Document:

Exhibit 10.9

 

	
  

  	
  Document
  A111TM – 1997

  

 

Standard Form of Agreement
Between Owner and Contractor

where the basis for payment is the COST OF THE WORK
PLUS A FEE with a negotiated Guaranteed Maximum Price

 

AGREEMENT made as of the 6th day of June in the year
Two Thousand Five

(In words, indicate day,
month and year)

 

BETWEEN the Owner:

(Name, address and other
information)

 

Diamond Jo Worth, LLC

400 East 3rd Street

Dubuque, IA 52001

 

and the Contractor:

(Name, address and other
information)

 

Henkel Construction Company

208 East State Street, P.O. Box 920

Mason City, IA 50401

 

The Project is:

(Name and location)

 

Excursion Gambling Boat

Worth County, IA

 

The Architect is:

(Name, address and other
information)

 

KGA Architecture

4495 South Polaris Avenue

Las Vegas, NV 89103

 

The Owner and Contractor agree as follows.

 

ADDITIONS AND DELETIONS:

 

The author of this document has added
information needed for its completion. The author may also have revised the
text of the original AIA standard form. An  Additions
and Deletions Report that notes added information as well as revisions to
the standard form text is available from the author and should be reviewed. A
vertical line in the left margin of this document indicates where the author
has added necessary information and where the author has added to or deleted
from the original AIA text.

 

This document has important legal
consequences.  Consultation with an
attorney is encouraged with respect to its completion or modification. 

 

This document is not intended for use in
competitive bidding.

 

AIA Document A201-1997, 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. 

 

 

AIA Document
A111TM – 1997. Copyright © 1920, 1925, 1951, 1958, 1961, 1963, 1967, 1974,
1978, 1987 and 1997 by The American Institute of Architects.   All rights reserved.  WARNING: This AIA® Document is
protected by U.S. Copyright Law and International Treaties. Unauthorized
reproduction or distribution of this AIA® Document, or any portion
of it, may result in severe civil and criminal penalties, and will be
prosecuted to the maximum extent possible under the law.  This document was produced by AIA software at
11:28:39 on 06/04/2005 under Order No.1000159854_1 which expires on 1/31/2006,
and is not for resale.

 

	
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1

 

ARTICLE 1 
THE CONTRACT DOCUMENTS

 

The Contract Documents consist of this
Agreement, Conditions of the Contract (General, Supplementary and other
Conditions), Drawings, Specifications, Addenda issued prior to execution of
this Agreement, other documents listed in this Agreement and Modifications
issued after execution of this Agreement; these form the Contract, and are as
fully a part of the Contract as if attached to this Agreement or repeated
herein. The Contract represents the entire and integrated agreement between the
parties hereto and supersedes prior negotiations, representations or
agreements, either written or oral. An enumeration of the Contract Documents,
other than Modifications, appears in Article 15. If anything in the other
Contract Documents is inconsistent with this Agreement, this Agreement shall
govern.

 

ARTICLE 2  THE
WORK OF THIS CONTRACT

 

The Contractor shall fully execute the Work
described in the Contract Documents, except to the extent specifically
indicated in the Contract Documents to be the responsibility of others.

 

ARTICLE 3  RELATIONSHIP OF THE PARTIES

 

The Contractor accepts the relationship of
trust and confidence established by this Agreement and covenants with the Owner
to cooperate with the Architect and exercise the Contractor’s skill and
judgment in furthering the interests of the Owner; to furnish efficient
business administration and supervision; to furnish at all times an adequate
supply of workers and materials; and to perform the Work in an expeditious and
economical manner consistent with the Owner’s interests. The Owner agrees to
furnish and approve, in a timely manner, information required by the Contractor
and to make payments to the Contractor in accordance with the requirements of
the Contract Documents.

 

ARTICLE 4 
DATE OF COMMENCEMENT AND SUBSTANTIAL COMPLETION

 

§ 4.1  The date of commencement of the Work shall be
the date of this Agreement unless a different date is stated below or provision
is made for the date to be fixed in a notice to proceed issued by the Owner.

 

Date of commencement shall be established as
June 6, 2005 or the date upon which Contractor has received owner’s written
Notice to Proceed, proof of financing acceptable to Contractor for the Initial
Contract Sum, and a fully executed Contract. 
Contractor shall acknowledge in writing when these conditions have been
met.  This acknowledgment shall be given
by a separate letter.

 

If, prior to commencement of the Work, the
Owner requires time to file mortgages, mechanic’s liens and other security
interests, the Owner’s time requirement shall be as follows:

 

§ 4.2  The Contract Time
shall be measured from the date of commencement.

 

§ 4.3  The Contractor
shall achieve Substantial Completion of the Contractor’s Work not later than
235 calendar days from the date of commencement, per Article 4.1:

 

“Substantial Completion” (or similar words
such as “Substantially Complete”, and any derivation thereof) means that the
following has occurred:

 

The construction of the Project (other than exterior items if same cannot be completed due to adverse weather
conditions) has been completed in accordance with this Contract and
the Contract Documents and in substantial compliance with all legal
requirements pertaining to Contractor’s Work so as to allow the Project to be
utilized for its intended purpose, in each case, as reasonably determined by
the Architect after consultation with the Contractor and the Owner (but without
giving effect to any work to be completed by the Owner or any other person
and/or any work for which the Contractor has no legal obligation to control, contractual relationship with, or responsibility to complete under the
Contract).

 

§ 4.3.1  The Contractor
shall achieve Substantial Completion on or before the date which is 235
calendar days after all items in Article 4.1 Paragraph 2 above have been
satisfied.  The Contractor acknowledges
and agrees that time is of the essence as to such date of Substantial
Completion and the Contractor and the Owner each agree that the damages to be
suffered by the Owner for the Contractor’s failure to achieve Substantial
Completion by said date is are not susceptible to calculation.  Accordingly, the Contractor and the Owner
agree that the Guaranteed

 

 

AIA Document
A111TM – 1997. Copyright © 1920, 1925, 1951, 1958, 1961, 1963, 1967, 1974,
1978, 1987 and 1997 by The American Institute of Architects.   All rights reserved.  WARNING: This AIA® Document is
protected by U.S. Copyright Law and International Treaties. Unauthorized
reproduction or distribution of this AIA® Document, or any portion
of it, may result in severe civil and criminal penalties, and will be
prosecuted to the maximum extent possible under the law.  This document was produced by AIA software at
11:28:39 on 06/04/2005 under Order No.1000159854_1 which expires on 1/31/2006,
and is not for resale.

 

	
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2

 

Maximum Price (GMP) shall be reduced by an
amount equal to $10,000 for each day that Substantial Completion extends beyond
said date and the Owner acknowledges that such liquidated damages shall be the
only damages to be recovered by the Owner with respect to failure to achieve
Substantial Completion by said date. 
Adjustments to Guaranteed Maximum Price (GMP) as set forth in this
Section shall be by Change Order which shall be prepared by the Architect for
signature by the Owner, the Contractor and the Architect within ten (10) days
after Substantial Completion.

 

	
  Portion
  of Work

  	
   

  	
  Substantial Completion date

  
	
  59,400 Square Foot Casino

  	
   

  	
  Two-Hundred-Thirty-Five (235) Calendar Days
  from the Date of Commencement per Articles 4.1 and 4.3 above.

  

 

, subject to adjustments of this Contract
Time as provided in the Contract Documents.

 

ARTICLE 5  BASIS
FOR PAYMENT

 

§ 5.1  CONTRACT SUM

 

§ 5.1.1  The Owner shall pay
the Contractor the Contract Sum in current funds for the Contractor’s
performance of the Contract. The Contract Sum is the Cost of the Work as
defined in Article 7 plus the Contractor’s Fee.

 

§ 5.1.2  The Contractor’s
Fee is as follows:

 

(State a lump sum,
percentage of Cost of the Work or other provision for determining the
Contractor’s Fee, and describe the method of adjustment of the Contractor’s Fee
for changes in the Work.)

 

Total fee compensation to be paid to
Contractor shall be a flat fee of Seven-Hundred-Thousand and No/100 Dollars
($700,000.00) plus 3.5% of the Cost of the Work involved in any additive Change
Orders (other than the Change Orders for the hotel construction and the
GMP).  Owner may add the construction of
a 100 room hotel by Change Order for the separate flat fee of
Two-Hundred-Fifty-Thousand and No/100 Dollars ($250,000.00) if hotel
construction is added by Change Order prior to January 1, 2006.  Fees shall not be reduced for change orders
resulting in a lower cost of the Work.

 

§ 5.2  GUARANTEED MAXIMUM PRICE

 

§ 5.2.1  The sum of the Cost
of the Work and the Contractor’s Fee shall be a maximum sum guaranteed by the
Contractor, 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.

 

Initial Contract Sum (including partial
Contractor’s Fee) shall be Nine-Hundred-Twenty-Five-Thousand and No/100 Dollars
($925,000.00) and shall include project mobilization, site fencing, caisson
drilling and installation, and site mass earthwork.

 

Guaranteed Maximum Price (GMP) shall be added
to this Contract by Change Order.  The
Guaranteed Maximum Price shall be an amount mutually agreed to by Owner and
Contractor which includes the Cost of the Work as defined in Article 7 plus the
Contractor’s Fee.

 

 

AIA Document
A111TM – 1997. Copyright © 1920, 1925, 1951, 1958, 1961, 1963, 1967, 1974,
1978, 1987 and 1997 by The American Institute of Architects.   All rights reserved.  WARNING: This AIA® Document is
protected by U.S. Copyright Law and International Treaties. Unauthorized
reproduction or distribution of this AIA® Document, or any portion
of it, may result in severe civil and criminal penalties, and will be
prosecuted to the maximum extent possible under the law.  This document was produced by AIA software at
11:28:39 on 06/04/2005 under Order No.1000159854_1 which expires on 1/31/2006,
and is not for resale.

 

	
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3

 

§ 5.2.1.1  From and after the
date on which the Guaranteed Maximum Price (GMP) has been established and all
of the Work has been contracted with Subcontractors and providers of equipment
and materials in accordance with the Contract Documents, any subsequent
reductions in the scope of the Work which reduce the Cost of the Work in the
Guaranteed Maximum Price (GMP) will be incorporated into the Contract by a
Change Order which reduces the GMP by an amount equal to the cost reduction
generated by that change in scope.  Prior
to Substantial Completion,  reductions in
cost and/or savings achieved by the Contractor in any manner other than a
reduction in scope shall not result in a reduction of the Guaranteed Maximum
Price.

 

Within (30) days after the date on which
Substantial Completion occurs (or such other date approved by the Contractor
and the Owner), the Cost of the Work shall be determined by the Owner and the
Contractor.  In the event that the sum of
the Cost of the Work and the Contractor’s Fee are less than the GMP, 100% of
all savings (other than cash discounts which are for the benefit of the
Contractor pursuant to Article 9) will be retained by the Owner.  Such savings shall reduce the Cost of the
Work and the parties will enter into a Change Order which reduces the GMP by an
amount equal to such savings.

 

§ 5.2.2  The Guaranteed
Maximum Price is based on the following alternates, if any, which are described
in the Contract Documents and are hereby accepted by the Owner:

(State the numbers or other
identification of accepted alternates. If decisions on other alternates are to
be made by the Owner subsequent to the execution of this Agreement, attach a
schedule of such other alternates showing the amount for each and the date when
the amount expires.)

 

To
be determined.

 

§ 5.2.3  Unit prices, if any, are as follows:

 

	
  Description

  	
   

  	
  Units

  	
   

  	
  Price ($ 0.00)

  	
   

  
	
  To be determined

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

§ 5.2.4  Allowances, if any, are as follows

(Identify and state the
amounts of any allowances, and state whether they include labor, materials, or
both.)

 

	
  Allowance

  	
   

  	
  Amount ($ 0.00)

  	
   

  	
  Included items

  	
   

  
	
  To be determined

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

§ 5.2.5  Assumptions, if any, on which the Guaranteed
Maximum Price is based are as follows:

 

To be determined

 

§ 5.2.6  To the extent that
the Drawings and Specifications are anticipated to require further development
by the Architect, the Contractor has provided in the Guaranteed Maximum Price
for such further development consistent with the Contract Documents as set
forth in a change order.  Such further
development does not include such things as changes in scope, systems, kinds and
quality of materials, finishes or equipment, all of which, if required, shall
be incorporated by Change Order.

 

ARTICLE 6 
CHANGES IN THE WORK

 

§ 6.1  Adjustments to the
Guaranteed Maximum Price on account of changes in the Work may be determined by
any of the methods listed in Section 7.3.3 of AIA Document A201-1997.

 

§ 6.2  In calculating
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
Section 7.3.3.3 of AIA Document A201-1997 and the terms “costs” and “a
reasonable allowance for overhead and profit” as used in Section 7.3.6 of AIA
Document A201-1997 shall have the meanings assigned to them in AIA Document
A201-1997 and shall not be modified by Articles 5, 7 and 8 of this Agreement.
Adjustments 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.

