OREGON BUSINESS DEVELOPMENT DEPARTMENT CREDIT ENHANCEMENT FUND INSURANCE PROGRAM LOAN INSURANCE AGREEMENT

Transcription

1 OREGON BUSINESS DEVELOPMENT DEPARTMENT CREDIT ENHANCEMENT FUND INSURANCE PROGRAM LOAN INSURANCE AGREEMENT In consideration of the mutual undertakings set forth in this Agreement, ("Lender") and the State of Oregon, acting by and through its Business Development Department ("OBDD") agree that Lender will make secured business loans that in its sole judgment are advisable to eligible borrowers, and OBDD will insure payment of such loans subject to the following terms and conditions: Section 1. INCLUDED LOANS: OBDD shall only insure a loan: (A) that is made by Lender to a borrower, for an amount and purpose and on terms which have been approved specifically by OBDD in a written loan insurance authorization (the "Authorization") issued with respect to such loan; and (B) with respect to which Lender has complied with the further terms and conditions of this Agreement, the Credit Enhancement Fund Act, ORS 285B.200 to 285B.218, and any applicable rules adopted by OBDD. Section 2. INSURANCE PREMIUMS: Upon disbursement of the loan proceeds, Lender shall pay to OBDD a loan insurance premium in the amount set forth in the Authorization. OBDD's insurance shall be effective upon receipt by OBDD of: (A) the loan insurance premium, (B) the Authorization duly executed by Lender, and (C) the supplemental agreement substantially in the form of Exhibit A to the Authorization ( Supplemental Agreement ) duly executed by the borrower and all guarantors. Section 3. RESPONSIBILITIES OF LENDER: A. Prior to forwarding a request for insurance to OBDD, Lender shall: i. Make such investigation of the character, credit history and business ability of the applicant and the stability and earnings prospects of the business in which the loan proceeds are to be used, as would be the normal practice of a prudent lender making or servicing an uninsured or unguaranteed loan in the amount proposed, including a review of personal and business financial statements; and ii. Make such investigation of the value and existence of title to the proposed collateral as would be the normal practice of a prudent lender making or Page 1 - LOAN INSURANCE AGREEMENT

2 servicing an uninsured or unguaranteed secured loan in the amount proposed. B. On or prior to closing the loan and disbursing the loan proceeds, Lender shall do all the following: i. Cause to be executed, delivered, and where necessary filed or recorded with the proper authorities, a loan agreement, a note, mortgage or trust deed, security agreement, financing statement, continuation statement, and such other instruments, documents and agreements as may be applicable, and shall take such other action as is required, consistent with prudent lending practices, to document the loan and to obtain a valid and enforceable lien or security interest in the collateral securing repayment of the loan that is prior to the interests or claims of all other persons, except as may be specifically excepted by OBDD in the Authorization, and to include in its documentation with the borrower, consistent with prudent lending practices, the requirement that the collateral be adequately maintained and insured, and that any taxes or governmental charges assessed on the collateral be paid when due. All loan documents shall comply with the requirements of OAR and permit assignment of the loan documents by Lender to OBDD. ii. iii. Cause to be executed and delivered by each guarantor on Lender's standard form a guaranty and a mortgage, deed of trust and/or security agreement, as required by the Authorization, and take such further action, consistent with prudent lending practices, to obtain a valid and enforceable lien or security interest in any collateral securing the guaranty. Each guaranty shall include a statement that the guarantor waives any right or claim for contribution or reimbursement from OBDD and acknowledges that OBDD is not a co-guarantor or co-surety. Cause to be executed by the borrower and Lender and delivered to OBDD an application in a form as directed by and acceptable to OBDD. C. Lender shall during the term of a loan insured hereunder: i. Exercise such supervision over the collateral for the loan and its disposition, if authorized, as would be the normal practice of a prudent lender making or servicing an uninsured or unguaranteed secured loan in the amount of the loan. Page 2 - LOAN INSURANCE AGREEMENT

