[Federal Register Volume 59, Number 94 (Tuesday, May 17, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-11793]


[[Page Unknown]]

[Federal Register: May 17, 1994]


=======================================================================
-----------------------------------------------------------------------

SMALL BUSINESS ADMINISTRATION

 

Business Loans, Secondary Market

AGENCY: Small Business Administration.

ACTION: Revision of SBA Form 1086.

-----------------------------------------------------------------------

SUMMARY: On November 23, 1992, (57 FR 54949), the public was asked to 
comment on a proposed revision of Small Business Administration (SBA) 
Form 1086, Secondary Participation Guaranty Agreement. Very few 
comments were received. These have been analyzed and SBA has made 
certain changes based thereon. SBA is hereby publishing a revision of 
Form 1086.

EFFECTIVE DATE: The revised Form 1086 must be used on any Guaranteed 
Interest received by the Fiscal and Transfer Agent on and after (60 
days from the date of this publication).

FOR FURTHER INFORMATION CONTACT:
James W. Hammersley (202-205-6493) or Marybeth Kerrigan (202-205-6493). 
Suite 8300, Small Business Administration, 409 3rd St. SW, Washington, 
DC, 20416.

SUPPLEMENTARY INFORMATION: The Small Business Administration has 
prepared a revision of the document (SBA Form 1086) used to execute the 
sale of the Guaranteed Interest portion of a 7(a) loan into the 
secondary market. The modifications address changes in the market and 
are intended to improve program operations. The revision incorporates 
several changes that have been suggested by lenders, investors and 
broker/dealers.
    On November 23, 1992 (57 FR 54949), the public was asked to provide 
comments on the proposed revision. Very few comments were received. 
These have been analyzed and SBA has made certain changes to the 
revision that had been proposed.
    The major changes to SBA Form 1086 are these:
    1. The ``Date of First Disbursement'' has been added to the Lender 
Certifications in Section I.
    2. Language incorporating the ``normal'' servicing fee and the 
``premium protection fee'' has been implemented.
    3. Language incorporating the 40 basis point program fee and the 
program user fee equal to 50% of the portion of the sale price in 
excess of 110 percent of the principal amount outstanding of the 
guaranteed portion has been added.
    4. The provision for a split wire settlement has been removed. 
During a recent sample period, fewer than 5 percent of settlements used 
this facility. It was subject to abuse, including an attempt by an 
unregistered broker to wire money to a personal checking account.
    5. The premium refund language has been modified to include 
borrower prepayments as well as defaults.
    6. The grace period for late payments to Colson is changed. 
Payments will now be due on the 3rd of the month or the next business 
day if the 3rd is not a business day. The grace period will be two 
business days after the due date.
    Following is the revised SBA Form 1086.
Erskine B. Bowles,
Administrator.
OMB NO. 3245-0185
EXPIRATION DATE: 1/31/97
SBA LOAN NUMBER__________

SECONDARY PARTICIPATION GUARANTY AGREEMENT

IMPORTANT INFORMATION
    THIS FORM IS TO BE USED FOR THE INITIAL TRANSFER ONLY. ALL 
SUBSEQUENT TRANSFERS MUST USE THE DETACHED ASSIGNMENT SBA FORM 1088. 
LOANS SOLD USING SBA FORM 1084 MUST BE CERTIFICATED PRIOR TO RESALE: 
USE SBA FORM 1085.
    A. LENDER CERTIFICATIONS. The LENDER CERTIFIES, by signing this 
document, among other things that: (See paragraphs 3, 10 and 20 of the 
Terms and Conditions herein)
    (1) Lender, including its officers, directors and employees, has no 
knowledge of a default by Borrower and has no knowledge or information 
that would indicate the likelihood of a default.
    (2) Lender has paid the SBA guaranty fee.
    (3) The loan is fully disbursed, and
    (4) Lender acknowledges that it has no authority to unilaterally 
repurchase the Guaranteed Interest from Registered Holder without the 
written consent of the SBA.
    B. BORROWER PAYMENTS. Lender shall send to the Fiscal and Transfer 
Agent (``FTA'') the FTA share of all Borrower payments received after 
settlement of the loan sale. LENDER WILL NOT SEND ANY PAYMENTS DIRECTLY 
TO THE REGISTERED HOLDER OR TO THE BROKER/DEALER. Lender will retain a 
copy of this Form. Lender will not receive a return copy of this Form 
after settlement. The Wire transfer receipt from the settlement through 
FTA will be the Lender's notification that the sale is complete.
    C. LENDER PAYMENT AND LATE PAYMENT PENALTY. Lender payment and 
remittance information (SBA Form 1502) shall be due at FTA on the third 
calendar day of every month, or the next business day if the third is 
not a business day. On any payment not received in the offices of FTA 
by 5 pm Eastern Time on the second business day after the due date, FTA 
will, on behalf of SBA, levy a late payment penalty of five percent 
(5%) of the amount remitted late, or $100, whichever is greater 
(subject to a maximum penalty of $5,000 per month). This penalty will 
be paid through FTA along with the late penalty identified in paragraph 
6(c) that is due to FTA. (See paragraph 6 of the Terms and Conditions.)
    D. PAYMENT MODIFICATIONS. Lender may approve one deferral of 
payment for up to three consecutive monthly payments without obtaining 
prior permission from Registered Holder. Lender shall immediately 
notify FTA and SBA of any deferral. Any other payment modification must 
receive prior approval by Registered Holder. Requests for payment 
modification must be forwarded to FTA which will forward the proposed 
modification to Registered Holder or provide the name of such 
Registered Holder to Lender for direct negotiations at Registered 
Holder's discretion. (See Paragraph 2 of the Terms and Conditions.)
    E. BORROWER PREPAYMENTS. For loans approved by or on behalf of SBA 
after February 14, 1985. Lender must give ten (10) business days 
advance written notice to FTA to allow time for FTA to request that 
Registered Holder return the Certificate. On the date of prepayment. 
Lender will wire funds to FTA consisting of principal and accrued 
interest through the date immediately preceding the date funds are 
wired, plus any penalty or other fees due to FTA. (See Paragraph 15 of 
the Terms and Conditions.)

    SBA Form 1086 (1-94) Previous editions are obsolete.

    F. LENDER REPURCHASES. Unless all conditions in paragraph 20 are 
met. Lender may repurchase a loan only on a willing buyer-willing 
seller basis. Lender liquidity or a desire to add loans to a portfolio 
are not acceptable reasons to pay off a loan at par. (See Paragraphs 3 
and 20 of the Terms and Conditions.)
    G. PROGRAM FEES. There is a 40 basis point fee collected from all 
payments received from lender, which is transmitted to SBA to defray 
program expenses. In addition, FTA will withhold from the settlement 
transaction one-half of the premium amount in excess of 10% of the loan 
balance. This amount is also sent to SBA to defray program expenses and 
will not be refunded under any circumstances. (See Section I of the 
Terms and Conditions.)

TERMS AND CONDITIONS

    The Small Business Administration, an Agency of the United States 
Government (``SBA'') and the Lender named below (``Lender'') entered 
into a guaranty agreement on SBA Form 750 (``750 Agreement'') 
applicable to a loan (``Loan'') made by Lender in participation with 
SBA to the Borrower (``Borrower'') named below evidenced by Borrower's 
Note and any modifications thereto (``Note'') a copy of which is 
attached hereto and incorporated by reference. Lender is the 
beneficiary under the 750 Agreement of SBA's guaranty of the specified 
percentage of the outstanding balance of the Loan (``Guaranteed 
Interest'').

Section I: Borrower Information and Lender Certifications

Lender ________________________________________ Borrower 
________________________________________

Address ________________________________________ Address 
________________________________________

Zip ____________________ Zip ____________________

Contact Person ________________________________________ Telephone 
________________________________________

    LENDER CERTIFIES THE FOLLOWING AS OF THE DATE OF LENDER'S 
SIGNATURE:

Date of 750 Agreement ________________ Percent of SBA Guaranty 
________________

Date of Note ________________ Original Face Amount $________________

SBA Loan Authorization Date ________________ (Date of SBA Form 529B)

Outstanding Principal Amount of Loan $________________

Outstanding Principal Amount of Guaranteed Interest $________________ 
(This is the ``Par Value'')

    THE SBA GUARANTY FEE WAS PAID ON ____________________ [date].

