<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 4, 1997
REGISTRATION NO. 333-26133
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
CONCEPTS DIRECT, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 5961 52-1781893
(STATE OR OTHER JURISDICTION (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
</TABLE>
1351 SOUTH SUNSET STREET
LONGMONT, COLORADO 80501
(303) 772-9171
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
ROBERT L. BURRUS, JR.
MCGUIRE, WOODS, BATTLE & BOOTHE, L.L.P.
ONE JAMES CENTER
RICHMOND, VIRGINIA 23219
(804) 775-1000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
COPIES TO:
KENNETH R. LAMB
GIBSON, DUNN & CRUTCHER LLP
ONE MONTGOMERY STREET
SAN FRANCISCO, CALIFORNIA 94104
(415) 393-8200
------------------------
Approximate date of commencement of proposed sale to the public:
As soon as practicable after this Registration Statement becomes effective.
------------------------
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
================================================================================
<PAGE> 2
CONCEPTS DIRECT, INC.
CROSS REFERENCE SHEET
SHOWING LOCATION IN PROSPECTUS OF INFORMATION
REQUIRED BY ITEMS OF FORM S-1
<TABLE>
<CAPTION>
FORM S-1 ITEM
NUMBER AND CAPTION PROSPECTUS CAPTION
------------------------------------------- -------------------------------------------
<S> <C> <C>
1. Forepart of Registration Statement and Forepart of Registration Statement;
Outside Front Cover Page of Prospectus..... Outside Front Cover Page of Prospectus
2. Inside Front and Outside Back Cover Pages Inside Front and Outside Back Cover Pages
of Prospectus.............................. of Prospectus
3. Summary Information, Risk Factors.......... Prospectus Summary; Risk Factors
4. Use of Proceeds............................ Prospectus Summary; Use of Proceeds
5. Dilution................................... Not Applicable
6. Selling Security Holders................... Principal and Selling Stockholders
7. Plan of Distribution....................... Outside Front Cover Page of Prospectus;
Principal and Selling Stockholders;
8. Description of Securities to be Underwriting
Registered................................. Outside Front Cover Page of Prospectus;
Dividend Policy; Description of Capital
Stock; Underwriting
9. Interests of Named Experts and Counsel..... Legal Matters; Experts
10. Information with Respect to Registrant..... Prospectus Summary; Risk Factors;
Capitalization; Dividend Policy; Price
Range of Common Stock; Selected Financial
Data; Management's Discussion and Analysis
of Financial Condition and Results of
Operations; Business; Management; Executive
11. Disclosure of Commission Position on Compensation; Principal and Selling
Indemnification for Securities Act Stockholders; Financial Statements
Liabilities................................ Not Applicable
</TABLE>
<PAGE> 3
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED JUNE 4, 1997
1,600,000 SHARES
CONCEPTS DIRECT, INC.
[CONCEPTS DIRECT LOGO]
COMMON STOCK
------------------------
Of the 1,600,000 shares of Common Stock, par value $.10 per share ("Common
Stock"), of Concepts Direct, Inc. (the "Company" or "Concepts Direct") offered
hereby, 471,404 shares are being sold by the Company and 1,128,596 shares are
being sold by certain stockholders of the Company ("Selling Stockholders"). See
"Principal and Selling Stockholders." The Company will not receive any of the
proceeds from the sale of the Common Stock offered by the Selling Stockholders.
On May 30, 1997, the last sale price of the Company's Common Stock, as reported
on the Nasdaq SmallCap Market, was $22.00 per share. The Company's Common Stock
is traded under the symbol "CDIR." The Company has applied to have the Common
Stock approved for quotation on the Nasdaq National Market under the same
symbol.
------------------------
SEE "RISK FACTORS" BEGINNING ON PAGE 7 FOR CERTAIN INFORMATION THAT SHOULD
BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE COMMON STOCK OFFERED HEREBY.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<TABLE>
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==================================================================================================
UNDERWRITING PROCEEDS TO
PRICE TO DISCOUNTS AND PROCEEDS TO SELLING
THE PUBLIC COMMISSIONS(1) THE COMPANY(2) STOCKHOLDERS(3)
- --------------------------------------------------------------------------------------------------
Per Share..................... $ $ $ $
- --------------------------------------------------------------------------------------------------
Total......................... $ $ $ $
==================================================================================================
</TABLE>
(1) See "Underwriting" for information concerning indemnification of the
Underwriters by the Company and the Selling Stockholders and other matters.
(2) Before deducting expenses estimated at $ payable on a pro-rata basis
by the Company and Selling Stockholders.
(3) The Company has granted the Underwriters a 30-day option to purchase up to
240,000 shares of Common Stock at the Price to the Public less Underwriting
Discounts and Commissions, solely to cover over-allotments, if any. If such
option is exercised in full, the total Price to the Public, Underwriting
Discounts and Commissions and Proceeds to the Company will be ,
, and , respectively. See "Underwriting."
------------------------
The shares of Common Stock are being offered hereby by the Underwriters
named herein, subject to prior sale, when, as and if issued by the Company and
delivered to and accepted by the Underwriters and subject to certain prior
conditions, including the right of the Underwriters to reject any order in whole
or in part. It is expected that delivery of the shares of Common Stock will be
made in New York, New York at the offices of EVEREN Clearing Corporation or
through the facilities of The Depository Trust Company on or about ,
1997.
EVEREN SECURITIES, INC. SCOTT & STRINGFELLOW, INC.
The date of this Prospectus is , 1997.
<PAGE> 4
[CONCEPTS DIRECT LOGO]
[PHOTOGRAPHS OF CATALOG COVERS]
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK AT
A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
TRANSACTIONS MAY BE EFFECTED ON THE NASDAQ SMALLCAP MARKET, NASDAQ NATIONAL
MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY
TIME. SEE "UNDERWRITING."
IN CONNECTION WITH THIS OFFERING, CERTAIN UNDERWRITERS AND SELLING STOCKHOLDERS
MAY ENGAGE IN PASSIVE MARKET MAKING TRANSACTIONS IN THE COMMON STOCK ON THE
NASDAQ SMALLCAP MARKET OR THE NASDAQ NATIONAL MARKET IN ACCORDANCE WITH RULE 103
OF REGULATION M UNDER THE SECURITIES EXCHANGE ACT OF 1934. SEE "UNDERWRITING."
2
<PAGE> 5
[PHOTOGRAPHS AND DESCRIPTIONS OF MERCHANDISE FEATURED IN THE COMPANY'S CATALOGS]
<PAGE> 6
[PHOTOGRAPHS AND DESCRIPTIONS OF MERCHANDISE FEATURED IN THE COMPANY'S CATALOGS]
<PAGE> 7
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by, and should be read
in conjunction with, the more detailed information and the financial statements
and related notes thereto appearing elsewhere in this Prospectus. See "Risk
Factors" for a discussion of certain risks associated with an investment in the
Common Stock. Unless the context otherwise requires, the terms "Concepts Direct"
or the "Company" refer to Concepts Direct, Inc., a Delaware corporation, or,
prior to the 1992 spin-off, the Consumer Products Division of Wiland Services,
Inc. This Prospectus is being used by the Company and the Selling Stockholders
to offer, respectively, 471,404 shares and 1,128,596 shares of Common Stock (the
"Offering"). On February 25, 1997, the Company's Board of Directors declared a
2-for-1 split of the Common Stock. Stockholders of record at the close of
business on March 14, 1997 were entitled to participate in the stock-split,
which was effected in the form of a 100% stock dividend payable on March 31,
1997. All of the share and per share data in this Prospectus has been adjusted
to reflect such stock-split. The information set forth herein assumes an
offering price of $22.00 per share for the Common Stock offered hereby (the last
sale price of the Common Stock as reported on the Nasdaq SmallCap Market on May
30, 1997) and, unless otherwise specified, no exercise of the Underwriters'
over-allotment option.
THE COMPANY
Concepts Direct, Inc. (the "Company") is a direct marketer of personalized
labels, paper products, collectibles, gift items, home decorative items and
casual apparel (primarily t-shirts and caps) that are selected and designed
based on the hobbies, interests and lifestyles of its target customers. The
Company markets its merchandise primarily through its three current catalogs,
Colorful Images(R), Linda Anderson(R) and Colorful Images Presents
Impressions(R) ("Impressions"), which are mailed to prospects derived from
rented and exchanged lists and names from its proprietary database. This
database includes customers, gift recipients and catalog requestors and had
grown to over 6,000,000 names at March 31, 1997, including approximately
1,800,000 customers who had purchased in the prior 12 months. The Company uses a
disciplined, analytical approach to marketing and merchandising to target
customers. The Company believes that this approach, together with its direct
marketing expertise, merchandising capabilities and popular consumable products,
have built brand identity and customer loyalty which will serve as a foundation
for future growth.
The Company mailed approximately 43.5 million catalogs in 1996 (excluding
catalogs inserted in product shipments). Colorful Images(R), the Company's
flagship catalog, offers over 900 different styles and themes of personalized
paper products, as well as t-shirts, collectible figurines and other products
that supplement its colorful line of paper products. The Linda Anderson(R)
catalog offers a variety of gifts, home decorative items, casual sweaters and
sweatshirts, typically at higher price points than Colorful Images(R).
Impressions, the Company's third catalog, is dedicated exclusively to
personalized gift items. A large segment of the Company's customers are women
between the ages of 35 and 54. The Company believes that one of the strengths of
its product line is its general appeal to many women.
The Company had record net income of $1.9 million and record net sales of
$51.1 million in 1996, an increase of 129.8% and 21.4% over 1995. This trend
continued in the three month period ended March 31, 1997, when the Company had
record first quarter net income of $673,000 and record first quarter net sales
of $16.0 million, an increase of 153.3% and 37.7% over the three month period
ended March 31, 1996. In addition, net cash provided by operating activities
grew to a record $3.6 million in 1996.
According to the U.S. Census Bureau, the $46 billion mail order industry
has experienced significant growth over the past decade. From 1985 to 1995, the
mail order industry surpassed all other retail sectors in growth with a compound
annual growth rate of 11.3%, compared to 5.5% growth for the total retail
market.
Business Strategy -- The Company's goal is to create, build and operate
multiple direct marketing concepts that profitably sell merchandise to a
targeted customer base. The principal components of its business strategy
include effective marketing to the Company's proprietary database and the use of
list testing and segment analysis to target mailings to prospective customers.
The Company also employs a disciplined approach to merchandise selection and new
product development to eliminate products that do not meet
3
<PAGE> 8
expectations and replace them with more popular products. These strategies,
together with the Company's emphasis on creative presentation and customer
satisfaction, are designed to promote repeat purchases, including consumable
reorders, increased spending and gift giving.
Growth Strategy -- The Company's growth strategy consists of the following
principal components:
- INCREASE CATALOG CIRCULATION. Total catalogs mailed has increased from
approximately 14.5 million in 1993 to approximately 43.5 million in
1996 (excluding catalogs inserted in product shipments), a 44%
compound annual growth rate. The Company believes that its list
testing strategy, emphasis on evaluation of performance data and
recognition of the long-term value of a new customer have allowed it
to expand circulation, achieve acceptable response rates and enlarge
its proprietary database. As its catalog titles and proprietary
database expands, the Company plans to continue to increase catalog
circulation.
- EXPAND PAGE COUNT AND MERCHANDISE SELECTION. The Company plans to
increase catalog page and product count by introducing new merchandise
and adding products tailored to the tastes of its customers and
prospects. The Company believes this strategy will enhance the appeal
of each catalog and provide additional opportunity for contribution to
net sales.
- INTRODUCE COMPLEMENTARY NEW CATALOG TITLES. The Company believes that
its proprietary database and understanding of the product preferences
of its primary audience will enable it to introduce new catalogs
focused on historically popular product lines such as collectibles and
t-shirts. For example, the Company recently entered into a license
agreement through September 2001 authorizing it to design, create and
distribute a catalog consisting exclusively of merchandise featuring
Snoopy(TM), Charlie Brown(TM) and the other PEANUTS(R) characters.
- PROMOTE MERCHANDISE FEATURING POPULAR LICENSED CHARACTERS AND
BRANDS. The Company offers personalized labels, collectibles, t-shirts
and gift merchandise featuring popular licensed characters and brands,
including Snoopy(TM) and the other PEANUTS(R) characters,
Coca-Cola(R), Precious Moments(R), Dreamsicles(R) and others. The
Company has customers in its proprietary database who are interested
in licensed or branded merchandise and plans to seek additional
arrangements for such merchandise.
- EXPAND FACILITIES AND OPERATIONAL CAPABILITIES. The Company has broken
ground on a new facility designed to substantially increase its
current operational capacity to approximately 117,000 square feet,
providing space for growth and allowing more efficient operations and
fulfillment functions. The Company plans to continue enhancing its
software, manufacturing and fulfillment systems to support its growth
plans.
The Company believes its past investment in management, systems and its
proprietary database will support the growth of its existing catalogs and the
introduction of new catalogs. The Company currently plans to test at least three
(3) new catalog titles in 1997. These catalogs will feature historically popular
merchandise types and themes and are being designed to capitalize on the
Company's proprietary database. The Company has budgeted less than $1.6 million,
including inventory, to conduct the initial test of these three new catalogs.
The Company is a Delaware corporation incorporated in 1992 and is the
continuing operation of the Consumer Products Division of Wiland Services, Inc.,
which merged with Neodata Corporation in September 1992. The Company's executive
offices are located at 1351 South Sunset Street, Longmont, Colorado 80501-6549,
and its telephone number is (303) 772-9171.
4
<PAGE> 9
THE OFFERING
<TABLE>
<S> <C>
Common Stock Offered by the Company................................... 471,404 shares(1)
Common Stock Offered by the Selling Stockholders...................... 1,128,596 shares
Common Stock to be Outstanding After the Consummation of the
Offering............................................................ 4,724,286 shares(1)(2)
Use of Proceeds....................................................... Working Capital and
General Corporate
Purposes
Nasdaq SmallCap Market/Proposed Nasdaq National Market Symbol......... CDIR
Risk Factors.......................................................... The Common Stock offered
hereby involves certain
risks. See "Risk
Factors."
</TABLE>
- ---------------
(1) Excludes 240,000 shares of Common Stock subject to the Underwriters'
over-allotment option.
(2) Excludes 19,334 shares of Common Stock subject to options exercisable as of
April 1, 1997.
------------------------
Colorful Images(R), Linda Anderson(R) and Colorful Images Presents
Impressions(R) are registered service marks of the Company. The Company has
applied for registration of its Linda Anderson's Collectibles(SM) service mark.
Tradenames and trademarks of other companies appearing in this Prospectus are
the property of their respective holders.
5
<PAGE> 10
SUMMARY FINANCIAL AND OPERATING DATA
(IN THOUSANDS, EXCEPT PERCENTAGES AND PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED DECEMBER 31, ENDED MARCH 31,
------------------------------------------------------- -------------------
1992(1) 1993 1994 1995 1996 1996 1997
------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales.................................. $22,631 $15,936 $20,724 $42,147 $51,126 $11,584 $15,952
Gross profit............................... 8,851 5,876 9,318 19,861 24,292 5,643 7,993
Operating income (loss) from continuing
operations............................... (5,629) (2,543) 1,403 638 2,562 263 951
Income (loss) from continuing operations
before income taxes...................... (5,578) (2,509) 1,490 937 2,808 375 1,052
Income from discontinued operations........ 23,598 -- -- -- -- -- --
Net income (loss).......................... $20,028 $(2,252) $ 1,490 $ 843 $ 1,937 $ 266 $ 673
======= ======= ======= ======= ======= ======= =======
Earnings (loss) per share from continuing
operations............................... $ (0.99) $ (0.56) $ 0.34 $ 0.19 $ 0.44 $ 0.06 $ 0.15
Net earnings (loss) per share.............. $ 5.56 $ (0.56) $ 0.34 $ 0.19 $ 0.44 $ 0.06 $ 0.15
======= ======= ======= ======= ======= ======= =======
Weighted average number of common shares
and common share equivalents
outstanding.............................. 3,604 3,999 4,323 4,404 4,442 4,442 4,482
======= ======= ======= ======= ======= ======= =======
COMPANY OPERATING DATA:
(EXPRESSED AS PERCENTAGES)
Net sales growth (decline)................. (29.6)% 30.0% 103.3% 21.3% 37.7%
Gross profit growth (decline).............. (33.6) 58.6 113.1 22.3 41.6
Operating profit growth (decline).......... 54.8 155.2 (54.5) 301.6 261.9
Gross margin............................... 36.9 45.0 47.1 47.5 48.7% 50.1
Operating margin........................... (16.0) 6.8 1.5 5.0 2.3 6.0
Net income (loss) margin................... (14.1) 7.2 2.0 3.8 2.3 4.2
SELECTED OPERATING DATA:
Total active customers at period end(2).... 804 1,362 1,644 1,474 1,807
</TABLE>
<TABLE>
<CAPTION>
AT MARCH 31, 1997
------------------------
ACTUAL AS ADJUSTED(3)
------- --------------
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BALANCE SHEET DATA:
Working capital........................................................................... $ 4,503 $ 14,003
Total assets.............................................................................. 14,061 23,561
Long-term debt............................................................................ 0 0
Lease obligations......................................................................... 0 0
Total stockholders' equity................................................................ 7,653 17,153
</TABLE>
- ---------------
(1) On September 30, 1992, Wiland Services, Inc. ("Wiland") completed a merger
transaction with Neodata Corporation. Wiland had two business divisions:
Consumer Products and Direct Marketing Services. Concepts Direct, Inc.,
formerly the Consumer Products division of Wiland, was created in connection
with the merger and accounting conventions required that Concepts Direct be
treated as the continuing operation. For financial reporting purposes, the
operations of the Direct Marketing Services division of Wiland are treated
as discontinued operations of Concepts Direct, Inc.
(2) "Active customers" is defined as database records on customers who have
purchased merchandise from the Company one or more times within the 12
months preceding the end of the period indicated.
(3) Adjusted to reflect the sale by the Company of 471,404 shares of Common
Stock offered hereby at an assumed price of $22.00 per share (the last sale
price of the Common Stock as reported on May 30, 1997), less estimated
underwriting discounts and offering expenses payable on a pro-rata basis by
the Company and Selling Stockholders.
6
<PAGE> 11
RISK FACTORS
The following principal risk factors should be considered carefully in
addition to the other information contained in this Prospectus before purchasing
the Common Stock offered hereby. This Prospectus contains forward-looking
statements (as such term is defined in the Private Securities Litigation Reform
Act of 1995). Because such statements include risks and uncertainties, actual
results could differ materially from those expressed or implied by such
forward-looking statements. Factors that could cause or contribute to such
differences include, but are not limited to, those discussed below and in the
sections entitled "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and "Business," as well as those discussed elsewhere
in this Prospectus.
FLUCTUATIONS IN RESPONSE RATES; RELIANCE ON COLORFUL IMAGES(R) CATALOG
The Company's net sales and net income depend on its catalog operations.
Response rates to the Company's mailings have fluctuated and can be affected by
many factors, including consumer preferences, economic conditions, the timing of
catalog mailings, the catalog's merchandise mix, mailing lists utilized and the
Company's ability to respond to and process orders in a timely manner, some of
which are outside the Company's control. Any inability of the Company to target
accurately the appropriate prospects and customers, to achieve adequate response
rates or to process orders effectively could result in lower sales, markdowns or
write-offs of inventory, increased merchandise returns and lower margins, and
thus could adversely affect the Company's net sales and net income. Catalog
mailings also entail substantial costs for postage, paper, and printing,
virtually all of which costs are incurred prior to the mailing of each catalog.
Costs to stock a portion of the merchandise inventory needed to fulfill orders
are also incurred before actual orders from a mailing are known. Thus, the
Company has limited ability to adjust the costs for a particular mailing to
reflect the performance of that mailing. If, for any reason, the Company were to
experience a significant shortfall in revenue from a particular mailing, the
Company's financial condition and results of operations would be adversely
affected.
The Company's first catalog, Colorful Images(R), is the only catalog among
the Company's offerings that has been successful over a sustained period of
time. It accounted for over 90% of Company sales in 1996. The newer Company
catalog titles, Linda Anderson(R) and Impressions, are at earlier stages of
development. There can be no assurance that they or any planned catalogs or
other marketing or distribution strategies the Company may develop will be
successful.
RISKS ASSOCIATED WITH GROWTH STRATEGY
The Company's growth strategy involves various risks, including a high
degree of reliance on prospect mailings, which typically have less favorable
response rates than customer mailings. In addition, there can be no assurance
that the Company will be able to continue to identify and offer new merchandise
that appeals to its customer base and prospects, or that the introduction of new
marketing or distribution strategies, such as new catalog titles or other
offers, will achieve acceptance in the marketplace. The failure of the Company
to sustain the growth of catalog sales, to increase its proprietary database, to
maintain its customer or prospect response rates or to successfully introduce
new catalog titles and merchandise lines could adversely affect the Company's
financial condition and results of operations.
The Company's ability to pursue its growth strategy also depends on its
ability to manage a larger business. Managing growth will require the Company to
continue to implement and improve its operations and financial and management
information systems and to continue to expand, motivate and effectively manage
its workforce. As the Company's sales increase, the Company will be required to
maintain higher inventories to provide satisfactory order fulfillment to its
customers. This increase in inventory levels may expose the Company to greater
risk of excess inventory.
The Company's ability to pursue its growth strategy depends on its ability
to successfully increase the size of its operation by relocating to a larger
facility. Any difficulty in such relocation could adversely affect the Company's
business. See "-- Relocation of Company's Operations; Risk of Disaster." In
addition, there can
7
<PAGE> 12
be no assurance that improvements or expansions in the Company's information
systems, telephone systems, order fulfillment functions or related facilities or
operations will increase the productivity of the Company or that such changes
will meet the future needs of the Company. Continued growth could strain the
Company's management, financial, merchandising, marketing, order fulfillment,
distribution and other resources. The Company may experience operating
difficulties, including difficulties in training and managing an increasing
number of employees (many of whom have historically been temporary or part
time), in sourcing and managing inventory, in obtaining sufficient materials and
manufacturing capacity to produce its merchandise and in upgrading its
management information systems. The Company may also experience difficulties
related to loss of business if it fails to respond to customer inquiries or
process customer orders in an efficient and timely manner, or experiences delays
in operations, production or shipment. Failure to manage growth effectively
could adversely affect the Company's financial condition and results of
operations. See "Reliance on Information Systems -- Potential Disruptions" and
"Business -- Growth Strategy."
DEPENDENCE ON PRIMARY PRODUCT LINES
The Company initially sold only personalized self-adhesive labels but has
added new product lines during the past several years, including other paper
products, such as note pads, calling cards, memo cubes and Christmas cards, and
a selection of non-paper merchandise, including collectibles, gift items, home
decorative items and casual apparel (primarily t-shirts and caps). While the
percentages of total sales derived from personalized paper products has declined
in 1994, 1995 and 1996 to 74%, 65% and 59%, paper products, of which labels
remain the principal sales contributor, continue to be the Company's primary
product line. Margins achieved by the Company on paper products, particularly
its labels, are typically substantially higher than the margins achieved on its
other products and overall margins may decline with changes in the merchandise
mix. There can be no assurance that the Company will continue to be able to
identify and offer new merchandise that appeals to its customers and prospects.
Any decrease in sales or margins on paper products, or the rate of growth of
such sales, may have a disproportionately adverse effect on the Company's
financial condition and results of operations.
RELIANCE ON USE OF RENTED AND EXCHANGED LISTS
The Company mails catalogs to names from its proprietary database and to
prospects whose names are obtained from exchanged and rented lists.
Approximately half of the catalogs mailed by the Company in 1996 were sent to
names from exchanged or rented lists, and the Company anticipates continuing the
use of such lists, possibly in larger proportion to total mail volume than was
the case in 1996. Mailings to exchanged or rented lists usually generate lower
response rates than mailings to recent Company customers. The Company
anticipates that overall response rates may decline if it increases its use of
exchanged and rented lists relative to its use of names from its proprietary
database. The Company's growth strategy necessitates the expansion of its
proprietary database and is dependent on prospecting for new customers through
the use of exchanged and rented lists. If the Company is not successful in
prospecting, its response rates from mailings to names from its proprietary
database could decrease, which may have an adverse effect on the Company's
financial condition and results of operations. No assurances can be given that
the Company will continue to have access to rented and exchanged lists, or that
such lists will be available on terms that are acceptable to the Company.
POSTAGE, PAPER AND PRINTING COSTS ASSOCIATED WITH THE DISTRIBUTION OF CATALOGS
AND MERCHANDISE
Postage, paper and printing costs typically represent more than 75% of the
total cost of producing and distributing the Company's catalogs. In addition,
the Company ships its merchandise to customers via the United States Postal
Service and other carriers. Postage and carrier prices increase periodically and
can be expected to increase in the future. The last major U.S. postage rate
increase became effective January 1, 1995 and increased standard class postage
rates for mailing the Company's catalogs approximately 14%. Based on trade
reports, the Company believes that a standard class rate increase within the
next 12 to 18 months is likely. Any increase in postage or shipping rates may
adversely affect the Company's financial condition and
8
<PAGE> 13
results of operations. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
Paper costs associated with production of Company catalogs have fluctuated
significantly as market prices for such paper have been volatile, and the
Company has not always been able to predict future paper prices or negotiate
fixed rates for specified periods of time. In addition, the paper used to
produce the Company's paper products is obtained from several sources, and the
rates on this paper are also sometimes volatile. No long term price agreements
exist. Printing costs on a unit basis may increase in the future. Any future
increases in paper or printing costs for the Company's catalogs or paper
products may adversely affect the Company's financial condition and results of
operations.
Higher postage, paper or printing expenses would increase the Company's
cost of doing business. The Company may not be able to pass such increased costs
on to its customers through increased prices for its products. In addition, to
the extent that the Company attempts to offset such increases through reductions
in the circulation of one or more catalog titles either by reducing the number
of editions distributed per year or the number of pages, or both, or reducing
the number of catalogs mailed, the Company's growth strategy would be adversely
affected. See "Business -- Growth Strategy."
RELIANCE ON KEY VENDORS
The Company relies on a limited number of vendors to produce its label
stock and print its catalogs and paper products. Any significant cost increase
or inability to obtain raw materials or merchandise could adversely affect the
Company's financial condition and results of operations.
RELOCATION OF COMPANY'S OPERATIONS; RISK OF DISASTER
The Company's success depends, to a large degree, on efficient and
uninterrupted operation of its facilities. The Company needs additional space to
handle anticipated sales volume increases. The Company is currently constructing
a new, substantially larger facility in Longmont, Colorado and plans to move all
of its production, administrative and operations functions into this facility by
September 1997. If the Company is not able to relocate by the end of August
1997, the Company will need to either extend the lease of its existing
headquarters and lease temporary space or make alternative arrangements in order
to accommodate anticipated fourth quarter volume. The landlord of the current
facility has verbally indicated that it will cooperate if a suitable replacement
tenant has not been located and the Company needs to extend its current lease.
The landlord, to date, has not been willing to sign an extension option. If
construction of the new facility is late and the current landlord will not agree
to a lease extension, a significant dispute or business disruption may occur.
Any such event or decrease in the Company's efficiency, especially at a time of
year when it historically has received a significant portion of its orders and
related annual net sales, could adversely affect the Company's business. See
"Business -- Properties."
If a natural or other disaster were to destroy or significantly damage the
Company's one major facility, the Company would need to obtain alternative
facilities and additional inventory to conduct its operations, significantly
increasing costs and resulting in delays in the fulfillment of customer orders.
The Company's business interruption insurance may not be adequate to cover such
damage to the Company, including lost goodwill with its customers.
RELIANCE ON INFORMATION SYSTEMS; POTENTIAL DISRUPTIONS
The Company processes a large volume of relatively small orders. The
Company's business depends on the effective operation of its management
information and telecommunications systems. Any material disruption or slowdown
in the Company's order processing or fulfillment systems resulting from the
relocation of the Company's operations, strikes or labor disputes, telephone
down times, electrical outages, mechanical
9
<PAGE> 14
problems, human error or accidents, fire, natural disasters, adverse weather
conditions or other events could cause delays in the Company's ability to
receive and distribute orders and may cause orders to be lost or to be shipped
or delivered late. In the event the Company is unable to provide prompt,
accurate and complete service to its customers on a competitive basis, the
Company may lose repeat orders, and customers may cancel orders or return goods
which could result in a reduction of net sales and increased administrative and
shipping costs.
In August 1995, the Company installed a new, internally-developed software
system and began retraining most employees to operate the new system. This
retraining, in conjunction with certain problems with the new software, led to a
low telephone answer rate and other service problems during the third and fourth
quarters of 1995 which in turn negatively affected the Company's financial
performance. Difficulty in implementing the operations software systems resulted
in delayed shipments and correspondingly high backlog during the last half of
1995. During the fourth quarter of 1996, as a result of Company sales exceeding
projections, the Company had a shortage of personnel to process orders, leading
temporarily to high backlogs. There can be no assurance similar problems will
not occur in the future. As the Company's strategies depend in part on
maintaining a reputation for good customer service, any impairment of its
customer service reputation could result in lost orders and adversely affect the
Company's business.
The Company attempts to deliver its catalogs to its customers at timely
intervals and in appropriate seasons and relies heavily on the United States
Postal Service and others to do so. Failure to deliver Company mailings at
scheduled times, whether due to postal delays, printing delays, disruptions in
the mailing of catalogs or other factors, could affect demand for the Company's
products and could adversely affect its business. See "Business -- Customer
Service."
COMPETITION
The markets for the Company's merchandise are highly competitive. The
opportunities in these markets have encouraged the entry of new competitors as
well as increased competition from established companies. The Company competes
with direct marketers, catalog retailers, direct mailers, retail stores and
others. Sales of apparel, gift items and home decorative items through home
television shopping networks or other electronic media, such as the Internet,
could provide additional sources of competition for the Company in the future.
Within each merchandise category the Company has significant competitors and may
face new competition from new entrants or existing competitors who focus on
market segments currently served by the Company. Many competitors are larger and
have significantly greater financial, marketing and other resources than the
Company. Increased catalog mailings by the Company's competitors may adversely
affect response rates to the Company's own catalog mailings. Because the Company
currently sources most of its paper products and other merchandise from
suppliers, distributors and manufacturers located in the United States, where
labor and production costs may be higher than in some foreign countries, there
can be no assurance that the Company's merchandise can be competitively priced
with merchandise offered by competitors whose sourcing is primarily from abroad.
There can be no assurance that the Company will be able to maintain or increase
its market share in the future. The failure of the Company to compete
successfully could adversely affect the Company's business. See
"Business -- Competition."
DEPENDENCE ON SIGNIFICANT LICENSE RIGHTS AND BRANDED MERCHANDISE
The Company has purchased or licensed rights to certain artwork used in its
products. In addition, the Company purchases brand name merchandise and has
licensed certain rights on a royalty basis from leading companies. Trademarked
merchandise currently appearing in the Company's catalogs include PEANUTS(R),
Boyd's Bears(R), Dreamsicles(R), Coca-Cola(R), Looney Tunes(R), Warner
Bros(R)and others. There can be no assurance that these products will continue
to be available to the Company. Licensed rights are generally short-term, and
the potential for renewals is beyond the Company's control. Brand name
merchandise may or may not continue to be available to the Company. If the
Company were unable to offer a significant portion of such products and
merchandise, the Company's business could be adversely affected. See
"Business -- Licensing and Service Marks."
10
<PAGE> 15
In the past, third parties have asserted that the Company has offered
products in violation of the intellectual property rights of others. In certain
instances, the Company ceased selling those products as a result of such
assertions. To date, the Company has not agreed to pay, nor been required to
pay, any damages as a result of such claims. The Company's procedures for
determining whether third parties have rights with respect to any particular
product are limited and may not always reveal all rights of others. No assurance
can be given that the Company will not be required to cease selling products
that have been profitable for the Company, or that the Company will not be
obligated to make payments to third parties as a result of the Company
infringing the rights of others.
DEPENDENCE ON KEY PERSONNEL
The success of the Company's business is dependant, to a large extent, upon
the efforts and abilities of its key employees, particularly Phillip A. Wiland
(Chairman and Chief Executive Officer), J. Michael Wolfe (President and Chief
Operating Officer) and several other senior staff members of the Company. The
loss of one or more of its key employees could adversely affect the Company. The
Company's future success will also depend on its ability to employ additional
qualified senior management. In addition, the low unemployment rate in the area
where the Company is located may make it difficult to hire the employees
required to support the Company's further growth. There can be no assurance that
the Company will be successful in attracting or retaining additional qualified
personnel. See "Management" and "Business."
POSSIBLE INCREASE IN MERCHANDISE RETURNS AND REFUNDS
The Company emphasizes customer service and has a return policy intended to
assure customer satisfaction. The retail value of refunds and merchandise
replacements issued under the return policy in 1996 and 1995 was approximately
5.8% and 7.0% of net sales. The Company makes allowances in its financial
statements for anticipated merchandise returns and refunds based on historical
return rates. There can be no assurance that actual merchandise returns or
refunds will not exceed the Company's allowances. In addition, because the
Company's allowances are based on historical rates, there can be no assurance
that the introduction of new merchandise in existing catalogs or the
introduction of new catalogs, changes in the merchandise mix or other factors
will not cause actual returns or refunds to exceed return allowances. The
Company's growth strategy contemplates the introduction of new catalogs which
will offer primarily non-paper merchandise. The Company's historical return and
refund rates for apparel, gifts, collectibles and home furnishings products have
been higher than its return and refund rates for its personalized labels and
other paper products. Consequently, as the Company expands its merchandising
efforts, it anticipates that its overall return and refund rate may also
increase. Any significant increase in merchandise returns or merchandise refunds
that exceed the Company's historic allowances could adversely affect the
Company's business. See "Business -- Growth Strategy" and "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
QUARTERLY AND SEASONAL FLUCTUATIONS
The Company's results of operations have fluctuated and can be expected to
continue to fluctuate as a result of a number of factors including, among other
things, seasonal fluctuations in response rates, fluctuations in postage, paper,
printing and production costs, the timing of new merchandise and catalog
offerings, merchandise returns, adverse weather conditions that affect
distribution or shipping and shifts in the timing of certain holidays. In
addition, the Company recognizes costs of catalog development and production as
sales are realized (such recognition not to exceed twelve months with most costs
amortized in the first three months after a catalog is distributed).
Consequently, quarter to quarter revenue and expense comparisons will be
impacted by the timing of the mailing of the Company's catalogs. Catalog mailing
dates may occur in different quarters from year to year depending on the
performance of third party couriers, the date of certain holidays and the
Company's assessment of market opportunities. A portion of the revenue from any
catalog mailing is recognized in quarters after the quarter in which the catalog
was mailed and, depending on the exact time a particular catalog offering is
mailed in a given year, the revenue from such catalog offering may be recognized
in a quarter different from when revenue was recognized in the previous year
from an otherwise
11
<PAGE> 16
comparable catalog offering. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Overview."
The Company's business is seasonal. Historically, a substantial portion of
the Company's net sales and net income have been realized during its fourth
quarter. If, for any reason, the Company's net sales are substantially below
those normally expected during this quarter, the Company's annual results would
be adversely affected. In anticipation of increased sales activity during the
fourth quarter, the Company incurs significant additional expenses, including
costs associated with increasing inventory and the hiring of a substantial
number of employees to supplement its staff. If the Company underestimates or
overestimates orders, particularly in the fourth quarter, it may incur inventory
shortages or write-offs that are higher than historical rates. No assurances can
be given that an adequate supply of employees will be available to satisfy the
Company's seasonal needs, or that the Company will be able to accurately predict
its seasonal personnel needs. In the event the Company overestimates its
personnel needs, the Company would incur unnecessary costs and an erosion in its
net income. If for any reason the Company is unable to respond and process
orders, the Company could not only lose orders but could lose goodwill with
customers. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations."
CHANGING CONSUMER PREFERENCES; GENERAL ECONOMIC CONDITIONS
The Company's future success depends in part on its ability to anticipate
and respond to changes in consumer preferences. No assurance can be given that
the Company will respond in a timely or commercially appropriate manner to such
changes. Failure to anticipate and respond to changing consumer preferences
could lead to, among other things, lower sales of the Company's products,
significant markdowns or write-offs of inventory, increased merchandise returns,
and lower margins. The Company's business is sensitive to changes in customers'
spending and discretionary income patterns which, in turn, are controlled in
part by economic conditions. Adverse economic conditions in any area of the
United States could have a material adverse effect on the Company's financial
condition and results of operations.
LIMITED HISTORICAL TRADING VOLUME; POSSIBLE VOLATILITY
The Common Stock has experienced low trading volumes due, in part, to the
substantial holdings by executive officers, members of the Board of Directors
and greater than 5% stockholders who collectively have held a significant
portion of the outstanding shares. Following the Offering, approximately 36.5%
of the shares (34.7% assuming exercise of the overallotment option) will be held
by the Company's executive officers and members of the Board of Directors. The
spread between the bid and asked prices for the Common Stock on the Nasdaq
SmallCap Market has been quite significant, generally greater than 10%. As of
June 2, 1997, the bid was $19.75 and the asked was $24.00. No assurance can be
given that an active trading market will develop or continue following the
Offering.
In addition, even if a more active trading market does develop, no
assurance can be given that the market price for the Company's Common Stock will
not be volatile. The market price for the Common Stock may be significantly
affected by a variety of factors, including a relatively high price to earnings
ratio, the Company's operating results, changes in any earnings estimates
publicly announced by the Company or by securities analysts, announcements of
new merchandise offerings by the Company or its competitors and seasonal effects
on sales. In addition, the Nasdaq Stock Market and the Common Stock have
historically experienced a high level of price and volume volatility. Wide price
fluctuations may not necessarily be related to the operating performance of the
Company. Future sales of Common Stock by the Company's existing stockholders
following the completion of the Offering and the expiration of the one year
lock-up period referred to in "Shares Eligible For Future Sales; Possible
Reduction of Stock Price" below could also have an adverse effect on the market
price of the Common Stock. For these and other reasons, there can be no
assurance the market price of the Common Stock will not decline below the public
offering price. See "Shares Eligible for Future Sale; Possible Reduction of
Stock Price" and "Underwriting."
The market price of the Common Stock is currently at or near an all-time
high. Although the market price for the Common Stock has increased significantly
over the past few years, there can be no assurance the
12
<PAGE> 17
market price of the Common Stock will continue to increase in the future. See
"Price Range of Common Stock."
RISK OF INCREASED OBLIGATION TO COLLECT STATE SALES TAXES
At present, the Company does not collect sales taxes or other similar taxes
with respect to shipments of goods into most states and believes that it is not
required to do so. However, various states have sought to impose on mail order
companies the burden of collecting state sales or use taxes on the sale of
merchandise shipped to that state's residents. The U.S. Supreme Court has held
that the states, absent Congressional legislation, may not impose tax collection
obligations on an out-of-state mail order company whose only contacts with the
taxing state are the distribution of catalogs and other advertisement materials,
and whose subsequent delivery of purchased goods is by mail or interstate common
carriers. While some cases have concluded that greater contact between
out-of-state mail order companies and a particular state support the required
collection of sales taxes, the Company believes that its only contact with
states where it does not currently collect sales tax is the distribution of
catalogs and advertising materials and shipment of orders to customers. If
Congress enacts legislation imposing an increased state sales tax burden on the
Company or if the Company otherwise becomes subject to collection of additional
sales or use tax, the imposition of additional tax collection obligations could
adversely affect the Company's business.
SHARES ELIGIBLE FOR FUTURE SALE; POSSIBLE REDUCTION OF STOCK PRICE
Assuming the Underwriters do not exercise the over-allotment option,
following the Offering the Company will have outstanding 4,724,286 shares of
Common Stock. Of such shares, the 1,600,000 shares of Common Stock offered
hereby will be freely tradeable. Of the 3,124,286 remaining shares, 1,729,094
will be held by Phillip A. Wiland (the Company's Chairman of the Board and Chief
Executive Officer), J. Michael Wolfe (the Company's President and Chief
Operating Officer) and certain other officers and members of the Company's Board
of Directors who, together with the Company, have agreed not to sell, contract
to sell, or otherwise dispose of any shares of Common Stock without the consent
of Underwriters for a period of one year after the date of this Prospectus. Upon
expiration of such agreements, all of such shares will be freely eligible for
sale in the public markets or eligible for sale in accordance with Rule 144
promulgated under the Securities Act of 1933, as amended (the "Securities Act").
Sales of substantial amounts of Common Stock in the public market following the
Offering (including shares issued upon the exercise of stock options) by current
holders of the Company's Common Stock and stock options, or the perception that
such sales might occur, could also adversely affect the market price of the
Common Stock. See "Description of Capital Stock," "Management" and
"Underwriting."
BROAD DISCRETION AS TO USE OF PROCEEDS
The Company expects to use the net proceeds it receives from the Offering
primarily for working capital and general corporate purposes. Since the Company
has no current specific plan for this portion of the proceeds of the Offering,
management will have broad discretion over the use of the proceeds.
CONTROL OF THE COMPANY
Upon completion of the Offering, 27.8% of the Company will be beneficially
owned by Phillip A. and Linda S. Wiland and 36.5% will be beneficially owned by
the directors and executive officers of the Company as a group (26.4% and 34.7%,
respectively, if the over-allotment option is exercised). By virtue of these
holdings, Mr. and Mrs. Wiland alone, as well as the directors and executive
officers as a group, will be able to exert substantial influence over actions
requiring consent of the Company's stockholders. If the directors and executive
officers were to act in concert, and if less than 73% of the total outstanding
shares of the Company were present in person or by proxy at an appropriate
stockholders' meeting, they would be able to elect all of the Company's
directors, effect certain other corporate transactions requiring stockholder
approval and generally direct the affairs of the Company (although not
transactions which would increase the Company's authorized capital stock,
dissolve, merge or sell the assets of the Company, or effect other fundamental
corporate transactions). Such degree of control by these individuals may
discourage certain types of
13
<PAGE> 18
transactions involving an actual or potential change of control of the Company,
including transactions in which the holders of Common Stock might receive a
premium for their shares over prevailing market prices.
USE OF PROCEEDS
The net proceeds to the Company from the sale of the 471,404 shares of
Common Stock offered hereby by the Company are expected to be approximately
$9,500,000 (approximately $14,400,000 if the Underwriters' over-allotment option
is exercised in full), assuming a public offering price of $22.00 per share (the
last sale price of the Common Stock as reported on May 30, 1997) and after
deducting estimated underwriting discounts, commissions and offering expenses
payable on a pro rata basis by the Company and Selling Stockholders.
The Company intends to use the net proceeds of the Offering primarily for
working capital and general corporate purposes. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Liquidity and
Capital Resources." The Company will not receive any proceeds from the sale of
the Common Stock by the Selling Stockholders. See "Principal and Selling
Stockholders." Pending use of the proceeds, the Company intends to invest the
net proceeds from the Offering in short-term, interest-bearing, investment grade
securities.
14
<PAGE> 19
CAPITALIZATION
The following table sets forth the capitalization of the Company as of
March 31, 1997 (i) on an actual basis and (ii) on an as adjusted basis to
reflect the receipt and application of the net proceeds from the sale of 471,404
shares of the Common Stock offered by the Company hereby at an assumed public
offering price of $22.00 per share (the last sale price of the Common Stock as
reported on May 30, 1997). The following table should be read in conjunction
with "Management's Discussion and Analysis of Financial Condition and Results of
Operations," and the financial statements, related notes and other financial
information included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
AT MARCH 31, 1997
----------------------
ACTUAL AS ADJUSTED
------ -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Cash and cash equivalents............................................... $3,355 $12,855
======= ========
Long-term debt.......................................................... $ -- $ --
Capitalized lease obligations........................................... -- --
Stockholders' equity
Common Stock, $.10 par value; authorized 6,000,000 shares; issued and
outstanding 4,252,882 and 4,724,286, actual and as adjusted........ 425 472
Additional paid-in capital............................................ 4,172 13,625
Retained earnings..................................................... 3,056 3,056
------- --------
Total stockholders' equity....................................... 7,653 17,153
------- --------
Total capitalization........................................ $7,653 $17,153
======= ========
</TABLE>
15
<PAGE> 20
DIVIDEND POLICY
The Company does not anticipate paying any cash dividends on its shares of
Common Stock because it intends to retain its earnings, if any, to finance the
expansion of its business and for general corporate purposes. Any payment of
future dividends will be at the discretion of the Board of Directors and will
depend upon, among other things, the Company's earnings, financial condition,
capital requirements, level of indebtedness, contractual restrictions with
respect to the payment of dividends and other factors that the Company's Board
of Directors deems relevant.
PRICE RANGE OF COMMON STOCK
The Common Stock is traded on the Nasdaq SmallCap Market under the symbol
"CDIR." The Company has applied to have the Common Stock traded on the Nasdaq
National Market under the same symbol. On May 30, 1997, the last sale price of
the Common Stock was $22.00 per share. The following table sets forth, for the
periods indicated, the range of high and low bid and asked quotations for the
Company's Common Stock as reported by the National Association of Securities
Dealers, Inc. On May 20, 1997, there were approximately 515 stockholders of
record and beneficial holders of the Common Stock.
The following prices reflect a 2-for-1 stock split in the form of a 100%
stock dividend paid on March 31, 1997 to stockholders of record on March 14,
1997. The quotations represent prices between dealers and do not include retail
mark-up, mark-down or commissions and may not necessarily represent actual
transactions. While the Common Stock has been publicly traded since the
Company's spin-off from Wiland Services, Inc., the Common Stock has experienced
low trading volumes due, in part, to the substantial holdings by executive
officers, members of the Board of Directors and greater than 5% stockholders who
collectively have held a significant portion of the outstanding shares. The
spread between the bid and asked prices for the Common Stock on the Nasdaq
SmallCap Market has been quite significant, generally greater than 10%. In
addition, even if a more active trading market does develop, no assurance can be
given that the market price for the Company's Common Stock will not be volatile.
See "Risk Factors -- Limited Historical Trading Volume; Possible Volatility."
<TABLE>
<CAPTION>
HIGH LOW
-------------------- --------------------
BID ASKED BID ASKED
-------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1995
First Quarter............................................. $ 4 1/4 $ 5 $ 2 1/2 $ 3
Second Quarter............................................ 4 4 7/8 3 1/2 4 3/8
Third Quarter............................................. 4 7/8 5 3/4 4 4 7/8
Fourth Quarter............................................ 6 5/8 7 3/8 4 7/8 5 3/4
YEAR ENDED DECEMBER 31, 1996
First Quarter............................................. 10 1/4 10 7/8 6 3/8 7 3/8
Second Quarter............................................ 10 1/4 11 1/4 9 9 7/8
Third Quarter............................................. 9 1/2 10 1/4 8 9
Fourth Quarter............................................ 9 1/4 10 1/4 8 1/2 9 1/2
YEAR ENDING DECEMBER 31, 1997
First Quarter............................................. 17 1/2 20 1/2 9 1/4 10 1/4
Second Quarter (through June 2, 1997)..................... 22 3/4 26 18 1/4 20 3/4
</TABLE>
16
<PAGE> 21
SELECTED FINANCIAL AND OPERATING DATA
(IN THOUSANDS, EXCEPT PERCENTAGES AND PER SHARE DATA)
The following selected financial and operating data (except for "Company
Operating Data" and "Selected Operating Data") for the five years ended December
31, 1996 are derived from the financial statements of the Company which have
been audited by Ernst & Young LLP, independent auditors. The financial and
operating data for the three month periods ended March 31, 1997 and 1996 are
derived from unaudited financial statements. The unaudited financial statements
include all adjustments, consisting only of normal recurring accruals, which the
Company considers necessary for a fair presentation of the financial position
and the results of operations for these periods. Operating results for the three
months ended March 31, 1997 are not necessarily indicative of the results that
may be expected for the entire year ending December 31, 1997. The data should be
read in conjunction with "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and the financial statements, related
notes, and other financial information included herein.
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED DECEMBER 31, ENDED MARCH 31,
------------------------------------------------------- -----------------
1992(1) 1993 1994 1995 1996 1996 1997
------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Net sales....................................... $22,631 $15,936 $20,724 $42,147 $51,126 $11,584 $15,952
Operating costs and expenses
Cost of product and delivery.................. 13,780 10,060 11,406 22,286 26,834 5,941 7,959
Selling, general and administrative........... 14,480 8,419 7,915 19,222 21,730 5,380 7,042
-------- -------- -------- -------- -------- -------- --------
Operating income (loss) from continuing
operations.................................... (5,629) (2,543) 1,403 638 2,562 263 951
Other income, net............................... 50 34 87 298 246 112 101
-------- -------- -------- -------- -------- -------- --------
Income (loss) from continuing operations before
income taxes.................................. (5,578) (2,509) 1,490 937 2,808 375 1,052
Provision (credit) for income taxes............. (2,008) (257) -- 94 871 109 379
-------- -------- -------- -------- -------- -------- --------
Income (loss) from continuing operations........ (3,570) (2,252) 1,490 843 1,937 266 673
Income from discontinued operations............. 23,598 -- -- -- -- -- --
Net income (loss)............................... $20,028 $(2,252) $ 1,490 $ 843 $ 1,937 $ 266 $ 673
======== ======== ======== ======== ======== ======== ========
Earnings (loss) per share from continuing
operations.................................... $ (0.99) $ (0.56) $ 0.34 $ 0.19 $ 0.44 $ 0.06 $ 0.15
Earnings per share from discontinued
operations.................................... $ 6.55 -- -- -- -- -- --
Net earnings (loss) per share................... $ 5.56 $ (0.56) $ 0.34 $ 0.19 $ 0.44 $ 0.06 $ 0.15
======== ======== ======== ======== ======== ======== ========
Weighted average number of common shares and
common share equivalents outstanding.......... 3,604 3,999 4,323 4,404 4,442 4,442 4,482
======== ======== ======== ======== ======== ======== ========
COMPANY OPERATING DATA:
Net sales growth (decline)...................... (29.6)% 30.0% 103.3% 21.3% 37.7%
Gross profit growth (decline)................... (33.6) 58.6 113.1 22.3 41.6
Operating profit growth (decline)............... 54.8 155.2 (54.5) 301.6 261.9
Gross margin.................................... 36.9 45.0 47.1 47.5 48.7% 50.1
Operating margin................................ (16.0) 6.8 1.5 5.0 2.3 6.0
Net income (loss) margin........................ (14.1) 7.2 2.0 3.8 2.3 4.2
SELECTED OPERATING DATA:
Total active customers at period end(2)......... 804 1,362 1,644 1,474 1,807
</TABLE>
<TABLE>
<CAPTION>
AT MARCH 31, 1997
AT DECEMBER 31, -----------------------
---------------------------------------------------- AS
1992(1) 1993 1994 1995 1996 ACTUAL ADJUSTED(3)
------- ------ ------ ------ ------- ------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital.............................. $3,550 $1,962 $3,211 $3,889 $ 5,925 $ 4,503 $14,003
Total assets................................. 8,436 5,047 8,294 9,924 14,487 14,061 23,561
Long-term debt............................... -- -- -- -- -- -- --
Lease obligations............................ 207 155 160 67 -- -- --
Total stockholders' equity................... 4,064 2,681 4,172 5,024 6,969 7,653 17,153
</TABLE>
- ---------------
(1) On September 30, 1992, Wiland Services, Inc. ("Wiland") completed a merger
transaction with Neodata Corporation. Wiland had two business divisions:
Consumer Products and Direct Marketing Services. Concepts Direct, Inc.,
formerly the Consumer Products division of Wiland, was created in connection
with the merger and accounting conventions required that Concepts Direct be
treated as the continuing operation. For financial reporting purposes, the
operations of the Direct Marketing Services division of Wiland are treated
as discontinued operations of Concepts Direct, Inc.
(2) "Active customers" is defined as database records on customers who have
purchased merchandise from the Company within the 12 months preceding the
end of the period indicated.
(3) Adjusted to reflect the sale by the Company of 471,404 shares of Common
Stock offered hereby at an assumed price of $22.00 per share (the last sale
price of the Common Stock as reported on May 30, 1997), less estimated
underwriting discounts and offering expenses payable on a pro-rata basis by
the Company and Selling Stockholders.
17
<PAGE> 22
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
Through its three current catalogs, Colorful Images(R), Linda Anderson(R)
and Colorful Images Presents Impressions(R), the Company markets personalized
labels, paper products, collectibles, gifts, home decorative items and casual
apparel (primarily t-shirts and caps). The Company also markets its products, to
a much lesser extent, through other media such as newspaper free standing
inserts and co-op mailings. The Company uses a disciplined, analytical approach
to marketing and merchandising to target its customers. It believes that this
approach together with its direct marketing expertise, merchandising
capabilities and popular consumable products have built strong brand identity
and customer loyalty which will serve as a foundation for future growth.
The Company believes its net sales growth of 103% from 1994 to 1995, 21%
from 1995 to 1996, and 38% from the three month period ended March 31, 1996 to
the three month period ended March 31, 1997 is attributable to a variety of
factors. Between January 1, 1995 and December 31, 1996, the Company increased
its proprietary database of active customers from approximately 800,000 names to
approximately 1,600,000 names, a compound annual growth rate of 41.4%. The
Company believes its growth is attributable primarily to increases in the amount
of merchandise offered in its catalogs and to improvements in the Company's
merchandise selection, creative presentation, database management and list
segmenting techniques.
The Company's business is seasonal, with a disproportionate percentage of
its net sales generated in the fourth quarter. During the fourth quarter of
1995, net sales were adversely affected by the installation of new software.
Initially, the new software caused delays in order processing and the Company
missed orders. During the fourth quarter of 1996, the new software met
management's expectations and actual sales exceeded company projections. As a
result of Company sales exceeding projections, the Company had a shortage of
personnel to process orders. Consequently, some order shipments were delayed and
some potential phone orders were never received.
In January 1997, the Company purchased 139 acres of undeveloped land in
Longmont, Colorado, and a new facility which is substantially larger than its
current facility is currently being constructed on approximately 11 of the 139
acres. The Company intends to hold the remaining land for sale or expansion. The
new building is intended to house its production, administrative and warehouse
functions. The Company plans to move into this facility by September 1997.
Revenues from sales of products are recognized upon shipment. Deferred
advertising costs, which consist primarily of expenses incurred for printing and
distributing advertising materials, primarily catalogs, are included in selling,
general and administrative expenses. These expenses are deferred for financial
reporting purposes until the advertising materials are distributed, then
amortized over periods of time (not to exceed twelve months with most costs
amortized in the first three months after distribution) estimated to approximate
the periods during which related sales occur.
On February 25, 1997, the Board of Directors authorized the issuance of a
2-for-1 stock-split to be effected in the form of a 100% stock dividend payable
March 31, 1997 to stockholders of record on March 14, 1997. Additionally, in
1994 the Board of Directors authorized the issuance of a 2-for-1 stock-split to
be effected in the form of a 100% stock dividend payable December 15, 1994 to
stockholders of record on November 14, 1994. Historical share and per share data
have been adjusted to reflect the effect of these stock-splits.
18
<PAGE> 23
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, certain selected
income statement data as a percentage of net sales:
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
------------------------- ---------------
1994 1995 1996 1996 1997
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Net sales........................................ 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of product and delivery..................... 55.0 52.9 52.5 51.3 49.9
----- ----- ----- ----- -----
Gross profit..................................... 45.0 47.1 47.5 48.7 50.1
Selling, general and administrative expense...... 38.2 45.6 42.5 46.4 44.1
----- ----- ----- ----- -----
Operating income................................. 6.8 1.5 5.0 2.3 6.0
Other income, net................................ 0.4 0.7 0.5 1.0 0.6
----- ----- ----- ----- -----
Income before income taxes....................... 7.2 2.2 5.5 3.3 6.6
----- ----- ----- ----- -----
Provision for income taxes....................... -- 0.2 1.7 1.0 2.4
Net income....................................... 7.2% 2.0% 3.8% 2.3% 4.2%
===== ===== ===== ===== =====
</TABLE>
THREE MONTHS ENDED MARCH 31, 1997 COMPARED TO THREE MONTHS ENDED MARCH 31, 1996
Net sales increased by $4.4 million, or 37.7%, to $16.0 million for the
first quarter of 1997 from $11.6 million for the same period of 1996. This
increase resulted primarily from the distribution of a greater number of
catalogs and other advertising media, increased page count of the catalogs and
an increase in the number of products offered. Increased sales were also
attributable to improved catalog response rates.
Gross profit increased by $2.4 million, or 41.6%, to $8.0 million for the
first quarter of 1997 from $5.6 million for the same period of 1996. Gross
profit increased as a percentage of net sales to 50.1% for the first quarter of
1997 from 48.7% for the same period of 1996. The increase in gross profit as a
percentage of net sales occurred primarily because of improved efficiencies of
operations and higher sales over which to spread fixed costs associated with
production and delivery.
Selling, general and administrative expense increased $1.6 million, or
30.9%, to $7.0 million for the first quarter of 1997 from $5.4 million for the
same period of 1996. Selling, general and administrative expense decreased as a
percentage of net sales to 44.1% for the first quarter of 1997 from 46.4% for
the same period of 1996. The decrease resulted primarily from improved response
to Company advertising, lower paper costs related to catalog preparation and
distribution and increased sales over which to spread relatively fixed costs.
Operating income increased by $688,000, or 261.9%, to $951,000 for the
first quarter of 1997 from $263,000 for the same period of 1996. Operating
income increased as a percentage of net sales to 6.0% for the first quarter of
1997 from 2.3% for the same period of 1996. Other income, primarily interest
income and vendor payment discounts, was $101,000 for the first quarter of 1997
compared to $112,000 for the same period of 1996.
The provision for income taxes amount for the first quarter of 1997 was
$379,000 as compared to $109,000 in the first quarter of 1996. The income tax
rate was 36% in the first quarter of 1997 as compared to 29% in the same period
of 1996 because of the availability of research and development tax credits in
the first quarter of 1996.
Net income increased by $407,000, or 153.3%, to $673,000 for the first
quarter of 1997 from $266,000 for the same period of 1996. Net income increased
as a percentage of net sales to 4.2% in the first quarter of 1997 from 2.3% in
the same period of 1996. Earnings per share increased $0.09, or 150.0%, to $0.15
for the first quarter of 1997 from $0.06 for the same period of 1996.
19
<PAGE> 24
YEAR ENDED 1996 COMPARED TO YEAR ENDED 1995
Net sales increased by $9.0 million, or 21.3%, to $51.1 million in 1996
from $42.1 million in 1995. This increase resulted primarily from the
distribution of a greater number of catalogs and other advertising media,
increased page count of the catalogs and a greater number of products offered.
Increased sales are also attributable to improved response rates. Personalized
paper product sales increased by approximately $2.9 million, or 10.1%, to $31.5
million in 1996 from $28.6 million in 1995 and decreased as a percentage of
total sales from 65% in 1995 to 59% in 1996.
Gross profit increased by $4.4 million, or 22.1%, to $24.3 million in 1996
from $19.9 million in 1995. Gross profit increased as a percentage of net sales
to 47.5% in 1996 from 47.1% in 1995. The increase in gross profit as a
percentage of net sales occurred primarily because of improved efficiencies of
operations, increased sales of paper products (which generally have
substantially higher margins than other merchandise) and higher sales over which
to spread fixed costs. In both 1996 and 1995, personalized paper product costs
were less than 15% of sales price compared to other non-personalized products
whose costs were in excess of 30% of sales price.
Selling, general and administrative expense increased $2.5 million, or
13.0%, to $21.7 million in 1996 from $19.2 million in 1995. Selling, general and
administrative expense decreased as a percentage of net sales to 42.5% in 1996
from 45.6% in 1995. The decrease was primarily due to improved response rates to
Company catalogs, lower paper costs during the last few months of the year and
increased revenues to absorb relatively stable fixed costs.
Operating income increased by $1.9 million, or 297.8%, to $2.6 million in
1996 from $638,000 in 1995. Operating income increased as a percentage of net
sales to 5.0% in 1996 from 1.5% in 1995. Other income, consisting primarily of
interest income and vendor payment discounts, decreased from $298,000 in 1995 to
$246,000 for 1996.
Income tax expense increased $777,000 to $871,000 in 1996 from $94,000 in
1995. Income tax expense in 1996 was approximately 31%, which was lower than the
statutory rate, because of the availability of research and development credits.
Management currently anticipates its effective income tax rate for 1997 will be
approximately 36%.
Net income increased by $1.1 million, or 129.8%, to $1.9 million in 1996
from $843,000 in 1995. Net income increased as a percentage of net sales to 3.8%
in 1996 from 2.0% in 1995. Earnings per share increased $0.25 per share, or
131.6%, to $0.44 in 1996 from $0.19 in 1995.
YEAR ENDED 1995 COMPARED TO YEAR ENDED 1994
Net sales increased by $21.4 million, or 103.4%, to $42.1 million in 1995
from $20.7 million in 1994. This increase resulted primarily from the
distribution of a greater number of catalogs and other advertising media,
increased page count of the catalogs and a greater number of products offered.
Increased sales were also attributable to improved response rates. Personalized
paper product sales increased by approximately $13.5 million, or 89%, to $28.6
million in 1995 from $15.1 million in 1994 and decreased as a percentage of
total sales from 74% in 1994 to 65% in 1995.
Gross profit increased by $10.5 million, or 112.9%, to $19.9 million in
1995 from $9.3 million in 1994. Gross profit increased as a percentage of net
sales to 47.1% in 1995 from 45.0% in 1994. The increase in gross profit as a
percentage of net sales occurred primarily because of improved efficiencies of
operations, increased sales of paper products (which have substantially higher
margins than other merchandise) and higher sales over which to spread fixed
costs. The increase would have been larger had it not been for difficulties in
1995 related to the implementation of new software and systems to perform order
fulfillment, inventory control and related functions. In both 1995 and 1994,
personalized paper product costs were less than 15% of sales price compared to
other non-personalized products whose costs were in excess of 30% of sales
price.
Selling, general and administrative expense increased $11.3 million, or
142.9%, to $19.2 million in 1995 from $7.9 million in 1994. Selling, general and
administrative expense increased as a percentage of net sales to
20
<PAGE> 25
45.6% in 1995 from 38.2% in 1994. The increase resulted primarily from the
distribution of a greater number of catalogs and other advertising materials to
prospects and increased paper and postage costs related to catalog preparation
and distribution.
Operating income decreased by $765,000, or 54.6%, to $638,000 in 1995 from
$1.4 million in 1994. Operating income decreased as a percentage of net sales to
1.5% in 1995 from 6.8% in 1994. Other income, consisting primarily of interest
income and vendor payment discounts, increased from $87,000 in 1994 to $298,000
in 1995.
Income tax expense increased $94,000 in 1995 from zero in 1994. Income tax
expense in 1995 was approximately 10%, which was lower than the statutory rate,
due to the availability for book purposes of valuation allowances for deferred
tax assets, all of which were utilized in 1995. No income tax expense was
recorded in 1994 due to the availability of net operating loss carry-forwards.
Net income decreased by $648,000, or 43.2%, to $843,000 in 1995 from $1.5
million in 1994. Net income decreased as a percentage of net sales to 2.0% in
1995 from 7.2% in 1994. Earnings per share decreased $0.15, or 44.1%, to $0.19
in 1995 from $0.34 in 1994.
QUARTERLY AND SEASONAL FLUCTUATIONS
Company sales have certain seasonal fluctuations that primarily relate to
the purchasing patterns of individual consumers and increased distribution of
catalogs. These patterns tend to concentrate sales in the fourth quarter. In
1994, 1995 and 1996, approximately 40%, 39% and 41% of net sales occurred in the
last three months of the year, respectively. Consequently, net income in the
first three quarters compared to the fourth quarter has historically been lower
as a percentage of net sales since administrative and certain operating expenses
remain relatively constant during the year. During the last three years, prices
for the Company's products have not increased significantly.
The following table contains selected unaudited quarterly financial data
for 1995 and 1996 and for the first three months of 1997. The unaudited
information has been prepared on the same basis as the audited financial
statements appearing elsewhere in this Prospectus and includes all normal
recurring adjustments necessary to present fairly, in all material respects, the
information set forth therein.
<TABLE>
<CAPTION>
QUARTER ENDED
-----------------------------------------------------------------------------------------------------------
1995 1996 1997
--------------------------------------------- --------------------------------------------- ---------
MAR. 31, JUNE 30, SEPT. 30, DEC. 31, MAR. 31, JUNE 30, SEPT. 30, DEC. 31, MAR. 31,
1995 1995 1995 1995 1996 1996 1996 1996 1997
-------- -------- --------- -------- -------- -------- --------- -------- ---------
(IN THOUSANDS EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales.......... $8,100 $9,491 $ 8,307 $ 16,249 $11,584 $9,000 $ 9,800 $ 20,742 $15,952
Operating costs and
expenses Cost of
product and
delivery......... 4,151 4,530 4,460 9,145 5,941 4,907 5,119 10,867 7,959
Selling, general
and
administrative... 3,658 4,769 4,129 6,667 5,380 4,438 4,423 7,489 7,042
------ ------ ------ ------- ------- ------ ------ -------- -------
Operating income
(loss)........... 291 192 (282) 437 263 (344) 258 2,386 951
Other income,
net.............. 61 80 71 86 112 35 51 48 101
------ ------ ------ ------- ------- ------ ------ -------- -------
Income (loss)
before income
taxes............ 352 272 (211) 524 375 (310) 309 2,434 1,052
Provision (credit)
for income
taxes............ 123 95 (74) (50) 109 (90) 89 763 379
------ ------ ------ ------- ------- ------ ------ -------- -------
Net income
(loss)........... $ 229 $ 177 $ (137) $ 574 $ 266 $ (220) $ 220 $ 1,671 $ 673
====== ====== ====== ======= ======= ====== ====== ======== =======
Earnings (loss) per
share............ $ 0.05 $ 0.04 $ (0.03) $ 0.13 $ 0.06 $(0.05) $ 0.05 $ 0.38 $ 0.15
====== ====== ====== ======= ======= ====== ====== ======== =======
Weighted average
number of common
shares and common
share equivalents
outstanding...... 4,386 4,391 4,412 4,428 4,442 4,441 4,437 4,446 4,482
====== ====== ====== ======= ======= ====== ====== ======== =======
</TABLE>
21
<PAGE> 26
<TABLE>
<CAPTION>
QUARTER ENDED
-----------------------------------------------------------------------------------------------------------
1995 1996 1997
--------------------------------------------- --------------------------------------------- ---------
MAR. 31, JUNE 30, SEPT. 30, DEC. 31, MAR. 31, JUNE 30, SEPT. 30, DEC. 31, MAR. 31,
1995 1995 1995 1995 1996 1996 1996 1996 1997
-------- -------- --------- -------- -------- -------- --------- -------- ---------
(PERCENTAGE OF TOTAL NET SALES)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales.......... 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Operating costs and
expenses Cost of
product and
delivery......... 51.2 47.7 53.7 56.3 51.3 54.5 52.3 52.4 49.9
Selling, general
and
administrative. 45.2 50.3 49.7 41.0 46.4 49.3 45.1 36.1 44.1
------ ------ ------ ------- ------- ------ ------ ----- -------
Operating income
(loss)........... 3.6 2.0 (3.4) 2.7 2.3 (3.8) 2.6 11.5 6.0
Other income,
net.............. 0.7 0.9 0.9 0.5 0.9 0.4 0.5 0.2 0.6
------ ------ ------ ------- ------- ------ ------ ----- -------
Income (loss)
before income
taxes............ 4.3 2.9 (2.5) 3.2 3.2 (3.4) 3.1 11.7 6.6
Provision (credit)
for income
taxes............ 1.5 1.0 (0.9) (0.3) 0.9 (1.0) 0.9 3.7 2.4
------ ------ ------ ------- ------- ------ ------ ----- -------
Net income
(loss)........... 2.8% 1.9% (1.6)% 3.5% 2.3% (2.4)% 2.2% 8.0% 4.2%
====== ====== ====== ======= ======= ====== ====== ===== =======
</TABLE>
LIQUIDITY AND CAPITAL RESOURCES
Since the Company was spun off from Wiland in 1992, the Company has funded
its growth primarily through funds generated from operations and has not
generally relied on external sources of financing.
Cash and cash equivalents decreased by $3.1 million in the first quarter of
1997, increased by $3.1 million in 1996, decreased by $13,000 in 1995 and
increased by $1.9 million in 1994. Activity in several significant areas had the
greatest impact on cash and cash equivalents as described below.
The increase in deferred advertising costs of $1.6 million in 1996
primarily related to the Company's incurring costs for significant portions of
January 1997 catalogs in 1996 and increased catalog circulation in January 1997
as compared to the same period in 1996. The increase in deferred advertising
costs of only $58,000 in 1995 primarily related to the distribution of January
1996 catalogs in early January as compared to distribution of January 1995
catalogs in late December of 1994. If the January 1996 Colorful Images(R)
catalog had been distributed in December 1995, management believes deferred
advertising costs and accounts payable in 1995 would have increased by
approximately $1.0 million. Increased distribution of catalogs over 1993 levels
was the primary reason for increased deferred advertising costs of $1.2 million
in 1994 and increased accounts payable of $1.3 million. The increases of
inventories of $1.6 million and $386,000 in 1995 and 1994, respectively,
primarily related to increased sales. The decrease in accounts payable of $1.6
million in the first quarter of 1997 resulted primarily from the payment in
early January 1997 for inventory and advertising cost purchased or incurred in
the fourth quarter of 1996. The increase in accounts payable of $2.2 million in
1996 primarily related to the incurring of significant advertising costs for
January 1997 mailings near the end of 1996 and timing of payments for inventory.
The large increase in sales in the fourth quarter of 1995 was the primary reason
for the $480,000 increase in customer liabilities (primarily unshipped customer
orders and a reserve for future customer warranty costs and product returns).
