Construction Agreement - STANDARD FORM OF AGREEMENT BETWEEN

EXHIBIT 10.39


STANDARD FORM OF AGREEMENT BETWEEN
OWNER AND CONTRACTOR WHERE THE BASIS OF PAYMENT IS
THE COST OF THE WORK PLUS A FEE WITH OR
WITHOUT A GUARANTEED MAXIMUM PRICE

AIA Document A111 - Electronic Format


THIS DOCUMENT HAS IMPORTANT LEGAL CONSEQUENCES: CONSULTATION WITH AN ATTORNEY IS ENCOURAGED WITH RESPECT TO ITS COMPLETION OR MODIFICATION. AUTHENTICATION OF THIS ELECTRONICALLY DRAFTED AIA DOCUMENT MAY BE MADE BY USING AIA DOCUMENT D401.


The 1987 Edition of AIA Document A201, General Conditions of the Contract for Construction, is adopted in this document by reference. Do not use with other general conditions unless this document is modified. This document has been approved and endorsed by The Associated General Contractors of America.


Copyright 1920, 1925, 1951, 1958, 1961, 1967, 1974, 1978, 1987 by The American Institute of Architects, 1735 New York Avenue N.W., Washington D.C. 20006-5292. Reproduction of the material herein or substantial quotation of its provisions without written permission of the AIA violates the copyright laws of the United States and will be subject to legal prosecution.


- -------------------------------------------------------------------------------- AGREEMENT made as of the 24th day of OCTOBER in the year of Nineteen Hundred and Ninety- Seven


BETWEEN THE Owner: (Name and address) DM MANAGEMENT, INC., a CORPORATION 25 Recreation PARK DRIVE, SUITE 200 Hingham, MA 02043


and the Contractor: (Name and address) CLAYCO CONSTRUCTION COMPANY, INC. 2199 Innerbelt Business Center Drive St. Louis, MO 63114 ATTN: C. David Moses


the Project is: (Name and address) NEW DISTRIBUTION FACILITY 1-93 and Route 3 Tilton, NH


the Architect is: (Name and address) MITCHELL-HUGEBACK ARCHITECTS, INC. 400 South Woodsmill Road, Suite 120 Chesterfield, MO 63017


The Owner and Contractor agree as set forth below.


ARTICLE 1 - -------------------------------------------------------------------------------- AIA DOCUMENT AIII - OWNER-CONTRACTOR AGREEMENT - TENTH EDITION - AIA - COPYRIGHT 1987 - THE AMERICAN INSTITUTE OF ARCHITECTS, 1735 NEW YORK AVENUE N.W., WASHINGTON D.C. 20006-5292. Unlicensed photocopying violates U.S. copyright laws and is subject to legal prosecution. This document was electronically produced with permission of the AIA and can be reproduced without violation until the date of expiration as noted below.


Electronic Format A111-1987 User Document: CDMMANA111V4.DOC -- 2/27/1998.AIA License Number 105838, which expires on 7/31/1998 -- Page #1


THE CONTRACT DOCUMENTS


1.1 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 16. If anything in the other Contract Documents is inconsistent with this Agreement, this Agreement shall govern.


ARTICLE 2
THE WORK OF THIS CONTRACT
2.1 The Contractor shall execute the entire Work described in the Contract Documents, except to the extent specifically indicated in the Contract Documents to be the responsibility of others, or as follows: Design and construct one 425,270 square foot distribution facility in accordance with Outline Specifications dated 12-24-97 attached hereto and Mitchell-Hugeback Floor Plan A2.0 dated 10-24-97, and the other Contract Documents.


