Document:

Exhibit 10.5

 

CELLEGY PHARMACEUTICALS, INC.

 

NOTICE OF ASSUMPTION OF BIOSYN OPTIONS

 

Dear
Anne-Marie Corner:

 

As you know, on October 22, 2004, Cellegy Pharmaceuticals, Inc. (“Cellegy”) acquired all the
outstanding shares of capital stock of Biosyn, Inc. (“Biosyn”)
and assumed all outstanding options and warrants to purchase Biosyn common
stock in an exchange transaction (the “Exchange”).  This letter confirms the information set
forth in the Stock Option Assumption Agreement (“Option
Assumption Agreement”) that was previously sent to you regarding
one or more outstanding options to purchase Biosyn common stock (“Biosyn Options”) held by you prior
to the Exchange.  As a result of the
Exchange, your Biosyn Options are no longer exercisable for Biosyn common stock.  Instead, your Biosyn Options are exercisable
for shares of Cellegy common stock under the terms set forth in the Option
Assumption Agreement.

 

The tables below summarize your Biosyn Options immediately before and
after the Exchange.  These options may
have been granted to you pursuant to Biosyn’s 1999 Stock Option Plan (the “Plan”) or they may have been granted
to you other than pursuant to the Plan.

 

 

 

	
   

  	
  BIOSYN PLAN OPTION

  	
   

  	
   

  	
   

  	
  ASSUMED BIOSYN OPTION

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Grant Date

  	
   

  	
  Option

  Expiration Date

  	
   

  	
  No. of Shares of

  Biosyn Common

  Stock

  	
   

  	
  Exercise Price

  per share

  	
   

  	
  No. of Shares of Cellegy

  Common Stock

  	
   

  	
  Exercise Price

  Per Share

  	
   

  
	
  1/1/00

  	
   

  	
  12/31/09

  	
   

  	
  15,000

  	
   

  	
  $

  	
  2.50

  	
   

  	
  2,570

  	
   

  	
  $

  	
  14.60

  	
   

  
	
  1/1/01

  	
   

  	
  12/31/10

  	
   

  	
  15,000

  	
   

  	
  $

  	
  3.00

  	
   

  	
  2,570

  	
   

  	
  $

  	
  17.52

  	
   

  
	
  2/20/02

  	
   

  	
  2/19/12

  	
   

  	
  20,000

  	
   

  	
  $

  	
  1.50

  	
   

  	
  3,426

  	
   

  	
  $

  	
  8.76

  	
   

  
	
  1/6/03

  	
   

  	
  1/5/13

  	
   

  	
  50,000

  	
   

  	
  $

  	
  .05

  	
   

  	
  8,564

  	
   

  	
  $

  	
  0.29

  	
   

  
	
  1/5/04

  	
   

  	
  1/4/14

  	
   

  	
  40,000

  	
   

  	
  $

  	
  .05

  	
   

  	
  6,851

  	
   

  	
  $

  	
  0.29

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  BIOSYN
  NON-PLAN OPTION

  	
   

  	
   

  	
   

  	
  ASSUMED
  BIOSYN OPTION

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Grant Date

  	
   

  	
  Option

  Expiration Date

  	
   

  	
  No. of
  Shares of

  Biosyn Common

  Stock

  	
   

  	
  Exercise
  Price

  per share

  	
   

  	
  No. of
  Shares of Cellegy

  Common Stock

  	
   

  	
  Exercise
  Price

  Per Share

  	
   

  
	
  6/1/95

  	
   

  	
  5/31/05

  	
   

  	
  60,000

  	
   

  	
  $

  	
  0.01

  	
   

  	
  10,277

  	
   

  	
  $

  	
  0.06

  	
   

  
	
  6/1/96

  	
   

  	
  5/31/06

  	
   

  	
  12,000

  	
   

  	
  $

  	
  0.01

  	
   

  	
  2,056

  	
   

  	
  $

  	
  0.06

  	
   

  
	
  12/31/97

  	
   

  	
  12/30/07

  	
   

  	
  10,000

  	
   

  	
  $

  	
  0.01

  	
   

  	
  1,713

  	
   

  	
  $

  	
  0.06

  	
   

  
	
  12/31/98

  	
   

  	
  12/30/08

  	
   

  	
  10,000

  	
   

  	
  $

  	
  3.00

  	
   

  	
  1,713

  	
   

  	
  $

  	
  17.52

  	
   

  
	
  12/31/98

  	
   

  	
  12/30/08

  	
   

  	
  20,000

  	
   

  	
  $

  	
  0.01

  	
   

  	
  3,426

  	
   

  	
  $

  	
  0.06

  	
   

  
																	

 

 

To exercise your assumed Biosyn Option(s), you must send to Cellegy at
the address listed on the attached Exercise Notice (i) an executed and
completed Exercise Notice for each Biosyn Option that you intend to exercise
and (ii) the full purchase price of the Cellegy common stock that you wish to
acquire upon exercise of the Biosyn Option in accordance with the Exercise
Notice.

 

                Please note
that pursuant to the terms of the Exchange, you will not be able to sell any
shares of Cellegy common stock that you acquire upon exercise of your assumed
Biosyn Options until January 20, 2005.

 

                If you have any questions about
your assumed Biosyn Option(s), please call Virginia Alsup at Cellegy at
650-616-2200.

 

	
  CELLEGY
  PHARMACEUTICALS, INC.

  
	
   

  
	
  /s/
  A. Richard Juelis

  
	
  A.
  Richard Juelis, 

  
	
  Chief
  Financial Officer

  

 

 

 

EXHIBIT A

 

NOTICE OF EXERCISE

(For Employees of Cellegy Pharmaceuticals, Inc.)

 

CELLEGY PHARMACEUTICALS,
INC.

 

Address:        349 Oyster Point Boulevard, Suite 200

                        South San Francisco, CA
94080

 

Attention: Corporate
Secretary

 

I
hereby elect to purchase the number of shares of Common Stock of CELLEGY
PHARMACEUTICALS, INC. (the “Company”) as set forth below:

 

	
  Option
  Holder:

  	
   

  	
   

  	
   

  	
  Number
  of Shares Purchased:

  	
   

  	
   

  
	
  Social
  Security Number:

  	
   

  	
   

  	
   

  	
  Purchase
  Price per Share:

  	
   

  	
   

  
	
  Address:

  	
   

  	
   

  	
   

  	
  Aggregate
  Purchase Price:

  	
   

  	
   

  
	
   

  	
   

  	
  Date
  of Option Agreement:

  	
   

  	
   

  
									

 

Type
of Option:

                o Incentive
Stock Option

                o Non-qualified
Stock Option

 

1.                                       Delivery
of Purchase Price.  Option
Holder hereby delivers to the Company the Aggregate Purchase Price, to the
extent permitted in the Stock Option Agreement (the “Option Agreement”) as
follows (check as applicable and complete):

 

o                                    in cash (by
check) in the amount of $                         ,
receipt of which is acknowledged by the Company;

 

o                                    through a “same-day-sale”
commitment, delivered herewith, from Option Holder and the NASD Dealer named
therein, in the amount of $                             .

 

2.                                       Lock-Up;
Legend.  Option Holder hereby agrees
that the Shares are subject to a lock-up agreement between the Company and
Option Holder and that Option Holder may not sell or otherwise transfer, or
enter into any agreement to sell or transfer, or enter into any other economic
arrangement that transfers to another, in whole or in part, any of the economic
consequences of ownership of the Shares (other than to donees of Option Holder
who agree to be similarly bound) prior to January 20, 2005.  Option Holder hereby agrees that the Company
may place appropriate restrictive legends on any stock certificates
representing the Shares and may impose stop-transfer instructions with respect
to the Shares to effect the foregoing.

 

3.                                       Tax
Consequences.  OPTION
HOLDER UNDERSTANDS THAT OPTION HOLDER MAY SUFFER ADVERSE TAX CONSEQUENCES AS A
RESULT OF OPTION 

 

 

                                                HOLDER’S
PURCHASE OR DISPOSITION OF THE SHARES. 
OPTION HOLDER REPRESENTS THAT OPTION HOLDER HAS CONSULTED WITH ANY TAX
CONSULTANT(S) OPTION HOLDER DEEMS ADVISABLE IN CONNECTION WITH THE PURCHASE OR
DISPOSITION OF THE SHARES AND THAT OPTION HOLDER IS NOT RELYING ON THE COMPANY
FOR ANY TAX ADVISE.

 

4.                                       Entire
Agreement.  The Option
Agreement and the Stock Option Assumption Agreement that was previously
delivered to Option Holder in connection with the Company’s acquisition of
Biosyn, Inc. (“Option Assumption Agreement”) are incorporated herein by
reference.  This Exercise Notice, the
Option Agreement and the Option Assumption Agreement constitute the entire
agreement and understanding of the parties and supersede in their entirety all
prior understandings and agreements of the Company and Option Holder with
respect to the subject matter hereof.

 

 

	
   

  	
   

  	
   

  
	
  Date

  	
   

  	
  Signature
  of Option Holder

  

 

 

Spousal Consent

 

 

I
acknowledge that I have read the foregoing Notice of Exercise (the “Notice”) and that I know its
contents.  I hereby consent to and
approve all of the provisions of the Notice, and agree that the shares of the
Common Stock of Cellegy Pharmaceuticals, Inc. purchased thereunder (the “Shares”) and any interest I may have
in such Shares are subject to all the provisions of the Notice.  I will take no action at any time to hinder
operation of the Agreement on these Shares or any interest I may have in or to
them.