Net income of $673,000, $1.9 million, $843,000 and $1.5 million in the first
quarter of 1997, and in 1996, 1995 and 1994, respectively, contributed
significantly to increased cash in these periods.
Significant items of use of cash during 1996, 1995 and 1994 were purchases
of property and equipment of $377,000, $550,000 and $502,000, respectively.
These purchases primarily related to computer equipment, order fulfillment
equipment and furnishings acquisitions to accommodate the sales growth and
expansion.
The Company had $3.4 million of unencumbered cash and cash equivalents at
March 31, 1997 and $6.4 million at December 31, 1996. Management believes that
results of operations, continued operational planning review, funds from the
Offering plus current cash balances will produce funds necessary to meet its
anticipated working capital requirements for the current year. The Company is
currently constructing a new facility on the approximately 139 acres of
undeveloped land purchased in January 1997. The Company expects to use current
cash balances and outside sources, most likely from a bank, to finance this
construction on a portion of the property, at a total building and development
cost of approximately $8.5 million (excluding land). The Company intends to hold
the remaining land for sale or expansion.
22
<PAGE> 27
Significant items of investing activities during the first quarter of 1997
were purchases of property and equipment of $2.2 million and the use of $500,000
to collateralize a letter of credit. The purchases of property and equipment
primarily related to the purchase of undeveloped land and certain costs of the
new facility currently under construction on the property. The letter of credit
relates to certain obligations generally expected to be resolved within one
year, in connection with improvements to the building site.
The Company has entered into a $3.7 million secured credit facility with
Bank One, Colorado, N.A. ("Bank One"), bearing interest at a variable rate equal
to Bank One's prime rate, currently 8.5%. The credit facility is secured by the
Company's cash, inventories, accounts receivable and equipment. The Company must
comply with certain financial and performance covenants contained in the credit
facility, including a minimum current ratio, a minimum tangible net worth, a
maximum total debt to equity ratio and a minimum debt service coverage ratio and
maintenance of its primary accounts with the bank. At April 30, 1997, the
Company was in compliance with all such covenants. Of the total facility,
$700,000 may be used for furniture and equipment purchases and, until April
1998, amounts funded may be converted to a three year term note at a variable
rate equal to Bank One's prime rate. The remaining $3 million of the credit
facility is made up of two revolving lines of credit, $1 million for the
purchase of paper to be used in future catalog mailings and $2 million for
general working capital purposes. The revolving lines of credit expire in April
1998, at which time the Company anticipates being able to renew the
arrangements, either through Bank One or another lending institution.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
The provisions of the Private Securities Litigation Reform Act of 1995 (the
"Act") provide companies with a "safe harbor" when making forward-looking
statements. This "safe harbor" encourages companies to provide prospective
information without fear of litigation. Company statements that are not
historical facts, including statements about management's expectations, beliefs,
plans and objectives for 1997 and beyond, are forward-looking statements (as
such term is defined in the Act) and involve various risks and uncertainties.
Factors that could cause the Company's actual results to differ materially from
management's projections, forecasts, estimates and expectations include, but are
not limited to, the following: reliance on catalog operations in general, and on
the Colorful Images(R) catalog in particular; potential inability to
cost-effectively implement its growth strategy; dependence on paper products as
a predominant product line; potential inability to effectively manage and
develop its proprietary database; changes in postal rates or the costs of paper
and printing; reliance on third parties for shipping; reliance on a limited
number of key vendors; the Company's ability to complete construction of and
transfer to the Company's new facilities by September 1997 at a time of the year
when it historically has received a significant portion of its orders and
related annual net sales; risk of disaster; potential disruptions in order
processing or fulfillment; increased competitive activity and other competitive
factors including name recognition and the Company's relative newness to the
mail order catalog business; dependence on significant license rights and
branded merchandise; dependence on key personnel; merchandise returns and
refunds; quarterly and seasonal fluctuations; changes in the general economic
conditions of the United States; changes in consumer spending generally or
specifically with reference to the types of merchandise that the Company offers
in its catalogs; and state tax issues relating to the taxation of out of state
mail order companies. See "Risk Factors."
23
<PAGE> 28
BUSINESS
OVERVIEW
Concepts Direct, Inc. (the "Company") is a direct marketer of personalized
labels, paper products, collectibles, gift items, home decorative items and
casual apparel (primarily t-shirts and caps) that are selected and designed
based on the hobbies, interests and lifestyles of its target customers. The
Company markets its merchandise primarily through its three current catalogs,
Colorful Images(R), Linda Anderson(R), and Colorful Images Presents
Impressions(R) ("Impressions"), which are mailed to prospects derived from
rented and exchanged lists and names from its proprietary database. This
database includes customers, gift recipients and catalog requestors and had
grown to over 6,000,000 names at March 31, 1997, including approximately
1,800,000 customers who had purchased in the prior 12 months. The Company uses a
disciplined, analytical approach to marketing and merchandising to target
customers. The Company believes that this approach, together with its direct
marketing expertise, merchandising capabilities and popular consumable products,
have built brand identity and customer loyalty which will serve as a foundation
for future growth.
From 1988 to September 30, 1992, Company operations were conducted in the
Consumer Products division of Wiland Services, Inc. ("Wiland"), a company that
provided a variety of database management, list processing and marketing
research services to the direct marketing industry. The Company's historical
roots in Wiland, where several of the Company's senior executives developed
their knowledge of the direct marketing industry, provided the foundation for
the Company's list, database and results analysis expertise. Headquartered in
Longmont, Colorado, the Company began independent operations under its name on
September 30, 1992, as a result of a spin-off from Wiland in connection with
Wiland's merger with Neodata Corporation.
INDUSTRY OVERVIEW
The direct marketing industry has experienced significant growth over the
past decade. According to the U.S. Census Bureau, the mail order industry
accounted for $46 billion of the total $2.3 trillion retail market in 1995, up
from $11 billion of the total $957 billion retail market in 1980. From 1985 to
1995, the total mail order sector surpassed other retail sectors in growth with
a compound annual growth rate of 11.3% compared to 5.5% growth for the total
retail trade market. The Company believes that this growth trend and relatively
small current proportion of catalog sales to total retail sales will allow the
catalog direct marketing industry opportunities to experience continued growth
in the future. According to an industry trade magazine, each of the top ten
largest North American consumer catalogs had a twelve month buyers list
consisting of at least 2,200,000 names. As of March 31, 1997, the Company's
proprietary database included approximately 1,800,000 names of customers who
made purchases within the last twelve months.
BUSINESS STRATEGY
The Company's goal is to create, build and operate multiple direct
marketing concepts that profitably sell merchandise to a targeted customer base.
Its principal strategies for achieving this goal are set forth below.
Analytical Approach to Prospecting for New Customers. The Company's
analytical approach to prospecting for new customers emphasizes list testing
(for example, by mailing a catalog initially to only a small percentage of a
rented or exchanged list) and segment analysis, adherence to list performance
guidelines and recognition of the long-term value of a customer. A principal
operating strategy of the Company is to prospect, primarily through the use of
rented and exchanged lists, for new customers who can be added to its existing
proprietary database. When prospects buy as a result of Company mailings, they
are added to the proprietary database, increasing the number of customers
available for future mailings.
Effective Marketing to Proprietary Customer Database. The Company seeks to
maximize the effective use of its proprietary database of over 6,000,000 names.
In addition to the recency, frequency and monetary data typically used in
database direct marketing, the Company also maintains information concerning the
types and themes of merchandise purchased by its customers. This data provides
insight into customer hobbies, interests and lifestyles, not only for Company
mailings but also for list rental and exchange purposes. The use of this data,
in conjunction with purchase history data such as latest order date and order
size, helps
24
<PAGE> 29
the Company make niche selections from its database, offer products which are
suited to the styles and tastes of its customers and develop new catalogs.
Disciplined Approach to Merchandising. The Company employs a disciplined
approach to selecting merchandise likely to generate purchases by its customers
and prospects. The Company attempts to make merchandise selections that fit a
market niche and price point rather than simply selecting items of general
popularity in the retail market. Products offered are subject to "Ruthless
Elimination" based on square inch and incremental contribution analysis that
identifies products that do not achieve acceptable performance standards.
Merchandise Assortments Created for Targeted Audiences. The Company seeks
to create numerous product lines targeting the Company's primary audience of
adult women. It then makes customer contact through its catalogs. Colorful
Images(R) presents an assortment of mid to low price point merchandise primarily
for women who are interested in personalized paper products (labels, note pads,
cards, memo cubes, etc.), collectibles and gifts. Linda Anderson(R) typically
offers higher price point gifts, home decorative items and casual apparel. The
Impressions catalog presents personalized merchandise.
Promotion of Repeat Purchases, Including Consumable Reorders, Increased
Spending and Gift Giving. A strategy of the Company in creating Colorful
Images(R) was to develop a line of consumable products which customers would
subsequently re-order and supplement the consumables line with an assortment of
other merchandise. Labels and paper products, which are a major segment of the
Colorful Images(R) product line, are used at varying rates by different
consumers, but all are subject to consumption and potential reorder. The other
merchandise promotes gift giving and is intended to increase customer spending.
The Company encourages repeat business from its customers by offering products
which have met expectations in the past, testing new products and developing new
catalogs.
Excellent Catalog Shopping Experience. The Company attempts to provide a
catalog shopping experience that achieves customer satisfaction through
exclusive designs, popular licensed and branded merchandise, creative
presentation, product quality and good service. The Company strives to provide
friendly, knowledgeable telephone service, prompt fulfillment of orders and
courteous resolution of customer complaints, including a "Satisfaction
Guaranteed" exchange policy.
GROWTH STRATEGY
The Company's growth strategy consists of the following principal
components:
Increase Catalog Circulation. The Company plans to expand total circulation
of its catalogs within the parameters of its marketing strategy. The Company
believes that its list testing strategy, evaluation of performance data and
recognition of the long-term value of a new customer have been significant
contributing factors to its historical success in expanding circulation,
achieving acceptable overall response rates and enlarging its proprietary
database. Total catalogs mailed has increased from approximately 14.5 million in
1993 to approximately 43.5 million in 1996 (excluding catalogs inserted in
product shipments), a 44% compound annual growth rate. This increase in
circulation has been a significant factor in the 47.5% compound annual net sales
growth rate achieved during the same period. As its catalog titles and
proprietary database expands, Concepts Direct plans to continue to increase
catalog circulation.
Expand Page Count and Merchandise Selection. As part of its growth
strategy, the Company plans to further expand its catalogs by increasing and
refining its merchandise selection. The Colorful Images(R) catalog, which began
as a flyer offering only a few styles of personalized labels, increased to 104
pages during the fall 1996 season. This substantial expansion was achieved by
adding more merchandise offerings, including many label styles, a variety of
other paper products and an assortment of collectible, gift, home decorative and
apparel items. This strategy has allowed the Company to assess the appeal of its
merchandise offerings and attempt to offer merchandise tailored to the tastes of
its customers and prospects. The Company plans to continue to expand the page
count and merchandise selection of its existing catalogs as long as it believes
results warrant.
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<PAGE> 30
Introduce Complementary New Catalog Titles. The Company intends to leverage
its proprietary database and understanding of product preferences of its primary
audience by introducing new complementary catalog titles. For example, Colorful
Images(R) and other Company catalogs have produced a database comprised in part
of customers who collect figurines. The Company believes this provides an
opportunity to launch a new catalog featuring a wide assortment of popular
collectibles. In addition, many Company customers have purchased t-shirts from
the Colorful Images(R) and other Company catalogs. Many of these shirts reflect
customer personalities or interests. The Company plans to use this database
segment as it develops a new catalog featuring primarily t-shirts and moderately
priced casual apparel. In addition, the Company recently entered into a license
agreement through September 2001 authorizing it to design, create and distribute
a catalog consisting exclusively of merchandise featuring Snoopy(TM), Charlie
Brown(TM) and the other PEANUTS(R) characters. The first PEANUTS(R) catalog is
planned for distribution in the third or fourth quarter of 1997.
Promote Merchandise Featuring Popular Licensed Characters and Brands. The
Company offers personalized labels, collectibles, t-shirts and gift merchandise
featuring popular licensed characters and brands. The Company has a license to
use the PEANUTS(R) characters, including Snoopy(TM), Charlie Brown(TM),
Woodstock(TM), Lucy(TM) and Linus(TM), on label products. It has also been
granted licenses to feature popular collectibles such as Boyds Bears(R) and
Dreamsicles(R) on its paper products. The Company also sells popular branded
merchandise bearing the trademarks Coca-Cola(R), Warner Bros(R) and others. The
Company has developed customer segments in its proprietary database who are
interested in licensed or branded merchandise and plans to seek additional
arrangements for such merchandise.
Expand Facilities and Operational Capabilities. The Company has broken
ground on a new facility designed to substantially increase the Company's
current operational capacity, providing space for growth and allowing more
efficient organization of operations and fulfillment functions. The Company
believes that its computer software systems supporting customer service, order
processing and other key activities are important to its direct marketing
success. The Company plans to continue enhancing its systems to support the
Company's growth plans. The Company is also seeking to improve its manufacturing
and order fulfillment processes.
CURRENT CATALOGS AND OTHER MARKETING CHANNELS
The Company currently markets its products primarily under three catalog
titles:
Colorful Images(R). Colorful Images(R) provides customers interesting means
to express their hobbies, interests and lifestyles in their choice of
personalized self-adhesive labels, paper products, collectibles, home decorative
items, gift merchandise and t-shirts. The Company believes it has assembled one
of the largest assortments of personalized labels available to consumers. A
consumer may choose a floral design, an angel theme, a country look, a Victorian
style, a Monet reproduction or a ballet dancing pig from among the more than 750
different labels offered. The Company also offers self-adhesive labels with
popular licensed characters such as Snoopy(TM) and the other PEANUTS(R)
characters, Boyds Bears(R) and Dreamsicles(R). The Company believes the depth
and diversity of the Colorful Images(R) product assortment and its creative
format have allowed it to establish a loyal segment of its customers who enjoy
the catalog and have adopted Company products as their personal trademark. Price
points in the Colorful Images(R) catalog generally range from $6.95 to $49.95,
excluding shipping and handling.
The Colorful Images(R) catalog is produced in separate versions for
customers and prospects. The prospect version generally contains fewer pages and
is typically limited to merchandise items which have been popular in past
mailings to prospects. The customer version contains merchandise which has been
popular in past mailings to customers, additional merchandise in existing
categories and new merchandise that the Company wishes to test. The Company
believes that creating separate catalogs with fewer pages for prospects than for
customers is an effective technique to improve performance of the Colorful
Images(R) catalog with both groups.
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As the Company's proprietary database has grown, the number of editions of
its flagship catalog, Colorful Images(R), has increased from five (5) in 1994,
to six (6) and seven (7) in 1995 and 1996. In addition, the Company has made and
plans to continue making smaller mailings to niche segments of the proprietary
database. The Company has experienced a steady increase in performance of the
catalog based on mailings to the best 2 million customers with this group's
revenue increasing by approximately 47% over the past three years.
<TABLE>
<CAPTION>
Colorful Images(R) Best 2,000,000
Customers Analysis
Consisting of the best performing customer segments
during the past three years.
Average RPM Index*
Year Average Revenue Per Thousand Index
---- ----------------------------------
<S> <C>
1994 Catalogs 1.0
1995 Catalogs 1.31
1996 Catalogs 1.47
</TABLE>
*Revenue per thousand catalogs mailed. 1994 is base year index of 1.0
The Company believes that Colorful Images(R) sales have improved as a
result of a variety of factors, including its analytical approach to
prospecting, increases in page count per catalog, improvement in catalog
creative presentation, expansion of product lines and modifications in the
merchandise mix. The Company reevaluates these factors prior to each new catalog
edition, taking into account the most recent performance data available.
Information contained in the Company's proprietary database, particularly
product purchasing characteristics of its customers, is helpful in designing new
catalogs. The Company believes its ability to evaluate performance data has
contributed to improving response rates. The Company is exploring other methods
of contacting Colorful Images(R) customers, including preferred customer clubs,
seasonal catalog editions and special offers.
Linda Anderson(R). Linda Anderson(R) offers an assortment of gifts, home
decorative merchandise and casual apparel, generally at higher price points than
Colorful Images(R) (typically ranging from $10.95 to $249.95, excluding shipping
and handling).
The Company's goal is for its catalogs to develop their own personalities
and an affinity with customers who find the merchandise consistent with their
tastes. The Company is positioning and refining the Linda Anderson(R) catalog as
it accumulates new data from each mailing. Products for Linda Anderson(R) are
selected and the creative presentation is designed to make Linda Anderson(R)
attractive to the target audience.
The most responsive customers for Linda Anderson(R) in past mailings have
been recent previous buyers from the catalog. Certain Colorful Images(R)
customers have also performed well for Linda Anderson(R), reinforcing the
Company's belief that it can successfully launch new catalogs in part by using
its proprietary database. As Colorful Images(R) continues to grow, some of the
new customers it generates may also respond to the Linda Anderson(R) line of
products.
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Linda Anderson(R) Catalog
Results for Mailings To Selected Segments
Fourth Quarter, 1995 vs. 1996
<TABLE>
<CAPTION>
1995 Quantity 1995 Average 1996 Quantity 1996 Average
Segment Mailed RPM Index* Mailed RPM Index*
------- ------------- -------------- ------------- --------------
<S> <C> <C> <C> <C>
Linda Anderson(R) 13,248 1.0 22,562 1.6
Existing Customers
Colorful Images(R) 211,539 1.0 495,205 1.13
Customers
Outside Prospect 435,580 1.0 862,733 1.45
Homes
Total 660,367 1.0 1,380,500 1.34
</TABLE>
*Revenue per thousand catalogs mailed. 1995 is base year index of 1.0
During the period from 1994 until the fall of 1996, the Company mailed
three (3) test editions of the Linda Anderson(R) catalog. The fall 1996 edition
produced a positive contribution to operating results. This result exceeded
Company expectations despite the fact that several prospect lists were being
used for Linda Anderson(R) for the first time. Based on this response, the
Company plans to mail the Linda Anderson(R) catalog four (4) times in 1997.
Colorful Images Presents Impressions(R). Impressions was introduced in the
second quarter of 1996, offering various products such as coffee mugs, mouse
pads, note pads, stationery and gift items, many of which were personalized
products. The Impressions catalog relies heavily on the Colorful Images(R)
customer base of merchandise buyers. The Company has now decided to offer only
personalized products in Impressions and is attempting to develop a popular
assortment of personalized merchandise which will not overlap with Colorful
Images(R). Impressions had developed a small base of more than 12,000 customers
at March 31, 1997 and, during the three-month period ended March 31, 1997, made
a small positive contribution to operating results as an insert with Colorful
Images(R) and Linda Anderson(R) product shipments. The Company plans to continue
using Impressions as a package insert, test other distribution channels and
conduct test mailings until a further rollout is justified.
The latest edition of Impressions contains only 24 pages and offers only
personalized merchandise. The Company expects page count to increase in future
editions. Prices charged for Impressions products typically range from $5.95 to
approximately $60.00, excluding shipping and handling. The Company plans at
least one (1) new edition of Impressions in 1997.
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Other Marketing Channels. The Company also employs a variety of alternate
media to generate sales for its Colorful Images(R) products. Alternate media
includes primarily direct mail co-ops and advertisements in newspaper free
standing inserts. During the first half of 1996, the Company used such media
more extensively than in 1995. Results have been inconsistent and have varied by
media type. In 1997, the Company expects to use alternate media somewhat more
extensively than in 1996. The Company may gradually increase its circulation in
such media if results warrant, but expects alternate media to account for less
than 10% of net sales in 1997.
The Company's two small retail outlets are used for inventory liquidation
purposes and accounted for less than 1% of net sales in 1996. The Company has no
immediate plans to open additional retail stores.
NEW CONCEPTS
As part of its growth strategy, the Company continues to consider other
direct marketing concepts that may justify additional catalogs featuring
successful product lines from existing catalogs. The Company has identified
several product lines which meet this standard and currently plans to test at
least three (3) new catalogs during 1997. Specific timing for these catalogs
will depend on when the Company believes each is ready for launch from a
marketing, merchandise and operations standpoint.
Linda Anderson's Collectibles(sm). The initial edition of this new catalog
is scheduled for launch during the third quarter of 1997 and is expected to
include at least 35 lines of collectible merchandise with over 300 individual
items. The catalog will include information about collecting and may offer a
club membership for customers who regularly purchase from the catalog. The
Company has previously offered a more limited selection of collectibles lines in
existing catalogs and has been pleased with the performance of these products.
As a result, the Company's proprietary database contains a number of
collectibles buyers. Linda Anderson's Collectibles(sm) will present a selection
of collectibles from an assortment of recognized companies and established
artists. The Company believes this proposed catalog should be attractive not
only to collectors in the Company's proprietary database but also to collectors
obtained through rented and exchanged lists.
T-shirt Catalog. The Company has capitalized on the popularity of casual
apparel by offering t-shirts, sweatshirts and a limited selection of caps,
shorts and skirts in its Colorful Images(R), Linda Anderson(R) and Impressions
catalogs. T-shirts with a humorous theme or which reflect the hobbies, interests
and lifestyles of the consumer have been among the Company's best-selling
products. The Company's proprietary database now contains a segment of such
buyers. A new catalog will attempt to target this segment as well as prospects
from rented and exchanged lists. This new catalog is scheduled for launch during
the summer of 1997 and will contain over 250 different t-shirts, caps and other
colorful, casual apparel items.
PEANUTS(R) Catalog. The Company has recently entered into a license
agreement with United Feature Syndicate, the licensing agent for Charles M.
Schulz, the creator of the PEANUTS(R) comic strip, to design, create and
distribute a catalog consisting exclusively of merchandise featuring Snoopy(TM),
Charlie Brown(TM) and the other PEANUTS(R) characters. Since September 1996, the
Company has had a license to feature PEANUTS(R) characters on personalized label
products. The characters have proven to be a popular addition to the Colorful
Images(R) product line. As a result of this arrangement, and in conjunction with
other merchandise featuring the PEANUTS(R) characters sold by the Company in its
Colorful Images(R) and Linda Anderson(R) catalogs, the Company has information
in its proprietary database on previous buyers of PEANUTS(R) merchandise.
A title for the new PEANUTS(R) catalog has not yet been finalized. The
Company plans to develop and circulate the first edition of the new PEANUTS(R)
catalog in the third or fourth quarter of 1997 offering merchandise manufactured
by vendors authorized by United Feature Syndicate. In addition, the Company has
the right to design and manufacture exclusive merchandise for inclusion in the
catalog, subject to approval of particular merchandise by the licensor. The
Company will pay a royalty on sales generated by the catalog. The Company plans
multiple editions of the catalog each year, although actual distributions will
depend on results. The Company plans to mail the catalog to names from its
proprietary database and to prospects on rented and exchanged lists. In
addition, the Company plans to distribute the new PEANUTS(R) catalog as an
insert in its product shipments. Prospects who purchase merchandise from the
PEANUTS(R) catalog will be added to the Company's proprietary database.
Business-to-Business Catalog. The Company is evaluating the business/home
office market and developing a plan to launch a new catalog to serve this market
by offering a diverse line of paper and other business-
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<PAGE> 34
oriented products. Such a catalog should benefit from the Company's knowledge of
paper products and their distribution through Colorful Images(R), the Company's
existing vendor relationships, its existing paper products manufacturing
expertise and its ability to target this market using marketing techniques
already in place. While there is a significant established direct market for
products similar to those the Company is considering, the Company believes it
can bring a fresh design approach to products in this market. The Company also
believes that this market may be receptive to complementary, nonpaper
merchandise lines. Planning is proceeding but the Company has neither
established a firm date to test this concept nor made a final decision to go
forward with a business and home office catalog.
Investment in a New Catalog Launch. The cost of launching a new catalog
varies substantially depending on factors such as research and creative design,
size of the test catalog (in pages and in number of products offered), number of
test catalogs circulated and the amount of test inventory purchased. Risks are
associated with each test and a new catalog and tests may continue until the
catalog provides a positive contribution or the Company decides to discontinue
its efforts. Ultimately, the amount of investment in a new launch depends
primarily on the number and scale of tests conducted. The Company has budgeted
less than $1.6 million, including inventory, to conduct the initial test of the
Linda Anderson's Collectibles,(SM)t-shirt and PEANUTS(R) catalogs.
DEVELOPMENT OF CUSTOMER BASE AND MARKETING
Proprietary Database. The Company's proprietary database stores information
on each customer. The information is derived primarily from customer
transactions and is updated as new transactions are recorded. The Company relies
on prospect mailings to rented and exchanged mailing lists obtained from mail
order companies, magazine publishers and other sources. New customers are also
obtained as a result of alternate media advertising such as newspaper inserts
and co-op mailings. The use of these sources has been and is expected to
continue to be a component of the Company's efforts to obtain new customers and
add them to the proprietary database. During 1996, the Company mailed over 43.5
million copies of three different catalog titles (excluding catalogs inserted in
product shipments), of which over half were mailed to prospective customers.
At March 31, 1997, the Company's proprietary database contained information
on over 6,000,000 customers, catalog requesters and gift recipients.
Approximately 1,600,000 customers placed orders with the Company during the 12
months ended December 31, 1996, compared to approximately 800,000 for the 12
months ended December 31, 1994, a compound annual growth rate of 41.4%. The
active customer count increased to approximately 1,800,000 at March 31, 1997.
According to an industry trade magazine, each of the top ten largest North
American consumer catalogs had a twelve month buyers list consisting of at least
2,200,000 names.
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ACTIVE CUSTOMERS IN PROPRIETARY DATABASE(1)
<TABLE>
<CAPTION>
DATE ACTIVE CUSTOMERS IN DATABASE
---- ----------------------------
<S> <C>
12/31/94 804,000
12/31/95 1,362,000
12/31/96 1,644,000
3/31/97 1,807,000
</TABLE>
(1) "Active customers" is defined as database records on customers who have
purchased merchandise from the Company one or more times within the 12
months preceding the end of the period indicated.
In recent years, the Company has not mailed a single offer to its entire
proprietary database. For each customer mailing the Company seeks to select
names it believes are likely to respond to the offer at an acceptable rate. The
Company's database system, selection methodologies and outside services help the
Company segment its proprietary database according to certain variables and
analyze each segment's performance. The Company believes that its ability to
analyze its database and select recipients for a particular direct marketing
campaign are critical components of its success. The Company utilizes various
indicators, such as frequency and size of order, date of last order, and style
and theme of products purchased to target its catalog mailings.
Marketing Objectives. The Company's marketing programs are designed to
attract new customers and generate additional sales from existing customers.
Attracting new customers is principally accomplished through prospecting using
mailings to individuals identified through rented and exchanged mailing lists.
Generating additional sales from existing customers requires expanding and
improving the merchandise mix, improving creative presentation, mailing based on
customers' past purchase histories and launching new offers which prove to be
popular with customers.
The Company's Customers. Information provided to the Company by independent
sources indicates that a large segment of the Company's customers are women
between the ages of 35 and 54. The Company believes that one of the strengths of
its product line is its general appeal to many women.
Prospecting for New Customers; Growth of Mailing List. The Company
exchanges lists with and rents lists from other direct marketers in order to
gain new customers. The Company also uses alternate media such as newspaper
inserts and co-op mail to prospect for new customers. Prospects receive a
catalog or other direct marketing offer tailored to what the Company believes to
be their merchandise tastes and preferences based on available data. Product and
media performance are analyzed based on profitability. Product continuation and
media utilization are determined based on these analyses.
To effectively use outside mailing lists, the Company evaluates list
profiles provided by list brokers and uses analytical tools. Multivariate
regression analysis, profile analysis, geographic analysis, predictive modeling
and cooperative databases are being used in a limited number of cases and are
expected to become more important in the Company's analysis of outside lists.
Customer Clubs and Other Programs. Beginning in 1996, the Company
introduced the Colorful Images(R) Preferred Customer Club. An initial one year
free membership was given to a segment of the
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<PAGE> 36
proprietary database in a special mailing which announced the club and described
benefits. Orders produced by that initial mailing were above expectations. The
Company is now selling memberships which provide discounts to club members. In
addition, the Company may produce special seasonal catalogs and "Thank You",
"Welcome", "Mover" or other packages to increase customer loyalty and average
annual spending by current customers.
Encouraging Gift Giving. The Company offers a selection of low cost items
with the goal that its customers will purchase them as gifts. The Company
encourages gift giving by providing a gift section on certain order forms. Gift
recipients are added to the proprietary database and are sent offers from the
Company.
MERCHANDISING
Merchandise Mix. The Company initially offered only personalized labels,
but has steadily increased its breadth of paper products to over 900 different
styles and themes, including over 750 personalized label choices. This
assortment allows Colorful Images(R) to appeal to a diverse group of customers.
Other Colorful Images(R) products include t-shirts, collectible figurines and
other products. Linda Anderson(R) presents a variety of gift items, home
decorative items, casual sweaters and sweatshirts. Impressions presents a
collection of personalized gift items. The Company's planned new catalogs, Linda
Anderson's Collectibles(sm) and the t-shirt catalog, are being designed as more
specialized catalogs offering a wider selection for some of the Company's
popular product lines.
New Products. The Company believes that "new" sells. New merchandise
regularly incorporated into existing catalogs helps to keep catalogs interesting
to customers who see them frequently. "New" may also allow the Company to take
advantage of popular trends in consumer preferences. The Company attempts to add
new merchandise and believes that doing so in the past has been an important
part of improved response.
Exclusive Merchandise. Some of the paper products offered in Colorful
Images(R) are proprietary designs developed by the Company's in-house art
department and freelance artists. The Company is also in the early stages of
working with vendors to create other merchandise exclusive to the Company. The
Company believes its efforts to be a sole source supplier for certain products,
particularly consumables, offer it a competitive advantage and an increased
likelihood of repeat business.
Merchandise Sourcing and Vendor Relationships. The Company purchased its
merchandise from approximately 400 vendors in 1996. The Company's merchandise
acquisition strategy emphasizes relationships with domestic vendors, including
domestic representatives of foreign manufacturers, to facilitate inventory
management processes by providing acceptable quality control and turnaround
times for merchandise reorders. In 1996, over 99% of the Company's merchandise
was either manufactured in the United States or ordered from domestic
representatives of foreign firms. The Company believes that its vendor
relationships are generally excellent. No single vendor accounted for more than
15% of total merchandise purchases in 1996.
CUSTOMER SERVICE
The Company seeks to emphasize customer service from the initial contact
through ultimate order fulfillment and, if necessary, merchandise return or
exchange.
Call Center. The Company staffs a call center that can be contacted through
its toll-free telephone numbers 24 hours a day, seven days a week to place
orders, request a catalog or inquire concerning order status. During 1996,
approximately 40% of the Company's orders were received by telephone with the
remaining 60% of its orders received by mail or facsimile.
Order Entry. The Company uses a system that allows its staff to accomplish
on-line entry of telephone, mail or facsimile orders. This transaction
processing system supports mail and telephone orders, credit authorization,
order processing, distribution and shipment. Company personnel process orders
directly into the on-line system which provides, among other things, customer
history information, merchandise availability information and merchandise
specifications. The Company attempts to have telephone agents who are
knowledgeable in key merchandise features and have access to samples, which
enable them to answer inquiries from customers. On average, the Company
completes typical telephone orders in two to four
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<PAGE> 37
minutes. Customers must pay telephone and facsimile orders with a major credit
card. Credit cards, checks or money orders are accepted with mail orders. All
credit charges are preauthorized prior to shipment.
Order Fulfillment. After a customer's order is entered in the system,
orders are processed, picked, packed and shipped (or, in a small percentage of
cases, forwarded to a drop shipper). Merchandise, quantity and ship date are
entered into the proprietary database. In-stock items typically are shipped
within one to ten days of order entry depending on the items ordered and
workload.
The Company attempts to adjust the number of employees to meet variable
demand levels, particularly during the peak fourth quarter selling season. The
Company's ability to fulfill orders on a timely basis, especially during the
fourth quarter holiday season, is important to the Company's operations. This
ability depends in part on the availability of employees who have adequate
training and the efficiency of the Company's telephone call center. In 1996, the
Company shipped approximately 2.4 million packages, approximately 60% of which
were sent by standard class mail through the U.S. Postal Service and the balance
by other carriers. Priority or express service is available for an extra charge.
The Company's order backlog was approximately $468,000 as of December 31,
1995 and $422,000 as of December 31, 1996. Orders represented by this backlog
are normally shipped within approximately ten days. Difficulty in implementing
software systems to perform order fulfillment and related functions resulted in
delayed shipments and correspondingly high backlog during the last half of 1995.
During the fourth quarter of 1996, the new software met management's
expectations and processed actual sales which exceeded Company projections.
However, as a result of Company sales exceeding projections, the Company had a
shortage of personnel to process orders, leading temporarily to high backlogs.
Employee Training. The Company has established an employee training program
conducted by a full time trainer. To date, training programs have been primarily
associated with the call center, order entry and customer service functions. The
Company intends to provide for two classrooms in its new facility currently
under construction and plans to increase the scope and depth of its training
programs.
Return Policy. The Company has a return policy intended to assure customer
satisfaction and to encourage first time and repeat orders. The retail value of
refunds and merchandise replacements issued under the returns policy in 1996 was
approximately 5.8% of net sales. If returned merchandise cannot be restocked it
is returned to the manufacturer, held for disposal in inventory liquidation
processes or discarded. Product and order problem inquiries are directed to
customer service personnel who are trained to resolve customer issues.
INFORMATION SYSTEMS AND TECHNOLOGY
The Company currently uses an internally developed order processing system.
This system is used for order entry and fulfillment tasks, the recording of
orders, credit authorization, order processing, shipment, inventory control,
management information and related functions.
All of the Company's order fulfillment systems are located at its Longmont,
Colorado facility. The Company's main hardware platforms are manufactured by
Xerox Corporation and Data General Corporation. The Company expects to change
and add computer hardware prior to the time it moves to its new facility and
anticipates that these additions should accommodate the Company's near-term
growth strategy. These changes and additions, in combination with expiring
leases, are expected to result in a small decrease in monthly expenses.
Prior to installation of the new software in August 1995, the Company had
used various licensed computer software packages to perform order fulfillment,
inventory control and related functions. The new software uses Oracle as the
primary software platform. Certain difficulties were experienced with the fall
1995 software implementation. These difficulties delayed customer shipments and
related sales recognition in 1995. The Company believes that those software
problems have been substantially corrected, and the software met management's
expectations in 1996. Company personnel are working on further improvements to
the software.
MATERIALS AND INVENTORY
In 1996 the Company purchased over 95% of its materials and product
inventory from domestic manufacturers, importers and domestic representatives of
foreign manufacturers. Purchase arrangements with suppliers are generally for a
specified product, price and quantity of product. While the Company purchases
its
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base paper stock for most of its personalized labels from one primary vendor,
management believes alternative vendors are available, if needed. The material
used in the production of the Company's catalogs is available from many
different sources.
The Company spends significant amounts on paper used in the production of
its catalogs and paper products. The cost of paper fluctuates. In the first half
of 1996, the cost of paper the Company used to produce its catalogs was higher
than in previous periods. Accordingly, the Company's cost of doing business
increased. Unit cost of such paper declined during the latter part of 1996,
which was reflected in lower costs as a percentage of net sales.
Except for a few specialized items which are drop shipped directly from
suppliers, the Company maintains an inventory of products it sells. Based on
analysis of past catalog mailings, evaluation of probable customer buying
patterns and projections for new products, the Company believes it has been able
to plan its inventory needs without the necessity of committing an excessive
amount of working capital. Furthermore, the Company believes its gross margins
on paper products have tended to minimize the inventory required for a given
dollar sales volume. If the Company's merchandise mix changes, additional
capital may be required for larger inventories. The Company's collectibles,
gift, home decorative and apparel inventory liquidation processes include
product exchange agreements with vendors, sale of products through its small
retail outlets and discarding of some items.
COMPETITION
Direct marketing is highly competitive. Thousands of companies offer
products via catalog, direct mail, newspaper inserts, television and other
media. The Company competes on the basis of the quality, diversity and price of
merchandise offered and customer service.
Management believes that, although many companies offer personalized
labels, there are only a few companies that offer a broad variety of
personalized labels comparable to that sold by the Company, which the Company
believes is a competitive advantage. The Company's other merchandise product
lines face even greater competition in the marketplace than the Company's paper
products. A substantial number of competitors distribute catalogs that offer the
merchandise categories contained in the Company's catalogs. In addition, certain
of the merchandise sold in the Company's catalogs is available through retail
stores and other sources.
Certain of the Company's current and potential competitors have
significantly greater development, order fulfillment, marketing and capital
resources and name recognition than the Company. See "Risk Factors --
Competition."
EMPLOYEES
As of December 31, 1996, the Company had approximately 479 employees, 265
of whom were part-time. Of the 214 full-time employees, 14 supported information
technology, 11 supported creative and marketing functions, 170 supported
operations and 19 supported other functions. None of the employees are covered
by collective bargaining agreements. The Company considers its relationship with
its employees to be generally good.
PROPERTIES
The Company's corporate headquarters, administrative offices and operations
are located in Longmont, Colorado, approximately 40 miles from downtown Denver.
While the Company believes that the facilities it occupies are well maintained
and in good operating condition, the Company is crowded in the current facility.
In January 1997, the Company purchased 139 acres of undeveloped land in
Longmont, Colorado, and a new facility which is substantially larger than its
current facility is currently being constructed on approximately 11 of the 139
acres. The Company intends to hold the remaining land for sale or expansion. The
new building is intended to house production, administrative and warehouse
functions. The Company plans to move into this facility by September 1997. If
the Company is not able to relocate by the end of August 1997, the Company will
need to either extend the lease of its existing headquarters and lease temporary
space or make alternative arrangements in order to accommodate anticipated
fourth quarter volume. The landlord of the current facility has verbally
indicated that it will cooperate if a suitable replacement tenant has not been
located and the
34
<PAGE> 39
Company needs to extend its current lease. The landlord, to date, has not been
willing to sign an extension option. If construction of the new facility is late
and the current landlord will not agree to a lease extension, a significant
dispute or business disruption may occur. In addition, the Company also leases
temporary warehouse space from time to time.
The following table sets forth the primary real property which the Company
owns and leases.
<TABLE>
<CAPTION>
LEASE 1997
LOCATION FUNCTION EXPIRATION RENT SQUARE FEET
- ----------------- -------------------- --------------- -------- -----------
<S> <C> <C> <C> <C>
Longmont, CO New Headquarters Owned Owned 117,000(1)
Longmont, CO(2) Current Headquarters August 31, 1997 $306,000(3) 58,064
Longmont, CO Retail Outlet August 30, 1997 $ 15,600 1,700
Cheyenne, WY Retail Outlet October 1, 1997 $ 9,200 1,100
Longmont, CO(2) Warehouse Space August 31, 1997 $ 30,000(3) 10,000
</TABLE>
- ---------------
(1) Currently under construction
(2) To be vacated on completion of the move to the new facility currently under
construction
(3) January 1, 1997 -- August 31, 1997
LICENSING AND SERVICE MARKS
The Company has federally registered the service marks used for each of its
three existing catalogs. The Company anticipates that it will seek registration
of the service marks used for catalogs that it develops in the future.
The Company has developed certain artwork used in its labels and other
products. In addition, the Company has purchased or licensed rights to certain
artwork from third parties, generally for a period of at least five years.
Certain rights are also licensed on a royalty basis, including PEANUTS(R), The
Boyds Collection Ltd.(R), Dreamsicles(R) and others.
The Company has recently entered into a license agreement with United
Feature Syndicate, the licensing agent for Charles M. Schulz, the creator of the
PEANUTS(R) comic strip, to design, create and distribute a catalog consisting
exclusively of merchandise featuring the PEANUTS(R) characters. The first
PEANUTS(R) catalog is planned for distribution in the third or fourth quarter of
1997. The license agreement will terminate on September 30, 2001 unless earlier
terminated by United Feature Syndicate in the event (i) the Company breaches any
of its material obligations under the agreement, (ii) of certain bankruptcy or
insolvency matters involving the Company, (iii) the Company does not meet
certain prescribed levels of retail sales of the licensed products, (iv) the
Company does not meet prescribed catalog circulation guidelines for the
PEANUTS(R) catalog or (v) the Company does not distribute the first issue of the
catalog by November 15, 1997. If the new catalog is successful, failure to renew
this agreement or any early termination thereof could have a material adverse
impact on the Company's business.
From time to time, the Company sells brand name products supplied by
vendors who license rights to the trade names and trademarks associated with the
products. The Company generally relies on representations and assurances from
vendors regarding these rights. In the past, third parties have asserted that
the Company has offered products in violation of the intellectual property
rights of others. In certain instances, the Company ceased selling those
products as a result of such assertions. To date, the Company has not agreed to
pay, or been required to pay, any damages as a result of such claims. The
Company's procedures for determining whether third parties have rights with
respect to any particular product are limited and may not always reveal all
rights of others.
GOVERNMENT REGULATIONS; STATE SALES TAXES
The Company must comply with Federal, state and local laws that affect its
business. In particular, the Company is subject to Federal Trade Commission
regulations governing the Company's advertising and trade
35
<PAGE> 40
practices, including the merchandise Mail Order Rule and related regulations,
which require that mail order merchants ship goods within the time promised or
within a reasonable time, or else offer the consumer a refund.
The Company has historically collected and remitted sales and similar taxes
only in those states in which it operates a location. In recent years a number
of states have asserted that advertising by a corporation within their borders
provides sufficient nexus to require the collection and remittance of such
taxes. In a decision rendered on May 26, 1992, the United States Supreme Court
held that application of North Dakota's use tax statute against an out-of-state
mail order firm with neither sales representatives nor outlets in the state
placed an unconstitutional burden on interstate commerce. However, the Court
also noted that Congress may be better equipped to resolve the issue presented
by the case. If Congress should pass legislation supporting the states' taxing
authority, it could have a negative impact on the financial condition and
results of operations of the Company. The actual impact would depend on the
specifics of any such legislation.
Some states also require residents of the state who purchase products by
mail order to remit to the state the state sales tax that would be collected by
the merchant if the product was sold from a location within the state. To date,
this type of legislation has not had a material impact on the Company's
business.
LEGAL PROCEEDINGS
The Company is engaged in claims and litigation that arise in the ordinary
course of business, none of which management believes to be material.
36
<PAGE> 41
MANAGEMENT
DIRECTORS, EXECUTIVE OFFICERS AND CERTAIN KEY EMPLOYEES
The following table sets forth certain information concerning each of the
directors, executive officers and certain key employees of the Company as of
March 31, 1997.
<TABLE>
<CAPTION>
YEARS WITH
DIRECTORS AND EXECUTIVE OFFICERS AGE COMPANY(1) POSITION
- -------------------------------- --- ---------- ----------------------------------------------
<S> <C> <C> <C>
Phillip A. Wiland 50 25 Chairman of the Board and Chief Executive
Officer
J. Michael Wolfe 38 15 President and Chief Operating Officer
H. Franklin Marcus, Jr. 51 20 Secretary, Treasurer and Chief Financial
Officer
Michael T. Buoncristiano 55 17 Director
Robert L. Burrus, Jr. 62 12 Director
Stephen R. Polk 41 9 Director
Phillip D. White, Ph.D. 50 9 Director
</TABLE>
<TABLE>
<CAPTION>
CERTAIN KEY EMPLOYEES
- --------------------------------
<S> <C> <C> <C>
Julie G. Andresen 40 7 Vice President, Creative Design
Thomas P. Murray 35 10 Vice President, Marketing
R.C. Lloyd 52 1 Vice President, Operations
Phillip A. Tobias 43 22 Vice President, Information Technology
Vickie J. Slade 39 10 Vice President, Merchandise
David H. Haddon 38 12 Controller
</TABLE>
- ---------------
(1) Includes years at Concepts Direct, Inc. and its predecessor, Wiland
Services, Inc., either as an employee or as a director. Wiland Services,
Inc. was acquired by Neodata Corporation in 1992.
DIRECTORS AND EXECUTIVE OFFICERS
Phillip A. Wiland has served as Chairman of the Board of Directors and
Chief Executive Officer of the Company since December 18, 1992. Mr. Wiland was
President of the Company from September 30, 1992 until December 18, 1992. Mr.
Wiland was President and Chief Executive Officer of Wiland Services, Inc. from
1971 to September 30, 1992.
J. Michael Wolfe has served as President and Chief Operating Officer of the
Company since December 18, 1992. Mr. Wolfe was Vice President of Wiland
Services, Inc. from 1989 to 1992 and served as Vice President, Product Marketing
of Wiland Services, Inc. from 1987 to 1989. Mr. Wolfe held other positions at
Wiland Services, Inc. from 1981 to 1987.
H. Franklin Marcus, Jr. has served as Secretary-Treasurer and Chief
Financial Officer of the Company since September 30, 1992. Mr. Marcus served as
Secretary-Treasurer of Wiland Services, Inc. from 1978 to 1992 and as Chief
Financial Officer from 1989 to 1992.
Michael T. Buoncristiano has served as a Director of the Company since
1992. Mr. Buoncristiano has been the President of AVANTI! Direct Marketing
Services, Inc. since 1990. Mr. Buoncristiano served as Executive Vice President,
Marketing of Wiland Services, Inc. from 1985 to 1990 and Vice President, Sales
from 1979 to 1984.
Robert L. Burrus, Jr. has served as a Director of the Company since 1992
and served as a Director of Wiland Services, Inc. from 1984 to 1992. He has
served as Chairman of the law firm of McGuire, Woods, Battle & Boothe, L.L.P.
since 1990. Mr. Burrus is also a Director of CSX Corporation, Heilig-Meyers
Company, O'Sullivan Corporation, S&K Famous Brands, Inc. and Smithfield Foods,
Inc.
37
<PAGE> 42
Stephen R. Polk has served as a Director of the Company since 1992 and
served as a Director of Wiland Services, Inc. from 1987 to 1992. He has served
as the Chairman of the Board and Chief Executive Officer of R.L. Polk & Co.
since 1994. From 1990 to 1994, Mr. Polk served as the President of R.L. Polk &
Co.
Phillip D. White, Ph.D. has served as a Director of the Company since 1992
and served as a Director of Wiland Services, Inc. from 1987 to 1992. Dr. White
is an Associate Professor and past Chairman of Marketing, College of Business
and Administration, University of Colorado at Boulder (currently on leave). Dr.
White has written and lectured extensively on marketing and, since 1996, has
been the President of Phillip D. White & Associates, Inc.
CERTAIN KEY EMPLOYEES
Julie G. Andresen has served as Vice President, Creative Design of the
Company since 1993. Ms. Andresen served as Director, Creative Design from 1992
to 1993 and as Manager Creative Design of Wiland Services, Inc. from 1989 to
1992. Ms. Andresen was Project Coordinator with Knudsen Printing from 1988 to
1989 and Associate Manager of Graphic Design for Communications Art, Inc. from
1984 to 1985.
Thomas P. Murray has served as Vice President, Marketing of the Company
since 1995. He served as Product Manager with Neodata Corporation from 1994 to
1995 and Account Director with Neodata Corporation from 1992 to 1994. Mr. Murray
served as Account Executive with Wiland Services, Inc. from 1989 to 1992 and
held other positions at Wiland Services, Inc. from 1984 to 1989.
R. C. Lloyd has served as Vice President, Operations of the Company since
1996. Mr. Lloyd was a Product Management Consultant during 1995 and served as
General Manager of Neodata Corporation from 1992 to 1995. Mr. Lloyd was General
Manager of Presort, Inc. from 1991 to 1992, Circulation Manager with Group
Publishing from 1990 to 1991 and Manager of Administration with Ball Aerospace
from 1984 to 1989.
Phillip A. Tobias has served as Vice President, Information Technology of
the Company since 1995. He was an Information Systems Architect with Neodata
Corporation from 1992 to 1995. Mr. Tobias served as Vice President, Special
Projects with Wiland Services, Inc. from 1989 to 1992 and held other positions
at Wiland Services, Inc. from 1972 to 1989.
Vickie J. Slade has served as Vice President, Merchandise of the Company
since April 1997. Ms. Slade was Merchandise Manager from 1992 to April 1997. Ms.
Slade was the Executive Assistant to the President with Wiland Services, Inc.
from 1990 to 1992 and held other positions at Wiland Services, Inc. from 1986 to
1990.
David H. Haddon has served as Controller of the Company since 1995. Mr.
Haddon served as Senior Accounting Manager with the Company from 1992 to 1995,
Senior Accounting Manager with Wiland Services, Inc. from 1990 to 1992 and
Accounting Manager with Wiland Services, Inc. from 1984 to 1990. Mr. Haddon was
formerly a Certified Public Accountant with Ernst & Young LLP.
COMMITTEES OF THE BOARD
The standing committees of the Board of Directors include an Audit
Committee and a Compensation and Nominations Committee.
Messrs. Polk, White and Buoncristiano are the members of the Audit
Committee, which met four times in 1996. The principal function of the Audit
Committee is to oversee the performance of the Company's independent
accountants. In this capacity, the Audit Committee recommends the firm to be
engaged by the Company for independent auditing and reviews the overall scope
and results of the annual audit. It also reviews, among other things, the
functions and performance of the Company's internal accounting controls, the
performance of nonaudit services, and changes in accounting policies.
Messrs. Burrus, Polk, White and Buoncristiano are the members of the
Compensation and Nominations Committee, which met two times in 1996. The
principal functions of the Compensation and Nominations Committee are to review
and set the direct and indirect compensation of the directors and officers of
the Company, to administer the Company's incentive compensation and stock option
plans and consider
38
<PAGE> 43
nominations for director made by stockholders of the Company. The Committee
reviews the salaries and bonuses for all officers and certain other executives,
recommends special benefits and perquisites for management, and consults with
management regarding employee benefits and general personnel policies and
recommends persons to be considered for election to the Board of Directors,
membership on committees of the Board of Directors, and positions as executive
officers of the Company.
COMPENSATION OF DIRECTORS
The Company pays to each director who is not a Company employee an annual
retainer of $4,000 and $500 for each meeting of the Board of Directors or any
committee meeting of the Board of Directors attended. All directors are
reimbursed for travel expenses incurred as a result of service on the Board of
Directors.
Directors who are not employees of the Company also receive awards under
the 1992 Non-Employee Directors Stock Option Plan (the "1992 Plan"). Stock
option grants under the 1992 Plan are automatic. Each eligible director of the
Company on the effective date of the 1992 Plan, December 18, 1992, automatically
received an option to purchase 6,000 shares of Common Stock (split adjusted).
Each eligible director newly elected by the Company's stockholders on and after
the effective date of the 1992 Plan automatically receives an option to purchase
6,000 shares on the date the director is elected by the stockholders. In
addition, on the second anniversary of the date on which an eligible director
receives his or her initial grant of an option, and biannually thereafter, each
then eligible director will automatically receive an option to acquire an
additional 4,000 shares of Common Stock (split adjusted). The number of shares
of Common Stock currently reserved for issuance under the 1992 Plan is 80,000
(split adjusted). The exercise price of the options granted under the 1992 Plan
is the fair market value of the Common Stock on the date of the option grant.
Option grants under the 1992 Plan are exercisable in annual increments of 33.3%
commencing one year following the date of grant.
On December 18, 1996, the fourth anniversary date on which each eligible
director received his initial grant of options, four non-employee members of the
Board of Directors were automatically granted an aggregate of 16,000 stock
options in accordance with the 1992 Plan, at an option price of $9.75 per share,
the fair market value on the date of the grant.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Mr. Burrus, a member of the Compensation and Nominations Committee, is
Chairman and partner of the law firm of McGuire, Woods, Battle & Boothe, L.L.P.,
which has served as general counsel to the Company since 1992 and previously
served as general counsel to Wiland Services, Inc.
39
<PAGE> 44
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth, for the years ended December 31, 1994, 1995
and 1996, certain compensation awarded to, earned by, or paid to the Company's
Chief Executive Officer and to the Company's other executive officers whose
annual compensation exceeded $100,000 for the year ended December 31, 1996.
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
AWARDS
------------
ANNUAL COMPENSATION SECURITIES
- ------------------------------------------------------------------------- UNDERLYING ALL OTHER
SALARY BONUS OTHER ANNUAL OPTIONS/SARS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR ($) ($) COMPENSATION (#) ($)(1)
- --------------------------------- ---- ------- ------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Phillip A. Wiland,............... 1996 167,390 57,025 (2) 0 3,939
Chairman and Chief 1995 133,424 31,860 (2) 0 3,403
Executive Officer 1994 107,804 36,389 (2) 16,000 2,283
J. Michael Wolfe,................ 1996 150,690 51,054 (2) 0 2,709
President and 1995 131,597 30,654 (2) 0 1,427
Chief Operating Officer 1994 100,323 35,543 (2) 16,000 1,454
H. Franklin Marcus, Jr........... 1996 86,010 29,316 (2) 0 2,173
Chief Financial Officer and 1995 78,689 18,314 (2) 0 2,147
Secretary, Treasurer 1994 61,680 22,346 (2) 8,000 1,554
</TABLE>
- ---------------
(1) These amounts were paid by the Company as matching contributions under the
Company's Retirement Savings Plan.
(2) None of the named executive officers received Other Annual Compensation in
excess of the lesser of $50,000 or 10% of combined salary and bonus for
1994, 1995 or 1996.
1992 EMPLOYEE STOCK OPTION PLAN
The Company's 1992 Employee Stock Option Plan (the "Stock Option Plan") was
adopted by the Board of Directors on December 18, 1992 and approved by the
stockholders on July 30, 1993. Under the Stock Option Plan, 280,000 shares of
Common Stock (split adjusted) have been authorized for issuance pursuant to
incentive awards. Such incentive awards may be in the form of stock options,
stock appreciation rights, restricted stock or incentive stock. All present and
future employees of the Company who hold positions with management
responsibilities are eligible to receive incentive awards under the Stock Option
Plan, if specifically recommended by the Compensation and Nominations Committee
of the Board of Directors and approved by the full Board. The Stock Option Plan
is administered by the Compensation and Nominations Committee of the Board of
Directors. As of May 20, 1997, options to purchase 240,000 shares were
outstanding, of which options to purchase 19,000 shares were presently
exercisable.
INCENTIVE COMPENSATION PLAN
Since 1992, the Board of Directors of the Company has adopted an Incentive
Compensation Plan each year to encourage certain employees to increase Company
earnings steadily and significantly. Under these Incentive Compensation Plans,
certain employees of the Company receive annual or quarterly incentive bonuses
if the Company reaches certain earnings per share ("EPS") or return on average
equity ("ROAE") thresholds. Depending upon the level of EPS and ROAE on
quarter-to-quarter and year-to-date bases, eligible employees may receive cash
bonuses equal to certain percentages of their base salary. To participate in an
Incentive Compensation Plan, eligible employees must be an employee on the first
business day and last calendar day of the period covered. These Incentive
Compensation Plans are administered by the Compensation and Nominations
Committee of the Board of Directors. The Company's 1997 Incentive Compensation
Plan was adopted by the Board of Directors on December 7, 1996 and covers 16
employees.
40
<PAGE> 45
OPTIONS/SAR EXERCISES AND YEAR-END VALUE TABLE
The following table sets forth information concerning each exercise of
stock options and SARs during the year ended December 31, 1996, and the year-end
value of unexercised options and SARs, for each of the executive officers named
in the Summary Compensation Table.
<TABLE>
<CAPTION>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR, AND YEAR END OPTION/SAR VALUES
- ----------------------------------------------------------------------------------------------------------------------------
NUMBER OF SECURITIES VALUE OF
UNDERLYING UNEXERCISED UNEXERCISED IN-THE-MONEY
OPTIONS/SARS AT OPTIONS/SARS AT
SHARES VALUE 12/31/96(#) 12/31/96(1)($)
ACQUIRED ON REALIZED ----------------------------- -----------------------------
NAME EXERCISE(#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- -------------------------- --------------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Phillip A. Wiland......... 0 0 2,000 30,000 $18,345 $ 254,775
J. Michael Wolfe.......... 0 0 4,000 44,000 36,690 383,810
H. Franklin Marcus, Jr.... 0 0 2,000 22,000 18,345 191,905
</TABLE>
- ---------------
(1) The value calculation is based on the market value of the underlying stock
at year end, minus the exercise price.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On May 20, 1993, Mr. Wolfe, an executive officer of the Company, purchased
160,000 shares of Common Stock from the Company at the price of $.5625 per
share. Mr. Wolfe made a down payment of $27,000 on the purchase and financed the
remaining $63,000 by delivering to the Company a non-recourse installment note
accruing interest at a rate of 5.5% per annum. The note provided that payment of
interest must be made on a quarterly basis and that the principal be paid in
four annual installments, each equal to 10% of the principal amount, commencing
on May 1, 1994, with a balloon payment of the remaining balance on May 1, 1998.
Mr. Wolfe pledged the entire 160,000 shares of Common Stock to the Company as
collateral for the loan. Mr. Wolfe paid off the loan in full in 1996.
41
<PAGE> 46
PRINCIPAL AND SELLING STOCKHOLDERS
The following table sets forth information with respect to the Company's
Common Stock beneficially owned as of May 20, 1997 by (i) each person known by
the Company to be the beneficial owner of more than 5% of the shares of Common
Stock, (ii) each selling stockholder, (iii) each director individually, (iv)
each executive officer individually and (v) all executive officers and directors
as a group. All shares have been adjusted to reflect the 2-for-1 stock split on
March 31, 1997.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP BENEFICIAL OWNERSHIP
BEFORE OFFERING(1) AFTER OFFERING
--------------------- NUMBER ---------------------
NUMBER OF SHARES NUMBER
NAME OF SHARES PERCENT TO BE SOLD OF SHARES PERCENT
- ---------------------------------------- --------- ------- ---------- --------- -------
<S> <C> <C> <C> <C> <C>
Phillip A. Wiland....................... 1,515,468(2) 35.47% 197,468 1,318,000 27.79%
1351 S. Sunset
Longmont, CO 80501
Michael T. Buoncristiano................ 77,898(3) 1.82 32,500 43,898 *
450 7th Street, Suite LL8
Hoboken, NJ 07030
Robert L. Burrus, Jr.................... 8,668 * 0 8,668 *
One James Center
Richmond, VA 23219
H. Franklin Marcus, Jr.................. 85,196 1.99 6,000 79,196 1.67
1351 S. Sunset
Longmont, CO 80501
Phillip D. White, Ph.D.................. 128,666(4) 3.01 34,000 94,666 2.00
200 Camden Place
Boulder, CO 80302
J. Michael Wolfe........................ 188,528 4.41 12,528 176,000 3.71
1351 S. Sunset
Longmont, CO 80501
Stephen R. Polk......................... 8,666(7) * 0 8,666 *
1155 Brewery Park Blvd.
Detroit, MI 48207
All Directors and....................... 2,013,090 47.12 282,496 1,729,094 36.45
Executive Officers as a Group (7
Persons)
Patricia Buoncristiano.................. 1,000 * 1,000 0 *
450 7th Street, Suite LL8
Hoboken, NJ 07030
Louise A. Buoncristiano................. -- * 1,500(5) 0 *
450 7th Street, Suite LL8
Hoboken, NJ 07030
5% OWNERS
Laifer Capital.......................... 793,200(6) 18.57 0 793,200 16.72
Management, Inc.
114 West 47th Street
New York, NY 10036
R.L. Polk & Co. ........................ 843,600(7) 19.75 843,600 0 *
1155 Brewery Park Blvd.
Detroit, MI 48207
</TABLE>
- ---------------
* Does not exceed 1% of the outstanding shares of the Company
(1) Except as described in footnotes (2), (3), (4), (5), (6) and (7) below, each
individual has sole voting power and sole investment power with respect to
the Common Stock set forth opposite his name. Includes, as to Mr. White
2,666 shares, as to Messrs. Buoncristiano and Burrus 1,334 shares, as to
Messrs. Marcus and Wiland 2,000 shares, and as to Mr. Wolfe 4,000 shares of
Common Stock, that could be acquired through exercise of stock options that
are currently exercisable or will become exercisable within 60 days of the
date of this Prospectus.
42
<PAGE> 47
(2) Includes 1,497,968 shares owned in joint tenancy by Mr. Wiland and his wife,
who share voting and investment power as to the shares, 12,900 shares held
by Mr. Wiland as custodian for his minor children under the Uniform Gifts to
Minors Act and for which Mr. Wiland has sole voting and investment power and
4,600 shares owned by Mr. Wiland's daughter and for which Mr. Wiland shares
voting and investment power.
(3) Includes 71,564 shares owned by Mr. Buoncristiano, 4,000 shares held in an
IRA in the name of Mr. Buoncristiano for which Mr. Buoncristiano has sole
voting and investment power, and 1,000 shares held by Mr. Buoncristiano as
custodian for his minor child under the Uniform Transfer to Minors Act and
for which Mr. Buoncristiano has sole voting and investment power.
(4) Includes 10,000 shares owned by Dr. White and 106,000 shares held in an IRA
in the name of Dr. White for which Dr. White has sole voting and investment
power and 10,000 shares held by the Phillip D. White Family Limited
Partnership for which Dr. White's wife has sole voting and investment power.
(5) Represents shares to be transferred from Michael T. Buoncristiano prior to
the Offering.
(6) Ownership information is based on the Schedule 13D filed on May 19, 1997.
According to this Schedule 13D, Laifer Capital Management, Inc. holds
552,200 shares with sole voting and dispositive power and 241,000 shares
with shared dispositive power.
(7) Stephen R. Polk, a Director of the Company, is Chairman of the Board and
Chief Executive Officer of R.L. Polk & Co., and may by virtue of these
positions be deemed to share voting and investment power over shares owned
by R.L. Polk & Co. Mr. Polk disclaims any such shared control of shares
owned by R.L. Polk & Co.
43
<PAGE> 48
DESCRIPTION OF CAPITAL STOCK
The following description of the Company's capital stock is subject in all
respects to the General Corporation Law of the State of Delaware ("Delaware
GCL") and to the provisions of the Company's Amended and Restated Certificate of
Incorporation ("Certificate of Incorporation") and Bylaws, which are exhibits to
the Registration Statement.
GENERAL
The Company's Certificate of Incorporation currently provides that the
Company is authorized to issue 6,000,000 shares of Common Stock, par value $.10
per share. As of May 20, 1997, the Company had 4,252,882 shares of Common Stock
outstanding. Upon completion of this Offering, there will be 4,724,286 shares of
Common Stock outstanding. In addition, an aggregate of 328,666 shares of Common
Stock are reserved for issuance under the 1992 Stock Option Plan and the 1992
Non-Employee Directors Stock Option Plan.
COMMON STOCK
Holders of Common Stock are entitled to receive such dividends as may be
declared from time to time by the Board of Directors out of funds legally
available therefor. See "Dividend Policy." In the event of the liquidation,
dissolution or winding up of the Company, the holders of Common Stock will be
entitled to share ratably in all assets remaining after payment of liabilities.
The Company's Common Stock has no preemptive, subscription or conversion rights
and there are no redemption or sinking fund provisions in the Company's
Certificate of Incorporation. The issued and outstanding shares of Common Stock
are fully paid and nonassessable.
Stockholders are entitled to one vote for each share of Common Stock held
of record on all matters on which stockholders are entitled or permitted to
vote. The Common Stock does not have cumulative voting rights. As a result, the
holders of more than 50% of the shares of Common Stock voting for the election
of directors can elect all the directors if they choose to do so, and in such
event, the holders of the remaining shares of Common Stock will not be able to
elect any other person or persons to the Board of Directors of the Company.
CERTAIN PROVISIONS OF DELAWARE LAW
The Company is subject to Section 203 of the Delaware GCL. In general,
Section 203 prevents an "interested stockholder" (defined generally as a person
owning 15% or more of a corporation's outstanding voting stock) from engaging in
a "business combination" (as defined) with a Delaware corporation for three
years following the date such person became an interested stockholder unless (i)
before such person became an interested stockholder, the board of directors of
the corporation approved the transaction in which the interested stockholder
became an interested stockholder or approved the business combination; (ii) upon
consummation of the transaction that resulted in the interested stockholder
becoming an interested stockholder, the interested stockholder owns at least 85%
of the voting stock of the corporation outstanding at the time the transaction
commenced (excluding shares owned by persons who are both officers and directors
of the corporation, and shares held by certain employee stock ownership plans);
or (iii) following the transaction in which such person became an interested
stockholder, the business combination is approved by the board of directors of
the corporation and authorized at a meeting of stockholders by the affirmative
vote of the holders of at least two-thirds of the outstanding voting stock of
the corporation not owned by the interested stockholder.
LIMITATION ON LIABILITY AND BYLAW PROVISIONS
The Company's Certificate of Incorporation provides that to the fullest
extent permitted by the Delaware GCL, a director of the Company shall not be
liable to the Company or its stockholders for monetary damages for breach of
fiduciary duty as a director. Under the Delaware GCL, liability of a director
may not be limited (i) for any breach of the director's duty of loyalty to the
Company or its stockholders, (ii) for acts or
44
<PAGE> 49
omissions not in good faith or that involve intentional misconduct or a knowing
violation of law, (iii) in respect of certain unlawful dividend payments or
stock redemptions or repurchases, and (iv) for any transaction from which the
director derives an improper personal benefit. The effect of this provision of
the Company's Certificate of Incorporation is to eliminate the rights of the
Company and its stockholders (through stockholders' derivative suits on behalf
of the Company) to recover monetary damages against a director for breach of the
fiduciary duty of care as a director (including breaches resulting from
negligent or grossly negligent behavior) except in the situations described in
clauses (i) through (iv) above. This provision does not limit or eliminate the
rights of the Company or any stockholder to seek non-monetary relief such as an
injunction or rescission in the event of a breach of a director's duty of care.
In addition, the Company's Bylaws provide that it shall indemnify its directors,
officers, employees and agents to the fullest extent permitted by the Delaware
GCL.
The Company's Bylaws provide that the number of directors will be fixed
from time to time by the Board of Directors. The number of directors is
currently fixed at five.
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for the Common Stock is Norwest Bank
Minnesota, N.A., 161 North Concord Exchange, South St. Paul, Minnesota, 55075.
45
<PAGE> 50
UNDERWRITING
Subject to the terms and certain conditions of the Underwriting Agreement
(the "Underwriting Agreement"), the underwriters named below (the
"Underwriters"), for whom EVEREN Securities, Inc. and Scott & Stringfellow, Inc.
are acting as representatives (the "Representatives"), have severally agreed to
purchase an aggregate of 1,600,000 shares of Common Stock from the Company and
the Selling Stockholders. The number of shares of Common Stock that each
Underwriter has agreed to purchase is set forth opposite its name below.
<TABLE>
<CAPTION>
UNDERWRITER NUMBER OF SHARES
------------------------------------------------------------- ----------------
<S> <C>
EVEREN Securities, Inc.......................................
Scott & Stringfellow, Inc....................................
---------
Total.............................................. 1,600,000
=========
</TABLE>
The Underwriting Agreement provides that the obligations of the several
Underwriters who are parties thereunder are subject to certain conditions. If
any of the shares of Common Stock are purchased by the Underwriters pursuant to
the Underwriting Agreement, all such shares of Common Stock (other than the
shares of Common Stock covered by the over-allotment option described below)
must be so purchased.
The Company has been advised by the Representatives that the Underwriters
propose to offer the Common Stock to the public initially at the price to the
public set forth on the cover page of this Prospectus and to certain dealers at
such price less a concession not to exceed $ per share. The Underwriters may
allow, and such dealers may re-allow, discounts not to exceed $ per share to
certain other dealers. After the initial public offering of the shares of Common
Stock, the public offering price and the other selling terms may be changed by
the Representatives.
The Company has granted to the Underwriters an option to purchase up to an
aggregate of 240,000 additional shares of Common Stock at the price to the
public set forth on the cover page of this Prospectus, less underwriting
discounts and commissions, solely to cover over-allotments, if any. Such option
may be exercised at any time until 30 days after the date of this Prospectus. To
the extent that the Underwriters exercise such option, each of the Underwriters
will be committed, subject to certain conditions, to purchase a number of option
shares proportionate to such Underwriter's initial commitment as indicated in
the preceding table.
The Company and the Selling Stockholders have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the Act,
or to contribute to payments that the Underwriters may be required to make in
respect thereof.
The public offering price for the Common Stock set forth on the cover page
of this Prospectus was determined by negotiations among the Company and the
Representatives. The factors considered in determining the public offering price
include the information set forth in this Prospectus and otherwise available to
the Representatives, the trading history of the Common Stock on the Nasdaq
SmallCap Market, the history of and prospects for the industry in which the
Company competes, the ability of the Company's management, the past and present
operations of the Company, the historical results of the operations of the
Company, the prospects for future earnings of the Company, the general condition
of the securities market at the time of this offering and the recent market
prices of securities of generally comparable companies. Prior to this offering,
trading in the Company's Common Stock has been quite limited. There can be no
assurance as to the liquidity of any market that may develop for the Common
Stock or the ability of holders to sell their Common Stock, nor can there be any
assurance that the price at which holders are able to sell their Common Stock
will not be lower than the price at which the Common Stock is sold to the public
by the Underwriters. See "Risk Factors -- Limited Historical Trading Volume;
Possible Volatility."
46
<PAGE> 51
The Company, Phillip A. Wiland (the Company's Chairman of the Board and
Chief Executive Officer), J. Michael Wolfe (the Company's President and Chief
Operating Officer), H. Franklin Marcus, Jr. (the Company's Chief Financial
Officer) and each of the Company's other directors (Mr. Wiland, Mr. Wolfe, Mr.
