UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
|X| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 1997
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from ______________ to ___________________
Commission File Number: 1-12624
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Syratech Corporation
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(Exact name of registrant as specified in its charter)
Delaware 13-3354944
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(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
175 McClellan Highway
East Boston, Massachusetts 02128-9114
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(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code - 617-561-2200
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Securities registered pursuant to Section 12(b) of the Act: Name of each
exchange on which registered:
None
Securities registered pursuant to Section 12(g) of the act:
None
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months, and (2) has been subject to such filing requirements
for the past 90 days. YES X NO
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Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
The aggregate market value of voting stock held by non-affiliates is
not applicable as no public market for the voting stock of the registrant
exists. Number of the registrant's Shares of Common Stock, Par Value $0.01 per
share, outstanding at March 21, 1998 - 3,784,018.
DOCUMENTS INCORPORATED BY REFERENCE
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FORWARD-LOOKING STATEMENTS
The Private Securities Litigation Reform Act of 1995 provides a "safe
harbor" for forward-looking statements. Except for the historical information
contained or incorporated by reference in this Annual Report on Form 10-K, the
matters discussed or incorporated by reference herein are forward-looking
statements. Such forward-looking statements involve known and unknown risks,
uncertainties and other factors that may cause the actual results, performance
or achievements of the Company, or industry results, to be materially different
from any future results, performance or achievements expressed or implied by
such forward-looking statements. Such factors include, among others, general
economic and business conditions; industry capacity; industry trends; overseas
expansion; the loss of major customers; changes in demand for the Company's
products; the timing of orders received from customers; cost and availability of
raw materials; dependence on foreign sources of supply; changes in business
strategy or development plans; availability and quality of management;
availability, terms and deployment of capital; and the seasonal nature of the
business. SPECIAL ATTENTION SHOULD BE PAID TO SUCH FORWARD-LOOKING STATEMENTS
INCLUDING, BUT NOT LIMITED TO, STATEMENTS RELATING TO (I) THE COMPANY'S ABILITY
TO EXECUTE ITS GROWTH STRATEGIES AND TO REALIZE ITS GROWTH OBJECTIVES, (II) THE
COMPANY'S PLANNED EXPANSION OF ITS PRODUCT OFFERINGS, (III) THE COMPANY'S
ABILITY TO OBTAIN SUFFICIENT RESOURCES TO FINANCE ITS WORKING CAPITAL AND
CAPITAL EXPENDITURE NEEDS AND PROVIDE FOR ITS KNOWN OBLIGATIONS, AND (IV) THE
CONTINUATION OF, AND THE COMPANY'S ABILITY TO BENEFIT FROM, THE VENDOR
CONSOLIDATION TREND IN THE RETAIL INDUSTRY DESCRIBED ELSEWHERE IN THE ANNUAL
REPORT ON FORM 10-K.
PART I
ITEM 1. BUSINESS
Overview
Syratech Corporation (the "Company") designs, manufactures, imports and
markets a diverse portfolio of tabletop, giftware and seasonal products. The
Company is one of the leading domestic manufacturers and marketers of sterling
silver flatware, sterling silver and silver-plated hollowware. The Company also
offers a number of other complementary tabletop and giftware items, including
stainless steel flatware, brass hollowware, picture frames and photo albums,
glassware, woodenware and ceramics. Tabletop and giftware products generated
approximately 67% of net sales for the year ended December 31, 1997. The Company
is also a leading domestic manufacturer and marketer of seasonal products
including Christmas ornaments, as well as a distributor of Christmas trim,
lighting and tree skirts. Seasonal products generated approximately 33% of net
sales for the year ended December 31, 1997.
The Company has positioned itself as a single-source supplier to retailers
by offering a wide assortment of products across multiple prices points through
its "good-better-best" strategy. This strategy enables the Company to sell its
products through a broad array of distribution channels, including retail
specialty stores, department stores, mass market merchandisers, catalogue
showrooms, warehouse clubs, premium and incentive marketers, drug store chains
and home centers. Such growth was achieved through recent acquisitions, the
addition of new products and product categories and expanded distribution of
existing products. The Company markets its products under numerous Company-owned
tradenames including Towle Silversmiths, Wallace International Silversmiths and
International Silver Company tradenames which are used in connection with the
sale of tabletop and giftware items, and the Rauch, Silvestri and Potpourri
tradenames which are used in connection with the sale of Christmas and other
seasonal merchandise.
Recent Merger and Recapitalization
On April 16, 1997, THL Transaction I Corp., ("THL I"), a Delaware
corporation, controlled by affiliates of Thomas H. Lee Company ("THL"), was
merged with and into the Company (the "Merger") pursuant to the Restated
Agreement and Plan of Merger. Pursuant to the Merger, each share of the
Company's Common Stock, par value $0.01 per share ("Common Stock") issued and
outstanding immediately prior to the effective time of the Merger (the
"Effective Time") (April 16, 1997) (other than (i) shares of Common Stock held
by the Company or any wholly-owned subsidiary thereof, and (ii) 35,232 shares of
Common Stock that were contributed to the Company by Leonard Florence (former
principal shareholder) upon the Merger and which were then canceled and retired)
was entitled to receive at the election of the holder thereof and as stated
below, either (a) $32.00 in cash (except that Leonard Florence received $28.00
in cash) or (b) one fully paid and non-assessable share of the Company's Common
Stock.
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Upon the Merger, THL acquired, directly from the Company, an aggregate of
18,000 shares which represented 100% of the Company's 12% Cumulative Redeemable
Preferred Stock and 2,374,793 shares in exchange for corresponding stock
interests in THL I, for which THL paid an aggregate of $94 million in cash.
Accordingly, THL, through its investments, controls the Company.
At the Effective Time, the Company entered into debt financing arrangements
consisting of $165 million principal amount of 11% Senior Notes (the "Notes")
and a Senior Revolving Credit Facility of $130 million (the "Revolving Credit
Facility"). The amount invested by THL in THL I, the purchase price for the
Cumulative Redeemable Preferred Stock, plus proceeds of the Notes and a portion
of the proceeds available pursuant to the Revolving Credit Facility were used to
finance the acquisition of the shares of the Company's outstanding Common Stock
that were not retained by the Company's then existing stockholders, and to
refinance the Company's outstanding indebtedness. The Revolving Credit Facility
is also intended to provide for the Company's working capital requirements at
the time of and following the Merger.
The transaction was accounted for as a recapitalization.
See Management's Discussion and Analysis of Financial Condition and Results
of Operations - Recent Transactions and the Notes to the Consolidated Financial
Statements.
Competitive Strengths
The Company's goal is to become the leading domestic, single-source
supplier of tabletop, giftware and seasonal products to retailers. To achieve
this goal, the Company will rely on its core competitive strengths, which are as
follows:
Leading Market Positions. The Company is one of the leading domestic
marketers and manufacturers of sterling silver flatware and sterling silver and
silver-plated hollowware. These products are sold under the Wallace, Towle and
International Silver tradenames, which are well recognized and date back to the
American Colonial period. In addition, the Company is one of the leading
domestic manufacturers of Christmas ornaments. These products are sold under the
Rauch, Silvestri and Potpourri tradenames, which are well-established brands for
Christmas and other seasonal merchandise. Historically, the Company has been
able to increase sales by leveraging its leading market positions, strong
presence with retailers, and strong brand identity with consumers to introduce
new products and product categories.
Broad Portfolio of Products with Well-Recognized Tradenames. The Company
provides a broad offering of quality products at multiple price points. These
items range from exclusive prestige products, such as sterling silver flatware
and hollowware, to moderately priced products, including silver-plated and
stainless steel flatware, silver-plated and brass hollowware and other giftware
and seasonal merchandise.
Syratech uses Company-owned and licensed tradenames as merchandising tools
to assist retailers in coordinating their product offerings and differentiating
their products from those of their competitors. In addition to the Wallace,
Towle and International Silver, Rauch, Silvestri and Potpourri tradenames, the
Company markets giftware products under numerous other tradenames, including
Rochard, Holiday Workshop, Melannco and Elements. The Company believes that its
strongest brands draw customers into retail stores specifically to purchase
products bearing those tradenames. In addition to its own tradenames, the
Company produces a variety of products under license from certain entities
including Warner Bros.(R), Cuisinart(R), and the Victoria & Albert Museum(R).
The Company recently acquired certain assets, including the intellectual
property, of Farberware, Inc. Following this acquisition, the Company licensed
the Farberware tradename to third parties for use on cookware and bakeware,
small electric and certain other commercial electric items. The Company is
currently marketing certain products under the Farberware tradename and believes
there are significant opportunities to develop the tradename in other product
categories which have not been otherwise licensed to third parties.
The Company's diverse product lines allow it to target a wide range of
customers and to respond more effectively to changes in retail distribution and
consumer preferences. Furthermore, the vendor consolidation trend in the retail
industry increases demand for vendors, like the Company, who can make timely
deliveries of a broad range of quality products and provide advertising and
other sales support.
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Diversified Distribution Channels. The Company sells its products to
approximately 35,000 customers in most major distribution channels, including
retail specialty stores, such as jewelry, seasonal and nonseasonal giftware and
collectible stores, department stores, mass market merchandisers, catalogue
showrooms and warehouse clubs, premium and incentive marketers, drug store
chains and home centers. The Company believes that the Rauch and Silvestri
acquisitions will strengthen the Company's presence with mass-market
merchandisers and department and specialty stores, respectively. In addition,
the Company has a policy of not owning or operating Company outlet stores and
believes that this policy further strengthens relationships with customers. The
Company's broad customer base, both in terms of number of customers and channels
of distribution, reduces its exposure to any single customer or channel of
distribution. In 1997, no single customer accounted for 10% or more of the
Company's net sales.
Innovative Product Development. The Company's design team and independent
designers in conjunction with the Company's product development and marketing
team design the vast majority of the Company's products, including products that
are sourced from outside vendors. The Company's design and product development
and marketing teams collaborate (i) to introduce innovative new products and
product categories, such as the Holiday Workshop line of seasonal products, the
Hostess Helpers(R) sterling accessory line and a dinnerware category that
coordinates with sterling silver flatware and (ii) to develop acquired brands
into substantial product lines for the Company, such as the Melannco lines of
picture frames and photo albums and the Elements glassware lines.
Integrated Manufacturing and Sourcing. The Company relies both on its own
domestic manufacturing capabilities and on a variety of suppliers located
primarily in the Asia Pacific Rim to deliver quality products at competitive
prices to its customers. The Company's decision on whether to manufacture or
import is based largely on expertise, quality, availability and cost. In order
to ensure quality, certain imported products are manufactured using
Company-owned tools and dies. In 1997, through its import organization comprised
of approximately 148 employees, both in the U.S. and overseas, the Company
sourced products from overseas manufacturers, with whom in many cases it has
long-standing relationships.
Business Strategy
The Company has developed and is implementing a business strategy to build
upon its core operating strengths and enhance profitability.
Leverage Recent Acquisitions. The Company believes the opportunities for
growth in sales and profitability exist through successfully integrating its
recent acquisitions into the Company's sales and marketing organization and
consolidating and rationalizing certain operations. Historically, the Company
has expanded and augmented acquired product lines through leveraging internal
marketing expertise and existing distribution lines.
The Company plans to expand the distribution of Rauch, Silvestri and
Potpourri products by marketing them through the Company's established
distribution channels and plans to add new products to their existing lines. By
integrating Rauch, Silvestri and Potpourri with the Company's internally
developed Holiday Workshop line of seasonal products, the Company has
significantly expanded its product offerings in this product category, both in
terms of types of product and retail price points, and strengthened its presence
in major retail channels. In addition, the Company believes that such
strengthened presence will provide the Company with substantial opportunities to
cross-sell the Company's tabletop and giftware product lines through Rauch and
Silvestri distribution channels.
Through the acquisition of C.J. Vander, the Company hopes to expand the
distribution of Wallace and Towle sterling silver and silver-plated product
lines into the European market, primarily through C.J. Vander's existing
distribution channels. In addition, the Company intends to expand the
distribution of C.J. Vander products in the United States, through the Company's
independent representatives who sell to high-end specialty and department
stores.
Expanded Distribution of Existing Product Lines. The Company believes that
it has significant opportunities to expand the distribution of its existing
product lines by increasing the penetration of existing retailer customers and
the number of retail outlets to which it sells. Beginning in 1994, the Company
implemented a program with a specialty retailer and franchisee, whereby the
Company sources, markets and distributes giftware products for the customer's
retail system comprised of several thousand stores. As a result, the Company has
identified several growth opportunities, both in terms of expanded product
offerings and additional store coverage. In addition, the Company intends to
expand the distribution of several product lines introduced in the past several
years,
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such as Melannco and Elements product lines, which the Company believes are
growth opportunities which have not yet been fully exploited.
Broaden Product Offerings. The Company expects to make a number of new
product introductions each year. As a result of planned investments in tools,
dies and machinery, the Company believes that it will be able to broaden
significantly its offering of Christmas and other seasonal merchandise. The
Company intends to capitalize on the Farberware tradename by introducing new
products in categories as to which exclusive rights to the tradename have not
been granted to third parties. In addition, the Company continues to expand and
upgrade its line of sterling silver, silver-plated and other tabletop and
giftware products.
Invest Further in Technology and Productivity to Maintain Low Cost
Structure. In order to support the growth of the business, the Company, during
1997 and through the first quarter of 1998, will have invested over $20 million
for a 886,000 square foot warehouse and distribution center in Mira Loma,
California which will serve as its western region warehouse and distribution
center. The Company intends to invest in additional application solutions to
enhance its Electronic Data Interchange (EDI) and warehousing capabilities. The
Company plans to add a Warehouse Management System (WMS) to each of its
warehouses. These systems will enhance the Company's ability to service its
customers by improving its order processing and logistics and storage
utilization, minimize order cycle times, enhance inventory management, and
ensure that customer orders are processed efficiently. The Company is planning
to expand its manufacturing capabilities by acquiring new tools and dies and
machinery. In 1996, the Company also purchased a 828,000 square foot
manufacturing and distribution facility in Chester, South Carolina which will
increase production capacity and reduce costs.
Make Selected Acquisitions. The Company believes that the giftware and
seasonal markets and, to a lesser extent, the tabletop market are highly
fragmented with a number of small manufacturers and marketers of a limited line
of products. The Company believes that these industry dynamics and the
continuing trend among retailers to consolidate their vendor base will generate
attractive opportunities to acquire complementary brands, products, product
categories and businesses that will provide operating synergies.
Limitations on Growth Strategy. The Company's ability to follow the growth
plans outlined in preceding paragraphs may be constrained by the availability
and cost of capital. Immediately following the Merger there was a substantial
decrease in stockholders' equity (see the Company's Consolidated Financial
Statements Note 2) and, as a consequence, the Company may find it necessary to
curtail or abandon some or all of its growth plans.
Products
The Company designs, manufactures, imports and markets a diverse offering
of quality tabletop, giftware and seasonal products. The Company defines
seasonal products as Christmas tree ornaments, other Christmas decorations and a
variety of other products sold for Halloween, Easter, Thanksgiving, Mother's Day
and Valentine's Day. Seasonal products are marketed under a variety of the
Company's tradenames. Seasonal products are included in the Tabletop and
Giftware product category and are marketed under the Wallace, Towle, and
International Silver tradenames. For example, the Company considers picture
frames a tabletop and giftware item and also considers it seasonal just by
changing the packaging slightly (e.g., a red colored box at Christmas time).
Therefore, a certain number of the Company's products and/or product lines are
sold as both Tabletop and Giftware and as Seasonal products.
The following table presents a breakdown of the Company's net sales by
major product categories for the periods presented. For the purpose of this
table, seasonal products include the Rauch (including Rochard), Silvestri and
Holiday Workshop product lines. Certain seasonal products marketed under
Wallace, Towle and International Silver trademarks are included in the tabletop
and giftware product category.
Year Ended December 31,
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1997 1996 1995
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Tabletop and Giftware....... $193,950 $171,824 $153,170
Seasonal.................... 96,912 99,107 16,530
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Total....... $290,862 $270,931 $169,520
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The majority of the Company's products are sold through the same
distribution channels. Customers in each distribution channel purchase a wide
range of the Company's products. Distribution costs are not tracked by product
category and therefore are not
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distinguishable between Tabletop and Giftware and Seasonal. In addition, selling
and marketing costs, including product design, trade shows and travel, are not
tracked separately and are not reasonably allocable by product category.
A significant portion of the Company's products are also sourced overseas.
This function is also not performed by product or product lines and is therefore
not reasonably allocable by product category.
The Company also believes that a significant change in sales of specific
products will not materially impact operating results.
The Company's products include those shown below; all of which are marketed
under one of the Company's many well-recognized tradenames as follows:
Tabletop and Giftware
Sterling Silver and Silver-plated Flatware and Hollowware. The Company
designs, markets and distributes a variety of products in these categories,
including flatware, serving pieces, cosmetic accessories and hollowware, such as
candlesticks, casseroles and coffee and tea services under the tradenames
Wallace Silversmiths(R), Towle Silversmiths(R), International Silver Company(R),
C.J. Vander(TM) and Tuttle Sterling(R). A majority of the Company's products in
this category are manufactured at the Company's plants in Puerto Rico and
Massachusetts. These products are sold primarily to specialty stores, including
jewelry stores and gift stores, and department stores and are generally included
in bridal registries.
Stainless Steel Flatware. The Company designs, markets and distributes
several lines of stainless steel flatware ranging from premium mass-produced
sets to high-end flatware place settings. The Company markets these products
under tradenames such as Wallace Silversmiths(R), Towle Silversmiths(R),
International Silver Company(R), 1847 Rogers Bros.(R) and, under a license
agreement, the tradename Cuisinart(R). The Company's products in this category
are imported from the Company's third-party vendors located primarily in the
Asia Pacific Rim. The primary channels of distribution include department
stores, mass-market merchandisers, warehouse clubs and specialty stores and
these products are also included in bridal registries.
Picture Frames and Photo Albums. The Company designs, markets and
distributes several lines of picture frames and photo albums. The picture frames
range from sterling silver on the high end to a variety of other frames produced
in wood, resin, ceramic, metal and other mediums. The photo albums are produced
in metal, fabric and resin. The Company markets these products under tradenames
such as Melannco International(R), International Silver Company(R), Wallace
Silversmiths(R) and Towle Silversmiths(R) and under a license agreement, the
tradename, The Walt Disney Company(R). The Company's products in this category
are imported from the Company's third-party vendors located primarily in the
Asia Pacific Rim. The channels of distribution include department stores,
including stationery departments, specialty stores and mass market
merchandisers.
Glassware, Woodenware and Ceramics. The Company designs, markets and
distributes several lines of glassware products, including beverageware, glass
dinnerware, serveware and accessories, glass vases, candle lighting and salad
sets. The Company markets these products under the tradenames International
Silver Company(R), Elements(R), Farberware(R), Ambrosia(R), and under a license
agreement, the tradename Cuisinart(R). The Company designs, markets and
distributes a line of woodenware which includes woodenware and a line of ceramic
serveware and storage. The Company markets these products under the
Farberware(R) tradename. The Company's products in this category are imported
from the Company's third-party vendors located primarily in the Asia Pacific
Rim. The channels of distribution of the Company's glassware line include
mass-market merchandisers, department stores, warehouse clubs and specialty
stores.
Porcelain Boxes. The Company designs, markets and distributes a diverse
range of high-end, hand-painted porcelain boxes under the Rochard(TM) tradename
which are primarily manufactured by third-party vendors located primarily in
France. The channels of distribution include specialty stores, including jewelry
stores and department stores.
Other Tabletop and Giftware. The Company designs, markets and distributes a
wide range of other tabletop and giftware products, including premium products
such as picture frames and cosmetic accessories as "gift with purchase" items,
stainless steel kitchen and bath accessories, brassware, napkin rings and
decorative clocks. The primary channels of distribution include department
stores, mass-market merchandisers, warehouse clubs and specialty stores.
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Seasonal Products
Christmas Ornaments. The Company designs, markets and distributes Christmas
tree ornaments made of glass, satin, ceramic and resin. The Company's products
are distributed through specialty stores, department stores, jewelry stores,
mass market merchandisers and warehouse clubs. These products are marketed under
the tradenames Rauch(R), Silvestri(R), Holiday Workshop(R), Potpourri Press(R),
and International Christmas(TM). The Company also manufactures limited edition,
sterling silver Christmas ornaments that are marketed under the tradenames
Wallace Silversmiths(R) and Towle Silversmiths(R).
Other Christmas Decorations. The Company designs, markets and distributes a
diverse product offering of other Christmas decorations including figurines,
waterglobes, collectibles, trim, lighting, tree skirts and other decorative
items produced in wood, resin, metal, paper, textiles, glass and ceramic. These
products are marketed under the tradenames Silvestri(R), Rauch(R), Holiday
Workshop(R), Potpourri Press(R), International Christmas(TM). These products are
distributed through specialty stores, department stores, mass market
merchandisers and warehouse clubs.
Other Seasonal Products. The Company designs, markets and distributes a
variety of other seasonal products for Halloween, Easter, Thanksgiving, Mother's
Day and Valentine's Day. These products include figurines, vases, bowls, trays
and other items comprised of metal, resin, wood, ceramic and glass. These
products are distributed through specialty stores, department stores, mass
market merchandisers and warehouse clubs.
Sales, Marketing and Distribution
During 1997, and through the first quarter of 1998, the Company will have
invested over $20 million on an 886,000 square foot warehouse and distribution
center in Mira Loma, California, which will serve as its western region
warehouse and distribution center.
The Company sells many different types of products, with a variety of price
points and target customers. Accordingly, the Company sells its products through
a variety of distribution channels including department and specialty stores,
mass market merchandisers, and warehouse clubs, catalogue showrooms, drugstores,
supermarkets, incentive marketers and jewelry stores. The Company maintains
separate sales forces for its product lines so as to provide the specialized
expertise and attention necessary to service its customer base. The Company's
sales and marketing staff coordinates with individual retailers to devise
marketing strategies and merchandising concepts and to furnish advice on
advertising and product promotion. The Company has developed several promotional
programs for use in the ordinary course of business to promote sales throughout
the year.
The Company's various sales and marketing efforts are supported from its
principal office and showroom in East Boston, Massachusetts and, for certain of
its products, from its offices and showrooms in Hong Kong and London. The
Company maintains additional showrooms in New York, Los Angeles, Atlanta and
Dallas. The Company's sales and marketing staff at December 31, 1997, consisted
of approximately 130 employees who are salaried, paid commissions based on sales
or, in some instances, paid a base salary plus commissions. The Company also
distributes certain of its products through independent sales representatives
who work on a commission basis only.
Retailing Customers
During 1997, 20 customers accounted for approximately 40% of the Company's net
sales. No one customer represented 10% or more of the Company's net sales.
1997 Channels of Distribution % of 1997 Net Sales
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Mass Market Merchandises, Catalogue Showrooms, Warehouse Clubs,
Drug Stores, Supermarkets.......................................... 30%
Department Stores..................................................... 27%
Specialty Stores, Jewelry Stores, Premium and Incentive Marketers..... 43%
In order better to service its customers, the Company has invested in
equipment and software to allow its customers to transmit their orders
electronically throughout the EDI system.
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Manufacturing and Raw Materials
The Company produces its sterling silver flatware at its manufacturing
facility in San German, Puerto Rico, where it fabricates and manufactures
sterling silver into finished products for the Wallace, International, Towle and
Tuttle lines, and at its facility in Sheffield, England for C.J. Vander, Ltd.
and Roberts and Belk. The Company also designs, produces and maintains the tools
required for manufacturing sterling silver flatware.
The Company has maintained, in the aggregate, approximately six months of
inventory. The Company's silver fabrication operation in its Puerto Rico
manufacturing plant became fully operational during 1994. This process reduces
the need for purchasing fabricated silver from outside vendors. The Company uses
fabricated silver in its manufacturing operations. Fabricated sterling silver
made from fine silver purchased by the Company may be readily obtainable from
outside resources as well. The Company purchases fine silver in the spot market
in quantities the Company believes are adequate to meet reasonably foreseeable
consumer demand for its silver products. The Company does not engage in
speculative purchases of fine silver. In the five-year period ended December 31,
1997, the closing price of silver as quoted by Handy & Harman Inc. has ranged
from $3.54 per troy ounce to $6.71 per troy ounce ($6.12 at March 12, 1998).
The Company manufactures silver-plated giftware and tabletop products,
including hollowware, at its manufacturing and silver-plating facilities in
North Dighton, Massachusetts and in Sheffield, England. These facilities have
all the stamping, processing, soldering, finishing, polishing, silver-plating
and packaging capabilities necessary to turn unfinished metal into finished
products.
The Company's imported products originate as designs created by its
internal design staff or by independent designers, in each case in conjunction
with the Company's product development and marketing staffs. Products based on
these designs are manufactured to the Company's specifications in various
countries including Hong Kong, India, Korea, Taiwan, the People's Republic of
China and Japan.
In 1997, the Company purchased an aggregate of approximately $123 million
of products from approximately 800 foreign manufacturers. No vendor accounted
for 10% or more of such purchases in 1997. The Company does not have information
on the financial condition of its major foreign vendors, all of which are
privately held, but is not aware of any unfavorable information related to their
respective financial condition. Of the Company's foreign purchases in 1997,
approximately 87% were from vendors located in the Far East; approximately 4%
were from vendors located in India and approximately 9% in the aggregate from
vendors in other locations. The Company's arrangements with its manufacturers
are subject to the risks of doing business abroad, including risks associated
with foreign currency and potential import restriction. The Company also is
subject to risks associated with the availability of, and time required for, the
transportation of products from foreign countries, including shipping losses or
lost sales that may result from delays or interruptions in shipping. The Company
does not believe that the loss of any single foreign supplier would have a
material long-term adverse impact on the Company's source of supply, as other
suppliers with whom the Company does business would be able to increase
production to fulfill the Company's requirements.
The Company has invested in increasing production capacity and improving
productivity related to its Rauch operations. For several of the prior selling
seasons, the Company believes that Rauch had operated under capacity
constraints. The Company has developed and installed new automatic machinery
which was installed during the first quarter of 1997. The Company is in the
process of improving the design and operation of the new machinery and
anticipates that Rauch's total production capacity will have increased to 150%
of its capacity prior to installation. In 1996, the Company also purchased an
828,000 square foot building in Chester, South Carolina, which is in close
proximity to the existing Rauch manufacturing plant. This new facility has
allowed adequate space for the new machinery is expected to reduce costs
substantially. This large warehouse and distribution center has allowed the
Company to consolidate its outside warehousing and manufacturing. The Company
continuously looks for opportunities for new equipment to reduce production
costs.
The recently acquired Rauch Christmas decoration manufacturing process uses
three basic raw materials: (i) expandable polystyrene ("EPS") for unbreakable
ornaments, (ii) glass ornament blanks and (iii) acetate or polyester yarn
materials including boxes and packaging. To produce Christmas stockings, tree
skirts and Santa Claus hats and suits, Rauch purchases non-woven and knitted
pile fabric. Rauch has not experienced difficulty in obtaining raw materials or
other supplies from its suppliers and does not anticipate any such difficulty in
the foreseeable future. Rauch imports ornament hangers, small glass and satin
balls and assorted tree and off-the-tree decorations from Taiwan, Hong Kong,
Mexico and Colombia.
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Competition
The tabletop, giftware and seasonal products industries in which the
Company is engaged are highly competitive. Not only the large number of domestic
manufacturers affects competition, but also the large volume of foreign imports.
Several of the Company's competitors are larger and have greater financial
resources than the Company. The Company's products compete indirectly with a
broad range of household products not offered by the Company. Within the overall
tabletop products industry, the production of sterling silver flatware in the
United States is relatively concentrated, with five manufacturers, including the
Company, accounting for substantially all of the sterling silver flatware
manufactured and sold in the United States. The other principal manufacturers
and marketers of sterling silver flatware are Gorham, Inc. and its affiliate The
Kirk Steiff Company, Reed & Barton Corp. and Lunt Silversmiths, all of which
have been in business for many years. The giftware and seasonal products
industries, however, are very fragmented with numerous small manufacturers and
marketers of a limited number of products. The Company is not aware of any
competitor having the same product line breadth.
A number of factors affect competition in the sale of products of the type
manufactured, imported and sold by the Company. Among these are brand
identification, style, design, packaging, price, quality, promotion, sales staff
and the level of service provided to customers. The importance of these
competitive factors varies from customer to customer and from product to product
and no one of these factors is dominant in all cases. The Company believes that
its ability to compete effectively can be attributed to its performance in all
of these areas. Certain of the Company's foreign competitors have tried to gain
market share in the United States by producing low-cost items and by taking
advantage of the increased purchasing power of the dollar in times when the
dollar is relatively strong as compared to foreign countries. Rising labor costs
in many foreign countries and the relative weakness of the dollar, as compared
to the exchange rates prevailing in the mid-1980's, have reduced these
advantages to some extent in recent years.
Trademarks, Copyrights and Patents
The success of the Company's various businesses depends in part on the
Company's ability to exploit certain proprietary designs, trademarks and brand
names on an exclusive basis in reliance upon the protections afforded by
applicable copyright, patent and trademark laws and regulations. The loss of
certain of the Company's rights to such designs, trademarks and brand names or
the inability of the Company effectively to protect or enforce such rights could
adversely affect the Company. The Company does not believe that there is a
significant danger that it will lose its rights to any of its material
trademarks and tradenames or be unable effectively to protect or enforce such
rights. Although the loss of any right to designs, trademarks and tradenames
could have negative effects, any such effects are unlikely to be material.
Seasonality
Sales are generally higher in the third and fourth quarters and are
strongly influenced by the buying patterns associated with the Christmas season.
The acquisitions of Rauch, Silvestri and Potpourri Press have increased the
seasonality of the Company since the majority of Rauch, Silvestri and Potpourri
Press products are Christmas items. The Company's needs for working capital
accelerate in the second half of the year and, accordingly, total debt levels
tend to peak in the third and fourth quarters, falling off again in the first
quarter of the following year. The amount of the Company's sales generated
during the second half of the year generally depends upon a number of factors,
including general economic conditions, and other factors beyond the Company's
control. The Company's results of operations would be adversely affected and
disproportionately affected if the Company's sales were substantially lower than
those normally expected during the second half of the year. The Company
continues to introduce products appropriate to other holidays and seasons in
order to increase sales during the first and second quarters.
Backlog and Warranty
The Company's backlog consists of cancelable orders and is dependent upon
trends in consumer demand throughout the year. Customer order patterns vary from
year to year, largely because of annual differences in consumer acceptance of
product lines, product availability, marketing strategies, inventory levels of
retailers and differences in overall economic and weather conditions. Orders for
the Company's products are generally subject to cancellation until shipment. As
a result, the Company's backlog consists of cancelable orders and is dependent
upon trends in consumer demand throughout the year. Customer order patterns vary
from year to year, largely because of annual differences in consumer acceptance
of product lines, product availability, marketing strategies, inventory levels
of retailers and differences in overall economic and weather conditions. As a
result, comparison of backlog as of any
8
<PAGE>
date in a given year with backlog at the same date in a prior year is not
necessarily indicative of sales trends. The Company had (exclusive of
Farberware) a backlog of approximately $19.7 million as of December 31, 1997,
compared to approximately $24.3 million as of December 31, 1996. See
"Seasonality." The Company does not believe that backlog is necessarily
indicative of the Company's future results of operations or prospects.
The Company's warranty policy is to accept returns of products with defects
in materials or workmanship. The Company will also accept returns of incorrectly
shipped goods where the Company has been notified on a timely basis and, in
certain cases, to maintain customer goodwill. In accordance with normal retail
industry practice, the Company ordinarily accepts returns only from its
customers and does not ordinarily accept returns directly from consumers.
Certain of the products returned to the Company by its customers, however, may
have been returned to those customers by consumers. The Company will routinely
accept returns for imported products that are received late by the customer. The
majority of the returned products are resold into the same distribution channel.
During the three year period ended December 31, 1997, returns and allowances
amounted to approximately 2.7% of sales.
Environmental Regulation
The Company's manufacturing operations, including silverplating, chrome
plating, tool making and painting operations routinely involve the handling of
waste materials that are classified as hazardous. The Company also refabricates
certain materials used in its silverplating operations. The Company is subject
to certain domestic federal, state and local laws and regulations concerning the
containment and disposal of hazardous materials and, therefore, in the ordinary
course of its business. The Company incurs compliance costs and may be required
to incur clean-up costs. The Company's C.J. Vander facility is also subject to
many environmental regulations related to its plating operations in the United
Kingdom. Based upon currently available information, the Company does not expect
that the costs of such compliance and clean-up costs will be material. Actions
by federal, state and local governments concerning environmental matters could
result in laws or regulations that could increase the cost of producing the
products manufactured by the Company or otherwise adversely affect the demand
for its products. In addition, the future costs of compliance with environmental
laws and regulations and liabilities resulting from currently unknown
circumstances or developments could be substantial and could have a material
adverse effect on the Company. For example, certain laws and regulations could
impose liability upon the Company for any historic releases of hazardous
substances from facilities that it has owned or operated, or, from facilities to
which its waste materials have been transported for treatment or disposal.
9
<PAGE>
Properties
The following table sets forth information with respect to the Company's
properties as of March 21, 1998:
<TABLE>
<CAPTION>
APPROXIMATE
SQUARE
FOOTAGE OR
LOCATION TYPE OF FACILITY ACREAGE STATUS
- -------- ---------------- -------- ------
<S> <C> <C> <C>
Mira Loma, CA.............. Warehouse/Distribution/Land 886,000 Owned
Chester, SC................ Warehouse/Manufacturing/Showroom 828,000 Owned
Revere, MA................. Warehouse/Distribution 580,000 Owned
Gastonia, NC............... Office/Manufacturing/Distribution 447,441 Owned
East Boston, MA............ Office/Showroom 292,000 Owned
Dallas, TX................. Warehouse 135,000 Leased
El Paso, TX................ Office/Manufacturing 135,000 Owned
North Dighton, MA.......... Office/Manufacturing/Warehouse 134,042 Leased
Crisfield, MD.............. Office/Manufacturing/Warehouse 71,754 Leased
San German, PR............. Manufacturing/Office 70,296 Leased
Hong Kong.................. Office/Warehouse/Showroom 48,818 Leased
Atlanta, GA................ Showrooms 15,050 Leased
Dallas, TX................. Showrooms 9,716 Leased
Los Angeles, CA............ Showroom 5,745 Leased
Wallingford, CT............ Office 2,800 Leased
Cramerton, NC.............. Land 34.1 Acres Owned
Dallas, TX................. Office 25,000 Leased
Sheffield, England......... Manufacturing/Warehouse 30,839 Owned
London, England............ Office/Showroom 4,000 Leased
China...................... Warehouse/Office 163,936 Leased
Taiwan..................... Office 5,292 Leased
Philippines................ Office 4,380 Leased
Chicago, IL................ Showroom 7,452 Leased
New York, NY............... Warehouse 3,800 Leased
Guangzhou, PRC............. Office 1,246 Leased
Tianjin, PRC............... Office 3,958 Leased
Greensboro, NC............. Office 2,747 Leased
New York, NY............... Showrooms 45,611 Leased
Ecclesfield, England....... Manufacturing/Warehouse/Showroom 39,950 Owned
</TABLE>
- -------
Employees
As of December 31, 1997, the Company had approximately 1,875 employees. The
Company believes that its relationship with its employees is good.
The Company's employees are not represented by labor unions; however,
Rauch, which merged with the Company on February 15, 1996, was a subject of
efforts by UNITE (the "Union") in the fall of 1995 to organize Rauch's
employees. A scheduled Union election was postponed because the Union filed
unfair labor practice charges against Rauch with the National Labor Relations
Board (the "NLRB"). These charges, which related to allegations of threats and
promises by Rauch officials and the termination of certain employees, were
settled pursuant to an agreement between Rauch and the Union. On May 2, 1996,
the NLRB approved the agreement and the Union's request that the petition for an
election be withdrawn with prejudice.
On March 31, 1994 an Administrative Law Judge ("ALJ") designated by the
NLRB determined that the Company's subsidiaries Wallace International de P.R.,
Inc. and International Silver de P.R., Inc. (the "P.R. Subsidiaries") had
engaged in unfair labor
10
<PAGE>
practices incident to a union election (won by the P.R. Subsidiaries) held in
February 1993 and ordered the P.R. Subsidiaries to refrain from certain conduct
and to take certain affirmative action. The ALJ's decision was affirmed by the
NLRB on September 22, 1994. Incident to a second union election (also won by the
P.R. Subsidiaries) held on June 22, 1994 pursuant to stipulation, the P.R.
Subsidiaries were again charged with unfair labor practices. The ALJ again found
that the P.R. Subsidiaries had engaged in unfair labor practices. The Company
has appealed to the NLRB, and the appeal is pending.
Legal Proceedings
The Company has been named as a defendant in several legal actions arising
from its normal business activities, including routine copyright and trademark
litigation, which actions are considered normal in the businesses in which the
Company is engaged.
ITEM 4. Submission of Matters to A Vote of Security Holders
During the fourth quarter of 1997, no matters were submitted to a vote of
the Company's shareholders through the solicitation of proxies or otherwise.
PART II
ITEM 5. Market for Registrant's Common Equity and Related Stockholder Matters
Absence of Public Market
There is no existing public market for the Notes and the Company does not
intend to list the Notes on any national securities exchange. Factors such as
quarterly or cyclical variations in the Company's financial condition and
results of operations, variations in interest rates, future announcements
concerning the Company or its competitors, government regulation, general
economic and other conditions could cause the market price of the Notes to
fluctuate substantially.
Syratech Common Stock, which was traded on the NYSE under the symbol "SYR",
was de-listed from the NYSE upon consummation of the Merger. From the effective
time of the Merger, the Company has had less than 300 stockholders. On April 14,
1997, the last trading day before the execution of the Merger Agreement, the
last sales price of Syratech Common Stock as reported on the NYSE was $32.13 per
share. The average of the closing prices for the 20 consecutive trading days
ended October 22, 1996, the last trading day before the public announcement of
the Merger Agreement, was $24.59 per share.
The following table sets forth, for the periods indicated, the high and
low sales closing prices per share of Syratech Common Stock, during which time
the Company's stock was actively traded.
HIGH LOW
---- ---
FISCAL 1996
First Quarter (ended March 31, 1996).......... $26 3/8 $20 1/2
Second Quarter (ended June 30, 1996).......... 27 5/8 22 3/8
Third Quarter (ended September 30, 1996)...... 24 1/2 22
Fourth Quarter (ended December 31, 1996)...... 31 3/4 23 3/8
FISCAL 1997
First Quarter (ended March 31, 1997).......... $32 $31 1/8
Second Quarter (through April 14, 1997)....... 32 1/8 31 7/8
Dividends Paid
The Company has never paid cash dividends on its common stock and does not
expect to do so in the foreseeable future. The Company intends to retain all
earnings to provide funds for the operation and expansion of its businesses.
Dividends on shares of Cumulative Redeemable Preferred Stock are cumulative
from the date of issue and are payable when and as declared from time to time by
the board of Directors of the Company. Such dividends accrue on a daily basis
(whether or not
11
<PAGE>
declared) from the original date of issue at an annual rate per
share equal to 12% of the original purchase price per share, with such amount to
be compounded annually on each December 31 so that if the dividend is not paid
for any year the unpaid amount will be added to the original purchase price of
the cumulative Redeemable Preferred Stock for the purpose of calculating
succeeding years' dividends.
12
<PAGE>
ITEM 6. Selected Financial Data
The following selected consolidated financial information as of December
31, 1997 through 1993 and for each of the years in the five-year period ended
December 31, 1997 has been derived from the consolidated financial statements of
the Company. The consolidated balance sheets of the Company as of December 31,
1997 and 1996 and the consolidated statements of operations, stockholders'
equity and cash flows for each of the three years in the period ended December
31, 1997, together with the notes thereto and the related report of Deloitte &
Touche LLP, independent auditors, are included elsewhere herein. The information
set forth below should be read in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and the Consolidated
Financial Statements and Notes thereto of the Company included elsewhere in this
Annual Report on Form 10-K.
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------------------------------------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Income Statement Data(1):
Net sales .................................. $290,862 $270,931 $169,520 $147,291 $122,682
Cost of sales .............................. 213,366 194,113 119,836 104,600 84,643
-------- -------- -------- -------- --------
Gross profit ............................... 77,496 76,818 49,684 42,691 38,039
Selling, general and administrative expenses 72,740 57,664 34,239 31,613 27,727
Other operating income (2) ................. 2,366 3,948
-------- -------- -------- -------- --------
Income from operations ..................... 7,122 23,102 15,445 11,078 10,312
Interest expense ........................... (16,027) (3,150) (287) (559) (948)
Interest income ............................ 257 771 4,881 98 82
Other income (3) ........................... 2,184 11,900
-------- -------- -------- -------- --------
Income (loss) before income taxes .......... (6,464) 32,623 20,039 10,617 9,446
Provision (benefit) for income taxes ...... (1,868) 12,234 6,863 2,758 2,390
-------- -------- -------- -------- --------
Income (loss) from continuing operations ... (4,596) 20,389 13,176 7,859 7,056
Discontinued operations:
Income from discontinued operations, net
of income taxes ......................... 2,572 12,068 10,838
Gain on sale of Syroco, Inc., net of income
taxes ................................... 30,451
-------- -------- -------- -------- --------
Net income (loss) .......................... (4,596) 20,389 46,199 19,927 17,894
Preferred stock dividend ................... 1,530
-------- -------- -------- -------- --------
Net income (loss) applicable to common
stockholders ............................... ($6,126) $20,389 $46,199 $19,927 $17,894
======== ======== ======== ======== ========
Basic Earnings (loss) per share (4):
Continuing operations ..................... ($1.17) $2.34 $1.13 $0.67 $0.61
Discontinued operations ................... -- -- 2.82 1.03 0.93
-------- -------- -------- -------- --------
Net income (loss) per common share ....... ($1.17) $2.34 $3.95 $1.70 $1.54
Weighted-average number of shares
outstanding.............................. 5,216 8,695 11,707 11,688 11,650
======== ======== ======== ======== ========
Diluted Earnings (loss) per share (4):
Continuing operations ...................... ($1.17) $2.32 $1.12 $0.67 $0.60
Discontinued operations .................... -- -- 2.79 1.02 0.92
-------- -------- -------- -------- --------
Net income (loss) per common share ......... ($1.17) $2.32 $3.91 $1.69 $1.52
======== ======== ======== ======== ========
Shares:
Weighted-average number of shares
outstanding ............................. 5,216 8,695 11,707 11,688 11,650
Effect of dilutive stock options ......... -- 104 96 121 118
-------- -------- -------- -------- --------
Adjusted weighted-average number of shares
outstanding ............................. 5,216 8,799 11,803 11,809 11,768
======== ======== ======== ======== ========
</TABLE>
13
<PAGE>
(1) The income statement data for years prior to 1996 has been restated to
reflect Syroco, Inc. as a discontinued operation. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations-Recent Transactions."
(2) Consists of income from the sale of Farberware inventory and other
operating income, net of certain selling, general and administrative
expenses.
(3) Consists of nonrecurring pre-tax income related to the sale of certain
equipment associated with the Farberware settlement in 1997 and
licensing the Farberware name on cookware and bakeware in 1996. See
Note 3 to the Company's Consolidated Financial Statements.
(4) In the fourth quarter of 1997, the Company adopted the provisions of
Statement of Financial Accounting Standards No. 128, "Earning per
share." As a result, all periods presented have been restated. See Note
1 to the Company's Consolidated Financial Statements.
<TABLE>
<CAPTION>
December 31,
--------------------------------------------------------
1997 1996 1995 1994 1993
BALANCE SHEET DATA: (in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Working capital ........... $113,857 $119,918 $122,050 $125,136 $105,115
Total assets .............. 266,000 227,254 220,566 190,684 152,060
Total debt (5) ............ 183,900 6,636 51,735(6) 15,379 5,060
Stockholders' equity ...... 24,904 170,248 146,596 152,100 131,005
Book value per common share 1.42 19.58 16.91 13.01 11.25
</TABLE>
- -------------
(5) Consists of long-term debt, notes payable and current maturities of
long-term debt.
(6) Reflects temporary borrowings of $51,735 made on December 29, 1995 in
connection with the purchase by the Company for retirement of 3,065
shares of Common Stock owned by affiliates of Katy Industries, Inc.
(the "Katy Stock Repurchase"). These borrowings were paid on January 2,
1996.
ITEM 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
FORWARD-LOOKING STATEMENTS
The Private Securities Litigation Reform Act of 1995 provides a "safe
harbor" for forward-looking statements. Except for the historical information
contained or incorporated by reference in this Annual Report on Form 10-K, the
matters discussed or incorporated by reference herein are forward-looking
statements. Such forward-looking statements involve known and unknown risks,
uncertainties and other factors that may cause the actual results, performance
or achievements of the Company, or industry results, to be materially different
from any future results, performance or achievements expressed or implied by
such forward-looking statements. Such factors include, among others, general
economic and business conditions; industry capacity; industry trends; overseas
expansion; the loss of major customers; changes in demand for the Company's
products; the timing of orders received from customers; cost and availability of
raw materials; dependence on foreign sources of supply; changes in business
strategy or development plans; availability and quality of management;
availability, terms and deployment of capital; and the seasonal nature of the
business. SPECIAL ATTENTION SHOULD BE PAID TO SUCH FORWARD-LOOKING STATEMENTS
INCLUDING, BUT NOT LIMITED TO, STATEMENTS RELATING TO (i) THE COMPANY'S ABILITY
TO EXECUTE ITS GROWTH STRATEGIES AND TO REALIZE ITS GROWTH OBJECTIVES, (ii) THE
COMPANY'S PLANNED EXPANSION OF ITS PRODUCT OFFERINGS, (iii) THE COMPANY'S
ABILITY TO OBTAIN SUFFICIENT RESOURCES TO FINANCE ITS WORKING CAPITAL AND
CAPITAL EXPENDITURE NEEDS AND PROVIDE FOR ITS KNOWN OBLIGATIONS, AND (iv) THE
CONTINUATION OF, AND THE COMPANY'S ABILITY TO BENEFIT FROM, THE VENDOR
CONSOLIDATION TREND IN THE RETAIL INDUSTRY DESCRIBED ELSEWHERE IN THE ANNUAL
REPORT ON FORM 10-K.
14
<PAGE>
Recent Transactions
Merger and Recapitalization
On April 16, 1997, THL Transaction I Corp. ("THL I"), a Delaware corporation,
controlled by affiliates of Thomas H. Lee Company ("THL"), was merged with and
into the Company (the "Merger") pursuant to the Restated Agreement and Plan of
Merger, dated as of November 27, 1996, effective as of October 23, 1996, as
amended on February 14, 1997, between THL I and the Company.
Pursuant to the Merger, each share of the Company's Common Stock, par value
$0.01 per share ("Common Stock") issued and outstanding immediately prior to the
effective time of the Merger (the "Effective Time") (April 16, 1997) (other than
(i) shares of Common Stock held by the Company or any wholly-owned subsidiary
thereof, and (ii) 35,232 shares of Common Stock that were contributed to the
Company by Leonard Florence (former principal shareholder) upon the Merger and
which were then canceled and retired) was entitled to receive at the election of
the holder thereof and as stated below, either (a) $32.00 in cash (except that
Leonard Florence received $28.00 in cash) or (b) one fully paid and
non-assessable share of the Company's Common Stock. Common Stock retained was
limited in the case of each stockholder (other than Management Stockholders) to
34.75% of such stockholder's shares of Common Stock. Also, because no more than
an aggregate of 868,250 shares of the Company's Common Stock could be retained
by stockholders (other than Management Stockholders), the right to retain the
Company's Common Stock was to be subject to proration. In addition, each Company
Stock Option granted under the 1986 and 1993 Stock Plans that were outstanding
immediately prior to the Effective Time, vested and was canceled in exchange for
the excess in cash of $32.00 over the exercise price per share of the Company's
Common Stock. The aggregate amount paid to optionees of $3.7 million and $.2
million related to the vesting of the stock options was charged to compensation
expense.
Upon the Merger, THL acquired, directly from the Company, an aggregate of
18,000 shares which represented 100% of the Company's 12% Cumulative Redeemable
Preferred Stock and 2,374,793 in exchange for corresponding stock interests in
THL I, for which THL had paid an aggregate of $94 million in cash. Accordingly,
the THL investment resulted in control of the Company.
At the Effective Time, the Company entered into debt financing arrangements
consisting of $165 million principal amount of 11% Senior Notes (the "Notes")
and a Senior Revolving Credit Facility of $130 million (the "Revolving Credit
Facility"). The amount invested by THL in THL I, the purchase price for the
Cumulative Redeemable Preferred Stock, plus proceeds of the Notes and a portion
of the proceeds available pursuant to the Revolving Credit Facility were used to
finance the acquisition of the shares of the Company's outstanding Common Stock
that were not retained by the Company's then existing stockholders, and to
refinance the Company's outstanding indebtedness. The Revolving Credit Facility
is also intended to provide for the Company's working capital requirements at
the time of and following the Merger.
In connection with the Merger, the Company entered into a management
agreement with Thomas H. Lee Company for which the Company pays an annual
management fee in the amount of $450,000 ($320,000 expensed for the year ended
December 31, 1997).
The transaction was accounted for as a recapitalization.
See Notes to Consolidated Financial Statements.
Rauch Industries, Inc.
On February 15, 1996, the Company, through an indirect wholly owned
subsidiary, acquired the outstanding shares of Rauch for approximately $49.6
million, including costs of the transaction. The acquisition was accounted for
under the purchase method of accounting, and the results of operations of Rauch
have been included with the results of the Company from February 15, 1996.
Farberware Inc.
On April 2, 1996, the Company, through its indirect wholly owned
subsidiary, Far-B Acquisition Corp. ("Far-B"), together with Lifetime Hoan
Corporation ("Lifetime"), acquired certain assets from Farberware Inc., a
subsidiary of U.S. Industries, Inc. ("USI"). Lifetime and the Company are not
affiliates. Farberware Inc. was a manufacturer of aluminum clad, stainless steel
cookware and bakeware and small electric kitchen appliances. The aggregate
consideration paid by Far-B and Lifetime was approximately $45.8
15
<PAGE>
million, of which Far-B paid approximately $32.6 million. A manufacturing
service agreement entered into on April 2, 1996 to provide products for a
transition period was terminated in 1996 and during 1997 the Company sold or
disposed of all acquired inventory and no longer manufactures or sells
Farberware cookware and bakeware products or noncommercial electric products.
Net sales for the year ended December 31, 1997 and 1996 exclude revenue from the
sales of Farberware inventory, and $2.6 million and $3.9 million, respectively,
related to these sales and to licensing income, net of certain selling, general
and administrative expenses, has been recorded as other operating income.
The Company acquired Farberware Inc. assets in order to expand Farberware's
licensing activities and to use the Farberware name on certain of the Company's
existing and new products.
The Company and Lifetime agreed to an allocation between them of the assets
acquired from Farberware Inc. and to the joint administration of certain
licensing rights.
On June 27, 1996, the Company's Farberware Inc. subsidiary (formerly Far-B)
("Farberware") entered into a license agreement with Meyer Marketing Co. Ltd.
("Meyer") pursuant to which Meyer was granted certain rights for a term of 200
years. For such grant, Meyer made a one-time payment to the Company of $25.5
million, which resulted in recognition by the Company of $11.9 million of
non-recurring income. Under the terms of the licensing agreement, the Company
has no further obligation with respect to the amount paid by Meyer. On July 12,
1996, Farberware granted to a major retail chain the exclusive license to use
and exploit the Farberware name and related intellectual property in connection
with the sourcing, manufacture, marketing and sale of certain electric products
for quarterly royalty payments. On October 25, 1996 Farberware granted to FCI
Corp. a license to use and exploit the Farberware name in connection with the
sourcing, manufacturing, marketing and sale of certain Commercial Products.
Subsequent to the acquisition of the assets from Farberware Inc., legal
disputes arose amongst the parties over alleged breaches of agreements. On
February 3, 1997, the Company, Farberware, and Lifetime reached an agreement
(the "Settlement Agreement"), with Bruckner Manufacturing Corp. ("BMC") and U.S.
Industries Inc. ("USI") to settle all previous outstanding legal disputes
arising out of the Farberware Asset Purchase Agreement ("APA") and the
Manufacturing Services Agreement ("MSA"). Under the terms of the Settlement
Agreement, the Company received certain finished goods inventory at no cost, and
paid for certain finished goods inventories purchased under the MSA. The Company
also received a waiver of certain restrictions in the APA on disposing of tools,
machinery, and equipment formerly used by BMC in the manufacture of Farberware
products. The Company sold the majority of the tools, machinery and equipment in
1997 and retained the remainder for use in its existing businesses. The sale of
the tools, machinery and equipment resulted in net proceeds to the Company of
$2,184, which has been recorded as other non-operating income in 1997.
See Notes to Consolidated Financial Statements.
Silvestri
On April 16, 1996, the Company purchased finished goods inventory and
intangible assets of the Silvestri division of FFSC, Inc. ("Silvestri") for
approximately $8.6 million. Silvestri products include Christmas ornaments,
collectibles, lighting and trim as well as other seasonal and nonseasonal
giftware and decorative accessories. The acquisition was accounted for under the
purchase method of accounting, and the results of operations of Silvestri have
been included with the results of the Company from April 16, 1996.
C.J. Vander
On May 8, 1996, the Company, through one of its subsidiaries, acquired all
of the outstanding common stock of C.J. Vander, a manufacturer of sterling
silver and silver-plated flatware and hollowware in Sheffield and London,
England. The purchase price was immaterial to the Company's consolidated
financial statements. The acquisition was accounted for under the purchase
method of accounting and the results of operations of C. J. Vander have been
included with the results of the Company from May 8, 1996.
Potpourri Press
On November 26, 1996, a wholly-owned subsidiary of the Company acquired
inventory, tangible property, intellectual property rights, certain key records
(including customer lists, customer files, supplier information, catalogs) and
certain contract rights of Potpourri Press, a North Carolina-based manufacturer
and marketer of Christmas products, for a purchase price of approximately
16
<PAGE>
$2.3 million plus a $0.2 million promissory note. This acquisition was
accounted for under the purchase method of accounting and the results of
operations of Potpourri Press have been included with the results of the Company
from November 26, 1996.
Syroco
On April 11, 1995, pursuant to an agreement entered into on March 28, 1995,
the Company, through its subsidiary, Syratech Holding Corporation, sold Syroco,
Inc. ("Syroco"). The net proceeds received after costs of the sale and income
taxes were $133.9 million. The sale resulted in the discontinuance of the
Company's casual furniture and accessories business and resulted in an after-tax
gain on disposal of $30.5 million which was recognized in the second quarter of
1995. The results of operations for the discontinued segment are included in
discontinued operations in the Consolidated Statements and Statement of
Operations and Statements of Cash Flows for the year ended December 31, 1995.
The following table sets forth certain financial data as a percentage of
net sales of the Company for each of the years presented.
Percentage of Net Sales
------------------------------
Year Ended December 31,
------------------------------
1997 1996 1995(1)
----- ----- -----
Net sales..................................... 100.0% 100.0% 100.0%
Cost of sales................................. 73.4 71.6 70.7
----- ----- -----
Gross profit............................... 26.6 28.4 29.3
Selling, general and administrative expenses.. 25.0 21.3 20.2
Other operating income (2).................... 0.8 1.4 --
----- ----- -----
Income from operations..................... 2.4 8.5 9.1
Interest income (expense), net................ (5.4) (0.9) 2.7
Other income (3).............................. 0.8 4.4 --
----- ----- -----
Income (loss) before income taxes.......... (2.2) 12.0 11.8
Provision (benefit) for income taxes.......... (0.6) 4.5 4.0
----- ----- -----
Income (loss) from continuing operations... (1.6%) 7.5% 7.8%
===== ===== =====
- ------------------
(1) The income statement data for 1995 has been restated to reflect Syroco, Inc.
as a discontinued operation. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations-Recent Transactions."
(2) Consists of income from the sale of Farberware inventory and other operating
income, net of certain selling, general and administrative expenses.
(3) Consists of non-recurring pre-tax income related to the sale of certain
equipment associated with the Farberware settlement in 1997 and licensing the
Farberware name on cookware and bakeware in 1996. See Note 3 to the Company's
Consolidated Financial Statements.
Year Ended December 31, 1997 Compared to Year Ended December 31, 1996
Net sales increased 7.4% to $290.9 million for the year ended December 31,
1997 from $270.9 million for the year ended December 31, 1996. Excluding the
impact of the Rauch, Silvestri, C.J. Vander and Potpourri Press acquisitions in
1996, net sales
17
<PAGE>
increased 11.7%. This increase reflects higher sales volume of giftware items
(primarily crystal and silver-plated items) and of stainless steel and sterling
silver flatware. Sales related to the Company's 1996 acquisitions decreased 1.7%
due to lower sales of Rauch Christmas ornaments. Changes in product prices did
not materially impact net sales.
Gross profit was $77.5 million for the year ended December 31, 1997
compared with $76.8 million for the year ended December 31, 1996. Gross profit
as a percentage of net sales was 26.6% for the year ended December 31, 1997
compared to 28.4% for the year ended December 31, 1996. The decrease in the
gross profit percentage of 1.8 percentage points is related to Rauch new
equipment start-up manufacturing inefficiencies, and to the impact of having a
full year of warehousing expenses for the seasonal Silvestri business compared
with the partial year in 1996, as well as a reduced proportion of higher margin
products in the total product mix. The decrease in gross profit margin was not
materially impacted by change in product prices.
Selling, general and administrative expenses ("S, G & A expenses")
increased to 25.0% as a percentage of net sales or $72.7 million for the year
ended December 31, 1997 from 21.3% or $57.7 million for the year ended December
31, 1996. Included in S, G & A expenses for 1997 is a one-time charge of $3.9
million for stock option compensation expense due to the Merger. Also
contributing to the increase are higher personnel and related costs including
costs in the Company's Pacific Rim offices to support the 1996 acquisitions and
to establish an increased presence in mainland China which management believes
will enable the Company to reduce expenses in its higher cost Hong Kong,
Philippines, and Taiwan locations. During 1997, the Philippines office was
closed, and cost reductions in Taiwan and Hong Kong are underway. In addition,
during 1997, there is a full year of S, G & A expenses associated with the
product lines acquired during 1996 compared with partial period in the prior
year, and these expenses are running at levels higher than initially anticipated
due to delays in integrating operations of these acquisitions.
Income from operations of $7.1 million and $23.1 million for the years
ended December 31, 1997 and 1996, respectively included other operating income
of $2.4 million and $3.9 million, respectively, resulting from the disposal of
Farberware inventory and Farberware license revenue. Income from operations for
1997 includes the one-time charge of $3.9 million to compensation expense
related to stock options as a result of the Merger.
Other non-operating income in 1997 represents $2.2 million of income from
the sale of equipment associated with the Farberware settlement, and in 1996,
represents $11.9 million of income from the one-time licensing fee received for
the Farberware name on cookware and bakeware. See Note 3 to the Company's
Consolidated Financial Statements.
Interest expense, net, was $15.8 million and $2.4 million for the years
ended December 31, 1997 and 1996, respectively. This change results primarily
from the increase in debt, including the issuance of the 11% Senior Notes, to
finance the Merger.
The benefit from income taxes was $1.9 million for the year ended December
31, 1997, compared to an income tax provision of $12.2 million for the year
ended December 31, 1996. The benefit from income taxes in 1997 arose from the
net loss for the year.
Net loss applicable to common stockholders for the year ended December 31,
1997 was ($6.1) million or ($1.17) (diluted) per share, on adjusted weighted
average shares outstanding of 5,216,000 (diluted), compared to net income
available to common stockholders of $20.4 million or $2.32 (diluted) per share,
on 8,799,000 adjusted weighted average shares outstanding in 1996. The reduction
in adjusted weighted average shares primarily reflects the acquisition and
retirement of 4.9 million shares of Company Common Stock in connection with the
Merger, which was effected on April 16, 1997.
Year Ended December 31, 1996 Compared to Year Ended December 31, 1995
Net sales increased 59.8% to $270.9 million for the year ended December 31,
1996 from $169.5 million for the year ended December 31, 1995. Excluding the
impact of acquisitions of businesses and product lines completed in 1996, net
sales increased 8.1%. This increase reflects increased sales volume of giftware
items (including seasonal items, picture frames and silver-plated items) and of
sterling silver flatware. The changes in product prices did not materially
impact net sales.
Gross profit increased 54.6% to $76.8 million for the year ended December
31, 1996 from $49.7 million for the year ended December 31, 1995. Gross profit
as a percentage of sales was 28.4% for the year ended December 31, 1996 compared
to 29.3% for the year ended December 31, 1995. The decrease in gross profit
percentage was primarily a result of the acquisition of Rauch, which gross
profit margin is lower than that of certain of the Company's other product
lines, and a $1.3 million nonrecurring compensation
18
<PAGE>
expense charge related to the transfer of shares to one of the executive
officers. See Note 11 to the Company's consolidated financial statements.
Partially offsetting this decrease was the gross profit on the recently acquired
higher margin Silvestri seasonal product line. Excluding the impact of
acquisitions, the gross profit percentage was 30.3% for the year ended December
31, 1996. This increase in gross profit percentage, exclusive of acquisitions,
was due to increased sterling flatware sales which have a higher profit margin
than other tabletop and giftware items, and also to a change in product mix in
the giftware lines to higher margin items including frames and certain seasonal
products. The increase in gross profit margin was not materially impacted by
change in product prices.
Selling, general and administrative expenses ("S, G & A expenses")
increased to 21.3% as a percentage of net sales or $57.7 million for the year
ended December 31, 1996 from 20.2% or $34.2 million for the year ended December
31, 1995. S, G & A expenses were $39.5 million or 21.5% as a percentage of net
sales excluding S, G & A expenses incurred at Rauch, Silvestri, C.J. Vander and
Potpourri. These acquired companies had $18.2 million of S, G & A expenses
including the allocation of existing and continuing corporate expenses.
Substantial resources were dedicated and additional expenses were incurred as a
result of acquiring product lines, integrating functions (including selling and
marketing, customer service and general and administrative functions) and in the
case of Farberware, general and administrative costs of disposing of the product
line during 1996. Allocated corporate costs incurred to sell the Farberware
product line of $2.6 million are not included in the other operating income line
and are included in the Company's S, G & A expenses. Also included in S, G & A
expenses in 1996 was $2.6 million of nonrecurring compensation expense related
to the transfer of shares to two other executive officers. See Note 11 to the
Company's consolidated financial statements.
Income from operations increased 49.6% to $23.1 million in the year ended
December 31, 1996. Included in income from operations for the year ended
December 31, 1996 was $3.5 million, net of certain S, G & A expenses, from the
disposal of Farberware inventory.
Other non-operating income in 1996 represents $11.9 million of income from
the one-time licensing fee for the Farberware name on cookware and bakeware. See
Note 3 to the Company's Consolidated Financial Statements.
Interest expense, net, was $2.4 million for the year ended December 31,
1996 compared to interest income, net of $4.6 million for the year ended
December 31, 1995. This change results from a reduction in invested cash used to
purchase and retire 3,064,751 shares of the Company's Common Stock, for recent
acquisitions and for seasonal working capital needs.
The provision for income taxes was $12.2 million for the year ended
December 31, 1996 compared to $6.9 million for the year ended December 31, 1995.
The effective income tax rate was 37.5% for the year ended December 31, 1996
compared to 34.3% for the year ended December 31, 1995. This increase in the
effective income tax rate in 1996 is due to a higher proportion of income earned
in tax jurisdictions with higher income tax rates, including but not limited to
the Farberware income.
Net income for the year ended December 31, 1996, all of which was income
from continuing operations, was $20.4 million or $2.32 per share, on shares of
8,799,000, compared to income from continuing operations of $13.2 million, or
$1.12 per share, on shares of 11,803,000, for the year ended December 31, 1995.
The year ended December 31, 1996 included non-recurring pre-tax income of $11.9
million, net of costs, resulting from a license agreement. Net income for the
year ended December 31, 1995 was $46.2 million or $3.91 per share. The year
ended December 31, 1995 included income from discontinued operations, net of
income taxes, of $2.6 million and the gain on sale of Syroco, Inc. of $30.5
million totaling $2.79 per share.
Liquidity and Capital Resources
Net cash used in operating activities for the year ended December 31, 1997
was $12.6 million. The primary uses of cash were for financing fees related to
debt incurred in connection with the Merger, and increases in operating working
capital needs.
The Company's working capital requirements are seasonal and tend to be
highest in the period from September through December due to the Christmas
selling season. Accounts receivable tend to decline during the first quarter as
receivables generated during the third and fourth quarters are collected and
remain lower until the next peak season beginning in September. This seasonality
has increased as a result of the acquisitions of Rauch and Silvestri product
lines.
19
<PAGE>
Capital expenditures were approximately $24.5 million for the year ended
December 31, 1997. These expenditures were primarily for the purchase of land
and construction of a warehouse and distribution facility in Mira Loma, CA,
purchase of a single story manufacturing facility for C.J. Vander, improvements
at the Company's East Boston facility and the purchase of machinery, tools and
dies for the Rauch, Puerto Rico and C. J. Vander manufacturing facilities.
Completion of the Mira Loma facility is expected to cost $4 million in the first
quarter of 1998.
The Company's level of indebtedness will have several important effects on
its future operation, including (i) a substantial portion of the Company's cash
flow from operations must be dedicated to the payment of interest on its
indebtedness and will not be available for other purposes, (ii) covenants
contained in the New Credit Facility and the Indenture governing the Senior
Notes will require the Company to meet certain financial tests, and other
restrictions may limit its ability to borrow additional funds or to dispose of
assets and may affect the Company's flexibility in planning for, and reacting
to, changes in its business, including possible acquisition activities, and
(iii) the Company's ability to obtain additional financing in the future for
working capital, capital expenditures, acquisitions, general corporate purposes
or other purposes may be impaired.
The Company believes that funds generated from operations and borrowings
available under the Revolving Credit Facility will be sufficient to finance the
Company's working capital requirements, provide for all known obligations of the
Company (including the obligations of the Company under the $165.0 million Notes
issued in connection with the Merger and under its operating leases) and fund
planned capital expenditures through December 31, 1998. See "Merger and
Recapitalization."
See Note 2 to the accompanying Consolidated Financial Statements for a
description of the terms of the Merger and Note 11 for dividend and liquidation
terms of the Company's Cumulative Redeemable Preferred Stock.
See Note 7 and 16 to the accompanying Consolidated Financial Statements for
the discussion on borrowings, availability, covenants and dividend restrictions
of the Company under its Revolving Credit Facilities and its Notes due April 15,
2007.
Year 2000 Conversion
The Company has modified certain key systems to comply with Year 2000
requirements and initiated a program to evaluate and modify the systems that are
not Year 2000 compliant. The Company will continue to evaluate the remaining
systems, and where appropriate, make the necessary modifications. The Company
currently believes that the expenditures necessary to be Year 2000 compliant
will not be material to its financial condition or results of operations in any
given year.
Accounting Pronouncements
In June 1997, the Financial Accounting Standards Board issued Statements
of Financial Accounting Standards Nos. 130 and 131, "Reporting Comprehensive
Income" and "Disclosures about Segments of an Enterprise and Related
Information" ("SFAS 130" and "SFAS 131", respectively). The Company will be
required to adopt the provisions of these statements in fiscal 1998. SFAS 130
provides standards for reporting items considered to be "comprehensive income"
and uses the term "other comprehensive income" to refer to revenues, expenses,
gains and losses that are included in comprehensive income under generally
accepted accounting principles but excluded from net income. Currently the only
items presented in the Company's consolidated financial statements that would be
considered other comprehensive income as defined in SFAS 130 are cumulative
translation adjustments, which are recorded as components of stockholders'
equity. SFAS 131 establishes new standards for reporting information about
operating segments. The Company believes the segment information required to be
disclosed under SFAS 131 will be more comprehensive than previously provided,
including expanded disclosure of income statement and balance sheet items for
each reportable operating segment. The Company has not yet completed its
analysis of the operating segments it will report on. The Company believes that
the provisions of SFAS 130 will not, when adopted, have a material impact on the
Company's consolidated financial statements.
In February 1998, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 132 ("SFAS 132"), "Employers' Disclosures
about Pensions and Other Postretirement Benefits". SFAS 132 standardizes the
disclosure requirement for pensions and other postretirement benefits to the
extent practicable. It does not change the measurement or recognition of those
plans. The Company will be required to adopt the provisions of this statement in
1998. The adoption of these provisions will not have a material impact upon the
Company's consolidated financial statements.
20
<PAGE>
ITEM 8. Financial Statements and Supplementary Data
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Report of Independent Auditors............................................................................. 22
Consolidated Financial Statements:
Consolidated balance sheets as of December 31, 1997 and 1996........................................... 23
Consolidated statements of operations for the years ended December 31, 1997, 1996 and 1995............. 24
Consolidated statements of stockholders' equity for the years ended December 31, 1997, 1996 and 1995... 25
Consolidated statements of cash flows for the years ended December 31, 1997, 1996 and 1995............. 26
Notes to consolidated financial statements............................................................. 27
</TABLE>
21
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of Syratech Corporation:
We have audited the accompanying consolidated balance sheets of Syratech
Corporation (the "Company") and subsidiaries as of December 31, 1997 and 1996,
and the related consolidated statements of operations, stockholders' equity, and
cash flows for each of the three years in the period ended December 31, 1997.
Our audits also included the consolidated financial statement schedule listed in
the Index at Item 14. These financial statements and financial statement
schedule are the responsibility of the Company's management. Our responsibility
is to express an opinion on these financial statements and financial statement
schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of Syratech Corporation and
subsidiaries as of December 31, 1997 and 1996, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1997 in conformity with generally accepted accounting principles.
Also, in our opinion, such consolidated financial statement schedule, when
considered in relation to the basic consolidated financial statements taken as a
whole, present fairly in all material respects the information set forth
therein.
As discussed in Note 2 to the consolidated financial statements, the
Company completed a merger accounted for as a recapitalization in 1997.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
February 16, 1998 (March 30, 1998 as to Note 16)
<PAGE>
SYRATECH CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
<TABLE>
<CAPTION>
December 31,
------------------------
1997 1996
--------- ---------
<S> <C> <C>
ASSETS
Current assets:
Cash and equivalents $ 2,981 $ 3,605
Accounts receivable, net 63,893 60,020
Inventories 84,295 79,355
Deferred income taxes 11,337 8,940
Prepaid expenses and other 2,392 3,803
Properties held for sale 1,836 -
--------- ---------
Total current assets 166,734 155,723
Property, plant and equipment, net 82,404 63,955
Purchase price in excess of net assets acquired, net 6,790 7,032
Other assets, net 10,072 544
--------- ---------
Total $ 266,000 $ 227,254
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Revolving loan facilities and notes payable $ 18,900 $ 6,636
Accounts payable 14,234 9,689
Accrued expenses 12,777 11,049
Accrued compensation 3,390 4,228
Accrued advertising 3,576 3,273
Income taxes payable - 930
--------- ---------
Total current liabilities 52,877 35,805
Long-term debt 165,000 -
Deferred income taxes 20,083 17,706
Pension liability 3,136 3,288
Other long-term liabilities - 207
Commitments and contingencies (Notes 9 and 14)
Stockholders' equity:
Preferred stock, $.01 par value, 500,000 shares
authorized in 1997; (25,000 designated as cumulative, redeemable
preferred stock, 18,000 shares issued and outstanding in 1997,
(liquidation value of $18,000, and includes accrued
and unpaid dividends of $1,530) 19,530 -
Common stock, $.01 par value, 20,000,000 shares
authorized, 3,784,018 and 8,695,231 shares issued and
outstanding in 1997 and 1996, respectively 38 87
Additional paid-in capital - 12,480
Retained earnings 4,567 157,117
Cumulative translation adjustment 769 567
Less: Treasury stock; 218 shares, at cost in 1996 - (3)
--------- ---------
Total stockholders' equity 24,904 170,248
--------- ---------
Total $ 266,000 $ 227,254
========= =========
</TABLE>
See notes to consolidated financial statements
23
<PAGE>
SYRATECH CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
<TABLE>
<CAPTION>
For the Years Ended December 31,
---------------------------------------
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
Net sales $ 290,862 $ 270,931 $ 169,520
Cost of sales 213,366 194,113 119,836
--------- --------- ---------
Gross profit 77,496 76,818 49,684
Selling, general and administrative expenses 72,740 57,664 34,239
Other operating income 2,366 3,948 -
--------- --------- ---------
Income from operations 7,122 23,102 15,445
Interest expense (16,027) (3,150) (287)
Interest income 257 771 4,881
Other income 2,184 11,900 -
--------- --------- ---------
Income (loss) before provision (benefit) for income
taxes (6,464) 32,623 20,039
Provision (benefit) for income taxes (1,868) 12,234 6,863
--------- --------- ---------
Income (loss) from continuing operations (4,596) 20,389 13,176
Discontinued operations:
Income from discontinued operations, net of income
taxes of $1,645 - - 2,572
Gain on sale of Syroco, Inc, net of income taxes
of $16,599 - - 30,451
--------- --------- ---------
Net income (loss) (4,596) 20,389 46,199
Preferred stock dividends accrued 1,530 - -
--------- --------- ---------
Net income (loss) applicable to common stockholders $ (6,126) $ 20,389 $ 46,199
========= ========= =========
Basic earnings (loss) per share:
Continuing operations ($1.17) $2.34 $1.13
Discontinued operations - - 2.82
--------- --------- ---------
Net income (loss) per common share ($1.17) $2.34 $3.95
========= ========= =========
Weighted-average number of shares outstanding 5,216 8,695 11,707
========= ========= =========
Diluted earnings (loss) per share:
Continuing operations ($1.17) $2.32 $1.12
Discontinued operations - - 2.79
--------- --------- ---------
Net income (loss) per common share ($1.17) $2.32 $3.91
========= ========= =========
Shares:
Weighted-average number of shares outstanding 5,216 8,695 11,707
Effect of dilutive stock options - 104 96
--------- --------- ---------
Adjusted weighted-average number of shares outstanding 5,216 8,799 11,803
========= ========= =========
</TABLE>
See notes to consolidated financial statements.
24
<PAGE>
SYRATECH CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 and 1995
(in thousands, except for share data)
<TABLE>
<CAPTION>
Cumulative Redeemable
Common Stock Preferred Stock Additional Cumulative
-------------------- --------------------- Paid-In Retained Translation Treasury
Shares Amount Shares Amount Capital Earnings Adjustment Stock Total
------------ ------ --------- -------- -------- -------- ----------- ------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, January 1, 1995 11,687,632 $ 116 - $ - $ 61,373 $ 90,529 $ 85 $ (3) $ 152,100
Exercise of stock options 44,150 1 326 327
Compensation related to
stock options 102 102
Tax effect of stock options (78) (78)
Purchase of common stock -
for retirement (3,064,751) (30) (52,024) (52,054)
Net income 46,199 46,199
---------- ---- -------- -------- -------- -------- ----- ---- --------
Balance, December 31, 1995 8,667,031 87 - - 9,699 136,728 85 (3) 146,596
Exercise of stock options 28,200 202 202
Compensation related to
stock options 78 78
Tax effect of stock options 250 250
Transfer of shares 2,338 2,338
Rights redemption (87) (87)
Translation adjustment 482 482
Net income 20,389 20,389
---------- ---- -------- -------- -------- -------- ----- ---- --------
Balance, December 31, 1996 8,695,231 87 - - 12,480 157,117 567 (3) 170,248
Exercise of stock options 8,000 91 91
Compensation related to
stock options 209 209
Issuance of preferred stock 18,000 18,000 18,000
Sale and purchase of common
stock for retirement
(including related
costs of $11,555) (4,919,213) (49) (12,780) (146,424) 3 (159,250)
Accrued preferred stock
dividend 1,530 (1,530) -
Translation adjustment 202 202
Net loss (4,596) (4,596)
---------- ---- -------- -------- -------- -------- ----- ---- --------
Balance, December 31, 1997 3,784,018 $ 38 18,000 $ 19,530 $ - $ 4,567 $ 769 $ - $ 24,904
========== ==== ======== ======== ======== ======== ===== ==== ========
</TABLE>
See notes to consolidated financial statements.
25
<PAGE>
SYRATECH CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
For the Years Ended December 31,
-----------------------------------
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) ($4,596) $20,389 $46,199
Adjustments to reconcile net income (loss) to net cash provided by (used in)
operating activities:
Depreciation and amortization 6,199 4,767 3,253
Deferred income taxes (20) (2,756) (2,229)
Acquisition of Farberware assets - (9,500) -
Disposal of Farberware assets - 13,600 -
Farberware electrics license - 500 -
Transfer of shares - 3,655 -
Pension liability (152) 1,564 1,155
Compensation related to stock options 209 78 102
Other long-term liability (207) - -
Gain (loss) on disposal of assets and other 50 (17) 3
Increase (decrease) in assets and liabilities, net of effect of businesses
acquired:
Marketable securities - 30,561 (30,561)
Accounts receivable (3,873) (18,356) (3,649)
Inventories (4,940) (17,106) (817)
Prepaid expenses and other 726 (471) (1,446)
Other assets (10,800) - -
Accounts payable and accrued expenses 5,736 (2,870) 595
Income taxes payable (930) (2,095) (2,306)
Discontinued operations - 1,834 (49,915)
-------- -------- --------
Net cash provided by (used in) operating activities (12,598) 23,777 (39,616)
-------- -------- --------
Cash flows from investing activities:
Purchases of property, plant and equipment (24,461) (15,125) (2,679)
Net proceeds from sale of Syroco, Inc - - 133,931
Proceeds from disposal of assets 23 66 -
Insurance claim proceeds - 23,771 -
Acquisitions of businesses, net of cash acquired - (48,540) -
Other 101 (186) 61
-------- -------- --------
Net cash provided by (used in) investing activities (24,337) (40,014) 131,313
-------- -------- --------
Cash flows from financing activities:
Change in revolving loan facilities and notes payable 12,264 (59,075) (14,504)
Proceeds from borrowings 165,000 - -
Repayment of borrowings - (300) (875)
Proceeds from sale of preferred stock 18,000 - -
Proceeds from sale of common stock 75,993 - -
Purchase of common stock for retirement (including related costs of $11,555) (235,243) - -
Tax effect on stock options - 250 (78)
Exercise of stock options 91 202 327
Deferred financing costs and other (19) (24) 60
-------- -------- --------
Net cash provided by (used in) financing activities 36,086 (58,947) (15,070)
-------- -------- --------
Effect of exchange rate changes on cash and equivalents 225 296 -
-------- -------- --------
Net increase (decrease) in cash and equivalents (624) (74,888) 76,627
Cash and equivalents, beginning of year 3,605 78,493 1,866
-------- -------- --------
Cash and equivalents, end of year $2,981 $3,605 $78,493
======== ======== ========
</TABLE>
See notes to consolidated financial statements.
