-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, BDCholYNVU5+uL0ZDgsYqYiVSR5n19LallOzlRmqHTRq1O+NpdrRSlmlvjfI6kfE tWrAPmvatlSS/l7KvO/U3A== 0000907242-98-000013.txt : 19980817 0000907242-98-000013.hdr.sgml : 19980817 ACCESSION NUMBER: 0000907242-98-000013 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19980630 FILED AS OF DATE: 19980814 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: MONARCH CASINO & RESORT INC CENTRAL INDEX KEY: 0000907242 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-MISCELLANEOUS AMUSEMENT & RECREATION [7990] IRS NUMBER: 880300760 STATE OF INCORPORATION: NV FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-22088 FILM NUMBER: 98688501 BUSINESS ADDRESS: STREET 1: 1175 W MOANA LANE STREET 2: STE 200 CITY: RENO STATE: NV ZIP: 89509 BUSINESS PHONE: 7028253355 MAIL ADDRESS: STREET 1: 1175 W MOANA LANE STREET 2: STE 200 CITY: RENO STATE: NV ZIP: 89509 10-Q 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 1998 or [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM ______TO______. Commission File No. 0-22088 MONARCH CASINO & RESORT, INC. (Exact name of registrant as specified in its charter) ------------------------- NEVADA 88-0300760 (State or other jurisdiction (I.R.S. Employer of incorporation or organization) Identification No.) 1175 W. MOANA LANE, SUITE 200 RENO, NEVADA 89509 (Address of principal (Zip code) executive offices) Registrant's telephone number, including area code: (702) 825-3355 ------------------------- NOT APPLICABLE (Former name, former address and former fiscal year, if changed since last report.) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES _X_ NO ___ APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS: Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13, or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. YES ___ NO ___ APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. As of August 10, 1998, there were 9,436,275 shares of Monarch Casino & Resort, Inc. $0.01 par value common stock outstanding. PART 1. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS MONARCH CASINO & RESORT, INC. CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended Six Months Ended June 30, June 30, -------------------------- -------------------------- 1998 1997 1998 1997 ------------ ------------ ------------ ------------ (Unaudited) (Unaudited) (Unaudited) (Unaudited) Revenues Casino............................... $ 10,681,129 $ 10,154,909 $ 20,180,099 $ 19,249,057 Food and beverage.................... 4,772,862 4,517,100 8,996,263 8,692,946 Hotel................................ 3,046,689 2,598,008 5,449,103 4,856,375 Other................................ 695,125 634,486 1,257,519 1,127,829 ------------ ------------ ------------ ------------ Gross revenues.................... 19,206,762 17,904,503 35,893,941 33,926,207 Less promotional allowances.......... (2,633,993) (2,155,463) (4,767,930) (4,039,302) ------------ ------------ ------------ ------------ Net revenues...................... 16,561,812 15,749,040 31,115,054 29,886,905 ------------ ------------ ------------ ------------ Operating expenses Casino............................... 4,538,495 4,194,303 8,609,530 7,893,977 Food and beverage.................... 2,591,075 2,437,800 4,876,778 4,767,223 Hotel................................ 893,817 989,263 1,814,431 1,901,497 Other................................ 127,781 107,765 245,094 213,819 Selling, general and administrative.. 4,246,132 4,000,037 8,289,971 7,896,193 Depreciation and amortization........ 1,156,104 1,053,687 2,286,148 2,119,991 ------------ ------------ ------------ ------------ Total............................. 13,553,404 12,782,855 26,121,952 24,792,700 ------------ ------------ ------------ ------------ Income from operations............ 3,008,408 2,966,185 4,993,102 5,094,205 ------------ ------------ ------------ ------------ Other expense Interest expense..................... 581,101 829,582 1,197,734 1,700,509 ------------ ------------ ------------ ------------ Total............................. 581,101 829,582 1,197,734 1,700,509 ------------ ------------ ------------ ------------ Income before income taxes........ 2,427,307 2,136,603 3,795,368 3,393,696 Provision for income taxes............. 825,284 726,445 1,290,390 1,153,856 ------------ ------------ ------------ ------------ Net Income........................ $ 1,602,023 $ 1,410,158 $ 2,504,978 $ 2,239,840 ============ ============ ============ ============ Income per share of common stock Net income Basic.............................. $ 0.17 $ 0.15 $ 0.27 $ 0.24 Diluted............................ $ 0.17 $ 0.15 $ 0.26 $ 0.24 Weighted average number of common shares and potential common shares outstanding Basic.............................. 9,436,275 9,451,780 9,436,275 9,452,524 Diluted............................ 9,508,406 9,462,325 9,506,560 9,454,600
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements. -2- MONARCH CASINO & RESORT, INC. CONSOLIDATED BALANCE SHEETS
June 30, December 31, 1998 1997 ------------ ------------ (Unaudited) ASSETS Current assets Cash........................................ $ 4,034,413 $ 5,527,839 Receivables, net............................ 1,339,263 837,420 Inventories................................. 410,799 570,367 Prepaid expenses............................ 1,485,839 1,333,176 Deferred income taxes....................... 695,000 1,055,000 ------------ ------------ Total current assets..................... 7,965,314 9,323,802 ------------ ------------ Property and equipment Land........................................ 10,339,530 10,339,530 Buildings................................... 36,273,298 36,273,298 Furniture and equipment..................... 23,412,042 22,304,919 Improvements................................ 5,067,268 5,040,033 ------------ ------------ 75,092,138 73,957,780 Less accumulated depreciation and amortization.............. (20,025,261) (17,868,111) ------------ ------------ 55,066,877 56,089,669 Construction in progress.................... 2,555,845 682,047 ------------ ------------ Net property and equipment............... 57,622,722 56,771,716 ------------ ------------ Other assets.................................. 1,781,578 1,732,569 ------------ ------------ $ 67,369,614 $ 67,828,087 ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities Current maturities of long-term debt........ $ 2,512,504 $ 2,243,611 Accounts payable............................ 2,802,764 4,111,457 Accrued expenses............................ 3,166,828 3,383,855 Federal income taxes payable................ 220,881 240,970 ------------ ------------ Total current liabilities................ 8,702,977 9,979,893 Long-term debt, less current maturities....... 31,232,995 32,907,530 Deferred income taxes......................... 2,235,000 2,247,000 Commitments and contingencies................. - - Stockholders' equity Preferred stock, $.01 par value, 10,000,000 shares authorized; none issued............. - - Common stock, $.01 par value, 30,000,000 shares authorized; 9,536,275 issued; 9,436,275 and 9,436,275 outstanding........ 95,363 95,363 Additional paid-in capital.................. 17,241,788 17,241,788 Treasury stock.............................. (329,875) (329,875) Retained earnings........................... 8,191,366 5,686,388 ------------ ------------ Total stockholders' equity............... 25,198,642 22,693,664 ------------ ------------ $ 67,369,614 $ 67,828,087 ============ ============
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements. -3- MONARCH CASINO & RESORT, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS
Six Months Ended June 30, ---------------------------- 1998 1997 ------------ ------------ (Unaudited) (Unaudited) Cash flows from operating activities: Net income.................................. $ 2,504,978 $ 2,239,840 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization............. 2,286,148 2,119,991 (Gain) loss on disposal of assets......... 17,495 (412) Increase in receivables, net.............. (501,843) (580,824) Decrease in inventories................... 159,568 30,418 Increase in prepaid expenses.............. (152,663) (315,563) Decrease in deferred income tax asset..... 360,000 - Increase in other assets.................. (49,009) (19,167) Decrease in accounts payable.............. (1,308,693) (459,731) Increase (decrease) in accrued expenses... (237,116) 8,324 Increase (decrease) in deferred income tax liability..................... (12,000) 1,078,856 ------------ ------------ Net cash provided by operating activities.................... 3,066,865 4,101,732 ------------ ------------ Cash flows from investing activities: Proceeds from sale of assets................ 8,120 187,215 Acquisition of property and equipment....... (2,495,561) (802,716) ------------ ------------ Net cash used in investing activities.... (2,487,441) (615,501) ------------ ------------ Cash flows from financing activities: Principal payments on long-term debt........ (2,072,850) (4,504,805) Acquisition of treasury stock............... - (65,875) ------------ ------------ Net cash used in financing activities.... (2,072,850) (1,084,449) ------------ ------------ Net decrease in cash..................... (1,493,426) (1,084,449) Cash at beginning of period................... 5,527,839 4,021,952 ------------ ------------ Cash at end of period......................... $ 4,034,413 $ 2,937,503 ============ ============ Supplemental disclosure of cash flow information: Cash paid for interest, net of capitalized interest................ $ 1,198,350 $ 1,726,687 Capitalized interest........................ 47,409 - Cash paid for income taxes.................. 962,479 360,000 Supplemental schedule of non-cash investing and financing activities: The Company financed the purchase of property and equipment in the following amounts..... 667,208 192,987
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements. -4- MONARCH CASINO & RESORT, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation Monarch Casino & Resort, Inc. ("Monarch") was incorporated in 1993. Golden Road Motor Inn, Inc. ("Golden Road") operates the Atlantis Casino Resort (the "Atlantis") in Reno, Nevada. Unless stated otherwise, the "Company" refers collectively to Monarch, its wholly owned subsidiary, Golden Road, and majority owned subsidiaries, Dunes Marina Resort and Casino, Inc. ("Dunes Marina"), formed in December 1993, and Sea World Processors, Inc. ("Sea World"), purchased in February 1994. The consolidated financial statements include the accounts of Monarch, Golden Road, Dunes Marina and Sea World, and eliminate intercompany balances and transactions. Use of Estimates In preparing these financial statements in conformity with generally accepted accounting principles, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and revenues and expenses during the year. Actual results could differ from those estimates. Reclassifications Certain amounts in the 1997 consolidated financial statements have been reclassified to conform with the 1998 presentation. These reclassifications had no effect on the Company's net income. NOTE 2. INTERIM FINANCIAL STATEMENTS The accompanying consolidated financial statements for the three month and six month periods ended June 30, 1998 and June 30, 1997 are unaudited. In the opinion of management, all adjustments, consisting of normal recurring adjustments necessary for a fair presentation of the Company's financial position and results of operations for such periods, have been included. The accompanying unaudited consolidated financial statements should be read in conjunction with the Company's audited financial statements included in its Annual Report on Form 10-K for the year ended December 31, 1997. The results for the three month and six month periods ended June 30, 1998 are not necessarily indicative of the results that may be expected for the year ending December 31, 1998, or for any other period. NOTE 3. EARNINGS PER SHARE In 1997, the Company adopted the provisions of SFAS No. 128, Earnings Per Share. Earnings per share for all periods presented have been restated to reflect the adoption of SFAS No. 128. SFAS No. 128 requires companies to present basic earnings per share, and, if applicable, diluted earnings per share. Basic earnings per share excludes dilution and is computed by dividing net earnings available to common stockholders by the weighted average number of common shares outstanding for the period. Diluted earnings per share -5- reflects the potential dilution that could occur if options to issue common stock were exercised into common stock. The following is a reconciliation of the number of shares (denominator) used in the basic and diluted earnings per share computations (Shares in thousands):
Three Months ended June 30, ----------------------------------- 1998 1997 ---------------- ---------------- Per Share Per Share Shares Amount Shares Amount ------ --------- ------ --------- Net Income Basic..................... 9,436 $0.17 9,452 $0.15 Effect of dilutive stock options............ 72 - 10 - ------ --------- ------ --------- Diluted................... 9,508 $0.17 9,462 $0.15 ====== ========= ====== =========
Six Months ended June 30, ----------------------------------- 1998 1997 ---------------- ---------------- Per Share Per Share Shares Amount Shares Amount ------ --------- ------ --------- Net Income Basic..................... 9,436 $0.27 9,453 $0.24 Effect of dilutive stock options............ 70 (.01) 2 - ------ --------- ------ --------- Diluted................... 9,506 $0.26 9,455 $0.24 ====== ========= ====== =========
The following options were not included in the computation of diluted earnings per share because the options' exercise price was greater than the average market price of the common shares: -6-
Three Months ended June 30, ---------------------------- 1998 1997 ----------- ----------- Options to purchase shares of common stock (in thousands)..... 17 77 Exercise prices.................. $6.44-$8.06 $3.50-$8.06 Expiration dates................. 9/98-5/08 9/98-6/02
Six Months ended June 30, ---------------------------- 1998 1997 ----------- ----------- Options to purchase shares of common stock (in thousands)..... 17 188 Exercise prices.................. $6.44-$8.06 $2.88-$8.06 Expiration dates................. 9/98-5/08 9/98-5/07
-7- ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS STATEMENT ON FORWARD-LOOKING INFORMATION Certain information included herein contains statements that may be considered forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, such as statements relating to anticipated expenses, capital spending and financing sources. Such forward-looking information involves important risks and uncertainties that could significantly affect anticipated results in the future and, accordingly, such results may differ from those expressed in any forward-looking statements made herein. These risks and uncertainties include, but are not limited to, those relating to competitive industry conditions, Reno-area tourism conditions, dependence on existing management, leverage and debt service (including sensitivity to fluctuations in interest rates), the regulation of the gaming industry (including actions affecting licensing), outcome of litigation, domestic or global economic conditions, changes in federal or state tax laws or the administration of such laws, and issues related to the year 2000. RESULTS OF OPERATIONS Comparison of Operating Results for the Three Month Periods Ended June 30, 1998 and 1997 For the three month period ended June 30, 1998, the Company earned $1.6 million, or $.17 per share, on net revenues of $16.6 million, up from earnings of $1.4 million, or $.15 per share, on net revenues of $15.7 million for the three months ended June 30, 1997. The Company's income from operations totaled $3.0 million in each of the 1998 and 1997 second quarter periods. The Company's net revenues, net income and earnings per share for the three months ended June 30, 1998 represent the best second quarter results in the Company's history. In the 1998 second quarter, the Company continued to benefit from the rapid growth occurring in the residential and industrial communities south of the Atlantis in Reno, and from the increasing popularity of the Atlantis with visitors to the Reno area. The Company also believes its 1998 second quarter results reflect effective marketing programs and the positive impact of the 1998 American Bowling Congress ("ABC") tournament, which ran from March through June at the National Bowling Stadium in downtown Reno. Casino revenues totaled $10.7 million in the second quarter of 1998, up from $10.2 million in the 1997 second quarter, with increases in both slot and table game revenues contributing to the increase. Casino operating expenses amounted to 42.5% of casino revenues in the 1998 second quarter, compared to 41.3% in the 1997 second quarter, primarily as a result of higher promotional allowance costs in the 1998 period. Food and beverage revenues for the 1998 second quarter totaled $4.8 million, up from $4.5 million for the 1997 second quarter, with the increase primarily due to an increase in the amount of revenue generated per customer at the Atlantis' food and beverage outlets. Food and beverage operating expenses during the 1998 second quarter amounted to 54.3% of food and beverage revenues, up slightly from 54.0% for the second quarter of 1997. Hotel revenues in the 1998 second quarter increased to $3.0 million from $2.6 million in the 1997 second quarter, reflecting a substantial improvement -8- in the Atlantis' average daily room rate ("ADR") and a slight improvement in the Atlantis' average occupancy rate during the 1998 period. Hotel operating expenses in the 1998 second quarter equaled 29.3% of hotel revenues, compared to 38.1% for the same quarter in 1997, with the improvement reflecting increased operating efficiencies and a higher level of revenue from which to offset the relatively high level of fixed costs of the hotel operation. Other revenues in the 1998 second quarter totaled $695 thousand, up from $634 thousand in the 1997 second quarter, with the increase due primarily to increased retail sales at the Atlantis. Other expenses increased slightly as a percentage of other revenues, rising to 18.4% in the 1998 second quarter from 17.0% in the 1997 second quarter. Selling, general and administrative expenses were essentially unchanged in the 1998 second quarter at 25.6% of net revenues, compared to 25.4% in the second quarter of 1997. Interest expense for the 1998 second quarter totaled $581 thousand, down from $830 thousand in the second quarter of 1997, reflecting lower average outstanding debt, lower average interest rates on the Company's debt, and the capitalization of certain interest costs during the 1998 period. During the 1998 second quarter, the Company capitalized approximately $29 thousand in interest costs related to construction activities at the Atlantis. Comparison of Operating Results for the Six Month Periods Ended June 30, 1998 and 1997 For the six months ended June 30, 1998, the Company earned $2.5 million, or $.26 per share (diluted), on net revenues of $31.1 million, compared to earnings of $2.2 million, or $.24 per share, on net revenues of $29.9 million during the six months ended June 30, 1997. Operating income for the 1998 six month period totaled $5.0 million, compared to $5.1 million for the same period in 1997. Net revenues, net income and earnings per share for the first half of 1998 represented the best first half results in Monarch's history. Casino revenues for the first six months of 1998 totaled $20.2 million, up from $19.2 million for the first six months of 1997, driven by growth in both slot and table game revenues. Casino operating expenses amounted to 42.7% of casino revenues for the six months ended June 30, 1998, compared to 41.0% for the six month period ending June 30, 1997, with the change due primarily to higher promotional allowance costs during the 1998 period. Food and beverage revenues totaled $9.0 million for the six months ended June 30, 1998, compared to $8.7 million for the six months ended June 30, 1997. The Company's food and beverage operating expense margin improved slightly to 54.2% in the 1998 period from 54.8% for the same period in 1997. Hotel revenues for the first six months of 1998 totaled $5.4 million, up from $4.9 million for the first six months of 1997, with the improvement primarily due to an increase in the Atlantis' ADR in the 1998 period. The hotel operating expense margin for the six month period ended June 30, 1998 was 33.3%, compared to 39.2% for the first six months of 1997, with the improvement reflecting increased operating efficiencies and a higher level of revenue from which to offset the relatively high level of fixed costs of the hotel operation. -9- Selling, general and administrative expenses were essentially unchanged in the first six months of 1998 at 26.6% of net revenues, compared to 26.4% in the first six months of 1997. Interest expense for the first six months of 1998 totaled $1.2 million, down from $1.7 million in the first six months of 1997, reflecting lower average outstanding debt, lower average interest rates on the Company's debt, and the capitalization of certain interest costs during the 1998 period. During the 1998 period, the Company capitalized approximately $47 thousand in interest costs related to construction activities at the Atlantis. OTHER FACTORS AFFECTING CURRENT AND FUTURE RESULTS The Company signed an agreement with Perini Building Company on June 12, 1998 to construct an expansion of the Atlantis that will add approximately 390 rooms, 16,000 square feet of additional casino space and other amenities to the Atlantis (the "Expansion Project"). Major construction activity is underway at the Atlantis, which could result in business disruptions while the construction is underway. The Company has carefully planned the project to mitigate the disruptive effects of construction by redirecting traffic flows, creating alternative access points at the Atlantis, and restricting construction crews, materials and vehicles to specified areas; however, the Company believes it is unlikely that such steps will completely alleviate the disruptive impact of this large-scale construction project. On April 20, 1998, the Company entered into a contract with Krump Construction, Inc. ("Krump") of Reno, Nevada to construct a pedestrian overhead walkway connecting the Atlantis with a 16-acre site owned by the Company adjacent to and across South Virginia Street from the Atlantis (the "Walkway Project"). Although the Walkway Project is much smaller in scale than the Expansion Project, the construction activity associated with the Walkway Project could also impede access to the property and result in business disruptions while the construction is underway. The Company has taken similar steps to those described above to minimize the disruptive impact of this construction activity, but believes that some disruption will occur. With the Expansion Project and the Walkway Project, the Company is subject to certain risks typically associated with large-scale construction projects, including the risks of delay, shortages of materials or skilled labor, unforeseen engineering, environmental and/or geological problems, work stoppages, weather interference and unanticipated cost increases. LIQUIDITY AND CAPITAL RESOURCES For the six months ended June 30, 1998, net cash provided by operating activities totaled $3.1 million. Net cash used in investing activities for the same period totaled $2.5 million, which consisted entirely of acquisitions of property and equipment at the Atlantis, and net cash used in financing activities totaled $2.1 million, with funds used to reduce the Company's outstanding debt. As a result, at June 30, 1998 the Company had cash of $4.0 million, compared to $5.5 million at December 31, 1997. On December 30, 1997, the Company completed the refinancing of its long- term debt with an $80 million construction and reducing revolving credit facility with a group of banks (the "Credit Facility"). The Credit Facility replaced approximately $33 million in existing long-term debt, with the -10- remainder of the $80 million Credit Facility available for use as a source of funding for the Expansion Project and the Walkway Project. The principal terms of the Credit Facility are summarized in the Company's Annual Report on Form 10-K for the year ended December 31, 1997. The Company has signed contracts to construct the Expansion Project and the Walkway Project, which the Company currently estimates will cost approximately $63 million to construct. The Company believes it will have adequate resources available through cash on