AIA Document A111 1997

Standard Form of Agreement Between Owner and Contractor
Where the basis for payment is the COST OF THE WORK PLUS A FEE with a negotiated
Guaranteed Maximum Price

AGREEMENT made as of the 25th day of            August            in the year 2005
(In words, indicate day, month and year)

BETWEEN the Owner:
(Name, address and other information)

Duncan Investments, LLC
225 South Sepulveda Blvd.
Manhattan Beach, CA 90266

and the Contractor:
(Name, address and other information)

Morley Construction Company
2901 28^th Street, Suite 100
Santa Monica, CA 90405

The Project is:
(Name and location)

Skechers Office Building
330 South Sepulveda Blvd.
Manhattan Beach, CA 90266

The Architect is:
(Name, address and other information)

David Forbes Hibbert AIA

1544 20^th Street, Suite 103
Santa Monica, CA 90404

The Owner and Contractor agree as follows.

1

ARTICLE 1 THE CONTRACT DOCUMENTS
The Contract Documents consist of this Agreement, Conditions of the Contract (General, Supplementary and other Conditions), Drawings, Specifications, Addenda issued prior to execution of this Agreement, other documents listed in this Agreement and Modifications issued after execution of this Agreement; these form the Contract, and are as fully a part of the Contract as if attached to this Agreement or repeated herein. The Contract represents the entire and integrated agreement between the parties hereto and supersedes prior negotiations, representations or agreements, either written or oral. An enumeration of the Contract Documents, other than Modifications, appears in Article 15. If anything in the other Contract Documents is inconsistent with this Agreement, this Agreement shall govern.

ARTICLE 2 THE WORK OF THIS CONTRACT
The Contractor shall fully execute the Work described in the Contract Documents, except to the extent specifically indicated in the Contract Documents to be the responsibility of others.

ARTICLE 3 RELATIONSHIP OF THE PARTIES
The Contractor accepts the relationship of trust and confidence established by this Agreement and covenants with the Owner to cooperate with the Architect and exercise the Contractors skill and judgment in furthering the interests of the Owner; to furnish efficient business administration and supervision; to furnish at all times an adequate supply of workers and materials; and to perform the Work in an expeditious and economical manner consistent with the Owners interests. The Owner agrees to furnish and approve, in a timely manner, information required by the Contractor and to make payments to the Contractor in accordance with the requirements of the Contract Documents.

ARTICLE 4 DATE OF COMMENCEMENT AND SUBSTANTIAL COMPLETION
4.1 The date of commencement of the Work shall be the date of this Agreement unless a different date is stated below or provision is made for the date to be fixed in a notice to proceed issued by the Owner.
(Insert the date of commencement, if it differs from the date of this Agreement or, if applicable, state that the date will be fixed in a notice to proceed.)

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

4.2 The Contract Time shall be measured from the date of commencement. The Date of Commencement shall be five (5) working days after the Owners Notice to Proceed.

4.3 The Contractor shall achieve Substantial Completion of the entire Work not later than 462 calendar            days from the date of commencement, or as follows:
(Insert number of calendar days. Alternatively, a calendar date may be used when coordinated with the date of commencement. Unless stated elsewhere in the Contract Documents, insert any requirements for earlier Substantial Completion of certain portions of the Work.)

As Shown on Exhibit F, the anticipated date of Commencement is September 1, 2005. Based on the date, the calculated date of Substantive Completion is December 6, 2006.

, subject to adjustments of this Contract Time as provided in the Contract Documents.
(Insert provisions, if any, for liquidated damages relating to failure to complete on time, or for bonus payments for early completion of the Work.)

4.4 If Contractor achieves Substantial Completion of the Work prior to the Scheduled Completion Date, as adjusted by Change Orders, then Contractor shall be entitled to an early completion bonus equal to $20,000 dollars.

4.5 Owner and Contractor acknowledge and agree that if Contractor fails to achieve Substantial Completion of the Work within the Contract Time, as adjusted by Change Order, Owner will suffer substantial damages which are both extremely difficult and impracticable to ascertain. Therefore, Owner and Contractor agree that in the event Contractor fails to achieve Substantial Completion within thirty (30) days after the final Scheduled Completion Date, Contractor shall pay to Owner as liquidated damages, not as a penalty but as a reasonable estimate of the amount of damages Owner will suffer, $ 1,000 dollars for each day of delay (after the expiration of said thirty (30) day grace period), until the Work is Substantially Complete. If Contractor fails to achieve Substantial Completion within sixty (60) days after the final scheduled completion date, Contractor shall pay to Owner as liquidated damages $2,000 dollars for each day of delay after the sixtieth day. Owner and Contractor acknowledge and agree that this liquidated damages provision shall be the only remedy to Owner for damages caused by Contractors failure to achieve Substantial Completion within the Contract Time.

ARTICLE 5 BASIS FOR PAYMENT
5.1 CONTRACT SUM
5.1.1 The Owner shall pay the Contractor the Contract Sum in current funds for the Contractors performance of the Contract. The Contract Sum is the Cost of the Work as defined in Article 7 plus the Contractors Fee.

