Fillable Printable SC SSBCI Loan Participation Program Master Loan Participation Agreement

SC SSBCI Loan Participation Program Master Loan Participation Agreement

SC SSBCI LOAN PARTICIPATION PROGRAM

Agreement No. _______

MASTER LOAN PARTICIPATION AGREEMENT

BUSINESS DEVELOPMENT CORPORATION OF SC (BDC)

_________________________________________________

(PARTICIPATING LENDER NAME)

_____________________________________________________

(PARTICIPATING LENDER ADDRESS)

_____________________________________________________

(PARTICIPATING LENDER CITY/STATE/ZIP + 4)

ATTN: ___________________________________________________

(PARTICIPATING LENDER CONTACT/TITLE)

PHONE: ________________________________________________

(PARTICIPATING LENDER)

FAX: ___________________________________________________

(PARTICIPATING LENDER)

FEIN: ___________________________________________________

(PARTICIPATING LENDER)

MASTER LOAN PARTICIPATION AGREEMENT

This Loan Participation Agreement (the "Agreement") is entered into as of___________, by and between

____________________(the "Lender"), and the Business Development Corporation of SC (BDC), having

its principal office at 111 Executive Center Drive, Suite 225, Columbia, SC 29210

RECITALS

Whereas the State of South Carolina through the SC Jobs Economic Development Authority (JEDA) has

created the SC 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 III of Public Law 111-240); the Allocation Agreement dated July 6, 2011, as amended, between the

United States Treasury (the "US Treasury") and the State of South Carolina; and

Whereas the purpose of the SC SSBCI Loan Participation Program (the “Program") is to foster economic

development in South Carolina by enhancing the availability of credit to small and medium-sized

businesses from private sources of capital; and

Whereas, in pursuit of those goals, JEDA has entered into a contract with BDC to offer the Program; and

the BDC may be willing, from time to time, to purchase participation interests in loans, including

principal and interest payable there under, made by the Lender to certain Program-eligible businesses.

Now therefore, in consideration of the premises and the agreements contained herein, the Lender and the

BDC 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 following meaning unless the context or use indicates a

different meaning. Definitions shall be applicable to both the singular and plural forms of the terms as the

context may require:

"Allocated Funds" means funds awarded to the State of South Carolina on account of the Allocation

Agreement dated July 6, 2011, as amended, between the US Treasury and the State of South

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 BDC, and all successors and assigns of such

Borrower; provided such Borrower:

(a) Is:

1. a for-profit corporation, limited liability company, partnership, joint venture, sole

proprietorship, state-designated charitable, religious, or other non-profit or eleemosynary

institution, government-owned corporation, consumer or marketing cooperatives, or faith-based

organization and,

2. the loan proceeds will be used for a business purpose in the State of South Carolina, said

business purpose includes, but is not limited to, start up costs, working capital, business

procurement, franchise fees, equipment, inventory, as well as the purchase, construction

renovation or tenant improvements of an eligible place of business that is not for passive real

estate investment purposes. The definition of business purpose excludes activities that relate to

acquiring or holding passive investments such as commercial real estate ownership, the purchase

of securities; and lobbying activities as defined in Section 3 (7) of the Lobbying Disclosure Act of

1995, P.L. 104-65, as amended.

(b) is not:

1. a business engaged in speculative activities that develop profits from fluctuations in price

rather than through normal course of trade, such as wildcatting for oil and dealing in

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commodities futures, unless those activities are incidental to the regular activities of the

Borrower and part of a legitimate risk management strategy to guard against price

fluctuations related to the regular activities of the Borrower;

2. a business that earns more than half of its annual net revenue from lending activities;

unless the Borrower is a non-bank or non-bank holding company certified as a

Community Development Financial Institution (CDFI);

3. a business engaged in pyramid sales, where a participant's primary incentive is based on

the sales made by an ever-increasing number of participants;

4. a business engaged in activities that are prohibited by federal law or applicable law in the

jurisdiction where the business is located or conducted, including the production,

servicing, or distribution 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

5. a business engaged in gambling enterprises, unless the Borrower earns less than 33

percent of its annual net revenue from lottery sales; and

controls the Lender, or a subsidiary or affiliate of the Lender; nor a member of the immediate

family of an 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, or a subsidiary or affiliate 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 of the Lender. For purposes of

this paragraph, the terms "executive officer," "director," "principal shareholder," "immediate

family", and “related interest” refer to the same relationship to a financial institution lender as the

relationship described in part 215 of title 12 of the Code of Federal Regulations, or any successor

to such part.