Marcus and such other directors will beneficially own an aggregate of 1,729,094
shares of Common Stock after this offering) have agreed with the Underwriters
not to (other than in connection with this offering and in connection with
certain transfers of Common Stock to entities organized for the exclusive
benefit of family members of such persons), directly or indirectly, offer,
pledge, sell, contract to sell, sell any option or contract to purchase,
purchase any option or contract to sell, grant any option, right or warrant to
purchase, or otherwise transfer or dispose of, any shares of Common Stock of the
Company or issue any securities convertible into or exercisable or exchangeable
(except pursuant to the terms of the Company's employee or non-employee director
stock plans) for Common Stock, or enter into any swap or other agreement to do
any of the foregoing, for a period of 12 months after the date of this
Prospectus without the written consent of EVEREN Securities, Inc. (the "Lock-Up
Agreement"). The other Selling Stockholders have also agreed to such
restrictions. These "lock-up" restrictions do not apply to the estate of any
person described above in the event such person dies during the 12-month
"lock-up" period and do not prohibit any person from exercising options (but
would prohibit the sale during the restricted period of any shares of Common
Stock purchased upon exercise of such options). As part of the Lock-Up
Agreement, the Company has also agreed with the Underwriters that it will not,
without the written consent of EVEREN Securities, Inc., file a registration
statement relating to shares of capital stock (including the Common Stock), or
securities convertible into or exercisable or exchangeable for, or warrants,
options or rights to purchase or acquire, capital stock, during such 12-month
period, with the exception of the filing of Registration Statements on Form S-8
with respect to the Company's employee stock plans.
In connection with the Offering, certain Underwriters and selling group
members and their respective affiliates may engage in transactions that
stabilize, maintain or otherwise affect the market price of the Common Stock.
Such transactions may include stabilization transactions effected in accordance
with the Securities Exchange Act of 1934 pursuant to which such persons may bid
for or purchase Common Stock for the purpose of stabilizing its market price.
The Underwriters also may create a short position for the account of the
Underwriters by selling more Common Stock in connection with the Offering than
they are committed to purchase from the Company and the Selling Stockholders,
and in such case may purchase Common Stock in the open market following
completion of the Offering to cover all or a portion of such shares of Common
Stock or may exercise the Underwriters' over-allotment option referred to above.
In addition, the Representative, on behalf of the Underwriters, may impose
"penalty bids" under contractual arrangements with the Underwriters whereby it
may reclaim from an Underwriter (or dealer participating in the Offering), for
the account of the other Underwriters, the selling concession with respect to
Common Stock that is distributed in the Offering but subsequently purchased for
the account of the Underwriters in the open market. Any of the transactions
described in this paragraph may result in the maintenance of the price of the
Common Stock at a level above that which might otherwise prevail in the open
market. None of the transactions described in this paragraph are required, and,
if they are undertaken, they may be discontinued at any time.
LEGAL MATTERS
The validity of the shares of Concepts Direct, Inc. offered hereby will be
passed upon for the Company and the Selling Stockholders by McGuire, Woods,
Battle & Boothe, L.L.P., Richmond, Virginia. Certain legal matters relating to
the Offering will be passed upon for the Underwriters by Gibson, Dunn & Crutcher
LLP, San Francisco, California. Lawyers of McGuire, Woods, Battle & Boothe,
L.L.P. own approximately 9,000 shares of the Common Stock.
EXPERTS
The financial statements of Concepts Direct, Inc. at December 31, 1996 and
1995 and for each of the three years in the period ended December 31, 1996,
appearing in this Prospectus and Registration Statement have been audited by
Ernst & Young LLP, independent auditors, as set forth in their report thereon
appearing
47
<PAGE> 52
elsewhere herein, are included in reliance upon such report given upon the
authority of such firm as experts in accounting and auditing.
ADDITIONAL INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). The Registration
Statement, of which this Prospectus is a part, as well as such reports, proxy
statements and other information can be inspected and copied at the public
reference facilities maintained by the Commission at Room 1024, 450 Fifth
Street, N.W., Washington, D.C. 20549 and at the Commission's Regional Offices
located at 7 World Trade Center, New York, New York 10048 and Northwest Atrium,
500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such
materials can be obtained from the Public Reference Section of the Commission at
450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed rates. The
Commission also maintains a Worldwide Web site (address: http://www.sec.gov)
that contains reports, proxy and information statements and other information
regarding registrants that file electronically with the Commission. The Common
Stock is traded on the Nasdaq SmallCap Market and the Company has applied to
have the Common Stock traded on the Nasdaq National Market. Reports and other
information concerning the Company may also be inspected at the offices of the
Nasdaq Stock Market, 1725 K Street, N.W., Washington, D.C. 20006.
As permitted by the rules and regulations of the Commission, this
Prospectus omits certain information contained in the Registration Statement on
Form S-1 (the "Registration Statement") of which this Prospectus is a part. For
such information, reference is made to the Registration Statement and the
exhibits thereto. Statements made in this Prospectus as to the contents of any
contract, agreement or other document are not necessarily complete; with respect
to each such contract, agreement or other document filed as an exhibit to the
Registration Statement or incorporated by reference herein, reference is made to
such contract, agreement or other document for a more complete description of
the matter involved, and each such statement is qualified in its entirety by
such reference.
48
<PAGE> 53
CONCEPTS DIRECT, INC.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Auditors....................................................... F-2
Balance Sheets as of December 31, 1995 and 1996 and March 31, 1997 (unaudited)....... F-3
Income Statements for the years ended December 31, 1994, 1995 and 1996 and the
three-month periods ended March 31, 1996 and 1997 (unaudited)...................... F-4
Statements of Stockholders' Equity for the years ended December 31, 1994, 1995 and
1996 and the three-month period ended March 31, 1997 (unaudited)................... F-5
Statements of Cash Flows for the years ended December 31, 1994, 1995 and 1996 and the
three-month periods ended March 31, 1996 and 1997 (unaudited)...................... F-6
Notes to Financial Statements........................................................ F-7
</TABLE>
F-1
<PAGE> 54
REPORT OF INDEPENDENT AUDITORS
Stockholders and Board of Directors
Concepts Direct, Inc.
We have audited the accompanying balance sheets of Concepts Direct, Inc. as
of December 31, 1996 and 1995, and the related income statements, statements of
stockholders' equity, and statements of cash flows for each of the three years
in the period ended December 31, 1996. Our audits also included the financial
statement schedule listed in the Index at Item 16(b). These financial statements
and schedule are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements and
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, the financial statements referred to above present fairly,
in all material respects, the financial position of Concepts Direct, Inc. at
December 31, 1996 and 1995, and the results of its operations and its cash flows
for each of the three years in the period ended December 31, 1996, in conformity
with generally accepted accounting principles. Also, in our opinion, the related
financial statement schedule, when considered in relation to the basic financial
statements taken as a whole, presents fairly in all material respects the
information set forth therein.
ERNST & YOUNG LLP
Denver, Colorado
January 31, 1997
except for Note 7 as to which the date is
February 25, 1997
F-2
<PAGE> 55
CONCEPTS DIRECT, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
-------------------------- -----------
1995 1996 1997
---------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets
Cash and cash equivalents.......................... $3,324,838 $ 6,425,137 $ 3,354,506
Restricted cash.................................... 0 0 500,000
Accounts receivable, less allowances............... 108,102 165,833 154,836
Deferred advertising costs......................... 2,207,244 3,818,827 3,927,976
Inventories, less allowances....................... 2,798,878 2,783,999 2,755,697
Prepaid expenses and other......................... 283,254 248,920 218,364
---------- ----------- -----------
Total current assets....................... 8,722,316 13,442,716 10,911,379
Property and equipment, net.......................... 994,744 792,199 2,913,204
Other assets......................................... 206,768 252,068 236,813
---------- ----------- -----------
$9,923,828 $14,486,983 $14,061,396
========== =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable................................... $3,107,174 $ 5,323,278 $ 3,751,333
Current maturities of lease obligations............ 87,275 59,457 34,804
Accrued employee compensation...................... 638,943 584,868 663,141
Customer liabilities............................... 908,264 762,491 962,269
Current and deferred income taxes payable.......... 90,925 787,643 996,643
---------- ----------- -----------
Total current liabilities.................. 4,832,581 7,517,737 6,408,190
Lease obligations.................................... 67,493 -- --
Commitments and contingencies
Stockholders' equity
Common Stock, $.10 par value, authorized 6,000,000
shares; issued and outstanding 4,242,216 and
4,232,882 in 1996 and 1995, respectively,
4,250,882 shares at March 31, 1997.............. 211,644 212,111 425,088
Additional paid-in capital......................... 4,366,633 4,374,455 4,172,274
Retained earnings.................................. 445,477 2,382,680 3,055,844
---------- ----------- -----------
Total stockholders' equity................. 5,023,754 6,969,246 7,653,206
---------- ----------- -----------
$9,923,828 $14,486,983 $14,061,396
========== =========== ===========
</TABLE>
See notes to financial statements.
F-3
<PAGE> 56
CONCEPTS DIRECT, INC.
INCOME STATEMENTS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, THREE MONTHS ENDED MARCH 31,
--------------------------------------- ----------------------------
1994 1995 1996 1996 1997
----------- ----------- ----------- ----------- --------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net Sales....................... $20,723,829 $42,146,997 $51,125,844 $11,583,964 $15,952,360
Operating costs and expenses
Cost of product and
delivery................... 11,406,063 22,286,173 26,833,956 5,941,346 7,959,421
Selling, general and
administrative............. 7,914,501 19,222,425 21,729,621 5,379,896 7,042,032
----------- ----------- ----------- ----------- -----------
Total operating costs and
expenses...................... 19,320,564 41,508,598 48,563,577 11,321,242 15,001,453
----------- ----------- ----------- ----------- -----------
Operating income................ 1,403,265 638,399 2,562,267 262,722 950,907
Other income, net............... 87,195 298,266 245,936 112,047 101,257
----------- ----------- ----------- ----------- -----------
Income before income taxes...... 1,490,460 936,665 2,808,203 374,769 1,052,164
Provision for income taxes...... -- 94,000 871,000 109,000 379,000
----------- ----------- ----------- ----------- -----------
Net income...................... $ 1,490,460 $ 842,665 $ 1,937,203 $ 265,769 $ 673,164
=========== =========== =========== =========== ===========
Earnings per share.............. $ 0.34 $ 0.19 $ 0.44 $ 0.06 $ 0.15
=========== =========== =========== =========== ===========
Weighted average number of
common shares and common share
equivalents outstanding....... 4,323,096 4,404,332 4,441,664 4,442,132 4,482,159
</TABLE>
See notes to financial statements.
F-4
<PAGE> 57
CONCEPTS DIRECT, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
NUMBER OF
SHARES OF ADDITIONAL RETAINED TOTAL
COMMON COMMON PAID-IN EARNINGS STOCKHOLDERS'
STOCK STOCK CAPITAL (DEFICIT) EQUITY
--------- -------- ---------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1993.......... 1,055,387 $105,539 $4,463,295 ($1,887,648) $ 2,681,186
Net income.......................... -- -- -- 1,490,460 1,490,460
Stock split......................... 1,055,387 105,538 (105,538) -- --
--------- -------- ---------- ----------- -----------
Balance at December 31, 1994.......... 2,110,774 211,077 4,357,757 (397,188) 4,171,646
Net income.......................... -- -- -- 842,665 842,665
Exercise of stock options........... 5,667 567 8,876 -- 9,443
--------- -------- ---------- ----------- -----------
Balance at December 31, 1995.......... 2,116,441 211,644 4,366,633 445,477 5,023,754
Net income.......................... -- -- -- 1,937,203 1,937,203
Exercise of stock options........... 4,667 467 7,822 -- 8,289
--------- -------- ---------- ----------- -----------
Balance at December 31, 1996.......... 2,121,108 212,111 4,374,455 2,382,680 6,969,246
Net income (Unaudited).............. -- -- -- 673,164 673,164
Exercise of stock options
(Unaudited)...................... 4,333 433 10,363 -- 10,796
Stock split (Unaudited)............. 2,125,441 212,544 (212,544) -- --
--------- -------- ---------- ----------- -----------
Balance at March 31, 1997
(Unaudited)......................... 4,250,882 $425,088 $4,172,274 $ 3,055,844 $ 7,653,206
========= ======== ========== =========== ===========
</TABLE>
See notes to financial statements.
F-5
<PAGE> 58
CONCEPTS DIRECT, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
--------------------------------------- ------------------------
1994 1995 1996 1996 1997
----------- ----------- ----------- ---------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net income.............................. $ 1,490,460 $ 842,665 $ 1,937,203 $ 265,769 $ 673,164
Adjustments to reconcile net income to
net cash provided by operating
activities:
Provision for (recovery of) losses on
accounts receivable................ (18,870) (3,130) 23,000 7,000 --
Provision (credit) for losses in
inventory values................... 247,364 32,602 41,721 (41,538) 60,657
Depreciation and amortization........ 376,537 507,689 520,698 121,512 74,603
Increase in current and deferred
income taxes payable............... -- 90,925 696,718 29,000 209,000
Loss on disposals of property and
equipment.......................... 1,779 -- 59,013 -- --
Changes in operating assets and
liabilities:
Accounts receivable.................. 174,152 119,339 (80,731) (78,808) 10,997
Deferred advertising costs........... (1,163,440) (57,560) (1,611,583) (326,592) (109,149)
Inventories.......................... (385,961) (1,639,514) (26,842) 544,719 (32,355)
Prepaid expenses and other........... 80,368 (13,681) 34,334 38,847 30,556
Accounts payable..................... 1,312,468 94,078 2,216,104 (679,892) (1,571,945)
Accrued employee compensation........ 230,699 191,755 (54,075) (242,806) 78,273
Customer liabilities................. 182,274 480,173 (145,773) (481,738) 199,778
----------- ----------- ----------- ----------- -----------
NET CASH PROVIDED BY (USED IN) OPERATING 2,527,830 645,341 3,609,787 (844,527) (376,421)
ACTIVITIES..............................
INVESTING ACTIVITIES
Cash restricted as collateral........... -- -- -- -- (500,000)
Purchases of property and equipment..... (502,186) (550,328) (377,426) (71,157) (2,195,608)
Sales of property, equipment and 900 -- 260 -- --
investments..........................
Other investing activities, net......... (31,796) (38,135) (45,300) (47,229) 15,255
----------- ----------- ----------- ----------- -----------
NET CASH USED IN INVESTING ACTIVITIES..... (533,082) (588,463) (422,466) (118,386) (2,680,353)
FINANCING ACTIVITIES
Principal payment of lease (61,530) (79,498) (95,311) (24,851) (24,653)
obligations..........................
Sale of Common Stock and exercise of
stock options........................ -- 9,443 8,289 7,134 10,796
----------- ----------- ----------- ----------- -----------
NET CASH USED IN FINANCING ACTIVITIES..... (61,530) (70,055) (87,022) (17,717) (13,857)
----------- ----------- ----------- ----------- -----------
INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS.......................... 1,933,218 (13,177) 3,100,299 (980,630) (3,070,631)
Cash and cash equivalents at beginning
of year.............................. 1,404,797 3,338,015 3,324,838 3,324,838 6,425,137
----------- ----------- ----------- ----------- -----------
Cash and cash equivalents at end of
period............................... $ 3,338,015 $ 3,324,838 $ 6,425,137 $2,344,208 $ 3,354,506
=========== =========== =========== =========== ===========
</TABLE>
See notes to financial statements.
F-6
<PAGE> 59
CONCEPTS DIRECT, INC.
NOTES TO FINANCIAL STATEMENTS
(INFORMATION APPLICABLE TO THE THREE MONTHS ENDED MARCH 31, 1996 AND 1997 IS
UNAUDITED)
NOTE 1. SIGNIFICANT ACCOUNTING POLICIES
Organization: Concepts Direct, Inc. markets various products directly to
individual consumers, including a line of personal labels, stationery, desk
accessories and other merchandise under various catalog titles. The Company's
corporate and operations facilities are located in Longmont, Colorado. The
Company sells its products nationwide and in Canada.
Interim Financial Statements: The Company, in its opinion, has included all
adjustments (consisting only of normal recurring accruals) necessary for a fair
presentation of its financial position at March 31, 1997 and the results of its
operations for the three months ended March 31, 1997 and 1996. The results of
operations for the three months ended March 31, 1997 are not necessarily
indicative of the results for a full year.
Use of Estimates: The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from these estimates.
Revenue Recognition: Revenues from the sale of products are recognized when
products are shipped.
The Company's sales are attributable entirely to United States operations.
Export sales to Canada were approximately 4.6%, 2.5% and 1.9% of total sales in
1994, 1995 and 1996, respectively, and 2.1% and 1.3% for the three months ended
March 31, 1996 and 1997, respectively. Export sales excluding Canada, were
insignificant in all periods reported.
Cash Equivalents: The Company considers all highly liquid investments, including
marketable securities, with a maturity of three months or less when purchased to
be cash equivalents.
Marketable securities are carried at cost which approximates market value
and consisted of the following at:
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
------------------------- ----------
1995 1996 1997
---------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C>
U.S. Government Obligations.......... $ 986,600 $4,555,206 $1,230,471
Commercial Certificates of Deposit... 720,000 360,000 784,000
---------- ---------- ----------
Total Marketable Securities.......... $1,706,600 $4,915,206 $2,014,471
========== ========== ==========
</TABLE>
Deferred Advertising Costs: These costs primarily relate to printing and
distribution of advertising materials. Such costs are deferred for financial
reporting purposes until the advertising materials are distributed, then
amortized over succeeding periods (not to exceed twelve months) on the basis of
estimated sales. Amortization is accelerated in the earlier months of the
amortization period. Historical sales statistics are the principle factors used
in estimating the amortization rate. Other advertising and promotional costs are
expensed as incurred. Advertising costs were $6,142,000, $16,477,000 and
$18,373,000 in 1994, 1995 and 1996, respectively, and $4,626,000 and $6,075,000
for the three months ended March 31, 1996 and 1997, respectively.
Inventories: Inventories of products, net of valuation allowances of $692,000
and $400,000 at December 31, 1995 and 1996, respectively, and $447,000 at March
31, 1997, are stated at the lower of cost (first-in, first-out method) or
market.
Property and Equipment: Such assets are stated on the basis of cost. Purchased
and leased computer software is depreciated using the straight-line method. All
other property and equipment is depreciated using accelerated methods.
F-7
<PAGE> 60
CONCEPTS DIRECT, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION APPLICABLE TO THE THREE MONTHS ENDED MARCH 31, 1996 AND 1997 IS
UNAUDITED)
NOTE 1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Warranties: The Company's sales of products are subject to a satisfaction
guarantee. Certain sales of products are also under warranty against defects in
material and workmanship for various periods. The Company accrues for
anticipated future warranty costs and product returns with periodic adjustments
to reflect actual experience.
Income Taxes: Deferred income taxes are based on the liability method as
prescribed by Statement of Financial Accounting Standards No. 109 which requires
an adjustment to the deferred tax liability to reflect income tax rates
currently in effect rather than historical rates. When income tax rates increase
or decrease a corresponding adjustment to income tax expense is recorded by
applying the rate change to the cumulative temporary differences.
Earnings Per Common Share: Earnings per common share computations are based on
the weighted average number of common shares and common stock equivalents (stock
options determined under the treasury stock method) outstanding during the
period. Primary and fully diluted earnings per share are the same.
Dividend Policy: At the present time, the Company intends to retain earnings to
provide funds for operations and expansion of the Company's business. Thus, it
does not foresee paying cash dividends in the future.
NOTE 2. STATEMENTS OF CASH FLOWS
Following is supplemental information to the statements of cash flows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, THREE MONTHS ENDED MARCH 31,
---------------------------- -----------------------------
1994 1995 1996 1996 1997
------- ------- -------- ----------- ---------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Non-cash investing and financing activities:
Lease obligation incurred in connection
with acquisition of data processing
equipment.............................. $92,619 $ -- $ -- $ -- $ --
Cash - flow data:
Cash paid during the year for:
Interest............................... $17,081 $19,197 $ 12,801 $ 4,887 $ 1,425
Income taxes........................... $ -- $ 3,075 $174,282 $80,000 $ 170,000
</TABLE>
NOTE 3. PROPERTY AND EQUIPMENT
Following is a summary of property and equipment at:
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31, PRINCIPAL
------------------------- ----------- ESTIMATED
1995 1996 1997 USEFUL LIVES
----------- ----------- ----------- ------------
(UNAUDITED)
<S> <C> <C> <C> <C>
Data processing equipment.................... $ 1,091,440 $ 1,071,792 $ 1,105,575 5-7 years
Purchased and leased computer software....... 609,406 389,269 389,269 5 years
Furniture and equipment...................... 743,008 761,350 761,350 1-5 years
Leasehold improvements....................... 368,233 368,233 368,233 5 years
Building under construction.................. -- -- 698,615
Land......................................... -- 182,676 1,641,625
----------- ----------- -----------
2,812,087 2,773,320 4,964,667
Less accumulated depreciation and
amortization............................... (1,817,343) (1,981,121) (2,051,463)
----------- ----------- -----------
$ 994,744 $ 792,199 $ 2,913,204
=========== =========== ===========
</TABLE>
F-8
<PAGE> 61
CONCEPTS DIRECT, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION APPLICABLE TO THE THREE MONTHS ENDED MARCH 31, 1996 AND 1997 IS
UNAUDITED)
NOTE 3. PROPERTY AND EQUIPMENT (CONTINUED)
In January, 1997, the Company purchased approximately 139 acres of
undeveloped land near the Company's offices for approximately $1,400,000. The
Company intends to use a portion of this land for a new facility, hold some of
the land for expansion, and attempt to sell most of the remaining acreage to
other parties.
The Company anticipates completing a new building, costing approximately
$8,500,000, during the summer of 1997. The lease on the Company's current
facility in Longmont, Colorado expires August 31, 1997. The Company also
anticipates significant additions to furniture and equipment during 1997.
On March 25, 1997, an irrevocable standby letter of credit for $500,000 was
issued by a regional bank. The letter relates to certain obligations anticipated
to be resolved within one year, in connection with improvements to the building
site. The letter of credit is collateralized by $500,000 of cash held on deposit
in an interest bearing account at the issuing bank.
NOTE 4. LEASE OBLIGATIONS
Future minimum lease payments due for all non-cancelable leases are as
follows at:
<TABLE>
<CAPTION>
DECEMBER 31, 1996 MARCH 31, 1997
-------------------- ------------------------
OPERATING CAPITAL OPERATING CAPITAL
---------- ------- ---------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
1997............................................ $1,085,000 $61,871 $ -- $ --
1998............................................ 687,000 -- 956,000 35,802
1999............................................ 671,000 -- 697,000 --
2000............................................ 471,000 -- 653,000 --
2001............................................ 234,000 -- 396,000 --
2002............................................ -- -- 160,000
Thereafter........................................ -- -- -- --
----------- ------- ----------- -------
Total future minimum lease payment................ $3,148,000 61,871 $2,862,000 35,802
=========== ===========
Less imputed interest........................ (2,414) (998)
------- -------
Present value of capital lease obligations... $59,457 $34,804
======= =======
</TABLE>
The Company leases various buildings and equipment used in operations under
agreements which expire at various dates through November 2000, excluding
various renewal options available, some of which are subject to annual
adjustments for cost escalation. Total rental expense for all continuing
operations operating leases amounted to $834,000, $1,072,000 and $1,269,000 for
the years ended December 31, 1994, 1995 and 1996, respectively, and $299,000 and
$281,000 for the three months ended March 31, 1996 and 1997, respectively.
Capital lease are classified with data processing equipment and purchased
and leased computer software. Unamortized values were $137,261 and $60,865 at
December 31, 1995 and 1996, respectively, and $49,650 at March 31, 1997.
F-9
<PAGE> 62
CONCEPTS DIRECT, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION APPLICABLE TO THE THREE MONTHS ENDED MARCH 31, 1996 AND 1997 IS
UNAUDITED)
NOTE 5. OTHER INCOME, NET
Following is a summary of the Company's other income (deductions):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, THREE MONTHS ENDED MARCH 31,
------------------------------ ----------------------------
1994 1995 1996 1996 1997
-------- -------- -------- ----------- --------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Interest income........................... $ 79,050 $144,718 $161,430 $ 50,397 $ 61,883
Interest expense.......................... (17,081) (19,197) (12,801) (4,487) (1,425)
Vendor payment discounts.................. 27,135 134,771 121,149 31,095 40,755
Other, net................................ (1,909) 37,974 (23,842) 35,042 44
-------- -------- -------- --------- ---------
$ 87,195 $298,266 $245,936 $ 112,047 $ 101,257
======== ======== ======== ========= =========
</TABLE>
NOTE 6. INCOME TAXES
The differences between federal statutory income tax rates and the
Company's effective tax rates are as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, THREE MONTHS ENDED MARCH 31,
--------------------------------- ----------------------------
1994 1995 1996 1996 1997
--------- --------- --------- ----------- --------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Federal tax expense (benefit) at
statutory rate....................... $ 507,000 $ 318,000 $ 955,000 $ 127,000 $ 358,000
Effect of permanent differences........ 3,000 3,000 3,000 1,000 1,000
State income tax less federal tax
benefits............................. 6,000 7,000 17,000 2,000 21,000
Utilization of net operating loss
carryforwards........................ (516,000) -- -- -- --
Research and experimentation tax
credits.............................. -- -- (104,000) (21,000) (1,000)
Valuation allowance for deferred tax
assets............................... -- (234,000) -- -- --
--------- --------- --------- --------- ---------
$ -- $ 94,000 $ 871,000 $ 109,000 $ 379,000
========= ========= ========= ========= =========
</TABLE>
The income tax expense (benefit) consists of the following:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, THREE MONTHS ENDED MARCH 31,
---------------------------------------------------------------------------------------------------------------------
1994 1995 1996 1996 1997
------------------ ------------------ ------------------- ------------------------- -------------------------
CURRENT DEFERRED CURRENT DEFERRED CURRENT DEFERRED CURRENT DEFERRED CURRENT DEFERRED
------- -------- ------- -------- -------- -------- ----------- ----------- ----------- -----------
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Federal... $ -- $ -- $54,000 $ 37,000 $141,000 $702,000 $ 104,000 $ 3,000 $ 311,000 $47,000
State..... -- -- 2,000 1,000 7,000 21,000 1,000 1,000 19,000 2,000
------- -------- ------- -------- -------- -------- --------- ------- --------- -------
$ -- $ -- $56,000 $ 38,000 $148,000 $723,000 $ 105,000 $ 4,000 $ 330,000 $49,000
======= ======== ======= ======== ======== ======== ========= ======= ========= =======
</TABLE>
F-10
<PAGE> 63
CONCEPTS DIRECT, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION APPLICABLE TO THE THREE MONTHS ENDED MARCH 31, 1996 AND 1997 IS
UNAUDITED)
NOTE 6. INCOME TAXES (CONTINUED)
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components of
the Company's deferred tax liabilities and assets consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
----------------------------------- -----------------------
1994 1995 1996 1996 1997
--------- --------- ----------- --------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Deferred tax liabilities:
Deferred advertising costs........ ($752,000) ($773,000) $(1,337,000) ($887,000) ($1,414,000)
Deferred tax assets:
Allowance for doubtful accounts... 7,000 6,000 14,000 9,000 15,000
Inventory differences............. 646,000 376,000 236,000 469,000 261,000
Property and equipment............ 156,000 142,000 160,000 156,000 167,000
Other nondeductible accruals...... 120,000 211,000 166,000 211,000 161,000
Net operating loss
carryforwards.................. 57,000 -- -- -- --
--------- --------- ----------- --------- -----------
Total deferred tax assets......... 986,000 735,000 576,000 845,000 604,000
Valuation allowance for deferred
tax assets..................... (234,000) -- -- -- --
--------- --------- ----------- --------- -----------
Net deferred tax assets............. 752,000 735,000 576,000 845,000 604,000
--------- --------- ----------- --------- -----------
Net deferred tax liabilities........ $ -- ($ 38,000) ($ 761,000) ($ 42,000) ($ 810,000)
========= ========= =========== ========= ===========
</TABLE>
At December 31, 1996 and March 31, 1997 the Company has no tax
carryforwards available.
NOTE 7. STOCKHOLDERS' EQUITY
On February 25, 1997, the Board of Directors approved a two-for-one stock
split, effected in the form of a stock dividend payable March 31, 1997 to
shareholders of record on March 14, 1997. Accordingly, March 31, 1997 balances
reflect the split with an increase in Common Stock and a reduction in additional
paid-in capital of $212,544. Number of shares outstanding, stock option and per
share data have been retroactively adjusted to reflect the split.
On October 29, 1994, the Board of Directors approved a two-for-one stock
split, effected in the form of a stock dividend, payable December 15, 1994 to
shareholders of record on November 14, 1994. Accordingly, December 31, 1994
balances reflect the split with an increase in Common Stock and a reduction in
additional paid-in capital of $105,538. Number of shares outstanding, stock
option and per share data have been retroactively adjusted to reflect the split.
During 1993, the Company issued and sold 584,000 shares of Common Stock to
officers and directors at market value. 160,000 shares sold to an officer were
financed in part by a $63,000 note receivable, collateralized by the Common
Stock financed. The note receivable was due in annual installments through 1998
with interest, payable quarterly, at 5.5%. The outstanding loan balance was
$50,400 as of December 31, 1995. The note receivable was paid in full during
1996.
Under the terms of the Concepts Direct, Inc. 1992 Employee Stock Option
Plan, certain key employees were granted options to purchase shares of Common
Stock of the Company at an option price equal to fair market value on the date
of the grant. Options granted are exercisable in annual increments of 25%
commencing four years following the date of grant and expire ten years following
the date of grant. The 1992 Employee Stock Option Plan also provides for the
issuance of incentive stock to key employees. There were
F-11
<PAGE> 64
CONCEPTS DIRECT, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION APPLICABLE TO THE THREE MONTHS ENDED MARCH 31, 1996 AND 1997 IS
UNAUDITED)
NOTE 7. STOCKHOLDERS' EQUITY (CONTINUED)
280,000, 278,000 and 278,000 shares of Common Stock reserved for issuance under
the plan as of December 31, 1995, December 31, 1996 and March 31, 1997,
respectively.
Under the terms of the Concepts Direct, Inc. 1992 Non-Employee Directors
Stock Option Plan, the outside directors were granted options to purchase shares
of Common Stock of the Company at an option price equal to fair market value on
the date of grant. Options are exercisable in annual increments of 33.3%
commencing one year following the date of grant and expire five years following
the date of the grant. There were 68,666, 61,332 and 52,666 shares of Common
Stock reserved for issuance under the plan as of December 31, 1995, December 31,
1996 and March 31, 1997, respectively.
The Company has elected to follow Accounting Principles Board Opinion No.
25, "Accounting for Stock Issued to Employees" (APB 25) and related
Interpretations in accounting for its stock options because, as discussed below,
the alternative fair value accounting provided for by Financial Accounting
Standards No. 123, "Accounting for Stock-Based Compensation" (Statement No.
123), requires use of option valuation models that were not developed for use in
valuing the stock options. Under APB 25, because the exercise price of the
Company's stock options equals the market price of the underlying stock on the
date of grant, no compensation expense is recognized.
Pro forma information regarding net income and earnings per share is
required by Statement No. 123, and has been determined as if the Company had
accounted for its stock options under the fair value method of that Statement.
The fair value for these options was estimated at the date of grant using a
Black-Scholes option pricing model with the following weighted average
assumptions:
<TABLE>
<CAPTION>
1995 1996
---------- ----------
<S> <C> <C>
Risk-free interest rate................................ 5.5% 5.5%
Dividend yields........................................ 0.0% 0.0%
Volatility factors of the expected market price of the
Company's common stock............................... 0.587 0.587
Weighted-average expected life of the employee stock
options.............................................. 5.5 years 5.5 years
Weighted-average expected life of the non-employee
stock options........................................ 2 years 2 years
</TABLE>
The weighted-average fair value of options granted were as follows:
<TABLE>
<CAPTION>
1995 1996
----- -----
<S> <C> <C>
1992 Employee Plan........................................... $2.14 $5.20
1992 Non-Employee Plan....................................... -- $3.38
</TABLE>
The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options which have no vesting restrictions
and are fully transferable. In addition, option valuation models require the
input of highly subjective assumptions including the expected stock price
volatility. Because the Company's stock options have characteristics
significantly different from those of traded options, and because changes in the
subjective input assumptions can materially affect the fair value estimate, in
management's opinion, the existing models do not necessarily provide a reliable
single measure of the fair value of its stock options.
F-12
<PAGE> 65
CONCEPTS DIRECT, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION APPLICABLE TO THE THREE MONTHS ENDED MARCH 31, 1996 AND 1997 IS
UNAUDITED)
NOTE 7. STOCKHOLDERS' EQUITY (CONTINUED)
For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options' vesting periods. The Company's
pro forma information follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, THREE MONTHS ENDED MARCH 31,
----------------------- ---------------------------
1995 1996 1996 1997
-------- ---------- ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Pro forma net income........ $827,705 $1,907,467 $ 259,730 $ 653,637
Pro forma earnings per
share..................... $ 0.19 $ 0.43 $ 0.06 $ 0.15
</TABLE>
Because Statement No. 123 is applicable only to options granted subsequent
to December 31, 1994, its pro forma effect will not be fully reflected until
2001.
A summary of the Company's stock option activity, and related information
follows:
<TABLE>
<CAPTION>
1992 EMPLOYEE PLAN 1992 NON-EMPLOYEE PLAN
-------------------- ----------------------
WEIGHTED WEIGHTED
NUMBER AVERAGE NUMBER AVERAGE
OF EXERCISE OF EXERCISE
SHARES PRICE SHARES PRICE
------- -------- ------- --------
<S> <C> <C> <C> <C>
Outstanding at December 31, 1993.................. 156,000 $ 0.54 24,000 $ 0.58
Granted at market price......................... 64,000 $ 1.51 16,000 $ 2.75
Canceled........................................ (44,000) $ 0.60 -- $ --
------- ------ ------- ------
Outstanding at December 31, 1994.................. 176,000 $ 0.88 40,000 $ 1.45
Granted at market price......................... 49,000 $ 3.77 -- $ 0.00
Exercised....................................... -- -- (11,334) $ 0.83
------- ------ ------- ------
Outstanding at December 31, 1995.................. 225,000 $ 1.51 28,666 $ 1.69
Granted at market price......................... 25,000 $ 9.12 16,000 $ 9.75
Exercised....................................... (2,000) $ 0.58 (7,334) $ 0.97
Canceled........................................ (8,000) $ 0.88 -- --
------- ------ ------- ------
Outstanding at December 31, 1996.................. 240,000 $ 2.33 37,332 $ 5.28
Exercised (unaudited)........................... -- $ -- (8,666) $ 1.24
------- ------ ------- ------
Outstanding at March 31, 1997 (unaudited)......... 240,000 $ 2.33 28,666 $ 6.51
======= ====== ======= ======
</TABLE>
F-13
<PAGE> 66
CONCEPTS DIRECT, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION APPLICABLE TO THE THREE MONTHS ENDED MARCH 31, 1996 AND 1997 IS
UNAUDITED)
NOTE 7. STOCKHOLDERS' EQUITY (CONTINUED)
A summary of outstanding options, by year they become exercisable, follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, YEAR ENDED MARCH 31,
---------------------------------------- -------------------------------------------
(UNAUDITED)
1992 NON-EMPLOYEE 1992 NON-EMPLOYEE
1992 EMPLOYEE PLAN PLAN 1992 EMPLOYEE PLAN PLAN
------------------ ----------------- --------------------- -----------------
WEIGHTED WEIGHTED WEIGHTED WEIGHTED
NUMBER AVERAGE NUMBER AVERAGE NUMBER AVERAGE NUMBER AVERAGE
OF EXERCISE OF EXERCISE OF EXERCISE OF EXERCISE
SHARES PRICE SHARES PRICE SHARES PRICE SHARES PRICE
------- -------- ------ -------- ------- ----------- ------ --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1996........ 12,000 $ 0.58 16,004 $ 1.66 -- $ -- -- $ --
1997........ 30,000 $ 0.54 10,664 $ 6.25 12,000 $0.58 7,334 $ 2.16
1998........ 42,000 $ 0.88 5,336 $ 9.75 30,000 $0.54 10,668 $ 6.25
1999........ 54,250 $ 1.53 5,328 $ 9.75 48,000 $1.14 5,336 $ 9.75
2000........ 46,500 $ 2.84 -- $ -- 54,250 $1.53 5,328 $ 9.75
2001........ 30,500 $ 4.06 -- $ -- 46,500 $2.84 -- $ --
2002........ 18,500 $ 5.58 -- $ -- 30,500 $4.06 -- $ --
2003........ 6,250 $ 9.13 -- $ -- 12,500 $6.81 -- $ --
2004........ -- $ -- -- $ -- 6,250 $9.13 -- $ --
------- ------ ------ ------ ------- ----- ------ ------
Outstanding...... 240,000 $ 2.33 37,332 $ 5.28 240,000 $2.33 28,666 $ 6.51
======= ====== ====== ====== ======= ===== ====== ======
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1996 MARCH 31, 1997
----------------- --------------
(UNAUDITED)
<S> <C> <C>
Exercise price range of options outstanding:
1992 Employee Plan.......................... $0.50-$9.13 $ 0.50-$9.13
1992 Non-Employee Plan...................... $0.58-$9.75 $ 0.58-$9.75
Weighted-average remaining contractual life of
options outstanding:
1992 Employee Plan.......................... 7.3 years 7.1 years
1992 Non-Employee Plan...................... 2.8 years 3.7 years
</TABLE>
NOTE 8. EMPLOYEE RETIREMENT SAVINGS PLAN
In May 1985, the Company adopted a Retirement Savings Plan under Section
401(k) of the Internal Revenue Code. Participation in the Plan is available to
any employee of the Company who has completed one year of service and is age
twenty-one or older. The Company contributes $10 monthly for each eligible
employee, plus up to $0.50 for each dollar contributed by each participant on
the first 4% of eligible compensation, depending on years of service. The
Company may contribute an additional amount if it has sufficient profits. The
Company's contributions to employees of Concepts Direct, Inc. were $27,000,
$33,000 and $55,000 in 1994, 1995 and 1996, respectively, and $16,000 and
$11,000 for the three months ended March 31, 1996 and 1997, respectively.
F-14
<PAGE> 67
CONCEPTS DIRECT, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION APPLICABLE TO THE THREE MONTHS ENDED MARCH 31, 1996 AND 1997 IS
UNAUDITED)
NOTE 9. CREDIT FACILITY
In May 1997, the Company entered into a $3.7 million credit facility with a
bank, bearing interest at a variable rate equal to the bank's prime rate,
secured by the Company's cash, inventories, accounts receivable and equipment.
The Company must comply with certain financial and performance covenants
contained in the credit facility, including a minimum current ratio, a minimum
tangible net worth, a maximum total debt to equity ratio and a minimum debt
service coverage ratio and maintenance of its primary accounts with the bank. Of
the total facility, $700,000 may be used for furniture and equipment purchases
and, until April 1998, amounts funded may be converted to a three year term note
at a variable rate equal to the bank's prime rate. The remaining $3 million of
the credit facility is made up of two revolving lines of credit, $1 million for
the purchase of paper to be used in future catalog mailings and $2 million for
general working capital purposes. The credit facility expires in April 1998, at
which time the Company anticipates being able to renew the arrangements.
NOTE 10. QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
<TABLE>
<CAPTION>
INCOME NET EARNINGS (LOSS)
NET (LOSS) FROM INCOME PER COMMON
SALES OPERATIONS (LOSS) SHARE
------- ----------- ------ ---------------
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
1994:
First....................... $ 3,652 $ 148 $ 161 $ 0.04
Second...................... 4,107 129 151 0.04
Third....................... 4,669 350 372 0.09
Fourth...................... 8,296 776 806 0.18
1995:
First....................... $ 8,100 $ 291 $ 229 $ 0.05
Second...................... 9,491 192 177 0.04
Third....................... 8,307 (282) (137) (0.03)
Fourth...................... 16,249 437 574 0.13(a)
1996:
First....................... $11,584 $ 263 $ 266 $ 0.06
Second...................... 9,000 (344) (220) (0.05)
Third....................... 9,800 258 220 0.05
Fourth...................... 20,742 2,386 1,671 0.38
1997:
First....................... $15,952 $ 951 $ 673 $ 0.15
</TABLE>
(a) The 1995 fourth quarter was favorably impacted by the reversal of a $234,000
deferred tax asset valuation allowance which reversal resulted from the
Company having taxable temporary differences greater than deductible
temporary differences and loss carryforwards at December 31, 1995.
F-15
<PAGE> 68
[PHOTOGRAPHS AND DESCRIPTIONS OF MERCHANDISE FEATURED IN THE COMPANY'S CATALOGS]
<PAGE> 69
[PHOTOGRAPHS AND DESCRIPTIONS OF MERCHANDISE FEATURED IN THE COMPANY'S CATALOGS]
<PAGE> 70
[PHOTOGRAPHS OF CATALOG COVERS AND SELECTED PAGES FROM CATALOGS]
<PAGE> 71
================================================================================
NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS AND, IF GIVEN OR
MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE COMPANY, ANY OF THE SELLING STOCKHOLDERS OR ANY OF
THE UNDERWRITERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF ANY OFFER TO BUY ANY SECURITY OTHER THAN THE SHARES OF COMMON
STOCK OFFERED BY THIS PROSPECTUS, NOR DOES IT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF ANY OFFER TO BUY THE SHARES OF COMMON STOCK BY ANYONE IN ANY
JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED, OR IN WHICH
THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO, OR TO
ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER
THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS
CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.................... 3
Risk Factors.......................... 7
Use of Proceeds....................... 14
Capitalization........................ 15
Dividend Policy....................... 16
Price Range of Common Stock........... 16
Selected Financial and Operating
Data................................ 17
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 18
Business.............................. 24
Management............................ 37
Executive Compensation................ 40
Principal and Selling Stockholders.... 42
Description of Capital Stock.......... 44
Underwriting.......................... 46
Legal Matters......................... 47
Experts............................... 47
Additional Information................ 48
Index to Financial Statements......... F-1
</TABLE>
================================================================================
================================================================================
1,600,000 SHARES
CONCEPTS DIRECT, INC.
[CONCEPTS DIRECT LOGO]
COMMON STOCK
-------------------
PROSPECTUS
-------------------
EVEREN SECURITIES, INC.
SCOTT & STRINGFELLOW, INC.
, 1997
================================================================================
<PAGE> 72
PART II. INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth all expenses, other than the underwriting
discounts and commissions, payable on a pro-rata basis by the Company and the
Selling Stockholders in connection with the sale of the Common Stock being
registered. All the amounts shown are estimates except for the SEC registration
fee, the NASD filing fee and the Nasdaq National Market application fee.
<TABLE>
<S> <C>
SEC registration fee.................................................... $ 11,918
NASD filing fee......................................................... 4,433
Nasdaq National Market application fee.................................. 28,611
Blue Sky fees and expenses.............................................. 10,000
Printing and engraving expenses......................................... 80,000
Legal fees and expenses................................................. 200,000
Accounting fees and expenses............................................ 50,000
Transfer Agent and Registrar fees....................................... 10,000
Miscellaneous........................................................... 45,000
--------
Total......................................................... $439,962
========
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the Delaware GCL permits a corporation to indemnify its
directors and officers against expenses (including attorney's fees), judgments,
fines and amounts paid in settlements actually and reasonably incurred by them
in connection with any action, suit or proceeding brought by third parties, if
such directors or officers acted in good faith and in a manner they reasonably
believed to be in or not opposed to the best interests of the corporation and,
with respect to any criminal action or proceeding, had no reason to believe
their conduct was unlawful. In a derivative action, i.e., one by or in the right
of the corporation, indemnification may be made only for expenses actually and
reasonably incurred by directors and officers in connection with the defense or
settlement of an action or suit, and only with respect to a matter as to which
they shall have acted in good faith and in a manner they reasonably believed to
be in or not opposed to the best interest of the corporation, except that no
indemnification shall be made if such person shall have been adjudged liable to
the corporation, unless and only to the extent that the court in which the
action or suit was brought shall determine upon application that the defendant
officers or directors are reasonably entitled to indemnity for such expenses
despite such adjudication of liability. The Company's Bylaws provide that it
shall indemnify its directors, officers, employees and agents to the fullest
extent permitted by the Delaware GCL.
In addition, the Company's Certificate of Incorporation provides that to
the fullest extent permitted by the Delaware GCL, a director of the Company
shall not be liable to the Company or its stockholders for monetary damages for
breach of fiduciary duty as a director. Under the Delaware GCL, liability of a
director may not be limited (i) for any breach of the director's duty of loyalty
to the Company or its stockholders, (ii) for acts or omissions not in good faith
or that involve intentional misconduct or a knowing violation of law, (iii) in
respect of certain unlawful dividend payments or stock redemptions or
repurchases, and (iv) for any transaction from which the director derives an
improper personal benefit. The effect of this provision in the Company's
Certificate of Incorporation is to eliminate the rights of the Company and its
stockholders (through stockholders' derivative suits on behalf of the Company)
to recover monetary damages against a director for breach of the fiduciary duty
of care as a director (including breaches resulting from negligent or grossly
negligent behavior) except in the situation described in clauses (i) through
(iv) above. This provision does not limit or eliminate the rights of the Company
or any stockholders to seek non-monetary relief such as an injunction or
rescission in the event of a breach of a director's duty of care.
II-1
<PAGE> 73
Pursuant to Section 145 of the Delaware GCL, the Company maintains
directors and officers' liability insurance coverage.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
Not applicable.
ITEM 16. EXHIBITS.
(a) EXHIBITS:
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------- ------------------------------------------------------------------------------------
<C> <S>
* 1.1 Form of Underwriting Agreement.
3.1 Registrant's Amended and Restated Certificate of Incorporation filed as Exhibit 3(a)
to the Registrant's Annual Report on Form 10-K for the fiscal year ended December
31, 1992, is expressly incorporated herein by this reference.
3.2 Registrant's Bylaws and Statement of Organization of the Incorporator filed as
Exhibit 3(b) to the Registrant's Annual Report on Form 10-K for the fiscal year
ended December 31, 1992, is expressly incorporated herein by this reference.
* 5.1 Opinion and consent of McGuire, Woods, Battle & Boothe, L.L.P.
10.1 Lease dated March 17, 1992 between Registrant and Pratt Partnership filed as Exhibit
2 to Wiland Services, Inc.'s Quarterly Report on Form 10-Q for the quarter ended
March 31, 1992 (File No. 0-12967), is expressly incorporated herein by this
reference.
10.2 Amendment dated May 16, 1996 to Lease dated March 17, 1992 between Registrant and
Pratt Partnership filed as Exhibit 2 to Registrant's Quarterly Report on Form 10-Q
for the quarter ended June 30, 1996, is expressly incorporated herein by this
reference.
10.3 Real Estate Contract and Purchase and Sale Agreement dated March 20, 1996 between
Registrant and Richard B. Norton filed as Exhibit 1 to Registrant's Quarterly Report
on Form 10-Q for the quarter ended March 31, 1996, is expressly incorporated herein
by this reference.
10.4 First amendment dated May 10, 1996 to Purchase and Sale Agreement dated March 20,
1996 between Registrant and Richard B. Norton filed as Exhibit 1 to Registrant's
Quarterly Report on Form 10-Q for the quarter ended June 30, 1996, is expressly
incorporated herein by this reference.
10.5 Second amendment dated November 26, 1996 to Purchase and Sale Agreement dated March
20, 1996 between Registrant and Richard B. Norton filed as Exhibit 10(e) to
Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1996,
is expressly incorporated herein by this reference.
10.6 Contract between Registrant and Intergroup, Inc. as Architect for the Provision of
Architectural Services, dated September 4, 1996, in connection with the design of a
new facility for Registrant in Longmont, Colorado filed as Exhibit 10(h) to
Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1996,
is expressly incorporated herein by this reference.
10.7 Registrant's amended Profit Sharing Plan, reflecting an amendment under Section
401(k) of the Internal Revenue Code dated May 31, 1985 filed as Exhibit 10(1) to
Wiland Services, Inc.'s Annual Report on Form 10-K for the fiscal year ended
December 31, 1985 (File No. 0-12967), is expressly incorporated herein by this
reference.
10.8 Registrant's 1997 Incentive Compensation Plan for officers of the Registrant filed
as Exhibit 10(j) to Registrant's Annual Report on Form 10-K for the fiscal year
ended December 31, 1996, is expressly incorporated herein by this reference.
10.9 Registrant's 1992 Stock Option Plan filed as Exhibit A to Registrant's definitive
proxy statement dated June 29, 1993 for the Annual Meeting of Shareholders held on
July 30, 1993, is expressly incorporated herein by this reference.
</TABLE>
II-2
<PAGE> 74
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------- ------------------------------------------------------------------------------------
<C> <S>
10.10 Registrant's 1992 Non-Employee Directors Stock Option Plan filed as Exhibit B to the
Registrant's definitive proxy statement dated June 29, 1993 for the Annual Meeting
of Shareholders held on July 30, 1993, is expressly incorporated herein by this
reference.
*10.11 Standard Form of Agreement between Registrant and Saunders Construction, Inc. as
Contractor, dated May 1, 1997, in connection with construction of a new facility for
Registrant in Longmont, Colorado.
*10.12 Loan Agreement between Registrant and Bank One, Colorado, N.A. as lender, dated May
1, 1997, in connection with a $3.7 million credit facility.
*23.1 Consent of Ernst & Young, LLP.
*23.2 Consent of McGuire, Woods, Battle & Boothe, L.L.P. (included in Exhibit 5.1).
+24.1 Powers of Attorney.
</TABLE>
- ---------------
+ Previously filed.
* Filed herewith.
(b) FINANCIAL STATEMENT SCHEDULES
The following financial statement schedules of Concepts Direct, Inc. are
filed herewith:
Schedule II -- Valuation and Qualifying Accounts
All other schedules are omitted because they are not required, they are not
applicable or the information is already included in the financial statements or
notes thereto.
ITEM 17. UNDERTAKINGS.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933, as amended (the "Securities Act") may be permitted to directors,
officers and controlling persons of the registrant pursuant to the foregoing
provisions, or otherwise, the registrant has been advised that in the opinion of
the Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act and is, therefore, unenforceable. In
the event that a claim for indemnification against such liabilities (other than
the payment by the registrant of expenses incurred or paid by a director,
officer or controlling person of the registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the registrant will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-3
<PAGE> 75
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-1 and has duly caused this Amendment No. 1 to
the registration statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Longmont, State of Colorado, on June
3, 1997.
CONCEPTS DIRECT, INC.
By: /s/ PHILLIP A. WILAND
------------------------------------
Phillip A. Wiland
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the registration statement has been signed on June 3, 1997 by the
following persons in the respective capacities indicated opposite their names.
<TABLE>
<CAPTION>
SIGNATURE TITLE
- ----------------------------------------------- --------------------------------------------
<C> <S>
/s/ PHILLIP A. WILAND Chief Executive Officer and Chairman of the
- ----------------------------------------------- Board Principal Executive Officer
Phillip A. Wiland
/s/ MICHAEL T. BUONCRISTIANO* Director
- -----------------------------------------------
Michael T. Buoncristiano
/s/ ROBERT L. BURRUS, JR.* Director
- -----------------------------------------------
Robert L. Burrus, Jr.
/s/ STEPHEN R. POLK* Director
- -----------------------------------------------
Stephen R. Polk
/s/ PHILLIP D. WHITE* Director
- -----------------------------------------------
Phillip D. White
/s/ H. FRANKLIN MARCUS, JR. Secretary/Treasurer
- ----------------------------------------------- Chief Financial Officer
H. Franklin Marcus, Jr. Principal Financial and Accounting Officer
*By: /s/ H. FRANKLIN MARCUS, JR.
- -----------------------------------------------
H. Franklin Marcus, Jr.
Attorney-in-fact
</TABLE>
II-4
<PAGE> 76
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
CONCEPTS DIRECT, INC.
YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
COL. C COL. D
COL. B CHARGED CHARGED TO COL. F
BALANCE AT (CREDITED) OTHER COL. E BALANCE AT
COL. A BEGINNING TO COSTS ACCOUNTS -- DEDUCTIONS END
DESCRIPTION OF PERIOD AND EXPENSES DESCRIBE DESCRIBE OF PERIOD
- -------------------------------------- ---------- ------------ ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Year Ended December 31, 1996
Deducted from asset accounts:
Allowance for doubtful
accounts....................... $ 18,078 $ 23,000 $ -- $ (78)(a) $ 41,000
Allowance for inventory
obsolescence................... 691,542 41,721 -- (333,263)(b) 400,000
---------- ------------ ---------- ---------- ----------
Totals deducted from asset
accounts....................... $ 709,620 $ 64,721 $ -- $ (333,341) $ 441,000
---------- ------------ ---------- ---------- ----------
Product warranty liability.......... $ 383,084 $ (128,840) $ -- $ -- $ 254,124
======== ========== ======== ========= ========
Year Ended December 31, 1995
Deducted from asset accounts:
Allowance for doubtful
accounts....................... $ 21,130 $ (3,130) $ -- $ 78(a) $ 18,078
Allowance for inventory
obsolescence................... 761,981 32,602 -- (103,041)(b) 691,542
---------- ------------ ---------- ---------- ----------
Totals deducted from asset
accounts....................... $ 783,111 $ 29,472 $ -- $ (102,963) $ 709,620
---------- ------------ ---------- ---------- ----------
Product warranty liability.......... $ 129,111 $ 253,953 $ -- $ -- $ 383,064
======== ========== ======== ========= ========
Year Ended December 31, 1994
Deducted from asset accounts:
Allowance for doubtful
accounts....................... $ 40,000 $ (18,870) $ -- $ -- $ 21,130
Allowance for inventory
obsolescence................... 679,969 247,364 -- (165,352)(b) 761,981
---------- ------------ ---------- ---------- ----------
Totals deducted from asset
accounts....................... $ 719,969 $ 228,494 $ -- $ (165,352) $ 783,111
---------- ------------ ---------- ---------- ----------
Product warranty liability.......... $ 92,718 $ 36,393 $ -- $ -- $ 129,111
======== ========== ======== ========= ========
</TABLE>
- ---------------
(a) Uncollectible accounts written off, net of recoveries.
(b) Inventory written off, net of recoveries.
<PAGE> 77
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- --------------------------------------------------------------------------------
<S> <C>
* 1.1 Form of Underwriting Agreement.
3.1 Registrant's Amended and Restated Certificate of Incorporation filed as Exhibit
3(a) to the Registrant's Annual Report on Form 10-K for the fiscal year ended
December 31, 1992, is expressly incorporated herein by this reference.
3.2 Registrant's Bylaws and Statement of Organization of the Incorporator filed as
Exhibit 3(b) to the Registrant's Annual Report on Form 10-K for the fiscal year
ended December 31, 1992, is expressly incorporated herein by this reference.
* 5.1 Opinion and consent of McGuire, Woods, Battle & Boothe, L.L.P.
10.1 Lease dated March 17, 1992 between Registrant and Pratt Partnership filed as
Exhibit 2 to Wiland Services, Inc.'s Quarterly Report on Form 10-Q for the
quarter ended March 31, 1992 (File No. 0-12967), is expressly incorporated
herein by this reference.
10.2 Amendment dated May 16, 1996 to Lease dated March 17, 1992 between Registrant
and Pratt Partnership filed as Exhibit 2 to Registrant's Quarterly Report on
Form 10-Q for the quarter ended June 30, 1996, is expressly incorporated herein
by this reference.
10.3 Real Estate Contract and Purchase and Sale Agreement dated March 20, 1996
between Registrant and Richard B. Norton filed as Exhibit 1 to Registrant's
Quarterly Report on Form 10-Q for the quarter ended March 31, 1996, is expressly
incorporated herein by this reference.
10.4 First amendment dated May 10, 1996 to Purchase and Sale Agreement dated March
20, 1996 between Registrant and Richard B. Norton filed as Exhibit 1 to
Registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 1996,
is expressly incorporated herein by this reference.
10.5 Second amendment dated November 26, 1996 to Purchase and Sale Agreement dated
March 20, 1996 between Registrant and Richard B. Norton filed as Exhibit 10(e)
to Registrant's Annual Report on Form 10-K for the fiscal year ended December
31, 1996, is expressly incorporated herein by this reference.
10.6 Contract between Registrant and Intergroup, Inc. as Architect for the Provision
of Architectural Services, dated September 4, 1996, in connection with the
design of a new facility for Registrant in Longmont, Colorado filed as Exhibit
10(h) to Registrant's Annual Report on Form 10-K for the fiscal year ended
December 31, 1996, is expressly incorporated herein by this reference.
10.7 Registrant's amended Profit Sharing Plan, reflecting an amendment under Section
401(k) of the Internal Revenue Code dated May 31, 1985 filed as Exhibit 10(1) to
Wiland Services, Inc.'s Annual Report on Form 10-K for the fiscal year ended
December 31, 1985 (File No. 0-12967), is expressly incorporated herein by this
reference.
10.8 Registrant's 1997 Incentive Compensation Plan for officers of the Registrant
filed as Exhibit 10(j) to Registrant's Annual Report on Form 10-K for the fiscal
year ended December 31, 1996, is expressly incorporated herein by this
reference.
10.9 Registrant's 1992 Stock Option Plan filed as Exhibit A to Registrant's
definitive proxy statement dated June 29, 1993 for the Annual Meeting of
Shareholders held on July 30, 1993, is expressly incorporated herein by this
reference.
</TABLE>
<PAGE> 78
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- --------------------------------------------------------------------------------
<C> <S>
10.10 Registrant's 1992 Non-Employee Directors Stock Option Plan filed as Exhibit B to
the Registrant's definitive proxy statement dated June 29, 1993 for the Annual
Meeting of Shareholders held on July 30, 1993, is expressly incorporated herein
by this reference.
*10.11 Standard Form of Agreement between Registrant and Saunders Construction, Inc. as
Contractor, dated May 1, 1997, in connection with construction of a new facility
for Registrant in Longmont, Colorado.
*10.12 Loan Agreement between Registrant and Bank One, Colorado, N.A. as lender, dated
May 1, 1997, in connection with a $3.7 million credit facility.
*23.1 Consent of Ernst & Young, LLP.
*23.2 Consent of McGuire, Woods, Battle & Boothe, L.L.P. (included in Exhibit 5.1).
+24.1 Powers of Attorney.
</TABLE>
- ---------------
+ Previously filed.
* Filed herewith.
<PAGE> 1
EXHIBIT 1.1
- -------------------------------------------------------------------------------
1,840,000 SHARES
CONCEPTS DIRECT, INC.
COMMON STOCK
JUNE __, 1997
UNDERWRITING AGREEMENT
EVEREN SECURITIES, INC.
&
SCOTT & STRINGFELLOW, INC.
- -------------------------------------------------------------------------------
<PAGE> 2
1,840,000 Shares
Concepts Direct, Inc.
Common Stock
($.10 par value)
UNDERWRITING AGREEMENT
June __, 1997
EVEREN Securities, Inc.
Scott & Stringfellow, Inc.
As Representatives of
the Several Underwriters
c/o EVEREN Securities, Inc.
77 West Wacker Drive
Chicago, Illinois 60601-1994
Ladies and Gentlemen:
Concepts Direct, Inc., a Delaware corporation (the "Company"), and the
stockholders of the Company set forth on Schedule I hereto (collectively
referred to as the "Selling Stockholders"), confirm their agreement with each
other and the several underwriters listed in Schedule II hereto (the
"Underwriters"), for whom EVEREN Securities, Inc. and Scott & Stringfellow,
Inc. (collectively, the "Representatives") have been duly authorized to act as
representatives, as follows:
1. The Shares. Subject to the terms and conditions set forth in this
agreement (the "Agreement"), the Company proposes to issue and sell Four Hundred
Seventy-One Thousand, Four Hundred and Four (471,404) shares of its authorized
but unissued Common Stock, $.10 par value (the "Common Stock"), to the several
Underwriters, and the Selling Stockholders propose
1
<PAGE> 3
to sell an aggregate of One Million One Hundred Twenty-Eight Thousand, Five
Hundred Ninety-Six (1,128,596) shares of issued and outstanding Common Stock to
the several Underwriters in the amounts set forth on Schedule II. Such One
Million Six Hundred Thousand (1,600,000) shares of Common Stock proposed to be
sold by the Company and the Selling Stockholders are hereinafter referred to as
the "Firm Shares." The Company also proposes to grant to the Underwriters an
option to purchase up to Two Hundred Forty Thousand (240,000) additional shares
of Common Stock (the "Additional Shares") if requested by the Underwriters as
provided in Section 3 hereof. The Firm Shares and the Additional Shares are
herein collectively called the "Shares."
The Company and each of the Selling Stockholders hereby confirm their
respective agreements with the Underwriters as follows:
2. Registration Statement and Prospectus. The Company has prepared and
duly filed with the Securities and Exchange Commission (the "Commission") in
accordance with the provisions of the Securities Act of 1933, as amended, and
the rules and regulations of the Commission thereunder (collectively, the
"Act"), a registration statement on Form S-1 (File No. 333-26133) including a
prospectus, relating to the Shares. To the extent the registration statement
has been amended, each such amendment has been prepared and duly filed with the
Commission. The registration statement, as amended, at the time when it became
or becomes effective, including all financial schedules and exhibits thereto
and all of the information (if any) deemed to be part of the registration
statement at the time of its effectiveness pursuant to Rule 430A under the Act
("Rule 430A"), is hereinafter referred to as the "Registration Statement"; the
prospectus in the form first provided to the Underwriters by the Company in
connection with the offering and sale of the Shares (whether or not required to
be filed pursuant to Rule 424(b) under the Act ("Rule 424(b)")) is hereinafter
referred to as the "Prospectus," except that if any revised prospectus shall be
provided to the Underwriters by the Company for use in connection with the
offering of the Shares that differs from the Prospectus (whether or not any
such revised prospectus is required to be filed by the Company pursuant to Rule
424(b) under the Act), the term "Prospectus" shall refer to the revised
prospectus from and after the time it is first provided to the Underwriters for
such use. Each preliminary prospectus included in the Registration Statement
prior to the time it became or becomes effective is herein referred to as a
"Preliminary Prospectus."
3. Agreements to Sell and Purchase. On the basis of the representations
and warranties contained in this Agreement, and subject to the terms and
conditions hereof, (i) the Company agrees to issue and sell to the
Underwriters, at a price of $_____ per Share (the "Purchase Price"), Four
Hundred Seventy-One Thousand, Four Hundred and Four (471,404) newly issued Firm
Shares, (ii) each Selling Stockholder agrees to sell to the Underwriters, at
the Purchase Price, the number of Firm Shares set forth next to such Selling
Stockholder's name on Schedule I; and (iii) each Underwriter agrees, severally
and not jointly, to purchase from the Company and the Selling Stockholders, at
the Purchase Price, the aggregate number of Firm Shares set forth opposite the
name of such Underwriter in Schedule II hereto. The number of Firm Shares to
be purchased by each Underwriter from the Company and each Selling Stockholder
shall be as nearly as practicable in the same proportion as the number of Firm
Shares
2
<PAGE> 4
being sold by the Company and each Selling Stockholder bears to the total number
of Firm Shares to be sold hereunder.
On the basis of the representations and warranties contained in this
Agreement, and subject to the terms and conditions hereof, (i) the Company
agrees to sell to the Underwriters, at the Purchase Price, up to Two Hundred
Forty Thousand (240,000) Additional Shares; and (ii) the Underwriters shall
have the right to purchase, severally and not jointly, from time to time, up to
an aggregate of Two Hundred Forty Thousand (240,000) Additional Shares at the
Purchase Price. Additional Shares may be purchased as provided in Section 4
hereof solely for the purpose of covering over-allotments made in connection
with the offering of the Firm Shares. If any Additional Shares are to be
purchased, each Underwriter, severally and not jointly, agrees to purchase the
number of Additional Shares (subject to such adjustments to eliminate
fractional shares as the Representatives may determine) that bears the same
proportion to the total number of Additional Shares to be purchased as the
number of Firm Shares set forth opposite the name of such Underwriter in
Schedule II bears to the total number of Firm Shares.
For a period of 12 months from the date this Agreement becomes effective,
the Company covenants and agrees that it will not, without the prior written
consent of EVEREN Securities, Inc. on behalf of the Underwriters (1) offer,
pledge, sell, contract to sell, sell any option or contract to purchase,
purchase any option or contract to sell, grant any option, right or warrant to
purchase, or otherwise transfer or dispose of, directly or indirectly, any
shares of Common Stock or any securities convertible into or exercisable or
exchangeable for Common Stock, or (2) enter into any swap or other agreement
that transfers, in whole or in part, any of the economic consequences of
ownership of any shares of Common Stock, whether any such transaction described
in clause (1) or (2) above is to be settled by delivery of Common Stock or other
securities, in cash or otherwise; provided, however, that this clause shall not
apply to the transactions expressly contemplated by this Agreement or the
granting of options to purchase shares of Common Stock to the Company's
directors and employees pursuant to the exercise of options under the 1992
Non-Employee Directors Stock Option Plan or the 1992 Employee Stock Option Plan
(collectively, the "Option Plans").
For a period of 12 months from the date this Agreement becomes effective,
the Company covenants and agrees that it will not, without the prior written
consent of EVEREN Securities, Inc. on behalf of the Underwriters, file a
registration statement relating to shares of capital stock (including the
Common Stock) or securities convertible into or exercisable or exchangeable
for, capital stock, or warrants, options or rights to purchase or acquire,
capital stock, with the exception of the filing of Registration Statements on
Form S-8 with respect to the Option Plans.
For a period of 12 months from the date this Agreement becomes effective,
each Selling Stockholder covenants and agrees that such Selling Stockholder
will not, without the prior written consent of EVEREN Securities, Inc. on
behalf of the Underwriters (1) offer, pledge, sell, contract to sell, sell any
option or contract to purchase, purchase any option or contract to sell, grant
any option, right or warrant to purchase, or otherwise transfer or dispose of,
directly or indirectly, any shares of Common Stock or any securities
convertible into or exercisable or exchangeable for Common Stock, or (2) enter
into any swap or other agreement that transfers, in
3
<PAGE> 5
whole or in part, any of the economic consequences of ownership of the Common
Stock, whether any such transaction described in clause (1) or (2) above is to
be settled by delivery of Common Stock or other securities, in cash or
otherwise; provided, however, that this clause shall not apply to the
transactions expressly contemplated by this Agreement or to transfers of Common
Stock to partnerships, limited liability companies, trusts or similar entities
organized for the exclusive benefit of family members of Selling Stockholders
for financial and estate planning purposes so long as any transferee that
receives Common Stock as a result of such transfer shall agree upon such
transfer to be bound by the terms of this paragraph and shall be capable of
being so bound.
4. Agreements of the Company as to Delivery and Payment. The Company and
Selling Stockholders agree with each Underwriter that:
(a) Delivery to the Underwriters of and payment for the Firm Shares
shall be made at 10:00 A.M., New York City time, on the third full
business day (such time and date being referred to as the "Closing Date")
following the date of the initial public offering of the Firm Shares as
advised to you by the Company, at such place as you shall designate.
(b) Delivery to the Underwriters of and payment for any Additional
Shares to be purchased by the Underwriters shall be made at such place as
the Representatives shall designate, at 10:00 A.M., New York City time,
on such date or dates (individually, an "Option Closing Date" and
collectively, the "Option Closing Dates"), which may be the same as the
Closing Date but shall in no event be earlier than the Closing Date, as
shall be specified in a written notice from the Representatives to the
Company of the Underwriters' determination to purchase a number,
specified in said notice, of Additional Shares. Any such notice may be
given at any time prior to the thirty-first (31st) day after the date of
this Agreement.
(c) Certificates for the Shares shall be registered in such names
and issued in such denominations as you shall request in writing not
later than two business days prior to the Closing Date or the applicable
Option Closing Date, as the case may be, and shall be made available for
inspection not later than 9:30 A.M., New York City time, on the business
day next preceding the Closing Date or the applicable Option Closing
Date, as the case may be, with any transfer taxes payable upon initial
issuance or the transfer thereof duly paid by the Company for the
respective accounts of the Underwriters against payment of the Purchase
Price therefor by certified or official bank check or checks payable in
New York Clearing House or similar next-day funds to the order of the
Company and the Selling Stockholders.
