Attachment 1 Statement of Work Central Servicing Agent (CSA) for 504 Loan Program .pdf

504 Central Servicing Agent (CSA) Requirements

Statement of Work (SOW) Solicitation Number 73351023R0023

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Statement of Work (SOW) – Outline of contents

BACKGROUND

1-General

2-504 Financial Servicing Overview and Definitions

REQUIREMENTS AND TASK DESCRIPTIONS - ESCROW AGENCY DUTIES OF

CONTRACTOR AS THE CENTRAL SERVING AGENT (CSA)

1-Fund Accounts

2-504 Loan and Debenture Processing

3-504 Debentures

4-Disbursements, Fees, Payments, and Prepayments of 504 Debentures

5-Disbursement of 504 Debenture Proceeds and Third Party Lender Fee

6-Monthly Fee Disbursement

7-Late Payment Fees

8-Supplemental Monthly Payments (SMPs)

9-Miscellaneous Receipts Act

10-Funds in the MRA

11-Collection of Data

12-Reports

13-Accounts and Transfer of Funds

14-Tax Reporting

15-Miscellaneous Financial Requirements

PROCESS MODERNIZATION SUPPORT

2-Loan Origination

3-Loan Servicing and Liquidation Actions

4-Document Management

5-E-Signature

6-504 Technology Development and Operations Support

7-CSA System Modernization

8-Communication and Cooperation

9-Progress Reporting, and Project Manager and Key Personnel

MISCELLANEOUS

1-Contractor Staff Security Clearance

2-Transition

3-Auditing

4-Invoicing

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BACKGROUND

1-General

The mission of the U.S. Small Business Administration (SBA) is to support the Nation’s economy by assisting in the establishment and development of new and existing small businesses and by assisting in the economic recovery of communities during national disasters. Since 1953, SBA has carried out this mission by implementing targeted loan programs for small businesses, assisting businesses with obtaining government contracts, and providing loans during disasters.

The SBA’s Office of Capital Access (OCA) is responsible for implementing programs to assist small businesses. SBA offers a range of loan programs with the support of its lender community.

The 504 loan program is a finance vehicle that provides long term, fixed rate loans for fixed assets.

Certified Development Companies (CDCs) partner with third party lenders and SBA to finance

504 loans. CDCs use proceeds of debentures, obligations issued by CDCs and guaranteed 100% by SBA, to fund 504 loans to small business concerns (the Small Business Concerns or SBCs) for eligible business purposes. A 504 project has three components. The typical deal structure consists of a loan from a third-party lender secured with a senior lien on the financed asset covering 50 percent or more of the project cost. The second component is a 504 loan made by a

CDC and secured with a junior lien (funded by a 100 percent SBA guaranteed debenture) covering up to 40 percent of the project cost. The final portion is a contribution from the borrower of at least 10 percent equity.

Section 505 of the Small Business Investment Act of 1958 authorizes SBA to appoint a Trustee to pool debentures guaranteed by SBA and issue Certificates representing ownership of all or a part of the debenture pool. Section 505 also authorizes SBA to guarantee the timely payment of principal and interest to holders of such Certificates. 504 loan payments are due monthly and debenture payments are made on a semi-annual basis. Under this contract, the Central Servicing

Agency (CSA) performs payment collection, escrow and paying agent functions for these loans, debentures, and pools. (See 13 CFR § 120.954.)

Pursuant to this Statement of Work (SOW), Contractor will perform the functions of the CSA which include:

• 504 Financial Servicing;

• 504 Process Modernization;

• 504 Information Technology Developments and Operations Support; and

• 504 Customer Service/Communication Management.

• Loan Accounting System (LAS) Operational Support

CSA Project Management

CSA is a system in its operations and maintenance phase of the lifecycle. The vendor must provide and maintain a project management plan that will address the key processes that will be used on the project. At a minimum, the plan should contain the items listed below.

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a. Quality Assurance Plan – defines the processes that will be used to validate the quality of work deliverables

b. Configuration Management Plan – details the controls in place to prevent baselines from being altered without approval

c. Requirements Management Procedures – defines the procedures to manage the software, hardware, and network requirements.

d. Risk Management Plan – details the processes that will be used to manage and communicate risk for all processes, to include cybersecurity risks.

e. Communication Plan – details the processes and procedures to gather the project information, distribute it to all stakeholders in a timely manner, and, finally, store it

a. Transition-In Plan - Develop a detailed Transition-In Plan detailing activates to be performed, timeframes and assignees

1. Manage changes with the use of OCA’s JIRA Tracking system. The project manager will update the workload in OCA’s JIRA Tracking as the work is received.

2. Utilize accepted project management practices.

3. Participate in meetings as needed.

4. Support the annual financial audit process.

5. Support the annual IT audit process.

6. Support full integration with the OCIO provided enterprise cybersecurity services

7. Conduct a Service Organization Control 1 (SOC 1) audit

8. Transition-Out Plan - at the end of this contract, the vendor shall develop a detailed

Transition-Out Plan, detailing activates to be performed, timeframes and assignees.

