<PAGE>
 
                                 EXHIBIT 10.7

                               AIA DOCUMENT AIII
                          Standard Form of Agreement
                         Between Owner and Contractor
                      where the basis of payments is the
                          COST OF THE WORK PLUS A FEE
                  with or without a Guaranteed Maximum Price

                                 1987 EDITION

 THIS DOCUMENT HAS IMPORTANT LEGAL CONSEQUENCES CONSULTATION WITH AN ATTORNEY
         IS ENCOURAGED WITH RESPECT TO ITS COMPLETION OR MODIFICATION.

       The 1987 Edition of AIA Document A201, General Conditions of the
     Contract for Construction, is adopted in this document by reference. 
  Do not use with other general conditions unless this document is modified.

    This document has been approved and endorsed by The Associated General
                            Contractors of America.


                                   AGREEMENT

made of the 3rd day of December in the year of Nineteen Hundred and Ninety Six


                BETWEEN The Owner: Laboratory Specialists, Inc
                      (Name & Address) 113 Jarrell Drive
                        Belle Chasse, Louisiana  70037

          and the Contractor: Kerry O'Connor General Contractor, Inc.
                        (Name & Address) P. O. Box 2984
                           Gretna, Louisiana  70054

                   the Project is: Offices & Laboratory For
                 (Name & Address) Laboratory Specialists, Inc.
                              1101 Newton Street
                           Gretna, Louisiana  70053

           the Architect is: Frank E. Gerarve, Jr., Architect, Inc.
                  (Name & Address) 9108 Chretion Point Place
                         River Ridge, Louisiana 70123

              The Owner and Contractor agree as set forth below.

                                       1
<PAGE>
 
                                   ARTICLE 1
                                   ---------

                            THE CONTRACT DOCUMENTS

1.1  The Contract Documents consist of this Agreement, Conditions of the
Contract (General, Supplementary and other Conditions), Drawings,
Specifications, Addenda issued prior to executions 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 superseded prior
negotiations, representations or agreements, either written or oral. An
enumeration of the Contract Documents, other than Modifications, appears in
Article 16. If anything in the other Contract Documents is inconsistent with
this Agreement, this Agreement shall govern.

                                   ARTICLE 2
                                   ---------

                           THE WORK OF THIS CONTRACT

2.1  The Contractor shall execute the entire Work described in the Contract
Documents, except to the extend specifically indicated in the Contract Documents
to be the responsibility of others, of as follows: N/A

                                   ARTICLE 3
                                   ---------

                          RELATIONSHIP OF THE PARTIES

3.1  The Contractor accepts the relationship of trust and confidence established
by this Agreement and covenants with the Owner to cooperate with the Architect
and utilize the Contractor's best skill, efforts and judgment in furthering the
interest of the Owner: to furnish efficient business administration and
supervision; to make best efforts to furnish at all times an adequate supply of
workers and materials; and to perform the Work in the best way and most
expeditious and economical manner consistent with the interest of the Owner. The
Owner agrees to exercise best efforts to enable the Contractor to perform the
Work in the best way and most expeditious manner by furnishing and approving in
a timely way information required by the Contractor and making payments to the
Contractor in accordance with requirement of the Contract Document.

                                   ARTICLE 4

                DATE OF COMMENCEMENT AND SUBSTANTIAL COMPLETION

4.1  The date of commencement is the date from which the Contract Time of
Subparagraph 4.2 is measured; it shall be the date of this Agreement, as first
written above unless a difference date is stated below or provision is made for
the date to be fixed in a notice to proceed issued by the Owner.

                            SAME AS AGREEMENT DATE.

                                       2
<PAGE>
 
Unless the date of commencement is established by a notice to proceed by the
Owner, the Contractor shall notify the Owner in writing not less than five days
before commencing the Work to permit the timely filing of mortgages, mechanics
liens and other security interests.

