SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[x] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended June 30, 1996
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
---------------------- -----------------------
Commission file number: 1-13636
Mendocino Brewing Company, Inc.
(Name of small business issuer in its charter)
California 68-0318293
(State or other jurisdiction of (I.R.S. Employee Identification No.)
incorporation or organization)
13351 South Highway 101, Hopland, CA 95449
(Address of principal executive offices) (Zip code)
Issuer's telephone number: (707) 744-1015
Securities registered under Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
Common Stock, no par value The Pacific Stock Exchange
Securities registered under Section 12(g) of the Act:
Not applicable
(Title of class)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes X No
----- ------
The number of shares of the issuer's common stock outstanding as of June
30, 1996 is 2,322,222.
<PAGE>
PART I
Item 1. Financial Statements.
<TABLE>
MENDOCINO BREWING COMPANY, INC.
BALANCE SHEET
June 30, 1996
(Unaudited)
ASSETS
<S> <C>
Current Assets
Cash and cash equivalents $ 21,226
Accounts receivable 550,382
Inventories 463,532
Prepaid expenses and taxes 73,088
Deferred income taxes 37,000
----------------
Total Current Assets: 1,145,228
----------------
Property and Equipment 6,947,661
----------------
Other Assets
Label development costs, net of amortization 23,575
Deposits and other assets 98,413
----------------
Total Other Assets: 121,988
----------------
Total Assets: $ 8,214,877
================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Short-term borrowing $ 360,000
Accounts payable 367,982
Accrued wages and related expense 105,510
Accrued construction costs 2,363,142
Accrued profit sharing 30,000
Accrued liabilities 33,870
Current maturities of long-term debt 10,021
----------------
Total Current Liabilities: 3,270,525
Long term debt - less current maturities 550,652
Deferred income taxes 20,200
----------------
Total Liabilities: 3,841,377
Commitments -
Stockholders' Equity
Common stock, no par value; 20,000,000 shares authorized; 3,869,569
2,322,222 shares issued and outstanding
Preferred stock, 2,000,000 shares authorized, 227,600 of 227,600
which are designated Series A, no par value, with aggregate
liquidation preference of $227,600; 227,600 Series A shares
issued and outstanding
Retained earnings 276,331
----------------
Total Stockholders' Equity: 4,373,500
----------------
Total Liabilities and Stockholders' Equity: $ 8,214,877
================
<FN>
The accompanying notes are an integral
part of these financial statements
</FN>
</TABLE>
-1-
<PAGE>
MENDOCINO BREWING COMPANY, INC.
STATEMENT OF OPERATIONS
(Unaudited)
Three Months Ended
June 30,
1996 1995
---- ----
Sales $ 1,227,428 $ 870,656
Less excise taxes 18,138 36,547
----------- -----------
Net Sales 1,209,290 834,109
Cost of goods sold 545,711 465,593
----------- -----------
Gross profit 663,579 368,516
----------- -----------
Operating expenses
Retail operations 192,082 146,498
Marketing and distribution 199,830 66,456
General and administrative 187,700 138,397
----------- -----------
579,612 351,351
----------- -----------
Income from Operations 83,967 17,165
Other income (expense)
Interest income 269 37,931
Other income (expense) (43,543) 6,001
----------- -----------
(43,274) 43,932
----------- -----------
Income before income taxes 40,693 61,097
Provision for (benefit from) income taxes (21,500) 19,957
----------- -----------
Net Income $ 62,193 $ 41,140
=========== ===========
Earnings per share $ 0.03 $ 0.02
=========== ===========
Weighted average common shares outstanding 2,322,222 2,308,888
The accompanying notes are an integral
part of these financial statements
-2-
<PAGE>
MENDOCINO BREWING COMPANY, INC.
STATEMENT OF OPERATIONS
(Unaudited)
Six Months Ended
June 30,
1996 1995
---- ----
Sales $ 1,911,373 $ 1,675,207
Less excise taxes 71,049 74,487
----------- -----------
Net Sales 1,840,324 1,600,720
Cost of goods sold 870,450 907,754
----------- -----------
Gross profit 969,874 692,966
----------- -----------
Operating expenses
Retail operations 372,285 280,858
Marketing and distribution 292,820 126,380
General and administrative 339,551 313,298
----------- -----------
1,004,656 720,536
----------- -----------
Loss from Operations (34,782) (27,570)
Other income (expense)
Interest income 10,819 74,790
Other income (expense) (47,361) 6,001
----------- -----------
(36,542) 80,791
----------- -----------
Income (loss) before income taxes (71,324) 53,221
Provision for (benefit from) income taxes (20,700) 20,757
----------- -----------
Net Income (loss) $ (50,624) $ 32,464
=========== ===========
Earnings per share $ (0.02) $ 0.01
=========== ===========
Weighted average common shares outstanding 2,322,222 2,294,148
The accompanying notes are an integral
part of these financial statements
-3-
<PAGE>
<TABLE>
MENDOCINO BREWING COMPANY, INC.
STATEMENT OF CASH FLOWS
(Unaudited)
<CAPTION>
Three Months Ended
June 30,
1996 1995
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $ 62,193 $ 41,140
Adjustments to reconcile net income (loss) to net
cash provided (used) by operating activities:
Depreciation and amortization 11,758 11,375
Deferred income taxes (21,500) -
Changes in:
Accounts receivable (300,308) 9,842
Inventories (14,823) 39,073
Prepaid expenses and taxes (20,745) 9,126
Accounts payable 229,852 (19,642)
Accrued wages and related expense 7,131 1,411
Accrued profit sharing - 11,250
Accrued liabilities 9,352 14,058
Income taxes payable - -
-------------- ------------
Net Cash Provided by (Used by) Operating Activities: (37,090) 117,633
-------------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment (1,759,713) (965,360)
Deposits and other assets 23,081 44,033
Deferred offering costs (37,941) -
Reduction of deferred offering costs - (77,191)
-------------- ------------
Net Cash Used by Investing Activities: (1,774,573) (998,518)
-------------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Payments on short-term borrowings (40,000) -
Proceeds from long-term debt - 492,872
Principal payments on long-term debt (2,368) -
Accrued construction costs 1,351,847 -
-------------- ------------
Net Cash Provided by Financing Activities: 1,309,479 492,872
DECREASE IN CASH (502,184) (388,013)
CASH, BEGINNING OF PERIOD 523,410 3,234,022
CASH, END OF PERIOD $ 21,226 $ 2,846,009
-------------- ------------
Supplemental Cash Flow Information Includes the Following:
Cash Paid During the Period for:
Income Taxes $ - $ 800
<FN>
The accompanying notes are an integral
part of these financial statements
</FN>
</TABLE>
-4-
<PAGE>
<TABLE>
MENDOCINO BREWING COMPANY, INC.
STATEMENT OF CASH FLOWS
(Unaudited)
<CAPTION>
Six Months Ended
June 30,
1996 1995
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income (Loss) $ (50,624) $ 32,464
Adjustments to reconcile net income (loss) to net
cash used by operating activities:
Depreciation and amortization 23,008 22,370
Deferred income taxes (21,500) -
Changes in:
Accounts receivable (91,504) (38,765)
Inventories (207,278) 34,467
Prepaid expenses and taxes (25,992) (6,141)
Accounts payable 262,302 (31,935)
Accrued wages and related expense (24,366) (5,440)
Accrued profit sharing - (33,750)
Accrued liabilities 11,670 5,785
Income taxes payable (34,200) -
-------------- ------------
Net Cash Used by Operating Activities: (158,484) (20,945)
-------------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment (3,013,164) (1,265,802)
Deposits and other assets 14,564 255,366
Deferred offering costs (53,934) -
Reduction of deferred offering costs - (35,510)
-------------- ------------
Net Cash Used by Investing Activities: (3,052,535) (1,045,946)
-------------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from short-term borrowings 360,000 -
Proceeds from long-term debt - 492,872
Principal payments on long-term debt (4,683) (7,866)
Accrued construction costs 1,180,819 -
Proceeds from sale of common stock - 527,117
-------------- ------------
Net Cash Provided by Financing Activities: 1,536,136 1,012,123
DECREASE IN CASH (1,674,883) (54,768)
CASH, BEGINNING OF PERIOD 1,696,109 2,900,777
CASH, END OF PERIOD $ 21,226 $ 2,846,009
-------------- ------------
Supplemental Cash Flow Information Includes the Following:
Cash Paid During the Period for:
Income Taxes $ 52,500 $ 34,850
<FN>
The accompanying notes are an integral
part of these financial statements
</FN>
</TABLE>
-5-
<PAGE>
MENDOCINO BREWING COMPANY, INC.
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
Note 1 - Basis of Presentation
The financial statements included herein have been prepared by the
Company, without audit, pursuant to the rules and regulations of the Securities
and Exchange Commission. Certain information and footnote disclosures normally
included in the financial statements prepared in accordance with generally
accepted accounting principles have been omitted pursuant to such rules and
regulations. It is believed, however, that the disclosures are adequate to make
the information presented not misleading.
The financial statements, in the opinion of management, reflect all
adjustments necessary to fairly state the financial position and the results of
operations. These results are not necessarily to be considered indicative of the
results for the entire year.
Note 2 - Long-Term Debt
Long-term debt consists of a note payable, due in monthly installments
of $4,435 including interest at 9%, maturing June 1997, and secured by real
property and a note payable, due one lump sum of $76,200 plus interest at 9%,
maturing December 1998, and secured by real property.
Note 3 - Short-Term Borrowing
The Company has a $600,000 line of credit from a bank with a variable
interest rate of prime +1.5%, maturing December 1996. The note is secured by
receivables, inventory, and equipment.
-6-
<PAGE>
Item 2. Management's Discussion and Analysis.
The following discussion and analysis should be read in conjunction
with the Financial Statements and the Notes thereto and other financial
information included elsewhere in this Prospectus. The discussion of results and
trends does not necessarily imply that these results and trends will continue.
Overview
Comparing the first six months of 1996 to the same period in 1995,
gross sales are up 14.1%, cost of goods sold is down 4.1%, and gross profit is
up 40.0%. The bankruptcy of a distributor, increased promotional and labor
expenses associated with the operation of The Hopland Brewery brewpub and
merchandise store, and increased marketing expenses resulted in a 39.4% increase
in operating expenses but only $7,200 in additional losses from operations
compared to the same period in 1995. The Company plans to continue marketing
activities at a high level and plans to continue promotional expenses at The
Hopland Brewery at current levels, but the Company will not incur any additional
losses attributable to the bankrupt distributor. Management's decision to write
off $38,000 in expenses incurred in exploring an alliance with a mid-western
distribution company (classified as "other expense"), when combined with a
$64,000 decrease in interest earnings as the Company spent the cash proceeds
from the public offering, further reduced pre-tax income to a $50,600 loss for
the first six months of 1996 compared to income of $32,500 for the same period
in 1995.
As a result of the above factors, net income for the six month period
was down $83,100 for a net loss of $50,624 compared to net income of $32,500 for
the same period in 1995. For at least the past three fiscal years, operating
results for the first two quarters have not been indicative of operating results
for the entire year. In 1995, net income for the first two quarters was 18.7% of
net income for the year; in 1994, it was 22.5%; and in 1993, it was 15.4% (on a
pro forma basis assuming that the Company, which was then organized as a limited
partnership, had paid income taxes at the corporate rates then in effect).
Operating results for the first two quarters of 1996 are not necessarily
indicative of operating results for the full year.
For fiscal year 1996, Mendocino Brewing expects to realize increases in
sales over 1995 of up to 25% as a result of the addition of a bottling tank to
its Hopland facility in September 1995, which increased then current capacity by
32%. Management expects that by the time the Company reaches production of
60,000 bbl. per year at the Ukiah facility currently under construction,
depending on the mix of bottled and draft beer produced and future pricing,
annual sales could triple from 1995 levels. These forward looking statements are
subject to risks and uncertainties. The Company's actual results could differ
materially if, among other causes, the Company fails to complete construction of
the new brewery on time, fails to sell its increased production, materially
reduces the price of its products, experiences unanticipated difficulty in
transferring bottling operations from Hopland to Ukiah, or experiences any of
the other circumstances discussed in "Risk Factors" in the Company's Prospectus
dated June 15, 1994.
Results of Operations:
Six Months Ending June 30, 1996 Compared to Six Months Ending June 30,
1995. The following discussion sets forth information for the six month periods
ending June 30, 1995 and 1996. This information has been derived from unaudited
interim financial statements of the Company contained elsewhere herein and
reflects, in Management's opinion, all adjustments, consisting only of normal
recurring adjustments, necessary for a fair presentation of the results of
operations for these periods. Results of operations for any interim period are
not necessarily indicative of results to be expected for the full fiscal year.
The following table sets forth, as a percentage of sales, certain items
included in the Company's Statements of Income, see Financial Statements
elsewhere in this Report, for the periods indicated:
Six Months Ended June 30,
----------------------------
1996 1995
------------ ------------
Statements of Income Data:
Sales ....................................... 103.86% 104.65%
Excise taxes ................................ 3.86 4.65
Net sales ................................... 100.00 100.00
Costs of sales .............................. 47.30 56.71
Gross profit ................................ 52.70 43.29
Retail operating expense .................... 20.23 17.55
Marketing expense ........................... 15.91 7.89
General and administrative expense .......... 18.45 19.57
Total operating expenses .................... 54.59 45.01
Loss from operations ........................ (1.89) (1.72)
Other income ................................ (1.99) 5.05
Income (loss) before income taxes ........... (3.88) 3.32
Provision for (benefit from )income taxes ... (1.12) 1.30
Net income (loss) ........................... (2.75) 2.03
At June 30,
------------------------------
1996 1995
------------- -------------
Balance Sheet Data:
Cash and cash equivalents ............ $ 21,226 $ 2,846,009
Working capital (deficit)............. (2,215,297) 3,126,836
Property and equipment ............... 6,947,661 1 545,669
Deposits and other assets ............ 98,413 63,381
Total assets ......................... 8,214,877 5,004,927
Long-term debt ....................... 550,652 483,642
Total liabilities .................... 3,841,377 722,039
Shareholders' equity ................. 4,373,500 4,282,888
Sales. Sales increased 14.1% from $1,675,200 for the six month period
ended June 30, 1995 to $1,911,400 for the comparable period in 1996. Growth in
sales was attributable to changes in the brewing process implemented in
September 1995, in which a 24 hour brewing schedule and an additional bottling
tank enabled production to increase. A decrease in sales in the first quarter of
1996 compared to 1995 was offset by an increase in sales in the second quarter
of 1996 compared to 1995. Management attributes the decrease in the first
quarter of 1996 to delays in implementing a new marketing plan, the effects of
seasonality, and increased competition within the domestic craft beer segment.
Increased sales in the second quarter of 1996 are attributed to the
implementation of a new marketing plan plus expansion into new geographic
market. Management attributes approximately half of the sales increase in the
second quarter to increased sales to existing distributors with the other half
attributable to geographic expansion. The Company anticipates that the beer
inventory built up in the first quarter of 1996 will be used to meet increased
demand during the summer months. Retail sales at The Hopland Brewery brewpub and
merchandise store increased 6.0% from the six month period ended June 30, 1995
to the comparable period in 1996. Management attributes the increase to an
increased awareness of MBC's products as a result of the direct public offering
completed in February 1995.
Cost of goods sold. Cost of goods sold decreased as a percentage of net
sales 9.41 percentage points from the six month period ended June 30, 1995 to
the same period in 1996. The implementation of 24-hour brewing in September 1995
significantly improved production efficiencies. The cost of bottles also dropped
in the third quarter of 1995.
Gross profit. Gross profit increased 40.0% from $693,000 for the six
month period ended June 30, 1995 to $970,000 for the comparable period in 1996.
Operating expenses. Operating expenses increased 39.4% from $720,500
for the six month period ended June 30, 1995 to $1,004,700 for the comparable
period in 1996. Several factors contributed to the increases. Marketing expenses
increased partly because of the increase in production that occurred in
September 1995 and partly in anticipation of opening the new brewery. Management
expects to further increase marketing expenses in the balance of 1996 and into
1997. Marketing expenses take the form of point of sales and promotional costs,
periodic price discount specials to distributors, and marketing labor. Retail
operating expense increased due primarily to higher labor costs and increased
promotional expenses. Management expects promotional expenses for retail
operations to continue at current levels. The Company wrote off $38,000 in bad
debts in the second quarter after a distributor went out of business. Finally,
general and administrative expense increased due to administrative labor (human
resources and shareholder relations) and legal fees related to trademark issues.
Other income (expense). Other income (expense) decreased by $117,300 in
the six months ended June 30, 1996 compared to the same period for 1995
primarily as a result of a write-off of approximately $38,000 in expenses
incurred in exploring an alliance with a mid-western distribution company and a
decrease of $64,000 in interest earnings as cash from the initial direct public
offering was used for the expansion project.
Balance Sheet. Cash and cash equivalents decreased in the six months of
1996 compared to 1995 due to the on going construction and equipment costs of
the new brewery expansion. Management presently estimates that construction
which began in September 1995 will take approximately twelve months to complete.
