HomeMy WebLinkAboutRobert Hauptly Construction Co-6/14/2010 (2)08/11/2010 10:12 FAX J 002/013
DISBURSEMENT AGREEMENT
This Disbursement Agreement (the "Agreement") entered into on this 11th day of June, 2010, between
Robert C. Hauptly dba Robert C. Hauptly Construction Company (the "Principal"), American Safety
Casualty Insurance Company (the "Surety"), and the funds administration company, National American
Insurance Company of Califomia ("NAICC").
WHEREAS:
A. The Principal has entered or will enter into a Contract (the "Contract") with the City of
Waterloo (the "Obligee"), concerning the construction of a work of improvement designated
as Removal and Replacement of the Aeration Equipment in the Existing Aeration Basins at
the Satellite and Easton Avenue Water Pollution Control Facilities (WPCF), City Contract No.
788 (the "Project"); and
B. The Contract requires the Principal to provide to Obligee a Surety Bond (the "Bond")
guarantying Principal's performance of its obligations to Obligee with respect to the Contract
and the Project; and
C. Principal has made application for the Bond to the Surety; and
D. Surety having independently underwritten and evaluated the application and request of
Principal for a Bond, conditionally elects to issue the Bond; and
E. In consideration of issuance of the Bond, the Surety requires that all payments due from
Obligee to Principal for work performed under the Contract be deposited into a Disbursement
Account to facilitate the proper and expeditious receipt and disbursement of funds pursuant to
the terms of this Agreement; and
F. Principal has selected NAICC to perform disbursement services and NAICC Is willing to
provide such services as described in this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and undertakings set forth herein and
other good and valuable consideration, the receipt and adequacy of which is hereby acknowledged, the
parties hereto agree as follows:
ARTICLE 1
TERM
1,1 The term of this agreement shall begin on the date first shown above and shall continue,
unless sooner terminated according to the terms of Article 6 below, until the final disbursement of funds
from the Disbursement Account. After the Project has been completed, or after termination of this
Agreement according to the terms of Article 6, and after NAICC has disbursed all funds from the
Disbursement Account, NAICC shall not have any further obligations and responsibilities pursuant to this
Agreement. The Indemnification Provisions contained in Article 5 of this Agreement shall continue after
the termination of the Agreement.
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ARTICLE 2
ACKNOWLEDGMENTS BY PRINCIPAL
2.1 The Principal acknowledges that this Agreement does not appoint NAICC as trustee of the
Disbursement Account for any purpose, and that legal title to the funds in the Disbursement Account
shall remain with the Principal until such funds are disbursed by NAICC or unless there is a default
pursuant to Article 4.8 herein. The Principal further acknowledges that NAICC's sole capacity under this
Agreement is to disburse the funds in accordance with this Agreement as an accommodation to Surety
and Principal. Principal further acknowledges and agrees that NAICC may rely upon documents
provided by and verified by the Principal to be genuine and NAICC may disburse funds based upon said
documents in good faith and without liability.
2.2 The Principal acknowledges that NAICC' s role under this Agreement is that of an
independent contractor, and not as an agent or employee of Principal or Surety for any purpose,
including, but not limited to payment of taxes, standards of care and/or liability.
2.3 The Principal acknowledges and consents to allow NAICC to satisfy any demand for funds
made by the Surety, including but not limited to, a demand made per Article 4.8 herein. Any such
demand by the Surety shall be In writing and upon receipt of such demand the requested funds shall be
released to the Surety.
2.4 The Principal acknowledges that this Agreement or any provisions contained herein, shall not
waive any rights of the Surety given by Principal in any General Indemnity Agreement made separately
and apart from this Agreement.
2.5 The Principal has full legal authority to enter into this Agreement and perform all its
obligations under this Agreement. The Principal has taken all action necessary to authorize it to enter
into and perform this Agreement. This Agreement constitutes a valid and binding obligation of the
Principal. The execution of and performance under this Agreement by the Principal will not conflict with,
result in the breach or termination of, or constitute a default under any of the Principal's organizational
documents or any agreement, contract, or other instrument, or any order or judgment to which the
Principal is a party or by which the Principal is bound.
