties, obligations or liabilities on the part of the Deal
Agent shall be read into this Agreement or otherwise exist for the Deal Agent.
In performing its functions and duties hereunder, the Deal Agent shall act
solely as agent
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for the Secured Parties and does not assume nor shall be deemed to have assumed
any obligation or relationship of trust or agency with or for the Seller or any
of its successors or assigns. The Deal Agent shall not be required to take any
action which exposes the Deal Agent to personal liability or which is contrary
to this Agreement or applicable law. The appointment and authority of the Deal
Agent hereunder shall terminate at the indefeasible payment in full of the
Aggregate Unpaids.
(b) Each Investor hereby designates and appoints First Union as
Liquidity Agent hereunder, and authorizes the Liquidity Agent to take such
actions as agent on its behalf and to exercise such powers as are delegated to
the Liquidity Agent by the terms of this Agreement together with such powers as
are reasonably incidental thereto. The Liquidity Agent shall not have any duties
or responsibilities, except those expressly set forth herein, or any fiduciary
relationship with any Investor, and no implied covenants, functions,
responsibilities, duties, obligations or liabilities on the part of the
Liquidity Agent shall be read into this Agreement or otherwise exist for the
Liquidity Agent. In performing its functions and duties hereunder, the Liquidity
Agent shall act solely as agent for the Investors and does not assume nor shall
be deemed to have assumed any obligation or relationship of trust or agency with
or for the Seller or any of its successors or assigns. The Liquidity Agent shall
not be required to take any action which exposes the Liquidity Agent to personal
liability or which is contrary to this Agreement or applicable law. The
appointment and authority of the Liquidity Agent hereunder shall terminate at
the indefeasible payment in full of the Aggregate Unpaids.
SECTION 9.2 DELEGATION OF DUTIES.
(a) The Deal Agent may execute any of its duties under this Agreement by or
through agents or attorneys-in-fact and shall be entitled to advice of counsel
concerning all matters pertaining to such duties. The Deal Agent shall not be
responsible for the negligence or misconduct of any agents or attorneys-in-fact
selected by it with reasonable care.
(b) The Liquidity Agent may execute any of its duties under this Agreement
by or through agents or attorneys-in-fact and shall be entitled to advice of
counsel concerning all matters pertaining to such duties. The Liquidity Agent
shall not be responsible for the negligence or misconduct of any agents or
attorneys-in-fact selected by it with reasonable care.
SECTION 9.3 EXCULPATORY PROVISIONS.
(a) Neither the Deal Agent nor any of its directors, officers, agents or
employees shall be (i) liable for any action lawfully taken or omitted to be
taken by it or them under or in connection with this Agreement (except for its,
their or such Person's own gross negligence or willful misconduct or, in the
case of the Deal Agent, the breach of its obligations expressly set forth in
this Agreement), or (ii) responsible in any manner to any of the Secured Parties
for any recitals, statements, representations or warranties made by the Seller
contained in this Agreement or in any certificate, report, statement or other
document referred to or provided for in, or received under or in connection
with, this Agreement for the value, validity, effectiveness,
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genuineness, enforceability or sufficiency of this Agreement or any other
document furnished in connection herewith, or for any failure of the Seller to
perform its obligations hereunder, or for the satisfaction of any condition
specified in Article III. The Deal Agent shall not be under any obligation to
any Secured Party to ascertain or to inquire as to the observance or performance
of any of the agreements or covenants contained in, or conditions of, this
Agreement, or to inspect the properties, books or records of the Seller. The
Deal Agent shall not be deemed to have knowledge of any Early Amortization Event
unless the Deal Agent has received notice from the Seller or a Secured Party.
(b) Neither the Liquidity Agent nor any of its directors, officers, agents
or employees shall be (i) liable for any action lawfully taken or omitted to be
taken by it or them under or in connection with this Agreement (except for its,
their or such Person's own gross negligence or willful misconduct or, in the
case of the Liquidity Agent, the breach of its obligations expressly set forth
in this Agreement), or (ii) responsible in any manner to the Deal Agent or any
of the Secured Parties for any recitals, statements, representations or
warranties made by the Seller contained in this Agreement or in any certificate,
report, statement or other document referred to or provided for in, or received
under or in connection with, this Agreement or for the value, validity,
effectiveness, genuineness, enforceability or sufficiency of this Agreement or
any other document furnished in connection herewith, or for any failure of the
Seller to perform its obligations hereunder, or for the satisfaction of any
condition specified in Article III. The Liquidity Agent shall not be under any
obligation to the Deal Agent or any Secured Party to ascertain or to inquire as
to the observance or performance of any of the agreements or covenants contained
in, or conditions of, this Agreement, or to inspect the properties, books or
records of the Seller. The Liquidity Agent shall not be deemed to have knowledge
of any Early Amortization Event unless the Liquidity Agent has received notice
from the Seller, the Deal Agent or a Secured Party.
SECTION 9.4 RELIANCE.
(a) The Deal Agent shall in all cases be entitled to rely, and shall be
fully protected in relying, upon any document or conversation believed by it to
be genuine and correct and to have been signed, sent or made by the proper
Person or Persons and upon advice and statements of legal counsel (including,
without limitation, counsel to the Seller), independent accountants and other
experts selected by the Deal Agent. The Deal Agent shall in all cases be fully
justified in failing or refusing to take any action under this Agreement or any
other document furnished in connection herewith unless it shall first receive
such advice or concurrence of VFCC or the Required Investors or all of the
Secured Parties, as applicable, as it deems appropriate or it shall first be
indemnified to its satisfaction by the Secured Parties; provided, that, unless
and until the Deal Agent shall have received such advice, the Deal Agent may
take or refrain from taking any action, as the Deal Agent shall deem advisable
and in the best interests of the Secured Parties. The Deal Agent shall in all
cases be fully protected in acting, or in refraining from acting, in accordance
with a request of VFCC or the Required Investors or all of the Secured Parties,
as applicable, and such request and any action taken or failure to act pursuant
thereto shall be binding upon all the Secured Parties.
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(b) The Liquidity Agent shall in all cases be entitled to rely, and shall
be fully protected in relying, upon any document or conversation believed by it
to be genuine and correct and to have been signed, sent or made by the proper
Person or Persons and upon advice and statements of legal counsel (including,
without limitation, counsel to the Seller), independent accountants and other
experts selected by the Liquidity Agent. The Liquidity Agent shall in all cases
be fully justified in failing or refusing to take any action under this
Agreement or any other document furnished in connection herewith unless it shall
first receive such advice or concurrence of Required Investors as it deems
appropriate or it shall first be indemnified to its satisfaction by the
Investors, provided that unless and until the Liquidity Agent shall have
received such advice, the Liquidity Agent may take or refrain from taking any
action, as the Liquidity Agent shall deem advisable and in the best interests of
the Investors. The Liquidity Agent shall in all cases be fully protected in
acting, or in refraining from acting, in accordance with a request of the
Required Investors and such request and any action taken or failure to act
pursuant thereto shall be binding upon all the Investors.
SECTION 9.5 NON-RELIANCE ON DEAL AGENT, LIQUIDITY AGENT AND OTHERS.
Each Secured Party expressly acknowledges that neither the Deal Agent, the
Liquidity Agent nor any of their respective officers, directors, employees,
agents, attorneys-in-fact or affiliates has made any representations or
warranties to it and that no act by the Deal Agent or the Liquidity Agent
hereafter taken, including, without limitation, any review of the affairs of the
Seller, shall be deemed to constitute any representation or warranty by the Deal
Agent or the Liquidity Agent. Each Secured Party represents and warrants to the
Deal Agent and to the Liquidity Agent that it has and will, independently and
without reliance upon the Deal Agent. the Liquidity Agent or any other Secured
Party and based on such documents and information as it has deemed appropriate,
made its own appraisal of and investigation into the business. operations,
property, prospects, financial and other conditions and creditworthiness of the
Seller and made its own decision to enter into this Agreement.
SECTION 9.6 REIMBURSEMENT AND INDEMNIFICATION.
The Investors agree to reimburse and indemnify VFCC, the Deal Agent. the
Liquidity Agent and each of their respective officers, directors, employees,
representatives and agents ratably according to their pro rata shares, to the
extent not paid or reimbursed by the Seller (i) for any amounts for which VFCC,
the Liquidity Agent, acting in its capacity as Liquidity Agent, or the Deal
Agent, acting in its capacity as Deal Agent, is entitled to reimbursement by the
Seller hereunder and (ii) for any other expenses incurred by VFCC, the Liquidity
Agent, acting in its capacity as Liquidity Agent, or the Deal Agent, in its
capacity as Deal Agent and acting on behalf of the Secured Parties, in
connection with the administration and enforcement of this Agreement.
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SECTION 9.7 DEAL AGENT AND LIQUIDITY AGENT IN THEIR INDIVIDUAL CAPACITIES.
The Deal Agent, the Liquidity Agent and each of their respective Affiliates
may make loans to, accept deposits from and generally engage in any kind of
business with the Seller or any Affiliate of the Seller as though the Deal Agent
or the Liquidity Agent, as the case may be, were not the Deal Agent or the
Liquidity Agent, as the case may be, hereunder. With respect to the making of
Purchases pursuant to this Agreement, the Deal Agent, the Liquidity Agent and
each of their respective Affiliates shall have the same rights and powers under
this Agreement as any Purchaser and may exercise the same as though it were not
the Deal Agent or the Liquidity Agent, as the case may be, and the terms
"Investor," "Purchaser," "Investors" and "Purchasers" shall include the Deal
Agent or the Liquidity Agent, as the case may be, in its individual capacity.
SECTION 9.8 SUCCESSOR DEAL AGENT OR LIQUIDITY AGENT.
(a) The Deal Agent may, upon 5 days' notice to the Seller and the Secured
Parties, and the Deal Agent will, upon the direction of all of the Secured
Parties (other than the Deal Agent, in its individual capacity) resign as Deal
Agent. If the Deal Agent shall resign, then the Required Investors during such
5-day period shall appoint from among the Secured Parties a successor agent. If
for any reason no successor Deal Agent is appointed by the Required Investors
during such 5-day period, then effective upon the expiration of such 5-day
period, the Secured Parties shall perform all of the duties of the Deal Agent
hereunder and the Seller shall make all payments in respect of the Aggregate
Unpaids or under any fee letter delivered by the Originator to the Deal Agent
and the Secured Parties directly to the applicable Purchaser and for all
purposes shall deal directly with the Secured Parties. After any retiring Deal
Agent's resignation hereunder as Deal Agent, the provisions of Article VIII and
Article IX shall inure to its benefit as to any actions taken or omitted to be
taken by it while it was Deal Agent under this Agreement.
(b) The Liquidity Agent may, upon 5 days' notice to the Seller, the Deal
Agent and the Investors, and the Liquidity Agent will, upon the direction of all
of the Investors (other than the Liquidity Agent, in its individual capacity)
resign as Liquidity Agent. If the Liquidity Agent shall resign, then the
Required Investors during such 5-day period shall appoint from among the
Investors a successor Liquidity Agent. If for any reason no successor Liquidity
Agent is appointed by the Required Investors during such 5-day period, then
effective upon the expiration of such 5-day period, the Investors shall perform
all of the duties of the Liquidity Agent hereunder and all payments in respect
of the outstanding Capital. After any retiring Liquidity Agent's resignation
hereunder as Liquidity Agent, the provisions of Article VIII and Article IX
shall inure to its benefit as to any actions taken or omitted to be taken by it
while it was Liquidity Agent under this Agreement.
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ARTICLE X
ASSIGNMENTS; PARTICIPATIONS
SECTION 10.1 ASSIGNMENTS AND PARTICIPATIONS.
(a) Each Investor may upon at least 30 days' notice to VFCC, the Deal Agent
and the Liquidity Agent, and prior to the Termination Date with the consent of
the Seller (which consent shall not be unreasonably withheld), assign to one or
more banks or other entities all or a portion of its rights and obligations
under this Agreement; provided, however, that (i) each such assignment shall be
of a constant, and not a varying percentage of all of the assigning Investor's
rights and obligations under this Agreement, (ii) the amount of the Commitment
of the assigning Investor being assigned pursuant to each such assignment
(determined as of the date of the Assignment and Acceptance with respect to such
assignment) shall in no event be less than the lesser of (a) $10,000,000 or an
integral multiple of $1,000,000 in excess of that amount and (b) the full amount
of the assigning Investor's Commitment, (iii) each such assignment shall be to
an Eligible Assignee, (iv) the parties to each such assignment shall execute and
deliver to the Deal Agent, for its acceptance and recording in the Register, an
Assignment and Acceptance, together with a processing and recordation fee of
$3,000 or such lesser amount as shall be approved by the Deal Agent, (v) the
parties to each such assignment shall have agreed to reimburse the Deal Agent,
the Liquidity Agent and VFCC for all reasonable fees, costs and expenses
(including, without limitation, the reasonable fees and out-of-pocket expenses
of counsel for each of the Deal Agent, the Liquidity Agent and VFCC) incurred by
the Deal Agent the Liquidity Agent and VFCC, respectively, in connection with
such assignment and (vi) there shall be no increased costs, expenses or taxes
incurred by the Deal Agent, the Liquidity Agent or VFCC upon such assignment or
participation; and provided, further, that upon the effective date of such
assignment the provisions of Section 3.03(f) of the Administration Agreement
shall be satisfied. Upon such execution, delivery and acceptance by the Deal
Agent and the Liquidity Agent and the recording by the Deal Agent, from and
after the effective date specified in each Assignment and Acceptance, which
effective date shall be the date of acceptance thereof by the Deal Agent and the
Liquidity Agent, unless a later date is specified therein, (i) the assignee
thereunder shall be a party hereto and, to the extent that rights and
obligations hereunder have been assigned to it pursuant to such Assignment and
Acceptance, have the rights and obligations of an Investor hereunder and (ii)
the Investor assignor thereunder shall, to the extent that rights and
obligations hereunder have been assigned by it pursuant to such Assignment and
Acceptance, relinquish its rights and be released from its obligations under
this Agreement (and, in the case of an Assignment and Acceptance covering all or
the remaining portion of an assigning Investor's rights and obligations under
this Agreement, such Investor shall cease to be a party hereto).
(b) By executing and delivering an Assignment and Acceptance, the Investor
assignor thereunder and the assignee thereunder confirm to and agree with each
other and the other parties hereto as follows: (i) other than as provided in
such Assignment and Acceptance, such assigning Investor makes no representation
or warranty and assumes no responsibility with respect to any
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statements, warranties or representations made in or in connection with this
Agreement or the execution, legality, validity, enforceability, genuineness,
sufficiency or value of this Agreement or any other instrument or document
furnished pursuant hereto; (ii) such assigning Investor makes no representation
or warranty and assumes no responsibility with respect to the financial
condition of VFCC or the performance or observance by VFCC of any of its
obligations under this Agreement or any other instrument or document furnished
pursuant hereto; (iii) such assignee confirms that it has received a copy of
this Agreement, together with copies of such financial statements and other
documents and information as it has deemed appropriate to make its own credit
analysis and decision to enter into such Assignment and Acceptance; (iv) such
assignee will, independently and without reliance upon the Deal Agent or the
Liquidity Agent, such assigning Investor or any other Investor and based on such
documents and information as it shall deem appropriate at the time, continue to
make its own credit decisions in taking or not taking action under this
Agreement; (v) such assigning Investor and such assignee confirm that such
assignee is an Eligible Assignee; (vi) such assignee appoints and authorizes
each of the Deal Agent and the Liquidity Agent to take such action as agent on
its behalf and to exercise such powers under this Agreement as are delegated to
such agent by the terms hereof, together with such powers as are reasonably
incidental thereto; and (vii) such assignee agrees that it will perform in
accordance with their terms all of the obligations which by the terms of this
Agreement are required to be performed by it as an Investor.
(c) The Deal Agent shall maintain at its address referred to herein a copy
of each Assignment and Acceptance delivered to and accepted by it and a register
for the recordation of the names and addresses of the Investors and the
Commitment of, and principal amount of, each Asset Interest owned by each
investor from time to time (the "Register"). The entries in the Register shall
be conclusive and binding for all purposes, absent manifest error, and VFCC, the
Seller and the Investors may treat each Person whose name is recorded in the
Register as an Investor hereunder for all purposes of this Agreement. The
Register shall be available for inspection by VFCC, the Liquidity Agent or any
Investor at any reasonable time and from time to time upon reasonable prior
notice.
(d) Subject to the provisions of Section 10.1(a), upon its receipt of an
Assignment and Acceptance executed by an assigning Investor and an assignee, the
Deal Agent and the Liquidity Agent shall each, if such Assignment and Acceptance
has been completed and is in substantially the form of Exhibit D hereto, accept
such Assignment and Acceptance, and the Deal Agent shall then (i) record the
information contained therein in the Register and (ii) give prompt notice
thereof to VFCC.
(e) Each Investor may sell participations to one or more banks or other
entities in or to all or a portion of its rights and obligations under this
Agreement (including, without limitation, all or a portion of its Commitment and
each Asset Interest owned by it); provided, however, that (i) such Investor's
obligations under this Agreement (including, without limitation, its Commitment
hereunder) shall remain unchanged, (ii) such Investor shall remain solely
responsible to the other parties hereto for the performance of such obligations
and (iii) the Deal Agent and the other Investors shall continue to deal solely
and directly with such Investor in
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connection with such Investor's rights and obligations under this Agreement; and
provided, further, that the Deal Agent shall have confirmed that upon the
effective date of such participation the provisions of Section 3.03(f) of the
Administration Agreement shall be satisfied. Notwithstanding anything herein to
the contrary, each participant shall have the rights of an Investor (including
any right to receive payment) under Sections 2.14 and 2.15; provided, however,
that no participant shall be entitled to receive payment under either such
Section in excess of the amount that would have been payable under such Section
by the Seller to the Investor granting its participation had such participation
not been granted, and no Investor granting a participation shall be entitled to
receive payment under either such Section in an amount which exceeds the sum of
(i) the amount to which such Investor is entitled under such Section with
respect to any portion of any Asset Interest owned by such Investor which is not
subject to any participation plus (ii) the aggregate amount to which its
participants are entitled under such Sections with respect to the amounts of
their respective participations. With respect to any participation described in
this Section 10.1, the participant's rights as set forth in the agreement
between such participant and the applicable Investor to agree to or to restrict
such Investor's ability to agree to any modification, waiver or release of any
of the terms of this Agreement or to exercise or refrain from exercising any
powers or rights which such Investor may have under or in respect of this
Agreement shall be limited to the right to consent to any of the matters set
forth in Section 11.1 of this Agreement.
(f) Each Investor may, in connection with any assignment or participation
or proposed assignment or participation pursuant to this Section 10.1, disclose
to the assignee or participant or proposed assignee or participant any
information relating to the Seller or VFCC furnished to such Investor by or on
behalf of the Seller or VFCC, but such Investor shall require such assignee or
participant or proposed assignee or participant to keep all such information
confidential.
(g) In the event (i) an Investor ceases to qualify as an Eligible Assignee,
or (ii) an Investor makes demand for compensation pursuant to Section 2.15 or
Section 2.16, VFCC may, and, upon the direction of the Seller and prior to the
occurrence of the Termination Date, shall, in any such case, notwithstanding any
provision to the contrary herein, replace such Investor with an Eligible
Assignee by giving three Business Days' prior written notice to such Investor.
In the event of the replacement of an Investor, such Investor agrees (i) to
assign all of its rights and obligations hereunder to an Eligible Assignee
selected by VFCC upon payment to such Investor of the amount of such Investor's
Asset Interests together with any accrued and unpaid Yield thereon, all accrued
and unpaid commitment fees owing to such Investor and all other amounts owing to
such Investor hereunder and (ii) to execute and deliver an Assignment and
Acceptance and such other documents evidencing such assignment as shall be
necessary or reasonably requested by VFCC or the Deal Agent. In the event that
any Investor ceases to qualify as an Eligible Assignee, such affected Investor
agrees (1) to give the Deal Agent, the Seller and VFCC prompt written notice
thereof and (2) subject to the following proviso, to reimburse the Deal Agent,
the Liquidity Agent, the Seller, VFCC and the relevant assignee for all fees,
costs and expenses (including, without limitation, the reasonable fees and
out-of-pocket expenses of counsel for each of the Deal Agent, the Liquidity
Agent, the Seller and VFCC and such assignee)
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incurred by the Deal Agent, the Liquidity Agent, the Seller, VFCC and such
assignee. respectively, in connection with any assignment made pursuant to this
Section 10.1(g) by such affected Investor; provided, however, that such affected
Investor's liability for such costs, fees and expenses shall be limited to the
amount of any up-front fees paid to such affected Investor at the time that it
became a party to this Agreement.
(h) Nothing herein shall prohibit any Investor from pledging or assigning
as collateral any of its rights under this Agreement to any Federal Reserve Bank
in accordance with applicable law and any such pledge or collateral assignment
may be made without compliance with Section 10.1(a) or Section 10.1(b).
(i) In the event any Investor causes increased costs, expenses or taxes to
be incurred by the Deal Agent, Liquidity Agreement or VFCC in connection with
the assignment or participation of such Investor's rights and obligations under
this Agreement to an Eligible Assignee then such Investor agrees that it will
make reasonable efforts to assign such increased costs, expenses or taxes to
such Eligible Assignee in accordance with the provisions of this Agreement.
ARTICLE XI
MISCELLANEOUS
SECTION 11.1 AMENDMENTS AND WAIVERS.
(a) Except as provided in this Section 11.1, no amendment, waiver or other
modification of any provision of this Agreement shall be effective without the
written agreement of the Seller, the Deal Agent, VFCC and the Required
Investors; provided, however, that any amendment of this Agreement which is
solely for the purpose of adding a Purchaser or increasing the Commitment of all
Purchasers may be effected with the written consent of the Deal Agent. Any
waiver or consent shall be effective only in the specific instance and for the
specific purpose for which given.
(b) No amendment, waiver or other modification affecting the rights or
obligations of any Hedge Counterparty shall be effective against such Hedge
Counterparty without the written agreement of such Hedge Counterparty.
(c) No amendment, waiver or other modification adversely affecting the
rights or obligations of the Backup Servicer or Collateral Custodian shall be
effective against such Backup Servicer or Collateral Custodian without their
written agreement.
(d) The Seller shall not agree to any amendment, waiver or other
modification if the effect thereof is to jeopardize the Seller's status as a
qualifying special purpose entity under FASB Statement 125, as amended and
interpreted.
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SECTION 11.2 NOTICES, ETC.
All notices and other communications provided for hereunder shall, unless
otherwise stated herein, be in writing (including telex communication and
communication by facsimile copy) and mailed, telexed, transmitted or delivered,
as to each party hereto, at its address set forth under its name on the
signature pages hereof or specified in such party's Assignment and Acceptance or
at such other address as shall be designated by such party in a written notice
to the other parties hereto. All such notices and communications shall be
effective, upon receipt, or in the case of (a) notice by mail, five days after
being deposited in the United States mail, first class postage prepaid, (b)
notice by telex, when telexed against receipt of answer back, or (c) notice by
facsimile copy, when verbal communication of receipt is obtained, except that
notices and communications pursuant to Article II shall not be effective until
received with respect to any notice sent by mail or telex.
SECTION 11.3 [RESERVED.]
SECTION 11.4 NO WAIVER, RIGHTS AND REMEDIES.
No failure on the part of the Deal Agent, the Liquidity Agent or any
Secured Party or any assignee of any Secured Party to exercise, and no delay in
exercising, any right or remedy hereunder shall operate as a waiver thereof, nor
shall any single or partial exercise of any right or remedy hereunder preclude
any other or further exercise thereof or the exercise of any other right. The
rights and remedies herein provided are cumulative and not exclusive of any
rights and remedies provided by law.
SECTION 11.5 BINDING EFFECT.
This Agreement shall be binding upon and inure to the benefit of the
Seller, the Deal Agent, the Liquidity Agent, the Secured Parties and their
respective successors and permitted assigns and, in addition, the provisions of
Section 2.7 and 2.9 applicable to the Hedge Counterparty shall inure to the
benefit of each Hedge Counterparty, whether or not that Hedge Counterparty is a
Secured Party.
SECTION 11.6 TERM OF THIS AGREEMENT.
This Agreement, including, without limitation, the Seller's obligation to
observe its covenants set forth in Article V, and the Servicer's obligation to
observe its covenants set forth in Article VI, shall remain in full force and
effect until the Collection Date; provided, however, that the rights and
remedies with respect to any breach of any representation and warranty made or
deemed made by the Seller pursuant to Articles III and IV and the
indemnification and payment provisions of Article VIII and Article IX and the
provisions of Section 11.10 and Section 11.11 shall be continuing and shall
survive any termination of this Agreement.
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SECTION 11.7 GOVERNING LAW; CONSENT TO JURISDICTION; WAIVER OF OBJECTION
TO VENUE.
THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE
LAWS OF THE STATE OF NEW YORK. EACH OF THE SECURED PARTIES, THE SELLER, THE
LIQUIDITY AGENT AND THE DEAL AGENT HEREBY AGREES TO THE NON-EXCLUSIVE
JURISDICTION OF ANY FEDERAL COURT LOCATED WITHIN THE STATE OF NEW YORK. EACH OF
THE PARTIES HERETO AND EACH SECURED PARTY HEREBY WAIVES ANY OBJECTION BASED ON
FORUM NON CONVENIENS, AND ANY OBJECTION TO VENUE OF ANY ACTION INSTITUTED
HEREUNDER IN ANY OF THE AFOREMENTIONED COURTS AND CONSENTS TO THE GRANTING OF
SUCH LEGAL OR EQUITABLE RELIEF AS IS DEEMED APPROPRIATE BY SUCH COURT.
SECTION 11.8 WAIVER OF JURY TRIAL.
TO THE EXTENT PERMITTED BY APPLICABLE LAW, EACH OF THE SECURED PARTIES, THE
SELLER AND THE DEAL AGENT WAIVES ANY RIGHT TO HAVE A JURY PARTICIPATE IN
RESOLVING ANY DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT, OR OTHERWISE BETWEEN
THE PARTIES HERETO ARISING OUT OF, CONNECTED WITH, RELATED TO, OR INCIDENTAL TO
THE RELATIONSHIP BETWEEN ANY OF THEM IN CONNECTION WITH THIS AGREEMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY. INSTEAD, ANY SUCH DISPUTE RESOLVED IN COURT
WILL BE RESOLVED IN A BENCH TRIAL WITHOUT A JURY.
SECTION 11.9 COSTS, EXPENSES AND TAXES.
(a) In addition to (but without duplication of) the rights of
indemnification granted to the Deal Agent, the Liquidity Agent, the Secured
Parties and its or their Affiliates and officers, directors, employees and
agents thereof under Article VIII hereof, the Seller agrees to pay on demand all
reasonable costs and expenses of the Deal Agent, the Liquidity Agent, and the
Secured Parties incurred in connection with the preparation, execution,
delivery, administration (including periodic auditing), amendment or
modification of, or any waiver or consent issued in connection with, this
Agreement and the other documents to be delivered hereunder or in connection
herewith, including, without limitation, the reasonable fees and out-of-pocket
expenses of counsel for the Deal Agent, the Liquidity Agent, and the Secured
Parties with respect thereto and with respect to advising the Deal Agent, the
Liquidity Agent, and the Secured Parties as to their respective rights and
remedies under this Agreement and the other documents to be delivered hereunder
or in connection herewith in an amount not to exceed $85,000 (excluding any
Hedge Agreement) provided that the transaction contemplated herein closes on or
before December 29, 1998, and the structure described in the summary of terms
does not materially change, and all costs and expenses, if any (including
reasonable counsel fees and expenses), incurred by the Deal Agent, the Liquidity
Agent, or the Secured Parties in connection with the enforcement of this
Agreement and the other documents to be delivered hereunder or in
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connection herewith (including any Hedge Agreement); provided, that the fees
above other than legal fees may not exceed $5,000 per occurrence and per service
provider without FIB's consent which shall not unreasonably be withheld.
(b) The Seller shall pay on demand any and all stamp, sales, excise and
other taxes (excluding taxes based on income) and fees payable or determined to
be payable in connection with the execution, delivery, filing and recording of
this Agreement, the other documents to be delivered hereunder or any agreement
or other document providing liquidity support, credit enhancement or other
similar support to the Purchasers in connection with this Agreement or the
funding or maintenance of Capital hereunder.
(c) The Seller shall pay on demand all other costs, expenses and taxes
(excluding income taxes) ("Other Costs"), including, without limitation, all
reasonable costs and expenses incurred by the Deal Agent in connection with
periodic audits of the Seller's or the Servicer's books and records and the cost
of rating VFCC's commercial paper by independent financial rating agencies,
which are incurred as a result of the execution of this Agreement.
SECTION 11.10 NO PROCEEDINGS.
Each of the Seller, the Deal Agent, the Liquidity Agent and the Secured
Parties hereby agrees that it will not institute against, or join any other
Person in instituting against VFCC any proceedings of the type referred to in
Section 4.1(f) 50 long as any commercial paper issued by VFCC shall be
outstanding and there shall not have elapsed one year and one day since the last
day on which any such commercial paper shall have been outstanding.
SECTION 11.11 RECOURSE AGAINST CERTAIN PARTIES.
(a) No recourse under or with respect to any obligation, covenant or
agreement (including, without limitation, the payment of any fees or any other
obligations) of any Secured Party as contained in this Agreement or any other
agreement, instrument or document entered into by it pursuant hereto or in
connection herewith shall be had against any manager or administrator of such
Secured Party or any incorporator, affiliate, stockholder, officer, employee or
director of such Secured Party or of any such manager or administrator, as such,
by the enforcement of any assessment or by any legal or equitable proceeding, by
virtue of any statute or otherwise it being expressly and understood that the
agreements of such Secured Party contained in this Agreement and all of the
other agreements, instruments and documents entered into by it pursuant hereto
or in connection herewith are, in each case, solely the corporate obligations of
such Secured Party, and that no personal liability whatsoever shall attach to or
be incurred by any manager or administrator of such Secured Party or any
incorporator, stockholder, affiliate, officer, employee or director of such
Secured Party or of any such manager or administrator, as such, or any other of
them, under or by reason of any of the obligations. covenants or agreements of
such Secured Party contained in this Agreement or in any other such instruments,
documents or agreements, or which are implied therefrom, and that any and all
personal liability of every such manager or administrator of such Secured Party
and each
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incorporator, stockholder, affiliate, officer, employee or director of such
Secured Party or of any such administrator, or any of them, for breaches by such
Secured Party of any such obligations, covenants or agreements, which liability
may arise either at common law or at equity, by statute or constitution, or
otherwise, is hereby expressly waived as a condition of and in consideration for
the execution of this Agreement.
(b) Notwithstanding anything in this Agreement or any other Transaction
Document to the contrary, VFCC shall have no obligation to pay any amount
required to be paid by it hereunder or thereunder in excess of any amount
available to VFCC after paying or making provision for the payment of its
Commercial Paper Notes. All payment obligations of VFCC hereunder are contingent
upon the availability of funds in excess of the amounts necessary to pay
Commercial Paper Notes; and each of the Seller, the Servicer, the Backup
Servicer, the Deal Agent, the Liquidity Agent and the Secured Parties agrees
that they shall not have a claim under Section 101(5) of the Bankruptcy Code if
and to the extent that any such payment obligation exceeds the amount available
to VFCC to pay such amounts after paying or making provision for the payment of
its Commercial Paper Notes.
(c) The provisions of this Section 11.11 shall survive the termination of
this Agreement.
SECTION 11.12 PROTECTION OF OWNERSHIP INTEREST; APPOINTMENT OF DEAL AGENT
AS ATTORNEY-IN-FACT.
(a) The Seller agrees that from time to time, at its expense, it will
promptly execute and deliver all instruments and documents, and take all
actions, that may reasonably be necessary or desirable, or that the Deal Agent
may reasonably request, to perfect, protect or more fully evidence the Asset
Interests and the undivided ownership interest in the Assets in the Asset Pool
represented by such Asset Interests, or to enable the Deal Agent or the Secured
Parties to exercise and enforce their rights and remedies hereunder.
(b) If the Seller or the Servicer fails to perform any of its obligations
hereunder after five Business Days' notice from the Deal Agent, the Deal Agent
or any Secured Party may (but shall not be required to) perform, or cause
performance of, such obligation; and the Deal Agent's or such Secured Party's
reasonable costs and expenses incurred in connection therewith shall be payable
by the Seller (if the Servicer that fails to so perform is the Seller or an
Affiliate thereof) as provided in Article VIII, as applicable. The Seller
irrevocably authorizes the Deal Agent and appoints the Deal Agent as its
attorney-in-fact to act on behalf of the Seller (i) to execute on behalf of the
Seller as debtor and to file financing statements necessary or desirable in the
Deal Agent's sole discretion to perfect and to maintain the perfection and
priority of the interest of the Secured Parties in the Asset Pool and (ii) to
file a carbon, photographic or other reproduction of this Agreement or any
financing statement with respect to the Asset Pool as a financing statement in
such offices as the Deal Agent in its sole discretion deems necessary or
desirable to perfect and to maintain the perfection and priority of the
interests of the Secured Parties in the Asset Pool. This appointment is coupled
with an interest and is irrevocable.
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(c) The parties hereto intend that the conveyance of Asset Interests by the
Seller to the Purchasers shall be treated as sales for all purposes. If, despite
such intention, a determination is made that such transactions shall not be
treated as sales, then the parties hereto intend that this Agreement constitutes
a security agreement and the transactions effected hereby constitute secured
loans by the Purchasers to the Seller under applicable law. For such purpose,
the Seller hereby transfers, conveys, assigns and grants to the Deal Agent, for
the benefit of the Secured Parties, a continuing security interest in all
Assets, all Collections, all Hedging Agreements and the proceeds of the
foregoing to secure the repayment of all Capital, all payments at any time due
or accrued in respect of the Yield on any Asset Interest and all other payments
at any time due (whether accrued or due) by the Seller hereunder (including
without limit any amount owing under Article VIII hereof), under any Hedging
Agreement (including, without limitation, payments in respect of the termination
of any such Hedging Agreement) or under any fee letter to the Deal Agent and
each Purchaser.
SECTION 11.13 CONFIDENTIALITY
(a) Each of the Deal Agent, the Secured Parties, the Liquidity Agent and
the Seller shall maintain and shall cause each of its employees and officers to
maintain the confidentiality of the Agreement and the other confidential
proprietary information with respect to the other parties hereto and their
respective businesses obtained by it or them in connection with the structuring,
negotiating and execution of the transactions contemplated herein, except that
each such party and its officers and employees may (i) disclose such information
to its external accountants and attorneys and as required by an applicable law
or order of any judicial or administrative proceeding, (ii) disclose the
existence of this Agreement, but not the financial terms thereof and (iii)
disclose the Agreement and such information in any suit, action. proceeding or
investigation (whether in law or in equity or pursuant to arbitration) involving
and of the Transaction Documents or any Hedging Agreement for the purpose of
defending itself, reducing itself, reducing its liability, or protecting or
exercising any of its claims, rights, remedies, or interests under or in
connection with any of the Transaction Documents or any Hedging Agreement.
(b) Anything herein to the contrary notwithstanding, the Seller hereby
consents to the disclosure of any nonpublic information with respect to it (i)
to the Deal Agent, the Liquidity Agent, or the Secured Parties by each other,
(ii) by the Liquidity Agent, the Deal Agent or the Secured Parties to any
prospective or actual Eligible Assignee or participant of any of them or (iii)
by the Deal Agent, the Liquidity Agent or the Secured Parties to any Rating
Agency, commercial paper dealer or provider of a surety, guaranty or credit or
liquidity enhancement to a Secured Party and to any officers, directors,
employees, outside accountants and attorneys of any of the foregoing, provided
each such Person is informed of the confidential nature of such information and
agree to be bound hereby. In addition, the Secured Parties, the Liquidity Agent
and the Deal Agent may disclose any such nonpublic information pursuant to any
law, rule. regulation, direction, request or order of any judicial,
administrative or regulatory authority or proceedings.
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SECTION 11.14 EXECUTION IN COUNTERPARTS; SEVERABILITY; INTEGRATION.
This Agreement may be executed in any number of counterparts and by
different parties hereto in separate counterparts, each of which when so
executed shall be deemed to be an original and all of which when taken together
shall constitute one and the same agreement. In case any provision in or
obligation under this Agreement shall be invalid, illegal or unenforceable in
any jurisdiction, the validity, legality and enforceability of the remaining
provisions or obligations, or of such provision or obligation in any other
jurisdiction, shall not in any way be affected or impaired thereby. This
Agreement contains the final and complete integration of all prior expressions
by the parties hereto with respect to the subject matter hereof and shall
constitute the entire agreement among the parties hereto with respect to the
subject matter hereof, superseding all prior oral or written understandings
other than any fee letter delivered by the Originator to the Deal Agent and the
Purchasers.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
96
<PAGE> 102
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
by their respective officers thereunto duly authorized, as of the date first
above written.
THE SELLER: FNBNE FUNDING CORP.
By: /s/Theodore Horan
Name: Theodore Horan
Title: Vice President
THE SERVICER: FIRST INTERNATIONAL BANK
(f/k/a First National Bank of England)
By: /s/ Theodore Horan
Name: Theodore Horan
Title: Senior Vice President
[SIGNATURES CONTINUED ON THE FOLLOWING PAGE]
97
<PAGE> 103
THE REQUIRED INVESTORS: FIRST UNION NATIONAL BANK
By: /s/Bill A. Shirley
Name: Bill A. Shirley
Title: Senior Vice President
Commitment: $65,000,000
First Union National Bank
One First Union Center, TW-9
Charlotte, North Carolina 28288
Attention: Capital Markets Credit
Administration
Facsimile: (704) 374-3254
Telephone: (704) 374-4001
THE DEAL AGENT: FIRST UNION CAPITAL MARKETS CORP.
