ENGINEERING, PROCUREMENT AND CONSTRUCTION SERVICES AGREEMENT

Exhibit 10.3

Execution Copy

ENGINEERING, PROCUREMENT AND CONSTRUCTION SERVICES AGREEMENT

for

PRELIMINARY WORK

for the

CORPUS CHRISTI LNG RECEIVING,

STORAGE AND REGASIFICATION TERMINAL

by and between

CORPUS CHRISTI LNG, LLC

as Owner

and

LA QUINTA LNG PARTNERS, LP

as Contractor

Dated as of the 13th Day of April, 2006

TABLE OF CONTENTS

 

 

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LIST OF ATTACHMENTS AND SCHEDULES

 

 

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SERVICES AGREEMENT for PRELIMINARY WORK

for the CORPUS CHRISTI LNG RECEIVING,

STORAGE AND REGASIFICATION TERMINAL

THIS ENGINEERING, PROCUREMENT AND CONSTRUCTION SERVICES AGREEMENT for PRELIMINARY WORK (this “ Agreement ”), dated as of the 13th Day of April, 2006 (the “ Agreement Effective Date ”), is entered into by and between CORPUS CHRISTI LNG, LLC , a Delaware limited liability company, having its principal place of business at 717 Texas Avenue, Suite 3100, Houston, Texas 77002 (“ Owner ”), and LA QUINTA LNG PARTNERS, LP , a Texas limited partnership, having an address at 527 Logwood, San Antonio, Texas 78224 (“ Contractor ” and, together with Owner, each a “ Party ” and together the “ Parties ”).

RECITALS

WHEREAS, the Parties contemplate that, from time to time, Owner will desire to engage Contractor to provide certain preliminary Work (as defined below) for the LNG receiving, storage and regasification terminal to be constructed and owned by Owner, located in San Patricio County and Nueces County near Portland, Texas (as more fully described below, the “ Facility ”); and

WHEREAS, Contractor, itself or through its vendors, suppliers, and subcontractors, desires to provide such preliminary Work, subject to the terms of one or more Work Orders (as defined below) to be mutually executed by the Parties;

NOW THEREFORE, in consideration of the mutual covenants herein contained and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the Parties, intending to be legally bound, hereby agree as follows:

Article 1

DEFINITIONS

1.1 In addition to other defined terms used throughout this Agreement, when used herein, the following capitalized terms have the meanings specified in this Section 1.1.

“ AAA ” has the meaning set forth in Section 17.2.

“ AAA Rules ” has the meaning set forth in Section 17.2.

“ Affiliate ” means any Person that directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with a Party; provided, however , with respect to Contractor, the term “Affiliate” also includes Zachry and AMEC and with respect to Owner, the term “Affiliate” also includes Cheniere. For purposes of this definition, “control” (including, with correlative meanings, the terms “controlled by” and “under common control with”) means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities or otherwise.

“ Agreement ” means this Agreement (including all Attachments and Schedules attached hereto), as it may be amended from time to time in accordance with this Agreement.

“ Agreement Effective Date ” has the meaning set forth in the preamble.

“ AMEC ” means AMEC E&C Services, Inc., a Georgia corporation, or any successor entity thereto.

“ Applicable Codes and Standards ” means any and all codes, standards or requirements applicable to the Work set forth or listed in a Work Order, in any Applicable Law, or which are set forth or listed in any document or Drawing listed in a Work Order, which codes, standards and requirements shall govern Contractor’s performance of the Work, as provided herein; provided that , with respect to Applicable Codes and Standards which are not set forth in any Applicable Law, any reference herein to Applicable Codes and Standards shall be deemed only to refer to such Applicable Codes and Standards in existence as of the applicable Work Order Effective Date.

“ Applicable Law ” means all laws, statutes, ordinances, orders, decrees, injunctions, licenses, Permits, approvals, rules and regulations, including any conditions thereto, of any Governmental Instrumentality having jurisdiction over all or any portion of the Site or the Facility or performance of all or any portion of the Work, or other legislative or administrative action of a Governmental Instrumentality, or a final decree, judgment or order of a court which relates to the performance of Work hereunder.

“ Books and Records ” has the meaning set forth in Section 3.13A.

“ Business Day ” means every Day other than a Saturday, a Sunday or a Day that is an official holiday for employees of the federal government of the United States of America.

“ CAD ” has the meaning set forth in Section 3.4E.

“ Change in Law ” means any amendment, modification, superseding act, deletion, addition or change in or to Applicable Law (excluding changes to Tax laws where such Taxes are based upon Contractor’s gross receipts, capital, income or profits/losses) that occurs and takes effect after the applicable Work Order Effective Date. A Change in Law shall include any official change in the interpretation or application of Applicable Law (including Applicable Codes and Standards set forth in Applicable Law), provided that such change is expressed in writing by the applicable Governmental Instrumentality.

“ Change Order ” means, after the execution of a Work Order, (i) a written instrument signed by both Parties in the form of Attachment D , executed pursuant to the applicable provisions of Article 6; or (ii) a determination issued pursuant to Article 17 that authorizes an addition to, deletion from, suspension of, or any other modification or adjustment to the requirements of a Work Order.

“ Cheniere ” means Cheniere Energy, Inc.

“ Confidential Information ” has the meaning set forth in Section 18.3.

 

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“ Consequential Damages ” has the meaning set forth in Section 19.2.

“ Construction Equipment ” means the equipment, machinery, structures, scaffolding, materials, tools, supplies and systems owned, rented or leased by Contractor or its Subcontractors for use in accomplishing the Work, but not intended for incorporation into the Facility.

“ Contract Documents ” means this Agreement and all Work Orders and Change Orders as they may be amended from time to time in accordance with this Agreement.

“ Contractor ” has the meaning set forth in the preamble hereto.

“ Contractor Group ” means (i) Contractor, Zachry, AMEC and each of their respective Affiliates and (ii) the respective directors, officers, agents, employees, representatives of each Person specified in clause (i) above.

“ Contractor Representative ” means that Person or Persons designated by Contractor in a written notice to Owner, and acceptable to Owner, who shall have (except for any limitations specified in such notice) complete authority to act on behalf of Contractor on all matters pertaining to the Contract Documents or the Work including giving instructions and making changes in the Work and executing Work Orders. Contractor designates Harold “Mike” Mosley, Jr. as the Contractor Representative. Notification of a change in Contractor Representative shall be provided in advance, in writing, to Owner.

“ Contractor’s Confidential Information ” has the meaning set forth in Section 18.2.

“ Contractor’s Intellectual Property ” has the meaning set forth in Section 11.1B.

“ Corrective Work ” has the meaning set forth in Section 12.2.

“ Cost of Work ” shall have the meaning set forth in Attachment C .

“ Day ” means a calendar day.

“ Default ” has the meaning set forth in Section 15.1A.

“ Defect ” or “ Defective ” has the meaning set forth in Section 12.1A.

“ Defect Correction Period ” means the period commencing upon completion of all Work under the Contract Documents and ending eighteen (18) months thereafter.

“ Disclosing Party ” has the meaning set forth in Section 18.3.

“ Dispute ” has the meaning set forth in Section 17.1.

“ Dispute Notice ” has the meaning set forth in Section 17.1.

“ Drawings ” means the graphic and pictorial documents showing the design, location and dimensions of the Facility, generally including plans, elevations, sections, details,

 

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schedules and diagrams, which are prepared as a part of and during the performance of the Work.

“ EPC Agreement ” has the meaning set forth in Section 3.1C.

“ Equipment ” means any of the equipment, materials, supplies, software, licenses and systems required for the completion of and permanent incorporation into the Facility.

“ Excusable Delay ” means any act or event that is (i) beyond the reasonable control of the affected Party, not due to its fault or negligence and (ii) could not have been prevented or avoided by the affected Party through the exercise of due diligence. Excusable Delay may include acts of Third Parties, catastrophic storms or floods, lightning, tornadoes, hurricanes, a named tropical storm, earthquakes and other acts of God, wars, civil disturbances, revolution, acts of public enemy, acts of terrorism, credible threats of terrorism, revolts, insurrections, sabotage, riot, plague, epidemic, commercial embargoes, expropriation or confiscation of the Facility, fires, explosions, industrial action or strike (excluding industrial actions and strikes involving only the employees of Contractor or any of its Subcontractors at the Site) and actions, inactions, or delays of a Governmental Instrumentality that were not requested, promoted, or caused by the affected Party. For avoidance of doubt, Excusable Delay shall not include any of the following causes: (i) economic hardship; (ii) changes in market conditions; or (iii) nonperformance or delay by Contractor or its Subcontractors, unless otherwise caused by an Excusable Delay.

“ Facility ” means the LNG receiving, storage and regasification facilities that will be engineered, procured, constructed, pre-commissioned, commissioned and tested in accordance with the terms of this Agreement or the EPC Agreement, as applicable.

“ Fee ” has the meaning set forth in Attachment C .

“ FERC ” means the Federal Energy Regulatory Commission.

“ Final Lien and Claim Waiver ” means the waiver and release provided to Owner by Contractor and Subcontractors in accordance with the requirements of Section 8.8, which shall be in the form of Attachment J , Schedules J-3 and J -4 .

“ GAAP ” means generally accepted accounting principles.

“ Geotechnical Reports ” means the following reports provided by Owner to Contractor prior to the Agreement Effective Date: (i) Final Report, Geotechnical Investigation, LNG Tank Area, Corpus Christi, Texas, dated September 2003, prepared by Tolunay-Wong Engineers, Inc.; (ii) Final Report, Geotechnical Investigation, Process Area, Piperack and Waterline, Liquefied Natural Gas Terminal, Corpus Christi, Texas, dated September 2003, prepared by Tolunay-Wong Engineers, Inc; (iii) Final Report, Geotechnical Investigation, Berth Area, Liquefied Natural Gas Terminal, Corpus Christi, Texas, dated September 2003, prepared by Tolunay-Wong Engineers, Inc; (iv) Geological Technical Hazard Evaluation, Corpus Christi LNG Terminal, Ingleside, Texas, dated September 19, 2003, prepared by Tolunay-Wong Engineers, Inc.; and (v) Seismic Hazard Assessment of the Planned LNG Terminal Site in Corpus Christi, Texas, dated September 2003, prepared by ABS Consulting, Inc.

 

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“ Good Engineering and Construction Practices ” or “GECP” means the generally accepted practices, skill, care, methods, techniques and standards employed by the international LNG industry at the time of the applicable Work Order Effective Date that are commonly used in prudent design, engineering, procurement and construction to safely design and construct LNG related facilities of similar size and type as the Facility, in accordance with Applicable Law and Applicable Codes and Standards.

“ Governmental Instrumentality ” means any federal, state or local department, office, instrumentality, agency, court, board or commission having jurisdiction over a Party or any portion of the Work, the Facility or the Site.

“ Guarantor ” means AMEC plc, a public limited company organized under the laws of the United Kingdom.

“ Hazardous Materials ” means any substance that under Applicable Law is considered to be hazardous or toxic or is or may be required to be remediated, including (i) any petroleum or petroleum products, radioactive materials, asbestos in any form that is or could become friable, urea formaldehyde foam insulation, transformers or other equipment that contain dielectric fluid containing polychlorinated biphenyls and processes and certain cooling systems that use chlorofluorocarbons, (ii) any chemicals, materials or substances which are now or hereafter become defined as or included in the definition of “hazardous substances,” “hazardous wastes,” “hazardous materials,” “extremely hazardous wastes,” “restricted hazardous wastes,” “toxic substances,” “toxic pollutants,” or any words of similar import pursuant to Applicable Law, or (iii) any other chemical, material, substance or waste, exposure to which is now or hereafter prohibited, limited or regulated by any Governmental Instrumentality, or which may be the subject of liability for damages, costs or remediation.

“ HSE Plan ” has the meaning set forth in Section 3.9.

“ Indemnified Party ” means any member of the Owner Group or the Contractor Group, as the context requires.

“ Indemnifying Party ” means Owner or Contractor, as the context requires.

“ Initial Payment ” has the meaning set forth in Section 8.1.

“ Insolvency Event ” in relation to any Party or Guarantor means the bankruptcy, insolvency, liquidation, administration, administrative or other receivership or dissolution of such Party or Guarantor, and any equivalent or analogous proceedings by whatever name known and in whatever jurisdiction, and any step taken (including the presentation of a petition or the passing of a resolution or making a general assignment or filing for the benefit of its creditors) for or with a view toward any of the foregoing. Notwithstanding the above definition, the Parties agree that a corporate reorganization of Guarantor shall not be considered an Insolvency Event, provided that any such reorganization of Guarantor does not create a material adverse change in the Guarantor’s financial condition.

 

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“ Interim Lien and Claim Waiver ” means the waiver and release provided to Owner by Contractor and Subcontractors in accordance with the requirements of Section 8.7, which shall be in the form of Attachment J , Schedules J-1 and J -2 .

“ Invoice ” means Contractor’s request for a payment pursuant to Section 8.1, which invoice shall be in the form of Attachment I .

“ Key Personnel ” or “ Key Persons ” has the meaning set forth in Section 2.2B.

“ Landowner ” means any Person with whom the Contractor must interface on the Site, such Persons being identified in Attachment E or within the applicable Work Order.

“ Lender ” means any entity or entities providing temporary or permanent debt financing to Owner for the Facility.

“ LNG ” means liquefied Natural Gas.

“ Master Services Agreement ” means the Master Services Agreement among Cheniere, Zachry and AMEC, dated October 14, 2005.

“ Memorandum of Understanding ” has the meaning set forth in Section 20.1.

“ Mediation Request ” has the meaning set forth in Section 17.2.

“ Month ” means a Gregorian calendar month; “ month ” means any period of thirty (30) consecutive Days.

“ Monthly ” means an event occurring or an action taken once every Month.

“ Monthly Progress Reports ” has the meaning set forth in Section 3.16A.8.

“ Natural Gas ” means combustible gas consisting primarily of methane.

“ Owner ” has the meaning set forth in the preamble hereto.

“ Owner Default ” has the meaning set forth in Section 15.5.

“ Owner Group ” means (i) Owner, its parent and each of their respective Affiliates and (ii) the respective directors, officers, agents, employees and representatives of each Person specified in clause (i) above.

“ Owner Representative ” means that Person or Persons designated by Owner in a written notice to Contractor, each of whom shall have (except for any limitations specified in such notice) complete authority to act on behalf of Owner on all matters pertaining to the Contract Documents or the Work, including giving instructions and making changes in the Work and executing Work Orders. Owner designates Ed Lehotsky and Carlos Macias as the Owner Representatives. Notification of a change in Owner Representative shall be provided in advance, in writing, to Contractor.

 

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“ Owner’s Confidential Information ” has the meaning set forth in Section 18.1.

“ P&ID’s ” means piping and instrumentation diagrams.

“ Parent Guarantee ” has the meaning set forth in Section 20.17.

“ Party ” or “ Parties ” means Owner and/or Contractor and their successors and permitted assigns.

“ Permit ” means any valid waiver, certificate, approval, consent, license, exemption, variance, franchise, permit, authorization or similar order or authorization from any Governmental Instrumentality required to be obtained or maintained in connection with the Facility, the Site or the Work.

“ Person ” means any individual, company, joint venture, corporation, partnership, association, joint stock company, limited liability company, trust, estate, unincorporated organization, Governmental Instrumentality or other entity having legal capacity.

“ Qualified Research Expenditures ” means the costs funded by Owner under the Contract Documents that are incurred in connection with Work performed by Contractor and its Subcontractors which meet all of the requirements of Section 41(d)(1) of the Internal Revenue Code of 1986, as amended, and which are related to the development or improvement of a business component of the Facility.

“ Receiving Party ” has the meaning set forth in Section 18.3.

“ Rights of Way and Easements ” means the rights of way and easements listed in Attachment E , which shall, for the purposes of the Contract Documents, unless otherwise indicated in this Agreement, be considered part of the Site.

