Construction/Development Agreement

CONSTRUCTION/DEVELOPMENT AGREEMENT BETWEEN OWNER,
CONTRACTOR AND DEVELOPER
(SWISS AMERICAN SAUSAGE FACILITY/CROSSROADS)


THIS CONSTRUCTION/DEVELOPMENT AGREEMENT BETWEEN OWNER, CONTRACTOR, AND DEVELOPER ("AGREEMENT"), dated for reference purposes as June 19, 1998 is made by and between SWISS AMERICAN SAUSAGE CO., DIVISION OF PROVENA FOODS INC., a corporation organized under the laws of the State of California (hereinafter called "OWNER"), A.P. THOMAS CONSTRUCTION, INC., a california corporation (hereinafter called "CONTRACTOR"), and CATLIN PROPERTIES, INC., a California corporation ("DEVELOPER"), with respect to the construction by Contractor of the project (hereinafter the "PROPERTY" or "PROJECT"), described in Exhibit A
--------- attached hereto. The date upon which this Agreement is fully executed by all parties shall be referred to hereinafter as the "EFFECTIVE DATE".


ARTICLE 1
DEFINITIONS


A. The "OWNER" is the person or entity identified as such in the Agreement and is referred to throughout the Contract Documents (as hereinafter defined).


B. the "DEVELOPER" is the person or entity identified as such in the Agreement and is referred to throughout the Contract Documents. Pursuant to separate documentation, Developer is the authorized agent of Crossroads CREA Investors LLC, a Delaware limited liability company with regard to the development of the Project known as "Crossroads Commercial Center," located in Lathrop, California, in which the Project is located.


C. The "CONTRACTOR" is the person or entity identified as such in the Agreement and is referred to throughout the Contract Documents.


D. The "ARCHITECT" shall mean W.B. Clausen Structural Engineers Inc., or any other qualified architect agreed upon by Developer and Owner.


E. The "PROJECT" is the total design and construction for which the Contractor is responsible under this Agreement, including, all professional design services and all construction documents, labor, materials, supplies, fixtures, tools, equipment, transportation, and other items to perform all work of whatever nature to construct upon the Property and complete in a workmanlike manner that certain Project generally described in Exhibit A attached hereto.
---------


F. The "WORK" is the performance of Contractor's obligations set forth in this Agreement and as provided in Exhibit B attached hereto.
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G. The "CONTRACT DOCUMENTS" consist of this Agreement, the documents listed in this Agreement, and the documents set forth in Exhibit C attached hereto.
---------


ARTICLE 2
PLAN AND ESTIMATE PROCESS


2.1 PRELIMINARY PLANS/PRELIMINARY COST ESTIMATE. The Architect, pursuant
------------------------------------------- to separate documentation entered into directly between Owner and Architect, at Owner's cost, shall prepare preliminary plans and specifications ("PRELIMINARY PLANS AND SPECIFICATIONS") of the Project, which shall be in sufficient detail to enable a preliminary cost estimate to be developed, and deliver such document to Developer and Contractor within one (1) day following the Effective Date. Owner shall cause the Architect to reasonably cooperate with Developer and Contractor with regard to any requested modifications necessary to enable the preparation of a preliminary cost estimate ("PRELIMINARY COST ESTIMATE") of the expense of constructing the Project. The Developer and Contractor shall deliver to Owner the Preliminary Cost Estimate within one (1) day following their receipt of the Preliminary Plans and Specifications. Owner shall approve or disapprove of the Preliminary Cost Estimate within one (1) day following receipt of such document by delivery of written notice ("PRELIMINARY COST NOTICE") to Developer and Contractor. If such notice disapproves of such estimate and such estimate is not amended to the satisfaction of Owner, Developer and Contractor within one (1) day following the date of Developer's and Contractor's receipt of the Preliminary Cost Notice, this Agreement shall automatically terminate and the parties shall have no further obligations hereunder. The failure of Owner to deliver the Preliminary Cost Notice within the specified time period shall be deemed Owner's disapproval of the Preliminary Cost Estimate. In preparing the Preliminary Cost Estimate, Developer and Contractor shall use their collective commercially reasonable efforts to approximate the expected cost of constructing the Project, consulting with subcontractors, materialmen and/or service providers, to determine such estimate, and such analysis shall be summarized and included with the Preliminary Cost Estimate. As a result of the preliminary nature of the Preliminary Cost Estimate, the Developer and Contractor make no representation or warranty regarding such matters, however, if, following delivery of the Preliminary Cost Estimate, Developer and/or Contractor discover that any line item within such estimate is materially inaccurate, Developer or Contractor, as appropriate, shall provide Owner with written notice of such determination. Owner shall evidence its approval of the Preliminary Plans and Specifications, within one (1) day following Developer's and Contractor's receipt of the Preliminary Cost Estimate, by signing such document and delivering it to Developer and Contractor, following which such document shall be referred to as the "APPROVED PRELIMINARY COST ESTIMATE."