26
<PAGE>
SYRATECH CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of dollars except share and per share data)
1. Business and Summary of Significant Accounting Policies
Business
Syratech Corporation designs, manufactures, imports and markets a diverse
portfolio of tabletop, giftware and seasonal products, including: sterling
silver, silver-plated and stainless steel flatware, sterling silver,
silver-plated and brass hollowware, picture frames and photo albums, glassware,
woodenware and ceramics, fine porcelain boxes, figurines, waterglobes and
Christmas ornaments, trim, lighting and tree skirts.
Summary of Significant Accounting Policies
Basis of Consolidation
The consolidated financial statements include the accounts of Syratech
Corporation and its subsidiaries (the "Company"), Syratech Holding Corporation
and its subsidiaries, Syratech Security Corporation, Wallace International
Silversmiths, Inc. and its subsidiaries ("Wallace"), Leonard Florence
Associates, Inc. ("LFA"), Towle Manufacturing Company and its subsidiaries
("Towle"), Rauch Industries, Inc. and its subsidiaries ("Rauch"), Silvestri Inc.
and subsidiaries ("Silvestri"), and Syratech (H.K.) Ltd. and its subsidiaries
("Syratech H.K."). All significant intercompany balances and transactions have
been eliminated.
Recapitalization
The Company has accounted for the merger between THL I and the Company,
and the related purchase of common stock for retirement, as a recapitalization
(see Note 2).
Earnings Per Share
Effective in the fourth quarter of 1997, the Company adopted the provisions
of Statement of Financial Accounting Standards No. 128, "Earnings Per Share"
("Statement 128"), which supersedes Accounting Principles Board Opinion No. 15.
Statement 128 specifies the computation, presentation, and disclosure
requirements for earnings per share ("EPS") for entities with publicly held
common stock or potential common stock. All prior periods have been restated to
reflect the adoption of Statement 128.
Use of Estimates
In preparing financial statements in conformity with generally accepted
accounting principles, management is required to make estimates and assumptions
that affect the reported amount of assets and liabilities and the disclosure of
contingent assets and liabilities at the date of the consolidated financial
statements and revenues and expenses during the reporting period. Actual results
could differ from these estimates.
27
<PAGE>
SYRATECH CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Revenue Recognition
Revenue is recognized when products are shipped. The Company provides
allowances for estimated doubtful accounts and sales returns based on historical
experience and evaluation of specific accounts. Such allowances, excluding
amounts related to Farberware Inc. (see Note 3), were comprised of the
following:
December 31,
-----------------------
1997 1996
------ ------
Sales returns and allowances $5,977 $3,501
Doubtful accounts 1,231 1,861
------ ------
$7,208 $5,362
====== ======
Customers
Substantially all customers are retailers. No base of customers in one
geographic area constitutes a significant portion of sales. No single customer
represented 10% or greater of consolidated net sales in 1997, 1996 or 1995.
Inventories
Inventories are stated at the lower of cost or market. Two subsidiaries
determine cost on the last-in, first-out ("LIFO") method for silver and certain
non-silver inventories. For all other inventories, cost is determined on the
first-in, first-out ("FIFO") method.
Properties Held for Sale
Properties held for sale consist of 2.9 acres of land in Revere,
Massachusetts (with a cost of $1,151) and two buildings in Sheffield, England
(with a cost of $685). On January 28, 1998, the Company entered into a contract
to sell the 2.9 acres of land for $1.9 million. Pursuant to the agreement, on
January 28, 1998, the Company entered into an escrow agreement with the buyer. A
deposit of $200 was paid to the Company by the buyer and will be held in escrow
until the closing, which is scheduled to occur on November 28, 1998. At December
31, 1997, the properties held for sale are separately presented in the
accompanying consolidated balance sheet and are stated at cost which is lower
than the estimated net realizable values of such properties.
Property, Plant and Equipment
Purchased property, plant and equipment is recorded at cost. Leased
equipment is recorded at the present value of the minimum lease payments
required during the lease term. Depreciation is provided using the straight-line
method over the estimated useful lives of the related assets and over the terms,
if shorter, of the related leases, as follows:
Years
-------
Buildings and improvements 4 to 39
Tools and dies 3 to 50
Machinery and equipment 3 to 10
Other 3 to 10
In 1997, the Company changed the estimated useful lives of certain tools and
dies from ten to fifty years. The change in useful lives did not have a material
impact on the net loss of the Company for the year ended December 31, 1997.
28
<PAGE>
SYRATECH CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Purchase Price in Excess of Net Assets Acquired
Purchase price in excess of net assets acquired is amortized using the
straight-line method over 30 years (see Note 3). The Company evaluates the
carrying value of goodwill based upon current and anticipated net income and
undiscounted cash flows, and recognizes an impairment when it is probable that
such estimated future net income and/or cash flows will be less than the
carrying value of goodwill. Measurement of the amount of impairment, if any, is
based upon the difference between carrying value and estimated fair value.
Other Assets
Other assets consist principally of deposits, deferred fees, deferred
financing costs and deferred long-term rent. Deferred financing costs are being
amortized using the interest method over the terms of the related loans.
Accumulated amortization aggregated approximately $1,008 and $125 at December
31, 1997 and 1996, respectively.
Advertising Costs
Advertising costs are charged to operations when incurred. These costs are
recorded in selling, general and administrative expenses and totaled $4,156,
$3,690 and $3,064 in the years ended December 31, 1997, 1996 and 1995,
respectively.
Financial Instruments
The carrying values of cash and equivalents, accounts receivable, accounts
payable and borrowings under revolving credit facilities approximate fair value
due to the short-term nature of these instruments. The fair value of the Notes
(Note 2) was estimated to be $151,800 as of December 31, 1997, based upon recent
private market trades.
Income Taxes
The Company and its domestic subsidiaries (except for Wallace's Puerto
Rican subsidiaries) file a consolidated federal income tax return. The Puerto
Rican subsidiaries file separate returns in accordance with Section 936 of the
Internal Revenue Code. Deferred income taxes are provided for certain income and
expense items, which are accounted for differently for financial reporting and
income tax purposes.
Foreign Currency Translation
Assets and liabilities denominated in foreign currencies are translated
into U.S. dollars at year-end exchange rates and income and expense items are
translated at the average rates of exchange prevailing during each year. The
effects of foreign currency fluctuations on the foreign subsidiaries' assets and
liabilities have been reflected as a separate component of stockholders' equity.
Transaction gains and losses have been insignificant.
Recent Accounting Pronouncements
In June 1997, the Financial Accounting Standards Board issued Statements of
Financial Accounting Standards Nos. 130 and 131, "Reporting Comprehensive
Income" and "Disclosures about Segments of an Enterprise and Related
Information" ("SFAS 130" and "SFAS 131", respectively). The Company will be
required to adopt the provisions of these statements in fiscal 1998. SFAS 130
provides standards for reporting items considered to be "comprehensive income"
and uses the term "other comprehensive income" to refer to revenues, expenses,
gains and losses that are included in comprehensive income under generally
accepted accounting principles but excluded from net income. Currently the only
items presented in the Company's consolidated financial statements that would be
considered other comprehensive income as defined in SFAS 130 are cumulative
translation adjustments, which are recorded as components of stockholders'
equity. SFAS 131 establishes new standards for reporting information about
operating
29
<PAGE>
SYRATECH CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
segments. The Company believes the segment information required to be
disclosed under SFAS 131 will be more comprehensive than previously provided,
including expanded disclosure of statement of operations and balance sheet items
for each reportable operating segment. The Company has not yet completed its
analysis of the operating segments it will report on. The Company believes that
the provisions of SFAS 130 will not, when adopted, have a material impact on the
Company's consolidated financial statements.
In February 1998, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 132 ("SFAS 132"), "Employers' Disclosures
about Pensions and Other Postretirement Benefits. SFAS 132 standardizes the
disclosure requirement for pensions and other postretirement benefits to the
extent practicable. It does not change the measurement or recognition of those
plans. The Company will be required to adopt the provisions of this statement in
1998. The adoption of these provisions will not have a material impact upon the
Company's consolidated financial statements.
Reclassification
Certain prior year amounts have been reclassified to conform to the 1997
presentation.
Cash Flow Information
Supplemental cash flow information is as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------------
1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
Cash paid during the year for:
Interest $11,716 $ 2,383 $ 268
======= ======= =======
Income taxes $ 2,654 $16,791 $30,593
======= ======= =======
Supplemental schedule of non-cash investing and financing activities:
Purchase of common stock for retirement, financed by issuance
of promissory notes and assumption of bank debt $ - $ - $51,735
======= ======= =======
Rights redemption obligation $ - $ 87 $ -
======= ======= =======
Share transfer by principal stockholder $ - $ 2,338 $ -
======= ======= =======
</TABLE>
2. Merger and Recapitalization
On April 16, 1997, THL Transaction I Corp. ("THL I"), a Delaware corporation,
controlled by affiliates of Thomas H. Lee Company ("THL"), was merged with and
into the Company (the "Merger") pursuant to the Restated Agreement and Plan of
Merger, dated as of November 27, 1996, effective as of October 23, 1996, as
amended on February 14, 1997, between THL I and the Company.
Pursuant to the Merger, each share of the Company's Common Stock, par value
$0.01 per share ("Common Stock") issued and outstanding immediately prior to the
effective time of the Merger (the "Effective Time") (April 16, 1997) (other than
(i) shares of Common Stock held by the Company or any wholly-owned subsidiary
thereof, and (ii) 35,232 shares of Common Stock that were contributed to the
Company by Leonard Florence (former principal shareholder) upon the Merger and
which were then canceled and retired) was entitled to receive at the election of
the holder thereof and as stated below, either (a) $32.00 in cash (except that
Leonard Florence received $28.00 in cash) or (b) one fully paid and
non-assessable share of the Company's Common Stock. Common Stock retained was
limited in the case of each stockholder (other than Management Stockholders) to
34.75% of such stockholder's shares of Common Stock. Also, because no more than
an aggregate of 868,250 shares of the Company's Common Stock could be retained
by stockholders (other than Management Stockholders), the right to retain the
Company's Common Stock was to be subject to proration. In addition, each Company
Stock Option granted under the 1986 and 1993 Stock Plans that was outstanding
immediately prior to the Effective Time, vested and was canceled in exchange for
the excess in cash of $32.00 over the exercise price per share of the Company's
Common Stock. The aggregate amount paid to optionees of $3,685 and $188 related
to the vesting of the options
30
<PAGE>
SYRATECH CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
was charged to compensation expense.
Upon the Merger, THL acquired, directly from the Company, an aggregate of
18,000 shares which represented 100% of the Company's 12% Cumulative Redeemable
Preferred Stock and 2,374,793 shares which represented 62.8% of the Company's
Common Stock, in exchange for corresponding stock interests in THL I, for which
THL had paid an aggregate of $93,993 in cash. Accordingly, THL acquired control
of the Company.
At the Effective Time, the Company entered into debt financing arrangements
consisting of $165,000 principal amount of 11% Senior Notes (the "Notes") and a
Senior Revolving Credit Facility of $130,000 (the "Revolving Credit Facility").
The amount invested by THL in THL I, the purchase price for the Cumulative
Redeemable Preferred Stock, plus proceeds of the Notes and a portion of the
proceeds available pursuant to the Revolving Credit Facility, were used to
finance the acquisition of the shares of the Company's outstanding Common Stock
that were not retained by the Company's then existing stockholders, and to
refinance the Company's outstanding indebtedness. The Revolving Credit Facility
is also intended to provide for the Company's working capital requirements at
the time of and following the Merger.
The transaction was accounted for as a recapitalization.
At the Effective Time of the Merger, the employment agreement with the
Chairman of the Board and Chief Executive Officer was amended which (i) changed
his term of full-time employment from a rolling five-year term to a fixed
five-year term, (ii) provided for a minimum base salary of $1,150 per annum,
(iii) established $1,150 as the minimum amount upon which the Chairman's
retirement benefit (and the survivor's benefit of his surviving spouse) will be
computed, and (iv) created contractual rights with respect to certain
perquisites that he was accorded informally under present arrangements with the
Company. The employment agreement with the Vice President of Purchasing was also
amended to change his term of full-time employment from a rolling five-year term
to a fixed five-year term.
31
<PAGE>
SYRATECH CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
3. Acquisitions
Acquisitions of Businesses
On February 15, 1996, the Company, through an indirect wholly owned
subsidiary, acquired the outstanding shares of Rauch for approximately $49,626
including costs of the transaction. The acquisition was accounted for under the
purchase method of accounting, and the results of operations of Rauch have been
included with the results of the Company from February 15, 1996.
The purchase price in excess of net assets acquired of $7,224 is being
amortized on the straight-line basis over 30 years. Rauch is a leading domestic
manufacturer and marketer of Christmas and other seasonal products, in
particular glass and satin tree ornaments. During 1996, the Company received
$23,771 in connection with an insurance claim relating to a 1994 fire at a Rauch
facility.
The allocation of purchase price is as follows:
Cash paid to Rauch shareholders $ 48,042
Acquisition costs incurred 1,584
--------
Total purchase price $ 49,626
========
Allocated to:
Cash $ 2,084
Accounts receivable 8,461
Insurance receivable 23,771
Inventories 19,206
Deferred income taxes 2,518
Prepaid expenses and other 983
Property, plant and equipment, net 23,081
Other assets 89
Purchase price in excess of net assets required 7,224
Current liabilities (22,303)
Deferred income taxes (15,488)
--------
Total $ 49,626
========
32
<PAGE>
SYRATECH CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following summarized pro forma (unaudited) information assumes the
acquisition had occurred on January 1, 1996.
1996
--------
Net sales $271,450
========
Income from continuing operations $ 19,657
========
Net income $ 19,657
========
Basic earnings per share:
Continuing operations $ 2.26
========
Net income per common share $ 2.26
========
Weighted-average number of shares outstanding 8,695
========
Diluted earnings per share:
Continuing operations $2.23
========
Net income per common share $2.23
========
Weighted-average number of shares outstanding 8,695
Effect of dilutive stock options 104
--------
Adjusted weighted-average number of shares outstanding 8,799
========
On May 8, 1996, the Company, through one of its subsidiaries, acquired all
of the outstanding common stock of C.J. Vander Ltd., a manufacturer of sterling
silver and silver-plated flatware and hollowware in Sheffield and London,
England. The purchase price was immaterial to the Company's consolidated
financial statements. The acquisition was accounted for under the purchase
method of accounting, and the results of operations of C.J. Vander have been
included with the results of the Company from May 8, 1996. The results of
operations for 1996 would not have differed significantly had this acquisition
taken place on January 1, 1996.
Acquisition of Assets
Farberware
On April 2, 1996, the Company, through its indirect wholly-owned
subsidiary, Far-B Acquisition Corp. ("Far-B"), together with Lifetime Hoan
Corporation ("Lifetime") acquired certain assets from Farberware Inc., a
subsidiary of U.S. Industries, Inc. The Company and Lifetime are not affiliates.
Farberware Inc. was a manufacturer of aluminum clad, stainless steel cookware
and bakeware and small electric kitchen appliances. The aggregate consideration
paid by Far-B and Lifetime was $45,771, of which Far-B paid approximately
$32,611. The assets acquired by the Company included certain of the inventory,
the tradename "Farberware" and the intellectual property (including the
intellectual property that relates to cookware and bakeware and electric
products other than major kitchen appliances) and certain tools and dies and
machinery and equipment. Effective April 2, 1996, the Company, through Far-B,
entered into a manufacturing services agreement with Farberware Inc. for
transitional manufacturing services for certain finished goods previously
produced by Farberware Inc. The Company entered into the manufacturing service
agreement in part to provide continuity of product during a transition period in
order to protect the strength of the Farberware name in the marketplace. The
manufacturing service agreement has terminated in 1996 and during 1997, the
Company sold or disposed of all acquired inventory and no longer manufactures or
sells Farberware cookware and bakeware products or noncommercial electric
products. Accordingly, net sales for the year ended December 31, 1997 and 1996
exclude revenue from the sales of Farberware inventory, and $2.6 million and
$3.9 million, respectively, related to these sales and to licensing income, net
of certain selling, general and administrative expenses, has been recorded as
other operating income.
The Company acquired Farberware in order to expand Farberware's licensing
activities to use the Farberware name on certain of the Company's existing and
new products.
In a separate transaction, the Company and Far-B entered into an agreement
with Lifetime, which provided for the allocation between them of the assets
acquired from Farberware Inc., the granting of a long-term license to Lifetime
for use of the Farberware name in connection with an extensive list of products,
the granting to Lifetime of long-term exclusive rights to operate Farberware
33
<PAGE>
SYRATECH CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
outlet stores, the reservation of certain exclusive rights to Far-B (including
exclusive rights to use of the Farberware name for corporate purposes and for
the marketing of cookware and bakeware products as well as electric products)
and administration of certain licensing rights.
On June 27, 1996, the Company's Farberware Inc. subsidiary (formerly Far-B)
("Farberware") entered into a license agreement with Meyer Marketing Co. Ltd.
("Meyer") pursuant to which Meyer was granted for a term of 200 years (i) an
exclusive worldwide license to use and exploit the Farberware name and certain
related intellectual property rights in connection with the sourcing,
manufacture and distribution of cookware and bakeware products for home use and
commercial, industrial and institutional size pots, pans and roasters, and (ii)
non-exclusive (shared) rights to use certain Farberware technology and other
intellectual property. For such grant, Meyer made a one-time payment to the
Company of $25,500, which resulted in recognition by the Company of $11,900 of
non-recurring income. Under the terms of the licensing agreement, the Company
has no further obligation with respect to the amount paid by Meyer. As such, the
entire proceeds received were recognized as revenue in the second quarter of
1996. On July 12, 1996, Farberware granted to a major retail chain the exclusive
license to use and exploit the Farberware name and related intellectual property
in connection with the sourcing, manufacture, marketing and sale of certain
electric products for quarterly royalty payments. On October 25, 1996 Farberware
granted to FCI Corp. a license to use and exploit the Farberware name in
connection with the sourcing, manufacturing, marketing and sale of certain
commercial products (defined as six specified commercial urns and one specified
commercial convection oven plus cookware, bakeware and electric products
developed by the Licensee solely and exclusively for commercial, industrial or
institutional use with the prior written approval of Farberware) for the payment
of quarterly royalties.
Pursuant to an agreement made with Lifetime contemporaneously with the
agreement for acquisition of assets of Farberware Inc., the Company and Lifetime
agreed to share the rights to receive, and the obligation to pay certain
commissions in respect of, royalties under specified license agreements assigned
to the Company by the prior owner of the Farberware tradename. Subject to
certain intellectual property rights that the Company has reserved exclusively
for itself, the Company and Lifetime expect to continue to grant licenses to
third parties for use of the Farberware tradename. The Company also markets
specific products from time to time under the Farberware tradename. The
agreement with Lifetime provides that for a period of sixty days following a
change of control of either the Company or Lifetime, the other co-owner of the
joint venture will have the right to require the co-owner that has experienced
the change in control to set a price for a one-half interest in the venture, and
thereupon the other co-owner (i.e., the one that has not experienced a change of
control) can elect either to buy its co-owner's interest at the price so set or
to sell its own interest at such price to the co-owner that set it.
Subsequent to the acquisition of the assets from Farberware Inc., legal
disputes arose amongst the parties over alleged breaches of agreements. On
February 3, 1997, the Company, Farberware, and Lifetime reached an agreement
(the "Settlement Agreement") with Bruckner Manufacturing Corp. ("BMC") and U.S.
Industries Inc. ("USI") to settle all previous outstanding legal disputes
arising out of the Farberware Asset Purchase Agreement ("APA") and the
Manufacturing Services Agreement ("MSA"). Under the terms of the Settlement
Agreement, the Company received certain finished goods inventory at no cost, and
paid for certain finished goods inventories purchased under the MSA. The Company
also received a waiver of certain restrictions in the APA on disposing of tools,
machinery, and equipment formerly used by BMC in the manufacture of Farberware
products. The Company sold the majority of the tools, machinery and equipment in
1997 and retained the remainder for use in its existing businesses. The sale of
the tools, machinery and equipment resulted in net proceeds to the Company of
$2,184, which has been recorded as other non-operating income in 1997.
Silvestri
On April 16, 1996, the Company purchased finished goods inventory and
intangible assets of the Silvestri division of FFSC, Inc. ("Silvestri") for
approximately $8,600. Silvestri products include Christmas ornaments,
collectibles, lighting and trim as well as other seasonal and nonseasonal
giftware and decorative accessories.
During January of 1998, in connection with management's plan to reduce
costs and improve operating efficiencies by integrating its recent acquisition,
the Company announced plans to close certain Silvestri administrative and
distribution operations and move them to its corporate headquarters.
34
<PAGE>
SYRATECH CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Potpourri Press
On November 26, 1996, a wholly-owned subsidiary of the Company acquired
inventory, tangible property, intellectual property rights, certain records
and certain contract rights of Potpourri Press, Inc., a North Carolina-based
manufacturer and marketer of Christmas products, for a purchase price of
approximately $2,300 plus a $240 promissory note (Note 7).
4. Discontinued Operations
On April 11, 1995, pursuant to an agreement entered into on March 28, 1995,
the Company, through its subsidiary, Syratech Holding Corporation, sold Syroco,
Inc. ("Syroco"). The net proceeds received after costs of the sale and income
taxes were $133,931. On September 25, 1995, the Company reached a final
settlement regarding the sale of Syroco. Under the terms of the settlement, the
Company reacquired certain assets and reassumed certain liabilities of Syroco
which have been recorded at their estimated net fair value of $1,834 at December
31, 1995. The sale resulted in the discontinuation of the Company's casual
furniture and accessories business and resulted in an after-tax gain on disposal
of $30,451 which was recognized in the second quarter of 1995. The operating
results (unaudited) of the discontinued segment for the three months ended March
31, 1995 includes net sales of $33,626, income before provision for income taxes
of $4,217, provision for income taxes of $1,645, resulting in income from
discontinued operations of $2,572.
The results of operations and cash flows for the discontinued segment are
included in discontinued operations in the consolidated statement of operations
and the consolidated statement of cash flows for the year ended December 31,
1995. The operating results of the discontinued segment exclude previously
allocated corporate expenses. Substantially all of these assets have been sold
or disposed of with no effect on the previously recognized gain on disposal.
5. Inventories
December 31,
-------------------------
1997 1996
------- -------
Inventories were comprised of the following:
Raw materials $10,169 $ 9,020
Work-in-process 4,917 5,980
Finished goods 69,209 64,355
------- -------
Total $84,295 $79,355
======= =======
Inventories would have been approximately $1,784 and $3,430 higher at
December 31, 1997 and 1996, respectively if the FIFO method had been used for
all inventories. Increases in LIFO inventory quantities had the effect of
decreasing consolidated net loss by $74 in 1997 and decreasing income by $59 in
1996. There were no decreases in LIFO inventory quantities in 1995.
35
<PAGE>
SYRATECH CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
6. Property, Plant and Equipment
Property, plant and equipment was comprised of the following:
December 31,
----------------------------
1997 1996
--------- --------
Land and improvements $ 10,345 $ 8,305
Buildings and improvements 43,092 41,838
Tools and dies 16,501 14,635
Machinery and equipment 30,911 25,388
Other 1,984 1,619
Construction in progress 16,950 4,923
-------- --------
Total 119,783 96,708
Less accumulated depreciation (37,379) (32,753)
-------- --------
Net $ 82,404 $ 63,955
======== ========
Capitalized interest is not material to the Company's consolidated
financial statements in any year presented.
The Company has commitments under contracts for the construction of a
warehouse and distribution facility in Mira Loma, California. Portions of such
contracts not completed at December 31, 1997 are not reflected in the
consolidated financial statements. These unrecorded commitments were
approximately $3,947 at December 31, 1997.
7. Revolving Loan Facilities and Notes Payable
1997 Revolving Loan Facilities and Notes Payable
On the effective date of the Merger, the Company entered into a Senior
Revolving Credit Facility (the "Revolving Credit Facility") and terminated its
$60,000 Amended and Restated Loan and Security Agreement (the "Loan Agreement").
The Revolving Credit Facility, as amended on July 31, 1997 and December 31,
1997, provides for $130,000 of borrowings, including a $30,000 sublimit for the
issuance of standby and commercial letters of credit. Borrowings made under the
Revolving Credit Facility bear interest at a rate equal to, at the Company's
option, Eurodollar Rate plus 225 basis points (7.97% using the 30 day Eurodollar
rate at December 31, 1997) or the Prime Rate plus 50 basis points ( 9% at
December 31, 1997). The weighted-average interest rate on borrowings outstanding
under this facility for the year ended December 31, 1997 was 8.81%. At December
31, 1997, $6,000,000 of the outstanding borrowings were at the Eurodollar rate
and the balance of the outstanding borrowings were at the Prime Rate. The
Revolving Credit Facility expires on April 16, 2002. Pursuant to the terms of
the Revolving Credit Facility, the Company is required during February and March
of each year to maintain excess availability of at least $45,000 except February
and March 1998 when minimum availability must be $30,000. The obligations of the
Company under the Revolving Credit Facility are secured by inventory and
accounts receivable of the Company (the "Issuer/Guarantor Parent") and its
domestic subsidiaries and by a pledge of 100% of the domestic subsidiaries' and
at least 65% of the foreign subsidiaries' outstanding capital stock (the
"Guarantor Subsidiaries") (Note 17). The Revolving Credit Facility contains
customary covenants of the Company and the subsidiary borrowers, including but
not limited to minimum earnings before income taxes, depreciation, amortization,
and certain adjustments ("EBITDA"), as defined, funded debt to EBITDA and fixed
charge coverage ratios, as defined in the Revolving Credit Facility, and minimum
consolidated net worth on or after December 31, 1997 to be at least $1.00 (not
in thousands). The Company is in compliance with the covenants, as amended, as
of December 31, 1997 and for the year then ended. Availability under the
Revolving Credit Facility, net of outstanding letters of credit, was $61,837 at
December 31, 1997.
Furthermore, in connection with the Merger, the Company entered into debt
financing of $165,000 of 11% Senior Notes (the "Notes") The Notes, due April 15,
2007, require interest payments to be made semi-annually on April 15 and October
15. The Notes are general unsecured obligations of the Company and rank pari
passu in right of payment with all current and future
36
<PAGE>
SYRATECH CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
unsubordinated indebtedness of the Company, including borrowings under the
Revolving Credit Facility. However, all borrowings under the Revolving Credit
Facility are secured by a first priority lien on the accounts receivable and
inventory of the Company and its domestic subsidiaries ("Guarantor
Subsidiaries") but not of its foreign subsidiaries ("Non-Guarantor
Subsidiaries"). Consequently, the obligations of the Company under the Notes are
effectively subordinated to its obligations under the Revolving Credit Facility
to the extent of such assets. The Notes are redeemable, in whole or in part, at
the Company's option after April 15, 2002.
The Company's ability to pay dividends is restricted by terms of the
Revolving Credit Facility and the Notes. The Notes also include financial
covenants which are less restrictive than the covenants contained in the
Revolving Credit Facility. A default under the Notes will trigger a default
under the Revolving Credit Facility.
1996 Revolving Loan Facilities
The 1996 Revolving Loan Facility was repaid in its entirety upon completion
of the Merger. The weighted-average interest rate on borrowings outstanding
under this facility for the year ended December 31, 1996 was 7.29%. At December
31, 1996, there was $5,878 outstanding under the facility and credit
availability (net of letters of credit outstanding) was
$83,770.
Other Debt Facilities
On the effective date of the Merger, the Company paid the outstanding
borrowings of $252 under one of Wallace's Puerto Rican subsidiaries' $10,000
Amended and Restated Line of Credit Agreement (the "Credit Facility"). On May 1,
1997, the Company entered into a $1,000 facility (the "Facility"), expiring on
May 31, 1998, with the same lender. The Facility bears interest at a rate equal
to, at the Company's option, the Eurodollar Rate plus 175 basis points (7.47%
using the 30-day Eurodollar rate at December 31, 1997) or the bank's Prime Rate
less 25 basis points. (8.25% at December 31, 1997). Availability under the
Facility was $49 at December 31, 1997. The weighted-average interest rate on
borrowings outstanding under this facility for the year ended December 31, 1997
was 7.80%. Borrowings under the 1997 and 1996 facilities were uncollateralized;
however, the pledge of assets owned by one of the subsidiaries as collateral for
other loans was prohibited. Borrowings under the Credit Facility were guaranteed
by the Company and cross-guaranteed by certain other subsidiaries.
The weighted average interest rate on borrowings outstanding under this
Facility for the year ended December 31, 1996 was 8.08%. At December 31, 1996,
$558 was outstanding under the Facility and the credit availability was $9,442.
At December 31, 1996, the Company had a note payable of $200 related to the
purchase of Potpourri (Note 3).
8. Income Taxes
The provisions (benefit) for income taxes are as follows:
Year Ended December 31,
-------------------------------------
1997 1996 1995
------- ------- -------
Current:
Federal $(3,121) $11,379 $ 6,518
State 448 3,542 1,674
Foreign 825 1,307 937
------- ------- -------
(1,848) 16,228 9,129
------- ------- -------
Deferred
Federal (4) (3,344) (1,805)
State (16) (900) (383)
Foreign - - -
------- ------- -------
(20) (4,244) (2,188)
------- ------- -------
Tax effect of stock options:
Federal - 193 (60)
State - 57 (18)
------- ------- -------
- 250 (78)
------- ------- -------
Total $(1,868) $12,234 $ 6,863
======= ======= =======
37
<PAGE>
SYRATECH CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The reconciliation between the Company's effective income tax rate and the
U.S. federal statutory rate are as follows:
Year Ended December 31,
---------------------------
1997 1996 1995
------ ------ ------
Federal statutory rate (35.0%) 35.0% 35.0%
State taxes, net of federal income tax benefit 1.2 4.9 2.5
Foreign income taxes (including Puerto Rico) 2.0 (4.5) (3.6)
Other 2.9 2.1 0.4
----- ---- ----
Effective income tax rate (28.9%) 37.5% 34.3%
===== ==== ====
The components of income before provision (benefit) for income taxes were
comprised of the following:
Year Ended December 31,
-----------------------------------
1997 1996 1995
--------- -------- --------
Domestic $ (10,226) $ 25,457 $ 14,480
Foreign 3,762 7,166 5,559
--------- -------- --------
Total $ (6,464) $ 32,623 $ 20,039
========= ======== ========
Provisions have been made for taxes on the undistributed earnings of
Syratech H.K. and Wallace's Puerto Rican subsidiaries, which are ultimately
expected to be remitted to the parent company. The Company has permanently
invested a portion of the undistributed earnings of its Puerto Rican and
Syratech H.K. subsidiaries. It is not practical to estimate the amount of
unrecognized deferred tax liability attributable to these undistributed foreign
earnings.
Wallace's Puerto Rican subsidiaries operate under grants from the
Commonwealth of Puerto Rico exempting 90% of their income from taxation until
December 2003. Had the Company not been eligible for the tax exemption, the net
loss in 1997 would have increased by approximately $1,685 and net income in
1996 and 1995 would have been reduced by approximately $1,211 and $1,198,
respectively.
The tax effects of significant items comprising the Company's net deferred
tax asset (liability) are as follows:
December 31,
-------------
1997 1996
-------- ---------
Current deferred tax assets:
Accounts receivable $ 3,078 $ 4,475
Inventory 2,330 2,336
Reserves and accruals 1,596 2,266
Foreign operating loss carryforwards 5,203 175
Other 92 296
-------- --------
Total 12,299 9,548
Valuation allowance (962) (608)
-------- --------
Net current deferred tax asset $ 11,337 $ 8,940
======== ========
Non-current deferred tax asset (liability):
Property, plant and equipment $(17,252) $(17,263)
Deferred compensation 1,402 1,876
Foreign earnings to be remitted (4,233) 206
Other (2,525)
-------- --------
Net non-current deferred tax liability $(20,083) $(17,706)
======== ========
38
<PAGE>
SYRATECH CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The valuation allowance relates primarily to the potential unusable portion
of foreign tax loss carryforwards in 1997. At December 31, 1996 the valuation
allowance related to the potential unusable portion of foreign tax loss
carryforwards of $530 and contribution carryforwards of $1,066.
9. Commitments and Contingencies
The Company and its subsidiaries have various operating lease commitments
for buildings and equipment. The lease agreements generally require the Company
to pay insurance, real estate taxes, and maintenance and contain various renewal
options. Future minimum rental payments for all noncancellable operating leases
for each of the next five years and thereafter are as follows:
1998 $3,393
1999 3,121
2000 2,551
2001 1,602
2002 899
Subsequent to 2002 1,779
Rent expense for all operating leases was approximately $6,254, $5,209 and
$1,821 in 1997, 1996 and 1995, respectively.
Certain subsidiaries were contingently obligated for outstanding letters of
credit, trade acceptances and similar instruments aggregating $8,199 at December
31, 1997 (Note 7). The assets of Syratech H.K. are pledged as collateral for
certain of these contingent obligations.
10. Employee Benefit Plans
401(K) Savings Plans
The Company has three 401(k) savings plans. The 401(k) savings plans cover
substantially all employees of its domestic and Puerto Rican subsidiaries. The
401(k) plans are subject to certain minimum age and length of employment
requirements. Under two of these plans, the Company matches 30% of participants'
contributions up to 6% of compensation. Under the other plan, the Company
matches 50% of the first five hundred twenty dollars contributed and 25%
thereafter, of the participants' contributions up to 15% of compensation. The
Company also has a savings plan, established in 1991, covering substantially all
employees of the Company's Hong Kong subsidiary. Under the Hong Kong plan, the
Company contributes up to 10% of the participants' compensation. The Company
contributed an aggregate of $463, $597 and $256 to all of these Plans in 1997,
1996 and 1995.
Officers Retirement Plan
The Company has employment agreements with certain officers and employees
for terms ranging from three to five years, which provide for minimum annual
salaries aggregating $2,901 and certain other benefits.
Agreements with five of the Company's officers provide for other retirement
benefit payments. Two agreements provide that the benefit payments be based upon
two percent of the average total annual compensation (salary and bonus) for the
three-year period preceding the executives' retirement dates multiplied by the
number of years of service. In addition, one of the agreements provides for a
100% survivor benefit for the executive's spouse. Two agreements provide for
benefit payments based upon the greater of (i) $75,000 or (ii) one-half of one
percent of the average total annual compensation (salary and bonus) for the
three-year period preceding the executives' retirement dates multiplied by the
number of years of service. One agreement with an officer provides for benefit
payments based upon the greater of (i) $75,000 or (ii) one percent of the
average total annual compensation (salary and bonus) for the three-year period
preceding the executives' retirement dates multiplied by the number of years of
service.
Upon consummation of the Merger (Note 2), an employment agreement with an
officer was amended so as to (i) change the officer's term of full-time
employment from a rolling five-year term to a fixed five-year term, (ii) provide
for a minimum base salary
39
<PAGE>
SYRATECH CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
of $1,150 per annum, (iii) establish $1,150 as the minimum amount upon which the
officer's retirement benefit (and the survivor's benefit of his surviving
spouse) will be computed and (iv) create contractual rights with respect to
certain perquisites that he is accorded informally under present arrangements
with the Company. Additionally, an employment agreement with another officer was
amended to change the officer's term of full-time employment from a rolling
five-year term to a fixed five-year term.
Pension expense is determined using assumptions at the beginning of the
year. Assumptions used in determining the actuarial present value of the
projected benefit obligation include: a discount rate of 6.75%, 7.5% and 8.5% in
1997, 1996 and 1995, respectively, and a rate of future increases in benefit
compensation of 3%. The effect of the changes in discount rates was not material
to the consolidated financial statements.
Net pension cost included the following components:
1997 1996 1995
---- ------ ----
Service cost for benefits earned $279 $ 317 $196
Interest cost benefit obligation 195 199 123
Amortization of prior service cost (33) 620 476
Amortization of loss 4 191 -
---- ------ ----
Net periodic pension cost $445 $1,327 $795
==== ====== ====
The following table summarizes the amounts recognized in the consolidated
balance sheets as of December 31, 1997 and 1996:
1997 1996
------ ------
Actuarial present value of obligations:
Vested benefit obligation $3,261 $3,287
====== ======
Projected benefit obligation $3,529 $3,612
Fair value of plan assets - -
------ ------
Projected benefit obligation in excess of plan assets 3,529 3,612
Unrecognized prior service cost 366 (610)
Unrecognized gain/(loss) (759) (311)
Additional minimum liability - 597
====== ======
Net accrued pension liability $3,136 $3,288
====== ======
Other
The Company's C. J. Vander subsidiary also has an employee benefit plan.
The Company's obligation under the plan is not material to the Company's
consolidated financial position or results of operations.
11. Stockholders' Equity
Preferred Stock
The liquidation preference of the Cumulative Redeemable Preferred Stock is
$1,000 per share plus accrued but unpaid dividends. Holders of the Cumulative
Redeemable Preferred Stock are entitled, subject to the rights of creditors, in
the event of any voluntary or involuntary liquidation of the Company, to an
amount in cash equal to $1,000 for each share outstanding plus all accrued and
unpaid dividends. The rights of holders of the Cumulative Redeemable Preferred
Stock upon liquidation of the Company rank prior to those of the holders of
Common Stock.
Dividends on shares of Cumulative Redeemable Preferred Stock are cumulative
from the date of issue and are payable when and as declared from time to time by
the Board of Directors of the Company. Such dividends accrue on a daily basis
(whether or not declared) from the original date of issue at an annual rate per
share equal to 12% of the original purchase price per share, with such amount to
be compounded annually on each December 31 so that if the dividend is not paid
for any year the unpaid amount will be
40
<PAGE>
SYRATECH CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
added to the original purchase price of the Cumulative Redeemable Preferred
Stock for the purpose of calculating succeeding years' dividends. At December
31, 1997, $1,530 has been accrued.
The Cumulative Redeemable Preferred Stock is redeemable at any time at the
option of the Company, in whole or in part, at $1,000 per share plus all
accumulated and unpaid dividends, if any, to the date of redemption. Subject to
the Company's existing debt agreements, the Company must redeem all outstanding
Cumulative Redeemable Preferred Stock in the event of a public offering of
equity, a change of control or certain sales of assets.
Key Employee Stock Option Plans
Pursuant to the Merger, each Common Stock option granted under the Company's
1986 Stock Option Plan ("1986 Plan"), the 1993 Key Employee Stock Option Plan
("1993 Plan") and the 1995 Key Employee Stock Option Plan ("1995 Plan"), that
were outstanding immediately prior to the Effective Time, vested and were
cancelled in exchange for the excess of $32.00 over the exercise price per
share. The aggregate amount paid to optionees of $3,685 and $188 related to the
vesting of the stock options was charged to compensation expense.
A summary of stock option activity under all the Company's plans is as
follows:
Weighted Average
Exercise Price
Shares Per Share
--------- ---------------
Outstanding at January 1, 1995 300,750 $10.64
Canceled (90,900) $12.91
Granted 54,500 $16.87
Exercised (44,150) $7.29
--------
Outstanding at December 31, 1995 220,200 $11.92
Canceled (102,000) $24.47
Granted 139,500 $24.68
Exercised (28,200) $7.17
--------
Outstanding at December 31, 1996 229,500 $14.68
Canceled (221,500) $14.71
Granted -
Exercised (8,000) $13.90
========
Outstanding at December 31, 1997 -
========
Exercisable at December 31, 1996 107,080
========
The Company applies Accounting Principles Board Opinion No. 15 and
related interpretations in accounting for its stock option and other employee
stock-based compensation plans. Had compensation cost for the Company's stock
option plans been determined based on fair value at the grant dates for awards
under those plans which were granted on or after January 1, 1995 consistent with
the method of SFAS No. 123, the Company's net income and earnings per share for
the year ended December 31, 1996 would have been reduced to the pro forma
amounts indicated below:
41
<PAGE>
SYRATECH CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
1996 1995
------- -------
Net income (loss):
As reported $20,389 $46,199
======= =======
Pro forma $20,036 $45,762
======= =======
Basic earnings per share:
As reported $ 2.34 $ 3.95
======= =======
Pro forma $ 2.30 $ 3.91
======= =======
Weighted average number of
shares outstanding 8,695 11,707
======= =======
Diluted earnings per share:
As reported $ 2.32 $ 3.91
======= =======
Pro forma $ 2.28 $ 3.88
======= =======
Weighted average number of
shares outstanding 8,695 11,707
Effect of dilutive stock options 104 96
------- -------
Adjusted weighted average number of
shares outstanding 8,799 11,803
======= =======
The pro forma results are not necessarily indicative of results that would
have been reported if all options had been measured under SFAS No. 123.
The weighted average remaining contractual life of options outstanding at
December 31, 1996 was 6.99 years. The weighted average fair value of options
granted during 1995 and 1996 was $8.03 and $8.94 per share, respectively. There
were no options granted in 1997.
The fair value of options granted under the Company's stock option plans
during 1995 and 1996 was estimated on the date of grant using the Black-Scholes
option pricing model with the following weighted-average assumptions used: no
dividend yield, expected volatility of 30.6%, risk-free interest rate of 6.0%,
and expected lives of either 5.3 or 7.7 years.
Transfer of Shares
On December 31, 1996, the Company's Chief Executive Officer and principal
shareholder (the "Principal Shareholder") of the Company, the Company and THL
Transaction I Corp. entered into agreements with three executive officers
whereby the Principal Shareholder will transfer up to 73,068 shares (the
"Shares") of his Syratech common stock to the Company to effect the transfer of
an equal number of newly issued shares to the executive officers. In connection
with each transfer of shares of stock, the agreements also provide for each
executive to receive, from the Company, as additional compensation, an annual
lump sum cash payment (the "Lump Sum Payments") for the reimbursement of income
taxes owed by the executive as a result of such transfer and payment. The
transfer of Shares by the Principal Shareholder and the Lump Sum Payments to the
executives are irrevocable and unconditional and are not based upon the
executives' future employment with the Company. On December 31, 1996, 31,812
shares were transferred and Lump Sum Payments totaling $703 were made to the
executives. On January 14, 1997, shares aggregating 31,884 were transferred and
Lump Sum Payments totaling $705 were made to the executives. On January 14,
1998, the remaining 9,372 shares were transferred to the executives.
The estimated value of the shares has been recorded as an addition to
additional paid-in capital of $2,338. Total compensation expense equal to the
estimated fair value of the Shares plus an estimate of the aggregate Lump Sum
Payments, or $3,953, was recorded in the fourth quarter of 1996.
Short-term compensation payable was $207 and $705 at December 31, 1997 and
1996, respectively. The long-term compensation payable at December 31, 1996 was
$207.
The weighted-average fair value of the shares was $31.50. The fair value of
the shares based on the provision of SFAS No. 123 was not materially different
from the amounts recorded.
42
<PAGE>
SYRATECH CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Purchase of Common Stock
On December 29, 1995, the Company effected the Katy Stock Repurchase. The
aggregate purchase price of $52,054 represented approximately $17 per share. The
purchase was financed by the issuance of two promissory notes due January 2,
1996 to subsidiaries of Katy and the assumption of short-term bank debt, all
aggregating $51,735. The two promissory notes and the short-term bank debt were
paid on January 2, 1996. The Company's par and additional paid-in capital values
have been decreased to reflect the purchase.
Shareholder Rights Plan
On October 26, 1992 the Company's Board of Directors adopted a Shareholder
Rights Plan (the "Plan"). Under the Plan, the Company distributed a dividend of
one right (a "Right") to purchase shares of preferred stock to stockholders of
record on October 31, 1992 and further authorized the issuance of one Right to
each share of common stock which becomes outstanding after the record date. Each
Right entitles the registered holder to purchase from the Company one
one-hundredth of a share of a new series of preferred stock ("Series A Preferred
stock") at a price of $50, subject to adjustment. As amended on July 5, 1994,
the Rights become exercisable only if an individual or group (an "Acquiring
Person") acquires 15% or more of the outstanding common stock or commences a
tender offer which would result in its ownership of 30% or more of the
outstanding common stock, or in the case of a person who beneficially owned 20%
or more of the outstanding common stock on October 26, 1992, such person
acquires an additional 1% or more of the outstanding common stock.
As required by the Merger and Recapitalization (Note 2), effective on
November 8, 1996, the Company redeemed all outstanding Rights and terminated the
Shareholder Rights Plan pursuant to which the Rights were issued. The redemption
price for each Right is one cent and if holders of Rights have not received
payment of the redemption price prior to the Effective Time, they will have the
redemption price of their Rights added to the payment of the cash price for
their shares of Company Common Stock in the Merger.
12. Related-Party Transactions
In connection with the Merger, the Company entered into a Management
Agreement with Thomas H. Lee Company for which the Company pays an annual
management fee in the amount of $450 ($320 incurred for the year ended December
31, 1997).
In 1996 a beneficial owner of less than 1% of the Company held a significant
management role in Service Merchandise Co., Inc. ("Service"). A different person
is a director of the Company and is also a director of Service. The Company had
net sales to Service of approximately $6,867, $12,432 and $10,706 for 1997, 1996
and 1995, respectively.
Effective July 12, 1996, the Company, through an indirect wholly-owned
subsidiary, granted a license to Service to use certain trademarks, patents and
copyrights relating to certain electric and other products. The agreement is
subject to cancellation with six months' notice by the licensee.
In 1996, Wacker Industrial Company ("Wacker"), a major supplier, is owned
by a holder of less than 1% of the Company's common stock. In 1997, 1996 and
1995, the Company had purchases from this supplier of approximately $5,806,
$4,478 and $5,371, respectively. Accounts payable to this supplier approximated
$41 and $93 at December 31, 1997 and 1996, respectively.
Other transactions with companies affiliated with certain
directors/stockholders include net sales of approximately $903, $790 and $735
for 1997, 1996 and 1995, respectively. There were no purchases of products or
services for 1997, 1996 and 1995. Accounts receivable from these companies
approximated $19 and $7 as of December 31, 1997 and 1996, respectively. There
were no accounts payable.
43
<PAGE>
SYRATECH CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
13. Foreign Operations
The Company's foreign operations relate to its Hong Kong subsidiary, and as
of May 8, 1996, its C.J. Vander subsidiary. The sales of the Hong Kong
subsidiary are substantially to customers in the United States and the sales of
its C.J. Vander subsidiary are primarily to foreign customers. Summarized
financial information about the Company's operations in different geographic
areas is as follows:
Year Ended December 31,
----------------------------------
1997 1996 1995
-------- -------- --------
Net sales:
United States $231,152 $212,516 $122,950
Hong Kong 54,950 54,749 46,570
Other foreign 4,760 3,666 0
-------- -------- --------
Total $290,862 $270,931 $169,520
======== ======== ========
Income (loss) from operations:
United States $2,851 $15,372 $9,846
Hong Kong 4,841 8,235 5,599
Other foreign (570) (505) 0
-------- -------- --------
Total $ 7,122 $23,102 $15,445
======== ======== ========
Identifiable assets:
United States $250,899 $212,377 $213,162
Hong Kong 6,245 7,754 7,404
Other foreign 8,856 7,123 0
-------- -------- --------
Total $266,000 $227,254 $220,566
======== ======== ========
14. Litigation
The Company has been named as a defendant in several legal actions arising
from its normal business activities. The Company carries insurance against
liability for certain types of risks. Although the amount of liability that
could result from any litigation cannot be predicted, in the opinion of
management, the Company's potential liability on all known claims would not have
a material adverse effect on the consolidated financial position or results of
operations of the Company.
44
<PAGE>
SYRATECH CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
15. Quarterly Results (Unaudited)
SUPPLEMENTARY INFORMATION
Quarterly Results (unaudited)
<TABLE>
<CAPTION>
First Second Third Fourth
Quarter Quarter Quarter Quarter
------- ------- -------- -------
<S> <C> <C> <C> <C>
Year Ended December 31, 1997:
Net sales $44,039 $41,015 $109,044 $96,764
Gross profit 12,625 11,351 32,183 21,337
Income (loss) from operations (855) (6,074) 13,490 561
Income (loss) before provision (benefit) for income taxes 171 (9,025) 7,654 (5,264)
Net income (loss) applicable to common stockholders 107 (6,091) 1,934 (2,076)
Basic Earnings (loss) per share:
Net income (loss) per share $0.01 ($1.33) $0.51 ($0.55)
======= ======= ======== =======
Weighted-average number of shares outstanding 8,699 4,595 3,784 3,784
======= ======= ======== =======
Diluted Earnings (loss) per share:
Net income (loss) per share $0.01 ($1.33) $0.51 ($0.55)
======= ======= ======== =======
Weighted-average number of shares outstanding 8,699 4,595 3,784 3,784
Effect of dilutive stock options 121 - - -
------- ------- -------- -------
Adjusted weighted-average number of shares outstanding 8,820 4,595 3,784 3,784
======= ======= ======== =======
Year Ended December 31, 1996:
Net sales $31,266 $38,592 $112,869 $88,204
Gross profit 9,048 10,178 33,198 24,394
Income (loss) from operations (290) 2,183 16,427 4,782
Income before provision for income taxes 143 13,261 15,395 3,824
Net income applicable to common stockholders 90 8,623 10,006 1,670
Basic Earnings (loss) per share:
Net income (loss) per share $0.01 $0.99 $1.15 $0.19
======= ======= ======== =======
Weighted-average number of shares outstanding 8,674 8,677 8,677 8,752
======= ======= ======== =======
Diluted Earnings (loss) per share:
Net income (loss) per share $0.01 $0.98 $1.14 $0.19
======= ======= ======== =======
Weighted-average number of shares outstanding 8,674 8,677 8,677 8,752
Effect of dilutive stock options 104 116 93 103
------- ------- -------- -------
Adjusted weighted-average number of shares outstanding 8,778 8,793 8,770 8,855
======= ======= ======== =======
</TABLE>
During the fourth quarter of 1997, the Company recorded an inventory adjustment
of $2,800 related to shrinkage and to excess material and scrap costs related to
the start-up of new manufacturing equipment.
45
<PAGE>
SYRATECH CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
16. Subsequent Events
On March 30, 1998, the Company amended its Revolving Credit Facility to
change the financial covenants of the Company and the subsidiary borrowers,
including but not limited to, revising the funded debt to EBITDA, as defined,
and fixed charge coverage ratios, and capital expenditure covenants. The Company
expects to be in compliance with all of the covenants, as amended, during fiscal
1998.
Note 17. Supplemental Condensed Consolidating Financial Statements
The following supplemental condensed consolidating financial statements as
of December 31, 1997 and 1996 and for each of the three years in the period
ended December 31, 1997, present separate financial information for the Company
("Issuer/Guarantor Parent"), the Guarantor Subsidiaries (Note 7), the
Non-Guarantor Subsidiaries (Note 7), and Discontinued Operations (Note 4).
Separate financial statements of each guarantor are not presented because
management believes that such statements would not be materially different from
the information presented herein.
46
<PAGE>
SYRATECH CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
SUPPLEMENTAL CONDENSED CONSOLIDATING BALANCE SHEETS
December 31, 1997
<TABLE>
<CAPTION>
Issuer/
Guarantor Guarantor Non-Guarantor
Parent Subsidiaries Subsidiaries Elimination Consolidated
--------- ------------ ------------ ----------- ------------
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and equivalents $ 18 $ 91 $ 2,872 $ 2,981
Accounts receivable, net 61,367 2,526 63,893
Inventories 79,500 4,754 $ 41 84,295
Deferred income taxes 729 10,608 11,337
Prepaid expenses and other 2,075 317 2,392
Properties held for sale 1,151 685 1,836
--------- --------- -------- ---------- ---------
Total current assets 747 154,792 11,154 41 166,734
Property, plant and equipment, net 78,406 3,947 51 82,404
Purchase price in excess of net assets acquired 6,790 6,790
Other assets 189,236 278 (179,442) 10,072
--------- --------- -------- ---------- ---------
Total $ 189,983 $ 240,266 $ 15,101 $ (179,350) $ 266,000
========= ========= ======== ========== =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Revolving loan facilities and notes payable $ 18,900 $ 18,900
Accounts payable 12,703 $ 1,531 14,234
Accrued expenses $ 4,515 7,730 532 12,777
Accrued compensation 3,020 370 3,390
Accrued advertising 3,576 3,576
Income taxes payable 19,949 (19,877) (78) $ 6
--------- --------- -------- ---------- ---------
Total current liabilities 24,464 26,052 2,355 6 52,877
Long-term debt 165,000 165,000
Deferred income taxes 2,295 17,788 20,083
Pension liability 3,136 3,136
Other long - term liabilities
Intercompany (receivable) payable (63,038) 64,997 (7,677) 5,718
Commitments and contingencies
Stockholders' equity 61,262 128,293 20,423 (185,074) 24,904
--------- --------- -------- ---------- ---------
Total $ 189,983 $ 240,266 $ 15,101 $ (179,350) $ 266,000
========= ========= ======== ========== =========
</TABLE>
47
<PAGE>
SYRATECH CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
SUPPLEMENTAL CONDENSED CONSOLIDATING BALANCE SHEETS
December 31, 1996
<TABLE>
<CAPTION>
Issuer/
Guarantor Guarantor Non-Guarantor
Parent Subsidiaries Subsidiaries Elimination Consolidated
--------- ------------ ------------- ----------- ------------
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and equivalents $ 18 $ 146 $ 3,441 $ 3,605
Accounts receivable, net 56,719 3,301 60,020
Inventories 74,134 5,180 $ 41 79,355
Deferred income taxes 729 8,211 8,940
Prepaid expenses and other 2,653 1,150 3,803
--------- --------- --------- ---------- ---------
Total current assets 747 141,863 13,072 41 155,723
Property, plant and equipment, net 62,219 1,805 (69) 63,955
Purchase price in excess of net assets
acquired 7,032 7,032
Other assets 179,442 544 (179,442) 544
--------- --------- --------- ---------- ---------
Total $ 180,189 $ 211,658 $ 14,877 $ (179,470) $ 227,254
========= ========= ========= ========== =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Revolving loan facilities and notes
payable $ 6,604 $ 32 $ 6,636
Accounts payable 7,637 2,052 9,689
Accrued expenses $ 1,058 9,420 571 11,049
Accrued compensation 3,812 416 4,228
Accrued advertising 3,273 3,273
Income taxes payable 19,907 (19,581) 598 $ 6 930
--------- --------- --------- ---------- ---------
Total current liabilities 20,965 11,165 3,669 6 35,805
Deferred income taxes 2,295 15,411 17,706
Pension liability 3,288 3,288
Other long-term liabilities 207 207
Intercompany (receivable) payable (62,863) 62,863 (5,718) 5,718
Stockholders' equity 219,792 118,724 16,926 (185,194) 170,248
--------- --------- --------- ---------- ---------
Total $ 180,189 $ 211,658 $ 14,877 $ (179,470) $ 227,254
========= ========= ========= ========== =========
</TABLE>
48
<PAGE>
SYRATECH CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
Year Ended December 31, 1997
<TABLE>
<CAPTION>
Issuer/
Guarantor Guarantor Non-Guarantor
Parent Subsidiaries Subsidiaries Eliminations Consolidated
--------- ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Net sales $ 170,758 $ 89,903 $ 30,201 $ 290,862
Cost of sales 113,512 69,651 30,203 213,366
--------- -------- -------- ---------
Gross profit 57,246 20,252 (2) 77,496
Selling, general and administrative expenses $ 3,719 52,730 16,136 155 72,740
Other operating income 2,366 2,366
--------- --------- -------- -------- ---------
Income (loss) from operations (3,719) 6,882 4,116 (157) 7,122
Interest expense (13,864) (2,119) (44) (16,027)
Interest income 208 49 257
Other income 2,184 2,184
--------- --------- -------- -------- ---------
Income (loss) before provision (benefit) for
income taxes (17,583) 7,155 4,121 (157) (6,464)
Provision (benefit) for income taxes (2,693) 825 (1,868)
--------- --------- -------- -------- ---------
Net income (loss) (17,583) 9,848 3,296 (157) (4,596)
Preferred stock dividends accrued 1,530 1,530
--------- --------- -------- -------- ---------
Net income (loss) available to common stockholders $ (19,113) $ 9,848 $ 3,296 $ (157) $ (6,126)
========= ========= ======== ======== =========
</TABLE>
49
<PAGE>
SYRATECH CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
Year Ended December 31, 1996
<TABLE>
<CAPTION>
Issuer/
Guarantor Guarantor Non-Guarantor
Parent Subsidiaries Subsidiaries Eliminations Consolidated
------ ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Net sales $ 212,530 $ 85,498 $ (27,097) $ 270,931
Cost of sales 154,622 66,582 (27,091) 194,113
--------- -------- --------- ---------
Gross profit 57,908 18,916 (6) 76,818
Selling, general and administrative
expenses $ (360) 46,844 11,880 (700) 57,664
Other operating income 3,948 3,948
------ --------- -------- --------- ---------
Income from operations 360 15,012 7,036 694 23,102
Interest expense (3,114) (36) (3,150)
Interest income 70 535 166 771
Other income 11,900 11,900
------ --------- -------- --------- ---------
Income before provision for income
taxes 430 24,333 7,166 694 32,623
Provision for income taxes 1,092 9,835 1,307 12,234
------ --------- -------- --------- ---------
Net (loss) income $ (662) $ 14,498 $ 5,859 $ 694 $ 20,389
====== ========= ======== ========= =========
</TABLE>
50
<PAGE>
SYRATECH CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
Year Ended December 31, 1995
<TABLE>
<CAPTION>
Issuer/
Guarantor Guarantor Non-Guarantor
Parent Subsidiaries Subsidiaries Eliminations Consolidated
--------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net sales $ 122,950 $ 67,354 $ (20,784) $ 169,520
Cost of sales 87,593 53,027 (20,784) 119,836
--------- -------- --------- ---------
Gross profit 35,357 14,327 49,684
Selling, general and administrative
expenses 25,522 8,728 (11) 34,239
--------- -------- --------- ---------
Income from operations 9,835 5,599 11 15,445
Interest expense (198) (89) (287)
Interest income $ 4,496 336 49 4,881
Other income 1,300 1,300 (2,600)
-------- ------- ------- -------- --------
Income before provision for
income taxes 5,796 11,273 5,559 (2,589) 20,039
Provision for income taxes 2,623 3,303 937 6,863
-------- ------- ------- -------- --------
Income from continuing
operations 3,173 7,970 4,622 (2,589) 13,176
Discontinued operations, net 33,023 33,023
-------- ------- ------- -------- --------
Net income $ 36,196 $ 7,970 $ 4,622 $ (2,589) $ 46,199
======== ======= ======= ======== ========
</TABLE>
51
<PAGE>
SYRATECH CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
Year Ended December 31, 1997
<TABLE>
<CAPTION>
Issuer/
Guarantor Guarantor Non-Guarantor
Parent Subsidiaries Subsidiaries Eliminations Consolidated
--------- ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) applicable to common stockholders $ (17,583) $ 9,848 $ 3,296 $ (157) $ (4,596)
Adjustments to reconcile net income to net
cash provided by (used in) operations:
Depreciation and amortization 1,008 4,781 410 6,199
Deferred income taxes (20) (20)
Pension liability (152) (152)
Compensation related to stock options 209 209
Other long-term liability (207) (207)
Gain or (loss) on disposal of assets and other 50 50
Increase (decrease) in assets and liabilities,
net of effect of businesses
of businesses acquired:
Accounts receivable (4,648) 775 (3,873)
Inventories (5,366) 426 (4,940)
Prepaid expenses and other 578 148 726
Other assets (10,800) (10,800)
Accounts payable and accrued expenses 3,455 2,888 (607) 5,736
Income taxes payable 42 (296) (676) (930)
Intercompany account (175) 2,064 (2,046) 157
--------- --------- --------- --------- ---------
Net cash (used in) provided by operations (23,844) 9,520 1,726 -- (12,598)
--------- --------- --------- --------- ---------
Cash flows from investing activities:
Purchases of property, plant and equipment (21,909) (2,552) (24,461)
Other 124 124
--------- --------- --------- --------- ---------
Net cash (used in) investing activities -- (21,785) (2,552) -- (24,337)
--------- --------- --------- --------- ---------
Cash flows from financing activities:
Change in revolving loan facilities 12,232 32 12,264
Proceeds from borrowings 165,000 165,000
Proceeds from sale of preferred stock 18,000 18,000
Proceeds from sale of common stock 75,993 75,993
Purchase of common stock for retirement
(including related costs of $11,555) (235,243) (235,243)
Exercise of stock options 91 91
Deferred financing costs and other 3 (22) (19)
--------- --------- --------- --------- ---------
Net cash provided by (used in) financing activities 23,844 12,210 32 -- 36,086
--------- --------- --------- --------- ---------
Effect of exchange rate changes on cash 225 225
--------- --------- --------- --------- ---------
Net increase (decrease) in cash and equivalents -- (55) (569) (624)
Cash and equivalents, beginning of year 18 146 3,441 3,605
--------- --------- --------- --------- ---------
Cash and equivalents, end of year $ 18 $ 91 $ 2,872 $ -- $ 2,981
========= ========= ========= ========= =========
</TABLE>
52
<PAGE>
SYRATECH CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
Year Ended December 31, 1996
<TABLE>
<CAPTION>
Issuer/
Guarantor Guarantor Non-Guarantor
Parent Subsidiaries Subsidiaries Eliminations Consolidated
--------- ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net (loss) income $ (662) $ 14,498 $ 5,859 $ 694 $ 20,389
Adjustments to reconcile net (loss)
income to net cash provided by (used
in) operations:
Depreciation and amortization 4,466 279 22 4,767
Deferred income taxes 1,329 (4,085) (2,756)
Acquisition of Farberware assets (9,500) (9,500)
Disposal of Farberware assets 13,600 13,600
Farberware electrics license 500 500
Transfer of shares 2,338 1,317 3,655
Other 78 1,542 5 1,625
Increase (decrease) in cash net of
effect of businesses acquired:
Marketable securities 30,561 30,561
Accounts receivable (18,129) (227) (18,356)
Inventories (16,352) (754) (17,106)
Prepaid expenses and other 516 (816) (171) (471)
Accounts payable and accrued
expenses 49 (2,235) (684) (2,870)
Income taxes payable (245) (1,979) 129 (2,095)
Intercompany account 689 1,147 (122) (1,714)
Discontinued operations 1,834 1,834
-------- -------- -------- ------ --------
Net cash provided by (used in) operating
activities 36,487 (16,026) 4,314 (998) 23,777
-------- -------- -------- ------ --------
Cash flows from investing activities:
Insurance claim proceeds 23,771 23,771
Acquisitions of businesses net of cash
acquired (48,540) (998) 998 (48,540)
Purchases of property, plant and
equipment (13,643) (1,482) (15,125)
Other (130) 10 (120)
-------- -------- -------- ------ --------
Net cash used in investing activities (48,540) 9,998 (2,470) 998 (40,014)
-------- -------- -------- ------ --------
Cash flows from financing activities:
Change in revolving loan facilities (51,735) (5,296) (2,044) (59,075)
Repayment of borrowings (300) (300)
Other 452 (16) (8) 428
-------- -------- -------- ------ --------
Net cash used in financing activities (51,283) (5,612) (2,052) (58,947)
-------- -------- -------- ------ --------
Effect of exchange rate changes on cash
and equivalents 296 296
-------- -------- -------- ------ --------
Net increase (decrease) in cash and
equivalents (63,336) (11,640) 88 (74,888)
Cash and equivalents, beginning of year 63,354 11,786 3,353 78,493
-------- -------- -------- ------ --------
Cash and equivalents, end of year $ 18 $ 146 $ 3,441 $ -- $ 3,605
======== ======== ======== ====== ========
</TABLE>
53
<PAGE>
SYRATECH CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Concluded)
SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
Year Ended December 31, 1995
<TABLE>
<CAPTION>
Issuer/
Guarantor Guarantor Non-Guarantor
Parent Subsidiaries Subsidiaries Eliminations Consolidated
------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net income $ 36,196 $ 7,970 $ 4,622 $ (2,589) $ 46,199
Adjustments to reconcile net income to
net cash provided by (used in)
operations:
Depreciation and amortization 3,089 175 (11) 3,253
Deferred income taxes (1,202) (1,027) (2,229)
Other 102 1,158 1,260
Increase (decrease) in cash:
Marketable securities (30,561) (30,561)
Accounts receivable (3,273) (376) (3,649)
Inventories (772) (45) (817)
Prepaid expenses and other (516) (914) (16) (1,446)
Accounts payable and accrued
expenses 922 (686) 359 595
Income taxes payable 21,241 (23,837) 290 (2,306)
Intercompany account (47,093) 47,421 (2,928) 2,600
Discontinued operations (49,915) (49,915)
--------- --------- --------- -------- ---------
Net cash (used in) provided by
operating activities (70,826) 29,129 2,081 (39,616)
--------- --------- --------- -------- ---------
Cash flows from investing activities:
Net proceeds on sale of Syroco, Inc 133,931 133,931
Purchases of property, plant and
equipment (2,559) (120) (2,679)
Other 61 61
--------- --------- --------- -------- ---------
Net cash provided by (used in)
investing activities 133,931 (2,498) (120) 131,313
--------- --------- --------- -------- ---------
Cash flows from financing activities:
Change in revolving loan facilities (14,504) (14,504)
Repayment of borrowings (875) (875)
Other 249 60 309
--------- --------- --------- -------- ---------
Net cash provided by (used in)
financing activities 249 (15,319) (15,070)
--------- --------- --------- -------- ---------
Net increase in cash
Net increase in cash and equivalents 63,354 11,312 1,961 76,627
Cash and equivalents, beginning of year 474 1,392 1,866
--------- --------- --------- -------- ---------
Cash and equivalents, end of year $ 63,354 $ 11,786 $ 3,353 $ -- $ 78,493
========= ========= ========= ======== =========
</TABLE>
54
<PAGE>
ITEM 9 Changes In And Disagreements With Accountants On Accounting And
Financial Disclosure
Not applicable
PART III
ITEM 10 Directors And Executive Officers Of The Registrant
<TABLE>
<CAPTION>
Officer/
Director
Name Age Principal Occupation Since
---- --- -------------------- -----
<S> <C> <C> <C>
Leonard Florence 66 Chairman of the Board, Chief Executive Officer and 1986
President of the Company
E Merle Randolph 65 Executive Vice President, International Marketing
and West Coast Distribution, Director 1986
Michael S Krause 57 Executive Vice President and Chief Operating Officer 1997
Ami A Trauber 58 Executive Vice President of Finance, Administration, 1998
Strategic Planning and Chief Financial Officer and
Treasurer
Melvin L Levine 66 Vice President of Purchasing of the Company, Director 1986
Alan R Kanter 45 Vice President of Sales of the Company, Director 1986
Faye A Florence 41 Vice President and General Counsel; Secretary of the
Company 1987
David V Harkins 56 Director 1997
Thomas M Hagerty 35 Director 1997
Scott A Schoen 39 Director 1997
Kent R Weldon 30 Director 1997
Seth W Lawry 33 Director 1997
</TABLE>
Leonard Florence is Chairman of the Board, Chief Executive Officer and
President of the Company. He has served in the capacity of Chairman of the Board
and Chief Executive Officer continuously since September 1986. He has also been
President and a director of certain of its subsidiaries since their respective
dates of organization. Mr. Florence previously served as President of the
Company from 1986 to 1994 and resumed the position in 1995. Mr. Florence has
been an executive in the tabletop and giftware products industry for more than
35 years.
E. Merle Randolph was appointed to Executive Vice President, International
Manufacturing and West Coast Distribution on January 26, 1998. He had been Vice
President, Chief Financial Officer and Treasurer of the Company since September
1986. He became a Director of the Company in May 1989. Mr. Randolph is also an
officer of certain of the Company's subsidiaries. For 17 years prior to joining
the Company, Mr. Randolph was employed in various financial positions by
Rockwell International Corporation.
Michael S. Krause became Executive Vice President and Chief Operating
Officer on August 11, 1997. Prior to joining the Company, Mr. Krause served as
Senior Vice President Global Operations at Tambrands, Inc. in 1996, Vice
President Supply Chain at The Quaker Oats Company, Executive Vice President in
1995, Supply Chain at Stella Foods, Inc. in 1994, and Senior Vice President
Operations at Goody Products, Inc. from 1991 to 1993.
Ami A. Trauber was appointed Executive Vice President of Finance,
Administration, Strategic Planning and Chief Financial Officer and Corporate
Treasurer on January 26, 1998. Prior to joining the Company, Mr. Trauber served
as acting Chief Financial Officer at Visual Edge Systems, Inc. and served as
President, Chief Operating Officer, Director and Part Owner of Ed's West, Inc.
He served as Corporate Vice President Finance and Control at Harcourt General,
Inc. from 1978-1990.
55
<PAGE>
Melvin L. Levine has been a Vice President of the Company and certain of
its subsidiaries since September 1986. Mr. Levine has been an executive in the
tabletop and giftware products industry for more than 35 years. He became a
director of the Company in May 1989. Mr. Levine is also an officer and director
of certain of the Company's subsidiaries.
Alan R. Kanter has been a Vice President of the Company and a subsidiary of
the Company since September 1986. Mr. Kanter has been employed in the tabletop
and giftware industry for more than 20 years.
Faye A. Florence an attorney, has been Vice President and General Counsel
of the Company since June 1987 and Secretary since August 1987. Ms. Florence is
also an officer of certain of the Company's subsidiaries. Ms. Florence is the
daughter of Leonard Florence.
David V. Harkins is Senior Managing Director of Thomas H. Lee Company since
1991. He joined Thomas H. Lee Company in 1986. He is President and Trustee of
THL Equity Trust III, the General Partner of THL Equity Advisers III Limited
Partnership, which is the General Partner of Thomas H. Lee Equity Fund III, L.P.
Mr. Harkins is Chairman of National Dentex Corporation since 1983. Mr. Harkins
is a Director of Stanley Furniture Company, Inc., National Dentex Corporation,
HomeSide, Inc., Freedom Securities, Inc. and First Alert, Inc.
Thomas M. Hagerty is a Managing Director of the Thomas H. Lee Company where
he has been employed since 1993. He joined Thomas H. Lee Company in 1988. Mr.
Hagerty is Vice President and Trustee of THL Equity Trust III, the General
Partner of THL Equity Advisers III Limited Partnership, which is the General
Partner of Thomas H. Lee Equity Fund III, L.P. Mr. Hagerty is a director of
Select Beverages, Inc., Freedom Securities, Inc. and HomeSide, Inc.
Scott A. Schoen is a Managing Director of the Thomas H. Lee Company where
he has been employed since 1986. Mr. Schoen joined Thomas H. Lee Company in
1986. Mr. Schoen is a Managing Director of the Thomas H. Lee Company where he
has been employed since 1986. Mr. Schoen is also a Trustee of THL Equity Trust
III, the General Partner of THL Equity Advisors Limited Partnership III, which
is the General Partner of Thomas H. Lee Equity Fund III, L.P. Mr. Schoen also
serves as Vice President of Thomas H. Lee Advisors I and Thomas H. Lee Advisors
II. Mr. Schoen is a director of Transwestern Publishing Co., First Alert, Inc.,
Signature Brands USA, Inc., and Rayovac Corporation. Mr. Schoen received a BA in
History from Yale University, a JD from Harvard Law School and and MBA from the
Harvard Graduate School of Business Administration. Mr. Schoen is a member of
the New York Bar.
Kent R. Weldon is Vice President of THL Equity Trust III, the General
Partner of THL Equity Advisers III Limited Partnership, which is the General
Partner of Thomas H. Lee Equity III, L.P. Mr. Weldon worked at Thomas H. Lee
Company from 1991 to 1993 and rejoined in 1995. From 1989 to 1991, Mr. Weldon
worked in the Mergers & Acquisitions Department of Morgan Stanley & Co.
Incorporated, 1585 Broadway, New York, New York. He is a Director of Fisher
Scientific International, Inc. and Fitz and Floyd. From 1993 to 1995, Mr. Weldon
attended the Harvard Graduate School of Business Administration.
Seth W. Lawry has worked at Thomas H. Lee Company from 1989 to 1990 and
rejoined in 1994. He is Vice President of THL Equity Trust III, the General
Partner of THL Equity Advisers III Limited Partnership, which is the General
Partner of Thomas H. Lee Equity III, L.P. From 1990 to 1992, Mr. Lawry attended
Stanford Graduate School of Business. From 1992 to 1994, Mr. Lawry worked in the
Mergers & Acquisitions Department of Morgan Stanley & Co. Incorporated, 1585
Broadway, New York, New York. Mr. Lawry is a director of Freedom Securities,
Inc.
Meetings Of The Board Of Directors
The Board of Directors consists of Leonard Florence, E. Merle Randolph,
Melvin Levine, Alan Kanter, David Harkins, Thomas M. Hagerty, Scott A. Schoen,
Kent R. Weldon and Seth W. Lawry. The Chairman of the Board is Leonard Florence.
The Board of Directors held a meeting on February 24, 1998 to replace those
committees as constituted prior to the Merger. The reconstituted committees
include an Audit Committee and a Compensation and Stock Option Committee.
The Audit Committee consists of Scott Schoen, Kent Weldon and Tom Hagerty.
Scott Schoen is the Chairman of the Audit Committee. This Committee has
oversight authority and responsibility for the financial statements of the
Company and its subsidiaries. In conjunction with its responsibilities, the
Committee invites representatives of Deloitte & Touche LLP to be present, at
both of its meetings.
56
<PAGE>
The Compensation and Stock Option Committee consists of David Harkins, Tom
Hagerty and Seth Lawry. David Harkins is the Chairman of the Compensation and
Stock Option Committee. The functions of the Compensation and Stock Option
Committee include fixing the compensation and reviewing the salaries, of the
Chief Executive Officer and the executive officers of the Company, including the
review of incentive plans and benefits. The Committee also administers the
Company's Key Employees' Stock Option Plans, to determine the terms upon which,
and the identities of the persons to whom, options to purchase shares of Common
Stock of the Company shall be granted.
ITEM 11. Executive Compensation
The following table sets forth the compensation awarded to, earned by or
paid to the Chief Executive Officer and the four other most highly compensated
executive officers during the fiscal years ended December 31, 1997, 1996 and
1995 for services rendered in all capacities to the Company and its
subsidiaries. (3)
Summary Compensation Table
Annual
Compensation(1)
--------------------------
<TABLE>
<CAPTION>
Fiscal All Other
Year Salary Bonus Compensation
Name and Principal Position Ended $ $ ($)(2)
--------------------------- ----- ------ ----- ------
<S> <C> <C> <C> <C>
Leonard Florence 12/31/97 $1,150,000 --- $ 19,717
Chairman of the Board, President 12/31/96 $ 700,000 $500,000 $ 22,401
and Chief Executive Officer 12/31/95 $ 650,000 $500,000 $ 22,790
Melvin L. Levine 12/31/97 $ 350,000 --- $ 151,150
Vice President of Purchasing 12/31/96 $ 350,000 $ 75,000 $1,320,520
12/31/95 $ 325,000 $ 75,000 $ 2,772
Alan R. Kanter 12/31/97 $ 350,000 --- $ 151,150
Vice President of Sales 12/31/96 $ 350,000 $ 75,000 $1,320,520
12/31/95 $ 325,000 $ 75,000 $ 2,772
E. Merle Randolph 12/31/97 $ 325,000 --- $ 92,070
Executive Vice President, International 12/31/96 $ 325,000 $ 75,000 $1,320,520
Manufacturing and West Coast Division 12/31/95 $ 300,000 $350,000 $ 2,772
Faye A. Florence 12/31/97 $ 200,000 $ 22,000 $ 290,500
Vice President and General 12/31/96 $ 200,000 $ 30,000 $ 2,850
Counsel, Secretary 12/31/95 $ 175,000 $ 30,000 $ 2,772
</TABLE>
(1) The column designated "Other Annual Compensation" by the Securities and
Exchange Commission ("SEC") for the reporting of perquisites and other personal
benefits has been eliminated because the amounts paid to each executive officer
do not exceed the disclosure threshold established by the SEC pursuant to
applicable rules and no other compensation required to be reported under that
column was awarded to, earned by or paid to any of the named executive officers
during the period covered by the table. In addition, the columns designated by
the SEC for the reporting of certain long-term compensation, including awards of
restricted stock and long-term incentive plan payouts have been eliminated as no
such awards or payouts were made during the period covered by the table.
(2) The estimated dollar value benefit of insurance premiums paid by the Company
with respect to life insurance for the benefit of Leonard Florence for the years
ended December 31, 1997, 1996 and 1995 was $16,867, $19,551, and $20,018
respectively. Messrs. Levine, Kanter and Randolph entered into agreement with
Leonard Florence, the Company, and THL Transaction I Corp., whereby they
received 24,356 shares of Syratech Common Stock valued at $779,392 and lump sum
cash payments totaling $538,278 for
57
<PAGE>
reimbursement of income taxes pursuant to a transfer of 73,068 shares of
Syratech Common Stock by Leonard Florence to the Company. See Note 11 to the
Company's Consolidated Financial Statements. Stock options granted under the
1986 and 1993 Stock Plans outstanding at April 16, 1997, the date of the Merger
between the Company and THL I, were cancelled pursuant to the Merger Agreement
in exchange for compensation equal to the excess of $32 over the option exercise
price. Messrs. Levine, Randolph, Kanter, and Ms. Florence received compensation
related to such option cancellations of $148,700, $89,220, $148,700, and
$287,650, respectively, during 1997. All other amounts represent contributions
made by the Company to the accounts of named executive officers pursuant to the
Company's 401(k) Plan.