hand, cash flow from operations, and borrowings allowed under the Credit Facility to construct the Expansion Project and the Walkway Project. In addition to the potential funding requirements associated with the Expansion Project and the Walkway Project, the Company continues to monitor expansion opportunities at its other Reno site and elsewhere in Nevada and in other jurisdictions. The decision by the Company to proceed with any substantial project will require the Company to secure adequate financing on acceptable terms. No assurances can be made that if such projects are pursued that adequate financing would be available on acceptable terms, if at all. The Company believes that its existing cash balances, cash flow from operations and borrowings allowed under the Credit Facility will provide the Company with sufficient resources to fund its operations, meet its existing debt obligations and fund its capital expenditure requirements; however, the Company's operations are subject to financial, economic, competitive, regulatory, and other factors, many of which are beyond its control. If the Company is unable to generate sufficient cash flow, it could be required to adopt one or more alternatives, such as reducing, delaying or eliminating planned capital expenditures, selling assets, restructuring debt or obtaining additional equity capital. On April 10, 1995, the Company announced that its Board of Directors authorized the open market repurchase of up to 200,000 shares of the Company's common stock. As of August 10, 1998, the Company had repurchased 100,000 shares on the open market at a total cost of approximately $330 thousand under this authorization. The Company has funded the purchases made to date and intends to fund any future repurchases from cash on hand. YEAR 2000 During 1997, the Company undertook an assessment of the information systems and software used in its operations to determine whether or not those systems were Year 2000 compliant, and implemented plans to upgrade systems and/or software that was determined not to be Year 2000 compliant. Based on that assessment and the plans made as a result thereof, the Company believes that its critical internal information systems are Year 2000 compliant or will be made Year 2000 compliant before the end of 1999. The Company has begun and is continuing to assess potential issues related to the Year 2000 other than those relating to the Company's internal information systems, such as critical supplier readiness and potential problems associated with embedded technologies, and will develop and implement plans to correct any deficiencies found. The costs of addressing the Company's year 2000 issues have not been finally determined, but are not currently expected to be material to the Company's results of operations or financial position; however, should the Company and/or its critical suppliers fail to identify and/or correct material Year 2000 issues, such failure could impact the Company's ability to operate -11- as it did before the Year 2000, and subsequently have a material impact on the Company's results of operations or financial position. In such an event, the Company will address issues as they arise and strive to minimize any impact on the Company's operations. For a more detailed discussion of the Company's liquidity and capital resources, and issues related to the Year 2000, see the Company's Annual Report on Form 10-K for the year ended December 31, 1997, Item 7. -12- PART II. OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits Exhibit No. Description ----------- ----------- 10.01 Second Amendment to Construction and Reducing Revolving Credit Agreement, dated as of June 12, 1998, among Golden Road Motor Inn, Inc. as Borrower, Monarch Casino & Resort, Inc., John Farahi, Bahram Farahi, and Behrouz Farahi as guarantors, the Lenders as defined therein, and Wells Fargo Bank as administrative and collateral Agent for the Lenders, Swingline Lender and L/C Issuer. 10.02 Agreement dated June 12, 1998, between Golden Road Motor Inn, Inc. and Perini Building Company, Inc. EX-27 Financial Data Schedule (b) Reports on Form 8-K None -13- SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. MONARCH CASINO & RESORT, INC. (Registrant) Date: August 13, 1998 By: /s/ BEN FARAHI ------------------------------------ Ben Farahi, Co-Chairman of the Board, Secretary, Treasurer and Chief Financial Officer(Principal Financial Officer and Duly Authorized Officer)
-14- EXHIBIT INDEX Exhibit No. Description Page No. - ----------- ----------- -------- 10.01 Second Amendment to Construction and 16 Reducing Revolving Credit Agreement, dated as of June 12, 1998, among Golden Road Motor Inn, Inc. as Borrower, Monarch Casino & Resort, Inc., John Farahi, Bahram Farahi, and Behrouz Farahi as guarantors, the Lenders as defined therein, and Wells Fargo Bank as administrative and collateral Agent for the Lenders, Swingline Lender and L/C Issuer. 10.02 Agreement dated June 12, 1998, between 26 Golden Road Motor Inn, Inc. and Perini Building Company, Inc. EX-27 Financial Data Schedule 75
-15- EX-10 2 SECOND AMENDMENT TO CREDIT AGREEMENT THIS SECOND AMENDMENT TO CREDIT AGREEMENT ("Second Amendment") is made and entered into as of the 12th day of June, 1998, by and among GOLDEN ROAD MOTOR INN, INC., a Nevada corporation (the "Borrower"), MONARCH CASINO & RESORT, INC., a Nevada corporation ("MCRI"), JOHN FARAHI, BAHRAM FARAHI and BEHROUZ FARAHI (collectively "Farahi" and together with MCRI, collectively the "Guarantors") and WELLS FARGO BANK, National Association, THE FIRST NATIONAL BANK OF CHICAGO, U.S. BANK NATIONAL ASSOCIATION, FIRST SECURITY BANK, N.A. and IMPERIAL BANK, as Lenders, and WELLS FARGO BANK, National Association, as Swingline Lender and L/C Issuer and as the administrative and collateral agent for the Lenders, Swingline Lender and L/C Issuer (herein in such capacity called the "Agent Bank" and, together with the Lenders, Swingline Lender and L/C Issuer collectively referred to as the "Banks"). R_E_C_I_T_A_L_S: WHEREAS: A. Borrower, Guarantors and Banks entered into a Credit Agreement dated as of December 29, 1997, as amended by First Amendment to Credit Agreement dated as of the 9th day of January, 1998 (collectively the "Existing Credit Agreement") for the purpose of establishing a reducing revolving line of credit in favor of Borrower, to be funded by Lenders up to the maximum principal amount of Eighty Million Dollars ($80,000,000.00), including a Swingline Facility to be funded by Swingline Lender up to the maximum amount of Two Million Five Hundred Thousand Dollars ($2,500,000.00) at any time outstanding and an additional subfacility for the issuance by L/C Issuer of standby and commercial letters of credit up to the maximum aggregate amount of Two Million Five Hundred Thousand Dollars ($2,500,000.00) at any time outstanding. B. For the purpose of this Second Amendment, all capitalized words and terms not otherwise defined herein shall have the respective meanings and be construed herein as provided in Section 1.01 of the Existing Credit Agreement and any reference to a provision of the Existing Credit Agreement shall be deemed to incorporate that provision as a part hereof, in the same manner and with the same effect as if the same were fully set forth herein. C. Borrower and Guarantors desire to further amend the Existing Credit Agreement for the purposes of: (i) increasing the aggregate amount of secured purchase money Indebtedness and Capital Lease Liabilities which may be incurred by Borrower to a maximum aggregate amount of Four Million Five Hundred Thousand Dollars ($4,500,000.00), (ii) permitting Borrower to incur additional Indebtedness up to the maximum aggregate amount of Ten Million Dollars ($10,000,000.00), which is structurally and contractually subordinated to the Bank Facilities, the proceeds of which are to be used to increase the amount of Available Borrowings by reducing the Funded Outstandings under the Credit Facility with the net proceeds of the Subordinated Debt received by Borrower, (iii) permitting the Borrower to refinance the Caramella Obligations, and (iv) making other modifications of the provisions regarding construction of the Expansion Project. D. Banks have agreed to amend the Existing Credit Agreement on the terms and subject to the conditions and provisions set forth in this Second Amendment. NOW, THEREFORE, in consideration of the foregoing and other good and valuable considerations, the receipt and sufficiency of which are hereby acknowledged, the parties hereto do agree to the amendments and modifications to the Existing Credit Agreement as specifically hereinafter provided as follows: 1. Definitions. Section 1.01 of the Existing Credit Agreement entitled "Definitions" shall be and is hereby amended to include the following definitions. Those terms which are currently defined by Section 1.01 of the Existing Credit Agreement and which are also defined below shall be superseded and restated by the applicable definition set forth below: "Credit Agreement" shall mean the Existing Credit Agreement as amended by the Second Amendment, together with all Schedules, Exhibits and other attachments thereto, as it may be further amended, modified, extended, renewed or restated from time to time. "Existing Credit Agreement" shall have the meaning set forth in Recital Paragraph A of the Second Amendment. "Funded Debt" shall mean with reference to the Borrower for any period the daily average of the Funded Outstandings for the last month of such period, plus the total as of the last day of such period of both the long-term and current portions (without duplication) of all other interest bearing Indebtedness (exclusive of the Subordinated Debt) and Capitalized Lease Liabilities. "Payment Subordination Agreement" shall mean the Payment Subordination Agreement to be executed by each Subordinated Debt Holder intending to loan or advance all or any portion of the Subordinated Debt to Borrower, which shall be executed in favor of Agent Bank on behalf of the Lenders prior to any such loan or advance of funds under the Subordinated Debt in the form of the Payment Subordination Agreement marked "Exhibit P", affixed to the Second Amendment and by this reference incorporated herein and made a part hereof. "Permitted Deferred FF&E Acquisition Costs" shall mean, as of any date of determination, Five Million Five Hundred Thousand Dollars ($5,500,000.00), less that portion of the FF&E Acquisition Costs which have, as of such date, been incurred and paid from third party purchase money financing to the extent permitted under Section 6.07(a) or (b). "Schedule of Permitted Deferred Construction Equity" shall mean the Schedule of Permitted Deferred Construction Equity marked "Schedule 9.13(g)", affixed to the Second Amendment and by this reference incorporated herein and made a part hereof, setting forth the Maximum Amount of Permitted Deferred Construction Equity which is permitted to remain unpaid or unfunded during each of the therein described Deferred Construction Equity Periods. "Second Amendment" shall mean the Second Amendment to Credit Agreement. "Second Amendment Effective Date" shall mean the date upon which each of the conditions precedent set forth in Paragraph 8 of the Second Amendment shall have occurred to the satisfaction of Agent Bank. "Subordinated Debt" shall mean Indebtedness up to the aggregate maximum amount of Ten Million Dollars ($10,000,000.00), owing by Borrower to the Subordinated Debt Holder(s) which may or may not be secured by all or any portion of the Collateral or Collateral Properties which: (a) has been structurally and contractually subordinated to the Bank Facilities prior to the incurrence of such Subordinated Debt by execution of a Payment Subordination Agreement by Borrower, Guarantors and the Subordinated Debt Holder(s) in favor of Agent Bank; (b) there is no principal or sinking fund payment requirement maturing or otherwise coming due prior to one (1) year subsequent to the Maturity Date; (c) the maturity date of the Subordinated Debt shall not be prior to one (1) year subsequent to the Maturity Date; (d) all covenants, terms and conditions of the Subordinated Debt shall be less restrictive on MCRI and the Borrower than those applicable under the Credit Agreement; (e) the covenants, terms, conditions, representations, events of default and other provisions of the Subordinated Debt shall be acceptable (from the perspective of a senior lender) to Requisite Lenders, which acceptance shall not be unreasonably withheld or delayed; and (f) the net proceeds of such Subordinated Debt received by Borrower shall only be used to reduce the Funded Outstandings under the Credit Facility. "Subordinated Debt Holder(s)" shall mean collective reference to the Person or Persons who loan or advance funds to Borrower as Subordinated Debt. 2. Amendment of Section 6.07(a). As of the Second Amendment Effective Date, Section 6.07(a) of the Existing Credit Agreement shall be and is hereby deleted and the following is substituted as a full restatement thereof: "a. Incurrence of secured purchase money Indebtedness and Capital Lease Liabilities relating to FF&E to be used in connection with the Hotel/Casino Facility not in excess of the aggregate amount of Four Million Five Hundred Thousand Dollars ($4,500,000.00) at any time outstanding;" 3. Amendment of Section 6.07(e). As of the Second Amendment Effective Date, Section 6.07(e) of the Existing Credit Agreement shall be and is hereby deleted and the following is substituted as a full restatement thereof: "e. Indebtedness evidenced by: (i) the Credit Facility, and (ii) the Subordinated Debt up to the maximum aggregate amount of Ten Million Dollars ($10,000,000.000." 4. Additional Understandings Regarding Subordinated Debt. The undersigned further agree to the following with respect to the Subordinated Debt: a. The Subordinated Debt shall not be deemed to be "Funded Debt" for purposes of calculating the Leverage Ratio of the Borrower and the calculation thereof as set forth on the Pricing Certificate and the Compliance Certificate shall be made exclusive of the Subordinated Debt; b. In the event the Subordinated Debt is secured by a Lien on any portion of the Collateral or Collateral Properties, such Lien shall be deemed to be a Permitted Encumbrance consented to in writing by Agent Bank upon the approval of Requisite Lenders as provided in Subsection (vii) of the definition of Permitted Encumbrances so long as such Lien is structurally and contractually subordinated to the Liens in favor of the Agent Bank securing repayment of the Bank Facilities. 5. Amendment of Schedule of Permitted Deferred Construction Equity. As of the Second Amendment Effective Date, the Schedule of Permitted Deferred Construction Equity, Schedule 9.13(g), shall be and is hereby amended and fully restated by the Schedule of Permitted Deferred Construction Equity marked "Schedule 9.13(g)" affixed to the Second Amendment and by this reference incorporated herein and made a part hereof. 6. Addition of Section 5.22. As of the Second Amendment Effective Date, Section 5.22 entitled "Prohibition on Prepayment or Defeasance of Subordinated Debt" shall be and is hereby added to the Credit Agreement as follows: "Section 5.22. Prohibition on Prepayment or Defeasance of Subordinated Debt. Notwithstanding anything contained in this Credit Agreement to the contrary, neither Borrower nor MCRI shall, except with the prior written consent of the Requisite Lenders, purchase, redeem, retire or otherwise acquire for value, or set apart any money for a sinking, defeasance or other analogous fund for, the purchase, redemption, retirement or other acquisition of, or make any voluntary payment or prepayment of the principal of or interest on, or any other amount owing in respect of, the Subordinated Debt, except for, to the extent not prohibited by the Payment Subordination Agreement, regularly scheduled payments of interest in respect of such Subordinated Debt required pursuant to the instruments evidencing such Subordinated Debt. Any breach of the covenant set forth in the preceding sentence shall be deemed to be an Event of Default under the Credit Agreement." 7. Refinance of Caramella Obligations. At any time subsequent to the Second Amendment Effective Date, Borrower may, at Borrower's discretion, refinance the Caramella Obligations so long as: (i) the outstanding principal of the refinancing Indebtedness does not exceed the outstanding balance of principal on the Caramella Obligations, (ii) the rate of interest on the refinancing Indebtedness shall not exceed prevailing rates of interest in the Reno area for similarly secured Indebtedness, and (iii) such refinancing Indebtedness may only be secured by a first priority deed of trust encumbering the identical portion of the Hotel/Casino Property securing repayment of the Caramella Obligations. In the event Borrower refinances the Caramella Obligations in accordance with the provisions set forth above, Agent Bank shall and is hereby authorized and directed to execute subordinations of the Security Documentation and such estoppels as may be reasonably necessary to perfect a first priority deed of trust in favor of the holder of the refinancing Indebtedness, as provided in subparagraph (iii) hereinabove. 8. Conditions Precedent to Second Amendment Effective Date. The occurrence of the Second Amendment Effective Date is subject to Agent Bank having received the following documents and payments, in each case in a form and substance reasonably satisfactory to Agent Bank, and the occurrence of each other condition precedent set forth below on or before June 12, 1998: a. Due execution by Borrower, Guarantors and Banks of seven (7) duplicate originals of this Second Amendment; b. Corporate resolutions or other evidence of requisite authority of Borrower and Guarantors, as applicable, to execute the Second Amendment; and c. Reimbursement to Agent Bank by Borrower for all reasonable fees and out-of-pocket expenses incurred by Agent Bank in connection with the Second Amendment, including, but not limited to, reasonable attorneys' fees of Henderson & Morgan, LLC; and d. Such other documents, instruments or conditions as may be reasonably required by Lenders. 9. Representations of Borrower. Borrower hereby represents to the Banks that: a. the representations and warranties contained in Article IV of the Existing Credit Agreement and contained in each of the other Loan Documents (other than representations and warranties which expressly speak only as of a different date, which shall be true and correct in all material respects as of such date) are true and correct on and as of the Second Amendment Effective Date in all material respects as though such representations and warranties had been made on and as of the Second Amendment Effective Date, except to the extent that such representations and warranties are not true and correct as a result of a change which is permitted by the Credit Agreement or by any other Loan Document or which has been otherwise consented to by Agent Bank; b. Since the date of the most recent financial statements referred to in Section 5.08 of the Existing Credit Agreement, no Material Adverse Change has occurred and no event or circumstance which could reasonably be expected to result in a Material Adverse Change or Material Adverse Effect has occurred; c. no event has occurred and is continuing which constitutes a Default or Event of Default under the terms of the Credit Agreement; and d. The execution, delivery and performance of this Second Amendment has been duly authorized by all necessary action of Borrower and Guarantors and this Second Amendment constitutes a valid, binding and enforceable obligation of Borrower and Guarantors. 10. Affirmation and Ratification of Continuing Guaranty. Guarantors join in the execution of this Second Amendment for the purpose of ratifying and affirming their respective obligations under the Continuing Guaranty for the guaranty of the full and prompt payment and performance of all of Borrower's indebtedness and obligations under the Bank Facilities and each of the Loan Documents, as modified and amended under this Second Amendment. 11. Incorporation by Reference. This Second Amendment shall be and is hereby incorporated in and forms a part of the Existing Credit Agreement. 12. Governing Law. This Second Amendment to Credit Agreement shall be governed by the internal laws of the State of Nevada without reference to conflicts of laws principles. 13. Counterparts. This Second Amendment may be executed in any number of separate counterparts with the same effect as if the signatures hereto and hereby were upon the same instrument. All such counterparts shall together constitute one and the same document. 14. Continuance of Terms and Provisions. All of the terms and provisions of the Credit Agreement shall remain unchanged except as specifically modified herein. 15. Additional and Replacement Schedules and Exhibits Attached. The following additional Schedule and Exhibit are attached hereto and incorporated herein and made a part of the Credit Agreement as follows: Schedule 9.13(g) - Schedule of Permitted Deferred Construction Equity Exhibit P - Payment Subordination Agreement - Form IN WITNESS WHEREOF, the parties hereto have executed this Second Amendment as of the day and year first above written. BORROWER: GOLDEN ROAD MOTOR INN, INC., a Nevada corporation By /s/ Ben Farahi ---------------------- Ben Farahi, Secretary GUARANTORS: MCRI: MONARCH CASINO & RESORT, INC., a Nevada corporation By /s/ Ben Farahi ---------------------- Ben Farahi, Secretary /s/ John Farahi ------------------------ John Farahi /s/ Bahram Farahi ------------------------ Bahram Farahi /s/ Behrouz Farahi ------------------------ Behrouz Farahi BANKS: WELLS FARGO BANK, National Association, Agent Bank, Lender, Swingline Lender and L/C Issuer By /s/ Rochanne Hacket ---------------------- Rochanne Hackett, Vice President BANKS: THE FIRST NATIONAL BANK OF CHICAGO By /s/ Mark A. Isley ---------------------- Mark A. Isley First Vice President US BANK NATIONAL ASSOCIATION By /s/ Steven G. Buntin ---------------------- Steven G. Buntin Vice President FIRST SECURITY BANK, N.A. By /s/ David P. Williams ---------------------- David P. Williams Vice President IMPERIAL BANK By /s/ Steven K. Johnson ---------------------- Steven K. Johnson Senior Vice President SCHEDULE OF PERMITTED DEFERRED CONSTRUCTION EQUITY DEFERRED CONSTRUCTION EQUITY MAXIMUM AMOUNT OF PERMITTED PERIODS DEFERRED CONSTRUCTION EQUITY ============================================================================= Initial Construction $6,300,000.00 Disbursement Date ("ICDD") through 90th day following the ICDD From the 91st day following 5,300,000.00 the ICDD through the 180th day following the ICDD From the 181st day following 4,300,000.00 the ICDD through the 270th day following the ICDD From the 271st day following 3,300,000.00 the ICDD through the 360th day following the ICDD From the 361st day following 2,300,000.00 the ICDD through the 450th day following the ICDD From the 451st day following 0.00 (Zero) the ICDD through and including the Completion Date SCHEDULE 9.13(g) TO SECOND AMENDMENT EXHIBIT P Payment Subordination Agreement (Form) [NOT INCLUDED] EX-10 3 CONTRACT FOR CONSTRUCTION Standard Form of Agreement Between Owner and Contractor Where the basis of payment is a STIPULATED SUM. AGREEMENT made as of the 12 day of June in the year 1998 BETWEEN the Owner: Golden Road Motor Inn, Inc. 1175 W. Moana Lane, Suite 200 Reno, NV 89509 And the Contractor: Perini Building Company, Inc. 360 East Coronado Road, Phoenix, AZ 85004. The project is: Atlantis Casino Resort Phase IV Expansion, 3800 South Virginia Street Reno, NV 89502 The Architect is: Waldemar Eklof Architects 1175 W. Moana Lane, Suite 201 Reno, NV 89509 The Owner and Contractor agree as follows: ARTICLE 1 THE CONTRACT DOCUMENTS The Contract Documents consist of this Agreement, Conditions of the Contract (General, Supplementary, Special and other Conditions), Project Specifications, Drawings, Addenda issued prior to execution of this Agreement, other documents listed in this Agreement and Modifications issued after execution of this Agreement; these form the Contract, and are as fully a part of the Contract as if attached to this Agreement or repeated herein. The Contract represents the entire and integrated agreement between the parties hereto and supersedes prior negotiations, representations or agreements, either written or oral. An enumeration of the Contract Documents, other than Modifications, appears in Article 8. All references herein to General Conditions of the Contract for Construction, A201-1997, are hereby amended to read and refer to A201-1987. ARTICLE 2 THE WORK OF THIS CONTRACT The Contractor shall fully execute the Work described in the Contract Documents, except to the extent specifically indicated in the Contract Documents to be the responsibility of others. ARTICLE 3 DATE OF COMMENCEMENT AND SUBSTANTIAL COMPLETION 3.1 The date of commencement of the Work shall be June 15, 1998. 