5. Further Agreements of the Company. The Company also agrees with each
Underwriter that:
(a) it will, if the Registration Statement has not heretofore become
effective under the Act, file an amendment to the Registration Statement
or, if necessary pursuant to Rule 430A under the Act, a post-effective
amendment to the Registration Statement, as soon as practicable after the
execution and delivery of this Agreement, and will use its best
4
<PAGE> 6
efforts to cause the Registration Statement or such post-effective
amendment to become effective at the earliest possible time; and the
Company will comply fully and in a timely manner with the applicable
provisions of Rule 424(b), Rule 430A and the other rules under the Act;
(b) it will advise you promptly and, if requested by you, confirm
such advice in writing, (i) when the Registration Statement has become
effective, if and when the Prospectus is sent for filing pursuant to Rule
424 under the Act and when any post-effective amendment to the
Registration Statement becomes effective, (ii) of the receipt of any
comments from the Commission that relate to the Registration Statement or
requests by the Commission for amendments to the Registration Statement
or amendments or supplements to the Prospectus or for additional
information, (iii) of the issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement, or of the
suspension of qualification of the Shares for offering or sale in any
jurisdiction, or the initiation or, to the best knowledge of the Company,
threat of any proceedings for such purpose by the Commission or any state
securities commission or other regulatory authority, and (iv) of the
happening of any event or information becoming known during the period
referred to in paragraph (e) below that makes any statement of a material
fact made in the Registration Statement untrue or that requires the
making of any additions to or changes in the Registration Statement (as
amended or supplemented from time to time) in order to make the
statements therein not misleading or that makes any statement of a
material fact made in the Prospectus (as amended or supplemented from
time to time) untrue or that requires the making of any additions to or
changes in the Prospectus (as amended or supplemented from time to time)
in order to make the statements therein, not misleading; if at any time
the Commission shall issue or institute proceedings (or threaten to
institute any such proceedings) to issue any stop order suspending the
effectiveness of the Registration Statement, or any state securities
commission or other regulatory authority shall issue or institute
proceedings (or threaten to institute proceedings) to issue an order
suspending the qualification or exemption of the Shares under any state
securities or Blue Sky laws, the Company shall use its best efforts to
obtain the withdrawal or lifting of such order at the earliest possible
time;
(c) it will furnish to you without charge three signed copies of the
Registration Statement as first filed with the Commission and of each
amendment to it, including all exhibits filed therewith, and will furnish
to you and each Underwriter designated by you such number of conformed
copies of the Registration Statement as so filed and of each amendment to
it, without exhibits, as you may reasonably request;
(d) it will not file any amendment or supplement to the Registration
Statement, whether before or after the time when it becomes effective, or
make any amendment or supplement to the Prospectus of which you shall not
previously have been advised and provided a copy a reasonable period of
time prior to the filing thereof or to which you or your counsel shall
reasonably object; and it will prepare and file with the Commission,
promptly upon your reasonable request, any amendment to the Registration
Statement or supplement to the Prospectus that may be necessary or
advisable in connection with the
5
<PAGE> 7
distribution of the Shares by you in your or your counsel's
opinion, and will use its best efforts to cause the same to become
effective as promptly as possible;
(e) promptly after the Registration Statement becomes effective, and
from time to time thereafter for such period as a prospectus is required
by the Act to be delivered in connection with the sales by an underwriter
or a dealer (in the opinion of your counsel), it will furnish to each
Underwriter and dealer without charge as many copies of the Prospectus
(and any amendment or supplement of the Prospectus) as such Underwriter
or dealer may reasonably request for the purposes contemplated by the
Act; the Company consents to the use of the Prospectus and any amendment
or supplement thereto by any Underwriter or any dealer, both in
connection with the offering or sale of the Shares and for such period of
time thereafter as the Prospectus is required by the Act to be delivered
in connection therewith;
(f) if during the period specified in paragraph (e) any event shall
occur or information become known as a result of which in the opinion of
your counsel it becomes necessary to amend or supplement the Prospectus in
order to make the statements therein, in light of the circumstances
existing as of the date the Prospectus is delivered to a purchaser, not
misleading, or it is necessary to amend or supplement the Prospectus to
comply with any law, forthwith to prepare and, subject to paragraph 5(d)
above, it will file with the Commission at the sole expense of the Company
an appropriate amendment or supplement to the Prospectus so that the
statements of any material facts in the Prospectus, as so amended and
supplemented, will not in light of the circumstances when it is so
delivered, be misleading, or so that the Prospectus will comply with law
and it will furnish to the Underwriters and to such dealers as the
Underwriters shall specify, at the sole expense of the Company, such
number of copies thereof as such Underwriters or dealers may reasonably
request;
(g) prior to any public offering of the Shares, it will cooperate
with you and counsel for the Underwriters in connection with the
registration or qualification of the Shares for offer and sale by the
several Underwriters and by dealers under the state securities or Blue
Sky laws of such jurisdictions as you may request (provided, that the
Company shall not be obligated to qualify as a foreign corporation in any
jurisdiction in which it is not so qualified or to take any action which
would subject it to general consent to service of process in any
jurisdiction in which it is not now so subject); the Company will
continue such qualification in effect so long as required by law for the
distribution of the Shares and will file such consents to service of
process or other documents as may be necessary in order to effect such
registration or qualification (provided, that the Company shall not be
obligated to take any action that would subject it to general consent to
service of process in any jurisdiction in which it is not now so
subject);
(h) it will not, prior to the exercise in full or termination or
expiration of the option to purchase the Additional Shares, incur any
liability or obligation, direct or contingent, or enter into any material
transaction, other than in the ordinary course of business, except as
contemplated by the Prospectus and except for the long term credit
agreements currently being negotiated by the Company with Bank One;
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<PAGE> 8
(i) it will not acquire any capital stock of the Company prior to
the exercise in full or termination or expiration of the option to
purchase the Additional Shares nor will the Company declare or pay any
dividend or make any other distribution upon the Common Stock payable to
stockholders of record on a date prior to the exercise in full or
termination or expiration of the option to purchase the Additional
Shares;
(j) it will mail and make generally available to its security
holders and furnish to the Underwriters as soon as reasonably practicable
a consolidated earnings statement covering a period of at least 12 months
beginning after the "effective date" (as defined in Rule 158 under the
Act) of the Registration Statement (but in no event commencing later than
90 days after such date) that will satisfy the provisions of Section
11(a) of the Act and Rule 158 thereunder and to advise you in writing
when such statement has been made so available;
(k) during the period of five years after the date of this
Agreement, it will furnish to you a copy (i) as soon as practicable after
the filing thereof, of each report filed by the Company with the
Commission, any securities exchange or the National Association of
Securities Dealers, Inc. ("NASD"); (ii) as soon as practicable after the
release thereof, of each press release relating to the Company; (iii) as
soon as available, of each report of the Company mailed to stockholders;
and (iv) as soon as available, such other publicly available information
concerning the Company as you may reasonably request;
(l) whether or not the transactions contemplated hereby are
consummated or this Agreement becomes effective as to all of its
provisions or is terminated, to pay all costs, fees, expenses and taxes
incident to the performance by the Company of its obligations hereunder,
including (i) the preparation, printing, filing and distribution under
the Act of the Registration Statement (including financial statements and
exhibits), each preliminary Prospectus and all amendments and supplements
to any of them prior to or during the period specified in paragraph (e)
above of this Section 5, (ii) the word processing, reproduction and
distribution of this Agreement, the Blue Sky Survey and any other
agreements, memoranda, correspondence and other documents prepared and
delivered by the Underwriters or their counsel in connection with the
offering of the Shares (including in each case any disbursements of
counsel for the Underwriters relating to such preparation and delivery),
(iii) the registration or qualification of the Shares for offer and sale
under the securities or Blue Sky laws of the several states, including in
each case the fees and disbursements of counsel for the Underwriters,
relating to such registration or qualification and memoranda relating
thereto, (iv) filings and clearance with the NASD in connection with the
offering and sale of the Shares, (v) the approval for quotation of the
Shares on the Nasdaq National Market, (vi) furnishing such copies of the
Registration Statement, each Preliminary Prospectus, the Prospectus and
all amendments and supplements thereto as may be requested for use in
connection with the offering or sale of the Shares by the Underwriters or
by dealers to whom the Shares may be sold, (vii) obtaining the opinions to
be provided pursuant to Section 8(g) of this Agreement and (viii) the
performance by the Company of all of its other obligations under this
Agreement; if the sale of the Shares provided for herein is not
consummated because the Underwriters
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<PAGE> 9
exercise their right to terminate this Agreement pursuant to Section 9
hereof and any of the following have occurred during the term of this
Agreement: (a) there has been any material adverse change in the condition
(financial or otherwise), earnings, affairs, business or prospects of the
Company, or (b) the Company or any of the Selling Stockholders shall
refuse or be unable to comply with any provision hereof (except as the
result of a breach of this Agreement by the Underwriters), the Company
will promptly reimburse the Underwriters upon demand for all reasonable
out-of-pocket expenses (including the fees and disbursements of counsel
for the Underwriters) that shall have been incurred by the Underwriters in
connection with the proposed purchase and sale of Shares;
(m) it intends to use the net proceeds received by it from the sale
of the Shares being sold by it in the manner specified in the Prospectus
and it will file such reports with the Commission with respect to the
application of the proceeds therefrom as may be required in accordance
with Rule 463 under the Act and will furnish you copies of any such
reports as soon as practicable after the filing thereof;
(n) if, at the time of effectiveness of the Registration Statement,
any information shall have been omitted therefrom in reliance upon Rule
430A, then immediately following the execution and delivery of this
Agreement, it will prepare, and file or transmit for filing with the
Commission in accordance with such Rule 430A and Rule 424(b), copies of
an amended prospectus, or, if required by such Rule 430A, a
post-effective amendment to the Registration Statement (including an
amended prospectus), containing all information so omitted;
(o) it will cause the Shares to be approved for quotation, subject
to notice of issuance or sale, on the Nasdaq National Market; it will
comply with all registration, filing and reporting requirements of the
Securities Exchange Act of 1934, as amended, (the "Exchange Act") and the
Nasdaq National Market; and
(p) it will use its best efforts to do and perform all things
required to be done and performed under this Agreement by it prior to or
after the Closing Date or any Option Closing Date, as the case may be,
and to satisfy all conditions precedent to the delivery of the Shares.
6. Representations and Warranties.
(a) The Company represents and warrants, and the Selling
Stockholders severally and not jointly represent and warrant, to each
Underwriter as of the date hereof, the Closing Date and each Option
Closing Date that:
(i) the Commission has not issued any order preventing or
suspending the use of any Preliminary Prospectus relating to the
proposed offering of the Shares nor instituted or threatened any
proceedings for that purpose. The Registration Statement, on the
date it became or becomes effective, each Preliminary Prospectus,
on the date of the filing
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<PAGE> 10
thereof with the Commission, and the Prospectus and any amendment or
supplement thereto, on the date of filing thereof with the
Commission (or if not filed, on the date provided by the Company to
the Underwriters in connection with the offering and sale of the
Shares) and at the Closing Date and each Option Closing Date
conformed or will conform with the requirements of the Act and the
rules and regulations promulgated thereunder ("Rules and
Regulations"); the Registration Statement, on the date it became or
becomes effective, did not or will not contain an untrue statement
of material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not
misleading; each Preliminary Prospectus, on the date of the filing
thereof with the Commission, and the Prospectus and any amendment or
supplement thereto, on the date of filing thereof with the
Commission (or if not filed, on the date provided by the Company to
the Underwriters in connection with the offering and sale of the
Shares) and at the Closing Date and each Option Closing Date did not
and will not include an untrue statement of material fact or omit to
state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under
which they were made, not misleading; the foregoing shall not apply
to statements in or omissions from the Registration Statement and
the Prospectus made or omitted in reliance upon, and in conformity
with, information relating to the Underwriters furnished in writing
to the Company by or on behalf of the Underwriters with your consent
expressly for use therein; the Company and the Selling Stockholders
hereby acknowledge for all purposes under this Agreement that (A)
the statements set forth under the caption "Underwriting" in the
Prospectus, (B) the stabilization and passive market making legends
on the gate-fold of the Prospectus and (C) footnotes 1 and 3 and the
last paragraph of text on the cover page of the Prospectus
constitute the only written information furnished to the Company by
or on behalf of the Underwriters for use in the preparation of the
Registration Statement or the Prospectus or any amendment or
supplement thereto;
(ii) the Company has no subsidiaries and has never had a
subsidiary; the Company has been duly incorporated and is a validly
existing corporation in good standing under the laws of Delaware,
with full corporate power and authority to own or lease its
properties and assets and to conduct its business as described in
the Registration Statement and the Prospectus and is duly qualified
to do business in each jurisdiction in which it owns or leases real
property or in which the conduct of its business or the ownership
or leasing of property requires such qualification, except where
the failure to be so qualified, either individually or in the
aggregate, would not have a material adverse effect on the
condition (financial or otherwise), business, assets, prospects,
net worth or results of operations of the Company taken as a whole
(a "Material Adverse Effect");
(iii) the capitalization of the Company is, and upon
consummation of the transactions contemplated hereby and by the
Prospectus will be, as set forth in the Registration Statement and
the Prospectus under the caption "Capitalization;" all of the
outstanding shares of capital stock of the Company have been duly
authorized and are validly issued, are fully paid and non-assessable
and conform to the description thereof in the Registration Statement
and the Prospectus and were
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<PAGE> 11
not issued in violation of any preemptive rights or other rights to
subscribe for or purchase securities; and, except as set forth in
the Registration Statement and the Prospectus with respect to the
Option Plans, no options, warrants or other rights to purchase from
the Company, agreements or other obligations of the Company to issue
or other rights to convert any obligation into, or exchange any
securities for, shares of capital stock of or ownership interests in
the Company are outstanding; the description of the Company's 1992
Stock Option Plan and the other options or rights granted and
exercised thereunder, as set forth in the Registration Statement and
the Prospectus, accurately and fairly presents the information
required to be shown under the Act with respect to such options and
rights;
(iv) subsequent to the respective dates as of which
information is given in the Registration Statement and Prospectus,
and except as described therein, (A) the Company has not incurred
any material liabilities or obligations, direct or contingent, or
entered into any material transactions not in the ordinary course
of business, (B) the Company has not purchased any of its
outstanding capital stock or declared, paid or otherwise made any
dividend or distribution of any kind on its capital stock or
otherwise and (C) there has not been any material adverse change in
the Company's condition (financial or otherwise), business,
affairs, prospects or results of operations or any material change
in the Company's capital stock, short-term debt or long-term debt;
(v) the Shares to be sold by the Company pursuant to this
Agreement have been duly and validly authorized and, when issued,
delivered and paid for pursuant to this Agreement, will be validly
issued, fully paid and nonassessable, and will conform to the
description thereof contained in the Prospectus;
(vi) this Agreement has been duly authorized, executed and
delivered by the Company and is a legal, valid and binding
agreement of the Company enforceable in accordance with its terms,
except (i) as enforceability thereof may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws
affecting creditors' rights generally and by general equity
principles and (ii) that rights to indemnity or contribution
hereunder may be limited by Federal or state securities laws or the
public policy underlying such laws;
(vii) the Company is not in violation of its Certificate of
Incorporation or by-laws; the Company is not in violation of or in
breach of or in default in (nor has any event occurred that with
notice or lapse of time, or both, would be a breach of or a default
in) the performance of any obligation, agreement or condition
contained in any agreement, lease, contract, permit, license,
franchise agreement, mortgage, loan agreement, debenture, note,
deed of trust, bond, indenture or other evidence of indebtedness or
any other instrument or obligation (collectively, "Obligations and
Instruments") to which the Company is a party or by which the
Company or any of its properties or assets is bound or affected
(except for such contravention or default as would not have a
Material Adverse Effect); the
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<PAGE> 12
Company is not in violation of any statute, judgment, decree, order,
Rule or regulation (collectively, "Laws") applicable to the Company
or any of its properties or assets that, alone, or together with
other violations of Laws would result in a Material Adverse Effect;
and, to the best knowledge of the Company, no other party under any
contract or other agreement to which the Company is a party is in
material default thereunder except for such defaults as would not
individually or in the aggregate result in a Material Adverse
Effect;
(viii) the execution, delivery and performance of this
Agreement and delivery of the Shares by the Company and compliance
by the Company with all the provisions hereof and the consummation
of the transactions contemplated hereby and as described in the
Prospectus will not, alone or upon notice or the passage of time or
both (A) require any consent, approval, authorization or other order
of any court, regulatory body, administrative agency or other
governmental body or third party (except such as may be required
under the Act and the securities or Blue Sky laws of the various
states or by the NASD), (B) result in the creation or imposition of
any lien, charge or encumbrance upon any of the properties or assets
of the Company pursuant to the terms and provisions of any
Obligation or Instrument, (C) conflict with or constitute a breach
or default under any Obligation or Instrument to which the Company
is a party or by which the Company or any of its properties or
assets is bound, (except for such creation, conflict, breach or
default as would not have a Material Adverse Effect), or (D)
assuming compliance with the Act and all applicable state securities
or Blue Sky laws, violate or conflict with any Laws applicable to
the Company or any of its properties or assets (except for such
violation or conflict as could not have a Material Adverse Effect);
no action, suit or proceeding before any court or arbitrator or any
governmental body, agency or official (domestic or foreign) is
pending against or, to the knowledge of the Company, threatened
against the Company, that, if adversely determined, could reasonably
be expected to in any manner invalidate this Agreement;
(ix) except as set forth in the Prospectus, there is no
action, suit, proceeding, inquiry or investigation, governmental or
otherwise before any court, arbitrator or governmental agency or
body (collectively, "Proceedings") pending to which the Company is
a party or to which any of its properties or assets are subject,
that, if determined adversely to the Company, might result in a
Material Adverse Effect, or that might materially and adversely
affect the properties or assets thereof, or that seeks to restrain,
enjoin, prevent the consummation of or otherwise challenge the
issuance or sale of any of the Shares to be sold hereunder or the
consummation of the transactions described in the Prospectus and, to
the best knowledge of the Company after due inquiry, no such
Proceedings are threatened or contemplated; and there is no
contract, document, agreement or transaction to which the Company is
a party, or that involved or involves the Company or any of its
properties or assets that are required to be described in or filed
as exhibits to the Registration Statement or the Prospectus by the
Act or the Rules and Regulations that have not been so described or
filed; no action has been
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<PAGE> 13
taken with respect to the Company, and, to the best knowledge of
the Company and the Selling Stockholders, no statute, Rule or
regulation or order has been enacted, adopted or issued by any
governmental agency that suspends the effectiveness of the
Registration Statement, prevents or suspends the use of any
Preliminary Prospectus or the Prospectus or suspends the sale of
the Shares in any jurisdiction referred to in Section 5(g) hereof;
no injunction, restraining order or order of any nature by a
federal or state court of competent jurisdiction has been issued
with respect to the Company that might prevent the issuance of the
Shares, suspend the effectiveness of the Registration Statement,
prevent or suspend the use of any Preliminary Prospectus or the
Prospectus or suspend the sale of the Shares in any jurisdiction
referred to in Section 5(g) hereof; and every request of the
Commission, or any securities authority or agency of any
jurisdiction, for additional information (to be included in the
Registration Statement or the Prospectus or otherwise) has been
complied with in all material respects;
(x) the Company has not violated any foreign, federal, state
or local law or regulation relating to the protection of human
health and safety, the environment or hazardous or toxic substances
or wastes, pollutants or contaminants ("Environmental Laws"), nor
any foreign, Federal, state or local law relating to discrimination
in the hiring, promotion or pay of employees nor any applicable
foreign, Federal or state wages and hours laws, nor any provisions
of the Employee Retirement Income Security Act of 1974, as amended
or the rules and regulations promulgated thereunder or similar
foreign laws, that, in each case or in the aggregate, might result
in a Material Adverse Effect; none of the property leased by the
Company is contaminated with any waste or hazardous substances
(except that certain leased locations may contain asbestos or
certain cleaning materials, the presence of which will not result
in a Material Adverse Effect), nor may the Company be deemed an
"owner or operator" of a "facility" or "vessel" that owns,
possesses, transports, generates, discharges or disposes of a
"hazardous substance" as those terms are defined in Section 9601 of
the Comprehensive Response Compensation and Liability Act of 1980,
U.S.C. Section 9601 et seq.;
(xi) the Company has such permits, licenses, franchises and
authorizations of governmental or regulatory authorities or third
parties ("Permits"), including, without limitation, under any
applicable Environmental Laws, as are necessary to own, lease and
operate its properties and assets and to conduct its businesses,
except where the failure to have any such Permit would not have a
Material Adverse Effect; the Company has fulfilled and performed
all of its material obligations with respect to such Permits and no
event has occurred that allows, or after notice or lapse of time,
or both would allow, revocation or termination thereof or result in
any other material impairment of the rights of the holder of any
such Permit; and except as described in the Prospectus, such
Permits contain no restrictions that are materially burdensome to
the Company;
(xii) the Company is not, and does not intend to conduct its
business in a manner in which it would become, an "investment
company" or a company
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<PAGE> 14
"controlled" by an "investment company" within the meaning of the
Investment Company Act of 1940, as amended (the "Investment Company
Act");
(xiii) except as otherwise set forth in the Prospectus, the
Company has good and marketable title, free and clear of all liens,
claims, encumbrances and restrictions (except liens for
taxes not yet due and payable) to all property and assets described
in the Registration Statement as being owned by it; all leases to
which the Company is a party are subsisting, valid and binding and
no default of the Company or, as applicable, any of the Selling
Stockholders or their respective affiliates or, to the best
knowledge of the Company and the Selling Stockholders, any other
person has occurred or is continuing thereunder that might result in
a Material Adverse Effect; and the Company enjoys peaceful and
undisturbed possession under all such leases to which the Company is
a party as lessee with such exceptions as do not materially
interfere with the use made thereof by the Company;
(xiv) the Company maintains reasonably adequate insurance for
the conduct of its business in accordance with prudent business
practices (and the insurance maintained by retailers generally)
with reputable third-party insurers;
(xv) to the best knowledge of the Company and the Selling
Stockholders, Ernst & Young LLP, the accounting firm that has
certified or reviewed, or shall certify or review, the financial
statements and supporting schedules filed or to be filed with the
Commission as part of the Registration Statement and the
Prospectus, is an independent public accounting firm with respect
to the Company as required by the Act;
(xvi) the consolidated financial statements of the Company,
together with related notes and schedules of the Company included
in the Registration Statement and the Prospectus, are accurate and
present fairly the financial position, results of operations and
cash flows of the Company at the indicated dates and for the
indicated periods; such financial statements have been prepared in
accordance with generally accepted accounting principles ("GAAP")
consistently applied throughout the periods involved, and all
adjustments necessary for a fair presentation of results for such
periods have been made and any unaudited financial statements have
been prepared on a basis substantially consistent with that of the
audited operating financial statements included in the Registration
Statement and the Prospectus; and the summary and selected
financial and operating data included in the Registration Statement
and the Prospectus presents fairly the information shown therein
and have been compiled on a basis consistent with the audited and
any unaudited financial statements, as the case may be, included
therein; and the pro forma information included in the Prospectus
present fairly the information shown therein, have been prepared in
accordance with GAAP and the Commission's rules and guidelines with
respect to pro forma financial statements and other pro forma
information, have been properly compiled on the pro forma basis
described therein, and the assumptions used in the preparation
thereof are
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<PAGE> 15
reasonable and the adjustments used therein are appropriate under
the circumstances;
(xvii) no holder of any security of the Company has any right
to require inclusion of any such security in the Registration
Statement; there are no preemptive rights with respect to the
offering being made by the Prospectus;
(xviii) except as disclosed in the Registration Statement and
the Prospectus, no labor dispute with the employees of the Company
exists, or to the best knowledge of the Company after due inquiry,
is imminent, that could result in a Material Adverse Effect; and
the Company has not received notice of any existing or imminent
labor disturbance by the employees of any of its principle
suppliers, customers, manufacturers or contractors that could
result in any Material Adverse Effect;
(xix) the Company has filed or caused to be filed, or has
properly filed extensions for, all foreign, federal, state and
local income, value added and franchise tax returns and has paid
all taxes and assessments shown thereon as due, except for such
taxes and assessments as are disclosed or adequately reserved
against and that are being contested in good faith by appropriate
proceedings, promptly instituted and diligently conducted; all
material tax liabilities are adequately provided for on the books of
the Company, and there is no material tax deficiency that has been
or might be asserted against the Company that is not so provided
for;
(xx) the Company owns or possesses, or can acquire on
reasonable terms, the patents, patent rights, licenses, inventions,
copyrights, know-how (including trade secrets and other unpatented
and or unpatentable proprietary or confidential information,
systems or procedures), trademarks, service marks and trade names
(collectively, "Patents and Proprietary Rights") currently employed
by it in connection with the business it now operates except where
the failure to so own, possess or acquire such Patents and
Proprietary Rights would not have a Material Adverse Effect; and
the Company has not received any notice and is not otherwise aware
of any infringement of or conflict with asserted rights of others
with respect to any Patent or Proprietary Rights that, if the
subject of any unfavorable decision, ruling or finding, singly or
in the aggregate, could result in a Material Adverse Effect;
(xxi) the Company has conducted, is conducting and intends to
conduct its business so as to comply in all material respects with
applicable federal, state, local and foreign government Laws,
except where the failure to comply would not have a Material
Adverse Effect; and except as set forth in the Registration
Statement and the Prospectus, the Company is not charged with or,
to the Company's knowledge after due inquiry, under investigation
with respect to, any material violation of any such Laws;
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<PAGE> 16
(xxii) the Company has not taken and will not take, directly or
indirectly, any action designed to or which has constituted or that
might reasonably be expected to cause or result, under the Exchange
Act or otherwise, in stabilization or manipulation of the price of
any security of the Company to facilitate the sale or resale of the
Shares;
(xxiii) neither the Company nor, to the best knowledge of the
Company and the Selling Stockholders, any employee or agent of the
Company has made any payment of funds of the Company or received or
retained any funds in violation of any law, Rule or regulation
(including, without limitation, the Foreign Corrupt Practices Act)
or of a character required to be disclosed in the Prospectus; the
Company has not, at any time during the past five years, (1) made
any unlawful contributions to any candidate for any political
office, or failed fully to disclose any contribution in violation
of law, or (2) made any unlawful payment to state, federal or
foreign government officer or officers, or other person charged
with similar public or quasi-public duty;
(xxiv) no transaction has occurred between or among the
Company and any of the Company's officers or directors or any
affiliate or affiliates of any such officer or director that is
required to be described in and is not described in the
Registration Statement and the Prospectus;
(xxv) other than as provided to the Underwriters under this
Agreement, the Company has not incurred any liability for finder's
or broker's fees or agent's commissions in connection with the
execution and delivery of this Agreement, the offer and sale of the
Shares or the transactions hereby contemplated;
(xxvi) the Company maintains a system of internal accounting
controls sufficient to provide reasonable assurance that (i)
transactions are executed in accordance with management's general
or specific authorizations, (ii) transactions are recorded as
necessary to permit preparation of financial statements in
conformity with GAAP and to maintain asset accountability, (iii)
access to assets is permitted only in accordance with management's
general or specific authorization, and (iv) the recorded
accountability for inventory is compared with the existing
inventory at reasonable intervals and appropriate action is taken
with respect to any differences; and
(xxvii) there is no material document of a character required
to be described in the Registration Statement or the Prospectus or
to be filed as an exhibit to the Registration Statement that is not
described or filed as required.
(b) In addition to the foregoing, the Selling Stockholders severally
and not jointly represent and warrant to, and agree with, the
Underwriters that:
(i) Such Selling Stockholder has all requisite power to enter
into this Agreement and to sell, assign, transfer and deliver to
the Underwriters the Shares
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<PAGE> 17
to be sold by such Selling Stockholder hereunder in accordance with
the terms of this Agreement. This Agreement has been duly executed
and delivered by such Selling Stockholder and constitutes and will
constitute the legal, valid and binding obligation of such Selling
Stockholder enforceable against such Selling Stockholder in
accordance with its terms, except (i) as the enforceability thereof
may be limited by bankruptcy, insolvency, reorganization, moratorium
or other similar laws affecting the creditors' rights generally and
by general equity principles and (ii) that rights to indemnity or
contribution hereunder may be limited by Federal or state securities
laws or the public policy underlying such laws.
(ii) Such Selling Stockholder has duly executed and delivered
a power of attorney and custody agreement (with respect to such
Selling Stockholder, the "Power-of-Attorney" and the "Custody
Agreement," respectively), each in the form heretofore delivered to
the Representatives, appointing each of Phillip Wiland and Franklin
Marcus, individually, as such Selling Stockholder's
attorney-in-fact (in each case, the "Attorney-in-Fact") with
authority to execute, deliver and perform this Agreement on behalf
of such Selling Stockholder and appointing Norwest Bank Minnesota,
N.A., as custodian thereunder (the "Custodian"). Certificates in
negotiable form, endorsed in blank or accompanied by blank stock
powers duly executed, with signatures appropriately guaranteed,
representing the Shares to be sold by such Selling Stockholder
hereunder have been deposited with the Custodian pursuant to the
Custody Agreement for the purpose of delivery pursuant to this
Agreement. Such Selling Stockholder has full power to enter into
the Custody Agreement and the Power-of-Attorney and to perform its
obligations under the Custody Agreement. The Custody Agreement and
the Power-of-Attorney have been duly executed and delivered by such
Selling Stockholder and are the legal, valid, binding and
enforceable instruments of such Selling Stockholder, except (i) as
the enforceability thereof may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws
affecting creditors' rights generally and by general equity
principles and (ii) that rights to indemnity or contribution
hereunder may be limited by Federal or state securities laws or the
public policy underlying such laws. Such Selling Stockholder
agrees that each of the Shares represented by the certificates on
deposit with the Custodian is subject to the interests of the
Underwriters hereunder, that the arrangements made for such
custody, the appointment of the Attorneys-in-Fact and the right,
power and authority of the Attorneys-in-Fact to execute and deliver
this Agreement and to carry out the terms of this Agreement, are to
that extent irrevocable and that the obligations of such Selling
Stockholder hereunder shall not be terminated, except as provided
in this Agreement or the Custody Agreement, by any act of such
Selling Stockholder, by operation of law or otherwise, whether in
the case of any individual Selling Stockholder by the death or
incapacity of such Selling Stockholder, in the case of a trust or
estate by the death of the trustee or trustees or the executor or
executors or the termination of such trust or estate, or in the
case of a corporate or partnership Selling Stockholder by its
liquidation or dissolution or by the occurrence of any other event.
If any individual Selling
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<PAGE> 18
Stockholder, trustee or executor should die or become incapacitated
or any such trust should be terminated, or if any corporate or
partnership Selling Stockholder shall liquidate or dissolve, or if
any other event should occur, before the delivery of such Shares
hereunder, the certificates for such Shares deposited with the
Custodian shall be delivered by the Custodian in accordance with the
respective terms and conditions of this Agreement as if such death,
incapacity, termination, liquidation or dissolution or other event
had not occurred, regardless of whether or not the Custodian or the
Attorneys-in-Fact shall have received notice thereof.
(iii) Such Selling Stockholder is the lawful record and
beneficial owner of the Shares to be sold by such Selling
Stockholder hereunder. Upon sale and delivery of, and payment for,
such Shares, as provided herein, such Selling Stockholder will
convey good and marketable title to such Shares, free and clear of
any security interests, liens, encumbrances, equities, claims,
options, rights of third parties or other defects.
(iv) Such Selling Stockholder has reviewed the Prospectus (or,
if the Prospectus is not in existence, the most recent Preliminary
Prospectus) and the Registration Statement, and the information
regarding such Selling Stockholder set forth therein under the
caption "Principal and Selling Stockholders" is complete and
accurate.
(v) The sale by such Selling Stockholder of Shares pursuant
hereto is not prompted by any adverse information concerning the
Company or any Subsidiary that is not set forth in the Registration
Statement or the Prospectus (or, if the Prospectus is not in
existence, the most recent Preliminary Prospectus).
(vi) The sale of the Shares to the Underwriters by such
Selling Stockholder pursuant to this Agreement, the compliance by
such Selling Stockholder with the other provisions of this
Agreement, the Custody Agreement and the consummation of the other
transactions herein contemplated do not (A) require the consent,
approval, authorization, registration or qualification of or with
any governmental authority, except such as have been obtained, such
as may be required under state and foreign Blue Sky laws and, if
the Registration Statement is not effective under the Securities
Act as of the time of execution hereof, such as may be required
(and shall be obtained as provided in this Agreement) under the
Securities Act and the Exchange Act, or (B) result in a breach or
violation of any of the terms and provisions of, or constitute a
default under, any indenture, mortgage, deed of trust, lease or
other agreement or instrument to which such Selling Stockholder is
a party or by which such Selling Stockholder or any of such Selling
Stockholder's properties are bound, or any statute or any judgment,
decree, order, rule or regulation of any court or other
governmental authority or any arbitrator applicable to such Selling
Stockholder; and
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<PAGE> 19
(vii) none of the Selling Stockholders nor any trustee or
beneficiary of the Selling Stockholders is affiliated as a
director, officer, partner, stock holder, or otherwise with any
securities broker or dealer which is a member of the NASD or any
other organization that owns or controls any member of the NASD.
(c) Any certificate signed by any officer of the Company and
delivered to you or to counsel for the Underwriters shall be deemed a
representation and warranty made by the Company and each of the Selling
Stockholders to each Underwriter as to the matters covered thereby and,
severally and not jointly, shall be deemed incorporated herein in its
entirety and shall be effective as if such representation and warranty
were made herein; and any certificate signed by the Selling Stockholders
as such and delivered to you or to counsel for the Underwriters shall
also be deemed a representation and warranty made by the Company and,
severally and not jointly, each of the Selling Stockholders to each
Underwriter as to the matters covered thereby and shall also be deemed
incorporated herein in its entirety and shall be effective as if such
representation and warranty were made herein; provided, however, that the
indemnification contained in this paragraph with respect to any
Preliminary Prospectus shall not inure to the benefit of any Underwriter
(or to the benefit of any person controlling such Underwriter or any
employee of such Underwriter) on account of any such loss, liability,
claim, damage or expense arising from the sale of the Firm Shares or
Additional Shares by such Underwriter to any person if a copy of the
Prospectus shall not have been sent to such person within the time
required by the Act and the Regulations, and the untrue statement or
alleged untrue statement or omission or alleged omission of a material
fact contained in such Preliminary Prospectus was corrected in the
Prospectus, as amended or supplemented, provided that the Company had
delivered the Prospectus, as amended or supplemented, to the several
Underwriters on a timely basis to permit such delivery or sending.
7. Indemnification.
(a) The Company agrees, and, subject to Section 7(e) below, the
Selling Stockholders, severally and not jointly agree, to indemnify and
hold harmless each of the Underwriters and each person, if any, who
controls each of the Underwriters within the meaning of Section 15 of the
Act or Section 20 of the Exchange Act (collectively the Underwriters and
each such person are referred to herein as the "indemnified parties")
from and against any and all losses, claims, damages, liabilities and
judgments caused by, arising out of, related to or based upon any untrue
statement or alleged untrue statement of a material fact contained in the
Registration Statement (as amended or supplemented if the Company shall
have furnished any amendments or supplements thereto), including the
information deemed to be part of the Registration Statement at the time
of effectiveness pursuant to Rule 430A, if applicable, or the Prospectus
or any Preliminary Prospectus or caused by any omission or alleged
omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading; provided,
however, that neither the Company nor any Selling Stockholder shall be
liable in any such case to the extent that such losses, claims, damages,
liabilities or judgments are caused by an untrue statement or omission
made or omitted in reliance upon, and in conformity with,
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<PAGE> 20
information relating to the Underwriters furnished in writing to the
Company by or on behalf of the Underwriters with your consent expressly
for use therein.
(b) In case any action shall be brought against any of the
indemnified parties, based upon any Preliminary Prospectus, the
Registration Statement or the Prospectus or any amendment or supplement
thereto and with respect to which indemnity may be sought against the
Company or any Selling Stockholder, such indemnified parties shall
promptly notify the Company (and the Selling Stockholders, care of the
Company) in writing (but the failure so to notify shall not relieve the
Company or the Selling Stockholders of any liability that they may
otherwise have to such indemnified parties under this Section 7 (although
the Company's and the Selling Stockholders' liability to an indemnified
party may be reduced on a monetary basis to the extent, but only to the
extent, they have been prejudiced by such failure on the part of such
indemnified party)), and the Company and the Selling Stockholders shall
promptly assume the defense thereof, including the employment of counsel
reasonably satisfactory to such indemnified party and payment of all fees
and expenses. The indemnified parties shall each have the right to
employ separate counsel in any such action and participate in the defense
thereof, but the fees and expenses of such counsel shall be at the
expense of such indemnified parties unless (i) the employment of such
counsel shall have been specifically authorized by the Company, (ii) the
Company and the Selling Stockholders shall have failed to assume promptly
the defense or to employ counsel reasonably satisfactory to such
indemnified party or (iii) the named parties to any such action
(including any impleaded parties) include both the indemnified parties
and the Company or the Selling Stockholders, and an indemnified party
shall have been advised by counsel that there may be one or more legal
defenses available to one or more of the indemnified parties that are
different from or additional to those available to the Company or the
Selling Stockholders (in which case the Company and the Selling
Stockholders shall not have the right to assume the defense of such
action on behalf of such indemnified party, it being understood, however,
that the Company and the Selling Stockholders shall not, in connection
with any one such action or separate but substantially similar or related
actions in the same jurisdiction arising out of the same general
allegations or circumstances, be liable for the fees and expenses of more
than one separate firm of attorneys (in addition to any local counsel)
for the indemnified parties, which firm shall be designated in writing by
EVEREN Securities, Inc., and that all such fees and expenses shall be
reimbursed promptly as they are incurred). The Company and the Selling
Stockholders shall not be liable for any settlement of any such action
effected without their written consent, which consent shall not be
unreasonably withheld, but if settled with the written consent of the
Company and the Selling Stockholders, the Company and the Selling
Stockholders agree to indemnify and hold harmless the indemnified parties
from and against any and all loss or liability by reason of such
settlement. Notwithstanding the foregoing sentence, if at any time an
indemnified party shall have requested indemnifying party to reimburse
the indemnified party for fees and expenses of counsel as contemplated by
the second sentence of this paragraph, the indemnifying party agrees that
it shall be liable for any settlement of any proceeding effected without
its written consent if (i) such settlement is entered into more than 10
business days after delivery by registered or certified mail to the
proper address for notice
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<PAGE> 21
to such indemnifying party of the aforesaid request (whether or not such
delivery is accepted) and (ii) such indemnifying party shall not have
reimbursed the indemnified party in accordance with such request prior to
the date of such settlement. No indemnifying party shall, without the
prior written consent of the indemnified party, effect any settlement of
any pending or threatened proceeding in respect of which any indemnified
party is or could reasonably have been expected to have been made a party
and indemnity could have been sought hereunder by such indemnified party,
unless such settlement includes an unconditional and complete release in
writing of such indemnified party from any and all liability on claims
that are the subject matter of such proceeding, which such settlement
shall be in form and substance reasonably satisfactory to the indemnified
party. The indemnification provided in this Section 7 will be in addition
to any liability which the Company and the Selling Stockholders may
otherwise have.
(c) The Underwriters agree, severally and not jointly, to indemnify
and hold harmless the Selling Stockholders, the Company, its directors,
its officers who sign the Registration Statement and any person
controlling the Company or any Selling Stockholder within the meaning of
Section 15 of the Act or Section 20 of the Exchange Act, to the same
extent as the foregoing indemnity from the Company and the Selling
Stockholders to the Underwriters but only with reference to information
stated in or omitted from the Registration Statement, the Prospectus or
any Preliminary Prospectus in reliance upon, and in conformity with,
information relating to the Underwriters furnished in writing to the
Company by or on behalf of the Underwriters with your consent expressly
for use therein. In case any action shall be brought against the
Company, any of the Selling Stockholders, any of the Company's directors,
any such officers or any person controlling the Company based on the
Registration Statement, the Prospectus or any Preliminary Prospectus and
in respect of which indemnity may be sought against the Underwriters, the
Underwriters shall have the rights and duties given to the Company and
the Selling Stockholders by Section 7(b) hereof (except that if the
Company and the Selling Stockholders shall have assumed the defense
thereof, such Underwriter shall not be required to do so, but may employ
separate counsel therein and participate in the defense thereof but the
fees and expenses of such counsel shall be at the expense of such
Underwriter), and the Selling Stockholders, the Company, its directors,
any such officers and any person controlling the Company shall have the
rights and duties given to the "indemnified parties" by Section 7(b)
hereof.
(d) To provide for just and equitable contribution, if an
indemnified party makes a claim for indemnification pursuant to Section 7
(subject to the limitations hereof) but it is found in a final judicial
determination, not subject to further appeal, that such indemnification
may not be enforced in such case, even though this Agreement expressly
provides for indemnification in such case, then each indemnifying party,
in lieu of indemnifying such indemnified party, shall contribute to the
amount paid or payable by such indemnified party as a result of such
losses, claims, damages, liabilities and judgments (i) in such proportion
as is appropriate to reflect the relative benefits received by the
Company and the Selling Stockholders on the one hand and the Underwriters
on the other from the offering of the Securities or (ii) if the
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<PAGE> 22
allocation provided in clause (i) above is not permitted by applicable
law, in such proportion as is appropriate to reflect not only the relative
benefits referred to in clause (i) above but also the relative fault of
the Company and the Selling Stockholders on the one hand and the
Underwriters on the other in connection with the statements or omissions
or alleged statements or omissions that resulted in such losses, claims,
damages, liabilities or judgments, as well as any other relevant equitable
considerations. The relative benefits received by the Company and the
Selling Stockholders on the one hand and the Underwriters on the other
shall be deemed to be in the same proportion as the total net proceeds
from the offering and sale of the Shares (before deducting expenses)
received by the Company and the Selling Stockholders on the one hand, and
the total underwriting discounts and commissions received by the
Underwriters on the other, bears to the total price to the public of the
Shares, in each case as set forth in the table on the cover page of the
Prospectus. The relative fault of the Company, the Selling Stockholders
and the Underwriters shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact
or the omission or the alleged omission to state a material fact relates
to information supplied by the Company, the Selling Stockholders or the
Underwriters and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or
omission.
The Company, the Selling Stockholders and the Underwriters agree
that it would not be just and equitable if contribution pursuant to this
Section 7(d) were determined by pro rata allocation (even if the
Underwriters or the Selling Stockholders were treated as one entity for
such purpose) or by any other method of allocation that does not take
account of the equitable considerations referred to in the immediately
preceding paragraph. The amount paid or payable by an indemnified party
as a result of the losses, claims, damages, liabilities or judgments
referred to in the immediately preceding paragraph shall be deemed to
include, subject to the limitations set forth above, any legal or other
expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this Section 7, no Underwriter shall be required to
contribute any amount in excess of the amount by which the total price at
which the Shares underwritten by it and distributed to the public were
offered to the public exceeds the amount of any damages which such
Underwriter has otherwise paid or been required to pay by reason of such
untrue or alleged untrue statement or omission or alleged omission, and
the Selling Stockholders shall not be required to contribute, more in the
aggregate than the Maximum Amount (as defined below). No person guilty
of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. The Underwriters'
obligation in this Section 7(d) to contribute are several in proportion
to the respective amount of Shares purchased hereunder by each
Underwriter and not joint.
(e) (i) The liability of each Selling Stockholder under this Section
7, together with any liability for any breach of any representation,
warranty, covenant or other provision of this Agreement, shall be limited
to the proceeds received by such Selling Stockholder from the sale of
such Selling Stockholder's Shares pursuant to this Agreement, net of (i)
underwriting discounts and commissions paid by such Selling
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Stockholder to the Underwriters in connection with such sale, and (ii)
federal and state income taxes paid by such Selling Stockholder on the
proceeds received by such Selling Stockholder as a consequence of such
sale. The foregoing limitation for each Selling Stockholder is referred
to as the "Maximum Amount."
(ii) In addition, the liability of each Selling Stockholder under
this Section 7, together with any liability for any breach of any
representation, warranty, covenant or other provision of this Agreement,
shall be proportional based on the ratio that the number of Shares being
sold by such Selling Stockholder bears to the total number of Shares
being sold by all Selling Stockholders; provided, however, that with
respect to the breach of any representation or warranty in Section 6(b),
such liability shall not be so proportional, no Selling Stockholder shall
be liable for the breach of any such representation or warranty by any
other Selling Stockholder, and each Selling Stockholder shall be liable
in full (not to exceed the Maximum Amount) with respect to any breach
thereof by such Selling Stockholder.
(f) No Underwriter or controlling person may obtain any remedies
from any Selling Stockholder for any specific claim under this Agreement
(except for any claim based upon the breach by any Selling Stockholder of
any representation or warranty in any of Section 6(b)(i) through Section
6(b)(vii) to which this restriction shall not apply), until such
Underwriter or controlling person has first used all reasonable efforts
to pursue and exhaust all remedies it may have against the Company with
respect to such specific claim. Without limiting the generality of the
foregoing, an Underwriter or controlling person shall be deemed to have
used all reasonable efforts to pursue and exhaust all remedies it may
have against the Company with respect to such specific claim, and may
pursue any remedies it may have against the Selling Stockholder, if (A)
such Underwriter or controlling person is in the process of pursuing
remedies against the Company and any of the following events occurs, or,
prior to the time at which such Underwriter or controlling person
commences the process of pursuing remedies against the Company, any of
the following events has occurred and is continuing: (1) the Company
files a petition, answer or any pleading seeking or acquiescing in any
reorganization, liquidation or other relief under chapter 7 or 11 of the
Bankruptcy Code; (2) the Company seeks or acquiesces in the appointment
of a trustee (other than a trustee appointed solely for the purposes of
facilitating the issuance of any debt securities of the Company),
receiver or liquidator of all or part of its assets; or (3) the Company
makes a general assignment for the benefit of its creditors, (B) a court
of competent jurisdiction: (1) appoints a trustee, receiver or liquidator
of all or part of the Company's assets; or (2) determines in any action,
suit or proceeding that the Company is insolvent (in the accounting,
bankruptcy, equity or legal definitions), or (C) a court or arbitration
panel of competent jurisdiction enters an order in any action, suit or
proceeding by such Underwriter or controlling person against the Company
that is materially adverse to such Underwriter or controlling person, and
is either an order on the merits of such action, suit or proceeding, or
is an order relating to a procedural question which likely would
materially impact the ability of such Underwriter or controlling person
to recover its claims against the Company. Notwithstanding the foregoing,
if, in the reasonable judgment of any Underwriter or controlling person,
the applicable statute of limitations for any potential action, suit or
proceeding by such Underwriter or controlling person for indemnification
against the Selling Stockholder will expire, such Underwriter or
controlling person may name the Selling Stockholder in any action, suit
or proceeding to which the Company is also a party solely for purposes of
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preserving any rights such Underwriter or controlling person may have to
seek indemnification from the Selling Stockholder after having used its
reasonable efforts to pursue and exhaust all remedies it may have against
the Company.
8. Conditions of the Obligations of the Underwriters. The obligations of
the several Underwriters to purchase and pay for the Firm Shares on the Closing
Date and the Additional Shares on any Option Closing Date are subject to the
fulfillment of each of the following conditions on or prior to the Closing Date
and each Option Closing Date:
(a) All the representations and warranties of the Company and the
Selling Stockholders contained in this Agreement and in any certificate
delivered hereunder shall be true and correct on the Closing Date and
each Option Closing Date with the same force and effect as if made on and
as of the Closing Date or Option Closing Date, as applicable. The
Company and the Selling Stockholders shall not have failed at or prior to
the Closing Date or Option Closing Date, as applicable, to perform or
comply in all respects with any of the agreements herein contained and
required to be performed or complied with by the Company or the Selling
Stockholders at or prior to the Closing Date.
(b) If the Registration Statement is not effective at the time of
the execution and delivery of this Agreement, the Registration Statement
shall have become effective (or, if a post-effective amendment is
required to be filed pursuant to Rule 430A under the Act, such
post-effective amendment shall have become effective) not later than 9:30
A.M., New York City time, on the date of this Agreement or such later
time as you may approve in writing or, if the Registration Statement has
been declared effective prior to the execution and delivery hereof in
reliance on Rule 430A, the Prospectus shall have been filed as required
hereby, if necessary; and at the Closing Date and each applicable Option
Closing Date, no stop order suspending the effectiveness of the
Registration Statement shall have been issued and no proceedings for that
purpose shall have been commenced or shall be pending before or, to the
best knowledge of the Underwriters, the Company or the Selling
Stockholders, threatened by the Commission; every request for additional
information on the part of the Commission shall have been complied with
to the Underwriters' satisfaction; no stop order suspending the sale of
the Shares in any jurisdiction referred to in Section 5(g) shall have
been issued and no proceeding for that purpose shall have been commenced
or shall be pending or threatened.
(c) The Shares shall have been qualified for sale under the Blue Sky
laws of such states as shall have been specified by the Representatives.
(d) The legality and sufficiency of the authorization, issuance and
sale or transfer and sale of the Shares hereunder, the validity and form
of the certificates representing the Shares, the execution and delivery
of this Agreement and all corporate proceedings and other legal matters
incident thereto, and the form of the Registration Statement and the
Prospectus (except financial statements) shall have been approved by
counsel for the Underwriters exercising reasonable judgment, and no
Underwriter shall have advised the Company that the Registration Statement
or the Prospectus, or any amendment or supplement thereto, contains an
untrue statement of material fact, or omits
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to state a fact that in your opinion is material and is required to be
stated therein or is necessary to make the statements therein not
misleading.
(e) Subsequent to the execution and delivery of this Agreement,
there shall not have occurred any material change, or any material
development involving a prospective change, in or affecting particularly
the business or properties of the Company, whether or not arising in the
ordinary course of business, that, in the judgment of the
Representatives, makes it impractical or inadvisable to proceed with the
public offering or purchase of the Shares as contemplated hereby.
(f) You shall have received an agreement from each of the officers
and directors who are not Selling Stockholders of the Company (the
"Additional Stockholders"), whereby each such officer or director agrees
to be bound by an agreement to the same effect as the covenants set forth
in the last paragraph of Section 3 of this Agreement (the "Lock-Up
Agreements").
(g) You shall have received an opinion (satisfactory to you and your
counsel) dated the Closing Date or the Option Closing Date, as the case
may be, of McGuire, Woods, Battle & Boothe, L.L.P., counsel for the
Company and the Selling Stockholders, in form and substance satisfactory
to the Representatives as set forth in Exhibit A.
(h) You shall have received an opinion of Gibson, Dunn & Crutcher
LLP, counsel for the Underwriters, dated the Closing Date or the Option
Closing Date, as the case may be, in form and substance satisfactory to
the Representatives.
(i) You shall have received, in connection with the execution of
this Agreement and on the Closing Date and each Option Closing Date, a
"cold comfort" letter from Ernst & Young LLP, dated as of each such date
in form and substance satisfactory to you with respect to the financial
statements and certain financial information and data contained in the
Registration Statement and the Prospectus.
(j) You shall have received from the Company a certificate, signed
by Phillip A. Wiland, J. Michael Wolfe and H. Franklin Marcus, Jr. in
their capacities as Chief Executive Officer, President and Chief
Financial Officer of the Company, respectively, addressed to the
Underwriters and dated the Closing Date or Option Closing Date, as
applicable to the effect that:
(i) such officer does not know of any Proceedings instituted,
threatened or contemplated against the Company of a character
required to be disclosed in the Prospectus that are not so
disclosed; such officer does not know of any material contract
required to be filed as an exhibit to the Registration Statement
which is not so filed;
(ii) such officer has carefully examined the Registration
Statement and the Prospectus and all amendments or supplements
thereto and, in such officer's opinion, such Registration Statement
or such amendment as of its effective date
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<PAGE> 26
and as of the Closing Date, and the Prospectus or such supplement as
of its date and as of the Closing Date, did not contain an untrue
statement of material fact or omit to state a material fact required
to be stated therein or necessary in order to make the statements
therein not misleading and, in such officer's opinion, since the
effective date of the Registration Statement, no event has occurred
or information become known that should have been set forth in an
amendment to the Registration Statement or a supplement to the
Prospectus which has not been so set forth in such amendment or
supplement;
(iii) the representations and warranties of the Company set
forth in Section 6(a) of this Agreement are true and correct as of
the date of this Agreement and as of the Closing Date or the Option
Closing Date, as the case may be, and the Company has complied with
all the agreements and satisfied all the conditions on its part to
be performed or satisfied at or prior to such Closing Date; and
(iv) the Commission has not issued an order preventing or
suspending the use of the Prospectus or any preliminary prospectus
filed as a part of the Registration Statement or any amendment
thereto; no stop order suspending the effectiveness of the
Registration Statement has been issued; and, to the best knowledge
of the respective signers, no proceedings for that purpose have
been instituted or are pending or contemplated under the Act.
The delivery of the certificate provided for in this subparagraph
shall be and constitute a representation and warranty of the Company as
to the facts set forth in said certificate.
(k) You shall have received a certificate of each Selling
Stockholder dated the Closing Date or the Option Closing Date, as the
case may be, to the effect that the representations and warranties of
such Selling Stockholder set forth in Sections 6(a) and 6(b) of this
Agreement are true and correct as of such date and the Selling
Stockholder has complied with all the agreements and satisfied all the
conditions on the part of such Selling Stockholder to be performed or
satisfied at or prior to such date.
(l) You and Gibson, Dunn & Crutcher LLP, counsel for the
Underwriters, shall have received on or before the Closing Date or the
Option Closing Date, as the case may be, such further documents,
opinions, certificates and schedules or instruments relating to the
business, corporate, legal and financial affairs of the Company as you
and they shall have reasonably requested from the Company.
(m) Each Selling Stockholder will deliver to EVEREN Securities,
Inc., prior to the Effective Date, a properly completed and executed
United States Treasury Department Form W-9 (or other applicable form or
statement specified by Treasury Department regulations in lieu thereof).
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9. Effective Date of Agreement, Termination and Defaults. This Agreement
shall become effective upon, and shall not be deemed delivered until, the later
of (i) execution of this Agreement and (ii) when notification of the
effectiveness of the Registration Statement has been released by the Commission.
This Agreement may be terminated at any time prior to the Closing Date
and any exercise of the option to purchase Additional Shares may be canceled at
any time prior to any Option Closing Date by the Underwriters by written notice
to the Company if any of the following has occurred: (i) since the respective
dates as of which information is given in the Registration Statement and the
Prospectus, any material adverse change or development involving a prospective
material adverse change in the condition, financial or otherwise, of the Company
or the earnings, assets, liabilities, affairs, prospects, management or business
of the Company, whether or not arising in the ordinary course of business, that
would, in the Representatives' sole judgment, make it impracticable to market
the Shares on the terms and in the manner contemplated in the Prospectus, (ii)
any outbreak or escalation of hostilities or other national or international
calamity or crisis or change in economic conditions or in the financial markets
of the United States that, in the Representatives' judgment, is material and
adverse and would, in the Representatives' judgment, make it impracticable to
market the Shares on the terms and in the manner contemplated in the Prospectus,
(iii) the suspension or material limitation of trading in securities on the
NYSE, the American Stock Exchange or the Nasdaq Stock Market or limitation on
prices for securities on either such exchange or the Nasdaq Stock Market, (iv)
the enactment, publication, decree or other promulgation of any federal or state
statute, regulation, Rule or order of any court or other governmental authority
that in the Representatives' opinion materially and adversely affects, or will
materially and adversely affect, the business or operations of the Company, (v)
the declaration of a banking moratorium by either federal or Illinois, New York
or Colorado state authorities, (vi) the taking of any action by any Federal,
state or local government or agency in respect of its monetary or fiscal affairs
that in the Representatives' opinion has a material adverse effect on the
financial markets in the United States, (vii) there shall be any change in
financial markets or in political, economic or financial conditions which, in
the opinion of the Representatives, either renders it impracticable or
inadvisable to proceed with the offering and sale of the Shares on the terms set
forth in the Prospectus or materially adversely affects the market for the
Shares, or (vii) any conditions to the Underwriters' obligations shall not have
been fulfilled when and as required by this Agreement.
If on the Closing Date or on any Option Closing Date, as the case may
be, any of the Underwriters shall fail or refuse to purchase the Firm Shares or
Additional Shares, as the case may be, which it has agreed to purchase
hereunder on such date, and the aggregate number of Firm Shares or Additional
Shares, as the case may be, that such defaulting Underwriter or Underwriters
agreed but failed or refused to purchase does not exceed, in the aggregate, 10%
of the total number of Shares that all Underwriters are obligated to purchase on
such date, each non-defaulting Underwriter shall be obligated, in the proportion
which the number of Firm Shares set forth opposite its name in Schedule II
hereto bears to the total number of Firm Shares or Additional Shares, as the
case may be, that all the non-defaulting Underwriters have agreed to purchase,
or in such other proportion as you may specify, to purchase the Firm Shares or
Additional Shares, as the case may be, that such defaulting Underwriter or
Underwriters agreed but failed or refused to purchase on such date. If, on the
Closing Date or on the Option Closing
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<PAGE> 28
Date, as the case may be, any of the Underwriters shall fail or refuse to
purchase the Firm Shares or Additional Shares, as the case may be, in an amount
that exceeds, in the aggregate, 10% of the total number of the Shares, and
arrangements satisfactory to you and the Company for the purchase of such Shares
are not made within 48 hours after such default, this Agreement shall terminate
without liability on the part of the non-defaulting Underwriters, the Company
and the Selling Stockholders, except as otherwise provided in this Section 9. In
any such case that does not result in termination of this Agreement, either you
or the Company may postpone the Closing Date or the Option Closing Date, as the
case may be, for not longer than seven (7) days, in order that the required
changes, if any, in the Registration Statement and the Prospectus or any other
documents or arrangements may be effected. Any action taken under this
paragraph shall not relieve a defaulting Underwriter from liability in respect
of any default of any such Underwriter under this Agreement.
The indemnity and contribution provisions and other agreements,
representations and warranties of the Company, the Selling Stockholders and the
Company's officers and directors set forth in or made pursuant to this
Agreement shall remain operative and in full force and effect, and will survive
delivery of and payment for the Shares, regardless of (i) any investigation, or
statement as to the results thereof, made by or on behalf of any of the
Underwriters or by or on behalf of the Company or any Selling Stockholder or the
officers or directors of the Company or any controlling person of the Company,
(ii) acceptance of the Shares and payment therefor hereunder or (iii)
termination of this Agreement. Notwithstanding any termination of this
Agreement, the Company shall be liable for and shall pay all expenses it has
agreed to pay pursuant to Section 5(l).
Except as otherwise provided, this Agreement has been and is made
solely for the benefit of, and shall be binding upon, the Company, the Selling
Stockholders, the Underwriters, any indemnified person referred to herein and
their respective successors and assigns, all as and to the extent provided in
this Agreement, and no other person shall acquire or have any right under or by
virtue of this Agreement. The terms "successors and assigns" shall not include
a purchaser of any of the Shares from any of the several Underwriters merely
because of such purchase.
10. Effectiveness of Registration Statement. You, the Company and the
Selling Stockholders will use your, its and their best efforts to cause the
Registration Statement to become effective, if it has not yet become effective,
and to prevent the issuance of any stop order suspending the effectiveness of
the Registration Statement and, if such stop order be issued, to obtain as soon
as possible the lifting thereof.
11. Miscellaneous. All communications hereunder will be in writing and,
if sent to the Underwriters will be mailed, delivered or telegraphed and
confirmed to you c/o EVEREN Securities, Inc., 77 West Wacker Drive, Chicago,
Illinois 60601-1994, Attention: Syndicate Department, with a copy to Gibson,
Dunn & Crutcher LLP, One Montgomery Street, San Francisco, California 94104,
Attention: Kenneth R. Lamb; if sent to the Company will be mailed, delivered or
telegraphed and confirmed to the Company at its corporate headquarters,
attention Chief Executive Officer with a copy to McGuire, Woods, Battle &
Boothe, L.L.P., One James Center, Richmond, Virginia 23219, Attention: Robert
L. Burrus, Jr.; and if sent to the Selling
27
<PAGE> 29
Stockholders will be mailed, delivered or telegraphed care of the Company, with
a copy to, or in any case to such other address as the person to be notified may
have requested in writing.
THIS AGREEMENT SHALL BE GOVERNED AND CONSTRUED IN ACCORDANCE WITH THE LAWS
OF THE STATE OF ILLINOIS WITHOUT REGARD TO THE PRINCIPLES OF CONFLICTS OF LAW
THEREOF.
This Agreement may be signed in various counterparts which together shall
constitute one and the same instrument.
28
<PAGE> 30
Please confirm that the foregoing correctly sets forth the agreement among
the Company, the Selling Stockholders and the several Underwriters, including
you.
Very truly yours,
CONCEPTS DIRECT, INC., a Delaware corporation
By:
----------------------------------
Name: Phillip A. Wiland
Title: Chief Executive Officer
Selling Stockholders:
-----------------------------------------
Phillip A. Wiland
-----------------------------------------
Michael T. Buoncristiano
-----------------------------------------
H. Franklin Marcus, Jr.
-----------------------------------------
Phillip D. White
-----------------------------------------
J. Michael Wolfe
-----------------------------------------
Patricia Buoncristiano
-----------------------------------------
Louise A. Buoncristiano
R.L. POLK & CO.
By:
--------------------------------------
Title:
-----------------------------------
Print Name:
-----------------------------
The foregoing Underwriting Agreement is hereby
confirmed and accepted as of the date first
above written.
EVEREN Securities, Inc.
Acting as Representatives of the several
Underwriters named in Schedule II.
29
<PAGE> 31
By: EVEREN Securities, Inc.
By:
--------------------------------
Todd Jadwin
30
<PAGE> 32
SCHEDULE I
<TABLE>
<CAPTION>
NAME AND ADDRESS OF SELLING STOCKHOLDER NUMBER OF FIRM SHARES
<S> <C>
Phillip A. Wiland 197,468
1351 South Sunset
Longmont, Colorado 80501
Michael T. Buoncristiano 32,500
450 7th Street, Suite LL8
Hoboken, New Jersey 07030
H. Franklin Marcus, Jr. 6,000
1351 South Sunset
Longmont, Colorado 80501
Phillip D. White 34,000
200 Camden Place
Boulder, Colorado 80302
J. Michael Wolfe 12,528
1351 South Sunset
Longmont, Colorado 80501
Patricia Buoncristiano 1,000
c/o Michael T. Buoncristiano
450 7th Street, Suite LL8
Hoboken, New Jersey 07030
Louise A. Buoncristiano 1,500
c/o Michael T. Buoncristiano
450 7th Street, Suite LL8
Hoboken, New Jersey 07030
R.L. Polk & Co. 843,600
1155 Brewery Park Boulevard
Detroit, Michigan 48207
</TABLE>
31
<PAGE> 33
SCHEDULE II
<TABLE>
<CAPTION>
UNDERWRITER NUMBER OF FIRM
SHARES TO BE
PURCHASED
<S> <C>
EVEREN Securities, Inc......................................
Scott & Stringfellow, Inc...................................
TOTAL 1,600,000
=========
</TABLE>
32
<PAGE> 1
Exhibit 5.1
McGuire, Woods, Battle & Boothe, L.L.P.
One James Center
Richmond, Virginia 23219
June 3, 1997
Concepts Direct, Inc.
1351 South Sunset Street
Longmont, Colorado 80501
Concepts Direct, Inc.
Registration Statement on Form S-1
Gentlemen:
We are acting as your counsel in connection with the Registration
Statement on Form S-1 (Registration No. 333-26133) (the "Registration
Statement"), filed with the Securities and Exchange Commission under the
Securities Act of 1933, as amended (the "1933 Act"), relating to the offer and
sale of up to 1,840,000 shares of Common Stock, par value $.10 per share (the
"Shares"), of Concepts Direct, Inc. (the "Company"). Defined terms not
otherwise defined herein have the meaning ascribed to them in the Registration
Statement.
We have participated in the preparation of the Registration Statement
and have examined such corporate records and documents, statements and
certificates of officers of the Company and public officials and other
materials as we have deemed necessary to the issuance of this opinion. Based on
the foregoing, we are of the opinion that:
1. The Company is duly organized and validly existing under the laws
of the State of Delaware.
2. The 1,840,000 Shares covered by the Registration Statement have
been duly authorized.
3. The 1,128,596 Shares being sold by the Selling Stockholders referred
to in the Registration Statement are, and the 471,404 Shares being
sold by the Company and the 240,000 Shares covered by the
over-allotment option granted by the Company to the Underwriters
referred to in the Registration Statement, when issued and paid for
as described in the Registration Statement, will be validly issued,
fully paid and nonassessable.
We consent to the filing of this opinion as an exhibit to the
Registration Statement and to the statement made in reference to our firm under
the caption "Legal Matters" in the related Prospectus and in any amendment or
supplement to the Prospectus. We do not admit by giving this consent that we
are in the category of persons whose consent is required under Section 7 of the
1933 Act or the rules and regulations of the Securities and Exchange Commission
thereunder.
Very truly yours,
/s/ McGuire, Woods, Battle & Boothe, L.L.P.
<PAGE> 1
EXHIBIT 10.11
SAUNDERS 111
STANDARD FORM OF AGREEMENT
BETWEEN OWNER AND CONTRACTOR
Where the basis of payment is the
COST OF THE WORK PLUS A FEE
with or without a Guaranteed Maximum Price
1995 Edition
This Document has important legal consequences; consultation with an attorney is
encouraged with respect to its completion or modification.
The 1987 Edition of AIA Document A201, General Conditions of the Contract for
Construction, is adopted in this document by reference. Do not use with other
general conditions unless this document is modified.
AGREEMENT
Made as of the 1st day of May in the year of Nineteen Hundred and Ninety Seven.
BETWEEN the Owner: CONCEPTS DIRECT, INC.
(Name and Address) 1351 South Sunset Street
Longmont, CO 80501-6549
and the Contractor: SAUNDERS CONSTRUCTION, INC.
(Name & Address) 6950 South Jordan Road
PO Box 3908
Englewood, CO 80155
the Project is: CONCEPTS DIRECT
(Name & Address) 2950 Colorful Avenue
Longmont, CO 80504
part of
in
The Architect is: INTERGROUP, INC.
2696 South Colorado Boulevard
Denver, CO 80222
The Owner and Contractor agree as set forth below.
<PAGE> 2
ARTICLE 1
THE CONTRACT DOCUMENTS
1.1 The Contract Documents consist of this Agreement, Conditions of the
Contract (General, Supplementary and other Conditions). Drawings,
Specifications, Addenda issued prior to execution of this Agreement,
other documents listed in this Agreement and Modifications issued after
execution of this Agreement, these form the Contract and are as fully a
part of the Contract as if attached to this Agreement or repeated
herein. The Contract represents the entire and integrated agreement
between the parties hereto and supersedes prior negotiations,
representations or agreements, either written or oral. An enumeration of
the Contract Documents, other than Modifications, appears in Article 16.
If anything in the other Contract Documents is inconsistent with the
Agreement, this Agreement shall govern.
ARTICLE 2
THE WORK OF THIS CONTRACT
2.1 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:
All Work for the Project will be in accordance with the Contract Documents with
the Budget/Qualifications noted in Attachment B.
This contract is expressly contingent on the Owner providing to Saunders
Construction, Inc. not later than May 15, 1997, a written BANK COMMITMENT of
construction funding in terms acceptable to Saunders Construction, Inc. this
evidence will reference to the source of funds. The Owner agrees to supply
evidence of CONCEPTS DIRECT CORPORATE RESOLUTION FOR EXECUTION OF this
agreement. THE CONTRACTOR WILL PERMIT OWNER TO ASSIGN THIS AGREEMENT TO A LENDER
AS ADDITIONAL COLLATERAL FOR THE CONSTRUCTION LOAN AND CONTRACTOR WILL PERMIT
THIS AGREEMENT TO BE REASONABLY AMENDED TO SATISFY CONSTRUCTION LENDERS
REQUIREMENTS.
ARTICLE 3
RELATIONSHIP OF THE PARTIES
3.1 The Contractor accepts the relationship of trust and confidence
established by this Agreement and covenants with the Owner to cooperate with the
Architect and utilize the Contractor's best skill, efforts and judgment in
furthering the interests of the Owner; to furnish efficient business
administration and supervision; to make bets efforts to furnish at all times an
adequate supply of workers and materials; and to perform the Work in the best
way and most expeditious and economical manner consistent with the interests of
the Owner. The Owner agrees to exercise best efforts to enable the Contractor to
perform the Work in the best way and most expeditious manner by furnishing and
approving in a timely way information required by the Contractor and making
payments to the Contractor in accordance with requirements of the Contract
Documents.
ARTICLE 4
DATE OF COMMENCEMENT AND SUBSTANTIAL COMPLETION
4.1 The date of commencement is the date from which the Contract Time of
Subparagraph 4.2 is measured; it 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.
DATE OF COMMENCEMENT IS: FEBRUARY 27, 1997.
Execution of this agreement constitutes the Notice to Proceed from the Owner
subject to any restrictions noted above.
4.2 The Contractor shall achieve Substantial Completion of the entire Work
not later than SEPTEMBER 9, 1997. * IF CONTRACTOR ACHIEVES EARLIER SUBSTANTIAL
COMPLETION DATE THEN THE BONUS
<PAGE> 3
PROVISION OF SUPPLEMENTAL CONDITIONS (9.12.1) WILL PREVAIL, subject to
adjustments of this Contract Time as provided in the Contract Documents. The
Owner agrees to be responsible for applying for utility installations and for
clarifying and modifying the Construction Documents as required by all approving
authorities. The Contractor agrees to apply for all building permits, BONDS and
to aid the Owner in coordinating with the building department and other
governmental approving authorities for the release of all construction permits.
The Contractor also agrees to aid the Owner in coordinating with the public
utility companies for the timely installation of all utility installations. The
Contractor will not be responsible for any delays caused by the Owner or his
agents nor by the approving authorities or public utility companies. The
completion date of the Work is subject to release of all permits and the
installation of all public utilities so as not to delay the progress of
construction.
CONTRACTOR AGREES THAT THE OWNER SHALL HAVE THE RIGHT TO DELIVER FURNITURE AND
EQUIPMENT INTO THE BUILDING PRIOR TO SUBSTANTIAL COMPLETION, IF THIS FURNITURE
AND EQUIPMENT DOES NOT SERIOUSLY INTERFERE WITH THE CONTRACTORS OPERATIONS.
QUESTIONS OF WHAT CONSTITUTES INTERFERENCE SHALL BE DEFINED BY THE ARCHITECT
WHOSE DECISION SHALL BE FINAL. THE OWNER'S RIGHT TO OCCUPY PORTIONS OF THE
PROJECT PRIOR TO SUBSTANTIAL COMPLETION SHALL BE GOVERNED BY THE SUPPLEMENTAL
CONDITIONS.
ARTICLE 5
CONTRACT SUM
5.1 The Owner shall pay the Contractor in current funds for the Contractor's
performance of the Contract the Contract Sum consisting of the Cost of the Work
as defined in Article 7 and the Contractor's Fee determined as follows:
(State a lump sum, percentage of Cost of the Work or other provision for
determining the Contractor's Fee, and explain how the Contractor's Fee is to be
adjusted for changes in the Work.)
