Document:

exv10w3

 

Exhibit 10.3

GENERAL CONDITIONS OF THE CONTRACT

FOR CONSTRUCTION

TABLE OF ARTICLES

	 	 	 
	1.	 	Contract Documents

	2.	 	Architect

	3.	 	Owner

	4.	 	Contractor

	5.	 	Subcontractors

	6.	 	Work by Owner or by Separate Contractors

	7.	 	Miscellaneous Provisions

	8.	 	Time

	9.	 	Payments and Completion

	10.	 	Protection of Persons and Property

	11.	 	Insurance

	12.	 	Changes in the Work

	13.	 	Uncovering and Correction of Work

	14.	 	Termination of Contract

	15.	 	Resolution of Claims

	16.	 	Hazardous Materials

					
	 	 	 	 	 
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GENERAL CONDITIONS OF THE CONTRACT FOR CONSTRUCTION

ARTICLE 1

CONTRACT DOCUMENTS

1.1
DEFINITIONS

1.1.1 The Contract

The Contract Documents form the Contract for Construction. This Contract represents the entire and
integrated agreement between the parties hereto and supersedes all prior negotiations,
representations, or agreements, either written or oral. The Contract may be amended or modified
only by a Modification as defined in Subparagraph 1.1.2. Nothing contained in the Contract
Documents shall create any contractual relationship between the Owner and the Architect, or the
Owner and any Subcontractor or Sub-subcontractor or between the Contractor and Architect.
References to the “Agreement” shall mean and refer to the specifically modified Agreement between
Owner and Contractor.

1.1.2 The Contract Documents

The Contract Documents consist of the Agreement, the General Conditions of the Contract, all
Drawings, Specifications, and all Modifications issued after execution of the Contract. A
Modification is (1) a written amendment to the Contract signed by all parties, (2) a Change Order,
(3) a written interpretation issued by the Architect, and (4) a written order for a minor change in
the Work issued by the Architect pursuant to Paragraph 12.4.

1.1.3 The Work

The Work comprises the completed construction required by the Contract Documents and includes all
labor necessary to produce such construction, and all materials and equipment incorporated or to be
incorporated in such construction.

1.1.4 The Project

The Project is the total construction of which the Work performed under the Contract Documents may
be whole or a part, and which may include construction by the Owner or by Separate Contractors.

1.1.5 The Drawings and Specifications

The Drawings and Specifications have been reviewed and accepted by the Owner prior to the execution
of the Contract. These Drawings and Specifications fully define the scope of the Work to be
performed by Contractor and are not subject to further review by the Owner or the Owner’s
Construction Inspector as to the scope of the Work required under the Contract Documents. These
Drawings and Specifications are subject to change as to the scope of the Work with an appropriate
adjustment in the Contract Sum as provided herein. In addition, the Architect from time to time
may issue Supplemental Drawings or Field Orders further defining these Drawings and Specifications,
as the Architect deems necessary.

					
	 	 	 	 	 
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1.1.6 The Owner’s Construction Inspector

Owner may appoint, at Owner’s expense, a Construction Inspector to act as the Owner’s
representative during construction on questions concerning Contractor’s compliance with the
Contract Documents, The Owner may at any time, or from time to time, designate any person or
organization to act as Owner’s Construction Inspector by notifying the Contractor in writing of
such designation. Such designation shall be effective upon receipt of such notice by the
Contractor. Any such designation may be withdrawn or terminated by Owner at any time by notice to
Contractor.

1.2
EXECUTION, CORRELATION AND INTENT

1.2.1 The Agreement shall be signed by the Owner and Contractor.

1.2.2 By executing the Contract, Contractor represents that it has visited the site,
familiarized itself with the local conditions under which the Work is to be performed, and
correlated its observations with the requirements of the Contract Documents.

1.2.3 The intent of the Contract Documents is to include all items necessary for the
proper execution and completion of the Work. The Contract Documents are complementary, and what is
required by any one shall be as binding as if required by all. Work not covered in the Contract
Documents will not be required unless it is consistent therewith and is reasonably inferable
therefrom as being necessary to produce the indicated results. Words and abbreviations which have
well-known technical or trade meanings are used in the Contract Documents in accordance with such
recognized meanings.

1.2.4 The organization of the Specifications into divisions, sections and articles, and the
arrangement of Drawings shall not control Contractor in dividing the Work among Subcontractors or
in establishing the extent of Work to be performed by any trade.

1.3 OWNERSHIP AND USE OF DOCUMENTS

1.3.1 (There is no Subparagraph 1.3.1) .

1.3.2 All Drawings, Specifications and all copies thereof furnished by the Architect under
the Contract, are and shall remain its property and are not to be used on any other project. With
the exception of one copy and electronic files of all such Drawings to be used by the Owner
exclusively for this project in reference to service, maintenance and repairs. Specifications and
any other documents prepared by the Architect which are a part of the Contract for each party, all
other copies of such documents are to be returned to the Architect at the completion of the Work.

					
	 	 	 	 	 
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ARTICLE 2 

ARCHITECT

2.1 DEFINITION

2.1.1 The Architect is the person or organization authorized to practice architecture in
the State where the Project is located and who is responsible for the preparation of and who has
signed the Drawings and Specifications for the Project identified in the Contract between the Owner
and Contractor, he is the Architect of Record for the Project. The Owner recognizes that the
Architect is an affiliate of Contractor. The term Architect means the Architect or its authorized
representative.

2.2
ADMINISTRATION OF THE CONTRACT

2.2.1 The Architect will visit the site periodically to determine in general if the
Work is proceeding in accordance with the Contract Documents. However, the Architect will not be
required to make exhaustive or continuous on-site observations to check the quality or quantity of
the Work.

2.2.2 The Architect will not be responsible for and will not have control or charge of
construction means, methods, techniques, sequences or procedures, or for safety precautions and
programs in connection with the Work, and will not be responsible for Contractor’s failure to carry
out the Work in accordance with the Contract Documents. The Architect will not be responsible for
or have control or charge over the acts or omissions of Contractor, Subcontractors, or any of their
agents or employees, or any other persons performing any of the Work.

2.2.3 The Architect and the Owner’s Construction Inspector shall at all times have
access to the Work wherever it is in preparation and progress. Contractor shall provide reasonable
facilities for such access so the Architect and the Owner’s Construction Inspector may perform
their functions under the Contract Documents.

2.2.4 The Architect shall furnish interpretations and clarifications of the drawings
and specifications, by means of additional drawings, addenda or otherwise, as are necessary for the
proper execution and progress of the Project.

2.2.5 The Architect’s decisions in matters relating to artistic effect will be final if
consistent with the intent of the Contract Documents.

2.2.6 (There is no Subparagraph 2.2.6.)

2.2.7 The Architect will review and approve or take other appropriate action upon
Contractor’s submittals such as Shop Drawings, Product Data and Samples, but only for conformance
with the design concept of the Work and with the information given in the Contract Documents.
The Architect’s approval of a specific item shall not indicate approval of an assembly of which the
item is a component.

					
	 	 	 	 	 
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2.2.8 The Architect shall assist Contractor in conducting observations to determine the
dates of Substantial Completion and final completion.

2.2.9 The Architect may provide one or more Project Representatives to assist the Architect
in carrying out its responsibilities at the site.

2.2.10 In the event of the resignation, refusal or inability to act of the Architect, or if for any
other reason Contractor decides to do so, Contractor may designate another architect (who must be
licensed to practice in the State in which the Project is located, and who may be an employee of
Contractor, or otherwise affiliated with Contractor), as the Architect for purposes of the
Contract.

ARTICLE 3 

OWNER

3.1 DEFINITION

3.1.1 The Owner is the person or entity identified as such in the Agreement and is
referred to throughout the Contract Documents as if singular in number and masculine in gender.
The term Owner means the Owner or its authorized representative.

3.2 INFORMATION AND SERVICES REQUIRED OF THE OWNER

3.2.1 The Owner shall, at the request of Contractor, at the time of execution of the
Agreement, furnish to Contractor reasonable evidence that he has made financial arrangements to
fulfill its obligations under the Contract. Unless such reasonable evidence is furnished,
Contractor is not required to commence the Work. The Owner shall disclose all information known to
the Owner regarding the presence of hazardous materials, pollutants, contaminants, or other
environmental, subsurface or concealed conditions at the Project’s site.

3.2.2 The Owner shall furnish all surveys and subsoil investigations describing the
physical characteristics, legal limitations and utility locations for the site of the Project, and
a legal description of the site.

3.2.3 Except as provided in Subparagraph 4.7.1, the Owner shall secure and pay for
necessary approvals, easements, assessments and charges required for the construction, use or
occupancy of permanent structures or for permanent changes in existing facilities.

3.2.4 Information or services under the Owner’s control shall be furnished by the Owner
with reasonable promptness to avoid delay in the orderly progress of the Work.

3.2.5 (There is no Subparagraph 3.2.5.)

3.2.6 The Owner shall issue all instructions to Contractor.

					
	 	 	 	 	 
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3.2.7 The foregoing are in addition to other duties and responsibilities of the Owner
enumerated herein and especially those in respect to Work by Owner or by Separate Contractors,
Payments and Completion, and Insurance in Articles 6, 9 and 11, respectively.

3.3 OWNER’S RIGHT TO STOP THE WORK

3.3.1 If Contractor fails to correct defective Work as required by Paragraph 13.2,
fails to carry out the Work in accordance with the Contract
Documents or fails to provide Owner with a plan of correction within
_15       days after receipt of written notice from the Owner, the Owner, by a written order signed
personally may order Contractor to stop the Work, or any portion thereof, until the cause for such
order has been eliminated; however, this right of the Owner to stop the Work shall not give rise to
any duty on the part of the Owner to exercise this right for the benefit of Contractor or any other
person or entity, except to the extent required by Subparagraph 6.1.3.

3.4 OWNER’S RIGHT TO CARRY OUT THE WORK

3.4.1 If Contractor defaults or neglects to carry out the Work in accordance with the
Contract Documents and fails within seven days after receipt of written notice from the Owner to
commence and continue correction of such default or neglect with diligence and promptness, the
Owner may, after seven days following receipt by Contractor of an additional written notice and
without prejudice to any other remedy he may have, make good such deficiencies. In such case an
appropriate Change Order shall be issued deducting from the payments then or thereafter due
Contractor the cost of correcting such deficiencies. If the payments then or thereafter due
Contractor are not sufficient to cover such amount, Contractor shall pay the difference to the
Owner.

ARTICLE 4 

Contractor

4.1 DEFINITION

4.1.1 Contractor is the Contractor for the Work required by the Contract Documents and is
identified as such in the Agreement and is referred to throughout the Contract Documents.

4.2 REVIEW OF DRAWINGS AND SPECIFICATIONS

4.2.1 Contractor represents to the Owner that it has reviewed the Drawings and
Specifications incorporated in the Contract.

4.3
SUPERVISION AND CONSTRUCTION PROCEDURES

4.3.1 Contractor shall supervise and direct the Work, using reasonable skill and
attention. It shall be solely responsible for all construction means, methods, techniques,
sequences and procedures and for coordinating all portions of the Work under the Contract.

					
	 	 	 	 	 
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4.3.2 Contractor shall be responsible to the Owner for the negligent or wrongful acts
and omissions of its employees, Subcontractors and their agents and employees, and other persons
performing any of the Work under a contract with Contractor.

4.3.3 Contractor shall not be relieved from its obligations to perform the Work in
accordance with the Contract Documents either by the activities or duties of the Architect, or by
inspections, tests or approvals required or performed under Paragraph 7.7 by persons other than
Contractor.

4.4 LABOR AMD MATERIALS

4.4.1 Unless otherwise provided in the Contract Documents, Contractor shall provide and pay
for all labor, materials, equipment, tools, construction equipment and machinery, transportation,
and other facilities and services necessary for the proper execution and completion of the Work.

4.4.2 Contractor shall at all times enforce discipline and good order among its employees
and shall not employ on the Work any unfit person or anyone not skilled in the task assigned.

4.4.3 During construction in remodeled areas, Contractor wherever possible shall use
existing water, heat and utilities with the utility charges for this usage paid by the Owner. If
it is necessary for construction purposes to bring in separate metered utility services, the usage
charges for these separate services shall be paid for by Contractor during construction. For new
construction, if new utility service connections are required, Contractor shall pay the metered
utility charges for all service during construction. As areas of the buildings are substantially
completed and occupied by the Owner the utility usage bills shall be pro-rated between Contractor
and the Owner based upon the ratio of unoccupied and occupied areas and the dates of occupancy by
the Owner.

4.5 WARRANTY

Contractor warrants to the Owner that all materials and equipment furnished under this Contract
will be new unless otherwise specified, and that all new materials and equipment will be entitled
to all warranties given by the manufacturer. All such materials and equipment not so conforming to
these standards may be considered defective. If required by the Architect or the Owner’s
Construction Inspector, Contractor shall furnish satisfactory evidence as to the kind and quality
of any such materials and equipment. The Contractor’s warranty excludes remedy for damage or defect
caused by abuse, modifications not executed by the Contractor, improper or insufficient
maintenance, improper operation, or normal wear and tear and normal usage. All applicable
warranties related to the Work, whether pursuant to this Section or other provisions of the
Contract Documents or applicable law, shall commence as of the date of Substantial Completion of
the Work, and shall terminate and expire one (1) year after Substantial Completion of the Work,
except for third party warranties expressly provided in the Contract Documents or any other written
warranty given to the Owner at the end of the Project. THE CONTRACTOR HEREBY DISCLAIMS ANY AND ALL
EXPRESS OR IMPLIED WARRANTIES, INCLUDING WITHOUT LIMITATION, ANY WARRANTIES OF MERCHANTABILITY OR
FITNESS FOR ANY PARTICULAR PURPOSE, EXCEPT AS EXPRESSLY WARRANTED HEREIN. THERE ARE NO WARRANTIES
WHICH EXTEND BEYOND THE DESCRIPTION ON THE FACE HEREOF.

					
	 	 	 	 	 
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4.6 TAXES

The Contractor shall pay sales, consumer, use and similar taxes for the Work or portions thereof
provided by the Contractor which are legally enacted when bids are received or negotiations
concluded, whether or not yet effective or merely scheduled to go into effect.

4.7 PERMITS, FEES AND NOTICES

4.7.1 Contractor or its subcontractors shall secure and pay all permits, governmental
fees and licenses required by Contractor or its subcontractors for the proper execution and
completion of the Work, which are applicable at the time the Agreement between the Owner and
Contractor is signed. Contractor has no obligation to secure or pay for any permits, licenses or
connection fees of the Owner, such as impact fees, traffic mitigation, school and special use fees,
governmental imposed service fees, occupancy permits or utility usage fees for post-construction
use by the Owner or any similar charges based on utility flow rates or assessments based on utility
system amortization. It is the responsibility of the Contractor to make certain that the Drawings
and Specifications are in accordance with applicable laws, statutes, building codes and regulations
in effect at the time of Contract. Any fees, charges, costs or licenses required by any laws,
ordinances, rules, regulations or orders of any public authority for the purpose of reviewing,
inspecting, approving, checking or filing plans and specifications other than the direct fees
charged for the filing of the plans and specifications for the issuance of a building permit shall
be paid by the Owner and are not the responsibility of Contractor.

4.7.2 Contractor or its subcontractors shall give all notices and comply with all laws,
ordinances, rules, regulations and lawful orders of any public authority bearing on the performance
of the Work.

4.7.3 If Contractor observes that the Contract is at variance therewith in any respect,
it shall promptly notify the Architect and the Owner, in writing, and any necessary changes shall
be adjusted by appropriate Modification. If Contractor performs any Work knowing it to be contrary
to such laws, ordinances, rules and regulations, and without such notice Contractor shall assume
full responsibility therefor and shall bear all costs attributable thereto.

4.8 INTENTIONALLY DELETED

4.9 SUPERINTENDENT

4.9.1 Contractor shall employ a competent superintendent and necessary assistants who
shall be in attendance at the Project site during the progress of the Work. The superintendent
shall represent Contractor and all communications concerning compliance with the Drawings and
Specifications given to the superintendent shall be as binding as if given to Contractor.
Important communications shall be confirmed in writing. Other communications shall be so confirmed
on written request in each case.

4.10 CONSTRUCTION SCHEDULE

4.10.1 Contractor, within 60 days after the execution of the Contract, shall prepare and
submit for the Owner’s approval an estimated construction schedule for the Work, The construction
schedule shall be related to the

					
	 	 	 	 	 
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entire Project to the extent required by the Contract. This schedule shall indicate the dates for
the starting and completion of the various stages of construction and shall be revised as required
by the conditions of the Work. This construction schedule is developed solely for the purpose of
job management by Contractor. It should be used only for general planning purposes by the Owner
and is not to be construed as a part of the contractual performance by Contractor to the Owner.

4.11 DOCUMENTS AND SAMPLES AT THE SITE

4.11.1 Contractor shall maintain at the site for the Owner one record copy of all
Drawings, Specifications, Addenda, Change Orders and other Modifications,in good order and marked
currently to record all changes made during construction, and approved Shop Drawings, Product Data
and Samples. These shall be available to the Owner’s Construction Inspector and shall be delivered
to Owner’s Construction Inspector for the Owner upon completion of the Work.

4.12 SHOP DRAWINGS, PRODUCT DATA AND SAMPLES

4.12.1 Shop Drawings are drawings, diagrams, schedules and other data specially prepared
for the Work by the Contractor or any Subcontractor, manufacturer, supplier or distributor to
illustrate some portion of the Work.

4.12 .2 Product Data are illustrations, standard schedules, performance charts,
instructions, brochures, diagrams and other information furnished by Contractor to illustrate a
material, product or system for some portion of the Work.

4.12.3 Samples are physical examples furnished by Contractor to illustrate materials,
equipment or workmanship and establish standards by which the Work will be judged.

