Design/build Construction Contract

DESIGN/BUILD


CONSTRUCTION CONTRACT


for


McLeod Technology Center


Draft #1


Date 9-17-96


Executed 10-23-96


/s/ LAF 2
TABLE OF CONTENTS


ARTICLE 1 - SCOPE OF THE PROJECT ......................................... 3


ARTICLE 2 - TIME OF COMPLETION ........................................... 4


ARTICLE 3 - CONTRACT SUM ................................................. 4


ARTICLE 4 - PAYMENT OF CONTRACT SUM ...................................... 4


(a) Progress Payments ............................................ 4
(b) Punch List Work .............................................. 5
(c) Final Payment ................................................ 6
(d) Liens ........................................................ 6
(e) Late Payment ................................................. 6


ARTICLE 5 - BOND ......................................................... 7


ARTICLE 6 - CHANGES IN THE WORK .......................................... 7


ARTICLE 7 - CORRECTION OF THE WORK ....................................... 7


(a) Rejected work ................................................ 7
(b) Warranty Period .............................................. 8
ARTICLE 8 - INSURANCE .................................................... 8


(a) Design/Builder's Liability Insurance ......................... 8
(b) Casualty Insurance ........................................... 9
(c) Waiver of Subrogation ........................................10
(d) Notice of Cancellation .......................................10


ARTICLE 9 - TERMINATION OF THE CONTRACT ..................................10


(a) Termination by Design/Builder ................................10
(b) Termination by Owner .........................................10


ARTICLE 10 - MISCELLANEOUS PROVISIONS ....................................11


(a) Owner and Design/Builder Representatives .....................11


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(b) Ownership of Plans................................................11
(c) Survey and Easements..............................................12
(d) Supervision and Construction Procedures...........................12
(e) Labor and Materials...............................................12
(f) Quality Assurance and Testing.....................................12
(g) Taxes, Permits, Fees and Bonds....................................13
(h) Royalties and Patents.............................................13
(i) Concealed Conditions..............................................13
(j) Cleaning Up.......................................................14
(k) Access............................................................14
(l) Work by Owner.....................................................14
(m) Indemnification...................................................14
(n) Notices...........................................................15
(o) Governing Law.....................................................15
(p) Binding Effect....................................................16
(q) Hazardous Substances, Buried Tanks and Wells......................16
(r) Project Closeout..................................................17
(s) Entire Agreement..................................................17
(t) Allowances........................................................17
(u) Addendum..........................................................17
(v) Additional Terms..................................................18


ARTICLE 11 - ARBITRATION AND LEGAL COSTS.....................................18


(a) Arbitration......................................................18
(b) Legal Costs......................................................18


EXHIBIT A....................................................................20


EXHIBIT B....................................................................23


EXHIBIT C....................................................................24


EXHIBIT D....................................................................25


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DESIGN/BUILD
CONSTRUCTION CONTRACT


This Contract, made this 17th day of September, 1996, by and between Ryan Construction Company of Minnesota, Inc., a Minnesota corporation (hereinafter called "Design/Builder"), and McLeod, Inc., an Iowa Corporation (hereinafter called "Owner"); and which incorporates the interim letter agreement executed by and between Design/Builder and Owner dated July 11, 1996 ("Interim Contract"), the terms and conditions of which remain in full force and effect. A copy of the Interim Contract is attached as Exhibit C and is incorporated into this agreement by this reference.


Witnesseth that, in consideration of the mutual covenants and agreements contained herein, Design/Builder and Owner hereby agree as follows:


Article 1 -- Scope of the Project


Design/Builder shall furnish all of the labor, materials, equipment and all of the services necessary for the design and construction of an approximately 160,000 square foot office building, located at 6400 C Street Road, S.W., Cedar Rapids, Iowa, and related improvements in accordance with the plans, outline specifications and any other materials described on Exhibit A, in accordance with the Construction Documents as authorized by appropriate Change Orders, and the final plans specifications prepared therefrom (hereinafter referred to as the "Project"). Both the design and construction of the Project shall be undertaken with a standard of care, skill and workmanship throughout, consistent with applicable industry standards in the area in which the Project is located. Final plans and specifications will comply with all applicable building codes, ordinances and regulations in effect and enforced as of the date of this Contract. Owner has furnished to Design/Builder any necessary program or design information regarding Owner's needs or requirements for the Project and for any work to be performed by separate contractors working directly for Owner. Design/Builder shall be entitled to rely on the accuracy and completeness of such information in the design of the Project. Additional design services for space planning of movable office work stations, design of custom furniture, selection of furnishings, artwork and accessories, and inventorying of existing furniture and equipment are not within the scope of the services to be provided by Design/Builder pursuant to this Contract and must be separately contracted for in writing.