 

	
   

  	
   

  	
   

  
	
  Date

  	
   

  	
  Signature
  of Optionee’s Spouse

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Spouse’s
  Name typed or printed

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Optionee’s
  Name typed or printedExhibit 10.09

 

[CONFIDENTIAL TREATMENT
REQUESTED] /*/ INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406
PROMULGATED UNDER THE SECURITIES ACT OF 1933, AS AMENDED.

 

 

TERMS AND CONDITIONS

 

for

ENGINEERING, PROCUREMENT AND

CONSTRUCTION MANAGEMENT SERVICES

 

Between

 

ACUSPHERE, INC. (“ACUSPHERE”)

 

and

 

PARSONS COMMERCIAL TECHNOLOGY INC. (“PARSONS”)

 

 

TABLE OF CONTENTS

 

	
  ARTICLE I

  	
  SCOPE OF SERVICES

  	
   

  
	
   

  	
  1.1

  	
  Description
  of Services

  	
   

  
	
   

  	
  1.2

  	
  Parsons Responsibilities

  	
   

  
	
   

  	
  1.2A

  	
  Independent
  Contractor

  	
   

  
	
   

  	
  1.3

  	
  Owner’s
  responsibilities

  	
   

  
	
   

  	
  1.4

  	
  Changes

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE II

  	
  COMPENSATION

  	
   

  
	
   

  	
  2.1

  	
  Contract Price

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE III

  	
  TERMS OF PAYMENT

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE IV

  	
  WARRANTIES AND
  GUARANTEES

  	
   

  
	
   

  	
  4.1

  	
  Engineering and
  Design Warranty

  	
   

  
	
   

  	
  4.2

  	
  Construction
  Warranty

  	
   

  
	
   

  	
  4.3

  	
  Third Party Warranty
  and Guarantee

  	
   

  
	
   

  	
  4.4

  	
  Limitations

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE V

  	
  INDEMNIFICATION

  	
   

  
	
   

  	
  5.1

  	
  Bodily
  Injury and Property damage Liability

  	
   

  
	
   

  	
  5.2

  	
  Protection of the
  Facilities

  	
   

  
	
   

  	
  5.3

  	
  Owner’s
  Equipment

  	
   

  
	
   

  	
  5.4

  	
  Limitations

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE VI

  	
  INSURANCE

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE VII

  	
  COMPLETION

  	
   

  
	
   

  	
  7.1

  	
  Scheduled
  Completion

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE VIII

  	
  TRANSFER AND
  ACCEPTANCE

  	
   

  
	
   

  	
  8.1

  	
  Care,
  Custody and Control

  	
   

  
	
   

  	
  8.2

  	
  Acceptance of the Services

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE IX

  	
  TERMINATION, CANCELLATION
  AND SUSPENSION

  	
   

  
	
   

  	
  9.1

  	
  Termination by Owner
  for Default

  	
   

  
	
   

  	
  9.2

  	
  Termination by
  Parsons for Default

  	
   

  
	
   

  	
  9.3

  	
  Termination for Convenience

  	
   

  
	
   

  	
  9.4

  	
  Suspension
  by Owner

  	
   

  
	
   

  	
  9.5

  	
  Rights
  upon Termination

  	
   

  

 

i

 

	
  ARTICLE X

  	
  SAFETY
  AND ENVIRONMENTAL

  	
   

  
	
   

  	
  10.1

  	
  Compliance
  with Laws

  	
   

  
	
   

  	
  10.2

  	
  Pre-Existing
  conditions

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE XI

  	
  FORCE
  MAJEURE

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE XII

  	
  INTELLECTUAL PROPERTY

  	
   

  
	
   

  	
  12.1

  	
  Title to Plans and
  Specifications

  	
   

  
	
   

  	
  12.2

  	
  Secrecy
  Agreements

  	
   

  
	
   

  	
  12.3

  	
  Patents

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE XIII

  	
  DISPUTE
  RESOLUTION (NEGOTIATION, MEDIATION AND LITIGATION)

  	
   

  
	
   

  	
  13.1

  	
  General
  Disputes

  	
   

  
	
   

  	
  13.2

  	
  Dispute
  Resolution

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE XIV

  	
  GENERAL PROVISIONS

  	
   

  
	
   

  	
  14.1

  	
  Independent
  Contractor

  	
   

  
	
   

  	
  14.2

  	
  Subcontracts

  	
   

  
	
   

  	
  14.3

  	
  Assignment

  	
   

  
	
   

  	
  14.4

  	
  Audit and
  Maintenance of Records

  	
   

  
	
   

  	
  14.5

  	
  Avoidance
  of Liens

  	
   

  
	
   

  	
  14.5A

  	
  Final Lien
  Waiver and Release of Claims

  	
   

  
	
   

  	
  14.6

  	
  Surplus
  Material

  	
   

  
	
   

  	
  14.7

  	
  Notices

  	
   

  
	
   

  	
  14.8

  	
  Representations and
  Remedies

  	
   

  
	
   

  	
  14.9

  	
  Damages

  	
   

  
	
   

  	
  14.10

  	
  Solicitation of Employment

  	
   

  
	
   

  	
  14.11

  	
  Interpretation

  	
   

  
	
   

  	
  14.12

  	
  Entire
  Agreement

  	
   

  
	
   

  	
  14.13

  	
  Security Interest
  in Major Equipment

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE XV

  	
  SPECIAL
  CONDITIONS AND CORRESPONDENCE/ INVOICING INSTRUCTIONS

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE XVI

  	
  TAXES, DUTIES AND FEES

  	
   

  
	
   

  	
   

  	
   

  
	
  EXHIBIT 1

  	
  Existing Contract Scope and
  Related Compensation

  	
   

  
	
  EXHIBIT 2

  	
  Compensation and Payment

  	
   

  
	
  EXHIBIT 3

  	
  Equipment List

  	
   

  

 

ii

 

TERMS AND CONDITIONS FOR

ENGINEERING, PROCUREMENT AND

CONSTRUCTION MANAGEMENT SERVICES

 

THIS
AGREEMENT (“Agreement”) for the performance of services is made effective as of
the 6th day of July 2004 between ACUSPHERE, INC., with
principal offices at 500 Arsenal Street, Watertown, Massachusetts 02472 (“Owner”)
and PARSONS COMMERCIAL TECHNOLOGY GROUP INC. (“PARSONS”), with principal
offices for this project located at 150 Federal Street, Boston, Massachusetts
02110.

 

This
Agreement establishes the terms and conditions for engineering, procurement and
construction management services to be provided by Parsons and describes the
responsibilities of both Parsons and Owner. It is understood and agreed that
these terms and conditions shall apply to existing work being performed by
Parsons for Owner, as described below, and that these terms and conditions may
be incorporated by reference into future agreements between Parsons and Owner
which agreements may be entered into as the scope of services for such services
becomes better defined.

 

IN
CONSIDERATION of the covenants hereinafter set forth, the parties hereto
mutually agree as follows:

 

ARTICLE I                                                                  SCOPE
OF SERVICES

 

1.1           Description of Services

 

Parsons shall perform engineering, procurement and
construction management services (hereinafter referred to as the “Services”)
which may be contracted for in connection with Owner’s aseptic pharmaceutical
manufacturing facility located at 890 East Street, Tewksbury, Massachusetts
(the “Facilities”).  Such Services may
include those specifically set forth and described in the Basis of Design
Report prepared by Parsons, the first revision of which was dated August 20,
2004 (the “BDR”) and as further defined and updated in the Proposal for
Engineering, Procurement and Construction Manufacturing Management Services
AI-700-301 Commercial Manufacturing Facility that was prepared by Parsons on September 3,
2004, as amended (the Proposal).

 

It is understood that the proposal made by Parsons to
Owner on September 8, 2004 represents a subset of the work under the September 3,
2004 proposal. Nothing contained in the terms and conditions of this Agreement
shall be construed to bind either party to any of the other work described in
the September 3, 2004 proposal or the September 8, 2004 proposal.
Work is authorized only to the extent that it is separately agreed to by Owner
and Parsons.

 

It is understood that Owner leases said Facilities but
that Owner shall own the majority of equipment added to, and improvements made
to, the facility.

 

1

 

1.2           Parsons Responsibilities

 

As
required for the Services contracted between the parties, Parsons shall (unless
otherwise provided herein) subject to the terms and provisions of this
agreement:

 

(a)   Furnish
supervisors, engineers, designers, draftsmen, and other personnel necessary for
the preparation of drawings and specifications;

 

(b)   Furnish buyers,
inspectors, expediters, and other personnel necessary to procure specified
equipment per the Proposal, as defined per Section 1.1, as Owner’s
purchasing agent;

 

(c)   Furnish
supervisors, foremen, skilled and unskilled labor, and all other personnel;
provided that, to the extent available, such personnel shall be individuals
with Parsons experience;

 

(d)   Procure or supply
machinery, equipment, materials, expendable construction items and supplies,
related services and contracts;

 

(e)   Prepare and
furnish a project schedule and cost estimate;

 

(f)    Obtain all
licenses required except for those specified to be obtained by Owner;

 

(g)   Supply the major
construction tools and equipment, and where not available, procure third party
construction tools and equipment, and supply small tools; and

 

(h)   Appoint an
individual who shall be authorized to act on behalf of Parsons and with whom
Owner may consult at all reasonable times, and whose instructions, requests,
and decisions will be binding upon Parsons as to all matters pertaining to this
Agreement and the performance of the parties hereunder. Parsons shall, upon
execution of the Agreement, advise Owner in writing of the name of the
individual referred to in the preceding sentence.

 

(i)    Comply, with
respect to applicable provisions specified and provided by Acusphere, with the
Owner’s Commercial Building Lease dated the 20th of July 2004 between
Acusphere, Inc. and 890 East LLC, of which Parsons has been separately provided
a copy.