4.2  The Contractor shall achieve Substantial Completion of the entire Work not
later than 100 Calendar Days of Commencement.

   subject to adjustments of this Contract Time as provided in the Contract
                               Documents.   N/A


                                   ARTICLE 5
                                   ---------

                                 CONTRACT SUM

5.1  The Owner shall pay the Contractor in current funds for the Contractor's
performance of the Contract the Contract Sum consisting of the Cost of the Work
as defined in Article 7 and the Contractor's Fee determined as follows:


                        COST            399,611.00
                        CONTR. MKUP 10%  39,961.00
                                        ----------
                                        439,572.00

       * CONTRACTOR FEE WILL BE 10% OF ALL COST ASSOCIATED WITH PROJECT

5.2  GUARANTEED MAXIMUM PRICE (IF APPLICABLE)

5.2.1  The sum of the Cost of the Work and the Contractor's Fee is guaranteed by
the Contractor not to exceed FOUR HUNDRED THIRTY NINE THOUSAND FIVE HUNDRED
SEVENTY TWO AND NO/100 Dollars ($439,572.00), subject to additions and
deductions by Change Order as provided in the Contract Documents. Such maximum
sum is referred to in the Contract Documents as the Guaranteed Maximum Price,
Costs which would cause the Guaranteed Maximum Price to be exceeded shall be
paid by the Contractor without reimbursement by the Owner.

5.2.2.  The Guaranteed Maximum Price is based upon the following alternates, if
any, which are described in the Contract Documents and are hereby accepted by
the Owner:
                                     NONE


5.2.3. The amounts agreed to for unit prices, if any, are as follows:
  
                                      None

                                   ARTICLE 6
                                   ---------

                              CHANGES IN THE WORK

6.1  CONTRACTS WITH A GUARANTEED MAXIMUM PRICE

                                       3
<PAGE>
 
6.1.1  Adjustment to the Guaranteed Maximum Price on account of changes in the
Work may be determined by any of the methods listed in Subparagraph 7.3.3 of the
General Conditions.

6.1.2  In calculation adjustments to subcontracts (except those awarded with the
Owner's prior consent on the basis of cost plus a fee) the terms "cost" and
"fee" as used in clause 7.3.3.3 of the General Conditions and the terms "costs"
and "a reasonable allowance for overhead and profit" as used in Subparagraph
7.3.6 of the General Conditions shall have the meanings assigned to them in the
General Conditions and shall not be modified by Articles 5,7 and 8 of this
Agreement Adjustment to subcontracts awarded with the Owner's prior consent on
the basis of cost plus a fee shall be calculated in accordance with the terms of
those subcontracts.

6.1.3  In calculating adjustments to this Contract, the terms "cost" and "costs"
as used in the above reference provisions of the General Conditions shall mean
the Cost of The Work as defined in Article 7 of this Agreement and the terms
"fee" and "a reasonable allowance for overhead and profit" shall mean the
Contractor's Fee as defined in Paragraph 5.1 of this Agreement.

6.2   CONTRACTS WITHOUT A GUARANTEED MAXIMUM PRICE

6.2.1  Increased costs for the items set forth in Article 7 which result from
changes in the Work shall become part of the Cost of the Work, and the
Contractor's Fee shall be adjusted as provided in Paragraph 5.1.

6.3   All CONTRACTS

6.3.1  If no specific provision is made in Paragraph 5.1 for adjustment of the
Contractor's Fee in the case of changes in the Work, or if the extend of such
changes is such, int eh aggregate, that application of the adjustments
provisions of Paragraph 5.1 will cause substantial inequity to the Owner or
Contractor, the Contractor's Fee shall be equitably adjusted on the basis of the
Fee established for the original Work.

                                   ARTICLE 7

                            COSTS TO BE REIMBURSED

7.1  The term Cost of the Work shall mean costs necessarily incurred by the
contractor in the proper performance of the Work. Such costs shall be at rates
not higher than the standard paid at the place of the Project except with prior
consent of the Owner. The Cost of the Work shall include only the items set
forth in this Article 7.

7.1.1 LABOR COSTS

7.1.1.1  Wages of construction workers directly employed by the Contractor to
perform the construction of the Work at the site or, with the Owner's agreement,
at off-site workshops.


