Development & Construction MGMT Agreement

DEVELOPMENT


AND


CONSTRUCTION


MANAGEMENT


AGREEMENT


by
and
between


SUGARLAND PROPERTIES INCORPORATED


and


KENT ELECTRONICS CORPORATION 2


TABLE OF CONTENTS


I. Engagement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2


II. Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2


III. Project Team, SPI Representative, and Kent Representative . . . . . . . . . . . . . . . . . 2
A. Project Team . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
B. SPI Representative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
C. Kent Representative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
D. Meetings Between Representatives . . . . . . . . . . . . . . . . . . . . . . . . 3


IV. Development and Construction Management Services . . . . . . . . . . . . . . . . . . . . . . 3
A. Project Schedule . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
B. Initial Planning . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
C. Contract Documents and Construction and Development Documents . . . . . . . . . 5
D. Construction and Development Services . . . . . . . . . . . . . . . . . . . . . 6
E. Accounting Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
F. Assignment of SPI's Rights under Contract Documents and Construction
and Development Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
G. Performance Standards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9


V. Kent's Payment Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9


VI. Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
A. Fixed Development and Construction Management Fee . . . . . . . . . . . . . . . 11
B. Additional Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
C. Early Completion Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11


VII. Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
A. Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
B. Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
C. Termination by Kent Without Cause . . . . . . . . . . . . . . . . . . . . . . . 13


VIII. Limitation of Liability of SPI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
A. General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
B. Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15


IX. Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
A. Kent Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
B. SPI Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
C. General Contractor's Insurance . . . . . . . . . . . . . . . . . . . . . . . . . 15
D. General Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
E. Waiver of Subrogation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17


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X. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
A. Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
B. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
C. Interpretation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
D. No Third-Party Beneficiary . . . . . . . . . . . . . . . . . . . . . . . . . . 19
E. Excusable Delay . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
F. No Ownership Interest; No Partnership . . . . . . . . . . . . . . . . . . . . 20
G. Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
H. Further Actions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
I. Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
J. Ownership of Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
K. Invalidity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
L. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
M. Time of the Essence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21


SCHEDULE OF DEFINITIONS


The following capitalized terms defined in the provisions of this Agreement are listed below:


"AGREEMENT" means this Development and Construction Management Agreement.


"CONSTRUCTION AND DEVELOPMENT DOCUMENTS" is defined in Paragraph IV.2.C.


"CONTRACT DOCUMENTS" is defined in Paragraph IV.1.C.


CONTRACT TIME" is defined in Paragraph IV.A.


"CONTRACTOR(S)" is defined in Article III.


"FINAL COMPLETION" is defined in Article II.


"FINALLY COMPLETED" is defined in Article II.


"FIXED DEVELOPMENT AND CONSTRUCTION MANAGEMENT FEE" is defined in Paragraph VI.A.


"KENT" means Kent Electronics Corporation, a Texas corporation.


"LETTER AGREEMENT" is defined in Paragraph 6 of the Recitals.


"OPTION AGREEMENT" is defined in Paragraph 1 of the Recitals.


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"PROJECT" is defined in Paragraph 3 of the Recitals.


"PROJECT ARCHITECT" means House Reh Burwell Architects as set forth in Article III.


"PROJECT COST BUDGET" is defined in Paragraph IV.B.2.


"PROJECT SCHEDULE" is defined in the first grammatical paragraph of Paragraph IV.A.


"PROJECT TEAM" is defined in Article III.


"PUNCHLIST ITEMS" is defined in the second grammatical paragraph of Paragraph IV.A.


"PURCHASE AND SALE AGREEMENT" is defined in Paragraph 1 of the Recitals.


"SPI" means Sugarland Properties Incorporated, a Texas corporation.


"SPI GROUP" is defined in Paragraph VIII.A.


"SUBSTANTIAL COMPLETION" is defined in the second grammatical paragraph of Paragraph IV.A.


"TERM" is defined in Article II.


"TOTAL PROJECT COSTS" is defined in Paragraph VI.A.