The Contractor will be reimbursed for all Costs of the Work and a lump sum fee
of $244,285.00. The Contractor will be entitled to a mark-up for overhead and
fee of 10% on all changes.
5.2 GUARANTEED MAXIMUM PRICE (IF APPLICABLE)
5.2.1 The sum of the Cost of the Work and the Contractor's Fee is guaranteed
by the Contractor not to exceed Six Million, Three Hundred Fifty One Thousand,
Four Hundred Sixteen Dollars ($6,351,416.00), subject to additions and
deductions by Change Order as provided in the Contract Documents. Such maximum
sum is referred to in the Contract Documents as the Guaranteed Maximum Price.
Costs which would cause the Guaranteed Maximum Price to be exceeded shall be
paid by the Contractor without reimbursement by the Owner.
(Insert specific provisions if the Contractor is to participate in any savings.)
Saunders Construction, Inc. guarantees that the total cost of the Project,
including the Contractor's fee, will not exceed the Guaranteed Maximum Price
based on the Work as defined in this agreement; the cost for specific
installations or line items is not guaranteed.
5.2.2 The Guaranteed Maximum Price 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, but only if a
Guaranteed Maximum Price is inserted in Subparagraph 5.2.1. 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 under which that amount is valid.)
ANY SAVINGS IN THE COST OF THE WORK SHALL BE CREDITED ONE HUNDRED PERCENT
(100%) THEREOF TO OWNER.
5.2.3 The amounts agreed to for unit prices, if any, are as follows:
(State unit prices only if a Guaranteed Maximum Price is inserted in
Subparagraph 5.2.1.)
ARTICLE 6
CHANGES IN THE WORK
6.1 CONTRACTS WITH A GUARANTEED MAXIMUM PRICE
<PAGE> 4
6.1.1 Adjustments to the Guaranteed Maximum Price on account of changes in
the Work may be determined by any of the methods listed in Subparagraph 7.3.3
of the General Conditions.
6.1.2 In calculating adjustments to subcontracts (except those awarded with
the Owner's prior consent on the basis of cost plus a fee), the terms "cost"
and "fee" as used in Clause 7.3.3.3 of the General conditions and the terms
"costs" and "a reasonable allowance for overhead and profit" as used in
Subparagraph 7.3.6 of the General Conditions shall have the meanings assigned
to them in the General Conditions and shall not be modified by Articles 5.7 and
8 of this Agreement. Adjustments to subcontracts awarded with the Owner's prior
consent on the basis of cost plus a fee shall be calculated in accordance with
the terms of those subcontracts.
6.1.3 In calculating adjustments to this Contract, the terms "cost" and
"costs" as used in the above referenced provisions of the General Conditions
shall mean the Cost of the Work as defined in Article 7 of this Agreement and
the terms "fee" and "a reasonable allowance for overhead and profit" shall mean
the Contractor's Fee as defined in Paragraph 5.1 of this Agreement.
6.3 ALL CONTRACTS
6.3.1 If no specific provision is made in Paragraph 5.1 for adjustment of the
Contractor's Fee in the case of changes in the Work, or if the extent of such
changes is such, in the aggregate, that application of the adjustment
provisions of Paragraph 5.1 will cause substantial inequity to the Owner or
Contractor, the Contractor's Fee shall be equitably adjusted on the basis of
the Fee established for the original Work.
ARTICLE 7
---------
COSTS TO BE REIMBURSED
7.1 The terms Cost of the Work shall mean costs necessarily incurred by the
Contractor in the proper performance of the Work. Such costs shall be at rates
not higher than the standard paid at the place of the Project except with prior
WRITTEN consent of the Owner. The Cost of the Work shall include only the items
set forth in this Article 7.
7.1.1 LABOR COSTS
7.1.1.1 Wages of construction workers directly employed by the Contractor to
perform the construction of the Work at the site or, with the Owner's
agreement, at off-site workshops.
7.1.1.2 Wages or salaries of the Contractor's supervisory and administrative
personnel when stationed at OR IN TRANSIT TO the site with the Owner's ADVANCE
WRITTEN agreement.
(If it is intended that the wages or salaries of certain personnel stationed at
the Contractor's principal or other offices shall be included in the Cost of
the Work, identify in Article 14 the personnel to be included and whether for
all or only part of their time).
7.1.1.3 Wages and salaries of the Contractor's supervisory or administrative
personnel engaged, at factories, workshops or on the road, in expediting the
projection or transportation of materials or equipment required for the Work,
but only for that portion of their time required for the Work.
7.1.1.4 Costs paid or incurred by the Contractor for taxes, insurance,
assessments and benefits such as sick leave, medical and health benefits,
holidays, vacations and pensions, provided such costs are based on wages and
salaries included in the Cost of the Work under Clauses 7.1.1.1 through 7.1.1.3.
7.1.2 SUBCONTRACT COSTS
Payments made by the Contractor to Subcontractors in accordance with the
requirements of the subcontracts, BUT SUBJECT TO THE TERMS AND LIMITS IN THE
SUPPLEMENTAL CONDITIONS.
7.1.3 COSTS OF MATERIALS AND EQUIPMENT INCORPORATED IN THE COMPLETED
CONSTRUCTION
<PAGE> 5
7.1.3.1 Costs, including transportation, of materials and equipment
incorporated or to be incorporated in the completed construction.
7.1.3.2 Costs of materials described in the preceding Clause 7.1.3.1 in excess
of those actually installed but required to provide reasonable allowance for
waste and for spoilage. Unused excess materials, if any, shall be handed over
to the owner at the completion of the Work or, at the Owner's option, shall be
sold by the Contractor; amounts realized, if any, from such sales shall be
credited to the Owner as a deduction from the Cost of the Work.
7.1.4 COSTS OF OTHER MATERIALS AND EQUIPMENT, TEMPORARY FACILITIES AND RELATED
ITEMS
7.1.4.1 Costs, including transportation, installation, maintenance,
dismantling and removal of materials, supplies, temporary facilities,
machinery, equipment, and hand tools not customarily owned by the construction
workers, which are provided by Contractor at the site and fully consumed in the
performance of the Work, and cost less salvage value on such items if not fully
consumed, whether sold to others or retained by the Contractor. Cost for items
previously used by the Contractor shall meet fair market value.
7.1.4.2 Rental charges for temporary facilities, machinery, equipment, and hand
tools not customarily owned by the construction workers, which are provided by
the Contractor at the site, whether rented from the Contractor or others, and
costs of transportation, installation, minor repairs and replacements,
dismantling and removal thereof. Rates and quantities of equipment rented
shall be subject to the Owner's prior approval. RENTAL CHARGES SHALL IN NO
EVENT BE HIGHER THAN PREVAILING RATES IN THE AREA.
7.1.4.3 Costs or removal of debris from the site.
7.1.4.4 Costs of telegrams and long distance telephone calls, postage and
parcel delivery charges, telephone services at the site and reasonable petty
cash expenses of the site office.
7.1.4.5 That portion of the reasonable travel expenses of the Contractor's
personnel incurred while traveling in discharge of duties connected with the
Work, SUBJECT TO ESTIMATED COST COVERED IN THE G.M.P.
7.1.5 MISCELLANEOUS COSTS
7.1.5.1 That portion directly attributable to this Contract of premiums for
insurance and bonds.
7.1.5.2 Sales, use or similar taxes imposed by a governmental authority which
are related to the Work and for which the Contractor is liable.
7.1.5.3 Fees and assessments for the building permit and for other permits,
licenses and inspections for which the Contractor is required by the Contract
Documents to pay.
7.1.5.4 Fees of testing laboratories for test required by the Contract
Documents, except those related to defective or nonconforming Work for which
reimbursement is excluded by Subparagraph 13.5.3 of the General Conditions or
other provisions of the Contract Documents and which do not fall within the
scope of Subparagraphs 7.2.2 through 7.2.4 below.
7.1.5.6 Deposits lost for causes other than the Contractor's fault or
negligence.
7.1.6 OTHER COSTS
7.1.6.1 Other costs incurred in the performance of the Work is and to the
extent approved in advance in writing by the Owner.
7.2 EMERGENCIES; REPAIRS TO DAMAGED, DEFECTIVE OR NONCONFORMING WORK
The Cost of the work shall also include costs described in Paragraph 7.1 which
are incurred by the Contractor.
7.2.1 In taking action to prevent threatened damage, injury or loss in case of
an emergency affecting the safety of persons and property, as provided in
Paragraph 10.3 of the General Conditions.
7.2.2 In repairing or correcting Work damaged or improperly executed by
construction workers in the employ of the Contractor, provided such damage or
improper execution did not result from the fault or negligence of the
Contractor or the Contractor's foremen, engineers or superintendents, or other
supervisory, administrative or managerial personnel of the Contractor.**
<PAGE> 6
7.2.3. In repairing damaged work other than that described in Subparagraph
7.2.2. provided such damage did not result from the fault or negligence of the
Contractor or the Contractor's personnel, and only to the extent that the cost
of such repairs is not recoverable by the Contractor from others and the
Contractor is not compensated therefor by insurance or otherwise.**
7.2.4. In correcting defective or nonconforming Work performed or supplied by
a Subcontractor or material supplier and not corrected by them, provided such
defective or nonconforming Work did not result from the fault or neglect of the
Contractor or the Contractor's personnel adequately to supervise and direct the
Work of the Subcontractor or material supplier, and only to the extent that the
cost of correcting the defective or nonconforming Work is not recoverable by
the Contractor from the Subcontractor or material supplier.**
*CONTRACTOR IS BEING HIRED BY OWNER TO PERFORM FIRST CLASS WORK IN EVERY
RESPECT, AND IT MUST EXERCISE ITS BEST PROFESSIONAL JUDGMENT, SKILL AND CARE
DURING ALL ASPECTS OF THE CONSTRUCTION. IN A PROJECT OF THIS MAGNITUDE THERE
WILL BE SOME INSTANCES WHERE CORRECTIVE WORK IS REQUIRED, BUT CONTRACTOR WILL
NOT BE REIMBURSED FOR ANY COSTS, LOSSES OR DAMAGES WHICH, UNDER PREVAILING
INDUSTRY STANDARDS, FOR FIRST CLASS COMMERCIAL CONTRACTORS, IS THE RESULT OF A
CLEAR LACK OF CARE OR SKILL ON THE PART OF THE CONTRACTOR.
ARTICLE 8
COSTS NOT TO BE REIMBURSED
8.1 The Cost of the Work shall not include:
8.1.1 Salaries and other compensation of the Contractor's personnel stationed
at the Contractor's principal office or offices other than the site office,
except as specifically provided in Clauses 7.1.1.2 and 7.1.1.3.
8.1.2 Expenses of the Contractor's principal office and offices other than
the site office.
8.1.3 Overhead and general expenses, except as may be expressly included in
Article 7.
8.1.4 The Contractor's capital expenses, including interest on the
Contractor's capital employed for the work.
8.1.5 Rental costs of machinery and equipment, except as specifically
provided in Clause 7.1.4.2.
8.1.6 Except as provided in Subparagraphs 7.2.2 through 7.2.4 and Paragraph
13.6 of this Agreement, costs due to the fault or negligence of the Contractor,
anyone directly or indirectly employed by any of them, or for whose acts any of
them may be liable, including but not limited to costs for the correction of
damages, defective or nonconforming Work, disposal and replacement of materials
and equipment incorrectly ordered or supplied, and making good damage to
property not forming part of the Work.
8.1.7 Any cost not specifically and expressly described in Article 7.
8.1.8 Costs which would cause the Guaranteed Maximum Price, if any, to be
exceeded.
ARTICLE 9
DISCOUNTS, REBATES AND REFUNDS
9.1 Cash discounts obtained on payments made by the Contractor shall accrue
to the Owner, if (1) before making the payment, the Contractor included them in
an Application for Payment and received payment therefor from the Owner, or (2)
the Owner has deposited funds with the Contractor with which to make payments;
otherwise, cash discounts shall accrue to the Contractor. Trade discounts,
rebates, refunds and amounts received from sales of surplus materials and
equipment shall accrue to the Owner, and the Contractor shall make provisions so
that they can be secured.
9.2 Amounts which accrue to the Owner in accordance with the provisions of
Paragraph 9.1 shall be credited to the Owner as a deduction from the Cost of
the Work.
ARTICLE 10
SUBCONTRACTS AND OTHER AGREEMENTS
<PAGE> 7
10.1 Those portions of the Work that the Contractor does not customarily
perform with the Contractor's own personnel shall be performed under
subcontracts or by other appropriate agreements with the Contractor. The
Contractor shall obtain bids from Subcontractors and from suppliers of
materials or equipment fabricated especially for the Work and shall deliver
such bids to the Architect. The Owner will then determine, with the advice of
the Contractor and subject to the reasonable objection of the Architect, which
bids will be accepted. The Owner may designate specific persons or entities
from whom the Contractor shall obtain bids; however, if a Guaranteed Maximum
Price has been established, the Owner may not prohibit the Contractor from
obtaining bids from others. The Contractor shall not be required to contract
with anyone to whom the Contractor has reasonable objection.
10.2 If a Guaranteed Maximum Price has been established and a specific
bidder among those whose bids are delivered by the Contractor to the Architect
(1) is recommended to the Owner by the Contractor; (2) is qualified to perform
that portion of the Work; and (3) has submitted a bid which conforms to the
requirements of the Contract Documents without reservation or exceptions, but
the Owner requires that another bid be accepted; then the Contractor may
require that a Change Order be issued to adjust the Guaranteed Maximum Price by
the difference between the bid of the person or entity recommended to the Owner
by the Contractor and the amount of the subcontract or other agreement actually
signed with the person or entity designated by the Owner.
10.3 Subcontracts or other agreements shall conform to the payment
provisions of Paragraphs 12.7 and 12.8, and shall not be awarded on the basis
of cost plus a fee without the prior consent of the Owner.
ARTICLE 11
ACCOUNTING RECORDS
11.1 The Contractor shall keep full and detailed accounts and exercise such
controls as may be necessary for proper financial management under this
Contract; the accounting and control systems shall be satisfactory to the
Owner. The Owner and Owner's accountants shall be afforded access to the
Contractor's records, books, correspondence, instructions, drawings, receipts,
subcontracts, purchase orders, vouchers, memoranda and other data relating to
this Contract, and the Contractor shall preserve these for a period of three
years after final payment, or for such longer period as may be required by law.
ARTICLE 12
PROGRESS PAYMENTS
12.1 Based upon Applications for Payment submitted to the Architect by the
Contractor and Certificates for Payment issued by the 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.
12.2 The period covered by each Application for Payment shall be one calendar
month ending the last day of the month, or as follows:
12.3 Provided an Application for Payment is received by the Architect not
later than the FIRST day of a month, the Owner shall make payment to the
Contractor not later than the FIFTEENTH day of the SAME month. If an
Application for Payment is received after the application date fixed above,
payment shall be made by the Owner not later than FIFTEEN days after the
Architect receives the Application for Payment.
12.4 The Contractor will submit two copies of the Application of Payment
using Saunders Application INCLUDING SCHEDULE OF VALUES G702 for Payment Form
to the Architect not later than the first day of each month. Interim
applications will be made on a percentage completion basis of items listed in
the Schedule of Values submitted and agreed upon by all parties. The Contractor
will submit with each application except the first interim lien waivers from
all subcontractors and major material suppliers paid under the previous
application. Saunders Construction, Inc. will execute an interim lien waiver
upon receipt of each payment. Interim lien waivers do not cover unpaid
retainage or work in progress which has not been included in the payment
application.
<PAGE> 8
The final Application for Payment will include ALL SUCH AFFIDAVITS,
CERTIFICATES, CONSENTS AND STATEMENTS REQUIRED BY 9.10.2 OF SUPPLEMENTAL
CONDITIONS INCLUDING INSURANCE AND SUCH AFFIDAVITS OR CERTIFICATES AS OWNERS
LENDER MAY REASONABLY REQUIRE AND AN AFFIDAVIT TO ALLOW OWNERS TITLE COMPANY
TO REMOVE MECHANICS LIEN EXCEPTIONS OR HAVE SAID EXCEPTIONS BONDED OVER AND a
substantiation of costs, consisting of computer printouts. Records of all
Project costs will be kept at the main office of Saunders Construction, Inc.
for review by the Owner as required; all records will be maintained for at
least two years after the date of Substantial Completion of the Project. Final
lien waivers from Saunders Construction, Inc., subcontractors, and major
material suppliers will be exchanged for the final payment.
12.5 CONTRACTS WITH A GUARANTEED MAXIMUM PRICE
12.5.1 Each Application for Payment shall be based upon the most recent
Schedule of Values submitted by the Contractor in accordance with the Contract
Documents. The Schedule of Values shall allocate the entire Guaranteed Maximum
Price among the various portions of the Work, except that the Contractor's Fee
shall be shown as a single separate item. The Schedule of Values shall be
prepared in such form and supported by such data to substantiate its accuracy as
the Architect may require. This schedule, unless objected to by the Architect,
shall be used as a basis for reviewing the Contractor's Applications for
Payment.
12.5.2 Applications for Payment shall show the percentage completion of each
portion of the Work as of the end of the period covered by the Application for
Payment. The percentage completion shall be the lesser of (1) the percentage
of that portion of the Work which has actually been completed or (2) the
percentage obtained by dividing (a) the expense which has actually been
incurred by the Contractor on account of that portion of the Work for which the
Contractor has made or intends to make actual payment prior to the next
Application for Payment by (b) the share of the Guaranteed Maximum Price
allocated to that portion of the Work in the Schedule of Values.
12.5.3 Subject to other provisions of the Contract Documents, the amount of
each progress payment shall be computed as follows:
12.5.3.1 Take that portion of the Guaranteed Maximum Price properly allocable
to completed Work as determined by multiplying the percentage completion of
each portion of the Work by the share of the Guaranteed Maximum Price allocated
to that portion of the Work in the Schedule of Values. 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, even though the Guaranteed Maximum Price has not yet been adjusted
by Change Order.
12.5.3.2 Add that portion of the Guaranteed Maximum Price properly allocable
to materials and equipment delivered and suitably stored at the site for
subsequent incorporation in the Work or, if approved in advance by the Owner,
suitably stored off the site at a location agreed upon in writing.
12.5.3.3 Add the Contractor's Fee. The Contractor's Fee shall be computed upon
the Cost of the Work described in the two preceding Clauses at the rate stated
in Paragraph 5.1 or, if the Contractor's Fee is stated as a fixed sum in that
Paragraph, shall be an amount which bears the same ratio to that fixed-sum Fee
as the Cost of the Work in the two preceding Clauses bears to a reasonable
estimate of the probable Cost of the Work upon its completion.
12.5.3.3.1 Subtract the retainage as defined in Paragraph 12.5.4.
12.5.3.4 Subtract the aggregate of previous payments made by the Owner.
12.4.3.5 Subtract the shortfall, if any, indicated by the Contractor in the
documentation required by Paragraph 12.4 to substantiate prior Applications for
Payment, or resulting from errors subsequently discovered by the Owner's
accountants in such documentation.
12.5.3.6 Subtract amounts, if any, for which the Architect has withheld or
nullified a Certificate for Payment as provided in Paragraph 9.5 of the General
Conditions.
12.5.4 Retainage, if any, shall be as follows:
(If it is intended to retain additional amounts from progress payments to the
Contractor beyond (1) the retainage from the Contractor's fee provided in
Clause 12.5.3.3, (2) the retainage from Subcontractors provided in Paragraph
12.7 below, and (3) the retainage, if any, provided by other provisions of the
Contract, insert provision for such additional retainage here. Such provision,
if made, should also describe any arrangement for limiting or reducing the
amount retainage after the Work reaches a certain state of completion.)
A retainage of ten percent (10%) will be withheld from all payments until the
Project is fifty percent (50%) complete AS CERTIFIED BY THE ARCHITECT. Should
progress of the Work be acceptable to the Owner at
<PAGE> 9
this point, additional retainage will be withheld AT THE RATE OF 4% UNTIL FINAL
COMPLETION OF THE WORK, SUCH AT THE TIME OF FINAL PAYMENT THE MAXIMUM AMOUNT OF
RETAINAGE WILL NOT EXCEED SEVEN PERCENT (7%) OF THE SUM OF THE GUARANTEED
MAXIMUM COST AND CONTRACTOR'S FEE.
<PAGE> 10
12.8 Except with the Owner's prior approval, the Contractor shall not make
advance payments to suppliers for materials or equipment which have not been
delivered and stored at the site.
12.9 In taking action on the Contractor's Applications for Payment, the
Architect shall be entitled to rely on the accuracy and completeness of the
information furnished by the Contractor and shall not be deemed to represent
that the Architect has made a detailed examination, audit or arithmetic
verification of the documentation submitted in accordance with Paragraph 12.4 or
other supporting data; that the Architect has made exhaustive or continuous
on-site inspections or that the Architect has made examinations to ascertain how
or for what purposes the Contractor has used amounts previously paid on account
of the Contract. Such examinations, audits and verifications, if required by the
Owner, will be performed by the Owner's accountants acting in the sole interest
of the Owner.
ARTICLE 13
FINAL PAYMENT
13.1 Final payment shall be made by the Owner to the Contractor when (1) the
Contract has been fully performed by the Contractor except for the Contractor's
responsibility to correct defective or nonconforming Work, as provided in
Subparagraph 12.2.2 of the General Conditions, and to satisfy other
requirements, if any, which necessarily survive final payment; (2) a final
Application for Payment and a final accounting for the Cost of the Work have
been submitted by the Contractor and reviewed by the Owner's accountants; and
(3) a final Certificate for Payment has then been issued by the Architect; such
final payment shall be made by the Owner not more than 30 days after the
issuance of the Architect's final Certificate for Payment, or as follows:
AND ALL CONDITIONS OF ARTICLE 12.4 AND 9.10.2 OF SUPPLEMENTAL CONDITIONS HAVE
BEEN MET.
13.2 The amount of the final payment shall be calculated as follows:
13.2.1 Take the sum of the Cost of the Work substantiated by the Contractor's
final accounting and the Contractor's Fee; but not more than the Guaranteed
Maximum Price, if any.
13.2.2 Subtract amounts, if any, for which the Architect withholds, in whole or
in part, a final Certificate for Payment as provided in Subparagraph 9.5.1 of
the General Conditions or other provisions of the Contract Documents.
13.2.3 Subtract the aggregate of previous payments made by the Owner.
If the aggregate of previous payments made by the Owner exceeds the amount due
the Contractor, the Contractor shall reimburse the difference to the Owner.
13.3 The Owner's accountants will review and report in writing on the
Contractor's final accounting within 30 days after delivery of the final
accounting to the Architect by the Contractor. Based upon such Cost of Work as
the Owner's accountants report to be substantiated by the Contractor's final
accounting, and provided the other conditions of Paragraph 13.1 have been met,
the Architect will, within seven days after receipt of the written report of the
Owner's accountants, either issue to the Owner a final Certificate for Payment
with a copy to the Contractor, or notify the Contractor and Owner in writing of
the Architect's reasons for withholding a certificate as provided in
Subparagraph 9.5.1 of the General Conditions. The time periods stated in this
Paragraph 13.3 supersede those stated in Subparagraph 9.4.1 of the General
Conditions.
13.4 If the Owner's accountants report the Cost of Work as substantiated by
the Contractor's final accounting to be less than claimed by the Contractor, the
Contractor shall be entitled to demand arbitration of the disputed amount
without a further decision of the Architect. Such demand for arbitration shall
be made by the Contractor within 30 days after the Contractor's receipt of a
copy of the Architect's final Certificate for Payment; failure to demand
arbitration within this 30-day period shall result in the substantiated amount
reported by the Owner's accountants becoming binding on the Contractor. Pending
a final resolution by arbitration, the Owner shall pay the Contractor the amount
certified in the Architect's final Certificate for Payment.
13.5 If, subsequent to final payment and at the Owner's request, the
Contractor incurs costs described in Article 7 and not excluded by Article 8 to
correct defective or nonconforming Work, the Owner shall reimburse the
Contractor such costs and the Contractor's Fee applicable thereto on the same
basis as if such costs had been incurred prior to final payment, but not in
excess of the Guaranteed Maximum Price, if any. If the Contractor has
participated in savings as provided in Paragraph 5.2, the amount of such savings
shall be recalculated and appropriate credit given to the Owner in determining
the net amount to be paid by the Owner to the Contractor.
<PAGE> 11
13.6 THE CONTRACTOR SHALL NOT RECEIVE FINAL PAYMENT OF ANY AMOUNTS PAYABLE
BY THE CONTRACTOR TO SUBCONTRACTORS, LENDERS OR MATERIAL SUPPLIERS UNTIL SUCH
TIME AS: (i) ALL WORK IS PROPERLY COMPLETED, PUNCHLIST ITEMS ARE PROPERLY
CORRECTED AND COMPLETED, ALL WAIVERS OR RELEASE OF LIENS HAVE BEEN SUBMITTED,
ALL OPERATING MANUALS AND DRAWINGS RECEIVED, ALL DISPUTE, CLAIMS OR CREDITS
RESOLVED OR BONDED OVER; (ii) ALL CHANGE ORDERS EXECUTED; AND (iii) ALL OTHER
CONDITIONS TO FINAL PAYMENT SATISFIED.
ARTICLE 14
MISCELLANEOUS PROVISIONS
14.1 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.
14.2 Payments due and unpaid under the Contract shall bear interest from the
date payment is due at the rate stated below, or in the absence thereof, at the
legal rate prevailing from time to time at the place where the Project is
located.
(insert rate of interest agreed upon, if any.)
Interest will be paid at the prime interest plus ONE percent (1%) as
established by the Union Bank and Trust, 100 Broadway, Denver, Colorado.
(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.)
14.3 Other provisions:
14.3.1 Should the Owner elect to terminate the Contract without cause, the
Contractor shall be reimbursed for all costs due under Article 5 as of the date
of termination, any unavoidable costs of termination, and a PERCENTAGE amount
of the Contractor's Fee PROPORTIONAL TO THE VALUE OF THE WORK IN PLACE. In no
case shall the Contractor's fee be less than 20% of the estimated fee as of the
date of execution of this agreement and as modified by changes to the Agreement.
The Owner will not be entitled to use the Contractor's equipment without the
written agreement of the Contractor.
14.3.2 All reasonable attorney fees and/or legal expenses incurred by either
party to enforce the terms or provisions of this agreement shall be paid by the
party not prevailing in any such act.
14.3.3 The Contractor agrees to record all as-built information on a set of
construction documents at the jobsite. At the completion of the Project, the
Contractor will turn over to the Architect all notes of locations or details
which differ from the original Construction Documents or from written
modifications. The Contractor will not be responsible for transferring to the
as-built documents any addenda, clarifications, or changes documented by the
consultants.
14.3.4 The Owner agrees to indemnify and hold harmless Saunders Construction,
Inc., its employees and its subcontractors, for any and all claims, fines,
penalties, and legal costs including attorneys fees arising out of the
performance of the Work which may involve asbestos or other contaminants which
may exist on the Owner's property and is not a part of this agreement.
14.3.5 The Contractor reserves the right to reject changes in the Work which
would require the Contractor to include responsibilities not customarily
performed or managed by the Contractor or to reject the assignment by the Owner
of any subcontractor to this agreement based on the Contractor's reasonable
assessment of the Subcontractor's qualifications.
14.3.6 The Contractor agrees to provide submittals consisting of samples,
colors, product specifications and details; the Contractor is not responsible
to provide architectural or engineering design details not indicated in the
Contract Documents except to demonstrate compliance with current design or to
support the design professionals in resolving details.
14.3.7 NO MEMBER OF THE OWNER OR ANY EMPLOYEES, OFFICERS, DIRECTORS,
STOCKHOLDERS OR AFFILIATES THEREOF SHALL BE PERSONALLY LIABLE FOR THE
OBSERVANCE OR PERFORMANCE OF ANY OF THE OWNER'S OBLIGATIONS HEREUNDER, ALL SUCH
LIABILITY BEING STRICTLY LIMITED TO CONCEPTS DIRECT, INC. AS A CORPORATE ENTITY.
<PAGE> 12
14.3.8 THE CONTRACTORS PROJECT MANAGER AND PROJECT ADMINISTRATOR'S TIME WILL BE
CHARGED TO THE COST OF THE WORK WHEN IN TRANSIT TO AND WHEN SPENDING TIME AT THE
JOBSITE.
ARTICLE 15
TERMINATION OR SUSPENSION
15.1 The Contract may be terminated by the Contractor as provided in Article
14 of the General Conditions; however, the amount to be paid to the Contractor
under Subparagraph 14.1.2 of the General Conditions shall not exceed the amount
the Contractor would be entitled to receive under Paragraph 15.3 below, except
that the Contractor's Fee shall be calculated as if the Work had been fully
completed by the Contractor, including a reasonable estimate of the Cost of the
Work for Work not actually completed.
15.2 If a Guaranteed Maximum Price is established in Article 5, the Contract
may be terminated by the Owner for cause as provided in Article 14 of the
General Conditions; however, the amount, if any, to be paid to the Contractor
under Subparagraph 14.2.4 of the General Conditions shall not cause the
Guaranteed Maximum Price to be exceeded, nor shall it exceed the amount the
Contractor would be entitled to receive under Paragraph 15.3 below.
15.3 If no Guaranteed Maximum Price is established in Article 5, the Contract
may be terminated by the Owner for cause as provided in Article 14 of the
General Conditions; however, the Owner shall then pay the Contractor an amount
calculated as follows:
15.3.1 Take the Cost of the Work incurred by the Contractor to the date of
termination.
15.3.2 Add the Contractor's Fee computed upon the Cost of Work to the date of
termination at the rate stated in Paragraph 5.1 or, if the Contractor's Fee is
stated as a fixed sum in that Paragraph, an amount which bears the same ration
to that fixed-sum Fee as the Cost of the Work at the time of termination bears
to a reasonable estimate of the probable Cost of the Work upon its completion.
15.3.3 Subtract the aggregate of previous payments made by the Owner.
The Owner shall also pay the Contractor fair compensation, either by purchase or
rental at the election of the Owner, for any equipment owned by the Contractor
which the Owner elects to retain and which is not otherwise included in the Cost
of the Work under Subparagraph 15.3.1. To the extent that the Owner elects to
take legal assignment of subcontracts and purchase orders (including rental
agreements), the Contractor shall, as a condition of receiving the payments
referred to in this Article 15, execute and deliver all such papers and take all
such steps, including the legal assignment of such subcontracts and other
contractual rights of the Contractor, as the Owner may require for the purpose
of fully vesting in the Owner the rights and benefits of the Contractor under
such subcontracts or purchase orders.
15.4 The Work may be suspended by the Owner as provided in Article 14 of the
General Conditions; in such case, the Guaranteed Maximum Price, if any, shall be
increased as provided in Subparagraph 14.3.2 of the General Conditions except
that the term "cost of performance of the Contract" in that Subparagraph shall
be understood to mean the Cost of the Work and the term "profit" shall be
understood to mean the Contractor's Fee as described in Paragraphs 5.1 and 6.3
of this Agreement.
ARTICLE 16
ENUMERATION OF CONTRACT DOCUMENTS
16.1 The Contract Documents, except for Modifications issued after execution
of this Agreement, are enumerated as follows:
16.1.1 The Agreement is this executed Standard Form of Agreement Between Owner
and Contractor, SCI 111, 1995 Edition.
16.1.2 The General Conditions are the General Conditions of the Contract for
Construction, AIA Document A201, 1987 Edition.
16.1.3 The Supplementary and other Conditions of the Contract are those
contained in the Project Manual dated ___________________, and are as follows:
<PAGE> 13
Document Title Pages
REFER TO ATTACHMENT "A"
16.1.4 The Specifications are those contained in the Project Manual dated as
in Paragraph 16.1.3, and are as follows:
(Either list the Specifications here or refer to an exhibit attached to this
Agreement.)
Section Title Pages
REFER TO ATTACHMENT "A"
16.1.5 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 Date
REFER TO ATTACHMENT "A"
16.1.6 The Addenda, if any, are as follows:
Number Date Pages
REFER TO ATTACHMENT "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 16
<PAGE> 14
16.1.7 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 Contractors 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.)
ATTACHMENT "A" - List of Contract documents
Attachment "B" - Budget/Qualifications, dated 5/1/97.
SUPPLEMENTAL CONDITIONS
This Agreement is entered into as of the day and year first written above and
is executed in at least three original copies of which one is to be delivered to
the Contractor, one to the Architect for use in the administration of the
Contract, and the remainder to the Owner.
OWNER CONTRACTOR
SAUNDERS CONSTRUCTION, INC.
/S/ PHILLIP A. WILAND /S/ DARRELL EASTWOOD
- --------------------------------- -------------------------------------
(Signature) (Signature)
Phillip A. Wiland, Chairman & CEO Darrell Eastwood, Project Executive
- --------------------------------- -------------------------------------
(Printed Name & Title) (Printed Name & Title)
PM /s/PM PCS/s/PCS
------ ------
<PAGE> 15
T H E A M E R I C A N I N S T I T U T E O F A R C H I T E C T S
[LOGO]
- --------------------------------------------------------------------------------
AIA Document A201
GENERAL CONDITIONS OF THE CONTRACT
FOR CONSTRUCTION
THIS DOCUMENT HAS IMPORTANT LEGAL CONSEQUENCES; CONSULTATION
WITH AN ATTORNEY IS ENCOURAGED WITH RESPECT TO ITS MODIFICATION
- --------------------------------------------------------------------------------
1987 EDITION
TABLE OF ARTICLES
1. GENERAL PROVISIONS
2. OWNER
3. CONTRACTOR
4. ADMINISTRATION OF THE CONTRACT
5. SUBCONTRACTORS
6. CONSTRUCTION BY OWNER OR BY
SEPARATE 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
This document has been approved and endorsed by the
Associated General Contractors of America.
Copyright 1911, 1915, 1918, 1925, 1937, 1951, 1958, 1961, 1963, 1966, 1967,
1970, 1976, (c) 1987 by The American Institute of Architects, 1735 New York
Avenue, N.W., Washington, D.C. 20006. Reproduction of the material herein or
substantial quotation of its provisions without written permission of the AIA
violates the copyright laws of the United States and will be subject to legal
prosecutions.
- --------------------------------------------------------------------------------
AIA DOCUMENT A201 - GENERAL CONDITIONS OF THE CONTRACT FOR CONSTRUCTION -
FOURTEENTH EDITION AIA - (c) 1987 THE AMERICAN INSTITUTE OF ARCHITECTS, 1735
NEW YORK AVENUE, N.W., WASHINGTON, D.C. 20006
A201-1987 1
<PAGE> 16
INDEX
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<TABLE>
<S> <C>
Acceptance of Nonconforming Work.............................. 9.6.6, 9.9.3, 12.3
Acceptance of Work ........................................... 9.6.6, 9.8.2, 9.9.3, 9.10.1, 9.10.3
Access to Work .............................................. 3.16, 6.2.1, 12.1
Accident Prevention .......................................... 4.2.3, 10
Acts and Omissions ........................................... 3.2.1, 3.2.2, 3.3.2, 3.12.8, 3.18, 4.2.3, 4.3.2, 4.3.9, 8.3.1,
10.1.4, 10.2.5, 13.4.2, 13.7, 14.1
Addenda ...................................................... 1.1.1.3.11
Additional Cost, Claims for .................................. 4.3.6, 4.3.7, 4.3.9, 6.1.1, 10.3.
Additional Inspections and Testing ........................... 4.2.6, 9.8.2, 12.2.1, 13.5
Additional Time, Claims for .................................. 4.3.6, 4.3.8, 4.3.9, 8.3.2
ADMINISTRATION OF THE CONTRACT ............................... 3.3.3.4, 9.4, 9.5
Advertisement or Invitation to Bid ........................... 1.1.1
Aesthetic Effect ............................................. 4.2.13, 4.5.1
Allowances ................................................... 3.8
All-risk Insurance ........................................... 11.3.1.1
Applications for Payment ..................................... 4.2.5, 7.3.7, 9.2, 9.3, 9.4, 9.5.1, 9.6.3, 9.8.3, 9.10.1, 9.10.3,
9.10.4, 11.1.3, 14.2.4
Approvals .................................................... 2.4, 3.3.3, 3.5.3, 10.2, 3.12.4 through 3.12.8, 3.18.3, 4.2.7,
9.3.2, 11.3.1.4, 13.4.2, 13.5
Arbitration .................................................. 4.1.4, 4.3.2, 4.3.4, 4.4.4, 4.5, 8.3.1, 10.1.2, 11.3.9, 11.3.10
Architect .................................................... 4.1
Architect, Definition of ..................................... 4.1.1
Architect, Extent of Authority ............................... 2.4.3.12.6, 4.2, 4.3.2, 4.3.6, 4.4, 5.2, 6.3, 7.1.2, 7.2.1, 7.3.6,
7.4, 9.2, 9.3.1, 9.4, 9.5, 9.6.3, 9.8.2, 9.8.3, 9.10.1, 9.10.3,
12.1, 12.2.1, 13.5.1, 13.5.2, 14.2.2, 14.2.4
Architect, Limitations of Authority and Responsibility........ 3.3.3, 3.12.8, 3.12.11, 4.1.2, 4.2.1, 4.2.2, 4.2.3, 4.2.6, 4.2.7,
4.2.10, 4.2.12, 4.2.13, 4.3.2, 5.2.1, 7.4, 9.4.2, 9.6.4, 9.6.6
Architect's Additional Services and Expenses ................. 2.4, 9.8.2, 11.3.1.1, 12.2.1, 12.2.4, 13.5.2, 13.5.3, 14.2.4
Architect's Administration of the Contract ................... 4.2, 4.3.6, 4.3.7, 4.4, 9.4, 9.5
Architect's Approvals ........................................ 2.4, 3.5.1, 3.10.2, 3.12.6, 3.12.8, 3.18.3, 4.2.7
Architect's Authority to Reject Work ......................... 3.5.1, 4.2.6, 12.1.2, 12.2.1
Architect's Copyright ........................................ 1.3
Architect's Decisions ........................................ 4.2.6, 4.2.7, 4.2.11, 4.2.12, 4.2.13, 4.3.2., 4.3.6, 4.4.41, 4.4.4,
3.4.5, 6.3, 7.3.6, 7.3.8, 8.1.3, 8.3.1, 9.2, 9.4, 9.5.1, 9.8.2,
9.9.1, 10.1.2, 13.5.2, 14.2.2, 14.2.4
Architect's Inspections ...................................... 4.2.2, 4.2.9, 4.3.6, 9.4.2, 9.8.2
Architect's Instructions ..................................... 4.2.6, 4.2.7, 4.2.8, 4.3.7, 7.4.1, 12.1, 13.5.2
Architect's Interpretations .................................. 4.2.11, 4.2.12, 4.3.7
Architect's On-Site Observations ............................. 4.2.2, 4.2.5,. 4.3.6, 9.4.2, 9.5.1, 9.10.1, 13.5
Architect's Project Representative ........................... 4.2.10
Architect's Relationship with Contractor...................... 1.1.2, 3.2.1, 3.2.2, 3.3.3, 3.5.1, 3.7.3, 3.11, 3.12.8,
3.12.11, 3.16, 3.18, 4.2.3, 4.2.4, 4.2.6, 4.2.12, 5.2, 6.2.2,
7.3.4, 9.8.2, 11.3.7.
Architect's Relationship with Subcontractors ................. 1.1.2, 3.2.1, 3.2.2, 3.3.3, 3.5.1, 3.7.3, 3.11, 3.12.8, 3.12.11,
3.16, 3.18, 4.2.3, 4.2.4, 4.2.6, 5.2.12, 5.2, 6.2.2, 7.3.4, 9.8.2,
11.3.7, 12.1, 13.5
Architect's Representations .................................. 9.4.2, 9.5.1, 9.10.1
Architect's Site Visits ...................................... 4.2.2, 4.2.5, 4.2.9, 4.3.6, 9.4.2, 9.5.1, 9.8.2, 9.9.2, 9.10.1, 13.5
Asbestos ..................................................... 10.1
Attorneys' Fees .............................................. 3.18.1, 9.10.2, 10.1.4
Award of Separate Contracts .................................. 6.1.1
Award of Subcontracts and Other Contracts
for Portions of the Work ................................... 5.2
Basic Definitions ............................................ 1.1
Bidding Requirements ......................................... 1.1.1, 1.1.7, 5.2.1, 11.4.1
Boiler and Machinery Insurance ................................ 11.3.2
Bonds, Lien .................................................. 9.10.2
Bonds, Performance and Payment ............................... 7.3.6.4, 9.10.3, 11.3.9, 11.4
Building Permit .............................................. 3.7.1
Capitalization ............................................... 1.4
Certificate of Substantial Completion ........................ 9.8.2
Certificates for Payment ..................................... 4.2.5, 4.2.9, 9.3.3, 9.4, 9.5, 9.6.1, 9.6.6, 9.7.1. 9.8.3., 9.10.1,
9.10.3, 13.7, 14.1.1.3, 14.2.4
Certificates of Inspection, Testing or Approval .............. 3.12.11, 13.5.4
Certificates of Insurance .................................... 9.3.2, 9.10.2, 11.1.3
Change Orders ................................................ 1.1.1, 2.4.1, 3.8.2.4.3.11, 4.2.8, 4.3.3, 5.2.3, 7.1, 7.2, 7.3.2,
8.3.1, 9.3.1.1, 9.10.3, 11.3.1.2, 11.3.4, 11.3.9, 12.1.2
Change Orders, Definition of ................................. 7.2.1
Changes ...................................................... 7.1
CHANGES IN THE WORK .......................................... 3.11, 4.2.8, 7, 8.3.1, 9.3.1.1, 10.1.3
Claim, Definition of ......................................... 4.3.1
Claims and Disputes .......................................... 4.3, 4.4, 4.5, 6.2.5, 8.3.2, 9.3.1.2, 9.3.3, 9.10.4, 10.1.4
Claims and Timely Assertion of Claims ........................ 4.5.6
Claims for Additional Cost ................................... 4.3.6, 4.3.7, 4.3.9, 6.1.1, 10.3
Claims for Additional Time ................................... 4.3.6, 4.3.8, 4.3.9, 8.3.2
Claims for Concealed or Unknown Conditions ................... 4.3.6
Claims for Damages ........................................... 3.18, 4.3.9, 6.1.1, 6.2.5, 8.3.2, 9.5.1.2, 10.1.4
Claims Subject to Arbitration ................................ 4.3.2, 4.4.4, 4.5.1
Cleaning Up .................................................. 3.15, 6.3
Commencement of Statutory Limitation Period .................. 13.7
Commencement of the Work, Conditions Relating to ............. 2.1.2, 2.2.1, 3.2.1, 3.2.2, 3.7.1, 3.10.1, 3.12.6, 4.3.7, 5.2.1,
6.2.2, 8.1.2, 8.2.2, 9.2, 11.1.3, 11.3.6, 11.4.1
Commencement of the Work, Definition of ...................... 8.1.2
Communications Facilitating Contract Administration .......... 3.9.1, 4.2.4, 5.2.1
Completion, Conditions Relating to ........................... 3.11, 3.15, 4.2.2, 4.2.9, 4.3.2, 9.4.2, 9.8, 9.9.1, 9.10, 11.3.5,
12.2.2, 13.7.1
COMPLETION, PAYMENTS AND ..................................... 9
Completion, Substantial ...................................... 4.2.9, 4.3.5.2, 8.1.3, 8.2.3, 9.8, 9.9.1, 12.2.2, 13.7
Compliance with Laws ......................................... 1.3, 3.6, 3.7, 3.13., 4.1.1, 10.2.2, 11.1, 11.3, 13.1, 13.5.1,
13.5.2, 13.6, 14.1.1, 14.2.1.3
Concealed or Unknown Conditions .............................. 4.3.6
Conditions of the Contract ................................... 1.1.1, 1.1.7, 6.1.1
Consent, Written ............................................. 1.3.1, 3.12.8, 3.14.2, 4.1.2, 4.3.4, 4.5.5, 9.3.2, 9.8.2, 9.9.1,
9.10.2, 9.10.3, 10.1.2, 10.1.3, 11.3.1, 11.3.1.4, 11.3.11, 13.2,
13.4.2
CONSTRUCTION BY OWNER OR BY SEPARATE CONTRACTORS ............. 1.1.4.6
Construction Change Directive, Definition of ................. 7.3.1
Construction Change Directives ............................... 1.1.1, 4.2.8, 7.1.7.3, 9.3.1.1
Construction Schedules, Contractor's ......................... 3.10, 6.1.3
Contingent Assignment of Subcontracts ........................ 5.4
Continuing Contract Performance .............................. 4.3.4
Contract, Definition of ...................................... 1.1.2
CONTRACT, TERMINATION OR SUSPENSION OF THE ................... 4.3.7, 5.4.1.1, 14
Contract Administration ...................................... 3.3.3, 4.9.4, 9.5
Contract Award and Execution, Conditions Relating to ......... 3.7.1, 3.10, 5.2, 9.2, 11.1.3, 11.3.6, 11.4.1
Contract Documents, The ...................................... 1.1, 1.2, 7
Contract Documents, Copies Furnished and Use of .............. 1.3, 2.2.5, 5.3
Contract Documents, Definition of ............................ 1.1.1
Contract Performance During Arbitration ...................... 4.3.4, 4.5.3
Contract Sum ................................................. 3.8, 4.3.6, 4.3.7, 4.4.4, 5.2.3, 6.1.3, 7.2, 7.3, 9.1, 9.7, 11.3.1,
12.2.4, 12.2.4, 12.3, 14.2.4
Contract Sum, Definition of .................................. 9.1
Contract Time ................................................ 4.3.6, 4.3.8, 4.4.4, 7.2.1.3, 7.3, 8.2.1, 8.3.1, 9.7, 12.1.1
Contract Time, Definition of ................................. 8.1.1
- ------------------------------------------------------------------------------------------------------------------------------------
AIA DOCUMENT A201 - GENERAL CONDITIONS OF THE CONTRACT FOR CONSTRUCTION - FOURTEENTH EDITION
AIA - (C) 1987 THE AMERICAN INSTITUTE OF ARCHITECTS, 1735 NEW YORK AVENUE, N.W., WASHINGTON, D.C. 20006
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CONTRACTOR........................................................................... 3
Contractor, Definition of............................................................ 3.7, 6.1.2
Contractor's Bid..................................................................... 1.1.1
Contractor's Construction Schedules.................................................. 3.10, 6.1.3
Contractor's Employees............................................................... 3.3.2, 3.4.2, 3.8.1, 3.9.3.18, 4.2.3,
4.2.6, 8.1.2, 10.2, 10.3, 11.1.1, 14.2.1.1
Contractor's Liability insurance..................................................... 11.1
Contractor's Relationship with Separate Contractors and
Owner's Forces..................................................................... 2.2.6, 3.12.5, 3.14.2, 4.2.4.6, 12.2.5
Contractor's Relationship with Subcontractors........................................ 1.2.4, 3.3.2, 3.18.1, 3.18.2., 5.2,
5.3, 5.4, 9.6.2, 11.3.7, 11.3.8, 14.2.1.2
Contractor's Relationship with the Architect......................................... 1.1.2, 3.2.1, 3.2.2, 3.3.3, 3.5.1, 3.7.3,
3.11, 3.12.8, 3.16, 3.18, 4.2.3,
4.2.4, 4.2.6, 4.2.12, 5.2, 6.2.2, 7.3.4,
9.8.2, 11.3.7, 12.1, 13.5
Contractor's Representations......................................................... 1.2.2, 3.5.1, 3.12.7, 6.2.2, 8.2.1, 9.3.3
Contractor's Responsibility for Those
Performing the Work................................................................ 3.3.2, 3.18, 4.2.3, 10
Contractor's Review of Contract Documents............................................ 1.2.2, 3.2, 3.7.3
Contractor's Right to Stop the Work.................................................. 9.7
Contractor's Right to Terminate the Contract......................................... 14.1
Contractor's Submittals.............................................................. 3.10, 3.11, 3.12, 4.2.7, 5.2.1, 5.2.3,
7.3.6, 9.2, 9.3.1, 9.8.2, 9.9.1, 9.10.2.
9.10.3, 10.1.2, 11.4.2, 11.4.3
Contractor's Superintendent.......................................................... 3.9, 10.2.6
Contractor's Supervision and Construction Procedures................................. 1.2.4, 3.3, 3.4, 4.2.3, 8.2.2, 8.2.3, 10
Contractual Liability Insurance...................................................... 11.1.1.7, 11.2.1
Coordination and Correlation......................................................... 1.2.2, 1.2.4, 3.3.1, 3.10, 3.12.7, 6.1.3,
6.2.1
Copies Furnished of Drawings and Specifications...................................... 1.3, 2.2.5, 3.11
Correction of Work................................................................... 2.3.2.4, 4.2.1, 9.8.2, 9.9.1, 12.1.2,
12.2, 13.7.1.3
Cost, Definition of.................................................................. 7.3.6, 14.3.5
Costs................................................................................ 2.4, 3.2.1, 3.7.4, 3.8.2, 3.15.2, 4.3.6,
4.3.7, 4.3.8.1, 5.2.3, 6.1.1, 6.2.3, 6.3,
7.3.3.3, 7.3.6, 7.3.7, 9.7, 9.8.2,
9.10.2, 11.3.1.2, 11.3.1.3, 11.3.4, 11.3.9,
12.1, 12.2.1, 12.2.4, 12.2.5, 13.5, 14
Cutting and Patching ................................................................ 3.14, 6.2.6
Damage to Construction of Owner or Separate Contractors.............................. 3.14.2, 6.2.4, 9.5.1.5, 10.2.1.2, 10.2.5,
10.3, 11.1, 11.3, 12.2.5
Damage to the Work................................................................... 3.14.2, 9.9.1, 10.2.1.2, 10.2.5, 10.3,
11.3
Damages Claims for................................................................... 3.18, 4.3.9, 6.1.1, 6.2.5, 8.3.2, 9.5.1.2,
10.1.4
Damages for Delay.................................................................... 6.1.1, 8.3.3, 9.5.1.6, 9.7
Date of Commencement of the Work. Definition of...................................... 8.1.2
Date of Substantial Completion, Definition of........................................ 8.1.3
Day, Definition of................................................................... 8.1.4
Decisions of the Architect........................................................... 4.2.6, 4.2.7, 4.2.11, 4.2.12, 4.2.13,
4.3.2 4.3.6, 4.4.1, 4.4.4, 4.5, 6.3,
7.3.6, 7.3.8, 8.1.3, 8.3.1, 9.2, 9.4,
9.5.1, 9.8.2, 9.9.1, 10.1.2, 13.5.2,
14.2.2, 14.2.4
Decisions to Withhold Certification.................................................. 9.5, 9.7, 14.1.1.3
Defective or Nonconforming Work, Acceptance Rejection and Correction of.............. 2.3, 2.4, 3.5.1.4.2.1, 4.2.6, 4.3.5,
9.5.2, 9.8.2, 9.9.1, 10.2.5, 12. 13.7.1.3
Defective Work, Definition of........................................................ 3.5.1
Definitions.......................................................................... 1.1.2.1.1, 3.1, 3.5.1.3.12.1, 3.12.1,
3.12.2, 3.12.3, 4.1.1, 4.3.1, 5.1, 6.1.2,
7.2.1, 7.3.1, 7.3.6, 8.1, 9.1, 9.8.1
Delays and Extensions of Time........................................................ 4.3.1, 4.3.8.1, 4.3.8.2, 6.1.1, 6.2.3,
7.2.1, 7.3.1, 7.3.4, 7.3.5, 7.3.8, 7.3.9,
8.1.1, 8.3, 10.3.1, 14.1.1.4
Disputes............................................................................. 4.1.4, 4.3.4.4, 4.5, 6.2.5, 6.3, 7.3.8,
9.3.1.2
Documents and Samples at the Site.................................................... 3.11
Drawings, Definition of............................................................... 1.1.5
Drawings and Specifications. Use and Ownership of................................... 1.1.1, 1.3, 2.2.5, 3.11, 5.3
Duty to Review Contract Documents and Field Conditions............................... 3.2
Effective Date of Insurance.......................................................... 8.2.2, 11.1.2
Emergencies.......................................................................... 4.3.7, 10.3
Employees, Contractor's.............................................................. 3.3.2, 3.4.2, 3.8.1, 3.9, 3.18.1, 3.18.2,
4.2.3, 4.2.6, 8.1.2, 10.2, 10.3, 11.1.1,
14.2.1.1
Equipment, Labor Materials and....................................................... 1.1.3, 1.1.6, 3.4, 3.5.1, 3.8.2, 3.12.3,
3.12.7 3.12.11, 3.13, 3.15.1, 4.2.7,
6.2.1, 7.3.6, 9.3.2, 9.3.3, 11.3, 12.2.4,
14
Execution and Progress of the Work................................................... 1.1.3, 1.2.3, 3.2, 3.4.1, 3.5.1, 4.2.2,
4.2.3, 4.3.4, 4.3.8, 6.2.2, 7.13, 7.3.9,
8.2, 8.3, 9.5, 9.9.1, 10.2, 14.2, 14.3
Execution, Correlation and Intent of the Contract Documents.......................... 1.2, 3.7.1
Extensions of Time................................................................... 4.3.1, 4.3.8, 7.2.1.3, 8.3, 10.3.1
Failure of Payment by Contractor..................................................... 9.5.1.3, 14.2.1.2
Failure of Payment by Owner.......................................................... 4.3.7, 9.7, 14.1.3
Faulty Work (See Defective or Nonconforming Work)
Final Completion and Final Payment................................................... 4.2.1, 4.2.9, 4.3.2, 4.3.5, 9.10, 11.1.2,
11.1.3, 11.3.5, 12.3.1, 13.7
Financial Arrangements, Owner's...................................................... 2.2.1
Fire and Extended Coverage Insurance.................................................. 11.3
GENERAL PROVISIONS................................................................... 1
Governing Law........................................................................ 13.1
Guarantees (See Warranty and Warranties)
Hazardous Materials.................................................................. 10.1, 10.2.4
Identification of Contract Documents................................................. 1.2.1
Identification of Subcontractors and Suppliers....................................... 5.2.1
Indemnification...................................................................... 3.17, 3.19, 9.10.2, 10.1.4, 11.3.1.2,
11.3.7
Information and Services Required of the Owner....................................... 2.1.2, 2.2 4.3.4, 6.1.3, 6.1.4, 6.2.6,
9.3.2, 9.6.1, 9.6.4, 9.8.3, 9.9.2,
9.10.3, 10.1.4, 11.2, 11.3, 13.5.1, 13.5.2
Injury or Damage to Person or Property............................................... 4.3.9
Inspections.......................................................................... 3.3.3, 3.3, 4.3, 7.1, 4.2.2, 4.2.6, 4.2.9
4.3.6, 9.4.2, 9.8.2, 9.9.2, 9.10.1, 13.5
Instructions to Bidders.............................................................. 1.1.1
Instructions to the Contractor....................................................... 3.8.1, 4.2.8, 5.2.1.7, 12.1, 13.5.2
Insurance............................................................................ 4.3.9, 6.1.1, 7.3.6.4, 9.3.2, 9.8.2,
9.9.1, 9.10.2, 11
Insurance Boiler and Machinery....................................................... 11.3.2
Insurance, Contractor's Liability.................................................... 11.1
Insurance, Effective Date of......................................................... 8.2.2, 11.1.2
Insurance, Loss of Use............................................................... 11.3.3
Insurance, Owner's Liability......................................................... 11.2
Insurance, Property.................................................................. 10.2.5, 11.3
Insurance, Stored Materials.......................................................... 9.3.2, 11.3.1.4
INSURANCE AND BONDS.................................................................. 11
Insurance Companies, Consent to Partial Occupancy.................................... 9.9.1, 11.3.11
Insurance Companies, Settlement with................................................. 11.3.10
Intent of the Contract Documents..................................................... 1.2.3, 3.12.4, 4.2.6, 4.2.7, 4.2.12,
4.2.13, 7.4
Interest............................................................................. 13.6
Interpretation....................................................................... 1.2.5, 1.4, 1.5, 4.1.1, 4.3.1, 5.1,
6.1.2, 8.1.4
Interpretations, Written............................................................. 4.2.11, 4.2.12, 4.3.7
Joinder and Consolidation of Claims Required......................................... 4.5.6
Judgment on Final Award.............................................................. 4.5.1, 4.5.4.1, 4.5.7
Labor and Materials, Equipment....................................................... 1.1.3, 1.1.6, 3.4, 3.5.1, 3.8.2, 3.12.2,
3.12.3, 3.12.7, 3.12, 11.3, 13,
3.15.1, 4.2.7, 6.2.1, 7.3.6, 9.3.2,
9.3.3, 12.2.4, 14
Labor Disputes....................................................................... 8.3.1
Laws and Regulations................................................................. 1.3, 3.6, 3.7, 3.13, 4.1.1, 4.5.5, 4.5.7,
9.9.1, 10.2.2, 11.1, 11.3, 13.1, 13.4,
13.5.1, 13.5.2, 13.6
Liens................................................................................ 2.1.2, 4.3.2, 4.3.5.1, 8.2.2, 9.3.3, 9.10.2
Limitation on Consolidation of Joinder............................................... 4.5.5
Limitations, Statutes of............................................................. 4.5.4.2, 12.2.6, 13.7
Limitations, of Authority............................................................ 3.3.1, 4.1.2, 4.2.1, 4.2.3, 4.2.7, 4.2.10,
5.2.2, 5.2.4, 7.4, 11.3.10
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Limitations of Liability................................. 2.3, 3.2.1, 3.5.1, 3.7.3, 3.12.8, 3.12.11,
3.17, 3.18, 4.2.6, 4.2.7, 4.2.12 6.2.2, 9.4.2, 9.6.4, 9.10.4,
10.1.4, 10.2.5, 11.1.2, 11.2.1, 11.3.7, 13.4.2, 13.5.2
Limitations of Time, General............................. 2.2.1, 2.2.4, 3.2.1, 3.7.3,
3.8.3, 3.10, 3.12.5, 3.15.1, 4.2.1, 4.2.7, 4.2.11, 4.3.2,
4.3.3, 4.3.4, 4.3.6, 4.3.9, 4.5.4.2, 5.2.1, 5.2.3, 6.2.4, 7.3.4, 7.4,
8.2, 9.5, 9.6.2, 9.8, 9.9, 9.10, 11.1.3, 11.3.1, 11.3.2, 11.3.5,
11.3.6, 12.2.1, 12.2.2, 13.5, 13.7
Limitations of Time, Specific........................... 2.1.2, 2.2.1, 2.4, 3.10, 3.11,
3.15.1, 4.2.1, 4.2.11, 4.3, 4.4, 4.5, 5.3, 5.4, 7.3.5, 7.3.9, 8.2,
9.2, 9.3.1, 9.3.3, 9.4.1, 9.6.1, 9.7, 9.8.2, 9.10.2, 11.1.3, 11.3.6,
11.3.10, 11.3.11, 12.2.2, 12.2.4, 12.2.6, 13.7, 14
Loss of Use Insurance................................... 11.3.3
Material Suppliers...................................... 1.3.1, 3.12.1, 4.2.4, 4.2.6, 5.2.1,
9.3.1, 9.3.1.2, 9.3.3, 9.4.2, 9.6.5, 9.10.4
Materials, Hazardous.................................... 10.1, 10.2.4
Materials, Labor, Equipment and......................... 1.1.3, 1.1.6, 3.4, 3.5.1, 3.8.2,
3.12.2, 3.12.3, 3.12.7, 3.12.11, 3.13, 3.15.1, 4.2.7, 6.2.1
7.3.6, 9.3.2, 9.3.3, 12.2.4, 14
Means, Methods, Techniques, Sequences and
Procedures of Construction........................... 3.3.1, 4.2.3, 4.2.7, 9.4.2
Minor Changes in the Work.............................. 1.1.1, 4.2.8, 4.3.7, 7.1, 7.4
MISCELLANEOUS PROVISIONS............................... 13
Modifications, Definition of........................... 1.1.1
Modifications to the Contract.......................... 1.1.1, 1.1.2, 3.7.3, 3.11,
4.1.2, 4.2.1, 5.2.3, 7, 8.3.1, 9.7
Mutual Responsibility.................................. 6.2
Nonconforming Work, Acceptance of...................... 12.3
Nonconforming Work, Rejection and Correction of........ 2.3.1,
4.3.5, 9.5.2, 9.8.2, 12, 13.7.1.3
Notice.................................................. 2.3, 2.4, 3.2.1, 3.2.2, 3.7.3, 3.7.4, 3.9, 3.12.8,
3.12.9, 3.17, 4.3, 4.4.4, 4.5, 5.2.1, 5.3, 5.4.1.1, 8.2.2, 9.4.1,
9.5.1, 9.6.1, 9.7, 9.10, 10.1.2, 10.2.6, 11.1.3, 11.3, 12.2.2,
12.2.4, 13.3, 13.5.1, 13.5.2, 14
Notice, Written......................................... 2.3, 2.4, 3.9, 3.12.8, 3.12.9, 4.3,
4.4.4, 4.5, 5.2.1, 5.3, 5.4.1.1, 8.2.2, 9.4.1, 9.5.1, 9.7, 9.10,
10.1.2, 10.2.6, 11.1.3, 11.3, 12.2.2, 12.2.4, 13.3, 13.5.2, 14
Notice of Testing and Inspections....................... 13.5.1, 13.5.2
Notice to Proceed....................................... 8.2.2
Notices, Permits, Fees and.............................. 2.2.3, 3.7, 3.13, 7.3.6.4, 10.2.2
Observations, Architect's On-Site....................... 4.2.2, 4.2.5,
4.3.6, 9.4.2, 9.5.1, 9.10.1, 13.5
Observations, Contractor's............................. 1.2.2, 3.2.2
Occupancy............................................... 9.6.6, 9.8.1, 9.9, 11.3.11
On-Site Inspections by the Architect.................... 4.2.2, 4.2.9, 4.3.6,
9.4.2, 9.8.2, 9.9.2, 9.10.1
On-Site Observations by the Architect................... 4.2.2, 4.2.5, 4.3.6,
9.4.2, 9.5.1, 9.10.1, 13.5
Orders, Written......................................... 2.3, 3.9, 4.3.7, 7, 8.2.2, 11.3.9, 12.1,
12.2, 13.5.2, 14.3.1
OWNER................................................... 2
Owner, Definition of.................................... 2.1
Owner, Information and Services Required of the......... 2.1.2,
2.2, 4.3.4, 6, 9, 10.1.4, 11.2, 11.3, 13.5.1, 14.1.1.5, 14.1.3
Owner's Authority....................................... 3.8.1, 4.1.3, 4.2.9, 5.2.1, 5.2.4, 5.4.1,
7.3.1, 8.2.2, 9.3.1, 9.3.2, 11.4.1, 12.2.4, 13.5.2, 14.2, 14.3.1
Owner's Financial Capability............................ 2.2.1, 14.1.1.5
Owner's Liability Insurance............................. 11.2
Owner's Loss of Use Insurance........................... 11.3.3
Owner's Relationship with Subcontractors................ 1.1.2,
5.2.1, 5.4.1, 9.6.4
Owner's Right to Carry Out the Work..................... 2.4, 12.2.4, 14.2.2.2
Owner's Right to Clean Up............................... 6.3
Owner's Right to Perform Construction and to
Award Separate Contracts.............................. 6.1
Owner's Right to Stop the Work.......................... 2.3, 4.3.7
Owner's Right to Suspend the Work....................... 14.3
Owner's Right to Terminate the Contract................ 14.2
Ownership and Use of Architect's Drawings, Specifications
and Other Documents................................... 1.1.1, 1.3, 2.2.5, 5.3
Partial Occupancy or Use................................ 9.6.6, 9.9, 11.3.11
Patching, Cutting and................................... 3.14, 6.2.6
Patents, Royalties and.................................. 3.17
Payment, Applications for............................... 4.2.5, 9.2, 9.3, 9.4,
9.5.1, 9.8.3, 9.10.1, 9.10.3, 9.10.4, 14.2.4
Payment, Certificate for................................ 4.2.5, 4.2.9, 9.3.3, 9.4, 9.5,
9.6.1, 9.6.6, 9.7.1, 9.8.3, 9.10.1, 9.10.3, 13.7, 14.1.1.3, 14.2.4,
Payment, Failure of..................................... 4.3.7, 9.5.1.3,
9.7, 9.10.2, 14.1.1.3, 14.2.1.2
Payment, Final.......................................... 4.2.1, 4.2.9, 4.3.2, 4.3.5, 9.10, 11.1.2
11.1.3, 11.3.5, 12.3.1
Payment Bond, Performance Bond and...................... 7.3.6.4,
9.10.3, 11.3.9, 11.4
Payments, Progress...................................... 4.3.4, 9.3, 9.6,
9.8.3, 9.10.3, 13.6, 14.2.3
PAYMENTS AND COMPLETION................................. 9, 14
Payments to Subcontractors.............................. 5.4.2, 9.5.1.3,
9.6.2, 9.6.3, 9.6.4, 11.3.8, 14.2.1.2
PCB..................................................... 10.1
Performance Bond and Payment Bond....................... 7.3.6.4,
9.10.3, 11.3.9, 11.4
Permits, Fees and Notices............................... 2.2.3, 3.7, 3.13, 7.3.6.4, 10.2.2
PERSONS AND PROPERTY, PROTECTION OF..................... 10
Polychlorinated Biphenyl................................ 10.1
product Data, Definition of............................. 3.12.2
Product Data and Samples, Shop Drawings................. 3.11, 3.12, 4.2.7
Progress and Completion................................. 4.2.2, 4.3.4, 8.2
Progress Payments....................................... 4.3.4, 9.3,
9.6, 9.8.3, 9.10.3, 13.6, 14.2.3
Project, Definition of the.............................. 1.1.4
Project Manual, Definition of the....................... 1.1.7
Project Manuals......................................... 2.2.5
Project Representatives................................. 4.2.10
Property Insurance...................................... 10.2.5, 11.3
PROTECTION OF PERSONS AND PROPERTY...................... 10
Regulations and Laws.................................... 1.3.3.6, 3.7, 3.13, 4.1.1, 4.5.5,
4.5.7, 10.2.2, 11.1, 11.3, 13.1, 13.4 13.5.1, 13.5.2, 13.6, 14
Rejection of Work....................................... 3.5.1, 4.2.6, 12.2
Releases of Waivers and Liens........................... 9.10.2
Representations......................................... 1.2.2, 3.5.1, 3.12.7,
6.2.2, 8.2.1, 9.3.3, 9.4.2, 9.5.1, 9.8.2, 9.10.1
Representatives......................................... 2.1.1, 3.1.1, 3.9,
4.1.1, 4.2.1, 4.2.10, 5.1.1, 5.1.2, 13.2.1
Resolution of Claims and Disputes....................... 4.4, 4.5
Responsibility for Those Performing the Work............ 3.3.2,
4.2.3, 6.1.3, 6.2, 10
Retainage............................................... 9.3.1, 9.6.2, 9.8.3, 9.9.1, 9.10.2, 9.10.3
Review of Contract Documents and Field
Conditions by Contractor.............................. 1.2.2, 3.2, 3.7.3, 3.12.7
Review of Contractor's Submittals by
Owner and Architect................................... 3.10.1, 3.10.2, 3.11, 3.12,
4.2.7, 4.2.9, 5.2.1, 5.2.3, 9.2, 9.8.2
Review of Shop Drawings, Product Data
and Samples by Contractor............................. 3.12.5
Rights and Remedies..................................... 1.1.2, 2.3, 2.4, 3.5.1, 3.15.2,
4.2.6, 4.3.6, 4.5, 5.3, 6.1, 6.3, 7.3.1, 8.3.1, 9.5.1, 9.7, 10.2.5,
10.3, 12.2.2, 12.2.4, 13.4, 14
Royalties and Patents................................... 3.17
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Rules and Notices for Arbitration........................... 4.5.2
Safety of Persons and Property.............................. 10.2
Safety Precautions and Programs............................. 4.2.3. 4.2.7, 10.1
Samples, Definition of...................................... 3.12.3
Samples, Shop Drawings, Product Data and.................... 3.11, 3.12, 4.2.7
Samples at the Site, Documents and.......................... 3.11
Schedule of Values.......................................... 9.2, 9.3.1
Schedules, Construction..................................... 3.10
Separate Contracts and Contractors.......................... 1.1.4, 3.14.2, 4.2.4,
4.5.5, 6, 11.3.7, 12.1.2, 12.2.5
Shop Drawings, Definition of................................ 3.12.1
Shop Drawings, Product Data and Samples..................... 3.11, 3.12, 4.2.7
Site, Use of................................................ 3.13, 6.1.1, 6.2.1
Site Inspections............................................ 1.2.2, 3.3.4, 4.2.2, 4.2.9, 4.3.6, 9.8.2, 9.10.1, 13.5
Site Visits, Architect's.................................... 4.2.2, 4.2.5, 4.2.9, 4.3.6,
9.4.2, 9.5.1, 9.8.2, 9.9.2, 9.10.1, 13.5
Special Inspections and Testing............................. 4.2.6, 12.2.1, 13.5
Specifications, Definition of the........................... 1.1.6
Specifications, The......................................... 1.1.1, 1.1.6, 1.1.7, 1.2.4, 1.3, 3.11
Statutes of Limitations..................................... 4.5.4.2, 12.2.6, 13.7
Stopping the Work........................................... 2.3, 4.3.7, 9.7, 10.1.2, 10.3, 14.1
Stored Materials............................................ 6.2.1, 9.3.2, 10.2.1.2, 11.3.1.4, 12.2.4
Subcontractor, Definition of................................ 5.1.1
SUBCONTRACTORS.............................................. 5
Subcontractors, Work by..................................... 1.2.4, 3.3.2, 3.12.1,
4.2.3, 5.3, 5.4
Subcontractual Relations.................................... 5.3, 5.4, 9.3,1.2, 9.6.2,
9.6.3, 9.6.4, 10.2.1, 11.3.7, 11.3.8, 14.1.1, 14.2.1.2, 14.3.2
Submittals.................................................. 1.3, 3.2.3, 3.10, 3.11, 3.12, 4.2.7, 5.2.1, 5.2.3,
7.3.6, 9.2, 9.3.1, 9.8.2, 9.9.1, 9.10.2, 9.10.3, 10.1.2, 11.1.3
Subrogation, Waivers of..................................... 6.1.1, 11.3.5, 11.3.7
Substantial Completion...................................... 4.2.9, 4.3, 5.2, 8.1.1, 8.1.3,
8.2.3, 9.8, 9.9.1, 12.2.1, 12.2.2, 13.7
Substantial Completion, Definition of....................... 9.8.1
Substitution of Subcontractors.............................. 5.2.3, 5.2.4
Substitution of the Architects.............................. 4.1.3
Substitutions of Materials.................................. 3.5.1
Sub-subcontractor, Definition of............................ 5.1.2
Subsurface Conditions....................................... 4.3.6
Successors and Assigns...................................... 13.2
Superintendent.............................................. 3.9, 10.2.6
Supervision and Construction Procedures..................... 1.2.4, 3.3, 3.4,
4.2.3, 4.3.4, 6.1.3, 6.2.4, 7.1.3, 7.3.4, 8.2, 8.3.1, 10, 12, 14
Surety...................................................... 4.4.1, 4.4.4, 5.4.1.2, 9.10.2, 9.10.3, 14.2.2
Surety, Consent of.......................................... 9.9.1, 9.10.2, 9.10.3
Surveys..................................................... 2.2.2, 3.18.3
Suspension by the Owner for Convenience..................... 14.3
Suspension of the Work...................................... 4.3.7, 5.4.2, 14.1.1.4, 14.3
Suspension or Termination of the Contract................... 4.3.7, 5.4.1.1, 14
Taxes....................................................... 3.6, 7.3.6.4
Termination by the Contractor............................... 14.1
Termination by the Owner for Cause.......................... 5.4.1.1, 14.2
Termination of the Architect................................ 4.1.3
Termination of the Contractor............................... 14.2.2
TERMINATION OR SUSPENSION OF THE CONTRACT................... 14
Tests and Inspections....................................... 3.3.3, 4.2.6, 4.2.9, 9.4.2, 12.2.1, 13.5
TIME........................................................ 8
Time, Delays and Extensions of.............................. 4.3.8, 7.2.1, 8.3
Time Limits, Specific....................................... 2.1.2, 2.2.1, 2.4, 3.10, 3.11, 3.15.1,
4.2.1, 4.2.11, 4.3, 4.4, 4.5, 5.3, 5.4, 7.3.5, 7.3.9, 8.2, 9.2, 9.3.1,
9.3.3, 9.4.1, 9.6.1, 9.7, 9.8.2, 9.10.2, 11.1.3, 11.3.6, 11.3.10,
11.3.11, 12.2.2, 12.2.4, 12.2.6, 13.7, 14
Time Limits on Claims....................................... 4.3.2, 4.3.3, 4.3.6, 4.3.9, 4.4, 4.5
Title to Work............................................... 9.3.2, 9.3.3
UNCOVERING AND CORRECTION OF WORK........................... 12
Uncovering of Work.......................................... 12.1
Unforeseen Conditions....................................... 4.3.6, 8.3.1, 10.1
Unit Prices................................................. 7.1.4, 7.3.3.2
Use of Documents............................................ 1.1.1, 1.3, 2.2.5, 3.12.7, 5.3
Use of Site................................................. 3.13, 6.1.1, 6.1.2
Values, Schedule of......................................... 9.2, 9.3.1
Waiver of Claims; Final Payment............................. 4.3.5, 4.5.1, 9.10.3
Waiver of Claims by the Architect........................... 13.4.2
Waiver of Claims by the Contractor.......................... 9.10.4, 11.3.7, 13.4.2
Waiver of Claims by the Owner............................... 4.3.5, 4.5.1, 9.9.3,
9.10.3, 1.3.3, 11.3.5, 11.3.7, 13.4.2
Waiver of Liens............................................. 9.10.2
Waivers of Subrogation...................................... 6.1.1, 11.3.5, 11.3.7
Warranty and Warranties..................................... 3.5, 4.2.9,
4.3.5.3, 9.3.3, 9.8.2, 9.9.1, 12.2.2, 13.7.1.3
Weather Delays.............................................. 4.3.8.2
When Arbitration May Be Demanded............................ 4.5.4
Work, Definition of......................................... 1.1.3
Written Consent............................................. 1.3.1, 3.12.8, 3.14.2, 4.1.2, 4.3.4,
4.5.5, 9.3.2, 9.8.2, 9.9.1, 9.10.2, 9.10.3, 10.1.2, 10.1.3,
11.3.1, 1.3.1.4, 11.3.11, 13.2, 13.4.2
Written Interpretations..................................... 4.2.11, 4.2.12, 4.3.7
Written Notice.............................................. 2.3, 2.4, 3.9, 3.12.8, 3.12.9, 4.3, 4.4.4,
4.5, 5.2.1, 5.3, 5.4.1.1, 8.2.2, 9.4.1, 9.5.1, 9.7, 9.10, 10.1.2,
10.2.6, 11.1.3, 11.3, 12.2.2, 12.2.4, 13.3, 13.5.2, 14
Written Orders.............................................. 2.3, 3.9, 4.3.7,
7, 8.2.2, 11.3.9, 12.1, 12.2, 13.5.2, 14.3.1
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AIA DOCUMENT A201 - GENERAL CONDITIONS OF THE CONTRACT FOR CONSTRUCTION - FOURTEENTH EDITION
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GENERAL CONDITIONS OF THE CONTRACT FOR CONSTRUCTION
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ARTICLE 1
GENERAL PROVISIONS
1.1 BASIC DEFINITIONS
1.1.1 THE CONTRACT DOCUMENTS
The Contract Documents consist of the Agreement between Owner and Contractor
(hereinafter the Agreement), Conditions of the Contract (General, Supplementary
and other Conditions), Drawings, Specifications, addenda issued prior to
execution of the Contract, other documents listed in the Agreement and
Modifications issued after execution of the Contract. 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 Owner and
a Subcontractor or Sub-subcontractor or (3) between any persons or entities
other than the Owner and Contractor. The Architect shall, however, be entitled
to performance and enforcement of obligations under the Contract intended to
facilitate performance of the Architect's 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 the Owner or by separate contractors.