7.1.1.2  Wages or salaries of the Contractor's supervisory and administrative
personnel when stationed at the site with the Owner's agreement.

7.1.1.3  Wages and salaries of the Contractor's supervisory or administrative
personnel engaged, at factories, workshops or on the road, in expediting the
production or transportation of materials or equipment required for the Work,
but only for that portion of their time required for the Work.

7.1.1.4  Costs paid or incurred by the Contractor for taxes,insurance,
contributions, assessments and benefits required by law or collective bargaining
agreements and, for personnel not covered by such agreements, customary

                                       4
<PAGE>
 
benefits such as sick leave, medical and health benefits, holidays, vacations
and pensions, provided such costs are based on wages and salaries included int
he cost of the Work under Clauses 7.1.1.1 through 7.1.1.3.

7.1.2  SUBCONTRACT COSTS

Payments made by the Contractor to Subcontractors in accordance with the
requirement of the subcontracts.

7.1.3  COSTS OF MATERIALS AND EQUIPMENT INCORPORATED IN THE COMPLETION
CONSTRUCTION

7.1.3.1  Costs, including transportation, of materials and equipment
incorporated or to be incorporated in the completed construction.

7.1.3.2  Costs of materials described in the preceding Clause 7.1.3.1 in excess
of those actually installed but required to provide reasonable allowance for
waste and for spoilage. Unused excess materials, if any, shall be handed over to
the Owner at the completion of the Work or, at the Owner's option, shall be sold
by the contractor; amounts realized, if any, from such sales shall be credited
to the Owner as a deduction from the Cost of the Work. 

7.1.4  COSTS OF OTHER MATERIALS AND EQUIPMENT, TEMPORARY FACILITIES AND RELATED
ITEMS
 
7.1.4.1  Costs, including transportation, installation, maintenance, dismantling
and removal of materials, supplies, temporary facilities, machinery, equipment,
and hand tools not customarily owned by the construction workers, which are
provided by the Contractor at the site and fully consumed in the performance of
the Work' and cost less salvage value on such items if not fully consumed,
whether sold to others or retained by the Contractor. Cost for items previously
used by the Contractor shall mean fair market value.
 
7.1.4.2  Rental charges for temporary facilities, machinery, equipment, and hand
tools not customarily owned by the construction workers, which are provided by
the Contractor at the site, whether rented from the Contractor or others, and
costs of transportation, installation, minor repairs and replacement,
dismantling and removal thereof. Rates and quantities of equipment rented shall
be subject to the Owner's prior approval.

7.1.4.3  Costs of removal of debris from the site.

7.1.4.4  Costs of telegrams and long-distance calls, postage and parcel delivery
charges, telephone service at the site and reasonable petty cash expenses of the
site office.

7.1.4.5  That portion of the reasonable travel and subsistence expenses of the
Contractor's personnel incurred white traveling in discharge of duties connected
with the Work.

7.1.5  MISCELLANEOUS COSTS

7.1.5.1  That portion directly attributable to this Contract of premiums for
insurance and bonds.

7.1.5.2  Sales, use of similar taxes imposed by a governmental authority which
are related to the Work and for which the Contractor is liable.

7.1.5.3  Fees and assessments for the building permit and for other permits,
licenses and inspections for which the Contractor is required by the Contract
Documents to pay.

                                       5
<PAGE>
 
7.1.5.4  Fees of testing laboratories for tests required by the Contract
Documents, except those related to defective or nonconforming Work for which
reimbursement is excluded by Subparagraph 1.3.5.3 of the General Conditions or
other provisions of the Contract Documents and which do not fall within the
scope of Subparagraphs 7.2.2 through 7.2.4 below.