SCHEDULE OF EXHIBITS


Exhibit "A" -- Description of Plans and Specifications Exhibit "B" -- Project Schedule Exhibit "C" -- Metes and Bounds description of the Land Exhibit "D" -- Project Cost Budget Exhibit "E" -- Qualifications to Plans Exhibit "F" -- Letter of Credit Drafting Statement


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DEVELOPMENT AND CONSTRUCTION MANAGEMENT AGREEMENT


THIS DEVELOPMENT AND CONSTRUCTION MANAGEMENT AGREEMENT (this "Agreement") is dated as of April 21, 1995, between SUGARLAND PROPERTIES INCORPORATED, a Texas corporation (hereafter referred to as "SPI"), and KENT ELECTRONICS CORPORATION, a Texas corporation (hereafter referred to as "Kent"), as follows:


R E C I T A L S:


1. SPI and Kent have entered into that certain Purchase and Sale Agreement ("Purchase and Sale Agreement") dated as of March 2, 1995, pursuant to which Kent had the right to purchase several tracts, including that certain tract of land comprising approximately 51 acres of land described by metes and bounds on Exhibit "C" which is attached hereto and incorporated herein for all purposes (the "Land"). The Land is located in Fort Bend County, Texas and is also known as Tract 130, Commercial Reserve "A" of the Final Plat of Sugar Land Business Park Tract 130 and Tract 131, a subdivision in the City of Sugar Land, Texas according to the map or plat thereof recorded under Slide No. 1356/B of the Plat Records of Fort Bend County Texas. SPI and Kent have also entered into that certain agreement ("Option Agreement") pursuant to which Kent has the option to purchase the land described therein.


2. On March 7, 1995, Kent purchased the Land.


3. Kent desires to develop office, assembly and light manufacturing, warehouse and/or office/distribution facilities, and associated facilities and betterments on the Land (the "Project").


4. Kent desires to retain the services of SPI to organize, coordinate, arrange, supervise and administer the development of the Project, and to perform certain other services hereafter set forth.


5. The purpose of this Agreement is to set forth the mutual understandings and responsibilities of the parties with respect to the Project.


6. SPI and Kent have, prior to the date of this Agreement, entered into that certain letter agreement dated September 14, 1994, as amended by a first amendment thereto dated December 6, 1994 (as so amended, the "Letter Agreement").


AGREEMENT:


NOW, THEREFORE, for valuable consideration, SPI and Kent hereby agree as follows:


6
I. ENGAGEMENT


Subject to the terms and provisions of this Agreement, and for the "Term" (hereafter defined) of this Agreement, Kent hereby engages SPI as Kent's prime contractor, and grants to SPI the sole and exclusive right to supervise, administer, and manage the performance of the development and construction of the Project (but the foregoing shall not be construed to preclude Kent, its agents, representatives and contractors, and their respective officers and employees from inspecting the Project during construction at any time or times). Subject to the terms and provisions of this Agreement and in consideration of the compensation herein provided, SPI hereby accepts such engagement and, acting as an independent contractor, shall, during the Term, supervise, administer, and manage the development and construction of the Project pursuant to the terms, conditions and provisions of this Agreement.


II. TERM


The term of this Agreement (the "Term") shall commence as of the date of this Agreement and shall continue until the Project is "Finally Completed" (hereafter defined) or this Agreement is earlier terminated as set forth herein (or such later date as may be provided for elsewhere in this Agreement). For the purposes hereof, the Project will be "Finally Completed" (or, alternatively, the Project will have achieved "Final Completion") when "Substantial Completion" (hereafter defined) of the Project has occurred and all "punchlist items" (hereafter defined) and other conditions precedent to achieving final completion pursuant to the provisions of the master construction contract for the Project have been completed, all in accordance with said construction contract and this Agreement, and when the landscaping contemplated for the Project will have been installed. SPI and Kent acknowledge that the landscaping will not be installed until completion of construction of the remainder of the Project has occurred. When the landscape contractor has achieved final completion of its work in the manner described in such contractor's contract, the Project will be considered to be finally completed for purposes of determining the expiration of the Term of this Agreement.