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Article 2 - Time of Completion


Design/Builder shall achieve Substantial Completion of the Project not later than April 1, 1997. However, if Design/Builder is delayed at any time in the progress of the work by any act or neglect of Owner or of any agent or employee of Owner or of any separate contractor employed by Owner, changes ordered in the work, labor disputes, fire or other casualty, unusual delay in deliveries, shortages or unavailability of fuel or materials, unusual weather, acts of God or public enemy, governmental action or non-action, or by any other cause beyond the control of Design/Builder, then the time by which Substantial Completion is to be achieved shall be extended by a period equal to such delay. All claims for an extension of time shall be made in writing to Owner within 20 days after the occurrence of the cause of delay or shall be deemed waived, but in the case of a continuing cause of delay, only one claim shall be necessary. Substantial Completion shall be deemed to have been achieved when construction is sufficiently complete so that Owner can utilize the Project for the purpose for which it is intended and a certificate of occupancy (temporary or permanent) has been issued for the Project. Owner understands that site improvements may not be complete on April 1, 1997, but will be complete as soon as reasonably possible thereafter depending on weather conditions, however, any such incomplete items shall not affect the Owner's occupancy of the Project. Time is of the essence in the completion of this Project. Owner and Design/Builder shall execute a Certificate of Substantial Completion certifying such date as the Date of Substantial Completion. As of the Date of Substantial Completion, Owner shall assume full responsibility for all utilities, insurance, security, and all other operational aspects of the Project.


Article 3 - Contract Sum


Owner shall pay Design/Builder for the performance of this Contract, subject to additions and deductions as provided for herein, in current funds, the Contract Sum of Twelve Million, Three hundred seventy-five thousand, five hundred thirty-six Dollars ($12,375,536).


Article 4 - Payment of Contract Sum

(a) Progress Payments. Owner shall make payments on account of the
Contract Sum as follows:


(i) Design/Builder shall submit to Owner, on or about the first
day of each month, an Application for Payment based on the
value of the work completed (including materials suitably stored
on the site) and the Schedule of Values set forth in Exhibit B.
The Schedule of Values shall be the basis for the allocation of
the contract price


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to the activities shown on the Construction Schedule. If no Schedule of
Values is attached hereto, Design/Builder shall submit one to Owner prior
to its first Application for Payment.


(ii) Upon receipt of each Application for Payment, Owner shall have the
right to inspect the Project to confirm that Design/Builder's Application
reflects the value of work actually completed. If Owner discovers that the
work actually completed differs from that represented on the Application
for Payment, or the work is defective or does not comply with the
requirements of this Contract, Owner may withhold such sums as it
reasonably deems necessary in light of the work actually completed until
the work is completed or the defect is remedied.


(iii) Within 15 days after receipt of each Application for Payment, Owner
shall pay to Design/Builder the entire amount thereof, subject to possible
withholding as provided above, except that until such time as
Design/Builder certifies that the Project is 50% complete, a retainage of
10% of the amount set forth in each Application for Payment shall be
withheld. Subsequent to the Design/Builder's certification that the Project
is 50% complete, no additional retainage shall be withheld from such
progress payments to Design/Builder. No payment to Design/Builder shall
constitute an acceptance of any work not in accordance with the
requirements of this Contract.


(iv) Upon receipt of each payment from Owner, Design/Builder shall deliver
to Owner its lien waiver in the amount of such payment. If requested by
Owner, prior to receipt of the second and each succeeding payment,
Design/Builder shall deliver to Owner lien waivers from its subcontractors
and suppliers covered by the previous payment received from Owner.
Design/Builder guarantees that title to all work, materials and equipment
covered by an Application for Payment, whether incorporated into the
Project or not, will pass to Owner free and clear of all liens, claims,
security interests and encumbrances upon the receipt of such payment by
Design/Builder.


(b) Punch List Work. Upon Substantial Completion of the work by Design/Builder, Design/Builder and Owner shall jointly inspect the Project, including but not limited to all Design/Builder or subcontractor installed equipment which constitutes part of the Project. If there remain "punch list" items to be completed, Design/Builder and Owner shall list


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(c) Final Payment. The unpaid balance of the Contract Sum, including all sums retained pursuant to Clause 4(a)(iii) shall be due and payable within 15 days after the Date of Substantial Completion of the Project. Final payment shall be made simultaneously with the furnishing of a lien waiver from the Design/Builder and lien waivers from its subcontractors and suppliers for all sums paid to Design/Builder. Owner may withhold a sum equal to 150% of the estimated cost of completing any unfinished work. Thereafter, Owner shall pay to Design/Builder, on a monthly basis, the amount withheld for unfinished items as each item is completed.


