Minneapolis, Minnesota

(763) 208-6430

http://www.calthacompany.com

On March 18, 2008, the U.S. Small Business Administration (SBA) releaseda revision to its procedures under the Lender & Development CompaniesLoan Programs (SOP 50-10(5)). These new procedures go into affect onMay 1, 2008.

Some of the key changes are procedures related to environmentalassessments detailed under the Environmental Policies & Proceduresrequirements. This Regulatory Briefing summarizes some of the keyelements of these new SBA requirements.

Overview

The goal of the policy is to identify properties that have a higher risk forenvironmental contamination, and to assure that if contamination ispresent, it is addressed in a manner that reduces the potential liability ofSBA and the lender.

The basic structure is:

SBA requires an Environmental Investigation of ALLCOMMERCIAL property loans it is securing;

The level of the Environmental Investigation will depend on therisks for contamination

The determination of the appropriate level of EnvironmentalInvestigation will follow a formal process path (see Page 2), so thatLenders can quickly determine what documentation SBA will require forindividual loans. At a minimum, the investigation will require anevaluation of current and past uses, and completion of an EnvironmentalQuestionnaire.

The SBA Environmental Policy also provides specific guidance on stepsrequired based on the results of the environmental investigation.

I N S I D E T H I S

B R I E F I N G

1 Overview

2 Basic Structure for SBA

Policy

3 Decision Process Flowchart

4 What Are “Environmentally

Sensitive Industries”?

5 What Do I Need To Do

Then?

6 What If a Property Has

Known Contamination?

Environmental

Investigation:

The process of evaluating

the environmentalconditions at a property.

It may include:

Environmental Questionnaire

Records Search

Phase I ESA

Transaction Screen

Phase II ESA

Basic Structure for SBA Policy

Regulatory Briefing

U.S. SBA’s RevisedEnvironmental Policies& Procedures

April 2008

©Caltha LLP 2008

Page 2 Regulatory Briefing

Decision Process Flowchart

The revised SBA environmental policy includes a list of businesses, identified by their NAICS IndustrialClassification Code, that are considered “environmentally sensitive industries”. The types of businessesincluded are quite broad; including some that may not typically be thought of as high risk:

Most types of light and heavy manufacturing Agricultural, including crop and animal production, forestry & logging Wholesalers, including equipment and machinery Gas stations Transportation companies Rental & Leasing companies Hospitals, care centers, laboratories Golf courses, skiing facilities, marinas, campgrounds Equipment and machinery repair Others

What Are “Environmentally Sensitive Industries”?

©Caltha LLP 2008

Regulatory Briefing Page 3

The purpose of the revised policy is to identify issues and to assure that all appropriate steps are takento reduce liabilities. Several mitigating factors are addressed by the SBA Policy:

Obtaining Indemnification Addressing sites where remediation is complete, and confirmation monitoring is on-going Obtaining “no further action” letters or similar assurance letters from government agencies Addressing sites requiring minimal remediation Establishing clean up funds or escrow accounts Addressing sites impacted by releases from neighboring properties Identifying additional or substitute collateral Other

Regulatory Briefings are publishedperiodically by Caltha to highlight new orproposed environmental, health & safetyregulations

Caltha LLPHeadquarter inMinneapolis, MN

Phone:(763) 208-6430

Website:http://www.calthacompany.com

E-mail:

info@calthacompany.com

The revised SBA environmental policy also includes specific requirements Lenders must follow based onthe results of the Environmental Investigation,

Follow up on a Transaction Screen: If the environmental professional conducting the Transaction Screen concludes that further

investigation is warranted, the Lender must obtain a Phase I ESA.

Follow up on a Phase I ESA: If the environmental professional conducting the ESA concludes that further investigation is

warranted, the Lender must proceed as recommended by the environmental professional; Best Practices recommended to reduce potential liabilities, such as improved housekeeping or

installing secondary containment, must be followed.

Follow up on a Phase II ESA/Investigation:If contamination is found, and the Lender still wishes to make the loan, additional documentation willbe required, including

Determination if reportable or actionable quantities have been exceeded, Determination if remediation is required, Estimate of remediation costs, and Projected completion date for any remediation.

What Do I Need To Do Then?

What If a Property Is Known To Be Contaminated?

Caltha LLP has specialized expertise inassessing commercial & industrial properties,including “environmentally-sensitiveindustries”. Caltha helps Lenders met the SBAdocumentation requirements.

Need a quote for services? Call (763) 208-6430

Or go to our on-line Quote Request Form athttp://calthacompany.com/request_quote.html

or simply Google “Caltha Quote”