Date of First Disbursement of Loan ____________________ [date].

Date of Final Disbursement of Loan ____________________ [date].

Guaranteed portion has a {time}  fixed rate or {time}  variable rate 
(check one).

Unguaranteed portion has a {time}  fixed rate or {time}  variable rate 
(check one).

Interest is paid to, but not including ____________________ [date].

Interest is calculated on {time}  30/360 or {time}  Actual Days/365 
(check one) (OTHER METHODS ARE PROHIBITED.)

    THIS INTEREST ACCRUAL SHALL BE MAINTAINED FOR THE LIFE OF THE LOAN.
    SBA shall retain a program fee equal to \4/10\ of one percent per 
year of the guaranteed principal amount outstanding. Such fee shall be 
collected by the FTA from all payments received from Lender. FTA shall 
transmit such fees to SBA on a regular basis, no less frequently than 
monthly.
    There shall be a minimum servicing fee required by SBA. This fee 
shall be published from time to time in the Federal Register. The 
minimum servicing fee as of the date of publication of this form is 
0.3% per annum for all loans. There shall also be a minimum premium 
protection fee for any Guaranteed Interest sold at a price greater than 
Par Value. This fee shall be published from time to time in the Federal 
Register. The minimum premium protection fee as of the date of 
publication of this form is 0.7% per annum. For any Guaranteed Interest 
sold at a price greater than Par Value, the total minimum fees, as of 
the date of publication of this form, are 1.0% per annum.
    Except for the period between final disbursement and the first 
interest adjustment date, lender's total fees must remain constant for 
the life of the loan. Lender's total fees, as computed on the unpaid 
principal amount of the Guaranteed Interest shall be entered next to 
the phrase ``Lender's Permanent Fee'' below. If this Agreement relates 
to a variable rate loan, the total fee may be adjusted for the period 
from final disbursement to the first adjustment date to conform the 
rate to market rates. If such an adjustment is used, enter the initial 
fee next to the phrase ``Lender's Initial Fee'' below.

Lender's Permanent Fee ____________________

Lender's Initial Fee* ____________________ (Optional--Variable Rate 
Loans Only--If initial fee is different than permanent fee)

    *Lender's Initial Fee must conform to the minimum fee 
requirements described above.

    Price paid for the Guaranteed Interest. (Net of accrued interest. 
Otherwise include ALL money and other items of value exchanged.)

Price paid by purchaser: $________________% of Par ________________

    SBA shall retain a program user fee equal to 50% of the portion of 
the sale price which is in excess of 110 percent of the principal 
amount outstanding of the guaranteed portion. Such fee shall be 
collected by the FTA and shall be remitted by FTA to SBA on a regular 
basis, no less frequently than monthly. SBA will not refund such 
program user fee under any circumstances.
    CASH FLOW YIELD based upon Constant Prepayment Rate. (Enter both 
mortgage and bond equivalent yield.) For a variable rate loan, the 
yield should be based upon the current net rate and should be entered 
as a spread from the Prime Rate. EXAMPLE: Prime +1% based upon 10% 
Prime Rate.

Constant Annual Prepayment Rate assumption ________________% per annum.

Certificate Interest Rate: ____________% [Borrower's Note rate less 
applicable fees]

Certificate Cap ____________% Certificate Floor ________________% (if 
applicable)

Mortgage Yield: (Fixed Rate Loan) ________________________________%

(Variable Rate Loan) Prime (+/-) __________% based on __________% Prime

Bond Equivalent Yield: (Fixed Rate Loan) ____________________%

(Variable Rate Loan) Prime (+/-) __________% based on __________% Prime

    Lender hereby assigns the Guaranteed Interest to Purchaser/
Registered Holder as follows:

Name ________________________________

Address ________________________ Zip code ____________

Contact Person ______________________________ Telephone 
______________________________

    Under the penalties of perjury, Purchaser/Registered Holder 
certifies that its Taxpayer Identification Number is 
____________________ and that it is not subject to backup withholding 
pursuant to an Internal Revenue Service Notice. Failure to provide a 
Taxpayer Identification Number will subject interest earned to backup 
withholding.
    Registered Holder requests SBA to issue through FTA a Guaranteed 
Interest Certificate (``Certificate'') evidencing ownership of the 
Guaranteed Interest in the name of Registered Holder (such person or 
entity, or any subsequent transferee, during its respective period of 
ownership of the Certificate to be called ``Registered Holder''). SBA, 
Lender and Registered Holder (for itself and for any subsequent 
Registered Holder) agree to the appointment by SBA of FTA to serve as 
the agent to transfer Certificates and to receive loan repayments, and 
to transmit such payments to the Registered Holder.
    A written notification to or demand upon SBA pursuant to this 
Agreement shall be made through FTA to:

SBA Servicing Office ______________________________

Address ______________________________

City ____________________ State ____________________ Zip 
____________________

    SBA Servicing Office Code (Please see attached list of Office Codes 
at the end of this document) ____________________

Section II: Lender, Registered Holder and FTA Rights and 
Responsibilities

    1. Lender's Sale of Guaranteed Interest. Lender has sold the 
Guaranteed Interest and acknowledges that it has received value for 
that Guaranteed Interest. Lender has given notice and acknowledgment of 
the transfer of the Guaranteed Interest by completing the following 
legend on the Note:
    The guaranteed portion of this Note has been transferred to a 
Registered Holder for value.