3 ii. iii. Exercise such supervision of the use of loan proceeds as may be reasonable to monitor that the proceeds are used for authorized purposes. Upon request, provide OBDD with copies of all documents executed in connection with the loan and loan disbursements and the loan records maintained by Lender. Lender shall maintain such records with respect to insured loans as are customarily maintained by a prudent lender making or servicing an uninsured or unguaranteed loan in the amount of the loan. Section 4. LOAN CHARGES: Lender will impose no charges on the borrower for a loan insured hereunder that would not normally be imposed had the loan not been insured, other than for the insurance premiums payable to OBDD or costs incurred in connection with enforcing any OBDD prescribed monitoring and control procedures required under the Evergreen Entrants Insurance or otherwise required by OBDD. Section 5. ADMINISTRATION AND SERVICING OF LOANS: Lender shall hold the loan documents, receive all payments of principal and interest, and take such other action as may be required or advisable to administer and service the loan in accordance with the normal practice of a prudent lender. In addition, Lender shall exercise the same degree and standard of care that Lender exercises in the administration and servicing of similar loans for which Lender has not obtained insurance. Prudent lending practices include, without limitation, a periodic review of financial statements and collateral as often as is customary for similar loans, and Lender should maintain contact with the borrower so that material adverse management or operational changes can be detected. Lender shall not, without the written consent of OBDD: (A) make or consent to any transfer or assignment of any note or interest therein, or any material alteration in the terms of any loan document; (B) make or consent to any release, conveyance, lease, substitution or exchange of any collateral, unless such action does not involve collateral securing more than 20 percent of the original principal amount of the loan, the loan is current and scheduled payments have been made for more than one year, provided OBDD may, on a case by case basis, revoke this authority to release collateral through written notice to Lender; (C) extend or postpone any repayment terms except as authorized in Section 7.D; (D) consent to or permit any sale, merger, consolidation or reorganization of borrower or sale, transfer or other disposition of all or substantially all of the assets of borrower; or (E) waive or release any claim against borrower, surety, guarantor or other obligor, or any other creditor, or trustee in bankruptcy, arising out of any loan document. OBDD will respond to any request for consent from Lender pursuant to this Section 5 within fifteen (15) days of receiving such request. If OBDD does not so respond, OBDD will be deemed to have denied the request for consent. Section 6. REPORTS: Lender will provide OBDD with such financial information on an insured loan as required in the Authorization or as OBDD may reasonably request from time to time. Page 3 - LOAN INSURANCE AGREEMENT

4 Section 7. DEFAULT AND NOTICE OF DEFAULT: Lender agrees to notify OBDD in writing within five (5) business days of any default in a payment of principal or interest of an insured loan that remains uncured for a period of thirty (30) calendar days, except that in the case of a default in the payment of principal or interest of an insured line of credit or other one-principal-payment loan, Lender shall notify OBDD as soon as reasonably possible, but in no event later than thirty (30) calendar days after the default. Lender agrees to notify OBDD in writing within fifteen (15) business days of the discovery of any other event of default or any other condition or event that in its judgement indicates a loan may or will become difficult to collect in full. Within thirty (30) calendar days after receipt by OBDD of a notice of default, OBDD may, in its sole discretion, elect one of the two following options: A. Cure. OBDD may elect to cure any default that is reasonably susceptible to cure. If the OBDD commences to cure a default pursuant to this Section 7.A., it may thereafter cease to cure the default and may, with Lender approval, elect the payment option described in Section 7.B. below. B. Payment. If the defaulted loan is insured hereunder for 75% or more of the principal loan amount, OBDD may elect to pay the insured portion of the loan, in which case Lender shall assign all loan documents and rights to OBDD. If OBDD does not elect either option described in Section 7.A. or Section 7.B. above or if OBDD ceases to cure a default under Section 7.A. above and does not elect the payment option described in Section 7.B. above, Lender shall, upon written notice to OBDD, elect one of the following two options: C. Liquidation. Lender may accelerate the maturity of the loan and proceed to enforce all loan documents and liquidate the collateral for the loan, including proceeding against any guarantors, all in a commercially reasonable manner and in accordance with standards and practices of prudent lenders. D. Deferment. Lender may defer principal and interest payments for up to sixty (60) calendar days in any consecutive five year period, if it, on the basis of its sound business judgement, deems such deferral reasonable and prudent. At any time, but not later than five (5) calendar days after any such deferral period, Lender shall either (i) require the borrower to resume scheduled payments or (ii) elect the liquidation option described in Section 7.C. above. If Lender does not elect either option described in Section 7.C. or Section 7.D. within ten (10) business days after it has to right to do so, OBDD may select from among the options provided in Section 7.A. through Section 7.D. above. At any time, OBDD and Lender may agree in writing upon such other action as they deem prudent or Page 4 - LOAN INSURANCE AGREEMENT

