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Fillable Printable North Carolina Loan Participation Program

Fillable Printable North Carolina Loan Participation Program

North Carolina Loan Participation Program

North Carolina Loan Participation Program

NORTH CAROLINA
LOAN PARTICIPATION PROGRAM
Agreement No._________________
MASTER LOAN PARTICIPATION AGREEMENT
between
RURAL ECONOMIC DEVELOPMENT CENTER, INC.
and
_________________________________________________
(PARTICIPATING LENDER NAME)
___________________________________________________________
(PARTICIPATING LENDER ADDRESS)
___________________________________________________________
(PARTICIPATING LENDER CITY/STATE/ZIP)
ATTN: ___________________________________________________________
(PARTICIPATING LENDER CONTACT & TITLE)
PHONE: _______________________FAX:_______________________
(PARTICIPATING LENDER)(PARTICIPATING LENDER)
EMAIL:__________________________________________
(PARTICIPATING LENDER)
FEIN: _________________________________
(PARTICIPATING LENDER)
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NORTH CAROLINA LOAN PARTICIPATION PROGRAM
MASTER LOAN PARTICPATION AGREEMENT
This Loan Participation Agreement (the "Agreement") is entered into as of this ___________day
of _________, 20______ by and between _________________________________ (the "Lender"), a
(national/state banking association, a Corporation, etc.), having its principal office located at
________________________________________________ and the Rural Economic Development
Center, Inc.(the “Rural Center”), having its principal office located at 4021 Carya Drive, Raleigh,
North Carolina 27610.
RECITALS
Whereas the State of North Carolina through the Department of Commerce has created the
SSBCI Loan Participation Program (as hereinafter defined) under the authority granted to it by the federal
State Small Business Credit Initiative ("SSBCI") of the Small Business Jobs Act of 2010 (Title IIIof
Public Law111-240); the Allocation Agreement, as amended and dated January25, 2012between the
United States Treasury (the "US Treasury") and the State of North Carolina; and
Whereasthe purpose of the SSBCILoan Participation Program (the “Program") is to foster
economic development in North Carolina by enhancingthe availability of credit tosmall and medium-
sized businesses from private sources of capital; and
Whereas,in pursuit of those goals, the Department of Commerce hasentered into a contract with
the Rural Center to offer the Program; andthe Rural Centermay be willing, fromtime to time, to
purchase participation interests in loans, includingprincipal and interest payable there under, made by the
Lender to certain Program-eligible businesses.
Now therefore,in consideration of the premises and the agreementscontained herein, the Lender
and the Rural Center hereby agree as follows:
1. DEFINITIONS
In addition to the words and terms defined elsewhere is this Agreement,each of the following
words and terms used in this Agreement shall have the followingmeaningunless the context or use
indicatesa different meaning. Definitions shall be applicable to both the singular and pluralforms of the
terms as the context may require:
"Allocated Funds" means fundsawarded to the State of North Carolina on account of theAllocation
Agreement as amended and dated January25, 2012, between the US Treasuryand the State of North
Carolina.
"Borrower" means the recipient of a Loan from the Lender for which a Participation Certificate has been
or will be issued by the Lender and acknowledged by the Rural Center, and all successors and assigns of
such Borrower; provided such Borrower:
A.is a for-profit corporation, limited liabilitycompany, partnership, joint venture, sole
proprietorship, state-designatedcharitable, religious, or other non-profit or eleemosynary
institution, government-owned corporation, consumer or marketing cooperatives, orfaith-based
organization having five hundred(500) orfewer employees and the loan proceeds will be used
for a business purpose in the State of North Carolina;
B.is not:
i.a business engaged in speculative activities thatdevelop profits fromfluctuations in price
rather than through normal course of trade, such as wildcatting for oiland dealingin
commodities futures, unless thoseactivities are incidental to the regular activities of the
Borrower and part of a legitimate risk management strategyto guard againstprice
fluctuations related to the regular activities of the Borrower;
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ii.a businessthatearns morethan half of its annual net revenue fromlendingactivities;
unless the Borrower is a non-bankor non-bank holdingcompanycertified asa
Community Development Financial Institution (CDFI);
iii.a business engaged in pyramid sales, where a participant's primaryincentive is based on
the sales made by an ever-increasing number of participants;
iv.a business engaged in activities that are prohibitedby federal law or applicable law in the
jurisdiction where the business islocated or conducted, includingthe production,
servicing, ordistribution of otherwise legal products that are to be used in connection
with an illegal activity, such as selling drug paraphernalia or operating a motel that
knowingly permits illegal prostitution; or
v.a business engaged in gambling enterprises, unless the Borrower earns less than 33
percent of its annual net revenue from lottery sales; and
C.is not an executive officer,director or principalshareholder of the Lender or a company which
controls the Lender, or a subsidiaryor affiliate ofthe Lender; nora member of the immediate
family ofan executive officer, director or principal shareholder of the Lender or a company
which controls the Lender, or a subsidiary or affiliate of the Lender; nor an entity controlled by an
executive officer, director or principal shareholder of the Lender or a company which controls the
Lender, ora subsidiary oraffiliate of the Lender; nor a member of the immediate family of an
entity controlled by an executive officer,director or principal shareholder of the Lender or a
company which controls the Lender, or a subsidiary or affiliate ofthe Lender.For purposes of
this paragraph, theterms "executive officer," "director," "principal shareholder," and "immediate
family" shall be as defined in 12 C.F.R. Sec. 215.2 (1991), including any amendments thereto.
