copies of invoices and lien waivers, and copies of cancelled checks shall be attached to the statement. The statement shall be signed by a person authorized to order expenditure of the borrower's funds.

(c) The lender has verified that loan disbursements and drawdowns approved under prior milestones have been used only for the previously stated purposes.

Subpart D-Servicing the Guaranteed Loan

§ 300.50 Loan servicing and reporting requirements.

Loan servicing is the responsibility of the lender. The guarantee will specify the lender's servicing requirements which include, but are not limited to, loan disbursements under § 300.47, and notification by the lender to the Secretary immediately upon knowledge, but in no event within more than 30 calendar days of:

(a) Any nonpayment by the borrower of the principal or interest on the date specified in the loan agreement, together with appropriate notices to the borrower;

(b) Any failure by the borrower, known to the lender, to comply with the terms and conditions as set forth in the loan agreement; and

(c) Any information or circumstance which has caused the lender to believe that repayment of the loan is in jeopardy.

(a) The lender is responsible for seeing that proper and adequate liens upon all collateral are obtained and maintained in existence and of record to protect the interest of the lender, the U.S. Government, and any holders of the guaranteed loan. The lender will be the mortgagee, or secured party of record, with regard to such collateral, notwithstanding the fact that another party may hold a portion of the loan.

(b) Collateral may include, but is not necessarily limited to, the following: Land, buildings, machinery, equipment, furniture, fixtures, inventory, accounts receivable, cash or special

cash collateral accounts, marketable securities, and cash surrender value of life insurance policies. Collateral may also include assignments of leases or leasehold interests, revenues, patents, copyrights, and contract rights.

(c) The lender may not take separate collateral to secure only that protion of the loan not covered by the guarantee. The lender may not require compensating balances or certificates of deposit, other than as used in the ordinary course of business, as a means of reducing its exposure on the unguaranteed portion of the loan.

(d) First liens on all assets pledged as collateral will be preferred. Loans collateralized entirely with secondary or other inferior lien positions will receive lower priority treatment under the program.

§ 300.60 Project monitoring and auditing.

(a) The guarantee shall provide that the lender and the borrower shall keep such records concerning the project as is necessary to facilitate an effective audit and performance evaluation of the project. The guarantee shall also provide that the Secretary of Energy, the Secretary of the Treasury, and the Comptroller General, or their duly authorized representatives, shall have access, for the purpose of audit and examination, to any pertinent books, documents, papers, and records of the borrower and the lender. Such inspection may be made during the regular office hours of the borrower or the lender, or at any other time mutually convenient.

(b) The Secretary may undertake certain loan monitoring functions which will be performed by a representative of the Secretary acting in coordination with the lender's loan servicing. Specifically, the Secretary's role in loan monitoring may include, but not necessarily be limited to, the following:

(1) Written approval of all requests for disbursements as set forth in the guarantee. Requests for disbursements should be aggregated to cover milestones of the project, such as infrastructure improvements, equipment purchases, etc.;

(2) Review of periodic financial statements of the borrower; and

(3) Periodic inspection of the collateral pledged to secure the loan and the borrower's operating facilities and records.

§ 300.61 Assignment or transfer of guaranteed loan.

(a) The lender may assign, participate, sell, or otherwise transfer any part or all of his right, title, and interest in the guaranteed loan, subject to the procedures and limits specified in the guarantee. The lender will, however, continue to be responsible for the collateral and servicing of the loan, unless the Secretary approves a substitute lender.

(b) When a guaranteed protion of a loan is transferred from the lender to a holder, the holder then succeeds to all rights of the lender in the guarantee to the extent of the portion of the loan purchased by the holder.

(c) The assignment agreement of the quaranteed portion of the loan, or any part thereof, shall be executed by the holder, the lender, and the Secretary, and will set forth (specifically or by reference) the terms and conditions of the assignment.

