<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
[X] Quarterly Report Under Section 13 or 15(d) of the Securities Exchange Act
of 1934
For the quarterly period ended November 30, 1996
-----------------
[ ] Transition Report Under Section 13 or 15(d) of the Exchange Act
For the transition period from to
----------------- -----------------
Commission File Number: 0-5531
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FLORAFAX INTERNATIONAL, INC.
----------------------------
(Exact name of small business issuer as specified in its charter)
Delaware 41-0719035
- ------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
8075 20th Street, Vero Beach, Florida 32966
- --------------------------------------------------------------------------------
(Address of principal executive offices)
561-563-0263
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(Issuer's telephone number)
----------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
YES X NO
--- ---
The registrant had 8,220,603 shares of common stock, $0.01 par value,
outstanding at November 30, 1996.
Transitional Small Business Disclosure Format (Check one): Yes : No X
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<PAGE> 2
INDEX
<TABLE>
<CAPTION>
PART I FINANCIAL INFORMATION PAGE NO.
<S> <C> <C>
Item 1. Financial Statements (Unaudited):
Consolidated Balance Sheets
November 30, 1996 and August 31, 1996 1-2
Consolidated Statements of Income and
Accumulated Deficit
Three Months Ended November 30, 1996
and November 30, 1995 3
Consolidated Statements of Cash Flows
Three Months Ended November 30, 1996
and November 30, 1995 4-5
Notes to Consolidated Financial Statements 6-7
Item 2. Managements Discussion and Analysis of
Financial Condition and Results of Operations 8-10
PART II OTHER INFORMATION
Item 1. Legal Proceedings 11
Item 2. Changes in Securities 11
Item 3. Defaults Upon Senior Securities 11
Item 4. Submission of Matters to a Vote of Security Holders 11
Item 5. Other Information 11
Item 6. Exhibits and Reports on Form 8-K 11-13
Signatures 13
</TABLE>
<PAGE> 3
FLORAFAX INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS (IN THOUSANDS)
NOVEMBER 30 AUGUST 31
1996 1996
----------- -----------
(Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $3,859 $3,671
Restricted cash 82 99
Accounts receivable:
Members, less allowances of $562
at November 30, 1996 and $532 at
August 31, 1996 805 1,202
Charge card issuers 614 326
Other 135 73
----------- -----------
1,554 1,601
Deferred tax asset, net of allowance 271 261
Prepaid and other assets 207 54
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TOTAL CURRENT ASSETS 5,973 5,686
Property and equipment, at cost:
Fixtures and equipment 1,256 1,188
Computer systems 701 670
Communication systems 929 929
Leasehold improvements 73 25
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2,959 2,812
Accumulated depreciation
and amortization 2,569 2,534
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390 278
Other assets:
Excess of cost over net assets
of acquired business 1,995 1,995
Deferred tax asset, net of allowance 627 602
Other 230 261
----------- -----------
2,852 2,858
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Total assets $9,215 $8,822
=========== ===========
</TABLE>
See accompanying notes.
1
<PAGE> 4
FLORAFAX INTERNATIONAL, INC.
Consolidated Balance Sheets
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY (In Thousands)
November 30 August 31
1996 1996
----------- ---------
(Unaudited)
<S> <C> <C>
CURRENT LIABILITIES:
Current maturities of long-term debt $ 79
Accounts payable $ 3,978 3,913
Unearned directory income 84
Accrued liabilities:
Member benefits 176 170
Other 1,252 1,036
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TOTAL CURRENT LIABILITIES 5,490 5,198
Long term debt, less current maturities 80 334
Membership security deposits 52 53
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TOTAL LIABILITIES 5,622 5,585
STOCKHOLDERS' EQUITY
Preferred stock ($10 per value, 600,000
shares authorized, none issued)
Common stock - ($.01 per value, 18,000,000 shares
authorized, 8,243,603 and 8,232,727 issued at
November 30, 1996 and August 31, 1996, respectively,
8,220,603 and 8,209,727 outstanding at November 30, 1996
and August 31, 1996 respectively 83 83
Additional paid-in capital 10,098 10,087
Accumulated deficit (6,588) (6,933)
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TOTAL STOCKHOLDERS' EQUITY 3,593 3,237
------- -------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 9,215 $ 8,822
======= =======
</TABLE>
See accompanying notes.
2
<PAGE> 5
FLORAFAX INTERNATIONAL, INC.
Consolidated Statements of Income and Accumulated Deficit
(In Thousands Except per Share Data)
<TABLE>
<CAPTION>
Three Months Ended
---------------------------
November 30 November 30
1996 1995
----------- -----------
(Unaudited)
<S> <C> <C>
NET REVENUES:
Member dues and fees $ 511 $ 470
Floral and other order
processing 991 934
Directory and advertising fees 303 295
Charge card processing 403 320
Other revenue 4 24
------- -------
2,212 2,043
EXPENSES:
General and administrative 1,172 1,120
Selling, advertising and promotion 602 524
Directory publishing 91 77
Depreciation, amortization and retirements 60 103
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1,925 1,824
======= =======
OPERATING INCOME 287 219
Other Income (expense):
Interest Expense (3) (77)
Other 2 1
Interest Income 28 20
------- -------
27 (56)
INCOME BEFORE TAXES 314 163
Income tax expense (benefit) (31) 6
------- --------
NET INCOME 345 157
Accumulated deficit at beginning of period (6,933) (9,195)
------- --------
ACCUMULATED DEFICIT AT END OF PERIOD $(6,588) $(9,038)
======= ========
Primary earnings per share $ 0.04 $ 0.03
Fully diluted earnings per share $ 0.04 $ 0.03
</TABLE>
See accompanying notes.
3
<PAGE> 6
FLORAFAX INTERNATIONAL, INC.
Consolidated Statements of Cash Flows
(In Thousands)
<TABLE>
<CAPTION>
Three months ended
--------------------------
November 30 November 30
1996 1995
----------- -----------
(Unaudited)
<S> <C> <C>
OPERATING ACTIVITIES
Net income $345 $157
ADJUSTMENTS TO RECONCILE NET INCOME
TO NET CASH PROVIDED BY OPERATING ACTIVITIES
Deferred income tax benefit (35)
Depreciation, amortization, and retirements 35 75
Provision for doubtful accounts 46 40
Increase (decrease) in cash
flows due to changes in:
Accounts receivable 1 (340)
Prepaid and other assets (153) (122)
Other assets 31 28
Accounts payable 65 371
Accrued liabilities 306 198
Membership security deposits (1) (10)
---- ----
Net cash provided by
operating activities 640 397
INVESTING ACTIVITIES
Capital expenditures (147) (40)
(Increase) decrease in restricted cash 17 (11)
---- ----
Net cash used in
investing activities (130) (51)
</TABLE>
(Continued)
4
<PAGE> 7
FLORAFAX INTERNATIONAL, INC.
Consolidated Statements of Cash Flows (continued)
(In Thousands)
<TABLE>
<CAPTION>
Three months ended
--------------------------
November 30 November 30
1996 1995
----------- -----------
(Unaudited)
<S> <C> <C>
FINANCING ACTIVITIES
Proceeds from issuing stock $ 11 $ 5
Payments of debt (333) (117)
------ ------
Net cash used in
financing activities (322) (112)
------ ------
NET INCREASE IN
CASH AND CASH EQUIVALENTS 188 234
CASH AND CASH EQUIVALENTS
AT BEGINNING OF YEAR 3,671 1,972
------ ------
CASH AND CASH EQUIVALENTS
AT END OF PERIOD $3,859 $2,206
====== ======
Supplemental disclosures of
cash flow information:
Cash paid during the period for interest $ 1 $ 14
Cash paid during the period for income tax $ 12 $ 6
====== ======
</TABLE>
See accompanying notes.
5
<PAGE> 8
FLORAFAX INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED NOVEMBER 30, 1996
NOTE (1) MANAGEMENT'S OPINION AND ACCOUNTING POLICIES
The accompanying interim financial statements should be read in conjunction
with the Florafax International, Inc. (the Company's Form 10-KSB for the year
ended August 31, 1996.