A $492,872 loan from owner of the property enabled the Company to purchase the
eight acres selected as the new brewery site from the Redevelopment Agency of
Ukiah. The note is due in monthly installments of $4,435 including interest at
9%, matures in June 1997, and is secured by real property. A loan from the same
owner of the property for $76,230 enabled the Company to exercise an option to
purchase an additional one acre of land adjacent to the above eight acre parcel
in November 1995. The note is due in full December, 1998, plus accrued interest
at 9%. Short term borrowing from the Savings Bank of Mendocino County for
$400,000 (obtained in March 1996 at an interest rate of 10.25%) was repaid in
full in April 1996. The Company obtained short term borrowing from WestAmerica
Bank for $600,000 (at a variable interest rate of prime + 1.5%), $240,000 of
which was unused at June 30, 1996. After June 30, 1996, the Company prepaid
$300,000 on the two real estate purchase notes and the lender agreed to
subordinate the notes to permanent financing for the new brewery and to an
anticipated $1 million SBA loan. The Company borrowed $60,000 from BDM
Construction Co. Inc. at 12% per annum due August 31, 1996 to fund the
prepayment.
Liquidity and Capital Resources. The Company has yet to secure
permanent financing for the new brewery in the amount of approximately
$3,700,000 for the construction of the building and $2,100,000 for the
acquisition of brewing equipment. Management expects the financing to be
completed during the third quarter. This forward looking statement is subject to
risks and uncertainties. The financing might not be completed in the third
quarter, or at all, if the presently contemplated funding sources impose
conditions the Company is not able to meet or otherwise fail to provide expected
financing.
PART II
Item 3. Submission of Matters to a Vote of Security Holders.
The Company held its annual meeting of shareholders in Ukiah,
California, on May 22, 1996. Votes were cast for the election of directors to
serve until their successors are elected at the next annual meeting of the
Company as follows:
Candidate Votes For Votes Withheld
- --------- --------- --------------
H. Michael Laybourn 1,653,170 780
Norman H. Franks 1,653,170 780
Michael F. Lovett 1,653,170 780
Eric G. Bradley 1,653,170 780
Daniel R. Moldenhauer 1,653,070 880
The shareholders also ratified the appointment of Moss Adams as the Company's
independent auditors for 1996 by a vote of 1,646,573 for, 1,000 against, and
6,377 abstain.
Item 6. Exhibits and Reports on Form 8-K.
Exhibit
Number Description of Document
- ---------- -----------------------
3.1 Restated Articles of Incorporation, as amended, of the Company
(Incorporated by reference from the Company's Registration
Statement dated June 15, 1994, as amended, previously filed
with the Commission, Registration No. 33-78390-LA.)
3.2 Bylaws of the Company (Incorporated by referenced from the
Company's Report on Form 10-KSB for the annual period ended
December 31, 1994 previously filed with the Commission.)
4.1 Articles 5 and 6 of the Restated Articles of Incorporation, as
amended, of the Company (Reference is made to Exhibit 3.1)
4.2 Article 10 of the Restated Articles of Incorporation, as
amended, of the Company (Reference is made to Exhibit 3.2)
19.1 Construction agreement with BDM Construction Company, Inc.
19.2 $60,000 Note payable to BDM Construction Company, Inc.
19.3 Agreement to modify note and deed of trust dated June 6, 1995
with Langley, et al.
19.4 Agreement to modify note dated June 6, 1995 with Langley, et
al.
19.5 Amendment to installment note payable to Langley, et al.
19.6 Manufacturing Business Expansion and Relocation Agreement with
the City of Ukiah
19.7 Manufacturing Business Expansion and Relocation Agreement with
the Ukiah Redevelopment Agency
19.8 Consulting Agreement with Daniel R. Moldenhauer
19.9 Commitment Letter from the Savings Bank of Mendocino County
27 Financial Data Schedule
No reports on Form 8-K were filed during the quarter for which this report
is filed.
SIGNATURE
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereto duly
authorized.
Mendocino Brewing Company, Inc.
(Registrant)
Date August 13, 1996 /s/ H. Michael Laybourn
---------------------------- -----------------------------------------
H. Michael Laybourn, President
Date August 13, 1996 /s/ Norman H. Franks
---------------------------- -----------------------------------------
Norman H. Franks, Chief Financial Officer
Standard Form of Agreement Between Owner and Contractor where the basis of
payment is a Stipulated Sum
AGREEMENT
made as of the 28th day of August in the year of Nineteen Hundred and
Ninety-Five
BETWEEN the Owner:
Mendocino Brewing Company
P.O. Box 400
Hopland, CA 95449
and the Contractor:
BDM Construction Company, Inc.
835 Piner Road, Suite D
Santa Rosa, CA 95403
The Project is:
Mendocino Brewing Company
1875 Airport Road
Ukiah, CA 95482
The Architect is:
Victor F. Lopes
2606 East Side Road
Ukiah, CA 95482
The Owner and Contractor agree as set forth below.
ARTICLE 1
THE CONTRACT DOCUMENTS
The Contract Documents consist of this Agreement, Conditions of the Contract
(General, Supplementary and other Conditions), Drawings, Specifications, addenda
issued prior to execution of this Agreement, other documents listed in this
Agreement and Modifications issued after execution of this Agreement; these form
the Contract, and are as fully a part of the Contract as if attached to this
Agreement or repeated herein. The Contract represents the entire and integrated
agreement between the parties hereto and supersedes prior negotiations,
representations or agreements, either written or oral. An enumeration of the
Contract Documents, other than Modifications, appears in Article 9.
ARTICLE 2
THE WORK OF THIS CONTRACT
The Contractor shall execute the entire Work described in the Contract
Documents, except to the extent specifically indicated in the Contract Documents
to be the responsibility of others, or as follows:
The Project is to build a building to house a beer brewery with appropriate
loading docks and rams, maintenance building, parking, landscaping and roadways,
all as more particularly outlined in those general conceptual drawings by Victor
F. Lopes, Architect, of Ukiah, CA and identified as site development permit
project data vicinity map, site plan and exterior elevations all dated May 17,
1995 and identified as sheets A, B, and C. The Project will be more particularly
in accordance with working drawings to be prepared
<PAGE>
by Architect and provided to Contractor by Owner to construct the Project as
identified above.
ARTICLE 3
DATE OF COMMENCEMENT AND SUBSTANTIAL COMPLETION
3.1 The date of commencement is the date from which the Contract Time of
Paragraph
3.2 is measured, and shall be the date of this Agreement, as first written
above, unless a different date is stated below or provision is made for the date
to be fixed in a notice to proceed issued by the Owner.
Unless the date of commencement is established by a notice to proceed issued by
the Owner, the Contractor shall notify the Owner in writing not less than five
days before commencing the Work to permit the timely filing of mortgages,
mechanic's liens and other security interests.
3.2 The Contractor shall achieve Substantial Completion of the entire Work not
later than September 1, 1996, subject to adjustments of this Contract Time as
provided in the Contract Documents.
ARTICLE 4
CONTRACT SUM
4.1 The Owner shall pay the Contractor in current funds for the Contractor's
performance of the Contract the Contract Sum of Six Million Two Hundred Six
Thousand Six Hundred Twenty Nine Dollars ($6,206,629.00), subject to additions
and deductions as provided in the Contract Documents.
4.2 The Contract Sum is based upon the following alternatives, if any, which are
described in the Contract Documents and are hereby accepted by the Owner: See
Exhibit 'B' - Exhibit 'B', the Estimate Summary represents the Contractors
estimated schedule of values for this project. It is hereby agreed that the
Contract Sum of $6,206,629.00 represents the total amount allocated for the
construction of the completed project as defined by the Contract Documents
(Exhibit 'A' and 'C'). This Contract Sum is not to be exceeded unless Owner
authorizes additional work in accordance with the General Conditions (AIA
Document A201). It is further agreed that any cost savings which exist after all
Subcontracts, Purchase Orders, and Labor are accounted for, will result in a
deductive Change Order to this Contract.
4.3 Unit prices, if any, are as follows: The following labor rates have been
established for this project:
A. Superintendent $45.00/hr.
B. Carpenters $36.00/hr.
C. Laborers $25.00/hr.
D. Fab Shop Labor $60.00/hr.
<PAGE>
ARTICLE 5
PROGRESS PAYMENTS
5.1 Based upon Applications for Payment submitted to the Owner by the
Contractor and the Owner shall make progress payments on account of the
Contract Sum to the Contractor as provided below and elsewhere in the
Contract Documents.
5.2 The period covered by each Application for Payment shall be one calendar
month ending on the last day of the month. Contractor agrees to furnish to
Owner, unless such requirement is waived in writing by Owner, releases of
claims for labor and material furnished on the job as of the date being
covered by the Progress Payment, or for the entire job if for Final
Payment, and for subcontractors/materialmen performing work and/or
furnishing materials under this Agreement, all in the form specifically
provided by the Owner. Owner shall have the right, at any time, to make
checks for Progress Payments payable jointly to the Contractor and any of
his subcontractors, appropriate unions, material suppliers, labor or
equipment suppliers, and the same shall operate to discharge the obligation
for payment of the amount so paid by Owner to the Contractor. Any payment
made hereunder prior to completion and acceptance of the Work, shall not be
construed as evidence of acceptance of any part of Contractor's work, which
shall only be accepted pursuant to those provisions of the Contract
Documents pertaining to acceptance of the work.
5.3 Provided an Application for Payment is received by the Owner not later than
the 10th day of a month, the Owner shall make payment to the Contractor not
later than the 30th day of the same month. If an Application for Payment is
received by the Owner after the application date fixed above, payment shall
be made by the Owner not later than 30 days after the Owner receives the
Application for Payment.
5.4 Each Application for payment shall be based upon the Schedule of Values
submitted by the Contractor in accordance with the Contract Documents. The
Schedule of Values shall allocate the entire Contract Sum among the various
portions of the Work and be prepared in such form and supported by such
data to substantiate its accuracy as the Owner may require. This schedule,
unless objected to by the Owner, shall be used as a basis for reviewing the
Contractor's Applications for Payment.
5.5 Applications for Payment shall indicate the percentage of completion of
each portion of the Work as of the end of the period covered by the
Application for Payment.
5.6 Subject to the provisions of the Contract Documents, the amount of each
progress payment shall be computed as follows:
5.6.1. Take that portion of the Contract Sum properly allocable to completed
Work as determined by multiplying the percentage completion of each portion
of the Work by the share of the total Contract Sum allocated to that
portion of the Work in the Schedule of Values, less retainage of ten
percent (10%). Pending final determination of cost to the Owner of changes
in the Work, amounts not in dispute may be included as provided in
Subparagraph 7.3.7 of the General Conditions even though the Contract Sum
has not yet been adjusted by Change Order;
5.6.2. Add that portion of the Contract Sum properly allocable to materials and
equipment delivered and suitably stored at the site for subsequent
incorporation in the completed
<PAGE>
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%);
5.6.3. Subtract the aggregate of previous payments made by the Owner; and
5.6.4. Subtract amounts, if any, for which the Owner has withheld or nullified a
Certificate for Payment as provided in Paragraph 9.5 of the General
Conditions.
5.7 The progress payment amount determined in accordance with Paragraph 5.6
shall be further modified under the following circumstances:
5.7.1 Add, upon Substantial Completion of the Work, a sum sufficient to
increase the total payments to Ninety percent (90%) of the Contract Sum,
less such amounts as the Owner ct shall determine for incomplete Work and
unsettled claims; and
5.7.2 Add, if final completion of the Work is thereafter materially delayed
through no fault of the Contractor, any additional amounts payable in
accordance with Subparagraph 9.10.3 of the General Conditions.
ARTICLE 6
FINAL PAYMENT
Final payment, constituting the entire unpaid balance of the Contract Sum, shall
be made by the Owner to the Contractor when (1) the Contract has been fully
performed by the Contractor including Punch List work except for the
contractor's responsibility to correct nonconforming Work as provided in
subparagraph 12.2.2 of the General Conditions and to satisfy other requirements,
if any, which necessarily survive final payment; and (2) a final Invoice for
Payment has been issued by the Contractor, such final payment shall be made by
the Owner not more than 30 days after the issuance of the Invoice for Payment,
or as follows: Thirty (30) days following Owner's receipt of the following: A.
Recordation of a Substantial Notice of Completion. B. Final Conditional Lien
Releases from subs, suppliers, and contractor.
ARTICLE 7
MISCELLANEOUS PROVISIONS
7.1. Where reference is made in this Agreement to a provision of the General
Conditions or another Contract Document, the reference refers to that
provision as amended or supplemented by other provisions of the Contract
Documents.
7.2. Payments due and unpaid under the Contract shall bear interest from the
date payment is due at the rate stated below, or in the absence thereof, at
the legal rate prevailing from time to time at the place where the Project
is located. (Insert rate of interest agreed upon, if any.)
7.3. Other provisions:
7.3.1 Cost of bonds, permits, fees, engineering, assessments, duties, utility
fees, testing, and inspections to be paid by Owner
7.3.2 Auto parking section to be 2" of AC over 6" of base. Truck areas to be 3"
A.C. over 11" of base.
7.3.3 All offsite work to be excluded.
7.3.4 Future bar is NIC.
7.3.5 2nd floor is unfinished.
<PAGE>
7.3.6 Bell tower is NIC.
7.3.7 Preparation of Subgrade for 37 auto parking lot at the North-East is
included in this contract. The Base and Paving is NIC.
7.3.8 Roof structure over SBR is NIC.
7.3.9 The following allowances exist for scopes of work which need to be
defined: Blower Room (24,000), Sludge Tank (5,000), Offsite Electrical (30,000),
Plumbing at Bottle/Keg (60,000), Electrical at Bottle/Keg (50,000), Filler Room
(35,000), and Casework (22,000).
7.3.10 Owner agrees to indemnify Contractor and its subcontractors from any
claims, costs, and liability relating to hazardous substances on the property
that are not generated, transported, or disposed of by Contractor.
ARTICLE 8
TERMINATION OR SUSPENSION
8.1 The Contract may be terminated by the Owner or the Contractor as provided
in Article 14 of the General Conditions.
8.2 The Work may be suspended by the Owner as provided in Article 14 of the
General Conditions.
ARTICLE 9
ENUMERATION OF CONTRACT DOCUMENTS
9.1 The Contract Documents, except for Modifications issued after execution of
this Agreement, are enumerated as follows:
9.1.1 The Agreement is this executed Standard Form of Agreement Between Owner
and Contractor, AIA Document A101, 1987 Edition.
9.1.2 The General Conditions are the General Conditions of the Contract for
Construction, AIA Document A201, 1987 Edition.
9.1.3 The Supplementary and other Conditions of the Contract are those contained
in the Project Manual dated and are as follows: See Exhibit 'A'
9.1.4 The Specifications are those contained in the Project Manual dated as in
Subparagraph 9.1.3, and are as follows: See Exhibit 'A'
9.1.5 The Drawings are as follows, and are dated, unless a different date is
shown below: See Exhibit 'A'
9.1.6 The addenda, if any, are as follows: See Exhibit 'A' Portions of addenda
relating to bidding requirements are not part of the Contract Documents unless
the bidding requirements are also enumerated in this Article 9.
9.1.7 Other documents, if any, forming part of the Contract Documents are as
follows: Exhibit 'A' (4 pages), Exhibit 'B' (1 page), and Exhibit 'C' (1 page)
are hereby enumerated as contract documents. 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
lender, and the remainder to the Owner.
<PAGE>
OWNER CONTRACTOR
- --------------------------- ----------------------------
(Signature) (Signature)
- --------------------------- ----------------------------
Mendocino Brewing Company BDM Construction
Company Inc.
<PAGE>
EXHIBIT 'A'
VICTOR FERNANDO LOPES, ARCHITECT
A-1 TITLE SHEET AND DRAWING INDEX 12/28/95
A-2 VICINITY MAP AND PROJECT DATE 12/28/95
A-3 SITE PLAN 12/28/95
A-4 BREWERY FLOOR PLAN 4/15/96
A-5 ADMINISTRATION FIRST FLOOR PLAN 4/15/96
A-5.1 ADMINISTRATION FIRST REFLECTED CEILING PLAN 4/15/96
A-6 ADMINISTRATION MEZZANINE FLOOR PLAN 4/15/96
A-7 EXTERIOR ELEVATIONS - PHASE 1 4/15/96
A-8 BUILDING SECTIONS 4/15/96
A-9 BUILDING SECTIONS 4/15/96
A-10 INTERIOR FINISH SCHEDULE 4/15/96
A-11 EXTERIOR FRAMING DETAILS 4/15/96
A-12 EXTERIOR FRAMING DETAILS 4/15/96
A-13 EXTERIOR FRAMING DETAILS 4/15/96
B-1 BASEMENT FOUNDATION PLAN 12/28/95
B-2 STRUCTURAL SECTIONS AND DETAILS 12/28/95
B-3 STRUCTURAL DETAILS 12/28/95
G-1 GRADING PLAN 12/28/95
G-2 GRADING SECTIONS 12/28/95
S-1 FOUNDATION PLAN 4/24/96
S-2 FLOOR PLAN 4/24/96
S-3 FOOTING SCHEDULE 4/24/96
S-4 FOUNDATION DETAILS 4/24/96
S-5 FOUNDATION DETAILS 4/24/96
S-6 FOUNDATION DETAILS 12/28/95
<PAGE>
Page 1 of 4
SUMMIT ENGINEERING, INC.