"Closing Documents" means all documents executed or delivered by the Borrower ortheLender with
respect to a Loan, includingwithout limitation a copy of the Note, the loan agreement, any security
agreement, any financingstatement orUniformCommercialCode filing, any guaranty, any mortgage or
assignment of rents, any pledge agreements, and any other document that secures repayment of the Loan.
"Commitment Letter"is a contingent commitment letter prepared by the Rural Center notifyingthe
Lender thatthe Rural Center is willingto purchasea Participation interest in a loan, and sets forth any
special conditions related to the Participation that are binding. All commitments are contingent upon the
Lender and Borrower meeting all requirements and providingadequate support documentation sufficient
to complywith applicable laws and regulations to allow the Rural Center to filethe Loan Documents in
order to obligate and obtain funds.(A sample Commitment Letter is attached as ExhibitA). The
CommitmentLetter, together with any approved revisions, will also set forth other terms and conditions
specific to an individual Participation and are binding on the Lender and the Borrower.
"Lender" means a financial institution withwhich the Rural Center has entered into an agreementor
contract to provide loans to small businesses, in which the Rural Center purchases an undivided interest in
the otherwise qualifying loan.
"Lender Rate" means an interest rate set bythe Lender, either fixed, adjustable, or variable (determined
by the promissory note) used in calculating the amount of interest shared by the Lender and the Rural
Center pro rataon a given Loan, which rate shall initially be that referenced in the CommitmentLetter
related to such Loan. If the Lender Rate is adjustable or variable, the Rural Center rate shall be adjusted
upwards or downwards everytime the interest rate charged the Borroweris adjusted, so that the pro rata
share shall always be the same as it was on the Purchase Date.
"Loan" means a loan made by the Lender to a Borrower in which the Rural Center has or will have a
Participation.
"Loan Documents" means the Closing Documents, the Participation Certificate, the Commitment Letter,
and all other documents executed or delivered by the Borrower, guarantor, or Lender with respect to a
Loan, including without limitationthe Borrower's application, business plan, and historical and projected
financial statementsand anyfinancial statements and reportsdelivered by the Borrower to the Lender on
an ongoingbasis, the Lender's financial, repayment and collateral analysis, credit reports, and all periodic
reports required to be delivered to the Rural Center by the Lender under this Agreement.
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"Note" means the promissory note of the Borrower payable to the order of theLenderevidencing the
Loan.
"Participation" means, with respect to a Loan, the RuralCenter’s undivided participation interest in
such Loan, the Loan Documents and all of the Lender's right, title and interestpertainingto the Loan and
all proceeds arising therefromincluding, without limitation, any collateral for such Loan and any
guaranties, mortgages, or othersecurityinterests obtained inconnection therewith, expressed as a
percentage and calculated from time to time by reference to the outstanding principal balance of the Loan.
"Participation Amount" means, with respect to a Loan, that portion of the original principal amount of
the Loan purchased bythe Rural Center fromthe Lender, minus the aggregate principal amount repaid, as
of any date, on that portion of such Loan purchased by the Rural Center from the Lender.
"Participation Certificate" means the document evidencing the RuralCenter‘s Participationwith
respect to a Loan made between the Lender and the Borrower. A sample Participation Certificate is
attached hereto as Exhibit B.
“Participation Percentage”means the Rural Center’s undivided participationinterest in such Loan
divided by the amount of the Loan as set forth in the Commitment Letter and the Participation Certificate.
"Project" means the project of the Borrower for which Loan funds are to be used, includingwithout
limitation the Loan, anyequity or any other funds provided byowners, shareholders, banks, or other
financial institutions.