7.1.5.5  Royalties and license fees paid for the use of a particular design,
process or product required by the Contract Documents; the cost of defending
suits or claims for infringement of patent rights arising from such requirements
by the Contract Documents; payments made in accordance with legal judgments
against the contractor resulting from such suits or claims and payments of
settlements made with the Owner's consent; provided, however, that such costs of
legal defenses, judgment and settlements shall not be included in the
calculation of the Contractor's Fee or of a Guaranteed Maximum Price, if any,
and provided that such royalties, fees and costs are not excluded by the last
sentence of Subparagraph 3.17.1 of the General Conditions or other provisions of
the Contract Documents.

7.1.5.6  Deposits lost for causes other than the Contractor's fault or
negligence.

7.1.6  OTHER COSTS

7.1.6.1  Other costs incurred in the performance of the Work if and to the
extent approved in advance in writing by the Owner

7.2    EMERGENCIES: REPAIRS TO DAMAGED, DEFECTIVE OR NONCONFORMING WORK

The Cost of the Work shall also include costs described in Paragraph 7.1 which
are incurred by the Contractor:

7.2.1  In taking action to prevent threatened damage, injury or loss in case of
an emergency affecting the safety of persons and property, as provided in
Paragraph 10.3 of the General Conditions.

7.2.2  In repairing or correcting Work damaged or improperly executed by
construction workers in the employ of the Contractor, provided such damage or
improper execution did not result from the fault or negligence of the Contractor
or the Contractor's foremen, engineers or superintendents, or other supervisory,
administrative or managerial personnel of the Contractor.

7.2.3  In repairing damaged Work other than that described in Subparagraph 7.2.2
provided such damage did not result from the fault or negligence of the
contractor or the Contractor's personnel, and only to the extent that the cost
of such repairs is not recoverable by the Contractor from others and the
Contractor is not compensated therefor by insurance or otherwise.

7.2.4  In correcting defective or nonconforming Work performed or supplied by a
Subcontractor or material supplier and not corrected by them, provided such
defective or nonconforming Work did not result from the fault or neglect of the
Contractor of the Contractor's personnel adequately to supervise and direct the
Work of the Subcontractor or material supplier, and only to the extend that the
cost of correcting the defective or nonconforming Work is not recoverable by the
Contractor from the Subcontractor of material supplier.

                                   ARTICLE 8
                                   ---------

                          COSTS NOT TO BE REIMBURSED

8.1    The Cost of the Work shall not include:

                                       6
<PAGE>
 
8.1.1  Salaries and other compensation of the Contractor's personnel stationed
at the Contractor's principal office of offices other than the site office,
except as specifically provided in Clauses 7.1.1.2 and 7.1.1.3 or as may be
provided in Article 14.

8.1.2  Expenses of the Contractor's principal office and offices other than the
site office.

8.1.3  Overhead and general expenses, except as may be expressly included in
Article 7.

8.1.4  The Contractor's capital expenses, including interest on the Contractor's
capital employed for the Work.

8.1.5  Rental costs of machinery and equipment, except as specifically provided
in Clause 7.1.4.2.

8.1.6  Except as provided in Subparagraph 7.2.2 through 7.2.4 and paragraph 13.5
of this Agreement, costs due to the fault or negligence of the Contractor,
Subcontractors, anyone directly or indirectly employed by any of them, or for
whose acts any of them may be liable, including but not limited to costs for the
correction of damages, defective or nonconforming Work, disposal and replacement
of materials and equipment incorrectly ordered or supplied, and making good
damage to property not forming part of the Work.

8.1.7  Any cost not specifically and expressly described in Article 7.

8.1.8  Costs which would cause the Guaranteed Maximum Price, if any, to be
exceeded.

                                   ARTICLE 9
                                   ---------

                        DISCOUNTS, REBATES AND REFUNDS

9.1  Cash discounts obtained on payments made by the Contractor shall accrue to
the Owner if (1) before making the payment, the Contractor included them in an
Application for Payment and received payment therefor from the Owner, or (2) the
Owner has deposited funds with the Contractor with which to make payments;
otherwise, cash discounts shall accrue to the Contractor. Trade discounts,
rebates, refunds and amounts received from sales of surplus materials and
equipment shall accrue to the Owner, and the Contractor shall make provisions so
that the can be accrued.