(3) Michael S. Krause, Executive Vice President and Chief Operating Officer,
joined the Company on August 11, 1997 and received total compensation of
$100,529 during 1997.
Stock Option Grants
There were no grants of stock options to any of the named executive
officers during the last fiscal year. The Company does not grant stock
appreciation rights ("SARs") of any kind.
Option Exercises/Value Of Unexercised Options
The following table sets forth certain information concerning options to
purchase Common Stock of the Company exercised during the fiscal year ending
December 31, 1997 by each of the named executive officers. None of the named
executive officers has any SAR's or unexercised stock options as of December 31,
1997.
Aggregated Options Exercised in Last
Fiscal Year and FY-End Option Values
<TABLE>
<CAPTION>
Value of Unexercised
Number of Unexercised in-the-Money
Stock Options At Stock Options At
Fiscal Year End Fiscal Year End(1)
Acquired on Value ----------------------------------- -----------------------------------
Name Exercise Realized Exercisable(2) Unexercisable(#) Exercisable(2) Unexercisable (#)
---- -------- -------- -------------- ---------------- -------------- -----------------
<S> <C> <C> <C> <C> <C> <C>
Leonard Florence 0 $0 0 0 $0 $0
E. Merle Randolph 4,000 $59,480 0 0 $0 $0
Melvin L. Levine 0 $0 0 0 $0 $0
Alan R. Kanter 0 $0 0 0 $0 $0
Faye A. Florence 0 $0 0 0 $0 $0
</TABLE>
- ----------
(1) Based upon the closing sale price of the Company's Common Stock of $32 at
the time of the Merger minus the respective option exercise price.
Compensation Of Directors
The directors of the Company are currently compensated indirectly through
the management fee agreement between the Company and THL I. (See Notes to the
consolidated financial statements).
58
<PAGE>
Compensation And Stock Option Committee Interlocks And Insider Participation
In connection with the Merger, the Company entered into a Management
Agreement with Thomas H. Lee Company for which the Company pays an annual
management fee in the amount of $450. ($320 incurred in the year ended December
31, 1997.)
Compensation And Stock Option Committee Report
The Members of the Compensation and Stock Option Committee of the Board of
Directors are all non-employee directors. The Committee is charged with the
responsibility of fixing the annual compensation of the Chief Executive Officer
of the Company, and in consultation with the Chief Executive Officer of the
Company, determining the annual compensation of the other executive officers of
the Company and the officers of each subsidiary of the Company, subject in each
case to any employment or other contract between the Company or a subsidiary
thereof and any such officer. In addition, the Committee is charged with the
responsibility to determine the payment of bonuses or other supplemental
compensation to the Chief Executive Officer of the Company and, in consultation
with the Chief Executive Officer, to determine payment of bonuses or other
supplemental compensation to any other officer of the Company or any subsidiary
thereof.
Further, the Committee has the authority over the issuance of stock options
or the grant of awards under any stock option, stock bonus or other stock based
compensation and/or incentive plans for officers and/or employees of the
Company.
The overall compensation paid to executive officers of the Company includes
cash compensation consisting of a base salary plus a performance bonus, stock
options for executive officers and participation in various benefit plans
generally available to employees, such as health insurance and contributions
made to the accounts of its employees pursuant to the Company's 401(k) Plan.
The Committee attempts to balance the compensation paid to the executive
officers of the Company to the Company's performance. In its review, the
Committee may consider the level of compensation paid to executive officers of
companies of comparable market capitalization, however, this is somewhat
difficult since industry peers, and principal competitors are often either
privately held companies or divisions of large publicly held companies, and
therefore, executive compensation information is not publicly available. The
Committee, therefore, has generally relied upon its analysis of overall Company
performance including the level of net sales and net income and the individual
efforts and achievements of each executive officer during the fiscal year.
The Company was a party to employment agreements with certain of the named
executive officers during fiscal year 1997. Such agreements were approved by
both the Committee and the Board of Directors of the Company in August 1991 and
fixed the minimum salary levels of such officers. Employment agreements with two
of its officers, including the Chief Executive Officer were amended in August,
1995 reflecting changes to the annual retirement benefits to be received.
Additionally, the employment agreements with Messrs. Randolph and Kanter were
amended in July 1996, to provide, and during the same month Faye A. Florence and
the Company entered into a Retirement Benefit Agreement that provides for
certain retirement benefits to be received.
Upon consummation of the Merger (Note 2), an employment agreement with an
officer was amended so as to (i) change the officer's term of full-time
employment from a rolling five-year term to a fixed five-year term, (ii) provide
for a minimum base salary of $1,150 per annum, (iii) establish $1,150 as the
minimum amount upon which the officer's retirement benefit (and the survivor's
benefit of his surviving spouse) will be computed and (iv) create contractual
rights with respect to certain perquisites that he is accorded informally under
present arrangements with the Company. Additionally, an employment agreement
with another officer was amended to change the officer's term of full-time
employment from a rolling five-year term to a fixed five-year term.
In addition, one of the officers was awarded a bonus for services rendered
to the Company during the period ended December 31, 1997.
In evaluating the compensation paid to the Chief Executive Officer, Mr.
Florence, the Committee evaluates many factors. The Committee following an
analysis of the Company's overall performance and financial results establishes
Mr. Florence's overall compensation. Additionally, Mr. Florence's performance in
his position is reviewed in conjunction with his ongoing ability to provide the
necessary direction for the Company's continued growth. Moreover, the Committee
determined as it has in the past that Mr. Florence's compensation should also be
determined in conjunction with the visibility and leadership roles which Mr.
Florence continues to possess in the industries in which the Company operates.
59
<PAGE>
Employment Agreements
Effective August 16, 1991, the Company entered into an employment agreement
with Leonard Florence (the "Florence Employment Agreement") providing for the
employment of Mr. Florence as Chief Executive Officer of the Company at an
annual base salary, payable in month installments, of not less than $0.35
million as well as for certain other benefits and the reimbursement of expenses.
Unless otherwise terminated by the Company as provided in the Florence
Employment Agreement, Mr. Florence's term of full-time employment will continue
until the earlier of (i) the fifth anniversary of receipt of a notice of
termination given by either party to the other or (ii) the first anniversary of
receipt of a notice of termination given by Mr. Florence to the Company on or
after his 64th birthday. The Company may, at its discretion, but without any
obligation, increase Mr. Florence's base salary during the term of full-time
employment. Once the base salary shall have been increased, it shall not
thereafter be decreased without his written consent. Mr. Florence's current base
salary is $0.7 million per annum. The Florence Employment Agreement obligates
Mr. Florence to provide certain advisory services to the Company during the
five-year period following the term of Mr. Florence's full-time employment (the
"Advisory Period") and provides for Mr. Florence to receive annual compensation
during the Advisory Period in an amount equal to not less than 25% of his base
salary during the final year of his full-time employment. During the period of
his full-time employment and the Advisory Period, Mr. Florence is prohibited
from engaging in any business that is competitive with any line of business in
which the Company is engaged that contributes three percent or more of the gross
revenues of the Company. The Florence Employment Agreement also provides for
payment to Mr. Florence of a retirement benefit.
The Company entered into a similar employment agreement, also effective as
of August 16, 1991, with Melvin L. Levine, Vice President of Purchasing of the
Company, except in Mr. Levine's case the base salary was $0.225 million for the
year ended December 31, 1992. Mr. Levine's current base salary is $0.350 million
per annum.
As of May 1995 and July 1995, the employment agreements with Messrs. Levine
and Florence were amended with respect to the computation and payment of
retirement benefits to each and, in the case of Mr. Florence, to provide for
payment of a survivor's benefit to his surviving spouse. Specifically, the
amendments provided for annual retirement benefit payments in amounts equal to
2% of their respective average total compensation (i.e., base salary and bonus
compensation) in the three years preceding attainment by the relevant executive
of age sixty-five or termination of such executive's full time employment,
whichever occurs later, multiplied by the number of years of such executive's
employment by the Company.
The Employment Agreements with Messrs. Florence and Levine, as amended,
provide for retirement benefit payments determined and payable in accordance
with the agreements. The following table shows the estimated annual benefits
payable to Messrs. Florence and Levine upon retirement based upon various
compensation levels and years of service.
PENSION PLAN TABLE
Years of Service
----------------------------------------------
REMUNERATION 5 10 15
- ------------ - -- --
$ 400,000 $ 40,000 $ 80,000 $ 120,000
500,000 50,000 100,000 150,000
600,000 60,000 120,000 180,000
700,000 70,000 140,000 210,000
800,000 80,000 160,000 240,000
900,000 90,000 180,000 270,000
1,000,000 100,000 200,000 300,000
1,100,000 110,000 220,000 330,000
1,200,000 120,000 240,000 360,000
1,300,000 130,000 260,000 390,000
1,400,000 140,000 280,000 420,000
Messrs. Florence and Levine have each completed ten years of credited
service. Retirement benefits under the employment agreements are computed on the
basis of a straight-life annuity and are not reduced by the benefits received
under Social Security, but would be reduced by any benefits received under any
Company funded pension plan that hereafter may be adopted.
60
<PAGE>
Upon the consummation of the Merger, the Employment Agreement with Leonard
Florence was amended so as to (i) change his term of full-time employment from a
rolling-five-year term to a fixed five-year term, (ii) provide for a minimum
base compensation of $1.15 million per annum, (iii) establish $1.15 million as
the minimum amount upon which his retirement benefit (and survivors benefit of
his surviving spouse) will be computed and (iv) create contractual rights with
respect to certain perquisites that are accorded to him informally under his
present arrangement with the Company. Under Section 162(m) of the Internal
Revenue Code, so much of the compensation paid to Mr. Florence as exceeds $1
million annually may not be deductible by the Company for federal income tax
purposes. The Employment Agreement with Melvin L. Levine was amended, as of the
Effective Time, to change his term of full-time employment from a rolling
five-year term to a fixed five-year term.
The Company has also entered into employment agreements, effective as of
August 16, 1991, with E. Merle Randolph, Vice President, Chief Financial Officer
and Treasurer, and Alan R. Kanter, Vice President of Sales of the Company. The
agreements with Messrs. Randolph and Kanter are similar to those with Messrs.
Florence and Levine described above, except that (i) the term of full-time
employment of each of Messrs. Randolph and Kanter will continue until the third
anniversary of receipt of a notice of termination given by the Company to the
executive involved or by such executive to the Company, (ii) the period during
which each of Messrs. Randolph and Kanter has agreed to provide advisory
services to the Company (and to be bound by a non-competition agreement)
following the term of his full-time employment will be the lesser of three years
or six months for each year of his full-time employment beginning with the date
of the employment agreement, with such advisory period and the coextensive
non-competition covenant being subject to termination at the election of the
Company on six months prior notice to the executive involved, and (iii) no
provision was originally made therein for a payment of a retirement benefit.
The employment agreements of Messrs. Randolph and Kanter were amended in
July 1996, to provide, and during the same month Faye A. Florence and the
Company entered into a Retirement Benefit Agreement that provides, inter alia,
for the payment at age 65 or upon termination of such officer's employment,
whichever is later, of an annual retirement benefit to each such officer equal
to a percentage of his or her average annual compensation for the three fiscal
years ended immediately prior to the date on which such officer ceases to be a
full time employee of the Company multiplied by the number of years of such
officer's service to the Company. The minimum annual retirement benefit for each
such officer will be $75,000.
The Employment Agreement of Mr. Randolph was amended in January 1998, to
modify the terms of his job responsibilities. Mr. Randolph, who had been Vice
President, Chief Financial Officer and Treasurer of the Company, became the
Company's Executive Vice President of International Manufacturing and West Coast
Distribution. Mr. Randolph will perform his services subject only to the
direction and control of the Board and the Chief Executive Officer, or his
designee, and will report to the Chief Executive Officer or his designee, or if
requested to do so, to the Board.
On December 31, 1996, the Company, THL I and Leonard Florence entered into
three separate agreements, one with each of Alan R. Kanter, Melvin L. Levine and
E. Merle Randolph (each an "Executive Party"). Pursuant to each of the three
agreements (i) Mr. Florence agreed to contribute to the Company (a) on December
31, 1996, 10,604 shares of Syratech Common Stock, (b) on January 14, 1997,
10,628 shares of Syratech Common Stock and (c) and on January 14, 1998,
3,124shares of shares of Syratech Common Stock (ii) on each of the dates of
contribution of such shares of Syratech Common Stock by Mr. Florence to the
Company, such shares were canceled and the Company issued to the Executive
Party, that number of shares of Syratech Common Stock that would be equal to the
number of shares of Syratech Common Stock contributed to the Company on such
date by Mr. Florence; (iii) on December 31, 1996 the Company paid each Executive
Party the sum of $234,346; (iv) on January 14, 1997 the Company paid to each
Executive Party an amount equal to the lesser of (x) the income tax benefit to
the Company from the issuance of shares of Syratech Common Stock and the cash
payment required to be made to him on such date or (y) the aggregate amount of
federal, state and local income taxes to be owed by each Executive Party as a
result of the issuance of such shares and the making of such cash payment; and
(v) on January 14, 1998 the Company is required to pay to each Executive Party
an amount equal to the lesser of (x) the income tax benefit to the Company from
the issuance of shares of Common Stock and the cash payment to be made to each
Executive Party on such date or (y) the aggregate amount of federal, state and
local income taxes that will be owed by each Executive Party as a result of the
issuance of shares of Common Stock and cash payment to be made to him on such
date. Each agreement provides that the manner in which the payments to be made
to each Executive Party for the purpose of transferring to each Executive Party
the tax benefits to the Company from such transactions are to be calculated and
subsequently adjusted is to be in the sole discretion of the Company.
61
<PAGE>
The Company and each Executive Party also entered into an amendment to the
respective Executive Party's Employment Agreement (each an "Amendment No. 2 to
Employment Agreement") dated January 31, 1997, to be effective as of December
31, 1996, to clarify and ensure that the transfer of shares referenced in the
above paragraph did not alter the total compensation of the relevant Executive
Party for purposes of calculating the Executive Party's retirement benefit.
ITEM 12. Security Ownership of Certain Beneficial Owners and Management
The following table sets forth certain information concerning the
beneficial ownership of Syratech Common Stock (i) by each stockholder who is
known by the Company to own beneficially in excess of 5% of the outstanding
Common Stock, (ii) by each director, and (iii) by all officers and directors as
a group, as of January 15, 1998. Except as otherwise indicated, all persons
listed below have (i) sole voting power and investment power with respect to
their shares of Common Stock, except to the extent that authority is shared by
spouses under applicable law, and (ii) record and beneficial ownership with
respect to their shares of Common Stock.
Shares Of
Common Stock
Beneficially
Name Owned Percentage
- ---- ------------ ----------
Leonard Florence (a) 362,850 9.6%
E. Merle Randolph 33,999 *
Melvin L. Levine 44,256 1.2%
Alan R. Kanter 51,356 1.4%
Faye A. Florence 3,527 *
David V. Harkins (b) 2,210,788 58.4%
Scott A. Schoen (b) 2,205,936 58.3%
Thomas M. Hagerty (b) 2,204,316 58.3%
Seth W. Lawry (b) 2,198,646 58.1%
Kent R. Weldon (b) 2,197,431 58.1%
Thomas H. Lee Company Affiliates (c) 2,196,216 58.0%
Officers and Directors as a group (10 persons) 2,728,241 72.1%
CMS Companies Inc. Affiliates (d) 255,678 6.8%
*Less then 1% of the issued and outstanding Syratech Common Stock.
(a) The business address for Leonard Florence is c/o Syratech Corporation, 175
McClellan Highway, East Boston, Massachusetts, 02128-9114.
(b) The business address of this stockholder is c/o Thomas H. Lee Company, 75
State Street, Boston, Massachusetts 02109. Includes an aggregate of
2,196,216 shares of common stock owned by Thomas H. Lee Equity Fund III,
L.P., Thomas H. Lee Foreign Fund III, L.P. and THL Co-Investors III-A LLC
which may be deemed to be beneficially owned by Messrs. Harkins, Hagerty,
Schoen, Lawry and Weldon, officers of Thomas H. Lee Company. Each of such
persons disclaims beneficial ownership of such shares.
(c) THL Equity Advisors III limited Partnership ("Advisors"), the general
partner of Thomas H. Lee Equity Fund III, L.P. and Thomas H. Lee Foreign
Fund III, L.P., THL Equity Trust III ("Equity Trust"), the general partner
of Advisors, Thomas H. Lee, Messrs. Harkins, Hagerty and Schoen and other
managing directors of Thomas H. Lee Company may be deemed to be beneficial
owners of the shares of Syratech Common Stock held by such funds. Each of
such persons maintains a principal business address at Suite 2600, 75 State
Street, Boston, Massachusetts 02109. Each of such persons disclaims
beneficial ownership of such shares.
(d) All such voting securities are owned by CMS Business Spectrum Fund L.P.,
CMS Co-Investment Subpartners, CMS Mid-Atlantic Business Opportunity
Partners, L.P., and CMS diversified Partners Each of such persons maintains
a principal business address c/o CMS Companies, Inc. 1926 Arch Street,
Philadelphia, PA 19103-1484.
62
<PAGE>
ITEM 13. Certain Relationships And Related Transactions
In connection with the Merger, the Company entered into a Management Fee
with the Thomas H. Lee Company for which the Company pays an annual management
fee in the amount of $450.
Lifetime Hoan Corporation ("Lifetime") purchased from the Company
merchandise in the amount of approximately $45 during the year ended December
31, 1997. In April 1996, the Company and Lifetime, acting together, acquired
certain assets of Farberware, including the rights to share in certain royalties
under certain license agreements entered into and assigned to the Company by the
prior owner of the Farberware tradename. In addition, the Company expects to
continue to grant licenses with respect to the Farberware tradename in
conjunction with Lifetime.
The Company believes that the transactions described or referred to above
were effected on terms no less favorable to the Company than those that could
have been obtained from unaffiliated third parties.
PART IV
ITEM 14. Exhibits, Financial Statement Schedules And Reports On Form 8-K
(a) Exhibits
2.1 Restated Agreement and Plan of Merger dated November 27, 1996,
effective as of October 23, 1996 between Syratech and THL Transaction I
Corp. and the Amendment, dated February 14, 1997 to the Restated
Agreement and Plan of Merger. Incorporated by reference from Exhibit
2.1 to Form S-4 Registration Statement No. 333-16917.
3.1 Restated Certificate of Incorporation of Syratech. Incorporated by
reference from Exhibit 3.1 to Form S-1 Registration Statement No.
33-41619.
3.2 Syratech Corporation Certificate of Designations in respect of Series A
Preferred Stock dated October 26, 1992. Incorporated by reference from
Exhibit 3.2 to Form S-4 Registration Statement No. 333-16917.
3.3 Bylaws of Syratech. Incorporated by reference from Exhibit 3.2 to Form
S-1 Registration Statement No. 33-41619.
3.4 Amendment to Section 2.9 of the Bylaws of Syratech, effective August
15, 1991. Incorporated by reference from Exhibit 3.3 to Form S-1
Registration Statement No. 33-41619.
3.5 Certificate of Ownership and Merger of WSC Liquidating, Inc. by and
into Syratech Corporation dated May 9, 1996. Incorporated by reference
from Exhibit 3.5 to Form S-4 Registration Statement No. 333-16917.
3.6 Specimen Common Stock Certificate. Incorporated by reference to Exhibit
4.1 to Form 10-K of Syratech for the year ended December 31, 1993.
10.1 Form of Amended and Restated Employment Agreement dated as of April 16,
1997 between Leonard Florence and the Company. Incorporated by
reference from Exhibit 10.1 to Form S-4 Registration Statement No.
333-16917.
10.2 Employment Agreement dated August 16, 1991 between E. Merle Randolph
and the Company. Incorporated by reference from Exhibit 10.17 to Form
S-1 Registration Statement No. 33-41619.
10.3 Employment Agreement dated August 16, 1991, between Melvin L. Levine
and the 10.4 Company. Incorporated by reference from Exhibit 10.18 to
Form S-1 Registration Statement No. 33-41619.
63
<PAGE>
10.4 Employment Agreement dated August 16, 1991 between Alan R. Kanter and
the Company. Incorporated by reference from Exhibit 10.19 to Form S-1
Registration Statement No. 33-41619.
10.5 Amendment No. 1 dated as of July 27, 1996 to Employment Agreement dated
as of August 16, 1991 between E. Merle Randolph and the Company.
Incorporated by reference from Exhibit 10.5 to Form S-4 Registration
Statement No. 333-16917.
10.6 Amendment No. 1 dated as of May 11, 1995 to Employment Agreement dated
as of August 16, 1991 between Melvin L. Levine and the Company.
Incorporated by reference from Exhibit 10.8 to Form 10-K for Syratech
for the year ended December 31, 1995.
10.7 Amendment No. 1 dated as of July 27, 1996 to Employment Agreement dated
as of August 16, 1991 between Alan R. Kanter and the Company.
Incorporated by reference from Exhibit 10.7 to Form S-4 Registration
Statement No. 333-16917.
10.8 Retirement Benefit Agreement dated as of July 27, 1996 between Faye A.
Florence and the Company. Incorporated by reference from Exhibit 10.8
to Form S-4 Registration Statement No. 333-16917.
10.9 Amendment No. 2, dated as of January 31, 1997, effective as of December
31, 1996, to Employment Agreement dated as of August 16, 1991 between
E. Merle Randolph and the Company. Incorporated by reference from
Exhibit 10.9 to Form S-4 Registration Statement No. 333-16917.
10.10 Amendment No. 2, dated as of January 31, 1997, effective as of December
31, 1996, to Employment Agreement dated as of August 16, 1991 between
Melvin L. Levine and the Company. Incorporated by reference from
Exhibit 10.10 to Form S-4 Registration Statement No. 333-16917.
10.11 Amendment No. 2 dated January 31, 1997 effective as of December 31,
1996, to Employment Agreement dated as of August 16, 1991 between Alan
R. Kanter and the Company. Incorporated by reference from Exhibit 10.11
to Form S-4 Registration Statement No. 333-16917.
10.12 Agreement dated December 31, 1996 by and between the Company, THL I
Transaction Corp., Leonard Florence and Melvin L. Levine. Incorporated
by reference from Exhibit 10.12 to Form S-4 Registration Statement No.
333-16917.
10.13 Agreement dated December 31, 1996 by and between the Company, THL I
Transaction Corp., Leonard Florence and E. Merle Randolph. Incorporated
by reference from Exhibit 10.13 to Form S-4 Registration Statement No.
333-16917.
10.14 Agreement dated December 31, 1996 by and between the Company, THL I
Transaction Corp., Leonard Florence and Alan R. Kanter. Incorporated by
reference from Exhibit 10.14 to Form S-4 Registration Statement No.
333-16917.
10.15 Asset Purchase Agreement dated February 2, 1996 by and between
Farberware Inc., the Company, Lifetime Hoan Corporation and Far-B
Acquisition Corp., Inc. Incorporated by reference from Exhibit 1 to
Form 8-K dated April 16, 1996.
10.16 Settlement Agreement dated February 3, 1997 by and among Bruckner
Manufacturing Corp. (formerly Farberware Inc.), U.S. Industries, Inc.,
Farberware Inc. (formerly Far-B Acquisition Corp.) and Lifetime Hoan
Corporation. Incorporated by reference from Exhibit 10.16 to Form S-4
Registration Statement No. 333-16917.
10.17 Agreement dated as of December 7, 1995 among the Company, SYR
Acquisition Inc. and Rauch Industries, Inc. Incorporated by reference
from Exhibit 1 to Form 8-K of the Company dated December 7, 1995.
Incorporated by reference from Exhibit 10.17 to Form S-4 Registration
Statement No. 333-16917.
10.18 Amended and Restated Line of Credit Agreement among Wallace
International de Puerto Rico, Inc., International Silver de Puerto
Rico, Inc. and Banco Popular de Puerto Rico dated October 15, 1996.
Incorporated by reference from Exhibit 10.18 to Form S-4 Registration
Statement No. 333-16917.
64
<PAGE>
10.19 Agreement, dated as of February 2, 1996, by and among the Company,
Lifetime Hoan Corporation and Far-B Acquisition Corp. Incorporated by
reference from Exhibit 10.19 to Form S-4 Registration Statement No.
333-16917.
10.20 Agreement, dated as of May 3, 1996, by and among the Company,
Farberware Inc. and Meyer Manufacturing Co. Ltd. Incorporated by
reference from Exhibit 10.20 to Form S-4 Registration Statement No.
333-16917.
10.21 License Agreement, dated as of July 12, 1996, by and between Farberware
Inc. and Service Merchandise Company, Inc. (redacted to omit certain
royalty information). Incorporated by reference from Exhibit 10.21 to
Form S-4 Registration Statement No. 333-16917.
10.22 Agreement, dated as of October 16, 1996, among Farberware Inc., Service
Merchandise Company, Inc. and Windmere-Durable Holdings, Inc. (amending
Item 10.21). Incorporated by reference from Exhibit 10.22 to Form S-4
Registration Statement No. 333-16917.
10.23 Commitment Letter between Banco Popular de Puerto Rico and Wallace
International de PR, Inc. dated May 1, 1997. Incorporated by reference
from Exhibit 10-1 to Form 10-Q dated August 13, 1997.
10.24 Letter Agreement between Banco Popular de Puerto Rico and Wallace
International de PR, Inc. dated May 12, 1997. Incorporated by reference
from Exhibit 10-2 to Form 10-Q dated August 13, 1997.
10.25 Amendment No. 1, dated as of July 31, 1997, to Loan and Security
Agreement, dated as of April 16, 1997. Incorporated by reference from
Exhibit 10-1 to Form 10-Q dated November 12, 1997.
10.26 Amendment No. 2, dated as of December 31, 1997, to Loan and Security
Agreement, dated as of April 16, 1997.
10.27 Amendment No. 3 dated as of January 26, 1998 to Employment Agreement
dated as of August 16, 1991 between E. Merle Randolph and the Company.
10.28 Purchase and Sale Agreement dated as of January 28, 1998 by and among
The Claremont Company, Inc. and Fay A. Florence, Leonard Florence and
E. Merle Randolph, Trustees of 175 Amlegion Realty Trust.
10.29 Escrow Agreement dated January 28, 1998 by and among Faye A. Florence,
Leonard Florence and E. Merle Randolph, Trustees of 175 Amlegion Realty
Trust and The Claremont Company and Hutchins, Wheeler & Dittmar, A
Professional Corporation.
10.30 Agreement between Rauch Industries, Inc. and Guy Yocom Construction,
Inc., dated July 31, 1997.
10.31 Agreement between Rauch Industries, Inc. and C.A.S. Construction Inc.,
dated August 25, 1997.
10.32 Varco-Pruden Purchase Order dated June 16, 1997.
10.33 Amendment No. 3, dated as of March 30, 1998, to Loan and Security
Agreement, dated as of April 16, 1997.
11 Statement re: computation of per share earnings.
22 List of Subsidiaries. Incorporated by reference from Exhibit 22 to Form
S-4 Registration Statement No. 333-16917.
27.1 Financial Data Schedule
27.2 Financial Data Schedule
27.3 Financial Data Schedule
(b) Financial Statement Schedule:
Schedule II: Valuation and Qualifying Accounts
65
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) the Securities Act of
1934, the Registrant has duly caused this Annual Report on Form 10-K to be
signed on its behalf by the undersigned, thereunto duly authorized, in the City
of Boston, State of Massachusetts, on the 31st day of March, 1998.
SYRATECH CORPORATION
By: /s/ LEONARD FLORENCE
---------------------
Leonard Florence
Chairman of the Board,
Chief Executive Officer and President
Pursuant to the requirements of the Securities Act of 1934, this Annual
Report on Form 10-K has been signed by the following persons in the capacities
and on the dates indicated below.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ Leonard Florence Chairman of the Board of March 31, 1998
- ------------------------- Directors, Chief Executive
Leonard Florence Officer and President (Principal
Executive Officer)
/s/ Ami A. Trauber Executive Vice President, Chief March 31, 1998
- ------------------------- Financial Officer, Treasurer and
Ami A. Trauber Director (Principal Financial and
Accounting Officer)
/s/ Thomas M. Hagerty Director March 31, 1998
- -------------------------
Thomas M. Hagerty
/s/ David V. Harkins Director March 31, 1998
- -------------------------
David V. Harkins
/s/ Alan R. Kanter Director March 31, 1998
- -------------------------
Alan R. Kanter
/s/ Seth W. Lawry Director March 31, 1998
- -------------------------
Seth W. Lawry
/s/ Melvin L. Levine Director March 31, 1998
- -------------------------
Melvin L. Levine
/s/ E. Merle Randolph Director March 31, 1998
- -------------------------
E. Merle Randolph
/s/ Scott A. Schoen Director March 31, 1998
- -------------------------
Scott A. Schoen
/s/ Kent R. Weldon Director March 31, 1998
- -------------------------
Kent R. Weldon
66
<PAGE>
SCHEDULE II
SYRATECH CORPORATION AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS)
<TABLE>
<CAPTION>
Beginning of Costs and Charged to End of
Description Period Expenses Other Accts. Deductions Period
----------- ------------ ---------- ------------ ---------- ----------
<S> <C> <C> <C> <C> <C>
Year Ended December 31, 1997
Allowance for doubtful accounts $ 1,861 $ 2,356 $(1,959) $(1,027)(a) $ 1,231
Sales returns and allowances 3,501 8,978 1,959 (8,461)(b) 5,977
------- ------- ------- ------- -------
$ 5,362 $11,334 $ -- $(9,488) $ 7,208
======= ======= ======= ======= =======
Year Ended December 31, 1996
Allowance for doubtful accounts $ 1,603 $ 93 $ -- $ 165 (a) $ 1,861
Sales returns and allowances 2,604 5,813 -- (4,916)(b) 3,501
------- ------- ------- ------- -------
$ 4,207 $ 5,906 $ -- $(4,751) $ 5,362
======= ======= ======= ======= =======
Year Ended December 31, 1995
Allowance for doubtful accounts $ 1,372 $ 602 $ -- $ (371)(a) $ 1,603
Sales returns and allowances 2,133 5,206 -- (4,735)(b) 2,604
------- ------- ------- ------- -------
$ 3,505 $ 5,808 $ -- $(5,106) $ 4,207
======= ======= ======= ======= =======
</TABLE>
- --------
(a) Doubtful accounts written off
(b) Sales returns and other
<PAGE>
INDEX TO EXHIBITS
2.1 Restated Agreement and Plan of Merger dated November 27, 1996,
effective as of October 23, 1996 between Syratech and THL Transaction I
Corp. and the Amendment, dated February 14, 1997 to the Restated
Agreement and Plan of Merger. Incorporated by reference from Exhibit
2.1 to Form S-4 Registration Statement No. 333-16917.
3.1 Restated Certificate of Incorporation of Syratech. Incorporated by
reference from Exhibit 3.1 to Form S-1 Registration Statement No.
33-41619.
3.2 Syratech Corporation Certificate of Designations in respect of Series A
Preferred Stock dated October 26, 1992. Incorporated by reference from
Exhibit 3.2 to Form S-4 Registration Statement No. 333-16917.
3.3 Bylaws of Syratech. Incorporated by reference from Exhibit 3.2 to Form
S-1 Registration Statement No. 33-41619.
3.4 Amendment to Section 2.9 of the Bylaws of Syratech, effective August
15, 1991. Incorporated by reference from Exhibit 3.3 to Form S-1
Registration Statement No. 33-41619.
3.5 Certificate of Ownership and Merger of WSC Liquidating, Inc. by and
into Syratech Corporation dated May 9, 1996. Incorporated by reference
from Exhibit 3.5 to Form S-4 Registration Statement No. 333-16917.
3.6 Specimen Common Stock Certificate. Incorporated by reference to Exhibit
4.1 to Form 10-K of Syratech for the year ended December 31, 1993.
10.1 Form of Amended and Restated Employment Agreement dated as of April 16,
1997 between Leonard Florence and the Company. Incorporated by
reference from Exhibit 10.1 to Form S-4 Registration Statement No.
333-16917.
10.2 Employment Agreement dated August 16, 1991 between E. Merle Randolph
and the Company. Incorporated by reference from Exhibit 10.17 to Form
S-1 Registration Statement No. 33-41619.
10.3 Employment Agreement dated August 16, 1991, between Melvin L. Levine
and the 10.4 Company. Incorporated by reference from Exhibit 10.18 to
Form S-1 Registration
Statement No. 33-41619.
10.4 Employment Agreement dated August 16, 1991 between Alan R. Kanter and
the Company. Incorporated by reference from Exhibit 10.19 to Form S-1
Registration Statement No. 33-41619.
10.5 Amendment No. 1 dated as of July 27, 1996 to Employment Agreement dated
as of August 16, 1991 between E. Merle Randolph and the Company.
Incorporated by reference from Exhibit 10.5 to Form S-4 Registration
Statement No. 333-16917.
10.6 Amendment No. 1 dated as of May 11, 1995 to Employment Agreement dated
as of August 16, 1991 between Melvin L. Levine and the Company.
Incorporated by reference from Exhibit 10.8 to Form 10-K for Syratech
for the year ended December 31, 1995.
10.7 Amendment No. 1 dated as of July 27, 1996 to Employment Agreement dated
as of August 16, 1991 between Alan R. Kanter and the Company.
Incorporated by reference from Exhibit 10.7 to Form S-4 Registration
Statement No. 333-16917.
10.8 Retirement Benefit Agreement dated as of July 27, 1996 between Faye A.
Florence and the Company. Incorporated by reference from Exhibit 10.8
to Form S-4 Registration Statement No. 333-16917.
10.9 Amendment No. 2, dated as of January 31, 1997, effective as of December
31, 1996, to Employment Agreement dated as of August 16, 1991 between
E. Merle Randolph and the Company. Incorporated by reference from
Exhibit 10.9 to Form S-4 Registration Statement No. 333-16917.
10.10 Amendment No. 2, dated as of January 31, 1997, effective as of December
31, 1996, to Employment Agreement dated as of August 16, 1991 between
Melvin L. Levine and the Company. Incorporated by reference from
Exhibit 10.10 to Form S-4 Registration Statement No. 333-16917.
<PAGE>
10.11 Amendment No. 2 dated January 31, 1997 effective as of December 31,
1996, to Employment Agreement dated as of August 16, 1991 between Alan
R. Kanter and the Company. Incorporated by reference from Exhibit 10.11
to Form S-4 Registration Statement No. 333-16917.
10.12 Agreement dated December 31, 1996 by and between the Company, THL I
Transaction Corp., Leonard Florence and Melvin L. Levine. Incorporated
by reference from Exhibit 10.12 to Form S-4 Registration Statement No.
333-16917.
10.13 Agreement dated December 31, 1996 by and between the Company, THL I
Transaction Corp., Leonard Florence and E. Merle Randolph. Incorporated
by reference from Exhibit 10.13 to Form S-4 Registration Statement No.
333-16917.
10.14 Agreement dated December 31, 1996 by and between the Company, THL I
Transaction Corp., Leonard Florence and Alan R. Kanter. Incorporated by
reference from Exhibit 10.14 to Form S-4 Registration Statement No.
333-16917.
10.15 Asset Purchase Agreement dated February 2, 1996 by and between
Farberware Inc., the Company, Lifetime Hoan Corporation and Far-B
Acquisition Corp., Inc. Incorporated by reference from Exhibit 1 to
Form 8-K dated April 16, 1996.
10.16 Settlement Agreement dated February 3, 1997 by and among Bruckner
Manufacturing Corp. (formerly Farberware Inc.), U.S. Industries, Inc.,
Farberware Inc. (formerly Far-B Acquisition Corp.) and Lifetime Hoan
Corporation. Incorporated by reference from Exhibit 10.16 to Form S-4
Registration Statement No. 333-16917.
10.17 Agreement dated as of December 7, 1995 among the Company, SYR
Acquisition Inc. and Rauch Industries, Inc. Incorporated by reference
from Exhibit 1 to Form 8-K of the Company dated December 7, 1995.
Incorporated by reference from Exhibit 10.17 to Form S-4 Registration
Statement No. 333-16917.
10.18 Amended and Restated Line of Credit Agreement among Wallace
International de Puerto Rico, Inc., International Silver de Puerto
Rico, Inc. and Banco Popular de Puerto Rico dated October 15, 1996.
Incorporated by reference from Exhibit 10.18 to Form S-4 Registration
Statement No. 333-16917.
10.19 Agreement, dated as of February 2, 1996, by and among the Company,
Lifetime Hoan Corporation and Far-B Acquisition Corp. Incorporated by
reference from Exhibit 10.19 to Form S-4 Registration Statement No.
333-16917.
10.20 Agreement, dated as of May 3, 1996, by and among the Company,
Farberware Inc. and Meyer Manufacturing Co. Ltd. Incorporated by
reference from Exhibit 10.20 to Form S-4 Registration Statement No.
333-16917.
10.21 License Agreement, dated as of July 12, 1996, by and between Farberware
Inc. and Service Merchandise Company, Inc. (redacted to omit certain
royalty information). Incorporated by reference from Exhibit 10.21 to
Form S-4 Registration Statement No. 333-16917.
10.22 Agreement, dated as of October 16, 1996, among Farberware Inc., Service
Merchandise Company, Inc. and Windmere-Durable Holdings, Inc. (amending
Item 10.21). Incorporated by reference from Exhibit 10.22 to Form S-4
Registration Statement No. 333-16917.
10.23 Commitment Letter between Banco Popular de Puerto Rico and Wallace
International de PR, Inc. dated May 1, 1997. Incorporated by reference
from Exhibit 10-1 to Form 10-Q dated August 13, 1997.
10.24 Letter Agreement between Banco Popular de Puerto Rico and Wallace
International de PR, Inc. dated May 12, 1997. Incorporated by reference
from Exhibit 10-2 to Form 10-Q dated August 13, 1997.
10.25 Amendment No. 1, dated as of July 31, 1997, to Loan and Security
Agreement, dated as of April 16, 1997. Incorporated by reference from
Exhibit 10-1 to Form 10-Q dated November 12, 1997.
10.26 Amendment No. 2, dated as of December 31, 1997, to Loan and Security
Agreement, dated as of April 16, 1997.
10.27 Amendment No. 3 dated as of January 26, 1998 to Employment Agreement
dated as of August 16, 1991 between E. Merle Randolph and the Company.
10.28 Purchase and Sale Agreement dated as of January 28, 1998 by and among
The Claremont Company, Inc. and Faye A. Florence, Leonard Florence and
E. Merle Randolph, Trustees of 175 Amlegion Realty Trust.
<PAGE>
10.29 Escrow Agreement dated January 28, 1998 by and among Faye A. Florence,
Leonard Florence and E. Merle Randolph, Trustees of 175 Amlegion Realty
Trust and The Claremont Company and Hutchins, Wheeler & Dittmar, A
Professional Corporation.
10.30 Agreement between Rauch Industries, Inc. and Guy Yocom Construction,
Inc., dated July 31, 1997.
10.31 Agreement between Rauch Industries, Inc. and C.A.S. Construction Inc.,
dated August 25, 1997.
10.32 Varco-Pruden Purchase Order dated June 16, 1997.
10.33 Amendment No. 3, dated as of March 30, 1998, to Loan and Security
Agreement, dated as of April 16, 1997.
11 Statement re: computation of per share earnings.
22 List of Subsidiaries. Incorporated by reference from Exhibit 22 to Form
S-4 Registration Statement No. 333-16917.
27.1 Financial Data Schedule
27.2 Financial Data Schedule
27.3 Financial Data Schedule
EX 10.26
AMENDMENT NO. 2
to
LOAN AND SECURITY AGREEMENT
dated as of April 16, 1997
THIS AMENDMENT NO. 2 dated as of December 31, 1997 (this "Amendment")
is made by SYRATECH CORPORATION, a Delaware corporation, TOWLE MANUFACTURING
COMPANY, a Delaware corporation, LEONARD FLORENCE ASSOCIATES, INC., a
Massachusetts corporation, WALLACE INTERNATIONAL SILVERSMITHS, INC., a Delaware
corporation, SYRATECH HOLDING CORPORATION, an Arkansas corporation, RAUCH
INDUSTRIES, INC., a North Carolina corporation, ROCHARD, INC., a New York
corporation, HOLIDAY PRODUCTS, INC., a North Carolina corporation, FARBERWARE
INC., a Delaware corporation, SILVESTRI, INC., a Delaware corporation, the
financial institutions parties hereto from time to time as Lenders, and
NATIONSBANK, N.A. (formerly named NationsBank, N.A. (South), a national banking
association ("NationsBank"), as administrative agent for the Lenders (the
"Administrative Agent").
Preliminary Statements
----------------------
The Borrowers, the Lenders and the Administrative Agent are parties to
a Loan and Security Agreement dated as of April 16, 1997, as amended by
Amendment No. 1 dated as of July 31, 1997 (the "Loan Agreement"; terms defined
in the Loan Agreement and not otherwise defined herein being used herein as
therein defined).
The Borrowers have requested that the Lenders modify certain financial
covenants and amend certain other provisions of the Loan Agreement and the
Lenders and the Administrative Agent have agreed to such modifications to the
Loan Agreement as hereinafter set forth, upon and subject to all of the terms,
conditions and provisions hereof.
NOW, THEREFORE, in consideration of the Loan Agreement, the Loans made
by the Lenders and outstanding thereunder, the mutual promises hereinafter set
forth and other good and valuable consideration the receipt and sufficiency of
which are hereby acknowledged, the parties hereto hereby agree as follows:
Section 1. Amendments to Loan Agreement. The Loan Agreement is hereby
amended, effective as provided in Section 2, by
(a) amending Section 1.1 Definitions thereof by amending the definition
"EBITDA" in its entirety to read as follows:
EBITDA FOR A SPECIFIED PERIOD MEANS CONSOLIDATED Net Income of
Syratech and its Consolidated Subsidiaries for such period, before
provision for interest expense, income taxes, depreciation expense,
amortization, and any extraordinary item(s), all determined in
accordance with GAAP; plus; during the period from April 15, 1997
through December 31, 1997, an amount not greater than $3,873,756,
expensed by Syratech in connection with the exercise of certain
employee stock options exercised in connection with the Merger.
(b) amending Section 11.1 Financial Ratios by
(i) amending Section 11.1(b) Total Funded Debt to EBITDA by
inserting therein after the phrase "four consecutive Fiscal
Quarters" appearing therein, the parenthetical phrase (other than
such period ending December 31, 1997, as to which this covenant
shall not apply);
(ii) amending Section 11.1(c) Fixed Charge Coverage by deleting
clause (ii) thereof in its entirety and changing the designation
of clause (iii) to clause (ii); and
20
<PAGE>
(iii) adding a new subsection (d) to read as follows:
(d) Minimum EBITDA. EBITDA for the period of four consecutive
Fiscal Quarters ending December 31, 1997 to be less than
$18,000,000.
(c) amending Section 11.4 Investments by inserting therein after the
phrase "Borrowers may Acquire a Business Unit or Subsidiary"
appearing therein, the phrase "after March 31, 1998";
(d) amending Section 11.5 Capital Expenditures in its entirety to read
as follows:
Section 11.5 Capital Expenditures. Make or incur any Capital
Expenditures; provided, however, that the Borrowers may make or incur
Capital Expenditures (a) in connection with the construction of a
warehouse and distribution facility in Ontario, California in Fiscal years
1997 and 1998 in an aggregate amount not greater than $17,500,000, and (b)
in an additional amount (i) during Fiscal Year 1997 not greater than
$9,500,000 and (ii) during each Fiscal Year ending after December 31, 1997
not greater than $7,500,000, plus any amount, up to $3,000,000, by which
$7,500,000 exceeded actual Capital Expenditures in the preceding Fiscal
Year.
(e) amending Section 11.10 Benefit Plans by deleting the amount of
$4,500,000" therein and substituting therefor the amount of
"$4,750,000"; and
(f) amending Section 11.14 Minimum Availability in its entirety to read
as follows:
Section 2. Effectiveness of Amendment. This Amendment shall become
effective as of the date hereof on the date on which the Administrative
Agent shall have received each of the following documents (in sufficient
copies for each Lender);
(a) this Amendment duly executed and delivered by each Borrower
and the Required Lenders,
(b) a certificate of the Secretary of each Borrower having
attached thereof the articles or certificate of incorporation and bylaws of
such Borrower as in effect on the date hereof attached thereto (or containing
the certification of such Secretary that no amendment or modification of such
articles or certificate or bylaws has become effective since the last date on
which such documents were delivered to the Administrative Agent pursuant to
the Loan Agreement), and to the further effect that the incumbency
certificate and corporate action delivered in connection with the occurrence
of the date hereof remain in effect, unchanged,
(c) a certificate of the President or Financial Officer of
Syratech to the effect that
(i) the representations and warranties of the Borrowers
contained in the Loan Documents are true and correct
in all material respects on and as of the date hereof
as if made on and as of such date, and
(ii) no Default of Event of Default has occurred and is
continuing, and such statements shall be true;
(d) payment of an amendment fee to the Administrative Agent for
the Ratable account of the Lenders in the amount of $325,000;
and
(e) such other documents, certificates and instruments in
connection with the effectiveness of this Amendment as the
Administrative Agent or any Lender may reasonably request.
21
<PAGE>
Section 3. Effect of Amendment. From and after the effectiveness
of this Amendment, all references in the Loan Agreement and in any other
Loan Document to :this Agreement," "the Loan Agreement," "hereunder,"
"hereof" and words of like import referring to the Loan Agreement, shall
mean and be references to the Loan Agreement as amended by this Amendment.
Except as expressly amended hereby, the Loan Agreement and all terms,
conditions and provisions thereof remain in full force and effect and are
hereby ratified and confirmed. The execution, delivery and effectiveness
of this Amendment shall not, except as expressly provided herein, operate
as a waiver of any right, power or remedy of any Lender or the
Administrative Agent under any of the Loan Documents, nor constitute a
waiver of any provision of any of the Loan Documents.
Section 4. Counterpart Execution; Governing Law.
(a) Execution in Counterparts. This Amendment may be executed
in any number of counterparts and by different parties
hereto in separate counterparts, each of which when so
executed and delivered shall be deemed to be an original
and all of which taken together shall constitute but one
and the same agreement.
(b) Governing Law. This Amendment shall be governed by and
construed in accordance with the laws of the State of
Georgia.
22
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment
to be executed by their respective officers thereunto duly authorized, as of
the date first above written.
BORROWERS:
SYRATECH CORPORATION
By: /s/ E. M. Randolph
-----------------------------------
Name: E. M. Randolph
Title: Vice President, Treasurer and
Chief Financial Officer
TOWLE MANUFACTURING COMPANY
By: /s/ E. M. Randolph
-----------------------------------
Name: E. M. Randolph
Title: Vice President, Treasurer and
Chief Financial Officer
LEONARD FLORENCE ASSOCIATES, INC.
By: /s/ E. M. Randolph
-----------------------------------
Name: E. M. Randolph
Title: Vice President and Treasurer
WALLACE INTERNATIONAL SILVERSMITHS,
INC.
By: /s/ E. M. Randolph
-----------------------------------
Name: E. M. Randolph
Title: Vice President and Treasurer
SYRATECH HOLDING CORPORATION
By: /s/ Richard Freiman
-----------------------------------
Name: Richard Freiman
Title: President
23
<PAGE>
RAUCH INDUSTRIES, INC.
By: /s/ E. M. Randolph
-----------------------------------
Name: E. M. Randolph
Title: Vice President and Chief
Financial Officer
ROCHARD, INC.
By: /s/ Richard Sonking
-----------------------------------
Name: Richard Sonking
Title: President
HOLIDAY PRODUCTS, INC.
By:/s/ Roger S. Silverstein
-----------------------------------
Name: Roger S. Silverstein
Title: President
FARBERWARE INC.
By: /s/ E. M. Randolph
-----------------------------------
Name: E. M. Randolph
Title: Treasurer
SILVESTRI, INC.
By: /s/ E. M. Randolph
-----------------------------------
Name: E. M. Randolph
Title: Treasurer
ADMINISTRATIVE AGENT:
NATIONSBANK, N.A.
By: /s/ Brian R. O'Fallon
-----------------------------------
Brian R. O'Fallon
Senior Vice President
24
<PAGE>
LENDERS:
NATIONSBANK, N.A.
By: /s/ Brian R. O'Fallon
-----------------------------------
Brian R. O'Fallon
Senior Vice President
AMERICAN NATIONAL BANK AND TRUST
COMPANY OF CHICAGO
By: /s/ Robert J. Shanahan
-----------------------------------
Name: Robert J. Shanahan
Title: Vice President
BANKBOSTON, N.A.
By:/s/ Andrew A. Doherty
-----------------------------------
Name: Andrew A. Doherty
Title: Vice President
FLEET NATIONAL BANK
By: /s/ Scott E. Carpenter
-----------------------------------
Name: Scott E. Carpenter
Title: Vice President
UNION BANK OF CALIFORNIA, N.A.
By: /s/ Greg Ennis
-----------------------------------
Name: Greg Ennis
Title: Vice President
BHF-BANK AKTIENGESELLSCHAFT
By: /s/ Hans J. Scholz
-----------------------------------
Name: Hans J. Scholz
Title: Assistant Vice President
SANWA BUSINESS CREDIT CORPORATION
By: /s/ Lawrence J. Placek
-----------------------------------
Name: Lawrence J. Placek
Title: Vice President
AMENDMENT NO. 3 TO EMPLOYMENT AGREEMENT
AMENDMENT NO. 3 dated as of January 26, 1998, to Agreement dated as of
August 16, 1991, between SYRATECH CORPORATION, a Delaware corporation (the
Company) and E. MERLE RANDOLPH (the Executive).
The Executive is now, and at all times since prior to August 16, 1991 has
been, Vice President, Treasurer and Chief Financial Officer of the Company. On
August 16, 1991 the Company and the Executive entered into an Employment
Agreement (the Agreement). The Agreement was amended by Amendment No. 1 dated as
of July 27, 1996 and Amendment No. 2 dated as of January 31, 1997, effective as
of December 31, 1996 for the purposes of establishing and modifying the
provision for computation and payment of the retirement benefit thereunder. The
Company and the Executive now wish to modify the terms of the Executive's
Agreement related to the Executive's job responsibilities.
In consideration of the mutual covenants and agreements herein contained,
the parties agree as follows:
1. Amendment of Sections 2.1 and 2.2. Sections 2.1 and 2.2 of the Agreement
are hereby amended and restated to read in their entirety as follows:
2.1 Duties During Term of Full-Time Employment.
During the Executive's term of full-time employment the Executive shall
devote his full working time and energies to the business and affairs of
the Company. The Executive agrees during such term to use his best efforts,
skill and abilities to promote the Company's interests; to serve as a
director and officer of the Company if elected by the stockholders or
Board; to serve as a director and officer of any corporation which is a
subsidiary of the Company if elected by the stockholders or board of
directors of such subsidiary corporation; and to perform such duties
(consistent with his status as set forth below in this Section 2) as may be
assigned to him by the Board or by the Chief Executive Officer of the
Company (the CEO) or his designee. During his term of full-time employment,
the Executive shall not, directly or indirectly, without the prior consent
of a majority of the members of the Board who are not employees of the
Company or any of its subsidiaries, render any services to any other
person, or acquire any interests of any type in any other person, in
conflict with this full-time, exclusive position as Executive Vice
President-International Manufacturing and West Coast Distribution;
provided, however, that the foregoing shall not be deemed to prohibit the
Executive from (a) acquiring, solely as an investment and through market
purchases, securities of any entity which are registered under Section 12
of the Securities Exchange Act of 1934 and which are publicly traded so
long as he is not party of any control group of such corporation, (b)
acquiring, solely as an investment, any securities of, or interests in, any
other entity so long as he remains a passive investor in such entity and
does not become part of any control group thereof and so long as such
entity has no material business connection with the Company or any of its
subsidiaries, (c) serving as a director of any other corporation which is
not in competition with the Company or any of its subsidiaries and which
has no material business connection within the Company or any of its
subsidiaries; or (d) devoting such time and energy as the Executive deems
appropriate consistent with his duties hereunder to the work of
eleemosynary institutions of the Executive's choosing.
2.2 Authority. Subject to the direction and control of the Board,
during the Executive's term of full-time employment the Executive shall be
the Executive Vice President-International Manufacturing and West Coast
Distribution and, as such, shall have the power and authority now provided
for in Section 5.8 of the Bylaws of the Company. The Executive will perform
his services subject only to the direction and control of the Board and the
CEO or his designee and will report to the CEO or his designee and, if
requested to do so, to the Board.
3. Confirmation of Other Terms. In all other respects the provisions of the
Agreement are ratified, confirmed and approved.
IN WITNESS WHEREOF, the parties have duly executed this Amendment to the
Agreement as of the day and year first written above.
SYRATECH CORPORATION
By: /s/ Leonard Florence
-----------------------------------------
Chairman of the Board,
President and Chief Executive
Officer
By: /s/ E. Merle Randolph
-----------------------------------------
Executive Vice President of
International Manufacturing and
West Coast Distribution
PURCHASE AND SALE AGREEMENT
---------------------------
1. PARTIES
This 28th day of January, 1998, Faye A. Florence, Leonard Florence and
E. Merle Randolph, Trustees of 175 Amlegion Realty Trust, u/d/t dated April 10,
1995, and recorded with the Suffolk County Registry of Deeds in Book ___, Page
______, with an address c/o Syratech Corporation, 175 McClellan Highway, P.O.
Box 9114, E. Boston, MA 01228-9114 (hereinafter referred to as "Seller") agrees
to sell and The Claremont Company, Inc., (hereinafter referred to as "Buyer"),
agrees to buy, upon the terms hereinafter set forth, the premises described in
Paragraphs 2 and 3 below.
2. DESCRIPTION
The land commonly known as and numbered 135 American Legion Highway,
Revere, Massachusetts, more particularly described in Exhibit A attached hereto
and hereby made a part hereof (the "Premises").
3. BUILDINGS, STRUCTURES, IMPROVEMENTS, FIXTURES
Intentionally deleted.
4. TITLE DEED
The Premises are to be conveyed by quitclaim deed to Buyer, which deed
shall convey a good and clear record and marketable title thereto, free from all
encumbrances, except:
(a) Provisions of all applicable building, zoning, health, land use
control, or other laws, ordinances or regulations which may affect the use,
maintenance or ownership of the Premises.
(b) Such real estate and personal property taxes for the current fiscal
tax year as are not due and payable at the time of the closing, which the Buyer
shall assume and agree to pay.
(c) Any liens for municipal betterments to be constructed after the
Closing Date which at the time of closing the Buyer shall assume and agree to
pay by execution of such instruments as Seller may require.
<PAGE>
(d) Any covenant, restriction, easement or other matter of record
recorded with the Suffolk County Registry of Deeds as of the date that the Buyer
completes its title examination within the Inspection Period (defined in
Paragraph 20 hereof) to which the Buyer has not objected. The Seller covenants
with the Buyer that without Buyer's consent, no further encumbrances will be
placed against the Premises by the Seller subsequent to the execution of this
Agreement.
5. PURCHASE PRICE
The agreed purchase price for said Premises is One Million Nine Hundred
Thousand and 00/100 Dollars ($1,900,000.00). A deposit of Two Hundred Thousand
and 00/100 Dollars ($200,000.00) (the "Deposit") has been paid by the Buyer on
or before this date. The remainder of the purchase price, as set forth above, is
to be paid on the Closing Date in immediately available funds, or at Seller's
option, by certified or bank check or by wire transfer.
6. TIME FOR PERFORMANCE; DELIVERY OF DEED
Such deed and other documents to be delivered by Seller and Buyer
hereunder at the time of closing shall be delivered at the offices of Gadsby &
Hannah, L.L.P., 225 Franklin Street, Boston, Massachusetts 02110 at 10 o'clock
A.M. two hundred forty (240) days from the date hereof (or, in the event such
date falls on a weekend or holiday, to the next business day thereafter) (the
"Closing Date"), unless otherwise extended as hereinafter provided. Time is of
the essence of this Agreement.
7. POSSESSION AND CONDITION OF PREMISES
On the Closing Date, Seller shall deliver to Buyer full possession of
the Premises, free and clear of all tenants and occupants, the Premises to be
then in the same condition as they now are, reasonable wear and tear excepted.
8. EXTENSION TO PERFECT TITLE OR MAKE PREMISES CONFORM
If the Seller shall be unable to give title or to make conveyance, or
to deliver possession of the Premises, all as herein stipulated, or if at the
time of the delivery of the deed the Premises do not conform with the provisions
hereof, then the Seller shall use reasonable efforts to remove any defects in
title, or to deliver possession as provided herein, or to make the said Premises
conform to the provisions hereof, as the case may be, in which event the time
for performance shall be extended for a period of thirty (30) days, provided
that reasonable efforts shall not require the expenditure by Seller of more than
$10,000, including attorneys fees. Such $10,000 limitation shall not include
voluntary encumbrances placed on the Premises by Seller.
9. FAILURE TO PERFECT TITLE OR MAKE PREMISES CONFORM
If at the expiration of the extended time for performance the Seller
shall have failed to remove any defects in title, deliver possession, or make
the Premises conform, as the case may be, all as herein agreed, then, at the
Buyer's option, any payments made under this Agreement shall be forthwith
refunded and all other obligations of the parties hereto shall cease and this
Agreement shall be void and without recourse to the parties hereto.
10. BUYER'S ELECTION TO ACCEPT TITLE
Notwithstanding anything in this Agreement to the contrary, the Buyer
shall have the election at either the original or any extended time for
performance, to accept such title as the Seller can deliver to the Premises and
to pay therefor the full purchase price without deduction, in which case the
Seller shall convey such title.
11. ACCEPTANCE OF DEED
The acceptance and recording of a deed by the Buyer shall be deemed to
be a full performance and discharge of every agreement and obligation herein
contained or expressed, and Buyer thereafter shall have no right or claim
against Seller with respect to this Agreement or the Premises, including,
without limitation, any claim relating to the condition of the Premises or any
state of facts regarding the Premises, including any set forth in this
Agreement, whether or not known to the Seller or discoverable by the Seller at
the time of the execution of the Agreement, at the time of the delivery of the
deed, or at any other time. Buyer agrees that its purchase of the Premises is
made on an "as-is" basis.
<PAGE>
12. USE OF PURCHASE MONEY TO CLEAR TITLE
To enable the Seller to make conveyance as herein provided, the Seller
may, at the time of delivery of the deed, use the purchase money or any portion
thereof to clear the title of any or all encumbrances or interests and the
parties may make arrangements for the delivery and recording of any such
discharges after delivery of the deed in accordance with prevailing conveyancing
practices.
13. ADJUSTMENTS
Real estate and personal property taxes, water, sewer use, fuel, gas
and other obligations of or credits to Seller relating to the Premises, shall be
adjusted ratably as of the date of closing and the net amount thereof shall be
added to or deducted from the purchase price, as the case may be. The cost of
all transfer taxes arising out of the recording of the deed in connection with
this transaction shall be borne by the Seller. The costs of title search and
certification, title insurance (if any) and recording costs arising out of this
transaction shall be borne in accordance with prevailing conveyancing practices
in Suffolk County, Massachusetts.
14. ADJUSTMENT OF UNASSESSED AND ABATED TAXES
If the amount of said taxes is not known at the time of the delivery of
the deed, they shall be apportioned on the basis of the taxes assessed for the
preceding year, with a reapportionment as soon as the new tax rate and valuation
can be ascertained; and, if the taxes which are to be apportioned shall
thereafter be reduced by abatement, the amount of such abatement, less the
reasonable cost of obtaining the same, shall be apportioned between the parties,
provided that neither party shall be obligated to institute or prosecute
proceedings for an abatement except as herein agreed. The provisions of this
Paragraph 14 shall survive delivery of the deed hereunder.
15. BROKERAGE
The Buyer and Seller represent and warrant that neither has dealt with
a broker or agent with respect to this transaction or with respect to the
Premises. Each party covenants and agrees, on account of its actions with
respect to this sale, to indemnify, hold harmless and defend the other
<PAGE>
party from and against all claims for brokerage or commission by any party on
account of this sale. The provisions of this Paragraph 15 shall survive delivery
of the deed hereunder.
16. DEPOSIT
The Deposit shall be held in escrow by Hutchins, Wheeler & Dittmar,
subject to the terms of this Agreement, and shall be duly accounted for at the
time of closing. Any income earned on the Deposit (which shall be part of the
Deposit) shall be paid to Seller, except in the case of a default hereunder, in
which case interest shall follow the Deposit. Seller's Federal Tax
Identification Number is 04-681-2249. Buyer's Federal Tax Identification Number
is 04-279-5779.
17. DEFAULT; DAMAGES
If Buyer shall fail to fulfill the Buyer's agreements herein, the
Deposit (or applicable portion thereof as set forth in Paragraph 28 hereof)
shall be retained by the Seller as liquidated damages, and this Agreement shall
terminate without further recourse to Buyer, at law and in equity.
18. NO ASSIGNMENT
If Buyer either makes an assignment of Buyer's right under this
Agreement or records a copy of this Agreement, at Seller's option, Seller may
declare Seller's obligations hereunder to be null and void, and may deem Buyer
to be in default of Buyer's obligations hereunder, whereupon this Agreement
shall be deemed void and of no further force or effect and all deposits and
interest thereon shall be retained by Seller. Notwithstanding the foregoing,
Buyer shall have the right to assign Buyer's rights under this Agreement to any
entity in which any one or more of Pat Carney, The Claremont Company, Inc.,
and/or Steve Bodi are members of any general partner entity of a limited
partnership or members of a limited liability company or any entity which is
controlled by any one or more of them.
19. BUYER'S ACKNOWLEDGMENT RE: WARRANTIES
Buyer represents, warrants and agrees that there have been no
representations, warranties or Agreements made by or on behalf of Seller as to
any matters concerning the Premises including but not limited to its area,
topography, climate, air, water, water rights, utilities, present or future
zoning, soil, subsoil, the uses for which the Premises are suited, the presence
of oil or hazardous
<PAGE>
waste thereon, drainage, or access or with respect to the compliance by the
Premises with any law, bylaw or regulation of any governmental authority, except
as specifically set forth in this Agreement. Furthermore, Buyer represents,
warrants and agrees that it and/or its representatives have or will have made
their own independent inspection and investigation of the Premises. No patent or
latent physical condition of the Premises whether or not now known or
discoverable or whenever discovered shall affect the rights of any party hereto.
Any agreements, warranties or representations not expressly set forth in this
Agreement shall in no way bind Seller, and Buyer expressly waives any right of
rescission and all claims for damages against Seller, its agents and employees,
by reason of any other such statement, representation, warranty, promise or
agreement. This Agreement contains the entire agreement between the parties
hereto and no addition to or modification of any term or provision of this
Agreement shall be effective unless set forth in a writing signed by both Seller
and Buyer.
20. RIGHT OF ENTRY; INSPECTION CONTINGENCY
From the date hereof through the Closing Date, Buyer or its authorized
representative(s) shall have the right to enter on the Premises at reasonable
times, to inspect and measure the Premises, to show the Premises to contractors,
engineers, architects, surveyors, insurers, lenders, and to make legal,
financial, accounting, engineering, feasibility, environmental and market tests,
studies, reviews, analyses, investigations and surveys of the Premises
(collectively, the "Investigations"); all as Buyer may determine necessary and
appropriate and all at Buyer's sole cost and expense. Notwithstanding the
foregoing, in connection with any Investigations:
(a) Buyer may not break any surface of the Premises or otherwise
perform any invasive activities at the Premises, including, without
limitation in connection with any environmental or geotechnical
testing, except upon providing Seller with five (5) days' advance
notice of such subsurface testing. Seller's duly authorized
representative(s) shall have the right to be present for such
testing.
(b) Buyer may, at its sole cost and expense, engage an environmental
consultant to conduct environmental testing on the Premises. At
least five (5) days
<PAGE>
prior to conducting such testing, Buyer shall give Seller a summary
of the proposed scope and location of testing.
(c) Except as set forth above with respect to Buyer's subsurface
testing, Buyer shall notify Seller of Buyer's desire to enter the
Premises at least twenty-four (24) hours prior to the proposed time
for such entry.
(d) Prior to entering upon the Premises, Buyer shall obtain (and
provide Buyer with a certificate evidencing) public liability
insurance (in limits reasonably acceptable to Seller) naming Seller
as an additional insured.
(e) Buyer shall forthwith at its expense, (i) repair any and all damage
to the Premises attributable in whole or in part to any activity
permitted hereunder or any activity, act or omission of Buyer or
any person claiming through Buyer on or about the Premises and (ii)
restore the Premises to the condition it was in immediately prior
to any such entry, activity, act or omission.
(f) Buyer shall indemnify and hold Seller harmless for, from and
against all losses, damage, liabilities, claims, costs and expenses
(including reasonable attorneys' fees) arising out of or in any way
connected with any Buyer's Investigations.
(g) Buyer shall, at its expense, upon Seller's instruction, deliver to
Seller copies of all plans, specifications, tests, studies,
reviews, analyses, investigations and surveys conducted pursuant to
this Paragraph 20 (the "Studies").
The provisions of the foregoing clauses (a) and (f) shall survive the
termination of this Agreement prior to the Closing, and the provisions of the
foregoing clause (e) shall survive the Closing or any earlier termination of
this Agreement. Furthermore, in the event of a termination of this Agreement
prior to the Closing, Buyer shall assign to Seller all of Buyer's right, title
and interest in and to any such Studies as Seller may, at its option, from time
to time thereafter request. In contemplation of such assignment, Buyer shall
have all of such Studies performed for the mutual benefit of Buyer and Seller
and such Studies shall name Seller as a party entitled to
<PAGE>
rely thereon. The provisions of the preceding sentence shall survive the
termination of this Agreement prior to the Closing.
Seller shall deliver to Buyer within five (5) business days after the
date of this Agreement, a copy of any environmental reports in Seller's
possession and control relating to the Premises. Within sixty (60) days of the
date hereof, (the "Inspection Period") if Buyer is not satisfied in its sole
discretion with the results of any Studies which are conducted pursuant to the
terms hereof, or the results of title searches or any other reviews or
investigations regarding the Premises, Buyer may terminate this Agreement by
written notice to Seller, whereupon the Seller shall return the Deposit to the
Buyer and this Agreement shall terminate without further recourse to the
parties, except as otherwise expressly set forth herein. If the Buyer fails to
deliver a notice of termination aforesaid, Buyer's right to terminate under this
Paragraph 20 shall be deemed waived and notwithstanding anything set forth in
Paragraph 27 to the contrary, the Escrow Agent shall release one-half of the
Deposit ($100,000.00) to Seller, which funds shall become property of the Seller
and shall not be refundable to Buyer for any reason thereafter, except in the
event of Seller's failure to comply with its obligations hereunder as provided
more particularly under Paragraph 28 hereof, but shall be credited against the
Purchase Price at the time of closing.
21. PERMITS AND APPROVALS FOR USE OF PREMISES
Seller makes no representation or warranty as to the existence,
issuance, status or any other matter relating to any permits, licenses and other
permissions or approvals required from any state, federal, city or other public
authority for the operation of the Premises or for any other purposes and Buyer
agrees that the nonexistence of or any defect in the same shall be Buyer's sole
responsibility and that Seller shall have no obligation to provide the same or
cure any defect in the same as a condition to Buyer's obligations hereunder.
The foregoing notwithstanding, the Seller agrees that the Seller shall
cooperate with the Buyer in all reasonable respects in connection with the
pursuit of any permits, special permits, approvals, or other filings the Buyer
is required to make to any applicable state or local authority in
<PAGE>
connection with the anticipated development of a hotel on the Premises. Seller's
obligation to cooperate as set forth above shall be at no cost or expense to the
Seller.
22. NOTICES
All notices required hereunder shall be given in writing by registered
or certified mail, return receipt requested, or by any nationally recognized
overnight delivery company as follows:
a. If to Seller: To the address set forth in paragraph one hereof
Attention E. Merle Randolph
Fax No. (617) 561-0275
with a copy to: Faye A. Florence, Esquire
Fax No. (617) 568-1361
and with a copy to: James Westra, Esq.
Hutchins, Wheeler & Dittmar
A Professional Corporation
101 Federal Street
Boston, MA 02110
Fax No. (617) 951-1295
b. If to Buyer: To the address set forth in paragraph one hereof
with a copy to: Diane M. McDermott, Esquire
Gadsby & Hannah, LLP
426 Franklin Street
Boston, MA 02110
Fax No. (617) 345-7050
23. CONSTRUCTION OF AGREEMENT
This instrument, executed in triplicate, is to be construed as a
Massachusetts contract, is to take effect as a sealed instrument, sets forth the
entire agreement between the parties, is binding upon and inures to the benefit
of the parties hereto and their respective permitted successors and assigns, and
may be canceled, modified or amended only by a written instrument executed by
both Seller and Buyer. The captions and marginal notes are used as a matter of
convenience and
<PAGE>
are not to be considered a part of this Agreement or to be used in determining
the intent of the parties to it. For purposes of any action or proceeding
involving this Agreement, each party expressly submits to the jurisdiction of
all federal and state courts located in the Commonwealth of Massachusetts and
consents that any order, process, notice of motion or other application to or by
any of said courts or a judge thereof may be served within or without such
courts's jurisdiction by registered mail or personal service, provided that a
reasonable time for appearance is allowed (but not less than the time afforded
by any law or rule), and waives any right to contest the appropriateness of any
action brought in any such court based upon lack of personal jurisdiction,
improper venue or forum non conveniens.
24. FURTHER ASSURANCES
Following the execution of this Agreement, Buyer and Seller shall
cooperate fully with each other so as to take any and all actions and execute
any and all documents as are reasonably necessary to facilitate the transaction
contemplated by this Agreement.
25. AS IS
The Premises is sold "as is" and as shown, and no representations have
been made by Seller in regard to its condition except those contained in this
Agreement. Buyer and Seller agree that they have incorporated in this Agreement
their entire understanding and no oral statement or prior written statement made
by either of them or by any other person extrinsic to this Agreement shall have
any force or effect. Buyer agrees that Buyer is not relying on any
representations, oral or written, concerning the age, condition, workmanship or
suitability of the Premises or any part thereof for any purposes made by any
person, other than those representations expressly set forth in this Agreement
or in other documents expressly made a part hereof.
26. LEASES; INCOME AND EXPENSE STATEMENT.
Intentionally deleted.
27. ESCROW PROVISION.
The Deposit shall be held and controlled, as specified in this
Agreement, by Seller's attorneys, Hutchins, Wheeler & Dittmar (for the purposes
hereof, the "Escrow Agent"). It is understood and agreed that the Escrow Agent
shall promptly, when collected by it, place the Deposit in an
<PAGE>
insured interest-bearing account at a bank, trust company or institutional
depositary in Boston, Massachusetts. At the closing hereunder, the Deposit will
be credited or paid to Seller, and all interest which has been earned on the
Deposit shall be paid to Seller. If the closing does not occur for any reason
whatsoever and this Agreement is terminated, then all such interest will be
delivered with and paid to the party ultimately receiving the Deposit. The
Escrow Agent will have no responsibility to maximize such interest, but only to
place the Deposit in an account as provided for herein promptly upon collection
thereof by the Escrow Agent. The Escrow Agent will not be liable for any failure
of the institution in which the Deposit is being held. It is acknowledged that
the Escrow Agent is counsel for Seller, and Buyer agrees that Escrow Agent may
continue to act as such counsel notwithstanding its role as Escrow Agent even in
the event of any dispute between the parties relating to this transaction. In
the event of any dispute relating to the right of possession or the disposition
of the Deposit, the Escrow Agent will retain dominion and control over the same
until such dispute shall have been settled by mutual Agreement of Buyer and
Seller with notice thereof to Escrow Agent, whereupon the Deposit will be paid
over in accordance with such mutual Agreement of the parties; or, if such
dispute is taken to a court of competent jurisdiction, the Deposit will be paid
over into the custody of such court or otherwise paid over in accordance with
the final order, decree or judgment of such court. It is contemplated that the
Escrow Agent will not incur any cost or expense in the performance of its duties
hereunder; and, in the event of a dispute, Escrow Agent shall be reimbursed for
its reasonable out-of-pocket costs and expenses incurred in connection with such
dispute and the settlement thereof, such reimbursement to be made between Buyer
and Seller as they may mutually agree incident to the settlement of such
dispute; or, if such dispute shall be resolved by a final order, decree or
judgment by a court as aforesaid, such reimbursement shall be made by the
unsuccessful party in such proceeding. In no event shall Escrow Agent be under
any duty to institute or defend any such proceeding nor shall Escrow Agent be
required under any circumstances to take any action requested by Seller or Buyer
until indemnified to Escrow
<PAGE>
Agent's reasonable satisfaction by the party or parties requesting such action.
Escrow Agent shall not be liable to any party except for actions taken in bad
faith.
28. BUYER'S EXTENSION
In the event Buyer is unable to obtain any permits Buyer deems
necessary for Buyer's intended use of the Premises, Buyer may elect to extend
the Closing Date hereunder for two (2) periods of ninety (90) days each (each an
"Extension Period") upon the following terms and conditions. Fourteen (14) days
prior to the Closing Date (as the same may be extended hereunder), Buyer shall
deliver notice to Seller of its election so to extend the Closing Date (an
"Extension Notice") to that date which is ninety (90) days from the
then-scheduled Closing Date (or in the event such date falls on a weekday or
holiday, to the next business day thereafter). Upon Seller's receipt of Buyer's
first Extension Notice, notwithstanding anything set forth in Paragraph 27 to
the contrary, the balance of the Deposit ($100,000.00) shall be released by the
Escrow Agent to Seller, and such funds shall become property of the Seller and
shall not be refundable to Buyer for any reason thereafter except as set forth
below, but shall be credited against the Purchase Price at the time of closing.
In the event that the Buyer elects not to extend the Closing Date and does not
close on the Closing Date for any reason, the $100,000 then being held in escrow
shall be immediately returned to the Buyer. As a condition precedent to Buyer's
exercise of its right to extend the terms of this Agreement for a second
Extension Period, Buyer shall pay directly to Seller simultaneously with the
Extension Notice $50,000, which amount shall be non-refundable, but credited
against the Purchase Price at the time of closing. During the Extension
Period(s), the Buyer shall also pay to the Seller, at the commencement of each
30-day period, $9,000 which shall constitute an extension payment on account of
Buyer's extension of the terms hereof for such 30-day period (or any part
thereof) and shall not be applied to reduce the Purchase Price. Buyer may,
during any Extension Period, establish a Closing Date earlier than the last day
of such Extension Period, upon ten (10) days' written notice to Seller.
Notwithstanding anything to the contrary herein contained, in the event that the
Seller does not comply with its obligations hereunder, all Deposits and
extension payments paid hereunder shall, at the Buyer's option, be
<PAGE>
returned to the Buyer in addition to, and not in limitation of, the other rights
available to the Buyer under the terms of this Agreement or by applicable law,
including the right to seek specific performance of the Seller's material
obligations hereunder.
<PAGE>
Executed as an instrument under seal as of the date first above written.
SELLER: BUYER:
175 AMLEGION REVERE REALTY TRUST THE CLAREMONT COMPANY, INC.
By: /s/ Faye A. Florence /s/ Steven R. Bodi
__________________________________ _______________________________
Faye A. Florence, trustee and not Name: Steven R. Bodi
individually Title: Vice President
By: /s/ Leonard Florence
__________________________________
Leonard Florence, trustee and not
individually
By: /s/ E. Merle Randolph
__________________________________
E. Merle Randolph, trustee and not
individually
231867-6
<PAGE>
EXHIBIT A
(Property Description for land located at
135 American Legion Highway, Revere, MA)
ESCROW AGREEMENT
This Agreement is made as of this 28th day of January, 1998 by and
among Faye A. Florence, Leonard Florence and E. Merle Randolph, Trustees of 175
Amlegion Realty Trust (the "Seller"), The Claremont Company, Inc., a
____________ corporation ("Buyer") and Hutchins, Wheeler & Dittmar, A
Professional Corporation ("Escrow Agreement")
Reference is hereby made to that certain Purchase and Sale Agreement
("Sales Agreement") of an even date herewith by and between Seller and Buyer.
WHEREAS, pursuant to the terms and provisions of the Sales Agreement,
Escrow Agent is to hold, in escrow, a deposit made by Buyer in the amount of Two
Hundred Thousand and 00/100 Dollars ($200,000.00), the parties hereto agree as
follows:
1. All deposits made hereunder (together with interest thereon, the
"Deposit") shall be held and controlled, as specified in this Agreement, by the
Escrow Agent.
2. It is understood and agreed that, the Escrow Agent shall
promptly, when collected by it, place the Deposit in an interest-bearing account
at a federally insured bank, trust company or institutional depositary in
Boston, Massachusetts.
3. The Escrow Agent will have no responsibility to maximize such
interest, but only to place the Deposit in an account as provided for herein
promptly upon collection thereof by the Escrow Agent. The Escrow Agent will not
be liable for any failure of the institution in which the Deposit is being held.
4. The Deposit shall be held and delivered by Escrow Agent in
accordance with Section 3 of the Sales Agreement.
5. In the event of any dispute relating to the right of possession
or the disposition of the Deposit, the Escrow Agent will retain dominion and
control over the same until such dispute shall have been settled by mutual
agreement of Buyer and Seller with notice thereof to Escrow Agent, whereupon the
Deposit will be paid over in accordance with such mutual agreement of the
parties; or, if such dispute is taken to a court of competent jurisdiction, the
Deposit will be paid over into the custody of such court or otherwise paid over
in accordance with the final order, decree or judgment of such court.
