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Exhibit
10.7
IMPERIUM GRAYS HARBOR
LLC
CONSTRUCTION
AGREEMENT
COST PLUS
FEE
THIS AGREEMENT is made
effective this 25th day of August, 2006, by and between Imperium
Grays Harbor LLC, a Washington limited liability company (the
“Owner”) and JH Kelly LLC, a Washington limited
liability company (the “Contractor”). Each of the Owner
and the Contractor may be referred to as a “Party” and
collectively as the “Parties.”
1. The Work . The
Contractor agrees to furnish and pay for all supervision, contract
administration, services, labor, materials, equipment, tools, and
other costs necessary to perform all requirements of the Contract
Documents (as hereinafter defined) for the scope of work described
on Exhibit A, a form of which is attached hereto, said Work
(hereinafter defined) to performed as part of Owner’s
biodiesel production facility located at Grays Harbor, Washington
(the “Project”). The Contractor shall perform the Work
in a workmanlike manner and in strict accordance with this
Agreement. The Contractor shall be solely responsible for all
construction means, methods, techniques, sequences, procedures, and
safety precautions or programs, and for supervising, coordinating
and performing all of the work. The Agreement contains the general
terms and conditions which will govern all future specifications
and scope intended to be issued to and performed by Contractor with
respect to the Project. The parties acknowledge and agree that the
Project involves several discrete “phases” of Work, and
each phase to be performed by Contractor shall be incorporated into
this Agreement by an amendment executed by both Parties. Each
amendment shall be consecutively numbered (e.g. Exhibit A1, Exhibit
A2, etc) and shall describe and detail: (i) the scope of work
to be performed; (ii) the Cost of the Work (as defined in
Section 5) and the Contractor’s Fee (as defined in
Section 4) for the work to be performed; (iii) any
attendant and requisite changes to the Project Schedule,
Preliminary Schedule of Values, required completion dates,
liquidated damages, or fees; and (iv) any other changes to the
Agreement terms and conditions necessitated by the particular phase
of work. All work described and incorporated on any Exhibit A
hereto shall be collectively referred to as the
“Work”.
1.1 The Contractor agrees
that Steve Dahl shall serve as the Project Manager of the
Contractor for the Work and, in that capacity, he shall be
responsible for personally managing and administering the
performance of the Contractor’s obligations under this
Agreement, subject to his continuing employment by Contractor and
the needs, staffing and skill requirements of the specific Project
stage). The Project Superintendent of the Contractor for the
Project will be mutually agreed upon by the Parties. Provided they
remain in the employ of or otherwise affiliated with the
Contractor, the persons referenced in this Section shall not be
replaced without the prior written approval of the Owner. The Owner
shall have the right to approve persons proposed as replacements
for the Project Manager and Project Superintendent. The
Owner’s approvals under this Section shall not unreasonably
be withheld. Furthermore, the Contractor agrees that the primary
members of the Contractor’s Project team will be available to
perform the Work on throughout its duration.
1.2 The Contractor agrees
that throughout the Project’s duration, the Contractor will
have sufficient resources available to perform and complete the
Work in accordance with the Project Schedule (as defined in Exhibit
D). Furthermore, the Contractor represents and warrants that any
labor or other agreement it may have with its employees or any
entity representing them does not expire prior to the Guaranteed
Completion Date (as hereinafter defined); provided however, that
the collective bargaining agreements governing craft labor required
for the performance of the Work do contain wage escalation
provisions that may increase wage rates and, accordingly, the costs
of labor over the course of the Project. Copies of these agreements
will be made available to the Owner upon request.
2. Contract Documents
. The Contract Documents shall be defined as the following, which
are all incorporated herein by this reference:
This Agreement.
Scope of Work or
“Work”, including without limitation the Drawings and
Specifications listed therein, attached as Exhibit A
.
Preliminary Schedule of
Values, attached as Exhibit B , provided solely as a
preliminary estimate of cash flow needs for the Owner
Form of Waivers and Releases,
attached as Exhibit C.
Project Schedule, attached as
Exhibit D .
Contractor Rates as of the
effective date of Agreement: Craft Rates, Equipment Rates and
Fabrication Rates, , attached as Exhibit E .
Form of Subcontractors’
Express Warranties, attached as Exhibit F.