“ Rights of Way and Easement Agreements ” means the agreements between Owner or its Affiliates and Landowners with respect to the Rights of Way and Easements. The Rights of Way and Easement Agreements, which are incorporated herein by reference, are listed in Attachment E .

“ Safety Standards ” has the meaning set forth in Section 3.9.

“ Scope of Work ” means the description of Work to be performed by Contractor under this Agreement or as set forth in a particular Work Order, depending upon the context in which the term “Scope of Work” is used.

“ SEC ” means the Securities and Exchange Commission or any successor entity thereto.

“ Site ” means those areas shown in greater detail in Attachment E .

“ Specifications ” means those documents consisting of the written requirements for Equipment, standards and workmanship for the Work, which are prepared as a part of and during the performance of the Work.

 

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“ Subcontract ” means a direct or indirect agreement by Contractor with a Subcontractor for the performance of any portion of the Work.

“ Subcontractor ” means any Person, of any tier who has a direct or indirect contract with Contractor to perform any portion of the Work.

“ Taxes ” means any and all taxes, assessments, levies, duties, fees, charges and withholdings of any kind or nature whatsoever and howsoever described, including value-added, sales and use taxes, gross receipts, license, payroll, environmental, profits, premium, franchise, property, excise, capital stock, import, stamp, transfer, employment, occupation, generation, privilege, utility, regulatory, energy, consumption, lease, filing, recording and activity taxes, levies, duties, fees, charges, imposts and withholding, together with any and all penalties, interest and additions thereto.

“ Tax Exempt Equipment ” is defined in Section 4.4A.2.

“ Third Party ” means any Person other than a member of (i) the Contractor Group, (ii) the Owner Group, or (iii) any Subcontractor or any employee, officer or director of such Subcontractor.

“ Third Party Proprietary Work Product ” has the meaning set forth in Section 11.1B.

“ U.S. Dollars ” or “ U.S.$ ” means the legal tender of the United States of America.

“ Warranty ” or “ Warranties ” has the meaning set forth in Section 12.1A.

“ Work ” means the obligations, duties and responsibilities to be performed by or on behalf of Contractor in connection with certain preliminary design, engineering, procurement, pipeline dismantlement, removal and construction, road construction, and Site work, and the required related labor and materials and Equipment, all in accordance with the terms of the Contract Documents.

“ Work Order ” means an order for Work in substantially the form of Attachment N , signed in writing by both Parties, which sets forth and describes Scope of Work for such Work Order and a Work Schedule.

“ Work Order Effective Date ” means the date on which the Parties execute the applicable Work Order.

“ Work Order No. 1 ” is the Work Order mutually agreed to between Owner and Contractor and set forth in Attachment M , which describes an initial Scope of Work and Work Schedule to be performed by Contractor under the Work Order and pursuant to this Agreement.

“ Work Product ” has the meaning set forth in Section 11.1A.

“ Work Schedule ” means the schedule of the performance of Work by Contractor under a Work Order.

 

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“ Zachry ” means Zachry Construction Corporation, a Delaware corporation, or any successor entity thereto.

1.2 The meanings specified in this Article 1 are applicable to both the singular and plural. As used in this Agreement, the terms “herein,” “herewith,” “hereunder” and “hereof” are references to this Agreement taken as a whole, and the terms “include,” “includes” and “including” mean “including, without limitation,” or variant thereof. Reference in this Agreement to an Article or Section shall be a reference to an Article or Section contained in this Agreement (and not in any Attachments or Schedules to this Agreement) unless expressly stated otherwise, and a reference in this Agreement to an Attachment or Schedule shall be a reference to an Attachment or Schedule attached to this Agreement unless expressly stated otherwise.

Article 2

RELATIONSHIP OF OWNER, CONTRACTOR AND SUBCONTRACTORS

2.1 Status of Contractor . The relationship of Contractor to Owner shall be that of an independent contractor. Any provisions of the Contract Documents which may appear to give Owner or the Owner Representative the right to direct or control Contractor as to details of performing the Work, or to exercise any measure of control over the Work, shall be deemed to mean that Contractor shall follow the desires of Owner or the Owner Representative in the results of the Work only and not in the means by which the Work is to be accomplished, and Contractor shall have the complete right, obligation and authoritative control over the Work as to the manner, means or details as to how to perform the Work. Nothing herein shall be interpreted to create a master-servant or principal-agent relationship between Contractor, or any of its Subcontractors, and Owner. Nevertheless, Contractor shall comply with all provisions, terms and conditions of the Contract Documents, and the fact that Contractor is an independent contractor does not relieve it from its responsibility to fully, completely, timely and safely perform the Work in compliance with the Contract Documents.

2.2 Key Personnel, Organization Chart and Contractor Representative .

A. Contractor Personnel . Contractor represents that it has adequate and fully qualified personnel and facilities within its organization to perform the Work required by the Contract Documents.

B. Key Personnel and Organization Chart . Attachment F sets forth Contractor’s organizational chart to be implemented for the Work and also contains a list of key personnel (“ Key Personnel ” or “ Key Persons ”) from Contractor’s organization who will be assigned to the Work. Key Personnel shall, unless otherwise expressly stated in Attachment F , be devoted full-time to the Work until completion of the Work, and Key Personnel shall not be removed or reassigned without Owner’s prior written approval. All requests for the substitution of Key Personnel shall include a detailed explanation and reason for the request and the resumes of professional education and experience for a minimum of two (2) candidates of equal or greater qualifications and experience. Should Owner approve of the replacement of a Key Person, Contractor shall, so far as reasonably practicable, allow for an overlap of at least one (1) week during which both the Key Person to be replaced and the Owner-approved new Key Person shall work together full time. The

 

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additional cost of any replacement of such Key Personnel and overlap time shall be entirely at Contractor’s expense. Owner shall have the right, but not the obligation, at any time to require that Contractor replace any Key Person with another employee acceptable to Owner.

C. Contractor Representative . The Contractor Representative is a Key Person.

2.3 Subcontractors . Owner acknowledges and agrees that Contractor intends to have portions of the Work accomplished by Subcontractors pursuant to written Subcontracts. All Subcontractors shall be reputable, qualified firms with an established record of successful performance in their respective professions performing identical or substantially similar work. All Subcontracts shall be consistent with the terms or provisions of the Contract Documents to the extent such terms and provisions are applicable to the Scope of Work of any applicable Work Order. In the event Contractor is unable to obtain consistent provisions in any Subcontract, or Owner’s written approval to deviate from the provisions of the Contract Documents within such Subcontract, Contractor will use commercially reasonable efforts to provide a substitute Subcontractor; provided, however , should Contractor, notwithstanding its use of commercially reasonable efforts, be unable to procure a substitute Subcontractor, Contractor shall not be deemed to be in default or breach of this Agreement. No Subcontractor is intended to be or shall be deemed a third-party beneficiary of this Agreement or any Work Order. Contractor shall be fully responsible to Owner for the acts and omissions of Subcontractors and of Persons directly or indirectly employed by any of them in the performance of the Work, as it is for the acts or omissions of Persons directly employed by Contractor. The work of any Subcontractor shall be subject to inspection by Owner to the same extent as the Work of Contractor. All Subcontractors and their respective personnel are to be instructed by Contractor in the terms and requirements of the Owner-approved safety and environmental protection regulations and policies and shall be expected to comply with such regulations. In the event that any personnel are not adhering to such regulations and policies, such personnel shall be removed by Contractor. In no event shall Contractor be entitled to any adjustment of any Work Schedule under any Work Order as a result of such personnel’s non-compliance with such regulations and policies set forth in the HSE Plan, or any removal of personnel necessitated by non-compliance. Nothing contained herein shall (i) create any contractual relationship between any Subcontractor and Owner, or (ii) obligate Owner to pay or cause the payment of any amounts to Subcontractor.

2.4 Subcontracts .

A. Approved List . Subject to Section 2.4C, Attachment G sets forth a list of contractors and suppliers that Contractor and Owner have agreed are approved for selection as Subcontractors for the performance of that portion of the Work specified in Attachment G . Following the Agreement Effective Date, Contractor and Owner may specify in a Work Order additional contractors and suppliers for selection as Subcontractors for performance of Work set forth in such Work Order. Approval by Owner of any Subcontractors does not relieve Contractor of any responsibilities under the Contract Documents.

 

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B. Additional Proposed Subcontractors . In the event that Contractor is considering the selection of a Subcontractor not listed on Attachment G or in a Work Order, Contractor shall notify Owner of its proposed Subcontractor as soon as possible during the selection process and furnish to Owner all information requested by Owner with respect to Contractor’s selection criteria (including copies of bid packages furnished to prospective Subcontractors, responses to such bid packages, and the qualifications of the proposed Subcontractors). Contractor shall use best efforts to hire qualified, local Subcontractors. Owner shall have the discretion to reject any proposed Subcontractor not listed on Attachment G or in a Work Order for a Subcontract within ten (10) Days of Owner’s receipt of Contractor’s notice and proper documentation given pursuant to this Section 2.4. If Owner does not accept or reject a Subcontractor that is otherwise properly proposed by Contractor pursuant to this Section 2.4, then such Subcontractor shall be deemed approved by Owner, but such approval does not relieve Contractor of any responsibilities under the Contract Documents. Contractor shall not enter into any Subcontract with a proposed Subcontractor that is rejected by Owner in accordance with this Section 2.4. Even if Owner approves of a Subcontractor, Owner nevertheless has the right of approval with respect to the terms and conditions of any Subcontract.

C. Subcontracts . Owner shall have the right to approve any Subcontract exceeding Fifty Thousand U.S. Dollars (U.S.$50,000) prior to execution of such Subcontract by Contractor, but approval by Owner of any Subcontract shall not relieve Contractor of any of its obligations under this Agreement. The price in any Subcontract may be for a separated fixed price, on a cost-reimbursable basis or some other basis, in each case to be approved by Owner. Contractor shall furnish Owner with a copy of all Subcontracts ten (10) or more Days prior to the execution of each such Subcontract. Without limitation of the requirements in this Section 2.4, each Subcontract shall contain the following provisions:

1. the Subcontract may, upon termination of this Agreement or all or any part of the Work, and Owner’s written notice to such Subcontractor, be assigned to Owner without the consent of Subcontractor; and

2. unless otherwise agreed by Owner in writing, Subcontractor shall comply with and perform for the benefit of Owner all requirements and obligations of Contractor to Owner under the Contract Documents, as such requirements and obligations are applicable to the performance of the work under the Subcontract.

3. Subcontractor’s billings and change orders, if any, will separate charges/pricing for “skills and labor” from charges/pricing for taxable Equipment and taxable services re-sold to Owner.

 

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Article 3

CONTRACTOR’S RESPONSIBILITIES

3.1 Scope of Work .

A. Generally . The initial Work to be performed by Contractor under this Agreement is specified in Work Order No. 1, which is attached hereto as Attachment M . Any further Work to be performed by Contractor shall be mutually agreed upon between Owner and Contractor in subsequent Work Orders in the form of Attachment N . All Work Orders shall be dated and numbered and shall include a Scope of Work and Work Schedule for such Work Order. The rights of Owner and Contractor under each Work Order shall be independent of those under all other Work Orders. Each Work Order shall be governed by the provisions of this Agreement and shall be deemed to incorporate by reference all terms and conditions of this Agreement and shall constitute a separate and binding contract between the Parties. Contractor shall perform the Work under each Work Order in accordance with GECP, Applicable Law, Applicable Codes and Standards, and all other terms and provisions of this Agreement and such Work Order. It is understood and agreed that the Work shall include any incidental work that can reasonably be inferred as necessary to complete any Scope of Work under any Work Order in accordance with GECP, Applicable Law, Applicable Codes and Standards, and all other terms and provisions of this Agreement, excluding only those items which Owner has specifically agreed to provide under the terms of this Agreement. S UBJECT TO W ORK O RDER N O . 1, NOTHING IN THIS A GREEMENT REQUIRES O WNER TO ORDER W ORK FROM C ONTRACTOR OR REQUIRES C ONTRACTOR TO PROVIDE W ORK TO O WNER , AND C ONTRACTOR SHALL BE COMPENSATED ONLY FOR SUCH W ORK AS C ONTRACTOR ACTUALLY PERFORMS PURSUANT TO A W ORK O RDER EXECUTED IN ACCORDANCE WITH THIS A GREEMENT .

B. Exception to Scope of Work . Contractor shall not be responsible for providing (i) the Permits that Owner is responsible for obtaining in accordance with Section 4.2; (ii) those requirements set forth under Sections 4.3 and 4.5; (iii) legal description of the Site and a survey of the Site showing the boundaries of the Site and one survey control point pursuant to Section 4.5; and (iv) any other obligations or requirements expressly set forth in the Contract Documents as required to be performed by Owner.

C. EPC Agreement . If the Parties enter into an agreement for the engineering, procurement, and construction of the Facility (the proposed “ EPC Agreement ”), then the Work performed under the Contract Documents shall become part of the EPC Agreement and the terms and conditions of the EPC Agreement shall govern the Work performed under the Contract Documents and shall control over any terms in the Contract Documents. T HE P ARTIES ACKNOWLEDGE THAT THE C ONTRACT D OCUMENTS DO NOT IMPOSE ANY OBLIGATION ON O WNER TO ENTER INTO AN EPC A GREEMENT WITH C ONTRACTOR FOR THE ENGINEERING , PROCUREMENT AND CONSTRUCTION OF THE F ACILITY .

3.2 Applicable Law . By signing any particular Work Order, Contractor represents that it has investigated to its satisfaction Applicable Law (including any Applicable Codes and Standards incorporated into Applicable Law) in existence as of the applicable Work Order Effective Date, and warrants that it can perform the Work in accordance with such Applicable Law. Contractor shall perform the Work in accordance with Applicable Law, whether or not such Applicable Law came into effect before such Work Order Effective Date or during the performance of the Work. Contractor shall advise Owner of any change in Applicable Law occurring after such Work Order Effective Date.

 

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3.3 Changes in Applicable Codes and Standards Not Constituting a Change in Law . Contractor shall provide notice to Owner on a timely basis, and no later than thirty (30) Days after such a change, of any change in Applicable Codes and Standards that does not constitute a Change in Law. Contractor shall inform Owner if compliance with a changed Applicable Code and Standard is mandatory to comply with GECP. In the event Owner, at its sole option, elects for Contractor to implement a change in Applicable Codes and Standards that does not constitute a Change in Law, Owner shall so inform Contractor in writing.

3.4 Design and Engineering Work .

A. General . Contractor shall, as part of the Work, perform all design and engineering Work in accordance with the Contract Documents and cause the Work to meet and achieve the requirements of the Contract Documents.

B. Drawings and Specifications . The Drawings and Specifications shall be based on the requirements of the Contract Documents, including the Scope of Work of the Agreement and Design Basis as set out in Attachment A , GECP, Applicable Codes and Standards and Applicable Law.

C. Review Process .

1. Submission by Contractor . Contractor shall submit copies of the Drawings and Specifications to Owner for formal review, comment or disapproval in accordance with the requirements set forth in the applicable Work Order.

2. Review Periods . Owner shall have up to ten (10) Business Days from its receipt of Drawings and Specifications submitted in accordance with Section 3.4C.1 to issue to Contractor written comments, proposed changes and/or written disapprovals of the submission of such Drawings and Specifications to Contractor.

If Owner does not issue any comments, proposed changes or written disapprovals within such time periods, Contractor may proceed with the development of such Drawings and Specifications, but Owner’s lack of comments or disapproval, if applicable, shall in no event constitute an approval of the matters received by Owner.

In the event that Owner disapproves the Drawings or Specifications, Owner shall provide Contractor with a written statement of the reasons for such rejection within the time period required for Owner’s response, and Contractor shall provide Owner with revised and corrected Drawings and Specifications as soon as possible thereafter.