 

(j)    Assist Acusphere
by providing required letter to Acusphere for notification to Massachusetts
Development Finance Agency (“MassDevelopment”), as reasonably requested by
MassDevelopment or Owner, when Owner has spent at least two million dollars
towards the improvement of the facility in connection with the Leasehold
Mortgage and Security Agreement dated 16th

 

2

 

of August 2004
between Acusphere, Inc. and MassDevelopment, of which Parsons has been
separately provided a copy, and not to intentionally do anything which would
cause Owner to not comply with its covenants under such agreement.

 

(k)   Install AI-700
manufacturing process equipment as supplied by Owner.

 

(l)    Allow access to
the work areas for personnel of the Owner and its agents, contractor and
subcontractors coordinated with Parsons Construction Manager prior to jobsite
entry. All Owner personnel, agents, contractors and subcontractors shall be
required to follow all Parsons safety requirements and training. This will
include such access as is needed to test, operate or maintain Owner’s AI-700
manufacturing process equipment within the Facility while work by Parsons is
ongoing in or around the same work areas.

 

(m)  Except as
necessary, refrain from entering parts of the Facility which are not being
modified as part of the Services such as the two-story office space section of
the building.

 

(n)   Clean-up, at its
own cost or the cost of its contractors, any non pre-existing hazardous waste,
hazardous materials, or pollutants generated at the facility or otherwise
introduced by Parsons or its contractors.

 

1.2A        Independent Contractor

 

(a)   Parsons is and
shall operate as an independent contractor in the performance of Construction
Management in regards to this Agreement and not as an agent or employee of
Owner, except with respect to the procurement, as Purchasing Agent of Owner, of
certain specified equipment.

 

(b)   Other than to the
extent Parsons shall place agency purchase orders for Owner, all Parsons’
subcontracts, supply agreements, and lease and rental agreements entered into
pursuant to this Agreement shall contain a provision expressly stating that no
contractual relationship exists between Owner and the Contractor, Supplier,
person, or entity with which Parsons has entered into a purchasing or
contracting relationship. It is understood that that forms of such agreements
will be consistent with the Parsons’ forms titled “Construction Subcontract
Agreement (LFI)”(Rev. L, July 1, 2003) or “Construction
Subcontract Agreement (SFI)” (Rev. K, July 1, 2003) for
construction services and that Parsons will not make any significant
modification to the terms of these contracts without notifying Owner in writing
and obtaining the written approval of an authorized representative of Owner.

 

It is
also understood that Parsons has and uses different contract forms for
consulting services, professional and non-professional services, as well as
other field services and that the obligations of the parties to such contract
agreements are appropriate to the nature of services to be provided and 

 

3

 

Parsons
shall use appropriate independent (non-agency) contract forms in place of
construction subcontract forms where appropriate provided that such forms do
not make any warranties or representations on behalf of Owner which are
inconsistent with the standard form LFI and SFI form examples that have been
provided to Owner.

 

To the
extent that Parsons places purchase orders with vendors, such purchase orders
shall only be placed with the express written approval of Owner and under forms
approved by Owner.

 

(c)   At all times,
Parsons shall be solely responsible for the means, methods, sequences, and
procedures for the performance of its work under this Agreement.

 

(d)   Parsons shall
accept responsibility for its agents, contractors, subcontractors, suppliers,
and all others it hires or engages to perform or assist in performing the work,
whether on or off the project site.

 

1.3           Owner’s Responsibilities

 

Unless
otherwise provided herein, the Owner shall at such times as may be required by
Parsons for the successful and expeditious completion of the Services (the “Services
of Owner”):

 

(a)   Provide a site for
the construction of the Facilities and suitable access thereto consistent with
a site logistics plan to be prepared by Parsons and reviewed by Owner
encompassing the building and parking lot, provide a reasonably adequate area
or areas for Parsons and other Contractor’s offices, warehouses, craft change
rooms, shop buildings, welding facilities, materials storage and lay down area,
employee parking, and furnish necessary construction utilities.

 

(b)   Obtain any process
and other licenses which are required for the Facilities, which are
specifically identified in the contract documents as being the responsibility
of Owner;

 

(c)   Take such steps
agreed to by Owner which are reasonably necessary and consistent with a
commissioning plan to be mutually developed and agreed to by Owner and Parsons
to start up the Facilities, including the AI-700 manufacturing process
equipment and maintenance thereof;

 

(d)   Pay all taxes
assessed against the Facilities;

 

(e)   Advise of the
existence and, except as provided for in the Proposal, undertake the abatement
and disposal of hazardous substances as defined in the Comprehensive
Environmental Response, Compensation and liability Act 

 

4

 

which
are encountered but not created by Parsons in the performance of the Services;

 

(f)    Provide Parsons
with all drawings, specifications and other required data necessary for the
completion of the Services for all Owner supplied equipment and Owner specified
equipment and on which Parsons shall rely, other than those to be supplied by
Parsons as part of the Services;

 

For
purposes of (f) above, it is understood that Owner supplied equipment consists
of AI-700 manufacturing process equipment as detailed on the equipment list
attached hereto as Exhibit 3, as may be amended from time to time, and
made a part hereof. Owner is responsible for the delivery of Owner supplied
equipment to the Facilities where it will be installed by Parsons, including
the mating of this equipment with facility systems, controls and utilities.
Additional Owner specified equipment consists of the [CONFIDENTIAL TREATMENT
REQUESTED] /*/. The installation of this equipment is currently not included in
the project. Parsons is responsible for the specifications for all other
equipment as detailed in Exhibit B referenced in Exhibit 3.  Should any additional equipment be required
that is not in Exhibit B, Owner and Parsons shall mutually agree in writing on
the responsibilities for designing, selecting, procuring, installing and
commissioning such equipment.

 

(g)   Appoint one or
more individuals who shall be authorized to act on behalf of Owner, with whom
Parsons may consult at all reasonable times, and whose instructions, requests,
and decisions will be binding upon Owner as to all matters pertaining to this
Agreement and the performance of the parties hereunder. It is understood that
Owner may appoint a different individual to approve change orders and other
actions, if any, which involve changes in financial consideration than the
individual appointed by Owner to address matters such as design assumptions and
project oversight.  Owner shall advise
Parsons in writing of the name(s) of the individual(s) referred to in the
preceding sentence. Unless otherwise stated by Owner in writing, the approval
of the Chief Financial Officer or Chief Executive Officer is required to
approve any change order or other action which potentially increases the
financial commitment that Owner makes to Parsons or any vendor or contractor
hereunder.

 

1.4           Changes

 

(a)   OWNER may,
through its authorized representative, without invalidating this Agreement,
order changes within the general Scope of Services required by this Agreement,
by altering, adding to, or deducting from the Services to be performed by
written order to Parsons (a “Change”). If any Change under this clause causes
an increase or decrease in Parsons cost of, or the time required for, the
performance of any part of the Services, an equitable adjustment shall be made
by mutual agreement, and this Agreement shall be 

 

5

 

modified
accordingly by issuance of a Change Order signed by the authorized
representatives of the Parties. In no event shall Parsons be obligated to perform
a Change, nor shall Owner be obligated to pay any increased amounts, or agree
to extend the time of performance, prior to mutual acceptance and execution of
a written Change Order.

 

(b)   If the Owner
issues any instruction which, in Parsons reasonable opinion, will increase the
time for performance or the cost of performing any of the Services, Parsons
shall be entitled to submit promptly a Request for Change Order to the Owner,
specifying the matters it believes entitle it to a Change Order.  The failure of Parsons to submit promptly
(and in no event later than 10 days after such instruction or matter becomes
known) a Request for Change Order to the Owner shall constitute a waiver of
Parsons’ right to submit a claim based on such instruction or matters.

 

(c)   If either party
disputes the existence, extent, validity or effect of a Change, then either
party may notify the other party that it desires to meet and resolve the
dispute. If the dispute cannot be resolved to the mutual satisfaction of the
parties within ten (10) business days, then either party can demand resolution
in accordance with Article XIII titled, “Dispute Resolution (Negotiation,
Mediation and Litigation).”

 

ARTICLE II                                 COMPENSATION

 

2.1           Contract Price

 

Prior
to entering into this Agreement, Parsons commenced work for Owner based on a
series of incremental agreements. Such work, and the estimated costs of such
work, is described in Contract Work (Form 1) Authorization No. 1 and Contract
Work (Form 2) Authorization No. 1 as dated concurrently herewith.  All work under such forms incorporate by
reference the terms and conditions hereunder and such work, including the work
described in the prior agreements referenced by such forms, are subject to
these terms and conditions as these terms and conditions supercede the prior
terms and conditions for such work. It is anticipated that the Owner and
Parsons may expand the contract scope through future Contract Work
Authorizations and that such future Contract Work Authorizations will also
incorporate the terms and conditions hereunder.

 

ARTICLE III          TERMS
OF PAYMENT

 

To the
extent that Owner and Parsons have in the past, or do in the future, enter into
Contract Work Authorizations for work to be performed which agreements
incorporate the terms and conditions hereunder, the Owner shall make payments
to Parsons in accordance with the terms of payment specified in Exhibit 2
attached titled “Compensation and Payment.”

 

6

 

ARTICLE IV
WARRANTIES AND GUARANTEES

 

4.1           Engineering and Design Warranty

 

Parsons
warrants it will perform its engineering and design services (“Engineering
Services”) in accordance with the current standards of care and diligence
normally practiced by recognized engineering firms in performing services of a
similar nature. If during the one (1) year period following acceptance of the
Services pursuant to section 8.2 it is shown that there is an error or
omission in the Engineering Services as a result of Parsons failure to meet
those standards and Owner has notified Parsons in writing of any such error
within that period, Parsons shall reperform such Engineering Services within
the original scope of Services as may be necessary to remedy such error. All
costs incurred by Parsons in performing such corrective engineering and design
services shall be to the account of Parsons. 
It is understood and agreed that time is of the essence with respect to
the correction of any such error or omission.

