<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1998
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM ______TO______.
Commission File No. 0-22088
MONARCH CASINO & RESORT, INC.
(Exact name of registrant as specified in its charter)
-------------------------
NEVADA 88-0300760
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
1175 W. MOANA LANE, SUITE 200
RENO, NEVADA 89509
(Address of principal (Zip code)
executive offices)
Registrant's telephone number, including area code: (702) 825-3355
-------------------------
NOT APPLICABLE
(Former name, former address and former fiscal
year, if changed since last report.)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. YES _X_ NO ___
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13, or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. YES ___ NO ___
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date. As of August 10, 1998,
there were 9,436,275 shares of Monarch Casino & Resort, Inc. $0.01 par value
common stock outstanding.
<PAGE>
PART 1. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
MONARCH CASINO & RESORT, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
-------------------------- --------------------------
1998 1997 1998 1997
------------ ------------ ------------ ------------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Revenues
Casino............................... $ 10,681,129 $ 10,154,909 $ 20,180,099 $ 19,249,057
Food and beverage.................... 4,772,862 4,517,100 8,996,263 8,692,946
Hotel................................ 3,046,689 2,598,008 5,449,103 4,856,375
Other................................ 695,125 634,486 1,257,519 1,127,829
------------ ------------ ------------ ------------
Gross revenues.................... 19,206,762 17,904,503 35,893,941 33,926,207
Less promotional allowances.......... (2,633,993) (2,155,463) (4,767,930) (4,039,302)
------------ ------------ ------------ ------------
Net revenues...................... 16,561,812 15,749,040 31,115,054 29,886,905
------------ ------------ ------------ ------------
Operating expenses
Casino............................... 4,538,495 4,194,303 8,609,530 7,893,977
Food and beverage.................... 2,591,075 2,437,800 4,876,778 4,767,223
Hotel................................ 893,817 989,263 1,814,431 1,901,497
Other................................ 127,781 107,765 245,094 213,819
Selling, general and administrative.. 4,246,132 4,000,037 8,289,971 7,896,193
Depreciation and amortization........ 1,156,104 1,053,687 2,286,148 2,119,991
------------ ------------ ------------ ------------
Total............................. 13,553,404 12,782,855 26,121,952 24,792,700
------------ ------------ ------------ ------------
Income from operations............ 3,008,408 2,966,185 4,993,102 5,094,205
------------ ------------ ------------ ------------
Other expense
Interest expense..................... 581,101 829,582 1,197,734 1,700,509
------------ ------------ ------------ ------------
Total............................. 581,101 829,582 1,197,734 1,700,509
------------ ------------ ------------ ------------
Income before income taxes........ 2,427,307 2,136,603 3,795,368 3,393,696
Provision for income taxes............. 825,284 726,445 1,290,390 1,153,856
------------ ------------ ------------ ------------
Net Income........................ $ 1,602,023 $ 1,410,158 $ 2,504,978 $ 2,239,840
============ ============ ============ ============
Income per share of common stock
Net income
Basic.............................. $ 0.17 $ 0.15 $ 0.27 $ 0.24
Diluted............................ $ 0.17 $ 0.15 $ 0.26 $ 0.24
Weighted average number of common
shares and potential common
shares outstanding
Basic.............................. 9,436,275 9,451,780 9,436,275 9,452,524
Diluted............................ 9,508,406 9,462,325 9,506,560 9,454,600
</TABLE>
The accompanying Notes to Consolidated Financial Statements are an
integral part of these statements.
-2- <PAGE>
MONARCH CASINO & RESORT, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
------------ ------------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets
Cash........................................ $ 4,034,413 $ 5,527,839
Receivables, net............................ 1,339,263 837,420
Inventories................................. 410,799 570,367
Prepaid expenses............................ 1,485,839 1,333,176
Deferred income taxes....................... 695,000 1,055,000
------------ ------------
Total current assets..................... 7,965,314 9,323,802
------------ ------------
Property and equipment
Land........................................ 10,339,530 10,339,530
Buildings................................... 36,273,298 36,273,298
Furniture and equipment..................... 23,412,042 22,304,919
Improvements................................ 5,067,268 5,040,033
------------ ------------
75,092,138 73,957,780
Less accumulated
depreciation and amortization.............. (20,025,261) (17,868,111)
------------ ------------
55,066,877 56,089,669
Construction in progress.................... 2,555,845 682,047
------------ ------------
Net property and equipment............... 57,622,722 56,771,716
------------ ------------
Other assets.................................. 1,781,578 1,732,569
------------ ------------
$ 67,369,614 $ 67,828,087
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Current maturities of long-term debt........ $ 2,512,504 $ 2,243,611
Accounts payable............................ 2,802,764 4,111,457
Accrued expenses............................ 3,166,828 3,383,855
Federal income taxes payable................ 220,881 240,970
------------ ------------
Total current liabilities................ 8,702,977 9,979,893
Long-term debt, less current maturities....... 31,232,995 32,907,530
Deferred income taxes......................... 2,235,000 2,247,000
Commitments and contingencies................. - -
Stockholders' equity
Preferred stock, $.01 par value, 10,000,000
shares authorized; none issued............. - -
Common stock, $.01 par value, 30,000,000
shares authorized; 9,536,275 issued;
9,436,275 and 9,436,275 outstanding........ 95,363 95,363
Additional paid-in capital.................. 17,241,788 17,241,788
Treasury stock.............................. (329,875) (329,875)
Retained earnings........................... 8,191,366 5,686,388
------------ ------------
Total stockholders' equity............... 25,198,642 22,693,664
------------ ------------
$ 67,369,614 $ 67,828,087
============ ============
</TABLE>
The accompanying Notes to Consolidated Financial Statements are an
integral part of these statements.
-3- <PAGE>
MONARCH CASINO & RESORT, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Six Months Ended
June 30,
----------------------------
1998 1997
------------ ------------
(Unaudited) (Unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net income.................................. $ 2,504,978 $ 2,239,840
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization............. 2,286,148 2,119,991
(Gain) loss on disposal of assets......... 17,495 (412)
Increase in receivables, net.............. (501,843) (580,824)
Decrease in inventories................... 159,568 30,418
Increase in prepaid expenses.............. (152,663) (315,563)
Decrease in deferred income tax asset..... 360,000 -
Increase in other assets.................. (49,009) (19,167)
Decrease in accounts payable.............. (1,308,693) (459,731)
Increase (decrease) in accrued expenses... (237,116) 8,324
Increase (decrease) in deferred
income tax liability..................... (12,000) 1,078,856
------------ ------------
Net cash provided by
operating activities.................... 3,066,865 4,101,732
------------ ------------
Cash flows from investing activities:
Proceeds from sale of assets................ 8,120 187,215
Acquisition of property and equipment....... (2,495,561) (802,716)
------------ ------------
Net cash used in investing activities.... (2,487,441) (615,501)
------------ ------------
Cash flows from financing activities:
Principal payments on long-term debt........ (2,072,850) (4,504,805)
Acquisition of treasury stock............... - (65,875)
------------ ------------
Net cash used in financing activities.... (2,072,850) (1,084,449)
------------ ------------
Net decrease in cash..................... (1,493,426) (1,084,449)
Cash at beginning of period................... 5,527,839 4,021,952
------------ ------------
Cash at end of period......................... $ 4,034,413 $ 2,937,503
============ ============
Supplemental disclosure of
cash flow information:
Cash paid for interest,
net of capitalized interest................ $ 1,198,350 $ 1,726,687
Capitalized interest........................ 47,409 -
Cash paid for income taxes.................. 962,479 360,000
Supplemental schedule of non-cash
investing and financing activities:
The Company financed the purchase of property
and equipment in the following amounts..... 667,208 192,987
</TABLE>
The accompanying Notes to Consolidated Financial Statements are an
integral part of these statements.
-4- <PAGE>
MONARCH CASINO & RESORT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
Monarch Casino & Resort, Inc. ("Monarch") was incorporated in 1993.
Golden Road Motor Inn, Inc. ("Golden Road") operates the Atlantis Casino
Resort (the "Atlantis") in Reno, Nevada. Unless stated otherwise, the
"Company" refers collectively to Monarch, its wholly owned subsidiary, Golden
Road, and majority owned subsidiaries, Dunes Marina Resort and Casino, Inc.
("Dunes Marina"), formed in December 1993, and Sea World Processors, Inc.
("Sea World"), purchased in February 1994.
The consolidated financial statements include the accounts of Monarch,
Golden Road, Dunes Marina and Sea World, and eliminate intercompany balances
and transactions.
Use of Estimates
In preparing these financial statements in conformity with generally
accepted accounting principles, management is required to make estimates and
assumptions that affect the reported amounts of assets and liabilities and the
disclosure of contingent assets and liabilities at the date of the financial
statements and revenues and expenses during the year. Actual results could
differ from those estimates.
Reclassifications
Certain amounts in the 1997 consolidated financial statements have been
reclassified to conform with the 1998 presentation. These reclassifications
had no effect on the Company's net income.
NOTE 2. INTERIM FINANCIAL STATEMENTS
The accompanying consolidated financial statements for the three month
and six month periods ended June 30, 1998 and June 30, 1997 are unaudited. In
the opinion of management, all adjustments, consisting of normal recurring
adjustments necessary for a fair presentation of the Company's financial
position and results of operations for such periods, have been included. The
accompanying unaudited consolidated financial statements should be read in
conjunction with the Company's audited financial statements included in its
Annual Report on Form 10-K for the year ended December 31, 1997. The results
for the three month and six month periods ended June 30, 1998 are not
necessarily indicative of the results that may be expected for the year ending
December 31, 1998, or for any other period.
NOTE 3. EARNINGS PER SHARE
In 1997, the Company adopted the provisions of SFAS No. 128, Earnings Per
Share. Earnings per share for all periods presented have been restated to
reflect the adoption of SFAS No. 128. SFAS No. 128 requires companies to
present basic earnings per share, and, if applicable, diluted earnings per
share. Basic earnings per share excludes dilution and is computed by dividing
net earnings available to common stockholders by the weighted average number
of common shares outstanding for the period. Diluted earnings per share
-5-
reflects the potential dilution that could occur if options to issue common
stock were exercised into common stock.