In the event of conflicts or
inconsistencies between or among the Contract Documents, this
Agreement shall take precedence over the Scope of Work (including
without limitation its Drawings and Specifications), the Drawings
shall take precedence over the Specifications, and larger-scale
detailed Drawings shall take precedence over smaller scale general
Drawings. In the event of any remaining conflicts or
inconsistencies between or among the Contract Documents, the
Contractor shall perform the higher quality and the greater
quantity of the Work except as directed in advance of the Work in
writing by the Owner to do otherwise.
3. Total Price
. The Owner shall pay the Contractor for the Contractor’s
performance of its obligations under this Agreement the Cost of the
Work (as defined in Section 5) plus the Contractor’s Fee
(as defined in Section 4).
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4. Contractor’s
Fee . The Contractor’s Fee shall be as specified on
Exhibit A (the “Contractor’s Fee”). The
Contractor’s Fee shall be compensation for all of the
Contractor’s costs not included in the Cost of the Work. In
the event that change orders and/or added or deleted Work increase
or decrease the total Cost of Work over the sum specified on the
applicable Exhibit A, then Contractor’s Fee shall be
increased or decreased in accordance with the formula set forth in
Section 10.2 for all amounts over or below said
threshold.
5. Cost of the Work .
The Cost of the Work shall be limited to costs reasonably incurred
by the Contractor in the proper performance of the Work (as further
described below, the “Cost of the Work”), which shall
exclude any components supplied by Owner or others. Contractor
equipment, labor and supervision shall in be billed in accordance
with Contractor’s then current rate schedules (the version
effective as of the execution date of this Agreement is attached
hereto as Exhibit E). All remaining costs shall be at rates
comparable to the standard paid at the place of the Project .
Contractor is directed to employ a forty (40) hour work week
and not utilize overtime or premium time rates or incur material or
equipment expediting costs, unless the Owner has approved the use
of such overtime or premium time or expediting costs in writing in
advance. In addition, Contractor shall keep Owner regularly
apprised of crew sizes and shall provide written monthly reports
documenting actual versus estimated man-hours expended in the
course of the Work. The Cost of the Work shall include only the
items set forth in this Section 5, as follows:
5.1 Wages of construction
workers directly employed by the Contractor to perform the
construction of the Work at the site or in Contractor’s
fabrication facilities.
5.2 Wages of construction
workers directly employed by the Contractor to perform the
construction of the Work at locations other than the site, provided
that the nature and scope of such off-site Work is approved in
writing in advance by the Owner.
5.3 Wages or salaries of the
Contractor’s supervisory and administrative personnel
wherever located or engaged, but only for that portion of their
time required for and directly related to the performance of the
Work.
5.4 Costs paid or incurred by
the Contractor for employee-related insurance, contributions,
assessments, travel, subsistence and benefits required by law or
collective bargaining agreements and, for personnel not covered by
such agreements, customary benefits such as employee-related
insurance, contributions, assessments, sick leave, medical and
health benefits, holidays, vacations and pensions, provided such
costs are based on wages and salaries included in the Cost of the
Work under Paragraphs 5.1, 5.2, and 5.3.
5.5 Actual payments made by
the Contractor to Subcontractors in accordance with the
requirements of the applicable subcontracts and supply contracts,
and subject to the provisions of Section 26 and its
subparagraphs. As used in this Agreement, the term
“Subcontractors” shall include all subcontractors and
suppliers under a direct contract with Contractor.
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5.6 Costs, including
transportation and installation, of materials and equipment
incorporated or to be incorporated in the completed Project. Costs,
including transportation, installation, maintenance, dismantling
and removal, of materials, supplies, temporary facilities,
machinery, equipment and hand tools not customarily owned by the
construction workers which are provided by the Contractor at the
site and fully consumed in the performance of the Work; and cost
less salvage value on such items if not fully consumed, whether
sold to others or retained by the Contractor. Cost for items
previously used by the Contractor shall be fair market
value.
5.7 Rental costs of machinery
and equipment used in the performance of the Work; provided that in
no event shall such rental costs paid for particular items of
machinery or equipment exceed the market rate purchase price of
such items.
5.8 Costs of installing
equipment and components furnished by the Owner
(“Owner-Furnished Components”).