III. PROJECT TEAM, SPI REPRESENTATIVE, AND KENT REPRESENTATIVE


A. PROJECT TEAM. SPI shall provide a project team (the "Project Team") to enable SPI to perform its duties hereunder, which Project Team shall be the responsibility of SPI, subject to the limitations provided herein. The Project Team, as well as any party providing any assistance to SPI in performing its duties hereunder, shall be collectively referred to as the "Contractor." While Kent's approval of the Project Team is not required, Kent acknowledges that it has previously approved the use of the following (who are the current Project Team): (i) Rust Lichliter as (a) surveyor for the Project, (b) drainage engineer for the Project, and (c) civil engineer for the Project (including the design of the drainage ditch and paving and utility design associated with the expansion of Gillingham Road); (ii) House Reh Burwell Architects ("Project Architect"), as architect for the Project; (iii) E. E. Reed, as general contractor for the Project; and (iv) Dabney Engineering, as the MEP engineer for the Project. SPI may, from time to time upon notice to Kent, replace any member of the Project Team with a well-qualified


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7


individual or firm designated by SPI that is acceptable to Kent in the exercise of reasonable judgment.


B. SPI REPRESENTATIVE. SPI shall designate a representative (the "SPI Representative") to act on behalf of SPI when recommendations, approvals, or commitments from SPI are required under this Agreement and to function as the principal source of liaison and communication with Kent. Kent hereby approves SPI's designation of Steven H. Mercadal as the initial SPI Representative. SPI may, from time to time upon notice to Kent, replace the SPI Representative with a well-qualified individual designated by SPI who is acceptable to Kent in the exercise of reasonable judgment.


C. KENT REPRESENTATIVE. Kent shall designate an individual (the "Kent Representative") to act for and on behalf of Kent when approvals or commitments from Kent are required under this Agreement, and to function as the principal source of liaison and communication with SPI. SPI hereby approves Kent's designation of Cathy Felts as the initial Kent Representative. Kent may, from time to time upon notice to SPI, replace the Kent Representative with an individual designated by Kent and acceptable to SPI in the exercise of reasonable judgment.


D. MEETINGS BETWEEN REPRESENTATIVES. SPI will meet with Kent throughout the term of this Agreement promptly following the request of Kent to discuss any matter relating to the Project, and Kent will meet with SPI throughout the term of this Agreement promptly following the request of SPI to discuss any matter relating to the Project.


IV. DEVELOPMENT AND CONSTRUCTION MANAGEMENT SERVICES


SPI shall cause the Project to be constructed, and shall supervise, administer, and manage the development and construction of the Project (such services being herein referred to collectively as the "Development and Construction Management Services") in accordance with this Agreement, including the following provisions:


A. PROJECT SCHEDULE. Kent and SPI hereby approve the project schedule that is attached hereto and incorporated herein for all purposes as Exhibit "B," which project schedule requires that "Substantial Completion" (hereafter defined) of the Project occur by December 15, 1995. Final Completion of the Project shall occur not later than thirty (30) days following Substantial Completion of the Project. Such project schedule, (as amended and revised from time to time in accordance with this Agreement, the "Project Schedule") may need to be amended and revised from time to time in accordance with the completion time extension provisions of the "Construction Contracts" (hereafter defined), including the terms of change orders issued pursuant to the Construction Contracts. The date of Substantial Completion provided for in the Project Schedule, as amended from time to time pursuant to the provisions of this Agreement, is herein referred to as the "Contract Time".