ARTICLE 3
RELATIONSHIP OF THE PARTIES


3.1 The Contractor accepts the relationship of trust and confidence established by this Agreement and covenants with the Owner to utilize the Contractor's best skill, efforts and judgment in furthering the interests of the Owner; to furnish efficient business administration and supervision; to make best efforts to furnish at all times an adequate supply of workers and materials; and to perform the Work in the best way and most expeditious and economical manner consistent with the interests of the Owner. The Owner agrees to exercise best efforts to enable the Contractor to perform the Work in the best way and most expeditious manner by furnishing and approving in a timely way information required by the Contractor and making payments to the Contractor in accordance with requirements of the Contract Documents. The Contractor will establish a direct contractual relationship with the Architect, design professionals and other licensed professionals to provide the design of the Project; provided, however that the Owner will obtain and pay for all civil engineering work required in connection with the Project from a licensed civil engineering firm. The Owner acknowledges and agrees that the Contractor is not a licensed architect or engineer and is not agreeing to perform services which require such a license in the State in which the Project is located. Such services will be performed by licensed architects and engineers and qualified design build subcontractors under separate agreements. The fees and expenses of those design professionals contracted and paid for by the Contractor shall be included as part of the Cost of the Work. The fees and expenses of the civil engineer retained by the Owner and any other contractor the Owner retains shall not be included as part of the Cost of the Work or included within the GMP (as defined herein below). The Contractor shall be responsible to the Owner for acts and omissions of the Contractor's employees and parties in privity of contract with the contractor to perform a portion of the Work, including their agents and employees, including without limitation the Architect, Subcontractors, and Subsubcontractors. The Contractor agrees that all Work shall be performed in compliance with (1) customary good practices and professional skill and care, (2) the drawings and specifications, and (3) any statutes, ordinances, codes, regulations and standards of public bodies or trade regulators having any jurisdiction over the Project at the time of contract execution.


ARTICLE 4
DATE OF COMMENCEMENT AND SUBSTANTIAL COMPLETION


4.1 The date of commencement is the date from which the Contract Time of Subparagraph 4.2 is measured; it shall be the date of this Agreement, as first written above, 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) September 11, 1997


Unless the date of commencement is established by a notice to proceed issued by the Owner, the Contractor shall notify the Owner in writing not less than five days before commencing the Work to permit timely filing of mortgages, mechanic's liens and other security interests. Notwithstanding anything provided to the contrary herein, the parties hereby confirm that the Work has commenced and - -------------------------------------------------------------------------------- AIA DOCUMENT AIII - OWNER-CONTRACTOR AGREEMENT - TENTH EDITION - AIA - COPYRIGHT 1987 - THE AMERICAN INSTITUTE OF ARCHITECTS, 1735 NEW YORK AVENUE N.W., WASHINGTON D.C. 20006-5292. Unlicensed photocopying violates U.S. copyright laws and is subject to legal prosecution.. This document was electronically produced with permission of the AIA and can be reproduced without violation until the date of expiration as noted below.


Electronic Format A111-1987 User Document: CDMMANA111V4.DOC -- 2/27/1998. AIA License Number 105838, which expires on 7/31/1998 -- Page #2


that all Work done by the Contractor on the Project prior to the date hereof shall be deemed to have been done pursuant to this Agreement and to be subject to the provisions hereof.


4.2 (insert the calendar date or number of calendar days after the date of commencement. Also insert any requirements for earlier Substantial Completion of certain portions of the Work, if not stated elsewhere in the Contract Documents.) The Contractor shall have achieved Substantial Completion of the following portions of the Work on or before the dates indicated below for each portion of the Work (such dates being referred to herein as the "Substantial Completion Dates"), subject to extensions for any delays contemplated in Paragraph 8.3.1 of the form of the General Conditions (AIA Document No. A201) attached hereto:


Warehouse Area 7-1-98 Main Office/Connecting Corridor 8-30-98


, 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.)


ARTICLE 5
CONTRACT SUM
5.1 The Owner shall pay the Contractor in current funds for the Contractor's performance of the Contract the Contract Sum consisting of the Cost of the Work as defined in Article 7 and the Contractor's Fee determined as follows: (State a lump sum, percentage of Cost of the Work or other provision for determining the Contractor's Fee, and explain how the Contractor's Fee is to be adjusted for changes in the Work) The Contractor's Fee shall equal Eight Hundred Ninety-Six Thousand Forty-Seven Dollars ($896,047.00) which is the product of Five and one-half Percent (5.50%) times the final estimated Cost of the Work. If Substantial Completion of the Warehouse Area is achieved on or before July 1, 1998 and Substantial Completion of the Main Office/Connecting Corridor is achieved on or before August 30, 1998, then the Contractor shall be entitled to an additional fee equal to one percent (1%) of the final GMP, which amount shall be due and payable within the later of (i) thirty (30) days after Final Completion, and (ii) the date on which lien waivers are delivered by the Contractor to the Owner from all subcontractors (it being agreed, however that in lieu of lien waivers invoices marked paid or other reasonable evidence of payment shall only be required where the total subcontract is less than $10,000.00). The Contractor's Fee shall be fixed at $896,047.00, subject to adjustment only in the eent of a Change Order or a Construction Change Directive which results in the final Cost of the Work exceeding $16,291,780.10, in which event the Contractor shall be entitled to an additional fee equal to five and one-half percent (5 1/2%) of the final Cost of the Work in excess of $16,291,780.10.