In the opinion of Management the unaudited consolidated financial statements
contain all adjustments (consisting of only normal recurring adjustments)
necessary to present fairly the Company's consolidated financial position as of
November 30, 1996 and the consolidated results of operations and cash flows for
the three months ended November 30, 1996. Certain income statement items,
primarily in the floral order revenue and selling expense categories, have been
reclassified to conform to current period presentation.
Included in the computation of earnings per share is the dilutive effect of
outstanding warrants and options for the Company's common stock.
Historically, the Company's flowers-by-wire operation is seasonal in that its
member florists send a much larger volume of orders during Thanksgiving, the
Christmas season, Valentine's Day, Easter and Mother's Day. Therefore, the
results of operations of an interim period may not necessarily be indicative of
the results expected for a full year. In an effort to increase orders to
member florists the Company continues to engage in non traditional campaigns
through it's wholly owned subsidiary, The Flower Club, Inc. The Flower Club
generates orders by pursuing joint marketing relationships with nationally
recognized corporations. The Company engages in joint marketing campaigns with
these corporations not only during holidays, but also during non seasonal
periods in an effort to provide member florists with orders during slow periods
of the year. Floral orders and handling fees generated through The Flower Club
have become significant, representing 57% of gross floral order revenue for the
quarter ended November 30, 1996 compared to 50% for the quarter ended November
30, 1995.
NOTE (2) CONTINGENCIES
Florafax International, Inc. vs. Bellerose Floral Inc. and GTE Market Resources
Inc., et al.
In October 1989, Bellerose Floral, Inc. (Bellerose) of Bayside, N.Y., an
affiliate of 800-FLOWERS, Inc. became a Florafax member florist, and Florafax
agreed to provide certain telecommunications services to Bellerose for a fee.
GTE Market Resources, Inc. (GTE/MR) was engaged by Florafax to provide
order-entry services for Florafax and to customers of Florafax, including
Bellerose.
6
<PAGE> 9
FLORAFAX INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED NOVEMBER 30, 1996
In 1990 certain disputes arose among Florafax, Bellerose and GTE/MR regarding
the services to be performed by GTE/MR. As a result, in 1990, Florafax filed
an action in Tulsa County (Oklahoma) District Court against GTE/MR and
Bellerose. Bellerose then filed an action in New York Federal Court against
Florafax. Subsequently, Florafax and Bellerose settled their claims against
each other Florafax pursued its claim against GTE/MR for damages suffered as a
result of GTE/MR's breach of the telecommunications service agreement. On
November 23, 1993 a jury awarded Florafax $1,481,000 in net damages against
GTE/MR.
GTE/MR appealed this case and posted bond with the Court in order to do so. On
December 22, 1994 this case was assigned to the Oklahoma Court of Appeals by
the Oklahoma Supreme Court. On April 4, 1995 the Court of Appeals of the State
of Oklahoma released for publication its decision on the appeal filed by
GTE/MR. The award to the Company of $743,117 for consequential damages was
affirmed. To the extent that the Company was awarded lost profits for two
years in the amount of $750,000, the judgment was reversed and remanded for a
determination of lost profits as limited by Oklahoma law. The award to GTE/MR
of a set-off amount of $88,750 for unpaid invoices was affirmed, a contractual
rate of 18% per annum applied for prejudgment interest was applied and the
case remanded for a determination of an award of GTE's reasonable attorney's
fees, expenses and other collection costs incurred in recovering the unpaid
invoice amounts, but not their fees or expenses in defending against the claims
of the Company or in pursuing other unsuccessful aspects of GTE/MR's
counterclaim. The denial of the Company's request for attorney's fees was
affirmed. The Company and GTE/MR have each petitioned the Oklahoma Supreme
Court for writ of certiorari to review the portions of the Oklahoma Court of
Appeals decision adverse to their respective interests, and both of the parties
appeals have been granted. There are no assurances that the Company will
obtain a favorable ruling from the Oklahoma Supreme Court.
The Company's legal counsel has tried this case on a contingency fee basis and,
accordingly, the Company has incurred minimal expenses related to this
litigation. However, the agreement between the Company and its legal counsel
stipulates that the Company's attorneys are to receive 40% of the net proceeds
now that the case has reached the appellate court. Consequently, the Company
is to receive 60% of the ultimate proceeds. Recognition of any of these
amounts will not be reflected in the financial statements until ultimate
resolution.
7
<PAGE> 10
FLORAFAX INTERNATIONAL, INC.
Management's Discussion and Analysis of Financial
Condition and Results of Operations
Liquidity and Capital Resources
Cash on hand as of November 30, 1996 was $3,859,000, compared to $3,671,000 at
August 31, 1996, and $2,206,000 at November 30, 1995. Due to the amount of
cash on hand, during the quarter ended November 30, 1996 the Company retired
$333,000 of its outstanding debt. As a result, the Company's long term debt at
November 30, 1996 was only $80,000.
The Company continues to generate positive cash flow from operations. Cash
provided by operations for the quarter ended November 30, 1996 was $640,000
compared to $397,000 for the quarter ended November 30, 1995.
Operating cash flows historically have been generated primarily from processing
floral orders and charge card transactions for the Company's member florists,
as well as collecting dues, fees and directory advertising from the members.
Floral order processing may require settlement with the fulfilling florist
before collection of funds from the sending florist. The terms of the
Company's receivables are 30 days, which management believes are consistent
within the industry. Charge card processing, however, generally allows the
Company to collect funds from the charge card issuer prior to settlement with
the merchant. Since in both types of transactions the Company is both
collecting and settling funds, the timing of these cash flows has a significant
impact on the Company's liquidity.
As discussed in Note 1 to the consolidated financial statements the Company
continues to engage in non traditional campaigns through it's wholly owned
subsidiary, The Flower Club. This has helped to improve the Company's cash
flow as the majority of orders generated through The Flower Club are paid for
by credit cards. This allows the Company to receive its funds within days
after processing the transaction. For the quarter ended November 30, 1996
floral orders and handling fees generated through The Flower Club amounted to
approximately $3,170,000 compared to $2,650,000 for the quarter ended November
30, 1995, an increase of 20%.
RESULTS OF OPERATIONS
General Comments
The Company's profitability appears to be continuing in fiscal 1997, as net
income for the quarter ended November 30, 1996 was $345,000 compared to
$157,000 for the quarter ended November 30, 1995. Operating income for the
quarter ended November 30, 1996 was $287,000 compared to $219,000 for the
quarter ended November 30, 1995, an increase of 31%.
8
<PAGE> 11
FLORAFAX INTERNATIONAL, INC.
Management's Discussion and Analysis of Financial
Condition and Results of Operations
Net Revenues
Revenues from member dues and fees increased by 9% for the quarter ended
November 30, 1996 when compared to the same quarter in the prior year. This is
primarily attributable to a growth in the number of member florists. The
Company believes this growth in membership is due to the number of orders that
the Company is providing to it's members and because the Company has the
lowest dues in the industry.
Floral order revenues increased by 6% for the quarter ended November 30, 1996
when compared to the same period in the previous year. This increase is
primarily a result of orders generated by The Flower Club.
Net revenues from credit card operations increased by 26% for the quarter ended
November 30, 1996 when compared to the same quarter in the previous year. The
primary reason for the increase was an increase in volume, as total dollars
processed during the quarter ended November 30, 1996 were $69,824,000 compared
to $56,387,000 for the quarter ended November 30, 1995.
Expenses
Member support, general and administrative expenses increased by 5% for the
quarter ended November 30, 1996 when compared to the same quarter in the
previous year. Payroll and related benefits increased by approximately $150,000
for the quarter ended November 30, 1996 when compared to the same quarter in the
prior year. The payroll increase is primarily attributable to an increase in
the number of personnel needed to handle the order volume generated by the
Flower Club as well as general wage increases throughout the Company. Certain
other expenses such as legal and accounting fees, as well as the cost of fax
machines related to the Company's fax program, were also higher than the
previous quarter last year. Conversely, the Company realized certain savings
in the quarter ended November 30, 1996 when compared to the same period in the
previous year. The Company's phone cost decreased by $104,000 for the quarter
due to a new contract with the Company's long distance phone service carrier.
In addition, during the quarter ended November 30, 1996 the Company received
an unexpected credit from it's long distance carrier in the amount of $47,000.
This credit has been recorded as a reduction of general and administrative
expenses.