 

The
contents of 4.1 above do not remove or limit the Owner’s right to make a claim
for damages as otherwise provided in the terms and conditions of this document.

 

4.2           Construction Warranty

 

Parsons
warrants it will perform its construction management and other Services not
described in Section 4.1 hereinafter (“Construction Management Services”)
in accordance with the current standards of care and diligence normally
practiced by recognized construction management firms in performing services of
a similar nature and that such Construction Management Services shall be free
from material defects in workmanship. If during the one (1) year period
following acceptance of the Services pursuant to Section 8.2 it is shown
that there is an error in the Construction Management Services as a result of
Parsons failure to meet those standards and Owner has notified Parsons in
writing of any such error within that period, Parsons shall reperform such
Construction Management Services within the original scope of Services as may
be necessary to remedy such error. All “incremental costs” incurred by Parsons
in performing such corrective services shall be reimbursable in accordance with
Exhibit 2 attached hereto, but no fee shall be paid on such corrective
services.  It is understood and agreed
that time is of the essence with respect to any such corrective service.

 

The
contents of 4.2 above do not remove or limit the Owner’s right to make a claim
for damages as otherwise provided in the terms and conditions of this document.

 

7

 

4.3           Third Party Warranty and Guarantee

 

Parsons
will, for the protection of Owner, demand from all Vendors and Contractors from
which Parsons procures machinery, equipment or materials or services,
warranties and guarantees with respect to such machinery, equipment, materials
or services, which shall be made available to Owner to the full extent of the
terms thereof.  Parsons responsibility
with respect to machinery, equipment and materials or services obtained from
Vendors or Contractors shall be limited to rendering all reasonable assistance
to Owner for the purpose of enforcing the same. 
All costs incurred by Parsons in performing such Services shall be
reimbursable in accordance with Exhibit 2 attached hereto, except that it is
understood that with respect to costs incurred by subcontractors in connection
with warranties and guarantees that Parsons will ensure that all such costs are
born by the subcontractors or otherwise not seek reimbursement from Owner for
such costs.

 

4.4           Limitations

 

Parsons
shall have no warranty obligation or liability for defects in the Services to
the extent (a) the warranty claim is attributable primarily to Parsons reliance
upon or use of data, design criteria, drawings, specifications or other
information furnished by Owner in connection with Owner supplied equipment or
Owner specified equipment as described in Section 1.3, which may be
amended from time to time, (b) Owner failed to properly operate and maintain
the Facilities, and (c) Owner fails to provide Parsons an opportunity to
promptly make such tests and perform such remedial services as Parsons
reasonably deems appropriate.

 

ARTICLE V           INDEMNIFICATION

 

5.1           Bodily Injury and Property Damage
Liability

 

Parsons
will indemnify, defend and hold Owner harmless from any and all claims,
liabilities, and causes of action for bodily injury to or death of any person,
or for damage to or destruction of property (excluding, however, the property
referred to in Section 5.2 and 5.3) to the extent resulting from the
physical acts or negligence of Parsons in the performance of the Services.

 

5.2           Protection of the Facilities

 

Except
as otherwise provided in Section 5.1, Parsons will be responsible for and
obligated to replace, repair, or reconstruct, and to furnish any material,
equipment, or supplies furnished by Parsons which are lost, damaged, or
destroyed due to Parsons negligence or acts prior to transfer of care, custody,
and control of the facilities or the affected portion thereof to Owner. Owner
assumes all responsibility for such loss, damage, or destruction after such
transfer of care, custody, and control to Owner unless caused by Parsons acts
or negligence.

 

8

 

5.3           Owner’s Equipment

 

As
between Parsons and Owner, Owner assumes responsibility and risk for all loss
of or damage to specified equipment purchased by Owner with respect to which
title has transferred to Owner, property owned by or in the custody of Owner,
unless caused by Parsons or Parsons subcontractor’s negligence or willful
misconduct, however such loss or damage shall occur, and agrees to maintain
property damage insurance fully covering said property from such risk and,
except in the event of negligence or willful misconduct on the part of Parsons
or one or more of Parsons’ subcontractors, does hereby and shall cause its
insurers to waive rights of subrogation against Parsons and its vendors and
subcontractors of any tier under such insurance of Owner.

 

5.4           Limitations

 

Parsons
shall have no obligation to Owner with respect to any damage or loss to
property caused by the perils of war, insurrection, revolution, nuclear
reaction, or other like perils as may be excluded under the limits of the
insurance coverage provided pursuant to Article VI.  Parsons liability with respect to loss,
damage or injury shall not exceed the limits of the insurance coverage called
for pursuant to Article VI.

 

ARTICLE VI                             INSURANCE

 

Before
commencing the Services, Parsons shall, at its own cost and expense, purchase
and maintain the following insurance:

 

•      Worker’s
Compensation coverage as required by law.

 

•      Employer’s
Liability with limits of $1,000,000 per occurrence.

 

•      General
Liability coverage for damages as a result of death or bodily injury
(including personal injury) to any persons or destruction or damage to any
property with limits of $5,000,000 per occurrence.  Such coverage shall include, but not be
limited to:

 

a)     Contractual
Liability

 

b)    Products
Liability including Completed Operations

 

c)     Premises
Operations

 

d)    Broad form Property
damage (including X, C, U as applicable)

 

e)     Personal Injury
Liability

 

9

 

•      Automobile
Liability Insurance as a result of death or bodily injury to any persons or
destruction or damage to any property arising out of the ownership, maintenance
or use of any motor vehicle with combined single limits of $1,000,000.

 

•      Excess
Liability insurance over the aforementioned coverage’s in the amount of
$5,000,000.

 

•      Professional
Liability Insurance.  Parsons shall maintain
Professional Liability Insurance with limits of $5,000,000 per claim and
general aggregate for claims arising from the negligent performance of
professional Services under this Agreement.

 

Parsons
insurance required herein shall be primary to any similar insurance carried by
Owner.  The above insurance policies
(excluding professional liability and worker’s compensation) shall include
Owner as an additional insured, but only to the extent of the named insured’s
negligence.

 

Furthermore,
Parsons will ensure that any and all Contractors managed by Parsons shall have
adequate insurance coverage for workers compensation, employers liability,
general liability, automobile liability, excess liability and professional
liability consistent with the terms described above with the understanding that
such Contractors may have limits of $1,000,000 per occurrence for general
liability insurance and $1,000,000 per claim for professional liability
insurance and be considered to have reasonable insurance coverage provide that
they have excess liability insurance of at least $5,000,000.

 

All
required coverage shall provide 30 days written notice of any material change
or cancellation.  Prior to commencement
of any Services, Parsons shall furnish certificates of insurance evidencing the
above coverage.

 

Owner
shall purchase and maintain property insurance upon the entire Project, which
project amount excludes the cost of the building which is understood to be
insured by the landlord, for the full cost of replacement as of the time of any
loss. This insurance shall include as named insureds Owner and shall insure
against loss from the perils of Fire, Extended Coverage, and shall include “All
Risk” insurance for physical loss or damage including, without duplication of
coverage, at least theft, vandalism, malicious mischief, transit, collapse,
flood, and earthquake. Owner and Parsons waive all rights against each other,
the Subcontractors, and their Sub-Subcontractors for damages caused by perils
covered by insurance provided under this paragraph. Parsons shall require
similar waivers from all Subcontractors and their Sub-Subcontractors. Nothing
in these waivers shall waive any party of their responsibilities with respect
to damage caused by their respective acts or negligence.

 

10

 

ARTICLE VII        COMPLETION

 

7.1           Scheduled Completion

 

Time
is of the essence.  Parsons shall
commence the Services as agreed after the date of this Agreement and shall
prosecute the services on a best efforts basis continuously and with due
diligence in accordance with the schedule provided in the September 3,
2004 Proposal.

 

As
soon as the Facilities, or any part thereof, is in the opinion of Parsons
mechanically complete and ready for initial start-up operation, Parsons shall
so notify the Owner by means of a Construction Completion Report. This report
shall state which parts of the Facilities Parsons proposes to demonstrate
(meaning to prove or make evident by reasoning or adducing evidence) have been
mechanically completed in accordance with this Agreement and have passed such
tests as may have been required of Parsons under the Agreement. Parsons shall
propose a program for such demonstrations commencing within a reasonably prompt
timeframe after the date of the notice. Mechanical Completion and the term “mechanically
complete” shall mean that all components of the Facilities have been properly
installed in accordance with applicable drawings and specifications, and the
Facilities are demonstrated to be ready for reasonable initial startup

 

The
responsibilities of Parsons and Owner in demonstrating the initial startup of
such Facilities, or parts thereof, shall be defined in a Commissioning Plan
which will be mutually agreed to by Parsons and Owner.

 

Upon
the reasonably satisfactory completion of such demonstration, Parsons and the
Owner shall sign the Construction Completion Report, stating that Parsons has
demonstrated to the Owner that the Project or part thereof is mechanically
complete and in a condition such that any procedures needed before the
Facilities or part thereof is put into operation may safely be carried out.
Such Construction Completion Report may include a reasonable punchlist of items
requiring completion before the Acceptance of the Services. Mechanical
Completion shall not be achieved if the punchlist includes substantial items
which would hinder the Owner from operating in the space or which would be
difficult to correct due to environmental or other requirements, such as can
exist in connection with cleanrooms.