By: /s/James L. Sigman
Name: James L. Sigman
Title: Director
First Union National Bank
One First Union Center, TW-9
Charlotte, North Carolina 28288
Attention: Conduit Administration
Facsimile: (704) 383-6036
Telephone: (704) 383-9343
[SIGNATURES CONTINUED ON THE FOLLOWING PAGE]
98
<PAGE> 104
THE HEDGE COUNTERPARTY: FIRST UNION NATIONAL BANK
By: /s/Bill A. Shirley
Name: Bill A. Shirley
Title: Senior Vice President
First Union National Bank
One First Union Center, TW-9
Charlotte, North Carolina 28288
Attention: Capital Markets Credit
Administration
Facsimile: (704) 374-3254
Telephone: (704) 374-4001
THE LIQUIDITY AGENT: FIRST UNION NATIONAL BANK
By: /s/Bill A. Shirley
Name: Bill A. Shirley
Title: Senior Vice President
First Union National Bank
One First Union Center, TW-9
Charlotte, North Carolina 28288
Attention: Capital Markets Credit
Administration
Facsimile: (704) 374-3254
Telephone: (704) 374-4001
[SIGNATURES CONTINUED ON THE FOLLOWING PAGE]
99
<PAGE> 105
THE COLLATERAL CUSTODIAN HSBC BANK USA
By: /s/Susan Barstock
Name: Susan Barstock
Title: Assistant Vice President
HSBC Bank USA
140 Broadway
Corporate Trust Department, 12th Floor
New York, New York 10005
Attention: Susan Barstock
Facsimile: (212) 658-6425
Telephone: (212) 658-2079
THE BACKUP SERVICER HSBC BANK USA
By: /s/Susan Barstock
Name: Susan Barstock
Title: Assistant Vice President
HSBC Bank USA
140 Broadway
Corporate Trust Department, 12th Floor
New York, New York 10005
Attention: Susan Barstock
Facsimile: (212) 658-6425
Telephone:
100
<PAGE> 1
Exhibit 10.13.1
EXECUTION COPY
AMENDMENT NO. 1 TO
AMENDED AND RESTATED LOAN
PURCHASE AND SERVICING AGREEMENT
THIS AMENDMENT NO. 1 TO AMENDED AND RESTATED LOAN PURCHASE AND
SERVICING AGREEMENT, dated as of NOVEMBER 23, 1999 (this "Amendment"), is
entered into by and among FNBNE FUNDING CORP., as the Seller, FIRST
INTERNATIONAL BANK (f/k/a First National Bank of New England), certain
INVESTORS, VARIABLE FUNDING CAPITAL CORPORATION ("VFCC"), as a Purchaser, FIRST
UNION SECURITIES, INC. (successor-in-interest to First Union Capital Markets
Corp.), as the Deal Agent, FIRST UNION NATIONAL BANK, as the Liquidity Agent,
and HSBC BANK USA, as the Collateral Custodian and Backup Servicer. Capitalized
terms used but not otherwise defined herein shall have the meanings given to
such terms in the Agreement (as defined below).
WHEREAS, the parties hereto entered into that certain Amended and
Restated Loan Purchase and Servicing Agreement, dated as of September 24, 1999
(the "Agreement");
WHEREAS, the parties hereto desire to amend the Agreement in certain
respects as provided herein;
NOW, THEREFORE, in consideration of the premises and other mutual
covenants contained herein, the parties hereto agree as follows:
SECTION 1. AMENDMENTS.
(a) The definition of "Commitment Termination Date" set forth in
Section 1.1 of the Agreement is hereby amended and restated as follows:
"Commitment Termination Date: November 15, 2002 or such later
date to which the Commitment Termination Date may be extended
(if extended) in the sole discretion of VFCC and each Investor
in accordance with the Terms of Section 2.1(b)."
(b) Section 1.1 of the Agreement is hereby amended by adding the
following defined term:
"Permitted Securitization Transaction: Any (a) financing
transaction undertaken by the Seller or an Affiliate of the
Seller that is secured, directly or indirectly, by the Assets
or any portion thereof or any interest therein, and (b) any
securitization, including any sale, lease, whole loan sale,
asset securitization,
<PAGE> 2
secured loan or other transfer, to the extent approved in
writing by the Deal Agent in its sole discretion."
(c) The definition of "Purchase Limit" set forth in Section 1.1 of the
Agreement is hereby amended and restated in its entirety as follows:
"Purchase Limit: At any time $95,000,000, on or after the
Termination Date, the "Purchase Limit" shall mean the
aggregate outstanding Capital."
(d) Section 1.1 of the Agreement is hereby amended by adding the
following defined term:
"Servicer's Put Option Date Certificate: A certificate
delivered by the Servicer pursuant to Section 2.17(a) in the
form of Exhibit M hereto."
(e) Article II of the Agreement is hereby amended to add the following
new Section 2.17:
"SECTION 2.17 PUT OPTION.
(a) The Seller hereby grants to the Deal Agent, on behalf of
the Purchasers, the option (the "Put Option") to require the
Seller to prepay all or a portion of the aggregate Capital in
connection with the sale and assignment to the Seller by the
Deal Agent, on behalf of the Purchasers, of the Assets,
subject to the following terms and conditions:
(i) The Deal Agent, on behalf of the Purchasers,
shall have given the Seller at least fifteen (15) days prior
written notice of its intention to exercise its Put Option.
Such notice shall specify the portion of the aggregate Capital
for which the Put Option is being exercised and shall set for
closing a date (the "Put Option Purchase Date"), which is not
less than fifteen (15) nor more than ninety (90) days after
the date such notice is sent. The Deal Agent, on behalf of the
Purchasers, may rescind such notice, without liability of any
kind, at any time prior to the Put Option Purchase Date by
giving written notice thereof to the Seller;
(ii) Any Put Option shall be exercised solely in
connection with a Permitted Securitization Transaction;
(iii) No portion of the proceeds used by the Seller
to prepay Capital on a Put Option Purchase Date shall be
realized from the Seller's sale or assignment of Assets back
to the Originator on such date;
(iv) Unless a Put Option Purchase Date is a Payment
Date (in which case the relevant calculations with respect to
such Put Option shall be reflected on the applicable Monthly
Report), the Servicer shall deliver to the Deal Agent a
<PAGE> 3
Servicer's Put Option Purchase Date Certificate, together with
evidence to the reasonable satisfaction of the Deal Agent
(which evidence may consist solely of the Servicer's Put
Option Purchase Date Certificate) that the Seller shall have
sufficient funds on the related Put Option Purchase Date to
effect the contemplated Put Option in accordance with this
Agreement. In effecting a Put Option, the Seller may use the
proceeds of sales of the Assets (which sales must be made in
arm's-length transactions to Persons other than the
Originator);
(v) After giving effect to the prepayment of Capital
pursuant to the exercise of the Put Option and the assignment
to the Seller of the Assets on any Put Option Purchase Date,
(x) the remaining aggregate Capital shall be less than or
equal to the lesser of the Capital Limit and the Purchase
Limit, (y) the representations and warranties contained in
Section 4.1 and Section 4.2 hereof shall continue to be
correct in all material respects, except to the extent
relating to an earlier date, and (z) neither an Early
Amortization Event nor an event that, with the giving of
notice of the lapse of time, or both, would become an Early
Amortization Event, shall have resulted.
(vi) On the related Put Option Purchase Date, the
Deal Agent shall have received, for the benefit of the
Purchasers and the Hedge Counterparties, as applicable, in
immediately available funds, an amount equal to the sum of (i)
the portion of the aggregate Capital to be prepaid plus (ii)
an amount equal to all unpaid Yield to the extent reasonably
determined by the Deal Agent to be attributable to that
portion of the aggregate Capital to be paid in connection with
the Put Option plus (iii) an aggregate amount equal to the sum
of all other amounts due and owing to the Deal Agent, the
Purchasers and the Hedge Counterparties, as applicable, under
this Agreement and the other Transaction Documents, to the
extent accrued to such date and to accrue thereafter
(including, without limitation, Breakage Costs and Hedge
Breakage Costs).
(vii) On or prior to each Put Option Purchase Date,
the Deal Agent shall designate the Assets to be sold and
assigned to the Seller.
(b) In connection with any Put Option that does not constitute
a prepayment in full of the outstanding aggregate Capital,
then, following receipt by the Deal Agent of the amounts
referred to in clause (v) above, there shall be sold and
assigned to the Seller all of the right, title and interest of
the Deal Agent in, to and under the portion of the Assets so
retransferred and such portion of the Assets so retransferred
shall be released from the Lien of this Agreement (subject to
the requirements of clause (iv) above).
(c) The Seller hereby agrees to pay the reasonable legal fees
and expenses of the Deal Agent, the Purchasers and the Hedge
Counterparties in connection with any Put Option (including,
but not limited to, expenses incurred in connection with the
release of the Lien of the Deal Agent, the Purchasers, the
Hedge
<PAGE> 4
Counterparties and any other party having such an interest in
the Assets in connection with such Put Option).
(d) In connection with any Put Option, on the related Put
Option Purchase Date, the Deal Agent, on behalf of the
Purchasers and the Hedge Counterparties, shall, at the expense
of the Seller (i) execute such instruments of release with
respect to the portion of the Assets to be retransferred to
the Seller, in recordable form if necessary, in favor of the
Seller as the Seller may reasonably request, (ii) deliver any
portion of the Assets to be retransferred to the Seller in its
possession to the Seller and (iii) otherwise take such
actions, and cause or permit the Collateral Custodian to take
such actions, as are necessary and appropriate to release the
Lien of the Deal Agent on the portion of the Assets to be
retransferred to the Seller and release and deliver to the
Seller such portion of the Assets to be retransferred to the
Seller."
(e) Notwithstanding any other provision of this Section 2.17,
the closing of the Put Option may only occur if the Seller
obtains the Capital for which the Put Option is being
exercised by transferring the applicable Assets in a Permitted
Securitization Transaction.
(g) The amount of the "Commitment" for the Required Investors set forth
on the signature pages of the Agreement is hereby amended and restated
to be "$95,000,000."
SECTION 2. AGREEMENT IN FULL FORCE AND EFFECT AS AMENDED. Except as
specifically amended hereby, the Agreement shall remain in full force and
effect. All references to the Agreement shall be deemed to mean the Agreement as
modified hereby. This Amendment shall not constitute a novation of the
Agreement, but shall constitute an amendment thereof. The parties hereto agree
to be bound by the terms and conditions of the Agreement, as amended by this
Amendment, as though such terms and conditions were set forth herein.
SECTION 3. REPRESENTATIONS. Each of the Seller and Servicer represent
and warrant as of the date of this Amendment as follows:
(i) it is duly incorporated or organized, validly existing and
in good standing under the laws of its jurisdiction of incorporation or
organization;
(ii) the execution, delivery and performance by it of this
Amendment are within its powers, have been duly authorized, and do not
contravene (A) its charter, by-laws, or other organizational documents,
or (B) any Requirements of Law applicable to it;
(iii) no consent, license, permit, approval or authorization
of, or registration, filing or declaration with any governmental
authority, is required in connection with the execution, delivery,
performance, validity or enforceability of this Amendment by or against
it;
<PAGE> 5
(iv) this Amendment has been duly executed and delivered by
it;
(v) this Amendment constitutes its legal, valid and binding
obligation enforceable against it in accordance with its terms, except
as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditors' rights generally or by general principles of equity;
(vi) it is not in default under the Agreement; and
(vii) there is no Early Amortization Event, Servicer
Termination Event or event that, with the giving of notice or the lapse
of time, or both, would become an Early Amortization Event or Servicer
Termination Event.
SECTION 4. CONDITIONS PRECEDENT. The effectiveness of this Amendment is
subject to the following conditions precedent: (i) delivery to the Deal Agent of
a copy of the Amendment, duly executed by each of the parties hereto; (ii)
delivery to the Deal Agent (in a form acceptable to it) of a due authorization,
execution, and enforceability opinion with respect to this Amendment; and (iii)
such other documents, agreements, certificates or legal opinions as the Deal
Agent, may reasonably require.
SECTION 5. MISCELLANEOUS.
(a) This Amendment may be executed in any number of counterparts, and
by the different parties hereto on the same or separate counterparts, each of
which shall be deemed to be an original instrument but all of which together
shall constitute one and the same agreement.
(b) The descriptive headings of the various sections of this Amendment
are inserted for convenience of reference only and shall not be deemed to affect
the meaning or construction of any of the provisions hereof.
(c) This Amendment may not be amended or otherwise modified except as
provided in the Agreement.
(d) First Union certifies by execution hereof that it is an Investor
with Commitments in excess of 66-2/3% of the Purchase Limit, and therefore is a
Required Investor pursuant to the Agreement.
(e) The failure or unenforceability of any provision hereof shall not
affect the other provisions of this Amendment.
(f) Whenever the context and construction so require, all words used in
the singular number herein shall be deemed to have been used in the plural, and
vice versa, and the masculine gender shall include the feminine and neuter and
the neuter shall include the masculine and feminine.
<PAGE> 6
(g) This Amendment represents the final agreement between the parties
and may not be contradicted by evidence of prior, contemporaneous or subsequent
oral agreements between the parties. There are no unwritten oral agreements
between the parties.
(h) THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES UNDER
THIS AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REFERENCE TO ITS CONFLICT OF LAWS
PROVISIONS.
[Remainder of Page Intentionally Left Blank]
<PAGE> 7
IN WITNESS WHEREOF, the parties have caused this Amendment to be
executed by their respective officers thereunto duly authorized, as of the date
first above written.
THE SELLER: FNBNE FUNDING CORP.
By: /s/ Ted Horan
--------------------------
Name: Ted Horan
--------------------------
Title: Vice President
--------------------------
THE SERVICER: FIRST INTERNATIONAL BANK
(f/k/a First National Bank of England)
By: /s/Ted Horan
--------------------------
Name: Ted Horan
--------------------------
Title: Senior Vice President
--------------------------
THE REQUIRED INVESTORS: FIRST UNION NATIONAL BANK
By: /s/Bill A. Shirley
--------------------------
Name: Bill A. Shirley
--------------------------
Title: Senior Vice President
--------------------------
Commitment: $95,000,000
First Union National Bank
One First Union Center, TW-9
Charlotte, North Carolina 28288
Attention: Capital Markets Credit Administration
Facsimile: (704) 374-3254
Telephone: (704) 374-4001
S-1
<PAGE> 8
VFCC: VARIABLE FUNDING CAPITAL CORPORATION
By First Union Securities, Inc. (successor-in-
interest to First Union Capital Markets Corp.)
By: /s/Paul S. Zajac
--------------------------
Name: Paul S. Zajac
--------------------------
Title: Vice President
--------------------------
First Union Securities, Inc.
One First Union Center, TW-9
Charlotte, North Carolina 28288
Attention: Conduit Administration
Facsimile: (704) 383-6036
Telephone: (704) 383-9343
With a copy to: Lord Securities Corp.
2 Wall Street, 19th Floor
New York, New York 10005
Attention: Vice President
Facsimile: (212) 346-9012
Confirmation No.: (212) 346-9008
THE DEAL AGENT: FIRST UNION SECURITIES, INC.
(successor-in-interest First Union Capital Markets
Corp.)
By: /s/James L. Sigman
--------------------------
Name: James L. Sigman
--------------------------
Title: Director
--------------------------
First Union Securities, Inc.
One First Union Center, TW-9
Charlotte, North Carolina 28288
Attention: Conduit Administration
Facsimile: (704) 383-6036
Telephone: (704) 383-9343
S-2
<PAGE> 9
THE HEDGE COUNTERPARTY: FIRST UNION NATIONAL BANK
By: /s/ Bill A. Shirley
--------------------------
Name: Bill A. Shirley
--------------------------
Title: Senior Vice President
--------------------------
First Union National Bank
One First Union Center, TW-9
Charlotte, North Carolina 28288
Attention: Capital Markets Credit Administration
Facsimile: (704) 374-3254
Telephone: (704) 374-4001
THE LIQUIDITY AGENT: FIRST UNION NATIONAL BANK
By: /s/Bill A. Shirley
--------------------------
Name: Bill A. Shirley
--------------------------
Title: Senior Vice President
--------------------------
First Union National Bank
One First Union Center, TW-9
Charlotte, North Carolina 28288
Attention: Capital Markets Credit Administration
Facsimile: (704) 374-3254
Telephone: (704) 374-4001
S-3
<PAGE> 10
THE COLLATERAL CUSTODIAN: HSBC BANK USA
By: /s/Susan Barstock
--------------------------
Name: Susan Barstock
--------------------------
Title: Assistant Vice President
--------------------------
HSBC Bank USA
140 Broadway
Corporate Trust Department, 12th Floor
New York, New York 10005
Attention: Susan Barstock
Facsimile: (212) 658-6425
THE BACKUP SERVICER: HSBC BANK USA
By: /s/Susan Barstock
--------------------------
Name: Susan Barstock
--------------------------
Title: Assistant Vice President
--------------------------
HSBC Bank USA
140 Broadway
Corporate Trust Department, 12th Floor
New York, New York 10005
Attention: Susan Barstock
Facsimile: (212) 658-6425
S-4
<PAGE> 1
Exhibit 10.15.1
POOLING AND SERVICING AGREEMENT
Dated as of May 31, 1999
HSBC Bank USA
(Trustee)
and
FIRST INTERNATIONAL BANK, NATIONAL ASSOCIATION
(Seller and Servicer)
First International Bank
SBA Loan-Backed Adjustable Rate
Certificates, Series 1999-1, Class A, Class M and Class B
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Section Page
- ------- ----
<S> <C>
ARTICLE I
DEFINITIONS
Definitions ................................................................................................... 1
ARTICLE II
SALE AND CONVEYANCE OF THE TRUST FUND
2.01 Sale and Conveyance of Trust Fund................................................................ II-1
2.02 Possession of SBA Files.......................................................................... II-1
2.03 Books and Records................................................................................ II-1
2.04 Delivery of SBA Loan Documents................................................................... II-2
2.05 Acceptance by Trustee of the Trust Fund; Certain Substitutions; Certification by Trustee;........ II-5
2.06 [Intentionally Omitted].......................................................................... II-7
2.07 Authentication of Certificates................................................................... II-7
2.08 Fees and Expenses of the Trustee................................................................. II-7
2.09 Sale and Conveyance of the Subsequent SBA Loans.................................................. II-7
2.10 Optional Purchase of Defaulted SBA Loans......................................................... II-10
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.01 Representations of the Bank..................................................................... III-1
3.02 Individual SBA Loans............................................................................ III-4
3.03 Purchase and Substitution of Defective SBA Loans............................................... III-10
</TABLE>
(i)
<PAGE> 3
<TABLE>
<S> <C>
ARTICLE IV
THE CERTIFICATES
4.01 The Certificates................................................................................. IV-1
4.02 Registration of Transfer and Exchange of Certificates............................................ IV-1
4.03 Mutilated, Destroyed, Lost or Stolen Certificates................................................ IV-9
4.04 Persons Deemed Owners............................................................................ IV-10
ARTICLE V
ADMINISTRATION AND SERVICING OF SBA LOANS
5.01 Duties of the Servicer............................................................................ V-1
5.02 Liquidation of SBA Loans.......................................................................... V-5
5.03 Establishment of Principal and Interest Accounts; Deposits in Principal and Interest Accounts..... V-6
5.04 Permitted Withdrawals From the Principal and Interest Account..................................... V-8
5.05 [Intentionally Omitted]........................................................................... V-9
5.06 Transfer of Accounts.............................................................................. V-9
5.07 Maintenance of Hazard Insurance................................................................... V-10
5.08 [Intentionally Omitted]........................................................................... V-10
5.09 Fidelity Bond..................................................................................... V-10
5.10 Title, Management and Disposition of Foreclosed Property.......................................... V-11
5.11 [Omitted.]........................................................................................ V-12
5.12 Collection of Certain SBA Loan Payments........................................................... V-12
5.13 Access to Certain Documentation and Information Regarding the SBA Loans........................... V-13
ARTICLE VI
PAYMENTS TO THE CERTIFICATEHOLDERS
6.01 Establishment of Certificate Account; Deposits in Certificate Account; Permitted Withdrawals from
Certificate Account........................................................................... VI-1
6.02 Establishment of Spread Account; Deposits in Spread Account; Permitted Withdrawals from
Spread Account ............................................................................... VI-2
</TABLE>
(ii)
<PAGE> 4
<TABLE>
<S> <C>
6.03 Establishment of Expense Account; Deposits in Expense Account; Permitted Withdrawals from
Expense Account .............................................................................. VI-4
6.04 Pre-Funding Account and Capitalized Interest Account.............................................. VI-5
6.05 [Intentionally Omitted]........................................................................... VI-7
6.06 Investment of Accounts............................................................................ VI-7
6.07 Distributions..................................................................................... VI-8
6.08 [Omitted]......................................................................................... VI-10
6.09 Statements........................................................................................ VI-10
6.10 Advances by the Servicer.......................................................................... VI-14
6.11 Compensating Interest............................................................................. VI-15
6.12 Reports of Foreclosure and Abandonment of Mortgaged Property...................................... VI-15
ARTICLE VII
GENERAL SERVICING PROCEDURE
7.01 [Omitted]......................................................................................... VII-1
7.02 Satisfaction of Mortgages and Collateral and Release of SBA Files................................. VII-1
7.03 Servicing Compensation............................................................................ VII-2
7.04 Annual Statement as to Compliance................................................................. VII-3
7.05 Annual Independent Public Accountants' Servicing Report........................................... VII-3
7.06 SBA's and Trustee's Right to Examine Servicer Records and Audit Operations........................ VII-3
7.07 Reports to the Trustee; Principal and Interest Account Statements................................. VII-4
7.08 Premium Protection Fee and Servicing Fee.......................................................... VII-4
ARTICLE VIII
REPORTS TO BE PROVIDED BY SERVICER
8.01 Financial Statements.............................................................................. VIII-1
</TABLE>
(iii)
<PAGE> 5
<TABLE>
<S> <C>
ARTICLE IX
THE SERVICER
9.01 Indemnification; Third Party Claims.............................................................. IX-1
9.02 Merger or Consolidation of the Servicer; Assignment of the Servicer's Duties..................... IX-2
9.03 Limitation on Liability of the Servicer and Others............................................... IX-3
9.04 Servicer Not to Resign........................................................................... IX-3
ARTICLE X
DEFAULT
10.01 Events of Default................................................................................. X-1
10.02 Trustee to Act; Appointment of Successor.......................................................... X-3
10.03 Waiver of Defaults................................................................................ X-5
10.04 Control by Majority Certificateholders and Others................................................. X-5
ARTICLE XI
TERMINATION
11.01 Termination...................................................................................... XI-1
11.02 Accounting Upon Termination of Servicer.......................................................... XI-2
ARTICLE XII
THE TRUSTEE
12.01 Duties of Trustee............................................................................... XII-1
12.02 Certain Matters Affecting the Trustee........................................................... XII-2
12.03 Trustee Not Liable for Certificates or SBA Loans................................................ XII-4
12.04 Trustee May Own Certificates.................................................................... XII-4
12.05 Servicer To Pay Trustee's Fees and Expenses..................................................... XII-5
12.06 Eligibility Requirements for Trustee............................................................ XII-5
12.07 Resignation and Removal of the Trustee.......................................................... XII-6
12.08 Successor Trustee............................................................................... XII-7
12.09 Merger or Consolidation of Trustee.............................................................. XII-8
</TABLE>
(iv)
<PAGE> 6
<TABLE>
<S> <C>
12.10 Appointment of Co-Trustee or Separate Trustee................................................... XII-8
12.11 Authenticating Agent............................................................................ XII-10
12.12 Tax Returns and Reports......................................................................... XII-10
12.13 Protection of Trust Fund........................................................................ XII-11
12.14 Representations, Warranties and Covenants of Trustee............................................ XII-12
ARTICLE XIII
MISCELLANEOUS PROVISIONS
13.01 Acts of Certificateholders...................................................................... XIII-1
13.02 Amendment....................................................................................... XIII-1
13.03 Recordation of Agreement........................................................................ XIII-2
13.04 Duration of Agreement........................................................................... XIII-2
13.05 Governing Law................................................................................... XIII-2
13.06 Notices......................................................................................... XIII-2
13.07 Severability of Provisions...................................................................... XIII-3
13.08 No Partnership.................................................................................. XIII-3
13.09 Counterparts.................................................................................... XIII-3
13.10 Successors and Assigns.......................................................................... XIII-3
13.11 Headings........................................................................................ XIII-3
13.12 Paying Agent.................................................................................... XIII-4
13.13 Notification to Rating Agency................................................................... XIII-4
13.14 Third Party Rights.............................................................................. XIII-5
13.15 Inconsistencies................................................................................. XIII-5
</TABLE>
(v)
<PAGE> 7
EXHIBIT INDEX
EXHIBIT A Contents of SBA File
EXHIBIT B-1 Form of Class A Certificate
EXHIBIT B-2 Form of Class M Certificate
EXHIBIT B-3 Form of Class B Certificate
EXHIBIT C Principal and Interest Account Letter Agreement
EXHIBIT D [Omitted]
EXHIBIT E Wiring Instructions Form
EXHIBIT F-1 Initial Certification
EXHIBIT F-2 Final Certification
EXHIBIT G [Omitted]
EXHIBIT H SBA Loan Schedule
EXHIBIT I Request for Release of Documents
EXHIBIT J Form of Liquidation Report
EXHIBIT K Form of Delinquency Report
EXHIBIT L Servicer's Monthly Computer Diskette Format
EXHIBIT M Multi-Party Agreement
EXHIBIT N Spread Account Agreement
EXHIBIT O-1 Form of Transferee Letter
EXHIBIT O-2 Form of Rule 144A Certification
EXHIBIT P List of SBA Loans with lost SBA Notes
(vi)
<PAGE> 8
Agreement dated as of May 31, 1999, between HSBC Bank USA, as
trustee (the "Trustee"), First International Bank, National Association, as
Seller (in such capacity, the "Seller") and as Servicer (in such capacity, the
"Servicer", and collectively or in another capacity, the "Bank"):
PRELIMINARY STATEMENT
The Seller, in the ordinary course of its business, originates
and acquires SBA Section 7(a) Loans (the "SBA Section 7(a) Loans") to small
businesses in compliance with the provisions of the Small Business Act and the
rules and regulations thereunder, which SBA Section 7(a) Loans are evidenced by
the SBA Notes in favor of the Seller.
Pursuant to and in accordance with the provisions of the Small
Business Act and the Loan Guaranty Agreement, a portion of each SBA Section 7(a)
Loan has been guaranteed by the Small Business Administration (the "SBA").
The Seller has previously sold the Guaranteed Interest (as
defined herein) in the SBA Section 7(a) Loans to certain Registered Holders
pursuant to SBA Form 1086 Agreements between such Registered Holders, the SBA
and the Seller. In accordance with such SBA Form 1086 Agreements, the parties
hereto acknowledge that the SBA is the party in interest with respect to the
Guaranteed Interest.
Pursuant to and in accordance with policies of the SBA, the
Servicer is required to retain a portion of the interest received on the
Guaranteed Interest of each SBA Section 7(a) Loan sold to the Trust Fund (such
portion, the "Premium Protection Fee").
To facilitate the sale of the Unguaranteed Interest (as
defined herein) in the SBA Section 7(a) Loans, and the servicing of the SBA
Loans by the Servicer, the Bank is entering into this Agreement with the
Trustee. The Seller is transferring the Unguaranteed Interest in the SBA Loans
to the Trustee for the benefit of the SBA and the Certificateholders under this
Agreement, pursuant to which Certificates are being issued, denominated on the
face thereof as First International Bank SBA Loan-Backed Adjustable Rate
Certificates, Series 1999-1, Class A, Class M and Class B, representing in the
aggregate a 100% undivided beneficial ownership interest in the right to receive
the principal portion of the Unguaranteed Interests of the SBA Loans together
with interest thereon at the then applicable Class A, Class M or Class B
Interest Distribution Amount, as the case may be. The Unguaranteed Interest of
the Initial SBA Loans have an aggregate outstanding principal balance of
$28,419,589.23 as
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of May 31, 1999 (the "Cut-Off Date"), after application of payments received by
the Seller on or before such date.
The parties hereto agree as follows:
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ARTICLE I
DEFINITIONS
Whenever used herein, the following words and phrases, unless
the context otherwise requires, shall have the following meanings. This
Agreement relates to a Trust Fund evidenced by First International Bank SBA
Loan-Backed Adjustable Rate Certificates, Series 1999-1, Class A, Class M and
Class B. Unless otherwise provided, all calculations of interest pursuant to
this Agreement including, but not limited to, the Class A, Class M and Class B
Interest Distribution Amounts, are based on a 360-day year and twelve 30-day
months.
ACCOUNT: The Certificate Account, the Pre-Funding Account and
the Capitalized Interest Account established by the Trustee for the benefit of
the Certificateholders; the Expense Account established by the Trustee for the
benefit of the Trustee; and the Spread Account held by the Spread Account
Custodian pursuant to the Spread Account Agreement. The Trustee's obligation to
establish and maintain the Certificate Account is not delegable.
ACCOUNT NUMBER: The number assigned to each SBA Loan by the
Seller, as set forth in Exhibit H hereto.
ACCOUNT PROPERTY: Has the meaning set forth in Section 3 of
the Spread Account Agreement.
ADDITION NOTICE: With respect to the transfer of Subsequent
SBA Loans to the Trust Fund pursuant to Section 2.09 herein, notice, which shall
be given not later than three Business Days prior to the related Subsequent
Transfer Date, of the Seller's designation of Subsequent SBA Loans to be sold to
the Trust Fund and the aggregate Principal Balance of such Subsequent SBA Loans.
ADDITIONAL FEE: With respect to each Additional Fee SBA Loan,
the fee payable to the SBA by the Seller equal to 40 basis points or 50 basis
points per annum, as the case may be, on the outstanding balance of the
Guaranteed Interest of such Additional Fee SBA Loan.
ADDITIONAL FEE SBA LOAN: An SBA Section 7(a) Loan sold in the
secondary market on or after September 1, 1993 (unless the related SBA Section
7(a) Loan was approved by the SBA on or after October 12, 1995), for which the
related Additional Fee is 40 basis points per annum, or an SBA Section 7(a) Loan
approved by the SBA on or after October 12, 1995 (regardless of whether it was
sold
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in the secondary market), for which the related Additional Fee is 50 basis
points per annum.
ADJUSTED CLASS A INTEREST DISTRIBUTION AMOUNT: With respect to
each Remittance Date, the product of (A) the aggregate amount of interest
payable with respect to each SBA Loan in accordance with its terms, net of the
interest payable to the Registered Holder, the Premium Protection Fee, the
Excess Spread, the Servicing Fee, the FTA's Fee, the Additional Fee, the Extra
Interest and the Annual Expense Escrow Amount allocable to such interest (plus,
for the Remittance Dates occurring in July, August and September 1999, any
amounts transferred from the Pre-Funding Account and the Capitalized Interest
Account for such Remittance Date to be applied as a payment of interest on the
Certificates) and (B) a fraction, the numerator of which is the amounts set
forth in clauses (i) and (ii) of the definition of Class A Interest Distribution
Amount with respect to such Remittance Date, and the denominator of which is the
sum of the amounts set forth in clauses (i) and (ii) of the definitions of Class
A Interest Distribution Amount, Class M Interest Distribution Amount and Class B
Interest Distribution Amount, each with respect to such Remittance Date.
ADJUSTED CLASS B INTEREST DISTRIBUTION AMOUNT: With respect to
each Remittance Date, the product of (A) the aggregate amount of interest
payable with respect to each SBA Loan in accordance with its terms, net of the
interest payable to the Registered Holder, the Premium Protection Fee, the
Excess Spread, the Servicing Fee, the FTA's Fee, the Additional Fee, the Extra
Interest and the Annual Expense Escrow Amount allocable to such interest (plus,
for the Remittance Dates occurring in July, August and September 1999, any
amounts transferred from the Pre-Funding Account and the Capitalized Interest
Account for such Remittance Date to be applied as a payment of interest on the
Certificates) and (B) a fraction, the numerator of which is the amounts set
forth in clauses (i) and (ii) of the definition of Class B Interest Distribution
Amount with respect to such Remittance Date, and the denominator of which is the
sum of the amounts set forth in clauses (i) and (ii) of the definitions of Class
A Interest Distribution Amount, Class M Interest Distribution Amount and Class B
Interest Distribution Amount, each with respect to such Remittance Date.
ADJUSTED CLASS M INTEREST DISTRIBUTION AMOUNT: With respect to
each Remittance Date, the product of (A) the aggregate amount of interest
payable with respect to each SBA Loan in accordance with its terms, net of the
interest payable to the Registered Holder, the Premium Protection Fee, the
Excess Spread, the Servicing Fee, the FTA's Fee, the Additional Fee, the Extra
Interest and the Annual Expense Escrow Amount allocable to such
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interest (plus, for the Remittance Dates occurring in July, August and September
1999 any amounts transferred from the Pre-Funding Account and the Capitalized
Interest Account for such Remittance Date to be applied as a payment of interest
on the Certificates) and (B) a fraction, the numerator of which is the amounts
set forth in clauses (i) and (ii) of the definition of Class M Interest
Distribution Amount with respect to such Remittance Date, and the denominator of
which is the sum of the amounts set forth in clauses (i) and (ii) of the
definitions of Class A Interest Distribution Amount, Class M Interest
Distribution Amount and Class B Interest Distribution Amount, each with respect
to such Remittance Date.
ADJUSTED SBA LOAN BENCHMARK RATE: With respect to any SBA
Loan, a percentage per annum equal to the sum of (i) the then applicable
weighted average Class A, Class M and Class B Benchmark Rates and (ii) .06% per
annum, relating to the Annual Expense Escrow Amount.
ADJUSTMENT DATE: For each Interest Accrual Period, the first
Business Day of such Interest Accrual Period, commencing July 15, 1999. The
Prime Rate in effect for each Adjustment Date shall be the Prime Rate published
in The Wall Street Journal on the first Business Day of the month preceding the
start of such Interest Accrual Period (i.e., the Prime Rate in effect for the
July 15, 1999 Adjustment Date shall be the Prime Rate published on the first
Business Day in June 1999).
AGGREGATE CLASS A CERTIFICATE PRINCIPAL BALANCE: As of any
date of determination, the Original Class A Certificate Principal Balance less
the sum of all amounts previously distributed to the Class A Certificateholders
in respect of principal.
AGGREGATE CLASS B CERTIFICATE PRINCIPAL BALANCE: As of any
date of determination, the Original Class B Certificate Principal Balance less
the sum of all amounts previously distributed to the Class B Certificateholders
in respect of principal.
AGGREGATE CLASS M CERTIFICATE PRINCIPAL BALANCE: As of any
date of determination, the Original Class M Certificate Principal Balance less
the sum of all amounts previously distributed to the Class M Certificateholders
in respect of principal.
AGREEMENT: This Pooling and Servicing Agreement and all
amendments hereof and supplements hereto.
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ANNUAL EXPENSE ESCROW AMOUNT: The product of .06% per annum
and the Pool Principal Balance, which is computed and payable on a monthly basis
and represents the estimated annual Trustee's fees and Trust Fund expenses.
ASSIGNMENT OF MORTGAGE: With respect to those SBA Loans
secured by a Mortgaged Property, an assignment of the Mortgage, notice of
transfer or equivalent instrument sufficient under the laws of the jurisdiction
wherein the related Mortgaged Property is located to reflect of record the
transfer of the related SBA Loan to the Trustee subject to the Multi-Party
Agreement.
AUTHENTICATING AGENT: Initially, HSBC Bank USA and thereafter,
any successor appointed pursuant to Section 12.11.
AVAILABLE FUNDS: With respect to each Remittance Date, the sum
of (i) all amounts received from any source by the Servicer or any Subservicer
during the preceding calendar month (including Excess Spread) with respect to
principal and interest on the SBA Loans (net of the amount payable to the
Registered Holders, the Premium Protection Fee, the FTA's Fee, the Additional
Fee and the Servicing Fee), (ii) advances by the Servicer, (iii) amounts to be
transferred from the Pre-Funding Account and the Capitalized Interest Account
with respect to the Remittance Dates in July, August and September 1999, and
(iv) amounts in the Spread Account.
BANK: First International Bank, National Association, in its
individual capacity or in its capacities as Seller and Servicer hereunder.
BIF: The Bank Insurance Fund, or any successor thereto.
BUSINESS DAY: Any day other than (i) a Saturday or Sunday, or
(ii) a day on which banking institutions in the States of New York or
Connecticut are authorized or obligated by law or executive order to be closed.
CAPITALIZED INTEREST ACCOUNT: As described in Section 6.04.
CAPITALIZED INTEREST REQUIREMENT: With respect to the
Remittance Dates in July, August and September 1999, the excess, if any, of (i)
30 days' interest calculated at the weighted average Class A, Class M and Class
B Benchmark Rates on the excess of (a) the Aggregate Class A, Class M and Class
B Certificate Principal Balances for such Remittance Date over (b) the aggregate
Principal Balances of the SBA Loans for such
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Remittance Date over (ii) any Pre-Funding Earnings to be transferred to the
Certificate Account on such Remittance Date pursuant to Section 6.04(d). With
respect to the Special Remittance Date, accrued interest calculated at the
weighted average Class A, Class M and Class B Benchmark Rates on the amount to
be transferred on the Special Remittance Date from the Pre-Funding Account to
the Certificate Account pursuant to Section 6.04(c).
CERTIFICATE: Any Class A, Class M or Class B Certificate
executed by the Servicer and authenticated by the Trustee or the Authenticating
Agent substantially in the form annexed hereto as Exhibits B-1, B-2, and B-3.
CERTIFICATE ACCOUNT: As described in Section 6.01.
CERTIFICATEHOLDER or HOLDER: Each Person in whose name a Class
A, Class M or Class B Certificate is registered in the Certificate Register,
except that, solely for the purposes of giving any consent, waiver, request or
demand pursuant to this Agreement, any Certificate registered in the name of the
Seller, the Servicer, any Subservicer or any affiliate of any of them, shall be
deemed not to be outstanding and the undivided Percentage Interest evidenced
thereby shall not be taken into account in determining whether the requisite
percentage of Certificates necessary to effect any such consent, waiver, request
or demand has been obtained.
CERTIFICATE REGISTER: As described in Section 4.02.
CERTIFICATE REGISTRAR: Initially, HSBC Bank USA, and
thereafter, any successor appointed pursuant to Section 4.02.
CLASS A BENCHMARK RATE: During the initial Interest Accrual
Period 5.82% per annum. During each subsequent Interest Accrual Period, the
Prime Rate in effect on the related Adjustment Date minus 1.93% per annum.
CLASS A CERTIFICATE: A Certificate denominated as a Class A
Certificate.
CLASS A CERTIFICATEHOLDER: A holder of a Class A Certificate.
CLASS A INTEREST DISTRIBUTION AMOUNT: With respect to each
Remittance Date, the sum of (i) the interest accrued for the related Interest
Accrual Period at the then applicable Class A Benchmark Rate on the Aggregate
Class A Certificate Principal Balance outstanding immediately prior to such
Remittance Date and (ii) the amount of the shortfall, if any, of the interest
that
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the Class A Certificates were entitled to receive on a preceding Remittance Date
but did not receive plus interest thereon at the then applicable Class A
Benchmark Rate compounded monthly; provided, however, that on each Remittance
Date after the first Remittance Date the amount set forth in Clause (i) of Class
A Interest Distribution Amount will be increased or decreased, as the case may
be, to equal the Adjusted Class A Interest Distribution Amount for such
Remittance Date.
CLASS A PERCENTAGE: With respect to each Remittance Date,
90.0%, representing the beneficial ownership interest of the Class A
Certificates in the Trust Fund.