(d) Liens. Design/Builder shall, at all times, keep the Project free of liens arising out of the work of this Contract for which Design/Builder has been paid. If any such liens are filed, Design/Builder shall, within 14 days after such filing, either,


(i) Satisfy such lien, or


(ii) Post a bond in an amount equal to 150% of the amount of such lien.


(e) Late Payment. In the event that any payment by Owner to Design/Builder is not paid when due, excluding any amount being withheld as retainage or withheld by Owner due to substandard, nonconforming or defective work, Owner shall pay interest on said unpaid amount from the date due to and including the date of payment at a variable rate equal to 3% per annum in excess of the rate of interest from time to time publicly announced by First Bank National Association, Minneapolis, Minnesota, as its reference rate, or such lesser rate as may be the maximum rate permitted by law. Owner shall pay to Design/Builder all costs reasonably incurred by Design/Builder in the collection of amounts payable by Owner hereunder, including reasonable attorneys' fee.


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Article 5 - Bond


Upon Owner's request at any time prior to commencement of construction, Design/Builder shall furnish a surety bond for its performance of this Contract and the payment of all obligations to subcontractors arising hereunder. If such bond is requested, the Contract Sum shall be increased by the full amount of the premium therefor.


Article 6 - Changes in the Work


(a) Owner, without invalidating this Contract, may request changes in
the Project within the general scope of this Contract, consisting of
additions, deletions, alterations or other modifications, with the
Contract Sum and the time for Substantial Completion to be adjusted
accordingly. All changes in the Project shall be made only pursuant to a
written Change Order signed by Owner Clark McLeod, or another officer of
Owner if Mr. McLeod is not reasonably available, subject to the
exception in paragraph 10(a), and Design/Builder setting forth any
adjustment to the Contract Sum and time for Substantial Completion. If
applicable, the adjustment to the Contract Sum shall be determined by
application of the unit prices set forth in the specifications.
Otherwise, the adjustment shall be agreed upon by Design/Builder and
Owner before Design/Builder proceeds on any such changes, additions or
alterations.


(b) If, during the design process, Owner requests a substantial change
to the design of the Project that Owner has previously approved or given
Design/Builder direction to perform, the Contract Sum shall be increased
by the amount of Design/Builder's additional design costs to perform
such change. Design/Builder shall notify Owner of such costs and a
Change Order shall be entered into prior to making such change.


(c) If, after the final plans and specifications have been approved by
Owner and Design/Builder, Owner requests Design/Builder to submit a
proposal for a change in the work and then elects not to proceed with
the change, a Change Order shall be issued to reimburse Design/Builder
for any costs incurred for design services for proposed revisions to the
final plans and specifications.


Article 7 - Correction of the Work


(a) Rejected work. Design/Builder shall, at its own expense,
promptly correct work rejected by Owner that does not conform to the
requirements of this Contract.


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9 (b) Warranty Period. If, within one year after the Date of Substantial Completion of the Project, or within such longer period of time as may be prescribed by law or by the terms of any applicable special warranty contained in the specifications, any of the work is found to be defective due to faulty workmanship or materials or not in accordance with the requirements of this Contract, and if, within such period Owner notifies Design/Builder thereof in writing, then Design/Builder shall correct the same at its expense within a reasonable time after receipt of such notice. Owner shall notify Design/Builder promptly after discovery of the condition. Establishment of this one year warranty period relates only to the specific obligation of Design/Builder to correct the work, and shall in no way affect the time within which Design/Builder's obligation to comply with the requirements of this Contract may sought to be enforced. Prior to the expiration of this warranty period, representatives of Owner and Design/Builder shall inspect the Project, jointly determine if any work does not conform to the requirements of this Contract, and Design/Builder shall promptly correct such non-conforming work, provided that such non-conforming work is not the result of abuse, neglect or improper or inadequate care and maintenance by Owner. Such inspection shall not be construed or deemed to be a waiver of any other legal remedies available to the Owner at law or in equity.


Article 8 -- Insurance


(a) Design/Builder's Liability Insurance. Design/Builder shall purchase and maintain such insurance as will protect it (and, where stated, Owner) from the claims set forth below which may arise out of the performance of this Contract, whether such performance be by Design/Builder or by any subcontractor of Design/Builder or by anyone directly or indirectly employed by any of them or by anyone for whose acts any of them may be liable:


(i) Worker's Compensation and Employee's Liability insurance for
claims under worker's compensation, disability benefit and other
similar employee benefit acts, in the amounts required by law
and claims for damages arising out of ...