4.12.4 The Contractor shall review, stamp with its approval and submit, with reasonable
promptness and in orderly sequence so as to cause no delay in the Work or in the work of any other
contractor, all Shop Drawings and Samples required by the Contract or subsequently by the Architect
as covered by Modifications. Shop Drawings and Samples shall be properly identified as specified,
or as the Architect may require. At the time of submission Contractor shall inform the Architect
and the Owner in writing of any deviation in the Shop Drawings or Samples from the requirements of
the Contract. Contractor shall make any corrections required by the Architect and shall resubmit
the required number of corrected copies of Shop Drawings or new Samples until approved. Contractor
shall direct specific attention in writing or on resubmitted Shop Drawings to revisions other than
the corrections requested by the Architect on previous submissions.

4.12.5 By approving and submitting Shop Drawings, Product Data and Samples, the
Contractor represents that it has determined and verified all materials, field measurements, and
field construction criteria related thereto, or will do so, and that it has checked and coordinated
the information contained within such submittals with the requirements of the Work and of the
Contract Documents.

					
	 	 	 	 	 
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4.12.6 Contractor shall not be relieved of responsibility for any deviation from the
requirements of the Contract Documents by the Architect’s approval of Shop Drawings, Product Data
or Samples under Subparagraph 2.2.14 unless Contractor has specifically informed the Owner in
writing of such deviation at the time of submission and the Owner has given written approval to the
specific deviation. Contractor shall not be relieved from responsibility for errors or omissions
in the Shop Drawings, Product Data or Samples by the Owner’s approval thereof.

4.12.7 Contractor shall direct specific attention, in writing or on resubmitted Shop
Drawings, Product Data or Samples, to revisions other than those requested by the Owner on previous
submittals.

4.12.8 The Contractor shall not be required to provide professional services which
constitute the practice of architecture or engineering unless such services are specifically
required by the Contract Documents for a portion of the Work or unless the Contractor needs to
provide such services in order to carry out the Contractor’s responsibilities for construction
means, methods, techniques, sequences and procedures. No portion of the Work requiring submission
of a Shop Drawing, Product Data or Sample shall be commenced until the submittal has been approved
by the Architect as provided in Subparagraph 2.2.14 and when required by Subparagraph 4.12,6. All
such portions of the Work shall be in accordance with approved submittals. One (1) set of approved
Shop Drawings shall be forwarded to the Owner at the same time as sent to the subcontractors.

4.13 USE OF SITE

4.13.1 Contractor shall confine operations at the site to areas permitted by law,
ordinances, permits and the Contract Documents and shall not unreasonably encumber the site with
any materials or equipment.

4.14 CUTTING AND PATCHING OF WORK

4.14.1 Contractor shall be responsible for all cutting, fitting or patching that may be
required to complete the Work or to make its several parts fit together properly.

4.14.2 Contractor shall not damage or endanger any portion of the Work or the work of the
Owner or any separate Contractors by cutting, patching or otherwise altering any work, or by
excavation. Contractor shall not cut or otherwise alter the work of the Owner or any separate
Contractor except with the written consent of the Owner and of such separate Contractor. Contractor
shall not unreasonably withhold from the Owner or any separate Contractor its consent to cutting or
otherwise altering the Work.

4.15 CLEANING UP

4.15.1 Contractor at all times shall keep the premises free from accumulation of waste
materials or rubbish caused by its operations. At the completion of the Work it shall remove all
its waste materials and rubbish from and about the Project as well as all its tools, construction
equipment, machinery and surplus materials.

					
	 	 	 	 	 
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4.15.2 If Contractor fails to clean up at the completion of the Work, after written
request from the Owner, the Owner may do so as provided in Paragraph 3.4 and the cost thereof shall
be charged to Contractor.

4.16 COMMUNICATIONS

4.16.1 Contractor shall forward all communications directly to the Owner.

4.17 ROYALTIES AND PATENTS

4.17.1 Contractor shall pay all royalties and license fees. It shall defend all suits
or claims for infringement of any patent rights and shall save the Owner harmless from loss on
account thereof, except that the Owner shall be responsible for all such loss when a particular
design, process or the product of a particular manufacturer or manufacturers is specified, but if
Contractor has reason to believe that the design, process or product specified is an infringement
of a patent, he shall be responsible for such loss unless it promptly gives such information to the
Owner.

					
	 	 	 	 	 
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4.18 INDEMNIFICATION

4.18.1 To the fullest extent permitted by law, Contractor shall indemnify and hold harmless
the Owner and its agents and employees from and against all claims, damages, losses and expenses
including attorneys’ fees arising out of or resulting from the performance of the Work, to the
extent that any such claim, damage, loss or expense (1) is attributable to bodily injury, sickness,
disease or death, or to injury to or destruction of tangible property (other than the Work itself)
including the loss of use resulting therefrom, and (2) is caused by any negligent act or omission
of Contractor, any subcontractor, anyone directly or indirectly employed by any of them or anyone
for whose acts any of them may be liable, regardless of whether or not it is caused in part by a
party indemnified hereunder; provided, however, that the foregoing agreement to indemnify shall not
extend to liability claims, damages, loss or expenses, including attorney’s fees, arising out of
(a) the preparation or approval of maps, drawings, opinions, reports, surveys, Change Orders,
designs or specifications by the Owner, or the agents or employees of the Owner; (b) or the giving
or failure to give directions or instructions by the Owner, or the agents or employees of Owner,
where such giving or failure to give directions or instructions is the primary cause of bodily
injury to persons or damage to property; or (c) the negligence
or wrongful misconduct of the Owner.
To the fullest extent permitted by law, the Owner shall indemnify and hold harmless the
Contractor, its Subcontractors , and the agents and employees of any of them from and against
claims, damages, losses and expenses including but not limited to attorney’s fees, arising out of
or resulting from the Project, provided that such claim, damage, loss and expense is attributable
to bodily injury, sickness, disease or death, or to injury to or destruction of tangible property,
but only to the extent caused by the Owner’s breach of this Contract, or the negligent acts or
omissions of the Owner, the Owner’s separate contractors (as contemplated in subparagraph 6.1.1),
anyone directly or indirectly employed by them or anyone for whose acts they may be liable (other
than the Contractor and its Subcontractors), regardless of whether or not such claim, damage, loss
or expense is caused in part by a party indemnified hereunder; provided, however, that the
foregoing agreement to indemnify shall not extend to liability claims, damages, loss or expenses,
including attorney fees, arising out of the negligence or wrongful misconduct of the Contractor.
Such obligation shall not be construed to negate, abridge, or reduce other rights or obligations of
indemnity which would otherwise exist as to a party or person described in this Section 4.18. The
obligations of the Contractor and the Owner herein are subject to the provisions of Subparagraphs
7.4.3 and 11.3.6.

4.18.2 In any and all claims against the Owner or any of their agents or employees by any
employee of Contractor, any Subcontractor, anyone directly or indirectly employed by any of them or
anyone for whose acts any of them may be liable, the indemnification obligation under this
Paragraph 4.18 shall not be limited in any way by any limitation on the amount or type of damages,
compensation or benefits payable by or for Contractor or any Subcontractor under workers’ or
workmen’s compensation acts, disability benefit acts or other employee benefit acts.

					
	 	 	 	 	 
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ARTICLE 5

 SUBCONTRACTORS

5.1 DEFINITION

5.1.1 A Subcontractor is a person or entity who has a direct contract with Contractor to
perform any of the Work at the site. The term Subcontractor is referred to throughout the Contract
Documents as if singular in number and masculine in gender and means a Subcontractor or its
authorized representative. The term Subcontractor does not include any separate Contractor or its
subcontractors.

5.1.2 A sub-subcontractor is a person or entity who has a direct or indirect contract with
a Subcontractor to perform any of the Work at the site. The term Sub-subcontractor is referred to
throughout the Contract Documents as if singular in number and masculine in gender and means a Sub-subcontractor or an authorized representative thereof.

5.2 AWARD OF SUBCONTRACTS AND OTHER CONTRACTS FOR PORTIONS OF THE WORK

5.2.1 Contractor, as soon as practicable after the execution of the Contract, shall
furnish to the Owner in writing for acceptance a list of names of the Subcontractors proposed for
the principal portions of the Work. If the Owner, after due investigation has reasonable objection
to any Subcontractor on such list and does not accept such
Subcontractor, he shall within
_10       days
of receiving from Contractor the list of proposed Subcontractors so notify Contractor in writing.
Failure of the Owner to make objection promptly to any Subcontractor on the list shall constitute
acceptance of such Subcontractor. Notwithstanding anything herein to the contrary, the Owner
hereby agrees that the Contractor may subcontract portions of the Work to the Contractor or
divisions of the Contractor pursuant to a subcontract agreement, and the subcontract sum thereof
shall constitute a cost of the work.

5.2.2 Contractor shall not contract with any such proposed person or entity to whom the
Owner has made reasonable objection under the provisions of Subparagraph 5.2.1. Contractor shall
not be required to contract with anyone whom it has a reasonable objection.

5.2.3 If the Owner refuses to accept any Subcontractor or person or organization on a list
submitted by Contractor in response to the requirements of the Contract, Contractor shall submit an
acceptable substitute and the Contract Sum shall be increased or decreased by the difference in
cost occasioned by such substitution and an appropriate Change Order shall be issued; however, no
increase in the Contract Sum shall be allowed for any such substitution unless Contractor has acted
promptly and responsively in submitting for acceptance any list or lists of names as required by
Subparagraph 5.2.1.

					
	 	 	 	 	 
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5.2.4 Contractor shall make no substitution for any Subcontractor, person or entity
previously selected if the Owner makes reasonable objection to such substitution.

5.3
SUBCONTRACTURAL RELATIONS

5.3.1 By an appropriate agreement, written where legally required for validity,
Contractor shall require each Subcontractor, to the extent of the Work to be performed by the
Subcontractor, to be bound to Contractor by the terms of the Contract Documents, and to assume
toward Contractor all the obligations and responsibilities which Contractor, by these Documents,
assumes toward the Owner. Said agreement shall preserve and protect the rights of the Owner under
the Contract Documents with respect to the Work to be performed by the Subcontractor so that the
subcontracting thereof will not prejudice such rights, and shall allow to the Subcontractor, unless
specifically provided otherwise in the Contractor-Subcontractor agreement, the benefit of all
rights, remedies and redress against Contractor that Contractor, by these Documents, has against
the Owner. Where appropriate, Contractor shall require each Subcontractor to enter into similar
agreements with its Sub-subcontractors. Contractor shall make available to each proposed
Subcontractor, prior to the execution of the Subcontract, copies of the Contract Documents to which
the Subcontractor will be bound by this Paragraph 5.3, and identify to the Subcontractor any terms
and conditions of the proposed Subcontract which may be at variance
with the Contract Documents. Each Subcontractor shall similarly make copies of such Documents available to its
Sub-subcontractors.

ARTICLE 6

WORK BY OWNER OR BY SEPARATE CONTRACTORS

6.1 OWNER’S RIGHT TO PERFORM WORK AND TO AWARD SEPARATE CONTRACTS

6.1.1 The Owner reserves the right to perform work related to the Project with its own
forces, and to award separate contracts in connection with other portions of the Project or other
work on the site under these or similar Conditions of the Contract including insurance and waiver’s
of subrogation. The Contractor shall be entitled to a Change Order for any delays or increases of
the Cost of the Work caused by such separate contractors. If Contractor claims that delay or
additional cost is involved because of such action by the Owner, he shall make such claim as
provided elsewhere in the Contract Documents.

6.1.2 When separate contracts are awarded for different portions of the Project or other
work on the site, the term Contractor in the Contract Documents in each case shall mean the
Contractor who executes each separate Owner-Contractor Agreement.

6.1.3 The Owner will provide for the coordination of the work of its own forces and of each
separate Contractor with the Work of Contractor, who shall cooperate therewith as provided in
Paragraph 6.2.

6.1.4 Unless otherwise provided in the Contract Documents, when the Owner performs
construction or operations related to the Project with the Owner’s own forces or pursuant to
separate contracts with other

					
	 	 	 	 	 
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contractors, the Owner shall be deemed to be subject to the same obligations and to have the same
rights which apply to the Contractor under the Conditions of the Contract. If the Owner awards
separate contracts with any other contractors for any work on the Project site during the
performance of the Work, then the Owner shall cause each and every other contractor (and their
subcontractors of any tier) to name the Contractor as an additional insured on all liability
insurance policies maintained by such other contractor (and their subcontractors of any tier) to
the extent such policies cover liabilities relating to the Project or other work being performed at
the Project site. The Owner shall furnish to the Contractor written evidence that such insurance
is in effect and that the Contractor has been named an additional insured.

6.2 MUTUAL RESPONSIBILITY

6.2.1 Contractor shall afford the Owner and separate Contractors reasonable opportunity for
the introduction and storage of their materials and equipment and the execution of their work, and
shall connect and coordinate its Work with theirs as required by the Contract Documents.

6.2.2 If any part of Contractor’s Work depends for proper execution or results upon the
work of the Owner or any separate Contractor, Contractor shall, prior to proceeding with the Work,
promptly report to the Owner any apparent discrepancies or defects in such other work that render
it unsuitable for such proper execution and results. Failure of Contractor so to report shall
constitute an acceptance of the Owner’s or separate Contractors’ work as fit and proper to receive
its Work, except as to defects which may subsequently become apparent in such work by others after
the execution of Contractor’s Work.

6.2.3 Any costs caused by defective or ill-timed work shall be borne by the party
responsible therefor.

6.2.4 Should Contractor wrongfully cause damage to the work or property of the Owner, or to
other work on the site, Contractor shall promptly remedy such damage as provided in Subparagraph
10.2.5.

6.2.5 Should Contractor wrongfully cause damage to the work or property of any separate
contractor, Contractor shall upon due notice promptly attempt to settle with such other contractor
by agreement, or otherwise to resolve the dispute. If such separate contractor sues or initiates
an arbitration proceeding against the Owner on account of any damage alleged to have been caused by
CONTRACTOR, the Owner shall notify Contractor, who shall defend such proceedings at the Owner’s
expense, and if any judgment or award or settlement before judgment or award against the Owner
arises therefrom Contractor shall pay or satisfy it and shall reimburse the Owner for all
attorneys’ fees and court or arbitration costs which the Owner has incurred.

6.3 OWNER’S RIGHT TO CLEAN UP

6.3.1 If a dispute arises between Contractor and separate Contractors as to their
responsibility for cleaning up as required by Paragraph 4.15, the Owner may clean up and charge the
cost thereof to the Contractors responsible therefor.

					
	 	 	 	 	 
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ARTICLE 7 

MISCELLANEOUS PROVISIONS

7.1 GOVERNING LAW

7.1.1 The Contract shall be governed by the law of the place where the Project is
located.

7.2 SUCCESSORS AND ASSIGNS

7.2.1 The Owner and Contractor each binds itself, its partners, successors, assigns and
legal representatives to the other party hereto and to the partners, successors, assigns and legal
representatives of such other party in respect to all covenants, agreements and obligations
contained in the Contract Documents. Neither party to the Contract shall assign the Contract or
sublet it as a whole without the written consent of the other, nor shall Contractor assign any
moneys due or to become due to it hereunder, without the previous written consent of the Owner.

7.3 WRITTEN NOTICE

7.3.1 Written notice shall be deemed to have been duly served if delivered in person to
the individual or member of the firm or entity or to an officer of the corporation for whom it was
intended, or if delivered at or sent by registered or certified mail to the last known business
address of the intended recipient.

7.4 CLAIMS FOR DAMAGE

7.4.1 Should either party to the Contract suffer injury or damage to person or property
because of any act or omission of the other party or of any of its employees, agents or others for
whose acts he is legally liable, claim shall be made in writing to such other party within 21 days
after the first observance of such injury or damage.

7.4.2 Claims for Additional Time

7.4.2.1 If the Contractor wishes to make Claim for an increase in the Contract Time, written notice
as provided herein shall be given. The Contractor’s Claim shall include an estimate of cost and of
probable effect of delay on progress of the Work. In the case of a continuing delay only one Claim
is necessary.

7.4.2.2 If adverse weather conditions or adverse site conditions caused by adverse weather are the
basis for a Claim for additional time, such Claim shall be documented by data substantiating that
either (i) adverse weather conditions were abnormal for the period of time, could not have been
reasonably anticipated and had an adverse effect on the scheduled construction, or (ii) adverse
weather conditions prevented the type of Work then scheduled, or (iii) adverse site conditions
caused by adverse weather prevented the type of Work then scheduled.

					
	 	 	 	 	 
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7.4.3
Claims for Consequential Damages.

7.4.3.1 The Contractor and Owner waive Claims against each other for
consequential damages arising out of or relating to this Contract. This mutual waiver includes:

	 	.1	 	damages incurred by the Owner for rental expenses, for losses of use, income, profit,
financing, business and reputation, and for loss of management or employee productivity or of the
services of such persons; and
	 
	 	.2	 	damages incurred by the Contractor for principal
office expenses including the compensation of personnel stationed there, for losses of financing,
business and reputation, and for loss of profit except anticipated profit arising directly from the
Work.

7.5 BOND

7.5.1 If requested to do so by the Owner, Contractor will furnish to the Owner, at
cost, a Contract Bond covering the faithful performance of the Work free and clear of all liens
arising out of claims for labor, material and/or equipment entering into the construction of the
Project. This Bond shall require Contractor to indemnify and save harmless the Owner from all loss,
cost and damage which the Owner may suffer by reason of Contractor’s failure to so perform. This
Bond shall be in favor of the Owner and issued by a company approved by the Owner, which approval
shall not be unreasonably withheld. This Bond shall not be valid if the payments required under
the Contract are not made by the Owner in accordance with the terms and conditions of the Contract.
Neither this subparagraph nor any other provision of the Contract imposes any duty upon Contractor
to see to the payment of any monies to parties furnishing labor, material or equipment pursuant to
a Contract with a subcontractor so long as title to all such labor, material and equipment
incorporated into the Project passes to the Owner free and clear of liens, claims, security
interests and other encumbrances. Contractor shall not be required to furnish any bonds covering
such payments other than the Contract Bond required hereunder.