"Prompt Payment" means the time periodwithin which the Lendermust forward or remit the Rural
Center‘s pro rata share of the Borrower’spaymentof itsLoan to theRural Centerin orderto avoid late
fees hereunder. If theRural Centerhas one Participation with Lender, payment is considered timelyfor
this purpose if the Lender remits in immediate funds said payment tothe RuralCenterwithinfive (5)
business days ofreceiptof payment. Ifthe RuralCenter has more than one Participation with Lender,
payment may be combined for all Participations and remitted within five (5) business days of the end of
each month. In the event a payment is not remitted to the Rural Center within five (5) business days of its
above mentioned due date,a late fee of the greater of 4%of the total payment due (perpaymentbeing
withheld) or $50 (per payment being withheld), whichever is greater, shall be automatically assessed.
Arrearage will be determined fromthe date the payment should have been remitted through the date the
payment is actuallyremitted. This late fee will be immediatelydue and owing. Additionally, any and all
late fees due to Lender’s delinquencyshall not be theresponsibility of, and shall not be absorbed by or
charged to, the Borrower. In compellingcircumstances and upon the Lender’s written request, the Rural
Center may, within its sole discretion, agree to waive any late fees due to a late payment.
"Purchase Date" means, with respect to a Participation, the date on which such Participation is
purchased.
"Servicing Expenses" means any and all out-of-pocket liabilities, obligations,losses,penalties, expenses
(includingreasonable legal expenses and fees), disbursements, costs and damages, but excluding salaries
and wages of its officers and employees and overhead expenses, incurred by the Lender, or for which the
Lender is responsible, directly or indirectly, in connection with orarisingasa result of (a) the
enforcement of rights or remedies with respect to a Loan or the collection of same (including those arising
due to suits, claims or counterclaims by another partyagainstthe Lender), and (b) the protection of the
interests in any collateral securingthe repayment of the Loan. “Servicing Expenses” does NOTinclude
services or products provided by or through the Lender for the benefit of the Borrower, guarantor, or
other responsible partyto facilitate their compliance with agreed terms and conditions. The mere fact that
the Lenderpays an expense does not in itself qualifyitas a “Servicing Expense;” ratherthere mustbea
clear correlation to the enforcementof the Lender’s rights or remedies. Business restructuring expenses
do not constitute “Servicing Expenses” unless prior written approvalis obtained from the Rural Center.
2. APPLICATIONS AND APPROVAL; SALE AND PURCHASE OF PARTICIPATION
2.1 Applications. The Lendershall accept applications fromprospective Borrowers and, if found
creditworthy by the Lender andmeeting the Program requirements contained in Section 3 below, the
Lender shall submit the Application for Participation in substantially the formattached hereto as Exhibit
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D, supportingdocuments, and the details of the proposed Loanin a formsatisfactory to the Rural Center,
for theRural Center 's review and purchase approval. The Lendermust also obtainandsubmit to the
Rural Centera Certification executed by the Borrower (with necessaryattachments) in substantially the
form attached hereto as Exhibit C. TheRural Center expressly reserves the right, in its solediscretion, to
accept or reject any Borrower and/or any Loan. Once the Lender receives a Commitment Letter, it may
consummate the Loan and shall sell a Participation therein to theRural Center,pursuantto the terms and
conditions set forth herein.
2.2 Maximum Rural Center Participation Amount. The Lender shall sell, assign and transfer,
and the Rural Center shall purchase and accept, subject to the terms and conditions of this Agreement, a
Participation of not less than Thirty SevenThousand Five Hundred Dollars ($37,500) nor more than Two
Hundred Fifty Thousand Dollars ($250,000). In no case shall the amountof a Participation exceed fifteen
percent (15%)of the lesser of the appraised value or the total cost of any Project for which a Loan is
made, and in no case shall the termof the Loan be anylonger than ten (10) years, however the loan may
be amortized for a longer period, butnot longer than twenty (20)years; unless the President or authorized
designee of the Rural Center documents in writing thatit is in the best interestsof theState to waive the
above limitations.The Rural Center’s Participation is computed by dividing the Rural Center’s principal
balance by the Loan’s principal balance. The Lender is responsible for monitoring and ensuring that, at
any given time, the Rural Center’s Participation never exceeds its participation percentage. In the event
the Rural Center’s Participation is ever greater than the Rural Center’s original participation percentage,
the Lender must immediately pay the Rural Center the excess principal to bring the Rural Center’s
Participation into compliance with the Commitment Letter.
2.3 The Rural CenterCommitment. Upon receipt fromthe Lender ofan Application for
Participation with the applicable documents, the Rural Center, in its sole discretion, shall determine
whether it will purchase a Participation interest in the loan. The Rural Center shallmake every attempt to
make its determination within thirty(30) days ofreceipt of the Applicationfor Participation and
applicabledocuments. If the Rural Center approves the Application for Participation, itwill issue and
send, via electronic communication, a Commitment Letter to the Lender, which shall remain in effect for
thirty (30)days. The Lender shall, within thirty (30) days after theCommitmentLetter is issued, sign it
and return the original to the Rural Center orthe Commitment Lettershall expire. If the Lender does not
close the Loan within one hundred twenty(120) daysafter the Commitment Letter is issued, the Rural
Center’s commitment will expire, unless a written extension of time is granted by the Rural Center. The
Rural Center , in itssole discretion,maygrant an extension of time providedthat no material change in
either the scope of the Project, the financial condition of the Borrower (including guarantors), or its ability
to repaythe Loan as originally approved has occurred. If the RuralCenter declines the Application for
Participation, itwill make every attempt toso advise the Lenderwithin thirty (30) days of receipt of the
application.