9.2  Amounts which accrue to the Owner in accordance with the provisions of
Paragraph 9.1 shall be credited to the Owner as a deduction from the Cost of
Work.

                                  ARTICLE 10
                                  ----------

                       SUBCONTRACTS AND OTHER AGREEMENTS

10.1  Those portions of the Work that the Contractor does not customarily
perform with the contractor's own personnel shall be performed under
subcontracts or by other appropriate agreements with the Contractor. The
Contractor shall obtain bids from Subcontractors and from suppliers of materials
or equipment fabricated especially for the Work and shall deliver such bids to
the Architect. The Owner will then determine, with the advice of the Contractor
and subject to the reasonable objection of the Architect which bids will be
accepted. The Owner may designate specific persons or entities from whom the
Contractor shall obtain bids; however, if a guaranteed Maximum Price has been
established, the Owner may not prohibit the Contractor from obtaining bids from
others. The Contractor shall not be required to contact with anyone to whom the
Contractor has reasonable objections.

                                       7
<PAGE>
 
10.2  If a Guaranteed Maximum Price has been established and a specific bidder
among those whose bids are delivered by the Contractor to the Architect (1) is
recommended to the Owner by the Contractor; (2) is qualified to perform that
position of the Work; and (3) has submitted a bid which conforms to the
requirements of the Contract Documents without reservations or exceptions, but
the Owner requires that another bid be accepted; then the Contractor may require
that a Change Order be issued to adjust the Guaranteed Maximum Price by the
difference between the bid of the person or entity recommended to the Owner by
the Contractor and the amount of the subcontract or other agreement actually
signed with the person or entity designated by the Owner.

10.3  Subcontracts or other agreements shall conform to the payment provisions
of Paragraphs 12.7 and 12.8, and shall not be awarded on the basis of cost plus
a fee without the prior consent of the Owner

                                  ARTICLE 11
                                  ----------

                              ACCOUNTING RECORDS

11.1 The contractor shall keep full and detailed accounts and exercise such
controls as may be necessary for proper financial management under this
contract; the accounting and control systems shall be satisfactory to the Owner.
The Owner and the Owner's accountants shall be afforded access to the
Contractor's records, books, correspondence, instructions, drawings, receipts,
subcontracts, purchase orders, vouchers, memoranda and other data relating to
this Contract, and the Contractor shall preserve these for a period of three
years after final payment, or for such longer period as may be required by law.

                                  ARTICLE 12
                                  ----------

                               PROGRESS PAYMENTS

12.1  Based upon Applications for Payment submitted to the Architect by the
Contractor and Certificates for Payment issued by the Architect, the Owner shall
make progress payments on account of the Contract Sum to the Contractor as
provided below and elsewhere in the Contract Documents.

12.2  The period covered by each Application for Payment shall be one calendar
month ending on the last day of the month, or as follows:

12.3  Provided an Application for Payment is received by the Architect not later
than the 20th day of a month, the Owner shall make payment to the Contractor not
later than the 30th day of the month. If an Application for Payment is received
by the Architect after the application date fixed above, payment shall be made
by the Owner not later than 10 days after the Architect received the Application
for Payment.


12.4  With each Application for Payment the Contractor shall submit payrolls,
petty cash accounts, receipted invoices and any other evidence required by the
Owner or Architect to demonstrate that cash disbursements already made by the
Contractor on account of the Cost of the Work equal or exceed (1) progress
payments already received by the Contractor; less (2) that portion of these
payments attributable to the Contractor's Fee; plus (3) payrolls for the period
covered by the present Application for Payment; plus (4) retainage provided
Subparagraph 12.5.4 if any, applicable to prior progress payments.

12.5 CONTRACTS WITH A GUARANTEED MAXIMUM PRICE
 
12.5.1 Each Application for Payment shall be based upon the most recent schedule
of values submitted by the Contractor in accordance with the Contract Documents.
The schedule of values shall allocate the entire Guaranteed Maximum Price amount
the various portions of the Work, except that eh Contractor's Fee shall be

                                       8
<PAGE>

shown as a single separate item. The schedule of values shall be prepared in
such form and supported by such data to substantiate its accuracy as the
Architect may require. This schedule, unless objected to by the Architect, shall
be used as a basis for reviewing the Contractor's Application for Payment.
 
