Hergenroeder Rega Ewing & Kennedy, LLC skennedy@hrslaw.com Phone 412.208.3310 Fax 412.281.6153

1. Hergenroeder Rega Ewing & Kennedy, LLCskennedy@hrslaw.comPhone 412.208.3310Fax 412.281.6153

2. SBA Authorization: Review Carefully Check Note repayment terms Check names Check collateral Check equity Check use of proceeds

3. Change Letters: If Authorization is incorrect, prepare change letter and send If you have any doubt about what is in the Authorization do a change letter

4. Loan Fee Collect and submit timely

5. 1050/Use of Proceeds with copies of Checks: Only get one form signed MUST HAVE AN AUDIT TRAIL Must comply with use of proceeds in Authorization Must match disbursements with use within 10% Watch out for EPC/OC. No Working Capital

6. Mortgagee Title Insurance Policy: Have reviewed by experienced person Less is more, the more exceptions the less coverage Watch out for: Use covenants Existing liens Some standard Endorsements Oil and Gas

7. Survey: Should have with new construction Look for encroachments Look for access

8. Evidence of balance due on first mortgage: Verify balance Determine if Open End Watch for HELOC Future Advances

9. Pre-Closing UCC and Other Searches: Check all jurisdictions Check Bankruptcy Check Judgments Credit Report will have Order right away to avoid problems POST CLOSING UCC SEARCH: Verify Priority Good to pre-file

10. UCC-1 Financing Statements: Be certain of name Be certain of where to file Watch out for collateral that must be in possession of Secured Party (stocks) Process filing takes 7-10 business days Pre-file

11. Pledge of Stock: Similar to Security Agreement Sometimes done if business is licensed May need to posses stock

12. Control Agreement: Need for uncertificated stocks, investment accounts, etc. Only way to get to the Collateral and only way to perfect security interest

13. Stock Power: Done with Stock Certificates Sign in blank

14. Lease: Must match term of Loan If you don’t care do a change letter because Authorization requires the term of the lease to be as loan as the loan May include renewal options as long as tenant can exercise unilaterally

15. Landlord Waiver: Subordinate Landlord lien to Bank lien Must be able to cure default, so need notice of default and opportunity to cure Must have access to collateral Problem if you don’t get it

16. Assignment of Tenant’s Interest in Lease: Rare, but sometimes required Difficult to get May not want it

17. Liquor License: A license is a privilege In Pennsylvania you can take security interest but subject to Liquor Control Board You can get interest in the ability to transfer General Intangible under UCC-1; someone else may have a lien already Should be mentioned in both the Security Agreement and the UCC-1 If the business closes down, you may want to remove the license

18. Liquor License Power of Attorney: Good to have so that you can work with Liquor Control Board and taxing authorities, Pennsylvania Department of Revenue Allows lender to execute transfer documents and fill out forms

19. Franchise Offering/ Agreement: Whole process in SOP Be sure you have all the Franchise Documents and all signed Franchisor should certify that these are all the documents Careful! May render Loan ineligible!

20. Agreement of Franchise (to cure default): Requires notice of default and opportunity to cure Defer franchise fees is Loan is in default (hard to get) Access to Franchisor’s books as they pertain to Borrower

21. Certificate of Insurance for real and personal property listing Make sure in place Change Endorsement Copy of Declarations page Mortgagee/Lender Loss Payee

22. Workers Compensation Insurance: Must have if they have employees

23. Life Insurance: Be certain Insured is correct Owner may be other than insured Copy of the policy Term long enough for loan? Be sure in correct amount

24. Collateral Assignment of Life Insurance: Must be signed by OWNER of the policy Must not be assigned to anyone else Must be correct Insured Must be correct Amount Must be assigned as Collateral, NOT CHANGE IN BENEFICIARY

25. Partnership Authorization and Partnership Agreement: Check all parties Be sure allow for Confession of Judgment whether a GP or an LP If not all Partners must sign authority of one Partner to sign Confession of Judgment

26. Standby Creditor’s Agreement (SBA Form 155): Get copy of Standby Note Compare to be sure it is correct Be sure you have payee on Note as Standby Creditor

27. Copy of Standby Note with Endorsement: If no Note, tell them to draft one Have Note endorsed as follows: “This Note is subject to the terms and conditions of a Standby Creditor’s agreement between Payee and ____________ (Bank) dated the _____ day of _____________, 20__”

28. Evidence of Equity: Critical I prefer an Affidavit One of the first things looked at Cash is King In kind must be supported by appraisal (I would be sure SBA agrees) Careful about where it comes from, there are many specific rules about this

29. Compliance with Bulk Sale Provisions: Purchase of more than 51% of assets Pennsylvania Department of Revenue clearance Escrow/Indemnification Verify payment of seller taxes

30. Complete Equipment List: Important as this is required by Authorization under collateral where security interest is listed Should have list of all equipment All equipment over the value of $5,000 should have a complete description with serial number

31. HUD-1 Settlement Sheet: Good way to track use of proceeds

32. Bill of Sale: Same as a Deed for personal property

33. Business Licenses, Permits, EIN, Certificate of Occupancy: Must have EIN If Borrower requires a license, need a copy (attorney, barber, restaurant with liquor license, dentist, doctor, etc.) Pennsylvania contractors are required to have permits

34. Non-Compete Agreement: Good to have in a business acquisition Be sure the principal or principals of the seller are bound. No good if seller is a corporation and person that can compete is an individual. They are not bound.

35. Fixed Price Contract: Protects Lender and Borrower Must match use of proceeds

36. Contractor’s Builders Risk and Workers Comp:

37. Collateral Assignment of Construction Documents: Need if you have to complete work

38. Occupancy Certificate: Post closing Very important for new construction and leasehold improvements

39. Earthquake Compliance: New construction only