2.4 Purchase and Funding ofParticipation. Upon the closing of a Loan for which the Lender
has received a Commitment Letter, the Lender shall notifythe Rural Center’s Vice President for Finance
and Administration, or authorized designee, of the closingand shall deliver all ClosingDocuments to the
Rural Center within fifteen (15) business days ofthe closing, otherwise the Rural Center’s Participation
shall be void, unless thefifteen dayperiod is waived or extended in writing by the Rural Center. The
Rural Center shall acknowledge the Participation Certificate (a sample of which is attached asExhibit B)
by having its President orauthorized designee execute the Certificate and return it to the Lender. The
Rural Center shall processthe Participation Certificate and any other documents necessary to fund its
Participation, and then simultaneously or as soon as practicable shall initiate the actionsto cause delivery
of its Participation Amount to the Lender. The Participation will be consideredfundedon the date the
Rural Center funds are transferred to the Lender by ACH transfer. Interest will begin to accrue on the date
of closing. The Lender willbe responsible for the timely movement/distribution of the Rural Center funds
to the Borrower.
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3. SSBCI PROGRAM REQUIREMENTS
Obligations of the Rural Center will cease immediately withoutpenalty or further paymentbeing
required if the Allocated Funds for the Program are no longer available (whether they have all been
otherwise utilized or the Rural Center no longer has access to them). The Rural Centerand the Lender
acknowledge that the Program will be funded, in whole or in part, by State Small Business Credit
Initiative Programfunds, as available, and as such, both the Rural Center and the Lender agree that the
use of funds pursuant to this Agreement shall be governed by, and not be inderogation of, any rules,
regulations, or guidelines for the Programpromulgated or issued bythe US Treasuryor the State of North
Carolina. As to each Loan in which the RuralCenter purchases aParticipation, the Lender agrees that it
will have determined that all of the following are true and correct:
A.The proceeds of the Loan willnotbe used:
i.to repay delinquent federal or state income taxes unless the Borrower has a payment plan
in place with the relevant taxing authority;
ii.to repay taxes held in trust or escrow (e.g., payroll or sales taxes);
iii.to reimbursefunds owed toany owner of theBorrower, includingany equity injection or
injection of capital for the Borrower's continuance;
iv.to purchase any portion of any ownership interest in the Borrower;
v.for activities thatrelate to acquiringorholdingpassive investments, such as commercial
real estate ownership and the purchaseof securities; and lobbyingactivities, as defined in
Section 3(7) of the Lobbying Disclosure Act of 1995, P.L. 104-65, as amended; or
vi.to refinance a loan previously made to the Borrower by the Lender;
B.No principal of the Borroweror the Lender has been convicted ofa sex offense against a minor
(as such terms are defined in Section 111 of the Sex Offender Registration and Notification Act
(42 U.S.C. § 16911));
C.The Lender is in material compliance with all federal and state laws, rules, and regulations
pertaining to the making of loans (including 31 C.F.R. § 103.121);
D.The Borrower is readyto implement the Project and hasthe financial ability to carryout the
Project;
E.The Borrower is responsible and creditworthy;
F.The Loan is protected bysecurity, which may include, as available, first or second mortgage
positions on real or personalproperty, royalty payments on sales of products or services, or any
other security satisfactoryto the Lender to secure repaymentof the Loan. Personal notes or
guaranties have been executed by persons owning more than twenty (20) percent of the Borrower;
G.The Loan Documents are in an amount and form, and contain such terms and provisions with
respect to propertyinsurance, repairs, alterations, paymentof taxes and assessments,delinquency
charges, default remedies, additional security, and other matters, adequate to protect the State’s
interest in ensuring repayment;
H.Guarantors are responsible and creditworthy. Guarantors’ assets have been verified and will
undergo periodic review both to ensure their continuing capacity to provide performance
guaranties in the amounts required to ensure repayment, and to ensure that thesame assets have
not been pledged or are supporting other loans or guaranties.
4. COMPENSATION TO LENDER
The Borrower shall pay interest to the Lender at the rate agreed upon between the Lender and the
Borrower. All application and origination fees collected by the Lender, with respectto the Loan, will be
shared pro rata with the Rural Center, unless waived by the Rural Center.