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.
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 in 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 ARCHITECT'S 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 not 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
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6 A201-1987 AIA DOCUMENT A201 - GENERAL CONDITIONS OF THE CONTRACT FOR
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INSTITUTE OF ARCHITECTS, 1735 NEW YORK AVENUE N.W., WASHINGTON,
D.C. 20006
<PAGE> 21
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 in 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
(1) 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.
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.
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.
2.2.6 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 Separate 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 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, except to the extent required by
Subparagraph 6.1.3.
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 Architect's 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. 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 the Contract Documents as if singular in
number. The term "Contractor" means the Contractor or the Contractor's
authorized representative.
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AIA DOCUMENT A201 - GENERAL CONDITIONS OF THE CONTRACT FOR A201-1987 7
CONSTRUCTION - FOURTEENTH EDITION AIA(R) - (C)1987 THE
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WASHINGTON, D.C. 20006
<PAGE> 22
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 Architect errors,
inconsistencies or omissions discovered. The Contractor shall not be liable to
the Owner or Architect for damage resulting from errors, inconsistencies or
omissions in the Contract Documents unless the Contractor recognized such
error, inconsistency or omission and knowingly failed to report it to the
Architect. If the Contractor performs any construction activity knowing it
involves a recognized error, inconsistency or omission in the Contract
Documents without such notice to the Architect, the Contractor shall assume
appropriate responsibility for such performance and shall bear an appropriate
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 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
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
the Contract, unless Contract Documents give other specific instructions
concerning these matters.
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
Architect in the Architect's 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 be responsible for inspection of portions of Work
already performed under this Contract 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, 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.
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 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. The Contractor's warranty
excludes remedy for damage or defect caused by abuse, modifications not
executed by the Contractor, improper or insufficient maintenance, improper
operation, or normal wear and tear under normal usage. If required by the
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 Contractor shall
secure and pay for the building permit and 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, regulations and lawful orders of public authorities bearing
on performance of the Work.
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 Architect and Owner in writing, and
necessary changes shall be accomplished by appropriate Modification.
3.7.4 If the Contractor performs Work knowing it to be contrary to laws,
statutes, ordinances, building codes, and rules and regulations without such
notice to the Architect and Owner, the Contractor shall assume full
responsibility for such Work and shall bear the attributable costs.
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:
.1 materials and equipment under an allowance shall be selected
promptly by the Owner to avoid delay in the Work;
.2 allowances shall cover the cost to the Contractor of materials and
equipment delivered at the site and all required taxes, less
applicable trade discounts:
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8 A201-1987 AIA DOCUMENT A201 - GENERAL CONDITIONS OF THE CONTRACT FOR
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INSTITUTE OF ARCHITECTS, 1735 NEW YORK AVENUE N.W., WASHINGTON,
D.C. 20006
<PAGE> 23
.3 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 (1) 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 SCHEDULES
3.10.1 The Contractor, promptly after being awarded the Contract, shall prepare
and submit for the Owner's and Architect's information a Contractor's
construction schedule for the Work. The 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 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 prepare and keep current, for the Architect's
approval, a schedule of submittals which is coordinated with the Contractor's
construction schedule and allows the Architect reasonable time to review
submittals.
3.10.3 The Contractor shall conform to the most recent schedules.
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 Architect and shall be delivered to the Architect 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-subsonctractor,
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 4.2.7.
3.12.5 The Contractor shall review, approve and submit to the Architect Shop
Drawings, Product Data, Samples and similar submittals required by the Contract
Documents with reasonable promptness and in such sequence as to cause no delay
in the Work or in the activities of the Owner or of separate 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 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 Architect's approval of Shop
Drawings, Product Data, Samples or similar submittals unless the Contractor has
specifically informed the Architect in writing of such deviation at the time of
submittal and the Architect has 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
Architect's approval thereof.
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 Architect on previous submittals.
3.12.10 Informational submittals upon which the Architect is not expected to
take responsive action may be so identified in the Contract Documents.
3.12.11 When professional certification of performance criteria of materials,
systems or equipment is required by the Contract Documents, the 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.
3.14 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 or separate contractors
by cutting, patching or otherwise altering such construction, or by excavation.
The Contractor shall not cut or otherwise alter such construction by the
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AIA DOCUMENT A201 - GENERAL CONDITIONS OF THE CONTRACT FOR A201-1987 9
CONSTRUCTION - FOURTEENTH EDITION AIA(R) - (C)1987 THE
AMERICAN INSTITUTE OF ARCHITECTS, 1735 NEW YORK AVENUE, N.W.,
WASHINGTON, D.C. 20006
<PAGE> 24
Owner or a separate contractor except with written consent of the Owner and of
such separate contractor; such consent shall not be unreasonably withheld. The
Contractor shall not unreasonably withhold from the Owner or a separate
contractor the Contractor's consent to cutting or otherwise altering the Work.
3.15 CLEANING UP
3.15.1 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 Owner may do so and the cost thereof shall be charged to the
Contractor.
3.16 ACCESS TO WORK
3.16.1 The Contractor shall provide the Owner 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 and Architect harmless from loss on account thereof, but
shall not be responsible for such defense or loss when a particular design,
process or product of a particular manufacturer or manufacturers is required by
the Contract Documents. However, if the Contractor has reason to believe that
the required design, process or product is an infringement of a patent, the
Contractor shall be responsible for such loss unless such information is
promptly furnished to the Architect.
3.18 INDEMNIFICATION
3.18.1 To the fullest extent permitted by law, the Contractor shall indemnify
and hold harmless the Owner, Architect, Architects consultants, and agents
and employees of any of them from and against claims, damages, losses and
expenses, including but not limited to attorneys' fees, arising out of or
resulting from performance of the Work, 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 property (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 Contractor, a
Subcontractor, anyone directly or indirectly employed by them or anyone for
whose acts they 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 Paragraph 3.18.
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' or workmen's
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 Architect, the Architect's 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 Architect, the Architect's 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.
ARTICLE 4
---------
ADMINISTRATION OF THE CONTRACT
4.1 ARCHITECT
4.1.1 The Architect is the person lawfully licensed to practice architecture
or any 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.
4.1.2 Duties, responsibilities and limitations of authority of the Architect
as set forth in the Contract Documents shall not be restricted, modified or
extended without written consent of the Owner, Contractor and Architect.
Consent shall not be unreasonably withheld.
4.1.3 In case of termination of employment of the Architect, the Owner shall
appoint an architect against whom the Contractor makes no reasonable objection
and whose status under the Contract Documents shall be that of the former
architect.
4.1.4 Disputes arising under Subparagraphs 4.1.2 and 4.1.3 shall be subject
to arbitration.
4.2 ARCHITECT'S ADMINISTRATION OF THE CONTRACT
4.2.1 The Architect will provide administration of the Contract as described
in the Contract Documents, and will be the Owner's representative (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 Architect will advise and consult with the Owner. The
Architect 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.
4.2.2 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.
4.2.3 The 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. The Architect will not be responsible for the Contractor's failure to
carry out the Work in accordance with the Contract Documents. The Architect
will not have control over or charge of and will not be responsible for acts or
omissions of the Con-
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10 A201-1987 AIA DOCUMENT A201 - GENERAL CONDITIONS OF THE CONTRACT
FOR CONSTRUCTION - FOURTEENTH EDITION AIA(R) - (C)1987
THE AMERICAN INSTITUTE OF ARCHITECTS, 1735 NEW YORK
AVENUE N.W., WASHINGTON, D.C. 20006
<PAGE> 25
tractor. Subcontractors, or their agents or employees, or of any other persons
performing portions of the Work.
4.2.4 COMMUNICATIONS FACILITATING CONTRACT ADMINISTRATION. Except as
otherwise provided in the Contract Documents or when direct communications have
been specially authorized, the Owner and Contractor shall endeavor to
communicate through 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 separate contractors shall be through the Owner.
4.2.5 Based on the Architect's observations and evaluations of the
Contractor's Applications for Payment, the Architect will review and certify the
amounts due the Contractor and will issue Certificates for Payment in such
amounts.
4.2.6 The Architect will have authority to reject Work which does not conform
to the Contract Documents. Whenever the Architect considers it necessary or
advisable for implementation of the intent of the Contract Documents, the
Architect will have authority to require additional inspection or testing of the
Work in accordance with Subparagraphs 13.5.2 and 13.5.3, whether or not such
Work is fabricated, installed or completed. However, neither this authority of
the Architect nor a decision made in good faith either to exercise or not to
exercise such authority shall give rise to a duty or responsibility of the
Architect to the Contractor, Subcontractors, material and equipment suppliers,
their agents or employees, or other persons performing portions of the work.
4.2.7 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 or in the activities of the Owner, Contractor or separate
contractors, while allowing sufficient time in the Architect's professional
judgment to permit adequate review. Review of such submittals is not conducted
for the purpose of determining the accuracy and completeness of other details
such as dimensions and quantities, or for substantiating instructions for
installation or performance of equipment or systems, 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.
4.2.8 The Architect will prepare Change Orders and Construction Change
Directives, and may authorize minor changes in the Work as provided in Paragraph
7.4.
4.2.9 The Architect will conduct inspections to determine the date or dates of
Substantial Completion and the date of final completion, will receive and
forward to the Owner for the Owner's review and records written warranties and
related documents required by the Contract and assembled by the Contractor, and
will issue a final Certificate for Payment upon compliance with the requirements
of the Contract Documents.
4.2.10 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.
4.2.11 The Architect will interpret and decide matters concerning performance
under and requirements of the Contract Documents on written request of either
the 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 4.2, 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.
4.2.12 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 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.
4.2.13 The Architect's decisions on matters relating to aesthetic effect will
be final if consistent with the intent expressed in the Contract Documents.
4.3 CLAIMS AND DISPUTES
4.3.1 DEFINITION. A Claim is a demand or assertion by one of the parties
seeking, as a matter of right, adjustment or interpretation of Contract terms,
payment of money, extension of time or other relief with respect to the terms of
the Contract. The term "Claim" also includes other disputes and matters in
question between the Owner and Contractor arising out of or relating to the
Contract. Claims must be made by written notice. The responsibility to
substantiate Claims shall rest with the party making the Claim.
4.3.2 DECISION OF ARCHITECT. Claims, including those alleging an error
of omission by the Architect, shall be referred initially to the Architect for
action as provided in Paragraph 4.4. A decision by the Architect, as provided in
Subparagraph 4.4.4, shall be required as a condition precedent to arbitration or
litigation of a Claim between the Contractor and Owner as to all such matters
arising prior to the date final payment is due, regardless of (1) whether such
matters relate to execution and progress of the Work or (2) the extent to which
the Work has been completed. The decision by the Architect in response to a
Claim shall not be a condition precedent to arbitration or litigation in the
event (1) the position of Architect is vacant, (2) the Architect has not
received evidence or has failed to render a decision within agreed time limits,
(3) the Architect has failed to take action required under Subparagraph 4.4.4
within 30 days after the Claim is made, (4) 45 days have passed after the Claim
has been referred to the Architect or (5) the Claim relates to a mechanic's
lien.
4.3.3 TIME LIMITS ON CLAIMS. Claims by either party must be made within 21
days after occurrence of the event giving rise to such Claim or within 21 days
after the claimant first recognizes the condition giving rise to the Claim,
whichever is later. Claims must be made by written notice. An additional Claim
made after the initial Claim has been implemented by Change Order will not be
considered unless submitted in a timely manner.
AIA DOCUMENT A201 - GENERAL CONDITIONS OF THE CONTRACT FOR CONSTRUCTION -
FOURTEENTH EDITION AIA(R) - (C) 1987 THE AMERICAN INSTITUTE OF ARCHITECTS,
1735 NEW YORK AVENUE N.W., WASHINGTON, D.C. 20006
A201-1987 11
<PAGE> 26
4.3.4 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.
4.3.5 WAIVER OF CLAIMS; FINAL PAYMENT. The making of final payment shall
constitute a waiver of Claims by the Owner except those arising from:
.1 liens, Claims, security interests or encumbrances arising out of
the Contract and unsettled;
.2 failure of the Work to comply with the requirements of the Contract
Documents; or
.3 terms of special warranties required by the Contract Documents.
4.3.6 CLAIMS FOR CONCEALED OR UNKNOWN CONDITIONS. If conditions are
encountered at the site which are (1) subsurface or otherwise concealed
physical conditions which differ materially from those indicated in the
Contract Documents or (2) unknown physical conditions of an unusual nature,
which differ materially from those ordinarily found to exist and generally
recognized as inherent in construction activities of the character provided for
in the Contract Documents, then notice by the observing party shall be given to
the other party promptly before conditions are disturbed and in no event later
than 21 days after first observance of the conditions. The Architect will
promptly investigate such conditions and, if they differ materially and cause
an increase or decrease in the Contractor's cost of, or time required for,
performance of any part of the work, will recommend an equitable adjustment in
the Contract Sum or Contract Time, or both. If the Architect determines that
the conditions at the site are not materially different from those indicated in
the Contract Documents and that no change in the terms of the Contract is
justified, the Architect shall so notify the Owner and Contractor in writing,
stating the reasons. Claims by either party in opposition to such determination
must be made within 21 days after the Architect has given notice of the
decision. If the Owner and Contractor cannot agree on an adjustment in the
Contract Sum or Contract Time, the adjustment shall be referred to the
Architect for initial determination, subject to further proceedings pursuant to
Paragraph 4.4.
4.3.7 CLAIMS FOR ADDITIONAL COST. If the Contractor wishes to make Claim for
an increase in the Contract Sum, written notice as provided herein shall be
given before proceeding to execute the Work. Prior notice is not required for
Claims relating to an emergency endangering life or property arising under
Paragraph 10.3. If the Contractor believes additional cost is involved for
reasons including but not limited to (1) a written interpretation from the
Architect, (2) an order by the Owner to stop the Work where the Contractor was
not at fault, (3) a written order for a minor change in the Work issued by the
Architect, (4) failure of payment by the Owner, (5) termination of the Contract
by the Owner, (6) Owner's suspension or (7) other reasonable grounds, Claim
shall be filed in accordance with the procedure established herein.
4.3.8 CLAIMS FOR ADDITIONAL TIME
4.3.8.1 If the Contractor wishes to make Claim for an increase in the Contract
Time, written notice as provided herein shall be given. The Contractor's Claim
shall include an estimate of cost and of probable effect of delay on progress
of the Work. In the case of a continuing delay only one Claim is necessary.
4.3.8.2 If adverse weather conditions are the basis for a Claim for additional
time, such Claim shall be documented by data substantiating that weather
conditions were abnormal for the period of time and could not have been
reasonably anticipated, and that weather conditions had an adverse effect on
the scheduled construction.
4.3.9 INJURY OR DAMAGE TO PERSON OR PROPERTY. If either party to the Contract
suffers injury or damage to person or property because of an act or omission of
the other party, of any of the other party's employees or agents, or of others
for whose acts such party is legally liable, written notice of such injury or
damage, whether or not insured, shall be given to the other party within a
reasonable time not exceeding 21 days after first observance. The notice shall
provide sufficient detail to enable the other party to investigate the matter.
If a Claim for additional cost or time related to this Claim is to be asserted,
it shall be filed as provided in Subparagraphs 4.3.7 or 4.3.8.
4.4 RESOLUTION OF CLAIMS AND DISPUTES
4.4.1 The Architect will review Claims and take one or more of the following
preliminary actions within ten days of receipt of a Claim: (1) request
additional supporting data from the claimant, (2) submit a schedule to the
parties indicating when the Architect expects to take action, (3) reject the
Claim in whole or in part, stating reasons for rejection, (4) recommend
approval of the Claim by the other party or (5) suggest a compromise. The
Architect may also, but is not obligated to, notify the surety, if any, of the
nature and amount of the Claim.
4.4.2 If a Claim has been resolved, the Architect will prepare or obtain
appropriate documentation.
4.4.3 If a Claim has not been resolved, the party making the Claim shall,
within ten days after the Architect's preliminary response, take one or more of
the following actions: (1) submit additional supporting data requested by the
Architect, (2) modify the initial Claim or (3) notify the Architect that the
initial Claim stands.
4.4.4 If a Claim has not been resolved after consideration of the foregoing
and of further evidence presented by the parties or requested by the Architect,
the Architect will notify the parties in writing that the Architect's decision
will be made within seven days, which decision shall be final and binding on
the parties but subject to arbitration. Upon expiration of such time period,
the Architect will render to the parties the Architect's written decision
relative to the Claim, including any change in the Contract Sum or Contract Time
or both. If there is a surety and there appears to be a possibility of a
Contractor's default, the Architect may, but is not obligated to, notify the
surety and request the surety's assistance in resolving the controversy.
4.5 ARBITRATION
4.5.1 CONTROVERSIES AND CLAIMS SUBJECT TO ARBITRATION. Any controversy or
Claim arising out of or related to the Contract, or the breach thereof, shall
be settled by arbitration in accordance with the Construction Industry
Arbitration Rules of the American Arbitration Association, and judgment upon
the award rendered by the arbitrator or arbitrators may be entered in any court
having jurisdiction thereof, except controversies or Claims relating to
aesthetic effect and except those waived as provided for in Subparagraph 4.3.5.
Such controversies or Claims upon which the Architect has given notice and
rendered a decision as provided in Subparagraph 4.4.4 shall be subject to
arbitration upon written demand of either party. Arbitration may be commenced
when 45 days have passed after a Claim has been referred to the Architect as
provided in Paragraph 4.3 and no decision has been rendered.
<TABLE>
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AIA DOCUMENT A201 - GENERAL CONDITIONS OF THE CONTRACT FOR CONSTRUCTION - FOURTEENTH EDITION
12 A201-1987 AIA(R) - (c)1987 THE AMERICAN INSTITUTE OF ARCHITECTS, 1735 NEW YORK AVENUE N.W., WASHINGTON, D.C. 20006
</TABLE>
<PAGE> 27
4.5.2 RULES AND NOTICES FOR ARBITRATION. Claims between the Owner and
Contractor not resolved under Paragraph 4.4 shall, if subject to arbitration
under Subparagraph 4.5.1, be decided by arbitration in accordance with the
Construction Industry Arbitration Rules of the American Arbitration Association
currently in effect, unless the parties mutually agree otherwise. Notice of
demand for arbitration shall be filed in writing with the other party to the
Agreement between the Owner and Contractor and with the American Arbitration
Association, and a copy shall be filed with the Architect.
4.5.3 CONTRACT PERFORMANCE DURING ARBITRATION. During arbitration proceedings,
the Owner and Contractor shall comply with Subparagraph 4.3.4.
4.5.3 WHEN ARBITRATION MAY BE DEMANDED. Demand for arbitration of any Claim
may not be made until the earlier of (1) the date on which the Architect has
rendered a final written decision on the Claim, (2) the tenth day after the
parties have presented evidence to the Architect or have been given reasonable
opportunity to do so, if the Architect has not rendered a final written
decision by that date, or (3) any of the five events described in
Subparagraph 4.3.2.
4.5.4.1 When a written decision of the Architect states that (1) the decision
is final but subject to arbitration and (2) a demand for arbitration of a Claim
covered by such decision must be made within 30 days after the date on which
the party making the demand receives the final written decision, then failure
to demand arbitration within said 30 days period shall result in the
Architect's decision becoming final and binding upon the Owner and Contractor.
If the Architect renders a decision after arbitration proceedings have been
initiated, such decision may be entered as evidence, but shall not supercede
arbitration proceedings unless the decision is acceptable to all parties
concerned.
4.5.4.2 A demand for arbitration shall be made within the time limits
specified in Subparagraphs 4.5.1 and 4.5.4 and Clause 4.5.4.1 as applicable,
and in other cases within a reasonable time after the Claim has arisen, and in
no event shall it be made after the date when institution of legal or
equitable proceedings based on such Claim would be barred by the applicable
statute of limitations as determined pursuant to Paragraph 13.7.
4.5.5 LIMITATION ON CONSOLIDATION OR JOINDER. No arbitration arising out of or
relating to the Contract Documents shall include, by consolidation or joinder or
in any other manner, the Architect, the Architect's employees or consultants,
except by written consent containing specific reference to the Agreement and
signed by the Architect, Owner, Contractor and any other person or entity sought
to be joined. No arbitration shall include, by consolidation or joinder or in
any other manner, parties other than the Owner, Contractor, a separate
contractor as described in Article 6 and other persons substantially involved in
a common question of fact or law whose presence is required if complete relief
is to be accorded in arbitration. No person or entity other than the Owner,
Contractor or a separate contractor as described in Article 6 shall be included
as an original third party or additional third party or additional third party
to an arbitration whose interest or responsibility is insubstantial. Consent to
arbitration involving an additional person or entity shall not constitute
consent to arbitration of a dispute not described therein or with a person or
entity not named or described therein. The foregoing agreement to arbitrate and
other agreements to arbitrate with an additional person or entity duly consented
to by parties to the Agreement shall be specifically enforceable under
applicable law in any court having jurisdiction thereof.
4.5.6 CLAIMS AND TIMELY ASSERTION OF CLAIMS. A party who files a notice of
demand for arbitration must assert in the demand all Claims then known to that
party on which arbitration is permitted to be demanded. When a party fails to
include a Claim through oversight, inadvertence or excusable neglect, or when a
Claim has matured or been acquired subsequently, the arbitrator or arbitrators
may permit amendment.
4.5.7 JUDGMENT ON FINAL AWARD. The award rendered by the arbitrator or
arbitrators shall be final, and judgment may be entered upon it in accordance
with applicable law in any court having jurisdiction thereof.
ARTICLE 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 a separate contractor
or subcontractors of a separate contractor.
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, shall furnish in writing to the Owner through the
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 Architect will promptly reply to the
Contractor in writing stating whether or not the Owner or the Architect, after
due investigation, has reasonable objection to any such proposed person or
entity. Failure of the Owner or Architect 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 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 or Architect has reasonable objection to a person or entity
proposed by the Contractor, the Contractor shall propose another to whom the
Owner 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.
5.2.4 The Contractor shall not change a Subcontractor, person or entity
previously selected if the Owner or Architect makes reasonable objection to
such change.
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<PAGE> 28
5.3 SUBCONTRACTUAL RELATIONS
5.3.1 By appropriate agreement, written where legally required for validity,
the Contractor shall require each Subcontractor, to the extent of the Work to
be performed by the Subcontractor, to be bound to the Contractor by terms of
the Contract Documents, and to assume toward the Contractor all the obligations
and responsibilities which the Contractor, by these documents, assumes toward
the Owner and Architect. Each subcontract agreement shall preserve and protect
the rights of the Owner and Architect under the Contract Documents with respect
to the work to be performed by the Subcontractor so that subcontracting
thereof will not prejudice such rights, and shall allow to the Subcontractor,
unless specifically provided otherwise in the subcontract agreement, the
benefit of all rights, remedies and redress against the Contractor that the
Contractor, by the Contract Documents, has against the Owner. Where
appropriate, the Contractor shall require each subcontractor to enter into
similar agreements with Sub-subcontractors. The Contractor shall make available
to each proposed Subcontractor, prior to the execution of the subcontract
agreement, copies of the Contract Documents to which the Subcontractor will be
bound, and, upon written request of the Subcontractor, identify to the
Subcontractor terms and conditions of the proposed subcontract agreement which
may be at variance with the Contract Documents. Subcontractors shall similarly
make copies of applicable portions of such documents available to their
respective proposed Sub-subcontractors.
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 for cause pursuant to Paragraph 14.2 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 30 days, the
Subcontractor's compensation shall be equitably adjusted.
ARTICLE 6
---------
CONSTRUCTION BY OWNER
OR BY SEPARATE CONTRACTORS
6.1 OWNER'S RIGHT TO PERFORM CONSTRUCTION AND TO AWARD SEPARATE CONTRACTS
6.1.1 The Owner reserves the right to perform construction or operations
related to the Project with the Owner's own forces, and to award separate
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 separate contracts are awarded for different portions of the
Project or other construction or operations on the site, the term "Contractor"
in the Contract Documents in each case shall mean the Contractor who executes
each separate Owner-Contractor Agreement.
6.1.3 The Owner shall provide for coordination of the activities of the
Owner's own forces and of each separate contractor with the Work of the
Contractor, who shall cooperate with them. The Contractor shall participate
with other separate contractors and the Owner in reviewing their construction
schedules when directed to do so. The Contractor shall make any revisions to
the construction schedule and Contract Sum deemed necessary after a joint
review and mutual agreement. The construction schedules shall then constitute
the schedules to be used by the Contractor, separate contractors and the Owner
until subsequently revised.
6.1.4 Unless otherwise provided in the Contract Documents, when the Owner
performs construction or operations related to the Project with the Owner's own
forces, the Owner shall be deemed to be subject to the same obligations and to
have the same rights which apply to the Contractor under the Conditions of the
Contract, including, without excluding others, those stated in Article 3, this
Article 6 and Articles 10, 11 and 12.
6.2 MUTUAL RESPONSIBILITY
6.2.1 The Contractor shall afford the Owner and separate 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 or a separate contractor,
the Contractor shall, prior to proceeding with that portion of the Work,
promptly report to the 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 or separate 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 or partially completed construction or to property of
the Owner or separate contractors as provided in Subparagraph 10.2.5.
6.2.5 Claims and other disputes and matters in question between the
Contractor and a separate contractor shall be subject to the provisions of
Paragraph 4.3 provided the separate contractor has reciprocal obligations.
6.2.6 The Owner and each separate contractor 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, separate 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 Architect determines to be just.
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CONSTRUCTION - FOURTEENTH EDITION
AIA(R) - (C) 1997 THE AMERICAN INSTITUTE OF ARCHITECTS,
1735 NEW YORK AVENUE N.W., WASHINGTON, D.C. 20006
<PAGE> 29
ARTICLE 7
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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 agreement among the Owner,
Contractor and Architect; a Construction Change Directive requires agreement by
the Owner and Architect and may or may not be agreed to by the Contractor; an
order for a minor change in the Work may be issued by the Architect alone.
7.1.3 Changes in the Work shall be performed under applicable provisions of
the Contract Documents, and the 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 in 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.
7.2 CHANGE ORDERS
7.2.1 A Change Order is a written instrument prepared by the Architect and
signed by the Owner, Contractor and Architect, stating their agreement upon all
of the following:
.1 a change in the Work;
.2 the amount of the adjustment in the Contract Sum, if any; and
.3 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
Architect and signed by the Owner 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 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 cost to be determined in a manner agreed upon by the parties and a
mutually acceptable fixed or percentage fee; or
.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 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.
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 Architect 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 Architect 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' or workmen's compensation insurance;
.2 costs of materials, supplies and equipment, including costs of
transportation, whether incorporated or consumed;
.3 rental costs of machinery and equipment, exclusive of hand tools,
whether rented from the Contractor or others;
.4 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
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 Architect. 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 Architect for determination.
7.3.9 When the Owner and Contractor agree with the determination made by the
Architect concerning the adjustments in the Contract Sum and Contract Time, or
otherwise reach agreement upon the adjustments, such agreement shall be
effective immediately and shall be recorded by preparation and execution of an
appropriate Change Order.
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AVENUE N.W., WASHINGTON, D.C. 20006
<PAGE> 30
7.4 MINOR CHANGES IN THE WORK
7.4.1 The Architect 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 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.
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 the date certified by the
Architect in accordance with 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 or Architect, or of an employee of either, or of a
separate contractor employed by the Owner, 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, or by other causes which the Architect determines
may justify delay, then the Contract Time shall be extended by Change Order for
such reasonable time as the Architect may determine.
8.3.2 Claims relating to time shall be made in accordance with applicable
provisions of Paragraph 4.3.
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 The Contract Sum is stated in the Agreement and, including authorized
adjustments, is the total amount payable by the Owner to the Contractor for
performance of the Work under the Contract Documents.
9.2 SCHEDULE OF VALUES
9.2.1 Before the first Application for Payment, the Contractor shall submit
to the Architect 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 Architect may require. This schedule, unless objected to by the
Architect, shall be used as a basis for reviewing the Contractor's Applications
for Payment.
9.3 APPLICATIONS FOR PAYMENT
9.3.1 At least ten days before the date established for each progress
payment, the Contractor shall submit to the Architect an itemized Application
for Payment for operations 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 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 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, to the best of the
Contractor's knowledge, information and belief, 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.
9.4 CERTIFICATES FOR PAYMENT
9.4.1 The Architect will, within seven days after receipt of the Contractor's
Application for Payment, either issue to the
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Owner a Certificate for Payment, with a copy to the Contractor, for such amount
as the Architect determines is properly due, or notify the Contractor and Owner
in writing of the Architect's reasons for withholding certification in whole or
in part as provided in Subparagraph 9.5.1.
9.4.2 The issuance of a Certificate for Payment will constitute a
representation by the Architect to the Owner, based on the Architect's
observations at the site and the data comprising the Application for Payment,
that the Work has progressed to the point indicated and that, to the best of
the Architect's knowledge, information and belief, 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 Architect. The
issuance of a Certificate for Payment will further constitute a representation
that the Contractor is entitled to payment in the amount certified. However,
the issuance of a Certificate for Payment will not be a representation that the
Architect has (1) made exhaustive or continuous on-site inspections to check
the quality or quantity of the Work, (2) reviewed construction means, methods,
techniques, sequences or procedures, (3) reviewed copies of requisitions
received from Subcontractors and material suppliers and other data requested by
the Owner to substantiate the Contractor's right to payment or (4) 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 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 Architect's opinion the representations to the
Owner required by Subparagraph 9.4.2 cannot be made. If the Architect is unable
to certify payment in the amount of the Application, the Architect will notify
the Contractor and Owner as provided in Subparagraph 9.4.1. If the Contractor
and Architect cannot agree on a revised amount, the Architect will promptly
issue a Certificate for Payment for the amount for which the Architect is able
to make such representations to the Owner. The 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 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
.7 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 Architect has issued a 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 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 Architect 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 Architect and Owner on
account of portions of the Work done by such Subcontractor.
9.6.4 Neither the Owner 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 the Architect does not issue a Certificate for Payment, through no
fault of the Contractor, within seven days after receipt of the Contractor's
Application for Payment, or if the Owner does not pay the Contractor within
seven days after the date established in the Contract Documents the amount
certified by the Architect or awarded by arbitration, then the Contractor may,
upon seven additional days' written notice to the Owner and Architect, stop the
Work until payment of the amount owing has been received. The Contract Time
shall be extended appropriately and the Contract Sum shall be increased by the
amount of the Contractor's reasonable costs of shut-down, delay and start-up,
which shall be accomplished as provided in Article 7.
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.
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 shall prepare and submit to the 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 Contractor's list,
the Architect will make an inspection to determine whether the Work or desig-
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nated portion thereof is substantially complete. If the Architect's inspection
discloses any item, whether or not included on the Contractor's 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 Architect.
The Contractor shall then submit a request for another inspection by the
Architect 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
Contractor 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 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 age 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 shall prepare and submit a list to the
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.
9.9.2 Immediately prior to such partial occupancy or use, the Owner,
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 Upon receipt of written notice that the Work is ready for final
inspection and acceptance and upon receipt of a final Application for Payment,
the Architect will promptly make such inspection and, when the Architect finds
the Work acceptable under the Contract Documents and the Contract fully
performed, the Architect will promptly issue a final Certificate for Payment
stating that to the best of the Architect's knowledge, information and belief,
and on the basis of the Architect's 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 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 Architect (1) 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 otherwise
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 cancelled 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 Architect so confirms, the
Owner shall, upon application by the Contractor and certification by the
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
Architect 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. The making of final payment shall constitute a
waiver of claims by the Owner as provided in Subparagraph 4.3.5.
9.10.4 Acceptance of final 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 4.3.5.
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18 A201-1987 AIA DOCUMENT A201 - GENERAL CONDITIONS OF THE CONTRACT FOR
CONSTRUCTION - FOURTEENTH EDITION AIA(R) - (C)1987 THE AMERICAN
INSTITUTE OF ARCHITECTS, 1735 NEW YORK AVENUE N.W., WASHINGTON,
D.C. 20006
<PAGE> 33
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.
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 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, or in accordance with final
determination by the Architect on which arbitration has not been demanded, or
by arbitration under Article 4.
10.1.3 The Contractor shall not be required pursuant to Article 7 to perform
without consent any Work relating to asbestos or polychlorinated biphenyl (PCB).
10.1.4 To the fullest extent permitted by law, the Owner shall indemnify and
hold harmless the Contractor, Architect, Architect's consultants and agents and
employees of any of them from and against claims, damages, losses and expenses,
including but not limited to 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
property (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.
10.2 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 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 the Contractor's Subcontractors or
Sub-subcontractors; and
.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.
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 or 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 (other than damage
or loss insured under property insurance required by the Contract Documents) to
property referred to in Clauses 10.2.1.2 and 10.2.1.3 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 and 10.2.1.3, except damage or loss attributable to acts or omissions
of the Owner or Architect or anyone directly or indirectly employed by either
of them, or by anyone for whose acts either of them may be liable, 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 3.18.
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 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 of persons or property, the Contractor
shall act, at the Contractor's discretion, to prevent threatened damage, injury
or loss. Additional compensation or extension of time claimed by the Contractor
on account of an emergency shall be determined as provided in Paragraph 4.3 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' or workmen's compensation, disability benefit
and other similar employee benefit acts which are applicable to the
Work to be performed;
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AIA DOCUMENT A201 - GENERAL CONDITIONS OF THE CONTRACT FOR A201-1987 19
CONSTRUCTION - FOURTEENTH EDITION AIA(R) - (C) 1987 THE AMERICAN
INSTITUTE OF ARCHITECTS, 1735 NEW YORK AVENUE, N.W., WASHINGTON,
D.C. 20006
<PAGE> 34
.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 (1) 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 11.1.1 shall be written for not
less than limits of liability specified in the Contract Documents or required
by law, whichever coverage is greater. 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.
11.1.3 Certificates of Insurance acceptable to the Owner shall be filed with
the Owner prior to commencement of the Work. These Certificates and the
insurance policies required by this Paragraph 11.1 shall contain a provision
that coverages afforded under the policies will not be cancelled or allowed to
expire until at least 30 days' prior written notice has been given to the
Owner. 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 without voluntary deductibles. 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 final 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 11.3 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, malicious
mischief, collapse, false-work, 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
property 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. If deductibles are
not identified in the Contract Documents, the Owner shall pay costs not covered
because of 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.
11.3.2 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, 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. The Owner waives
all rights of action against the Contractor for loss of use of the Owner's
property, including consequential losses 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.
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20 A201-1987 AIA DOCUMENT A201 - GENERAL CONDITIONS OF THE CONTRACT FOR
CONSTRUCTION - FOURTEENTH EDITION AIA(R) - (C)1987 THE AMERICAN
INSTITUTE OF ARCHITECTS, 1735 NEW YORK AVENUE, N.W.,
WASHINGTON, D.C. 20006
<PAGE> 35
11.3.5 If during the Project construction period the Owner insures properties,
real or personal or both, adjoining or adjacent to the site by property
insurance under policies separate from those insuring the Project, or if after
final payment property insurance is to be provided on the completed Project
through a policy or policies other than those insuring the Project during the
construction period, the Owner shall waive all rights in accordance with the
terms of subparagraph 11.3.7 for damages caused by fire or other perils covered
by this separate property insurance. All separate policies shall provide this
waiver of subrogation by endorsement or otherwise.
11.3.6 Before an exposure to loss may occur, the Owner shall file with the
Contractor a copy of each policy that includes insurance coverages required by
this Paragraph 11.3. Each policy shall contain all generally applicable
conditions, definitions, exclusions and endorsements related to this Project.
Each policy shall contain a provision that the policy will not be cancelled or
allowed to expire until at least 30 days' prior written notice has been given
to the Contractor.
11.3.7 WAIVERS OF SUBROGATION. The Owner and Contractor waive all rights
against (1) each other and any of their subcontractors, sub-subcontractors,
agents and employees, each of the other, and (2) the Architect, Architect's
consultants, separate contractors described in Article 6, if any, and any of
their subcontractors, sub-subcontractors, agents and employees, for damages
caused by fire or other perils to the extent covered by property insurance
obtained pursuant to this Paragraph 11.3 or other property insurance applicable
to the Work, except such rights as they have to proceeds of such insurance held
by the Owner as fiduciary. The Owner or Contractor, as appropriate, shall
require of the Architect, Architect's consultants, 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 property 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.
11.3.9 If required in writing by a party in interest, the Owner as fiduciary
shall, upon occurrence of an insured loss, give bond for proper performance of
the Owner's duties. The cost of required bonds shall be charged against
proceeds received as fiduciary. 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, or in accordance with an
arbitration award in which case the procedure shall be as provided in
Paragraph 4.5. 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 unless one of the parties in interest shall object in writing
within five days after occurrence of loss to the Owner's exercise of this
power; if such objection be made, arbitrators shall be chosen as provided in
Paragraph 4.5. The Owner as fiduciary shall, in that case, make settlement with
insurers in accordance with directions of such arbitrators. If distribution of
insurance proceeds by arbitration is required, the arbitrators will direct such
distribution.
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.
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.
ARTICLE 12
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UNCOVERING AND CORRECTION OF WORK
12.1 UNCOVERING OF WORK
12.1.1 If a portion of the Work is covered contrary to the Architect's request
or to requirements specifically expressed in the Contract Documents, it must,
if required in writing by the Architect, be uncovered for the Architect's
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 Architect has not
specifically requested to observe prior to its being covered, the 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 Contract shall
pay such costs unless the condition was caused by the Owner or a separate
contractor 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 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 Architect's services and expenses made necessary thereby.
12.2.2 If, within one year after the date of Substantial Completion of the
work or designated portion thereof, or after the date
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AIA DOCUMENT A201 - GENERAL CONDITIONS OF THE CONTRACT A201-1987 21
FOR CONSTRUCTION - FOURTEENTH EDITION AIA(?) - (C)1987
THE AMERICAN INSTITUTE OF ARCHITECTS, 1735 NEW YORK
AVENUE N.W., WASHINGTON, D.C. 20006
<PAGE> 36
for commencement of warranties established under Subparagraph 9.9.1, or by
terms of an applicable special warranty required by the Contract Documents, any
of the Work is found to be not in accordance with the requirements of the
Contract Documents, the Contractor shall correct it promptly after receipt of
written notice from the Owner to do so unless the Owner has previously given
the Contractor a written acceptance of such condition. This period of one year
shall be extended with respect to portions of work first performed after
Substantial Completion by the period of time between Substantial Completion and
the actual performance of the Work. This obligation under this Subparagraph
12.2.2 shall survive acceptance of the Work under the Contract and termination
of the Contract. The Owner shall give such notice promptly after discovery of
the condition.
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, 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
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
Contractors 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
separate 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
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 party 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. Neither party to the Contract shall assign the Contract as a whole
without written consent of the other. If either party attempts to make such an
assignment without such consent, that party shall nevertheless remain legally
responsible for all obligations under the Contract.
13.3 WRITTEN NOTICE
13.3.1 Written notice shall be deemed to have been duly served if delivered in
person to the individual or a member of the firm or entity or to an officer of
the corporation for which it was intended, or if delivered at or sent by
registered or certified mail to the last business address known to the party
giving notice.
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, 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.
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 Architect timely notice of when and where tests and
inspections are to be made so the 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 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 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
Architect of when and where tests and inspections are to be made so the
Architect may observe such procedures.
<TABLE>
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AIA DOCUMENT A201 - GENERAL CONDITIONS OF THE CONTRACT FOR CONSTRUCTION - FOURTEENTH EDITION
22 A201-1987 AIA(R) - (c)1987 THE AMERICAN INSTITUTE OF ARCHITECTS, 1735 NEW YORK AVENUE N.W., WASHINGTON, D.C. 20006
</TABLE>
<PAGE> 37
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 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 Architect.
13.5.5 If the Architect is to observe tests, inspections or approvals required
by the Contract Documents, the 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 FOR 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
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TERMINATION OR SUSPENSION OF THE CONTRACT
14.1 TERMINATION BY THE CONTRACTOR
14.1.1 The Contractor 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 Architect has not issued a Certificate for Payment and
has not notified the Contractor of the reason for withholding
certification as provided in Subparagraph 9.4.1, 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 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 and the 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 The Owner may terminate the Contract if the Contractor:
.1 persistently or repeatedly 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, upon certification by
the Architect that sufficient cause exists to jus-
- -------------------------------------------------------------------------------
AIA DOCUMENT A201 - GENERAL CONDITIONS OF THE CONTRACT A201-1987 23
FOR CONSTRUCTION - FOURTEENTH EDITION AIA(R) - (C)1987
THE AMERICAN INSTITUTE OF ARCHITECTS, 1735 NEW YORK
AVENUE N.W., WASHINGTON,, D.C. 20006
<PAGE> 38
tify such action, 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:
.1 take possession of the site and of all materials, equipment, tools,
and construction equipment and machinery thereon owned by the
Contractor;
.2 accept assignment of subcontracts pursuant to Paragraph 5.4; and
.3 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 Contract 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 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 be certified by the Architect, upon application, and this obligation for
payment shall survive termination of the Contract.
14.3 SUSPENSION BY THE OWNER
FOR CONVENIENCE
14.3.1 The Owner may, without cause, order the Contractor in writing to
suspend, delay or interrupt the Work in whole or in part for such period of
time as the Owner may determine.
14.3.2 An adjustment shall be made for increases in the cost of performance of
the Contract, including profit on the increased cost of performance, caused by
suspension, delay or interruption. No adjustment shall be made to the extent:
.1 that performance is, was or would have been so suspended, delayed or
interrupted by another cause for which the Contractor is
responsible; or
.2 that an equitable adjustment is made or denied under another
provision of this Contract.
14.3.3 Adjustments made in the cost of performance may have a mutually agreed
fixed or percentage fee.
- --------------------------------------------------------------------------------
AIA DOCUMENT 201 - GENERAL CONDITIONS OF THE CONTRACT FOR
24 A201-1987 CONSTRUCTION - FOURTEENTH EDITION
AIA(R) - (C) 1987 THE AMERICAN INSTITUTE OF ARCHITECTS,
1755 NEW YORK AVENUE, N.W., WASHINGTON, D.C. 20006
3/87
<PAGE> 39
ATTACHMENT "A"
List of Contract Documents
for
CONCEPTS DIRECT
<TABLE>
<CAPTION>
Number Title/Description Date
- ------ ----------------- ----
<S> <C> <C>
S1.1 General Notes 3/18/97
S1.2 Structural Details 3/18/97
S1.3 Structural Details 3/18/97
S2.1 Drilled Pier Schedule
S2.2 Foundation Plan 3/18/97
S2.3 Foundation Plan 3/18/97
S2.4 Foundation Plan 3/18/97
S2.5 Foundation Plan 3/18/97
S2.6 Foundation Plan 3/18/97
S2.7 Foundation Plan 3/18/97
S2.8 Mezzanine Floor Framing Plan 3/18/97
S3.1 Special Joist Load Schedule 3/18/97
S3.2 Roof Framing Plan 3/18/97
S3.3 Roof Framing Plan 3/18/97
S3.4 Roof Framing Plan 3/18/97
S3.5 Roof Framing Plan 3/18/97
S3.6 Roof Framing Plan 3/18/97
S3.7 Roof Framing Plan 3/18/97
S3.8 Truss A, B, & C Details 3/18/97
S4.1 Tilt-up Wall Panel Reinforcing Schedule 3/18/97
S4.2 Wall Panel Details 3/18/97
S4.3 Wall Panel Details 3/18/97
S4.4 Wall Panel Details 3/18/97
S5.1 Roof Framing Details 3/18/97
S5.2 Structural Details 3/18/97
Civil 14 of 23 Lot 1 Site Plan 2/5/97
Civil 15 of 23 Lot 1 Utility Plan 2/5/97
Civil 16 of 23 Lot 1 Utility Profiles 2/5/97
Civil 17 of 23 Lot 1 Grading Plan 2/5/97
Civil 18 of 23 Final Drainage Plan 2/5/97
Civil 19 of 23 Erosion Control Plan 2/5/97
Civil 20 of 23 Detail Sheet 1/29/97
Civil 21 of 23 Detail Sheet 1/29/97
Landscape Sheet 1 Landscape Plan 1/6/97
Landscape Sheet 2 Landscape Plan 1/6/97
Landscape Sheet 3 Landscape Plan 1/6/97
</TABLE>
<PAGE> 40
ATTACHMENT "A"
Page Two
for
CONCEPTS DIRECT
<TABLE>
<CAPTION>
Number Title/Description Date
- ------ ----------------- ----
<S> <C> <C>
Sheet I-1 Irrigation Plan 1/6/97
Sheet I-2 Irrigation Plan 1/6/97
Sheet I-3 Irrigation Plan 1/6/97
Sheet I-4 Irrigation Plan 1/6/97
A1.1 Site/Roof Plan 3/18/97
A1.2 Site Details 3/18/97
A1.3 Roof Details 3/18/97
A2.1 Master Floor Plan 3/18/97
A2.2-A2.7 Partial Floor Plan 3/18/97
A2.8 Enlarger Plans 3/18/97
A2.9 Enlarger Plans 3/18/97
A2.10 Enlarger Plans 3/18/97
A3.1 Master Reflected Ceiling Plan 3/18/97
A3.2-A3.7 Partial Reflected Ceiling Plan 3/18/97
A4.1 Elevations 3/18/97
A4.2-A4.5 Partial Elevations 3/18/97
A5.2-A5.14 Sections 3/18/97
A6.1 Door/Hardware Schedule 3/18/97
A6.2 Door/Window Details 3/18/97
A6.3-A6.6 Casework Elevations 3/18/97
A7.1 Finish Schedule 3/18/97
A8.1-A8.5 Interior Details 3/18/97
M1.2-M1.7 Partial Floor Plans 3/7/97
M1.8 Mechanical Schedule 3/7/97
P1.1 Plumbing Floor Plan 3/7/97
P1.2 Plumbing Enlarger Plans 3/7/97
E1.0 One Line Diagram 4/18/97
E1.1 Electrical Site Plan 4/7/97
E1.2 Mechanical Schedule 4/7/97
E1.3 Luminiare Schedule 4/18/97
E1.4 Electrical Room Panels 4/7/97
E1.5 Electrical Closets/Equipment Room Panels 4/7/97
E2.1 Fire Alarm & Mechanical Equipment Plan 4/7/97
E2.2 thru E2.5 Partial Electrical Plans 4/18/97
E2.6 thru E3.3 Partial Electrical Plans 4/7/97
E3.4 thru E3.7 Partial Electrical Plans 4/18/97
</TABLE>
<PAGE> 41
ATTACHMENT "A"
List of Contract Documents
For
CONCEPTS DIRECT
Geotechnical Engineering Report prepared by Terracon dated December 9, 1996.
Saunders Construction Inc. project scheduled, revised February 20, 1997.
Addendum #1 to Bid Package #3 - dated April 10, 1997
Addendum #2 to Bid Package #3 - dated April 15, 1997
Project Specifications Entitled Concepts Direct Office/Manufacturing/
Distribution
Facility as Prepared by Intergroup, Inc. Dated February 14, 1997
Supplemental Conditions
Supplementary General Conditions
<PAGE> 42
- -------------------------------------------------------------------------------
ATTACHMENT B
COST SUMMARY
<TABLE>
<S> <C> <C>
SAUNDERS OWNER: ARCHITECT:
6950 S. Jordan Road CONCEPTS DIRECT INTERGROUP, INC.
Englewood, Colorado DENVER, COLORADO
Prepared BY: GC/DH GMP ESTIMATE FOR: ESTIMATE NUMBER: 96091
DATE: 4/30/97 CONCEPTS DIRECT WAREHOUSE
REV: 5/1/97 Building and Site Development BUILDING AREA: 118800 SF
Longmont, Colorado
</TABLE>
- -------------------------------------------------------------------------------
<TABLE>
DESCRIPTION AMOUNT $/PER SE
----------- ------ --------
<S> <C> <C> <C>
SITEWORK
Site Preparation and Earthwork $291,474 $2.45
Site Concrete $179,868 $1.51
Asphalt Paving $183,539 $1.54
Site Utilities $69,357 $0.58
Site Specialties $83,803 $0.71
Landscape and Irrigation $253,783 $2.14
Subtotal $1,061,825 $8.94
CONCRETE
Foundations/Footings/Caissons $257,472 $2.17
Floor Slabs and Infills $274,253 $2.31
Site Cast Tilt-up Wall Panels $318,166 $2.68
Grout $14,363 $0.12
Subtotal $864,254 $7.27
MASONRY
Block Masonry $0 $0.00
Stonework $0 $0.00
Subtotal $0
METALS
Structural Steel Material $519,514 $4.37
Steel Erection $0 $0.00
Bar Joists and Metal Deck $0 $0.00
Miscellaneous Metal Items $22,454 $0.19
Subtotal $541,967 $4.56
CARPENTRY
Rough Carpentry $27,221 $0.23
Finish Carpentry $136,227 $1.15
Subtotal $163,448 $1.36
THER/MOIST PROTECTION
Dampproofing / Waterproofing $5,149 $0.04
Batt and Foundation Insulation $13,460 $0.11
Membrane Roofing and Sheet Metal $214,289 $1.80
Metal Wall Panels $13,000 $0.11
Roof Hatches and Skylights $37,146 $0.31
Caulking and Sealants $21,383 $0.18
Subtotal $304,426 $2.56
DOORS & WINDOWS
Hollow Metal Doors, Frames and Hardware $87,414 $0.74
Wood Doors $28,716 $0.24
Overhead Doors $13,061 $0.11
Special Doors $13,283 $0.11
Aluminum Framing and Glazing $86,406 $0.73
Subtotal $228,880 $1.93
</TABLE>
- -------------------------------------------------------------------------------
Prepared by Saunders 5/2/97
<PAGE> 43
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
DESCRIPTION AMOUNT
----------- ------
<S> <C> <C> <C> <C>
FINISHES
Metal Studs and Drywall $404,185 $3.40
Ceramic Tile $41,398 $0.35
Accoustical Ceilings $66,630 $0.56
Carpeting $145,043 $1.22
Painting $93,500 $0.79
Subtotal $750,756 $6.32
SPECIALITIES $24,137 $0.20
EQUIPMENT $47,498 $0.40
FURNISHINGS $60,688 $0.51
MECHANICAL
Fire Sprinklers $98,514 $0.83
Plumbing $228,967 $1.93
Heating, Ventilating, Air Conditioning, and Piping $623,179 $5.25
Subtotal $950,660 $8.00
ELECTRICAL $764,496 $6.44
-------- -----
- ------------------------------------------------------------------------------------------------------------------------------------
Subtotal HARD COSTS $5,763,036 $48.51
18500 CONSTRUCTION CONTINGENCY $120,000 $1.01
GENERAL CONDITIONS/SUPERVISION/INSURANCE $216,920 $1.83
BUILDING PERMIT & PLAN CHECK FEES N/A Paid by Owner
18100 MISC PERMITS AND FEES $3,054 $0.03
USE TAX N/A Paid by Owner
18300 PERFORMANCE & PAYMENT BONDS $0 Alternate
18003 BUILDER'S RISK INSURANCE $4,122 $0.03
------ -----
SUBTOTAL $6,107,131 $51.41
CONSTRUCTION FEE $244,285 $2.06
-------- -----
---------------------------------------------------------------------------------------------------------------
300 TOTAL $6,351,416 $53.46
---------------------------------------------------------------------------------------------------------------
DEVELOPMENT FEES
Mountain View Fire District - Plan review & inspections N/A Paid by Owner
Development Fees N/A Paid by Owner
---------------------------------------------------------------------------------------------------------------
PROJECT TOTAL $6,351,416 $53.46
---------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Prepared by Saunders 5/2/97
<PAGE> 44
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
SAUNDERS OWNER: ARCHITECT:
6950 S. Jordan Road CONCEPTS DIRECT INTERGROUP, INC.
Englewood, Colorado DENVER, COLORADO
PREPARED BY: GC/DH GMP ESTIMATE FOR: ESTIMATE NUMBER: 96091
DATE: 4/30/97 CONCEPTS DIRECT WAREHOUSE
REV: 5/1/97 Building and Site Development BUILDING AREA: 118800 SF
Longmont, Colorado
- ------------------------------------------------------------------------------------------------------------------------------------
Cost Description QTY UM Unit Amount $/SF Remarks
Code Cost
- ------------------------------------------------------------------------------------------------------------------------------------
DIVISION I - GENERAL CONDITIONS
<S> <C> <C> <C> <C> <C> <C> <C>
1001 Licenses & Misc. Bonds 1 LS $3,053.57 $3,054 $0.03
1026 Field Meetings 30 WKS $25.00 $750 $0.01
1027 Superintendents's Truck Expense 7.5 MO $524.56 $3,934 $0.03
1029 PM/PE Mileage 30 WKS $45.00 $1,350 $0.01 - 1 Trip per week
1031 Safety Labor and Materials 7.5 MO $104.23 $782 $0.01
1031 Safety Overhead 1 LS $6,683.03 $6,683 $0.06
1031 Safety Inspections 2 EA $350.00 $700 $0.01
1040 General Superintendent N/A $0 Not Required
1041 Superintendent 30 WKS $1,996.00 $59,880 $0.50
1043 Project Manager 30 WKS $520.00 $15,600 $0.13
1044 Project Engineer 30 WKS $1,562.00 $46,860 $0.39
1045 Project Administrator 30 WKS $180.00 $5,400 $0.05
1050 General Labor and Clean-up 30 WKS $368.00 $11,064 $0.09
1312 Project Photographs 7.5 MO $20.76 $156 $0.00
1313 Blueprinting and Duplication 1 LS $1,500.00 $1,500 $0.01 Shop Drawings, Etc.
1314 As-Built Survey 1 LS $1,000.00 $1,000 $0.01
1316 Mailing and Shipping 1 LS $250.00 $250 $0.00
1501 Temporary Power Consumption 7.5 MO $1,000.00 $7,500 $0.06
1504 Temporary Telephone 7.5 MO $1,200.00 $9,000 $0.08
1505 Temporary Water 7.5 MO $125.00 $938 $0.01
1505 Drinking Water 7.5 MO $85.00 $638 $0.01
1506 Temporary Toilet 7.5 MO $250.00 $1,875 $0.02
1507 Temporary Fire Protection 1 LS $150.00 $150 $0.00
1508 Temporary Storage Trailer 7.5 MO $100.00 $750 $0.01
1509 Temporary Construction Office 7.5 MO $250.00 $1,875 $0.02
1509 Move-in/Out Temporary Trailers 1 LS $1,582.77 $1,583 $0.01
1511 Communications Equipment N/A $0
1522 Small Tools and Equipment 1 LS $4,455.35 $4,455 $0.04
1522 Consumable Small Tools 1 LS $1,038.00 $1,038 $0.01
1525 Trash Dumpsters 48 EA $230.00 $11,040 $0.09
1610 Material Deliveries 1 LS $8,910.70 $8,911 $0.08
1700 Punchlist 1 LS $1,366.94 $1,367 $0.01
1710 Final Clean-up - Manufacturing 53,300 SF $0.03 $1,599 $0.01
1710 Final Clean-up - Office 65,500 SF $0.08 $5,240 $0.04
------ ----- ------ -----
--------------------------------------------------------------------------------------------------------------------------
TOTALS General Conditions $216,920 $1.83
--------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
GMP Estimate Page 1 11:00 AM 5/2/97
<PAGE> 45
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
SAUNDERS OWNER: ARCHITECT:
6950 S. Jordan Road CONCEPTS DIRECT INTERGROUP, INC.
Englewood, Colorado DENVER, COLORADO
PREPARED BY: GC/DH GMP ESTIMATE FOR: ESTIMATE NUMBER: 96091
DATE: 4/30/97 CONCEPTS DIRECT WAREHOUSE
REV: 5/1/97 Building and Site Development BUILDING AREA: 118800 SF
Longmont, Colorado
- ------------------------------------------------------------------------------------------------------------------------------------
Cost Description QTY UM Unit Amount $/SF Remarks
Code Cost
- ------------------------------------------------------------------------------------------------------------------------------------