CONSULTING CIVIL ENGINEERS
C-1 PW GRADING AND DRAINAGE PLAN 11/10/95
S-1 GENERAL NOTES & ABBREVIATIONS 10/25/95
S-2 STRUCTURAL PLANS 10/18/95
S-3 STANDARD DETAILS 10/18/95
S-4 STRUCTURAL DETAILS 10/25/95
S-5 STRUCTURAL DETAILS 10/18/95
PW-1 ABBREVIATIONS, SYMBOLS & KEY MAP 10/18/95
PW-2 PWI-PWE AREA PLANS & SECTIONS 10/18/95
PW-3 BLOWER BLDG & A.A. PIPING 11/4/95
PW-4 SLUDGE STORAGE TANKS 10/18/95
PW-5 SECTIONS AND DETAILS 10/18/95
PW-6 SECTIONS AND DETAILS 10/18/95
VARCO-PRUDEN BUILDINGS
JOB NO. 51746
DRAWINGS #1 THRU #106
<PAGE>
PAGE 2 OF 4
COSTA ENGINEERS INC.
MECHANICAL ENGINEERING
M-1 MECHANICAL FLOOR PLAN 11/13/95
M-2 MECHANICAL PLAN 11/13/95
M-3 PARTIAL PLAN - MECHANICAL 11/13/95
M-4 PARTIAL PLAN - MECHANICAL 11/13/95
M-5 MECHANICAL SCHEDULES & LEGENDS 11/14/95
M-6 MECHNICAL DETAILS 11/14/95
M-7 MECHANICAL DETAILS 11/13/95
E-8 FIRE ALARM/LIGHTING CONTROL 11/13/95
P-1 PLUMBING FLOOR PLAN 11/13/95
P-2 PLUMBING FLOOR PLAN 11/13/95
P-3 PLUMBING FLOOR PLAN 11/13/95
P-4 PLUMBING FLOOR PLAN 11/13/95
P-5 PARTIAL PLUMBING PLAN 11/13/95
P-6 PARTIAL PLUMBING PLAN 11/13/95
P-7 PLUMBING SCHEDULES, ETC. 11/13/95
P-8 PLUMBING DETAILS 11/13/95
P-9 PLUMBING DETAILS 11/13/95
HANSEN & SLAUGHTER, INC.
ELECTRICAL ENGINEERING
E-1 SCHEDULES, DETAILS AND NOTES 11/13/95
E-2 SITE PLAN 11/13/95
E-3 BUILDING FLOOR PLAN LIGHTING 11/13/95
E-4 BUILDING FLOOR PLAN POWER 11/13/95
E-5 OFFICE FLOOR PLAN LIGHTING 11/13/95
E-6 OFFICE FLOOR PLAN POWER 11/13/95
E-7 SINGLE LINE DIAGRAM 11/13/95
E-8 FIRE ALARM/LIGHTING CONTROL 11/13/95
E-9 SCHEDULES 11/13/95
E-10 SCHEDULES 11/13/95
E-11 SCHEDULES 11/13/95
<PAGE>
PAGE 3 OF 4
SIERRA DESIGN & MANUFACTURING
1545-5 FLOOR DRAIN LAYOUT
10/14/95
1545-11 22 oz. BOTTLING LINE LAYOUT #8
10/7/95
1545-12 22 oz. BOTTLING LINE ELECTRICAL
10/8/95
1545-14 12, 22 oz. & KEG LINES
10/14/95
1545-16 22 oz. FILLER ROOM
10/7/95
1545-17 22 oz. BOTTLING LINE UTILITIES
10/5/95
1545-18 KEG LINE UTILITIES
10/20/95
AQUA AEROBICS
8107764 TITLE PAGE
10/13/95
8107764-1 SHEET 1
10/6/95
8107764-2 SHEET 2
10/3/95
8107764-3 SHEET 3
10/4/95
8107764-4 SHEET 4
10/5/95
8107764-5 SHEET 5
10/5/95
8107764-6 SHEET 6
10/5/95
8107764-7 SHEET 7
10/6/95
8107764-8 SHEET 8
10/4/95
<PAGE>
8107764-9 SHEET 9
10/5/95
94749041-1 SHEET 1
10/11/95
94749041-2 SHEET 2
10/11/95
94749041-3 SHEET 3
10/11/95
94749041-4 SHEET 4
10/11/95
94749041-5 SHEET 5
10/11/95
94749041-6 SHEET 6 10/95
94749041-7 SHEET 7 10/95
INDUSTRIAL REFRIGERATION & PROCESS PIPING, INC.
R-1 REFRIGERANT EQUIPMENT SCHEDULES
10/20/95
R-2 REFRIGERATION PACKAGE BASE DESIGN
9/28/95
R-3 REFRIGERATION PIPING & EQUIPMENT LAYOUT
10/20/95
R-4 CHILLER PACKAGE CONDENSER LAYOUT
10/20/95
R-5 BLDG. SECTIONS W/ REFRIGERATION EQUIPMENT
10/20/95
PAGE 4 OF 4
<PAGE>
Exhibit 'B' - Phase 1
- ----------------- ----------------------------------- --------------------------
ITEM DESCRIPTION BUDGET 05/13/96
- ----------------- ----------------------------------- --------------------------
1 JOB OVERHEAD 281,354.00
- ----------------- ----------------------------------- --------------------------
2 SITEWORK 150,000.00
- ----------------- ----------------------------------- --------------------------
SURVEY CONTROL 5,000.00
- ----------------- ----------------------------------- --------------------------
PAVING 187,000.00
- ----------------- ----------------------------------- --------------------------
STRIPING & BUMPERS 741.00
- ----------------- ----------------------------------- --------------------------
FIRE PROTECTION YARD PIPING 18,600.00
- ----------------- ----------------------------------- --------------------------
STORM DRAINAGE 16,000.00
- ----------------- ----------------------------------- --------------------------
DOMESTIC SEWER SYSEM 3,000.00
- ----------------- ----------------------------------- --------------------------
WASTE WATER SYSTEM (AQUA AEROBICS) 182,000.00
- ----------------- ----------------------------------- --------------------------
BLOWER ROOM 24,000.00
- ----------------- ----------------------------------- --------------------------
SLUDGE TANK 5,000.00
- ----------------- ----------------------------------- --------------------------
UTILITY CHASES 1,200.00
- ----------------- ----------------------------------- --------------------------
DOMESTIC WATER (SITE) 1,500.00
- ----------------- ----------------------------------- --------------------------
SITE CONCRETE 90,000.00
- ----------------- ----------------------------------- --------------------------
LANDSCAPE & IRRIGATION (ALLOW) 80,000.00
- ----------------- ----------------------------------- --------------------------
FENCING 15,000.00
- ----------------- ----------------------------------- --------------------------
SIGNAGE (ALLOW) 1,000.00
- ----------------- ----------------------------------- --------------------------
6 BUILDING CONCRETE 871,932.00
- ----------------- ----------------------------------- --------------------------
10 CARPENTRY 91,498.00
- ----------------- ----------------------------------- --------------------------
11 MILLWORK 17,162.00
- ----------------- ----------------------------------- --------------------------
CASEWORK (ALLOW) 22,000.00
- ----------------- ----------------------------------- --------------------------
WOOD DOORS 11,137.00
- ----------------- ----------------------------------- --------------------------
12 FINISH HARDWARE 18,562.00
- ----------------- ----------------------------------- --------------------------
13 STRUCTURAL STEEL 60,000.00
- ----------------- ----------------------------------- --------------------------
14 MISCELLANEOUS IRON 15,000.00
- ----------------- ----------------------------------- --------------------------
15 PRE-ENGINEERED COMPONENTS 478,987.00
- ----------------- ----------------------------------- --------------------------
ERECTION 175,000.00
- ----------------- ----------------------------------- --------------------------
16 HOLLOW METAL DOORS & FRAMES 15,795.00
- ----------------- ----------------------------------- --------------------------
TOILET PARTITIONS 3,800.00
- ----------------- ----------------------------------- --------------------------
ROLL-UP DOORS 15,400.00
- ----------------- ----------------------------------- --------------------------
17 ALUM, GLASS, GLAZING 63,000.00
- ----------------- ----------------------------------- --------------------------
18 CONCRETE TILE ROOF 39,500.00
- ----------------- ----------------------------------- --------------------------
<PAGE>
- ----------------- ----------------------------------- --------------------------
CAULKING & SEALANTS 2,000.00
- ----------------- ----------------------------------- --------------------------
19 FLASHING & SHEETMETAL 10,000.00
- ----------------- ----------------------------------- --------------------------
20 LATH & PLASTER 191,120.00
- ----------------- ----------------------------------- --------------------------
DRYWALL & METAL STUDS 126,260.00
- ----------------- ----------------------------------- --------------------------
21 ACOUSTICAL CEILING 8,208.00
- ----------------- ----------------------------------- --------------------------
INSULATION 40,356.00
- ----------------- ----------------------------------- --------------------------
22 QUARRY TILE 34,000.00
- ----------------- ----------------------------------- --------------------------
CERAMIC TILE 31,600.00
- ----------------- ----------------------------------- --------------------------
23 CARPET 7,599.00
- ----------------- ----------------------------------- --------------------------
SHEETVINYL & RUBBER BASE 9,530.00
- ----------------- ----------------------------------- --------------------------
EPOXY FLOORING & WALLS 71,504.00
- ----------------- ----------------------------------- --------------------------
24 LADDER & HATCH 1,500.00
- ----------------- ----------------------------------- --------------------------
TOILET ACCESSORIES 4,950.00
- ----------------- ----------------------------------- --------------------------
LOCKERS 4,750.00
- ----------------- ----------------------------------- --------------------------
DOCK LEVELORS 17,000.00
- ----------------- ----------------------------------- --------------------------
FILLER ROOM 35,000.00
- ----------------- ----------------------------------- --------------------------
25 PAINTING 52,000.00
- ----------------- ----------------------------------- --------------------------
VINYL WALL COVERING 3,070.00
- ----------------- ----------------------------------- --------------------------
26 PLUMBING 384,000.00
- ----------------- ----------------------------------- --------------------------
PLUMBING AT BOTTLING/KEG 60,000.00
- ----------------- ----------------------------------- --------------------------
HVAC 166,584.00
- ----------------- ----------------------------------- --------------------------
REFRIGERATION 116,832.00
- ----------------- ----------------------------------- --------------------------
27 ELECTRICAL 520,000.00
- ----------------- ----------------------------------- --------------------------
OFFSITE ELECTRICAL 30,000.00
- ----------------- ----------------------------------- --------------------------
ELECTRICAL AT BOTTLING/KEG 50,000.00
- ----------------- ----------------------------------- --------------------------
28 FIRE SPRINKLERS 41,120.00
- ----------------- ----------------------------------- --------------------------
29 FRP PANELS 103,250.00
- ----------------- ----------------------------------- --------------------------
TREE PRUNING 10,657.00
- ----------------- ----------------------------------- --------------------------
TEMP ACCESS ROAD 5,587.00
- ----------------- ----------------------------------- --------------------------
PRECISION/SET EQUIPMENT 35,000.00
- ----------------- ----------------------------------- --------------------------
TEGRA 18,548.00
- ----------------- ----------------------------------- --------------------------
SCHRAM 500,000.00
- ----------------- ----------------------------------- --------------------------
DEWATERING 28,000.00
- ----------------- ----------------------------------- --------------------------
GENERATOR 10,000.00
- ----------------- ----------------------------------- --------------------------
PERMITS, FEES, ENGINEERING,ETC. 32,770.00
- ----------------- ----------------------------------- --------------------------
MARK-UP 483,666.00
- ----------------- ----------------------------------- --------------------------
TOTAL BUDGET $6,206,629.00
- ----------------- ----------------------------------- --------------------------
<PAGE>
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 other Conditions), Drawings, Specifications, addenda issued prior to
execution of the Contract, other documents listed in the Agreement and
Modifications issued after execution of the Contract. A Modification is (1) a
written amendment to the Contract signed by both parties, (2) a Change Order,
(3) a Construction Change Directive or (4) a written order for a minor change in
the Work issued by the Architect. Unless specifically enumerated in the
Agreement, the Contract Documents do not include other documents such as bidding
requirements (advertisement or invitation to bid, Instructions to Bidders,
sample forms, the Contractor's bid or portions of addenda relating to bidding
requirements).
1.1.2 THE CONTRACT
The Contract Documents form the Contract for Construction. The Contract
represents the entire and integrated agreement between the parties hereto and
supersedes prior negotiations, representations or agreements, either written or
oral. The Contract may be
<PAGE>
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 the 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.
<PAGE>
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 and other documents prepared by the Architect, and unless
otherwise indicated the Architect shall be deemed the author of them and will
retain all common law, statutory and other reserved rights, in addition to the
copyright. All copies of them, except the Contractor's record set, shall be
returned or suitably accounted for to the Architect, on request, upon completion
of the Work. The Drawings, Specifications and other documents prepared by the
Architect, and copies thereof furnished to the Contractor, are for use solely
with respect to this Project. They are not to be used by the Contractor or any
Subcontractor, Sub-subcontractor or material or equipment supplier on other
projects or for additions to this Project outside the scope of the Work without
the specific written consent of the Owner and Architect. The Contractor,
Subcontractors, Sub-subcontractors and material or equipment suppliers are
granted a limited license to use and reproduce applicable portions of the
Drawings, Specifications and other documents prepared by the Architect
appropriate to and for use in the execution of their Work under the Contract
Documents. All copies made under this license shall bear the statutory copyright
notice, if any, shown on the Drawings, Specifications and other documents
prepared by the Architect. Submittal or distribution to meet official regulatory
requirements or for other purposes in connection with this Project is not to be
construed as publication 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.
<PAGE>
ARTICLE 2
OWNER
2.1 DEFINITION
2.1.1 The Owner is the person or entity identified as such in the Agreement and
is referred to throughout the Contract Documents as if singular in number.
The term "Owner" means the Owner or the Owner's authorized representative.
2.1.2 The Owner upon reasonable written request shall furnish to the Contractor
in writing information which is necessary and relevant for the Contractor
to evaluate, give notice of or enforce mechanic's lien rights. Such
information shall include a correct statement of the record legal title to
the property on which the Project is located, usually referred to as the
site, and the Owner's interest therein at the time of execution of the
Agreement and, within five days after any change, information of such
change in title, recorded or unrecorded.
2.2 INFORMATION AND SERVICES REQUIRED OF THE OWNER
2.2.1 The Owner shall, at the request of the Contractor, prior to execution of
the Agreement and promptly from time to time thereafter, furnish to the
Contractor reasonable evidence that financial arrangements have been made
to fulfill the Owner's obligations under the Contract. [Note: Unless such
reasonable evidence were furnished on request prior to the execution of the
Agreement, the prospective contractor would not be required to execute the
Agreement or to commence the Work.]
2.2.2 The Owner shall furnish surveys describing physical characteristics, legal
limitations and utility locations for the site of the Project, and a legal
description of the site.
2.2.3 Except for permits and fees which are the responsibility of the Contractor
under the Contract Documents, the Owner shall secure and pay for necessary
approvals, easements, assessments and charges required for construction,
use or occupancy of permanent structures or for permanent changes in
existing facilities.
2.2.4 Information or services under the Owner's control shall be furnished by
the Owner with reasonable promptness to avoid delay in orderly progress of
the Work.
2.2.5 Unless otherwise provided in the Contract Documents, the Contractor will
be furnished, free of charge, such copies of Drawings and Project Manuals
as are reasonably necessary for execution of the Work.
2.2.6 The foregoing are in addition to other duties and responsibilities of the
Owner enumerated herein and especially those in respect to Article 6
(Construction by Owner or by Separate Contractors), Article 9 (Payments and
Completion) and Article 11 (Insurance and Bonds).
2.3 OWNER'S RIGHT TO STOP THE WORK
2.3.1 If the Contractor fails to correct Work which is not in accordance with
the requirements of the Contract Documents as required by Paragraph 12.2 or
persistently fails to carry out Work in accordance with the Contract
Documents, the Owner, by written order signed personally or by an agent
specifically so empowered by the Owner in writing, may order the Contractor
to stop the Work, or any portion thereof, until the cause for such order
has been eliminated; however, the right of the Owner to stop the Work shall
not give rise to a duty on the part of the Owner to exercise this
<PAGE>
right for the benefit of the Contractor or any other person or entity,
except to the extent required by Subparagraph 6.1.3.
2.4 OWNER'S RIGHT TO CARRY OUT THE WORK
2.4.1 If the Contractor defaults or neglects to carry out the Work in accordance
with the Contract Documents and fails within a seven-day period after receipt of
written notice from the Owner to commence and continue correction of such
default or neglect with diligence and promptness, the Owner may after such
seven-day period give the Contractor a second written notice to correct such
deficiencies within a second seven-day period. If the Contractor within such
second seven-day period after receipt of such second notice fails to commence
and continue to correct any deficiencies, the Owner may, without prejudice to
other remedies the Owner may have, correct such deficiencies. In such case an
appropriate Change Order shall be issued deducting from payments then or
thereafter due the Contractor the cost of correcting such deficiencies,
including compensation for the Architect's additional services and expenses made
necessary by such default, neglect or failure. Such action by the Owner and
amounts charged to the Contractor are both subject to prior approval of the
Architect. If payments then or thereafter due the Contractor are not sufficient
to cover such amounts, the Contractor shall pay the difference to the Owner.