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5. OWNERSHIP INTEREST IN PARTICIPATION LOAN, LOAN DOCUMENTS AND
RECORDS, LIENS, SECURITY, GUARANTIES, AND OTHER COLLATERAL
5.1 The Rural Center'sUndivided Interest. Upon the Rural Center’s purchase of a
Participation in a Loan, and pursuant to the provisions of Section 2, the Rural Center shall, without the
necessityof any written instrument of assignment or other document, become vested with an undivided
equitable ownership interest (proportional to such Participation fromtime to time) in: (i) the Loan; (ii) the
Loan Documents; and (iii) any other rights and claims of theLender withrespect to the Loan. If the
Lender acquires any security interests or liens grantedby any of the Loan Documents, the Rural Center
shall have an undivided interest in such security interest or lien equal to its Participation in the Loan,
notwithstanding the fact that the security interest or lien is in the name of,and/or possession is maintained
by, the Lender.
5.2 The Lender as Trustee. All Loan Documents and the rights conveyed by themexecuted and
delivered in connection with the Loan shall be held bythe Lender in trust forthe pro rata benefitof the
Lender and the Rural Center, and as servicing agent fortheRural Center. The Lender is authorized to
retain the Note and the Loan Documents in the Lender's name and to deal with parties other than the
Rural Center as though the Lender were an absolute owner of the Loan and the Loan Documents. Any
person, firmor corporation maydeal with the Lender concerningthe Loan inthesame manner as ifthe
Participation was notoutstanding and the Lender wasthe sole owner of the Loan, aslimited by Section
6.5, 6.6, and 6.7 of this Agreement. The Lender may perform any ofits obligations hereunder by or
through its agents, employees or attorneys.
5.3 Limits of the Rural Center's Interest. Although the Lender holds for the Rural Center’s
proportional benefit all collateral securing performance and payment of a Borrower's obligations and
liabilities under and in connection with anyLoan, the Rural Center shall have no interest in any other
property taken assecurity for any other credit, loan or financial accommodation made or furnished to the
Borrower by the Lender in which theRural Center has no Participation. This shall include any property
now or hereafter in the Lender's possession or under the Lender's control or in anydeposit held that may
be or maybecome securityfor performance or payment of a Borrower's or guarantor's obligationsand
liabilities under and in connection with other indebtedness owing to Lender byreason of the general
description contained in any other instrumentheld by the Lender orby reason of any right of setoff,
counterclaim, banker's lien or otherwise; provided, however, if such property, deposit, indebtedness or the
proceedsthereofshall be applied to the paymentor reductionof principal, interest, fees or any other
amounts owingby a Borrower or guarantor in connection with a Loan, then the Rural Center shall be
entitled to its pro rata share of such payment. All collateral securing performance and payment of a
Borrower's obligations and liabilities under and in connection with anyLoan may be used by Lenderin
connection with other indebtedness owingto Lender, but only if indebtedness is specifically subordinate
to the Loan.
6. COLLECTIONS, DISBURSEMENTS AND ADMINISTRATION
6.1 Collection and Transfer of Payments.
A.The Lender, as servicer of the Loan, shall be obligated to collect, as the Rural Center’s trustee
with respect to the Rural Center's pro rata share thereof, all payments of interest and principal
due and payable on the Loan, together with anycharges, fees, costs, expenses and any and all
other amounts due on or in connection with the Loan Documents, includingwithout
limitation all ServicingExpenses incurred by Lender. If the Lender receives, collects or
applies in full an interest payment with respect to a Loan, the Lender will remitto the Rural
Center itspro rata share. If the Lenderreceives, collectsor applies onlya partial payment of
interest with respectto a Loan, unless the Rural Center has subordinated withrespect to
payment, the Lender willremitto the Rural Center interest on the ParticipationAmount of
such Loan at a rate equal to the amount due theRural Center under thepreceding sentence
multiplied by the Participation Percentage. Ifthe Lender receives, collects or applies a
principalpayment or prepayment with respect to a Loan, the Lenderwill remitto the Rural
Center its pro rata share of such amount. Unless theLender is otherwise entitled to apply
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payments as provided in Section 9 hereof, the Lender shall promptlyremit the Rural Center’s
share of payments on account of principal and interest to theRuralCenter within five (5)
business days of receiptor five (5) business days of the endof each month if the RuralCenter
has more than one Participation.