Contract Deliverables

Task

Number Deliverables Task Description

Scheduled

Completion

1 Project Management Plan Submit with

Proposal

2 Final Quality Assurance Plan Per Project

Management

Plan Schedule

3 Recent Industry Compliance Report (SSAE-18, SOC-1, ISO-27001, etc.) conducted within the last year.

Per Project

Management

Plan Schedule

4 Baseline Project Management Plan (BPMP) Submit with

Proposal

5 Quality Control Plan (QCP) Submit with

Proposal

6 Phase-in Plan (PIP) Submit with

Proposal

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Task

Number Deliverables Task Description

Scheduled

Completion

7 All operational items defined in this SOW Per Project

Management

Plan Schedule

8 All reports at the frequency identified throughout this SOW

Per Project

Management

Plan Schedule

9 The collection and maintenance of all program data as outlined in this SOW

Per Project

Management

Plan Schedule

10 Transition-Out Plan 30 Days

Before End of

Contract

2-504 Financial Servicing Overview and Definitions

This Statement of Work (SOW) details the functions required by the SBA for contractor services to facilitate the day-to-day operations of the SBA 504 program, pursuant to Section 505 of the

Small Business Investment Act of 1958.

Pursuant to this (SOW), Contractor will perform the functions of the CSA. CSA and Contractor are interchangeable and the same for purposes of this (SOW).

Pursuant to Section 505 of the Small Business Investment Act of 1958, SBA appoints a Trustee to serve as an agent for SBA for the purpose of issuing the debenture Certificates. SBA currently offers 25-year and 20-year certificates on a monthly basis and 10-year certificates every other month. The Agency anticipates that the offerings will continue as such; however, these plans with respect to future offerings are subject to change due to such factors as the level of demand for funds by SBCs, the number of CDCs operating, changes in the law, market conditions and

SBA policy. Loan payments are due monthly and debenture payments are made on a semi-annual basis. Under this contract, the Central Servicing Agency (CSA) performs payment collection, escrow and paying agent functions for these loans, debentures, and pools. (See 13

CFR 120.954.)

The following words, definitions, and acronyms are found within this Statement of Work

(SOW). The following list is meant to be helpful, but should not be considered to be complete or all inclusive:

• ACH – Automated Clearing House

• COR – Contracting Officer Representative

• CSA – Central Servicing Agency or Agent - interchangeable with “contractor” or

“awardee”

• DDA - In addition to a “demand deposit account,” this term shall also be understood to

Central Servicing Agent (CSA) – SBA Guaranteed 504 Loan Program Page 5 of 43 mean an account established on the CSA’s trust accounting system. Funds held in the

FMLP and 504 DDA shall be held as a non-interest bearing account until such time as the funds held are further transferred to the appropriate sub-accounts in accordance with this contract.

3-Information Technology Developments and Operations

This purpose of this section is: 1) to clarify that SBA owns the CSA suite of software and hardware used to meet the business requirements of this contract; 2) to enhance the Office of

Capital Access (OCA) Information Technology (IT) security position associated with the CSA

Vendors activities; and 3) to clarify and simplify OCA’s IT investment reporting and oversight commitments.

All software products, code, Systems (or “Solutions”), applications, hardware, software, and licenses (to include software used in development efforts) are to be licensed and registered 100% under SBA, clearly indicating that SBA 100% owns said items.

At no additional cost to the Government, Contractor shall operate, maintain and support systems within CAFS that accommodates all existing forms of SBA financial program delivery methods and payment format transactions, secondary market sale and guarantee retention reporting, as well as all possible loan status designations and payment remittance methods.

The Contractor CAFS applications shall seamlessly interface to the SBA’s CAFS loan program management system.

Any language contrary within the Statement of Work (SOW) to the requirements, scope, nature, and purpose outlined in this section should be considered subservient to this section.

REQUIREMENTS AND TASK DESCRIPTIONS - ESCROW AGENCY DUTIES OF

CONTRACTOR AS THE CENTRAL SERVING AGENT (CSA)

1. Fund Accounts

A-Master Reserve Account (MRA) and Master Demand Deposit Accounts

The MRA includes: (1) Suspense Account (Interest Bearing Trust Account, (2) Escrow

Account, (3) Trust Account, (4) Net Funding Account, (4) Servicing Fee Account, and (5) Late

Fee Account.

The Master Demand Deposit Accounts include: (1) Master Deposit Account, (2) Funding

Account, (3) Payments Outstanding Account, and (4) ACH Reject Account.

B-Master Reserve Account (MRA)

On behalf of the SBA, the CSA will establish and maintain a trust account to be known as the

SBA MRA. The purpose of the MRA is to provide an account for the flow of funds moving through the 504 Loan Program. Each account established or maintained pursuant to this contract shall be subject to all Federal and State banking regulations. As escrow agent, CSA shall have

Central Servicing Agent (CSA) – SBA Guaranteed 504 Loan Program Page 6 of 43 custody of all funds collected for 504 loans until such funds are disbursed. These funds shall be deposited in one of several accounts described below. CSA shall invest the funds contained in these accounts in the manner set by SBA, which may be amended from time to time at SBA's sole discretion.

Investment earnings will be deposited to the MRA as received and shall be credited to the appropriate accounts. CSA is not entitled to receive any of these funds for its own use, unless specifically allowed elsewhere in this contract. CSA, or its designee, shall provide SBA with a monthly statement of the activity in the MRA, in such detail as SBA may reasonably require, and shall establish and maintain such control and audit procedures as SBA may reasonably require.

This statement shall include the amount of float payments sent to each CDC. CSA shall provide any accounting reports required by SBA to adequately track the funds flowing in and out of this portfolio account.

The CSA is not compensated from investment earnings.

