<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934
Date of Report: June 29, 1995
EMERGENT GROUP, INC.
(Exact name of registrant as specified in its charter)
South Carolina 0-8909 57-0513287
(State of other juris- (Commission (IRS Employer
diction of incorporation) File Number) Identification Number)
Suite 750, 15 South Main Street, Greenville, South Carolina 29601
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (803) 235-8056
The Exhibit Index appears on page 4 hereof.
<PAGE>
Item 2. Acquisition or Disposition of Assets
On June 29, 1995, Emergent Business Capital, Inc. ("EBC"), a
wholly-owned subsidiary of Emergent Group, Inc. (the "Company") entered
into the Pooling and Servicing Agreement dated as of June 29, 1995 (the
"Pooling Agreement") between EBC, as Seller and Master Servicer, and
First Union National Bank of North Carolina, as Trustee (the "Trustee"),
which Pooling Agreement established a trust (the "Trust").
Pursuant to the Pooling Agreement and the Certificate Purchase
Agreement entered into between EBC and Prudential Securities
Incorporated, the Company (through the Trust) issued and sold to
Prudential Securities Incorporated $15,357,000 aggregate principal
amount of Emergent SBA Loan-Backed Adjustable Rate Certificates, Series
1995-1, Class A (the "Class A Certificates"). The Class A Certificates,
together the Emergent SBA Loan-Backed Adjustable Rate Certificates,
Series 1995-1, Class B (together, the "Certificates"), represent the
entire undivided ownership interest in certain unguaranteed interests
(the "Unguaranteed Interests") in a pool of loans (the "SBA Loans")
partially guaranteed by the U.S. Small Business Administration (the
"SBA").
In connection with the transactions described above, EBC received
proceeds, net of placement agency fees and expenses, of approximately
$15,139,000. The Pooling and Servicing Agreement and the Supplement,
attached hereto as exhibits, are incorporated herein by reference. The
Company will provide to the Commission, upon request, any other
documents entered into in connection with the above described
transaction and referenced in the Pooling Agreement.
Item 7. Financial Statements and Exhibits
(a) Financial Statements of the Businesses Acquired. Not applicable.
(b) Pro Forma Financial Information. It is impractical to provide
the required pro forma information at this time. Such information will
be filed via amendment within 60 days from the date hereof.
(c) Exhibits.
28.1 The Pooling and Servicing Agreement dated as of June 29,
1995 between Emergent Business Capital, Inc., as Seller
and Servicer, and First Union National Bank of North
Carolina, as Trustee.
28.2 Certificate Purchase Agreement between the Placement
Agent, as initial purchaser, and the Company
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned hereunto duly authorized.
EMERGENT GROUP, INC.
July 12, 1995 By: /s/Robert S. Davis
Robert S. Davis
Vice President and Chief
Financial Officer
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Exhibit Index
28.1 The Pooling and Servicing Agreement dated as of June 29, 1995
between Emergent Business Capital, Inc., as Seller and Servicer,
and First Union National Bank of North Carolina, as Trustee.
28.2 Certificate Purchase Agreement between the Placement Agent, as
initial purchaser, and the Company
EXHIBIT 28.1
POOLING AND SERVICING AGREEMENT
Dated as of June 1, 1995
FIRST UNION NATIONAL BANK OF NORTH CAROLINA
(Trustee)
and
EMERGENT BUSINESS CAPITAL, INC.
(Seller and Servicer)
Emergent SBA Loan-Backed Adjustable Rate
Certificates, Series 1995-1, Class A and Class B
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TOC \f TABLE OF CONTENTS
ARTICLE I
DEFINITIONS
Page
ACCOUNT I-1
ACCOUNT NUMBER I-1
ADDITIONAL FEE I-1
ADDITIONAL FEE SBA LOAN I-1
ADJUSTED CLASS A INTEREST DISTRIBUTION AMOUNT I-1
ADJUSTED CLASS B INTEREST DISTRIBUTION AMOUNT I-2
ADJUSTED SBA LOAN REMITTANCE RATE I-2
ADJUSTMENT DATE I-2
AGGREGATE CLASS A CERTIFICATE PRINCIPAL BALANCE I-2
AGGREGATE CLASS B CERTIFICATE PRINCIPAL BALANCE I-2
AGREEMENT I-2
ANNUAL EXPENSE ESCROW AMOUNT I-3
ASSIGNMENT OF MORTGAGE I-3
AUTHENTICATING AGENT I-3
AVAILABLE FUNDS I-3
BIF I-3
BOOK-ENTRY CERTIFICATES I-3
BUSINESS DAY I-3
CERTIFICATE I-3
CERTIFICATE ACCOUNT I-4
CERTIFICATE REGISTER I-4
CERTIFICATE REGISTRAR I-4
CERTIFICATEHOLDER or HOLDER I-4
CERTIFICATE OWNER I-4
CLASS A CARRY-FORWARD AMOUNT I-4
CLASS A CERTIFICATE I-4
CLASS A CERTIFICATEHOLDER I-4
CLASS A INTEREST DISTRIBUTION AMOUNT I-4
CLASS A PERCENTAGE I-5
CLASS A PRINCIPAL DISTRIBUTION AMOUNT I-5
CLASS A REMITTANCE RATE I-5
CLASS B CARRY-FORWARD AMOUNT I-6
CLASS B CERTIFICATE I-6
CLASS B CERTIFICATEHOLDER I-6
CLASS B INTEREST DISTRIBUTION AMOUNT I-6
CLASS B PERCENTAGE I-7
CLASS B PRINCIPAL DISTRIBUTION AMOUNT I-7
CLASS B REMITTANCE RATE I-7
<PAGE>
CLEARING AGENCY I-8
CLEARING AGENCY PARTICIPANT I-8
CLOSING DATE I-8
CODE I-8
COLLATERAL I-8
COMMERCIAL PROPERTY I-8
COMPENSATING INTEREST I-8
CURTAILMENT I-8
CUT-OFF DATE I-8
DEFINITIVE CERTIFICATES I-8
DELETED SBA LOAN I-9
DEPOSITORY AGREEMENT I-9
DESIGNATED DEPOSITORY INSTITUTION I-9
DETERMINATION DATE I-9
DUE DATE I-9
DUE PERIOD I-9
ERISA I-9
ERISA PLAN I-9
EVENT OF DEFAULT I-9
EXCESS PAYMENTS I-10
EXCESS PROCEEDS I-10
EXCESS SPREAD I-10
EXCHANGE ACT I-10
EXPENSE ACCOUNT I-10
EXTRA INTEREST I-10
EXTRA INTEREST PERCENTAGE I-10
FDIC I-11
FHLMC I-11
FIDELITY BOND I-11
FNMA I-11
FORECLOSED PROPERTY I-11
FORECLOSED PROPERTY DISPOSITION I-11
GUARANTEED INTEREST I-11
INITIAL DEPOSIT I-11
INSTITUTIONAL ACCREDITED INVESTOR I-11
INSURANCE PROCEEDS I-11
INTEREST ACCRUAL PERIOD I-11
LEGENDED DEFINITIVE CERTIFICATE I-12
LIQUIDATED SBA LOAN I-12
LIQUIDATION PROCEEDS I-12
LOAN GUARANTY AGREEMENT I-12
LOAN-TO-VALUE RATIO OR LTV I-12
MAJORITY CERTIFICATEHOLDERS I-12
MONTHLY ADVANCE I-12
MONTHLY PAYMENT I-13
MONTHLY RESET LOANS I-13
MORTGAGE I-13
MORTGAGED PROPERTY I-13
MULTI-PARTY AGREEMENT I-13
NET LIQUIDATION PROCEEDS I-13
NONREIMBURSABLE MONTHLY ADVANCE I-13
NOTE CUSTODIAN I-13
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OBLIGOR I-13
OFFERING CIRCULAR I-13
OFFICERS' CERTIFICATE I-13
OPINION OF COUNSEL I-13
ORIGINAL CLASS A CERTIFICATE PRINCIPAL BALANCE I-14
ORIGINAL CLASS B CERTIFICATE PRINCIPAL BALANCE I-14
ORIGINAL POOL PRINCIPAL BALANCE I-14
PAYING AGENT I-14
PERCENTAGE INTEREST I-14
PERMITTED INSTRUMENTS I-14
PERSON I-15
PLACEMENT AGENT I-15
POOL PRINCIPAL BALANCE I-15
PRIME RATE I-16
PRINCIPAL AND INTEREST ACCOUNT I-16
PRINCIPAL BALANCE I-16
PRINCIPAL PREPAYMENT I-16
PRIOR LIEN I-16
QIB I-16
QUALIFIED SUBSTITUTE SBA LOAN I-16
RATING AGENCY I-17
RECORD DATE I-17
REGISTERED HOLDER I-17
REIMBURSABLE AMOUNTS I-17
RELEASED MORTGAGED PROPERTY PROCEEDS I-17
REMITTANCE DATE I-18
RESIDENTIAL PROPERTY I-18
RESPONSIBLE OFFICER I-18
RULE 144A I-18
RULE 144A CERTIFICATE I-18
RULE 144A INFORMATION I-18
SAIF I-18
SBA I-18
SBA FILE I-19
SBA FISCAL AGENT I-19
SBA FISCAL AGENT'S FEE I-19
SBA Form 1086 I-19
SBA LOAN I-19
SBA LOAN INTEREST RATE I-19
SBA LOAN SCHEDULE I-19
SBA NOTE I-20
SBA RULES AND REGULATIONS I-20
SECURITIES ACT I-20
SECURITIES LEGEND I-20
SELLER I-20
SERIES I-20
SERVICER I-20
SERVICER'S CERTIFICATE I-20
SERVICING ADVANCES I-20
SERVICING FEE I-21
SERVICING OFFICER I-21
SPECIFIED SPREAD ACCOUNT REQUIREMENT I-21
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SPREAD ACCOUNT I-22
SPREAD ACCOUNT AGREEMENT I-22
SPREAD ACCOUNT CUSTODIAN I-22
SPREAD ACCOUNT DEPOSITOR I-22
SPREAD ACCOUNT EXCESS I-22
SPREAD BALANCE I-22
SUBSERVICER I-22
SUBSERVICING AGREEMENT I-22
SUBSTITUTION ADJUSTMENT I-22
TAX RETURN I-23
TERMINATION PRICE I-23
TRUST FUND I-23
TRANSFEREE CERTIFICATE I-23
TRUSTEE I-23
TRUSTEE'S DOCUMENT FILE I-23
UNGUARANTEED INTEREST I-23
UNGUARANTEED PERCENTAGE I-24
UNLEGENDED DEFINITIVE CERTIFICATE I-24
ARTICLE II
SALE AND CONVEYANCE OF THE TRUST FUND
Section 2.1 Sale and Conveyance of Trust Fund II-1
Section 2.2 Possession of SBA Files II-1
Section 2.3 Books and Records II-1
Section 2.4 Delivery of SBA Loan Documents II-2
Section 2.5 Acceptance by Trustee of the Trust Fund;
Certain Substitutions; Certification
by Trustee. II-5
Section 2.6 Authentication of Certificates. II-7
Section 2.7 Fees and Expenses of the Trustee. II-7
ARTICLE III
REPRESENTATIONS AND WARRANTIES
Section 3.1 Representations of the Seller. III-1
Section 3.2 Individual SBA Loans. III-4
Section 3.3 Purchase and Substitution of Defective
SBA Loans. III-10
ARTICLE IV
THE CERTIFICATES
Section 4.1 The Certificates. IV-1
Section 4.2 Registration of Transfer and Exchange
of Certificates. IV-1
Section 4.3 Mutilated, Destroyed, Lost or
Stolen Certificates. IV-6
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Section 4.4 Persons Deemed Owners. IV-7
Section 4.0. Lists of Certificateholders IV-11
ARTICLE V
ADMINISTRATION AND SERVICING OF SBA LOANS
Section 5.1 Duties of the Servicer. V-1
Section 5.2 Liquidation of SBA Loans. V-4
Section 5.3 Establishment of Principal and
Interest Accounts; Deposits in
Principal and Interest Accounts. V-6
Section 5.4 Permitted Withdrawals From the
Principal and Interest Account. V-8
Section 5.5 Transfer of Accounts. V-9
Section 5.6 Maintenance of Hazard Insurance. V-10
Section 5.7 Fidelity Bond. V-10
Section 5.8 Title, Management and Disposition
of Foreclosed Property. V-11
Section 5.9 Collection of Certain SBA
Loan Payments. V-12
Section 5.10 Access to Certain Documentation and
Information Regarding the SBA Loans V-13
Section 5.11 Superior Liens. V-13
ARTICLE VI
PAYMENTS TO THE CERTIFICATEHOLDERS
Section 6.1 Establishment of Certificate Account;
Deposits in Certificate Account; Permitted
Withdrawals from Certificate Account. VI-1
Section 6.2 Establishment of Spread Account;
Deposits in Spread Account; Permitted
Withdrawals from Spread Account. VI-2
Section 6.3 Establishment of Expense Account;
Deposits in Expense Account; Permitted
Withdrawals from Expense Account. VI-4
Section 6.4 Investment of Accounts. VI-5
Section 6.5 Distributions. VI-7
Section 6.6 Statements. VI-9
Section 6.7 Advances by the Servicer. VI-13
Section 6.8 Compensating Interest. VI-13
Section 6.9 Reports of Foreclosure and Abandonment of
Mortgaged Property. VI-14
ARTICLE VII
GENERAL SERVICING PROCEDURE
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Section 7.1 Satisfaction of Mortgages and Collateral and
Release of SBA Files. VII-1
Section 7.2 Servicing Compensation. VII-3
Section 7.3 Annual Statement as to Compliance. VII-3
Section 7.4 Annual Independent Public
Accountants' Servicing Report. VII-3
Section 7.5 SBA's, and Trustee's Right to Examine
Servicer Records and Audit Operations. VII-4
Section 7.6 Reports to the Trustee; Principal and
Interest Account Statements. VII-4
ARTICLE VIII
REPORTS TO BE PROVIDED BY SERVICER
Section 8.1 Financial Statements. VIII-1
ARTICLE IX
THE SERVICER
Section 9.1 Indemnification; Third Party Claims. IX-1
Section 9.2 Merger or Consolidation of the Servicer. IX-2
Section 9.3 Limitation on Liability of the
Servicer and Others IX-2
Section 9.4 Servicer Not to Resign. IX-3
ARTICLE X
DEFAULT
Section 10.1 Events of Default X-1
Section 10.2 Trustee to Act; Appointment of Successor. X-3
Section 10.3 Waiver of Defaults. X-5
Section 10.4 Control by Majority Certificateholders and
Others. X-5
ARTICLE XI
TERMINATION
Section 11.1 Termination. XI-1
Section 11.2 Accounting Upon Termination of
Servicer. XI-2
ARTICLE XII
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THE TRUSTEE
Section 12.1 Duties of Trustee. XII-1
Section 12.2 Certain Matters Affecting the Trustee. XII-2
Section 12.3 Trustee Not Liable for Certificates
or SBA Loans. XII-4
Section 12.4 Trustee May Own Certificates. XII-5
Section 12.5 Servicer To Pay Trustee's Fees
and Expenses. XII-5
Section 12.6 Eligibility Requirements for Trustee. XII-6
Section 12.7 Resignation and Removal of the
Trustee. XII-6
Section 12.8 Successor Trustee. XII-7
Section 12.9 Merger or Consolidation of Trustee. XII-8
Section 12.10 Appointment of Co-Trustee or Separate
Trustee. XII-8
Section 12.11 Authenticating Agent. XII-10
Section 12.12 Tax Returns and Reports. XII-11
Section 12.13 Protection of Trust Fund. XII-12
Section 12.14 Representations, Warranties and
Covenants of Trustee. XII-13
ARTICLE XIII
MISCELLANEOUS PROVISIONS
Section 13.1 Acts of Certificateholders. XIII-1
Section 13.2 Amendment. XIII-1
Section 13.3 Recordation of Agreement. XIII-2
Section 13.4 Duration of Agreement. XIII-2
Section 13.5 Governing Law. XIII-2
Section 13.6 Notices. XIII-2
Section 13.7 Severability of Provisions. XIII-3
Section 13.8 No Partnership. XIII-3
Section 13.9 Counterparts. XIII-3
Section 13.10 Successors and Assigns. XIII-4
Section 13.11 Headings. XIII-4
Section 13.12 Paying Agent. XIII-4
Section 13.13 Notification to Rating Agency. XIII-5
Section 13.14 Third Party Rights XIII-5
<PAGE>
EXHIBIT A Contents of SBA File
EXHIBIT B-1 Form of Class A Certificate
EXHIBIT B-2 Form of Class B Certificate
EXHIBIT C Principal and Interest Account
Letter Agreement
EXHIBIT D Wiring Instructions Form
EXHIBIT E-1 Initial Certification
EXHIBIT E-2 Final Certification
EXHIBIT F SBA Loan Schedule
EXHIBIT G Request for Release of Documents
EXHIBIT H Form of Liquidation Report
EXHIBIT I Form of Delinquency Report
EXHIBIT J Servicer's Monthly Computer Tape Format
EXHIBIT K Multi-Party Agreement
EXHIBIT L Spread Account Agreement
EXHIBIT M Form of Securities Legend
EXHIBIT N Form of Rule 144A Transfer Certificates
EXHIBIT O Form of Rule 144A Exchange Certificates
EXHIBIT P Form of Purchaser's Letter Institutional Accredited
Investor
EXHIBIT Q Emergent Business Capital Holdings Corporation Note
EXHIBIT R Form of ERISA Transfer Affidavit
<PAGE>
Agreement dated as of June 1, 1995, among First Union National Bank of
North Carolina, as trustee (the "Trustee"), and Emergent Business Capital,
Inc., as Seller (in such capacity, the "Seller") and Servicer (in such
capacity, the "Servicer"):
PRELIMINARY STATEMENT
The Seller, in the ordinary course of its business, originates and acquires
SBA Loans (the "SBA Loans") to small businesses in compliance with the
provisions of the Small Business Act and the rules and regulations thereun-
der, which SBA 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 Loan has been
guaranteed by the Small Business Administration (the "SBA") (such portion,
the "Guaranteed Interest").
The Seller has previously sold the Guaranteed Interest in the SBA 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.
To facilitate the sale of the entire portion of each SBA Loan not
guaranteed by the SBA and sold to Registered Holders (the "Unguaranteed
Interest"), which Unguaranteed Interest includes the Excess Spread, and the
servicing of the SBA Loans by the Servicer, the Seller and the Servicer are
entering into this Agreement with the Trustee. The Seller is transferring
the SBA Loans to the Trustee for the benefit of the SBA and the Certifi-
cateholders under this Agreement, pursuant to which Certificates are being
issued, denominated on the face thereof as Emergent SBA Loan-Backed Ad-
justable Rate Certificates, Series 1995-1, Class A and Class B, represent-
ing in the aggregate a 100% undivided beneficial ownership interest in the
right to receive the principal portion of the Unguaranteed Interests of the
SBA Loans together with interest thereon at the then applicable Class A or
Class B Remittance Rate, as the case may be. The Unguaranteed Interests of
the SBA Loans have an aggregate outstanding principal balance of
$17,063,377 as of May 31, 1995 (the "Cut-Off Date"), after application of
payments received by the Seller on or before such date.
The parties hereto agree as follows:
<PAGE>
ARTICLE
1.
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 Emergent SBA Loan-Backed Adjustable
Rate Certificates, Series 1995-1, Class A and Class B. Unless otherwise
provided, all calculations of interest pursuant to this Agreement includ-
ing, but not limited to, the Class A and Class B Interest Distribution
Amounts, are based on a 360-day year and twelve 30-day months.
ACCOUNT: The Certificate Account 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 identifying number assigned to each SBA Loan by the
Seller, as set forth in Exhibit F hereto.
ADDITIONAL FEE: With respect to each Additional Fee SBA Loan, the fee
payable to the SBA by the Seller equal to 40 basis points per annum on the
outstanding balance of the Guaranteed Interest of such Additional Fee SBA
Loan.
ADDITIONAL FEE SBA LOAN: An SBA Loan sold in the secondary market on or
after September 1, 1993, and, thus, subject to the Additional Fee.
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 Excess Spread (other
than the portion thereof allocable to the Servicing Fee on the Guaranteed
Interest), the Servicing Fee, the SBA Fiscal Agent's Fee, the Extra
Interest and the Annual Expense Escrow Amount allocable to such interest
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 defini-
tion of Class A Interest Distribution Amount and the amounts set forth in
clauses (i) and (ii) of the definition of Class B Interest Distribution
Amount, each with respect to such Remittance Date.
ADJUSTED CLASS B INTEREST DISTRIBUTION AMOUNT: With respect to each
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 Excess Spread (other
than the portion thereof allocable to the Servicing Fee on the Guaranteed
Interest), the Servicing Fee, the SBA Fiscal Agent's Fee, the Extra Inter-
<PAGE>
est and the Annual Expense Escrow Amount allocable to such interest and (B)
a fraction, the numerator of which is the amounts set forth in clauses (i)
and (ii) of the definition of Class B Interest Distribution Amount with
respect to such Remittance Date, and the denominator of which is the sum of
the amounts set forth in clauses (i) and (ii) of the definition of Class A
Interest Distribution Amount and the amounts set forth in clauses (i) and
(ii) of the definition of Class B Interest Distribution Amount, each with
respect to such Remittance Date.
ADJUSTED SBA LOAN REMITTANCE RATE: With respect to any SBA Loan, an amount
per annum equal to the sum of (i) the then applicable weighted average
Class A and Class B Remittance Rates and (ii) the Annual Expense Escrow
Amount.
ADJUSTMENT DATE: The first day of each January, April, July and October,
commencing July 17, 1995; provided, however that for each Monthly Reset
Loan, the Adjustment Date will be the First Business Day of each month.
AGGREGATE CLASS A CERTIFICATE PRINCIPAL BALANCE: As of any date of
determination, the Original Class A Aggregate Certificate Principal Balance
less the sum of all amounts previously distributed to the Class A Certifi-
cateholders in respect of principal.
AGGREGATE CLASS B CERTIFICATE PRINCIPAL BALANCE: As of any date of
determination, the Original Aggregate Class B Certificate Principal Balance
less the sum of all amounts previously distributed to the Class B
Certificateholders in respect of principal.
AGREEMENT: This Pooling and Servicing Agreement and all amendments hereof
and supplements hereto.
ANNUAL EXPENSE ESCROW AMOUNT: $8,000 per annum plus out-of-pocket expenses
(estimated to be approximately $300 per annum).
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 or Mortgage relating to an SBA Loan to the Trustee.
AUTHENTICATING AGENT: Initially, First Union National Bank of North
Carolina 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 Holder, the SBA Fiscal Agent's Fee, any Additional Fee and the
Servicing Fee), (ii) Monthly Advances by the Servicer and (iii) amounts in
the Spread Account.
BIF: The Bank Insurance Fund, or any successor thereto.
<PAGE>
BOOK-ENTRY CERTIFICATES: Certificates evidencing a beneficial interest in
a Class of Certificates, ownership and transfer of which shall be made
through book entries by a Clearing Agency as described in Section 4.6.
BUSINESS DAY: Any day other than (i) a Saturday or Sunday, or (ii) a day
on which banking institutions in the States of North Carolina, New York or
South Carolina are authorized or obligated by law or executive order to be
closed.
CERTIFICATE: Any Class A 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 and B-2; provided, however, that
with respect to any Book-Entry Certificate, "Certificate" means such Book-
Entry Certificate and, when appropriate within the context of any Section
of this Agreement, any interest in a Book-Entry Certificate in the
authorized denomination as provided herein of any Person as shown on the
records of the Clearing Agency.
CERTIFICATE ACCOUNT: As described in Section 6.1.
CERTIFICATE REGISTER: As described in Section 4.2.
CERTIFICATE REGISTRAR: Initially, First Union National Bank of North
Carolina, and thereafter, any successor appointed pursuant to Section 4.2.
CERTIFICATEHOLDER or HOLDER: Each Person in whose name a Class A 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 con-
sent, waiver, request or demand has been obtained.
CERTIFICATE OWNER: With respect to a Book-Entry Certificate, the Person
who is the beneficial owner of such Book-Entry Certificate, as may be
reflected on the books of the Clearing Agency, or on the books of a Person
maintaining an account with such Clearing Agency (directly or as an
indirect participant), in accordance with the rules of such Clearing
Agency, and, with respect to any Definitive Certificate, the
Certificateholder.
CLASS A CARRY-FORWARD AMOUNT: The amount, if any, by which (i) the Class A
Principal Distribution Amount with respect to any preceding Remittance Date
exceeded (ii) the amount of the actual principal distribution to the Class
A Certificates on such Remittance Date.
CLASS A CERTIFICATE: A Certificate denominated as a Class A Certificate.
CLASS A CERTIFICATEHOLDER: A holder of a Class A Certificate.
<PAGE>
CLASS A INTEREST DISTRIBUTION AMOUNT: With respect to each Remittance
Date, the sum of (i) the interest accrued for the related Interest Accrual
Period at the then applicable Class A Remittance Rate on the Aggregate
Class A Certificate Principal Balance outstanding immediately prior to such
Remittance Date and (ii) the amount of the shortfall, if any, of any
interest that the Class A Certificates were entitled to receive on a
preceding Remittance Date but did not receive plus interest thereon at the
then applicable Class A Remittance Rate compounded monthly; provided,
however, that on each Remittance Date the Class A Interest Distribution
Amount will be increased or decreased, as the case may be, to equal the
Adjusted Class A Interest Distribution Amount for such Remittance Date.
CLASS A PERCENTAGE: With respect to each Remittance Date, 90%,
representing the beneficial ownership interest of the Class A Certificates
in the Trust Fund.
CLASS A PRINCIPAL DISTRIBUTION AMOUNT: With respect to each Remittance
Date, the Class A Percentage multiplied by the sum of, without duplication,
(i) the Unguaranteed Percentage of all payments and other recoveries of
principal of an SBA Loan (net of amounts reimbursable to the Servicer
pursuant to this Agreement) received by the Servicer or any Subservicer in
the related Due Period, excluding amounts received relating to SBA Loans
which have been delinquent 24 months or have been determined to be
uncollectible, in whole or in part, by the Servicer to the extent that the
Class A Certificateholders have previously received the Class A Percentage
of the Principal Balance of such SBA Loans; (ii) the principal portion of
any Unguaranteed Interest actually purchased by the 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; and (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.
CLASS A REMITTANCE RATE: During the initial Interest Accrual Period 7.65%
per annum. During each subsequent Interest Accrual Period the Class A
Remittance Rate as it relates to all of the SBA Loans other than the
Monthly Reset Loans is determined as follows; (a) for the March, April and
May Remittance Dates of each year, the Remittance Rate will be the Prime
Rate as established on the Adjustment Date in the preceding month of
January minus 135 basis points; (b) for the June, July and August
Remittance Dates of each year, the Remittance Rate will be the Prime Rate
as established on the Adjustment Date in the preceding month of April minus
135 basis points; (c) for the September, October and November Remittance
Dates of each year, the Remittance Rate will be the Prime Rate as
established on the Adjustment Date in the preceding month of July minus 135
basis points; and (d) for the December, January and February Remittance
Dates of each year, the Remittance Rate will be the Prime Rate as
<PAGE>
established on the Adjustment Date in the preceding month of October minus
135 basis points. With respect to that portion of the Class A Remittance
Rate which is derived from the Monthly Reset Loans, the Class A Remittance
Rate shall be the Prime Rate as established on the Adjustment Date two
months immediately preceding such Remittance Date minus 135 basis points.
CLASS B CARRY-FORWARD AMOUNT: The amount, if any, by which (i) the Class B
Principal Distribution Amount with respect to any preceding Remittance Date
exceeded (ii) the amount of the actual principal distribution to the Class
B Certificates on such Remittance Date; provided however that principal
that would have been distributed to the Class B Certificate but was
deposited in the Spread Account to increase the amount in deposit in the
Spread Account to an amount equal to the Specified Spread Account
Requirement shall not be considered part of the Class B Carry-Forward
Amount.
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 Remittance Rate on the Aggregate
Class B Certificate Principal Balance outstanding immediately prior to such
Remittance Date and (ii) the amount of the shortfall, if any, of any
interest that the Class B Certificates were entitled to receive on a
preceding Remittance Date but did not receive plus interest thereon at the
then applicable Class B Remittance Rate compounded monthly; provided,
however, that on each Remittance Date,the Class B Interest Distribution
Amount will be increased or decreased, as the case may be, to equal the
Adjusted Class B Interest Distribution Amount for such Remittance Date.
CLASS B PERCENTAGE: With respect to each Remittance Date, 10%,
representing the beneficial ownership interest of the Class B Certificates
in the Trust Fund.
CLASS B PRINCIPAL DISTRIBUTION AMOUNT: With respect to each Remittance
Date, the Class B Percentage multiplied by the sum of, without duplication,
(i) the Unguaranteed Percentage of all payments and other recoveries of
principal of an SBA Loan (net of amounts reimbursable to the Servicer
pursuant to this Agreement) received by the Servicer or any Subservicer in
the related Due Period, excluding amounts received relating to SBA Loans
which have been delinquent 24 months or have been determined to be
uncollectible, in whole or in part, by the Servicer to the extent that the
Class B Certificateholders have previously received the Class B Percentage
of the Principal Balance of such SBA Loans, including distributions of
principal that have been deposited into the Spread Account to raise the
amount on deposit in the Spread Account to the Specified Spread Account
Requirements; (ii) the principal portion of any Unguaranteed Interest
actually purchased by the Seller for breach of a representation and warran-
ty or other defect and actually received by the Trustee as of the related
Determination Date; (iii) any Substitution Adjustments deposited in the
<PAGE>
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; and (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.