5.1.2 The Contractors Fee shall be $ 655,096 dollars.
(State a lump sum, percentage of Cost of the Work or other provision for determining the Contractors Fee, and describe the method of adjustment of the Contractors Fee for changes in the Work.)

5.1.3 Changes (Change Order and Construction Change Directives) that affect the Cost of the Work shall be handled as follows:

5.1.3.1 For changes which increase the Cost of the Work, the estimated value shall be the Cost of the work (computed in accordance with Article 7), plus an allowance for jobsite General Conditions of eight percent (8%) and Contractors Fixed Fee of three and three-quarters ( 3.75%) percent.

5.1.3.2 For changes which decrease the cost, the estimated value shall be the direct change in the Cost of the Work (computed per Article 7), with a reduction in the Contractors Fee of (3.75%) percent.

5.1.3.3 After values have been computed per 5.1.3.1 and 5.1.3.2 above, these estimated values shall be used to establish the adjusted Guaranteed Maximum Price.

5.1.3.4 Billings for the Cost of the Work on changes will be actual costs (per Article 7), and will be incorporated into the billings for the Project as a whole, not reported separately.

5.1.3.5 If the Contractor is asked by the owner to perform tenant work, over and above the changes in the base building described above, then such tenant work shall be handled under a separate agreement.

5.1.4 After completion of the Project, and after the Guaranteed Maximum Price has been adjusted per Article 5.1.3 above, it shall be compared to the total of the Cost of the Work (defined in Article 7), plus the Contractors Fee (Article 5.1.2). If the final Guaranteed Maximum Price exceeds the total of the cost of the Work plus any unused monies from the line item contingency noted in 5.2.1.2 and 5.2.1.3 plus Contractors fee, then the difference (Savings) shall be divided between the Owner and Contractor. The Owner will be credited with the first $50,000 in Savings, thereafter the Owner will be credited with 75% of the Savings, and will pay the Contractor 25% of the Savings as Additional Fee.

5.2 GUARANTEED MAXIMUM PRICE
5.2.1 The sum of the Cost of the Work and the Contractors Fee is guaranteed by the Contractor not to exceed Eighteen-Million One-Hundred Twenty-Four Thousand Three-Hundred Twenty-Two ($18,124,322 ), subject to additions and deductions by Change Order as provided in the Contract Documents. Such maximum sum is referred to in the Contract Documents as the Guaranteed Maximum Price. Costs which would cause the Guaranteed Maximum Price to be exceeded shall be paid by the Contractor without reimbursement by the Owner.
(Insert specific provisions if the Contractor is to participate in any savings.)

5.2.1.1 There is only one Guaranteed Maximum Price provided by this Contract. Although the Contractor has furnished the Owner with the Budget Line Item Breakdown (Exhibit C), the amounts of the individual line items in these exhibits are not guaranteed. The final cost of any particular line item may be more or less than the estimate, except for the structural concrete work which will be performed on a Lump Sum basis, as per Paragraph 7.3.2 of this Agreement. The Contractor does, however, guarantee that it will perform the work required by the Contract Documents within the Guaranteed Maximum Price.

5.2.1.2 The Guaranteed Maximum Price has been determined by computing an estimated cost, then adding a contingency factor to the estimated cost, and increasing the figure thus obtained by the Contractors Fee.

5.2.1.3 The Contingency is intended for the Contractors use to cover unanticipated overrun of any costs, additional cost caused by failure of any subcontractor, and any other unforeseen events. The contingency factor is not to be used by the Owner to cover the cost of changes to the Contract Documents required by the Owner, Architect or governing authority, nor for any other purpose.

5.2.2 The Guaranteed Maximum Price is based on the following alternates, if any, which are described in the Contract Documents and are hereby accepted by the Owner:
(State the numbers or other identification of accepted alternates. If decisions on other alternates are to be made by the Owner subsequent to the execution of this Agreement, attach a schedule of such other alternates showing the amount for each and the date when the amount expires.)

5.2.3 Unit prices, if any, are as follows:

5.2.4 Allowances, if any, are as follows
(Identify and state the amounts of any allowances, and state whether they include labor, materials, or both.)

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

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

5.2.7 The Contractor represents and warrants to Owner that (i) it has substantial experience and expertise in building projects such as the Project, and it acknowledges that such experience and expertise were substantial and material factors in Owners decisions to retain Contractor to build the Project, and (ii) it has carefully reviewed the Contract Documents, and has determined that they are sufficiently comprehensive and complete as to permit Contractor to build the Project within the Project Budget and the guaranteed Maximum Price and within the Contract time. Therefore Contractor acknowledges and agrees that Contractor shall not seek, and Owner shall have no obligation to agree to, any increase in the Guaranteed Maximum Price, or any extension of the Contract Time, based upon normal coordination needs of the plans and specifications.

ARTICLE 6 CHANGES IN THE WORK
6.1 Adjustments to the Guaranteed Maximum Price on account of changes in the Work may be determined by any of the methods listed in Section 7.3.3 of AIA Document A201-1997.