ARTICLE 3
CONTRACTOR
3.1 DEFINITION
3.1.1 The Contractor is the person or entity identified as such in the Agreement
and is referred to throughout the Contract Documents as if singular in number.
The term "Contractor" means the Contractor or the Contractor's authorized
representative.
3.2 REVIEW OF CONTRACT DOCUMENTS AND FIELD CONDITIONS BY CONTRACTOR
3.2.1 The Contractor shall carefully study and compare the Contract Documents
with each other and with information furnished by the Owner pursuant to
Subparagraph 2.2.2 and shall at once report to the Architect errors,
inconsistencies or omissions discovered. The Contractor shall not be liable
to the Owner or Architect for damage resulting from errors, inconsistencies
or omissions in the Contract Documents unless the Contractor recognized
such error, inconsistency or omission and knowingly failed to report it to
the Architect. If the Contractor performs any construction activity knowing
it involves a recognized error, inconsistency or omission in the Contract
Documents without such notice to the Architect, the Contractor shall assume
appropriate responsibility for such performance and shall bear an
appropriate amount of the attributable costs for correction.
3.2.2 The Contractor shall take field measurements and verify field conditions
and shall carefully compare such field measurements and conditions and
other information known to the Contractor with the Contract Documents
before commencing activities. Errors, inconsistencies or omissions
discovered shall be reported to the Architect at once.
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3.2.3 The Contractor shall perform the Work in accordance with the Contract
Documents and submittals approved pursuant in Paragraph 3.12.
3.3 SUPERVISION AND CONSTRUCTION PROCEDURES
3.3.1 The Contractor shall supervise and direct the Work, using the Contractor's
best skill and attention. The Contractor shall be solely responsible for
and have control over construction means, methods, techniques, sequences
and procedures and for coordinating all portions of the Work under the
Contract, unless Contract Documents give other specific instructions
concerning these matters.
3.3.2 The Contractor shall be responsible to the Owner for acts and omissions of
the Contractor's employees, Subcontractors and their agents and employees,
and other persons performing portions of the Work under a contract with the
Contractor.
3.3.3 The Contractor shall not be relieved of obligations to perform the Work in
accordance with the Contract Documents either by activities or duties of
the Architect in the Architect's administration of the Contract, or by
tests, inspections or approvals required or performed by persons other than
the Contractor.
3.3.4 The Contractor shall be responsible for inspection of portions of Work
already performed under this Contract to determine that such portions are
in proper condition to receive subsequent Work.
3.4 LABOR AND MATERIALS
3.4.1 Unless otherwise provided in the Contract Documents, the Contractor shall
provide and pay for labor, materials, equipment, tools, construction
equipment and machinery, water, heat, utilities, transportation, and other
facilities and services necessary for proper execution and completion of
the Work, whether temporary or permanent and whether or not incorporated or
to be incorporated in the Work.
3.4.2 The Contractor shall enforce strict discipline and good order among the
Contractor's employees and other persons carrying out the Contract. The
Contractor shall not permit employment of unfit persons or persons not
skilled in tasks assigned to them.
3.5 WARRANTY
3.5.1 The Contractor warrants to the Owner and Architect that materials and
equipment furnished under the Contract will be of good quality and new unless
otherwise required or permitted by the Contract Documents, that the Work will be
free from defects not inherent in the quality required or permitted, and that
the Work will conform with the requirements of the Contract Documents. Work not
conforming to these requirements, including substitutions not properly approved
and authorized, may be considered defective. The Contractor's warranty excludes
remedy for damage or defect caused by abuse, modifications not executed by the
Contractor, improper or insufficient maintenance, improper operation, or normal
wear and tear under normal usage. If required by the Architect, the Contractor
shall furnish satisfactory evidence as to the kind and quality of materials and
equipment.
3.6 TAXES
3.6.1 The Contractor shall pay sales, consumer, use and similar taxes for the
Work or portions thereof provided by the Contractor which are legally
enacted when bids are
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received or negotiations concluded, whether or not yet effective or merely
scheduled to go into effect.
3.7 PERMITS, FEES AND NOTICES
3.7.1 Unless otherwise provided in the Contract Documents, the Owner shall
secure and pay for the building permit and other permits and governmental
fees, licenses and inspections necessary for proper execution and
completion of the Work which are customarily secured after execution of the
Contract and which are legally required when bids are received or
negotiations concluded.
3.7.2 The Contractor shall comply with and give notices required by laws,
ordinances, rules, regulations and lawful orders of public authorities
bearing on performance of the Work.
3.7.3 It is not the Contractor's responsibility to ascertain that the Contract
Documents are in accordance with applicable laws, statutes, ordinances,
building codes, and rules and regulations. However, if the Contractor
observes that portions of the Contract Documents are at variance therewith,
the Contractor shall promptly notify the Architect and Owner in writing,
and necessary changes shall be accomplished by appropriate Modification.
3.7.4 If the Contractor performs Work knowing it to be contrary to laws,
statutes, ordinances, building codes, and rules and regulations without
such notice to the Architect and Owner, the Contractor shall assume full
responsibility for such Work and shall bear the attributable costs.
3.8 ALLOWANCES
3.8.1 The Contractor shall include in the Contract Sum all allowances stated in
the Contract Documents. Items covered by allowances shall be supplied for
such amounts and by such persons or entities as the Owner may direct, but
the Contractor shall not be required to employ persons or entities against
which the Contractor makes reasonable objection.
3.8.2 Unless otherwise provided in the Contract Documents:
.1 materials and equipment under an allowance shall be selected
promptly by the Owner to avoid delay in the Work;
.2 allowances shall cover the cost to the Contractor of materials and
equipment delivered at the site and all required taxes, less
applicable trade discounts;
.3 Contractor's costs for unloading and handling at the site, labor,
installation costs, overhead, profit and other expenses contemplated
for stated allowance amounts shall be included in the Contract Sum and
not in the allowances;
.4 whenever costs are more than or less than allowances, the Contract
Sum shall be adjusted accordingly by Change Order. The amount of the
Change Order shall reflect (1) the difference between actual costs and
the allowances under Clause 3.8.2.2 and (2) changes in Contractor's
costs under Clause 3.8.2.3.
3.9 SUPERINTENDENT
3.9.1 The Contractor shall employ a competent superintendent and necessary
assistants who shall be in attendance at the Project site during performance of
the Work. The superintendent shall represent the Contractor, and communications
given to the superintendent shall be as binding as if given to the Contractor.
Important
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communications shall be confirmed in writing. Other communications shall be
similarly confirmed on written request in each case.
3.10 CONTRACTOR'S CONSTRUCTION SCHEDULES
3.10.1 The Contractor, within a reasonable time after receipt of the drawings
and specifications, 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 Subcontractor,
Sub-subcontractor, manufacturer, supplier or distributor to illustrate some
portion of the Work.
3.12.2 Product Data are illustrations, standard schedules, performance charts,
instructions, brochures, diagrams and other information furnished by the
Contractor to illustrate materials or equipment for some portion of the
Work.
3.12.3 Samples are physical examples which illustrate materials, equipment or
workmanship and establish standards by which the Work will be judged.
3.12.4 Shop Drawings, Product Data, Samples and similar submittals are not
Contract Documents. The purpose of their submittal is to demonstrate for
those portions of the Work for which submittals are required the way the
Contractor proposes to conform to the information given and the design
concept expressed in the Contract Documents. Review by the Architect is
subject to the limitations of Subparagraph 4.2.7.
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.
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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
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3.16.1 The Contractor shall provide the Owner and Architect access to the Work
in preparation and progress wherever located.
3.17 ROYALTIES AND PATENTS
3.17.1 The Contractor shall pay all royalties and license fees. The Contractor
shall defend suits or claims for infringement of patent rights and shall hold
the Owner and Architect harmless from loss on account thereof, but shall not be
responsible for such defense or loss when a particular design, process or
product of a particular manufacturer or manufacturers is required by the
Contract Documents. However, if the Contractor has reason to believe that the
required design, process or product is an infringement of a patent, the
Contractor shall be responsible for such loss unless such information is
promptly furnished to the Architect.
3.18 INDEMNIFICATION
3.18.1 To the fullest extent permitted by law, the Contractor shall indemnify
and hold harmless the Owner, Architect, 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.
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ARTICLE 4
ADMINISTRATION OF THE CONTRACT
4.1 ARCHITECT
4.1.1 The Architect is the person lawfully licensed to practice architecture or
an entity lawfully practicing architecture identified as such in the
Agreement and is referred to throughout the Contract Documents as if
singular in number. The term "Architect" means the Architect or the
Architect's authorized representative.
4.1.2 Duties, responsibilities and limitations of authority of the Architect as
set forth in the Contract Documents shall not be restricted, modified or
extended without written consent of the Owner, Contractor and Architect.
Consent shall not be unreasonably withheld.
4.1.3 In case of termination of employment of the Architect, the Owner shall
appoint an architect against whom the Contractor makes no reasonable
objection and whose status under the Contract Documents shall be that of
the former architect.
4.1.4 Disputes arising under Subparagraphs 4.1.2 and 4.1.3 shall be subject to
arbitration.
4.2 ARCHITECT'S ADMINISTRATION OF THE CONTRACT
4.2.1 The Architect will provide administration of the Contract as described in
the Contract Documents, and will be the Owner's representative (1) during
construction, (2) until final payment is due and (3) with the Owner's
concurrence, from time to time during the correction period described in
Paragraph 12.2. The Architect will advise and consult with the Owner. The
Architect will have authority to act on behalf of the Owner only to the extent
provided in the Contract Documents, unless otherwise modified by written
instrument in accordance with other provisions of the Contract.
4.2.2 The Architect will visit the site, as requested by Owner, 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. 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.
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4.2.5 Based on the Owner's observations and evaluations of the Contractor's
Applications for Payment, the Owner will review and certify the amounts due
the Contractor.
4.2.6 The Owner 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
Owner 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 Owner 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 Owner 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 of substantial completion
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 a set forth in an
exhibit to be incorporated in the Contract Documents.
4.2.11 Upon specific request of the Owner, the Owner will interpret and decide
matters concerning performance under and requirements of the Contract
Documents. 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
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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 Owner's decisions on matters relating to aesthetic effect will be
final if consistent with the intent expressed in the Contract Documents.
4.3 CLAIMS AND DISPUTES
4.3.1 Definition. A Claim is a demand or assertion by one of the parties
seeking, as a matter of right, adjustment or interpretation of Contract
terms, payment of money, extension of time or other relief with respect to
the terms of the Contract. The term "Claim" also includes other disputes
and matters in question between the Owner and Contractor arising out of or
relating to the Contract. Claims must be made by written notice. The
responsibility to substantiate Claims shall rest with the party making the
Claim.
4.3.3 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 arbitration, unless otherwise agreed in writing the Contractor shall
proceed diligently with performance of the Contract and the Owner shall continue
to make payments in accordance with the Contract Documents.
4.3.5 Waiver of Claims: Final Payment. The making of final payment shall
constitute a waiver of Claims by the Owner except those arising from:
.1 liens, Claims, security interests or encumbrances arising out of
the Contract and unsettled;
.2 failure of the Work to comply with the requirements of the Contract
Documents; or
.3 terms of special warranties required by the Contract Documents.
4.3.6 Claims for Concealed or Unknown Conditions. If conditions are encountered
at the site which are (1) subsurface or otherwise concealed physical conditions
which differ materially from those indicated in the Contract Documents or (2)
unknown physical conditions of an unusual nature, which differ materially from
those ordinarily found to exist and generally recognized as inherent in
construction activities of the character provided for in the Contract Documents,
then notice by the observing party shall be given to the other party promptly
before conditions are disturbed and in no event later than 21 days after first
observance of the conditions. The Architect will promptly investigate
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such conditions and, if they differ materially and cause an increase or decrease
in the Contractor's cost of, or time required for, performance of any part of
the Work, will recommend an equitable adjustment in the Contract Sum or Contract
Time, or both. If the Architect determines that the conditions at the site are
not materially different from those indicated in the Contract Documents and that
no change in the terms of the Contract is justified, the Architect shall so
notify the Owner and Contractor in writing, stating the reasons. Claims by
either party in opposition to such determination must be made within 21 days
after the Architect has given notice of the decision. If the Owner and
Contractor cannot agree on an adjustment in the Contract Sum or Contract Time,
the adjustment shall be referred to the Architect for initial determination,
subject to further proceedings pursuant to Paragraph 4.4.
4.3.7 Claims for Additional Cost. If the Contractor wishes to make Claim for an
increase in the Contract Sum, written notice as provided herein shall be given
before proceeding to execute the Work. Prior notice is not required for Claims
relating to an emergency endangering life or property arising under Paragraph
10.3. If the Contractor believes additional cost is involved for reasons
including but not limited to (1) a written interpretation from the Architect,
(2) an order by the Owner to stop the Work where the Contractor was not at
fault, (3) a written order for a minor change in the Work issued by the
Architect, (4) failure of payment by the Owner, (5) termination of the Contract
by the Owner, (6) Owner's suspension or (7) other reasonable grounds. Claim
shall be filed in accordance with the procedure established herein.
4.3.8 Claims for Additional Time
4.3.8.1 If the Contractor wishes to make Claim for an increase in the Contract
Time, written notice as provided herein shall be given. The Contractor's Claim
shall include an estimate of cost and of probable effect of delay on progress of
the Work. In the case of continuing delay only one Claim is necessary.
4.3.8.2 If adverse weather conditions are the basis for a Claim for additional
time, such Claim shall be documented by data substantiating that weather
conditions were abnormal for the period of time and could not have been
reasonably anticipated, and that weather conditions had an adverse effect on the
scheduled construction.
4.3.9 Injury or Damage to Person or Property. If either party to the Contract
suffers injury or damage to person or property because of an act or omission of
the other party, of any of the other party's employees or agents, or of others
for whose acts such party is legally liable, written notice of such injury or
damage, whether or not insured, shall be given to the other party within a
reasonable time not exceeding 21 days after first observance. The notice shall
provide sufficient detail to enable the other party to investigate the matter.
If a Claim for additional cost or time related to this Claim is to be asserted,
it shall be filed as provided in Subparagraphs 4.3.7 or 4.3.8.
4.4 RESOLUTION OF CLAIMS AND DISPUTES
4.4.1 The Architect will review Claims and take one or more of the following
preliminary actions within ten days of receipt of a Claim: (1) request
additional supporting data from the claimant, (2) submit a schedule to the
parties indicating when the Architect expects to take action, (3) reject the
Claim in whole or in part, stating reasons for rejection, (4) recommend approval
of the Claim by the other party or (5) suggest a compromise. The
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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 not been resolved, the Architect will prepare or obtain
appropriate documentation.
4.4.3 If a Claim has not been resolved, the party making the Claim shall, within
ten days after the Architect's preliminary response, take one or more of the
following actions: (1) submit additional supporting data requested by the
Architect, (2) modify the initial Claim or (3) notify the Architect that the
initial Claim stands.
4.4.4 If a Claim has not been resolved after consideration of the foregoing and
of further evidence presented by the parties or requested by the Architect, the
Architect will notify the parties in writing that the Architect's decision will
be made within seven days, which decision shall be final and binding on the
parties but subject to arbitration. Upon expiration of such time period, the
Architect will render to the parties the Architect's written decision relative
to the Claim, including any change in the Contract Sum or Contract Time or both.
If there is a surety and there appears to be a possibility of the Contractor's
default, the Architect may, but is not obligated to, notify the surety and
request the surety's assistance in resolving controversy.
4.5 ARBITRATION
4.5.1 Controversies and Claims Subject to Arbitration. Any controversy or Claim
arising out of or related to the Contract, or the breach thereof, shall be
settled by arbitration in accordance with the Construction Industry Arbitration
Rules of the American Arbitration Association, and judgment upon the award
rendered by the arbitrator or arbitrators may be entered in any court having
jurisdiction thereof, except controversies or Claims relating to aesthetic
effect and except those waived as provided for in Subparagraph 4.3.5. Such
controversies or Claims upon which the Architect has given notice and rendered a
decision as provided for in Subparagraph 4.4.4 shall be subject to arbitration
upon written demand of either party. Arbitration may be commenced when 45 days
have passed after the Claim has been referred to the Architect as provided in
Paragraph 4.3 and no decision has been rendered.
4.5.2 Rules and Notices for Arbitration. Claims between the Owner and Contractor
not resolved under Paragraph 4.4 shall, if subject to arbitration under
Subparagraph 4.5.1 be decided by arbitration in accordance with the Construction
Industry Arbitration Rules of the American Arbitration Association currently in
effect, unless the parties mutually agree otherwise. Notice of demand for
arbitration shall be filed in writing with the other party to the Agreement
between the Owner and Contractor and with the American Arbitration Association
or JAMS if agreed by the parties.
4.5.3 Contract Performance During Arbitration. During arbitration proceedings,
the Owner and Contractor shall comply with Subparagraph 4.3.4.
4.5.4 When Arbitration May Be Demanded
4.5.4.1
4.5.4.2 A demand for arbitration shall be made within the time limits specified
in Subparagraphs 4.5.1 and 4.5.4, and in other cases within a reasonable time
after the Claim has arisen, and in no event shall it be made after the date when
institution of legal
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or equitable proceedings based on such Claim would be barred by the applicable
statute of limitations as determined pursuant to Paragraph 13.7.