Dated____________________      (Lender)____________________

    Lender has delivered or hereby delivers to FTA a photocopy of the 
Note and any modifications thereto with the legend; such photocopy 
shall be incorporated into this Agreement. This legend shall serve as 
notification for any future transfer of the Guaranteed Interest. The 
date of the legend shall be on or before the date of settlement for the 
sale of the guaranteed interest.
    The photocopy of the note and any modifications thereto must have a 
legend stating that the photocopy is a true and certified copy of the 
original.
    2. Loan Servicing. Lender shall remain obligated under the terms 
and conditions of the 750 Agreement, and shall continue to service the 
Loan in the manner set forth in the 750 Agreement. Modifications to the 
750 Agreement or the Note that do not affect the repayment terms of the 
Note may be effected by Lender of SBA without the consent of Registered 
Holder (for itself and any subsequent Registered Holder). Lender, at 
the request of Borrower, may grant one deferment of Borrower's 
scheduled payments for a continuous period not to exceed three (3) 
months of past or future installments. Lender shall immediately notify 
FTA and the SBA field office in writing of any deferment. The 
notification will include (i) the SBA Loan Number, (ii) the Borrower's 
name, (iii) the terms of such deferment, (iv) the date Borrower is to 
resume payment, and (v) reconfirmation of the basis of interest 
calculation (e.g. 30/360 or Actual Days/365). Interest is not waived, 
only deferred. Subsequent to the deferment period, payments received 
from Borrower will first be applied to accrued interest until such time 
as interest is paid to a current status, then to principal and 
interest. Registered Holder may not demand repurchase of the Guaranteed 
Interest during the deferment period, or before Borrower's failure to 
pay the first scheduled installment following the deferment period. 
Lender shall not authorize any additional deferment, or any extension 
of Loan maturity without the prior written consent of the Registered 
Holder.
    No change in terms and conditions of repayment of the Note other 
than the deferment authorized in this paragraph shall be made by Lender 
or SBA without the prior written consent of Registered Holder. A 
request for such payment modification must be forwarded by Lender to 
FTA. FTA will forward the proposed modification to Registered Holder. 
The Registered Holder must respond to the request within thirty (30) 
calendar days of the date of the request from FTA. Lack of response 
will be construed by Lender and FTA as nonconsent, and appropriate 
action under Paragraphs 10, 11 or 20 of this Agreement will be taken. 
FTA, at the discretion of Registered Holder, may provide the name of 
Registered Holder to Lender for direct negotiation of the modification.
    3. Representations and Acknowledgment of Lender. Lender hereby 
certifies that the Loan has been made and fully disbursed to Borrower, 
and that the full amount of the guaranty fee has been paid to SBA. The 
outstanding principal amount of the Guaranteed Interest and date to 
which interest is paid as certified by Lender is accepted by SBA and 
have been warranted by SBA to the Registered Holder as of the SBA 
Warranty Date. The Warranty Date is the date this Agreement is settled 
by Lender and Registered Holder through FTA. Lender shall be liable to 
SBA for any damage to SBA resulting from any error in (i) the certified 
principal amount, (ii) percentage of Guaranteed Interest, and/or (iii) 
date to which interest is paid. Lender also represents that as of the 
Warranty Date neither it nor any of its directors, officers, employees, 
or agents has or should have through the exercise of reasonable 
diligence, any actual or constructive knowledge of any default by 
Borrower on the Note, or has any information indicating the likelihood 
of a default by Borrower or the likelihood of prepayment of the Loan by 
Borrower by refinancing or otherwise.
    If Borrower makes the first three payments required by the Note 
after the Warranty Date in the month in which they are due and the 
payments are the full amount required by the Note, the Lender shall 
have no liability to refund the premium.
    If the borrower prepays the loan for any reason within 90 days of 
the Warranty Date, Lender must refund any premium received.
    If the borrower fails to make the first three monthly payments due 
after the Warranty Date and the borrower enters uncured default within 
275 calendar days from the Warranty Date, Lender shall refund any 
premium received. Borrower payments must be received by the Lender in 
the month in which they are due and must be full payments as defined in 
the Borrower's note.
    Liability of lender for refund of premium will not be affected by 
any deferment granted under Paragraph 2 or other payment modification 
granted during the 90 day period.
    SBA shall bear no liability for refund or premium. Lender's failure 
to refund such premium to Registered Holder may, as determined by SBA, 
constitute a significant violation of the Rules and Regulations of the 
Secondary Market.
    SBA will not refund the program user fee collected from the premium 
under any circumstances.
    If Lender has repurchased the Guaranteed Interest pursuant to 
Paragraph 10 or 20, and if the Borrower subsequently makes installment 
payments on the Note in full for a period of twelve (12) consecutive 
months. Lender may sell the Guaranteed Interest it has repurchased.
    Lender hereby acknowledges that it has no authority pursuant to 
this Agreement to unilaterally repurchase the Guaranteed Interest from 
Registered Holder at par without the written consent of SBA.
    4. Obligations and Representations of Registered Holder. SBA shall 
purchase the Guaranteed Interest from Registered Holder pursuant to the 
terms of this Agreement regardless of whether SBA has any knowledge of 
possible negligence, fraud or misrepresentation by Lender or Borrower, 
provided neither Registered Holder nor any person or entity having the 
beneficial interest in the Guaranteed Interest participated in, or at 
the time it purchased the Guaranteed Interest had knowledge of, such 
negligence, fraud or misrepresentation.
    Subject to the provisions of 18 U.S.C. Sec. 1001 (relating among 
other things to false claims) Registered Holder, and any person or 
entity having the beneficial interest therein, hereby warrants that it 
was not the Borrower, Lender or an ``Associate'' of Lender, or anyone 
standing in the same relationship to Borrower. (``Associate'' is 
defined in Title 13, Code of Federal Regulations, Part 120.) Registered 
Holder warrants that it had neither participated in nor been aware of 
any negligence, fraud or misrepresentation by Lender or Borrower with 
respect to the Note or related Loan documentation. Neither execution of 
this Agreement by SBA, nor purchase by SBA from Registered Holder shall 
constitute any waiver by SBA of any right of recovery against Lender, 
Registered Holder, or any other person or entity.
    Registered Holder (for itself and each subsequent Registered 
Holder) hereby acknowledges that the Loan may be terminated on a date 
other than its maturity date. At that time, the Certificate will be 
called for redemption, at par, and the Registered Holder must submit an 
affidavit attesting to the provisions of this paragraph. The 
Certificate will cease to accrue interest as of the date of such 
termination, regardless of whether the Certificate is surrendered and 
the affidavit is received.
    5. Issuance of Guaranteed Interest Certificate. SBA, Lender and 
Registered Holder (for itself and each subsequent Registered Holder) 
agree that ownership of the Guaranteed Interest shall be evidenced by a 
Certificate to be issued by SBA. SBA shall issue such Certificate by 
designating and authorizing such issuance by FTA, or through its own 
facilities.
    FTA shall be the custodian of the executed original of this 
Agreement. The Agreement shall be delivered to FTA immediately after 
execution by Lender and Registered Holder. Each Registered Holder shall 
receive the Certificate described herein. Registered Holder may obtain 
from FTA a copy of the executed Agreement pertaining to the Guaranteed 
Interest represented by the Certificate upon payment of a reproduction 
fee.
    Upon execution of this Agreement and delivery to FTA, FTA shall 
issue to Registered Holder (or to Registered Holder's assignee if FTA 
is provided written information on a timely basis) the Certificate 
evidencing the ownership of the Guaranteed Interest in the Loan. If 
Registered Holder is not the person or entity having the beneficial 
interest in the Certificate, Registered Holder hereby represents that 
it has obtained authorization from such holder of beneficial interest 
appointing Registered Holder as agent for such person or entity with 
respect to all transactions arising out of the respective obligations 
under this Agreement.
    The Certificate shall identify the Guaranteed Interest and shall 
state, among other things: (i) Name of Registered Holder, (ii) the 
Principal Amount of Guaranteed Interest as of the Warranty Date, (iii) 
the Certificate Interest Rate, and (iv) the Borrower's Payment Date.
    Transfer of the Guaranteed Interest by Registered Holder may be 
effected by the transferee: (i) obtaining from the transferor the 
executed Detached Assignment and Disclosure Form (SBA Form 1088), (ii) 
presenting the Certificate and executed Detached Assignment and 
Disclosure Form to FTA for registration of transfer and issuance of a 
new Certificate, (iii) paying to FTA a Certificate issuance fee set 
from time to time by SBA, and (iv) presenting to FTA the exact spelling 
of the name in which the new Certificate is to be issued, complete 
address and tax identification number of the new Registered Holder, 
name and telephone number of the person handling the transfer, and 
complete instructions for delivery of the new Certificate.
    6. Obligations of Lender.
    (a) FTS must receive from Lender by the third calendar day of every 
months, or the next business day thereafter if the third is not a 
business day, (``FTA Due Date'') the FTS's share of all sums Lender 
received from Borrower as regularly scheduled payments during the 
proceeding month. By the same date, Lender shall provide the following 
information on Mandatory Remittance Form (SBA Form 1502), (or an exact 
facsimile format), with respect to each Loan which Lender has sold to a 
Registered Holder and which is registered with the FTA. Lender 
acknowledges that ``each Loan'' mans all loans registered with the FTA 
regardless of which version of SBA Form 1086 or 1085 was executed at 