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For purposes of this Agreement, "Substantial Completion" shall be deemed achieved when SPI has caused the general contractor to obtain and deliver to Kent all final inspection tags, permits and other consents from all governmental authorities that are required for Kent's occupancy and use of the Project. The phrase "Kent's occupancy and use of the Project", as used in the preceding sentence, shall mean the physical occupancy, use and operation of the Project as an office, light manufacturing, assembly, warehouse and/or distribution facility, it being understood that certain minor finishing items or adjustments may still be required by the general contractor (which items or adjustments are herein referred to as "punchlist items") and that Kent may not be able to use the Project until Kent has installed all of its furniture and equipment. SPI will use its best efforts to allow Kent to install its furniture and equipment at the Project prior to Substantial Completion, provided that Kent does not unreasonably interfere with the progress of construction of the Project, Kent accepts all risk of damage to its furniture and equipment and insures such furniture and equipment for not less than eighty percent (80%) of its replacement value, and further subject to any requirements of applicable law.


If SPI fails to cause the general contractor to achieve Substantial Completion of the Project by December 15, 1995, as such date may be extended pursuant to the provisions of this Paragraph IV.A of this Agreement and/or by any "Event of Force Majeure" (hereafter defined), Kent, as its sole remedy except as provided below, shall be entitled to retain or recover from SPI, as liquidated damages and not as a penalty, the following amounts: (i) One Thousand Dollars ($1,000) per day commencing upon the first day following expiration of the Contract Time allotted for Substantial Completion and continuing until Substantial Completion of the Project is achieved by SPI, up to thirty (30) days after the expiration of the Contract Time allotted for Substantial Completion; and (ii) Two Thousand Dollars ($2,000) per day commencing upon the thirty-first (31st) day following expiration of the Contract Time allotted for Substantial Completion and continuing until Substantial Completion of the Project is achieved by SPI. Such liquidated damages are hereby agreed to be a reasonable pre-estimate of the damages Kent will incur as a result of delay of Substantial Completion of the Project. Kent may deduct the liquidated damages from any unpaid amounts then or thereafter due SPI under this Agreement. Any liquidated damages not so deducted from any unpaid amounts due SPI shall be payable to Kent upon the written demand of Kent, together with interest from the date of the demand at the lesser of twelve percent (12%) per annum or the maximum lawful rate. Notwithstanding anything contained in this grammatical paragraph to the contrary, in the event Substantial Completion of the Project is not achieved within sixty (60) days after December 15, 1995, as such date may be extended pursuant to the provisions of this Paragraph IV.A and/or by any Event of Force Majeure, then (1) Kent shall continue to be entitled to liquidated damages for the first sixty (60) days as hereinabove provided, but shall recover regular contract damages for SPI's failure to achieve Substantial Completion within sixty (60) days following the Contract Time allotted for Substantial Completion, subject, however, to a maximum of the total "Fixed Development and Construction Fee" (hereinafter defined), minus the amount of liquidated damages paid by SPI to Kent pursuant to the provisions of this Agreement and be entitled to exercise any other remedies provided herein for same and (2) such failure shall be an "Event of Default" (hereafter defined) by SPI not subject to the notice and cure provisions of Article VII.


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B. INITIAL PLANNING. In connection with the planning of the Project:


1. SPI has performed a facility needs analysis for Kent,
reviewed proposed designs for the Project with Kent, and identified
Kent's needs as reflected in the "Contract Documents" (hereafter
defined). SPI also has coordinated the efforts of all Contractors
involved in the design and engineering services required to describe
the Project in detail, including all parties involved in the
preparation of the "Construction and Development Documents" (hereafter
defined); and