4.5.5 Limitation on Consolidation or Joinder. No arbitration shall include, by
consolidation or joinder or in any other manner, parties other than the Owner,
Contractor, a separate contractor as described in Article 6 and other persons
substantially involved in a common question of fact or law whose presence is
required if complete relief is to be accorded in arbitration. No person or
entity other than the Owner, Contractor or a separate contractor as described in
Article 6 shall be included as an original third party or additional third party
to an arbitration whose interest or responsibility is insubstantial. Consent to
arbitration involving an additional person or entity shall not constitute
consent to arbitration of a dispute not described therein or with a person or
entity not named or described therein. The foregoing agreement to arbitrate and
other agreements to arbitrate with an additional person or entity duly consented
to by parties to the Agreement shall be specifically enforceable under
applicable law in any court having jurisdiction thereof.
4.5.6 Claims and Timely Assertion of Claims. A party who files a notice of
demand for arbitration must assert in the demand all Claims then known to that
party on which arbitration is permitted to be demanded. When a party fails to
include a Claim through oversight, inadvertence or excusable neglect, or when a
Claim has matured or been acquired subsequently, the arbitrator or arbitrators
may permit amendment.
4.5.7 Judgment on Final Award. The award rendered by the arbitrator or
arbitrators shall be final, and judgment may be entered upon it in accordance
with applicable law in any court having jurisdiction thereof.
ARTICLE 5
SUBCONTRACTORS
5.1 DEFINITIONS
5.1.1 A Subcontractor is a person or entity who has a direct contract with the
Contractor to perform a portion of the Work at the site. The term
"Subcontractor" is referred to throughout the Contract Documents as if singular
in number and means a Subcontractor or an authorized representative of the
Subcontractor. The term "Subcontractor" does not include a separate contractor
or subcontractors of a separate contractor.
5.1.2 A Sub-subcontractor is a person or entity who has a direct or indirect
contract with a Subcontractor to perform a portion of the Work at the site. The
term "Sub-subcontractor" is referred to throughout the Contract Documents as if
singular in number and means a Sub-subcontractor or an authorized representative
of the Sub-subcontractor.
5.2 AWARD OF SUBCONTRACTS AND OTHER CONTRACTS FOR PORTIONS OF THE WORK
5.2.1 Unless otherwise stated in the Contract Documents or the bidding
requirements, the Contractor, as soon as practicable after award of the
Contract, shall furnish in writing to the Owner and Architect the names of
persons or entities (including those who are to furnish materials or equipment
fabricated to a special design) proposed for each principal portion of the Work.
The Architect or Owner will promptly reply to the Contractor in writing stating
whether or not the Owner or the Architect, after due investigation, has
<PAGE>
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 agreement, written where legally required for validity, the
Contractor shall require each Subcontractor, to the extent of the Work to be
performed by the Subcontractor, to be bound to the Contractor by terms of the
Contract Documents, and to assume toward the Contractor all the obligations and
responsibilities which the Contractor, by these Documents, assumes toward the
Owner and Architect. Each subcontract agreement shall preserve and protect the
rights of the Owner and Architect under the Contract Documents with respect to
the Work to be performed by the Subcontractor so that subcontracting thereof
will not prejudice such rights, and shall allow to the Subcontractor, unless
specifically provided otherwise in the subcontract agreement, the benefit of all
rights, remedies and redress against the Contractor that the Contractor, by the
Contract Documents, has against the Owner. Where appropriate, the Contractor
shall require each Subcontractor to enter into similar agreements with the
Sub-subcontractors. The Contractor shall make available to each proposed
Subcontractor, prior to the execution of the subcontract agreement, copies of
the Contract Documents to which the Subcontractor will be bound, and, upon
written request of the Subcontractor, identify to the Subcontractor terms and
conditions of the proposed subcontract agreement which may be at variance with
the Contract Documents. Subcontractors shall similarly make copies of applicable
portions of such documents available to their respective proposed
Sub-subcontractors.
5.4 CONTINGENT ASSIGNMENT OF SUBCONTRACTS
5.4.1 Each subcontract agreement for a portion of the Work is assigned by the
Contractor to the Owner provided that:
.1 assignment is effective only after termination of the Contract by
the Owner for cause pursuant to Paragraph 14.2 and only for those
subcontract agreements which the Owner accepts by notifying the
Subcontractor in writing; and
.2 assignment is subject to the prior rights of the surety, if any,
obligated under bond relating to the Contract.
5.4.2 If the Work has been suspended for more than 30 days, the Subcontractor's
compensation shall be equitably adjusted.
<PAGE>
ARTICLE 6
CONSTRUCTION BY OWNER OR BY SEPARATE CONTRACTORS
6.1 OWNER'S RIGHT TO PERFORM CONSTRUCTION AND TO AWARD SEPARATE CONTRACTS
6.1.1 The Owner reserves the right to perform construction or operations related
to the Project with the Owner's own forces, and to award separate contracts in
connection with other portions of the Project or other construction or
operations on the site under Conditions of the Contract identical or
substantially similar to these including those portions related to insurance and
waiver of subrogation. If the Contractor claims that delay or additional cost is
involved because of such action by the Owner, the Contractor shall make such
Claim as provided elsewhere in the Contract Documents.
6.1.2 When separate contracts are awarded for different portions of the Project
or other construction or operations on the site, the term "Contractor" in the
Contract Documents in each case shall mean the Contractor who executes each
separate Owner-Contractor Agreement.
6.1.3 The Owner shall provide for coordination of the activities of the Owner's
own forces and of each separate contractor with the Work of the Contractor, who
shall cooperate with them. The Contractor shall participate with other separate
contractors and the Owner in reviewing their construction schedules when
directed to do so. The Contractor shall make any revisions to the construction
schedule and Contract Sum deemed necessary after a joint review and mutual
agreement. The construction schedules shall then constitute the schedules to be
used by the Contractor, separate contractors and the Owner until subsequently
revised.
6.1.4 Unless otherwise provided in the Contract Documents, when the Owner
performs construction or operations related to the Project with the Owner's own
forces, the Owner shall be deemed to be subject to the same obligations and to
have the same rights which apply to the Contractor under the Conditions of the
Contract, including, without excluding others, those stated in Article 3, this
Article 6 and Articles 10, 11 and 12.
6.2 MUTUAL RESPONSIBILITY
6.2.1 The Contractor shall afford the Owner and separate contractors reasonable
opportunity for introduction and storage of their materials and equipment
and performance of their activities and shall connect and coordinate the
Contractor's construction and operations with theirs as required by the
Contract Documents.
6.2.2 If part of the Contractor's Work depends for proper execution or results
upon construction or operations by the Owner or a separate contractor, the
Contractor shall, prior to proceeding with that portion of the Work,
promptly report to the Architect apparent discrepancies or defects in such
other construction that would render it unsuitable for such proper
execution and results. Failure of the Contractor so to report shall
constitute an acknowledgment that the Owner's or separate contractors'
completed or partially completed construction is fit and proper to receive
the Contractor's Work, except as to defects not then reasonably
discoverable.
6.2.3 Costs caused by delays or by improperly timed activities or defective
construction shall be borne by the party responsible therefor.
<PAGE>
6.2.4 The Contractor shall promptly remedy damage wrongfully caused by the
Contractor to completed or partially completed construction or to property
of the Owner or separate contractors as provided in Subparagraph 10.2.5.
6.2.5 Claims and other disputes and matters in question between the Contractor
and a separate contractor shall be subject to the provisions of Paragraph
4.3 provided the separate contractor has reciprocal obligations.
6.2.6 The Owner and each separate contractor shall have the same
responsibilities for cutting and patching as are described for the
Contractor in Paragraph 3.14.
6.3 OWNER'S RIGHT TO CLEAN UP
6.3.1 If a dispute arises among the Contractor, separate contractors and the
Owner as to the responsibility under their respective contracts for
maintaining the premises and surrounding area free from waste materials and
rubbish 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 and
Contractor; 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 or Owner.
7.1.3 Changes in the Work shall be performed under applicable provisions of the
Contract Documents, and the Contractor shall proceed promptly, unless otherwise
provided in the Change Order, Construction Change Directive or order for a minor
change in the Work.
7.1.4 If unit prices are stated in the Contract Documents or subsequently agreed
upon, and if quantities originally contemplated are so changed in a proposed
Change Order or Construction Change Directive that application of such unit
prices to quantities of Work proposed will cause substantial inequity to the
Owner or Contractor, the applicable unit prices shall be equitably adjusted.
7.2 CHANGE ORDERS
7.2.1 A Change Order is a written instrument prepared by the Architect and
signed by the Owner, Contractor and Architect, stating their agreement upon all
of the following:
.1 a change in the Work;
.2 the amount of the adjustment in the Contract Sum, if any; and
.3 the extent of the adjustment in the Contract Time, if any.
7.2.2 Methods used in determining adjustments to the Contract Sum may include
those listed in Subparagraph 7.3.3.
<PAGE>
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 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 the 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.
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 Owner on the basis of reasonable expenditures and savings of
those performing the Work attributable to the change. In such case, and also
under Clause 7.3.3.3, the Contractor shall keep and present, in such form as the
Owner may prescribe, an itemized accounting together with appropriate supporting
data. Unless otherwise provided in the Contract Documents, costs for the
purposes of this Subparagraph 7.3.6 shall be limited to the following:
.1 costs of labor, including social security, old age and unemployment
insurance, fringe benefits required by agreement or custom, and
workers' or workmen's compensation insurance;
.2 costs of materials, supplies and equipment, including 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 office personnel for
subcontractors directly attributable to the change.
<PAGE>
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 Owner. When both additions and credits covering related
Work or substitutions are involved in a change, the allowance for overhead
and profit shall be figured on the basis of net increase, if any, with
respect to that change.
7.3.8 If the Owner and Contractor do not agree with the adjustment in the
Contract Time or the method for determining it, the adjustment or the
method shall be referred to the arbitration for determination.
7.3.9 When the Owner and Contractor agree concerning the adjustments in the
Contract Sum and Contract Time, or otherwise reach agreement upon the
adjustments, such agreement shall be effective immediately and shall be
recorded by preparation and execution of an appropriate Change Order.
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 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
<PAGE>
other agreed period before commencing the Work to permit the timely filing of
mortgages, mechanic's liens and other security interests.
8.2.3 The Contractor shall proceed expeditiously with adequate forces and shall
achieve Substantial Completion within the Contract Time.
8.3 DELAYS AND EXTENSIONS OF TIME
8.3.1 If the Contractor is delayed at any time in progress of the Work by an act
or neglect of the Owner or Architect, or of an employee of either, or of a
separate contractor employed by the Owner, or by changes ordered in the Work, or
by labor disputes, fire, unusual delay in deliveries, unavoidable casualties or
other causes beyond the Contractor's control, or by delay authorized by the
owner pending arbitration, or by other causes which the Owner 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 Owner 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 Owner may require. This schedule, unless objected to by the Owner, shall be
used as a basis for reviewing the Contractor's Applications for Payment.
9.3 APPLICATIONS FOR PAYMENT
9.3.1 At least ten days before the date established for each progress payment,
the Contractor shall submit to the Owner an itemized Application for Payment for
operations completed in accordance with the schedule of values. Such application
shall be notarized, if required, and supported by such data substantiating the
Contractor's right to payment as the Owner may require, such as copies of
requisitions from Subcontractors and material suppliers, and reflecting
retainage if provided for elsewhere in the Contract Documents.
9.3.1.1 Such applications may include requests for payment on account of changes
in the Work which have been properly authorized by Construction Change
Directives but not yet included in Change Orders.
<PAGE>
9.3.1.2 Such applications may not include requests for payment of amounts the
Contractor does not intend to pay to a Subcontractor or material supplier
because of a dispute or other reason.
9.3.2 Unless otherwise provided in the Contract Documents, payments shall be
made on account of materials and equipment delivered and suitably stored at the
site for subsequent incorporation in the Work. If approved in advance by the
Owner, payment may similarly be made for materials and equipment suitably stored
off the site at a location agreed upon in writing. Payment for materials and
equipment stored on or off the site shall be conditioned upon compliance by the
Contractor with procedures satisfactory to the Owner to establish the Owner's
title to such materials and equipment or otherwise protect the Owner's interest,
and shall include applicable insurance, storage and transportation to the site
for such materials and equipment stored off the site.
9.3.3 The Contractor warrants that title to all Work covered by an Application
for Payment will pass to the Owner no later than the time of payment. The
Contractor further warrants that upon submittal of an Application for Payment
all Work for which payments have been previously issued and payments received
from the Owner shall, to the best of the Contractor's knowledge, information and
belief, be free and clear of liens, claims, security interests or encumbrances
in favor of the Contractor, Subcontractors, material suppliers, or other persons
or entities making a claim by reason of having provided labor, materials and
equipment relating to the Work. 9.5 DECISIONS TO WITHHOLD CERTIFICATION 9.5.1
The Owner may decide to withhold Payment in whole or in part, to the extent
necessary to protect the Owner, 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 payment are removed, payment will
be made for amounts previously withheld.
9.6 PROGRESS PAYMENTS
9.6.1 The Owner shall make payment in the manner and within the time provided in
the Contract Documents.
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
<PAGE>
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.
9.6.4 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 be 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 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 Owner does not pay the Contractor within seven days after the date
established in the Contract Documents the amount the Owner deems owed subject to
Paragraph 5.9.1, 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. See Exhibit `D'.
9.8 SUBSTANTIAL COMPLETION
9.8.1 Substantial Completion is the stage in the progress of the Work when the
Work or designated portion thereof is sufficiently complete in accordance with
the Contract Documents so the Owner can occupy or utilize the Work for its
intended use.
9.8.2 When the Contractor considers that the Work, or a portion thereof which
the Owner agrees to accept separately, is substantially complete, the Contractor
shall prepare and submit to the Architect a comprehensive list of items to be
completed or corrected. The Contractor shall proceed promptly to complete and
correct items on the list. Failure to include an item on such list does not
alter the responsibility of the Contractor to complete all Work in acccordance
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 Agreement shall be submitted to the
Owner and Contractor for their written acceptance of responsibilities assigned
to them in such Certificate.
<PAGE>
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 the Contractor.
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 9.9.2 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 canceled or allowed to expire until at least 30 days' prior written
notice has been given to the Owner, (3) a written statement that the
<PAGE>
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, oi any, to final payment and (5), if required by the Owner, other data
establishing payment or satisfaction of obligations, such as receipts, releases
and waivers of liens, claims, security interests or encumbrances arising out of
the Contract, to the extent and in such form as may be designated by the Owner.
If a Subcontractor refuses to furnish a release or waiver required by the Owner,
the Contractor may furnish a bond satisfactory to the Owner to indemnify the
Owner against such lien. If such lien remains unsatisfied after payments are
made, the Contractor shall refund to the Owner all money that the Owner may be
compelled to pay in discharging such lien, including all costs and reasonable
attorneys' fees.
9.10.3 If, after Substantial Completion of Work, final completion thereof is
materially delayed through no fault of the Contractor or by issuance of the
Change Orders affecting final completion, and the Architect so confirms, the
Owner shall, upon application by the Contractor and certification by the
Architect, and without terminating the Contract, make payment of the balance due
for that portion of the Work fully completed and accepted. If the remaining
balance for Work not fully completed or corrected is less than retainage
stipulated in the Contract Documents, and if bonds have been furnished, the
written consent of surety to payment of the balance due for that portion of the
Work fully completed and accepted shall be submitted by the Contractor to the
Architect prior to certification of such payment. Such payment shall be made
under terms and conditions governing final payment, except that it shall not
constitute a waiver of claims. The making of final payment shall constitute a
waiver of claims by the Owner as provided in Subparagraph 4.3.5.
9.10.4 Acceptance of final payment by the Contractor, a Subcontractor or
material supplier shall constitute a waiver of claims by the 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
<PAGE>
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 theWork itself) including loss of use resulting therefrom, but only
to the extent caused in whole or in part by negligent acts or omissions of the
Owner, anyone directly or indirectly employed by the Owner or anyone for whose
acts the Owner may be liable, regardless of whether or not such claim, damage,
loss or expense is caused in part by a party indemnified hereunder. Such
obligation shall not be construed to negate, abridge, or reduce other rights or
obligations of indemnity which would otherwise exist as to a party or person
described in this Subparagraph 10.1.4.
10.2 SAFETY OF PERSONS AND PROPERTY
10.2.1 The Contractor shall take reasonable precautions for safety of, and shall
provide reasonable protection to prevent damage, injury or loss to:
.1 employees on the Work and other persons who may be affected
thereby;
.2 the Work and materials and equipment to be incorporated therein,
whether in storage on or off the site, under care, custody or control of the
Contractor or the Contractor's Subcontractors or Sub-subcontractors; and
.3 other property at the site or adjacent thereto, such as trees,
shrubs, lawns, walks, pavements, roadways, structures and utilities
not designated for removal, relocation or replacement in the course of
construction.
10.2.2 The Contractor shall give notices and comply with applicable laws,
ordinances, rules, regulations and lawful orders of public authorities
bearing on safety of persons or property or their protection from damage,
injury or loss.
10.2.3 The Contractor shall erect and maintain, as required by existing
conditions and performance of the Contract, reasonable safeguards for
safety and protection, including posting danger signs and other warnings
against hazards, promulgating safety regulations and notifying owners and
users of adjacent sites and utilities.