5.2 GUARANTEED MAXIMUM PRICE (IF APPLICABLE)


5.2.1 The sum of the estimated Cost of the Work and the Contractor's Fee is guaranteed by the Contractor not to exceed SEVENTEEN MILLION ONE HUNDRED EIGHTY- SEVEN THOUSAND EIGHT HUNDRED TWENTY-EIGHT Dollars ($17,187,828.00), subject to additions and deductions by Change Order as provided in the Contract Documents or as provided in Paragraph 5.2.4 below. Such maximum sum is referred to in the Contract Documents as the Guaranteed Maximum Price or the "GMP". 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.) If the sum of the final Cost of the Work plus the Contractor's Fee is less than the GMP, then such difference (the "savings") shall be shared by the parties as follows: seventy-five percent (75%) of the savings shall be retained by the Owner and twenty-five percent (25%) of the savings shall be paid to the Contractor as an additional fee. Such payment shall be made by the Owner within thirty (30) days after Final Completion.


5.2.2 The Guaranteed Maximum Price is based upon 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, but only if a Guaranteed Maximum Price is inserted in Subparagraph 5.2.1. 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 until which that amount is valid.) See Contractor's Proposal Book Dated 9-4-97.


5.2.3 The amounts agreed to for unit prices, if any, are as follows: - -------------------------------------------------------------------------------- AIA DOCUMENT A111 - OWNER-CONTRACTOR AGREEMENT - TENTH EDITION - AIA - COPYRIGHT 1987 - THE AMERICAN INSTITUTE OF ARCHITECTS, 1735 NEW YORK AVENUE N.W., WASHINGTON D.C. 20006-5292. Unlicensed photocopying violates U.S. copyright laws and is subject to legal prosecution. This document was electronically produced with permission of the AIA and can be reproduced without violation until the date of expiration as noted below.


Electronic Format A111-1987 User Document: CDMMANA111V4.DOC -- 2/27/1998. AIA License Number 105838, which expires on 7/31/1998 -- Page #3


(State unit prices only if a Guaranteed Maximum Price is inserted in Subparagraph 5.2.1) See Contractor's Proposal Book Dated 9-4-97.


5.2.4. If the Contract Documents specifically provide for any allowances, then the parties agree that (i) the GMP shall be reduced by the amount, if any, by which the allowance exceeds the actual cost of the item for which such allowance was made, and (ii) the GMP shall be increased by the amount, if any, by which the actual cost of the item for which such allowance was made exceeds the allowance.


ARTICLE 6
CHANGES IN THE WORK
6.1 CONTRACTS WITH A GUARANTEED MAXIMUM PRICE


6.1.1 Adjustments to the Guaranteed Maximum Price on account of changes in the Work shall be determined as provided in Paragraph 6.3 below.


6.1.2 [Deleted.]


6.1.3 In calculating adjustments to this Contract, the terms "cost" and "costs" as used herein 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 Contractor's Fee as defined in Paragraph 5.1 of this Agreement.


6.2 CONTRACTS WITHOUT A GUARANTEED MAXIMUM PRICE


6.2.1 [Deleted.]


6.3 ALL CONTRACTS


6.3.1 If no specific provision is made in paragraph 5.1 for adjustment of the Contractor's 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 Paragraph 5.1 will cause substantial inequity to the Owner or Contractor, the Contractor's Fee shall be equitably adjusted on the basis of the Fee established for the original Work.