C-Master Reserve Subaccounts /504 MRA Escrow Subaccounts

(a)Establish and Maintain MRA Escrow Subaccount

As agent for CDCs, the CSA shall establish and maintain the MRA Escrow Subaccount. The

CSA shall record deposits to the 504 DDA into the MRA Escrow Subaccount the following:

• the principal and interest portion of each Note Payment, and

• the amount of any optional prepayment.

The CSA shall make disbursements of interest earned on sums recorded in the MRA Escrow

Subaccount, and shall disburse other sums held therein. The CSA shall maintain on its records an individual subaccount for each 504 loan for accounting purposes. These individual subaccounts shall reflect the transactions in the MRA Escrow Account for each individual loan.

All financial actions shall be in accordance with this SOW and best business practices.

(b)Interest Distribution – MRA Escrow Subaccount

The CSA shall distribute interest earned on the 504 MRA Escrow account semi-annually to each

CDC on a proportional basis. The distribution will be based on the earnings of the account for the six month period prior to March 31 and September 30 of each year with the distribution to be made on or about May 1 and November 1, respectively.

(c)MRA Holding Subaccount

As agent for the SBA, the CSA shall maintain on its records the MRA Holding Subaccount. The

CSA shall record deposits from the 504 DDA into the MRA Holding Subaccount such servicing fees otherwise payable to CDCs. Amounts held in the MRA Holding Subaccount shall be disbursed at such time and in such amounts to such person(s) or entities as the COR shall direct in writing from time to time.

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(d)Establishment of Trust Account - 504 MRA Fee Subaccount

The CSA shall establish and maintain a trust account titled 504 MRA Fee Subaccount. CSA shall transfer the following deposits from the 504 DDA into the MRA Fee Subaccount:

• the amount of any Guaranty Advance Payment received from SBA and

• the fees received with respect to each Debenture pursuant to each individual Servicing

Agent Agreement (SAA) (SBA Form 1506 - http://www.sba.gov/sbaforms/sbaf1506.

pdf).

The CSA, pursuant to written instructions from the COR, shall make payments from the MRA

Fee Subaccount to:

• the Fiscal and Selling Agent,

• the Trustee (if different from the CSA) for its respective fees,

• or to any other person or entity as the COR may designate in writing from time to time.

Notwithstanding the foregoing, CSA shall disburse such funds from the MRA Fee Subaccount as provided herein without further written direction from the SBA.

D-Master Reserve Subaccounts/Master Deposit Accounts

(a)Establishment of 504 Demand Deposit Accounts (DDA) and 504 Interest Bearing Trust

Deposit Account

504 DDA shall be established for 504 transactions. It shall be a non-interest bearing DDA, into which the CSA shall direct all payments received by it pursuant to this contract or as contemplated by this contract. Following the deposit of the payments into the 504 DDAs, available funds shall be transferred or disbursed to an Interest Bearing Trust Deposit Account (an account intended to hold payments until fully collected and swept into the MRA), with the latest transfer occurring no earlier than 3:00 PM prevailing Eastern Time on the date the funds become available, or at such other time as approved by the COR). This shall be known as the "cutoff time." Any payments received after the cutoff time will be transferred to an interest bearing trust deposit account on the following business day. In the case of a payments deposit, funds will be transferred to an interest bearing trust deposit account no later than five (5) business days after deposit or such date as the applicable check actually is irrevocably credited to the account following such deposit. Funds received in the interest bearing trust deposit account will be transferred each business day, in accordance with an applicable Trust Agreement, to the MRA.

(b)Amount Transfers

All amounts that are held for the benefit of the 504 MRA Fee Sub-account and the 504 MRA

Escrow Sub-account and which, pursuant to the terms hereof, are required to be transferred to the

Trustee, SBA, or disbursed to third parties as herein provided, shall be transferred to the appropriate CSA Trust Account or Disbursement Account on the date such transfer or disbursement is required to be made, and such transfer or disbursement shall be effected there http://www.sba.gov/sbaforms/sbaf1506.

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(c)Interest earned

All interest earned on the payments shall remain in the MRA account, to be distributed as provided in this contract or upon written instruction by the COR.

2-504 Loan and Debenture Processing

A-Interest Accrual

Interest shall accrue monthly based on the outstanding loan balances. Interest shall be calculated on the basis of a 12-month year with 30 days in each month. All payments are due on the 1st of each month. As long as payments are made within the month in which they are due, the payment is treated as if it were made the first day of the month. Interest and principal reductions reflected on the loan amortization schedule for each monthly period will be the same as the amount recognized for that period so long as the payments are made within the month when due.

B-Borrower Late Fee, Servicing Fee, and Guaranty Fee

Borrower late fees (as defined in the Note, SBA Form 1505 -http://www.sba.gov/sbaforms/sbaf1505 .pdf and http://www.sba.gov/sbaforms/sbax1505.pdf), the

CSA and CDC servicing fee, and the SBA ongoing guaranty fee will be accounted for on an accrual basis. The CSA and CDC servicing fee and the SBA ongoing guaranty fee are described in the Servicing Agent Agreement.

C-Order of Payment Application

Loan payments are applied as of the date of receipt and in the following order:

1) Borrower Receivable - Apply in one (1) month increments in the order set forth below until the full amount of any balance owed is satisfied. Any remaining balance to be applied to the amount owed for the next fee in priority.

a) SBA Guarantee Fee

b) CSA Servicing Fee

c) CDC Servicing Fee

2) Current Month's Fees - Apply in one (1) month increments until the full amount of any delinquency is satisfied. Any remaining balance to be applied to the amount owed for the next fee in priority.

a) SBA Guarantee Fee

b) CSA Servicing Fee

c) CDC Servicing Fee

3) Interest - Apply in full day increments until amount required is satisfied. If funds available are less than a day of interest, the balance is applied to principal.