"Closing Documents" means all documents executed or delivered by the Borrower or the Lender with

respect to a Loan, including without limitation a copy of the Note, the loan agreement, any security

agreement, any financing statement or Uniform Commercial Code 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 BDC notifying the Lender that

the BDC is willing to purchase a 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 providing adequate support documentation sufficient to comply

with applicable laws and regulations to allow the BDC to file the Loan Documents in order to obligate

and obtain funds. (A sample Commitment Letter is attached as Exhibit A). The Commitment Letter,

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 with which the BDC has entered into an agreement or contract to

provide loans to small businesses, in which the BDC purchases an undivided interest in the otherwise

qualifying loan.

"Lender Rate" means an interest rate set by the Lender, either fixed, adjustable, or variable (determined

by the promissory note) used in calculating the amount of interest shared by the Lender and the BDC pro

rata on a given Loan, which rate shall initially be that referenced in the Commitment Letter related to

such Loan. If the Lender Rate is adjustable or variable, the BDC rate shall be adjusted upwards or

downwards every time the interest rate charged the Borrower is adjusted, so that the pro rata share shall

always be the same as it was on the Purchase Date.

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"Loan" means a loan made by the Lender to a Borrower in which BDC 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 limitation the Borrower's application, business plan, and historical and projected

financial statements and any financial statements and reports delivered by the Borrower to the Lender on

an ongoing basis, the Lender's financial, repayment and collateral analysis, credit reports, and all periodic

reports required to be delivered to BDC by the Lender under this Agreement.

"Note" means the promissory note of the Borrower payable to the order of the Lender evidencing the

Loan.

"Participation" means, with respect to a Loan, BDC’s undivided participation interest in such Loan, the

Loan Documents and all of the Lender's right, title and interest pertaining to the Loan and all proceeds

arising therefrom including, without limitation, any collateral for such Loan and any guaranties,

mortgages, or other security interests obtained in connection 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 by BDC from the Lender, minus the aggregate principal amount repaid, as of any

date, on that portion of such Loan purchased by BDC from the Lender.

"Participation Certificate" means the document evidencing BDC‘s Participation with respect to a Loan

made between the Lender and the Borrower. A sample Participation Certificate is attached hereto as

Exhibit B.

“Participation Percentage” means BDC’s undivided participation interest 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, including without

limitation the Loan, any equity or any other funds provided by owners, shareholders, banks, or other

financial institutions.

"Prompt Payment" means the time period within which the Lender must forward or remit BDC‘s pro

rata share of the Borrower’s payment of its Loan to BDC in order to avoid late fees hereunder. If BDC

has one Participation with Lender, payment is considered timely for this purpose if the Lender remits in

immediate funds said payment to BDC within five (5) business days of receipt of payment. If BDC 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 BDC

within five (5) business days of its above mentioned due date, a late fee of the greater of 4% of the total

payment due (per payment being withheld) or $50 (per payment being withheld), whichever is greater,

shall be automatically assessed. Arrearage will be determined from the date the payment should have

been remitted through the date the payment is actually remitted. This late fee will be immediately due and

owing. Additionally, any and all late fees due to Lender’s delinquency shall not be the responsibility of,

and shall not be absorbed by or charged to, the Borrower. In compelling circumstances and upon the

Lender’s written request, BDC 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

(including reasonable 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 or arising as a 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 party against the Lender), and (b) the protection of the

interests in any collateral securing the repayment of the Loan. “Servicing Expenses” does NOT include

services or products provided by or through the Lender for the benefit of the Borrower, guarantor, or

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other responsible party to facilitate their compliance with agreed terms and conditions. The mere fact that

the Lender pays an expense does not in itself qualify it as a “Servicing Expense;” rather there must be a

clear correlation to the enforcement of the Lender’s rights or remedies. Business restructuring expenses

do not constitute “Servicing Expenses” unless prior written approval is obtained from BDC.

2. APPLICATIONS AND APPROVAL; SALE AND PURCHASE OF PARTICIPATION

2.1 Applications. The Lender shall accept applications from prospective Borrowers and, if found

creditworthy by the Lender and meeting the Program requirements contained in Section 3 below, the

Lender shall submit the Application for Participation in substantially the form attached hereto as Exhibit

D, supporting documents, and the details of the proposed Loan in a form satisfactory to BDC, for the

BDC 's review and purchase approval. The Lender must also obtain and submit to BDC a Certification

executed by the Borrower (with necessary attachments) in substantially the form attached hereto as

Exhibit C. BDC expressly reserves the right, in its sole discretion, 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 BDC, pursuant to the terms and conditions set forth herein.

