CONSTRUCTION MANAGEMENT AGREEMENT

 

“Completion Date” is defined in Section 9.3.

 

“Construction Manager” is defined in the Preamble.

 

“Construction Manager Estimate” is defined in Section 8.3.

 

“Contract Price” is defined in Section 5.2.

 

“Contractor” means any Person, other than Construction Manager, performing all or any portion of the Work, or performing any other services, or providing goods, equipment, materials, supplies, or labor services related to the Work, including contractors, subcontractors (and every tier of subcontractors), vendors, suppliers, agents and representatives of Construction Manager, whether hired by Construction Manager or by another Person hired by Construction Manager.

 

“Costs” means all verifiable, direct, out-of-pocket costs incurred by Construction Manager in performing the Work, but shall not include any costs or expenses (i) for general or overhead expenses of Construction Manager or (ii) that would not have been incurred absent the bad faith, gross negligence, or willful misconduct of Construction Manager or any Contactor.

 

“Damages” is defined in Section 13.1(a).

 

“Data” is defined in Section 3.4.

 

“Day” means a period of twenty-four (24) consecutive hours beginning at 7:00 a.m., Central Time, or at such other hour as Construction Manager and Owner mutually agree.

 

“Defect” means any equipment, materials, tools, supplies, installation or other work performed or provided by, or within the responsibility of Construction Manager or any Contractors which (i) fails to conform to the Scope of Work or is of improper or inferior workmanship; (ii) could reasonably be expected to adversely effect the design or operation of the Casino Hotel; or (iii) otherwise fails to meet the warranties set forth in Section 10.2.

 

“Delay Liquidated Damages” is defined in Section 6.2(a).

 

“Event of Default” or “Default” means the occurrence of any of the following events, circumstances or conditions: (i) the failure by either Party to perform or comply with any material agreement, covenant, obligation or other provision contained in this Agreement when such failure has not been remedied (after delivery of written notice thereof) within ten (10) Days; (ii) the entry of either Party into voluntary or involuntary bankruptcy, receivership or similar protective proceedings; or (iii) the inaccuracy or breach of any material representation or warranty contained in Article X.

 

“Force Majeure” is defined in Section 12.1.

 

“Governmental Authority” means applicable tribal, national, state and local governments and all agencies, authorities, departments, instrumentalities, courts, corporations or the other subdivisions of each having or claiming a regulatory interest in or jurisdiction over the Casino Hotel, the Work or the Parties

 

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“Guaranteed Completion Date” is defined in Section 6.1.

 

“Guaranteed Maximum Price” is defined in Section 5.2.

 

“Hazardous Materials” shall mean any hazardous materials, hazardous wastes, hazardous constituents, hazardous or toxic substances, petroleum products (including crude oil or any fraction thereof), defined or regulated as such under any environmental Law.

 

“Invoice” is defined in Section 5.3(a).

 

“Laws” means the laws, rules, regulations, decrees and orders of the United States of America, the Indian Nation and all other governmental bodies having relevant jurisdiction, whether such now exist or hereafter come into effect.

 

“Loss” or “Losses” means any actions, claims, settlements, judgments, demands, liens, losses, damages, fines, penalties, interest, costs, expenses (including, without limitation, expenses attributable to the defense of any actions or claims), attorneys’ fees and liabilities related to the construction of the Casino Hotel; provided, however, that as between the Parties, the term Loss shall not include damages which one Party has waived or released its right to seek from the other Party pursuant to Article XIII.

 

“Notice to Proceed” is defined in Article IV.

 

“Notice to Proceed Date” is defined in Article IV.

 

“Owner” is defined in the Preamble.

 

“Owner Directive” is defined in Section 8.5.

 

“Owner Indemnified Party” is defined in Section 13.2(a).

 

“Party” and “Parties” means, each of Owner and Construction Manager, individually or collectively, as the context may require.

 

“Performance Security” is defined in Article VII.

 

“Person” means any individual or entity, including, without limitation, any corporation, limited liability company, joint venture, joint stock company, general or limited partnership, trust, agency, association, organization, government authority (including any agency or administrative group thereof) or other entity.

 

“Progress Report” is defined in Section 5.3(e).

 

“Property” means the areas designated by Owner for performance of the Work

 

“Repair” (which shall also mean “Repairing”) is defined in Section 10.2(a).

 

“Retainage” is defined in Section 5.5.

 

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“Scope of Work” is set forth on Schedule 1 (as may be amended pursuant to the terms of this Agreement).