4) Principal - Apply until the balance matches the 504 Note Amortization Schedule.

5) Late Fee - Apply in one (1) month increments if a fee has been assessed.

6) Unallocated Funds - Monies available after all other categories are satisfied or where the amount available is insufficient to pay the late fee due.

http://www.sba.gov/sbaforms/sbaf1505

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D-Servicing and Guarantee Fee Calculation

The CSA and CDC servicing fees, and the SBA ongoing guaranty fee are based on the outstanding principal balance at the end of the 5-year intervals with one exception. If a 504 Loan is not current at the 5-year reset date, the fees continue to be reset, but the Borrower’s monthly payment amount remains the same. The additional monies generated by the difference between the Borrowers’ unadjusted monthly payment and what would have been a reduced payment amount can then be applied to pay past due amounts. Once the account is caught up, the loan will be reset to what it should have been at the next 5 year reset.

E-Delinquent Loans

Delinquent loans will not be considered current until all amounts due are paid including late fees and a principal reduction necessary to bring the outstanding loan balance in accordance with the amortization schedule or until the loan is re-amortized. Re-amortization is at the discretion of the

SBA servicing office which shall provide written instruction to the CSA.

F-Review of Sale Documents

To ensure that the data is received and processed properly, CSA will check key information on the SAA, and Note for accuracy using ETRAN or any successor SBA system. The CSA will be required to provide a terminal and all communications equipment (including dedicated secured transmission lines) necessary to hook up to the SBA computer system. (ETRAN is SBA’s electronic loan system). If there is a discrepancy with the interest rate, loan amount, the CDC name, subprogram code, borrower name, or other data item as identified by SBA, the CSA will notify the COR and work with the SBA to resolve any discrepancies.

G-Processing of Sale Documents

The CSA shall receive all SAAs (SBA Form 1506) and copies of all Notes (SBA Form 1505) and the original Debenture (SBA Form 1504) forwarded to it by each District Counsel, CDC or such other office as the COR may determine, and shall review and verify the calculations in the

SAA. The Original Debenture SBA Form 1504 will be sent to the Trustee by the CSA. The SAA is an integral part of this contract and is incorporated herein by reference. The CSA is responsible for all tasks identified as tasks of the CSA in the SAA. The SBA may change the format of receiving these documents to electronic.

H-Supplemental Payment Processing (SPP)

The CSA shall implement a process call SPP. If a Borrower sells some of the Project collateral

(i.e., outdated equipment), the funds are sent to the CSA and used to bring the loan current. Any excess funds are posted into “unallocated/reserve.” SPP shall be used to automatically apply some or all of the funds to keep the loan current. If the loan is current, the remaining funds will remain in the “unallocated/reserve” account until there are adequate funds to pay the loan off.

I-Delinquent and Deferred Loan

Delinquent Loans are those loans where a monthly payment has not been received during the month in which it was due. Deferred Loans are those loans for which SBA or the CDC has

Central Servicing Agent (CSA) – SBA Guaranteed 504 Loan Program Page 10 of 43 agreed in writing with the Borrower that monthly loan payments may be temporarily deferred.

Deferred Loans will be accounted for using the "catch up" that will be prepared by CSA and mutually approved by the CDC and the borrower using the methodology described in

Attachment 1-2, entitled "CSA User Manual." SBA or the CDC shall advise the CSA of each

Deferred Loan During the period of the deferment when the Borrower resumes making loan payments designed to catch up to the original loan amortization schedule, the loan is in a "catch-up" status. If a loan payment is missed while the loan is in "catch up" status, the loan status changes to Delinquent. If the Borrower is able to bring the loan back to the original amortization schedule, the loan is again current.

3-504 Debentures

A-Debenture Payments

One debenture is issued for every loan in the same amount as the loan. Debenture payments are currently made on a semi-annual basis. Debenture amortization schedules will be provided by the

Trustee. During the life of this contract, SBA may change the payment schedule for debentures.

B-504 Debenture Pool

At or before noon (Eastern Time) on the second Business Day preceding each Offering Date, the

CSA shall provide the SBA Office with electronic notice of the following information with respect to each such Note and SAA received by it in respect of the next 504 Debenture Pool to be formed:

• the CDC,

• the SBA loan number,

• the principal amount of the Note and the form number of such Note,

• the pool series and funding date, and

• the term of the Note.

The SBA shall cause the Trustee on the second Business Day following each Pricing Date, to electronically notify the CSA and the Fiscal Selling Agent of the interest rate and semi-annual principal and interest amounts payable with respect to each Debenture to be included in the

Debenture Pool next to be formed, and to upload all the documents (prepayment schedules and copies of related note) on the CSA system for the CSA, the Fiscal Selling Agent and SBA to view.

C-Determination of Fees and Note Payment Amount

Pursuant to instructions contained in each SAA, the CSA shall calculate:

• its portion of the monthly Servicing Fees, and

• each CDC's portion of the monthly Servicing Fees;

• the Borrower's Note Payment amount, and

• the SBA on-going guaranty fee.

The CSA shall generate amortization schedules pursuant to Section C-2B-#5. CSA shall calculate and notify the Fiscal and Selling Agent of the five-year effective rates of the loans.

Such notification shall be uploaded to the secure CSA system.