Owner’s lack of disapproval of or comments on, or any approval by Owner of, any Drawings and Specifications shall not in any way be deemed to limit or in any way alter Contractor’s responsibility to design and engineer the Facility and perform the Work in accordance with the requirements of the Contract Documents.

D. Design Licenses . Contractor shall perform all design and engineering Work in accordance with Applicable Law, and all Drawings and Specifications shall be

 

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complete and fully coordinated and stamped by design professionals duly licensed in accordance with Applicable Law.

E. CAD Drawings . Drawings prepared by Contractor or its Subcontractors under the Contract Documents shall be prepared using computer aided design (“ CAD ”). Contractor shall provide Drawings in their native formats as set forth in the applicable Work Order along with six (6) hard copies.

F. Progress P&ID’s . During the progress of the Work, Contractor shall maintain and provide Owner with access to a marked, up-to-date set of P&ID’s maintained for and by Contractor.

G. Other Information . Contractor shall deliver to Owner copies of any and all Drawings, Specifications or other documents, as requested by Owner, within a reasonable time of such request.

3.5 Environmental Regulations and Environmental Compliance . Without limitation of Section 3.1, Contractor shall perform the Work and shall design the Facility in compliance with Contractor’s HSE Plan. If applicable to the Work to be performed under the Contract Documents, Contractor shall dispose of all non-hazardous wastes and Hazardous Materials brought onto the Site by Contractor or any of its Subcontractors or produced as a by-product of Equipment, material or Construction Equipment brought onto the Site by Contractor or Subcontractors during performance of the Work, all of which shall be disposed in off-Site locations permitted to receive such non-hazardous wastes and Hazardous Materials. Contractor shall deliver to Owner (i) notice of any pending or threatened material environmental claim with respect to the Facility, and (ii) promptly upon their becoming available, copies of written communications with any Governmental Instrumentality relating to any such material environmental claim.

3.6 Construction Equipment . Contractor shall furnish all Construction Equipment necessary and appropriate for the timely and safe completion of the Work in compliance with the Contract Documents. Notwithstanding anything to the contrary contained in this Agreement, Contractor shall be responsible for damage to or destruction or loss of, from any cause whatsoever, all such Construction Equipment. Subject to Section 3 of Schedule L-1 , Contractor shall require all insurance policies (including policies of Contractor and all Subcontractors) in any way relating to such Construction Equipment to include clauses stating that each underwriter will waive all rights of recovery, under subrogation or otherwise, against Owner and any Owner Affiliates.

3.7 Employment of Personnel .

A. Contractor shall not employ, or permit any Subcontractor to employ, in connection with its performance under the Contract Documents, any Person who is demonstrably not skilled or qualified in the services or work assigned to such Person. Contractor agrees to promptly remove (or to require any Subcontractor to remove) from its services or work in connection with the Work any Person who does not meet the foregoing requirements. In addition, Contractor agrees that, after receipt of written notice from Owner, it shall promptly remove from the Work any employee or agent of Contractor or of

 

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its Subcontractors who, in Owner’s opinion, is unsafe, incompetent, careless, unqualified to perform the Work assigned to such Person, creates an unsafe or hostile work environment, disregards the terms and conditions of the Contract Documents, or is interrupting, interfering with or impeding the timely and proper completion of the Work. N OTWITHSTANDING THE FOREGOING , O WNER SHALL HAVE NO LIABILITY AND C ONTRACTOR AGREES TO RELEASE , INDEMNIFY , DEFEND AND HOLD HARMLESS THE O WNER G ROUP FROM AND AGAINST ANY AND ALL CLAIMS , CAUSES OF ACTION , DAMAGES , LOSSES , COST AND EXPENSES ( INCLUDING ALL REASONABLE ATTORNEYS ’ FEES AND LITIGATION OR ARBITRATION EXPENSES ) AND LIABILITIES , OF WHATSOEVER KIND OR NATURE , WHICH MAY DIRECTLY OR INDIRECTLY ARISE OR RESULT FROM C ONTRACTOR OR ANY S UBCONTRACTOR CHOOSING TO TERMINATE THE EMPLOYMENT OF ANY SUCH EMPLOYEE ( INCLUDING ANY K EY P ERSON ) OR REMOVE SUCH EMPLOYEE FROM THE W ORK WHO FAILS TO MEET THE FOREGOING REQUIREMENTS FOLLOWING A REQUEST BY O WNER TO HAVE SUCH EMPLOYEE REMOVED FROM THE W ORK . Any such employee shall be replaced at the cost and expense of Contractor or the relevant Subcontractor, as appropriate.

B. Contractor is responsible for maintaining labor relations in such manner that, so far as reasonably practicable, there is harmony among workers. Contractor and its Subcontractors shall conduct their labor relations in accordance with the recognized prevailing local area practices. Contractor shall inform Owner promptly of any labor dispute, anticipated labor dispute, request or demand by a labor organization, its representatives or members which may reasonably be expected to affect the Work. Contractor further agrees to inform Owner, before any commitments are made, during the negotiations of any agreements or understandings with local or national labor organizations.

3.8 Clean-Up . If applicable to the Work to be performed under the Contract Documents, Contractor shall, to Owner’s satisfaction, at all times keep the Site free from all waste materials or rubbish caused by the activities of Contractor or any of its Subcontractors. As soon as practicable after final completion of the Work, Contractor shall remove all of its Construction Equipment and remove from the Site all waste material and rubbish that was caused by the activities of Contractor or any of its Subcontractors. The Site shall be restored in accordance with all Permits and the Contract Documents. In the event of Contractor’s failure to comply with any of the foregoing upon three (3) Days’ notice to do so, Owner may accomplish the same; provided, however , that Contractor shall be responsible for all reasonable costs associated with such removal and/or restoration, including costs associated with Taxes, permitting and transportation.

3.9 HSE Plan; Security . Contractor recognizes and agrees that safety and physical security are of paramount importance in the performance of the Work and that Contractor is responsible for performing the Work in a safe and physically secure manner. Within sixty (60) Days after the Agreement Effective Date, Contractor shall submit to Owner for its review a health, safety and environmental plan (including a drug testing program) based upon Contractor’s standard safety and environmental policies, as modified to account for the particulars of the Work to be performed under this Agreement (the “ HSE Plan ”). Contractor shall revise the HSE Plan to incorporate comments, if any, provided by Owner during its review, which shall be conducted within ten (10) Days of receipt of the HSE Plan. Contractor further agrees to perform the Work in accordance with the health, safety and environmental rules and standards of Applicable Law,

 

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GECP and the HSE Plan (collectively, the “ Safety Standards ”). Owner’s review of, or comments with respect to, the HSE Plan shall not in any way relieve Contractor of its obligations under this Agreement (including Contractor’s obligations to conduct the Work in accordance with the health, safety and environmental rules of Applicable Law and GECP). Contractor shall appoint one or more (as appropriate) safety representative(s) reasonably acceptable to Owner who shall have responsibility to correct unsafe conditions or unsafe acts associated with Work performed on the Site, act on behalf of Contractor on health, safety and environmental matters, and participate in periodic safety meetings with Owner. Contractor further agrees to provide or cause to be provided necessary training and safety equipment to its employees, Subcontractors, and to Owner personnel temporarily visiting the Site to ensure their compliance with the foregoing Safety Standards and enforce the use of such training and safety equipment. Contractor shall maintain all accident, injury and any other records required by Applicable Law or by Permit and shall furnish Owner a Monthly summary of injuries and labor hours lost due to injuries. Should Owner at any time observe Contractor, or any of its Subcontractors performing the Work at the Site in violation of the Safety Standards or in an unsafe manner, or in a manner that would, if continued, violate the Safety Standards or become unsafe, then Owner shall have the right (but not the obligation) to require Contractor to stop the affected Work until such time as the manner of performing such Work has been rendered safe. In connection with Work performed at the Site, Contractor shall be responsible for the security, fencing, guarding and lighting until all of the completion of such Work. In addition, for Work performed on Rights of Way and Easements, Contractor shall perform all Work in accordance with, and cause all Subcontractors to perform all Work in accordance with, the safety, health and environmental rules and policies required by the Landowners of such Rights of Way and Easements and provided in advance to Contractor in writing.

3.10 Emergencies . In the event of any emergency endangering life or property in any way relating to the Work, whether on the Site or otherwise, Contractor shall take such action as may be reasonable and necessary to prevent, avoid or mitigate injury, damage, or loss and shall, as soon as reasonably possible, report any such incidents, including Contractor’s response thereto, to Owner. If Contractor fails to take such action and the emergency requires immediate action, then Owner, with or without notice to Contractor may, but shall be under no obligation to, take reasonable action as required to address such emergency. The taking of any such action by Owner, or Owner’s failure to take any action, shall not limit Contractor’s liability. Contractor shall reimburse Owner in an amount equal to the reasonable costs incurred by Owner in taking such action.

3.11 Contractor Permits . Contractor shall be responsible for obtaining the Permits listed in Schedule B-1 and any other Permits to be issued in Contractor’s name as may be required to perform the Work under the Contract Documents. Contractor shall provide Owner with copies of such Permits as soon as reasonably practicable after they are obtained.

3.12 Assistance with Owner Permits . Contractor shall provide assistance, information and documentation as requested by Owner to enable Owner to obtain any Permits that Owner is required to obtain in connection with the Section 4.2.

 

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3.13 Books, Records and Audits .

A. Contractor shall keep full and detailed books, records, daily reports, schedules, accounts, work logs, payroll records, receipts, statements, electronic files, correspondence and other pertinent documents as may be necessary for proper performance of the Work under the Contract Documents, as required under Applicable Law or the Contract Documents, and in any way relating to the Contract Documents (“ Books and Records ”). Contractor shall maintain all such Books and Records in accordance with GAAP and shall retain all such Books and Records for a minimum period of three (3) years after the earlier of the termination or expiration of this Agreement, or such greater period of time as may be required under Applicable Law.

B. Upon reasonable notice, Owner shall have the right to audit, or have audited by Owner’s third party auditors, Contractor’s Books and Records; provided, however , that such audit shall not extend to calculations of the internal composition of any compensation that is fixed in amount hereunder, including the composition of any agreed-upon multipliers, rates, burdens and markups reflected in Attachment C . When requested by Owner, Contractor shall provide Owner or its auditors with reasonable access to all such Books and Records, and Contractor’s personnel shall cooperate with Owner and such auditors to effectuate the audit or audits hereunder. Owner and its auditors shall have the right to copy all such Books and Records. Contractor shall endeavor to include audit provisions identical to this Section 3.13 in all Subcontracts. No access to Books and Records shall be granted to Owner’s auditors until such auditors have signed a confidentiality agreement with Contractor in accordance with the standard practice in the auditing industry for audits of this kind.

C. Contractor shall not, and shall provide that its Subcontractors and agents or employees of any of them shall not (i) pay any commissions or fees, or grant any rebates, to any employee or officer of Owner or its Affiliates, (ii) favor employees or officers of same with gifts or entertainment of a significant cost or value, or (iii) enter into any business arrangements with employees or officers of same.

3.14 Tax Accounting and Auditing . Within a reasonable period of time following a request therefor by Owner, Contractor shall provide to Owner or its auditors any information (including Books and Records) regarding quantities and descriptions of any Equipment ordered for the Facility and any other information as Owner or its auditors may deem reasonably necessary in connection with the preparation of Owner’s tax returns (including information reasonably required to determine the amount of Qualified Research Expenditures incurred in connection with the Work) or other tax documentation in connection with the Work. Contractor shall be responsible for personal property Taxes on Construction Equipment.

3.15 Temporary Utilities, Roads, Facilities and Storage . Until final completion of the Work, to the extent applicable, Contractor shall provide all temporary utilities ( i.e. , electricity, water, communication, cable, telephone, waste and sewer) necessary for the performance of the Work, including installation and usage costs. Subject to Section 4.3, Contractor shall construct and maintain temporary access and haul roads as may be necessary for the proper performance of the Contract Documents and the Work. If requested by Owner, Contractor shall provide Owner with sufficient office space at the time of Contractor’s mobilization at the Site to accommodate Owner’s Site representative and support staff at the Site. Contractor shall provide Owner with all

 

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office space, construction trailers, utilities, storage and warehousing, security, telephones, furnishings, and other temporary facilities required for their oversight of the Work, as set forth in more detail in the applicable Work Order. Once title to Equipment has passed to Owner as set forth in Section 9.1, such Equipment shall, if stored at a location other than on the Site, be segregated from other goods, and shall be clearly marked as “Property of Corpus Christi LNG, LLC.”

3.16 Reports .

A. Contractor shall provide Owner with an electronic copy of the following reports and other documentation:

1. minutes for all weekly status and other Work-related meetings with Owner within five (5) Business Days following such meeting;

2. safety incident reports within three (3) Business Days of the occurrence of any such incident; except for any safety incident involving a significant non-scheduled event such as fires, explosions, mechanical failures or major injuries which shall be provided to Owner within eight (8) hours of the occurrence of such incident; provided, however, notification shall be provided to Owner immediately if the incident is of significant magnitude to threaten public or employee safety, cause significant property damage or interrupt the Work;

3. productivity reports;

4. manpower reports;

5. cost reports;

6. reports with respect to Contractor and Subcontractor performance;

7. schedule reports; and

8. Monthly progress reports (“ Monthly Progress Reports ”) in form and content to be mutually determined by the Parties.

3.17 Payment . Contractor shall timely make all payments required to be paid to Owner pursuant to the terms of this Agreement.

3.18 Commercial Activities . Neither Contractor nor its employees shall establish any commercial activity or issue concessions or permits of any kind to Third Parties for establishing commercial activities on the Site or any other lands owned or controlled by Owner.

3.19 Title to Materials Found . As between Owner and Contractor, the title to water, soil, rock, gravel, sand, minerals, timber and any other materials developed or obtained in the excavation or other operations of Contractor or any Subcontractor and the right to use said materials or dispose of same is hereby expressly reserved by Owner. Notwithstanding the foregoing, Contractor shall be permitted, without charge and with Owner’s approval, to use in the Work any such materials that comply with the requirements of the Contract Documents.

 

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3.20 Survey Control Points and Layout . If necessary for the performance of the Work, Contractor shall establish all survey control points and layout any such Work in accordance with the requirements of the Contract Documents, which shall be based on the survey control point established by Owner pursuant to Section 4.5. If Contractor or any of its Subcontractors or any of the representatives or employees of any of them move or destroy or render inaccurate the survey control point provided by Owner, such control point shall be replaced by Contractor at Contractor’s own expense.

3.21 Cooperation with Others . Subject to the provisions of this Agreement, including Section 4.3, Contractor acknowledges that Owner or Owner’s other contractors or subcontractors may be working at the Site during the performance of the Contract Documents and Contractor’s Work or use of certain facilities may be interfered with as a result of such concurrent activities. Subject to Section 4.3, Contractor agrees to coordinate the performance of the Work with such other contractors or subcontractors performing work at the Site so as not to materially interfere with any of Owner’s other contractors or subcontractors performing work at the Site; provided, however, Contractor shall in all cases coordinate the Work with any Persons (other than Owner or Owner’s other contractors or subcontractors) on or using the Rights of Way and Easements, and Contractor shall adhere to the reasonable instructions provided by Owner or the applicable Landowner(s) in connection with Work performed within such Rights of Way and Easements.

3.22 Responsibility for Property . Contractor shall plan and conduct its operations so that neither Contractor nor any of its Subcontractors shall (i) enter upon lands (other than the Site) or waterbodies in their natural state unless authorized by the appropriate owner or entity; (ii) close or obstruct any utility installation, highway, waterway, harbor, road or other property unless Permits are obtained and authorized by the appropriate entity or authority; or (iii) disrupt or otherwise interfere with the operation of any portion of any pipeline, telephone, conduit or electric transmission line, ditch, navigational aid, dock or structure unless otherwise specifically authorized in a Work Order or in writing by Owner. The foregoing includes damage arising from performance of the Work through operation of Construction Equipment or stockpiling of materials.