 

“Stated Rate” means an annual rate of interest (compounded monthly) equal to the lesser of (i) the sum of the one year LIBOR rate quoted in the Wall Street Journal (or, in its absence, a similar publication) on the first Day of the applicable month plus one percent (1%).

 

“Warranty Period” is defined in Section 10.4.

 

“Work” is defined in Section 2.2.

 

ARTICLE II.
CONSTRUCTION MANAGEMENT SERVICES

 

2.1           Appointment as Construction Manager. Subject to the terms and conditions of this Agreement, Owner hereby appoints Construction Manager to act hereunder as an independent contractor to manage the construction of the Casino Hotel, and Construction Manager hereby accepts such appointment and agrees to act pursuant to the provisions of this Agreement. Construction Manager is an independent contractor and agrees to maintain such status and relationship.  Neither Construction Manager nor any Manager Indemnified Party shall be deemed to be the agents, representatives or employees of Owner.  Nothing herein is intended to, or shall be deemed to, create a partnership, joint venture, agency or other relationship creating fiduciary or quasi fiduciary duties or similar duties and obligations or otherwise subject the Parties to joint and several or vicarious liability or to impose any duty, obligation or liability that would arise therefrom with respect to either or both of the Parties.

 

2.2           Work to be Performed. This Agreement is a turnkey contract and Construction Manager’s obligation is to provide Owner with the Casino Hotel complete and in full operating condition, completed in every detail according to the Scope of Work within the time and schedules designated herein and for the purposes designated herein by Owner, and to do and furnish everything necessary in connection therewith, all on a total, fixed price basis as set forth herein.  Without limiting the generality of the foregoing, Construction Manager shall perform the Work set forth on Schedule 1 (the “Work”).

 

2.3           Use of Contractors.

 

(a)           Schedule 2 sets forth certain items of the Work, and with respect to each such item of Work, the Person(s) approved by Construction Manager and Owner to perform such Work.  Schedule 2 may not be modified without the prior written consent of Owner, such consent not to be unreasonably withheld.  Construction Manager is prohibited from subcontracting or assigning any of the Work, except as approved by Owner and set forth on Schedule 2.  Upon Owner’s request, Construction Manager shall cause a qualified representative of any Contractor to meet with Owner.

 

(b)           Approval by Owner of any Contractor shall not relieve Construction Manager of any of its obligations under this Agreement and Construction Manager shall, at all times, be responsible for all of the Work, including all Work set forth on Schedule 2.  All Work performed by a Contractor shall be pursuant to an appropriate written

 

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agreement between Contractor and Construction Manager.  All such Contractor contracts entered into by Construction Manager for any portion of the Work shall:

 

(i)            conform to and require Contractor to perform in accordance with the requirements, terms and conditions of this Agreement,

 

(ii)           be assignable to Owners upon Owner’s written request,

 

(iii)          preserve and protect the rights of Owner under this Agreement and with respect to the Work to be performed,

 

(iv)          require Contractor to provide and maintain adequate insurance consistent its obligations related to this Agreement and the Work to be performed, and

 

(v)           obligate Contractor to execute a waiver and release with respect to any lien rights for each payment received by the such Contractor for the Work.

 

ARTICLE III.
GENERAL OBLIGATIONS OF CONSTRUCTION MANAGER

 

3.1           Standard of Performance. Construction Manager shall perform the Work and carry out its other obligations hereunder, and shall require all of its employees, Contractors, agents, materialmen and vendors furnishing labor, materials or services in any way relating to this Agreement or affecting the Casino Hotel to carry out their respective responsibilities in accordance with (a) the terms of this Agreement, (b) safe, sound, efficient, workmanlike, economically prudent, and environmentally sound practices, and (c) all Laws, permits and licenses applicable to the Casino Hotel and the construction thereof.

 

3.2           Construction Manager’s Employees, Consultants and Contractors. Construction Manager shall pay all expenses in connection with employing, retaining and supervising other Persons necessary or appropriate for the performance of the Work, including compensation, salaries, wages, overhead and administrative expenses incurred by Construction Manager, and as applicable, FICA and Medicare taxes, workers’ compensation insurance, retirement and insurance benefits and other such expenses.  All services performed or materials supplied by any Affiliate of Construction Manager shall be performed or supplied at terms and rates that are reasonably competitive with the terms and rates known to Construction Manager to be prevailing in the industry at the time for the area of operations.