CLASS B REMITTANCE RATE: During the initial Interest Accrual Period 8.25%
per annum. During each subsequent Interest Accrual Period the Class B
Remittance Rate as it relates to all of the SBA Loans other than the
Monthly Reset Loans is determined as follows: (a) for the March, April and
May Remittance Dates of each year, the Remittance Rate will be the Prime
Rate as established on the Adjustment Date in the preceding month of
January minus 75 basis points; (b) for the June, July and August Remittance
Dates of each year, the Remittance Rate will be the Prime Rate as
established on the Adjustment Date in the preceding month of April minus 75
basis points; (c) for the September, October and November Remittance Dates
of each year, the Remittance Rate will be the Prime Rate as established in
the Adjustment Date in the preceding month of July minus 75 basis points;
and (d) for the December, January and February Remittance Dates of each
year, the Remittance Rate will be the Prime Rate as established on the
Adjustment Date in the preceding month of October minus 75 basis points.
With respect to that portion of the Class B Remittance Rate which is
derived from the Monthly Reset Loans, the Class B Remittance Rate shall be
the Prime Rate as established on the Adjustment Date in the two months
preceding such Remittance Date minus 75 basis points.
CLEARING AGENCY: An organization registered as a "clearing agency"
pursuant to Section 17A of the Exchange Act. The initial Clearing Agency
shall be The Depository Trust Company.
CLEARING AGENCY PARTICIPANT: A broker, dealer, bank, other financial
institution or other Person for whom from time to time a Clearing Agency
effects book-entry transfers and pledges of securities deposited with the
Clearing Agency.
CLOSING DATE: June 29, 1995.
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 to secure payment under an SBA Loan.
COMMERCIAL PROPERTY: Real property (other than agricultural property or
Residential Property) that is generally used by the Obligor in the conduct
of its business.
COMPENSATING INTEREST: As defined in Section 6.8.
<PAGE>
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 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, 1995.
DEFINITIVE CERTIFICATES: Certificate of any Class issued in definitive,
fully registered, certificated form without interest coupons in minimum
denominations of $100,000 and integral multiples of $1,000 in excess of
such minimum amount.
DELETED SBA LOAN: An SBA Loan replaced by a Qualified Substitute SBA Loan.
DEPOSITORY AGREEMENT: With respect to any Class of Book-Entry
Certificates, the agreement among the Seller, the Trustee and the Clearing
Agency.
DESIGNATED DEPOSITORY INSTITUTION: With respect to the Principal and
Interest Account, an entity which is an institution whose deposits are
insured by either the BIF or SAIF the unsecured and uncollateralized long-
term debt obligations of which shall be rated A2 or better by the Rating
Agency, and which is either (i) a federal savings association duly orga-
nized, 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.
DETERMINATION DATE: That day of each month which is the third Business Day
prior to the 15th day of such month.
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.
ERISA PLAN: As defined in Section 4.2(g).
EVENT OF DEFAULT: As described in Section 10.01.
<PAGE>
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 Prin-
cipal Prepayment or payment with respect to an overdue amount. Excess
Payments are payments of principal for purposes of this Agreement.
EXCESS PROCEEDS: As of any Remittance Date, with respect to any Liquidated
SBA Loan, the excess, if any, of (a) the Unguaranteed Percentage of the
total Net Liquidation Proceeds, over (b) the Principal Balance of such SBA
Loan as of the date such SBA Loan became a Liquidated SBA Loan plus 30 days
interest thereon at the then applicable Adjusted SBA Loan Remittance Rate;
provided, however, that such excess shall be reduced by the amount by which
interest accrued on the advance, if any, made by the Servicer at the
related SBA Loan Interest Rate(s) exceeds interest accrued on such advance
at the then applicable weighted average Class A and Class B Remittance
Rates.
EXCESS SPREAD: With respect to any Remittance Date, the amount by which
(i) the interest collected by the Servicer or any Subservicer on the
principal portion of the Guaranteed Interest of each SBA Loan exceeds (ii)
the sum of (a) the interest payable to the Registered Holder, (b) the SBA
Fiscal Agent's Fee and (c) with respect to the Additional Fee SBA Loans,
the Additional Fee.
EXCHANGE ACT: The Securities Exchange Act of 1934, as amended.
EXPENSE ACCOUNT: The expense account established and maintained by the
Trustee in accordance with Section 6.3 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 applica-
ble 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 over (ii) the sum of the rates used in determining the
Servicing Fee and the Annual Expense Escrow Amount and 7.71% per annum
(i.e., the initial weighted average Class A and Class B Remittance Rates
without giving effect to any applicable lifetime floors or caps on the SBA
Loans).
FDIC: The Federal Deposit Insurance Corporation and any successor thereto.
FHLMC: The Federal Home Loan Mortgage Corporation and any successor
thereto.
FIDELITY BOND: As described in Section 5.7.
FNMA: The Federal National Mortgage Association and any successor thereto.
<PAGE>
FORECLOSED PROPERTY: As described in Section 5.8.
FORECLOSED PROPERTY DISPOSITION: The final sale of a Foreclosed Property
acquired in foreclosure or by deed in lieu of foreclosure. The proceeds of
any Foreclosed Property Disposition constitute part of the definition of
Liquidation Proceeds.
GUARANTEED INTEREST: As to any SBA 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.
INITIAL DEPOSIT: A deposit of $341,268 required to be made by the Spread
Account Depositor into the Spread Account on the Closing Date, such deposit
being equal to 2% of the Original Pool Principal Balance.
INSTITUTIONAL ACCREDITED INVESTOR: A Person which is an institution and is
an "accredited investor" as defined in Rule 501(a)(1), (2), (3) or (7)
under the Securities Act and that is not otherwise a QIB.
INSURANCE PROCEEDS: Proceeds paid by any insurer pursuant to any insurance
policy covering an SBA Loan, 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 1995, the period commencing on the
Closing Date and ending on July 14, 1995.
LEGENDED DEFINITIVE CERTIFICATE: A Definitive Certificate bearing the
Securities Legend which initially shall be all Definitive Certificates.
LIQUIDATED SBA LOAN: Any defaulted SBA Loan 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, 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: The Loan Guaranty Agreement (Deferred
Participation) (SBA Form 750) dated April 17, 1992 between the SBA and
Emergent Business Capital, Inc., as such agreement may be amended from time
to time or such other Loan Guaranty Agreement (Deferred Participation) (SBA
Form 750) as may be effective between the SBA and any successor to Emergent
Business Capital, Inc. or any other party to this agreement.
<PAGE>
LOAN-TO-VALUE RATIO OR LTV: With respect to any SBA Loan, the gross amount
of the loan divided by the total net collateral value (as determined by the
Seller in accordance with its underwriting criteria) of all the Collateral
securing such loan.
MAJORITY CERTIFICATEHOLDERS: The Holder or Holders of Class A and Class B
Certificates evidencing an Aggregate Class A Certificate Principal Balance
and Aggregate Class B Certificate Principal Balance, as the case may be, in
excess of 50% of the Aggregate Class A Certificate Principal Balance and
Aggregate Class B Certificate Principal Balance, as the case may be.
MONTHLY ADVANCE: An advance made by the Servicer pursuant to Section 6.7
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.
MONTHLY RESET LOANS: SBA Loans whose rate of interest is reset on a
Monthly basis.
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 June
1, 1995 among the Seller, the Trustee the Note Custodian and the SBA,
substantially in the form of Exhibit K 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 5.4(b)
and (ii) amounts required to be released to the related Obligor pursuant to
applicable law.
NONREIMBURSABLE MONTHLY ADVANCE: As defined in Section 6.7.
NOTE CUSTODIAN: Carolina First Bank in its capacity as Note Custodian
under the Multi-Party Agreement.
OBLIGOR: The obligor on an SBA Note.
OFFERING CIRCULAR: The Offering Circular dated June 29, 1995 pursuant to
which the Emergent SBA Loan Backed Adjustable Rate Certificates, Series
1995-1, Class A and Class B were initially offered and any amendments or
supplements thereto.
OFFICERS' CERTIFICATE: A certificate delivered to the Trustee signed by
the Chairman of the Board, the President or a Vice President or Assistant
<PAGE>
Vice President, and by the Treasurer, the Secretary, or one of the Assis-
tant Secretaries of the Seller or the Servicer as required by this Agree-
ment.
OPINION OF COUNSEL: A written opinion of counsel, who may, without
limitation, be counsel for the Seller or Servicer, reasonably acceptable to
the Trustee and experienced in matters relating thereto.
ORIGINAL CLASS A CERTIFICATE PRINCIPAL BALANCE: $15,357,000.
ORIGINAL CLASS B CERTIFICATE PRINCIPAL BALANCE:
$1,706,377.
ORIGINAL POOL PRINCIPAL BALANCE: $17,063,377.
PAYING AGENT: Initially, First Union National Bank of North Carolina, and
thereafter, any other Person that meets the eligibility standards for the
Paying Agent specified in Section 13.12 hereof and is authorized by the
Trustee to make payments on the Certificates on behalf of the Trustee.
PERCENTAGE INTEREST: With respect to a Class A or Class B Certificate, the
portion of the Trust Fund evidenced by such Class A or Class B Certificate,
expressed as a percentage, the numerator of which is the denomination rep-
resented by such Class A or Class B Certificate and the denominator of
which is the Original Class A Certificate Principal Balance or Original
Class B Certificate Principal Balance, as the case may be. The Certifi-
cates are issuable only in the minimum Percentage Interest corresponding to
a minimum denomination of $100,000 and integral multiples of $1,000 in
excess thereof, except for one Certificate of each Class which may be
issued in a different denomination to equal the remainder of the Original
Class A Certificate Principal Balance or Original Class B Certificate
Principal Balance, as the case may be.
PERMITTED INSTRUMENTS: As used herein, Permitted Instruments shall include
the following:
I. direct general obligations of, or obligations fully and
unconditionally guaranteed as to the timely payment of principal and
interest by, the United States or any agency or instrumentality thereof,
provided such obligations are backed by the full faith and credit of the
United States, FHA debentures, Federal Home Loan Bank consolidated
senior debt obligations, and FNMA senior debt obligations, but excluding
any of such securities whose terms do not provide for payment of a fixed
dollar amount upon maturity or call for redemption;
II. federal funds, certificates of deposit, time deposits and banker's
acceptances (having original maturities of not more than 365 days) of
any bank or trust company incorporated under the laws of the United
States or any state thereof, provided that the short-term debt
obligations of such bank or trust company at the date of acquisition
thereof have been rated Prime-1 or better by the Rating Agency;
<PAGE>
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 the Rating Agency;
IV. commercial paper (having original maturities of not more than 365
days) rated Prime-1 or better by the Rating Agency;
V. debt obligations rated Aaa by the Rating Agency (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 the Rating
Agency the assets of which are invested solely in instruments described
in clauses (i)-(v) above; and
(vii) 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, joint venture,
association, joint-stock company, trust, national banking association,
unincorporated organization or government or any agency or political
subdivision thereof.
PLACEMENT AGENT: Prudential Securities Incorporated.
POOL PRINCIPAL BALANCE: The aggregate Principal Balances as of any date of
determination.
PRIME RATE: With respect to any applicable Adjustment Date, the lowest
prime lending rate published in the Eastern Edition of The Wall Street
Journal on such Adjustment Date.
PRINCIPAL AND INTEREST ACCOUNT: The principal and interest account
established by the Servicer pursuant to Section 5.3 hereof.
PRINCIPAL BALANCE: With respect to any SBA Loan or related Foreclosed
Property, at any date of determination, (i) the Unguaranteed Percentage of
the principal balance of the SBA Loan outstanding as of the Cut-Off Date,
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 6.5 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 to the extent applied by
the Servicer as recoveries of principal in accordance with the provisions
<PAGE>
hereof, which were distributed pursuant to Section 6.5 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 which is not a first priority lien, each mortgage loan relating to
the corresponding Mortgaged Property having a prior priority lien.
QIB: A "qualified institutional buyer" as defined in Rule 144A.
QUALIFIED SUBSTITUTE SBA LOAN: An SBA loan or SBA loans substituted for a
Deleted SBA Loan pursuant to Section 2.5 or 3.3 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) 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, and (vii) complies or comply as the date of substitution with each
representation and warranty set forth in Section 3.2.
RATING AGENCY: Moody's Investors Service, Inc. or any successor thereto.
RECORD DATE: The close of business on the last day of the month
immediately preceding the month of the related Remittance Date.
REGISTERED HOLDER: With respect to any SBA 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 Servicer and/or the Seller with respect to (i) the Monthly Advances
and Servicing Advances reimbursable pursuant to Section 5.4(c), (ii) any
advances reimbursable pursuant to Section 9.1 and not previously reimbursed
pursuant to Section 6.3(c)(i), and (iii) any other amounts reimbursable to
the Servicer or the Seller pursuant to this Agreement.
RELEASED MORTGAGED PROPERTY PROCEEDS: As to any SBA Loan secured by a
Mortgaged Property, proceeds received by the Servicer in connection with
(a) a taking of an entire Mortgaged Property by exercise of the power of
eminent domain or condemnation or (b) any release of part of the Mortgaged
<PAGE>
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 1995.
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 devel-
opment, (vi) three- or four-family house, (vii) high-rise condominium,
(viii) mixed use building or (ix) manufactured home (as defined in
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 Division, 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 Seller, the President,
any Vice President, Assistant Vice President, or any Secretary or Assistant
Secretary.
RULE 144A: Rule 144A under the Securities Act.
RULE 144A CERTIFICATE: A certificate substantially in the form of Exhibit
N hereto.
RULE 144A INFORMATION: The Offering Circular; copies of the statements and
reports distributed to Certificateholders in respect of the next preceding
Distribution Date pursuant to Section 6.6; and such other documents as the
Borrower may, at the time of the Trustee's or the Servicer's receipt of a
request for information pursuant to Section 4.7, have most recently fur-
nished to the Trustee and the Servicer under a statement that such docu-
ments are furnished for the purpose of responding to requests for Rule 144A
Information.
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 FISCAL AGENT: Colson Services Corp., in its capacity as Agent of the
SBA or any successor thereto appointed by the SBA.
<PAGE>
SBA FISCAL AGENT'S FEE: With respect to each SBA Loan, the monthly fee
payable to the SBA Fiscal Agent in accordance with the SBA Rules and
Regulations.
SBA Form 1086: The Secondary Participation Guaranty and Certification
Agreement on SBA Form 1086, pursuant to which investors purchase the SBA
Guaranteed Portion.
SBA LOAN: An individual loan which is transferred to the Trustee pursuant
to this Agreement and listed on the SBA Loan Schedule as amended from time
to time, 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. 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 3.2(h)
hereof with respect to the loan, shall nevertheless be considered an "SBA
Loan" for all purposes of this Agreement.
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 attached hereto as Exhibit F,
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 busi-
ness 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 and guaranteed rate payable to the Registered Holder
and the SBA Fiscal Agent, (vi) when the first Monthly Payment was due,
(vii) the Monthly Payment as of the Cut-Off Date, (viii) the remaining
number of months to maturity as of the Cut-Off Date, (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, and (xii) the lifetime
minimum and maximum SBA Loan Interest Rates, if applicable.
SBA NOTE: The note or other evidence of indebtedness evidencing the
indebtedness of an Obligor under an SBA Loan.
SBA RULES AND REGULATIONS: The Small Business Act, as amended, codified at
15 U.S.C. 631, et seq., all rules and regulations promulgated from time to
time thereunder and the Loan Guaranty Agreement.
SECURITIES ACT: The Securities Act of 1933, as amended, and the rules,
regulations and published interpretations of the Securities and Exchange
Commission promulgated thereunder from time to time.
<PAGE>
SECURITIES LEGEND: The legend set forth in Exhibit M hereto.
SELLER: Emergent Business Capital, Inc., a South Carolina corporation, and
its successors and assigns as Seller hereunder.
SERIES: 1995-1.
SERVICER: Emergent Business Capital, Inc., a South Carolina corporation,
and its successors and assigns as Servicer hereunder.
SERVICER'S CERTIFICATE: The certificate as defined in Section 6.6.
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 preserva-
tion, restoration and protection of the Mortgaged Property or other
Collateral, (ii) any enforcement or judicial proceedings, including fore-
closures, (iii) the management and liquidation of the Foreclosed Property,
(iv) compliance with the obligations under clause (iv) of Section 5.1(a)
and Sections 5.2 and 5.6, which Servicing Advances are reimbursable to the
Servicer to the extent provided in Section 5.4(c) and (v) in connection
with the liquidation of an SBA Loan, expenditures relating to the purchase
or maintenance of any Prior Lien pursuant to Section 5.11, for all of which
costs and expenses the Servicer is entitled to reimbursement thereon up to
a maximum rate per annum equal to the related SBA Loan Interest Rate,
except that any amount of such interest accrued at a rate in excess of the
weighted average Class A and Class B Remittance 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 and except that the Servicer shall not be required to
advance any such amounts if, in its reasonable judgment, the Servicer
determines that the amount of such proposed Servicing Advance will not be
recoverable from Liquidation Proceeds, Released Mortgaged Property Pro-
ceeds, Insurance Proceeds or otherwise in respect of the SBA Loans.
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 and shall be computed on the basis of the same principal amount
and for the period respecting which any related interest payment on an SBA
Loan is computed. The Servicing Fee is payable solely from the interest
portion of related (i) Monthly Payments, (ii) Liquidation Proceeds or (iii)
Released Mortgaged Property Proceeds collected by the Servicer, or as
otherwise provided in Section 5.4. 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,
as such list may from time to time be amended.
<PAGE>
SPECIFIED SPREAD ACCOUNT REQUIREMENT: The maximum amount of Spread 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 of the Unguaranteed Interests of all SBA
Loans 180 days or more delinquent and (ii) the greater of (a) 4.0% of the
then outstanding aggregate principal balance of the Unguaranteed Interests
of all SBA Loans or (b) the amount of the Initial Deposit; provided,
however, that for purposes of clauses (i) and (ii)(a), there shall be
excluded the principal portion of the Unguaranteed Interests of SBA Loans
which have been delinquent 24 months or have been determined to be uncol-
lectible, in whole or in part, by the Servicer, to the extent that the
Certificateholders have previously received the principal portion of the
Unguaranteed Interests of such SBA Loans.
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 6.2
hereof.
SPREAD ACCOUNT AGREEMENT: The Agreement dated as of June 1, 1995 by and
among the Spread Account Depositor and the Spread Account Custodian,
substantially in the form attached hereto as Exhibit L, as amended from
time to time by the parties thereto.
SPREAD ACCOUNT CUSTODIAN: First Union National Bank of North Carolina, in
its capacity as Spread Account Custodian under the Spread Account
Agreement, or any successor thereto.
SPREAD ACCOUNT DEPOSITOR: Emergent Business Capital Holdings Corporation,
a Delaware corporation.
SPREAD ACCOUNT EXCESS: As defined in Section 6.2(b)(iii).
SPREAD BALANCE: As of any date of determination, the sum of the aggregate
amount then on deposit in the Spread Account.
SUBSERVICER: Any person with whom the Servicer enters into a Subservicing
Agreement and who satisfies any requirements set forth in Section 5.1(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 5.1(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 Section 2.5 or 3.3, 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.
<PAGE>
TAX RETURN: The federal income tax return to be filed on behalf of the
Trust Fund together with any and all other information reports or returns
that may be required to be furnished to the Certificateholders or filed
with the Internal Revenue Service or any other governmental taxing
authority under any applicable provision of federal, state or local tax
laws.
TERMINATION PRICE: The price defined in Section 11.1 hereof.
TRUST FUND: All right, title and interest of Seller in and to the
following, whether now existing or hereafter acquired: (i) an undivided
interest equal to the Unguaranteed Percentage in each SBA Loan, (ii) an
undivided interest equal to the Unguaranteed Percentage in each SBA Loan,
(iii) with respect to each SBA Loan, the SBA File relating to such SBA
Loan, (iv) with respect to each SBA Loan, all rights and claims against the
SBA, (v) with respect to each SBA Loan, all rights and claims against the
holder of the Guaranteed Portion of each SBA Loan, (vi) with respect to any
SBA Loan, all rights under any insurance policy, (vii) with respect to any
SBA Loan in default, an undivided interest equal to the Unguaranteed Per-
centage in any cash or other proceeds received on foreclosure, or
liquidation whether through trustee's sale, foreclosure sale or otherwise,
(viii) the seller's interest in any Mortgage securing an SBA Loan, and (ix)
proceeds of the foregoing.
TRANSFEREE CERTIFICATE: As defined in Section 4.2(d) and substantially in
the form annexed hereto as Exhibit O.
TRUSTEE: First Union National Bank of North Carolina, or its successor in
interest, or any successor trustee appointed as herein provided.
TRUSTEE'S DOCUMENT FILE: The documents delivered pursuant to Section 2.4.
UNGUARANTEED INTEREST: That portion of an SBA Loan not guaranteed by the
SBA pursuant to the SBA Rules and Regulations.
UNGUARANTEED PERCENTAGE: With respect to any SBA Loan, the quotient,
expressed as a percentage, the numerator of which shall be the principal
portion of the Unguaranteed Interest of such SBA Loan as of the 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 Loan as of the Cut-Off Date.
UNLEGENDED DEFINITIVE CERTIFICATE: A Definitive Certificate which does not
bear the Securities Legend and which can only be issued if the Borrower
determines under applicable law that the placement of the Securities Legend
on such Definitive Certificate is no longer required.
<PAGE>
ARTICLE
1.
SALE AND CONVEYANCE OF THE TRUST FUND
Section 2.1 Sale and Conveyance of Trust Fund.
1. 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, all of the right,
title and interest of the Seller, whether now existing or hereafter
acquired, in and to the Trust Fund.
2. 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.
Section 2.2 Possession of SBA Files.
3. Upon the issuance of the Certificates, the ownership of
each SBA Note, the Mortgage and the contents of the related SBA File is
vested in the Trustee for the benefit of the SBA and the Certificate-
holders, as their interests may appear.
4. Pursuant to Section 2.4, the Seller has delivered or caused
to be delivered each SBA Note to the Note Custodian.
Section 2.3 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 the Seller shall respond to any third-
party inquiry that such transfer is so reflected as a sale. The Seller
shall be responsible for maintaining, and shall maintain, a complete set of
books and records for each SBA Loan which shall be clearly marked to
reflect the ownership of each SBA Loan by the Trustee for the benefit of
the SBA and the Certificateholders, as their interests may appear.
Section 2.4 Delivery of SBA Loan Documents.
The Seller, contemporaneously with the delivery of this
Agreement, has delivered or caused to be delivered to the Trustee or, with
respect to the SBA Notes being delivered pursuant to (a) below, to the Note
Custodian, each of the following documents for each SBA Loan:
5. The original SBA Note, endorsed by means of an allonge as
follows: "Pay to the order of Carolina First Bank, and its successors and
assigns, as agent for First Union National Bank of North Carolina as
trustee under that certain Pooling and Servicing Agreement dated as of June
1, 1995, for the benefit of the holders of Emergent SBA Loan-Backed
Certificates, Series 1995-1, Class A and Class B, and the United States
<PAGE>
Small Business Administration as their respective interests may appear,
without recourse" and signed, by facsimile or manual signature, in the name
of the Seller by a Responsible Officer, with all prior and intervening
endorsements showing a complete chain of endorsement from the originator to
the Seller, if the Seller was not the originator;
6. 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;
7. With respect to those SBA Loans secured by Mortgaged
Properties, either: (i) the original Assignment of Mortgage from the
Seller endorsed as follows: "First Union National Bank of North Carolina
("Assignee"), its successors and assigns, as trustee under the Pooling and
Servicing Agreement dated as of June 1, 1995, subject to the Multi-Party
Agreement dated as of June 1, 1995" 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);
8. 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, in-
cluding 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;
9. 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 to the extent the Seller
obtained such policies certified as true by the Seller;
10. For all SBA Loans, blanket assignment of all collateral
securing the SBA Loan, including without limitation, all rights under
applicable guarantees and insurance policies;
<PAGE>
11. For all SBA Loans, irrevocable power of attorney of the
Seller to the Trustee to execute, deliver, file or record and otherwise
deal with the Collateral for the SBA Loans in accordance with the Agree-
ment. 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
12. 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 Parties and the Seller as the Debtor.
The UCC-1 financing statements will be filed promptly following the Closing
Date in New York, North Carolina and South Carolina 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 270 days of the Closing Date, 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 as-
signments 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 2.4, in those instances where the public
recording office retains the original Mortgage, Assignment of Mortgage or
the intervening assignments of the Mortgage after it has been recorded, the
Seller shall be deemed to have 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 Note Custodian, 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 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.
All recordings required pursuant to this Section 2.4 shall be
accomplished by and at the expense of the Servicer.
<PAGE>
Section 13. Acceptance by Trustee of
the Trust Fund; Cer-
tain Substitutions; Certification by Trustee.
14. The SBA shall cause the Note Custodian to execute and
deliver on the Closing Date, for each SBA Loan, an acknowledgment of
receipt of the original SBA Note by the Note Custodian by facsimile with an
originally executed copy to follow, in the form attached as Exhibit 1 to
the Multi-Party Agreement, and declares that the Note Custodian 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,
with respect to any Qualified Substitute SBA Loan, within 45 days after the
assignment thereof) and to deliver to the Certificateholders, the Seller,
the SBA and the Servicer a certification in the form attached hereto as
Exhibit E-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 Servicer, the Seller, the SBA,
each Rating Agency and any Certificateholder who requests a copy from the
Trustee a final certification in the form attached hereto as Exhibit E-2
evidencing the completeness of the Trustee's Document Files.
15. 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 2.4 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 Servicer and the Seller. In performing any such
review, the Trustee or the SBA, as the case may be, may conclusively rely
on the Seller as to the purported genuineness of any such document and any
signature thereon. It is understood that the scope of the Trustee's and
the SBA's review of the SBA Files is limited solely to confirming that the
documents listed in Section 2.4 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 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 3.3 or (ii) purchase the
Unguaranteed Interest of such SBA Loan at a purchase price equal to the
Principal Balance of such Unguaranteed Interest as of the date of purchase,
plus 30 days' interest on such Principal Balance, computed at the Adjusted
SBA Loan Remittance Rate as of the next succeeding Determination Date, plus
any accrued unpaid Servicing Fees, Monthly Advances and Servicing Advances
reimbursable to the Servicer, which purchase price shall be deposited in
<PAGE>
the Principal and Interest Account on the next succeeding Determination
Date.
16. 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 G 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.
17. 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 G hereto. Upon receipt of such certification, the Trustee or the
SBA, as the case may be, shall deliver to the Servicer the requested docu-
mentation and the Trustee shall execute, without recourse, and deliver such
instruments of transfer necessary to release all or the requested part of
the Mortgaged Property or other Collateral from the lien of the related SBA
Loan.
On the Remittance Date in March of each year, the Trustee shall
deliver to the Seller, the SBA and the Servicer a certification detailing
all transactions with respect to the SBA Loans for which the Trustee holds
a Trustee's Document File pursuant to this Agreement during the prior
calendar year. Such certification shall list all Trustee's Document Files
which were released by or returned to the Trustee or the Note Custodian
during the prior calendar year, the date of such release or return and the
reason for such release or return. The Note Custodian shall also provide
such certification to the Seller, the SBA and the Servicer regarding the
Trustee's Document Files held by it.
Section 2.6 Authentication of Certificates.
The Trustee acknowledges the assignment to it of the SBA Loans
and the delivery to the Trustee and the Note Custodian 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 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.
<PAGE>
Section 2.7 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, (ii) any other fees and
expenses to which the Trustee is entitled hereunder, and
(iii) reimbursements to the Servicer for any advances made by the Servicer
to the Expense Account pursuant to Section 6.3 hereof, shall be paid from
the Expense Account in the manner set forth in Section 6.3 hereof; provid-
ed, however, that the Seller shall be liable for any expenses of the Trust
Fund incurred prior to the Closing Date. The Trustee shall be paid fees
and expenses in excess of amounts available in the Expense Account by the
Servicer pursuant to the terms of Section 12.5 hereof. 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.
<PAGE>
ARTICLE 1.
REPRESENTATIONS AND WARRANTIES
Section 3.1 Representations of the
Seller.