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2.2 AGREED PRICE. Within three (3) days following Owner's approval of the
------------ Approved Preliminary Cost Estimate, Owner shall cause the Architect to immediately commence the preparation of final plans and specifications ("PLANS AND SPECIFICATIONS"), consisting of technical drawings, schedules, diagrams, material criteria and specifications, for the Project, and deliver such document to Developer and Contractor. Owner shall cause the Plans and Specifications to be delivered to Developer and Contractor not later than ten (10) days following the commencement of preparation of such documents. Owner shall cause the Architect to incorporate any reasonable modifications requested by Developer and/or Contractor necessary to make such document either consistent with the Preliminary Plans and Specifications or necessary to enable a final price proposal to be developed ("FIXED PRICE PROPOSAL"). Within ten (10) days following Developer's and Contractor's receipt of the Plans and Specifications, Developer and Contractor shall prepare and deliver the Fixed Price Proposal to Owner. Such budget shall set forth all costs and expenses necessary to construct the Project consistent with the Plans and Specifications, established customary contingencies for the various stages of construction, and include copies of all bids received from qualified subcontractors utilized by Contractor in preparing and finalizing the Fixed Price Proposal. Within three (3) days following Owner's receipt of the Fixed Price Proposal, Owner shall approve or disapprove such document, which approval shall not be unreasonably withheld, by delivery of written notice to Contractor and Owner. Contractor shall incorporate any reasonable revisions to the Fixed Price Proposal requested by Owner. In the event that Owner, Contractor and Developer cannot agree upon the Fixed Price Proposal within twenty (20) days following Owner's receipt thereof, this Agreement shall automatically terminate and, except as provided herein, the parties shall have no further obligations under this Agreement. Notwithstanding any other provision of this Agreement to the contrary, in the event that the Agreement terminates pursuant to the provisions of this Section 2.2, and the total Fixed Price Proposal is less than or equal to Three Million Eight Hundred Twenty Thousand and No/lOOths Dollars ($3,820,000.00) for the cost of the Project, plus Two Hundred Ninety Thousand and No/lOOths Dollars ($290,000.00) for all fees for utility hookup, and construction permits, within five (5) days of such termination, Owner shall pay Contractor the amount of Twenty Thousand and No/lOOths Dollars ($20,000.00) ("SECTION 2.2 TERMINATION FEE"). Upon Owner's approval of the Fixed Price Proposal, Owner shall evidence such approval by signing such document and deliver it to Developer and Contractor, following which such document shall be referred to as the "FIXED PRICE AGREEMENT."


2.3 PROGRESS SCHEDULE. Concurrent with Contractor's delivery of the Fixed Price Proposal, Contractor shall prepare and deliver to Owner a proposed time schedule ("PROPOSED TIME SCHEDULE") relating to the Work. Within five (5) days following


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Owner's receipt of the Proposed Time Schedule, Owner shall approve or disapprove such document, which approval shall not be unreasonably withheld, by delivery of written notice to Developer and Contractor. Contractor shall incorporate any reasonable revisions to the Proposed Time Schedule requested by Owner. Owner's approval of the Fixed Price Agreement shall also be deemed Owner's approval of the Proposed Time Schedule, following which, such document shall be referred to as the "APPROVED TIME SCHEDULE."


ARTICLE 3
DEVELOPER RESPONSIBILITIES


3.1 DEVELOPER'S SERVICES. The Developer will perform the following
-------------------- services under this Agreement in each of the two phases described below.


