Sec. 14.26.01.07. Terms and Conditions of Loan

A. The borrower shall make a contribution to the project, acceptable to the Administration, which may take the form of:

(1) Cash;

(2) Payment of certain predevelopment costs such as preliminary architectural site plans, engineering design studies or feasibility studies, or technical assessments necessary to implement the project;

(3) Contribution of in-kind services acceptable to the Administration; or

(4) Contribution of equipment, labor, or materials for use in the project.

B. Security.

(1) Security or collateral are required for any loan to a nonprofit organization or eligible business.

(2) When security is required, a loan shall be secured by liens on real property, equipment, or other assets purchased with loan proceeds and any other collateral approved by the lender and the Administration which may include, but are not limited to:

(a) The personal guarantees of the principals of the applicant;

(b) Liens on the business assets of the applicant;

(c) Guarantees of related entities;

(d) Indemnity deeds of trust on real property owned by the principals of the applicant;

(e) A cash escrow; or

(f) Any other form of security or collateral acceptable to the Administration.

(3) If applicable, the borrower shall make the necessary arrangements and, if necessary, execute a waiver in favor of the Administration with a landlord to facilitate the Administration’s security and collateral.

C. Repayment.

(1) The principal and interest of a loan under the Program shall be repaid:

(a) From energy cost savings realized by the energy conservation project, or other revenues specified by the borrower equal or equivalent to energy cost savings; and

(b) In accordance with a schedule acceptable to the Administration provided that the date for beginning of the repayment of a loan may not be later than 2 years from closing of the loan.

(2) In calculating the energy cost savings, the Administration, on a case by case basis, may take a number of factors into consideration, including:

(a) Actual or anticipated changes to the energy consumption and energy use of a borrower; and

(b) Whether these changes will produce monetary or other forms of savings to a borrower.

(3) At the conclusion of each fiscal year, if the energy cost savings resulting from the project do not equal or exceed the expected repayment schedule for the loan, the Administration may upon the petition of a borrower:

(a) Adjust the terms of repayment with the borrower in such a manner as to assure that the annual payment amount does not exceed the actual energy cost savings resulting from the project; and

(b) Extend the repayment period for up to 1 additional year beyond the original maturity date, at the discretion of the Program, or a longer period at the discretion of the Director.

D. Interest Rate. The principal of the loan shall bear interest at a rate determined to be necessary and reasonable for the project, which, at the discretion of the Director, may be as low as zero percent.

E. In the event of default, the Administration may modify:

(1) The rate of interest;

(2) The time or amount of payment; or

(3) Any other term of the loan in order to ensure repayment and achieve the purposes of the Program.

F. Template Documents.

(1) The Administration shall publish a loan agreement, note, and security agreement on its website no later than 30 days following the start of eachfiscal year that will serve as the Program documents for that fiscal year.

(2) The Program documents published under §F(1) of this regulation shall conform to the minimum provisions required under §G of this regulation and include any additional provisions deemed appropriate by the Administration.

(3) Except as provided in §F(4) of this regulation, the Administration shall utilize the Program documents published under subsection (1) of this section for each loan issued to a borrower under the Program.

(4) The Administration may grant a modification or amendment to a Program document published under §F(1) of this regulation only upon a determination by the Administration of good cause, which may include a determination by the Administration that:

(a) A provision of a template document is contrary to law; or

(b) A modification or amendment is necessary to facilitate the issuance of a loan to an applicant that is otherwise eligible for a loan under the Program.

G. Document Requirements.

(1) A loan agreement issued under the Program shall, at a minimum, include:

(a) A definition of terms;

(b) Interest rates, fees, and other expenses to be paid by the borrower;

(c) A disbursement schedule consistent with the schedule proposed by the borrower in its application;

(d) Conditions precedent and other terms that affect the disbursement and availability and funds;

(e) Applicable representations, warranties, and covenants;

(f) Indemnification of the Administration and its employees;

(g) A requirement to hold the Administration and its employees harmless;

(h) Default events;

(i) Contact information;

(j) A statement of governing law;

(k) Terms related to confession of judgment; and

(l) Collection procedures.

(2) A security agreement issued under the Program shall, at a minimum, include:

(a) A description of collateral;

(b) Applicable representations, warranties, and covenants; and

(c) Default events.

(3) A note issued under the Program shall, at a minimum, include:

(a) A definition of terms;

(b) Interest rates, fees, and other expenses to be paid by the borrower;

(c) Applicable representations, warranties, and covenants;

(d) Indemnification of the Administration and its employees;

(e) A requirement to hold the Administration and its employees harmless;

(f) Default events;

(g) A statement of governing law;

(h) Terms related to confession of judgment;

(i) Collection procedures; and

(j) A requirement for notarization.

H. Insurance.

(1) The Administration may require a borrower to maintain insurance as described in this section.

(2) Multi-Peril Insurance. Multi-peril insurance provides fire and extended coverage insurance on the project both during and upon completion of construction, rehabilitation, or modification of a project. The insurance coverage shall include the endorsements that the Administration may require, including:

(a) Collapse;

(b) Explosion;

(c) Loss of rents; and

(d) Vandalism.

(3) Liability Insurance. Comprehensive general liability insurance shall be maintained with the endorsements that the Administration may require both during and after construction, rehabilitation, or modification of a project.

(4) Flood Insurance. If the project is located on real property which is in the 100-year flood plain, as designated by the U.S. Department of Housing and Urban Development, the project shall be covered by a flood plain insurance policy. Before closing of a loan for a project, permits shall be secured from the Maryland Department of Natural Resources and the political subdivision in which the project is located.

(5) Contractor's Insurance. If a project involves construction, rehabilitation, or modification of a structure or improvements of any kind, the general contractor shall provide insurance coverage for comprehensive public liability, property damage, and Workers' Compensation in the form and amounts required by the Administration.

(6) Other Insurance. The borrower shall provide at closing of the loan other insurance the Administration may require, including:

(a) Builder's risk;

(b) Boiler insurance;

(c) Comprehensive automobile liability; and

(d) Broad form Workers' Compensation.

(7) Terms and Conditions. Insurance coverage shall meet the following minimum requirements plus any additional requirements which may be set by the Administration:

(a) Insurance shall be provided by:

(i) Companies or other legal entities that are authorized to transact business in the State, and which are reputable and financially sound, as determined by the Administration; or

(ii) In the case of local jurisdictions, self-insurance programs that are acceptable to the Administration;

(b) To the extent applicable, insurance shall be in force upon the closing of the loan;

(c) To the extent applicable, an insurance policy shall contain a standard lender endorsement attached to or printed in the policy naming the Administration as mortgagee;

(d) To the extent required by the Administration, the insurance policy shall name the Administration as loss payee and additional insured;

(e) Insurance shall provide for notification to the Administration before termination; and

(f) Insurance shall contain terms and coverage satisfactory to the Administration.

I. Disbursement. Loan proceeds shall be disbursed directly to the borrower upon the terms and conditions set forth in the loan documents.