3.2 The Contract Time shall be measured from the date of commencement. 3.3 The Contractor shall achieve Substantial Completion of the entire Work pursuant to paragraphs 3.3.1 and 3.3.2 below and in accordance with Exhibit A, (Perini Schedule), attached hereto and incorporated herein by this reference, subject only to adjustments of the Contract Time as provided in the Contract Documents. 3.3.1 Substantial Completion: Owner and Contractor acknowledge that time is of the essence in this Agreement and that Owner has emphasized to Contractor the importance of this work being "substantially completed" as follows: All guest rooms on floors 1 through 14 of the new tower, inclusive, to be completed and ready for occupancy by April 14, 1999 (with the exception of the HVAC system for said rooms, which will be completed and ready by May 24, 1999); All other work within the scope of this Contract to be completed and ready for occupancy by Monday, June 14, 1999. Owner and Contractor acknowledge that should the work not be "substantially completed" as stated, the Owner will suffer severe and substantial damages, the precise nature and amount of which cannot be adequately calculated. For this reason, the Contractor agrees that in the event the work is not substantially completed as stated, Contractor shall pay liquidated damages to Owner as follows: (i) if any of the guest rooms on floors 1 through 14, inclusive, are not complete and ready for occupancy by April 14, 1999, (with the exception of the HVAC system for said rooms which is to be complete by May 24, 1999), Contractor shall pay Owner $5,000.00 per day from April 15, 1999, until all guest rooms on floors 1 through 14, inclusive, are complete and ready for occupancy; (ii) if any portion of the construction within the scope of work is not completed and ready for occupancy by June 14, 1999, Contractor shall pay Owner $5,000.00 per day from June 15, 1999, until the work is completed and ready for occupancy. Owner and Contractor agree that this amount is reasonable and not a penalty. 3.3.2 The completion dates stated above are subject to: (i) Owner furnishing his materials and/or equipment when requested and finishing his work as required, which requirement shall be subject to Contractor timely providing Owner with lists of materials and quantities needed, and; (ii) Owner's other contractors (i.e. those contractors on the job who are not subcontractors of Contractor) performing their work within a reasonably coordinated time schedule to be provided by Contractor prior to execution of the Contract. Under no circumstances shall any delay of the work be justified where such delay is caused by the negligence or fault of Contractor or any of its Subcontractors or suppliers of Contractor or its sub-contractors or sub- subcontractors. ARTICLE 4 CONTRACT SUM 4.1 The Owner shall pay the Contractor the Contract Sum in current funds for the Contractor's performance of the Contract. The Contract Sum shall be THIRTY-FOUR MILLION SIX HUNDRED SIXTY-SIX THOUSAND FOUR HUNDRED TWO DOLLARS ($34,666,402.00), subject to additions and deductions as provided in the Contract Documents. 4.2 Contractor warrants that it can and will perform all work included within the scope of work contemplated by the Contract Documents for the Contract Sum and that Contractor is not depending upon additive change orders in entering into this Contract. ARTICLE 5 PAYMENTS 5.1 PROGRESS PAYMENTS 5.1.1 Based upon Applications for Payment and Certifications thereof with all documentation required by Owner's Lender submitted to the Architect by the Contractor and Certificates for Payment issued by the Architect, the Owner shall make progress payments on account of the Contract Sum to the Contractor as provided below and elsewhere in the Contract Documents. 5.1.2 The period covered by each Application for Payment shall be one calendar month ending on the last day of the month. 5.1.3. Provided that an Application for Payment is received by the Architect not later than the 25th day of the month, the Owner shall make payment to the Contractor not later than 11 banking business days after the end of that month. There shall be no more than one application per month on the 25th of each month. 5.1.4 Each Application for Payment shall be based on the most recent schedule of values submitted by the Contractor in accordance with the Contract Documents. The schedule of values shall allocate the entire Contract Sum among the various portions of the Work. The schedule of values shall be prepared in such form and supported by such data to substantiate its accuracy as the Architect may require. This schedule, unless objected to by the Architect, shall be used as a basis for reviewing the Contractor's Applications for Payment. 5.1.5 Applications for Payment shall indicate the percentage of completion of each portion of the Work as of the end of the period covered by the Application for Payment. 5.1.6 Subject to other provisions of the Contract Documents, the amount of each progress payment shall be computed as follows: .1 Take that portion of the Contract Sum properly allocable to completed Work as determined by multiplying the percentage completion of each portion of the Work by the share of the Contract Sum allocated to that portion of the Work in the schedule of values, less retainage of ten percent (10%). Pending final determination of cost to the Owner of changes in the Work, amounts not in dispute shall be included as provided in Subparagraph 7.3.8 of The General Conditions of the Contract; .2 Add that portion of the Contract Sum properly allocable to materials and equipment delivered and suitably stored at the site for incorporation in the completed construction (or, if approved in advance by the Owner, suitably stored off the site at a location agreed upon in writing), less retainage of ten percent (10%); except that no payment will be made for equipment or material to be installed more than 30 days after such equipment/material has been delivered. .3 Subtract the aggregate of previous payments made by the Owner; and .4 Subtract amounts, if any, for which the Architect has withheld or nullified a Certificate for Payment as provided in Paragraph 9.5 of The General Conditions of the Contract. 5.1.7 The progress payment amount determined in accordance with Subparagraph 5.1.6 shall be further modified under the following circumstances: .1 Add, upon Substantial Completion of the Work a sum sufficient to increase the total payments to the full amount of the Contract Sum, less such amounts as the Architect shall determine for incomplete Work, retainage applicable to such work and unsettled claims; and .2 Add, if final completion of the Work is thereafter materially delayed through no fault of the Contractor, any additional amounts payable in accordance with Subparagraph 9.10.3 of The General Conditions of the Contract. 5.1.8 Reduction or limitation of retainage, if any, shall be as follows: 5.1.9 Except with the Owner's prior written approval, the Contractor shall not make advance payments to suppliers for materials or equipment which have not been delivered and stored at the site. 5.1A Payment for alterations/additions requiring a change to the scope of the work where a change order has been duly executed by Owner shall be paid as follows: .1 for additive change order work performed by subcontractors, the net amount of subcontractor's cost for materials, labor and fee, plus a fee of 6% (six percent); .2 for additive change order work performed by the Contractor's own forces, the net amount of Contractor's basic cost for materials and labor plus a fee of 6% (six percent); .3 for deductive change order work performed by subcontractors, the net amount of subcontractor's cost for materials, labor and fee, plus a fee of 6% (six percent); .4 for deductive change order work performed by the Contractor's own forces, the net amount of Contractor's basic cost for materials and labor, plus a fee of 6% (six percent). 5.1B If the overall net effect of all changes orders, (i.e. the sum of additive and deductive changes) is a negative, thus lowering the contract price stated in paragraph 4.1, all percentages stated in paragraphs 5.1A.1 through 5.1A.4 shall be reduced to 5% (five percent). 5.1C Fees for alterations and additions which involve a change in the scope of work under the Contract do not include the cost of bonding, insurance or additional field staff which may be required for such scope changes. There shall be no costs attributed to bonding, insurance, overhead, supervision or additional staff for any alterations or additions which do not involve a change in the scope of work. Payment for alterations/ additions not requiring a change to the scope of the work shall be made 120 days after substantial completion of the work of the project. 5.2 FINAL PAYMENT 5.2.1 Final Payment, constituting the entire unpaid balance of the Contract Sum, shall be made by the Owner to the Contractor when: .1 the Contractor has fully performed the Contract except for the Contractor's responsibility to correct Work as provided in Subparagraph 12.2.2 of The General Conditions of the Contract, and to satisfy other requirements, if any, which extend beyond final payment; and .2 a final Certificate for Payment has been issued by the Architect. 5.2.2 The Owner's final payment to the Contractor shall be made upon verification to Owner that no liens or other encumbrances remain outstanding against the subject property. Additionally, final payment shall be made no later than 45 days after the recording in Washoe County by Owner of an appropriate Notice of Completion (which Notice shall be signed by Owner within 15 days of Certified Occupancy and upon recording of which, Owner shall immediately deliver a copy of same in person or by certified mail to Contractor pursuant to NRS 108.228(4)), and upon verification to Owner and Lender that no liens or encumbrances have been filed as a result of the Work. Remaining funds held for retention by Owner shall be released at such time as all of the following have occurred: .1 The project has been accepted by Owner and certified completed by the Architect and Contractor after a final inspection which shall be made within 10 business days after the filing of the Notice of Completion; .2 A permanent Certificate of Occupancy for the project has been issued to Owner by the City of Reno and a copy thereof delivered to Owner provided, however, that this condition may be satisfied by the issuance of a temporary Certificate of Occupancy by the City of Reno, so long as the condition for the issuance of permanent Certificate of Occupancy is completion of the exterior landscaping in accordance with the Plans and Specifications or conditions beyond Contractor's control; .3 A Notice of Completion has been posted on the Premises and recorded in the office of the County Recorder of Washoe County, Nevada, the lien period has expired and the Title Company has issued its final 101.2 Endorsement to the title Insurance Policy showing no liens, claims or encumbrances except those approved by Owner. Owner shall disburse all proceeds so as to cooperate with the Title Company in order to maintain the Title Insurance Policy referred to in the Loan Agreement in full force and effect; .4 A release of lien of Contractor and its Subcontractors and suppliers for all work performed that is acceptable to the Lender. 5.3 Final Disbursement of Hard Costs Final disbursement constituting the unpaid balance of the contract price shall be due and payable 120 days after the entire work project is delivered to Owner, ready for beneficial occupancy, provided that each condition for the release of the remaining funds held for retention as set forth above has been fully satisfied. ARTICLE 6 TERMINATION OR SUSPENSION 6.1 The Contract may be terminated by the Owner or the Contractor as provided in Article 14 or The General Conditions of the Contract. 6.2 The Work may be suspended by the Owner as provided in Article 14 of The General Conditions of the Contract. ARTICLE 7 MISCELLANEOUS PROVISIONS 7.1 Where reference is made in this Agreement to a provision of The General Conditions of the Contract or another Contract Document, the reference refers to that provision as amended or supplemented by other provisions of the Contract Documents. 7.2 Payments due and unpaid under the Contract shall bear interest from the date payment is due at the Prime Rate plus 1.0% (One percent). 7.3 The Owner's representative is: Ben Farahi 1175 W. Moana Lane, Suite 200 Reno, NV 89509, 825-3355 fax 825-7705. 7.4 The Contractor's representative is: Bob Gaus, Perini Building Company, on- site at the construction project. 7.5 The Contractor's representative shall not be changed without the consent and written authorization of the Owner. 7.6 Other provisions: 7.6.1 This Agreement and all Contract Documents are fully assignable by Owner at any time. 7.6.1.1 Copies of all contract documents of all subcontracts entered into between Contractor and any subcontractor, the value/price of which is equal to or greater than FIVE HUNDRED THOUSAND DOLLARS ($500,000.00), must be provided to Owner for delivery to Owner's Lender. Additionally, all subcontracts entered into between Contractor and any subcontractor, the value/price of which is equal to or greater than FIVE MILLION DOLLARS ($5,000,000.00) must be assigned by Contractor to Owner's Lender. 7.6.2 All temporary utilities to be paid by Contractor, who will use best efforts to keep power off when not in use and otherwise avoid power waste. 7.6.3 Contractor acknowledges responsibility for and will defend and hold Owner harmless for any risks, i.e. earthquake, flood, etc., that he does not insure against, including deductibles. ARTICLE 8 ENUMERATION OF CONTRACT DOCUMENTS 8.1 The Contract Documents, except for Modifications issued after execution of this Agreement, are enumerated as follows: this CONTRACT FOR CONSTRUCTION, consisting of 8 pages; THE GENERAL CONDITIONS OF THE CONTRACT, including SPECIAL CONDITIONS contained therein, consisting of 45 pages; EXHIBIT A, Perini Work Schedule; EXHIBIT B, Schedule of Values; EXHIBIT C, CONTRACT CLARIFICATIONS, consisting of 3 pages plus Attachments 1, 2 and 3; EXHIBIT D, THE PROJECT SPECIFICATIONS, dated April 6, 1998, which include ADDENDUM NUMBER 1 dated April 24, 1998, ADDENDUM NUMBER 2 dated May 1, 1998 and ADDENDUM NUMBER 3 dated May 4, 1998 and also including MEMORANDUM OF WALDEMAR EKLOF dated May 6, 1998, and also including CLARIFICATION MEMORANDUM OF WALDEMAR EKLOF dated May 8, 1998 and also including latest drawings with corrections/changes of building department dated May 27, 1998; EXHIBIT E, INSURANCE REQUIREMENTS, consisting of 4 pages; EXHIBIT F, ATLANTIS TOWER AND CASINO EXPANSION LIST OF DRAWINGS, consisting of 9 pages; EXHIBIT G, BLACK EAGLE SOILS REPORT; EXHIBIT H, Otis Elevator Work Schedule; EXHIBIT I, Value Engineering/contract changes; EXHIBIT J, Revised Kitchen Drawings dated June 8, 1998; EXHIBIT K, Life Safety Package; EXHIBIT L, Contractor's Certification to Lender re: Project Completion and Budget; _______ This Agreement is entered into as of the day and year first written above and is executed in at least three original copies, of which one is to be delivered to the Contractor, one to the Architect for use in the administration of the Contract, and the remainder to the Owner. Agreement Clarification 8.1.7 .1 All temporary construction partitioning shall be sheet rocked on the public side, taped and painted. It shall be closed on top and bottom to prevent dust infiltration into public space. The temporary walkways will be constructed before the main southeast doors leading to the east parking lot are taken out. .2 The Toucan Charlies Buffet Restaurant shall remain open at all times. When a shut down is unavoidable, the Owner will cooperate with the Contractor in determining when a shut down of a few hours maximum may occur. .3 Any utility shut down at all must occur at a time of least disruption to the facility operation and must be coordinated with the hotel management a minimum of 48 hours in advance. The Owner will establish the hours of least disruption. .4 In lieu of payment and performance bonding, Perini shall provide its Corporate Guarantee for performance of all work. .5 If this Contract omits any requirements mandated by Owner's Lender which do not include cost analysis beyond what is already provided for in the Contract Documents, Contractor shall execute an appropriate addendum to the Contract to provide for such requirements. .6 Contractor has met with and coordinated scheduling with Otis Elevator, Owner's contractor for the purchase and installation of elevators in the project. Contractor shall coordinate with Otis and perform its work so as to provide for Otis' scheduling. /s/Ben Farahi /s/Craig Shaw OWNER CONTRACTOR Ben Farahi, CFO General Conditions of the Contract for Construction Table of Articles 1. General Provisions 2. Owner 3. Contractor 4. Administration of the Contract 5. Subcontractors 6. Construction by Owner or by Separate Contractors 7. Changes in the Work 8. Time 9. Payments and Completion 10. Protection of Persons and Property 11. Insurance and Bonds 12. Uncovering and Correction of Work 13. Miscellaneous Provisions 14. Termination or Suspension of the Contract GENERAL CONDITIONS OF THE CONTRACT FOR CONSTRUCTION ARTICLE 1 GENERAL PROVISIONS 1.1 BASIC DEFINITIONS 1.1.1 THE CONTRACT DOCUMENTS The Contract Documents consist of the Agreement between Owner and Contractor (hereinafter the Agreement), Conditions of the Contract (General, Supplementary and Special Conditions), Drawings, Specifications, addenda issued prior to execution of the Contract, other documents listed in the Agreement and Modifications issued after execution of the contract. A Modification is (1) a written amendment to the Contract signed by both parties, (2) a Change Order, (3) a Construction Change Directive or (4) a written order for a minor change in the work issued by the Architect. Unless specifically enumerated in the Agreement, the Contract Documents do not include other documents such as bidding requirements (advertisement or invitation to bid, Instructions to Bidders, sample forms, the Contractor's bid or portions of addenda relating to bidding requirements). 1.1.2 THE CONTRACT The Contract Documents form the Contract for Construction. The Contract represents the entire and integrated agreement between the parties hereto and supersedes prior negotiations, representations or agreements, either written or oral. The Contract may be amended or modified only by a Modification. The Contract Documents shall not be construed to create a contractual relationship of any kind (1) between the Architect and Contractor, (2) between the Owner and a Subcontractor or Sub- subcontractor or (3) between any persons or entities other than the Owner and Contractor. The Architect shall, however, be entitled to performance and enforcement of obligations under the contract intended to facilitate performance of the Architect's duties. 1.1.3 THE WORK The term "Work" means the construction and services required by the Contract Documents, whether completed or partially completed, and includes all other labor, materials, equipment and services provided or to be provided by the Contractor to fulfill the Contractor's obligations. The Work may constitute the whole or a part of the Project. 1.1.4 THE PROJECT The Project is the total construction of which the Work performed under the Contract Documents may be the whole or a part and which may include construction by the Owner or by separate contractors. 1.1.5 THE DRAWINGS The Drawings are the graphic and pictorial portions of the Contract Documents, wherever located and whenever issued, showing the design, location and dimensions of the Work, generally including plans, elevations, sections, details, schedules and diagrams. 1.1.6 THE SPECIFICATIONS The Specifications are that portion of the Contract Documents consisting of the written requirements for materials, equipment, construction systems, standards and workmanship for the Work, and performance of related services. 1.1.7 THE PROJECT MANUAL The Project Manual is the volume usually assembled for the Work which may include the bidding requirements, sample forms, Conditions of the Contract and Specifications. 1.2 EXECUTION, CORRELATION AND INTENT 1.2.1 The Contract Documents shall be signed by the Owner and Contractor as provided in the Agreement. If either the Owner or Contractor or both do not sign all the Contract Documents, the Architect shall identify such unsigned Documents upon request. 1.2.2 Execution of the Contract by the Contractor is a representation that the Contractor has visited the site, become familiar with local conditions under which the Work is to be performed and correlated personal observations with requirements of the Contract Documents. 1.2.3 The intent of the Contract Documents is to include all items necessary for the proper execution and completion of the Work by the Contractor. The Contract Documents are complementary, and what is required by one shall be as binding as if required by all; performance by the Contractor shall be required only to the extent consistent with the Contract Documents and reasonably inferable from them as being necessary to produce the intended results. 1.2.4 Organization of the Specifications into divisions, sections and articles, and arrangement of Drawings shall not control the Contractor in dividing the Work among Subcontractors or in establishing the extent of Work to be performed by any trade. 1.2.5 Unless otherwise stated in the Contract Documents, words which have well-known technical or construction industry meanings are used in the Contract Documents in accordance with such recognized meanings. 1.3 OWNERSHIP AND USE OF ARCHITECT'S DRAWINGS, SPECIFICATIONS AND OTHER DOCUMENTS 1.3.1 The Drawings, Specifications and other documents prepared by the Architect are instruments of the Architect's service through which the Work to be executed by the Contractor is described. The Contractor may retain one contract record set. Neither the Contractor nor any Subcontractor, Sub- subcontractor or material or equipment supplier shall own or claim a copyright in the Drawings, Specifications or other documents prepared by the Architect, and unless otherwise indicated the Architect shall be deemed the author of them and will retain all common law, statutory and other reserved rights, in addition to the copyright. All copies of them, except the Contractor's record set, shall be returned or suitably accounted for to the Architect, on request, upon completion of the Work. The Drawings, Specifications and other documents prepared by the Architect, and copies thereof furnished to the Contractor, are for use solely with respect to this Project. They are not to be used by the Contractor or any Subcontractor, Sub-subcontractor or material or equipment supplier on other projects or for additions to this Project outside the scope of the Work without the specific written consent of the Owner and Architect. The Contractor, Subcontractors, Sub-subcontractors and material or equipment suppliers are granted a limited license to use and reproduce applicable portions of the Drawings, Specifications and other documents prepared by the Architect appropriate to and for use in the execution of their Work under the contract Documents. All copies made under this license shall bear the statutory copyright notice, if any, shown on the Drawings, Specifications and other documents prepared by the Architect. Submittal or distribution to meet official regulatory requirements or for other purposes in connection with this Project is not to be construed as publication in derogation of the Architect's copyright or other reserved rights. 1.4 CAPITALIZATION 1.4.1 Terms capitalized in these General Conditions include those which are (1) specifically defined, (2) the titles of numbered articles and identified references to Paragraphs, Subparagraphs and Clauses in the document or (3) the titles of other documents published by the American Institute of Architects. 1.5 INTERPRETATION 1.5.1 In the interest of brevity the Contract Documents frequently omit modifying words such as "all" and "any" and articles such as "the" and "an," but the fact that a modifier or an article is absent from one statement and appears in another is not intended to affect the interpretation of either statement. ARTICLE 2 OWNER 2.1 DEFINITION 2.1.1 The Owner is the person or entity identified as such in the Agreement and is referred to throughout the Contract Documents as if singular in number. The term "Owner" means the Owner or the Owner's authorized representative. 