CLASS B BENCHMARK RATE: During the initial Interest Accrual
Period 12.25% per annum. During each subsequent Interest Accrual Period, the
Prime Rate in effect on the related Adjustment Date plus 4.50% per annum.
CLASS B CERTIFICATE: A Certificate denominated as a Class B
Certificate.
CLASS B CERTIFICATEHOLDER: A holder of a Class B Certificate.
CLASS B INTEREST DISTRIBUTION AMOUNT: With respect to each
Remittance Date, the sum of (i) the interest accrued for the related Interest
Accrual Period at the then applicable Class B Benchmark Rate on the Aggregate
Class B Certificate Principal Balance outstanding immediately prior to such
Remittance Date and (ii) the amount of the shortfall, if any, of the interest
that the Class B Certificates were entitled to receive on a preceding Remittance
Date but did not receive plus interest thereon at the then applicable Class B
Benchmark Rate compounded monthly; provided, however, that on each Remittance
Date after the first Remittance Date the amount set forth in Clause (i) of Class
B Interest Distribution Amount will be increased or decreased, as the case may
be, to equal the Adjusted Class B Interest Distribution Amount for such
Remittance Date.
CLASS B INTEREST SHORTFALL AMOUNT: For any Remittance Date the
amount, if any, determined pursuant to Clause (ii) of the definition of Class B
Interest Distribution Amount.
CLASS B PERCENTAGE: With respect to each Remittance Date,
2.00%, representing the beneficial ownership interest of the Class B
Certificates in the Trust Fund.
CLASS CARRY-FORWARD AMOUNT: The amount, if any, by which (i)
the Class Principal Distribution Amount for each Class of Certificates with
respect to any preceding Remittance Date
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exceeded (ii) the amount of the actual principal distribution to the Class of
Certificates on such Remittance Date.
CLASS M BENCHMARK RATE: During the initial Interest Accrual
Period 6.40% per annum. During each subsequent Interest Accrual Period, the
Prime Rate in effect on the preceding Adjustment Date minus 1.35% per annum.
CLASS M CERTIFICATE: A certificate denominated as a Class M
Certificate.
CLASS M CERTIFICATEHOLDER: A holder of a Class M Certificate.
CLASS M INTEREST DISTRIBUTION AMOUNT: With respect to each
Remittance Date, the sum of (i) the interest accrued for the related Interest
Accrual Period at the then applicable Class M Benchmark Rate on the Aggregate
Class M Certificate Principal Balance outstanding immediately prior to such
Remittance Date and (ii) the amount of the shortfall, if any, of the interest
that the Class M Certificates were entitled to receive on a preceding Remittance
Date but did not receive plus interest thereon at the then applicable Class M
Benchmark Rate compounded monthly; provided, however, that on each Remittance
Date after the first Remittance Date the amount set forth in clause (i) of Class
M Interest Distribution Amount will be increased or decreased, as the case may
be, to equal the Adjusted Class M Interest Distribution Amount for such
Remittance Date.
CLASS M INTEREST SHORTFALL AMOUNT: For any Remittance Date the
amount, if any, determined pursuant to Clause (ii) of the definition of Class M
Interest Distribution Amount.
CLASS M PERCENTAGE: With respect to each Remittance Date,
approximately 8.0% representing the beneficial ownership interest of the Class M
Certificates in the Trust Fund.
CLASS PRINCIPAL DISTRIBUTION AMOUNT: With respect to each
Remittance Date, for each Class of Certificates, an amount equal to the Class A,
Class M or Class B Percentage, as the case may be, multiplied by the sum of,
without duplication, (i) the Unguaranteed Percentage of all payments and other
recoveries of principal of an SBA Loan (net of amounts reimbursable to the
Servicer pursuant to this Agreement) received by the Servicer or any Subservicer
in the related Due Period, excluding amounts received relating to SBA Loans
which have been delinquent 24 months or have been determined to be
uncollectible, in whole or in part, by the Servicer to the extent that the
applicable Class of Certificateholders has previously received the Class A,
Class M or Class B Percentage as the case may be, of the Principal
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Balance of such SBA Loans; (ii) the principal portion of any Unguaranteed
Interest actually purchased by the Seller for breach of a representation and
warranty or other defect and actually received by the Trustee as of the related
Determination Date; (iii) any Substitution Adjustments deposited in the
Principal and Interest Account and transferred to the Certificate Account as of
the related Determination Date; (iv) the Unguaranteed Percentage of all losses
on SBA Loans which were finally liquidated during the applicable Due Period; (v)
the Unguaranteed Percentage of the then outstanding principal balance of any SBA
Loan which, as of the first day of the related Due Period, has been delinquent
24 months or has been determined to be uncollectible, in whole or in part, by
the Servicer; and (vi) the amount, if any, released from the Pre-Funding Account
on the July, August and September 1999 Remittance Dates.
CLOSING DATE: June 17, 1999
CODE: The Internal Revenue Code of 1986, as amended, or any
successor legislation thereto.
COLLATERAL: All items of property (including a Mortgaged
Property), whether real or personal, tangible or intangible, or otherwise,
pledged by an Obligor or others to the Seller (including guarantees on behalf of
the Obligor) to secure payment under an SBA Loan.
COMMERCIAL PROPERTY: Real property (other than agricultural
property or Residential Property) that generally is used by the Obligor in the
conduct of its business.
COMPENSATING INTEREST: As defined in Section 6.11.
CONFIDENTIAL PLACEMENT MEMORANDUM: The Confidential Private
Placement Memorandum dated June 16, 1999 prepared by the Seller in connection
with the offer and sale of the Class A and Class M Certificates.
CORPORATE TRUST OFFICE: The principal office of the Trustee at
which at any particular time its corporate trust business shall be administered
which office at the date of the execution of this Agreement is located at HSBC
Bank USA, 140 Broadway, New York, New York 10005, 12th Floor, Attention
Corporate Trust Department or at any other time at such other address as the
Trustee may designate from time to time by notice to the parties hereto.
CURTAILMENT: With respect to an SBA Loan, any payment of
principal received during a Due Period as part of a payment that is in excess of
five times the amount of the Monthly Payment
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due for such Due Period and which is not intended to satisfy the SBA Loan in
full, nor is intended to cure a delinquency.
CUT-OFF DATE: May 31, 1999.
DEFAULTED SBA LOAN: Any SBA Loan as to which the Obligor has
failed to make payment in full of three or more consecutive Monthly Payments.
DELETED SBA LOAN: An SBA Loan replaced by a Qualified
Substitute SBA Loan.
DEPOSITORY: The Depository Trust Company and any successor
Depository hereafter named.
DESIGNATED DEPOSITORY INSTITUTION: With respect to the
Principal and Interest Account or items of Account Property held in deposit
accounts, an entity which is an institution whose deposits are insured by either
the BIF or SAIF administered by the FDIC, the unsecured and uncollateralized
long-term debt obligations of which shall be rated A2 or better by Moody's, and
which is either (i) a federal savings association duly organized, validly
existing and in good standing under the federal banking laws, (ii) an
institution duly organized, validly existing and in good standing under the
applicable banking laws of any state, (iii) a national banking association duly
organized, validly existing and in good standing under the federal banking laws,
or (iv) a principal subsidiary of a bank holding company, in each case acting or
designated by the Servicer as the depository institution for the Principal and
Interest Account or the Spread Account Depositor with respect to items of
Account Property, as the case may be.
DETERMINATION DATE: That day of each month which is the third
Business Day prior to the Remittance Date.
DIRECT PARTICIPANT: Any broker-dealer, bank or other financial
institution for which the Depository holds Certificates from time to time as a
securities depository.
DUE DATE: The day of the month on which the Monthly Payment is
due from the Obligor on an SBA Loan.
DUE PERIOD: With respect to each Remittance Date, the calendar
month preceding the month in which such Remittance Date occurs.
ERISA: The Employee Retirement Income Security Act of 1974, as
amended, or any successor legislation thereto.
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EVENT OF DEFAULT: As described in Section 10.01.
EXCESS PAYMENTS: With respect to a Due Period, any amounts
received on an SBA Loan in excess of the Monthly Payment due on the Due Date
relating to such Due Period which does not constitute either a Curtailment or a
Principal Prepayment or payment with respect to an overdue amount. Excess
Payments are payments of principal for purposes of this Agreement.
EXCESS PROCEEDS: As of any Remittance Date, with respect to
any Liquidated SBA Loan, the excess, if any, of (a) the Unguaranteed Percentage
of the total Net Liquidation Proceeds, over (b) the Unguaranteed Percentage of
the Principal Balance of such SBA Loan as of the date such SBA Loan became a
Liquidated SBA Loan plus 30 days interest thereon at the then applicable
Adjusted SBA Loan Benchmark Rate; provided, however, that such excess shall be
reduced by the amount by which interest accrued on the advance, if any, made by
the Servicer at the related SBA Loan Interest Rate(s) exceeds interest accrued
on such advance at the then applicable weighted average Class A, Class M and
Class B Benchmark Rates.
EXCESS SPREAD: With respect to any Remittance Date, the
amount, if any, by which (i) the interest collected by the Servicer or any
Subservicer on the principal portion of the Guaranteed Interest of each SBA
Section 7(a) Loan exceeds (ii) the sum of (a) the interest payable to the
Registered Holder, (b) the FTA's Fee, (c) the Premium Protection Fee, (d) with
respect to the Additional Fee SBA Loans, the Additional Fee and (e) the
Servicing Fee attributable to the Guaranteed Interest.
EXPENSE ACCOUNT: The expense account established and
maintained by the Trustee in accordance with Section 6.03 hereof.
EXTRA INTEREST: With respect to each SBA Loan, for each
Remittance Date the product of (i) the principal portion of the Unguaranteed
Interest of such SBA Loan for such Remittance Date and (ii) one-twelfth of the
Extra Interest Percentage.
EXTRA INTEREST PERCENTAGE: With respect to each SBA Loan, the
excess of (i) the SBA Loan Interest Rate that would be in effect for such SBA
Loan as of the Cut-Off Date without giving effect to any applicable lifetime
floors or caps over (ii) the sum of the rates used in determining the Servicing
Fee and the Annual Expense Escrow Amount and 5.995% per annum (i.e., the initial
weighted average Class A, Class M and Class B Benchmark Rates without giving
effect to any applicable lifetime floors or caps on the SBA Loans).
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FDIC: The Federal Deposit Insurance Corporation and any
successor thereto.
FHLMC: The Federal Home Loan Mortgage Corporation and any
successor thereto.
FIDELITY BOND: As described in Section 5.09.
FNMA: The Federal National Mortgage Association and any
successor thereto.
FORECLOSED PROPERTY: As described in Section 5.10.
FORECLOSED PROPERTY DISPOSITION: The final sale of a
Foreclosed Property acquired in foreclosure or by deed in lieu of foreclosure or
of Repossessed Collateral acquired by legal process. The proceeds of any
Foreclosed Property Disposition constitute part of the definition of Liquidation
Proceeds.
FTA: Colson Services Corp., in its capacity as the Fiscal and
Transfer Agent of the SBA under the Multi-Party Agreement, or any successor
thereto appointed by the SBA.
FTA'S FEE: With respect to the Guaranteed Interest of each SBA
Section 7(a) Loan sold into the secondary market, the monthly fee payable to the
FTA in accordance with Form 1086 and the SBA Rules and Regulations.
FUNDING PERIOD: The period commencing on the Closing Date and
ending on the earliest to occur of (i) the date on which the amount on deposit
in the Pre-Funding Account is less than $100,000, (ii) the date on which an
Event of Default occurs or (iii) at the close of business on September 14, 1999.
GLOBAL CERTIFICATE: Any Certificate registered in the name of
the Depository or its nominee, beneficial interests of which are reflected on
the books of the Depository or on the books of a Person maintaining any account
with such Depository (directly or as an indirect participant in accordance with
the rules of such Depository).
GUARANTEED INTEREST: As to any SBA Section 7(a) Loan, the
right to receive the guaranteed portion of the principal balance thereof
together with interest thereon at a per annum rate in effect from time to time
in accordance with the terms of the related SBA Form 1086. Certificateholders
have no right or interest in the Guaranteed Interest.
INDIRECT PARTICIPANT: Any financial institution for whom any
Direct Participant holds an interest in any Certificate.
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INDIVIDUAL CERTIFICATE: Any Certificate registered in the name
of a holder other than the Depository or its nominee.
INITIAL SPREAD ACCOUNT DEPOSIT: A deposit of $374,195.89
required to be made by the Spread Account Depositor into the Spread Account on
the Closing Date, such deposit being equal to 1% of the sum of (i) the Original
Pool Principal Balance and (ii) the Original Pre-Funded Amount.
INITIAL SBA LOANS: THE SBA Loans listed on Exhibit H hereto
and delivered to the Trustee on the Closing Date.
INSTITUTIONAL ACCREDITED INVESTOR: Any Person satisfying the
definition of "Accredited Investor" within the meaning of Rule 501(a)(1), (2),
(3) or (7) of Regulation D under the Securities Act.
INSURANCE PROCEEDS: Proceeds paid by any insurer pursuant to
any insurance policy covering an SBA Loan, Collateral, Repossessed Collateral or
Foreclosed Property, including but not limited to title, hazard, life, health
and/or accident insurance policies.
INTEREST ACCRUAL PERIOD: With respect to each Remittance Date,
the period commencing on the 15th day of the month preceding such Remittance
Date and ending on the 14th day of the month of such Remittance Date. However,
for the Remittance Date occurring in July 1999, the period commencing on the
Closing Date and ending on July 14, 1999.
LIQUIDATED SBA LOAN: Any defaulted SBA Loan, Repossessed
Collateral or Foreclosed Property as to which the Servicer has determined that
all amounts which it reasonably and in good faith expects to recover have been
recovered from or on account of such SBA Loan.
LIQUIDATION PROCEEDS: Cash, including Insurance Proceeds,
proceeds of any Foreclosed Property Disposition, revenues received with respect
to the conservation and disposition of a Foreclosed Property or Repossessed
Collateral, and any other amounts received in connection with the liquidation of
defaulted SBA Loans, whether through trustee's sale, foreclosure sale or
otherwise.
LOAN GUARANTY AGREEMENT: Collectively, one or more Loan
Guaranty Agreements (Deferred Participation) (SBA Form 750), between the SBA and
the Servicer, as such agreements may be amended, supplemented or replaced from
time to time, or such Loan
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Guaranty Agreement as applicable to a successor to the Servicer, as the case may
be.
LOAN-TO-VALUE RATIO OR LTV: With respect to any SBA Loan, (a)
the sum of (i) the original principal amount of such SBA Loan as of origination
and (ii) the principal balance of any Prior Lien as of the date of origination
of the related SBA Loan, divided by (b) the total discounted net collateral
value (as determined by the Seller in accordance with its underwriting criteria)
of the primary and secondary Collateral securing such SBA Loan at the time of
origination.
MAJORITY CERTIFICATEHOLDERS: The Holder or Holders of Class A,
Class M and Class B Certificates evidencing an Aggregate Class A, Class M and
Class B Certificate Principal Balance in excess of 50% of the Aggregate Class A,
Class M and Class B Certificate Principal Balance.
MONTHLY ADVANCE: An advance made by the Servicer pursuant to
Section 6.10 hereof.
MONTHLY PAYMENT: The monthly payment of principal and/or
interest required to be made by an Obligor on the related SBA Loan, as adjusted
pursuant to the terms of the related SBA Note.
MOODY'S: Moody's Investors Service, Inc. or any successor
thereto.
MORTGAGE: The mortgage, deed of trust or other instrument
creating a lien on a Mortgaged Property.
MORTGAGED PROPERTY: The underlying real property, if any,
securing an SBA Loan, consisting of a Commercial Property or Residential
Property and any improvements thereon.
MULTI-PARTY AGREEMENT: That certain Multi-Party Agreement
dated as of May 31, 1999 among the Seller, the Trustee, the SBA and the FTA,
substantially in the form of Exhibit M hereto, as amended from time to time by
the parties thereto.
NET LIQUIDATION PROCEEDS: Liquidation Proceeds net of (i) any
reimbursements to the Servicer made therefrom pursuant to Section 5.04(b) and
(ii) amounts required to be released to the related Obligor pursuant to
applicable law.
OBLIGOR: The obligor on an SBA Note.
OCC: The Office of the Comptroller of the Currency.
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<PAGE> 23
OFFICER'S CERTIFICATE: A certificate delivered to the Trustee
signed by the Chairman of the Board, the President, an Executive Vice President,
a Vice President, an Assistant Vice President, the Treasurer, the Secretary, or
one of the Assistant Secretaries of the Bank as required by this Agreement.
OPINION OF COUNSEL: A written opinion of counsel, who may,
without limitation, be counsel for the Bank, reasonably acceptable to the
Trustee and experienced in matters relating thereto.
ORIGINAL CLASS A CERTIFICATE PRINCIPAL BALANCE:
$33,677,000.
ORIGINAL CLASS B CERTIFICATE PRINCIPAL BALANCE:
$749,589.23.
ORIGINAL CLASS M CERTIFICATE PRINCIPAL BALANCE: $2,993,000.
ORIGINAL POOL PRINCIPAL BALANCE: $28,419,589.23.
ORIGINAL PRE-FUNDED AMOUNT: $9,000,000, representing the
amount deposited in the Pre-Funding Account on the Closing Date.
OVERFUNDED INTEREST AMOUNT:
With respect to each Subsequent Transfer Date occurring in
July 1999, the difference between (i) three-months' interest on the aggregate
Principal Balances of the Subsequent SBA Loans acquired by the Trust Fund on
such Subsequent Transfer Date, calculated at the weighted average Class A, Class
M and Class B Benchmark Rates, and (ii) three-months' interest on the aggregate
Principal Balances of the Subsequent SBA Loans acquired by the Trust Fund on
such Subsequent Transfer Date, calculated at the rate at which Pre-Funding
Account moneys are invested as of such Subsequent Transfer Date.
With respect to each Subsequent Transfer Date occurring in
August 1999, the difference between (i) two-month's interest on the aggregate
Principal Balances of the Subsequent SBA Loans acquired by the Trust Fund on
such Subsequent Transfer Date, calculated at the weighted average Class A, Class
M and Class B Benchmark Rates, and (ii) two-month's interest on the aggregate
Principal Balances of the Subsequent SBA Loans acquired by the Trust Fund on
such Subsequent Transfer Date, calculated at the rate at which Pre-Funding
Account moneys are invested as of such Subsequent Transfer Date.
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<PAGE> 24
With respect to each Subsequent Transfer Date occurring in
September 1999, the difference between (i) one-month's interest on the aggregate
Principal Balances of the Subsequent SBA Loans acquired by the Trust Fund on
such Subsequent Transfer Date, calculated at the weighted average Class A, Class
M and Class B Benchmark Rates, and (ii) one-month's interest on the aggregate
Principal Balances of the Subsequent SBA Loans acquired by the Trust Fund on
such Subsequent Transfer Date, calculated at the rate at which Pre-Funding
Account moneys are invested as of such Subsequent Transfer Date.
PAYING AGENT: Initially, HSBC Bank USA, and thereafter, any
other Person that meets the eligibility standards for the Paying Agent specified
in Section 13.12 hereof and is authorized by the Trustee to make payments on the
Certificates on behalf of the Trustee.
PERCENTAGE INTEREST: With respect to a Class A, Class M or
Class B Certificate, the portion of the Trust Fund evidenced by such Class A,
Class M or Class B Certificate, expressed as a percentage, the numerator of
which is the denomination represented by such Class A, Class M or Class B
Certificate and the denominator of which is the Original Class A Certificate
Principal Balance, Original Class M Certificate Principal Balance or Original
Class B Certificate Principal Balance, as the case may be. The Certificates are
issuable only in the minimum Percentage Interest corresponding to a minimum
denomination of $100,000 and integral multiples of $1,000 in excess thereof,
except for one Certificate of each Class which may be issued in a different
denomination to equal the remainder of the Original Class A Certificate
Principal Balance, Original Class M Certificate Principal Balance or Original
Class B Certificate Principal Balance, as the case may be.
PERMITTED INSTRUMENTS: As used herein, Permitted Instruments
shall include the following:
(i) direct general obligations of, or obligations fully and
unconditionally guaranteed as to the timely payment of principal and
interest by, the United States or any agency or instrumentality
thereof, provided such obligations are backed by the full faith and
credit of the United States, FHA debentures, Federal Home Loan Bank
consolidated senior debt obligations, and FNMA senior debt obligations,
but excluding any of such securities whose terms do not provide for
payment of a fixed dollar amount upon maturity or call for redemption;
(ii) federal funds, certificates of deposit, time deposits and
banker's acceptances (having original
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<PAGE> 25
maturities of not more than 365 days) of any bank or trust company
incorporated under the laws of the United States or any state thereof,
provided that the short-term debt obligations of such bank or trust
company at the date of acquisition thereof have been rated Prime-1 or
better by Moody's;
(iii) deposits of any bank or savings and loan association
which has combined capital, surplus and undivided profits of at least
$3,000,000 which deposits are held only up to the limits insured by the
BIF or SAIF administered by the FDIC, provided that the unsecured
long-term debt obligations of such bank or savings and loan association
have been rated A3 or better by Moody's;
(iv) commercial paper (having original maturities of not more
than 365 days) rated Prime-1 or better by Moody's;
(v) debt obligations rated Aaa by Moody's (other than any such
obligations that do not have a fixed par value and/or whose terms do
not promise a fixed dollar amount at maturity or call date);
(vi) investments in money market funds rated Aaa or better by
Moody's, the assets of which are invested solely in instruments
described in clauses (i)-(v) above (including, without limitation, any
fund which the Trustee or an affiliate of the Trustee serves as an
investment advisor, administrator, shareholder, servicing agent and/or
custodian or sub-custodian, notwithstanding that (a) the Trustee or an
affiliate of the Trustee charges and collects fees and expenses from
such funds for services rendered, (b) the Trustee charges and collects
fees and expenses for services rendered pursuant to this Agreement, and
(c) services performed for such funds and pursuant to this Agreement
may converge at any time (the parties hereto specifically authorizes
the Trustee or an affiliate of the Trustee to charge and collect all
fees and expenses from such funds for services rendered to such funds,
in addition to any fees and expenses the Trustee may charge and collect
for services rendered pursuant to this Agreement));
(vii) guaranteed investment contracts or surety bonds
providing for the investment of funds in an account or insuring a
minimum rate of return on investments of such funds, which contract or
surety bond shall:
(a) be an obligation of an insurance company or other
corporation whose debt obligations or insurance
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<PAGE> 26
financial strength or claims paying ability are rated "Aaa" by
Moody's; and
(b) provide that the Trustee may exercise all of the
rights of the Seller under such contract or surety bond
without the necessity of the taking of any action by the
Seller;
(viii) A repurchase agreement that satisfies the following
criteria:
(a) Must be between the Trustee and a dealer bank or
securities firm described in 1. or 2. below:
1. Primary dealers on the Federal
Reserve reporting dealer list which
are rated "Aa" or better by
Moody's, or
2. Banks rated "Aa" or better by
Moody's.
(b) The written repurchase agreement must include the
following:
1. Securities which are acceptable for
the transfer are:
A. Direct U.S. government
securities, or
B. Securities of Federal
Agencies backed by the
full faith and credit of
the U.S. government (and
FNMA & FHLMC),
2. the term of the repurchase
agreement may be up to 60 days,
3. the collateral must be delivered to
the Trustee or third party
custodian acting as agent for the
Trustee by appropriate book entries
and confirmation statements must
have been delivered before or
simultaneous with payment
(perfection by possession of
certificated securities),
4. Valuation of collateral:
The securities must be valued
weekly, marked-to-market at
current market price plus
accrued interest. The value of
the collateral must be equal to
at least 104% of the amount of
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<PAGE> 27
cash transferred by the Trustee
or custodian for the Trustee to
the dealer bank or security
firm under the repurchase
agreement plus accrued
interest. If the value of
securities held as collateral
slips below 104% of the value
of the cash transferred by the
Trustee plus accrued interest,
then additional cash and/or
acceptable securities must be
transferred. If, however, the
securities used as collateral
are FNMA or FHLMC, then the
value of collateral must equal
at least 105%; and
(ix) any other investment acceptable to the Rating Agency,
written confirmation of which shall be furnished to the Trustee prior
to any such investment.
PERSON: Any individual, corporation, partnership, limited
liability company, limited liability partnership, joint venture, association,
joint-stock company, trust, national banking association, unincorporated
organization or government or any agency or political subdivision thereof.
POOL PRINCIPAL BALANCE: The aggregate Principal Balances as of
any date of determination.
PRE-FUNDED AMOUNT: With respect to any date of determination,
the amount on deposit in the Pre-Funding Account.
PRE-FUNDING ACCOUNT: The Pre-Funding Account established in
accordance with Section 6.04 hereof and maintained by the Trustee.
PRE-FUNDING EARNINGS: With respect to the Remittance Date in
July 1999, the actual investment earnings earned during the period from the
Closing Date through the Business Day immediately preceding the Determination
Date in July 1999 (inclusive) on the Pre-Funded Amount. With respect to the
Remittance Date in August 1999, the actual investment earnings earned during the
period from the Determination Date in July 1999 through the Business Day
immediately preceding the Determination Date in August 1999 (inclusive), on the
Pre-Funded Amount. With respect to the Remittance Date in September 1999, the
actual investment earnings earned during the period from the Closing Date
through the Business Day immediately preceding the Determination Date in
September 1999 (inclusive) on the Pre-Funded Amount.
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<PAGE> 28
PREMIUM PROTECTION FEE: As to any SBA Loan and any date of
determination, an amount equal to 0.60% per annum of the then outstanding
principal balance of the related Guaranteed Interest.
PRIME RATE: With respect to any date of determination, the
lowest prime lending rate published in the Money Rate Section of The Wall Street
Journal.
PRINCIPAL AND INTEREST ACCOUNT: The principal and interest
account established by the Servicer pursuant to Section 5.03 hereof.
PRINCIPAL BALANCE: With respect to any SBA Loan or related
Foreclosed Property or Repossessed Collateral, at any date of determination, (i)
the Unguaranteed Percentage of the principal balance of the SBA Loan outstanding
as of the Cut-Off Date (or applicable Subsequent Cut-Off Date with respect to
Subsequent SBA Loans), after application of principal payments received on or
before such date, minus (ii) the sum of (a) the Unguaranteed Percentage of the
principal portion of the Monthly Payments received during each Due Period ending
prior to the most recent Remittance Date, which were distributed pursuant to
Section 6.07 on any previous Remittance Date, and (b) the Unguaranteed
Percentage of all Principal Prepayments, Curtailments, Excess Payments,
Insurance Proceeds, Released Mortgaged Property Proceeds, Net Liquidation
Proceeds and net income from a Foreclosed Property or Repossessed Collateral to
the extent applied by the Servicer as recoveries of principal in accordance with
the provisions hereof, which were distributed pursuant to Section 6.07 on any
previous Remittance Date. The Principal Balance of any Liquidated SBA Loan or
any SBA Loan that has been paid off will equal $0.
PRINCIPAL PREPAYMENT: Any payment or other recovery of
principal on an SBA Loan equal to the outstanding principal balance thereof,
received in advance of the final scheduled Due Date which is intended to satisfy
an SBA Loan in full.
PRIOR LIEN: With respect to any SBA Loan secured by a lien on
a Mortgaged Property or on other Collateral which is not a first priority lien,
each lien relating to the corresponding Mortgaged Property or other Collateral
having a prior priority lien.
QUALIFIED INSTITUTIONAL BUYER: As used herein, has the meaning
ascribed to such term in Rule 144A under the Securities Act.
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<PAGE> 29
QUALIFIED SUBSTITUTE SBA LOAN: An SBA loan or SBA loans
substituted for a Deleted SBA Loan pursuant to Section 2.05 or 3.03 hereof,
which (i) has or have an SBA Loan interest rate or rates of not less than (and
not more than two percentage points more than) the SBA Loan Interest Rate for
the Deleted SBA Loan, (ii) substantially relates or relate to the same type of
Collateral as the Deleted SBA Loan, (iii) matures or mature no later than (and
not more than one year earlier than) the Deleted SBA Loan, (iv) has or have a
Loan-to-Value Ratio or Loan-to-Value Ratios at the time of such substitution no
higher than the Loan-to Value Ratio of the Deleted SBA Loan at such time, (v)
has or have a principal balance or principal balances relating to an
unguaranteed interest or unguaranteed interests (after application of all
payments received on or prior to the date of substitution) equal to or less than
the Principal Balance of the Unguaranteed Interest or Unguaranteed Interests as
of such date of the Deleted SBA Loan, (vi) has or have the same Unguaranteed
Percentage at the time of substitution as the Deleted SBA Loan; (vii) was or
were originated under the same program type as the Deleted SBA Loan; and (viii)
complies or comply as the date of substitution with each representation and
warranty set forth in Section 3.02.
RATING AGENCY: Moody's.
RATING AGENCY CONDITION: With respect to any specified action,
that the Rating Agency shall have notified the Servicer and the Trustee, orally
or in writing, that such action will not result in a reduction or withdrawal of
the rating assigned by the respective Rating Agency to either Class of
Certificates.
RECORD DATE: With respect to any Remittance Date, the close of
business on the last day of the month immediately preceding the month of the
related Remittance Date. With respect to the Special Remittance Date, August 31,
1999.
REGISTERED HOLDER: With respect to any SBA Section 7(a) Loan,
the Person identified as such in the applicable SBA Form 1086, and any permitted
assignees thereof.
REIMBURSABLE AMOUNTS: As of any date of determination, an
amount payable to the Bank, in its capacity as either Seller or Servicer, with
respect to (i) the Monthly Advances and Servicing Advances reimbursable pursuant
to Section 5.04(b), (ii) any advances reimbursable pursuant to Section 9.01 and
not previously reimbursed pursuant to Section 6.03(c)(i), and (iii) any other
amounts paid by and reimbursable to the Seller or Servicer pursuant to this
Agreement.
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<PAGE> 30
RELEASED MORTGAGED PROPERTY PROCEEDS: As to any SBA Loan
secured by a Mortgaged Property, proceeds received by the Servicer in connection
with (a) a taking of an entire Mortgaged Property by exercise of the power of
eminent domain or condemnation or (b) any release of part of the Mortgaged
Property from the lien of the related Mortgage, whether by partial condemnation,
sale or otherwise, which are not released to the Obligor in accordance with
applicable law, the SBA or the Registered Holder in accordance with the SBA
Rules and Regulations, the Servicer's customary SBA loan servicing procedures
and this Agreement.
REMITTANCE DATE: The 15th day of any month or if such 15th day
is not a Business Day, the first Business Day immediately following, commencing
in July 1999.
REO PROPERTY: Real estate property taken in the name of the
Trustee on behalf of the Trust for the benefit of the Certificateholders and the
SBA as a result of foreclosure on an Obligor's SBA Loan.
REPOSSESSED COLLATERAL: Items of Collateral taken in the name
of the Trustee on behalf of the Trust for the benefit of the Certificateholders
and the SBA as a result of legal action enforcing the lien on the Collateral
resulting from a default on the related Obligor's SBA Loan.
RESIDENTIAL PROPERTY: Any one or more of the following, (i)
single family dwelling unit not attached in any way to another unit, (ii) row
house, (iii) two-family house, (iv) low-rise condominium, (v) planned unit
development, (vi) three- or four-family house, (vii) high-rise condominium,
(viii) mixed use building or (ix) manufactured home (as defined in the
FNMA/FHLMC Seller-Servicers' Guide) to the extent that it constitutes real
property in the state in which it is located.
RESPONSIBLE OFFICER: When used with respect to the Trustee,
any officer assigned to the Corporate Trust Office, including any Vice
President, Assistant Vice President, any Assistant Secretary, any trust officer
or any other officer of the Trustee customarily performing functions similar to
those performed by any of the above designated officers and also, with respect
to a particular matter, any other officer to whom such matter is referred
because of such officer's knowledge of and familiarity with the particular
subject. When used with respect to the Bank, the President, any Vice President,
Assistant Vice President, or any Secretary or Assistant Secretary.
RULE 144A CERTIFICATION: A letter substantially in the form
attached hereto as Exhibit O-2.
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<PAGE> 31
SAIF: The Savings Association Insurance Fund, or any successor
thereto.
SBA: The United States Small Business Administration, an
agency of the United States Government.
SBA FILE: As described in Exhibit A.
SBA Form 1086: The Secondary Participation Guaranty and
Certification Agreement on SBA Form 1086, pursuant to which investors purchase
the Guaranteed Interest.
SBA LOAN: An individual loan, the Unguaranteed Interest of
which is transferred to the Trust Fund pursuant to this Agreement, together with
the rights and obligations of a holder thereof and payments thereon and proceeds
therefrom, the SBA Loans originally subject to this Agreement being identified
on the SBA Loan Schedule as set forth on Exhibit H. Any loan which, although
intended by the parties hereto to have been, and which purportedly was,
transferred and assigned to the Trust Fund by the Seller (as indicated by the
SBA Loan Schedule), in fact was not transferred and assigned to the Trust Fund
for any reason whatsoever, including, without limitation, the incorrectness of
the statement set forth in Section 3.02(h) hereof with respect to the loan,
shall nevertheless be considered an "SBA Loan" for all purposes of this
Agreement. For the purposes of this Agreement, references to SBA Loans are
equivalent to references to SBA Section 7(a) Loans.
SBA LOAN INTEREST RATE: With respect to any date of
determination, the then applicable annual rate of interest borne by an SBA Loan,
pursuant to its terms, which, as of the Cut-Off Date, is shown on the SBA Loan
Schedule.
SBA LOAN SCHEDULE: The schedule of SBA Loans listed on Exhibit
H attached hereto and delivered to the Trustee on the Closing Date or Subsequent
Transfer Date, as the case may be, such schedule identifying each SBA Loan by
address of the related premises, and the name of the Obligor and setting forth
as to each SBA Loan the following information: (i) the Principal Balance as of
the close of business on the Cut-Off Date, (ii) the Account Number, (iii) the
original principal amount of the SBA Loan, (iv) the SBA Loan date and original
number of months to maturity, in months, (v) the SBA Loan Interest Rate as of
the Cut-Off Date or Subsequent Cut-Off Date, as the case may be, and guaranteed
rate payable to the Registered Holder and the FTA, (vi) when the first Monthly
Payment was due, (vii) the Monthly Payment as of the Cut-Off Date or Subsequent
Cut-Off Date, as the case may be, (viii) the remaining number of months to
maturity as
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<PAGE> 32
of the Cut-Off Date or Subsequent Cut-Off Date, as the case may be, (ix) the
Unguaranteed Percentage, (x) the SBA loan number, (xi) the margin which is added
to the Prime Rate to determine the SBA Loan Interest Rate or, in the case of
fixed rate SBA Loans, the rate of interest specified in the related SBA Note,
and (xii) the lifetime minimum and maximum SBA Loan Interest Rates, if
applicable.
SBA NOTE: The note or other evidence of indebtedness
evidencing the indebtedness of an Obligor under an SBA Loan.
SBA RULES AND REGULATIONS: The Small Business Act, as amended,
codified at 15 U.S.C. 631 et. seq., the Loan Guaranty Agreement, all legislation
binding on the SBA regarding financial transactions, all rules and regulations
promulgated from time to time thereunder, the Loan Guaranty Agreement and SBA
Standard Operating Procedures and official notices as from time to time are in
effect.
SBA Section 7(a) LOAN: An SBA Loan originated pursuant to
Section 7(a) of the SBA Rules and Regulations. For purposes of this Agreement,
references to SBA Section 7(a) Loans are equivalent to references to SBA Loans.
SECURITIES ACT: The Securities Act of 1933, as amended.
SECURITIES LEGEND: "THIS CERTIFICATE HAS NOT BEEN AND WILL NOT
BE REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), OR UNDER ANY STATE SECURITIES OR BLUE SKY LAW OF ANY STATE. THE HOLDER
HEREOF, BY PURCHASING THIS CERTIFICATE, AGREES THAT THIS CERTIFICATE MAY BE
REOFFERED, RESOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY IN COMPLIANCE WITH THE
SECURITIES ACT AND OTHER APPLICABLE LAWS AND ONLY (1) (A) PURSUANT TO RULE 144A
UNDER THE SECURITIES ACT ("RULE 144A") TO A PERSON THAT THE HOLDER REASONABLY
BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A (A
"QIB"), PURCHASING FOR ITS OWN ACCOUNT OR A QIB PURCHASING FOR THE ACCOUNT OF A
QIB, WHOM THE HOLDER HAS INFORMED THAT THE REOFFER, RESALE, PLEDGE OR OTHER
TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, OR (B) IN CERTIFICATED FORM TO
AN INSTITUTIONAL "ACCREDITED INVESTOR" (WITHIN THE MEANING OF RULE 501(a)(1)-(3)
OR (7) UNDER THE SECURITIES ACT) PURCHASING FOR INVESTMENT AND NOT FOR
DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT, IN EACH CASE, SUBJECT TO (X)
THE RECEIPT BY THE TRUSTEE OF A LETTER SUBSTANTIALLY IN THE FORM PROVIDED IN THE
AGREEMENT AND (Y) THE RECEIPT BY THE TRUSTEE OF SUCH OTHER EVIDENCE ACCEPTABLE
TO THE TRUSTEE THAT SUCH REOFFER, RESALE, PLEDGE OR TRANSFER IS IN COMPLIANCE
WITH THE SECURITIES ACT AND OTHER APPLICABLE LAWS OR IN EACH CASE IN ACCORDANCE
WITH ALL APPLICABLE SECURITIES LAWS OF
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<PAGE> 33
THE UNITED STATES AND SECURITIES AND BLUE SKY LAWS OF ANY STATE OF THE UNITED
STATES AND ANY OTHER APPLICABLE JURISDICTION, (2) PURSUANT TO ANOTHER EXEMPTION
AVAILABLE UNDER THE SECURITIES ACT AND IN ACCORDANCE WITH ANY APPLICABLE STATE
SECURITIES LAWS, OR (3) PURSUANT TO A VALID REGISTRATION STATEMENT. "
SELLER: First International Bank, National Association, and
its successors and assigns as Seller hereunder.
SERIES: 1999-1.
SERVICER: First International Bank, National Association, and
its successors and permitted assigns as Servicer hereunder.
SERVICER'S CERTIFICATE: The certificate as defined in Section
6.09.