DIVISION II - SITEWORK
<S> <C> <C> <C> <C> <C> <C>
2200 SITE PREPARATION AND EARTHWORK
2048 Layout labor 1 LS $2,570.40 $2,570 $0.02
2048 Restaking / Second Survey 1 LS $5,000.00 $5,000 $0.04
2022 Temp. Barricade, etc. 8 MO $208.45 $1,583 $0.01
2200 Earthwork Subquote 1 SC $180,500.00 $180,500 $1.52 Horn Contruction
2200 Stabilize subgrades - change order 1 SC $45,467.00 $45,467 $0.38 Horn Construction
Road work for perimeter roads INCL $0
2055 Remove irrigation canal for road work 1 LS $2,420.00 $2,420 $0.02
Vehicle Tracking Control/Silt Fence 1 SC In Subquote
Sawcut Asphalt @ Street N/A $0 None Required
Sawcut Sidewalk N/A $0 None Required
Sawcut Street Curbs N/A $0 None Required
Clear and grub site - total site INCL In Subquote
Strip & Stockpile topsoil INCL In Subquote 6" Across Site
Cuts to fills direct on site INCL In Subquote
Import fill material INCL In Subquote Move from adjacent Site
Excavate detention pond INCL In Subquote
Scarify & Recompact @ Site Conc. INCL In Subquote
Structural Fill From Borrow - 3' INCL In Subquote At Building Pad
Structual fill under slab & footings N/A $0 Not Required
Excavate/Backfill building perimeter INCL In Subquote
Finish grade building pad INCL In Subquote
Replace topsoil @ landscaped areas INCL In Subquote 6" Thick
Fine grade parking & landscape INCL In Subquote
Build Temporary road - 9" road base INCL In Subquote
Remove temp. road, topsoil cover INCL In Subquote
Silt Fence INCL In Subquote
2200 Proof roll & repairs (stabilize
subgrades) 1 LS $5,000.00 $5,000 $0.04 ALLOWANCE
2040 Scarify & recompact under temp. road 1 SC $3,500.00 $3,500 $0.03
2040 Miscellaneous regrading 1 LS $3,500.00 $3,500 $0.03
Under drain & piping in streets N/A $0 Later bid package
2040 Temporary Drives and Parking 1 LS $3,184.40 $3,184 $0.03 Trailer parking lot
Frost / Mud / Snow removal N/A $0 Draw from contingency
if needed
Import pit run under dock paving N/A $0 Draw from contingency
if needed
2051 Pumping water 1 LS $568.80 $569 $0.00
2522 Skid Steer Loader 3 MO $2,249.45 $6,748 $0.06
2522 Misc. Rental Equip 1 LS $2,822.48 $2,822 $0.02 Compactors, etc.
2200 Bury culvert @ borrow pit 1 LS $2,500.00 $2,500 $0.02
2040 Gravel for crane / fire truck access 1 LS $13,000.00 $13,000 $0.11
Place dirt over vapor barrier 2,220 CY $0 Not included $11,000
Perimeter drain N/A $0 Not Required
2480 Gravel @ Planters 14 CY $50.00 $700 $0.01
2480 Filter Fabric in Planters 320 SF $1.00 $320 $0.00
2480 Topsoil @ Planters 28 CY $30.00 $840 $0.01
2040 Maintain access road 6 MO $921.93 $5,532 $0.05
2054 Maintenance & removal of silt fence 6 M0 $273.18 $1,639 $0.01
2050 Sweep/Clean public roads 6 MO $197.52 $1,185 $0.01
2054 Dust Control 3 MO $971.28 $2,914 $0.02 1hrs 3x/week
2500 ASPHALT PAVING
Layout N/A By Owner
Paving subquote 1 SC $173,273.00 $173,273 $1.46 Bituminous
Scarify and recompact subgrade 1 SC $6,839.00 $6,839 $0.06 Bituminous
2500 Parking lot paving 5' Depth 16,175 SY $0
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
GMP Estimate Page 2 11:00 AM 5/2/97
<PAGE> 46
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Cost Description QTY UM Unit Amount $/SF Remarks
Code Cost
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
2500 Truck paving @ docks 7" Depth 3,264 SY $0
Add second move-in INCL $0
Raise water valves and manholes 1 LS $3,427.20 $3,427 $0.03
Repair Asphalt @ Curb Cuts/Utilities N/A $0 Not Required
2532 CONCRETE PAVING
2048 Layout labor 1 LS $4,051.90 $4,052 $0.03
2532 Fine Grade 14,257 SF $0.25 $3,564 $0.03
2522 Skid Steer Loader 1 MO $2,249.45 $2,249 $0.02
2522 Air Compressor 1 MO $2,113.12 $2,113 $0.02
2532 Edge Form 404 LF $2.35 $951 $0.01
3097 Form number 404 LF $0.36 $147 $0.00
2532 Doweled Edge & Bulkhead Forms 32 LF $2.62 $84 $0.00
3097 Form number 32 LF $0.42 $13 $0.00
2532 Keyway on Edge Form 32 LF $0.75 $24 $0.00
3097 Form number 32 LF $0.52 $17 $0.00
2532 Expansion Jt. Filler - 8" 302 LF $1.41 $425 $0.00
3203 Place 3/4" Dia. x 18" Smooth Dowels 22 EA $1.05 $23 $0.00
3203 Furnish 3/4" x 18" Smooth Dowels 22 EA $1.09 $24 $0.00
3220 Wire Mesh - 6X6/W2.9XW2.9 151 SQS $17.19 $2,597 $0.02
3300 Concrete Material 389 CY $56.62 $22,036 $0.19
2800 Pump Concrete @ Truck Aprons 1 LS $1,500.00 $1,500 $0.01
2532 Place & Finish 14,257 SF $0.50 $7,129 $0.06
3390 Sawcut Control Joints for Seal 1,901 LF $0.70 $1,331 $0.01
2532 Cure and Protect 14,257 SF $0.05 $743 $0.01
Weather Protection 1 LS $0 Not Required
2535 SLOPED DOCK WALLS
2535 Fine grade/hand excavate slope 720 SF $0.92 $664 $0.01
2535 Edge form - top and bottom 252 LF $3.66 $923 $0.01
3097 Form lumber 252 LF $0.52 $131 $0.00
2535 Expansion Joint Filler 12 SF $4.54 $54 $0.00
3300 Concrete Material 14 CY $56.62 $793 $0.01
2535 Place & finish slab 660 SF $0.75 $495 $0.00
2180 Strip and face curbs 252 LF $3.50 $882 $0.01
3201 Rebar 1,200 LBS (In Quote)
2535 Cure & protect 912 SF $0.05 $45 $0.00
2180 CURB AND GUTTER
2180 Fine Grade 11,180 SF $0.26 $2,925 $0.02
2180 Form & Place 5,590 LF $4.50 $25,155 $0.21 Subcontract
2180 Trowel finish curbs 168 HRS $28.56 $4,798 $0.04
2180 Expansion Joint Filler 559 LF $2.40 $1,342 $0.01
3300 Concrete Material 342 CY $60.20 $20,573 $0.17
2180 Cure and Protect 14,000 SF $0.05 $730 $0.01
DRAIN CHASES N/A Underground drains
2185 CROSS PANS @ CURB CUTS
2185 Fine Grade 4,382 SF $0.26 $1,146 $0.01
2185 Form Edges 1,459 LF $2.50 $3,648 $0.03
3097 Form lumber 1,459 LF $0.36 $530 $0.00
3300 Concrete Material 88 CY $56.62 $4,962 $0.04
3220 Wire Mesh - 6X6/W1.4XW1.4 47 SQS $17.19 $813 %0.01
2185 Place and Finish Concrete 4,382 SF $0.50 $2,191 $0.02
2185 Cure and Protect 4,382 SF $0.05 $228 $0.00
2190 SIDEWALKS @ BUILDING PERIMETER
2190 Fine Grade 9,900 SF $0.26 $2,590 $0.02
2190 Form Edges and Bulkheads 496 LF $2.50 $1,240 $0.01
3097 Form lumber 496 LF $0.36 $180 $0.00
2190 Expansion Joint Filler 678 LF $0.78 $530 $0.00
3300 Concrete Material 131 CY $56.62 $7,399 $0.06
3220 Wire Mesh - 6X6/W1.4XW1.4 119 SQS $17.19 $2,045 $0.02
2190 Place and Finish Concrete 9,900 SF $0.50 $4,950 $0.04
2190 Cure and Protect 9,900 SF $0.05 $516 $0.00
2532 DOLLY STRIP AT TRUCK PARKING
2532 Fine Grade 340 SF $0.26 $89 $0.00
2532 Form Edges and Bulkheads 178 LF $2.50 $445 $0.00
3097 Form lumber 178 LF $0.36 $65 $0.00
3300 Concrete Material 7 CY $56.62 $385 $0.00
3220 Wire Mesh - 6X6/W1.4XW1.4 4 SQS $17.19 $63 $0.00
2532 Place and Finish Concrete 340 SF $0.50 $170 $0.00
2532 Cure and Protect 340 SF $0.05 $18 $0.00
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
GMP Estimate Page 3 11:00 AM 5/2/97
<PAGE> 47
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Cost Description QTY UM Unit Amount $/SF Remarks
Code Cost
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
2194 STOOPS AT EXIT DOORS - 6' x 6'
2194 Fine Grade 216 SF $0.26 $57 $0.00
2194 Form Edges and Bulkheads 103 LF $2.86 $309 $0.00
3097 Form lumber
2194 Expansion Joint Filler 432 LF $0.78 $338 $0.00
3300 Concrete Material 6 CY $56.62 $340 $0.00
3220 Wire Mesh - 6X6/W1.4XW1.4 3 SQS $17.19 $52 $0.00
2194 Place and Finish Concrete 216 SF $0.50 $108 $0.00
2194 Cure and Protect 216 SF $0.05 $11 $0.00
2194 TRANSFORMER PAD - 20' x 10'
2194 Fine Grade 200 SF $0.26 $52 $0.00
2194 Form Edges and Bulkheads 76 LF $2.50 $190 $0.00
3097 Form lumber 76 LF $0.36 $28 $0.00
2194 Expansion Joint Filler 12 LF $0.78 $9 $0.00
3300 Concrete Material 4 CY $56.62 $226 $0.00
3220 Wire Mesh - 6X6/W1.4XW1.4 3 SQS $17.19 $52 $0.00
2194 Place and Finish Concrete 200 SF $0.50 $100 $0.00
2194 Cure and Protect 200 SF $0.05 $10 $0.00
SIDEWALKS OUTSIDE P.L. N/A Not Included
2185 DRAIN PANS
2185 Fine Grade 3,916 SF $0.26 $1,025 $0.01
2185 Form Edges and Bulkheads 1,538 LF $1.57 $2,414 $0.02
3097 Form lumber 1,538 LF $0.26 $399 $0.00
2185 Expansion Joint Filler 154 LF $0.78 $120 $0.00
3300 Concrete Material 78 CY $56.62 $4,435 $0.04
2185 Place and Finish Concrete 3,916 SF $0.50 $1,958 $0.02
2185 Cure and Protect 3,916 SF $0.05 $204 $0.00
2532 BASKETBALL SLAB
2532 Fine Grade 1,280 SF $0.26 $335 $0.00
2532 Form Edges and Bulkheads 144 LF $1.57 $226 $0.00
3097 Form lumber 144 LF $0.26 $37 $0.00
3300 Concrete Material 17 CY $56.62 $957 $0.01
3220 Wire Mesh - 6X6/W1.4XW1.4 14 SQS $17.19 $233 $0.00
2532 Place and Finish Concrete 1,280 SF $0.50 $640 $0.01
2532 Cure and Protect 1,280 SF $0.05 $67 $0.00
HOOP POLE BASE
2532 Excavate/backfill for pole base 2 CY $73.76 $111 $0.00
2532 Place concrete base 1 CY $160.34 $224 $0.00
3300 Concrete material 1 CY $56.62 $79 $0.00
2181 CURB @ VOLLEYBALL PERIMETER
2181 Fine Grade 180 LF $1.00 $180 $0.00
2181 Form Edges over 12" 720 SF $3.50 $2,520 $0.02
3098 Form rental 720 SF $0.50 $360 $0.00
3099 Form hardware & accessories 720 SF $0.52 $374 $0.00
3201 Rebar 600 LBS $0.43 $259 $0.00
3300 Concrete Material 10 CY $56.62 $566 $0.00
2181 Place Concrete 180 LF $4.00 $720 $0.01
2181 Finish Top 180 LF $1.01 $183 $0.00
2181 Cure and Protect 840 SF $0.05 $44 $0.00
Sand fill at court 30 CY $34.95 $1,035 $0.01
2181 CURB @ SIDE ENTRANCE PLANTERS
2181 Fine Grade 78 LF $1.00 $78 $0.00
2181 Form Edges over 12" - curved 234 SF $5.00 $1,170 $0.01
3097 Form lumber 234 SF $1.56 $364 $0.00
3201 Rebar 300 LBS $0.43 $129 $0.00
3300 Concrete Material 2 CY $56.62 $135 $0.00
2181 Place Concrete 78 LF $4.00 $312 $0.00
2181 Finish Top & Sides 78 LF $2.00 $156 $0.00
2181 Cure and Protect 273 SF $0.05 $14 $0.00
2195 LIGHT POLE BASES
2195 Site light poles 19 EA $331.68 $6,302 $0.05
3305 CONCRETE ENCASEMENTS ON TELEPHONE CONDUITS
3305 Place Encasements 60 CY $76.62 $4,597 $0.04 Exterior work only
3201 Rebar 1,800 LBS $0.43 $776 $0.01 Exterior work only
2534 HANDICAP RAMPS
2534 Fine Grade 420 SF $0.26 $110 $0.00
2534 Form Edges 4" 98 LF $2.86 $281 $0.00
2534 Curb Form 28 LF $4.44 $124 $0.00
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
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<CAPTION>
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Cost Description QTY UM Unit Amount $/SF Remarks
Code Cost
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
2534 Expansion Joint Filler 14 LF $0.78 $11 $0.00
3220 Wire Mesh - 6X6/W1.4XW1.4 5 SQS $16.86 $84 $0.00
3300 Concrete Material 7 CY $77.85 $549 $0.00 Colored ?
2534 Place and Finish Concrete 420 SF $0.55 $231 $0.00
2534 Strip and Face Curbs 28 LF $3.50 $98 $0.00
2534 Cure and Protect 420 SF $0.05 $22 $0.00
2700 SITE UTILITIES
Surveying and Staking N/A $0 By Owner
2700 Water Service N/A $0 By Owner
2700 Storm Sewer 1 SC $64,425.00 $64,425 $0.54 Excavating Engineers
Trash guards 2 EA $2,166.14 $4,332 $0.04
2700 Roof Drain Piping INCL $0 In Above
2700 Sanitary Sewer N/A $0 By Owner
2700 Install sleeves for gas main - 2 each 2 EA $300.00 $600 $0.01
2620 SITE SPECIALITY ITEMS
2577 Parking Lot Striping 1 SC $3,500.00 $3,500 $0.03
2620 Bike racks 2 EA $890.19 $1,780 $0.01
2620 Precast planters @ entrances 2 EA $2,849.43 $5,699 $0.05
Handicap/Fire Lane Signs 1 SC $3,500.00 $3,500 $0.03
2610 Directional Signage INCL $0 With allowance below
2611 Monument Sign at Entries 7 EA $7,000.00 $49,000 $0.41 ALLOWANCE
2611 Monument Sign at Highway 119 1 EA $20,000.00 $20,000 $0.17 ALLOWANCE
Horseshoe Pit
2620 Wood timbers @ perimeter 32 LF $9.00 $288 $0.00
2480 Sand fill for pit 1 CY $30.00 $36 $0.00
2480 LANDSCAPING AND IRRIGATION
2480 Landscape and Irrigation 1 SC $175,347.00 $175,347 $1.48 Urban Farmer
2480 Interior plantings 1 ALLOW $10,000.00 $10,000 $0.08 SCI Allowance
2480 Spread topsoil @ borrow pit 1 SC $3,500.00 $3,500 $0.03
2480 Reseed Borrow areas 185,000 SF $0.12 $22,320 $0.19
2480 Reseed Temporary road area 21,800 SF $0.12 $2,616 $0.02
2480 Landscaping @ Lot 3 & Hwy. 119 1 ALLOW $40,000.00 $40,000 $0.34 ALLOWANCE
- ---------- ------- -----
-----------------------------------------------------------------------------------------------------------------------------
TOTALS Site Development $1,061,825 $8.94
-----------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
DIVISION III - CONCRETE
3048 Layout labor 1 LS $12,686.30 $12,686 $0.11
3201 REINFORCING
3201 Rebar Quote 1 SC $57,688.70 $57,689 $0.49 Dalco
3201 Rebar Placing Quote 1 SC $27,071.00 $27,071 $0.23 Great Western
Caisson rebar 14 TN (In Quote)
Exterior columns casings 0 TN (In Quote)
Grade Beams / Pier Caps 4 TN (In Quote)
Exterior CIP Columns 3 TN (In Quote)
Miscellaneous dowels, embeds 1 LS $3,500.00 $3,500 $0.03
SLABS
3220 WWF @ 5" Slab 5,724 SF $0.20 $1,163 $0.01
3220 Supports for Reinforcing Steel 5,724 SF $0.03 $178 $0.00
3201 Misc. Rebar @ thickened, edges 1 LS $1,038.00 $1,038 $0.01
Rebar - #3's @ 18" oc ew 28 TN (In Quote)
3201 Supports for Reinforcing Steel 113,532 SF $0.03 $3,535 $0.03
3072 CAISSONS
Caissons (18") - 77 ea 62 CY
Caissons (24") - 102 ea 143 CY
3048 Layout Caissons 179 EA $31.14 $5,574 $0.05
3070 Drill Caissons - 18" & 24" 1 SC $48,786.00 $48,786 $0.41 Snows Caissons
Drill Caissons - 18" 939 LF INCL
Drill Caissons - 24" 1,232 LF INCL
Core drilling at rock INCL $0
Remove Caisson Spoils INCL (With Earthwork)
3072 Place Caissons 402 CY $11.42 $4,592 $0.04
3300 Concrete Material 402 CY $53.72 $21,594 $0.18
3800 Pump concrete 11 DAYS $1,609.09 $17,700 $0.15
3072 Form Tops 358 LF $18.95 $6,784 $0.06
3195 Embed Plates 108 EA $10.90 $1,177 $0.01
3195 Anchor Bolt Sets 87 EA $18.17 $1,581 $0.01
- ------------------------------------------------------------------------------------------------------------------------------------
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<CAPTION>
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Cost Description QTY UM Unit Amount $/SF Remarks
Code Cost
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Pump Water INCL INCL
3305 EXTERIOR COLUMN CASINGS
3305 Form Tops - Sonotube 15 LF $18.95 $275 $0.00
3305 Place Columns 1 CY $42.85 $45 $0.00
3300 Concrete Material 1 CY $53.72 $56 $0.00
3110 GRADE BEAMS / PIER CAPS
2260 Fine Grade 179 SF $0.50 $90 $0.00
3110 Form Sides Over 12" 3,034 SF $2.86 $8,665 $0.07
3098 Form Rental 3,034 SF $0.50 $1,517 $0.01
3099 Form Hardware 3,034 SF $0.47 $1,417 $0.01
3097 Form Lumber for Bulkhead 66 LF $0.52 $34 $0.00
3195 Embed Plates 14 EA $10.90 $153 $0.00
3195 Anchor Bolt Sets 13 EA $18.17 $236 $0.00
3300 Concrete Material 44 CY $53.72 $2,354 $0.02
3320 Place and Finish 44 CY $21.42 $939 $0.01
3320 Trowel Finish Tops 290 SF $0.10 $29 $0.00
3395 Point & Patch 679 SF $0.22 $149 $0.00
3398 Rub Exterior 679 SF $1.01 $685 $0.01
3393 Cure Formed Surfaces/Memb. Cur 3,034 SF $0.05 $158 $0.00
3140 CIP Columns
3140 Form Sides 1,200 SF $4.28 $5,141 $0.04
3098 Form Rental 1,200 SF $1.83 $2,196 $0.02
3099 Form Hardware 1,200 SF $0.47 $561 $0.00
3195 Embed Plates 8 EA $10.90 $87 $0.00
3300 Concrete Material 24 CY $53.72 $1,289 $0.01
3345 Place and Finish 24 CY $21.42 $514 $0.00
3395 Point & Patch 1,200 SF $0.22 $264 $0.00
3398 Rub Exterior 1,024 SF $1.01 $1,034 $0.01
3393 Cure Formed Surfaces/Memb. Cur 1,200 SF $0.05 $63 $0.00
3800 PUMP CONCRETE 24 CY $20.00 $480 $0.00
EXTERIOR MASONRY WALL FOOTINGS N/A NOT REQUIRED
3148 DOCK PIT WALLS
3148 Sideform(3'-3") 1,521 SF $3.55 $5,403 $0.05
3098 Form Rental 1,521 SF $0.40 $608 $0.01
3099 Form Hardware 1,521 SF $0.42 $632 $0.01
3395 Point & Patch 1,521 SF $0.22 $334 $0.00
3300 Concrete Material 20 CY $53.72 $1,075 $0.01
3340 Place and Finish 20 CY $20.93 $419 $0.00
3800 Pump Concrete 20 CY $7.00 $140 $0.00
3393 Cure Formed Surfaces/Memb. Cur 1,521 SF $0.05 $79 $0.00
3148 COMPUTER ROOM PIT WALLS
3148 Sideform(1'-4") 1,045 SF $3.55 $3,712 $0.03
3098 Form Rental 1,045 SF $0.40 $418 $0.00
3099 Form Hardware 1,045 SF $0.42 $434 $0.00
3395 Point & Patch 1,045 SF $0.22 $230 $0.00
3300 Concrete Material 10 CY $53.72 $561 $0.00
3340 Place and Finish 10 CY $20.93 $219 $0.00
3800 Pump Concrete 10 CY $7.00 $73 $0.00
3393 Cure Formed Surfaces/Memb. Cure 1,045 SF $0.05 $55 $0.00
VAULT WALL FOOTINGS N/A Thickened Slab
EXTERIOR PLANTER/COLUMN FOOTINGS N/A Pier Cap - Above
3150 SLAB ON GRADE
2265 Fine Grade 118,832 SF $0.15 $18,101 $0.15
2265 Regrade at Pipe Trenches, etc 1 LS $1,500.00 $1,500 $0.01
Vapor Barrier 118,832 SF $0 Not included $.15, $.50
Slab prep overtime 128 1/2 HRS $14.28 $1,826 $0.02 8 men - 2 weekends
2522 Skid Steer Loader 1 MO $2,249.45 $2,249 $0.02
3522 Air Compressor 1 MO $2,113.12 $2,113 $0.02
3150 Edge Form - 6" @ Doors 94 LF $1.83 $172 $0.00
3150 Edge Form - 6" @ Pit Slabs 678 LF $1.83 $1,242 $0.01
3097 Materials for Edge Form 772 LF $0.36 $280 $0.00
3150 Edge Form (12") @ Recess slabs 608 LF $3.55 $2,160 $0.02
3097 Materials for Recess Form 608 LF $1.04 $631 $0.01
3151 Doweled Edge Form @ Pourback 1,526 LF $3.15 $4,801 $0.04
3151 Doweled Bulkhead Form 1,195 LF $3.14 $3,754 $0.03
3097 Materials for Bulkheads 2,721 LF $0.42 $1,130 $0.01
3155 Styro @ Column Diamond Blockout 263 SF $2.62 $687 $0.01
3155 Materials for Blockout 263 SF $0.52 $136 $0.00
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
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<TABLE>
<CAPTION>
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Cost Description QTY UM Unit Amount $/SF Remarks
Code Cost
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
3155 Sawcut Blockouts 420 LF $0.50 $210 $0.00
Remove blockouts 1 LS $1,475.20 $1,475 $0.01
3151 Pourback Blockouts 263 SF $1.64 $431 $0.00
3155 Styro @ Plumbing/Electrical Blockouts 348 SF $2.62 $910 $0.01
3155 Materials for Blockout 348 SF $0.52 $181 $0.00
3155 Sawcut Blockouts 588 LF $0.50 $294 $0.00
3151 Pourback Blockouts 348 SF $1.64 $571 $0.00
3195 Place Embedded Angle @ dock door 117 LF $3.57 $418 $0.00
3195 Materials to Place Angle 117 LF $0.16 $18 $0.00
3150 Expansion Joint Filler - 4" 1,472 LF $0.78 $1,152 $0.01
3151 Column Diamond Prep 90 EA $6.29 $566 $0.00
2265 Thickened Stab Prep @ Vault 144 SF $0.52 $76 $0.00
3203 3/4" Dia. x 48" Smooth Rod @ PB 385 EA $2.14 $823 $0.01
3203 3/4" Dia. x 18" Smooth Rod @ CJ 1,195 EA $2.14 $2,553 $0.02
3204 #3's x 14" Smooth Rod @ Diamonds 360 EA $2.14 $769 $0.01
3300 Concrete Material for Slab - 6" 1/2 1,149 CY $58.65 $67,386 $0.57
3300 Concrete Material for Slab - 6" 1/2 1,149 CY $56.76 $65,239 $0.55
3300 Concrete Material for Slab - 5" 90 CY $56.78 $5,108 $0.04
3300 Concrete @ Vault Thcknd. Slab 3 CY $56.78 $167 $0.00
3300 Accelerator for Slabs 2,298 CY $0 Draw from contingency
3800 Pump Concrete 2,391 CY $5.70 $13,624 $0.11 if needed
3522 Power Screed 1 MO $1,759.50 $1,760 $0.01
3522 Power Trowel 118,832 SF $0.01 $1,188 $0.01
3350 Place & Finish Interior Slabs - 6" 103,038 SF $0.37 $38,364 $0.32
3350 Place & Finish Pourback Slabs - 6" 9,774 SF $0.39 $3,844 $0.00
3350 Place & Finish Recess Slabs - 6" 5,300 SF $0.39 $2,084 $0.02
3350 Place & Finish Dock Pit Slabs - 6" 720 SF $0.39 $263 $0.00
3390 Sawcut Control Joints 15,228 LF $0.55 $8,411 $0.07
3351 Place and Finish Column Diamonds 563 SF $1.52 $857 $0.01
3393 Cure and Protect on Slab 118,832 SF $0.04 $4,187 $0.04
3393 Cure and Protect/Column Diamonds 563 SF $0.08 $46 $0.00
3029 Weather Protection for Slabs 1 LS $5,519.00 $5,519 $0.05
3354 SLAB ON DECK @ MEZZANINE - 3"
3031 Perimeter handrail 92 LF $3.92 $360 $0.00
3050 Clean Deck 1,448 SF $0.16 $227 $0.00
3220 WWF 1,564 SF $0.20 $318 $0.00
3300 Concrete Material for Slab 19 CY $56.78 $1,105 $0.01
3800 Pump Concrete 19 CY $9.00 $175 $0.00
3354 Place & Finish Interior Slabs 1,448 SF $0.37 $539 $0.00
3393 Cure and Protect 1,448 SF $0.05 $75 $0.00
3354 SLAB ON DECK @ PLATFORM - 3"
3050 Clean Deck 925 SF $0.16 $145 $0.00
3220 WWF 999 SF $0.20 $203 $0.00
3300 Concrete Material for Slab 12 CY $56.78 $706 $0.01
3800 Pump Concrete 12 CY $9.00 $112 $0.00
3354 Place & Finish Interior Slabs 925 SF $0.37 $344 $0.00
3393 Cure and Protect 925 SF $0.05 $48 $0.00
STAIR PAN FILL
3050 Clean Pans 70 SF $0.52 $37 $0.00
3300 Concrete Material 1 CY $56.78 $40 $0.00
3360 Place & Finish 70 LF $3.05 $214 $0.00
3393 Cure and Protect 130 SF $0.14 $18 $0.00
EQUIPMENT PADS
3710 Clean Floor 60 SF $0.52 $31 $0.00
3300 Concrete Material 1 CY $56.78 $45 $0.00
3710 Edge Form 46 LF $3.66 $168 $0.00
3710 Materials for Edge Form 46 LF $0.36 $17 $0.00
3710 Place & Finish Interior Slabs 60 SF $0.37 $22 $0.00
3383 Cure and Protect 60 SF $0.05 $3 $0.00
TILT-UP WALL PANELS
3401 Panel Layout - Standard 46 EA $93.42 $4,297 $0.04
3401 Panel Layout - Other 59 EA $93.42 $5,512 $0.05 Columns/Spandrels/Vault
2522 Skid Steer Loader 1 MO $2,249.45 $2,249 $0.02
2522 Forklift 1 MO $3,817.24 $3,817 $0.03
3522 Air Compressor 1 MO $2,113.12 $2,113 $0.02
3404 Edge Form - Standard 7,687 LF $1.53 $11,791 $0.10
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
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<CAPTION>
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Cost Description QTY UM Unit Amount $/SF Remarks
Code Cost
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
3404 Edge Form (9") 446 LF $1.53 $684 $0.01
3404 Edge Forms (16") 580 SF $4.08 $2,368 $0.02
3406 Opening Forms 1,783 LF $3.83 $6,827 $0.06
3412 Chamfer 9,388 LF $0.38 $3,541 $0.03
3413 Reveal Strip 3,912 LF $0.92 $3,591 $0.03
3412 Bevel Tops of Panels 1,730 LF $1.04 $1,803 $0.02
3412 Mitre Panel Corners 397 LF $7.60 $3,015 $0.03
3414 Strip tilt-up panes 105 EA $40.60 $4,263 $0.04
3416 Lifting Inserts - 6" 44 EA $14.56 $641 $0.01
3416 Lifting Inserts -7" 620 EA $14.72 $9,124 $0.08
3416 Lifting Inserts - 9" 32 EA $15.86 $507 $0.00
3416 Lifting Inserts - 16" 8 EA $30.91 $247 $0.00
3416 Lifting Inserts - Edge Pick 76 EA $22.61 $1,718 $0.01
3416 Brace Inserts - 6" 18 EA $13.00 $234 $0.00
3416 Brace Inserts - 7" 182 EA $13.11 $2,386 $0.02
3416 Brace Inserts - 9" 8 EA $13.11 $105 $0.00
3416 Brace Inserts - 16" 6 EA $25.72 $206 $0.00
3416 Stiffback inserts 17 EA $6.62 $113 $0.00
3420 Embed Misc. Plates/Angles 540 EA $4.19 $2,261 $0.02
3420 Recessed Embed Plates/Pts. w/rebar 820 EA $14.30 $11,727 $0.10
3416 Embed Angles - OH Jambs 272 LF $4.07 $1,107 0.01
3422 Bond Breaker 42,382 SF $0.06 $2,649 0.02
3201 Reinforcing Steel and Supports 70 TN (IN QUOTE)
3201 Misc. rebar at lifting points, etc. 1 LS $3,925.40 $3,925 $0.03
3300 Concrete Material 1,000 CY $56.78 $56,779 $0.48
3300 High Early Strength Concrete Premium 250 CY $3.11 $779 $0.01
3800 Pump Concrete 1 SC $6,250.00 $6,250 $0.05
3425 Place and Float Finish 32,372 SF $0.31 $10,065 $0.08 Not incl. trowel finish
3428 Place and Trowel Finish 10,016 SF $0.37 $3,715 $0.03
3427 Special Finish at Lobby 5,140 SF $7.00 $35,980 $0.30 Colorado Hardscapes
3428 Cure and Protect 42,382 SF $0.05 $2,209 $0.02
3430 Panel Cleanup 105 EA $47.20 $4,956 $0.04
PANEL ERECTION/BRACE REMOVAL 105 EA
3434 Panel erection - subcontract 1 SC $46,400.00 $46,400 $0.39 D & G
3523 Transit Rental 1 MO $272.66 $273 $0.00
3510 Deadmen - Large 38 EA $239.72 $9,109 $0.08
3434 Brace Removal 216 EA $15.70 $3,391 $0.03
3438 Brace Rental 216 EA $23.36 $5,045 $0.04
3442 Power Wash Panels 1 LS $4,000.00 $4,000 $0.03
3442 Patch and Rub Panels 37,000 SF $0.46 $17,898 $0.15
3522 Personnel Lifts and Fuel 2 MO $3,540.78 $7,082 $0.06
3444 Patch Floor Slabs 42,382 SF $0.16 $6,645 $0.06
3448 Panel Engineering 50 EA $30.00 $1,500 $0.01
3446 Panel Shop Drawings 105 EA $31.14 $3,270 $0.03
3450 GROUT
3450 Tilt-up Panel Bottom 30 CF $52.23 $1,567 $0.01
3450 Grout Recessed Inserts 150 EA $11.82 $1,772 $0.01
3600 Grout Base Plates 12 CF $122.01 $1,464 $0.01
3600 Hollow Metal Door Frames 9 EA $104.44 $940 $0.01
MISCELLANEOUS
5510 Concrete Bollard Bases 110 EA $78.36 $8,620 $0.07
--- ------ ------ -----
----------------------------------------------------------------------------------------------------------------------
TOTALS Concrete $864,254 $5.46
----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
DIVISION IV - MASONRY
4001 MASONRY
Exterior screen walls N/A Not Required
STONEWORK
Sandstone veneer - exterior N/A Not Required
----------------------------------------------------------------------------------------------------------------------
TOTALS Masonry $0 $0.00
----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
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<CAPTION>
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Cost Description QTY UM Unit Amount $/SF Remarks
Code Cost
- ----------------------------------------------------------------------------------------------------------------------------------
DIVISION V - METALS
<S> <C> <C> <C> <C> <C>
5100 Layout labor 20 HRS $32.18 $6.44 $0.01
Structural Steel and Misc. Metals 1 SC $518,870.00 $518,870 $4.37 Boulder Steel
Steel Subcontract INCL $0
Roof Framing INCL $0
Mezzanine Framing INCL $0
Raised Floor INCL $0
BAR JOIST/GIRDER/ROOF DECK MATERIAL
Roof Framing INCL $0
Mezzanine Framing INCL $0
Metal Decks on Canopies INCL $0
Raised Floor INCL $0
STEEL ERECTION
Roof Framing INCL $0
Mezzanine Framing INCL $0
Raised Floor INCL $0
STRUCTURAL STUD FRAMING
Framing @ front entrance N/A $0 Tilt-up
Framing above vestibule INCL $0 w/Gyp. Board
MISCELLANEOUS METALS
Fabricated light fixtures 11 EA 1,250.00 $13,750 $0.12
Site Chain Barrier 2 EA $476.67 $953 $0.01
Embed Angles @ Overhead Doors INCL $0
Embed Angles @ Strip Doors INCL $0
Embed Angles @ Leveler Pits INCL $0
Mezzanine Stair & Handrails INCL $0
Strips Ladder & Rails INCL $0
Framing at Skylight INCL $0
Tube Steel Canopies @ Side Entries INCL $0
Tube Steel Canopy @ Front Entry INCL $0
Pipe rail at print room door 5 LF $65.00 $325 $0.00
Pipe Bollards - install 110 EA $49.32 $5,425 $0.05
Skylight Angles INCL $0
Opening Frames as HVAC Units INCL $0
Miscellaneous Steel 1 LS $2,000,000 $2,000 $0.02
---- ---------- ------ -----
-----------------------------------------------------------------------------------------------------------------------------
TOTALS Metals $541,967 $4.65
-----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
DIVISION VI - CARPENTRY
<S> <C> <C> <C> <C> <C> <C>
ROUGH CARPENTRY
Blocking @ Skylights and Hatch 304 LF $1.88 $571 $0.00 2X4
Telephone/Electrical Backboards 868 SF $1.93 $1,676 $0.01 All sides of 4 rooms
Locker bases 232 LF $1.36 $316 $0.00
Nailers above canopy purlins 1,384 LF $2.41 $3,332 $0.03 2X4's
Plywood @ standing seam roof 3,756 SF $1.35 $5,070 $0.04
Plywood @ shipping/receiving
docks 2,400 SF $1.03 $2,467 $0.02 On wall furring
Parapet cap blocking 334 LF $3.38 $1,130 $0.01
Wood Bucks @ overhead doors 446 LF $5.84 $2,603 $0.02 2X8's
Wood Bucks @ strip doors 20 LF $5.84 $117 $0.00 2X8's
Blocking @ interior window
perimeters 1,146 LF $1.88 $2,153 $0.02 2X4's
Blocking @ base of furring 2,000 LS $1.23 $2,466 $0.02
Miscellaneous Room Blocking 118,000 SF $0.04 $4,958 $0.04
Rough Hardware 1 LS $363.30 $363 $0.00
FINISH CARPENTRY ALLOWANCE
Built-in counters & cabinets 1 ALLOW $75,000.00 $75,000 $0.63 ALLOWANCE
Built-in lunchroom seating 1 ALLOW $27,000.00 $27,000 $0.23 ALLOWANCE
CEO conference - wall unit
& doors 1 ALLOW $5,000.00 $5,000 $0.04 ALLOWANCE
Trim @ interior windows 1,002 LF $5.00 $5,010 $0.04
Restroom vanities 105 LF $40.00 $4,200 $0.04
Coat rod & shelf 91 LF $15.00 $1,358 $0.01
Wood covers on baseboard heaters 100 LF $25.00 $2,500 $0.02 $25.00/LF
Wainscoat trim @ executive
offices/conf 100 SF $15.00 $1,500 $0.01 ALLOWANCE
Miscellaneous Trim 1 LS $5,000.00 $5,000 $0.04 ALLOWANCE
Window Silts - 5" Oak 320 LF $8.51 $2,724 $0.02 Architects
Quantities
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
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<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
Cost Description QTY UM Unit Amount $/SF Remarks
Code Cost
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Plam light valances 325 LF $10.00 $3,250 $0.03
Wood cap @ mezzanine low wall 15 LF $8.00 $120 $0.00
Wood base @ executive offices 477 LF $7.47 $3,565 $0.03
--- ----- ------ -----
--------------------------------------------------------------------------------------------------------------------------
TOTALS Carpentry $163,448 $1.38
--------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
DIVISION VII - THERMAL & MOISTURE
DAMPPROOFING & WATERPROOFING 1 SC $1,925.00 $1,925 $0.02 RSI
Dampproofing @ Concrete Walls 1 SC $3,000.00 $3,000 $0.03
Waterproof planter boxes 280 SF $0.80 $224 $0.00
Add waterproofing for new planters
INSULATION
Foundation Insulation 4,401 SF $0.94 $4,121 $0.03
Vapor Barrier @ Humidified Rooms INCL (In "09250")
Vinyl faced insulation @ exterior walls 1 SC $8,929.00 $8,929 $0.08 MATO
Batt & Blanket Insulation - Exterior 23,991 INCL (In "09250")
Rigid Insulation @ back of Vestibule
walls 440 SF $0.93 $410 $0.00
Insulation @ top of walls - Docks 260 INCL (In "09250")
7500 MEMBRANE ROOFING
Membrane roofing subquote 1 SC $214,289.00 $214,289 $1.80 CEI West
Vapor barrier on roof - over print/comp. INCL $0
Membrane roofing - high roof INCL $0
Membrane roofing - low roof INCL $0
Membrane roofing - vestibule INCL $0
Bond on Roofing Subcontractor INCL $0
SHEETMETAL
Perimeter counterflashing INCL (w/Roofing)
Roof penetrations INCL (w/Roofing)
STANDING SEAM ROOF
Curved roof at entries INCL (w/Roofing)
METAL SOFFIT/WALL PANELS
Metal ceiling panels at vestibule/lobby 1 SC $12,500.00 $12,500 $0.11 Elward
Caulking at Alucabond panels 1 LS $500.00 $500 $0.00
Perf. Metal Soffits @ Canopies INCL (w/Roofing)
ROOF ACCESSORIES
Roof Access Hatch 1 EA $768.42 $768 $0.01 Rio Grande
Plastic Skylights - 5'x 5' 1 LS $1,996.34 $1,996 $0.02 Wozniak
KalWall Subquote 1 SC $34,381.00 $34,381 $0.29 Includes Tube
Framing
7900 CAULKING AND SEALANTS
Caulking Subquote 1 SC 20,500.00 $20,500 $0.17 Division 7
Miscellaneous Building & Panel INCL $0
Manufacturing Floor Saw & Perim. INCL $0
Curb to Sidewalks INCL $0
Miscellaneous Saunders Caulk 1 LS $882.60 $883 $0.01
-- ------- ---- -----
----------------------------------------------------------------------------------------------------------------------------
TOTALS Thermal & Moisture $304,426 $2.56
----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
DIVISION VIII - DOORS & WINDOWS
<S> <C> <C> <C> <C> <C> <C>
HOLLOW METAL DOORS & FRAMES
Layout Door Locations 121 EA $31.14 $3,768 $0.03
Hollow Metal Door Frames - Single 101 EA $37.13 $3,750 $0.03
Hollow Metal Door Frames - Double 20 EA $37.13 $743 $0.01
Hollow Metal Doors - Exterior 10 EA $52.33 $523 $0.00
Hollow Metal Windows - Interior 17 EA $42.84 $728 $0.01
Misc Anchors and Fasteners 1 LS $519.00 $519 $0.00
HM Windows at north exterior wall 14 EA $181.68 $2,544 $0.02
Hollow Metal material 1 PO $20,237.89 $20,238 $0.17 Powers Products
WOOD DOORS
Oak Doors - 3' x 7' 131 EA $57.12 $7,483 $0.06
Closet Doors Slide - Pairs 2 EA $321.84 $644 $0.01
Closet Doors Swing - Pairs 3 EA $321.84 $966 $0.01
Wood Door Material 1 PO $19,624.43 $19,624 $0.17 Colonial Door
OVERHEAD DOORS
Overhead Doors - Subquote 1 SC $13,061.00 $13,061 $0.11 Raynor Door -
oval lites
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
GMP Estimate Page 10 11:00 AM 5/27/97
<PAGE> 54
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Cost Description QTY UM Unit Amount $/SF Remarks
Code Cost
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Overhead Doors - 12' x 14' INCL $0
Electric Operators - 12' x 14' doors INCL $0
Overhead Doors - 8' x 8' INCL $0
Overhead Doors - 9' x 10' INCL $0
SPECIAL DOORS
Strip doors - 9 x 10 1 SC $2,959.00 $2,959 $0.02 Door Tech
Studio Blackout Curtain 180 SF $6.00 $1,080 $0.01
Print storage room high speed door 1 EA $9,244.00 $9,244 $0.08 Materials Handling
STOREFRONTS / GLAZING
Aluminum / Glazing Subquote 1 SC $78,443.00 $78,443 $0.66 Harding Glass
Security hardware - Interwest specs 1 SC $2,293.00 $2,293 $0.02
Add Heat Mirror to Cust. Service Glazing 7 EA $810.00 $5,670 $0.05 SCI Recommendation
Entry curtainwall - 2 sides INCL $0
Exterior storefront INCL $0
Exterior punched windows INCL $0
Entry doors - Special (Etched) INCL $0
Entry doors - Standard INCL $0
Interior HM Windows INCL $0
Interior Wood Windows INCL $0
Glazing @ HM Frames INCL $0
Mirrors INCL $0
Breakmetal Trim @ Mullions INCL $0
Shower doors N/A $0 Curtains
FINISH HARDWARE
Furnish & Install Finish Hardware 141 LV $73.26 $10,329 $0.09
Vault door lock 1 PO $3,103.62 $3,104 $0.03 "Cypher" lock
Added security hardware 15 DOORS $255.44 $3,757 $0.03 Changed 4.22.97
Hardware material 1 PO $37,411.60 $37,412 $0.31 ALLOWANCE
- ---------- ------- -----
----------------------------------------------------------------------------------------------------------------------------
TOTALS Doors & Windows $228,880 $1.93
----------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
DIVISION IX - FINISHES
Layout Finishes 8 WKS $1,245.60 $9,965 $0.08
9250 METAL STUDS AND DRYWALL
Gyp. Board Quote 1 SC $387,120.00 $387,120 $3.26 Delta
FRP columns 4 EA $1,200.00 $4,800 $0.04 Columns at break-room
Gyp. board bulkhead walls @ ceiling INCL $0
Drop walls @ skylights INCL $0
Partitions to above ceiling INCL $0
Furr exterior walls to structure INCL $0 Office areas
Furr exterior walls above storefront INCL $0
Furr exterior walls to structure INCL $0 North Warehouse wall
Full-height partitions INCL $0
Fire walls - full height INCL $0
Gyp. board ceilings INCL $0
Beam & exterior soffits INCL $0 Open office areas
Exterior soffits - EIFS INCL $0
Troweled acrylic finish on planters 300 SF $5.00 $1,500 $0.01
Gyp. board wrap on columns INCL $0
Access panels 1 LS $800.00 $800 $0.01
9300 CERAMIC TILE ALLOWANCE
Flooring tile 2,710 SF $5.00 $13,550 $0.11
Base tile 896 LF $5.50 $4,928 $0.04
Wall tile 3,584 SF $5.00 $17,920 $0.15
Stone tile - lobby, COO, CEO 1 ALLOW $5,000.00 $5,000 $0.04 ALLOWANCE
ACOUSTICAL CEILINGS
SAC Quote 1 SC $51,250.00 $51,520 $0.43 Acoustics Systems, Inc.
2x4 SAC ceiling INCL $0
2x2 SAC ceiling INCL $0
Eggcrate louvers at light valances 325 SF $8.00 $2,600 $0.02
Sound Panels in Printer Room 1 LS $2,350.00 $2,350 $0.02
Tackable wall surface - conference rooms 950 SF $5.00 $4,750 $0.04
White boards - install 420 SF $4.00 $1,680 $0.01
Add fixture support wires 1 LS $4,000.00 $4,000 $0.03
RESILIENT FLOORING & BASE ALLOWANCE
Rubber base 7,278 LF $1.10 $8,006 $0.07
</TABLE>
GMP Estimate Page 11 11:00 AM 5/2/97
<PAGE> 55
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Cost Description QTY UM Unit Amount $/SF Remarks
Code Cost
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
VCT flooring 805 SF $1.50 $1,208 $0.01
CARPETING ALLOWANCE
Carpet Material w/waste - Executive 1,808 SY $18.00 $19,432 $0.16 Architects allowance -
installed
Carpet Material w/waste - Standard 5,263 SY $18.00 $94,736 $0.80 Architects allowance -
installed
Carpet installation INCL $0
SPECIAL FLOORING
Sealed concrete floors - standard 6,305 SF $0.25 $1,576 $0.01
Sealed concrete floors - special 57,386 SF $0.35 $20,085 $0.17 Clear coat
9900 PAINTING & WALLCOVERING
Painting Subquote 1 SC $89,500.00 $89,500 $0.75 Gene Lessar Painting
Painted gyp. board walls INCL $0
Painted gyp. board ceilings INCL $0
Paint H.M. door frames INCL $0
Paint H.M. doors INCL $0
Finish wood doors INCL $0
Vinyl wallcovering 1 ALLOW $4,000.00 $4,000 $0.03 ALLOWANCE
- --------- ------ -----
-----------------------------------------------------------------------------------------------------------------------------
TOTALS Finishes $750,756 $6.32
-----------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
DIVISION 10 - SPECIALITIES
10005 KNOX BOXES
Knox Box at Entry 1 EA $264.99 $265 $0.00
Knox Box at Driveway Gates 2 EA $264.99 $530 $0.00
TOILET ACCESSORIES
Subquote 1 SC $17,200.00 $17,200 $0.14 CBS
Standard Toilet Partitions INCL $0
Handicap Toilet Partitions INCL $0
Urinal Screens INCL $0
Grab Bars INCL $0
Toilet Paper Holders INCL $0
Soap Dispensers INCL $0
Waste Receptacles INCL $0
Paper Towel Dispenser INCL $0
Coat Hooks INCL $0
Shower rod/curtains 1 SC $150.00 $150 $0.00
10400 SIGNAGE AT INTERIOR DOORS ALLOWANCE
Interior Doors 43 EA $35.00 $1,505 $0.01 Conference & utility doors
10500 LOCKERS
Employee lockers N/A $0 By furniture supplier
FIRE EXTINGUISHER/CABINETS
10520 Fire Extinguishers & Cabinets - install 1 LS $4,486.98 $4,487 $0.04 Flash
- --------- ------ -----
-----------------------------------------------------------------------------------------------------------------------------
TOTALS Specialities $24,137 $0.20
-----------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
DIVISION XI - EQUIPMENT
11130 AUDIO VISUAL EQUIPMENT
Projection Screen 1 EA $1,500.00 $1,500 $0.01 Main conference room
11160 DOCK EQUIPMENT
Subquote Equipment 1 SC $44,644.00 $44,644 $0.38 Forklift Systems
"Kelly" dock levelers INCL $0
Vehicle restraints for docks INCL $0
Embed plates for restraints INCL $0
Dock Bumpers @ Dock Doors INCL $0
Dock Shelters @ Dock Doors INCL $0
11480 ATHLETIC EQUIPMENT
Outdoor volleyball net & poles 1 SET $684.95 $685 $0.01
Basketball hoop & net 1 EA $669.00 $669 $0.01
------- ---- -----
-----------------------------------------------------------------------------------------------------------------------------
TOTALS Equipment $47,498 $0.00
-----------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
GMP Estimate Page 12 11:00 AM 5/2/97
<PAGE> 56
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Cost Description QTY UM Unit Amount $/SF Remarks
Code Cost
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
DIVISION XII - FURNISHINGS
12270 ACCESS FLOORING
Flooring Subquote 1 SC $53,500.00 $53,500 $0.45 AC Systems
Raised access flooring - 16" Rm 1094 INCL $0
Raised access flooring - Heavy Rm 1018 INCL $0
12510 WINDOW BLINDS
Accoustical & light seal blind @ CEO conf 1 EA $600.00 $600 $0.01
Window blinds 1 SC $5,436.00 $5,436 $0.05 Lu-Tek
12670 ENTRY MAT
Pedimat at vestibule 72 SF $16.00 $1,152 $0.01
-- ------ ------ -----
-----------------------------------------------------------------------------------------------------------------------------
TOTALS Furnishings $60,688 $0.45
-----------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
DIVISION XV - MECHANICAL
15300 FIRE SPRINKLERS/DESIGN 1 SC $98,514.00 $98,514 $0.83
15400 PLUMBING, INCLUDING DESIGN
Plumbing INCL $0 With HVAC
Sanitary sewer INCL $0
Storm sewer INCL $0
Domestic water piping INCL $0
Gas piping INCL $0
Compressed air piping INCL $0
Engineering INCL $0
15500 HVAC, INCLUDING DESIGN
HVAC/Plumbing Quote 1 SC $839,553.00 $839,553 $7.07
Plumbing changes 1 SC $0
HVAC changes 1 SC $0
Bond 1 SC $12,593.30 $12,593 $0.11
- ---------- ------- -----
-----------------------------------------------------------------------------------------------------------------------------
TOTALS Mechanical $950,660 $8.00
-----------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
DIVISION XVI - ELECTRICAL
16000 ELECTRICAL, INCLUDING DESIGN
Electrical Quote 1 SC $746,276.00 $746,276 $6.28
Added service phones 0 ? $0
Site sign lighting 1 ALLOW $3,220.00 $3,220 $0.03 ALLOWANCE
Service Equipment INCL $0
Mechanical Equipment - Additional Hook-up INCL $0
Fire Alarm INCL $0
Manuf., pick-pack shipping & receiving INCL $0
General Power INCL $0
Phone and Data INCL $0
Lighting INCL $0
Other INCL $0
Design Fee INCL $0
Bond INCL $0
Temporary Electric 1 LS $15,000.00 $15,000 $0.13
- ---------- ------- -----
-----------------------------------------------------------------------------------------------------------------------------
TOTALS Electrical $764,496 $6.44
-----------------------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------------
Subtotal HARD COSTS $5,763,036 $48.51
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
GMP Estimate Page 13 11:00 AM 5/2/97
<PAGE> 57
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Cost Description QTY UM Unit Amount $/SF Remarks
Code Cost
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
18500 CONSTRUCTION CONTINGENCY $120,000 $1.01
GENERAL CONDITIONS/SUPERVISION/INSURANCE $216,920 $1.83
BUILDING PERMIT & PLAN CHECK FEES N/A Paid by Owner
18100 MISC PERMITS AND FEES $3,054 $0.03
USE TAX N/A Paid by Owner
18300 PERFORMANCE & PAYMENT BONDS $0 Alternate
18003 BUILDER'S RISK INSURANCE $4,122 $0.03
------ -----
SUBTOTAL $6,107,131 $51.41
CONSTRUCTION FEE $244,285 $2.06
-------- -----
-----------------------------------------------------------------------------------------------------------------------------
300 TOTAL $6,351,416 $53.46
-----------------------------------------------------------------------------------------------------------------------------
DEVELOPMENT FEES
Mountain View Fire District - Plan review & inspections N/A Paid by Owner
Development Fees N/A Paid by Owner
-----------------------------------------------------------------------------------------------------------------------------
PROJECT TOTAL $6,351,416 $53.46
-----------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
GMP Estimate Page 14 11:00 AM 5/2/97
<PAGE> 58
ATTACHMENT B
<TABLE>
<S> <C> <C>
SAUNDERS OWNER: ARCHITECT:
6950 So. Jordan Road CONCEPTS DIRECT INTERGROUP, INC.
Englewood, Colorado
CLARIFICATIONS AND QUALIFICATIONS FOR: Estimate Number:
PREPARED BY: DFH/GC NEW CONCEPTS DIRECT FACILITY 96091
DATE: 11/19/96 Westview Business Park
REVISED: 5/1/97 Longmont, CO Total Building Area: 118,800
</TABLE>
CLARIFICATIONS, QUALIFICATIONS, AND ASSUMPTIONS:
GENERAL
1. This budget pricing is based upon the drawings dated March 18, 1997
and specifications dated February 14, 1997, along with Addendum Number
1 dated April 10, 1997, Addendum Number 2 dated April 15, 1997, and
miscellaneous field directives, all issued by Intergroup, Inc. for the
construction of the building and related site improvements, exclusive
of manufacturing equipment and furniture. It is also based upon a
series of assumptions which are itemized in the following notes.
2. Please note that due to the aggressive construction schedule, there
may be some miscellaneous work such as painting and landscaping that
may continue past the date of substantial completion.
3. The specifications require us to provide temporary connections to
water, electrical power, and telephone, which is included, but we have
not included any costs associated with providing permanent services of
electricity, natural gas, telephone, data transmission lines, or cable
television to the building. Due to the method of assessing and
subsequently refunding many of these charges, it is better if these
are paid directly by the Owner.
4. We have included the cost to layout our work, but per verbal
agreement, we have excluded building and site layout. Property corner
pins and benchmarks will be provided and certified by the Owner.
5. The scope of work of this pricing includes sitework within the
property lines of the site only (except landscaping). We have assumed
that the developer of the business park will construct the site
improvements outside of the property lines and provide utility taps
and services at the locations indicated on the drawings. Per verbal
direction, we have included the cost of constructing the curb cuts for
our site as shown on the site plan. Please note that utility services
must be constructed and operational according to our schedule in order
to complete testing and obtain a Certificate of Occupancy for the
building. Also, please note that fire officials will require water
mains to be operational before roofing operations can begin. An
allowance is included for constructing the landscaping and irrigation
along Fairview Street and Highway 119.
6. The cost of a performance and payment bond is excluded from this
pricing.
7. Any costs of identifying, testing, remediation, or removal of any
contaminated soils or hazardous materials are not included in this
pricing or scope of work. Prior to the start of work, the Owner must
certify that no contaminated soils or hazardous materials exist that
would pose a threat to Saunders personnel or those of our
subcontractors. In addition, any cost impacts associated with
scheduling or phasing the work around hazardous material removal are
not included.
8. This pricing is based upon constructing the work as depicted on the
drawings and required by the specifications. We have not included any
contingencies for modifications that my be required for compliance
with codes and regulations, or the interpretations of code enforcement
agencies.
9. Per the specifications, we have excluded costs for field testing and
inspections for soils, concrete, asphalt, masonry, steel, etc. These
will be contracted and paid by the Owner.
10. This pricing does not include any labor, materials, or equipment for
relocating or storing product, storage shelving, racks, etc. or for
disassembly and removal of existing Owner equipment or furnishings.
11. Per verbal agreement, we have excluded costs for permit and plan check
fees and use taxes. These will be paid directly by the Owner.
SITEWORK
1. Saunders will make reasonable efforts to locate existing underground
utilities, but cannot be responsible for costs associated with repair
or relocation of underground utilities that are unknown or
unanticipated. No relocation of existing utilities is included.
2. We have assumed that some overexcavation and recompaction of subgrades
will be required at miscellaneous soft spots, but we have not included
any major overexcavation or recompaction work for the site. The costs
expended to date for stabilizing the building pad have been included.
We have assumed that on-site soils will be suitable for reuse, and
have not included any importing of structural fill material.
3. No underslab gravel or vapor barrier is included for either interior
or exterior slabs.
4. We have included a budget for replacing topsoil into berms in
landscaped areas, but have not included waterproofing or perimeter
drains around the building.
5. This pricing does not include any allowances for the removal of buried
debris or structures that may be encountered during excavation. We
have assumed that all soils removed from excavations may be used as
backfill around the new structure.
<PAGE> 59
ATTACHMENT B
CONCEPTS DIRECT OFFICE AND MANUFACTURING FACILITY
CLARIFICATIONS, QUALIFICATIONS, AND ASSUMPTIONS, CONTINUED:
SITEWORK, CONTINUED:
6. Due to the required completion date of the project, it will not be
possible to allow time for the building pad to settle as was
originally planned. Please note that some settlement in the floor
slab may occur.
7. The cost of constructing water mains, fire hydrants, dometic water
tap, and sanitary sewer mains is not included. Per verbal agreement,
this work is being installed by the street utility contractor.
STRUCTURAL
1. The letters that have been previously signed to authorize Saunders to
proceed with structural components do not include the cost of
modifications that have been made subsequently in the field. Costs
for the changes made to date have been included in this pricing.
2. The letters that have been previously signed to authorize Saunders to
proceed with caissons do not include costs associated with core
drilling through rock, which was not anticipated, but was subsequently
required. Costs for this additional work have been included in this
pricing.
THERMAL AND MOISTURE PROTECTION
1. Standing seam metal roofing has been assumed to be a manufacturer's
standard color. Soffit panels will be field painted.
2. No gutters or downspouts have been included for the entry canopy roofs
3. We have not included wood nailers at the perimeter of the membrane
roofing. This is typically not required by the manufacturers.
4. The specifications (Section 7530) make reference to Factory Mutual
requirements for the roof. Please note that Factory Mutual has not
tested ballasted roofs, but offers recommendations for ballasted
roofs. These recommendations will be followed where appropriate, but
the roof will not carry a Factory Mutual approval. A mechanically
attached roof can be provided for additional cost.
5. Vapor barrier under roof insulation is provided over humidified rooms
only.
6. Alucobond panels have been provided at the main entry vestibule with
joint locations and spacing as verbally agreed between the
subcontractor and the Architect.
7. Per previous discussions, smoke ventilation is not included in the
warehouse. This will need to be added in the future in the event
stored material extends above 12'.
DOORS, WINDOWS, AND HARDWARE
1. An allowance has been included for finish hardware. Once security
requirements have been finalized, this cost can be determined.
2. Per discussions with the Owner and Architect, this pricing includes
furnishing two oval window lights in each overhead door (three in the
large door) in lieu of the solid glass panels shown in the drawings.
FINISHES AND SPECIALTIES
1. This pricing is based upon the use of manufacturer's standard colors
and finishes for floor coverings, tile, toilet partitions, etc.
2. Allowances are included for cabinetry and millwork, floor finishes,
wall coverings, signage, etc. This pricing will be adjusted to
reflect the difference between the allowance amounts and actual cost
for this work once final bids are received.
3. Per discussions with the Architect, the allowance for carpet includes
installation, and not just material as mentioned in Section 01210 of
the Specifications.
EQUIPMENT
1. No labor, equipment, rigging, or protection materials are included for
unloading, storing, or handling any Owner-furnished materials handling
systems or equipment.
MECHANICAL
1. Fire sprinklers have been included throughout the facility, but no
pre-action or heat detection systems are included. In addition, no
rack sprinklers. A spare valve and 4" main is provided for future
rack sprinklers. Since no single space is larger than 50,000 square
feet, we have not included draft curtains. We have assumed an
Ordinary Hazard, Group II requirement.
2. At the time of preparation of this proposal, no water pressure and
flow rates were available for the mains to be constructed in the
adjoining roads. We have assumed that pressures and flows will be
adequate, and that a fire pump will not be required.
3. We have included a total of 15 compressed air drops in the
manufacturing/assembly area.
ELECTRICAL
1. No telephone, security, data, or communications wiring, or equipment,
or the connection of this equipment, is included.
<PAGE> 60
ATTACHMENT B
CONCEPTS DIRECT OFFICE AND MANUFACTURING FACILITY
ALLOWANCES:
The following allowance amounts are included in this pricing:
<TABLE>
<S> <C>
Proof Rolling and Subgrade Repairs in Parking Lot $5,000
Landscaping Along Fairview and Highway 119 $40,000
Interior Plantings $10,000
Finish Hardware $35,000
Exterior Site Signage $69,000
Interior Signage $1,500
Built-in Counters and Cabinets and Stone Countertop $80,000
Built-in Lunchroom Seating $27,000
Wood Wainscots and Miscellaneous Trim $6,500
Carpet and Installation $18/SY
Ceramic and Resilient Tile - Installed $45,000
Stone/Quarry Tile in Reception and Conference Rooms - Installed $5,000
Vinyl Wall Covering in Executive Areas - Installed $4,000
Electrical Connection and/or Lighting of Sign at Highway 119 $3,200
</TABLE>
EXCLUSIONS:
The following items are excluded from the scope of this pricing:
1. Architect's and consultant's fees (except for design/build portions of
the work).
2. Printing and duplication costs for construction documents and progress
printings.
3. US West, Public Service Company and cable television charges.
4. Cost of testing and inspections.
5. Damage from expansive soils.
6. Allowances for buried or unforeseen conditions.
7. Security fencing around the construction site, guard services, or night
watchman.
8. Flagpoles, benches, trash receptacles, etc.
9. Handrail or guardrail except as shown on the drawings.
10. Remote monitoring of the fire alarm, security, or fire sprinkler
systems.
11. Water quality holding and filtration systems.
12. Performance and payment bonds.
13. Electrical and mechanical connections of Owner-furnished telephone, or
computer systems,
14. Foundations, structural reinforcement, roof openings, etc. for
Owner-furnished equipment.
15. Work tables, shelves, racks, desks, or furnishings, except as noted.
16. CCTV monitors, cameras, or security system.
17. Painting of exposed structural framing.
18. Fireproofing of the structure.
19. Patterned or colored concrete sidewalks or paving.
20. Importing of topsoil in landscaped areas. These areas will have
amendments to the existing topsoil.
21. Kitchen or breakroom appliances.
22. Tackboards, bulletin boards, etc., except in Conference Rooms,
23. Wire mesh partitions or interior fencing.
24. Floor drains or trench drains in the manufacturing/assembly and dock
areas.
25. Centering of fire sprinkler heads in acoustical ceiling tile.
26. Standby electric generator or transfer switch.
27. Access control or card key systems.
28. Water and sewer tap and development fees. These will be paid directly
by the Owner.
29. Permit and plan check fees and use taxes. These will be paid directly
by the Owner.
30. Smoke ventilation or skylights in the warehouse.
31. Furnishing or installation of audio/visual presentation equipment,
except for projection screens.
<PAGE> 61
SUPPLEMENTAL CONDITIONS
This Agreement regarding supplemental conditions is made as of the
day of March, 1997 by and between CONCEPTS DIRECT, INC. ("Owner") and SAUNDERS
CONSTRUCTION, INC. ("Contractor").
A. General
The following supplemental conditions modify, change, delete from or add
to the "General Conditions of the Contract for Construction," AIA Document A201,
Fourteenth Edition, 1987 (hereinafter referred to as the "General Conditions").
These supplemental General Conditions are intended to be read in conjunction
with the Architect's Supplementary General Conditions, which are attached hereto
as Exhibit A and incorporated herein by reference, and which conditions
Contractor accepted in responding to and being awarded the Contract for Owner's
Project. Where any portion of the Architect's Supplementary General Conditions
conflicts with these Architect's Supplementary Conditions, the Supplemental
General Conditions shall control. Where any portion of the General Conditions is
modified or deleted by these Supplemental Conditions, or the Architect's
Supplementary General Conditions, the remaining unaltered provisions of the
General Conditions shall remain in effect.
B. Article 1: General Provisions
1.1.8 PROVIDE
Except as otherwise defined in greater detail, the term "provide" means
"furnish and install, complete and ready for intended use", as applicable in
each instance."
C. Article 2: Owner
2.3 Owner's Right to Stop the Work: Add the following to Subparagraph
2.3.1: "Failure of the Owner to notify the Contractor of necessary corrections
or to stop the work shall not relieve the Contractor of any responsibilities or
obligations of the Contract Documents."
D. Article 3: Contractor
Add a new Subparagraph 3.1.2 to read as follows: "The Contractor will
permit the Owner to assign this agreement to a Lender as additional collateral
for the construction loan and
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Contractor will permit this agreement to be amended to satisfy reasonable
requirements Owner's construction lender may have in regard to the Project.
The Contractor shall execute and properly complete the entire Work
described in the Contract Documents, except as to the extent specifically
indicated in the Contract Documents to be the responsibility of others.
All Work for the Project will be in accordance with the Contract
Documents."
3.9 Superintendent: Add the following to the end of Subparagraph
3.9.1: "The superintendent shall be satisfactory to the Architect and the
Owner and the Contractor shall not replace the superintendent without the prior
written consent of the Owner and the Architect. The Superintendent shall remain
full time on the Project until the completion of the Punch List, unless
authorized by Architect in writing."
Add Paragraph 3.19, "During the performance of this Contract, the
Contractor agrees as follows:
"(a) The Contractor will not discriminate against any employee or
applicant for employment because of race, religion, color, sex, or national
origin, except where religion, sex, or national origin is a bona fide
occupational qualification reasonably necessary to the normal operation of the
Contractor. The Contractor agrees to post in conspicuous places, available to
employees and applicants for employment, notices setting forth the provisions
of this nondiscrimination clause.
"(b) The Contractor will, in all solicitations or advertisements for
employees placed by or on behalf of the Contractor, state that such Contractor
is an equal opportunity employer; provided, however, that notices,
advertisements and solicitations placed in accordance with federal law, rule or
regulation shall be deemed sufficient for the purpose of meeting the
requirements of this chapter."
E. Article 5: Subcontractors
Add the following to Subparagraph 5.2.2 after the phrase "contract
with" in the first line: "or purchase or install such products manufactured
by".
F. Article 6: Construction by Owner or by Separate Contractors
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6.1 Owner's Right to Perform Construction and to Award Separate
Contracts: Add Subparagraph 6.1.5: "The Owner shall have the right to deliver
furniture and equipment into the building prior to completion of the work by
the Contractor if this equipment does not seriously interfere with the
Contractor's operations. Questions of what constitutes interference shall be
referred to the Architect and his decision shall be final."
G. Article 7: Changes in the Work
7.1 Change Orders: In the first sentence of Subparagraph 7.3.6, delete
the words "a reasonable allowance for overhead and profit" and substitute in
their place "an allowance for overhead and profit in accordance with the
schedules set forth in Subparagraph 7.3.10 below."
7.3 Construction Change Directives: Add the following Subparagraphs
7.3.10 and 7.3.11: "7.3.10 In Subparagraph 7.3.6 the allowance for overhead and
profit combined, included in the total cost to the Owner, shall be based on the
following schedule:
.1 For the Contractor, for any Work performed by the Contractor's own
forces, 10 percent of the cost.
.2 For the Contractor, the Work performed by his Subcontractor, 10
percent of the amount due the Subcontractor.
.3 For each Subcontractor of Sub-subcontractor involved, for any
Work performed by that Subcontractor's own forces, 10 percent
of the cost.
.4 For each Subcontractor, for Work performed by his
Subsubcontractors, 10 percent of the amount due the
Subsubcontractor.
.5 Cost to which overhead and profit is to be applied shall be
determined in accordance with Subparagraph 7.3.6.
.6 In order to facilitate checking of quotations for extras or
credits, all proposals, except those so minor that their propriety
can be seen by inspection, shall be accompanied by a complete
itemization of all costs including labor, materials, and
subcontracts. Labor and materials shall be itemized in the manner
prescribed above. Where major cost items are subcontracts, they
shall be itemized also. In no case will a change involving over
$100.00 be approved without such itemization."
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H. Article 8: Time
8.2 Progress and Completion: Add the following to the end of
Subparagraph 8.2.1: "and the Contractor is capable of properly completing the
work within the contract time."
I. Article 9: Payments and Completion
9.8 Substantial Completion: Add the following to Subparagraph 9.8.1:
"Work will not be considered "Substantially Complete" until all systems and
equipment to be installed by Contractor as part of the Work for the Project
have been tested and found to be functioning properly."
9.12 Early Completion Bonus: Add the following Subparagraph 9.12.1:
"The Contractor shall be entitled to an early completion bonus in accordance
with the following schedule:
Bonus is for Delivery of Certificate of
Occupancy by Date Indicated
A. August 18, 1997 = $50,000
B. August 25, 1997 = $30,000
C. September 1, 1997 = $10,000
D. September 8, 1997 = $ 5,000
E. September 9, 1997, = $ No Bonus
or later
if Contractor substantially completes the Project on or prior to the date next
to the applicable bonus sum and delivers to the Owner a properly processed and
approved Certificate of Occupancy which allows Owner to fully use and occupy
the Work and the Project with no restrictions on use and all security required
by the applicable jurisdiction for uncompleted items of the Project having been
posted by Contractor ("Bonus Completion Date"). For the purposes of determining
the Contractor's entitlement to the early completion bonus, the Contractor will
not be entitled to any extensions of time of the Bonus Completion Date for
delays caused for any reason. The Bonus Completion Date will not be extended by
any other extensions of time for which the Contractor becomes entitled to an
extension of the date of Substantial Completion. The Contractor recognizes that
the Bonus Completion Date is the date on which the Contractor delivers to the
Owner the Certificate of Occupancy as described above and is not the same as
the date of Substantial Completion and that there may be extensions to the date
of Substantial Completion for which there are no corresponding extensions to
the Bonus Completion Date. This Early Completion Bonus is being given as an
incentive to encourage early completion of the Work."
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J. Article 10: Protection of Persons and Property
Add the following Subparagraph 10.1.5: "To the fullest extent permitted by
law, the Contractor shall indemnify and hold harmless the Owner and the Owner's
consultants and separate contractors, any of their subcontractors,
sub-subcontractors, agents and employees from and against claims, damages,
losses and expenses, including but not limited to attorneys' fees, arising out
of or resulting from environmental problems caused in whole or in part by the
operations of the Contractor, the Contractor's contractors, anyone directly or
indirectly employed by either, or anyone by whose acts either may be liable,
regardless of whether or not they were caused in part by a party indemnified
hereunder. Such obligation shall not be construed to negate, abridge or
otherwise reduce the indemnification obligations of the Contractor under
Paragraph 3.18. Nothing in this Indemnity Agreement shall impose liability on
the Contractor for pre-existing conditions, except to the extent that such
pre-existing conditions are made worse because of negligent acts or omissions of
the Contractor, the Contractor's contractors, anyone directly or indirectly
employed by either, or anyone by whose acts either may be liable."
10.2 Safety of Persons and Property: Add the following to Subparagraph
10.2.3: "The Contractor shall at all times protect the excavation, trenches, and
construction from damage caused by rain water, ground water and all other water.
The Contractor shall provide pumps, drainage ditches, enclosures and other
equipment required to provide this protection. The Contractor shall provide all
shoring, bracing and sheeting required for safety and proper execution of the
work and shall have the same removed when the work is complete. All shoring,
bracing and sheeting shall meet the requirements of the local governing unit."
Add the following subparagraph 10.2.4.1: "When use or storage of explosives
or other hazardous materials or equipment or unusual methods are necessary, the
Contractor shall give the Owner reasonable advance written notice thereof."
K. Article 11: Insurance and Bonds
11.1 Contractor's Liability Insurance: Modify Subparagraph 11.1.1 by adding
in the first line, following the word "maintain", the words "in a company or
companies licensed or authorized to do business in the State of Colorado.
11.1.1.1 Delete the semicolon at the end of Clause 11.1.1.1 and add:
, including private entities performing
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Work at the site and exempt from the coverage on account of number of
employees or occupation, which entities shall maintain voluntary
compensation coverage at the same limits specified for mandatory
coverage for the duration of the Project.
11.1.1.2 Delete the semicolon at the end of Clause 11.1.1.2 and add: or persons
or entities excluded by statute from the requirements of Clause
11.1.1.1 but required by the Contract Documents to provide the
insurance required by that Clause:
11.1.1.8 Liability insurance shall include all major divisions of coverage and
be on a comprehensive basis including:
.1 Premises Operations (including X, C and U coverages as applicable).
.2 Independent Contractor's Protective.
.3 Products and Completed Operations.
.4 Personal Injury Liability with Employment Exclusion deleted.
.5 Contractual, including specified provision for Contractor's
obligation under Paragraph 3.18.
.6 Owned, non-owned and hired motor vehicles.
.7 Broad Form Property Damage including Completed Operations.
.8 Umbrella Excess Liability.
11.1.1.9 If the General Liability coverages are provided by a Commercial General
Liability Policy on a claims-made basis, the policy date or Retroactive
Date shall predate the Contract; the termination date of the policy or
applicable extended reporting period shall be no earlier than the
termination date of coverages required to be maintained after final
payment, certified in accordance with Subparagraph 9.10.2.
Add the following Clause 11.1.2.1 to 11.1.2:
11.1.2.1 The insurance required by Subparagraph 11.1.1 shall be written for not
less than the following limits, or greater if required by law:
(a) State: Statutory
(b) Applicable Federal (e.g. Longshoremen's): Statutory
(c) Employer's Liability:
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$100,000.00 per Accident
$500,000.00 Disease, Policy Limit
$500,000.00 Disease, Each Employee
.2 Comprehensive Commercial General Liability (including Premises
Operations; Independent Contractor's Protective; products and
Combined Operations; Broad Form Property Damage):
(a) Bodily Injury:
$1,000,000.00 Occurrence
$1,000,000.00 Aggregate
(b) Property Damage:
$1,000,000.00 Each Occurrence
$1,000,000.00 Aggregate
(c) Products and Completed Operations to be maintained for five
years after final payment:
$1,000,000.00 Aggregate
(d) Property Damage Liability insurance shall provide X, C and U
coverage.
(e) Broad Form Property Damage Coverage shall include Completed
Operations.
.3 Contractual Liability:
(a) Bodily Injury:
$1,000,000.00 Each Occurrence
$1,000,000.00 Aggregate
(b) Property Damage:
$1,000,000.00 Each Occurrence
$1,000,000.00 Aggregate
.4 Personal Injury, with Employment Exclusion deleted:
$1,000,000.00 Aggregate
.5 Business Auto Liability (including owned, non-owned and hired
vehicles):
(a) Bodily Injury:
$1,000,000.00 Each Occurrence
$1,000,000.00 Aggregate
(b) Property Damage:
$1,000,000.00 Each Occurrence
.6 If the General Liability coverages are provided by a Commercial
Liability policy the:
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(a) General Aggregate shall be not less than $1,000,000.00 on any
one fire.
(b) Fire Damage Limit shall be not less than $1,000,000.00 on any
one fire.
(c) Medical Expense Limit shall be not less than $50,000.00 on any
one person.
.7 Umbrella Excess Liability:
$5,000,000.00 over primary insurance.
(10,000.00 retention for self-insured hazards each occurrence.
11.1.2 Add the following sentence to Subparagraph 11.1.3: The
certificate shall be ACORD form 25S with AIA Document G715,
Supplemental Attachment.
11.3 Property Insurance
11.3.1.1 Add the following sentence to Clause 11.3.1.1: The form of
policy for this coverage shall be Completed Value.
11.3.1.3 Add the following sentence to Clause 11.3.1.3: This property
insurance is written with a deductible of $10,000.00 per
occurrence ($50,000.00 for flood damage) with a deductible
aggregate of $10,000.00 ($50,000.00 for flood damage).
Delete the first three sentences of Subparagraph 11.3.9 and
substitute the following:
11.3.9 If required in writing by a party in interest, the Owner as
fiduciary shall, upon occurrence to insured loss, 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, or in accordance with an arbitration award
in which case the procedure shall be as provided in Paragraph
4.5.
L. Article 13: Miscellaneous Provisions:
13.5 Tests and Inspections: Add Paragraph 13.5.7: "The use of permanent
equipment for temporary heat or other construction activities shall in no way
affect the warranty period for equipment. The warranty period shall commence
upon actual use of the equipment by the Owner or when the above mentioned tests
have been successfully performed."
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13.6 Interest: Delete Subparagraph 13.6.1 in its entirety and replace
it with the following: "Payments due and unpaid under the Contract Documents
shall bear interest from the date payment is due at the rate of prime plus
one."