 

Mechanical
completion is further defined by the mechanical completion checklist. A draft
of which checklist is included with Parsons September 3, 2004 Proposal as
Attachment C.

 

11

 

ARTICLE VIII       TRANSFER
AND ACCEPTANCE

 

8.1           Care,
Custody and Control

 

Mechanical
completion will be achieved on a system-by-system basis. Mechanical completion
shall be deemed to have occurred upon the Owner’s signing of the Construction
Completion Report for that system, and the care, custody, and the control of
the subject system or relevant part thereof shall pass to Owner. In any event,
the care, custody, and control of the Facilities or part thereof shall pass to
Owner no later than the time when Owner takes physical possession thereof. From
and after the date of the transfer of the care, custody, and the control of the
Facilities or part thereof, Owner shall assume all risks of physical loss or
damage thereto and shall, excluding damage caused by the acts of Parsons or its
subcontractors, and does hereby, release Parsons from and Owner will and shall
cause its insurers to waive rights of subrogation against Parsons and its
Vendors and Subcontractors of any tier for such loss or damage to the Facilities
which may thereafter occur, unless and to the extent that damage resulting
within three years of such transfer of control can be shown to have resulted
from the faulty workmanship or negligence of Parsons or its Vendors or
Subcontractors.

 

8.2           Acceptance of the Services

 

When
Parsons deems it has completed all the Services, it shall so notify Owner in
writing. Within fifteen (15) days thereafter, Owner shall advise Parsons in
writing of any deficiencies or defects in the Services for which Parsons is responsible
under this Agreement. As soon as any such deficiencies or defects are
corrected, Owner shall accept the Services in writing.  In the event Parsons and the Owner disagree
as to deficiencies or defects in the Services, the matter will be subject to dispute
resolution under this Agreement.

 

ARTICLE IX                            TERMINATION,
CANCELLATION AND SUSPENSION

 

9.1           Termination by Owner for Default

 

Should
Parsons become insolvent or bankrupt, or should Parsons commit a substantial
breach of a material provision of this Agreement, and should Parsons thereafter
fail to commence actions in good faith to remedy such breach within ten (10)
days after written demand by Owner or Parsons is unable to correct such breach
within thirty (30) days, Owner may terminate this Agreement and enter upon the
premises and take possession thereof and at the same time instruct Parsons to
remove from the premises all of its tools, equipment, and supplies, or Owner
may take possession of any and all of such tools, equipment, and supplies, for the
purpose of completing the Services. Upon any such termination, Parsons shall be
compensated for all costs incurred and Services satisfactorily performed under
any agreement that incorporates these terms, plus the earned portion of the Fee
provided for under any agreement that incorporates 

 

12

 

these
terms, less Owner’s reasonable costs incurred to remedy such breach and remove
Parsons. In the event that Owner uses any of Parsons equipment or tools, Owner
shall return the same to Parsons in good condition and repair, reasonable wear
and tear excepted, and shall pay Parsons for the use thereof as provided
hereunder or under any agreement that incorporates these terms.

 

9.2           Termination by Parsons for Default

 

Should
Owner become insolvent or bankrupt or commit a substantial breach or default of
a material provision of this Agreement and (a) fails to remedy the same within
ten (10) days after written notice thereof from Parsons if the breach
constitutes a failure to pay money, or (b) fails to commence actions to remedy
the same within ten (10) days after written notice thereof from Parsons and
thereafter to proceed diligently in remedying the same if the breach is other
than to pay money, then Parsons may, at its option, suspend performance or
terminate this Agreement. Should Parsons so suspend or terminate this
Agreement, it shall be paid for all reasonable costs incurred and Services
performed to the date of suspension/termination in accordance with the provisions
of Exhibit 2, including any reasonable cancellation charges by Vendors and
Subcontractors, and the cost of all reasonable standby and
demobilization/remobilization expenses plus the earned portion of the Fee
provided for hereunder or under any agreement that incorporates these terms.

 

9.3           Termination for Convenience

 

Owner
reserves the right to terminate the Services for Owner’s convenience upon no
less than thirty (30) days notice in writing to Parsons. Should the Services be
so terminated by Owner, Parsons shall be paid for all costs incurred to date of
termination and through demobilization in accordance with the terms hereunder
or under any agreement that incorporates these terms, including any
cancellation charges by Vendors and Subcontractors, in accordance with the
provisions of Article II, and the earned portion of the Fee provided for
in Exhibit 2.

 

9.4           Suspension by Owner

 

Owner
reserves the right to suspend the Services upon ten (10) days’ written notice
to Parsons, unless Parsons agrees in writing to a shorter notice period. Should
the Services be so suspended, Parsons shall be paid for all reasonable costs
incurred in accordance with the terms hereunder or under any agreement that
incorporates these terms and Fee earned for Services performed to the date of
suspension and through demobilization, including any reasonable suspension or
cancellation charges by Vendors and Subcontractors. When a suspension equals or
exceeds ninety (90) days in the aggregate, Parsons may elect to treat such
suspension as a cancellation for Convenience of Owner pursuant to Section 9.3.

 

13

 

9.5           Rights Upon Termination

 

For
avoidance of doubt, except in the event that Services are terminated under Section 9.2
and Owner fails to compensate Parsons for all Services rendered in accordance
with Exhibit 2, Owner shall have the right to resume construction within the
facility at any time without Parsons provided, however, that such resumption of
construction without Parsons shall not limit Owner’s responsibilities for
compensating Parsons in full, in accordance with the terms specified in Exhibit
2, for Services rendered through the date at which the Services were rendered
by Parsons.  In such circumstances,
Parsons agrees not to take any action which would prevent Owner from continuing
construction.  If requested by Owner, in
conjunction with such termination, Parsons agrees to assist Owner in its
transfer of the work hereunder to another construction management company
provided that Owner agrees to pay Parsons for its time and expenses in a manner
which is consistent with Exhibit 2, excluding the 3% fee to Parsons on any
such transfer-related work.  In such
circumstances, Parsons agrees to use its commercial best efforts to assist in
such transfer.

 

ARTICLE X           SAFETY AND
ENVIRONMENTAL

 

10.1         Compliance with Laws

 

(a)   Parsons shall
design the Facilities so they comply with all applicable laws, including,
without limitation, state and federal Occupational Safety and Health Acts (“OSHA”),
and with applicable environmental laws, rules and regulations in force at the
Effective Date of this Agreement.

 

(b)   Parsons
shall perform its Services in accordance with applicable laws, rules,
regulations and orders relating to environmental concerns or safety and shall
require each vendor, subcontractor and contractor to have an appropriate safety
program covering their employees;

 

(c)   From and after
transfer of care, custody and control of the Facilities or part thereof, Owner
assumes responsibility for compliance by the Facilities or portion thereof with
applicable safety and environmental laws, rules and regulations and orders.

 

10.2         Pre-Existing Conditions

 

(a)   Owner warrants it
has disclosed or it shall immediately disclose as information becomes available
(i) any and all reports, test results, public records and other sources of
information known to Owner which show areas of contamination at the site and
(ii) all other information known by Owner relevant to the site.  Anything herein to the contrary
notwithstanding, title to, ownership of, and legal responsibility and liability
for any and all pre-existing and undisclosed contamination shall at all times
remain with Owner.  

 

14

 

“Contamination”
is any hazardous materials or toxic substance, pollutant or contaminant (as the
same may be defined under any applicable law) present at the job site, which
has not been introduced to the site by Parsons or its subcontractors.

 

(b)   Owner shall, at
Owner’s sole expense and risk, arrange for the handling, storage,
transportation, treatment and delivery for disposal of pre-existing and
undisclosed Contamination. Owner shall be solely responsible for obtaining a
disposal site for such material. Owner shall look to the disposal facility
and/or transporter for any responsibility or liability arising from improper
disposal or transportation of such waste. Parsons shall not have or exert any
control over Owner in Owner’s obligations or responsibilities as a generator in
the storage, transportation, treatment or disposal of any hazardous materials
or contamination not created or caused by Parsons. Owner shall complete and
execute any required governmental forms relating to regulated activities of the
Owner, including, but not limited to, generation, storage, handling, treatment,
transportation, or disposal of pre-existing hazardous materials generated or
handled by Owner.  Owner shall defend,
indemnify and save Parsons harmless from all damages, penalties, and other
costs and liabilities resulting from hazardous materials generated or handled
by Owner.

 

ARTICLE XI                   FORCE
MAJEURE

 

Any
delays in or failure of performance by Owner or Parsons, other than payment of
money, shall not constitute a default hereunder if and to the extent such
delays or failures of performance are caused by occurrences beyond the
reasonable control of Owner or Parsons, as the case may be, including but not
limited to: acts of God or the public enemy; expropriation or confiscation of
facilities; act of war (declared or undeclared), hostilities or acts of
terrorism; rebellion or sabotage or damage resulting therefrom; riots or
strikes or other concerted acts of workmen, whether direct or indirect; or any
causes, whether or not of the same class or kind as those specially above
named, which are not within the control of Owner or Parsons respectively, and
which by the exercise of reasonable diligence, Owner or Parsons , respectively,
is unable to prevent (“Force Majeure”). Parsons Scheduled Completion Date shall
be adjusted in accordance with Changes Article 1.4 to account for any
Force Majeure delay and Parsons shall be reimbursed by Owner in accordance with
Exhibit 2 for all costs incurred in connection with or arising from a Force
Majeure event, including, but not limited to, those costs incurred in the
exercise of reasonable diligence to avoid or mitigate a Force Majeure event.

 

Parsons
shall notify Owner within 10 days of a Force Majeure occurrence or as soon
thereafter as practical.