The Seller hereby represents and warrants to the Trustee and
the Certificateholders as of the Closing Date:
1. The Seller is a corporation duly organized, validly
existing, and in good standing under the laws of the jurisdiction of its
incorporation and has all licenses necessary to carry on its business as
now being conducted and is licensed, qualified and in good standing in each
state where the laws of such state require licensing or qualification in
order to conduct business of the type conducted by the Seller and perform
its obligations hereunder; the Seller has corporate power and authority to
execute and deliver this Agreement and to perform in accordance herewith;
the execution, delivery and performance of this Agreement (including all
instruments of transfer to be delivered pursuant to this Agreement) by the
Seller and the consummation of the transactions contemplated hereby have
been duly and validly authorized by all necessary corporate action; this
Agreement evidences the valid, binding and enforceable obligation of the
Seller; and all requisite corporate action has been taken by the Seller to
make this Agreement valid, binding and enforceable upon the Seller 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;
2. All actions, approvals, consents, waivers, exemptions,
variances, franchises, orders, permits, authorizations, rights and licenses
required to be taken, given or obtained, as the case may be, by or from any
federal, state or other governmental authority or agency (other than any
such actions, approvals, etc., under any state securities laws, real estate
syndication or "Blue Sky" statutes, as to which the Seller makes no such
representation or warranty), that are necessary or advisable in connection
with the purchase and sale of the Certificates and the execution and
delivery by the Seller of the documents to which it is a party, have been
duly taken, given or obtained, as the case may be, are in full force and
effect on the date hereof, are not subject to any pending proceedings or
appeals (administrative, judicial or otherwise) and either the time within
which any appeal therefrom may be taken or review thereof may be obtained
has expired or no review thereof may be obtained or appeal therefrom taken,
and are adequate to authorize the consummation of the transactions con-
templated by this Agreement and the other documents on the part of the
Seller and the performance by the Seller of its obligations under this
Agreement and such of the other documents to which it is a party;
3. The consummation of the transactions contemplated by this
Agreement will not result in the breach of any terms or provisions of the
<PAGE>
articles of incorporation or by-laws of the Seller or result in the breach
of any term or provision of, or conflict with or constitute a default under
or result in the acceleration of any obligation under, any material
agreement, indenture or loan or credit agreement or other material instru-
ment to which the Seller or its property is subject, or result in the
violation of any law, rule, regulation, order, judgment or decree to which
the Seller or its property is subject, the violation of which would have a
material adverse effect on the Certificateholders, the properties related
to an SBA Loan or the consummation of the transactions contemplated herein;
4. 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 mis-
leading;
5. The Seller does not believe, nor does it have any reason or
cause to believe, that it cannot perform each and every covenant contained
in this Agreement;
6. There is no action, suit, proceeding or investigation
pending or, to the best of the Seller's knowledge, threatened against the
Seller which, either in any one instance or in the aggregate, may (i)
result in any material adverse change in the business, operations,
financial condition, properties or assets of the Seller or in any material
impairment of the right or ability of the Seller to carry on its business
substantially as now conducted, or in any material liability on the part of
the Seller or of any action taken or to be taken in connection with the
obligations of the Seller contemplated herein, or which would be likely to
impair materially the ability of the Seller to perform under the terms of
this Agreement or (ii) which would draw into question the validity of this
Agreement or the SBA Loans;
7. The Trust Fund will not constitute an "investment company"
within the meaning of the Investment Company Act;
8. The Seller is not in default with respect to any order or
decree of any court or any order, regulation or demand of any federal,
state, municipal or governmental agency, which default might have
consequences that would materially and adversely affect the condition (fi-
nancial or other) or operations of the Seller or its properties or might
have consequences that would materially and adversely affect its perfor-
mance hereunder;
9. No Certificateholder is subject to state licensing
requirements solely by virtue of holding the Certificates;
10. The transfer, assignment and conveyance of the SBA Notes
and the Mortgages by the Seller pursuant to this Agreement are not subject
to the bulk transfer laws or any similar statutory provisions in effect in
<PAGE>
any applicable jurisdiction and do not violate the SBA Rules and Regula-
tions;
11. The origination and collection practices used by the
Seller with respect to each SBA Note and Mortgage have been in all material
respects legal, proper, prudent and customary in the SBA loan origination
and servicing business;
12. Each SBA Loan was selected from among the existing SBA
loans in the Seller's portfolio at the date hereof in a manner not designed
to adversely affect the Certificateholders;
13. The Seller received fair consideration and reasonably
equivalent value in exchange for the sale of the Unguaranteed Interest of
the SBA Loans evidenced by the Certificates;
14. Neither the Seller nor any of its affiliates sold any
interest in any SBA Loan evidenced by the Certificates with any intent to
hinder, delay or defraud any of their respective creditors; and
15. The Seller is solvent, and the Seller 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.
Section 3.2 Individual SBA Loans.
The Seller hereby represents and warrants to the Trustee, and
the Certificateholders, with respect to each SBA Loan originated by the
Seller, as of the Closing Date:
16. The information with respect to each SBA Loan set forth
in the SBA Loan Schedule is true and correct;
17. All of the original or certified documentation set forth
in Section 2.4 (including all material documents related thereto) has been
or will be delivered to the Trustee or the Note Custodian, on behalf of the
Trustee, on the Closing Date or as otherwise provided in Section 2.4;
18. Each Mortgaged Property is improved by a Commercial
Property or a Residential Property and does not constitute other than real
property under state law;
19. Except with respect to no more than 1.2% of the SBA Loans,
each SBA Loan has been originated by the Seller and is being serviced by
the Servicer or one or more Subservicers;
20. For each month, the amount of interest payable by each
Obligor in accordance with the terms of the related SBA Loan, net of the
amount of interest payable to the related Registered Holder, the Excess
Spread related to such SBA Loan and the Note Custodian's Fee, is at least
equal to the sum of (i) the amount of interest payable to the Certifi-
cateholders on the related Remittance Date, (ii) the Servicing Fee, and
(iii) the Annual Expense Escrow Amount, in each case for the same month;
<PAGE>
21. Each SBA Note will, with respect to principal payments,
adjust quarterly and provide for a schedule of Monthly Payments which are,
if timely paid, sufficient to fully amortize the principal balance of such
SBA Note on its maturity date;
22. 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 Mort-
gaged 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;
23. Immediately prior to the transfer and assignment herein
contemplated, the Seller held good and indefeasible title to, and was the
sole owner of, the Unguaranteed Interest of each SBA Loan conveyed by the
Seller subject to no liens, charges, mortgages, encumbrances or rights of
others except as set forth in Section 3.2(g) 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 as set forth in Section 3.2(g), the interests of the SBA or other
liens which will be released simultaneously with such transfer and as-
signment;
24. As of the Cut-Off Date, no SBA Loan is 30 or more days
delinquent in payment;
25. To the best of the Seller's knowledge, there is no
delinquent tax or assessment lien on any Mortgaged Property, and each
Mortgaged Property is free of material damage and is in good repair;
26. The SBA Loan is not 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;
<PAGE>
27. 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;
28. Except with respect to no more than 1.2% of the SBA Loans
which were acquired and re-underwritten by the Seller in accordance with
its customary underwriting procedures, the SBA Loans were originated by the
Seller in accordance with the underwriting criteria set forth in the
Offering Circular;
29. Pursuant to the SBA Rules and Regulations, the Seller
requires that the improvements upon each Mortgaged Property are covered by
a valid and existing hazard insurance policy with a generally acceptable
carrier that provides for fire and extended coverage representing coverage
described in Section 5.6;
30. Pursuant to the SBA Rules and Regulations, the Seller
requires that if a Mortgaged Property is in an area identified in the
Federal Register by the Federal Emergency Management Agency as having
special flood hazards, a flood insurance policy is in effect with respect
to such Mortgaged Property with a generally acceptable carrier in an amount
representing coverage described in Section 5.6;
31. Each SBA Note, any related Mortgage and any other
agreement pursuant to which Collateral is pledged to the Seller is the
legal, valid and binding obligation of the maker thereof and is enforceable
in accordance with its terms, except only as such enforcement may be
limited by bankruptcy, insolvency, reorganization, moratorium or other
similar laws affecting the enforcement of creditors' rights generally and
by general principles of equity (whether considered in a proceeding or
action in equity or at law), 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;
32. The Servicer 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 Seller, respectively;
33. 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 related Obligor (or, subject to Sec-
tion 2.4 hereof, are in the process of being recorded);
<PAGE>
34. Each SBA Loan conforms, and all such SBA Loans in the
aggregate conform, to the description thereof set forth in the Offering
Circular;
35. 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;
36. 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;
37. 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;
38. Each Mortgaged Property which is the primary collateral
for the related SBA Loan was, at the time of origination of such SBA Loan,
and to the best of the Seller's knowledge, is, as of the Cut-Off Date, free
of contamination from toxic substances or hazardous wastes that would have
a material adverse effect on either the value of the Mortgaged Property or
the ability of the Mortgagee to obtain rights and benefits intended to be
afforded by the related Mortgage;
39. The proceeds of the SBA Loan have been fully disbursed,
and there is no obligation on the part of the Seller to make future
advances thereunder. 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;
40. There is no obligation on the part of the Seller or any
other party (except for any guarantor of an SBA Loan) to make Monthly
Payments in addition to those made by the Obligor;
41. No statement, report or other document signed by the
Seller constituting a part of the SBA File contains any untrue statement of
material fact or omits to state a material fact necessary to make the
statements contained therein not misleading;
(aa) With respect to each Mortgage constituting a deed of
trust, a trustee, duly qualified under applicable law to serve as such, has
<PAGE>
been properly designated and currently so serves and is named in such Mort-
gage, and no fees or expenses are or will become payable by the Certif-
icateholders 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 and that is not a first mortgage loan, either (i) no consent for
the SBA Loan is required by the holder of any related Prior Lien or
(ii) such consent has been obtained;
(dd) Each SBA Loan was originated to a business located in the
State identified in the SBA Loan Schedule;
(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 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 Mort-
gage;
(gg) As of the Closing Date there is no material default (in
the case of a payment default, a payment more than 30 days past due),
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 neither the Servicer nor the Seller have
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;
<PAGE>
(ii) The SBA Loan was not selected for inclusion under this
Agreement from the Seller's portfolio of comparable SBA loans on any basis
which would have a material adverse effect on a Certificateholder; and
(jj) All amounts received after the Cut-Off Date with respect
to the SBA Loans have been, to the extent required by this Agreement,
deposited into the Principal and Interest Account and are, as of the
Closing Date, in the Principal and Interest Account.
(kk) At origination, the realizable value of the collateral
securing each SBA Loan, together with the amount of each personal guarantee
with respect thereto, equalled or exceeded 100% of the principal amount of
each SBA Loan.
Section 3.3 Purchase and Substitution of Defective
SBA Loans.
It is understood and agreed that the representations and
warranties set forth in Sections 3.1 and 3.2 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 Seller's best knowledge), the
party discovering such breach shall give prompt written notice to the
others. Within 60 days of the earlier of its discovery or its receipt of
notice of any breach of a representation or warranty, the Seller shall
(a) promptly cure such breach in all material respects, (b) purchase the
Unguaranteed Interest 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 2.5(b), or (c) remove such SBA Loan from
the Trust Fund (in which case it shall become a Deleted SBA Loan) and
substitute one or more Qualified Substitute SBA Loans. Any such substitu-
tion shall be accompanied by payment by the Seller of the Substitution
Adjustment, if any.
As to any Deleted SBA Loan for which the Seller substitutes a
Qualified Substitute SBA Loan or Loans, the Servicer shall effect such
substitution by delivering to the Trustee and the Note Custodian a
certification in the form attached hereto as Exhibit G, executed by a
Servicing Officer, and shall also deliver to the Trustee and the Note
Custodian, 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 Note
<PAGE>
Custodian's Fee and the Servicing Fee with respect to each 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 2.4 and 2.5, and the
Seller shall be deemed to have made with respect to such Qualified Substi-
tute SBA Loan or Loans, as of the date of substitution, the covenants,
representations and warranties set forth in Sections 3.1 and 3.2. 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 Section 2.5 and this Section 3.3, the Seller 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 Seller's representations and warranties contained in
this Agreement. It is understood and agreed that the obligations of the
Seller set forth in Sections 2.5 and 3.3 to cure, purchase or substitute
for a defective SBA Loan and to indemnify the Certificateholders and the
Trustee as provided in Sections 2.5 and 3.3 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 Servicer or the Seller relating
to or arising out of the breach of any representations and warranties made
in Section 2.5, 3.1 or 3.2 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.
<PAGE>
ARTICLE 2.
THE CERTIFICATES
Section 4.1 The Certificates.
The Class A and Class B Certificates shall be substantially in
the forms annexed hereto as Exhibits B-1 and B-2 and shall, upon original
issue, be executed and delivered by the Servicer to the Trustee for
authentication and redelivery to or upon the order of the Seller, upon re-
ceipt by the Trustee and the Note Custodian of the documents specified in
Section 2.4. All Certificates shall be executed on behalf of the Servicer
by its President, one of its Vice Presidents or one of its Assistant Vice
Presidents, 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
the proper officers 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. Each Certificate shall have a Note attached to it in the
form of Exhibit Q hereto.
Section 4.2 Registration of Transfer and Exchange
of Certificates.
1. The Certificate Registrar shall cause to be maintained
in accordance with the provisions of Section 4.5 a Certificate Register in
which, subject to such reasonable regulations as it may prescribe, the
Certificate Registrar shall provide for the registration of the Certifi-
cates and of transfers and exchanges of Certificates as herein provided.
The Trustee shall serve as the initial Certificate Registrar for the
purpose of registering transfers and exchanges of Certificates as herein
provided. The exchange, transfer and registration of Notes in the form of
Exhibit Q shall be made simultaneously with and only in conjunction with
the exchange, transfer and registration of the related Certificates.
2. No restrictions to transfer shall apply to the
transfer or registration of transfer of an Unlegended Definitive
Certificate to a transferee that takes delivery in the form of a Definitive
Certificate. By acceptance of a Legended Definitive Certificate, whether
upon original issuance or subsequent transfer, each Holder of such a
Certificate acknowledges the restrictions on the transfer of such Certifi-
cate set forth in the Securities Legend and agrees that it will transfer
such a Certificate only as provided herein.
The following restrictions shall apply with respect to the
transfer and registration of transfer of a Legended Definitive Certificate
<PAGE>
to a transferee that takes delivery in the form of a Definitive Certificate:
I. The Trustee shall register the transfer of a Legended Definitive
Certificate if the requested transfer is (x) to the Seller, an
affiliate (as defined in Rule 144(a)(1) under the Securities Act) of
the Seller or the Placement Agent or (y) being made by a transferor
who has provided the Trustee with a Rule 144A Certificate in the form
of Exhibit N hereto.
1. The Trustee shall register the transfer of a Legended
Definitive Certificate if (x) the transferor has advised the Seller and the
Trustee in writing that the Certificate is being transferred to an
Institutional Accredited Investor; and (y) prior to transfer the transferor
furnishes to the Trustee and the Seller a letter of the transferee substan-
tially in the form of Exhibit P hereto. In addition, the Seller or the
Trustee may as a condition of the registration of any such transfer require
the transferor to furnish such other certifications, legal opinions or
other information (at the transferor's expense) as it may reasonably
require to confirm that the proposed transfer is being made pursuant to an
exemption from, or in a transaction not subject to, the registration re-
quirements of the Securities Act and other applicable laws.
A transferee shall only be able to take delivery of an
Unlegended Definitive Certificate if and after the Seller submits to the
Trustee an Officers' Certificate of the Seller stating that the Securities
Legend is not required on such Definitive Certificate by applicable law.
Upon the Seller submitting such Officers' Certificate to the Trustee, the
Holder of such Certificate may submit such Certificate to the Trustee to
exchange such Certificate for an Unlegended Definitive Certificate and the
Trustee shall satisfy such request notwithstanding anything else herein to
the contrary, and delivery permitted herein of a Legended Definitive Cer-
tificate may be made in the form of an Unlegended Definitive Certificate.
1. Transfers of beneficial interests in the Book-Entry Certificates, or
transfers by Holders of Definitive Certificates to transferees that take
delivery in the form of beneficial interests in the Book-Entry Cer-
tificates, may be made only in accordance with this Section 4.2(c) and in
accordance with the rules of the Clearing Agency.
I. In the case of a beneficial interest in a Book-Entry Certificate
being transferred to an Institutional Accredited Investor, such
transferee shall be required to take delivery in the form of a
Definitive Certificate or Certificates and the Trustee shall register
such transfer only upon compliance with the provisions of Section
4.2(b)(ii), mutatis mutandis.
1. In the case of a beneficial interest in a Book-Entry
Certificate being transferred to a transferee that takes delivery in the
form of a Definitive Certificate or Certificates, except as set forth in
<PAGE>
clause (i) above, the Trustee shall register such transfer only upon
compliance with the provisions of Section 4.2(b)(i) or (ii), mutatis
mutandis.
2. In the case of a Definitive Certificate being transferred to a
transferee that takes delivery in the form of a beneficial interest in a
Book-Entry Certificate, the Trustee shall register such transfer if the
transferor has provided the Trustee with a Rule 144A Certificate in the
form of Exhibit N hereto.
3. No restrictions shall apply with respect to the transfer or
registration of transfer of a beneficial interest in a Book-Entry Certifi-
cate to a transferee that takes delivery in the form of a beneficial
interest in such Book-Entry Certificate.
1. An exchange of a beneficial interest in a Book-Entry Certificate for
a Definitive Certificate or Certificates, an exchange of a Definitive
Certificate or Certificates for a beneficial interest in a Book-Entry
Certificate and an exchange of a Definitive Certificate or Certificates for
another Definitive Certificate or Certificates (in each case, whether or
not such exchange is made in anticipation of subsequent transfer, and in
the case of a Book-Entry Certificate, so long as the Book-Entry Certificate
remains outstanding and is held by or on behalf of the Clearing Agency) may
be made only in accordance with this Section 4.2(d) and in accordance with
the rules of the Clearing Agency.
I. A Holder of a beneficial interest in a Book-Entry Certificate
may at any time exchange such beneficial interest for a Definitive
Certificate or Certificates of the same Class.
1. A Holder of a Definitive Certificate may exchange such
Certificate for a beneficial interest in the Book-Entry Certificate of the
same Class if such Holder furnishes to the Seller and to the Trustee a cer-
tificate substantially in the form of Exhibit O hereto.
2. A Holder of a Definitive Certificate may exchange such
Certificate for an equal aggregate principal amount of Definitive Certifi-
cates in different authorized denominations without any certification.
a. b. Upon acceptance for exchange or transfer of a
Definitive Certificate for a beneficial interest in the Book-Entry
Certificate of the same Class as provided herein, the Trustee shall cancel
such Definitive Certificate and shall request the Clearing Agency to
endorse on the schedule affixed to such Book-Entry Certificate (or on a
continuation of such schedule affixed to such Book-Entry Certificate and
made a part thereof) an appropriate notation evidencing the date of such
exchange or transfer and an increase in the principal amount of such Book-
Entry Certificate equal to the principal amount of such Definitive
Certificate exchanged or transferred therefor.
<PAGE>
c. Upon acceptance for exchange or transfer of a beneficial
interest in a Book-Entry Certificate for a Definitive Certificate of the
same Class as provided herein, the Trustee shall request the Clearing
Agency to endorse on the schedule affixed to such Book-Entry Certificate
(or on a continuation of such schedule affixed to such Book-Entry
Certificate and made a part thereof) an appropriate notation evidencing the
date of such exchange or transfer and a decrease in the principal amount of
such Book-Entry Certificate equal to the principal amount of such Definiti-
ve Certificate issued in exchange therefor or upon transfer thereof.
1. The following provisions shall apply to the placement of the
Securities Legend on any Definitive Certificate issued in exchange for or
upon transfer of another Definitive Certificate or of a beneficial interest
in a Book-Entry Certificate and to the removal of the Securities Legend
from any Legended Definitive Certificate.
I. Unless determined otherwise by the Seller in accordance with
applicable law, a Definitive Certificate issued upon transfer of or
exchange for a beneficial interest in a Book-Entry Certificate shall
bear the Securities Legend.
1. Upon the transfer, exchange or replacement of a Legended
Definitive Certificate, or upon specific request of a Holder of a Legended
Definitive Certificate for removal of the Securities Legend therefrom, the
Trustee shall deliver an Unlegended Definitive Certificate or Certificates
if there is provided to the Seller evidence reasonably satisfactory to the
Seller (which may include an Opinion of Counsel) that neither the Secu-
rities Legend nor the restrictions on transfer set forth therein are
required to ensure compliance with the Securities Act.
2. Upon the transfer, exchange or replacement of an Unlegended
Definitive Certificate, the Trustee shall deliver a Legended or Unlegended
Definitive Certificate or Certificates, as the Holder may request.
1. Each transferee of a Class B Certificate shall be deemed to have
agreed with and represented to the Seller and the Trustee that such Person
is not an employee benefit plan subject to ERISA or a plan or individual
retirement account subject to Section 4975 of the Code (an "ERISA Plan")
and has not used any assets of any such plan or account to acquire such
Certificate.
1. The provisions of this Section 4.2(h) shall be subject in
every respect to Sections 4.2(b) through (g). The Holder of a beneficial
interest in a Book-Entry Certificate may, subject to the rules and
procedures of the Clearing Agency, cause the Clearing Agency to notify the
Trustee in writing of a request for transfer or exchange of such beneficial
interest for a Definitive Certificate or Certificates. Every Certificate
presented or surrendered for registration of transfer or exchange shall (if
so required by the Seller, the Certificate Registrar or the Trustee) be
duly endorsed by, or be accompanied by a written instrument of transfer in
<PAGE>
form satisfactory to the Certificate Registrar duly executed by, the Holder
thereof or its attorney duly authorized in writing. Upon surrender for
registration of transfer of any Certificate at any office or agency of the
Seller maintained for such purpose pursuant to Section 4.5, the
Authenticating Agent or the Trustee shall execute and the Trustee or the
Authenticating Agent shall authenticate and deliver, in the name of the
designated transferee or transferees, one or more new Certificates of a
like aggregate original Percentage Interest of the same Class. The Trustee
may decline to accept any request for an exchange or registration of
transfer of any Certificate during the period commencing on any Record Date
and ending on the related Remittance Date. At the option of the Certif-
icateholders, Certificates may be exchanged for other Certificates of a
like aggregate original Percentage Interest of the same Class upon surren-
der of the Certificates to be exchanged at any such office or agency.
Whenever any Certificates are so surrendered for exchange, the Authenticat-
ing Agent or the Trustee shall execute and the Trustee or the Authenticat-
ing Agent shall authenticate, date and deliver the Certificates which the
Certificateholder making the exchange is entitled to receive.
1. No service charge shall be made to a Certificate-
holder for any registration of transfer or exchange of Certificates, but
the Certificate Registrar may require payment of a sum sufficient to cover
any tax or governmental charge that may be imposed in connection with any
registration of transfer or exchange of Certificates.
2. All Certificates surrendered for registration of
transfer or exchange shall be cancelled by the Certificate Registrar or the
Trustee in accordance with their standard procedures.
3. The Certificate Registrar shall provide to the
Trustee (unless the Trustee is acting as Certificate Registrar) (i) upon
receipt of a written request from the Trustee, notice of each registration
of transfer of a Certificate, (ii) an updated copy of the Certificate
Register at the beginning of each calendar quarter and (iii) upon receipt
of a written request therefor, a list of Holders of the Certificates.
Section 4.3 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 (which, in the
case of an insurance company, shall be limited to a letter of 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 Regis-
trar 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
<PAGE>
issuance of any new Certificate under this Section 4.3, 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 4.3 shall constitute complete and indefeasible
evidence of ownership in the Trust Fund, as if originally issued, whether
or not the mutilated, destroyed, lost or stolen Certificate shall be found
at any time.
Section 4.4 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 6.5 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.
Section 4.5 Maintenance of Office or Agency.
The Trustee shall maintain in New York City or the City of
Charlotte, North Carolina an office or agency where the Certificates may be
surrendered for registration of transfer or exchange and presented for
final distribution and where notices and demands in respect of the
Certificates and this Agreement may be served. The Trustee initially
appoints its corporate trust office in Charlotte, North Carolina as its
presenting agent for said purposes. The Certificate Registrar will give
prompt written notice to the Seller, the Servicer, the Trustee and the
Certificateholders of any change in the location of such office or agency.
Section 4.6 Book-Entry Certificates.
2. The Book-Entry Certificates upon original issuance (i) shall
be delivered by the Trustee in typewritten form to the initial Clearing
Agency, (ii) shall initially be registered on the Certificate Register in
the name of Cede & Co., the nominee of the initial Clearing Agency 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 corpora-
tion ("DTC"), to the Seller or its agent for registration of
transfer, exchange or payment, and any certificate issued is regis-
tered 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."
A Book-Entry Certificate may be deposited with such other
Clearing Agency as the Seller may from time to time designate, and shall
bear such legend as may be appropriate; provided that such successor Clear-
<PAGE>
ing Agency maintains a book-entry system that qualifies to be treated as
"registered form" under Section 163(f)(3) of the Code.
3. If at any time the Clearing Agency for the Book-Entry
Certificates notifies the Depositor or the Trustee that it is unwilling or
unable to continue as Clearing Agency for the Book-Entry Certificates or if
at any time the Clearing Agency shall no longer be eligible to act as such
under this Section 4.6, the Seller shall appoint a successor Clearing Agen-
cy with respect to the Book-Entry Certificates. Any such successor Clear-
ing Agency must maintain a book-entry system that qualifies under Section
163(f)(3) of the Code. If a successor Clearing Agency for such Book-Entry
Certificate is not appointed by the Seller within 90 days after the Seller
receives such notice or a copy thereof from the Trustee or becomes aware of
such ineligibility or unwillingness, the Seller's election pursuant to this
Section 4.6 that such Certificates be represented by Book-Entry Certifi-
cates shall no longer be effective and the Servicer shall execute and the
Trustee and/or the Authenticating Agent shall authenticate and deliver Def-
initive Certificates of the same Class and in any authorized denominations
having an aggregate Percentage Interest equal to the aggregate Percentage
Interest of such Book-Entry Certificates in exchange for such Book-Entry
Certificate.
If the Trustee has instituted or has been directed to institute
any judicial proceeding in a court to enforce the rights of the
Certificateholders under the Certificates, and the Trustee has been advised
by counsel that in connection with such proceeding it is necessary or
appropriate for the Trustee to obtain possession of the Certificates, the
Certificates represented by the Book-Entry Certificates shall no longer be
represented by such Book-Entry Certificates. In such event, the Servicer
shall execute and the Trustee and/or the Authenticating Agent shall
authenticate and deliver, in exchange for the Book-Entry Certificates,
Definitive Certificates of the same Class, in authorized denominations, in
an aggregate Percentage Interest equal to the Percentage Interest
represented by such Book-Entry Certificates.
4. The Book-Entry Certificates shall in all respects be
entitled to the same benefits under this Agreement as Definitive
Certificates authenticated and delivered hereunder.
5. Beneficial interests in the Book-Entry Certificate will be
sold in minimum denominations of $100,000 and integral multiples of $1,000
above such minimum amount. Owners of a beneficial interest in the Book-
Entry Certificate will be entitled to receive physical delivery of Definit-
ive Certificates only as provided herein. The Definitive Certificates will
be sold in minimum denominations of $100,000 and in integral multiples of
$1,000 above such minimum amount.
<PAGE>
6. The Seller, the Servicer, the Paying Agent, the Certificate
Registrar and the Trustee may deal with the Clearing Agency and the
Clearing Agency Participants for all purposes (including the making of
distributions on the Certificates of each Class) as the authorized repre-
sentatives of the Certificate Owners;
7. To the extent that the provisions of this Section 4.6
conflict with any other provisions of this Agreement, the provisions of
this Section 4.6 shall control with respect to each affected Certificate.
8. The rights of Certificate Owners of Book-Entry Certificates
shall be exercised only through the Clearing Agency and the applicable
Clearing Agency Participants and shall be limited to those established by
law and agreements between such Certificate Owners and the Clearing Agency
and/or the Clearing Agency Participants. Pursuant to the Depository
Agreement applicable to each Class of Book-Entry Certificates, except to
the extent that Definitive Certificates of such Class are issued, the ini-
tial Clearing Agency will make book-entry transfers among the Clearing
Agency Participants and receive and transmit distributions of principal and
interest on such Book-Entry Certificates to such Clearing Agency Partici-
pants.
Section 4.7 Rule 144A Information. Upon request of any Holder
of a Certificate or of any beneficial interest therein, if the Trust is at
the time of such request not subject to the reporting requirements of sec-
tion 13 or 15(d) of the Exchange Act, the Servicer shall promptly furnish
Rule 144A Information to such Holder or to a prospective purchaser of such
Certificate designated by such Holder in order to permit compliance by such
Holder with Rule 144A in connection with the resale of such Certificate by
such Holder.
Section 4.8 Notices to Clearing Agency. Whenever notice or
other communication to the Certificate Owners of Book-Entry Certificates is
required under this Agreement, except to the extent that Definitive Certi-
ficates shall have been issued to Certificate Owners, the Servicer or the
Trustee shall give all such notices and communications specified herein to
be given to the Certificate Owners of Book-Entry Certificates to the Clear-
ing Agency for distribution to the Certificate Owners of such Book-Entry
Certificates.
Section 4.9 Definitive Certificates. If (i) (A) the Seller
advises the Trustee in writing that the Clearing Agency is no longer
willing or able to discharge properly its responsibilities under the appli-
cable Depository Agreement or the Trustee is so advised by the Clearing
Agency in writing, and (B) the Seller is unable to locate a qualified
successor, or (ii) Certificate Owners of a Class representing beneficial
interests aggregating not less than 50% of the aggregate Percentage
Interest of such Class advise the Trustee and the applicable Clearing
Agency through the applicable Clearing Agency Participants in writing that
the continuation of a book-entry system through the applicable Clearing
Agency is no longer in the best interests of the Certificate Owners of such
Class, the Trustee shall notify all Certificate Owners of such Class,
<PAGE>
through the applicable Clearing Agency Participants, of the occurrence of
any such event and of the availability of Definitive Certificates to
Certificate Owners of such Class requesting the same. Upon surrender to
the Certificate Registrar of the Certificates of such Class by the applica-
ble Clearing Agency accompanied by registration instructions from the
applicable Clearing Agency for registration, the Certificate Registrar
shall issue the Definitive Certificates of such Class. Neither the Deposi-
tor, the Borrower, the Certificate Registrar nor the Trustee shall be
liable for any delay in delivery of such instructions and may conclusively
rely on, and shall be protected in relying on, such instructions. Upon the
issuance of Definitive Certificates of such Class, all references herein to
obligations imposed upon or to be performed by the applicable Clearing
Agency shall be deemed to be imposed upon and performed by the Paying Agent
and the Certificate Registrar, to the extent applicable with respect to
such Definitive Certificates, and the Trustee, the Paying Agent and the
Certificate Registrar shall recognize the Holders of the Definitive Certi-
ficates of such Class as Certificateholders of such Class hereunder.