7.6 RIGHTS AND REMEDIES

7.6.1 The duties and obligations imposed by the Contract Documents and the rights and
remedies available thereunder shall be in addition to and not a limitation of any duties,
obligations, rights and remedies otherwise imposed or available by law.

7.6.2 No action or failure to act by the Owner or Contractor shall constitute a waiver of
any right or duty afforded any of them under the Contract, nor shall any such action or failure to
act constitute an approval of or acquiescence in any breach thereunder, except as may be
specifically agreed in writing.

7.6.3 If any arbitration, litigation or other proceeding is commenced by either party
hereunder, to enforce the obligations of the other party, then (a) the identity of the prevailing
party in any such proceeding shall be determined by the arbitrator or court (whichever is
applicable), (b) such prevailing party shall be reimbursed by the non-prevailing party for all of
the prevailing party’s reasonable out-of-pocket expenses

					
	 	 	 	 	 
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incurred in connection therewith, including without limitation reasonable attorneys’ fees and (c)
the arbitrator or court (whichever is applicable) shall be authorized to make an award of such
expense in any such proceeding.

7.7 TESTS

7.7.1 If the Contract or any laws, ordinances, rules, regulations or orders of any public
authority having jurisdiction require any Work to be inspected, tested or approved by Building
Inspector, Contractor shall give the Owner timely notice of its readiness and of the date arranged
so they may observe such inspection, testing or approval. Contractor shall bear all costs of such
inspections, tests and approvals unless otherwise provided. Should there be a requirement by any
laws, ordinances, rules, regulations or orders of any public authority having jurisdiction for
special inspections by persons other than the Building Inspector, the Owner shall employ the
services of a qualified special inspector who will provide selective or continuous inspection on
the construction and work requiring its employment.

7.7.2 If the Architect or the Owner determines that any Work requires special inspection,
testing, or approval which Subparagraph 7.7.1 does not include, the Architect or Owner will
instruct Contractor to order such special inspection, testing or approval, and Contractor shall
give notice as provided in Subparagraph 7.7.1. If such special inspection or testing reveals a
failure of the Work to comply with the requirements of the Contract Documents or if such special
inspection or testing was required by the Architect (whether or not it reveals a failure of the
Work to comply with the requirements of the Contract Documents), Contractor shall bear all costs
thereof, including compensation for the Architect’s additional services made necessary by such
failure; otherwise the Owner shall bear such costs, and an appropriate Change Order shall be
issued.

7.7.3 Required certificates of inspection, testing or approval shall be secured by
Contractor and promptly delivered by it to the Owner.

7.7.4 If either the Architect or the Owner’s Construction Inspector wishes to observe the
inspections, tests or approvals required by the Contract Documents, he will do so promptly and,
where practicable, at the source of supply.

7.8 INTEREST

7.8.1 If the Owner fails to make payment in accordance with the terms of the Contract
Documents, in addition to those remedies available to Contractor under Subparagraph 9.7, there
shall be added to such payment annual interest at a rate of 12%, which interest shall be compounded
annually and annually added to, and bear the same interest as, the unpaid payment, but only to the
extent allowed by law, which interest shall commence on the first day after said payment is due and
continue until the payment with interest is received by Contractor.

7.9 (There is no Paragraph 7.9.)

					
	 	 	 	 	 
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ARTICLE 8 

TIME

8.1 DEFINITION

8.1.1 Unless otherwise provided, the Contract Time is the period of time allotted in the
Contract Documents for Substantial Completion of the Work as defined in Subparagraph 8.1.3,
including authorized adjustments thereto.

8.1.2 The date of commencement of the Work shall be the date upon which all of the
following have occurred: (1) execution of the Contract Documents; (2) issuance of all necessary
permits for construction by the governing authorities; (3) completion of any demolition work by the
Owner if such a requirement prior to the start of Contractor’s work under the Contract; and (4)
submission of satisfactory evidence to Contractor from the Owner of completion of financing
necessary to fund the Contract.

8.1.3 The Date of Substantial Completion of the Work or designated portion thereof is the
Date certified by the Architect when construction is sufficiently complete, in accordance with the
Contract Documents, so the Owner can occupy or utilize the Work or designated portion thereof for
the use for which it is intended. If at any time the Owner occupies all or any portion of the
Work, such occupancy shall be an acknowledgement by Owner of substantial completion of the occupied
Work Area whether or not the Architect has issued a Certificate of Substantial Completion therefor
or whether or not the Owner has accepted such Area.

8.1.4 The term day as used in the Contract Documents shall mean calendar day unless
otherwise specifically designated.

8.2 PROGRESS AND COMPLETION

8.2.1 All time limits stated in the Contract Documents are of the essence of the
Contract.

8.2.2 Contractor shall begin the Work on the date of commencement as defined in
Subparagraph 8.1.2 unless extended as provided elsewhere in the Contract Documents. It shall carry
the Work forward expeditiously with adequate forces and shall achieve Substantial Completion within
the Contract Time.

8.3 DELAYS AND EXTENSIONS OF TIME

8.3.1 If the Contractor is delayed at any time in the commencement or progress of the Work
by an act or neglect of the Owner, an employee of the Owner, a separate contractor employed by the
Owner, by changes ordered by Owner in the Work, the Contract Time shall be extended by Change Order
for a reasonable time and the Contract Sum shall be adjusted to the extent reasonably necessary to
compensate the Contractor for any increase in the cost of the Work caused by such delay. Where
delays are caused by adverse weather conditions or adverse site conditions caused by adverse
weather which prevent construction activities of the type then scheduled, the Contract Time may be
extended by Change Order for a reasonable time, but there will be no adjustment in the Contract
Sum. Where delays are caused by circumstances which are beyond the Contractor’s control, other than

					
	 	 	 	 	 
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adverse weather conditions, the Contract Time may be extended by Change Order for a reasonable time
and the Contract Sum may be adjusted to the extent reasonably necessary to compensate the
Contractor for fifty percent (50%) of any increase in the cost of the Work resulting from such
delay. In order to determine for purposes of this Subparagraph 8.3.1 the amount of any increase in
the cost of the Work, Contractor shall provide to the Owner the amount of such increase together
with any applicable subcontracts with subcontractors for material and labor who are affected by the
delay and any Change Orders required by such subcontractors which state the increase in the cost of
materials and/or labor resulting from any delay for which the Contract Sum may be adjusted in
accordance with this Subparagraph 8.3.1. In determining such increased cost of the Work, there
shall be no increase for the cost of any built-in profit by the Contractor in the Contract Sum.

8.3.2 Notices of delay shall be made in writing to the Owner no more than thirty (30)
days after the occurrence of the cause of a delay and all claims for extension of time for
performance of the contract shall be made in writing to the Owner no more than forty-five (45) days
after the termination of the cause of the delay has ended; otherwise the claim for delay shall be
waived. In the case of a continuing cause of delay only one notice shall be required.

8.3.3 If no agreement is made stating the dates upon which interpretations as provided in
Subparagraph 2.2.8 shall be furnished, then no claim for delay shall be allowed on account of
failure to furnish such interpretations until fifteen (15) days after written request is made for
them, and not then unless such claim is reasonable.

8.3.4 This Paragraph 8.3 does not exclude the recovery of damages for delay by either party
under other provisions of the Contract Documents.

ARTICLE 9 

PAYMENTS AND COMPLETION

9.1 CONTRACT SUM

9.1.1 The Contract Sum is stated in the Agreement and, including authorized adjustments
thereto, is the total amount payable by the Owner to Contractor for the performance of the Work
under the Contract Documents.

9.2 SCHEDULE OF VALUES

9.2.1 Before the second Application for Payment, Contractor shall submit to the Owner,
a schedule of values of the various portions of the work, aggregating the Total Contract. Each
item in the schedule of values shall include its proper share of
overhead and profit. This
schedule, when and if approved by the Owner, shall be used only as a basis for Contractor’s
Application for Payment.

					
	 	 	 	 	 
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9.3 APPLICATIONS FOR PAYMENT

9.3.1 At least ten (10) days before the date for each progress payment established in the
Agreement, Contractor shall submit to the Owner an itemized Application for Payment, reflecting
retainage, if any, as provided elsewhere in the Contract Documents.

9.3.2 Payments shall be made on account of materials and equipment delivered and suitably
stored at the site for subsequent incorporation in the Work. Payment may similarly be made for
materials and equipment suitably stored off the site at a location agreed upon in writing. Payment
for materials and equipment stored on or off the site shall be conditioned upon compliance by the
Contractor with procedures satisfactory to the Owner to establish the Owner’s title to such
materials and equipment or otherwise protect the Owner’s interest, and shall include the costs of
applicable insurance, storage and transportation to the site for such materials and equipment
stored off the site. Except to the extent coverable by insurance pursuant to Section 11.4, the
Contractor shall be liable for loss or damage to stored materials, whether stored on-site or
off-site.

9.3.3 Contractor warrants that title to all Work, materials and equipment covered by an
Application for Payment will pass to the Owner either by incorporation, in the construction or upon
the receipt of payment by Contractor, whichever occurs first, free and clear of all liens, claims,
security interests or encumbrances, hereinafter referred to in this Article 9 as “liens”; and that
no Work, materials or equipment covered by an Application for Payment will have been acquired by
Contractor, or by any other person performing Work at the site or furnishing materials and
equipment for the Project, subject to an agreement under which an interest therein or an
encumbrance thereon is retained by the seller or otherwise imposed by Contractor or such other
person.

9.4 CERTIFICATES FOR PAYMENT

9.4.1 The Owner will within seven days after receipt of the Contractor’s Application for
Payment, either pay the amount of such Application for Payment to the Contractor, or notify the
Contractor in writing of the Owner’s reasons for withholding payment in whole or in part.

9.4.2 Except as provided in Subparagraph 9.5.5, the making of a Payment will constitute a
representation by the Owner that the Work has progressed to the point indicated and that, to the
best of the Owner’s knowledge, information and belief, the quality of the Work is in accordance
with the Contract Documents (subject to an evaluation of the Work for conformance with the Contract
Documents upon Substantial Completion, to results of subsequent tests and inspections, to
correction of minor deviations from the Contract documents prior to completion and to specific
qualifications expressed by the Owner). The making of a Payment will further constitute a
representation that the Contractor is entitled to payment in the amount set forth in the
Application for Payment.

9.5 PROGRESS PAYMENT

9.5.1 After the Owner has issued a Certificate for Payment, the Owner shall make
payment in the manner and within twenty (20) days or such shorter time as may be provided in the
Contract Documents.

					
	 	 	 	 	 
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9.5.2 Contractor shall promptly pay each Subcontractor, upon receipt of payment from the
Owner, out of the amount paid to Contractor on account of such Subcontractor’s Work, the amount to
which said Subcontractor is entitled reflecting the percentage to be retained, if any, in
accordance with the terms of the Subcontract. Contractor shall, by an appropriate agreement with
each Subcontractor, require each Subcontractor to make payments to its Sub-subcontractors in
similar manner.

9.5.3 (There is no Subparagraph 9.5.3.)

9.5.4 The Owner shall not have any obligation to pay or to see to the payment of any moneys
to any Subcontractor except as may otherwise be required by law.

9.5.5 No progress payment, nor any partial or entire use or occupancy of the Project by the
Owner, shall constitute an acceptance of any Work not in accordance with the Contract Documents.

9.6 PAYMENTS WITHHELD

9.6.1 DECISIONS TO WITHHOLD CERTIFICATION

If the Owner withholds a payment of all or any portion of an Application for Payment, then Owner
will notify the Contractor. If the Contractor and the Owner cannot agree on a revised amount, the
Owner will promptly pay the amount which is not in dispute. The Owner may withhold a Payment or,
because of subsequently discovered evidence, may request a refund of the whole or a part of a
Payment previously made to such extent as may be reasonably necessary to protect the Owner from
loss for which the Contractor is responsible, resulting from acts and omission because of:

	 	.1	 	defective Work not remedied;
	 
	 	.2	 	third party claims filed or reasonable evidence indicating
probable filing of such claims unless security acceptable to the Owner is provided by the
Contractor;
	 
	 	.3	 	failure of the Contractor to make payments properly to
Subcontractors or for labor, materials or equipment;
	 
	 	.4	 	reasonable evidence that the Work cannot be completed for the
unpaid balance of the Contract Sum;
	 
	 	.5	 	damage to the Owner or other contractor;
	 
	 	.6	 	reasonable evidence that the Work will not be completed within the Contract Time, and that the
unpaid balance would not be adequate to cover actual or liquidated damages for the anticipated
delay; or
	 
	 	.7	 	persistent failure to carry out the Work in accordance with the Contract Documents.

9.6.2 When the above grounds in Subparagraph 9.6.1 are removed, payment shall be made for
amounts withheld because of them. If the Contractor provides the Owner with a lien bond sufficient
to cover mechanics’ liens filed by the Contractor or any Subcontractor, the Owner shall not
withhold payment. The Contractor at its cost will diligently
pursue the removal of any lien filed by a Subcontractor, and regardless of whether a lien bond is
provided as set forth above, during such time the Owner shall not satisfy or pay off the lien or
otherwise settle or compromise the Contractor’s claim; provided, however, that promptly after a
final, non-appealable judgment is rendered directing that the property be

					
	 	 	 	 	 
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sold to satisfy the lien, and in any event prior to the date of such sale, the Contractor will
satisfy the lien and pay the Contractor all amounts owing.

9.7 PAYMENT AND FINANCING

9.7.1 If the Owner should fail to pay Contractor within seven days after the date for
payment established in the Contract any amount certified by the Owner, then Contractor may, upon
seven (7) additional days written notice to the Owner stop the Work until payment of the amount
owing has been received. The Contract Sum shall be increased by the amount of Contractor’s
reasonable costs of shut-down, delay and start-up, which shall be effected by appropriate Change
Order in accordance with Article 12.

9.7.2
If at any time, before or after commencement of the work, Contractor reasonably
believes that the funding or financing of the Project is not sufficient or is in doubt, then
Contractor may, upon seven (7) days written notice to the Owner, suspend its obligations under the
contract until the Owner submits evidence satisfactory to Contractor that the financing or funding
of the Project is sufficient.

9.8 SUBSTANTIAL COMPLETION AND FINAL PAYMENT

9.8.1 When Contractor determines that the Work, or a designated portion thereof which
is acceptable to the Architect, is substantially complete as defined in Subparagraph 8.1.3,
Contractor shall prepare for submission to the Owner a list of items to be completed or corrected.
The failure to include any items on such list does not alter the responsibility of Contractor to
complete all Work in accordance with the Contract Documents. When the Architect on the basis of an
inspection determines that the Work is substantially complete, the Architect will then prepare a
Certificate of Substantial Completion which shall establish the Date of Substantial Completion,
shall state the responsibilities of the Owner and Contractor for maintenance, security, heating,
cooling, utilities and insurance, and shall fix the time within which Contractor shall complete or
correct the items listed therein. Warranties required by the Contract Documents shall commence on
the earlier of the Date of Substantial Completion or occupancy or placing into service by the Owner
of the Work or designated portion thereof, except for items on the list submitted to the Owner by
Contractor, the warranty for these items shall commence on the date that the items are furnished or
corrected by Contractor. The Certificate of Substantial Completion shall be submitted to the Owner
and Contractor for their written acceptance of the responsibilities assigned to them in such
Certificate. Upon Substantial Completion of the Work or a designated portion thereof and upon
application by Contractor and certification by the Owner, the Owner shall make payment, reflecting
adjustment in retention, if any, for such work or portion thereof as provided in the Contract
Documents. If at any time the Owner occupies or places into service all or any portion of the
Work, such occupancy or placing into service shall be an acknowledgment by Owner of Substantial
Completion of the Work so occupied or placed into service, Owner whether or not the Owner has
accepted such Work.

					
	 	 	 	 	 
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9.9 FINAL COMPLETION AND FINAL PAYMENT

9.9.1 Upon receipt of written notice from Contractor that the Work is ready for final
inspection and acceptance and upon receipt of a final Application for Payment, the Owner will
promptly make such inspection and, when he finds the Work acceptable under the Contract Documents
and the Contract fully performed, he will promptly issue a final Certificate for Payment stating
that to the best of its knowledge, information and belief, and on the basis of its observations and
inspections, the Work has been completed in accordance with the terms and conditions of the
Contract Documents and that the entire balance found to be due Contractor, and noted in said final
Certificate, is due and payable. The Owner’s final Certificate for Payment will constitute a
further representation that the conditions precedent to Contractor’s being entitled to final
payment as set forth in Subparagraph 9.9.2 have been fulfilled.

9.9.2 The final payment shall not become due until Contractor submits to the Owner (1) an
affidavit that all payrolls, bills for materials and equipment, and other indebtedness connected
with the Work for which the Owner or its property might in any way be responsible, and for which
Contractor has been paid, have been paid or otherwise satisfied,
(2) consent of surety, if any, to final payment and (3), if required by the Owner, other data
establishing payment or satisfaction of all such obligations, such as receipts, releases and
waivers of liens arising out of the Contract, to the extent and in such form as may be designated
by the Owner. If any Subcontractor refuses to furnish a release or waiver required by the Owner,
Contractor may furnish a bond satisfactory to the Owner to indemnify Owner against any such lien.
If any such lien remains unsatisfied after all payments are made, Contractor shall refund to the
Owner all moneys that the latter may be compelled to pay in discharging such lien, including all
costs and reasonable attorneys’ fees.

9.9.3 If, after Substantial Completion of the Work, final completion thereof is
materially delayed through no fault of Contractor or by the issuance of Change Orders affecting
final completion, the Owner shall, upon application by Contractor, and without terminating the
Contract, make payment of the balance due for that portion of the Work fully completed and
accepted. If the remaining balance for Work not fully completed or corrected is less than the
retainage stipulated in the Contract Documents, and if bonds have been furnished as provided in
Paragraph 7.5, the written consent of the surety to the payment of the balance due for that portion
of the Work fully completed and accepted shall be submitted by Contractor to the Owner prior to
certification of such payment. Such payment shall be made under the terms and conditions governing
final payment, except that it shall not constitute a waiver of claims.