2.6 To the best knowledge of the Principal, there are no legal actions or investigations pending or
threatened against the Principal or the Surety in relationship to the Project.
21 The Principal acknowledges that NAICC shall have the right but not the obligation to contact
the Obligee and its representatives, and any subcontractor, supplier, or laborer employed to verify its
account or payment status related to the Project.
2.8 Upon request. the Principal will provide full access to all books, records, contracts, and other
documents related to the Project to NA1CC and/or the Surety and any of their attorneys, accountants or
other consultants.
2.9 The Principal has read and fully understands this Agreement and its substantive application.
The Principal further warrants that no term or provision of this Agreement will impede the Principars
ability to comply with the Contract with the Obligee or hinder the Principal's general business operations.
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2.10 The Principal and indemnitors acknowledge that they understand they can seek bonding
from another company if they are unsatisfied with the terms and conditions imposed by the Surety,
including the requirement for disbursement administration.
2.11 The Principal and indemnitors acknowledge that the Surety has explained the seriousness of
the commitments involved in the Disbursement Agreement, and that the Surety has encouraged them to
read the agreement carefully and consult with legal counsel regarding anything they do not understand.
2.12 The Principal acknowledges that one purpose of the Disbursement Agreement is intended to
protect the Surety from suffering financially, and should not be construed as a promise by the Surety to
issue further bonds or to provide financing of any kind. Furthermore, the Principal acknowledges that
neither the Surety nor NAICC has any obligation to make advances on behalf of the Principal or
indemnitors. If the Surety does elect to make advances, any such payment or advance by the Surety is
intended to minimize its exposure to loss on the bond and is not to be construed as an agreement to pay
or advance other obligations of the Principal. Further, Surety may cease advancing or paying obligations
of the Principal or indemnitors in its sole discretion. In addition, it is understood that any such advances
are made with a complete reservation and in accordance with the Surety's right to indemnification and
reimbursement.
2.13 The Principal acknowledges that the Surety is imposing the requirement of funds
administration as a condition of its Issuance of the Bond. The Principal therefore acknowledges it is
receiving valuable consideration by entering into the Agreement. The Principal further acknowledges
that the parties performance under the terms of the Agreement shall in no way be construed by the
Principal to interfere with Its business.
ARTICLE 3
RESPONSIBILmES OF PRINCIPAL
3.1 Principal shall direct Obligee to deliver to NAICC for deposit in the Disbursement Account all
payments due or to become due from Obligee to Principal under the Contract. The Principal shall obtain
a fully executed Notice of Assignment of Contract Funds indicating Obligee's consent, in the form and
substance set forth on attached Exhibit "A" and deliver said executed Agreement to NAICC. The
Obligee's written agreement to deliver the funds to NAICC is a condition precedent to NAICC's
obligations under this Agreement. In the event that funds are delivered directly to the Principal by the
Obligee (whether by mistake or otherwise), Principal shall Immediately forward those funds to NAICC for
deposit into the Disbursement Account. The failure by the Principal to forward such funds immediately
will be deemed to be a default under this Agreement (Article 7). This default will be reported to the Surety
and may result in the Principal's loss of surety credit.
3.2 The Principal shall make an advance deposit of eighty-one thousand and 44/100 dollars
($$1,000.44) into the Disbursement Account prior to the issuance of the Bond to the Principal by the
Surety. These funds shall be available for use by the Principal as working capital to pay any direct costs
on the Project approved by the Surety, excluding any payments for overhead and profit, but any funds so
used shall be repaid from the proceeds of the next payment NAICC receives from the Obligee in order to
restore the advance deposit to the original balance.
3.3 The Principal shall execute and provide NAICC copies of the following documents related to
the Project before commencement of work:
a. Project Information Sheet - Exhibit "B" attached.
b. Copy of Bid and original estimate
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c. Contract with the Obligee including all general conditions, exhibits, attachments,
appendices and, if requested, copy of plans, specifications and addenda thereto.
d. Schedule of Values with CSI' code or other identifying item number used by the Principal
for project billings to the Obligee
e. Itemized Budget of Costs (Exhibit "Cl including:
▪ Listing of all subcontractors and material suppliers to be engaged on the Project with
the value of the goods or services to be provided by each
• Listing of costs to be incurred by the Principal including labor and labor burdens
• Amount for Principal's Overhead and Profit, which when added to the totals for the
preceding two items shall at all time be equal to the Schedule of Values.