2.2 Maximum BDC Participation Amount. The Lender shall sell, assign and transfer, and BDC shall

purchase and accept, subject to the terms and conditions of this Agreement, a Participation of not less

than Fifty Thousand Dollars ($50,000) nor more than One Million Dollars ($1,000,000) unless the

President or authorized designee of BDC documents the exception in writing. BDC’s Participation is

computed by dividing BDC’s principal balance by the Loan’s principal balance. The Lender is

responsible for monitoring and ensuring that, at any given time, BDC’s Participation never exceeds its

participation percentage. In the event BDC’s Participation is ever greater than BDC’s original

participation percentage, the Lender must immediately pay BDC the excess principal to bring BDC’s

Participation into compliance with the Commitment Letter.

2.3 The BDC Commitment. Upon receipt from the Lender of an Application for Participation with the

applicable documents, BDC, in its sole discretion, shall determine whether it will purchase a Participation

interest in the loan. BDC shall make every attempt to make its determination within thirty (30) days of

receipt of the Application for Participation and applicable documents. If BDC approves the Application

for Participation, it will 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

the Commitment Letter is issued, sign it and return the original to BDC or the Commitment Letter shall

expire. If the Lender does not close the Loan within one hundred twenty (120) days after the Commitment

Letter is issued, BDC’s commitment will expire, unless a written extension of time is granted by BDC.

BDC, in its sole discretion, may grant an extension of time provided that no material change in either the

scope of the Project, the financial condition of the Borrower (including guarantors), or its ability to repay

the Loan as originally approved has occurred. If BDC declines the Application for Participation, it will

make every attempt to so advise the Lender within thirty (30) days of receipt of the application.

2.4 Purchase and Funding of Participation. Upon the closing of a Loan for which the Lender has

received a Commitment Letter, the Lender shall notify BDC’s authorized designee of the closing and

shall deliver all Closing Documents to BDC within fifteen (15) business days of the closing, otherwise

BDC’s Participation shall be void, unless the fifteen day period is waived or extended in writing by BDC.

BDC shall acknowledge the Participation Certificate (a sample of which is attached as Exhibit B) by

having its President or authorized designee execute the Certificate and return it to the Lender. BDC shall

process the Participation Certificate and any other documents necessary to fund its Participation, and then

simultaneously or as soon as practicable shall initiate the actions to cause delivery of its Participation

Amount to the Lender. The Participation will be considered funded on the date BDC funds are transferred

to the Lender. Interest will begin to accrue on the date of closing. The Lender will be responsible for the

timely movement/distribution of BDC’s funds to the Borrower.

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3. SSBCI PROGRAM REQUIREMENTS

Obligations of BDC will cease immediately without penalty or further payment being required if the

Allocated Funds for the Program are no longer available (whether they have all been otherwise utilized or

BDC no longer has access to them). BDC and the Lender acknowledge that the Program will be funded,

in whole or in part, by State Small Business Credit Initiative Program funds, as available, and as such,

both BDC and the Lender agree that the use of funds pursuant to this Agreement shall be governed by,

and not be in derogation of, any rules, regulations, or guidelines for the Program promulgated or issued

by the US Treasury or the State of South Carolina. As to each Loan in which BDC purchases a

Participation, the Lender agrees that it will have determined to the best of its knowledge and belief that all

of the following are true and correct:

(A) The proceeds of the Loan will not be 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 reimburse funds owed to any owner, including any equity injection or injection of

capital for the business’ continuance;

(iv) to purchase any portion of the ownership interest of any owner of the business; or

(v) to refinance a loan previously made to the Borrower by the Lender;

(B) No principal of the Borrower or the Lender has been convicted of a 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));

pertaining to the making of loans (including 31 C.F.R. § 103.121);

(D) The Borrower is ready to implement the Project and has the financial ability to carry out the

Project;

(E) The Borrower is responsible and creditworthy;

(F) The Loan Documents are in an amount and form, and contain such terms and provisions with

respect to property insurance, repairs, alterations, payment of taxes and assessments, delinquency

charges, default remedies, additional security, and other matters, adequate to protect the State’s

interest in ensuring repayment;

(G) Guarantors are responsible and creditworthy.