B.Payments are to be made byACH transferfromthe Lender’s account. Payments mustbe
coordinatedwith the Rural Center’s loanservicing representative in theRural Center
AccountingOffice. A Monthly Report/PaymentDistributionSummary and Transmittal must
be completed and submitted with each and every payment remitted to the Rural Center. If the
Rural Center has more than one Participation Loan with the Lender, the Lender may make
one ACH transfer combining payments intooneremittance. The Report/Payment Distribution
Summary and Transmittal shall disclose information, including but not limited to, the date the
Lender received payment fromoron behalf of each Borrower, the manner in which the
Lender apportioned said payment betweeninterest andprincipal betweenthe Lender and the
Rural Center, and the outstandingbalance of the Loan. In the event thataBorrower fails to
remit a scheduled payment to the Lender, the Lender, nevertheless, must submit the Monthly
Report/Payment Distribution Summaryand Transmittal to the Rural Center indicatingeither
that no payment was received orthat no payment was due and owing to the Rural Center.
6.2 Loan Servicing and Application of Payments.
A.Inits handlingof the Loan and any collateral security rights under the Loan Documents, the
Lender shall exercise the same care and due diligence it exercises when it processes loans and
collateral security rightson its own behalf and within the covenants and requirements in
Sections 6.5, 6.6, and 6.7. Exceptfor the express warranties contained herein, the Loan and
Participation shall be for the amounts specified in theCommitment Letter. Except as
provided for inSection 18.1, a Participation or a Loan maynotbe transferred bythe Rural
Center or the Lender (as applicable), in whole or in part, without the written consent of the
other party. It is also understood that the Lender shall have no independent responsibility for
the performance ofa Borrower's obligation, nor forany failure ordelay in exercising any
rights or powers given the Lender by the Loan Documents, beyond undertakingthe same care
that the Lenderexercises in the making and handling of loans and credits for its own account.
B.All securityevidencedby the Loan Documents and any additional securitygiven by a
Borrower shall be held by the Lender primarily assecurity for the Loan and shall not be used
or applied toward paymentof other obligations of the Borrower to the Lender, as long as the
Loan remains unpaid and as long as this Agreement remains in effect; provided however, that
nothingherein shall preventthe Lender fromcollecting payments fromthe Borrower for
other indebtedness, or foreclosing upon othersecuritythat is not securing a Loan covered
under this Agreement, if the other loans or credits are in default, are separatelystated on the
books of the Lender, and thesecurityor other collateral is segregated at all times, and
provided that any such action triggers an event of default under the Loan Documents.
C.The Lender shall, if possible, provide the Rural Center with advance notice of a change in the
Lender Rate with respect to a Loan, and shall in all cases provide such noticeto the Rural
Center no later than the dateon which the first paymentaffected by the rate change is
delivered to the Rural Center.
6.3 Lender's Late Payments to the Rural Center.
A.Ifthe Lender fails to make Prompt Payment to the Rural Center for it’spro rata share ofany
payment the Lender receivesfrom, or on behalf of, the Borrower with respect to a Loan, the
Lender shall paythe Rural Center a late fee and/or interest as described in Section 1 (Prompt
Payment) of this Agreement.
B.If all or part of any payment made to the Lender is rescinded or must otherwise be returned to
a Borrower forany reason(other than the Lender's negligence or misconduct), and if the
Lender has, prior thereto, paid to the Rural Center its pro rata share of such payment, the
Lender shall, after telephone notice tothe Rural Center and confirmed later in writing,
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subtract the appropriate portion of such rescinded or returned payment from the Rural
Center's next payment hereunder.
6.4 Application ofMonies. Except as provided in Section 6.7, all monies collected or received
by the Lender in connection with any Loan (other than the fees)shall be applied and distributed in the
following order of priority:(i)to the payment ofall Servicing Expenses (if any); (ii) to the payment of
accrued and unpaid interest on the Note; and (iii) to the payment of principal on the Note. Before any
distributionto the Rural Center, with respect to any such application beingmade, the amount thereof shall
be adjusted to the extentthat any amount is owed by either partyto the other, inaccordance with the
terms hereof.
6.5 Lender's Powers. The Rural Center authorizes the Lender, and the Lender herebyagrees, to
act as trustee for the Rural Center subject to the limitations contained herein, including the provisions of
Sections 6.2(B), 6.6 and 6.7 hereof: (i) to negotiate, control, manage and service the Loan; (ii) to enforce
or to refrain fromenforcing the Loan Documents;(iii) to give consents, commitments or waivers in
connection with the Loan Documents; (iv) to acquire additional security for the Loan; (v) to take or
refrain from taking any action and make any determination provided for herein or in the Loan Documents;
and (vi) to exercise all such powers as areincidental thereto. The Lenderacknowledges its status as
trustee and represents that it has the power to performthe serviceslisted in this Section. In acting under
this Agreement, the Lender agrees to exercise the same degree of care in administeringeach Loan as it
would usein managingitsown loans in which no Participation hasbeen issued. TheLender agrees that
the exercise of these fiduciary responsibilities as trustee for the Rural Centerincludes the full and
complete pursuit of amounts owed in relation to any unpaid portion of the entire Loan until released from
that responsibility in writing bythe Rural Center, while the Rural Center retains an undivided interest in
the Loan and any related Loan Documents. Further, the Lenderagrees that it will take no independent
action, unless agreed to in advance and in writingby the Rural Center, that directly, or indirectly by
nature of a proceeding orprocess, releasesthe Borrower or anyguarantor or other responsible party or
entity, in full or in partial satisfaction, froma continuing responsibility to repay the Loan and/or other
applicable charges/fees in relation to debt collection activities, until all amounts due are paid in full.