Section 4.10. Lists of Certificateholders. At such time, if
any, as Book-Entry Certificates are no longer outstanding, if three or more
Certificateholders or any Certificateholder holding 5% or more of the
Percentage Interest (i) request in writing from the Trustee a list of names
and addresses of Certificateholders, (ii) state that such Certificate-
holders desire to communicate with other Certificateholders with respect to
their rights hereunder or under the Certificates, and (iii) provide a copy
of the communication which such Certificateholders propose to transmit (for
information purposes and not review), then the Trustee shall, within 10
Business Days after the receipt of such request, afford the requesting Cer-
tificateholders access during normal business hours to the list of the
Certificateholders held by the Trustee, if any, as of the most recent
Record Date. If such Record Date list is as of a date more than 90 days
prior to the date of receipt of such Certificateholders' request, the
Trustee shall promptly prepare or cause to be prepared a current list and
promptly afford the requesting Certificateholders access to the new list
upon its receipt by the Trustee. The expense of providing any such infor-
mation requested by the requesting Certificateholders shall be borne by
such Certificateholders and shall not be borne by the Trustee.
<PAGE>
ARTICLE 1.
ADMINISTRATION AND SERVICING OF SBA LOANS
Section 5.1 Duties of the Servicer.
I. 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 pay-
ment 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 5.1(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 or wilful
misconduct.
1. The Servicer, as independent contract servicer, shall
service and administer the SBA Loans and shall have full power and
authority, acting alone, to do any and all things in connection with
such servicing and administration which the Servicer may deem necessary
or desirable and consistent with the terms of this Agreement, the Multi-
Party Agreement and the SBA Rules and Regulations. The Servicer may
enter into Subservicing Agreements for any servicing and administration
of SBA Loans with any entity approved with prior written consent by the
SBA. Any such Subservicing Agreement shall be consistent with and not
<PAGE>
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 Loans or
enter into a Subservicing Agreement with a successor subservicer which
qualifies hereunder.
2. Notwithstanding any Subservicing Agreement, any of the
provisions of this Agreement relating to agreements or arrangements
between the Servicer and Subservicer or reference to actions taken
through a Subservicer or otherwise, the Servicer shall remain obligated
and primarily liable to the Trustee, the SBA and the Certificateholders
for the servicing and administering of the SBA Loans in accordance with
the provisions of this Agreement, 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.
3. 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 Sec-
tion 5.1(e).
4. 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 10.2 hereof, 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 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
<PAGE>
otherwise use its best efforts to effect the orderly and efficient
transfer of the Subservicing Agreements to the assuming party.
5. Consistent with the terms of this Agreement, 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 Sec-
tion 5.9), 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.
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 Certifi-
cateholders be added to the amount owing under the related SBA Loan.
Without limiting the generality of the foregoing, 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 re-
lease, 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 Certifi-
cateholder and/or the Trustee shall furnish the Servicer, within 5 Busi-
ness 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 G 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 management procedures) and exercise the
same care that it customarily employs and exercises in servicing and admin-
istering SBA loans for its own account, in accordance with the SBA Rules
and Regulations and giving due consideration to the Certificateholders' and
the SBA's reliance on the Servicer.
6. 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 9.4, after receipt of the Opinion of
<PAGE>
Counsel required pursuant to Section 9.4 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 10.2 hereof. 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.
Section 5.2 Liquidation of SBA Loans.
In the event that any payment due under any SBA Loan and not
postponed pursuant to Section 5.1 is not paid when the same becomes due and
payable, or in the event the Obligor fails to perform any other covenant or
obligation under the SBA Loan, the Servicer shall take such action in
accordance with the SBA Rules and Regulations as it shall deem to be in the
best interests of the Certificateholders and the SBA. With respect to any
such SBA 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 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 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 except in the event the
Trustee is serving as successor to the Servicer hereunder. Subject to the
SBA Rules and Regulations and with the prior written consent of the SBA,
the Servicer shall foreclose upon or otherwise comparably effect the owner-
ship in the name of the SBA of Mortgaged Properties or other Collateral
relating to defaulted SBA Loans as to which no satisfactory arrangements
can be made for collection of delinquent payments in accordance with the
provisions of Section 5.8. In the event, the Trustee is successor to the
Servicer, it shall not foreclose on any Mortgaged Properties without the
SBA's prior written consent. In connection with any foreclosures or other
conversions, the Servicer shall exercise collection and foreclosure proce-
dures with the same degree of care and skill in its exercise or use as it
would exercise or use under the circumstances in the conduct of its own
affairs. The Unguaranteed Percentage of any amounts advanced in connection
with such foreclosure or other action shall constitute "Servicing
Advances." The Servicer shall take into account the existence of any
hazardous substances, hazardous wastes or solid wastes on Mortgaged Proper-
ties in determining whether to foreclose upon or otherwise comparably
convert the ownership of such Mortgaged Property, and will not foreclose on
a Mortgaged Property where it has cause to believe such substances exist
unless it had received a Phase 1 environmental report and such report
suggests that the benefits of foreclosure outweigh the costs. In the event
the Trustee is serving as successor to the Servicer hereunder it shall not
be required to foreclose on any Mortgaged Properties unless it shall have
received a Phase I environmental report indicating no environmental
<PAGE>
problems and it shall have received adequate indemnification from the SBA
or the Certificateholders against any claims, losses or expenses from
potential liability from any environmental contamination.
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 H, detailing the Liquidation Proceeds received
from the Liquidated SBA Loan, expenses incurred with respect thereto, and
any loss incurred in connection therewith.
Section 5.3 Establishment of Principal and
Interest Accounts; Deposits in
Principal and Interest Accounts.
1. The Servicer shall cause to be established and maintained one or more
Principal and Interest Accounts, in one or more Designated Depository
Institutions (provided, however, that one or more Principal and Interest
Accounts may be established and maintained with First Union National Bank
of North Carolina so long as First Union National Bank of North Carolina
remains a Designated Depository Institution), 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 Instru-
ments, titled "Emergent Business Capital, Inc., in trust for the registered
holders of Emergent SBA Loan-Backed Adjustable Rate Certificates, Series
1995-1, Class A and Class B." Such Principal and Interest Accounts shall
be insured by the BIF or SAIF administered by the FDIC to the maximum
extent provided by law. The creation of any Principal and Interest Account
shall be evidenced by a letter agreement in the form of Exhibit C hereto.
A copy of such letter agreement shall be furnished to the
Trustee, the SBA and, upon request, any Certificateholder.
1. 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;
A. 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 Holder, the SBA Fiscal Agent's Fee, any Additional Fee
and the Servicing Fee with respect to each SBA Loan and other servicing
compensation payable to the Servicer as permitted herein) including
reimbursement of Monthly Advances and Servicing Advances;
B. the Unguaranteed Percentage of all Net Liquidation Proceeds;
<PAGE>
C. 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);
D. the Unguaranteed Percentage of all Released Mortgaged Property
Proceeds;
E. 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 2.5 and 3.3;
F. any amount required to be deposited in the Principal and Interest
Account pursuant to Section 5.4 or 5.8; and
G. the amount of any losses incurred in connection with investments in
Permitted Instruments.
1. The foregoing requirements for deposit in the Principal and Interest
Account shall be exclusive, it being understood and agreed that, without
limiting the generality of the foregoing, payments with respect to the
Guaranteed Interest and the Servicing Fee with respect to each SBA Loan and
to the extent received and permitted by Section 7.2, together with the
difference between any Liquidation Proceeds and the related Net Liquidation
Proceeds, need not be deposited by the Servicer in the Principal and
Interest Account.
1. Any interest earnings on funds held in the Principal and
Interest Account paid by a Designated Depository Institution shall be for
the account of the Servicer and may only be withdrawn from the Principal
and Interest Account by the Servicer immediately following its monthly
remittance to the Trustee pursuant to Section 5.4(b). Any reference herein
to amounts on deposit in the Principal and Interest Account shall refer to
amounts net of such investment earnings.
Section 5.4 Permitted Withdrawals From the
Principal and Interest Account.
The Servicer shall withdraw funds from the Principal and
Interest Account for the following purposes:
2. to reimburse itself for any accrued and unpaid Monthly
Advances provided, however, that the Servicer shall reimburse itself for
Monthly Advances attributable to the fact that a month has fewer than 30
days out of interest collections attributable to a month that has more than
30 days;
3. 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 net of
<PAGE>
Compensating Interest, Monthly Advances and amounts then on deposit in the
Spread Account;
4. to reimburse itself for any accrued and unpaid Servicing
Fees and for unreimbursed Servicing Advances to the extent deposited in the
Principal and Interest Account (and not netted from Monthly Payments
received); provided, however, that the Servicer's right to such reimburse-
ment pursuant hereto shall be subordinate to the rights of the Registered
Holders;
5. 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;
I. II. to make investments in Permitted Instruments and a) to pay to
itself, as permitted by Section 5.3(d), interest paid in respect of
Permitted Instruments or by a Designated Depository Institution on funds
deposited in the Principal and Interest Account;
1. 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;
1. to pay itself servicing compensation pursuant to
Section 7.2 hereof or interest as permitted under the definition of Excess
Proceeds; and
2. 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 5.3(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 follow-
ing 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 "Emergent Business
Capital, Inc., in trust for the registered holders of Emergent SBA Loan-
Backed Adjustable Rate Certificates, Series 1995-1." 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
<PAGE>
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 5.5 Transfer of Accounts.
The Servicer may, upon written notice to the Trustee and the
SBA, transfer any Principal and Interest Account to a different Designated
Depository Institution.
Section 5.6 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 repre-
senting 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 in
accordance with 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 Proper-
ty, 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 5.4. 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 5.7 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 $2,50,000, and a maximum
deductible of $25,000, 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 Employ-
<PAGE>
ees"). The fidelity bond shall insure the Trustee, its officers and
employees against losses resulting from forgery, theft, embezzlement or
fraud by such Servicer Employees. The errors and omissions policy shall
insure against losses resulting from the errors, omissions and negligent
acts of such Servicer Employees. No provision of this Section 5.7 requir-
ing 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 Aetna Casualty
and Surety Company.
Section 5.8 Title, Management and Disposition
of Foreclosed Property.
In the event that title to a Mortgaged Property is acquired in
foreclosure or by deed in lieu of foreclosure (a "Foreclosed Property"),
the deed or certificate of sale shall be taken in the name of the SBA.
Unless the servicing of a Foreclosed Property is assumed by the
SBA pursuant to the SBA Rules and Regulations, the Servicer, subject to
Sections 5.1 and 5.2 hereof, shall manage, conserve, protect and operate
each Foreclosed Property 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 in the same manner
that it manages, conserves, protects and operates other foreclosed property
for its own account, and in the same manner that similar property in the
same locality as the Foreclosed Property 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 net
of Servicing Advances.
The disposition of Foreclosed Property shall be carried out by
the Servicer at such price, and upon such terms and conditions, as the
Servicer, with SBA concurrence, 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 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 5.4, 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
<PAGE>
to be distributed to the Certificateholders in accordance with Section 6.5
hereof.
In the event any Mortgaged Property 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 within two years
after its acquisition unless the Servicer and the Trustee shall have
received an Opinion of Counsel also addressed to the SBA with respect to
such longer retention.
Section 5.9 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, to the extent such procedures shall be consistent with this
Agreement, 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 which the Servicer would be entitled to retain
hereunder as servicing compensation and extend the due date for payments
due on an SBA Note for a period (with respect to each payment as to which
the due date is extended) not greater than 180 days after the initially
scheduled due date for such payment provided that the Servicer determines
such extension would not be considered a new mortgage loan for federal
income tax purposes. In the event the Servicer shall consent to the
deferment of the due dates for payments due on an SBA Note, the Servicer
shall nonetheless make payment of any required Monthly Advance with respect
to the payments so extended to the same extent as if such installment were
due, owing and delinquent and had not been deferred, and shall be entitled
to reimbursement therefor in accordance with Section 5.4(b) hereof.
Section 5.10 Access to Certain Documentation and
Information Regarding the SBA Loans.
The Servicer shall provide to the Trustee, the SBA, the Cer-
tificateholders, the FDIC, the Office of Thrift Supervision 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.
Section 5.11 Superior Liens.
If the Servicer is notified that any superior lienholder has
accelerated or intends to accelerate the obligations secured by a Prior
Lien, or has declared or intends to declare a default under the mortgage or
the promissory note secured thereby, or has filed or intends to file an
election to have the Mortgaged Property sold or foreclosed, the Servicer
shall take, on behalf of the SBA and the Trust Fund, whatever actions are
necessary to protect the interests of the Certificateholders and the SBA,
<PAGE>
and/or to preserve the security of the related SBA Loan. The Servicer
shall immediately notify the Trustee and the SBA of any such action or
circumstances. The Servicer will advance the necessary funds to cure the
default or reinstate the superior lien, if such advance is in the best
interests Certificateholders and the SBA. The Servicer shall thereafter
take such action as is necessary to recover the amount so advanced.
<PAGE>
ARTICLE 1.
PAYMENTS TO THE CERTIFICATEHOLDERS
Section 6.1 Establishment of
Certificate Account; Deposits in Certificate
Account; Permitted Withdrawals from
Certificate Account.
I. No later than the Closing Date, the Trustee will establish and
maintain with itself in its trust department a trust account titled
"Certificate Account, First Union National Bank of North Carolina, as
trustee for the registered holders of Emergent SBA Loan-Backed
Adjustable Rate Certificates, Series 1995-1, Class A and Class B"
(the "Certificate Account"). The Trustee shall, promptly upon re-
ceipt, deposit in the Certificate Account and retain therein:
A. 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;
B. the Compensating Interest and the portion of the Monthly
Advance remitted to the Trustee by the Servicer;
C. amounts transferred from the Spread Account pursuant to
Section 6.2(b)(i); and
D. amounts required to be paid by the Servicer pursuant to
Section 6.4(e) in connection with losses on investments of amounts in
the Certificate Account.
1. 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 6.5(b)
and thereafter by the following parties in no particular order of
priority:
E. by the Trustee, to invest amounts on deposit in the
Certificate Account in Permitted Instruments pursuant to Section 6.4;
F. by the Trustee, to pay on a monthly basis to the Servicer as
additional servicing compensation interest paid and earnings realized on
Permitted Instruments;
G. by the Trustee, to withdraw any amount not required to be
deposited in the Certificate Account or deposited therein in error; and
H. by the Trustee, to clear and terminate the Certificate Account
upon the termination of this Agreement in accordance with the terms of
Section 11.1 hereof.
<PAGE>
Section 6.2 Establishment of Spread Account;
Deposits in Spread Account; Permitted
Withdrawals from Spread Account.
1. 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
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 Deposit made by the Spread
Account Depositor;
J. on each Remittance Date, that portion of the Available Funds,
if any, required to be deposited into the Spread Account pursuant to
Section 6.5(b)(vii) until the Spread Balance equals the then applicable
Specified Spread Account Requirement; and
K. amounts required to be paid by the Servicer pursuant to
Section 6.4(e) in connection with losses on investments of amounts in
the Spread Account.
1. 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:
L. to deposit in the Certificate Account an amount by which (a)
the sum of the Class A and Class B Interest Distribution Amounts, the
Class A and Class B Principal Distribution Amounts and the Class A and
Class B Carry Forward Amounts exceeds (b) the Available Funds for such
Remittance Date (but excluding from such definition of Available Funds,
amounts in the Spread Account);
M. to deposit in the Certificate Account the amount, if any,
required to make the full distribution to the Expense Account pursuant
to Section 6.5(b)(v); and
N. to the extent that the amount then on deposit in the Spread
Account after giving effect to all required transfers from the Spread
Account to the Certificate Account on such Remittance Date then exceeds
the Specified Spread Account Requirement as of such Remittance Date
(such excess, a "Spread Account Excess"), an amount equal to such Spread
Account Excess shall be distributed by the Spread Account Custodian to
the Spread Account Depositor;
and also, in no particular order of priority:
<PAGE>
O. to invest amounts on deposit in the Spread Account in
Permitted Instruments pursuant to Section 6.4;
P. to withdraw any amount not required to be deposited in the
Spread Account or deposited therein in error; and
Q. to clear and terminate the Spread Account upon the termination
of this Agreement in accordance with the terms of Section 11.1.
1. 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 6.4(b).
Section 6.3 Establishment of Expense Account;
Deposits in Expense Account; Permitted
Withdrawals from Expense Account.
2. 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:
R. 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
S. upon receipt, amounts required to be paid by the Servicer
pursuant to Section 6.4(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.
Thereafter, the Servicer shall be entitled to reimbursement from the
Expense Account for the amount of any such advance from any excess funds
available pursuant to subclause (c)(ii) below. Without limiting the
obligation of the Servicer to advance such insufficiency, in the event the
Servicer does not advance the full amount of such insufficiency by the
Business Day immediately preceding the Determination Date, the amount of
such insufficiency shall be deposited into the Expense Account for payment
to the Trustee pursuant to Section 6.5(b)(iii), to the extent of available
funds in the Certificate Account.
1. The Trustee may invest amounts on deposit in the Expense
Account in Permitted Instruments pursuant to Section 6.4 hereof, and the
Trustee shall withdraw amounts on deposit in the Expense Account to:
<PAGE>
T. pay the Trustee's fees and expenses as described in Section
2.7 hereof;
U. pay on a monthly basis to the Servicer as additional servicing
compensation interest paid and earnings realized on Permitted
Instruments;
V. withdraw any amounts not required to be deposited in the
Expense Account or deposited therein in error; and
W. clear and terminate the Expense Account upon the termination
of this Agreement in accordance with the terms of Section 11.1.
1. 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):
X. reimburse the Servicer and/or the Seller, for reimbursable
advances made pursuant to Section 9.1;
Y. reimburse the Servicer for advances made by it pursuant to the
last paragraph of subclause (a) above; and
Z. 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 6.4 Investment of Accounts.
1. 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 held 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 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.
<PAGE>
2. 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.
3. Subject to Section 12.1 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).
4. 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.
5. 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 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 re-
ceipt by the Servicer of such notice.
Section 6.5 Distributions.
6. 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.
7. 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 6.1(a)(i), (ii) and (iv)
and (B) the amounts deposited therein pursuant to Section 6.2(b)(i) and
make distributions thereof in the following order of priority:
AA. First, to the Class A Certificates in an amount up to the
Class A Interest Distribution Amount;
BB. Second, to the Class A Certificates in an amount up to the
sum of (a) the Class A Principal Distribution Amount and (b) the Class A
Carry Forward Amount;
<PAGE>
CC. Third, 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 6.3(a) resulting from insufficiencies
in the Expense Account;
DD. Fourth, to the Class B Certificates in an amount up to the
Class B Interest Distribution Amount;
EE. Fifth, to the Class B Certificates, in an amount up to the
sum of (a) the Class B Principal Distribution Amount and (b) the Class B
Carry Forward Amount;
FF. Sixth, to the Servicer in an amount up to the Reimbursable
Amounts;
GG. Seventh, to the Spread Account, any remaining Available Funds
unless and until the amount therein equals the Specified Spread Account
Requirement; and
HH. Eighth, to the Spread Account Depositor, any amounts in
excess of the Specified Spread Account Requirement;
provided however, that no distribution to the Class B
Certificateholders pursuant to clauses (iii) and (iv) above shall be made
unless the amount on deposit in the Spread Account equals the Specified
Spread Account Requirement; provided further that in the case of clauses
(i), (ii), (iv) and (v) above, principal received on an SBA Loan will be
used first to pay all principal due on the Class A or Class B Certificates
and then may be used to pay interest on the Class A or Class B Certificates
and interest received on an SBA Loan will only be used to pay interest on a
Class A or Class B Certificate.
In the event the Trustee is serving as successor to the
Servicer hereunder, all claims, demands, actions, suits, judgments, costs,
losses and expenses of any kind asserted against or incurred by Trustee in
such capacity (including legal fees and expenses to defend such claims or
suits) in any way related to or arising from its role as successor Servicer
hereunder, including but not limited to the origination, ownership,
possession, repossession, sale, foreclosure, liquidation, redemption, other
disposition of the Collateral or enforcement of any SBA Loans or rights
pursuant thereto shall be payable to the Trustee before any distributions
pursuant to this Section are made. In addition, in the event the Trustee
is serving as successor to the Servicer hereunder, all costs and expenses
incurred by the Trustee as successor to the Servicer in connection with or
related to the following servicing activities shall be reimbursable to the
Trustee before any other distribution pursuant to this Section is made:
(i) enforcing payment under any SBA Loan whether by foreclosure of a
Mortgage Property or other Collateral or 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 rights and remedies provided by the SBA Note, Mortgage or other
<PAGE>
agreement securing Collateral or otherwise available at law or equity; (ii)
obtaining the annual accountant's report required by Section 7.5 hereof;
(iii) maintaining the insurance required pursuant to Section 5.7 hereof;
(iv) liquidating SBA Loans pursuant to Section 5.2 hereof; (v) managing,
conserving, protecting and operating any Foreclosed Property pursuant to
Section 5.10 hereof; (vi) satisfying or discharging superior liens in
accordance with Section 5.14 hereof; (vii) preparing and filing any tax re-
turns required by Section 12.12 hereof, (viii) all legal fees and expenses
reasonably incurred in connection with the foregoing servicing activities;
and (ix) any other extraordinary expenses reasonably incurred in connection
with servicing the SBA Loans for the benefit of the Certificateholders.
1. 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, 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 6.6 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 the Serv-
icer's Monthly Computer Tape or such other machine readable media mutually
agreeable by the Servicer and the Trustee in the form attached hereto as
Exhibit J (both in hard copy and in computer tape form or such other
machine readable media mutually agreeable by the Servicer and the Trustee)
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 Certifi-
cates, the date of this Agreement, and, as of the close of business on the
Record Date for such month (and, for the first six Remittance Dates,
accompanied by a report verifying the mathematical accuracy of the amounts
shown in the Servicer's Certificate and that such amounts were computed in
accordance with the terms of this Agreement from a firm of nationally
recognized independent public accountants reasonably acceptable to the
Trustee):
II. Available Funds for the related Remittance Date;
<PAGE>
JJ. The Aggregate Class A Certificate Principal Balance, the
Aggregate Class B Certificate Principal Balance and the Pool Principal
Balance as reported in the prior Servicer's Certificate pursuant to sub-
clause (xii) below, or, in the case of the first Determination Date, the
Original Class A and Class B Certificate Principal Balance and the
Original Pool Principal Balance;
KK. The number and Principal Balances of all SBA Loans which were
the subject of Principal Prepayments during the Due Period;
LL. The product of the Unguaranteed Percentage multiplied by all
Curtailments which were received during the Due Period;
MM. 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;
NN. The aggregate amount of interest received on each SBA Loan
net of the SBA Fiscal Agent's Fee, the Additional Fee and the portion
thereof payable to the Registered Holders;
OO. 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;
PP. The delinquency and foreclosure information set forth in the
form attached hereto as Exhibit I;
QQ. The product of the Unguaranteed Percentage multiplied by the
amount of any losses realized on a Liquidated SBA Loan;
RR. The Class A and Class B Interest Distribution Amounts and
Principal Distribution Amounts for the Remittance Date with the
components thereof stated separately;
SS. The amount 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 6.2(b)(i);
TT. The Aggregate Class A Certificate Principal Balance,
Aggregate Class B Certificate Principal Balance and the Pool Principal
Balance after giving effect to the distribution to be made on the Remit-
tance Date;
UU. The Specified Spread Account Requirement with respect to such
Remittance Date;
VV. The weighted average maturity and weighted average SBA Loan
Interest Rate;
<PAGE>
WW. The Servicing Fees and amounts to be deposited to the Expense
Account;
XX. The amount of all payments and reimbursements to the Servicer
pursuant to Section 5.4(c), (d), (e)(ii), (f) and (g) or any other
Reimbursable Amounts;
YY. The Class A and Class B Remittance Rates with respect to such
Remittance Date; and
ZZ. Such other information as the Certificateholders or the
Rating Agency may reasonably require.
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 6.1(a)(iv); and the amounts which are reimbursable to
the Servicer or the Seller pursuant to Sections 6.3(c)(i), 6.3(c)(ii) and
6.5(b)(vi) (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.
1. 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 an annual 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 informa-
tion shall be provided by the Servicer pursuant to any requirements of
the Code as from time to time are in force.
2. 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
the Office of Thrift Supervision or other regulatory authorities with
respect to investment in the Certificates.
<PAGE>
3. 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 Certificate-
holder 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 6.7 Advances by the Servicer.
Not later than the close of business on each Determination
Date, the Servicer shall remit to the Trustee for deposit in the Certifi-
cate Account an amount (as indicated in the Servicer's Certificate prepared
pursuant to Section 6.6), to be distributed on the related Remittance Date
pursuant to Section 6.5, equal to the amount by which (i) 30 days' interest
at a rate equal to the then applicable Adjusted SBA Loan Remittance Rate on
the aggregate Class A and Class B Principal Balances immediately prior to
the related Remittance Date (plus or minus the difference, if any, between
(A) the sum of the Class A and Class B Interest Distribution Amounts and
(B) the sum of the Adjusted Class A and Adjusted Class B Interest Distri-
bution 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 and the SBA Fiscal Agent's Fee, such excess being defined herein as
the "Monthly Advance." The Servicer may reimburse itself for Monthly
Advances made pursuant to Section 5.4.
Notwithstanding anything herein to the contrary, the Servicer
shall not be obligated to make a Monthly Advance in respect of any SBA Loan
if, in its reasonable judgment the Servicer determines that the amount of
such proposed Monthly Advance will not be recoverable from Liquidation
Proceeds, Released Mortgaged Property Proceeds, Insurance Proceeds or
otherwise in respect of the SBA Loans (any such Monthly Advance, a
"Nonreimbursable Monthly Advance"). Any determination by the Servicer that
a Monthly Advance would constitute a Nonreimburseable Monthly Advance shall
be evidenced by an Officers' Certificate of the Servicer delivered to the
Trustee setting out in reasonable detail the reason for such determination.
Section 6.8 Compensating Interest.
The Certificateholders shall be entitled to a full month's
interest on the principal portion of the Unguaranteed Interest of each SBA
Loan at the then applicable Class A or Class B Remittance Rate, as the case
may be. Not later than the close of business on each Determination Date,
with respect to each SBA Loan for which a Principal Prepayment or Curtail-
ment was received during the related Due Period, the Servicer shall remit
<PAGE>
to the Trustee for deposit in the Certificate Account from amounts
otherwise payable to it as servicing compensation, an amount (such amount
required to be delivered to the Trustee is referred to herein as "Compen-
sating Interest") (as indicated in the Servicer's Certificate prepared
pursuant to Section 6.6) equal to the difference between (a) 30 days'
interest at the Adjusted SBA Loan Remittance Rate on the Principal Balance
of each such SBA Loan as of the beginning of the Due Period applicable to
the Remittance Date on which such amount will be distributed, and (b) the
amount of interest actually received on each such SBA Loan for such Due
Period net of the portion thereof payable to the Registered Holder, the SBA
Fiscal Agent's Fee, the Servicing Fee, the Excess Spread and the fees and
expenses of the Trustee allocable to such interest.
Section 6.9 Reports of Foreclosure and
Abandonment of Mortgaged Property.
Each year the Servicer shall prepare the reports of foreclo-
sures and abandonments of any Mortgaged Property required by Section 6050J
of the Code. In order to facilitate this reporting process, the Servicer,
on or before February 15th of each year, will prepare reports relating to
each instance occurring during the previous calendar year in which the
Servicer (i) on behalf of the Trust Fund acquires an interest in a Mort-
gaged Property through foreclosure or other comparable conversion in full
or partial satisfaction of the SBA Loan, or (ii) knows or has reason to
know that a Mortgaged Property has been abandoned.
<PAGE>
ARTICLE
1.
GENERAL SERVICING PROCEDURE
Section 7.1 Satisfaction of Mortgages
and Collateral and Release of SBA Files.
The Servicer shall maintain the Fidelity Bond as provided for
in Section 5.7 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 promptly provide the
Note Custodian and the Trustee with a certification in the form of
Exhibit G 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 5.3 have been or will be so deposited)
of a Servicing Officer and shall request placement of it in the Trustee's
Document File. Upon receipt of such certification and request, the Note
Custodian 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.
From time to time and as appropriate for the servicing or
foreclosure of any SBA Loan, the Note Custodian and the Trustee shall, upon
request of the Servicer and delivery to the Note Custodian and the Trustee
of a certification in the form of Exhibit G attached hereto signed by a
Servicing Officer, release the related Trustee's Document File to the
Servicer within 3 Business Days, and the Trustee and the Note Custodian
shall execute such documents as shall be necessary to the prosecution of
any such proceedings. Such servicing receipt shall obligate the Servicer
to return the Trustee's Document File to the Note Custodian 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 have 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 of initiating or pursuing legal action or other proceedings for
the foreclosure of the Mortgaged Property or other Collateral either
judicially or non-judicially, and the Servicer has delivered to the Note
Custodian and the Trustee a certificate of a Servicing Officer certifying
as to the name and address of the Person to which 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
<PAGE>
was liquidated, the servicing receipt shall be released by the Note
Custodian and 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 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 Servic-
ing 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 mail or deliver, 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 proceeds of the related SBA Loan have been collected
in full by or on behalf of the Obligor and that such proceeds have been
deposited in the Principal and Interest Account.
Section 7.2 Servicing Compensation.
As compensation for its services hereunder, the Servicer shall
be entitled to withdraw from the Principal and Interest Account or to
retain from interest payments on the SBA Loans the Servicer's Servicing
Fee; provided, however, that the Servicer only may withdraw from the
Principal and Interest Account the Servicer's Servicing Fee related to the
Unguaranteed Interest. 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 and amounts remitted pursuant to Section
6.3(c)(iii) 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 7.3 Annual Statement as to Compliance.
<PAGE>
The Servicer will deliver to the Trustee, the SBA and the
Rating Agency on or before March 31 of each year beginning March 31, 1996,
an Officers' Certificate stating that (i) the Servicer has fully complied
in all material respects 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 officers'
supervision, and (iii) to the best of such officers' 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 7.4 Annual Independent Public
Accountants' Servicing Report.