The following is a reconciliation of the number of shares (denominator)
used in the basic and diluted earnings per share computations (Shares in
thousands):
<TABLE>
<CAPTION>
Three Months ended June 30,
-----------------------------------
1998 1997
---------------- ----------------
Per Share Per Share
Shares Amount Shares Amount
------ --------- ------ ---------
<S> <C> <C> <C> <C>
Net Income
Basic..................... 9,436 $0.17 9,452 $0.15
Effect of dilutive
stock options............ 72 - 10 -
------ --------- ------ ---------
Diluted................... 9,508 $0.17 9,462 $0.15
====== ========= ====== =========
</TABLE>
<TABLE>
<CAPTION>
Six Months ended June 30,
-----------------------------------
1998 1997
---------------- ----------------
Per Share Per Share
Shares Amount Shares Amount
------ --------- ------ ---------
<S> <C> <C> <C> <C>
Net Income
Basic..................... 9,436 $0.27 9,453 $0.24
Effect of dilutive
stock options............ 70 (.01) 2 -
------ --------- ------ ---------
Diluted................... 9,506 $0.26 9,455 $0.24
====== ========= ====== =========
</TABLE>
The following options were not included in the computation of diluted
earnings per share because the options' exercise price was greater than the
average market price of the common shares:
-6- <PAGE>
<TABLE>
<CAPTION>
Three Months ended June 30,
----------------------------
1998 1997
----------- -----------
<S> <C> <C>
Options to purchase shares of
common stock (in thousands)..... 17 77
Exercise prices.................. $6.44-$8.06 $3.50-$8.06
Expiration dates................. 9/98-5/08 9/98-6/02
</TABLE>
<TABLE>
<CAPTION>
Six Months ended June 30,
----------------------------
1998 1997
----------- -----------
<S> <C> <C>
Options to purchase shares of
common stock (in thousands)..... 17 188
Exercise prices.................. $6.44-$8.06 $2.88-$8.06
Expiration dates................. 9/98-5/08 9/98-5/07
</TABLE>
-7- <PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
STATEMENT ON FORWARD-LOOKING INFORMATION
Certain information included herein contains statements that may be
considered forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934,
such as statements relating to anticipated expenses, capital spending and
financing sources. Such forward-looking information involves important risks
and uncertainties that could significantly affect anticipated results in the
future and, accordingly, such results may differ from those expressed in any
forward-looking statements made herein. These risks and uncertainties
include, but are not limited to, those relating to competitive industry
conditions, Reno-area tourism conditions, dependence on existing management,
leverage and debt service (including sensitivity to fluctuations in interest
rates), the regulation of the gaming industry (including actions affecting
licensing), outcome of litigation, domestic or global economic conditions,
changes in federal or state tax laws or the administration of such laws, and
issues related to the year 2000.
RESULTS OF OPERATIONS
Comparison of Operating Results for the Three Month
Periods Ended June 30, 1998 and 1997
For the three month period ended June 30, 1998, the Company earned $1.6
million, or $.17 per share, on net revenues of $16.6 million, up from earnings
of $1.4 million, or $.15 per share, on net revenues of $15.7 million for the
three months ended June 30, 1997. The Company's income from operations
totaled $3.0 million in each of the 1998 and 1997 second quarter periods. The
Company's net revenues, net income and earnings per share for the three months
ended June 30, 1998 represent the best second quarter results in the Company's
history. In the 1998 second quarter, the Company continued to benefit from
the rapid growth occurring in the residential and industrial communities south
of the Atlantis in Reno, and from the increasing popularity of the Atlantis
with visitors to the Reno area. The Company also believes its 1998 second
quarter results reflect effective marketing programs and the positive impact
of the 1998 American Bowling Congress ("ABC") tournament, which ran from March
through June at the National Bowling Stadium in downtown Reno.
Casino revenues totaled $10.7 million in the second quarter of 1998, up
from $10.2 million in the 1997 second quarter, with increases in both slot and
table game revenues contributing to the increase. Casino operating expenses
amounted to 42.5% of casino revenues in the 1998 second quarter, compared to
41.3% in the 1997 second quarter, primarily as a result of higher promotional
allowance costs in the 1998 period.
Food and beverage revenues for the 1998 second quarter totaled $4.8
million, up from $4.5 million for the 1997 second quarter, with the increase
primarily due to an increase in the amount of revenue generated per customer
at the Atlantis' food and beverage outlets. Food and beverage operating
expenses during the 1998 second quarter amounted to 54.3% of food and beverage
revenues, up slightly from 54.0% for the second quarter of 1997.
Hotel revenues in the 1998 second quarter increased to $3.0 million from
$2.6 million in the 1997 second quarter, reflecting a substantial improvement
-8- <PAGE>
in the Atlantis' average daily room rate ("ADR") and a slight improvement in
the Atlantis' average occupancy rate during the 1998 period. Hotel operating
expenses in the 1998 second quarter equaled 29.3% of hotel revenues, compared
to 38.1% for the same quarter in 1997, with the improvement reflecting
increased operating efficiencies and a higher level of revenue from which to
offset the relatively high level of fixed costs of the hotel operation.
Other revenues in the 1998 second quarter totaled $695 thousand, up from
$634 thousand in the 1997 second quarter, with the increase due primarily to
increased retail sales at the Atlantis. Other expenses increased slightly as
a percentage of other revenues, rising to 18.4% in the 1998 second quarter
from 17.0% in the 1997 second quarter.
Selling, general and administrative expenses were essentially unchanged
in the 1998 second quarter at 25.6% of net revenues, compared to 25.4% in the
second quarter of 1997.
Interest expense for the 1998 second quarter totaled $581 thousand, down
from $830 thousand in the second quarter of 1997, reflecting lower average
outstanding debt, lower average interest rates on the Company's debt, and the
capitalization of certain interest costs during the 1998 period. During the
1998 second quarter, the Company capitalized approximately $29 thousand in
interest costs related to construction activities at the Atlantis.
Comparison of Operating Results for the Six Month
Periods Ended June 30, 1998 and 1997
For the six months ended June 30, 1998, the Company earned $2.5 million,
or $.26 per share (diluted), on net revenues of $31.1 million, compared to
earnings of $2.2 million, or $.24 per share, on net revenues of $29.9 million
during the six months ended June 30, 1997. Operating income for the 1998 six
month period totaled $5.0 million, compared to $5.1 million for the same
period in 1997. Net revenues, net income and earnings per share for the
first half of 1998 represented the best first half results in Monarch's
history.
Casino revenues for the first six months of 1998 totaled $20.2 million,
up from $19.2 million for the first six months of 1997, driven by growth in
both slot and table game revenues. Casino operating expenses amounted to
42.7% of casino revenues for the six months ended June 30, 1998, compared to
41.0% for the six month period ending June 30, 1997, with the change due
primarily to higher promotional allowance costs during the 1998 period.
Food and beverage revenues totaled $9.0 million for the six months ended
June 30, 1998, compared to $8.7 million for the six months ended June 30,
1997. The Company's food and beverage operating expense margin improved
slightly to 54.2% in the 1998 period from 54.8% for the same period in 1997.
Hotel revenues for the first six months of 1998 totaled $5.4 million, up
from $4.9 million for the first six months of 1997, with the improvement
primarily due to an increase in the Atlantis' ADR in the 1998 period. The
hotel operating expense margin for the six month period ended June 30, 1998
was 33.3%, compared to 39.2% for the first six months of 1997, with the
improvement reflecting increased operating efficiencies and a higher level of
revenue from which to offset the relatively high level of fixed costs of the
hotel operation.
-9- <PAGE>
Selling, general and administrative expenses were essentially unchanged
in the first six months of 1998 at 26.6% of net revenues, compared to 26.4% in
the first six months of 1997.
Interest expense for the first six months of 1998 totaled $1.2 million,
down from $1.7 million in the first six months of 1997, reflecting lower
average outstanding debt, lower average interest rates on the Company's debt,
and the capitalization of certain interest costs during the 1998 period.
During the 1998 period, the Company capitalized approximately $47 thousand in
interest costs related to construction activities at the Atlantis.
OTHER FACTORS AFFECTING CURRENT AND FUTURE RESULTS
The Company signed an agreement with Perini Building Company on June 12,
1998 to construct an expansion of the Atlantis that will add approximately 390
rooms, 16,000 square feet of additional casino space and other amenities to
the Atlantis (the "Expansion Project"). Major construction activity is
underway at the Atlantis, which could result in business disruptions while the
construction is underway. The Company has carefully planned the project to
mitigate the disruptive effects of construction by redirecting traffic flows,
creating alternative access points at the Atlantis, and restricting
construction crews, materials and vehicles to specified areas; however, the
Company believes it is unlikely that such steps will completely alleviate the
disruptive impact of this large-scale construction project.
On April 20, 1998, the Company entered into a contract with Krump
Construction, Inc. ("Krump") of Reno, Nevada to construct a pedestrian
overhead walkway connecting the Atlantis with a 16-acre site owned by the
Company adjacent to and across South Virginia Street from the Atlantis (the
"Walkway Project"). Although the Walkway Project is much smaller in scale
than the Expansion Project, the construction activity associated with the
Walkway Project could also impede access to the property and result in
business disruptions while the construction is underway. The Company has
taken similar steps to those described above to minimize the disruptive impact
of this construction activity, but believes that some disruption will occur.
With the Expansion Project and the Walkway Project, the Company is
subject to certain risks typically associated with large-scale construction
projects, including the risks of delay, shortages of materials or skilled
labor, unforeseen engineering, environmental and/or geological problems, work
stoppages, weather interference and unanticipated cost increases.
LIQUIDITY AND CAPITAL RESOURCES
For the six months ended June 30, 1998, net cash provided by operating
activities totaled $3.1 million. Net cash used in investing activities for
the same period totaled $2.5 million, which consisted entirely of acquisitions
of property and equipment at the Atlantis, and net cash used in financing
activities totaled $2.1 million, with funds used to reduce the Company's
outstanding debt. As a result, at June 30, 1998 the Company had cash of $4.0
million, compared to $5.5 million at December 31, 1997.
On December 30, 1997, the Company completed the refinancing of its long-
term debt with an $80 million construction and reducing revolving credit
facility with a group of banks (the "Credit Facility"). The Credit Facility
replaced approximately $33 million in existing long-term debt, with the
-10- <PAGE>
remainder of the $80 million Credit Facility available for use as a source of
funding for the Expansion Project and the Walkway Project. The principal
terms of the Credit Facility are summarized in the Company's Annual Report on
Form 10-K for the year ended December 31, 1997.
The Company has signed contracts to construct the Expansion Project and
the Walkway Project, which the Company currently estimates will cost
approximately $63 million to construct. The Company believes it will have
adequate resources available through cash on hand, cash flow from operations,
and borrowings allowed under the Credit Facility to construct the Expansion
Project and the Walkway Project.
In addition to the potential funding requirements associated with the
Expansion Project and the Walkway Project, the Company continues to monitor
expansion opportunities at its other Reno site and elsewhere in Nevada and in
other jurisdictions. The decision by the Company to proceed with any
substantial project will require the Company to secure adequate financing on
acceptable terms. No assurances can be made that if such projects are pursued
that adequate financing would be available on acceptable terms, if at all.