5.9 Costs of removal and
disposal of debris from the Project site.
5.10 Premiums for insurance,
to the extent of the portion directly attributable to this
Agreement.
5.11 Costs of permits, fees,
tests and inspections paid by the Contractor pursuant to
Section 20.
5.12 Costs relating to any
general conditions and overhead reasonably allocable to the Work
and not to any other project. These costs include items such as
utilities, telecommunications, water coolers, portable toilets,
etc.
5.13 Cost of the building
permit, if obtained by the Contractor; provided, that this cost
shall not be subject to Contractor’s markup or
fee.
5.14 Other costs incurred in
the performance of the Work if and to the extent approved in
advance in writing by the Owner.
6. Costs Not to be
Reimbursed . The Cost of the Work shall, except to the extent
reasonably allocable to the Work or the Project, exclude the
following:
6.1 Wages, salaries and other
compensation of the Contractor’s and Subcontractors’
personnel for their time not required for the performance of the
Work.
6.2 Expenses of the
Contractor’s principal office and other offices,
6.3 Overhead,
“soft” general conditions costs, and other general
expenses.
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6.4 The Contractor’s
capital expenses, including interest on the Contractor’s
capital employed for the Work.
6.5 The Owner’s costs
in furnishing Owner-Furnished Components.
6.6 Costs due to the fault or
negligence of the Contractor, Subcontractors, or anyone directly or
indirectly employed by any of them or for whose acts any of them
may be liable, including but not limited to costs of correcting,
retesting and reinspecting damaged, defective or nonconforming
Work, disposal and replacement of materials and equipment
incorrectly ordered or supplied, and making good damage to property
not forming part of the Work.
6.7 Any cost not specifically
and expressly described in Section 5.
7. Financing
Arrangements . The Owner either has or will obtain financing
for the work to be performed under this Agreement. Upon execution
of this Agreement or as soon thereafter as reasonably possible, the
Owner shall provide the Contractor with evidence of financing in a
mutually agreeable form, which shall include a deposit of the
Contract Price, including any bonus potentially payable to the
Contractor, in a bank account in the name of the Contractor or its
affiliate. Evidence of such financing shall be a condition
precedent to the Contractor’s commencing or continuing the
Work. The Contractor shall be notified prior to any material change
in financing.
8. Payment . The Owner
shall pay the Contractor the Contract Price in monthly progress
payments plus a final payment, as set out in this Section 8.
Progress payments shall reflect the actual Cost of Work and the
allocable portion of Contractor’s Fee for said period, but
Contractor shall endeavor to perform the Work and bill in
accordance with the Preliminary Schedule of Values attached as
Exhibit B . The Preliminary Schedule of Values shall be
updated from time to time by the Contractor to account for actual
Work progress, changes in the Work or Project Schedule, Change
Orders (as defined in Section 10) and allocation of
contingencies. Final payment shall be made upon Mechanical
Completion of the Work, subject to the provisions of
Section 8.2.
8.1 The Contractor’s
applications for progress payments, together with such waivers and
releases, Cost of the Work documentation and cost data, and other
documentation as the Owner or its lender or engineer reasonably
shall require, shall be submitted to the Owner no later than the
fifth (5th) day of each month, and the Owner shall make
payment via wire transfer to the Contractor no later than fifteen
(15) days after receipt of Contractor’s application for
a progress payment. The Owner shall make final payment no later
than fifteen (15) days after receipt of Contractor’s
application for final payment, together with such waivers and
releases, Cost of the Work documentation and cost data, warranties,
operations and maintenance manuals, keys, record drawings, and
other documentation and items as the Owner reasonably shall
require. The Owner and Contractor agree that the waivers and
releases to be submitted under this Paragraph 8.1 shall be in the
form set out in pExhibit C . The Owner and Contractor also
agree
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that such waivers and releases shall be
executed by the Contractor and those from whom the Owner may
reasonably require them.