SERVICING ADVANCES: All reasonable and customary
"out-of-pocket" costs and expenses incurred in the performance by the Servicer
of its servicing obligations, including, but not limited to, the cost of (i) the
preservation, restoration and protection of the Mortgaged Property or other
Collateral, (ii) any enforcement or judicial proceedings, including
foreclosures, (iii) the management and liquidation of the Foreclosed Property or
Repossessed Collateral, (iv) compliance with the obligations under clause (iv)
of Section 5.01(a) and Sections 5.02 and 5.07, which Servicing Advances are
reimbursable to the Servicer to the extent provided in Section 5.04(b) and (v)
in connection with the liquidation of an SBA Loan, expenditures relating to the
purchase or maintenance of any Prior Lien for all of which costs and expenses
the Servicer is entitled to reimbursement thereon up to a maximum rate per annum
equal to the related SBA Loan Interest Rate, except that any amount of such
interest accrued at a rate in excess of the weighted average Class A, Class M
and Class B Benchmark Rates with respect to the Remittance Date on or prior to
which the Unguaranteed Percentage of the Net Liquidation Proceeds will be
distributed shall be reimbursable only from Excess Proceeds.
SERVICING FEE: As to each SBA Loan, the annual fee payable to
the Servicer. Such fee shall be calculated and payable monthly from the amounts
received in respect of interest on the Guaranteed Interest and the Unguaranteed
Interest of such SBA Loan, shall accrue at the rate of 0.40% per annum on the
entire principal balance of such SBA Loan and shall be computed on the basis of
the same principal amount and for the period respecting which any related
interest payment on an SBA Loan is computed. The Servicing Fee is payable solely
from the interest portion of related (i) Monthly Payments, (ii) Liquidation
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<PAGE> 34
Proceeds or (iii) Released Mortgaged Property Proceeds collected by the
Servicer, or as otherwise provided in Section 5.04. The Servicing Fee includes
any servicing fees owed or payable to any Subservicer.
SERVICING OFFICER: Any officer of the Servicer involved in, or
responsible for, the administration and servicing of the SBA Loans whose name
appears on a list of servicing officers furnished to the Trustee by the Servicer
on the Closing Date hereof and as such list may from time to time be amended.
SPECIAL REMITTANCE DATE: September 15, 1999.
SPECIFIED SPREAD ACCOUNT REQUIREMENT: The maximum amount of
Spread Account Balance required to be on deposit at any time in the Spread
Account which, with respect to any Remittance Date, shall be equal to the sum of
(i) the then outstanding Principal Balance with respect to all SBA Loans 180
days or more delinquent and (ii) the greater of (a) 3% of the then outstanding
Pool Principal Balance or (b) 2% of the Original Pool Principal Balance;
provided, however, that for purposes of clauses (i) and (ii)(a), there shall be
excluded the Principal Balance of SBA Loans which have been delinquent 24 months
or have been determined to be uncollectible, in whole or in part, by the
Servicer, to the extent that the Certificateholders have previously received the
Principal Balance of such SBA Loans; provided, however, that in no event shall
the Spread Account Balance exceed the then outstanding Pool Principal Balance.
SPREAD ACCOUNT: The Spread Account established in accordance
with the terms of the Spread Account Agreement and maintained by the Spread
Account Custodian for distribution in accordance with the provisions of Section
6.02 hereof.
SPREAD ACCOUNT AGREEMENT: The Agreement dated as of June 17,
1999 by and among the Spread Account Depositor and the Spread Account Custodian,
substantially in the form attached hereto as Exhibit N, as amended from time to
time by the parties thereto.
SPREAD ACCOUNT BALANCE: As of any date of determination, the
sum of the aggregate amount then on deposit in the Spread Account.
SPREAD ACCOUNT CUSTODIAN: HSBC Bank USA, in its capacity as
Spread Account Custodian under the Spread Account Agreement, or any successor
thereto.
SPREAD ACCOUNT DEPOSITOR: FNBNE SBA Holdings, Inc., a
wholly-owned subsidiary of the Bank.
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<PAGE> 35
SPREAD ACCOUNT EXCESS: As defined in Section 6.02(b)(iii).
SUBSEQUENT CUT-OFF DATE: The beginning of business on each
date specified in a Subsequent Transfer Agreement with respect to those
Subsequent SBA Loans which are transferred and assigned to the Trust Fund
pursuant to the related Subsequent Transfer Agreement.
SUBSEQUENT SBA LOANS: The SBA Loans sold to the Trust Fund
pursuant to Section 2.09, which shall be listed on the Schedule of SBA Loans
attached to the related Subsequent Transfer Agreement.
SUBSEQUENT TRANSFER AGREEMENT: Each Subsequent Transfer
Agreement dated as of a Subsequent Transfer Date executed by the Trustee and the
Seller, by which Subsequent SBA Loans are sold and assigned to the Trust Fund.
SUBSEQUENT TRANSFER DATE: The date specified as such in each
Subsequent Transfer Agreement.
SUBSERVICER: Any person with whom the Servicer has entered
into a Subservicing Agreement and who satisfies any requirements set forth in
Section 5.01(b) hereof in respect of the qualification of a Subservicer.
SUBSERVICING AGREEMENT: Any agreement between the Servicer and
any Subservicer relating to subservicing and/or administration of certain SBA
Loans as provided in Section 5.01(b), a copy of which shall be delivered, along
with any modifications thereto, to the Trustee and the SBA.
SUBSTITUTION ADJUSTMENT: As to any date on which a
substitution occurs pursuant to Sections 2.05 or 3.03, the amount (if any) by
which the aggregate unguaranteed portions of the principal balances (after
application of principal payments received on or before the date of
substitution) of any Qualified Substitute SBA Loans as of the date of
substitution are less than the aggregate of the Principal Balance of the related
Deleted SBA Loans.
TAX RETURN: The federal income tax return to be filed on
behalf of the Trust Fund together with any and all other information reports or
returns that may be required to be furnished to the Certificateholders or filed
with the Internal Revenue Service or any other governmental taxing authority
under any applicable provision of federal, state or local tax laws.
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TERMINATION PRICE: The price defined in Section 11.01
hereof.
TRANSFEREE LETTER: A letter substantially in the form attached
hereto as Exhibit O-1.
TRUST FUND: The segregated pool of assets subject hereto,
constituting the trust created hereby and to be administered hereunder,
consisting of: (i) the Unguaranteed Interest of such SBA Loans as from time to
time are subject to this Agreement, together with, subject to the Multi-Party
Agreement, the SBA Files relating thereto and all proceeds thereof, (ii) the
Unguaranteed Interest of such assets (including any Permitted Instruments) as
from time to time are identified as Foreclosed Property, Repossessed Collateral
or are deposited in or constitute the Certificate Account, (iii) the
Unguaranteed Interests of any Insurance Proceeds under all insurance policies
with respect to the SBA Loans required to be maintained pursuant to this
Agreement, (iv) the Unguaranteed Interest of any Liquidation Proceeds and (v)
the Unguaranteed Interest of any Released Mortgaged Property Proceeds, including
all earnings thereon and proceeds thereof. Amounts deposited in the Principal
and Interest Account, Spread Account, Pre-Funding Account and Capitalized
Interest Account shall be held by the Trustee or the Spread Account Custodian,
as the case may be, but shall not constitute part of the Trust Fund. Also,
neither the Servicing Fee nor the Premium Protection Fee shall constitute part
of the Trust Fund.
TRUSTEE: HSBC Bank USA, or its successor in interest, or any
successor trustee appointed as herein provided.
TRUSTEE'S DOCUMENT FILE: The documents delivered pursuant to
Section 2.04.
UNGUARANTEED INTEREST: The sum of (i) that portion of an SBA
Loan not guaranteed by the SBA pursuant to the SBA Rules and Regulations and not
constituting the Premium Protection Fee, the FTA's Fee, the Servicing Fee, and,
with respect to the Additional Fee SBA Loans, the Additional Fee, and (ii) the
Excess Spread.
UNGUARANTEED PERCENTAGE: With respect to any SBA Section 7(a)
Loan, the quotient, expressed as a percentage, the numerator of which shall be
the principal portion of the Unguaranteed Interest of such SBA Section 7(a) Loan
as of the Cut-Off Date (or, in the case of a Subsequent SBA Loan, as of the
Subsequent Cut-Off Date) and the denominator of which shall be the sum of the
principal portion of the Unguaranteed Interest and the principal portion of the
Guaranteed Interest of such SBA Section 7(a) Loan as of the
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Cut-Off Date (or, in the case of a Subsequent SBA Loan, as of the Subsequent
Cut-Off Date).
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ARTICLE II
SALE AND CONVEYANCE OF THE TRUST FUND
Section 2.01 Sale and Conveyance of Trust Fund.
(a) The Seller hereby sells, transfers, assigns, sets over and
conveys to the Trustee without recourse and for the benefit of the SBA and the
Certificateholders, as their interests may appear, subject to the terms of this
Agreement and the Multi-Party Agreement, all of the right, title and interest of
the Seller in and to the Unguaranteed Interests of the Initial SBA Loans and the
Subsequent SBA Loans and all other assets included or to be included in the
Trust Fund.
(b) The rights of the Certificateholders to receive payments
with respect to the SBA Loans in respect of the Certificates, and all ownership
interests of the Certificateholders in such payments, shall be as set forth in
this Agreement. The Servicing Fee and the Premium Protection Fee shall not
constitute part of the Trust Fund and the Certificateholders 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 SBA Files.
(a) Upon the issuance of the Certificates, the ownership of
each SBA Note, the Mortgage and the contents of the related SBA File relating to
the Initial SBA Loans is, and upon each Subsequent Transfer Date the ownership
of each Mortgage Note, the Mortgage and the contents of the related Mortgage
File relating to the applicable Subsequent SBA Loans will be, vested in the
Trustee for the benefit of the SBA and the Certificateholders, as their
interests may appear.
(b) Pursuant to Section 2.04, with respect to the Initial SBA
Loans, the Seller has delivered or caused to be delivered, and, on each
Subsequent Transfer Date, the Seller will deliver or cause to be delivered, each
SBA Note relating to an SBA Section 7(a) Loan to the FTA.
Section 2.03 Books and Records.
The sale of the Unguaranteed Interest of each SBA Loan shall
be reflected on the Seller's balance sheets and other financial statements as a
sale of assets by the Seller and Seller shall respond to any third-party inquiry
that such transfer is so reflected as a sale. The Seller shall be responsible
for maintaining, and shall maintain, a complete set of books and
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records for each SBA Loan which shall be clearly marked to reflect the ownership
of the Unguaranteed Interest in each SBA Loan by the Trustee for the benefit of
the SBA and the Certificateholders, as their interests may appear.
Section 2.04 Delivery of SBA Loan Documents.
The Seller, (i) contemporaneously with the delivery of this
Agreement, has delivered or caused to be delivered to the Trustee or, with
respect to the SBA Notes relating to the SBA Section 7(a) Loans being delivered
pursuant to (a) below, to the FTA, each of the following documents for each
Initial SBA Loan and (ii) on each Subsequent Transfer Date, will deliver or
cause to be delivered to the Trustee, or with respect to the SBA Notes relating
to the SBA Section 7(a) Loans being delivered pursuant to paragraph (a) below,
to the FTA, each of the following documents for each Subsequent SBA Loan:
(a) The original SBA Note, endorsed by means of an allonge as
follows: "Pay to the order of HSBC Bank USA, and its successors and assigns, as
trustee under that certain Pooling and Servicing Agreement dated as of May 31,
1999, for the benefit of the United States Small Business Administration and
holders of First International Bank SBA Loan-Backed Certificates, Series 1999-1,
Class A, Class M and Class B, as their respective interests may appear, without
recourse" and signed, by facsimile or manual signature, in the name of the
Seller by a Responsible Officer, with all prior and intervening endorsements
showing a complete chain of endorsement from the originator to the Seller, if
the Seller was not the originator; provided, however, that in lieu of the
original SBA Note relating to one SBA Loan, with an aggregate Principal Balance
as of the Cut-Off Date of approximately $45,184.58, as identified in the list
delivered to the Trustee by the Seller on the Closing Date and set forth on
Exhibit P hereto, the Seller may deliver a lost note affidavit and, if a copy
exists, a copy of the original SBA Note.
(b) With respect to those SBA Loans secured by Mortgaged
Properties, either: (i) the original Mortgage, with evidence of recording
thereon, (ii) a copy of the Mortgage certified as a true copy by a Responsible
Officer of the Seller where the original has been transmitted for recording
until such time as the original is returned by the public recording office or
duly licensed title or escrow officer or (iii) a copy of the Mortgage certified
by the public recording office in those instances where the original recorded
Mortgage has been lost.
(c) With respect to those SBA Loans secured by Mortgaged
Properties, either: (i) the original Assignment of Mortgage from the Seller
endorsed as follows: "HSBC Bank USA,
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("Assignee") its successors and assigns, as trustee under the Pooling and
Servicing Agreement dated as of May 31, 1999 subject to the Multi-Party
Agreement dated as of May 31, 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 Trustee, such
Responsible Officer may complete one or more blanket certificates attaching
copies of one or more Assignments of Mortgage relating to the Mortgages
originated by the Seller);
(d) With respect to those SBA Loans secured by Mortgaged
Properties, either: (i) originals of all intervening assignments, if any,
showing a complete chain of title from the originator to the Seller, including
warehousing assignments, with evidence of recording thereon if such assignments
were recorded, (ii) copies of any assignments certified as true copies by a
Responsible Officer of the Seller where the originals have been submitted for
recording until such time as the originals are returned by the public recording
officer, or (iii) copies of any assignments certified by the public recording
office in any instances where the original recorded assignments have been lost;
(e) With respect to those SBA Loans secured by Mortgaged
Properties, either: (i) originals of all title insurance policies relating to
the Mortgaged Properties to the extent the Seller obtained such policies or (ii)
copies of any title insurance policies or other evidence of lien position,
including but not limited to Policy Insurance Record of Title ("PIRT") policies,
limited liability reports and lot book reports, to the extent the Seller obtains
such policies or other evidence of lien position, certified as true by the
Seller;
(f) With respect to those SBA Loans secured by other items of
Collateral, the original or a certified copy of all filed UCC financing
statements securing such Collateral naming the Seller as "Secured Party;"
(g) For all SBA Loans, blanket assignment of all Collateral
securing the SBA Loan, including without limitation, all rights under applicable
guarantees and insurance policies;
(h) For all SBA Loans, irrevocable power of attorney of the
Seller to the Trustee to execute, deliver, file or record and otherwise deal
with the Collateral for the SBA Loans in
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accordance with the Agreement. The power of attorney will be delegable by the
Trustee to the Servicer and any successor servicer and will permit the Trustee
or its delegate to prepare, execute and file or record UCC financing statements
and notices to insurers; and
(i) For all SBA Loans, blanket UCC-1 financing statements
identifying by type all Collateral for the SBA Loans in the SBA Loan Pool and
naming the Trustee as "Secured Party" and the Seller as the "Debtor". The UCC-1
financing statements will be filed promptly following the Closing Date in
Connecticut and will be in the nature of protective notice filings rather than
true financing statements.
The Seller shall, within ten Business Days after the receipt
thereof, and in any event, within one year of the Closing Date (or with respect
to the Subsequent SBA Loans, within one year of the related Subsequent Transfer
Date), unless such documents have been lost, deliver or cause to be delivered to
the Trustee: (i) the original recorded Mortgage in those instances where a copy
thereof certified by the Seller was delivered to the Trustee; (ii) the original
recorded Assignment of Mortgage from the Seller to the Trustee, which, together
with any intervening assignments of Mortgage, evidences a complete chain of
title from the originator to the Trustee in those instances where copies thereof
certified by the Seller were delivered to the Trustee; and (iii) any intervening
assignments of Mortgage in those instances where copies thereof certified by the
Seller were delivered to the Trustee. Notwithstanding anything to the contrary
contained in this Section 2.04, in those instances where the public recording
office retains the original Mortgage, Assignment of Mortgage or the intervening
assignments of the Mortgage after it has been recorded, or if such document has
been lost, the Seller shall be deemed to have satisfied its obligations
hereunder upon delivery to the Trustee of a copy of such Mortgage, Assignment of
Mortgage or assignments of Mortgage certified by the public recording office to
be a true copy of the recorded original thereof. All SBA Loan documents held by
the Trustee or the FTA, as the case may be, as to each SBA Loan are referred to
herein as the "Trustee's Document File."
Although it is the intent of the parties to this Agreement
that the conveyance of the Seller's right, title and interest in and to the
Unguaranteed Interests of the SBA Loans and other assets in the Trust Fund
pursuant to this Agreement shall constitute a purchase and sale and not a loan,
in the event that such conveyance is deemed to be a loan, it is the intent of
the parties to this Agreement that the Seller shall be deemed to have granted,
and hereby does grant, to the Trustee for the benefit of the Certificateholders
and the SBA a first priority
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perfected security interest in all of the Seller's right, title and interest in,
to and under the Unguaranteed Interests of the SBA Loans and other assets in the
Trust Fund, and that this Agreement shall constitute a security agreement under
applicable law.
All recording required pursuant to this Section 2.04 shall be
accomplished by and at the expense of the Servicer.
Section 2.05 Acceptance by Trustee of the Trust Fund; Certain
Substitutions; Certification by Trustee.
(a) The SBA shall cause the FTA to execute and deliver on the
Closing Date (or, with respect to the Subsequent SBA Loans, on the related
Subsequent Transfer Date), for each SBA Section 7(a) Loan, an acknowledgment of
receipt of the SBA Note by the FTA in the form attached as Exhibit 1 to the
Multi-Party Agreement, and declares that the FTA will hold such documents and
any amendments, replacements or supplements thereto, as agent for the benefit of
the SBA and the Certificateholders. The Trustee agrees, for the benefit of the
SBA and the Certificateholders, to review each Trustee's Document File within 90
days after the Closing Date or Subsequent Transfer Date, as the case may be (or,
with respect to any Qualified Substitute SBA Loan, within 45 days after the
assignment thereof), and to deliver to the Certificateholders, the Seller, the
Servicer and the SBA a certification in the form attached hereto as Exhibit F-1.
Within 360 days after the Closing Date (or, with respect to any Qualified
Substitute SBA Loan, within 360 days after the assignment thereof), the Trustee
shall deliver to the Seller, the Servicer, the SBA, the Rating Agency and any
Certificateholder who requests a copy from the Trustee a final certification in
the form attached hereto as Exhibit F-2 evidencing the completeness of the
Trustee's Document Files.
(b) If the Trustee or the SBA, as the case may be, during the
process of reviewing the Trustee's Document Files finds any document
constituting a part of a Trustee's Document File which is not properly executed,
has not been received, is unrelated to an SBA Loan identified in the SBA Loan
Schedule, or does not conform in a material respect to the requirements of
Section 2.04 or the description thereof as set forth in the SBA Loan Schedule,
the Trustee or the SBA, as the case may be, shall promptly so notify the Seller
and the Servicer. In performing any such review, the Trustee or the SBA, as the
case may be, may conclusively rely on the Seller as to the purported genuineness
of any such document and any signature thereon. It is understood that the scope
of the Trustee's and the SBA's review of the SBA Files is limited solely to
confirming that the documents listed
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in Section 2.04 have been executed and received and relate to the SBA Loans
identified in the SBA Loan Schedule. The Seller agrees to use reasonable efforts
to remedy a material defect in a document constituting part of an SBA File of
which it is so notified by the Trustee or the SBA, as the case may be. If,
however, within 60 days after the Trustee's or the SBA's notice to it respecting
such material defect the Seller has not remedied the defect and such defect
materially and adversely affects the value of the related SBA Loan, the Seller
will (i) substitute in lieu of such SBA Loan a Qualified Substitute SBA Loan in
the manner and subject to the conditions set forth in Section 3.03 or (ii)
purchase the Unguaranteed Interest of such SBA Loan at a purchase price equal to
the Principal Balance of such Unguaranteed Interest as of the date of purchase,
plus 30 days' interest on such Principal Balance, computed at the Adjusted SBA
Loan Benchmark Rate as of the next succeeding Determination Date, plus any
accrued unpaid Servicing Fees, Monthly Advances and Servicing Advances
reimbursable to the Servicer, which purchase price shall be deposited in the
Principal and Interest Account on the next succeeding Determination Date.
(c) Upon receipt by the Trustee and the SBA of a certification
of a Servicing Officer of the Servicer of such purchase and the deposit of the
amounts described above in the Principal and Interest Account (which
certification shall be in the form of Exhibit I hereto), the Trustee and the SBA
shall release to the Servicer for release to the Seller the related Trustee's
Document File and the Trustee and the SBA shall execute, without recourse, and
deliver such instruments of transfer necessary to transfer such SBA Loan to the
Seller. All costs of any such transfer shall be borne by the Servicer.
(d) If in connection with taking any action the Servicer
requires any item constituting part of the Trustee's Document File, or the
release from the lien of the related SBA Loan of all or part of any Mortgaged
Property or other Collateral, the Servicer shall deliver to the Trustee and the
SBA a certificate to such effect in the form attached as Exhibit I hereto. Upon
receipt of such certification, the Trustee or the SBA, as the case may be, shall
deliver to the Servicer the requested documentation and the Trustee shall
execute, without recourse, and deliver such instruments of transfer necessary to
release all or the requested part of the Mortgaged Property or other Collateral
from the lien of the related SBA Loan.
On the Remittance Date in March of each year, the Trustee
shall deliver to the Seller, the SBA and the Servicer a certification detailing
all transactions with respect to the SBA Loans for which the Trustee holds a
Trustee's Document File pursuant to this Agreement during the prior calendar
year. Such
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certification shall list all Trustee's Document Files which were released by or
returned to the 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 [Intentionally Omitted]
Section 2.07 Authentication of Certificates.
The Trustee acknowledges the assignment to it on behalf of the
Trust Fund of the Unguaranteed Interests in the SBA Loans and the delivery to
the Trustee and the FTA of the Trustee's Document Files and, concurrently with
such delivery, has authenticated or caused to be authenticated and delivered to
or upon the order of the Seller, in exchange for the Unguaranteed Interests in
the SBA Loans, the Trustee's Document Files and the other assets included in the
definition of Trust Fund, Certificates duly authenticated by the Trustee in
authorized denominations.
Section 2.08 Fees and Expenses of the Trustee.
The fees and expenses of the Trustee including (i) the annual
fees of the Trustee, payable quarterly in advance, and subject to rebate to the
Servicer as additional servicing compensation hereunder for any fraction of a
calendar quarter in which this Agreement terminates, (ii) any other fees and
expenses to which the Trustee is entitled pursuant to this Agreement or its
written agreement with the Seller, and (iii) reimbursements to the Servicer for
any advances made by the Servicer to the Expense Account pursuant to Section
6.03 hereof, shall be paid from the Expense Account in the manner set forth in
Section 6.03 hereof; provided, however, that the Seller shall be liable for any
expenses of the Trust Fund incurred prior to the Closing Date. The Servicer and
the Trustee hereby covenant with the Certificateholders that every material
contract or other material agreement entered into by the Trustee, or the
Servicer, acting as attorney-in-fact for the Trustee, on behalf of the Trust
Fund shall expressly state therein that no Certificateholder shall be personally
liable in connection with such contract or agreement.
Section 2.09 Sale and Conveyance of the Subsequent SBA Loans.
(a) Subject to the conditions set forth in paragraph (b)
below, in consideration of the Trustee's delivery on the related Subsequent
Transfer Dates to or upon the order of the Seller of all or a portion of the
balance of funds in the Pre-Funding Account, the Seller shall on any Subsequent
Transfer Date sell, transfer, assign, set over and otherwise convey without
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recourse, to the Trustee all right, title and interest of the Seller in and to
the Unguaranteed Interest of each Subsequent SBA Loan listed on the SBA Loan
Schedule delivered by the Seller on such Subsequent Transfer Date, all their
right, title and interest in and to principal collected and interest accruing on
the Unguaranteed Interest of each such Subsequent SBA Loan on and after the
related Subsequent Cut-Off Date and all their right, title and interest in the
Unguaranteed Interest in all insurance policies; provided, however, that the
Seller reserve and retain all their right, title and interest in and to
principal (including Principal Prepayments) collected and interest accruing on
each such Subsequent SBA Loan prior to the related Subsequent Cut-Off Date. The
transfer by the Seller of the Unguaranteed Interest of the Subsequent SBA Loans
set forth on the SBA Loan Schedule to the Trustee shall be absolute and shall be
intended by all parties hereto to be treated as a sale by the Seller.
Although it is the intent of the parties to this Agreement
that the conveyance of the Seller's right, title and interest in and to the
Unguaranteed Interests of the SBA Loans and other assets in the Trust Fund
pursuant to this Agreement shall constitute a purchase and sale and not a loan,
in the event that such conveyance is deemed to be a loan, it is the intent of
the parties to this Agreement that the Seller shall be deemed to have granted,
and hereby does grant, to the Trustee a first priority perfected security
interest in all of the Seller's right, title and interest in, to and under the
Unguaranteed Interests of the SBA Loans and other assets in the Trust Fund, and
that this Agreement shall constitute a security agreement under applicable law.
The amount released from the Pre-Funding Account shall be
one-hundred percent (100%) of the aggregate Principal Balances as of the related
Subsequent Cut-Off Date of the Subsequent SBA Loans so transferred on the
related Subsequent Transfer Date.
(b) The Seller shall transfer to the Trustee the Unguaranteed
Interest of the Subsequent SBA Loans and the other property and rights related
thereto described in paragraph (a) above only upon the satisfaction of each of
the following conditions on or prior to the related Subsequent Transfer Date:
(i) the Seller shall have provided the Trustee with a
timely Addition Notice and shall have provided any information
reasonably requested by it with respect to the Subsequent SBA
Loans;
(ii) the Seller shall have delivered to the Trustee a
duly executed written assignment (including an acceptance by
the Trustee) that shall include SBA
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Loan Schedules, listing the Subsequent SBA Loans and any other
exhibits listed thereon;
(iii) the Seller shall have deposited in the
Principal and Interest Account all collections in respect of
the Subsequent SBA Loans received on or after the related
Subsequent Cut-Off Date;
(iv) as of each Subsequent Transfer Date, the Bank
was not insolvent nor will it have been made insolvent by such
transfer nor is it aware of any pending insolvency;
(v) such addition will not result in a material
adverse tax consequence to the Trust Fund or the Holders of
the Certificates;
(vi) the Pre-Funding Period shall not have
terminated;
(vii) the Seller shall have delivered to the Trustee
an Officer's Certificate confirming the satisfaction of each
condition precedent specified in this paragraph (b) and in the
related Subsequent Transfer Agreement;
(viii) the Seller shall have delivered to the Rating
Agency and the Trustee, Opinions of Counsel with respect to
the transfer of the Subsequent SBA Loans substantially in the
form of the Opinions of Counsel delivered to the Trustee on
the Closing Date (bankruptcy, corporate and tax opinions); and
(ix) the FTA shall have delivered, pursuant to
Section 2.05(a) hereof, an acknowledgment of receipt of the
SBA Note relating to such SBA Section 7(a) Loan in the form
attached as Exhibit 1 to the Multi-Party Agreement.
(c) The obligation of the Trust Fund to purchase the
Unguaranteed Interest of a Subsequent SBA Loan on any Subsequent Transfer Date
is subject to the requirement, as evidenced by a certificate from a Responsible
Officer of the Seller, that such Subsequent SBA Loan conforms in all material
respects to the representations and warranties concerning the individual Initial
SBA Loans set forth in Sections 3.01 and 3.02 (except that any reference therein
to the Cut-Off Date shall be deemed a reference to the applicable Subsequent
Cut-Off Date) and that the inclusion of all Subsequent SBA Loans being
transferred to the Trust Fund on such Subsequent Transfer Date will not change,
in any material
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respect, the characteristics of the Initial SBA Loans, in the aggregate, set
forth in Sections 3.01 and 3.02 or in the Confidential Placement Memorandum
under the headings "Summary of Terms -- The SBA Loan Pool" and "The SBA Loan
Pool." Further, each Subsequent SBA Loan must be an SBA Section 7(a) Loan.
(d) In connection with the transfer and assignment of the
Subsequent SBA Loans, the Seller agrees to satisfy the conditions set forth in
Sections 2.01, 2.02, 2.03, 2.04 and 2.05.
(e) In connection with each Subsequent Transfer Date, on the
Remittance Dates in July, August and September 1999 and the Special Remittance
Date, the Seller shall determine, and the Trustee shall cooperate with the
Seller in determining (i) the amount and correct dispositions of the Capitalized
Interest Requirements, Overfunded Interest Amounts, and Pre-Funding Earnings and
(ii) any other necessary matters in connection with the administration of the
Pre-Funding Account and of the Capitalized Interest Account. If any amounts are
incorrectly released to the Seller from the Capitalized Interest Account, the
Seller shall immediately repay such amounts to the Trustee.
Section 2.10 Optional Purchase of Defaulted SBA Loans.
The Servicer shall have the right, but not the obligation, to
purchase the Unguaranteed Interest of any Defaulted SBA Loan for a purchase
price equal to the Principal Balance of such Unguaranteed Interest as of the
date of repurchase, plus 30 days' interest on such Principal Balance, computed
at the Adjusted SBA Loan Benchmark Rate as of the next succeeding Determination
Date, plus any accrued unpaid Servicing Fees, Monthly Advances and Servicing
Advances reimbursable to the Servicer, which purchase price shall be deposited
in the Principal and Interest Account on the next succeeding Determination Date.
Any such repurchase shall be accomplished in the manner specified in Section
2.05(b). In no event shall the aggregate Principal Balance of the Unguaranteed
Interests of all Defaulted SBA Loans purchased pursuant to this Section 2.10
exceed 5.0% of the sum of (i) the Original Pool Principal Balance and (ii) the
Original Pre-Funded Amount.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES
Section 3.01 Representations of the Bank.
The Bank hereby represents and warrants to the Trustee and the
Certificateholders as of the Closing Date:
(a) The Bank is a nationally chartered bank duly organized and
validly existing under the laws of the United States and has all licenses
necessary to carry on its business as now being conducted and is licensed and
qualified in each state where the laws of such state require licensing or
qualification in order to conduct business of the type conducted by the Bank and
perform its obligations hereunder; the Bank has all requisite power and
authority to execute and deliver this Agreement and to perform in accordance
herewith and therewith; the execution, delivery and performance of this
Agreement (including all instruments of transfer to be delivered pursuant to
this Agreement) by the Bank and the consummation of the transactions
contemplated hereby and thereby have been duly and validly authorized by all
necessary corporate action; this Agreement evidences the valid, binding and
enforceable obligation of the Bank; and all requisite corporate action has been
taken by the Bank to make this Agreement valid, binding and enforceable upon the
Bank in accordance with its terms, subject to the effect of bankruptcy,
insolvency, reorganization, moratorium and other similar laws relating to or
affecting creditors' rights generally or the application of equitable principles
in any proceeding, whether at law or in equity, none of which will affect the
ownership of the SBA Loans by the Trustee, as trustee.
(b) All actions, approvals, consents, waivers, exemptions,
variances, franchises, orders, permits, authorizations, rights and licenses
required to be taken, given or obtained, as the case may be, by or from any
federal, state or other governmental authority or agency (other than any such
actions, approvals, etc., under any state securities laws, real estate
syndication or "Blue Sky" statutes, as to which the Bank makes no such
representation or warranty), that are necessary or advisable in connection with
the purchase and sale of the Certificates and the execution and delivery by the
Bank of the documents to which it is a party, have been duly taken, given or
obtained, as the case may be, are in full force and effect on the date hereof,
are not subject to any pending proceedings or appeals (administrative, judicial
or otherwise) and either the time within which any appeal therefrom may be taken
or review thereof may be obtained has expired or no review thereof may be
obtained or appeal therefrom taken, and are adequate to authorize
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the consummation of the transactions contemplated by this Agreement and the
other documents on the part of the Bank and the performance by the Bank of its
obligations under this Agreement and such of the other documents to which it is
a party;
(c) The consummation of the transactions contemplated by this
Agreement will not result in the breach of any terms or provisions of the
articles of association or by-laws of the Bank or result in the breach of any
term or provision of, or conflict with or constitute a default under or result
in the acceleration of any obligation under, any material agreement, indenture
or loan or credit agreement or other material instrument to which the Bank or
its property is subject, or result in the violation of any law, rule,
regulation, order, judgment or decree to which the Bank or its property is
subject;
(d) Neither this Agreement nor any statement, report or other
document furnished or to be furnished pursuant to this Agreement or in
connection with the transactions contemplated hereby and thereby contains any
untrue statement of material fact or omits to state a material fact necessary to
make the statements contained herein or therein not misleading in light of the
circumstances under which they were made;
(e) The Bank does not believe, nor does it have any reason or
cause to believe, that it cannot perform each and every covenant contained in
this Agreement;
(f) There is no action, order, suit, proceeding or
investigation pending or, to the best of the Bank's knowledge, threatened
against the Bank which, either in any one instance or in the aggregate, may (i)
result in any material adverse change in the business, operations, financial
condition, properties or assets of the Bank or in any material impairment of the
right or ability of the Bank to carry on its business substantially as now
conducted, or in any material liability on the part of the Bank or of any action
taken or to be taken in connection with the obligations of the Bank contemplated
herein, or which would be likely to impair materially the ability of the Bank to
perform under the terms of this Agreement or (ii) which would draw into question
the validity of this Agreement or the SBA Loans;
(g) The Trust Fund will not constitute an "investment company"
within the meaning of the Investment Company Act of 1940, as amended;
(h) The Bank is not in default with respect to any order or
decree of any court or any order, regulation or demand of any federal, state,
municipal or governmental agency, which default might have consequences that
would materially and
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adversely affect the condition (financial or other) or operations of the Bank or
its properties or might have consequences that would materially and adversely
affect its performance hereunder;
(i) The statements contained in the Confidential Placement
Memorandum which describe the Bank or the SBA Loans or matters or activities for
which the Bank is responsible in accordance with the Confidential Placement
Memorandum, this Agreement and all documents referred to therein or herein or
delivered in connection therewith or herewith, or which are attributable to the
Bank therein or herein are true and correct in all material respects, and the
Confidential Placement Memorandum does not contain any untrue statement of a
material fact with respect to the Bank or the SBA Loans and does not omit to
state a material fact necessary to make the statements contained therein with
respect to the Bank or the SBA Loans not misleading in light of the
circumstances under which they were made. The Bank is not aware that the
Confidential Placement Memorandum contains any untrue statement of a material
fact or omits to state any material fact necessary to make the statements
contained therein not misleading in light of the circumstances under which they
were made. There is no fact peculiar to the Bank or the SBA Loans and known to
the Bank that materially adversely affects or in the future may (so far as the
Bank can now reasonably foresee) materially adversely affect the Bank or the SBA
Loans or the ownership interests therein represented by the Certificates that
has not been set forth in the Confidential Placement Memorandum;
(j) No Certificateholder is subject to Connecticut state
licensing requirements solely by virtue of holding the Certificates;
(k) The transfer, assignment and conveyance of the SBA Notes
and the Mortgages by the Bank pursuant to this Agreement are not or, with
respect to the Subsequent SBA Loans, will not be, subject to the bulk transfer
laws or any similar statutory provisions in effect in any applicable
jurisdiction and do not violate the SBA Rules and Regulations;
(l) The origination and collection practices used by the Bank
with respect to each SBA Note and Mortgage relating to the Initial SBA Loans
have been, and the origination and collection practices to be used by the Bank
with respect to each SBA Note and Mortgage relating to the Subsequent SBA Loans
will have been, in all material respects legal, proper, prudent and customary in
the SBA loan origination and servicing business;
(m) Each Initial SBA Loan was, and each Subsequent SBA Loan
will be, selected from among the existing SBA loans in the
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Bank's portfolio at the date hereof or, in the case of the Subsequent SBA Loans,
at the related Subsequent Cut-Off Date, in a manner not designed to adversely
affect the Certificateholders;
(n) The Bank received fair consideration and reasonably
equivalent value or, in the case of the Subsequent SBA Loans, will have received
fair consideration and reasonably equivalent value, in exchange for the sale of
the Unguaranteed Interest of the SBA Loans evidenced by the Certificates;
(o) Neither the Bank nor any of its affiliates sold or, in the
case of the Subsequent SBA Loans, will have sold any interest in any SBA Loan
evidenced by the Certificates with any intent to hinder, delay or defraud any of
their respective creditors;
(p) The Bank is solvent, and the Bank will not be rendered
insolvent as a result of the transfer of the SBA Loans to the Trust Fund or the
sale of the Certificates; and
(q) The chief executive office and legal name of the Bank is
as set forth on the respective UCC-1 financing statement filed on behalf of the
Bank pursuant to Section 2.04(h), such office is the place where the Bank is
"located" for the purposes of Section 9-103(3)(d) of the Uniform Commercial Code
as in effect in the State of New York, and neither the location of such office
nor the legal name of the Bank has changed in the past four months.
Section 3.02 Individual SBA Loans.