 

15

 

ARTICLE XII                  INTELLECTUAL
PROPERTY

 

12.1         Title to Plans and Specifications

 

Drawings
and specifications prepared by Parsons or others pursuant to this Agreement
(hereinafter “Documentation”) shall be the property of Owner. . In the event
Owner uses such information for any future projects, Owner shall defend,
indemnify and hold Parsons harmless from and against any costs (including
attorney’s fees and costs of suit) and liabilities arising out of claims or
suits asserted against Parsons even if such claims or suits are based on
allegations of negligence of Parsons. Parsons agrees that at the completion of
its services hereunder, or at any time upon the request of Owner, that it will
provide Owner with a complete set of all existing design and engineering plans
and drawings related to the project.

 

12.2         Secrecy Agreements

 

Any
written agreements between Parsons and Owner entered into prior to the
effective date hereof relating to secrecy or confidentiality of information
exchanged between Parsons and Owner shall be deemed incorporated herein by
reference as if fully set forth in this Agreement.

 

12.3         Patents

 

Parsons
agrees to include, as a term or condition of each purchase order for equipment
issued by it in the performance of the Services, a patent indemnification
provision extending from the vendor under such purchase order to owner and
Parsons and to render such assistance to Owner as may be reasonably required on
a reimbursable cost basis to enforce the terms of such indemnification by
vendors.

 

ARTICLE XIII                DISPUTE RESOLUTION- (NEGOTIATION,
MEDIATION AND LITIGATION)

 

13.1         General Disputes

 

In the
event of a dispute between the parties, arising under or relating to this
Agreement which cannot be amicably resolved the following shall apply:

 

13.2         Dispute Resolution

 

(a)   Claims, disputes
or other matters in question between parties to this Agreement arising out of
or relating to Agreement or breach thereof shall be subject to and decided by
negotiation prior to mediation, followed by litigation only if necessary to
resolve the matter.  Such mediation shall
be conducted in accordance with Construction Industry Mediation Procedures of
the American 

 

16

 

Arbitration
Association, or other mutually-agreeable alternative dispute resolution
provider.

 

(b)   Prior to
litigation, the parties shall endeavor to settle disputes by mediation.  Demand for mediation shall be filed in
writing with the other party to this Agreement within a reasonable time after
claim, dispute, or other matters in question have arisen.  In no event shall the demand for mediation be
made after the date when institution of legal or equitable proceedings based on
such claim, dispute or other matter in question would be barred by the
applicable statutes or repose or limitations.

 

ARTICLE XIV                GENERAL
PROVISIONS

 

14.1         Independent Contractor

 

Parsons
shall perform the Services as an independent contractor, except that contracts
or purchase orders for equipment mutually-specified by Owner and Parsons may be
issued by Parsons as purchasing agent for Owner.

 

As a
Purchasing agent of Owner with respect to purchases of mutually-specified
equipment, Parsons will not make any representations which are not consistent
with those defined in the Procurement Procedures Manual established between the
Owner and Parsons.  In addition, Parsons
will not place any orders for materials or equipment on Owners’ behalf, or make
any other commitments on the Owners’ behalf, without the express written approval
of an authorized representative of the Owner with respect to the placement of
such order or the making of such commitment. Parsons agrees to maintain
complete records of all such orders and commitments and to make such records
available to Owner upon request.

 

14.2         Subcontracts

 

Parsons
may subcontract any portion of its Services to a Subcontractor, subject to
approval by Owner, which approval shall not be unreasonably withheld. Except as
otherwise provided in this Agreement, in no case shall Owner’s approval of any
subcontract relieve Parsons of any of its obligations under this Agreement.
Notwithstanding the above, Parsons may have portions of the Services performed
by its affiliated entities or their employees, in which event Parsons shall be
responsible for such Services and Owner will look solely to Parsons as if the
Services were performed by Parsons.

 

14.3         Assignment

 

This
Agreement shall not be assignable by either party without the prior written
consent of the other party hereto, except that it may be assigned without such
consent to the successor of either party, or to a person, firm, or corporation 

 

17

 

acquiring
all or substantially all of the business assets of such party or to a wholly
owned subsidiary of either party, but such assignment shall not relieve the
assigning party of any of its obligations under this Agreement.  Any attempted assignment without such consent
shall be null and void.  No assignment of
this Agreement shall be valid until this Agreement shall have been assumed by
the assignee. When duly assigned in accordance with the foregoing, this
Agreement shall be binding upon and shall inure to the benefit of the assignee.

 

14.4         Audit and Maintenance of Records

 

Parsons’
work hereunder shall be done on an “open book” basis.  As such, Parsons will periodically, and any
time upon Owners’ request, provide Owner with a summary of all actual costs
incurred, all costs committed, all disputes and other matters associated with
actual or potential costs hereunder.

 

Owner
shall have the right to audit and inspect Parsons records and accounts covering
costs hereunder at all reasonable times during the course of the Services and
for a period of one (1) year after the acceptance thereof pursuant to Section 8.2
provided, however, the purpose of any such audit shall be only for verification
of such costs and that Parsons shall not be required to keep records of or
provide access to those of its costs covered by Fee, allowances, fixed rates,
or of costs which are expressed in terms of percentages of other costs.

 

To the
extent that Parsons has an audit or review performed of its actual costs or
estimated costs hereunder by any third-party consultant, accountant, government
entity or other party, Parsons will share the results of such audit or review
with Owner.

 

14.5         Avoidance of Liens

 

Upon
receipt of payment from Acusphere, Parsons shall at all times promptly pay for
all services, labor, equipment, and supplies used or furnished by Parsons or
any contractor, subcontractor, materialmen, or suppliers under this Agreement
and, to the fullest extent permitted by applicable law, shall keep the property
and project site and all property belonging to Owner and its Landlord free and
clear of any and all liens and rights of lien arising out of services, labor,
or goods furnished by Parsons or its employees, contractors, subcontractors, or
suppliers, in the performance of the work. 
Parsons shall immediately comply with Owner’s request for partial lien
waivers from contractors, subcontractors, and suppliers in format permitted by
law and acceptable to Owners.  If Parsons
fails to release and discharge any such lien or claim of lien that Parsons has
previously been paid by Acusphere for against the project site or the property
of Owner or its Landlord arising out of performance of the work within seven
(7) working days after receipt of written notice from Owner to remove such lien
or claim of lien, Owner may, at its option, discharge or release the lien or
claim of lien or otherwise deal with the lien claimant, and Parsons shall pay
Owner any 

 

18

 

reasonable
costs and expenses incurred by Owner in so doing, including reasonable
attorneys’ fees and court costs so incurred.

 

14.5A      Final Lien Waiver and Release of Claims

 

Owner
shall not be obligated to make final payment to Parsons until Parsons has
delivered to Owner a Final Lien Waiver and Release of Claims satisfactory to
Owner certifying:  (a) that Parsons
has fully performed under this Agreement and that all claims of Parsons for the
Work are satisfied upon the making of such final payment; (b) that no
property of Owner or other property used in connection with the Agreement is
subject to any unsatisfied lien or claim as a result of the performance of the
Agreement; (c) that all rights of lien against Owner’s property in
connection with the Agreement are released (including, without limitation, if
Owner requests, final releases of lien satisfactory in form to Owner and
executed by all persons who by reason of furnishing services, labor, or other,
for the Work are potential lienors against Owner’s property); and d) that
Parsons will have paid in full all outstanding obligations against the work
promptly upon receipt of final payment.

 

14.6         Surplus Material

 

Parsons
shall use reasonable care to limit the amount of surplus materials procured for
the Facilities. It is understood, however, that in performing work of the scope
and complexity of the Services, it is necessary and inevitable that certain
surplus materials be purchased. The purchase price and transportation costs of
such surplus materials shall be considered costs of the Services to the same
extent as any materials actually incorporated into the Facilities. Parsons
shall, as soon as it is feasible to do so, determine and advise Owner what
materials are surplus materials and thereafter shall dispose of such materials
as directed by Owner, and the cost of the Services shall be for the Owner’s
account and paid to Parsons with Fee.

 

14.7         Notices

 

All
notices pertaining to this Agreement shall be in writing and, if to Owner,
shall be sufficient when sent registered or certified mail or telecopied (with
oral confirmation) to Owner at the following address:

 

Acusphere,
Inc.

Attn:
Chief Financial Officer

500
Arsenal Street

Watertown,
MA 02472

Tel:
617-648-8800

Fax:
617-926-3605

 

19

 

All
notices to Parsons shall be sufficient when sent registered or certified mail
or telecopied (with oral confirmation) to Parsons to the following address:

 

Gary
McKiernan

Parsons
Commercial Technology Group Inc.

150
Federal Street

Boston,
MA 02110-1713

Tel:
617-449-1280

Tel:
617-449-9777

 

14.8         Representations and Remedies

 

Parsons
makes no representations, covenants, warranties, or guarantees, express or
implied, other than those expressly set forth herein. The parties’ rights,
liabilities, responsibilities and remedies with respect to the Services shall
be exclusively those expressly set forth in this Agreement.

 

14.9         Damages

 

(a)   Neither party
shall be responsible or held liable to the other for consequential, incidental,
special or indirect damages, including without limitation, liability for loss
of use of the facilities or Owner’s existing property, loss of profits,
interest, product or business interruption, increased costs of operations and
maintenance or staffing needs, however the same may be caused.

 

(b)   Owner hereby
releases, indemnifies and agrees to hold Parsons harmless from any liability
arising from the ownership, use or operation of the facilities, or any part
thereof, subsequent to the transfer of care, custody and control as provided in
Article VIII to Owner, except only as provided in Articles IV and V.