3.23 Equipment Quality . Contractor shall furnish reasonable evidence as to the kind, quality, and quantity of all Equipment. Without prior written approval by Owner which specifically waives the requirements of this Agreement, where a Work Order specifies the procurement of certain Equipment as part of the Work, Contractor shall not procure any Equipment other than as specified in the Work Order. If Contractor wishes to modify the requirements with respect to any Equipment, then it shall make written application to Owner for Owner’s approval (such approval not to be unreasonably withheld), prior to procuring such Equipment. Such application shall (i) identify the requirements being modified, (ii) certify that the quality of the proposed substitute is equal to or better than that currently specified, and (iii) certify that the substitute is suited to the same use and capable of performing the same function as that specified. If the preceding requirements are not followed, then any substitution shall constitute a material failure by Contractor to comply with its obligations under the Contract Documents.

 

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3.24 Excusable Delay . If an Excusable Delay prevents the performance of any Work under a Work Order and causes Contractor to suspend performance of any such Work affected by an Excusable Delay, such suspension shall not be considered a Default, provided that Contractor uses all reasonable efforts to (i) mitigate the effects of such Excusable Delay and (ii) recommence such affected Work.

3.25 Nondiscrimination . Contractor agrees that it shall conduct its activities without discrimination on account of race, creed, color, sex, national origin, age or disability and shall comply with Applicable Law relating thereto, including Executive Order 11246, as amended. Upon the request of Owner, Contractor shall provide Owner with copies of all plans or programs that Contractor uses to satisfy the requirements of this Section 3.25.

3.26 Rights of Way and Easement Agreements . During the performance of the Work, Contractor shall comply with any obligations of the Rights of Way and Easement Agreements to the extent that such obligations apply to the Work being performed and provided that such Rights of Way and Easement Agreements are provided in advance of Contractor performing Work on such Rights of Way and Easement.

Article 4

OWNER’S RESPONSIBILITIES

Owner shall comply with the following provisions in a timely manner in accordance with the Work Schedule at no cost to Contractor:

4.1 Payments . Owner shall timely make payments in accordance with the provisions of Article 8 hereof.

4.2 Owner Permits . Owner shall be responsible for obtaining the Permits listed in Schedule B-2 . Owner shall maintain and, to the extent applicable, renew such Permits. To the extent Owner has already obtained any such Permits as of the Agreement Effective Date, Owner shall provide copies of such Permits to Contractor on or before the Agreement Effective Date. The terms of all such Permits shall be compatible with Contractor’s performance of the Work, and Owner shall promptly notify Contractor of any changes to the terms of any such Permit that impacts Contractor’s performance of the Work under the Contract Documents. Owner shall provide information, assistance and documentation to Contractor as reasonably requested in connection with the Permits that Contractor is responsible for obtaining in accordance with Section 3.11.

4.3 Access to the Site .

A. In accordance with Attachment K and subject to the terms of this Agreement, including Sections 3.21 and 4.3B, Owner shall provide Contractor with access to the Site, provided that Contractor’s access to Rights of Way and Easements shall be in accordance with the terms and conditions of the Rights of Ways and Easement Agreements.

B. Owner shall have access to the Site at all times.

 

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4.4 Sales and Use Tax Matters .

A. Sales and Use Tax Exemption Certificates on Tax Exempt Equipment .

1. For Texas state and local sales and use tax purposes, the Contract Documents shall be considered to be a separated contract for the construction of new non-residential real property as defined under Applicable Law, including 34 Tex. Admin Code Rule § 3.291(a)(12). Work Orders, all Change Orders, and Contractor’s Invoices will separate pricing/charges for “skills and labor” from pricing/charges for Equipment and taxable services re-sold to Owner. Contractor’s Invoices shall further separate Contractor’s pricing for taxable Equipment and taxable services re-sold to Owner from Contractor’s pricing/charges for Tax Exempt Equipment. Contractor shall invoice Owner Texas sales and use tax on Contractor’s sales price of the separated taxable Equipment and separated taxable services re-sold to Owner. Owner will pay Contractor Texas sales and use tax and Contractor will remit these taxes to the appropriate taxing authorities. Contractor shall ensure that all Subcontracts are separated for Texas state and local sales and use tax purposes. Contractor shall issue valid Texas re-sale certificates to Contractor’s Subcontractors for Subcontractor purchases of Equipment and taxable services re-sold to Owner.

2. Owner shall list in each Work Order and Change Order those items of Equipment to be permanently installed at the Facility in which Owner intends to claim a manufacturing, pollution control or other applicable exemption from the payment of Texas state and applicable local sales and use taxes under Applicable Law, including the governing law specified in Section 20.9 (“ Tax Exempt Equipment ”), which such list as set out in the Work Order may be adjusted by Owner at its sole discretion with written notice to Contractor on or before the completion of the Work and formalized by Change Order. In addition, Owner will update the list of Tax Exempt Equipment and taxable services re-sold to Owner in a Work Order (i) with respect to any additional items of Equipment and taxable services re-sold to Owner added by Change Order which are subject to a manufacturing, pollution control or other applicable exemption from the payment of Texas state and applicable local sales and use taxes, or (ii) should Owner determine that any Equipment previously designated as taxable Equipment and taxable services re-sold to Owner should be designated as Tax Exempt Equipment or tax exempt services. Owner shall provide Contractor with a valid Texas state and applicable local sales and use tax exemption certificates claiming the manufacturing and pollution control exemptions for the Tax Exempt Equipment (including Tax Exempt Equipment added to a Work Order by Change Order). The Owner-issued Texas sales and use tax exemption certification will be supported by the Owner-provided list included and incorporated into applicable Work Order.

3. Contractor shall maintain for Owner’s review copies of Texas state and applicable local sales and use tax exemption certificates and other similar documentation necessary to support all Texas state and applicable local sales and use tax exemptions that may be available to Owner, Contractor or any Subcontractor in connection with the Work.

 

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4. Contractor shall reasonably cooperate with Owner to minimize any and all Texas state and applicable local sales and use taxes relating to the Facility and the Work. If Contractor or any Subcontractor incurs any Texas state and applicable local sales and use taxes on any items of Tax Exempt Equipment or taxable services re-sold to Owner listed in a Work Order, due to Contractor failing to follow such Owner provided listed in the Work Order, Contractor shall be responsible for the payment of such Texas state and applicable local sales and use taxes, penalties and interest, without reimbursement by Owner and C ONTRACTOR SHALL INDEMNIFY , DEFEND AND HOLD HARMLESS O WNER G ROUP FROM AND AGAINST ANY CLAIMS BY A G OVERNMENTAL I NSTRUMENTALITY FOR SUCH T EXAS STATE AND APPLICABLE LOCAL SALES AND USE TAXES . If the state of Texas increases or decreases the state or local option sales and use tax rates, the increase or decrease will be to the Owner’s account.

5. For clarification purposes, it is understood that Owner is solely responsible for the accuracy of the Owner-provided list in the Work Order regarding Tax Exempt Equipment and taxable services re-sold to Owner. If Contractor or any Subcontractor pays or incurs any Texas state and applicable local sales and use taxes on any items of Tax Exempt Equipment or taxable services re-sold to Owner attributable to the Owner’s failure to provide Contractor with a valid Texas state and applicable local sales and use tax exemption certificate for all or any portion of the Tax Exempt Equipment and taxable services resold to Owner included in the Owner-provided list in the applicable Work Order (including adjustments made to a Work Order due to Change Orders), Contractor shall be entitled to reimbursement in accordance with Article 7 in an amount equal to such Texas state and applicable local sales and use taxes, penalties and interest, if any, that are properly owed and paid by Contractor for such Tax Exempt Equipment and services improperly identified by Owner in the Owner-provided list included in the Work Order regarding Tax Exempt Equipment and taxable services re-sold to Owner, and O WNER SHALL INDEMNIFY , DEFEND AND HOLD HARMLESS C ONTRACTOR G ROUP FROM AND AGAINST ANY CLAIMS BY A G OVERNMENTAL I NSTRUMENTALITY FOR SUCH T EXAS STATE AND LOCAL SALES AND USE TAXES .

B. Texas Sales and Use Tax on Taxable Equipment & Taxable Services Re-Sold to Owner . With each Invoice that includes any Equipment to be permanently installed in the Project (other than Tax Exempt Equipment) and taxable services resold to Owner including items such as real property services and non-Hazardous Materials removal services, Contractor shall separately list in the Invoice and bill Owner the Texas state and applicable local sales and use taxes with respect to such taxable Equipment and services. Contractor invoice charges for labor and skills will be separated from Contractor invoice charges for Equipment. In addition, Contractor will separate invoice charges for taxable Equipment from invoice charges for Tax Exempt Equipment and services. In no instance will “skills and labor”, service, fabrication labor or any other form of labor charge” be billed together with a charge for taxable Equipment. The Texas state and applicable local sales and use taxes charged to Owner shall be based on the prices listed in Attachment C and the schedule in the applicable Work Order. Texas sales and use tax amounts billed Owner will be subject to the provisions of Section 4.4A.4 and 4.4A5 (which

 

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may be subject to Change Order or Work Order), which shall represent Owner’s maximum liability to Contractor for Texas state and applicable local sales and use taxes on taxable Equipment and services. Subject to other provisions of this Agreement, Owner shall remit to Contractor the payment of such Texas sales and use taxes within the time allowed for the payment of Invoices under this Agreement. Contractor shall be responsible for paying to the applicable Governmental Instrumentality all applicable Texas state and applicable local sales and use taxes owed under Applicable Law with respect to taxable Equipment and services. If the Owner elects to dispute the applicable Texas state and applicable sales and use taxes on any item, Owner shall bear the costs incurred in resolving such dispute.

4.5 Legal Description and Survey . As of the Agreement Effective Date, Owner has provided to Contractor (i) the legal description of the Site as set forth in Attachment E and (ii) a survey of the Site showing the boundaries of the Site and one survey control point, prepared by Shiner Moseley and Associates, Inc., dated June 8, 2004. Contractor shall be entitled to rely upon the accuracy of this information. To the extent any existing structures or utilities are shown in the survey, Contractor shall independently verify the locations of such existing structures and utilities.

4.6 Owner-Provided Items . Owner shall provide those items listed in Attachment K (within the times listed in Attachment K ) or any other items specified in a Work Order as being Owner-provided items. The items already provided by Owner are listed in Attachment K . The Contractor shall be entitled to rely upon the accuracy and completeness of those items designated by Owner as “Rely Upon” within the Design Basis in Schedule A-2 .

4.7 Excusable Delay . Owner’s obligations under this Agreement, except for any obligation to pay monies due to Contractor as provided under this Agreement, shall be suspended to the extent that performance of such obligation is delayed or prevented by Excusable Delay.

4.8 Personal and Real Property Taxes . Owner shall be responsible for personal and real property Taxes on the Facility and the Equipment that are stored or located on the Site on the applicable Tax assessment date provided for under Applicable Law.

4.9 Waivers of Consequential Damages from Landowners . Unless otherwise agreed to in writing by Contractor, such agreement not to be unreasonably withheld, Owner is responsible for obtaining a written waiver of consequential damages from Landowners in favor of Contractor as a condition precedent to Contractor’s obligation to commence Work in those areas of the Site that cause Contractor to interface with such Landowner.

Article 5

COMMENCEMENT OF WORK AND SCHEDULING OBLIGATIONS

5.1 Commencement of Work . Contractor shall not, and shall not be obligated to, commence performance of any Work until Owner and Contractor mutually execute a Work Order authorizing the same pursuant to the terms and conditions of this Agreement and such Work Order. Upon execution of a Work Order by the Parties, Contractor shall promptly commence with the performance of the Work specified in the Work Order.

5.2 Work Order No. 1 . Notwithstanding Section 5.1, the Parties agree to execute Work Order No. 1 within seven (7) Days after the Agreement Effective Date. Upon execution of

 

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Work Order No. 1 by the Parties, Contractor shall promptly commence with the performance of Work specified in Work Order No. 1 in accordance with this Agreement and the terms and conditions set forth in such Work Order.

5.3 Work Schedules . Contractor shall use all commercially reasonable efforts to perform the Work in accordance with the Work Schedule set forth in the applicable Work Order.

Article 6

CHANGES AND CHANGE ORDERS

6.1 Changes . Changes may be made to a Scope of Work of any Work Order under a mutually accepted Change Order in the form of Attachment D . Such Change Order shall be signed by both Parties and shall set forth, in appropriate detail, the changes, additions or deletions to the original Scope of Work of such Work Order and the effect of such change on the Work Schedule and Fee.

6.2 Adjustment Only Through Change Order . There shall be no adjustments to a Work Order except by Change Order. All Change Orders shall have the pricing “separated” for Texas sales and use tax purposes.

Article 7

COMPENSATION

As full compensation for performing all Work and all other obligations under this Agreement, Owner shall pay Contractor a total remuneration consisting of the Fee and the Cost of Work, as such amounts are calculated under Attachment C and reconciled with prior payments pursuant to Article 8.

Article 8

INVOICING AND PAYMENTS TO CONTRACTOR

8.1 Initial Payment . Upon execution of Work Order No. 1 in accordance with Section 5.2, Contractor shall deliver to Owner: (a) an Invoice for Six Million Three Hundred Twenty Five Thousand Sixty Nine U.S. Dollars (U.S.$6,325,069), which amount is a good faith estimate of the Cost of Work and Fee anticipated to be incurred and earned by Contractor under Work Order No. 1 from the date of such execution through the end of the following Month, supported by information and documentation required under this Article 8 (the “ Initial Payment ”), (b) a list of Work items for Work Order No. 1 that Contractor has scheduled and plans to perform during the time period between the date of execution of Work Order No. 1 and the end of the following Month, and (c) a look-ahead schedule for such time period, prepared by Contractor, that shows Contractor’s schedule for performing such Work items during the time period. Upon receipt of the above, Owner shall pay Contractor the Initial Payment.

8.2 Subsequent Invoices for Progress Payments .

A. This Section 8.2 shall govern the submittal of all Invoices except for the Invoice for the Initial Payment under Section 8.1 and the Invoice for final payment under Section 8.8.

 

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B. On or about the tenth (10th) Day of each Month (for the purposes of Article 8, the “current Month”), Contractor shall submit to Owner for each Work Order: (a) an Invoice containing a good faith estimate of the Cost of Work and Fee anticipated to be incurred and earned by Contractor in performing Work under such Work Order in the following Month (for the purposes of Article 8, the “following Month”), supported by information and documentation required under this Article 8, (b) a list of Work items that Contractor has scheduled and plans to perform during such following Month under such Work Order, and (c) a 30-Day look-ahead schedule, prepared by Contractor, for such following Month that shows Contractor’s schedule for performing such Work items during such following Month. Such Invoice shall contain a “true-up” or reconciliation to account for the actual Fee and Cost of Work incurred during the previous Month, by adjusting the amount of such Invoice upwards or downwards based on the difference between (i) the Fee and Cost of Work actually incurred by Contractor during the previous Month and (ii) the estimated Fee and Cost of Work Invoiced for such previous Month, as provided in further detail in Section 8.14.

C. If Owner has any objections to the Invoice, list or schedule submitted under Section 8.2B, Owner shall notify Contractor within five (5) Days of Owner’s receipt of such Invoice, list and schedule and set out with specificity the reasons for its objections. If Owner objects to such Invoice, list or schedule within such time and the Parties are unable to resolve any disagreements between them relating to such Invoice, list or schedule within ten (10) Days after Owner’s receipt of such Invoice, list and schedule, Contractor shall submit to Owner, no later than the tenth (10th) Day after receipt of Owner’s objections, a revised Invoice for all undisputed amounts, which Owner shall pay in accordance with this Article 8. Disputed amounts will be resolved in accordance with Article 17.