9
<PAGE> 12
Selling and advertising expenses increased by 15% for the quarter ended November
30, 1996 when compared to the same quarter in the previous year. The main
component of this increase was an increase in commissions paid to an outside
marketing firm whose responsibilities include attracting and maintaining Flower
Club corporate partners. In addition, the Company also experienced an increase
in advertising costs associated with the ongoing efforts to increase it's number
of member florists.
Depreciation and amortization declined by 42% when compared to last year. Many
of the Company's depreciable assets are becoming fully depreciated. In
addition, a significant portion of the decline is a result of terminating the
Floranet 5000 program in the last quarter of fiscal 1996. At the time this
program was terminated all Floranet 5000 equipment and related software
development costs were charged to expense.
Other income (expense)
Interest expense has been virtually eliminated during the quarter ended November
30, 1996. During the last quarter of fiscal 1996 the majority of the Company's
debt was converted to equity, thereby eliminating the interest expense
associated with this debt. In addition, shortly after year end the Company
retired another $333,000 of debt, bringing the total long term debt of the
Company to $80,000 as of November 30, 1996.
Income Taxes
The Company accounts for income taxes using Financial Accounting Standard Board
Statement No. 109, Accounting for Income Taxes, which requires the asset and
liability method of accounting for income taxes. Under the asset and liability
method deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Historically, the Company had provided the full valuation allowance on
net deferred tax assets based on the Company's history of losses and the
uncertainty surrounding the Company's ability to recognize such assets.
However, during the year ended August 31, 1996 the Company re-evaluated its
historical losses, and its projected future earnings, and reached the conclusion
that it was more likely than not that some portion of the deferred tax asset
would be realized. At that time the valuation allowance was reduced resulting
in a net deferred tax benefit. At November 30, 1996 the Company evaluated its
projected future earnings in a manner consistent with the approach taken at
August 31, 1996 and, as a result, recorded a net income tax benefit of $31,000.
The Company believes that maintaining a portion of the valuation allowance is
necessary for conservative purposes. The Company will continue to evaluate the
valuation allowance based on current and projected future earnings and will make
adjustments to the allowance based on the evidence and circumstances at that
time.
10
<PAGE> 13
PART II OTHER INFORMATION
Item 1. Legal Proceedings
For a summary of legal proceedings, reference is made to Item 3, Legal
Proceedings, included in the Company's annual report on Form 10-KSB for the year
ended August 31, 1996 and to Note 2 of the Notes to Consolidated Financial
Statements included in this filing.
Item 2. Changes in Securities
None
Item 3. Defaults Upon Senior Securities
None
Item 4. The Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
The following agreements were entered into during this reporting period and,
accordingly, are included with this filing:
Exhibit Reference
Exhibit 10 Construction agreement dated September 30, 1996 between
Registrant and C.E. Block Architect of Vero Beach, Florida.
(27) Financial Data Schedule (for SEC use only).
The following items have been included as exhibits in filings by the Company in
a previous year and, accordingly, are incorporated here by reference.
11
<PAGE> 14
Exhibit Reference
(10) Material Contracts
(a) Convertible subordinated notes due to Clark Estates maturing June
30, 1996.
(b) Subordinated debentures maturing in 1998.
(c) Agreement dated December 3, 1993, Addendum, Second Addendum,
Third Addendum, Fourth Addendum and Fifth Addendum thereto
by and between the Registrant and Citizens Fidelity Bank
and Trust Company (now PNC Bank, Kentucky, Inc.).
(d) Purchase Agreement for certain assets formerly owned by Savannah
Floral Services, Inc. dated March 10, 1994
(e) Note Payable to Andrew Williams dated March 10, 1994
(f) Promissory Note to Citrus Bank dated November 9, 1993
(g) Promissory Note to Citrus Bank dated November 17, 1993
(h) Promissory Note to Citrus Bank dated January 25, 1994
(i) Loan to James H. West, Director, President and Chief Financial
Officer, dated August 28, 1994
(j) Consulting agreement with David Harper of Ventura County
California dated December 10, 1993.
(k) Promissory Note to Citrus Bank dated August 31, 1995.
(l) Operating lease agreement between Registrant and Alvin Wunderlich
dated April 1995.
(22) Subsidiaries of the Registrant
(3) Articles of incorporation and Bylaws of the Registrant, as amended.
12
<PAGE> 15
Reports on Form 8-K
No reports on Form 8-K were filed during the first quarter of fiscal 1996.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Florafax International, Inc.
Date: January 9, 1997 /s/ James H. West
-----------------
James H. West
President and Chief
Financial Officer
13
<PAGE> 1
THE AMERICAN INSTITUTE OF ARCHITECTS [LOGO]
- --------------------------------------------------------------------------------
AIA Document B141
STANDARD FORM OF AGREEMENT BETWEEN
OWNER AND ARCHITECT
1987 EDITION
THIS DOCUMENT HAS IMPORTANT LEGAL CONSEQUENCES; CONSULTATION WITH AN ATTORNEY
IS ENCOURAGED WITH RESPECT TO ITS COMPLETION OR MODIFICATION.
- --------------------------------------------------------------------------------
AGREEMENT
made as of the day of in the year of
Nineteen Hundred and
BETWEEN the Owner: Florafax International, Inc.
(Name and address) 8075 20th Street
Vero Beach, Florida 32966
(561) 563-0263
and the Architect: C.E. Block Architect
(Name and address) 2044 14th Avenue, Suite 21
Vero Beach, FL 32960
(561) 569-3799
For the following Project:
(Include detailed description of Project, location, address and scope.)
7200 square feet one-story mansonry building addition, located on Road 60, Vero
Beach, Florida.
The Owner and Architect agree as set forth below.
- --------------------------------------------------------------------------------
Copyright 1917, 1926, 1948, 1951, 1953, 1958, 1961, 1963, 1966, 1967,
1970, 1974, 1977, (C)1987 by The American Institute of Architects, 1935 New
York Avenue, N.W., Washington, D.C., 20006. Reproduction of the material
herein or substantial quotation of its provisions without written permission
of the AIA violates the copyright laws of the United States and will be
subject to legal prosecution.
- --------------------------------------------------------------------------------
AIA DOCUMENT B141 - OWNER - ARCHITECT AGREEMENT - FOURTEENTH EDITION - AIA(C) =
(C)1987 THE AMERICAN INSTITUTE OF ARCHITECTS, 1735 NEW YORK AVENUE, N.W.,
WASHINGTON, D.C. 20006
WARNING: Unlicensed photocopying violates U.S. copyright laws and is subject
to legal prosecution.
<PAGE> 2
TERMS AND CONDITIONS OF AGREEMENT BETWEEN OWNER AND ARCHITECT
ARTICLE 1
ARCHITECT'S RESPONSIBILITIES
1.1 ARCHITECT'S SERVICES
1.1.1 The Architect's services consist of those services performed by the
Architect, Architect's employees and Architect's consultants as enumerated in
Articles 2 and 3 of this Agreement and any other services included in Article
12.
1.1.2 The Architect's services shall be performed as expeditiously as is
consistent with professional skill and care and the orderly progress of the
Work. Upon request of the Owner, the Architect shall submit for the Owner's
approval a schedule for the performance of the Architect's services which may be
adjusted as the Project proceeds, and shall include allowances for periods of
time required for the Owner's review and for approval of submissions by
authorities having jurisdiction over the Project. Time limits established by
this schedule approved by the Owner shall not, except for reasonable cause, be
exceeded by the Architect or Owner.
1.1.3 The services covered by this Agreement are subject to the time
limitations contained in Subparagraph 11.5.1.
ARTICLE 2
SCOPE OF ARCHITECT'S BASIC SERVICES
2.1 DEFINITION
2.1.1 The Architect's Basic Services consist of those described in Paragraphs
2.2 through 2.6 and any other services identified in Article 12 as part of Basic
Services, and include normal structural, mechanical and electrical engineering
services.
2.2 SCHEMATIC DESIGN PHASE
2.2.1 The Architect shall review the program furnished by the Owner to
ascertain the requirements of the Project and shall arrive at a mutual
understanding of such requirements with the Owner.
2.2.2 The Architect shall provide a preliminary evaluation of the Owner's
program, schedule and construction budget requirements, each in terms of the
other, subject to the limitations set forth in Subparagraph 5.2.1.