6. It is contemplated that the Escrow Agent will not incur any cost
or expense in the performance of its duties hereunder; and, in the event of a
dispute, Escrow Agent shall be reimbursed for its reasonable out-of-pocket costs
and expenses incurred in connection with such dispute and the settlement
thereof, such reimbursement to be made between Buyer and Seller as they may
mutually agree incident to the settlement of such dispute; or, if such dispute
shall be resolved by a final order, decree or judgment by a court as aforesaid,
such reimbursement shall be made by the unsuccessful party in such proceeding.
In no event shall Escrow Agent be under any duty to institute or defend any such
proceeding nor shall Escrow Agent be required under any
<PAGE>
circumstances to take any action requested by Seller or Buyer until indemnified
to Escrow Agent's reasonable satisfaction by the party or parties requesting
such action. Escrow Agent shall not be liable to any party except for actions
constituting gross negligence and wilful misconduct or failure to comply.
7. The duties of the Escrow Agent shall be determined solely by the
express provisions of this Agreement and are purely ministerial in nature. If
there is any dispute between the parties hereto as to whether or not the Escrow
Agent is obligation to disburse or release the funds held under and pursuant to
this Agreement, the Escrow Agent shall not be obligated to make such
disbursement or delivery, but in such event shall hold the funds until receipt
by the Escrow Agent of an authorization in writing signed by all persons having
an interest in said dispute, directing the disposition of the funds, or in the
absence of such authorization, the Escrow Agent shall hold the funds until a
final determination of the rights of the parties in an appropriate proceeding.
If such written authorization is not given, or proceedings for such
determination are not begun and diligently continued, the Escrow Agent may, but
is not required to, retain counsel and bring an appropriate action or proceeding
for leave to deposit the funds pending such determination. The Escrow Agent
shall be reimbursed for all costs and expenses incurred by it in connection with
such action or proceeding, including reasonable attorneys' fees and
disbursements, by the parties hereto. Upon delivery of the funds as provided
herein, the Escrow Agent shall have no further liability hereunder. If
threatened with litigation, the Escrow Agent is hereby authorized by the
undersigned to interplead all interested parties in any court of competent
jurisdiction and to deposit the funds with the clerk of the court, and thereupon
the Escrow Agent shall be fully relieved and discharged of any further
responsibility under this Agreement.
8. The Escrow Agent shall not be liable for any mistake of fact or
error of judgment or any acts or omissions of any kind unless caused by its
willful misconduct (including failure to follow instructions or gross
negligence. Parties hereto each release the Escrow Agent from liability for any
act done or omitted to be done by the Escrow Agent in good faith in the
performance of its obligations and duties hereunder except to the extent
constituting gross negligence, willful misconduct or breach of this Agreement.
The Escrow Agent shall be entitled to rely on any instrument or signature
believed by it to be genuine and may assume that any person purporting to give
any writing, notice, or instruction in connection with this Agreement is duly
authorized to do so by the party on whose behalf such writing, notice, or
instruction is given.
9. The undersigned hereby jointly and severally indemnify the Escrow
Agent for and hold it harmless against any loss, liability, or expense incurred
without negligence or bad faith on the part of the Escrow Agent arising out of
or in connection with the acceptance of or the performance of its duties under
this Agreement, as well as the costs and expenses, including reasonable
attorneys' fees and disbursements, of defending against any claim or liability
arising under this Agreement except to the extent constituting gross negligence,
willful misconduct or breach of this Agreement.
10. The parties hereby acknowledge and agree that Federal Deposit
Insurance for the Escrow Funds, if any, is limited to a cumulative maximum
amount of $100,000.00 for each individual depositor for all of the depositor's
accounts at the same or related institution. The parties further hereby
acknowledge and agree that certain banking instruments such as, but not limited
to,
<PAGE>
repurchase agreements and letters of credit, are not covered at all by Federal
Deposit Insurance. The parties acknowledge and agree that the Escrow Agent shall
have no obligation or liability with respect to insuring the Escrow Funds or
with respect to the solvency of the depository institution, or otherwise with
respect to the appropriateness of the depository institution for purposes of the
deposit(s) contemplated hereby. Further, the parties understand the Escrow Agent
assumes no responsibility for, nor will we hold same liable for, any loss
occurring which arises from the fact that (a) the amount of the account or
accounts contemplated hereby may cause the aggregate amount of any individual
depositor's account or accounts to exceed $100,000.00, (b) that this excess
amount is not insured by the Federal Deposit Insurance Corporation, or (c) that
Federal Deposit Insurance is not available on certain types of bank instruments.
11. It is acknowledged that Escrow Agent is counsel for the Seller
and Buyer agrees that Escrow Agent may continue to act as such counsel,
notwithstanding its role as Escrow Agent, even in the event of a dispute
relating to the Sales Agreement between Buyer and Seller.
Executed as a sealed instrument as of the date first set forth above.
- --------------------------------------------------------------------------------
SELLER:
BUYER: 175 AMLEGION REALTY TRUST
THE CLAREMONT COMPANY, INC.
By: /s/ Faye A. Florence
___________________________
Faye A. Florence, Trustees
By: /s/ Steven R. Bodi and not individually
______________________________
Vice President
- --------------------------------------------------------------------------------
By: /s/ Leonard Florence
___________________________
Leonard Florence, Trustee
HUTCHINS, WHEELER & DITTMAR, and not individually
A Professional Corporation
By: /s/ E. Merle Randolph
___________________________
E. Merle Randolph, Trustee
By: /s/ Craig M. Tateronis and not individually
______________________________
- --------------------------------------------------------------------------------
265957-1
- --------------------------------------------------------------------------------
Rauch Industries, Mira Loma, California
c/o Syratech Corporation
Concrete Contract
Guy Yocom Construction, Inc.
July 31, 1997
Project: Rauch Industries
Mira Loma, CA
Project Manager: James J. Orlando Phone: (315)471-5338X327
Fax: (315)471 -5330
Project Superintendent: Joseph Spoto Phone: (909) 930-0513
and (909) 930-0514
Fax: (909) 930-0982
Project Architect: Vesely & Associates Phone: (315) 471-5338
c/o V.I.P. Architectural
Associates
One Webster's Landing
Syracuse, NY 13202
Documents Enclosed:
Drawings Dated
- -------- -----
Rough Grading Plan (Sheet 1 of 5) 4-10-97
Rough Grading Plan (Sheet 2 of 5) 4-10-97
Rough Grading Plan (Sheet 3 of 5) 4-10-97
Rough Grading Plan (Sheet 4 of 5) 4-10-97
Rough Grading Plan (Sheet 5 of 5) 4-10-97
T Title Sheet 6-3-97
1.0 Plot Plan 2-28-97
1.1 Plot Plan 2-28-97
2.0 Floor Plan 6-3-97
2.1 Partial Floor Plan 6-3-97
2.2 Partial Floor Plan 6-3-97
2.3 Partial Floor Plan 6-3-97
2.4 Partial Floor Plan 6-3-97
2.5 Enlarged Plan Truckers Office 6-3-97
2.6 Schedules 6-3-97
3.0 Elevations 6-3-97
3.1 Office Elevations/Building Sections 6-3-97
4.0 Roof Plan Details 6-3-97
5.0 Details 6-3-97
1
<PAGE>
Rauch Industries, Mira Loma, California
c/o Syratech Corporation
Concrete Contract
Guy Yocom Construction, Inc.
July 31, 1997
Documents Enclosed: (Continued)
Drawings Dated
- -------- -----
SP.1 Specifications 6-3-97
SP.2 Partial Floor Plan 6-3-97
SP.3 Specifications 6-3-97
SP.4 Specifications 6-3-97
SP.5 Specifications 6-3-97
S.1 General Notes & Details 5-16-97
S.2 Foundation Plan Continued 5-17-97
S.3 Foundation Plan Continued 5-17-97
S.4 Foundation Plan Continued 5-17-97
S.5 Foundation Plan Continued 5-17-97
S.6 Framing Plan Continued 5-17-97
S.7 Framing Plan Continued 5-17-97
S.8 Framing Plan Continued 5-17-97
S.9 Framing Plan Continued 5-17-97
S.10 North Wall Panel Elevation 5-17-97
S.11 North Wall Panel Elevation 5-17-97
S-12 North Wall Panel Elevation 5-17-97
S-13 North Wall Panel Elevation 5-17-97
S-14 East Wall Panel Elevation 5-17-97
S-15 South Wall Panel Elevation 5-17-97
S-16 South Wall Panel Elevation 5-17-97
S-17 South Wall Panel Elevation 5-17-97
S-18 South Wall Panel Elevation 5-17-97
S-19 West Wall Panel Elevation 5-17-97
S.20 Office Foundation Plan 5-17-97
S.21 Floor and Roof Framing Plan 4-7-97
S.22 Interior Panel & Office Panel Elevation 6-17-97
D.1 Details 5-16-97
D.2 Details 5-16-97
D.3 Details 5-16-97
D.4 Details 5-16-97
2
<PAGE>
Rauch Industries, Mira Loma, California
c/o Syratech Corporation
Concrete Contract
Guy Yocom Construction, Inc.
July 31, 1997
Documents Enclosed: (Continued)
Drawings Dated
- -------- -----
VARCO-Pruden Drawings
1 of 6 Cover Sheet 4-22-97
2 Anchor Bolt 4-22-97
3 Anchor Bolt 4-25-97
4 Anchor Bolt 4-25-97
5 Anchor Bolt 4-25-97
6 of 6 Anchor Bolt 4-22-97
7 Frame Elevation 4-22-97
8 Frame Elevation 4-22-97
9 Frame Elevation 4-22-97
10 Frame Elevation 4-22-97
11 Frame Elevation 4-30-97
12 Roof Primary 5-7-97
13 Roof Primary 5-7-97
14 Roof Primary 5-7-97
15 Roof Secondary 5-8-97
16 Roof Secondary 5-8-97
17 Roof Secondary 5-8-97
18 Wall Secondary 4-22-97
19 Wall Secondary 4-30-97
20 Wall Secondary 5-7-97
21 Wall Secondary 4-22-97
22 Wall Secondary 4-30-97
23 Wall Secondary 5-7-97
24 Wall Secondary 4-30-97
25 Wall Secondary 4-30-97
26 Roof Sheeting 4-30-97
27 Roof Sheeting 4-30-97
28 Roof Sheeting 4-30-97
29 Erection Details 5-8-97
30 Erection Details 5-8-97
MRD50 Frame Details 5-1-97
31 5-8-97
3
<PAGE>
Rauch Industries, Mira Loma, California
c/o Syratech Corporation
Concrete Contract
Guy Yocom Construction, Inc.
July 31, 1997
Documents Enclosed: (Continued)
Scope of Work 7-31-97
Contract Pricing Breakdown 7-31-97
Standard General Conditions 7-31-97
AIA Document A101/CMa 7-31-97
AIA Document A201/Cma - 7-31-97
Supplement
Guy Yocom Job Schedule
V.I.P.'s Request for Quotation 6-26-97
Namdar Structural Engineer's fax 7-7-97
GENERAL NOTES:
1. Project is not a California "Capital Improvement" in regard to sales tax
2. Project is not a California prevailing wage rate.
3 Scheduling:
4 As-Built Documents: upon completion of work and prior to release of final
payment, the following documents will be required:
A. "As-Built" Drawings showing actual in-place locations of all
equipment. Provide one reproducible sepia and (3) blueline prints.
B. Proof of inspection and acceptance by local code official inspectors.
C. Letter of Certification that scope of work is completed in accordance
with all codes and regulations
4
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Rauch Industries, Mira Loma, California
c/o Syratech Corporation
Concrete Contract
Guy Yocom Construction, Inc.
July 31, 1997
SCOPE OF WORK - CONCRETE FLATWORK, FOUNDATIONS AND TILT-UP PANELS
PART I GENERAL:
- -----
All concrete complete, in total compliance with the contract documents to the
complete satisfaction of architect, construction manager, owner and applicable
inspectors with the following inclusions, exclusions and stipulations:
A) It is this contractor's responsibility to coordinate with other trades and
define the requirements this contractor may have relating to other trades
as necessary to insure work progresses simultaneously with other
contractors work.
B) Contractor shall proceed immediately with the assemblage of all shop
drawings, design drawings, specifications, product cuts and materials as
may be required for the approval of the Architect, construction manager,
owner and applicable inspectors to meet the schedule as defined herein at
no additional cost to the owner
C) It is this contractor's responsibility for securing all materials for the
work as defined herein and shall be responsible for accepting delivery,
unloading, placing, and storing all materials and paying freight charges.
D) It is this contractor's responsibility to clean up and dispose of their own
refuse. Direction shall come from the Site Superintendent.
E) Job meetings are a requirement of this contract and a responsible
representative of the contractor's firm shall be present unless otherwise
excused.
F) Work shall include, but is not necessarily limited to the complete
installation of the following system:
1) Complete concrete flatwork, foundations and tilt-up panels for the
Rauch Industries, Mira Loma, California project including work
required for exterior dock pads in accordance with specifications,
contract documents and contract drawings.
2) Drawings and specifications provided are meant to outline the minimum
requirements of the owner of this project. All components not shown or
listed in drawings or specifications, but that are required for a
complete installation are to be included.
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Rauch Industries, Mira Loma, California
c/o Syratech Corporation
Concrete Contract
Guy Yocom Construction, Inc.
July 31, 1997
3) Contractor is to submit to Construction Manager (5) complete sets of
shop drawings and equipment submittals for all components to be used
in this project for approval. (Any materials supplied that are not
approved will be removed and replaced at the contractor's cost).
4) All work is to be completed in accordance with all applicable state
and local codes and regulations. Federal safety guidelines (OSHA,
etc.) are to be strictly adhered to.
5) Contractor is to apply for and pay for all permits and licenses
required for p proper execution of their portion of the project.
6) All contractors are required to adhere to the provisions of the Hazard
Communication Standard Information and Hazardous Chemicals Present and
will be this subcontractor's responsibility to exchange and circulate
to other contractors, their employees and the construction manager.
7) This contractor may be required to work overtime, weekends or a second
shift to meet the construction manager's schedule. The construction
manager may update, shorten, or revise the construction schedule as
required to meet completion dates. There will not be any additional
costs to the owner for requiring this contractor to work hours
necessary to meet completion dates.
8) Upon completion of work and prior to release of final payment, the
following documents will be required:
a) "As-Built" drawings showing actual in-place locations of all
materials and equipment. Provide one reproducible sepia and (3)
blueline prints.
b) Proof of inspection and acceptance by local code official
inspectors.
c) Letter of Certification that scope of work is completed in
accordance with all codes and regulations.
9) Provide all labor and equipment necessary to complete the work,
including lifts, concrete, concrete reinforcement, pumps, conveyers,
trucking, anchors, form lumber, scaffolding, rigging, etc. and
miscellaneous tools and equipment.
10) Any penetrations through Architectural concrete shall be core drilled
in order to avoid damaging the concrete.
11) All layout and elevation control for this contractor's work is
included.
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Rauch Industries, Mira Loma, California
c/o Syratech Corporation
Concrete Contract
Guy Yocom Construction, Inc.
July 31, 1997
12) Entire system shall be guaranteed for a period of one year from the
date of completion against defective parts and the standard
manufacturer's warranties.
13) The contractor shall furnish to the owner any tests and certifications
as may be required including compaction tests, concrete testing, etc./
14) The entire system must be completed to the owner's architect and
construction manager's approval and in accordance with codes,
specifications, and contract drawings (copies attached), as contract
documents.
15) All methods and procedures will be in strict accordance with the
American Concrete Institute (ACI) Guidelines and the Portland Cement
Association "Concrete Floors on Ground", 2nd Edition 1990.
16) The concrete shall be placed and finished with appropriate methods to
achieve conformance with the ACI Guideline #17 "Standard
Specifications for Tolerances for Concrete Construction and Materials"
and ASTM #E-1155-87 "Standard Test Method for Determining Floor
Flatness and Levelness Using the F-Number System".
Floor Flatness Ff = 25
Floor Levelness Fl = 20
17) Contractor is to supply all equipment as required to place and finish
concrete slabs foundations, tilt-up panels, site concrete paving and
all other work as outlined. This includes, but is not necessarily
limited to concrete screeds, trowels, pumps, conveyors, power buggies,
sprayers, etc.
18) Contractor shall include all labor and equipment to patch and repair
exterior tilt up wall and stairs as required.
19) Basis of Payment:
A) Payment will be made to contractor per contract terms for work
properly completed per the contract documents for the actual area
of work completed.
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Rauch Industries, Mira Loma, California
c/o Syratech Corporation
Concrete Contract
Guy Yocom Construction, Inc.
July 31, 1997
B) Any concrete placed by this contractor that does not meet all of
these specifications for quality shall be removed and replaced at
the expense of this contractor. Any concrete or repair materials
required for replacement of faulty workmanship will be purchased
by contractor or deducted by owner from moneys due to contractor
for work already completed.
C) The owner retains the right to hire additional contractors or
complete work in this contract by their own forces if required to
meet the completion schedule or maintain quality control. The
owner will not be required to follow any formal notification
process to contractor to accomplish this.
20) Areas of concrete work shall include:
a) New interior slab on grade with dock pits (new and future).
b) Exterior concrete pavements.
c) Concrete tilt-up wall panels
d) All stairs and ramps.
PART 2 MATERIALS
- -------
A) Redimix concrete that will be provided by the Contractor will conform to
the approved mix design(s). All concrete will be placed at a maximum slump
of 4" as determined by independent testing laboratory.
B) Construction joint formwork to be wood or metal as per contractor's choice.
C) Construction joint dowels to be smooth steel dowels, saw cut, size per
drawings.
D) Concrete curing for slabs and exterior concrete will be wet cured with
approved blanket for 7 days. Wall panels will be cured by a chemical
compound with approved submittal and be spray or roller appied.
E) 6 ml. polyethylene vapor barrier to be provided for the office area slab.
8
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Rauch Industries, Mira Loma, California
c/o Syratech Corporation
Concrete Contract
Guy Yocom Construction, Inc.
July 31, 1997
PART 3 EXECUTION
- -------
A) Subbase Preparation
1) Subbase layer stone will be provided, installed, graded, and properly
compacted by others. This contractor is to inspect, verify and accept
the levelness and proper elevation of this work prior to placement of
concrete. This contractor is responsible to notify the construction
manager of any discrepancies that do not meet specifications prior to
placing concrete upon the subbase. This contractor will be responsible
for any over run in concrete volume caused by the acceptance of
incorrect elevation or levelness of subbase. This contractor is
responsible for fine grading of subbase as required.
B) Placing Reinforcement
1) Comply with Concrete Reinforcing Steel Institute's recommended
practice for "Placing Reinforcing Bars", for details and methods of
reinforcement and supports, and as herein specified.
2) Clean reinforcement of loose rust and mill scale, earth, ice, and
other materials which reduce or destroy bond with concrete.
3) Accurately position, support and secure reinforcement against
displacement by formwork, construction, or concrete placement
operations. Locate and support reinforcing by metal chairs, runners,
bolsters, spacers, and hangers, as required.
4) Place reinforcement to obtain at least minimum coverage for concrete
protection. Arrange, space and securely tie bars and bar supports to
hold reinforcement in position during concrete placement operations.
Set wire ties so ends are directed into concrete, not toward exposed
concrete surfaces.
5) Install welded wire fabric in as long lengths as practicable. Lap
adjoining pieces at least one full mesh and lace splices with wire.
Offset end laps in adjacent widths to prevent continuous laps in
either direction.
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Rauch Industries, Mira Loma, California
c/o Syratech Corporation
Concrete Contract
Guy Yocom Construction, Inc.
July 31, 1997
C. Formwork
--------
1) Edge Forms and Screed Strips for Slabs and tilt-up panels: Set edge
forms or bulkheads and intermediate screed strips for work areas to
obtain required elevations and contours in finished surface. Provide
and secure units sufficiently strong to support types of strike-off
templates or accepted compacting type screeds.
2) Fabricate forms for easy removal without hammering or prying against
concrete surfaces. Provide crush plates or wrecking plates where
stripping may damage cast concrete surfaces. Provide top forms for
inclined surfaces where slope is too steep to place concrete with
bottom forms only. Kerf wood inserts for forming keyways, reglets,
recesses, and the like, to prevent swelling and for easy removal.
3) Remove formwork in such a manner and upon completion of sufficient
concrete curing so as to not damage adjacent concrete.
4) Coat contact surfaces of forms with a form-coating compound before
reinforcement is placed.
5) Thin form-coating compounds only with thinning agent of type, and in
amount, and under conditions of form-coating compound manufacturer's
directions. Do not allow excess form-coating material to accumulate in
forms or to come into contact with concrete surfaces against which
fresh concrete will be placed. Apply in compliance with manufacturer's
instructions.
6) Coat steel forms with a non-staining, rust-preventative form oil or
otherwise protect against rusting. Rust-stained steel formwork is not
acceptable.
7) Contractor to place perimeter insulation and expansion joint materials
as in accordance with contract documents.
8) Subcontractor to place and finish all concrete at the interior of
column isolation joints in accordance construction manager's schedule.
10
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Rauch Industries, Mira Loma, California
c/o Syratech Corporation
Concrete Contract
Guy Yocom Construction, Inc.
July 31, 1997
D) Concrete Placement
--------
1) Pre-placement Inspection: Before placing concrete, inspect and
complete formwork installation, reinforcing steel, and items to be
embedded or cast-in. Notify other crafts to permit installation of
their work; cooperate with other trades in setting such work. Moisten
wood forms immediately before placing concrete where form coatings are
not used.
2) Coordinate the installation of joint materials and moisture barriers
with placement of forms and reinforcing steel.
3) Deposit concrete continuously or in layers of such thickness that no
concrete will be placed on concrete which has hardened sufficiently to
cause the formation of seams or planes of weakness. If a section
cannot be placed continuously, provide construction joints as herein
specified. Deposit concrete as nearly as practicable to its final
location to avoid segregation.
4) Placing Concrete in Forms: Deposit concrete in forms in horizontal
layers not deeper than 24" and in a manner to avoid inclined
construction joints. Where placement consists of several layers, place
each layer while preceding layer is still plastic to avoid cold
joints.
5) Consolidate placed concrete by mechanical vibrating equipment
supplemented by hand-spading, rodding or tamping. Use equipment and
procedures for consolidation of concrete in accordance with ACI
recommended practices.
6) Do not use vibrators to transport concrete inside forms. Insert and
withdraw vibrators vertically at uniformly spaced locations not
farther than visible effectiveness of machine. Place vibrators to
rapidly penetrate placed layer and at least 6" into preceding layer.
Do not insert vibrators into lower layers of concrete that have begun
to set. At each insertion limit duration of vibration to time
necessary to consolidate concrete and complete embedment of
reinforcement and other embedded items without causing segregation of
mix.
7) Placing Concrete Slabs and tilt-up panels: Deposit and consolidate
concrete slabs and panels in a continuous operation, within limits of
construction joints, until the placing of a panel or section is
completed.
11
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Rauch Industries, Mira Loma, California
c/o Syratech Corporation
Concrete Contract
Guy Yocom Construction, Inc.
July 31, 1997
8) Consolidate concrete during placing operations so that concrete is
thoroughly worked around reinforcement and other embedded items and
into corners.
9) Bring slab surfaces to correct level with straightedge and strikeoff.
Use bull floats or darbies to smooth surface, free of humps or
hollows. Do not disturb slab surfaces prior to beginning finishing
operations.
10) Maintain reinforcing in proper position during concrete placement
operations.
F) Floor Slab and Panel Finishes
---------
1) Trowel Finish: Apply trowel finish to monolithic slab surfaces to be
exposed to view, and slab surfaces to be covered with resilient
flooring, paint or other thin film finish coating system.
2) After floating, begin first trowel finish operation using power-driven
trowel. Begin final troweling when surface produces a ringing sound as
trowel is moved over surface. Consolidate concrete surface by final
machine-troweling operation, free of trowel marks, uniform in texture
and appearance, and with a surface plane tolerance as specified. Grind
smooth surface defects which would telegraph through applied floor
covering system.
3) Non-Slip Broom Finish: Apply non-slip broom finish to exterior
concrete pavements, steps and walks, and elsewhere as indicated.
Immediately after trowel finishing, slightly roughen concrete surface
by brooming with fiber bristle broom perpendicular to main traffic
route. Coordinate required final finish with Architect before
application.
G) Concrete Curing and Protection
1) General: Protect freshly placed concrete from premature drying and
excessive cold or hot temperatures.
2) Start initial curing as soon as free water has disappeared from
concrete surface after placing and finishing.
12
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Rauch Industries, Mira Loma, California
c/o Syratech Corporation
Concrete Contract
Guy Yocom Construction, Inc.
July 31, 1997
3) Provide curing compound to wall panels:
Provide wet curing for slabs and exterior concrete. Apply specified
curing and sealing compound as soon as final finishing operations are
complete (within (2) hours). Apply uniformly in continuous operation
by spray or roller in accordance with manufacturer's directions.
Maintain continuity of coating. Wet curing also within 2 hours and
must remain covered and wet for seven days.
H) Joints
------
1) Construction Joints: Locate and install construction joints, so as not
to impair strength and appearance of the structure, as acceptable to
Architect.
2) Contraction (Control) Joints in Slabs-on-Ground: Construct contraction
joints in slabs-on-ground to form panels of patterns as shown. Utilize
"Sofcut" saw with diamond blade and saw joints minimum 1" deep within
(8) hours of final finishing operation.
Bonus Clause
- --
1) If this contractor completes 100% of their scope of work for the first
440,000 sq. ft. by 9/15/97 a $2,000 per day bonus will be paid by the
owner for each day of work completed prior to 9/15/97.
2) If this contractor completes 100% of the entire project by 11/3/97 the
owner will pay a bonus of $2,000.00 per day for work completed prior
to 11/3/97.
13
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Rauch Industries, Mira Loma, California
c/o Syratech Corporation
Concrete Contract
Guy Yocom Construction, Inc.
July 31, 1997
CONTRACT PRICING BREAKDOWN:
1. Concrete Foundations
a. Excavation $44,000.00
b. Form Work $32,400.00
c. Reinforcing $184,520.00
d. Place/Finish $289,454.00
e. Backfill $28,400.00
2. Concrete Floor Slab with Dock Pits
a. Grade with Onsite Material $28,147.00
b. Form Work $37,183.00
c. Reinforcing $170,000.00
d. Place $1,072,619.00
e. Finish $211,475.00
f. Saw Cut $25,000.00
g. Joint Fill (m.m. 80 or equal) Excluded
h. Wet Cure $37,436.00
* Note: Sawcut pattern is changed to 16.67 fee x 18.33 feet. No zip strip
allowed. No keyway at construction joints 3/4 smooth dowels by 18" long 16"
on-center at construction joint.
3. Deduct for eliminating smooth dowels at control
joints in building slab. ($67,385.00)
4. Concrete Tilt-Up
a. Form Work $145,610.00
b. Reinforcing $441,547.00
c. Place $416,700.00
d. Finish $93,251.00
e. Erection $93,000 00
f. Panel Sealant $19,600.00
g. Back Fill $34,500.00
h. Chemical Cure $5,500 00
i. Rub & Patch $107,202.00
14
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Rauch Industries, Mira Loma, California
c/o Syratech Corporation
Concrete Contract
Guy Yocom Construction, Inc.
July 31, 1997
CONTRACT PRICING BREAKDOWN: (Continued)
5. Exterior Pavements
a. Fine Grade with Onsite Material $7,079.00
b. Form Work $17,480.00
c. Place $210,916.00
d. Finish $39,330.00
e. Wet Cure $5,700.00
Total Contract Amount $3,730,664.00
(Including all applicable taxes)
15
<PAGE>
SECTION 01000 - GENERAL CONDITIONS MAY, 1997
1.1 BASIC DEFINITIONS:
A. Contractor
The Contractor is Guy Yocom Construction, Inc.
B. Work
----
The term "Work" means the construction and services required by the
Contract Documents, whether completed or partially completed, and
includes all other labor, materials, equipment and services provided
or to be provided by the Contractor to fulfill the Contractor's
obligations. The Work may constitute the whole or a part of the
Project.
C. Contract Documents
--------
The Contract Documents consist of the Contract Agreement Between
Contractor and Owner, Conditions of the Contract, Drawings,
Specifications, Addenda, Price Breakdown, Alternate Schedule, etc. as
listed on the Contract Agreement form.
D. Alternates
An Alternate is an amount proposed by Bidders and stated on the Bid
Form for certain items that may be added to or deducted from Base Bid
amount if the Owner decides to accept a corresponding change in either
the amount of construction to be completed, or in the products,
materials, equipment, systems or installation methods described in
Contract Documents. Product alternates must be approved prior to the
bid.
1.2 REVIEW OF CONTRACT DOCUMENTS & FIELD CONDITIONS BY SUBCONTRACTOR:
A. This Contractor shall examine all Contract Documents and shall visit
the site of the Work to determine the extent and difficulty of the
Work and the existing conditions prior to executing the Contract
Agreement or submitting a bid. No claims for additional compensation
will be allowed for failure to do so.
B. The Contractor shall take field dimensions and conditions and verify
these with the Contract Documents prior to commencing with this Scope
of Work. Errors, omissions or inconsistencies shall be reported to the
Owner immediately and prior to commencing work of this Contract.
C. The Contractor shall perform the Work in accordance with the Contract
Documents and approved submittals.
1
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SECTION 01000 - GENERAL CONDITIONS MAY, 1997
D. The Contractor shall coordinate the Work of this contract with all
other trades so that all work will progress simultaneously and be
complete and operational.
E. Job meetings are a requirement as scheduled by the Owner. A
responsible representative of the Contractor is required to attend
unless otherwise excused.
1.3 SUPERVISION:
A. The Contractor shall supervise and direct the Work, using the
Contractor's best skill and attention. The Contractor shall be solely
responsible for and have control over construction means, methods,
techniques, sequences and procedures and for coordinating all portions
of the Work under this contract. Al1 work will subject to overall
coordination by the Owner.
B. The Contractor shall not be relieved of obligations to perform the
Work in accordance with the Contract Documents either by activities or
duties of the Owner or Architect in their administration of the
Contract or by tests, inspections or approvals required or performed
by persons other than the Contractor.
C. The Contractor shall inspect portions of the Project related to the
Contractor's Work in order to determine that such portions are in
proper condition and in accordance with specifications to receive
subsequent work. Failure to notify Owner of any previously completed
non-conforming work prior to commencing the Work of this Contract
constitutes acceptance by this Contractor of the previously completed
work. No claims by this Contractor for additional compensation will be
allowed for correction of prior non-conforming work completed by
others or for increased costs in completion or repair of the
Contractor's Work caused by non-conforming work completed by others.
1.4 LABOR AND MATERIALS:
A. Unless otherwise provided in the Contract Documents, the Contractor
shall provide and pay for labor, materials, equipment, tools,
construction equipment and machinery, water, heat, utilities,
transportation and other facilities and services necessary for proper
execution and completion of the Work, whether temporary or permanent
and whether or not incorporated or to be incorporated in the Work.
B. The Contractor shall enforce strict discipline and good order among
the Contractor's employees and other persons carrying out the
Contract. The Contractor shall not permit employment of unfit persons
or persons not skilled in tasks assigned to them.
2
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SECTION 01000 - GENERAL CONDITIONS MAY, 1997
C. Unless otherwise stated, the contract amount is a lump sum value and
not to be construed as a unit price contract. Price Breakdowns and
quantities stated are for convenience only and are not meant to limit
the Scope of Work except as defined by Contract Documents.
1.5 WARRANTY:
A. The Contractor warrants to the Owner and Architect that materials and
equipment furnished under the Contract will be of good quality and new
unless otherwise required or permitted by the Contract Documents, that
the Work will be free from defects not inherent in the quality
required or permitted, and that the Work will conform with the
requirements of the Contract Documents. Work not conforming to these
requirements, including substitutions not properly approved and
authorized, may be considered defective. Unless otherwise stated or
required by law, all work completed by this Subcontract shall be
warranted for a minimum of one (1) year after final acceptance by the
Owner.
1.6 TAXES:
Unless otherwise provided in the Contract Documents, the Contractor shall
pay all sales, consumer, use and similar taxes for the Work or portions
thereof provided by the Contractor that are in effect at the time of the
execution of this Contract.
1.7 PERMITS, FEES AND NOTICES:
Unless otherwise provided in the Contract Documents, the Contractor shall
secure and pay for all required permits and governmental fees, licenses and
inspections necessary for proper execution and completion of the Work which
are customarily and legally required.
1.8 SHOP DRAWINGS, PRODUCT DATA AND SAMPLES:
A. Shop Drawings are drawings, diagrams, schedules and other data
specially prepared for the Work by the Contractor, manufacturer,
supplier or distributor to illustrate some portion of the Work.
B. Product Data are illustrations, standard schedules, performance
charts, instructions, brochures, diagrams and other information
furnished by the Contractor to illustrate materials or equipment for
some portion of the Work.
3
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SECTION 01000 - GENERAL CONDITIONS MAY, 1997
C. Samples are physical examples which illustrate materials, equipment or
workmanship and establish standards by which the Work will be judged.
D. Shop Drawings, Product Data, Samples and similar submittals are not
Contract Documents. The purpose of their submittal is to demonstrate
for those portions of the Work for which submittals are required the
way the Contractor proposes to conform to the information given and
the design concept expressed in the Contract Documents.
E. The Contractor shall review, approve and submit to the Owner, in
accordance with the schedule and sequence approved by the Owner, Shop
Drawings, Product Data, Samples and similar submittals required by the
Contract Documents. The Contractor shall cooperate with the Owner in
the coordination of the Subcontractor's Shop Drawings, Product Data,
Samples and similar submittals with related documents submitted by
other Contractors. Submittals made by the Contractor which are not
required by the Contract Documents may be returned without action.
F. The Contractor shall perform no portion of the Work requiring
submittal and review of Shop Drawings, Product Data, Samples or
similar submittals until the respective submittal has been approved by
the Owner and Architect. Such Work shall be in accordance with
approved submittals.
G. By approving and submitting Shop Drawings, Product Data, Samples and
similar submittals, the Contractor represents that the Contractor has
determined and verified materials, field measurements and field
construction criteria related thereto, or will do so, and has checked
and coordinated the information contained within such submittals with
the requirements of the Work and of the Contract Documents.
H. The Contractor shall not be relieved of responsibility for deviations
from requirements of the Contract Documents by the Owner's and
Architect's approval of Shop Drawings, Product Data, Samples and
similar submittals unless the Subcontractor has specifically informed
the Owner and Architect in writing of such deviation at the time of
submittal and the Owner and Architect have given written approval to
the specific deviation. The Contractor shall not be relieved of
responsibility for errors or omissions in Shop Drawings, Product Data,
Samples and similar submittals by the Owner and Architect's approval
thereof.
I. The Contractor shall direct specific attention, in writing or on
resubmitted Shop Drawings, Product Data, Samples and similar
submittals to revisions other than those requested by the Owner and
Architect on previous submittals.
4
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SECTION 01000 - GENERAL CONDITIONS MAY, 1997
J. Informational submittals, upon which the Owner and Architect are not
expected to take responsive action, may be so identified in the
Contract Documents.
K. When professional certification of performance criteria of materials,
systems or equipment is required by the Contract Documents, the Owner
vand Architect shall be entitled to rely upon the accuracy and
completeness of such calculations and certifications.
1.9 CUTTING AND PATCHING:
A. The Contractor shall be responsible for cutting, fitting or patching
required to complete the Work or to make its parts fit together
properly
B. The Contractor shall not damage or endanger a portion of the Work or
fully or partially completed construction of the Owner's own forces or
of other Contractors by cutting, patching, excavating or otherwise
altering such construction. The Contractor shall not cut or otherwise
alter such construction by other Contractors or by the Owner's own
forces except with written consent on the Owner and such other
Contractors, such consent shall not be unreasonably withheld. The
Contractor shall not unreasonably withhold from the other Contractors
or the Owner the Contractor's consent to cutting or otherwise altering
the Work.
1.10 CLEANING UP:
A. The Contractor shall keep the premises and surrounding area free from
accumulation of waste materials or rubbish caused by operations under
the Contract. At completion of the Work or as directed by the Owner,
the Contractor shall remove from and about the Project waste
materials, rubbish, the Contractor's tools, construction equipment,
machinery and surplus materials. Unless otherwise stated in the
Contract Documents, the Contractor shall remove all debris resulting
from the Work and dispose of off site and pay all disposal fees in
accordance with all applicable rules and regulations.
5
<PAGE>
SECTION 01000 - GENERAL CONDITIONS MAY, 1997
1.11 USE OF SITE:
A. The Contractor shall confine operations at the site to areas permitted
by law, ordinances, permits and the Contract Documents and shall not
unreasonably encumber the site with materials or equipment.
B. The Contractor shall coordinate the Contractor's operations with, and
secure the approval of, the Owner before using any portion of the
site.
1.12 SAFETY OF PERSONS AND PROPERTY:
A. The Contractor shall be responsible for initiating, maintaining and
supervising all safety precautions and programs in connection with the
performance of the Contract. The Contractor shall submit the
Contractor's safety program to the Owner for review and coordination
with the safety programs of other Contractors.
B. The Contractor shall take reasonable precautions for safety of, and
shall provide reasonable protection to prevent damage, injury or loss
to:
1) Employees on the Work and other persons who may be affected
thereby;
2) The work and materials and equipment to be incorporated therein,
whether in storage on or off the site, under care, custody or
control of the Contractor or Contractors;
3) Other property at the site or adjacent thereto, such as trees,
shrubs, lawns, walks, pavements, roadways, structures and
utilities not designated for removal, relocation or replacement
in the course of construction; and
4) Construction or operations by the Owner or other Contractors.
C. The Contractor shall give notices and comply with applicable laws,
ordinances, rules, regulations and lawful orders of public authorities
bearing on safety of persons or property or their protection from
damage, injury or loss.
D. The Contractor shall erect and maintain, as required by existing
conditions and performance of the Contract, reasonable safeguards for
safety and protection, including posting danger signs and other
warnings against hazards, promulgating safety regulations and
notifying owners and users of adjacent sites and utilities.
6
<PAGE>
SECTION 01000 - GENERAL CONDITIONS MAY, 1997
E. When use or storage of explosives or other hazardous materials or
equipment or unusual methods are necessary for execution of the Work,
the Subcontractor shall exercise utmost care and carry on such
activities under supervision of properly qualified personnel.
F. The Contractor shall not load or permit any part of the construction
or site to be loaded so as to endanger its safety.
1.13 CORRECTION OF WORK:
A. The Contractor shall promptly correct Work rejected by the Owner or
Architect or failing to conform to the requirements of the Contract
Documents, whether observed before or after Substantial Completion and
whether or not fabricated, installed or completed. The Contractor
shall bear costs of correcting such rejected Work, including
additional testing and inspections and compensation for the Owner and
Architect's services and expenses made necessary thereby.
1.14 CLAIMS:
A. Time Limit on Claims
All claims by this Contractor against the Owner or Architect must be
made within 14 days after occurrence of the event giving rise to such
claim. Claims for additional cost must be made by written notice prior
to proceeding to execute the Work.
1.15 "AS-BUILT" DOCUMENTATION:
A. When required by the Contract and prior to final payment, the
following documents are to be provided by this Contractor:
1) As-Built drawings showing actual in-place locations of all pipe
and equipment. Provide one reproducible sepia and three blueline
prints.
2) Proof of inspection and acceptance by applicable local code
officials and inspectors.
3) Letter of Certification that Scope of Work of this Contract is
completed in accordance with Contract Documents and all
applicable local codes and regulations.
7
<PAGE>
[Logo]
Standard Form of Agreement Between Owner and
Contractor where the basis of payment is a Stipulated Sum -
Construction Manager-Adviser Edition
AIA Document A101/CMa - Electronic Format
THIS DOCUMENT HAS IMPORTANT LEGAL CONSEQUENCES: CONSULTATION WITH AN ATTORNEY IS
ENCOURAGED WITH RESPECT TO ITS COMPLETION OR MODIFICATION. AUTHENTICATION OF
THIS ELECTRONICALLY DRAFTED AIA DOCUMENT MAY BE MADE BY USING AIA DOCUMENT D401.
The 1992 Edition of AIA Document A201/CMa, General Conditions of the Contract
for Construction, Construction Manager-Adviser Edition, is adopted in this
document by reference. Do not use with other general conditions unless this
document is modified.
AGREEMENT
made as of the 31st day July of in the year of 1997.
(In words, indicate day, month and year)
BETWEEN the Owner:
(Name ant address) Rauch Industries, Inc.
Division of Syratech Corporation
175 McClellan Highway
East Boston, MA 02128
and the Contractor:
(Name and address) Guy Yocom Construction, Inc.
P.O. Box 7621
Redlands, CA 92375
For the following Project:
(Include detailed description of Project, location, address and scope.)
Rauch Industries
11640 Harrel Street
Mira Loma, CA 91752
The Construction Manager is:
(Name and address) V.I.P. Structures, Inc.
One Webster's Landing
Syracuse, NY 13202
The Architect is:
(Name and address) Vesely & Associates
c/o V.I.P. Architectural Associates
One Webster's Landing
Syracuse, NY 13202
The Owner and Contractor agree as set forth below.
Copyright 1975, 1980, copyright 1992 by The American Institute of Architects,
1735 New York Avenue N.W., Washington D.C. 20006-5292. 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 A101/lCMa OWNER-CONTRACTOR AGREEMENT o CONSTRUCTION 1
MANAGER-ADVISER EDITION - AIA - COPYRIGHT 1992 THE AMERICAN INSTITUTE
OF ARCHITECTS, 1735 NEW YORK AVENUE N.W., WASHINGTON D.C 20006-5292.;
Unlicensed photocopying violates U.S. copyright laws and is subject to
legal prosecution. This document was electronically produced with
permission of the AIA and can be reproduced without violation until
the date of expiration as noted below.
Electronic Format A101/CMa-1992
<PAGE>
ARTICLE 2
THE WORK OF THIS CONTRACT
The Contractor shall execute the entire Work described in the Contract
Documents, except to the extent specifically indicated in the Contract Documents
to be the responsibility of others, or as follows:
Please see "Scope of Work" attached.
ARTICLE 3
DATE OF COMMENCEMENT AND SUBSTANTIAL COMPLETION
3.1 The date of commencement is the date from which the Contract Time of
Paragraph 3.2 is measured, and shall be the date of this Agreement, as first
written above, unless a different date is stated below or provision is made for
the date to be fixed in a notice to proceed issued by the Owner. (Insert the
date of commencement, if it differs from the date of this Agreement or, if
applicable, state that the date will be fixed in a notice to proceed.)
Please see "Scope of Work - General Notes" attached.
Unless the date of commencement is established by a notice to proceed issued by
the Owner, the Contractor shall notify the Owner, through the Construction
Manager, in writing not less than five days before commencing the Work to permit
the timely filing of mortgages, mechanic's liens and other security interests.
3.2 The Contractor shall achieve Substantial Completion of the entire Work not
later than
(Insert the calendar date or number of calendar days after the date of
commencement. Also insert any requirements for earlier Substantial Completion of
certain portions of the Work, if not stated elsewhere in the Contract
Documents.)
Per the Construction Manager's Schedule
See Supplement (new paragraphs 3.3 & 3.4)
, subject to adjustments of this Contract Time as provided in the Contract
Documents. Insert provisions, if any, for liquidated damages relating to failure
to complete on time.)
AIA DOCUMENT A101/lCMa OWNER-CONTRACTOR AGREEMENT o CONSTRUCTION 2
MANAGER-ADVISER EDITION - AIA - COPYRIGHT 1992 THE AMERICAN INSTITUTE
OF ARCHITECTS, 1735 NEW YORK AVENUE N.W., WASHINGTON D.C 20006-5292.;
Unlicensed photocopying violates U.S. copyright laws and is subject to
legal prosecution. This document was electronically produced with
permission of the AIA and can be reproduced without violation until
the date of expiration as noted below.
Electronic Format A101/CMa-1992
<PAGE>
ARTICLE 4
CONTRACT SUM
4.1 The Owner shall pay the Contractor in current funds for the Contractor's
performance of the Contract the Contract Sum of Three Million Seven Hundred
Thirty Thousand Six Hundred Sixty Four Dollars ($ 3,730,664.00 ), subject to
additions and deductions as provided in the Contract Documents.
4.2 The Contract Sum is based upon the following alternates, if any, which are
described in the Contract Documents and are hereby accepted by the Owner:
(State the numbers or other identification of accepted alternates. If decisions
on other alternates are to be made by the Owner subsequent to the execution of
this Agreement, attach a schedule of such other alternates showing the amount
for each and the date until which that amount is valid.)
Please see "Pricing Breakdown" attached.
4.3 Unit prices, if any, are as follows:
See attached "Alternates".
AIA DOCUMENT A101/lCMa OWNER-CONTRACTOR AGREEMENT o CONSTRUCTION 3
MANAGER-ADVISER EDITION - AIA - COPYRIGHT 1992 THE AMERICAN INSTITUTE
OF ARCHITECTS, 1735 NEW YORK AVENUE N.W., WASHINGTON D.C 20006-5292.;
Unlicensed photocopying violates U.S. copyright laws and is subject to
legal prosecution. This document was electronically produced with
permission of the AIA and can be reproduced without violation until
the date of expiration as noted below.
Electronic Format A101/CMa-1992
<PAGE>
ARTICLE 5
PROGRESS PAYMENTS
5.1 Based upon Applications for Payment submitted by the Contractor to the
Construction Manager, and upon Project Applications and Certificates for Payment
issued by the Construction Manager and Architect, the Owner shall make progress
payments on account of the Contract Sum to the Contractor as provided below and
elsewhere in the Contract Documents.
5.2 The period covered by each Application for Payment shall be one calendar
month ending on the last day of the month, or as follows:
5.3 Provided an Application for Payment is submitted to the Construction Manager
not later than the 25th day of a month, the Owner shall make payment to the
Contractor not later than the 15th day of the following month. If an Application
for Payment is received by the Construction Manager after the application date
fixed above, payment shall be made by the Owner not later than thirty (30) days
after the Construction Manager receives the Application for Payment. All payment
applications must be accompanied with Contractors Lien Waiver and all applicable
subcontractors/material suppliers.
5.4 Each Application for Payment shall be based upon the Schedule of Values
submitted by the Contractor in accordance with the Contract Documents. The
Schedule of Values shall allocate the entire Contract Sum among the various
portions of the Work and be prepared in such form and supported by such data to
substantiate its accuracy as the Construction Manager or Architect may require.
This schedule, unless objected to by the Construction Manager or Architect,
shall be used as a basis for reviewing the Contractor's Applications for
Payment.
5.5 Applications for Payment shall indicate the percentage of completion of each
portion of the Work as of the end of the period covered by the Application for
Payment.
5.6 Subject to the provisions of the Contract Documents, the amount of each
progress payment shall be computed as follows:
5.6.1 Take that portion of the Contract Sum properly allocable to completed Work
as determined by multiplying the percentage completion of each portion of the
Work by the share of the total Contract Sum allocated to that portion of the
Work in the Schedule of Values, less retainage of ten percent (10%). Pending
final determination of cost to the Owner of changes in the Work, amounts not in
dispute may be included as provided in Subparagraph 7.3.7 of the General
Conditions;
5.6.2 Add that portion of the Contract Sum properly allocable to materials and
equipment delivered and suitably stored at the site for subsequent incorporation
in the completed construction (or, if approved in advance by the Owner, suitably
stored off the site at a location agreed upon in writing), less retainage of____
percent (__%);
5.6.3 Subtract the aggregate of previous payments made by the Owner; and
5.6.4 Subtract amounts, if any, for which the Construction Manager or Architect
has withheld or nullified a Certificate for Payment as provided in Paragraph 9.5
of the General Conditions.
5.7 The progress payment amount determined in accordance with Paragraph 5.6
shall be further modified under the following circumstances:
5.7.1 Add, upon Substantial Completion of the Work, a sum sufficient to increase
the total payments to ninety percent (90 %) of the Contract Sum, less such
amounts as the Construction Manager recommends and the Architect determines for
incomplete Work and unsettled claims; and
5.7.2 Add, if final completion of the Work is thereafter materially delayed
through no fault of the Contractor, any additional amounts payable in accordance
with Subparagraph 9.10.3 of the General Conditions.
5.8 Reduction or limitation of retainage, if any, shall be as follows: (If it is
intended, prior to Substantial Completion of the entire Work, to reduce or limit
the retainage resulting from the percentages inserted in Subparagraphs 5. 6.1
and 5. 6.2 above, and this is not explained elsewhere in the Contract Documents,
insert here provisions for such reduction or limitation.)
AIA DOCUMENT A101/lCMa OWNER-CONTRACTOR AGREEMENT o CONSTRUCTION 4
MANAGER-ADVISER EDITION - AIA - COPYRIGHT 1992 THE AMERICAN INSTITUTE
OF ARCHITECTS, 1735 NEW YORK AVENUE N.W., WASHINGTON D.C 20006-5292.;
Unlicensed photocopying violates U.S. copyright laws and is subject to
legal prosecution. This document was electronically produced with
permission of the AIA and can be reproduced without violation until
the date of expiration as noted below.
Electronic Format A101/CMa-1992
<PAGE>
ARTICLE 7
MISCELLANEOUS PROVISIONS
7.1 Where reference is made in this Agreement to a provision of the General
Conditions or another Contract Document, the reference refers to that provision
as amended or supplemented by other provisions of the Contract Documents.
(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
Contractor's principal places of business, the location of the Project and
elsewhere may affect the validity of this provision. Legal advice should be
obtained with respect to deletions or modifications, and also regarding
requirements such as written disclosures or waivers.)
7.3 Temporary facilities and services:
(Here insert temporary facilities and services which are different from or in
addition to those included elsewhere in the Contract Documents.)
7.4 Other Provisions: (See Supplement)
(Here list any special provisions affecting the Contract.)
AIA DOCUMENT A101/lCMa OWNER-CONTRACTOR AGREEMENT o CONSTRUCTION 5
MANAGER-ADVISER EDITION - AIA - COPYRIGHT 1992 THE AMERICAN INSTITUTE
OF ARCHITECTS, 1735 NEW YORK AVENUE N.W., WASHINGTON D.C 20006-5292.;
Unlicensed photocopying violates U.S. copyright laws and is subject to
legal prosecution. This document was electronically produced with
permission of the AIA and can be reproduced without violation until
the date of expiration as noted below.
Electronic Format A101/CMa-1992
<PAGE>
ARTICLE 8
TERMINATION OR SUSPENSION
8.1 The Contract may be terminated by the Owner or the Contractor as provided in
Article 14 of the General Conditions.
8.2 The Work may be suspended by the Owner as provided in Article 14 of the
General Conditions.
ARTICLE 9
ENUMERATION OF CONTRACT DOCUMENTS
Document Title Pages
Please see "List of Contract Documents" attached.
9.1.4 The Specifications are those contained in the Project Manual dated as in
Subparagraph 9.1.3, and are as follows: (Either list the Specifications here or
refer to an exhibit attached to this Agreement.)
Section Title Pages
Please see "List of Contract Documents" attached.
AIA DOCUMENT A101/lCMa OWNER-CONTRACTOR AGREEMENT o CONSTRUCTION 6
MANAGER-ADVISER EDITION - AIA - COPYRIGHT 1992 THE AMERICAN INSTITUTE
OF ARCHITECTS, 1735 NEW YORK AVENUE N.W., WASHINGTON D.C 20006-5292.;
Unlicensed photocopying violates U.S. copyright laws and is subject to
legal prosecution. This document was electronically produced with
permission of the AIA and can be reproduced without violation until
the date of expiration as noted below.
Electronic Format A101/CMa-1992
<PAGE>
9.1.5 The Drawings are as follows, and are dated unless a different date is
shown below: (Either list the Drawings here or refer to an exhibit attached to
this Agreement.)
Number Title Pages
Please see "List of Contract Documents" attached.
9.1.6 The Addenda, if any, are as follows:
Number Date Pages
N/A
Portions of Addenda relating to bidding requirements are not part of the
Contract Documents unless the bidding requirements are also enumerated in this
Article 9.
AIA DOCUMENT A101/lCMa OWNER-CONTRACTOR AGREEMENT o CONSTRUCTION 7
MANAGER-ADVISER EDITION - AIA - COPYRIGHT 1992 THE AMERICAN INSTITUTE
OF ARCHITECTS, 1735 NEW YORK AVENUE N.W., WASHINGTON D.C 20006-5292.;
Unlicensed photocopying violates U.S. copyright laws and is subject to
legal prosecution. This document was electronically produced with
permission of the AIA and can be reproduced without violation until
the date of expiration as noted below.
Electronic Format A101/CMa-1992
<PAGE>
9.1.7 Other documents, if any, forming part of the Contract Documents are as
follows
(List here any additional documents which are intended to form part of the
Contract Documents. The General Conditions provide that bidding requirements
such as advertisement or invitation to bid, Instructions to Bidders, sample
forms and the Contractor's bid are not part of the Contract Documents unless
enumerated in this Agreement They should be listed here only if intended to be
part of the Contract Documents.)
Please see "List of Contract Documents" attached.
This Agreement is entered into as of the day and year first written above and is
executed in at least four original copies of which one is to be delivered to the
Contractor, one each to the Construction Manager and Architect for use in the
administration of the Contract, and the remainder to the Owner.
OWNER CONTRACTOR
/s/ E. Merle Randolph /s/ Guy Yocum
- ------------------------ -----------------------------------
E. Merle Randolph Guy Yocum
Chief Financial Officer President
Rauch Industries Subsidiary Guy Yocum Construction, Inc.
of Syratech Corp.
AIA DOCUMENT A101/lCMa OWNER-CONTRACTOR AGREEMENT o CONSTRUCTION 8
MANAGER-ADVISER EDITION - AIA - COPYRIGHT 1992 THE AMERICAN INSTITUTE
OF ARCHITECTS, 1735 NEW YORK AVENUE N.W., WASHINGTON D.C 20006-5292.;
Unlicensed photocopying violates U.S. copyright laws and is subject to
legal prosecution. This document was electronically produced with
permission of the AIA and can be reproduced without violation until
the date of expiration as noted below.
Electronic Format A101/CMa-1992
<PAGE>
SUPPLEMENT
This Supplement is being attached to, and incorporated by this reference in
the certain Standard Form of Agreement between Owner and Contractor, where basis
of payment is a Stipulated Sum (AIA Document A101/CMa, 1992) ("Agreement") made
and entered into by and between Rauch Industries, Inc., a North Carolina
corporation ("Owner"), and Guy Yocum Construction, Inc., a ("Contractor"), for
the purpose of modifying certain terms and conditions of (i) the Agreement and
(ii) the General Conditions of the Contract for Construction (AIA Document
A201/CMa, 1992), ("General Conditions") incorporated in the Agreement, attached
thereto. All references to the Agreement and/or General Conditions shall mean
the Agreement and General Conditions as modified by this Supplement. The article
and paragraph numbers set forth in this Supplement correspond to the article and
paragraph numbers set forth in the Agreement and General Conditions. Any term
used herein with initial capital letters that is not otherwise defined herein
shall have the same meaning ascribed to such term in the Agreement and General
Conditions.
Modifications to the Agreement:
1. Article 1: The Contract Documents. Article 1 of the Agreement is hereby
deleted in its entirety and the following is substituted in its place.
"The Contract Documents consist of the following, which together with
Modifications made in the manner provided therein and issued subsequent to the
execution of the Agreement, form the Contract:
(i) The Agreement; and
(ii) The General Conditions; and
(iii) The Supplement attached hereto and incorporated herein by this
reference ("Supplement"); and
(iv) The Construction Documents consisting of those documents indicated on
Exhibit A attached hereto; and
[(v) The Contractor's Progress Schedule, attached hereto as Exhibit B; and
(vi) The Legal Description which describes the Project Site located in the
City of Mira Loma, County of Riverside, State of California, and is
attached hereto as Exhibit C.]"
"In general, the Drawings shall show dimensions, positions, materials and
kinds of construction; the Specifications shall describe quality of materials,
workmanship and methods. Work called for on the Drawings and not mentioned in
the Specifications, or vice versa, shall be performed as though fully set forth
in both. Work not particularly detailed, marked or specified shall be the same
as similar parts that are detailed, marked or specified."
<PAGE>
"Architectural dimensions shall be checked by the Contractor for
consistency and accuracy prior to the ordering of any material and prior to the
installation thereof. Contractor shall immediately inform Construction Manager
and Architect of any defects, suspected defects, and/or inconsistencies in the
Drawings and Specifications or in any work by others affecting the work which
comes to the Contractor's attention. After consulting with Owner with respect to
such error, the Construction Manager will issue instructions as to how to
proceed within five (5) business days after receiving notice of such error from
the Contractor. If the Contractor proceeds with the work based on any such error
without approved instructions from the Construction Manager, the Contractor
shall make good any resulting damage or defects. The foregoing provisions
include specification typographical errors and drawing notational errors where
the Contractor reasonably believes an error exists. Figured dimensions on scale
drawings and on full size drawings shall govern over scale drawings without
figured dimensions."
"In the event of any conflict between any of the documents described above,
the terms and provisions of the Supplement shall control over those of the
Agreement, the General Conditions, and the Construction Documents and the terms
and provisions of the Agreement shall control over those of the General
Conditions. In the event of a conflict between the Specifications and the
Drawings, regarding materials, quality, size, shape or dimension, the
Construction Manager after consulting with the Architect and Owner, and with
Owner's approval, shall decide the correct intent."
2. Article 3: Date Of Commencement And Substantial Completion. The following
paragraphs are hereby added to Article 3 of the Agreement:
"3.3 The Contractor has prepared a Schedule for the Work attached hereto as
Exhibit B ("Progress Schedule"). The Progress Schedule shall be related to the
entire Project to the full extent required by the Contract Documents, shall
include a Schedule for all required submittals, and shall provide for
expeditious and practicable execution of the Work. The Progress Schedule shall
indicate the dates for the starting and completion of the various stages of
construction and shall be revised as required by the conditions of the Work,
subject to Construction Manager's and Owner's approval. The Progress Schedule
shall be computer-generated by the Critical Path Method and shall cover all
activities, milestones and trades required for the execution of the Work with
scheduling and delivery dates for long-lead-time materials and equipment. The
adequacy of the information in the submitted Progress Schedule is subject to the
approval of the Construction Manager and the Owner. With each Application for
Payment submitted by the Contractor in accordance with the Contract, other than
the final Application for Payment, the Contractor shall submit to the
Construction Manager and Owner a current Progress Schedule revised to indicate
the portion of the Work executed during the time period covered by the
Application for Payment, all progress slippages occurring during previously
covered time periods, and the corrective actions taken for the slippage
carryover into the time period covered by the Application for Payment, the
anticipated delays or difficulties, and all other information required to
adequately present the actual status of the progress of the Work as of the date
of the Application for Payment as may be further required by the Construction
Manager and Owner."
2
<PAGE>
"3.4 In the event the Contractor falls behind the Progress Schedule to such
an extent that the Owner and Construction Manager in good faith determines that
the Contractor will be unable to achieve Substantial Completion by the date set
forth in the Progress Schedule, as such date may be extended as provided in the
Contract Documents, the Contractor shall, within two (2) working days following
the Owner's or Construction Manager's demand therefor, provide to the Owner, in
writing, a detailed explanation of the measures the Contractor will take in
order to recover from the delay so that the progress of the Work complies with
the Progress Schedule. If, in the Owner's good faith business judgment, the
Contractor's intended recovery measures will not cause the Contractor to recover
from the delay (provided such delay arises from a cause which is the
Contractor's or its Subcontractor's responsibility) so as to achieve substantial
completion on schedule, the Owner may direct the Contractor to accelerate the
progress of the Work, at the Contractor's sole cost (which acceleration costs
shall not cause an adjustment to the Contract Sum). Such methods of acceleration
may, at the Owner's election, include, without limitation, employing such
additional forces or paying such additional overtime wages as may be required in
order to assure that the progress of the Work is in compliance with the Progress
Schedule and assure timely Substantial Completion of the Work.]"
3. Article 6: Final Payment. Article 6 is hereby deleted in its entirety and
the following is substituted in its place:
"6.1 Final payment constituting the unpaid balance of the Contract Sum, if
any, (subject to any retention with respect to minor punch-list work or
defective work) shall be due and payable within 30 days following the
recordation of a valid Notice of Completion with respect to the Work, provided
that as a condition to such payment the Owner has approved the Work and the
Contractor has first delivered to the Owner's Representative such other evidence
of the Contractor's full payment of Subcontractors and the absence of any liens
with respect to the Work as Owner or its lender may require including,
specifically, the Owner's receipt of fully executed lien releases conditioned
only upon final payment from all Subcontractors and material suppliers involved
in the Project and a title report "dated down" to the date of final payment.
Final payment may, at Owner's option, be made in the form of a joint check(s)
made payable to the Contractor and applicable Subcontractor(s) unless the
Contractor files a release bond with respect to any liens in accordance with the
provisions of California Civil Code Sections 3143 and/or 3171, or any successor
statute(s) thereto. The Contractor shall provide evidence satisfactory to the
Owner establishing the identities of such Subcontractors and the amounts of the
payments to which they are entitled.
If there should remain minor items to be completed, the Contractor and the
Owner shall list such items and the Contractor shall complete said items within
a reasonable time following Substantial Completion (as such term is defined in
Subparagraph 9.8.1 of the General Conditions) of the Work, which reasonable time
shall in no event shall be greater than thirty (30) days unless otherwise agreed
to, in writing, by the Owner. The Owner may retain an amount equal to two (2)
times the cost to complete
3
<PAGE>
the minor work ("punch-list work"), as reasonably determined by Owner, until
such time as the punch-list work is completed. Within seven (7) days following
the Contractor's written notification to the Owner that this punch-list work has
been completed, the Owner's Representative shall reasonably determine whether
said punch-list work has, in fact, been completed. If the Owner's Representative
determines that the punch-list work has been completed, he shall, within said
seven (7) day period, deliver a written notice of said completion to the Owner
together with the Contractor's invoice for said work. Payment for this
punch-list work shall be made within thirty (30) days after the date on which
the Owner receives the Contractor's invoice and approval from Owner's
Representative."
4. Article 7: Miscellaneous Provisions. The following paragraphs are hereby
added to Article 7 of the Agreement:
7.4 Contractor shall observe and abide by and perform all of its
obligations hereunder in accordance with applicable laws, rules and regulations
of all governmental authorities having jurisdiction over the Project site.
7.5 Except to the extent the Contract Documents expressly provide
otherwise, in the event of any dispute between the Owner and the Contractor, the
Contractor shall proceed with the performance of its obligations hereunder with
reservation of all rights and remedies it may have at law or in equity.
7.6 The terms of the Contract Documents are intended by the parties to be a
final expression of their understanding with respect to such terms as are
included in Contract Documents and may not be contradicted by evidence of any
prior or contemporaneous statements, representations, agreements or
understandings. Additionally, the parties hereby expressly agree that no such
statements, representations, agreements or understandings exist. The parties
further intend that the Contract Documents constitute the complete and exclusive
statement of the terms of the Contract Documents and that no extrinsic evidence
whatsoever may be introduced in any judicial proceeding to contradict the
Contract Documents. No addition to, deletion from or modification of any term or
provision of this Agreement shall be effective unless it is made in a writing
signed by the parties hereto. Where reference is made in this Agreement to a
provision of the General Conditions or another Contract Document, the reference
refers to that provision as amended or supplemented by this Agreement or the
other provisions of the Contract Documents.
7.7 In addition to any other indemnity provisions contained herein, and not
as a limitation thereof, the Contractor shall indemnify, defend, protect and
hold the Indemnified parties (as defined in Paragraph 3.18 of the General
Conditions as set forth in this Supplement) and the Project harmless from and
against any and all losses, liabilities, damages, claims, expenses, delays, work
stoppages, cessation of the Work, and/or costs including, without limitation,
loss of rents and profits and actual attorneys' fees, arising from or in any way
relating to any strike, picketing, hand-billing, boycott, work slowdown or
stoppage, or labor dispute or labor related claim affecting Owner or
4
<PAGE>
the Project which relates directly or indirectly to the performance of the Work
by Contractor or those for whom Contractor is responsible. The Contractor's duty
to defend the Indemnified Parties and the Indemnified Parties' right to control
the litigation are set forth in Paragraph 3.18 of the General Conditions.
7.8 If either party commences an action against the other to enforce any of
the terms of the Contract Documents or because of the breach by either party of
any of the terms of the Contract Documents, the losing or defaulting party,
whether by out-of-court settlement or final judgment, shall pay to the
prevailing party the costs and expenses incurred in connection with the
prosecution or defense of such action and any appeals in connection therewith,
including accountants' fees and actual attorneys' fees. Any judgment or order
entered in any final judgment shall contain a specific provision providing for
the recovery of all costs and expenses of suit, including, without limitation,
actual attorneys' fees and costs and expenses incurred in connection with (i)
enforcing, perfecting and executing such judgment; (ii) post-judgment motions;
(iii) contempt proceedings; (iv) garnishment, levee, and debtor and third-party
examinations; (v) discovery; and (vi) bankruptcy litigation.
7.9 The Contractor shall not assign the whole or any portion of its
interest under the Contract Documents or any payments due or to become due the
Contractor hereunder, nor subcontract any of its obligations hereunder without
first obtaining in each instance the prior written consent of the Owner. No
assignment, whether voluntary or involuntary, by operation of law, under legal
process or proceedings, by receivership, in bankruptcy or otherwise, shall be
valid or effective without such prior written consent of the Owner. Should the
Contractor attempt to make or suffer to be made any such assignment, except as
aforesaid, the Owner may, at its option, terminate this Agreement upon written
notice to the Contractor. Should the Owner consent to any such assignment by the
Contractor, such consent shall not constitute a waiver of any of the
restrictions of this Paragraph and the same shall apply to each successive
assignment hereunder, if any. Owner may assign its interest in this Agreement at
any time without consent of the Contractor.
7.10 Contractor shall indemnify, defend (in accordance with the provisions
of Paragraph 3.18 of the General Conditions), protect and hold the Indemnified
Parties and the Project harmless from and against any and all losses, fines,
penalties, liabilities, damages, expenses and costs including, without
limitation, actual attorneys' fees, arising from or in any way relating to all
taxes and contributions imposed or required by any law for any employment
insurance, pensions, old age retirement funds, or similar purpose required of
its Subcontractors, including, without limitation, taxes and contributions
required under the Federal Social Security Act and the unemployment compensation
law or any similar law of any state. Any person or entity not a party to this
Agreement and not a parent, affiliate or subsidiary of such party shall have no
right to rely on or claim any benefit pursuant to the above provision.
Contractor shall pay all taxes and contributions imposed or required by any law
for any employment insurance, pensions, old age retirement funds, or similar
purpose required of Contractor, including, without
5
<PAGE>
limitation, taxes and contributions required under the Federal Social Security
Act and the unemployment compensation law or any similar law of any state.
7.11 Notwithstanding the fact that this Agreement is executed as of the
date first set forth above, the parties recognize that a portion of the Work may
have been performed prior to such date, all of which Work shall be governed by
the terms and conditions of the Contract Documents and shall be deemed to be a
part of the Work. Without limiting the foregoing, all of Contractor's
liabilities and obligations to Owner hereunder shall apply to all work and
services provided by Contractor for the Project prior hereto, notwithstanding
the fact that such work or services may have been performed prior to the date
hereof pursuant to prior negotiations, representations, agreements,
understandings or otherwise. All Work performed hereunder prior to the date of
the Agreement, but subsequent to the issuance of a Notice to Proceed, is hereby
deemed a part of the Work and subject to compensation and timely payment
hereunder.
7.12 The Section headings of this Agreement are used herein for reference
purposes only and should not govern, limit, or be used in construing this
Agreement or any provision hereof. Any Exhibits attached hereto are incorporated
herein by reference and expressly made a part of this Agreement for all
purposes. References to any Exhibit made in this Agreement shall be deemed to
include this reference and incorporation. Where the context so requires, the use
of the neuter gender shall include the masculine and feminine genders, the
masculine gender shall include the feminine and neuter genders, and the singular
number shall include the plural and vice versa. Each party hereto acknowledges
that (i) each party hereto is of equal bargaining strength; (ii) each such party
has actively participated in the preparation, and negotiation of this Agreement;
(iii) each such party has had the opportunity to consult with such party's
attorneys and advisors relative to entering into this Agreement, and (iv) any
rule of construction to the effect that ambiguities are to be resolved against
the drafting party shall not apply in the interpretation of this Agreement, any
portion hereof, any amendments hereto, or any Exhibits attached hereto.
7.13 This Agreement may be executed in one or more counterparts, each of
which shall be deemed an original, and all of which together shall constitute
one and the same instrument.
7.14 The waiver or failure to enforce any provision of this Agreement shall
not operate as a waiver of any future breach of any such provision or any other
provision hereof.
7.15 If any provision of this Agreement, or any application of any such
provision to any party or circumstances, shall be determined by any court of
competent jurisdiction to be invalid and unenforceable to any extent, the
remainder of this Agreement or the application of such provision to such person
or circumstances, other than the application as to which such provision is
determined to be invalid or unenforceable, shall not be affected thereby, and
each provision shall be valid and shall be enforced to the fullest extent
permitted by law.
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7.16 CONTRACTORS ARE REQUIRED BY LAW TO BE LICENSED AND REGULATED BY THE
CONTRACTORS' STATE LICENSE BOARD WHICH HAS JURISDICTION TO INVESTIGATE
COMPLAINTS AGAINST CONTRACTORS IF A COMPLAINT IS FILED WITHIN THREE (3) YEARS OF
THE DATE OF THE ALLEGED VIOLATION. ANY QUESTIONS CONCERNING A CONTRACTOR MAY BE
REFERRED TO THE REGISTRAR, CONTRACTORS' STATE LICENSE BOARD, P. O. BOX 26000,
SACRAMENTO, CALIFORNIA 95826. The Contractor hereby warrants and represents that
it is a duly licensed contractor under the laws of the State of California and
that its contractor's license number is 503739.
7.17 The cost of all soils, materials testing, surveying and inspection
provided by Owner, Owner's Engineer, soils engineer or government agency shall
be excluded from the Work. However, if Contractor's work does not meet
applicable standards or pass required inspections, or if Contractor damages or
loses any survey stakes, then the cost of any re-testing, re-surveying or
re-inspection shall be the responsibility of the Contractor.
7.18 Prior to the start of the Contractor's work, the Contractor shall
procure for contractor's work and maintain in force Worker's Compensation
insurance and all insurance required of the contractor under the contract
documents. (Also refer to Article II: Insurance.)
Rauch Industries, c/o Syratech Corporation shall be named as an additional
insured on each of these policies provided by the Contractor. (See Article II:
Insurance for limits of insurance coverage.)
Certificates of Insurance or certified copies of policies acceptable to
Rauch Industries, c/o Syratech Corporation shall all be filed with Rauch prior
to the commencement of work.
In the event the Contractor fails to obtain or maintain any insurance coverage
required under this Agreement, Rauch Industries, c/o Syratech Corporation may
purchase such coverage and charge the expense thereof to the Contractor or
terminate this Agreement.
5. Article 3: Contractor. The following is added to Subparagraph 3.12.8
".1 Such written notice of said deviation shall be a separate writing
distinct from shop drawing, product data, samples or submittals under
Subparagraph 4.2.7 of General Conditions and shall specifically describe said
deviation and effect of same, if any, in regard to submittal accompanying same."
Subparagraph 3.1.8.1 of the General Conditions is hereby deleted in its
entirety and the following paragraph is substituted in its place:
"3.18.1 Contractor shall, to the fullest extent permitted by law,
indemnify, defend, protect and hold harmless Construction Manager and Owner,
their constituent
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partners, all subsidiary or affiliated companies of Construction Manager and
Owner, and all of such parties' employees, partners, stockholders, officers,
directors and agents and their respective heirs, executors, administrators,
successors and assigns (collectively referred to as the "Owner Parties") and the
Project (the Owner Parties shall be collectively referred to as the "Indemnified
Parties") from and against any claims, demands, debts, causes of action,
liabilities, losses, damages, costs, expenses, including actual attorneys' fees,
awards, court costs, penalties, fines or judgments, resulting from or arising
out of (i) the performance of the Work, or (ii) breach of the obligations of
Contractor under the Contract Documents including, but not limited to, Defective
Work or violations of or a failure to comply with any safety order, rule or
regulation, or (iii) any and all liens, stop notices and charges of every type,
nature, kind or description which may at any time be filed or claimed against
the Project, or any portion thereof, or the Owner as a consequence of acts or
omissions of Contractor, Contractor's agents, servants, employees,
Subcontractors, Sub-subcontractors or any or all of them, (iv) any claim by or
any act or omission of any employee of Contractor, any Subcontractor,
Sub-subcontractor or anyone employed directly or indirectly by any of them or
for whose acts they may be liable, including, without limitation, any workers'
compensation claims, equal employment opportunity claims, unemployment claims,
withholding claims or social security claims, or (v) any other act or omission
with respect to the Work by Contractor, its Subcontractors, Sub-subcontractors
or anyone directly or indirectly employed by any of them or anyone for whose
acts they may be liable, attributable to death, bodily injury, sickness, disease
or injury to or destruction of tangible property, or loss of use thereof. Except
as specifically limited as set forth below, the indemnification by Contractor of
the Indemnified Parties under this Paragraph 3.18 shall apply regardless of any
concurrent or contributory active and/or passive negligent act or omission of
the party to be indemnified; provided, however, Contractor shall not be
obligated to indemnify the Owner Parties to the extent such damages are the
result of the sole negligence or willful misconduct of one or more of the Owner
Parties or for defects in design furnished by the Owner Parties. Such obligation
shall not be construed as to negate, abridge or otherwise reduce any other right
or obligation of indemnity which would otherwise exist under the Contract
Documents and/or under the laws as to any party described in this Paragraph."
The following Subparagraphs are hereby added to Paragraph 3.18 of the
General Conditions:
"3.18.4 Contractor agrees within five (5) days after written demand or
within seven (7) days from the filing thereof, whichever is earlier, to cause
the effect of any suit or lien arising out of the Work for which Contractor is
responsible, to be removed from the Project or to post a bond in accordance with
law, and in the event Contractor shall fail to do so, Owner is authorized to use
whatever means in its discretion it may deem appropriate to cause said lien to
be removed or dismissed, including, without limitation, the posting of a bond
pursuant to law, and the costs thereof, together with attorneys' fees shall be
immediately due and payable to Owner by Contractor."
3.18.5 Contractor hereby acknowledges and agrees that if any one or more
claims or actions are asserted against the Indemnified Parties giving rise to a
duty to
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defend on the part of Contractor pursuant to this Paragraph 3.18, the
Indemnified Parties shall have the right to elect, in the Indemnified Parties'
sole and absolute discretion, whether to contest any one or more of such claims
or actions and Contractor shall be required to perform the obligations of
Contractor set forth above regardless of whether the Indemnified Parties elect
to contest such claim(s). If the Indemnified Parties elect to contest any such
claim(s), the Indemnified Parties shall have the right to select the Indemnified
Parties' own counsel and control the Indemnified Parties' own defense and
Contractor shall bear the cost of employing such counsel and otherwise defending
such claim(s). The Indemnified Parties shall have the right, at their option,
upon notice to Contractor, to tender their defense to Contractor and to approve
such counsel as Contractor deems necessary to represent the Indemnified Parties
in connection with any liability indemnified under this Paragraph 3.18, and all
fees and expenses of such counsel shall be the sole responsibility of
Contractor. In the event that one or more of the Indemnified Parties tender
their defense to Contractor and thereafter determines that there is a conflict
between the interests of the Indemnified Parties, on the one hand, and the
interests of Contractor, on the other, then the Indemnified Parties shall be
entitled to retain separate counsel in connection with such lawsuit, action,
claim or proceeding at the cost and expense of Contractor, provided that
Contractor shall not be obligated to pay the fees and expenses of more than one
firm of attorneys representing Indemnified Parties."
"3.18.6 The provisions of this Paragraph 3.18 shall survive the termination
or expiration of the Contract and shall not be limited in any way by the amount
or type of insurance obtained by Owner, the Indemnified Parties, Contractor or
any Subcontractor."
6. Article 5: Subcontractors. Subparagraph 5.3.1 of the General Conditions is
hereby deleted in its entirety and the following is substituted in its place:
"5.3.1 All work performed for the Contractor by a Subcontractor shall be
pursuant to an appropriate agreement, written where legally required for
validity, between the Contractor and Subcontractor (and where appropriate
between Subcontractors and Sub-subcontractors) which shall contain provisions
that:
(i) preserve and protect the rights of the Owner under the Contract
with respect to the Work to be performed under the Subcontract so that the
subcontracting thereof will not prejudice such rights;
(ii) require that such Work be performed in accordance with the
requirements of the Contract Documents;
(iii) the Contractor assign its interest in the subcontract to Owner
or Owner's designee, which assignment shall become effective only upon
Contractor's default under the Contract Documents and Subcontractor's
receipt of notification from Owner (a) that Contractor is in default under
the Contract Documents, (b) the name of the assignee, and (c) that the
assignment is effective;
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(iv) require submission to the Contractor of applications for payment
under each Subcontract to which the Contractor is a party, in reasonable
time to enable the Contractor to apply for payment in accordance with
Article 9 of the General Conditions and Articles 6 and 7 of the Agreement.