the time of sale of transfer. SEE PAYMENT CALCULATION EXAMPLE ATTACHED 
TO THIS AGREEMENT.
      1. The SBA Loan Number
      2. The Alpha abbreviation for the SBA field office
      3. The Note interest rate (or rates if the interest rate on a 
variable rate loan changed during the payment period)
      4. The interest amount due to the FTA
      5. The principal amount due the FTA
      6. The total amount due the FTA for the particular Loan
      7. The time period covered by the interest rate(s) in Item 3
      8. The number of days in the interest period
      9. The calendar basis (30/360 or Actual Days/365)
      10. The closing principal balance for the Loan
      11. A grand total for Items 4, 5 and 6 of all loans sold
      12. A late payment penalty (if applicable)
    (b) With the exception of prepayments pursuant to Paragraph 15 of 
this Agreement, payments received other than as regularly scheduled in 
the previous month must be remitted by Lender to FTA within two (2) 
business days of receipt of collected funds. Such remittance shall 
include the information described in Items 1 to 12 above.
    (c) As stated in subparagraph (a) above, Lender remittance is due 
to FTA by the FTA Due Date. POSTMARKS ARE NOT CONSIDERED AS PROOF OF 
RECEIPT. THE REQUIREMENT IS RECEIPT BY FTA. If Lender remittance, 
including complete payment information as specified is subparagraph (a) 
is not received in the office of the FTA by 5 p.m. Eastern Time on the 
second business day after the FTA Due Date, Lender shall pay:
    (i) a late payment penalty to FTA equal to the interest on the 
unremitted amount at the rate provided in the Note, less the rate of 
Lender's servicing fee; and
    (ii) a late payment penalty to FTA calculated at a rate of twelve 
percent (12%) per annum on the unremitted amount; and
    (iii) a late payment penalty to SBA (collected by FTA), which is 
the greater of $100 or five percent (5%) of the unremitted amount.
    There is no limit on the penalty calculated in (i) and (ii) above. 
There is a $5,000 per month per reporting unit limit for the penalty 
identified in (iii) above. SEE EXAMPLE OF LATE PAYMENT PENALTY 
CALCULATION ATTACHED TO THIS AGREEMENT.
    If these penalty fees are not included in the remittance, FTA, on 
behalf of SBA, shall levy such late payment penalties on Lender. 
Failure by Lender to pay such penalty and collection fees within ten 
(10) business days of receipt of a bill for such fees may constitute a 
significant violation of the Rules and Regulations of the Secondary 
Market. FTA and SBA reserve the right to withhold these penalty fees 
from settlement of any future Guaranteed Interest sale, or any payment 
made by SBA or FTA to Lender.
    FTA will retain the penalty and collection fees due FTA and forward 
the fee due SBA at the end of the month.
    (d) Lender agrees to work with SBA and FTA, at no charge, to 
reconcile immediately any Loan in which the interest paid-to-date on 
the Lender's books differs from the records of the FTA by three (3) 
days or more. Lender agrees to provide a transcript of account within 
ten (10) business days of receipt of a request from SBA or FTA. Failure 
of Lender to provide a transcript upon request may cause the Lender to 
be fined $100 by SBA.
    (e) Lender's total fees as computed on the unpaid principal amount 
of the Guaranteed Interest for the period of actual services performed 
by Lender shall remain as specified in Section I above for the life of 
the Loan. These Lender fees are not transferable except to an entity to 
which servicing of the loan is assigned under the provisions of the 
Form 750 Agreement and SBA Regulations and Standard Operating 
Procedures.
    (f) Lender agrees to deposit the pro rata share of borrower's 
payment due to the FTA in a trust account with the name ``Colson 
Services Corp., FTA, in trust for the individual security 
beneficiaries.''
    7. Obligations of FTA.
    (a) FTA shall have the obligation to remit to Registered Holder 
payments received pursuant to Paragraph 6 of this Agreement (less 
applicable fees and penalties, if any), as follows:
    (i) Investor payment date will be the fifteenth of the month or 
next business day if the fifteenth is not a business day. Any payment 
received by the FTA up to the second business day prior to the investor 
payment date will be sent to the investor on the investor payment date.
    (ii) Any payment received by FTA on or after the second business 
day prior to the investor payment date of the month following 
Borrower's scheduled payment will be remitted to Registered Holder with 
two (2) business days of receipt of immediately available funds by FTA. 
Any late payment penalty received by FTA pursuant to subparagraphs 
6(c)(i) and 6(c)(ii) of this Agreement allocated tot he period after 
the fifteenth day, or the next business day if the fifteenth is not a 
business day, of such following month shall be remitted to the 
Registered Holder. The balance of such penalties shall be retained by 
FTA.
    (iii) Other amounts received from Lender by FTA will be held and 
applied as required by this Agreement.
    (iv) With the prior written consent of SBA. FTA may offset from 
payments due to Registered Holder any prior overpayments made to 
Registered Holder.
    (b) Prepayments pursuant to Paragraph 15 of this Agreement or full 
redemption payments received by FTA from Lender or SBA shall be 
remitted by FTA to Registered Holder by wire transfer within two (2) 
business days of receipt of immediately available funds by the FTA. 
Payment on full redemption of the Certificate will be made only after 
presentation of the Certificate to FTA by Registered Holder. FTA shall 
retain a final transfer fee upon redemption.
    (c) Each remittance by FTA to Register Holder shall be accompanied 
by a statement of (i) the amount allocable to interest, (ii) the amount 
allocable to principal, and (iii) the remaining principal balance as of 
the date on which such allocations were calculated.
    (d) If FTA fails to make timely remittance to Registered Holder in 
accordance with this Paragraph 7, FTA shall pay to Registered Holder: 
(i) interest on the unremitted amount at the rate provided in the Note 
less applicable fees, plus (ii) a late payment penalty calculated at a 
rate of 12% per annum on the amount of such payment, plus (iii) a fee 
of $100 per loan to SBA. The fee identified in (iii) shall be limited 
to not more than $50,000 per month.
    (e) FTA agrees to identify to Lender each month any Loan in which 
the paid-to-date on its books differs by three (3) days or more from 
the paid-to-date on the books of Lender, provided the information 
required by Paragraph 6(a) has been submitted to FTA by Lender. Such 
identified differences will be reconciled on a timely basis.
    (f) FTA agrees to issue Certificates within two business days of 
settlement or receipt of Form of Detached Assignment.
    (g) FTA agrees to acknowledge any request from Registered Holder 
for late payment claims within ten (10) business days of receipt.
    (h) FTA agrees to forward to Registered Holder, within five (5) 
business days of receipt, any servicing request requiring concurrence 
of Registered Holder. FTA agrees to forward Registered Holder's 
response to Lender within five (5) business days of receipt. If FTA 
does not receive a response from Registered Holder within thirty (30) 
calendar days from the date of the request. Registered Holder will be 
deemed to have submitted a response of nonconsent. FTA is directed to 
take appropriate action pursuant to Paragraphs 10, 11 or 20 of this 
Agreement.
    (i) Where the Guaranteed Interest is a part of a Pool pursuant to 
Section 120.700 of the SBA Rules and Regulations as amended, the FTA, 
as manager of the pool, will, on behalf of Registered Holder of 
Guaranteed Loan Pool Certificates, agree to servicing actions by Lender 
that have been approved by SBA that will not affect the rights of the 
Certificate Holder.
    (j) FTA will provide to each SBA field office, in a format approved 
by SBA, on or before the last business day of each month a report of 
the execution of Secondary Market Guaranty Agreements (SBA Form 1086) 
during the previous month.
    (k) FTA agrees to pay accrued interest for any loan which FTA fails 
to include in the late payment report described in Paragraph 10(a). FTA 
shall be responsible for interest beginning 90 days after the interest 
paid to date of the loan and continuing until 30 days after the SBA 
field office receives notification of the arrearage.
    8. Transferability of Guaranteed Interest. Each Registered Holder 
maintains under this Agreement the right to assign the Guaranteed 
Interest. Each Registered Holder of the Guaranteed Interest shall be 
deemed to have represented that to the best of its knowledge, it has, 
and so long as it is a Registered Holder will have, no interest in the 
Borrower, the Note or the collateral hypothecated to the Loan, other 
than the Guaranteed Interest held under this Agreement. Each Registered 
Holder represents that it will not service or attempt to service the 
Loan, or secure or attempt to secure additional collateral from 
Borrower.
    Without the consent of SBA, Lender or FTA. Registered Holder may 
transfer the ownership of the Guaranteed Interest to a subsequent 
assignee (other than the Borrower, Lender, or an ``Associate'' of the 
Lender as defined in Title 13, Code of Federal Regulations, Part 120, 
or anyone standing in the same relationship to the Borrower). The 
effective date of any transfer of the Guaranteed Interest shall be the 
date on which such transfer is registered on the books of FTA. Any 
payment or action by FTA or SBA to the transferor Registered Holder 
prior to the effective date of the transfer of the Guaranteed Interest 
shall be final and fully effective. Neither SBA nor FTA shall have any 
further obligation to the transferee Registered Holder with respect to 
such payment or action, and any adjustment between the transferor and 
transferee resulting from such payment or action by SBA or FTA shall be 
the responsibility and obligation solely of the transferor and 
transferee.
    FTA will make payments on payment date to the person or entity that 
on the books of FTA is the Registered Holder as of the close of 
business on the Record Date. The Record Date is the last business day 
of the prior month. Any other adjustment between transferee and 
transferor is their responsibility and obligation. At any given time, 
there shall only be one Registered Holder entitled to the benefits of 
ownership of the Guaranteed Interest. Upon transfer of the Guaranteed 
Interest, the transferor shall cease to have any right in the 
Guaranteed Interest or any obligation or commitment under this 
Agreement.