9.9.4 The making of final payment shall constitute a waiver of all claims by the Owner
except those arising from:

	 	.1	 	unsettled liens,
	 
	 	.2	 	faulty or defective Work appearing after Substantial Completion,
	 
	 	.3	 	failure of the Work to comply with the requirements of the Contract Documents, as amended and
modified,

					
	 	 	 	 	 
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	 	.4	 	terms of any special warranties required by the Contract Documents.

9.9.5 The acceptance of final payment shall constitute a waiver of all claims by
Contractor, subcontractors or material suppliers, except those previously made in writing and
identified by Contractor as unsettled at the time of the final payment.

ARTICLE 10

PROTECTION OF PERSONS AND PROPERTY

10.1 SAFETY PRECAUTIONS AND PROGRAMS

10.1.1 Contractor shall be responsible for initiating, maintaining and supervising all
safety precautions and programs in connection with the Work.

10.2 SAFETY OF PERSONS AND PROPERTY

10.2.1 Contractor shall take all reasonable precautions for the safety of, and shall
provide all reasonable protection to prevent damage, injury or loss to:

	 	.1	 	employees on the Work and all other persons who may be affected thereby,
	 
	 	.2	 	the Work and all materials and equipment to be
incorporated therein, whether in storage on or off the site, under the care, custody or control of
Contractor or any of its Subcontractors or Sub-subcontractors; and
	 
	 	.3	 	other property at the site or adjacent thereto, including trees, shrubs, lawns, walks,
pavements, roadways, structures and utilities not designated for removal, relocation or replacement
in the course of construction.

10.2.2 Contractor shall give all notices and comply with all applicable
laws, ordinances, rules, regulations and lawful orders of any public authority bearing on the
safety of persons or property or their protection from damage, injury or loss.

10.2.3 Contractor shall erect and maintain, as required by existing conditions and
progress of the Work, all reasonable safeguards for safety and protection, including posting danger
signs and other warnings against hazards, promulgating safety regulations and notifying owners and
users of adjacent utilities.

10.2.4 When the use or storage of explosives or other hazardous materials or equipment
is necessary for the execution of the Work, Contractor shall exercise the utmost care and shall
carry on such activities under the supervision of properly qualified personnel.

					
	 	 	 	 	 
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10.2.5
Contractor shall promptly remedy all damage or loss (other than damage or loss
insured under Paragraph 11.3) to any property referred to in
Clauses 10.2.1.2 and 10.2.1.3 caused
in whole or in part by Contractor, any Subcontractor, any Sub-subcontractor, or anyone directly or
indirectly employed by any of them, or by anyone for whose acts any of them may be liable and for
which Contractor is responsible under Clauses 10.2.1.2 and 10.2.1.3, except damage or loss
attributable to the acts or omissions of the Owner or anyone directly or indirectly employed by the
Owner, or by anyone for whose acts the Owner may be liable, and not attributable to the fault or
negligence of Contractor. The foregoing obligations of Contractor are in addition to its
obligations under Paragraph 4.18.

10.2.6 Contractor shall designate a responsible member of its organization at the site
whose duty shall be the prevention of accidents. This person shall be Contractor’s superintendent
unless otherwise designated by Contractor in writing to the Owner.

10.2.7 Contractor shall not load or permit any part of the Work to be loaded so as to
endanger its safety.

10.2.8 The Owner is committed to provided a safe working environment on the jobsite. In
endeavoring to achieve a safe workplace, the Owner requires that the Contractor implement a
substance abuse policy covering all Contractor, Subcontractor, and Sub-subcontractor employees of
any tier throughout the duration of this Project. Contractor agrees that such policy shall be in
accordance with the Contractor’s corporate substance abuse policy.

10.3 EMERGENCIES

10.3.1 In any emergency affecting the safety of persons or property, Contractor shall
act, at its discretion, to prevent threatened damage, injury or loss. Any additional compensation
or extension of time claimed by Contractor on account of emergency work shall be determined as
provided in Article 12 for Changes in the Work.

10.3.2 If, without negligence on the part of the Contractor, the Contractor is held
liable for the cost of remediation of a hazardous material or substance solely by reason of
performing Work as required by the Contract Documents, the Owner shall indemnify the Contractor for
all cost and expense thereby incurred. However, if Contractor or a Subcontractor brought to the
site the hazardous material or substance, then Contractor shall be liable for the cost of
remediation and the Owner shall not be required to indemnify Contractor. Owner shall be required
to indemnify the Contractor to the extent that its employees, agents, separate contractors or any
party for which Owner is directly or indirectly liable, negligently causes the necessity for such
remediation.

					
	 	 	 	 	 
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ARTICLE 11

INSURANCE

11.1 CONTRACTOR’S LIABILITY INSURANCE

11.1.1 Contractor shall purchase and maintain such insurance as will protect Contractor
from claims set forth below which may arise out of or result from Contractor’s operations under the
Contract, whether such operations be by itself or by Subcontractor or by anyone directly or
indirectly employed by any of them, or by anyone for whose acts any of them may be liable:

	 	.1	 	claims under workers’ or workmen’s compensation,
disability benefit and other similar employee benefit acts;
	 
	 	.2	 	claims for damages because of bodily injury, occupational sickness or disease, or death of its
employees;
	 
	 	.3	 	claims for damages because of bodily injury, sickness or disease, or death of any person other
than its employees;
	 
	 	.4	 	claims for damages insured by usual personal injury
liability coverage which are sustained (1) by any person as a result of an offense directly or
indirectly related to the employment of such person by Contractor, or (2) by any other person;
	 
	 	.5	 	claims for damages, other than to the Work itself, because of injury to or destruction of
tangible property, including loss of use resulting therefrom; and
	 
	 	.6	 	claims for damages because of bodily injury or death of any person or property damage arising
out of the ownership, maintenance or use of any motor vehicle.

11.1.2 The insurance required by Subparagraph 11.1.1 shall be written for not less than any
limits of liability specified in the Contract Documents, or required by law, whichever is greater.

11.1.3 The insurance required by Subparagraph 11.1.1 shall include contractual liability
insurance applicable to Contractor’s obligations
under Paragraph 4.18.1.

11.1.4 Certificates of Insurance reflecting the coverages Contractor is required to
provide under the Contract Documents shall be filed with the Owner prior to execution of the
Contract. These Certificates shall contain a provision that coverages afforded under the policies
will not be cancelled until at least thirty (30) days prior written notice has been given to the
Owner.

					
	 	 	 	 	 
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11.2 OWNER’S LIABILITY INSURANCE

11.2.1 The Owner shall be responsible for purchasing and maintaining its own liability
insurance and, at its option, may purchase and maintain such insurance as will protect Owner
against claims which may arise from operations under the Contract.

11.3 PROPERTY INSURANCE

11.3.1 The Owner shall purchase and maintain, in a company or companies lawfully authorized
to do business in the jurisdiction in which the Project is located, property insurance written on a
builder’s risk “all-risk” or equivalent policy form in the amount of the value of the Work then
completed by Contractor and cost of materials supplied or installed by others, comprising the then
total value for the entire Project at the site on a replacement cost basis. Such property insurance
shall be maintained, unless otherwise provided in the Contract Documents or otherwise agreed in
writing by all persons and entities who are beneficiaries of such insurance, until final payment
has been made as provided in Section 9.9 or until no person or entity other than the Owner has an
insurable interest in the property required by this Section 11.4 to be covered, whichever is later.
This insurance shall include interests of the Owner, the Contractor, Subcontractors and
Sub-subcontractors in the Project.

11.3.1.2 Property insurance shall be on an “all-risk” or equivalent policy form and shall
include insurance against the perils of fire (with extended coverage) and physical loss or damage
including, without duplication of coverage, theft, vandalism, malicious mischief, collapse,
earthquake, flood, windstorm, falsework, testing and startup, temporary buildings and debris
removal including demolition occasioned by enforcement of any applicable legal requirements, and
shall cover reasonable compensation for Architect’s and Contractor’s services and expenses required
as a result of such insured loss. The Owner shall provide the required Certificate(s) of Insurance
to the Contractor prior to commencement of the Work. A copy of the Policy(ies) will only be
provided upon specific request.

11.3.1.3 If the property insurance requires deductibles, the Owner shall pay such
applicable deductible.

11.3.1.4 This property insurance shall cover portions of the Work stored off the site, and
also portions of the Work in transit.

11.3.2 The Owner shall purchase and maintain such boiler and machinery insurance as may be
required by the Contract Documents or by law. This insurance shall include the interests of the
Owner, Contractor, Subcontractors and Sub-subcontractors in the Work.

11.3.3 Any loss insured under Subparagraph 11.3.1 is to be adjusted
with the Owner and made payable to the Owner as trustee for the insureds, as their interests may
appear, subject to the requirements of any applicable mortgagee clause as approved by Contractor
and of Subparagraph 11.3.8. Contractor shall pay each Subcontractor a just share of any insurance
moneys received by Contractor and by appropriate agreement, written where legally required for
validity, shall require each Subcontractor to make payments to its Sub-subcontractors in similar
manner.

					
	 	 	 	 	 
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11.3.4 The Owner shall file a copy of all policies with Contractor before any exposure to
loss may occur. If the Owner does not intend to purchase such insurance or any specific coverage
required therein, Owner shall notify Contractor in writing prior to the commencement of the Work.
In the event of receipt of such written notice, Contractor may then effect insurance coverage not
purchased by the Owner which will protect Contractor’s interest, its subcontractors and its
sub-subcontractors in the Work, and by appropriate Change Order, the cost thereof shall be charged
to the Owner. If Contractor is damaged by the Owner’s failure to obtain or maintain the complete
insurance coverage required, then the Owner shall be responsible for all costs and damages
resulting therefrom which would have otherwise been insured had the Owner obtained the coverage
required.

11.3.5 If Contractor requests in writing that insurance for risks other than those
described in Subparagraphs 11.3.1 and 11.3.2 or other specific hazards be included in the property
insurance policy, the Owner shall, include such insurance, and pay the cost thereof.

11.3.6 The Owner and Contractor waive all rights against (1) each other and the
Subcontractors, Sub-subcontractors, agents and employees each of the other, and (2) separate
Contractors, if any, and their subcontractors, sub-subcontractors, agents and employees, for
damages caused by fire or other perils to the extent covered by insurance obtained pursuant to this
Paragraph 11.3 or any other property insurance applicable to the Work, except such rights as they
may have to the proceeds of such insurance held by the Owner as trustee. The Owner or Contractor,
as appropriate, shall require of, separate Contractors, subcontractors and Sub-subcontractors by
appropriate agreements, written where legally required for validity, similar waivers each in favor
of all other parties enumerated herein. The policies shall provide such waivers of subrogation by
endorsement or otherwise. A waiver of subrogation shall be effective as to a person or entity even
though that person or entity would otherwise have a duty of indemnification, contractual or
otherwise, did not pay the insurance premium directly or indirectly, and whether or not the person
or entity had an insurable interest in the property damaged.

11.3.7 If required in writing by any party in interest, the Owner as trustee shall, upon
the occurrence of an insured loss, give bond for the proper performance of its duties. He shall
deposit in a separate account any money so received, and he shall distribute it in accordance with
such agreement as the parties in interest may reach. If, after such loss, no other special
agreement is made, replacement of damaged work shall be covered by an appropriate Change Order.

11.3.8 The Owner as trustee shall have power to adjust and settle any loss with the
insurers unless one of the parties in interest shall object in writing within five days after the
occurrence of loss to the Owner’s exercise of this power. The Owner as trustee shall, in that
case, make settlement with the insurers in accordance with the agreement of the parties.

11.3.9 If the Owner finds it necessary to occupy or use a portion or portions of the Work
prior to Substantial Completion thereof, such occupancy shall not commence prior to a time mutually
agreed to by the Owner and Contractor and to which the insurance company or companies providing the
property insurance have consented by endorsement to the

					
	 	 	 	 	 
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policy or policies. This insurance shall not be cancelled or lapsed on account of such partial
occupancy. Consent of Contractor and of the insurance company or companies to such occupancy or
use shall not be unreasonably withheld.

11.3.10 If during the Project construction period the Owner insures properties, real or
personal or both, at or adjacent to the site by property insurance under policies separate from
those insuring the Project, or if after final payment property insurance is to be provided on the
completed Project through a policy or policies other than those insuring the Project during the
construction period, the Owner shall waive all rights for damages caused by fire or other causes of
loss covered by this separate property insurance. All separate policies shall provide this waiver
of subrogation by endorsement or otherwise.

11.4 LOSS OF USE INSURANCE

11.4.1 The Owner shall purchase and maintain such insurance as is necessary to insure
Owner against loss of use of Owner’s property due to fire or other hazards, however caused. The
Owner hereby waives all rights of action against Contractor for loss of use of Owner’s property,
including consequential damages due to fire or other hazards however caused.

ARTICLE 12 

CHANGES
IN THE WORK

12.1 CHANGE ORDERS

12.1.1 A Change Order is a written order to Contractor signed by Contractor and Owner,
issued after the execution of the Contract, authorizing a Change in the Work or an adjustment in
the Contract Sum or the Contract Time. The Contract Sum and the Contract Time may be changed only
by Change Order.

12.1.2 The Owner, without invalidating the Contract, may request Changes in the Work within
the general scope of the Contract consisting of additions, deletions or other revisions, the
Contract Sum and the Contract Time being adjusted accordingly. All such Changes in the Work shall
be authorized by Change Order, and shall be executed under the applicable conditions of the
Contract. If any such Change in the Work requires design services by Architect and Structural
Engineer, or if any proposed Change in the Work is initiated or requested by the Owner and requires
design services by Architect, whether or not such proposed Change results in a Change in the Work,
the Owner shall compensate the Architect and Structural
Engineer for such services, such compensation to be in addition to that specified in the Agreement
of this Contract.

12.1.3 The cost or credit to the Owner resulting from a change in the Work shall be
determined in one or more of the following ways:

	 	.1	 	by mutual acceptance of a lump sum properly itemized;

					
	 	 	 	 	 
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	 	.2	 	by unit prices stated in the Contract Documents or subsequently agreed upon;
	 
	 	.3	 	if the Owner and Contractor cannot agree on any of the above, then the method provided in
subparagraph 12.1.4 shall be followed.

12.1.4 If none of the methods set forth in Clauses 12.1.3.1 or 12.1.3.2 is agreed upon,
Contractor, provided it receives a written order signed by the Owner and the Architect, shall
promptly proceed with the Work involved. The cost of such Work shall then be determined Contractor
and approved by the Owner on the basis of the reason-able expenditures and savings of those
performing the Work attributable to the Change, including, in the case of an increase in the
Contract Sum, the following:

	 	.1	 	for subcontractors, the increase shall be based upon the cost of labor (including Social
Security, insurance and welfare contributions), materials, equipment rentals, and there shall be
added to these costs a fixed fee of fifteen percent (15%). This fixed fee shall be full
compensation to cover the cost of supervision (job and office), all overhead, bond, profit and any
other expenses, including all costs resulting from additional time, if any, required to complete
the Subcontract.
	 
	 	.2	 	for Contractor, the increase shall be based upon the cost of the following items.

               .1 the cost of all materials required by the change;

               .2 the cost of all labor required by the change (including all fringes, payroll taxes and
insurance);

               .3 the cost of all equipment rentals;

               .4 the cost of all portions of the Work performed by subcontractors;

               .5 the cost of field overhead attributable to this change;

               .6 a fixed fee of 15% of the total of .1, .2, .3, .4,
and .5 above, which shall be the compensation to CONTRACTOR to cover the cost of hand tools, home
office overhead, other expenses and profit; and,

               .7 the cost of Architectural and Engineering services, if
required, resulting from this change per Paragraph 12.1.2.

In such case, Contractor shall keep and present an itemized accounting together with appropriate
supporting data, for inclusion in a Change Order. Unless otherwise provided in the Contract
Documents, cost shall be limited to the following: Cost of materials, including sales tax and cost
of delivery; cost of labor, including Social Security, old age and unemployment insurance, and
fringe benefits required by agreement or custom; Workers’ or Workmen’s Compensation insurance;
bond premiums; rental value of equipment and machinery; and the additional costs of supervision and
field office personnel directly attributable to the change. Pending final determination of cost to
the Owner, payments on account shall be made on the Application of Payment. The amount of credit
to be allowed by Contractor to the Owner for any deletion or change which results in a net decrease
in the Contract Sum will be the amount of the actual net cost as confirmed by the Owner. When both
additions and credits covering related

					
	 	 	 	 	 
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Work or substitutions are involved in any one change, the allowance for overhead and profit shall
be figured on the basis of the net increase, if any, with respect to that change.

12.1.5 If unit prices are stated in the Contract Documents or subsequently agreed upon,
and if the quantities originally contemplated are so changed in a proposed Change Order that
application of the agreed unit prices to the quantities of Work proposed will cause substantial
inequity to the Owner or CONTRACTOR, the applicable unit prices shall be equitably adjusted.

12.2 CONCEALED CONDITIONS

12.2.1 Claims for Concealed or Unknown Conditions. If conditions are encountered at the
site which are (1) subsurface or otherwise concealed physical conditions which differ materially
from those indicated in the Contract Documents or (2) unknown physical conditions of an unusual
nature, which differ materially from those ordinarily found to exist and generally recognized as
inherent in construction activities of the character provided for in the Contract Documents, then
notice by the observing party shall be given to the other party promptly before conditions are
disturbed and in no event later than 14 days after first observance of the conditions. If the
conditions encountered are materially different, the Contract Sum and Contract Time shall be
equitably adjusted, but if the Owner and Contractor cannot agree on an adjustment in the Contract
Sum or Contract Time, the matter shall be considered a Claim and be resolved in accordance with
this Agreement.

