Form 4.1.2
The Surety’s Financing Notice Letter
to the Principal and the Indemnitors
[Surety’s Letterhead]
Names and Addresses for the
Principal
Corporate Indemnitors
Individual Indemnitors
RE:
Principal: ______________________________
Indemnitors: ____________________________
Surety: ________________________________
Obligees: Various
Bonds, Contracts and Projects: Various
Dear Principal and Indemnitors:
By your letter request to the Surety for financial assistance dated _______ (the “Financial Assistance
Request Letter”), you have requested certain financial accommodations and/or other assistance from the
Surety for the purpose of performing and/or completing the Principal’s performance of the work on
various contracts for which the Surety executed Performance Bonds and paying the Principal’s
obligations to various subcontractors and suppliers of labor, material and services used in the performance
of the work on various contracts for which the Surety executed Payment Bonds. A copy of the Financial
Assistance Request Letter is attached to this letter as Exhibit A.
At this time, the Surety has not determined whether it will provide the requested financial
accommodations and/or other assistance. Before the Surety can make such a decision and respond to your
Financial Assistance Request Letter, the Surety must perform an investigation conducted by its
representatives. You must not construe the Surety’s investigation or any statements made or actions taken
by the Surety or the Surety’s representatives during the investigation to be an agreement or promise to
render any financial accommodations and/or other assistance of any kind to the Principal or to engage in
any course of conduct for the benefit of the Principal.
The Principal and the Indemnitors acknowledge, admit, warrant and represent that they have no other
source of funding or money available to them to cure the Principal’s defaults under the Bonded Contracts
and their breaches and defaults under the Indemnity Agreement, and that the Principal is unable to
perform the obligations secured by the Performance and Payment Bonds without certain financial
accommodations and/or other assistance from the Surety.
Attached as Exhibit B to this letter is a list of all of the outstanding Performance and Payment Bonds
executed by the Surety and the Principal (the “Bonds”) for the various contracts (the “Bonded Contracts”)
and projects (the “Bonded Projects”). For each of the Bonds, the Bonded Contracts and the Bonded
Projects, the Principal shall provide the following information and documentation:
1. A copy of the Bonded Contract;
2. A copy of the last approved payment application for the Bonded Project;
3. A copy of the last paid payment application for the Bonded Project;
4. A copy of all approved change orders for the Bonded Project;
5. A copy of all pending change orders for the Bonded Project;
6. A copy of the updated and current schedule for the Bonded Project;
7. A list of equipment and manpower for the Bonded Project;
8. A copy of the Principal’s internal equipment rental rates;
9. A copy of the most updated and current Bonded Project cost report;
10. Copies of all subcontracts and purchase orders for the Bonded Project;
11. A detailed cost to complete estimate and projection for the Bonded Project; and
12. Complete access to the correspondence and all other documentation for the Bonded Project.
Furthermore, the Principal and the Indemnitors give permission to the Surety and its representatives
to conduct such an investigation as the Surety’s representatives deem necessary, including, but not limited
to:
1. A review of the Principal’s books, records, accounts and files;
2. Visits to and reviews of the Bonded Projects at the Bonded Project job sites;
3. Interviews with the Principal’s officers and employees;
4. Interviews with the attorneys, accountants and other professionals retained by the Principal;
5. Interviews with the Principal’s bank(s) and other creditors, including payment bond claimants
and others;
6. Interviews with the owners’ and/or obligees’ representatives on each of the Principal’s Bonded
Projects and any non-bonded projects; and
7. Interviews with and a review of the documents of any other person or persons who the Surety
believes has relevant facts for the Surety’s investigation.
The Principal and the Indemnitors shall fully cooperate with the Surety and the Surety’s
representatives during the investigation and shall promptly provide all of the above information and
documentation that is necessary for the Surety’s representatives to perform and complete the information
gathering and analysis for the Surety’s investigation.
The Principal and the Indemnitors have executed an Indemnity Agreement dated
_____________________ in favor of the Surety (the “Indemnity Agreement”), a copy of which is
attached as Exhibit C. The Principal and the Indemnitors reaffirm their obligations and duties to the
Surety pursuant to the terms of the Indemnity Agreement, including but not limited to their obligations to
exonerate, indemnify and hold the Surety harmless from and against any and all loss, costs and expenses
that the Surety may incur as a result of the execution of the Bonds for the Principal. The Principal and the
Indemnitors agree to execute any and all other documents the Surety deems necessary to secure the Surety
for all loss and expense the Surety may incur on behalf of the Principal. The Principal and the
Indemnitors also agree to execute any and all other documents the Surety deems necessary for the
Principal and the Indemnitors to perform and implement their obligations undertaken under the Indemnity
Agreement. The Principal’s and the Indemnitors’ agreement to cooperate and perform their obligations
under the Indemnity Agreement is not and shall not be construed as consideration to the Surety in
exchange for the Surety’s decision to render any financial accommodations and/or other assistance to the
Principal now or in the future, including but not limited to the provision of financial accommodations
and/or other assistance or for providing additional bonding to the Principal.
The Principal and the Indemnitors shall provide to the Surety sworn to financial statements listing all
of their assets, their liabilities on those assets, any other liabilities (secured or unsecured), and other
financial information and documentation requested or to be requested by the Surety, including their last
two years of filed federal income tax returns (corporate and individual), in order for the Surety to
determine the Principal’s and the Indemnitors’ obligations to the Surety under the Indemnity Agreement
and to evaluate the collateral that will be made available to the Surety by the Principal and the
Indemnitors to secure their obligations to the Surety under the Indemnity Agreement.