    FTA shall serve as the central registry of Certificate ownership.
    9. Certificates Lost, Destroyed, Stolen, Mutilated or Defaced. 
Procedures for claim resulting from loss, theft, destruction, 
mutilation or defacement of a Certificate are found in Title 13, Code 
of Federal Regulations, Part 120. Upon written request, FTA will 
provide such procedures to any claimant.
    10. Repurchase of Guaranteed Interest by Lender.
    (a) FTA will provide to each SBA field office on or before the last 
business day of the month a list of Loans which are in arrears based on 
criteria supplied to FTA by SBA.
    With five (5) business days of the receipt of the list, the SBA 
field office will contact Lender to determine the status of the Loan. A 
Loan requires action where (i) Lender's records indicate the interest 
paid-to-date is more than (60) days in arrears or (ii) default by 
Borrower in payment of any installment of principal and interest has 
continued uncured for more than sixty (60) days. SBA will, in 
consultation with the Lender, decide on an appropriate remedial action 
under Paragraph 2 of this Agreement, or determine whether Lender will 
be offered the option to purchase the guaranteed portion. This decision 
will be made by SBA within ten (10) business days of the first contact 
with Lender.
    SBA will notify the FTA in writing of the action to be taken within 
five (5) business days of the decision.
    Where the decision is for Lender to purchase the Guaranteed 
Interest, FTA, at its option, may request a transcript of account from 
Lender. Lender agrees to provide the transcript of account within ten 
(10) business days of receipt of the request from FTA. Lender's failure 
to comply with the request for transcript may result in a $100 penalty 
payable to SBA.
    FTA and Lender will reconcile the transcript of account within ten 
(10) business days of the receipt of the transcript by FTA. If Lender 
and FTA cannot agree on the balance and interest paid-to-date within 
such ten (10) business days, FTA will immediately send the Lender's and 
FTA's transcript to the SBA field office for reconciliation. The 
reconciliation by the SBA field office will be final. SBA will notify 
Lender and FTA of the reconciliation immediately.
    Within ten (10) business days of the reconciliation of the account 
of a Loan that the Lender is to repurchase, the Lender will transmit 
and FTA will receive ten (10) business days advance written notice of 
the date of purchase. Within two (2) business days of receipt of such 
notification, FTA will notify Registered Holder of the repurchase date 
and request Registered Holder to forward the Certificate to FTA.
    On the date of purchase, Lender, without further notification from 
FTA, will forward by wire transfer a payment to FTA that includes the 
outstanding principal balance of the Guaranteed Interest plus interest 
through the date immediately preceding the date of the wire transfer.
    (b) Upon receipt of the purchase amount from Lender (or from SBA 
pursuant to Paragraph 11 of this Agreement), FTA shall remit to 
Registered Holder within two (2) business days the outstanding 
principal balance of the Guaranteed Interest plus interest through the 
date immediately preceding the date of Lender purchase. FTA may deduct 
from such amount a final transfer charge for the final transfer and 
redemption of the Certificate. The amount of such final transfer charge 
will not exceed the normal transfer charge for certificates.
    (c) Upon repurchase of the Guaranteed Interest by Lender, the 
rights and obligations of Lender, FTA and SBA shall be governed by the 
750 Agreement and any continuing provisions of this Agreement.
    11. Purchase by SBA.
    (a) Written notices will be given to Lender and FTA when SBA is to 
purchase the Guaranteed Interest. Within five (5) business days of such 
notice, Lender and FTA will provide a transcript and final statement of 
account of the Guaranteed Interest to SBA. Failure by Lender or FTA to 
provide the transcript may result in a $100 penalty payable to SBA by 
the party failing to comply. SBA will reconcile the transcripts and the 
reconciliation will be final.
    Within ten (10) business days of final reconciliation of the 
account, SBA will provide ten (10) business days advance written notice 
to FTA of the date of purchase. FTA, within two (2) business days of 
the receipt of the written notice, will notify Registered Holder of the 
repurchase date and request Registered Holder to forward the 
Certificate to FTA.
    On the purchase date, SBA will arrange to have funds wired to FTA. 
Upon receipt of the purchase amount from SBA, FTA shall remit to 
Registered Holder, within two (2) business days, the outstanding 
principal plus accrued interest through the date immediately preceding 
the date of SBA purchase.
    (b) SBA's payment of accrued interest to the payment date on a 
fixed interest rate Note shall be at the Note rate less the Lender's 
servicing fee. On Notes with a variable interest rate, SBA's payment of 
accrued interest shall be at that rate in effect on the date of the 
earliest uncured Borrower default, if the loan is in default, or at the 
rate in effect at the time of purchase, less the lender's fees if the 
loan is not in default.
    (c) If Lender fails to furnish a current transcript statement as 
required by this paragraph and paragraph 13(a)(i) within ten business 
days after SBA's request therefor, then SBA may rely on the certified 
statement of account with supporting documentation, from FTA. If any 
such information shall be inaccurate, whether inadvertently or 
otherwise, an appropriate adjustment in settlement will be made as 
expeditiously as possible.
    (d) SBA shall not be liable for any amount attributable to any late 
payment charges pursuant to Paragraph 6 of this Agreement that may be 
due FTA or Registered Holder.
    (e) Upon written demand by SBA, Lender shall immediately repay to 
SBA the amount by which the amount paid by SBA exceeds the amount of 
SBA's obligation to Lender under the 750 Agreement, and the amount paid 
by SBA for any payments by Borrower which were not remitted by Lender 
to FTA, including accrued interest thereon, plus accrued interest at 
the Note interest rate computed on the unpaid balance of the Guaranteed 
Interest from the date of purchase by SBA to date of repayment by 
Lender.
    (f) Upon purchase of the Guaranteed Interest by SBA pursuant to 
this Paragraph, the rights and obligations of Lender and SBA shall be 
governed by the 750 Agreement and any continuing provisions of this 
Agreement. SBA shall be deemed a transferee of the Guaranteed Interest 
and the final Registered Holder thereof with all the rights and 
privileges of such Registered Holder under this Agreement.
    12. Default by Lender.
    (a) Pursuant to Paragraph 10(a) of this Agreement. FTA notifies the 
SBA field office of Loans which are past due. SBA contacts the Lender 
to determine status of the Loans.
    (b) When SBA determines that the Lender has failed for any reason 
to remit to FTA the payments required pursuant to Paragraph 6 of this 
Agreement, SBA may purchase the Guaranteed Interest under the 
provisions of Paragraph 11 of this Agreement, provided however, under 
no circumstances shall SBA be liable for any amount attributable to any 
late payment charge.
    (c) If SBA purchases the Guaranteed Interest from Registered Holder 
because of default by Lender, and if Borrower has not been in uncured 
default on any payment due under the Note for more than sixty (60) 
calendar days, SBA shall have the option:
    (i) to require Lender to purchase the Guaranteed Interest from SBA 
for an amount equal to the amount paid by SBA to Registered Holder plus 
accrued interest (at the interest rate provided in the Note) from the 
date of the SBA purchase to the date of the Lender's repurchase, plus a 
penalty equal to twenty percent (20%) of the amount paid by SBA, or
    (ii) to require Lender to pay SBA a penalty equal to twenty percent 
(20%) of the amount paid by SBA to Registered Holder.
    (d) If on the date SBA purchases the Guaranteed Interest from 
Registered Holder pursuant to this Paragraph, Borrower shall be in 
uncured default for more than sixty (60) calendar days, then the 
provisions of Paragraphs 11(e) and 11(f) of this Agreement will become 
applicable in lieu of subparagraph (c) of this paragraph.
    (e) If Lender fails to furnish a current transcript statement as 
required by paragraph 13(a)(i) within ten business days after SBA's 
request therefor, then SBA may rely on the certified statement of 
account with supporting documentation from FTA. If any such information 
shall be inaccurate, whether inadvertently or otherwise, an appropriate 
adjustment in settlement will be made as expeditiously as possible.
    13. Other Obligations of the Lender.
    (a) Lender hereby consents to the purchase of the Guaranteed 
Interest by SBA in accordance with Paragraphs 11 and 12 of this 
Agreement. Lender shall, within ten business days of a request 
therefor, and without charge, furnish to SBA and FTA (i) a transcript 
of account, (ii) a current certified statement of the unpaid principal 
and interest then owed by Borrower on the Note, and (iii) a statement 
covering any payments by Borrower not remitted by Lender to FTA.
    (b) Upon request by FTA at any time, Lender shall issue at no 
charge a certified statement of the outstanding principal amount of the 
Guaranteed Interest and the effective interest rate on the Note as of 
the date of such certified statement.
    (c) Lender agrees that failure to provide the information requested 
pursuant to Paragraphs 10, 11, 12 and 13 of this Agreement may result 
in a $100 penalty payable to SBA.
    (d) Lender agrees that purchase of the Guaranteed Interest pursuant 
to Paragraphs 11 or 12 of this Agreement does not release or otherwise 
modify any of Lender's obligations to SBA arising from the Loan or the 
750 Agreement, and that such purchase by SBA does not waive any of 
SBA's rights against Lender.
    (e) Lender agrees that SBA, as final owner of the Guaranteed 
Interest under this Agreement, in addition to all rights under the 750 
Agreement, shall also have the right to offset against Lender all 
rights inuring to SBA under this Agreement against SBA's obligation to 
Lender under the 750 Agreement.
    (f) Lender agrees to assign, transfer and deliver the Note and 
related loan documents to SBA upon written demand from SBA after 
purchase of the Guaranteed Interest pursuant to this Agreement.
    14. Default by Fiscal and Transfer Agent
    (a) If FTA receives any payment from Lender or SBA and fails to 
remit to Registered Holder pursuant to Paragraph 7 of this Agreement, 
Registered Holder shall have the right to make written demand on FTA 