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D-Post-Debenture Tasks

No later than five (5) business days following the CSA's disbursement of the Debenture

Proceeds, CSA shall:

• complete each SAA and the Note,

• retain an executed counterpart of each such SAA and a copy of each Note as completed with attachments,

• deliver to the appropriate SBA Office, as the COR may determine, a completed copy of the Note with attachments and one executed counterpart or copy of the related SAA, and

Should the Trustee fail to provide the written notice as required by this SOW on one or more of the 504 Prepayment Schedules specified in the first sentence of this paragraph, the CSA shall so advise the SBA Headquarters Office no later than 10:30 AM (Eastern Time) on the third business day following such Pricing Date.

E-Loan Amortization Schedules for Debentures

After receipt of the computation of the dollar amount of the semi-annual payment from the

Trustee, the CSA shall calculate the monthly loan amortization amount by dividing the semi-annual payment amount by six and computing a note interest rate. The CSA shall then determine the monthly payment by adding the amount of the CDC, the SBA and the CSA fees to the monthly amount necessary to amortize the loan as determined above. The CSA shall develop a system to produce such loan amortization schedules. The CSA shall work with the Fiscal and

Selling Agent (presently Eagle Compliance, LLC) regarding the determination of the borrower's

Note rate. These schedules should be posted on the secure CSA System. SBA may change the payment schedule for debentures to a monthly payment.

F-Termination of Servicing

In the case of acceleration of the Loan and purchase of the Debenture, the CSA, in accordance with written notice from SBA, may be notified to cease all servicing activities related to a particular loan. Notification shall specify the effective date that servicing shall cease. After the effective date, the CSA shall forward to SBA a transcript of the borrower's account as of the effective date. The transcript shall show:

• the payment history on the account and application of funds, and

• the amount of all funds, if any, paid by the Borrower which remains in the SBA

Escrow/Reserve Account or MRA Escrow Subaccount after the CSA deducts applicable

Fees.

The SBA must determine that the transcript is acceptable. The CSA shall forward electronically the transcript to the SBA Denver Finance Center no later than the Second Business Day following the effective date. The CSA shall notify the SBA of the amount of all funds, if any, paid by a Borrower on a 504 Note which remain in the MRA Escrow Subaccount. SBA shall not be liable to the CSA for any Servicing Fee deficiency in the event the SBA Escrow/Reserve

Account or MRA Fee Subaccount is inadequate to cover such fees.

G-Reinstatement of Terminated Accounts

The SBA reserves the right to reinstate the servicing responsibilities of the CSA on 504 loans where the underlying debentures have been purchased by the SBA. In these cases, the fees

Central Servicing Agent (CSA) – SBA Guaranteed 504 Loan Program Page 12 of 43 applicable to the CSA servicing will begin on the date servicing recommences.

4-Disbursements, Fees, Payments, and Prepayments of 504 Debentures

A-Semi-Annual 504 Debenture Payments-Preparation for Debenture Payment

The Debenture Payment shall consist of funds received from borrowers to pay the semi-annual principal and interest amount, funds received from borrowers to prepay the debenture, funds received from the SBA due to Accelerations, and advanced funds received from the SBA due to borrower payment deficiencies on loans that have not been accelerated. On the third business day before the Debenture Payment Date, the CSA shall determine whether the aggregate amount paid into the MRA Escrow Subaccount is sufficient to pay the full amount due on such Debenture

Payment Date. To be sufficient, the amount must equal the principal and interest due on the debentures, plus any optional prepayments and acceleration payments.

If the amount is not sufficient to make the semiannual debenture payment, the CSA shall determine whether there are sufficient funds in the MRA Fee Subaccount. If the amounts in the

MRA Escrow Subaccount and the MRA Fee Subaccount together with the amount of such

Acceleration Payments to be deposited by the SBA into the 504 Deposit Account are insufficient to make the full payment due on such Debenture Payment Date, the CSA shall tell the SBA

Denver Finance Center electronically on the third business day prior to such Debenture Payment

Date the amount of the deficiency. The SBA shall then make a Guarantee Advance Payment by depositing the amount of such deficiency into the 504 Deposit Account, by wire transfer in immediately available funds, to arrive no later than the second business day preceding the relevant Debenture Payment Date.

B- Semi-Annual 504 Debenture Payments Debenture Payment

On each Debenture Payment Date, the CSA shall transfer to the 504 Disbursement Account the following amounts;

• from the MRA Escrow Subaccount the aggregate amount of the Debenture Payments and

Optional Prepayments, and

• if necessary, from the MRA Fee Subaccount to the extent there are available funds in the amount of the shortfall in the MRA Escrow Subaccount, taking into consideration the amount of Acceleration Payments made by the SBA to the 504 Deposit Account; and

• any Guaranty Advance Payments relating to such debentures.

C- Semi-Annual 504 Debenture Payments/Aggregate Transfers

The aggregate of the foregoing amounts shall be transferred to the trustee on the last business day of the month by 10:00 a.m. (Eastern Time). At the time of such transfer, the CSA shall provide to the Trustee in writing, or as otherwise agreed to by the CSA and the Trustee from time to time, a schedule listing, with respect to the funds so transferred:

• the aggregate amount of funds transferred with respect to each Debenture Pool,

• for any Optional Prepayment, the Debenture to which such Optional Prepayment relates and the amount of premium (if any) paid, and

• for any Acceleration Payment, the Debenture to which such Acceleration Payment relates.