 

3.3           Payments Pursuant to Agreements. Construction Manager shall promptly pay all undisputed amounts due and payable to (a) all Contractors in accordance with the terms of applicable Contractor contract and (b) any other third Party providing goods or services in connection with the Work.

 

3.4           Ownership and Custody of and Access to Data. Notwithstanding anything in this Agreement to the contrary, Owner shall be the sole and exclusive owner of all reports, filings, agreements, instruments and other documents (collectively, “Data”), whether prepared by

 

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Construction Manager, Owner or any other Person, including a Contractor, related to the Work and any such Data shall be made available to Owner at Construction Manager’s office during reasonable business hours on provision of reasonable notice. Within a reasonable period of time after delivery of the Completion Certificate, or immediately upon the termination of this Agreement, Construction Manager shall deliver originals of all Data to Owner.

 

3.5           Inspection and Rejection by Owner. Owner, and its designated representatives, shall have the right to inspect all Work including, without limitation, testing, inspection, repairs, construction, installation, removal of equipment, meetings or other communications with any Person, or similar activities undertaken by Construction Manager in connection with this Agreement.  Owner shall have the right to reject, or to direct Construction Manager to reject, at any time, any such portion of the Work, including any design, engineering, materials, equipment, installation, tools or supplies, which in Owner’s reasonable judgment does not conform to this Agreement, including the Work Scope, or which contains Defects. Upon such rejection, Construction Manager shall promptly remedy any condition identified by Owner as giving rise to such rejection.

 

3.6           Disclosure to Owner.  Construction Manager shall promptly notify Owner of any event, circumstance or condition known to Construction Manager constituting or which reasonably could be expected to constitute a material breach, violation of any Law, or default of any other obligation of Owner of which Construction Manager has knowledge. Construction Manager shall promptly notify Owner of any significant circumstance, event, occurrence or condition (whether then existing or, in Construction Manager’s opinion, expected to exist in the near future), including issues related to the acquisition (including eminent domain proceedings) of rights of way and similar matters.

 

3.7           Risk of Loss. Until the earlier of the Completion Date and the termination of this Agreement, Construction Manager assumes risk of loss and full responsibility for the cost of replacing or repairing the damage to the Casino Hotel and all materials, equipment, spare parts, supplies and maintenance equipment (including temporary materials, equipment and supplies) which are purchased by Construction Manager or Owner for permanent installation in, or for use during construction of; the Casino Hotel. It is contemplated that all material, equipment and supplies will be owned by Owner and purchased or furnished for Owner’s account. Construction Manager shall assume such risk of loss and full responsibility regardless of whether Owner has title to such items under this Agreement (unless such loss or damage is a result of the gross negligence or intentional misconduct of Owner or Owner’s agents during such time as such agents are acting under Owner’s control, in which case Owner shall be responsible for the amount of any deductibles under applicable insurance policies); provided, however that such deductibles shall not exceed (a) $250,000.00 in respect of each claim for earthquake or flood damage and (b) $250,000.00 in respect of each other claim. Upon the earlier of the Completion Date and the termination of this Agreement, risk of loss and responsibility shall be assumed by Owner.

 

3.8           Construction Budget. At least thirty (30)  Days prior to the date scheduled for the Notice to Proceed Date, Construction Manager shall submit to Owner for Owner’s approval a budget for the Work, which budget amount shall not exceed the Guaranteed Maximum Price.

 

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ARTICLE IV.
COMMENCEMENT OF WORK

 

Owner shall issue to Construction Manager a written notice instructing Construction Manager to commence the Work (the “Notice to Proceed”). Upon receipt of the Notice to Proceed (the “Notice to Proceed Date”), Construction Manager shall commence and continuously and diligently pursue and perform the Work, in a manner and with adequate resources to ensure compliance with the Guaranteed Completion Date, the Construction Schedule set forth on Schedule 3, and otherwise in compliance with this Agreement.

 

ARTICLE V.
ACCOUNTING AND COMPENSATION

 

5.1           Accounting Records. Construction Manager shall keep complete and accurate records of all costs, expenses and expenditures in connection with this Agreement. To the extent necessary or appropriate to verify the amounts billed to Owner pursuant to this Agreement, Owner or its designated representatives, after five (5) Days’ prior written notice to Construction Manager, shall have the right during normal business hours to audit or examine, all books and records maintained by Construction Manager relating to the construction of the Casino Hotel. Such right shall include the right to meet with Construction Manager’s internal auditors to discuss matters relevant to the audit or examination. Owner shall have three (3) years after the termination of this Agreement to initiate an audit of Construction Manager’s records for any Work performed or materials provided during the term of this Agreement.  Owner shall make every reasonable effort to conduct audits in a manner which will result in a minimum of inconvenience to Construction Manager.