• Each listing for labor, material suppliers and subcontractor shall have a CSI code or
other Identifying number that corresponds to the appropriate Schedule of Value Item
• Listing of the addresses and telephone numbers of the previously listed
subcontractors and material suppliers
• Copies of all Subcontract Agreements and Purchase Orders supporting amounts listed
on the Itemized Budget of Costs.
f. If requested, provide a detained construction schedule showing timeframes for the various
construction activities, including proposed interim and final completion dates for each
activity and the project in total.
3.4 The Principal during the course of the Protect shall execute and provide NAICC copies of the
following documents related to the Project:
a. Approved Change Orders between the Principal and the Obligee either increasing or
decreasing the value of the Contract or extending the construction schedule
b. Updated schedule of values
c. Updated Itemized Budget of.Costs reflecting changes, additions, or deletions necessitated
by changes in the Project due to Approved Change Orders. No changes will be allowed in
the Itemized Budget of Costs without the support of Approved Change Orders or the
approval of the Surety.
d. All change orders shall be broken down into the proper CSI code or other identifying item
number used by the Principal for protect billings to the Obligee
e. If requested, an updated construction schedule showing any changes in completion for
activities that have been completed
f. Within five days of receipt, any preliminary notices, claim liens, or other notices involving
nonpayment for labor or materials related to the Project
g. Monthly billings from Principal to Obligee including all supporting documentation
h. Copies of any additional Subcontract Agreements and Purchase Orders not previously
provided.
i. Copies of any Approved Change Orders to any of the Subcontract Agreements and
Purchase Orders supporting, the amounts listed on any revised schedule of values and
Itemized Budget of Costs
3.5 The Principal shall execute and deliver to NAICC, a Disbursement Voucher (Exhibit "D")
authorizing payments to subcontractors and suppliers for labor, material, equipment and services
provided to the Project. Requests for advance deposits to subcontractors, suppliers, and/or other
vendors am not to be submitted for payment without prior written approval of the Surety. One
Disbursement Voucher shall be submitted for each progress billing for which the Principal Is requesting
payment. The Principal shall Inspect the work performed or material supplied relating to the
Disbursement Voucher and certify that payment is appropriate. The Disbursement Voucher shall be
executed by an authorized representative of the Principal, as listed on the Project Information Sheet
attached. Each Disbursement Voucher shall:
a. Identify the subcontractors or suppliers to be paid
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b. State the amount to be paid to each subcontractor or supplier
c. Identify all applicable CSI codes, line item numbers and their relationship to the Schedule
of Values submitted to the Obligee for billing support. All payroll reports must indicate
applicable Schedule of Values item number.
d. Be accompanied by appropriate supporting documentation, including but not limited to
invoices, statements, Subcontractor's Schedule of Values and progress billings, receipts,
delivery tickets, and any other appropriate documents verifying amounts to be paid
e. Be accompanied by properly executed lien releases acceptable to the Principal and the
Surety (Exhibits "E", "E1", "F", and "F1").
3.6 The Principal shall execute and deliver to NAICC, a separate Disbursement Voucher (Exhibit "G")
to receive reimbursements for its own labor and expenses or to receive payment for its overhead and
profit. Payments directly to the Principal shall be handled as follows:
a. Labor eiigible for reimbursement under this section shall include only direct labor employed at the
job site required to complete the Project including reasonable job site supervision.
b. Reimbursement for direct labor supplied by the Principal shall be reimbursed based on the
Certified Payroll Report or other approved Payroll Report prepared and certified by the Principal.
Payment of all labor costs of Principal's employees including withholding and payroll taxes and
other amounts deducted from employee wages an the bonded project from the date of the
Disbursement Agreement forward shall be made by Principal on a priority basis directly by
Principal to the appropriate payee's for all labor, withholding and payroll taxes and other normal
payroll burden expenses. It shall be the sole responsibility of the Principal and indemnitors,
within the time limits of all appropriate statutes and regulations, to pay these obligations.
