Minnesota Housing Finance Agency

PERFORMANCE BOND
DUAL OBLIGEE

Effective as of the _____ day of ____________, 20__ (the “Effective Date”), _________________________________________, a ______________________, as Contractor (“Contractor”), and ___________________________________________________, a _________________________, as Surety (hereinafter called "Surety"), are held and firmly bound in the amount of $__________ (the “Penal Sum”) to ______________________________________________, a Minnesota ____________________, [address] (“Owner-Obligee”), and Minnesota Housing Finance Agency, 400 Wabasha Street North, Suite 400, St. Paul, MN, 55102-1109 (“Lender-Obligee;” Owner-Obligee and Lender-Obligee are collectively referred to as “Obligees”), as their respective interests may appear in the Construction Loan Agreement, dated _____________, 20__ (the “Construction Loan Agreement”). Contractor and Surety bind themselves, their heirs, executors, administrators, successors, and assigns, jointly and severally. 

	A. Contractor and Owner-Obligee have entered into a Construction Contract, dated ______________, 20___ (the “Contract”), which is incorporated into this Performance Bond (this “Bond”) by reference. The Contract requires approval of Lender-Obligee for the construction of a development designated as ____________________________________ (the “Development”). 

	B.  Pursuant to the Construction Loan Agreement, which is incorporated into this Bond by reference, Lender-Obligee has agreed to make a loan to Owner-Obligee secured by a mortgage on the Development and Owner-Obligee will use the proceeds of that loan to make payments to Contractor under the Contract. Obligees want to ensure that Contractor promptly performs the work provided for in the Contract (the “Work”). 

	C. Contractor and Surety agree that if Contractor promptly performs all the Work, or Contractor and Surety fully indemnify and save harmless Obligees from all cost and damage suffered by reason of any failure of Contractor to perform the Work and fully reimburses and repays to Obligees all expense that Obligees incur in compensating for any default by Contractor, then this Bond will be void; otherwise, this Bond will remain in full force and effect.

	This Bond is subject to the following further provisions:

	1.	Either Owner-Obligee or Lender-Obligee may declare Contractor in default under the Contract by a written notice of default sent to Surety.  The notice of default must specify the default and be served by mailing the same by registered mail, postage prepaid, in an envelope addressed to Surety, at the address set forth on the signature page of this Bond, or served in any manner in which summons or subpoena may be served under Minnesota law, except that service need not be made by a public officer.

	2.	After Owner-Obligee or Lender-Obligee have served a written notice of default pursuant to paragraph 1, Surety must promptly:

(a)	Hire another contractor acceptable to Lender-Obligee to complete the Work in accordance with the terms and conditions of the Contract, or

(b)	Bid the Work in a manner acceptable to Lender-Obligee, award the bid to the lowest reasonable bondable bidder and prepare and mediate an agreement between the bidder and Lender-Obligee.

	3.	Surety must promptly pay directly to the contractor selected under paragraph 2 when due the amounts reasonably necessary to complete the Work or cure the defaults.  In no event will Surety be obligated to pay more than the Penal Sum.

	4.	Contractor and Surety will not be liable under this Bond to the Obligees, or either of them, unless the Obligees, or either of them, pay the Contractor in accordance with the terms of the Contract and the Construction Loan Agreement, and perform all their other obligations under the Contract and the Construction Loan Agreement at the time and in the manner required by that agreement.

	5.	Obligees may not bring any suit, action, or proceeding because of any default on this Bond later than two years after the day the final payment under the Contract becomes due.

	6.	Without the prior written approval of Surety, Obligees may not amend the Contract if the cost of the amendment, when added to the cost of prior amendments, increases the original Contract price by more than 10 percent. If Obligees make any other amendment of the Contract or the Work, Obligees give Contractor any extension of time for the performance of the Work, or either Obligees or Contractor forbear to the other, Surety or Contractor will not be released of its obligations under this Bond, and Surety waives notice of that amendment, extension, or forbearance. 

	7.	The aggregate liability of Surety to Obligees or their assigns is limited to the Penal Sum.  Surety, upon making any payment hereunder, will be subrogated to, and entitled to an assignment of all rights of, Contractor. 

(THE REMAINING PORTION OF THIS PAGE WAS INTENTIONALLY LEFT BLANK)

[PERFORMANCE BOND SIGNATURE PAGE]

	IN WITNESS WHEREOF, the duly authorized officers of each of Contractor and Surety have executed this Bond as of the Effective Date*.
*(Not earlier than the Contract date).

													

						By:							
						 	(Contractor)
Its: 							

[ADDRESS]

													

						By:							
						 	(Surety)
Its: 							

[ADDRESS]

STATE OF MINNESOTA	)
				) ss.
COUNTY OF			)

	The foregoing instrument was acknowledged before me this _____ day of __________ 20__, by ___________________________, the ______________________________________ of 	______________________________________, a Minnesota 	_________________, on behalf of said _____________________.

						_______________________________________
								Notary Public

STATE OF MINNESOTA	)
				) ss.
COUNTY OF			)

	The foregoing instrument was acknowledged before me this _____ day of __________ 20__, by ___________________________, the ______________________________________ of 	______________________________________, a Minnesota 	_________________, on behalf of said _____________________.

						_______________________________________
								Notary Public