The Bank hereby represents and warrants to the Trustee, and
the Certificateholders, with respect to each Initial SBA Loan originated or
acquired by the Bank, as of the Closing Date, and with respect to each
Subsequent SBA Loan originated by the Bank, as of the related Subsequent
Transfer Date:
(a) The information with respect to each SBA Loan set forth in
the SBA Loan Schedule is true and correct;
(b) All of the original or certified documentation set forth
in Section 2.04 (including all material documents related thereto) has been or
will be delivered to the Trustee or the FTA, on behalf of the Trustee, on the
Closing Date or as otherwise provided in Section 2.04;
(c) Each Mortgaged Property serving as the primary Collateral
for an SBA Loan is improved by a Commercial Property or a Residential Property
and does not constitute other than real property under state law;
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(d) Except for Initial SBA Loans (and up to 10 Subsequent SBA
Loans) that were purchased and reunderwritten by the Bank, each SBA Loan has
been originated by the Bank, in its capacity as Seller and each SBA Loan is
being serviced by the Bank, in its capacity as Servicer;
(e) Each SBA Loan is an SBA Section 7(a) Loan;
(f) Except for 5 Initial SBA Loans that bear fixed rates of
interest, the SBA Loan Interest Rates adjust monthly to equal the then
applicable Prime Rate plus the margin (if applicable) set forth in the related
SBA Note. Each adjustable rate SBA Note will, with respect to principal
payments, adjust monthly to provide for a schedule of Monthly Payments which
are, if timely paid, sufficient to fully amortize the principal balance of such
SBA Loan on its respective maturity date;
(g) With respect to those SBA Loans secured by a Mortgaged
Property, each Mortgage is a valid and subsisting lien of record on the
Mortgaged Property subject only to any applicable Prior Liens on such Mortgaged
Property and subject in all cases to such exceptions that are generally
acceptable to banking institutions in connection with their regular commercial
lending activities, and such other exceptions to which similar properties are
commonly subject and which do not individually, or in the aggregate, materially
and adversely affect the benefits of the security intended to be provided by
such Mortgage;
(h) Immediately prior to the transfer and assignment herein
contemplated, the Bank held good and indefeasible title to, and was the sole
owner of, the Unguaranteed Interest of each SBA Loan conveyed by the Bank
subject to no liens, charges, mortgages, encumbrances or rights of others except
as set forth in Sections 3.02(g) or 3.02(kk) or other liens which will be
released simultaneously with such transfer and assignment; and immediately upon
the transfer and assignment herein contemplated, the Trustee will hold good and
indefeasible title, to, and be the sole owner of, each SBA Loan subject to no
liens, charges, mortgages, encumbrances or rights of others except (i) as set
forth in Sections 3.02(g) or 3.02(kk), (ii) the interests of the SBA or (iii)
other liens which will be released simultaneously with such transfer and
assignment;
(i) As of the Cut-Off Date (or, with respect to any Subsequent
SBA Loan, as of the related Subsequent Cut-Off Date), no SBA Loan is more than
30 days delinquent in payment;
(j) To the best of the Bank's knowledge, there is no
delinquent tax or assessment lien on any Mortgaged Property, and
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each Mortgaged Property is free of material damage and is in good repair;
(k) No SBA Loan is subject to any right of rescission,
set-off, counterclaim or defense, including the defense of usury, nor will the
operation of any of the terms of the SBA Note or any related Mortgage, or the
exercise of any right thereunder, render either the SBA Note or any related
Mortgage unenforceable in whole or in part, or subject to any right of
rescission, set-off, counterclaim or defense, including the defense of usury,
and no such right of rescission, set-off, counterclaim or defense has been
asserted with respect thereto;
(l) Each SBA Loan at the time it was made complied and, as of
the Closing Date complies, in all material respects with applicable state and
federal laws and regulations, including, without limitation, usury, equal credit
opportunity, disclosure and recording laws and the SBA Rules and Regulations;
(m) Each Initial SBA Loan was (and each Subsequent SBA Loan
will be) originated and underwritten or purchased and reunderwritten by the Bank
in accordance with the underwriting criteria set forth in the Confidential
Placement Memorandum; provided, however, that without the prior written consent
of the SBA, no more than 10 Subsequent SBA Loans may have been purchased by the
Bank from a third party;
(n) Pursuant to the SBA Rules and Regulations, the Bank
requires that the improvements upon each Mortgaged Property are covered by a
valid and existing hazard insurance policy with a generally acceptable carrier
that provides for fire and extended coverage representing coverage described in
Section 5.07;
(o) Pursuant to the SBA Rules and Regulations, the Bank
requires that if a Mortgaged Property is in an area identified in the Federal
Register by the Federal Emergency Management Agency as having special flood
hazards, a flood insurance policy is in effect with respect to such Mortgaged
Property with a generally acceptable carrier in an amount representing coverage
described in Section 5.07;
(p) Each SBA Note, any related Mortgage and any other
agreement pursuant to which Collateral is pledged to the Bank is the legal,
valid and binding obligation of the maker thereof and is enforceable in
accordance with its terms, except only as such enforcement may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting the enforcement of creditors' rights generally and by general
principles of equity (whether considered in a proceeding or
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action in equity or at law), none of which will prevent the ultimate realization
of the security provided by the Collateral or other agreement, and all parties
to each SBA Loan had full legal capacity to execute all SBA Loan documents and
convey the estate therein purported to be conveyed;
(q) The Bank has caused and will cause to be performed any and
all acts reasonably required to be performed to preserve the rights and remedies
of the Trustee in any insurance policies applicable to the SBA Loans including,
without limitation, in each case, any necessary notifications of insurers,
assignments of policies or interests therein, and establishments of co-insured,
joint loss payee and mortgagee rights in favor of the Trustee or the Bank,
respectively;
(r) Each original Mortgage was recorded, and all subsequent
assignments of the original Mortgage have been recorded in the appropriate
jurisdictions wherein such recordation is necessary to perfect the lien thereof
as against creditors of the Bank (or, subject to Section 2.04 hereof, are in the
process of being recorded);
(s) Each SBA Loan conforms, and all such SBA Loans in the
aggregate conform, to the description thereof set forth in the Confidential
Placement Memorandum;
(t) The terms of the SBA Note and the related Mortgage or
other security agreement pursuant to which Collateral was pledged have not been
impaired, altered or modified in any respect, except by a written instrument
which has been recorded, if necessary, to protect the interest of the SBA and
the Certificateholders and which has been delivered to the Trustee;
(u) There are no material defaults in complying with the terms
of any applicable Mortgage, and all taxes, governmental assessments, insurance
premiums, water, sewer and municipal charges, leasehold payments or ground rents
which previously became due and owing have been paid, or an escrow of funds has
been established in an amount sufficient to pay for every such item which
remains unpaid and which has been assessed but is not yet due and payable;
(v) There is no proceeding pending or threatened for the total
or partial condemnation of any Mortgaged Property, nor is such a proceeding
currently occurring, and such property is undamaged by waste, fire, earthquake
or earth movement, windstorm, flood, tornado or other casualty, so as to affect
adversely the value of the Mortgaged Property as security for the SBA Loan or
the use for which the premises were intended;
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(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 Cut-Off Date, the Seller has no knowledge of any such contamination from
toxic substances or hazardous waste material on any Mortgaged Property unless
such items are below action levels or such Mortgaged Property is subject to
ongoing environmental rehabilitation approved by the SBA;;
(x) The proceeds of the SBA Loan have been fully disbursed,
and there is no obligation on the part of the Bank to make future advances
thereunder 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 Bank or any
other party (except for any guarantor of an SBA Loan) to make Monthly Payments
(except for Monthly Advances) in addition to those made by the Obligor;
(z) No statement, report or other document signed by the Bank
constituting a part of the SBA File contains any untrue statement of a material
fact or omits to state a material fact necessary to make the statements
contained therein not misleading in light of the circumstances under which they
were made;
(aa) With respect to each Mortgage constituting a deed of
trust, a trustee, duly qualified under applicable law to serve as such, has been
properly designated and currently so serves and is named in such Mortgage, and
no fees or expenses are or will become payable by the Certificateholders to the
trustee under the deed of trust, except in connection with a trustee's sale
after default by the Obligor;
(bb) No SBA Loan has a shared appreciation feature, or other
contingent interest feature;
(cc) With respect to each SBA Loan secured by a Mortgaged
Property or other Collateral and that is not a first priority lien, either (i)
no consent for the SBA Loan is required by the holder of any related Prior Lien
or (ii) such consent has been obtained;
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(dd) Each SBA Loan was originated to a business located in the
State identified in the SBA Loan Schedule;
(ee) All parties which have had any interest in the SBA Loan,
whether as mortgagee, assignee, pledgee or otherwise, are (or, during the period
in which they held and disposed of such interest, were) (1) in compliance with
any and all applicable licensing requirements of the laws of the state wherein
any Mortgaged Property is located, and (2)(A) organized under the laws of such
state, or (B) qualified to do business in such state, or (C) federal savings and
loan associations or national banks having principal offices in such state, or
(D) not doing business in such state;
(ff) Any related Mortgage contains customary and enforceable
provisions in accordance with the SBA Rules and Regulations which render the
rights and remedies of the holder thereof adequate for the realization against
the Mortgaged Property of the benefits of the security, including, (i) in the
case of a Mortgage designated as a deed of trust, by trustee's sale, and (ii)
otherwise by judicial foreclosure. There is no homestead or other exemption
available to the Mortgagor which would materially interfere with the right to
sell the Mortgaged Property at a trustee's sale or the right to foreclose the
Mortgage;
(gg) There is no default, breach, violation or event of
acceleration existing under the SBA Note and no event which, with the passage of
time or with notice and the expiration of any grace or cure period, would
constitute a default, breach, violation or event of acceleration; and the Bank,
in its capacity as either Servicer or Seller, has not waived any default,
breach, violation or event of acceleration;
(hh) All parties to the SBA Note and any related Mortgage or
other document pursuant to which Collateral was pledged had legal capacity to
execute the SBA Note and any such Mortgage or other document and each SBA Note
and Mortgage or other document have been duly and properly executed by such
parties;
(ii) The SBA Loan was not selected for inclusion under this
Agreement from the Bank's portfolio of comparable SBA loans on any basis which
would have a material adverse affect on a Certificateholder;
(jj) All amounts received after the Cut-Off Date (or, with
respect to the Subsequent SBA Loans, after the related Subsequent Cut-Off Date)
with respect to the SBA Loans have been, to the extent required by this
Agreement, deposited into the
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Principal and Interest Account and are, as of the Closing Date (or with respect
to the Subsequent SBA Loans, as of the related Subsequent Transfer Date), in the
Principal and Interest Account; and
(kk) With respect to those SBA Loans secured by Collateral
other than a Mortgaged Property, the related SBA Note, security agreements, if
any, and UCC-1 filed with respect to such Collateral creates a valid and
subsisting lien of record on such Collateral subject only to any Prior Liens, if
any, on such Collateral and subject in all cases to such exceptions that are
generally acceptable to lending institutions in connection with their regular
commercial lending activities, and such other exceptions to which similar
Collateral is commonly subject and which do not individually, or in the
aggregate, materially and adversely affect the benefits of the security intended
to be provided by such SBA Note, security agreement and UCC-1.
Section 3.03 Purchase and Substitution of Defective SBA Loans.
It is understood and agreed that the representations and
warranties set forth in Sections 3.01 and 3.02 shall survive delivery of the
Certificates to the Certificateholders. Upon discovery by the Servicer, any
Subservicer or the Trustee of a breach of any of such representations and
warranties which materially and adversely affects the value of the SBA Loans or
the interest of the Certificateholders or the SBA therein or which materially
and adversely affects the interests of the Certificateholders and the SBA in the
related SBA Loan in the case of a representation and warranty relating to a
particular SBA Loan (notwithstanding that such representation and warranty was
made to the Bank's best knowledge), the party discovering such breach shall give
prompt written notice to the others. Within 60 days of the earlier of its
discovery or its receipt of notice of any breach of a representation or
warranty, the Bank, in its capacity as Seller shall (a) promptly cure such
breach in all material respects, (b) purchase the Unguaranteed Interest of such
SBA Loan by depositing in the Principal and Interest Account, on the next
succeeding Determination Date, an amount and in the manner specified in Section
2.05(b), or (c) if within two years of the Closing Date, remove such SBA Loan
from the Trust Fund (in which case it shall become a Deleted SBA Loan) and
substitute one or more Qualified Substitute SBA Loans. Any such substitution
shall be accompanied by payment by the Seller of the Substitution Adjustment, if
any.
As to any Deleted SBA Loan for which the Seller substitutes a
Qualified Substitute SBA Loan or Loans, the
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Servicer shall effect such substitution by delivering to the Trustee and the FTA
a certification in the form attached hereto as Exhibit I, executed by a
Servicing Officer, and shall also deliver to the Trustee and the FTA, as
applicable, the documents constituting the Trustee's Document File for such
Qualified Substitute SBA Loan or Loans.
The Servicer shall deposit in the Principal and Interest
Account the Unguaranteed Percentage of all payments of principal received in
connection with such Qualified Substitute SBA Loan or Loans after the date of
such substitution together with all interest (net of the 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 Trustee that such
substitution has taken place and shall amend the SBA Loan Schedule to reflect
the removal of such Deleted SBA Loan from the terms of this Agreement and the
substitution of the Qualified Substitute SBA Loan or Loans. Upon such
substitution, such Qualified Substitute SBA Loan or Loans shall be subject to
the terms of this Agreement in all respects, including Sections 2.04 and 2.05,
and the Seller shall be deemed to have made with respect to such Qualified
Substitute SBA Loan or Loans, as of the date of substitution, the covenants,
representations and warranties set forth in Sections 3.01 and 3.02. On the date
of such substitution, the Seller will remit to the Servicer, and the Servicer
will deposit into the Principal and Interest Account an amount equal to the
Substitution Adjustment.
In addition to the cure, purchase and substitution obligation
in Sections 2.04, 2.05 and 3.03, the Bank shall indemnify and hold harmless the
Trust Fund, the Trustee and the Certificateholders against any loss, damages,
penalties, fines, forfeitures, reasonable legal fees and related costs,
judgments and other costs and expenses resulting from any claim, demand, defense
or assertion based on or grounded upon, or resulting from, a breach of the
Bank's representations and warranties contained in this Agreement. It is
understood and agreed that the obligations of the Bank, in its capacity as
Seller set forth in Sections 2.04, 2.05 and 3.03 to cure, purchase or substitute
for a defective SBA Loan and to indemnify the Certificateholders and the Trustee
as provided in Sections 2.04, 2.05 and 3.03
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constitute the sole remedies of the Trustee and the Certificateholders
respecting a breach of the foregoing representations and warranties.
Any cause of action against the Bank, in its capacity as
either Servicer or the Seller, relating to or arising out of the breach of any
representations and warranties made in Sections 2.05, 3.01 or 3.02 shall accrue
as to any SBA Loan upon (i) discovery of such breach by any party and notice
thereof to the Seller and or notice thereof by the Seller to the Trustee, (ii)
failure by the Seller to cure such breach or purchase or substitute such SBA
Loan as specified above, and (iii) demand upon the Seller by the Trustee for all
amounts payable hereunder in respect of such SBA Loan.
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ARTICLE IV
THE CERTIFICATES
Section 4.01 The Certificates.
The Class A, Class M and Class B Certificates shall be
substantially in the forms annexed hereto as Exhibits B-1, B-2 and B-3 and
shall, upon original issue, be executed and delivered by the Servicer to the
Trustee for authentication and redelivery to or upon the order of the Seller,
upon receipt by the Trustee and the FTA of the documents specified in Section
2.04. All Certificates shall be executed on behalf of the Servicer by a
Responsible Officer, in the denominations specified in the definition of
Percentage Interest, and shall be authenticated on behalf of the Trustee by one
of its Responsible Officers. Certificates bearing the signatures of individuals
who were at the time of the execution or authentication of the Certificates a
Responsible Officer of the Servicer or a Responsible Officer of the Trustee, as
the case may be, shall bind the Servicer or the Trustee, as the case may be,
notwithstanding that such individuals or any of them have ceased to hold such
offices prior to the delivery of such Certificates or did not hold such offices
at the date of such Certificates. All Certificates issued hereunder shall be
dated the date of their authentication.
Section 4.02 Registration of Transfer and Exchange of
Certificates.
(a) The Trustee shall cause to be kept at the office of the
Certificate Registrar, in New York, New York, a Certificate Register in which,
subject to such reasonable regulations as it may prescribe, it shall provide for
the registration of Certificates and of transfers and exchanges of Certificates
as herein provided. The Certificate Register shall contain the name, remittance
instructions, Class and Percentage Interest of each Certificateholder, as well
as the Series and the number in the Series. HSBC Bank USA is initially appointed
Certificate Registrar for the purpose of registering Certificates and transfers
and exchanges of Certificates as herein provided.
(b) Each Class of Certificates shall be issued in minimum
denominations of $100,000 original principal amount and integral multiples of
$1,000 in excess thereof, except that one Certificate of each Class may be in a
different denomination so that the sum of the denominations of all outstanding
Class A, Class M and Class B Certificates shall equal the Original Class A,
Class M and Class B Certificate Principal Balance, respectively. On the Closing
Date, the Trustee will execute and authenticate (i) one or more Global
Certificates and/or (ii)
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Individual Certificates all in an aggregate principal amount that shall equal
the Original Class A, Original Class M and Original Class B Certificate
Principal Balances.
The Global Certificates (i) shall be delivered by the
Seller to the Depository or, pursuant to the Depository's instructions, shall be
delivered by the Seller on behalf of the Depository to and deposited with the
Depository's custodian, and in each case shall be registered in the name of Cede
& Co. and (ii) shall bear a legend substantially to the following effect:
"Unless this certificate is presented by an
authorized representative of The Depository Trust Company, a
New York corporation ("DTC"), to the Certificate Registrar or
its agent for registration of transfer, exchange or payment,
and any certificate issued is registered in the name of Cede &
Co. or in such other name as is requested by an authorized
representative of DTC (and any payment is made to Cede & Co.
or to such other entity as is requested by an authorized
representative of DTC), ANY TRANSFER, PLEDGE OR OTHER USE
HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL
inasmuch as the registered owner hereof, Cede & Co., has an
interest herein."
The Global Certificates may be deposited with such
other Depository as the Seller may from time to time
designate, and shall bear such legend as may be appropriate; provided that such
successor Depository maintains a book-entry system that qualifies to be treated
as "registered form" under Section 163(f)(3) of the Code.
The Seller and the Trustee are hereby authorized to
and shall execute and deliver a Letter of Representations, in the form provided
by the Depository, with the Depository relating to the Certificates.
(c) With respect to Certificates registered in the Certificate
Register in the name of Cede & Co., as nominee of the Depository, the Seller,
the Servicer and the Trustee shall have no responsibility or obligation to
Direct or Indirect Participants or beneficial owners for which the Depository
holds Certificates from time to time as a Depository and the Trustee and its
agents, employees, officers and directors may treat the Depository as the
absolute owner of the Certificates for all purposes whatsoever. Without limiting
the immediately preceding sentence, the Seller, the Servicer and the Trustee
shall have no responsibility or obligation with respect to (a) the accuracy of
the records of the Depository, Cede & Co., or any Direct or Indirect Participant
with respect to the ownership interest in
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the Certificates, (b) the delivery to any Direct or Indirect Participant or any
other Person, other than a registered Holder of a Certificate, (c) the payment
to any Direct or Indirect Participant or any other Person, other than a
registered Holder of a Certificate as shown in the Certificate Register, of any
amount with respect to any distribution of principal or interest on the
Certificates or (d) the making of book-entry transfers among Direct and Indirect
Participants of the Depository with respect to Certificates registered in the
Certificate Register in the name of the nominee of the Depository. No Person
other than a registered Holder of a Certificate as shown in the Certificate
Register shall receive a certificate evidencing such Certificate.
(d) Upon delivery by the Depository to the Trustee of written
notice to the effect that the Depository has determined to substitute a new
nominee in place of Cede & Co., and subject to the provisions hereof with
respect to the payment of distributions by the mailing of checks or drafts to
the registered Holders of Certificates appearing as registered Owners in the
Certificate Register on a Record Date, the name "Cede & Co." in this Agreement
shall refer to such new nominee of the Depository.
(e) In the event that (i) the Depository or the Servicer
advises the Trustee in writing that the Depository is no longer willing or able
to discharge properly its responsibilities as nominee and depository with
respect to the Certificates and the Servicer is unable to locate a qualified
successor or (ii) the Servicer at its sole option elects to terminate the
book-entry system through the Depository, the Certificates shall no longer be
restricted to being registered in the Certificate Register in the name of Cede &
Co. (or a successor nominee) as nominee of the Depository. At that time, the
Servicer may determine that the Certificates shall be registered in the name of
and deposited with a successor depository operating a global book-entry system,
as may be acceptable to the Servicer, or such depository's agent or designee
but, if the Servicer does not select such alternative global book-entry system,
then upon surrender to the Certificate Registrar of the Global Certificates by
the Depository, accompanied by the registration instructions from the Depository
for registration, the Trustee shall at the Servicer's expense authenticate
Individual Certificates. Neither the Servicer nor the Trustee shall be liable
for any delay in delivery of such instructions and may conclusively rely on, and
shall be fully protected in relying on, such instructions. Upon the issuance of
Individual Certificates, the Trustee, the Certificate Registrar, the Servicer,
any Paying Agent and the Seller shall recognize the Holders of the Individual
Certificates as Certificateholders hereunder.
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(f) Notwithstanding any other provision of this Agreement to
the contrary, so long as any Certificates are registered in the name of Cede &
Co., as nominee of the Depository, all distributions of principal and interest
on such Certificates and all notices with respect to such Certificates shall be
made and given, respectively, in the manner provided in the Letter of
Representations.
(g) Subject to the preceding paragraphs, upon surrender for
registration of transfer of any Certificate at the office of the Certificate
Registrar and, upon satisfaction of the conditions set forth below, the Servicer
shall execute in the name of the designated transferee or transferees, a new
Certificate of the same Percentage Interest and dated the date of authentication
by the Trustee. The Certificate Registrar shall notify the Servicer and the
Trustee of any such transfer. The Certificate Registrar shall not transfer any
Class B Certificate, until 6 years after the issue date of the Class B
Certificates without the prior written consent of the SBA.
At the option of the Certificateholders, Certificates
may be exchanged for other Certificates in authorized denominations of a like
Class and aggregate Percentage Interest, upon surrender of the Certificates to
be exchanged at such office. Whenever any Certificates are so surrendered for
exchange, the Servicer shall execute the Certificates which the
Certificateholder making the exchange is entitled to receive. Every Certificate
presented or surrendered for transfer or exchange shall be accompanied by wiring
instructions, if applicable, in the form of Exhibit E.
(h) No service charge shall be made for any transfer or
exchange of Certificates, but prior to transfer the Certificate Registrar may
require payment by the transferor of a sum sufficient to cover any tax or
governmental charge that may be imposed in connection with any transfer or
exchange of Certificates.
All Certificates surrendered for transfer and exchange shall
be marked canceled by the Authenticating Agent and retained for one year and
destroyed thereafter.
(i) By acceptance of an Individual Certificate, whether upon
original issuance or subsequent transfer, each holder of such a Certificate
acknowledges the restrictions on the transfer of such Certificate set forth in
the Securities Legend and agrees that it will transfer such Certificate only as
provided herein. In addition to the provisions of Section 4.02(n), the following
restrictions shall apply with respect to the transfer and registration of
transfer of an Individual
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Certificate to a transferee that takes delivery in the form of an Individual
Certificate:
(i) The Certificate Registrar shall register the
transfer of an Individual Certificate if the requested
transfer is being made to a transferee who has provided the
Certificate Registrar with a Rule 144A Certification.
(ii) The Certificate Registrar shall register the
transfer of any Individual Certificate (other than the initial
delivery of the Class B Certificates to the Spread Account
Depositor) if (x) the transferor has advised the Certificate
Registrar in writing that the Certificate is being transferred
to an Institutional Accredited Investor; and (y) prior to the
transfer the transferee furnishes to the Certificate Registrar
a Transferee Letter, provided that, if based upon an Opinion
of Counsel to the effect that the delivery of (x) and (y)
above are not sufficient to confirm that the proposed transfer
is being made pursuant to an exemption from, or in a
transaction not subject to, the registration requirements of
the Securities Act and other applicable laws, the Certificate
Registrar may as a condition of the registration of any such
transfer require the transferor to furnish other
certifications, legal opinions or other information prior to
registering the transfer of an Individual Certificate.
(j) Subject to Section 4.02(n), so long as the Global
Certificate remains outstanding and is held by or on behalf of the Depository,
transfers of beneficial interests in the Global Certificate, or transfers by
holders of Individual Certificates to transferees that take delivery in the form
of beneficial interests in the Global Certificate, may be made only in
accordance with this Section 4.02(j) and in accordance with the rules of the
Depository.
(i) In the case of a beneficial interest in the
Global Certificate being transferred to an Institutional
Accredited Investor, such transferee shall be required to take
delivery in the form of an Individual Certificate or
Certificates and the Certificate Registrar shall register such
transfer only upon compliance with the provisions of Section
4.02(i)(ii).
(ii) In the case of a beneficial interest in the
Global Certificate being transferred to a transferee that
takes delivery in the form of an Individual
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Certificate or Certificates, except as set forth in clause (i)
above, the Certificate Registrar shall register such transfer
only upon compliance with the provisions of Section
4.02(i)(i).
(iii) In the case of an Individual Certificate being
transferred to a transferee that takes delivery in the form of
a beneficial interest in a Global Certificate, the Certificate
Registrar shall register such transfer if the transferee has
provided the Certificate Registrar with a Rule 144A
Certification.
(iv) No restrictions shall apply with respect to the
transfer or registration of transfer of a beneficial interest
in the Global Certificate to a transferee that takes delivery
in the form of a beneficial interest in the Global
Certificate.
(k) Subject to Section 4.02(n), an exchange of a beneficial
interest in the Global Certificate for an Individual Certificate or
Certificates, an exchange of an Individual Certificate or Certificates for a
beneficial interest in the Global Certificate and an exchange of an Individual
Certificate or Certificates for another Individual Certificate or Certificates
(in each case, whether or not such exchange is made in anticipation of
subsequent transfer, and, in the case of the Global Certificate, so long as such
Certificate remains outstanding and is held by or on behalf of the Depository)
may be made only in accordance with this Section 4.02(k) and in accordance with
the rules of the Depository.
(i) A holder of a beneficial interest in the Global
Certificate may at any time exchange such beneficial interest
for an Individual Certificate or Certificates.
(ii) A holder of an Individual Certificate may
exchange such Certificate for a beneficial interest in the
Global Certificate if such holder furnishes to the Registrar a
Rule 144A Certification.
(iii)A holder of an Individual Certificate may
exchange such Certificate for an equal aggregate principal
amount of Individual Certificates in different authorized
denominations without any certification.
(l) (i) Upon acceptance for exchange or transfer of an
Individual Certificate for a beneficial interest in the Global Certificate as
provided herein, the Certificate Registrar shall
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cancel such Individual Certificate and shall (or shall request the Depository
to) endorse on the schedule affixed to the applicable Global Certificate (or on
a continuation of such schedule affixed to the Global Certificate and made a
part thereof) an appropriate notation evidencing the date of such exchange or
transfer and an increase in the certificate balance of the Global Certificate
equal to the certificate balance of such Individual Certificate exchanged or
transferred therefor.
(ii) Upon acceptance for exchange or transfer of a
beneficial interest in the Global Certificate for an
Individual Certificate as provided herein, the Certificate
Registrar shall (or shall request the Depository to) endorse
on the schedule affixed to the Global Certificate (or on a
continuation of such schedule affixed to the Global
Certificate and made a part thereof) an appropriate notation
evidencing the date of such exchange or transfer and a
decrease in the certificate balance of the Global Certificate
equal to the certificate balance of such Individual
Certificate issued in exchange therefor or upon transfer
thereof.
(m) The Securities Legend shall be placed on any Individual
Certificate issued in exchange for or upon transfer of another Individual
Certificate or of a beneficial interest in the Global Certificate.
(n) Subject to the restrictions on transfer and exchange set
forth in this Section 4.02, the holder of any Individual Certificate may
transfer or exchange the same in whole or in part (in an initial certificate
balance equal to the minimum authorized denomination or any integral multiple of
$1,000 in excess thereof) by surrendering such Certificate at the Corporate
Trust Office, or at the office of any transfer agent, together with an executed
instrument of assignment and transfer satisfactory in form and substance to the
Certificate Registrar in the case of transfer and a written request for exchange
in the case of exchange. The holder of a beneficial interest in a Global
Certificate may, subject to the rules and procedures of the Depository, cause
the Depository (or its nominee) to notify the Certificate Registrar in writing
of a request for transfer or exchange of such beneficial interest for an
Individual Certificate or Certificates. Following a proper request for transfer
or exchange, the Certificate Registrar shall, within five Business Days of such
request made at such Corporate Trust Office, cause the Trustee to authenticate
and the Certificate Registrar to deliver at such Corporate Trust Office, to the
transferee (in the case of transfer) or holder (in the case of
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exchange) or send by first class mail at the risk of the transferee (in the case
of transfer) or holder (in the case of exchange) to such address as the
transferee or holder, as applicable, may request, an Individual Certificate or
Certificates, as the case may require, for a like aggregate Percentage Interest
and in such authorized denomination or denominations as may be requested. The
presentation for transfer or exchange of any Individual Certificate shall not be
valid unless made at the Corporate Trust Office by the registered holder in
person, or by a duly authorized attorney-in-fact.
(o) No transfer of any Certificate shall be made unless such
transfer is exempt from the registration requirements of the Securities Act and
any applicable state securities laws or is made in accordance with said Act and
laws. In the event of any such transfer, unless such transfer is made in
reliance upon Rule 144A under the Securities Act and except for the initial
issuance of the Class B Certificates to the Spread Account Depositor, (i) the
Trustee may require a written Opinion of Counsel (which may be in-house counsel)
acceptable to and in form and substance reasonably satisfactory to the Trustee
that such transfer may be made pursuant to an exemption, describing the
applicable exemption and the basis therefor, from said Act and laws or is being
made pursuant to said Act and laws, which Opinion of Counsel shall not be an
expense of the Trustee, the Seller, the Servicer or the Trust Fund and (ii) the
Trustee shall require the transferee to execute a Transferee Letter certifying
to the Seller and the Trustee the facts surrounding such transfer, which
Transferee Letter shall not be an expense of the Trustee, the Seller, the
Servicer or the Trust Fund. The holder of a Certificate desiring to effect such
transfer shall, and does hereby agree to, indemnify the Trustee, the Seller and
the Servicer against any liability that may result if the transfer is not so
exempt or is not made in accordance with such federal and state laws. None of
the Seller, the Servicer, the Trustee or the Trust Fund intends or is obligated
to register or qualify any Certificate under the Securities Act or any state
securities laws.
(p) No Certificate may be acquired directly or indirectly, for
or on behalf of an employee benefit plan or other retirement arrangement subject
to ERISA, and/or Section 4975 of the Code, (collectively, a "Plan"). No transfer
of a Certificate representing an Individual Certificate shall be made unless the
Trustee shall have received a certification from the transferee of such
Individual Certificate, acceptable to and in form and substance satisfactory to
the Trustee and the Servicer, to the effect that such transferee is not
acquiring a Certificate, directly or indirectly, for or on behalf of a Plan.
Notwithstanding anything else to the contrary herein, in the event any purported
transfer of any certificate representing an Individual Certificate is made
without delivery of the
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certification referred to above, such certification shall be deemed to have been
made by the Transferee by its acceptance of such Individual Certificate. In
addition, any purported transfer of a Certificate representing an Individual
Certificate directly or indirectly to or on behalf of a Plan shall be void and
of no effect. The acquisition of a Certificate representing an interest in a
Global Certificate shall be deemed a representation by the acquirer that it is
not acquiring a Certificate, directly or indirectly, for or on behalf of a Plan.
(q) Notwithstanding any other provision of this Agreement to
the contrary, on the Closing Date, the Trustee shall authenticate in the name
of, and deliver to, the Spread Account Depositor, the Class B Certificate in the
form of a single Individual Certificate in an aggregate principal amount equal
to the Original Class B Principal Balance. The Class B Certificate may not be
sold, pledged, transferred, assigned, have a participation interest sold in such
Class B Certificate or otherwise conveyed, in whole or in part, for a period of
six years from the issue date of the Class B Certificate, without the prior
written approval of the SBA and a copy of such approval shall be furnished to
the Trustee. A legend to such effect shall be placed on the Class B Certificate.
Section 4.03 Mutilated, Destroyed, Lost or Stolen
Certificates.
If (i) any mutilated Certificate is surrendered to the
Certificate Registrar, or the Trustee and the Certificate Registrar receives
evidence to its satisfaction of the destruction, loss or theft of any
Certificate, and (ii) there is delivered to the Servicer, the Trustee and the
Certificate Registrar such security or indemnity as may be required by each of
them to save each of them harmless, then, in the absence of notice to the
Servicer, the Trustee and the Certificate Registrar that such Certificate has
been acquired by a bona fide purchaser, the Servicer shall execute and deliver,
and the Trustee shall authenticate, in exchange for or in lieu of any such
mutilated, destroyed, lost or stolen Certificate, a new Certificate of like
Class, tenor and Percentage Interest, but bearing a number not contemporaneously
outstanding. Upon the issuance of any new Certificate under this Section 4.03,
the Servicer and the Trustee may require the payment of a sum sufficient to
cover any tax or other governmental charge that may be imposed in relation
thereto and any other expenses connected therewith. Any duplicate Certificate
issued pursuant to this Section 4.03 shall constitute complete and indefeasible
evidence of ownership in the Trust Fund, as if originally issued, whether or not
the mutilated, destroyed, lost or stolen Certificate shall be found at any time.
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Section 4.04 Persons Deemed Owners.
Prior to due presentation of a Certificate for registration of
transfer, the Servicer, the Seller, the Trustee, the Paying Agent and the
Certificate Registrar may treat the Person in whose name any Certificate is
registered as the owner of such Certificate for the purpose of receiving
remittances pursuant to Section 6.07 and for all other purposes whatsoever, and
the Seller, the Servicer, the Trustee and the Certificate Registrar shall not be
affected by notice to the contrary.
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ARTICLE V
ADMINISTRATION AND SERVICING OF SBA LOANS
Section 5.01 Duties of the Servicer.
(a) The Servicer covenants and agrees that it shall act as
agent (and the Servicer is hereby appointed to act as agent) on behalf of the
Trust Fund and that, in such capacity, it shall: (i) prepare and file, or cause
to be prepared and filed, in a timely manner, any Tax Return required to be
filed by the Trust Fund; (ii) prepare and forward, or cause to be prepared and
forwarded, to the Trustee, the Certificateholders and to the Internal Revenue
Service and any other relevant governmental taxing authority all information
returns or reports as and when required to be provided to them in accordance
with any provision of federal, state or local income tax laws; (iii) to the
extent that the affairs of the Trust Fund are within its control, conduct such
affairs at all times that any Certificates are outstanding so as to maintain the
status of the Trust Fund as a grantor trust under any applicable federal, state
and local laws; (iv) pay the amount of any and all federal, state, and local
taxes, imposed on the Trust Fund when and as the same shall be due and payable
(but such obligation shall not prevent the Servicer or any other appropriate
Person from contesting any such tax in appropriate proceedings and shall not
prevent the Servicer from withholding payment of such tax, if permitted by law,
pending the outcome of such proceedings); (v) ensure that any such returns or
reports filed on behalf of the Trust Fund are properly executed by the
appropriate person; and (vi) represent the Trust Fund in any administrative or
judicial proceedings relating to an examination or audit by any governmental
taxing authority, request an administrative adjustment as to any taxable year of
the Trust Fund, enter into settlement agreements with any governmental taxing
agency, extend any statute of limitations relating to any item of the Trust Fund
and otherwise act on behalf of the Trust Fund in relation to any tax matter
involving the Trust Fund. The Servicer shall indemnify the Trustee and the Trust
Fund for any liability it may incur in connection with this Section 5.01(a),
which indemnification shall survive the termination of the Trust Fund; provided,
however, that the Servicer shall not indemnify the Trustee for the Trustee's
negligence, willful misconduct or bad faith.
(b) The Servicer, as independent contract servicer, shall
service and administer the SBA Loans and shall have full power and authority,
acting alone, to do any and all things in connection with such servicing and
administration which the Servicer may deem necessary or desirable and consistent
with the terms of this Agreement and the Multi-Party Agreement and the SBA
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Rules and Regulations. The Servicer may enter into Subservicing Agreements for
any servicing and administration of SBA Section 7(a) Loans with any entity
approved with prior written consent by the SBA. 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 Section 7(a) Loans or enter into a Subservicing
Agreement with a successor Subservicer which qualifies hereunder.
(c) Notwithstanding any Subservicing Agreement, any of the
provisions of this Agreement relating to agreements or arrangements between the
Servicer and a Subservicer or reference to actions taken through a Subservicer
or otherwise, the Servicer shall remain obligated and primarily liable to the
Trustee, for itself and on behalf of the Certificateholders, the SBA and the
Certificateholders for the servicing and administering of the SBA Loans in
accordance with the provisions of this Agreement and the Multi-Party Agreement
and the SBA Rules and Regulations, without diminution of such obligation or
liability by virtue of such Subservicing Agreements or arrangements or by virtue
of indemnification from the Subservicer and to the same extent and under the
same terms and conditions as if the Servicer alone were servicing and
administering the SBA Loans. For purposes of this Agreement, the Servicer shall
be deemed to have received payments on SBA Loans when any Subservicer has
received such payments. The Servicer shall be entitled to enter into any
agreement with a Subservicer for indemnification of the Servicer by such
Subservicer, and nothing contained in this Agreement shall be deemed to limit or
modify such indemnification.
(d) Any Subservicing Agreement that may be entered into and
any transactions or services relating to the SBA Loans involving a Subservicer
in its capacity as such and not as an originator shall be deemed to be between
the Subservicer and the Servicer alone, and the Trustee, the SBA and
Certificateholders shall not be deemed parties thereto and shall have no claims,
rights, obligations, duties or liabilities with respect to the Subservicer
except as set forth in Section 5.01(e).
(e) In the event the Servicer shall for any reason no longer
be the Servicer (including by reason of an Event of Default), the Trustee or its
designee shall, subject to Section 10.02 hereof and the Multi-Party Agreement,
thereupon assume all of the rights and obligations of the Servicer under each
Subservicing Agreement that the Servicer may have entered into, unless the
Trustee is then permitted and elects to terminate any Subservicing Agreement in
accordance with its terms. The
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Trustee, its designee or the successor servicer for the Trustee shall be deemed
to have assumed all of the Servicer's interest therein and to have replaced the
Servicer as a party to each Subservicing Agreement to the same extent as if the
Subservicing Agreements had been assigned to the assuming party, except that the
Servicer shall not thereby be relieved of any liability or obligations under the
Subservicing Agreements. The Servicer at its expense and without right of
reimbursement therefor, shall, upon request of the Trustee, deliver to the
assuming party all documents and records relating to each Subservicing Agreement
and the SBA Loans then being serviced and an accounting of amounts collected and
held by it and otherwise use its best efforts to effect the orderly and
efficient transfer of the Subservicing Agreements to the assuming party.
(f) So long as it is consistent with the terms of this
Agreement and the Multi-Party Agreement, the SBA Agreement (as defined in the
Multi-Party Agreement) and the SBA Rules and Regulations, the Servicer may
waive, modify or vary any term of any SBA Loan or consent to the postponement of
strict compliance with any such term or in any manner grant indulgence to any
Obligor if in the Servicer's determination such waiver, modification,
postponement or indulgence is not materially adverse to the interests of the SBA
and the Certificateholders, provided, however, that (unless (x) the Obligor is
in default with respect to the SBA Loan, or such default is, in the judgment of
the Servicer, imminent and (y) the Servicer determines that any modification
would not be considered a new loan for federal income tax purposes) the Servicer
may not permit any modification with respect to any SBA Loan that would change
the SBA Loan Interest Rate, defer (subject to Section 5.12), or forgive the
payment of any principal or interest (unless in connection with the liquidation
of the related SBA Loan), or extend the final maturity date on such SBA Loan
without the consent of the SBA, if such consent is then required by the SBA
Rules and Regulations. The Servicer may exercise all unilateral servicing
actions permitted by participating lenders in accordance with the SBA Rules and
Regulations. No costs incurred by the Servicer or any Subservicer in respect of
Servicing Advances shall for the purposes of distributions to Certificateholders
be added to the amount owing under the related SBA Loan. Without limiting the
generality of the foregoing, so long as it is consistent with the SBA Rules and
Regulations, the Servicer shall continue, and is hereby authorized and empowered
to execute and deliver on behalf of the Trustee, the SBA and each
Certificateholder, all instruments of satisfaction or cancellation, or of
partial or full release, discharge and all other comparable instruments, with
respect to the SBA Loans and with respect to any Mortgaged Properties or other
Collateral. If reasonably required by the Servicer, each Certificateholder
and/or the Trustee shall furnish
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the Servicer, within 5 Business Days of receipt of the Servicer's request, with
any powers of attorney and other documents necessary or appropriate to enable
the Servicer to carry out its servicing and administrative duties under this
Agreement. Any such request to the Trustee shall be accompanied by a
certification in the form of Exhibit I attached hereto signed by a Servicing
Officer.