2.2.3 The Architect shall review with the Owner alternative approaches to
design and construction of the Project.
2.2.4 Based on the mutually agreed-upon program, schedule and construction
budget requirements, the Architect shall prepare, for approval by the Owner,
Schematic Design Documents consisting of drawings and other documents
illustrating the scale and relationship of Project components.
2.2.5 The Architect shall submit to the Owner a preliminary estimate of
Construction Costs based on current area, volume or other unit costs.
2.3 DESIGN DEVELOPMENT PHASE
2.3.1 Based on the approved Schematic Design Documents and any adjustments
authorized by the Owner in the program, schedule or construction budget, the
Architect shall prepare, for approval by the Owner, Design Development Documents
consisting of drawings and other documents to fix and describe the size and
character of the Project as to architectural, structural, mechanical and
electrical systems, materials and such other elements as may be appropriate.
2.3.2 The Architect shall advise the Owner of any adjustments to the
preliminary estimate of Construction Cost.
2.4 CONSTRUCTION DOCUMENTS PHASE
2.4.1 Based on the approved Design Development Documents and any further
adjustments in the scope or quality of the Project or in the construction budget
authorized by the Owner, the Architect shall prepare, for approval by the Owner,
Construction Documents consisting of Drawings and Specifications setting forth
in detail the requirements for the construction of the Project.
2.4.2 The Architect shall assist the Owner in the preparation of the necessary
bidding information, bidding forms, the Conditions of the Contract, and the form
of Agreement between the Owner and Contractor.
2.4.3 The Architect shall advise the Owner of any adjustments to previous
preliminary estimates of Construction Cost indicated by changes in requirements
or general market conditions.
2.4.4 The Architect shall assist the Owner in connection with the Owner's
responsibility for filing documents required for the approval of governmental
authorities having jurisdiction over the Project.
2.5 BIDDING OR NEGOTIATION PHASE
2.5.1 The Architect, following the Owner's approval of the Construction
Documents and the latest preliminary estimate of Construction Cost, shall assist
the Owner in obtaining bids or negotiated proposals and assist in awarding and
preparing contracts for construction.
2.6 CONSTRUCTION PHASE-ADMINISTRATION OF THE CONSTRUCTION CONTRACT
2.6.1 The Architect's responsibility to provide Basic Services for the
Construction Phase under this Agreement commences with the award of the
Contract for Construction and terminates at the earlier of the issuance to the
Owner of the final Certificate for Payment or 60 days after the date of
Substantial Completion of the Work.
2.6.2 The Architect shall provide administration of the Contract for
Construction as set forth below and in the edition of AIA Document A201.
General Conditions of the Contract for Construction, current as of the date of
this Agreement, unless otherwise provided in this Agreement.
2.6.3 Duties, responsibilities and limitations of authority of the Architect
shall not be restricted, modified or extended without written agreement of the
Owner and Architect with consent of the Contractor, which consent shall not be
unreasonably withheld.
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AIA DOCUMENT B141 - OWNER - ARCHITECT AGREEMENT - FOURTEENTH EDITION - AIA(C) =
(C)1987 THE AMERICAN INSTITUTE OF ARCHITECTS, 1735 NEW YORK AVENUE, N.W.,
WASHINGTON, D.C. 20006
WARNING: Unlicensed photocopying violates U.S. copyright laws and is subject
to legal prosecution.
<PAGE> 3
2.6.4 The Architect shall be a representative of and shall advise and consult
with the Owner (1) during construction until final payment to the Contractor is
due, and (2) as an Additional Service at the Owner's direction from time to time
during the correction period described in the Contract for Construction. The
Architect shall have authority to act on behalf of the Owner only to the extent
provided in this Agreement unless otherwise modified by written instrument.
2.6.5 The Architect shall visit the site at intervals appropriate to the stage
of construction or as otherwise agreed by the Owner and Architect in writing to
become generally familiar with the progress and quality of the Work completed
and to determine in general if the Work is being performed in a manner
indicating that the Work when completed will be in accordance with the Contract
Documents. However, the Architect shall not be required to make exhaustive or
continuous on-site inspections to check the quality or quantity of the Work. On
the basis of on-site observations as an architect, the Architect shall keep the
Owner informed of the progress and quality of the Work, and shall endeavor to
guard the Owner against defects and deficiencies in the Work. (More extensive
site representation may be agreed to as an Additional Service, as described in
Paragraph 3.2)
2.6.6 The Architect shall not have control over or charge of and shall not be
responsible for construction means, methods, techniques, sequences or
procedures, or for safety precautions and programs in connection with the Work,
since these are solely the Contractor's responsibility under the Contract for
Construction. The Architect shall not be responsible for the Contractor's
schedules or failure to carry out the Work in accordance with the Contract
Documents. The Architect shall not have control over or charge of acts or
omissions of the Contractor, Subcontractors, or their agents or employees, or of
any other persons performing portions of the Work.
2.6.7 The Architect shall at all times have access to the Work wherever it is
in preparation or progress.
2.6.8 Except as may otherwise be provided in the Contract Documents or when
direct communications have been specially authorized, the Owner and Contractor
shall communicate through the Architect. Communications by and with the
Architect's consultants shall be through the Architect.
2.6.9 Based on the Architect's observations and evaluations of the Contractor's
Applications for Payment, the Architect shall review and certify the amounts due
the Contractor.
2.6.10 The Architect's certification for payment shall constitute a
representation to the Owner, based on the Architect's observations at the site
as provided in Subparagraph 2.6.5 and on the data comprising the Contractor's
Application for Payment, that, to the best of the Architect's knowledge,
information and belief, the Work has progressed to the point indicated and the
quality of Work is in accordance with the Contract documents. The foregoing
representations are subject to an evaluation of the Work for conformance with
the Contract Documents. The foregoing representations are subject to an
evaluation of the Work for conformance with the Contract Documents upon
Substantial Completion, to results of subsequent tests and inspections, to minor
deviations from the Contract Documents correctable prior to completion and to
specific qualifications expressed by the Architect. The issuance of a
Certificate for Payment shall further constitute a representation that the
Contractor is entitled to payment in the amount certified. However, the
issuance of a Certificate for Payment shall not be a representation that the
Architect has (1) made exhausive or continuous on-site inspections to check the
quality or quantity of the Work, (2) reviewed construction means, methods,
techniques, sequences or procedures, (3) reviewed copies of requisitions
received from Subcontractors and material suppliers and other data requested by
the Owner to substantiate the Contractor's right to payment or (4) ascertained
how or for what purpose the Contractor has used money previously paid on account
of the Contract Sum.
2.6.11 The Architect shall have authority to reject Work which does not conform
to the Contract Documents. Whenever the Architect considers it necessary or
advisable for implementation of the intent of the Contract Documents, the
Architect will have authority to require additional inspection or testing of the
Work in accordance with the provisions of the Contract Documents, whether or not
such Work is fabricated, installed or completed. However, neither this
authority of the Architect nor a decision made in good faith either to exercise
or not to exercise such authority shall give rise to a duty or responsibility of
the Architect to the Contractor, Subcontractors, material and equipment
suppliers, their agents or employees or other persons performing portions of the
Work.
2.6.12 The Architect shall review and approve or take other appropriate action
upon Contractor's submittals such as Shop Drawings, Product Data and Samples,
but only for the limited purpose of checking for conformance with information
given and the design concept expressed in the Contract Documents. The
Architect's action shall be taken with such reasonable promptness as to cause no
delay in the Work or in the construction of the Owner or of separate
contractors, while allowing sufficient time in the Architect's professional
judgment to permit adequate review. Review of such submittals is not conducted
for the purpose of determining the accuracy and completeness of other details
such as dimensions and quantities or for substantiating instructions for
installation or performance of equipment or systems designed by the Contractor,
all of which remain the responsibility of the Contractor to the extent required
by the Contract Documents. The Architect's review shall not constitute
approval of safety precautions or, unless otherwise specifically stated by the
Architect, of construction means, methods, techniques, sequences or procedures.
The Architect's approval of a specific item shall not indicate approval of an
assembly of which the item is a component. When professional certification of
performance characteristics of materials, systems or equipment is required by
the Contract Documents, the Architect shall be entitled to rely upon such
certification to establish that the materials, systems or equipment will meet
the performance criteria required by the Contract Documents.