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D-Reimbursement of SBA for Guarantee Advance Payments

At each semi-annual Debenture Payment Date, CSA shall determine the amount of funds available for the account of each 504 loan. If there are funds in excess of those necessary to make the semi-annual payment, they shall be distributed as follows and in the following order:

• to reimburse the MRA Fee Subaccount for any withdrawals made by the CSA in accordance with this SOW, but only if the SBA has not made a Guaranty Advance

Payment to the MRA Fee Subaccount described above with respect to such advances,

• to the SBA at its address, any amount paid by the SBA pursuant to a Guaranty Advance

Payment to the MRA Fee Subaccount, and

• to the MRA Fee Subaccount.

5-Disbursement of 504 Debenture Proceeds and Third Party Lender Fee

A-Disbursement of Debenture Proceeds

Upon the receipt of Debenture Proceeds into the applicable DDA, CSA shall disburse the aggregate amount of such Debenture Proceeds in the manner provided for in the related SAA.

With the exception of the SBA Guaranty Fee, the CSA shall make such disbursement as soon as is practicable after its receipt in collected funds of such Debenture Proceeds, but in no event later than one (l) Business Day following such receipt.

B-504 Funding Fee

Upon the receipt of 504 Debenture Proceeds into the 504 DDA, the CSA shall transfer to the

MRA Fee Subaccount the portion of such Debenture Proceeds attributable to the Funding Fees specified in the related SAA. SBA receives the residual funds remaining after CSA administrative expenses are covered.

C-SBA Guaranty Fee

Upon the receipt of Debenture Proceeds, the CSA shall transfer to SBA in accordance with the

Miscellaneous Receipts Act the portion of such Debenture Proceeds attributable to the SBA

Guaranty Fee specified in the related SAA.

D-CDC Processing Fee

Upon the receipt of 504 Debenture Proceeds, the CSA shall transfer the portion of such

Debenture Proceeds attributable to the CDC Processing Fee as directed by the COR.

E-CDC Closing Costs and Fees

Upon the receipt of 504 Debenture Proceeds, the CSA shall transfer the portion of such

Debenture Proceeds attributable to the CDC Closing Costs and Fees as directed by the COR.

F-Third Party Lender Participation Fee

CSA shall collect the Third Party Lender Fee if applicable. This fee may be paid directly by the third party lender or subtracted from the CDC Processing Fee. This fee shall be forwarded to the

SBA in accordance with the Miscellaneous Receipts Act.

G-Receipt and Application of 504 Note Payments

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Each Borrower is required by the Note and the corresponding SAA to remit Note Payments through an Automated Clearing House (ACH) on the first business day of the month or by another manner approved by the CSA in writing. Upon its receipt of funds designated by a

Borrower as a Note Payment, the CSA shall determine whether such funds are sufficient to make a Note Payment or instead should be considered as a Partial Note Payment. Partial Note payments shall be applied in the same manner as Note Payments. However, a late fee will be assessed when less than a full payment is made unless the loan has been deferred by SBA. When the CSA determines the funds received are sufficient to make a Note Payment, the CSA shall record the amount thereof in the following order and manner:

1) Borrower Receivable

Apply in one (1) month increments in the order set forth below until the full amount of any delinquency is satisfied. Any remaining balance is to be applied to the amount owed for the next fee in priority as follows;

a) SBA Guarantee Fee

b) CSA Servicing Fee

c) CDC Servicing Fee

2) Current Month’s Fees

Apply in one (1) month increments until the full amount of any delinquency is satisfied. Any remaining balance is to be applied to the amount owed for the next fee in priority as follows:

a) SBA Guarantee Fee

b) CSA Servicing Fee

c) CDC Servicing Fee

3) Interest

Apply in full day increments until amount required is satisfied. If funds available are less than a day of interest, the balance is applied to principal.

4) Principal

Apply until the balance matches the 504 Note Amortization Schedule.

5) Late Fee

Apply in one (1) month increments if a fee has been assessed. Late fees are assessed on the 16th or next business day.

6) Unallocated Funds

These are monies available after all other categories are satisfied or where the amount available is insufficient to pay the late fee due.

NOTE: Partial Note payments shall be applied in the same manner as Note Payments. However, a late fee will be assessed when less than a full payment is made unless the loan has been deferred by SBA.

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6-Monthly Fee Disbursement

A-CSA Servicing Fees

The CSA Servicing Fees received from Borrowers shall be disbursed by the CSA to itself in accordance with this SOW. If the ACH is rejected after the CSA has paid itself, these funds shall be returned by the CSA. If these returned payments are resubmitted, the CSA may pay itself upon receipt of good funds. SBA receives the residual funds after CSA administrative costs are covered.

B-CDC Servicing Fees

Unless SBA directs otherwise in writing, the CDC Servicing Fees received from Borrowers shall be disbursed by the CSA to the CDCs in accordance with this SOW. If the ACH is rejected after the CSA has paid this fee, a receivable for the CDC to repay the CSA will be created. This receivable shall be liquidated in one of three manners:

• if good funds are remitted by the borrower,

• if good funds are not received from the borrower by the next Note Payment Date, the

CSA shall withhold the amount owed from the next disbursement to the CDC, and

• if there is no disbursement due to the CDC on the next disbursement date, the CSA shall issue a claim letter to the CDC.