 

(c)   If Owner is not
the sole owner of the Facilities or existing property at or adjacent to the
jobsite, or if the Facilities are to be owned or operated by a person or entity
other than Owner, Owner shall obtain waivers and/or releases from the other
owners or operators thereof sufficient to provide to Parsons the same
protection from liability for loss or damage that would be afforded to Parsons
under this Agreement as if the Owner were the sole owner or operator. As an
alternative, Owner shall protect and indemnify Parsons from any and all
liability to the facility Owner’s and operators to the same extent afforded
Parsons by the Owner herein.

 

(d)   It is understood
and agreed that Parsons, acting on behalf of Owner, and after securing approval
of costs per bid tabs provided by Parsons to Owner, may place Purchase Orders
as Agent and Contracts, Subcontracts, Service Agreements, Rental Agreements
and/or Lease Agreements as Construction Manager in conjunction with work
required herein. It is also understood that from time to time Vendors,
Suppliers, Contractors, Subcontractors, Service 

 

20

 

Providers,
Rental Companies and/or Leasing Companies may become involved in disputes with
Parsons as a result of goods being furnished or services being provided.

 

In the
event any such dispute arises causing Parsons to incur any negotiation,
mediation, arbitration and/or legal expenses in conjunction with such dispute,
the following shall apply:

 

a)    
Situations where Parsons is pursuing a vendor or subcontractor: 
Provided that the costs are reasonable and provided that Acusphere approves
such pursuit in advance and can elect to discontinue such pursuit via Parsons
at any time, Acusphere will pay Parsons their costs incurred in such pursuit.

 

b)    
Situations where Parsons is pursued by a vendor or subcontractor:

 

i)              If
Acusphere and Parsons agree that their was no negligence or willful misconduct
or obvious mismanagement on the part of Parsons and if Acusphere and Parsons
agree that the dispute relates solely to the project for which Parsons is
working with Acusphere (as opposed to some feud that carries over from another
job), Acusphere will pay Parsons reasonable costs, including costs incurred by
Parsons for negotiation, mediation, arbitration, legal services and judgments
awarded to other parties, provided that Acusphere has complete control over the
right to settle the dispute with the vendor or subcontractor and provided that
Acusphere has the right to take over the defense of such matter if Acusphere so
elects.

 

ii)             If
Acusphere and Parsons agree that the dispute results from prior experience
between Parsons and the vendor or subcontractor or results from Parsons’
negligence or willful misconduct or mismanagement, Parsons will be responsible
for all such costs.

 

iii)            If
Acusphere and Parsons cannot agree on who is responsible, Acusphere and Parsons
will seek a mediator to determine whether the circumstances dictate that (i) or
(ii) is the right course or whether such costs should be shared by Acusphere
and Parsons.

 

It is
understood that Owners’ agreement to reimburse Parsons for costs in certain
circumstances relating to disputes is an agreement between Owner and Parsons
only and that Parsons will not make any representation to any subcontractor that
Owner will reimburse such costs for subcontractors unless Parsons is
specifically authorized to do so in writing by Acusphere.

 

21

 

14.10       Solicitation of Employment

 

Neither
party shall, whether during the term of this Agreement or for a period of 180
days thereafter, directly or indirectly for itself or on behalf of, or in
conjunction with, any other person, partnership, corporation, business or
organization, solicit, hire, contract with or engage the employment of an
employee of the other with whom that party or its personnel have had contact in
the course of providing Services under this Agreement, unless that party has
obtained written consent of the other to such hiring. Nothing in this provision
shall prevent Owner from separately contracting with any vendor or
subcontractor utilized by Parsons or from hiring any employee of such any such
vendor or subcontractor.

 

14.11       Interpretation

 

(a)   This Agreement
shall be governed by and interpreted in accordance with the laws of the
Commonwealth of Massachusetts, excluding provisions thereof, which refer to the
laws of another jurisdiction.

 

(b)   Headings and
titles of articles, Sections, paragraphs and other subparts of this Agreement
are for the convenience of reference only and shall not be considered in
interpreting the text of this Agreement. Modifications or amendments to this
Agreement must be in writing and executed by a duly authorized representative
of each party.

 

(c)   Indemnities
against, releases from, assumptions of and limitations on liability expressed
in this Agreement, as well as waivers of subrogation rights, shall apply even
in the event of the fault, negligence or strict liability of the party
indemnified or released or whose liability is limited or assumed or against
whom rights of subrogation are waived and shall extend to the officers,
directors, employees, licensors, agents, partners and related entities of such
party and its partners and related entities.

 

(d)   The parties agree
to look solely to each other with respect to the obligations and liability
arising in connection with this Agreement and Services performed hereunder.
This Agreement and each and every provision hereof are for the exclusive
benefit of Owner and Parsons and not for the benefit of any third party, except
to the extent such benefits have been expressly extended pursuant to Section 14.11
(c).

 

(e)   In the event that
any portion or all of this Agreement is held to be void or unenforceable, the
parties agree to negotiate in good faith to amend the commercial and other
terms of this Agreement in order to effect the intent of the parties as set
forth in this Agreement.

 

22

 

(f)    The provisions of
this Agreement which by their nature are intended to survive the termination,
cancellation, completion, or expiration of the Agreement, including but not
limited to any indemnity obligations or expressed limitations of or releases
from liability, shall continue as valid and enforceable obligations of the
parties notwithstanding any such termination, cancellation, completion or
expiration.

 

14.12       Entire Agreement

 

(a)   This Agreement
consists of this contract document, documents expressly incorporated herein and
the following attached exhibits:

 

Exhibit
1:  Existing Contract Scope and Related
Compensation;

Exhibit
2:  Compensation and Payment; and

Exhibit 3:  Equipment List.

Documents
referenced in this Agreement, subarticle 1.1 “Description of Services”

 

It is
anticipated that the Owner and Parsons will expand the contract scope through
future Contract Work Authorization Forms and that such future Contract Work
Authorization Forms will incorporate the terms and conditions hereunder.

 

(b)   This Agreement, as
defined in this Section, sets forth the full and complete understanding of the
parties as of the date first above stated, and it supersedes any and all
agreements and representations made or dated prior thereto. In the event of any
conflict between this contract document and any of the Exhibits hereto, the
terms and provisions of this contract document shall control. In the event of
any conflict among the Exhibits, the Exhibit of the latest date shall control.

 

(c)   THE PARTIES
ACKNOWLEDGE AND AGREE THE TERMS AND CONDITIONS OF THIS AGREEMENT HAVE BEEN
FREELY, FAIRLY AND THOROUGHLY NEGOTIATED. FURTHER, THE PARTIES ACKNOWLEDGE AND
AGREE SUCH TERMS AND CONDITIONS, INCLUDING BUT NOT LIMITED TO THOSE RELATING TO
WAIVERS, ALLOCATIONS OF, RELEASES FROM, INDEMNITES AGAINST AND LIMITATIONS OF
LIABILITY, WHICH MAY REQUIRE CONSPICUOUS IDENTIFICATION, HAVE NOT BEEN SO
IDENTIFIED BY MUTUAL AGREEMENT AND THE PARTIES HAVE ACTUAL KNOWLEDGE OF THE
INTENT AND EFFECT OF SUCH TERMS AND CONDITIONS. EACH PARTY ACKNOWLEDGES THAT IN
EXECUTING THIS AGREEMENT IT RELIED SOLELY ON ITS OWN JUDGEMENT, BELIEF, AND
KNOWLEDGE, AND SUCH ADVICE AS IT MAY HAVE RECEIVED FROM ITS OWN COUNSEL, AND IT
HAS NOT BEEN INFLUENCED BY ANY REPRESENTATION OR STATEMENTS MADE BY ANY OTHER
PARTY OR SUCH OTHER PARTY’S COUNSEL. 

 

23

 

NO
PROVISION IN THIS AGREEMENT IS TO BE INTERPRETED FOR OR AGAINST ANY PARTY
BECAUSE THAT PARTY OR ITS COUNSEL DRAFTED SUCH PROVISION.

 

14.13       Security Interest in Major Equipment

 

If
progress payments or deposits are made for equipment, Owner shall have and
shall be entitled to perfect a first priority security interest in such
equipment to the extent of such payments made.

 

The
parties shall cooperate to cause the execution of such documents as may be
necessary to effectuate such security interest.

 

ARTICLE XV                  SPECIAL CONDITIONS AND CORRESPONDENCE/INVOICING
INSTRUCTIONS:

 

See
Exhibit 2 for invoicing instructions.

 

ARTICLE XVI                TAXES,
DUTIES AND FEES

 

Parsons
shall pay when due, and the pricing set forth in this Agreement shall be
inclusive of, all taxes, duties, fees and other assessments of whatever nature
imposed by governmental authorities and applicable to the performance of
Parsons Work and this Agreement.

 

IN WITNESS WHEREOF, the
parties hereto have executed this contract, document as of the date and year
first above written.

 

	
  OWNER

  ACUSPHERE, INC.

  	
   

  	
  PARSONS COMMERCIAL TECHNOLOGY 

  GROUP INC. (“PARSONS”)

  
	
   

  	
   

  	
   

  
	
  /s/ Sherri C. Oberg

  	
   

  	
   

  	
  /s/ Daniel Mariani

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  By: Sherri C. Oberg

  	
   

  	
   

  	
  By: Daniel Mariani

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Title: President and CEO

  	
   

  	
   

  	
  Title: Sr. V.P.

  	
   

  

 

24

 

EXHIBIT 1

 

EXISTING CONTRACT SCOPE AND RELATED COMPENSATION

 

 

As the design work being
performed by Parsons advances, it is anticipated that the Owner and Parsons
will enter into agreements which expand the contract scope in accordance with
subarticle 1.1 “Description of Services”, and that such future Contract
Work Authorizations will incorporate the terms and conditions hereunder. As of
the date of this Agreement, the Owner and Parsons have agreed to the scope of
work and amount of compensation defined in the Contract Work Authorization
(Form 1) for Engineering and Construction Management Services #1 and the
Contract Work Authorization (Form 2) for Agency Procurements #2.