Insert A: 6.3.2 The Owner shall have the right to order changes in the Work by giving the Contractor a written change order request (a "CO Request"), setting forth in detail the nature of the requested change. Upon receipt of a CO Request the Contractor shall furnish to the Owner a written offer to make the change requested which offer shall include the Contractor's determination of the changes, if any, to the (i) the Cost of the Work, (ii) the Contractor's Fee provided that any CCD (defined below) results in an increase in the Cost of the Work as provided in Paragraph 5.1 above, (iii) the GMP, (iv) the schedule of values, or (v) the Substantial Completion Dates, or any one or more of the foregoing, resulting from the changes described in such CO Request. If the Owner accepts such offer in writing and without revision then such offer shall constitute a change order (a "Change Order") which shall operate to amend this Contract as provided therein. If the Contractor accepts such counteroffer in writing, then the same shall constitute a Change Order. If the Owner accepts such offer subject to revisions not previously agreed to by the Contractor in writing then such "acceptance" shall constitute a construction change directive (a "CCD") and the Contractor shall promptly proceed with the work described in the CCD. The cost of the work covered by the CCD shall then be determined on the basis of reasonable expenditures and savings of those performing the work covered by the CCD, including the expenses of design services and revisions to the Contract Documents. The Contractor shall keep and present an itemized accouting together with appropriate supporting data for inclusion in a CCD. Unless otherwise provided in the Contract Documents, costs of the work covered by th CCD shall include the following: costs of labor including social security, old age and unemployment insurance, fringe benefits required by agreement or custom, and workers' compensation insurance, costs of material, supplies and equipment, including costs of transportation, whether incorporated or consumed, and sales taxes, rental costs of machinery and equipment, costs of premiums for all bonds and insurance, permit fees and sales, use or similar taxes related to such work, and additional costs of supervision and field office personnel directly - -------------------------------------------------------------------------------- AIA DOCUMENT A111 - OWNER-CONTRACTOR AGREEMENT - TENTH EDITION - AIA - COPYRIGHT 1987 - THE AMERICAN INSTITUTE OF ARCHITECTS, 1735 NEW YORK AVENUE N.W., WASHINGTON D.C. 20006-5292. Unlicensed photocopying violates U.S. copyright laws and is subject to legal prosecution. This document was electronically produced with permission of the AIA and can be reproduced without violation until the date of expiration as noted below.


Electronic Format A111-1987 User Document: CDMMANA111V4.DOC -- 2/27/1998. AIA License Number 105838, which expires on 7/31/1998 -- Page #4


attributable to the change, and any increase in the Contractor's Fee as provided in Paragraph 5.1 above. Pending final determination of the cost of such work, the Owner shall make reasonable payments on account thereof pursuant to Applications for payment submitted by the Contractor. The Contractor shall have no obligation to perform any changes in the Work except pursuant to a Change Order or a CCD made as provided herein.


ARTICLE 7
COSTS TO BE REIMBURSED


7.1 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.


7.1.1 LABOR COSTS


7.1.1.1 Wages of construction workers directly employed by the Contractor to perform the construction of the Work at the site or, with the Owner's agreement, at off-site workshops.


7.1.1.2 Wages or salaries of the Contractor's supervisory and administrative personnel when stationed at the site with the Owner's agreement. (If it is intended that the wages or salaries of certain personnel stationed at the Contractor's 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.)


7.1.1.3 Wages and salaries of the Contractor's 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.


7.1 .1.4 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 Clauses 7.1.l.l through 7.1.1.3.


7.1.2 SUBCONTRACT COSTS


Payments made by the Contractor to Subcontractors in accordance with the requirements of the subcontracts.


7.1.3 COSTS OF MATERIALS AND EQUIPMENT INCORPORATED IN THE COMPLETED CONSTRUCTION


7.1.3.1 Costs, including transportation, of materials and equipment incorporated or to be incorporated in the completed construction.


7.1.3.2 Costs of materials described in the preceding Clause 7.1.3.1 in excess of those actually installed but required to provide reasonable allowance for waste and for spoilage. Unused excess materials, if any, shall be handed over to the Owner at the completion of the Work or, at the Owner's option, shall be sold by the Contractor; amounts realized, if any, from such sales shall be credited to the Owner as a deduction from the Cost of the Work or shall be paid to the Owner.


7.1.4 COSTS OF OTHER MATERIALS AND EQUIPMENT, TEMPORARY FACILITIES AND RELATED ITEMS


7.1.4.1 Costs, including transportation, installation, maintenance, dismantling and removal of materials, supplies, temporary facilities, machinery, equipment, and hand tools not customarily owned by the construction workers, which are provided by the Contractor at the site and fully consumed in the performance of the Work; and cost less salvage value on such items if not fully consumed, whether sold to others or retained by the Contractor. Cost for items previously used by the Contractor shall mean fair market value.


7.1.4.2 Rental charges for temporary facilities, machinery, equipment, and hand tools not customarily owned by the construction workers, which 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 Owner's prior approval. - -------------------------------------------------------------------------------- AIA DOCUMENT A111 - OWNER-CONTRACTOR AGREEMENT - TENTH EDITION - AIA - COPYRIGHT 1987 - THE AMERICAN INSTITUTE OF ARCHITECTS, 1735 NEW YORK AVENUE N.W., WASHINGTON D.C. 20006-5292. Unlicensed photocopying violates U.S. copyright laws and is subject to legal prosecution. This document was electronically produced with permission of the AIA and can be reproduced without violation until the date of expiration as noted below.