The Servicer, in servicing and administering the SBA Loans,
shall employ or cause to be employed procedures (including collection,
foreclosure and Foreclosed Property and Repossessed Collateral management
procedures) and exercise the same care that it customarily employs and exercises
in servicing and administering SBA Loans for its own account and prudent lending
standards, and in accordance with the SBA Rules and Regulations, giving due
consideration to the Certificateholders' and the SBA's reliance on the Servicer.
(g) On and after such time as the Trustee receives the
resignation of, or notice of the removal of, the Servicer from its rights and
obligations under this Agreement, and with respect to resignation pursuant to
Section 9.04, after receipt of the Opinion of Counsel required pursuant to
Section 9.04 addressed to the SBA and the Trustee, the Trustee or its designee
shall assume all of the rights and obligations of the Servicer, subject to
Section 10.02 hereof and the Multi-Party Agreement. The Servicer shall, upon
request of the Trustee but at the expense of the Servicer, deliver to the
Trustee all documents and records (including computer tapes and diskettes)
relating to the SBA Loans and an accounting of amounts collected and held by the
Servicer and otherwise use its best efforts to effect the orderly and efficient
transfer of servicing rights and obligations to the assuming party.
(h) For so long as any of the Certificates are outstanding and
are "restricted securities" within the meaning of Rule 144(a)(3) of the
Securities Act, (1) the Servicer will provide or cause to be provided to any
holder of such Certificates and any prospective purchaser thereof designated by
such a holder, upon the request of such holder or prospective purchaser, the
information required to be provided to such holder or prospective purchaser by
Rule 144A(d)(4) under the Securities Act; and (2) the Servicer shall update such
information from time to time in order to prevent such information from becoming
false and misleading and will take such other actions as are necessary to ensure
that the safe harbor exemption from the registration requirements of the
Securities Act under Rule 144A is and will be available for resales of such
Certificates conducted in accordance with Rule 144A.
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Section 5.02 Liquidation of SBA Loans.
In the event that any payment due under any SBA Loan and not
postponed pursuant to Section 5.01 is not paid when the same becomes due and
payable, or in the event the Obligor fails to perform any other covenant or
obligation under the SBA Loan, the Servicer shall take such action as it shall
deem to be in the best interests of the Certificateholders and the SBA. With
respect to any such SBA Section 7(a) Loan for which the SBA has expressed to the
Servicer the SBA's desire to assume servicing of such SBA Loan consistent with
the SBA Rules and Regulations, the Trustee shall, upon written direction of the
Servicer, deliver to the SBA or its designee all or any portion of the Trustee's
Document File relating to such SBA Section 7(a) Loan and the Trustee shall
execute such documents, including but not limited to an endorsement of the
related SBA Note and an assignment of the related Mortgage, as the Servicer or
the SBA shall request. Expenses incurred in connection with any such action
shall be the responsibility of the Servicer and shall not be chargeable to the
Principal and Interest Account or the Certificate Account. Subject to the SBA
Rules and Regulations and with the prior written consent of the SBA (if required
by the SBA Rules and Regulations), the Servicer shall foreclose upon or
otherwise comparably effect the ownership of Mortgaged Properties or other
Collateral relating to defaulted SBA Section 7(a) Loans for which the related
SBA Section 7(a) Loan is still outstanding, as to which no satisfactory
arrangements can be made for collection of delinquent payments in accordance
with the provisions of Section 5.10. In connection with such foreclosure or
other conversion 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 lending 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 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. Section 6991) including
any derivative, fraction, by-product, constituent or breakdown product thereof,
or additive thereto. In the event that the environmental investigation
determines the existence of any hazardous material on or under the Mortgaged
Property in excess of minimum action levels established by relevant regulatory
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agencies, title to such property shall not be taken without prior written
approval from the SBA.
After an SBA Loan has become a Liquidated SBA Loan, the
Servicer shall promptly prepare and forward to the Trustee and the SBA and upon
request, any Certificateholder, a Liquidation Report, in the form attached
hereto as Exhibit J, detailing the Liquidation Proceeds received from the
Liquidated SBA Loan, expenses incurred with respect thereto, and any loss
incurred in connection therewith.
Section 5.03 Establishment of Principal and
Interest Accounts; Deposits in
Principal and Interest Accounts.
(a) The Servicer shall cause to be established and maintained
one or more Principal and Interest Accounts, in one or more Designated
Depository Institutions, in the form of time deposit or demand accounts, which
may be interest-bearing or such accounts may be trust accounts wherein the
moneys therein are invested in Permitted Instruments, titled "First
International Bank, National Association, in trust for the registered holders of
First International Bank SBA Loan-Backed Adjustable Rate Certificates, Series
1999-1, Class A, Class M and Class B." Such Principal and Interest Accounts
shall be insured by the BIF or SAIF administered by the FDIC to the maximum
extent provided by law. The creation of any Principal and Interest Account shall
be evidenced by a letter agreement in the form of Exhibit C hereto.
A copy of such letter agreement shall be furnished to the
Trustee, the SBA and, upon request, any Certificateholder.
(b) The Servicer and each Subservicer shall deposit without
duplication (within two Business Days of receipt thereof) in the Principal and
Interest Account and retain therein:
(i) the Unguaranteed Percentage of all payments
received after the Cut-Off Date on account of principal on the
SBA Loans, including the Unguaranteed Percentage of all Excess
Payments, Principal Prepayments and Curtailments collected
after the Cut-Off Date, the Unguaranteed Percentage of all
Insurance Proceeds (other than amounts to be applied to
restoration or repair of any related Mortgaged Property, or to
be released to the Obligor in accordance with customary
servicing procedures) and the Unguaranteed Percentage of all
Released Mortgaged Property Proceeds;
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(ii) all payments received after the Cut-Off 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 customary servicing
procedures);
(v) the Unguaranteed Percentage of all Released
Mortgaged Property Proceeds;
(vi) any amounts paid in connection with the
repurchase of the Unguaranteed Interest of any SBA Loan and
the amount of any Substitution Adjustment received pursuant to
Sections 2.05 and 3.03;
(vii) any amount required to be deposited in the
Principal and Interest Account pursuant to Section 5.04 or
5.10; and
(viii) the amount of any losses incurred in
connection with investments in Permitted Instruments.
(c) The foregoing requirements for deposit in the Principal
and Interest Account shall be exclusive, it being understood and agreed that,
without limiting the generality of the foregoing, payments with respect to the
Guaranteed Interest 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, should 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
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Servicer immediately following its monthly remittance to the Trustee pursuant to
Section 5.04(a). Any reference herein to amounts on deposit in the Principal and
Interest Account shall refer to amounts net of such investment earnings.
Section 5.04 Permitted Withdrawals From the
Principal and Interest Account
The Servicer shall withdraw funds from the Principal and
Interest Account for the following purposes:
(a) to effect the remittance to the Trustee on each
Determination Date for deposit in the Certificate Account, the portion of the
Available Funds for the related Remittance Date that is separate from
Compensating Interest, Monthly Advances and amounts then on deposit in the
Spread Account;
(b) to reimburse itself for any accrued unpaid Servicing Fees
and Premium Protection Fees allocable to the SBA Loans, unreimbursed Monthly
Advances and for unreimbursed Servicing Advances to the extent deposited in the
Principal and Interest Account (and not netted from Monthly Payments received).
The Servicer's right to reimbursement for unpaid Servicing Fees and Premium
Protection Fees and, except as provided in the following sentence, Servicing
Advances and Monthly Advances shall be limited to Liquidation Proceeds, Released
Mortgaged Property Proceeds, Insurance Proceeds and such other amounts as may be
collected by the Servicer from the Obligor or otherwise relating to the SBA Loan
in respect of which such unreimbursed amounts are owed. The Servicer's right to
reimbursement for Servicing Advances and Monthly Advances in excess of such
amounts shall be limited to any late collections of interest received on the SBA
Loans generally, including Liquidation Proceeds, Released Mortgaged Property
Proceeds, Insurance Proceeds and any other amounts, provided, however, that the
Servicer's right to such reimbursement pursuant to this sentence shall be
subordinate to the rights of the Certificateholders and the Registered Holders;
(c) to withdraw any amount received from an Obligor that is
recoverable and sought to be recovered as a voidable preference by a trustee in
bankruptcy pursuant to the United States Bankruptcy Code in accordance with a
final, nonappealable order of a court having competent jurisdiction;
(d) (i) to make investments in Permitted Instruments and (ii)
to pay to itself, as permitted by Section 5.03(d), interest paid in respect of
Permitted Instruments or by a Designated Depository Institution on funds
deposited in the Principal and Interest Account;
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(e) to withdraw any funds deposited in the Principal and
Interest Account that were not required to be deposited therein or were
deposited therein in error;
(f) to pay itself servicing compensation pursuant to Section
7.03 hereof or interest as permitted under the definition of Excess Proceeds;
and
(g) to clear and terminate the Principal and Interest Account
upon the termination of this Agreement.
So long as no default or Event of Default shall have occurred
and be continuing, and consistent with any requirements of the Code, the
Principal and Interest Account shall either be maintained with a Designated
Depository Institution as an interest-bearing account meeting the requirements
set forth in Section 5.03(a), or the funds held therein may be invested by the
Servicer (to the extent practicable) in Permitted Instruments, as directed in
writing by the Servicer. In either case, funds in the Principal and Interest
Account must be available for withdrawal without penalty, and any Permitted
Instruments must mature not later than the Business Day immediately preceding
the Determination Date next following the date of such investment (except that
if such Permitted Instrument is an obligation of the institution that maintains
such account, then such Permitted Instrument shall mature not later than such
Determination Date) and shall not be sold or disposed of prior to its maturity.
All Permitted Instruments must be held by or registered in the name of "First
International Bank, National Association, in trust for the registered holders of
First International Bank SBA Loan-Backed Adjustable Rate Certificates, Series
1999-1." All interest or other earnings from funds on deposit in the Principal
and Interest Account (or any Permitted Instruments thereof) shall be the
exclusive property of the Servicer, and may be withdrawn from the Principal and
Interest Account pursuant to clause (d) above. The amount of any losses incurred
in connection with the investment of funds in the Principal and Interest Account
in Permitted Instruments shall be deposited in the Principal and Interest
Account by the Servicer from its own funds immediately as realized without
reimbursement therefor.
Section 5.05 [Intentionally Omitted]
Section 5.06 Transfer of Accounts.
The Servicer may, upon written notice to the Trustee and the
SBA, transfer any Principal and Interest Account to a different Designated
Depository Institution.
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Section 5.07 Maintenance of Hazard Insurance.
The Servicer shall comply with the SBA Rules and Regulations
concerning the issuance and maintenance of fire and hazard insurance with
extended coverage customary in the area where the Mortgaged Property is located.
If at origination of an SBA Loan, to the best of the Servicer's knowledge after
reasonable investigation, the related Mortgaged Property is in an area
identified in the Federal Register by the Flood Emergency Management Agency as
having special flood hazards (and such flood insurance has been made available)
consistent with the SBA Rules and Regulations, the Servicer will require the
related Obligor to purchase a flood insurance policy with a generally acceptable
insurance carrier, in an amount representing coverage not less than the least of
(i) the full insurable value of the Mortgaged Property, or (ii) the maximum
amount of insurance available under the National Flood Insurance Act of 1968, as
amended. The Servicer shall also maintain, to the extent such insurance is
available, and required by the SBA Rules and Regulations and the Servicer's
policies, on Foreclosed Property constituting real property, fire and hazard
insurance in the amounts described above and liability insurance. Any amounts
collected by the Servicer under any such policies (other than amounts to be
applied to the restoration or repair of the Mortgaged Property, or to be
released to the Obligor in accordance with the SBA Rules and Regulations) shall
be deposited in the Principal and Interest Account, subject to withdrawal
pursuant to Section 5.04. It is understood and agreed that no earthquake or
other additional insurance need be required by the Servicer of any Obligor or
maintained on Foreclosed Property, other than pursuant to such applicable laws
and regulations as shall at any time be in force and as shall require such
additional insurance. All policies required hereunder shall be endorsed with
standard mortgagee clauses with losses payable to the Servicer or its
affiliates.
Section 5.08 [Intentionally Omitted]
Section 5.09 Fidelity Bond.
The Servicer shall maintain with a responsible company, and at
its own expense, a blanket fidelity bond and an errors and omissions insurance
policy, in a minimum amount equal to $1,500,000, and a maximum deductible of
$100,000, if commercially available, with coverage on all employees acting in
any capacity requiring such persons to handle funds, money, documents or papers
relating to the SBA Loans ("Servicer Employees"). The fidelity bond shall insure
the Trustee, its officers and employees against losses resulting from forgery,
theft, embezzlement or fraud by such Servicer Employees. The errors and
omissions policy shall insure against losses resulting from the
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errors, omissions and negligent acts of such Servicer employees. No provision of
this Section 5.09 requiring such fidelity bond and errors and omissions
insurance shall relieve the Servicer from its duties as set forth in this
Agreement. Upon the request of the Trustee, the SBA or any Certificateholder,
the Servicer shall cause to be delivered to the Trustee, the SBA or such
Certificateholder a certified true copy of such fidelity bond and insurance
policy. The current issuer of such fidelity bond and insurance policy is The
Hartford Underwriters Insurance Company, located in Hartford, Connecticut.
Section 5.10 Title, Management and Disposition
of Foreclosed Property
In the event that title to a Mortgaged Property or other
Collateral is acquired in foreclosure, by deed in lieu of foreclosure or by
other legal process(a "Foreclosed Property"), the deed or certificate of sale or
the Repossessed Collateral may be taken in the name of the Trustee on behalf of
the Trust for the benefit of the Certificateholders and the SBA, as their
interests may appear under the Multi-Party Agreement dated the date of this
Agreement.
Unless the servicing of a Foreclosed Property or item of
Repossessed Collateral relating to an SBA Section 7(a) Loan is assumed by the
SBA pursuant to the SBA Rules and Regulations, the Servicer, subject to Sections
5.01 and 5.02 hereof, shall manage, conserve, protect and operate each
Foreclosed Property or other Repossessed Collateral for the SBA and the
Certificateholders solely for the purpose of its prudent and prompt disposition
and sale. The Servicer shall, either itself or through an agent selected by the
Servicer, manage, conserve, protect and operate the Foreclosed Property or other
Repossessed Collateral in the same manner that it manages, conserves, protects
and operates other foreclosed or repossessed property for its own account, and
in the same manner that similar property in the same locality as the Foreclosed
Property or other Repossessed Collateral is managed. The Servicer shall attempt
to sell the same (and may temporarily rent the same) on such terms and
conditions as the Servicer deems to be in the best interest of the SBA and the
Certificateholders.
The Servicer shall cause to be deposited in the Principal and
Interest Account, no later than five Business Days after the receipt thereof,
the Unguaranteed Percentage of all revenues received with respect to the
conservation and disposition of the related Foreclosed Property or other
Repossessed Collateral net of Servicing Advances.
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The disposition of Foreclosed Property or other Repossessed
Collateral shall be carried out by the Servicer at such price, and upon such
terms and conditions, as the Servicer, with SBA concurrence (if required by the
SBA Rules and Regulations), deems to be in the best interest of the SBA and the
Certificateholders. The Unguaranteed Percentage of the proceeds of sale of the
Foreclosed Property or other Repossessed Collateral shall promptly, but in no
event later than two Business Days after receipt, be deposited in the Principal
and Interest Account as received from time to time and, as soon as practicable
thereafter, the expenses of such sale shall be paid. The Servicer shall, subject
to Section 5.04, reimburse itself for any related unreimbursed Servicing
Advances, unpaid Servicing Fees and unreimbursed Monthly Advances, and the
Servicer shall deposit in the Principal and Interest Account the Unguaranteed
Percentage of the net cash proceeds of such sale to be distributed to the
Certificateholders in accordance with Section 6.07 hereof.
In the event any Mortgaged Property or other Repossessed
Collateral is acquired as aforesaid or otherwise in connection with a default or
imminent default on an SBA Loan, the Servicer shall dispose of such Mortgaged
Property or other Repossessed Collateral within two years after its acquisition
unless the Servicer and the Trustee shall have received an Opinion of Counsel
also addressed to the SBA to the effect that such longer retention will not
cause the Trust Fund to be subject to Federal income tax.
Section 5.11 [Intentionally Omitted.]
Section 5.12 Collection of Certain SBA
Loan Payments.
The Servicer shall make reasonable efforts to collect all
payments called for under the terms and provisions of the SBA Loans, and shall
cause the Obligor under the SBA Loan, to the extent such procedures shall be
consistent with this Agreement, to comply with the terms and provisions of any
applicable hazard insurance policy. Consistent with the foregoing and the SBA
Rules and Regulations, the Servicer may in its discretion waive or permit to be
waived any fee or charge (other than the Servicing Fee 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 provided that the Servicer determines such
extension would not be considered a new mortgage loan for federal income
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tax purposes. In the event the Servicer shall consent to the deferment of the
due dates for payments due on an SBA Note, the Servicer shall nonetheless make
payment of any required Monthly Advance with respect to the payments so extended
to the same extent as if such installment were due, owing and delinquent and had
not been deferred, and shall be entitled to reimbursement therefor in accordance
with Section 5.04(b) hereof.
Section 5.13 Access to Certain Documentation and
Information Regarding the SBA Loans.
The Servicer shall provide to the Trustee, the SBA, the FDIC,
and the OCC, and the supervisory agents and examiners of each of the foregoing
access to the documentation regarding the SBA Loans required by applicable
local, state and federal regulations, such access being afforded without charge
but only upon reasonable request and during normal business hours at the offices
of the Servicer designated by it.
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ARTICLE VI
PAYMENTS TO THE CERTIFICATEHOLDERS
Section 6.01 Establishment of Certificate
Account; Deposits in Certificate
Account; Permitted Withdrawals from
Certificate Account.
(a) No later than the Closing Date, the Trustee will establish
and maintain with itself in its trust department a trust account, which shall
not be interest-bearing, titled "Certificate Account, HSBC Bank USA, as trustee
for the registered holders of First International Bank SBA Loan-Backed
Adjustable Rate Certificates, Series 1999-1, Class A, Class M and Class B" (the
"Certificate Account"). The Trustee shall, promptly upon receipt, deposit in the
Certificate Account and retain therein:
(i) the Available Funds (net of the amount of Monthly
Advances and Compensating Interest deposited pursuant to
subclause (ii) below and amounts then on deposit in the Spread
Account) remitted by the Servicer;
(ii) the Compensating Interest and the portion of the
Monthly Advance remitted to the Trustee by the Servicer;
(iii) amounts transferred from the Spread Account
pursuant to Section 6.02(b)(i);
(iv) amounts required to be paid by the Servicer
pursuant to Section 6.06(e) in connection with losses on
investments of amounts in the Certificate Account; and
(v) amounts transferred from the Pre-Funding Account
and the Capitalized Interest Account on the Special Remittance
Date pursuant to Sections 6.04(c) and (h), respectively.
(b) Amounts on deposit in the Certificate Account
shall be withdrawn on each Remittance Date by the Trustee, or the Paying Agent,
on its behalf, to effect the distribution described in Section 6.07(b) and
thereafter by the following parties in no particular order of priority:
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(i) by the Trustee, to invest amounts on deposit in
the Certificate Account in Permitted Instruments pursuant to
Section 6.06;
(ii) by the Trustee, to pay on a monthly basis to the
Servicer as additional servicing compensation interest paid
and earnings realized on Permitted Instruments;
(iii) by the Trustee, to withdraw any amount not
required to be deposited in the Certificate Account or
deposited therein in error; and
(iv) by the Trustee, to clear and terminate the
Certificate Account upon the termination of this Agreement in
accordance with the terms of Section 11.01 hereof.
Section 6.02 Establishment of Spread Account;
Deposits in Spread Account; Permitted
Withdrawals from Spread Account.
(a) No later than the Closing Date, the Trustee will establish
with the Spread Account Custodian an Account in accordance with the terms of the
Spread Account Agreement (the "Spread Account"). The Spread Account shall be the
property of the Spread Account Depositor, subject to the terms hereof and of the
Spread Account Agreement, and the funds held therein may be invested in
Permitted Instruments. The Spread Account shall not constitute part of the Trust
Fund. The Trustee or the Spread Account Custodian, as the case may be, shall,
promptly upon receipt, deposit into the Spread Account or, in the case of the
Trustee, transfer to the Spread Account Custodian for deposit in the Spread
Account:
(i) on the Closing Date, the Initial Spread Account
Deposit made by the Spread Account Depositor;
(ii) on each Remittance Date, that portion of the
Available Funds, if any, required to be deposited into the
Spread Account pursuant to Section 6.07(b)(ix) until the
Spread Account Balance equals the then applicable Specified
Spread Account Requirement; and
(iii) amounts required to be paid by the Servicer
pursuant to Section 6.06(e) in connection with losses on
investments of amounts in the Spread Account.
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(b) Amounts on deposit in the Spread Account shall be
withdrawn by the Spread Account Custodian and transferred to the Trustee for
distribution in the manner set forth in subclause (c) below on each Remittance
Date in the following order of priority:
(i) to deposit in the Certificate Account an amount
by which (a) the sum of the Class A and Class M Interest
Distribution Amounts, the Class A and Class M Principal
Distribution Amounts and the Class A and Class M Carry Forward
Amounts exceeds (b) the Available Funds for such Remittance
Date (but excluding from such definition of Available Funds,
amounts in the Spread Account);
(ii) to deposit in the Certificate Account the
amount, if any, required to make the full distribution to the
Expense Account pursuant to Section 6.07(b)(viii); and
(iii) to the extent that the amount then on deposit
in the Spread Account after giving effect to all required
transfers from the Spread Account to the Certificate Account
on such Remittance Date then exceeds the Specified Spread
Account Requirement as of such Remittance Date (such excess, a
"Spread Account Excess"), an amount equal to such Spread
Account Excess shall be distributed by the Spread Account
Custodian first, to the Class B Certificateholders, the
amount, if any, by which the Class B Interest Distribution
Amount, the Class B Principal Distribution Amount and the
Class B Carry-Forward Amount for such Remittance Date exceeds
the portion of the Available Funds (but excluding from such
definition amounts in the Spread Account) being distributed to
the Class B Certificates on such Remittance Date, and second,
to the Spread Account Depositor;
and also, in no particular order of priority:
(iv) to invest amounts on deposit in the Spread
Account in Permitted Instruments pursuant to Section 6.06;
(v) to withdraw any amount not required to be
deposited in the Spread Account or deposited therein in error;
and
(vi) to clear and terminate the Spread Account upon
the termination of this Agreement in accordance with the terms
of Section 11.01.
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(c) Any amounts which are required to be withdrawn from the
Spread Account pursuant to paragraph (b) above shall be withdrawn from the
Spread Account in the following order of priority: (i) first, from any
uninvested funds therein, and (ii) second, from the proceeds of the liquidation
of any investments therein pursuant to Section 6.06(b).
(d) Any amounts which are distributed by the Spread Account
Custodian to the Spread Account Depositor pursuant to paragraph (b) above will
not be required to be refunded, regardless of whether there are sufficient funds
on a subsequent Remittance Date to make a full distribution to holders of the
Certificates on such Remittance Date.
Section 6.03 Establishment of Expense Account;
Deposits in Expense Account; Permitted
Withdrawals from Expense Account
(a) No later than the Closing Date, the Trustee will establish
with itself an account for the benefit of the Trustee to pay its fees and
expenses related to the Trust Fund (the "Expense Account"). The Expense Account
shall not constitute part of the Trust Fund and is for the benefit of the
Trustee and, on a subordinate basis, for the benefit of the Servicer as
described in (b)(ii) and (c) below. The Trustee shall deposit into the Expense
Account:
(i) on each Remittance Date from the amounts on
deposit in the Certificate Account an amount equal to
one-twelfth of the Annual Expense Escrow Amount; and
(ii) upon receipt, amounts required to be paid by the
Servicer pursuant to Section 6.06(e) in connection with losses
on investments of amounts in the Expense Account.
If, at any time the amount then on deposit in the Expense Account shall be
insufficient to pay in full the fees and expenses of the Trustee then due, the
Trustee shall make demand on the Servicer to advance the amount of such
insufficiency, and the Servicer shall promptly advance such amount to the
Trustee. Thereafter, the Servicer shall be entitled to reimbursement from the
Expense Account for the amount of any such advance from any excess funds
available pursuant to subclause (c)(ii) below. Without limiting the obligation
of the Servicer to advance such insufficiency, in the event the Servicer does
not advance the full amount of such insufficiency by the Business Day
immediately preceding the Determination Date, the amount of such insufficiency
shall be deposited into the Expense Account for payment to the Trustee
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pursuant to Section 6.07(b)(viii), to the extent of available funds in the
Certificate Account.
(b) The Trustee, at the direction of the Servicer, may invest
amounts on deposit in the Expense Account in Permitted Instruments pursuant to
Section 6.06 hereof, and the Trustee shall withdraw amounts on deposit in the
Expense Account to:
(i) pay the Trustee's fees and expenses as described
in Section 2.08 hereof;
(ii) pay on a monthly basis to the Servicer as
additional servicing compensation interest paid and earnings
realized on Permitted Instruments;
(iii) withdraw any amounts not required to be
deposited in the Expense Account or deposited therein in
error; and
(iv) clear and terminate the Expense Account upon the
termination of this Agreement in accordance with the terms of
Section 11.01.
(c) On the twelfth Remittance Date following
the Closing Date, and on each twelfth Remittance
Date thereafter, the Trustee shall determine that all payments required to be
made during the prior twelve month period pursuant to subclauses (b)(i), (b)(ii)
and (b)(iii) above, have been made, and, if all such payments have been made,
from the amounts remaining in the Expense Account, the Trustee shall (in the
following order of priority):
(i) reimburse the Servicer and/or the Seller, for
reimbursable advances made pursuant to Section 9.01;
(ii) reimburse the Servicer for advances made by it
pursuant to the last paragraph of subclause (a) above; and
(iii) remit to the Servicer as additional servicing
compensation any amounts remaining in the Expense Account
after payments made pursuant to subclauses (b)(i), (b)(ii),
(b)(iii), (c)(i) and (c)(ii), above.
Section 6.04 Pre-Funding Account and Capitalized
Interest Account.
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(a) No later than the Closing Date, the Seller shall establish
and maintain with the Trustee in its trust department a trust account, which
shall not be interest-bearing, titled "First International Bank, National
Association SBA Pre-Funding Account 1999-1" (the "Pre-Funding Account"). The
Pre-Funding Account shall not constitute part of the Trust Fund. The Seller
shall be deemed the owner of the Pre-Funding Account for Federal income tax
purposes. The Trustee shall, promptly upon receipt, deposit into the Pre-Funding
Account and retain therein the Original Pre-Funded Amount from the proceeds of
the sale of the Certificates.
(b) On each Subsequent Transfer Date, the Seller shall
instruct the Trustee to withdraw from the Pre-Funding Account an amount equal to
100% of the aggregate Principal Balances of the Subsequent SBA Loans as of the
related Subsequent Cut-Off Date sold to the Trust Fund on such Subsequent
Transfer Date and pay such amount to or upon the order of the Seller with
respect to such transfer.
(c) If at the end of the Funding Period amounts still remain
in the Pre-Funding Account, the Servicer shall instruct the Trustee to withdraw
from the Pre-Funding Account on the immediately following Remittance Date and
deposit such amounts in the Certificate Account. However, if at the close of
business on September 14, 1999, amounts still remain in the Pre-Funding Account,
the Servicer shall instruct the Trustee to withdraw from the Pre-Funding Account
on the Special Remittance Date and deposit in the Certificate Account any
Pre-Funded Amount then remaining in the Pre-Funding Account, and then the
Pre-Funding Account shall be closed.
(d) On the Remittance Dates occurring in July, August and
September 1999, the Trustee shall transfer from the Pre-Funding Account to the
Certificate Account, the Pre-Funding Earnings, if any, applicable to each such
Remittance Date.
(e) No later than the Closing Date, the Seller shall establish
and maintain with the Trustee in its trust department a trust account, which
shall not be interest-bearing, titled "First International Bank, National
Association SBA Capitalized Interest Account 1999-1" (the "Capitalized Interest
Account"). The Capitalized Interest Account shall not constitute part of the
Trust Fund. The Seller shall be deemed the owner of the Capitalized Interest
Account for Federal income tax purposes. The Trustee shall, promptly upon
receipt, deposit into the Capitalized Interest Account $76,809.33. If prior to
the end of the Funding Period the funds on deposit in the Pre-Funding Account
are invested in a guaranteed investment contract, repurchase agreement or other
arrangement acceptable to the Rating Agency, that constitutes a Permitted
Instrument, the
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Trustee shall, within one Business Day of its receipt of notification of
satisfaction of the Rating Agency Condition, withdraw from the Capitalized
Interest Account and pay to the Seller the amount set forth in such
notification.
(f) On each Subsequent Transfer Date the Seller may instruct
the Trustee to withdraw from the Capitalized Interest Account and pay on such
Subsequent Transfer Date to the Seller the Overfunded Interest Amount for such
Subsequent Transfer Date, as calculated by the Seller pursuant to Section
2.09(e) hereof.
(g) On the Remittance Dates occurring in July, August and
September 1999, the Trustee shall transfer from the Capitalized Interest Account
to the Certificate Account, the Capitalized Interest Requirement, if any, for
such Remittance Dates.
(h) On the Special Remittance Date, the Trustee shall transfer
from the Capitalized Interest Account to the Certificate Account the Capitalized
Interest Requirement, if any, for such Special Remittance Date. Any amounts
remaining in the Capitalized Interest Account after taking into account such
transfer shall be paid on such Special Remittance Date to the Seller, and the
Capitalized Interest Account shall be closed.
Section 6.05 [Intentionally Omitted]
Section 6.06 Investment of Accounts.
(a) So long as no default or Event of Default shall have
occurred and be continuing, and consistent with any requirements of the Code,
all or a portion of any Account which is not by the terms of this Agreement to
be held uninvested by the Trustee or the Spread Account Custodian shall be
invested and reinvested by the Trustee or the Spread Account Custodian, as
directed in writing by the Servicer, in one or more Permitted Instruments in the
name of the Trustee or the Spread Account Custodian, as the case may be, bearing
interest or sold at a discount. No such investment in the Certificate Account,
the Pre-Funding Account, the Capitalized Interest Account and the Spread Account
shall mature later than the Business Day immediately preceding the next
Remittance Date and no such investment in the Expense Account shall mature later
than the Business Day immediately preceding the date such funds will be needed
to pay fees or premiums; provided, however, the Trustee or any affiliate
thereof, may be the obligor on any investment which otherwise qualifies as a
Permitted Instrument and any investment on which the Trustee is the obligor may
mature on such Remittance Date or date when needed, as the case may be.
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(b) If any amounts are needed for disbursement from any
Account held by the Trustee or the Spread Account Custodian and sufficient
uninvested funds are not available to make such disbursement, the Trustee or the
Spread Account Custodian, as the case may be, shall cause to be sold or
otherwise converted to cash a sufficient amount of the investments in such
Account. Neither the Trustee nor the Spread Account Custodian shall be liable
for any investment loss or other charge resulting therefrom.
(c) Subject to Section 12.01 hereof, neither the Trustee nor
the Spread Account Custodian shall in any way be held liable by reason of any
insufficiency in any Account held by the Trustee or the Spread Account Custodian
resulting from any investment loss on any Permitted Instrument included therein
(except to the extent that the Trustee is the obligor thereon).
(d) The Trustee and the Spread Account Custodian shall invest
and reinvest funds in the Accounts held by the Trustee or the Spread Account
Custodian, to the fullest extent practicable, in such manner as the Servicer
shall from time to time direct in writing, but only in one or more Permitted
Instruments.
(e) All income or other gain from investments in any Account
held by the Trustee or the Spread Account Custodian shall be deposited in such
Account, as the case may be, immediately on receipt, and the Trustee or the
Spread Account Custodian shall notify the Servicer of any loss resulting from
such investments. The Servicer shall remit the amount of any such loss, to the
extent that such investment was made at the direction of the Servicer, from its
own funds, without reimbursement therefor, to the Trustee or the Spread Account
Custodian, as the case may be, for deposit in the Account from which the related
funds were withdrawn for investment by the next Determination Date following
receipt by the Servicer of such notice.
Section 6.07 Distributions.
(a) The rights of the Certificateholders to receive
distributions from the proceeds of the Trust Fund, and all ownership interests
of the Certificateholders in such distributions, shall be as set forth in this
Agreement.
(b) On each Remittance Date the Trustee shall withdraw from
the Certificate Account the sum of (A) that portion of the Available Funds
received from the Servicer pursuant to Section 6.01(a)(i), (ii) and (iv),and (B)
the amounts deposited therein pursuant to Section 6.02(b)(i) and make
distributions thereof in the following order of priority:
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(i) First, to the Class A Certificates in an amount
up to the Class A Interest Distribution Amount;
(ii) Second, to the Class M Certificates in an amount
up to the Class M Interest Distribution Amount (other than the
Class M Interest Shortfall Amount, if any);
(iii) Third, to the Class A Certificates in an amount
up to the sum of (a) the Class Principal Distribution Amount
for the Class A Certificates and (b) the Class Carry Forward
Amount for the Class A Certificates;
(iv) Fourth, to the Class M Certificates, in an
amount up to the sum of (a) the Class Principal Distribution
Amount for the Class M Certificates and (b) the Class Carry
Forward Amount for the Class M Certificates;
(v) Fifth, to the Class M Certificates, the Class M
Interest Shortfall Amount.
(vi) Sixth, to the Class B Certificates in an amount
up to the Class B Interest Distribution Amount (other than the
Class B Interest Shortfall Amount, if any);
(vii) Seventh, to the Class B Certificates, the Class
Principal Distribution Amount for the Class B Certificates;
(viii) Eighth, to the Expense Account in an amount up
to one-twelfth of the Annual Expense Escrow Amount plus any
amount required to be paid to the Trustee pursuant to Section
6.03(a) resulting from insufficiencies in the Expense Account;
(ix) Ninth, to the Spread Account, any remaining
Available Funds unless and until the amount therein equals the
Specified Spread Account Requirement;
(x) Tenth, to the Class B Certificates, the Class B
Interest Shortfall Amount;
(xi) Eleventh, to the Class B Certificates, the Class
Carry-Forward Amount for the Class B Certificates;
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(xii) Twelfth, to the Servicer in an amount up to the
Reimbursable Amounts; and
(xiii) Thirteenth, to the Spread Account Depositor,
any amounts in excess of the Specified Spread Account
Requirement.
Additionally, on the Special Remittance Date, the Trustee
shall withdraw from the Certificate Account the amount, if any, deposited
therein pursuant to Section 6.01(a)(v) and make distributions thereof as
follows: (i) from amounts transferred from the Pre-Funding Account,
distributions of principal to the Class A, Class M and Class B Certificates pro
rata based upon the Class A, Class M and Class B Percentages and (ii) from
amounts transferred from the Capitalized Interest Account, distributions of
interest to such Class A, Class M and Class B Certificates equal to the
applicable Capitalized Interest Requirement.
(c) All distributions made to the Certificateholders of a
particular Class will be made on a pro rata basis among the Certificateholders
of record of the applicable Class on the next preceding Record Date based on the
Percentage Interest represented by their respective Certificates on such date,
and shall be made by check or, upon request by a Certificateholder, by wire
transfer of immediately available funds to the account of such Certificateholder
at a bank or other entity having appropriate facilities therefor, and, in the
case of wire transfers, at the expense of such Certificateholder unless such
Certificateholder shall own of record Certificates which have initial
Certificate Principal Balances aggregating at least $5,000,000.
Section 6.08 [Intentionally Omitted]
Section 6.09 Statements.
Each month, not later than 12:00 noon New York time on the
Determination Date, the Servicer shall deliver to the Trustee, by telecopy, for
distribution to the Certificateholders, the receipt and legibility of which
shall be confirmed telephonically, with hard copy thereof and the Servicer's
Monthly Computer Diskette in the form attached hereto as Exhibit L (both in hard
copy and in computer diskette form) to be delivered on the Business Day
following the Determination Date, a certificate signed by a Servicing Officer (a
"Servicer's Certificate") stating the date (day, month and year), the Series
number of the Certificates, the date of this Agreement, and, as of the close of
business on the Record Date for such month:
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(i) Available Funds for the related Remittance Date;
(ii) The Aggregate Class A Certificate Principal
Balance, the Aggregate Class M Certificate Principal Balance,
the Aggregate Class B Certificate Principal Balance and the
Pool Principal Balance as reported in the prior Servicer's
Certificate pursuant to subclause (xii) below, or, in the case
of the first Determination Date, the Original Class A, Class M
and Class B Certificate Principal Balance and the Original
Pool Principal Balance;
(iii) The number and Principal Balances of all SBA
Loans which were the subject of Principal Prepayments during
the Due Period and the number and Principal Balances of all
Defaulted SBA Loans purchased by the Servicer during the Due
Period;
(iv) The product of the Unguaranteed Percentage
multiplied by all Curtailments which were received during the
Due Period;
(v) The product of the Unguaranteed Percentage
multiplied by all Excess Payments and the product of the
Unguaranteed Percentage multiplied by 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 amount of the Monthly Advances to be made
on the Determination Date and the Compensating Interest
payment to be made on the Determination Date;
(viii) The delinquency and foreclosure information
set forth in the form attached hereto as Exhibit K;
(ix) The product of the Unguaranteed Percentage
multiplied by the amount of any losses realized on a
Liquidated SBA Loan;
(x) The Class A, Class M and Class B Interest
Distribution Amounts and Principal
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Distribution Amounts for the Remittance Date with the
components thereof stated separately;
(xi) The amount stated in dollars and as a percentage
of the current aggregate Principal Balance of the Class A,
Class M and Class B Certificates of the funds available in the
Spread Account as of the related Record Date in cash and from
liquidation of Permitted Instruments and the amount, if any,
to be transferred from the Spread Account to the Certificate
Account pursuant to Section 6.02(b)(i);
(xii) The Aggregate Class A Certificate Principal
Balance, Aggregate Class M Certificate Principal Balance,
Aggregate Class B Certificate Principal Balance and the Pool
Principal Balance after giving effect to the distribution to
be made on the Remittance Date;
(xiii) The Spread Account Balance and the Specified
Spread Account Requirement with respect to such Remittance
Date;
(xiv) The weighted average maturity and weighted
average SBA Loan Interest Rate;
(xv) The Servicing Fees and the Annual Expense Escrow
Amount and other amounts to be deposited to the Expense
Account;
(xvi) The amount of all payments and reimbursements
to the Servicer pursuant to Section 5.04 (b), (c), (d)(ii),
(e) and (f);
(xvii) The Class A, Class M and Class B Benchmark
Rates with respect to such Remittance Date and the actual
interest rate for the Class A, Class M and Class B
Certificates with respect to such Remittance Date based upon
the Class A, Class M and Class B Interest Distribution
Amounts;
(xviii) During the Funding Period, the aggregate
Principal Balance of the Subsequent SBA Loans purchased during
the prior Due Period and the amount on deposit in the
Pre-Funding Account and the Capitalized Interest Account as of
the end of such Due Period; and
(xix) Such other information as the Trustee, the
Certificateholders or the Rating Agency may reasonably
require; provided, however, that the
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Servicer shall have no obligation to distribute such
information directly to any Certificateholder.