8.2 The Owner may withhold
all or a portion of a progress payment or final payment on account
of (1) incomplete Work, (2) defective or nonconforming
Work, (3) claims filed or a reasonable basis to believe that
such claims will be filed imminently, (4) failure of the
Contractor to make payments properly for labor, services,
materials, equipment or subcontracts, (5) damages caused to the
Owner or another party by Contractor or those under
Contractor’s control, or (6) failure to carry out the
Work in accordance with this Agreement, all as determined by Owner
in its reasonable discretion. In so doing, the Owner may withhold
up to one hundred fifty percent (150%), respectively, of
(1) the cost to complete such incomplete Work, (2) the
cost to cure such defective or nonconforming Work, (3) the
amount of such claims, (4) the amount of such payments not
made, (5) the amount of such damages, and (6) all costs
reasonably necessary to cure any failure to carry out the Work in
accordance with this Agreement.
8.3 The making of final
payment shall constitute a waiver of all claims by the Owner except
those expressly reserved in writing by the Owner at the time of
final payment and those arising from (1) unsettled
construction lien or other claims, (2) defective, deficient,
or nonconforming Work, (3) failure of the Work to comply with
the requirements of this Agreement or (4) breach of
warranty.
8.4 Cash discounts obtained
on payments made by the Contractor shall accrue to the Owner if,
before making the payment, the Contractor included them in an
application for payment and received payment therefor from the
Owner. The Contractor shall timely notify the Owner of all
opportunities for such cash discounts. Trade discounts, rebates,
refunds and amounts received from sales of surplus materials and
equipment shall accrue to the Owner, and the Contractor shall make
provisions so that they can be secured. Amounts which accrue to the
Owner in accordance with this provision shall be credited to the
Owner as a deduction from the Cost of the Work.
9. Contract Times .
Time is of the essence of this Agreement, and specifically of the
provisions of this Section 9, which sets forth the times of
performance for various components of this Agreement (the
“Contract Times”).
9.1 The Contractor has
already commenced performance of the Work pursuant to a Limited
Notice to Proceed executed by the Owner and the Contractor on
July 14, 2006.
9.2 Both the Owner and
Contractor shall perform their obligations under this Agreement in
compliance with the Project Schedule attached as Exhibit D ,
subject to modifications of such Project Schedule consistent with
changes in the Contract Times pursuant to Sections 10 and
13.
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9.3 The Contractor shall
achieve Mechanical Completion (as hereinafter defined) of the Work
not later than the applicable date specified on Exhibit A, subject
to changes in these Contract Times pursuant to Sections 10 and 13
(the “Guaranteed Mechanical Completion Date”).
Mechanical Completion shall be achieved when: (i) the Work is
completed in accordance with this Agreement, except for punch list
items; (ii) the Owner has received any required temporary or
final certificate of occupancy from the governmental agency with
jurisdiction over the Project; and (iii) the registered
architects or engineers who designed portions or components of the
Work have issued certificates of Mechanical Completion as to those
portions or components. The Owner shall not occupy or utilize the
Work until it is mechanically completed except as agreed in writing
in advance by the Contractor.
9.4 The Contractor shall
achieve Final Completion (as hereinafter defined) of the Work not
later than the applicable date specified on Exhibit A, subject to
changes in these Contract Times pursuant to Sections 10 and 13 (the
“Guaranteed Final Completion Date”). Final Completion
shall be achieved when: (i) Mechanical Completion of the Work
has been acknowledged by the Owner and engineer in writing;
(ii) final lien waivers and releases and other documents or
inspections reasonably required by Owner’s engineer or lender
have been delivered; (iii) the Contractor has delivered the
job books and as-built drawings; (iv) all the
Contractor’s supplies, personnel and rubbish have been
removed from the site; (v) all punch list items have been
completed (or otherwise resolved by agreement of the Owner and the
Contractor; and (vi) Liquidated Damages, if applicable, have
paid to Owner.
9.5 In lieu of actual delay
damages, the Owner and Contractor agree that if Mechanical
Completion is not achieved by the applicable Guaranteed Mechanical
Completion Date, the amount of the Owner’s actual damages
will be difficult to determine. Accordingly, the Owner and the
Contractor agree that in the event the Contractor fails to achieve
Mechanical Completion by the applicable Guaranteed Mechanical
Completion Date, the Contractor shall pay to the Owner as
liquidated damages to compensate the Owner for damages related to
the delayed completion of the Work (“Liquidated
Damages”) seventy-five thousand dollars per week
($75,000/week) for every calendar week Contractor fails to meet the
Guaranteed Mechanical Completion Date referenced in paragraph 9.3
(less then full weeks shall be pro-rated; provided, however, that
the aggregate amount of liquidated damages cannot exceed six
hundred thousand dollars ($600,000).