 

 

AIA Document
A111TM – 1997. Copyright © 1920, 1925, 1951, 1958, 1961, 1963, 1967, 1974,
1978, 1987 and 1997 by The American Institute of Architects.   All rights reserved.  WARNING: This AIA® Document is
protected by U.S. Copyright Law and International Treaties. Unauthorized
reproduction or distribution of this AIA® Document, or any portion
of it, may result in severe civil and criminal penalties, and will be
prosecuted to the maximum extent possible under the law.  This document was produced by AIA software at
11:28:39 on 06/04/2005 under Order No.1000159854_1 which expires on 1/31/2006,
and is not for resale.

 

	
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4

 

§ 6.3  In calculating
adjustments to the Guaranteed Maximum Price, the terms “cost” and “costs” as
used in the above-referenced provisions of AIA Document A201-1997 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 Section 5.1.2 of this Agreement.

 

§ 6.4  

 

ARTICLE 7  COSTS
TO BE REIMBURSED AND INCLUDED IN THE GUARANTEED MAXIMUM PRICE (GMP)

 

§ 7.1  COST OF THE WORK

 

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.

 

§ 7.2 LABOR COSTS

 

§ 7.2.1

 

Labor Costs of the Contractor’s supervisory
and administrative personnel and workmen and women when at the site or engaged
in the performance of Contractor’s Work for this project (including Work performed
pursuant to Change Orders).

 

See Attachment “A” – Worth County Excursion
Gambling Boat Labor Rate Schedule for labor rates which will apply to the
Contract.  These labor rates include all
benefits, workers compensation costs, and other amounts paid or payable to, or
with respect to, such personnel and workmen and women and shall remain in
effect throughout construction of the Project (including Work performed
pursuant to Change Orders) other than the Change Order for the hotel
construction which shall set forth a separate Guaranteed Maximum Price for the
hotel construction) and shall apply to all Henkel Construction Company project
management and field labor performed on the Project.

 

§ 7.2.3  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.

 

§ 7.2.4  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 benefits such as sick leave, medical
and health benefits, holidays, vacations and pensions, provided such costs are
based on wages and salaries included in the Cost of the Work under Sections
7.2.1 through 7.2.3.

 

§ 7.3  SUBCONTRACT COSTS

 

§ 7.3.1

 

Amounts properly billed by Subcontractors for
Work in accordance with subcontracts covering their portions of the Work which
subcontracts shall be approved by the Owner and the Contractor in accordance
with the Contract Documents.  If Owner’s
rejection of Subcontractor, Sub-subcontractor, supplier, or vendor results in a
purchase cost or schedule duration which exceeds what Contractor has proposed,
then a Change Order shall be executed by Owner adding such extra costs and/or
time.

 

§ 7.4  COSTS OF MATERIALS AND
EQUIPMENT INCORPORATED IN THE COMPLETED CONSTRUCTION

 

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

 

 

AIA Document
A111TM – 1997. Copyright © 1920, 1925, 1951, 1958, 1961, 1963, 1967, 1974,
1978, 1987 and 1997 by The American Institute of Architects.   All rights reserved.  WARNING: This AIA® Document is
protected by U.S. Copyright Law and International Treaties. Unauthorized
reproduction or distribution of this AIA® Document, or any portion
of it, may result in severe civil and criminal penalties, and will be
prosecuted to the maximum extent possible under the law.  This document was produced by AIA software at
11:28:39 on 06/04/2005 under Order No.1000159854_1 which expires on 1/31/2006,
and is not for resale.

 

	
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5

 

§ 7.4.2  Costs of materials
described in the preceding Section 7.4.1 in excess of those actually installed
to allow for reasonable waste and spoilage. Unused excess materials, if any,
shall become the Owner’s property at the completion of the Work or, at the
Owner’s option, shall be sold by the Contractor. Any amounts realized from such
sales shall be credited to the Owner as a deduction from the Cost of the Work.

 

§ 7.5  COSTS OF OTHER MATERIALS
AND EQUIPMENT, TEMPORARY FACILITIES AND RELATED ITEMS

 

§ 7.5.1  Costs, including
transportation and storage, installation, maintenance, dismantling and removal
of materials, supplies, temporary facilities, machinery, equipment, and hand
tools not customarily owned by construction workers, that are provided by the
Contractor at the site and fully consumed in the performance of the Work; and
cost (less salvage value) of 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.

 

§ 7.5.2  Rental charges for
temporary facilities, machinery, fuel, oil, grease, equipment, and hand tools
not customarily owned by construction workers that are provided by the
Contractor at the site, whether rented from the Contractor or others, and costs
of transportation, installation, minor repairs and replacements, dismantling
and removal thereof. Rates and quantities of equipment rented shall be subject
to the Owner’s prior approval.  Internal
rental rates for Henkel Construction Company furnished rental equipment shall
be hourly and shall be based on 100% of current AED Green Book rates.

 

§ 7.5.3  Costs of removal of
debris from the site.

 

§ 7.5.4  Costs of document
reproductions, facsimile transmissions and long-distance telephone calls,
postage and parcel delivery charges, cellular telephone charges and pager
services, photographs, telephone and internet service at the site and
reasonable petty cash expenses of the site office.

 

§ 7.5.5  That portion of the
reasonable expenses of the Contractor’s personnel incurred while traveling in
discharge of duties connected with the Work.

 

§ 7.5.6  Costs of materials
and equipment suitably stored off the site at a mutually acceptable location,
if approved in advance by the Owner.

 

§ 7.6 MISCELLANEOUS COSTS

 

§ 7.6.1  That portion of
insurance and bond premiums that can be directly attributed to this Contract:

 

§ 7.6.2

 

All applicable taxes and fees associated with
Contractor’s Work.

 

§ 7.6.3  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.

 

§ 7.6.4 Fees of laboratories for tests required by the
Contract Documents, except those related to defective or nonconforming Work for
which reimbursement is excluded by Section 13.5.3 of AIA Document A201-1997 or
other provisions of the Contract Documents, and which do not fall within the
scope of Section 7.7.3.

 

§ 7.6.5 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 requirement of the Contract Documents; and 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. However, such costs
of legal defenses, judgments and settlements shall not be included in the
calculation of the Contractor’s Fee or subject to the

 

 

AIA Document
A111TM – 1997. Copyright © 1920, 1925, 1951, 1958, 1961, 1963, 1967, 1974,
1978, 1987 and 1997 by The American Institute of Architects.   All rights reserved.  WARNING: This AIA® Document is
protected by U.S. Copyright Law and International Treaties. Unauthorized
reproduction or distribution of this AIA® Document, or any portion
of it, may result in severe civil and criminal penalties, and will be
prosecuted to the maximum extent possible under the law.  This document was produced by AIA software at
11:28:39 on 06/04/2005 under Order No.1000159854_1 which expires on 1/31/2006,
and is not for resale.

 

	
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6

 

Guaranteed Maximum Price. If such royalties,
fees and costs are excluded by the last sentence of Section 3.17.1 of AIA
Document A201-1997 or other provisions of the Contract Documents, then they
shall not be included in the Cost of the Work.

 

§ 7.6.6 Data processing costs related to the Work including
all hardware and software costs.

 

§ 7.6.7 Deposits lost for causes other than the Contractor’s
negligence or failure to fulfill a specific responsibility to the Owner as set
forth in the Contract Documents.

 

§ 7.6.8 Legal, mediation and arbitration costs, including
attorneys’ fees, other than those arising from disputes between the Owner and
Contractor and/or the Contractor, a Subcontractor, and/or a Sub-Subcontractor
or any of them, reasonably incurred by the Contractor in the performance of the
Work and with the Owner’s prior written approval; which approval shall not be
unreasonably withheld.

 

§ 7.6.9 Expenses incurred in accordance with the Contractor’s
standard personnel policy for relocation and temporary living allowances of
personnel required for the Work, if approved by the Owner.

 

§ 7.6.10 Cost of necessary safety equipment, supplies, drug
testing, safety seminars, and safety incentives.

 

§ 7.6.11 Meals and lodging while conducting business for the
Project.

 

§ 7.6.12 Offsite storage, warehousing and fabrication, if
necessary.

 

§ 7.6.13 Costs incurred after completion of the Project for
warranty items that cannot be billed to Subcontractors, up to a maximum of
Fifty Thousand and No/100 Dollars ($50,000.00).

 

§ 7.7 OTHER COSTS AND EMERGENCIES

 

§ 7.7.1 Any cost not specifically excluded by Article 8
which Contractor incurs in the performance of the Work or furtherance of the
Project.

 

§ 7.7.2 Costs due to emergencies incurred 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 Section 10.6 of AIA Document
A201-1997.

 

§ 7.7.3 Costs of repairing or correcting damaged or
nonconforming Work executed by the Contractor, Subcontractors or suppliers,
provided that such damaged or nonconforming Work was not caused by negligence
or failure to fulfill a specific responsibility of the Contractor and only to
the extent that the cost of repair or correction is not recoverable by the
Contractor from insurance, sureties, Subcontractors or suppliers.

 

ARTICLE 8  COSTS NOT TO BE
REIMBURSED NOR INCLUDED IN THE GUARANTEED MAXIMUM PRICE (GMP)

 

§ 8.1 The Cost of the Work shall not include:

 

§ 8.1.1 Salaries and other compensation of the Contractor’s
personnel stationed at the Contractor’s principal office or offices other than
the site office, except as specifically provided in Sections 7.2.2 and 7.2.3 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 Section 7.5.2.

 

§ 8.1.6 Except as provided in Section 7.7.3 of this
Agreement, costs due to the negligence or failure to fulfill a specific
responsibility of the Contractor, Subcontractors and suppliers or anyone directly
or indirectly employed by any of them or for whose acts any of them may be
liable.

 

 

AIA Document
A111TM – 1997. Copyright © 1920, 1925, 1951, 1958, 1961, 1963, 1967, 1974,
1978, 1987 and 1997 by The American Institute of Architects.   All rights reserved.  WARNING: This AIA® Document is
protected by U.S. Copyright Law and International Treaties. Unauthorized
reproduction or distribution of this AIA® Document, or any portion
of it, may result in severe civil and criminal penalties, and will be
prosecuted to the maximum extent possible under the law.  This document was produced by AIA software at
11:28:39 on 06/04/2005 under Order No.1000159854_1 which expires on 1/31/2006,
and is not for resale.

 

	
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7

 

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

 

§ 8.1.8 Costs, other than costs included in Change Orders
approved by the Owner, that would cause the Guaranteed Maximum Price 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 they can be secured.

 

§ 9.2 Amounts that accrue to the Owner in accordance with
the provisions of Section 9.1 shall be credited to the Owner dollar for dollar
as a deduction from the Cost of the 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
Owner may designate specific persons or entities from whom the Contractor shall
obtain bids. 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 shall then determine, with
the advice of the Contractor and the Architect, which bids will be accepted.
The Contractor shall not be required to contract with anyone to whom the
Contractor has reasonable objection.

 

§ 10.2 If 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 portion of the Work; and (3)
has submitted a bid that 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 applicable payment provisions of this Agreement, and shall not be awarded
on the basis of cost plus a fee without the prior consent of the Owner.

 

§ 10.4 The Contractor shall require a clause in all
subcontracts and subsubcontracts prohibiting the Contactors or such
Subcontractor or Subsubcontractor thereunder, as the case may be, from
receiving any discount, refund, inducement, benefit or payment which is not to
or for the benefit of the Owner and which is not reflected in the terms of the
applicable subcontract or subsubcontract, as applicable.  Each subcontractor and subsubcontractor shall
certify as to such statement after written request by the Contractor, the Owner
or the Owner’s Representative or his Designee.

 

ARTICLE 11 ACCOUNTING RECORDS

 

The Contractor shall keep full and detailed
accounts and exercise such controls as may be necessary for proper financial
management under this Contract, and the accounting and control systems shall be
satisfactory to the Owner. The Owner and the Owner’s accountants shall be
afforded access to, and shall be permitted to audit and copy, 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 PAYMENTS

 

§ 12.1 PROGRESS PAYMENTS

 

§ 12.1.1 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.

 

 

AIA Document
A111TM – 1997. Copyright © 1920, 1925, 1951, 1958, 1961, 1963, 1967, 1974,
1978, 1987 and 1997 by The American Institute of Architects.   All rights reserved.  WARNING: This AIA® Document is
protected by U.S. Copyright Law and International Treaties. Unauthorized
reproduction or distribution of this AIA® Document, or any portion
of it, may result in severe civil and criminal penalties, and will be
prosecuted to the maximum extent possible under the law.  This document was produced by AIA software at
11:28:39 on 06/04/2005 under Order No.1000159854_1 which expires on 1/31/2006,
and is not for resale.

 

	
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8

 

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

 

§ 12.1.3 Provided that an Application for Payment is received
by the Architect not later than the 10th day of a month, the Owner shall make
payment to the Contractor not later than the 30th day of the same month. If an
Application for Payment is received by the Architect after the application date
fixed above, payment shall be made by the Owner not later than twenty (20) days
after the approval by the Owner’s Project Representative or Project
Representative’s Designee.

 

§ 12.1.4

 

With each Application for Payment, the
Contractor shall submit timesheets, petty cash accounts, and along with the
current progress payment, copies of invoices and other documentation to
substantiate Contractor’s costs to date as the date of the Progress Payment
Application unless Contractor’s cost of the work has exceeded the GMP.  After each such Progress Payment Application
has been approved and funded by Owner, the Contractor shall make the payments
to the Subcontractors, Sub-subcontractors, vendors, or suppliers as set forth
in such approved Progress Payment Application.