The Company believes that its existing cash balances, cash flow from
operations and borrowings allowed under the Credit Facility will provide the
Company with sufficient resources to fund its operations, meet its existing
debt obligations and fund its capital expenditure requirements; however, the
Company's operations are subject to financial, economic, competitive,
regulatory, and other factors, many of which are beyond its control. If the
Company is unable to generate sufficient cash flow, it could be required to
adopt one or more alternatives, such as reducing, delaying or eliminating
planned capital expenditures, selling assets, restructuring debt or obtaining
additional equity capital.
On April 10, 1995, the Company announced that its Board of Directors
authorized the open market repurchase of up to 200,000 shares of the Company's
common stock. As of August 10, 1998, the Company had repurchased 100,000
shares on the open market at a total cost of approximately $330 thousand under
this authorization. The Company has funded the purchases made to date and
intends to fund any future repurchases from cash on hand.
YEAR 2000
During 1997, the Company undertook an assessment of the information
systems and software used in its operations to determine whether or not those
systems were Year 2000 compliant, and implemented plans to upgrade systems
and/or software that was determined not to be Year 2000 compliant. Based on
that assessment and the plans made as a result thereof, the Company believes
that its critical internal information systems are Year 2000 compliant or will
be made Year 2000 compliant before the end of 1999. The Company has begun and
is continuing to assess potential issues related to the Year 2000 other than
those relating to the Company's internal information systems, such as critical
supplier readiness and potential problems associated with embedded
technologies, and will develop and implement plans to correct any deficiencies
found. The costs of addressing the Company's year 2000 issues have not been
finally determined, but are not currently expected to be material to the
Company's results of operations or financial position; however, should the
Company and/or its critical suppliers fail to identify and/or correct material
Year 2000 issues, such failure could impact the Company's ability to operate
-11- <PAGE>
as it did before the Year 2000, and subsequently have a material impact on the
Company's results of operations or financial position. In such an event, the
Company will address issues as they arise and strive to minimize any impact on
the Company's operations.
For a more detailed discussion of the Company's liquidity and capital
resources, and issues related to the Year 2000, see the Company's Annual
Report on Form 10-K for the year ended December 31, 1997, Item 7.
-12- <PAGE>
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit No. Description
----------- -----------
10.01 Second Amendment to Construction and
Reducing Revolving Credit Agreement, dated
as of June 12, 1998, among Golden Road
Motor Inn, Inc. as Borrower, Monarch Casino
& Resort, Inc., John Farahi, Bahram Farahi,
and Behrouz Farahi as guarantors, the
Lenders as defined therein, and Wells Fargo
Bank as administrative and collateral Agent
for the Lenders, Swingline Lender and L/C
Issuer.
10.02 Agreement dated June 12, 1998, between
Golden Road Motor Inn, Inc. and Perini
Building Company, Inc.
EX-27 Financial Data Schedule
(b) Reports on Form 8-K
None
-13- <PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
MONARCH CASINO & RESORT, INC.
(Registrant)
<TABLE>
<S> <C>
Date: August 13, 1998 By: /s/ BEN FARAHI
------------------------------------
Ben Farahi, Co-Chairman of the Board,
Secretary, Treasurer and Chief
Financial Officer(Principal Financial
Officer and Duly Authorized Officer)
</TABLE>
-14- <PAGE>
EXHIBIT INDEX
<TABLE>
<S> <C> <C>
Exhibit No. Description Page No.
- ----------- ----------- --------
10.01 Second Amendment to Construction and 16
Reducing Revolving Credit Agreement, dated
as of June 12, 1998, among Golden Road
Motor Inn, Inc. as Borrower, Monarch Casino
& Resort, Inc., John Farahi, Bahram Farahi,
and Behrouz Farahi as guarantors, the
Lenders as defined therein, and Wells Fargo
Bank as administrative and collateral Agent
for the Lenders, Swingline Lender and L/C
Issuer.
10.02 Agreement dated June 12, 1998, between 26
Golden Road Motor Inn, Inc. and Perini
Building Company, Inc.
EX-27 Financial Data Schedule 75
</TABLE>
-15- <PAGE>
SECOND AMENDMENT TO CREDIT AGREEMENT
THIS SECOND AMENDMENT TO CREDIT AGREEMENT ("Second Amendment") is made
and entered into as of the 12th day of June, 1998, by and among GOLDEN ROAD
MOTOR INN, INC., a Nevada corporation (the "Borrower"), MONARCH CASINO &
RESORT, INC., a Nevada corporation ("MCRI"), JOHN FARAHI, BAHRAM FARAHI and
BEHROUZ FARAHI (collectively "Farahi" and together with MCRI, collectively the
"Guarantors") and WELLS FARGO BANK, National Association, THE FIRST NATIONAL
BANK OF CHICAGO, U.S. BANK NATIONAL ASSOCIATION, FIRST SECURITY BANK, N.A. and
IMPERIAL BANK, as Lenders, and WELLS FARGO BANK, National Association, as
Swingline Lender and L/C Issuer and as the administrative and collateral agent
for the Lenders, Swingline Lender and L/C Issuer (herein in such capacity
called the "Agent Bank" and, together with the Lenders, Swingline Lender and
L/C Issuer collectively referred to as the "Banks").
R_E_C_I_T_A_L_S:
WHEREAS:
A. Borrower, Guarantors and Banks entered into a Credit Agreement
dated as of December 29, 1997, as amended by First Amendment to Credit
Agreement dated as of the 9th day of January, 1998 (collectively the "Existing
Credit Agreement") for the purpose of establishing a reducing revolving line
of credit in favor of Borrower, to be funded by Lenders up to the maximum
principal amount of Eighty Million Dollars ($80,000,000.00), including a
Swingline Facility to be funded by Swingline Lender up to the maximum amount
of Two Million Five Hundred Thousand Dollars ($2,500,000.00) at any time
outstanding and an additional subfacility for the issuance by L/C Issuer of
standby and commercial letters of credit up to the maximum aggregate amount of
Two Million Five Hundred Thousand Dollars ($2,500,000.00) at any time
outstanding.
B. For the purpose of this Second Amendment, all capitalized words
and terms not otherwise defined herein shall have the respective meanings and
be construed herein as provided in Section 1.01 of the Existing Credit
Agreement and any reference to a provision of the Existing Credit Agreement
shall be deemed to incorporate that provision as a part hereof, in the same
manner and with the same effect as if the same were fully set forth herein.
C. Borrower and Guarantors desire to further amend the Existing
Credit Agreement for the purposes of: (i) increasing the aggregate amount of
secured purchase money Indebtedness and Capital Lease Liabilities which may be
incurred by Borrower to a maximum aggregate amount of Four Million Five
Hundred Thousand Dollars ($4,500,000.00), (ii) permitting Borrower to incur
additional Indebtedness up to the maximum aggregate amount of Ten Million
Dollars ($10,000,000.00), which is structurally and contractually subordinated
to the Bank Facilities, the proceeds of which are to be used to increase the
amount of Available Borrowings by reducing the Funded Outstandings under the
Credit Facility with the net proceeds of the Subordinated Debt received by
Borrower, (iii) permitting the Borrower to refinance the Caramella
Obligations, and (iv) making other modifications of the provisions regarding
construction of the Expansion Project.
D. Banks have agreed to amend the Existing Credit Agreement on the
terms and subject to the conditions and provisions set forth in this Second
Amendment.
NOW, THEREFORE, in consideration of the foregoing and other good and
valuable considerations, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto do agree to the amendments and modifications
to the Existing Credit Agreement as specifically hereinafter provided as
follows:
1. Definitions. Section 1.01 of the Existing Credit Agreement
entitled "Definitions" shall be and is hereby amended to include the following
definitions. Those terms which are currently defined by Section 1.01 of the
Existing Credit Agreement and which are also defined below shall be superseded
and restated by the applicable definition set forth below:
"Credit Agreement" shall mean the Existing Credit Agreement as amended by
the Second Amendment, together with all Schedules, Exhibits and other
attachments thereto, as it may be further amended, modified, extended, renewed
or restated from time to time.
"Existing Credit Agreement" shall have the meaning set forth in Recital
Paragraph A of the Second Amendment.
"Funded Debt" shall mean with reference to the Borrower for any period
the daily average of the Funded Outstandings for the last month of such
period, plus the total as of the last day of such period of both the long-term
and current portions (without duplication) of all other interest bearing
Indebtedness (exclusive of the Subordinated Debt) and Capitalized Lease
Liabilities.
"Payment Subordination Agreement" shall mean the Payment Subordination
Agreement to be executed by each Subordinated Debt Holder intending to loan or
advance all or any portion of the Subordinated Debt to Borrower, which shall
be executed in favor of Agent Bank on behalf of the Lenders prior to any such
loan or advance of funds under the Subordinated Debt in the form of the
Payment Subordination Agreement marked "Exhibit P", affixed to the Second
Amendment and by this reference incorporated herein and made a part hereof.
"Permitted Deferred FF&E Acquisition Costs" shall mean, as of any date of
determination, Five Million Five Hundred Thousand Dollars ($5,500,000.00),
less that portion of the FF&E Acquisition Costs which have, as of such date,
been incurred and paid from third party purchase money financing to the extent
permitted under Section 6.07(a) or (b).
"Schedule of Permitted Deferred Construction Equity" shall mean the
Schedule of Permitted Deferred Construction Equity marked "Schedule 9.13(g)",
affixed to the Second Amendment and by this reference incorporated herein and
made a part hereof, setting forth the Maximum Amount of Permitted Deferred
Construction Equity which is permitted to remain unpaid or unfunded during
each of the therein described Deferred Construction Equity Periods.
"Second Amendment" shall mean the Second Amendment to Credit Agreement.
"Second Amendment Effective Date" shall mean the date upon which each of
the conditions precedent set forth in Paragraph 8 of the Second Amendment
shall have occurred to the satisfaction of Agent Bank.
"Subordinated Debt" shall mean Indebtedness up to the aggregate maximum
amount of Ten Million Dollars ($10,000,000.00), owing by Borrower to the
Subordinated Debt Holder(s) which may or may not be secured by all or any
portion of the Collateral or Collateral Properties which: (a) has been
structurally and contractually subordinated to the Bank Facilities prior to
the incurrence of such Subordinated Debt by execution of a Payment
Subordination Agreement by Borrower, Guarantors and the Subordinated Debt
Holder(s) in favor of Agent Bank; (b) there is no principal or sinking fund
payment requirement maturing or otherwise coming due prior to one (1) year
subsequent to the Maturity Date; (c) the maturity date of the Subordinated
Debt shall not be prior to one (1) year subsequent to the Maturity Date; (d)
all covenants, terms and conditions of the Subordinated Debt shall be less
restrictive on MCRI and the Borrower than those applicable under the Credit
Agreement; (e) the covenants, terms, conditions, representations, events of
default and other provisions of the Subordinated Debt shall be acceptable
(from the perspective of a senior lender) to Requisite Lenders, which
acceptance shall not be unreasonably withheld or delayed; and (f) the net
proceeds of such Subordinated Debt received by Borrower shall only be used to
reduce the Funded Outstandings under the Credit Facility.