2.1.2 The Owner upon reasonable written request shall furnish to the Contractor in writing information which is necessary and relevant for the Contractor to evaluate, give notice of or enforce mechanic's lien rights. Such information shall include a correct statement of the record legal title to the property on which the Project is located, usually referred to as the site, and the Owner's interest therein at the time of execution of the Agreement and, within five days after any change, information of such change in title, recorded or unrecorded. 2.2 INFORMATION AND SERVICES REQUIRED OF THE OWNER 2.2.1 Before work begins, Owner will provide Contractor with Certification from its Lender that Lender has agreed to loan Owner sufficient funds to complete the Work under this Agreement. 2.2.2 The Owner shall furnish surveys describing physical characteristics, legal limitations and utility locations for the site of the Project, and a legal description of the site, if reasonably needed and requested by Contractor. 2.2.3 The Owner shall secure and pay for necessary approvals, easements, assessments and charges required for construction, use or occupancy of permanent structures or for permanent changes in existing facilities, if necessary for the Construction Project. 2.2.4 Information or services under the Owner's control shall be furnished by the Owner with reasonable promptness to avoid delay in orderly progress of the Work. 2.2.5 Unless otherwise provided in the Contract Documents, the Contractor will be furnished, free of charge, such copies of Drawings and Project Manuals as are reasonably necessary for execution of the Work. 2.2.6 The foregoing are in addition to other duties and responsibilities of the Owner enumerated herein in respect to Article 6 (Construction by Owner or by Separate Contractors), Article 9 (Payments and Completion) and Article 11 (Insurance and Bond). 2.3 OWNER'S RIGHT TO STOP THE WORK 2.3.1 If the Contractor fails to correct Work which is not in accordance with the requirements of the Contract Documents as required by Paragraph 12.2 or persistently fails to carry out Work in accordance with the Contract Documents, the Owner, by written order signed personally by or an agent specifically so empowered by the Owner in writing, may order the Contractor to stop the Work, or any portion thereof, until the cause for such order has been eliminated; however, the right of the Owner to stop the Work shall not give rise to a duty on the part of the Owner to exercise this right for the benefit of the Contractor or any other person or entity, except to the extent required by Subparagraph 6.1.3. 2.4 OWNER'S RIGHT TO CARRY OUT THE WORK 2.4.1 If the Contractor defaults or neglects to carry out the Work in accordance with the Contract Documents and fails within a seven-day period after receipt of written notice from the Owner to commence and continue correction of such default or neglect with diligence and promptness, the Owner may after such seven-day period without prejudice to other remedies the Owner may have, correct such deficiencies. In such case an appropriate Change Order shall be issued deducting from payments then or thereafter due the Contractor the cost of correcting such deficiencies, including compensation for the Architect's additional services and expenses made necessary by such default, neglect or failure. Such action by the Owner and amounts charged to the Contractor are both subject to prior approval of the Architect. If payments then or thereafter due the Contractor are not sufficient to cover such amounts, the Contractor shall pay the difference to the Owner. ARTICLE 3 CONTRACTOR 3.1 DEFINITION 3.1.1 The Contractor is the person or entity identified as such in the Agreement and is referred to throughout the Contract Documents as if singular in number. The term "Contractor" means the Contractor or the Contractor's authorized representative(s). 3.2 REVIEW OF CONTRACT DOCUMENTS AND FIELD CONDITIONS BY CONTRACTOR 3.2.1 As he proceeds with his work, the Contractor shall carefully study and compare the Contract Documents with each other and with information furnished by the Owner pursuant to Subparagraph 2.2.2 and shall, as soon as possible, report to the Architect errors, inconsistencies or omissions discovered. The Contractor shall not be liable to the Owner or Architect for damage resulting from errors, inconsistencies or omissions in the Contract Documents unless the Contractor recognized such error, inconsistency or omission and knowingly failed to report it to the Architect. If the Contractor performs any construction activity knowing it involves a recognized error, inconsistency or omission in the Contract Documents without such notice to the Architect, the Contractor shall assume appropriate responsibility for such performance and shall bear an appropriate amount of the attributable costs for correction. 3.2.2 The Contractor shall take field measurements and verify field conditions and shall carefully compare such field measurements and conditions and other information known to the Contractor with the Contract Documents before commencing activities in specific areas. Errors, inconsistencies or omissions discovered shall be reported to the Architect and Owner at once. 3.2.3 The Contractor shall perform the Work in accordance with the Contract Documents and submittals approved pursuant to Paragraph 3.12. 3.3 SUPERVISION AND CONSTRUCTION PROCEDURES 3.3.1 The Contractor shall supervise and direct the Work, using the Contractor's best skill and attention. The Contractor shall be solely responsible for and have control over construction means, methods, techniques, sequences and procedures and for coordinating all portions of the Work under the Contract, unless Contract Documents give other specific instructions concerning these matters. 3.3.2 The Contractor shall be responsible to the Owner for acts and omissions of the Contractor's employees, Subcontractors and their agents and employees, and other persons performing portions of the Work under a contract with the Contractor. 3.3.3 The Contractor shall not be relieved of obligations to perform the Work in accordance with the Contract Documents either by activities or duties of the Architect in the Architect's administration of the Contract, or by tests, inspections or approvals required or performed by persons other than the Contractor. 3.3.4 The Contractor shall be responsible for inspection of portions of Work already performed under this Contract to determine that such portions are in proper condition to receive subsequent Work. 3.4 LABOR AND MATERIALS 3.4.1 unless otherwise provided in the Contract Documents, the Contractor shall provide and pay for labor, materials, equipment, tools, construction equipment and machinery, water, heat, utilities, transportation, and other facilities and services necessary for proper execution and completion of the work, whether temporary or permanent and whether or not incorporated or to be incorporated in the Work. 3.4.2 The Contractor shall enforce strict discipline and good order among the Contractor's employees and other persons carrying out the Contract. The Contractor shall not permit employment of unfit persons or persons not skilled in tasks assigned to them. 3.5 WARRANTY 3.5.1 The Contractor warrants to the Owner and Architect that materials and equipment furnished under the Contract will be of good quality and new unless otherwise required or permitted by the Contract Documents, that the Work will be free from defects not inherent in the Quality required or permitted, and that the Work will conform with the requirements of the Contract Documents. Work not conforming to these requirements, including substitutions not properly approved and authorized, may be considered defective. The Contractor's warranty excludes remedy for damage or defect caused by abuse, modifications not executed by the Contractor, improper or insufficient maintenance, improper operation, or normal wear and tear under normal usage. The Contractor shall furnish satisfactory evidence as to the kind and quality of materials and equipment. 3.6 TAXES 3.6.1 The Contractor shall pay sales, consumer, use and similar taxes for the Work or portions thereof provided by the Contractor which are legally enacted when bids are received or negotiations concluded, whether or not yet effective or merely scheduled to go into effect. 3.7 PERMITS, FEES AND NOTICES 3.7.1 Owner shall secure and pay for the building permit and other permits and governmental fees, licenses and inspections necessary for proper execution and completion of the Work which are customarily secured after execution of the Contract and which are legally required when bids are received or negotiations concluded. 3.7.2 The Contractor shall comply with and give notices required by laws, ordinances, rules regulations and lawful orders of public authorities bearing on performance of the Work. 3.7.3 It is not the Contractor's responsibility to ascertain that the Contract Documents are in accordance with applicable laws, statutes, ordinances, building codes and rules and regulations. However, if the Contractor observes that portions of the Contract Documents are at variance therewith, the Contractor shall promptly notify the Architect and Owner in writing, and necessary changes shall be accomplished by appropriate Modification. 3.7.4 If the Contractor performs Work knowing it to be contrary to laws, statutes, ordinances, building codes, and rules and regulations without such notice to the Architect and Owner, the Contractor shall assume full responsibility for such Work and shall bear the attributable costs. 3.8 ALLOWANCES 3.8.1 The Contractor shall include in the Contract Sum all allowances stated in the Contract Documents. Items covered by allowances shall be supplied for such amounts and by such persons or entities as the Owner may direct, but the Contractor shall not be required to employ persons or entities against which the Contractor makes reasonable objection. 3.8.2 Unless otherwise provided in the Contract Documents: .1 materials and equipment under an allowance shall be selected by the Owner to avoid delay in the Work; .2 Allowances shall cover the cost to the Contractor of materials and equipment delivered at the site and all required taxes, less applicable trade discounts; .3 Contractor's costs for unloading and handling at the site, labor, installation costs, overhead, profit and other expenses contemplated for stated allowance amounts shall be included in the Contract Sum and not in the allowances; .4 whenever costs are more than or less than allowances, the Contract Sum shall be adjusted accordingly by Change Order. The amount of the Change Order shall reflect (1) the difference between actual costs and the allowances under Clause 3.8.2.2 and (2) changes in contractor's costs under Clause 3.8.2.3. 3.9 MANAGER / SUPERINTENDENT 3.9.1 The Contractor shall employ a competent manager and superintendent and necessary assistants who shall be in attendance at the Project site during performance of the Work. The superintendent shall represent the Contractor, and communications given to the manager or superintendent shall be as binding as if given to the Contractor. Important communications shall be confirmed in writing to the Contractor's office, attention BOB GAUS or CHRISTOPHER ANDERSON. Other communications shall be similarly confirmed on written request in each case. 3.10 CONTRACTOR'S CONSTRUCTION SCHEDULES 3.10.1 The Contractor, promptly after being awarded the Contract, shall prepare and submit for the Owner's and Architect's information a Contractor's construction schedule for the Work. The schedule shall not exceed time limits current under the Contract Documents, shall be revised at appropriate intervals as required by the conditions of the Work and Project, shall be related to the entire Project to the extent required by the Contract Documents, and shall provide for expeditious and practicable execution of the Work. 3.10.2 The Contractor shall prepare and keep current, for the Architect's approval, a schedule of submittals which is coordinated with the Contractor's construction schedule and allows the Architect reasonable time to review submittals. 3.10.3 The Contractor shall conform to the most recent schedules. 3.11 DOCUMENTS AND SAMPLES AT THE SITE 3.11.1 The Contractor shall maintain at the site for the Owner one record copy of the Drawings, Specifications, addenda, Change Orders and other Modifications, in good order and marked currently to record changes and selections made during construction, and in addition approved Shop Drawings, Product Data, Samples and similar required submittals. These shall be available to the Architect and shall be delivered to the Architect for submittal to the Owner upon completion of the Work. 3.12 SHOP DRAWINGS, PRODUCT DATA AND SAMPLES 3.12.1 Shop Drawings are drawings, diagrams, schedules and other data specially prepared for the Work by the Contractor or a Subcontractor, Sub- subcontractor, manufacturer, supplier or distributor to illustrate some portion of the Work. 3.12.2 Product Data are illustrations, standard schedules, performance charts, instructions, brochures, diagrams and other information furnished by the Contractor to illustrate materials or equipment for some portion of the Work. 3.12.3 Samples are physical examples which illustrate materials, equipment or workmanship and establish standards by which the Work will be judged. 3.12.4 Shop Drawings, Product Data, Samples and similar submittals are not Contract Documents. The purpose of their submittal is to demonstrate for the portions of the Work for which submittals are required the way the Contractor proposes to conform to the information given and the design concept expressed in the Contract Documents. Review by the Architect is subject to the limitations of Subparagraph 4.2.7. 3.12.5 The Contractor shall review, approve and submit to the Architect Shop Drawings, Product Data, Samples and similar submittals required by the Contract Documents with reasonable promptness and in such sequence as to cause no delay in the Work or in the activities of the Owner or of separate contractors. Submittals made by the Contractor which are not required by the Contract Documents may be returned without action. 3.12.6 The Contractor shall perform no portion of the Work requiring submittal and review of Shop Drawings, Product Data, Samples or similar submittals until the respective submittal has been approved by the Architect. Such Work shall be in accordance with approved submittals. 3.12.7 By approving and submitting Shop Drawings, Product Data, Samples and similar submittals, the Contractor represents that the Contractor has determined and verified materials, field measurements and field construction criteria related thereto, or will do so, and has checked and coordinated the information contained within such submittals with the requirements of the Work and of the Contract Documents. 3.12.8 The Contractor shall not be relieved of responsibility for deviations from requirements of the Contract Documents by the Architect's approval of Shop Drawings, Product Data, Samples or similar submittals unless the Contractor has specifically informed the Architect in writing of such deviation at the time of submittal and the Architect has given written approval to the specific deviation. The Contractor shall not be relieved of responsibility for errors or omissions in Shop Drawings, Product Data, Samples or similar submittals by the Architect's approval thereof. 3.12.9 The Contractor shall direct specific attention, in writing or on resubmitted Shop Drawings, Product Data, Samples or similar submittals, to revisions other than those requested by the Architect on previous submittals. 3.12.10 Informational submittals upon which the Architect is not expected to take responsive action may be so identified in the Contract Documents. 3.12.11 When professional certification of performance criteria of materials, systems or equipment is required by the Contract Documents, the Architect shall be entitled to rely upon the accuracy and completeness of such calculations and certifications. 3.13 USE OF SITE 3.13.1 The Contractor shall confine operations at the site to areas permitted by law, ordinances, permits and the Contract Documents and shall not unreasonably encumber the site with materials or equipment. 3.14 CUTTING AND PATCHING 3.14.1 The Contractor shall be responsible for cutting, fitting or patching required to complete the Work or to make its parts fit together properly. 3.14.2 The Contractor shall not damage or endanger a portion of the Work or fully or partially completed construction of the Owner or separate contractors by cutting, patching or otherwise altering such construction, or by excavation. The Contractor shall not cut or otherwise alter such construction by the Owner or a separate contractor except with written consent of the Owner and of such separate contractor; such consent shall not be unreasonably withheld. The Contractor shall not unreasonably withhold from the Owner or a separate contractor the Contractor's consent to cutting or otherwise altering the Work. 3.15 CLEANING UP 3.15.1 The Contractor shall keep the premises and surrounding area free from accumulation of waste materials or rubbish caused by operations under the Contract. At completion of the work the Contractor shall remove from and about the Project waste materials, rubbish, the Contractor's tools, construction equipment, machinery and surplus materials. 3.15.2 If the Contractor fails to clean up as provided in the Contract Documents, the Owner may do so and the cost thereof shall be charged to the Contractor. 3.16 ACCESS TO WORK 3.16.1 The Contractor shall provide the Owner and Architect access to the Work in preparation and progress wherever located. 3.17 ROYALTIES AND PATENTS 3.17.1 The Contractor shall pay all royalties and license feels. The Contractor shall defend suits or claims for infringement of patent rights and shall hold the Owner and Architect harmless from loss on account thereof, but shall not be responsible for such defense or loss when a particular design, process or product of a particular manufacturer or manufacturers is required by the Contract Documents. However, if the Contractor has reason to believe that the required design, process or product is an infringement of a patent, the Contractor shall be responsible for such loss unless such information is promptly furnished to the Architect. 3.18 INDEMNIFICATION 3.18.1 To the fullest extent permitted by law, the Contractor shall indemnify and hold harmless the Owner, Owner's Lender, Architect, Architect's consultants, and agents and employees of any of them from and against claims, damages, losses and expenses, including but not limited to attorneys' fees, arising out of or resulting from performance of the Work, provided that such claim, damage, loss or expense is attributable to bodily injury, sickness, disease or death, or to injury to or destruction of tangible property (other than the Work itself) including loss of use resulting therefrom, but only to the extent caused in whole or in part by negligent acts or omissions of the Contractor, a Subcontractor, anyone directly or indirectly employed by them or anyone for whose acts they may be liable, regardless of whether or not such claim, damage, loss or expense is caused in part by a party indemnified hereunder. Such obligation shall not be construed to negate, abridge, or reduce other rights or obligations of indemnity which would otherwise exist as to a party or person described in this Paragraph 3.18. 3.18.2 In claims against any person or entity indemnified under this Paragraph 3.18 by an employee of the Contractor, a Subcontractor, anyone directly or indirectly employed by them or anyone for whose acts they may be liable, the indemnification obligation under this paragraph 3.18 shall not be limited by a limitation on amount or type of damages, compensation or benefits payable by or for the Contractor or a Subcontractor under workers' or workmen's compensation acts, disability benefit acts or other employee benefit acts. 3.18.3 The obligations of the Contractor under this Paragraph 3.18 shall not extend to the liability of the Architect, the Architect's consultants, and agents and employees of any of them arising out of (1) the preparation or approval of maps, drawings, opinions, reports, surveys, Change Orders, designs or specifications, or (2) the giving of or the failure to give directions or instructions by the Architect, the Architect's consultants, and agents and employees of any of them provided such giving or failure to give is the primary cause of the injury or damage. ARTICLE 4 ADMINISTRATION OF THE CONTRACT 4.1 ARCHITECT 4.1.1 The Architect is the person lawfully licensed to practice architecture or any entity lawfully practicing architecture identified as such in the Agreement and is referred to throughout the Contract Documents as if singular in number. The term "Architect' means the Architect or the Architect's authorized representative. 4.1.2 Duties, responsibilities and limitations of authority of the architect as set forth in the Contract Documents shall not be restricted, modified or extended without written consent of the Owner, Contractor and Architect. Consent shall not be unreasonably withheld. 4.1.3 In case of termination of employment of the Architect, the Owner shall appoint an architect against whom the Contractor makes no reasonable objection and whose status under the Contract Documents shall be that of the former architect. 4.2 ARCHITECT'S ADMINISTRATION OF THE CONTRACT 4.2.1 The Architect will provide administration of the Contract as described in the Contract Documents, and will be the Owner's representative (1) during construction, (2) until final payment is due and (3) with the Owner's concurrence, from time to time during the correction period described in Paragraph 12.2. The Architect will advise and consult with the Owner. The Architect will have authority to act on behalf of the Owner only to the extent provided in the Contract Documents, unless otherwise modified by written instrument in accordance with other provisions of the Contract. 4.2.2 The Architect will visit the site at intervals appropriate to the stage of construction to become generally familiar with the progress and quality of the completed Work and to determine in general if the Work is being performed in a manner indicating that the Work, when completed, will be in accordance with the Contract Documents. However, the Architect will not be required to make exhaustive or continuous on-site inspections to check quality or quantity of the Work. On the basis of on-site observations as an architect, the Architect will keep the Owner informed of progress of the Work, and will endeavor to guard the Owner against defects and deficiencies in the Work. 4.2.3 The Architect will not have control over or charge of and will not be responsible for construction means, methods, techniques, sequences or procedures, or for safety precautions and programs in connection with the work, since these are solely the Contractor's responsibility as provided in Paragraph 3.3. The Architect will not be responsible for the Contractor's failure to carry out the Work in accordance with the Contract Documents. The Architect will not have control over or charge of and will not be responsible for acts or omissions of the Contractor, Subcontractors, or their agents or employees, or of any other persons performing portions of the Work. 4.2.4 Communications Facilitating Contract Administration. The Owner and Contractor shall endeavor to communicate effectively either directly through their representatives named in the Contract Documents or when necessary, through the Architect. Communications by and with the Architect's consultants shall be through the Architect. Communications by and with Subcontractors and material suppliers shall be through the Contractor. Communications by and with separate contractors shall be through the Owner. 4.2.5 Based on the Architect's observations and evaluations of the Contractor's Applications for payment, the Architect will review and certify the amounts due the Contractor and will issue Certificates for Payment in such amounts. 