12.2.2 The Owner and Contractor acknowledge and agree that while asbestos may be present
in the existing structure, if any, the Contract Documents do not require Contractor to identify or
remove any asbestos unless a Modification to the Contract is agreed to by the Owner, Contractor.

12.3 CLAIMS FOR ADDITIONAL COST

12.3.1 Any claim for an increase in the Contract Sum shall be made in writing to the
Owner within forty-five (45) days after the occurrence of the event giving rise to such claim
except where the event for which the claim is made is delay, then within forty-five (45) days of
the event ending the delay. Such notice of claim shall be given before proceeding to execute the
Work, except (1) in an emergency endangering life or property, in which case the Work shall proceed
in accordance with Subparagraph 10.3.1, or (2) in the case of a claim for delay which is cause for
the Contract Time to be extended pursuant to Subparagraph 8.3.1. No claim shall be valid unless
the notice provided herein is given. Any increases in the Contract Sum resulting from a claim made
in accordance with this paragraph shall be made by written Change Order.

12.3.2 Any claim for additional costs because of (1) any interpretation issued pursuant
to Subparagraph 2.2.8; (2) any order by the Owner to stop work pursuant to Paragraph 3.3; (3) any
written order for a minor change in the work issued pursuant to Paragraph 12.4; or (4) any delay
which is cause for the Contract Time to be extended pursuant to Subparagraph 8.3.1; shall be made
in accordance with Subparagraph 12.3.1.

					
	 	 	 	 	 
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12.4 MINOR CHANGES IN THE WORK

12.4.1 The Architect will have authority to order minor changes in the Work not
involving an adjustment in the Contract Sum or an extension of the Contract Time and not
inconsistent with the intent of the Contract Documents.

ARTICLE 13 

UNCOVERING AND CORRECTION OF WORK

13.1 UNCOVERING OF WORK

13.1.1 If any portion of the Work should be covered contrary to the request of the Owner’s
Construction Inspector or to requirements specifically expressed in the Contract Documents, it
must, if required in writing by either party, be uncovered for its observation and shall be
replaced at Contractor’s expense.

13.1.2 If any other Work has been covered which the Owner’s Construction Inspector has not
specifically requested to observe prior to being covered, the Owner’s Construction Inspector may
request to see such Work and it shall be uncovered by Contractor. If such Work be found in
substantial conformance with the Contract Documents, the cost of uncovering and replacement shall,
by appropriate Change Order, be charged to the Owner. If such Work be found not in substantial
conformance with the Contract Documents, Contractor shall pay such costs unless it be found that
this condition was caused by a separate Contractor employed as provided in Article 6, and in that
event the Owner shall be responsible for the payment of such costs.

13.2
Correction of Work

13.2.1 Contractor shall promptly correct all Work rejected as failing to substantially
conform to the Contract Documents that is observed before Substantial Completion and whether or not
fabricated, installed or completed. Contractor shall bear all costs of correcting such rejected
Work.

13.2.2 If, within one year after the Date of Substantial Completion or within such
longer period of time as may be prescribed by law or by the terms of any applicable special
guarantee required by the Contract Documents, any of the Work is found to be defective or not in
substantial conformance with the Contract, Contractor shall correct it promptly after receipt of a
written notice from the Owner to do so unless the Owner has previously given Contractor a written
acceptance of such Work. The Owner shall give such notice promptly after discovery of the defect
or substantial nonconformance. During the one-year period for correction of
Work, if the Owner fails to notify the Contractor and give the Contractor an opportunity to make
the correction, the Owner waives the rights to require correction by
the Contractor.

					
	 	 	 	 	 
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13.2.3 All such defective or substantially non-conforming Work under Subparagraphs
13.2.1 and 13.2.2 shall be removed from the site if necessary, and the Work shall be corrected to
comply with the Contract without cost to the Owner.

13.2.4 Contractor shall bear the cost of making good all work of separate Contractors
destroyed or damaged by such removal or correction.

13.2.5 If Contractor does not remove such defective or substantially non-conforming Work
within a reasonable time fixed by written notice from the Owner, the Owner may remove it and may
store the materials or equipment at the expense of Contractor. If Contractor does not pay the cost
of such removal and storage within ten days thereafter, the Owner may upon ten (10) additional days
written notice sell such Work at auction or at private sale and shall account for the net proceeds
thereof, after deducting all the costs that should have been borne by Contractor, including
compensation for additional architectural services. If such proceeds of sale do not cover all
costs which Contractor should have borne, the difference shall be charged to Contractor and an
appropriate Change Order shall be issued. If the payments then or thereafter due Contractor are
not sufficient to cover such amount, Contractor shall pay the difference to the Owner.

13.2.6 If Contractor fails to correct such defective or substantially non-conforming Work,
the Owner may correct it in accordance with Paragraph 3.4.

13.2.7 Nothing contained in this Paragraph 13.2 shall be construed to establish a period
of limitation with respect to any other obligation which Contractor might have under the Contract
Documents, including Paragraph 4.5 hereof. The establishment of the time period of one year after
the Date of Substantial Completion or such longer period of time as may be prescribed by law or by
the terms of any warranty required by the Contract Documents relates only to the specific
obligation of Contractor to correct the Work, and has no relationship to the time within which its
obligation to comply with the Contract Documents may be sought to be enforced, nor to the time
within which proceedings may be commenced to establish Contractor’s liability with respect to its
obligations other than specifically to correct the Work.

13.3 ACCEPTANCE OF DEFECTIVE OR NON-CONFORMING WORK

13.3.1 If the Owner prefers to accept defective or non-conforming Work, he may do so
instead of requiring its removal and correction, in which case a Change Order will be issued to
reflect a reduction in the Contract Sum where appropriate and equitable. Such adjustment shall be
effected whether or not final payment has been made.

ARTICLE 14

TERMINATION OF CONTRACT

14.1 TERMINATION BY CONTRACTOR

14.1.1 If the Work is stopped for a period of thirty (30) days under an order of any court
or other public authority claiming jurisdiction, or as a result of an act of government, such as
declaration of national emergency

					
	 	 	 	 	 
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making materials unavailable, through no act or fault of Contractor or a subcontractor or their
agents or employees or any other persons performing any of the Work under a contract with
Contractor or if the Work should be stopped for a period of thirty (30) days by Contractor for the
Owner’s failure to make payment as provided in Paragraph 9.7.1, or if the Contract shall be
suspended for thirty (30) days for the Owner’s failure to provide satisfactory evidence of
financing or funding as provided in Subparagraph 9.7.2, then Contractor may, upon seven (7) days
written notice to the Owner, terminate the contract and recover from the Owner payment for all Work
executed and for any proven loss sustained upon any materials, equipment, tools, construction
equipment and machinery including reasonable profit, overhead and damages, including without
limitation, overhead and profit on the Work not executed.

14.2 TERMINATION BY THE OWNER

14.2.1 If Contractor is adjudged a bankrupt, or if it makes a general assignment for the
benefit of its creditors, or if a receiver is appointed on account of its insolvency, or if it
persistently or repeatedly refuses or fails, except in cases for which extension of time is
provided, to supply enough properly skilled workmen or proper materials, or if it fails to make
prompt payment to Subcontractors or for materials or labor, or persistently disregards laws,
ordinances, rules, regulations or orders of any public authority having jurisdiction, or otherwise
is guilty of a substantial violation of a provision of the Contract Documents, then the Owner, upon
certification by the Owner’s Construction Inspector that sufficient cause exists to justify such
action, may, without prejudice to any right or remedy and after giving Contractor and its surety,
if any, seven (7) days written notice, terminate the employment of Contractor and take possession
of the site and of all materials, equipment, tools, construction equipment and machinery thereon
owned by Contractor and may finish the Work by whatever method he may deem expedient. In such case
Contractor shall not be entitled to receive any further payment until the Work is finished.

14.2.2 If the unpaid balance of the Contract Sum exceeds the costs of finishing the
Work, such excess shall be paid to Contractor. If such costs exceed the unpaid balance, Contractor
shall pay the difference to the Owner. The amount to be paid to Contractor or to the Owner, as the
case may be, in the manner provided in Paragraph 9.4, and this obligation for payment shall survive
the termination of the Contract.

					
	 	 	 	 	 
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ARTICLE 15 

RESOLUTION OF CLAIMS

15.1 MECHANIC’S LIENS

If a Claim relates to or is the subject of a mechanic’s lien, the party asserting such Claim may
proceed in accordance with applicable law to comply with the lien notice or filing deadlines prior
to resolution of the Claim, by mediation or by arbitration.

15.2 MEDIATION

15.2.1 Any Claim arising out of or related to the Contract, except those waived and barred
elsewhere in the Contract as shall be subject to mediation as a condition precedent to arbitration
or the institution of legal or equitable proceedings by either party.

15.2.2 The parties shall endeavor to resolve their Claims by mediation in good faith,
which, unless the parties mutually agree otherwise, shall be in accordance with the Construction
Industry Mediation Rules of the American Arbitration Association. If the parties cannot agree upon
a mediator, the parties will apply to either the American Arbitration Association for appointment
of a mediator in accordance with that organization’s rules. Requests for mediation shall be in
writing with the other party. The request may be made concurrently with the filing of a demand for
arbitration but, in such event, mediation shall proceed in advance of arbitration or legal or
equitable proceedings, which shall be stayed pending mediation for a period of 120 days from the
date of filing, unless stayed for a longer period by agreement of the parties or court order.

15.2.3 The parties shall share equally the mediator’s fee and any filing fees. The
mediation shall be held in St. Louis County, Missouri, unless another location is mutually agreed
upon. Agreements reached in mediation shall be enforceable as settlement agreements in any court
having jurisdiction thereof.

15.3 ARBITRATION

15.3.1 Any controversy or Claim arising out of or related to the Contract, or the breach
thereof, except those waived and barred elsewhere in the Contract, which are not resolved by
mediation, shall be settled by
binding arbitration and judgment upon the award rendered by the arbitrator or arbitrators may be
entered in any court having jurisdiction thereof. The arbitration shall be held within St. Louis
County, Missouri, unless another location is mutually agreed upon. Prior to arbitration, the
parties shall endeavor to resolve disputes by mediation in accordance with the provisions of
Article 15.

15.3.2 Claims not resolved by mediation shall be decided by arbitration which, unless
the parties mutually agree otherwise, shall be in accordance with the Construction Industry
Arbitration Rules of the American Arbitration Association currently in effect. The demand for
arbitration shall be filed in writing with the other party to the Contract and with the

					
	 	 	 	 	 
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American Arbitration Association, and a copy shall be filed with the Architect.

15.3.3 A demand for arbitration shall be made within a reasonable time after the Claim
has arisen, and in no event shall it be made after the date when institution of legal or equitable
proceedings based on such Claim would be barred by the applicable statute of limitations.

15.3.4 Either party may demand production of documents from the other in advance of the
arbitration and the party from whom the documents are requested shall produce the documents
requested within thirty (30) days of the request, or such other date as the parties may agree.
Other discovery may be permitted in the discretion of the arbitrator, upon a showing of good cause.
All disputes regarding discovery shall be decided by the arbitrator. The arbitration award shall
be made under and in accordance with the laws of the State of Illinois, supported by substantial
evidence, and shall be in writing. The foregoing agreement to arbitrate and other agreements to
arbitrate with an additional person or entity duly consented to by parties to the Agreement shall
be specifically enforceable under applicable law in any court having jurisdiction thereof.

15.3.5 Claims and Timely Assertion of Claims. The party filing a notice of demand for
arbitration must assert in the demand all Claims then known to that party on which arbitration is
permitted to be demanded.

15.3.6 Judgment on Final Award. The award rendered by the arbitrator or arbitrators
shall be final, and judgment may be entered upon it in accordance with applicable law in any court
having jurisdiction thereof.

ARTICLE 16 

HAZARDOUS MATERIALS

16.1 HAZARDOUS MATERIALS

16.1.1 If reasonable precautions will be inadequate to prevent foreseeable bodily injury or
death to persons resulting from a material or substance, including but not limited to asbestos,
lead paint or polychlorinated biphenyl (PCB), encountered on the site by the Contractor, the
Contractor shall, upon recognizing the condition, immediately stop Work in the affected area and
report the condition to the Owner in writing. If Contractor discovers any unknown or previously
undiscovered or undisclosed potentially hazardous or toxic materials, he shall, upon recognizing
the
condition, immediately stop Work in the affected area and report the condition to the Owner in
writing.

16.1.2 The Owner shall obtain the services of a licensed laboratory to verify the presence
or absence of the material or substance reported by the Contractor and, in the event such material
or substance is found to be present, to verify that it has been rendered harmless. Unless otherwise
required by the Contract Documents, the Owner shall furnish in writing to the Contractor the names
and qualifications of persons or entities who are to perform tests verifying the presence or
absence of such material or substance or who are to perform the task of removal or safe containment
of

					
	 	 	 	 	 
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	 	GENERAL CONDITIONS
	 	 

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such material or substance. The Contractor will promptly reply to the Owner in writing stating
whether or not either has reasonable objection to the persons or entities proposed by the Owner. If
the Contractor has an objection to a person or entity proposed by the Owner, the Owner shall
propose another to whom the Contractor has no reasonable objection. When the material or substance
has been rendered harmless, Work in the affected area shall resume upon written agreement of the
Owner and Contractor. The Contract Time shall be extended appropriately and the Contract Sum shall
be increased in the amount of the Contractor’s reasonable additional costs of shut-down, delay and
start-up, which adjustments shall be accomplished as provided in Article 12.

16.1.3 To the fullest extent permitted by law, the Owner shall indemnify and hold harmless
the Contractor, Subcontractors, Architect, Architect’s consultants and agents and employees of any
of them from and against claims, damages, losses and expenses, including but not limited to
attorneys’ fees, arising out of or resulting from performance of the Work in the affected area if
in fact the material or substance presents the risk of bodily injury or death as described in
Section 10.3.1, the material or substance was present on the project site prior to Contractor
commencing work, and the material or substance has not been rendered harmless, provided that such
claim, damage, loss or expense is attributable to bodily injury, sickness, disease or death, or to
injury to or destruction of tangible property (other than the Work itself) but only to the extent
that such damage, loss or expense is not due to the negligence of a party seeking indemnity.

16.1.4 The Owner shall not be responsible under Section 10.3 for materials and substances
brought to the site by the Contractor or Subcontractor.

					
	 	 	 	 	 
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	 	END OF GENERAL CONDITIONS

GENERAL CONDITIONS
	 	 

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GENERAL CONDITIONS OF THE CONTRACT

FOR CONSTRUCTION

TABLE OF ARTICLES

	 	 	 
	1.	 	Contract Documents

	 	 	 

	2.	 	Architect

	 	 	 

	3.	 	Owner

	 	 	 

	4.	 	Contractor

	 	 	 

	5.	 	Subcontractors

	 	 	 

	6.	 	Work by Owner or by Separate Contractors

	 	 	 

	7.	 	Miscellaneous Provisions

	 	 	 

	8.	 	Time

	 	 	 

	9.	 	Payments and Completion

	 	 	 

	10.	 	Protection of Persons and Property

	 	 	 

	11.	 	Insurance

	 	 	 

	12.	 	Changes in the Work

	 	 	 

	13.	 	Uncovering and Correction of Work

	 	 	 

	14.	 	Termination of Contract

	 	 	 

	15.	 	Resolution of Claims

	 	 	 

	16.	 	Hazardous Materials

					
	 	 	 	 	 
	Clayco/Financial Services
	 	GENERAL CONDITIONS
	 	TABLE OF ARTICLESexv10w1

 

Exhibit 10.1

LOAN AGREEMENT

     THIS LOAN AGREEMENT (“Loan Agreement”) is made and entered into as of this 25th day of July,
2006, by and between M&I MARSHALL & ILSLEY BANK (“Lender”) and SUMMIT HOTEL PROPERTIES, LLC, a
South Dakota limited liability company (the “Borrower”).

W I T N E S S E T H :

     WHEREAS, Lender has agreed to make up to a $14,080,000.00 loan to finance the construction of
a 146 room hotel and related improvements thereon (the “Project”).

     NOW, THEREFORE, in consideration of the mutual premises and covenants herein contained and
other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged,
the parties agree as follows:

     1. Definitions. The following definitions shall apply to this Loan Agreement:

     1.1. Architect. The Architect is Peter Villard.

     1.2. Business Day. Business Day shall mean any day except a Saturday, Sunday
or a day on which banks in Milwaukee, Wisconsin are authorized or required by law to close.

     1.3. Capital Lease. Capital Lease shall mean a financing mechanism that meets
any one of the following criteria: (i) ownership (title) to the leased asset passes to the
lessee by the end of the lease term for a relatively nominal amount as compared to the fair
market of such asset; (ii) pursuant to the lease, lessee has an option to purchase the
leased asset at the end (or near the end) of the lease term for a relatively nominal amount
as compared to the fair market value of such asset; (iii) the lease term is equal to or
greater than 75% of the estimated economic life of the leased asset; or (iv) the net present
value of the lease payments equals or exceeds 90% of the current market value of the leased
asset.

     1.4. City. The City shall be the City of Bloomington, Minnesota.

     1.5. Collateral Security Documents. The Collateral Security Documents shall
include the following documents, each of which has been executed by Borrower in favor of
Lender and dated as of an even date herewith unless otherwise noted:

          1.5.1. Real Estate Mortgage, Security Agreement, Financing Statement and Assignment of
Leases and Rents (“Mortgage”).

          1.5.2. Collateral Assignment of Contract Rights.

          1.5.3. General Business Security Agreement.

 

 

          1.5.4. UCC Financing Statement.

          1.5.5. Collateral Assignment of Licenses, Approvals and Permits.

          1.5.6. Reserved.

          1.5.7. The Collateral Security Documents shall also include all other documents and
instruments, at any time, executed, which evidence or secure the Loan.