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 fees, origination fees and interest collected by the Lender, with respect to the

Loan, will be shared pro rata with BDC, unless waived by BDC.

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5. OWNERSHIP INTEREST IN PARTICIPATION LOAN, LOAN DOCUMENTS AND

RECORDS, LIENS, SECURITY, GUARANTIES, AND OTHER COLLATERAL

5.1 BDC's Undivided Interest. Upon BDC’s purchase of a Participation in a Loan, and pursuant to the

provisions of Section 2, BDC shall, without the necessity of any written instrument of assignment or other

document, become vested with an undivided equitable ownership interest (proportional to such

Participation from time to time) in: (i) the Loan; (ii) the Loan Documents; and (iii) any other rights and

claims of the Lender with respect to the Loan. If the Lender acquires any security interests or liens

granted by any of the Loan Documents, BDC 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 them executed and

delivered in connection with the Loan shall be held by the Lender in trust for the pro rata benefit of the

Lender and BDC, and as servicing agent for BDC. The Lender is authorized to retain the Note and the

Loan Documents in the Lender's name and to deal with parties other than BDC as though the Lender were

an absolute owner of the Loan and the Loan Documents. Any person, firm or corporation may deal with

the Lender concerning the Loan in the same manner as if the Participation was not outstanding and the

Lender was the sole owner of the Loan, as limited by Section 6.5, 6.6, and 6.7 of this Agreement. The

Lender may perform any of its obligations hereunder by or through its agents, employees or attorneys.

5.3 Limits of BDC's Interest. Although the Lender holds for BDC’s proportional benefit all collateral

securing performance and payment of a Borrower's obligations and liabilities under and in connection

with any Loan, BDC shall have no interest in any other property taken as security for any other credit,

loan or financial accommodation made or furnished to the Borrower by the Lender in which BDC has no

Participation. This shall include any property now or hereafter in the Lender's possession or under the

Lender's control or in any deposit held that may be or may become security for performance or payment

of a Borrower's or guarantor's obligations and liabilities under and in connection with other indebtedness

owing to Lender by reason of the general description contained in any other instrument held by the

Lender or by reason of any right of setoff, counterclaim, banker's lien or otherwise; provided, however, if

such property, deposit, indebtedness or the proceeds thereof shall be applied to the payment or reduction

of principal, interest, fees or any other amounts owing by a Borrower or guarantor in connection with a

Loan, then BDC 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 any

Loan may be used by Lender in connection with other indebtedness owing to Lender, but only if lien

position 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 BDC’s trustee with respect to

BDC's pro rata share thereof, all payments of interest and principal due and payable on the Loan, together

with any charges, fees, costs, expenses and any and all other amounts due on or in connection with the

Loan Documents, including without limitation all Servicing Expenses incurred by Lender. If the Lender

receives, collects or applies in full an interest payment with respect to a Loan, the Lender will remit to

BDC its pro rata share. If the Lender receives, collects or applies only a partial payment of interest with

respect to a Loan, unless BDC has subordinated with respect to payment, the Lender will remit to BDC

interest on the Participation Amount of such Loan at a rate equal to the amount due BDC under the

preceding sentence multiplied by the Participation Percentage. If the Lender receives, collects or applies a

principal payment or prepayment with respect to a Loan, the Lender will remit to BDC its pro rata share

of such amount. Unless the Lender is otherwise entitled to apply payments as provided in Section 9

hereof, the Lender shall promptly remit BDC’s share of payments on account of principal and interest to

BDC within five (5) business days of receipt or five (5) business days of the end of each month if BDC

has more than one Participation.

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(B) Payments are to be made by ACH transfer from the Lender’s account. Payments must be coordinated

with BDC’s loan servicing representative in BDC Accounting Office. A Monthly Report/Payment

Distribution Summary and Transmittal must be completed and submitted with each and every payment

remitted to BDC. If BDC has more than one Participation with the Lender, the Lender may make one

ACH transfer combining payments into one remittance. The Report/Payment Distribution Summary and

Transmittal shall disclose information, including but not limited to, the date the Lender received payment

from or on behalf of each Borrower, the manner in which the Lender apportioned said payment between

interest and principal between the Lender and BDC, and the outstanding balance of the Loan. In the event

that a Borrower fails to remit a scheduled payment to the Lender, the Lender, nevertheless, must submit

the Monthly Report/Payment Distribution Summary and Transmittal to BDC indicating either that no

payment was received or that no payment was due and owing to BDC.