12.5.2 Applications for Payment shall show the percentage completions of each
portion of the Work as of the end of the period covered by the Application for
Payment. The percentage completions shall be the less of (1) the percentage of
that portion of the Work which as actually been completed of (2) the percentage
obtained by dividing (1) the expense which has actually been incurred by the
Contractor on account of that portion of the Work for which the Contractor has
made or intends to make actual payment prior to the next Application for Payment
by (b) the share of the Guaranteed Maximum Price allocated to that portion of
the Work in the schedule of values.
 
12.5.3 Subject to other provision of the Contract documents, the amount of each
progress payment shall be computed as follows:
 
12.5.3.1 Take that portion of the Guaranteed Maximum Price properly allocable to
completed Work as determined by multiplying the percentage completion of each
portion of the Work by the share of the Guaranteed Maximum Price allocated to
that portion of the Work in the schedule of values. Pending final determination
of cost to the Owner of changes in the Work amounts not in dispute may be
included as provided in subparagraph 7.3.7 of the General Conditions, even
though the Guaranteed Maximum Price has not yet been adjusted by Change Order.

12.5.3.2 Add that portion of the Guaranteed Maximum Price property allocable to
materials and equipment delivered and suitable stored at the site for subsequent
incorporation int he Work or, if approved by the Owner, suitably stored off the
site at a location agreed upon in writing.

12.5.3.3 Add the Contractor's Fee, less retainage of NONE percent(%) The
Contractor's Fee shall be computed upon the Cost of the Work described in the
two preceding Clauses at the rate stated in Paragraph 5.1 or, if the
Contractor's Fee is stated as a fixed sum in that Paragraph, shall be an amount
which bears the same ratio to that fixed-sum Fee as the Cost of the Work in the
two preceding Clauses bears to a reasonable estimate of the probable Cost of the
Work upon its completion.

12.5.3.4 Subtract the aggregate of previous payments made by the Owner.

12.5.3.5 Subtract the shortfall, if any, indicated by the Contractor in the
documentation required by Paragraph 12.4 to substantiate prior Applications for
Payment, or resulting from errors subsequently discovered by the Owner's
accountants in such documentation.

12.5.3.6 Subtract amounts, if any, for which the Architect has withheld or
nullified a Certificate for Payment as provided in Paragraph 9.5 of the General
Conditions.

12.5.4 Additional retainage, if any, shall be as follows: NONE


                                  ARTICLE 13
                                  ----------

                                 FINAL PAYMENT

13.1 Final payment shall be made by the Owner to the Contractor when (1) the
Contract has been fully performed by the Contractor except for the Contractor's
responsibility to correct defective or nonconforming Work, as provided in
subparagraph 12.2.2 of the General Conditions, and to satisfy other
requirements, if any, which necessarily survive final payment;(2) a final
Application for Payment and a final accounting for the Cost of the Work have
been submitted by the Contractor and reviewed by the Owner's accountants; and
(3) a final Certificate

                                       9
<PAGE>
 
for Payment has then been issued by the Architect; such final payment shall be
made by the Owner not more than 30 days after the issuance of the Architect's
final Certificate for Payment, or as follows:

13.2 The amount of the final payment shall be calculated as follows:

13.2.1 Take the sum of the Cost of the Work substantiated by the Contractor's
final accounting and the Contractor's Fee; but not more than the Guaranteed
Maximum Price, if any.

13.2.2 Subtract amounts, if any, for which the Architect withholds, in whole or
in part, a final Certificate for Payment as provided in Subparagraph 9.5.1 of
the General Conditions or other provisions of the Contact documents.

13.2.3 Subtract the aggregate of previous payments made by the Owner.

If the aggregate of previous payments made by the Owner exceeds the amount due
the Contractor, the Contractor shall reimburse the difference to the Owner.
 