9.6 The Owner and Contractor
agree that if Mechanical Completion for the Work occurs prior to
the Guaranteed Mechanical Completion Date, the Owner shall pay to
the Contractor as a bonus seventy-five thousand dollars per week
($75,000/week) for every calendar week the Work reaches Mechanical
Completion prior to its Guaranteed Mechanical Completion Date (less
then full weeks shall be pro-rated); provided that the aggregate
amount of the bonus shall not exceed three hundred thousand dollars
($300,000).
10. Changes . Without
invalidating this Agreement, the Owner or Contractor may order
changes in the Work within the general scope of this Agreement
consisting of additions, deletions or other revisions (each a
“Change Order”). It is expressly understood and agreed
that the Contractor shall not be entitled to additional
compensation or an extension of the Contract
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Times for any extra or additional work
or for work outside the scope of the Agreement, except as set out
in this Section 10.
10.1 The Owner and Contractor
shall enter into a written Change Order signed by both parties
stating the changed Work to be performed, any agreed changes in the
Contractor’s Fee, and any agreed changes in the Contract
Times. Any extra or changed work performed without prior written
direction or approval of Owner shall not be compensated by
Owner.
10.2 If the Owner and
Contractor are unable to agree on the changes in the
Contractor’s Fee or the changes in the Contract Times, the
Owner may direct the Contractor in writing to perform the changed
Work and the Contractor shall immediately perform such Work. In
such case, and subject to Section 4 above, (i) the
Contractor’s Fee shall be calculated in accordance with the
following mark-up schedule, as applied to the actual change in the
Costs of the Work: 20% on staff labor and supervision; 15% on
direct and fabrication labor; 10% on materials and equipment and 5%
on Subcontractors; and (ii) the Contract Times shall be
adjusted based on the reasonable actual impact on the
Contractor’s performance of the Work. If the parties are
unable to agree on the changes in the Contractor’s Fee or in
the Contract Times, the Owner shall determine any such changes,
which shall be subject to arbitration if demanded by the
Contractor.
11. Site Investigation
. The Contractor warrants that, by examination, it has satisfied
itself as to the general nature and location of the Work, the
general character, quantity and kind of materials to be
encountered, the equipment required and the general conditions and
other matters which may in any manner affect the Work. The Owner
shall furnish all site surveys and legal descriptions required for
the Work, if any, and Contractor shall be entitled to rely upon the
same. Contractor expressly disclaims all liability for latent or
subsurface conditions. Notwithstanding the foregoing, Contractor
shall be responsible for locating and managing the Work around any
existing underground pipes and electrical lines.
12. Claims for Damages
. If the Contractor has any claim for additional compensation or
other damages against the Owner, the Contractor shall give the
Owner written notice of such claim within ten (10) days after
the Contractor obtains knowledge of the event alleged to have given
rise to the claim. If the Contractor fails to give such notice, the
claim shall be deemed waived and forever discharged.
13. Delay . If the
Contractor is ready, able and willing to work but is delayed at any
time during the progress of the Work by any act or neglect of the
Owner, changes ordered in the Work or an event of Force Majeure (as
defined in Section 38), the Contract Times shall be extended
by the number of calendar days that the Work as a whole is delayed
pursuant to this Section 13. The Contractor shall submit any
claim for an extension of time to the Owner, in writing, within ten
(10) days after the commencement of the delay. Only one claim
is necessary in the event of a continuing delay. The written claim
for extension of time shall state the number of days claimed and
the reason for the delay. Any claim for a time extension which is
not
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presented in accordance with all
requirements of this paragraph shall be deemed waived and forever
discharged.
13.1 If adverse weather
conditions or other events of Force Majeure are the basis for a
claim for an extension of the Contract Times, such claim shall be
allowed only to the extent it is documented by data substantiating
that the weather conditions (i) were unusually severe for the
Aberdeen area during the period of time in question,
(ii) unusually severe to be defined as occurrences of in
excess of 1.50 inches of precipitation for 2 or more consecutive
days, and/or precipitation in excess of 2.00 inches of
precipitation for 1 or more consecutive days, and/or precipitation
in excess of 1.00 inches for 3 or more consecutive days, as
measured at Hoquiam’s Bowerman Airport, (iii) could not
have been reasonably anticipated and (iiii) had an adverse
effect on the scheduled performance of the Work.