The Trustee shall forward such report to the
Certificateholders and the Rating Agency on the Remittance Date, together with a
separate report indicating the amount of funds deposited in the Certificate
Account pursuant to Section 6.01(a)(iv); and the amounts which are reimbursable
to the Servicer or the Seller pursuant to Sections 6.03(c)(i), 6.03(c)(ii) and
6.07(b)(xii) (all reports prepared by the Trustee of such withdrawals and
deposits will be based in whole or in part upon the information provided to the
Trustee by the Servicer).
To the extent that there are inconsistencies between the
telecopy of the Servicer's Certificate and the hard copy thereof, the Trustee
shall be entitled to rely upon the telecopy. In the case of information
furnished pursuant to subclauses (ii), (iii), (iv), (v), (x) and (xii), above,
the amounts shall be expressed in a separate section of the report as a dollar
amount for each Class per $1,000 original dollar amount as of the Cut-Off Date.
Additionally, on the Special Remittance Date the Trustee
shall, based upon information received from the Servicer, forward to the
Certificateholders and the Rating Agency a report setting forth the amount of
principal and interest, if any, being paid to each Class of Certificates on the
Special Remittance Date.
(a) Within a reasonable period of time after the end of each
calendar year, the Servicer shall furnish to the Trustee for distribution to
each Person who at any time during the calendar year was a Certificateholder
such information as is reasonably necessary to provide to such Person a
statement containing the information set forth in subclauses (vi), (x), and
(xiv), above, aggregated for such calendar year or applicable portion thereof
during which such Person was a Certificateholder. Such obligation of the
Servicer shall be deemed to have been satisfied to the extent that substantially
comparable information shall be provided by the Servicer pursuant to any
requirements of the Code as from time to time are in force.
(b) Upon reasonable advance notice in writing, the Servicer
will provide to each Certificateholder which is a savings and loan association,
bank or insurance company certain reports and access to information and
documentation regarding the SBA Loans sufficient to permit such
Certificateholder to comply with applicable regulations of its regulatory
authorities with respect to investment in the Certificates.
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(c) The Servicer shall furnish to each Certificateholder,
during the term of this Agreement, such periodic, special, or other reports or
information, whether or not provided for herein, as shall be necessary,
reasonable, or appropriate with respect to the Certificateholder or otherwise
with respect to the purposes of this Agreement, all such reports or information
to be provided by and in accordance with such applicable instructions and
directions as the Certificateholder may reasonably require; provided, that the
Servicer shall be entitled to be reimbursed by such Certificateholder for the
Servicer's actual expenses incurred in providing such reports if such reports
are not producible in the ordinary course of the Servicer's business. The Rating
Agency shall receive copies of any such reports or information furnished to the
Certificateholders.
Section 6.10 Advances by the Servicer.
Not later than the close of business on each Determination
Date, the Servicer, may in its sole discretion, if it determines such amount is
recoverable, remit to the Trustee for deposit in the Certificate Account an
amount (as indicated in the Servicer's Certificate prepared pursuant to Section
6.09), to be distributed on the related Remittance Date pursuant to Section
6.07, equal to the amount by which (i) 30 days' interest at a rate equal to the
then applicable Adjusted SBA Loan Benchmark Rate on the aggregate Class A, Class
M and Class B Principal Balances immediately prior to the related Remittance
Date (plus or minus the difference, if any, between (A) the sum of the Class A,
Class M and Class B Interest Distribution Amounts and (B) the sum of the
Adjusted Class A, Adjusted Class M and Adjusted Class B Interest Distribution
Amounts for the related Remittance Date) exceeds (ii) the amount received by the
Servicer as of the related Record Date in respect of interest on the SBA Loans
minus the interest payable to the Registered Holders, the Premium Protection
Fee, the Additional Fee, the Servicing Fee and the FTA's Fee (plus, for the
Remittance Dates in July, August and September 1999, the sum of (i) all funds to
be transferred to the Certificate Account from the Capitalized Interest Account
for such Remittance Date pursuant to Section 6.04(g) and (ii) the Pre-Funding
Earnings for the applicable Remittance Date), such excess being defined herein
as the "Monthly Advance." The Servicer may reimburse itself for Monthly Advances
made pursuant to Section 5.04. Notwithstanding the foregoing, the Servicer shall
not be required to make a Monthly Advance with respect to an SBA Loan if it
determines, in good faith, that such advance would be nonrecoverable from
amounts received in respect of the SBA Loans.
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Section 6.11 Compensating Interest.
The Certificateholders shall be entitled to a full month's
interest on the principal portion of the Unguaranteed Interest of each SBA Loan
at the then applicable Class A, Class M or Class B Benchmark Rate, as the case
may be. Not later than the close of business on each Determination Date, with
respect to each SBA Loan for which a Principal Prepayment or Curtailment was
received during the related Due Period, the Servicer shall remit to the Trustee
for deposit in the Certificate Account from amounts otherwise payable to it as
servicing compensation (other than the Premium Protection Fee and the Servicing
Fee with respect to the Guaranteed Interest), an amount (such amount required to
be delivered to the Trustee is referred to herein as "Compensating Interest")
(as indicated in the Servicer's Certificate prepared pursuant to Section 6.09)
equal to the difference between (a) 30 days' interest at the Adjusted SBA Loan
Benchmark Rate on the Principal Balance of each such SBA Loan as of the
beginning of the Due Period applicable to the Remittance Date on which such
amount will be distributed, and (b) the amount of interest actually received on
the Unguaranteed Interest of each such SBA Loan for such Due Period net of the
portion thereof payable to the Registered Holder, the Premium Protection Fee,
the FTA's Fee, the Servicing Fee, the Excess Spread and the fees and expenses of
the Trustee allocable to such interest and, with respect to each Additional Fee
SBA Loan, the Additional Fee.
Section 6.12 Reports of Foreclosure and Abandonment
of Mortgaged Property
Each year the Servicer shall make the reports of foreclosures
and abandonments of any Mortgaged Property required by Section 6050J of the
Code. Promptly after filing each such report with the Internal Revenue Service,
the Servicer shall provide the Trustee with an Officer's Certificate certifying
that such report has been filed.
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Exhibit 10.15.1
ARTICLE VII
GENERAL SERVICING PROCEDURE
Section 7.01 [Intentionally Omitted]
Section 7.02 Satisfaction of Mortgages and Collateral and
Release of SBA Files
The Servicer shall maintain the Fidelity Bond as provided for
in Section 5.09 insuring the Servicer against any loss it may sustain with
respect to any SBA Loan not satisfied in accordance with the procedures set
forth herein.
Upon the payment in full of any SBA Loan, or the receipt by
the Servicer of a notification that payment in full will be escrowed in a manner
customary for such purposes, the Servicer will immediately notify the FTA and
the Trustee by a certification in the form of Exhibit I attached hereto (which
certification shall include a statement to the effect that all amounts received
or to be received in connection with such payment which are required to be
deposited in the Principal and Interest Account pursuant to Section 5.03 have
been or will be so deposited) of a Servicing Officer and shall request delivery
to it of the Trustee's Document File. Upon receipt of such certification and
request, the FTA and the Trustee shall release, within 3 Business Days, the
related Trustee's Document File to the Servicer. Expenses incurred in connection
with any instrument of satisfaction or deed of reconveyance shall be payable
only from and to the extent of servicing compensation and shall not be
chargeable to the Principal and Interest Account or the Certificate Account.
Subject to the Multi-Party Agreement, from time to time and as
appropriate for the servicing or foreclosure of any SBA Loan, the FTA and the
Trustee shall, upon request of the Servicer and delivery to the FTA and the
Trustee of a certification in the form of Exhibit I attached hereto signed by a
Servicing Officer, release the related Trustee's Document File to the Servicer
within 3 Business Days, and the Trustee shall execute such documents as shall be
necessary to the prosecution of any such proceedings. The Servicer shall return
the Trustee's Document File to the FTA and the Trustee when the need therefor by
the Servicer no longer exists, unless the SBA Loan has been liquidated and the
Unguaranteed Percentage of the Liquidation Proceeds relating to the SBA Loan has
been deposited in the Principal and Interest Account and remitted to the Trustee
for deposit in the Certificate Account or the SBA File or such document has been
delivered to an attorney, or to a public trustee or other public official as
required by law, for purposes
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of initiating or pursuing legal action or other proceedings for the foreclosure
of the Mortgaged Property or repossession of other Collateral either judicially
or non-judicially, and the Servicer has delivered to the FTA and the Trustee a
certificate of a Servicing Officer certifying as to the name and address of the
Person to whom such SBA File or such document was delivered and the purpose or
purposes of such delivery. Upon receipt of a certificate of a Servicing Officer
stating that such SBA Loan was liquidated, the servicing receipt shall be
released by the Trustee to the Servicer.
The Trustee shall execute and deliver to the Servicer any
court pleadings, requests for trustee's sale or other documents provided to it
necessary to the foreclosure or trustee's sale in respect of a Mortgaged
Property or other Collateral or to any legal action brought to obtain judgment
against any Obligor on the SBA Note or Mortgage or other agreement securing
Collateral or to obtain a deficiency judgment, or to enforce any other remedies
or rights provided by the SBA Note or Mortgage or other agreement securing
Collateral or otherwise available at law or in equity. Together with such
documents or pleadings, the Servicer shall deliver to the Trustee a certificate
of a Servicing Officer requesting that such pleadings or documents be executed
by the Trustee and certifying as to the reason such documents or pleadings are
required and that the execution and delivery thereof by the Trustee will not
invalidate or otherwise affect the lien of the Mortgage or other agreement
securing Collateral, except for the termination of such a lien upon completion
of the foreclosure or trustee's sale. The Trustee shall, upon receipt of a
written request from a Servicing Officer, execute any document provided to the
Trustee by the Servicer or take any other action requested in such request, that
is, in the opinion of the Servicer as evidenced by such request, required by any
state or other jurisdiction to discharge the lien of a Mortgage or other
agreement securing Collateral upon the satisfaction thereof and the Trustee will
sign and post, but will not guarantee receipt of, any such documents to the
Servicer, or such other party as the Servicer may direct, within five Business
Days of the Trustee's receipt of such certificate or documents. Such certificate
or documents shall establish to the Trustee's satisfaction that the related SBA
Loan has been paid in full by or on behalf of the Obligor and that such payment
has been deposited in the Principal and Interest Account.
Section 7.03 Servicing Compensation.
As compensation for its services hereunder, the Servicer shall
be entitled to 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
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and the Premium Protection Fee and, in accordance with Section 5.04(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 6.03(c)(iii) and late payment charges shall be retained by
or remitted to the Servicer to the extent not required to be remitted to the
Trustee for deposit in the Certificate Account. The Servicer shall be required
to pay all expenses incurred by it in connection with its servicing activities
hereunder and shall not be entitled to reimbursement therefor except as
specifically provided for herein.
Section 7.04 Annual Statement as to Compliance.
The Servicer will deliver to the Trustee, the SBA and the
Rating Agency on or before March 31 of each year beginning March 31, 2000, an
Officer's Certificate stating that (i) the Servicer has fully complied with the
provisions of Articles V and VII, (ii) a review of the activities of the
Servicer during the preceding calendar year and of performance under this
Agreement has been made under such officer's supervision, and (iii) to the best
of such officer's knowledge, based on such review, the Servicer has fulfilled
all its obligations under this Agreement throughout such year, or, if there has
been a default in the fulfillment of any such obligation, specifying each such
default known to such officers and the nature and status thereof and the action
being taken by the Servicer to cure such default.
Section 7.05 Annual Independent Public Accountants' Servicing
Report
On or before March 31 of each year beginning March 31, 2000,
the Servicer, at its expense, shall cause one of the "big five" accounting firms
to furnish a letter or letters to the Trustee and the Rating Agency to the
effect that such firm has with respect to the Servicer's overall servicing
operations examined such operations in accordance with the requirements of the
Uniform Single Audit Program for Mortgage Bankers, and stating such firm's
conclusions relating thereto.
Section 7.06 SBA's and Trustee's Right to Examine Servicer
Records and Audit Operations
The SBA and the Trustee shall have the right upon reasonable
prior notice, during normal business hours and as often as reasonably required,
to examine and audit any and all of the books, records or other information of
the Servicer, whether held by the Servicer or by another on behalf of the
Servicer,
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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 7.07 Reports to the Trustee; Principal and Interest
Account Statements.
Not later than 20 days after each Record Date, the Servicer
shall forward to the Trustee and the SBA a statement, certified by a Servicing
Officer, setting forth the status of the Principal and Interest Account as of
the close of business on the preceding Record Date and showing, for the period
covered by such statement, the aggregate of deposits into the Principal and
Interest Account for each category of deposit specified in Section 5.03, the
aggregate of withdrawals from the Principal and Interest Account for each
category of withdrawal specified in Section 5.04, the aggregate amount of
permitted withdrawals not made in the related Due Period, and the amount of any
Monthly Advances or payments of Compensating Interest, in each case, for the
related Due Period.
Section 7.08 Premium Protection Fee and Servicing Fee.
Pursuant to and in accordance with the policies of the SBA and
SBA Form 1086, the Servicer shall retain the Premium Protection Fee and the
Servicing Fee for each SBA Section 7(a) Loan. Neither the Premium Protection Fee
nor the Servicing Fee shall constitute part of the Trust Fund 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
Servicer is replaced as servicer pursuant to any provision of this Agreement, it
shall no longer be entitled to the Premium Protection Fee and the Servicing Fee
but, instead, the successor servicer shall be entitled thereto.
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ARTICLE VIII
REPORTS TO BE PROVIDED BY SERVICER
Section 8.01 Financial Statements.
The Servicer understands that, in connection with a transfer
of the Certificates, Certificateholders may request that the Servicer make
available to prospective Certificateholders the annual audited financial
statements of the Servicer's parent (First International Bancorp, Inc., and any
successor thereto) for one or more of the most recently completed five fiscal
years for which such statements are publicly available, which request shall not
be unreasonably denied.
The Servicer also agrees to make available on a reasonable
basis to any prospective Certificateholder a knowledgeable financial or
accounting officer for the purpose of answering reasonable questions respecting
recent developments affecting the Servicer or the financial statements of the
Servicer and its parent (First International Bancorp, Inc. and any successor
thereto) and to permit any prospective Certificateholder to inspect the
Servicer's servicing facilities during normal business hours for the purpose of
satisfying such prospective Certificateholder that the Servicer has the ability
to service the SBA Loans in accordance with this Agreement.
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ARTICLE IX
THE SERVICER
Section 9.01 Indemnification; Third Party Claims.
(a) The Servicer agrees to indemnify and hold the Trustee, the
SBA, and each Certificateholder harmless against any and all claims, losses,
penalties, fines, forfeitures, legal fees and related costs, judgments, and any
other costs, fees and expenses that the Trustee, the SBA, and any
Certificateholder may sustain in any way related to the failure of the Servicer
to perform its duties and service the SBA Loans in compliance with the terms of
this Agreement. The Servicer shall immediately notify the Trustee, the SBA and
each Certificateholder if a claim is made by any party with respect to this
Agreement, and the Servicer shall assume (with the consent of the Trustee) the
defense of any such claim and pay all expenses in connection therewith,
including reasonable counsel fees, and promptly pay, discharge and satisfy any
judgment or decree which may be entered against the Servicer, the Trustee, the
SBA, and/or a Certificateholder in respect of such claim. The Trustee may
reimburse the Servicer from the Expense Account pursuant to Section 6.03(c)(i)
for all amounts advanced by it pursuant to the preceding sentence except when
the claim relates directly to the failure of the Servicer to service and
administer the SBA Loans in compliance with the terms of this Agreement.
(b) The Seller agrees to indemnify and hold the Trustee, the
SBA and each Certificateholder harmless against any and all claims, losses,
penalties, fines, forfeitures, legal fees and related costs, judgments, and any
other costs, fees and expenses that the Trustee, the SBA, and any
Certificateholder may sustain in any way related to the failure of the Servicer,
if it is an affiliate thereof, or the failure of the Seller to perform its
respective duties in compliance with the terms of this Agreement and in the best
interests of the SBA and the Certificateholders. The Seller shall immediately
notify the Trustee, the SBA, and each Certificateholder if a claim is made by a
third party with respect to this Agreement, and the Seller shall assume (with
the consent of the Trustee) the defense of any such claim and pay all expenses
in connection therewith, including reasonable counsel fees, and promptly pay,
discharge and satisfy any judgment or decree which may be entered against the
Servicer, the Seller, the Trustee, the SBA and/or a Certificateholder in respect
of such claim. The Trustee may reimburse the Seller from the Expense Account
pursuant to Section 6.03(c)(i) for all amounts advanced by them pursuant to the
preceding sentence except when the claim relates directly to the Seller's
indemnification pursuant to Section 2.05 and
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Section 3.03 or to the failure of the Servicer, if it is an affiliate of the
Seller, to perform its obligations to service and administer the Mortgages in
compliance with the terms of this Agreement, or the failure of the Seller to
perform its duties in compliance with the terms of this Agreement and in the
best interests of the SBA and the Certificateholders.
Section 9.02 Merger or Consolidation of the Servicer;
Assignment of the Servicer's Duties.
The Servicer will keep in full effect its existence, rights
and franchises as a corporation, bank or association (it being understood that
the Servicer intends to convert from a national banking charter to a state
banking charter) and will obtain and preserve its qualification to do business
as a foreign entity in each jurisdiction necessary to protect the validity and
enforceability of this Agreement or any of the SBA Loans and to perform its
duties under this Agreement.
Any Person into which the Servicer may be merged or
consolidated, or any Person resulting from any merger, conversion or
consolidation to which the Servicer shall be a party, or any Person succeeding
to all or substantially all of the business of the Servicer, shall be an
established mortgage loan servicing institution that has a net worth of at least
$15,000,000 and shall be an approved SBA guaranteed lender in good standing,
operating pursuant to an effective Loan Guaranty Agreement, and shall be the
successor of the Servicer, hereunder, without the execution or filing of any
paper or any further act on the part of any of the parties hereto, anything
herein to the contrary notwithstanding 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 or consolidation to the Trustee, the Rating
Agency and the SBA.
Subject to the receipt of written approval from the SBA, the
Servicer is permitted to assign its rights and duties hereunder to, and such
rights and duties can be assumed by, an affiliate of the Servicer having a net
worth of at least $15,000,000 and which is an approved SBA guaranteed lender in
good standing, operating pursuant to an effective Loan Guaranty Agreement (the
"Assignee") (in which case all of the provisions of this Agreement and the
Multi-Party Agreement shall, to the same extent as they apply to the Servicer
hereunder, apply to the Assignee rather than the Servicer), without the
execution or filing of any paper or any further act on the part of any of the
parties hereto, anything herein to the contrary notwithstanding except as may be
otherwise required by the SBA Rules and Regulations and the Multi-Party
Agreement. The Servicer shall
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send notice of any such assignment to the Trustee, the Rating Agency and the
SBA.
Section 9.03 Limitation on Liability of the Servicer and
Others.
The Servicer and any director, officer, employee or agent of
the Servicer may rely on any document of any kind which it in good faith
reasonably believes to be genuine and to have been adopted or signed by the
proper authorities or persons respecting any matters arising hereunder. Subject
to the terms of Section 9.01 herein, the Servicer shall have no obligation to
appear with respect to, prosecute or defend any legal action which is not
incidental to the Servicer's duty to service the SBA Loans in accordance with
this Agreement.
Section 9.04 Servicer Not to Resign.
The Servicer shall not resign from the obligations and duties
hereby imposed on it except (i) by mutual consent of the Servicer, the SBA, the
Trustee and the Majority Certificateholders, or (ii) in connection with a
merger, conversion or consolidation permitted pursuant to Section 9.02 and with
the prior written consent of the SBA and written notice to the Rating Agency (in
which case the Person resulting from the merger, conversion or consolidation
shall be the successor of the Servicer), or (iii) in connection with an
assignment permitted pursuant to Section 9.02 and with the consent of the SBA
(in which case the Assignee shall be the successor of the Servicer), or (iv)
upon the determination that the Servicer's duties hereunder are no longer
permissible under applicable law or administrative determination and such
incapacity cannot be cured by the Servicer. Any such determination permitting
the resignation of the Servicer shall be evidenced by a written Opinion of
Counsel (who may be counsel for the Servicer) to such effect delivered to the
Trustee, the SBA and to each Certificateholder, which Opinion of Counsel shall
be in form and substance acceptable to the Trustee. No such resignation shall
become effective until a successor has assumed the Servicer's responsibilities
and obligations hereunder in accordance with Section 10.02.
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ARTICLE X
DEFAULT
Section 10.01 Events of Default.
(a) In case one or more of the following Events of Default by
the Servicer shall occur and be continuing, that is to say:
(i) (A) the failure by the Servicer to make any
required Servicing Advance, to the extent such failure
materially and adversely affects the interests of the
Certificateholders; (B) the failure by the Servicer to make
any required Monthly Advance to the extent such failure
materially and adversely affects the interests of the
Certificateholders; (C) the failure by the Servicer to remit
any Compensating Interest to the extent such failure
materially and adversely affects the interests of the
Certificateholders; or (D) any failure by the Servicer to
remit to Certificateholders, or to the Trustee for the benefit
of the Certificateholders, any payment required to be made
under the terms of this Agreement which continues unremedied
after the date upon which written notice of such failure,
requiring the same to be remedied, shall have been given to
the Servicer by the Trustee or to the Servicer and the Trustee
by any Certificateholder; or
(ii) failure by the Servicer or the Seller duly to
observe or perform, in any material respect, any other
covenants, obligations or agreements of the Servicer or the
Seller as set forth in this Agreement, which failure continues
unremedied for a period of 60 days after the date on which
written notice of such failure, requiring the same to be
remedied, shall have been given to the Servicer or the Seller,
as the case may be, by the Trustee or to the Servicer, or the
Seller, as the case may be, and the Trustee by any
Certificateholder; or
(iii) a decree or order of a court or agency or
supervisory authority having jurisdiction for the appointment
of a conservator or receiver or liquidator in any insolvency,
readjustment of debt, marshaling of assets and liabilities or
similar proceedings, or for the winding-up or liquidation of
its affairs, shall have been entered against the Servicer and
such decree
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or order shall have remained in force, undischarged or
unstayed for a period of 60 days; or
(iv) the Servicer shall consent to the appointment of
a conservator or receiver or liquidator in any insolvency,
readjustment of debt, marshaling of assets and liabilities or
similar proceedings of or relating to the Servicer or of or
relating to all or substantially all of the Servicer's
property; or
(v) the Servicer shall admit in writing its inability
to pay its debts as they become due, file a petition to take
advantage of any applicable insolvency or reorganization
statute, make an assignment for the benefit of its creditors,
or voluntarily suspend payment of its obligations;
(b) then, and in each and every such case,
so long as an Event of Default shall not have been remedied, and in the case of
clause (i) above (except for clause (i)(B)), if such Event of Default shall not
have been remedied within 30 days after the Servicer has received notice of such
Event of Default, (x) with respect solely to clause (i)(B) above, if such
Monthly Advance is not made earlier than 4:00 p.m. New York time on the
Determination Date, the Trustee shall give immediate telephonic notice of such
failure to a Servicing Officer of the Servicer and, unless such failure is
cured, either by receipt of payment or receipt of evidence (e.g., a wire
reference number communicated by the sending bank) that such funds have been
sent, by 12:00 Noon New York time on the following Business Day, the Trustee
shall immediately assume, pursuant to Section 10.02 hereof, the duties of a
successor servicer; and (y) in the case of clauses (i)(A), (i)(C), (i)(D),
(iii), (iv) and (v), the Majority Certificateholders, by notice in writing to
the Servicer (except with respect to (iii), (iv) and (v) for which no notice is
required) may, in addition to whatever rights such Certificateholders may have
at law or equity including damages, injunctive relief and specific performance,
in each case immediately terminate all the rights and obligations of the
Servicer under this Agreement and in and to the SBA Loans and the proceeds
thereof, as Servicer. Upon such receipt by the Servicer of a second written
notice from the Majority Certificateholders stating that they or it intend to
terminate the Servicer as a result of such Event of Default, all authority and
power of the Servicer under this Agreement, whether with respect to the SBA
Loans or otherwise, shall, subject to Section 10.02 and the Multi-Party
Agreement, pass to and be vested in the Trustee and the Trustee is hereby
authorized and empowered to execute and deliver, on behalf of the Servicer, as
attorney-in-fact or otherwise, any and all documents and other instruments and
do or
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cause to be done all other acts or things necessary or appropriate to effect the
purposes of such notice of termination, including, but not limited to, the
transfer and endorsement or assignment of the SBA Loans and related documents.
The Servicer agrees to cooperate with the Trustee in effecting the termination
of the Servicer's responsibilities and rights hereunder, including, without
limitation, the transfer to the Trustee for administration by it of all amounts
which shall at the time be credited by the Servicer to each Principal and
Interest Account or thereafter received with respect to the SBA Loans. The
Trustee shall provide notice to the SBA of any Event of Default and any actual
termination hereunder.
Section 10.02 Trustee to Act; Appointment of Successor
On and after the time of the Servicer's immediate termination,
or the Servicer's receipt of notice if required by Section 10.01, or at any time
if the Trustee receives the resignation of the Servicer evidenced by an Opinion
of Counsel pursuant to Section 9.04 or the Servicer is removed as Servicer
pursuant to this Article X, the Trustee shall be the successor in all respects
to the Servicer in its capacity as Servicer under this Agreement and the
transactions set forth or provided for herein and shall be subject to all the
responsibilities, duties and liabilities relating thereto placed on the Servicer
by the terms and provisions hereof; provided, however, that the Trustee shall
not be liable for any actions of any Servicer prior to it, and that the Trustee
shall not be obligated to make advances or payments pursuant to Sections 6.03,
6.10, 6.11 or 5.10 but only to the extent the Trustee determines reasonably and
in good faith that such advances would not be recoverable, such determination to
be evidenced with respect to each such advance by a certification of a
Responsible Officer of the Trustee. As compensation therefor, the Trustee shall
be entitled to all funds relating to the SBA Loans which the Servicer would have
been entitled to receive from the Principal and Interest Account pursuant to
Section 5.04 if the Servicer had continued to act as Servicer hereunder,
together with other servicing compensation in the form of assumption fees, late
payment charges or otherwise as provided in Sections 7.01 and 7.03 and shall be
entitled to the Servicing Fee and the Premium Protection Fee.
Notwithstanding the above, the Trustee shall, if it is unable
to so act or if the SBA so requests in writing to the Trustee, appoint, or
petition a court of competent jurisdiction to appoint, any established servicing
institution acceptable to the SBA including but not limited to the SBA and
satisfying the Rating Agency Condition that has a net worth of not less than
$15,000,000, and which is an approved SBA guaranteed lender in good standing,
operating pursuant to an effective Loan Guaranty
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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 Trustee and remitted directly to the Trustee or,
at the direction of the Trustee, to the successor servicer. As compensation, any
successor servicer (including, without limitation, the 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 5.04 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
7.03 and shall be entitled to the Servicing Fee and the Premium Protection Fee.
In the event the Trustee is required to solicit bids as provided herein, the
Trustee shall solicit, by public announcement, bids from banks and mortgage
servicing institutions meeting the qualifications set forth above. Such public
announcement shall specify that the successor servicer shall be entitled to the
full amount of the aggregate Servicing Fees and Premium Protection Fees as
servicing compensation, together with the other servicing compensation in the
form of assumption fees, late payment charges or otherwise. Within thirty days
after any such public announcement, the Trustee shall negotiate and effect the
sale, transfer and assignment of the servicing rights and responsibilities
hereunder to the qualified party submitting the highest qualifying bid. The
Trustee shall deduct from any sum received by the Trustee from the successor to
the Servicer in respect of such sale, transfer and assignment all costs and
expenses of any public announcement and of any sale, transfer and assignment of
the servicing rights and responsibilities hereunder and the amount of any
unreimbursed Servicing Advances and Monthly Advances. After such deductions, the
remainder of such sum shall be paid by the Trustee as a servicing fee to the SBA
at the time of such sale, transfer and assignment to the Servicer's successor.
The Trustee and such successor shall take such action, consistent with this
Agreement, as shall be necessary to effectuate any such succession. The Servicer
agrees to cooperate with the Trustee and any successor servicer in effecting the
termination of the Servicer's servicing responsibilities and rights hereunder
and shall promptly provide the Trustee or such successor servicer, as
applicable, all documents and records reasonably requested by it to enable it to
assume the Servicer's functions hereunder and shall promptly also transfer to
the Trustee or such successor servicer, as applicable, all amounts which then
have been or should have been deposited in the Principal and Interest Account or
Spread Account by the Servicer or which are thereafter received with respect to
the SBA Loans. Neither the Trustee nor any other successor servicer shall be
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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 Trustee to each Certificateholder and the SBA
and the Trustee and the SBA shall have consented thereto. The Trustee shall not
resign as servicer until a successor servicer reasonably acceptable to the SBA
has been appointed.
Pending appointment of a successor to the Servicer hereunder,
the Trustee shall act in such capacity as hereinabove provided. In connection
with such appointment and assumption, the Trustee may make such arrangements for
the compensation of such successor out of payments on SBA Loans as it and such
successor shall agree; provided, however, that no such compensation shall be in
excess of that permitted the Servicer pursuant to Section 7.03 or otherwise as
provided in this Agreement. The Servicer, the Trustee and such successor shall
take such action, consistent with this Agreement, as shall be necessary to
effectuate any such succession.
Section 10.03 Waiver of Defaults.
The SBA may, or the Majority Certificateholders may on behalf
of all Certificateholders and subject to the consent of the SBA, which consent
may not be unreasonably withheld, and satisfaction of the Rating Agency
Condition, waive any events permitting removal of the Servicer pursuant to this
Article X; provided, however, that the Majority Certificateholders or the SBA
may not waive a default in making a required distribution on a Certificate
without the consent of the holder of such Certificate. Upon any waiver of a past
default, such default shall cease to exist, and any Event of Default arising
therefrom shall be deemed to have been remedied for every purpose of this
Agreement. No such waiver shall extend to any subsequent or other default or
impair any right consequent thereto except to the extent expressly so waived.
Section 10.04. Control by Majority Certificateholders and
Others.
The SBA may, or the Majority Certificateholders with the
consent of the SBA may, direct the time, method and place of conducting any
proceeding relating to the Trust Fund or the Certificates or for any remedy
available to the Trustee with respect to the Certificates or exercising any
trust or power
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conferred on the Trustee with respect to the Certificates or the Trust Fund
provided that:
(i) such direction shall not be in conflict with any
rule of law or with this Agreement;
(ii) the Trustee shall have been provided with
indemnity satisfactory to it; and
(iii) the Trustee may take any other action deemed
proper by the Trustee which is not inconsistent with such
direction; provided, however, that the Trustee, as the case
may be, need not take any action which it determines might
involve it in liability or may be unjustly prejudicial to the
Certificateholders not so directing.
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ARTICLE XI
TERMINATION
Section 11.01 Termination.
This Agreement shall terminate upon notice to the Trustee of
the earlier of the following events: (a) the final payment or other liquidation
of the last SBA Loan or the disposition of all property acquired upon
foreclosure or deed in lieu of foreclosure of any SBA Loan and the remittance of
all funds due thereunder, or (b) mutual consent of the Servicer and all
Certificateholders in writing; provided, however, that in no event shall the
Trust Fund established by this Agreement terminate later than twenty-one years
after the death of the last surviving lineal descendant of Joseph P. Kennedy,
late Ambassador of the United States to the Court of St. James, alive as of the
date hereof.
The Servicer may, at its option, terminate this Agreement on
any date on which the Pool Principal Balance is less than 5.0% of the sum of (i)
the Original Pool Principal Balance and (ii) the Original Pre-Funded Amount by
purchasing, on the next succeeding Remittance Date, all of the Unguaranteed
Interests in the SBA Loans and Foreclosed Properties at a price equal to the sum
of (i) 100% of the then outstanding Aggregate Class A, Class M and Class B
Certificate Principal Balances, and (ii) 30 days' interest thereon at the then
applicable Class A, Class M and Class B Benchmark Rates, as the case may be (the
"Termination Price"). Notwithstanding the prior sentence, if at the time the
Servicer determines to exercise such option the unsecured long-term debt
obligations of the Servicer are not rated at least Baa3 by Moody's, if such
Rating Agency is still rating the Certificates, the Servicer shall give such
Rating Agency prior written notice of the Servicer's determination to exercise
such option and shall not exercise such option, without the consent of each such
Rating Agency, prior to furnishing each such Rating Agency with an Opinion of
Counsel, in form and substance reasonably satisfactory to each such Rating
Agency, that the exercise of such option would not be deemed a fraudulent
conveyance by the Servicer.
Notice of any termination, specifying the Remittance Date upon
which the Trust Fund will terminate and that the Certificateholders shall
surrender their Certificates to the Trustee for payment of the final
distribution and cancellation shall be given promptly by the Servicer by letter
to Certificateholders mailed during the month of such final distribution before
the Determination Date in such month, specifying (i) the Remittance Date upon
which final payment of
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the Certificates will be made upon presentation and surrender of Certificates at
the office of the Trustee therein designated, (ii) the amount of any such final
payment and (iii) that the Record Date otherwise applicable to such Remittance
Date is not applicable, payments being made only upon presentation and surrender
of the Certificates at the office of the Trustee therein specified. The Servicer
shall give such notice to the Trustee therein specified. The Servicer shall give
such notice to the Trustee at the time such notice is given to
Certificateholders. Any obligation of the Servicer to pay amounts due to the
Trustee shall survive the termination of this Agreement.
In the event that all of the Certificateholders shall not
surrender their Certificates for cancellation within six months after the time
specified in the above-mentioned written notice, the Servicer shall give a
second written notice to the remaining Certificateholders to surrender their
Certificates for cancellation and receive the final distribution with respect
thereto and shall at the expense of the Trust Fund cause to be published once,
in the national edition of The Wall Street Journal notice that such money
remains unclaimed. If within six months after the second notice all of the
Certificates shall not have been surrendered for cancellation, the Trustee may
take appropriate steps, or may appoint an agent to take appropriate steps, to
contact the remaining Certificateholders concerning surrender of their
Certificates and the cost thereof shall be paid out of the funds and other
assets which remain subject hereto. If within the period then specified in the
escheat laws of the State of New York after the second notice all the
Certificates shall not have been surrendered for cancellation, the Seller shall
be entitled to all unclaimed funds and other assets which remain subject hereto
and the Trustee upon transfer of such funds shall be discharged of any
responsibility for such funds and the Certificateholders shall look to the
Seller for payment.
Section 11.02 Accounting Upon Termination of Servicer
Upon termination of the Servicer under Article X hereof, the
Servicer shall:
(a) deliver to its successor or, if none shall yet have been
appointed, to the Trustee the funds in any Principal and Interest Account;
(b) deliver to its successor or, if none shall yet have been
appointed, to the Trustee all SBA Files and related documents and statements
held by it hereunder and a SBA Loan portfolio computer diskette;
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(c) deliver to its successor or, if none shall yet have been
appointed, to the Trustee and, upon request, to the Certificateholders a full
accounting of all funds, including a statement showing the Monthly Payments
collected by it and a statement of moneys held in trust by it for the payments
or charges with respect to the SBA Loans; and
(d) execute and deliver such instruments and perform all acts
reasonably requested in order to effect the orderly and efficient transfer of
servicing of the SBA Loans to its successor and to more fully and definitively
vest in such successor all rights, powers, duties, responsibilities, obligations
and liabilities of the Servicer under this Agreement.
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ARTICLE XII
THE TRUSTEE
Section 12.01 Duties of Trustee.
The Trustee, prior to the occurrence of an Event of Default
and after the curing of all Events of Default which may have occurred,
undertakes to perform such duties and only such duties as are specifically set
forth in this Agreement. If an Event of Default has occurred and has not been
cured or waived, the Trustee shall exercise such of the rights and powers vested
in it by this Agreement, and use the same degree of care and skill in its
exercise as a prudent person would exercise or use under the circumstances in
the conduct of such person's own affairs.
The Trustee, upon receipt of all resolutions, certificates,
statements, opinions, reports, documents, orders or other instruments furnished
to the Trustee which are specifically required to be furnished pursuant to any
provision of this Agreement, shall examine them to determine whether they
conform to the requirements of this Agreement, provided, however that the
Trustee shall not be responsible for the accuracy or content of any resolution,
certificate, statement, opinion, report, document, order or other instrument
furnished by the Servicer or the Seller hereunder. If any such instrument is
found not to conform to the requirements of this Agreement in a material manner,
the Trustee shall take action as it deems appropriate to have the instrument
corrected, and if the instrument is not corrected to the Trustee's satisfaction,
the Trustee will provide notice thereof to the Certificateholders and the
Servicer.
No provision of this Agreement shall be construed to relieve
the Trustee from liability for its own negligent action, its own negligent
failure to act or its own willful misconduct or bad faith; provided, however,
that:
(a) Prior to the occurrence of an Event of Default, and after
the curing of all such Events of Default which may have occurred, the duties and
obligations of the Trustee shall be determined solely by the express provisions
of this Agreement, the Trustee shall not be liable except for the performance of
such duties and obligations as are specifically set forth in this Agreement, no
implied covenants or obligations shall be read into this Agreement against the
Trustee and, in the absence of bad faith on the part of the Trustee, the Trustee
may conclusively rely, as to the truth of the statements and the correctness of
the opinions expressed therein, upon any certificates or opinions
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furnished to the Trustee and conforming to the requirements of this Agreement;
(b) The Trustee shall not be personally liable for an error of
judgment made in good faith by officers of the Trustee, unless it shall be
proved that the Trustee was negligent in ascertaining the pertinent facts;
(c) The Trustee shall not be personally liable with respect to
any action taken, suffered or omitted to be taken by it in good faith in
accordance with the direction of the Majority Certificateholders, relating to
the time, method and place of conducting any proceeding for any remedy available
to the Trustee, or exercising any trust or power conferred upon the Trustee,
under this Agreement;
(d) In the absence of actual knowledge of an officer of the
Trustee in its Corporate Trust Office of an Event of Default, the Trustee shall
not be required to take notice or be deemed to have notice or knowledge of any
default or Event of Default unless the Trustee shall be specifically notified in
writing by the Servicer or any of the Certificateholders. In the absence of
actual knowledge or receipt of such notice, the Trustee may conclusively assume
that there is no default or Event of Default; and
(e) The Trustee shall not be required to expend or risk its
own funds or otherwise incur financial liability for the performance of any of
its duties hereunder or the exercise of any of its rights or powers if there is
reasonable ground for believing that the repayment of such funds or adequate
indemnity against such risk or liability is not reasonably assured to it.