2.6.13 The Architect shall prepare Change Orders and Construction Change
Directives, with supporting documentation and date if deemed necessary by the
Architect as provided in Subparagraphs 3.1.1 and 3.3.3, for the Owner's approval
and execution in accordance with the Contract Documents, and may authorize minor
changes in the Work not involving an adjustment in the Contract Sum or an
extension of the Contract Time which are not inconsistent with the intent of the
Contract Documents.
2.6.14 The Architect shall conduct inspections to determine the date or dates of
Substantial Completion and the date of final completion, shall receive and
forward to the Owner for the Owner's review and records written warranties and
related documents required by the Contract Documents and assembled by the
Contractor, and shall issue a final Certificate for Payment upon compliance with
the requirements of the Contract Documents.
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AIA DOCUMENT B141 - OWNER - ARCHITECT AGREEMENT - FOURTEENTH EDITION - AIA(C) =
(C)1987 THE AMERICAN INSTITUTE OF ARCHITECTS, 1735 NEW YORK AVENUE, N.W.,
WASHINGTON, D.C. 20006
WARNING: Unlicensed photocopying violates U.S. copyright laws and is subject
to legal prosecution.
<PAGE> 4
2.6.15 The Architect shall interpret and decide matters concerning performance
of the Owner and Contractor under the requirements of the Contract Documents on
written request of either the Owner or Contractor. The Architect's response to
such requests shall be made with reasonable promptness and within any time
links agreed upon.
2.6.16 Interpretations and decisions of the Architect shall be consistent with
the intent of and reasonably inferable from the Contract Documents and shall be
in writing or in the form of drawings. When making such interpretations and
initial decisions, the Architect shall endeavor to secure faithful performance
by both Owner and Contractor, shall not show partiality to either, and shall
not be liable for results of interpretations or decisions so rendered in good
faith.
2.6.17 The Architect's decisions on matters relating to aesthetic effect shall
be final if consistent with the intent expressed in the Contract Documents.
2.6.18 The Architect shall render written decisions within a reasonable time
on all claims, disputes or other matters in question between the Owner and
Contractor relating to the execution or progress of the Work as provided in the
Contract Documents.
2.8.19 The Architect's decisions on claims, disputes or other matters,
including those in question between the Owner and Contractor, except for those
relating to aesthetic effect as provided in Subparagraph 2.6.17, shall be
subject to arbitration as provided in this Agreement and in the Contract
Documents.
ARTICLE 3
ADDITIONAL SERVICES
3.1 GENERAL
3.1.1 The services described in this Article 3 are not included in Basic
Services unless so identified in Article 12, and they shall be paid for by the
Owner as provided in this Agreement, in addition to the compensation for Basic
Services. The services described under Paragraphs 3.2 and 3.4 shall only be
provided if authorized or confirmed in writing by the Owner. If services
described under Contingent Additional Services in Paragraph 3.3 are required
due to circumstances beyond the Architect's control,the Architect shall notify
the Owner prior to commencing such services. If the Owner deems that such
services described under Paragraph 3.3 are not required, the Owner shall give
prompt written notice to the Architect. If the Owner indicates in writing that
all or part of such Contingent Additional Services are not required, the
Architect shall have no obligation to provide those services.
3.2 PROJECT REPRESENTATION BEYOND BASIC SERVICES
3.2.1 If more extensive representation at the site than is described in
Subparagraph 2.6.5 is required, the Architect shall provide one or more Project
Representatives to assist in carrying out such additional on-site
responsibilities.
3.2. Project Representatives shall be selected, employed and directed by the
Architect, and the Architect shall be compensated therefor as agreed by the
Owner and Architect. The duties, responsibilities and limitation of authority
of Project Representatives shall be as described in the edition of AIA Document
B352 current as of the date of this Agreement, unless otherwise agreed.
3.2.3 Through the observations by such Project Representatives, the Architect
shall endeavor to provide further protection for the Owner against defects and
deficiencies in the Work, but the furnishing of such project representation
shall not modify the rights, responsibilities or obligations of the Architect as
described elsewhere in this Agreement.
3.3 CONTINGENT ADDITIONAL SERVICES
3.3.1 Making revisions in Drawings, Specifications or other documents when such
revisions are:
.1 inconsistent with approvals or instructions previously given by the
Owner, including revisions made necessary by adjustments in the
Owner's program or Project budget;
.2 required by the enactment or revision of codes, laws or regulations
subsequent to the preparation of such documents; or
.3 due to changes required as a result of the Owner's failure to render
decisions in a timely manner.
3.3.2 Providing services required because of significant changes in the
Project including, but not limited to, size, quality, complexity, the Owner's
schedule, or the method of bidding or negotiating and contracting for
construction, except for services required under Subparagraph 5.2.5.
3.3.3 Preparing Drawings, Specifications and other documentation and supporting
data, evaluating Contractor's proposals, and providing other services in
connection with Change Orders and Construction Change Directives.
3.3.4 Providing services in connection with evaluating substitutions proposed
by the Contractor and making subsequent revisions to Drawings, Specifications
and other documentation resulting therefrom.
3.3.5 Providing consultation concerning replacement of Work damaged by fire or
other cause during construction, and furnishing services required in connection
with the replacement of such Work.
3.3.6 Providing services made necessary by the default of the Contractor, by
major defects or deficiencies in the Work of the Contractor, or by failure of
performance of either the Owner or Contractor under the Contract for
Construction.
3.3.7 Providing services in evaluating an extensive number of claims submitted
by the Contractor or others in connection with the Work.
3.3.8 Providing services in connection with a public hearing, arbitration
proceeding or legal proceeding except where the Architect is party thereto.
3.3.9 Preparing documents for alternate, separate or sequential bids or
providing services in connection with bidding, negotiation or construction
prior to the completion of the Construction Documents Phase.
3.4 OPTIONAL ADDITIONAL SERVICES
3.4.1 Providing analyses of the Owner's needs and programming the requirements
of the Project.
3.4.2 Providing financial feasibility or other special studies.
3.4.3 Providing planning surveys, site evaluations or comparative studies of
prospective sites.
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AIA DOCUMENT B141 - OWNER - ARCHITECT AGREEMENT - FOURTEENTH EDITON - AIA(C) =
(C)1987 THE AMERICAN INSTITUE OF ARCHITECTS, 1735 NEW YORK AVENUE, N.W.,
WASHINGTON, D.C. 30006
WARNING: Unlicensed photocopying violates U.S. copyright laws and is subject
to legal prosecution.
<PAGE> 5
3.4.4 Providing special surveys, environmental studies and submissions required
for approvals of governmental authorities or others having jurisdiction over
the Project.
3.4.5 Providing services relative to future facilities, systems and equipment.
3.4.6 Providing services to investigate existing conditions or facilities or
to make measured drawings thereof.
3.4.7 Providing services to verify the accuracy of drawings or other
information furnished by the Owner.
3.4.8 Providing coordination of construction performed by separate contractors
or by the Owner's own forces and coordination of services required in
connection with construction performed and equipment supplied by the Owner.
3.4.9 Providing services in connection with the work of a construction manager
or separate consultants retained by the Owner.
3.4.10 Providing detailed estimates of Construction Cost.
3.4.11 Providing detailed quantity surveys or inventories of material,
equipment and labor.
3.4.12 Providing analyses of owning and operating costs.
3.4.13 Providing interior design and other similar services required for or in
connection with the selection, procurement or installation of furniture,
furnishings and related equipment.
3.4.14 Providing services for planning tenant or rental spaces.
3.4.15 Making investigations, inventories of materials or equipment, or
valuations and detailed appraisals of existing facilities.
3.4.16 Preparing a set of reproducible record drawings showing significant
changes in the Work made during construction based on marked-up prints,
drawings and other data furnished by the Contractor to the Architect.
3.4.17 Providing assistance in the utilization of equipment or systems such as
testing, adjusting and balancing, preparation of operation and maintenance
manuals, training personnel for operation and maintenance, and consultation
during operation.
3.4.18 Providing services after issuance to the Owner of the final Certificate
for Payment, or in the absence of a final Certificate for Payment, more than
60 days after the date of Substantial Completion of the Work.