13.2 An extension of the
Contract Times shall be allowed only to the extent that such delay
was not caused by any fault or negligence of the Contractor,
Subcontractors, anyone directly or indirectly employed by any of
them or for whose acts any of them may be liable.
13.3 If the Work is stopped
or suspended by order of any court or governmental authority,
within seven (7) days after receipt of notice that such Work
stoppage or suspension is removed, the Contractor shall complete
the Work as expeditiously as reasonably possible. In the event of
such stoppage or suspension, the Contractor shall be entitled to an
extension in the Contract Times equal to the length of the delay
(the length of the stoppage or suspension plus the seven
(7) or fewer days after notice within which the Contractor
recommences the Work) plus an equitable increase in the
Contractor’s Fee.
14. Contractor’s
Payment Obligations . The Contractor shall pay all of its
obligations arising out of or in connection with the Work in a
timely manner. Upon reasonable evidence that one or more
Subcontractors have not been or will not be paid, the Owner may pay
any of the Contractor’s payment obligations directly to the
claimant or by multiple payee check to the Contractor and the
claimant and parties in intervening tiers, if any, and deduct the
amount of such payment from amounts due or to become due to the
Contractor. Upon the Owner’s written request, the Contractor
shall furnish to the Owner all information required to facilitate
such direct or multiple payee payments, including without
limitation a complete listing of outstanding amounts owed to all
Subcontractors.
15. Liens . The
Contractor shall keep the Project and Project property free and
clear of all construction liens arising out of the Work. If any
liens arising out of the Work are filed by any person or entity,
including without limitation any Subcontractor, the Contractor
shall, at its cost and within ten (10) days after demand from
the Owner, satisfy said lien or post and perfect a bond under
applicable law so as to remove the lien from the Project and
Project property. The above notwithstanding, nothing herein shall
preclude or deprive Contractor of the right to file and maintain a
lien on the Project or Project property in the event of non-payment
by Owner.
16. Warranty
.
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16.1 The Contractor warrants
to the Owner that the materials and equipment furnished under this
Agreement will be (a) new and of good quality; (b) free
from defects in materials and workmanship, unless otherwise
approved in writing in advance by the Owner, and (c) that the
Work will be performed in a good and workmanlike manner and in
accordance with the Plans and all applicable codes, laws and
standards. The Contractor shall collect and submit to the Owner,
upon Mechanical Completion of the Work, all warranties from
Subcontractors supplying materials, equipment or components
incorporated into the Project, and the Contractor hereby assigns to
the Owner all of the Contractor’s rights under such
warranties. The Contractor agrees that such warranties from those
Subcontractors referenced in Exhibit F shall comply with the
requirements set out in Exhibit F .
16.2 The Contractor will
recommend to Owner all process and construction improvements that
it believes in good faith would optimize the Project construction
and operations, provided that Contractor’s liability for
breaches of such warranty shall be limited to instances of gross
negligence or willful misconduct.
16.3 The following shall
govern the durations of the warranties described above. The base
warranty period will commence when Mechanical Completion has been
achieved and will continue for the lesser of (i) twelve
(12) months from the applicable Guaranteed Mechanical
Completion Date; or 18 months after the applicable Final Completion
Date (“Base Warranty Period”). Warranty for any repairs
or replacements shall commence on the date the repair or
replacement is completed and continue until the later of the
expiration of the Base Warranty Period or six (6) months from
the date of completion of the repair or replacement and shall not
exceed a maximum of thirty (30) months from the Mechanical
Completion Date (the “Repair Warranty Period”) (the
Base Warranty Period plus the Repair Warranty Period are
collectively referred to as the “Warranty Period”).
Contractor shall, as mitigation of the damages suffered by the
Owner, at Contractor’s own cost and expense (including the
cost of labor and equipment) promptly repair or replace with
materials of new and good quality any Work or materials which fail
to comply with the warranty during the Warranty Period.
17. Defective Work .
The Work shall be subject to observation and approval by the Owner
and representatives of governmental agencies with jurisdiction over
the Project. Without limiting the effect of the prior sentence, all
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