On or before March 31 of each year beginning March 31, 1996,
the Servicer, at its expense, shall cause (i) Elliott, Davis & Company, LLP
or (ii) a firm of nationally recognized independent public accountants
reasonably acceptable to the Trustee or (iii) such other firm of
independent accountants reasonably acceptable to the Trustee (provided that
the use of such firm would not result in the downgrading or withdrawal of
the rating then assigned to the Class A Certificates by the Rating Agency)
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 7.5 SBA's, and Trustee's Right
to Examine Servicer Records and Audit
Operations.
The SBA and the Trustee shall have the right upon reasonable
prior notice, during normal business hours and as often as reasonably
required, to examine and audit any and all of the books, records or other
information of the Servicer, whether held by the Servicer or by another on
behalf of the Servicer, which may be relevant to the performance or obser-
vance 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 7.6 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 show-
ing, for the period covered by such statement, the aggregate of deposits
into the Principal and Interest Account for each category of deposit
<PAGE>
specified in Section 5.3, the aggregate of withdrawals from the Principal
and Interest Account for each category of withdrawal specified in Section
5.4, the aggregate amount of permitted withdrawals not made in the related
Due Period, and the amount of any Monthly Advances or payments of Compen-
sating Interest, in each case, for the related Due Period.
<PAGE>
ARTICLE 1.
REPORTS TO BE PROVIDED BY SERVICER
Section 8.1 Financial Statements.
The Servicer understands that, in connection with the 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 for one or more of the most recently
completed five fiscal years for which such statements are 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 to permit any prospective Certificateholder
or 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.
<PAGE>
ARTICLE 2.
THE SERVICER
Section 9.1 Indemnification; Third Party
Claims.
I. The Servicer agrees to indemnify and hold the Trustee, the SBA,
and each Certificateholder harmless against any and all claims,
losses, penalties, taxes, 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
hereunder 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
Certificateholder in respect of such claim. The Trustee may
reimburse the Servicer from the Expense Account pursuant to Sec-
tion 6.3(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.
1. 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 duties in compliance with the terms of this
Agreement and in the best interests of the SBA and the Certificatehold-
ers. 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 connec-
tion 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 Certif-
icateholder in respect of such claim. The Trustee may reimburse the
Seller from the Expense Account pursuant to Section 6.3(c)(i) for all
amounts advanced by it pursuant to the preceding sentence except when
the claim relates directly to the Seller's indemnification pursuant to
Section 2.5 and Section 3.3 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
<PAGE>
the terms of this Agreement and in the best interests of the SBA and the
Certificateholders.
Section 9.2 Merger or Consolidation of
the Servicer.
The Servicer will keep in full effect its existence, rights and
franchises as a corporation, and will obtain and preserve its qualification
to do business as a foreign corporation, 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 corporation resulting from any merger, conversion or
consolidation to which the Servicer shall be a party, or any Person
succeeding to the business of the Servicer, shall be an established
mortgage loan servicing institution that has a net worth of at least
$15,000,000 and shall be an approved SBA guaranteed lender in good
standing, operating pursuant to an effective Loan Guaranty Agreement, and
shall be the successor of the Servicer, hereunder, without the execution or
filing of any paper or any further act on the part of any of the parties
hereto, anything herein to the contrary notwithstanding. The Servicer
shall send notice of any such merger or consolidation to the Trustee, the
Rating Agency and the SBA.
Section 9.3 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 respecting any matters arising hereunder. Subject to
the terms of Section 9.1 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.
<PAGE>
Section 9.4 Servicer Not to Resign.
The Servicer shall not assign this Agreement nor resign from
the obligations and duties hereby imposed on it except by mutual consent of
the Servicer, the SBA, the Trustee and the Majority Certificateholders, or
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 permit-
ting 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 10.2.
<PAGE>
ARTICLE
1.
DEFAULT
Section 10.1 Events of Default.
1. In case one or more of the following Events of Default by
the Servicer shall occur and be continuing:
I. (A) the failure by the Servicer to make any required
Servicing Advance; (B) the failure by the Servicer to make any
required Monthly Advance (other than a Nonreimbursable Monthly
Advance); (C) the failure by the Servicer to remit any Compen-
sating Interest; 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 Certifi-
cateholder; or
A. failure by the Servicer 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
B. 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, marshal-
ling of assets and liabilities or similar proceedings, or for the wind-
ing-up or liquidation of its affairs, shall have been entered against
the Servicer and such decree or order shall have remained in force,
undischarged or unstayed for a period of 60 days; or
C. the Servicer shall consent to the appointment of a conservator
or receiver or liquidator in any insolvency, readjustment of debt,
marshalling 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
D. 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;
<PAGE>
1. 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 De-
fault, (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 Determi-
nation 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 10.2 hereof, the
duties of a successor Servicer and 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. The Servicer agrees
to cooperate with the Trustee in effecting the termination of the
Servicer's responsibilities and rights hereunder, including, without
limitation, the transfer to the Trustee for administration by it of all
amounts which shall at the time be credited by the Servicer to each
Principal and Interest Account or thereafter received with respect to the
SBA Loans. The Trustee shall provide notice to the SBA of any Event of
Default hereunder.
Section 10.2 Trustee to Act; Appointment of
Successor.
Within 60 days of the Servicer's Termination as provided herein
or resignation of the Servicer pursuant to Section 9.4 hereof, the Trustee
shall succeed to the rights and duties of the Servicer hereunder provided
however, that the Servicer shall continue to serve as Servicer until the
Trustee assumes such servicing responsibilities. 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 or for losses related to or resulting from errors
or omissions in the servicing records provided to the Trustee. As compen-
sation therefor, the Trustee shall be entitled to all funds relating to the
SBA Loans which the Servicer would have been entitled to receive pursuant
to Section 7.2 and such compensation shall be payable from the Principal
and Interest Account pursuant to Section 5.4 or from Monthly Payments
recieved by the Servicer pursuant to Section 5.3(c) hereof 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 other-
wise as provided in Section 7.2 hereof.
<PAGE>
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
mortgage loan servicing institution acceptable to the SBA that has a net
worth of not less than $15,000,000, and which is an approved SBA guaranteed
lender in good standing, operating pursuant to an effective Loan Guaranty
Agreement, as the successor to the Servicer hereunder in the assumption of
all or any part of the responsibilities, duties or liabilities of the
Servicer hereunder. Any collections received by the Servicer after removal
or resignation shall be endorsed by it to the Trustee and remitted directly
to the Trustee or, at the direction of the Trustee, to the successor
servicer. The compensation of any successor servicer (including, without
limitation, the Trustee) so appointed shall be the aggregate Servicing Fees
and other servicing compensation in the form of assumption fees, late
payment charges or otherwise. In the event the Trustee is required to
solicit bids as provided herein, the Trustee shall solicit, by public
announcement, bids from housing and home finance institutions, 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 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 responsi-
bilities 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 assign-
ment 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 to the Servicer at the time of such sale, transfer and
assignment to the Servicer's successor. The Trustee and such successor
shall take such action, consistent with this Agreement, as shall be
necessary to effectuate any such succession. The Servicer agrees to
cooperate with the Trustee and any successor servicer in effecting the
termination of the Servicer's servicing responsibilities and rights
hereunder and shall promptly provide the Trustee or such successor
servicer, as applicable, all documents and records reasonably requested by
it to enable it to assume the Servicer's functions hereunder and shall
promptly also transfer to the Trustee or such successor servicer, as
applicable, all amounts which then have been or should have been deposited
in the Principal and Interest Account or Spread Account by the Servicer or
which are thereafter received with respect to the SBA Loans. Neither the
Trustee nor any other successor servicer shall be held liable by reason of
any failure to make, or any delay in making, any distribution hereunder or
any portion thereof caused by (i) the failure of the Servicer to deliver,
or any delay in delivering, cash, documents or records to it, or
(ii) restrictions imposed by any regulatory authority having jurisdiction
over the Servicer hereunder. No 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
<PAGE>
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 7.2 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 10.3 Waiver of Defaults.
The SBA 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, 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 10.4 Control by Majority Certificate-
holders and Others.
The SBA or the Majority Certificateholders with the consent of
the SBA may direct the time, method and place of conducting any proceeding
relating to the Trust Fund or the Certificates or for any remedy available
to the Trustee with respect to the Certificates or exercising any trust or
power conferred on the Trustee with respect to the Certificates or the
Trust Fund provided that:
I. such direction shall not be in conflict with any rule of
law or with this Agreement;
A. the Trustee shall have been provided with indemnity satisfactory
to it; and
B. 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 Holders not so directing.
<PAGE>
ARTICLE
1.
TERMINATION
Section 11.1 Termination.
This Agreement shall terminate upon notice to the Trustee of
the later 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 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's, alive as of the date hereof.
Notwithstanding the foregoing Servicer may, at its option,
terminate this Agreement on any date on which the Pool Principal Balance is
less than 10% of the Original Pool Principal Balance 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 Class A and Class B Principal Balances, and (ii) 30
days' interest thereon at the then applicable Class A and Class B
Remittance Rates, as the case may be (the "Termination Price"). Notwith-
standing 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 the Rating Agency and the Rating
Agency is still rating the Certificates, the Servicer shall give the Rating
Agency prior written notice of the Servicer's determination to exercise
such option and shall not exercise such option, without the consent of the
Rating Agency, prior to furnishing the Rating Agency with an Opinion of
Counsel, in form and substance reasonably satisfactory to the 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
first class mail, postage prepaid, 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 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
<PAGE>
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 responsi-
bility for such funds and the Certificateholders shall look to the Seller
for payment.
Section 11.2 Accounting Upon Termination of
Servicer.
Upon termination of the Servicer under Article X hereof, the
Servicer shall:
I. deliver to its successor or, if none shall yet have been
appointed, to the Trustee the funds in any Principal and Interest
Account;
1. 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 tape;
2. 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 monies held in trust by it
for the payments or charges with respect to the SBA Loans; and
3. 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.
<PAGE>
<PAGE>
ARTICLE
1.
THE TRUSTEE
Section 12.1 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 deter-
mine 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.
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; provided, however, that:
1. 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 obliga-
tions shall be read into this Agreement against the Trustee and, in the ab-
sence 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 furnished to the
Trustee and conforming to the requirements of this Agreement;
2. 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;
3. 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
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accordance with the direction of the 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;
4. In the absence of actual knowledge 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
5. 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.
6. In the event the Trustee serves as successor to the
Servicer hereunder, no implied duties or obligations shall be imposed on
the Trustee as successor Servicer and the terms and conditions of this
Agreement and the performance thereof by the Trustee in its conformity as
successor to the Servicer shall not create any additional fiduciary duty on
the Trustee to the Certificateholders, the SBA, the Servicer or any other
person.
Section 12.2 Certain Matters Affecting the Trustee.
I. Except as otherwise provided in Section 12.1:
A. The Trustee may rely and shall be protected in acting or
refraining from acting upon any resolution, Officers' 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;
B. The Trustee may consult with counsel of its choice and any
advice of counsel shall be full and complete authorization and
protection in respect of any action taken or suffered or omitted by it
hereunder in good faith and in accordance with such advice of counsel;
C. The Trustee shall be under no obligation to exercise any of
the trusts or powers vested in it by this Agreement including servicing
as to successor to the Servicer 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
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Trustee reasonable security or indemnity against the costs, expenses and
liabilities which may be incurred therein or thereby;
D. The Trustee shall not be personally liable for any action
taken, suffered or omitted by it in good faith and believed by it to be
authorized or within the discretion or rights or powers conferred upon
it by this Agreement;
E. 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 examina-
tion 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;
F. 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 in the performance of such act;
G. 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; and
H. 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.
Section 12.3 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 ac-
countable 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
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sufficiency of the security for the Certificates issued or intended to be
issued hereunder.
Section 12.4 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.
Section 12.5 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 out-of-pocket 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. To the extent that fees and expenses of the
Trustee reimbursable hereunder 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 6.3. The Trustee and any director, officer,
employee or agent of the Trustee 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 Certifi-
cates, 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 12.5 shall survive payment of the Certificates, and shall
extend to any successor to the Servicer and any co-trustee appointed pursu-
ant to this Article XII.
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Section 12.6 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 $50,000,000,
(iv) having unsecured and unguaranteed long-term debt obligations rated at
least Baa3 by the Rating Agency or such other rating as is acceptable to
the SBA, (v) is subject to supervision or examination by federal 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 require-
ments 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
that it has so ceased to be eligible to be the Trustee (which shall give
prompt notice to the SBA and each Certificateholder) and (b) resign, upon
the request of the SBA or the Majority Certificateholders, in the manner
and with the effect specified in Section 12.7.
Section 12.7 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 resigna-
tion, 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 12.6 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 ap-
pointed, 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
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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.
The Majority Certificateholders with the consent of the SBA,
which consent will not be unreasonably withheld, 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 12.8.
Section 12.8 Successor Trustee.
Any successor trustee appointed as provided in Section 12.7
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 12.6.
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.
Section 12.9 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
<PAGE>
association succeeding to the business of the trustee, shall be the succes-
sor of the Trustee hereunder, provided such corporation or national banking
association shall be eligible under the provisions of Section 12.6, 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, 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 12.6 hereunder. No notice to Holders of
Certificates of the appointment of co-trustee(s) or separate trustee(s)
shall be required under Section 12.8 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 four 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 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 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)
<PAGE>
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 lia-
bility 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 re-
spect 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 succes-
sor trustee.
Section 12.11 Authenticating Agent.
Upon the request of the Servicer, the Trustee shall appoint an
Authenticating Agent, initially, First Union National Bank of North
Carolina, with power to act on the Trustee's behalf and subject to its
direction in the authentication and delivery of the Certificates in connec-
tion with transfers and exchanges under Section 4.2, 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 12.6.
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
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the part of the parties hereto or the Authenticating Agent or such succes-
sor 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 4.4 and 12.3 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 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; provided, however, the Trustee shall have no liability for any
taxes required pursuant to any such Tax Return.
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 such taxes or for information provided by, or calculations
provided by, the Servicer.
Section 12.13 Protection of Trust Fund.
1. 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 13.2 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:
<PAGE>
I. more effectively hold in trust all or any portion of the
Trust Fund or such other assets;
A. perfect, publish notice of, or protect the validity of any grant
made or to be made by this Agreement;
B. enforce any of the SBA Loans; or
C. 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.
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
Certificateholders.
1. 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
Certificateholders; 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.
1. 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:
2. The Trustee is a national banking association duly orga-
nized, validly existing and in good standing under the laws of the United
States.
3. 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.
4. The execution, delivery and performance by the Trustee of
this Agreement shall not (i) violate any provision of any law or any order,
<PAGE>
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 adversely affect the Trustee's performance or ability to
perform its duties under this Agreement or the transactions contemplated in
this Agreement.
5. 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.
6. 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.
7. 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.
8. 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.
<PAGE>
ARTICLE 1.
MISCELLANEOUS PROVISIONS
Section 13.1 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 13.2 Amendment.
1. 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.
2. 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.
3. 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.
<PAGE>
Section 13.3 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 13.4 Duration of Agreement.
This Agreement shall continue in existence and effect until
terminated as herein provided.
Section 13.5 Governing Law.
THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS
OF THE STATE OF NEW YORK AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE
PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS, WITHOUT
GIVING EFFECT TO PRINCIPLES OF CONFLICTS OF LAW.
Section 13.6 Notices.
All demands, notices and communications hereunder shall be in
writing and shall be deemed to have been duly given if delivered by hand
delivery at or mailed by overnight mail, certified, registered or first
class mail, postage prepaid, to (i) in the case of the Servicer and the
Seller, Emergent Business Capital, Inc., P.O. Box 17526, Greenville, SC
29606, Attention: Kevin Mast or such other addresses as may hereafter be
furnished to the Certificateholders in writing by the Seller and the
Servicer, (ii) in the case of the Trustee, First Union National Bank of
North Carolina, 230 South Tryon Street, 8th Floor, Charlotte, North
Carolina 28288-1179, Attention: Corporate Trust Department, (iii) in the
case of the Certificateholders, as set forth in the Certificate Register,
(iv) in the case of the Rating Agency, to Moody's Investors Service, ABS
Monitoring Department, 99 Church Street, 4th Floor, New York, New York
10007, (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, and (vi) if to the
Trustee as successor to the Servicer, First Union National Bank of North
Carolina, 301 South College Street, TW-12 NC 0575, Charlotte, N.C. 28288,
Attention: Portfolio Management, with a copy to First Union Corporation
Legal Division, One First Union Center, MCNC0013, Charlotte, N.C. 28288.
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.
<PAGE>
Section 13.7 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 13.8 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 13.9 Counterparts.
This Agreement may be executed in one or more counterparts and
by the different parties hereto on separate counterparts, each of which,
when so executed, shall be deemed to be an original; such counterparts,
together, shall constitute one and the same agreement.
Section 13.10 Successors and Assigns.
This Agreement shall inure to the benefit of and be binding
upon the Seller and the Servicer, the Trustee and the Certificateholders
and their respective successors and assigns.
Section 13.11 Headings.
The headings of the various sections of this Agreement have
been inserted for convenience of reference only and shall not be deemed to
be part of this Agreement.
Section 13.12 Paying Agent.
The Trustee hereby appoints First Union National Bank of North
Carolina 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 12.6(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 6.4, that such
Paying Agent will:
<PAGE>
4. 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
5. 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 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 De-
fault, and (4) 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 Note Custodian, 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.
<PAGE>
IN WITNESS WHEREOF, the Seller, the Servicer 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.
EMERGENT BUSINESS CAPITAL, INC.,
as Seller and Servicer
By:
Name:
Title:
FIRST UNION NATIONAL BANK
OF NORTH CAROLINA, as Trustee
By:
Name:
Title:
<PAGE>
Acceptance of First Union National Bank of North Carolina
First Union National Bank of North Carolina hereby accepts its
appointment under the within instrument to serve as initial Authenticating
Agent, Certificate Registrar and Paying Agent. In connection therewith,
First Union National Bank of North Carolina agrees to be bound by all
applicable provisions of such instrument.
FIRST UNION NATIONAL BANK of NORTH
CAROLINA, as initial Authenticating
Agent, Certificate Registrar and Paying
Agent
By:
Name:
Title:
<PAGE>
STATE OF NEW YORK )
: ss.:
COUNTY OF NEW YORK)
On the ____ day of ________, 1995 before me, a Notary Public in
and for said State, personally appeared ____________________ known to me to
be an officer of the Trustee, the national banking association that execut-
ed the within instrument, and also known to me to be the person who exe-
cuted it on behalf of said banking association, and acknowledged to me that
such banking association executed the within instrument.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
official seal the day and year in this certificate first above written.
Notary Public
My Commission expires
<PAGE>
STATE OF NEW YORK )
: ss.:
COUNTY OF NEW YORK)
On the ____ day of _____, 1995 before me, a Notary Public in
and for the State of New York, personally appeared ____________________
known to me to be the ________________ of Emergent Business Capital, Inc.,
one of the corporations that executed the within instrument and also known
to me to be the person who executed it on behalf of said corporation, and
acknowledged to me that such corporation executed the within instrument.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
official seal the day and year in this certificate first above written.
Notary Public
My Commission expires
<PAGE>
STATE OF NEW YORK )
: ss.:
COUNTY OF NEW YORK)
On the ____ day of _____, 1995 before me, a Notary Public in
and for the State of New York, personally appeared ____________________
known to me to be the ________________ of Emergent Business Capital, Inc.,
one of the corporations that executed the within instrument and also known
to me to be the person who executed it on behalf of said corporation, and
acknowledged to me that such corporation executed the within instrument.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
official seal the day and year in this certificate first above written.
Notary Public
My Commission expires
<PAGE>
STATE OF NEW YORK )
: ss.:
COUNTY OF NEW YORK)
On the ____ day of _____, 1995 before me, a Notary Public in
and for the State of New York, personally appeared ____________________
known to me to be the ________________ of Emergent Business Capital, Inc.,
one of the corporations that executed the within instrument and also known
to me to be the person who executed it on behalf of said corporation, and
acknowledged to me that such corporation executed the within instrument.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
official seal the day and year in this certificate first above written.
Notary Public
My Commission expires
<PAGE>
EXHIBIT A
CONTENTS OF SBA FILE
With respect to each SBA Loan, the SBA File shall include a
copy of any of the following items delivered to the Trustee or, with
respect to 1 below, the Note Custodian, all of which shall be available for
inspection by the Certificateholders:
2. The original SBA Note, endorsed by means of an allonge as
follows: "Pay to the order of First Union National Bank of North
Carolina, and its successors and assigns, as trustee under that cer-
tain Pooling and Servicing Agreement dated as of June 1, 1995, for
the benefit of the United States Small Business Administration and
holders of Emergent SBA Loan-Backed Adjustable Rate Certificates,
Series 1995-1, Class A and Class B, as their respective interests may
appear, without recourse" and signed, by facsimile or manual sig-
nature, in the name of the Seller by a Responsible Officer, with all
prior and intervening endorsements showing a complete chain of en-
dorsement from the originator to the Seller, if the Seller was not
the originator;
2. With respect to those SBA Loans secured by Mortgaged
Properties, either: (i) the original Mortgage, with
evidence of recording thereon, (ii) a copy of the
Mortgage certified as a true copy by a Responsible
Officer of the Seller where the original has been
transmitted for recording until such time as the original
is returned by the public recording office or duly
licensed title or escrow officer or (iii) a copy of the
Mortgage certified by the public recording office in
those instances where the original recorded Mortgage has
been lost;
3. With respect to those SBA Loans secured by Mortgaged
Properties, either: (i) the original Assignment of
Mortgage from the applicable Seller endorsed as follows:
"First Union National Bank of North Carolina (`Assign-
ee'), its successors and assigns, as trustee under the
Pooling and Servicing Agreement dated as of June 1, 1995,
subject to the Multi-Party Agreement dated as of June 1,
1995" 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
<PAGE>
complete one or more blanket certificates attaching
copies of one or more Assignments of Mortgage relating to
the Mortgages originated by the Seller);
4. With respect to those SBA Loans secured by Mortgaged
Properties, either: (i) originals of all intervening
assignments, if any, showing a complete chain of title
from the originator to the Seller, including warehousing
assignments, with evidence of recording thereon if such
assignments were recorded, (ii) copies of any assignments
certified as true copies by a Responsible Officer of the
Seller where the originals have been submitted for
recording until such time as the originals are returned
by the public recording officer, or (iii) copies of any
assignments certified by the public recording office in
any instances where the original recorded assignments
have been lost;
5. With respect to those SBA Loans secured by Mortgaged
Properties, either: (i) originals of all title insurance
policies relating to the Mortgaged Properties to the
extent the Seller obtained such policies or (ii) copies
of any title insurance policies to the extent the Seller
obtained such policies certified as true by the Seller or
the public recording office in any instance where the
original title insurance policies have been lost;
6. For all SBA Loans, blanket assignment of all collateral
securing the SBA Loan, including without limitation, all
rights under applicable guarantees and insurance
policies;
7. For all SBA Loans, irrevocable power of attorney of the
Seller to First Union National Bank of North Carolina, as
trustee to execute, deliver, file or record and otherwise
deal with the Collateral for the SBA Loans in accordance
with the Agreement. The power of attorney will be dele-
gable by the First Union National Bank of North Carolina,
as trustee to the Servicer and any successor servicer and
will permit the First Union National Bank of North
Carolina, as trustee or its delegate to prepare, execute
and file or record UCC financing statements and notices
to insurers; and
8. 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 First Union National
Bank of North Carolina, as trustee and the SBA as Secured
Parties and the Seller as the Debtor. The UCC-1 financ-
ing statements will be filed promptly following the Clos-
ing Date in New York, Kansas, North Carolina and South
<PAGE>
Carolina and will be in the nature of protective notice
filings rather than a true financing statement.
<PAGE>
EXHIBIT B-1
[FORM OF CLASS A CERTIFICATE]
THIS CERTIFICATE DOES NOT EVIDENCE AN OBLIGATION OF, OR AN INTEREST IN, AND
IS NOT GUARANTEED BY, THE SERVICER, THE SELLER OR THE TRUSTEE, OR ANY
AFFILIATE OF ANY OF THEM AND IS NOT INSURED OR GUARANTEED BY THE SMALL
BUSINESS ADMINISTRATION, THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION, THE VETERANS ADMINISTRATION OR
ANY OTHER GOVERNMENTAL AGENCY OR PRIVATE INSURER.
EMERGENT SBA LOAN-BACKED ADJUSTABLE RATE
Series 1995-1 Original Class A Certificate
Class A Principal Balance:
No. 1 $___________
Original Dollar Amount as
of the Cut-Off Date
Represented by this
Certificate:
$__________
Remittance Rate: Percentage Interest of
Variable the Class A Certificates
Evidenced by this
Certificate:
Servicer:
Emergent Business Capital,
Inc.
Cut-Off Date:
________ __, 1995
First Remittance Date: Latest Maturity Date:
_________ __, 1995 _________ __, ____
CUSIP No.: ___________
Closing Date: Trustee:
________ __, 1995 First Union National Bank
of North Carolina
Emergent Business Capital, Inc. certifies that
_________ is the registered owner of a percentage interest (the "Percentage
Interest") in the Unguaranteed Interest in a pool of loans partially
<PAGE>
guaranteed by the U.S. Small Business Administration (the "SBA Loans") and
serviced by Emergent Business Capital, Inc. (hereinafter called the
"Servicer," in its capacity as the Servicer, the "Seller," in its capacity
as the Seller, which terms include any successor entity under the Agreement
referred to below). The SBA Loans were originated by the Seller. The SBA
Loans will be serviced pursuant to the terms and conditions of that certain
Pooling and Servicing Agreement dated as of June 1, 1995 (the "Agreement")
by and among Emergent Business Capital, Inc. and First Union National Bank
of North Carolina, as trustee (the "Trustee"), certain of the pertinent
provisions of which are set forth herein. To the extent not defined
herein, the capitalized terms used herein have the meanings assigned in the
Agreement. This Certificate is issued under and is subject to the terms,
provisions and conditions of the Agreement, to which Agreement the holder
of this Certificate by virtue of the acceptance hereof assents and by which
such holder is bound. The Unguaranteed Interests of the SBA Loans have an
aggregate outstanding principal balance, at the close of business on the
Cut-Off Date herein referred to, after application of payments received by
the Servicer on or before such date, of $___________.
On each Remittance Date, commencing on ________ __, 1995, the
Trustee or Paying Agent shall distribute to the Person in whose name this
Certificate is registered at the close of business on the last day of the
month next preceding the month of such distribution (the "Record Date"), an
amount equal to the product of the Percentage Interest of the Class A Cer-
tificates evidenced by this Certificate and the amount required to be
distributed to Holders of Class A Certificates on such Remittance Date
pursuant to Section 6.5 of the Agreement.
During the initial Interest Accrual Period, this Certificate
will bear interest at the rate of ____% per annum. During each subsequent
Interest Accrual Period, this Certificate will bear interest at a per annum
rate equal to the Prime Rate in effect on the preceding Adjustment Date
minus _____ percent, subject to the limits described in the Agreement.
Distributions on this Certificate will be made by the Trustee
or Paying Agent by check mailed to the address of the Person entitled
thereto as such name and address shall appear on the Certificate Register
or, upon written request of any Person who is the owner of record of
Certificate having an initial Certificate Principal Balance exceeding
$5,000,000 delivered to the Trustee not less than 5 Business Days, prior to
the applicable Remittance Date, by wire transfer of immediately available
funds to the account of the Person entitled thereto as shall appear on the
Certificate Register without the presentation or surrender of this Certifi-
cate or the making of any notation thereon, at a bank or other entity
having appropriate facilities therefor.
Notwithstanding the above, the final distribution on this
Certificate will be made after due notice by the Trustee of the pendency of
such distribution and only upon presentation and surrender of this Class A
Certificate at the office or agency maintained for that purpose by the
Certificate Registrar.
<PAGE>
This Certificate is one of a duly authorized issue of
Certificates designated as Emergent SBA Loan-Backed, Adjustable Rate
Certificates, Series 1995-1, Class A and Class B (herein called the
"Certificates") and representing undivided ownership in the right to
receive the principal portion of the Unguaranteed Interests of the SBA
Loans together with interest thereon at the then applicable Class A or
Class B Remittance Rate, as the case may be.
Neither the Certificates nor the SBA Loans represent an
obligation of, or an interest in, the Servicer and are not insured or
guaranteed by the Federal Deposit Insurance Corporation, the Small Business
Administration, the Government National Mortgage Association or the
Veterans Administration or any other governmental agency. The Certificates
are limited in right of payment to certain collections and recoveries
respecting the SBA Loans, all as more specifically set forth herein and in
the Agreement. In the event Servicer funds are advanced with respect to
any SBA Loan, such advance is reimbursable to the Servicer from late
recoveries of interest on the SBA Loans generally.
As provided in the Agreement, deposits and withdrawals from the
Certificate Account, the Spread Account and the Expense Account may be made
by the Trustee from time to time for purposes other than distributions to
Certificateholders, such purposes including reimbursement to the Servicer
of advances made, or certain expenses incurred, by it, and investment in
Permitted Instruments.
Subject to certain restrictions, the Agreement permits the
amendment thereof with respect to certain modifications (a) by the Seller,
the Servicer and the Trustee without the consent of the Certificateholders
and (b) by the Seller, the Servicer and the Trustee with the consent of the
Majority Certificateholders. The Agreement permits the Majority Certif-
icateholders to waive, on behalf of all Certificateholders, any default by
the Servicer in the performance of its obligations under the Agreement and
its consequences, except in a default in making any required distribution
on a Certificate. Any such consent or waiver by the Majority
Certificateholders shall be conclusive and binding on the holder of this
Certificate and upon all future holders of this Certificate and of any
Certificate issued upon the transfer hereof or in exchange herefor or in
lieu hereof whether or not notation of such consent is made upon this
Certificate. The Agreement permits the Majority Certificateholders to
waive, on behalf of all Certificateholders, any default by the Servicer in
the performance of its obligations under the Agreement and its
consequences, except in a default in making any required distribution on a
Certificate. Any such consent or waiver by the Majority Certificateholders
shall be conclusive and binding on the holder of this Certificate and upon
all future holders of this Certificate and of any Certificate issued upon
the transfer hereof or in exchange herefor or in lieu hereof whether or not
notation of such consent is made upon this Certificate.
