These regulations prescribe the policies, procedures, and authorizations for insuring loans or other financial obligations made by financial institutions to businesses to encourage economic development. The basic objective of the Program is to provide financial assistance in order to increase and expand financing opportunities for businesses and to encourage economic development through financial assistance. The terms appearing in these regulations have the meanings defined in the MIDFA Act and the Revenue Bond Act and, in addition, the meanings defined here. Terms Defined. “Applicant” means a corporation, partnership, sole proprietor, joint venture, or individual applying for financial assistance under the Program. "Authority" means the Maryland Industrial Development Financing Authority. “County” means any county or Baltimore City. “Department” means the Department of Commerce, a principal department of the State. “Director” means the Executive Director or Associate Director of the Authority. “Financial assistance” means the issuance of bonds or insurance under the Program. “Financial institution” means any financial institution as that term is defined in Financial Institutions Article, §1-101(h), Annotated Code of Maryland, as well as any other lender approved by the Authority. “Insurance” means insurance of a loan by the Authority in accordance with the MIDFA Act. “Insurance agreement” means the insurance agreement between the lender or its representatives and the Authority providing for the terms of the Authority's insurance under the Program. “Lender” means a financial institution that makes a loan, purchases a bond, or provides other credit enhancement under the Program. “Loan” means any type of financial obligation under the Program, including bonds or notes, letters of credit or other instruments, certificates or other evidences of obligation issued, offered for sale or delivered by any person or public body for any purpose found and determined by the Authority to accomplish the purposes of the MIDFA Act and the Revenue Bond Act. “MIDFA Act” means Economic Development Article, Title 5, Subtitle 4, Annotated Code of Maryland. “Program” means the Bond Program, as authorized by the MIDFA Act and the Revenue Bond Act. “Revenue Bond Act” means Economic Development Article, Title 12, Subtitle 1, Annotated Code of Maryland. “Secretary” means the Secretary of Commerce. An applicant shall meet the following requirements to qualify for financial assistance: Be in good standing and qualified to do business in Maryland if a corporation, partnership, or other similar entity; Have the legal capacity and all necessary legal authorization to incur the obligations of the loan; Demonstrate creditworthiness and repayment capability acceptable to the Authority. The proceeds of the loan may be used for any purposes approved by the Authority and permitted by the MIDFA Act and the Revenue Bond Act, including: Acquisition of real property and the construction of new buildings or renovation of existing buildings; Acquisition and installation of machinery and equipment; The obtaining of additional credit enhancements such as a letter of credit or bond insurance; and Payment of costs related to issuance of the bonds and permitted by the MIDFA Act, the Revenue Bond Act, and any applicable federal law. Loans shall meet the following requirements: Maximum Insurance. The maximum insurance with respect to any one transaction may not exceed the lesser of: $5,000,000; or 100 percent of the total of: The principal of, redemption or prepayment premiums or penalties on, and interest on, the loan, Principal of, redemption or prepayment premiums or penalties on, and interest on any instrument executed, obtained, or delivered in connection with the issuance and sale of bonds, and The payment or insurance of the payment of any fees or premiums necessary to obtain insurance, guarantees, or other credit support in connection with insurance provided by the Authority under the MIDFA Act. Term and Interest Rate. The term and interest rate of a loan shall be as negotiated between the applicant and the lender and approved by the Authority. Determination of Insurance Amount. The Authority may consider the following factors when considering the amount of insurance for a loan: Amount of the loan; Amount and type of collateral securing the loan; Request of the lender; Economic impact of the loan; and Any other factor that the Authority considers relevant. Security. 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 Authority which may include, but are not limited to: The personal guarantees of the principals of the applicant; Liens on the business assets of the applicant; Guarantees of related entities; and Indemnity deeds of trust on real property owned by the principals of the applicant. The personal guarantees of the principals of the applicant shall be required when the Authority insures a loan. Economic Impact. The economic impact of the loan shall be substantial. To determine the economic impact of a project, the Authority may consider: Amount of the loan; Amount of any requested insurance; Amount of any required volume cap allocation; Terms of the loan to be insured; Number of new jobs that will be created or existing jobs that will be retained because of the loan; Addition to the tax base of a county and the State; Development of small and medium businesses and minority-owned businesses; Promotion of tourism in the State; Retention of existing industry and commerce and the attraction of new industry and commerce in the State and a balanced economy in the State through, among other things, port development and the control, reduction, or abatement of pollution of the environment, and the utilization and disposal of wastes; Factors which lead to the broadening of capital ownership, including the establishment of employee stock ownership plans; Protection of natural resources and the encouragement of resource recovery; General promotion of the health, welfare, and safety of the residents of each of the counties and municipalities of the State; and Any other factor that the Authority considers relevant. Removal or Abandonment. The Authority shall determine that the transaction will not result in the removal of the business operations of any person benefiting from the transaction, from one county to another county, or the abandonment of the business operations in the State of any person benefiting from the transaction. If the transaction will result