Please be advised that:
1. The decision with respect to providing any financial accommodations and/or other assistance to
the Principal will be made by the executives of the Surety in its Home Office;
2. No other Surety representative, including the undersigned, outside counsel, consultants or agents,
has the authority to make such a decision;
3. The Surety may have additional requests for information and documentation from the Principal
and the Indemnitors, including but not limited to any updated financial information from the Principal and
the Indemnitors;
4. There may be further conditions precedent, documents and requests from the Surety to the
Principal and the Indemnitors in addition to those set forth above;
5. The Surety’s sole obligations under its Bonds are to the obligees named therein or the
beneficiaries thereof; and
6. The Surety has not undertaken any obligation to the Principal or the Indemnitors under the Bonds,
the Indemnity Agreement or this letter.
The Surety, in its sole option and discretion, may deem it prudent in the Surety’s own best interests to
provide certain interim financial accommodations and/or other assistance to the Principal, including the
payment of certain payroll and bills of the Principal’s subcontractors and suppliers on the Bonded
Projects, and overhead items of the Principal, including insurance premiums. The Principal and the
Indemnitors are liable to reimburse the Surety for any such interim financial accommodations and/or
other assistance in accordance with the terms and provisions of the Indemnity Agreement.
The Principal and the Indemnitors acknowledge and agree that the Surety has no obligation under the
Indemnity Agreement, the Bonds or otherwise at law or in equity to provide interim or final financial
accommodations and/or other assistance to the Principal in any manner or method, or to make any
payments other than those payments for which the Surety may be liable to others under its Bonds, and
that the Surety has made no commitment to provide any interim or final financial accommodations and/or
other assistance to the Principal in this letter. The Principal and the Indemnitors also acknowledge and
agree that the Surety has no obligation or duty to the Principal and/or the Indemnitors to prevent them
from or assist them in avoiding a business failure, or ceasing business operations, losing current or future
business, or losing future business opportunities. The Principal and the Indemnitors further acknowledge
and agree that the Surety is not in any way responsible for the Principal’s and/or the Indemnitors’ current
financial condition. Even though the Principal and the Indemnitors may suffer financial hardship if the
Surety refuses to provide financial accommodations and/or other assistance, the Surety is not liable or
responsible to the Principal and/or the Indemnitors for such results, and any and all potential claims
and/or causes of action that the Principal and/or the Indemnitors may have against the Surety that may
arise from any such results are hereby waived, released and discharged by the Principal and the
Indemnitors.
THE PRINCIPAL AND THE INDEMNITORS SPECIFICALLY ACKNOWLEDGE AND AGREE
THAT THEIR EXECUTION OF THIS LETTER HAS NOT BEEN INDUCED BY OR MADE IN
RELIANCE UPON ANY ORAL OR WRITTEN REPRESENTATIONS BY THE SURETY OR ITS
AGENTS, EMPLOYEES, ATTORNEYS OR CONSULTANTS THAT THE SURETY WILL
PROVIDE ANY FINANCIAL ACCOMMODATIONS AND/OR OTHER ASSISTANCE TO THE
PRINCIPAL. IN THE EVENT THAT THE SURETY AGREES TO PROVIDE ANY FINANCIAL
ACCOMMODATIONS AND/OR OTHER ASSISTANCE TO THE PRINCIPAL, SAID ACTION
SHALL BE IN THE SOLE JUDGMENT, OPTION, AND DISCRETION OF THE SURETY AND IN
THE BEST INTERESTS OF THE SURETY AND NOT THE PRINCIPAL OR THE INDEMNITORS.
FURTHERMORE, THE SURETY’S AGREEMENT TO TAKE SUCH ACTION DOES NOT BIND
AND COMMIT THE SURETY TO PROVIDE OR TO CONTINUE TO PROVIDE ANY OTHER
FINANCIAL ACCOMMODATIONS AND/OR OTHER ASSISTANCE TO THE PRINCIPAL.
THE PRINCIPAL AND THE INDEMNITORS SPECIFICALLY ACKNOWLEDGE AND AGREE
THAT THEIR EXECUTION OF THIS LETTER HAS NOT BEEN INDUCED BY OR MADE IN
RELIANCE UPON ANY ORAL OR WRITTEN REPRESENTATIONS BY THE SURETY OR ITS
AGENTS, EMPLOYEES, ATTORNEYS OR CONSULTANTS THAT THE SURETY WILL
EXECUTE ANY FUTURE BOND OR BONDS ON BEHALF OF THE PRINCIPAL.
Upon the Surety’s completion of its investigation and analysis, the Surety will notify the Principal
and the Indemnitors of its decision with respect to the Principal’s request to the Surety for certain
financial accommodations and/or other assistance.
Nothing herein shall be deemed to be an estoppel, waiver, or modification of any of the Surety’s
rights or defenses, and the Surety hereby reserves all of its rights and defenses under the Indemnity
Agreement, the Bonds, any other contracts or agreements between and/or among the Principal and/or the
Indemnitors, at equity or under any applicable law.
Please execute this letter below and return it to me.
Very truly yours,
Surety Claims Representative
ACCEPTED:
PRINCIPAL
_________________________________
By: _____________________________
Title: ___________________________
Date: ____________________________
CORPORATE INDEMNITOR(S)
_________________________________
By: _____________________________
Title: ___________________________
Date: ____________________________
INDEMNITORS
_________________________________
Date: ____________________________
_________________________________
Date: ____________________________