8.3 Form and Content of Invoices . Contractor shall submit a separate Invoice for payment under each Work Order. All Invoices, other than the final Invoice for any Work Order under this Agreement, shall be in the form of Schedule I-1 and shall include a representation and certification by Contractor that:

A. except as noted in the current Month’s Invoice for any true-up or reconciliation for the previous Month’s Work, the Work items described in or relating to the previous Month’s Invoice have been performed in full accordance with the Agreement and Contractor incurred and earned during the previous Month the estimated Cost of Work and Fee included in the previous Month’s Invoice;

B. subject to any Excusable Delay, Contractor will perform the Work described in or relating to all Work items that are the subject of the current Month’s Invoice;

C. all quantities and prices in the current Month’s Invoice, including the estimated Cost of Work and estimated Fee, are estimated correctly and in accordance with the Agreement, including Section 8.4;

 

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D. a fully completed and executed Interim Lien and Claim Waiver from Contractor, and from each Subcontractor, is provided pursuant to Section 8.7 of the Agreement and is attached to the current Month’s Invoice;

E. all Subcontractors have been paid the monies due and payable for Work performed in accordance with the terms of such Subcontracts, except for amounts that are the subject of the current Month’s Invoice or for such amounts that are in good faith dispute by Contractor;

F. the current Month’s Invoice is signed by an authorized representative of Contractor; and

G. the Invoice, including the invoicing for any Change Orders, is “separated” for Texas sales and use tax purposes, including the following pricing separations:

 

1.

Engineering charges;

 

2.

New construction labor charges;

 

3.

New construction Taxable material charges;

 

4.

New construction exempt material charges;

 

5.

Construction Equipment charges;

 

6.

Taxable services re-sold to Owner;

 

7.

Subcontractor labor and other charges (not including any Equipment) should be merged with Contractor’s new construction labor charges;

 

8.

Subcontractor taxable Equipment (not including any labor charges) may be merged with Contractor’s taxable materials charges;

 

9.

Subcontractor exempt permanent material charges (not including any labor charges) may be merged with Contractor’s Taxable material charges;

 

10.

Other charges (optional), including charges for consumable supplies, including applicable sales and use taxes paid by Contractor; and

 

11.

G&A and markups.

8.4 Cost of Work Estimate . The estimated Cost of Work to be included in each Invoice and to be used as the basis for the estimated Fee under each Invoice shall include:

A. A detailed estimate of the costs of wages and salaries, supported by proper documentation and allowed under Attachment C as a Cost of Work, including (i) a list of

 

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work hours anticipated to be performed by each craft for the following Month, (ii) a description of the Work anticipated to be performed by each such craft, and (iii) any other supporting documents as Owner may require;

B. A detailed estimate of amounts to be paid by Contractor to a Subcontractor for the following Month for Cost of Work allowed under Attachment C , together with any records and other supporting documentation used to create such estimates, including: (i) bids; (ii) billing rates; and (iii) and other documentation as requested by Owner; and

C. A detailed estimate of all other costs anticipated to be incurred by Contractor for the following Month and allowed under Attachment C , along with records and other documentation supporting and evidencing such estimates, including (i) bids; (ii) billing rates; (iii) invoices (if applicable); and (iv) other supporting documents as Owner may reasonably require.

8.5 Review and Payment by Owner .

A. Each Invoice shall be reviewed by Owner and, upon Owner’s reasonable request, Contractor shall furnish any and all additional supporting documentation, certificates and information as necessary to establish that Contractor is entitled to payment for amounts billed in such Invoice. Subject to Owner’s right to withhold or offset payments under this Agreement, including Sections 8.11 and 8.14, and provided that Contractor has complied with Sections 8.2, 8.3 and 8.4, the amounts billed in each Invoice (other than the Invoice for final payment under the Agreement) and due and owing under this Agreement shall be payable by Owner to Contractor no later than twenty (20) Days after the later of Owner’s receipt of (i) the originally issued Invoice under Section 8.2B (and all documentation required under this Agreement) or (ii) the revised Invoice under Section 8.2C (and all documentation required under this Agreement).

B. Without limitation of the foregoing, and subject to Section 8.2C and 8.15, Owner shall not, with respect to any such Invoice, be required to pay Contractor for amounts not properly invoiced or documented under Sections 8.2, 8.3, 8.4 or this Section 8.5, or amounts in which Owner is entitled to withhold or offset under this Agreement. In addition, if a revised Invoice is required under Section 8.2, Owner shall be only required to make payment under a revised Invoice issued in accordance with Section 8.2 and not under the originally issued Invoice.

C. Payments shall be wire transferred made in U.S. Dollars to an account designated by Contractor.

8.6 Progress Reports . Attached with each Invoice, Contractor shall submit to Owner a Monthly Progress Report updated for all Work performed through the previous Month, the receipt of which shall be a condition of payment under this Article 8. This Section 8.6 shall not apply to the Invoice for the Initial Payment.

8.7 Interim Lien and Claim Waivers . As a condition precedent to Owner’s obligation to make any payment with respect to any Invoice, Contractor shall submit to Owner with each Invoice: (i) a fully executed Interim Lien and Claim Waiver from Contractor in the form

 

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of Schedule J-1 for all Work performed through the end of the immediately preceding Month and (ii) a fully executed Interim Lien and Claim Waiver from each Subcontractor in the form set forth in Schedule J-2 for all Work performed through the end of the immediately preceding Month. Interim Lien and Claim Waivers, however, shall not be required from Subcontractors until any amounts relating to their respective Work is included in an Invoice, and Subcontractors shall be required to submit additional Interim Lien and Claim Waivers only if their respective Work is not covered by a previous Interim Lien and Claim Waiver.

8.8 Final Payment . Upon final completion of Work under each Work Order, or upon Owner’s exercise of its compensation cap pursuant to any Work Order, Contractor shall submit a fully executed final Invoice in the form attached hereto as Schedule I-2 , along with (i) a statement summarizing and reconciling all previous Invoices, payments and Change Orders for such Work Order, including, as applicable, the Initial Payment; (ii) an affidavit that all payrolls, Taxes, bills for Equipment, liens, charges, claims, demands, judgments, security interests and any other indebtedness connected with such Work Order for which Contractor and its Subcontractors are liable (excluding Corrective Work) have been paid, including Texas state and applicable local sales and use taxes which Contractor is required under the Contract Documents, to pay; (iii) a fully executed Final Lien and Claim Waiver from Contractor in the form of Schedule J-3 , and (iv) a fully executed Final Lien and Claim Waiver from each Subcontractor in the form set forth in Schedule J-4 . No later than twenty (20) Days after receipt by Owner of such final Invoice and all required documentation and achieving completion of the Work under such Work Order, Owner shall, subject to its rights to withhold payment under this Agreement, pay Contractor the undisputed amounts within the final Invoice.

8.9 Payments During Default . Owner shall not be obligated to make any payments hereunder at any time in which a Default shall have occurred and is continuing.

8.10 Payments Not Acceptance of Work . No payment made hereunder by Owner shall be considered as approval or acceptance of any Work, Fee or Cost of Work by Owner or a waiver of any claim or right Owner may have hereunder. All payments shall be subject to correction in subsequent payments.

8.11 Payments Withheld . Owner may, upon providing written notice to Contractor specifying the reasons for such withholding, in addition to any other rights under this Agreement, withhold payment on an Invoice or a portion thereof, in an amount and to such extent as may be reasonably necessary to protect Owner from loss due to:

A. Defective Work, unless Contractor has, within fourteen (14) Days of a written notice given by Owner to Contractor, either (i) remedied such Defective Work or (ii) if such Defective Work cannot be remedied by the exercise of reasonable diligence within such fourteen (14) Day period, provided Owner with a written plan, reasonably acceptable to Owner, to remedy such Defective Work and commenced the remedy of such Defective Work;

B. liens or other encumbrances on all or a portion of the Site or the Work, which are filed by any Subcontractor or any other Person acting through or under any of them unless Contractor has, within fourteen (14) Days of a written notice given by Owner

 

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to Contractor, taken any of the following actions: (i) paid, satisfied or discharged the applicable liability, (ii) removed the lien or other encumbrance, or (iii) provided Owner with a bank guarantee or bond reasonably satisfactory to Owner in the applicable amount;

C. any breach by Contractor of any material term or provision of the Contract Documents; unless Contractor has, within fourteen (14) Days of a written notice given by Owner to Contractor, either (i) cured such breach or (ii) if such breach cannot be cured by the exercise of reasonable diligence within such fourteen (14) Day period, Contractor has commenced corrective action and is diligently exercising all commercially practicable efforts to cure such breach;

D. the assessment of any fines or penalties against Owner as a result of Contractor’s failure to comply with Applicable Law;

E. amounts paid by Owner to Contractor in a preceding Month or through the Initial Payment, if applicable, which have been determined to have been an overpayment pursuant to the reconciliation process in Section 8.14 or are otherwise subject to a dispute under this Agreement between Owner and Contractor; or

F. any other costs or liabilities which Owner has incurred for which Contractor is responsible under the Contract Documents.

Notwithstanding Owner’s ability to withhold amounts due to the reconciliation process in Section 8.14 and in accordance with Section 8.11E, Owner shall pay Contractor the amount withheld as soon as practicable, but in no event later than twenty (20) Days after Owner’s receipt of an Invoice from Contractor, if Contractor, as appropriate: (i) pays, satisfies or discharges the applicable liability and provides Owner with reasonable evidence of such payment, satisfaction or discharge, (ii) removes the lien or other encumbrance, (iii) cures the breach in question, (iv) remedies the Defective Work in question, (v) provides Owner with a bank guarantee or bond reasonably satisfactory to Owner in the amount of the withheld payment, and (vi) with respect to disputed amounts withheld pursuant to Section 8.11E, resolves the dispute in accordance with the dispute resolution procedures set forth in Article 17 (but only to the extent such resolution favors payment to Contractor).

8.12 Interest on Late Payments and Improper Collection . Any (a) amounts due but not paid hereunder within thirty (30) Days after the due date or (b) amounts withheld from Contractor but later finally determined in accordance with the dispute resolution procedure set forth in Article 17 to have been improperly withheld shall bear interest at the lesser of (i) an annual rate equal to the prime rate set from time to time by Citibank, N.A. plus three percent (3%), or (ii) the maximum rate permitted under Applicable Law.

8.13 Offset . Owner may offset any amount due and payable from Contractor to Owner under the Contract Documents against any amount due and payable to Contractor hereunder.

8.14 Payment Error . If an error is made in connection with a payment, and such payment is an overpayment, the Party receiving the payment in error shall immediately refund the mistaken amount to the paying Party. Without limiting the preceding sentence, and in addition to any other remedy available to Owner under this Agreement, (i) if Owner discovers that Work

 

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associated with a Work item contained Defective Work, then Owner may offset the amount of the payment against future payments in the amount of the payment until the correction of the Defective Work is achieved, (ii) if Owner discovers that any amounts paid by it to Contractor in a preceding Month was incorrect pursuant to Section 8.14, then Owner may offset such amounts against future payments, or (iii) if Owner discovers that any amounts paid by it to Contractor in a preceding Month lacked sufficient or accurate supporting information, then Owner may offset such amounts against future payments for such amounts until sufficient and accurate supporting information is provided pursuant to Sections 8.3, 8.4 and 8.5.

8.15 Reconciliation or True-Up of Payments . Contractor shall attach to each Invoice submitted in accordance with Section 8.2B all calculations and documentation, in accordance with Attachment C , which determine (i) the actual Cost of Work incurred by Contractor in the previous Month, including all calculations, data, work logs, invoices, receipts, and other supporting documentation necessary to justify such actual Cost of the Work and (ii) the Fee based upon Contractor’s calculated actual Cost of Work. Within five (5) Days of Owner’s receipt of such documentation and the actual Cost of Work, Owner may request from Contractor any additional documentation Owner requires to support the calculation of the actual Cost of Work. Should Owner and Contractor fail to agree upon the value of the actual Cost of Work or the Fee for such previous Month, such dispute will be resolved pursuant to Article 17. Failure of Owner to request additional documentation within the times specified above, or to object to the actual Cost of Work or Fee reported by Contractor and included in an Invoice, shall not prejudice Owner’s rights to later require such documentation or later object to such Cost of Work and Fee. Notwithstanding Owner or Contractor’s right to resolve a dispute regarding the actual Cost of Work or Fee in a particular Month pursuant to Article 17, Owner shall have the right to offset or withhold, from the current Month’s Invoice, the difference between (a) the aggregate of (i) the estimated Cost of Work for the previous Month’s Work and (ii) the estimated Fee for the previous Month’s Work and (b) the aggregate of (i) the undisputed portion of the actual Cost of Work for the previous Month’s Work and (ii) the undisputed portion of the Fee for the previous Month’s Work.

Article 9

TITLE AND RISK OF LOSS

9.1 Clear Title . Subject to Contractor’s receipt of all payments of undisputed amounts currently due in accordance with the terms of the Contract Documents, Contractor warrants and guarantees that legal title to and ownership of the Work shall be free and clear of any and all liens, claims, security interests or other encumbrances arising out of the Work when title thereto passes to Owner.

9.2 Title to Work . Title to all or any portion of the Work (other than Work Product) shall pass to Owner upon the earlier of (i) payment by Owner therefore or (ii) delivery of such Work upon the Site. Transfer of title to Work shall be without prejudice to Owner’s right to reject Defective Work, or any other right in the Contract Documents.

9.3 Risk of Loss . At all times during the effective period of this Agreement Owner shall retain any and all risk of loss or damage to the Work (including Equipment), provided that Contractor obtains and maintains the builder’s risk insurance as required under this Agreement. Whether or not Owner or Contractor insures or self-insures, Contractor is fully released from any

 

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and all such risk, and Owner agrees to waive all of its rights and require its insurers, as applicable, to waive subrogation rights against Contractor for loss or damage to the Work, even if such damage is caused by the negligence or fault of Contractor, and not only to the extent of Owner’s or Contractor’s insurance coverage, provided that Contractor obtains and maintains the builder’s risk insurance as required under this Agreement. Contractor will protect the Work against loss or damage from and after the time the Parties mutually execute a Work Order until such Work is finally accepted by Owner. Notwithstanding the foregoing, this Section 9.3 shall not in any way be deemed to affect Contractor’s obligations under Article 12.

Article 10

INSURANCE

10.1 Provision of Insurance . The Parties shall provide the insurance as specified in Attachment L on terms and conditions stated therein.

10.2 No Cancellation . All policies providing coverage hereunder shall contain a provision that at least thirty (30) Days’ prior written notice shall be given to the non-procuring Parties and additional insureds prior to cancellation, non-renewal or material change in the coverage.

10.3 Obligations Not Relieved . Anything in the Contract Documents to the contrary notwithstanding, the occurrence of any of the following shall in no way relieve Contractor from any of its obligations under the Contract Documents: (i) failure by Contractor to secure or maintain the insurance coverage required hereunder; (ii) failure by Contractor to comply fully with any of the insurance provisions of this Agreement; (iii) failure by Contractor to secure such endorsements on the policies as may be necessary to carry out the terms and provisions of the Contract Documents; (iv) the insolvency, bankruptcy or failure of any insurance company providing insurance to Contractor; or (v) failure of any insurance company to pay any claim accruing under its policy.

10.4 Failure to Provide Insurance . In the event that liability for any loss or damage is denied by the underwriter or underwriters in whole or in part due to the breach of said insurance by a procuring Party, or for any other reason attributable to such Party, or if either Party fails to maintain any of the insurance herein required, then the defaulting Party shall defend, indemnify and hold the other Party harmless against all losses which would otherwise have been covered by said insurance.