 

§ 12.1.5 Each Application for Payment shall be based on the
most recent schedule of values approved by the Contractor, the Architect, the
Owner, and the Owner’s Representative in accordance with the Contract
Documents. The schedule of values shall allocate the entire Guaranteed Maximum
Price among the various portions of the Work, except that the Contractor’s Fee
shall be 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 and Owner’s Representative may require. This schedule, unless
objected to by the Architect or the Owner, shall be used as a basis for
reviewing the Contractor’s Applications for Payment.

 

§ 12.1.6 Applications for Payment shall show the percentage
of completion of each portion of the Work as of the end of the period covered
by the Application for Payment. The percentage of completion shall be the
lesser of (1) the percentage of that portion of the Work which has actually
been completed; or (2) the percentage obtained by dividing (a) the expense that
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.

 

§ 12.1.7 Subject to other provisions of the Contract
Documents, the amount of each progress payment shall be computed as follows:

 

.1              take that portion
of the Guaranteed Maximum Price properly allocable to completed Work as
determined by multiplying the percentage of 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 shall be included as
provided in Section 7.3.8 of AIA Document A201-1997;

 

.2              add that portion of
the Guaranteed Maximum Price properly allocable to materials and equipment
delivered and suitably stored at the site for subsequent incorporation in the
Work, or if approved in advance by the Owner, suitably stored off the site at a
location agreed upon in writing;

 

.3              add the Contractor’s
Fee, less retainage.  Retainage shall be
10% until the Work under the Contract Agreement is 50% complete and has been
performed in accordance with the term thereof after which no further retainage
will be held and none shall be released until Substantial Completion, except by
mutual agreement between Owner and Contractor. 
The Contractor’s Fee shall be computed upon the Cost of the Work
described in the two preceding Clauses at the rate stated in Section 5.1.2 or,
if the Contractor’s Fee is stated as a fixed sum in that Subparagraph, shall be
an amount that 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;

 

 

AIA Document
A111TM – 1997. Copyright © 1920, 1925, 1951, 1958, 1961, 1963, 1967, 1974,
1978, 1987 and 1997 by The American Institute of Architects.   All rights reserved.  WARNING: This AIA® Document is
protected by U.S. Copyright Law and International Treaties. Unauthorized
reproduction or distribution of this AIA® Document, or any portion
of it, may result in severe civil and criminal penalties, and will be
prosecuted to the maximum extent possible under the law.  This document was produced by AIA software at
11:28:39 on 06/04/2005 under Order No.1000159854_1 which expires on 1/31/2006,
and is not for resale.

 

	
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9

 

.4              subtract the
aggregate of previous payments made by the Owner;

 

.5              subtract the
shortfall, if any, indicated by the Contractor in the documentation required by
Section 12.1.4 to substantiate prior Applications for Payment, or resulting
from errors subsequently discovered by the Owner’s accountants in such
documentation; and

 

.6              subtract amounts,
if any, for which the Architect has withheld or nullified a Certificate for
Payment as provided in Section 9.5 of AIA Document A201-1997.

 

§ 12.1.8 Except with the Owner’s prior approval, payments to
Subcontractors shall be subject to retainage. 
Retainage shall be 10% until the Work under the subcontract agreement is
50% complete and has been performed in accordance with the terms thereof after
which no further retainage will be held and none shall be released until
Substantial Completion, except by mutual agreement between Owner and
Contractor.  The Owner and the Contractor
shall agree upon a mutually acceptable procedure for review and approval of
payments and retention for Subcontractors. 
The Contractor shall not request payment from Owner for any amount being
withheld from a Subcontractor until such time as such withheld payment is to be
paid to the Subcontractor in accordance with its subcontract agreement.

 

§ 12.1.9 In taking action on the Contractor’s Applications
for Payment, the Architect, the Owner’s Representative, and/or his Designee
shall be entitled to rely on the accuracy and completeness of the information
furnished by the Contractor and shall not be deemed to represent that the
Architect, the Owner, the Owner’s Representative, and/or his Designee has made
a detailed examination, audit or arithmetic verification of the documentation
submitted in accordance with Section 12.1.4 or other supporting data; that the
Architect, the Owner, the Owner’s Representative, and/or his Designee has made
exhaustive or continuous on-site inspections or that the Architect, the Owner,
the Owner’s Representative, and/or his Designee has made examinations to
ascertain how or for what purposes the Contractor has used amounts previously
paid on account of the Contract. Such examinations, audits and verifications,
if required by the Owner, will be performed by the Owner’s accountants acting
in the sole interest of the Owner.

 

§ 12.2 FINAL PAYMENT

 

§ 12.2.1 Final payment, constituting the entire unpaid
balance of the Contract Sum, shall be made by the Owner to the Contractor when:

 

.1              the Contractor has
fully performed the Contract except for the Contractor’s responsibility to
correct Work as provided in Section 12.2.2 of AIA Document A201-1997, and to
satisfy other requirements, if any, which extend beyond final payment; and

 

.2              a final Certificate
for Payment has been issued by the Architect after approval by the Owner’s
Representative or his Designee.

 

§ 12.2.2 The Owner’s final payment to the Contractor shall be
made no later than 30 days after the issuance of the Architect’s final
Certificate for Payment, or as follows:

 

§ 12.2.3 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 Section
12.2.1 have been met, the Architect will, within seven days after approval of
the written report by the Owner’s accountants and the Owner’s Representative or
his Designee, either issue to the Owner a final Certificate for 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 Section 9.5.1
of the AIA Document A201-1997. The time periods stated in this Section 12.2.3
supersede those stated in Section 9.4.1 of the AIA Document A201-1997.  Total time for review and approval of the
accounting report and issuance of a final Certificate of Payment, By Owner,
Architect, Owner’s Accountants, Owner’s Representative, and all other

 

 

AIA Document
A111TM – 1997. Copyright © 1920, 1925, 1951, 1958, 1961, 1963, 1967, 1974,
1978, 1987 and 1997 by The American Institute of Architects.   All rights reserved.  WARNING: This AIA® Document is
protected by U.S. Copyright Law and International Treaties. Unauthorized
reproduction or distribution of this AIA® Document, or any portion
of it, may result in severe civil and criminal penalties, and will be
prosecuted to the maximum extent possible under the law.  This document was produced by AIA software at
11:28:39 on 06/04/2005 under Order No.1000159854_1 which expires on 1/31/2006,
and is not for resale.

 

	
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10

 

parties deemed necessary by Owner shall not
exceed 30 days (unless additional time is reasonably required to correct errors
and/or inconsistencies in the accounting report and the Certificate of
Payment).

 

§ 12.2.4 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.

 

§ 12.2.5 If, subsequent to final payment and 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 up to a
maximum warranty cost of Fifty Thousand and No/100 Dollars ($50,000.00) 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 the Contractor has participated
in savings as provided in Section 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 13 TERMINATION OR SUSPENSION

 

§ 13.1 The Contract may be terminated by the Contractor, or
by the Owner for convenience, as provided in Article 14 of AIA Document
A201-1997.  However, the amount to be
paid to the Contractor under Section 14.1.3 of AIA Document A201-1997 shall not
exceed the amount the Contractor would be entitled to receive under Section
13.2 below, except as follows:

 

If the contract is terminated by the Owner,
Contractor shall be paid for all costs of work incurred to date of said
termination, plus reasonable termination costs not to exceed Thirty Thousand
and No/100 Dollars ($30,000.00) for items including but not limited to
demobilization, termination of contracts, re-stocking charges, etc., and
Contractor’s fee of three and one half percent (3 1⁄2%) on all costs of
construction and termination.

 

§ 13.2 The Contract may be terminated by the Owner for
cause as provided in Article 14 of AIA Document A201-1997. The amount, if any,
to be paid to the Contractor under Section 14.2.4 of AIA Document A201-1997
shall not cause the Guaranteed Maximum Price to be exceeded, nor shall it
exceed an amount calculated as follows:

 

§ 13.2.1 Take the Cost of the Work incurred by the Contractor
to the date of termination;

 

§ 13.2.2 Add the Contractor’s Fee computed upon the Cost of
the Work to the date of termination at the rate stated in Section 5.1.2 or, if
the Contractor’s Fee is stated as a fixed sum in that Section, an amount that
bears the same ratio 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; and

 

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

 

§ 13.3 The Owner shall also pay the Contractor the actual
out of pocket costs of the Contractor, either by purchase or rental at the
election of the Owner, for any equipment owned by the Contractor that the Owner
elects to retain and that is not otherwise included in the Cost of the Work
under Section 13.2.1. To the extent that the Owner elects to take legal
assignment of subcontracts and purchase orders (including rental agreements),
the Contractor shall, as a condition of receiving the payments referred to in
this Article 13, 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 purpose of fully
vesting in the Owner the rights and benefits of the Contractor under such
subcontracts or purchase orders.

 

§ 13.4 The Work may be suspended by the Owner as provided
in Article 14 of AIA Document A201-1997; in such case, the Guaranteed Maximum
Price and Contract Time shall be increased as provided in Section 14.3.2 of AIA
Document A201-1997 except that the term “profit” shall be understood to mean
the Contractor’s Fee as described in Sections 5.1.2 and Section 6.4 of this
Agreement.

 

 

AIA Document
A111TM – 1997. Copyright © 1920, 1925, 1951, 1958, 1961, 1963, 1967, 1974,
1978, 1987 and 1997 by The American Institute of Architects.   All rights reserved.  WARNING: This AIA® Document is
protected by U.S. Copyright Law and International Treaties. Unauthorized
reproduction or distribution of this AIA® Document, or any portion
of it, may result in severe civil and criminal penalties, and will be
prosecuted to the maximum extent possible under the law.  This document was produced by AIA software at
11:28:39 on 06/04/2005 under Order No.1000159854_1 which expires on 1/31/2006,
and is not for resale.

 

	
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11

 

ARTICLE 14 MISCELLANEOUS PROVISIONS

 

§ 14.1 Where reference is made in this Agreement to a
provision AIA Document A201-1997 or another Contract Document, the reference
refers to that provision as amended or supplemented by other provisions of the
Contract Documents.

 

§ 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.

(Insert rate of interest
agreed upon, if any.)

 

12% APR

 

(Usury laws and
requirements under the Federal Truth in Lending Act, similar state and local
consumer credit laws and other regulations at the Owner’s and Contractor’s
principal places of business, the location of the Project and elsewhere may
affect the validity of this provision. Legal advice should be obtained with
respect to deletions or modifications, and also regarding requirements such as
written disclosures or waivers.)

 

§ 14.3 The Owner’s representative is:

(Name, address and other
information.)

 

Michael Luzich

Diamond Jo Worth, LLC

400 East 3rd Street

Dubuque, IA 52001

563-690-2120

 

§ 14.3.1 The Owner representative’s designee is:

 

Kevin Fontenot

Diamond Jo Worth, LLC

400 East 3rd Street

Dubuque, IA 52001

563-690-2120

 

§ 14.4 The Contractor’s representative is:

(Name, address and other
information.)

 

Alan Kittleson, Vice President

Henkel Construction Company

208 East State Street, P.O. Box 920

Mason City, IA 50401

641-423-5674

 

§ 14.5 Neither the Owner’s nor the Contractor’s
representative shall be changed without ten days’ written notice to the other
party.

 

§ 14.6 Other provisions:

 

It is hereby mutually agreed that Owner and
Contractor are entering into this agreement without a Guaranteed Maximum Price
(GMP) to expedite the start of construction for the benefit of the Owner.

 

It is further mutually agreed that the
Contractor will submit to Owner a proposed Change Order setting forth the
Guaranteed Maximum Price (GMP) (together with all underlying assumptions) no
later than fifteen (15) working days after receipt of the Guaranteed Maximum
Price documents from Owner.  After
approval of the GMP, the Contractor will enter into subcontract agreements with
Subcontractors, Sub-subcontractors, material and

 

 

AIA Document
A111TM – 1997. Copyright © 1920, 1925, 1951, 1958, 1961, 1963, 1967, 1974,
1978, 1987 and 1997 by The American Institute of Architects.   All rights reserved.  WARNING: This AIA® Document is
protected by U.S. Copyright Law and International Treaties. Unauthorized
reproduction or distribution of this AIA® Document, or any portion
of it, may result in severe civil and criminal penalties, and will be
prosecuted to the maximum extent possible under the law.  This document was produced by AIA software at
11:28:39 on 06/04/2005 under Order No.1000159854_1 which expires on 1/31/2006,
and is not for resale.

 

	
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12

 

equipment suppliers and vendors in accordance
with this Contract.  Prior to the
approval of such Change Order, construction will commence pursuant to separate
agreements with certain Subcontractors, Sub-subcontractors, material and
equipment suppliers and vendors and the terms of such separate agreements shall
be replaced by such subcontract agreements.

 

ARTICLE 15 ENUMERATION OF CONTRACT DOCUMENTS

 

§ 15.1 The Contract Documents, except for Modifications
issued after execution of this Agreement, are enumerated as follows:

 

§ 15.1.1 The Agreement is this executed 1997 edition of the
Standard Form of Agreement Between Owner and Contractor, AIA Document
A111-1997.