10.2.4 When use or storage of explosives or other hazardous materials or
equipment or unusual methods are necessary for execution of the Work, the
Contractor shall exercise utmost care and carry on such activities under
supervision of properly qualified personnel.
10.2.5 The Contractor shall promptly remedy damage and loss (other than damage
or loss insured under property insurance required by the Contract
Documents) to property referred to in Clauses 10.2.1.2 and 10.2.1.3 caused
in whole or in part by the Contractor, a Subcontractor, a
Sub-subcontractor, or anyone directly or indirectly employed by any of
them, or by anyone for whose acts they may be liable and for which the
Contractor is responsible under Clauses 10.2.1.2 and 10.2.1.3, except
<PAGE>
damage or loss attributable to acts or omissions of the Owner or Architect
or anyone directly or indirectly employed by either of them may be liable,
and not attributable to the fault or negligence of the Contractor. The
foregoing obligations of the Contractor are in addition to the Contractor's
obligations under Paragraph 3.18.
10.2.6 The Contractor shall designate a responsible member of the Contractor's
organization at the site whose duty shall be the prevention of accidents.
This person shall be the Contractor's superintendent unless otherwise
designated by the Contractor in writing to the Owner and Architect.
10.2.7 The Contractor shall not load or permit any part of the construction or
site to be loaded so as to endanger its safety.
10.3 EMERGENCIES
10.3.1 In an emergency affecting safety of persons or property, the Contractor
shall act, at the Contractor's discretion, to prevent threatened damage, injury
or loss. Additional compensation or extension of time claimed by the Contractor
on account of an emergency shall be determined as provided in Paragraph 4.3 and
Article 7.
ARTICLE 11
INSURANCE AND BONDS
11.1 CONTRACTOR'S LIABILITY INSURANCE
11.1.1 The Contractor shall purchase from and maintain in a company or companies
lawfully authorized to do business in the jurisdiction in which the Project is
located such insurance as will protect the Contractor from claims set forth
below which may arise out of a 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 for not
less than limits of liability specified in the Contract Documents or required by
law, whichever coverage is greater. Coverages, whether written on an occurrence
or claims-made basis,
<PAGE>
shall be maintained without interruption from date of commencement of the Work
until date of final payment and termination of any coverage required to be
maintained after final payment.
11.1.3 Certificates of Insurance acceptable to the Owner shall be filed with the
Owner prior to commencement of the Work. These Certificates and the insurance
policies required by this Paragraph 11.1 shall contain a provision that
coverages afforded under the policies will not be cancelled or allowed to expire
until at least 30 days' prior written notice has been given to the Owner. If any
of the foregoing insurance coverages are required to remain in force after final
payment and are reasonably available, an additional certificate evidencing
continuation of such coverage shall be submitted with the final Application for
Payment as required by Subparagraph 9.10.2. Information concerning reduction of
coverage shall be furnished by the Contractor with reasonable promptness in
accordance with the Contractor's information and belief.
11.2 OWNER'S LIABILITY INSURANCE
11.2.1 The Owner shall be responsible for purchasing and maintaining the Owner's
usual liability insurance. Optionally, the Owner may purchase and maintain other
insurance for self-protection against claims which may arise from operations
under the Contract. The Contractor shall not be responsible for purchasing and
maintaining this optional Owner's liability insurance unless specifically
required by the Contract Documents.
11.3 PROPERTY INSURANCE
11.3.1 Unless otherwise provided, the Owner shall purchase and maintain, in a
company or companies lawfully authorized to do business in the jurisdiction in
which the Project is located, property insurance in the amount of the initial
Contract Sum as well as subsequent modifications thereto for the entire Work at
the site on a replacement cost basis without voluntary deductibles. Such
property insurance shall be maintained, unless otherwise provided in the
Contract Documents or otherwise agreed in writing by all persons and entities
who are beneficiaries of such insurance, until final payment has been made as
provided in Paragraph 9.10 or until no person or entity other than the Owner has
an insurable interest in the property required by this Paragraph 11.3 to be
covered, whichever is earlier. This insurance shall include interests of the
Owner, the Contractor, Subcontractors and Sub-subcontractors in the Work.
11.3.1.1 Property insurance shall be on an all-risk policy form and shall insure
against the perils of fire and extended coverage and physical loss or damage
including, without duplication of coverage, theft, vandalism, malicious
mischief, collapse, false-work, temporary buildings and debris removal including
demolition occasioned by enforcement of any applicable legal requirements, and
shall cover reasonable compensation for Architect's services and expenses
required as a result of such insured loss. Coverage for other perils shall not
be required unless otherwise provided in the Contract Documents.
11.3.1.2 If the Owner does not intend to purchase such property insurance
required by the Contract and with all of the coverages in the amount described
above, the Owner shall so inform the Contractor in writing prior to commencement
of the Work. The Contractor may then effect insurance which will protect the
interests of the Contractor, Subcontractors and Sub-subcontractors in the Work,
and by appropriate Change Order the cost thereof shall be charged to the Owner.
If the Contractor is damaged by the failure or neglect of the Owner to purchase
or maintain insurance as described above, without so
<PAGE>
notifying the Contractor, then the Owner shall bear all reasonable costs
properly attributable thereto.
11.3.1.3 If the property insurance requires minimum deductibles and such
deductibles are identified in the Contract Documents, the Contractor shall pay
costs not covered because of such deductibles. If the Owner or insurer increases
the required minimum deductibles above the amounts so identified or if the Owner
elects to purchase this insurance with voluntary deductible amounts, the Owner
shall be responsible for payment of the additional costs not covered because of
such increased or voluntary deductibles. If deductibles are not identified in
the Contract Documents, the Owner shall pay costs not covered because of
deductibles.
11.3.1.4 Unless otherwise provided in the Contract Documents, this property
insurance shall cover portions of the Work stored off the site after written
approval of the Owner at the value established in the approval, and also
portions of the Work in transit.
11.3.2 Boiler and Machinery Insurance. The Owner shall purchase and maintain
boiler and machinery insurance required by the Contract Documents or by law,
which shall specifically cover such insured objects during installation and
until final acceptance by the Owner; this insurance shall include interests of
the Owner, Contractor, Subcontractors and Sub-subcontractors in the Work, and
the Owner and Contractor shall be named insureds.
11.3.3 Loss of Use Insurance. The Owner, at the Owner's option, may purchase and
maintain such insurance as will insure the Owner against loss of use of the
Owner's property due to fire or other hazards, however cased. The Owner waives
all rights of action against the Contractor for loss of use of the Owner's
property, including consequential losses due to fire or other hazards however
caused.
11.3.4 If the Contractor requests in writing that insurance for risks other than
those described herein or for other special hazards be included in the property
insurance policy, the Owner shall, if possible, include such insurance, and the
cost thereof shall be charged to the Contractor by appropriate Change Order.
11.3.5 If during the Project construction period the Owner insures properties,
real or personal or both, adjoining or adjacent to the site by property
insurance under policies separate from those insuring the Project, or if after
final payment property insurance is to be provided on the completed Project
through a policy or policies other than those insuring the Project during the
construction period, the Owner shall waive all rights in accordance with the
terms of Subparagraph 11.3.7 for damages caused by fire or other perils covered
by this separate property insurance. All separate policies shall provide this
waiver of subrogation by endorsement or otherwise.
11.3.6 Before an exposure to loss may occur, the Owner shall file with the
Contractor a copy of each policy that includes insurance coverages required by
this Paragraph 11.3. Each policy shall contain all generally applicable
conditions, definitions, exclusions and endorsements related to this Project.
Each policy shall contain a provision that the policy will not be cancelled or
allowed to expire until at least 30 days' prior written notice has been given to
the Contractor.
11.3.7 Waivers of Subrogation. The Owner and Contractor waive all rights against
(1) each other and any of their subcontractors, sub-subcontractors, agents and
employees, each of the other, and (2) the Architect, Architect's consultants,
separate contractors
<PAGE>
described in Article 6, if any, and any of their subcontractors,
sub-subcontractors, agents and employees, for damages caused by fire or other
perils to the extent covered by property insurance obtained pursuant to this
Paragraph 11.3 or other property insurance applicable to the Work, except such
rights as they have to proceeds of such insurance held by the Owner as
fiduciary. The Owner or Contractor, as appropriate, shall require of the
Architect, Architect's consultants, separate contractors described in Article 6,
if any, and the subcontractors, sub-subcontractors, agents and employees of any
of them, by appropriate agreements, written where legally required for validity,
similar waivers each in favor of other parties enumerated herein. The policies
shall provide such waivers of subrogation by endorsement or otherwise. A waiver
of subrogation shall be effective as to a person or entity even though that
person or entity would otherwise have a duty of indemnification, contractual or
otherwise have a duty of indemnification, contractual or otherwise, did not pay
the insurance premium directly or indirectly, and whether or not the person or
entity had a insurable interest in the property damaged.
11.3.8 A loss insured under Owner's property insurance shall be adjusted by the
Owner as fiduciary and made payable to the Owner as fiduciary for the insureds,
as their interests may appear, subject to requirements of any applicable
mortgagee clause and of Subparagraph 11.3.10. The Contractor shall pay
Subcontractors their just shares of insurance process received by the
Contractor, and by appropriate agreements, written where legally required for
validity, shall require Subcontractors to make payments to their
Sub-subcontractors in similar manner.
11.3.9 If required in writing by a party in interest, the Owner as fiduciary
shall, upon occurrence of an insured loss, give of required bond for proper
performance of the Owner's duties. The cost of required bonds shall be charged
against proceeds received as fiduciary. The Owner shall deposit in a separate
account proceeds so received, which the Owner shall distribute in accordance
with such agreements as the parties in interest may reach, or in accordance with
an arbitration award in which case the procedure shall be as provided in
Paragraph 4.5. If after such loss no other special agreement is made,
replacement of damaged property shall be covered by appropriate Change Order.
11.3.10 The Owner as fiduciary shall have power to adjust and settle a loss with
insurers unless one of the parties in interest shall object in writing within
five days after occurrence of loss to the Owner's exercise of this power; if
such objection be made, arbitrators shall be chosen as provided in Paragraph
4.5. The Owner as fiduciary shall, in that case, make settlement with insurers
in accordance with directions of such arbitrators. If distribution of insurance
proceeds by arbitration is required, the arbitrators will direct such
distribution.
11.3.11 Partial occupancy or use in accordance with Paragraph 9.9 shall not
commence until the insurance company or companies providing property insurance
have consented to such partial occupancy or use by endorsement or otherwise. The
Owner and the Contractor shall take reasonable steps to obtain consent of the
insurance company or companies and shall, without mutual written consent, take
no action with respect to partial occupancy or use that would cause
cancellation, lapse or reduction of insurance.
11.4 PERFORMANCE BOND AND PAYMENT BOND
11.4.1 The Owner shall have the right to require the Contractor to furnish bonds
covering faithful performance of the contract and payment of obligations arising
thereunder as
<PAGE>
stipulated in bidding requirements or specifically required in the Contract
Documents on the date of execution of the Contract.
11.4.2 Upon the request of any person or entity appearing to be a potential
beneficiary of bonds covering payment of obligations arising under the Contract,
the Contractor shall promptly furnish a copy of the bonds or shall permit a copy
to be made.
ARTICLE 12
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 Owner or Architect
has not specifically requested to observe prior to its being covered, the Owner
or Architect may request to see such Work and it shall be uncovered by the
Contractor. If such Work is in accordance with the Contract Documents, costs of
uncovering and replacement shall, by appropriate Change Order, be charged to the
Owner. If such Work is not in accordance with the Contract Documents, the
Contractor shall pay such costs unless the condition was caused by the Owner or
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 Owner or
Architect or failing to conform to the requirements of the Contract Documents,
whether observed before or after Substantial Completion and whether or not
fabricated, installed or completed. The Contractor shall bear costs of
correcting such rejected Work, including additional testing and inspections and
compensation for the 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 had previously given the Contractor a written acceptance of
such condition. This period of one year shall be extended with respect to
portions of Work first performed after Substantial Completion by the period of
time between Substantial Completion and the actual performance of the Work. This
obligation under this Subparagraph 12.2.2 shall survive acceptance of the Work
under the Contract and termination of the Contract. The Owner shall give such
notice promptly after discovery of the condition.
12.2.3 The Contractor shall remove from the site portions of the Work which are
not in accordance with the requirements of the Contract Documents and are
neither corrected by the Contractor nor accepted by the Owner.
12.2.4 If the Contractor fails to correct nonconforming Work within a reasonable
time, the Owner may correct it in accordance with Paragraph 2.4. If the
Contractor does not proceed with correction of such nonconforming Work within a
reasonable time fixed by
<PAGE>
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.
13.2 SUCCESSORS AND ASSIGNS
13.2.1 The Owner and Contractor respectively bind themselves, their partners,
successors, assigns and legal representatives to the other party hereto and to
partners, successors, assigns and legal representatives of such other party in
respect to covenants, agreements and obligations contained in the Contract
Documents. Neither party to the Contract shall assign the Contract as a whole
without written consent of the other. If either party attempts to make such an
assignment without such consent, that party shall nevertheless remain legally
responsible for all obligations under the Contract.
13.3 WRITTEN NOTICE
13.3.1 Written notice shall be deemed to have been duly served if delivered in
person to the individual or a member of the firm or entity or to an officer of
the corporation for
<PAGE>
which it was intended, or if delivered at or sent by registered or certified
mail to the last business address known to the party giving notice.
13.4 RIGHTS AND REMEDIES
13.4.1 Duties and obligations imposed by the Contract Documents and rights and
remedies available thereunder shall be in addition to and not a limitation of
duties, obligations, rights and remedies otherwise imposed or available by law.
13.4.2 No action or failure to act by the Owner, Architect or Contractor shall
constitute a waiver of a right or duty afforded them under the Contract, nor
shall such action or failure to act constitute approval of or acquiescence in a
breach thereunder, except as may be specifically agreed in writing.
13.5 TESTS AND INSPECTIONS
13.5.1 Test, 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 Owner and Architect timely notice of when and where tests and
inspections are to be made so the Owner and Architect may observe such
procedures. The Owner shall bear costs of tests, inspections or approvals which
do not become requirements until after bids are received or negotiations
concluded.
13.5.2 If the 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 Owner and Architect will,
upon written authorization from the Owner, instruct the Contractor to make
arrangements for such additional testing, inspection or approval by an entity
acceptable to the Owner, and the Contractor shall give timely notice to the
Owner and Architect of when and where tests and inspections are to be made so
the Owner and Architect may observe such procedures. The Owner shall bear such
costs except as provided in Subparagraph 13.5.3.
13.5.3 If such procedures for testing, inspection or approval under
Subparagraphs 13.5.1 and 13.5.2 reveal failure of the portions of the Work to
comply with requirements established by the Contract Documents, the Contractor
shall bear all costs made necessary by such failure including those of repeated
procedures and compensation for the 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 Documentsthe Architect will do so promptly and, where practible,
at the normal place of testing.
13.5.6 Tests or inspections conduted pursuant to the Contract Documents shall be
made promptly to avoid unreasonable delay in the Work.
13.6 INTEREST
13.6.1 Payments due and unpaid under the Contract Documents shall bear interest
from the date payment is due at such rate as the parties may agree upon in
writing or, in the
<PAGE>
absence thereof, at the legal rate prevailing from time to time at the place
where the Project is located.
13.7 COMMENCEMENT OF STATUTORY LIMITATION PERIOD
13.7.1 As between the Owner and Contractor:
.1 Before Substantial Completion. As to acts or failures to act occurring prior
to the relevant date of Substantial Completion, any applicable statute of
limitations shall commence to run and any alleged cause of action shall be
deemed to have accrued in any and all events not later than such date of
Substantial Completion;
.2 Between Substantial Completion and Final Certificate for Payment. As to acts
or failures to act occurring subsequent to the relevant date of Substantial
Completion and prior to issuance of the final Certificate for Payment, any
applicable statute of limitations shall commence to run and any alleged cause of
action shall be deemed to have accrued in any and all events not later than the
date of issuance of the final Certificate for Payment; and
.3 After Final Certificate for Substantial Completion. As to acts or failures to
act occurring after the relevant date of issuance of the final Certificate for
Substantial Completion, any applicable statute of limitations shall commence to
run and any alleged cause of action shall be deemed to have accrued in any and
all events not later than 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 or because the Owner has not made payment on an application Payment within
the time stated in the Contract Documents; and has not notified the Contractor
of the reasons for withholding the payment being related to the work.
.4 if repeated suspensions, delays or interruptions by the Owner as described in
Paragraph 14.3 constitute in the aggregate more than 100 percent of the total
number of days scheduled for completion, or 120 days in any 365-day period,
whichever is less; or
.5 the Owner has failed to furnish to the Contractor promptly, upon the
Contractor's request, reasonable evidence as required by Subparagraph 2.2.1.
14.1.2 If one of the above reasons exists, the contractor may, upon seven
additional days' written notice to the Owner and Architect, terminate the
Contract and recover from the Owner payment for Work executed and for proven
loss with respect to materials,
<PAGE>
equipment, tools, and construction equipment and machinery, including reasonable
overhead, profit and damages.
14.1.3 If the Work is stopped for a period of 60 days through no act or fault of
the Contractor or a Subcontractor or their agents or employees or any other
persons performing portions of the Work under contract with the Contractor
because the Owner has persistently failed to fulfill the Owner's obligations
under the Contract Documents with respect to matters important to the progress
of the Work, the Contractor may, upon seven additional days' written notice to
the Owner and the Architect, terminate the Contract and recover from the Owner
as provided in Subparagraph 14.1.2.