Section 12.02 Certain Matters Affecting the Trustee.
(a) Except as otherwise provided in Section 12.01:
(i) The Trustee may request and rely and shall be
protected in acting or refraining from acting upon any
resolution, Officer's Certificate, certificate of auditors or
any other certificate, statement, instrument, opinion, report,
notice, request, consent, order, appraisal, bond or other
paper or document believed by it to be genuine and to have
been signed or presented by the proper party or parties;
(ii) The Trustee may consult with counsel and any opinion
of counsel shall be full and complete authorization and
protection in respect of any action
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taken or suffered or omitted by it hereunder in good faith and
in accordance with such opinion of counsel;
(iii) The Trustee shall be under no obligation to exercise
any of the trusts or powers vested in it by this Agreement or
to institute, conduct or defend by litigation hereunder or in
relation hereto at the request, order or direction of the
Certificateholders, pursuant to the provisions of this
Agreement, unless such Certificateholders shall have offered
to the Trustee reasonable security or indemnity against the
costs, expenses and liabilities which may be incurred therein
or thereby; nothing contained herein shall, however, relieve
the Trustee of the obligation, upon the occurrence of an Event
of Default (which has not been cured), to exercise such of the
rights and powers vested in it by this Agreement, and to use
the same degree of care and skill in its exercise as a prudent
person would exercise or use under the circumstances in the
conduct of such person's own affairs;
(iv) The Trustee shall not be personally liable for
any action taken, suffered or omitted by it in good faith and
reasonably believed by it to be authorized or within the
discretion or rights or powers conferred upon it by this
Agreement;
(v) Prior to the occurrence of an Event of Default
hereunder and after the curing of all Events of Default which
may have occurred, the Trustee shall not be bound to make any
investigation into the facts or matters stated in any
resolution, certificate, statement, instrument, opinion,
report, notice, request, consent, order, approval, bond or
other paper or document, unless requested in writing to do so
by Holders of Certificates evidencing Percentage Interests
aggregating not less than 25% provided, however, that if the
payment within a reasonable time to the Trustee of the costs,
expenses or liabilities likely to be incurred by it in the
making of such investigation is, in the opinion of the
Trustee, not reasonably assured to the Trustee by the security
afforded to it by the terms of this Agreement, the Trustee may
require reasonable indemnity against such expense or liability
as a condition to taking any such action. The reasonable
expense of every such examination shall be paid by the
Servicer or, if paid by the Trustee, shall be repaid by the
Servicer upon demand from the Servicer's own funds;
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(vi) The right of the Trustee to perform any
discretionary act enumerated in this Agreement shall not be
construed as a duty, and the Trustee shall not be answerable
for other than its negligence or willful misconduct or bad
faith in the performance of such act;
(vii) The Trustee shall not be required to give any
bond or surety in respect of the execution of the trust
created hereby or the powers granted hereunder;
(viii) The Trustee may execute any of the trusts or
powers hereunder or perform any duties hereunder either
directly or by or through agents or attorneys; and
(ix) In the event that the Trustee is also acting as
Paying Agent, Certificate Registrar or Spread Account
Custodian, the rights and protections afforded to the Trustee
shall be afforded to the Trustee in such capacity as Paying
Agent, Certificate Registrar or Spread Account Custodian, as
the case may be.
Section 12.03 Trustee Not Liable for Certificates
or SBA Loans.
The recitals contained herein and in the Certificates (other
than the certificate of authentication on the Certificates) shall be taken as
the statements of the Servicer, and the Trustee assumes no responsibility for
their correctness. The Trustee makes no representations as to the validity or
sufficiency of this Agreement or of the Certificates or of any SBA Loan or
related document. The Trustee shall not be accountable for the use or
application by the Servicer of any of the Certificates or of the proceeds of
such Certificates, or for the use or application of any funds paid to the
Servicer in respect of the SBA Loans or deposited in or withdrawn from the
Principal and Interest Account by the Servicer. The Trustee shall not be
responsible for the legality or validity of the Agreement or the validity,
priority, perfection or sufficiency of the security for the Certificates issued
or intended to be issued hereunder.
Section 12.04 Trustee May Own Certificates.
The Trustee in its individual or any other capacity may become
the owner or pledgee of Certificates with the same rights it would have if it
were not Trustee, and may otherwise deal with the parties hereto.
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Section 12.05 Servicer To Pay Trustee's Fees
and Expenses.
The Servicer covenants and agrees to pay to the Trustee from
time to time, and the Trustee shall be entitled to, reasonable compensation
(which shall not be limited by any provision of law in regard to the
compensation of a trustee of an express trust) for all services rendered by it
in the execution of the trusts hereby created and in the exercise and
performance of any of the powers and duties hereunder of the Trustee, and the
Servicer will pay or reimburse the Trustee upon its request for all reasonable
expenses, disbursements and advances incurred or made by the Trustee in
accordance with any of the provisions of this Agreement (including the
reasonable compensation and the expenses and disbursements of its counsel and of
all persons not regularly in its employ) except any such expense, disbursement
or advance as may arise from its negligence or bad faith, provided that the
Trustee shall have no lien on the Trust Fund for the payment of its fees and
expenses. To the extent that actual fees and expenses of the Trustee exceed the
amount available for payment thereof on deposit in the Expense Account as of the
date such fees and expenses are due and payable, the Servicer shall reimburse
the Trustee for such shortfall out of its own funds without reimbursement
therefor, except as provided in Section 6.03. The Trustee and any director,
officer, employee or agent of the Trustee and the Spread Account Custodian and
any director, officer, employee or agent of the Spread Account Custodian shall
be indemnified by the Servicer and held harmless against any loss, liability or
expense (i) incurred in connection with any legal action relating to this
Agreement or the Certificates, other than any loss, liability or expense
incurred by reason of willful misfeasance, bad faith or negligence in the
performance of duties hereunder or by reason of reckless disregard of
obligations and duties hereunder, and (ii) resulting from any error in any tax
or information return prepared by the Servicer. The obligations of the Servicer
under this Section 12.05 shall survive payment of the Certificates, and shall
extend to any co-trustee appointed pursuant to this Article XII.
Section 12.06 Eligibility Requirements for Trustee.
The Trustee hereunder shall at all times be (i) a national
banking association or banking corporation or trust company organized and doing
business under the laws of any state or the United States of America, (ii)
authorized under such laws to exercise corporate trust powers, (iii) having a
combined capital and surplus of at least $30,000,000, (iv) having unsecured and
unguaranteed long-term debt obligations rated at least Baa3 by Moody's or such
other rating as is acceptable to the SBA, (v) is subject to supervision or
examination by federal
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or state authority, (vi) is an approved SBA guaranteed lender in good standing,
operating pursuant to an effective Loan Guaranty Agreement, and (vii) is
reasonably acceptable to the SBA. If such banking association publishes reports
of condition at least annually, pursuant to law or to the requirements of the
aforesaid supervising or examining authority, then for the purposes of this
Section its combined capital and surplus shall be deemed to be as set forth in
its most recent report of condition so published. In case at any time the
Trustee shall cease to be eligible in accordance with the provisions of this
Section, the Trustee shall (a) give prompt notice to the SBA and each
Certificateholder that it has so ceased to be eligible to be the Trustee and (b)
resign, upon the request of the SBA or the Majority Certificateholders, in the
manner and with the effect specified in Section 12.07.
Section 12.07 Resignation and Removal of the Trustee.
The Trustee may at any time resign and be discharged from the
trusts hereby created by giving written notice thereof to the Servicer, the SBA,
and to all Certificateholders. Upon receiving such notice of resignation, the
Servicer shall with the consent of the SBA promptly appoint a successor trustee
by written instrument, in duplicate, which instrument shall be delivered to the
resigning Trustee and to the successor trustee. A copy of such instrument shall
be delivered to the Certificateholders by the Servicer. Unless a successor
trustee shall have been so appointed and have accepted appointment within 60
days after the giving of such notice of resignation, the resigning Trustee may
petition any court of competent jurisdiction for the appointment of a successor
trustee. If the resigning Trustee fails to petition an appropriate court, the
SBA may, after such 60 day period, petition any court of competent jurisdiction
for the appointment of a successor trustee.
If at any time the Trustee shall cease to be eligible in
accordance with the provisions of Section 12.06 and shall fail to resign after
written request therefor by the Servicer, or if at any time the Trustee shall
become incapable of acting, or shall be adjudged bankrupt or insolvent, or a
receiver of the Trustee or of its property shall be appointed, or any public
officer shall take charge or control of the Trustee or of its property or
affairs for the purpose of rehabilitation, conservation or liquidation, then the
Servicer may remove the Trustee and appoint, subject to the approval of the SBA,
a successor trustee by written instrument, in duplicate, which instrument shall
be delivered to the Trustee so removed and to the successor trustee. A copy of
such instrument shall be delivered to the Certificateholders and the SBA by the
Servicer.
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The Majority Certificateholders with the consent of the SBA,
which consent will not be unreasonably withheld, and upon satisfaction of the
Rating Agency Condition, or the SBA may at any time remove the Trustee and
appoint a successor trustee by written instrument or instruments, in triplicate,
signed by such Holders or their attorneys-in-fact duly authorized, one complete
set of which instruments shall be delivered to the Servicer, one complete set to
the Trustee so removed and one complete set to the successor Trustee so
appointed.
Any resignation or removal of the Trustee and appointment of a
successor trustee pursuant to any of the provisions of this Section shall become
effective upon acceptance of appointment by the successor trustee as provided in
Section 12.08.
Section 12.08 Successor Trustee.
Any successor trustee appointed as provided in Section 12.07
shall execute, acknowledge and deliver to the Servicer and to its predecessor
trustee an instrument accepting such appointment hereunder, and thereupon the
resignation or removal of the predecessor trustee shall become effective and
such successor trustee, without any further act, deed or conveyance, shall
become fully vested with all the rights, powers, duties and obligations of its
predecessor hereunder, with the like effect as if originally named as trustee
herein. The predecessor trustee shall deliver to the successor trustee all SBA
Files and related documents and statements held by it hereunder, and the
Servicer and the predecessor trustee shall execute and deliver such instruments
and do such other things as may reasonably be required for more fully and
certainly vesting and confirming in the successor trustee all such rights,
powers, duties and obligations.
No successor trustee shall accept appointment as provided in
this Section unless at the time of such acceptance such successor trustee shall
be eligible under the provisions of Section 12.06.
Upon acceptance of appointment by a successor trustee as
provided in this Section, the Servicer shall mail notice of the succession of
such trustee hereunder to all Holders of Certificates at their addresses as
shown in the Certificate Register. If the Servicer fails to mail such notice
within 10 days after acceptance of appointment by the successor trustee, the
successor trustee shall cause such notice to be mailed at the expense of the
Servicer.
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Section 12.09 Merger or Consolidation of Trustee.
Any Person into which the Trustee may be merged or converted
or with which it may be consolidated or any corporation or national banking
association resulting from any merger, conversion or consolidation to which the
Trustee shall be a party, or any corporation or national banking association
succeeding to the business of the trustee, shall be the successor of the Trustee
hereunder, provided such corporation or national banking association shall be
eligible under the provisions of Section 12.06, without the execution or filing
of any paper or any further act on the part of any of the parties hereto,
anything herein to the contrary notwithstanding. The Trustee shall send notice
of any such merger or consolidation to the Rating Agency.
Section 12.10 Appointment of Co-Trustee or Separate
Trustee.
Notwithstanding any other provisions hereof, at any time, for
the purpose of meeting any legal requirements of any jurisdiction in which any
part of the Trust Fund or property securing the same may at the time be located,
the Servicer and the Trustee acting jointly shall have the power and shall
execute and deliver all instruments to appoint one or more Persons approved by
the Trustee and the SBA pursuant to the procedure set forth below, to act as
co-trustee or co-trustees, jointly with the Trustee, or separate trustee or
separate trustees, of all or any part of the Trust Fund, and to vest in such
Person or Persons, in such capacity, such title to the Trust Fund, or any part
thereof, and, subject to the other provisions of this Section 12.10, such
powers, duties, obligations, rights and trusts as the Servicer and the Trustee
may consider necessary or desirable. If the Servicer shall not have joined in
such appointment within 15 days after the receipt by it of a request so to do,
or in case an Event of Default shall have occurred and be continuing, the
Trustee alone shall have the power to make such appointment. No co-trustee or
separate trustee hereunder shall be required to meet the terms of eligibility as
a successor trustee under Section 12.06 hereunder. No notice to Holders of
Certificates of the appointment of co-trustee(s) or separate trustee(s) shall be
required under Section 12.08 hereof. The Trustee shall notify the SBA prior to
the appointment of any co-trustee(s) or separate trustee(s) and the SBA shall
have ten Business Days from its receipt of such notice to notify the Trustee
whether it, in its reasonable judgment, disapproves of such co-trustee(s) or
separate trustee(s). If the SBA does not notify the Trustee within such time
frame, it will be deemed to have approved such co-trustee(s) or separate
trustee(s). If the SBA notifies the Trustee within such time frame that it, in
its
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reasonable judgment, disapproves of such co-trustee(s) or separate trustee(s)
(which notice shall be accompanied by the name(s) of the SBA's alternative
proposed co-trustee(s) or separate trustee(s)), such appointments shall not be
effective.
In the case of any appointment of a co-trustee or separate
trustee pursuant to this Section 12.10, all rights, powers, duties and
obligations conferred or imposed upon the trustee shall be conferred or imposed
upon and exercised or performed by the Trustee and such separate trustee or
co-trustee jointly except to the extent that under any law of any jurisdiction
in which any particular act or acts are to be performed (whether as Trustee
hereunder or as successor to the Servicer hereunder), the Trustee shall be
incompetent or unqualified to perform such act or acts, in which event such
rights, powers, duties and obligations (including the holding of title to the
Trust Fund or any portion thereof in any such jurisdiction) shall be exercised
and performed by such separate trustee or co-trustee at the direction of the
Trustee.
Any notice, request or other writing given to the Trustee
shall be deemed to have been given to each of the then separate trustees and
co-trustees, as effectively as if given to each of them. Every instrument
appointing any separate trustee or co-trustee shall refer to this Agreement and
the conditions of this Article XII. Each separate trustee and co-trustee, upon
its acceptance of the trusts conferred, shall be vested with the estates or
property specified in its instrument of appointment, either jointly with the
Trustee or separately, as may be provided therein, subject to all the provisions
of this Agreement, specifically including every provision of this Agreement
relating to the conduct of, affecting the liability of, or affording protection
to, the Trustee. Every such instrument shall be filed with the Trustee.
Any separate trustee or co-trustee may, at any time,
constitute the Trustee, its agent or attorney-in-fact, with full power and
authority, to the extent not prohibited by law, to do any lawful act under or in
respect of this Agreement on its behalf and in its name. The Trustee shall not
be responsible for any action or inaction of any such separate trustee or
co-trustee. If any separate trustee or co-trustee shall die, become incapable of
acting, resign or be removed, all of its estates, properties, rights, remedies
and trusts shall vest in and be exercised by the Trustee, to the extent
permitted by law, without the appointment of a new or successor trustee.
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Section 12.11 Authenticating Agent.
Upon the request of the Servicer, the Trustee shall appoint an
Authenticating Agent, initially, HSBC Bank USA, with power to act on the
Trustee's behalf and subject to its direction in the authentication and delivery
of the Certificates in connection with transfers and exchanges under Section
4.02, as fully to all intents and purposes as though the Authenticating Agent
had been expressly authorized by that Section to authenticate and deliver
Certificates. For all purposes of this Agreement, the authentication and
delivery of Certificates by the Authenticating Agent pursuant to this Section
shall be deemed to be the authentication and delivery of Certificates by the
Trustee. Such Authenticating Agent shall at all times be a Person meeting the
requirements for the Trustee set forth in Section 12.06.
Any corporation or national banking association into which any
Authenticating Agent may be merged or converted or with which it may be
consolidated, or any corporation or national banking association resulting from
any merger, consolidation or conversion to which any Authenticating Agent shall
be a party, or any corporation or national banking association succeeding to the
corporate trust business of any Authenticating Agent, shall be the successor of
the Authenticating Agent hereunder, if such successor corporation or national
banking association is otherwise eligible under this Section, without the
execution or filing of any further act on the part of the parties hereto or the
Authenticating Agent or such successor corporation.
Any Authenticating Agent may at any time resign by giving
notice of resignation to the Trustee and the Servicer. The Trustee may at any
time terminate the agency of any Authenticating Agent by giving written notice
of termination to such Authenticating Agent and the Servicer. Upon receiving
such a notice of resignation or upon such a termination, or in case at any time
any Authenticating Agent shall cease to be eligible under this Section, the
Trustee shall promptly appoint a successor Authenticating Agent and shall give
written notice of such appointment to all Certificateholders as their names and
addresses appear on the Certificate Register. The Servicer agrees to pay to the
Authenticating Agent from time to time reasonable compensation for its services.
The provisions of Sections 4.04 and 12.03 shall be applicable to any
Authenticating Agent.
Section 12.12 Tax Returns and Reports.
The Trustee, upon request, will furnish the Servicer with all
such information as may be reasonably required in
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connection with the Servicer's preparation of all Tax Returns of the Trust Fund
and, upon request within five (5) Business Days after its receipt thereof, shall
(i) sign on behalf of the Trust Fund any Tax Return that the Trustee is required
to sign pursuant to applicable federal, state or local tax laws, and (ii) cause
such Tax Return to have been returned to the Servicer for filing.
The Servicer shall prepare and file or cause to be filed with
the Internal Revenue Service Federal tax information returns with respect to the
Trust Fund and the Certificates containing such information and at the times and
in the manner as may be required by the Code or applicable Treasury regulations,
and shall furnish to each Holder of Certificates at any time during the calendar
year for which such returns or reports are made such statements or information
at the times and in the manner as may be required thereby. The Trustee shall
sign all tax information returns filed pursuant to this Section and any other
returns as may be required by the Code, and in doing so shall rely entirely
upon, and shall have no liability for information provided by, or calculations
provided by, the Servicer.
Section 12.13 Protection of Trust Fund.
(a) The Trustee will hold the Trust Fund and such other assets
as may from time to time be deposited with it hereunder in trust for the benefit
of the Holders and the SBA and at the request of the Seller or the SBA will from
time to time execute and deliver all such supplements and amendments hereto
pursuant to Section 13.02 hereof and all instruments of further assurance and
other instruments, and will take such other action upon such request as it deems
reasonably necessary or advisable, to:
(i) more effectively hold in trust all or any portion
of the Trust Fund or such other assets;
(ii) perfect, publish notice of, or protect the
validity of any grant made or to be made by this Agreement;
(iii) enforce any of the SBA Loans; or
(iv) preserve and defend title to the Trust Fund and
the rights of the Trustee, and the ownership interests of the
Certificateholders represented thereby, in such Trust Fund
against the claims of all Persons and parties.
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The Trustee shall send copies of any request received from the
Seller or the SBA to take any action pursuant to this Section 12.13 to the
Holders.
(b) Subject to Article X hereof, the Trustee shall have the
power to enforce, and shall enforce the obligations of the other parties to this
Agreement by action, suit or proceeding at law or equity, and shall also have
the power to enjoin, by action or suit in equity, any acts or occurrences which
may be unlawful or in violation of the rights of the Holders; provided, however,
that nothing in this Section 12.13 shall require any action by the Trustee
unless the Trustee shall first (i) have been furnished indemnity satisfactory to
it and (ii) when required by this Agreement, have been requested to take such
action by the Majority Certificateholders, the SBA or the Seller in accordance
with the terms of this Agreement.
(c) The Trustee shall execute any instrument required pursuant
to this Section so long as such instrument does not conflict with this Agreement
or with the Trustee's fiduciary duties.
Section 12.14 Representations, Warranties and Covenants of
Trustee.
The Trustee hereby makes the following representations,
warranties and covenants on which the Seller, the Servicer, the SBA and the
Certificateholders shall rely:
(a) The Trustee is a banking corporation and trust company
duly organized, validly existing and in good standing under the laws of the
State of New York.
(b) The Trustee has full power, authority and legal right to
execute, deliver and perform this Agreement, and shall have taken all necessary
action to authorize the execution, delivery and performance by it of this
Agreement.
(c) The execution, delivery and performance by the Trustee of
this Agreement shall not (i) violate any provision of any law or any order,
writ, judgment or decree of any court, arbitrator or governmental authority
applicable to the Trustee or any of its assets, (ii) violate any provision of
the corporate charter or By-laws of the Trustee or (iii) violate any provision
of, or constitute, with or without notice or lapse of time, a default under, or
result in the creation or imposition of any lien on any properties included in
the Trust Fund pursuant to the provisions of, any mortgage, indenture, contract,
agreement or other undertaking to which it is a party, which violation, default
or lien could reasonably be expected to materially and
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adversely affect the Trustee's performance or ability to perform its duties
under this Agreement or the transactions contemplated in this Agreement.
(d) The execution, delivery and performance by the Trustee of
this Agreement shall not require the authorization, consent or approval of, the
giving of notice to, the filing or registration with or the taking of any other
action in respect of any governmental authority or agency regulating the banking
and corporate trust activities of the Trustee.
(e) This Agreement has been duly executed and delivered by the
Trustee and constitutes the legal, valid and binding agreement of the Trustee,
enforceable in accordance with its terms, subject to the effect of bankruptcy,
insolvency, reorganization, moratorium and other similar laws relating to or
affecting creditors' rights generally or the application of equitable principles
in any proceeding, whether at law or in equity. The Trustee hereby agrees and
covenants that it will not at any time in the future, deny that this Agreement
constitutes the legal, valid and binding agreement of the Trustee.
(f) The Trustee shall not take any action, or fail to take any
action, if such action or failure to take action will materially interfere with
the enforcement of any rights of the SBA or the Certificateholders under this
Agreement or the Certificates.
(g) The Trustee will comply at all times with the provisions
of the SBA Rules and Regulations in respect of its activities concerning the SBA
Loans, and will at all times hold an effective Loan Guaranty Agreement.
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ARTICLE XIII
MISCELLANEOUS PROVISIONS
Section 13.01 Acts of Certificateholders
Except as otherwise specifically provided herein, whenever
Certificateholder action, consent or approval is required under this Agreement,
such action, consent or approval shall be deemed to have been taken or given on
behalf of, and shall be binding upon, all Certificateholders if the Majority
Certificateholders agree to take such action or give such consent or approval.
Section 13.02 Amendment.
(a) This Agreement may be amended from time to time by the
Seller, the Servicer and the Trustee by written agreement, upon the prior
written consent of the SBA, without the notice to or consent of the
Certificateholders, to cure any ambiguity, to correct or supplement any
provisions herein, to comply with any changes in the Code, or to make any other
provisions with respect to matters or questions arising under this Agreement
which shall not be inconsistent with the provisions of this Agreement; provided,
however, that such action shall not, as evidenced by an Opinion of Counsel
delivered to the Trustee, adversely affect the interests of any
Certificateholder or any other party and further provided that no such amendment
shall reduce in any manner the amount of, or delay the timing of, any amounts
received on SBA Loans which are required to be distributed on any Certificate
without the consent of the Holder of such Certificate, or change the rights or
obligations of any other party hereto without the consent of such party.
(b) This Agreement may be amended from time to time by the
Seller, the Servicer, the Trustee and the Majority Certificateholders, upon the
prior written consent of the SBA, for the purpose of adding any provisions to or
changing in any manner or eliminating any of the provisions of this Agreement or
of modifying in any manner the rights of the Holders; provided, however, that no
such amendment shall reduce in any manner the amount of, or delay the timing of,
any amounts which are required to be distributed on any Certificate without the
consent of the Holder of such Certificate or reduce the percentage of Holders
which are required to consent to any such amendment without the consent of the
Holders of 100% of the Certificates affected thereby and, provided further, that
no amendment affecting only one class of Certificates shall require the approval
of Holders of Certificates of the other Class.
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(c) It shall not be necessary for the consent of Holders under
this Section to approve the particular form of any proposed amendment, but it
shall be sufficient if such consent shall approve the substance thereof.
Section 13.03 Recordation of Agreement.
To the extent permitted by applicable law, this Agreement is
subject to recordation in all appropriate public offices for real property
records in all of the counties or other comparable jurisdictions in which any or
all of the properties subject to the Mortgages are situated, and in any other
appropriate public recording office or elsewhere, such recordation to be
effected by the Servicer at the Certificateholders' expense on direction of the
Majority Certificateholders, but only when accompanied by an Opinion of Counsel
to the effect that such recordation materially and beneficially affects the
interests of the Certificateholders or is necessary for the administration or
servicing of the SBA Loans.
Section 13.04 Duration of Agreement.
This Agreement shall continue in existence and effect until
terminated as herein provided.
SECTION 13.05 GOVERNING LAW.
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 13.06 Notices.
All demands, notices and communications hereunder shall be in
writing and shall be deemed to have been duly given if personally delivered at
or mailed by overnight mail, certified mail or registered mail, postage prepaid,
to (i) in the case of the Bank, First International Bank, National Association,
280 Trumbull Street, Hartford, Connecticut 06103, Attention: Theodore Horan, or
such other addresses as may hereafter be furnished to the Certificateholders in
writing by the Bank, (ii) in the case of the Trustee, HSBC Bank USA, 140
Broadway, New York, New York 10005, 12th Floor, Attention: Corporate Trust
Department, (iii) in the case of the Certificateholders, as set forth in the
Certificate Register, (iv) in the case of Moody's,
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to Moody's Investors Service, ABS Monitoring Department, 99 Church Street, 4th
Floor, New York, New York 10007, and (v) in the case of the SBA, the United
States Small Business Administration, 409 Third Street, S.W., Washington, D.C.
20416, Attention: Associate Administrator for Financial Assistance. Any such
notices shall be deemed to be effective with respect to any party hereto upon
the receipt of such notice by such party, except that notices to the
Certificateholders shall be effective upon mailing or personal delivery.
Section 13.07 Severability of Provisions.
If any one or more of the covenants, agreements, provisions or
terms of this Agreement shall be held invalid for any reason whatsoever, then
such covenants, agreements, provisions or terms shall be deemed severable from
the remaining covenants, agreements, provisions or terms of this Agreement and
shall in no way affect the validity or enforceability of the other covenants,
agreements, provisions or terms of this Agreement.
Section 13.08 No Partnership.
Nothing herein contained shall be deemed or construed to
create a co-partnership or joint venture between the parties hereto and the
services of the Servicer shall be rendered as an independent contractor and not
as agent for the Certificateholders.
Section 13.09 Counterparts.
This Agreement may be executed in one or more counterparts and
by the different parties hereto on separate counterparts, each of which, when so
executed, shall be deemed to be an original; such counterparts, together, shall
constitute one and the same agreement.
Section 13.10 Permitted Successors and Assigns.
This Agreement shall inure to the benefit of and be binding
upon the Seller and the Servicer, the Trustee and the Certificateholders and
their respective permitted successors and assigns.
Section 13.11 Headings.
The headings of the various sections of this Agreement have
been inserted for convenience of reference only and shall not be deemed to be
part of this Agreement.
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Section 13.12 Paying Agent.
The Trustee hereby appoints HSBC Bank USA as Paying Agent. The
Trustee may appoint one or more other Paying Agents or successor Paying Agents
meeting the eligibility requirements of a Trustee set forth in Section 12.06
(i), (ii), (iii), (iv), (v) and (vii) hereof.
Each Paying Agent, immediately upon such appointment, shall
signify its acceptance of the duties and obligations imposed upon it by this
Agreement by written instrument of acceptance deposited with the Trustee.
Each such Paying Agent other than the Trustee shall execute
and deliver to the Trustee an instrument in which such Paying Agent shall agree
with the Trustee, subject to the provisions of Section 6.06, that such Paying
Agent will:
(a) allocate all sums received for distribution to the Holders
of Certificates for which it is acting as Paying Agent on each Remittance Date
among such Holders in the proportion specified by the Trustee; and
(b) hold all sums held by it for the distribution of amounts
due with respect to the Certificates in trust for the benefit of the Holders
entitled thereto until such sums shall be paid to such Holders or otherwise
disposed of as herein provided and pay such sums to such Persons as herein
provided.
Any Paying Agent other than the Trustee may at any time resign
and be discharged of the duties and obligations created by this Agreement by
giving at least sixty (60) days written notice to the Trustee. Any such Paying
Agent may be removed at any time by an instrument filed with such Paying Agent
signed by the Trustee.
In the event of the resignation or removal of any Paying Agent
other than the Trustee such Paying Agent shall pay over, assign and deliver any
moneys held by it as Paying Agent to its successor, or if there be no successor,
to the Trustee.
Upon the appointment, removal or notice of resignation of any
Paying Agent, the Trustee shall notify the Certificateholders by mailing notice
thereof to their addresses appearing on the Certificate Register.
Section 13.13 Notification to Rating Agency.
The Trustee shall give prompt notice to the Rating Agency of
the occurrence of any of the following events of which
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it has received notice: (1) any modification or amendment to this Agreement, (2)
any change of the Trustee, the Servicer or Paying Agent, (3) any Event of
Default or waiver of an Event of Default, (4) that any superior lienholder has
accelerated or intends to accelerate the obligations secured by a Prior Lien,
and (5) the final payment of all the Certificates. The Servicer shall promptly
deliver to the Rating Agency a copy of each of the Servicer's Certificates.
Further, the Servicer shall give prompt notice to the Rating Agency if the
Servicer or any of its affiliates acquire any Certificates.
Section 13.14 Third Party Rights
The Trustee, the FTA, the Spread Account Custodian and the
Servicer agree that the SBA shall be deemed a third-party beneficiary of this
Agreement entitled to all the rights and benefits set forth herein as fully as
if it were a party hereto.
Section 13.15 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.
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IN WITNESS WHEREOF, the Bank and the Trustee have caused their
names to be signed hereto by their respective officers thereunto duly authorized
as of the day and year first above written.
FIRST INTERNATIONAL BANK, NATIONAL
ASSOCIATION, as Seller and Servicer
By: /s/Leslie Galbraith
Name: Leslie Galbraith
Title: President
HSBC BANK USA,
as Trustee
By: /s/Susan Barstock
Name: Susan Barstock
Title: Assistant Vice President
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Acceptance of HSBC Bank USA
HSBC Bank USA hereby accepts its appointment under the within
instrument to serve as initial Authenticating Agent, Certificate Registrar and
Paying Agent. In connection therewith, HSBC Bank USA agrees to be bound by all
applicable provisions of such instrument.
HSBC BANK USA, as initial
Authenticating Agent, Certificate
Registrar and Paying Agent
By: /s/Susan Barstock
Name: Susan Barstock
Title: Assistant Vice President
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STATE OF NEW YORK )
: ss.:
COUNTY OF NEW YORK)
On the 17th day of June, 1999 before me, a Notary Public in
and for said State, personally appeared Susan Barstock known to me to be an
officer of the Trustee, the trust company that executed the within instrument,
and also known to me to be the person who executed it on behalf of said banking
corporation, and acknowledged to me that such banking corporation executed the
within instrument.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
official seal the day and year in this certificate first above written.
/s/ Amanda Scuder
Notary Public
My Commission expires 11/24/99
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STATE OF Connecticut )
: ss.:
COUNTY OF Hartford )
On the 16th day of June, 1999 before me, a Notary Public in
and for said State, personally appeared Leslie Galbraith known to me to be the
President of First International Bank, National Association, the corporation
that executed the within instrument as seller and servicer, and also known to me
to be the person who executed it on behalf of said corporation, and acknowledged
to me that such corporation executed the within instrument.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
official seal the day and year in this certificate first above written.
/s/ Neal Chorney
Notary Public
My Commission expires 2/28/00
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<PAGE> 1
EXHIBIT 10.15.2
EXECUTION COPY
================================================================================
SALE AND SERVICING AGREEMENT
Dated as of September 1, 1999
Between
FIB BUSINESS LOAN TRUST 1999-A
(Trust)
and
FIRST INTERNATIONAL BANK
(Seller and Servicer)
FIB Business Loan Notes, Series 1999-A
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Section Page
<S> <C>
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.............................................................2
Section 2.02 Possession of Business Files..................................................................2
Section 2.03 Books and Records.............................................................................3
Section 2.04 Delivery of Business Loan Documents...........................................................3
Section 2.05 Acceptance by Trustee of the Trust Fund; Certain Substitutions; Certification by
Indenture Trustee.............................................................................5
Section 2.06 [Reserved]....................................................................................7
Section 2.07 [Reserved]....................................................................................7
Section 2.08 Fees and Expenses of the Owner Trustee and the Indenture Trustee..............................7
Section 2.09 Transfer and Conveyance of the Subsequent Business Loans......................................7
Section 2.10 Optional Repurchase of Defaulted Business Loans..............................................10
ARTICLE III
REPRESENTATIONS AND WARRANTIES
Section 3.01 Representations of the Seller................................................................11
Section 3.02 Individual Business Loans....................................................................14
Section 3.03 Purchase and Substitution of Defective Loans.................................................19
</TABLE>
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<TABLE>
<S> <C>
ARTICLE IV
ADMINISTRATION AND SERVICING OF BUSINESS LOANS
Section 4.01 Duties of the Servicer.......................................................................22
Section 4.02 Liquidation of Business Loans................................................................25
Section 4.03 Establishment of Principal and Interest Accounts; Deposits in Principal and Interest
Accounts.....................................................................................26
Section 4.04 Permitted Withdrawals From the Applicable Principal and Interest Account.....................27
Section 4.05 [Intentionally Omitted]......................................................................29
Section 4.06 Transfer of Accounts.........................................................................29
Section 4.07 Maintenance of Hazard Insurance..............................................................29
Section 4.08 [Intentionally Omitted]......................................................................29
Section 4.09 Fidelity Bond................................................................................29
Section 4.10 Title, Management and Disposition of Foreclosed Property.....................................30
Section 4.11 [Intentionally Omitted]......................................................................31
Section 4.12 Collection of Certain Business Loan Payments.................................................31
Section 4.13 Access to Certain Documentation and Information Regarding the Business Loans.................31
ARTICLE V
PAYMENTS TO THE CERTIFICATEHOLDERS
Section 5.01 Establishment of Note Distribution Account; Deposits in Note Distribution Account;
Permitted Withdrawals from Note Distribution Account.........................................32
Section 5.02 Establishment of Spread Account; Deposits in Spread Account; Permitted Withdrawals
from Spread Account..........................................................................33
Section 5.03 Establishment of Expense Account; Deposits in Expense Account; Permitted Withdrawals
from Expense Account.........................................................................34
Section 5.04 Pre-Funding Account and Capitalized Interest Account.........................................36
Section 5.05 [Intentionally Omitted]......................................................................37
Section 5.06 Investment of Accounts.......................................................................37
Section 5.07 Distributions................................................................................38
Section 5.08 Determination of LIBOR.......................................................................40
Section 5.09 Statements...................................................................................41
Section 5.10 Advances by the Servicer.....................................................................44
Section 5.11 Compensating Interest........................................................................44
Section 5.12 Reports of Foreclosure and Abandonment.......................................................45
</TABLE>
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<TABLE>
<S> <C>
ARTICLE VI
GENERAL SERVICING PROCEDURE
Section 6.01 [Omitted]....................................................................................46
Section 6.02 Satisfaction of Mortgages and Collateral and Release of Business Files.......................46
Section 6.03 Servicing Compensation.......................................................................47
Section 6.04 Annual Statement as to Compliance............................................................47
Section 6.05 Annual Independent Public....................................................................48
Section 6.06 Trustee's Right to Examine Servicer Records and Audit Operations.............................48
Section 6.07 Reports to the Trustee; Principal and Interest Account Statements............................48
ARTICLE VII
REPORTS TO BE PROVIDED BY SERVICER
Section 7.01 Financial Statements.........................................................................50
ARTICLE VIII
THE SERVICER
Section 8.01 Indemnification; Third Party Claims..........................................................51
Section 8.02 Merger or Consolidation of the Servicer......................................................52
Section 8.03 Limitation on Liability of the Servicer and Others...........................................52
Section 8.04 Servicer Not to Resign.......................................................................52
ARTICLE IX
DEFAULT
Section 9.01 Events of Default............................................................................54
Section 9.02 Trustee to Act; Appointment of Successor.....................................................55
Section 9.03 Waiver of Defaults...........................................................................57
Section 9.04. Control by Majority Noteholders..............................................................57
ARTICLE X
TERMINATION
Section 10.01 Termination..................................................................................59
Section 10.02 Accounting Upon Termination of Servicer......................................................60
</TABLE>
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<TABLE>
<S> <C>
ARTICLE XI
MISCELLANEOUS PROVISIONS
Section 11.01 Acts of Noteholders..........................................................................61
Section 11.02 Amendment....................................................................................61
Section 11.03 Recordation of Agreement.....................................................................62
Section 11.04 Duration of Agreement........................................................................62
Section 11.05 Governing Law................................................................................62
Section 11.06 Notices......................................................................................62
Section 11.07 Severability of Provisions...................................................................63
Section 11.08 No Partnership...............................................................................63
Section 11.09 Counterparts.................................................................................63
Section 11.10 Successors and Assigns.......................................................................63
Section 11.11 Headings.....................................................................................63
Section 11.12 Notification to Rating Agencies..............................................................63
Section 11.13. Limitation of Liability......................................................................64
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APPENDIX A Definitions and Usage
EXHIBIT INDEX
EXHIBIT A Contents of Business 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 Interim Certification
EXHIBIT F-2 Final Certification
EXHIBIT G [Intentionally Omitted]
EXHIBIT H Business Loan Schedule
EXHIBIT I Request for Release of Documents
EXHIBIT J Form of Liquidation Report
EXHIBIT K Form of Delinquency Report
EXHIBIT L Servicer's Monthly Computer Tape Format
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Sale and Servicing Agreement dated as of September 1, 1999, between FIB
Business Loan Trust 1999-A (the "Trust"), and First International Bank, 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 Business Loans. The Issuer has entered
into a trust 