As provided in the Agreement and subject to certain limitations
therein set forth, the transfer of this Certificate is registrable in the
Certificate Register upon surrender of this Certificate for registration of
<PAGE>
transfer at the offices or agencies maintained by the Certificate Registrar
duly endorsed by, or accompanied by a written instrument of transfer in
form satisfactory to, the Trustee, duly executed by the holder hereof or
such holder's attorney duly authorized in writing, and thereupon one or
more new Certificates in authorized denominations evidencing the same
aggregate undivided Percentage Interest will be issued to the designated
transferee or transferees.
The Certificates are issuable only as registered Certificates.
As provided in the Agreement and subject to certain limitations therein set
forth, the Certificate is exchangeable for a new Certificate evidencing the
same undivided ownership interest, as requested by the holder surrendering
the same.
No service charge will be made for any such registration of
transfer or exchange, but the Certificate Registrar may require payment of
a sum sufficient to cover any tax or other governmental charge payable in
connection therewith.
The Servicer, the Seller, the Trustee and the Certificate
Registrar, and any agent of any of the foregoing, may treat the person in
whose name this Certificate is registered as the owner hereof for all
purposes, and none of the foregoing shall be affected by notice to the con-
trary.
Except for certain obligations of the Servicer to the Trustee,
the obligations created by the Agreement shall terminate upon notice to the
Trustee of: (i) the later of 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 (ii) mutual consent of the Servicer and all
Certificateholders in writing.
IN WITNESS WHEREOF, the Trustee has caused this Certificate to
be duly executed on behalf of Emergent SBA.
By:
Name:
Title:
This is one of the
Certificates referred
to in the within-
mentioned Agreement.
<PAGE>
FIRST UNION NATIONAL BANK OF
NORTH CAROLINA, as Trustee
By:______________________
Authorized Signatory
or
FIRST UNION NATIONAL BANK OF
NORTH CAROLINA, as
Authenticating Agent
By:
Authorized Signatory
<PAGE>
EXHIBIT B-2
[FORM OF CLASS B CERTIFICATE]
THIS CERTIFICATE DOES NOT EVIDENCE AN OBLIGATION OF, OR AN INTEREST IN, AND
IS NOT GUARANTEED BY, THE SERVICER, THE SELLER OR THE TRUSTEE, OR ANY
AFFILIATE OF ANY OF THEM AND IS NOT INSURED OR GUARANTEED BY THE SMALL
BUSINESS ADMINISTRATION, THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION, THE VETERANS ADMINISTRATION OR
ANY OTHER GOVERNMENTAL AGENCY OR PRIVATE INSURER.
NO TRANSFER OF A CLASS B CERTIFICATE OR CERTIFICATES OR ANY INTEREST
THEREIN SHALL BE MADE TO ANY EMPLOYEE BENEFIT PLAN OR OTHER RETIREMENT
ARRANGEMENT, INCLUDING INDIVIDUAL RETIREMENT ACCOUNTS AND ANNUITIES, KEOGH
PLANS AND COLLECTIVE INVESTMENT FUNDS AND SEPARATE ACCOUNTS IN WHICH SUCH
PLANS, ACCOUNTS OR ARRANGEMENTS ARE INVESTED, THAT ARE SUBJECT TO THE
EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA"), OR
SECTION 4975 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE").
THE RIGHTS OF THE HOLDERS OF THE CLASS B CERTIFICATES TO RECEIVE
DISTRIBUTIONS WITH RESPECT TO INTEREST AND PRINCIPAL WILL BE SUBORDINATED
TO SUCH RIGHTS OF THE HOLDERS OF THE CLASS A CERTIFICATES TO THE EXTENT
DESCRIBED IN THE POOLING AND SERVICING AGREEMENT REFERRED TO HEREIN.
<PAGE>
EMERGENT SBA LOAN-BACKED ADJUSTABLE RATE
Series 1995-1 Original Class B Certificate
Class B Principal Balance:
No. 1 $_________
Original Dollar Amount as
of the Cut-Off Date
Represented by this
Certificate:
$__________
Remittance Rate: Percentage Interest of
Variable the Class B Certificates
Evidenced by this
Certificate:
Servicer:
Emergent Business Capital, Inc.
Cut-Off Date:
________ __, 1995
First Remittance: Latest Maturity Date:
Date: _________ __, ____
________ __, 1995
CUSIP NO.: ________
Closing Date: Trustee:
_______ __, 1995 First Union National Bank
of North Carolina
<PAGE>
Emergent Business Capital, Inc. certifies that ________ is the
registered owner of a percentage interest (the "Percentage Interest") in
the Unguaranteed Interest in a pool of loans partially guaranteed by the
U.S. Small Business Administration (the "SBA Loans") and serviced by
Emergent Business Capital, Inc. (hereinafter called the "Servicer," in its
capacity as the Servicer and the "Seller," in its capacity as the Seller,
which terms include any successor entity under the Agreement referred to
below). The SBA Loans were originated by the Seller. The SBA Loans will
be serviced pursuant to the terms and conditions of that certain Pooling
and Servicing Agreement dated as of June 1, 1995 (the "Agreement") by and
among Emergent Business Capital, Inc. and First Union National Bank of
North Carolina, as trustee (the "Trustee"), certain of the pertinent provi-
sions of which are set forth herein. To the extent not defined herein, the
capitalized terms used herein have the meanings assigned in the Agreement.
This Certificate is issued under and is subject to the terms, provisions
and conditions of the Agreement, to which Agreement the holder of this
Certificate by virtue of the acceptance hereof assents and by which such
holder is bound. The Unguaranteed Interests of the SBA Loans have
aggregate outstanding principal balances, at the close of business on the
Cut-Off Date herein referred to, after application of payments received by
the Servicer on or before such date, of $_________.
On each Remittance Date, commencing on _______ __, 1995, the
Trustee or Paying Agent shall distribute to the Person in whose name this
Certificate is registered at the close of business on the last day of the
month next preceding the month of such distribution (the "Record Date"), an
amount equal to the product of the Percentage Interest of the Class B Cer-
tificates evidenced by this Certificate and the amount required to be
distributed to Holders of Class B Certificates on such Remittance Date
pursuant to Section 6.5 of the Agreement.
During the initial Interest Accrual Period, this Certificate
will bear interest at the rate of ____% per annum. During each subsequent
Interest Accrual Period, this Certificate will bear interest at a per annum
rate equal to the Prime Rate in effect on the preceding Adjustment Date
minus ____ percent, subject to the limits described in the Agreement.
Distributions on this Certificate will be made by the Trustee
or Paying Agent by check mailed to the address of the Person entitled
thereto as such name and address shall appear on the Certificate Register
or, upon written request of any Person who is the owner of record of
Certificate having an initial Certificate Principal Balance exceeding
$5,000,000 delivered to the Trustee not less than 5 Business Days, prior to
the applicable Remittance Date, by wire transfer of immediately available
funds to the account of the Person entitled thereto as shall appear on the
Certificate Register without the presentation or surrender of this Certifi-
cate or the making of any notation thereon, at a bank or other entity
having appropriate facilities therefor, and, in the case of wire transfers,
at the expense of such Person unless such Person shall own of record
Certificates which have initial Certificate Principal Balances aggregating
at least $5,000,000.
<PAGE>
Notwithstanding the above, the final distribution on this
Certificate will be made after due notice by the Trustee of the pendency of
such distribution and only upon presentation and surrender of this
Certificate at the office or agency maintained for that purpose by the Cer-
tificate Registrar.
This Certificate is one of a duly authorized issue of
Certificates designated as Emergent SBA Loan-Backed, Adjustable Rate
Certificates, Series 1995-1, Class A and Class B (herein called the
"Certificates") and representing undivided ownership in the right to
receive the principal portion of the Unguaranteed Interests of the SBA
Loans together with interest thereon at the then applicable Class A or
Class B Remittance Rate, as the case may be.
Neither the Certificates nor the SBA Loans represent an
obligation of, or an interest in, the Servicer and are not insured or
guaranteed by the Federal Deposit Insurance Corporation, the Small Business
Administration, the Government National Mortgage Association or the
Veterans Administration or any other governmental agency. The Certificates
are limited in right of payment to certain collections and recoveries
respecting the SBA Loans, all as more specifically set forth herein and in
the Agreement. In the event Servicer funds are advanced with respect to
any SBA Loan, such advance is reimbursable to the Servicer from late
recoveries of interest on the SBA Loans generally.
As provided in the Agreement, deposits and withdrawals from the
Certificate Account, the Spread Account and the Expense Account may be made
by the Trustee from time to time for purposes other than distributions to
Certificateholders, such purposes including reimbursement to the Servicer
of advances made, or certain expenses incurred, by it, and investment in
Permitted Instruments.
Subject to certain restrictions, the Agreement permits the
amendment thereof with respect to certain modifications (a) by the Seller,
the Servicer and the Trustee without the consent of the Certificateholders
and (b) by the Seller, the Servicer and the Trustee with the consent of the
Majority Certificateholders. The Agreement permits the Majority Certif-
icateholders to waive, on behalf of all Certificateholders, any default by
the Servicer in the performance of its obligations under the Agreement and
its consequences, except in a default in making any required distribution
on a Certificate. Any such consent or waiver by the Majority
Certificateholders shall be conclusive and binding on the holder of this
Certificate and upon all future holders of this Certificate and of any
Certificate issued upon the transfer hereof or in exchange herefor or in
lieu hereof whether or not notation of such consent is made upon this
Certificate. The Agreement permits the Majority Certificateholders to
waive, on behalf of all Certificateholders, any default by the Servicer in
the performance of its obligations under the Agreement and its
consequences, except in a default in making any required distribution on a
Certificate. Any such consent or waiver by the Majority Certificateholders
shall be conclusive and binding on the holder of this Certificate and upon
all future holders of this Certificate and of any Certificate issued upon
<PAGE>
the transfer hereof or in exchange herefor or in lieu hereof whether or not
notation of such consent is made upon this Certificate.
As provided in the Agreement and subject to certain limitations
therein set forth, the transfer of this Certificate is registrable in the
Certificate Register upon surrender of this Certificate for registration of
transfer at the offices or agencies maintained by the Certificate
Registrar, duly endorsed by, or accompanied by a written instrument of
transfer in form satisfactory to, the Trustee, duly executed by the holder
hereof or such holder's attorney duly authorized in writing, and thereupon
one or more new Certificates in authorized denominations evidencing the
same aggregate undivided Percentage Interest will be issued to the
designated transferee or transferees.
The Certificates are issuable only as registered Certificates.
As provided in the Agreement and subject to certain limitations therein set
forth, the Certificate is exchangeable for a new Certificate evidencing the
same undivided ownership interest, as requested by the holder surrendering
the same.
No service charge will be made for any such registration of
transfer or exchange, but the Certificate Registrar may require payment of
a sum sufficient to cover any tax or other governmental charge payable in
connection therewith.
The Servicer, the Seller, the Trustee and the Certificate
Registrar, and any agent of any of the foregoing, may treat the person in
whose name this Certificate is registered as the owner hereof for all
purposes, and none of the foregoing shall be affected by notice to the con-
trary.
Except for certain obligations of the Servicer to the Trustee,
the obligations created by the Agreement shall terminate upon notice to the
Trustee of: (i) the later of 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 (ii) mutual consent of the Servicer and all
Certificateholders in writing.
<PAGE>
IN WITNESS WHEREOF, the Servicer has caused this Certificate to
be duly executed.
First Union National Bank
of North Carolina
By:
Name:
Title:
Dated:_________________
(Seal)
Attest:
_________________________
Assistant Secretary
This is one of the
Certificates referred
to in the within-
mentioned Agreement.
FIRST UNION NATIONAL BANK OF
NORTH CAROLINA, as Trustee
By:______________________
Authorized Signatory
or
FIRST UNION NATIONAL BANK OF
NORTH CAROLINA,
as Authenticating Agent
By:
Authorized Signatory
<PAGE>
EXHIBIT C
PRINCIPAL AND INTEREST ACCOUNT LETTER AGREEMENT
(date)
To: ___________________________
___________________________
___________________________ (the "Depository")
As "Servicer" under the Pooling and Servicing Agreement, dated
as of _______ __, 1995, Emergent SBA Loan-Backed Adjustable Rate
Certificates, Series 1995-1 Class A and Class B (the "Agreement"), we
hereby authorize and request you to establish an account, as a Principal
and Interest Account pursuant to Section 5.3 of the Agreement, to be
designated as "Emergent Business Capital, Inc., in trust for the registered
holders of Emergent SBA Loan-Backed Adjustable Rate Certificates, Series
1995-1." All deposits in the account shall be subject to withdrawal there-
from by order signed by the Servicer. You may refuse any deposit which
would result in violation of the requirement that the account be fully
insured as described below. This letter is submitted to you in duplicate.
Please execute and return one original to us.
EMERGENT BUSINESS CAPITAL, INC.
By:
Name:
Title:
<PAGE>
The undersigned, as Depository, hereby certifies that the
above-described account has been established under Account Number
__________, at the office of the depository indicated above, and agrees to
honor withdrawals on such account as provided above. The amounts deposited
at any time in the account will be insured to the maximum amount provided
by applicable law by the Federal Deposit Insurance Corporation.
(Name of Depository)
By:
Name:
Title:
<PAGE>
EXHIBIT D
WIRING INSTRUCTIONS FORM
_______________, 19__
[Paying Agent]
[Trustee]
________________________
________________________
________________________
Re: Emergent SBA Loan-Backed
Adjustable Rate
Certificates, Series 1995-1,
[Class A] [Class B] Number
Dear Sir:
In connection with the sale of the above-captioned Certificate
by ___________________________________ to ___________-
________________________, ("Transferee") you, as Paying Agent, are
instructed to make all remittances to Transferee as Certificateholder as of
____________, 19__ by wire transfer. For such wire transfer, the wiring
instructions are as follows:
___________________________
___________________________
___________________________
________________________________
Transferee
Certificateholder's mailing address:
Name:
Address:
<PAGE>
EXHIBIT E-1
FORM OF INITIAL CERTIFICATION
, 1995
[Seller]
[Servicer]
[SBA]
Re: Pooling and Servicing Agreement
Emergent SBA Loan-Backed Adjustable
Rate Certificates, Series 1995-1,
dated as of June 1, 1995 among
Emergent Business Capital, Inc.
and First Union National Bank of
North Carolina, as trustee
Gentlemen:
In accordance with Section 2.5 of the above-captioned Pooling
and Servicing Agreement (the "Agreement"), the undersigned, as Trustee,
hereby certifies that, except as noted on the attachment hereto, if any
(the "Loan Exception Report"), it has received each of the documents
required to be delivered to it pursuant to Section 2.4 of the Agreement
(not including the original SBA Notes which are to be delivered to the Note
Custodian) with respect to each SBA Loan listed in the SBA Loan Schedule
and the documents contained therein appear to bear original signatures.
The Trustee has made no independent examination of any such
documents beyond the review specifically required in the above-referenced
Pooling and Servicing Agreement.
<PAGE>
The Trustee makes no representations as to: (i) the validity,
legality, sufficiency, enforceability or genuineness of any such documents
or any of the SBA Loans identified on the SBA Loan Schedule, or (ii) the
collectibility, insurability, effectiveness or suitability of any such SBA
Loan.
FIRST UNION NATIONAL BANK OF
NORTH CAROLINA, as Trustee
By:
Name:
Title:
<PAGE>
EXHIBIT E-2
FORM OF FINAL CERTIFICATION
[date]
[Servicer]
[Seller]
[SBA]
Re: Pooling and Servicing Agreement
dated as of June 1, 1995 among Emergent Business
Capital, Inc. and First Union National Bank of
North Carolina, Emergent SBA Loan-Backed Adjustable
Rate Certificates, Series 1995-1
Gentlemen:
<PAGE>
In accordance with Section 2.5 of the above-captioned Pooling
and Servicing Agreement, the undersigned, as Trustee, hereby certifies
that, except as noted on the attachment hereto, as to each SBA Loan listed
in the SBA Loan Schedule (other than any SBA Loan paid in full or listed on
the attachment hereto) it has reviewed the documents delivered to it
pursuant to Section 2.4 of the Pooling and Servicing Agreement and has
determined that (i) all such documents are in its possession, (ii) such
documents have been reviewed by it and have not been mutilated, damaged,
torn or otherwise physically altered and relate to such SBA Loan and
(iii) based on its examination, and only as to the foregoing documents, the
information set forth in the SBA Loan Schedule respecting such SBA Loan is
correct. The Trustee has made no independent examination of such documents
beyond the review specifically required in the above-referenced Pooling and
Servicing Agreement. The Trustee makes no representations as to: (i) the
validity, legality, enforceability or genuineness of any such documents
contained in each or any of the SBA Loans identified on the SBA Loan Sched-
ule, or (ii) the collectibility, insurability, effectiveness or suitability
of any such SBA Loan.
FIRST UNION NATIONAL BANK OF
NORTH CAROLINA, as Trustee
By:
Name:
Title:
EXHIBIT F
SBA LOAN SCHEDULE
<PAGE>
EXHIBIT G
REQUEST FOR RELEASE OF DOCUMENTS
To: [Trustee]
[SBA]
Re: Pooling and Servicing Agreement,
Emergent SBA Loan-Backed Adjustable
Rate Certificates,
Series 1995-1,
dated as of June 1, 1995
In connection with the administration of the pool of SBA
Loans held by you, we request the release, and acknowledge receipt, of
the (Trustee's SBA File/[specify document]) for the SBA Loan described
below, for the reason indicated.
Obligor's Name, Address & Zip Code:
SBA Loan Number:
Reason for Requesting Documents (check one)
____ 1. SBA Loan Paid in Full
(Servicer hereby certifies that all amounts
received in connection therewith have been credited to the
Principal and Interest Account and remitted to the Trustee
for deposit into the Certificate Account pursuant to the
Pooling and Servicing Agreement.)
____ 2. SBA Loan Liquidated
(Servicer hereby certifies that all proceeds of
foreclosure, insurance or other liquidation have been
finally received and credited to the Principal and Interest
Account and remitted to the Trustee for deposit into the
Certificate Account pursuant to the Pooling and Servicing
Agreement.)
____ 3. SBA Loan in Foreclosure
_____4. SBA Loan Repurchased Pursuant to Section 11.1
of the Pooling and Servicing Agreement.
_____5. SBA Loan Repurchased or Substituted Pursuant to Article II
or III of the Pooling and Servicing Agreement (Servicer
<PAGE>
hereby certifies that the repurchase price or Substitution
Adjustment has been credited to the Principal and Interest
Account and/or remitted to the Trustee for deposit into the
Certificate Account pursuant to the Pooling and Servicing
Agreement.)
____ 6. Collateral Being Released Pursuant to Section 5.1(f) of the
Pooling and Servicing Agreement.
____ 7. Other (explain) ____________________________
________________________________
If box 1 or 2 above is checked, and if all or part of the
Trustee's SBA File was previously released to us, please release to us
our previous receipt on file with you, as well as any additional
documents in your possession relating to the above specified SBA Loan.
<PAGE>
If box 3, 4, 5, 6 or 7 above is checked, upon our return of
all of the above documents to you, please acknowledge your receipt by
signing in the space indicated below, and returning this form.
<PAGE>
EMERGENT BUSINESS CAPITAL,
INC.
<PAGE>
By:
Name:
Date:
Documents returned to Trustee:
_______________________________
Trustee
By:____________________________
Date:__________________________
<PAGE>
EXHIBIT H
FORM OF LIQUIDATION REPORT
Customer Name:
Account number:
Original Principal Balance:
1. Unguaranteed Interest of Liquidation Proceeds
Principal Prepayment $________
Property Sale Proceeds ________
Insurance Proceeds ________
Other (Itemize) ________
Unguaranteed Interest of
Total Proceeds $_______
2. Servicing Advances $________
Monthly Advances ________
Total Advances $_______
3. Net Liquidation Proceeds $_______
(Line 1 minus Line 2)
4. Principal Balance of the SBA
Loan on date of liquidation $_______
5. Realized (Loss) or Gain $_______
(Line 3 minus Line 4)
<PAGE>
EXHIBIT I
FORM OF DELINQUENCY REPORT
DELINQUENCY AND FORECLOSURE INFORMATION
PRINCIPAL
AMOUNT OF
SBA LOANS
(INCLUDING
GUARANTEED
INTERESTS AND REO
FORECLOSURES
UNGUARANTEED # # OF # OF
OUTSTANDING # OF OUTSTANDING
INVESTOR INTERESTS) ACCT RANGES AMOUNT ACCTS. PCT ACCTS
DOLLARS % ACCTS DOLLARS %
1 TO 29 DAYS
30 TO 59 DAYS
60 TO 89 DAYS
90 AND OVER
TOTALS
<PAGE>
EXHIBIT J
SERVICER'S MONTHLY COMPUTER TAPE FORMAT
The computer tape to be delivered to the Trustee pursuant to Section 6.6
shall contain the following information for each SBA Loan as of the
related Record Date:
9.
Name of the Obligor, address of the Mortgaged Property, if ap-
plicable, and Account Number.
10.
The SBA Loan Interest Rate.
11.
The Monthly Payment.
12.
The dates on which the payments were received for the
applicable Due Period and the amount of such payments
segregated into the following categories; (a) total
interest received (including Servicing Fee, interest
payable to holder of the Guaranteed Interest, SBA
Fiscal Agent's Fee, Excess Spread and Extra Interest);
(b) interest payable to the holder of the Guaranteed
Interest and SBA Fiscal Agent's Fee; (c) principal and
Excess Payments received; (d) Curtailments received;
and (e) Principal Prepayments received.
13.
The SBA Loan principal balance.
14.
The SBA Loan date and original term to maturity.
15.
A "Delinquency Flag" noting that the SBA Loan is cur-
rent or delinquent. If delinquent, state the date on
which the last payment was received.
16.
For any SBA Loan that is not either 24 months delin-
quent or otherwise determined to be uncollectible, a
"Foreclosure Flag" noting that the SBA Loan is the
subject of foreclosure proceedings.
17.
For any SBA Loan that is not either 24 months delin-
quent or otherwise determined to be uncollectible, an
"REO Flag" noting that the Mortgaged Property is an
REO Property.
<PAGE>
18.
A "Liquidated SBA Loan Flag" noting that the SBA Loan
is a Liquidated SBA Loan and the Net Liquidation Pro-
ceeds received in connection therewith.
19.
Any additional information reasonably requested by the
Trustee.
<PAGE>
EXHIBIT K
MULTI-PARTY AGREEMENT
[BEING PREPARED BY EBC]
<PAGE>
EXHIBIT L
SPREAD ACCOUNT AGREEMENT
This Spread Account Agreement is dated as of June 1, 1995 (the
"Agreement") among Emergent Business Capital Holdings, Inc., a Delaware
corporation, as Spread Account Depositor (the "Spread Account
Depositor"), First Union National Bank of North Carolina, as trustee
(the "Trustee"), and First Union National Bank of North Carolina, in its
capacity as custodian hereunder (the "Spread Account Custodian"). All
capitalized terms used but not otherwise defined herein shall have the
meanings set forth in the Pooling and Servicing Agreement referred to
below.
WHEREAS, Emergent Business Capital, Inc. (the "Seller") and First Union
National Bank of North Carolina, in its capacity as Trustee, have
entered into a Pooling and Servicing Agreement, dated as of June 1, 1995
(the "Pooling and Servicing Agreement"), in connection with the
establishment of a Trust (the "Trust") and the issuance of the Emergent
SBA Loan-Backed, Adjustable Rate Certificates, Series 1995-1, repre-
senting an undivided beneficial ownership interest in the Trust;
WHEREAS, the Spread Account Depositor wishes to establish the Spread
Account (the "Account") with the Spread Account Custodian, to be used in
accordance with the provisions of Section 6.2 of the Pooling and Servic-
ing Agreement; and
WHEREAS, the Spread Account Custodian herein agrees to maintain the
Account in accordance with the terms of this Agreement and the Pooling
and Servicing Agreement.
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements herein contained, the parties hereto agree as follows:
Section 1. Definitions. In addition to those terms defined in the
pooling and Servicing Agreement and otherwise herein, the following
words and phrases, unless the context otherwise requires, shall have the
following meanings:
"Account Property" has the meaning set forth in Section 3 hereof.
"Account" has the meaning set forth in the second WHEREAS clause
hereof.
"Certificated Securities" has the meaning set forth in Section
8-102(l)(a) of the UCC.
"Clearing Corporation" has the meaning set forth in Section
8-102(3) of the UCC.
<PAGE>
"Delivery" when used with respect to Account Property means:
(i) with respect to Certificated Securities, bankers'
acceptances, commercial paper, negotiable certificates of
deposit and other obligations that constitute Instruments
and are susceptible of physical delivery (collectively, the
"Physical Property"), transfer thereof into the possession
of the Spread Account Custodian, or a bailee who has
received notice from the Seller and the Spread Account
Custodian of the Spread Account Custodian's security
interest in such Physical Property, or a Financial Interme-
diary acting with respect to such Physical Property on
behalf of the Spread Account Custodian, provided that any
such Physical Property that is in registered form has been
registered in the name of the Spread Account Custodian or
the Financial Intermediary or the nominee of either of them,
delivery by the Financial Intermediary taking possession of
a Physical Property of a confirmation to the Spread Account
Custodian of the receipt of the Physical Property and
identification by book-entry or other equivalent means of
such Physical Property as belonging to the Spread Account
Custodian and the making by the Spread Account Custodian of
entries in its books and records establishing that it holds
such Account Property solely as Spread Account Custodian
under the terms of this Agreement;
(ii) with respect to any type of Account Property that is a
book-entry security held through the Federal Reserve System
pursuant to federal book-entry regulations, the following
procedures, all in accordance with applicable law, including
applicable federal regulations and Articles VIII and IX of
the UCC: book-entry registration of such Account Property to
an appropriate book-entry account maintained with a Federal
Reserve Bank by the Spread Account Custodian or by another
Depositary acting on behalf of the Spread Account Custodian
and issuance to the Spread Account Custodian or such
Depositary, as the case may be, of a deposit advice or other
written confirmation of such book-entry registration; the
delivery of a confirmation by the Depositary to the Spread
Account Custodian of such book-entry registration to the
Depositary and the making by the Depositary of entries in
its books and records identifying such book-entry security
held through the Federal Reserve System pursuant to federal
book-entry regulations as belonging to the Spread Account
Custodian and indicating that the Depositary holds such Ac-
count Property solely as agent for the Spread Account
Custodian, and the making by the Spread Account Custodian of
entries in its books and records establishing that it holds
such Account Property solely as Spread Account Custodian
under the terms of this Agreement; and such additional or
alternative procedures as may hereafter become appropriate
to effect complete transfer to ownership of any such Account
<PAGE>
Property to the Spread Account Custodian, consistent with
changes in applicable law or regulations or the interpreta-
tion thereof;
(iii) with respect to any type of Account Property that is
a Certificated or Uncertificated Security which is subject
to the control of a Clearing Corporation, (x) the making of
appropriate entries on the books of such Clearing Corpora-
tion, decreasing the account of the transferor by the amount
of such Clearing Corporation's Securities and increasing the
appropriate account of the Spread Account Custodian or the
Financial Intermediary on behalf of the Spread Account
Custodian maintained at such Clearing Corporation by the
amount of such Securities, (y) the issuance by the Clearing
Corporation to the Spread Account Custodian or the Financial
Intermediary of a written confirmation of the registration
of such Securities to an account of the Spread Account
Custodian of Financial Intermediary and (z) the delivery of
a confirmation by the Financial Intermediary to the Spread
Account Custodian of such registration to the account of the
Financial Intermediary and the making by the Financial
Intermediary of entries in its books and records identifying
such Securities held through the Clearing Corporation as
belonging to the Spread Account Custodian and indicating
that the Financial Intermediary holds such Account Property
solely for the Spread Account Custodian, and the making by
the Spread Account Custodian of entries in its books and
records establishing that it holds such Account Property
solely as Spread Account Custodian under the terms of this
Agreement; and
(iv) with respect to any item of Account Property that is
an Uncertificated Security under Article VIII of the UCC and
that is not governed by clause (ii) or (iii) above, regis-
tration of the transfer to and interest in such Account
Property by the Spread Account Custodian or its nominee by
the issuer of such Account Property.
"Depositary" has the meaning set forth in 31 C.F.R.
(section mark) 306.118 or similar federal regulations governing the
transfer of securities issued by the United States Treasury which are
maintained in book-entry form.
"Financial Intermediary" has the meaning set forth in Section
8-313(4) of the UCC.
"Instruments" has the meaning set forth in Section 9-105(l)(ii) of
the UCC but excludes any "instruments" that are "certificated
securities" as defined in Section 8-102(l) (a) of the UCC.
"Physical Property" has the meaning set forth in clause (i) of the
definition of "Delivery" in this Section 1.
<PAGE>
"UCC" means the New York Uniform Commercial Code.
"Uncertificated Security" has the meaning set forth in Section
8-102(1)(b) of the UCC.
Section 2. Appointment of Spread Account Custodian. The Spread Account
Depositor and the Trustee hereby appoint First Union National Bank of
North Carolina as their agent under this Agreement to act on their
behalf in accordance with the terms of this Agreement with respect to
their interests in the Account and all amounts and investments deposited
therein or credited thereto. First Union National Bank of North
Carolina hereby accepts and acknowledges its appointment as agent on
behalf of the Spread Account Depositor and the Trustee.