Thereafter, It shall be the sole responsibility of the Principal and Indemnitors to prepare and
present to the representative of the disbursement control service necessary information verifying
their payment of all such taxes and other deductions from the payroll, including the appropriate
copies and/or canceled check(s) from the Principal. Upon receipt of the above documentation,
Principal shall be reimbursed from the disbursement service for Principal's payment of labor,
payroll taxes and deductions. Reimbursements will include the direct labor cost shown on the
Payroll Report plus an allowance for labor burden based on the percentage of labor which labor
burden represents as shown on the itemized Budget of Costs submitted by the Principal up to a
maximum of forty percent (40%).
c. Reimbursement for direct labor will be limited to funds received from the Obligee directly related
to the corresponding Schedule of Values and matching Itemized Budget of Costs
d. Reimbursement for other direct expenses paid by the Principal (Permits, Surety Bond Premiums,
etc.) excluding advance deposits to subcontractors, suppliers, and other vendors shall be
reimbursed as related funds are received from the Obligee. A copy of the Principal's canceled
check(s) used in paying such expenses must accompany the Disbursement Voucher, along with
properly executed unconditional lien release(s) (Exhibit "E1" or '71"). Advance deposits paid by
the Principal to subcontractors, suppliers, and/or vendors shall be reimbursed after the goods
and/or services for which the advance deposits were made have been received and accepted by
the Principal.
e. Payments for Principal's overhead and profit shall be based upon the percentage of completion
attained in the progress of the Project. Percentage of completion shall be determined based on
the lesser of (1) the percentage of the total contract funds which has been received from the
Obligee (cash received from the Obligee divided by the total contract amount), or (2) the
percentage of the total contract amount which has been incurred as cost (actual costs incurred to
date, excluding overhead and profit divided by the total contract amount, excluding overhead and
profit),
f. Disbursement Vouchers requesting payment to the Principal shall comply with the provisions
contained in Article 3.5, Sections a through e.
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g. Under no circumstances will Principal be paid in excess of the amounts indicated in the
appropriate section of the Itemized Budget of Costs until final settlement which occurs upon
completion and final acceptance of the Project by Obligee and consent of Surety for release of
such funds remaining in the Disbursement Account.
3.7 Upon completion of the Project, the Principal shall provide NAICC with a copy of the Obligee's
acceptance and recorded notice of completion if any. It shall also provide a final invoice from each
subcontractor and supplier along with an executed release which indicates that any and all lien rights or
claims will be waived upon receipt of final payment (Exhibit F). The Principal shall also provide a final
executed release from each first and second tier subcontractor and supplier which states that any and all
lien rights or claims against the Project and the bond have been discharged (Exhibit F1). Any
appropriate filings or other documentation verifying the release of any liens or claims shall accompany
the affidavit.
3,8 The Principal is responsible for all reasonable costs and expenses incurred by NAICC in
performing services outside its customary services in relation to this Agreement. Such costs and
expenses shall include but are not limited to bank fees, Including a monthly service charge of thirty-five
dollars ($35.00) per month; express delivery fees; cashier's checks; wire transfer fees at thirty dollars
($30.00) per incoming or outgoing wire transfer; and payroll service fees. In addition, if the Principal falls
to comply with the requirements of sections 3.3, 3.4, 3.5, 3.6 and 3.7 of this Agreement, or if the Principal
requests NAICC's assistance in obtaining and/or preparing the documents required in sections 3.3, 3.4,
3.5, 3.6 and 3.7, NAICC shall charge a fee of up to one tenth of one percent (0.10%) of the contract
value per each draw requiring NAICC's involvement in obtaining the necessary Information and
documentation to complete the draw request(s). The fees in this section are in addition to the service
fees detailed in sections 3.9, 3.10 and 3.11 of this Agreement.
3.9 If disputes arise with subcontractors, suppliers, or the Obligee relating to this agreement,
NAICC will promptly notify the Principal and Surety of such disputes. The Surety, at Its election, may
choose to handle any such disputes at its expense, or it may choose to engage the services of NAICC to
handle the disputes at the rate of three hundred fifty dollars ($350.00) per hour, plus expenses.