          1.5.8. Subordination, Non-Disturbance and Attornment Agreement regarding the Management
Agreement.

          1.5.9. Estoppel Certificate regarding the Management Agreement.

          1.5.10. Franchise Letter.

          1.5.11. Borrower Organizational Perfection Certificate.

          1.5.12. Assignment of General Contractor’s Contract.

          1.5.13. Assignment of Architect’s Contract.

          1.5.14. Cross Collateralization Agreement executed by Borrower.

     1.6. Construction Budget. The Construction Budget is the budget attached
hereto as EXHIBIT B, as previously approved by Lender.

     1.7. Debt Service Coverage Ratio. Debt Service Coverage Ratio shall mean a
ratio of the Net Operating Income attributable to the Project for any twelve (12)
consecutive months to the sum of (i) the aggregate of all principal and interest payments
due Lender under the Note during the same twelve (12) month period, and (ii) any and all
other payments of principal and interest that Borrower is obligated to pay attributable to
the Project (whether such obligation is undertaken prior to or subsequent to the date
hereof) during the same twelve (12) month period (“Other Debt”). Other Debt shall include,
but is not limited to, debt financing categorized as a Capital Lease.

     1.8. Disbursing Agreement. The Disbursing Agreement is the agreement executed
by and between Borrower, Lender and Title Insurance Company and pursuant to which the Loan
proceeds are to be disbursed.

     1.9. Estoppel Certificate. The Estoppel Certificate is the Certificate to be
executed in favor of Lender by the Manager of the Management Agreement and such affidavit
shall be in form and content acceptable to Lender.

     1.10. Existing Indebtedness. Borrower is indebted to First National Bank of
Omaha pursuant to the loan documents executed on June 24, 2005, as amended on November 30,
2005. Such loan documents provide for a credit line in the amount of Fifty Million Dollars
($50,000,000.00).

2

 

     1.11. Franchise Agreement. The Franchise Agreement is the Franchise Agreement
dated March 28, 2006, by and between Promus Hotels, Inc. and Borrower relating to the
operation of the 146-room hotel on the Real Estate.

     1.12. General Contractor. The General Contractor is Stahl Construction
Company.

     1.13. Licenses, Approvals and Permits. The Licenses, Approvals and Permits
shall be those licenses, approvals and permits issued by the appropriate federal, state or
local governments or quasi-governmental agencies required for Borrower to construct and
operate the Project on the Real Estate.

     1.14. Reserved.

     1.15. Loan. The Loan amount shall not exceed the lesser of 80% of total cost
of the Project as set forth in the Construction Budget or $14,080,000.00. The proceeds of
such Loan shall be used for the construction of a 146 room hotel and related improvements
thereon in accordance with Construction Budget and the Plans and Specifications.

     1.16. Loan Documents. The Loan Documents shall include, but not be limited to,
the Collateral Security Documents, the Note, the Disbursing Agreement and this Loan
Agreement.

     1.17. Management Agreement. The Management Agreement is the Management
Agreement dated as of February 11, 2004, which was amended by that certain First Amendment
to Management Agreement dated April 24,2006 by and between Borrower and The Summit Group, a
South Dakota corporation (“Manager”) and Borrower, pursuant to which Manager shall manage
the 146 room hotel once completed on behalf of Borrower.

     1.18. Net Operating Income. Net Operating Income shall mean the gross income
received from operation of the Project minus the Operating Expenses.

     1.19. Note. The Note is the $14,080,000.00 Mortgage Note executed by Borrower
in favor of Lender on a date even herewith, the proceeds of which shall be disbursed under
the Loan Agreement.

     1.20. Operating Expenses. Operating Expenses shall mean all expenses incurred
by Borrower with respect to the Project, whether or not now foreseen, determined on an
accrual basis (including reasonably foreseeable expenses not occurring annually), including,
but not limited to, the following: real estate taxes and special assessments (or any
substitutes hereafter collected by any governmental authority in lieu thereof or in addition
thereto), payroll taxes, federal and state unemployment taxes and social security taxes;
insurance, including but not limited to, fire (including, but not limited to, endorsements
for extended coverage, vandalism and malicious mischief and theft and mysterious
disappearance), public liability, water damage, worker’s compensation and business and
rental interruption insurance; water and sewer charges; license, permit and inspection fees;
costs of wages and salaries of operating personnel including other

3

 

compensation and fringe benefits; management fees pursuant to the Management Agreement;
auditors’ fees and legal fees; materials and supplies, including charges for telephone,
telegraph, postage, stationery supplies and other materials and expenses required for
operation of the Project; repairs to and maintenance of any portion of the Project,
including costs of materials, supplies, tools and equipment used in connection therewith and
including the repaving of parking areas, replanting of landscaped areas and replacing any
building components; costs incurred in connection with the operation, maintenance, repair,
inspection and servicing (including outside maintenance contracts) of electrical, plumbing,
heating, air-conditioning and mechanical equipment and the cost of materials, supplies,
tools and equipment used in connection therewith; cost of services (including heat, air
conditioning, electricity, gas, water and other utilities for the operation and maintenance
of any portion of the Project); any costs allocable to the Project under any easements
benefiting the Real Estate for parking and/or access; and all other expenses and costs
necessary or desirable to be incurred for the purpose of operating and maintaining the
Project in good and workmanlike condition, whether or not similar to the foregoing. Should
any governmental agency or political subdivision impose any taxes and/or assessments,
whether or not now customary or within the contemplation of the parties hereto, either by
way of substitution for taxes and assessments presently levied and assessed against the
Project, or in addition thereto, including, but not limited to, any tax or assessment
levied, assessed or imposed upon or measured by the rental payable hereunder, such taxes
and/or assessments shall be deemed to constitute an Operating Expense hereunder.
Notwithstanding the above, Operating Expenses shall not include: principal or interest
payments on the Note, Capital Leases, or any other obligation of Borrower; capital
improvements to the 146-room hotel located on the Real Estate other than routine maintenance
expenses; or, other non-recurring expenses funded with non-operating cash sources, including
but not limited to loan proceeds, investor equity, or hotel sale proceeds.

     1.21. Permitted Liens and Encumbrances. Permitted Liens and Encumbrances shall
be those liens and encumbrances permitted by Exhibit B to the Mortgage.

     1.22. Plans and Specifications. The Plans and Specifications are the plans and
specifications for the construction of Project, as prepared by the Architect.

     1.23. Project. The Project is the construction of 146 room hotel on the Real
Estate, all of which shall be constructed in accordance with the Construction Budget and the
Plans and Specifications.

     1.24. Property. The Property is the 146-room hotel to be located on the Real
Estate.

     1.25. Real Estate. The Real Estate is the real property described on EXHIBIT
A, attached hereto.

4

 

     1.26. Secured Assets. The Secured Assets shall mean all of the personal
property of Borrower related to the Property as described in the General Business Security
Agreement and the Collateral Assignment of Contract Rights.

     1.27. Statement of Accounts. Statements of Accounts shall be defined as that
documentation provided periodically by the financial institutions where cash, marketable
securities and bonds related to the Property are held in deposit or on account for Borrower.

     1.28. Subordination Agreement. The Subordination Agreement is the
Subordination, Non-Disturbance and Attornment Agreement to be executed by Lender and the
Manager under the Management Agreement and shall be in form and content reasonably
acceptable to Lender.

     1.29. Title Commitment. The Title Commitment shall be the commitment
referenced in Section 2.5.

     1.30. Title Insurance Company. The Title Insurance Company shall be Chicago
Title as approved by Lender.

     1.31. Zoning Letters. The Zoning Letters shall be the zoning letters issued by
the City relating to Borrower’s construction and operation of the Project on the Real
Estate.

     2. Conditions Precedent. This Loan Agreement shall become effective upon
satisfaction of the conditions set forth in this Section; provided, however, construction
disbursements for the Loan shall not be made until the conditions set forth in Section 3.1.1 and
3.1.2 are satisfied.

     2.1. Loan Documents. The Borrower shall have executed each of the Loan
Documents it is required to execute.

     2.2. Borrower’s Limited Liability Company Documents. Borrower shall have
furnished Lender copies, certified to Lender by a manager of Borrower to be true and correct
as of the date hereof, of the Articles of Organization and the Third Amended and Restated
Operating Agreement of Borrower, plus any amendments thereto, of Borrower and a Borrowing
Resolution authorizing the execution and delivery of the Loan Documents. Borrower shall
also deliver a satisfactory Certificate of Existence for Borrower issued by the Secretary of
State for the State of South Dakota and a Certificate of Authority for Borrower issued by
the Secretary of State for the State of Minnesota authorizing the Borrower to conduct
business in the State of Minnesota. Lastly, the Borrower shall furnish copies of the
following documents for The Summit Group, Inc., Borrower’s manager: Articles of
Incorporation, Bylaws and Certificate of Existence issued by the Secretary of State for the
State of South Dakota.

     2.3. Appraisal. Lender shall have received an appraisal by an appraiser
acceptable to Lender, in its reasonable discretion, showing that as of the date of
completion, the Project and the Real Estate shall have a value of $17,600,000.00.

5

 

     2.4. Insurance. Borrower shall have furnished to Lender the policies, or
certificates evidencing such policies, of insurance required in Section 5.3.

     2.5. Title Insurance. Borrower shall have furnished to Lender a commitment for
an ALTA form of mortgage title policy and attached endorsements, as requested by Lender,
issued by the Title Insurance Company, in form and content reasonably satisfactory to Lender
to the effect that the Title Insurance Company will issue its mortgagee’s title policy in
the amount of the Loan, insuring that Borrower owns fee simple title to the Real Estate
subject only to the Permitted Liens and Encumbrances and insuring that the Mortgage
constitutes a first and valid lien on the Real Estate, subject only to such Permitted Liens
and Encumbrances.

     2.6. Compliance with Laws. Borrower shall have provided Lender with
satisfactory evidence of compliance by the Real Estate and the Project, with respect to both
present and contemplated future uses, of all applicable laws, regulations, ordinances and
codes, including, but not limited to, zoning and subdivision laws, regulations, ordinances
and codes.

     2.7. Approvals and Permits. Borrower shall have provided Lender with copies of
all governmental approvals and permits required to construct the Project in Borrower’s
possession or control as of the date hereof.

     2.8. Plans and Specifications. Borrower shall have delivered, and Lender shall
have the right to approve or disapprove in its reasonable discretion, a complete set of the
Plans and Specifications to Lender.

     2.9. Phase I Environmental Assessment Report. An environmental assessment
report prepared by a qualified environmental engineer approved by Lender confirming that the
Real Estate complies with all applicable environmental laws, rules and regulations.

     2.10. Construction Budget. Borrower shall have delivered, and Lender shall
have the right to approve or disapprove in its reasonable discretion, the Construction
Budget to Lender.

     2.11. Construction Contracts. To the extent available, Borrower shall have
delivered to Lender, and Lender shall have the right to approve or disapprove in its
reasonable discretion, certified copies of all construction contracts, including, but not
limited to, all subcontractor contracts, necessary to complete the Project.

     2.12. Disbursing Agreement. Borrower shall have complied with all other terms
and conditions of the Disbursing Agreement.

     2.13. Utilities. Borrower shall have delivered to Lender evidence that
sanitary sewer, water, electricity, natural gas, cable television and other necessary
utilities are available to the Real Estate and the Project in a manner and at a time and
cost reasonably acceptable to Lender.

6

 

     2.14. Loan Fee. The Loan Fee shall equal one half (1/2) point or (0.005%) of
the Loan.

     2.15. Geotechnical Evaluation. The Borrower shall provide the Lender with a
Geotechnical Evaluation prepared by an engineer which is acceptable to Lender, at its
reasonable discretion, which report states that the soil is sufficient for the construction
of the Project.

     2.16. Legal Opinion. Lender shall receive from an attorney acceptable to
Lender, a legal opinion in form, scope and content acceptable to Lender in its sole
discretion, which may, among other things reasonably requested by Lender, confirm the
legality, validity and enforceability of the Loan Documents.

     2.17. Survey. Borrower shall have furnished Lender with an ALTA/ASCM Survey
prepared by a licensed surveyor reasonably satisfactory to Lender, which shows (i) all
foundations, improvements, driveways and fences, if any, on the real estate, (ii) all
easements and roads of right-of-ways and setback lines, if any, affecting the real estate,
(ii) the dimensions, boundaries and square footage of the real estate, (iv) no encroachments
by improvements on the real estate or by improvements located on the adjoining property
exist, and (iv) such additional information that may be required by Lender, and its
reasonable discretion.

     2.18. Assignment of General Contractor’s Contract. Borrower shall have
furnished Lender with a copy of the Assignment of General Contractor’s Contract, in form and
substance reasonably acceptable to Lender, assigning the contract for the construction of
the Project with the General Contractor to the Borrower.

     2.19. Assignment of Architect’s Contract. Borrower shall have furnished Lender
with a copy of the Assignment of Architect’s Contract, in form and substance reasonably
acceptable to Lender, assigning the contract for the architectural services necessary to
construct the Project with the Architect to the Borrower.

     2.20. Architect’s Contract. Borrower shall have furnished Lender with a copy
of the Architect’s Contract for architectural services necessary to construct the Project,
in form and substance reasonably acceptable to Lender.

     2.21. Architect’s Certificate. Borrower shall have furnished Lender with an
original Architect’s Certificate, in form and substance reasonably acceptable to Lender,
from the Architect relating to the Architect’s Contract for architectural services necessary
to construct the Project.

     2.22. Management Agreement. Borrower shall have furnished and Lender shall
have reviewed and approved a certified copy of the Management Agreement. Lender
acknowledges receipt and its approval of the Management Agreement.

     2.23. Searches. Lender shall have conducted, reviewed and approved a UCC
search, federal tax lien search, bankruptcy search, pending civil suit search and judgment
lien search of Borrower and Borrower’s manager, The Summit Group, Inc., in those
jurisdictions that Lender reasonably requires.

7

 

     2.24. Franchise Agreement. Borrower shall have furnished and Lender shall have
reviewed and approved a certified copy of the Franchise Agreement. Lender acknowledges
receipt and its approval of the Franchise Agreement.

     2.25. Manager Consent to Transaction. Manager shall have executed and
delivered to Lender a Manager’s Estoppel Affidavit pursuant to which it shall, among other
things, represent that the Management Agreement is in effect and that the Manager shall
manage the Property pursuant to the Management Agreement.

     2.26. Franchisor Consent. Promus Hotels, Inc. shall have executed and
delivered to Lender a Comfort Letter related to the Property in the standard form used by
Promus Hotels, Inc.

     2.27. Borrower’s Initial Equity Deposit. Borrower shall have provided Lender
with evidence, satisfactory to Lender, in its sole discretion, that Borrower has contributed
$3,520,000.00 to the construction of the Project. If Borrower has not previously
contributed the amount to Borrower’s equity as set forth in the Construction Budget,
Borrower shall deposit no later than August 11, 2006 with Lender $3,520,000.00 (“Initial
Equity Deposit”). The Initial Equity Deposit shall be held by Lender in an interest bearing
account and shall be used to fund the construction disbursements described herein prior to
Lender disbursing any Loan proceeds set forth herein.

     2.28. Plans and Specifications. Prior to the commencement of vertical
construction, Borrower shall have delivered to Lender, and Lender shall have the right to
approve or disapprove, in its sole discretion, a complete set of the Plans and
Specifications.

     3. Loan Disbursements. Proceeds of the Loan shall be disbursed as follows:

     3.1 Construction Loan Disbursements.

     3.1.1. Periodic Disbursements. The Loan proceeds may be disbursed in
several advances in accordance with the Disbursing Agreement and the following
conditions (except for the final disbursement of proceeds pursuant to the Loan which
shall be disbursed in accordance with Section 3.1.2); provided the following are
submitted to Lender:

     3.1.1.1. A draw request, on a satisfactory form to Lender, in its
reasonable discretion, certified by Borrower, Architect and General
Contractor setting forth, among other things (i) an itemized list of the
type of work completed for which payment is requested, (ii) the original
estimated cost to complete such work, (iii) the amount requested, (iv) the
amount previously disbursed for such work, (v) the estimated cost of
completing such work, and (vi) that no Event of Default exists pursuant to
this Loan Agreement, no default exists pursuant to the construction
contracts and no condition exists, with respect to the Loan Documents
or construction contracts that with the passage of time or giving of notice,
or both, would constitute an Event of Default pursuant to the Loan Agreement
or a default pursuant to the construction contracts.

8

 

     3.1.1.2. All other items required by the Disbursing Agreement.

     3.1.2. Final Construction Disbursement. Subject to the terms and
conditions hereof, Lender agrees to make the final disbursement under the Loan;
provided, Lender shall be satisfied that the construction has been completed in a
good and workmanlike manner in accordance with the Plans and Specifications and
Borrower shall submit to Lender the following:

     3.1.2.1. The items required in Section 3.1.1.

     3.1.2.2. A Certificate of Completion of the Project, in form and
content satisfactory to Lender executed by Borrower, General Contractor and
Architect.

     3.1.2.3. A Certificate of Occupancy for the Project as issued by the
City.

     3.1.2.4. Proper update endorsements to the Title Commitment (or the
policy if issued) in the face amount of the total sum outstanding under the
Loan insuring the Mortgage as a first lien on the Real Estate, subject only
to the Permitted Liens and Encumbrances.

     3.2. Additional Conditions as to Construction Loan Disbursements.

     3.2.1. Change Orders. The Borrower shall deliver to Lender revised
statements of estimated costs of construction of the Project showing changes in or
variations from the Construction Budget, as soon as such changes are known to the
Borrower; provided that such revised statements are only required to cover changes
involving amounts of $30,000.00 or more for individual changes, or if the aggregate
cost of all such changes is more than $100,000.00.