3.1.1 Design Phase.
------------


(a) Consultation During Project Development. Schedule and attend
--------------------------------------- regular meetings with the Architect during the Design Phase (as hereinafter defined) to advise on site use and improvements, selection of materials, building systems and equipment. Provide recommendations on construction feasibility, availability of materials and labor, time requirements for installation and construction, and factors related to cost including costs of alternative designs or materials.


(b) Scheduling. Develop, in conjunction with Contractor, the
---------- Proposed Time Schedule, that coordinates and integrates the Architect's design efforts with construction schedules. Update the Proposed Time Schedule incorporating a detailed schedule for the construction operations of the Project, including realistic activity sequences and durations, allocation of labor and materials, processing of shop drawings and samples, and delivery of products requiring long lead-time procurement.


(c) Project Construction Budget. Prepare, in conjunction with
--------------------------- Contractor, the Fixed Price Proposal as provided in this Agreement.


(d) Coordination of Contract Documents. Review the Plans and
---------------------------------- Specifications as they are being prepared, recommending alternative solutions whenever design details affect construction feasibility or schedules without, however, assuming any of the Architect's responsibilities for design. Review the Plans and Specifications with the Architect to eliminate areas of conflict and overlapping in the Work to be performed by the various trade contractors and prepare prequalification criteria for bidders.


(e) Equal Employment Opportunity. Determine, or assure
---------------------------- compliance of, applicable requirements for equal


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employment opportunity programs for inclusion in Project bidding documents.


3.2 CONSTRUCTION PHASE.
------------------


3.2.1 Project Control. During the Construction Phase (as hereinafter
--------------- defined), monitor the Work of the Contractor and coordinate the Work with the activities and responsibilities of the Owner, Architect and Contractor to complete the Project in accordance with the Approved Time Schedule.


(a) Establish procedures for coordination among the Owner, Architect, and Contractor with respect to all aspects of the Project and implement such procedures.


(b) Schedule and conduct progress meetings at which Contractor, Owner, and Architect with respect to all aspects of the Project and implement such procedures.


(c) Provide regular monitoring of the schedule as construction progresses. Identify potential variances between scheduled and Completion Date (as hereinafter defined). Review schedule for Work not started or incomplete and recommend to the Owner and Contractor adjustments in the Approved Time Schedule to meet the Completion Date.


3.2.2 Permits. Process all appropriate documentation to obtain the
------- Building Permit, Health/Safety Permit and all other applicable permits necessary with regard to the Work. Such process shall be subject to Owner's obligation to pay for all requisite fees for such permits.


3.2.3 Intentionally omitted.


3.2.4 Inspection. Inspect the Work of the Contractors for defects and
---------- deficiencies in the Work without assuming any of the Architect's responsibilities for inspection.


3.2.5 Shop Drawings and Samples. In collaboration with the Architect,
------------------------- establish and implement procedures for expediting the processing and approval of shop drawings and samples.


3.2.6 Reports and Project Site Documents. Record the progress of the
---------------------------------- Project. Submit progress reports to the Owner and the Architect. Cause Contractor to maintain at the Project site, on a current basis, records of all necessary contracts, drawings, samples, purchases, materials, equipment, maintenance and operating manuals and instructions, and other construction related documents, including all revisions. At the completion of the Project, cause Contractor to deliver all such records to the Owner.


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3.2.7 Start-up. With the Owner's personnel, direct the checkout of
-------- utilities, operations systems and equipment for readiness and assist in their initial start-up and testing.


3.2.8 Final Completion. Determine final completion and provide notice
---------------- to the Owner and Architect that the Work is ready for final inspection. Secure and transmit to the Architect required guarantees, affidavits, releases, bonds and waivers. Turn over to the Owner all keys, manuals, record drawings and maintenance stocks.