Such application for payment shall be for the same percentage complete as
requested by the Contractor;
(v) require that all claims for additional costs, extensions of time,
damages for delays or otherwise with respect to subcontracted portions of
the Work shall be submitted to the Contractor (via any Subcontractor or
Sub-subcontractor where appropriate) in sufficient time so that the
Contractor may comply in the manner provided in the Contract Documents for
like claims by the Contractor upon the Owner;
(vi) waive all rights the Contractor and Subcontractor may have
against one another for damages caused by fire or other perils covered by
the property insurance described in Paragraph 11.3 hereof, except such
rights as they may have to the proceeds of such insurance held by the Owner
as trustee under Paragraph 11.3 hereof; and
(vii) obligate each Subcontractor specifically to consent to the
provisions of this Subparagraph 5.3.1. The Contractor shall make available
to each proposed Subcontractor, prior to the execution of the Subcontract,
copies of the Contract Documents to which the Subcontractor will be bound
by this Subparagraph 5.3.1, and identify to the Subcontractor any terms and
conditions of the proposed Subcontract which may be at variance with the
Contract Documents. Each Subcontractor shall similarly make copies of such
Contract Documents available to his Sub-subcontractors."
"All portions of the Work that the Contractor's organization does not
perform shall be performed under Subcontracts or other appropriate agreement
with the Contractor. The Contractor shall obtain the Owner's approval (which
Owner shall have the right to exercise in it sole discretion) before concluding
any Subcontract Agreement or material purchase order. The Owner shall have the
right to approve which subcontractor shall be used in connection with the Work."
7. Article 6: Construction By Owner Or By Separate Contractors. Subparagraph
6.2.5 of the General Conditions is hereby deleted in its entirety and the
following subparagraph is substituted in its place:
"6.2.5 Should the Contractor cause damage to the work or property of any
Subcontractor, Sub-subcontractor or separate contractor, the Contractor shall,
upon due notice, promptly attempt to settle such matter or otherwise to resolve
the dispute. If such Subcontractor, Sub-subcontractor or separate contractor
brings suit against the Owner on account of any damage alleged to have been
caused by the Contractor, the Owner shall notify the Contractor, who shall
defend such proceedings at the Contractor's expense, and if any judgment or
award against the Owner arises therefrom, the Contractor shall pay or satisfy it
and shall reimburse the Owner for all attorneys' fees and court costs which the
Owner has incurred."
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8. Article 7: Changes In The Work. The following subparagraph is hereby added
to Article 7.1:
"7.1.5 IN NO EVENT SHALL THE CONTRACTOR RECEIVE ANY COMPENSATION IN EXCESS
OF THE CONTRACT SUM NOR SHALL CONTRACTOR BE ENTITLED TO RECEIVE ANY COMPENSATION
FOR EXTRA WORK WHETHER PARTIALLY OR FULLY COMPLETED OR SIMPLY PROPOSED, UNLESS
SUCH ADDITIONAL WORK IS AUTHORIZED BY A WRITTEN CHANGE ORDER SIGNED BY THE
OWNER. ONLY THE OWNER OR THE OWNER'S REPRESENTATIVE SHALL HAVE THE RIGHT TO
ISSUE A WRITTEN CHANGE ORDER TO CONTRACTOR AUTHORIZING AN ADDITION, DELETION OR
OTHER REVISION IN THE SCOPE OF THE WORK AND/OR AN ADJUSTMENT IN THE CONTRACT SUM
OR THE PROJECT SCHEDULE. CONTRACTOR WAIVES THE RIGHT TO RECEIVE ANY COMPENSATION
FOR ADDITIONAL WORK AND AGREES THAT THE OWNER SHALL NOT BE OBLIGATED TO PAY FOR
ANY ADDITIONAL WORK UNLESS CONTRACTOR AND OWNER HAVE COMPLIED WITH THE
PROVISIONS OF THIS SUBPARAGRAPH 7.1.5."
9. Article 8: Time. The following sentences are hereby added to Subparagraph
8.3.1 of the General Conditions:
"Notwithstanding anything to the contrary in Subparagraph 8.3.1 or
elsewhere in the Contract Documents, extension of the Completion Date shall be
Contractor's sole remedy for delay unless the same shall be caused by acts
constituting willful misconduct or intentional interference by the Owner with
Contractor's performance of the Work and where to the extent that such acts
continue after Contractor's notice to Owner of such interference. Owner's
exercise of any of its rights under Article 7, Changes in the Work, regardless
of the extent or number of such changes, or Owner's exercise of any of its
remedies of suspension of the Work, or requirement of correction or re-execution
of any defective Work, shall not under the circumstances be construed as
intentional interference with Contractor's performance of the Work."
Subparagraph 8.3.2 of the General Conditions is hereby deleted in its
entirety and the following subparagraph is substituted in its place:
"8.3.2 All claims for extension of time shall be made in writing to the
Owner no more than ten (10) working days after the later to occur of (i) the
occurrence of the delay, or (ii) if the occurrence of the delay is not readily
apparent, the date on which the Contractor becomes aware of the occurrence of
the delay; otherwise they shall be waived. The Contractor shall provide in its
notice an estimate of the probable effect of such delay on the progress of the
Work. In the case of a continuing course of delay only one claim is necessary."
10. Article 9: Payments And Completion. The following sentences are hereby
added to Subparagraph 9.3.3 of the General Conditions:
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"In the event any lien, stop notice or claim is made against the Owner or
the Project for payment for labor or materials furnished in connection with the
Work, Contractor shall at its sole cost and expense promptly post a bond in
accordance with California Civil Code Sections 3143 and/or 3171 and any
successor statute(s) thereto to cause the removal of such lien or stop notice.
If Contractor fails to post such bond or otherwise remove or discharge the lien,
stop notice or claim within seven (7) days from the filing thereof, then in
addition to such other remedies it may have, Owner shall have the right (but not
the obligation) to use whatever means in its discretion it may deem appropriate
to cause said claim, stop notice or lien to be rescinded, discharged,
compromised, dismissed or removed including, without limitation, posting of a
bond in accordance with California Civil Code Sections 3143 and/or 3171 and any
successor statute(s) thereto to cause the removal of such lien or stop notice.
Upon Owner's demand, Contractor shall promptly pay, which payment shall not be
reimbursable or increase the Contract Price, all costs incurred by Owner in
discharging such lien, stop notice and/or claim including, without limitation,
attorneys' fees and premiums for all bonds which the Owner may obtain and record
for the purpose of removing any lien, stop notice or claim relating to the
Work."
The following subparagraph is hereby added to Paragraph 9.10 of the General
Conditions:
"9.10.5 The Contractor understands and agrees that its final Application
for Payment will constitute a further representation that the conditions
precedent to the Contractor's being entitled to final payment as set forth in
Paragraph 9.10 have been fulfilled."
11. Article 10: Protection Of Persons And Property. Subparagraph 10.1.3 of the
General Conditions is hereby deleted in its entirety and the following
subparagraph is substituted in its place.
"10.1.3(a) Contractor and his Subcontractors shall use, handle, transport
and dispose of all Hazardous Materials (as defined below) in compliance with all
present and future federal, state and local environmental health or safety law,
including, but not limited to, all such statutes, regulations, rules,
ordinances, codes, and rules of common law. Contractor further agrees that
Contractor and his subcontractors shall not cause the discharge, release or
disposal of any Hazardous Material on the job site. Contractor and his
Subcontractors shall, upon completion of performance of all duties under this
Agreement, remove all supplies, materials and waste containing any Hazardous
Material from the job site. Contractor shall bear full financial responsibility,
as between the parties of this Agreement, for the compliance of Contractor and
his Subcontractors with the provisions of this Paragraph. Contractor agrees to
indemnify, defend (pursuant to the terms of the Agreement), protect and hold
Owner and its constituent partners and the other Indemnified Parties harmless
from and against any liabilities, costs, claims, damages, fines, penalties or
expenses, including actual attorneys' fees and costs of investigation, soils
testing, governmental approvals, remediation and clean-up arising out
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of or in any way connected with the failure of Contractor or his Subcontractors,
their agents, employees, officers, or representatives, to comply with this
paragraph. Should Contractor or his Subcontractors discharge, release or dispose
of any Hazardous Material on the site in violation of this paragraph, Contractor
shall immediately so inform Construction Manager and Owner in writing. In the
event Contractor or his Subcontractors encounter on the site any pipeline,
underground storage tank or other container, of any kind, that may contain a
Hazardous Material, or encounter material reasonably believed to be a Hazardous
Material, Contractor shall immediately stop work in the area affected and report
the condition to Owner in writing. If Contractor or his Subcontractors do not
comply with the requirements of this paragraph Owner may, but is not obligated
to, give written notice of violation to Contractor. Should Contractor or his
Subcontractors fail to comply with the requirements of this paragraph within
twenty-four (24) hours from the time Owner issues such written notice of
noncompliance or within the time of an abatement period specified by any
governmental agency, whichever period is shorter, Contractor shall be in
material default of the Agreement."
"(b) "Hazardous Material" means any substance: (1) the presence of which
requires investigation or remediation under any present or future federal, state
or local statute, regulation, ordinance, rule code, order, action, policy or
common law, or (2) which is or becomes defined as a "hazardous waste",
"hazardous substance", pollutant or contaminant under any present or future
federal, state or local statute, regulation, rule or ordinance or amendments
thereto including, without limitation, the Comprehensive Environmental Response
Compensation and Liability Act (42 U.S.C. Sections 9601 et seq.) and/or the
Resource Conservation and Recovery Act (42 U.S.C. Sections 6901 et seq.); or (3)
which is toxic, explosive, corrosive, flammable, infectious, radioactive,
carcinogenic, mutagenic, or otherwise hazardous and is or becomes regulated by
any governmental authority, agency, department, commission, board, agency or
instrumentality of the United States, the State of California or any political
subdivision thereof, or (4) the presence of which on the Property causes or
threatens to cause a nuisance upon the Property or to adjacent properties or
poses or threatens to pose a hazard to the health or safety of persons on or
about the Property; or (5) which contains gasoline, diesel fuel or other
petroleum hydrocarbons; or (6) which contains polychlorinated biphenyls (PCBs),
asbestos or urea formaldehyde foam insulation."
12. Article 11: Insurance.
Prior to the start of the Contractor's work, the contractor shall procure for
contractor's work and maintain in force Worker's Compensation Insurance and all
insurance required of the contractor under the contract documents.
Rauch Industries, c/o Syratech Corporation shall be named as an additional
insured on each of these policies provided by the Contractor. The Contractor's
comprehensive General and Automobile Liability Insurance shall be written with
Limits of Liability not less than the following:
A. Comprehensive General Liability including completed operations,
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1. Bodily Injury $1,000,000 each occurrence
$1,000,000 aggregate
2. Property Damage $1,000,000 each occurrence
$1,000,000 aggregate
B. Comprehensive Automobile Liability
1. Bodily Injury $1,000,000 each occurrence
$1,000,000 aggregate
2. Property Damage $1,000,000 each occurrence
$1,000,000 aggregate
The Contractor shall maintain in effect all insurance coverage required under
this Agreement at the Contractor's sole expense and with insurance companies
acceptable to Rauch Industries, c/o Syratech Corporation. All insurance policies
shall contain a provision that the coverage afforded thereunder shall not be
canceled or not renewed, nor restrictive modifications added, until at least
thirty (30) days prior written notice has been given to the Contractor unless
otherwise specifically required in the contract documents.
Certificates of Insurance, or certified copies of policies acceptable to Rauch
Industries, c/o Syratech Corporation shall all be filed with Rauch prior to the
commencement of work.
In the event the Contractor fails to obtain or maintain any insurance coverage
required under this Agreement, Rauch Industries, c/o Syratech Corporation may
purchase such coverage and charge the expense thereof to the Contractor, or
terminate this Agreement.
To the fullest extent permitted by law, the Contractor shall indemnify and hold
harmless Rauch Industries, c/o Syratech Corporation (including its affiliates,
parents and subsidiaries) and other contractors and subcontractors and all their
agents and employees from the against all claims, damages, loss and expenses,
including, but not limited to, attorney's fees, arising out of or resulting from
the performance of the Contractor's work provided that any such claim, damage,
loss or expense is attributable to bodily injury, sickness, disease or death or
to injury to or destruction of tangible property (other than the Contractor's
work itself) including the loss of use resulting therefrom, to the extent caused
or alleged to be caused in whole or in any part by any negligent act or omission
of the Contractor or anyone directly or indirectly employed by the Contractor or
anyone for whose acts the Contractor may be liable, regardless of whether it is
caused in part by the party indemnified hereunder.
In any and all claims against Rauch Industries, c/o Syratech Corporation,
(including its affiliates, parents, and subsidiaries) and other contractors or
subcontractors or any of their agents or employee of the Contractor, anyone
directly or indirectly employed by the Contractor or anyone for whose acts the
Contractor may be liable, the indemnification
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obligation under this Agreement shall not be limited in any way by any
limitation on the amount or type of damages, compensation or benefits payable by
or for the Contractor under worker's or workmen's compensation acts, disability
benefit acts or other employee benefit acts.
The following subparagraphs are hereby added to Paragraph 11.3 of the
General Conditions:
"11.3.12 Contractor shall purchase and maintain such insurance as will
reasonably protect him from the potential liability described in Paragraph 3.18.
The Contractor hereby indemnifies and agrees to hold harmless and defend Owner,
its shareholders, and its affiliates from all loss and liability to the extent
of any deficiency of coverage under such insurance. The Contractor will fully
insure, and the Owner will not be liable for the loss of, any building materials
not stored on the site of the Project."
"11.3.13 The coverage obtained pursuant to the provisions of Subparagraph
11.3.12 shall include insurance against damage from design warranties given
Subcontractors or Sub-subcontractors. This obligation shall survive any
termination of the Contract."
The following subparagraph is hereby added to Paragraph 11.4 of the
General Conditions:
"11.4.3 At the Owner's request (the cost of which shall be paid by Owner),
the Contractor shall obtain bonds from all Subcontractors and furnish to the
Owner bonds wherein the Subcontractors are the principals and Owner and the
Contractor are the dual obligees. Such bonds shall cover the faithful and full
performance of the Subcontracts, the payment of all obligations arising
thereunder; and the lien-free completion of the Subcontracts and the Work. At
the Owner's request (the cost of which shall be paid by Owner), the Contractor
shall also obtain a performance bond and a payment and materials bond in the
full amount of the Contract Sum wherein the Contractor is the Principal and the
Owner is the Obligee. The bonds shall be on forms and with a surety acceptable
to Owner."
The following paragraphs are hereby added to Article 11 of the General
Conditions:
"11.5 Requirements; Additional Insureds; Type Of Coverage. Before
Contractor does any work at or prepares or delivers materials to the side of
construction, the Contractor shall provide to Owner Certificates of Insurance
(and agrees that within thirty (30) days to submit to Owner endorsements to the
required policies) evidencing insurance coverage acceptable to Contractor in
amounts as specified herein. Contractor agrees to maintain the general liability
insurance for a minimum of five (5) years following completion of the Work and
continue to name Owner and any other required interest under this paragraph as
additional insured(s) for the entire five (5) year period. All insurance
policies maintained by the Contractor pursuant to the Agreement and the
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General Conditions shall name the Owner, all of Owner's affiliated companies,
any lender with an interest in the Project and all other Indemnified Parties, as
additional insureds. Contractor's insurance policy shall be primary and any
insurance maintained by Owner shall be non-contributing. Owner shall not be
required to contribute to the payment of premiums or other costs with respect to
Contractor's policy. Contractor's insurance policy shall include a Severability
of Interest clause or a Cross Liability endorsement. Contractor's insurance
policy shall provide that an act or omission of one of the named insureds shall
not reduce or avoid coverage to the other named insureds and shall afford
coverage for all claims based on acts, omissions, injury and damage, which
claims occurred or arose (or the onset of which occurred or arose) in whole or
in part during the policy period. Contractor shall require all of its
Subcontractors to carry insurance in the same amounts required of Contractor
above and with companies acceptable to Owner."
"11.6 Failure To Obtain Insurance. If Contractor fails to procure and
maintain the above-described insurance, or any portion thereof, Owner shall have
the right, but not the obligation, to procure and maintain the required
insurance for and in the name of Contractor and Contractor shall pay the cost
thereof and shall furnish all information necessary to acquire and maintain such
insurance. Contractor shall not violate or knowingly permit any violation of any
conditions or terms of the policies of insurance described herein."
13. Article 12: Uncovering And Correction Of Work. Subparagraph 12.2.2 of the
General Conditions is hereby deleted in its entirety and the following
subparagraph substituted in its place:
"12.2.2 If, within one (1) year after the date on which the issuance of the
final Certificate for Payment pursuant to Paragraph 9.10 of the General
Conditions or within such longer period of time as may be prescribed by law or
by the terms of any applicable special warranty required by the Contract
Documents, any of the Work is found to be defective or not in accordance with
the Contract Documents, the Contractor shall correct ("Corrective Work") it
promptly after receipt of a written notice ("Notice of Defect") from the Owner
to do so unless the Owner has previously given the Contractor a written
acceptance of such condition. The Owner shall give such notice promptly after
discovery of the condition. Contractor shall commence the Corrective Work within
five (5) days of receipt of the Notice of Defect and shall diligently complete
the Corrective Work to the satisfaction of Owner. If Contractor fails to
commence the Corrective Work with fifteen (15) days after receipt of the Notice
of Defect, or if Contractor fails to diligently complete the Corrective Work,
Owner shall have the right (but shall not have the obligation) to perform the
Corrective Work. In the event Owner performs the Corrective Work, Contractor
shall promptly reimburse Owner for the cost of the Corrective Work, including a
reasonable sum for overhead and profit. The Contractor shall be responsible for
enforcing any and all warranties given by Subcontractors or Sub-subcontractors,
which shall run to the benefit of Owner. This obligation shall survive any
termination of the Contract. The above provisions do not limit or modify any
other recourse or remedy
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available to the Owner at law or in equity with respect to defective work or
other violation of the Contract Documents."
14. Article 13: Miscellaneous Provisions. The provisions of Subparagraph 13.2.1
of the General Conditions are subject to Paragraph 7.13 of the Agreement.
The following subparagraph is hereby added to Paragraph 13.4 of the General
Conditions:
"13.3.1 Written Notice. All notices required to be given hereunder shall be
given in writing and shall be personally delivered, sent by facsimile or sent by
registered or certified mail, postage prepaid, return receipt requested, at the
following addresses:
If to Owner: Rauch Industries
Subsidiary of Syratech Corporation
175 McClellan Highway
East Boston, MA 02128
Attention: E. Merle Randolph
Telephone No. (617) 569-2200
Telecopier No: (617) 569-8484
If to Contractor: Guy W. Yocum
Guy Yocum Construction, Inc.
P.O. Box 7621
Redlands, CA 92375
Telephone No: (909) 792-2856
Telecopier No: (909) 793-4124
Unless sooner received, notice shall be deemed given three (3) business days
following the date of mailing, or if personally delivered, as of the date of
such delivery. Notice of change of address shall be given by written notice in
the manner detailed in this paragraph."
"13.4.3 During all disputes, actions, claims and other matters in question
arising out of, or relating to, this Contract or the breach hereof, the
Contractor shall carry on the Work and maintain the Progress Schedule, unless
otherwise provided herein or agreed between the Contractor and the Owner in
writing."
15. Article 14: Termination Or Suspension Of The Contract. Subparagraphs 14.3.1
through 14.3.3 of the General Conditions are hereby deleted in their entirety
and the following paragraphs are substituted therefor:
"14.2.1 Notwithstanding anything to the contrary set forth in the
Agreement, Owner shall have the right at any time for any or no reason
whatsoever to suspend work on the Project and all work connected therewith or to
terminate the Contract upon giving Contractor ten (10) days' prior written
notice. Thereupon, as the Contractor's sole
17
<PAGE>
remedy hereunder, the Owner shall pay the Contractor for the Work completed to
the effective date of the termination of the Contract as set forth below."
"14.3.2 Upon receipt of the notice of termination, Contractor shall
immediately, in accordance with Owner's instructions, proceed with performance
of the following duties:
14.3.2.1 Cease operations as specified;
14.3.2.2 Place no further orders and enter into no further
Subcontracts for materials, labor, services or facilities;
14.3.2.3 Unless otherwise specified, terminate all Subcontracts and
orders to the extent that they relate to Work so terminated;
14.3.2.4 Complete the performance of the Work not terminated; and
14.3.2.5 Take such other actions as may be necessary or requested by
Owner for the protection and preservation of the terminated Work."
"14.3.3 In the event of termination for Owner's convenience,
Contractor shall be paid:
14.3.3.1 A pro rata portion of the Contract Sum based upon the
percentage of Work completed for Work properly performed on the terminated
portion of the Work before the effective date of termination; and
14.3.3.2 Reasonable demobilization costs directly related to such
termination as described in detail in invoices and descriptions provided by
Contractor and approved by Owner."
"14.3.4 In determining amounts due Contractor under this Paragraph 14.3,
Owner shall be credited for payments previously made to Contractor for the
terminated portion of the Work and claims which Owner has against Contractor
under the Contract, and for the value of materials, supplies, equipment or other
items to be disposed of by Contractor that are covered under the Contract Sum.
If Contractor has, prior to the date of termination, collected sums in excess of
the reimbursable amounts set forth above, Contractor shall promptly pay such
excess to Owner or, at Owner's option, such excess shall be deducted from any
amounts due Contractor from Owner. In the event of such termination by Owner for
Contractor's breach, Owner may require Contractor to promptly assign all or some
Subcontracts, construction, plant, materials, tools, equipment and appliances
previously acquired by Owner, rental agreements and any other commitments which
Owner in Owner's sole discretion chooses to take by assignment, and in such
event, Contractor shall promptly execute and deliver to Owner written
assignments provided by Owner."
18
<PAGE>
"14.3.5 Nothing contained in this Article 14 shall be deemed to limit or
affect any other rights or remedies available to either party under the contract
in the event of a breach by the other party including without limitation the
recovery of extra costs or damages resulting from the breach of the other party
and the right of Owner to carry out the Work."
"14.3.6 In no event shall Contractor have a claim for damages, lost profits
or otherwise on account of the termination of the Agreement by Owner or
Contractor."
19
<PAGE>
IN WITNESS WHEREOF, the parties have executed, as a part of the Contract,
this Supplement as of the day and year of execution of the Agreement.
"OWNER" Rauch Industries, Inc.,
a subsidiary of Syratech Corporation
By: /s/ E. Merle Randolph
__________________________________
Name: E. Merle Randolph
Title: Chief Financial Officer
By: __________________________________
Name: ____________________________
Title: ___________________________
"CONTRACTOR" Guy Yocum Construction, Inc.,
a Corporation
By: /s/ Guy W. Yocum
__________________________________
Name: Guy W. Yocum
Title: President
By: __________________________________
Name: ____________________________
Title: ___________________________
License # 503939
__________________________
20
<PAGE>
[Logo]
General Conditions of the Contract for Construction
Construction Manager-Adviser Edition
AIA Document A201/CMa - Electronic Format
THIS DOCUMENT HAS IMPORTANT LEGAL CONSEQUENCES. CONSULTATION WITH AN ATTORNEY IS
ENCOURAGED WITH RESPECT TO ITS COMPLETION OR MODIFICATION. AUTHENTICATION OF
THIS ELECTRONICALLY DRAFTED AIA DOCUMENT MAY BE MADE BY USING AIA DOCUMENT D401.
Copyright 1975, 1980, copyright 1992 by The American Institute of Architects,
1735 New York Avenue N.W., Washington D.C. 20006-5292. 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.
Table of Articles
1. GENERAL PROVISIONS
2. OWNER
3. CONTRACTOR
4. ADMINISTRATION OF THE CONTRACT
5. SUBCONTRACTORS
6. CONSTRUCTION BY OWNER OR BY OTHER CONTRACTORS
7. CHANGES IN THE WORK
8. TIME
9. PAYMENTS AND COMPLETION
10. PROTECTION OF PERSONS AND PROPERTY
11. INSURANCE AND BONDS
12. UNCOVERING AND CORRECTION OF WORK
13. MISCELLANEOUS PROVISIONS
14. TERMINATION OR SUSPENSION OF THE CONTRACT
<PAGE>
GENERAL CONDITIONS OF THE CONTRACT FOR CONSTRUCTION
ARTICLE 1
GENERAL PROVISIONS
1.1 BASIC DEFINITIONS
1.1.1 THE CONTRACT DOCUMENTS
A Modification is (1) a written amendment to the Contract signed by both
parties, (2) a Change Order, (3) a Construction Change Directive or (4) a
written order for a minor change in the Work issued by the Architect. Unless
specifically enumerated in the Agreement, the Contract Documents do not include
other documents such as bidding requirements (advertisement or invitation to
bid, Instructions to Bidders, sample forms, the Contractor's bid or portions of
addenda relating to bidding requirements).
1.1.2 THE CONTRACT
The Contract Documents form the Contract for Construction. The Contract
represents the entire and integrated agreement between the parties hereto and
supersedes prior negotiations, representations or agreements, either written or
oral. The Contract may be amended or modified only by a Modification. The
Contract Documents shall not be construed to create a contractual relationship
of any kind (1) between the Architect and Contractor, (2) between the
Construction Manager and Contractor, (3) between the Architect and Construction
Manager, (4) between the Owner and a Subcontractor or Sub-subcontractor or (5)
between any persons or entities other than the Owner and Contractor. The
Construction Manager and Architect shall, however, be entitled to performance
and enforcement of obligations under the Contract intended to facilitate
performance of their duties.
1.1.3 THE WORK
The term "Work" means the construction and services required by the Contract
Documents, whether completed or partially completed, and includes all other
labor, materials, equipment and services provided or to be provided by the
Contractor to fulfill the Contractor's obligations. The Work may constitute the
whole or a part of the Project.
1.1.4 THE PROJECT
The Project is the total construction of which the Work performed under the
Contract Documents may be the whole or a part and which may include construction
by other Contractors and by the Owner's own forces including persons or entities
under separate contracts not administered by the Construction Manager.
1.1.5 THE DRAWINGS
The Drawings are the graphic and pictorial portions of the Contract Documents,
wherever located and whenever issued, showing the design, location and
dimensions of the Work, generally including plans, elevations, sections,
details, schedules and diagrams.
1.1.6 THE SPECIFICATIONS
The Specifications are that portion of the Contract Documents consisting of the
written requirements for materials, equipment, construction systems, standards
and workmanship for the Work, and performance of related services.
ALL DOCUMENT A201/CMa - GENERAL CONDITIONS OF THE CONTRACT FOR 2
CONSTRUCTION - CONSTRUCTION MANAGER-ADVISER EDITION - AIA - 01992 THE
AMERICAN INSTITUTE OF ARCHITECTS, 1735 NEW YORK AVENUE, N.W.,
WASHINGTON, D.C., 20006-5292
WARNING; Unlicensed photocopying violates U.S. copyright laws and is
subject to legal prosecution. This document was electronically
produced with permission of the AIA and can be reproduced without
violation until the date of expiration as noted below.
Electronic Format A201/CMa-1992
<PAGE>
1.1.7 THE PROJECT MANUAL
The Project Manual is the volume usually assembled for the Work which may
include the bidding requirements, sample forms, Conditions of the Contract and
Specifications.
1.2 EXECUTION, CORRELATION AND INTENT
1.2.1 The Contract Documents shall be signed by the Owner and Contractor as
provided in the Agreement. If either the Owner or Contractor or both do not sign
all the Contract Documents, the Architect shall identify such unsigned Documents
upon request.
1.2.2 Execution of the Contract by the Contractor is a representation that the
Contractor has visited the site, become familiar with local conditions under
which the Work is to be performed and correlated personal observations with
requirements of the Contract Documents.
1.2.3 The intent of the Contract Documents is to include all items necessary for
the proper execution and completion of the Work by the Contractor. The Contract
Documents are complementary, and what is required by one shall be as binding as
if required by all; performance by the Contractor shall be required only to the
extent consistent with the Contract Documents and reasonably inferable from them
as being necessary to produce the intended results.
1.2.4 Organization of the Specifications into divisions, sections and articles,
and arrangement of Drawings shall not control the Contractor in dividing the
Work among Subcontractors or in establishing the extent of Work to be performed
by any trade.
1.2.5 Unless otherwise stated m the Contract Documents, words which have
well-known technical or construction industry meanings are used in the Contract
Documents in accordance with such recognized meanings.
1.3 OWNERSHIP AND USE OF ARCHITECTS DRAWINGS, SPECIFICATIONS AND OTHER DOCUMENTS
1.3.1 The Drawings, Specifications and other documents prepared by the Architect
are instruments of the Architect's service through which the Work to be executed
by the Contractor is described. The Contractor may retain one contract record
set. Neither the Contractor nor any Subcontractor, Sub-subcontractor or material
or equipment supplier shall own or claim a copyright in the Drawings,
Specifications and other documents prepared by the Architect, and unless
otherwise indicated the Architect shall be deemed the author of them and will
retain all common law, statutory and other reserved rights, in addition to the
copyright. All copies of them, except the Contractor's record set, shall be
returned or suitably accounted for to the Architect, on request, upon completion
of the Work. The Drawings, Specifications and other documents prepared by the
Architect, and copies thereof furnished to the Contractor, are for use solely
with respect to this Project. They are not to be used by the Contractor or any
Subcontractor, Sub-subcontractor or material or equipment supplier on other
projects or for additions to this Project outside the scope of the Work without
the specific written consent of the Owner and Architect. The Contractor,
Subcontractors, Sub-subcontractors and material or equipment suppliers are
granted a limited license to use and reproduce applicable portions of the
Drawings, Specifications and other documents prepared by the Architect
appropriate to and for use in the execution of their Work under the Contract
Documents. All copies made under this license shall bear the statutory copyright
notice, if any, shown on the Drawings, Specifications and other documents
prepared by the Architect. Submittal or distribution to meet official regulatory
requirements or for other purposes in connection with this Project is not to be
construed as publication m derogation of the Architect's copyright or other
reserved rights.
1.4 CAPITALIZATION
1.4.1 Terms capitalized in these General Conditions include those which are (l)
specifically defined, (2) the titles of numbered articles and identified
references to Paragraphs, Subparagraphs and Clauses in the document or (3) the
titles of other documents published by the American Institute of Architects.
ALL DOCUMENT A201/CMa - GENERAL CONDITIONS OF THE CONTRACT FOR 3
CONSTRUCTION - CONSTRUCTION MANAGER-ADVISER EDITION - AIA - 01992 THE
AMERICAN INSTITUTE OF ARCHITECTS, 1735 NEW YORK AVENUE, N.W.,
WASHINGTON, D.C., 20006-5292 WARNING; Unlicensed photocopying violates
U.S. copyright laws and is subject to legal prosecution. This document
was electronically produced with permission of the AIA and can be
reproduced without violation until the date of expiration as noted
below.
Electronic Format A201/CMa-1992
<PAGE>
1.5 INTERPRETATION
1.5.1 In the interest of brevity the Contract Documents frequently omit
modifying words such as "all" and "any" and articles such as "the" and "an," but
the fact that a modifier or an article is absent from one statement and appears
in another is not intended to affect the interpretation of either statement.
ARTICLE 2
OWNER
2.1 DEFINITION
2.1.1 The Owner is the person or entity identified as such in the Agreement and
is referred to throughout the Contract Documents as if singular in number. The
term "Owner" means the Owner or the Owner's authorized representative.
2.1.2 The Owner upon reasonable written request shall furnish to the Contractor
in writing information which is necessary and relevant for the Contractor to
evaluate, give notice of or enforce mechanic's lien rights. Such information
shall include a correct statement of the record legal title to the property on
which the Project is located, usually referred to as the site, and the Owner's
interest therein at the time of execution of the Agreement and, within five days
after any change, information of such change in title, recorded or unrecorded.
2.2 INFORMATION AND SERVICES REQUIRED OF THE OWNER
2.2.1 The Owner shall, at the request of the Contractor, prior to execution of
the Agreement and promptly from time to time thereafter, furnish to the
Contractor reasonable evidence that financial arrangements have been made to
fulfill the Owner's obligations under the Contract. [Note: Unless such
reasonable evidence were furnished on request prior to the execution of the
Agreement, the prospective contractor would not be required to execute the
Agreement or to commence the Work].
2.2.2 The Owner shall furnish surveys describing physical characteristics, legal
limitations and utility locations for the site of the Project, and a legal
description of the site.
2.2.3 Except for permits and fees which are the responsibility of the Contractor
under the Contract Documents, the Owner shall secure and pay for necessary
approvals, easements, assessments and charges required for construction, use or
occupancy of permanent structures or for permanent changes in existing
facilities. Unless otherwise provided under the Contract Documents, the Owner,
through the Construction Manager, shall secure and pay for the building permit.
2.2.4 Information or services under the Owner's control shall be furnished by
the Owner with reasonable promptness to avoid delay in orderly progress of the
Work.
2.2.5 Unless otherwise provided in the Contract Documents, the Contractor will
be furnished, free of charge, such copies of Drawings and Project Manuals as are
reasonably necessary for execution of the Work. Any cost to the Contractor for
such drawings and specs shall be considered to be in the Contractors sum.
2.2.6 The Owner shall forward all communications to the Contractor through the
Construction Manager and shall contemporaneously provide the same communications
to the Architect.
2.2.7 The foregoing are in addition to other duties and responsibilities of the
Owner enumerated herein and especially those in respect to Article 6
(Construction by Owner or by Other Contractors), Article 9 (Payments and
Completion) and Article 11 (Insurance and Bonds).
2.3 OWNER'S RIGHT TO STOP THE WORK
2.3.1 If the Contractor fails to correct Work which is not in accordance with
the requirements of the Contract Documents as required by Paragraph 12.2 or
persistently fails to carry out Work in accordance with the Contract Documents,
the Owner, by written order signed personally or by an agent specifically so
empowered by the Owner in writing, may order the Contractor
ALL DOCUMENT A201/CMa - GENERAL CONDITIONS OF THE CONTRACT FOR 4
CONSTRUCTION - CONSTRUCTION MANAGER-ADVISER EDITION - AIA - 01992 THE
AMERICAN INSTITUTE OF ARCHITECTS, 1735 NEW YORK AVENUE, N.W.,
WASHINGTON, D.C., 20006-5292 WARNING; Unlicensed photocopying violates
U.S. copyright laws and is subject to legal prosecution. This document
was electronically produced with permission of the AIA and can be
reproduced without violation until the date of expiration as noted
below.
Electronic Format A201/CMa-1992
<PAGE>
to stop the Work, or any portion thereof, until the cause for such order has
been eliminated; however, the right of the Owner to stop the Work shall not give
rise to a duty on the part of the Owner to exercise this right for the benefit
of the Contractor or any other person or entity.
2.4 OWNER'S RIGHT TO CARRY OUT THE WORK
2.4.1 If the Contractor defaults or neglects to carry out the Work in accordance
with the Contract Documents and fails within a seven-day period after receipt of
written notice from the Owner to commence and continue correction of such
default or neglect with diligence and promptness, the Owner may after such
seven-day period give the Contractor a second written notice to correct such
deficiencies within a second seven-day period. If the Contractor within such
second seven-day period after receipt of such second notice fails to commence
and continue to correct any deficiencies, the Owner may, without prejudice to
other remedies the Owner may have, correct such deficiencies. In such case an
appropriate Change Order shall be issued deducting from payments then or
thereafter due the Contractor the cost of correcting such deficiencies,
including compensation for the Construction Manager's and Architect's and their
respective consultants' additional services and expenses made necessary by such
default, neglect or failure. Such action by the Owner and amounts charged to the
Contractor are both subject to prior approval of the Architect, after
consultation with the Construction Manager. If payments then or thereafter due
the Contractor are not sufficient to cover such amounts, the Contractor shall
pay the difference to the Owner.
ARTICLE 3
CONTRACTOR
3.1 DEFINITION
3.1.1 The Contractor is the person or entity identified as such in the Agreement
and is referred to throughout this Agreement as if singular in number. The term
"Contractor" means the Contractor or the Contractor's authorized representative.
3.1.2 The plural term "Contractors" refers to persons or entities who perform
construction under Conditions of the Contract that are administered by the
Construction Manager, and that are identical or substantially similar to these
Conditions.
3.2 REVIEW OF CONTRACT DOCUMENTS AND FIELD CONDITIONS BY CONTRACTOR
3.2.1 The Contractor shall carefully study and compare the Contract Documents
with each other and with information furnished by the Owner pursuant to
Subparagraph 2.2.2 and shall at once report to the Construction Manager and
Architect errors, inconsistencies or omissions discovered. The Contractor shall
not be liable to the Owner, Construction Manager or Architect for damage
resulting from errors, inconsistencies or omissions in the Contract Documents
unless the Contractor recognized or should have recognized such error,
inconsistency or omission and failed to report it to the Construction Manager
and Architect. If the Contractor performs any construction activity which it
knows or should know involves a recognized error, inconsistency or omission in
the Contract Documents without such notice to the Construction Manager and
Architect, the Contractor shall assume responsibility for such performance and
shall bear an appropriate full amount of the attributable costs for correction.
3.2.2 The Contractor shall take field measurements and verify field conditions
and shall carefully compare such field measurements and conditions and other
information known to the Contractor with the Contract Documents before
commencing activities. Errors, inconsistencies or omissions discovered shall be
reported to the Construction Manager and Architect at once.
3.2.3 The Contractor shall perform the Work in accordance with the Contract
Documents and submittals approved pursuant to Paragraph 3.12.
3.3 SUPERVISION AND CONSTRUCTION PROCEDURES
ALL DOCUMENT A201/CMa - GENERAL CONDITIONS OF THE CONTRACT FOR 5
CONSTRUCTION - CONSTRUCTION MANAGER-ADVISER EDITION - AIA - 01992 THE
AMERICAN INSTITUTE OF ARCHITECTS, 1735 NEW YORK AVENUE, N.W.,
WASHINGTON, D.C., 20006-5292 WARNING; Unlicensed photocopying violates
U.S. copyright laws and is subject to legal prosecution. This document
was electronically produced with permission of the AIA and can be
reproduced without violation until the date of expiration as noted
below.
Electronic Format A201/CMa-1992
<PAGE>
3.3.1 The Contractor shall supervise and direct the Work, using the Contractor's
best skill and attention. The Contractor shall be solely responsible for and
have control over construction means, methods, techniques, sequences and
procedures and for coordinating all portions of the Work under this Contract,
subject to overall coordination of the Construction Manager as provided in
Subparagraphs 4.6.3 and 4.6.4.
3.3.2 The Contractor shall be responsible to the Owner for acts and omissions of
the Contractor's employees, Subcontractors and their agents and employees, and
other persons performing portions of the Work under a contract with the
Contractor.
3.3.3 The Contractor shall not be relieved of obligations to perform the Work in
accordance with the Contract Documents either by activities or duties of the
Construction Manager or Architect in their administration of the Contract, or by
tests, inspections or approvals required or performed by persons other than the
Contractor.
3.3.4 The Contractor shall inspect portions of the Project related to the
Contractor's Work in order to determine that such portions are in proper
condition to receive subsequent Work.
3.4 LABOR AND MATERIALS
3.4.1 Unless otherwise provided in the Contract Documents, the Contractor shall
provide and pay for labor, materials, equipment, tools, construction equipment
and machinery, water, heat, utilities, and other facilities and services
necessary for proper execution and completion of the Work, whether temporary or
permanent and whether or not incorporated or to be incorporated in the Work.
3.4.2 The Contractor shall enforce strict discipline and good order among the
Contractor's employees and other persons carrying out the Contract. The
Contractor shall not permit employment of unfit persons or persons not skilled
in tasks assigned to them.
3.5 WARRANTY
3.5.1 The Contractor warrants to the Owner, Construction Manager and Architect
that materials and equipment furnished under the Contract will be of good
quality and new unless otherwise required or permitted by the Contract
Documents, that the Work will be free from defects and that the Work will
conform with the requirements of the Contract Documents. Work not conforming to
these requirements, including substitutions not properly approved and
authorized, shall be considered defective. If required by the Owner,
Construction Manager or Architect, the Contractor shall furnish satisfactory
evidence as to the kind and quality of materials and equipment.
3.6 TAXES
3.6.1 The Contractor shall pay sales, consumer, use and similar taxes for the
Work or portions thereof provided by the Contractor which are legally enacted
when bids are received or negotiations concluded, whether or not yet effective
or merely scheduled to go into effect.
3.7 PERMITS, FEES AND NOTICES
3.7.1 Unless otherwise provided in the Contract Documents, the Owner shall
secure and pay for the building permit and the Contractor shall secure and pay
for all other permits and governmental fees, licenses and inspections necessary
for proper execution and completion of the Work which are customarily secured
after execution of the Contract and which are legally required when bids are
received or negotiations concluded.
3.7.2 The Contractor shall comply with and give notices required by laws,
ordinances, rules and regulations and lawful orders of public authorities
bearing on performance of the Work.
ALL DOCUMENT A201/CMa - GENERAL CONDITIONS OF THE CONTRACT FOR 6
CONSTRUCTION - CONSTRUCTION MANAGER-ADVISER EDITION - AIA - 01992 THE
AMERICAN INSTITUTE OF ARCHITECTS, 1735 NEW YORK AVENUE, N.W.,
WASHINGTON, D.C., 20006-5292 WARNING; Unlicensed photocopying violates
U.S. copyright laws and is subject to legal prosecution. This document
was electronically produced with permission of the AIA and can be
reproduced without violation until the date of expiration as noted
below.
Electronic Format A201/CMa-1992
<PAGE>
3.7.3 It is not the Contractor's responsibility to ascertain that the Contract
Documents are in accordance with applicable laws, statutes, ordinances, building
codes, and rules and regulations. However, if the Contractor observes that
portions of the Contract Documents are at variance therewith, the Contractor
shall promptly notify the Construction Manager, Architect and Owner in writing,
and necessary changes shall be accomplished by appropriate Modification.
3.7.4 If the Contractor performs Work knowing and should have known or knows it
to be contrary to laws, statutes, ordinances, building codes, and rules and
regulations without such notice to the Construction Manager, Architect and
Owner, the Contractor shall assume full responsibility for such Work and shall
bear all of the attributable costs for correction.
3.8 ALLOWANCES
3.8.1 The Contractor shall include in the Contract Sum all allowances stated in
the Contract Documents. Items covered by allowances shall be supplied for such
amounts and by such persons or entities as the Owner may direct, but the
Contractor shall not be required to employ persons or entities against which the
Contractor makes reasonable objection.
3.8.2 Unless otherwise provided in the Contract Documents:
materials and equipment under an allowance shall be selected promptly by the
Owner to avoid delay in the Work;
allowances shall cover the cost to the Contractor of materials and equipment
delivered at the site and all required taxes, less applicable trade discounts;
Contractor's costs for unloading and handling at the site, labor, installation
costs, overhead, profit and other expenses contemplated for stated allowance
amounts shall be included in the Contract Sum and not in the allowances;
.4 whenever costs are more than or less than allowances, the Contract Sum
shall be adjusted accordingly by Change Order. The amount of the Change
Order shall reflect (l) the difference between actual costs and the
allowances under Clause 3.8.2.2 and (2) changes in Contractor's costs under
Clause 3.8.2.3.
3.9 SUPERINTENDENT
3.9.1 The Contractor shall employ a competent superintendent and necessary
assistants who shall be in attendance at the Project site during performance of
the Work. The superintendent shall represent the Contractor, and communications
given to the superintendent shall be as binding as if given to the Contractor.
Important communications shall be confirmed in writing. Other communications
shall be similarly confirmed on written request in each case.
3.10 CONTRACTOR'S CONSTRUCTION SCHEDULE
3.10.1 The Contractor, immediately after being awarded the Contract, shall
prepare and submit for the Owner's and Architect's information and the
Construction Manager's approval a Contractor's Construction Schedule for the
Work. Such schedule shall not exceed time limits current under the Contract
Documents, shall be revised at appropriate intervals as required by the
conditions of the Work and Project, shall be related to the entire Project
construction schedule to the extent required by the Contract Documents, and
shall provide for expeditious and practicable execution of the Work.
3.10.2 The Contractor shall cooperate with the Construction Manager in
scheduling and performing the Contractor's Work to avoid conflict, delay in or
interference with the Work of other Contractors or the construction or
operations of the Owner's own forces.
3.10.3 The Contractor shall prepare and keep current, for the Owner,
Construction Manager's and or Architect's approval, a schedule of submittals
which is coordinated with the Contractor's Construction Schedule and allows the
Construction Manager, Owner and Architect reasonable time to review submittals.
3.10.4 The Contractor shall conform to the most recent schedules.
ALL DOCUMENT A201/CMa - GENERAL CONDITIONS OF THE CONTRACT FOR 7
CONSTRUCTION - CONSTRUCTION MANAGER-ADVISER EDITION - AIA - 01992 THE
AMERICAN INSTITUTE OF ARCHITECTS, 1735 NEW YORK AVENUE, N.W.,
WASHINGTON, D.C., 20006-5292 WARNING; Unlicensed photocopying violates
U.S. copyright laws and is subject to legal prosecution. This document
was electronically produced with permission of the AIA and can be
reproduced without violation until the date of expiration as noted
below.
Electronic Format A201/CMa-1992
<PAGE>
3.11 DOCUMENTS AND SAMPLES AT THE SITE
3.11.1 The Contractor shall maintain at the site for the Owner one record copy
of the Drawings, Specifications, addenda, Change Orders and other Modifications,
in good order and marked currently to record changes and selections made during
construction, and in addition approved Shop Drawings, Product Data, Samples and
similar required submittals. These shall be available to the Construction
Manager and Architect and shall be delivered to the Construction Manager for
submittal to the Owner upon completion of the Work.
3.12 SHOP DRAWINGS, PRODUCT DATA AND SAMPLES
3.12.1 Shop Drawings are drawings, diagrams, schedules and other data specially
prepared for the Work by the Contractor or a Subcontractor, Sub-subcontractor,
manufacturer, supplier or distributor to illustrate some portion of the Work.
3.12.2 Product Data are illustrations, standard schedules, performance charts,
instructions, brochures, diagrams and other information furnished by the
Contractor to illustrate materials or equipment for some portion of the Work.
3.12.3 Samples are physical examples which illustrate materials, equipment or
workmanship and establish standards by which the Work will be judged.
3.12.4 Shop Drawings, Product Data, Samples and similar submittals are not
Contract Documents. The purpose of their submittal is to demonstrate for those
portions of the Work for which submittals are required the way the Contractor
proposes to conform to the information given and the design concept expressed in
the Contract Documents. Review by the Architect is subject to the limitations of
Subparagraph 4.6.12.
3.12.5 The Contractor shall review, approve and submit to the Construction
Manager, in accordance with the schedule and sequence approved by the
Construction Manager, Shop Drawings, Product Data, Samples and similar
submittals required by the Contract Documents. The Contractor shall cooperate
with the Construction Manager in the coordination of the Contractor's Shop
Drawings, Product Data, Samples and similar submittals with related documents
submitted by other Contractors. Submittals made by the Contractor which are not
required by the Contract Documents may be returned without action.
3.12.6 The Contractor shall perform no portion of the Work requiring submittal
and review of Shop Drawings, Product Data, Samples or similar submittals until
the respective submittal has been approved by the Construction Manager and
Architect. Such Work shall be in accordance with approved submittals.
3.12.7 By approving and submitting Shop Drawings, Product Data, Samples and
similar submittals, the Contractor represents that the Contractor has determined
and verified materials, field measurements and field construction criteria
related thereto, or will do so, and has checked and coordinated the information
contained within such submittals with the requirements of the Work and of the
Contract Documents.
3.12.8 The Contractor shall not be relieved of responsibility for deviations
from requirements of the Contract Documents by the Construction Manager's and
Architect's approval of Shop Drawings. Product Data, Samples or similar
submittals unless the Contractor has specifically informed the Construction
Manager and Architect in writing of such deviation at the time of submittal and
the Construction Manager and Architect have given written approval to the
specific deviation. The Contractor shall not be relieved of responsibility for
errors or omissions in Shop Drawings, Product Data, Samples or similar
submittals by the Construction Manager's and Architect's approval thereof. (See
Supplement)
3.12.9 The Contractor shall direct specific attention, in writing or on
resubmitted Shop Drawings, Product Data, Samples or similar submittals, to
revisions other than those requested by the Construction Manager and Architect
on previous submittals.
3.12.10 Informational submittals upon which the Construction Manager and
Architect are not expected to take responsive action may be so identified in the
Contract Documents.
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3.12.11 When professional certification of performance criteria of materials,
systems or equipment is required by the Contract Documents, the Construction
Manager and Architect shall be entitled to rely upon the accuracy and
completeness of such calculations and certifications.
3.13 USE OF SITE
3.13.1 The Contractor shall confine operations at the site to areas permitted by
law, ordinances, permits and the Contract Documents and shall not unreasonably
encumber the site with materials or equipment.
3.13.2 The Contractor shall coordinate the Contractor's operations with, and
secure the approval of, the Construction Manager before using any portion of the
site.
3.14 CUTTING AND PATCHING
3.14.1 The Contractor shall be responsible for cutting, fitting or patching
required to complete the Work or to make its parts fit together properly.
3.14.2 The Contractor shall not damage or endanger a portion of the Work or
fully or partially completed construction of the Owner's own forces or of other
Contractors by cutting, patching, excavating or otherwise altering such
construction. The Contractor shall not cut or otherwise alter such construction
by other Contractors or by the Owner's own forces except with written consent of
the Construction Manager, Owner and such other Contractors; such consent shall
not be unreasonably withheld. The Contractor shall not unreasonably withhold
from the other Contractors or the Owner the Contractor's consent to cutting or
otherwise altering the Work.
13.15 CLEANING UP
13.15.1 The Contractor shall keep the premises and surrounding area free from
accumulation of waste materials or rubbish caused by operations under the
Contract. At completion of the Work the Contractor shall remove from and about
the Project waste materials, rubbish, the Contractor's tools, construction
equipment, machinery and surplus materials.
3.15.2 If the Contractor fails to clean up as provided in the Contract
Documents, the Construction Manager may do so with the Owner's approval and the
cost thereof shall be charged to the Contractor deducted from the contract sum.
3.16 ACCESS TO WORK
3.16.1 The Contractor shall provide the Owner, Construction Manager and
Architect access to the Work in preparation and progress wherever located.
3.17 ROYALTIES AND PATENTS
3.17.1 The Contractor shall pay all royalties and license fees. The Contractor
shall defend suits or claims for infringement of patent rights and shall hold
the Owner, Construction Manager and Architect harmless from loss on account
thereof. The costs incurred in this subparagraph 3.17.1 shall be included in the
contract sum.
3.18 INDEMNIFICATION
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3.18.2 In claims against any person or entity indemnified under this Paragraph
3.18 by an employee of the Contractor, a Subcontractor, anyone directly or
indirectly employed by them or anyone for whose acts they may be liable, the
indemnification obligation under this Paragraph 3.18 shall not be limited by a
limitation on amount or type of damages, compensation or benefits payable by or
for the Contractor or a Subcontractor under workers' compensation acts,
disability benefit acts or other employee benefit acts.
3.18.3 The obligations of the Contractor under this Paragraph 3.18 shall not
extend to the liability of the Construction Manager, Architect, their
consultants, and agents and employees of any of them arising out of (1) the
preparation or approval of maps, drawings, opinions, reports, surveys, Change
Orders, designs or specifications, or (2) the giving of or the failure to give
directions or instructions by the Construction Manager, Architect, their
consultants, and agents and employees of any of them provided such giving or
failure to give is the primary cause of the injury or damage. (See Supplement)
ARTICLE 4
ADMINISTRATION OF THE
CONTRACT
4.1 ARCHITECT
4.1.1 The Architect is the person lawfully licensed to practice architecture or
an entity lawfully practicing architecture identified as such in the Agreement
and is referred to throughout the Contract Documents as if singular in number.
The term "Architect" means the Architect or the Architect's authorized
representative.
4.2 CONSTRUCTION MANAGER
4.2.1 The Construction Manager is the person or entity identified as such in the
Agreement and is referred to throughout the Contract Documents as if singular in
number. The term "Construction Manager" means the Construction Manager or the
Construction Manager's authorized representative.
4.3 Duties, responsibilities and limitations of authority of the Construction
Manager and Architect as set forth in the Contract Documents shall not be
restricted, modified or extended without written consent of the Owner,
Construction Manager, Architect and Contractor. Consent shall not be
unreasonably withheld.
4.4 In case of termination of employment of the Construction Manager or
Architect, the Owner shall appoint a construction manager or architect against
whom the Contractor makes no reasonable objection and whose status under the
Contract Documents shall be that of the former construction manager or
architect, respectively.
4.5 Disputes arising under Paragraphs 4.3 and 4.4 shall be subject to
arbitration.
4.6 ADMINISTRATION OF THE CONTRACT
4.6.1 The Construction Manager and Architect will provide administration of the
Contract as described in the Contract Documents, and will be the Owner's
representatives (1) during construction, (2) until final payment is due and (3)
with the Owner's concurrence, from time to time during the correction period
described in Paragraph 12.2. The Construction Manager and Architect will advise
and consult with the Owner and will have authority to act on behalf of the Owner
only to the extent provided in the Contract Documents, unless otherwise modified
by written instrument in accordance with other provisions of the Contract
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4.6.2 The Construction Manager will determine in general that the Work is being
performed in accordance with the requirements of the Contract Documents, will
keep the Owner informed of the progress of the Work, and will endeavor to guard
the Owner against defects and deficiencies in the Work
4.6.3 The Construction Manager will provide for coordination of the activities
of other Contractors and of the Owner's own forces with the Work of the
Contractor, who shall cooperate with them. The Contractor shall participate with
other Contractors and the Construction Manager and Owner in reviewing their
construction schedules when directed to do so. The Contractor shall make any
revisions to the construction schedule deemed necessary after a joint review and
mutual agreement. The construction schedules shall constitute the schedules to
be used by the Contractor, other Contractors, the Construction Manager and the
Owner until subsequently revised.
4.6.4 The Construction Manager will schedule and coordinate the activities of
the Contractors in accordance with the latest approved Project construction
schedule.
4.6.5 The Architect will visit the site at intervals appropriate to the stage of
construction to become generally familiar with the progress and quality of the
completed Work 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 will not be required to make
exhaustive or continuous on-site inspections to check quality or quantity of the
Work. On the basis of on-site observations as an architect, the Architect will
keep the Owner informed of progress of the Work, and will endeavor to guard the
Owner against defects and deficiencies in the Work.
4.6.6 The Construction Manager, except to the extent required by Subparagraph
4.6.4, and Architect will not have control over or charge of and will 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 as provided in Paragraph
3.3, and neither will be responsible for the Contractor's failure to carry out
the Work in accordance with the Contract Documents. Neither the Construction
Manager nor the Architect will have control over or charge of or be responsible
for acts or omissions of the Contractor, Subcontractors, or their agents or
employees, or of any other persons performing portions of the Work.
4.6.7 Communications Facilitating Contract Administration. Unless otherwise
directed by Owner, the Owner and Contractor shall communicate through the
Construction Manager, and shall contemporaneously provide the same
communications to the Architect. Communications by and with the Architect's
consultants shall be through the Architect. Communications by and with
Subcontractors and material suppliers shall be through the Contractor.
Communications by and with other Contractors shall be through the Construction
Manager and shall be contemporaneously provided to the Architect.
4.6.8 The Construction Manager will review and certify all Applications for
Payment by the Contractor, including final payment. The Construction Manager
will assemble each of the Contractor's Applications for Payment with similar
Applications from other Contractors into a Project Application and Project
Certificate for Payment. After reviewing and certifying the amounts due the
Contractors, the Construction Manager will submit the Project Application and
Project Certificate for Payment, along with the applicable Contractors'
Applications and Certificates for Payment, to the Architect.
4.6.9 Based on the Architect's observations and evaluations of Contractors'
Applications for Payment, and the certifications of the Construction Manager,
the Architect will review and certify the amounts due the Contractors and will
issue a Project Certificate for Payment.
4.6.10 The Architect will have authority to reject Work which does not conform
to the Contract Documents, and to require additional inspection or testing, in
accordance with Subparagraphs 13.5.2 and 13.5.3, whether or not such Work is
fabricated, installed or completed, but will take such action only after
notifying the Construction Manager. Subject to review by the Architect, the
Construction Manager will have the authority to reject Work which does not
conform to the Contract Documents. Whenever the Construction Manager considers
it necessary or advisable for implementation of the intent of the Contract
Documents, the Construction Manager will have authority to require additional
inspection or testing of the Work in accordance with Subparagraphs 13.5.2 and
13.5.3, whether or not such Work is fabricated, installed or completed. The
foregoing authority of the Construction Manager will be subject to the
provisions of Subparagraphs 4.6.18 through 4.6.20
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inclusive, with respect to interpretations and decisions of the Architect.
However, neither the Architect's nor the Construction Manager's authority to act
under this Subparagraph 4.6.10 nor a decision made by either of them in good
faith either to exercise or not to exercise such authority shall give rise to a
duty or responsibility of the Architect or the Construction Manager to the
Contractor, Subcontractors, material and equipment suppliers, their agents or
employees, or other persons performing any of the Work.
4.6.11 The Construction Manager will receive from the Contractor and review and
approve all Shop Drawings, Product Data and Samples, coordinate them with
information received from other Contractors, and transmit to the Architect those
recommended for approval. The Construction Manager's actions will be taken with
such reasonable promptness as to cause no delay in the Work of the Contractor or
in the activities of other Contractors, the Owner, or the Architect.
4.6.12 The Architect will review and approve or take other appropriate action
upon the 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 will be taken with such reasonable promptness as to cause
no delay in the Work of the Contractor or in the activities of the other
Contractors, the Owner, or the Construction Manager, 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, all of which remain the responsibility of the Contractor as required by
the Contract Documents. The Architect's review of the Contractor's submittals
shall not relieve the Contractor of the obligations under Paragraphs 3.3, 3.5
and 3.12. The Architect's review shall not constitute approval of safety
precautions or, unless otherwise specifically stated by the Architect, of any
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.
4.6.13 The Construction Manager will prepare Change Orders and Construction
Change Directives.
4.6.14 Following consultation with the Construction Manager, the Architect will
take appropriate action on Change Orders or Construction Change Directives in
accordance with Article 7 and will have authority to order minor changes in the
Work as provided in Paragraph 7.4.
4.6.15 The Construction Manager will maintain at the site for the Owner one
record copy of all Contracts, Drawings, Specifications, addenda, Change Orders
and other Modifications, in good order and marked currently to record all
changes and selections made during construction, and in addition approved Shop
Drawings, Product Data, Samples and similar required submittals. These will be
available to the Architect and the Contractor, and will be delivered to the
Owner upon completion of the Project.
4.6.16 The Construction Manager will assist the Architect in conducting
inspections to determine the dates of Substantial Completion and final
completion, and will receive and forward to the Architect written warranties and
related documents required by the Contract and assembled by the Contractor. The
Construction Manager will forward to the Architect a final Project Application
and Project Certificate for Payment upon compliance with the requirements of the
Contract Documents.
4.6.17 If the Owner and Architect agree, the Architect will provide one or more
project representatives to assist in carrying out the Architect's
responsibilities at the site. The duties, responsibilities and limitations of
authority of such project representatives shall be as set forth in an exhibit to
be incorporated in the Contract Documents.
4.6.18 The Architect will interpret and decide matters concerning performance
under and requirements of the Contract Documents on written request of the
Construction Manager, Owner or Contractor. The Architect's response to such
requests will be made with reasonable promptness and within any time limits
agreed upon. If no agreement is made concerning the time within which
interpretations required of the Architect shall be furnished in compliance with
this Paragraph 4.6. then delay shall not be recognized on account of failure by
the Architect to furnish such interpretations until 15 days after written
request is made for them.
4.6.19 Interpretations and decisions of the Architect will be consistent with
the intent of and reasonably inferable from the Contract Documents and will be
in writing or in the form of drawings. When making such interpretations
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and decisions, the Architect will endeavor to secure faithful performance by
both Owner and Contractor, will not show partiality to either and will not be
liable for results of interpretations or decisions so rendered in good faith.
4.6.20 The Architect's decisions on matters relating to aesthetic effect will be
final if consistent with the intent expressed in the Contract Documents.
4.7 CLAIMS AND DISPUTES
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ARTICLE 5
SUBCONTRACTORS
5.1 DEFINITIONS
5.1.1 A Subcontractor is a person or entity who has a direct contract with the
Contractor to perform a portion of the Work at the site. The term
"Subcontractor" is referred to throughout the Contract Documents as if singular
in number and means a Subcontractor or an authorized representative of the
Subcontractor. The term "Subcontractor" does not include other Contractors or
subcontractors of other Contractors.
5.1.2 A Sub-subcontractor is a person or entity who has a direct or indirect
contract with a Subcontractor to perform a portion of the Work at the site. The
term "Sub-subcontractor" is referred to throughout the Contract Documents as if
singular in number and means a Sub-subcontractor or an authorized representative
of the Sub-subcontractor.
5.2 AWARD OF SUBCONTRACTS AND OTHER CONTRACTS FOR PORTIONS OF THE WORK
5.2.1 Unless otherwise stated in the Contract Documents or the bidding
requirements, the Contractor, as soon as practicable after prior to the award of
the Contract, shall furnish in writing to the Construction Manager for review by
the Owner, Construction Manager and Architect the names of persons or entities
(including those who are to furnish materials or equipment fabricated to a
special design) proposed for each principal portion of the Work. The
Construction Manager will promptly reply to the Contractor in writing stating
whether or not the Owner, Construction Manager or Architect, after due
investigation, has reasonable objection to any such proposed person or entity.
Failure of the Construction Manager to reply promptly shall constitute notice of
no reasonable objection.
5.2.2 The Contractor shall not contract with a proposed person or entity to whom
the Owner, Construction Manager or Architect has made reasonable and timely
objection. The Contractor shall not be required to contract with anyone to whom
the Contractor has made reasonable objection.
5.2.3 If the Owner, Construction Manager or Architect has reasonable objection
to a person or entity proposed by the Contractor, the Contractor shall propose
another to whom the Owner, Construction Manager or Architect has no reasonable
objection. The Contract Sum shall be increased or decreased by the difference in
cost occasioned by such change and an appropriate Change Order shall be issued.
However, no increase in the Contract Sum shall be allowed for such change unless
the Contractor has acted promptly and responsively in submitting names as
required.
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5.2.4 The Contractor shall not change a Subcontractor, person or entity
previously selected if the Owner, Construction Manager or Architect makes
reasonable objection to such change.
5.3 SUBCONTRACTUAL RELATIONS
(See Supplement)
5.4 CONTINGENT ASSIGNMENT OF SUBCONTRACTS
5.4.1 Each subcontract agreement for a portion of the Work is assigned by the
Contractor to the Owner provided that:
.1 assignment is effective only after termination of the Contract by the Owner
and only for those subcontract agreements which the Owner accepts by
notifying the Subcontractor in writing; and
.2 assignment is subject to the prior rights of the surety, if any, obligated
under bond relating to the Contract.
5.4.2 If the Work has been suspended for more than 90 days, the Subcontractor's
compensation shall be equitably adjusted.
ARTICLE 6
CONSTRUCTION BY OWNER OR BY
OTHER CONTRACTORS
6.1 OWNER'S RIGHT TO PERFORM CONSTRUCTION WITH OWN FORCES AND TO AWARD OTHER
CONTRACTS
6.1.1 The Owner reserves the right to perform construction or operations related
to the Project with the Owner's own forces, which include persons or entities
under separate contracts not administered by the Construction Manager. The Owner
further reserves the right to award other contracts in connection with other
portions of the Project or other construction or operations on the site under
Conditions of the Contract identical or substantially similar to these including
those portions related to insurance and waiver of subrogation. If the Contractor
claims that delay or additional cost is involved because of such action by the
Owner, the Contractor shall make such Claim as provided elsewhere in the
Contract Documents.
6.1.2 When the Owner performs construction or operations with the Owner's own
forces including persons or entities under separate contracts not administered
by the Construction Manager, the Owner shall provide for coordination of such
forces with the Work of the Contractor, who shall cooperate with them.
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6.2 MUTUAL RESPONSIBILITY
6.2.1 The Contractor shall afford the Owner's own forces, Construction Manager
and other Contractors reasonable opportunity for introduction and storage of
their materials and equipment and performance of their activities, and shall
connect and coordinate the Contractor's construction and operations with theirs
as required by the Contract Documents.
6.2.2 If part of the Contractor's Work depends for proper execution or results
upon construction or operations by the Owner's own forces or other Contractors,
the Contractor shall, prior to proceeding with that portion of the Work,
promptly report to the Owner, Construction Manager and Architect apparent
discrepancies or defects in such other construction that would render it
unsuitable for such proper execution and results. Failure of the Contractor so
to report shall constitute an acknowledgment that the Owner's own forces or
other Contractors' completed or partially completed construction is fit and
proper to receive the Contractor's Work, except as to defects not then
reasonably discoverable.
6.2.3 Costs caused by delays or by improperly timed activities or defective
construction shall be borne by the party responsible therefor.
6.2.4 The Contractor shall promptly remedy damage wrongfully caused by the
Contractor to completed construction or partially completed construction or to
property of the Owner or other Contractors as provided in Subparagraph 10.2.5.
6.2.6 The Owner and other Contractors shall have the same responsibilities for
cutting and patching as are described for the Contractor in Paragraph 3.14.
6.3 OWNER'S RIGHT TO CLEAN UP
6.3.1 If a dispute arises among the Contractor, other Contractors and the Owner
as to the responsibility under their respective contracts for maintaining the
premises and surrounding area free from waste materials and rubbish as described
in Paragraph 3.15, the Owner may clean up and allocate the cost among those
responsible as the Construction Manager, in consultation with the Architect
Owner, determines to be just.
ARTICLE 7
CHANGES IN THE
WORK
7.1 CHANGES
7.1.1 Changes in the Work may be accomplished after execution of the Contract,
and without invalidating the Contract, by Change Order, Construction Change
Directive or order for a minor change in the Work, subject to the limitations
stated in this Article 7 and elsewhere in the Contract Documents.
7.1.2 A Change Order shall be based upon written agreement among the Owner,
Construction Manager, Architect and Contractor; a Construction Change Directive
requires agreement by the Owner, Construction Manager and Architect and may or
may not be agreed to by the Contractor.
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7.1.3 Changes in the Work shall be performed under applicable provisions of the
Contract Documents, and Contractor shall proceed promptly, unless otherwise
provided in the Change Order, Construction Change Directive or order for a minor
change in the Work.
7.1.4 If unit prices are stated m the Contract Documents or subsequently agreed
upon, and if quantities originally contemplated are so changed in a proposed
Change Order or Construction Change Directive that application of such unit
prices to quantities of Work proposed will cause substantial inequity to the
Owner or Contractor, the applicable unit prices shall be equitably adjusted.
(See Supplement)
7.2 Change Orders
7.2.1 A Change Order is a written instrument prepared by the Construction
Manager and signed by the Owner, Construction Manager, Architect and Contractor,
stating their agreement upon all of the following: a change in the Work; the
amount of the adjustment in the Contract Sum, if any; and the extent of the
adjustment in the Contract Time, if any.
7.2.2 Methods used in determining adjustments to the Contract Sum may include
those listed in Subparagraph 7.3.3.
7.3 CONSTRUCTION CHANGE DIRECTIVES
7.3.1 A Construction Change Directive is a written order prepared by the
Construction Manager and signed by the Owner, Construction Manager and
Architect, directing a change in the Work and stating a proposed basis for
adjustment, if any, in the Contract Sum or Contract Time, or both. The Owner may
by Construction Change Directive, without invalidating the Contract, order
changes in the Work within the general scope of the Contract consisting of
additions, deletions or other revisions, the Contract Sum and Contract Time
being adjusted accordingly.
7.3.2 A Construction Change Directive shall be used in the absence of total
agreement on the terms of a Change Order.
7.3.3 If the Construction Change Directive provides for an adjustment to the
Contract Sum, the adjustment shall be based at the Owner's option on one of the
following methods:
.1 mutual acceptance of a lump sum properly itemized and supported
by sufficient substantiating data to permit evaluation;
.2 unit prices stated in the Contract Documents or subsequently
agreed upon;
.3 pursuant to paragraph 4 of the contract between Owner &
Contractor.
.4 as provided in Subparagraph 7.3.6.
7.3.4 Upon receipt of a Construction Change Directive, the Contractor shall
promptly proceed with the change in the Work involved and advise the
Construction Manager and Architect of the Contractor's agreement or disagreement
with the method, if any, provided in the Construction Change Directive for
determining the proposed adjustment in the Contract Sum or Contract Time.
7.3.5 A Construction Change Directive signed by the Contractor indicates the
agreement of the Contractor therewith, including adjustment in Contract Sum and
Contract Time or the method for determining them. Such agreement shall be
effective immediately and shall be recorded as a Change Order.
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7.3.6 If the Contractor does not respond promptly or disagrees with the method
for adjustment in the Contract Sum, the method and the adjustment shall be
determined by the Construction Manager on the basis of reasonable expenditures
and savings of those performing the Work attributable to the change, including,
in case of an increase in the Contract Sum, a reasonable allowance for overhead
and profit. In such case, and also under Clause 7.3.3.3, the Contractor shall
keep and present, in such form as the Construction Manager may prescribe, an
itemized accounting together with appropriate supporting data. Unless otherwise
provided in the Contract Documents, costs for the purposes of this Subparagraph
7.3.6 shall be limited to the following:
.1 costs of labor, including social security, old age and unemployment
insurance, fringe benefits required by agreement or custom, and workers
compensation insurance;
.2 costs of materials, supplies and equipment, including cost of
transportation, whether incorporated or consumed;
.3 rental costs of machinery and equipment, exclusive of hand tools, whether
rented from the Contractor or others;
costs of premiums for all bonds and insurance, permit fees, and sales, use or
similar taxes related to the Work; and
.5 additional costs of supervision and field office personnel directly
attributable to the change.
7.3.7 Pending final determination of cost to the Owner, amounts not in dispute
may be included in Applications for Payment. The amount of credit to be allowed
by the Contractor to the Owner for a deletion or change which results in a net
decrease in the Contract Sum shall be actual net cost as confirmed by the
Construction Manager and approved by Owner. When both additions and credits
covering related Work or substitutions are involved in a change the allowance
for overhead and profit shall be figured on the basis of net increase, if any,
with respect to that change.
7.3.8 If the Owner and Contractor do not agree with the adjustment in Contract
Time or the method for determining it, the adjustment or the method shall be
referred to the Construction Manager for determination.
7.3.9 When the Owner and Contractor agree with the determination made by the
Construction Manager concerning the adjustments in the Contract Sum and Contact
Time, or otherwise reach agreement upon the adjustments, such agreement shall be
effective immediately issued through the Construction Manager and shall be
recorded by preparation and execution of an appropriate Change Order.
7.4 MINOR CHANGES IN THE WORK
7.4.1 The Owner will have authority to order minor changes in the Work not
involving adjustment in the Contract Sum or extension of the Contract Time and
not inconsistent with the intent of the Contract Documents. Such changes shall
be effected by written order issued through the Construction Manager and shall
be binding on the Owner and Contractor. The Contractor shall carry out such
written orders promptly.
ARTICLE 8
TIME
8.1 DEFINITIONS
8.1.1 Unless otherwise provided, Contract Time is the period of time, including
authorized adjustments, allotted in the Contract Documents for Substantial
Completion of the Work.
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8.1.2 The date of commencement of the Work is the date established in the
Agreement. The date shall not be postponed by the failure to act of the
Contractor or of persons or entities for whom the Contractor is responsible.
8.1.3 The date of Substantial Completion is defined in paragraph 9.8.
8.1.4 The term "day" as used in the Contract Documents shall mean calendar day
unless otherwise specifically defined.
8.2 PROGRESS AND COMPLETION
8.2.1 Time limits stated in the Contract Documents are of the essence of the
Contract. By executing the Agreement the Contractor confirms that the Contract
Time is a reasonable period for performing the Work.
8.2.2 The Contractor shall not knowingly, except by agreement or instruction of
the Owner in writing, prematurely commence operations on the site or elsewhere
prior to the effective date of insurance required by Article 11 to be furnished
by the Contractor. The date of commencement of the Work shall not be changed by
the effective date of such insurance. Unless the date of commencement is
established by a notice to proceed given by the Owner, the Contractor shall
notify the Owner in writing not less than five days or other agreed period
before commencing the Work to permit the timely filing of mortgages, mechanic's
liens and other security interests.
8.2.3 The Contractor shall proceed expeditiously with adequate forces and shall
achieve Substantial Completion within the Contract Time.
8.3 DELAYS AND EXTENSIONS OF TIME
8.3.1 If the Contractor is delayed at any time in progress of the Work by an act
or neglect of the Owner's own forces, Construction Manager, Architect, any of
the other Contractors or an employee of any of them, or by changes ordered in
the Work, or by labor disputes, fire, unusual delay in deliveries, unavoidable
casualties or other causes beyond the Contractor's control, or by delay
authorized by the Owner pending arbitration resolution of a dispute, or by other
causes which the Architect, based on the recommendation of the Construction
Manager, determines may justify delay, then the Contract Time shall be extended
by Change Order for such reasonable time as the Architect may determine.
8.3.3 This Paragraph 8.3 does not preclude recovery of damages for delay by
either party under other provisions of the Contract Documents.
ARTICLE 9
PAYMENTS AND COMPLETION
9.1 CONTRACT SUM
9.1.1 SCHEDULE OF VALUES
The Contract Sum is stated in the Agreement and, including authorized
adjustments, is the total maximum amount payable by the Owner to the Contractor
for performance of the Work under the Contract Documents.
9.2.1 Before the first Application for Payment, the Contractor shall submit to
the Owner, through the Construction Manager, a schedule of values allocated to
various portions of the Work, prepared in such form and supported by such data
to substantiate its accuracy as the Construction Manager and Owner may require.
This schedule, unless objected to by the Construction Manager or Owner, shall be
used as a basis for reviewing the Contractor's Applications for Payment.
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9.3 APPLICATIONS FOR PAYMENT
9.3.1 At least fifteen days before the date established for each progress
payment, the Contractor shall submit to the Construction Manager an itemized
Application for Payment for Work completed in accordance with the schedule of
values. Such application shall be notarized, if required, and supported by such
data substantiating the Contractor's right to payment as the Owner, Construction
Manager or Architect may require, such as copies of requisitions from
Subcontractors and material suppliers, and reflecting retainage if provided for
elsewhere in the Contract Documents.
9.3.1.1 Such applications may include requests for payment on account of changes
in the Work which have been properly authorized by Construction Change
Directives but not yet included in Change Orders.
9.3.1.2 Such applications may shall not include requests for payment of amounts
the Contractor does not intend to pay to a Subcontractor or material supplier
because of a dispute or other reason.
9.3.2 Unless otherwise provided in the Contract Documents, payments shall be
made on account of materials and equipment delivered and suitably stored at the
site for subsequent incorporation in the Work. If approved in advance by the
Owner, payment may similarly be made for materials and equipment suitably stored
off the site at a location agreed upon in writing. Payment for materials and
equipment stored on or off the site shall be conditioned upon compliance by the
Contractor with procedures satisfactory to the Owner to establish the Owner's
title to such materials and equipment or otherwise protect the Owner's interest,
and shall include applicable insurance, storage and transportation to the site
for such materials and equipment stored off the site.
9.3.3 The Contractor warrants that title to all Work covered by an Application
for Payment will pass to the Owner no later than the time of payment. The
Contractor further warrants that upon submittal of an Application for Payment
all Work for which Certificates for Payment have been previously issued and
payments received from the Owner shall be free and clear of liens, claims,
security interests or encumbrances in favor of the Contractor, Subcontractors,
material suppliers, or other persons or entities making a claim by reason of
having provided labor, materials and equipment relating to the Work. (See
Supplement)
9.4 CERTIFICATES FOR PAYMENT
9.4.1 The Construction Manager will assemble a Project Application for Payment
by combining the Contractor's applications with similar applications for
progress payments from other Contractors and, after certifying the amounts due
on such applications, forward them to the Architect within seven days.
9.4.2 Within seven days after the Architect's receipt of the Project Application
for Payment, the Construction Manager and Architect will either issue to the
Owner a Project Certificate for Payment, with a copy to the Contractor, for such
amount as the Construction Manager and Architect determine is properly due, or
notify the Contractor and Owner in writing of the Construction Manager's and
Architect's reasons for withholding certification in whole or in part as
provided in Subparagraph 9.5.1. Such notification will be forwarded to the
Contractor by the Construction Manager.
9.4.3 The issuance of a separate Certificate for Payment or a Project
Certificate for Payment will constitute representations made separately by the
Construction Manager and Architect to the Owner, based on their individual
observations at the site and the data comprising the Application for Payment
submitted by the Contractor, that the Work has progressed to the point indicated
and that, quality of the 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 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 Construction Manager or Architect. The issuance of a separate
Certificate for Payment or a Project Certificate for Payment will
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further constitute a representation that the Contractor is entitled to
payment in the amount certified. However, the issuance of a separate
Certificate for Payment or a Project Certificate for Payment will not
be a representation that the Construction Manager or Architect has (l)
made exhaustive or continuous on-site inspections to check the quality
or quantity of the Work, (2) reviewed the Contractor's 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) made examination to ascertain how
or for what purpose the Contractor has used money previously paid on
account of the Contract Sum.
9.5 DECISIONS TO WITHHOLD CERTIFICATION
9.5.1 The Construction Manager or Architect may decide not to certify payment
and may withhold a Certificate for Payment in whole or in part, to the extent
reasonably necessary to protect the Owner, if in the Construction Manager's or
Architect's opinion the representations to the Owner required by Subparagraph
9.4.3 cannot be made. If the Construction Manager or Architect is unable to
certify payment in the amount of the Application, the Construction Manager or
Architect will notify the Contractor and Owner as provided in Subparagraph
9.4.2. If the Contractor, Construction Manager and Architect cannot agree on a
revised amount, the Construction Manager and Architect will promptly issue a
Certificate for Payment for the amount for which the Construction Manager and
Architect are able to make such representations to the Owner. The Construction
Manager or Architect may also decide not to certify payment or, because of
subsequently discovered evidence or subsequent observations, may nullify the
whole or a part of a Certificate for Payment previously issued, to such extent
as may be necessary in the Construction Manager's or Architect's opinion to
protect the Owner from loss because of:
.1 defective Work not remedied;
.2 third party claims filed or reasonable evidence indicating probable filing
of such claims;
.3 failure of the Contractor to make payments properly to Subcontractors or
for labor, materials or equipment;
.4 reasonable evidence that the Work cannot be completed for the unpaid
balance of the Contract Sum;
.5 damage to the Owner or another contractor;
.6 reasonable evidence that the Work will not be completed within the Contract
Time, and that the unpaid balance would not be adequate to cover actual or
liquidated damages for the anticipated delay; or persistent failure to
carry out the Work in accordance with the Contract Documents.