5 convenient, including, where applicable, OBDD s election of the payment option provided in Section 7.B. Section 8. SHARING OF REPAYMENTS AND PROCEEDS OF COLLATERAL AND GUARANTEES: All repayments and proceeds of collateral and guarantees of any nature (other than insurance received pursuant to this Agreement), including without limitation rights of setoff and counterclaim, which Lender or OBDD may at any time receive or have in any insured loan, shall: (A) repay Lender and OBDD in the same proportion as the insured portion of the loan bears to the uninsured portion of the loan when the loan is insured pursuant to OBDD's Conventional and Evergreen Entrants Insurance, (B) be applied first to the uninsured portion of the loan when the loan is insured pursuant to OBDD's First Loss Insurance or (C) be applied in whole to the amount in default under a loan insured pursuant to the Evergreen Plus Insurance. If Lender has any other loan(s) outstanding to a borrower of an insured loan, other than another OBDD insured loan(s), and receives any payments or proceeds of collateral or any guarantee, Lender agrees to apply to the insured loan an amount not less than the lesser of the amount then due on the insured loan or the pro-rata share represented by the insured loan of all indebtedness of the same borrower to Lender (unless the borrower specifically directs payments or proceeds to a specific loan and Lender is required to apply payments or proceeds in that manner); provided (A) any such payments or proceeds of collateral or any guarantee will be applied first to the uninsured portion of a loan insured under OBDD's First Loss Insurance, (B) proceeds attributable to the sale or disposition of collateral for the insured loan which is secured by a lien with a higher priority than the lien securing an uninsured loan shall be applied in full to the insured loan, and (C) proceeds attributable to the sale or disposition of collateral for an uninsured loan which is secured by a lien with a higher priority than the lien securing the insured loan may be applied by Lender in full to such uninsured loan; provided further that all payments or proceeds must be applied to the insured loan unless Lender has disclosed the uninsured loan to OBDD prior to receiving the Authorization. Section 9. PAYMENT OF EXPENSES: All expenses of making, servicing, and collecting an insured loan shall be paid by, or be recoverable from, the borrower. All reasonable collection expenses (which include costs of collateral liquidation and collection of guarantees) incurred by Lender or OBDD which are not recoverable from the borrower shall be shared by Lender and OBDD pursuant to the provisions of Section 11 of this Agreement. Section 10. REQUESTS FOR PAYMENT OF INSURANCE : In the event that Lender elects to accelerate a loan and liquidate collateral pursuant to Section 7.C., Lender's request for payment of insurance shall be accompanied by Lender's written certification: Page 5 - LOAN INSURANCE AGREEMENT

6 A. That Lender has liquidated the collateral and all guarantees for the loan to the extent practicable and has diligently pursued and exhausted all reasonable sources of repayment; B. That Lender has allocated repayments, proceeds of collateral and any guarantees, and reasonable collection expenses as required by Sections 8 and 11 of this Agreement or the Authorization for the loan; and C. Of the principal, interest, and reasonable costs of collection remaining unpaid. Unless otherwise expressly agreed in writing by OBDD, OBDD's insurance will not cover any costs or other amounts charged to a loan by Lender as a result of any environmental liability or damage. Section 11. PAYMENT OF INSURANCE : Upon receipt of a written certification pursuant to Section 10 or when OBDD elects an option pursuant to Section 7.A. or Section 7.B. and provided the terms and conditions set forth in this Agreement have been satisfied and discharged, the provisions of this Section 11 shall govern maximum insurance payments by OBDD to Lender according to the type of insurance to which a loan is subject, as provided in the Authorization for that loan. A. Conventional Insurance. OBDD shall pay to Lender the insured loan percentage (as set forth in the Authorization for that loan) times the principal, accrued interest and Lender s reasonable costs of collection (exclusive of costs attributable to environmental problems) remaining unpaid after collateral liquidation and collection of guarantees, but in any event not exceeding the lesser of $2,000,000 or an amount equal to the insured percentage times the loan amount authorized in the Authorization. B. Evergreen Entrants Insurance. OBDD shall pay to Lender the insured loan percentage (as set forth in the Authorization for that loan) of the principal, accrued interest and Lender s reasonable costs of collection (exclusive of costs attributable to environmental problems) remaining unpaid after collateral liquidation and collection of guarantees, but in any event not exceeding the lesser of $1,500,000 or an amount equal to the insured percentage times the loan amount authorized in the Authorization. C. First Loss Insurance. OBDD shall pay to Lender 100% of the principal, accrued interest and Lender s reasonable costs of collection (exclusive of costs attributable to environmental problems) remaining unpaid after collateral liquidation and collection of guarantees, provided that such payment shall not exceed the lesser of (a) 25% of the outstanding loan balance, including principal, accrued interest and Lender s reasonable costs of collection, but not including the application of Page 6 - LOAN INSURANCE AGREEMENT