"Subordinated Debt Holder(s)" shall mean collective reference to the
Person or Persons who loan or advance funds to Borrower as Subordinated Debt.
2. Amendment of Section 6.07(a). As of the Second Amendment
Effective Date, Section 6.07(a) of the Existing Credit Agreement shall be and
is hereby deleted and the following is substituted as a full restatement
thereof:
"a. Incurrence of secured purchase money Indebtedness and
Capital Lease Liabilities relating to FF&E to be used in connection with the
Hotel/Casino Facility not in excess of the aggregate amount of Four Million
Five Hundred Thousand Dollars ($4,500,000.00) at any time outstanding;"
3. Amendment of Section 6.07(e). As of the Second Amendment
Effective Date, Section 6.07(e) of the Existing Credit Agreement shall be and
is hereby deleted and the following is substituted as a full restatement
thereof:
"e. Indebtedness evidenced by: (i) the Credit Facility, and (ii)
the Subordinated Debt up to the maximum aggregate amount of Ten Million
Dollars ($10,000,000.000."
4. Additional Understandings Regarding Subordinated Debt. The
undersigned further agree to the following with respect to the Subordinated
Debt:
a. The Subordinated Debt shall not be deemed to be "Funded Debt"
for purposes of calculating the Leverage Ratio of the Borrower and the
calculation thereof as set forth on the Pricing Certificate and the Compliance
Certificate shall be made exclusive of the Subordinated Debt;
b. In the event the Subordinated Debt is secured by a Lien on
any portion of the Collateral or Collateral Properties, such Lien shall be
deemed to be a Permitted Encumbrance consented to in writing by Agent Bank
upon the approval of Requisite Lenders as provided in Subsection (vii) of the
definition of Permitted Encumbrances so long as such Lien is structurally and
contractually subordinated to the Liens in favor of the Agent Bank securing
repayment of the Bank Facilities.
5. Amendment of Schedule of Permitted Deferred Construction Equity.
As of the Second Amendment Effective Date, the Schedule of Permitted Deferred
Construction Equity, Schedule 9.13(g), shall be and is hereby amended and
fully restated by the Schedule of Permitted Deferred Construction Equity
marked "Schedule 9.13(g)" affixed to the Second Amendment and by this
reference incorporated herein and made a part hereof.
6. Addition of Section 5.22. As of the Second Amendment Effective
Date, Section 5.22 entitled "Prohibition on Prepayment or Defeasance of
Subordinated Debt" shall be and is hereby added to the Credit Agreement as
follows:
"Section 5.22. Prohibition on Prepayment or Defeasance of
Subordinated Debt. Notwithstanding anything contained in this Credit
Agreement to the contrary, neither Borrower nor MCRI shall, except with the
prior written consent of the Requisite Lenders, purchase, redeem, retire or
otherwise acquire for value, or set apart any money for a sinking, defeasance
or other analogous fund for, the purchase, redemption, retirement or other
acquisition of, or make any voluntary payment or prepayment of the principal
of or interest on, or any other amount owing in respect of, the Subordinated
Debt, except for, to the extent not prohibited by the Payment Subordination
Agreement, regularly scheduled payments of interest in respect of such
Subordinated Debt required pursuant to the instruments evidencing such
Subordinated Debt. Any breach of the covenant set forth in the preceding
sentence shall be deemed to be an Event of Default under the Credit
Agreement."
7. Refinance of Caramella Obligations. At any time subsequent to the
Second Amendment Effective Date, Borrower may, at Borrower's discretion,
refinance the Caramella Obligations so long as: (i) the outstanding principal
of the refinancing Indebtedness does not exceed the outstanding balance of
principal on the Caramella Obligations, (ii) the rate of interest on the
refinancing Indebtedness shall not exceed prevailing rates of interest in the
Reno area for similarly secured Indebtedness, and (iii) such refinancing
Indebtedness may only be secured by a first priority deed of trust encumbering
the identical portion of the Hotel/Casino Property securing repayment of the
Caramella Obligations. In the event Borrower refinances the Caramella
Obligations in accordance with the provisions set forth above, Agent Bank
shall and is hereby authorized and directed to execute subordinations of the
Security Documentation and such estoppels as may be reasonably necessary to
perfect a first priority deed of trust in favor of the holder of the
refinancing Indebtedness, as provided in subparagraph (iii) hereinabove.
8. Conditions Precedent to Second Amendment Effective Date. The
occurrence of the Second Amendment Effective Date is subject to Agent Bank
having received the following documents and payments, in each case in a form
and substance reasonably satisfactory to Agent Bank, and the occurrence of
each other condition precedent set forth below on or before June 12, 1998:
a. Due execution by Borrower, Guarantors and Banks of seven (7)
duplicate originals of this Second Amendment;
b. Corporate resolutions or other evidence of requisite
authority of Borrower and Guarantors, as applicable, to execute the Second
Amendment; and
c. Reimbursement to Agent Bank by Borrower for all reasonable
fees and out-of-pocket expenses incurred by Agent Bank in connection with the
Second Amendment, including, but not limited to, reasonable attorneys' fees of
Henderson & Morgan, LLC; and
d. Such other documents, instruments or conditions as may be
reasonably required by Lenders.
9. Representations of Borrower. Borrower hereby represents to the
Banks that:
a. the representations and warranties contained in Article IV of
the Existing Credit Agreement and contained in each of the other Loan
Documents (other than representations and warranties which expressly speak
only as of a different date, which shall be true and correct in all material
respects as of such date) are true and correct on and as of the Second
Amendment Effective Date in all material respects as though such
representations and warranties had been made on and as of the Second Amendment
Effective Date, except to the extent that such representations and warranties
are not true and correct as a result of a change which is permitted by the
Credit Agreement or by any other Loan Document or which has been otherwise
consented to by Agent Bank;
b. Since the date of the most recent financial statements
referred to in Section 5.08 of the Existing Credit Agreement, no Material
Adverse Change has occurred and no event or circumstance which could
reasonably be expected to result in a Material Adverse Change or Material
Adverse Effect has occurred;
c. no event has occurred and is continuing which constitutes a
Default or Event of Default under the terms of the Credit Agreement; and
d. The execution, delivery and performance of this Second
Amendment has been duly authorized by all necessary action of Borrower and
Guarantors and this Second Amendment constitutes a valid, binding and
enforceable obligation of Borrower and Guarantors.
10. Affirmation and Ratification of Continuing Guaranty. Guarantors
join in the execution of this Second Amendment for the purpose of ratifying
and affirming their respective obligations under the Continuing Guaranty for
the guaranty of the full and prompt payment and performance of all of
Borrower's indebtedness and obligations under the Bank Facilities and each of
the Loan Documents, as modified and amended under this Second Amendment.
11. Incorporation by Reference. This Second Amendment shall be and
is hereby incorporated in and forms a part of the Existing Credit Agreement.
12. Governing Law. This Second Amendment to Credit Agreement shall
be governed by the internal laws of the State of Nevada without reference to
conflicts of laws principles.
13. Counterparts. This Second Amendment may be executed in any
number of separate counterparts with the same effect as if the signatures
hereto and hereby were upon the same instrument. All such counterparts shall
together constitute one and the same document.
14. Continuance of Terms and Provisions. All of the terms and
provisions of the Credit Agreement shall remain unchanged except as
specifically modified herein.
15. Additional and Replacement Schedules and Exhibits Attached. The
following additional Schedule and Exhibit are attached hereto and incorporated
herein and made a part of the Credit Agreement as follows:
Schedule 9.13(g) - Schedule of Permitted Deferred Construction
Equity
Exhibit P - Payment Subordination Agreement - Form
IN WITNESS WHEREOF, the parties hereto have executed this Second
Amendment as of the day and year first above written.
BORROWER:
GOLDEN ROAD MOTOR INN, INC.,
a Nevada corporation
By /s/ Ben Farahi
----------------------
Ben Farahi,
Secretary
<PAGE>
GUARANTORS:
MCRI:
MONARCH CASINO & RESORT, INC.,
a Nevada corporation
By /s/ Ben Farahi
----------------------
Ben Farahi,
Secretary
/s/ John Farahi
------------------------
John Farahi
/s/ Bahram Farahi
------------------------
Bahram Farahi
/s/ Behrouz Farahi
------------------------
Behrouz Farahi
<PAGE>
BANKS:
WELLS FARGO BANK,
National Association,
Agent Bank, Lender,
Swingline Lender and
L/C Issuer
By /s/ Rochanne Hacket
----------------------
Rochanne Hackett,
Vice President
BANKS:
THE FIRST NATIONAL BANK
OF CHICAGO
By /s/ Mark A. Isley
----------------------
Mark A. Isley
First Vice President
US BANK NATIONAL
ASSOCIATION
By /s/ Steven G. Buntin
----------------------
Steven G. Buntin
Vice President
FIRST SECURITY BANK, N.A.
By /s/ David P. Williams
----------------------
David P. Williams
Vice President
IMPERIAL BANK
By /s/ Steven K. Johnson
----------------------
Steven K. Johnson
Senior Vice President
<PAGE>
SCHEDULE OF PERMITTED DEFERRED CONSTRUCTION EQUITY
DEFERRED CONSTRUCTION EQUITY MAXIMUM AMOUNT OF PERMITTED
PERIODS DEFERRED CONSTRUCTION EQUITY
=============================================================================
Initial Construction $6,300,000.00
Disbursement Date ("ICDD")
through 90th day following
the ICDD
From the 91st day following 5,300,000.00
the ICDD through the 180th day
following the ICDD
From the 181st day following 4,300,000.00
the ICDD through the 270th day
following the ICDD
From the 271st day following 3,300,000.00
the ICDD through the 360th
day following the ICDD
From the 361st day following 2,300,000.00
the ICDD through the 450th
day following the ICDD
From the 451st day following 0.00 (Zero)
the ICDD through and including
the Completion Date
SCHEDULE 9.13(g)
TO
SECOND AMENDMENT<PAGE>
EXHIBIT P
Payment Subordination Agreement (Form)
[NOT INCLUDED]
CONTRACT FOR CONSTRUCTION
Standard Form of Agreement Between Owner and Contractor Where the basis of
payment is a STIPULATED SUM.
AGREEMENT made as of the 12 day of June in the year 1998
BETWEEN the Owner: Golden Road Motor Inn, Inc. 1175 W. Moana Lane, Suite 200
Reno, NV 89509
And the Contractor: Perini Building Company, Inc. 360 East Coronado Road,
Phoenix, AZ 85004.