10.5 Unavailable Insurance . If any insurance (including the limits or deductibles thereof) hereby required to be maintained, other than insurance required by Applicable Law to be maintained, shall not be reasonably available in the commercial insurance market, Owner and Contractor shall not unreasonably withhold their agreement to waive such requirement to the extent that maintenance thereof is not so available; provided, however , that the Party shall first request any such waiver in writing from the other Party, which request shall be accompanied by written reports prepared by two (2) independent advisers, including insurance brokers, of recognized international standing certifying that such insurance is not reasonably available in the commercial insurance market (and, in any case where the required amount is not so available, explaining in detail the basis for such conclusions), such insurance advisers and the form and

 

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substance of such reports to be reasonably acceptable to the other Party. Any such waiver shall be effective only so long as such insurance shall not be available and commercially feasible in the commercial insurance market.

Article 11

OWNERSHIP OF DOCUMENTATION

11.1 Work Product, Contractor’s Intellectual Property and Third Party Proprietary Work Product .

A. Ownership of Work Product . Owner and Contractor acknowledge that during the course of, and as a result of, the performance of the Work and prior services related to the Facility done by Zachry or AMEC for Owner under the Master Services Agreement, Contractor or any Subcontractors will create, or have created, and will deliver, or have delivered, to Owner, certain written materials, plans, Drawings (including P&IDs), Specifications or other tangible results of performance of the Work under the Contract Documents or performance of services by Zachry or AMEC for Owner under the Master Services Agreement (hereinafter individually or collectively referred to as “ Work Product ”). Subject to this Section 11.1, Owner shall own all rights, title and interest to the Work Product and any and all intellectual property rights in the Work Product (including all patents and applications therefor, all inventions, trade secrets, know-how, technology, technical data, customer lists, copyrights and all registrations and applications therefor, and all industrial designs) irrespective of any copyright notices or confidentiality legends to the contrary which may have been placed in or on such Work Product by Contractor, any Subcontractor, or any other Person.

B. Contractor’s Intellectual Property and Third Party Proprietary Work Product . Notwithstanding the provisions of Section 11.1A, Contractor shall (as between Owner and Contractor) retain ownership of all intellectual property rights previously owned by Contractor or developed by it outside the Contract Documents or any work developed by Zachry or AMEC outside the Master Services Agreement (hereinafter referred to as “ Contractor’s Intellectual Property ”), regardless of whether such Contractor’s Intellectual Property is embedded in the Work Product, and nothing in the Contract Documents shall result in a transfer of ownership of either Contractor’s Intellectual Property or the intellectual property rights previously owned or developed by Subcontractors outside the Contract Documents or the Master Services Agreement (“ Third Party Proprietary Work Product ”). With respect to such Contractor’s Intellectual Property and Third Party Proprietary Work Product relating to the Work, Contractor hereby grants Owner an irrevocable, perpetual and royalty-free license to use and (subject to Section 11.1C) modify Contractor’s Intellectual Property and Third Party Proprietary Work Product (which in either case is embedded in the Work Product relating to the Facility), in each case solely for the purpose of the design, engineering, construction, pre-commissioning, commissioning, start-up, testing and operation of the Facility. Owner shall be entitled to assign its rights in the Work Product and in such license; provided that such assignee shall only be entitled to use the Work Product and Contractor’s Intellectual Property and Third Party Proprietary Work Product which is embedded in the Work Product for the purposes specified above. Unless otherwise agreed to in writing by Owner, all Subcontracts shall contain provisions consistent with this Section 11.1.

 

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C. Modification of Work Product or Contractor’s Intellectual Property . In addition, Owner, at its own risk, or its contractors shall be entitled to modify (a) the Work Product or (b) Contractor’s Intellectual Property embedded in the Work Product in connection with the purposes set forth in Section 11.1B; provided that Owner shall first remove, or cause to be removed, all references to Contractor from the Work Product and Contractor’s Intellectual Property embedded in the Work Product. O WNER SHALL DEFEND , INDEMNIFY AND HOLD THE C ONTRACTOR G ROUP HARMLESS FROM AND AGAINST ALL DAMAGES , LOSSES , COSTS AND EXPENSES ( INCLUDING ALL REASONABLE ATTORNEYS ’ FEES AND LITIGATION OR ARBITRATION EXPENSES ) INCURRED BY ANY MEMBER OF THE C ONTRACTOR G ROUP AND CAUSED BY ANY MODIFICATIONS TO THE W ORK P RODUCT OR C ONTRACTOR ’ S I NTELLECTUAL P ROPERTY .

D. Owner’s Affiliates Use of the Work Product and Contractor’s Intellectual Property for Other Projects . In addition, Owner’s Affiliates shall be entitled to use the Work Product at Owner’s Affiliate sole risk and Contractor hereby grants to Owner’s Affiliates an irrevocable and royalty-free license, non-transferable and non-assignable (except as set forth below) to use Contractor’s Intellectual Property embedded in the Work Product, in each case solely for the purpose of developing other projects; provided that (i) Owner’s Affiliates shall first remove all references to Contractor and the Facility from the Work Product and Contractor’s Intellectual Property embedded in the Work Product, (ii) the use of any of Contractor’s Intellectual Property on such other projects shall be limited to such Contractor’s Intellectual Property which is embedded in the Work Product; and (iii) Owner’s Affiliate shall not assign such Work Product or license without Contractor’s consent, which consent shall not be unreasonably withheld. O WNER SHALL DEFEND , INDEMNIFY AND HOLD THE C ONTRACTOR G ROUP HARMLESS FROM AND AGAINST ALL DAMAGES , LOSSES , COSTS AND EXPENSES ( INCLUDING ALL REASONABLE ATTORNEYS ’ FEES AND LITIGATION OR ARBITRATION EXPENSES ) INCURRED BY ANY MEMBER OF THE C ONTRACTOR G ROUP AND CAUSED BY USE OF THE W ORK P RODUCT OR C ONTRACTOR ’ S I NTELLECTUAL P ROPERTY IN CONNECTION WITH PROJECTS OTHER THAN THE W ORK OR THE F ACILITY .

E. Identification of Third Party Proprietary Work Product . Contractor shall identify which portions of the Work Product contain Third Party Proprietary Work Product for which Owner’s Affiliates shall need to obtain permission from the appropriate owners of such Third Party Proprietary Work Product for use by Owner’s Affiliates on projects other than the Facility. Notwithstanding anything to the contrary in this Agreement, no license is granted to Owner with respect to the use of any Contractor proprietary software or systems.

11.2 Return of Work Product . All Work Product, and all copies thereof, shall be returned or delivered to Owner upon the earlier of (i) completion of all Work under the Contract Documents or (ii) termination of this Agreement, except that Contractor may, subject to its confidentiality obligations set forth in this Agreement, retain one record set of the Work Product; provided that , if the Parties execute the EPC Agreement, Contractor shall be entitled to retain such Work Product as specified in the EPC Agreement.

 

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11.3 Contractor’s Right to Use of Work Product . Contractor shall not have the right to use or modify any Work Product for any other project without the express written consent of Owner, which shall not be unreasonably withheld.

11.4 Owner Provided Documents . As between Owner and Contractor, all written materials, plans, drafts, specifications, computer files or other documents (if any) prepared or furnished by Owner or any of Owner’s other consultants or contractors shall at all times remain the property of Owner, and Contractor shall not make use of any such documents or other media for any other project or for any other purpose than as set forth herein. All such documents and other media, including all copies thereof, shall be returned to Owner upon the earlier of (i) completion of all Work under the Contract Documents or (ii) termination of this Agreement, except that Contractor may, subject to its confidentiality obligations as set forth in this Agreement, retain one record set of such documents or other media; provided that , if the Parties execute the EPC Agreement, Contractor shall be entitled to retain such documents or other media to the extent specified in the EPC Agreement.

Article 12

WARRANTY AND CORRECTION OF WORK

12.1 Warranty .

A. General . The warranties set forth in this Article 12 are hereinafter referred to as the “ Warranties ” or “ Warranty ”. Any Work, or component thereof, that is not in conformity with any Warranty is defective (“ Defective ”) and contains a defect (“ Defect ”).

B. Warranty of Work . Contractor hereby warrants that:

1. the Equipment, and each component thereof, shall be new (unless otherwise specified in the Contract Documents) and of good quality;

2. the Work (including the Equipment) shall be in accordance with all of the requirements of the Contract Documents, including in accordance with GECP, Applicable Law and, subject to Section 3.3, Applicable Codes and Standards; and

3. the Work (including the Equipment) shall be free from encumbrances to title, as set forth in greater detail in Section 9.1.

C. Assignment and Enforcement of Subcontractor Warranties . Contractor shall obtain warranties from Subcontractors that meet or exceed the requirements of the Contract Documents; provided , however , Contractor shall not in any way be relieved of its responsibilities and liability to Owner under the Contract Documents, regardless of whether such Subcontractor warranties meet the requirements of the Contract Documents, as Contractor shall be fully responsible and liable to Owner for its Warranty and Corrective Work obligations and liability under this Agreement for all Work. All such warranties shall run to the benefit of Contractor but shall permit Contractor, prior to assignment to Owner, the right (upon mutual agreement of the Parties), to authorize Owner to deal with Subcontractor on Contractor’s behalf. Such warranties, with duly executed instruments

 

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assigning the warranties, shall be delivered to Owner concurrent with the end of the Defect Correction Period. This Section 12.1C shall not in any way be construed to limit Contractor’s liability under the Contract Documents for the entire Work or its obligation to enforce Subcontractor warranties.

D. Exceptions to Warranty . Contractor shall have no liability to Owner, for any damage or defect to the extent caused by: (i) improper repairs or alterations, misuse, neglect or accident by Owner; (ii) operation, maintenance or use of the Facility, Work or any component thereof in a manner not in compliance with a material requirement of operation and maintenance manuals delivered by Contractor to Owner; (iii) normal wear and tear; or (iv) normal corrosion.

12.2 Defective Work . If, at any time during the period commencing upon the Work Order Effective Date and ending upon the expiration of the Defect Correction Period, any of the Work under a Work Order is found to be Defective, Contractor shall promptly correct (whether by repair, replacement or otherwise) such Defective Work and any other portions of the Work damaged by such Defective Work (the correction of the Defective Work and any portions of the Work damaged by such Defective Work is hereby defined as the “ Corrective Work ”). Contractor shall be reimbursed for Contractor’s Cost of Work, as determined under Attachment C , for such Corrective Work (including costs incurred by Contractor and allowable as a Cost of Work in enforcing Subcontracts), it being understood and agreed upon between the Parties that Contractor shall receive no Fee or any other form of profit or markup for the performance of any Corrective Work. Contractor may not request compensation for Cost of Work incurred by a Subcontractor to perform Corrective Work, unless the applicable Subcontract is on a cost-reimbursable basis and expressly permits such Subcontractor to be paid compensation for performing Corrective Work. If Contractor fails to commence the Corrective Work within a reasonable time not to exceed five (5) Days, or does not complete such Corrective Work on a prompt basis once commenced, then Owner has the right, but not the obligation, to perform the Corrective Work, and Contractor shall be liable to Owner for all damages, costs, losses and expenses incurred by Owner in connection with such Corrective Work. At Owner’s sole discretion, such damages, costs, losses and expenses incurred by Owner for such portion of Corrective Work shall be payable by Contractor to Owner no later than thirty (30) Days after Contractor’s receipt of Owner’s Invoice for such damages, costs, losses and expenses, or Owner may withhold payment of amounts otherwise due under the Contract Documents in the amount of such damages, costs, losses and expenses. This Section 12.2 sets forth the exclusive remedy for a breach of Warranty, except for (i) Owner’s right to terminate this Agreement, (ii) Contractor’s indemnification obligations under this Agreement, and (iii) Owner’s right to bring an action against Contractor, the Guarantor, Zachry and/or AMEC for Contractor’s failure to commence or complete the Corrective Work as required above.

12.3 Extended Defect Correction Period for Corrective Work . With respect to any Corrective Work performed by Contractor, the Defect Correction Period for such Corrective Work shall be extended for an additional one (1) year from the date of the completion of such Corrective Work; provided , however , in no event shall the Defect Correction Period for any Work (including Corrective Work) extend beyond thirty-six (36) Months after final completion of the Work.

12.4 Standards for Corrective Work . All Corrective Work shall be performed subject to the same terms and conditions under the Contract Documents as the original Work is required to

 

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be performed. In connection with the Corrective Work, any change to Equipment that would alter the requirements of the Contract Documents may be made only with prior written approval of Owner in accordance with Section 3.23.

12.5 Assignability of Warranties . The Warranties made in this Agreement shall be for the benefit of Owner and its successors and permitted assigns and the respective successors and permitted assigns of any of them, and are fully transferable and assignable.

12.6 Waiver of Implied Warranties . T HE EXPRESS WARRANTIES SET FORTH IN THIS A GREEMENT ( INCLUDING W ARRANTIES ) ARE EXCLUSIVE AND THE P ARTIES HEREBY DISCLAIM , AND O WNER HEREBY WAIVES ANY AND ALL STATUTORY , ORAL OR IMPLIED WARRANTIES UNDER A PPLICABLE L AW ( INCLUDING THE GOVERNING LAW SPECIFIED IN S ECTION  20.9), INCLUDING THE IMPLIED WARRANTY OF MERCHANTABILITY AND IMPLIED WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE AND WARRANTIES ARISING FROM COURSE OF DEALING OR TRADE USAGE . F OR AVOIDANCE OF DOUBT , THERE ARE NO WARRANTIES OTHER THAN AS STATED IN THE C ONTRACT D OCUMENTS .

Article 13

CONTRACTOR’S REPRESENTATIONS

Contractor, Zachry and AMEC represent and warrant as of the Agreement Effective Date, as applicable, that:

13.1 Corporate Standing . Contractor is a limited partnership duly organized, validly existing and in good standing under the laws of Texas; Contractor’s general partners are (i) Zachry, a duly organized, validly existing corporation in good standing under the laws of Delaware, and (ii) AMEC, a duly organized, validly existing corporation in good standing under the laws of Georgia; Contractor’s limited partners are (i) Capitol Construction, Inc. and (ii) AGRA Monenco U.S., Inc., both of which are duly organized, validly existing corporations in good standing under the laws of Nevada; and each is authorized to do business in all jurisdictions in which the nature of the business conducted by it makes such qualification necessary and where failure so to qualify would have a material adverse effect on its financial condition, operations, prospects, taxes or business.

13.2 No Violation of Law; Litigation . Each is not in violation of any Applicable Law or judgment entered by any Governmental Instrumentality, which violations, individually or in the aggregate, would affect its performance of any obligations under the Contract Documents. There are no legal or arbitration proceedings or any proceeding by or before any Governmental Instrumentality, now pending or (to the best of its knowledge) threatened against Contractor, Zachry, AMEC, Capitol Construction, Inc. or AGRA Monenco U.S., Inc. that, if adversely determined, could reasonably be expected to have a material adverse effect on the financial condition, operations, prospects or business, as a whole, of Contractor, Zachry , AMEC, Capitol Construction, Inc. or AGRA Monenco U.S., Inc. or the ability of any of them to perform their respective obligations under the Contract Documents.

13.3 Licenses . Contractor is the holder of all licenses required to permit it to operate or conduct its business in Texas now and as contemplated by the Contract Documents.

13.4 No Breach . Neither the execution and delivery of this Agreement, nor the

 

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consummation of the transactions herein contemplated or compliance with the terms and provisions hereof will conflict with or result in a breach of, or require any consent under, the charter or by-laws of Contractor, Zachry, AMEC, Capitol Construction, Inc. or AGRA Monenco U.S., Inc. or any Applicable Law or regulation, or any order, writ, injunction or decree of any court, or any agreement or instrument to which Contractor, Zachry, AMEC, Capitol Construction, Inc. or AGRA Monenco U.S., Inc. is a party or by which any or them are bound, or to which any of them are or any of their property or assets is subject, or constitute a default under any such agreement or instrument.