4.2.6 The Architect will have authority to reject Work which does not conform to the Contract Documents. Whenever the Architect considers it necessary or advisable for implementation of the intent of the Contract Documents, the Architect will have authority to require additional inspection or testing of the Work in accordance with Subparagraphs 13.5.2 and 13.5.3, whether or not such Work is fabricated, installed or completed. However, neither this authority of the Architect nor a decision made in good faith either to exercise or not to exercise such authority shall give rise to a duty or responsibility of the Architect to the Contractor, Subcontractors, material and equipment suppliers, their agents or employees, or other persons performing portions of the Work. 4.2.7 The Architect will review and approve or take other appropriate action upon the Contractor's submittals such as Shop Drawings, Product Data and Samples, but only for the limited purpose of checking for conformance with information given and the design concept expressed in the Contract Documents. The Architect's action will be taken with such reasonable promptness as to cause no delay in the Work or in the activities of the Owner, Contractor or separate contractors, while allowing sufficient time in the Architect's professional judgment to permit adequate review. Review of such submittals is not conducted for the purpose of determining the accuracy and completeness of other details such as dimensions and quantities, or for substantiating instructions for installation or performance of equipment or systems, all of which remain the responsibility of the Contractor as required by the Contract Documents. The Architect's review of the Contractor's submittals shall not relieve the Contractor of the obligations under Paragraphs 3.3, 3.5 and 3.12. The Architect's review shall not constitute approval of safety precautions or, unless otherwise specifically stated by the Architect, of any construction means, methods, techniques, sequences or procedures. The Architect's approval of a specific item shall not indicate approval of an assembly of which the item is a component. 4.2.8 The Architect will prepare Change Orders and Construction Change Directives, and may authorize minor changes in the Work as provided in Paragraph 7.4. 4.2.9 The Architect will conduct inspections to determine the date or dates of Substantial Completion and the date of final completion, will receive and forward to the Owner for the Owner's review and records written warranties and related documents required by the Contract and assembled by the Contractor, and will issue a final Certificate for Payment upon compliance with the requirements of the Contract Documents. 4.2.10 If the Owner and Architect agree, the Architect will provide one or more project representatives to assist in carrying out the Architect's responsibilities at the site. The duties, responsibilities and limitations of authority of such project representatives shall be as set forth in an exhibit to be incorporated in the Contract Documents. 4.2.11 The Architect will interpret and decide matters concerning performance under and requirements of the Contract Documents on written request of either the Owner or Contractor. The Architect's response to such requests will be made with reasonable promptness and within any time limits agreed upon. If no agreement is made concerning the time within which interpretations required of the Architect shall be furnished in compliance with this Paragraph 4.2, then delay shall not be recognized on account of failure by the Architect to furnish such interpretations until 15 days after written request is made for them. 4.2.12 Interpretations and decisions of the Architect will be consistent with the intent of and reasonably inferable from the Contract Documents and will be in writing or in the form of drawings. When making such interpretations and decisions, the Architect will endeavor to secure faithful performance by both Owner and Contractor, will not show partiality to either and will not be liable for results of interpretations or decisions so rendered in good faith. 4.2.13 The Architect's decisions on matters relating to aesthetic effect will be final if consistent with the intent expressed in the Contract Documents and if consistent with the overall first class development of the Project. 4.3 CLAIMS AND DISPUTES 4.3.1 Definition. A Claim is a demand or assertion by one of the parties seeking, as a matter of right, adjustment or interpretation of Contract terms, payment of money, extension of time or other relief with respect to the terms of the Contract. The term "Claim" also includes other disputes and matters in question between the Owner and Contractor arising out of or relating to the Contract. Claims must be made by written notice. The responsibility to substantiate Claims shall rest with the party making the Claim. 4.3.2 Decision of Architect. Claims, including those alleging an error or omission by the Architect, shall be referred initially to the Architect for action as provided in Paragraph 4.4. A decision by the Architect, as provided in Subparagraph 4.4.4, shall be required as a condition precedent to litigation of a Claim between the Contractor and Owner as to all such matters arising prior to the date final payment is due, regardless of (1) whether such matters relate to execution and progress of the Work or (2) the extent to which the Work has been completed. The decision by the Architect in response to a Claim shall not be a condition precedent to litigation in the event (1) the position of Architect is vacant,(2) the Architect has not received evidence or has failed to render a decision within agreed time limits, (3) the Architect has failed to take action required under Subparagraph 4.4.4 within 30 days after the Claim is made, (4) 45 days have passed after the Claim has been referred to the Architect or (5) the Claim relates to a mechanic's lien. 4.3.3 Time Limits on Claims. Claims by either party must be made within 21 days after occurrence of the event giving rise to such Claim or within 21 days after the claimant first recognizes the condition giving rise to the Claim, whichever is later. Claims must be made by written notice. An additional Claim made after the initial Claim has been implemented by Change Order will not be considered unless submitted in a timely manner. 4.3.4 Continuing Contract Performance. Pending final resolution of a Claim including litigation, unless otherwise agreed in writing the Contractor shall proceed diligently with performance of the Contract and the Owner shall continue to make payments in accordance with the Contract Documents. 4.3.5 Waiver of Claims: Final Payment. The making of final payment shall constitute a waiver of Claims by the Owner except those arising from: .1 liens, Claims, security interests or encumbrances arising out of the Contract and unsettled; .2 failure of the Work to comply with the requirements of the contract Documents; or .3 terms of special warranties required by the Contract Documents. 4.3.6 Claims for Concealed or Unknown Conditions. If conditions are encountered at the site which are (1) subsurface or otherwise concealed physical conditions which differ materially from those indicated in the Contract Documents or (2) unknown physical conditions of an unusual nature, which differ materially from those ordinarily found to exist and generally recognized as inherent in construction activities of the character provided for in the Contract Documents, then notice by the observing party shall be given to the other party promptly before conditions are disturbed and in no event later than 21 days after first observance of the conditions. The Architect will promptly investigate such conditions and, if they differ materially and cause an increase or decrease in the Contractor's cost of, or time required for, performance of any part of the Work, will recommend an equitable adjustment in the Contract Sum or Contract Time, or both. If the Architect determines that the conditions at the site are not materially different from those indicated in the Contract Documents and that no change in the terms of the Contract is justified, the Architect shall so notify the Owner and the Contractor in writing, stating the reasons. Claims by either party in opposition to such determination must be made within 21 days after the Architect has given notice of the decision. If the Owner and Contractor cannot agree on an adjustment in the Contract Sum or Contract time, the adjustment shall be referred to the Architect for initial determination, subject to further proceedings pursuant to Paragraph 4.4. 4.3.7 Claims for Additional Cost. If the Contractor wishes to make Claim for an increase in the Contract Sum, written notice is provided herein shall be given before proceeding to execute the Work. Prior notice is not required for Claims relating to an emergency endangering life or property arising under Paragraph 10.3. If the Contractor believes additional cost is involved for reasons including but not limited to (1) a written interpretation from the Architect, (2) an order by the Owner to stop the work where the Contractor was not at fault, (3) a written order for a minor change in the Work issued by the Architect, (4) failure of payment by the Owner, (5) termination of the Contract by the Owner, (6) Owner's suspension or (7) other reasonable ground, Claim shall be filed in accordance with the procedure established herein. 4.3.8 Claims for Additional Time 4.3.8.1 If the Contractor wishes to make Claim for an increase in the Contract Time, written notice as provided herein shall be given. The Contractor's Claim shall include an estimate of cost and of probable effect of delay on progress of the Work. In the case of a continuing delay only one Claim is necessary. 4.3.8.2 If adverse weather conditions are the basis for a Claim for additional time in excess of that allowed for in the specification, such Claim shall be documented by data substantiating that weather conditions were abnormal for the period of time and could not have been reasonably anticipated, and that weather conditions had an adverse effect on the scheduled construction. 4.3.9 Injury or Damage to Person or Property. If either party to the Contract suffers injury or damage to person or property because of an act or omission of the other party, of any of the other party's employees or agents, or of others for whose acts such party is legally liable, written notice of such injury or damage, whether or not insured, shall be given to the other party within a reasonable time not exceeding 21 days after first observance. The notice shall provide sufficient detail to enable the other party to investigate the matter. If a Claim or additional cost or time related to this Claim is to be asserted, it shall be filed as provided in Subparagraphs 4.3.7 or 4.3.8 4.4 RESOLUTION OF CLAIMS AND DISPUTES 4.4.1 The Architect will review Claims and take one or more of the following preliminary actions within ten days of receipt of a Claim: (1) request additional supporting data from the claimant, (2) submit a schedule to the parties indicating when the Architect expects to take action, (3) reject the Claim in whole or in part, stating reasons for rejection, (4) recommend approval of the Claim by the other party or (5) suggest a compromise. The Architect may also, but is not obligated to, notify the surety, if any, of the nature and amount of the Claim. 4.4.2 If a Claim has been resolved, the Architect will prepare or obtain appropriate documentation. 4.4.3 If a Claim has not been resolved, the party making the Claim shall, within ten days after the Architect's preliminary response, take one or more of the following actions: (1) submit additional supporting data requested by the Architect, (2) modify the initial Claim or (3) notify the Architect that the initial Claim stands. 4.4.4 If a claim has not been resolved after consideration of the foregoing and of further evidence presented by the parties or requested by the Architect, the Architect will notify the parties in writing that the Architect's decision will be made within seven days, which decision shall be final and binding on the parties but subject to litigation. Upon expiration of such time period, the Architect will render to the parties the Architect's written decision relative to the Claim, including any change in the Contract Sum or Contract Time or both. If there is a surety and there appears to be a possibility of a Contractor's default, the Architect may, but is not obligated to, notify the surety and request the surety's assistance in resolving the controversy. The Prevailing Party in any such litigation shall be entitled to recover its reasonable costs and attorneys' fee. 4.5. Contract Performance During Litigation. During litigation proceedings, the Owner and Contractor shall comply with Subparagraph 4.3.4. ARTICLE 5 SUBCONTRACTORS 5.1 DEFINITIONS 5.1.1 A Subcontractor is a person or entity who has a direct contract with the Contractor to perform a portion of the Work at the site. The term "Subcontractor" is referred to throughout the Contract Documents as if singular in number and means a Subcontractor or an authorized representative of the Subcontractor. The term "Subcontractor" does not include a separate contractor or subcontractors of a separate contractor. 5.1.2 A Sub-subcontractor is a person or entity who has a direct or indirect contract with a Subcontractor to perform a portion of the Work at the site. The term "Sub-subcontractor" is referred to throughout the Contract Documents as if singular in number and means a Sub-subcontractor or an authorized representative of the Sub-subcontractor. 5.2 AWARD OF SUBCONTRACTS AND OTHER CONTRACTS FOR PORTIONS OF THE WORK 5.2.1 Unless otherwise stated in the Contract Documents or the bidding requirements, the Contractor, as soon as practicable after award of the Contract, shall furnish in writing to the Owner through the Architect the names of persons or entities (including those who are to furnish materials or equipment fabricated to a special design) proposed for each principal portion of the Work. The Architect will promptly reply to the Contractor in writing stating whether or not the Owner or the Architect, after due investigation, has reasonable objection to any such proposed person or entity. Failure of the Owner or Architect to reply promptly shall constitute notice of no reasonable objection. 5.2.2 The Contractor shall not contract with a proposed person or entity to whom the Owner or Architect has made reasonable and timely objection. The Contractor shall not be required to contract with anyone to whom the Contractor has made reasonable objection. 5.2.3 If the Owner or Architect has reasonable objection to a person or entity proposed by the Contractor, the Contractor shall propose another to whom the Owner or Architect has no reasonable objection. The Contract Sum shall be increased or decreased by the difference in cost occasioned by such change and an appropriate Change Order shall be issued. However, no increase in the Contract Sum shall be allowed for such change unless the Contractor has acted promptly and responsively in submitting names as required. 5.2.4 The Contractor shall not change a Subcontractor, person or entity previously selected if the Owner or Architect makes reasonable objection to such change. 5.3 SUBCONTRACTUAL RELATIONS 5.3.1 By appropriate written agreement, the Contractor shall require each Subcontractor, to the extent of the Work to be performed by the Subcontractor, to be bound to the Contractor by terms of the Contract Documents, and to assume toward the Contractor all the obligations and responsibilities which the Contractor, by these Documents, assumes toward the Owner and Architect. Each subcontract agreement shall preserve and protect the rights of the Owner and Architect under the Contract Documents with respect to the Work to be performed by the Subcontractor so that subcontracting thereof will not prejudice such rights, and shall allow to the Subcontractor, unless specifically provided otherwise in the subcontract agreement, the benefit of all rights, remedies and redress against the Contractor that the Contractor, by the Contract Documents, has against the Owner. Where appropriate, the Contractor shall require each Subcontractor to enter into similar agreements with Sub-subcontractors. The Contractor shall make available to each proposed Subcontractor, prior to the execution of the subcontract agreement, copies of the Contract Documents to which the Subcontractor will be bound, and, upon written request of the Subcontractor, identify to the Subcontractor terms and conditions of the proposed subcontract agreement which may be at variance with the Contract Documents. Subcontractors shall similarly make copies of the applicable portions of such documents available to their respective proposed Sub-subcontractors. 5.4 CONTINGENT ASSIGNMENT OF SUBCONTRACTS 5.4.1 Each subcontract agreement for a portion of the Work is assigned by the Contractor to the Owner provided that: .1 assignment is effective only after termination of the Contract by the Owner for cause pursuant to Paragraph 14.2 and only for those subcontract agreements which the Owner accepts by notifying the Subcontractor in writing, and .2 assignment is subject to the prior rights of the surety, if any, obligated under bond relating to the Contract. 5.4.2 If the Work has been suspended for more than 30 days, the Subcontractor's compensation shall be equitably adjusted. ARTICLE 6 CONSTRUCTION BY OWNER OR BY SEPARATE CONTRACTORS 6.1 OWNER'S RIGHT TO PERFORM CONSTRUCTION AND TO AWARD SEPARATE CONTRACTS 6.1.1 The Owner reserves the right to perform construction or operations related to the Project with the Owner's own forces, and to award separate contracts in connection with other portions of the Project or other construction or operations on the site under Conditions of the Contract identical or substantially similar to these including those portions related to insurance and waiver of subrogation. If the Contractor claims that delay or additional cost is involved because of such action by the Owner, the Contractor shall make such Claim as provided elsewhere in the Contract Documents. 6.1.2 When separate contracts are awarded for different portions of the Project or other construction or operations on the site, the term "Contractor" in the Contract Documents in each case shall mean the Contractor who executes each separate Owner-Contractor Agreement. 6.1.3 The Owner shall provide for coordination of the activities of the Owner's own forces and of each separate contractor with the Work of the Contractor, who shall cooperate with them. The Contractor shall participate with other separate contractors and the Owner in reviewing their construction schedules when directed to do so. The Contractor shall make any revisions to the construction schedule and Contract Sum deemed necessary after a joint review and mutual agreement. The construction schedules shall then constitute the schedules to be used by the Contractor, separate contractors and the Owner until subsequently revised. 6.1.4 Unless otherwise provided in the Contract Documents, when the Owner performs construction or operations related to the Project with the Owner's own forces, the Owner shall be deemed to be subject to the same obligations and to have the same rights which apply to the Contractor under the Conditions of the Contract, including, without excluding others, those stated in Article 3, this Article 6 and Articles 10, 11 and 12. 6.2 MUTUAL RESPONSIBILITY 6.2.1 The Contractor shall afford the Owner and separate contractors reasonable opportunity for introduction and storage of their materials and equipment and performance of their activities and shall connect and coordinate the Contractor's construction and operations with theirs as required by the Contract Documents. 6.2.2 If part of the Contractor's Work depends for proper execution or results upon construction or operations by the Owner or a separate contractor, the Contractor shall, prior to proceeding with that portion of the Work, promptly report to the Architect apparent discrepancies or defects in such other construction that would render it unsuitable for such proper execution and results. Failure of the Contractor so to report shall constitute an acknowledgement that the Owner's or separate contractors' completed or partially completed construction as fit and proper to receive the Contractor's Work, except as to defects not then reasonably discoverable. 6.2.3 Costs caused by delays or by improperly timed activities or defective construction shall be borne by the party responsible therefor. 6.2.4. The Contractor shall, at its sole cost and expense, promptly remedy damage wrongfully caused by the Contractor to completed or partially completed construction or to property of the Owner or separate contractors as provided in Subparagraph 10.2.5. 6.2.5 Claims and other disputes and matters in question between the Contractor and a separate contractor shall be subject to the provisions of Paragraph 4.3 provided the separate contractor has reciprocal obligations. 6.2.6 The Owner and such separate contractor shall have the same responsibilities for cutting and patching as are described for the Contractor in paragraph 3.14. 6.3 OWNER'S RIGHT TO CLEAN UP 6.3.1 If a dispute arises among the Contractor, separate contractors and the Owner as to the responsibility under their respective contracts for maintaining the premises and surrounding area free from waste materials and rubbish as described in Paragraph 3.15, the Owner may clean up and allocate the cost among those responsible as the Architect determines to be just. ARTICLE 7 CHANGES IN THE WORK 7.1 CHANGES 7.1.1 Changes in the Work may be accomplished after execution of the Contract, and without invalidating the Contract, by Change Order, Construction Change Directive or order for a minor change in the Work, subject to the limitations stated in this Article 7 and elsewhere in the Contract Documents. 7.1.2 A Change Order shall be based upon agreement among the Owner, Contractor and Architect; a Construction Change Directive requires agreement by the Owner and Architect and may or may not be agreed to by the Contractor; an order for a minor change in the Work may be issued by the Architect alone. 7.1.3 Changes in the Work shall be performed under applicable provisions of the Contract Documents, and the Contractor shall proceed promptly, unless otherwise provided in the Change Order, Construction Change Directive or order for a minor change in the Work. 7.1.4 If unit prices are stated in the Contract Documents or subsequently agreed upon, and if quantities originally contemplated are so changed in a proposed Change Order or Construction Change Directive that application of such unit prices to quantities of Work proposed will cause substantial inequity to the Owner or Contractor, the applicable unit prices shall be equitably adjusted. 7.2 CHANGE ORDERS 7.2.1 A Change Order is a written instrument prepared by the Architect and signed by the Owner, Contractor and Architect, stating their agreement upon all of the following: .1 a change in the Work; .2 the amount of the adjustment in the Contract Sum, if any; and .3 the extent of the adjustment in the Contract Time, if any. No Change Order or Construction Change Directive is or shall be effective unless such Change Order or Construction Change Directive is signed by either John Farahi, Bob Farahi or Ben Farahi prior to any work being performed by Contractor. Any work performed by Contractor in violation of this provision is at Contractor's risk. 7.2.2 Methods used in determining adjustments to the Contract Sum may include those listed in Subparagraph 7.3.3. 7.3 CONSTRUCTION CHANGE DIRECTIVES 7.3.1 A Construction Change Directive is a written order prepared by the Architect and signed by the Owner and Architect, directing a change in the Work and stating a proposed basis for adjustment, if any, in the Contract Sum or Contract Time, or both. The Owner may by Construction Change Directive, without invalidating the Contract, order changes in the Work within the general scope of the Contract consisting of additions, deletions or other revisions, the Contract Sum and Contract Time being adjusted accordingly. 7.3.2 A Construction Change Directive shall be used in the absence of total agreement on the terms of a Change Order. 7.3.3 If the Construction Change Directive provides for an adjustment to the Contract Sum, the adjustment shall be based on one of the following methods: .1 mutual acceptance of a lump sum properly itemized and supported by sufficient substantiating data to permit evaluation; .2 unit prices stated in the Contract Documents or subsequently agreed upon; .3 cost to be determined in a manner agreed upon by the parties and a mutually acceptable fixed or percentage fee; or .4 as provided in Subparagraph 7.3.6. 