The project is: Atlantis Casino Resort Phase IV Expansion, 3800 South Virginia
Street Reno, NV 89502
The Architect is: Waldemar Eklof Architects 1175 W. Moana Lane, Suite 201
Reno, NV 89509
The Owner and Contractor agree as follows:
ARTICLE 1 THE CONTRACT DOCUMENTS
The Contract Documents consist of this Agreement, Conditions of the Contract
(General, Supplementary, Special and other Conditions), Project
Specifications, Drawings, 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 8. All references herein to General
Conditions of the Contract for Construction, A201-1997, are hereby amended to
read and refer to A201-1987.
ARTICLE 2 THE WORK OF THIS CONTRACT
The Contractor shall fully execute the Work described in the Contract
Documents, except to the extent specifically indicated in the Contract
Documents to be the responsibility of others.
ARTICLE 3 DATE OF COMMENCEMENT AND SUBSTANTIAL COMPLETION
3.1 The date of commencement of the Work shall be June 15, 1998.
3.2 The Contract Time shall be measured from the date of commencement.
3.3 The Contractor shall achieve Substantial Completion of the entire Work
pursuant to paragraphs 3.3.1 and 3.3.2 below and in accordance with Exhibit A,
(Perini Schedule), attached hereto and incorporated herein by this reference,
subject only to adjustments of the Contract Time as provided in the Contract
Documents.
3.3.1 Substantial Completion: Owner and Contractor acknowledge that time is of
the essence in this Agreement and that Owner has emphasized to Contractor the
importance of this work being "substantially completed" as follows: All guest
rooms on floors 1 through 14 of the new tower, inclusive, to be completed and
ready for occupancy by April 14, 1999 (with the exception of the HVAC system
for said rooms, which will be completed and ready by May 24, 1999); All other
work within the scope of this Contract to be completed and ready for occupancy
by Monday, June 14, 1999. Owner and Contractor acknowledge that should the
work not be "substantially completed" as stated, the Owner will suffer severe
and substantial damages, the precise nature and amount of which cannot be
adequately calculated. For this reason, the Contractor agrees that in the
event the work is not substantially completed as stated, Contractor shall pay
liquidated damages to Owner as follows: (i) if any of the guest rooms on
floors 1 through 14, inclusive, are not complete and ready for occupancy by
April 14, 1999, (with the exception of the HVAC system for said rooms which is
to be complete by May 24, 1999), Contractor shall pay Owner $5,000.00 per day
from April 15, 1999, until all guest rooms on floors 1 through 14, inclusive,
are complete and ready for occupancy; (ii) if any portion of the construction
within the scope of work is not completed and ready for occupancy by June 14,
1999, Contractor shall pay Owner $5,000.00 per day from June 15, 1999, until
the work is completed and ready for occupancy. Owner and Contractor agree
that this amount is reasonable and not a penalty.
3.3.2 The completion dates stated above are subject to: (i) Owner furnishing
his materials and/or equipment when requested and finishing his work as
required, which requirement shall be subject to Contractor timely providing
Owner with lists of materials and quantities needed, and; (ii) Owner's other
contractors (i.e. those contractors on the job who are not subcontractors of
Contractor) performing their work within a reasonably coordinated time
schedule to be provided by Contractor prior to execution of the Contract.
Under no circumstances shall any delay of the work be justified where such
delay is caused by the negligence or fault of Contractor or any of its
Subcontractors or suppliers of Contractor or its sub-contractors or sub-
subcontractors.
ARTICLE 4 CONTRACT SUM
4.1 The Owner shall pay the Contractor the Contract Sum in current funds for
the Contractor's performance of the Contract. The Contract Sum shall be
THIRTY-FOUR MILLION SIX HUNDRED SIXTY-SIX THOUSAND FOUR HUNDRED TWO DOLLARS
($34,666,402.00), subject to additions and deductions as provided in the
Contract Documents.
4.2 Contractor warrants that it can and will perform all work included within
the scope of work contemplated by the Contract Documents for the Contract Sum
and that Contractor is not depending upon additive change orders in entering
into this Contract.
ARTICLE 5 PAYMENTS
5.1 PROGRESS PAYMENTS
5.1.1 Based upon Applications for Payment and Certifications thereof with all
documentation required by Owner's Lender 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.
5.1.2 The period covered by each Application for Payment shall be one calendar
month ending on the last day of the month.
5.1.3. Provided that an Application for Payment is received by the Architect
not later than the 25th day of the month, the Owner shall make payment to the
Contractor not later than 11 banking business days after the end of that
month. There shall be no more than one application per month on the 25th of
each month.
5.1.4 Each Application for Payment shall be based on the most recent schedule
of values submitted by the Contractor in accordance with the Contract
Documents. The schedule of values shall allocate the entire Contract Sum
among the various portions of the Work. 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.
5.1.5 Applications for Payment shall indicate the percentage of completion of
each portion of the Work as of the end of the period covered by the
Application for Payment.
5.1.6 Subject to other provisions of the Contract Documents, the amount of
each progress payment shall be computed as follows:
.1 Take that portion of the Contract Sum properly allocable to completed Work
as determined by multiplying the percentage completion of each portion of the
Work by the share of the Contract Sum allocated to that portion of the Work in
the schedule of values, less retainage of ten percent (10%). Pending final
determination of cost to the Owner of changes in the Work, amounts not in
dispute shall be included as provided in Subparagraph 7.3.8 of The General
Conditions of the Contract;
.2 Add that portion of the Contract Sum properly allocable to materials and
equipment delivered and suitably stored at the site for incorporation in the
completed construction (or, if approved in advance by the Owner, suitably
stored off the site at a location agreed upon in writing), less retainage of
ten percent (10%); except that no payment will be made for equipment or
material to be installed more than 30 days after such equipment/material has
been delivered.
.3 Subtract the aggregate of previous payments made by the Owner; and
.4 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 of the Contract.
5.1.7 The progress payment amount determined in accordance with Subparagraph
5.1.6 shall be further modified under the following circumstances:
.1 Add, upon Substantial Completion of the Work a sum sufficient to increase
the total payments to the full amount of the Contract Sum, less such amounts
as the Architect shall determine for incomplete Work, retainage applicable to
such work and unsettled claims; and
.2 Add, if final completion of the Work is thereafter materially delayed
through no fault of the Contractor, any additional amounts payable in
accordance with Subparagraph 9.10.3 of The General Conditions of the Contract.
5.1.8 Reduction or limitation of retainage, if any, shall be as follows:
5.1.9 Except with the Owner's prior written approval, the Contractor shall not
make advance payments to suppliers for materials or equipment which have not
been delivered and stored at the site.
5.1A Payment for alterations/additions requiring a change to the scope of the
work where a change order has been duly executed by Owner shall be paid as
follows:
.1 for additive change order work performed by subcontractors, the net
amount of subcontractor's cost for materials, labor and fee, plus a fee of 6%
(six percent);
.2 for additive change order work performed by the Contractor's own
forces, the net amount of Contractor's basic cost for materials and labor plus
a fee of 6% (six percent);
.3 for deductive change order work performed by subcontractors, the net
amount of subcontractor's cost for materials, labor and fee, plus a fee of 6%
(six percent);
.4 for deductive change order work performed by the Contractor's own
forces, the net amount of Contractor's basic cost for materials and labor,
plus a fee of 6% (six percent).
5.1B If the overall net effect of all changes orders, (i.e. the sum of
additive and deductive changes) is a negative, thus lowering the contract
price stated in paragraph 4.1, all percentages stated in paragraphs 5.1A.1
through 5.1A.4 shall be reduced to 5% (five percent).
5.1C Fees for alterations and additions which involve a change in the scope of
work under the Contract do not include the cost of bonding, insurance or
additional field staff which may be required for such scope changes. There
shall be no costs attributed to bonding, insurance, overhead, supervision or
additional staff for any alterations or additions which do not involve a
change in the scope of work. Payment for alterations/ additions not requiring
a change to the scope of the work shall be made 120 days after substantial
completion of the work of the project.
5.2 FINAL PAYMENT
5.2.1 Final Payment, constituting the entire unpaid balance of the Contract
Sum, shall be made by the Owner to the Contractor when:
.1 the Contractor has fully performed the Contract except for the Contractor's
responsibility to correct Work as provided in Subparagraph 12.2.2 of The
General Conditions of the Contract, and to satisfy other requirements, if any,
which extend beyond final payment; and
.2 a final Certificate for Payment has been issued by the Architect.
5.2.2 The Owner's final payment to the Contractor shall be made upon
verification to Owner that no liens or other encumbrances remain outstanding
against the subject property. Additionally, final payment shall be made no
later than 45 days after the recording in Washoe County by Owner of an
appropriate Notice of Completion (which Notice shall be signed by Owner within
15 days of Certified Occupancy and upon recording of which, Owner shall
immediately deliver a copy of same in person or by certified mail to
Contractor pursuant to NRS 108.228(4)), and upon verification to Owner and
Lender that no liens or encumbrances have been filed as a result of the Work.
Remaining funds held for retention by Owner shall be released at such time as
all of the following have occurred:
.1 The project has been accepted by Owner and certified completed by the
Architect and Contractor after a final inspection which shall be made within
10 business days after the filing of the Notice of Completion;
.2 A permanent Certificate of Occupancy for the project has been issued to
Owner by the City of Reno and a copy thereof delivered to Owner provided,
however, that this condition may be satisfied by the issuance of a temporary
Certificate of Occupancy by the City of Reno, so long as the condition for the
issuance of permanent Certificate of Occupancy is completion of the exterior
landscaping in accordance with the Plans and Specifications or conditions
beyond Contractor's control;
.3 A Notice of Completion has been posted on the Premises and recorded in the
office of the County Recorder of Washoe County, Nevada, the lien period has
expired and the Title Company has issued its final 101.2 Endorsement to the
title Insurance Policy showing no liens, claims or encumbrances except those
approved by Owner. Owner shall disburse all proceeds so as to cooperate with
the Title Company in order to maintain the Title Insurance Policy referred to
in the Loan Agreement in full force and effect;
.4 A release of lien of Contractor and its Subcontractors and suppliers for
all work performed that is acceptable to the Lender.
5.3 Final Disbursement of Hard Costs
Final disbursement constituting the unpaid balance of the contract price shall
be due and payable 120 days after the entire work project is delivered to
Owner, ready for beneficial occupancy, provided that each condition for the
release of the remaining funds held for retention as set forth above has been
fully satisfied.
ARTICLE 6 TERMINATION OR SUSPENSION
6.1 The Contract may be terminated by the Owner or the Contractor as provided
in Article 14 or The General Conditions of the Contract.
6.2 The Work may be suspended by the Owner as provided in Article 14 of The
General Conditions of the Contract.
ARTICLE 7 MISCELLANEOUS PROVISIONS
7.1 Where reference is made in this Agreement to a provision of The General
Conditions of the Contract or another Contract Document, the reference refers
to that provision as amended or supplemented by other provisions of the
Contract Documents.
7.2 Payments due and unpaid under the Contract shall bear interest from the
date payment is due at the Prime Rate plus 1.0% (One percent).