(d) After assignment, sale, or transfer of all or part of a guaranteed loan, the lender shall promptly remit to the holder or other party then having an interest in the loan, their respective pro-rata shares of all payments received by the lender in connection with the loan, less only the lender's servicing fee (if any) as mutually agreed by the lender and the appropriate other party. Unless otherwise specified in the assignment agreement, all such payments due from the lender shall be made within 30 calendar days of the lender's receipt of the corresponding amounts.

(e) The guarantee shall be conclusive proof that the guarantee and the underlying loan are in compliance with the provisions of this regulation, and that such loan has been approved and is legal as to disbursed principal an accrued interest and other terms.

§ 300.62 Reduction or withdrawal of guarantee.

(a) The Secretary may reduce or withdraw the guarantee of loan amounts not yet drawn down by the borrower upon written notice to the lender and the borrower, if:

(1) Initiation of activity on the project has not occurred within the period of time set forth in the guarantee;

(2) The borrower has failed to comply with any material term or condition as set forth in the loan agreement. Drawdowns approved by the lender after such notification is received will not be covered by the guarantee;

(3) The lender has failed to comply with any material term or condition set forth in the guarantee. The guarantee may by reduced to the amount that has been received by the borrower as of the date the Secretary's notice has been received by the lender; or

(4) The Secretary and the lender determine that the project's economic success is no longer achievable. The guarantee shall be reduced to amounts which have been received by the borrower as of the date of the notice.

(b) In the event of paragraph (a) (2), (3), or (4) of this section, the holder(s) of the guarantee or portions thereof shall nevertheless have an incontestable right to the disbursed amount of principal and accrued interest thereon, except for fraud or material misrepresentation on the part of the holder.

(a) In the event of nonpayment of principal and/or interest due on the loan by the borrower under the terms of the loan, the lender shall notify the Secretary promptly, but in no event later than 30 calendar days of the occurrence of such nonpayment, provided such nonpayment has not been cured. If such default remains uncured for a total period of 45 calendar days or more from the date of nonpayment, the lender may elect, with the concurrence of the holder(s), if any, and with the approval of the Secretary, to defer payment from the borrower of any

overdue principal and accrued interest, or to reschedule the overdue and subsequent loan payments.

(b) If the lender and the holder(s), if any, cannot agree with the borrower to defer or reschedule the borrower's payment(s), either the lender or the holder(s), if any, may:

(1) Demand payment by the Secretary of any overdue amounts of guaranteed principal and accrued interest due from the borrower as a result of the default; or

(2) Demand payment by the Secretary of the entire outstanding guaranteed principal balance of the loan, and all unpaid interest accrued thereon to the date of the Secretary's payment hereunder.

(c) Upon receipt by the Secretary of a demand for payment as aforesaid, the Secretary shall pay the amounts lawfully demanded under the terms of the preceding paragaraph, within 60 calendar days of the date of such demand. In the event the demand is for an overdue payment under paragraph (b)(1) of this section, the Secretary may, in his discretion, consider the loan in default and pay the outstanding guaranteed balance of the loan with accrued interest.

(d) If the overdue amounts of guaranteed principal and accrued interest are paid by the Secretary, the loan remains in default until the borrower reimburses the Secretary for such payment(s). When the borrower remains in default, the Secretary may take action necessary to protect the interest of the U.S. Government.

(e) In the event of any payment under a guarantee, the Secretary shall be subrogated to the rights and remedies of the parties to which payment is made.

§ 300.81 Nonpayment to holder.

(a) In the event of the nonpayment by the borrower of a scheduled payment, the holder shall first make demand upon the lender for such payment, or for the repurchase of the holder's interest in the guaranteed loan. The holder shall provide the Secretary with notice of such demand for payment within 10 calendar days. The lender shall have the option to advance the overdue payments or to re

purchase the guaranteed portion(s) of the loan according to the holder(s) demand. If the lender does not make the payment within 30 calendar days, the holder may demand payment of the Secretary. Upon receipt by the Secretary of a demand for payment from the holder, the Secretary shall pay the holder the amounts lawfully demanded within 60 calendar days of the date of such demand. The Secretary shall make such payment regardless of whether the nonreceipt of the payment by the holder is due to a default by the borrower or the nontransmittal by the lender of the borrower's payment to the holder.

