Section 457-101-6 - Loan and Insurance Terms and ConditionsA.Loan Terms(1)Interest Rate and Term. The rate of interest on the insured loan and the term of the loan shall be agreed between the lender and the borrower, subject to the approval of the Authority.(2)Covenants. Any loan approved for insurance shall impose covenants and requirements in accordance with prudent lending practices as approved by the Authority.(3)Use of Loan Proceeds. The lender shall ensure that proceeds of an insured loan are used only for the business purposes approved by the Authority.(4)Personal Guaranties. All insured loans shall be guaranteed by any shareholder of the Borrower who: (a) owns 20% or more of the Borrower; or(b) owns 5% or more of the Borrower and receives substantial income from the Borrower, Exceptions may be made to the requirements of this paragraph only if: 1. For insured loans with FAME exposure equal to or less than $500,000, the Chief Executive Officer finds, or 2. For insured loans with FAME exposure over $500,000, two-thirds (2/3) of the Members of the Board present and voting at a meeting find: (i) extraordinary public benefit will result from the project; and(ii) substantial equity is present in the project.(5)Lien Priorities. Where the Authority's insurance liability exceeds $1,000,000, the insured Loan must have a first, or shared first priority lien on all material collateral that secures the loan.B.Insurance Terms(1)Types of Insurance. A lender may request insurance on a pro-rata or leveraged basis. (a) Pro Rata Insurance shall cover up to 100% (or such lesser amount as indicated in the Loan Insurance Authorization or Loan Insurance Agreement) of a lender's loss of principal, interest, and reasonable costs of collection including attorney's fees, on an insured loan on a pro rata basis, as a percentage of the Lender's total loss after default by borrower and application of all loan payments, proceeds of collateral and recoveries after default from borrower and guarantors, but in no event more than the specified percentage of the original loan amount, and in all cases subject to the limitations set forth in this Rule, the Loan Insurance Agreement required in Section VII and the Loan Insurance Authorization for the insured loan. By way of illustration, on a $100,000 loan with 90% pro rata loan insurance, the Authority's maximum insurance liability is $90,000, or 90% of the original principal balance of the loan. If, after default, liquidation of all collateral and reasonable enforcement of collection from borrowers and guarantors, the loan balance is 65,000, the Authority's pro rata insurance liability would be $58,500.(b) Leveraged Insurance shall cover 100% of a Lenders loss of principal, interest, and reasonable costs of collection including attorney's fees, up to the lesser of (a) 25% (or such lesser amount as indicated in the Loan Insurance Authorization or Loan Insurance Agreement) of the original loan amount; or (b) 25% (or such lesser amount as indicated in the Loan Insurance Authorization or Loan Insurance Agreement) of the loan balance at the time of default, prior to application of any proceeds of collateral or recoveries after default from borrower or guarantors to the insured loan, in all cases subject to the limitations set forth in this Rule, the Loan Insurance Agreement required in Section VII and the Loan Insurance Authorization for the insured loan prior to determining the applicability of insurance. By way of illustration, on a $100,000 loan with 25% leveraged loan insurance, the Authority's maximum insurance liability is $25,000, or 25% of the original principal balance of the loan. If, at the time of borrower default, the loan balance is $85,000, and after liquidation of collateral, application of all such proceeds and payments collected after default from borrower and guarantors, the loan balance is $20,000, the Authority's insurance liability would be $20,000.00.(2)Limitations on Insurance(a)Exclusions. Notwithstanding anything to the contrary elsewhere in this rule, Loan insurance does not cover any part of an insured loan balance that represents: (i) accrued interest at the contract (non-default) rate in excess of 90 days;(iii) default rate interest or penalty interest over the contract rate;(iv) unreasonable attorney's fees or other collection costs; or(v) costs of environmental remediation.(b)Maximum Insurance. Notwithstanding anything to the contrary elsewhere in this rule, the Authority's maximum aggregate liability to any one Borrower shall not exceed the lesser of (i) such amount as is set forth in the Credit Policy, or (b) the maximum amount permitted by 10 MRSA §1026-A. In addition, the maximum leveraged insurance liability of the authority to any one Borrower shall be $3,000,000.(c)Enhanced insurance coverage for certain projects. Notwithstanding anything to the contrary elsewhere in this rule, pro rata loan insurance shall not exceed 90% except in the following cases: (i) loans to veterans (provided Authority insured loans to veterans at rates greater than 90% shall not exceed $5,000,000 in the aggregate at any one time);(ii) loans for oil storage facility projects (provided Authority insured loans for oil storage facility projects at rates greater than 90% shall not exceed $5,000,000 in the aggregate at any one time);(iii) loans for clean fuel vehicle projects (provided Authority insured loans for clean fuel vehicle projects at rates greater than 90% shall not exceed $5,000,000 in the aggregate at any one time);(iv) loans for waste oil disposal site clean-up projects (provided Authority insured loans for waste oil disposal site clean-up projects at rates greater than 90% shall not exceed $1,000,000 in the aggregate at any one time);(v) loans for Plymouth waste oil remedial projects (provided Authority insured loans for Plymouth waste oil remedial projects at rates greater than 90% shall not exceed $1,000,000 in the aggregate at any one time);(d)Limit on Insurance during construction periods. Where the insured loan is projected in whole or in material part to finance a project involving construction or substantial renovation of a facility, and where such facility is a substantial part of the collateral for the insured Loan, Loan insurance shall not be effective until construction is completed and all costs of construction are paid, unless the Loan is otherwise adequately secured or the completion of construction is adequately ensured by a Performance Bond, such that the Authority determines, in its discretion, that the risk of loss on account of construction related issues is de minimus.(e)[Repealed effective December 9, 2012]94- 457 C.M.R. ch. 101, § 6