(a) Ineligibility. A Principal and its Affiliates lose eligibility for further SBA bond guarantees if any of the following occurs under an SBA-guaranteed bond issued on behalf of the Principal:
(1) Legal action under the guaranteed bond has been initiated.
(2) The Obligee has declared the Principal to be in default under the Contract.
(3) The Surety has established a claim reserve for the bond of at least $1000.
(4) The Surety has requested reimbursement for Losses incurred under the bond.
(5) The guarantee fee has not been paid by the Principal.
(6) The Principal committed fraud or material misrepresentation in obtaining the guaranteed bond.
(b) Reinstatement of Principal's eligibility. Prior Approval Sureties should refer to Sec. 115.36(b) for provisions on reinstatement of the Principal's eligibility. A PSB Surety may reinstate a Principal's eligibility upon the Surety's determination that reinstatement is appropriate.