     3.2.2. Loan In Balance. Borrower agrees that the Loan must at all
times remain in balance. The Borrower shall from time to time furnish Lender
reasonably satisfactory evidence of the Borrower’s ability to pay for all costs of
completing the Project, and if the estimated cost of completing the Project exceeds
the then remaining balance of proceeds available under the Loan, Borrower shall pay
out of Borrower’s own funds the next sums coming due for such work until the Loan is
brought back into balance before the Lender shall be required to disburse any
further sums hereunder.

     3.2.3. Completion of Construction. Construction of the Project shall
be completed in an orderly manner, but in any event on or before the date that is
one year from the date of commencement of construction.

9

 

     3.2.4. Liens. Upon demand by Lender, if any intervening liens or
other matters affecting title, which in Lender’s reasonable opinion materially
jeopardize its security interest in the Project or the Real Estate, are disclosed by
any means, Lender may withhold payment of further advances until such intervening
liens or such other matters have been waived by Lender in writing or satisfied.
Borrower shall immediately have any such liens or such other matters satisfied of
record and the existence of any such lien or encumbrance shall, if not removed
within thirty (30) days or if adequate steps satisfactory to Lender are not taken
within thirty (30) days to insure removal, constitute an Event of Default.
Notwithstanding the foregoing, Borrower may, in good faith and with reasonable
diligence, contest the validity or amount of any lien; provided, Borrower provides
Lender reasonable security that such lien shall not materially jeopardize Lender’s
security interest in the Project or the Real Estate.

     3.2.5. Segregation of Loan Proceeds. Lender shall, at its option, be
entitled to segregate and earmark sufficient proceeds of the Loan for the purpose of
paying all sums due or to become due Lender under this Agreement, including but not
limited to, reasonable fees, interest, and all out-of-pocket expenses incurred
relative to this Agreement and the Loan. Lender shall also be entitled to advance
such proceeds to itself in payment of such sums as they become due and payable, all
without further order or consent of the Borrower. Lender shall give Borrower notice
of any such action.

     3.2.6. Status of Disbursements. The Borrower agrees that all moneys
disbursed by Lender pursuant to the Loan (including amounts payable to and deducted
by Lender) shall (i) constitute loans made to the Borrower under this Agreement (ii)
shall be evidenced by the Note and (iii) that interest shall be computed thereon as
prescribed by the Note from the date the Borrower’s Loan accounts are charged with
the amount of the advance. Upon disbursement of any amount pursuant to the Loan,
Lender is authorized to record the date and the amount of each disbursement and any
such recordation shall constitute prima facie evidence of the accuracy of the
information so recorded.

     3.2.7. Objection to Requested Disbursement. If (i) Lender reasonably
determines that the quality or dollar value of the work performed or the material
furnished as represented by the draw requests delivered to Lender does not
correspond with the actual work performed or materials actually furnished, or (ii)
the work performed does not conform with the Plans and Specifications or the
Construction Budget, then Lender shall notify the Borrower of its objection to such
payment and, until such time as such objection is corrected to the reasonable
satisfaction of Lender, Lender may withhold such requested payment. If such
objection is not corrected within ten (10) days after the date of notification to
the Borrower of Lender’s objection, or, if greater, the time reasonably required to
correct such objection, Lender may withhold any future advances.

10

 

     3.2.8. Inspections. The Borrower shall be responsible for making
inspections of the Project during the course of construction and shall determine to
its own satisfaction that the work done or material supplied by the contractors
have been properly done or supplied in accordance with applicable contracts with
such contractors. Lender, in addition, may conduct such inspections of the Project
and the Real Estate as Lender shall reasonably deem necessary for the protection of
its interest. Unless an Event of Default exists hereunder, Borrower shall not be
required to pay the costs of more than one inspection per month made for the benefit
of Lender. Lender may also take such steps as it may reasonably deem appropriate to
verify the application of the Loan proceeds to work done and material furnished for
the Project and to vary the disbursement procedures set forth herein and in the
Disbursing Agreement, if the same becomes necessary to assure the proper application
of the Loan proceeds.

     3.2.9. No Liability of Lender. It is expressly understood and agreed
that Lender assumes no liability or responsibility for the satisfactory completion
of the Project, nor for the adequacy of funds advanced by it pursuant hereto to
complete the Project, nor for inspection during construction, nor for any other acts
on the part of the Borrower or the contractors to be performed in the construction
of the Project. Any inspections or reviews conducted by or for Lender shall be
solely for its own benefit, and shall not lessen or modify any of Borrower’s
obligations or responsibilities hereunder.

     3.2.10. Frequency of Disbursements. Lender shall not be required to
make more than one (1) Loan disbursement in any calendar month. Loan disbursements
may only be made on a Business Day.

     4. Representations and Warranties. The Borrower represents, warrants and certifies
to Lender that:

     4.1. Execution of Loan Documents. The Loan Documents have been duly executed
and delivered by the Borrower so that such documents constitute the legally enforceable
obligation of the Borrower in accordance with their respective terms.

     4.2. Financial Statements. All financial statements, information and other
data furnished by Borrower to Lender are complete and correct in all material respects and
disclose all contingent obligations which are material individually or in the aggregate.
Such financial statements accurately and fairly represent each applicable party’s financial
condition and operating results as of such date and since such date there has been no
material change in the Borrower’s financial condition or results of operations sufficient to
materially impair the Borrower’s ability to repay the Loan or make Borrower’s additional
equity deposit in accordance with Section 5.12 below.

     4.3. Operation of Real Estate and Project. To Borrower’s actual knowledge, the
present and proposed operation and use of the Real Estate and the Project do not violate any
applicable law, ordinance, code, rule, regulation, order or any restrictive covenant or any
similar land use restriction binding on the Real Estate or the Project.

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     4.4. Utilities. All water, sewer, electric, telephone, natural gas and
drainage facilities and all other utilities required by law and by the normal operation of
the Project
have been installed to the boundary lines of the Real Estate, are or will be connected
pursuant to valid permits and are adequate to fully comply with all requirements of law; or
the same may be extended to the Real Estate and the cost for such extension is included in
the Construction Budget.

     4.5. Ownership of Real Estate. As of the date hereof, and at all times
thereafter until the Loan has been paid in full, the Borrower will be the fee simple owner
of the applicable portion of the Real Estate described in the Mortgage executed by the
Borrower, free and clear of all liens, encumbrances, leases, management agreements, service
agreements, rental agreements, occupancy agreements, claims and charges except as may be
approved, in writing by Lender, except for the Permitted Liens and Encumbrances.
Notwithstanding the above, Borrower shall be entitled to secure loans, leases, Capital
Leases, and other similar financing instruments secured by a lien upon the Real Estate or
the Secured Assets, so long as such lien is junior to the security interest held by Lender
and such liens, in the aggregate, do not exceed $250,000.

     4.6. No Default. The Borrower is not in default under any agreement to which
it is a party to include the Prior Loans, the effect of which would materially adversely
affect performance by Borrower of its obligations pursuant to the terms and provisions of
the Loan Documents. To Borrower’s actual knowledge, neither the execution and delivery of
the Loan Documents nor any other document executed and delivered by Borrower in connection
with the Loan, nor the consummation of the Loan, nor compliance with the terms and
provisions thereof, violate any presently existing law, order, writ, injunction or decree of
any court or governmental department, commission, board, bureau, agency or instrumentality
or constitutes a default under any indenture, mortgage, deed of trust, agreement or contract
of any kind to which the Borrower may be bound.

     4.7. No Legal Proceedings. There are no actions, suits or proceedings pending
or, to Borrower’s knowledge, threatened against Borrower, the Project or the Real Estate
before any court or any governmental, administrative, regulatory, adjudicatory or
arbitrational body or agency of any kind which will materially adversely affect performance
by the Borrower of its obligations pursuant to the terms and provisions of the Loan
Documents.

     4.8. Insurance. Borrower has not received any notice from any insurer of any
defects or inadequacies in the Real Estate or the Project which would materially adversely
affect the insurability of the Real Estate or the Project.

     4.9. Liens and Encumbrances. Except for the Permitted Liens and Encumbrances,
Borrower has not taken, suffered or permitted any action, the effect of which would be to
establish or cause the inception or priority of any construction or materialman’s lien,
statutory or otherwise, or other lien, charge or encumbrance upon the Real Estate or the
Secured Assets to be prior or superior to the liens and security interests of the Collateral
Security Documents.

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     4.10. Insolvency. The Borrower has not filed any petition nor has any petition
been filed against it in bankruptcy or insolvency or reorganization or for the appointment
of a receiver or trustee or for the arrangement of debts, nor has the Borrower or the
Real Estate been the subject of such action, nor has such action been threatened by or
against it and/or the Real Estate. The Borrower is not insolvent nor will it be rendered
insolvent by the consummation of the Loan.

     4.11. Plans and Specifications. To the extent controllable by Borrower, the
Project will be constructed substantially in accordance with the Plans and Specifications.

     4.12. Construction Budget. The Project will be constructed substantially in
accordance with the Construction Budget, or the Borrower shall deposit funds required to
keep the loan in balance as discussed in Section 3.2.2 hereunder.

     4.13. Management Agreement. The Management Agreement is in full force and
effect and has not been modified, supplemented, amended or changed in any manner. No event
of default has occurred pursuant to the Management Agreement and Borrower does not know of
any event or circumstances which with the passage of time or the giving of notice, or both,
would constitute an event of default pursuant to the Management Agreement.

     4.13. Franchise Agreement. The Franchise Agreement is in full force and effect
and has not been modified, supplemented, amended or changed in any manner. No event of
default has occurred pursuant to the Franchise Agreement and Borrower does not know of any
event or circumstances which with the passage of time or the giving of notice, or both,
would constitute an event of default pursuant to the Franchise Agreement.

     4.14. Nature of Borrower’s Representations and Warranties. The representations
and warranties made in this Agreement shall remain true and correct in all material respects
and shall survive so long as any of the obligations have not been satisfied or the Loan or
any part thereof shall remain outstanding, and for any applicable statute of limitations
period thereafter. All representations and warranties made in this Agreement or in any
certificate or other document delivered to Lender by or on behalf of Borrower pursuant to or
in connection with the Loan shall be deemed to have been relied upon by Lender, its
successors and assigns, notwithstanding any investigation heretofore or hereafter made by or
on behalf of Lender. The representations and warranties contained herein have been made
after diligent inquiry calculated to ascertain the truth and accuracy of the subject matter
of each of such representations and warranties. All of such representations and warranties
are true and correct in all material respects and do not omit any material fact necessary to
make such representations and warranties not misleading.

     4.15. Existing Indebtedness. Borrower acknowledges that the Existing
Indebtedness to First National Bank of Omaha remains unpaid and constitutes valid and
existing debt obligations of Borrower.

     5. Covenants of Borrower. While this Loan Agreement is in effect, and until the Loan
has been repaid in full, Borrower shall comply with the covenants set forth below:

     5.1. Modification to Project and Real Estate. Except as contemplated herein
and except as permitted in Section 3.2.1 hereof, the Borrower shall not make any
modifications or additions to the Project without the prior express written consent of
Lender, which consent shall not be unreasonably withheld.

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     5.2. Liens. The Borrower shall not create or permit to be outstanding any
mortgage, encumbrance, or lien on the Real Estate or the Secured Assets except the Permitted
Liens and Encumbrances, or as otherwise permitted hereunder.

     5.3. Insurance. The Borrower shall at all times maintain in effect and furnish
the Lender with insurance policies and proof of payment of premiums as follows:

     5.3.1. Worker’s Compensation. Borrower shall cause appropriate
Worker’s Compensation coverage to be maintained in force at all times during the
term of the Note, and upon request of Lender, shall furnish Lender evidence of the
same.

     5.3.2. Construction Insurance. During the process of construction,
policies of All Risk Builder’s Risk Completed Value insurance with all endorsements
which are generally maintained by prudent real estate developers covering the
Project in at least the amount of the estimated cost to complete the Project, with
loss payable endorsements in favor of Lender or its assigns.

     5.3.3. Casualty Insurance. After completion of construction, Borrower
shall maintain an All Risk Casualty Insurance Policy with Vandalism and Malicious
Mischief Endorsements, a Full Replacement Cost Endorsement, Contingent Liability
from Operation of Building Laws Endorsement, Demolition Cost Endorsement and
Increased Cost of Construction Endorsement insuring against loss by fire, wind and
all other applicable hazards in the amount of 100% of the replacement cost of the
Project and Lender shall be named as mortgagee and loss payee.

     5.3.4. Comprehensive General Public Liability Insurance. Borrower
shall maintain Comprehensive General Public Liability and Property Damage Insurance
covering the Real Estate with combined single limits for bodily injury, property
damage and personal injury of at least Two Million Dollars ($2,000,000.00) per
accident or occurrence. In addition, Borrower shall maintain a $10,000,000.00
umbrella policy for Comprehensive General Public Liability and Property Damage.

     5.3.5. Flood Insurance. If any portion of the Real Estate is located
within a flood plain and flood insurance is available, Borrower shall maintain Flood
Insurance acceptable to Lender in Lender’s reasonable discretion.

     5.3.6. Additional Insurance Requirements. The insurance maintained by
Borrower under Section 5.3.3., shall bear a standard noncontributory first mortgagee
endorsement in favor of Lender or assigns and shall provide that proceeds related to
the Project under such policies shall be paid to Lender as required by the Mortgage
and disbursed in accordance with the provisions of the Mortgage. Lender shall be
named as an additional insured under the policy
maintained pursuant to Section 5.3.4. All insurance policies shall be written
by companies having a Best’s rating of “A” and a financial size category rating of
Class X or larger. All insurance policies shall provide that they may not be
cancelled without at least thirty (30) days written notice of intention to cancel
given by the applicable insurance company to Lender.

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     5.4. Taxes and Assessments. Notwithstanding anything contained herein to the
contrary, the Borrower shall pay and discharge, when due, all taxes, assessments and other
government charges upon the Real Estate and the Secured Assets, which, if unpaid, might by
law become a lien or charge upon the Real Estate or the Secured Assets; provided, that any
such taxes, assessments, or government charges need not be paid so long as the Borrower is
contesting such payment in good faith by appropriate proceedings which will avoid
foreclosure of liens securing such items and sufficient security, as determined at the
reasonable discretion of Lender, is provided to Lender.

     5.5. Compliance with Laws. Borrower will comply in all material respects with
the requirements of all applicable environmental, health, safety and sanitation laws, rules,
regulations and orders of regulatory and administrative authorities and, without limiting
the generality of the foregoing, promptly undertake and diligently pursue to completion
appropriate and legally authorized remedial and clean-up action in the event of any release
of oil or hazardous material or substance.

     5.6. Prohibition against Fundamental Changes. Without the prior written
consent of Lender, Borrower shall not enter into any transaction which either shall cause
the Class C Member to own less than 45% of the outstanding sharing ratios of the Borrower
(as defined in Borrower’s Third Amended and Restated Operating Agreement), or cause the
ownership of the Class C Member to be beneficially held by any person other than The Summit
Group, Inc., Kerry W. Boekelheide, or any of their affiliates, immediate family members, or
heirs. Furthermore, the Borrower shall not liquidate, wind up or dissolve itself (or suffer
any liquidation or dissolution); or convey, sell, lease, transfer or otherwise dispose of,
in one transaction or a series of transactions, all or substantially all of its business, or
assets..

     5.7. Expenses. Except as otherwise limited herein, pay and save Lender
harmless and indemnify Lender against liability for the payment of all reasonable
out-of-pocket expenses and reasonable counsel fees and expenses incurred by Lender in
connection with this transaction including, but not limited to, the preparation of the Loan
Documents, recording and filing fees, prosecution or defense of any action or proceeding or
other litigation affecting Borrower, the Real Estate or the Secured Assets and all costs of
collection of the Note.

     5.8. Use of Proceeds. The proceeds of the Loan shall be used solely to
reimburse Borrower for (i) actual expenses incurred by or on behalf of Borrower for the
construction of the Project in accordance with the Plans and Specifications and in
accordance with the Construction Budget, and (ii) after the occurrence of an Event of
Default, to the extent Lender in its sole discretion elects to apply such proceeds, to any
charges or expenses due from Borrower to Lender under the Loan Documents.

15

 

     5.9. Financial Statements. Throughout the term of this Loan Agreement,
Borrower shall furnish or cause to be furnished to the Lender the following:

     5.9.1. Borrower’s Annual Financial Statements. As soon as available,
and in any event within one-hundred twenty (120) days after the close of each fiscal
year of the Borrower, a copy of the financial statements of Borrower, including
balance sheets and statements of profit and loss, audited by an independent
certified public accounting firm chosen by Borrower.

     5.9.2. Real Estate Operating Statements. As soon as available, and in
any event within sixty (60) days after the close of each fiscal year of the
Borrower, a copy of the operating statements of the Property.

     5.9.3. Additional Information. Borrower shall cause to be furnished to
Lender such additional information concerning the financial condition of Borrower as
Lender may reasonably request from time to time. The Borrower will permit
representatives of the Lender to have free access during regular business hours to
the Real Estate and to inspect all books, records, and contracts of the Borrower
relating to the Real Estate, the Project and the Secured Assets. Once the
construction of the Project is complete, unless an Event of Default shall be
continuing, Borrower shall not be required to pay the Lender’s costs of inspection
of the Real Estate or Borrower’s books, record and contracts more frequently than
once per year. Such inspections by Lender shall not entitle Lender to re-audit the
books and records of Borrower.

     5.10. Management Agreement, Franchise Agreement or Service Agreements.
Borrower shall not enter into, modify, amend, supplement, terminate or cancel the Management
Agreement, the Franchise Agreement, without Lender’s prior written consent, which consent
may not be unreasonably withheld, conditioned or delayed.

     5.11. Governmental Approvals. Borrower shall obtain all approvals from all
governmental authorities necessary or required to proceed with the development and operation
of the Project.