 

§ 15.1.2 The General Conditions are the 1997 edition of the
General Conditions of the Contract for Construction, AIA Document A201-1997, as
modified by Agreement between Owner and Contractor.

 

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

 

	
  Document

  	
   

  	
  Title

  	
   

  	
  Pages

  	
   

  
	
  To be determined

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

§ 15.1.4 The Specifications are those contained in the
Project Manual dated as in Section 15.1.3, and are as follows:

(Either list the
Specifications here or refer to an exhibit attached to this Agreement.)

Title of Specifications exhibit:

To be determined

 

§ 15.1.5 The Drawings are as follows, and are dated    unless a different date is shown below:

(Either list the Drawings
here or refer to an exhibit attached to this Agreement.)

Title of Drawings exhibit:

To be determined

 

§ 15.1.6 The Addenda, if any, are as follows:

 

	
  Number

  	
   

  	
  Date

  	
   

  	
  Pages

  	
   

  
	
  To be determined

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

Portions of Addenda relating to bidding
requirements are not part of the Contract Documents unless the bidding
requirements are also enumerated in this Article 15.

 

§ 15.1.7 Other Documents, if any, forming part of the
Contract Documents are as follows:

(List here any additional
documents, such as a list of alternates that are intended to form part of the
Contract Documents. AIA Document A201-1997 provides that bidding requirements
such as advertisement or invitation to bid, Instructions to Bidders, sample
forms and the Contractor’s bid are not part of the Contract Documents unless
enumerated in this Agreement. They should be listed here only if intended to be
part of the Contract Documents.)

 

Exhibit “A” – “Insurance, Indemnification,
Bonding, and Waiver of Subrogation”

Attachment “A” – “Billing Labor Rate Schedule”

 

 

AIA Document
A111TM – 1997. Copyright © 1920, 1925, 1951, 1958, 1961, 1963, 1967, 1974,
1978, 1987 and 1997 by The American Institute of Architects.   All rights reserved.  WARNING: This AIA® Document is
protected by U.S. Copyright Law and International Treaties. Unauthorized
reproduction or distribution of this AIA® Document, or any portion
of it, may result in severe civil and criminal penalties, and will be
prosecuted to the maximum extent possible under the law.  This document was produced by AIA software at
11:28:39 on 06/04/2005 under Order No.1000159854_1 which expires on 1/31/2006,
and is not for resale.

 

	
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13

 

ARTICLE 16
INSURANCE AND BONDS

 

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

 

	
  Diamond Jo Worth, LLC 

  	
   

  	
  Henkel Construction Company

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
    OWNER (Signature)

  	
   

  	
    CONTRACTOR (Signature)

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
    Michael S. Luzich, President

  	
   

  	
    Thomas R. Schaefer, President

  	
   

  
	
    (Printed name
  and title)

  	
   

  	
    (Printed name
  and title)

  	
   

  

 

 

AIA Document
A111TM – 1997. Copyright © 1920, 1925, 1951, 1958, 1961, 1963, 1967, 1974,
1978, 1987 and 1997 by The American Institute of Architects.   All rights reserved.  WARNING: This AIA® Document is
protected by U.S. Copyright Law and International Treaties. Unauthorized
reproduction or distribution of this AIA® Document, or any portion
of it, may result in severe civil and criminal penalties, and will be
prosecuted to the maximum extent possible under the law.  This document was produced by AIA software at
11:28:39 on 06/04/2005 under Order No.1000159854_1 which expires on 1/31/2006,
and is not for resale.

 

	
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14

 

Additions
and Deletions Report for

 

AIA® Document
A111TM – 1997

 

This Additions and Deletions Report, as
defined on page 1 of the associated document, reproduces below all text the
author has added to the standard form AIA document in order to complete it, as
well as any text the author may have added to or deleted from the original AIA text.
Added text is shown underlined. Deleted text is indicated with a horizontal
line through the original AIA text.

 

Note: 
This Additions and Deletions Report is provided for information purposes
only and is not incorporated into or constitute any part of the associated AIA
document. This Additions and Deletions Report and its associated document were
generated simultaneously by AIA software at 11:28:39 on 06/04/2005.

 

PAGE 1

 

AGREEMENT made as of the 6th day of June in the year
Two Thousand Five

 

...

Diamond Jo Worth, LLC

...

400 East 3rd Street

...

Dubuque, IA 52001

...

Henkel Construction Company

...

208 East State Street, P.O. Box 920

...

Mason City, IA 50401

...

Excursion Gambling Boat

...

Worth County, IA

...

KGA Architecture

...

4495 South Polaris Avenue

...

Las Vegas, NV 89103

 

PAGE 2

 

Date of commencement shall be established as
June 6, 2005 or the date upon which Contractor has received owner’s written
Notice to Proceed, proof of financing acceptable to Contractor for the Initial
Contract Sum, and a fully executed Contract. 
Contractor shall acknowledge in writing when these conditions have been
met.  This acknowledgment shall be given
by a separate letter.

...

§ 4.3 The Contractor shall achieve Substantial Completion
of the Contractor’s Work not later than 235 calendar days from the date of
commencement, per Article 4.1:

...

“Substantial Completion” (or similar words
such as “Substantially Complete”, and any derivation thereof) means that the
following has occurred:

...

The construction of the Project (other than exterior items if same cannot be completed due to adverse weather
conditions) has been completed in accordance with this Contract and
the Contract Documents and in substantial compliance with all legal
requirements pertaining to Contractor’s Work so as to allow the Project to be
utilized for its intended purpose, in each case, as reasonably determined by
the Architect after consultation with the Contractor and the Owner (but without
giving effect to any work to be completed by the Owner or any other person
and/or any

 

 

Additions
and Deletions Report for AIA Document A111TM – 1997. Copyright © 1920, 1925, 1951,
1958, 1961, 1963, 1967, 1974, 1978, 1987 and 1997 by The American Institute of
Architects.   All rights reserved. 
WARNING: This AIA® Document is protected by U.S. Copyright
Law and International Treaties. Unauthorized reproduction or distribution of
this AIA® Document, or any portion of it, may result in severe civil
and criminal penalties, and will be prosecuted to the maximum extent possible
under the law.  This document was produced by AIA
software at 11:28:39 on 06/04/2005 under Order No.1000159854_1 which expires on
1/31/2006, and is not for resale.

 

	
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1

 

work for which the Contractor has no legal obligation to control, contractual
relationship with, or
responsibility to complete under the Contract).

...

§ 4.3.1 The Contractor shall achieve Substantial Completion
on or before the date which is 235 calendar days after all items in Article 4.1
Paragraph 2 above have been satisfied. 
The Contractor acknowledges and agrees that time is of the essence as to
such date of Substantial Completion and the Contractor and the Owner each agree
that the damages to be suffered by the Owner for the Contractor’s failure to
achieve Substantial Completion by said date are not susceptible to
calculation.  Accordingly, the Contractor
and the Owner agree that the Guaranteed Maximum Price (GMP) shall be reduced by
an amount equal to $10,000 for each day that Substantial Completion extends
beyond said date and the Owner acknowledges that such liquidated damages shall
be the only damages to be recovered by the Owner with respect to failure to
achieve Substantial Completion by said date. 
Adjustments to Guaranteed Maximum Price (GMP) as set forth in this
Section shall be by Change Order which shall be prepared by the Architect for
signature by the Owner, the Contractor and the Architect within ten (10) days
after Substantial Completion.

 

PAGE 3

 

	
  59,400
  Square Foot Casino

  	
   

  	
  Two-Hundred-Thirty-Five
  (235) Calendar Days

  
	
   

  	
   

  	
  from the
  Date of Commencement per Articles 4.1

  
	
   

  	
   

  	
  and 4.3
  above.

  

...

§ 5.1.2 The Contractor’s Fee is as follows:

...

Total fee compensation to be paid to
Contractor shall be a flat fee of Seven-Hundred-Thousand and No/100 Dollars
($700,000.00) plus 3.5% of the Cost of the Work involved in any additive Change
Orders (other than the Change Orders for the hotel construction and the
GMP).  Owner may add the construction of
a 100 room hotel by Change Order for the separate flat fee of Two-Hundred-Fifty-Thousand
and No/100 Dollars ($250,000.00) if hotel construction is added by Change Order
prior to January 1, 2006.  Fees shall not
be reduced for change orders resulting in a lower cost of the Work.

...

§ 5.2.1 The sum of the Cost of the Work and the Contractor’s
Fee shall be a maximum sum guaranteed by the Contractor, 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.

...

Initial Contract Sum (including partial
Contractor’s Fee) shall be Nine-Hundred-Twenty-Five-Thousand and No/100 Dollars
($925,000.00) and shall include project mobilization, site fencing, caisson
drilling and installation, and site mass earthwork.

...

Guaranteed Maximum Price (GMP) shall be added
to this Contract by Change Order.  The
Guaranteed Maximum Price shall be an amount mutually agreed to by Owner and
Contractor which includes the Cost of the Work as defined in Article 7 plus the
Contractor’s Fee.

 

PAGE 4

 

§ 5.2.1.1 From and after the date on which the Guaranteed
Maximum Price (GMP) has been established and all of the Work has been
contracted with Subcontractors and providers of equipment and materials in
accordance with the Contract Documents, any subsequent reductions in the scope
of the Work which reduce the Cost of the Work in the Guaranteed Maximum Price (GMP)
will be incorporated into the Contract by a Change Order which reduces the GMP
by an amount equal to the cost reduction generated by that change in
scope.  Prior to Substantial Completion,  reductions in cost and/or savings achieved by
the Contractor in any manner other than a reduction in scope shall not result
in a reduction of the Guaranteed Maximum Price.

...

Within (30) days after the date on which
Substantial Completion occurs (or such other date approved by the Contractor
and the Owner), the Cost of the Work shall be determined by the Owner and the
Contractor.  In the event

 

 

Additions
and Deletions Report for AIA Document A111TM – 1997. Copyright © 1920, 1925, 1951,
1958, 1961, 1963, 1967, 1974, 1978, 1987 and 1997 by The American Institute of
Architects.   All rights reserved. 
WARNING: This AIA® Document is protected by U.S. Copyright
Law and International Treaties. Unauthorized reproduction or distribution of
this AIA® Document, or any portion of it, may result in severe civil
and criminal penalties, and will be prosecuted to the maximum extent possible
under the law.  This document was produced by AIA
software at 11:28:39 on 06/04/2005 under Order No.1000159854_1 which expires on
1/31/2006, and is not for resale.

 

	
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2

 

that the sum of the Cost of the Work and the
Contractor’s Fee are less than the GMP, 100% of all savings (other than cash
discounts which are for the benefit of the Contractor pursuant to Article 9)
will be retained by the Owner.  Such
savings shall reduce the Cost of the Work and the parties will enter into a
Change Order which reduces the GMP by an amount equal to such savings.

...

To be determined.

...

To
be determined

...

To
be determined

...

To be determined

...

§ 5.2.6 To the extent that the Drawings and Specifications
are anticipated to require further development by the Architect, the Contractor
has provided in the Guaranteed Maximum Price for such further development
consistent with the Contract Documents as set forth in a change order.  Such further development does not include
such things as changes in scope, systems, kinds and quality of materials,
finishes or equipment, all of which, if required, shall be incorporated by
Change Order.

 

PAGE 5

 

ARTICLE 7  COSTS
TO BE REIMBURSED AND INCLUDED IN THE GUARANTEED MAXIMUM PRICE (GMP)

...

Labor Costs of the Contractor’s supervisory
and administrative personnel and workmen and women when at the site or engaged
in the performance of Contractor’s Work for this project (including Work
performed pursuant to Change Orders).

...

See Attachment “A” – Worth County Excursion
Gambling Boat Labor Rate Schedule for labor rates which will apply to the
Contract.  These labor rates include all
benefits, workers compensation costs, and other amounts paid or payable to, or
with respect to, such personnel and workmen and women and shall remain in
effect throughout construction of the Project (including Work performed
pursuant to Change Orders) other than the Change Order for the hotel
construction which shall set forth a separate Guaranteed Maximum Price for the
hotel construction) and shall apply to all Henkel Construction Company project
management and field labor performed on the Project.

...

Amounts properly billed by Subcontractors for
Work in accordance with subcontracts covering their portions of the Work which
subcontracts shall be approved by the Owner and the Contractor in accordance
with the Contract Documents.  If Owner’s
rejection of Subcontractor, Sub-subcontractor, supplier, or vendor results in a
purchase cost or schedule duration which exceeds what Contractor has proposed,
then a Change Order shall be executed by Owner adding such extra costs and/or
time.

 

PAGE 6

 

§ 7.5.2 Rental charges for temporary facilities, machinery,
fuel, oil, grease, equipment, and hand tools not customarily owned by
construction workers that are provided by the Contractor at the site, whether
rented from the Contractor or others, and costs of transportation,
installation, minor repairs and replacements, dismantling and removal thereof.
Rates and quantities of equipment rented shall be subject to the Owner’s prior
approval.  Internal rental rates for
Henkel Construction Company furnished rental equipment shall be hourly and
shall be based on 100% of current AED Green Book rates.

...

§ 7.5.4 Costs of document reproductions, facsimile
transmissions and long-distance telephone calls, postage and parcel delivery
charges, cellular telephone charges and pager services, photographs, telephone
and internet service at the site and reasonable petty cash expenses of the site
office.