Section 3. Pledge of Security Interest. The Spread Account Depositor
hereby assigns, sells, conveys and transfers to the Spread Account
Custodian and its successors and assigns, and grants thereto a security
interest in, all of its right, title and interest in and to all amounts
payable to the Spread Account pursuant to Section 6.2 of the Pooling and
Servicing Agreement, the Account, all amounts deposited therein or
credited thereto, from time to time, and all proceeds of the foregoing,
including, without limitation, all other amounts and investments held
from time to time in the Account (whether in the form of deposit ac-
counts, Physical Property, book-entry securities, Uncertificated
Securities, or otherwise) in consideration of its right to receive
Excess Spread in accordance with Section 6.2 of the Pooling and
Servicing Agreement (all of the foregoing, collectively, the "Account
Property"), to have and to hold all the aforesaid property, rights and
privileges unto the Spread Account Custodian, its successors and
assigns, in trust for the benefit of the Trustee and the
Certificateholders, subject to the terms and provisions, set forth in
this Agreement. The Spread Account Custodian hereby acknowledges such
transfer and, upon receipt, shall hold and distribute the Account
Property in accordance with the terms and provisions of this Agreement
and the Pooling and Servicing Agreement.
Section 4. Establishment of the Account. In consideration of its right
to receive Excess Spread in accordance with Section 6.2 of the Pooling
and Servicing Agreement, the Spread Account Depositor hereby establishes
and shall hereafter maintain with the Spread Account Custodian the
Account as a separate trust account to include the money and other
property deposited and held therein pursuant hereto. The Account shall
be a segregated trust account maintained in North Carolina and initially
established with the Spread Account Custodian and maintained with the
Spread Account Custodian in the Corporate Trust Department of the Spread
Account Custodian. The Spread Account Custodian acknowledges the
interest of the Trustee in the Account, as set forth herein and in Arti-
cle VI of the Pooling and Servicing Agreement. The Spread Account
Custodian further acknowledges and agrees that (i) any deposits to the
Account shall be made solely by the Servicer or the Trustee in
accordance with Section 6.2(a) of the Pooling and Servicing Agreement;
<PAGE>
(ii) any withdrawals from the Account shall be made by the Spread
Account Custodian solely upon instructions therefor given by the Trustee
as specifically set forth in Section 6.2(b) of the Pooling and Servicing
Agreement; and (iii) the Seller and the Servicer and the Spread Account
Depositor shall have no rights to receive any amounts in the Account
other than as specifically set forth herein and in Section 6.2(b) of the
Pooling and Servicing Agreement.
Section 5. Delivery of Account Property. With respect to the Account
Property, the Spread Account Depositor and the Spread Account Custodian
agree that:
(a) Any Account Property that is held in deposit accounts shall
be held solely in the name of the Spread Account Custodian in the
Corporate Trust Department of the Spread Account Custodian. Each
such deposit account shall be subject to the exclusive custody and
control of the Spread Account Custodian, and the Spread Account
Custodian shall have the sole signature authority with respect
thereto.
(b) Any Account Property that constitutes Physical Property shall
be delivered by the Spread Account Depositor to the Spread Account
Custodian in accordance with paragraph (i) of the definition of
"Delivery" in Section 1 hereof and shall be held, pending maturity
or disposition, solely by the Spread Account Custodian, a Finan-
cial Intermediary acting solely for the Spread Account Custodian
or a bailee to whom the Seller and the Spread Account Custodian
have given notice of the Spread Account Custodian's security
interest in such Account Property.
(c) Any Account Property that is a book-entry security held
through the Federal Reserve System pursuant to federal book-entry
regulations shall be delivered in accordance with paragraph (ii)
of the definition of "Delivery" in Section 1 hereof and shall be
maintained by the Spread Account Custodian and any other
Depositary acting on behalf of the Spread Account Custodian,
pending maturity or disposition, through continued book-entry
registration of such Account Property as described in such para-
graph.
(d) Any Account Property that is a Certificated or Uncertificated
Security subject to the control of a Clearing Corporation shall be
delivered to the Spread Account Custodian or a Financial
Intermediary for the benefit of the Spread Account Custodian in
accordance with paragraph (iii) of the definition of "Delivery" in
Section 1 hereof and shall be maintained by the Spread Account
Custodian or a Financial Intermediary for the benefit of the
Spread Account Custodian, pending maturity or disposition, through
continued registration of such Account Property as described in
such paragraph.
<PAGE>
(e) Any Account Property that is an Uncertificated Security under
Article 8 of the UCC and that is not governed by clause (c) or (d)
above shall be delivered to the Spread Account Custodian in accor-
dance with paragraph (iv) of the definition of "Delivery" in
Section 1 hereof and shall be maintained by the Spread Account
Custodian, pending maturity or disposition, through continued
registration of the Spread Account Custodian's (or its nominee's)
interest in such security on the books of the issuer thereof.
(f) Effective upon Delivery of any Account Property in the form
of Physical Property, book-entry securities, or Uncertificated
Securities, the Spread Account Custodian shall be deemed to have
represented that it has purchased such Account Property for value,
in good faith and without actual notice or actual knowledge prior
to or on the date of transfer of any adverse claims, liens or
encumbrances (including, without limitation, any liens arising
under the Code or ERISA) thereto.
(g)
The Spread Account Custodian shall not be obligated to determine
whether or not the Account Property has been properly "Delivered"
by the Spread Account Depositor pursuant to the terms hereof or
for determining that it has a perfected security interest in the
Account Property.
Section 6. Investment. Amounts held in the Account shall be invested
in Permitted Instruments in accordance with the provisions of Section
6.4 of the Pooling and Servicing Agreement. All such investments shall
be made in the name of the Spread Account Custodian or its nominee, and
all income and gain realized thereon shall be retained in the Account
until withdrawals are permitted under Section 6.2(b) of the Pooling and
Servicing Agreement.
Section 7. Statement of Account. On or before each Determination Date,
the Spread Account Custodian shall deliver to the Trustee, the Servicer
and the Spread Account Depositor an Officer's Certificate of the Spread
Account Custodian setting forth, as of such date, (i) the amount on
deposit in the Account, (ii) the activity in the Account for the
preceding month and (iii) the amount of any income or gain (or loss) on
amounts held in the Account.
Section 8. Termination. This Agreement shall terminate upon the
termination of the Pooling and Servicing Agreement in accordance with
their terms. Upon termination of this Agreement, any amounts on deposit
in the Account shall be paid by the Spread Account Custodian to the
Spread Account Depositor in accordance with the terms of the Pooling and
Servicing Agreement.
Section 9. Amendment. This Agreement may be amended by the Spread
Account Depositor and the Spread Account Custodian with the consent of
the Trustee. The parties hereto agree to make any changes to this
<PAGE>
Agreement required by the Rating Agency in order to obtain an
investment-grade rating.
Section 10. Counterparts. This Agreement may be executed in one or
more counterparts and by the different parties hereto on separate
counterparts, each of which, when so executed, shall be deemed to be an
original; such counterparts, together, shall constitute one and the same
Agreement.
Section 11. Governing Law. This Agreement shall be construed in
accordance with the laws of the State of New York, and the obligations,
rights and remedies of the parties under this Agreement shall be deter-
mined in accordance with such laws.
Section 12. Notices. All demands, notices and communications upon or
to the Spread Account Depositor, the Servicer, the Spread Account
Custodian or the Trustee under this Agreement shall be in writing,
personally delivered or mailed by certified mail, return receipt re-
quested, and shall be deemed to have been duly given upon receipt (a) in
the case of the Spread Account Depositor, the Servicer and the Trustee,
at the addresses therefor set forth in Section 13.6 of the Pooling and
Servicing Agreement; (b) in the case of the Spread Account Custodian, at
230 South Tryon Street, 8th Floor, Charlotte, North Carolina, 28288-
1179, Attention: Corporate Trust Department; and (c) in the case of the
Spread Account Depositor, c/o Emergent Business Capital, Inc., 15 South
Main Street, Suite 750, Greenville, South Carolina 29606.
Section 13. Severability of Provisions. If any one or more of the
agreements, provisions or terms of this Agreement shall be for any
reason whatsoever held invalid, then such agreements, provisions or
terms shall be deemed severable from the remaining agreements, provi-
sions or terms of this Agreement and shall in no way affect the validity
or enforceability of the other provisions of this Agreement.
Section 14. Assignment; Benefit of Agreement. Notwithstanding anything
to the contrary contained herein, this Agreement may not be assigned by
the Spread Account Depositor or the Spread Account Custodian without the
prior written consent of the Trustee. Subject to the foregoing, this
Agreement will inure to the benefit of and be binding upon the parties
hereto and the Trustee and their respective successors and permitted
assigns.
<PAGE>
IN WITNESS WHEREOF, the Spread Account Depositor, the Trustee and the
Spread Account Custodian have caused this Spread Account Agreement to be
duly executed by their respective officers as of the day and year first
above written.
FIRST UNION NATIONAL BANK OF
NORTH CAROLINA, as Trustee
By_____________________________
Authorized Officer
FIRST UNION NATIONAL BANK
OF NORTH CAROLINA, as
Spread Account Custodian
By_____________________________
EMERGENT BUSINESS CAPITAL HOLDINGS
CORPORATION, as Spread Account
Depositor
By_____________________________
<PAGE>
EXHIBIT M
FORM OF SECURITIES LEGEND
THIS CERTIFICATE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") OR ANY STATE
SECURITIES LAW. 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, WITHIN THREE YEARS AFTER THE LATER OF THE
ORIGINAL ISSUANCE OF THE CERTIFICATES OR THE LAST DATE ON WHICH THIS
CERTIFICATE IS HELD BY AN AFFILIATE OF THE SELLER ONLY (1) TO THE
SELLER, (2) PURSUANT TO RULE 144A UNDER THE SECURITIES ACT TO A PERSON
WHO THE HOLDER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER
("QIB") WITHIN THE MEANING OF RULE 144A, PURCHASING FOR ITS OWN ACCOUNT
OR FOR THE ACCOUNT OF A QIB, WHOM THE HOLDER HAS INFORMED THAT SUCH
REOFFER, RESALE, PLEDGE OR OTHER TRANSFER IS BEING MADE IN RELIANCE ON
RULE 144A; (3) PURSUANT TO AN EXEMPTION FROM REGISTRATION PROVIDED BY
RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE); OR (4) IN CERTIFICATED
FORM TO AN INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN THE MEANING OF
RULE 501(a)(1), (2), (3) OR (7) OF REGULATION D OF THE SECURITIES ACT
WHO IS NOT A QIB PURSUANT TO ANY OTHER EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO (A) RECEIPT BY THE SELLER
AND THE TRUSTEE OF A LETTER SUBSTANTIALLY IN THE FORM PROVIDED IN THE
POOLING AND SERVICING AGREEMENT REFERRED TO BELOW, AND (B) RECEIPT BY
THE SELLER AND THE TRUSTEE OF SUCH OTHER EVIDENCE ACCEPTABLE TO THE
SELLER AND THE TRUSTEE THAT SUCH REOFFER, RESALE, PLEDGE OR TRANSFER IS
IN COMPLIANCE WITH THE SECURITIES ACT AND OTHER APPLICABLE LAWS.
<PAGE>
EXHIBIT N
FORM OF RULE 144A TRANSFER CERTIFICATE
First Union National Bank of North Carolina,
as Trustee
230 South Tryon Street
Charlotte, North Carolina 28288
Attention: _______________
Emergent Business Capital, Inc.
15 South Main Street
Suite 750
Greenville, South Carolina 29606
Attention:____________
Re:
Emergent SBA Loan-Backed Adjustable Rate
Certificates, Series 1995-1
Reference is hereby made to the Pooling and Servicing
Agreement dated as of June 1, 1995 (the "Pooling and Servicing Agree-
ment") between Emergent Business Capital, Inc, as Seller and Servicer,
and First Union National Bank of North Carolina, as Trustee. Capital-
ized terms used but not defined herein shall have the meanings given to
them in the Pooling and Servicing Agreement.
[NOTE: INSERT [A] FOR TRANSFERS OF DEFINITIVE CERTIFICATES TO
TRANSFEREES THAT TAKE DELIVERY IN INTERESTS IN THE BOOK-ENTRY
CERTIFICATES. INSERT [B] FOR TRANSFERS OF DEFINITIVE CERTIFICATES TO
TRANSFEREES THAT TAKE DELIVERY IN DEFINITIVE CERTIFICATES. INSERT [C]
FOR TRANSFERS OF INTERESTS IN THE BOOK-ENTRY CERTIFICATES TO TRANSFEREES
THAT TAKE DELIVERY IN DEFINITIVE CERTIFICATES.)
[A] This letter relates to % initial Percentage Interest
of Class [A or B] Certificates which are held in the form of Definitive
Certificates in the name of [insert name of transferor] (the "Transfer-
or"). The Transferor has requested a transfer of such Definitive
Certificates for a beneficial interest in the Book-Entry Certificate of
such Class (CUSIP No. _________) to be held with the Clearing Agency in
the name of [insert name of transferee].
[B] This letter relates to % initial Percentage
Interest of Class [A or B] Certificates which are held in the form of
Definitive Certificates registered in the name of [insert name of trans-
feror] (the "Transferor"). The Transferor has requested a transfer of
such Definitive Certificates for Definitive Certificates of such Class
registered in the name of [insert name of transferee].
<PAGE>
[C] This letter relates to % initial Percentage Interest
of Class [A or B] Certificates which are held in the form of a benefi-
cial interest in the Book-Entry Certificate of such Class (CUSIP No.
_________) with the Clearing Agency in the name of [insert name of
transferor] (the "Transferor"). The Transferor has requested a transfer
of such beneficial interest in the Book-Entry Certificate for Definitive
Certificates of such Class registered in the name of [insert name of
transferee].
In connection with such request, and in respect of such
Certificates, the Transferor hereby certifies that such Certificates are
being transferred in accordance with (i) the transfer restrictions set
forth in the Pooling and Servicing Agreement and the Certificates and
(ii) Rule 144A under the Securities Act to a purchaser that the Trans-
feror reasonably believes is a "qualified institutional buyer" within
the meaning of Rule 144A purchasing for its own account or for the ac-
count of a "qualified institutional buyer", which purchaser is aware
that the sale to it is being made in reliance upon Rule 144A, in a
transaction meeting the requirements of Rule 144A and in accordance with
any applicable securities laws of any state of the United States or any
other applicable jurisdiction.
This certificate and the statements contained herein are
made for your benefit and the benefit of the Placement Agent and the
Seller.
[Insert Name of Transferor]
By:
Name:
Title:
Dated: ,
<PAGE>
EXHIBIT O
FORM OF RULE 144A EXCHANGE CERTIFICATE
First Union National Bank of North Carolina,
as Trustee
230 South Tryon Street
Charlotte, North Carolina 28288
Attention: _______________
Emergent Business Capital, Inc.
15 South Main Street
Suite 750
Greenville, South Carolina 29606
Attention:____________
Re: EBC SBA Loan-Backed Adjustable Rate
Certificates, Series 1995-1
Reference is hereby made to the Pooling and Servicing
Agreement dated as of June 1, 1995 (the "Pooling and Servicing Agree-
ment") between Emergent Business Capital, Inc, as Seller and Servicer,
and First Union National Bank of North Carolina, as Trustee. Capital-
ized terms used but not defined herein shall have the meanings given to
them in the Pooling and Servicing Agreement.
This letter relates to % initial Percentage Interest of
Class [A or B] Certificates which are held in the form of Definitive
Certificates in the name of [insert name of holder] (the "Holder"). The
Holder has requested an exchange of such Definitive Certificates for a
beneficial interest in the Book-Entry Certificate of such Class (CUSIP
No. _________) to be held with the Clearing Agency in the name of the
Holder.
In connection with such request, and in respect of such
Certificates, the Holder does hereby certify that it is a "qualified
institutional buyer" within the meaning of Rule 144A.
This certificate and the statements contained herein are
made for your benefit and the benefit of the Placement Agent and the
Depositor.
[Insert Name of Holders]
By:
Name:
Title:
Dated: ,
<PAGE>
<PAGE>
EXHIBIT P
FORM OF PURCHASER'S LETTER
INSTITUTIONAL ACCREDITED INVESTOR
(Date)
First Union National Bank of North Carolina,
as Trustee
230 South Tryon Street
Charlotte, North Carolina 28288
Attention: _______________
Emergent Business Capital, Inc.
15 South Main Street
Suite 750
Greenville, South Carolina 29606
Attention:____________
Re: EBC SBA Loan-Backed Adjustable Rate
Certificates, Series 1995-1
Reference is hereby made to the Pooling and Servicing
Agreement dated as of June 1, 1995 (the "Pooling and Servicing Agree-
ment") between Emergent Business Capital, Inc, as Seller and Servicer,
and First Union National Bank of North Carolina, as Trustee. Capital-
ized terms used but not defined herein shall have the meanings given to
them in the Pooling and Servicing Agreement.
This letter relates to our purchase of % initial Per-
centage Interest of Class [A or B] Certificates. In such connection, we
hereby confirm that:
(1) We have received a copy of the Offering Circular dated June __,
1995 relating to the Certificates (the "Offering Circular"), and
we understand that the Certificates have not been, and will not
be, registered under the Securities Act of 1933, as amended (the
"Securities Act"), and may not be sold except as permitted in the
following sentence. We agree, on our own behalf and on behalf of
any accounts for which we are acting as hereinafter stated, that
if we should sell any Certificates within three years of the later
of the date of original issuance of the Certificates or the last
day on which such Certificates are owned by the Seller or any
affiliate of the Seller we will do so only (A) to the Seller, (B)
to "qualified institutional buyers" (within the meaning of Rule
144A under the Securities Act) in accordance with Rule 144A under
the Securities Act ("QIBs"), (C) pursuant to the exemption from
registration provided by Rule 144 under the Securities Act, or (D)
to an institutional "accredited investor" within the meaning of
Rule 501(a)(1), (2), (3) or (7) of Regulation D under the
Securities Act that is not a QIB (an "Institutional Accredited
<PAGE>
Investor") which, prior to such transfer, delivers to the Trustee
under the Pooling and Servicing Agreement, a signed letter in the
form of this letter; and we further agree, in the capacities
stated above, to provide to any person purchasing any of the
Certificates from us a notice advising such purchaser that resales
of the Certificates are restricted as stated herein.
(2) We understand that, on any proposed resale of any Certificates to
an Institutional Accredited Investor, we will be required to fur-
nish to the Trustee and the Seller such certifications, legal
opinions and other information as either of them may reasonably
require to confirm that the proposed sale is being made pursuant
to an exemption from, or in a transaction not subject to, the
registration requirements of the Securities Act. We further under-
stand that the Certificates purchased by us will bear a legend to
the foregoing effect.
(3) We are acquiring the Certificates for investment purposes and not
with a view to, or for offer or sale in connection with, any
distribution in violation of the Securities Act. We have such
knowledge and experience in financial and business matters as to
be capable of evaluating the merits and risks of our investment in
the Certificates, and we and any account for which we are acting
are each able to bear the economic risk of such investment.
(4) We are acquiring the Offered Certificates purchased by us for our
own account or for one or more accounts (each of which is an
Institutional Accredited Investor or a QIB) as to each of which we
exercise sole investment discretion.
(5) We have received such information as we deem necessary in order to
make our investment decision.
(6) If we are acquiring Class B Certificates, we are not an ERISA
Plan, and no assets of any ERISA Plan have been used to acquire
such Certificates.
You are entitled to rely upon this letter and are irrevocably
authorized to produce this letter or a copy hereof to any interested
party in any administrative or legal proceeding or official inquiry with
respect to the matters covered hereby.
Very truly yours,
[PURCHASER]
By:____________
Name:
Title:
Certificates to be purchased:
<PAGE>
___% initial Percentage Interest
of Class __ Certificates.
<PAGE>
EXHIBIT Q
EMERGENT BUSINESS CAPITAL HOLDINGS CORPORATION
NOTE
1 No. ___
FOR VALUE RECEIVED, EMERGENT BUSINESS CAPITAL HOLDINGS
CORPORATION, a Delaware corporation (the "Company"), hereby promises to
pay to _______________, as registered owner, or registered assigns (the
"Holder"), interest at the rate, at the times and in the manner
hereinafter described. All capitalized terms used herein and not other-
wise defined shall have the meanings assigned thereto in that certain
pooling and servicing agreement, dated June 1, 1995 (the "Pooling and
Servicing Agreement"), between First Union National Bank of North
Carolina, as Trustee (in such capacity, the "Trustee"), and Emergent
Business Capital, Inc., as Seller and Servicer (the "Servicer").
Reference is further made herein to the Emergent SBA Loan-Backed Adjust-
able Rate Certificate, Series 1995-1, Class A issued pursuant to the
Pooling and Servicing Agreement, having a Certificate number correspond-
ing to the number first above set forth and to which this Note is at-
tached (the "Attached Certificate")
If the Servicer does not pay the Termination Price pursuant
to Section 11.1 of the Pooling and Servicing Agreement on the Remittance
Date next succeeding the date on which the Pool Principal Balance
becomes less than 10% of the Original Pool Principal Balance (the
"Optional Termination Date"), on the Optional Termination Date and on
each Remittance Date thereafter, the Company shall pay interest to the
Holder for the related Interest Accrual Period on the outstanding Cer-
tificate Principal Balance of the Attached Certificate such rate as will
increase the Class A Remittance Rate to the Prime Rate applicable to
such Remittance Date minus 50 basis points.
All payments on this Note shall be made to the registered
Holder hereof on the next preceding Record Date and shall be made by
check, or upon request by a Holder, by wire transfer of immediately
available funds to the account of such Holder at a bank or other entity
having appropriate facilities therefor, and, in the case of wire
transfers, at the expense of such Holder unless such Holder shall own of
record Certificates which have initial Certificate Principal Balances
aggregating at least $5,000,000.
Transfers and exchanges of this Note may be be made at the
corporate trust offices of First Union National Bank of North Carolina
or its successors (in such capacity, the "Agent") as provided in
Sections 4.1 and 4.2(a) of the Pooling and Servicing Agreement. In
1 Insert number corresponding to Certificate number of Attached
Certificate to which agreement is attached.
<PAGE>
connection with any such transfer or exchange, the Company shall execute
and deliver Notes in the form hereof, but registered in the names and in
the denominations requested by the transferee and bearing the same
number as the applicable Attached Certificate. No transfer or exchange
of this Note may be made to any person other than the registered holder
of the Attached Certificate.
If the Company shall fail to pay in full to the Holder any
amount payable hereunder on date of written notice of such failure shall
have been given to the Company by the Holder or the Agent, then and in
any such event, the Holder may proceed to enforce the payment of this
Note or to enforce any other legal or equitable right of the Holder.
THIS NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF
THE STATE OF NEW YORK AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE
COMPANY AND THE HOLDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS,
WITHOUT GIVING EFFECT TO PRINCIPLES OR CONFLICTS OF LAW.
IN WITNESS WHEREOF, the Company has caused its name to be
signed hereto by its officer thereunto duly authorized as of this 29th
day of June 1995.
EMERGENT BUSINESS CAPITAL
HOLDINGS CORPORATION
By: ______________________
Name:
Title:
<PAGE>
EXHIBIT R
FORM OF ERISA TRANSFER AFFIDAVIT
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
The undersigned, being first duly sworn, deposes and says as
follows:
1. The undersigned is the _________________ of (the "Investor"),
a [corporation duly organized] and existing under the laws of ________,
on behalf of which he makes this affidavit.
2. The Investor either (i) is acquiring only Class A
Certificates, or (ii) is not a Benefit Plan Investor subject to ERISA or
Section 4975 of the Code. For purposes of this paragraph, the term
"Benefit Plan Investor" means (A) any employee benefit plan (as defined
in Section 3(3) of ERISA), whether or not it is subject to Title I of
ERISA, (B) any plan described in Section 4975(e)(1) of the Code, (C) any
governmental plan, as defined in Section 3(32) of ERISA, subject to any
federal, state or local law which is, to a material extent, similar to
the provisions of ERISA or Section 4975 of the Code or (D) any entity
whose underlying assets include plan assets by reason of a plan's
investment in the entity (within the meaning of Department of Labor
Regulation 29 C.F.R. (section mark) 2510.3-101), other than a general asset
account of an insurance company.
3. The Investor hereby acknowledges that under the terms of the
Pooling and Servicing Agreement (the "Agreement") between Emergent
Business Capital, Inc. as Seller and Servicer (the "Servicer") and First
Union National Bank of North Carolina as Trustee, dated as of June 1,
1995, no transfer of the Class [ ] Certificates shall be permitted to be
made to any person unless the Depositor and Trustee have received a
certificate from such transferee to the effect that such transferee is
not a Benefit Plan Investor subject to ERISA or Section 4975 of the Code
(provided, however, that the Servicer and Trustee will not require such
certificate in the event that, as a result of change of law or
otherwise, counsel satisfactory to the Servicer and Trustee has rendered
an opinion to the effect that the purchase and holding of such Certifi-
cate will not constitute or result in a prohibited transaction under
ERISA or Section 4975 of the Code).
IN WITNESS WHEREOF, the Investor has caused this instrument to be
executed on its behalf, pursuant to proper authority, by its duly
authorized officer, duly attested, this ____ day of __________ 1994.
<PAGE>
By:
Name:
Title:
ATTEST:
______________________
STATE OF )
) ss.:
COUNTY OF )
Personally appeared before me the above-named
_______________, known or proved to me to be the same person who
executed the foregoing instrument and to be the ____________ of the
Investor, and acknowledged that he executed the same as his free act and
deed and the free act and deed of the Investor.
Subscribed and sworn before me this ____ day of ________
1994.
NOTARY PUBLIC
My commission expires the
____ day of __________, 19__.
<PAGE>
<PAGE>
EXHIBIT 28.2
EMERGENT SBA ADJUSTABLE RATE LOAN-BACKED
CERTIFICATES, SERIES 1995-1
$15,357,000 CLASS A CERTIFICATES
PURCHASE AGREEMENT
June 29, 1995
Prudential Securities Incorporated
One New York Plaza
New York, New York 10292
Ladies and Gentlemen:
Section 1. Authorization of Certificates.
Emergent Business Capital, Inc. (the "Company") has duly
authorized the sale of $15,357,000 in aggregate Certificate
Principal Balance of its EMERGENT SBA Loan-Backed Adjustable
Rate Certificates, Series 1995-1, Class A (the "Class A Cer-
tificates"). The Certificates will be issued pursuant to a
Pooling and Servicing Agreement, dated as of June 1, 1995,
between the Company and First Union National Bank of North
Carolina, a national banking association, as trustee there-
under (herein, together with its successors and assigns, the
"Trustee"). The Class A Certificates, together with the
EMERGENT SBA Loan-Backed Adjustable Rate Certificates,
Series 1995-1, Class B (the "Class B Certificates") having
an aggregate Certificate Principal Balance of $1,706,338
represent the entire beneficial ownership interest in a
trust fund (the "Trust Fund") created by the Company which
consists primarily of the right to receive payments and
certain other amounts attributable to certain unguaranteed
interests (the "Unguaranteed Interests") in a pool of loans
(the "SBA Loans") partially guaranteed by the U.S. Small
Business Administration (the "SBA") which will be trans-
ferred to the Trustee by the Company. Capitalized terms
used herein but not otherwise defined shall have the
meanings set forth in the Pooling and Servicing Agreement.
The Class A Certificates are to be offered and
sold by means of a confidential Offering Circular (including
any amendments or supplements thereto, the "Offering Circu-
lar") prepared by the Company and pursuant to a Private
Placement Agency Agreement, dated June 29, 1995 (the
"Placement Agreement"), between the Company and you, Pruden-
tial Securities Incorporated, as placement agent (the
<PAGE>
"Placement Agent") in a transaction exempt from the
registration requirements of Section 5 of the Securities Act
of 1933, as amended (the "Securities Act").
The Company hereby agrees with you (the "Initial
Purchaser") as follows:
Section 2. Purchase of Class A Certificates.
Subject to the terms and conditions and in reliance upon the
representations and warranties and agreements set forth
herein, the Company agrees to sell $15,357,000 aggregate
Certificate Principal Balance of Class A Certificates to the
Initial Purchaser as hereinafter provided, and the Initial
Purchaser agrees to purchase, on the Closing Date (as
defined in Section 3 below) at a purchase price equal to
99.796875% of their Certificate Principal Balance. At the
time of the delivery of the Class A Certificates to the
Initial Purchaser, the Initial Purchaser shall make such
payment to the Company of such purchase price by wire
transfer in immediately available funds to such account as
the Company shall designate.
Section 3. Delivery. Delivery of the Class A
Certificates shall be made in the form of one or more global
certificates delivered to The Depository Trust Company,
except that any Class A Certificate to be purchased by an
Institutional Accredited Investor that is not a QIB (as such
terms are defined in the Placement Agreement) shall be
delivered in fully registered, certificated form in the
minimum denominations set forth in the Offering Circular at
the offices of Skadden, Arps, Slate, Meagher & Flom, New
York, New York at 10:00 a.m. New York City time, on the date
hereof, or such other place, time or date as may be mutually
agreed upon by the Initial Purchaser and the Company (the
"Closing Date"). Subject to the foregoing, the Class A
Certificates will be registered in such names and such
denominations as the Initial Purchaser shall specify in
writing to the Company and the Trustee no later than two
Business Days prior to the Closing Date. A Business Day
shall be any day other than (i) a Saturday or a Sunday or
(ii) a legal holiday in The City and State of New York or
the State of North Carolina or (iii) a day on which banking
institutions in The City and State of New York or the State
of North Carolina are authorized or obligated by law or
executive order to be closed.
Section 4. Representations and Warranties of the
Company. The Company represents and warrants to the Initial
Purchaser, as of the Closing Date, that:
<PAGE>
(1 The Offering Circular is accurate in all material
respects and does not contain any untrue statement of a
material fact or omit to state a material fact
necessary in order to make the statements therein, in
the light of the circumstances existing at the Closing
Date, not misleading.