Any CDC Servicing Fees not submitted according to the time frame in this SOW, shall be sent to the CDC electronically on the last business day of each month. Upon the CSA's receipt of written notice from the SBA, the CSA shall disburse the CDC Servicing Fees to another CDC or to the

SBA. Such payment shall be sent electronically to the CDC, SBA, or any other entity designated by SBA. If sent to the SBA, it must be in accordance with the Miscellaneous Receipts Act.

C-SBA Ongoing Guaranty Fees

The SBA ongoing guaranty fee shall be collected from the borrower each month and submitted to SBA in accordance with the Miscellaneous Receipts Act. If a Treasury General Account is created to comply with the Miscellaneous Receipts Act, the CSA shall work with the SBA to establish a trust Treasury General Account called the "SBA Ongoing Guaranty Fee Account" in a

Treasury Authorized Depository. If the ACH rejects, the fees shall be returned along with any interest earned on this account during the month. The submission shall identify the SBA loan number and the SBA Ongoing Guaranty Fee associated with that loan number.

D-CDC Fee to SBA

The CDC fee (presently 1/8th of 1 per cent per annum) shall be collected each month by the CSA from the servicing fees collected for the CDCs and submitted to the SBA in accordance with the

Miscellaneous Receipts Act. If a Treasury General Account is created to comply with the

Miscellaneous Receipts Act, the CSA shall work with SBA to establish a trust Treasury General

Account called the "CDC Fee Account" in a Treasury Authorized Depository in which to deposit the CDC Fee in accordance with Section C-3F. If the ACH rejects, the fees shall be removed from the CDC Fee Account and returned to borrower's financial institution. The submission shall identify the SBA loan number and the SBA Ongoing Guaranty Fee associated with that loan

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E-Fee Disbursement

The CSA shall remit by use of an electronic funds transfer mechanism the fees described in this

SOW on the fifth business day after the Note Payment Date unless SBA directs the CSA to deposit any CDC Servicing Fees into the 504 MRA Holding Subaccount as part of an enforcement action. No CDC shall have any rights with respect to any Servicing Fee placed in the Holding Account or MRA Holding Subaccount on SBA instructions unless authorized in writing by the COR.

7-Late Payment Fees

A-Late Payment Fees - General

Section 504 Loans are subject to late payment fees, which may be waived by the CDC at its discretion.

B-CDC Notification of Late Payments

On the sixth day of each calendar month (or if such day is not a business day, on the next succeeding business day) the CSA shall create and post a web-based report that will notify respective CDCs of Note Payments due in such month which have not been received from

Borrowers by the fifth calendar day of such month.

C-Late Fee Assessment

On the 16th day of each calendar month (or if such day is not a business day, on the next succeeding business day) a late fee is assessed. Presently the late fee is 5% of the amount of the payment or $100, whichever is greater, unless the late fee is capped at a lower rate by state law

(e.g., 3% cap in Massachusetts), in which case the late fee shall not exceed the state cap. The

CSA shall create and post a web-based report that will notify respective CDCs of Note Payments due in such month which have not been received from Borrowers by the 15th calendar day of such month.

D-Distribution of Late Fees

Any late fees received by the CSA from a Borrower shall be transferred from the applicable

DDA to MRA Holding Subaccount for 504 loans. Within ten (10) business days following the end of each calendar month, the CSA shall disburse such amount of late fees to the CDCs except where the COR has directed the CSA in writing not to disburse fees to one or more CDCs. The

COR may also issue special instructions.

E-Waivers

The CDC shall notify the CSA that it has waived the Late Fee in writing. The CSA shall mark the file that a waiver of the Late Fee has been granted and send a copy of the action to the

Servicing Center and the CDC.

8-Supplemental Monthly Payments (SMPs)

A-SMPs for 504 Loans

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The SMP program is not available to 504 borrowers. (The calculation for a 504 prepayment penalty uses a formula based on the number of years the debenture has been outstanding rather than a change in the market interest rates. The more years the debenture has been outstanding, the smaller the prepayment premium. If the borrower defaults on the 504 loan and the SBA purchases the debenture, the SBA is not required to pay any prepayment premium to the investor.) Borrowers that must resort to the liquidation of collateral to make payments should work with the CDC/SBA servicing office to determine if purchase of the debenture is appropriate.

B-Deposits and Optional Prepayments

A Loan is subject to Optional Prepayment by the Borrower. Optional Prepayment must be the amount necessary to fully satisfy the indebtedness due under the Note and the Debenture. Partial prepayments are not permitted. If prepayment funds do not fully satisfy the debt outstanding including the amount required to prepay the Debenture in full including any prepayment premium, the Loan will not be prepaid and funds are to be returned to the Borrower by the CSA.

C-504 Prepayments

504 prepayments occur on the third (3rd) Thursday of the month before the Debenture's semi-annual payment date. The following is a schedule of duties performed by the CSA:

• 3rd Thursday of the month – the CSA will receive wired funds; deduct the CSA fees for proper number of months; distribute aggregate amount of the CDC fees to the CDC prior to paying off the Debenture; deposit appropriate principal, interest, and premium to satisfy the Debenture in the MRA Escrow Subaccount, as well as deposit any other funds received into the MRA Escrow Subaccount to be disbursed to the SBA or other appropriate parties as instructed by the COR; and

• Appropriate Debenture Payment Date - Remit proper amount to the Trustee.