7.3 The Owner's representative is: Ben Farahi 1175 W. Moana Lane, Suite 200
Reno, NV 89509, 825-3355 fax 825-7705.
7.4 The Contractor's representative is: Bob Gaus, Perini Building Company, on-
site at the construction project.
7.5 The Contractor's representative shall not be changed without the consent
and written authorization of the Owner.
7.6 Other provisions:
7.6.1 This Agreement and all Contract Documents are fully assignable by Owner
at any time.
7.6.1.1 Copies of all contract documents of all subcontracts entered into
between Contractor and any subcontractor, the value/price of which is equal to
or greater than FIVE HUNDRED THOUSAND DOLLARS ($500,000.00), must be provided
to Owner for delivery to Owner's Lender. Additionally, all subcontracts
entered into between Contractor and any subcontractor, the value/price of
which is equal to or greater than FIVE MILLION DOLLARS ($5,000,000.00) must be
assigned by Contractor to Owner's Lender.
7.6.2 All temporary utilities to be paid by Contractor, who will use best
efforts to keep power off when not in use and otherwise avoid power waste.
7.6.3 Contractor acknowledges responsibility for and will defend and hold
Owner harmless for any risks, i.e. earthquake, flood, etc., that he does not
insure against, including deductibles.
ARTICLE 8 ENUMERATION OF CONTRACT DOCUMENTS
8.1 The Contract Documents, except for Modifications issued after execution of
this Agreement, are enumerated as follows: this CONTRACT FOR CONSTRUCTION,
consisting of 8 pages; THE GENERAL CONDITIONS OF THE CONTRACT, including
SPECIAL CONDITIONS contained therein, consisting of 45 pages; EXHIBIT A,
Perini Work Schedule; EXHIBIT B, Schedule of Values; EXHIBIT C, CONTRACT
CLARIFICATIONS, consisting of 3 pages plus Attachments 1, 2 and 3; EXHIBIT D,
THE PROJECT SPECIFICATIONS, dated April 6, 1998, which include ADDENDUM NUMBER
1 dated April 24, 1998, ADDENDUM NUMBER 2 dated May 1, 1998 and ADDENDUM
NUMBER 3 dated May 4, 1998 and also including MEMORANDUM OF WALDEMAR EKLOF
dated May 6, 1998, and also including CLARIFICATION MEMORANDUM OF WALDEMAR
EKLOF dated May 8, 1998 and also including latest drawings with
corrections/changes of building department dated May 27, 1998; EXHIBIT E,
INSURANCE REQUIREMENTS, consisting of 4 pages; EXHIBIT F, ATLANTIS TOWER AND
CASINO EXPANSION LIST OF DRAWINGS, consisting of 9 pages; EXHIBIT G, BLACK
EAGLE SOILS REPORT; EXHIBIT H, Otis Elevator Work Schedule; EXHIBIT I, Value
Engineering/contract changes; EXHIBIT J, Revised Kitchen Drawings dated June
8, 1998; EXHIBIT K, Life Safety Package; EXHIBIT L, Contractor's Certification
to Lender re: Project Completion and Budget; _______
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.
Agreement Clarification 8.1.7
.1 All temporary construction partitioning shall be sheet rocked on the public
side, taped and painted. It shall be closed on top and bottom to prevent dust
infiltration into public space. The temporary walkways will be constructed
before the main southeast doors leading to the east parking lot are taken out.
.2 The Toucan Charlies Buffet Restaurant shall remain open at all times. When
a shut down is unavoidable, the Owner will cooperate with the Contractor in
determining when a shut down of a few hours maximum may occur.
.3 Any utility shut down at all must occur at a time of least disruption to
the facility operation and must be coordinated with the hotel management a
minimum of 48 hours in advance. The Owner will establish the hours of least
disruption.
.4 In lieu of payment and performance bonding, Perini shall provide its
Corporate Guarantee for performance of all work.
.5 If this Contract omits any requirements mandated by Owner's Lender
which do not include cost analysis beyond what is already provided for in the
Contract Documents, Contractor shall execute an appropriate addendum to the
Contract to provide for such requirements.
.6 Contractor has met with and coordinated scheduling with Otis Elevator,
Owner's contractor for the purchase and installation of elevators in the
project. Contractor shall coordinate with Otis and perform its work so as to
provide for Otis' scheduling.
/s/Ben Farahi /s/Craig Shaw
OWNER CONTRACTOR
Ben Farahi, CFO
<PAGE>
General Conditions of the Contract for Construction
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
GENERAL CONDITIONS OF THE CONTRACT FOR CONSTRUCTION
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 Special 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 nor any Subcontractor, Sub-
subcontractor or material or equipment supplier shall own or claim a copyright
in the Drawings, Specifications or other documents prepared by the Architect,
and unless otherwise indicated the Architect shall be deemed the author of
them and will retain all common law, statutory and other reserved rights, in
addition to the copyright. All copies of them, except the Contractor's record
set, shall be returned or suitably accounted for to the Architect, on request,
upon completion of the Work. The Drawings, Specifications and other documents
prepared by the Architect, and copies thereof furnished to the Contractor, are
for use solely with respect to this Project. They are not to be used by the
Contractor or any Subcontractor, Sub-subcontractor or material or equipment
supplier on other projects or for additions to this Project outside the scope
of the Work without the specific written consent of the Owner and Architect.
The Contractor, Subcontractors, Sub-subcontractors and material or equipment
suppliers are granted a limited license to use and reproduce applicable
portions of the Drawings, Specifications and other documents prepared by the
Architect appropriate to and for use in the execution of their Work under the
contract Documents. All copies made under this license shall bear the
statutory copyright notice, if any, shown on the Drawings, Specifications and
other documents prepared by the Architect. Submittal or distribution to meet
official regulatory requirements or for other purposes in connection with this
Project is not to be construed as publication 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 Before work begins, Owner will provide Contractor with Certification
from its Lender that Lender has agreed to loan Owner sufficient funds to
complete the Work under this Agreement.
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, if reasonably needed and requested by
Contractor.
2.2.3 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, if
necessary for the Construction Project.
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 in respect to Article 6 (Construction by Owner or
by Separate Contractors), Article 9 (Payments and Completion) and Article 11
(Insurance and Bond).
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 by or 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 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(s).
3.2 REVIEW OF CONTRACT DOCUMENTS AND FIELD CONDITIONS BY CONTRACTOR
3.2.1 As he proceeds with his work, 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, as soon as possible,
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 in specific areas. Errors, inconsistencies or omissions
discovered shall be reported to the Architect and Owner 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.
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 Owner 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 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;
.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 MANAGER / SUPERINTENDENT
3.9.1 The Contractor shall employ a competent manager and 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 manager or superintendent shall be as binding
as if given to the Contractor. Important communications shall be confirmed in
writing to the Contractor's office, attention BOB GAUS or CHRISTOPHER
ANDERSON. 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-
subcontractor, manufacturer, supplier or distributor to illustrate some
portion of the Work.
3.12.2 Product Data are illustrations, standard schedules, performance charts,
instructions, brochures, diagrams and other information furnished by the
Contractor to illustrate materials or equipment for some portion of the Work.
3.12.3 Samples are physical examples which illustrate materials, equipment or
workmanship and establish standards by which the Work will be judged.
3.12.4 Shop Drawings, Product Data, Samples and similar submittals are not
Contract Documents. The purpose of their submittal is to demonstrate for the
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 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 feels. 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, Owner's Lender, 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, 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.
4.2 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 Contractor, Subcontractors, or their agents or
employees, or of any other persons performing portions of the Work.
4.2.4 Communications Facilitating Contract Administration.
The Owner and Contractor shall endeavor to communicate effectively either
directly through their representatives named in the Contract Documents or when
necessary, 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 and
if consistent with the overall first class development of the Project.
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 or
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 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 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.
4.3.4 Continuing Contract Performance. Pending final resolution of a Claim
including litigation, 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 the 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 is 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 ground,
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 in excess of that allowed for in the specification, 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 or 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 litigation. 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. The Prevailing Party in any such litigation shall be entitled to
recover its reasonable costs and attorneys' fee.
4.5. Contract Performance During Litigation.
During litigation proceedings, the Owner and Contractor shall comply with
Subparagraph 4.3.4.
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, as soon as practicable after award of the
Contract, 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.
5.3 SUBCONTRACTUAL RELATIONS
5.3.1 By appropriate written agreement, 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 the
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
acknowledgement that the Owner's or separate contractors' completed or
partially completed construction as 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, at its sole cost and expense, 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 such 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.
ARTICLE 7 CHANGES IN THE WORK
7.1 CHANGES
7.1.1 Changes in the Work may be accomplished after execution of the Contract,
and without invalidating the Contract, by Change Order, Construction Change
Directive or order for a minor change in the Work, subject to the limitations
stated in this Article 7 and elsewhere in the Contract Documents.
7.1.2 A Change Order shall be based upon 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.
No Change Order or Construction Change Directive is or shall be effective
unless such Change Order or Construction Change Directive is signed by either
John Farahi, Bob Farahi or Ben Farahi prior to any work being performed by
Contractor. Any work performed by Contractor in violation of this provision
is at Contractor's risk.
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 cost 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 cost of
transportation, whether incorporated or consumed;
.3 rental costs of machinery and equipment, exclusive of hand tools, whether
rented from the Contractor or others;
.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 officer personnel directly
attributable to the change.
7.3.7 Pending final determination of cost to the Owner, amounts not in dispute
may be included in Applications for Payment. The amount of credit to be
allowed by the Contractor to the Owner for a deletion or change which results
in a net decrease in the Contract Sum shall be actual net cost as confirmed by
the 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 agreements shall be
effective immediately and shall be recorded by preparation and execution of an
appropriate Change Order.
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 (as further agreed in Paragraph 3.3 of the Contract),
fire, unusual and unavoidable delay in deliveries, unavoidable casualties or
other causes beyond the Contractor's control, or by delay authorized by the
Owner pending litigation, 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, 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 or account of
changes in the Work which have been properly authorized by Construction Change
Directives but not yet included in Changes 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 in
writing, signed by the Owner and Lender, payment may similarly be made for
materials and equipment suitably stored off the site at a bonded warehouse
location in Washoe County, Nevada. 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 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 Certificate 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,
materials 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 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 litigation, 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 what 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
designated 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
Contract Documents shall commence on the date of Substantial Completion of the
Work or designated portion thereof unless otherwise provided in the
Certificate of Substantial Completion. The Certificate of Substantial
Completion shall be submitted to the Owner and Contractor for their written
acceptance of responsibilities assigned to them in such Certificate.
9.8.3 Upon Substantial Completion of the Work or designated portion thereof
and upon application by the Contractor and certification by the Architect, the
Owner shall make payment, reflecting adjustment in retainage, if any, for such
Work or portion thereof as provided in the Contract Documents.