     5.12. Borrower’s Additional Equity Deposit. Within sixty (60) business days
following the issuance of the Certificate of Occupancy by the City, described in Section
3.1.2.3, Borrower shall deliver to Lender the difference between the (i) Total Project
Equity (defined below) and (ii) the Initial Equity Deposit. The term “Total Project Equity”
shall equal the actual aggregate cost of the Project less 65% of the appraised value of the
Project as determined pursuant to the appraisal described in Section 2.3 above.

     6. Defaults.

     6.1. Any of the following events shall constitute an Event of Default under this Loan
Agreement:

16

 

     6.1.1. Default Pursuant to Note. The Borrower shall default in the
payment of principal or interest due under the Note and such default shall continue
for a period of ten (10) days following the due date of such payment.

     6.1.2. Default Pursuant to Loan Documents. Except for a default
pursuant to Section 6.1.1, there shall be a default in the performance or observance
of any covenants or conditions required to be performed or observed by the Borrower
under the terms of the Loan Documents and such breach shall continue for a period of
thirty (30) days after written notice to the Borrower specifying such breach;
provided, however, if such default cannot reasonably be cured within such thirty
(30) days, Borrower shall not be deemed to be in default if Borrower commences
curing such breach within fifteen (15) days after written notice and thereafter
diligently completes the curing of such breach, provided that Lender’s security for
the Loan, in Lender’s sole opinion, is not materially impaired by such delay and
provided, further, that Borrower shall in no event have longer than one hundred
twenty (120) days to completely cure such default.

     6.1.3. Breach of Warranty or Representation. Any representation or
warranty made by the Borrower in the Loan Documents or as part of the Loan or in any
certificate or document furnished as part of the Loan shall prove untrue in any
material respect on the date as of which they were made or as of the date on which
they were to be effective.

     6.1.4. Insolvency. The Borrower shall admit in writing its inability
to pay its debts or shall make an assignment for the benefit of its creditors; or
shall be adjudicated a bankrupt; or shall file a voluntary petition in bankruptcy or
to effect a plan or other arrangement with creditors, or to liquidate assets of the
Borrower under court supervision; or shall have applied for the appointment of a
receiver, trustee or custodian for any of its assets; or a trustee, receiver or
custodian shall have been appointed for any assets of the Borrower and such trustee,
receiver or custodian shall not have been discharged within ninety (90) days after
the date of his appointment.

     6.1.5. Damage to Real Estate, Project or Secured Assets. If the
improvements on the Real Estate, or the Secured Assets are, in the reasonable
judgment of the Lender, materially injured or destroyed and Borrower does not take
prompt action to collect insurance proceeds and/or commence restoration in
accordance with the provisions of the Mortgage.

     6.1.6. Inspection of Real Estate. If the Lender is not permitted, at
all reasonable times upon prior reasonable notice and pursuant to the other terms
and conditions herein, to enter and inspect the Real Estate, Project and the Secured
Assets.

     6.1.7. Warrants and Attachments. Any warrant, attachment, execution
or other writ shall be issued or levied upon the Real Estate or the Secured Assets
or any property, real or personal, owned by Borrower shall remain undischarged,
unstayed or unbonded for a period in excess of ninety (90) days.

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     6.1.8. Default Pursuant to Existing Indebtedness. The occurrence of an
event of default, after expiration of any applicable cure period, pursuant to the
Existing Indebtedness loan documents or any loan agreement, mortgage, note,
assignment of leases and rents or other document evidencing or securing the Existing
Indebtedness by Borrower to the First National Bank of Omaha.

     6.1.9. Material Contracts. If the Management Agreement, the Franchise
Agreement or any contract which is material to Borrower’s business (“Material
Contracts”) is materially modified or amended without the Lender’s consent or if one
of the Material Contracts is terminated other than by the expiration of its term or
a breach or an event of default occurs under one of the Material Contracts on the
part of Borrower to perform.

     6.1.10. Default Pursuant to the Cambria Suites Hotel Construction Loan.
The occurrence of an Event of Default as defined in that certain Loan Agreement by
and between Lender and Borrower dated of even date herewith for the construction of
a 113 room, five-story Cambria Suite hotel and related improvements on the Real
Estate.

     6.2. Occurrence of Default. Upon the occurrence of an Event of Default, unless
such Event of Default is subsequently waived in writing by Lender, Lender shall be entitled,
at the option of Lender, to exercise any or all of the following rights and remedies:

     6.2.1. Suspend Disbursements. Lender may suspend its obligation to
make disbursements pursuant to the Loan.

     6.2.2. Accelerate Payments. Lender may declare the entire unpaid
principal balance due pursuant to the Note to be immediately due and payable,
together with accrued and unpaid interest, without further notice to or demand on
the Borrower. Notwithstanding the foregoing, if Borrower becomes insolvent, makes
an assignment for the benefit of its creditors, becomes the subject of an “order for
relief” within the meaning of the U.S. Bankruptcy Code, files a petition in
bankruptcy, or for reorganization, is adjudged bankrupt, has filed against them an
involuntary petition pursuant to the U.S. Bankruptcy Code or has a receiver,
trustee, custodian or a liquidator appointed to take control of any of its real or
personal property and such receiver, trustee, custodian or liquidator is not
discharged within sixty (60) days of their appointment, then the entire unpaid
principal balance due pursuant to the Note and all accrued and unpaid interest
thereon shall automatically and without the option of the Lender become immediately
due and payable.

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     6.2.3. Take Over Construction. If construction of the Project is not
completed, Lender may, but shall not be obligated to, take over and complete the
construction of the Project in accordance with Plans and Specifications approved by
Lender with such changes as Lender may, in its reasonable discretion, deem
appropriate, all at the risk and expense of the Borrower. Lender may assume or
reject any contracts entered into by the Borrower in connection with the
Project and Lender may enter into additional or different contracts for services,
labor and for materials necessary, in the discretion of Lender, to complete the
Project. Lender may pay, compromise and settle all claims in connection with the
Project. All reasonable sums, including reasonable attorney fees, charges and fees
for supervision and inspection of the construction, and for any other necessary
purpose in the sole discretion of Lender, expended by Lender in completing the
Project shall be deemed advances made by Lender to the Borrower, and the Borrower
shall be liable to Lender for the repayment of such sums, together with interest on
such amounts from the date of their expenditure at the default rate specified in the
Note. Lender may, in its discretion, at any time, abandon work on the Project after
having commenced such work and may recommence such work at any time, it being
understood that nothing in this Section shall impose any obligation on Lender to
complete the Project. For the purpose of carrying out the provisions of this
Section, the Borrower irrevocably appoints Lender as its attorney-in-fact, with full
power of substitution, to execute and deliver all such documents, pay and receive
such funds, and take such action as may be necessary in the judgment of Lender to
complete the Project.

     6.2.4. Other Remedies. Lender may exercise all enforcement remedies
specified or permitted in the Collateral Security Documents or any remedy available
to Lender at law or in equity.

     7. Re-platting Privilege. Provided no Event of Default exists, Borrower shall be
allowed, to re-plat and subdivide the Real Estate into two separate parcels such that one hotel is
situated on each newly-created parcel (the newly-created parcel on which the Hampton Inn & Suites
hotel, or its successor, is situated shall be referred to herein as the “Hampton Parcel” and
newly-created parcel on which the Cambria Suites, or its successor, is situated shall be referred
to herein as the “Cambria Parcel”, and the Hampton Parcel and Cambria Parcels may be individually
referred to herein as a “Property” and shall be collectively referred to herein as the “New
Parcels”), subject to the following conditions:

          7.1. Borrower shall deliver to Lender a survey and legal description of the Hampton Parcel and
the Cambria Parcel that show and provide for a common property line between the New Parcels in a
location acceptable to Lender in its reasonable discretion;

          7.2. Lender shall be provided with such evidence as Lender may reasonably require in order to
verify that no violation of zoning, parking or subdivision requirements with respect to the New
Parcels shall exist upon completion of the re-platting or subdivision, or that appropriate
variances were obtained with respect to the New Parcels;

          7.3. Lender shall be provided with evidence reasonably satisfactory to it that any and all
necessary governmental approvals of the subdivision and replatting of the New Parcels have been
obtained;

          7.4. Lender shall receive an endorsement to its loan title policy with respect to the New
Parcels in form and substance satisfactory to Lender in its sole discretion insuring that the
Hampton Parcel and the Cambria Parcel each has access to the same publicly dedicated
streets as prior to the creation of the New Parcels and amending the legal description to include
the legal descriptions of the New Parcels;

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          7.5. Borrower shall pay all costs, fees, and expenses incurred in connection with the release,
including, without limitation, recording fees, title charges and Lender’s reasonable attorney’s
fees;

          7.6. Borrower shall have created easements for utilities, signage, drainage, parking, ingress
and egress and other appropriate purposes in, on and over the New Parcels for the benefit of both
the Hampton Parcel and Cambria Parcel to the extent reasonably required by Lender and such
easements shall be insured as appurtenances in Lender’s loan title policy via endorsement;

          7.7 Borrower and any guarantors of the Loan shall reaffirm their respective obligations
pursuant to a ratification agreement in form and substance satisfactory to Lender;

          7.8. The release shall not affect any obligations of Borrower or guarantors, if any, under the
Loan Documents;

          7.9. Borrower must obtain separate tax parcel numbers for the Hampton Parcel and the Cambria
Parcel;

          7.10. Borrower must provide preliminary plans, drawings and surveys reasonably required by
Lender at least twenty (20) days prior to making application to any governmental authority for the
proposed re-plat or subdivision, and such preliminary plans, drawing and surveys shall be subject
to Lender’s review and approval prior to making such application, which approval shall not be
unreasonably withheld.

     8. Property Release Privilege. Provided no Event of Default exists, and in the
event that the Real Estate has been re-platted or subdivided pursuant to Section 7 above, the
Borrower may partially or entirely prepay either or both of the loans secured by the Real Estate,
upon twenty (20) days prior written notice to Lender. Upon payment in full of all principal and
interest outstanding under a loan, Lender shall immediately release its mortgage and security
interest from the respective property financed by the paid loan. The parties hereto acknowledge
that the loan in the original principal amount of $14,080,000 financed the Hampton Inn & Suites,
and the loan in the original principal amount of $10,400,000 financed the Cambria Suites.

     9. Additional Matters.

     9.1. Heirs, Assigns, Waiver, Etc. The provisions of this Loan Agreement shall
inure to the benefit of and be binding upon Borrower and Lender, and their respective heirs,
legal representatives, successors and assigns; provided, however, that this Loan Agreement
may not be assigned by the Borrower without the prior written consent of Lender. No delay
on the part of Lender in exercising any right, power or privilege shall operate as a waiver
thereof. The rights and remedies of Lender specified in this Loan Agreement shall be in
addition to and not exclusive of any other rights and remedies which Lender, by operation of
law, would otherwise possess.

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     9.2. Survival of Representations and Warranties. All agreements,
representations, and warranties made in this Loan Agreement shall survive the execution of
the Loan Documents and shall continue until the Note is repaid in full.

     9.3. Governing Law. This Loan Agreement shall be governed by the laws of the
State of Wisconsin.

     9.4. Amendment of Loan Agreement. This Loan Agreement may not be changed
orally, but only by an agreement in writing signed by the parties hereto.

     9.5. Indemnification. Borrower hereby agrees to hold and save Lender harmless
and indemnify it against and from all claims, liabilities, damages, losses or expenses
(including reasonable attorney fees) of any kind incurred by Lender and arising from or out
of the use, occupancy or possession of the Real Estate or otherwise in any way connected to
the Loan; provided, however if and to the extent such claims, liabilities, damages, losses
or expenses of any kind are incurred by Lender solely because of Lender’s negligence or
willful act or omission, then Borrower shall not be required to hold and save Lender
harmless or indemnify Lender.

     9.6. Notices. Any notice to be given hereunder shall be in writing, addressed
to the party at the address stated below and shall be (i) delivered in person to the
receiving party by the other party, his agent or a professional courier service, (ii) sent
by United States certified or registered mail, postage prepaid, return receipt requested, or
(iii) sent by telecopy to the receiving party at the telecopy phone number stated below.
Any such notice shall be deemed effective upon the earlier of the actual receipt of the
notice or (i) if delivered in person, then when such notice is delivered to an individual at
the receiving party’s address who is apparently authorized to accept deliveries, (ii) if
sent by United States certified or registered mail, then one day after such notice or
election is deposited with the United States Postal Service, or (iii) if sent by telecopy,
then at the time sent and confirmed by the sender’s transmitted copy of such notice.

	 	 	 
	     Lender:

	 	M&I Marshall & Ilsley Bank
	 

	 	770 North Water
	 

	 	Milwaukee, WI 53202
	 

	 	Attn: Michael J. Fruin
	 

	 	Telecopy No. (414) 765-7625
	 
	 	 
	     Borrower:

	 	Summit Hotel Properties, LLC
	 

	 	2701 S. Minnesota Ave., Suite #6
	 

	 	Sioux Falls, SD 57105
	 

	 	Attn: Hulyn Farr
	 

	 	Telecopy No. (605) 362-9388

     9.7. Severability. Any provision of this Agreement which is prohibited or
unenforceable shall be ineffective to the extent of such prohibition or unenforceability
without invalidating the remaining provisions hereof.

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     9.8. Headings. Section and subsection headings in this Agreement are included
herein for convenience only and shall not constitute a part of this Agreement for any
purpose.

     9.9. VENUE. BORROWER HEREBY AGREES THAT ALL ACTIONS OR PROCEEDINGS INITIATED
BY BORROWER AND ARISING DIRECTLY OR INDIRECTLY OUT OF THIS LOAN AGREEMENT OR THE OTHER LOAN
DOCUMENTS SHALL BE LITIGATED IN THE CIRCUIT COURT OF MILWAUKEE COUNTY, WISCONSIN. BORROWER
HEREBY EXPRESSLY SUBMITS AND CONSENTS IN ADVANCE TO SUCH JURISDICTION IN ANY ACTION OR
PROCEEDING COMMENCED BY LENDER IN SUCH COURT. BORROWER WAIVES ANY CLAIM THAT MILWAUKEE
COUNTY, WISCONSIN OR THE EASTERN DISTRICT OF WISCONSIN IS AN INCONVENIENT FORUM OR AN
IMPROPER FORUM BASED ON LACK OF VENUE. THE EXCLUSIVE CHOICE OF FORUM FOR BORROWER SET FORTH
IN THIS SECTION SHALL NOT BE DEEMED TO PRECLUDE THE ENFORCEMENT, BY LENDER, OF ANY JUDGMENT
OBTAINED IN ANY OTHER FORUM OR THE TAKING, BY LENDER, OF ANY ACTION TO ENFORCE THE SAME IN
ANY OTHER APPROPRIATE JURISDICTION, AND BORROWER HEREBY WAIVES THE RIGHT, IF ANY, TO
COLLATERALLY ATTACK ANY SUCH JUDGMENT OR ACTION.

     9.10. WAIVER OF TRIAL BY JURY. LENDER AND BORROWER ACKNOWLEDGE AND AGREE THAT
ANY CONTROVERSY WHICH MAY ARISE UNDER THIS LOAN AGREEMENT OR THE OTHER LOAN DOCUMENTS OR
WITH RESPECT TO THE TRANSACTIONS CONTEMPLATED HEREIN AND THEREIN WOULD BE BASED UPON
DIFFICULT AND COMPLEX ISSUES AND THEREFORE, THE PARTIES AGREE THAT ANY COURT PROCEEDING
ARISING OUT OF ANY SUCH CONTROVERSY WILL BE TRIED IN A COURT OF COMPETENT JURISDICTION BY A
JUDGE SITTING WITHOUT A JURY.

22

 

IN WITNESS WHEREOF, the undersigned have executed this Loan Agreement on the day, month and year
first above written.

	 	 	 	 	 	 	 
	 	 	M&I MARSHALL & ILSLEY BANK
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Michael J. Fruin	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Michael J. Fruin, Vice President	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Geoffrey R. Nauth	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:
	 	Geoffrey R. Nauth	 	 
	 

	 	Its:
	 	Vice President	 	 

23

 

	 	 	 	 	 	 	 	 	 
	 	 	SUMMIT HOTEL PROPERTIES, LLC	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	By:
	 	/s/ Kerry W. Boekelheide	 	 
	 

	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	Kerry W. Boekelheide	 	 
	 

	 	 	 	 	 	     Chief Executive Officer	 	 

24

 

EXHIBIT A

Legal Description

Lot 1, Block 1, Summit Hotel Properties, according to the recorded plat thereof, Hennepin County,
Minnesota

Abstract Property

Registered Property, Certificate of Title No. 1181720

 

 

EXHIBIT B

Construction Budget

	 	 	 	 	 	 	 
	Minneapolis
	 	 	 	 	 	 
	Hampton Inn & Suites
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 
	 	Rooms	 	 	146	 
	 
	 	Square Foot	 	 	111,376	 

	 	 	 	 	 	 	 	 	 
	Land
	 	$	1,611,000	 	 	 	 	 
	Building/Garage
	 	 	11,858,000	 	 	See Construction Contract Detail
	Franchise Fee
	 	 	75,000	 	 	 	 	 
	Signage
	 	 	15,000	 	 	 	 	 
	Phone Equipment
	 	 	70,000	 	 	 	 	 
	Internet High Speed
	 	 	15,000	 	 	 	 	 
	PMS
	 	 	65,000	 	 	 	 	 
	FF&E
	 	 	1,606,000	 	 	 	 	 
	Permits & Fees
	 	 	145,000	 	 	 	 	 
	Engineering Fees
	 	 	200,000	 	 	 	 	 
	Contingency
	 	 	600,000	 	 	 	 	 
	Construction Interest/Finance Costs
	 	 	790,000	 	 	 	 	 
	Professional Fees
	 	 	360,000	 	 	 	 	 
	Syndicated Cost
	 	 	—	 	 	 	 	 
	Operating Capital
	 	 	200,000	 	 	 	 	 
	 
	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	Total Cost
	 	$	17,610,000

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00113-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00113-of-00352.parquet"}]]