...

All applicable taxes and fees associated with
Contractor’s Work.

 

 

Additions
and Deletions Report for AIA Document A111TM – 1997. Copyright © 1920, 1925, 1951,
1958, 1961, 1963, 1967, 1974, 1978, 1987 and 1997 by The American Institute of
Architects.   All rights reserved. 
WARNING: This AIA® Document is protected by U.S. Copyright
Law and International Treaties. Unauthorized reproduction or distribution of
this AIA® Document, or any portion of it, may result in severe civil
and criminal penalties, and will be prosecuted to the maximum extent possible
under the law.  This document was produced by AIA
software at 11:28:39 on 06/04/2005 under Order No.1000159854_1 which expires on
1/31/2006, and is not for resale.

 

	
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3

 

...

PAGE 7

 

§ 7.6.6 Data processing costs related to the Work including
all hardware and software costs.

...

§ 7.6.8 Legal, mediation and arbitration costs, including
attorneys’ fees, other than those arising from disputes between the Owner and
Contractor and/or the Contractor, a Subcontractor, and/or a Sub-Subcontractor
or any of them, reasonably incurred by the Contractor in the performance of the
Work and with the Owner’s prior written approval; which approval shall not be
unreasonably withheld.

...

§ 7.6.10 Cost of necessary safety equipment, supplies, drug
testing, safety seminars, and safety incentives.

...

§ 7.6.11 Meals and lodging while conducting business for the
Project.

...

§ 7.6.12 Offsite storage, warehousing and fabrication, if
necessary.

...

§ 7.6.13 Costs incurred after completion of the Project for
warranty items that cannot be billed to Subcontractors, up to a maximum of
Fifty Thousand and No/100 Dollars ($50,000.00).

...

§ 7.7.1 Any cost not specifically excluded by Article 8
which Contractor incurs in the performance of the Work or furtherance of the
Project.

...

ARTICLE 8 COSTS NOT TO BE REIMBURSED NOR INCLUDED IN
THE GUARANTEED MAXIMUM PRICE (GMP)

 

PAGE 8

 

§ 9.2 Amounts that accrue to the Owner in accordance with
the provisions of Section 9.1 shall be credited to the Owner dollar for dollar
as a deduction from the Cost of the Work.

...

§ 10.4 The Contractor shall require a clause in all
subcontracts and subsubcontracts prohibiting the Contactors or such
Subcontractor or Subsubcontractor thereunder, as the case may be, from
receiving any discount, refund, inducement, benefit or payment which is not to
or for the benefit of the Owner and which is not reflected in the terms of the
applicable subcontract or subsubcontract, as applicable.  Each subcontractor and subsubcontractor shall
certify as to such statement after written request by the Contractor, the Owner
or the Owner’s Representative or his Designee.

 

PAGE 9

 

§ 12.1.3 Provided that an Application for Payment is received
by the Architect not later than the 10th day of a month, the Owner shall make
payment to the Contractor not later than the 30th day of the same month. If an
Application for Payment is received by the Architect after the application date
fixed above, payment shall be made by the Owner not later than twenty (20) days
after the approval by the Owner’s Project Representative or Project
Representative’s Designee.

...

§ 12.1.4 

 

 

Additions
and Deletions Report for AIA Document A111TM – 1997. Copyright © 1920, 1925, 1951,
1958, 1961, 1963, 1967, 1974, 1978, 1987 and 1997 by The American Institute of
Architects.   All rights reserved. 
WARNING: This AIA® Document is protected by U.S. Copyright
Law and International Treaties. Unauthorized reproduction or distribution of
this AIA® Document, or any portion of it, may result in severe civil
and criminal penalties, and will be prosecuted to the maximum extent possible
under the law.  This document was produced by AIA
software at 11:28:39 on 06/04/2005 under Order No.1000159854_1 which expires on
1/31/2006, and is not for resale.

 

	
  User Notes:

  	
   

  	
  (3955002732)

  

 

4

 

...

With each Application for Payment, the
Contractor shall submit timesheets, petty cash accounts, and along with the
current progress payment, copies of invoices and other documentation to
substantiate Contractor’s costs to date as the date of the Progress Payment
Application unless Contractor’s cost of the work has exceeded the GMP.  After each such Progress Payment Application
has been approved and funded by Owner, the Contractor shall make the payments
to the Subcontractors, Sub-subcontractors, vendors, or suppliers as set forth in
such approved Progress Payment Application.

...

§ 12.1.5 Each Application for Payment shall be based on the
most recent schedule of values approved by the Contractor, the Architect, the
Owner, and the Owner’s Representative in accordance with the Contract
Documents. The schedule of values shall allocate the entire Guaranteed Maximum
Price among the various portions of the Work, except that the Contractor’s Fee
shall be 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 and Owner’s Representative may require. This schedule, unless
objected to by the Architect or the Owner, shall be used as a basis for
reviewing the Contractor’s Applications for Payment.

...

.3              add the Contractor’s
Fee, less retainage.  Retainage shall be
10% until the Work under the Contract Agreement is 50% complete and has been
performed in accordance with the term thereof after which no further retainage
will be held and none shall be released until Substantial Completion, except by
mutual agreement between Owner and Contractor. The Contractor’s Fee shall be
computed upon the Cost of the Work described in the two preceding Clauses at
the rate stated in Section 5.1.2 or, if the Contractor’s Fee is stated as a
fixed sum in that Subparagraph, shall be an amount that 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;

 

PAGE 10

 

§ 12.1.8 Except with the Owner’s prior approval, payments to
Subcontractors shall be subject to retainage. 
Retainage shall be 10% until the Work under the subcontract agreement is
50% complete and has been performed in accordance with the terms thereof after
which no further retainage will be held and none shall be released until
Substantial Completion, except by mutual agreement between Owner and
Contractor.  The Owner and the Contractor
shall agree upon a mutually acceptable procedure for review and approval of
payments and retention for Subcontractors. 
The Contractor shall not request payment from Owner for any amount being
withheld from a Subcontractor until such time as such withheld payment is to be
paid to the Subcontractor in accordance with its subcontract agreement.

...

§ 12.1.9 In taking action on the Contractor’s Applications
for Payment, the Architect, the Owner’s Representative, and/or his Designee
shall be entitled to rely on the accuracy and completeness of the information
furnished by the Contractor and shall not be deemed to represent that the
Architect, the Owner, the Owner’s Representative, and/or his Designee has made
a detailed examination, audit or arithmetic verification of the documentation
submitted in accordance with Section 12.1.4 or other supporting data; that the
Architect, the Owner, the Owner’s Representative, and/or his Designee has made
exhaustive or continuous on-site inspections or that the Architect, the Owner,
the Owner’s Representative, and/or his Designee has made examinations to
ascertain how or for what purposes the Contractor has used amounts previously
paid on account of the Contract. Such examinations, audits and verifications,
if required by the Owner, will be performed by the Owner’s accountants acting
in the sole interest of the Owner.

...

.2              a final Certificate
for Payment has been issued by the Architect after approval by the Owner’s
Representative or his Designee.

...

§ 12.2.3 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 Section
12.2.1 have been met, the Architect will, within seven days after approval of
the written report by the Owner’s accountants and the Owner’s Representative or
his Designee, either issue to the Owner a final Certificate for Payment with a
copy to the Contractor, or notify the

 

 

Additions
and Deletions Report for AIA Document A111TM – 1997. Copyright © 1920, 1925, 1951,
1958, 1961, 1963, 1967, 1974, 1978, 1987 and 1997 by The American Institute of
Architects.   All rights reserved. 
WARNING: This AIA® Document is protected by U.S. Copyright
Law and International Treaties. Unauthorized reproduction or distribution of
this AIA® Document, or any portion of it, may result in severe civil
and criminal penalties, and will be prosecuted to the maximum extent possible
under the law.  This document was produced by AIA
software at 11:28:39 on 06/04/2005 under Order No.1000159854_1 which expires on
1/31/2006, and is not for resale.

 

	
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  (3955002732)

  

 

5

 

Contractor and Owner in writing of the
Architect’s reasons for withholding a certificate as provided in Section 9.5.1
of the AIA Document A201-1997. The time periods stated in this Section 12.2.3
supersede those stated in Section 9.4.1 of the AIA Document A201-1997.  Total time for review and approval of the
accounting report and issuance of a final Certificate of Payment, By Owner,
Architect, Owner’s Accountants, Owner’s Representative, and all other parties
deemed necessary by Owner shall not exceed 30 days (unless additional time is
reasonably required to correct errors and/or inconsistencies in the accounting
report and the Certificate of Payment).

 

PAGE 11

 

§ 12.2.5 If, subsequent to final payment and 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 up to a
maximum warranty cost of Fifty Thousand and No/100 Dollars ($50,000.00) 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 the Contractor has participated
in savings as provided in Section 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.

...

§ 13.1 The Contract may be terminated by the Contractor, or
by the Owner for convenience, as provided in Article 14 of AIA Document
A201-1997.  However, the amount to be
paid to the Contractor under Section 14.1.3 of AIA Document A201-1997 shall not
exceed the amount the Contractor would be entitled to receive under Section
13.2 below, except as follows:

...

If the contract is terminated by the Owner,
Contractor shall be paid for all costs of work incurred to date of said
termination, plus reasonable termination costs not to exceed Thirty Thousand
and No/100 Dollars ($30,000.00) for items including but not limited to
demobilization, termination of contracts, re-stocking charges, etc., and
Contractor’s fee of three and one half percent (3 1⁄2%) on all costs of
construction and termination.

...

§ 13.3 The Owner shall also pay the Contractor the actual
out of pocket costs of the Contractor, either by purchase or rental at the election
of the Owner, for any equipment owned by the Contractor that the Owner elects
to retain and that is not otherwise included in the Cost of the Work under
Section 13.2.1. To the extent that the Owner elects to take legal assignment of
subcontracts and purchase orders (including rental agreements), the Contractor
shall, as a condition of receiving the payments referred to in this Article 13,
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 purpose of fully vesting in the
Owner the rights and benefits of the Contractor under such subcontracts or
purchase orders.

 

PAGE 12

 

12% APR

...

Michael Luzich

...

Diamond Jo Worth, LLC

...

400 East 3rd Street

...

Dubuque, IA 52001

...

563-690-2120

...

§ 14.3.1 The Owner representative’s designee is:

...

Kevin Fontenot

...

Diamond Jo Worth, LLC

...

 

 

Additions
and Deletions Report for AIA Document A111TM – 1997. Copyright © 1920, 1925, 1951,
1958, 1961, 1963, 1967, 1974, 1978, 1987 and 1997 by The American Institute of
Architects.   All rights reserved. 
WARNING: This AIA® Document is protected by U.S. Copyright
Law and International Treaties. Unauthorized reproduction or distribution of
this AIA® Document, or any portion of it, may result in severe civil
and criminal penalties, and will be prosecuted to the maximum extent possible
under the law.  This document was produced by AIA
software at 11:28:39 on 06/04/2005 under Order No.1000159854_1 which expires on
1/31/2006, and is not for resale.

 

	
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6

 

400 East 3rd Street

...

Dubuque, IA 52001

...

563-690-2120

...

Alan Kittleson, Vice President

...

Henkel Construction Company

...

208 East State Street, P.O. Box 920

...

Mason City, IA 50401

...

641-423-5674

...

It is hereby mutually agreed that Owner and
Contractor are entering into this agreement without a Guaranteed Maximum Price
(GMP) to expedite the start of construction for the benefit of the Owner.

...

It is further mutually agreed that the
Contractor will submit to Owner a proposed Change Order setting forth the
Guaranteed Maximum Price (GMP) (together with all underlying assumptions) no
later than fifteen (15) working days after receipt of the Guaranteed Maximum
Price documents from Owner.  After
approval of the GMP, the Contractor will enter into subcontract agreements with
Subcontractors, Sub-subcontractors, material and equipment suppliers and
vendors in accordance with this Contract. 
Prior to the approval of such Change Order, construction will commence
pursuant to separate agreements with certain Subcontractors, Sub-subcontractors,
material and equipment suppliers and vendors and the terms of such separate
agreements shall be replaced by such subcontract agreements.

 

PAGE 13

...

...

...

§ 15.1.2 The General Conditions are the 1997 edition of the
General Conditions of the Contract for Construction, AIA Document. A201-1997,
as modified by Agreement between Owner and Contractor.

...

To
be determined

...

Title of Specifications exhibit:

...

To be determined

...

Title of Drawings exhibit:

...

To be determined

...

To
be determined

...

Exhibit “A” – “Insurance, Indemnification,
Bonding, and Waiver of Subrogation”

...

 

 

Additions
and Deletions Report for AIA Document A111TM – 1997. Copyright © 1920, 1925, 1951,
1958, 1961, 1963, 1967, 1974, 1978, 1987 and 1997 by The American Institute of
Architects.   All rights reserved.  WARNING: This AIA® Document is
protected by U.S. Copyright Law and International Treaties. Unauthorized
reproduction or distribution of this AIA® Document, or any portion
of it, may result in severe civil and criminal penalties, and will be
prosecuted to the maximum extent possible under the law.  This document was produced by AIA software at
11:28:39 on 06/04/2005 under Order No.1000159854_1 which expires on 1/31/2006,
and is not for resale.