9.9 PARTIAL OCCUPANCY OR USE
9.9.1 The Owner may occupy or use any completed or partially completed portion
of the Work at any stage when such portion is designated by separate agreement
with the Contractor, provided such occupancy or use is consented to by the
insurer as required under Subparagraph 11.3.11 and authorized by public
authorities having jurisdiction over the Work. Such partial occupancy or use
may commence whether or not the portion is substantially complete, provided
the Owner and Contractor have accepted in writing the responsibilities
assigned to each of them for payments, retainage if any, security,
maintenance, heat, utilities, damage to the Work and insurance, and have
agreed in writing concerning the period for correction of the Work and
commencement of warranties required by the Contract Documents. When the
Contractor considers a portion substantially complete, the Contractor 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 the 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 interest or encumbrances
arising out of the Contract, to the extent and in such form as may be
designated by the Owner or Lender. 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 approval by Lender and Owner, 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.
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. This indemnification shall be inapplicable if Contractor or any of
its Subcontractors is negligent or otherwise at fault in the removal of any
such hazardous material. In such case, Contractor shall indemnify Owner as
set forth in 3.18.1.
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 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 include any deductible 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 Subcontractors, 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 Contractors 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;
.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 or 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. The Contractor is to meet all Insurance Requirements
of Owner's Lender as specified in the Contract Documents.
11.1.3.1 Contractor's liability insurance provided pursuant to Paragraph
11.1.1 shall be endorsed naming Owner, Golden Road Motor Inn, Inc. and Lender
as additional insureds with respect to claims arising out of Contractor's
operations.
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 over
$10,000.00. 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 an Sub-
subcontractors in the Work. Contractor, Subcontractors and Sub-subcontractors
shall be named as additional insureds.
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, falsework, temporary buildings and debris removal
including demolition occasioned by enforcement of any applicable legal
requirements, and shall cover reasonable compensation for Architect's services
and expenses required as a result of such insured loss. Coverage for other
perils shall not be required unless otherwise provided in the Contract
Documents.
11.3.1.2 If the Owner does not intend to purchase such property insurance
required by the Contract and with all of the coverages in the amount described
above, the Owner shall so inform the Contractor in writing prior to
commencement of the Work. The Contractor may then effect insurance which will
protect the interests of the Contractor, Subcontractors and Sub-subcontractors
in the work, and by appropriate Change Order the cost thereof shall be charged
to the owner. If the Contractor is damaged by the failure or neglect of the
Owner to purchase or maintain insurance as described above, without so
notifying the Contractor, then the Owner shall bear all reasonable costs
properly attributable thereto.
11.3.1.3 If the property insurance requires minimum deductibles and such
deductibles are identified in the Contract Documents, the Contractor shall pay
costs not covered because of such deductibles. If the Owner or insurer
increases the required minimum deductibles above the amounts so identified or
if the Owner elects to purchase this insurance with voluntary deductible
amounts over $10,000., the Owner shall be responsible for payment of the
additional costs over $10,000. not covered because of such increased or
voluntary deductibles.
11.3.1.4 Unless otherwise provided in the Contract Documents, this property
insurance shall cover portions of the Work stored off the site after written
approval of the Owner at the value established in the approval and also
portions of the Work in transit.
11.3.3 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 reasonably possible and
economically feasible, include such insurance, and the cost thereof shall be
charged to the Contractor by appropriate Change Order.
11.3.5 If during the Project construction period the Owner insured 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 provisions of Exhibit ** to the Contract
entitled "Insurance Requirements" control waivers of subrogation.
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.
11.3.10 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.
11.3.12 The Carrying of the above Owner provided builder's risk insurance
shall in no way be interpreted as relieving the Contractor of any
responsibility or liability under the Contract.
11.3.13 In the event of failure of the Contractor to finish and maintain said
insurance as required in Article 11.1 and to furnish satisfactory evidence
thereof, the Owner shall have the right, at Contractor's sole expense, to take
out and maintain same for all parties on behalf of the Contractor who agrees
to furnish all necessary underwriting information.
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.
11.4.3 The "Insurance Requirements" contained in Exhibit ** to the Contract
are incorporated by this reference and the terms of those Requirements shall
control any inconsistency with the terms set forth in these Conditions.
ARTICLE 12 UNCOVERING AND CORRECTION OF WORK
12.1 UNCOVERING OF WORK
12.1.1 If a portion of the Work is covered contrary to the 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 Contractor
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 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 promptly correct nonconforming Work, the
Owner may correct it in accordance with Paragraph 2.4. If the Contractor does
not proceed with correction of such nonconforming Work with the 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 Contractor are not sufficient to cover such amount, the Contractor shall
pay the difference to the Owner.
12.2.5 The Contractor shall bear the cost of correcting destroyed or damaged
construction, whether completed or partially completed, of the Owner or
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. The parties select the courts of Nevada for the forum and
venue for any litigation.
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
13.1.1 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
and 3.3 of A101, i.e. the Contract.
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.
13.4.3 Breach: In the event either party claims a breach of the Agreement by
the other party, the party claiming the breach shall give written notice as
such are provided for herein. The party receiving notice of its claimed
breach shall have three business days to cure the claimed breach before this
Agreement shall be in default.
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. 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
applicable, 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 10 days after 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 statue 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 of failures to act
occurring after the relevant date of issuance of the final Certificate for
Payment, any applicable statue of limitations shall commence to run and any
alleged cause of action shall be deemed to have accrued in any and all events
not later than the date of any act or failure to act by the Contractor
pursuant to any warranty provided under Paragraph 3.5, the date of any
correction of the Work or failure to correct the Work by the Contractor under
Paragraph 12.2, or the date of actual commission of any other act or failure
to perform any duty or obligation by the Contractor or Owner, whichever occurs
last.
ARTICLE 14 TERMINATION OR SUSPENSION OF THE CONTRACT
14.1 TERMINATION BY THE CONTRACTOR
14.1.1 The 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
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 thereof 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 of 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 agreement between the Contractor and the
Subcontractors;
.3 persistently disregard 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 justify 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 Contractor shall not be entitled to receive further
payment until the Work is finished.
14.2.4 If the unpaid balance of the Contract Sum exceeds costs of finishing
the work, including compensation for the 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.
14.4 TERMINATION BY ACT OF LENDER
14.4.1 Without limitation on the provisions at Paragraph 14.2, the Owner shall
have the
right to terminate this Contract if Lender suspends, stops or terminates any
payments, pursuant to the Loan Agreement that funds this work. The Contractor
shall immediately discontinue the work and thereafter remove its equipment and
the employees from the Job Site. In the event of termination under this
paragraph, the Contractor shall, as its sole and exclusive remedy, recover
from the Owner payment for all Work executed and costs incurred up to the date
of termination less any payments previously made. In addition, the Contractor
shall recover its overhead costs (defined as the Project Manager,
Superintendent and their related costs) which are the result of closing the
Project, plus a fee of 3% of all work executed and costs incurred to the date
of termination.
14.5 The Contractor acknowledges that the Owner is in a business that is
subject to and exists because of privileged licenses issued by the Gaming
Control Board and Commission. If requested the Gaming Control Board and/or
Commission to do any act, Contractor shall comply.
14.6 SPECIAL CONDITIONS
14.6.1 General
a. The "General Conditions of the Contract for Construction" A.I.A. Form,
Fourteenth Edition, 1987, and the Supplementary Conditions, Section 0090, are
a part of, and their provisions shall apply with equal force to, all sections
of work.
b. This Section applies to the work of all other sections and shall be
performed by all Contractors and/or all affected trades.
c. Wherever the term "Borrower" appears in these General and/or Special
Conditions and the Agreement, it shall mean the "Owner."
14.6.2 Special Notice
a. The Contractor shall schedule his work such that the building's operations
are minimally interrupted and he shall submit a schedule of construction
operations to the Owner's representative for review and acceptance prior to
starting work.
b. Courtesy with respect to the building's employees and guests is mandatory.
c. Use of elevators, power outages, mechanical shut-down and so forth shall be
carefully coordinated with the Owner's representative.
d. No ceilings or wall shall remain "open" after the normal work day without
special permission from the Owner's representative.
14.6.3 Guarantees
a. All guarantees shall commence from the date of final completion.
b. Except as may be specified under other sections in the specifications,
guaranty all equipment furnished under the specifications for a period of one
year from date of acceptance against defective workmanship and material and
improper installation. Upon notification of failure, correct deficiency
immediately and without cost to the Owner.
c. Standard warranty of manufacturer shall apply for replacement of parts
after expiration of the above period. Manufacturer shall furnish replacement
parts to the Owner or his service agency as directed.
d. Furnish to the Owner printed manufacturers' warranties complete with
material included and expiration dates upon completion of project.
14.6.4 Reference Standards
a. Safety Standards:
(1) Occupational Safety and Health Administration under the Federal William-
Steiger Occupational Safety and Health Act of 1970;
(2) "Manual of Accident Prevention in Construction" published by Associated
General Contractors of America.
(3) All applicable regulations of authorities having or asserting
jurisdiction.
b. Throughout the specifications, reference is made to various widely
published standard, commercial specifications. Each Contractor shall direct
each of his subcontractors to become familiar with the contents of the
pertinent portions of these reference standards that are cited and referred
to.
c. When manufacturers of materials or fixtures used on this job provide
installation or maintenance directions not covered in these specifications or
detailed on the drawings, each Contractor furnishing the item shall follow
such directions, and shall issue appropriate copies to the other affected
Contractors.
14.6.5 Glass. Contractor shall be responsible for replacing broken or damaged
glass permanently installed in the building, where the breakage or damage is
caused by the Contractor, Subcontractor or Sub-subcontractor.
14.6.6 Drawings, Specifications and Measurements
a. Follow figures dimensions given on drawings; do not scale drawings.
b. In general, detail drawings take precedence over general drawings; addenda
or bulletins to specifications take precedence over original specifications
and earlier addenda.
c. Cut seals carefully, and neatly repair them in an acceptable manner.
Consult the Architect in cases where cutting into a structural portion of the
building is required so that satisfactory reinforcement may be provided.
d. Where specifications and drawings conflict or where detail references have
been omitted, Contractor shall be deemed to have estimated the most expensive
materials and construction involved unless he has asked for and obtained a
written decision from the Architect on which method or materials will be
required before signing the Agreement.
e. Use the sets of drawings furnished and/or purchased upon the signing of the
contract for construction purposes. Keep the stamped set for the primary use
of the Building Inspector keep it in good condition for the duration of the
Construction period.
14.6.7 Temporary Construction Walls
a. The Contractor shall be responsible for construction of temporary walls
around all areas of operations.
b. All walls shall have a "finished" look, unless otherwise shown on the
drawings. Finished with a coat of paint.
14.6.8 Temporary Construction Fence. The Contractor shall be responsible for
construction of temporary fence around all areas of operations.