D-Accelerations

The SBA shall promptly notify the CSA and the Trustee in writing or electronically of an

Acceleration Event. The SBA shall cause the Trustee to provide to the CSA in writing within one

(1) business day of the receipt of a notice of an Acceleration Event, a schedule setting forth with respect to the affected Debenture, the outstanding principal balance and the accrued interest to the applicable Debenture Payment Date. No later than four (4) business days prior to the applicable Debenture Payment Date, the CSA shall provide a schedule to the COR setting forth with respect to the affected Note and Debenture, with the following information included:

a. the outstanding principal balance and the accrued interest to such Debenture Payment

Date (as notice of such amounts was provided to the CSA by the Trustee);

b. the amount of funds in the MRA Escrow Subaccount constituting payments on the related

Note;

c. the net amount due from the SBA to make an Acceleration Payment with respect to such

Debenture (which amount shall be equal to the amount of "a" above less the amount of

"b" above, if any); and

d. unless directed otherwise by the SBA, a complete transcript of account of the Note.

No later than the two (2) business days prior to the applicable Debenture Payment Date, the SBA shall make an Acceleration Payment with respect to the Debenture, by wire transfer to the 504

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DDA, in the amount identified above. For purposes of this Section, the applicable Debenture

Payment Date shall mean the next succeeding Debenture Payment Date after the receipt by the

Trustee and the CSA of the notice of an Acceleration Event, unless such notice is received by either the CSA or the Trustee on or after the 20th calendar day of the month preceding such

Debenture Payment Date, in which case the applicable Debenture Payment Date shall be the second succeeding Debenture Payment Date after receipt by the Trustee and the CSA of such notice.

9-Miscellaneous Receipts Act

A-Fees and Funds to be Remitted to the SBA

In accordance with the requirements of the Miscellaneous Receipts Act, 31 U.S.C 3302, and the regulations and guidance issued by the Department of Treasury, the CSA must remit to the SBA any and all fees and other funds that belong to the SBA, including any interest earned on these fees while in the CSA’s possession, on the same day that these funds, in the aggregate, total

$5,000 or more. At any time that the funds, in the aggregate, total less than $5,000, the CSA may retain the funds until these funds accrue to $5,000 or more, at which time the CSA must remit immediately the funds to the SBA; provided, however, that the CSA must remit funds via wire to the SBA no later than Thursday of each week regardless of the aggregate amount of the funds.

Collection of government funds under the contract will be subject to the joint responsibility of

SBA and Financial Management Service of the Treasury Department (FMS). Any and all CSA remittances to the SBA should be by wire with a supporting file with a file identifier indicating the type of the remittance being paid, loan number, amount and effective date of receipt of funds.

The fees and other funds that belong to the SBA under this contract include:

a. the interest earned on the CDC servicing fees and late fees;

b. the SBA Guaranty Fee;

c. the Third Party Lender Participation Fee;

d. the regular and late on-going Guaranty Fee;

e. any funds that may be collected for the SBA as 504 Prepayments;

f. the CDC fee to SBA;

g. all fees associated with the First Mortgage Loan Pool (FMLP) program; and

h. Accrued interest on delinquent loans (when a borrower becomes delinquent, a small interest charge is assessed in excess of the amount stated in the original amortization schedule until the loan becomes current).

In addition, the CSA shall remit to the SBA any and all fees and other funds in accordance with this section, which the SBA identifies as Government funds, including any interest earned on these funds while in the CSA's possession.

CSA shall provide to SBA advance notice of any large deposit or withdrawals, (this will be defined at a later date) that may need to occur within a month in order to meet Treasury Advance

Notice Policy.

B-Miscellaneous

At the SBA's request, the CSA shall assist the SBA in implementing one of the following actions to ensure compliance with the Miscellaneous Receipts Act (reference in this Section):

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• establishing a Treasury General Account,

• seeking a waiver from FMS from the timing of deposit requirements of the Miscellaneous

Receipts Act; and

• any other action that would facilitate compliance with the Miscellaneous Receipts Act.

10-Funds in the MRA

A-Trust Account Bank

The CSA shall nominate a bank to provide trust services only with regard to the monetary accounts specifically established by the CSA for this contract. This nomination will be sent to the

COR for approval. The SBA reserves the right to ask the CSA to change the bank holding the trust accounts.

B-First Lien Position 504 Loan Pools (FMLP)

The First Mortgage Loan Pool (FMLP) program is a legacy portfolio of pooled first mortgage loans originated for 504 project financings. It is a program that requires the Contractor to have an established direct debit/direct credit payments system in order to timely collect and distribute pro rata payments to SBA, investors, and other interested parties. The Contractor shall also be able to provide customer service support staff to answer inquiries from investors, lenders, Pool

Originators, and small business borrowers. The Contractor shall be able to provide periodic reporting on advance requests to pool investors from SBA, and notify SBA of defaulted pool loans. The Contractor shall have the capability of providing encrypted file transfer of funds along with loan and pool data, and to provide daily support to SBA staff in designated SBA Operations

Centers. The Contractor shall be able to demonstrate that they are SOC-I compliant, and be available upon request to report to senior program officials, third party contractors, and federal credit officials tasked with the financial management of this SBA program.

C-Payments Collections

The Contractor shall make appropriate payments to each Registered Holder, Pool Originator, and originating Lender together with a statement of account. In the event that a borrower does not have sufficient funds in its account to cover the ACH request, or if any other borrower payment is returned to CSA for insufficient funds after payment to the investor, lender, or pool originator, CSA shall withdraw funds from the cash reserve established to cover the funds while the CSA seeks return of the funds from the Seller and the Pool Originator. Contractor shall offset any amount owed from subsequent payments to investor and seller.