7 the proceeds of collateral liquidation and payments by guarantors, (b) an amount equal to the insured percentage (as set forth in the Authorization for the loan) times the principal amount of the loan authorized in the Authorization or (c) $300,000. D. Evergreen Plus Insurance. OBDD shall pay to Lender an amount not to exceed the lesser of: (a) a ratable share of the total default charges, (b) up to 90% of the deficiency remaining after collateral liquidation and payment by guarantors, or (c) $1,500,000. The formula for calculating the ratable share of total default charges is: ( Guaranteed loan amount ) ( as set out in Authorization ) ( Principal outstanding upon default + unpaid ) ( ) X ( accrued interest + costs of collateral ) ( Total credit facility made available ) ( liquidation and collection of guarantees ) OBDD's loan insurance under Section 11.A. or Section 11.C. does not cover any balloon payment. OBDD will insure balloon payments under Section 11.B. and Section 11.D., provided OBDD's insurance is in effect for less than five (5) years or is extended in writing by OBDD. Notwithstanding any other provision in this Agreement, Lender acknowledges and agrees that OBDD's liability and obligation hereunder to make payments to Lender is limited to the moneys available in the Credit Enhancement Fund. Section 12. BREACH BY LENDER: Lender's breach of or negligence in discharging or failure to discharge any of its obligations or responsibilities under this Agreement, including any Authorization executed in accordance herewith, whenever discovered, shall constitute a default hereunder. OBDD may notify Lender of Lender s default and its election to nullify and terminate the insurance for the loan(s) affected by such default; provided that if Lender's breach is reasonably susceptible of being cured within thirty (30) calendar days, OBDD shall give Lender thirty (30) calendar days to cure the default. Section 13. NO WAIVER BY IMPLICATION: This Agreement may be amended only by a written amendment executed by both parties, and, when required, approved by the Oregon Department of Justice. No waiver or consent shall be effective unless in writing and signed by the party against whom enforcement is sought. Either party's delay in enforcing, or failure to enforce, any provision of this Agreement shall not constitute a waiver of any provision of this Agreement. Any waiver, consent, modification or change, if made, shall be effective only in the specific instance and for the specific purpose given. Section 14. ASSIGNMENT: Neither party may assign any right or obligation under this Agreement or any interest in a loan insured hereunder without the prior written consent of the other. OBDD and Lender are the only parties to this Agreement and are the Page 7 - LOAN INSURANCE AGREEMENT