14.6.9 Keying of Temporary Doors
a. Installation of all temporary doors shall be coordinated with the Owner's
representative prior to their installation.
b. All temporary keying shall be performed by the Contractor. The Contractor
shall immediately issue one set of keys to the Owner's representative.
14.6.10 Access to the Work Area. Access to the Project work area by
construction personnel shall be by the most inconspicuous route available, in
order that the public and the Owner's personnel are not inconvenienced.
Access shall be arranged prior to the commencement of the Work with the
Owner's representative, unless shown otherwise. Access to restricted and/or
limited access areas required by the Work shall be coordinated with the
Owner's representative.
14.6.11 Storage. Storage of materials, tools, equipment and so forth shall be
within the Project work area or another location designated and approved by
the Owner's representative.
14.6.12 Punch List
a. Access to the Project for the purpose of completing Punch List/Close-Out
items shall be approved by the Owner's representative and shall be performed
at a reasonable time that is least inconvenient to the Owner.
b. All Life/Safety Systems requiring shutdowns or tie-ins, in accordance with
the above clause, shall be coordinated with the Owner's representative and
shall be performed at such a time to minimize any effect on the safety, health
and welfare of the building's occupants. At the conclusion of each work day,
all Life/Safety Systems shall be energized and operative.
14.6.13 Toilet Facilities
a. Toilet Facilities shall be provided by Contractor.
b. The Owner's toilet facilities used by the general public are not to be used
by construction personnel.
14.6.14 Telephones. The Contractor, his Subcontractors and all construction
personnel associated with the Project are strictly prohibited from using the
Owner's telephone system for paging, information, messages and outside
telephone connections.
14.6.15 Eating Privileges
a. All construction personnel shall be permitted to eat in any area,
designated by the construction superintendent during the general construction
phase.
b. During the FF&E and finish phase of construction, construction personnel
are not permitted to eat where finish materials are in place nor use tables
and chairs or other furniture that are part of the Project. At this time the
Project Owner's representative will designate with the construction
superintendent, appropriate places for eating.
c. There will be no eating permitted in and around the swimming pool and deck
area after it is open.
14.6.16 Trade Names. No trade name shall appear on any item where it will be
seen by the public, except for elevators and escalators.
14.6.17 Owner Furnished Materials. Contractor shall unload all materials for
the project provided by Owner or Owner's other suppliers where such unloading
requires use of a forklift.<PAGE>
EXHIBIT A
Contract Schedule
[NOT INCLUDED]
EXHIBIT B
Schedule of Value
[NOT INCLUDED]
EXHIBIT C
CONTRACT CLARIFICATIONS
1. Any asbestos abatement or disposal of hazardous waste materials of existing
conditions is excluded from this Contract.
2. No permanent ground water dewatering system is included in this Work.
3. The water meter and vault for the 6" water line entering into the building
is excluded.
4. Owner must supply Perini with one (1) service elevator car for eight (8)
weeks per the Perini schedule in the contract documents.
5. Perini's work/operation hours shall be limited during the excavation and
concrete phases of the project to between the hours of 6:00 a.m. and 10:00
p.m. Perini acknowledges the 24 hour nature of the Atlantis operation and
will use its best efforts to minimize noise throughout the work of
construction.
6. All millwork and counter tops provided by Owner are assumed to be pre-
finished with all holes required for Contractor's work, cut and ready to
accept Contractor's hardware or fixtures as required.
7. Fees for alterations and additions which involve a change in the scope of
work under the Contract do not include the cost of bonding, insurance or
additional field staff which may be required for such scope changes. There
shall be no costs attributed to bonding, insurance, overhead, supervision or
additional staff for any alterations or additions which do not involve a
change in the scope of work.
8. Base bid does not include air-entrained concrete for structural concrete.
9. Plexiglass panel on 4/A5.8 to be part of the sign package and not included
in this proposal.
10. While none are anticipated, no provisions are included for utility company
fees.
11. Bid includes retrofit of existing fire alarm and detection system,
including interface with existing smoke control system. No provisions are
included for repair or replacement of faulty smoke control devices in the
existing building.
12. The fire alarm and detection system for the bridge are not included in
this Contract. However, this Contract does provide for a fire alarm and
detection system which will be fully integrated into and function with the
fire alarm and detection systems in the bridge and in the existing building to
fully comply with all codes and governmental authority requirements.
13. Bid includes empty conduit systems for security, computer, sound,
telephone and CATV as indicated on drawings.
14. No provisions are included for gaming equipment and keno conduit systems
unless indicated on drawings.
15. Temporary power and lighting will be provided by Perini and will meet OSHA
and Perini Building Company standards. Section 01700-03.02.02 requirements
exceed the provisions in the proposal. Temporary power shall be sub-metered
off existing service. Contractor shall supply and install the sub-meter.
16. The Existing Tower to New Tower roof expansion joint is included as a
galvanized sheet metal cover. The roof expansion joint is not included as a
fire rated assembly.
17. Pursuant to the letter of Jessen-Wright Structural Engineers to Mike
Shimko, dated May 20, 1998, Note 3-2 B, part 2 of Sheet S1.0, requiring a
maximum water/cement ratio of 0.40 for all concrete is modified to apply to
all concrete strengths above 4000 psi. For all concrete strengths equal or
less than 4,000 psi, the maximum water/cement ratio is increased to 0.50.
18. Substitute Tera' Gem III epoxy flooring in lieu of Merko Flor-Rez.
19. Manlift will be available for use by Owner and Owner's other contractors
on a cooperative basis in order to maximimize efficiency of the overall
construction. If no Perini operator is on duty when Owner or its other
contractors need the manlift, Owner or its other contractors will provide one.
20. A daily tour of construction by Owner will be available at 4:00 p.m.
Owner to be responsible for safety and conduct of tours.
21. Perini shall pay its suppliers and subcontractors within ten (10) days of
Perini's receipt of payment from Owner and shall provide for timely payment by
Perini's subcontractors to any respective sub-subcontractors.
22. The construction yard layout and parking for all contractors and their
employees shall be per the map attached hereto and incorporated by this
reference as Attachment 1.
23. There shall be no construction traffic on the parking lot east of the
building outside of the staging area. All supply and other vehicles shall
access from Peckham Lane.
24. In order to comply with the scheduled opening of the new phase, the
Contract provides for temporary hookup of utilities where necessary.
25. Per the Contract Documents and/or as described in the pre-bid meeting and
walk-through, the transition between staircase number 2 and the existing
staircase at the 18th and 19th levels is included in the Work of this
Contract. Removal of the slotshop next to the new passenger elevator lobby is
also included in the work of this Contract.
26. Perini warrants that it and all of its subcontractors and any sub-
subcontractors have studied all plans and specifications relating to this
project and that they have walked the jobsite and thoroughly reviewed its
conditions and understand how those conditions may affect their work and
bid(s). Accordingly, there will be no additional charges for any design shown
on any of the drawings or specifications, e.g. electrical, mechanical, etc.
27. Owner shall have until September 1, 1998, to select white, black or any
other standard window framing color on the twenty-first (21st) through twenty-
seventh (27th) floors, inclusive. Per Attachement 2, attached hereto and
incorporated by this reference, Owner shall have until the same date to select
the option to change all glass to one (1) type on the twenty-first (21st)
through twenty-seventh (27th) floors, inclusive, which option, if selected,
shall effect a Contract price adjustment as stated in Attachment 2.
28. In the event any potential subcontractor is introduced, recommended or
otherwise suggested by Owner to Perini and Perini ultimately contracts with or
otherwise hires or retains the services of such subcontractor, Owner shall
incur no liability or responsibility to Perini or any other party for the
performance or acts of such subcontractor and such subcontractor will be
treated by the terms of this agreement as would any other subcontractor.
29. The cost of a payment and performance bond is excluded from the Contract.
30. The cost of Gravel Base at the west lot is excluded from the Contract.
31. Pricing for Alternate Number 7 does not include rubbed concrete. Surface
will be a smooth, drywall finish with flat paint or plaster "knock-down"
finish.
32. Rescue air system is included as an allowance of ONE HUNDRED THOUSAND
DOLLARS ($100,000.00).
33. Contractor shall perform dust control in the construction yard.
34. Installation of all double stick carpeting and ceiling tile cost are
excluded from the Contract.
35. The quantity of ceiling tile required to complete the job is per the
attached letter of Paul Ogaz, incorporated herein as Attachment 3 by this
reference.
ATTACHMENT 1
Construction Yard (Drawing)
[NOT INCLUDED]
ATTACHMENT 2
Alpine Glass Proposal
[NOT INCLUDED]
ATTACHMENT 3
Paul S.J. Ogaz Co. Proposal
[NOT INCLUDED]
EXHIBIT D
Acknowledgement of receipt of Plans and Specifications and copies of
revisions, changes, and addendums to Plans and Specifications
[NOT INCLUDED]
EXHIBIT E
General Contractor/Major Subcontractor Insurance Requirements
[NOT INCLUDED]
EXHIBIT F
List of Drawings
[NOT INCLUDED]
EXHIBIT G
Acknowledgement of receipt of Soils Report
[NOT INCLUDED]
EXHIBIT H
Otis Elevator Schedule
[NOT INCLUDED]
EXHIBIT I
Value Engineering Schedule
[NOT INCLUDED]
EXHIBIT J
Acknowledgement of receipt of Revised Kitchen Drawings and List of Revised
Kitchen Drawings
[NOT INCLUDED]
EXHIBIT K
Acknowledgement of receipt of Life Safety Package.
[NOT INCLUDED]
EXHIBIT L
Contractor's Certification to Lender.
[NOT INCLUDED]
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM REGISTRANT'S
CONSOLIDATED FINANCIAL STATEMENTS AS OF JUNE 30, 1998 AND THE ACCOMPANYING NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS AND NOTES TO FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 4,034,413
<SECURITIES> 0
<RECEIVABLES> 1,339,263
<ALLOWANCES> 0
<INVENTORY> 410,799
<CURRENT-ASSETS> 7,965,314
<PP&E> 77,647,983
<DEPRECIATION> 20,025,261
<TOTAL-ASSETS> 67,369,614
<CURRENT-LIABILITIES> 8,702,977
<BONDS> 31,232,995
0
0
<COMMON> 95,363
<OTHER-SE> 25,103,279
<TOTAL-LIABILITY-AND-EQUITY> 67,369,614
<SALES> 0
<TOTAL-REVENUES> 16,561,812
<CGS> 0
<TOTAL-COSTS> 8,151,168
<OTHER-EXPENSES> 1,156,104
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 581,101
<INCOME-PRETAX> 2,427,307
<INCOME-TAX> 825,284
<INCOME-CONTINUING> 1,602,023
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,602,023
<EPS-PRIMARY> .17
<EPS-DILUTED> .17
</TABLE>