7.3.4 Upon receipt of a Construction Change Directive, the Contractor shall promptly proceed with the change in the Work involved and advise the Architect of the Contractor's agreement or disagreement with the method, if any, provided in the Construction Change Directive for determining the proposed adjustment in the Contract Sum or Contract Time. 7.3.5 A Construction Change Directive signed by the Contractor indicates the agreement of the Contractor therewith, including adjustment in Contract Sum and Contract Time or the method for determining them. Such agreement shall be effective immediately and shall be recorded as a Change Order. 7.3.6 If the Contractor does not respond promptly or disagrees with the method for adjustment in the Contract Sum, the method and the adjustment shall be determined by the Architect on the basis of reasonable expenditures and savings of those performing the Work attributable to the change, including, in case of an increase in the Contract Sum, a reasonable allowance for overhead and profit. In such case, and also under Clause 7.3.3.3, the Contractor shall keep and present, in such form as the Architect may prescribe, an itemized accounting together with appropriate supporting data. Unless otherwise provided in the Contract Documents, costs for the purposes of this Subparagraph 7.3.6 shall be limited to the following: .1 cost of labor, including social security, old age and unemployment insurance, fringe benefits required by agreement or custom, and workers' or workmen's compensation insurance; .2 costs of materials, supplies and equipment, including cost of transportation, whether incorporated or consumed; .3 rental costs of machinery and equipment, exclusive of hand tools, whether rented from the Contractor or others; .4 costs of premiums for all bonds and insurance, permit fees, and sales, use or similar taxes related to the Work; and .5 additional costs of supervision and field officer personnel directly attributable to the change. 7.3.7 Pending final determination of cost to the Owner, amounts not in dispute may be included in Applications for Payment. The amount of credit to be allowed by the Contractor to the Owner for a deletion or change which results in a net decrease in the Contract Sum shall be actual net cost as confirmed by the Architect. When both additions and credits covering related Work or substitutions are involved in a change, the allowance for overhead and profit shall be figured on the basis of net increase, if any, with respect to that change. 7.3.8 If the Owner and Contractor do not agree with the adjustment in Contract Time or the method for determining it, the adjustment or the method shall be referred to the Architect for determination. 7.3.9 When the Owner and Contractor agree with the determination made by the Architect concerning the adjustments in the Contract Sum and Contract Time, or otherwise reach agreement upon the adjustments, such agreements shall be effective immediately and shall be recorded by preparation and execution of an appropriate Change Order. 7.4 MINOR CHANGES IN THE WORK 7.4.1 The Architect will have authority to order minor changes in the Work not involving adjustment in the Contract Sum or extension of the Contract Time and not inconsistent with the intent of the Contract Documents. Such changes shall be effected by written order and shall be binding on the Owner and Contractor. The Contractor shall carry out such written orders promptly. ARTICLE 8 TIME 8.1 DEFINITIONS 8.1.1 Unless otherwise provided, Contract Time is the period of time, including authorized adjustments, allotted in the Contract Documents for Substantial Completion of the Work. 8.1.2 The date of commencement of the Work is the date established in the Agreement. The date shall not be postponed by the failure to act of the Contractor or of persons or entities for whom the Contractor is responsible. 8.1.3 The date of Substantial Completion is the date certified by the Architect in accordance with Paragraph 9.8. 8.1.4 The term "day" as used in the Contract Documents shall mean calendar day unless otherwise specifically defined. 8.2 PROGRESS AND COMPLETION 8.2.1 Time limits stated in the Contract Documents are of the essence of the Contract. By executing the Agreement the Contractor confirms that the Contract Time is a reasonable period for performing the Work. 8.2.2 The Contractor shall not knowingly, except by agreement or instruction of the Owner in writing, prematurely commence operations on the site or elsewhere prior to the effective date of insurance required by Article 11 to be furnished by the Contractor. The date of commencement of the Work shall not be changed by the effective date of such insurance. Unless the date of commencement is established by a notice to proceed given by the Owner, the Contractor shall notify the Owner in writing not less than five days or other agreed period before commencing the Work to permit the timely filing of mortgages, mechanic's liens and other security interests. 8.2.3 The Contractor shall proceed expeditiously with adequate forces and shall achieve Substantial Completion within the Contract Time. 8.3 DELAYS AND EXTENSIONS OF TIME 8.3.1 If the Contractor is delayed at any time in progress of the Work by an act or neglect of the Owner or Architect, or of an employee of either, or of a separate contractor employed by the owner, or by changes ordered in the Work, or by labor disputes (as further agreed in Paragraph 3.3 of the Contract), fire, unusual and unavoidable delay in deliveries, unavoidable casualties or other causes beyond the Contractor's control, or by delay authorized by the Owner pending litigation, or by other causes which the Architect determines may justify delay, then the Contract Time shall be extended by Change Order for such reasonable time as the Architect may determine. 8.3.2 Claims relating to time shall be made in accordance with applicable provisions of Paragraph 4.3 8.3.3 This Paragraph 8.3 does not preclude recovery of damages for delay by either party under other provisions of the Contract Documents. ARTICLE 9 PAYMENTS AND COMPLETION 9.1 CONTRACT SUM 9.1.1 The Contract Sum is stated in the Agreement and, including authorized adjustments, is the total amount payable by the Owner to the Contractor for performance of the Work under the Contract Documents. 9.2 SCHEDULE OF VALUES 9.2.1 Before the first Application for Payment, the Contractor shall submit to the Architect a schedule of values allocated to various portions of the Work, prepared in such form and supported by such data to substantiate its accuracy as the Architect may require. This schedule, unless objected to by the Architect, shall be used as a basis for reviewing the Contractor's Applications for Payment. 9.3 APPLICATIONS FOR PAYMENT 9.3.1 At least ten days before the date established for each progress payment, the Contractor shall submit to the Architect an itemized Application for Payment for operations completed in accordance with the schedule of values. Such application shall be notarized, and supported by such data substantiating the Contractor's right to payment as the Owner or Architect may require, such as copies of requisitions from Subcontractors and material suppliers, and reflecting retainage if provided for elsewhere in the Contract Documents. 9.3.1.1 Such applications may include requests for payment or account of changes in the Work which have been properly authorized by Construction Change Directives but not yet included in Changes Orders. 9.3.1.2 Such applications may not include requests for payment of amounts the Contractor does not intend to pay to a Subcontractor or material supplier because of a dispute or other reason. 9.3.2 Unless otherwise provided in the Contract Documents, payments shall be made on account of materials and equipment delivered and suitably stored at the site for subsequent incorporation in the Work. If approved in advance in writing, signed by the Owner and Lender, payment may similarly be made for materials and equipment suitably stored off the site at a bonded warehouse location in Washoe County, Nevada. Payment for materials and equipment stored on or off the site shall be conditioned upon compliance by the Contractor with procedures satisfactory to the Owner to establish the Owner's title to such materials and equipment or otherwise protect the Owner's interest, and shall include insurance, storage and transportation to the site for such materials and equipment stored off the site. 9.3.3 The Contractor warrants that title to all Work Covered by an Application for Payment will pass to the Owner no later than the time of payment. The Contractor further warrants that upon submittal of an Application for Payment all Work for which Certificate for Payment have been previously issued and payments received from the Owner shall, to the best of the Contractor's knowledge, information and belief, be free and clear of liens, claims, security interests or encumbrances in favor of the Contractor, Subcontractors, materials suppliers, or other persons or entities making a claim by reason of having provided labor, materials and equipment relating to the Work. 9.4 CERTIFICATES FOR PAYMENT 9.4.1 The Architect will, within seven days after receipt of the Contractor's Application for Payment, either issue to the Owner a Certificate for Payment, with a copy to the Contractor, for such amount as the Architect determines is properly due, or notify the Contractor and Owner in writing of the Architect's reasons for withholding certification in whole or in part as provided in Subparagraph 9.5.1. 9.4.2 The issuance of a Certificate for Payment will constitute a representation by the Architect to the Owner, based on the Architect's observations at the site and the data comprising the Application for Payment, that the Work has progressed to the point indicated and that, to the best of the Architect's knowledge, information and belief, quality of the Work is in accordance with the Contract Documents. The foregoing representations are subject to an evaluation of the Work for conformance with the Contract Documents upon Substantial Completion, to results of subsequent tests and inspections, to minor deviations from the Contract Documents correctable prior to completion and to specific qualifications expressed by the Architect. The issuance of a Certificate for Payment will further constitute a representation that the Contractor is entitled to payment in the amount certified. However, the issuance of a Certificate for Payment will not be a representation that the Architect has (1) made exhaustive or continuous on-site inspections to check the quality or quantity of the work, (2) reviewed construction means, methods, techniques, sequences or procedures, (3) reviewed copies of requisitions received from Subcontractors and material suppliers and other data requested by the Owner to substantiate the Contractor's right to payment or (4) made examination to ascertain how or for what purpose the Contractor has used money previously paid on account of the Contract Sum. 9.5 DECISIONS TO WITHHOLD CERTIFICATION 9.5.1 The Architect may decide not to certify payment and may withhold a Certificate for Payment in whole or in part, to the extent reasonably necessary to protect the Owner, if in the Architect's opinion the representations to the Owner required by Subparagraph 9.4.2 cannot be made. If the Architect is unable to certify payment in the amount of the application, the Architect will notify the Contractor and Owner as provided in Subparagraph 9.4.1. If the Contractor and Architect cannot agree on a revised amount, the Architect will promptly issue a Certificate for Payment for the amount for which the Architect is able to make such representations to the Owner. The Architect may also decide not to certify payment or, because of subsequently discovered evidence or subsequent observations, may nullify the whole or a part of a Certificate for Payment previously issued, to such extent as may be necessary in the Architect's opinion to protect the Owner from loss because of: .1 defective Work not remedied; .2 third party claims filed or reasonable evidence indicating probable filing of such claims; .3 failure of the Contractor to make payments properly to Subcontractors or for labor, materials or equipment; .4 reasonable evidence that the Work cannot be completed for the unpaid balance of the Contract Sum; .5 damage to the owner or another contractor; .6 reasonable evidence that the Work will not be completed within the Contract Time, and that the unpaid balance would not be adequate to cover actual or liquidated damages for the anticipated delay; or .7 persistent failure to carry out the Work in accordance with the Contract Documents. 9.5.2 When the above reasons for withholding certification are removed, certification will be made for amounts previously withheld. 9.6 PROGRESS PAYMENTS 9.6.1 After the Architect has issued a Certificate for Payment, the Owner shall make payment in the manner and within the time provided in the Contract Documents, and shall so notify the Architect. 9.6.2 The Contractor shall promptly pay each Subcontractor, upon receipt of payment from the Owner, out of the amount paid to the Contractor on account of such Subcontractor's portion of the Work, the amount to which said Subcontractor is entitled, reflecting percentages actually retained from payments to the Contractor on account of such Subcontractor's portion of the work. The Contractor shall, by appropriate agreement with each Subcontractor, require each Subcontractor to make payments to Sub-subcontractors in similar manner. 9.6.3 The Architect will, on request, furnish to a Subcontractor, if practicable, information regarding percentages of completion or amounts applied for by the Contractor and action taken thereon by the Architect and Owner on account of portions of the Work done by such Subcontractor. 9.6.4 Neither the Owner nor Architect shall have an obligation to pay or to see to the payment of money to a Subcontractor except as may otherwise be required by law. 9.6.5 Payment to material suppliers shall be treated in a manner similar to that provided in Subparagraphs 9.6.2, 9.6.3 and 9.6.4. 9.6.6 A Certificate for Payment, a progress payment, or partial or entire use or occupancy of the Project by the Owner shall not constitute acceptance of Work not in accordance with the Contract Documents. 9.7 FAILURE OF PAYMENT 9.7.1 If the Architect does not issue a Certificate for Payment, through no fault of the Contractor, within seven days after receipt of the Contractor's Application for Payment, or if the Owner does not pay the Contractor within seven days after the date established in the Contract Documents the amount certified by the Architect or awarded by litigation, then the Contractor may, upon seven additional days' written notice to the Owner and Architect, stop the Work until payment of the amount owing has been received. The Contract Time shall be extended appropriately and the Contract Sum shall be increased by the amount of the Contractor's reasonable costs of shut-down, delay and start-up, which shall be accomplished as provided in Article 7. 9.8 SUBSTANTIAL COMPLETION 9.8.1 Substantial Completion is the stage in the progress of the Work when the Work or designated portion thereof is sufficiently complete in accordance with the Contract Documents so the Owner can occupy or utilize the Work for its intended use. 9.8.2 When the Contractor considers what the Work or a portion thereof which the Owner agrees to accept separately, is substantially complete, the Contractor shall prepare and submit to the Architect a comprehensive list of items to be completed or corrected. The Contractor shall proceed promptly to complete and correct items on the list. Failure to include an item on such list does not alter the responsibility of the Contractor to complete all Work in accordance with the Contract Documents. Upon receipt of the Contractor's list, the Architect will make an inspection to determine whether the Work or designated portion thereof is substantially complete. If the Architect's inspection discloses any item, whether or not included on the Contractor's list, which is not in accordance with the requirements of the Contract Documents, the Contractor shall, before issuance of the Certificate of Substantial Completion, complete or correct such item upon notification by the Architect. The Contractor shall then submit a request for another inspection by the Architect to determine Substantial Completion. When the Work or designated portion thereof is substantially complete, the Architect will prepare a Certificate of Substantial Completion which shall establish the date of Substantial Completion, shall establish responsibilities of the Owner and Contractor for security, maintenance, heat, utilities, damage to the Work and insurance, and shall fix the time within which the Contractor shall finish all items on the list accompanying the Certificate. Warranties required by the Contract Documents shall commence on the date of Substantial Completion of the Work or designated portion thereof unless otherwise provided in the Certificate of Substantial Completion. The Certificate of Substantial Completion shall be submitted to the Owner and Contractor for their written acceptance of responsibilities assigned to them in such Certificate. 9.8.3 Upon Substantial Completion of the Work or designated portion thereof and upon application by the Contractor and certification by the Architect, the Owner shall make payment, reflecting adjustment in retainage, if any, for such Work or portion thereof as provided in the Contract Documents. 9.9 PARTIAL OCCUPANCY OR USE 9.9.1 The Owner may occupy or use any completed or partially completed portion of the Work at any stage when such portion is designated by separate agreement with the Contractor, provided such occupancy or use is consented to by the insurer as required under Subparagraph 11.3.11 and authorized by public authorities having jurisdiction over the Work. Such partial occupancy or use may commence whether or not the portion is substantially complete, provided the Owner and Contractor have accepted in writing the responsibilities assigned to each of them for payments, retainage if any, security, maintenance, heat, utilities, damage to the Work and insurance, and have agreed in writing concerning the period for correction of the Work and commencement of warranties required by the Contract Documents. When the Contractor considers a portion substantially complete, the Contractor shall prepare and submit a list to the Architect as provided under Subparagraph 9.8.2. Consent of the Contractor to partial occupancy or use shall not be unreasonably withheld. The stage of the progress of the Work shall be determined by written agreement between the Owner and Contractor or, if no agreement is reached, by decision of the Architect. 9.9.2 Immediately prior to such partial occupancy or use, the Owner, Contractor and Architect shall jointly inspect the area to be occupied or portion of the Work to be used in order to determine and record the condition of the work. 9.9.3 Unless otherwise agreed upon, partial occupancy or use of a portion or portions of the Work shall not constitute acceptance of Work not complying with the requirements of the Contract Documents. 9.10 FINAL COMPLETION AND FINAL PAYMENT 9.10.1 Upon receipt of written notice that the Work is ready for final inspection and acceptance and upon receipt of a final Application for Payment, the Architect will promptly make such inspection and, when the Architect finds the Work acceptable under the Contract Documents and the Contract fully performed, the Architect will promptly issue a final Certificate for Payment stating that to the best of the Architect's knowledge, information and belief, and on the basis of the Architect's observations and inspections, the Work has been completed in accordance with the terms and conditions of the Contract Documents and that the entire balance found to be due the Contractor and noted in said final Certificate is due and payable. The Architect's final Certificate for Payment will constitute a further representation that conditions listed in Subparagraph 9.10.2 as precedent to the Contractor's being entitled to final payment have been fulfilled. 9.10.2 Neither final payment nor any remaining retained percentage shall become due until the Contractor submits to the Architect (1) an affidavit that payrolls, bills for materials and equipment, and other indebtedness connected with the work for which the Owner or the Owner's property might be responsible or encumbered (less amounts withheld by Owner) have been paid or otherwise satisfied, (2) a certificate evidencing that insurance required by the Contract Documents to remain in force after final payment is currently in effect and will not be cancelled or allowed to expire until at least 30 days' prior written notice has been given to the Owner, (3) a written statement that the Contractor knows of no substantial reason that the insurance will not be renewable to cover the period required by the Contract Documents, (4) consent of surety, if any, to final payment and (5), if required by the Owner, other data establishing payment or satisfaction of obligations, such as receipts, releases and waivers of liens, claims, security interest or encumbrances arising out of the Contract, to the extent and in such form as may be designated by the Owner or Lender. If a Subcontractor refuses to furnish a release or waiver required by the Owner, the Contractor may furnish a bond satisfactory to the Owner to indemnify the Owner against such lien. If such lien remains unsatisfied after payments are made, the Contractor shall refund to the Owner all money that the Owner may be compelled to pay in discharging such lien, including all costs and reasonable attorneys' fees. 9.10.3 If, after Substantial Completion of the Work, final completion thereof is materially delayed through no fault of the Contractor or by issuance of Change Orders affecting final completion, and the Architect so confirms, the Owner shall, upon application by the Contractor and certification by the Architect and approval by Lender and Owner, and without terminating the Contract, make payment of the balance due for that portion of the Work fully completed and accepted. If the remaining balance for Work not fully completed or corrected is less than retainage stipulated in the Contract Documents, and if bonds have been furnished, the written consent of surety to payment of the balance due for that portion of the Work fully completed and accepted shall be submitted by the Contractor to the Architect prior to certification of such payment. Such payment shall be made under terms and conditions governing final payment, except that it shall not constitute a waiver of claims. The making of final payment shall constitute a waiver of claims by the Owner as provided in Subparagraph 4.3.5. 9.10.4 Acceptance of final payment by the Contractor, a Subcontractor or material supplier shall constitute a waiver of claims by that payee except those previously made in writing and identified by that payee as unsettled at the time of final Application for Payment. Such waivers shall be in addition to the waiver described in Subparagraph 4.3.5. ARTICLE 10 PROTECTION OF PERSONS AND PROPERTY 10.1 SAFETY PRECAUTIONS AND PROGRAMS 10.1.1 The Contractor shall be responsible for initiating, maintaining and supervising all safety precautions and programs in connection with the performance of the Contract. 10.1.2 In the event the Contractor encounters on the site material reasonably believed to be asbestos or polychlorinated biphenyl (PCB) which has not been rendered harmless, the Contractor shall immediately stop Work in the area affected and report the condition to the Owner and Architect in writing. The Work in the affected area shall not thereafter be resumed except by written agreement of the Owner and Contractor if in fact the material is asbestos or polychlorinated biphenyl (PCB) and has not been rendered harmless. The Work in the affected area shall be resumed in the absence of asbestos or polychlorinated biphenyl (PCB), or when it has been rendered harmless, by written agreement of the Owner and Contractor, or in accordance with final determination by the Architect on which arbitration has not been demanded, or by arbitration under Article 4. 