 

5.2           Contract Price. For the performance of the Work during the term of this Agreement, Owner agrees to pay Construction Manager, an amount equal to the Costs plus four percent (4%) (the “Contract Price”); provided, however, that the Contract Price may in no event exceed $123,000,000.00 (the “Guaranteed Maximum Price”).  The Contract Price will be Construction Manager’s complete compensation for the Work whether the Work are performed by Construction Manager’s personnel or by Contractors.

 

5.3           Request for Payment. No later than the tenth (10^th) Day of each month, Construction Manager shall submit to Owner a Request for Payment which shall include:

 

(a)           an invoice for the portion of the Contract Price incurred for the Work performed during the previous month (or, if applicable, prior months in case of third party invoices received during the previous month), if any, prepared in a form reasonably acceptable to Owner and supported by records evidencing the actual Costs incurred, minus the Retainage (an “Invoice”);

 

(b)           a certification that (i) such Request for Payment represents the amount to which Construction Manager is entitled to pursuant to the terms of this Agreement; and (ii) Construction Manager has paid all amounts that are due and owing to the Contractors, subject only to such disputed amounts as are specified by Construction Manager in the Progress Report;

 

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(c)           a partial lien waiver in the form of Exhibit A from Construction Manager ;

 

(d)           a partial lien waiver in the form of Exhibit B from each Contractor; and

 

(e)           a progress report (a “Progress Report”) which shall be in such form as may reasonably be requested by Owner, and which shall include, without limitation:

 

(i)            a description of the Work performed during the prior month;

 

(ii)           a description of the Work to be performed during the next month and an estimate of the Costs to be incurred in connection with such Work;

 

(iii)          a list of all Change Orders approved as of the end of the prior month;

 

(iv)          a discussion of any problems encountered during the prior month and remedies effected or planned; and

 

(v)           a description of any payment or other disputes with any Contractors or Governmental Authorities.

 

Additional Progress Reports.  Owner shall be immediately notified upon, but no later than one (1) Business Day from, Construction Manager’s knowledge of any specific change from a previously issued Progress Report.

 

5.4           Payments. Owner shall pay to Construction Manager the full undisputed amount of each Invoice within thirty (30) Business Days of receipt of each such Invoice. If Owner fails to make timely payments of any Invoice amount, or portion thereof, then Construction Manager shall be entitled to collect such unpaid undisputed amount, together with interest at the Stated Rate on any unpaid undisputed amount. If Owner’s failure to pay is a result of a good faith dispute of any Invoice amount, then interest will be payable only on the unpaid portion that is found or agreed by the Parties to be ultimately due. Interest shall accrue on unpaid amounts for the period beginning on the payment due date of the applicable Invoice and ending upon payment of such amount (together with the interest thereon). Payment and failure to object to all or any portion of an Invoice amount shall not be construed as an acceptance of defective Work or a waiver of any right under this Agreement by Owner.

 

5.5           Retainage. To secure Construction Manager’s performance of its obligations hereunder, the Company will withhold an amount equal to ten percent (10%) of the Contract Price (the “Retainage”) from each payment paid to Construction Manager by Owner (other than the final payment).  In the event that amounts are due under this Agreement from Construction Manager to Owner, and such amounts are not paid when due, Owner shall have the right to withhold additional amounts from Owner’s payments to Construction Manager equal to the amount owing by Construction Manager.

 

5.6           Bonus.  In the event the total Cost for constructing the Casino Hotel under this Agreement is less than the Guaranteed Maximum Price, Construction Manager shall be entitled to a bonus equal to fifty percent (50%) of the difference between the Guaranteed Maximum Price

 

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and the sum of: (a) all payments made to Construction Manager under this Agreement, (b) any Buy-Down Amounts paid by Construction Manager to Owner, and (c) any payments to third parties that directly resulted from a Construction Manager Event of Default (the “Bonus”).

 

5.7           Final Payment. Upon completion of the Casino Hotel, Construction Manager shall submit a final Request for Payment which shall set forth all amounts due and remaining unpaid to Construction Manager, including the Retainage and the Bonus, if any, and such amounts shall be paid by Owner within ninety (90) Business Days of Owner’s receipt of the final Request for Payment.