13.2 Successors and Assigns: Delete Subparagraph 13.2.1 in its entirety
and replace it with the following:
13.2.1 The Owner and the Contractor each binds itself, its
successors, assigns and legal representatives to the other party hereto and to
the successors, assigns and legal representatives of such other party with
respect to all covenants, agreements and obligations contained in the Contract
Documents. The Contractor may not assign its rights or obligations under the
Contract Documents without the prior written consent of the Owner which the
Owner may withhold for any reason. The Owner may assign its rights and
obligations under the Contract Documents to the Owner's Lender, but may not
assign its rights and obligations under the Contract Documents to any other
assignee or to any subsequent owner of the property on which the Project is to
be constructed without the prior written consent of the Contractor, which
consent Contractor agrees to not unreasonably withhold or delay. Any such
assignment shall not relieve the Contractor of its obligations hereunder."
Add a new Subparagraph 13.3.2:
"13.3.2 Should either party to the Contract suffer injury or damage
to person or property because of any act or omission of the other party or of
any of his employees, agents or others for whose acts he is legally liable,
claim shall be made in writing to such other party within a reasonable time
after the first observance of such injury or damage, provided the foregoing
shall not limit, impair or prejudice the Owner's rights and remedies under the
Contract Documents respective defective or non-conforming work."
Add a new Subparagraph 13.4.3:
"13.4.3 The invalidity of any part or provision of the Contract
Documents shall not impair or affect in any manner the validity, enforceability
or effect of the remainder of the Contract Documents."
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13.6 Tests
13.6.1 If the Contract Documents, laws, ordinances, rules, regulations
or orders of any public authority having jurisdiction require any portion of
the Work to be inspected, tested or approved, the Contractor shall give the
Architect and the Owner timely notice of his readiness so the Architect and the
Owner may observe such inspection, testing or approval. The Contractor shall
bear all costs of such inspections, tests or approvals conducted by public
authorities.
Delete existing Subparagraph 13.5.2 and substitute the following:
"13.5.2 If the Architect, owner or public authorities having
jurisdiction determine that any Work requires special inspection, testing, or
approval which Subparagraph 13.5.1, above, does not include, he shall, upon
written authorization from the Owner, instruct the Contractor to order such
special inspection, testing or approval, and the Contractor shall give notice
as provided in Subparagraph 13.6.1, above. If such special inspection or
testing reveals a failure of the Work to comply with the requirements of the
Contract Documents, the Contractor shall bear all costs thereof, including
compensation for the Architect's additional services made necessary by such
failure; otherwise the Owner shall bear such costs, and an appropriate Change
Order shall be issued."
Delete existing Subparagraph 13.5.4 and substitute the following:
"13.5.4 Certificates of inspection, testing or approval, including
certificate of occupancy under the building code, operating permits for any
mechanical apparatus (such as elevators, boilers and compressors) and all other
such certificates which may be required to permit full use and occupancy of the
Work by the Owner or by its tenants shall be secured and paid for by the
Contractor as provided in Subparagraph 3.7.1, above, and promptly delivered to
the Architect and the Owner. Compliance with the foregoing shall occur on or
before issuance of the temporary certificate of occupancy and shall be a
condition precedent to Substantial Completion of the Work unless delays in
issuance of a certificate of occupancy is not due to the fault of the
Contractor."
Add the following new Subparagraph 13.8:
"13.8 Entry and Use Before Completion
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13.8.1 Entry by separate contractors to perform work as permitted
pursuant to Article 6, above, (including without limitation construction of
leasehold improvements or installation of certain equipment) shall not
constitute acceptance of any portion of the Work or occupancy of any portion
thereof for purposes of the Contract Documents and shall not alter or relieve
any of the Contractor's rights or obligations under the Contract Documents.
Following Final Completion of the Work, the Contractor shall be relieved of the
primary responsibility for the protection of the Work.
13.8.2 The Owner shall have the right to occupy portions of the
Project. Any such occupancy prior to Substantial Completion shall be subject to
the following provisions:
(a) Such occupancy shall not constitute or be deemed to be completion
or Substantial Completion of the Work or applicable portion thereof
for any purposes under the Contract Documents and shall not relieve
any obligation of the Contractor under the Contract Documents for
the remainder of the Work.
(b) Such occupancy shall not waive any claims the Owner may have
against the Contractor for damages for default under the Contract
or otherwise relieve the Contractor of his obligation fully to
complete the portion of the Work so occupied.
(c) The Owner shall take reasonable precautions so as not to unduly
interfere with the continued progress of the Work.
(d) The Contractor shall exercise caution and shall be responsible for
damage to any of the Owner's property or the property of any tenant
of the Owner moved into the space so occupied, caused by or arising
from any Fault of the Contractor.
(e) The Contractor shall be responsible for security within any space
so occupied until Final Completion of the Work.
Add the following new Subparagraph 13.9:
"13.9 The Contractor's Certificate of Completion
13.9.1 The Contractor shall provide to the Owner a certificate of
completion certifying that the Work has been completed in accordance with all
applicable laws, rules, regulations, building codes, ordinances including all
zoning,
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subdivision and environmental laws, relating to the Project in a form requested
by the Owner. At the request of the Owner, the Contractor shall issue a copy of
the plans, so certified, based upon which the occupancy permits were issued
with respect to the Project."
13.10 No member of the Owner or any employees, officers, directors,
stockholders or affiliates thereof shall be personally liable for the
observance or performance of any of the Owner's obligations hereunder, all such
liability to Concepts Direct, Inc. as such liability being strictly limited to
Concepts Direct, Inc. as a corporate entity.
The parties after careful review and consultation with counsel, have
agreed to all the terms above and have signed this Agreement intending to be
fully and legally bound thereby as of the date inserted on page 1 of this
Agreement.
OWNER:
CONCEPTS DIRECT, INC.
/s/ [Signature Unreadable] By: /s/ Phillip A. Wiland
- -------------------------- --------------------------
Witness Phillip A. Wiland
Chairman
CONTRACTOR:
SAUNDERS CONSTRUCTION, INC.
By: /s/ Darrell Eastwood
-------------------------
Name: Darrell Eastwood
Title: Project Executive
EXHIBIT A: Architect's Supplementary General Conditions
(Section 00800); attached and incorporated
herein by reference
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SECTION 00800
SUPPLEMENTARY GENERAL CONDITIONS
PART 1 GENERAL
A. The General Conditions covering this contract shall be "The
General Conditions of the Contract for the Construction of
Buildings" of the American Institute of Architects, Document A-201,
1987, 14th Edition, hereinafter referred to as the General
Conditions.
The General Conditions shall remain in full effect as published
except as modified, rescinded, or supplemented by these
Supplementary General Conditions, which have precedence over and
shall revise the following Articles of the General Conditions, and
shall be used in conjunction with them as part of the Contract
Documents.
The General Conditions and these Supplementary General Conditions
shall apply to each and every section of the work as though written in full
therein.
ARTICLE ONE - GENERAL PROVISION:
1.2 EXECUTION, CORRELATION AND INTENT:
ADD the following to 1.2.6:
Where a conflict occurs between or within standards, Specifications,
and Drawings, the more stringent or higher quality requirements shall
apply. The precedence of the Construction Documents is in the following
sequence:
1). Addenda and modifications to the Drawings and Specifications
take precedence over the original construction documents.
2). Should there be a conflict within the Specifications or on
the Drawings, the Architect shall decide which stipulation
will provide the best installation and his decision shall be
final.
3). Should a conflict arise between the Drawings and the
Specifications, the Specifications shall have precedence
over the Drawings.
4). In the Drawings, the precedence shall be drawings of a larger
scale over those of a smaller scale, figured dimensions over
scaled dimensions, and noted materials over graphic indications.
ARTICLE TWO - OWNER:
No Change
ARTICLE THREE - CONTRACTOR:
3.4 LABOR AND MATERIALS
ADD the following subparagraph:
3.4.3 Bidders shall base their bid upon the use of any of the items
specifically named in the Specifications or on the Drawings,
or as approved in an Addendum issued by the Architect. No
changes or substitutions will be considered after the award
of the contract except those
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that will result in a better job, a savings to the Owner,
or both.
3.6 TAXES
ADD the following subparagraph:
3.6.2 Subcontractors shall be responsible for payment of all sales and
use taxes and shall show proof of payment of such taxes before
release of any retained funds.
3.7 PERMITS, FEES AND NOTICES
3.7.1 ADD the following:
Building permits will be obtained by the General Contractor.
Electrical and mechanical permits will be obtained by the
Mechanical and Electrical Subcontractors. The Contractor shall
call for all inspections required by the Local Building
Inspection Authority. Subcontractors to call for their
respective inspections.
Assessments against the property are the obligation of the Owner
and will be paid by the Owner as necessary to assure issuance
of permits specified above. This includes sewer and water
charges for capital improvements, including plant investment
fees and connection charges based on the cost of mains serving
the site.
ADD the following Article:
3.7.5 Any reference in the specification text to codes, standard
specifications or manufacturer's instructions will mean the
latest printed edition of each in effect at the contract date.
It will be the responsibility of the Contractor to obtain such
specifications or instructions prior to installation.
3.10 CONTRACTOR'S CONSTRUCTION SCHEDULES
ADD Article 3.10.4 as follows:
3.10.4 Completed progress schedule will be submitted to Architect no
later than fourteen (14) calendar days after date of Agreement
and will be updated during construction as required to keep
it current. Nothing in this requirement will be deemed to be
an usurpation of the Contractor's authority and responsibility
to plan and schedule the work as he sees fit subject to all
other requirements of the Contractor Documents.
3.12 SHOP DRAWINGS, PRODUCT DATA AND SAMPLES:
ADD the following:
3.12.12 After approval by the Contractor, the Contractor will submit
one (1) sepia and three (3) sets of blue line reproductions
of shop drawings to the Architect. Architect will retain one
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copy. Contractor shall be responsible for procuring shop
drawings for his own use as he may require for the progress of
the work and for review of shop drawings prior to submittal to
Architect. Architect will review these drawings as time permits
at the request of the Contractor and after approval by the
Contractor.
3.12.13 Manufacturer's Instructions: Where any item of work is required
by specification to be furnished, installed or performed in
accordance with a specified product manufacturer's instructions,
Contractor shall procure and distribute the necessary copies of
such instructions to all concerned parties.
3.15 CLEANING UP:
ADD the following Articles:
3.15.3 Besides the "broom cleaning", the following special cleaning is
required just prior to acceptance:
1). Remove stains, wash and polish glass, inside and
outside. This work shall be done by persons skilled and
equipped for such work.
2). Remove foreign matter, marks, stains, foreign paint,
finger prints, soil and dirt from (and have in a clean
condition where appropriate) the following:
a. Painted, decorated and stained work.
b. All hardware, fixtures and incorporated
equipment.
c. All finished surfaces and metal surfaces,
whether interior or exterior.
d. All doors and windows.
ARTICLE FOUR - ADMINISTRATION OF THE CONTRACT:
4.2 ARCHITECTS ADMINISTRATION OF THE CONTRACT
To Article 4.2.13 ADD the following:
The terms "artistic effect" as used herein refers to color,
texture, profile and juxtaposition of masses. The Architect
will be the sole interpreter of the design intent with respect
to such matters, but the Architect's authority with respect
thereto will not contravene any other rights of either the
Owner or the Contractor ascribed to them by other provisions
of the Contractor.
ARTICLE FIVE -- SUBCONTRACTORS:
No Change
ARTICLE SIX -- CONSTRUCTION BY OWNER OR BY SEPARATE CONTRACTORS:
No Change
ARTICLE SEVEN -- CHANGES IN THE WORK:
7.2 CHANGE ORDERS
ADD the following:
7.2.3 The cost or credit to the Owner resulting from a change in the
work
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shall be determined in one of the following ways:
1). By unit prices named in the bid. Unit prices shall
include all Contractors costs, including materials,
labor, supervision, taxes, insurance, bond overhead
and profit, and shall be applied directly to the
quantities or the differences in quantities for
which unit prices are requested.
2). By reasonable estimated cost of:
a. Labor, including foreman (labor costs shall
be direct costs)
b. Social Security and old age and unemployment
contributions.
c. Materials entering permanently into the work
(including taxes).
d. The ownership or rental cost of construction
plant and equipment during the time of use on
the extra work.
7.2.4 The Contractor's proposal shall include an itemized breakdown
showing quantities, until costs, hours and rates of labor, and
any other costs in such detail as may be required to allow the
reasonableness of costs to be established. Similar cost
information covering Subcontractor's work shall be included as
part of the Contractor's proposal. Minimum Charges for
"handling" will not be acceptable. Request for change order
quotations shall be returned to the Architect within ten (10)
calendar days of receipt by the Contractor.
ARTICLE EIGHT -- TIME:
8.2 PROGRESS AND COMPLETION
ADD the following subparagraphs:
8.2.4 The Owner shall have the right, if he deems it necessary or
advisable, to take possession of, or use any complete or
partially completed portions of the Work even if the time for
completing the entire Work has not expired and even if the Work
has not been finally accepted. Such possession and use shall not
constitute an acceptance or completion of such portions of the
Work. The Owner shall also have the right to enter the premises
for the purpose of doing work not covered under this Contract.
If the completion of any items of work under this Contract must
await the completion of work under separate Contracts entered
into by the Owner, the Contractor will be granted an extension
of time to complete the work affected by the separate
Contract(s).
8.2.5 The Contractor agrees to the use and occupancy of a portion or
unit of the project before formal acceptance by the Owner,
under the following conditions:
1). A Certificate Of Substantial Completion shall be
prepared and executed as provided in Paragraph 9.1 of
the General Conditions of the Contract for Construction,
except that when, in the opinion of the Owner, the
Contractor is chargeable with unwarranted delay in
completing work of other contract requirements, the
signature of the Contractor will not be required. The
Certificate of Substantial Completion shall be
accompanied
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by a written endorsement of the Contractor's insurance
carrier and surety permitting occupancy by the Owner
during the remaining period of project work.
2). Occupancy by the Owner shall not be construed by the
Contractor as being acceptance of that part of the project
to be occupied.
3). The Contractor shall not be held responsible for any damage
to the occupied part of the project resulting from the
Owner's occupancy.
4). Occupancy by the Owner shall not be deemed to constitute a
waiver of existing claims in behalf of the Owner or
Contractor against each other.
8.2.6 With the exception of Paragraph 8.2.5 use and occupancy by the Owner
prior to project acceptance does not relieve the Contractor of his
responsibility to maintain all insurance and bonds required of the
Contractor under the Contract until the project is completed and
accepted by the Owner.
8.2.7 It is agreed that time is of the essence and that the Owner will
suffer substantial damages if the work is not completed within the
time stated in the Agreement.
The Contractor agrees to make diligent efforts to keep the project
on schedule and substantially complete the project within the contract
time.
ARTICLE NINE -- PAYMENTS AND COMPLETIONS:
- ----------------------------------------
9.2 SCHEDULE OF VALUES
9.2.1 ADD the following:
The Schedules of Values shall be prepared in such a manner that
each major item of subcontract work is shown as a single line item.
9.3 APPLICATION FOR PAYMENTS
9.3.1 ADD the following:
The form of application for payment shall be AIA Document G702,
Application and Certification for Payment, supported by AIA Document
G702A, Continuation Sheet.
ARTICLE TEN -- PROTECTION OF PERSONS AND PROPERTY:
- --------------------------------------------------
No Change
ARTICLE ELEVEN -- INSURANCE AND BONDS
- -------------------------------------
11.1.1.1 Delete the semicolon at the end of Clause 11.1.1.1 and add:,
including private entities performing Work at the site and
exempt from the coverage on account of number of employees or
occupation, which entities shall maintain voluntary compensation
coverage at the same limits specified for mandatory coverage for
the duration of the Project.
<PAGE> 78
11.1.1.2 Delete the semicolon at the end of Clause 11.1.1.2 and add: or
persons or entities excluded by statute from the requirements of
Clause 11.1.1.1 but required by the Contract Documents to
provide the insurance required by that Clause;
11.1.1.8 Liability insurance shall include all major divisions of
coverage and be on a comprehensive basis including:
.1 Premises Operations (including X, C and U coverages as
applicable).
.2 Independent Contractor's Protective.
.3 Products and Completed Operations.
.4 Personal Injury Liability with Employment Exclusion
deleted.
.5 Contractual, including specified provision for
Contractor's obligation under Paragraph 3.18.
.6 Owned, non-owned and hired motor vehicles.
.7 Broad Form Property Damage including Completed Operations.
.8 Umbrella Excess Liability.
11.1.1.9 If the General Liability coverages are provided by a Commercial
General Liability Policy on a claims-made basis, the policy date
or Retroactive Date shall predate the Contract; the termination
date of the policy or applicable extended reporting period shall
be no earlier than the termination date of coverages required to
be maintained after final payment, certified in accordance with
Subparagraph 9.10.2.
Add the following Clause 11.1.2.1 to 11.1.2:
11.1.2.1 The insurance required by Subparagraph 11.1.1 shall be written
for not less than the following limits, or greater if required
by law:
(a) State: Statutory
(b) Applicable Federal (e.g. Longshoremen's): Statutory
(c) Employer's Liability: $100,000.00 per Accident
$500,000.00 Disease, Policy Limit
$500,000.00 Disease, Each Employee
.2 Comprehensive or Commercial Liability (including Premises
Operations; Independent Contractor's Protective; products
and Combined Operations; Broad Form Property Damage):
(a) Bodily Injury:
$1,000,000.00 Occurrence
$1,000,000.00 Aggregate
(b) Property Damage:
$1,000,000.00 Each Occurrence
$1,000,000.00 Aggregate
(c) Products and Completed Operations to be maintained for
five years after final payment:
$1,000,000.00 Aggregate
(d) Property Damage Liability Insurance shall provide X, C
and U coverage.
(e) Broad Form Property Damage Coverage shall include
Completed Operations.
.3 Contractual Liability:
(a) Bodily Injury:
$1,000,000.00 Each Occurrence
$1,000,000.00 Aggregate
(b) Property Damage:
$1,000,000.00 Each Occurrence
$1,000,000.00 Aggregate
<PAGE> 79
.4 Personal injury, with Employment Exclusion deleted:
$1,000,000.00 Aggregate
.5 Business Auto Liability (including owned, non-owned and
hired vehicles):
(a) Bodily Injury:
$1,000,000.00 Each Occurrence
$1,000,000.00 Aggregate
(b) Property Damage:
$1,000,000.00 Each Occurrence
.6 If the General Liability coverages are provided by a
Commercial Liability policy the:
(a) General Aggregate shall be not less than $1,000,000.00
on any one fire.
(b) Fire Damage Limit shall be not less than $1,000,000.00
on any one fire.
(c) Medical Expense Limit shall be not less than $50,000.00
on any one person.
.7 Umbrella Excess Liability:
$5,000,000.00 over primary insurance.
$10,000.00 retention for self-insured hazards each
occurrence.
11.1.3 Add the following sentence to Subparagraph 11.1.3:
The certificate shall be ACORD form 25S with AIA Document G715,
Supplemental Attachment.
11.3 Property Insurance
11.3.1.1 Add the following sentence to Clause 11.3.1.1:
The form of policy for this coverage shall be Completed Value.
11.3.1.3 Add the following sentence to Clause 11.3.1.3:
This property insurance is written with a deductible of
$10,000.00 per occurrence ($50,000.00 for flood damage) with a
deductible aggregate of $10,000.00 ($50,000.00 for flood
damage).
Delete the first three sentences to Subparagraph 11.3.9 and
substitute the following:
11.3.9 If required in writing by a party in interest, the Owner as
fiduciary shall, upon occurrence to insured loss, 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, or in accordance with an arbitration award
in which case the procedure shall be as provided in Paragraph
4.5.
11.4 Performance Bond and Payment Bond
Delete Subparagraph 11.4.1 and substitute the following:
11.4.1 The Contractor shall furnish bonds covering faithful performance
of the Contract and payment of obligations arising thereunder.
Bonds may be obtained through the Contractor's usual source and
the cost thereof shall be included in the Contract Sum. The
amount of each bond shall be equal to 100 percent of the
Contract Sum.
11.4.1.2 The Contractor shall require the attorney-in-fact who executes
the required bonds on behalf of the surety to affix thereto a
certified and current copy of the power of attorney.
<PAGE> 80
ARTICLE TWELVE - UNCOVERING AND CORRECTION OF WORK:
No Change
ARTICLE THIRTEEN - MISCELLANEOUS PROVISIONS:
13.5 TESTS AND INSPECTIONS
13.5.6 ADD the following:
The Contractor shall provide such equipment and facilities as the
Architect may require for conducting field tests and for collecting and
forwarding samples. The Contractor shall not use any material or
equipment represented by samples found to be unacceptable. The
Contractor shall give the Architect and testing laboratory timely notice
for required tests. See specifications, Section 01400 for detailed
procedures.
ARTICLE FOURTEEN - TERMINATION OR SUSPENSION OF THE CONTRACT:
No Change
ARTICLE FIFTEEN - MEASUREMENTS:
ADD this article:
15.1 Before ordering any material or doing any work, the Contractor shall
verify all measurements at the project and shall be responsible for the
correctness of same. No extra charge or compensation shall be allowed on
account of difference between actual dimensions and the measurements
indicated on the Drawings. Any difference which may be found shall be
submitted to the Owner for consideration before proceeding with the
work. The Architect and Owner shall not be responsible for scaling of
Drawings.
ARTICLE SIXTEEN - LEGAL ACTIONS:
ADD this article:
16.1 As a condition precedent to and as additional consideration for the
award of any contract or subcontract pursuant to these Specifications,
the Contractor and all Subcontractors, suppliers, engineers, and other
parties to the performance of the work required by these specifications,
do agree that in the event any party institute a suit against any party
because of any alleged failure to perform properly hereunder, or any
alleged error, omission, breach of warranty, negligence or mere
malpractice hereunder; and if such suit is not successfully prosecuted
to a judgement in favor of the party plaintiff, or if it is dismissed,
or if a judgement is rendered for any defendant or defendants, to the
party instituting the suit hereby agrees to pay in full all actual costs
of defense, including but not limited to attorney fees, expert witness
fees, costs of investigations in preparation for trial, professional
time expended by principals and employees of the prevailing party and
that the same shall be taxed as cost in said action and judgement
entered thereon.
END OF SECTION
<PAGE> 1
EXHIBIT 10.12
[BANK ONE LOGO]
LOAN AGREEMENT
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL LOAN DATE MATURITY LOAN NO. CALL COLLATERAL ACCOUNT OFFICER INITIALS
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$3,700,000 05-01-1997 04-29-1998 410
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
References in the shaded area are for Lender's use only and do not limit the
applicability of this document to any particular loan or item.
- --------------------------------------------------------------------------------
Borrower: CONCEPTS DIRECT, INC. Lender: BANK ONE, COLORADO, N.A.
A DELAWARE CORPORATION DOWNTOWN BOULDER BANKING CENTER
1351 SOUTH SUNSET BLVD. 2696 SOUTH COLORADO BLVD.
LONGMONT, CO 80501 DENVER, CO 80222
================================================================================
THIS LOAN AGREEMENT between CONCEPTS DIRECT, INC., A DELAWARE CORPORATION
("Borrower") and BANK ONE, COLORADO, N.A. ("Lender") is made and executed on
the following terms and conditions. Borrower has received prior commercial
loans from Lender or has applied to Lender for a commercial loan or loans and
other financial accommodations, including those which may be described on any
exhibit or schedule attached to this Agreement. All such loans and financial
accommodations, together with all future loans and financial accommodations
from Lender to Borrower, are referred to in this Agreement individually as the
"Loan" and collectively as the "Loans." Borrower understands and agrees that:
(a) In granting, renewing, or extending any Loan, Lender is relying upon
Borrower's representations, warranties, and agreements, as set forth in this
Agreement; (b) the granting, renewing, or extending of any Loan by Lender at
all times shall be subject to Lender's sole judgment and discretion; and (c)
all such Loans shall be and shall remain subject to the following terms and
conditions of this Agreement.
TERM. This Agreement shall be effective as of May 1, 1997, and shall continue
thereafter until all indebtedness of Borrower to Lender has been performed in
full and the parties terminate this Agreement in writing.
DEFINITIONS. The following words shall have the following meanings when used in
this Agreement. Terms not otherwise defined in this Agreement shall have the
meanings attributed to such terms in the Uniform Commercial Code. All
references to dollar amounts shall mean amounts in lawful money of the United
States of America.
Agreement. The word "Agreement" means this Loan Agreement, as this Loan
Agreement may be amended or modified from time to time, together with all
exhibits and schedules attached to this Loan Agreement from time to time.
Advance. The word "Advance" means a disbursement of Loan funds under this
Agreement.
Borrower. The word "Borrower" means CONCEPTS DIRECT, INC., A DELAWARE
CORPORATION. The word "Borrower" also includes, as applicable, all
subsidiaries and affiliates of Borrower as provided below in the paragraph
titled "Subsidiaries and Affiliates."
Borrowing Base. The words "Borrowing Base" mean AS DESCRIBED IN EXHIBIT "A"
ATTACHED.
Business Day. The words "Business Day" mean a day on which commercial banks
are open for business in the State of Colorado.
CERCLA. The word "CERCLA" means the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended.
Cash Flow. The words "Cash Flow" mean net income after taxes, and
exclusive of extraordinary gains and income, plus depreciation and
amortization.
Collateral. The word "Collateral" means and includes without limitation all
property and assets granted as collateral security for a Loan, whether real
or personal property, whether granted directly or indirectly, whether
granted now or in the future, and whether granted in the form of a security
interest, mortgage, deed of trust, assignment, pledge, chattel mortgage,
chattel trust, factor's lien, equipment trust, conditional sale, trust
receipt, lien, charge, lien or title retention contract, lease or
consignment intended as a security device, or any other security or lien
interest whatsoever, whether created by law, contract, or otherwise. The
word "Collateral" includes without limitation all collateral described
below in the section titled "COLLATERAL."
Debt. The word "Debt" means all of Borrower's liabilities excluding
Subordinated Debt.
Event of Default. The words "Event of Default" mean and include without
limitation any of the Events of Default set forth below in the section
titled "EVENTS OF DEFAULT."
Expiration Date. The words "Expiration Date" mean the date of termination
of Lender's commitment to lend under this Agreement.
Grantor. The word "Grantor" means and includes without limitation each and
all of the persons or entities granting a Security Interest in any
Collateral for the Indebtedness, including without limitation all Borrowers
granting such a Security Interest.
Guarantor. The word "Guarantor" means and includes without limitation each
and all of the guarantors, sureties, and accommodation parties in
connection with an Indebtedness.
Indebtedness. The word "Indebtedness" means and includes without limitation
all Loans, together with all other obligations, debts and liabilities of
Borrower to Lender, or any one or more of them, as well as all claims by
Lender against Borrower, or any one or more of them; whether now or
hereafter exiting, voluntary or involuntary, due or not due, absolute or
contingent, liquidated or unliquidated; whether Borrower may be liable
individually or jointly with others; whether Borrower may be obligated as a
guarantor, surety, or otherwise; whether recovery upon such Indebtedness
may be or hereafter may become barred by any statute or limitations; and
whether such Indebtedness may be or hereafter may become otherwise
unenforceable.
Inventory. The word "Inventory" means all of Borrower's raw materials, work
in process, finished goods, merchandise, parts and supplies, of every kind
and description, and goods held for sale or lease or furnished under
contracts of service in which Borrower now has or hereafter acquires any
right, whether held by Borrower or others, and all documents of title,
warehouse receipts, bills of lading, and all other documents of every type
covering all or any part of the foregoing. Inventory includes inventory
temporarily out of Borrower's custody or possession and all returns on
Accounts.
Lender. The word "Lender" means BANK ONE, COLORADO, N.A., its successors
and assigns.
Line of Credit. The words "Line of Credit" mean the facility described in
the Section titled "LINE OF CREDIT" below.
Liquid Assets. The words "Liquid Assets" mean Borrower's cash on hand plus
Borrower's readily marketable securities.
Loan. The word "Loan" or "Loans" means and includes without limitation any
and all commercial loans and financial accommodations from Lender to
Borrower, whether now or hereafter existing, and however evidenced,
including without limitation those loans and financial accommodations
described herein or described on any exhibit or schedule attached to this
Agreement from time to time.
Note. The word "Note" means and includes without limitation Borrower's
promissory note or notes, if any, evidencing Borrower's Loan obligations in
favor of Lender, as well as any substitute, replacement or refinancing note
or notes therefor.
Permitted Liens. The words "Permitted Liens" mean: (a) liens and security
interests securing indebtedness owed by Borrower to Lender; (b) liens for
taxes, assessments, or similar charges either not yet due or being
contested in good faith; (c) liens of materialmen, mechanics, warehousemen,
or carriers, or other like liens arising in the ordinary course of business
and securing obligations which are not yet delinquent; (d) purchase money
liens or purchase money security interests upon or in any property acquired
or held by Borrower in the ordinary course of business to secure
indebtedness outstanding on the date of this Agreement or permitted to be
incurred under the paragraph of this Agreement titled "Indebtedness and
Liens"; (e) liens and security interests which, as of the date of this
Agreement, have been disclosed to and approved by the Lender in writing;
and (f) those liens and security interests which in the aggregate
constitute an immaterial and insignificant monetary amount with respect to
the net value of Borrower's assets.
Related Documents. The words "Related Documents" mean and include without
limitation all promissory notes, credit agreements, loan agreements,
environmental agreements, guaranties, security agreements, mortgages, deeds
of trust, and all other instruments, agreements and documents, whether now
or hereafter existing, executed in connection with the Indebtedness.
Security Agreement. The words "Security Agreement" mean and include without
limitation any agreements, promises, covenants, arrangements,
understandings or other agreements, whether created by law, contract, or
otherwise, evidencing, governing, representing, or creating a Security
Interest.
<PAGE> 2
04-29-1997 LOAN AGREEMENT Page 2
Loan No (Continued)
================================================================================
Security Interest. The words "Security Interest" mean and include without
limitation any type of collateral security, wether in the form of a lien,
charge, mortgage, deed of trust, assignment, pledge, chattel mortgage,
chattel trust, factor's lien, equipment trust, conditional sale, trust
receipt lien or title retention contract, lease or consignment intended as
a security device, or any other security or lien interest whatsoever,
whether created by law, contract, or otherwise.
SARA. The word "SARA" means the Superfund Amendments and Reauthorization
Act of 1986 as now or hereafter amended.
Subordinated Debt. The words "Subordinated Debt" mean indebtedness and
liabilities of Borrower which have been subordinated by written agreement
to indebtedness owned by Borrower to Lender in form and substance
acceptable to Lender.
Tangible Net Worth. The words "Tangible Net Worth" mean Borrower's total
assets excluding all intangible assets (i.e., goodwill, trademarks,
patents, copyrights, organizational expenses, and similar intangible items,
but including leaseholds and leasehold improvements) less total Debt.
Working Capital. The words "Working Capital" mean Borrower's current
assets, less Borrower's current liabilities.
LINE OF CREDIT. Lender agrees to make Advances to Borrower from time to time
from the date of this Agreement to the Expiration Date, provided the aggregate
amount of such Advances outstanding at any time does not exceed the Borrowing
Base. Within the foregoing limits, Borrower may borrow, partially or wholly
prepay, and reborrow under this Agreement as follows.
Conditions Precedent to Each Advance. Lender's obligation to make any
Advance to or for the account of Borrower under this Agreement is subject
to the following conditions precedent, with all documents, instruments,
opinions, reports, and other items required under this Agreement to be in
form and substance satisfactory to Lender:
(a) Lender shall have received evidence that this Agreement and all
Related Documents have been duly authorized, executed, and delivered by
Borrower to Lender.
(b) Lender shall have received such opinions of counsel, supplemental
opinions, and documents as Lender may request.
(c) The security interests in the Collateral shall have been duly
authorized, created, and perfected with first lien priority and shall be
in full force and effect.
(d) All guaranties required by Lender for the Line of Credit shall have
been executed by each Guarantor, delivered to Lender, and be in full
force and effect.
(e) Lender, at its option and for its sole benefit, shall have conducted
an audit of Borrower's Inventory, books, records, and operations, and
Lender shall be satisfied as to their condition.
(f) Borrower shall have paid to Lender all fees, costs, and expenses
specified in this Agreement and the Related Documents as are then due
and payable.
(g) There shall not exist at the time of any Advance a condition which
would constitute an Event of Default under this Agreement, and Borrower
shall have delivered to Lender the compliance certificate called for in
the paragraph below titled "Compliance Certificate."
Making Loan Advances. Advances under the credit facility, as well as
directions for payment from Borrower's accounts, may be requested orally or
in writing by authorized persons. Lender may, but need not, require that
all oral requests be confirmed in writing. Each Advance shall be
conclusively deemed to have been made at the request of and for the benefit
of Borrower (a) when credited to any deposit account of Borrower maintained
with Lender or (b) when advanced in accordance with the Instructions of an
authorized person. Lender, at its option, may set a cutoff time, after
which all requests for Advances will be treated as having been requested on
the next succeeding Business Day.
Mandatory Loan Repayments. If at any time the aggregate principal amount of
the outstanding Advances shall exceed the applicable Borrowing Base,
Borrower, immediately upon written or oral notice from Lender, shall pay to
Lender an amount equal to the difference between the outstanding principal
balance of the Advances and the Borrowing Base. On the Expiration Date,
Borrower shall pay to Lender in full the aggregate unpaid principal amount
of all Advances then outstanding and all accrued unpaid interest, together
with all other applicable fees, costs and charges, if any, not yet paid.
Loan Account. Lender shall maintain on its books a record of account in
which Lender shall make entries for each Advance and such other debits and
credits as shall be appropriate in connection with the credit facility.
Lender shall provide Borrower with periodic statements of Borrower's
account, which statements shall be considered to be correct and
conclusively binding on Borrower unless Borrower notifies Lender to the
contrary within thirty (30) days after Borrower's receipt of any such
statement which Borrower deems to be incorrect.
COLLATERAL. To secure payment of the Line of Credit and performance of all
other Loans, obligations and duties owed by Borrower to Lender, Borrower (and
others, if required) shall grant to Lender Security Interests in such property
and assets as Lender may require (the "Collateral"), including without
limitation Borrower's present and future Inventory, Lender's Security Interests
in the Collateral shall be continuing liens and shall include the proceeds and
products of the Collateral, including without limitation the proceeds of any
insurance. With respect to the Collateral, Borrower agrees and represents and
warrants to Lender.
Perfection of Security Interests. Borrower agrees to execute such financing
statements and to take whatever other actions are requested by Lender to
perfect and continue Lender's Security Interests in the Collateral. Upon
request of Lender, Borrower will deliver to Lender any and all of the
documents evidencing or constituting the Collateral, and Borrower will note
Lender's interest upon any and all chattel paper if not delivered to Lender
for possession by Lender. Contemporaneous with the execution of this
Agreement, Borrower will execute one or more UCC financing statements and
any similar statements as may be required by applicable law, and will file
such financing statements and all such similar statements in the
appropriate location or locations. Borrower hereby appoints Lender as its
irrevocable attorney-in-fact for the purpose of executing any documents
necessary to perfect or to continue any Security Interest. Lender may at
any time, and without further authorization from Borrower, file a carbon,
photograph, facsimile, or other reproduction of any financing statement for
use as a financing statement. Borrower will reimburse Lender for all
expenses for the perfection, termination, and the continuation of the
perfection of Lender's security interest in the Collateral. Borrower
promptly will notify Lender of any change in Borrower's name including any
change to the assumed business names of Borrower. Borrower also promptly
will notify Lender of any change in Borrower's Social Security Number or
Employer Identification Number. Borrower further agrees to notify Lender
in writing prior to any change in address or location of Borrower's
principal governance office or should Borrower merge or consolidate with
any other entity.
Collateral Records. Borrower does now, and at all times hereafter shall,
keep correct and accurate records of the Collateral, all of which records
shall be available to Lender or Lender's representative upon demand for
inspection and copying at any reasonable time. With respect to the
Inventory, Borrower agrees to keep and maintain such records as Lender may
require, including without limitation information concerning Eligible
Inventory and records itemizing and describing the kind, type, quality, and
quantity of inventory, Borrower's Inventory costs and selling prices, and
the daily withdrawals and additions to Inventory.
Collateral Schedules. Concurrently with the execution and delivery of this
Agreement, Borrower shall execute and deliver to Lender a schedule of
Inventory and Eligible Inventory, in form and substance satisfactory to the
Lender. Thereafter and at such frequency as Lender shall require, Borrower
shall execute and deliver to Lender such supplemental schedules of Eligible
Inventory specifying the value thereof, and such other matters and
information relating to Borrower's Inventory as Lender may request.
Representations and Warranties Concerning Inventory. With respect to the
Inventory, Borrower represents and warrants to Lender; (a) All Inventory
represented by Borrower to be Eligible Inventory for purposes of this
Agreement conforms to the requirements of the definition of Eligible
Inventory; (b) All Inventory values listed on schedules delivered to Lender
will be true and correct, subject to immaterial variance; (c) The value of
the Inventory will be determined on a consistent accounting basis; (d)
Except for bulk paper label stock at printers and as agreed to the
contrary by Lender in writing, all Eligible Inventory is now and at all
times hereafter will be in Borrower's physical possession and shall not be
held by others on consignment, sale on approval, or sale or return; (e)
Except as reflected in the Inventory schedules delivered to Lender, all
Eligible Inventory is now and at all times hereafter will be of good and
merchantable quality, free from detects; (f) Eligible Inventory is not now
and will not at any time hereafter be stored with a bailee, warehouseman,
or similar party without Lender's prior written consent, and, in such
event, Borrower will concurrently at the time of bailment cause any such
bailee, warehouseman, or similar party to issue and deliver to Lender, in
form acceptable to Lender, warehouse receipts in Lender's name evidencing
the storage of Inventory; and (g) Lender, its assigns, or agents shall
have the right at any time and at Borrower's expense to inspect and
examine the Inventory and to check and test the same as to quality,
quantity, value, and condition.
REPRESENTATIONS AND WARRANTIES. Borrower represents and warrants to Lender, as
of the date of this Agreement, as of the date of each disbursement of Loan
proceeds, as of the date of any renewal, extension or modification of any Loan,
and at all times any Indebtedness exists:
Organization. Borrower is a corporation which is duly organized, validly
existing, and in good standing under the laws of the State of Delaware and
is validly existing and in good standing in all states in which Borrower is
doing business. Borrower has the full power and authority to own its
properties and to transact the businesses in which it is presently engaged
or presently proposes to engage. Borrower also is duly qualified as a
foreign corporation and is in good standing in which the failure to so
qualify would have a material adverse effect on its businesses or financial
condition.
Authorization. The execution, delivery, and performance of this Agreement
and all Related Documents by Borrower, to the extent to be executed,
delivered or performed by Borrower, have been duly authorized by all
necessary action by Borrower, do not require the consent or approval of any
other person, regulatory authority or governmental body, and do not
conflict with, result in a violation of, or constitute a default under (a)
any
<PAGE> 3
04-29-1997 LOAN AGREEMENT Page 3
Loan No (Continued)
- -------------------------------------------------------------------------------
provision of its articles of incorporation or organization, or bylaws, or
any agreement or other instrument binding upon Borrower or (b) any law,
governmental regulation, court decree, or order applicable to Borrower.
Financial Information. Each financial statement of Borrower supplied to
Lender truly and completely disclosed Borrower's financial condition as of
the date of the statement, and there has been no material adverse change in
Borrower's financial condition subsequent to the date of the most recent
financial statement supplied to Lender. Borrower has no material contingent
obligations except as disclosed in such financial statements.
Legal Effect. This Agreement constitutes, and any instrument or agreement
required hereunder to be given by Borrower when delivered will constitute,
legal, valid and binding obligations of Borrower enforceable against
Borrower in accordance with their respective terms.
Properties. Except for Permitted Liens, Borrower owns and has good title to
all of Borrower's properties free and clear of all Security Interests, and
has not executed any security documents or financing statements relating to
such properties. All of Borrower's properties are titled in Borrower's
legal name, and Borrower has not used, or filed a financing statement
under, any other name for at least the last five (5) years.
Hazardous Substances. The terms "hazardous waste." "hazardous substance,"
"disposal," "release," and "threatened release," as used in this Agreement,
shall have the same meanings as set forth in the "CERCLA"" SARA," the
Hazardous Materials Transportation Act, 49 U.S.C. Section 1801, et seq.,
the Resource Conservation and Recovery Act, 42 U.S.C. Section 5901, et
seq., or other applicable state or Federal laws, rules, or regulations
adopted pursuant to any of the foregoing. Except as disclosed to and
acknowledged by Lender in writing. Borrower represents and warrants that:
(a) During the period of Borrower's ownership of the properties, there has
been no use, generation, manufacture, storage, treatment, disposal, release
or threatened release of any hazardous waste or substance by any person on,
under, about or from any of the properties. (b) Borrower has no knowledge
of, or reason to believe that there has been (ii) any use, generation,
manufacture, storage, treatment, disposal, release, or threatened release
of any hazardous waste or substance on, under, about or from the properties
by any prior owners or occupants of any of the properties, or (ii) any
actual or threatened litigation or claims of any kind by any person
relating to such matters. (c) Neither Borrower nor any tenant, contractor,
agent or other authorized user of any of the properties shall use,
generate, manufacture, store, treat, dispose of, or release any hazardous
waste or substance on, under, about or from any of the properties: and any
such activity shall be conducted in compliance with all applicable federal,
state, and local laws, regulations, and ordinances, including without
limitation those laws, regulations and ordinances described above. Borrower
authorizes Lender and its Agents to enter upon the properties to make such
inspections and tests as Lender may deem appropriate to determine
compliance of the properties with this section of the Agreement. Any
inspections or tests made by Lender shall be at Borrower's expense and for
Lender's purposes only and shall not be construed to create any
responsibility or liability on the part of Lender to Borrower or to any
other person. The representations and warranties contained herein are based
on Borrower's due diligence in investigating the properties for hazardous
waste and hazardous substances. Borrower hereby (a) releases and waives any
future claims against Lender for indemnity or contribution in the event
Borrower becomes liable for cleanup or other costs under any such laws, and
(b) agrees to indemnify and hold harmless Lender against any and all
claims, losses, liabilities, damages, penalties, and expenses which Lender
may directly or indirectly sustain or suffer resulting from a breach of
this section of the Agreement or as a consequence of any use, generation,
manufacture, storage, disposal, release or threatened release occurring
prior to Borrower's ownership or interest in the properties, whether or not
the same was or should have been known to Borrower. The provisions of this
section of the Agreement, including the obligation to indemnify, shall
survive the payment of the Indebtedness and the termination or expiration
of this Agreement and shall not be affected by Lender's acquisition of any
interest in any of the properties, whether by foreclosure of otherwise.
Litigation and Claims. No litigation, claim, investigation, administrative
proceeding or similar action (including those for unpaid taxes ) against
Borrower is pending or threatened, and no other event has occurred which
may materially adversely affect Borrower's financial condition or
properties, other than litigation, claim, or other events, if any, that
have been disclosed to and acknowledged by Lender in writing.
Taxes. To the best of Borrower's knowledge, all tax returns and reports of
Borrower that are or were required to be fixed, have been filed, and all
taxes, assessments and other governmental charges have been paid in full,
except those presently being or to be contested by Borrower in good faith
in the ordinary course of business and for which adequate reserves have
been provided.
Lien Priority. Unless otherwise previously disclosed to Lender in writing.
Borrower has not entered into or granted any Security Agreements, or
permitted the filing or attachment of any Security Interests on or
affecting any of the Collateral directly or indirectly securing repayment
of Borrower's Loan and Note that would be prior or that may in any way be
superior to Lender's Security Interests and rights in and to such
Collateral.
Binding Effect. This Agreement, the Note, all Security Agreements directly
or indirectly securing repayment of Borrower's Loan and Note and all of the
Related Documents are binding upon Borrower as well as upon Borrower's
successors, representatives and assigns, and are legally enforceable in
accordance with their respective terms.
Commercial Purposes. Borrower intends to use the Loan proceeds solely for
business or commercial related purposes.
Employee Benefit Plans. Each employee benefit plan as to which Borrower may
have any liability complies in all material respects with all applicable
requirements of law and regulations, and (i) no Reportable Event nor
Prohibited Transaction (as defined in ERISA) has occurred with respect to
any such plan. (ii) Borrower has not withdrawn from any such plan or
initiated steps to do so. (iii) no steps have been taken to terminate any
such plan, and (iv) there are no unfunded liabilities other than those
previously disclosed to Lender in writing.
Location of Borrower's Offices and Records. Borrower's place of business,
or Borrower's Chief executive office, if Borrower has more than one place
of business, is located at 1351 SOUTH SUNSET BLVD., LONGMONT, CO 80501.
Unless Borrower has designated otherwise in writing this location is also
the office or offices where Borrower keeps its records concerning the
Collateral.
Information. All information heretofore or contemporaneously herewith
furnished by Borrower to Lender for the purposes of or in connection with
this Agreement or any transaction contemplated hereby is, and all
information hereafter furnished by or on behalf of Borrower to Lender will
be true and accurate in every material respect on the date as of which such
information is dated or certified; and none of such information is or will
be incomplete by omitting to state any material fact necessary to make such
information not misleading.
Survival of Representations and Warranties. Borrower understands and agrees
that Lender, without independent investigating, is relying upon the above
representations and warranties in extending Loan Advances to Borrower.
Borrower further agrees that the foregoing representations and warranties
shall be continuing in nature and shall remain in full force and effect
until such time as Borrower's indebtedness shall be paid in full, or until
this Agreement shall be terminated in the manner provided above, whichever
is the last to occur.
AFFIRMATIVE COVENANTS. Borrower covenants and agrees with Lender that, while
this Agreement is in effect, Borrower will:
Litigation. Promptly inform Lender in writing of (a) all material adverse
changes in Borrower's financial condition, and (b) all existing and all
threatened litigation, claims, investigations, administrative proceedings
or similar actions affecting Borrower or any Guarantor which could
materially affect the financial condition of Borrower or the financial
condition of any Guarantor.
Financial Records. Maintain its books and records in accordance with
generally accepted accounting principles, applied on a consistent basis,
and permit Lender to examine and audit Borrower's books and records at all
reasonable times.
Financial Statements. Furnish Lender with, as soon as available, but in no
event later than one hundred twenty (120) days after the end of each fiscal
year, Borrower's balance sheet and income statement for the year ended,
audited by a certified public accountant satisfactory to Lender, and, as
soon as available, but in no event later than forty five (45) days after
the end of each month, Borrower's balance sheet and profit and loss
statement for the period ended, prepared and certified as correct to the
best knowledge and belief by Borrower's chief financial officer or other
officer or person acceptable to Lender. All financial reports required to
be provided under this Agreement shall be prepared in accordance with
generally accepted accounting principles, applied on a consistent basis,
and certified by Borrower as being true and correct.
Additional Information. Furnish such additional information and statements,
lists or assets and liabilities, agings of receivables and payables,
inventory schedules, budgets, forecasts, tax returns, and other reports
with respect to Borrower's financial condition and business operations as
Lender may request from time to time.
Financial Covenants and Ratios. Comply with the following covenants and
ratios:
Net Worth Ratio. Maintain a ratio of Total Liabilities to Tangible Net
Worth of less than 2.25 to 1.00. Except as provided above, all
computations made to determine compliance with the requirements
contained in this paragraph shall be made in accordance with generally
accepted accounting principles, applied on a consistent basis, and
certified by Borrower as being true and correct.
Insurance. Maintain fire and other risk insurance, public liability
insurance, and such other insurance as Lender may require with respect
to Borrower's properties and operations, in form, amounts, coverages and
with insurance companies reasonably acceptable to Lender. Borrower, upon
request of Lender, will deliver to Lender from time to time the policies
or certificates of insurance in form satisfactory to Lender, including
stipulations that coverages will not be cancelled or diminished without
at least ten (10) days' prior written notice to Lender. Each insurance
policy also shall include an endorsement providing that coverage in
favor of Lender will not be impaired in any way by any act, omission or
default of Borrower or any other person. In connection with all policies
covering assets in which Lender holds or is offered a security interest
for the Loans, Borrower will provide Lender with such loss payable or
other endorsements as Lender may require.
Insurance Reports. Furnish to Lender, upon request of Lender, reports on
each existing insurance policy showing such information as Lender may
reasonably request, including without limitation the following: (a) the
name of the insurer; (b) the risks insured; (c) the amount of the
policy; (d) the properties insured; (e) the then current property values
on the basis of which insurance has been obtained and the manner of
<PAGE> 4
04-29-1997 LOAN AGREEMENT Page 4
Loan No. (Continued)
================================================================================
determining those values; and (f) the expiration date of the policy. In
addition, upon request of Lender (however not more often than
annually), Borrower will have an independent appraiser satisfactory to
Lender determine, as applicable, the actual cash value or replacement
cost of any Collateral. The cost of such appraisal shall be paid by
Borrower.
Other Agreements. Comply with all terms and conditions of all other
agreements, whether now or hereafter existing, between Borrower and any
other party and notify Lender immediately in writing of any default in
connection with any other such agreements.
Loan Proceeds. Use all Loan proceeds solely for Borrower's business
operations, unless specifically consented to the contrary by Lender in
writing.
Taxes, Charges and Liens. Pay and discharge when due all of its
indebtedness and obligations, including without limitation all
assessments, taxes, governmental charges, levies and liens, of every
kind and nature, imposed upon Borrower or its properties, income, or
profits, prior to the date on which penalties would attach, and all
lawful claims that, if unpaid, might become a lien or charge upon any of
Borrower's properties, income, or profits. Provided however, Borrower
will not be required to pay and discharge any such assessment, tax,
charge, levy, lien or claim so long as (a) the legality of the same
shall be contested in good faith by appropriate proceedings, and (b)
Borrower shall have established on its books adequate reserves with
respect to such contested assessment, tax, charge, levy, lien, or claim
in accordance with generally accepted accounting practices. Borrower,
upon demand of Lender, will furnish to Lender evidence of payment of the
assessments, taxes, charges, levies, liens and claims and will authorize
the appropriate governmental official to deliver to Lender at any time a
written statement of any assessments, taxes, charges, levies, liens and
claims against Borrower's properties, income, or profits.
Performance. Perform and comply with all terms, conditions, and
provisions set forth in this Agreement and in the Related Documents in a
timely manner, and promptly notify Lender if Borrower learns of the
occurrence of any event which constitutes an Event of Default under this
Agreement or under any of the Related Documents.
Operations. Maintain executive officers with substantially the same
qualifications and experience as the present executive officers; provide
written notice to Lender of any change in executive officers, conduct
its business affairs in a reasonable and prudent manner and in
compliance with all applicable federal, state and municipal laws,
ordinances, rules and regulations respecting its properties, charters,
businesses and operations, including without limitation, compliance with
the Americans With Disabilities Act and with all minimum funding
standards and other requirements of ERISA and other laws applicable to
Borrower's employee benefit plans.
Inspection. Permit employees or agents of Lender at any reasonable time
to inspect any and all Collateral for the Loan or Loans and Borrower's
other properties and to examine or audit Borrower's books, accounts, and
records and to make copies and memoranda of Borrower's books, accounts,
and records. If Borrower now or at any time hereafter maintains any
records (including without limitation computer generated records and
computer software programs for the generation of such records) in the
possession of a thirty party, Borrower, upon request of Lender, shall
notify such party to permit Lender free access to such records at all
reasonable times and to provide Lender with copies of any records it may
request, all at Borrower's expense.
Compliance Certificate. Unless waived in writing by Lender, provide
Lender MONTHLY and at the time of each disbursement of Loan proceeds
with a certificate executed by Borrower's chief financial officer, or
other officer or person acceptable to Lender, certifying that the
representations and warranties set forth in this Agreement are true and
correct as of the date of the certificate and further certifying that,
as of the date of the certificate, no Event of Default exists under this
Agreement.
Environmental Compliance and Reports. Borrower shall comply in all
respects with all environmental protection federal, state and local
laws, statutes, regulations and ordinances; not cause or permit to
exist, as a result of an intentional or unintentional action or omission
on its part or on the part of any third party, on property owned and/or
occupied by Borrower, any environmental activity where damage may result
to the environment, unless such environmental activity is pursuant to
and in compliance with the conditions of a permit issued by the
appropriate federal, state or local governmental authorities; shall
furnish to Lender promptly and in any event within thirty (30) days
after receipt thereof a copy of any notice, summons, lien, citation,
directive, letter or other communication from any governmental agency or
instrumentality concerning any intentional or unintentional action or
omission on Borrower's part in connection with any environmental
activity whether or not there is damage to the environment and/or other
natural resources.
Additional Assurances. Make, execute and deliver to Lender such
promissory notes, mortgages, deeds of trust, security agreements,
financing statements, instruments, documents and other agreements as
Lender or its attorneys may reasonably request to evidence and secure
the Loans and to perfect all Security Interests.
NEGATIVE COVENANTS. Borrower covenants and agrees with Lender that while this
Agreement is in effect, Borrower shall not, without the prior written consent
of Lender:
Indebtedness and Liens. (a) Except for trade debt incurred in the normal
course of business and indebtedness to Lender contemplated by this
Agreement, create, incur or assume indebtedness for borrowed money,
INCLUDING ADDITIONAL LOANS TO FINANCE DEVELOPMENT OF REAL ESTATE NOT
OCCUPIED BY BORROWER, AND including capital leases, (b) except as
allowed as a Permitted Lien, sell, transfer, mortgage, assign, pledge,
lease, grant a security interest in, or encumber any of Borrower's
assets, or (c) sell with recourse any of Borrower's accounts, except
to Lender.
Continuity of Operations. (a) Engage in any business activities
substantially different than those in which Borrower is presently
engaged, (b) cease operations, liquidate, merge, transfer, acquire or
consolidate with any other entity, change ownership, change its name,
dissolve or transfer or sell Collateral out of the ordinary course of
business, (c) pay any dividends on Borrower's stock (other than
dividends payable in its stock), provided, however that notwithstanding
the foregoing, but only so long as no Event of Default has occurred and
is continuing or would result from the payment of dividends, if Borrower
is a "Subchapter S Corporation" (as defined in the Internal Revenue Code
of 1986, as amended). Borrower may pay cash dividends on its stock to
its shareholders from time to time in amounts necessary to enable the
shareholders to pay income taxes and make estimated income tax payments
to satisfy their liabilities under federal and state law which arise
solely from their status as Shareholders of a Subchapter S Corporation
because of their ownership of shares of stock of Borrower, or (d)
purchase or retire any of Borrower's outstanding shares or alter or
amend Borrower's capital structure.
Loans, Acquisitions and Guaranties. (a) Loan, invest in or advance money
or assets, (b) purchase, create or acquire any interest in any other
enterprise or entity, or (c) incur any obligation as surety or guarantor
other than in the ordinary course of business.
CESSATION OF ADVANCES. If Lender has made any commitment to make any Loan to
Borrower, whether under this Agreement or under any other agreement, Lender
shall have no obligation to make Loan Advances or to disburse Loan proceeds if:
(a) Borrower or any Guarantor is in default under the terms of this Agreement
or any of the Related Documents or any other agreement that Borrower or any
Guarantor has with Lender; (b) Borrower or any Guarantor becomes insolvent,
files a petition in bankruptcy or similar proceedings, or is adjudged a
bankrupt, (c) there occurs a material adverse change in Borrower's financial
condition, in the financial condition of any Guarantor, or in the value of any
Collateral securing any Loan; or (d) any Guarantor seeks, claims or otherwise
attempts to limit, modify or revoke such Guarantor's guaranty of the Loan or
any other loan with Lender.
EXHIBIT "A". An exhibit, titled "EXHIBIT "A"," is attached to this Agreement
and by this reference is made a part of this Agreement just as if all the
provisions, terms and conditions of the Exhibit had been fully set forth in
this Agreement.
RIGHT OF SETOFF. Borrower grants to Lender a contractual possessory security
interest in, and hereby assigns, conveys, delivers, pledges, and transfers to
Lender all Borrower's right, title and interest in and to, Borrower's accounts
with Lender (whether checking, savings, or some other account), including
without limitation all accounts held jointly with someone else and all accounts
Borrower may open in the future, excluding however all IRA and Keogh accounts,
and all trust accounts for which the grant of a security interest would be
prohibited by law. Borrower authorizes Lender, to the extent permitted by
applicable law, to charge or setoff all sums owing on the Indebtedness against
any and all such accounts.
EVENTS OF DEFAULT. Each of the following shall constitute an Event of Default
under this Agreement:
Default on Indebtedness. Failure of Borrower to make any payment when
due on the Loans.
Other Defaults. Failure of Borrower or any Grantor to comply with or to
perform when due any other term, obligation, covenant or condition
contained in this Agreement or in any of the Related Documents, or
failure of Borrower to comply with or to perform any other term,
obligation, covenant or condition contained in any other agreement
between Lender and Borrower.
Default in Favor of Third Parties. Should Borrower or any Grantor
default under any loan, extension of credit, security agreement,
purchase or sales agreement, or any other agreement, in favor of any
other creditor or person that may materially affect any of Borrower's
property or Borrower's or any Grantor's ability to repay the Loans or
perform their respective obligations under this Agreement or any of the
Related Documents.
False Statements. Any warranty, representation or statement made or
furnished to Lender by or on behalf of Borrower or any Grantor under
this Agreement or the Related Documents is false or misleading in any
material respect at the time made or furnished, or becomes false or
misleading at any time thereafter.
Defective Collateralization. This Agreement or any of the Related
Documents ceases to be in full force and effect (including failure of
any Security Agreement to create a valid and perfected Security
Interest) at any time and for any reason.
Insolvency. The dissolution or termination of Borrower's assistance as a
going business, the insolvency of Borrower, the appointment of a
receiver for any part of Borrower's property, any assignment for the
benefit of creditors, any type of creditor workout, or the commencement
of any
<PAGE> 5
04-29-1997 LOAN AGREEMENT Page 5
Loan No (Continued)
===============================================================================
proceeding under any bankruptcy or insolvency laws by or against
Borrower.
Creditor or Forfeiture Proceedings. Commencement of foreclosure or
forfeiture proceedings, whether by judicial proceeding, self-help,
repossession or any other method, by any creditor of Borrower, any
creditor of any Grantor against any collateral securing the
Indebtedness, or by any governmental agency. This includes a
garnishment, attachment, or levy on or of any of Borrower's deposit
accounts with Lender.
Events Affecting Guarantor. Any of the preceding events occurs with
respect to any Guarantor of any of the indebtedness or any Guarantor
dies or becomes incompetent, or revokes or disputes the validity of, or
liability under, any Guaranty of the Indebtedness.
Change in Ownership. Any change in ownership of twenty-five percent
(25%) or more of the common stock of Borrower.
Adverse Change. A material adverse change occurs in Borrower's financial
condition, or Lender believes the prospect of payment or performance of
the indebtedness is impaired.
EFFECT OF AN EVENT OF DEFAULT. If any Event of Default shall occur, except
where otherwise provided in this Agreement or the Related Documents, all
commitments and obligations of Lender under this Agreement or the Related
Documents or any other agreement immediately will terminate (including any
obligation to make Loan Advances or disbursements), and, at Lender's option,
all indebtedness immediately will become due and payable, all without notice of
any kind to Borrower, except that in the case of an Event of Default of the
type described in the "Insolvency" subsection above, such acceleration shall be
automatic and not optional. In addition, Lender shall have all the rights and
remedies provided in the Related Documents or available at law, in equity, or
otherwise. Except as may be prohibited by applicable law, all of Lender's
rights and remedies shall be cumulative and may be exercised singularly or
concurrently. Election by Lender to pursue any remedy shall not exclude pursuit
of any other remedy, and an election to make expenditures or to take action to
perform an obligation of Borrower or of any Grantor shall not affect Lender's
right to declare a default and to exercise its rights and remedies.
MISCELLANEOUS PROVISIONS. The following miscellaneous provisions are a part of
this Agreement:
Amendments. This Agreement, together with any Related Documents,
constitutes the entire understanding and agreement of the parties as to
the matters set forth in this Agreement. No alteration of or amendment
to this Agreement shall be effective unless given in writing and signed
by the party or parties sought to be charged or bound by the alteration
or amendment.
Applicable Law. This Agreement has been delivered to Lender and accepted
by Lender in the State of Colorado. If there is a lawsuit, Borrower
agrees upon Lender's request to submit to the jurisdiction of the courts
of BOULDER County, the State of Colorado. Lender and Borrower hereby
waive the right to any jury trial in any action, proceeding, or
counterclaim brought by either Lender or Borrower against the other.
This Agreement shall be governed by and construed in accordance with the
laws of the State of Colorado.
Caption Headings. Caption headings in this Agreement are for convenience
purposes only and are not to be used to interpret or define the
provisions of this Agreement.
Consent to Loan Participation. Borrower agrees and consents to Lender's
sale or transfer, whether now or later, of one or more participation
interests in the Loans to one or more purchasers, whether related or
unrelated to Lender. Lender may provide, without any limitation
whatsoever, to any one or more purchasers, or potential purchasers, any
information or knowledge Lender may have about Borrower or about any
other matter relating to the Loan, and Borrower hereby waives any rights
to privacy it may have with respect to such matters. Borrower
additionally waives any and all notices of sale of participation
interests, as well as all notices of any repurchase of such
participation interests. Borrower also agrees that the purchasers of any
such participation interests will be considered as the absolute owners
of such interests in the Loans and will have all the rights granted
under the participation agreement or agreements governing the sale of
such participation interests. Borrower further waives all rights of
offset or counterclaim that it may have now or later against Lender or
against any purchaser of such a participation interest and
unconditionally agrees that either Lender or such purchaser may enforce
Borrower's obligation under the Loans irrespective of the failure or
insolvency of any holder of any interest in the Loans. Borrower further
agrees that the purchaser of any such participation interests may
enforce its interests irrespective of any personal claims or defenses
that Borrower may have against Lender.
Costs and Expenses. Borrower agrees to pay upon demand all of Lender's
expenses, including without limitation attorneys' fees, incurred in
connection with the preparation, execution, enforcement, modification
and collection of this Agreement or in connection with the Loans made
pursuant to this Agreement. Lender may pay someone else to help collect
the Loans and to enforce this Agreement, and Borrower will pay that
amount. This includes, subject to any limits under applicable law,
Lender's attorneys' fees and Lender's legal expenses, whether or not
there is a lawsuit, including attorneys' fees for bankruptcy proceedings
(including efforts to modify or vacate any automatic stay or
injunction), appeals, and any anticipated post-judgment collection
services. Borrower also will pay any court costs, in addition to all
other sums provided by law.
Notices. All notices required to be given under this Agreement shall be
given in writing, may be sent by telefacsimile, and shall be effective
when actually delivered or when deposited with a nationally recognized
overnight courier or deposited in the United States mail, first class,
postage prepaid, addressed to the party to whom the notice is to be
given at the address shown above. Any party may change its address for
notices under this Agreement by giving formal written notice to the
other parties, specifying that the purpose of the notice is to change
the party's address. To the extent permitted by applicable law, if there
is more than one Borrower, notice to any Borrower will constitute notice
to all Borrowers. For notice purposes, Borrower will keep lender
informed at all times of Borrower's current address(es).
Severability. If a court of competent jurisdiction finds any provision
of this Agreement to be invalid or unenforceable as to any person or
circumstance, such finding shall not render that provision invalid or
unenforceable as to any other persons or circumstances. If feasible, any
such offending provision shall be deemed to be modified to be within the
limits of enforceability or validity; however, if the offending
provision cannot be so modified, it shall be stricken and all other
provisions of this Agreement in all other respects shall remain valid
and enforceable.
Subsidiaries and Affiliates of Borrower. To the extent the context of
any provisions of this Agreement makes it appropriate, including without
limitation any representation, warranty or covenant, the word "Borrower"
as used herein shall include all subsidiaries and affiliates of
Borrower. Notwithstanding the foregoing however, under no circumstances
shall this Agreement be construed to require Lender to make any Loan or
other financial accommodation to any subsidiary or affiliate of
Borrower.
Successors and Assigns. All covenants and agreements contained by or on
behalf of Borrower shall bind its successors and assigns and shall inure
to the benefit of Lender, its successors and assigns. Borrower shall
not, however, have the right to assign its rights under this Agreement
or any interest therein, without the prior written consent of Lender.
Survival. All warranties, representations, and covenants made by
Borrower in this Agreement or in any certificate or other instrument
delivered by Borrower to Lender under this Agreement shall be
considered to have been relied upon by Lender and will survive the
making of the Loan and delivery to Lender of the Related Documents,
regardless of any investigation made by Lender or on Lender's behalf.
Time Is of the Essence. Time is of the essence in the performance of
this Agreement.
Waiver. Lender shall not be deemed to have waived any rights under this
Agreement unless such waiver is given in writing and signed by Lender.
No delay or omission on the part of Lender in exercising any right shall
operate as a waiver of such right or any other right. A waiver by Lender
of a provision of this Agreement shall not prejudice or constitute a
waiver of Lender's right otherwise to demand strict compliance with that
provision or any other provision of this Agreement. No prior waiver by
Lender, nor any course of dealing between Lender and Borrower, or
between Lender and any Grantor, shall constitute a waiver of any of
Lender's rights or of any obligations of Borrower or of any Grantor as
to any future transactions. Whenever the consent of Lender is required
under this Agreement, the granting of such consent by Lender in any
instance shall not constitute continuing consent in subsequent instances
where such consent is required, and in all cases such consent may be
granted or withheld in the sole discretion of Lender.
<PAGE> 6
04-29-1997 LOAN AGREEMENT Page 6
Loan No (Continued)
===============================================================================
BORROWER ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS LOAN AGREEMENT,
AND BORROWER AGREES TO ITS TERMS. THIS AGREEMENT IS DATED AS OF APRIL 29, 1997.
BORROWER:
CONCEPTS DIRECT INC., A DELAWARE CORPORATION
By: /s/ H. Franklin Marcus, Jr.
------------------------------------------------
H. FRANKLIN MARCUS, JR., CHIEF FINANCIAL OFFICER
LENDER:
BANK ONE, COLORADO, N.A.
By: /s/ [Signature Unreadable]
------------------------------------------------
Authorized Officer
===============================================================================
<PAGE> 7
EXHIBIT "A"
<TABLE>
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Principal Loan Date Maturity Loan No. Call Collateral Account Officer Initials
$2,000,000.00 05 01 1997 04 29 1998 410
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
References in the shaded area are for Lender's use only and do not limit the
applicability of this document to any particular loan or item.
- --------------------------------------------------------------------------------
Borrower: CONCEPTS DIRECT, INC., A DELAWARE CORPORATION
1351 SOUTH SUNSET BLVD.
LONGMONT, CO 80501
Lender: BANK ONE, COLORADO, N.A.
DOWNTOWN BOULDER BANKING CENTER
2696 SOUTH COLORADO BLVD.
DENVER, CO 80222
================================================================================
This EXHIBIT "A" is attached to and by this reference is made a part of each
Business Loan Agreement or Negative Pledge Agreement, dated April 29, 1997, and
executed in connection with a loan or other financial accommodations between
BANK ONE, COLORADO, N.A. and CONCEPTS DIRECT, INC., A DELAWARE CORPORATION.
The following borrowing base will apply to the $1,000,000.00 loan
facility for catalog stock paper purchases:
The lesser of (a) $1,000,000.00 or, (b) 50.00% of raw paper
stock inventory.
The following advance rate will apply to the $700,000.00 loan facility
for equipment and furniture acquisitions:
Up to $700,000.00, based on Lender approved purchases of
equipment and furniture at 80.00% of cost.
ADDITIONAL AFFIRMATIVE COVENANTS.
FINANCIAL STATEMENTS. In addition to the requirements set forth
in the Loan Agreement under the paragraph entitled "Financial
Statements" Borrower will furnish Lender with (a) as soon as
available, but in no event later than 120 days after the end of
each fiscal year, Borrower's 10-K for the year ended, (b) within
45 days after the end of each quarter, Borrower's quarterly
financial statements prepared as form 10-Q, and (c) within 45
days after the end of each month, a Borrowing Base and
Compliance Certificate.
FINANCIAL COVENANTS AND RATIOS. In addition to the covenants and
ratios set forth in the Loan Agreement under the paragraph
entitled "Financial Covenants and Ratios", borrower will comply
with the following:
TANGIBLE NET WORTH. Maintain a minimum Tangible Net
Worth of $6,000,000.00 prior to December 31, 1997 and
$7,000,000.00 on December 31, 1997 and thereafter.
CURRENT RATIO. Maintain a ratio of Current Assets to
Current Liabilities in excess of 1.10 to 1.00 prior to
December 31, 1997 and 1.25 to 1.00 on December 31, 1997
and thereafter.
DEBT SERVICE COVERAGE RATIO. Show a ratio of Net Income
plus Depreciation and Interest Expense for the fiscal
year ended divided by Current Maturities of Long Term
Debt Repaid and Interest Expense Incurred for the fiscal
year ended greater than or equal to 1.3:1.
THIS EXHIBIT "A" IS EXECUTED ON MAY 1, 1997.
BORROWER:
CONCEPTS DIRECT, INC., A DELAWARE CORPORATION
By: /s/ H. Franklin Marcus, Jr.
------------------------------------------------
H. FRANKLIN MARCUS, JR., CHIEF FINANCIAL OFFICER
LENDER:
BANK ONE, COLORADO, N.A.
By: /s/ [Signature Unreadable]
------------------------------------------------
Authorized Officer
================================================================================
<PAGE> 1
Exhibit 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the captions "Selected Financial
and Operating Data" and "Experts" and to the use of our report dated January
31, 1997 except for Note 7 as to which the date is February 25, 1997, in the
Pre-Effective Amendment No. 1 to the Registration Statement on Form S-1 and
related Prospectus of Concepts Direct, Inc. dated June 3, 1997.
ERNST & YOUNG LLP
Denver, Colorado
June 2, 1997