6.2 Loan Servicing and Application of Payments.

(A) In its handling of 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

rights on its own behalf and within the covenants and requirements in Sections 6.5, 6.6, and 6.7. Except

for the express warranties contained herein, the Loan and Participation shall be for the amounts specified

in the Commitment Letter. Except as provided for in Section 18.1, a Participation or a Loan may not be

transferred by BDC or the Lender (as applicable), in whole or in part, without the written consent of the

other party which consent shall not be unreasonably withheld. In no event shall the Lender reduce its

ownership to less than the agreed upon percentage of the initial participation. It is also understood that

the Lender shall have no independent responsibility for the performance of a Borrower's obligation, nor

for any failure or delay in exercising any rights or powers given the Lender by the Loan Documents,

beyond undertaking the same care that the Lender exercises in the making and handling of loans and

credits for its own account.

(B) All security evidenced by the Loan Documents and any additional security given by a Borrower shall

be held by the Lender primarily as security for the Loan and shall not be used or applied toward payment

of 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 nothing herein shall prevent the Lender from

collecting payments from the Borrower for other indebtedness, or foreclosing upon other security that is

not securing a Loan covered under this Agreement, if the other loans or credits are in default, are

separately stated on the books of the Lender, and the security or other collateral is segregated at all times,

and provided that any such action triggers an event of default under the Loan Documents.

respect to a Loan, and shall in all cases provide such notice to BDC no later than the date on which the

first payment affected by the rate change is delivered to BDC.

6.3 Lender's Late Payments to BDC.

(A) If the Lender fails to make Prompt Payment to BDC for it’s pro rata share of any payment the Lender

receives from, or on behalf of, the Borrower with respect to a Loan, the Lender shall pay BDC 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 for any reason (other than the Lender's negligence or misconduct), and if the Lender has, prior

thereto, paid to BDC its pro rata share of such payment, the Lender shall, after telephone notice to BDC

and confirmed later in writing, subtract the appropriate portion of such rescinded or returned payment

from BDC's next payment hereunder.

6.4 Application of Monies. 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 of all 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 distribution to

BDC, with respect to any such application being made, the amount thereof shall be adjusted to the extent

that any amount is owed by either party to the other, in accordance with the terms hereof.

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6.5 Lender's Powers. BDC authorizes the Lender, and the Lender hereby agrees, to act as agent for BDC

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 from enforcing 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 are

incidental thereto. The Lender acknowledges its status as trustee and represents that it has the power to

perform the services listed in this Section. In acting under this Agreement, the Lender agrees to exercise

the same degree of care in administering each Loan as it would use in managing its own loans in which no

Participation has been issued. The Lender agrees that the exercise of these fiduciary responsibilities as

trustee for BDC includes 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 by BDC, while BDC retains an

undivided interest in the Loan and any related Loan Documents. Further, the Lender agrees that it will

take no independent action, unless agreed to in advance and in writing by BDC, that directly, or indirectly

by nature of a proceeding or process, releases the Borrower or any guarantor or other responsible party or

entity, in full or in partial satisfaction, from a 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 hereby covenants with respect to each Loan that it shall not, without BDC’s prior

written consent or approval:

(i) consent to 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, partially or fully, any collateral given as security for the Loan or any

guarantor of the Loan;

(iii) extend the maturity date 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 maximum amount of the Loan or the obligations of the Lender or BDC

pursuant to any Loan Document;

(vi) require the acceptance of a new note evidencing the Loan, in substitution for the

Note;

(vii) waive or consent to the modification 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) In the event that Lender seeks BDC’s consent or approval for any of the matters enumerated

above BDC shall make every effort to respond to the Lender's request within ten (10)

business days after such request. Such response may be by telephone, to be confirmed in

writing promptly thereafter.

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Documents, the Lender shall consult in good faith with BDC. Notwithstanding the foregoing,

if such a default is caused by the nonpayment of principal or interest, by the bankruptcy of

the Borrower or a guarantor, or by the occurrence of an event that would have a material

adverse effect on the repayment of the Loan or the collateral securing the Loan (in the

Lender's reasonable judgment), the Lender shall not waive such default without the written

consent of BDC.

