California Code of Regulations › Title 10 - Investment › Chapter 7 - Business, Transportation and Housing Agency: Small Business Loans and Guarantees › Article 2.3 - Bond Guarantees › Section 5009 - Bond Guarantee and Bond Line Terms

Current through Register 2024 Notice Reg. No. 28, July 12, 2024
The terms and conditions of a Bond Guarantee or Bond Line
				  shall be consistent with the resolution of the Corporation approving the Bond
				  Guarantee or Bond Line and shall include all of the following:
(a) Provision that the Corporation promises
				to pay Losses up to ninety percent (90%) of the Bond, not to exceed five
				hundred thousand dollars ($500,000), subject only to the restriction that the
				Surety has not engaged in gross negligence, misrepresentation, fraud, or
				material breach of the terms of the Guarantee in writing, issuing, or servicing
				the Bond.
(b) Guarantee shall
				expire two hundred and ten days (210) following final payment by the party
				requiring the Bond (Obligee) of all amounts owed to Principal pursuant to the
				contract bonded, so long as no notice of claims has been received by Surety and
				is pending as of that expiration date. In the event that a notice of claim is
				pending as of that expiration date, the Guarantee shall remain in effect until
				resolution of that claim.
(c) A
				Corporation Bond Guarantee fee not to exceed two percent of the Guarantee
				amount. In the case of a Bond Line, the fee shall be charged for each
				Guarantee.
(d) The terms and
				conditions of the Bond subject to a Guarantee which shall be in accord with
				those generally established and accepted by the Surety for the type of contract
				for which the Bond is required.
(e)
				A statement that:
(1) Surety would not provide
				the Bond without the Guarantee.
(2)
				Consistent with Surety's underwriting and claims handling procedures, Surety
				shall take all reasonable action necessary to minimize risk of Loss, including
				but not limited to the taking of Collateral and obtaining personal guarantees,
				and Surety will pursue all possible sources of recovery.
(3) If any suit is filed against Surety upon
				the Bond, Surety shall immediately inform Corporation of receipt of notice
				thereof and shall take charge of all suits or claims arising under the Bond and
				compromise, settle or defend such suit or claim. Surety shall take all steps
				necessary to mitigate the Loss resulting from Principal's default. Surety shall
				not join Corporation in any lawsuit to which Surety is a party unless
				Corporation has denied a Claim.
(4)
				Liability of the Corporation under the Guarantee shall be reduced if the
				Guarantee requires Surety to take Collateral, and Surety fails to obtain and
				perfect the Collateral. In the event that the Surety fails to take or perfect
				Collateral required by the terms of the Guarantee, the liability of the
				Corporation pursuant to the Guarantee shall be reduced by the Guarantee
				percentage of the amount which could reasonably have been recovered by
				liquidating the Collateral.
(5) The
				terms of the Guarantee shall not be waived, changed or altered unless both
				Corporation and Surety's authorized representative have signed and dated assent
				thereto.
(6) Corporation shall have
				access to and the right to audit and inspect any and all documents maintained
				by the Surety related to the Bond. The audit shall be conducted in a reasonable
				manner during business hours or as otherwise agreed upon between Corporation
				and Surety.
(7) The Guarantee is
				made exclusively for the benefit of Corporation and Surety and does not confer
				any rights or benefits to any other party. In the event of the Surety's
				insolvency, Corporation shall not be liable to the receiver or trustee of the
				insolvent estate except for any Loss.