6.6 Lender's Covenants with Respect to the Loans.
A.The Lender herebycovenants with respect to each Loan that it shall not, without the Rural
Center’s prior written consent or approval:
i.consentto or accept any cancellation,termination,revision, or settlement of any
Loan Document, or agree to any transfer or termination of any instrument now or
hereafter assigned to it as security for the Loan;
ii.release, partiallyor fully, any collateral given as security for the Loan orany
guarantor of the Loan;
iii.extend the maturitydate of the Loan or the date of any interest or principal
payment there under;
iv.reduce the amount of any payment of principal or the applicable Lender Rate;
v.increase the maximumamount of the Loan or the obligations of the Lender or the
Rural Center pursuant to any Loan Document;
vi.require the acceptance of a new note evidencingthe Loan, in substitution for the
Note;
vii.waive orconsent to themodification of any Loan Document that would cause the
Loan to no longer be in compliance with the requirements of Section 3; or
viii.consent to any amendment or modification to a Loan Document that would be, in
the judgment of a prudent financial manager, material to the Loan.
B.Inthe event that the Lender breaches anyof the above enumerated covenants, it agrees that it
shall purchase the Rural Center’s outstanding Participation as of the date of the breach.
Version3.23.15 Page 10 of 26
C.Inthe event that Lender seeks the Rural Center’s consent or approval for any of the matters
enumerated above theRuralCentershall make every effort torespondto the Lender's request
within ten (10)business days after such request. Such response may be by telephone, tobe
confirmed in writing promptly thereafter.
D.Upon the occurrence of any default by the Borrower orguarantor under any of the Loan
Documents, the Lender shall consult ingood faith with the Rural Center. Notwithstanding the
foregoing, if such a default iscaused bythe nonpayment of principalor interest, bythe
bankruptcy of the Borrower or a guarantor, or by the occurrence of an event that would have
a material adverse effect on the repaymentof the Loan or the collateral securingthe Loan (in
the Lender's reasonable judgment), the Lender shallnot waive such default without the
written consent of the Rural Center. If, atanytime during the continued occurrence of such a
default, the Rural Center informs the Lender ofits desire thatthe Lender commence
foreclosure proceedings under the terms of the Loan Documents, the Lendershall either
commence such proceedings orpurchase the Rural Center’s Participation in accordance with
Section 7 hereof.
6.7 Subordination after Default. TheLender and the Rural Center may agree tothe
subordination ofamounts(both principal and interest) owed to the RuralCenter under certain
circumstances. Such subordination shall be effective only if noted on both the relevant the Commitment
Letter andParticipation Certificate. If the Lenderand the Rural Center soagree,the amountsowed by the
Lender to the Rural Center with respect to a Participationshall be subordinated to amounts owed by the
Borrower to the Lender fromand afterthe occurrence of all of the followingevents: (i) the occurrence of
any default under any of the applicableLoanDocuments;(ii) noticethereof to the Rural Center; (iii)
acceleration of the applicable Loan; and (iv) commencement and continuationof foreclosure proceedings
and other collection efforts, which shall include enforcing all guaranties with respect thereto.
However, in any foreclosure proceedingwhere the Lender is the successful bidder at the
foreclosure saleand the sale results in a loss toeither the Lenderand/or the Rural Center,or if Lender
otherwise acquires title to such propertyin lieu of a foreclosure, such as bya deed in lieu of foreclosure,
and in any such case the Lender subsequently sells the foreclosedor otherwise acquiredproperty within
twelve (12) months thereafter for a gain or profitin excess of the value of the loan, the Lenderis
obligated to remita pro rata share of said gain or profit equal to the Rural Center Participation Amount
within thirty (30) calendar daysthereafter. This alsoapplies to any situation where the Lender takes
judicial or non-judicial ownership of collateral assets for subsequent disposition.
Breach ofany of the Covenantsor requirements specified in Sections 6.5, 6.6, or6.7 renders all
subordination null and void as of the dateof thebreach. Unless a new subordinationagreement is
executed in writingby the Lenderand the Rural Center, any amounts recovered upon the Borrower’s
default are to be distributed on a pro rata basis equal to theRural Center Participation Amount, plus
recovered interest and fees if any.