6.7 Subordination after Default. The Lender and BDC may agree to the subordination of amounts (both

principal and interest) owed to BDC under certain circumstances. Such subordination shall be effective

only if noted on both the relevant Commitment Letter and Participation Certificate. If the Lender and

BDC so agree, the amounts owed by the Lender to BDC with respect to a Participation shall be

subordinated to amounts owed by the Borrower to the Lender from and after the occurrence of all of the

following events: (i) the occurrence of any default under any of the applicable Loan Documents; (ii)

notice thereof to BDC; (iii) acceleration of the applicable Loan; and (iv) commencement and continuation

of foreclosure proceedings and other collection efforts, which shall include enforcing all guaranties with

respect thereto.

However, in any foreclosure proceeding where the Lender is the successful bidder at the foreclosure sale

and the sale results in a loss to either the Lender and/or BDC, or if Lender otherwise acquires title to such

property in lieu of a foreclosure, such as by a deed in lieu of foreclosure, and in any such case the Lender

subsequently sells the foreclosed or otherwise acquired property within twelve (12) months thereafter for

a gain or profit in excess of the value of the loan, the Lender is obligated to remit a pro rata share of said

gain or profit equal to BDC Participation Amount within thirty (30) calendar days thereafter. This also

applies to any situation where the Lender takes judicial or non-judicial ownership of collateral assets for

subsequent disposition.

Intentional breach of any of Lender’s Covenants or requirements specified in Sections 6.5, 6.6, or 6.7

renders all subordination null and void as of the date of the breach. Unless a new subordination agreement

is executed in writing by the Lender and BDC, any amounts recovered upon the Borrower’s default are to

be distributed on a pro rata basis equal to BDC Participation Amount, plus recovered interest and fees if

any.

6.8 Retention of Counsel. In the event of actual or threatened litigation affecting a Loan or the security

for such Loan, and if the Lender is of the opinion that the services of an attorney should be retained to

protect those interests, the Lender may, following ten (10) business days' prior written notice to BDC

(unless, in the judgment of the Lender, immediate action is required, whereupon any reasonable form of

notice to BDC shall be acceptable), retain counsel to represent the Lender. The Lender shall seek to cause

the Borrower to pay the reasonable fees and expenses of such counsel in 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. BDC shall not have any right in

connection with such litigation to retain other counsel, except at the sole cost and expense of BDC.

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 Participation in the Loan,

upon written notice to BDC.

7.2 Price Payable by the Lender. The purchase price to be paid by the Lender to BDC 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).

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7.3 Consummation of Repurchase. Any such repurchase shall occur on a date selected by the Lender,

which date shall be no later than (a) ten (10) business days after the giving of 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 purchase price paid by the Lender to BDC shall be paid on such date in

immediately available funds, and concurrently therewith BDC shall execute, and deliver to the Lender,

document(s) reassigning to the Lender the Participation, without recourse, covenant or warranty, express

or implied (except that BDC shall warrant its ownership of the Participation, the amount of indebtedness

outstanding thereunder and its authority and capacity to execute such documents).

8. LENDER'S RIGHT OF OFFSET

To the extent that at any time a Borrower, guarantor or any other party makes any payment under the

relevant Loan Documents to the Lender by exercise of a right of offset of any kind, including any right

applying to deposits, accounts, moneys or other property of such Borrower or guarantor deposited at or

held by the Lender (but excluding any property securing the 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 from BDC as

much of the Participation Amount so as to return the Lender's and BDC's respective interests to the

percentages existing prior to the offset.

9. SUBORDINATION OF BDC'S PARTICIPATION TO SERVICING EXPENSES

Subject to the terms and conditions of this Agreement, each Participation shall be subordinated in

payment until such time as the 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 BDC for 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 Lender will reduce, for the purpose of recording the value of its assets in its financial books and

records, the value of any Loan asset by the amount of BDC’s Participation Amount. The Lender shall,

within ten (10) business days after a request by BDC or US Treasury, allow BDC or US Treasury to

examine the Lender's books and records concerning the Loan.

11. ACKNOWLEDGEMENTS AND AGREEMENTS BY THE PARTIES

BDC 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 Borrower and/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 does not constitute the sale of a "security" under or as defined in

the Securities Act of 1933 and the Securities Exchange Act of 1934.

a property interest and not a debtor-creditor relationship. This Agreement is not intended to

constitute, nor shall it be construed to establish, a partnership or joint venture between the

Lender and BDC.

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