for any payment not remitted by FTA.
    (b) If FTA fails to remit any such payment within ten (10) business 
days of such demand, Registered Holder shall have the right to make 
written demand on the SBA Servicing Office identified in this 
Agreement.
    (c) Upon receipt of written demand from Registered Holder, SBA will 
verify non-payment by FTA. If non-payment by FTA is verified, SBA, 
within thirty (30) days of verification of non-payment by FTA, will (i) 
make payment directly to Registered Holder of the amount of the 
unremitted payment plus interest at the Certificate rate to day of 
payment by SBA, or (ii) purchase the Guaranteed Interest pursuant to 
Paragraph 11 of this Agreement.
    (d) FTA shall repay SBA within ten (10) business days after receipt 
of written demand from SBA an amount equal to the unremitted amount 
plus interest computed at the interest rate on the Certificate on the 
unpaid balance of the Guaranteed Interest from the date of the failure 
of FTA to remit to the Registered Holder to the date of FTA's repayment 
to SBA. Such payment will not affect FTA's liability for a late payment 
charge under Paragraph 7 of this Agreement.
    15. Prepayment of Refinancing by Borrower.
    (a) A borrower may prepay a Loan guaranteed by SBA at any time 
without penalty. A prepayment subject to this Paragraph is any payment 
which is greater than twenty percent (20%) of the principal amount 
outstanding at the time of prepayment.
    (b) For loans approved by SBA or on behalf of SBA prior to February 
15, 1985, the Lender shall forward any prepayment amount pertaining to 
the Guaranteed Interest to the FTA within three (3) business days of 
receipt.
    (c) For loans approved by SBA or on behalf of SBA after February 
14, 1985, Lender shall transmit written notice to FTA of Borrower's 
intent to make a partial or total prepayment of principal. Such 
prepayment can be by refinancing or otherwise. The prepayment date is 
the date prior to maturity that Lender has established with the FTA, 
and on which immediately available funds shall be delivered to FTA. The 
written notice shall be received by the FTA at least ten (10) business 
days prior to prepayment date, and it shall be Lender's responsibility 
to verify receipt of such notice by FTA. Lender's notice to FTA shall 
include:
    (i) The SBA loan number and borrower name
    (ii) The prepayment date
    (iii) The principal amount being prepaid
    (iv) The accrued interest due the FTA as of prepayment date 
(interest shall accrue through and including the calendar day 
immediately preceding the prepayment date)
    (v) A certification by Lender that, to the best of its knowledge 
and belief, the prepayment funds are either Borrower's own funds or 
funds borrowed by Borrower (whether or not guaranteed by SBA) pursuant 
to a separate transaction
    (vi) A certification from an officer of the Lender that the 
prepayment is in accordance with the terms of this Agreement, the Note 
and applicable law.
    The Certifications are intended to guard against Lender's 
unilateral repurchase of the Guaranteed Interest from the Registered 
Holder without prior written consent of SBA.
    Lender's failure to provide such timely certification may result in 
a $100 penalty payable to SBA.
    (d) On the prepayment date, Lender will wire the amount due to FTA 
without notification from FTA. If the total funds are not received by 
FTA on the prepayment date, interest continues to accrue through the 
day immediately prior to the date that payment is received by FTA. If 
funds are not received by FTA on the prepayment date, Lender shall have 
thirty (30) calendar days from the date originally identified as the 
prepayment date to forward the prepayment funds. The funds will accrue 
interest through the day immediately prior to the date payment is 
received by FTA. If funds are not received within this thirty (30) day 
period, a new written notice is required in accordance with 
subparagraph (c) above.
    (e) FTA shall, upon receipt of notice pursuant to subparagraph (c) 
of this Paragraph, advise the Lender in writing of any discrepancy 
between the prepayment information supplied by the lender and the FTA's 
current records. Lender agrees to work with FTA to resolve errors or 
miscalculations that were made by the Lender or FTA during the course 
of the loan and which are discovered subsequent to the prepayment.
    (f) FTA will remit the prepayment amount to Registered Holder in 
accordance with Paragraph 7 of this Agreement.
    16. Option to Purchase by SBA. Pursuant to the 750 Agreement, SBA 
shall at any time have the option to purchase from the Registered 
Holder the outstanding balance of the Guaranteed Interest at the Note 
rate less the Lender's servicing fee. Failure of the Registered Holder 
to submit the Certificate to FTA for redemption on the date of 
prepayment specified by SBA or FTA will not entitle the Registered 
Holder to accrued interest beyond such date.
    17. Separate or Side Agreements. Separate or side agreements (i) 
between Lender and Registered Holder, (ii) between a Registered Holder 
and a subsequent transferee of the Guaranteed Interest, (iii) between 
FTA and Lender, or (iv) between FTA and any Registered Holder shall not 
in any way obligate SBA to make any payment except as provided in this 
Agreement, nor shall it modify the nature or extent of SBA's rights or 
obligations under the terms of this Agreement or of the 750 Agreement. 
Any such side agreement which has the effect of distorting the 
information supplied to SBA is prohibited.
    18. Indemnity and Force Majeure. Each party to this Agreement 
(including FTA) for itself and its successors and assigns, agrees to 
indemnify and hold harmless any other party (including FTA) from and 
against any costs, liabilities, and related expenses arising from the 
performance of its duties or otherwise arising under this Agreement; 
provided that no indemnification shall be provided under this Agreement 
for action or failure to act which constitutes negligence, breach of 
authority, or bad faith.
    If any party hereto (including FTA) is in doubt as to the 
applicability of this Agreement to a communication it has received, it 
may refer the matter to SBA for an opinion as to whether it may take, 
suffer or omit any action pursuant to such communications.
    Under no circumstances shall any party hereto (including FTA) be 
held liable to any person or entity for special or consequential 
damages or for attorneys fees or expenses in connection with its 
performance under this Agreement.
    If any party hereto (including FTA) shall be delayed in its 
performance hereunder or prevented entirely or in part from completing 
such performance due to causes or events beyond its control, such delay 
or non-performance shall be excused and the reasonable time for 
performance in connection with this Agreement shall be extended to 
include the period of such delay or non-performance. Causes or events 
include but are not limited to: (i) Act of God; (ii) postal 
malfunction; (iii) interruption of power or other utility, 
transportation, or communication service; (iv) act of civil or military 
authority; (v) sabotage; (vi) national emergency; (vii) war; (viii) 
explosion, flood, accident, earthquake or other catastrophe; (ix) fire; 
(x) strike or other labor problem; (xi) legal action; (xii) present or 
future law, government order, rule or regulation; or (xiii) shortage of 
suitable parts, materials, labor or transportation. In disputes between 
FTA and Lender, or between FTA and Registered Holder, SBA reserves the 
right to require FTA to take appropriate action as SBA determines, and 
if legal action is required, SBA will pay reasonable attorney's fees 
incurred by FTA in taking such action.
    19. Fees and Penalties. Lender and Registered Holder shall be 
responsible for payment of fees and penalties required of them by this 
Agreement which are in effect on the Settlement Date, and as published 
from time to time in the Federal Register. If any fees or penalties 
required in this Agreement, (including but not limited to those 
described in Paragraphs 5, 6, 10, 11, 12, 13, and 15), are not remitted 
on a timely basis by Lender, FTA and SBA reserve the right to withhold 
such fees and penalties from the settlement of any future Guaranteed 
Interest sale or payment on any defaulted guaranteed loan in the 
Lender's portfolio.
    20. Emergency Repurchase Authority by Lender. In certain critical 
situations in which the Borrower's ability to remain in business is 
directly dependent on a change in the provisions relating to the 
installment payments by Borrower, SBA may permit Lender to repurchase 
the Guaranteed Interest from Registered Holder. Lender must submit to 
the SBA field office a written request which includes the following:
    (i) Current financial statements of the Borrower.
    (ii) A written decline from Registered Holder to a specific request 
for a change in the terms and conditions of the payment, or a written 
statement from FTA that no response was received from Registered Holder 
or the Guaranteed Interest is part of a Pool.
    (iii) A statement that the proposed change in the terms and 
conditions of the Loan is solely for the benefit of Borrower, and
    (iv) A certification by Lender that it will make the requested 
change in the terms and conditions if repurchase is approved by SBA.
    The SBA Field Office must review the financial statements of 
Borrower and any other appropriate information and conclude that (i) a 
situation exists that Borrower's business will probably fail if the 
change is not approved, and (ii) that it is probable that the business 
will survive and resume payment if the change is approved. If all 
conditions are met, the SBA field office may approve the purchase of 
the Guaranteed Interest by Lender.
    Guaranteed Interests purchased pursuant to this Paragraph may not 
be resold unless the Borrower has made all payments as scheduled in the 
Note for a period of twelve (12) months.
    21. Inconsistent Provisions and Caption Headings. Any inconsistency 
between this Agreement and the 750 Agreement shall be resolved in favor 
of this Agreement. Any inconsistency between this Agreement and Title 
13, Code of Federal Regulations, shall be resolved in favor of Title 
13. The provisions of the Secondary Market Regulations, (Title 13, Code 
of Federal Regulations, Part 120) in effect on the Settlement Date, and 
as may be amended from time to time in the Federal Register, apply to 
this Agreement unless explicitly stated to be inapplicable. The caption 
headings for the various Paragraphs herein are for ease of reference 
only and are not to be deemed part of these Terms and Conditions.