 

	
  User Notes:

  	
   

  	
  (3955002732)

  

 

7

 

Attachment “A” — “Billing Labor Rate Schedule”

 

PAGE 14

 

...

	
  Diamond Jo Worth, LLC

  	
   

  	
  Henkel Construction Company

  	
   

  
	
  ...

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Michael S. Luzich, President

  	
   

  	
  Thomas R. Schaefer, President

  	
   

  

 

 

Additions
and Deletions Report for AIA Document A111TM – 1997. Copyright © 1920, 1925, 1951,
1958, 1961, 1963, 1967, 1974, 1978, 1987 and 1997 by The American Institute of
Architects.   All rights reserved. 
WARNING: This AIA® Document is protected by U.S. Copyright
Law and International Treaties. Unauthorized reproduction or distribution of
this AIA® Document, or any portion of it, may result in severe civil
and criminal penalties, and will be prosecuted to the maximum extent possible
under the law.  This document was produced by AIA
software at 11:28:39 on 06/04/2005 under Order No.1000159854_1 which expires on
1/31/2006, and is not for resale.

 

	
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  (3955002732)

  

 

8

 

Certification of Document’s Authenticity

AIA®
Document D401TM  – 2003

 

I,  ,
hereby certify, to the best of my knowledge, information and belief, that I
created the attached final document simultaneously with its associated
Additions and Deletions Report and this certification at 11:28:39 on 06/04/2005
under Order No. 1000159854_1 from AIA Contract Documents software and that in
preparing the attached final document I made no changes to the original text of
AIA® Document A111TM – 1997 - Standard Form of Agreement Between
Owner and Contractor where the basis for payment is the COST OF THE WORK PLUS A
FEE with a negotiated Guaranteed Maximum Price, as published by the AIA in its
software, other than those additions and deletions shown in the associated
Additions and Deletions Report.

 

	
   

  	
   

  
	
  (Signed)

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  (Title)

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  (Dated)

  	
   

  

 

 

AIA Document
D401TM – 2003. Copyright © 1992 and 2003 by The American Institute of
Architects.   All rights reserved. 
WARNING: This AIA® Document is protected by U.S. Copyright
Law and International Treaties. Unauthorized reproduction or distribution of
this AIA® Document, or any portion of it, may result in severe civil
and criminal penalties, and will be prosecuted to the maximum extent possible
under the law.  This document was produced by AIA
software at 11:28:39 on 06/04/2005 under Order No.1000159854_1 which expires on
1/31/2006, and is not for resale.

 

	
  User Notes:

  	
   

  	
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1EXHIBIT 10.1

 

Confidential

 

 

iVOW, Inc.

 

SUBSCRIPTION AGREEMENT

 

Dated as of May          ,
2005

 

Name of Subscriber:

Address of Subscriber:

 

Facsimile Number:

Telephone Number:

E-Mail Address:

Tax ID Number of Subscriber:

 

TO:         iVOW, Inc., a Delaware Corporation (the “Company”).

 

SUBSCRIPTION TO PURCHASE, units (a “Unit” or the “Units”) consisting of shares of
Common Stock, $0.01 par value per share, and warrants (the “Common Stock
Warrants”) exercisable for the purchase of shares of Common Stock of the Company,
on the terms and conditions set forth on Exhibit A hereto.  Each
Unit consists of one share of Common Stock and a Common Stock Warrant to
purchase one share of Common Stock of the Company. The Common Stock and the
Common Stock Warrants, and the shares of Common Stock issuable upon the
exercise of the Common Stock Warrants, are collectively referred to herein as
the “Securities”.  The initial
closing (the “Initial Closing”) of the offering will occur after
subscriptions for at least $2.0 million (the “Minimum Offering Amount”) have
been received and the funds representing the Minimum Offering Amount have been
placed into an escrow account.  The
Initial Closing shall consist of that number of Units that represent no more
than 19.9% of the outstanding voting power of the Company as defined in Rule 4350(i) of
the Nasdaq Stock Market.  The final
closing (the “Final Closing”) will take

 

 

place for the remaining offering amount held in the escrow account within
5 days of Stockholder Approval for the offering.

 

Price Per Unit:    $0.30 per Unit

 

Subscription Amount:  $                   
(the “Subscription Amount”) delivered herewith (as provided by paragraph
“A” below).

 

The undersigned Subscriber hereby
irrevocably subscribes for, and agrees to purchase, the Securities, at the
Subscription Amount (this “Subscription”), in accordance with and
subject to the terms, provisions and conditions set forth herein and the
exhibits hereto.  When this Subscription
Agreement is completed, signed and returned, with payment, by the undersigned
Subscriber, and accepted by the Company, the Subscriber will become entitled to
all of its benefits and subject to all of the obligations, restrictions and
limitations set forth herein and in the exhibits hereto.

 

The Subscriber understands that
this Subscription is an irrevocable offer to purchase the Securities and may be
accepted or rejected in whole or in part for any reason whatsoever by the
Company, at any time on or prior to June 15, 2005, unless otherwise
extended by the Placement Agent (as defined herein) and the Company (but in no
event later than June 30, 2005).

 

This Subscription is subject to the
Company’s receipt, at the Initial Closing, of executed Subscription Agreements
that have been accepted by the Company to purchase Units with aggregate gross
proceeds to the Company in an amount equal to at least $2,000,000.

 

This Subscription is subject to the
Company’s execution of a definitive voting agreement with the holders of more
than 50% of the Company’s outstanding shares of Common Stock and Preferred
Stock, providing that such holders shall vote in favor of approval of the
issuance of the shares of Common Stock and the shares of Common Stock issuable
upon the exercise of the Common Stock Warrants.

 

A.            Payment.  In connection with this Subscription
Agreement and subject to acceptance by the Company, the Subscriber hereby
delivers the Subscription Amount.  The
Subscription Amount will be held in a separate escrow fund pending the Company’s
acceptance or rejection of this Subscription. 
If the Company rejects this Subscription, the Subscription Amount shall
be returned in full without interest; and the Subscriber shall have no further
rights or obligations under or in respect of this Subscription.  See Exhibit B
for payment instruction.

 

B.            Representations and Warranties.    In connection with this Subscription, the Subscriber
hereby represents and warrants to, agrees with the Company, acknowledges and
confirms as follows:

 

2

 

(1)           The Securities being subscribed for by the
Subscriber will be purchased for the account of the Subscriber for investment
only and not with a view to, nor with any intention of, a distribution or
resale thereof, in whole or in part, or the grant of any participation
therein.  The Subscriber has no agreement
or other arrangement with any other person to sell, transfer, or pledge any
part of the Securities or any agreement or arrangement that would guarantee the
Subscriber any profit or against any loss with respect to such Securities, and
the Subscriber has no plans to enter into any such agreement or
arrangement.  The Subscriber acknowledges
and confirms that it understands that the Securities, and those securities
issuable upon exercise or conversion of the Securities, as the case may be,
have not been registered under the Securities Act of 1933, as amended (the “Securities
Act”), and the rules and regulations promulgated thereunder, or the
securities laws of any state or other jurisdiction, and cannot be disposed of
unless subsequently registered under the Securities Act and any applicable laws
of states or other jurisdictions or an exemption from such registration is
available.

 

(2)           The Securities are
being offered and sold by the Company under an exemption from registration
provided by the Securities Act and the rules and regulations promulgated
thereunder in reliance, in good faith, upon the representations and warranties
of the Subscriber contained herein.

 

(3)           The Subscriber:

 

(A) has been furnished a copy of the Company’s confidential offering package dated May 25, 2005 (the “PPM”);
 
(B) has carefully read, has carefully considered and fully understands the provisions of:
 
(i) the PPM (including, without limitation, the terms of this offering and the Securities offered by the Company as described in the “OFFERING” section of the PPM and the materials under the “RISK FACTORS” section of the PPM);
 
(ii) all documents and information included as exhibits, or incorporated in the PPM by reference, including but not limited to the filings and information made by the Company under the Exchange Act (as defined in the PPM); and
 
(iii) this Subscription Agreement (and the exhibits and annexes hereto).
 
(C) has been given sufficient access and opportunity to:
 
(i) examine all material books and records, and material contracts and documents of the Company and such other information and documents as the Subscriber has requested; and

 

3

 

(ii) ask questions of the Company and its management, and, if the Subscriber asked questions of the Company or its management, has received satisfactory answers.
 
(D) represents and warrants that in making the decision to invest in the Securities, the Subscriber has relied on independent investigations made by the Subscriber and the Subscriber’s own professional advisors.  The Subscriber acknowledges that no representation has been made by the Company or otherwise by or on behalf of the Company concerning the Securities (including any current value of the Securities or as to any prospective return on investment in the Securities), the Company, its business or prospects, or other matters, except as set forth in the PPM.

 

(4)           The Subscriber is able (i) to bear the economic
risk of the Subscriber’s investment in the Securities; (ii) to hold the
Securities for an indefinite period of time and understands that the Securities
cannot be resold unless subsequently registered under the Securities Act or
unless an exemption from such registration is available, as established by an
opinion of counsel satisfactory to the Company; and (iii) currently, and
based on existing conditions, hereafter will be able to afford a complete loss
of such investment.

 

(5)           The Subscriber understands the business in which the
Company is engaged and has such knowledge and experience in financial and
business matters that the Subscriber is capable of evaluating the merits and
risks of the Subscriber’s investment in the Securities and of making an
informed investment decision with respect thereto.

 

(6)           The Subscriber hereby acknowledges and confirms
that, except as set forth in the PPM, neither the Company nor any of its
officers, directors, affiliates, agents or representatives has made any
representations or warranties (oral or written) concerning (i) the
Securities; (ii) the Subscriber’s investment in the Securities; or (iii) the
Company, its business, prospects, or anticipated financial or other results, or
other matters.

 

(7)           The Subscriber understands that all certificates or other documents evidencing the Securities will bear substantially the following legend:
 
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR ANY STATE SECURITIES OR “BLUE SKY” LAWS, AND MAY NOT BE OFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, OR OTHERWISE DISPOSED OF UNLESS REGISTERED PURSUANT TO THE PROVISIONS OF SUCH ACT AND BLUE SKY LAWS OR AN EXEMPTION THEREFROM IS AVAILABLE AS ESTABLISHED BY A WRITTEN OPINION OF COUNSEL ACCEPTABLE TO THE CORPORATION.

 

4

 

(8)           The Subscriber understands that no federal or state agency has passed on or made any recommendation or endorsement of the Securities.
 

(9)           The Subscriber hereby represents and warrants that:

 

(Please check the boxes opposite each of the items in clauses (a) and
(b) below which is true of the Subscriber. 
If clause (a) is checked, the Subscriber need not complete the
items under clause (c).  If clause (a) is
not checked, please complete each blank in clause (c) below.  Please also initial each item checked or
completed.)

 

o            (a)           The Subscriber is an “accredited
investor” (as such term is defined in Rule 501(a) of Regulation D
promulgated by the Securities and Exchange Commission under the Securities Act)
for at least one of the reasons specified below:

 

o            The
Subscriber’s net worth (together with the net worth of the Subscriber’s spouse)
exceeds $1,000,000.

 

o            The
Subscriber’s individual income in each of the two immediately previous calendar
years has been $200,000 or more and his current year’s income is reasonably
expected to be at least equal to that amount; or, the Subscriber’s joint income
with his spouse in each of the two immediately previous calendar years has been
$300,000 or more and the current year’s joint income is reasonably expected to
equal at least that amount.

 

o            The
Subscriber is a director or executive officer of the Company.

 

o            The
Subscriber, if other than an individual, either (A) is a corporation,
partnership, business trust or 501(c)(3) organization which has total
assets in excess of $5,000,000 and has not been formed for the specific purpose
of purchasing the Securities, or (B) is an entity (other than a trust)
with only accredited investors as its partners, members or stockholders, or (C) is
a trust other than a business trust which has assets in excess of $5,000,000,
has not been organized for the purposes of acquiring the investment in the
Securities and has its investment hereunder directed by a person described in
the first sentence of the following clause (b). 
The Subscriber, if other than an individual, represents that this
Subscription has been duly authorized by all necessary corporate, partnership
or other governance action on its part.

 

o            (b)           The
Subscriber has (or, if other than an individual, is directed by a person who
has) such knowledge and experience in financial and business matters that he or
she is capable of evaluating the risks of an investment in the Securities.  The Subscriber has adequate means of
providing for current financial needs and contingencies, has no need for
liquidity in the investment

 

5

 

in the Securities, and is able to
bear the substantial economic risks of the investment in the Securities for an
indefinite period.

 

(c)           The Subscriber (if an individual) hereby represents
and warrants that:

 

(If the box opposite Paragraph
(9)(a) above has not been checked,
please complete the blanks below in this clause (c).)

 

The Subscriber’s higher education
consists of the following (include college or university, any graduate programs
and any other specialized education programs relevant to the Subscriber’s
business experience):

 

The Subscriber’s principal business
and professional activities during the last five years are as follows:

 

(10)         The Subscriber hereby represents and warrants as to
the following personal information:

 

(Each Subscriber should furnish all of the information called for below
in this Paragraph (10).)