(1.0.1 The Company has been duly incorporated and
is validly existing as a corporation in good standing under
the laws of the State of South Carolina, with full power and
authority (corporate and other) to own its properties and
conduct its business as described in the Offering Circular
and to perform its obligations under the Pooling and Ser-
vicing Agreement, the Placement Agreement and this Agree-
ment.
(1.0.2 The Placement Agreement and this Agreement
have been duly authorized, executed and delivered by the
Company and constitute valid and binding agreements of the
Company, enforceable against the Company in accordance with
their respective terms.
(1.0.3 The Pooling and Servicing Agreement has been
duly authorized, executed and delivered by the Company and
constitutes a valid and binding agreement of the Company,
enforceable against the Company in accordance with its terms
and conforms in all material respects to the description
thereof contained in the Offering Circular.
(1.0.4 The Multi-Party Agreement has been duly au-
thorized, executed and delivered by the Company and con-
stitutes a valid and binding agreement of the Company, en-
forceable against the Company in accordance with its terms
and conforms in all material respects to the description
thereof contained in the Offering Circular.
(1.0.5 The Class A Certificates, when issued, au-
thenticated and delivered pursuant to the Pooling and S-
ervicing Agreement, will have been duly executed by the
Company and authenticated, issued and delivered by the
Trustee and will be entitled to the benefits of the Pooling
and Servicing Agreement and conform in all material respects
to the description thereof contained in the Offering
Circular.
(1.0.6 There is no action, suit or proceeding pend-
ing against or threatened against or affecting, the Company
before any court or arbitrator or any governmental body,
agency or official in which there is a reasonable possi-
bility of an adverse decision which could materially ad-
versely affect the business, financial position or results
of operations of the Company or the ability of the Company
to perform its obligations under this Agreement, the Place-
<PAGE>
ment Agreement, the Pooling and Servicing Agreement or the
Multi-Party Agreement, or which in any manner calls into
question the validity of this Agreement, the Placement
Agreement, the Pooling and Servicing Agreement, the Multi-
Party Agreement or the Class A Certificates.
(1.0.7 The performance by the Company of all of its
obligations under the Pooling and Servicing Agreement,
Multi-Party Agreement, the Placement Agreement and this
Agreement and the consummation of the transactions herein
and therein contemplated will not conflict with or result in
a breach of any terms or provisions of, or constitute a
default under, any indenture, mortgage, deed of trust, loan
agreement or other agreement or instrument to which it is a
party or by which it is bound or to which any of its
property or assets, including the SBA Loans, is subject, or
any order, rule or regulation of any court or governmental
agency or body having jurisdiction over it or its properties
or assets, except where such conflicts, breaches and de-
faults in the aggregate would not have a material adverse
effect on the Company or the ability of the Company to
perform its obligations under the Pooling and Servicing
Agreement, Multi-Party Agreement, the Placement Agreement or
this Agreement.
(1.0.8 The Trust created by the Pooling and Servic-
ing Agreement is not an "investment company" or an entity
"controlled" by an "investment company" as such terms are
defined in the Investment Company Act of 1940, as amended
(the "1940 Act").
(1.0.9 It is not necessary in connection with the
offer, sale and delivery of the Class A Certificates in the
manner contemplated by this Agreement to register the Class
A Certificates under the Securities Act.
(1.0.10 No qualification of the Pooling and
Servicing Agreement under the Trust Indenture Act of 1939,
as amended (the "1939 Act"), is required.
(1.0.11 The Class A Certificates satisfy the re-
quirements set forth in Rule 144A(d)(3) under the Securities
Act.
(1.0.12 Ernst & Young, who will deliver the letter
required by Section 7(g) of this Agreement, are independent
public accountants with respect to the Company as required
by the Securities Act and the Rules and Regulations.
(1.0.13 Except for the lien of Nation Bank of
Georgia, which will be released in connection with the
delivery of this Agreement, at the time of execution and
<PAGE>
delivery of the Pooling and Servicing Agreement, the Company
owned each of the SBA Loans free and clear of all liens, en-
cumbrances, adverse claims or security interests ("Liens")
and the Company had the power and authority to transfer the
SBA Loans to the Trust and to transfer the Class A
Certificates to the Initial Purchaser.
(1.0.14 Upon the execution and delivery of the
Pooling and Servicing Agreement, payment by the Initial
Purchaser for the Class A Certificates and delivery to the
Initial Purchaser of the Class A Certificates, the Trust
owned the SBA Loans and the Initial Purchaser will acquire
title to the Class A Certificates, in each case free of
Liens except such Liens as may be created or granted by the
Initial Purchaser and those listed in the Pooling and Ser-
vicing Agreement.
(1.0.15 All consents, approvals and authorizations
of any governmental body, subdivision, agency, board or
authority (collectively, "Governmental Authorities"), if
any, required on the part of the Company in connection with
the execution and delivery by it of the Pooling and
Servicing Agreement, the Multi-Party Agreement, the
Placement Agreement and this Agreement or the carrying out
by it of the transactions contemplated hereby or thereby
have been obtained and are in full force and effect.
(1.0.16 The SBA Loans, individually and in the
aggregate, have the characteristics described in the
Offering Circular.
(1.0.17 Each of the representations and warranties
of the Company set forth in the Pooling and Servicing
Agreement is true and correct.
(1.0.18 Any taxes, fees and other governmental
charges payable by the Company in connection with the execu-
tion and delivery this Agreement, the Placement Agreement,
the Multi-Party Agreement, and the Pooling and Servicing
Agreement and the issuance of the Class A Certificates have
been or will be paid by the Company prior to the Closing
Date.
(1.0.19 No adverse selection procedures were used
in selecting the SBA Loans from among the loans that meet
the representations and warranties of the Company contained
in the Pooling and Servicing Agreement and that are included
in the portfolio of the Company.
(1.0.20 The Company is licensed, qualified and in
good standing in each state where an SBA Loan was made (as
defined in the Pooling and Servicing Agreement) if the laws of such
state require licensing or qualification in order to
<PAGE>
conduct business of the type conducted by the Company, to
originate the SBA Loans and to perform its obligations as
Company hereunder and under the Pooling and Servicing Agree-
ment.
Section
1. Sale of Class A Certificates to the Initial Purchaser.
The sale of the Class A Certificates to the Initial
Purchaser will be made without registration of the Class A
Certificates under the Securities Act, in reliance upon the
exemption therefrom provided by Section 4(2) of the
Securities Act.
The Initial Purchaser hereby represents to the
Company that it is a QIB within the meaning of Rule 144A
under the Securities Act.
The Initial Purchaser hereby represents and war-
rants to and agrees with the Company, that (i) the Initial
Purchaser is an "accredited investor" within the meaning of
Rule 501 under the Securities Act, (ii) the Initial
Purchaser will offer the Class A Certificates only (A) to
persons who the Initial Purchaser reasonably believes are
QIBs in transactions meeting the requirements of Rule 144A,
or (B) to institutional investors who the Initial Purchaser
reasonably believes are Institutional Accredited Investors.
The Initial Purchaser further agrees that it will (i) deliv-
er to each purchaser of Class A Certificates, at or prior to
the confirmation of sale, a copy of the Offering Circular
(as defined below), as then amended or supplemented, which
Offering Circular will include a Notice to Investors in the
form attached hereto as Exhibit D, and (ii) prior to any
sale of Class A Certificates (to an Institutional Accredited
Investor which is not also a Qualified Institutional Buyer),
a Purchaser's Letter in substantially the form attached
hereto as Exhibit E. The Initial Purchaser has not engaged
in any activity which would cause the offering of the Class
A Certificates not to qualify as a private offering as
contemplated herein. Without limiting the foregoing, the
Initial Purchaser has not engaged in any form of general
solicitation or general advertising (as those terms are used
in Regulation D), in connection with the offering of the
Class A Certificates.
The Initial Purchaser agrees that, in connection
with its offering of Class A Certificates, it will not
provide to prospective purchasers any information or make
any representations on behalf of the Company except such as
shall have been approved by the Company (and the Company
hereby acknowledges that the marketing memorandum dated June
19, 1995, the Preliminary Offering Circular) is hereby approved)
and will not make or deliver any written or oral
<PAGE>
statements which are inconsistent with the Offering
Circular.
Section 1. Certain Agreements of the Company.
The Company covenants and agrees with the Initial Purchaser
as follows:
1 If, at any time prior to the 60th day following the
Closing Date, any event involving the Company shall
occur as a result of which the Offering Circular (as
then amended or supplemented) would include an untrue
statement of a material fact or omit to state any
material fact necessary to make the statements therein,
in the light of the circumstances under which they were
made, not misleading, the Company promptly will notify
the Initial Purchaser and prepare and furnish to the
Initial Purchaser an amendment or supplement to the
Offering Circular that will correct such statement or
omission.
1.0.1 During the period referred to in Section
6(a), the Company will furnish to the Initial Purchaser
without charge copies of the Offering Circular (including
all exhibits and documents incorporated by reference
therein) and the Pooling and Servicing Agreement, and all
amendments or supplements to such documents, in each case as
soon as available and in such quantities as the Initial
Purchaser may reasonably request.
1.0.2 While any Class A Certificates remain out-
standing, the Company will make available, upon request, to
the Initial Purchaser and any holder and any prospective
purchaser of such Class A Certificates the information con-
cerning the Company specified in Rule 144A(d)(4) under the
Securities Act.
Section
1. Conditions of the Initial Purchaser's Obligations. The
obligations of the Initial Purchaser to purchase the Class A
Certificates on the Closing Date will be subject to the
accuracy of the representations and warranties of the
Company herein, to the performance by the Company of its
obligations hereunder and to the following additional condi-
tions precedent:
I. The Class A Certificates shall have been duly
authorized, executed, authenticated, delivered and
issued, and the Offering Circular and the Pooling and
Servicing Agreement shall have been duly authorized,
executed and delivered by the respective parties there-
<PAGE>
to and shall be in full force and effect, the SBA Loans
shall have been delivered to the Trustee's Agent
pursuant to the Pooling and Servicing Agreement and the
Spread Account shall have been funded as required by
the Pooling and Servicing Agreement.
The Initial Purchaser shall receive a certif-
icate, dated the Closing Date, of the President or any
Executive Vice President of the Company to the effect
that such officer has carefully examined this Agree-
ment, the Placement Agreement and the Offering Circular
and that, to the best of such officer's knowledge (i)
the representations and warranties of the Company set
forth herein and in the Placement Agreement are true
and correct as of the Closing Date, (ii) the Company
has complied with all agreements and satisfied all
conditions on its part to be performed or satisfied
hereunder at or prior to the Closing Date and (iii)
nothing has come to the attention of such officer that
would lead such officer to believe that the Offering
Circular contains any untrue statement of a material
fact or omits to state any material fact necessary in
order to make the statements therein, in the light of
the circumstances under which they were made, not mis-
leading.
1. The Class A Certificates shall have been rated
"AAA" by Moody's Investors Service ("Moody's"); such rating
shall not have been rescinded and no public announcement
shall have been made by Moody's that the ratings of the
Class A Certificates have been placed under review.
2. The Company shall have furnished to the Initial
Purchaser evidence (which may be in the form of an opinion
of counsel) satisfactory to the Initial Purchaser that the
Company is licensed, qualified and in good standing in each
state where an SBA Loan was made if the laws of such state
require licensing or qualification in order to conduct busi-
ness of the type conducted by the Company, to originate the
SBA Loans and to perform its obligations hereunder and under
the Pooling and Servicing Agreement and the Placement Agree-
ment.
3. The Company shall have furnished to the Initial
Purchaser an opinion, dated the Closing Date, of Skadden,
Arps, Slate, Meagher & Flom, special New York counsel to the
Company, substantially in the form attached hereto as
Exhibit A.
4. On the date of the Offering Circular, Ernst &
Young shall have furnished to the Initial Purchaser an
"agreed upon procedures" letter, dated the date of delivery
<PAGE>
thereof, in form and substance satisfactory to the Initial
Purchaser, with respect to certain financial and statistical
information contained in the Offering Circular.
5. The Company shall have furnished to the Initial
Purchaser an opinion, dated the Closing Date, of Macfarlane,
Ausley, Ferguson & McMullen, special counsel to the Trustee,
substantially in the form attached hereto as Exhibit B.
6. The Initial Purchaser shall have received an
opinion of Skadden, Arps, Slate, Meagher & Flom with respect
to certain federal tax matters.
7. The Initial Purchaser shall have received an
opinion of Wyche, Burgess, Freeman & Parham, P.A., special
South Carolina counsel to the Company, substantially in the
form attached hereto as Exhibit C.
8. The Initial Purchaser shall have received an
opinion of Wyche, Burgess, Freeman & Parham, P.A. with re-
spect to certain South Carolina state tax matters.
9. The Initial Purchaser shall have received an
opinion of Petree Stockton with respect to certain North
Carolina state tax matters.
10. The Initial Purchaser shall have received on
and as of the Closing Date an opinion of Skadden, Arps,
Slate, Meagher & Flom, special counsel to the Initial Pur-
chaser, with respect to the validity of the Pooling and
Servicing Agreement and the Class A Certificates, and other
related matters as the Initial Purchaser may reasonably re-
quest, and such counsel shall have received such papers and
information as they may reasonably request to enable them to
pass upon such matters.
11. On or prior to the Closing Date the Company
shall have furnished to the Initial Purchaser such further
certificates and documents as the Initial Purchaser shall
reasonably request.
12. The Initial Purchaser shall have received
copies of any opinions of counsel to the Company or the
Trustee supplied to Moody's relating to certain matters with
respect to the Class A Certificates. Any such opinions
shall be dated the Closing Date and addressed to the Initial
Purchaser or accompanied by reliance letters to the Initial
Purchaser or shall state that the Initial Purchaser may rely
upon them.
13. The Company shall have furnished to the Initial
Purchaser and its counsel such further information, certifi-
<PAGE>
cates and documents as the Initial Purchaser and its counsel
may reasonably have requested, and all proceedings in
connection with the transactions contemplated by this
Agreement and all documents incident hereto shall be in all
material respects reasonably satisfactory in form and sub-
stance to the Initial Purchaser and its counsel.
If any of the conditions specified in this Section
7 shall not have been fulfilled in all material respects
when and as provided in this Agreement, or if any of the
opinions and certificates mentioned above shall not be in
all material respects reasonably satisfactory in form and
substance to the Initial Purchaser, this Agreement and all
of the Initial Purchaser's obligations hereunder may be
canceled by the Initial Purchaser at or prior to delivery of
and payment for the Class A Certificates. Notice of such
cancellation shall be given to the Company in writing, or by
telephone or telegraph confirmed in writing.
Section
1. Termination. This Agreement shall be subject to
termination in the absolute discretion of the Initial
Purchaser, by notice given to the Company prior to delivery
of and payment for the Class A Certificates, if prior to
such time (i) trading in securities generally in the New
York Stock Exchange shall have been suspended or materially
limited or any setting of minimum prices for trading on such
exchange has occurred, (ii) there has been, since the
respective dates as of which information is given in the
Offering Circular, any material adverse change in the condi-
tion, financial or otherwise, or in the properties
(including, without limitation, the SBA Loans) or the earn-
ings, business affairs or business prospects of the Company
considered as one enterprise, whether or not arising in the
ordinary course of business; (iii) a general moratorium on
commercial banking activities in New York shall have been
declared by either federal or New York State authorities, or
(iv) there shall have occurred any material outbreak or
escalation of hostilities or other calamity or crises the
effect of which on the financial markets of the United
States in such as to make it, in the reasonable judgment of
the Initial Purchaser, impracticable or inadvisable to
market the Class A Certificates on the terms and in the
manner contemplated by the Offering Circular as amended or
supplemented.
Section 1. Severability Clause. Any part,
provision, representation, or warranty of this Agreement
which is prohibited or is held to be void or unenforceable
in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or
<PAGE>
unenforceability without invalidating the remaining
provisions hereof.
Section 2. Notices. All communications hereunder
will be in writing and effective only upon receipt and if
sent to the Initial Purchaser, will be delivered to
Prudential Securities Incorporated, One New York Plaza, New
York, New York, 10292, Attention: Evan Mitnick; or if sent
to the Company, will be delivered at Emergent Business
Capital, Inc., P.O. Box 17526, Greenville, South Carolina,
29606, Attention: CEO.
Section 3. Representations and Indemnities to
Survive. The respective agreements, representations,
warranties, indemnities and other statements of the Company
and its officers and of the Initial Purchaser set forth in
or made pursuant to this Agreement will remain in full force
and effect, regardless of any investigation made by or on
behalf of the Initial Purchaser or the Company, and will
survive delivery of and payment for the Class A
Certificates.
Section 4. Successors. This Agreement will inure
to the benefit of and be binding upon the parties hereto and
their respective successors and the officers, directors and
controlling persons referred to in Section 8 hereof and
their respective successors and assigns, and, except as
specifically set forth herein, no other person will have any
right or obligation hereunder.
Section 5. Applicable Law. THIS AGREEMENT WILL
BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF
THE STATE OF NEW YORK WITHOUT REGARD TO CHOICE OF LAW
PROVISIONS.
Section 6. Counterparts, Etc. This Agreement
supersedes all prior or contemporaneous agreements and
understandings relating to the subject matter hereof other
than (a) the Placement Agency Agreement dated June __, 1995
between the Agent and the Company, (b) the Engagement Letter
dated March 21, 1995 between the Agent and the Company, (c)
the letter agreement dated March 21, 1995 between the Agent
and the Company relating to confidentiality and (d) the
letter agreement dated March 21, 1995 between the Agent and
the Company relating to the indemnification of the Agent by
the Company (collectively, the "Other Agreements"). In the
event of any conflict between the terms of this Agreement
and the terms of the Other Agreements, the terms of this
Agreement shall govern (other than the Placement Agency
Agreement in which case the Placement Agency Agreement shall
govern). Neither this Agreement nor any term hereof may be changed,
waived, discharged or terminated except in writing
<PAGE>
signed by the party against whom enforcement of such change,
waiver, discharge or termination is sought. This Agreement
may be signed in any number of counterparts each of which
shall be deemed an original, which taken together shall
constitute one and the same instrument.
<PAGE>
If the foregoing is in accordance with your
understanding of our agreement, please sign and return to
the undersigned a counterpart hereof, whereupon this letter
and your acceptance shall represent a binding agreement
between the Company and the Initial Purchaser.
Very truly yours,
EMERGENT BUSINESS
CAPITAL, INC.
By:
Name:
Title:
The foregoing Agreement is
hereby confirmed and accepted
as of the date first above
written.
PRUDENTIAL SECURITIES INCORPORATED
By:
Name:
Title:
<PAGE>
EXHIBIT A
FORM OF OPINION OF SKADDEN, ARPS,
SLATE, MEAGHER & FLOM, SPECIAL NEW YORK
COUNSEL TO THE COMPANY
[TO COME]
<PAGE>
EXHIBIT B
FORM OF OPINION OF MACFARLANE, AUSLEY,
FERGUSON & MCMULLEN, SPECIAL
COUNSEL TO THE TRUSTEE
[TO COME]
<PAGE>
EXHIBIT C
FORM OF OPINION OF WYCHE, BURGESS,
FREEMAN & PARHAM, P.C., SPECIAL
SOUTH CAROLINA COUNSEL TO THE COMPANY
[TO COME]
<PAGE>
EXHIBIT D
FORM OF NOTICE TO INVESTORS
Because of the following restrictions, investors are
advised to consult legal counsel prior to making any offer,
resale, pledge or other transfer of Class A Certificates.
Each investor purchasing Class A Certificates from the
Placement Agent will be deemed to have represented and
agreed as follows (terms used in this "Notice to Investors"
section that are defined in Rule 144A under the Securities
Act ("Rule 144A") or in Regulation D under the Securities
Act ("Regulation D") or defined in that certain Pooling &
Servicing Agreement dated as of June 1, 1995 between
Emergent Business Capital, Inc. and First Union National
Bank of North Carolina, are used herein as defined therein):
(a) It understands that the Class A Certificates
have not been registered under the Securities Act, and
that if in the future it decides to offer, resell,
pledge or otherwise transfer such Class A Certificates
within three years after the later of the original
issuance of the Class A Certificates or the last date
on which such Class A Certificates are held by an
affiliate of the Seller, it will do so only (i) to the
Seller, (ii) to a person who the seller reasonably be-
lieves is a qualified institutional buyer ("QIB") in a
transaction meeting the requirements of Rule 144A,
(iii) pursuant to an exemption from registration under
the Securities Act provided by Rule 144 thereunder (if
available), or (iv) in certificated form to an
institutional "accredited investor" within the meaning
of Rule 501(a)(1), (2), (3) or (7) of Regulation D
under the Securities Act and who is not a QIB ("In-
stitutional Accredited Investor") in accordance with
the provisions of the Agreement which delivers to the
Seller and the Trustee a letter in the form of
Exhibit A hereto and such certificates, legal opinions
and other information as either of them may reasonably
require to confirm that the proposed sale is being made
pursuant to an exemption from, or in a transaction not
subject to, the registration requirements of the
Securities Act, in each case in accordance with any
applicable securities laws of any state of the United
States or any other applicable jurisdiction.
(b) It understands that Definitive Class A
Certificates will bear a legend to the following effect
unless the Seller and the Trustee determine otherwise
consistent with applicable law:
<PAGE>
"THIS CERTIFICATE HAS NOT BEEN AND WILL NOT BE
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "SECURITIES ACT") OR ANY STATE SECURITIES LAW.
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
WITHIN THREE YEARS AFTER THE LATER OF THE ORIGINAL
ISSUANCE OF THE CLASS A CERTIFICATES OR THE LAST DATE
ON WHICH THIS CERTIFICATE IS HELD BY AN AFFILIATE OF
THE SELLER ONLY (1) TO THE SELLER, (2) PURSUANT TO RULE
144A UNDER THE SECURITIES ACT TO A PERSON WHO THE
HOLDER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL
BUYER ("QIB") WITHIN THE MEANING OF RULE 144A,
PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A
QIB, WHOM THE HOLDER HAS INFORMED THAT SUCH REOFFER,
RESALE, PLEDGE OR OTHER TRANSFER IS BEING MADE IN
RELIANCE ON RULE 144A; (3) PURSUANT TO AN EXEMPTION
FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE
SECURITIES ACT (IF AVAILABLE); OR (4) IN CERTIFICATED
FORM TO AN INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN
THE MEANING OF RULE 501(a)(1), (2), (3) OR (7) OF REGU-
LATION D OF THE SECURITIES ACT WHO IS NOT A QIB
PURSUANT TO ANY OTHER EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT SUBJECT TO
(A) RECEIPT BY THE SELLER AND THE TRUSTEE OF A LETTER
SUBSTANTIALLY IN THE FORM PROVIDED IN THE AGREEMENT
REFERRED TO BELOW, AND (B) RECEIPT BY THE SELLER AND
THE TRUSTEE OF SUCH CERTIFICATES, LEGAL OPINIONS AND
OTHER EVIDENCE ACCEPTABLE TO THE SELLER AND THE TRUSTEE
THAT SUCH REOFFER, RESALE, PLEDGE OR TRANSFER IS IN
COMPLIANCE WITH THE SECURITIES ACT AND OTHER APPLICABLE
LAWS".
(c) It agrees that it will deliver to each
Institutional Accredited Investor to whom it transfers
Class A Certificates notice of any restrictions on
transfer of such Class A Certificates.
(d) If it is a QIB, it understands that the Class
A Certificates offered in reliance on Rule 144A will be
represented by the Global Class A Certificate. Before
any interest in the Global Class A Certificate may be
offered, sold, pledged or otherwise transferred to an
Institutional Accredited Investor, the transferee will
be required to provide the Trustee with a written
certification in the form attached hereto as Exhibit A
as to compliance with the transfer restrictions
referred to above.
<PAGE>
(e) If it is acquiring Class A Certificates, it
understands that in accordance with ERISA and the Code,
no Plan as to which the Placement Agent, any Lender,
the Seller, the Servicer or the Trustee is a party in
interest or disqualified person, and no qualified
institutional buyer acting on behalf of such a Plan,
may acquire such Class A Certificates unless the
acquisition would constitute an exempt transaction
under a statutory exemption or any of the
administrative exemptions issued by the U.S. Department
of Labor.
(f) If it is acquiring any Definitive Class A
Certificate as a fiduciary or agent for one or more
investor accounts, it represents that it has sole
investment discretion with respect to such account and
that it has full power to make the acknowledgements,
representations and agreements contained herein on
behalf of each such account.
(g) It is either (i) a QIB purchasing for its own
account or for the account of another QIB and it and
such other person are aware that the sale to it is
being made in reliance on Rule 144A or (ii) an
Institutional Accredited Investor and is purchasing the
Class A Certificates for its own account or for an
account with respect to which it exercises sole
investment discretion.
(i) It acknowledges that the Seller, the
Placement Agent and others will rely on the truth and
accuracy of the foregoing acknowledgements,
representations and agreements, and agrees that if any
of the foregoing acknowledgements, representations and
agreements deemed to have been made by it by its
purchase are no longer accurate, it shall promptly
notify the Seller and the Placement Agent.
Each original purchaser of a Definitive Class A
Certificate that is an Institutional Accredited Investor
will be required to sign a representation letter in the form
as Exhibit A hereto.
<PAGE>
EXHIBIT E
[To be signed by Accredited Investor who is not a Qualified
Institutional Buyer]
FORM OF PURCHASER'S LETTER
First Union National Bank of North Carolina, as Trustee
230 South Tryon Street
Charlotte, North Carolina 28288
Attention: _____________________
Prudential Securities Incorporated
One New York Plaza
New York, New York 10292
Attention: ______________________
Emergent Business Capital, Inc.
15 South Main Street
Greenville, South Carolina 29606
Attention: ______________________
Dear Sirs:
In connection with our proposed purchase of $15,357,000
Certificate Principal Balance of EBC SBA Loan-Backed
Adjustable Rate Certificates, Series 1995-1, Class A (the
"Class A Certificates") of Emergent Business Capital, Inc.
(the "Seller"), we confirm that:
(1) We have received a copy of the Offering Circular
dated May __, 1995 relating to the Class A
Certificates (the "Offering Circular"), and we
understand that the Offering Circular speaks only
as of its date and that the information contained
therein may not be correct or complete as of any
time subsequent to such date. We further under-
stand that the Class A Certificates have not been,
and will not be, registered under the Securities
Act of 1933, as amended (the "Securities Act"),
and may not be sold except as permitted in the
following sentence. We agree, on our own behalf
and on behalf of any accounts for which we are
acting as hereinafter stated, that if we should
sell any Class A Certificates within three years
of the later of the date of original issuance of
the offered certificates or the last day on which
such Class A Certificates are owned by the Seller
or any affiliate of the Seller we will do so only
(A) to the Seller, (B) to "qualified institutional
buyers" (within the meaning of Rule 144A under the
<PAGE>
Securities Act) in accordance with Rule 144A under
the Securities Act ("QIBs"), (C) pursuant to the
exemption from registration provided by Rule 144
under the Securities Act (if available), or (D) to
an institutional "accredited investor" within the
meaning of Rule 501(A)(1), (2), (3) or (7) of
Regulation D under the Securities Act that is not
a QIB (an "Institutional Accredited Investor")
which, prior to such sale, delivers to the Trustee
under the Pooling and Servicing Agreement dated as
of May 1, 1995 between Emergent Business Capital,
Inc., as Seller and Servicer and First Union
National Bank of North Carolina, as Trustee (the
"Trustee"), a signed letter substantially in the
form of this letter; and we further agree, in the
capacities stated above, to provide to any person
purchasing any of the Class A Certificates from us
a notice advising such purchaser that resales of
the Class A Certificates are restricted as stated
herein.
(2) We understand that, on any proposed resale of any
Class A Certificates to an Institutional Accred-
ited Investor, we and such Institutional Accred-
ited Investor will be required to furnish to the
Trustee and the Seller such certifications, legal
opinions and other information as either of them
may reasonably require to confirm that the
proposed sale is being made pursuant to an
exemption from, or in a transaction not subject
to, the registration requirements of the Securi-
ties Act. We further understand that the Class A
Certificates purchased by us will bear a legend to
the foregoing effect.
(3) We are an Institutional Accredited Investor and
are acquiring the Class A Certificates for
investment purposes and not with a view to, or for
offer or sale in connection with, any distribution
in violation of the Securities Act. We have such
knowledge and experience in financial and business
matters as to be capable of evaluating the merits
and risks of our investment in the Class A
Certificates, and we and any account for which we
are acting are each able to bear the economic risk
of such investment.
(4) We are acquiring the Class A Certificates pur-
chased by us for our own account or for one or
more accounts (each of which is an Institutional
Accredited Investor or a QIB) as to each of which
we exercise sole investment discretion and are
<PAGE>
authorized to make the representations, and enter
into the agreements, contained herein.
(5) We have received such information as we deem
necessary in order to make our investment deci-
sion.
(6) We understand that in accordance with ERISA and
the Internal Revenue Code of 1986, as amended no
ERISA Plan as to which the Placement Agent, the
Seller, the Servicer or the Trustee is a party in
interest or disqualified person, and no person
acting on behalf of such an ERISA Plan, may
acquire such Class A Certificate unless the
acquisition would constitute an exempt transaction
under a statutory exemption or any of the
administrative exemptions issued by the
U.S. Department of Labor.
Terms used in this letter which are not otherwise
defined herein have the respective meanings assigned thereto
in the Offering Circular.
<PAGE>
Each of you is entitled to rely upon this letter and is
irrevocably authorized to produce this letter or a copy
hereof to any interested party in any administrative or
legal proceeding or official inquiry with respect to the
matters covered hereby.
Very truly yours,
[PURCHASER]
By:
Name:
Title:
Class A Certificates to be purchased:
$ 15,357,000 original Certificate Principal Balance of
Class A Certificates.