3.4.19 Providing services of consultants for other than architectural,
structural, mechanical and electrical engineering portions of the Project
provided as a part of Basic Services.
3.4.20 Providing any other services not otherwise included in this Agreement
or not customarily furnished in accordance with generally accepted
architectural practice.
ARTICLE 4
OWNER'S RESPONSIBILITIES
4.1 The Owner shall provide full information regarding requirements for the
Project: Including a program which shall set forth the Owner's objectives,
schedule, constraints and criteria, including space requirements and
relationships, flexibility, expandability, special equipment, systems and site
requirements.
4.2 The Owner shall establish and update an overall budget for the Project,
including the Construction Cost, the Owner's other costs and reasonable
contingencies related to all of these costs.
4.3 If requested by the Architect, the Owner shall furnish evidence that
financial arrangements have been made to fulfill the Owner's obligations
under this Agreement.
4.4 The Owner shall designate a representative authorized to act on the Owner's
behalf with respect to the Project. The Owner or such authorized
representative shall render decisions in a timely manner pertaining to documents
submitted by the Architect in order to avoid unreasonable delay in the orderly
and sequential progress of the Architect's services.
4.5 The Owner shall furnish surveys describing physical characteristics, legal
limitations and utility locations for the site of the Project, and a written
legal description of the site. The surveys and legal information shall
include, as applicable, grades and lines of streets, alleys, pavements and
adjoining property and structures; adjacent drainage; rights-of-way,
restrictions, easements, encroachments, zoning, deed restrictions, boundaries
and contours of the site; locations, dimensions and necessary data pertaining
to existing buildings, other improvements and trees; and information concerning
available utility services and lines, both public and private, above and below
grade, including inverts and depths. All the information on the survey shall be
referenced to a Project benchmark.
4.6 The Owner shall furnish the services of geotechnical engineers when such
services are requested by the Architect. Such services may include but are
not limited to test borings, test pits, determinations of soil bearing values,
percolation tests, evaluations of hazardous materials, ground corrosion and
resistivity tests, including necessary operations for anticipating sub-soil
conditions, with reports and appropriate professional recommendations.
4.6.1 The Owner shall furnish the services of other consultants when such
services are reasonably required by the scope of the Project and are requested
by the Architect.
4.7 The Owner shall furnish structural, mechanical, chemical, air and water
pollution tests, tests for hazardous materials, and other laboratory and
environmental tests, inspections and reports required by law or the Contract
Documents.
4.8 The Owner shall furnish all legal, accounting and insurance counseling
services as may be necessary at any time for the Project, including auditing
services the Owner may require to verify the Contractor's Applications for
Payment or to ascertain how or for what purposes the Contractor has used the
money paid by or on behalf of the Owner.
4.9 The services, information, surveys and reports required by Paragraphs 4.5
through 4.8 shall be furnished at the Owner's expense, and the Architect shall
be entitled to rely upon the accuracy and completeness thereof.
4.10 Prompt written notice shall be given by the Owner to the Architect if the
Owner becomes aware of any fault or defect in the Project or nonconformance
with the Contract Documents.
4.11 The proposed language of certificates or certifications requested of the
Architect or Architect's consultants shall be submitted to the Architect for
review and approval at least 14 days prior to execution. The Owner shall not
request certifications that would require knowledge or services beyond the
scope of this Agreement.
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AIA DOCUMENT B141 - OWNER - ARCHITECT AGREEMENT - FOURTEENTH EDITION - AIA(C) =
(C)1987 THE AMERICAN INSTITUTE OF ARCHITECTS, 1735 NEW YORK AVENUE, N.W.,
WASHINGTON, D.C. 20006
WARNING: Unlicensed photocopying violates U.S. copyright laws and is subject
to legal prosecution.
<PAGE> 6
ARTICLE 5
CONSTRUCTION COST
5.1 DEFINITION
5.1.1 The Construction Cost shall be the total cost or estimated cost to the
Owner of all elements of the Project designed or specified by the Architect.
5.1.2 The Construction Cost shall include the cost at current market rates of
labor and materials furnished by the Owner and equipment designed, specified,
selected or specially provided for by the Architect, plus a reasonable
allowance for the Contractor's overhead and profit. In addition, a reasonable
allowance for contingencies shall be included for market conditions at the time
of bidding and for changes in the Work during construction.
5.1.3 Construction Cost does not include the compensation of the Architect and
Architect's consultants, the costs of the land, rights-of-way, financing or
other costs which are the responsibility of the Owner as provided in Article 4.
5.2 RESPONSIBILITY FOR CONSTRUCTION COST
5.2.1 Evaluations of the Owner's Project budget, preliminary estimates of
Construction Cost and detailed estimates of Construction Cost, if any, prepared
by the Architect, represent the Architect's best judgment as a design
professional familiar with the construction industry. It is recognized,
however, that neither the Architect nor the Owner has control over the cost of
labor, materials or equipment, over the Contractor's methods of determining bid
prices, or over competitive bidding, market or negotiating conditions.
Accordingly, the Architect cannot and does not warrant or represent that bids
or negotiated prices will not vary from the Owner's Project budget or from any
estimate of Construction Cost or evaluation prepared or agreed to by the
Architect.
5.2.2 No fixed limit of Construction Cost shall be established as a condition
of this Agreement by the furnishing, proposal or establishment of a Project
budget, unless such fixed limit has been agreed upon in writing and signed by
the parties hereto. If such a fixed limit has been established, the Architect
shall be permitted to include contingencies for design, bidding and price
escalation, to determine what materials, equipment, component systems and types
of construction are to be included in the Contract Documents, to make
reasonable adjustments in the scope of the Project and to include in the
Contract Documents alternate bids to adjust the Construction Cost to the fixed
limit. Fixed limits, if any, shall be increased in the amount of an increase
in the Contract Sum occurring after execution of the Contract for Construction.
5.2.3 If the Bidding or Negotiation Phase has not commenced within 90 days
after the Architect submits the Construction Documents to the Owner, any
Project budget or fixed limit of Construction Cost shall be adjusted to reflect
changes in the general level of prices in the construction industry between the
date of submission of the Construction Documents to the Owner and the date on
which proposals are sought.
5.2.4 If a fixed limit of Construction Cost (adjusted as provided in
Subparagraph 5.2.3) is exceeded by the lowest bona fide bid or negotiated
proposal, the Owner shall:
.1 give written approval of an increase in such fixed limit;
.2 authorize rebidding or negotiating of the Project within a
reasonable time;
.3 if the Project is abandoned, terminate in accordance with Paragraph
8.3; or
.4 cooperate in revising the Project scope and quality as required to
reduce the Construction Cost.
5.2.5 If the Owner chooses to proceed under Clause 5.2.4.4, the Architect,
without additional charge, shall modify the Contract Documents as necessary to
comply with the fixed limit, if established as a condition of this Agreement.
The modification of Contract Documents shall be the limit of the Architect's
responsibility arising out of the establishment of a fixed limit. The Architect
shall be entitled to compensation in accordance with this Agreement for all
services performed whether or not the Construction Phase is commenced.
ARTICLE 6
USE OF ARCHITECT'S DRAWINGS,
SPECIFICATIONS AND OTHER DOCUMENTS
6.1 The Drawings, Specifications and other documents prepared by the Architect
for this Project are instruments of the Architect's service for use solely
with respect to this Project and, unless otherwise provided, the Architect
shall be deemed the author of these documents and shall retain all common law,
statutory and other reserved rights, including the copyright. The Owner shall
be permitted to retain copies, including reproducible copies, of the
Architect's Drawings, Specficications and other documents for information and
reference in connection with the Owner's use and occupancy of the Project. The
Architect's Drawings, Specifications or other documents shall not be used by
the Owner of others on other projects, for additions to this Project or for
completion of this Project by others, unless the Architect is adjudged to be in
default under this Agreement, except by agreement in writing and with
appropriate compensation to the Architect.
6.2 Submission or distribution of documents to meet official regulatory
requirements or for similar purposes in connection with the Project is not to
be construed as publication in derogation of the Architect's reserved rights.
ARTICLE 7
ARBITRATION
7.1 Claims, disputes or other matters in question between the parties to this
Agreement arising out of or relating to this Agreement or breach thereof shall
be subject to and decided by arbitration in accordance with the Construction
Industry Arbitration Rules of the American Arbitration Association currently in
effect unless the parties mutually agree otherwise.