9.5.2 When the above reasons for withholding certification are removed,
certification will be made for amounts previously withheld.
9.6 PROGRESS PAYMENTS
9.6.1 After the Construction Manager and Architect have issued a Project
Certificate for Payment, the Owner shall make payment in the manner and within
the time provided in the Contract Documents, and shall so notify the
Construction Manager and Architect.
9.6.2 The Contractor shall promptly pay each Subcontractor, upon receipt of
payment from the Owner, out of the amount paid to the Contractor on account of
such Subcontractor's portion of the Work, the amount to which said Subcontractor
is entitled, reflecting percentages actually retained from payments to the
Contractor on account of such Subcontractor's portion of the Work. The
Contractor shall, by appropriate agreement with each Subcontractor, require each
Subcontractor to make payments to Sub-subcontractors in similar manner.
9.6.3 The Construction Manager will, on request, furnish to a Subcontractor, if
practicable, information regarding percentages of completion or amounts applied
for by the Contractor and action taken thereon by the Owner, Construction
Manager and Architect on account of portions of the Work done by such
Subcontractor.
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9.6.4 Neither the Owner, Construction Manager nor Architect shall have an
obligation to pay or to see to the payment of money to a Subcontractor except as
may otherwise be required by law.
9.6.5 Payment to material suppliers shall be treated in a manner similar to that
provided in Subparagraphs 9.6.2, 9.6.3 and 9.6.4.
9.6.6 A Certificate for Payment, a progress payment, or partial or entire use or
occupancy of the Project by the Owner shall not constitute acceptance of Work
not in accordance with the Contract Documents.
9.7 FAILURE OF PAYMENT
9.7.1 If, through no fault of the Contractor, l) the Construction Manager and
Architect do not issue a Project Certificate for Payment within fourteen days
after the Construction Manager's receipt of the Contractor's Application for
Payment or 2) the Owner does not pay the Contractor within seven (14) fourteen
days after the date established in the Contract Documents the amount certified
by the Construction Manager and Architect or awarded by arbitration as a result
of the resolution of a dispute, then the Contractor may, upon seven (10) ten
additional days' written notice to the Owner, Construction Manager and
Architect, stop the Work until payment of the amount owing has been received.
The Contract Time shall be extended appropriately.
9.8 SUBSTANTIAL COMPLETION
9.8.1 Substantial Completion is the stage in the progress of the Work when the
Work or designated portion thereof is sufficiently complete in accordance with
the Contract Documents so the Owner can occupy or utilize the Work for its
intended use. (See Supplement)
9.8.2 When the Contractor considers that the Work, or a portion thereof which
the Owner agrees to accept separately, is substantially complete, the Contractor
and Construction Manager shall jointly prepare and submit to the Owner and
Architect a comprehensive list of items to be completed or corrected. The
Contractor shall proceed promptly to complete and correct items on the list.
Failure to include an item on such list does not alter the responsibility of the
Contractor to complete all Work in accordance with the Contract Documents. Upon
receipt of the list, the Architect, Owner and Construction Manager, will make an
inspection to determine whether the Work or designated portion thereof is
substantially complete. If the Owner's Construction Manager's and Architect's
inspection discloses any item, whether or not included on the list, which is not
in accordance with the requirements of the Contract Documents, the Contractor
shall, before issuance of the Certificate of Substantial Completion, complete or
correct such item upon notification by the Owner, Construction Manager or
Architect. The Contractor shall then submit a request for another inspection by
the Architect, Owner and Construction Manager, to determine Substantial
Completion. When the Work or designated portion thereof is substantially
complete, the Architect will prepare a Certificate of Substantial Completion
which shall establish the date of Substantial Completion, shall establish
responsibilities of the Owner and Contractor for security, maintenance, heat,
utilities, damage to the Work and insurance, and shall fix the time within which
the Contractor shall finish all items on the list accompanying the Certificate.
Warranties required by the Contract Documents shall commence on the date of
Substantial Completion of the Work or designated portion thereof unless
otherwise provided in the Certificate of Substantial Completion. The Certificate
of Substantial Completion shall be submitted to the Owner and Contractor for
their written acceptance of responsibilities assigned to them in such
Certificate.
9.8.3 Upon Substantial Completion of the Work or designated portion thereof and
upon application by the Contractor and certification by the Construction Manager
and Architect, the Owner shall make payment, reflecting adjustment in retainage,
if any, for such Work or portion thereof as provided in the Contract Documents.
9.9 PARTIAL OCCUPANCY OR USE
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9.9.1 The Owner may occupy or use any completed or partially completed portion
of the Work at any stage when such portion is designated by separate agreement
with the Contractor, provided such occupancy or use is consented to by the
insurer as required under Subparagraph 11.3.11 and authorized by public
authorities having jurisdiction over the Work. Such partial occupancy or use may
commence whether or not the portion is substantially complete, provided the
Owner and Contractor have accepted in writing the responsibilities assigned to
each of them for payments, retainage if any, security, maintenance, heat,
utilities, damage to the Work and insurance, and have agreed in writing
concerning the period for correction of the Work and commencement of warranties
required by the Contract Documents. When the Contractor considers a portion
substantially complete, the Contractor and Construction Manager shall jointly
prepare and submit a list to the Owner and Architect as provided under
Subparagraph 9.8.2. Consent of the Contractor to partial occupancy or use shall
not be unreasonably withheld. The stage of the progress of the Work shall be
determined by written agreement between the Owner and Contractor or, if no
agreement is reached, by decision of the Architect after consultation with the
Construction Manager.
9.9.2 Immediately prior to such partial occupancy or use, the Owner,
Construction Manager, Contractor and Architect shall jointly inspect the area to
be occupied or portion of the Work to be used in order to determine and record
the condition of the Work.
9.9.3 Unless otherwise agreed upon, partial occupancy or use of a portion or
portions of the Work shall not constitute acceptance of Work not complying with
the requirements of the Contract Documents.
9.10 FINAL COMPLETION AND FINAL PAYMENT
9.10.1 Except as otherwise provided in the agreement. Upon completion of the
Work, the Contractor shall forward to the Construction Manager a written notice
that the Work is ready for final inspection and acceptance and shall also
forward to the Construction Manager a final Contractor's Application for
Payment. Except as otherwise provided in the agreement. Upon receipt, the
Construction Manager will forward the notice and Application to the Architect
who will promptly make such inspection. When the Architect, based on the
recommendation of the Construction Manager, finds the Work acceptable under the
Contract Documents and the Contract performed, the Construction Manager and
Architect will promptly issue a final Certificate for Payment stating that and
on the basis of their observations and inspections, the Work has been completed
in accordance with terms and conditions of the Contract Documents and that the
entire balance found to be due the Contractor and noted in said final
Certificate is due and payable. The Construction Manager's and Architect's final
Certificate for Payment will constitute a further representation that conditions
listed in Subparagraph 9.10.2 as precedent to the Contractor's being entitled to
final payment have been fulfilled.
9.10.2 Neither final payment nor any remaining retained percentage shall become
due until the Contractor submits to the Owner and Architect through the
Construction Manager (l) an affidavit that payrolls, bills for materials and
equipment, and other indebtedness connected with the Work for which the Owner or
the Owner's property might be responsible or encumbered (less amounts withheld
by Owner) have been paid or other wise satisfied, (2) a certificate evidencing
that insurance required by the Contract Documents to remain in force after final
payment is currently in effect and will not be canceled or allowed to expire
until at least 30 days' prior written notice has been given to the Owner, (3) a
written statement that the Contractor knows of no substantial reason that the
insurance will not be renewable to cover the period required by the Contract
Documents, (4) consent of surety, if any, to final payment and (5), if required
by the Owner, other data establishing payment or satisfaction of obligations,
such as receipts, releases and waivers of liens, claims, security interests or
encumbrances arising out of the Contract, to the extent and in such form as may
be designated by the Owner. If a Subcontractor refuses to furnish a release or
waiver required by the Owner, the Contractor may furnish a bond satisfactory to
the Owner to indemnify the Owner against such lien. If such lien remains
unsatisfied after payments are made, the Contractor shall refund to the Owner
all money that the Owner may be compelled to pay in discharging such lien,
including all costs and reasonable attorneys' fees.
9.10.3 If, after Substantial Completion of the Work, final completion thereof is
materially delayed through no fault of the Contractor or by issuance of Change
Orders affecting final completion, and the Construction Manager and
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Architect so confirm, the Owner shall, upon application by the Contractor and
certification by the Construction Manager and Architect, and without terminating
the Contract, make payment of the balance due for that portion of the Work fully
completed and accepted. If the remaining balance for Work not fully completed or
corrected is less than retainage stipulated in the Contract Documents. and if
bonds have been furnished, the written consent of surety to payment of the
balance due for that portion of the Work fully completed and accepted shall be
submitted by the Contractor to the Owner and Architect through the Construction
Manager prior to certification of such payment. Such payment shall be made under
terms and conditions governing final payment, except that it shall not
constitute a waiver of Claims by the Owner.
9.10.4 Acceptance of foal payment by the Contractor, a Subcontractor or material
supplier shall constitute a waiver of claims by that payee except those
previously made in writing and identified by that payee as unsettled at the time
of final Application for Payment. Such waivers shall be in addition to the
waiver described in Subparagraph 4.7.5. (See Supplement)
ARTICLE 10
PROTECTION OF PERSONS AND PROPERTY
10.1 SAFETY PRECAUTIONS AND PROGRAMS
10.1.1 The Contractor shall be responsible for initiating, maintaining and
supervising all safety precautions and programs in connection with the
performance of the Contract. The Contractor shall submit the Contractor's safety
program to the Construction Manager for review and coordination with the safety
programs of other Contractors.
10.1.2 In the event the Contractor encounters on the site material reasonably
believed to be asbestos or polychlorinated biphenyl (PCB) which has not been
rendered harmless, the Contractor shall immediately stop Work in the area
affected and report the condition to the Owner, Construction Manager and
Architect in writing. The Work in the affected area shall not thereafter be
resumed except by written agreement of the Owner and Contractor if in fact the
material is asbestos or polychlorinated biphenyl (PCB) and has not been rendered
harmless. The Work in the affected area shall be resumed in the absence of
asbestos or polychlorinated biphenyl (PCB), or when it has been rendered
harmless, by written agreement of the Owner and Contractor.
(See Supplement)
10.1.4 To the fullest extent permitted by law, the Owner shall indemnify and
hold harmless the Contractor, Construction Manager, Architect, their
consultants, and agents and employees of any of them from and against claims,
damages, losses and expenses, including but not limited to reasonable attorneys'
fees, arising out of or resulting from performance of the Work in the affected
area if in fact the material is asbestos or polychlorinated biphenyl (PCB) and
has not been rendered harmless, provided that such claim, damage, loss or
expense is attributable to bodily injury, sickness, disease or death, or to
injury to or destruction of tangible properly (other than the Work itself)
including loss of use resulting therefrom, but only to the extent caused in
whole or in part by negligent acts or omissions of the Owner, anyone directly or
indirectly employed by the Owner or anyone for whose acts the Owner may be
liable, regardless of whether or not such claim, damage, loss or expense is
caused in part by a party indemnified hereunder. Such obligation shall not be
construed to negate, abridge or reduce other rights or obligations of indemnity
which would otherwise exist as to a party or person described in this
Subparagraph 10.1.4.
10.1.5 If reasonable precautions will be inadequate to prevent foreseeable
bodily injury or death to persons resulting from a material or substance
encountered on the site by the Contractor, the Contractor shall, upon
recognizing the condition, immediately stop Work in the affected area and report
the condition to the Owner,
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Construction Manager and Architect in writing. The Owner, Contractor,
Construction Manager and Architect shall then proceed in the same manner
described in Subparagraph lo. 1.2.
10.1.6 The Owner shall be responsible for obtaining the services of a licensed
laboratory to verify a presence or absence of the material or substance reported
by the Contractor and, in the event such material or substance is found to be
present, to verify that it has been rendered harmless. Unless otherwise required
by the Contract Documents, the Owner shall furnish in writing to the Contractor,
Construction Manager and Architect the names and qualifications of persons or
entities who are to perform tests verifying the presence or absence of such
material or substance or who are to perform the task of removal or safe
containment of such material or substance. The Contractor, the Construction
Manager and the Architect will promptly reply to the Owner in writing stating
whether or not any of them has reasonable objection to the persons or entities
proposed by the Owner. If the Contractor, Construction Manager or Architect has
an objection to a person or entity proposed by the Owner, the Owner shall
propose another to whom the Contractor, the Construction Manager and the
Architect have no reasonable objection.
10.2 SAFETY OF PERSONS AND PROPERTY
10.2.1 The Contractor shall take reasonable precautions for safety of, and shall
provide reasonable protection to prevent damage, injury or loss to:
.1 employees on the Work of other persons who may be affected thereby;
.2 the Work and materials and equipment to be incorporated therein, whether in
storage on or off the site, under care, custody or control of the
Contractor or the Contractor's Subcontractors or Sub-subcontractors;
.3 other property at the site or adjacent thereto, such as trees, shrubs,
lawns, walks, pavements, roadways, structures and utilities not designated
for removal, relocation or replacement in the course of construction; and
.4 construction or operations by the Owner or other Contractors.
10.2.2 The Contractor shall give notices and comply with applicable laws,
ordinances, rules, regulations and lawful orders of public authorities bearing
on safety of persons or property or their protection from damage, injury or
loss.
10.2.3 The Contractor shall erect and maintain, as required by existing
conditions and performance of the Contract, reasonable safeguards for safety and
protection, including posting danger signs and other warnings against hazards,
promulgating safety regulations and notifying owners and users of adjacent sites
and utilities.
10.2.4 When use for storage of explosives or other hazardous materials or
equipment or unusual methods are necessary for execution of the Work, the
Contractor shall exercise utmost care and carry on such activities under
supervision of properly qualified personnel.
10.2.5 The Contractor shall promptly remedy damage and loss including losses
which are less than the deductible or retention limits of applicable policies of
insurance, (other than damage or loss insured under property insurance required
by the Contract Documents) to property referred to in Clauses 10.2.1.2, 10.2.1.3
and 10.2.1.4 caused in whole or in part by the Contractor, a Subcontractor, a
Sub-subcontractor, or anyone directly or indirectly employed by any of them, or
by anyone for whose acts they may be liable and for which the Contractor is
responsible under Clauses 10.2.1.2, 10.2.1.3 and 10.2.1.4, except damage or loss
attributable to sole negligence of the Owner, Construction Manager or Architect
or anyone directly or indirectly employed by any of them, and not attributable
to the fault or negligence of the Contractor. The foregoing obligations of the
Contractor are in addition to the Contractor's obligations under Paragraph 3.l8.
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10.2.6 The Contractor shall designate a responsible member of the Contractor's
organization at the site whose duty shall be the prevention of accidents. This
person shall be the Contractor's superintendent unless otherwise designated by
the Contractor in writing to the Owner, Construction Manager and Architect.
10.2.7 The Contractor shall not load or permit any part of the construction or
site to be loaded so as to endanger its safety.
10.3 EMERGENCIES
10.3.1 In an emergency affecting safety or persons or property, the Contractor
shall act, at the Contractor's discretion, to prevent threatened damage, injury
or loss, provided such emergency is not directly or indirectly caused by an act
or omission of Contractor, or its agents. Additional compensation or extension
of time claimed by the Contractor on account of an emergency shall be determined
as provided in Paragraph 4.7 and Article 7.
ARTICLE 11
INSURANCE AND
BONDS
11.1 CONTRACTOR'S LIABILITY INSURANCE
11.1.1 The Contractor shall purchase from and maintain in a company or companies
lawfully authorized to do business in the jurisdiction in which the Project is
located such insurance as will protect the Contractor from claims set forth
below which may arise out of or result from the Contractor's operations under
the Contract and for which the Contractor may be legally liable, whether such
operations be by the Contractor or by a Subcontractor or by anyone directly or
indirectly employed by any of them, or by anyone for whose acts any of them may
be liable:
.1 claims under workers compensation, disability benefit and other similar
employee benefit acts which are applicable to the Work to be performed;
.2 claims for damages because of bodily injury, occupational sickness or
disease, or death of the Contractor's employees;
.3 claims for damages because of bodily injury, sickness or disease, or death
of any person other than the Contractor's employees;
.4 claims for damages insured by usual personal injury liability coverage
which are sustained (l) by a person as a result of an offense directly or
indirectly related to employment of such person by the Contractor, or (2)
by another person;
.5 claims for damages, other than to the Work itself, because of injury to or
destruction of tangible property, including loss of use resulting
therefrom;
.6 claims for damages because of bodily injury, death of a person or property
damage arising out of ownership, maintenance or use of a motor vehicle; and
.7 claims involving contractual liability insurance applicable to the
Contractor's obligations under Paragraph 3.18.
11.1.2 The insurance required by Subparagraph l l. l. l shall be written for not
less than limits of liability specified in the Contract Documents or required by
law, whichever coverage is greater and shall apply as primary and excess to any
insurance maintained by Owner. Coverages, whether written on an occurrence or
claims-made basis, shall be maintained without interruption from date of
commencement of the Work until date of final payment and termination of any
coverage required to be maintained after final payment. (See Supplement)
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11.1.3 Certificates of insurance acceptable to the Owner shall be submitted to
the Construction Manager for transmittal to the Owner with a copy to the
Architect prior to commencement of the Work. These certificates and the
insurance policies required by this Paragraph l l. l shall contain a provision
that coverages afforded under the policies will not be canceled, materially
changed or allowed to expire until at least 30 days' prior written notice has
been given to the Owner and shall name Owner as additional insured. If any of
the foregoing insurance coverages are required to remain in force after final
payment and are reasonably available, an additional certificate evidencing
continuation of such coverage shall be submitted with the final Application for
Payment as required by Subparagraph 9.10.2. Information concerning reduction of
coverage shall be furnished by the Contractor with reasonable promptness in
accordance with the Contractor's information and belief
11.2 OWNER'S LIABILITY INSURANCE
11.2.1 The Owner shall be responsible for purchasing and maintaining the Owner's
usual liability insurance. Optionally, the Owner may purchase and maintain other
insurance for self-protection against claims which may arise from operations
under the Contract. The Contractor shall not be responsible for purchasing and
maintaining this optional Owner's liability insurance unless specifically
required by the Contract Documents.
11.3 PROPERTY INSURANCE
11.3.1 Unless otherwise provided, the Owner shall purchase and maintain, in a
company or companies lawfully authorized to do business in the jurisdiction in
which the Project is located, property insurance in the amount of the initial
Contract Sum as well as subsequent modifications thereto for the entire Work at
the site on a replacement cost basis and with such deductions and other
provisions as Owner deems to be commercially reasonable. Such property insurance
shall be maintained, unless otherwise provided in the Contract Documents or
otherwise agreed in writing by all persons and entities who are beneficiaries of
such insurance, until foal payment has been made as provided in Paragraph 9.10
or until no person or entity other than the Owner has an insurable interest in
the property required by this Paragraph l 1.3 to be covered, whichever is
earlier. This insurance shall include interests of the Owner, the Contractor,
Subcontractors and Sub-subcontractors in the Work.
11.3.1.1 Property insurance shall be on an "all-risk" policy form and shall
insure against the perils of fire and extended coverage and physical loss or
damage including, without duplication of coverage, theft, vandalism, and
malicious mischief, collapse, falsework, temporary buildings and debris removal
including demolition occasioned by enforcement of any applicable legal
requirements, and shall cover reasonable compensation for Architect's services
and expenses required as a result of such insured loss. Coverage for other
perils shall not be required unless otherwise provided in the Contract
Documents.
11.3.1.2 If the Owner does not intend to purchase such property insurance
required by the Contract and with all of the coverages in the amount described
above, the Owner shall so inform the Contractor in writing prior to commencement
of the Work. The Contractor may then effect insurance which will protect the
interests of the Contractor, Subcontractors and Sub-subcontractors in the Work,
and by appropriate Change Order the cost thereof shall be charged to the Owner.
If the Contractor is damaged by the failure or neglect of the Owner to purchase
or maintain insurance as described above, without so notifying the Contractor,
then the Owner shall bear all reasonable costs properly attributable thereto.
11.3.1.3 If the property insurance requires minimum deductibles and such
deductibles are identified in the Contract Documents, the Contractor shall pay
costs not covered because of such deductibles. If the Owner or insurer increases
the required minimum deductibles above the amounts so identified or if the Owner
elects to purchase this insurance with voluntary deductible amounts, the Owner
shall be responsible for payment of the additional costs not covered because of
such increased or voluntary deductibles.
11.3.1.4 Unless otherwise provided in the Contract Documents, this property
insurance shall cover portions of the Work stored off the site after written
approval of the Owner at the value established in the approval, and also
portions of the Work in transit.
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11.3.1.5 The insurance required by this Paragraph l 1.3 is not intended to cover
machinery, tools or equipment owned or rented by the Contractor which are
utilized in the performance of the Work but not incorporated into the permanent
improvements. The Contractor shall, at the Contractor's own expense, provide
insurance coverage for owned or rented machinery, tools or equipment which shall
be subject to the provisions of Subparagraph l 1.3.7.
11.3.2 Boiler and Machinery Insurance. The Owner shall purchase and maintain
boiler and machinery insurance required by the Contract Documents or by law,
which shall specifically cover such insured objects during installation and
until final acceptance by the Owner; this insurance shall include interests of
the Owner, Construction Manager, Contractor, Subcontractors and
Sub-subcontractors in the Work, and the Owner and Contractor shall be named
insureds.
11.3.3 Loss of Use Insurance. The Owner, at the Owner's option, may purchase and
maintain such insurance as will insure the Owner against loss of use of the
Owner's property due to fire or other hazards, however caused.
11.3.4 If the Contractor requests in writing that insurance for risks other than
those described herein or for other special hazards be included in the property
insurance policy, the Owner shall, if possible, include such insurance, and the
cost thereof shall be charged to the Contractor by appropriate Change Order.
11.3.7 Waivers of Subrogation. The Owner and Contractor waive all rights against
each other and against the Construction Manager, Architect, Owner's other
Contractors and own forces described in Article 6, if any, and the
subcontractors, sub-subcontractors, consultants, agents and employees of any of
them, for damages caused by fire or other perils to the extent covered by
property insurance obtained pursuant to this Paragraph l l .3 or other property
insurance applicable to the Work, except such rights as the Owner and Contractor
may have to the proceeds of such insurance held by the Owner as fiduciary. The
Owner or Contractor, as appropriate, shall require of the Construction Manager,
Construction Manager's consultants, Architect, Architect's consultants, Owner's
separate contractors described in Article 6, if any, and the subcontractors,
sub-subcontractors, agents and employees of any of them, by appropriate
agreements, written where legally required for validity, similar waivers each in
favor of other parties enumerated herein. The policies shall provide such
waivers of subrogation by endorsement or otherwise. A waiver of subrogation
shall be effective as to a person or entity even though that person or entity
would otherwise have a duty of indemnification, contractual or otherwise, did
not pay the insurance premium directly or indirectly, and whether or not the
person or entity had an insurable interest in the properly damaged.
11.3.8 A loss insured under Owner's property insurance shall be adjusted by the
Owner as fiduciary and made payable to the Owner as fiduciary for the insureds,
as their interests may appear, subject to requirements of any applicable
mortgagee clause and of Subparagraph 11.3.10. The Contractor shall pay
Subcontractors their just shares of insurance proceeds received by the
Contractor, and by appropriate agreements, written where legally required for
validity, shall require Subcontractors to make payments to their
Sub-subcontractors in similar manner.
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11.3.9 The Owner as fiduciary shall, upon occurrence of an insured loss, shall
deposit in a separate account proceeds so received, which the Owner shall
distribute in accordance with such agreement as the parties in interest may
reach. If after such loss no other special agreement is made, replacement of
damaged property shall be covered by appropriate Change Order.
11.3.10 The Owner as fiduciary shall have power to adjust and settle a loss with
insurers.
11.3.11 Partial occupancy or use in accordance with Paragraph 9.9 shall not
commence until the insurance company or companies providing property insurance
have consented to such partial occupancy or use by endorsement or otherwise. The
Owner and the Contractor shall take reasonable steps to obtain consent of the
insurance company or companies and shall, without mutual written consent, take
no action with respect to partial occupancy or use that would cause
cancellation, lapse or reduction of insurance. (See Supplement)
11.4 PERFORMANCE BOND AND PAYMENT BOND
11.4.1 The Owner shall have the right to require the Contractor to furnish bonds
covering faithful performance of the Contract and payment of obligations arising
thereunder as stipulated in bidding requirements or specifically required in the
Contract Documents on the date of execution of the Contract.
11.4.2 Upon the request of any person or entity appearing to be a potential
beneficiary of bonds covering payment of obligations arising under the Contract,
the Contractor shall promptly furnish a copy of the bonds or shall permit a copy
to be made. (See Supplement)
ARTICLE 12
UNCOVERING AND CORRECTION OF
WORK
12.1 UNCOVERING OF WORK
12.1.1 If a portion of the Work is covered contrary to the Construction
Manager's or Architect's request or to requirements specifically expressed in
the Contract Documents, it must, if required in writing by either, be uncovered
for their observation and be replaced at the Contractor's expense without change
in the Contract Time.
12.1.2 If a portion of the Work has been covered which the Construction Manager
or Architect has not specifically requested to observe prior to its being
covered, the Construction Manager or Architect may request to see such Work and
it shall be uncovered by the Contractor. If such Work is in accordance with the
Contract Documents, costs of uncovering and replacement shall, by appropriate
Change Order, be charged to the Owner. If such Work is not in accordance with
the Contract Documents, the Contractor shall pay such costs unless the condition
was caused by the Owner or one of the other Contractors in which event the Owner
shall be responsible for payment of such costs.
12.2 CORRECTION OF WORK
12.2.1 The Contractor shall promptly correct Work rejected by the Construction
Manager or Architect or failing to conform to the requirements of the Contract
Documents, whether observed before or after Substantial Completion and whether
or not fabricated, installed or completed. The Contractor shall bear costs of
correcting such rejected
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Work, including additional testing and inspections and compensation for the
Construction Manager's and Architect's services and expenses made necessary
thereby.
12.2.2 (See Supplement)
12.2.3 The Contractor shall remove from the site portions of the Work which are
not in accordance with the requirements of the Contract Documents and are
neither corrected by the Contractor nor accepted by the Owner.
12.2.4 If the Contractor fails to correct nonconforming Work within a reasonable
time, the Owner may correct it in accordance with Paragraph 2.4. If the
Contractor does not proceed with correction of such nonconforming Work within a
reasonable time fixed by written notice from the Architect issued through the
Construction Manager, the Owner may remove it and store the salvable materials
or equipment at the Contractor's expense. If the Contractor does not pay costs
of such removal and storage within ten days after written notice, the Owner may
upon ten additional days' written notice sell such materials and equipment at
auction or at private sale and shall account for the proceeds thereof, after
deducting costs and damages that should have been borne by the Contractor,
including compensation for the Construction Manager's and Architect's services
and expenses made necessary thereby. If such proceeds of sale do not cover costs
which the Contractor should have borne, the Contract Sum shall be reduced by the
deficiency. If payments then or thereafter due the Contractor are not sufficient
to cover such amount, the Contractor shall pay the difference to the Owner.
12.2.5 The Contractor shall bear the cost of correcting destroyed or damaged
construction, whether completed or partially completed, of the Owner or other
Contractors caused by the Contractor's correction or removal of Work which is
not in accordance with the requirements of the Contract Documents.
12.2.6 Nothing contained in this Paragraph 12.2 shall be construed to establish
a period of limitation with respect to other obligations which the Contractor
might have under the Contract Documents. Establishment of the time period of one
year as described in Subparagraph 12.2.2 relates only to the specific obligation
of the Contractor to correct the Work, and has no relationship to the time
within which the obligation to comply with the Contract Documents may be sought
to be enforced, nor to the time within which proceedings may be commenced to
establish the Contractor's liability with respect to the Contractor's
obligations other than specifically to correct the Work.
12.3 ACCEPTANCE OF NONCONFORMING WORK
12.3.1 If the Owner prefers to accept Work which is not in accordance with the
requirements of the Contract Documents, the Owner may do so instead of requiring
its removal and correction, in which case the Contract Sum will be reduced as
appropriate and equitable. Such adjustment shall be effected whether or not
final payment has been made.
ARTICLE 13
MISCELLANEOUS
PROVISIONS
13.1 GOVERNING LAW
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13.1.1 The Contract shall be governed by the law of the place where the Project
is located.
13.2 SUCCESSORS AND ASSIGNS
13.2.1 The Owner and Contractor respectively bind themselves, their partners,
successors, assigns and legal representatives to the other parry hereto and to
partners, successors, assigns and legal representatives of such other party in
respect to covenants, agreements and obligations contained in the Contract
Documents. Contractor shall not assign the Contract as a whole without written
consent of the Owner. (See Supplement)
13.3 WRITTEN NOTICE
13.3.1 (See Supplement)
13.4 RIGHTS AND REMEDIES
13.4.1 Duties and obligations imposed by the Contract Documents and rights and
remedies available thereunder shall be in addition to and not a limitation of
duties, obligations, rights and remedies otherwise imposed or available by law.
13.4.2 No action or failure to act by the Owner, Construction Manager, Architect
or Contractor shall constitute a waiver of a right or duty afforded them under
the Contract, nor shall such action or failure to act constitute approval of or
acquiescence in a breach thereunder, except as may be specifically agreed in
writing. (See Supplement)
13.5 TESTS AND INSPECTIONS
13.5.1 Tests, inspections and approvals of portions of the Work required by the
Contract Documents or by laws, ordinances, rules, regulations or orders of
public authorities having jurisdiction shall be made at an appropriate time.
Unless otherwise provided, the Contractor shall make arrangements for such
tests, inspections and approvals with an independent testing laboratory or
entity acceptable to the Owner, or with the appropriate public authority, and
shall bear all related costs of tests, inspections and approvals. The Contractor
shall give the Construction Manager and Architect timely notice of when and
where tests and inspections are to be made so the Construction Manager and
Architect may observe such procedures. The Owner shall bear costs of tests,
inspections or approvals which do not become requirements until after bids are
received or negotiations concluded.
13.5.2 If the Construction Manager, Architect, Owner or public authorities
having jurisdiction determine that portions of the Work require additional
testing, inspection or approval not included under Subparagraph 13.5.1, the
Construction Manager and Architect will, upon written authorization from the
Owner, instruct the Contractor to make arrangements for such additional testing,
inspection or approval by an entity acceptable to the Owner, and the Contractor
shall give timely notice to the Construction Manager and Architect of when and
where tests and inspections are to be made so the Construction Manager and
Architect may observe such procedures. The Owner shall bear such costs except as
provided in Subparagraph 13.5.3.
13.5.3 If such procedures for testing, inspection or approval under
Subparagraphs 13.5.1 and 13.5.2 reveal failure of the portions of the Work to
comply with requirements established by the Contract Documents, the Contractor
shall bear all costs made necessary by such failure including those of repeated
procedures and compensation for the Construction Manager's and Architect's
services and expenses.
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13.5.4 Required certificates of testing, inspection or approval shall, unless
otherwise required by the Contract Documents, be secured by the Contractor and
promptly delivered to the Construction Manager for transmittal to the Architect.
13.5.5 If the Construction Manager or Architect is to observe tests, inspections
or approvals required by the Contract Documents, the Construction Manager or
Architect will do so promptly and, where practicable, at the normal place of
testing.
13.5.6 Tests or inspections conducted pursuant to the Contract Documents shall
be made promptly to avoid unreasonable delay in the Work.
13.6 INTEREST
13.6.1 Payments due and unpaid under the Contract Documents shall bear interest
from the date payment is due at such rate as the parties may agree upon in
writing or, in the absence thereof, at the legal rate prevailing from time to
time at the place where the Project is located.
13.7 COMMENCEMENT OF STATUTORY LIMITATION PERIOD
13.7.1 As between the Owner and Contractor:
.1 Before Substantial Completion. As to acts or failures to act occurring
prior to the relevant date of Substantial Completion, any applicable
statute of limitations shall commence to run and any alleged cause of
action shall be deemed to have accrued in any and all events not later than
such date of Substantial Completion;
.2 Between Substantial Completion and Final Certificate Payment. As to acts or
failures to act occurring subsequent to the relevant date of Substantial
Completion and prior to issuance of the final Certificate for Payment, any
applicable statute of limitations shall commence to run and any alleged
cause of action shall be deemed to have accrued in any and all events not
later than the date of issuance of the final Certificate for Payment; and
.3 After Final Certificate for Payment. As to acts or failures to act occurring
after the relevant date of issuance of the final Certificate for Payment, any
applicable statute of limitations shall commence to run and any alleged cause of
action shall be deemed to have accrued in any and all events not later than the
date of any act or failure to act by the Contractor pursuant to any warranty
provided under Paragraph 3.5, the date of any correction of the Work or failure
to correct the Work by the Contractor under Paragraph 12.2, or the date of
actual commission of any other act or failure to perform any duty or obligation
by the Contractor or Owner, whichever occurs last.
ARTICLE 14
TERMINATION OR SUSPENSION
OF THE CONTRACT
14.1 TERMINATION BY THE CONTRACTOR
14.1.1 The Contract may terminate the Contract if the Work is stopped for a
period of 30 days through no act or fault of the Contractor or a Subcontractor,
Sub-subcontractor or their agents or employees or any other persons performing
portions of the Work under contract with the Contractor, for any of the
following reasons:
.1 issuance of an order of a court or other public authority having
jurisdiction;
.2 an act of government such as a declaration of national emergency, making
material unavailable;
.3 because the Construction Manager or Architect has not issued a Certificate
for Payment and has not notified the Contractor of the reason for
withholding certification as provided in Subparagraph 9.4.2, or because the
Owner has not made payment on a Certificate for Payment within the time
stated in the Contract Documents;
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.4 if repeated suspensions, delays or interruptions by the Owner as described
in Paragraph 14.3 constitute in the aggregate more than 100 percent of the
total number of days scheduled for completion, or 120 days in any 365-day
period, whichever is less; or
.5 the Owner has failed to furnish to the Contractor promptly, upon the
Contractor's request, reasonable evidence as required by Subparagraph
2.2.1.
14.1.2 If one of the above reasons exists, the Contractor may, upon seven
additional days' written notice to the Owner, Construction Manager and
Architect, terminate the Contract and recover from the Owner payment for Work
executed and for proven loss with respect to materials, equipment, tools, and
construction equipment and machinery, including reasonable overhead, profit and
damages.
14.1.3 If the Work is stopped for a period of 60 days through no act or fault of
the Contractor or a Subcontractor or their agents or employees or any other
persons performing portions of the Work under contract with the Contractor
because the Owner has persistently failed to fulfill the Owner's obligations
under the Contract Documents with respect to matters important to the progress
of the Work, the Contractor may, upon seven additional days' written notice to
the Owner, Construction Manager and Architect, terminate the Contract and
recover from the Owner as provided in Subparagraph 14.1.2.
14.2 TERMINATION BY THE OWNER FOR CAUSE
14.2.1 In addition to Owner's right to terminate the contract as set forth in
the supplement, after Owner's written consent, the Owner may terminate the
Contract if the Contractor:
.1 refuses or fails to supply enough properly skilled workers or proper
materials;
.2 fails to make payment to Subcontractors for materials or labor in
accordance with the respective agreements between the Contractor and the
Subcontractors;
.3 persistently disregards laws, ordinances, or rules, regulations or orders
of a public authority having jurisdiction; or
.4 otherwise is guilty of substantial breach of a provision of the Contract
Documents.
14.2.2 When any of the above reasons exist, the Owner, after consultation with
the Construction Manager, and may without prejudice to any other rights or
remedies of the Owner and after giving the Contractor and the Contractor's
surety, if any, seven days' written notice, terminate employment of the
Contractor and may, subject to any prior rights of the surety: take possession
of the site and of all materials, equipment, tools, and construction equipment
and machinery thereon owned by the Contractor; accept assignment of subcontracts
pursuant to Paragraph 5.4; and finish the Work by whatever reasonable method the
Owner may deem expedient.
14.2.3 When the Owner terminates the Contract for one of the reasons stated in
Subparagraph 14.2.1, the Contractor shall not be entitled to receive further
payment until the Work is finished.
14.2.4 If the unpaid balance of the Contract Sum exceeds costs of finishing the
Work, including compensation for the Construction Manager's and Architect's
services and expenses made necessary thereby, such excess shall be paid to the
Contractor. If such costs exceed the unpaid balance, the Contractor shall pay
the difference to the Owner. The amount to be paid to the Contractor or Owner,
as the case may be, shall, upon application, certified by the Architect after
consultation with the Construction Manager, and this obligation for payment
shall survive termination of the Contract.
14.3 SUSPENSION BY THE OWNER FOR CONVENIENCE
(See Supplement)
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<PAGE>
Rauch industries, Mira Loma, California
c/o Syratech Corporation
Varco-Pruden Steel Erection Contract
C.A.S. Construction, Inc.
August 25, 1997
Project. Rauch Industries
Mira Loma, CA
Project Manager: James J. Orlando Phone: (315)471-5338 X 327
Fax: (315)471 -5330
Project Superintendent: Joseph Spoto Phone: (909) 930-0513
and (909) 930-0514
Fax: (909) 930-0982
Project Architect: Vesely & Associates Phone: (315) 471-5338
c/o V.I.P. Architectural
Associates
One Webster's Landing
Syracuse, NY 13202
Documents Enclosed:
Drawings Dated
- -------- -----
Rough Grading Plan (Sheet 1 of 5) 4-10-97
Rough Grading Plan (Sheet 2 of 5) 4-10-97
Rough Grading Plan (Sheet 3 of 5) 4-10-97
Rough Grading Plan (Sheet 4 of 5) 4-10-97
Rough Grading Plan (Sheet 5 of 5) 4-10-97
T Title Sheet 6-3-97
1.0 Plot Plan 2-28-97
1.1 Plot Plan 2-28-97
2.0 Floor Plan 6-3-97
2.1 Partial Floor Plan 6-3-97
2.2 Partial Floor Plan 6-3-97
2.3 Partial Floor Plan 6-3-97
2.4 Partial Floor Plan 6-3-97
2.5 Enlarged Plan Truckers Office 6-3-97
2.6 Schedules 6-3-97
3.0 Elevations 6-3-97
3.1 Office Elevations/Building Sections 6-3-97
4.0 Roof Plan Details 6-3-97
5.0 Details 6-3-97
1
<PAGE>
Rauch Industries, Mira Loma, California
c/o Syratech Corporation
Varco-Pruden Steel Erection Contract
C.A.S. Construction, Inc.
August 25, 1997
Drawings (Continued) Dated
-----
SP.1 Specifications 6-3-97
SP.2 Partial Floor Plan 6-3-97
SP.3 Specifications 6-3-97
SP.4 Specifications 6-3-97
SP.5 Specifications 6-3-97
S.1 General Notes & Details 5-16-97
S.2 Foundation Plan Continued 5-17-97
S.3 Foundation Plan Continued 5-17-97
S.4 Foundation Plan Continued 5-17-97
S.5 Foundation Plan Continued 5-17-97
S.6 Framing Plan Continued 5-17-97
S.7 Framing Plan Continued 5-17-97
S.8 Framing Plan Continued 5-17-97
S.9 Framing Plan Continued 5-17-97
S.10 North Wall Panel Elevation 5-17-97
S.11 North Wall Panel Elevation 5-17-97
S-12 North Wall Panel Elevation 5-17-97
S-13 North Wall Panel Elevation 5-17-97
S-14 East Wall Panel Elevation 5-17-97
S-15 South Wall Panel Elevation 5-17-97
S-16 South Wall Panel Elevation 5-17-97
S-17 South Wall Panel Elevation 5-17-97
S-18 South Wall Panel Elevation 5-17-97
S-19 West Wall Panel Elevation 5-17-97
S.20 Office Foundation Plan 5-17-97
S.21 Floor and Roof Framing Plan 4-7-97
S.22 Interior Panel & Office Panel Elevation 6-17-97
D.1 Details 5-16-97
D.2 Details 5-16-97
D.3 Details 5-16-97
D.4 Details 5-16-97
1.0 Mechanical Drawings/Plot Plan 2-28-97
1.1 Mechanical Drawings/Plot Plan 2-28-97
2.0 Mechanical Drawings/Building Floor Plan 6-3-97
2.1 Mechanical Drawings/Partial Floor Plan 6-3-97
2.2 Mechanical Drawings/Partial Floor Plan 6-3-97
2.3 Mechanical Drawings/Partial Floor Plan 6-3-97
2.4 Mechanical Drawings/Partial Floor Plan 6-3-97
2.5 Mechanical Drawings/Partial Floor Plan 6-3-97
2
<PAGE>
Rauch Industries, Mira Loma, California
c/o Syratech Corporation
Varco-Pruden Steel Erection Contract
C.A.S. Construction, Inc.
August 25, 1997
Drawings (Continued) Dated
-----
VARCO-Pruden Drawings
1 of 6 Cover Sheet 4-22-97
2 Anchor Bolt 4-22-97
3 Anchor Bolt 4-25-97
4 Anchor Bolt 4-25-97
5 Anchor Bolt 4-25-97
6 of 6 Anchor Bolt 4-22-97
7 Frame Elevation 4-22-97
8 Frame Elevation 4-22-97
9 Frame Elevation 4-22-97
10 Frame Elevation 4-22-97
11 Frame Elevation 4-30-97
12 Roof Primary 5-7-97
13 Roof Primary 5-7-97
14 Roof Primary 5-7-97
15 Roof Secondary 5-8-97
16 Roof Secondary 5-8-97
17 Roof Secondary 5-8-37
18 Wall Secondary 4-22-97
19 Wall Secondary 4-30-97
20 Wall Secondary 5-7-97
21 Wall Secondary 4-22-97
22 Wall Secondary 4-30-97
23 Wall Secondary 5-7-97
24 Wall Secondary 4-30-97
25 Wall Secondary 4-30-97
26 Roof Sheeting 4-30-97
27 Roof Sheeting 4-30-97
28 Roof Sheeting 4-30-97
29 Erection Details 5-8-97
30 Erection Details 5-8-97
MRD50 Frame Details 5-1-97
31 5-8-97
Scope of Work 8-25-97
Contract Pricing Breakdown 8-25-97
Standard General Conditions 8-25-97
Specifications (on drawings)
AIA Document A101/CMa 8-25-97
AIA Document A201/Cma 8-25-97
Supplement
C.A.S. Steel Erection Quotation 7-20-97
3
<PAGE>
Rauch Industries, Mira Loma, California
c/o Syratech Corporation
Varco-Pruden Steel Erection Contract
C.A.S. Construction, Inc.
August 25, 1997
GENERAL NOTES:
1. Project is not a California "Capital Improvement" in regard to sales tax.
2. Project is not a California prevailing wage rate.
3 Scheduling: Frame lines 1 to 20 100% complete by 11/8/97. Frame lines 20 to
41 100% complete by 12/31/97.
Work Sequence: Interior steel to be erected first, perimeter steel to be
erected after concrete wall panels are in place.
SCOPE OF WORK:
All labor and equipment to install all structural steel, joists, deck and
miscellaneous steel in complete compliance with the contract documents and all
applicable local, state, and federal regulations to the complete satisfaction of
Construction Manager, Architect, owner and applicable inspectors with the
following inclusions, exclusions and stipulations:
1. It is this Contractor's responsibility to coordinate with other trades,
(i.e. plumbing, HVAC, fire protection, concrete, etc.) and define the
requirements this Contractor may have relating to other trades as necessary
to insure that steel work progresses simultaneously with other Contractor's
work.
2. Contractor shall proceed immediately with the assemblage of all shop
drawings' specifications, product cuts and material, etc. as may be
required for the approval of the Architect, Construction Manager, owner and
applicable inspectors to meet the schedule as defined herein at no
additional cost to the Owner.
3. Job meetings are a requirement of this contract and a responsible
representative of the contractor's firm shall be present unless otherwise
excused.
4. It is this contractor's responsibility for securing all labor and equipment
for the work as defined herein and shall be responsible for securing
pricing, unloading, and scheduling.
4
<PAGE>
Rauch Industries, Mira Loma, California
c/o Syratech Corporation
Varco-Pruden Steel Erection Contract
C.A.S. Construction, Inc.
August 25, 1997
5. Work shall include, but is not necessarily limited to the complete
installation of the following system:
A. A complete installation of structural and miscellaneous steel system
for the Rauch Industries California project in accordance with
specifications, contract documents, contract drawings, and C.A.S.
proposal dated 7/20/97.
B. Drawings and specifications provided are meant to outline the minimum
requirements of the owner of this project. All components not shown or
listed in drawings or specifications, but that are required for a
complete installation, are to be included.
C. Contractor is to submit to General Contractor (5) complete sets of
shop drawings and equipment submittals for all components to be used
in this project for approval. All pages of submittals must have the
specification reference number on every sheet. (Any materials supplied
that are not approved will be removed and replaced at the Contractor's
cost.)
D. It is this Contractor's responsibility for securing all pricing on
this project including equipment, and labor for the work as defined in
this Contract. There will be no additional cost to the Owner for any
increases.
E. All work is to be completed in accordance with all applicable state
and local Codes and Regulations. Federal Safety Guidelines (OSHA,
etc.) are to be strictly adhered to.
F. All contractors are required to adhere to the provisions of the Hazard
Communication Standard Information and Hazardous Chemicals Present
will be this contractor's responsibility to exchange and circulate
other contractors, their employees and the owner.
G. This contractor may be required to work overtime, weekends or a second
shift to meet the owner schedule. The owner may update, shorten, or
revise the construction schedule as required to meet completion dates.
There will not be any additional costs to the owner for requiring this
contractor to work hours necessary to meet completion dates.
5
<PAGE>
Rauch Industries, Mira Loma, California
c/o Syratech Corporation
Varco-Pruden Steel Erection Contract
C.A.S. Construction, Inc.
August 25, 1997
H. Upon completion of work and prior to release of final payment, the
following documents will be required in triplicate:
1. Proof of inspection and acceptance by local code official
inspectors.
2. Letter of Certification that scope of work is complete in
accordance with all codes and regulations.
3. Letter of Warranty for 5 years covering all roof leak repairs.
I. The contractor shall furnish to the owner any tests and certifications
as may be required.
J. The entire system must be completed to the owner's architects and
Construction Manager's approval and in accordance with codes,
specifications, and contract drawings (copies attached, as contract
documents).
K. Miscellaneous items included per specifications and drawings:
1. This contract shall be signed and returned to V.I.P. prior to the
start of any work by this contractor.
2. Constructor insurance certificate should be submitted to
Construction Manager with Rauch Industries named as additional
insured prior to start of work.
3. Anchor bolts and level nuts will be installed by others prior to
this contractor's work. All layout and elevation control shall be
the responsibility of this contractor. Start of steel erection
indicates acceptance of base plate preparation. No compensation
will be made for steel which is erected and later determined
needs adjustment due to anchor bolt layout.
4. This contractor shall be responsible for checking the accuracy of
all steel erection. All steel shall be checked for true, plumb
installation of elevations as specified.
6
<PAGE>
Rauch Industries, Mira Loma, California
c/o Syratech Corporation
Varco-Pruden Steel Erection Contract
C.A.S. Construction, Inc.
August 25, 1997
5. Job safety is a primary concern and shall be a priority. Unsafe
conditions or safety violations are justification for stoppage of
work or expulsion of personnel from jobsite.
6. All work is to be completed in accordance with all applicable
state and local codes and regulations. Federal Safety Guideline
(OSHA, etc.) are to be strictly adhered to.
7. The owner agrees to pay this contractor on a bi-weekly basis as
long as work is on schedule, work is being performed safely and
all proper paperwork is submitted (i.e., contracts, lien waivers,
insurance certificate, etc.). If the criteria is not met, the
payment terms of the contract will be followed.
8. The contractor has scheduled to work 5 days per week 10 hours per
day minimum, as discussed. Additional hours and/or days will be
worked out as necessary to meet the schedule.
9. This contractor has agreed to submit a 5 years roof weather
tightness warranty at the completion of this project to the
owner. Items covered will be the Varco Pruden standing seam roof
installation, roof curb and smoke vent installation, roof curbs
for access hatches and mechanical vents, complete gutter system
with roof drains bowls, all roof flashings (i.e., ridge cap, wall
flashing, eave flashings, etc.).
10. This contractor agrees to the following bonus clause and
liquidated damage clause to meet the required scheduling.
a. The Contractor will be paid a $2,000.00 per day bonus if the
building is 100% complete from frame lines 1 to 20 including
all roofing, flashings, seaming, ridge cap, gutter lining,
roof curbs and sky lights prior to 11/8/97. This contractor
also agrees to pay the owner $2,000.00 per day for each day
work is not complete 100% starting on 11/9/97 for frame
lines 1 to 20.
b. The Contractor will be paid a $2,000.00 per day bonus if the
building is 100% complete from frame lines 1 to 20 including
all roofing, flashings, seaming, ridge cap, gutter lining,
roof curbs and sky lights prior to 12/31/97. This contractor
also agrees to pay the owner $2,000.00 per day for each day
work is not complete 100% starting on 1/1/98 for frame lines
20 to 41.
7
<PAGE>
Rauch Industries, Mira Loma, California
c/o Syratech Corporation
Varco-Pruden Steel Erection Contract
C.A.S. Construction, Inc.
August 25,1997
CONTRACT PRICING BREAKDOWN:
1. Varco-Pruden steel erection, frames, bar joist, bridging, roof
bracing, temporary bracing, perimeter structural girts including
welding to tilt-up panels. $565,572.00
2. Varco-Pruden roof top and gutter installation, standing seam roof
3" insulation, roof flashings to concrete panels, gutter liner,
roof drains, and all related flashings. $448,889.00
3. Office area erection, frames, columns and all required temporary
bracing. $4,841.00
4. Roof curb installation, framing, curb and smoke hatches. $86,320.00
Total Contract Amount $1,105,622.00
8
<PAGE>
SECTION 01000 - GENERAL CONDITIONS MAY, 1997
1.1 BASIC DEFINITIONS:
A. Contractor
The Contractor is C.A.S. Construction, Inc.
B. Work
The term "Work" means the construction and services required by the
Contract Documents, whether completed or partially completed, and
includes all other labor, materials, equipment and services provided
or to be provided by the Contractor to fulfill the Contractor's
obligations. The Work may constitute the whole or a part of the
Project.
C. Contract Documents
The Contract Documents consist of the Contract Agreement Between
Contractor and Owner, Conditions of the Contract, Drawings,
Specifications, Addenda, Price Breakdown, Alternate Schedule, etc. as
listed on the Contract Agreement form.
D. Alternates
An Alternate is an amount proposed by Bidders and stated on the Bid
Form for certain items that may be added to or deducted from Base Bid
amount if the Owner decides to accept a corresponding change in either
the amount of construction to be completed, or in the products,
materials, equipment, systems or installation methods described in
Contract Documents. Product alternates must be approved prior to the
bid.
1.2 REVIEW OF CONTRACT DOCUMENTS & FIELD CONDITIONS BY SUBCONTRACTOR:
A. This Contractor shall examine all Contract Documents and shall visit
the site of the Work to determine the extent and difficulty of the
Work and the existing conditions prior to executing the Contract
Agreement or submitting a bid. No claims for additional compensation
will be allowed for failure to do so.
B. The Contractor shall take field dimensions and conditions and verify
these with the Contract Documents prior to commencing with this Scope
of Work. Errors, omissions or inconsistencies shall be reported to the
Owner immediately and prior to commencing work of this Contract.
C. The Contractor shall perform the Work in accordance with the Contract
Documents and approved submittals.
1
<PAGE>
SECTION 01000 - GENERAL CONDITIONS MAY, 1997
D. The Contractor shall coordinate the Work of this contract with all
other trades so that all work will progress simultaneously and be
complete and operational.
E. Job meetings are a requirement as scheduled by the Owner. A
responsible representative of the Contractor is required to attend
unless otherwise excused.
1.3 SUPERVISION:
A. The Contractor shall supervise and direct the Work, using the
Contractor's best skill and attention. The Contractor shall be solely
responsible for and have control over construction means, methods,
techniques, sequences and procedures and for coordinating all portions
of the Work under this contract. All work will subject to overall
coordination by the Owner.
B. The Contractor shall not be relieved of obligations to perform the
Work in accordance with the Contract Documents either by activities or
duties of the Owner or Architect in their administration of the
Contract or by tests, inspections or approvals required or performed
by persons other than the Contractor.
C. The Contractor shall inspect portions of the Project related to the
Contractor's Work in order to determine that such portions are in
proper condition and in accordance with specifications to receive
subsequent work. Failure to notify Owner of any previously completed
non-conforming work prior to commencing the Work of this Contract
constitutes acceptance by this Contractor of the previously completed
work. No claims by this Contractor for additional compensation will be
allowed for correction of prior non-conforming work completed by
others or for increased costs in completion or repair of the
Contractor's Work caused by non-conforming work completed by others.
1.4 LABOR AND MATERIALS
A. Unless otherwise provided in the Contract Documents, the Contractor
shall provide and pay for labor, materials, equipment, tools,
construction equipment and machinery, water, heat, utilities,
transportation and other facilities and services necessary for proper
execution and completion of the Work, whether temporary or permanent
and whether or not incorporated or to be incorporated in the Work.
B. The Contractor shall enforce strict discipline and good order among
the Contractor's employees and other persons carrying out the
Contract. The Contractor shall not permit employment of unfit persons
or persons not skilled in tasks assigned to them.
2
<PAGE>
SECTION 01000 - GENERAL CONDITIONS MAY, 1997
C. Unless otherwise stated, the contract amount is a lump sum value and
not to be construed as a unit price contract. Price Breakdowns and
quantities stated are for convenience only and are not meant to limit
the Scope of Work except as defined by Contract Documents.
1.5 WARRANTY:
A. The Contractor warrants to the Owner and Architect that materials and
equipment furnished under the Contract will be of good quality and new
unless otherwise required or permitted by the Contract Documents, that
the Work will be free from defects not inherent in the quality
required or permitted, and that the Work will conform with the
requirements of the Contract Documents. Work not conforming to these
requirements, including substitutions not properly approved and
authorized, may be considered defective. Unless otherwise stated or
required by law, all work completed by this Subcontract shall be
warranted for a minimum of one (1 ) year after final acceptance by the
Owner.
1.6 TAXES:
Unless otherwise provided in the Contract Documents, the Contractor
shall pay all sales, consumer, use and similar taxes for the Work or
portions thereof provided by the Contractor that are in effect at the
time of the execution of this Contract.
1.7 PERMITS, FEES AND NOTICES:
Unless otherwise provided in the Contract Documents, the Contractor
shall secure and pay for all required permits and governmental fees,
licenses and inspections necessary for proper execution and completion
of the Work which are customarily and legally required.
1.8 SHOP DRAWINGS, PRODUCT DATA AND SAMPLES:
A. Shop Drawings are drawings, diagrams, schedules and other data
specially prepared for the Work by the Contractor, manufacturer,
supplier or distributor to illustrate some portion of the Work.
B. Product Data are illustrations, standard schedules, performance
charts, instructions, brochures, diagrams and other information
furnished by the Contractor to illustrate materials or equipment for
some portion of the Work.
3
<PAGE>
SECTION 01000 - GENERAL CONDITIONS MAY, 1997
C. Samples are physical examples which illustrate materials, equipment or
workmanship and establish standards by which the Work will be judged.
D. Shop Drawings, Product Data, Samples and similar submittals are not
Contract Documents. The purpose of their submittal is to demonstrate
for those portions of the Work for which submittals are required the
way the Contractor proposes to conform to the information given and
the design concept expressed in the Contract Documents.
E. The Contractor shall review, approve and submit to the Owner, in
accordance with the schedule and sequence approved by the Owner, Shop
Drawings, Product Data, Samples and similar submittals required by the
Contract Documents. The Contractor shall cooperate with the Owner in
the coordination of the Subcontractor's Shop Drawings, Product Data,
Samples and similar submittals with related documents submitted by
other Contractors. Submittals made by the Contractor which are not
required by the Contract Documents may be resumed without action.
F. The Contractor shall perform no portion of the Work requiring
submittal and review of Shop Drawings, Product Data, Samples or
similar submittals until the respective submittal has been approved by
the Owner and Architect. Such Work shall be in accordance with
approved submittals.
G. By approving and submitting Shop Drawings, Product Data, Samples and
similar submittals, the Contractor represents that the Contractor has
determined and verified materials, field measurements and field
construction criteria related thereto, or will do so, and has checked
and coordinated the information contained within such submittals with
the requirements of the Work and of the Contract Documents.
H. The Contractor shall not be relieved of responsibility for deviations
from requirements of the Contract Documents by the Owner's and
Architect's approval of Shop Drawings, Product Data, Samples and
similar submittals unless the Subcontractor has specifically informed
the Owner and Architect in writing of such deviation at the time of
submittal and the Owner and Architect have given written approval to
the specific deviation. The Contractor shall not be relieved of
responsibility for errors or omissions in Shop Drawings, Product Data,
Samples and similar submittals by the Owner and Architect's approval
thereof.
I. The Contractor shall direct specific attention, in writing or on
resubmitted Shop Drawings, Product Data, Samples and similar
submittals to revisions other than those requested by the Owner and
Architect on previous submittals.
4
<PAGE>
SECTION 01000 - GENERAL CONDITIONS MAY, 1997
J. Informational submittals, upon which the Owner and Architect are not
expected to take responsive action, may be so identified in the
Contract Documents.
K. When professional certification of performance criteria of materials,
systems or equipment is required by the Contract Documents, the Owner
vend Architect shall be entitled to rely upon the accuracy and
completeness of such calculations and certifications.
1.9 CUTTING AND PATCHING:
A. The Contractor shall be responsible for cutting, fitting or patching
required to complete the Work or to make its parts fit together
properly.
B. The Contractor shall not damage or endanger a portion of the Work or
fully or partially completed construction of the Owner's own forces or
of other Contractors by cutting, patching, excavating or otherwise
altering such construction. The Contractor shall not cut or otherwise
alter such construction by other Contractors or by the Owner's own
forces except with written consent on the Owner and such other
Contractors, such consent shall not be unreasonably withheld. The
Contractor shall not unreasonably withhold from the other Contractors
or the Owner the Contractor's consent to cutting or otherwise altering
the Work.
1.10 CLEANING UP:
A. The Contractor shall keep the premises and surrounding area free from
accumulation of waste materials or rubbish caused by operations under
the Contract. At completion of the Work or as directed by the Owner,
the Contractor shall remove from and about the Project waste
materials, rubbish, the Contractor's tools, construction equipment,
machinery and surplus materials. Unless otherwise stated in the
Contract Documents, the Contractor shall remove all debris resulting
from the Work and dispose of off site and pay all disposal fees in
accordance with all applicable rules and regulations.
5
<PAGE>
SECTION 01000 - GENERAL CONDITIONS MAY, 1997
1.11 USE OF SITE:
A. The Contractor shall confine operations at the site to areas permitted
by law, ordinances, permits and the Contract Documents and shall not
unreasonably encumber the site with materials or equipment.
B. The Contractor shall coordinate the Contractor's operations with, and
secure the approval of, the Owner before using any portion of the
site.
1.12 SAFETY OF PERSONS AND PROPERTY:
A. The Contractor shall be responsible for initiating, maintaining and
supervising all safety precautions and programs in connection with the
performance of the Contract. The Contractor shall submit the
Contractor's safety program to the Owner for review and coordination
with the safety programs of other Contractors.
B. The Contractor shall take reasonable precautions for safety of, and
shall provide reasonable protection to prevent damage, injury or loss
to:
1) Employees on the Work and other persons who may be affected
thereby;
2) The work and materials and equipment to be incorporated therein,
whether in storage on or off the site, under care, custody or
control of the Contractor or Contractors;
3) Other property at the site or adjacent thereto, such as trees,
shrubs, lawns, walks, pavements, roadways, structures and
utilities not designated for removal, relocation or replacement
in the course of construction; and
4) Construction or operations by the Owner or other Contractors.
C. The Contractor shall give notices and comply with applicable laws,
ordinances, rules, regulations and lawful orders of public authorities
bearing on safety of persons or property or their protection from
damage, injury or loss.
D. The Contractor shall erect and maintain, as required by existing
conditions and performance of the Contract, reasonable safeguards for
safety and protection, including posting danger signs and other
warnings against hazards, promulgating safety regulations and
notifying owners and users of adjacent sites and utilities.
6
<PAGE>
SECTION 01000 - GENERAL CONDITIONS MAY, 1997
E. When use or storage of explosives or other hazardous materials or
equipment or unusual methods are necessary for execution of the Work,
the Subcontractor shall exercise utmost care and carry on such
activities under supervision of properly qualified personnel.
F. The Contractor shall not load or permit any part of the construction
or site to be loaded so as to endanger its safety.
1.13 CORRECTION OF WORK:
A. The Contractor shall promptly correct Work rejected by the Owner or
Architect or failing to conform to the requirements of the Contract
Documents, whether observed before or after Substantial Completion and
whether or not fabricated, installed or completed. The Contractor
shall bear costs of correcting such rejected Work, including
additional testing and inspections and compensation for the Owner and
Architect's services and expenses made necessary thereby.
1.14 CLAIMS:
A. Time Limit on Claims
All claims by this Contractor against the Owner or Architect must be
made within 14 days after occurrence of the event giving rise to such
claim. Claims for additional cost must be made by written notice prior
to proceeding to execute the Work.
1.15 "AS-BUILT" DOCUMENTATION:
A. When required by the Contract and prior to final payment, the
following documents are to be provided by this Contractor:
1) As-Built drawings showing actual in-place locations of all pipe
and equipment. Provide one reproducible sepia and three blueline
prints.
2) Proof of inspection and acceptance by applicable local code
officials and inspectors.
3) Letter of Certification that Scope of Work of this Contract is
completed in accordance with Contract Documents and all
applicable local codes and regulations.
7
<PAGE>
[Logo]
Standard Form of Agreement Between Owner and
Contractor where the basis of payment is a Stipulated Sum -
Construction Manager-Adviser Edition
AIA Document A101/CMa - Electronic Format
THIS DOCUMENT HAS IMPORTANT LEGAL CONSEQUENCES: CONSULTATION WITH AN ATTORNEY IS
ENCOURAGED WITH RESPECT TO ITS COMPLETION OR MODIFICATION. AUTHENTICATION OF
THIS ELECTRONICALLY DRAFTED AIA DOCUMENT MAY BE MADE BY USING AIA DOCUMENT D401.
The 1992 Edition of AIA Document A201/CMa, General Conditions of the Contract
for Construction, Construction Manager-Adviser Edition, is adopted in this
document by reference. Do not use with other general conditions unless this
document is modified.
AGREEMENT
made as of the 25TH day August of in the year of 1997.
(In words, indicate day, month and year)
BETWEEN the Owner:
(Name and address) Rauch Industries, Inc.
Division of Syratech Corporation
175 McClellan Highway
East Boston, MA 02128
and the Contractor:
(Name and address) C.A.S. Construction, Inc.
11020 Rose Avenue
Fontana, CA 92337
For the following Project:
(Include detailed description of Project, location, address and scope.)
Rauch Industries
11640 Harrel Street
Mira Loma, CA 91752
The Construction Manager is:
(Name and address) V.I.P. Structures, Inc.
One Webster's Landing
Syracuse, NY 13202
The Architect is:
(Name and address) Vesely & Associates
c/o V.I.P. Architectural Associates
One Webster's Landing
Syracuse, NY 13202
The Owner and Contractor agree as set forth below.
Copyright 1975, 1980, copyright 1992 by The American Institute of Architects,
1735 New York Avenue N.W., Washington D.C. 20006-5292. 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 A101/lCMa OWNER-CONTRACTOR AGREEMENT o CONSTRUCTION 1
MANAGER-ADVISER EDITION - AIA - COPYRIGHT 1992 THE AMERICAN INSTITUTE
OF ARCHITECTS, 1735 NEW YORK AVENUE N.W., WASHINGTON D.C 20006-5292.;
Unlicensed photocopying violates U.S. copyright laws and is subject to
legal prosecution. This document was electronically produced with
permission of the AIA and can be reproduced without violation until
the date of expiration as noted below.
Electronic Format A101/CMa-1992
<PAGE>
ARTICLE 2
THE WORK OF THIS CONTRACT
The Contractor shall execute the entire Work described in the Contract
Documents, except to the extent specifically indicated in the Contract Documents
to be the responsibility of others, or as follows:
Please see "Scope of Work" attached.
ARTICLE 3
DATE OF COMMENCEMENT AND SUBSTANTIAL COMPLETION
3.1 The date of commencement is the date from which the Contract Time of
Paragraph 3.2 is measured, and shall be the date of this Agreement, as first
written above, unless a different date is stated below or provision is made for
the date to be fixed in a notice to proceed issued by the Owner.
(Insert the date of commencement, if it differs from the date of this Agreement
or, if applicable, state that the date will be fixed in a notice to proceed.)
Please see "Scope of Work - General Notes" attached.
Unless the date of commencement is established by a notice to proceed issued by
the Owner, the Contractor shall notify the Owner, through the Construction
Manager, in writing not less than five days before commencing the Work to permit
the timely filing of mortgages, mechanic's liens and other security interests.
3.2 The Contractor shall achieve Substantial Completion of the entire Work not
later than
(Insert the calendar date or number of calendar days after the date of
commencement. Also insert any requirements for earlier Substantial Completion of
certain portions of the Work, if not stated elsewhere in the Contract
Documents.)
Per the Construction Manager's Schedule
See Supplement (new paragraphs 3.3 & 3.4)
, subject to adjustments of this Contract Time as provided in the Contract
Documents. Insert provisions, if any, for liquidated damages relating to failure
to complete on time.)
AIA DOCUMENT A101/lCMa OWNER-CONTRACTOR AGREEMENT o CONSTRUCTION 2
MANAGER-ADVISER EDITION - AIA - COPYRIGHT 1992 THE AMERICAN INSTITUTE
OF ARCHITECTS, 1735 NEW YORK AVENUE N.W., WASHINGTON D.C 20006-5292.;
Unlicensed photocopying violates U.S. copyright laws and is subject to
legal prosecution. This document was electronically produced with
permission of the AIA and can be reproduced without violation until
the date of expiration as noted below.
Electronic Format A101/CMa-1992
<PAGE>
ARTICLE 4
CONTRACT SUM
4.1 The Owner shall pay the Contractor in current funds for the Contractor's
performance of the Contract the Contract Sum of Dollars
($ ), subject to additions and deductions as provided in the
Contract Documents.
4.2 The Contract Sum is based upon the following alternates, if any, which are
described in the Contract Documents and are hereby accepted by the Owner:
(State the numbers or other identification of accepted alternates. If decisions
on other alternates are to be made by the Owner subsequent to the execution of
this Agreement, attach a schedule of such other alternates showing the amount
for each and the date until which that amount is valid.)
Please see "Pricing Breakdown" attached.
4.3 Unit prices, if any, are as follows:
AIA DOCUMENT A101/lCMa OWNER-CONTRACTOR AGREEMENT o CONSTRUCTION 3
MANAGER-ADVISER EDITION - AIA - COPYRIGHT 1992 THE AMERICAN INSTITUTE
OF ARCHITECTS, 1735 NEW YORK AVENUE N.W., WASHINGTON D.C 20006-5292.;
Unlicensed photocopying violates U.S. copyright laws and is subject to
legal prosecution. This document was electronically produced with
permission of the AIA and can be reproduced without violation until
the date of expiration as noted below.
Electronic Format A101/CMa-1992
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ARTICLE 5
PROGRESS PAYMENTS
5.1 Based upon Applications for Payment submitted by the Contractor to the
Construction Manager, and upon Project Applications and Certificates for Payment
issued by the Construction Manager and Architect, the Owner shall make progress
payments on account of the Contract Sum to the Contractor as provided below and
elsewhere in the Contract Documents.
5.2 The period covered by each Application for Payment shall be one calendar
month ending on the last day of the month, or as follows:
5.3 Provided an Application for Payment is submitted to the Construction Manager
not later than the 25th day of a month, the Owner shall make payment to the
Contractor not later than the 15th day of the following month. If an Application
for Payment is received by the Construction Manager after the application date
fixed above, payment shall be made by the Owner not later than thirty (30) days
after the Construction Manager receives the Application for Payment. All payment
applications must be accompanied with Contractors Lien Waiver and all applicable
subcontractors/material suppliers.
5.4 Each Application for Payment shall be based upon the Schedule of Values
submitted by the Contractor in accordance with the Contract Documents. The
Schedule of Values shall allocate the entire Contract Sum among the various
portions of the Work and be prepared in such form and supported by such data to
substantiate its accuracy as the Construction Manager or Architect may require.
This schedule, unless objected to by the Construction Manager or Architect,
shall be used as a basis for reviewing the Contractor's Applications for
Payment.
5.5 Applications for Payment shall indicate the percentage of completion of each
portion of the Work as of the end of the period covered by the Application for
Payment.
5.6 Subject to the provisions of the Contract Documents, the amount of each
progress payment shall be computed as follows:
5.6.1 Take that portion of the Contract Sum properly allocable to completed Work
as determined by multiplying the percentage completion of each portion of the
Work by the share of the total Contract Sum allocated to that portion of the
Work in the Schedule of Values, less retainage of ten percent (10%). Pending
final determination of cost to the Owner of changes in the Work, amounts not in
dispute may be included as provided in Subparagraph 7.3.7 of the General
Conditions;
5.6.2 Add that portion of the Contract Sum properly allocable to materials and
equipment delivered and suitably stored at the site for subsequent incorporation
in the completed construction (or, if approved in advance by the Owner, suitably
stored off the site at a location agreed upon in writing), less retainage of
percent ( %);
5.6.3 Subtract the aggregate of previous payments made by the Owner; and
5.6.4 Subtract amounts, if any, for which the Construction Manager or Architect
has withheld or nullified a Certificate for Payment as provided in Paragraph 9.5
of the General Conditions.
5.7 The progress payment amount determined in accordance with Paragraph 5.6
shall be further modified under the following circumstances:
5.7.1 Add, upon Substantial Completion of the Work, a sum sufficient to increase
the total payments to ninety percent (90 %) of the Contract Sum, less such
amounts as the Construction Manager recommends and the Architect determines for
incomplete Work and unsettled claims; and
5.7.2 Add, if final completion of the Work is thereafter materially delayed
through no fault of the Contractor, any additional amounts payable in accordance
with Subparagraph 9.10.3 of the General Conditions.
5.8 Reduction or limitation of retainage, if any, shall be as follows:
(If it is intended, prior to Substantial Completion of the entire Work, to
reduce or limit the retainage resulting from the percentages inserted in
Subparagraphs 5. 6.1 and 5. 6.2 above, and this is not explained elsewhere in
the Contract Documents, insert here provisions for such reduction or
limitation.)
AIA DOCUMENT A101/lCMa OWNER-CONTRACTOR AGREEMENT o CONSTRUCTION 4
MANAGER-ADVISER EDITION - AIA - COPYRIGHT 1992 THE AMERICAN INSTITUTE
OF ARCHITECTS, 1735 NEW YORK AVENUE N.W., WASHINGTON D.C 20006-5292.;
Unlicensed photocopying violates U.S. copyright laws and is subject to
legal prosecution. This document was electronically produced with
permission of the AIA and can be reproduced without violation until
the date of expiration as noted below.
Electronic Format A101/CMa-1992
<PAGE>
ARTICLE 7
MISCELLANEOUS PROVISIONS
7.1 Where reference is made in this Agreement to a provision of the General
Conditions or another Contract Document, the reference refers to that provision
as amended or supplemented by other provisions of the Contract Documents.
(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
Contractor's principal places of business, the location of the Project and
elsewhere may affect the validity of this provision. Legal advice should be
obtained with respect to deletions or modifications, and also regarding
requirements such as written disclosures or waivers.)
7.3 Temporary facilities and services:
(Here insert temporary facilities and services which are different from or in
addition to those included elsewhere in the Contract Documents.)
7.4 Other Provisions: (See Supplement)
(Here list any special provisions affecting the Contract.)
AIA DOCUMENT A101/lCMa OWNER-CONTRACTOR AGREEMENT o CONSTRUCTION 5
MANAGER-ADVISER EDITION - AIA - COPYRIGHT 1992 THE AMERICAN INSTITUTE
OF ARCHITECTS, 1735 NEW YORK AVENUE N.W., WASHINGTON D.C 20006-5292.;
Unlicensed photocopying violates U.S. copyright laws and is subject to
legal prosecution. This document was electronically produced with
permission of the AIA and can be reproduced without violation until
the date of expiration as noted below.
Electronic Format A101/CMa-1992
<PAGE>
ARTICLE 8
TERMINATION OR SUSPENSION
8.1 The Contract may be terminated by the Owner or the Contractor as provided in
Article 14 of the General Conditions.
8.2 The Work may be suspended by the Owner as provided in Article 14 of the
General Conditions.
Document Title Pages
Please see "List of Contract Documents" attached.
9.1.4 The Specifications are those contained in the Project Manual dated as in
Subparagraph 9.1.3, and are as follows: (Either list the Specifications here or
refer to an exhibit attached to this Agreement.)
Section Title Pages
Please see "List of Contract Documents" attached.
AIA DOCUMENT A101/lCMa OWNER-CONTRACTOR AGREEMENT o CONSTRUCTION 6
MANAGER-ADVISER EDITION - AIA - COPYRIGHT 1992 THE AMERICAN INSTITUTE
OF ARCHITECTS, 1735 NEW YORK AVENUE N.W., WASHINGTON D.C 20006-5292.;
Unlicensed photocopying violates U.S. copyright laws and is subject to
legal prosecution. This document was electronically produced with
permission of the AIA and can be reproduced without violation until
the date of expiration as noted below.
Electronic Format A101/CMa-1992
<PAGE>
9.1.5 The Drawings are as follows, and are dated unless a different date is
shown below: (Either list the Drawings here or refer to an exhibit attached to
this Agreement.)
Number Title Pages
Please see "List of Contract Documents" attached.
9.1.6 The Addenda, if any, are as follows:
Number Date Pages
N/A
Portions of Addenda relating to bidding requirements are not part of the
Contract Documents unless the bidding requirements are also enumerated in this
Article 9.
AIA DOCUMENT A101/lCMa OWNER-CONTRACTOR AGREEMENT o CONSTRUCTION 7
MANAGER-ADVISER EDITION - AIA - COPYRIGHT 1992 THE AMERICAN INSTITUTE
OF ARCHITECTS, 1735 NEW YORK AVENUE N.W., WASHINGTON D.C 20006-5292.;
Unlicensed photocopying violates U.S. copyright laws and is subject to
legal prosecution. This document was electronically produced with
permission of the AIA and can be reproduced without violation until
the date of expiration as noted below.
Electronic Format A101/CMa-1992
<PAGE>
9.1.7 Other documents, if any, forming part of the Contract Documents are as
follows: (List here any additional documents which are intended to form part of
the Contract Documents. The General Conditions provide that bidding requirements
such as advertisement or invitation to bid, Instructions to Bidders, sample
forms and the Contractor's bid are not part of the Contract Documents unless
enumerated in this Agreement They should be listed here only if intended to be
part of the Contract Documents.)
Please see "List of Contract Documents" attached.
This Agreement is entered into as of the day and year first written above and is
executed in at least four original copies of which one is to be delivered to the
Contractor, one each to the Construction Manager and Architect for use in the
administration of the Contract, and the remainder to the Owner.
OWNER CONTRACTOR
/s/ E. Merle Randolph /s/ Ronald W. Neagle
- --------------------- ----------------------
E. Merle Randolph Ronald W. Neagle
Chief Financial Officer C.A.S. Construction, Inc.
Rauch Industries
Subsidiary of
Syratech Corp.
AIA DOCUMENT A101/lCMa OWNER-CONTRACTOR AGREEMENT o CONSTRUCTION 8
MANAGER-ADVISER EDITION - AIA - COPYRIGHT 1992 THE AMERICAN INSTITUTE
OF ARCHITECTS, 1735 NEW YORK AVENUE N.W., WASHINGTON D.C 20006-5292.;
Unlicensed photocopying violates U.S. copyright laws and is subject to
legal prosecution. This document was electronically produced with
permission of the AIA and can be reproduced without violation until
the date of expiration as noted below.
Electronic Format A101/CMa-1992
<PAGE>
SUPPLEMENT
This Supplement is being attached to, and incorporated by this reference in
the certain Standard Form of Agreement between Owner and Contractor, where basis
of payment is a Stipulated Sum (AIA Document A101/CMa, 1992) ("Agreement") made
and entered into by and between Rauch Industries, Inc., a North Carolina
corporation ("Owner"), and C.A.S. Construction, a ("Contractor"), for the
purpose of modifying certain terms and conditions of (i) the Agreement and (ii)
the General Conditions of the Contract for Construction (AIA Document A201/CMa,
1992), ("General Conditions") incorporated in the Agreement, attached thereto.
All references to the Agreement and/or General Conditions shall mean the
Agreement and General Conditions as modified by this Supplement. The article and
paragraph numbers set forth in this Supplement correspond to the article and
paragraph numbers set forth in the Agreement and General Conditions. Any term
used herein with initial capital letters that is not otherwise defined herein
shall have the same meaning ascribed to such term in the Agreement and General
Conditions.