3.10 The Principal will pay to NAICC a fee of five thousand four hundred and 03/100 dollars
($5,400.03) based on a contract value of five hundred forty thousand two and 96/100 dollars
($540.002.96) and up to four (4) draw requests. NAICC will invoice the Principal for the service fee
based on the original Contract value as soon as the first funds from the Obligee are deposited into
NAICC's account. If the Principal has not paid said invoice by the time the first funds are ready for
disbursement, NAICC shall pay its fee out of those funds. NAICC will invoice the Principal for fees due
for any increases in the Contract value at the rate of one percent (1.0 %) of any increase. Any refund
due the Principal because the Contract value has decreased will be paid to Principal at the rate of one
percent (1.0 %) of any decrease at the time of final settlement for the Project. NAICC will also invoice
the Principal for up to two tenths of one percent (0.2 %) of the contract value for every draw request in
excess of four (4). NAICC may utilize funds in the Disbursement Account to pay any and all costs or
expenses incurred and fees earned by NAICC in connection with this Agreement The above fee does
not include any site visits performed by NAICC. Any site visits required by the Surety will be billed to the
Principal at two hundred fifty dollars ($250.00) per hour plus expenses.
3.11 In the event that the Obligee fails to deposit contract funds with NAICC and/or the funds are
deposited with the Principal who fails to immediately tum those funds over to NAICC, NAICC shall
charge an additional fee in the amount of one-half (1/2) times the percentage fee stated in the preceding
Article 3.10 times the amount of funds diverted from the Disbursement Account. Principal acknowledges
that the calculation of actual damages to NAICC in collecting wrongfully diverted funds is difficult to
quantify and that the additional fes charged in this paragraph is a reasonable liquidated damage fee.
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3.12 The Principal Is solely responsible for the timely payment of all taxes and union dues (If
applicable) and the timely compliance with all related reporting, including but not limited to, payroll,
income, sales and 1099 reporting, and/or any and all other similar requirements, whether federal, state,
local, union or other entity.
ARTICLE 4
RESPONSIBILITIES OF NAICC
4.1 NAICC shall establish a checking account ("Disbursement Account") at a banking institution
selected by NAICC. Withdrawals or disbursements from the Disbursement Account shall require the
signature of an authorized representative of NAICC. The authorized representatives of NAICC will be
Steve Kay, Paul Losie, Jon Schneider, Kevin Grant, Regan James, Vahe Khachaturian or as necessary,
any other person who may be designated as an authorized representative.
4.2 NAICC shall receive all funds from Obligee under the Contract and deposit said funds into the
Disbursement Account.
4.3 Funds shall be disbursed by NAICC from the Disbursement Account only upon receipt from
Principal of fully executed Disbursement Vouchers as outlined in Article 3.5 and 3.6. NAICC shall
prepare checks drawn on the Disbursement Account payable to each subcontractor, supplier, the
Principal, or NAICC, and present signed checks to the Principal for review. Principal will review the
checks and distribute them to the appropriate parties. Principal's review and distribution indicates
Principal's final and unconditional approval for the disbursement.
4.4 NAICC shall reserve funds equivalent to the amount of liens, stop notices or documented and
potentially supportable claims or disputes, plus a reasonable sum (not to exceed 25% of the Ilen, stop
notice, claim or dispute) for potential legal costs and attorney fees.
4.5 NAICC shall disburse funds only to the extent that funds are available in the Disbursement
Account in excess of the reserve described in Article 4.4. If at any time, the total of the Disbursement
Vouchers received from the Principal exceeds the amount available in the Disbursement Account,
NAICC will notify the Principal of such funds shortage and the Principal shall have the option to deposit
additional funds in the Disbursement Account or the Principal's fee for overhead and profit can be
reduced to cover all costs in excess of those itemized by the Principal, or the original Itemized budget of
costs is revised as a result of change orders or other appropriate adjustments in the itemized budget,
The appropriateness of those adjustments shall be determined at the sole discretion of NAICC. If the
Principal does not deposit additional funds to eliminate such funds shortage or adjust its fee, NAICC shall
disburse funds to those subcontractors or suppliers designated by the Principal to the extent of available
funds. NAICC shall also notify the Surety of such funds shortage if the Principal does not deposit
additional funds In the Disbursement Account to eliminate such funds shortage.