2. SPI has prepared and submitted to Kent, and Kent has
approved, a comprehensive budget for the Project for the various costs
to be incurred in the development of the Project, which budget is
attached hereto as Exhibit "D" and made a part hereof for all
purposes. It is understood that such budget may need to be amended
and revised from time to time, particularly as the Project is
constructed, which amendments and revisions shall be made by SPI in
its reasonable business judgment but subject to the prior written
approval of Kent (such budget, as so amended and revised from time to
time, is herein referred to as the "Project Cost Budget"). Any
changes in the Project Cost Budget shall be submitted in writing by
SPI to Kent, and Kent shall approve or disapprove such changes within
two (2) business days thereafter. If Kent fails to approve or
disapprove such changes within said two (2) business day period, the
Contract Time allotted for Substantial Completion shall be extended by
one (1) day for each day that Kent is late in approving or
disapproving such changes. If Kent disapproves such changes, Kent
hereby agreeing to exercise good faith in granting or denying approval
with respect to such changes, Kent shall indicate the reason for such
disapproval in reasonable detail. The Project Cost Budget includes a
contingency line item in the amount of Two Hundred Thousand Dollars
($200,000) to cover items reasonably inferable from the Contract
Documents or otherwise necessary to complete the Project not otherwise
covered by the Construction and Development Documents or change
orders. The contingency line item shall not be used for change
orders, unless otherwise approved in writing by SPI and Kent. SPI
shall provide Kent with a contingency use summary on a monthly basis.
Kent shall not be obligated to pay costs in the development of the
Project which exceed the overall Project Cost Budget; provided,
however, that SPI reserves the right to reallocate line items in the
Project Cost Budget whenever SPI determines that such adjustments are
necessary and appropriate.


C. CONTRACT DOCUMENTS AND CONSTRUCTION AND DEVELOPMENT DOCUMENTS. In connection with the Contract Documents and the Construction and Development Documents:


1. SPI and Kent have approved the plans, specifications,
and construction drawings for the Project prepared by the Project
Architect, described in Exhibit "A" attached hereto and incorporated
herein for all purposes, subject to the qualifications listed in
Exhibit"E" which is attached hereto and incorporated herein for all
purposes. SPI shall review and monitor, and make recommendations to
Kent concerning the further refinement and revision of the plans,
specifications and construction drawings for the


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Project prepared by the Project Architect (the "Contract Documents",
as amended from time to time in accordance with the provisions of this
Agreement) to clarify and resolve the qualifications; and all
amendments and revisions thereto involving a material design change,
causing an extension of the Project Schedule or an increase in the
overall Project Cost Budget shall be subject to the prior written
approval of Kent; provided, however, that the general contractor may
commence site work in accordance with plans, specifications and
construction drawings for the site work approved in writing by Kent
prior to approval by Kent of the final Contract Documents. The
Contract Documents approved by Kent shall establish the scope of the
Project and the work to be completed by the general contractor under
SPI's supervision.


2. SPI shall review, analyze, negotiate, execute, and
administer all contracts for the development and construction of the
Project, including, but not limited to, construction contracts (herein
sometimes referred to individually and collectively as the
"Construction Contracts"), engineering contracts, landscape
agreements, and architectural agreements (collectively, "Construction
and Development Documents"). SPI covenants and agrees that the
warranty provisions of the Construction Contracts shall be consistent
with the warranty requirements of the Construction and Development
Documents and that the change order provisions of the Construction
Contracts shall be consistent with the change order provisions of this
Agreement. Once the Construction and Development Documents have been
executed by SPI, it is understood and agreed that SPI shall have the
authority to amend the same or approve change orders, without the
approval of Kent so long as such amendments or change orders are made
in SPI's reasonable business judgment and are consistent with the
Contract Documents, Construction and Development Documents, Project
Cost Budget, Project Schedule and this Agreement. SPI agrees to
promptly furnish Kent with copies of all executed Construction and
Development Documents, including, without limitation, any amendments
of the Construction and Development Documents on or prior to the date
hereof, or if hereafter executed, promptly after the execution hereof.


3. Upon request by Kent, SPI shall consult with Kent
and/or the Project Architect and/or other members of the Project Team.


D. CONSTRUCTION AND DEVELOPMENT SERVICES. Following Kent's approval of the Contract Documents, SPI shall manage the construction and development of the Project, including:


1. Obtaining a building permit from the City of Sugar
Land, and any other necessary permits which may be required for the
construction of the Project.


2. Monitoring, supervising, and reviewing the work and
other Project-related activities of the general contractor and other
Contractors to insure compliance with the Project Schedule, Project
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