in the occurrence of either of the events in §F(1) of this regulation, the Authority shall determine that the transaction will discourage the business from leaving the State or will preserve the competitive position of the business in its industry. Operation on Default. The Authority shall determine that the Authority will not be required, except on default, to operate, service, or maintain any business. Title Insurance. If the loan is to be secured by real property, the Authority may require the: Applicant to provide an American Land Title Association Loan Policy, as amended, issued by a title insurance company acceptable to the Authority for an amount equal to the maximum principal amount of the loan, naming the Authority as an insured, evidencing that title to property offered as collateral on the date of closing is vested in the applicant, and containing only standard exceptions and encumbrances approved by the Authority. Title insurance policy to be accompanied by a survey, certified in the manner required by the Authority and the title company issuing the title insurance, showing that there are no easements or encroachments upon or other matters pertaining to the property, except those acceptable to the Authority. The title insurance policy may not contain any survey exceptions. Appraisals. The Authority may require an appraisal showing the value of real property or used equipment which is offered as collateral for the loan. Insurance. Before providing insurance, the Authority may require the applicant or the principals of the applicant and key managers to obtain and assign to the Authority life insurance up to the amount of the loan. The Authority may also require public liability insurance, business interruption insurance, hazard and casualty insurance, flood insurance, homeowner's insurance, and other appropriate forms of insurance. Financial Statements. The Authority shall require audited financial statements examined by an independent accountant acceptable to the Authority. Balloon Payments. The Authority may not insure the balloon payment due when the amortization of the loan is longer than the term of the loan, without an event of default occurring prior to maturity. Call Options. The Authority may not insure the payment due as the result of a call option or mandatory redemption exercised by the lender, without a default occurring before this action. Equity. The Authority shall require of the applicant an equity investment of at least 10 percent of the total cost of the acquired real estate and of at least 20 percent of the total cost of the acquired equipment. Application. Applications shall be made upon standard forms prescribed by the Authority. Each application shall include the following documentation: A fully completed and properly executed application; A copy of the articles of incorporation, bylaws, partnership agreement, or other organizational documents; A detailed description of the proposed use or uses of the proceeds of the loan including projected cash flow analyses and appraisals, and marketing plans or descriptions if requested by the Authority; Information that relates to the financial status of the applicant, including: Annual financial statements prepared in accordance with generally accepted accounting principles for 3—5 of the most recent years, A current balance sheet, A recent profit and loss statement, Financial projections for the next 3 years, Credit references, Personal financial statements of any individual applicants and personal guarantors, and The status of outstanding indebtedness; A detailed description of the application's experience in the trade or business for which the financial assistance is sought; Information that relates to the economic impact to be created by the financial assistance; and Any other relevant information the Authority requests. Processing of Application. After execution of the application, the applicant shall submit it to the Authority along with a copy of an executed commitment letter from the lender to provide financing which, at a minimum, shall state the amount, rate, and terms of the financing and amount of any requested insurance or a letter of intent from the lender on a form prescribed by the Authority. Each application shall be subject to an initial review by the Authority's staff to make a preliminary determination of the eligibility of the applicant and the project in accordance with these regulations. Each application shall be submitted to the Authority for review by the Authority's staff at least 14 business days before any Authority meeting date. Approval. Approval of financial assistance shall be evidenced by a signed resolution of the Authority. The Authority is not obligated to take further action after approval of a resolution until an applicant executes and returns a copy of the lender's commitment letter. Bonds issued by the Authority shall meet the following requirements before issuance: Approval of Local Political Subdivision. The legislative body of the county or municipality in which the facility to be financed with the proceeds of the bonds is to be located shall adopt a resolution which shall: Be administrative in nature, not subject to the procedures required for legislative acts, and not subject to referendum; Specify and describe the facility; and Generally describe the public purpose to be served by the facility. Public Hearing. When issuing bonds that are exempt from taxation under the Internal Revenue Code of 1986, as amended, 26 U.S.C. §1 et seq., which is incorporated by reference, a public hearing shall be held in order to allow the public an opportunity to offer comments on the proposed financial assistance for the facility. Notice to Department of Budget and Fiscal Planning. The Authority shall advise the State Department of Budget and Fiscal Planning of its intent to issue bonds by written notice describing the transaction and stating the proposed date of the issuance of the bonds. The State Department of Budget and Fiscal Planning shall receive the notice at least 30 days before the issuance of the bonds. Notice to State Board of Public Works. The Authority shall notify the State Board of Public Works of its intention to issue the bonds up to a stated amount and the Board of Public Works may coordinate the issuance of the bonds with any intended issuance of bonds of the State, its agencies, and public instrumentalities. However, the failure to notify the Board of Public Works may not affect in any way the: Validity or enforceability of any bonds issued by the Authority; Validity of any finding or determination by the Authority under the MIDFA Act; or Validity or enforceability of any agreement entered into by the Authority under the MIDFA Act. Approval of Governor. When issuing bonds that are exempt from taxation under the Internal Revenue Code of 1986, as amended, 26 U.S.C. §1 et seq., which is incorporated by reference, the Governor of the State shall approve the issuance of bonds. When bonds are issued by the Authority, it is in the interest of the public welfare and purpose that the Authority attempt to achieve a goal that 10 percent of the facility users are minority business enterprises within the meaning indicated in the State Finance and Procurement Article, §18-601, Annotated Code of Maryland. The failure to achieve the goal, however, may not affect in any way the: Validity or enforceability of any bonds issued by the Authority; Validity of any finding or determination by the Authority under the MIDFA Act; or Validity or enforceability of any agreement entered into by the Authority under the MIDFA Act. Payment of Premium. When providing insurance, the Authority shall receive from the lender the first year's insurance premium at closing and after that on each anniversary of the closing date in advance. The Authority may also require the lender or the applicant to reimburse the Authority for expenses the Authority incurs in processing and closing the loan, such as credit reports and appraisals. Computation of Premium. Except as provided in §C of this regulation, the insurance premium shall be calculated as the greater of: 1/2 of 1 percent of the outstanding insured principal balance of the loan; or $500. Determination of Rate. In accordance with the MIDFA Act, the insurance premium need not be uniform among transactions, and in determining the rate of the insurance premium, the Authority may consider the following factors: Other fees charged by the Authority or the lender; Amount of the loan or the amount of the insurance; Economic impact caused by the loan; and Other factors that the Authority considers relevant. Waiver of Insurance Premiums. The Authority may not charge any premium for insurance if the Authority determines that, at the time of approval of insurance, the facility or business with respect to which insurance is provided is located in a county where the average unemployment rate is at least 1 percent greater than the average unemployment rate for the United States. Standards for Unemployment Rates. Average unemployment rates shall be established by the Department or any other agency or department responsible for establishing the rates. Average unemployment rates for the United States shall be those established by the United States Department of Labor or any other agency or department responsible for establishing the rates. Review of Rates. The Authority annually shall review the rates based on statistics covering the preceding calendar year and only shall consider annual unemployment rates established not more than 12 months before the date of the Authority's review. The imposition or waiver of the insurance premium shall remain in effect as long as the Authority's insurance is in force. The Authority may charge an application, issuance, commitment, or other fees reasonably related to the expenses it incurs in processing an application and in issuing the bonds. Each applicant shall comply with all applicable federal, State, and local laws, Executive Orders, and Departmental policies regarding discrimination and equal opportunity in employment, minority business enterprises, housing and credit practices including Title VII of the Civil Rights Act of 1964, and the provisions of the Governor's Code of Fair Employment Practices, as amended. The Authority may establish from time to time detailed Program guidelines containing underwriting standards, loan processing requirements, and other requirements or matters relating to the financial assistance or to the Program. Copies of these guidelines shall be available for examination at the Authority's office. The Authority, upon request, shall make copies available to the public. An action or decision required or permitted to be taken or made by the Department pursuant to the MIDFA Act or these regulations may be taken by the Authority, the Secretary or the Secretary's designee, or, to the extent set forth in the MIDFA Act or properly delegated by the Authority or the Secretary, the Director of the Authority. The Secretary or the Authority may delegate to the Director of the Authority or to any other official or employee of the Department the authority to review and execute any Program documents or loan documents. A person may not knowingly make or cause any false statement or report to be made: In any application or in any document furnished to the Authority; For the purpose of influencing the action of the Authority on an application for financial assistance or for the purpose of influencing any action of the Authority affecting financial assistance whether or not the assistance may have been already extended. A person, or that person's aiders and abettors, who violates or attempts to violate any provision of §A of this regulation is guilty of a misdemeanor and on conviction is subject to a fine not exceeding $50,000, or imprisonment not exceeding 5 years, or both. The Authority may waive or vary particular provisions of these regulations to the extent that the waiver is not inconsistent with the MIDFA Act or the Revenue Bond Act if: Conformance to the requirements of any federal, State, or local programs in connection with a loan or financial assistance necessitates waiver or variance of a regulation; or In the determination of the Authority, the application of a regulation in a specific case or in an emergency situation would be inequitable or contrary to the purposes of the MIDFA Act or the Revenue Bond Act. The applicant shall comply, and remain in compliance, with the State's policy concerning drug-free and alcohol-free workplaces, as set forth in COMAR 01.01.1989.18, and shall make a good-faith effort to eliminate illegal drug use and alcohol and drug abuse from places at which work is performed in accordance with a State loan. Economic Development Article,§2-108, Title 5, Subtitle 4, and Title 12, Subtitle 1, Annotated Code of Maryland Effective date: April 16, 1990 (17:7 Md. R. 853) Regulation .16 adopted effective April 15, 1991 (18:7 Md. R. 775)