3.3 COMPENSATION FOR DEVELOPER. As compensation for services rendered by
-------------------------- Developer in accordance with the provisions of this Agreement, Owner agrees to pay Developer the amount of Two Hundred Sixty-Nine Thousand and No/l00ths Dollars ($269,000.00) ("DEVELOPER FEE AND PROFIT"). Within ten (10) days following Developer's delivery to Owner of written demand to Owner, in addition to the Developer Fee, Owner shall pay to Developer the amount of Two Thousand Five Hundred and No/l00ths Dollars ($2,500.00) for title services, the amount of Seven Thousand Five Hundred and No/l00ths Dollars ($7,500.00) for soils analysis plus the amount of Fifteen Thousand and No/l00ths Dollars ($15,000.00) for legal services (collectively, "ADDITIONAL FEE"). The Developer Fee shall be paid on a percentage of completion basis of the Work, which completion percentages shall be confirmed in writing by the Architect. Developer shall submit a written invoice for such percentage portion of Developer Fee not more than once every thirty (30) day period during the term of this Agreement. In the event that this Agreement is terminated in accordance with the provisions contained herein, Owner shall pay to Developer the Additional Fee plus the portion of the Developer Fee earned as of the date of such termination, and Owner shall have no obligation to pay Developer the remaining unpaid portion of the Developer Fee.


ARTICLE 4
CONSTRUCTION OF THE BUILDING


4.1 SCOPE OF WORK FOR CONTRACTOR. Contractor agrees to furnish all labor,
---------------------------- services, materials, equipment, and supplies required for the prompt and efficient completion of the Project, including all work necessary or incidental thereto, and as more particularly described in the Plans and Specifications (as hereinafter defined).


A. BASIC SERVICES - DESIGN PHASE. The Contractor's basic services
----------------------------- during the period of time in which Architect is preparing the Preliminary Plans and Specifications ("DESIGN PHASE") are as described below.


(1) The Contractor shall consult the Owner to ascertain requirements of the Project and shall review such requirements with the Owner.


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(2) The Contractor shall provide, after consultation with the Owner, a preliminary evaluation of the Project.


(3) The Contractor shall review with the Owner, alternative approaches to design and construction of the Project.


(4) The Contractor shall submit to the Owner for approval a proposal including the proposed schedule for completion of the Work and all other information necessary to complete the Project.


B. BASIC SERVICES-CONSTRUCTION PHASE. The Contractor's basic
--------------------------------- services following Owner's approval of the Fixed Price Agreement are described below.


(1) The Contractor shall obtain necessary approvals of the Plans and Specifications by the governmental authorities having jurisdiction over the Project, which includes the obtaining of a building permit ("BUILDING PERMIT"), the cost for which shall be the obligation of Owner, which cost shall be set forth in the Fixed Price Agreement. Owner agrees that all permits necessary for the handling, processing and/or packaging of food products and/or which are mandated by health and food safety governmental department shall be the obligation of Owner to obtain, which permits are collectively referred to as "HEALTH/FOOD PERMITS."


(2) During the course of construction, the Contractor shall prosecute the Work diligently to completion with the sufficient people on the job at all times and shall cooperate with and provide access and coordination for the electrical installation and preparation for and installation of equipment by contractors engaged directly by the Owner.


(3) Unless otherwise provided in the Contract Documents, the Contractor shall pay for labor, materials, equipment, tools, construction equipment and machinery, water, heat, utilities, transportation and other facilities and services necessary for proper execution and completion of the Work.


(4) The Contractor shall correct Work which does not conform to the Construction Documents, unless approved in writing by Owner.


(5) The Contractor shall give notices and comply with laws, ordinances, rules, regulations and lawful orders of public authorities relating to the Project.


(6) The Contractor at all times shall keep the Property and surrounding area free from dust which might become a nuisance to other property owners, accumulation of waste materials or rubbish caused by the operations under the Agreement. At the completion of the Work, the Contractor shall


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remove from and about the Project the Contractor's tools, construction equipment, machinery, surplus materials, waste materials and rubbish. If after first giving seven (7) days written notice to Contractor, the Contractor fails to clean up at the completion of the Work, the Owner may do so as provided in the Contract Documents, and the cost thereof shall be deducted from the Contract Sum. Contractor shall perform the following final cleaning activities for all trades at the completion of the Work:


(i) Remove any temporary structures;


(ii) Remove to a reasonable standard marks, stains, fingerprints and other soil or dirt from painted, decorated and natural finish woodwork;


(iii) Remove spots, plaster, soil and paint from ceramic tile, marble, interior and exterior glass and other finished materials, and wash or wipe clean;


(iv) Clean fixtures, cabinet work and equipment, removing stains, paint, dirt and dust, and leave same in undamaged, new condition;


(v) Clean aluminum in accordance with recommendations of the manufacturer; and


(vi) Mop clean resilient floors thoroughly. ...