 

5.8           Certain Conduct. Notwithstanding any other provision herein, Owner shall not be required to pay or reimburse Construction Manager for (a) any additional costs and expenses that would not have been incurred absent the bad faith, gross negligence, or willful misconduct of Construction Manager or (b) claims for non-payment of any and all contributions, withholding deductions or taxes measured by the wages, salaries or compensation paid to Persons employed by Construction Manager in connection herewith.

 

5.9           Taxes.  Construction Manager shall pay and be responsible for all taxes of any kind, including sales, use, excise, unemployment, income taxes and any and all other taxes on any item or service that is part of the Work, whether such tax is normally included in the price of such item or service or is normally stated separately and any other taxes imposed by any Governmental Authorities on any equipment, materials, labor and services furnished by Construction Manager or its Contractors, or otherwise arising out of Construction Manager’s performance of the Work, including any increases in any such taxes during the term of this Agreement; and any duties, fees, and royalties imposed with respect to any equipment, materials, labor or services.

 

ARTICLE VI.
GUARANTEES AND DELAY LIQUIDATED DAMAGES

 

6.1           Guarantee. Construction Manager guarantees that it shall achieve Completion not later than November 1, 2006, as such guaranteed date may be adjusted pursuant to this Agreement (the “Guaranteed Completion Date”).

 

6.2           Liquidated Damages for Delay.

 

(a)           Construction Manager understands that if Completion is not achieved by the Guaranteed Completion Date, Owner will suffer substantial damages.  Therefore, Construction Manager agrees that if Completion is not achieved by the Completion Date, Construction Manager shall pay Owner as liquidated damages $100,000.00 per Day, for each Day or part thereof by which Completion is delayed beyond the Guaranteed Completion Date, commencing on the date following the Guaranteed Completion Date and ending on the Completion Date (the “Delay Liquidated Damages”).  All Delay Liquidated Damages shall be paid by Construction Manager to Owner no later than fifteen (15) Business Days following Owner’s invoice therefore, for any Delay Liquidated Damages that have accrued during the preceding Month.

 

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(b)           Construction Manager and Owner agree that the Delay Liquidated Damages are liquidated damages, and in the circumstance that they are payable: (i) it would be extremely difficult to determine the actual damages of Owner, (ii) the agreed liquidated damages are a fair and reasonable estimate of the actual damages that would be suffered by Owner; (iii) in no event shall the amount of any such agreed-upon liquidated damages constitute a penalty for Construction Manager, and (iv) they are the sole remedy for the delay.  Construction Manager hereby waives, to the extent permitted by applicable law, any defense as to the validity of any agreed-upon liquidated damages in this agreement on the grounds that such liquidated damages are void as penalties.

 

ARTICLE VII.
PERFORMANCE SECURITY

 

To secure Construction Manager’s performance of its obligations hereunder, on or before the date of execution and delivery of this Agreement, Construction Manager shall furnish Owner with the Performance Security in the form of Exhibit C (the “Performance Security”).  Construction Manager shall cause the Performance Security to remain in full force and effect until all of Construction Manager’s obligations under this Agreement have been completed to the satisfaction of Owner.

 

ARTICLE VIII.
CHANGES

 

8.1           General. Except as set forth in Section 8.5, no change or adjustment to the Guaranteed Maximum Price or the Guaranteed Completion Date will be valid except as agreed to by the Parties in accordance with a duly issued Change Order executed in writing by Owner and Construction Manager. All such changes shall be made in accordance with this Article VIII and shall be considered, for all purposes of this Agreement, as part of the Work and shall not affect the validity of this Agreement.

 

8.2           Minor Modifications. Minor modifications or adjustments that involve no price or time adjustment and do not affect the Work to be provided by Construction Manager (or the performance thereof) as specified in this Agreement may be made by Construction Manager and shall not require a Change Order; provided, however, that Construction Manager shall notify Owner thereof in writing and Owner shall provide its prior written consent (which may be withheld at its sole discretion) prior to Construction Manager’s effecting any such modification.

 

8.3           Owner Directed Change Order. Owner, at any time or from time to time, may direct a change in the Work, including the Scope of Work, by issuing a Change Notice to Construction Manager. Within five (5) Business Days of receipt of such notice, Construction Manager shall prepare and deliver to Owner a detailed written estimate (the “Construction Manager Estimate”) relating to the contemplated change, which shall include:

 

(a)           any proposed change in the Guaranteed Maximum Price resulting from such change;

 

(b)           any effect such change could be expected to have on the Guaranteed Completion Date;