10.1.3 The Contractor shall not be required pursuant to Article 7 to perform without consent any Work relating to asbestos or polychlorinated biphenyl (PCB) 10.1.4 To the fullest extent permitted by law, the Owner shall indemnify and hold harmless the Contractor, Architect, Architect's consultants and agents and employees of any of them from and against claims, damages, losses and expenses, including but not limited to attorneys' fees, arising out of or resulting from performance of the Work in the affected area if in fact the material is asbestos or polychlorinated biphenyl (PCB) and has not been rendered harmless, provided that such claim, damage, loss or expense is attributable to bodily injury, sickness, disease or death, or to injury to or destruction of tangible property (other than the Work itself) including loss of use resulting therefrom, but only to the extent caused in whole or in part by negligent acts or omissions of the Owner, anyone directly or indirectly employed by the Owner or anyone for whose acts the Owner may be liable, regardless of whether or not such claim, damage, loss or expense is caused in part by a party indemnified hereunder. Such obligation shall not be construed to negate, abridge, or reduce other rights or obligations of indemnity which would otherwise exist as to a party or person described in this Subparagraph 10.1.4. This indemnification shall be inapplicable if Contractor or any of its Subcontractors is negligent or otherwise at fault in the removal of any such hazardous material. In such case, Contractor shall indemnify Owner as set forth in 3.18.1. 10.2 SAFETY OF PERSONS AND PROPERTY 10.2.1 The Contractor shall take reasonable precautions for safety of, and shall provide reasonable protection to prevent damage, injury or loss to: .1 employees on the Work and other persons who may be affected thereby; .2 the Work and materials and equipment to be incorporated therein, whether in storage on or off the site, under care, custody or control of the Contractor or the Contractor's Subcontractors or Sub-subcontractors; and .3 other property at the site or adjacent thereto, such trees, shrubs, lawns, walks, pavements, roadways, structures and utilities not designated for removal, relocation or replacement in the course of construction. 10.2.2 The Contractor shall give notices and comply with applicable laws, ordinances, rules regulations and lawful orders of public authorities bearing on safety of persons or property or their protection from damage, injury or loss. 10.2.3 The Contractor shall erect and maintain, as required by existing conditions and performance of the Contract, reasonable safeguards for safety and protection, including posting danger signs and other warnings against hazards, promulgating safety regulations and notifying owners and users of adjacent sites and utilities. 10.2.4 When use or storage of explosives or other hazardous materials or equipment or unusual methods are necessary for execution of the Work, the Contractor shall exercise utmost care and carry on such activities under supervision of properly qualified personnel. 10.2.5 The Contractor shall promptly remedy damage and loss (other than damage or loss insured under property insurance required by the Contract Documents) to include any deductible to property referred to in Clauses 10.2.1.2 and 10.2.1.3 caused in whole or in part by the Contractor, a Subcontractors, a Sub-subcontractor, or anyone directly or indirectly employed by any of them, or by anyone for whose acts they may be liable and for which the Contractor is responsible under Clauses 10.2.1.2 and 10.2.1.3, except damage or loss attributable to acts or omissions of the Owner or Architect or anyone directly or indirectly employed by either of them, or by anyone for whose acts either of them may be liable, and not attributable to the fault or negligence of the Contractor. The foregoing obligations of the contractor are in addition to the Contractor's obligations under Paragraph 3.18. 10.2.6 The Contractor shall designate a responsible member of the Contractor's organization at the site whose duty shall be the prevention of accidents. This person shall be the Contractor's superintendent unless otherwise designated by the Contractor in writing to the Owner and Architect. 10.2.7 The Contractors shall not load or permit any part of the construction or site to be loaded so as to endanger its safety. 10.3 EMERGENCIES 10.3.1 In an emergency affecting safety of persons or property, the Contractor shall act, at the Contractor's discretion, to prevent threatened damage, injury or loss. Additional compensation or extension of time claimed by the Contractor on account of an emergency shall be determined as provided in Paragraph 4.3 and Article 7. ARTICLE 11 INSURANCE AND BONDS 11.1 CONTRACTOR'S LIABILITY INSURANCE 11.1.1 The Contractor shall purchase from and maintain in a company or companies lawfully authorized to do business in the jurisdiction in which the Project is located such insurance as will protect the Contractor from claims set forth below which may arise out of or result from the Contractor's operations under the Contract and for which the Contractor may be legally liable, whether such operations be by the Contractor or by a subcontractor or by anyone directly or indirectly employed by any of them, or by anyone for whose acts any of them may be liable: .1 claims under workers' or workmen's compensation, disability benefit and other similar employee benefit acts which are applicable to the Work to be performed; .2 claims for damages because of bodily injury, occupational sickness or disease, or death of the Contractor's employees; .3 claims for damages because of bodily injury, sickness or disease, or death of any person other than the Contractor's employees; .4 claims for damages insured by usual personal injury liability coverage which are sustained (1) by a person as a result of an offense directly or indirectly related to employment of such person by the Contractor, or (2) by another person; .5 claims for damages, other than to the Work itself, because of injury to or destruction of tangible property, including loss of use resulting therefrom; .6 claims for damages because of bodily injury, death of a person or property damage arising out of ownership, maintenance or use of a motor vehicle; and .7 claims involving contractual liability insurance applicable to the Contractor's obligations under paragraph 3.18. 11.1.2 The insurance required by Subparagraph 11.1.1 shall be written or not less than limits of liability specified in the Contract Documents or required by law, whichever coverage is greater. Coverages, whether written on an occurrence or claims-made basis, shall be maintained without interruption from date of commencement of the Work until date of final payment and termination of any coverage required to be maintained after final payment. 11.1.3 Certificates of Insurance acceptable to the Owner shall be filed with the Owner prior to commencement of the Work. These Certificates and the insurance policies required by this Paragraph 11.1 shall contain a provision that coverages afforded under the policies will not be cancelled or allowed to expire until at least 30 days' prior written notice has been given to the Owner. If any of the foregoing insurance coverages are required to remain in force after final payment and are reasonably available, an additional certificate evidencing continuation of such coverage shall be submitted with the final application for Payment as required by Subparagraph 9.10.2. Information concerning reduction of coverage shall be furnished by the Contractor with reasonable promptness in accordance with the Contractor's information and belief. The Contractor is to meet all Insurance Requirements of Owner's Lender as specified in the Contract Documents. 11.1.3.1 Contractor's liability insurance provided pursuant to Paragraph 11.1.1 shall be endorsed naming Owner, Golden Road Motor Inn, Inc. and Lender as additional insureds with respect to claims arising out of Contractor's operations. 11.2 OWNER'S LIABILITY INSURANCE 11.2.1 The Owner shall be responsible for purchasing and maintaining the Owner's usual liability insurance. Optionally, the Owner may purchase and maintain other insurance for self-protection against claims which may arise from operations under the Contract. The Contractor shall not be responsible for purchasing and maintaining this optional Owner's liability insurance unless specifically required by the Contract Documents. 11.3 PROPERTY INSURANCE 11.3.1 Unless otherwise provided, the Owner shall purchase and maintain, in a company or companies lawfully authorized to do business in the jurisdiction in which the Project is located, property insurance in the amount of the initial Contract Sum as well as subsequent modifications thereto for the entire Work at the site on a replacement cost basis without voluntary deductibles over $10,000.00. Such property insurance shall be maintained, unless otherwise provided in the Contract Documents or otherwise agreed in writing by all persons and entities who are beneficiaries of such insurance, until final payment has been made as provided in paragraph 9.10 or until no person or entity other than the Owner has an insurable interest in the property required by this Paragraph 11.3 to be covered, whichever is earlier. This insurance shall include interests of the Owner, the Contractor, Subcontractors an Sub- subcontractors in the Work. Contractor, Subcontractors and Sub-subcontractors shall be named as additional insureds. 11.3.1.1 Property insurance shall be on an all-risk policy form and shall insure against the perils of fire and extended coverage and physical loss or damage including, without duplication of coverage, theft, vandalism, malicious mischief, collapse, falsework, temporary buildings and debris removal including demolition occasioned by enforcement of any applicable legal requirements, and shall cover reasonable compensation for Architect's services and expenses required as a result of such insured loss. Coverage for other perils shall not be required unless otherwise provided in the Contract Documents. 11.3.1.2 If the Owner does not intend to purchase such property insurance required by the Contract and with all of the coverages in the amount described above, the Owner shall so inform the Contractor in writing prior to commencement of the Work. The Contractor may then effect insurance which will protect the interests of the Contractor, Subcontractors and Sub-subcontractors in the work, and by appropriate Change Order the cost thereof shall be charged to the owner. If the Contractor is damaged by the failure or neglect of the Owner to purchase or maintain insurance as described above, without so notifying the Contractor, then the Owner shall bear all reasonable costs properly attributable thereto. 11.3.1.3 If the property insurance requires minimum deductibles and such deductibles are identified in the Contract Documents, the Contractor shall pay costs not covered because of such deductibles. If the Owner or insurer increases the required minimum deductibles above the amounts so identified or if the Owner elects to purchase this insurance with voluntary deductible amounts over $10,000., the Owner shall be responsible for payment of the additional costs over $10,000. not covered because of such increased or voluntary deductibles. 11.3.1.4 Unless otherwise provided in the Contract Documents, this property insurance shall cover portions of the Work stored off the site after written approval of the Owner at the value established in the approval and also portions of the Work in transit. 11.3.3 Loss of Use Insurance. The Owner, at the Owner's option, may purchase and maintain such insurance as will insure the Owner against loss of use of the Owner's property due to fire or other hazards, however caused. The Owner waives all rights of action against the Contractor for loss of use of the Owner's property, including consequential losses due to fire or other hazards however caused. 11.3.4 If the Contractor requests in writing that insurance for risks other than those described herein or for other special hazards be included in the property insurance policy, the Owner shall, if reasonably possible and economically feasible, include such insurance, and the cost thereof shall be charged to the Contractor by appropriate Change Order. 11.3.5 If during the Project construction period the Owner insured properties, real or personal or both, adjoining or adjacent to the site by property insurance under policies separate from those insuring the Project, or if after final payment property insurance is to be provided on the completed Project through a policy or policies other than those insuring the Project during the construction period, the Owner shall waive all rights in accordance with the terms of Subparagraph 11.3.7 for damages caused by fire or other perils covered by this separate property insurance. All separate policies shall provide this waiver of subrogation by endorsement or otherwise. 11.3.6 Before an exposure to loss may occur, the Owner shall file with the Contractor a copy of each policy that includes insurance coverages required by this paragraph 11.3. Each policy shall contain all generally applicable conditions, definitions, exclusions and endorsements related to this Project. Each policy shall contain a provision that the policy will not be cancelled or allowed to expire until at least 30 days' prior written notice has been given to the Contractor. 11.3.7 Waivers of Subrogation. The provisions of Exhibit ** to the Contract entitled "Insurance Requirements" control waivers of subrogation. 11.3.8 A loss insured under Owner's property insurance shall be adjusted by the Owner as fiduciary and made payable to the Owner as fiduciary for the insureds, as their interests may appear, subject to requirements of any applicable mortgagee clause and of Subparagraph 11.3.10. The Contractor shall pay Subcontractors their just shares of insurance proceeds received by the Contractor, and by appropriate agreements, written where legally required for validity, shall require Subcontractors to make payments to their Sub- subcontractors in similar manner. 11.3.10 The Owner as fiduciary shall have power to adjust and settle a loss with insurers unless one of the parties in interest shall object in writing within five days after occurrence of loss to the Owner's exercise of this power; if such objection be made, arbitrators shall be chosen as provided in Paragraph 4.5. The Owner as fiduciary shall, in that case, make settlement with insurers in accordance with directions of such arbitrators. If distribution of insurance proceeds by arbitration is required, the arbitrators will direct such distribution. 11.3.11 Partial occupancy or use in accordance with Paragraph 9.9 shall not commence until the insurance company or companies providing property insurance have consented to such partial occupancy or use by endorsement or otherwise. The Owner and the Contractor shall take reasonable steps to obtain consent of the insurance company or companies and shall, without mutual written consent, take no action with respect to partial occupancy or use that would cause cancellation, lapse or reduction of insurance. 11.3.12 The Carrying of the above Owner provided builder's risk insurance shall in no way be interpreted as relieving the Contractor of any responsibility or liability under the Contract. 11.3.13 In the event of failure of the Contractor to finish and maintain said insurance as required in Article 11.1 and to furnish satisfactory evidence thereof, the Owner shall have the right, at Contractor's sole expense, to take out and maintain same for all parties on behalf of the Contractor who agrees to furnish all necessary underwriting information. 11.4 PERFORMANCE BOND AND PAYMENT BOND 11.4.1 The Owner shall have the right to require the Contractor to furnish bonds covering faithful performance of the Contract and payment of obligations arising thereunder as stipulated in bidding requirements or specifically required in the Contract Documents on the date of execution of the Contract. 11.4.2 Upon the request of any person or entity appearing to be a potential beneficiary of bonds covering payment of obligations arising under the Contract, the Contractor shall promptly furnish a copy of the bonds or shall permit a copy to be made. 11.4.3 The "Insurance Requirements" contained in Exhibit ** to the Contract are incorporated by this reference and the terms of those Requirements shall control any inconsistency with the terms set forth in these Conditions. ARTICLE 12 UNCOVERING AND CORRECTION OF WORK 12.1 UNCOVERING OF WORK 12.1.1 If a portion of the Work is covered contrary to the Architect's request or to requirements specifically expressed in the Contract Documents, it must, if required in writing by the Architect, be uncovered for the Architect's observation and be replaced at the Contractor's expense without change in the Contract Time. 12.1.2 If a portion of the Work has been covered which the Architect has not specifically requested to observe prior to its being covered, the Architect may request to see such Work and it shall be uncovered by the Contractor. If such Work is in accordance with the Contract Documents, costs of uncovering and replacement shall, by appropriate Change Order, be charged to the Owner. If such Work is not in accordance with the Contract Documents, the Contractor shall pay such costs unless the condition was caused by the Owner or a separate contractor in which event the Owner shall be responsible for payment of such costs. 12.2 CORRECTION OF WORK 12.2.1 The Contractor shall promptly correct Work rejected by the Architect or failing to conform to the requirements of the Contract Documents, whether observed before or after Substantial Completion and whether or not fabricated, installed or completed. The Contractor shall bear costs of correcting such rejected work, including additional testing and inspections and compensation for the Architect's services and expenses made necessary thereby. 12.2.2 If, within one year after the date of Substantial Completion of the Work or designated portion thereof, or after the date for commencement of warranties established under Subparagraph 9.9.1, or by terms of an applicable special warranty required by the Contract Documents, any of the work is found to be not in accordance with the requirements of the Contract Documents, the Contractor shall correct it promptly after receipt of written notice from the Owner to do so unless the Owner has previously given the Contractor a written acceptance of such condition. This period of one year shall be extended with respect to portions of work first performed after substantial Completion by the period of time between Substantial Completion and the actual performance of the Work. This obligation under this Subparagraph 12.2.2 shall survive acceptance of the Work under the Contract and termination of the Contract. The Owner shall give such notice promptly after discovery of the condition. 12.2.3 The Contractor shall remove from the site portions of the Work which are not in accordance with the requirements of the Contract Documents and are neither corrected by the Contractor nor accepted by the Owner. 12.2.4 If the Contractor fails to promptly correct nonconforming Work, the Owner may correct it in accordance with Paragraph 2.4. If the Contractor does not proceed with correction of such nonconforming Work with the time fixed by written notice from the Architect, the Owner may remove it and store the salvable materials or equipment at the Contractor's expense. If the Contractor does not pay costs of such removal and storage within ten days after written notice, the Owner may upon ten additional days' written notice sell such materials and equipment at auction or at private sale and shall account for the proceeds thereof, after deducting costs and damages that should have been borne by the Contractor, including compensation for the Architect's services and expenses made necessary thereby. If such proceeds of sale do not cover costs which the Contractor should have borne, the Contract Sum shall be reduced by the deficiency. If payments then or thereafter due the Contractor are not sufficient to cover such amount, the Contractor shall pay the difference to the Owner. 12.2.5 The Contractor shall bear the cost of correcting destroyed or damaged construction, whether completed or partially completed, of the Owner or separate contractors caused by the Contractor's correction or removal of Work which is not in accordance with the requirements of the Contract Documents. 12.2.6 Nothing contained in this Paragraph 12.2 shall be construed to establish a period of limitation with respect to other obligations which the Contractor might have under the Contract Documents. Establishment of the time period of one year as described in Subparagraph 12.2.2 relates only to the specific obligation of the Contractor to correct the work, and has no relationship to the time within which the obligation to comply with the Contract Documents may be sought to be enforced, nor to the time within which proceedings may be commenced to establish the Contractor's liability with respect to the Contractor's obligations other than specifically to correct the Work. 12.3 ACCEPTANCE OF NONCONFORMING WORK 12.3.1 If the Owner prefers to accept Work which is not in accordance with the requirements of the Contract Documents, the Owner may do so instead of requiring its removal and correction, in which case the Contract Sum will be reduced as appropriate and equitable. Such adjustment shall be effected whether or not final payment has been made. ARTICLE 13 MISCELLANEOUS PROVISIONS 13.1 GOVERNING LAW 13.1.1 The Contract shall be governed by the law of the place where the Project is located. The parties select the courts of Nevada for the forum and venue for any litigation. 13.2 SUCCESSORS AND ASSIGNS 13.2.1 The Owner and Contractor respectively bind themselves, their partners, successors, assigns and legal representatives to the other party hereto and to partners, successors, assigns and legal representatives of such other party in respect to covenants, agreements and obligations contained in the Contract Documents. Neither party to the Contract shall assign the Contract as a whole without written consent of the other. If either party attempts to make such an assignment without such consent, that party shall nevertheless remain legally responsible for all obligations under the Contract. 13.3 WRITTEN NOTICE 13.1.1 Written notice shall be deemed to have been duly served if delivered in person to the individual or a member of the firm or entity or to an officer of the corporation for which it was intended, or if delivered at or sent by registered or certified mail to the last business address known to the party giving notice. 13.4 RIGHTS AND REMEDIES 13.4.1 Duties and obligations imposed by the Contract Documents and rights and remedies available thereunder shall be in addition to and not a limitation of duties, obligations, rights and remedies otherwise imposed or available by law and 3.3 of A101, i.e. the Contract. 13.4.2 No action or failure to act by the Owner, Architect or Contractor shall constitute a waiver of a right or duty afforded them under the Contract, nor shall such action or failure to act constitute approval of or acquiescence in a breach thereunder, except as may be specifically agreed in writing. 13.4.3 Breach: In the event either party claims a breach of the Agreement by the other party, the party claiming the breach shall give written notice as such are provided for herein. The party receiving notice of its claimed breach shall have three business days to cure the claimed breach before this Agreement shall be in default. 13.5 TESTS AND INSPECTIONS 13.5.1 Tests, inspections and approvals of portions of the Work required by the Contract Documents or by laws, ordinances, rules, regulations or orders of public authorities having jurisdiction shall be made at an appropriate time. Unless otherwise provided, the Contractor shall make arrangements for such tests, inspections and approvals with an independent testing laboratory or entity acceptable to the Owner, or with the appropriate public authority, and shall bear all related costs of tests, inspections and approvals. The Contractor shall give the Architect timely notice of when and where tests and inspections are to be made so the Architect may observe such procedures. The Owner shall bear costs of tests, inspections or approvals which do not become requirements until after bids are received or negotiations concluded. 13.5.2 If the Architect, Owner or public authorities having jurisdiction determine that portions of the Work require additional testing, inspection or approval not included under Subparagraph 13.5.1, the Architect will, upon written authorization from the Owner, instruct the Contractor to make arrangements for such additional testing, inspection or approval by an entity acceptable to the Owner, and the Contractor shall give timely notice to the Architect of when and where tests and inspections are to be made so the Architect may observe such procedures. The Owner shall bear such costs except as provided in Subparagraph 13.5.3. 