6.2 In calculating adjustments to subcontracts (except those awarded with the Owners prior consent on the basis of cost plus a fee), the terms cost and fee as used in Section 7.3.3.3 of AIA Document A201-1997 and the terms costs and a reasonable allowance for overhead and profit as used in Section 7.3.6 of AIA Document A201-1997 shall have the meanings assigned to them in AIA Document A201-1997 and shall not be modified by Articles 5, 7 and 8 of this Agreement. Adjustments to subcontracts awarded with the Owners prior consent on the basis of cost plus a fee shall be calculated in accordance with the terms of those subcontracts.

6.3 In calculating adjustments to the Guaranteed Maximum Price, the terms cost and costs as used in the above-referenced provisions of AIA Document A201-1997 shall mean the Cost of the Work as defined in Article 7 of this Agreement and the terms fee and a reasonable allowance for overhead and profit shall mean the Contractors Fee as defined in Section 5.1.2 of this Agreement.

6.4 If no specific provision is made in Section 5.1 for adjustment of the Contractors Fee in the case of changes in the Work, or if the extent of such changes is such, in the aggregate, that application of the adjustment provisions of Section 5.1 will cause substantial inequity to the Owner or Contractor, the Contractors Fee shall be equitably adjusted on the basis of the Fee established for the original Work, and the Guaranteed Maximum Price shall be adjusted accordingly.

ARTICLE 7 COSTS TO BE REIMBURSED
7.1 COST OF THE WORK
The term Cost of the Work shall mean costs necessarily incurred by the Contractor in the proper performance of the Work. Such costs shall be at rates not higher than the standard paid at the place of the Project except with prior consent of the Owner. The Cost of the Work shall include only the items set forth in this Article 7.

7.2 LABOR COSTS
7.2.1 Wages of construction workers directly employed by the Contractor to perform the construction of the Work at the site or, with the Owners approval, at off-site workshops.

7.2.2 Wages or salaries of the Contractors supervisory and administrative personnel when stationed at the site with the Owners approval.
(If it is intended that the wages or salaries of certain personnel stationed at the Contractors principal or other offices shall be included in the Cost of the Work, identify in Article 14 the personnel to be included and whether for all or only part of their time, and the rates at which their time will be charged to the Work.)

7.2.2.1 Prorated salaries and expenses of the following personnel for that portion of their time spent working on this Project (regardless of work place); Project Executive, Project Manager, Project Engineer, Safety Director, Project Accountant and General Superintendent, including automobile allowances where applicable.

7.2.3 Wages and salaries of the Contractors supervisory or administrative personnel engaged, at factories, workshops or on the road, in expediting the production or transportation of materials or equipment required for the Work, but only for that portion of their time required for the Work.

7.2.4 Costs paid or incurred by the Contractor for taxes, insurance, contributions, assessments and benefits required by law or collective bargaining agreements and, for personnel not covered by such agreements, customary benefits such as sick leave, medical and health benefits, holidays, vacations and pensions, provided such costs are based on wages and salaries included in the Cost of the Work under Sections 7.2.1 through 7.2.3.

7.2.4.1 The Contractor has computed the cost of Workers Compensation and other expenses measured by payroll for all employees, reimbursable under Article 7.2. It is agreed that the surcharges for these items, to be applied to the base wages for personnel described in Article 7, shall be 61.53%. It is recognized that minor changes and variation in this figure can occur, which are difficult or impossible to compute accurately. Therefore, the surcharges agreed on above shall be used for the duration of the Project.

7.3 SUBCONTRACT COSTS
7.3.1 Payments made by the Contractor to Subcontractors in accordance with the requirements of the subcontracts.

7.3.2 Self-Performed Work The Contractor will self-perform the structural concrete work for a Guaranteed lump-sum amount of $4,392,146 . The Contractor has submitted documentation supporting the Lump Sum amount to allow review by the Owner. The Owner will notify the Contractor if additional documentation is required.

7.4 COSTS OF MATERIALS AND EQUIPMENT INCORPORATED IN THE COMPLETED CONSTRUCTION
7.4.1 Costs, including transportation and storage, of materials and equipment incorporated or to be incorporated in the completed construction.

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

7.5 COSTS OF OTHER MATERIALS AND EQUIPMENT, TEMPORARY FACILITIES AND RELATED ITEMS
7.5.1 Costs, including transportation and storage, installation, maintenance, dismantling and removal of materials, supplies, temporary facilities, machinery, equipment, and hand tools not customarily owned by construction workers, that are provided by the Contractor at the site and fully consumed in the performance of the Work; and cost (less salvage value) of such items if not fully consumed, whether sold to others or retained by the Contractor. Cost for items previously used by the Contractor shall mean fair market value.

7.5.2 Rental charges for temporary facilities, machinery, equipment, and hand tools not customarily owned by construction workers that are provided by the Contractor at the site, whether rented from the Contractor or others, and costs of transportation, installation, minor repairs and replacements, dismantling and removal thereof. Rates and quantities of equipment rented shall be subject to the Owners prior approval.

 

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