13.5 Corporate Action . Each has all necessary power and authority to execute, deliver and perform its obligations under this Agreement; the execution, delivery and performance of this Agreement has been duly authorized by all necessary action on the part of each; and this Agreement has been duly and validly executed and delivered by each and constitutes a legal, valid and binding obligation of Contractor, Zachry and AMEC enforceable in accordance with its terms, except as the enforceability thereof may be limited by bankruptcy, insolvency, reorganization or moratorium or other similar laws relating to the enforcement of creditors’ rights generally.

13.6 Financial Solvency . Each is financially solvent, able to pay all debts as they mature and possesses sufficient working capital to complete the Work and perform its respective obligations hereunder. Guarantor, guaranteeing the obligations of Contractor pursuant to Section 20.17 of this Agreement, is financially solvent, able to pay all debts as they mature, and possesses sufficient working capital to perform the Parent Guarantee.

Article 14

OWNER’S REPRESENTATIONS

Owner represents and warrants as of the Agreement Effective Date that:

14.1 Standing . It is a limited liability company duly organized, validly existing and in good standing under the laws of Delaware, is qualified to do business in all jurisdictions in which the nature of the business conducted by it makes such qualification necessary and where failure so to qualify would have a material adverse effect on its financial condition, operations, prospects or business.

14.2 No Violation of Law; Litigation . It is not in violation of any Applicable Law, or judgment entered by any Governmental Instrumentality, which violations, individually or in the aggregate, would affect its performance of any obligations under this Agreement. There are no legal or arbitration proceedings or any proceeding by or before any Governmental Instrumentality, now pending or (to the best knowledge of Owner) threatened against Owner that, if adversely determined, could reasonably be expected to have a material adverse effect on the financial condition, operations, prospects or business, as a whole, of Owner, or its ability to perform under this Agreement.

14.3 Licenses . It is the holder of or will take the necessary action to obtain all Permits required to be obtained by it in accordance with Section 4.2.

14.4 No Breach . Neither the execution and delivery of this Agreement, nor the consummation of the transactions herein contemplated or compliance with the terms and

 

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provisions hereof and thereof will conflict with or result in a breach of, or require any consent under, the constituent documents of Owner, any Applicable Law, any order, writ, injunction or decree of any court, or any agreement or instrument to which Owner is a party or by which it is bound or to which it or any of its property or assets is subject, or constitute a default under any such agreement or instrument.

14.5 Corporate Action . It has all necessary power and authority to execute, deliver and perform its obligations under this Agreement; the execution, delivery and performance by Owner of this Agreement has been duly authorized by all necessary action on its part; and this Agreement has been duly and validly executed and delivered by Owner and constitutes a legal, valid and binding obligation of Owner enforceable in accordance with its terms, except as the enforceability thereof may be limited by bankruptcy, insolvency, reorganization or moratorium or other similar laws relating to the enforcement of creditors’ rights generally.

14.6 Ability to Pay . It is able to pay all amounts owed under this Agreement as they become due.

Article 15

DEFAULT, TERMINATION AND SUSPENSION

15.1 Default by Contractor .

A. Owner Rights Upon Contractor Default . If Contractor shall at any time: (i) fail to commence Work under any Work Order mutually agreed to in accordance with the provisions of the Contract Documents; (ii) abandon any Work, unless permitted under Section 3.24, 15.4 or 15.5; (iii) repudiate or fail to materially comply with any of its material obligations under the Contract Documents; (iv) be in Default pursuant to Section 20.7; (v) fail to maintain insurance required under this Agreement, subject to Section 10.5; (vi) fail to discharge liens filed by any Subcontractor as required under this Agreement; (vii) materially disregard Applicable Law or, subject to Section 3.3, Applicable Standards and Codes; or (viii) itself or Guarantor experiences an Insolvency Event, in which such case the cure provisions found below shall not apply (each of the foregoing being a “ Default ”) then, Owner has the right (without prejudice to any other rights under the Contract Documents) to provide written notice to Contractor specifying the nature of the Default and demanding that such Default be cured. If:

1. with respect to any clause above (with the exception of clause (viii)),

 

a.

Contractor fails to cure such Default within thirty (30) Days after receipt of such notice or,

 

b.

if the Default cannot be cured within such thirty (30) Day period through the diligent exercise of all commercially practicable efforts, Contractor fails to diligently exercise all commercially practicable efforts to cure such condition or fails to cure such condition within ninety (90) Days after receipt of such notice to cure such Default;

 

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    or

2. Contractor experiences an Insolvency Event, Owner,

in the event of (1) or (2), at its sole option and, without prejudice to any other rights that it has under this Agreement and, upon notice to Contractor, may

(y) take such steps as are reasonably necessary to overcome the Default condition, in which case Contractor shall be liable to Owner, subject to Sections 19.1 and 19.2, for any and all reasonable costs and expenses (including all reasonable attorneys’ fees, consultant fees and arbitration expenses) incurred by Owner in connection therewith, or

(z) terminate for Default Contractor’s performance of all or any portion of the Work under any or all Work Orders or this Agreement.

Guarantor’s failure to materially comply with any provision of the Parent Guarantee shall be a Default under this Agreement.

B. Additional Rights of Owner Upon Termination . In the event of a termination for Default in accordance with Section 15.1A, then Owner may, at its sole option, as applicable to the terminated portion of the Work: (i) enter onto the Site and, for the purpose of completing such Work, take possession of the Construction Equipment, Work Product, copies of all Work-specific Books and Records and other items owned or rented by Contractor (subject to the relevant Construction Equipment lease or rental agreements), (ii) take assignment of any or all of the Subcontracts, and/or (iii) either itself or through others complete the Work.

C. Obligations Upon Termination . Upon termination for Default in accordance with Section 15.1A, Contractor shall, as applicable to the terminated portion of the Work: (i) immediately discontinue Work on the date specified in the notice; (ii) place no further orders for Subcontracts, or any other items or services; (iii) inventory, maintain and turn over to Owner all Construction Equipment owned by Contractor and (subject to the relevant Construction Equipment lease or rental agreements) all Construction Equipment rented by Contractor and, in each case, present on the Site prior to Contractor’s receipt of the termination notice or provided by Owner for performance of the terminated Work; (iv) promptly make every reasonable effort to procure assignment or cancellation upon terms satisfactory to Owner of all Subcontracts, including rental agreements; (v) cooperate with Owner in the transfer of Work Product, including Drawings and Specifications, Permits and any other items or information and disposition of Work in progress so as to mitigate damages; (vi) comply with other reasonable requests from Owner regarding the terminated Work; (vii) thereafter preserve and protect Work already in progress and protect Equipment at the Site or in transit thereto, and to comply with any Applicable Law and any Applicable Codes and Standards; and (viii) perform all other obligations under Section 15.1B.

 

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D. No Further Entitlement to Payment . Upon termination for Default in accordance with Section 15.1A, Contractor shall not be entitled to any further payment from Owner for the terminated Work and Owner shall have no further obligation to make payment to Contractor for any terminated Work. Notwithstanding this Section 15.1D, within twenty (20) Days of the date of termination of this Agreement, Contractor shall reimburse Owner for any payments or portions of payments made pursuant to Article 8 which Contractor did not incur or earn through the actual Cost of Work or the Fee prior to termination for Default.

15.2 Termination for Convenience by Owner . Owner shall have the right to terminate all or a portion of the Work for its convenience by providing Contractor with a written notice of termination, to be effective upon receipt by Contractor. Upon termination for convenience, Contractor shall, as applicable to the terminated portion of the Work: (i) immediately discontinue the terminated portion of the Work on the date of the notice, (ii) place no further orders for Subcontracts or any other items or services for the terminated portion of the Work, (iii) promptly make every reasonable effort to procure cancellation upon terms satisfactory to Owner and Contractor of all Subcontracts, including rental agreements, unless Owner elects to take assignment of any such Subcontracts, (iv) assist Owner in the maintenance, protection, and disposition of Work in progress, including Equipment at the Site or in transit to the Site, (v) cooperate with Owner for the efficient transition of the Work, and (vi) cooperate with Owner in the transfer of Work Product, including Drawings and Specifications, Permits and any other items or information and disposition of Work in progress, and Owner may, at its sole option, take assignment of any or all of the Subcontracts. No later than twenty-five (25) Days after submission of Contractor’s Invoice(s) therefor, Contractor shall be paid for that portion of the Fee and Cost of Work for the Work performed up to the date of termination in accordance with this Agreement and the actual costs reasonably incurred by Contractor on account of such termination (which costs shall be adequately documented and supported by Contractor), including costs associated with demobilization of Contractor’s and Subcontractors’ personnel and Construction Equipment and any reasonable cancellation fees incurred by Contractor from cancellation of Subcontracts, less payments previously made to Contractor. If Contractor has been paid in excess of such amounts due to the advance payment methodology in Article 8, Contractor shall pay Owner such excess within twenty (20) Days of Owner’s demand. In no event under this Agreement shall Contractor be entitled to receive any amount for unabsorbed overhead, contingency, risk or anticipatory profits.

15.3 Suspension of Work . Owner may, for any reason, at any time and from time to time, by giving thirty (30) Days’ prior written notice to Contractor, suspend the carrying out of the Work or any part thereof, whereupon Contractor shall suspend the carrying out of such suspended Work for such time or times as Owner may require and shall take reasonable steps to minimize any costs associated with such suspension. During any such suspension, Contractor shall properly protect and secure such suspended Work in such manner as Owner may reasonably require. Unless otherwise instructed by Owner, Contractor shall during any such suspension maintain its staff and labor and otherwise be ready to proceed expeditiously with the Work as soon as reasonably practicable after receipt of Owner’s further instructions. As soon as reasonably practicable after receipt of notice to resume suspended Work, Contractor shall promptly resume performance of the Work to the extent required in the notice. In no event shall Contractor be entitled to any additional profits or damages due to such suspension.

 

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15.4 Suspension by Contractor for Owner’s Failure to Pay Undisputed Amounts . If Owner fails to pay any undisputed amount due and owing to Contractor and such failure continues for more than twenty (20) Days after the due date for such payment, then Contractor may suspend performance of the Work under the applicable Work Order until Contractor receives such undisputed amounts. Prior to any such suspension, Contractor shall provide Owner with at least fourteen (14) Days’ prior written notice of its intent to suspend performance of such Work. If and when Owner pays such undisputed amounts, Contractor shall immediately resume its performance of the Work.

15.5 Contractor’s Right to Terminate . If Owner shall at any time: (i) fail to pay any undisputed amount pursuant to Article 8; (ii) experience an Insolvency Event; or (iii) suspend the entire Work under this Agreement pursuant to Section 15.3 for one or more periods exceeding one hundred twenty (120) Days in the aggregate (each of the foregoing being an “ Owner Default ”) then, Contractor has the right (without prejudice to any other rights under the Agreement) to provide written notice to Owner specifying the nature of the Owner Default and demanding that such Owner Default be cured. If: (a) with respect to clause (i) Owner fails to cure such Owner Default within sixty (60) Days after receipt of such notice; (b) Owner experiences an Insolvency Event; or (c) Owner suspends the entire Work under this Agreement pursuant to Section 15.3 for an aggregate period exceeding one hundred twenty (120) Days, Contractor may, in the event of (a), (b) or (c), at its sole option and without prejudice to any other rights that it has under this Agreement, and upon notice to Owner, terminate this Agreement. In the event of such termination under this Section 15.5, Contractor shall have the rights (and Owner shall make the payments) provided for in Section 15.2 in the event of an Owner termination for convenience.

Article 16

INDEMNITIES

16.1 General Indemnification . In addition to its indemnification, defense and hold harmless obligations contained elsewhere in this Agreement, Contractor shall indemnify, hold harmless and defend the Owner Group from any and all damages, losses, costs and expenses (including all reasonable attorneys’ fees and litigation or arbitration expenses) to the extent that such damages, losses, costs and expenses result from any of the following:

A. FAILURE OF C ONTRACTOR OR ITS S UBCONTRACTORS TO COMPLY WITH A PPLICABLE L AW ; PROVIDED THAT THIS INDEMNITY SHALL BE LIMITED TO FINES AND PENALTIES IMPOSED ON O WNER G ROUP AND RESULTING FROM THE FAILURE OF C ONTRACTOR OR ITS S UBCONTRACTORS TO COMPLY WITH A PPLICABLE L AW ;

B. W ITH THE EXCEPTION OF ACTUAL OR ASSERTED VIOLATION OR INFRINGEMENT OF ANY DOMESTIC OR FOREIGN PATENTS , COPYRIGHTS OR TRADEMARKS OR OTHER INTELLECTUAL PROPERTY RELATED TO THE DOCUMENTS AND INFORMATION PREPARED BY B LACK  & V EATCH OR S HINER M OSELEY , ANY AND ALL DAMAGES , LOSSES , COSTS AND EXPENSES SUFFERED BY A T HIRD P ARTY AND RESULTING FROM ACTUAL OR ASSERTED VIOLATION OR INFRINGEMENT OF ANY DOMESTIC OR FOREIGN PATENTS , COPYRIGHTS OR TRADEMARKS OR OTHER INTELLECTUAL PROPERTY OWNED BY A T HIRD P ARTY TO THE EXTENT THAT SUCH VIOLATION OR INFRINGEMENT RESULTS FROM

 

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PERFORMANCE OF THE W ORK BY C ONTRACTOR OR ANY OF ITS S UBCONTRACTORS , OR ANY IMPROPER USE OF T HIRD P ARTY CONFIDENTIAL INFORMATION OR OTHER T HIRD P ARTY PROPRIETARY RIGHTS THAT MAY BE ATTRIBUTABLE TO C ONTRACTOR OR ANY S UBCONTRACTOR IN CONNECTION WITH THE W ORK ;

C. FAILURE BY C ONTRACTOR OR ANY S UBCONTRACTOR TO PAY T AXES FOR WHICH SUCH P ERSON IS LIABLE ;

D. FAILURE OF C ONTRACTOR TO MAKE PAYMENTS TO ANY S UBCONTRACTOR IN ACCORDANCE WITH THE RESPECTIVE S UBCONTRACT ; OR

E. PERSONAL INJURY TO OR DEATH OF ANY P ERSON ( OTHER THAN EMPLOYEES OF ANY MEMBER OF THE C ONTRACTOR G ROUP , THE O WNER G ROUP , ANY S UBCONTRACTOR OR L ANDOWNER ), AND DAMAGE TO OR DESTRUCTION OF PROPERTY OF T HIRD P ARTIES ( OTHER THAN L ANDOWNERS ) TO THE EXTENT ARISING OUT OF OR RESULTING FROM THE NEGLIGENCE IN CONNECTION WITH THE W ORK OF ANY MEMBER OF THE C ONTRACTOR G ROUP OR ANY S UBCONTRACTOR OR ANYONE DIRECTLY OR INDIRECTLY EMPLOYED BY THEM .

16.2 Injuries to Contractor’s or Owner’s Employees .

A. Injuries to Contractor’s Employees . S UBJECT TO S ECTION  16.4B, C ONTRACTOR SHALL DEFEND , INDEMNIFY AND HOLD HARMLESS THE O WNER G ROUP FROM AND AGAINST ALL DAMAGES , LOSSES , COSTS AND EXPENSES ( INCLUDING ALL REASONABLE ATTORNEYS ’ FEES , AND LITIGATION OR ARBITRATION EXPENSES ) ARISING OUT OF OR RESULTING FROM OR RELATED TO INJURY TO OR DEATH OF EMPLOYEES , OFFICERS OR DIRECTORS OF ANY MEMBER OF THE C ONTRACTOR G ROUP OR ANY S UBCONTRACTOR OCCURRING IN CONNECTION WITH THE W ORK OR THE F ACILITY , REGARDLESS OF THE CAUSE OF SUCH INJURY OR DEATH ( INCLUDING THE JOINT OR CONCURRENT NEGLIGENCE , BREACH OF CONTRACT OR OTHER BASIS OF LIABILITY OF ANY MEMBER OF THE O WNER G ROUP ) EXCEPT FOR THE SOLE NEGLIGENCE OF ANY MEMBER OF THE O WNER G ROUP .