13.3 The Owner's accountants will review and report in writing on the
Contractor's final accounting within 30 days after delivery of the final
accounting to the Architect by the Contractor. Based upon such Cost of the Work
as the Owner's accountants report to be substantiated by the Contractor's final
accounting, and provided the other conditions of Paragraph 13.1 have been met,
the Architect will, within seven days after receipt of the written report of the
Owner's accountants, either issue to the Owner a final Certificate of Payment,
with a copy to the Contractor, or notify the Contractor and Owner in writing of
the Architect's reasons for withholding a certificate as provided in
Subparagraph 9.5.1 of the General Conditions. The time periods stated in this
Paragraph 13.3 supersede those stated in Subparagraph 9.4.1 of the General
Conditions.
 
13.4 If the Owner's accountants report the Cost of the Work as substantiated by
the Contractor's final accounting to be less than claimed by the Contractor, the
Contractor shall be entitled to demand arbitration of the disputed amount
without a further decision of the Architect. such demand for arbitration shall
be made by the Contractor within 30 days after the Contractor's receipt of a
copy of the Architect's final Certificate for Payment; failure to demand
arbitration within this 30-day period shall result in the substantiated amount
reported by the Owner's accountants becoming binding on the Contractor. Pending
a final resolution by arbitration, the Owner shall pay the Contractor the amount
certified in the Architect's final Certificate for Payment.
 
13.5 If subsequent to final payment at the Owner's request, the Contractor
incurs costs described in Article 7 and not excluded by Article 8 to correct
defective or nonconforming Work, the Owner shall reimburse the Contractor such
costs and the Contractor's Fee applicable thereto on the same basis as if such
costs had been incurred prior to final payment, but not in excess of
Contractor's Fee applicable thereto on the same basis as if such costs had been
incurred prior to final payment, but not in excess of the Guaranteed Maximum
Price, if any. If the Contractor has participated in savings as provided in
paragraph 5.2 the amount of such savings shall be recalculated and appropriate
credit given to the Owner in determining the net amount to be paid by the Owner
to the Contractor.

                                  ARTICLE 14
                                  ----------

                           MISCELLANEOUS PROVISIONS

14.1 Where reference is made in this Agreement to a provision of the General
conditions or another Contract Document, the reference refers to that provision
as amended or supplemented by other provisions of the Contract Documents.

                                      10
<PAGE>
 
14.2 Payments due and unpaid under the Contract shall bear interest from the
date payment is due at the rate stated below, or in the absence thereof, at the
legal rate prevailing from time to time at the place where the Project is
located.

(Interest rate agreed upon, if any) 1% ABOVE PRIME INTEREST RATE AT THAT TIME.

                                  ARTICLE  15
                                  -----------
                           TERMINATION OR SUSPENSION

15.1 The Contract may be terminated by the Contractor as provided in Article 14
of the General conditions; however, the amount to be paid to the Contractor
under Subparagraph 14.1.2 of the General Conditions shall not exceed the amount
the Contractor would be entitled to receive under Paragraph 15.3 below, except
that the Contractor's Fee shall be calculated as if the Work had been fully
completed by the Contractor, including a reasonable estimate of the cost of the
Work for Work not actually completed.

15.2 If a Guaranteed Maximum Price is established in Article 5, the Contract may
bee terminated by the Owner for cause as provided in Article 14 of the General
Conditions, however,the amount, if any, to be paid to the Contractor under
Subparagraph 14.2.4 of the General Conditions shall not cause the Guaranteed
Maximum Price to be exceeded, nor shall it exceed the amount the Contractor
would be entitled to receive under Paragraph 15.3 below.

15.3 If no Guaranteed Maximum Price is established in Article 5, the Contract
may bee terminated by the Owner for cause as provided in Article 14 of the
General conditions; however, the Owner shall then pay the Contractor an amount
calculated as follows:

15.3.1 Take the cost of the Work incurred by the Contractor to the date of
termination.

15.3.2 Add the Contractor's Fee computed upon the cost of the Work to the date
of termination at the rate stated in Paragraph 5.1 of, if the Contractor's Fee
is stated as a fixed sum in that Paragraph, an amount which bears the same
ration to that fixed-sum Fee as the Cost of the Work at the time of termination
bears to a reasonable estimate of the probable Cost of the Work upon its
completion.