14.2 TERMINATION BY THE OWNER FOR CAUSE
14.2.1 The Owner may terminate the Contract if the Contractor:
.1 persistently or repeatedly refuses or fails to supply enough properly skilled
workers or proper materials;
.2 fails to make payment to Subcontractors for materials or labor in accordance
with the respective agreements between the Contractor and the Subcontractors;
.3 persistently disregards laws, ordinances, or rules, regulations or orders of
a public authority having jurisdiction; or
.4 otherwise is guilty of substantial breach of a provision of the Contract
Documents. 14.2.2 When any of the above reasons exist, the Owner, 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 of 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.
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.
<PAGE>
14.3.3 Adjustments made in the cost of performance may have a mutually agreed
fixed or percentage fee.
Exhibit 'D'
Supplement to Paragraph 9.6.1
If the Contractor disputes the Owner's determination of the amount owned in a
progress payment, then the Contractor disputes the Owner's determination of the
amount owned in a progress payment, then the Contractor shall continue to work,
but may seek arbitration which Owner agrees will be expedited and heard within
thirty (30) days or the parties may agree to a third party "neutral" whose
decision on the amount to be paid in a progress payment will be final.
BDM CONSTRUCTION
COMPANY INC.
835 Piner Rd., Suite 0
Post Office Box 3847
Santa Rosa, California
95402-3847
CL 376515
(707) 523-1722
Fax (707) 526-4980
PROMISSORY NOTE
July 31, 1996, Hopland, California. For valuable consideration, receipt of which
is hereby acknowledged, the borrower hereto agrees as follows:
1. BORROWER'S PROMISE TO PAY: For consideration received, We promise to pay the
sum of $60,000.00 together with interest, all due and payable on or before
August 31, 1996, by 5:00 p.m. without notice or demand, as provided for herein.
2. LOAN COSTS/SECURITY: In consideration of BDM Construction Company, Inc.'s
loan of the funds herein, borrower agrees to pay $60,600.00, principal and
interest, provided that the loan is paid by the due date. Interest will continue
to accrue at a rate of 12% per annum. A late charge of $50.00 per day will be
added for each day that the loan is not paid.
Borrower additionally authorizes BDM Construction Company Inc. to offset all
costs and attorney's fees incurred in connection with the preparation of this
agreement and ancillary documents including a U.C.C. financing statement,
together with any collection costs.
Should any payment due not be received by its due date, interest on the unpaid
balance shall accrue at the rate of 1.5% per month until paid in full, this is
in addition to all up front loan costs described herein. Borrower additionally
acknowledges that this note is secured by a UCC- I Filing covering a Krohnes
Labeler valued at approximately $108,000.00, currently stored at 290 East Gobbi
Street in Ukiah, California.
/s/ Norman Franks
MENDOCINO BREWING COMPANY
August 1, 1996
Agreement to Modify Note and Deed of Trust dated June 6, 1995 wherein
Ukiah Redevelopment Agency is named as Trustor and Langley et al is named as
Beneficiary in the original amount of $492,872; and the payoff and reconveyance
of Note and Deed of Trust dated November 15, 1995 wherein Ukiah Redevelopment
Agency is named as Trustor and Langley et al is named as Beneficiary in the
original amount of $76,230.00.
Said note(s) and deed(s) trust have been taken "subject to" by Mendocino
Brewing Company in subsequent sale(s).
Mendocino Brewing Company shall place into escrow the sum of $300,000
cash. Said $76,230. Note and Deed of Trust + accumulated interest shall be paid
off in full. The balance remaining of said $300,000 shall be paid over to reduce
the remaining principal of the $492,872 Note and Deed of Trust. The monthly
payment shall be reduced accordingly.
Cordes et al agrees to subordinate this modified note to a construction
loan from the Savings Bank of Mendocino County in the approximate amount of
$2,700,000 and Small Business Administration insured loan (Creditor to be named
later) in the approximate amount of $1,000,000.
/s/ Cordes P. Langley
Cordes P. Langley
/s/ David C. Dutton
David C. Dutton, Jr., Trustee
/s/ Philip G. Langley
Philip G. Langley
/s/ Ellen J. Alexander
Ellen J. Alexander
/s/ Grey M. Dutton
Grey M. Dutton, Trustee
Mendocino Brewing Company
BY: /s/ Norman Franks
August 1, 1996
Agreement to modify Note dated June 6, 1995 wherein Ukiah Redevelopment
Agency is named as Trustor and Langley et al is named as Beneficiary in the
original amount of $492,872; and the payoff and reconveyance of Note and Deed of
Trust dated November 15, 1995 wherein Ukiah Redevelopment Agency is named as
Trustor and Langley et al is named as Beneficiary in the original amount of
$76,230. Said note(s) and deed(s) trust have been taken "subject to" by
Mendocino Brewing Company in subsequent sale(s).
Mendocino Brewing Company shall place into escrow the sum of $300,000
cash. Said $76,230 Note and Deed of Trust + accumulated interest shall be paid
off in full. The balance remaining of said $300,000 shall be paid over to reduce
the remaining principal of the $492,872 Note and Deed of Trust. The monthly
payment shall be reduced accordingly.
Cordes et al agrees to subordinate this modified note to a construction
loan from the Savings Bank of Mendocino County in the approximate amount of
$2,700,000 and Small Business Administration insured loan (Creditor to be named
later) in the approximate amount of $1,000,000.
Mendocino Brewing Company by /s/ Norman Franks
Langley et al by /s/ Cordes P. Langley /s/ Philip G. Langley
The Ukiah Redevelopment Agency (RDA), while not a party to this
modification agreement, is aware of the terms of same and agrees that said
modification agreement does not change, modify or effect the June 6, 1995
Supplemental Escrow Instructions, more particularly as those instructions
require purchase of remainder acreage; provided that Langley acknowledges and
agrees by signing in the space provided above that its sole recourse in the
event that the RDA defaults on the installment note for $492,872, dated June 6,
1995 and modified Aug 1, 1996, is to foreclose under the original deed of trust
and shall have no right to recover on the note from the RDA by legal action,
set-off, counterclaim, or otherwise even if senior lien holders foreclose and
take or sell the entire security to satisfy their claims, in whole or in part.
Ukiah Redevelopment Agency by /s/ Candace Horsley
AMENDMENT TO INSTALLMENT NOTE
The terms of that certain Deed of Trust Note dated June 6, 1995,
recorded June 27, 1995 in Book 2260 of Official Records, Page 633, Mendocino
County Records, in the original amount of $492,872.00, are hereby amended as
follows, with an unpaid principal balance of $264,567.58:
1. Principal and Interest due in monthly installments of Two Thousand
Three Hundred Eighty and 38/100s ($2, 380.38), beginning August 27, 1996 and
continuing until June 27, 1997 on which date the remaining unpaid principal sum,
together with accrued interest, shall become immediately due and payable at the
option of the holder hereof.
All other terms of said Note and Deed of Trust shall remain unchanged.
Dated: 8-1-96
/s/ Cordes P. Langley
Cordes P. Langley, Beneficiary
/s/ David C. Dutton
David C. Dutton, Jr., Trustee, Beneficiary
/s/ Philip G. Langley
Philip G. Langley, Beneficiary
/s/ Ellen J. Alexander
Ellen J. Alexander, Beneficiary
/s/ Grey M. Dutton
Grey M. Dutton, Trustee, Beneficiary
Mendocino Brewing Company
BY: /s/ Norman Franks
Trustor
THIS DOCUMENT IS BEING SIGNED IN COUNTER PART
MANUFACTURING BUSINESS EXPANSION AND RELOCATION AGREEMENT FOR
MENDOCINO BREWING COMPANY
This Agreement is made and entered on August 8,1996, in Ukiah, California by and
between Mendocino Brewing Company, Inc. (MBC), a corporation organized and
operated under and in compliance with the laws of the State of California and
the City of Ukiah (City), a general law municipal corporation located in
Mendocino County, California.
RECITALS:
1. MBC is a small brewery currently located in Mendocino County, California, and
outside the City of Ukiah. MBC's current facility only permits it to brew
approximately 18,000 bbls. per year.
2. MBC wishes to expand and relocate its business and manufacturing facilities
within the City and City wishes to provide MBC with incentives to facilitate the
expansion and relocation of its operations in the City.
3. In providing MBC with the incentives provided in this Agreement, City has
relied upon the representations of MBC, that it will expand operations in City
with employees who have been or will be hired from the local labor force,
whenever possible. If MBC falls to complete the manufacturing facility and
commence manufacturing' operations by April 1, 1997, this Agreement shall
terminate and City shall have no obligations to MBC under the terms of this
Agreement.
4. City has determined that the attraction of new manufacturing jobs into the
local economy will provide general public benefits for the City which constitute
a sufficient public purpose to justify the use of City funds to support MBC
expansion to City.
AGREEMENT:
Wherefore, in consideration of the above-recited facts and the terms and
conditions as further stated herein, the parties hereby agree as follows:
1. Definitions: The following terms shall have the following meaning, unless
another meaning is expressly provided elsewhere in this Agreement.
A. "Manufacturing facility" means the brewing and bottling plant, the water
treatment storage pond and installed equipment necessary for manufacturing
operation.
B. "Manufacturing operations" means production of bottled beverages for sale.
C. "Existing work force" means 65 full and part-time employees, including 40
full-time and 25 part-time/seasonal employees.
D. "Local labor force" means persons residing and available for work in
Mendocino County.
E. "Whenever possible" means, in connection with hiring from the local labor
force, that MBC will include Mendocino County in its recruitment efforts to fill
positions through advertisements in local newspapers, job announcements to local
EDD offices, social service agencies, college placement offices and similar
organizations. If MBC receives applications from qualified local residents, it
will hire from those applicants, unless it has specific reasons why the
qualified applicants are unacceptable, MBC will not hire outside the local labor
force, unless it has been unable to hire a qualified applicant as a result of
such local recruitment effort.
2. Relocation and expansion of manufacturing facility: Starting April 1996, MBC
will continue to add up to 15 full-time employees to its existing workforce in
accordance with the schedule contained in the attached Exhibit "A" which is
incorporated herein by reference. MBC shall hire these additional employees from
the local labor force, whenever possible.
3. Incentives: After the execution of this Agreement by the parties hereto, the
City shall offer the following incentives to MBC:
3.1 Utility Discount: City shall discount water* and electric utility billings
by 50% for twelve months, starting in the monthly utility billing period that
MBC first begins to use utilities after completion of the manufacturing
facility. For the next twelve months City shall discount water and electric
utility billings by 30%.
3.2 Reduction in discount permitted: In any quarter that the average number of
full-time equivalent employees added to MBC's existing workforce is less than
the number specified in Section 1 for sixty (60) consecutive days, the City may
reduce the monthly utility discount provided in Section 2.1 by 10% for each
full-time equivalent employee (or portion of a full-time equivalent employee)
below the number specified in Section 1. For example, if the number of full-time
equivalent employees added to the existing workforce is 13 1/2 for sixty (60)
consecutive days during the time period when MBC is entitled to a 50% reduction
in utility billings, MBC would receive a 30% reduction in its billing for each
month thereafter that the number remains at 13 1/2. If the number of equivalent
full-time employees increased on the 61st day to 14, MBC would receive a 40%
reduction in the second month thereafter. In no event shall the amount of the
discount be reduced below zero.
* Water discount limited to consumption levels not to exceed 65,000 gallons per
day (gpd)
3.3 MBC to file payroll reports: Commencing on the 10th day of the month
beginning 90 days after it commences operations within the City, MBC shall file
with the City of Ukiah quarterly payroll reports in the form of a DE6 Quarterly
Wage Report, as filed by MBC with the Employment Development Department of
California, identifying on a quarterly basis the salary and benefits paid for
each position. This report is confidential MBC information. Should MBC fail to
file a report without good cause, City shall have no obligation to provide MBC
with any utility discount in any month in which MBC fails to file said report,
or in any month following such month until MBC files such report.
3.4 MBC to grant easement: MBC agrees to grant to City without any compensation
to MBC, any Public Utilities Easements which may be necessary in order to ensure
maintenance access to utilities and fire services constructed on the Brewery
site and maintained by City.
4. Term: This Agreement shall remain in effect for a period of two years from
the date MBC first begins to use utilities after completion of the manufacturing
facility.
5. Modifications: City or MBC may, from time to time, request changes in the
terms of this Agreement. Such changes, which are mutually agreed upon by and
between City and MBC, and approved by the City Council, shall be incorporated in
written amendments to this Agreement. To be effective, all such changes as
referred to in this section must be agreed upon in writing by both parties to
this Agreement.
6. Assignment: MBC shall not assign any interest in this Agreement, and shall
not transfer any interest in the same (whether by assignment or notation),
without the prior written consent of City.
7. Application of Laws: The parties hereby agree that all applicable Federal,
State and local rules, regulations and guidelines not written into this
Agreement shall hereby prevail during the period of this Agreement.
8. Governing Law: This Agreement shall be governed by and construed in
accordance with the laws of the State of California. Any legal action concerning
the agreement must be filed and litigated in the proper court in Mendocino
County.
9. Integration: This Agreement contains the entire expansion agreement among the
parties and supersedes all prior and contemporaneous oral and written
agreements, understandings, and representations among the parties. No amendments
to this Agreement shall be binding unless executed in writing by all of the
parties.
10. Waiver: No waiver of any of the provisions of this Agreement shall be
deemed, or shall constitute a waiver of any other provision, nor shall any
waiver constitute a continuing waiver. No waiver shall be binding unless
executed in writing by the party making the waiver.
11. Notice: Whenever notice, payment or other communication is required or
permitted under this Agreement it shall be deemed to have been given when
personally delivered or when deposited in the United States Mail with proper
first class postage affixed thereto and addressed as follows:
MENDOCINO BREWING CO. UKIAH
Michael Laybourn City of Ukiah
Mendocino Brewing Co. c/o Candace Horsley
PO Box 400 300 Seminary Avenue
Hopland, CA 95449
Ukiah, CA 95482
12. Paragraph headings: The paragraph headings contained herein are for
convenience and reference only and are not intended to define or limit the scope
of this Agreement.
13. Duplicate originals: This Agreement may be executed in one or more duplicate
originals bearing the original signature of both parties and when so executed
any such duplicate original shall be admissible as proof of the existence and
terms of the Agreement between the parties.
WHEREFORE, the parties have entered this Agreement on the date first written
above.
MENDOCINO BREWING COMPANY, INC. CITY OF UKIAH BY:
/s/ Michael Laybourn BY: /s/ Candace Horsley
Michael Laybourn, Candace Horsley,
President City Manager
MANUFACTURING BUSINESS EXPANSION AND RELOCATION AGREEMENT FOR
MENDOCINO BREWING COMPANY
This Agreement is made and entered on August 8, 1996, in Ukiah, California by
and between Mendocino Brewing Company, Inc. (MBC). a corporation organized and
operated under and in compliance with the laws of the State of California and
the Ukiah Redevelopment Agency (Agency), a public agency of the City of Ukiah,
located in Mendocino County, California.
RECITALS:
1. MBC is a small brewery currently located in Mendocino County, California, and
outside the City of Ukiah. MBC's current facility only permits it to brew
approximately 18,000 bbls. per year.
2. MBC wishes to expand and relocate its business and manufacturing facilities
within the City of Ukiah and Agency wishes to provide MBC with incentives to
facilitate the expansion and relocation of its operations in the Redevelopment
Project Area.
3. In providing MBC with the incentives provided in this Agreement, Agency has
relied upon the representations of MBC, that it will expand operations in the
Redevelopment Project Area with employees, who have been or will be hired from
the local labor force whenever possible, If MBC fails to complete the
manufacturing facility and commence manufacturing operations by April 1, 1997,
this Agreement shall terminate and Agency shall have no obligations to MBC under
the terms of this Agreement.
4. Agency has determined that the attraction of new manufacturing jobs into the
local economy will provide general public benefits for the Agency which
constitute a sufficient public purpose to justify the use of Agency funds to
provide public improvements to support MBC expansion to Redevelopment Project
Area.
AGREEMENT:
Wherefore, in consideration of the above-recited facts and the terms and
conditions as further stated herein, the parties hereby agree as follows:
1. Definitions: The following terms shall have the following meaning,
unless another meaning is expressly provided elsewhere in this Agreement.
A. "Manufacturing facility" means the brewing and bottling plant, the water
treatment storage pond and installed equipment necessary for manufacturing
operations.
B. "Manufacturing operations" means production of bottled beverages for sale.
C. "Existing work force" means 65 full and part-time employees, including 40
full-time and 25 part-time/seasonal employees.
D. "Local labor force" means persons residing and available for work in
Mendocino County.
E. "Whenever possible" means, in connection with hiring from the local labor
force, that MBC will include Mendocino County in its recruitment efforts to fill
positions through advertisements in local newspapers, job announcements to local
EDD offices, social service agencies, college placement offices and similar
organizations. If MBC receives applications from qualified local residents, it
will hire from those applicants, unless it has specific reasons why the
qualified applicants are unacceptable. MBC will not hire outside the local labor
force, unless it has been unable to hire a qualified applicant as a result of
such local recruitment effort.