Electronic Format A111-1987 User Document: CDMMANA111V4.DOC - 2/27/1998. AIA License Number 105838, which expires on 7/31/1998 -- Page #5


7.1.4.3 Costs of removal of debris from the site.


7.1.4.4 Costs of telegrams and long-distance telephone calls, postage and parcel delivery charges, telephone service at the site and reasonable petty cash expenses of the site office.


7.1.4.5 That portion of the reasonable travel and subsistence expenses of the Contractor's personnel incurred while traveling in discharge of duties connected with the Work.


7.1.5 MISCELLANEOUS COSTS


7.1.5.1 That portion directly attributable to this Contract of premiums for insurance and bonds.


7.1.5.2 Sales, use or similar taxes imposed by a governmental authority which are related to the Work and for which the Contractor is liable.


7.1.5.3 Fees and assessments for the building permit and for other permits, licenses and inspections for which the Contractor is required by the Contract Documents to pay.


7.1.5.4 Fees of testing laboratories for tests required by the Contract Documents, except those related to defective or nonconforming Work for which reimbursement is excluded by Subparagraph 13.5.3 of the General Conditions or other provisions of the Contract Documents and which do not fall within the scope of Subparagraphs 7.2.2 through 7.2.4 below.


7.1.5.5 Royalties and license fees paid for the use of a particular design, process or product required by the Contract Documents; the cost of defending suits or claims for infringement of patent rights arising from such requirement by the Contract Documents; payments made in accordance with legal judgments against the Contractor resulting from such suits or claims and payments of settlements made with the Owner's consent; provided, however, that such costs of legal defenses, judgment and settlements shall not be included in the calculation of the Contractor's Fee or of a Guaranteed Maximum Price, if any, and provided that such royalties, fees and costs are not excluded by the last sentence of Subparagraph 3.17.1 of the General Conditions or other provisions of the Contract Documents.


7.1.5.6 Deposits lost for causes other than the Contractor's fault or negligence.


7.1.6 OTHER COSTS


7.1.6.1 Other costs incurred in the performance of the Work if and to the extent approved in advance in writing by the Owner.


7.2 EMERGENCIES: REPAIRS TO DAMAGED, DEFECTIVE OR NONCONFORMING WORK


The Cost of the Work shall also include costs described in Paragraph 7.1 which are incurred by the Contractor:


7.2.1 In taking action to prevent threatened damage, injury or loss in case of an emergency affecting the safety of persons and property, as provided in Paragraph 10.3 of the General Conditions, provided such threat of damage, injury or loss does


7.2.2 not result from the fault or negligence of the Contractor or the Contractor's foremen, engineers or superintendents, or other supervisory, administrative or managerial personnel of the Contractor or other parties for whom the Contractor is responsible.


7.2.3 In repairing damaged Work other than that described in Subparagraph 7.2.2, provided such damage did not result from the fault or negligence of the Contractor or the Contractor's personnel or other parties for whom the Contractor is responsible and only to the extent that the cost of such repairs is not recoverable by the Contractor from others and the Contractor is not compensated therefor by insurance or otherwise.


7.2.4 [Deleted.] - -------------------------------------------------------------------------------- AIA DOCUMENT AIII - OWNER-CONTRACTOR AGREEMENT - TENTH EDITION - AIA - COPYRIGHT 1987 - THE AMERICAN INSTITUTE OF ARCHITECTS, 1735 NEW YORK AVENUE N.W., WASHINGTON D.C. 20006-5292. Unlicensed photocopying violates U.S. copyright laws and is subject to legal prosecution. This document was electronically produced with permission of the AIA and can be reproduced without violation until the date of expiration as noted below.


Electronic Format A111-1987 User Document: CDMMANA111V4.DOC -- 2/27/1998. AIA License Number 105838, which expires on 7/31/1998 -- Page #6


ARTICLE 8
COSTS NOT TO BE REIMBURSED
8.1 The Cost of the Work shall not include:


8.1.1 Salaries and other compensation of the Contractor's personnel stationed at the Contractor's principal office or offices other than the site office, except as specifically provided in Clauses 7.1.1.2 and 7.1.1.3 or as may be provided in Article 14.


8.1.2 Expenses of the Contractor's principal office and offices other than the site office.


8.1.3 Overhead and general expenses, except as may be expressly included in Article 7.


8.1.4 The Contractor's capital expenses, including interest on the Contractor's capital employed for the Work.


8.1.5 Rental costs of machinery and equipment, except as specifically provided in Clause 7.1.4.2.


8.1.6 Except as provided in Subparagraphs 7.2.2 through 7.2.4 and Paragraph 13.5 of this Agreement, costs due to the fault or negligence of the Contractor, Subcont ...