15.3.3 Subtract the aggregate of previous payments made by the Owner.

The Owner shall also pay the Contractor fair compensation, either by purchase of
rental at the elections of the Owner, for any equipment owned by the Contractor
which the Owner selects to retain and which is not otherwise included in the
Cost of the Work under Subparagraph 15.3.1. To the extend that the Owner elects
to take legal assignments of subcontracts and purchase orders (including rental
agreements), the Contractor shall, as a conditions of receiving the payments
referred to in this Article 15, execute and deliver all such papers and take all
such steps, including the legal assignment of such subcontracts and other
contractual rights of the Contractor, as the Owner may require for the propose
of fully vesting in the Owner the rights and benefits of the Contractor under
such subcontracts or purchase orders.

15.4 The Work may be suspended by the Owner as provided in Article 14 of the
General Conditions: in such case, the Guaranteed Maximum Price, if any, shall be
increased provided in Subparagraph 14.3.2 of the General conditions except that
the term "cost of performance of the Contract" in that Subparagraph shall be
understood to mean the Cost of the Work and the term "profit: shall be
understood to mean the Contractor's Fee as described in Paragraphs 5.1 and 6.3
of this Agreement.

                                  ARTICLE 16
                                  ----------

                       ENUMERATION OF CONTRACT DOCUMENTS

                                      11
<PAGE>
 
16.1 The Contract Documents, except for Modifications issued after execution of
this Agreement, are enumerated as follows:

16.1.1 The Agreement is this executed Standard Form of Agreement between Owner
and Contractor, AIA Document AIIIm 1987 Edition.

16.1.2 The General Conditions are the General Conditions of the Contract for
construction, AIA Document A201, 1987 Edition.

16.1.3 The Supplementary and other Conditions of the Contract are those
contained in the Project Manual dated                , and are as follows:

                             Document Title Pages
                                      N/A


16.1.4 The Specifications are those contained in the Project Manual dated as in
Paragraph 16.1.3 and are as follows:

                           Section      Title  Pages

                           ELECTRICAL SPECIFICATIONS

16.1.5 The Drawings are as follows, and are dated 7/16/96 & REVISED 10/17/96
unless a difference date is shown below:

                               Number Title Date
                                     A1-A4
                                     P1-P2
                                     M1-M2
                                     E1-E4
                                Total 12 Pages


16.1.6 The Addenda, if any, are as follows:

                               Number Date Pages
                                      N/A


16.1.7 Other Documents, if any, forming part of the contract Documents are as
follows:

AND NOW COMES LABORATORY SPECIALISTS OF AMERICA, INC., WHO IS MADE A PARTY TO
THIS CONTRACT AND IS BOUND WITH OWNER IS SOLIDO FOR THE FAITHFUL EXECUTION OF
ALL THE OBLIGATIONS TO THE PERFORMED ON THE PART OF THE OWNERS.

                          /s/ARTHUR R. PETERSON, JR.
                    LABORATORY SPECIALIST OF AMERICA, INC.

                                      12
<PAGE>
 
This Agreement is entered into as of the date and year first written above and
is executed in at least three original copies of which one is to be delivered to
the Contractor, one to the Architect for use in the administration of the
Contract, and the remainder to the Owner.

                               OWNER CONTRACTOR

/s/ ARTHUR R. PETERSON, JR.                       /s/ KERRY O'CONNOR
        (Signature)                                   (Signature)


LABORATORY SPECIALISTS, INC.                         KERRY O'CONNOR
  ARTHUR R. PETERSON, JR.                       GENERAL CONTRACTOR, INC.
        (President)                                  KERRY O'CONNOR
  (Printed name and title)                            (President)
                                                (Printed name and title)

                                      13