 

1

 

EXHIBIT 2

 

COMPENSATION AND PAYMENT

 

Engineering and
Design

 

All effort-hours
necessary for the project management, architectural, engineering, procurement,
and project controls portion of this project will be billed on a reimbursable
basis at a multiplier of 2.1 times base salary.

 

Such hours shall exclude
costs incurred for negotiating and documenting contract terms between Parsons
and Owner as such costs shall be borne by the respective parties.

 

All home office expenses
and local travel costs will be billed at a rate of $5 per effort-hour.

 

Service costs for civil
engineering, survey work, permit assistance, site investigations, and any other
outside engineering services performed by other than Parsons personnel under
the supervision of Parsons shall be invoiced to Owner at cost plus 10%.  Travel beyond the local area, defined as
Tewksbury, Boston, and Watertown, Massachusetts will be invoiced at out-of-pocket
cost plus 5%.

 

Construction
Management

 

All effort-hours for the
field-based construction management staff will be billed on a reimbursable
basis at a multiplier of 1.8 times base salary.

 

Project Fee
Invoices

 

Parsons will invoice
Owner on a monthly basis starting in November 2004 for the project fee at
a rate of 3% for all amounts due to be paid under each purchase order placed as
Agent, each general conditions order and subcontract and each construction
subcontract issued.  No Project Fee shall
be paid on design services performed by Parsons.

 

It is also understood
that consistent with the Owner reimbursing Parsons for the cost of general
conditions orders and subcontracts and each construction subcontract issued
plus the 3% fee thereon, Owner shall also reimburse Parsons for seconded
services of any seconded services provider engaged by Parsons, plus a 3% fee
thereon as if the provider is a subcontractor to Parsons provided that such
seconded services are for services within the scope of Parsons’
responsibilities on this project and provided that Owner shall only pay one
such 3% fee for such services. Retainage shall not apply to payments due the
seconded services provider. Except for potential seconded services to be
potentially provided to Parsons’ by The Richmond Group, Parsons will seek
advance approval from Owner before incurring seconded services costs on this
project.

 

1

 

Invoicing and
Payment Terms

 

Parsons will issue
advance payment invoices to Owner on a monthly basis at the beginning of the
month in accordance with the cash requirements necessary to meet payment
obligations to vendors, suppliers, and subcontractors working for Parsons for
the upcoming month, plus the amount due in accordance with the project services
payment schedule and the monthly project fee amount.  Such advance payment invoices shall not
include any amounts for release of retainage or clearing of punchlist items
which amounts shall only be paid by Owner to Parsons after release or
completion, respectively and shall not include any prepayments to Agency
vendors.  Any overpayment or underpayment
to Parsons based upon this advance payment method shall be offset against or
added to the payment schedule for the subsequent month.  To the extent, if any, that Owner agrees to
provide subcontractors or Parsons with financial incentives to achieve
specified milestones, such incentives will be paid based upon achievement and
not included in the advance payment invoices.

 

Owner shall pay vendors
directly for equipment purchases placed by Parsons as agent of Owner.

 

Parsons will also issue
reconciled actual cost statements on a monthly basis for the previous month and
apply either a debit or credit to the following month.

 

Payment terms for all
types of invoices are net 14 days, payable via wire transfer to a bank account
identified in writing to Owner by Parsons.

 

Parsons shall forward
copies of its invoices, together with the reconciled actual cost statements and
its estimate of cash requirements to meet payments to subcontractors to:

 

Acusphere,
Inc.

Attn:       Accounts
Payable

500
Arsenal Street

Watertown,
MA 02472

 

To ensure prompt
attention to such invoices, it is understood that the reconciliation of actual
costs and the estimate of cash requirements shall first be sent to, and discussed
with, Acusphere’s Vice President of Manufacturing or such person as is
designated by Acusphere’s Vice President of Manufacturing for such review.

 

Parsons will promptly
make payments to subcontractors when due. Parsons will not credit its own
accounts for any advance payment amount paid by Owner that was intended for
payment to subcontractors.

 

If this Agreement is
terminated and Owner has advanced payments to Parsons which exceed the amount
earned by Parsons and its subcontractors, Parsons shall within fourteen (14)
days for such termination refund Owner in full for such overpayment.

 

2

 

Retainage

 

A 10% retainage will be
withheld from each construction subcontract invoice. The retainage will not be
considered earned or released to subcontract until the completion of the
subcontractor’ work.

 

Guaranteed Maximum
Price (GMP)

 

If and when the parties
agree that all or part of the services covered by the terms and conditions for
Engineering, Procurement and Construction Management Services are sufficiently
defined to allow Parsons to perform all or part of it’s services on a GMP
basis, and if the Owner requests a GMP for all or part of the sufficiently
defined services, the parties agree to enter into negotiations for the purpose
of establishing a GMP for such portion or portions of the work the parties
agree are sufficiently definable.

 

A Guaranteed Maximum
Price is defined as follows:

 

“Guaranteed
Maximum Price: Sum established in an Agreement between Owner and parsons as the
maximum compensation to be paid by the Owner to Parsons for performing
specified Work on the basis of cost of labor and materials plus overhead
expenses and profit.”

 

Target Price, Cost
of the Work (Target Price)

 

If agreed to by Owner and
Parsons, the Contract Work Authorizations entered into by Owner and Parsons
shall be based on a target price. Under a target price arrangement, the target
price is based on the cost of the work which includes Parsons’ engineering and
design services and markups thereon, all Parsons’ home office expenses and
travel costs, invoiced at a $5 effort hour rate, service costs and markups,
construction subcontracts, construction management and markups thereon, Parsons’
project fees, and the costs of procurements made by Parsons as agent for Owner
which are further described in the Exhibit 2.

 

Collectively, the costs
of the work as defined herein shall be the only cost basis for determining the
target price regardless of any other project costs.

 

Exclusions from
Target Price

 

The target price final
calculations shall exclude the following costs, unless modified by subsequent
change order:

 

•              Commissioning
services to the extent that they are not included in the September 3, 2004
proposal.

•              Warranty
enforcement and assistance costs.

 

3

 

•              Work
by other than Parsons, or vendors of subcontractors of Parsons, listed on the
Responsibility Matrix (Attachment B) in Parsons’ September 3, 2004
proposal.

•              Any
and all costs, of every type and nature not identified in the “target price
cost of the work” described above this list of exclusions.

 

Purpose for Target
Price

 

The target price has been
established for the purpose of estimating the cost of the project and as a
management tool for identifying cost variances. 
THE TARGET PRICE SHALL NOT BE CONSIDERED A GUARANTEED MAXIMUM PRICE.

 

Shared Savings 

 

Owner and Parsons may
agree to a shared savings program. Unless specifically agreed to by Owner and
Parsons as part of a Contract Work Authorization, it is understood that Shared
Savings is not in effect.  To the extent
that the shared saving is in effect for a target price or GMP contract work
authorization and to the extent that actual costs incurred are less than the
stipulated target price or, if applicable, the GMP, Parsons and the Owner shall
share the savings on a 50/50 basis.  The
target price shall be calculated based on the cost of the work as described
above and the Owner shall pay Parsons 50 cents for every dollar that the target
price is under run, with the following exclusions. Shared savings shall not
apply to equipment purchases made by Parsons as agent for Owner as described in
Contract Work Authorization Form 2 nor shall shared savings apply to design
services, procurement services or other work provided directly by Parsons. Such
shared savings, when and if applicable, shall only apply to the Parsons
construction subcontract cost savings portion of the savings.

 

Payment of Shared
Savings

 

If and when shared
savings is in effect, within 60 days after acceptance of the project by Owner,
Parsons shall present Owner with a report detailing the final project
cost.  Owner shall review the final cost
report promptly and the parties shall negotiate in good faith to resolve any
disputed items related thereto. 
Acceptance of the project is based on the provisions of Article VIII
per above.

 

Following resolution of
any cost disputes Owner shall make payment to Parsons of the earned shared
savings within 15 days thereafter.

 

Owner shall not
unreasonably withhold any portion of the share savings due Parsons which is not
in dispute.

 

4

 

Adjustments to
Target Price

 

The Owner or Parsons
shall have a right to negotiate a reasonable adjustment to the target price in
conjunction with any Contract Work Authorization release which involves a
significant change in scope and the Owner and Parsons shall be entitled to seek
a resolution if a dispute arises, concerning the amount of the adjustment considered
reasonable, in accordance with the Dispute Resolution article contained in
the agreement.  In assessing whether or
not an adjustment is reasonable, it is recognized that Owner and Parsons have
collaborated on this project, the scope of work is has been studied by both
parties and the construction is being performed based upon Parsons’ design. To
the extent that design inputs or output requirements have been modified and
such modification results in a modification of the scope of work, a change
order may be applicable. However, unanticipated complications in construction
that arise, when not due to changes in design input or output requirements and
not due to latent problems under the soil and/or unknown hazardous waste
issues, are not intended to result in adjustment to the target price.

 

5

 

EXHIBIT 3

EQUIPMENT LIST

 

See equipment list,
marked “Exhibit B” and dated October 15, 2004 which is attached hereto and
made a part hereof.

 

1

 

Exhibit B

 

As of October 15, 2004

Equipment List

AI-700 Commercial
Manufacturing Facility – Phase 1A

 

[CONFIDENTIAL TREATMENT REQUESTED] /*/

 

2

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