2. Relocation and expansion of manufacturing facility: As of April 1996, MBC
will continue to add up to 15 full-time employees to its existing workforce in
accordance with the schedule contained in the attached Exhibit "A", which is
incorporated herein by reference. MBC shall hire these additional employees from
the local labor force, whenever possible.
3. Public Improvements: Agency agrees to provide access and utilities to the MBC
manufacturing facility. Agency further agrees to complete all public
improvements including curb and gutter normally associated with the improved
roadway along the Brewery frontage. Extension of water, sewer, and electric
utilities will be the responsibility of Agency. Value of said improvements is
estimated at $550,000.
4. Incentives: After the execution of this Agreement by the parties hereto, the
Agency shall offer the following incentives to MBC:
4.1 Utility Connection Fees: The Agency shall pay on MBC's behalf the following
utility connection fees in the following amounts, subject to the limitations and
conditions set forth in this paragraph.
Electric Utility Connection Fee $ 12,360
Water Utility Connection Fee* $ 7,040
Sewer Utility Connection Fee** $244,000
* Water utility connection fee is based upon a three-inch service connection.
** Sewer Utility Connection Fee of $244,000 is calculated at a discharge rate of
up to 55,000 gpd of Brewery discharge. For each 10,000 gpd over 55,000 gpd, a
fee will be assessed based on 44.44 times the capital improvement fee that is
established by City Code. The Brewery further agrees to develop a recycling plan
prior to any expansion that would increase discharge levels above 55,000 gpd.
Any provision for utilities not specifically mentioned herein such as telephone,
natural gas, or any other utility fees which may be required and not mentioned
herein are the sole responsibility of MBC. All other fees, taxes, or levies not
specifically defined herein are the sole responsibility of MBC.
5. Term: This Agreement shall remain in effect for three years from its
effective date.
6. Modifications: Agency or MBC may, from time to time, request changes in the
terms of this Agreement. Such changes, which are mutually agreed upon by and
between Agency and MBC, and approved by the Redevelopment Agency, shall be
incorporated in written amendments to this Agreement. To be effective, all such
changes as referred to in this section must be agreed upon in writing by both
parties to this Agreement.
7. Assignment: MBC shall not assign any interest in this Agreement, and shall
not transfer any interest in the some (whether by assignment or notation),
without the prior written consent of Agency.
8. Application of Laws: The parties hereby agree that all applicable Federal,
State and local rules, regulations and guidelines not written into this
Agreement shall hereby prevail during the period of this Agreement.
9. Governing Law: This Agreement shall be governed by and construed in
accordance with the laws of the State of California. Any legal action concerning
the Agreement must be filed and litigated in the proper court in Mendocino
County.
10. Integration: This Agreement contains the entire expansion agreement among
the parties and supersedes all prior and contemporaneous oral and written
agreements, understandings, and representations among the parties. No amendments
to this Agreement shall be binding unless executed in writing by all of the
parties.
11. Waiver: No waiver of any of the provisions of this Agreement shall be
deemed, or shall constitute a waiver of any other provision, nor shall any
waiver constitute a continuing waiver. No waiver shall be binding unless
executed in writing by the party making the waiver.
12. Notice: Whenever notice, payment or other communication is required or
permitted under this Agreement it shall be deemed to have been given when
personally delivered or when deposited in the United States Mail with proper
first class postage affixed thereto and addressed as follows:
MENDOCINO BREWING CO, INC. UKIAH
Michael Laybourn Ukiah Redevelopment Agency
Mendocino Brewing Co. c/o Candace Horsley
PO Box 400 300 Seminary Avenue
Hopland, CA 95449 Ukiah, CA 95482
13. Paragraph headings: The paragraph headings contained herein are for
convenience and reference only and are not intended to define or limit the scope
of this Agreement.
14. Duplicate originals: This Agreement may be executed in one or more duplicate
originals bearing the original signature of both parties and when so executed
any such duplicate original shall be admissible as proof of the existence and
terms of the Agreement between the parties.
15. Hold Harmless: MBC waives and agrees to hold Agency harmless from any claim
for damages including, but not limited to, compensatory and consequential
damages, based on Agency's failure to provide the public improvements described
in this Agreement at all or within any particular period of time. MBC's sole
remedies for Agency's breach of this Agreement shall be specific performance.
WHEREFORE, the parties have entered this Agreement on the date first written
above.
MENDOCINO BREWING COMPANY, INC. CITY OF UKIAH BY:
/s/ Michael Laybourn BY: /s/ Candace Horsley
Michael Laybourn, Candace Horsley,
President City Manager
Consulting Agreement
Agreement made this lst day of August, 1996 by and between Mendocino Brewing
Company (California), a corporation (Company) and Dan Moldenhauer, (Consultant)
Consultant is an independent contractor willing to provide certain skills and
abilities to the Company that the Company has need for.
In consideration of the mutual terms, conditions and covenants hereinafter set
forth, Company and Consultant agree as follows:
1. The company hereby employs the Consultant as an independent contractor, and
the Consultant hereby accepts employment.
2. The term of this Agreement shall commence on 1 August 1996 and shall
terminate at the completion of the new brewery. After the first thirty (30) days
of the term, either party may, without cause, terminate this Agreement by giving
30 days written notice to the other.
3. Company shall pay to Consultant and Consultant shall accept from the Company
as compensation for all services and expenses to be provided pursuant to this
Agreement, the sum of $3,200.00 per month payable 10 days after receiving the
invoice.
4. Consultant shall provide on an "as needed" basis the following services:
To act as "Project Manager" for the new brewery,
To provide adequate reports and project status.
To provide required financial information.
Consultant shall devote such time, attention and energies as required.
5. Consultant is an independent contractor and may engage in other business
activities provided, however, that Consultant shall not during the term of this
Agreement solicit Company's employees or accounts on behalf of Consultant or
another entity.
6. If Consultant becomes unable to perform services pursuant to this Agreement
by reason of illness, incapacity or death, compensation shall cease upon the
happening of the event.
7. Neither party may assign this Agreement without the express written consent
of the other party.
8. Consultant is an independent contractor and nothing contained in this
Agreement shall be deemed or interpreted to constitute the Consultant as a
partner, agent or employee of the Company, nor shall either party have and
authority to bind the other. Consultant will continue to serve as a member of
the Board of Directors.
9. It is agreed between the parties that there are no other agreements or
understandings between them relating to the subject matter of this Agreement.
This Agreement supersedes all prior agreements, oral or written, between the
parties and is intended as a complete and exclusive statement of the agreement
between the parties. No change or modification of this Agreement shall be valid
unless the same be in writing and signed by the parties.
10. All notices required or permitted to be given hereunder shall be in writing
and may be delivered personally or by Certified Mail - Return Receipt Requested,
postage prepaid, addressed to the party's last known address.
11. This Agreement shall be construed in accordance with and governed by the
laws of the State of California.
INTENDING TO BE LEGALLY BOUND, the parties hereto have caused this Agreement to
be executed as of the date first above written.
Mendocino Brewing Company
By /s/ Michael Laybourn
(Michael Laybourn)
/s/ Dan Moldenhauer
(Dan Moldenhauer)
SAVINGS BANK OF MENDOCINO COUNTY
P. O. BOX 3600 - UKIAH, CALIFORNIA 95482
TELEPHONE (707) 462-6613
June 13, 1996
Norman Franks
Michael Laybourn
Mendocino Brewing Company
PO Box 400
Hopland, CA 95449
Dear Mike and Norman:
Confirming our earlier conversation, I am pleased to inform you that Savings
Bank of Mendocino County (hereinafter referred to as "Bank") has approved your
real estate loan application which will provide for first trust deed
construction and permanent financing for a 62,000 square foot brewery facility
which you intend on occupying. This approval has been provided subject to the
documentation, terms and conditions stated below:
1) Loan Amount: The Bank will provide a $2,700,000 construction and permanent
financing package.
2) Term of Loan: The Bank shall provide you with a five month construction loan
during which time frame the proposed facility will be completed. The note will
provide for the monthly payment of accrued interest. Following the construction
loan period, any outstanding principal loan balance will be rewritten subject to
a 25 year amortized repayment schedule and a 15 year balloon maturity. It is
understood and providing you are not in default of any term or condition
contained in the note, Joan agreement or deed of trust upon maturity, the Bank
will renew any outstanding principal loan balance for an additional ten year
period, subject to terms and conditions which will be negotiated at the time of
renewal.
3) Interest rate: The construction loan package will be priced at the Bank's
Base Commercial Rate + 2.00%. Interest rate adjustments during the construction
phase of the project will occur with changes in the Bank's Base Commercial Rate.
The permanent financing package shall be priced at a margin above the
now prevailing five year Treasury Constant Maturity Index so as to insure that
the initial loan rate will not be less than 10%. The permanent financing package
will further provide for an interest cap of 2% above the initial fully indexed
interest rate at the time of the first interest rate adjustment (5 year
anniversary) and 3% above the initial fully indexed interest rate at the time of
the second projected interest rate adjustment (10 year anniversary). The note
will further provide for an interest rate floor of 8.50%.
4) Origination fee: In addition to a documentation fee of $275.00 and an
inspection fee of $950.00, you will be required to pay to the Bank an
origination fee calculated as follows: 2% on the construction financing package
and a 1/2% origination fee on the permanent take out.
5) Pre-payment penalty: None.
6) Collateral: The loan shall be secured by the following:
a) A first deed of trust encumbering the property and improvements
located at 1825 Airport Road, Ukiah, California consisting of approximately 8
acres of land.
b) A first deed of trust encumbering the real property upon which the
waste water treatment facility is being constructed which is approximately one
acre in size.
c) The loan contemplated herein shall be additionally collateralized by
a security agreement, in form and substance satisfactory to the Bank and its
counsel, covering all fixtures and/or improvements which are located on the to
be encumbered parcel of property.
d) In addition to the foregoing, the loan will be further secured by an
assignment of any and all leases which you may execute with any other party.
9) Additional conditions precedent: Prior to the closing date or at the option
of the Bank, there shall be delivered to Bank, in form and substance
satisfactory to Bank and its counsel:
a) Copies of all of the projected construction contracts and each major
sub-contract in material supply contracts relating to the construction of the
improvements, together with the final plans and specifications and/or any other
additional data pertaining to the completion of the improvements which may be
required by the Bank. Said construction contracts and plans and specifications
are to be, in Bank's sole opinion suitable for assignment to the Bank.
b) Evidence that all consents, permits and approvals from government
authorities, required or advisable in connection with construction of the
improvements, have been obtained by Borrower.
c) Evidence that all roadway, water, sewer, electric and other
facilities necessary for the construction of the improvements, without
impediment or delay are now or will be timely available at the boundaries of the
land.
d) Evidence that payment has been made for all costs and expenses
relating to the examination of title, recording and filing fees and other
expenses involved in closing the loan, unless the items are budgeted to be paid
from the loan.
e) A copy of any and all construction contracts executed by Borrower in
connection with this project, with the understanding that these documents must
be acceptable in form and substance to the Bank and its counsel.
f) Financial statements and any other information which would serve to
confirm the qualifications of the proposed contractor.
g) Evidence that there is in place course of construction insurance
coverage, satisfactory to Bank and its counsel, in an amount adequate to protect
the Bank's interest with the provision that the policy identify the Bank as loss
payee.
h) Such other documents or other instruments or procedures as the Bank
may reasonably require.
i) Receipt of a copy of the approved loan commitment made by a
secondary lender providing for a $1 million loan advance which will be used in
association with the aforementioned project. Said commitment will further
confirm that the loan advance will be collateralized by a second trust deed
against the aforementioned properties, subordinate only to the $2,700,000 loan
advance contemplated in this commitment letter.
It goes without mention that our responsibility to provide this
financial accommodation is conditioned upon our approval of all of the terms and
conditions, loan document, etc. which pertain to this proposed secondary
financing package.
j) Confirmation that the Mendocino Brewing Company, Inc. has received a
$2,100,000 commitment for lease financing. As in the instance of the
aforementioned $1 million secondary financing package, our responsibility to
provide the financial accommodations over-viewed in this correspondence is
further conditioned upon our approval of the amount, terms, conditions,
agreements, documents, etc. which pertain to the lease financing package.
k) A properly completed environmental questionnaire.
1) Confirmation that the WestAmerica Bank has agreed to extend the
maturity specified on its $600,000 loan commitment to Mendocino Brewing Company,
Inc. until December of 1996. In concert with the foregoing, we will require
confirmation that WestAmerica has agreed to subordinate its security interest in
the equipment assets of Mendocino Brewing Company, Inc. to the leasing company
creditor which intends on providing the aforementioned $2,100,000 in lease
financing.
m) Confirmation that the prime contractor, BDM Construction, has agreed
to defer $400,000 of the construction contract until such time as Mendocino
Brewing Company completes its public offering which is expected to materialize
on or before December of 1996. In association with this deferral, it is
important that this account payable be converted to a promissory note prior to
our advancing the loan contemplated in this commitment.
n) Confirmation that you have employed a project manager acceptable to
Bank to manage the construction project on site.
10) Construction Loan Agreement: On or before the closing date, the Borrower and
Bank shall enter into a construction loan agreement, prepared in form- and
substance satisfactory to Bank and its counsel.
11) Approval of Documentation: All instruments evidencing and securing or
otherwise relating to the loan on the project, must be satisfactory to the Bank
and its counsel.
12) Performance Bond: A 100% California contract bond for both a 100%
Performance Bond and a 100% Labor and Materials Bond, issued by sureties
acceptable to Bank. The bond(s) must name Bank as a co-beneficiary and be
recorded.
13) Title Insurance: You will be required to provide ALTA title insurance
coverage together with any other endorsements which the Bank might determine
necessary, for the full amount of the loan, containing no exception other than
those approved by the Bank which are usual and customary to such properties.
14) Indemnification: You will be required to indemnify the Bank against any and
all liabilities, obligations, loses/damages, penalties, claim actions, suits,
costs and expenses of whatever kind or nature which may be imposed on, incurred
by or asserted at any time against the Bank in any way relating to or arising in
connection with, construction of the improvements, the offer of sale and/or use,
occupation or operation of any of the property to be encumbered by the
construction deed of trust. Said indemnification shall also cover damages
arising from existing, or future hazardous waste and/or substances located on
the property, including the cost to clean up or detoxify the property.
If for any reason the bank becomes concerned that there could be
related environmental liability risks associated with our liens on the real
estate, we may consult with an specialist and may require an environmental audit
to be conducted and our commitment is conditioned upon our conclusion based
thereon that risks are acceptable to us. While your cost reimbursement will
include such consulting and audit expenses, we will obtain your approval before
proceeding with such an audit.
15) Assignment: You will be unable to assign this commitment letter or any of
its rights hereunder, to any other person or legal entity without specific
written approval of the Bank. The Bank may sell participations in the loan to
other banks.
16) Termination: Bank, at its option, may terminate this commitment letter and
its obligations hereunder, if (a) Borrower shall fail to observe or comply with
any of the terms and provision contained herein, or (b) Bank shall find
unacceptable or shall not approve any document or agreement, or information or
encumbrance applicable to the project, or (c) Borrower or parties involved in
the project become insolvent, or (d) Bankruptcy, insolvency, reorganization,
receivership, disillusion arrangement or other similar proceedings are commenced
by or against Borrower or your assets under any federal or state law.
Michael and Norman, we appreciate this opportunity to be of service and
look forward to your returning to us the enclosed copy of this correspondence,
acknowledging your acceptance of this offer together with a check in the amount
of $5,000.00. Providing that the loan is negotiated, these monies will be
credited towards the origination and documentation fee assessments as outlined
above. In the event, however, you decide not to proceed with the loan closing
through the Savings Bank of Mendocino County and you successfully obtain
alternate financing, this fee will represent a non-reimbursable loan application
fee.
Further, this loan must be completely negotiated, documented and closed
by August 15, 1996 or our commitment will expire. It goes without mention that
our commitment is subject to such additional terms, conditions and requirements
as may be provided in our loan documents or by Bank counsel. Should any of the
foregoing require clarification, don't hesitate contacting me at your earliest
convenience.
Sincerely,
/s/ Martin J. Lombardi
Martin J. Lombardi
Vice President
Acknowledgement: s/s Norman Franks Date: 6-18-96
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The unaudited financial statements of Mendocino Brewing Company, Inc.
as of June 30, 1996
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 21,226
<SECURITIES> 0
<RECEIVABLES> 550,382
<ALLOWANCES> 0
<INVENTORY> 463,532
<CURRENT-ASSETS> 1,145,228
<PP&E> 7,465,944
<DEPRECIATION> 518,283
<TOTAL-ASSETS> 8,214,877
<CURRENT-LIABILITIES> 3,270,525
<BONDS> 0
<COMMON> 3,869,569
0
227,600
<OTHER-SE> 276,331
<TOTAL-LIABILITY-AND-EQUITY> 8,214,877
<SALES> 1,840,324
<TOTAL-REVENUES> 1,911,373
<CGS> 870,450
<TOTAL-COSTS> 1,946,155
<OTHER-EXPENSES> (43,274)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (10,819)
<INCOME-PRETAX> (71,324)
<INCOME-TAX> (20,700)
<INCOME-CONTINUING> (50,624)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (50,624)
<EPS-PRIMARY> (0.02)
<EPS-DILUTED> 0
</TABLE>