 

The Subscriber’s residence address
(or, if other than an individual, principal office address) is as follows:

 

The Subscriber (if an individual)
maintains a house or apartment in the following state(s) in addition to his or
her residence:

 

The Subscriber (if an individual) pays state income taxes in the following
state:

 

The Subscriber (if an individual)
holds a driver’s license in the following state:

 

The Subscriber (if an individual)
is registered to vote in the following state:

 

6

 

(11)         This Subscription Agreement and any other documents
executed and delivered by the Subscriber in connection herewith have been duly
executed and delivered by the Subscriber, and are the legal, valid and binding
obligations of the Subscriber enforceable in accordance with their respective
terms.

 

(12)         The execution and delivery of this Subscription
Agreement and any other documents executed and delivered by the Subscriber in
connection herewith do not, and the performance and consummation of the terms
and transactions set forth or contemplated herein will not, contravene or
result in a default under any provision of existing law or regulations to which
the Subscriber is subject, or any indenture, mortgage or other agreement or
instrument to which the Subscriber is a party or by which he, she or it is
bound and does not require on the part of the Subscriber any approval,
authorization, license or filing from or with any foreign, federal or state or
municipal board or agency.

 

(13)         The Subscriber acknowledges that Silicon Valley Bank
is acting only as an escrow agent in connection with the offering of the
Securities described here, and has not endorsed, recommended or guaranteed the
purchase, value or repayment of such Securities.

 

C.            Effectiveness of Subscription.

 

(1)           This Subscription shall be binding upon the
successors and permitted assigns of the Subscriber and, when accepted by the
Company, shall be binding upon the successors and assigns of the Company.

 

(2)           All of the agreements,
representations and warranties made by the Subscriber in this Subscription
Agreement shall survive the execution and delivery hereof.  The Subscriber shall immediately notify the
Company upon discovering that any of the representations or warranties made
herein were false when made or has, as a result of changes in circumstances,
become false.  Every provision of this
Subscription Agreement is intended to be severable, and if any term or
provision hereof is held to be illegal or invalid for any reason whatsoever,
such illegality or invalidity shall not affect the validity of the remainder
hereof.

 

(3)           The agreements of the Subscriber and the Company set
forth herein shall become effective and binding upon the undersigned, without
right of revocation, upon the Company’s acceptance of this Subscription.

 

D.            Hedging.                Subscriber will not engage in any hedging or other
transaction which is designed to or could reasonably be expected to lead to or
result in a disposition of the Securities by the Subscriber or any other person
or entity.  Such prohibited hedging or
other transactions include without limitation effecting any short sale or
having in effect any short position (whether or not such sale or position is
against the box and regardless of when such position was entered into) or any
purchase, sale or grant of any right (including without limitation any put or
call option) with respect to the Securities.

 

7

 

E.             Stockholder Approval.

 

(1)           Unless previously prepared and filed, as soon as
practicable following the acceptance of this Subscription, the Company agrees
that it shall prepare and file with the SEC a preliminary proxy statement (as
amended and supplemented, the “Proxy Statement”) in connection with the
meeting of its stockholders (the “Stockholders Meeting”).  At the Stockholders Meeting, the Company will
seek to obtain stockholder approval (“Stockholder Approval”) of the
issuance of the shares of Common Stock and shares of Common Stock upon the
exercise of the Common Stock Warrants. The Company shall use its reasonable
best efforts to respond to any written comments of the SEC or its staff, and,
to the extent permitted by law, to cause the Proxy Statement to be mailed to
the Company’s stockholders as promptly as practicable after responding to all
such comments to the satisfaction of the SEC staff. Subscriber shall cooperate
with the Company in the preparation of the Proxy Statement or any amendment or
supplement thereto and shall furnish the Company with all information required
to be included therein with respect to Subscriber, the Subscription and this
offering.

 

(2)           Without limiting the generality of the foregoing,
the Subscriber shall correct promptly any information provided by it to be used
specifically in the Proxy Statement, if required, that shall have become false
or misleading in any material respect and shall take all reasonable steps
necessary to file with the SEC and have declared effective or cleared by the
SEC any amendment or supplement to the Proxy Statement so as to correct the
same and to cause the Proxy Statement as so corrected to be disseminated to the
stockholders of the Company, in each case to the extent required by applicable
law.

 

F.             Brokers or Finders.           The Subscriber has not engaged any brokers, finders
or agents, and the Company has not, and will not, except with respect to Dawson
James Securities (the “Placement Agent”), incur, directly or indirectly,
as a result of any action taken by the Subscriber, any liability for brokerage
or finders’ fees or agents’ commissions or any similar charges in conjunction
with this Subscription Agreement.  In the
event that the preceding sentence is in any way inaccurate, the Subscriber
agrees to indemnify and hold harmless the Company from any liability for any
commission or compensation in the nature of a finder’s fee (and the costs and
expenses of defending against such liability) for which the Company, or any of
its officers, directors, employees or representatives, is responsible, except
such as related to the Placement Agent for which the Company is solely
responsible in accordance with the terms and provisions of that certain Selling
Agreement dated May 3, 2005 by and between the Company and the Placement
Agent.

 

G.            Legal Advice.  The Subscriber understands that nothing in
the Company’s filings under the Exchange Act, this Subscription Agreement or
any other materials presented to the Subscriber in connection with the purchase
and sale of the Securities constitutes legal, tax or investment advice.  The Subscriber has consulted such legal, tax
and investment advisors as she, he or it, in her, his or its sole

 

8

 

discretion,
has deemed necessary or appropriate in connection with this Subscription
Agreement, and his, her or its subscription for the purchase of the Securities.

 

H.            Miscellaneous.     Unless otherwise indicated, the address on the front
page of this document is the legal residence of the Subscriber and all
offers and communications in connection with the offering of the Securities
subscribed to herein have been conducted at such address.

 

I.              Communications.                Any notice, demand, request or other communication
which may be required or contemplated herein shall be sufficiently given if (i) given
either by facsimile transmission, by reputable overnight delivery service,
delivery charges prepaid, or by registered or certified mail, postage prepaid
and return receipt requested, to the address indicated herein or to such other
address as any party hereto may specify as provided herein, or (ii) delivered
personally at such address.

 

J.             Confidentiality.    The Subscriber agrees to maintain in strict
confidence all non-public information regarding the Company obtained from the
Company or its representatives or agents during the course of this
Subscription.  The Subscriber also agrees
not to trade in the securities of the Company (other than pursuant to this
Subscription Agreement) at any time that the Subscriber is in possession of any
non-public information regarding the Company obtained from the Company or its
agents during the course of this Subscription.

 

K.            Applicable Law.    This Subscription Agreement and all legal relations,
claims or obligations arising out of this transaction shall be governed by and
construed in accordance with the internal substantive laws of the Commonwealth
of Delaware.

 

[signature page follows]

 

9

 

IN WITNESS WHEREOF, the undersigned has executed this Subscription
Agreement this         day of the month of                ,
2005.

 

	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Taxpayer Identification No.  

  
	
   

  	
   

  
	
   

  	
  Purchase Price:   $

  
	
   

  	
   

  
	
   

  	
  Number of Shares to be acquired:

  
	
   

  	
   

  
	
   

  	
  Underlying Shares subject to warrants:

  
	
   

  	
   

  
	
   

  	
  Address for Notice:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Facsimile No.:

  
	
   

  	
   

  
	
   

  	
  Telephone No.:

  
	
   

  	
   

  
	
   

  	
  Attn:

  
						

 

Please indicate below the number and type of Company securities
beneficially held (as determined under Rule 13d-3 under the
Securities Exchange Act of 1934) as of the date hereof, but excluding the
Company securities identified above that you are purchasing.  This information will be included in the
Registration Statement and, by signing above, you acknowledge that the Company
may rely on this information for inclusion in the Registration Statement.

 

	
   

  	
   

  
	
  (Identify the number of securities and type (e.g., common stock,
  warrants, etc.)

  

 

	
   

  	
   

  
	
  (Identify the extent to which you may not exercise sole voting and/or
  dispositive power of such securities and the reason(s) why)

  

 

10

 

ACCEPTANCE

 

The foregoing Subscription is
hereby accepted upon the terms and conditions set forth herein.

 

 

	
   

  	
  iVOW, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By: 

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  
	
  Date:

  	
   

  	
  , 2005

  	
   

  	
   

  
										

 

11

 

EXHIBIT A

 

This Exhibit A is qualified
in its entirety by Annex A hereto. 
Capitalized terms used in this Exhibit A and not otherwise defined
shall have the meanings set forth in the Subscription Agreement.

 

	
  Securities
  Offered:

  	
   

  	
  Each Unit consists of one share of Common Stock of the Company and a
  Warrant to purchase one share of Common Stock of the Company.

  
	
   

  	
   

  	
   

  
	
  Offering Amount:

  	
   

  	
  Minimum of $2.0 million/maximum of $2.5 million.

  
	
   

  	
   

  	
   

  
	
  Closings:

  	
   

  	
  The Initial Closing of the offering will occur after Subscription
  Agreements for the Minimum Offering Amount have been received and the funds
  have been placed into an Escrow Account. The Initial Closing shall consist of
  that number of Units that represent no more than 19.9% of the outstanding
  voting power of the Company as defined in Rule 4350(i) of the
  Nasdaq Stock Market. The Final Closing will take place for the remaining
  Offering Amount held in the Escrow Account within 5 days of Stockholder
  Approval for the Offering.

  
	
   

  	
   

  	
   

  
	
  Per Unit Price:

  	
   

  	
  $0.30 per Unit

  
	
   

  	
   

  	
   

  
	
  Warrants:

  	
   

  	
  The Warrants have an exercise price of $0.30 per share and shall be
  exercisable for Common Stock of the Company and have a five-year term,
  subject to the forced exercise provision below. The Warrants will contain
  provisions providing for same-day exercise and sale.

  
	
   

  	
   

  	
   

  
	
  Forced Exercise:

  	
   

  	
  The Company can require holders of Warrants to exercise their Warrants
  within 30 days of receiving notice from the Company (or forfeit such
  Warrants) when the price of the Company’s common stock closes at six
  (6) times the Per Unit Price per share or greater for 20 consecutive
  trading days subsequent to the effectiveness of the registration statement
  pertaining to the resale of the Common Stock underlying the Warrants;
  provided that the registration statement described below shall be effective at
  all times during such 30-day notice period.

  
	
   

  	
   

  	
   

  
	
  Registration Rights:

  	
   

  	
  The Company has agreed with the Placement Agent to file a registration
  statement within 45 days of Final Closing covering the resale of the Common
  Stock and the Common Stock underlying the Warrants offered herein. The
  Company has also agreed to use its best efforts to cause such registration
  statement to become effective as promptly as practicable and to remain
  effective until the first anniversary of the Closing (except as otherwise set
  forth above). Without limiting the foregoing, the Company will promptly
  respond

  

 

12

 

	
   

  	
   

  	
  to
  all SEC comments, inquiries and requests, and shall request acceleration of
  effectiveness at the earliest possible date. In the event a registration
  statement is not filed with the SEC within 45 days or is not declared
  effective within 150 days from the date of the Final Closing, then in such
  event a fee of 1% per month (or portion thereof) shall be assessed against the
  Company as a default payment and in favor of the holders of the Common Stock
  and Warrants for each such 30 day period until such time as the registration
  statement is declared effective.

  
	
   

  	
   

  	
   

  
	
  Transfer Restrictions:

  	
   

  	
  The Shares will initially be unregistered and may not be transferred
  absent registration under the Securities Act of 1933 (the “Securities Act”)
  or the availability of an exemption therefrom.

  
	
   

  	
   

  	
   

  
	
  Use of Proceeds:

  	
   

  	
  The Company intends that the net proceeds of the Offering and, if any,
  the additional proceeds to be received upon exercise of Warrants, will be
  used for development and expansion of the Company’s Obesity Surgery
  Management Services business, including working capital, funding of
  anticipated operating losses, infrastructure development, expenses associated
  with marketing efforts and payment of corporate overhead. In addition, we
  intend to use a portion of the proceeds from this offering (along with
  certain other of our assets) to redeem some of our outstanding shares of
  Series A Preferred Stock (the “Series A Shares”) and to obtain the
  rights to (i) redeem a portion of Series A Shares concurrent with
  this Unit financing and (ii) cause the conversion of the Series A
  Shares to common stock concurrent with this Unit financing.  Specifically,
  we currently intend to us use approximately $126,406 to redeem 75,844 shares
  of our 826,447 outstanding Series A Shares. We also intend to convert
  224,156 outstanding Series A Shares into 1,245,313 Units under this Unit
  financing at the time of the Final Closing. In exchange, we anticipate
  gaining the following rights: (i) the holders of Series A Shares
  will consent (which consent we are required to obtain) to the completion of
  the Offering described in this Memorandum and (ii) at the time of the
  Final Closing, the remaining 526,447 outstanding Series A Shares will
  convert into common stock on a 1 for 1 basis. As a result these actions, we
  will not have any outstanding Series A Shares immediately after the
  Final Closing. We may also use a portion of the net proceeds, currently
  intended for general corporate purposes, to invest in acquisitions, joint
  ventures or other collaborative arrangements, or to invest in or acquire
  products or services.