6.8 Retentionof Counsel.In the event of actual or threatened litigation affecting a Loan or the
securityforsuch Loan, and if the Lender is ofthe opinion that the servicesofan attorney shouldbe
retained to protect thoseinterests, theLendermay, followingten (10) businessdays'prior written notice
to the Rural Center (unless, in the judgmentof the Lender, immediate action is required, whereupon any
reasonable form of notice to the Rural Center shall be acceptable), retain counsel to representthe Lender.
The Lender shall seek to cause the Borrower to pay the reasonable fees and expenses of such counselin
accordance with the terms and conditions of the Loan Documents, but if the Borrower fails to pay such
fees and expenses, then the Lender shall pay all reasonable costs thereof as Servicing Expenses. The
Rural Centershall not haveany rightin connection with such litigation to retain other counsel, except at
the sole cost and expense of the Rural Center.
7. REPURCHASE BY LENDER OF THE PARTICIPATION
7.1 Repurchase by Lender. At any time during which the Loan is outstanding, the Lender shall
have the unconditional right, within its sole and exclusive discretion,to repurchase the Participationin the
Loan, upon written notice to the Rural Center.
Version3.23.15 Page 11 of 26
7.2 Price Payable by the Lender. The purchase price to be paid by the Lender to the Rural
Center under Sections 6.6(B) and 7.1 hereof shall be an amount equal to the Participation Amount,
together with any accrued interest thereon and fees (if any).
7.3 Consummation of Repurchase. Anysuch repurchaseshall occuron a date selected by the
Lender, which date shall be no later than (a) ten (10) business days after the givingof written notice by
the Lender of the exercise of its option to repurchase, or (b) twenty-five (25) business days after the
Lender begins foreclosure proceedings. The purchaseprice paid by the Lender to the Rural Center shall
be paid on such date in immediatelyavailable funds, and concurrently therewith the Rural Centershall
execute, and deliver to the Lender, document(s) reassigningto the Lender the Participation, without
recourse, covenantor warranty, express orimplied (except that the Rural Center shall warrant its
ownership of the Participation, the amount of indebtedness outstanding thereunder and its authorityand
capacity to execute such documents).
8. LENDER'S RIGHT OF OFFSET
To the extent thatat any time a Borrower, guarantor or any other party makes anypayment under
the relevantLoan Documents to the Lender by exercise of a right of offset of anykind, includingany
right applyingto deposits, accounts, moneys or other propertyof such Borrower or guarantor deposited at
or held by the Lender (but excluding any property securingthe Loan pursuant to the Loan Documents),
such payments shall be applied to reduce the Loan. Immediately thereafter, the Borrower’s outstanding
balance shall be automatically readjusted to reflect such payment, and the Lender shall purchase fromthe
Rural Center asmuch ofthe Participation Amount so as to return the Lender's and the Rural Center's
respective interests to the percentages existing prior to the offset.
9. SUBORDINATION OF THE RURAL CENTER'S PARTICIPATION
TO SERVICING EXPENSES
Subject to the terms and conditions of this Agreement,each Participation shall be subordinated in
payment until such time asthe Lender's Servicing Expenses (if any) with respect to the applicable Loan
have been paid in full. Accordingly, and in consideration thereof, Servicing Expenses shall be the sole
responsibility of the Lender, and the Lender hereby indemnifies the Rural Centerfor any and all liability
for Servicing Expenses. In all other events, subject to the terms of this Agreement, payments made on the
Participation shall be pari passu with amounts retained by the Lender with respect to the Borrower’s
outstanding balance, pro rata in accordance with their respective percentage interests.
10. BOOKKEEPING ENTRIES
The Lenderwill reduce, for the purpose of recordingthe value of its assets in its financial books
and records, the value of anyLoan asset by the amount of the Rural Center’s Participation Amount. The
Lender shall, within ten (10) business days after a request by the Rural Center orUS Treasury, allow the
Rural Center or US Treasury to examine the Lender's books and records concerning the Loan.
11. ACKNOWLEDGEMENTS AND AGREEMENTS BY THE PARTIES
The Rural Center and the Lender acknowledge and agree with respect to each Loan that:
A.The Lender is expected to exercise due diligence in determining (i) the accuracy of any
statement, warranty, representation or certification made by the Borrowerand/or any
guarantors in, or in connection with, any document relevant to the Loan,and (ii) the financial
condition of the Borrower and any guarantor with respect to the Loan or the performance or
observance of any obligations by the Borrower or any guarantor with respect to the Loan.
B.The sale of a Participation doesnot constitute the sale ofa "security" under or as defined in
the Securities Act of 1933 and the Securities Exchange Act of 1934.
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