B. Injuries to Owner’s Employees . O WNER SHALL DEFEND , INDEMNIFY AND HOLD HARMLESS THE C ONTRACTOR G ROUP FROM AND AGAINST ALL DAMAGES , LOSSES , COSTS AND EXPENSES ( INCLUDING ALL REASONABLE ATTORNEYS ’ FEES , AND LITIGATION OR ARBITRATION EXPENSES ) ARISING OUT OF RESULTING FROM OR RELATED TO INJURY TO OR DEATH OF ANY EMPLOYEES , OFFICERS OR DIRECTORS OF THE O WNER G ROUP OCCURRING IN CONNECTION WITH THE W ORK , REGARDLESS OF THE CAUSE OF SUCH INJURY OR DEATH ( INCLUDING THE JOINT OR CONCURRENT NEGLIGENCE , BREACH OF CONTRACT OR OTHER BASIS OF LIABILITY OF ANY MEMBER OF THE C ONTRACTOR G ROUP ) EXCEPT FOR THE SOLE NEGLIGENCE OF ANY MEMBER OF THE C ONTRACTOR G ROUP .

16.3 Damage to Contractor’s or Owner’s Property .

A. Damage to Contractor’s Property . C ONTRACTOR SHALL DEFEND , INDEMNIFY AND HOLD HARMLESS THE O WNER G ROUP FROM AND AGAINST ALL DAMAGES , LOSSES , COSTS AND EXPENSES ( INCLUDING ALL REASONABLE ATTORNEYS ’ FEES , AND LITIGATION OR ARBITRATION EXPENSES ) ARISING OUT OF OR RESULTING FROM OR RELATED

 

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TO DAMAGE TO OR DESTRUCTION OF PROPERTY OF ANY MEMBER OF THE C ONTRACTOR G ROUP OR ANY S UBCONTRACTOR OCCURRING IN CONNECTION WITH THE W ORK OR THE F ACILITY , REGARDLESS OF THE CAUSE OF DAMAGE OR DESTRUCTION , INCLUDING THE SOLE OR JOINT NEGLIGENCE , BREACH OF CONTRACT OR OTHER BASIS OF LIABILITY OF ANY MEMBER OF THE O WNER G ROUP .

B. Damage to Owner’s Property . O WNER SHALL DEFEND , INDEMNIFY AND HOLD HARMLESS THE C ONTRACTOR G ROUP FROM AND AGAINST ALL DAMAGES , LOSSES , COSTS AND EXPENSES ( INCLUDING ALL REASONABLE ATTORNEYS ’ FEES , AND LITIGATION OR ARBITRATION EXPENSES ) ARISING OUT OF OR RESULTING FROM OR RELATED TO DAMAGE TO OR DESTRUCTION OF PROPERTY OF O WNER G ROUP ( EXCLUDING THE W ORK AND THE F ACILITY ) OCCURRING IN CONNECTION WITH THE W ORK , REGARDLESS OF THE CAUSE OF SUCH DAMAGE OR DESTRUCTION , INCLUDING THE SOLE OR JOINT NEGLIGENCE , BREACH OF CONTRACT OR OTHER BASIS OF LIABILITY OF ANY MEMBER OF THE C ONTRACTOR G ROUP . Section 9.3 allocates the responsibility and liability for damage to the Work and the Facility.

16.4 Hazardous Materials Indemnification .

A. Contractor Indemnification Obligations . C ONTRACTOR SHALL INDEMNIFY , HOLD HARMLESS AND DEFEND THE O WNER G ROUP FROM ANY AND ALL DAMAGES , LOSSES , COSTS AND EXPENSES ( INCLUDING BODILY INJURY , DEATH AND PROPERTY DAMAGE OR DESTRUCTION AND REASONABLE ATTORNEYS ’ FEES AND LITIGATION OR ARBITRATION EXPENSES ) TO THE EXTENT THAT SUCH DAMAGES , LOSSES , COSTS AND EXPENSES SUFFERED BY A T HIRD P ARTY RESULT FROM :

1. C ONTRACTOR ’ S OR ANY S UBCONTRACTOR ’ S USE , HANDLING OR DISPOSAL OF H AZARDOUS M ATERIALS BROUGHT ON THE S ITE BY C ONTRACTOR OR ANY S UBCONTRACTOR ;

2. C ONTRACTOR ’ S OR ANY S UBCONTRACTOR ’ S FAILURE TO STOP W ORK IN AN AREA OF THE S ITE CONTAINING PRE - EXISTING H AZARDOUS M ATERIALS AFTER C ONTRACTOR OR SUCH S UBCONTRACTOR KNOWS SUCH AREA CONTAINS H AZARDOUS M ATERIALS , BUT SUCH INDEMNIFICATION , HOLD HARMLESS AND DEFENSE OBLIGATIONS ARE LIMITED TO THE PROCEEDS OF INSURANCE RECEIVED BY C ONTRACTOR UNDER C ONTRACTOR ’ S P OLLUTION L IABILITY I NSURANCE ( SUCH INSURANCE BEING REQUIRED BY A TTACHMENT L , TO BE PROCURED BY C ONTRACTOR ) AND THE DEFENSE OBLIGATIONS PROVIDED BY SUCH INSURANCE ;

3. C ONTRACTOR ’ S OR ANY S UBCONTRACTOR ’ S DISREGARD OF O WNER ’ S WRITTEN ADVICE AS TO THE NATURE AND SPECIFIC LOCATION OF SUCH H AZARDOUS M ATERIALS OR INSTRUCTIONS REGARDING SUCH H AZARDOUS M ATERIALS IN PERFORMING W ORK IN AREAS THAT CONTAIN OR MAY CONTAIN H AZARDOUS M ATERIALS , BUT SUCH INDEMNIFICATION , HOLD HARMLESS AND DEFENSE OBLIGATIONS ARE LIMITED TO THE PROCEEDS OF INSURANCE RECEIVED BY C ONTRACTOR OR ITS S UBCONTRACTORS UNDER C ONTRACTOR ’ S P OLLUTION L IABILITY I NSURANCE ( SUCH INSURANCE BEING REQUIRED BY A TTACHMENT L , TO

 

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BE PROCURED BY C ONTRACTOR ) AND THE DEFENSE OBLIGATIONS PROVIDED BY SUCH INSURANCE .

4. N OTWITHSTANDING S ECTIONS 16.4.A.2 AND 16.4.A.3, IN NO EVENT SHALL C ONTRACTOR ’ S LIABILITY UNDER S ECTIONS 16.4A.2 AND 16.4.A.3 EXCEED T WENTY -F IVE M ILLION U.S. D OLLARS (US$25,000,000) IN THE AGGREGATE .

B. Owner Indemnification Obligations . N OTWITHSTANDING S ECTIONS 16.2 AND 16.3, O WNER SHALL INDEMNIFY , HOLD HARMLESS AND DEFEND THE C ONTRACTOR G ROUP AND ITS S UBCONTRACTORS FROM ANY AND ALL DAMAGES , LOSSES , COSTS AND EXPENSES ( INCLUDING BODILY INJURY , DEATH AND PROPERTY DAMAGE OR DESTRUCTION AND REASONABLE ATTORNEYS ’ FEES AND LITIGATION OR ARBITRATION EXPENSES ) TO THE EXTENT THAT SUCH DAMAGES , LOSSES , COSTS AND EXPENSES RESULT FROM :

1. ANY PRE - EXISTING H AZARDOUS M ATERIALS AT THE S ITE , BUT EXCLUDING ANY DAMAGES , LOSSES , COSTS AND EXPENSES RESULTING FROM : ( I ) C ONTRACTOR ’ S OR ANY S UBCONTRACTOR ’ S FAILURE TO STOP W ORK IN AN AREA OF THE S ITE CONTAINING PRE - EXISTING H AZARDOUS M ATERIALS AFTER C ONTRACTOR OR SUCH S UBCONTRACTOR KNOWS SUCH AREA CONTAINS H AZARDOUS M ATERIALS , OR ( II ) C ONTRACTOR ’ S OR ANY S UBCONTRACTOR ’ S DISREGARD OF O WNER ’ S WRITTEN ADVICE AS TO THE NATURE OR SPECIFIC LOCATION OF SUCH H AZARDOUS M ATERIALS OR INSTRUCTIONS REGARDING SUCH H AZARDOUS M ATERIALS IN PERFORMING W ORK IN AREAS THAT CONTAIN OR MAY CONTAIN H AZARDOUS M ATERIALS ; OR

2. O WNER OR ANY T HIRD P ARTY BRINGING ANY H AZARDOUS M ATERIALS ON THE S ITE AFTER THE A GREEMENT E FFECTIVE D ATE .

16.5 Patent and Copyright Indemnification Procedure . I N THE EVENT THAT ANY VIOLATION OR INFRINGEMENT FOR WHICH C ONTRACTOR IS RESPONSIBLE TO INDEMNIFY THE O WNER G ROUP AS SET FORTH IN S ECTION  16.1B RESULTS IN ANY SUIT , CLAIM , TEMPORARY RESTRAINING ORDER OR PRELIMINARY INJUNCTION , C ONTRACTOR SHALL , IN ADDITION TO ITS OBLIGATIONS UNDER S ECTION  16.1B, MAKE EVERY REASONABLE EFFORT , BY GIVING A SATISFACTORY BOND OR OTHERWISE , TO SECURE THE SUSPENSION OF THE INJUNCTION OR RESTRAINING ORDER . I F , IN ANY SUCH SUIT OR CLAIM , THE W ORK , THE F ACILITY OR ANY PART , COMBINATION OR PROCESS THEREOF , IS HELD TO CONSTITUTE AN INFRINGEMENT AND ITS USE IS PRELIMINARILY OR PERMANENTLY ENJOINED , C ONTRACTOR SHALL PROMPTLY MAKE EVERY REASONABLE EFFORT TO SECURE FOR O WNER A LICENSE , AT NO COST TO O WNER , AUTHORIZING CONTINUED USE OF THE INFRINGING W ORK OR PORTION OF THE F ACILITY . I F C ONTRACTOR IS UNABLE TO SECURE SUCH A LICENSE WITHIN A REASONABLE TIME , C ONTRACTOR SHALL , AT ITS OWN EXPENSE AND WITHOUT IMPAIRING PERFORMANCE REQUIREMENTS , EITHER REPLACE THE AFFECTED W ORK , IN WHOLE OR PART , WITH NON - INFRINGING COMPONENTS OR PARTS OR MODIFY THE SAME SO THAT THEY BECOME NON - INFRINGING .

16.6 Lien Indemnification . S HOULD C ONTRACTOR OR ANY S UBCONTRACTOR OR ANY OTHER P ERSON ACTING THROUGH OR UNDER ANY OF THEM FILE A LIEN OR OTHER ENCUMBRANCE AGAINST ALL OR ANY PORTION OF THE W ORK , THE S ITE OR THE F ACILITY , PROVIDED THAT O WNER

 

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HAS MADE PAYMENT TO C ONTRACTOR OF ALL UNDISPUTED AMOUNTS CURRENTLY DUE C ONTRACTOR IN ACCORDANCE WITH THE TERMS OF THE C ONTRACT D OCUMENTS , C ONTRACTOR SHALL , AT ITS SOLE COST AND EXPENSE , REMOVE OR DISCHARGE , BY PAYMENT , BOND OR OTHERWISE , SUCH LIEN OR ENCUMBRANCE WITHIN TWENTY - FIVE (25) D AYS OF THE FILING OF SUCH LIEN OR ENCUMBRANCE . I F C ONTRACTOR FAILS TO REMOVE OR DISCHARGE ANY SUCH LIEN OR ENCUMBRANCE WITHIN SUCH TWENTY - FIVE (25) D AY PERIOD , THEN O WNER MAY , IN ITS SOLE DISCRETION AND IN ADDITION TO ANY OTHER RIGHTS THAT IT HAS UNDER THIS A GREEMENT , TAKE ANY ONE OR MORE OF THE FOLLOWING ACTIONS :

A. REMOVE OR DISCHARGE SUCH LIEN AND ENCUMBRANCE USING WHATEVER MEANS THAT O WNER , IN ITS SOLE DISCRETION , DEEMS APPROPRIATE , INCLUDING THE PAYMENT OF SETTLEMENT AMOUNTS THAT IT DETERMINES IN ITS SOLE DISCRETION AS BEING NECESSARY TO REMOVE OR DISCHARGE SUCH LIEN OR ENCUMBRANCE . I N SUCH CIRCUMSTANCE , C ONTRACTOR SHALL BE LIABLE TO O WNER FOR ALL DAMAGES , COSTS , LOSSES AND EXPENSES ( INCLUDING ALL REASONABLE ATTORNEYS ’ FEES AND LITIGATION OR ARBITRATION EXPENSES ) INCURRED BY O WNER ARISING OUT OF OR RELATING TO SUCH REMOVAL AND DISCHARGE , SUBJECT TO A MAXIMUM CAP EQUAL TO THE AMOUNT OF THE LIEN OR ENCUMBRANCE PLUS REASONABLE ATTORNEYS ’ FEES AND LITIGATION AND ARBITRATION EXPENSES . A LL SUCH DAMAGES , COSTS , LOSSES AND EXPENSES SHALL BE PAID BY C ONTRACTOR NO LATER THAN THIRTY (30) D AYS AFTER RECEIPT OF EACH INVOICE FROM O WNER ;

B. SEEK AND OBTAIN AN ORDER GRANTING SPECIFIC PERFORMANCE FROM A COURT OF COMPETENT JURISDICTION , REQUIRING THAT C ONTRACTOR IMMEDIATELY DISCHARGE AND REMOVE , BY BOND , PAYMENT OR OTHERWISE , SUCH LIEN OR ENCUMBRANCE . T HE P ARTIES EXPRESSLY AGREE THAT O WNER SHALL BE ENTITLED TO SUCH SPECIFIC PERFORMANCE AND THAT C ONTRACTOR SHALL BE LIABLE TO O WNER FOR ALL DAMAGES , COSTS , LOSSES AND EXPENSES ( INCLUDING ALL REASONABLE ATTORNEYS ’ FEES AND LITIGATION OR ARBITRATION EXPENSES ) INCURRED BY O WNER ARISING OUT OF OR RELATING TO SUCH SPECIFIC PERFORMANCE ACTION . C ONTRACTOR AGREES THAT THE FAILURE TO DISCHARGE AND REMOVE ANY SUCH LIEN OR ENCUMBRANCE WILL GIVE RISE TO IRREPARABLE INJURY TO O WNER AND O WNER ’ S A FFILIATES , AND FURTHER , THAT O WNER AND SUCH O WNER A FFILIATES WILL NOT BE ADEQUATELY COMPENSATED BY DAMAGES ; OR

C. CONDUCT THE DEFENSE OF ANY ACTION IN RESPECT OF ( AND ANY COUNTERCLAIMS RELATED TO ) SUCH LIENS OR ENCUMBRANCES AS SET FORTH IN S ECTION  16.7, WITHOUT REGARD TO C ONTRACTOR ’ S RIGHTS UNDER SUCH SECTION .

16.7 Legal Defense . N OT LATER THAN FIFTEEN (15) D AYS AFTER RECEIPT OF WRITTEN NOTICE FROM THE I NDEMNIFIED P ARTY TO THE I NDEMNIFYING P ARTY OF ANY CLAIMS , DEMANDS , ACTIONS OR CAUSES OF ACTION ASSERTED AGAINST SUCH I NDEMNIFIED P ARTY FOR WHICH THE I NDEMNIFYING P ARTY HAS INDEMNIFICATION , DEFENSE AND HOLD HARMLESS OBLIGATIONS UNDER THIS A GREEMENT , WHETHER SUCH CLAIM , DEMAND , ACTION OR CAUSE OF ACTION IS ASSERTED IN A LEGAL , JUDICIAL