(b) Subsequent to a demand for payment by any holder under this section, the lender shall, within 10 calendar days, furnish to the Secretary an accounting of all payments received by the lender and all payments made to any holder in connection with the respective loan.

§ 300.82 Liquidation.

(a) After borrower default has occurred, and demand for payment has been made upon the Secretary, as provided in § 300.80(b) (1) and (2), or in the event that the Secretary and the lender agree that default has OCcurred, the lender shall, in consultation with the Secretary, prepare a plan for liquidation of the assets pledged as collateral to secure the loan. When the liquidation plan has been approved by the Secretary, the lender shall proceed to take the necessary steps under applicable law to foreclose upon all of the collateral securing the loan, and to sell the collateral for the highest attainable value under the circumstances. Provisions shall be set forth in the guarantee for notice to the Secretary of the sale of collateral, expenses incurred in such sale, and other matters pertaining to the method of handling the disposition of such collateral in a coordinated manner between the Secretary and the lender.

(b) The lender shall give a full accounting of the sale of assets made pursuant to the plan of liquidation, and shall serve in a fiduciary capacity for the benefit of the parties having

an interest in the proceeds of the sale of the assets.

(c) No action taken by the lender in the liquidation of any assets pledged by the borrower shall affect the rights of any party, including the Secretary, having an interest in the loan to pursue, jointly or severally, to the extent provided in the loan agreement, legal action against the borrower, or other liable parties, for any deficiencies owing on the guaranteed balance after application of the proceeds received upon liquidation.

(d) Funds received by the lender as a result of liquidation actions shall be applied as follows:

(1) First, to the payment of reasonable and customary fees and expenses incurred in the liquidation process, and as set forth in the liquidation plan; and

(2) Second, distributed among the legal owners of interests in the loan; pro-rated in accordance with their relative percentage ownership of the loan.

(e) In the event the Secretary deems it necessary or desirable to protect or further the interest of the United States in connection with the liquidation of collateral or recovery of deficiencies due under the loan, the Secretary shall take such action as may be appropriate under the circumstances.

(f) Nothing in this section shall preclude the Secretary from purchasing the lender's interest in the project upon liquidation.

$ 300.90 Disclosure.

Subject to the requirements of law, and applicable regulations, information such as trade secrets, commercial and financial information, geological, geophysical, and geographical information, and data (including maps) concerning mine sites, which the borrower or the lender submits to DOE in writing during the preliminary discussions, or at any other time throughout the duration of the project, on a priviledged or confidential basis, will not be publicly disclosed by DOE without prior notification to the submitter. Any submitter asserting that information is priviledged or confidential shall appropriately identify and mark such information.

§ 300.92 Noninterference with Federal, State, and local requirements.

Nothing in this regulation shall be construed to modify requirements imposed on the borrower or the lender by Federal, State, or local government agencies in connection with permits, licenses, or other authorizations to conduct or finance any project.

§ 300.93 Appeals.

The guarantee shall include a provision which specifies that any dispute concerning a question of fact arising under the guarantee shall be decided in writing by the DOE official, or his successor, executing the guarantee. The borrower or the lender, as appropriate, may, within 7 calendar days from receipt of any such decision, request the DOE official to reconsider any such decision. If not satisfied with this final decision, the borrower or the lender, upon receipt of such written decision, may appeal the decision within 30 calendar days, in writing, to the Chairman, Energy Board of Contract Appeals (EBCA), Department of Energy, Washington, D.C. 20545. That Board, when functioning to resolve such loan guarantee disputes, shall proceed in the same general manner as when it presides over appeals involving contract disputes. The decision of the Board with respect to such appeals shall be the final decision of the Secretary.