In consideration of the mutual promises herein contained, the parties 
agree to all the provisions of this Agreement. In WITNESS WHEREOF, the 
parties have executed this multi-page Agreement this __________ day of 
__________ 19 ____ in New York State.

(Registered Holder) ________________________ SMALL BUSINESS 
ADMINISTRATION

By: ________________________
Title: ________________________

Date: ________________________

By: Administrator, Small Business Administration

(Lender) ________________________

By: ________________________

Title: ________________________

Date: ________________________

Examined and Accepted by Fiscal and Transfer Agent by: 
________________________

COLSON SERVICES CORP., P.O. Box 54, Bowling Green Station, New York, 
N.Y. 10274

    NOTICE: THE GUARANTEE OF SBA RELATES TO THE UNPAID PRINCIPAL 
BALANCE OF THE GUARANTEED INTEREST AND THE INTEREST DUE THEREON. ANY 
PREMIUM PAID BY THE REGISTERED HOLDER FOR THE GUARANTEED INTEREST IS 
NOT COVERED BY SBA'S GUARANTEE AND IS SUBJECT TO LOSS IN THE EVENT OF 
PREPAYMENT OR DEFAULT.

This form is required to obtain a benefit.

ATTACHMENT 1--SBA FORM 1086 SAMPLE CALCULATION

Lender's and Investor's Share of a Borrower's Payment

Total Borrower Payment Received By Lender...............       $3,450.05
Total Interest Payment Calculation:                                     
    Borrower's Balance..................................     $288,857.10
        Multiplied by                                                   
    Borrower's Interest Rate............................          8.750%
        Multiplied by                                                   
    Number of Paid Interest Days........................              31
        Divided by                                                      
    Interest Calendar Basis.............................             365
                                                         ---------------
            Total Interest payment......................       $2,146.64
Investor's Share of Interest Payment:                                   
    Borrower's Balance..................................     $288,857.10
        Multiplied by                                                   
    Percentage of Loan Sold to Investor.................         75.000%
        Multiplied by                                                   
    Interest Rate Sold..................................          7.750%
        Multiplied by                                                   
    Number of Paid Interest Days*.......................              31
        Divided by                                                      
    Interest Calendar Basis*............................             365
Investor's Share of Interest Payment to be Remitted to                  
 FTA....................................................       $1,425.98
Lender's Share of Interest Payment:                                     
    Borrower's Balance..................................     $288,857.10
        Multiplied by                                                   
    Percentage of Loan Retained by Lender...............         25.000%
        Multiplied by                                                   
    Borrower's Interest Rate............................          8.750%
        Multiplied by                                                   
    Number of Paid Interest Days........................              31
        Divided by                                                      
    Interest Calendar Basis.............................             365
Lender's Share of Interest Payment to be Retained by                    
 Lender.................................................         $536.66
Lender's Servicing Fee:                                                 
    Total Interest......................................       $2,146.64
        Minus                                                           
    Investor's Interest.................................       $1,425.98
        Minus                                                           
    Lender's Interest...................................         $536.66
Lender's Servicing Fee to be Retained by Lender.........         $184.00
Total Borrower Payment received By Lender...............       $3,450.05
Total Principal Payment:                                                
    Borrower's Total Payment............................       $3,450.05
        Minus                                                           
    Total Interest......................................       $2,146.64
                                                         ---------------
            Total Principal Payment.....................       $1,303.41
Investor's Share of Principal Payment:                                  
    Total Principal Payment.............................       $1,303.41
        Multiplied by                                                   
    Percentage of Loan Sold to Investor.................         75.000%
Investor's Share of Principal Payment to be Remitted to                 
 FTA....................................................         $977.56
Lender's Share of Principal Payment:                                    
    Total Principal Payment.............................       $1,303.41
        Minus                                                           
    Investor's Principal Payment........................         $977.56
Lender's Share of Principal Payment to be Retained by                   
 Lender.................................................         $325.85
Total to be Remitted to the FTA:                                        
    Investor's Share of Interest Payment................       $1,425.98
        Plus                                                            
    Investor's Share of Principal Payment...............        $977.56 
                                                         ---------------
            Total to be Remitted to FTA.................       $2,403.54
Total to be Retained by the Lender:                                     
    Lender's Share of Interest Payment..................         $536.66
        Plus                                                            
    Lender's Share of Principal Payment.................          325.85
        Plus                                                            
    Lender's Servicing Fee..............................         $184.00
                                                         ---------------
            Total to be Retained by Lender..............       $1,046.51
Payment Distribution Proof:                                             
    Borrower's Total Payment............................       $3,450.05
        Minus                                                           
    Total to be Remitted to the FTA.....................       $2,403.54
        Minus                                                           
    Total to be Retained by Lender......................       $1,046.51
Payment Distribution Proof..............................           $0.00
                                                                        