13.5.3 If such procedures for testing, inspection or approval under Subparagraphs 13.5.1 and 13.5.2 reveal failure of the portions of the Work to comply with requirements established by the Contract Documents, the Contractor shall bear all costs made necessary by such failure including those of repeated procedures and compensation for the Architect's services and expenses. 13.5.4 Required certificates of testing, inspection or approval shall, unless otherwise required by the Contract Documents, be secured by the Contractor and promptly delivered to the Architect. 13.5.5 If the Architect is to observe tests, inspections or approvals required by the Contract Documents, the Architect will do so promptly and, where applicable, at the normal place of testing. 13.5.6 Tests or inspections conducted pursuant to the Contract Documents shall be made promptly to avoid unreasonable delay in the work. 13.6 INTEREST 13.6.1 Payments due and unpaid under the Contract Documents shall bear interest 10 days after the date payment is due at such rate as the parties may agree upon in writing or, in the absence thereof, at the legal rate prevailing from time to time at the place where the Project is located. 13.7 COMMENCEMENT OF STATUTORY LIMITATION PERIOD 13.7.1 As between the Owner and Contractor. .1 Before Substantial Completion. As to acts or failures to act occurring prior to the relevant date of Substantial Completion, any applicable statue of limitations shall commence to run and any alleged cause of action shall be deemed to have accrued in any and all events not later than such date of Substantial Completion; .2 Between Substantial Completion and Final Certificate for Payment. As to acts or failures to act occurring subsequent to the relevant date of Substantial Completion and prior to issuance of the final Certificate for Payment, any applicable statute of limitations shall commence to run and any alleged cause of action shall be deemed to have accrued in any and all events not later than the date of issuance of the final Certificate for Payment; and .3 After Final Certificate for Payment. As to acts of failures to act occurring after the relevant date of issuance of the final Certificate for Payment, any applicable statue of limitations shall commence to run and any alleged cause of action shall be deemed to have accrued in any and all events not later than the date of any act or failure to act by the Contractor pursuant to any warranty provided under Paragraph 3.5, the date of any correction of the Work or failure to correct the Work by the Contractor under Paragraph 12.2, or the date of actual commission of any other act or failure to perform any duty or obligation by the Contractor or Owner, whichever occurs last. ARTICLE 14 TERMINATION OR SUSPENSION OF THE CONTRACT 14.1 TERMINATION BY THE CONTRACTOR 14.1.1 The Contractor may terminate the Contract if the Work is stopped for a period of 30 days through no act or fault of the Contractor or a Subcontractor, Sub-subcontractor or their agents or employees or any other persons performing portions of the work under contract with the Contractor, for any of the following reasons: .1 issuance of an order of a court or other public authority having jurisdiction; .2 an act of government, such as a declaration of national emergency, making material unavailable; .3 because the Architect has not issued a Certificate for Payment and has not notified the Contractor of the reason for withholding certification as provided in Subparagraph 9.4.1, or because the Owner has not made payment on a Certificate for Payment within the time stated in the Contract Documents; .4 if repeated suspensions, delays or interruptions by the Owner as described in Paragraph 14.3 constitute in the aggregate more than 100 percent of the total number of days scheduled for completion, or 120 days in any 365-day period, whichever is less; or 14.1.2 If one of the above reasons exists, the Contractor may, upon seven additional days' written notice to the Owner and Architect, terminate the Contract and recover from the Owner payment for Work executed and for proven loss thereof with respect to materials, equipment, tools and construction equipment and machinery, including reasonable overhead, profit and damages. 14.1.3 If the Work is stopped for a period of 60 days through no act or fault of the Contractor or a Subcontractor of their agents or employees or any other persons performing portions of the Work under contract with the Contractor because the Owner has persistently failed to fulfill the Owner's obligations under the Contract Documents with respect to matters important to the progress of the Work, the Contractor may, upon seven additional days' written notice to the Owner and the Architect, terminate the Contract and recover from the Owner as provided in Subparagraph 14.1.2. 14.2 TERMINATION BY THE OWNER FOR CAUSE 14.2.1 The Owner may terminate the Contract if the Contractor: .1 persistently or repeatedly refuses or fails to supply enough properly skilled workers or proper materials; .2 fails to make payment to Subcontractors for materials or labor in accordance with the respective agreement between the Contractor and the Subcontractors; .3 persistently disregard laws, ordinances or rules, regulations or orders of a public authority having jurisdiction; or .4 otherwise is guilty of substantial breach of a provision of the Contract Documents. 14.2.2 When any of the above reasons exist, the Owner, upon certification by the Architect that sufficient cause exists to justify such action, may without prejudice to any other rights or remedies of the Owner and after giving the Contractor and the Contractor's surety, if any, seven days' written notice, terminate employment of the Contractor and may, subject to any prior rights of the surety: .1 take possession of the site and of all materials, equipment, tools, and construction equipment and machinery thereon owned by the Contractor; .2 accept assignment of subcontracts pursuant to Paragraph 5.4; and .3 finish the Work by whatever reasonable method the Owner may deem expedient. 14.2.3 When the Owner terminates the Contract for one of the reasons stated in Subparagraph 14.2.1, the Contractor shall not be entitled to receive further payment until the Work is finished. 14.2.4 If the unpaid balance of the Contract Sum exceeds costs of finishing the work, including compensation for the Architect's services and expenses made necessary thereby, such excess shall be paid to the Contractor. If such costs exceed the unpaid balance, the Contractor shall pay the difference to the Owner. The amount to be paid to the Contractor or Owner, as the case may be, shall be certified by the Architect, upon application, and this obligation for payment shall survive termination of the Contract. 14.3 SUSPENSION BY THE OWNER FOR CONVENIENCE 14.3.1 The Owner may, without cause, order the Contractor in writing to suspend, delay or interrupt the Work in whole or in part for such period of time as the Owner may determine. 14.3.2 An adjustment shall be made for increases in the cost of performance of the Contract, including profit on the increased cost of performance, caused by suspension, delay or interruption. No adjustment shall be made to the extent: .1 that performance is, was or would have been so suspended, delayed or interrupted by another cause for which the Contractor is responsible; or .2 that an equitable adjustment is made or denied under another provision of this Contract. 14.3.3 Adjustments made in the cost of performance may have a mutually agreed fixed or percentage fee. 14.4 TERMINATION BY ACT OF LENDER 14.4.1 Without limitation on the provisions at Paragraph 14.2, the Owner shall have the right to terminate this Contract if Lender suspends, stops or terminates any payments, pursuant to the Loan Agreement that funds this work. The Contractor shall immediately discontinue the work and thereafter remove its equipment and the employees from the Job Site. In the event of termination under this paragraph, the Contractor shall, as its sole and exclusive remedy, recover from the Owner payment for all Work executed and costs incurred up to the date of termination less any payments previously made. In addition, the Contractor shall recover its overhead costs (defined as the Project Manager, Superintendent and their related costs) which are the result of closing the Project, plus a fee of 3% of all work executed and costs incurred to the date of termination. 14.5 The Contractor acknowledges that the Owner is in a business that is subject to and exists because of privileged licenses issued by the Gaming Control Board and Commission. If requested the Gaming Control Board and/or Commission to do any act, Contractor shall comply. 14.6 SPECIAL CONDITIONS 14.6.1 General a. The "General Conditions of the Contract for Construction" A.I.A. Form, Fourteenth Edition, 1987, and the Supplementary Conditions, Section 0090, are a part of, and their provisions shall apply with equal force to, all sections of work. b. This Section applies to the work of all other sections and shall be performed by all Contractors and/or all affected trades. c. Wherever the term "Borrower" appears in these General and/or Special Conditions and the Agreement, it shall mean the "Owner." 14.6.2 Special Notice a. The Contractor shall schedule his work such that the building's operations are minimally interrupted and he shall submit a schedule of construction operations to the Owner's representative for review and acceptance prior to starting work. b. Courtesy with respect to the building's employees and guests is mandatory. c. Use of elevators, power outages, mechanical shut-down and so forth shall be carefully coordinated with the Owner's representative. d. No ceilings or wall shall remain "open" after the normal work day without special permission from the Owner's representative. 14.6.3 Guarantees a. All guarantees shall commence from the date of final completion. b. Except as may be specified under other sections in the specifications, guaranty all equipment furnished under the specifications for a period of one year from date of acceptance against defective workmanship and material and improper installation. Upon notification of failure, correct deficiency immediately and without cost to the Owner. c. Standard warranty of manufacturer shall apply for replacement of parts after expiration of the above period. Manufacturer shall furnish replacement parts to the Owner or his service agency as directed. d. Furnish to the Owner printed manufacturers' warranties complete with material included and expiration dates upon completion of project. 14.6.4 Reference Standards a. Safety Standards: (1) Occupational Safety and Health Administration under the Federal William- Steiger Occupational Safety and Health Act of 1970; (2) "Manual of Accident Prevention in Construction" published by Associated General Contractors of America. (3) All applicable regulations of authorities having or asserting jurisdiction. b. Throughout the specifications, reference is made to various widely published standard, commercial specifications. Each Contractor shall direct each of his subcontractors to become familiar with the contents of the pertinent portions of these reference standards that are cited and referred to. c. When manufacturers of materials or fixtures used on this job provide installation or maintenance directions not covered in these specifications or detailed on the drawings, each Contractor furnishing the item shall follow such directions, and shall issue appropriate copies to the other affected Contractors. 14.6.5 Glass. Contractor shall be responsible for replacing broken or damaged glass permanently installed in the building, where the breakage or damage is caused by the Contractor, Subcontractor or Sub-subcontractor. 14.6.6 Drawings, Specifications and Measurements a. Follow figures dimensions given on drawings; do not scale drawings. b. In general, detail drawings take precedence over general drawings; addenda or bulletins to specifications take precedence over original specifications and earlier addenda. c. Cut seals carefully, and neatly repair them in an acceptable manner. Consult the Architect in cases where cutting into a structural portion of the building is required so that satisfactory reinforcement may be provided. d. Where specifications and drawings conflict or where detail references have been omitted, Contractor shall be deemed to have estimated the most expensive materials and construction involved unless he has asked for and obtained a written decision from the Architect on which method or materials will be required before signing the Agreement. e. Use the sets of drawings furnished and/or purchased upon the signing of the contract for construction purposes. Keep the stamped set for the primary use of the Building Inspector keep it in good condition for the duration of the Construction period. 14.6.7 Temporary Construction Walls a. The Contractor shall be responsible for construction of temporary walls around all areas of operations. b. All walls shall have a "finished" look, unless otherwise shown on the drawings. Finished with a coat of paint. 14.6.8 Temporary Construction Fence. The Contractor shall be responsible for construction of temporary fence around all areas of operations. 14.6.9 Keying of Temporary Doors a. Installation of all temporary doors shall be coordinated with the Owner's representative prior to their installation. b. All temporary keying shall be performed by the Contractor. The Contractor shall immediately issue one set of keys to the Owner's representative. 14.6.10 Access to the Work Area. Access to the Project work area by construction personnel shall be by the most inconspicuous route available, in order that the public and the Owner's personnel are not inconvenienced. Access shall be arranged prior to the commencement of the Work with the Owner's representative, unless shown otherwise. Access to restricted and/or limited access areas required by the Work shall be coordinated with the Owner's representative. 14.6.11 Storage. Storage of materials, tools, equipment and so forth shall be within the Project work area or another location designated and approved by the Owner's representative. 14.6.12 Punch List a. Access to the Project for the purpose of completing Punch List/Close-Out items shall be approved by the Owner's representative and shall be performed at a reasonable time that is least inconvenient to the Owner. b. All Life/Safety Systems requiring shutdowns or tie-ins, in accordance with the above clause, shall be coordinated with the Owner's representative and shall be performed at such a time to minimize any effect on the safety, health and welfare of the building's occupants. At the conclusion of each work day, all Life/Safety Systems shall be energized and operative. 14.6.13 Toilet Facilities a. Toilet Facilities shall be provided by Contractor. b. The Owner's toilet facilities used by the general public are not to be used by construction personnel. 14.6.14 Telephones. The Contractor, his Subcontractors and all construction personnel associated with the Project are strictly prohibited from using the Owner's telephone system for paging, information, messages and outside telephone connections. 14.6.15 Eating Privileges a. All construction personnel shall be permitted to eat in any area, designated by the construction superintendent during the general construction phase. b. During the FF&E and finish phase of construction, construction personnel are not permitted to eat where finish materials are in place nor use tables and chairs or other furniture that are part of the Project. At this time the Project Owner's representative will designate with the construction superintendent, appropriate places for eating. c. There will be no eating permitted in and around the swimming pool and deck area after it is open. 14.6.16 Trade Names. No trade name shall appear on any item where it will be seen by the public, except for elevators and escalators. 14.6.17 Owner Furnished Materials. Contractor shall unload all materials for the project provided by Owner or Owner's other suppliers where such unloading requires use of a forklift. EXHIBIT A Contract Schedule [NOT INCLUDED] EXHIBIT B Schedule of Value [NOT INCLUDED] EXHIBIT C CONTRACT CLARIFICATIONS 1. Any asbestos abatement or disposal of hazardous waste materials of existing conditions is excluded from this Contract. 2. No permanent ground water dewatering system is included in this Work. 3. The water meter and vault for the 6" water line entering into the building is excluded. 4. Owner must supply Perini with one (1) service elevator car for eight (8) weeks per the Perini schedule in the contract documents. 5. Perini's work/operation hours shall be limited during the excavation and concrete phases of the project to between the hours of 6:00 a.m. and 10:00 p.m. Perini acknowledges the 24 hour nature of the Atlantis operation and will use its best efforts to minimize noise throughout the work of construction. 6. All millwork and counter tops provided by Owner are assumed to be pre- finished with all holes required for Contractor's work, cut and ready to accept Contractor's hardware or fixtures as required. 7. Fees for alterations and additions which involve a change in the scope of work under the Contract do not include the cost of bonding, insurance or additional field staff which may be required for such scope changes. There shall be no costs attributed to bonding, insurance, overhead, supervision or additional staff for any alterations or additions which do not involve a change in the scope of work. 8. Base bid does not include air-entrained concrete for structural concrete. 9. Plexiglass panel on 4/A5.8 to be part of the sign package and not included in this proposal. 10. While none are anticipated, no provisions are included for utility company fees. 11. Bid includes retrofit of existing fire alarm and detection system, including interface with existing smoke control system. No provisions are included for repair or replacement of faulty smoke control devices in the existing building. 12. The fire alarm and detection system for the bridge are not included in this Contract. However, this Contract does provide for a fire alarm and detection system which will be fully integrated into and function with the fire alarm and detection systems in the bridge and in the existing building to fully comply with all codes and governmental authority requirements. 13. Bid includes empty conduit systems for security, computer, sound, telephone and CATV as indicated on drawings. 14. No provisions are included for gaming equipment and keno conduit systems unless indicated on drawings. 15. Temporary power and lighting will be provided by Perini and will meet OSHA and Perini Building Company standards. Section 01700-03.02.02 requirements exceed the provisions in the proposal. Temporary power shall be sub-metered off existing service. Contractor shall supply and install the sub-meter. 16. The Existing Tower to New Tower roof expansion joint is included as a galvanized sheet metal cover. The roof expansion joint is not included as a fire rated assembly. 17. Pursuant to the letter of Jessen-Wright Structural Engineers to Mike Shimko, dated May 20, 1998, Note 3-2 B, part 2 of Sheet S1.0, requiring a maximum water/cement ratio of 0.40 for all concrete is modified to apply to all concrete strengths above 4000 psi. For all concrete strengths equal or less than 4,000 psi, the maximum water/cement ratio is increased to 0.50. 18. Substitute Tera' Gem III epoxy flooring in lieu of Merko Flor-Rez. 19. Manlift will be available for use by Owner and Owner's other contractors on a cooperative basis in order to maximimize efficiency of the overall construction. If no Perini operator is on duty when Owner or its other contractors need the manlift, Owner or its other contractors will provide one. 20. A daily tour of construction by Owner will be available at 4:00 p.m. Owner to be responsible for safety and conduct of tours. 21. Perini shall pay its suppliers and subcontractors within ten (10) days of Perini's receipt of payment from Owner and shall provide for timely payment by Perini's subcontractors to any respective sub-subcontractors. 22. The construction yard layout and parking for all contractors and their employees shall be per the map attached hereto and incorporated by this reference as Attachment 1. 23. There shall be no construction traffic on the parking lot east of the building outside of the staging area. All supply and other vehicles shall access from Peckham Lane. 24. In order to comply with the scheduled opening of the new phase, the Contract provides for temporary hookup of utilities where necessary. 25. Per the Contract Documents and/or as described in the pre-bid meeting and walk-through, the transition between staircase number 2 and the existing staircase at the 18th and 19th levels is included in the Work of this Contract. Removal of the slotshop next to the new passenger elevator lobby is also included in the work of this Contract. 26. Perini warrants that it and all of its subcontractors and any sub- subcontractors have studied all plans and specifications relating to this project and that they have walked the jobsite and thoroughly reviewed its conditions and understand how those conditions may affect their work and bid(s). Accordingly, there will be no additional charges for any design shown on any of the drawings or specifications, e.g. electrical, mechanical, etc. 27. Owner shall have until September 1, 1998, to select white, black or any other standard window framing color on the twenty-first (21st) through twenty- seventh (27th) floors, inclusive. Per Attachement 2, attached hereto and incorporated by this reference, Owner shall have until the same date to select the option to change all glass to one (1) type on the twenty-first (21st) through twenty-seventh (27th) floors, inclusive, which option, if selected, shall effect a Contract price adjustment as stated in Attachment 2. 28. In the event any potential subcontractor is introduced, recommended or otherwise suggested by Owner to Perini and Perini ultimately contracts with or otherwise hires or retains the services of such subcontractor, Owner shall incur no liability or responsibility to Perini or any other party for the performance or acts of such subcontractor and such subcontractor will be treated by the terms of this agreement as would any other subcontractor. 29. The cost of a payment and performance bond is excluded from the Contract. 30. The cost of Gravel Base at the west lot is excluded from the Contract. 31. Pricing for Alternate Number 7 does not include rubbed concrete. Surface will be a smooth, drywall finish with flat paint or plaster "knock-down" finish. 32. Rescue air system is included as an allowance of ONE HUNDRED THOUSAND DOLLARS ($100,000.00). 33. Contractor shall perform dust control in the construction yard. 34. Installation of all double stick carpeting and ceiling tile cost are excluded from the Contract. 35. The quantity of ceiling tile required to complete the job is per the attached letter of Paul Ogaz, incorporated herein as Attachment 3 by this reference. ATTACHMENT 1 Construction Yard (Drawing) [NOT INCLUDED] ATTACHMENT 2 Alpine Glass Proposal [NOT INCLUDED] ATTACHMENT 3 Paul S.J. Ogaz Co. Proposal [NOT INCLUDED] EXHIBIT D Acknowledgement of receipt of Plans and Specifications and copies of revisions, changes, and addendums to Plans and Specifications [NOT INCLUDED] EXHIBIT E General Contractor/Major Subcontractor Insurance Requirements [NOT INCLUDED] EXHIBIT F List of Drawings [NOT INCLUDED] EXHIBIT G Acknowledgement of receipt of Soils Report [NOT INCLUDED] EXHIBIT H Otis Elevator Schedule [NOT INCLUDED] EXHIBIT I Value Engineering Schedule [NOT INCLUDED] EXHIBIT J Acknowledgement of receipt of Revised Kitchen Drawings and List of Revised Kitchen Drawings [NOT INCLUDED] EXHIBIT K Acknowledgement of receipt of Life Safety Package. [NOT INCLUDED] EXHIBIT L Contractor's Certification to Lender. [NOT INCLUDED] EX-27 4
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM REGISTRANT'S CONSOLIDATED FINANCIAL STATEMENTS AS OF JUNE 30, 1998 AND THE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS AND NOTES TO FINANCIAL STATEMENTS. 3-MOS DEC-31-1998 JUN-30-1998 4,034,413 0 1,339,263 0 410,799 7,965,314 77,647,983 20,025,261 67,369,614 8,702,977 31,232,995 0 0 95,363 25,103,279 67,369,614 0 16,561,812 0 8,151,168 1,156,104 0 581,101 2,427,307 825,284 1,602,023 0 0 0 1,602,023 .17 .17
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