8 only parties entitled to enforce its terms. Nothing in this Agreement gives, is intended to give, or shall be construed to give or provide any benefit or right, whether directly, indirectly or otherwise, to third persons any greater than the rights and benefits enjoyed by the general public unless such third persons are individually identified by name herein and expressly described as intended beneficiaries of the terms of this Agreement. Section 15. TERMINATION: Either party may terminate this Agreement by giving ten (10) calendar days written notice by certified mail, return receipt requested, to the other, but termination will not affect the rights and obligations of the parties with respect to insurance for loans previously authorized by OBDD. Lender may terminate the insurance for any loan at any time prior to requesting repayment thereunder. Section 16. SUCCESSORS AND ASSIGNS: This Agreement shall inure to the benefit of and be binding upon the successors and permitted assigns of the parties hereto. Section 17. NOTICE: Except as otherwise expressly provided in this Agreement, any notices to be given hereunder shall be given in writing by personal delivery, facsimile, or mailing the same, postage prepaid, to OBDD or Lender at the address or number set forth below: To OBDD: To Lender: or to such other addresses or numbers as either party may hereafter indicate pursuant to this Section. Any notice so addressed and mailed shall be deemed to be given Five (5) days after mailing. Any notice delivered by facsimile shall be deemed to be given when receipt of the transmission is generated by the transmitting machine. To be effective against OBDD, such facsimile transmission must be confirmed by telephone notice to OBDD's Business Services Manager. Any notice by personal delivery shall be deemed to be given when actually delivered. Section 18. COMPLIANCE WITH LAWS: Lender shall comply with all federal, state and local laws, regulations, executive orders and ordinances applicable to this Agreement and the loans. Lender hereby certifies that no Principal of 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 ). In this context Principal includes each director, Page 8 - LOAN INSURANCE AGREEMENT

9 each of the five most highly compensated executives, officers or employees of the Lender, and each direct or indirect holder of twenty percent (20%) or more of the ownership stock of the Lender. Lender will recertify this with each application for loan insurance and further certifies with each loan insurance application: (1) The loan has not been made in order to place under the protection of the Credit Enhancement Fund Insurance Program ("Program") prior debt that is not covered under the Program and that is or was owed by the borrower to the Lender or to an affiliate of Lender. (2) The loan is not a refinancing of a loan previously made to that borrower by the Lender or an affiliate of the Lender. Section 19. CHOICE OF LAW; DESIGNATION OF FORUM; FEDERAL FORUM. (a) The laws of the State of Oregon (without giving effect to its conflicts of law principles) govern all matters arising out of or relating to this Agreement, including, without limitation, its validity, interpretation, construction, performance, and enforcement. (b) Any party bringing a legal action or proceeding against any other party arising out of or relating to this Agreement shall bring the legal action or proceeding in the Circuit Court of the State of Oregon for Marion County (unless Oregon law requires that it be brought and conducted in another county). Each party hereby consents to the exclusive jurisdiction of such court, waives any objection to venue, and waives any claim that such forum is an inconvenient forum. (c) Notwithstanding Section 19(b), if a claim must be brought in a federal forum, then it must be brought and adjudicated solely and exclusively within the United States District Court for the District of Oregon. This Section applies to a claim brought against the State of Oregon only to the extent Congress has appropriately abrogated the State of Oregon s sovereign immunity and is not consent by the State of Oregon to be sued in federal court. This Section is also not a waiver by the State of Oregon of any form of defense or immunity, including but not limited to sovereign immunity and immunity based on the Eleventh Amendment to the Constitution of the United States. Section 20. INTEGRATION; PRIOR AGREEMENTS: This Agreement, including attachments hereto (which are by this reference incorporated herein), constitute the entire agreement between the parties on the subject matter hereof. This Agreement supersedes any prior loan insurance agreement between Lender and OBDD, excluding any Capital Access Program Loan Insurance Agreement, and shall govern any existing loans, as well as future loans, insured by OBDD under the Credit Enhancement Program, provided that this Agreement shall not be construed to alter or amend a specific existing Authorization pertaining to any particular loan. Section 21. TIME IS OF THE ESSENCE. Lender agrees that time is of the essence under this Agreement. Page 9 - LOAN INSURANCE AGREEMENT

10 Section 22. ATTORNEY FEES. To the extent permitted by the Oregon Constitution and the Oregon Tort Claims Act, the prevailing party in any dispute arising from this Agreement shall be entitled to recover from the other its reasonable attorney fees, costs and expenses at trial and on appeal. Reasonable attorney fees shall not exceed the rate charged to OBDD by its attorneys. IN WITNESS WHEREOF, Lender and OBDD have caused this Agreement to be executed by their duly authorized representatives as of the day of, 2. (Lender) By: Name & Title (print): State of Oregon acting by and through its Business Development Department By: Name & Title (print): Page 10 - LOAN INSURANCE AGREEMENT