Modifications to the Agreement:
1. Article 1: The Contract Documents. Article 1 of the Agreement is hereby
deleted in its entirety and the following is substituted in its place.
"The Contract Documents consist of the following, which together with
Modifications made in the manner provided therein and issued subsequent to the
execution of the Agreement, form the Contract:
(i) The Agreement; and
(ii) The General Conditions; and
(iii) The Supplement attached hereto and incorporated herein by this
reference ("Supplement"); and
(iv) The Construction Documents consisting of those documents indicated on
Exhibit A attached hereto; and
[(v) The Contractor's Progress Schedule, attached hereto as Exhibit B; and
(vi) The Legal Description which describes the Project Site located in the
City of Mira Loma, County of Riverside, State of California, and is
attached hereto as Exhibit C.]"
"In general, the Drawings shall show dimensions, positions, materials and
kinds of construction; the Specifications shall describe quality of materials,
workmanship and methods. Work called for on the Drawings and not mentioned in
the Specifications, or vice versa, shall be performed as though fully set forth
in both. Work not particularly detailed, marked or specified shall be the same
as similar parts that are detailed, marked or specified."
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"Architectural dimensions shall be checked by the Contractor for
consistency and accuracy prior to the ordering of any material and prior to the
installation thereof. Contractor shall immediately inform Construction Manager
and Architect of any defects, suspected defects, and/or inconsistencies in the
Drawings and Specifications or in any work by others affecting the work which
comes to the Contractor's attention. After consulting with Owner with respect to
such error, the Construction Manager will issue instructions as to how to
proceed within five (5) business days after receiving notice of such error from
the Contractor. If the Contractor proceeds with the work based on any such error
without approved instructions from the Construction Manager, the Contractor
shall make good any resulting damage or defects. The foregoing provisions
include specification typographical errors and drawing notational errors where
the Contractor reasonably believes an error exists. Figured dimensions on scale
drawings and on full size drawings shall govern over scale drawings without
figured dimensions."
"In the event of any conflict between any of the documents described above,
the terms and provisions of the Supplement shall control over those of the
Agreement, the General Conditions, and the Construction Documents and the terms
and provisions of the Agreement shall control over those of the General
Conditions. In the event of a conflict between the Specifications and the
Drawings, regarding materials, quality, size, shape or dimension, the
Construction Manager after consulting with the Architect and Owner, and with
Owner's approval, shall decide the correct intent."
2. Article 3: Date Of Commencement And Substantial Completion. The following
paragraphs are hereby added to Article 3 of the Agreement:
"3.3 The Contractor has prepared a Schedule for the Work attached hereto as
Exhibit B ("Progress Schedule"). The Progress Schedule shall be related to the
entire Project to the full extent required by the Contract Documents, shall
include a Schedule for all required submittals, and shall provide for
expeditious and practicable execution of the Work. The Progress Schedule shall
indicate the dates for the starting and completion of the various stages of
construction and shall be revised as required by the conditions of the Work,
subject to Construction Manager's and Owner's approval. The Progress Schedule
shall be computer-generated by the Critical Path Method and shall cover all
activities, milestones and trades required for the execution of the Work with
scheduling and delivery dates for long-lead-time materials and equipment. The
adequacy of the information in the submitted Progress Schedule is subject to the
approval of the Construction Manager and the Owner. With each Application for
Payment submitted by the Contractor in accordance with the Contract, other than
the final Application for Payment, the Contractor shall submit to the
Construction Manager and Owner a current Progress Schedule revised to indicate
the portion of the Work executed during the time period covered by the
Application for Payment, all progress slippages occurring during previously
covered time periods, and the corrective actions taken for the slippage
carryover into the time period covered by the Application for Payment, the
anticipated delays or difficulties, and all other information required to
adequately present the actual status of the progress of the Work as of the date
of the Application for Payment as may be further required by the Construction
Manager and Owner."
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"3.4 In the event the Contractor falls behind the Progress Schedule to such
an extent that the Owner and Construction Manager in good faith determines that
the Contractor will be unable to achieve Substantial Completion by the date set
forth in the Progress Schedule, as such date may be extended as provided in the
Contract Documents, the Contractor shall, within two (2) working days following
the Owner's or Construction Manager's demand therefor, provide to the Owner, in
writing, a detailed explanation of the measures the Contractor will take in
order to recover from the delay so that the progress of the Work complies with
the Progress Schedule. If, in the Owner's good faith business judgment, the
Contractor's intended recovery measures will not cause the Contractor to recover
from the delay (provided such delay arises from a cause which is the
Contractor's or its Subcontractor's responsibility) so as to achieve substantial
completion on schedule, the Owner may direct the Contractor to accelerate the
progress of the Work, at the Contractor's sole cost (which acceleration costs
shall not cause an adjustment to the Contract Sum). Such methods of acceleration
may, at the Owner's election, include, without limitation, employing such
additional forces or paying such additional overtime wages as may be required in
order to assure that the progress of the Work is in compliance with the Progress
Schedule and assure timely Substantial Completion of the Work.]"
3. Article 6: Final Payment. Article 6 is hereby deleted in its entirety and
the following is substituted in its place:
"6.1 Final payment constituting the unpaid balance of the Contract Sum, if
any, (subject to any retention with respect to minor punch-list work or
defective work) shall be due and payable within 30 days following the
recordation of a valid Notice of Completion with respect to the Work, provided
that as a condition to such payment the Owner has approved the Work and the
Contractor has first delivered to the Owner's Representative such other evidence
of the Contractor's full payment of Subcontractors and the absence of any liens
with respect to the Work as Owner or its lender may require including,
specifically, the Owner's receipt of fully executed lien releases conditioned
only upon final payment from all Subcontractors and material suppliers involved
in the Project and a title report "dated down" to the date of final payment.
Final payment may, at Owner's option, be made in the form of a joint check(s)
made payable to the Contractor and applicable Subcontractor(s) unless the
Contractor files a release bond with respect to any liens in accordance with the
provisions of California Civil Code Sections 3143 and/or 3171, or any successor
statute(s) thereto. The Contractor shall provide evidence satisfactory to the
Owner establishing the identities of such Subcontractors and the amounts of the
payments to which they are entitled.
If there should remain minor items to be completed, the Contractor and the
Owner shall list such items and the Contractor shall complete said items within
a reasonable time following Substantial Completion (as such term is defined in
Subparagraph 9.8.1 of the General Conditions) of the Work, which reasonable time
shall in no event shall be greater than thirty (30) days unless otherwise agreed
to, in writing, by the Owner. The Owner may retain an amount equal to two (2)
times the cost to complete
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the minor work ("punch-list work"), as reasonably determined by Owner, until
such time as the punch-list work is completed. Within seven (7) days following
the Contractor's written notification to the Owner that this punch-list work has
been completed, the Owner's Representative shall reasonably determine whether
said punch-list work has, in fact, been completed. If the Owner's Representative
determines that the punch-list work has been completed, he shall, within said
seven (7) day period, deliver a written notice of said completion to the Owner
together with the Contractor's invoice for said work. Payment for this
punch-list work shall be made within thirty (30) days after the date on which
the Owner receives the Contractor's invoice and approval from Owner's
Representative."
4. Article 7: Miscellaneous Provisions. The following paragraphs are hereby
added to Article 7 of the Agreement:
7.4 Contractor shall observe and abide by and perform all of its
obligations hereunder in accordance with applicable laws, rules and regulations
of all governmental authorities having jurisdiction over the Project site.
7.5 Except to the extent the Contract Documents expressly provide
otherwise, in the event of any dispute between the Owner and the Contractor, the
Contractor shall proceed with the performance of its obligations hereunder with
reservation of all rights and remedies it may have at law or in equity.
7.6 The terms of the Contract Documents are intended by the parties to be a
final expression of their understanding with respect to such terms as are
included in Contract Documents and may not be contradicted by evidence of any
prior or contemporaneous statements, representations, agreements or
understandings. Additionally, the parties hereby expressly agree that no such
statements, representations, agreements or understandings exist. The parties
further intend that the Contract Documents constitute the complete and exclusive
statement of the terms of the Contract Documents and that no extrinsic evidence
whatsoever may be introduced in any judicial proceeding to contradict the
Contract Documents. No addition to, deletion from or modification of any term or
provision of this Agreement shall be effective unless it is made in a writing
signed by the parties hereto. Where reference is made in this Agreement to a
provision of the General Conditions or another Contract Document, the reference
refers to that provision as amended or supplemented by this Agreement or the
other provisions of the Contract Documents.
7.7 In addition to any other indemnity provisions contained herein, and not
as a limitation thereof, the Contractor shall indemnify, defend, protect and
hold the Indemnified parties (as defined in Paragraph 3.18 of the General
Conditions as set forth in this Supplement) and the Project harmless from and
against any and all losses, liabilities, damages, claims, expenses, delays, work
stoppages, cessation of the Work, and/or costs including, without limitation,
loss of rents and profits and actual attorneys' fees, arising from or in any way
relating to any strike, picketing, hand-billing, boycott, work slowdown or
stoppage, or labor dispute or labor related claim affecting Owner or
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the Project which relates directly or indirectly to the performance of the Work
by Contractor or those for whom Contractor is responsible. The Contractor's duty
to defend the Indemnified Parties and the Indemnified Parties' right to control
the litigation are set forth in Paragraph 3.18 of the General Conditions.
7.8 If either party commences an action against the other to enforce any of
the terms of the Contract Documents or because of the breach by either party of
any of the terms of the Contract Documents, the losing or defaulting party,
whether by out-of-court settlement or final judgment, shall pay to the
prevailing party the costs and expenses incurred in connection with the
prosecution or defense of such action and any appeals in connection therewith,
including accountants' fees and actual attorneys' fees. Any judgment or order
entered in any final judgment shall contain a specific provision providing for
the recovery of all costs and expenses of suit, including, without limitation,
actual attorneys' fees and costs and expenses incurred in connection with (i)
enforcing, perfecting and executing such judgment; (ii) post-judgment motions;
(iii) contempt proceedings; (iv) garnishment, levee, and debtor and third-party
examinations; (v) discovery; and (vi) bankruptcy litigation.
7.9 The Contractor shall not assign the whole or any portion of its
interest under the Contract Documents or any payments due or to become due the
Contractor hereunder, nor subcontract any of its obligations hereunder without
first obtaining in each instance the prior written consent of the Owner. No
assignment, whether voluntary or involuntary, by operation of law, under legal
process or proceedings, by receivership, in bankruptcy or otherwise, shall be
valid or effective without such prior written consent of the Owner. Should the
Contractor attempt to make or suffer to be made any such assignment, except as
aforesaid, the Owner may, at its option, terminate this Agreement upon written
notice to the Contractor. Should the Owner consent to any such assignment by the
Contractor, such consent shall not constitute a waiver of any of the
restrictions of this Paragraph and the same shall apply to each successive
assignment hereunder, if any. Owner may assign its interest in this Agreement at
any time without consent of the Contractor.
7.10 Contractor shall indemnify, defend (in accordance with the provisions
of Paragraph 3.18 of the General Conditions), protect and hold the Indemnified
Parties and the Project harmless from and against any and all losses, fines,
penalties, liabilities, damages, expenses and costs including, without
limitation, actual attorneys' fees, arising from or in any way relating to all
taxes and contributions imposed or required by any law for any employment
insurance, pensions, old age retirement funds, or similar purpose required of
its Subcontractors, including, without limitation, taxes and contributions
required under the Federal Social Security Act and the unemployment compensation
law or any similar law of any state. Any person or entity not a party to this
Agreement and not a parent, affiliate or subsidiary of such party shall have no
right to rely on or claim any benefit pursuant to the above provision.
Contractor shall pay all taxes and contributions imposed or required by any law
for any employment insurance, pensions, old age retirement funds, or similar
purpose required of Contractor, including, without
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limitation, taxes and contributions required under the Federal Social Security
Act and the unemployment compensation law or any similar law of any state.
7.11 Notwithstanding the fact that this Agreement is executed as of the
date first set forth above, the parties recognize that a portion of the Work may
have been performed prior to such date, all of which Work shall be governed by
the terms and conditions of the Contract Documents and shall be deemed to be a
part of the Work. Without limiting the foregoing, all of Contractor's
liabilities and obligations to Owner hereunder shall apply to all work and
services provided by Contractor for the Project prior hereto, notwithstanding
the fact that such work or services may have been performed prior to the date
hereof pursuant to prior negotiations, representations, agreements,
understandings or otherwise. All Work performed hereunder prior to the date of
the Agreement, but subsequent to the issuance of a Notice to Proceed, is hereby
deemed a part of the Work and subject to compensation and timely payment
hereunder.
7.12 The Section headings of this Agreement are used herein for reference
purposes only and should not govern, limit, or be used in construing this
Agreement or any provision hereof. Any Exhibits attached hereto are incorporated
herein by reference and expressly made a part of this Agreement for all
purposes. References to any Exhibit made in this Agreement shall be deemed to
include this reference and incorporation. Where the context so requires, the use
of the neuter gender shall include the masculine and feminine genders, the
masculine gender shall include the feminine and neuter genders, and the singular
number shall include the plural and vice versa. Each party hereto acknowledges
that (i) each party hereto is of equal bargaining strength; (ii) each such party
has actively participated in the preparation, and negotiation of this Agreement;
(iii) each such party has had the opportunity to consult with such party's
attorneys and advisors relative to entering into this Agreement, and (iv) any
rule of construction to the effect that ambiguities are to be resolved against
the drafting party shall not apply in the interpretation of this Agreement, any
portion hereof, any amendments hereto, or any Exhibits attached hereto.
7.13 This Agreement may be executed in one or more counterparts, each of
which shall be deemed an original, and all of which together shall constitute
one and the same instrument.
7.14 The waiver or failure to enforce any provision of this Agreement shall
not operate as a waiver of any future breach of any such provision or any other
provision hereof.
7.15 If any provision of this Agreement, or any application of any such
provision to any party or circumstances, shall be determined by any court of
competent jurisdiction to be invalid and unenforceable to any extent, the
remainder of this Agreement or the application of such provision to such person
or circumstances, other than the application as to which such provision is
determined to be invalid or unenforceable, shall not be affected thereby, and
each provision shall be valid and shall be enforced to the fullest extent
permitted by law.
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7.16 CONTRACTORS ARE REQUIRED BY LAW TO BE LICENSED AND REGULATED BY THE
CONTRACTORS' STATE LICENSE BOARD WHICH HAS JURISDICTION TO INVESTIGATE
COMPLAINTS AGAINST CONTRACTORS IF A COMPLAINT IS FILED WITHIN THREE (3) YEARS OF
THE DATE OF THE ALLEGED VIOLATION. ANY QUESTIONS CONCERNING A CONTRACTOR MAY BE
REFERRED TO THE REGISTRAR, CONTRACTORS' STATE LICENSE BOARD, P. O. BOX 26000,
SACRAMENTO, CALIFORNIA 95826. The Contractor hereby warrants and represents that
it is a duly licensed contractor under the laws of the State of California and
that its contractor's license number is 317020.
7.17 The cost of all soils, materials testing, surveying and inspection
provided by Owner, Owner's Engineer, soils engineer or government agency shall
be excluded from the Work. However, if Contractor's work does not meet
applicable standards or pass required inspections, or if Contractor damages or
loses any survey stakes, then the cost of any re-testing, re-surveying or
re-inspection shall be the responsibility of the Contractor.
7.18 Prior to the start of the Contractor's work, the Contractor shall
procure for contractor's work and maintain in force Worker's Compensation
insurance and all insurance required of the contractor under the contract
documents. (Also refer to Article II: Insurance.)
Rauch Industries, c/o Syratech Corporation shall be named as an additional
insured on each of these policies provided by the Contractor. (See Article II:
Insurance for limits of insurance coverage.)
Certificates of Insurance or certified copies of policies acceptable to Rauch
Industries, c/o Syratech Corporation shall all be filed with Rauch prior to the
commencement of work.
In the event the Contractor fails to obtain or maintain any insurance coverage
required under this Agreement, Rauch Industries, c/o Syratech Corporation may
purchase such coverage and charge the expense thereof to the Contractor or
terminate this Agreement.
5. Article 3: Contractor. The following is added to Subparagraph 3.12.8
".1 Such written notice of said deviation shall be a separate writing
distinct from shop drawing, product data, samples or submittals under
Subparagraph 4.2.7 of General Conditions and shall specifically describe said
deviation and effect of same, if any, in regard to submittal accompanying same."
Subparagraph 3.1.8.1 of the General Conditions is hereby deleted in its
entirety and the following paragraph is substituted in its place:
"3.18.1 Contractor shall, to the fullest extent permitted by law,
indemnify, defend, protect and hold harmless Construction Manager and Owner,
their constituent
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partners, all subsidiary or affiliated companies of Construction Manager and
Owner, and all of such parties' employees, partners, stockholders, officers,
directors and agents and their respective heirs, executors, administrators,
successors and assigns (collectively referred to as the "Owner Parties") and the
Project (the Owner Parties shall be collectively referred to as the "Indemnified
Parties") from and against any claims, demands, debts, causes of action,
liabilities, losses, damages, costs, expenses, including actual attorneys' fees,
awards, court costs, penalties, fines or judgments, resulting from or arising
out of (i) the performance of the Work, or (ii) breach of the obligations of
Contractor under the Contract Documents including, but not limited to, Defective
Work or violations of or a failure to comply with any safety order, rule or
regulation, or (iii) any and all liens, stop notices and charges of every type,
nature, kind or description which may at any time be filed or claimed against
the Project, or any portion thereof, or the Owner as a consequence of acts or
omissions of Contractor, Contractor's agents, servants, employees,
Subcontractors, Sub-subcontractors or any or all of them, (iv) any claim by or
any act or omission of any employee of Contractor, any Subcontractor,
Sub-subcontractor or anyone employed directly or indirectly by any of them or
for whose acts they may be liable, including, without limitation, any workers'
compensation claims, equal employment opportunity claims, unemployment claims,
withholding claims or social security claims, or (v) any other act or omission
with respect to the Work by Contractor, its Subcontractors, Sub-subcontractors
or anyone directly or indirectly employed by any of them or anyone for whose
acts they may be liable, attributable to death, bodily injury, sickness, disease
or injury to or destruction of tangible property, or loss of use thereof. Except
as specifically limited as set forth below, the indemnification by Contractor of
the Indemnified Parties under this Paragraph 3.18 shall apply regardless of any
concurrent or contributory active and/or passive negligent act or omission of
the party to be indemnified; provided, however, Contractor shall not be
obligated to indemnify the Owner Parties to the extent such damages are the
result of the sole negligence or willful misconduct of one or more of the Owner
Parties or for defects in design furnished by the Owner Parties. Such obligation
shall not be construed as to negate, abridge or otherwise reduce any other right
or obligation of indemnity which would otherwise exist under the Contract
Documents and/or under the laws as to any party described in this Paragraph."
The following Subparagraphs are hereby added to Paragraph 3.18 of the
General Conditions:
"3.18.4 Contractor agrees within five (5) days after written demand or
within seven (7) days from the filing thereof, whichever is earlier, to cause
the effect of any suit or lien arising out of the Work for which Contractor is
responsible, to be removed from the Project or to post a bond in accordance with
law, and in the event Contractor shall fail to do so, Owner is authorized to use
whatever means in its discretion it may deem appropriate to cause said lien to
be removed or dismissed, including, without limitation, the posting of a bond
pursuant to law, and the costs thereof, together with attorneys' fees shall be
immediately due and payable to Owner by Contractor."
3.18.5 Contractor hereby acknowledges and agrees that if any one or more
claims or actions are asserted against the Indemnified Parties giving rise to a
duty to
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defend on the part of Contractor pursuant to this Paragraph 3.18, the
Indemnified Parties shall have the right to elect, in the Indemnified Parties'
sole and absolute discretion, whether to contest any one or more of such claims
or actions and Contractor shall be required to perform the obligations of
Contractor set forth above regardless of whether the Indemnified Parties elect
to contest such claim(s). If the Indemnified Parties elect to contest any such
claim(s), the Indemnified Parties shall have the right to select the Indemnified
Parties' own counsel and control the Indemnified Parties' own defense and
Contractor shall bear the cost of employing such counsel and otherwise defending
such claim(s). The Indemnified Parties shall have the right, at their option,
upon notice to Contractor, to tender their defense to Contractor and to approve
such counsel as Contractor deems necessary to represent the Indemnified Parties
in connection with any liability indemnified under this Paragraph 3.18, and all
fees and expenses of such counsel shall be the sole responsibility of
Contractor. In the event that one or more of the Indemnified Parties tender
their defense to Contractor and thereafter determines that there is a conflict
between the interests of the Indemnified Parties, on the one hand, and the
interests of Contractor, on the other, then the Indemnified Parties shall be
entitled to retain separate counsel in connection with such lawsuit, action,
claim or proceeding at the cost and expense of Contractor, provided that
Contractor shall not be obligated to pay the fees and expenses of more than one
firm of attorneys representing Indemnified Parties."
"3.18.6 The provisions of this Paragraph 3.18 shall survive the termination
or expiration of the Contract and shall not be limited in any way by the amount
or type of insurance obtained by Owner, the Indemnified Parties, Contractor or
any Subcontractor."
6. Article 5: Subcontractors. Subparagraph 5.3.1 of the General Conditions is
hereby deleted in its entirety and the following is substituted in its place:
"5.3.1 All work performed for the Contractor by a Subcontractor shall be
pursuant to an appropriate agreement, written where legally required for
validity, between the Contractor and Subcontractor (and where appropriate
between Subcontractors and Sub-subcontractors) which shall contain provisions
that:
(i) preserve and protect the rights of the Owner under the Contract
with respect to the Work to be performed under the Subcontract so that the
subcontracting thereof will not prejudice such rights;
(ii) require that such Work be performed in accordance with the
requirements of the Contract Documents;
(iii) the Contractor assign its interest in the subcontract to Owner
or Owner's designee, which assignment shall become effective only upon
Contractor's default under the Contract Documents and Subcontractor's
receipt of notification from Owner (a) that Contractor is in default under
the Contract Documents, (b) the name of the assignee, and (c) that the
assignment is effective;
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(iv) require submission to the Contractor of applications for payment
under each Subcontract to which the Contractor is a party, in reasonable
time to enable the Contractor to apply for payment in accordance with
Article 9 of the General Conditions and Articles 6 and 7 of the Agreement.
Such application for payment shall be for the same percentage complete as
requested by the Contractor;
(v) require that all claims for additional costs, extensions of time,
damages for delays or otherwise with respect to subcontracted portions of
the Work shall be submitted to the Contractor (via any Subcontractor or
Sub-subcontractor where appropriate) in sufficient time so that the
Contractor may comply in the manner provided in the Contract Documents for
like claims by the Contractor upon the Owner;
(vi) waive all rights the Contractor and Subcontractor may have
against one another for damages caused by fire or other perils covered by
the property insurance described in Paragraph 11.3 hereof, except such
rights as they may have to the proceeds of such insurance held by the Owner
as trustee under Paragraph 11.3 hereof; and
(vii) obligate each Subcontractor specifically to consent to the
provisions of this Subparagraph 5.3.1. The Contractor shall make available
to each proposed Subcontractor, prior to the execution of the Subcontract,
copies of the Contract Documents to which the Subcontractor will be bound
by this Subparagraph 5.3.1, and identify to the Subcontractor any terms and
conditions of the proposed Subcontract which may be at variance with the
Contract Documents. Each Subcontractor shall similarly make copies of such
Contract Documents available to his Sub-subcontractors."
"All portions of the Work that the Contractor's organization does not
perform shall be performed under Subcontracts or other appropriate agreement
with the Contractor. The Contractor shall obtain the Owner's approval (which
Owner shall have the right to exercise in it sole discretion) before concluding
any Subcontract Agreement or material purchase order. The Owner shall have the
right to approve which subcontractor shall be used in connection with the Work."
7. Article 6: Construction By Owner Or By Separate Contractors. Subparagraph
6.2.5 of the General Conditions is hereby deleted in its entirety and the
following subparagraph is substituted in its place:
"6.2.5 Should the Contractor cause damage to the work or property of any
Subcontractor, Sub-subcontractor or separate contractor, the Contractor shall,
upon due notice, promptly attempt to settle such matter or otherwise to resolve
the dispute. If such Subcontractor, Sub-subcontractor or separate contractor
brings suit against the Owner on account of any damage alleged to have been
caused by the Contractor, the Owner shall notify the Contractor, who shall
defend such proceedings at the Contractor's expense, and if any judgment or
award against the Owner arises therefrom, the Contractor shall pay or satisfy it
and shall reimburse the Owner for all attorneys' fees and court costs which the
Owner has incurred."
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8. Article 7: Changes In The Work. The following subparagraph is hereby added
to Article 7.1:
"7.1.5 IN NO EVENT SHALL THE CONTRACTOR RECEIVE ANY COMPENSATION IN EXCESS
OF THE CONTRACT SUM NOR SHALL CONTRACTOR BE ENTITLED TO RECEIVE ANY COMPENSATION
FOR EXTRA WORK WHETHER PARTIALLY OR FULLY COMPLETED OR SIMPLY PROPOSED, UNLESS
SUCH ADDITIONAL WORK IS AUTHORIZED BY A WRITTEN CHANGE ORDER SIGNED BY THE
OWNER. ONLY THE OWNER OR THE OWNER'S REPRESENTATIVE SHALL HAVE THE RIGHT TO
ISSUE A WRITTEN CHANGE ORDER TO CONTRACTOR AUTHORIZING AN ADDITION, DELETION OR
OTHER REVISION IN THE SCOPE OF THE WORK AND/OR AN ADJUSTMENT IN THE CONTRACT SUM
OR THE PROJECT SCHEDULE. CONTRACTOR WAIVES THE RIGHT TO RECEIVE ANY COMPENSATION
FOR ADDITIONAL WORK AND AGREES THAT THE OWNER SHALL NOT BE OBLIGATED TO PAY FOR
ANY ADDITIONAL WORK UNLESS CONTRACTOR AND OWNER HAVE COMPLIED WITH THE
PROVISIONS OF THIS SUBPARAGRAPH 7.1.5."
9. Article 8: Time. The following sentences are hereby added to Subparagraph
8.3.1 of the General Conditions:
"Notwithstanding anything to the contrary in Subparagraph 8.3.1 or
elsewhere in the Contract Documents, extension of the Completion Date shall be
Contractor's sole remedy for delay unless the same shall be caused by acts
constituting willful misconduct or intentional interference by the Owner with
Contractor's performance of the Work and where to the extent that such acts
continue after Contractor's notice to Owner of such interference. Owner's
exercise of any of its rights under Article 7, Changes in the Work, regardless
of the extent or number of such changes, or Owner's exercise of any of its
remedies of suspension of the Work, or requirement of correction or re-execution
of any defective Work, shall not under the circumstances be construed as
intentional interference with Contractor's performance of the Work."
Subparagraph 8.3.2 of the General Conditions is hereby deleted in its
entirety and the following subparagraph is substituted in its place:
"8.3.2 All claims for extension of time shall be made in writing to the
Owner no more than ten (10) working days after the later to occur of (i) the
occurrence of the delay, or (ii) if the occurrence of the delay is not readily
apparent, the date on which the Contractor becomes aware of the occurrence of
the delay; otherwise they shall be waived. The Contractor shall provide in its
notice an estimate of the probable effect of such delay on the progress of the
Work. In the case of a continuing course of delay only one claim is necessary."
10. Article 9: Payments And Completion. The following sentences are hereby
added to Subparagraph 9.3.3 of the General Conditions:
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"In the event any lien, stop notice or claim is made against the Owner or
the Project for payment for labor or materials furnished in connection with the
Work, Contractor shall at its sole cost and expense promptly post a bond in
accordance with California Civil Code Sections 3143 and/or 3171 and any
successor statute(s) thereto to cause the removal of such lien or stop notice.
If Contractor fails to post such bond or otherwise remove or discharge the lien,
stop notice or claim within seven (7) days from the filing thereof, then in
addition to such other remedies it may have, Owner shall have the right (but not
the obligation) to use whatever means in its discretion it may deem appropriate
to cause said claim, stop notice or lien to be rescinded, discharged,
compromised, dismissed or removed including, without limitation, posting of a
bond in accordance with California Civil Code Sections 3143 and/or 3171 and any
successor statute(s) thereto to cause the removal of such lien or stop notice.
Upon Owner's demand, Contractor shall promptly pay, which payment shall not be
reimbursable or increase the Contract Price, all costs incurred by Owner in
discharging such lien, stop notice and/or claim including, without limitation,
attorneys' fees and premiums for all bonds which the Owner may obtain and record
for the purpose of removing any lien, stop notice or claim relating to the
Work."
The following subparagraph is hereby added to Paragraph 9.10 of the General
Conditions:
"9.10.5 The Contractor understands and agrees that its final Application
for Payment will constitute a further representation that the conditions
precedent to the Contractor's being entitled to final payment as set forth in
Paragraph 9.10 have been fulfilled."
11. Article 10: Protection Of Persons And Property. Subparagraph 10.1.3 of the
General Conditions is hereby deleted in its entirety and the following
subparagraph is substituted in its place.
"10.1.3(a) Contractor and his Subcontractors shall use, handle, transport
and dispose of all Hazardous Materials (as defined below) in compliance with all
present and future federal, state and local environmental health or safety law,
including, but not limited to, all such statutes, regulations, rules,
ordinances, codes, and rules of common law. Contractor further agrees that
Contractor and his subcontractors shall not cause the discharge, release or
disposal of any Hazardous Material on the job site. Contractor and his
Subcontractors shall, upon completion of performance of all duties under this
Agreement, remove all supplies, materials and waste containing any Hazardous
Material from the job site. Contractor shall bear full financial responsibility,
as between the parties of this Agreement, for the compliance of Contractor and
his Subcontractors with the provisions of this Paragraph. Contractor agrees to
indemnify, defend (pursuant to the terms of the Agreement), protect and hold
Owner and its constituent partners and the other Indemnified Parties harmless
from and against any liabilities, costs, claims, damages, fines, penalties or
expenses, including actual attorneys' fees and costs of investigation, soils
testing, governmental approvals, remediation and clean-up arising out
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of or in any way connected with the failure of Contractor or his Subcontractors,
their agents, employees, officers, or representatives, to comply with this
paragraph. Should Contractor or his Subcontractors discharge, release or dispose
of any Hazardous Material on the site in violation of this paragraph, Contractor
shall immediately so inform Construction Manager and Owner in writing. In the
event Contractor or his Subcontractors encounter on the site any pipeline,
underground storage tank or other container, of any kind, that may contain a
Hazardous Material, or encounter material reasonably believed to be a Hazardous
Material, Contractor shall immediately stop work in the area affected and report
the condition to Owner in writing. If Contractor or his Subcontractors do not
comply with the requirements of this paragraph Owner may, but is not obligated
to, give written notice of violation to Contractor. Should Contractor or his
Subcontractors fail to comply with the requirements of this paragraph within
twenty-four (24) hours from the time Owner issues such written notice of
noncompliance or within the time of an abatement period specified by any
governmental agency, whichever period is shorter, Contractor shall be in
material default of the Agreement."
"(b) "Hazardous Material" means any substance: (1) the presence of which
requires investigation or remediation under any present or future federal, state
or local statute, regulation, ordinance, rule code, order, action, policy or
common law, or (2) which is or becomes defined as a "hazardous waste",
"hazardous substance", pollutant or contaminant under any present or future
federal, state or local statute, regulation, rule or ordinance or amendments
thereto including, without limitation, the Comprehensive Environmental Response
Compensation and Liability Act (42 U.S.C. Sections 9601 et seq.) and/or the
Resource Conservation and Recovery Act (42 U.S.C. Sections 6901 et seq.); or (3)
which is toxic, explosive, corrosive, flammable, infectious, radioactive,
carcinogenic, mutagenic, or otherwise hazardous and is or becomes regulated by
any governmental authority, agency, department, commission, board, agency or
instrumentality of the United States, the State of California or any political
subdivision thereof, or (4) the presence of which on the Property causes or
threatens to cause a nuisance upon the Property or to adjacent properties or
poses or threatens to pose a hazard to the health or safety of persons on or
about the Property; or (5) which contains gasoline, diesel fuel or other
petroleum hydrocarbons; or (6) which contains polychlorinated biphenyls (PCBs),
asbestos or urea formaldehyde foam insulation."
12. Article 11: Insurance.
Prior to the start of the Contractor's work, the contractor shall procure for
contractor's work and maintain in force Worker's Compensation Insurance and all
insurance required of the contractor under the contract documents.
Rauch Industries, c/o Syratech Corporation shall be named as an additional
insured on each of these policies provided by the Contractor. The Contractor's
comprehensive General and Automobile Liability Insurance shall be written with
Limits of Liability not less than the following:
A. Comprehensive General Liability including completed operations,
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1. Bodily Injury $1,000,000 each occurrence
$1,000,000 aggregate
2. Property Damage $1,000,000 each occurrence
$1,000,000 aggregate
B. Comprehensive Automobile Liability
1. Bodily Injury $1,000,000 each occurrence
$1,000,000 aggregate
2. Property Damage $1,000,000 each occurrence
$1,000,000 aggregate
The Contractor shall maintain in effect all insurance coverage required under
this Agreement at the Contractor's sole expense and with insurance companies
acceptable to Rauch Industries, c/o Syratech Corporation. All insurance policies
shall contain a provision that the coverage afforded thereunder shall not be
canceled or not renewed, nor restrictive modifications added, until at least
thirty (30) days prior written notice has been given to the Contractor unless
otherwise specifically required in the contract documents.
Certificates of Insurance, or certified copies of policies acceptable to Rauch
Industries, c/o Syratech Corporation shall all be filed with Rauch prior to the
commencement of work.
In the event the Contractor fails to obtain or maintain any insurance coverage
required under this Agreement, Rauch Industries, c/o Syratech Corporation may
purchase such coverage and charge the expense thereof to the Contractor, or
terminate this Agreement.
To the fullest extent permitted by law, the Contractor shall indemnify and hold
harmless Rauch Industries, c/o Syratech Corporation (including its affiliates,
parents and subsidiaries) and other contractors and subcontractors and all their
agents and employees from the against all claims, damages, loss and expenses,
including, but not limited to, attorney's fees, arising out of or resulting from
the performance of the Contractor's work provided that any such claim, damage,
loss or expense is attributable to bodily injury, sickness, disease or death or
to injury to or destruction of tangible property (other than the Contractor's
work itself) including the loss of use resulting therefrom, to the extent caused
or alleged to be caused in whole or in any part by any negligent act or omission
of the Contractor or anyone directly or indirectly employed by the Contractor or
anyone for whose acts the Contractor may be liable, regardless of whether it is
caused in part by the party indemnified hereunder.
In any and all claims against Rauch Industries, c/o Syratech Corporation,
(including its affiliates, parents, and subsidiaries) and other contractors or
subcontractors or any of their agents or employee of the Contractor, anyone
directly or indirectly employed by the Contractor or anyone for whose acts the
Contractor may be liable, the indemnification
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obligation under this Agreement shall not be limited in any way by any
limitation on the amount or type of damages, compensation or benefits payable by
or for the Contractor under worker's or workmen's compensation acts, disability
benefit acts or other employee benefit acts.
The following subparagraphs are hereby added to Paragraph 11.3 of the
General Conditions:
"11.3.12 Contractor shall purchase and maintain such insurance as will
reasonably protect him from the potential liability described in Paragraph 3.18.
The Contractor hereby indemnifies and agrees to hold harmless and defend Owner,
its shareholders, and its affiliates from all loss and liability to the extent
of any deficiency of coverage under such insurance. The Contractor will fully
insure, and the Owner will not be liable for the loss of, any building materials
not stored on the site of the Project."
"11.3.13 The coverage obtained pursuant to the provisions of Subparagraph
11.3.12 shall include insurance against damage from design warranties given
Subcontractors or Sub-subcontractors. This obligation shall survive any
termination of the Contract."
The following subparagraph is hereby added to Paragraph 11.4 of the General
Conditions:
"11.4.3 At the Owner's request (the cost of which shall be paid by Owner),
the Contractor shall obtain bonds from all Subcontractors and furnish to the
Owner bonds wherein the Subcontractors are the principals and Owner and the
Contractor are the dual obligees. Such bonds shall cover the faithful and full
performance of the Subcontracts, the payment of all obligations arising
thereunder; and the lien-free completion of the Subcontracts and the Work. At
the Owner's request (the cost of which shall be paid by Owner), the Contractor
shall also obtain a performance bond and a payment and materials bond in the
full amount of the Contract Sum wherein the Contractor is the Principal and the
Owner is the Obligee. The bonds shall be on forms and with a surety acceptable
to Owner."
The following paragraphs are hereby added to Article 11 of the General
Conditions:
"11.5 Requirements; Additional Insureds; Type Of Coverage. Before
Contractor does any work at or prepares or delivers materials to the side of
construction, the Contractor shall provide to Owner Certificates of Insurance
(and agrees that within thirty (30) days to submit to Owner endorsements to the
required policies) evidencing insurance coverage acceptable to Contractor in
amounts as specified herein. Contractor agrees to maintain the general liability
insurance for a minimum of five (5) years following completion of the Work and
continue to name Owner and any other required interest under this paragraph as
additional insured(s) for the entire five (5) year period. All insurance
policies maintained by the Contractor pursuant to the Agreement and the
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General Conditions shall name the Owner, all of Owner's affiliated companies,
any lender with an interest in the Project and all other Indemnified Parties, as
additional insureds. Contractor's insurance policy shall be primary and any
insurance maintained by Owner shall be non-contributing. Owner shall not be
required to contribute to the payment of premiums or other costs with respect to
Contractor's policy. Contractor's insurance policy shall include a Severability
of Interest clause or a Cross Liability endorsement. Contractor's insurance
policy shall provide that an act or omission of one of the named insureds shall
not reduce or avoid coverage to the other named insureds and shall afford
coverage for all claims based on acts, omissions, injury and damage, which
claims occurred or arose (or the onset of which occurred or arose) in whole or
in part during the policy period. Contractor shall require all of its
Subcontractors to carry insurance in the same amounts required of Contractor
above and with companies acceptable to Owner."
"11.6 Failure To Obtain Insurance. If Contractor fails to procure and
maintain the above-described insurance, or any portion thereof, Owner shall have
the right, but not the obligation, to procure and maintain the required
insurance for and in the name of Contractor and Contractor shall pay the cost
thereof and shall furnish all information necessary to acquire and maintain such
insurance. Contractor shall not violate or knowingly permit any violation of any
conditions or terms of the policies of insurance described herein."
13. Article 12: Uncovering And Correction Of Work. Subparagraph 12.2.2 of the
General Conditions is hereby deleted in its entirety and the following
subparagraph substituted in its place:
"12.2.2 If, within one (1) year after the date on which the issuance
of the final Certificate for Payment pursuant to Paragraph 9.10 of the General
Conditions or within such longer period of time as may be prescribed by law or
by the terms of any applicable special warranty required by the Contract
Documents, any of the Work is found to be defective or not in accordance with
the Contract Documents, the Contractor shall correct ("Corrective Work") it
promptly after receipt of a written notice ("Notice of Defect") from the Owner
to do so unless the Owner has previously given the Contractor a written
acceptance of such condition. The Owner shall give such notice promptly after
discovery of the condition. Contractor shall commence the Corrective Work within
five (5) days of receipt of the Notice of Defect and shall diligently complete
the Corrective Work to the satisfaction of Owner. If Contractor fails to
commence the Corrective Work with fifteen (15) days after receipt of the Notice
of Defect, or if Contractor fails to diligently complete the Corrective Work,
Owner shall have the right (but shall not have the obligation) to perform the
Corrective Work. In the event Owner performs the Corrective Work, Contractor
shall promptly reimburse Owner for the cost of the Corrective Work, including a
reasonable sum for overhead and profit. The Contractor shall be responsible for
enforcing any and all warranties given by Subcontractors or Sub-subcontractors,
which shall run to the benefit of Owner. This obligation shall survive any
termination of the Contract. The above provisions do not limit or modify any
other recourse or remedy
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available to the Owner at law or in equity with respect to defective work or
other violation of the Contract Documents."
14. Article 13: Miscellaneous Provisions. The provisions of Subparagraph 13.2.1
of the General Conditions are subject to Paragraph 7.13 of the Agreement.
The following subparagraph is hereby added to Paragraph 13.4 of the General
Conditions:
"13.3.1 Written Notice. All notices required to be given hereunder shall be
given in writing and shall be personally delivered, sent by facsimile or sent by
registered or certified mail, postage prepaid, return receipt requested, at the
following addresses:
If to Owner: Rauch Industries
Subsidiary of Syratech Corporation
175 McClellan Highway
East Boston, MA 02128
Attention: E. Merle Randolph
Telephone No. (617) 569-2200
Telecopier No: (617) 569-8484
If to Contractor: Ron Neagle
C.A.S. Construction, Inc.
11020 Rose Avenue
Fontana, CA 92337
Telephone No: (909) 357-8056
Telecopier No: (909) 357-2661
Unless sooner received, notice shall be deemed given three (3) business days
following the date of mailing, or if personally delivered, as of the date of
such delivery. Notice of change of address shall be given by written notice in
the manner detailed in this paragraph."
"13.4.3 During all disputes, actions, claims and other matters in question
arising out of, or relating to, this Contract or the breach hereof, the
Contractor shall carry on the Work and maintain the Progress Schedule, unless
otherwise provided herein or agreed between the Contractor and the Owner in
writing."
15. Article 14: Termination Or Suspension Of The Contract. Subparagraphs 14.3.1
through 14.3.3 of the General Conditions are hereby deleted in their entirety
and the following paragraphs are substituted therefor:
"14.2.1 Notwithstanding anything to the contrary set forth in the
Agreement, Owner shall have the right at any time for any or no reason
whatsoever to suspend work on the Project and all work connected therewith or to
terminate the Contract upon giving Contractor ten (10) days' prior written
notice. Thereupon, as the Contractor's sole
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remedy hereunder, the Owner shall pay the Contractor for the Work completed to
the effective date of the termination of the Contract as set forth below."
"14.3.2 Upon receipt of the notice of termination, Contractor shall
immediately, in accordance with Owner's instructions, proceed with performance
of the following duties:
14.3.2.1 Cease operations as specified;
14.3.2.2 Place no further orders and enter into no further
Subcontracts for materials, labor, services or facilities;
14.3.2.3 Unless otherwise specified, terminate all Subcontracts and
orders to the extent that they relate to Work so terminated;
14.3.2.4 Complete the performance of the Work not terminated; and
14.3.2.5 Take such other actions as may be necessary or requested by
Owner for the protection and preservation of the terminated Work."
"14.3.3 In the event of termination for Owner's convenience,
Contractor shall be paid:
14.3.3.1 A pro rata portion of the Contract Sum based upon the
percentage of Work completed for Work properly performed on the terminated
portion of the Work before the effective date of termination; and
14.3.3.2 Reasonable demobilization costs directly related to such
termination as described in detail in invoices and descriptions provided by
Contractor and approved by Owner."
"14.3.4 In determining amounts due Contractor under this Paragraph 14.3,
Owner shall be credited for payments previously made to Contractor for the
terminated portion of the Work and claims which Owner has against Contractor
under the Contract, and for the value of materials, supplies, equipment or other
items to be disposed of by Contractor that are covered under the Contract Sum.
If Contractor has, prior to the date of termination, collected sums in excess of
the reimbursable amounts set forth above, Contractor shall promptly pay such
excess to Owner or, at Owner's option, such excess shall be deducted from any
amounts due Contractor from Owner. In the event of such termination by Owner for
Contractor's breach, Owner may require Contractor to promptly assign all or some
Subcontracts, construction, plant, materials, tools, equipment and appliances
previously acquired by Owner, rental agreements and any other commitments which
Owner in Owner's sole discretion chooses to take by assignment, and in such
event, Contractor shall promptly execute and deliver to Owner written
assignments provided by Owner."
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"14.3.5 Nothing contained in this Article 14 shall be deemed to limit or
affect any other rights or remedies available to either party under the contract
in the event of a breach by the other party including without limitation the
recovery of extra costs or damages resulting from the breach of the other party
and the right of Owner to carry out the Work."
"14.3.6 In no event shall Contractor have a claim for damages, lost profits
or otherwise on account of the termination of the Agreement by Owner or
Contractor."
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IN WITNESS WHEREOF, the parties have executed, as a part of the Contract,
this Supplement as of the day and year of execution of the Agreement.
"OWNER" Rauch Industries,
a subsidiary of Syratech Corporation
By: /s/ E. Merle Randolph
__________________________________
Name: E. Merle Randolph
Title: Chief Financial Officer
By: __________________________________
Name: ____________________________
Title: ___________________________
"CONTRACTOR" C.A.S. Construction, Inc.,
a Corporation
By: /s/ Ronald Neagle
__________________________________
Name: Ronald Neagle
Title: President
By: __________________________________
Name: ____________________________
Title: ___________________________
License # ____________________________
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[Logo]
General Conditions of the Contract for Construction
Construction Manager-Adviser Edition
AIA Document A201/CMa - Electronic Format
THIS DOCUMENT HAS IMPORTANT LEGAL CONSEQUENCES: CONSULTATION WITH AN ATTORNEY IS
ENCOURAGED WITH RESPECT TO ITS COMPLETION OR MODIFICATION. AUTHENTICATION OF
THIS ELECTRONICALLY DRAFTED AIA DOCUMENT MAY BE MADE BY USING AIA DOCUMENT D401.
Copyright 1975, 1980, copyright 1992 by The American Institute of Architects,
1735 New York Avenue N.W., Washington D.C. 20006-5292. 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.
Table of Articles
1. GENERAL PROVISIONS
2. OWNER
3. CONTRACTOR
4. ADMINISTRATION OF THE CONTRACT
5. SUBCONTRACTORS
6. CONSTRUCTION BY OWNER OR BY OTHER CONTRACTORS
7. CHANGES IN THE WORK
8. TIME
9. PAYMENTS AND COMPLETION
10. PROTECTION OF PERSONS AND PROPERTY
11. INSURANCE AND BONDS
12. UNCOVERING AND CORRECTION OF WORK
13. MISCELLANEOUS PROVISIONS
14. TERMINATION OR SUSPENSION OF THE CONTRACT
<PAGE>
GENERAL CONDITIONS OF THE CONTRACT FOR CONSTRUCTION
ARTICLE 1
GENERAL PROVISIONS
1.1 BASIC DEFINITIONS
1.1.1 THE CONTRACT DOCUMENTS
A Modification is (1) a written amendment to the Contract signed by both
parties, (2) a Change Order, (3) a Construction Change Directive or (4) a
written order for a minor change in the Work issued by the Architect. Unless
specifically enumerated in the Agreement, the Contract Documents do not include
other documents such as bidding requirements (advertisement or invitation to
bid, Instructions to Bidders, sample forms, the Contractor's bid or portions of
addenda relating to bidding requirements).
1.1.2 THE CONTRACT
The Contract Documents form the Contract for Construction. The Contract
represents the entire and integrated agreement between the parties hereto and
supersedes prior negotiations, representations or agreements, either written or
oral. The Contract may be amended or modified only by a Modification. The
Contract Documents shall not be construed to create a contractual relationship
of any kind (1) between the Architect and Contractor, (2) between the
Construction Manager and Contractor, (3) between the Architect and Construction
Manager, (4) between the Owner and a Subcontractor or Sub-subcontractor or (5)
between any persons or entities other than the Owner and Contractor. The
Construction Manager and Architect shall, however, be entitled to performance
and enforcement of obligations under the Contract intended to facilitate
performance of their duties.
1.1.3 THE WORK
The term "Work" means the construction and services required by the Contract
Documents, whether completed or partially completed, and includes all other
labor, materials, equipment and services provided or to be provided by the
Contractor to fulfill the Contractor's obligations. The Work may constitute the
whole or a part of the Project.
1.1.4 THE PROJECT
The Project is the total construction of which the Work performed under the
Contract Documents may be the whole or a part and which may include construction
by other Contractors and by the Owner's own forces including persons or entities
under separate contracts not administered by the Construction Manager.
1.1.5 THE DRAWINGS
The Drawings are the graphic and pictorial portions of the Contract Documents,
wherever located and whenever issued, showing the design, location and
dimensions of the Work, generally including plans, elevations, sections,
details, schedules and diagrams.
1.1.6 THE SPECIFICATIONS
The Specifications are that portion of the Contract Documents consisting of the
written requirements for materials, equipment, construction systems, standards
and workmanship for the Work, and performance of related services.
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1.1.7 THE PROJECT MANUAL
The Project Manual is the volume usually assembled for the Work which may
include the bidding requirements, sample forms, Conditions of the Contract and
Specifications.
1.2 EXECUTION, CORRELATION AND INTENT
1.2.1 The Contract Documents shall be signed by the Owner and Contractor as
provided in the Agreement. If either the Owner or Contractor or both do not sign
all the Contract Documents, the Architect shall identify such unsigned Documents
upon request.
1.2.2 Execution of the Contract by the Contractor is a representation that the
Contractor has visited the site, become familiar with local conditions under
which the Work is to be performed and correlated personal observations with
requirements of the Contract Documents.
1.2.3 The intent of the Contract Documents is to include all items necessary for
the proper execution and completion of the Work by the Contractor. The Contract
Documents are complementary, and what is required by one shall be as binding as
if required by all; performance by the Contractor shall be required only to the
extent consistent with the Contract Documents and reasonably inferable from them
as being necessary to produce the intended results.
1.2.4 Organization of the Specifications into divisions, sections and articles,
and arrangement of Drawings shall not control the Contractor in dividing the
Work among Subcontractors or in establishing the extent of Work to be performed
by any trade.
1.2.5 Unless otherwise stated m the Contract Documents, words which have
well-known technical or construction industry meanings are used in the Contract
Documents in accordance with such recognized meanings.
1.3 OWNERSHIP AND USE OF ARCHITECTS DRAWINGS, SPECIFICATIONS AND OTHER DOCUMENTS
1.3.1 The Drawings, Specifications and other documents prepared by the Architect
are instruments of the Architect's service through which the Work to be executed
by the Contractor is described. The Contractor may retain one contract record
set. Neither the Contractor nor any Subcontractor, Sub-subcontractor or material
or equipment supplier shall own or claim a copyright in the Drawings,
Specifications and other documents prepared by the Architect, and unless
otherwise indicated the Architect shall be deemed the author of them and will
retain all common law, statutory and other reserved rights, in addition to the
copyright. All copies of them, except the Contractor's record set, shall be
returned or suitably accounted for to the Architect, on request, upon completion
of the Work. The Drawings, Specifications and other documents prepared by the
Architect, and copies thereof furnished to the Contractor, are for use solely
with respect to this Project. They are not to be used by the Contractor or any
Subcontractor, Sub-subcontractor or material or equipment supplier on other
projects or for additions to this Project outside the scope of the Work without
the specific written consent of the Owner and Architect. The Contractor,
Subcontractors, Sub-subcontractors and material or equipment suppliers are
granted a limited license to use and reproduce applicable portions of the
Drawings, Specifications and other documents prepared by the Architect
appropriate to and for use in the execution of their Work under the Contract
Documents. All copies made under this license shall bear the statutory copyright
notice, if any, shown on the Drawings, Specifications and other documents
prepared by the Architect. Submittal or distribution to meet official regulatory
requirements or for other purposes in connection with this Project is not to be
construed as publication m derogation of the Architect's copyright or other
reserved rights.
1.4 CAPITALIZATION
1.4.1 Terms capitalized in these General Conditions include those which are (l)
specifically defined, (2) the titles of numbered articles and identified
references to Paragraphs, Subparagraphs and Clauses in the document or (3) the
titles of other documents published by the American Institute of Architects.
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WASHINGTON, D.C., 20006-5292
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1.5 INTERPRETATION
1.5.1 In the interest of brevity the Contract Documents frequently omit
modifying words such as "all" and "any" and articles such as "the" and "an," but
the fact that a modifier or an article is absent from one statement and appears
in another is not intended to affect the interpretation of either statement.
ARTICLE 2
OWNER
2.1 DEFINITION
2.1.1 The Owner is the person or entity identified as such in the Agreement and
is referred to throughout the Contract Documents as if singular in number. The
term "Owner" means the Owner or the Owner's authorized representative.
2.1.2 The Owner upon reasonable written request shall furnish to the Contractor
in writing information which is necessary and relevant for the Contractor to
evaluate, give notice of or enforce mechanic's lien rights. Such information
shall include a correct statement of the record legal title to the property on
which the Project is located, usually referred to as the site, and the Owner's
interest therein at the time of execution of the Agreement and, within five days
after any change, information of such change in title, recorded or unrecorded.
2.2 INFORMATION AND SERVICES REQUIRED OF THE OWNER
2.2.1 The Owner shall, at the request of the Contractor, prior to execution of
the Agreement and promptly from time to time thereafter, furnish to the
Contractor reasonable evidence that financial arrangements have been made to
fulfill the Owner's obligations under the Contract. [Note: Unless such
reasonable evidence were furnished on request prior to the execution of the
Agreement, the prospective contractor would not be required to execute the
Agreement or to commence the Work].
2.2.2 The Owner shall furnish surveys describing physical characteristics, legal
limitations and utility locations for the site of the Project, and a legal
description of the site.
2.2.3 Except for permits and fees which are the responsibility of the Contractor
under the Contract Documents, the Owner shall secure and pay for necessary
approvals, easements, assessments and charges required for construction, use or
occupancy of permanent structures or for permanent changes in existing
facilities. Unless otherwise provided under the Contract Documents, the Owner,
through the Construction Manager, shall secure and pay for the building permit.
2.2.4 Information or services under the Owner's control shall be furnished by
the Owner with reasonable promptness to avoid delay in orderly progress of the
Work.
2.2.5 Unless otherwise provided in the Contract Documents, the Contractor will
be furnished, free of charge, such copies of Drawings and Project Manuals as are
reasonably necessary for execution of the Work. Any cost to the Contractor for
such drawings and specs shall be considered to be in the Contractors sum.
2.2.6 The Owner shall forward all communications to the Contractor through the
Construction Manager and shall contemporaneously provide the same communications
to the Architect.
2.2.7 The foregoing are in addition to other duties and responsibilities of the
Owner enumerated herein and especially those in respect to Article 6
(Construction by Owner or by Other Contractors), Article 9 (Payments and
Completion) and Article 11 (Insurance and Bonds).
2.3 OWNER'S RIGHT TO STOP THE WORK
2.3.1 If the Contractor fails to correct Work which is not in accordance with
the requirements of the Contract Documents as required by Paragraph 12.2 or
persistently fails to carry out Work in accordance with the Contract Documents,
the Owner, by written order signed personally or by an agent specifically so
empowered by the Owner in writing, may order the Contractor
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to stop the Work, or any portion thereof, until the cause for such order has
been eliminated; however, the right of the Owner to stop the Work shall not give
rise to a duty on the part of the Owner to exercise this right for the benefit
of the Contractor or any other person or entity.
2.4 OWNER'S RIGHT TO CARRY OUT THE WORK
2.4.1 If the Contractor defaults or neglects to carry out the Work in accordance
with the Contract Documents and fails within a seven-day period after receipt of
written notice from the Owner to commence and continue correction of such
default or neglect with diligence and promptness, the Owner may after such
seven-day period give the Contractor a second written notice to correct such
deficiencies within a second seven-day period. If the Contractor within such
second seven-day period after receipt of such second notice fails to commence
and continue to correct any deficiencies, the Owner may, without prejudice to
other remedies the Owner may have, correct such deficiencies. In such case an
appropriate Change Order shall be issued deducting from payments then or
thereafter due the Contractor the cost of correcting such deficiencies,
including compensation for the Construction Manager's and Architect's and their
respective consultants' additional services and expenses made necessary by such
default, neglect or failure. Such action by the Owner and amounts charged to the
Contractor are both subject to prior approval of the Architect, after
consultation with the Construction Manager. If payments then or thereafter due
the Contractor are not sufficient to cover such amounts, the Contractor shall
pay the difference to the Owner.
ARTICLE 3
CONTRACTOR
3.1 DEFINITION
3.1.1 The Contractor is the person or entity identified as such in the Agreement
and is referred to throughout this Agreement as if singular in number. The term
"Contractor" means the Contractor or the Contractor's authorized representative.
3.1.2 The plural term "Contractors" refers to persons or entities who perform
construction under Conditions of the Contract that are administered by the
Construction Manager, and that are identical or substantially similar to these
Conditions.
3.2 REVIEW OF CONTRACT DOCUMENTS AND FIELD CONDITIONS BY CONTRACTOR
3.2.1 The Contractor shall carefully study and compare the Contract Documents
with each other and with information furnished by the Owner pursuant to
Subparagraph 2.2.2 and shall at once report to the Construction Manager and
Architect errors, inconsistencies or omissions discovered. The Contractor shall
not be liable to the Owner, Construction Manager or Architect for damage
resulting from errors, inconsistencies or omissions in the Contract Documents
unless the Contractor recognized or should have recognized such error,
inconsistency or omission and failed to report it to the Construction Manager
and Architect. If the Contractor performs any construction activity involves a
recognized error, inconsistency or omission in the Contract Documents without
such notice to the Construction Manager and Architect, the Contractor shall
assume full responsibility for such performance and shall bear an full amount of
the attributable costs for correction.
3.2.2 The Contractor shall take field measurements and verify field conditions
and shall carefully compare such field measurements and conditions and other
information known to the Contractor with the Contract Documents before
commencing activities. Errors, inconsistencies or omissions discovered shall be
reported to the Construction Manager and Architect at once.
3.2.3 The Contractor shall perform the Work in accordance with the Contract
Documents and submittals approved pursuant to Paragraph 3.12.
3.3 SUPERVISION AND CONSTRUCTION PROCEDURES
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3.3.1 The Contractor shall supervise and direct the Work, using the Contractor's
best skill and attention. The Contractor shall be solely responsible for and
have control over construction means, methods, techniques, sequences and
procedures and for coordinating all portions of the Work under this Contract,
subject to overall coordination of the Construction Manager as provided in
Subparagraphs 4.6.3 and 4.6.4.
3.3.2 The Contractor shall be responsible to the Owner for acts and omissions of
the Contractor's employees, Subcontractors and their agents and employees, and
other persons performing portions of the Work under a contract with the
Contractor.
3.3.3 The Contractor shall not be relieved of obligations to perform the Work in
accordance with the Contract Documents either by activities or duties of the
Construction Manager or Architect in their administration of the Contract, or by
tests, inspections or approvals required or performed by persons other than the
Contractor.
3.3.4 The Contractor shall inspect portions of the Project related to the
Contractor's Work in order to determine that such portions are in proper
condition to receive subsequent Work.
3.4 LABOR AND MATERIALS
3.4.1 Unless otherwise provided in the Contract Documents, the Contractor shall
provide and pay for labor, materials, equipment, tools, construction equipment
and machinery, water, heat, utilities, and other facilities and services
necessary for proper execution and completion of the Work, whether temporary or
permanent and whether or not incorporated or to be incorporated in the Work.
3.4.2 The Contractor shall enforce strict discipline and good order among the
Contractor's employees and other persons carrying out the Contract. The
Contractor shall not permit employment of unfit persons or persons not skilled
in tasks assigned to them.
3.5 WARRANTY
3.5.1 The Contractor warrants to the Owner, Construction Manager and Architect
that materials and equipment furnished under the Contract will be of good
quality and new unless otherwise required or permitted by the Contract
Documents, that the Work will be free from defects and that the Work will
conform with the requirements of the Contract Documents. Work not conforming to
these requirements, including substitutions not properly approved and
authorized, shall be considered defective. If required by the Owner,
Construction Manager or Architect, the Contractor shall furnish satisfactory
evidence as to the kind and quality of materials and equipment.
3.6 TAXES
3.6.1 The Contractor shall pay sales, consumer, use and similar taxes for the
Work or portions thereof provided by the Contractor which are legally enacted
when bids are received or negotiations concluded, whether or not yet effective
or merely scheduled to go into effect.
3.7 PERMITS, FEES AND NOTICES
3.7.1 Unless otherwise provided in the Contract Documents, the Owner shall
secure and pay for the building permit and the Contractor shall secure and pay
for all other permits and governmental fees, licenses and inspections necessary
for proper execution and completion of the Work which are customarily secured
after execution of the Contract and which are legally required when bids are
received or negotiations concluded.
3.7.2 The Contractor shall comply with and give notices required by laws,
ordinances, rules and regulations and lawful orders of public authorities
bearing on performance of the Work.
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3.7.3 It is not the Contractor's responsibility to ascertain that the Contract
Documents are in accordance with applicable laws, statutes, ordinances, building
codes, and rules and regulations. However, if the Contractor observes that
portions of the Contract Documents are at variance therewith, the Contractor
shall promptly notify the Construction Manager, Architect and Owner in writing,
and necessary changes shall be accomplished by appropriate Modification.
3.7.4 If the Contractor performs Work and should have known or knows it
to be contrary to laws, statutes, ordinances, building codes, and rules and
regulations without such notice to the Construction Manager, Architect and
Owner, the Contractor shall assume full responsibility for such Work and shall
bear all of the attributable costs for correction.
3.8 ALLOWANCES
3.8.1 The Contractor shall include in the Contract Sum all allowances stated in
the Contract Documents. Items covered by allowances shall be supplied for such
amounts and by such persons or entities as the Owner may direct, but the
Contractor shall not be required to employ persons or entities against which the
Contractor makes reasonable objection.
3.8.2 Unless otherwise provided in the Contract Documents:
materials and equipment under an allowance shall be selected promptly by the
Owner to avoid delay in the Work;
allowances shall cover the cost to the Contractor of materials and equipment
delivered at the site and all required taxes, less applicable trade discounts;
Contractor's costs for unloading and handling at the site, labor, installation
costs, overhead, profit and other expenses contemplated for stated allowance
amounts shall be included in the Contract Sum and not in the allowances;
.4 whenever costs are more than or less than allowances, the Contract Sum shall
be adjusted accordingly by Change Order. The amount of the Change Order
shall reflect (l) the difference between actual costs and the allowances
under Clause 3.8.2.2 and (2) changes in Contractor's costs under Clause
3.8.2.3.
3.9 SUPERINTENDENT
3.9.1 The Contractor shall employ a competent superintendent and necessary
assistants who shall be in attendance at the Project site during performance of
the Work. The superintendent shall represent the Contractor, and communications
given to the superintendent shall be as binding as if given to the Contractor.
Important communications shall be confirmed in writing. Other communications
shall be similarly confirmed on written request in each case.
3.10 CONTRACTOR'S CONSTRUCTION SCHEDULE
3.10.1 The Contractor, immediately after being awarded the Contract, shall
prepare and submit for the Owner's and Architect's information and the
Construction Manager's approval a Contractor's Construction Schedule for the
Work. Such schedule shall not exceed time limits current under the Contract
Documents, shall be revised at appropriate intervals as required by the
conditions of the Work and Project, shall be related to the entire Project
construction schedule to the extent required by the Contract Documents, and
shall provide for expeditious and practicable execution of the Work.
3.10.2 The Contractor shall cooperate with the Construction Manager in
scheduling and performing the Contractor's Work to avoid conflict, delay in or
interference with the Work of other Contractors or the construction or
operations of the Owner's own forces.
3.10.3 The Contractor shall prepare and keep current, for the Owner,
Construction Manager's or Architect's approval, a schedule of submittals which
is coordinated with the Contractor's Construction Schedule and allows the
Construction Manager, Owner and Architect reasonable time to review submittals.
3.10.4 The Contractor shall conform to the most recent schedules.
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3.11 DOCUMENTS AND SAMPLES AT THE SITE
3.11.1 The Contractor shall maintain at the site for the Owner one record copy
of the Drawings, Specifications, addenda, Change Orders and other Modifications,
in good order and marked currently to record changes and selections made during
construction, and in addition approved Shop Drawings, Product Data, Samples and
similar required submittals. These shall be available to the Construction
Manager and Architect and shall be delivered to the Construction Manager for
submittal to the Owner upon completion of the Work.
3.12 SHOP DRAWINGS, PRODUCT DATA AND SAMPLES
3.12.1 Shop Drawings are drawings, diagrams, schedules and other data specially
prepared for the Work by the Contractor or a Subcontractor, Sub-subcontractor,
manufacturer, supplier or distributor to illustrate some portion of the Work.
3.12.2 Product Data are illustrations, standard schedules, performance charts,
instructions, brochures, diagrams and other information furnished by the
Contractor to illustrate materials or equipment for some portion of the Work.
3.12.3 Samples are physical examples which illustrate materials, equipment or
workmanship and establish standards by which the Work will be judged.
3.12.4 Shop Drawings, Product Data, Samples and similar submittals are not
Contract Documents. The purpose of their submittal is to demonstrate for those
portions of the Work for which submittals are required the way the Contractor
proposes to conform to the information given and the design concept expressed in
the Contract Documents. Review by the Architect is subject to the limitations of
Subparagraph 4.6.12.
3.12.5 The Contractor shall review, approve and submit to the Construction
Manager, in accordance with the schedule and sequence approved by the
Construction Manager, Shop Drawings, Product Data, Samples and similar
submittals required by the Contract Documents. The Contractor shall cooperate
with the Construction Manager in the coordination of the Contractor's Shop
Drawings, Product Data, Samples and similar submittals with related documents
submitted by other Contractors. Submittals made by the Contractor which are not
required by the Contract Documents may be returned without action.
3.12.6 The Contractor shall perform no portion of the Work requiring submittal
and review of Shop Drawings, Product Data, Samples or similar submittals until
the respective submittal has been approved by the Construction Manager and
Architect. Such Work shall be in accordance with approved submittals.
3.12.7 By approving and submitting Shop Drawings, Product Data, Samples and
similar submittals, the Contractor represents that the Contractor has determined
and verified materials, field measurements and field construction criteria
related thereto, or will do so, and has checked and coordinated the information
contained within such submittals with the requirements of the Work and of the
Contract Documents.
3.12.8 The Contractor shall not be relieved of responsibility for deviations
from requirements of the Contract Documents by the Construction Manager's and
Architect's approval of Shop Drawings. Product Data, Samples or similar
submittals unless the Contractor has specifically informed the Construction
Manager and Architect in writing of such deviation at the time of submittal and
the Construction Manager and Architect have given written approval to the
specific deviation. The Contractor shall not be relieved of responsibility for
errors or omissions in Shop Drawings, Product Data, Samples or similar
submittals by the Construction Manager's and Architect's approval thereof. (See
Supplement)
3.12.9 The Contractor shall direct specific attention, in writing or on
resubmitted Shop Drawings, Product Data, Samples or similar submittals, to
revisions other than those requested by the Construction Manager and Architect
on previous submittals.
3.12.10 Informational submittals upon which the Construction Manager and
Architect are not expected to take responsive action may be so identified in the
Contract Documents.
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3.12.11 When professional certification of performance criteria of materials,
systems or equipment is required by the Contract Documents, the Construction
Manager and Architect shall be entitled to rely upon the accuracy and
completeness of such calculations and certifications.
3.13 USE OF SITE
3.13.1 The Contractor shall confine operations at the site to areas permitted by
law, ordinances, permits and the Contract Documents and shall not unreasonably
encumber the site with materials or equipment.
3.13.2 The Contractor shall coordinate the Contractor's operations with, and
secure the approval of, the Construction Manager before using any portion of the
site.
3.14 CUTTING AND PATCHING
3.14.1 The Contractor shall be responsible for cutting, fitting or patching
required to complete the Work or to make its parts fit together properly.
3.14.2 The Contractor shall not damage or endanger a portion of the Work or
fully or partially completed construction of the Owner's own forces or of other
Contractors by cutting, patching, excavating or otherwise altering such
construction. The Contractor shall not cut or otherwise alter such construction
by other Contractors or by the Owner's own forces except with written consent of
the Construction Manager, Owner and such other Contractors; such consent shall
not be unreasonably withheld. The Contractor shall not unreasonably withhold
from the other Contractors or the Owner the Contractor's consent to cutting or
otherwise altering the Work.
13.15 CLEANING UP
13.15.1 The Contractor shall keep the premises and surrounding area free from
accumulation of waste materials or rubbish caused by operations under the
Contract. At completion of the Work the Contractor shall remove from and about
the Project waste materials, rubbish, the Contractor's tools, construction
equipment, machinery and surplus materials.
3.15.2 If the Contractor fails to clean up as provided in the Contract
Documents, the Construction Manager may do so with the Owner's approval and the
cost thereof shall be deducted from the contract sum.
3.16 ACCESS TO WORK
3.16.1 The Contractor shall provide the Owner, Construction Manager and
Architect access to the Work in preparation and progress wherever located.
3.17 ROYALTIES AND PATENTS
3.17.1 The Contractor shall pay all royalties and license fees. The Contractor
shall defend suits or claims for infringement of patent rights and shall hold
the Owner, Construction Manager and Architect harmless from loss on account
thereof. The costs incurred in this subparagraph 3.17.1 shall be included in the
contract sum.
3.18 INDEMNIFICATION
3.18.2 In claims against any person or entity indemnified under this Paragraph
3.18 by an employee of the Contractor, a Subcontractor, anyone directly or
indirectly employed by them or anyone for whose acts they may be liable, the
indemnification obligation under this Paragraph 3.18 shall not be limited by a
limitation on amount or type of damages, compensation or benefits payable by or
for the Contractor or a Subcontractor under workers' compensation acts,
disability benefit acts or other employee benefit acts.
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3.18.3 The obligations of the Contractor under this Paragraph 3.18 shall not
extend to the liability of the Construction Manager, Architect, their
consultants, and agents and employees of any of them arising out of (1) the
preparation or approval of maps, drawings, opinions, reports, surveys, Change
Orders, designs or specifications, or (2) the giving of or the failure to give
directions or instructions by the Construction Manager, Architect, their
consultants, and agents and employees of any of them provided such giving or
failure to give is the primary cause of the injury or damage. (See Supplement)
ARTICLE 4
ADMINISTRATION OF THE
CONTRACT
4.1 ARCHITECT
4.1.1 The Architect is the person lawfully licensed to practice architecture or
an entity lawfully practicing architecture identified as such in the Agreement
and is referred to throughout the Contract Documents as if singular in number.
The term "Architect" means the Architect or the Architect's authorized
representative.
4.2 CONSTRUCTION MANAGER
4.2.1 The Construction Manager is the person or entity identified as such in the
Agreement and is referred to throughout the Contract Documents as if singular in
number. The term "Construction Manager" means the Construction Manager or the
Construction Manager's authorized representative.
4.3 Duties, responsibilities and limitations of authority of the Construction
Manager and Architect as set forth in the Contract Documents shall not be
restricted, modified or extended without written consent of the Owner,
Construction Manager, Architect and Contractor. Consent shall not be
unreasonably withheld.
4.4 In case of termination of employment of the Construction Manager or
Architect, the Owner shall appoint a construction manager or architect against
whom the Contractor makes no reasonable objection and whose status under the
Contract Documents shall be that of the former construction manager or
architect, respectively.
4.5 Disputes arising under Paragraphs 4.3 and 4.4 shall be subject to
arbitration.
4.6 ADMINISTRATION OF THE CONTRACT
4.6.1 The Construction Manager and Architect will provide administration of the
Contract as described in the Contract Documents, and will be the Owner's
representatives (1) during construction, (2) until final payment is due and (3)
with the Owner's concurrence, from time to time during the correction period
described in Paragraph 12.2. The Construction Manager and Architect will advise
and consult with the Owner and will have authority to act on behalf of the Owner
only to the extent provided in the Contract Documents, unless otherwise modified
by written instrument in accordance with other provisions of the Contract
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4.6.2 The Construction Manager will determine in general that the Work is being
performed in accordance with the requirements of the Contract Documents, will
keep the Owner informed of the progress of the Work, and will endeavor to guard
the Owner against defects and deficiencies in the Work
4.6.3 The Construction Manager will provide for coordination of the activities
of other Contractors and of the Owner's own forces with the Work of the
Contractor, who shall cooperate with them. The Contractor shall participate with
other Contractors and the Construction Manager and Owner in reviewing their
construction schedules when directed to do so. The Contractor shall make any
revisions to the construction schedule deemed necessary after a joint review and
mutual agreement. The construction schedules shall constitute the schedules to
be used by the Contractor, other Contractors, the Construction Manager and the
Owner until subsequently revised.
4.6.4 The Construction Manager will schedule and coordinate the activities of
the Contractors in accordance with the latest approved Project construction
schedule.
4.6.5 The Architect will visit the site at intervals appropriate to the stage of
construction to become generally familiar with the progress and quality of the
completed Work 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 will not be required to make
exhaustive or continuous on-site inspections to check quality or quantity of the
Work. On the basis of on-site observations as an architect, the Architect will
keep the Owner informed of progress of the Work, and will endeavor to guard the
Owner against defects and deficiencies in the Work.
4.6.6 The Construction Manager, except to the extent required by Subparagraph
4.6.4, and Architect will not have control over or charge of and will 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 as provided in Paragraph
3.3, and neither will be responsible for the Contractor's failure to carry out
the Work in accordance with the Contract Documents. Neither the Construction
Manager nor the Architect will have control over or charge of or be responsible
for acts or omissions of the Contractor, Subcontractors, or their agents or
employees, or of any other persons performing portions of the Work.
4.6.7 Communications Facilitating Contract Administration. Unless otherwise
directed by Owner, the Owner and Contractor shall communicate through the
Construction Manager, and shall contemporaneously provide the same
communications to the Architect. Communications by and with the Architect's
consultants shall be through the Architect. Communications by and with
Subcontractors and material suppliers shall be through the Contractor.
Communications by and with other Contractors shall be through the Construction
Manager and shall be contemporaneously provided to the Architect.
4.6.8 The Construction Manager will review and certify all Applications for
Payment by the Contractor, including final payment. The Construction Manager
will assemble each of the Contractor's Applications for Payment with similar
Applications from other Contractors into a Project Application and Project
Certificate for Payment. After reviewing and certifying the amounts due the
Contractors, the Construction Manager will submit the Project Application and
Project Certificate for Payment, along with the applicable Contractors'
Applications and Certificates for Payment, to the Architect.
4.6.9 Based on the Architect's observations and evaluations of Contractors'
Applications for Payment, and the certifications of the Construction Manager,
the Architect will review and certify the amounts due the Contractors and will
issue a Project Certificate for Payment.
4.6.10 The Architect will have authority to reject Work which does not conform
to the Contract Documents, and to require additional inspection or testing, in
accordance with Subparagraphs 13.5.2 and 13.5.3, whether or not such Work is
fabricated, installed or completed, but will take such action only after
notifying the Construction Manager. Subject to review by the Architect, the
Construction Manager will have the authority to reject Work which does not
conform to the Contract Documents. Whenever the Construction Manager considers
it necessary or advisable for implementation of the intent of the Contract
Documents, the Construction Manager will have authority to require additional
inspection or testing of the Work in accordance with Subparagraphs 13.5.2 and
13.5.3, whether or not such Work is fabricated, installed or completed. The
foregoing authority of the Construction Manager will be subject to the
provisions of Subparagraphs 4.6.18 through 4.6.20
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inclusive, with respect to interpretations and decisions of the Architect.
However, neither the Architect's nor the Construction Manager's authority to act
under this Subparagraph 4.6.10 nor a decision made by either of them in good
faith either to exercise or not to exercise such authority shall give rise to a
duty or responsibility of the Architect or the Construction Manager to the
Contractor, Subcontractors, material and equipment suppliers, their agents or
employees, or other persons performing any of the Work.
4.6.11 The Construction Manager will receive from the Contractor and review and
approve all Shop Drawings, Product Data and Samples, coordinate them with
information received from other Contractors, and transmit to the Architect those
recommended for approval. The Construction Manager's actions will be taken with
such reasonable promptness as to cause no delay in the Work of the Contractor or
in the activities of other Contractors, the Owner, or the Architect.
4.6.12 The Architect will review and approve or take other appropriate action
upon the 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 will be taken with such reasonable promptness as to cause
no delay in the Work of the Contractor or in the activities of the other
Contractors, the Owner, or the Construction Manager, 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, all of which remain the responsibility of the Contractor as required by
the Contract Documents. The Architect's review of the Contractor's submittals
shall not relieve the Contractor of the obligations under Paragraphs 3.3, 3.5
and 3.12. The Architect's review shall not constitute approval of safety
precautions or, unless otherwise specifically stated by the Architect, of any
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.
4.6.13 The Construction Manager will prepare Change Orders and Construction
Change Directives.
4.6.14 Following consultation with the Construction Manager, the Architect will
take appropriate action on Change Orders or Construction Change Directives in
accordance with Article 7 and will have authority to order minor changes in the
Work as provided in Paragraph 7.4.
4.6.15 The Construction Manager will maintain at the site for the Owner one
record copy of all Contracts, Drawings, Specifications, addenda, Change Orders
and other Modifications, in good order and marked currently to record all
changes and selections made during construction, and in addition approved Shop
Drawings, Product Data, Samples and similar required submittals. These will be
available to the Architect and the Contractor, and will be delivered to the
Owner upon completion of the Project.
4.6.16 The Construction Manager will assist the Architect in conducting
inspections to determine the dates of Substantial Completion and final
completion, and will receive and forward to the Architect written warranties and
related documents required by the Contract and assembled by the Contractor. The
Construction Manager will forward to the Architect a final Project Application
and Project Certificate for Payment upon compliance with the requirements of the
Contract Documents.
4.6.17 If the Owner and Architect agree, the Architect will provide one or more
project representatives to assist in carrying out the Architect's
responsibilities at the site. The duties, responsibilities and limitations of
authority of such project representatives shall be as set forth in an exhibit to
be incorporated in the Contract Documents.
4.6.18 The Architect will interpret and decide matters concerning performance
under and requirements of the Contract Documents on written request of the
Construction Manager, Owner or Contractor. The Architect's response to such
requests will be made with reasonable promptness and within any time limits
agreed upon. If no agreement is made concerning the time within which
interpretations required of the Architect shall be furnished in compliance with
this Paragraph 4.6. then delay shall not be recognized on account of failure by
the Architect to furnish such interpretations until 15 days after written
request is made for them.