7.2 Demand for arbitration shall be filed in writing with the other party to
this Agreement and with the American Arbitration Association. A demand for
arbitration shall be made within a reasonable time after the claim, dispute or
other matter in question has arisen. In no event shall the demand for
arbitration be made after the date when institution of legal or equitable
proceedings based on such claim, dispute or other matter in question would be
barred by the applicable statutes of limitations.
7.3 No arbitration arising out of or relating to this Agreement shall include,
by consolidation, joinder or in any other manner, an additional person or
entity not a party to this Agreement,
<PAGE> 7
except by written consent containing a specific reference to this Agreement
signed by the Owner, Architect, and any other person or entity sought to be
joined. Consent to arbitration involving an additional person or entity shall
not constitute consent to arbitration of any claim, dispute or other matter in
question not described in written consent or with a person or entity not named
or described therein. The foregoing agreement to arbitrate and other
agreements to arbitrate with an additional person or entity duly consented to
by the parties to this Agreement shall be specifically enforceable in
accordance with applicable law in any court having jurisdiction thereof.
7.4 The award rendered by the arbitrator or arbitrators shall be final, and
judgment may be entered upon it in accordance with applicable law in any court
having jurisdiction thereof.
ARTICLE 8
TERMINATION, SUSPENSION OR ABANDONMENT
8.1 This Agreement may be terminated by either party upon not less than seven
days' written notice should the other party fail substantially to perform in
accordance with the terms of this Agreement through no fault of the party
initiating the termination.
8.2 If the Project is suspended by the Owner for more than 30 consecutive days,
the Architect shall be compensated for services performed prior to notice of
such suspension. When the Project is resumed, the Architect's compensation
shall be equitably adjusted to provide for expenses incurred in the
interruption and resumption of the Architect's services.
8.3 This Agreement may be terminated by the Owner upon not less than seven
days' written notice to the Architect in the event that the Project is
permanently abandoned. If the Project is abandoned by the Owner for more than
90 consecutive days, the Architect may terminate this Agreement by giving
written notice.
8.4 Failure of the Owner to make payments to the Architect in accordance with
this Agreement shall be considered substantial nonperformance and cause for
termination.
8.5 If the Owner fails to make payment when due the Architect for services and
expenses, the Architect may, upon seven days' written notice to the Owner,
suspend performance of services under this Agreement. Unless payment in full
is received by the Architect within seven days of the date of the notice, the
suspension shall take effect without further notice. In the event of a
suspension of services, the Architect shall have no liability to the Owner for
delay or damage caused the Owner because of such suspension of services.
8.6 In the event of termination not the fault of the Architect, the Architect
shall be compensated for services performed prior to termination, together with
Reimbursable Expenses then due and all Termination Expenses as defined in
Paragraph 8.7.
8.7 Termination Expenses are in addition to compensation for Basic and
Additional Services, and include expenses which are directly attributable to
termination. Termination Expenses shall be computed as a percentage of the
total compensation for Basic Services and Additional Services earned to the
time of termination, as follows:
.1 Twenty percent of the total compensation for Basic and Additional
Services earned to date if termination occurs before or during the
predesign, site analysis, or Schematic Design Phases; or
.2 Ten percent of the total compensation for Basic and Additional
Services earned to date if termination occurs during the Design
Development Phase; or
.3 Five percent of the total compensation for Basic and Additional
Services earned to date if termination occurs during any subsequent
phase.
ARTICLE 9
MISCELLANEOUS PROVISIONS
9.1 Unless otherwise provided, this Agreement shall be governed by the law of
the principal place of business of the Architect.
9.2 Terms in this Agreement shall have the same meaning as those in AIA
Document A201, General Conditions of the Contract for Contract for construction,
current as of the date of this Agreement.
9.3 Causes of action between the parties to this Agreement pertaining to acts
or failures to act shall be deemed to have occurred and the applicable statutes
of limitations shall commence to run not later than either the date of
Substantial Completion for acts or failures to act occurring prior to
Substantial Completion, or the date of issuance of the final Certificate for
Payment for acts or failures to act occurring after Substantial Completion.
9.4 The Owner and Architect waive all rights against each other and against the
contractors, consultants, agents and employees of the other for damages, but
only to the extent covered by property insurance during construction, except
such rights as they may have to the proceeds of such insurance as set forth in
the edition of AIA Document A201, General Conditions of the Contract for
Construction, current as of the date of this Agreement. The Owner and
Architect each shall require similar waivers from their contractors,
consultants and agents.
9.5 The Owner and Architect, respectively, bind themselves, their partners,
successors, assigns and legal representatives to the other party to this
Agreement and to the partners, successors, assigns and legal representatives of
such other party with respect to all covenants of this Agreement. Neither
Owner nor Architect shall assign this Agreement without the written consent of
the other.
9.6 This Agreement represents the entire and integrated agreement between the
Owner and Architect and supersedes all prior negotiations, representations or
agreements, either written or oral. This Agreement may be amended only by
written instrument signed by both Owner and Architect.
9.7 Nothing contained in this Agreement shall create a contractual relationship
with or a cause of action in favor of a third party against either the Owner or
Architect.
9.8 Unless otherwise provided in this Agreement, the Architect and Architect's
consultants shall have no responsibility for the discovery, presence, handling,
removal or disposal of or exposure of persons to hazardous materials in any
form at the Project site, including but not limited to asbestos, asbestos
products, polychlorinated biphenyl (PCB) or other toxic substances.
9.9 The Architect shall have the right to include representations of the
design of the Project, including photographs of the exterior and interior,
among the Architect's promotional and professional materials. The Architect's
materials shall not include the Owner's confidential or proprietary information
if the Owner has previously advised the Architect in writing of
<PAGE> 8
the specific information considered by the Owner to be confidential or
proprietary. The Owner shall provide professional credit for the Architect on
the construction sign and in the promotional materials for the Project.
ARTICLE 10
PAYMENTS TO THE ARCHITECT
10.1 DIRECT PERSONNEL EXPENSE
10.1.1 Direct Personnel Expense is defined as the direct salaries of the
Architect's personnel engaged on the Project and the portion of the cost of
their mandatory and customary contributions and benefits realted thereto, such
as employment taxes and other statutory employee benefits, insurance, sick
leave, holidays, vacations, pensions and similiar contributions and benefits.
10.2 REIMBURSABLE EXPENSES
10.2.1 Reimbursable Expenses are in addition to compensation for Basic and
Additional Services and include expenses incurred by the Architect and
Architect's employees and consultants in the interest of the Project, as
identified in the following Clauses.
10.2.1.1 Expense of transportation in connection with the Project; expenses in
connection with authorized out-of-town travel; long-distance communications;
and fees paid for securing approval of authorities having jurisdiction over the
Project.
10.2.1.2 Expense of reproductions, postage and handling of Drawings,
Specifications and other documents.
10.2.1.3 If authorized in advance by the Owner, expense of overtime work
requiring higher than regular rates.
10.2.1.4 Expense of renderings, models and mock-ups requested by the Owner.
10.2.1.5 Expense of additional insurance coverage or limits, including
professional liability insurance, requested by the Owner in excess of that
normally carried by the Architect and Architect's consultants.
10.2.1.6 Expense of computer-aided design and drafting epuipment time when
used in conection with the Project.
10.3 PAYMENTS ON ACCOUNT OF BASIC SERVICES
10.3.1 An initial payment as set forth in Paragraph 11.1 is the minimum payment
under this Agreement.
10.3.2 Subsequent payments for Basic Services shall be made monthly and, where
applicable, shall be in proportion to services performed within each phase of
service, on the basis set forth in Subparagraph 11.2.2.
10.3.3 If and to the extent that the time initially established in Subparagraph
11.5.1 of this Agreement is exceeded or extended through no fault of the
Architect, compensation for any services rendered during the additional period
of time shall be computed in the manner set forth in Subparagraph 11.3.2.