  
	
   

  	
   

  	
   

  
	
  Stockholder Approval:

  	
   

  	
  The Company shall prepare and file a proxy statement (the “Proxy
  Statement”) with the SEC in connection with a meeting of its stockholders to
  be held no later than July 20, 2005 (the “Stockholders Meeting”). At the
  Stockholders Meeting, the Company will seek stockholder approval of (i) the
  issuance of the shares of Common Stock and the Common Stock issuable upon the

  

 

13

 

	
   

  	
   

  	
  exercise of the Warrants, including the Placement Agent Warrants, and
  (ii) an increase in the authorized number of shares of Common Stock from
  35,000,000 to 70,000,000. IT SHALL BE A CONDITION TO THE INITIAL CLOSING THAT
  THE COMPANY SHALL HAVE ENTERED INTO A VOTING AGREEMENT WITH THE HOLDERS OF
  MORE THAN 50% OF THE COMPANY’S OUTSTANDING SHARES OF COMMON STOCK AND
  PREFERRED STOCK PROVIDING THAT SUCH HOLDERS SHALL VOTE IN FAVOR OF SUCH
  PROPOSALS At the Stockholders Meeting the Company also intends to seek
  approval for (i) an amendment to the Restated Certificate to effect, at
  the discretion of the Board of Directors of the Company, a reverse stock
  split of the issued and outstanding shares of Common Stock in a ratio for
  such stock split that is not less than 2:1 nor greater than 10:1 and
  (ii) an increase in the number of shares authorized for issuance
  pursuant to its Stock Option Plan.

  
	
   

  	
   

  	
   

  
	
  Risk Factors:

  	
   

  	
  The Securities offered hereby involve a high degree of risk. See Risk
  Factors in the PPM.

  
	
   

  	
   

  	
   

  
	
  Placement Agent:

  	
   

  	
  Dawson James

  
	
   

  	
   

  	
   

  
	
  Confidential Information:

  	
   

  	
  The recipient of this Memorandum and the materials attached hereto agrees
  with the Company to maintain in confidence this disclosed information,
  together with any other non-public information regarding the Company obtained
  from the Company or their agents during the course of the proposed Offering.
  The recipient also agrees not to trade in the securities of the Company
  (other than pursuant to this Offering) at any time that the recipient is in
  possession of any non-public information regarding the Company obtained from
  the Company or its agents during the course of this Offering. The Company has
  caused these materials to be delivered to you in reliance upon such agreement
  and upon Rule 100(b)(2)(ii) of Regulation FD as promulgated by the
  Securities and Exchange Commission.

  

 

14

 

EXHIBIT B

 

Payment Instructions

 

Remittance Via Check:

 

Payable To:

 

Mailed To:

 

Remittance Via Wire Transfer:

 

Account Name:

 

Bank:

Account #:

ABA #:

 

Address:

 

15

 

Annex A

 

Registration Rights

 

1.             Registration of Shares.  The Company
will (i) use best efforts to prepare and file, within 45 days after the
Final Closing, a Registration Statement (the “Registration Statement”)
with the SEC to register resales under the Securities Act of the Common Stock
and the Common Stock issuable upon the exercise of the Common Stock Warrants by
the Subscriber, (ii) use its reasonable best efforts to cause the
Registration Statement to become effective as soon as practicable after such
filing, (iii) use its reasonable best efforts to cause such Registration
Statement to remain effective until the first anniversary of the Final Closing
(except as otherwise set forth above); provided  that the Company
may suspend sales at any time under the Registration Statement immediately upon
notice to the Subscriber, for a period or periods of time not to exceed 90 days
in the aggregate during any 12-month period, if there then exists
material, non-public information relating to the Company, which in the
reasonable opinion of the Company, would not be appropriate for disclosure
during that time, and (iv) prepare and file with the SEC such amendments
and supplements to the Registration Statement and the prospectus used in
connection therewith as may be necessary to keep such Registration Statement
effective for the period specified in this sentence above.  Without limiting the foregoing, the Company
will promptly respond to all SEC comments, inquiries and requests, and shall
request acceleration of effectiveness at the earliest possible date.  In the event a registration statement is not
filed with the SEC within 45 days or is not declared effective within 150 days
from the date of the Final Closing, then in such event a fee of 1% per month
(or portion thereof) shall be assessed against the Company as a Default Payment
and in favor of the holders of the Common Stock and Warrants for each such 30
day period until such time as the registration statement is declared
effective.  The Subscriber shall provide
all information and materials, including, without limitation, all information
requested in a questionnaire to be provided to the Subscriber by the Company,
and take all such action as may be required in order to permit the Company to
comply with all applicable requirements of the Securities Act and the Exchange
Act and to obtain any desired acceleration of the effective date of the
Registration Statement, such provision of information and materials to be a
condition precedent to the obligations of the Company hereunder to register the
Common Stock issued or issuable upon the exercise of the Common Stock
Warrants.  The offerings made pursuant to
the Registration Statement shall not be underwritten.

 

2.             Registration Procedures.  With
respect to the registration of Common Stock under this Annex A, the Company
will: (i) furnish to the Subscriber such number of copies of the
Registration Statement, each amendment and supplement thereto, the prospectus
included in such Registration Statement (including each preliminary prospectus)
and such other documents as the Subscriber may reasonably request in order to
facilitate the disposition of the Common Stock and the Common Stock acquired by
the Subscriber upon the exercise of Common Stock Warrants and owned by the
Subscriber; (ii) use its best efforts to register or qualify the Common

 

16

 

Stock
included in such registration under such other securities or blue sky laws of
such jurisdictions as the Subscriber reasonably requests and do any and all
other acts and things which may be reasonably necessary or advisable to enable
the Subscriber to consummate the disposition in such jurisdictions of the
shares of Common Stock to be sold by the Subscriber (provided  that
the Company will not be required to qualify generally to do business in any
jurisdiction where it would not otherwise be required to qualify but for this
subparagraph, subject itself to taxation in any such jurisdiction, or consent
to general service of process in any such jurisdiction); (iii) notify the
Subscriber at any time when a prospectus relating thereto is required to be
delivered under the Securities Act, upon discovery that, or upon the discovery
of the happening of any event as a result of which, the prospectus included in
such registration statement contains an untrue statement of a material fact or
omits any fact necessary to make the statements therein not misleading in the
light of the circumstances under which they were made, and the Company will
promptly prepare and file with the SEC and, at the request of any the
Subscriber, furnish to the Subscriber a reasonable number of copies of, a
supplement or amendment to such prospectus so that, as thereafter delivered to
the Subscriber, such prospectus will not contain an untrue statement of a
material fact or omit to state any fact necessary to make the statements
therein not misleading in light of the circumstances under which they were
made; and (iv) promptly reissue, or promptly authorize and instruct its
transfer agent to reissue, unlegended certificates at the request of the
Subscriber upon such Subscriber’s delivery of original certificates
representing the shares of Common Stock tendered for sale pursuant to the
effective Registration Statement, and to promptly respond to broker’s inquiries
made of the Company in connection with such sales, in each case with a view to
reasonably assisting the Subscriber to complete such sale during such period of
effectiveness.

 

3.             Registration Expenses. All of the out-of-pocket expenses incurred by the
Company in complying with its obligations under this Annex A in
connection with the registration of the Common Stock and the Common Stock
issuable upon the exercise of the Common Stock Warrants, including, without
limitation, all SEC, Nasdaq SmallCap Market and blue sky registration and
filing fees, printing expenses, transfer agents’ and registrars’ fees, and the
fees and disbursements of the Company’s outside counsel and independent
accountants shall be paid by the Company. 
The Company shall not be responsible to pay any legal fees for any
Subscriber or any selling expenses of any Subscriber (including, without
limitation, any broker’s fees or commissions, including underwriter
commissions).

 

4.             Indemnification.

 

(a)           The Company agrees to indemnify and hold harmless, to
the extent permitted by law, the Subscriber, its officers, directors, employees
and agents and each Person who controls such Subscriber (within the meaning of
the Securities Act), if applicable, against any losses, claims, damages or
liabilities, joint or several, to which such the Subscriber or any such
director, officer, employee, agent or controlling Person may become subject
under the Securities Act or otherwise, insofar as such losses, claims, damages
or liabilities (or actions or proceedings, whether

 

17

 

commenced
or threatened, in respect thereof) arise out of or are based upon (i) any
untrue or alleged untrue statement of a material fact contained (A) in the
Registration Statement or prospectus or preliminary prospectus or any amendment
thereof or supplement thereto used in connection with this Annex A or (B) in
any application or other document or communication (in this Annex A
collectively called an “application”) executed by or on behalf of the Company
or based upon written information furnished by or on behalf of the Company
filed in any jurisdiction in order to qualify any securities covered by such
Registration Statement under the “blue sky” or securities laws thereof, (ii) any
omission or alleged omission of a material fact required to be stated therein
or necessary to make the statements therein not misleading or (iii) any
violation by the Company of the Securities Act or any state securities law, or
any rule or regulation promulgated under the Securities Act or any state
securities law, or any other law applicable to the Company relating to any such
registration or qualification, and the Company will reimburse the Subscriber
and each such director, officer and controlling Person for any legal or any
other expenses incurred by them in connection with investigating or defending
any such loss, claim liability, action or proceeding; provided  that
the Company shall not be liable in any such case to the extent that any such
loss, claim, damage, liability (or action or proceeding with respect thereof)
or expense arises out of or is based upon an untrue statement, any such
prospectus or preliminary prospectus or any amendment or supplement thereto, or
in any application, in reliance upon and in conformity with written information
prepared and furnished to the Company by the Subscriber or any other subscriber
expressly for use therein or by the Subscriber’s failure to deliver a copy of
the prospectus or any amendments or supplements thereto after the Company has
furnished the Subscriber with a sufficient number of copies of the same.

 

(b)           In connection with the Registration Statement, the
Subscriber will furnish to the Company in writing such information and
documents concerning the Subscriber as the Company reasonably requests for use
in connection with the Registration Statement or prospectus and, to the extent
permitted by law, will indemnify and hold harmless the Company and its
directors and officers and each other Person who controls or is controlled by
the Company and the directors and officers of each such Person controlling or
controlled by the Company and the directors and officers of each such
controlling or controlled Person (within the meaning of the Securities Act)
against any losses, claims, damages, liabilities, joint or several, to which
the Company or any such director or officer or controlling or controlled Person
may become subject under the Securities Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions or proceedings, whether
commenced or threatened, in respect thereof) arise out of or are based upon (i) any
untrue or alleged untrue statement of a material fact contained in the
Registration Statement, prospectus or preliminary prospectus or any amendment
thereof or supplement thereto or in, any application or (ii) any omission
or alleged omission of a material fact required to be stated therein or
necessary to make the statements therein not misleading, but only to the extent
that such untrue statement or omission or alleged omission is made in such
Registration Statement, any such prospectus or preliminary prospectus or any
amendment or supplement thereto, or in any application, in reliance upon and in
conformity with written information concerning

 

18

 

the
Subscriber prepared and furnished to the Company by or on behalf of the
Subscriber in writing expressly for use therein, and the Subscriber will
reimburse the Company and each such director, officer and controlling or
controlled Person for any legal or any other expenses incurred by them in
connection with investigating or defending any such loss, claim, liability,
action or proceeding.

 

(c)           Any person entitled to indemnification hereunder
will (i) give prompt written notice to the Company of any claim with
respect to which it seeks indemnification and (ii) unless in such
indemnified party’s reasonable judgment a conflict of interest between such
indemnified parties and the Company may exist with respect to such claim,
permit the Company to assume the defense of such claim with counsel reasonably
satisfactory to the indemnified party; provided, however, that
the failure of any indemnified party to give notice as provided herein shall
not relieve the indemnifying party of its obligations hereunder unless the
failure to give such notice is materially prejudicial to an indemnifying party’s
ability to defend such action.  If such
defense is assumed, the indemnified party will not be subject to any liability
for any settlement made by the Company without its consent (but such consent
will not be unreasonably withheld). 
Anything to the contrary appearing in this Annex A
notwithstanding, the Company will not be obligated to pay the fees and expenses
of more than one counsel for all parties indemnified hereunder with respect to
such claim, unless in the reasonable judgment of any indemnified party a
conflict of interest may exist between such indemnified party and any other of
such indemnified parties with respect to such claim.  If the Company assumes the defense, the
indemnified party may engage its own counsel at its own sole cost and
expense.  All fees and expenses of
counsel to any indemnified party required to be paid by the Company shall be
paid by the Company as incurred by such indemnified party.

 

(d)           The indemnification provided for herein will remain
in full force and effect regardless of any investigation made by or on behalf
of the indemnified party or any officer, director, employee, agent or
controlling or controlled Person of such indemnified party and will survive the
transfer of securities issued hereunder by the Subscriber.  If the indemnification provided for herein is
unavailable to an indemnified party or insufficient in respect of any losses,
claims, damages or liabilities referred to therein, then the Company, in lieu
of indemnifying such indemnified party thereunder, shall contribute to the
amount paid or payable by such indemnified party as a result of such losses,
claims, damages or liabilities in such proportion as is appropriate to reflect
the relative fault of the Company, on the one hand, and the indemnified party
or parties, on the other hand, in connection with the statements or omissions
that resulted in such losses, claims, damages or liabilities, as well as any
other relevant equitable considerations.

 

19

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