*Note: Figures shown are for illustrative purposes only. This example   
  utilizes an actual number of days in each month with a 365 days per   
  year basis. This same procedure may also be utilized for a constant 30
  days in each month with a 360 days per year basis.                    

ATTACHMENT 2--SBA FORM 1086

SBA Field Office Codes and Cities

Region 1
0101    Boston, MA
0172    Augusta, ME
0189    Concord, NH
0156    Hartford, CT
0150    Montpelier, VT
0165    Providence, RI
0130    Springfield, MA
Region 2
0296    Buffalo, NY
0299    Newark, NJ
0202    New York, NY
0252    Hato Rey, PR
0248    Syracuse, NY
0206    Elmira, NY
0235    Melville, NY
0219    Rochester, NY
Region 3
0373    Baltimore, MD
0390    Clarksburg, WV
0303    Philadelphia, PA
0358    Pittsburgh, PA
0304    Richmond, VA
0353    Washington, DC
0325    Charleston, WV
0316    Harrisburg, PA
0318    Wilkes-Barre, PA
0341    Wilmington, DE
Region 4
0405    Atlanta, GA
0459    Birmingham, AL
0460    Charlotte, NC
0464    Columbia, SC
0470    Jackson, MS
0491    Jacksonville, FL
0457    Louisville, KY
0455    Miami, FL
0474    Nashville, TN
0438    Gulfport, MS
Region 5
0507    Chicago, IL
0549    Cleveland, OH
0593    Columbus, OH
0515    Detroit, MI
0562    Indianapolis, IN
0563    Madison, WI
0508    Minneapolis, MN
0545    Cincinnati, OH
0543    Milwaukee, WI
0547    Marquette, MI
0517    Springfield, IL
Region 6
0682    Albuquerque, NM
0610    Dallas, TX
0677    El Paso, TX
0671    Houston, TX
0669    Little Rock, AR
0639    Harlingen (LRGV), TX
0678    Lubbock, TX
0679    New Orleans, LA
0680    Oklahoma City, OK
0681    San Antonio, TX
0637    Corpus Christi, TX
0623    Fort Worth, TX
Region 7
0736    Cedar Rapids, IA
0761    Des Moines, IA
0709    Kansas City, MO
0766    Omaha, NE
0768    St. Louis, MO
0767    Wichita, KS
0721    Springfield, MO
Region 8
0897    Casper, Wy
0811    Denver, CO
0875    Fargo, ND
0885    Helena, MT
0883    Salt Lake City, UT
0876    Sioux Falls, SD
Region 9
0942    Fresno, CA
0951    Honolulu, HI
0944    Las Vegas, NV
0914    Los Angeles, CA
0988    Phoenix, AZ
0954    San Diego, CA
0912    San Francisco, CA
0920    Santa Ana, CA
0995    Agana, Guam
0931    Sacramento, CA
0992    Fresno Comm. Loan
          Servicing Center
Region 10
1084    Anchorage, AK
1087    Boise, ID
1086    Portland, OR
1013    Seattle, WA
1094    Spokane, WA

ATTACHMENT 3--SBA FORM 1086

EXAMPLE OF A PENALTY CALCULATION FOR LATE LENDER REMITTANCE OF A 
BORROWER PAYMENT (See Paragraph 6(c))

Example 1

Assume:                                                                 
1. that a $1,000 payment received by Lender as a regularly              
 scheduled Borrower payment is received by the FTA on the               
 tenth of the month (a business day) following receipt by               
 Lender;                                                                
2. that the interest rate on the note less the Lender's                 
 servicing fee is 7.75%;                                                
3. that interest is calculated on a 30/360 day basis:                   
    (a) The late penalty is the greater of $100 or 5% of the            
     payment amount, subject to a $5,000 maximum on the                 
     Lender's total monthly remittance. $1,000 x 5%=$50. The            
     penalty is $100.........................................       $100
    (b) A penalty equal to the interest on the unremitted               
     amount at the rate provided in the Note (less the rate             
     of the Lender's servicing feel)                                    
        Unremitted amount....................................     $1,000
        Multiplied by Note Rate minus Lender's servicing fee.      7.75%
        Multiplied by number of late days....................          5
        Divided by interest calendar basis...................        350
                                                              ----------
                                                                   $1.08
    (c) A late penalty charge calculated at a rate of 12% per           
     annum on the unremitted amount                                     
        Unremitted amount....................................     $1,000
        Multiplied by 12%....................................        12%
        Multiplied by number of late days....................          5
        Divided by interest calendar basis...................        360
                                                              ----------
                                                                   $1.67
            TOTAL PENALTY....................................    $102.75
                                                                        

ATTACHMENT 3--SBA FORM 1086

EXAMPLE OF A PENALTY CALCULATION FOR LATE LENDER REMITTANCE OF A 
BORROWER PAYMENT (See Paragraph 6(c))

Example 2

Assume:                                                                 
1. that a $5,145.96 payment received by lender as a                     
 regularly scheduled Borrower payment is received by the                
 FTA on the fifteenth of the month (a business day)                     
 following receipt by the Lender;                                       
2. that the interest rate on the note less the Lender's                 
 servicing fee is 7.75%;                                                
3. that interest is calculated on an actual/365 day basis:              
    (a) The late penalty is the greater of $100 or 5% of                
     the payment amount, subject to a $5,000 maximum on the             
     Lender's total monthly remittance. $5.145.96 x                     
     5%=$257.30. The penalty is $257.30....................      $257.30
    (b) A penalty equal to the interest on the unremitted               
     amount at the rate provided in the Note (less the rate             
     of the Lender's servicing fee)                                     
        Unremitted amount..................................    $5,145.96
        Multiplied by Note rate minus Lender's servicing                
         fee...............................................        7.75%
        Multiplied by number of late days..................           10
        Divided by interest calendar basis.................          365
                                                            ------------
                                                                  $10.93
    (c) A late penalty charge calculated at a rate of 12%               
     per annum on the unremitted amount                                 
        Unremitted amount..................................    $5,145.96
        Multiplied by 12%..................................          12%
        Multiplied by number of late days..................           10
        Divided by interest calendar basis.................          365
                                                            ------------
                                                                  $16.92
            TOTAL PENALTY..................................      $285.15
                                                                        

ATTACHMENT 4--SBA FORM 1086

    PLEASE NOTE: Public reporting burden for this collection of 
information is estimated to average 3 hours and 45 minutes per 
response, including the time for reviewing instructions, searching 
existing data sources, gathering and maintaining the data needed, and 
completing and reviewing the collection of information. Send comments 
regarding this burden estimate or any other aspect of this collection 
of information, including suggestions for reducing this burden, to: 
Chief, Administrative Information Branch, Suite 5000, 409 Third Street, 
S.W., Washington, D.C., 20416; and to the Office of Information and 
Regulatory Affairs, Office of Management and Budget, Washington, DC, 
20503.

[FR Doc. 94-11793 Filed 5-16-94; 8:45 am]