10.3.4 When compensation is based on a percentage of Construction Cost and any
portions of the Project are deleted or otherwise not constructed, compensation
for those portions of the Project shall be payable to the extent services are
performed on those portions, in accordance with the schedule set forth in
Subparagraph 11.2.2, based on (1) the lowest bona fide bid or negotiated
proposal, or (2) if no such bid or proposal is received, the most recent
preliminary estimate of Construction Cost or detailed estimate of Construction
Cost for such portions of the Project.
10.4 PAYMENTS ON ACCOUNT OF ADDITIONAL SERVICES
10.4.1 Payments on account of the Architect's Additional Services and for
Reimbursable Expenses shall be made monthly upon presentation of the
Architect's statement of services rendered or expenses incurred.
10.5 PAYMENTS WITHHELD
10.5.1 No deductions shall be made from the Architect's compensation on
account of penalty, liquidated damages or other sums withheld from payments to
contractors, or on account of the charges in the Work other than those for
which the Architect has been found to be liable.
10.6 ARCHITECT'S ACCOUNTING RECORDS
10.6.1 Records or Reimbursable Expenses and expenses pertaining to Additional
Services and services performed on the basis of a multiple of Direct Personnel
Expense shall be available to the Owner or the Owner's authorized
representative at mutually convenient times.
ARTICLE 11
BASIS OF COMPENSATION
The Owner shall compensate the Architect as follows:
11.1 AN INITIAL PAYMENT of One Thousand Dollars ($ 1,000.00)
shall be made upon execution of this Agreement and credited to the Owner's
account at final payment.
11.2 BASIC COMPENSATION
11.2.1 FOR BASIC SERVICES, as described in Article 2. and any other services
included in Article 12 as part of Basic Services. Basic Compensation shall be
computed as follows:
(Insert basis of compensation, including stipulated sums, multiples or
percentages, and identify phases to which particular methods of compensation
apply, if necessary)
Seven percent (7%) of construction cost.
- --------------------------------------------------------------------------------
AIA DOCUMENT B141 - OWNER - ARCHITECT AGREEMENT - FOURTEENTH EDITION - AIA(C) =
(C)1987 THE AMERICAN INSTITUTE OF ARCHITECTS, 1735 NEW YORK AVENUE, N.W.,
WASHINGTON, D.C. 20006
WARNING: Unlicensed photocopying violates U.S. copyright laws and is subject
to legal prosecution.
<PAGE> 9
11.2.2 Where compensation is based on a stipulated sum or percentage of
Construction Cost, progress payments for Basic Services in each phase shall
total the following percentages of the total Basic Compensation payable:
(Insert additional phases as appropriate)
<TABLE>
<S> <C> <C>
Schematic Design Phase: Fifteen percent (15%)
Design Development Phase: Thirty percent (30%)
Construction Documents Phase: Eighty-five percent (85%)
Bidding of Negotiation Phase: Ninety percent (90%)
Construction Phase: One Hundred percent (10%)
- -------------------------------------------------------------------------
Total Basic Compensation: one hundred percent (100%)
</TABLE>
11.3 COMPENSATION FOR ADDITIONAL SERVICES
11.3.1 FOR PROJECT REPRESENTATION BEYOND BASIC SERVICES, as described in
Paragraph 3.2, compensation shall be computed as follows:
$60,/Hour - C.E. Block Architect personnel
11.3.2 FOR ADDITIONAL SERVICES OF THE ARCHITECT, as described in Articles 3
and 12, other than (1) Additional Project Representation, as described in
Paragraph 3.2, and (2) services included in Article 12 as part of Basic
Services, but excluding services of consultants, compensation shall be computed
as follows:
(Insert basis of compensation, including rates and/or multiples of Direct
Personnel Expense for Principals and employees, and identify Principals and
classify employees if required. Identify specific services to which particular
methods of compensation apply, if necessary.)
$60./Hour - C.E. Block Architect personnel
11.3.3 FOR ADDITIONAL SERVICES OF CONSULTANTS, including additional
structural, mechanical and electrical engineering services and those provided
under Subparagraph 3.4.19 or identified in Article 12 as part of Additional
Services, a multiple of one and two-tenths (1.2) times the amounts billed to
the Architect for such services.
(Identify specific types of consultants in Article 12, if required.)
11.4 REIMBURSABLE EXPENSES
11.4.1 FOR REIMBURSABLE EXPENSES, as described in Paragraph 10.2, and any
other items included in Article 12 as Reimbursable Expenses, a multiple of one
and two-tenths (1.2) times the expenses incurred by the Architect, the
Architect's employees and consultants in the interest of the Project.
11.5 ADDITIONAL PROVISIONS
11.5.1 IF THE BASIC SERVICES covered by this Agreement have not been
completed within eighteen (18) months of the date hereof, through no fault of
the Architect, extension of the Architect's services beyond that time shall be
compensated as provided in Subparagraphs 10.3.3 and 11.3.2.
11.5.2. Payments are due and payable fourteen (14) days from the date of the
Architect's invoice. Amounts unpaid thirty (30) days after the invoice date
shall bear interest at the rate entered below, or in the absence thereof at the
legal rate prevailing from time to time at the principal place of business of
the Architect.
(Insert rate of interest agreed upon.)
(Usury laws and requirements under the Federal Truth in Lending Act, similar
state and local consumer credit laws and other regulations at the Owner's and
Architect's principal places of business, the location of the Project and
elsewhere may affect the validity of this provision. Specific legal advice
should be obtained with respect to deletions or modifications, and also
regarding requirements such as written disclosures or waivers.)
- --------------------------------------------------------------------------------
AIA DOCUMENT B141 - OWNER - ARCHITECT AGREEMENT - FOURTEENTH EDITION - AIA(C) =
(C)1987 THE AMERICAN INSTITUTE OF ARCHITECTS, 1735 NEW YORK AVENUE, N.W.,
WASHINGTON, D.C. 20006
WARNING: Unlicensed photocopying violates U.S. copyright laws and is subject
to legal prosecution.
<PAGE> 10
11.6.3 The rates and multiples set forth for Additional Services shall be
annually adjusted in accordance with normal salary review practices of the
Architect.
ARTICLE 12
OTHER CONDITIONS OR SERVICES
(Insert descriptions of other services, modify Additional Services included
within Basic Compensation and modifications to the payment and compensation
terms included in this Agreement.)
1. Building engineering included.
2. Civil engineering additional cost to Architectural/Engineering fee.
3. Building structural engineering is based on normal soil conditions.
This Agreement entered into as of the day and year first written above.
OWNER Architect
/s/ 9/30/96
- ------------------------ ----------------------------------
(Signature) (Signature)
- ------------------------ ----------------------------------
(Printed name and title) (Printed name and title)
AIA [LOGO]
Caution: You should sign an original AIA document which has this caution
printed in red. An original assures that changes will not be obscured as may
occur when documents are reproduced.
- --------------------------------------------------------------------------------
AIA DOCUMENT B141 - OWNER - ARCHITECT AGREEMENT - FOURTEENTH EDITION - AIA(C) =
(C)1987 THE AMERICAN INSTITUTE OF ARCHITECTS, 1735 NEW YORK AVENUE, N.W.,
WASHINGTON, D.C. 20006
WARNING: Unlicensed photocopying violates U.S. copyright laws and is subject
to legal prosecution.
<TABLE> <S> <C>
<ARTICLE> 5
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<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> AUG-31-1997
<PERIOD-START> SEP-01-1996
<PERIOD-END> NOV-30-1996
<EXCHANGE-RATE> 1
<CASH> 3,941,000
<SECURITIES> 0
<RECEIVABLES> 2,116,000
<ALLOWANCES> 562,000
<INVENTORY> 0
<CURRENT-ASSETS> 5,973,000
<PP&E> 2,959,000
<DEPRECIATION> 2,569,000
<TOTAL-ASSETS> 9,215,000
<CURRENT-LIABILITIES> 5,490,000
<BONDS> 80,000
0
0
<COMMON> 83,000
<OTHER-SE> 3,510,000
<TOTAL-LIABILITY-AND-EQUITY> 9,215,000
<SALES> 0
<TOTAL-REVENUES> 2,212,000
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,925,000
<LOSS-PROVISION> 46,000
<INTEREST-EXPENSE> 3,000
<INCOME-PRETAX> 314,000
<INCOME-TAX> (31,000)
<INCOME-CONTINUING> 345,000
<DISCONTINUED> 0
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<EPS-PRIMARY> 0.04
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