4.6.19 Interpretations and decisions of the Architect will be consistent with
the intent of and reasonably inferable from the Contract Documents and will be
in writing or in the form of drawings. When making such interpretations
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and decisions, the Architect will endeavor to secure faithful performance by
both Owner and Contractor, will not show partiality to either and will not be
liable for results of interpretations or decisions so rendered in good faith.
4.6.20 The Architect's decisions on matters relating to aesthetic effect will be
final if consistent with the intent expressed in the Contract Documents.
4.7 CLAIMS AND DISPUTES
4.7.4 Continuing Contract Performance. Pending final resolution of a Claim
including arbitration, unless otherwise agreed in writing the Contractor shall
proceed diligently with performance of the Contract and the Owner shall continue
to make payments in accordance with the Contract Documents.
ARTICLE 5
SUBCONTRACTORS
5.1 DEFINITIONS
5.1.1 A Subcontractor is a person or entity who has a direct contract with the
Contractor to perform a portion of the Work at the site. The term
"Subcontractor" is referred to throughout the Contract Documents as if singular
in number and means a Subcontractor or an authorized representative of the
Subcontractor. The term "Subcontractor" does not include other Contractors or
subcontractors of other Contractors.
5.1.2 A Sub-subcontractor is a person or entity who has a direct or indirect
contract with a Subcontractor to perform a portion of the Work at the site. The
term "Sub-subcontractor" is referred to throughout the Contract Documents as if
singular in number and means a Sub-subcontractor or an authorized representative
of the Sub-subcontractor.
5.2 AWARD OF SUBCONTRACTS AND OTHER CONTRACTS FOR PORTIONS OF THE WORK
5.2.1 Unless otherwise stated in the Contract Documents or the bidding
requirements, the Contractor, prior to the award of the Contract, shall furnish
in writing to the Construction Manager for review by the Owner, Construction
Manager and Architect the names of persons or entities (including those who are
to furnish materials or equipment fabricated to a special design) proposed for
each principal portion of the Work. The Construction Manager will promptly reply
to the Contractor in writing stating whether or not the Owner, Construction
Manager or Architect, after due investigation, has reasonable objection to any
such proposed person or entity. Failure of the Construction Manager to reply
promptly shall constitute notice of no reasonable objection.
5.2.2 The Contractor shall not contract with a proposed person or entity to whom
the Owner, Construction Manager or Architect has made reasonable and timely
objection. The Contractor shall not be required to contract with anyone to whom
the Contractor has made reasonable objection.
5.2.3 If the Owner, Construction Manager or Architect has reasonable objection
to a person or entity proposed by the Contractor, the Contractor shall propose
another to whom the Owner, Construction Manager or Architect has no reasonable
objection. The Contract Sum shall be increased or decreased by the difference in
cost occasioned by such change and an appropriate Change Order shall be issued.
However, no increase in the Contract Sum shall be allowed for such change unless
the Contractor has acted promptly and responsively in submitting names as
required.
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5.2.4 The Contractor shall not change a Subcontractor, person or entity
previously selected if the Owner, Construction Manager or Architect makes
reasonable objection to such change.
5.3 SUBCONTRACTUAL RELATIONS
(See Supplement)
5.4 CONTINGENT ASSIGNMENT OF SUBCONTRACTS
5.4.1 Each subcontract agreement for a portion of the Work is assigned by the
Contractor to the Owner provided that:
.1 assignment is effective only after termination of the Contract by the Owner
and only for those subcontract agreements which the Owner accepts by
notifying the Subcontractor in writing; and
.2 assignment is subject to the prior rights of the surety, if any, obligated
under bond relating to the Contract.
5.4.2 If the Work has been suspended for more than 90 days, the Subcontractor's
compensation shall be equitably adjusted.
ARTICLE 6
CONSTRUCTION BY OWNER OR BY
OTHER CONTRACTORS
6.1 OWNER'S RIGHT TO PERFORM CONSTRUCTION WITH OWN FORCES AND TO AWARD OTHER
CONTRACTS
6.1.1 The Owner reserves the right to perform construction or operations related
to the Project with the Owner's own forces, which include persons or entities
under separate contracts not administered by the Construction Manager. The Owner
further reserves the right to award other contracts in connection with other
portions of the Project or other construction or operations on the site under
Conditions of the Contract identical or substantially similar to these including
those portions related to insurance and waiver of subrogation. If the Contractor
claims that delay or additional cost is involved because of such action by the
Owner, the Contractor shall make such Claim as provided elsewhere in the
Contract Documents.
6.1.2 When the Owner performs construction or operations with the Owner's own
forces including persons or entities under separate contracts not administered
by the Construction Manager, the Owner shall provide for coordination of such
forces with the Work of the Contractor, who shall cooperate with them.
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6.2 MUTUAL RESPONSIBILITY
6.2.1 The Contractor shall afford the Owner's own forces, Construction Manager
and other Contractors reasonable opportunity for introduction and storage of
their materials and equipment and performance of their activities, and shall
connect and coordinate the Contractor's construction and operations with theirs
as required by the Contract Documents.
6.2.2 If part of the Contractor's Work depends for proper execution or results
upon construction or operations by the Owner's own forces or other Contractors,
the Contractor shall, prior to proceeding with that portion of the Work,
promptly report to the Owner, Construction Manager and Architect apparent
discrepancies or defects in such other construction that would render it
unsuitable for such proper execution and results. Failure of the Contractor so
to report shall constitute an acknowledgment that the Owner's own forces or
other Contractors' completed or partially completed construction is fit and
proper to receive the Contractor's Work, except as to defects not then
reasonably discoverable.
6.2.3 Costs caused by delays or by improperly timed activities or defective
construction shall be borne by the party responsible therefor.
6.2.4 The Contractor shall promptly remedy damage wrongfully caused by the
Contractor to completed construction or partially completed construction or to
property of the Owner or other Contractors as provided in Subparagraph 10.2.5.
SEE SUPPLEMENT
6.2.6 The Owner and other Contractors shall have the same responsibilities for
cutting and patching as are described for the Contractor in Paragraph 3.14.
6.3 OWNER'S RIGHT TO CLEAN UP
6.3.1 If a dispute arises among the Contractor, other Contractors and the Owner
as to the responsibility under their respective contracts for maintaining the
premises and surrounding area free from waste materials and rubbish as described
in Paragraph 3.15, the Owner may clean up and allocate the cost among those
responsible as the Construction Manager, in consultation with the Owner,
determines to be just.
ARTICLE 7
CHANGES IN THE
WORK
7.1 CHANGES
7.1.1 Changes in the Work may be accomplished after execution of the Contract,
and without invalidating the Contract, by Change Order, Construction Change
Directive or order for a minor change in the Work, subject to the limitations
stated in this Article 7 and elsewhere in the Contract Documents.
7.1.2 A Change Order shall be based upon written agreement among the Owner,
Construction Manager, Architect and Contractor; a Construction Change Directive
requires agreement by the Owner, Construction
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Manager and Architect and may or may not be agreed to by the Contractor.
7.1.3 Changes in the Work shall be performed under applicable provisions of the
Contract Documents, and Contractor shall proceed promptly, unless otherwise
provided in the Change Order, Construction Change Directive or order for a minor
change in the Work.
7.1.4 If unit prices are stated m the Contract Documents or subsequently agreed
upon, and if quantities originally contemplated are so changed in a proposed
Change Order or Construction Change Directive that application of such unit
prices to quantities of Work proposed will cause substantial inequity to the
Owner or Contractor, the applicable unit prices shall be equitably adjusted.
(See Supplement)
7.2 Change Orders
7.2.1 A Change Order is a written instrument prepared by the Construction
Manager and signed by the Owner, Construction Manager, Architect and Contractor,
stating their agreement upon all of the following: a change in the Work; the
amount of the adjustment in the Contract Sum, if any; and the extent of the
adjustment in the Contract Time, if any.
7.2.2 Methods used in determining adjustments to the Contract Sum may include
those listed in Subparagraph 7.3.3.
7.3 CONSTRUCTION CHANGE DIRECTIVES
7.3.1 A Construction Change Directive is a written order prepared by the
Construction Manager and signed by the Owner, Construction Manager and
Architect, directing a change in the Work and stating a proposed basis for
adjustment, if any, in the Contract Sum or Contract Time, or both. The Owner may
by Construction Change Directive, without invalidating the Contract, order
changes in the Work within the general scope of the Contract consisting of
additions, deletions or other revisions, the Contract Sum and Contract Time
being adjusted accordingly.
7.3.2 A Construction Change Directive shall be used in the absence of total
agreement on the terms of a Change Order.
7.3.3 If the Construction Change Directive provides for an adjustment to the
Contract Sum, the adjustment shall be based at the Owner's option on one of the
following methods:
.1 mutual acceptance of a lump sum properly itemized and supported by sufficient
substantiating data to permit evaluation;
.2 unit prices stated in the Contract Documents or subsequently agreed upon;
.3 pursuant to paragraph 4 of the contract between Owner & Contractor
.4 as provided in Subparagraph 7.3.6.
7.3.4 Upon receipt of a Construction Change Directive, the Contractor shall
promptly proceed with the change in the Work involved and advise the
Construction Manager and Architect of the Contractor's agreement or disagreement
with the method, if any, provided in the Construction Change Directive for
determining the proposed adjustment in the Contract Sum or Contract Time.
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7.3.5 A Construction Change Directive signed by the Contractor indicates the
agreement of the Contractor therewith, including adjustment in Contract Sum and
Contract Time or the method for determining them. Such agreement shall be
effective immediately and shall be recorded as a Change Order.
7.3.6 If the Contractor does not respond promptly or disagrees with the method
for adjustment in the Contract Sum, the method and the adjustment shall be
determined by the Construction Manager on the basis of reasonable expenditures
and savings of those performing the Work attributable to the change, including,
in case of an increase in the Contract Sum, a reasonable allowance for overhead
and profit. In such case, and also under Clause 7.3.3.3, the Contractor shall
keep and present, in such form as the Construction Manager may prescribe, an
itemized accounting together with appropriate supporting data. Unless otherwise
provided in the Contract Documents, costs for the purposes of this Subparagraph
7.3.6 shall be limited to the following:
.1 costs of labor, including social security, old age and unemployment
insurance, fringe benefits required by agreement or custom, and workers
compensation insurance;
.2 costs of materials, supplies and equipment, including cost of transportation,
whether incorporated or consumed;
.3 rental costs of machinery and equipment, exclusive of hand tools, whether
rented from the Contractor or others;
costs of premiums for all bonds and insurance, permit fees, and sales, use or
similar taxes related to the Work; and
.5 additional costs of supervision and field office personnel directly
attributable to the change.
7.3.7 Pending final determination of cost to the Owner, amounts not in dispute
may be included in Applications for Payment. The amount of credit to be allowed
by the Contractor to the Owner for a deletion or change which results in a net
decrease in the Contract Sum shall be actual net cost as confirmed by the
Construction Manager and approved by Owner. When both additions and credits
covering related Work or substitutions are involved in a change the allowance
for overhead and profit shall be figured on the basis of net increase, if any,
with respect to that change.
7.3.8 If the Owner and Contractor do not agree with the adjustment in Contract
Time or the method for determining it, the adjustment or the method shall be
referred to the Construction Manager for determination.
7.3.9 When the Owner and Contractor agree with the determination made by the
Construction Manager concerning the adjustments in the Contract Sum and Contact
Time, or otherwise reach agreement upon the adjustments, such agreement shall be
effective immediately issued through the Construction Manager and shall be
recorded by preparation and execution of an appropriate Change Order.
7.4 MINOR CHANGES IN THE WORK
7.4.1 The Owner will have authority to order minor changes in the Work not
involving adjustment in the Contract Sum or extension of the Contract Time and
not inconsistent with the intent of the Contract Documents. Such changes shall
be effected by written order issued through the Construction Manager and shall
be binding on the Owner and Contractor. The Contractor shall carry out such
written orders promptly.
ARTICLE 8
TIME
8.1 DEFINITIONS
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8.1.1 Unless otherwise provided, Contract Time is the period of time, including
authorized adjustments, allotted in the Contract Documents for Substantial
Completion of the Work.
8.1.2 The date of commencement of the Work is the date established in the
Agreement. The date shall not be postponed by the failure to act of the
Contractor or of persons or entities for whom the Contractor is responsible.
8.1.3 The date of Substantial Completion is defined in paragraph 9.8
8.1.4 The term "day" as used in the Contract Documents shall mean calendar day
unless otherwise specifically defined.
8.2 PROGRESS AND COMPLETION
8.2.1 Time limits stated in the Contract Documents are of the essence of the
Contract. By executing the Agreement the Contractor confirms that the Contract
Time is a reasonable period for performing the Work.
8.2.2 The Contractor shall not knowingly, except by agreement or instruction of
the Owner in writing, prematurely commence operations on the site or elsewhere
prior to the effective date of insurance required by Article 11 to be furnished
by the Contractor. The date of commencement of the Work shall not be changed by
the effective date of such insurance. Unless the date of commencement is
established by a notice to proceed given by the Owner, the Contractor shall
notify the Owner in writing not less than five days or other agreed period
before commencing the Work to permit the timely filing of mortgages, mechanic's
liens and other security interests.
8.2.3 The Contractor shall proceed expeditiously with adequate forces and shall
achieve Substantial Completion within the Contract Time.
8.3 DELAYS AND EXTENSIONS OF TIME
8.3.1 If the Contractor is delayed at any time in progress of the Work by an act
or neglect of the Owner's own forces, Construction Manager, Architect, any of
the other Contractors or an employee of any of them, or by changes ordered in
the Work, or by labor disputes, fire, unusual delay in deliveries, unavoidable
casualties or other causes beyond the Contractor's control, or by delay
authorized by the Owner pending arbitration resolution of a dispute, or by other
causes which the Architect, based on the recommendation of the Construction
Manager, determines may justify delay, then the Contract Time shall be extended
by Change Order for such reasonable time as the Architect may determine.
(See Supplement)
8.3.3 This Paragraph 8.3 does not preclude recovery of damages for delay by
either party under other provisions of the Contract Documents.
ARTICLE 9
PAYMENTS AND COMPLETION
9.1 CONTRACT SUM
9.1.1 SCHEDULE OF VALUES
The Contract Sum is stated in the Agreement and, including authorized
adjustments, is the maximum amount payable by the Owner to the Contractor for
performance of the Work under the Contract Documents.
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9.2.1 Before the first Application for Payment, the Contractor shall submit to
the Owner, through the Construction Manager, a schedule of values allocated to
various portions of the Work, prepared in such form and supported by such data
to substantiate its accuracy as the Construction Manager and Owner may require.
This schedule, unless objected to by the Construction Manager or Owner, shall be
used as a basis for reviewing the Contractor's Applications for Payment.
9.3 APPLICATIONS FOR PAYMENT
9.3.1 At least fifteen days before the date established for each progress
payment, the Contractor shall submit to the Construction Manager an itemized
Application for Payment for Work completed in accordance with the schedule of
values. Such application shall be notarized, if required, and supported by such
data substantiating the Contractor's right to payment as the Owner, Construction
Manager or Architect may require, such as copies of requisitions from
Subcontractors and material suppliers, and reflecting retainage if provided for
elsewhere in the Contract Documents.
9.3.1.1 Such applications may include requests for payment on account of changes
in the Work which have been properly authorized by Construction Change
Directives but not yet included in Change Orders.
9.3.1.2 Such applications shall not include requests for payment of amounts the
Contractor does not intend to pay to a Subcontractor or material supplier
because of a dispute or other reason.
9.3.2 Unless otherwise provided in the Contract Documents, payments shall be
made on account of materials and equipment delivered and suitably stored at the
site for subsequent incorporation in the Work. If approved in advance by the
Owner, payment may similarly be made for materials and equipment suitably stored
off the site at a location agreed upon in writing. Payment for materials and
equipment stored on or off the site shall be conditioned upon compliance by the
Contractor with procedures satisfactory to the Owner to establish the Owner's
title to such materials and equipment or otherwise protect the Owner's interest,
and shall include applicable insurance, storage and transportation to the site
for such materials and equipment stored off the site.
9.3.3 The Contractor warrants that title to all Work covered by an Application
for Payment will pass to the Owner no later than the time of payment. The
Contractor further warrants that upon submittal of an Application for Payment
all Work for which Certificates for Payment have been previously issued and
payments received from the Owner shall be free and clear of liens, claims,
security interests or encumbrances in favor of the Contractor, Subcontractors,
material suppliers, or other persons or entities making a claim by reason of
having provided labor, materials and equipment relating to the Work. (See
Supplement)
9.4 CERTIFICATES FOR PAYMENT
9.4.1 The Construction Manager will assemble a Project Application for Payment
by combining the Contractor's applications with similar applications for
progress payments from other Contractors and, after certifying the amounts due
on such applications, forward them to the Architect within seven days.
9.4.2 Within seven days after the Architect's receipt of the Project Application
for Payment, the Construction Manager and Architect will either issue to the
Owner a Project Certificate for Payment, with a copy to the Contractor, for such
amount as the Construction Manager and Architect determine is properly due, or
notify the Contractor and Owner in writing of the Construction Manager's and
Architect's reasons for withholding certification in whole or in part as
provided in Subparagraph 9.5.1. Such notification will be forwarded to the
Contractor by the Construction Manager.
9.4.3 The issuance of a separate Certificate for Payment or a Project
Certificate for Payment will constitute representations made separately by the
Construction Manager and Architect to the Owner, based on their individual
observations at the site and the data comprising the Application for Payment
submitted by the Contractor, that the Work has progressed to the point indicated
and that quality of the Work is in accordance with the Contract Documents. The
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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 Construction Manager or Architect. The issuance of a separate
Certificate for Payment or a Project Certificate for Payment will further
constitute a representation that the Contractor is entitled to payment in the
amount certified. However, the issuance of a separate Certificate for Payment or
a Project Certificate for Payment will not be a representation that the
Construction Manager or Architect has (l) made exhaustive or continuous on-site
inspections to check the quality or quantity of the Work, (2) reviewed the
Contractor's 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) made examination to ascertain how or for what purpose
the Contractor has used money previously paid on account of the Contract Sum.
9.5 DECISIONS TO WITHHOLD CERTIFICATION
9.5.1 The Construction Manager or Architect may decide not to certify payment
and may withhold a Certificate for Payment in whole or in part, to the extent
reasonably necessary to protect the Owner, if in the Construction Manager's or
Architect's opinion the representations to the Owner required by Subparagraph
9.4.3 cannot be made. If the Construction Manager or Architect is unable to
certify payment in the amount of the Application, the Construction Manager or
Architect will notify the Contractor and Owner as provided in Subparagraph
9.4.2. If the Contractor, Construction Manager and Architect cannot agree on a
revised amount, the Construction Manager and Architect will promptly issue a
Certificate for Payment for the amount for which the Construction Manager and
Architect are able to make such representations to the Owner. The Construction
Manager or Architect may also decide not to certify payment or, because of
subsequently discovered evidence or subsequent observations, may nullify the
whole or a part of a Certificate for Payment previously issued, to such extent
as may be necessary in the Construction Manager's or Architect's opinion to
protect the Owner from loss because of:
.1 defective Work not remedied;
.2 third party claims filed or reasonable evidence indicating probable filing of
such claims;
.3 failure of the Contractor to make payments properly to Subcontractors or for
labor, materials or equipment;
.4 reasonable evidence that the Work cannot be completed for the unpaid balance
of the Contract Sum;
.5 damage to the Owner or another contractor;
.6 reasonable evidence that the Work will not be completed within the Contract
Time, and that the unpaid balance would not be adequate to cover actual or
liquidated damages for the anticipated delay; or persistent failure to
carry out the Work in accordance with the Contract Documents.
9.5.2 When the above reasons for withholding certification are removed,
certification will be made for amounts previously withheld.
9.6 PROGRESS PAYMENTS
9.6.1 After the Construction Manager and Architect have issued a Project
Certificate for Payment, the Owner shall make payment in the manner and within
the time provided in the Contract Documents, and shall so notify the
Construction Manager and Architect.
9.6.2 The Contractor shall promptly pay each Subcontractor, upon receipt of
payment from the Owner, out of the amount paid to the Contractor on account of
such Subcontractor's portion of the Work, the amount to which said Subcontractor
is entitled, reflecting percentages actually retained from payments to the
Contractor on account of
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such Subcontractor's portion of the Work. The Contractor shall, by appropriate
agreement with each Subcontractor, require each Subcontractor to make payments
to Sub-subcontractors in similar manner.
9.6.3 The Construction Manager will, on request, furnish to a Subcontractor, if
practicable, information regarding percentages of completion or amounts applied
for by the Contractor and action taken thereon by the Owner, Construction
Manager and Architect on account of portions of the Work done by such
Subcontractor.
9.6.4 Neither the Owner, Construction Manager nor Architect shall have an
obligation to pay or to see to the payment of money to a Subcontractor except as
may otherwise be required by law.
9.6.5 Payment to material suppliers shall be treated in a manner similar to that
provided in Subparagraphs 9.6.2, 9.6.3 and 9.6.4.
9.6.6 A Certificate for Payment, a progress payment, or partial or entire use or
occupancy of the Project by the Owner shall not constitute acceptance of Work
not in accordance with the Contract Documents.
9.7 FAILURE OF PAYMENT
9.7.1 If, through no fault of the Contractor, l) the Construction Manager and
Architect do not issue a Project Certificate for Payment within fourteen days
after the Construction Manager's receipt of the Contractor's Application for
Payment or 2) the Owner does not pay the Contractor within (14) fourteen days
after the date established in the Contract Documents the amount certified by the
Construction Manager and Architect or awarded as a result of the resolution of a
dispute, then the Contractor may, upon (10) ten additional days' written notice
to the Owner, Construction Manager and Architect, stop the Work until payment of
the amount owing has been received. The Contract Time shall be extended
appropriately.
9.8 SUBSTANTIAL COMPLETION
9.8.1 Substantial Completion is the stage in the progress of the Work when the
Work or designated portion thereof is sufficiently complete in accordance with
the Contract Documents so the Owner can occupy or utilize the Work for its
intended use. (See Supplement)
9.8.2 When the Contractor considers that the Work, or a portion thereof which
the Owner agrees to accept separately, is substantially complete, the Contractor
and Construction Manager shall jointly prepare and submit to the Owner and
Architect a comprehensive list of items to be completed or corrected. The
Contractor shall proceed promptly to complete and correct items on the list.
Failure to include an item on such list does not alter the responsibility of the
Contractor to complete all Work in accordance with the Contract Documents. Upon
receipt of the list, the Architect, Owner and Construction Manager, will make an
inspection to determine whether the Work or designated portion thereof is
substantially complete. If the Owner's Construction Manager's and Architect's
inspection discloses any item, whether or not included on the list, which is not
in accordance with the requirements of the Contract Documents, the Contractor
shall, before issuance of the Certificate of Substantial Completion, complete or
correct such item upon notification by the Owner, Construction Manager or
Architect. The Contractor shall then submit a request for another inspection by
the Architect, Owner and Construction Manager, to determine Substantial
Completion. When the Work or designated portion thereof is substantially
complete, the Architect will prepare a Certificate of Substantial Completion
which shall establish the date of Substantial Completion, shall establish
responsibilities of the Owner and Contractor for security, maintenance, heat,
utilities, damage to the Work and insurance, and shall fix the time within which
the Contractor shall finish all items on the list accompanying the Certificate.
Warranties required by the Contract Documents shall commence on the date of
Substantial Completion of the Work or designated portion thereof unless
otherwise provided in the Certificate of Substantial Completion. The Certificate
of Substantial Completion shall be submitted to the Owner and Contractor for
their written acceptance of responsibilities assigned to them in such
Certificate.
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9.8.3 Upon Substantial Completion of the Work or designated portion thereof and
upon application by the Contractor and certification by the Construction Manager
and Architect, the Owner shall make payment, reflecting adjustment in retainage,
if any, for such Work or portion thereof as provided in the Contract Documents.
9.9 PARTIAL OCCUPANCY OR USE
9.9.1 The Owner may occupy or use any completed or partially completed portion
of the Work at any stage when such portion is designated by separate agreement
with the Contractor, provided such occupancy or use is consented to by the
insurer as required under Subparagraph 11.3.11 and authorized by public
authorities having jurisdiction over the Work. Such partial occupancy or use may
commence whether or not the portion is substantially complete, provided the
Owner and Contractor have accepted in writing the responsibilities assigned to
each of them for payments, retainage if any, security, maintenance, heat,
utilities, damage to the Work and insurance, and have agreed in writing
concerning the period for correction of the Work and commencement of warranties
required by the Contract Documents. When the Contractor considers a portion
substantially complete, the Contractor and Construction Manager shall jointly
prepare and submit a list to the Owner and Architect as provided under
Subparagraph 9.8.2. Consent of the Contractor to partial occupancy or use shall
not be unreasonably withheld. The stage of the progress of the Work shall be
determined by written agreement between the Owner and Contractor or, if no
agreement is reached, by decision of the Architect after consultation with the
Construction Manager.
9.9.2 Immediately prior to such partial occupancy or use, the Owner,
Construction Manager, Contractor and Architect shall jointly inspect the area to
be occupied or portion of the Work to be used in order to determine and record
the condition of the Work.
9.9.3 Unless otherwise agreed upon, partial occupancy or use of a portion or
portions of the Work shall not constitute acceptance of Work not complying with
the requirements of the Contract Documents.
9.10 FINAL COMPLETION AND FINAL PAYMENT
9.10.1 Except s otherwise provided in the agreement upon completion of the Work,
the Contractor shall forward to the Construction Manager a written notice that
the Work is ready for final inspection and acceptance and shall also forward to
the Construction Manager a final Contractor's Application for Payment. Except as
otherwise provided in the agreement, upon receipt, the Construction Manager will
forward the notice and Application to the Architect who will promptly make such
inspection. When the Architect, based on the recommendation of the Construction
Manager, finds the Work acceptable under the Contract Documents and the Contract
performed, the Construction Manager and Architect will promptly issue a final
Certificate for Payment stating that and on the basis of their observations and
inspections, the Work has been completed in accordance with terms and conditions
of the Contract Documents and that the entire balance found to be due the
Contractor and noted in said final Certificate is due and payable. The
Construction Manager's and Architect's final Certificate for Payment will
constitute a further representation that conditions listed in Subparagraph
9.10.2 as precedent to the Contractor's being entitled to final payment have
been fulfilled.
9.10.2 Neither final payment nor any remaining retained percentage shall become
due until the Contractor submits to the Owner and Architect through the
Construction Manager (l) an affidavit that payrolls, bills for materials and
equipment, and other indebtedness connected with the Work for which the Owner or
the Owner's property might be responsible or encumbered (less amounts withheld
by Owner) have been paid or other wise satisfied, (2) a certificate evidencing
that insurance required by the Contract Documents to remain in force after final
payment is currently in effect and will not be canceled or allowed to expire
until at least 30 days' prior written notice has been given to the Owner, (3) a
written statement that the Contractor knows of no substantial reason that the
insurance will not be renewable to cover the period required by the Contract
Documents, (4) consent of surety, if any, to final payment and (5), if required
by the Owner, other data establishing payment or satisfaction of obligations,
such as receipts, releases and waivers of liens, claims, security interests or
encumbrances arising out of the Contract, to the extent and in such form as may
be designated by the Owner. If a Subcontractor refuses to furnish a release or
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waiver required by the Owner, the Contractor may furnish a bond satisfactory to
the Owner to indemnify the Owner against such lien. If such lien remains
unsatisfied after payments are made, the Contractor shall refund to the Owner
all money that the Owner may be compelled to pay in discharging such lien,
including all costs and reasonable attorneys' fees.
9.10.3 If, after Substantial Completion of the Work, final completion thereof is
materially delayed through no fault of the Contractor or by issuance of Change
Orders affecting final completion, and the Construction Manager and Architect so
confirm, the Owner shall, upon application by the Contractor and certification
by the Construction Manager and Architect, and without terminating the Contract,
make payment of the balance due for that portion of the Work fully completed and
accepted. If the remaining balance for Work not fully completed or corrected is
less than retainage stipulated in the Contract Documents. and if bonds have been
furnished, the written consent of surety to payment of the balance due for that
portion of the Work fully completed and accepted shall be submitted by the
Contractor to the Owner and Architect through the Construction Manager prior to
certification of such payment. Such payment shall be made under terms and
conditions governing final payment, except that it shall not constitute a waiver
of Claims by the Owner.
9.10.4 Acceptance of foal payment by the Contractor, a Subcontractor or material
supplier shall constitute a waiver of claims by that payee except those
previously made in writing and identified by that payee as unsettled at the time
of final Application for Payment. Such waivers shall be in addition to the
waiver described in Subparagraph 4.7.5. (See Supplement)
ARTICLE 10
PROTECTION OF PERSONS AND PROPERTY
10.1 SAFETY PRECAUTIONS AND PROGRAMS
10.1.1 The Contractor shall be responsible for initiating, maintaining and
supervising all safety precautions and programs in connection with the
performance of the Contract. The Contractor shall submit the Contractor's safety
program to the Construction Manager for review and coordination with the safety
programs of other Contractors.
10.1.2 In the event the Contractor encounters on the site material reasonably
believed to be asbestos or polychlorinated biphenyl (PCB) which has not been
rendered harmless, the Contractor shall immediately stop Work in the area
affected and report the condition to the Owner, Construction Manager and
Architect in writing. The Work in the affected area shall not thereafter be
resumed except by written agreement of the Owner and Contractor if in fact the
material is asbestos or polychlorinated biphenyl (PCB) and has not been rendered
harmless. The Work in the affected area shall be resumed in the absence of
asbestos or polychlorinated biphenyl (PCB), or when it has been rendered
harmless, by written agreement of the Owner and Contractor.
(See Supplement)
10.1.4 To the fullest extent permitted by law, the Owner shall indemnify and
hold harmless the Contractor, Construction Manager, Architect, their
consultants, and agents and employees of any of them from and against claims,
damages, losses and expenses, including but not limited to reasonable attorneys'
fees, arising out of or resulting from performance of the Work in the affected
area if in fact the material is asbestos or polychlorinated biphenyl (PCB) and
has not been rendered harmless, provided that such claim, damage, loss or
expense is attributable to bodily injury, sickness, disease or death, or to
injury to or destruction of tangible properly (other than the Work itself)
including loss of use resulting therefrom, but only to the extent caused in
whole or in part by negligent acts or omissions of the Owner, anyone directly or
indirectly employed by the Owner or anyone for whose acts the Owner may be
liable, regardless of whether or not such claim, damage, loss or expense is
caused in part by a party indemnified hereunder. Such obligation shall not be
construed to negate, abridge or reduce other
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rights or obligations of indemnity which would otherwise exist as to a party or
person described in this Subparagraph 10.1.4.
10.1.5 If reasonable precautions will be inadequate to prevent foreseeable
bodily injury or death to persons resulting from a material or substance
encountered on the site by the Contractor, the Contractor shall, upon
recognizing the condition, immediately stop Work in the affected area and report
the condition to the Owner, Construction Manager and Architect in writing. The
Owner, Contractor, Construction Manager and Architect shall then proceed in the
same manner described in Subparagraph lo. 1.2.
10.1.6 The Owner shall be responsible for obtaining the services of a licensed
laboratory to verify a presence or absence of the material or substance reported
by the Contractor and, in the event such material or substance is found to be
present, to verify that it has been rendered harmless. Unless otherwise required
by the Contract Documents, the Owner shall furnish in writing to the Contractor,
Construction Manager and Architect the names and qualifications of persons or
entities who are to perform tests verifying the presence or absence of such
material or substance or who are to perform the task of removal or safe
containment of such material or substance. The Contractor, the Construction
Manager and the Architect will promptly reply to the Owner in writing stating
whether or not any of them has reasonable objection to the persons or entities
proposed by the Owner. If the Contractor, Construction Manager or Architect has
an objection to a person or entity proposed by the Owner, the Owner shall
propose another to whom the Contractor, the Construction Manager and the
Architect have no reasonable objection.
10.2 SAFETY OF PERSONS AND PROPERTY
10.2.1 The Contractor shall take reasonable precautions for
safety of, and shall provide reasonable protection to prevent damage, injury or
loss to:
.1 employees on the Work of other persons who may be affected thereby;
.2 the Work and materials and equipment to be incorporated therein, whether in
storage on or off the site, under care, custody or control of the
Contractor or the Contractor's Subcontractors or Sub-subcontractors;
.3 other property at the site or adjacent thereto, such as trees, shrubs,
lawns, walks, pavements, roadways, structures and utilities not designated
for removal, relocation or replacement in the course of construction; and
.4 construction or operations by the Owner or other Contractors.
10.2.2 The Contractor shall give notices and comply with applicable laws,
ordinances, rules, regulations and lawful orders of public authorities bearing
on safety of persons or property or their protection from damage, injury or
loss.
10.2.3 The Contractor shall erect and maintain, as required by existing
conditions and performance of the Contract, reasonable safeguards for safety and
protection, including posting danger signs and other warnings against hazards,
promulgating safety regulations and notifying owners and users of adjacent sites
and utilities.
10.2.4 When use for storage of explosives or other hazardous materials or
equipment or unusual methods are necessary for execution of the Work, the
Contractor shall exercise utmost care and carry on such activities under
supervision of properly qualified personnel.
10.2.5 The Contractor shall promptly remedy damage and loss including losses
which are less than the deductible or retention limits of applicable policies of
insurance, (other than damage or loss insured under property insurance required
by the Contract Documents) to property referred to in Clauses 10.2.1.2, 10.2.1.3
and 10.2.1.4 caused in whole or in part by the Contractor, a Subcontractor, a
Sub-subcontractor, or anyone directly or indirectly employed by any of them, or
by anyone for whose acts they may be liable and for which the Contractor is
responsible under Clauses 10.2.1.2, 10.2.1.3 and 10.2.1.4, except damage or loss
attributable to sole negligence
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of the Owner, Construction Manager or Architect or anyone directly or indirectly
employed by any of them, and not attributable to the fault or negligence of the
Contractor. The foregoing obligations of the Contractor are in addition to the
Contractor's obligations under Paragraph 3.l8.
10.2.6 The Contractor shall designate a responsible member of the Contractor's
organization at the site whose duty shall be the prevention of accidents. This
person shall be the Contractor's superintendent unless otherwise designated by
the Contractor in writing to the Owner, Construction Manager and Architect.
10.2.7 The Contractor shall not load or permit any part of the construction or
site to be loaded so as to endanger its safety.
10.3 EMERGENCIES
10.3.1 In an emergency affecting safety or persons or property, the Contractor
shall act, at the Contractor's discretion, to prevent threatened damage, injury
or loss, provided such emergency is not directly or indirectly caused by an act
or omission of Contractor, or its agents. Additional compensation or extension
of time claimed by the Contractor on account of an emergency shall be determined
as provided in Paragraph 4.7 and Article 7.
ARTICLE 11
INSURANCE AND
BONDS
11.1 CONTRACTOR'S LIABILITY INSURANCE
11.1.1 The Contractor shall purchase from and maintain in a company or companies
lawfully authorized to do business in the jurisdiction in which the Project is
located such insurance as will protect the Contractor from claims set forth
below which may arise out of or result from the Contractor's operations under
the Contract and for which the Contractor may be legally liable, whether such
operations be by the Contractor or by a Subcontractor or by anyone directly or
indirectly employed by any of them, or by anyone for whose acts any of them may
be liable:
.1 claims under workers compensation, disability benefit and other similar
employee benefit acts which are applicable to the Work to be performed;
.2 claims for damages because of bodily injury, occupational sickness or
disease, or death of the Contractor's employees;
.3 claims for damages because of bodily injury, sickness or disease, or death of
any person other than the Contractor's employees;
.4 claims for damages insured by usual personal injury liability coverage which
are sustained (l) by a person as a result of an offense directly or
indirectly related to employment of such person by the Contractor, or (2)
by another person;
.5 claims for damages, other than to the Work itself, because of injury to or
destruction of tangible property, including loss of use resulting
therefrom;
.6 claims for damages because of bodily injury, death of a person or property
damage arising out of ownership, maintenance or use of a motor vehicle; and
.7 claims involving contractual liability insurance applicable to the
Contractor's obligations under Paragraph 3.18.
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11.1.2 The insurance required by Subparagraph l l. l. l shall be written for not
less than limits of liability specified in the Contract Documents or required by
law, whichever coverage is greater and shall apply as primary and excess to any
insurance maintained by Owner. Coverages, whether written on an occurrence or
claims-made basis, shall be maintained without interruption from date of
commencement of the Work until date of final payment and termination of any
coverage required to be maintained after final payment. (See Supplement)
11.1.3 Certificates of insurance acceptable to the Owner shall be submitted to
the Construction Manager for transmittal to the Owner with a copy to the
Architect prior to commencement of the Work. These certificates and the
insurance policies required by this Paragraph l l. l shall contain a provision
that coverages afforded under the policies will not be canceled, materially
changed or allowed to expire until at least 30 days' prior written notice has
been given to the Owner and shall name Owner as additional insured. If any of
the foregoing insurance coverages are required to remain in force after final
payment and are reasonably available, an additional certificate evidencing
continuation of such coverage shall be submitted with the final Application for
Payment as required by Subparagraph 9.10.2. Information concerning reduction of
coverage shall be furnished by the Contractor with reasonable promptness in
accordance with the Contractor's information and belief
11.2 OWNER'S LIABILITY INSURANCE
11.2.1 The Owner shall be responsible for purchasing and maintaining the Owner's
usual liability insurance. Optionally, the Owner may purchase and maintain other
insurance for self-protection against claims which may arise from operations
under the Contract. The Contractor shall not be responsible for purchasing and
maintaining this optional Owner's liability insurance unless specifically
required by the Contract Documents.
11.3 PROPERTY INSURANCE
11.3.1 Unless otherwise provided, the Owner shall purchase and maintain, in a
company or companies lawfully authorized to do business in the jurisdiction in
which the Project is located, property insurance in the amount of the initial
Contract Sum as well as subsequent modifications thereto for the entire Work at
the site on a replacement cost basis and with such deductions and other
provisions as Owner deems to be commercially reasonable. Such property insurance
shall be maintained, unless otherwise provided in the Contract Documents or
otherwise agreed in writing by all persons and entities who are beneficiaries of
such insurance, until foal payment has been made as provided in Paragraph 9.10
or until no person or entity other than the Owner has an insurable interest in
the property required by this Paragraph l 1.3 to be covered, whichever is
earlier. This insurance shall include interests of the Owner, the Contractor,
Subcontractors and Sub-subcontractors in the Work.
11.3.1.1 Property insurance shall be on an "all-risk" policy form and shall
insure against the perils of fire and extended coverage and physical loss or
damage including, without duplication of coverage, theft, vandalism, and
malicious mischief, collapse, falsework, temporary buildings and debris removal
including demolition occasioned by enforcement of any applicable legal
requirements, and shall cover reasonable compensation for Architect's services
and expenses required as a result of such insured loss. Coverage for other
perils shall not be required unless otherwise provided in the Contract
Documents.
11.3.1.2 If the Owner does not intend to purchase such property insurance
required by the Contract and with all of the coverages in the amount described
above, the Owner shall so inform the Contractor in writing prior to commencement
of the Work. The Contractor may then effect insurance which will protect the
interests of the Contractor, Subcontractors and Sub-subcontractors in the Work,
and by appropriate Change Order the cost thereof shall be charged to the Owner.
If the Contractor is damaged by the failure or neglect of the Owner to purchase
or maintain insurance as described above, without so notifying the Contractor,
then the Owner shall bear all reasonable costs properly attributable thereto.
11.3.1.3 If the property insurance requires minimum deductibles and such
deductibles are identified in the Contract Documents, the Contractor shall pay
costs not covered because of such deductibles. If the Owner or insurer increases
the required minimum deductibles above the amounts so identified or if the Owner
elects to purchase
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this insurance with voluntary deductible amounts, the Owner shall be responsible
for payment of the additional costs not covered because of such increased or
voluntary deductibles.
11.3.1.4 Unless otherwise provided in the Contract Documents, this property
insurance shall cover portions of the Work stored off the site after written
approval of the Owner at the value established in the approval, and also
portions of the Work in transit.
11.3.1.5 The insurance required by this Paragraph l 1.3 is not intended to cover
machinery, tools or equipment owned or rented by the Contractor which are
utilized in the performance of the Work but not incorporated into the permanent
improvements. The Contractor shall, at the Contractor's own expense, provide
insurance coverage for owned or rented machinery, tools or equipment which shall
be subject to the provisions of Subparagraph l 1.3.7.
11.3.2 Boiler and Machinery Insurance. The Owner shall purchase and maintain
boiler and machinery insurance required by the Contract Documents or by law,
which shall specifically cover such insured objects during installation and
until final acceptance by the Owner; this insurance shall include interests of
the Owner, Construction Manager, Contractor, Subcontractors and
Sub-subcontractors in the Work, and the Owner and Contractor shall be named
insureds.
11.3.3 Loss of Use Insurance. The Owner, at the Owner's option, may purchase and
maintain such insurance as will insure the Owner against loss of use of the
Owner's property due to fire or other hazards, however caused.
11.3.4 If the Contractor requests in writing that insurance for risks other than
those described herein or for other special hazards be included in the property
insurance policy, the Owner shall, if possible, include such insurance, and the
cost thereof shall be charged to the Contractor by appropriate Change Order.
11.3.7 Waivers of Subrogation. The Owner and Contractor waive all rights against
each other and against the Construction Manager, Architect, Owner's other
Contractors and own forces described in Article 6, if any, and the
subcontractors, sub-subcontractors, consultants, agents and employees of any of
them, for damages caused by fire or other perils to the extent covered by
property insurance obtained pursuant to this Paragraph l l .3 or other property
insurance applicable to the Work, except such rights as the Owner and Contractor
may have to the proceeds of such insurance held by the Owner as fiduciary. The
Owner or Contractor, as appropriate, shall require of the Construction Manager,
Construction Manager's consultants, Architect, Architect's consultants, Owner's
separate contractors described in Article 6, if any, and the subcontractors,
sub-subcontractors, agents and employees of any of them, by appropriate
agreements, written where legally required for validity, similar waivers each in
favor of other parties enumerated herein. The policies shall provide such
waivers of subrogation by endorsement or otherwise. A waiver of subrogation
shall be effective as to a person or entity even though that person or entity
would otherwise have a duty of indemnification, contractual or otherwise, did
not pay the insurance premium directly or indirectly, and whether or not the
person or entity had an insurable interest in the properly damaged.
11.3.8 A loss insured under Owner's property insurance shall be adjusted by the
Owner as fiduciary and made payable to the Owner as fiduciary for the insureds,
as their interests may appear, subject to requirements of any applicable
mortgagee clause and of Subparagraph 11.3.10. The Contractor shall pay
Subcontractors their just shares of insurance proceeds received by the
Contractor, and by appropriate agreements, written where legally required for
validity, shall require Subcontractors to make payments to their
Sub-subcontractors in similar manner.
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WASHINGTON, D.C., 20006-5292
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Electronic Format A201/CMa-1992
<PAGE>
11.3.9 The Owner as fiduciary shall, upon occurrence of an insured loss. The
Owner shall deposit in a separate account proceeds so received, which the Owner
shall distribute in accordance with such agreement as the parties in interest
may reach. If after such loss no other special agreement is made, replacement of
damaged property shall be covered by appropriate Change Order.
11.3.10 The Owner as fiduciary shall have power to adjust and settle a loss with
insurers .
11.3.11 Partial occupancy or use in accordance with Paragraph 9.9 shall not
commence until the insurance company or companies providing property insurance
have consented to such partial occupancy or use by endorsement or otherwise. The
Owner and the Contractor shall take reasonable steps to obtain consent of the
insurance company or companies and shall, without mutual written consent, take
no action with respect to partial occupancy or use that would cause
cancellation, lapse or reduction of insurance. (See Supplement)
11.4 PERFORMANCE BOND AND PAYMENT BOND
11.4.1 The Owner shall have the right to require the Contractor to furnish bonds
covering faithful performance of the Contract and payment of obligations arising
thereunder as stipulated in bidding requirements or specifically required in the
Contract Documents on the date of execution of the Contract.
11.4.2 Upon the request of any person or entity appearing to be a potential
beneficiary of bonds covering payment of obligations arising under the Contract,
the Contractor shall promptly furnish a copy of the bonds or shall permit a copy
to be made. (See Supplement)
ARTICLE 12
UNCOVERING AND CORRECTION OF
WORK
12.1 UNCOVERING OF WORK
12.1.1 If a portion of the Work is covered contrary to the Construction
Manager's or Architect's request or to requirements specifically expressed in
the Contract Documents, it must, if required in writing by either, be uncovered
for their observation and be replaced at the Contractor's expense without change
in the Contract Time.
12.1.2 If a portion of the Work has been covered which the Construction Manager
or Architect has not specifically requested to observe prior to its being
covered, the Construction Manager or Architect may request to see such Work and
it shall be uncovered by the Contractor. If such Work is in accordance with the
Contract Documents, costs of uncovering and replacement shall, by appropriate
Change Order, be charged to the Owner. If such Work is not in accordance with
the Contract Documents, the Contractor shall pay such costs unless the condition
was caused by the Owner or one of the other Contractors in which event the Owner
shall be responsible for payment of such costs.
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WASHINGTON, D.C., 20006-5292
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Electronic Format A201/CMa-1992
<PAGE>
12.2 CORRECTION OF WORK
12.2.1 The Contractor shall promptly correct Work rejected by the Construction
Manager or Architect or failing to conform to the requirements of the Contract
Documents, whether observed before or after Substantial Completion and whether
or not fabricated, installed or completed. The Contractor shall bear costs of
correcting such rejected Work, including additional testing and inspections and
compensation for the Construction Manager's and Architect's services and
expenses made necessary thereby.
(See Supplement)
12.2.3 The Contractor shall remove from the site portions of the Work which are
not in accordance with the requirements of the Contract Documents and are
neither corrected by the Contractor nor accepted by the Owner.
12.2.4 If the Contractor fails to correct nonconforming Work within a reasonable
time, the Owner may correct it in accordance with Paragraph 2.4. If the
Contractor does not proceed with correction of such nonconforming Work within a
reasonable time fixed by written notice from the Architect issued through the
Construction Manager, the Owner may remove it and store the salvable materials
or equipment at the Contractor's expense. If the Contractor does not pay costs
of such removal and storage within ten days after written notice, the Owner may
upon ten additional days' written notice sell such materials and equipment at
auction or at private sale and shall account for the proceeds thereof, after
deducting costs and damages that should have been borne by the Contractor,
including compensation for the Construction Manager's and Architect's services
and expenses made necessary thereby. If such proceeds of sale do not cover costs
which the Contractor should have borne, the Contract Sum shall be reduced by the
deficiency. If payments then or thereafter due the Contractor are not sufficient
to cover such amount, the Contractor shall pay the difference to the Owner.
12.2.5 The Contractor shall bear the cost of correcting destroyed or damaged
construction, whether completed or partially completed, of the Owner or other
Contractors caused by the Contractor's correction or removal of Work which is
not in accordance with the requirements of the Contract Documents.
12.2.6 Nothing contained in this Paragraph 12.2 shall be construed to establish
a period of limitation with respect to other obligations which the Contractor
might have under the Contract Documents. Establishment of the time period of one
year as described in Subparagraph 12.2.2 relates only to the specific obligation
of the Contractor to correct the Work, and has no relationship to the time
within which the obligation to comply with the Contract Documents may be sought
to be enforced, nor to the time within which proceedings may be commenced to
establish the Contractor's liability with respect to the Contractor's
obligations other than specifically to correct the Work.
12.3 ACCEPTANCE OF NONCONFORMING WORK
12.3.1 If the Owner prefers to accept Work which is not in accordance with the
requirements of the Contract Documents, the Owner may do so instead of requiring
its removal and correction, in which case the Contract Sum will be reduced as
appropriate and equitable. Such adjustment shall be effected whether or not
final payment has been made.
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THE AMERICAN INSTITUTE OF ARCHITECTS, 1735 NEW YORK AVENUE, N.W.,
WASHINGTON, D.C., 20006-5292
WARNING; Unlicensed photocopying violates U.S. copyright laws and is
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Electronic Format A201/CMa-1992
<PAGE>
ARTICLE 13
MISCELLANEOUS
PROVISIONS
13.1 GOVERNING LAW
13.1.1 The Contract shall be governed by the law of the place where the Project
is located.
13.2 SUCCESSORS AND ASSIGNS
13.2.1 The Owner and Contractor respectively bind themselves, their partners,
successors, assigns and legal representatives to the other parry hereto
and to partners, successors, assigns and legal representatives of such
other party in respect to covenants, agreements and obligations contained
in the Contract Documents. Contractor shall not assign the Contract as a
whole without written consent of the Owner. (See Supplement)
13.3 WRITTEN NOTICE
(See Supplement)
13.4 RIGHTS AND REMEDIES
13.4.1 Duties and obligations imposed by the Contract Documents and rights and
remedies available thereunder shall be in addition to and not a limitation of
duties, obligations, rights and remedies otherwise imposed or available by law.
13.4.2 No action or failure to act by the Owner, Construction Manager, Architect
or Contractor shall constitute a waiver of a right or duty afforded them under
the Contract, nor shall such action or failure to act constitute approval of or
acquiescence in a breach thereunder, except as may be specifically agreed in
writing. (See Supplement)
13.5 TESTS AND INSPECTIONS
13.5.1 Tests, inspections and approvals of portions of the Work required by the
Contract Documents or by laws, ordinances, rules, regulations or orders of
public authorities having jurisdiction shall be made at an appropriate time.
Unless otherwise provided, the Contractor shall make arrangements for such
tests, inspections and approvals with an independent testing laboratory or
entity acceptable to the Owner, or with the appropriate public authority, and
shall bear all related costs of tests, inspections and approvals. The Contractor
shall give the Construction Manager and Architect timely notice of when and
where tests and inspections are to be made so the Construction Manager and
Architect may observe such procedures. The Owner shall bear costs of tests,
inspections or approvals which do not become requirements until after bids are
received or negotiations concluded.
13.5.2 If the Construction Manager, Architect, Owner or public authorities
having jurisdiction determine that portions of the Work require additional
testing, inspection or approval not included under Subparagraph 13.5.1, the
Construction Manager and Architect will, upon written authorization from the
Owner, instruct the Contractor to make arrangements for such additional testing,
inspection or approval by an entity acceptable to the Owner, and the Contractor
shall give timely notice to the Construction Manager and Architect of when and
where tests and inspections are to be made so the Construction Manager and
Architect may observe such procedures. The Owner shall bear such costs except as
provided in Subparagraph 13.5.3.
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CONSTRUCTION - CONSTRUCTION MANAGER-ADVISER EDITION - AIA - 01992
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WASHINGTON, D.C., 20006-5292
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<PAGE>
13.5.3 If such procedures for testing, inspection or approval under
Subparagraphs 13.5.1 and 13.5.2 reveal failure of the portions of the Work to
comply with requirements established by the Contract Documents, the Contractor
shall bear all costs made necessary by such failure including those of repeated
procedures and compensation for the Construction Manager's and Architect's
services and expenses.
13.5.4 Required certificates of testing, inspection or approval shall, unless
otherwise required by the Contract Documents, be secured by the Contractor and
promptly delivered to the Construction Manager for transmittal to the Architect.
13.5.5 If the Construction Manager or Architect is to observe tests, inspections
or approvals required by the Contract Documents, the Construction Manager or
Architect will do so promptly and, where practicable, at the normal place of
testing.
13.5.6 Tests or inspections conducted pursuant to the Contract Documents shall
be made promptly to avoid unreasonable delay in the Work.
13.6 INTEREST
13.6.1 Payments due and unpaid under the Contract Documents shall bear interest
from the date payment is due at such rate as the parties may agree upon in
writing or, in the absence thereof, at the legal rate prevailing from time to
time at the place where the Project is located.
13.7 COMMENCEMENT OF STATUTORY LIMITATION PERIOD
13.7.1 As between the Owner and Contractor:
.1 Before Substantial Completion. As to acts or failures to act occurring prior
to the relevant date of Substantial Completion, any applicable statute of
limitations shall commence to run and any alleged cause of action shall be
deemed to have accrued in any and all events not later than such date of
Substantial Completion;
.2 Between Substantial Completion and Final Certificate Payment. As to acts or
failures to act occurring subsequent to the relevant date of Substantial
Completion and prior to issuance of the final Certificate for Payment, any
applicable statute of limitations shall commence to run and any alleged
cause of action shall be deemed to have accrued in any and all events not
later than the date of issuance of the final Certificate for Payment; and
.3 After Final Certificate for Payment. As to acts or failures to act occurring
after the relevant date of issuance of the final Certificate for Payment,
any applicable statute of limitations shall commence to run and any alleged
cause of action shall be deemed to have accrued in any and all events not
later than the date of any act or failure to act by the Contractor pursuant
to any warranty provided under Paragraph 3.5, the date of any correction of
the Work or failure to correct the Work by the Contractor under Paragraph
12.2, or the date of actual commission of any other act or failure to
perform any duty or obligation by the Contractor or Owner, whichever occurs
last.
ARTICLE 14
TERMINATION OR SUSPENSION
OF THE CONTRACT
14.1 TERMINATION BY THE CONTRACTOR
14.1.1 The Contract may terminate the Contract if the Work is stopped for a
period of 30 days through no act or fault of the Contractor or a Subcontractor,
Sub-subcontractor or their agents or employees or any other persons performing
portions of the Work under contract with the Contractor, for any of the
following reasons:
.1 issuance of an order of a court or other public authority having
jurisdiction;
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WASHINGTON, D.C., 20006-5292
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Electronic Format A201/CMa-1992
<PAGE>
.2 an act of government such as a declaration of national emergency, making
material unavailable;
.3 because the Construction Manager or Architect has not issued a Certificate
for Payment and has not notified the Contractor of the reason for
withholding certification as provided in Subparagraph 9.4.2, or because the
Owner has not made payment on a Certificate for Payment within the time
stated in the Contract Documents;
.4 if repeated suspensions, delays or interruptions by the Owner as described
in Paragraph 14.3 constitute in the aggregate more than 100 percent of the
total number of days scheduled for completion, or 120 days in any 365-day
period, whichever is less; or
.5 the Owner has failed to furnish to the Contractor promptly, upon the
Contractor's request, reasonable evidence as required by Subparagraph
2.2.1.
14.1.2 If one of the above reasons exists, the Contractor may, upon seven
additional days' written notice to the Owner, Construction Manager and
Architect, terminate the Contract and recover from the Owner payment for Work
executed and for proven loss with respect to materials, equipment, tools, and
construction equipment and machinery, including reasonable overhead, profit and
damages.
14.1.3 If the Work is stopped for a period of 60 days through no act or fault of
the Contractor or a Subcontractor or their agents or employees or any other
persons performing portions of the Work under contract with the Contractor
because the Owner has persistently failed to fulfill the Owner's obligations
under the Contract Documents with respect to matters important to the progress
of the Work, the Contractor may, upon seven additional days' written notice to
the Owner, Construction Manager and Architect, terminate the Contract and
recover from the Owner as provided in Subparagraph 14.1.2.
14.2 TERMINATION BY THE OWNER FOR CAUSE
14.2.1 In addition to Owner's right to terminate the contract as set forth in
the supplement, after Owner's w3ritten request, the Owner may terminate the
Contract if the Contractor:
.1 refuses or fails to supply enough properly skilled workers or proper
materials;
.2 fails to make payment to Subcontractors for materials or labor in
accordance with the respective agreements between the Contractor and the
Subcontractors;
.3 disregards laws, ordinances, or rules, regulations or orders of a public
authority having jurisdiction; or
.4 otherwise is guilty of substantial breach of a provision of the Contract
Documents.
14.2.2 When any of the above reasons exist, the Owner, after consultation with
the Construction Manager, may without prejudice to any other rights or remedies
of the Owner and after giving the Contractor and the Contractor's surety, if
any, seven days' written notice, terminate employment of the Contractor and may,
subject to any prior rights of the surety: take possession of the site and of
all materials, equipment, tools, and construction equipment and machinery
thereon owned by the Contractor; accept assignment of subcontracts pursuant to
Paragraph 5.4; and finish the Work by whatever reasonable method the Owner may
deem expedient.
14.2.3 When the Owner terminates the Contract for one of the reasons stated in
Subparagraph 14.2.1, the Contractor shall not be entitled to receive further
payment until the Work is finished.
14.2.4 If the unpaid balance of the Contract Sum exceeds costs of finishing the
Work, including compensation for the Construction Manager's and Architect's
services and expenses made necessary thereby, such excess shall be paid to the
Contractor. If such costs exceed the unpaid balance, the Contractor shall pay
the difference to the Owner. The amount to be paid to the Contractor or Owner,
as the case may be.
14.3 SUSPENSION BY THE OWNER FOR CONVENIENCE
(See Supplement)
(See Supplement)
ALL DOCUMENT A201/CMa - GENERAL CONDITIONS OF THE CONTRACT FOR 32
CONSTRUCTION - CONSTRUCTION MANAGER-ADVISER EDITION - AIA - 01992
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WASHINGTON, D.C., 20006-5292
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violation until the date of expiration as noted below.
Electronic Format A201/CMa-1992
June 13, 1997
THIS PURCHASE ORDER AUTHORIZES THE PURCHASE OF THE FOLLOWING
MATERIALS FROM V.I.P. STRUCTURES, INC.
To fabricate and supply a Varco-Pruden pre-engineered building as follows:
Width 400', length 2,200', eave height 34', 10", roof pitch 1/4:12, roofing to
be 24 gauge SSR galvalume, roof live load 20 lbs psf, wind load 70 mph,
additional collateral 5 lbs psf, interior columns to be pipe columns 10" maximum
diameter, and extended 7" below finish door, side wall column depth to be 24"
wide maximum and will extend 4', 11" below finish floor, bar joist are included.
Multi-gutter metal pan, geoflex thermal gutter liner, drain wedges and 6"
manville drains are included.
VP Subtotal $3,031,745.00
3" P.E.B. Insulation Subtotal $ 207,066.77
Combined Subtotal $3,238,811.77
California Sales Tax 7.75% $ 251,007.91
Total Cost $3,489,819.68
*V.I.P. Structures 10% Mark-up $ 323,881.18
Total Order $3,813,700.86
NOTE: V.I.P. Structures Contractor's mark-up would be applied to management
agreement fee per the terms of an executed construction management
agreement.
Authorized By:
/s/ Merle Randolph 6/16/97
------------------ -------
Merle Randolph Date
Rauch Industries
AMENDMENT NO. 3
to
LOAN AND SECURITY AGREEMENT
dated as of April 16, 1997
THIS AMENDMENT NO. 3 dated as of March 30, 1998 (this "Amendment") is made
by SYRATECH CORPORATION, a Delaware corporation, TOWLE MANUFACTURING COMPANY, a
Delaware corporation, LEONARD FLORENCE ASSOCIATES, INC., a Massachusetts
corporation, WALLACE INTERNATIONAL SILVERSMITHS, INC., a Delaware corporation,
SYRATECH HOLDING CORPORATION, an Arkansas corporation, RAUCH INDUSTRIES, INC., a
North Carolina corporation, ROCHARD, INC., a New York corporation, HOLIDAY
PRODUCTS, INC., a North Carolina corporation, FARBERWARE INC., a Delaware
corporation, SILVESTRI, INC., a Delaware corporation, the financial institutions
parties hereto from time to time as Lenders, and NATIONSBANK, N.A., a national
banking association ("NationsBank"), as administrative agent for the Lenders
(the "Administrative Agent").
Preliminary Statements
----------------------
The Borrowers, the Lenders and the Administrative Agent are parties to a
Loan and Security Agreement dated as of April 16, 1997, as amended by Amendment
No. 1 dated as of July 31, 1997 and Amendment No. 2 dated as of December 31,
1997 (the "Loan Agreement", terms defined in the Loan Agreement and not
otherwise defined herein being used herein as therein defined).
The Borrowers have requested that the Lenders modify certain financial
covenants and amend certain other provisions of the Loan Agreement and the
Lenders and the Administrative Agent have agreed to such modifications to the
Loan Agreement as hereinafter set forth, upon and subject to all of the terms,
conditions and provisions hereof.
NOW, THEREFORE, in consideration of the Loan Agreement, the Loans made by
the Lenders and outstanding thereunder, the mutual promises hereinafter set
forth and other good and valuable consideration the receipt and sufficiency of
which are hereby acknowledged, the parties hereto hereby agree as follows:
Section 1. Amendments to Loan Agreement. The Loan Agreement is hereby
amended, effective as provided in Section 2, by
(a) amending Section 1.1 Definitions by
(i) adding thereto in correct alphabetical order the following definition:
<PAGE>
Fiscal Quarter means each of the four consecutive periods of three Fiscal
Months each, beginning on the first day of a Fiscal Year.
(ii) amending the definition EBITDA in its entirety to read as follows:
EBITDA for a specified period means consolidated Net Income of Syratech
and its Consolidated Subsidiaries for such period, before provision for interest
expense, income taxes, depreciation expense, amortization, and any extraordinary
item(s), all determined in accordance with GAAP; plus any amount (up to
$1,250,000) applied before December and otherwise in accordance with the
provisions of Section 11.6, to fund unfunded pension liability of the Borrowers
to Leonard Florence, plus, during the period from April 15, 1997 through
December 31, 1997, an amount not greater than $3,873,756, expensed by Syratech
in connection with the exercise of certain employee stock options exercised in
connection with the Merger.
(b) amending Section 4.9 Prepayment Fee in its entirety to read as
follows:
Section 4.9 Prepayment Fee. If the Borrowers prepay the Loans in whole
(other than from the proceeds of a primary offering of securities of Syratech or
the sale of the Company as a whole) and terminate this Agreement (a) prior to
the first Anniversary or (b) after the first Anniversary but prior to March 1,
1999, the Borrowers shall pay to the Administrative Agent for the Ratable
benefit of the Lenders on such date of terminations, as liquidated damages and
compensation for the costs of making funds available to the Borrowers under this
Agreement and not as a penalty, an amount equal to 2% or 1%, respectively, of
the amount of the Revolving Credit Facility on the Effective Date.
(c) amending Section 11.1 Financial Ratios by
(i) amending Section 11.1(b) Total Funded Debt to EBITDA in its
entirety to read as follows:
(b) Total Funded Debt to EBITDA. Total Funded Debt to EBITDA for any
period of four consecutive Fiscal Quarters ending on or after a date specified
below, to be greater than the ratio specified opposite such date:
Date Ratio
3/31/98 14.84 to 1
6/30/98 19.16 to 1
9/30/98 15.83 to 1
12/31/98 8.80 to 1
3/31/99 5.0 to 1
12/31/99 4.5 to 1
12/31/00
and thereafter 4.25 to 1
2
<PAGE>
(ii) amending Section 11.1(c) Fixed Charge Coverage in its entirety
to read as follows:
(c) Fixed Charge Coverage: Fixed Charge Coverage for any period of
four consecutive Fiscal Quarters ending on or after a date specified below to be
less than the ratio specified opposite such date:
Date Ratio
3/31/98 0.30 to 1
6/30/98 0.22 to 1
9/30/98 0.29 to 1
12/31/98 0.71 to 1
3/31/99 1.15 to 1
12/31/99 1.20 to 1
12/31/00
and thereafter 1.30 to 1
(d) amending Section 11.4 Investments by deleting the figure "$40,000,000"
appearing therein and substituting therefor the figure "$20,000,000";
(e) amending Section 11.5 Capital Expenditures by deleting the figure
"$17,500,000" appearing therein and substituting therefor the figure
"$23,000,000",
(f) amending Section 11.6 Restricted Distributions and Payments, Etc. by
adding at the end thereof as a new grammatical paragraph the following:
To the extent that the payments hereinafter described may be deemed to
be Restricted Distributions or Restricted Payments, so long as no
Default or Event of Default has occurred and is continuing or would
exist after giving effect thereto, the Borrowers may (1) fund 50% of
the unfunded pension liability of the Borrowers to Leonard Florence, up
to an amount equal to $1,250,000, or after the effective date of
Amendment No. 3 to this Agreement, (2) fund the remaining unfunded
pension liability of the Borrowers to Leonard Florence, up to an amount
equal to $1,250,000, after December 1, 1998, provided that after giving
pro forma effect to such funding, based on actual performance by the
Borrowers during the 1998 Fiscal Year to date, no Default or Event of
Default would exist as of December 31, 1998, and (3) purchase life
insurance (which one or more of the Borrowers would own) covering
Messrs Randolph, Levine, and Kanter and Ms. Faye Florence, or otherwise
provide for the Borrowers' post-retirement obligations to such Persons,
on or after the effective date of Amendment No. 3 to this Agreement,
upon terms and conditions no more costly to the Borrowers and otherwise
not less favorable to the Borrowers than those outlined in Mr.
Randolph's letter dated March 10, 1998 addressed to the Agent, copies
of which have been furnished to each Lender.
Section 2. Effectiveness of Amendment. This Amendment shall become
effective as of the date hereof on the date on which the Administrative Agent
shall have received each of the following documents (in sufficient copies for
each Lender):
3
<PAGE>
(a) this Amendment duly executed and delivered by each Borrower and the
Required Lenders,
(b) a certificate of the Secretary of each Borrower having attached
thereto the articles or certificate of incorporation and bylaws of such Borrower
as in effect on the date hereof attached thereto (or containing the
certification of such Secretary that no amendment of modification of such
articles or certificate or bylaws has become effective since the last date on
which such documents were delivered to the Administrative Agent pursuant to the
Loan Agreement), and to the further effect that the incumbency certificate and
corporate action delivered in connection with the occurrence of the date hereof
remain in effect, unchanged,
(c) a certificate of the President or Financial Officer of Syratech to the
effect that
(i) the representations and warranties of the Borrowers contained in
the Loan Documents are true and correct in all material respects on and as of
the date hereof as if made on and as of such date, and
(ii) no Default or Event of Default has occurred and is continuing
and such statements shall be true; and
(d) such other documents, certificates and instrument sin connection with
the effectiveness of this Amendment as the Administrative Agent or any lender
may reasonably request.
Section 3. Effect on Amendment. From and after the effectiveness of this
Amendment, all references in the Loan Agreement and in any other Loan Document
to "this Agreement," "the Loan Agreement," "hereunder," "hereof" and words of
like import referring to the Loan Agreement, shall mean and be references to the
Loan Agreement as amended by this Amendment. Except as expressly amended hereby,
the Loan Agreement and all terms, conditions and provisions thereof remain in
full force and effect and are hereby ratified and confirmed. The execution,
delivery and effectiveness of this Amendment shall not, except as expressly
provided herein, operate as a waiver of any right, power or remedy of any Lender
or the Administrative Agent under any of the Loan Documents, nor constitute a
waiver of any provision of any of the Loan Documents.
Section 4. Counterpart Execution: Governing Law.
(a) Execution Counterparts. This Amendment may be executed in any number
of counterparts and by different parties hereto in separate counterparts, each
of which when so executed and delivered shall be deemed to be an original and
all of which taken together shall constitute but one and the same agreement.
(b) Governing Law. This Amendment shall be governed by and construed in
accordance with the laws of the State of Georgia.
4
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed by their respective officers thereunto duly authorized, as of the date
first above written.
BORROWERS:
SYRATECH CORPORATION
By: /s/ Ami A. Trauber
-----------------------------------------------
Ami A. Trauber
Executive Vice President of Finance,
Chief Financial Officer and
Corporate Treasurer
TOWLE MANUFACTURING COMPANY
By: /s/ Ami A. Trauber
-----------------------------------------------
Ami A. Trauber
Executive Vice President of Finance,
Chief Financial Officer and
Corporate Treasurer
LEONARD FLORENCE ASSOCIATES, INC.
By: /s/ Ami A. Trauber
-----------------------------------------------
Ami A. Trauber
Executive Vice President of Finance,
Chief Financial Officer and
Corporate Treasurer
WALLACE INTERNATIONAL SILVERSMITHS, INC.
By: /s/ Ami A. Trauber
-----------------------------------------------
Ami A. Trauber
Executive Vice President of Finance,
Chief Financial Officer and
Corporate Treasurer
SYRATECH HOLDING CORPORATION
By: /s/ Richard Freiman
-----------------------------------------------
Richard Freiman
President
RAUCH INDUSTRIES, INC.
By: /s/ Ami A. Trauber
-----------------------------------------------
Ami A. Trauber
Executive Vice President of Finance,
Chief Financial Officer and
Corporate Treasurer
ROCHARD, INC.
By: /s/ Richard Sonking
-----------------------------------------------
Richard Sonking
President
HOLIDAY PRODUCTS, INC.
By: /s/ Roger S. Silverstein
-----------------------------------------------
Roger S. Silverstein
President
FARBERWARE INC.
By: /s/ Ami A. Trauber
-----------------------------------------------
Ami A. Trauber
Executive Vice President of Finance,
Chief Financial Officer and
Corporate Treasurer
SILVESTRI, INC.
By: /s/ Ami A. Trauber
-----------------------------------------------
Ami A. Trauber
Executive Vice President of Finance,
Chief Financial Officer and
Corporate Treasurer
ADMINISTRATIVE AGENT:
NATIONSBANK, N.A.
By: /s/ Brian R. O'Fallon
-----------------------------------------------
Brian R. O'Fallon
Senior Vice President
5
<PAGE>
LENDERS:
NATIONSBANK, N.A.
By: /s/ Brian R. O'Fallon
-----------------------------------------------
Brian R. O'Fallon
Senior Vice President
AMERICAN NATIONAL BANK AND TRUST
COMPANY OF CHICAGO
By: /s/ Robert J. Shanahan
-----------------------------------------------
Robert J. Shanahan
Vice President
BANKBOSTON, N.A.
By: /s/Andrew A. Doherty
-----------------------------------------------
Andrew A. Doherty
Vice President
FLEET NATIONAL BANK
By: /s/Scott E. Carpenter
-----------------------------------------------
Scott E. Carpenter
Vice President
UNION BANK OF CALIFORNIA, N.A.
By: /s/Greg Ennis
-----------------------------------------------
Greg Ennis
Vice President
BHF-BANK AKTIENGESELLSCHAFT
By: /s/ Hans J. Scholz
-----------------------------------------------
Hans J. Scholz
Assistant Vice President
By: /s/ Thomas J. Scifo
-----------------------------------------------
Thomas J. Scifo
Assistant Vice President
SANWA BUSINESS CREDIT CORPORATION
By: /s/ Lawrence J. Placek
-----------------------------------------------
Lawrence J. Placek
Vice President
6
Exhibit 11
SYRATECH CORPORATION AND SUBSIDIARIES
COMPUTATION OF NET INCOME PER COMMON SHARE
(in thousands, except per share data)
<TABLE>
<CAPTION>
For the Years Ended December 31,
-----------------------------------
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Basic earnings (loss) per share:
Continuing operations........................................ ($1.17) $2.34 $1.13
Discontinued operations...................................... -- -- 2.82
------- ----- ------
Net income (loss) per common share......................... ($1.17) $2.34 $3.95
======= ===== ======
Weighted-average number of shares outstanding.............. 5,216 8,695 11,707
======= ===== ======
Diluted earnings (loss) per share:
Continuing operations........................................ ($1.17) $2.32 $1.12
======= ===== ======
Discontinued operations...................................... -- -- 2.79
------- ----- ------
Net income (loss) per common share......................... ($1.17) $2.32 $3.91
Shares:
Weighted-average number of shares outstanding.............. 5,216 8,695 11,707
Effect of dilutive stock options........................... -- 104 96
------- ----- ------
Adjusted weighted-average number of shares outstanding..... 5,216 8,799 11,803
======= ===== ======
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM THE SYRATECH
CORPORATION CONSOLIDATED BALANCE SHEET AND THE CONDENSED CONSOLIDATED STATEMENT
OF INCOME AS FILED AS PART OF THE ANNUAL REPORT ON FORM 10-K AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH ANNUAL REPORT ON FORM 10-K
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-1-1997
<PERIOD-END> DEC-31-1997
<CASH> 2,981
<SECURITIES> 0
<RECEIVABLES> 63,893
<ALLOWANCES> 7,208
<INVENTORY> 84,295
<CURRENT-ASSETS> 166,734
<PP&E> 82,404
<DEPRECIATION> 37,379
<TOTAL-ASSETS> 266,000
<CURRENT-LIABILITIES> 52,877
<BONDS> 165,000
0
19,530
<COMMON> 38
<OTHER-SE> 5,336
<TOTAL-LIABILITY-AND-EQUITY> 266,000
<SALES> 290,862
<TOTAL-REVENUES> 290,862
<CGS> 213,366
<TOTAL-COSTS> 213,366
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 16,027
<INCOME-PRETAX> (6,464)
<INCOME-TAX> (1,868)
<INCOME-CONTINUING> (4,596)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (6,126)
<EPS-PRIMARY> (1.17)
<EPS-DILUTED> (1.17)
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS RESTATED SUMMARY INFORMATION EXTRACTED FROM THE SYRATECH
CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS AS FILED AS PART OF THE ANNUAL
REPORT ON FORM 10-K AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH ANNUAL
REPORT ON FORM 10-K
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C> <C> <C> <C> <C>
<PERIOD-TYPE> 12-MOS 12-MOS 9-MOS 6-MOS 3-MOS
<FISCAL-YEAR-END> DEC-31-1995 DEC-31-1996 DEC-31-1996 DEC-31-1996 DEC-31-1996
<PERIOD-START> JAN-1-1995 JAN-1-1996 JAN-1-1996 JAN-1-1996 JAN-1-1996
<PERIOD-END> DEC-31-1995 DEC-31-1996 SEP-30-1996 JUN-30-1996 MAR-31-1996
<CASH> 78,493 3,605 9,532 3,409 11,487
<SECURITIES> 30,561 0 0 0 0
<RECEIVABLES> 31,893 65,382 124,113 59,802 33,406
<ALLOWANCES> 4,207 5,362 6,914 4,372 5,313
<INVENTORY> 41,151 79,355 105,297 109,061 68,577
<CURRENT-ASSETS> 190,639 155,723 242,063 197,401 120,792
<PP&E> 29,560 96,708 92,171 90,648 78,261
<DEPRECIATION> 19,295 32,753 31,340 30,244 28,090
<TOTAL-ASSETS> 220,566 227,254 310,349 264,289 194,378
<CURRENT-LIABILITIES> 68,589 35,805 123,377 87,684 27,888
<BONDS> 0 0 0 0 0
0 0 0 0 0
0 0 0 0 0
<COMMON> 87 87 87 87 87
<OTHER-SE> 146,509 170,161 165,422 155,406 146,686
<TOTAL-LIABILITY-AND-EQUITY> 220,566 227,254 310,349 264,289 194,378
<SALES> 169,520 270,931 182,727 69,858 31,266
<TOTAL-REVENUES> 169,520 270,931 182,727 69,858 31,266
<CGS> 119,836 194,113 130,303 50,632 22,218
<TOTAL-COSTS> 119,836 194,113 130,303 50,632 22,218
<OTHER-EXPENSES> 0 0 0 0 0
<LOSS-PROVISION> 0 0 0 0 0
<INTEREST-EXPENSE> 287 3,150 2,083 993 127
<INCOME-PRETAX> 20,039 32,623 28,799 13,404 143
<INCOME-TAX> 6,863 12,234 10,080 4,691 53
<INCOME-CONTINUING> 13,176 20,389 18,719 8,713 90
<DISCONTINUED> 33,023 0 0 0 0
<EXTRAORDINARY> 0 0 0 0 0
<CHANGES> 0 0 0 0 0
<NET-INCOME> 46,199 20,389 18,719 8,713 90
<EPS-PRIMARY> 3.95 2.34 2.16 1.00 0.01
<EPS-DILUTED> 3.91 2.32 2.13 0.99 0.01
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS RESTATED SUMMARY INFORMATION EXTRACTED FROM THE SYRATECH
CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS AS FILED AS PART OF THE ANNUAL
REPORT ON FORM 10-K AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH ANNUAL
REPORT ON FORM 10-K
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C> <C> <C>
<PERIOD-TYPE> 9-MOS 6-MOS 3-MOS
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1997 DEC-31-1997
<PERIOD-START> JAN-1-1997 JAN-1-1997 JAN-1-1997
<PERIOD-END> SEP-30-1997 JUN-30-1997 MAR-31-1997
<CASH> 498 2,128 1,279
<SECURITIES> 0 0 0
<RECEIVABLES> 109,247 53,307 54,328
<ALLOWANCES> 8,329 6,357 5,207
<INVENTORY> 107,692 104,439 78,827
<CURRENT-ASSETS> 222,084 171,218 144,069
<PP&E> 109,396 105,695 102,837
<DEPRECIATION> 36,080 34,933 33,763
<TOTAL-ASSETS> 312,725 259,749 220,514
<CURRENT-LIABILITIES> 97,903 49,222 28,763
<BONDS> 165,000 165,000 0
0 0 0
18,990 18,000 0
<COMMON> 38 38 87
<OTHER-SE> 6,875 5,201 170,024
<TOTAL-LIABILITY-AND-EQUITY> 312,725 259,749 220,514
<SALES> 194,098 85,054 44,039
<TOTAL-REVENUES> 194,098 85,054 44,039
<CGS> 137,939 61,078 31,414
<TOTAL-COSTS> 137,939 61,078 31,414
<OTHER-EXPENSES> 0 0 0
<LOSS-PROVISION> 0 0 0
<INTEREST-EXPENSE> 10,160 4,311 7
<INCOME-PRETAX> (1,200) (8,854) 171
<INCOME-TAX> 1,860 (3,320) 64
<INCOME-CONTINUING> (3,060) (5,534) 107
<DISCONTINUED> 0 0 0
<EXTRAORDINARY> 0 0 0
<CHANGES> 0 0 0
<NET-INCOME> (3,060) (5,534) 107
<EPS-PRIMARY> (0.71) (0.90) 0.01
<EPS-DILUTED> (0.71) (0.90) 0.01
</TABLE>