4.6 NAICC shall release to Principal any funds remaining in the Disbursement Account upon
completion of the Project when the following requirements are satisfied:
a. NAICC has received all documentation necessary under this Agreement indicating
Obligee's final acceptance of the Project
b. NAICC has received final payment from Obligee
c. All claims and disputes are resolved to the satisfaction of NAICC and the Surety
d. The Surety has consented in writing to the release of final payment to Principal
e. NAICC has been paid for all fees earned and expenses incurred related to this
Agreement.
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4.7 NAICC will notify the Surety immediately of any claim, suit, or circumstance which could, in
the opinion of NAICC, give rise to a claim or suit against the Surety. The Principal will receive a copy of
any such notification to the Surety.
4.8 NAICC shall, upon receipt of written notice from the Surety regarding the default of the
Principal, as described in Article 7, a claim being made, loss or costs, or expenses Incurred by the Surety
on any project bonded by the Surety, release all funds held in the Disbursement Account to the Surety.
The Principal consents to allow NAICC to satisfy any demand for funds made by the Surety and appoints
the Surety as its attorney-in-fact to request the execution of any check or draft needed to allow such
disbursements. If NAICC complies with the directions of the Surety, NAICC shall not be in breach of this
Agreement, and the Principal specifically releases and holds harmless NAICC from any claim the
Principal may have concerning such funds, The Principal will be notified of any such release of funds to
the Surety.
4.9 In the event that NAICC receives instructions which it believes conflict with either the terms of
this Agreement or instructions received from any other party, including the Obligee, the Surety, the
Principal, or any subcontractor/supplier, NAICC shall have the right to not take any action regarding the
conflicting instructions until such conflict Is resolved. NAICC will notify the Surety, the Principal, and any
other parties involved with the conflicting instructions, of the situation as soon as NAICC identifies the
conflict. A demand from the Surety as described in Article 4.8 takes precedent over any conflicting
instruction and NAICC shall follow the terms of Article 4.8 when a demand is received from the Surety,
4.10 NAICC shall be authorized, in its sole discretion, to rely upon and comply with any judgment,
decree, attachment, garnishment or levy upon any of the funds in the Disbursement Account or which
stays or enjoins the transfer or delivery of any of the funds In the Disbursement Account, issued by any
court of law or other jurisdiction, irrespective of whether the court of law or jurisdiction had proper
jurisdiction, venue, or competence, except with respect to iRS, or any bankruptcy court. In the case of
Principal's bankruptcy, or with respect to the IRS, NAICC will comply with any demand from Surety as
described in Article 4.8. If NAICC complies with any such order, NAICC shall not be liable to the
Principal or the Surety or any other person or entity by reason of such compliance, even though such
order may subsequently be reversed, modified, set aside, or otherwise vacated.
4.11 NAICC shall have the right but not the responsibility to inspect the Project for the purpose of
ascertaining the progress of construction, Such inspections by NAICC shall not be deemed in any
manner to be the equivalent of an architectural or engineering inspection or to give in any manner
assurance that construction is in compliance with the plans and specifications or any applicable building
safety, or other codes and regulations. NAICC Is not responsible for the quality of the construction,
safety of workers on the premises, or ensuring that the construction is according to the plans and
specifications for the Project; or ensuring that the Project is in compliance with ail Local, State and
Federal rules and regulations.
ARTICLE 5
INDEMNIFICATION
5.1 To the maximum extent permitted by law, Principal agrees to defend, hold harmless, and
indemnify NAICC and its employees, officers and directors from and against any and all liabilities, losses,
costs, expenses (including but not limited to attorneys fees), claims actions, or causes of action arising
out of or relating to NAICC's activities pursuant to this Agreement, but for the gross negligence of NAICC
in disbursing funds.
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5.2 NAICC shall not be liable for, and the Principal waives any claims or remedies the Principal
may have against NAICC for direct, indirect, special, consequential, incidental, liquidated, or punitive
damages, whether of the Principal or any third party, which arise out of any breach of this Agreement by
NAICC, NAICC's disbursement or handling of the Disbursement Account, any other claim or obligation
arising out of this Agreement, or any claim which arises pursuant to any tort or claim (including
negligence and strict liability, but excluding gross negligence and willful misconduct). Except as this
Agreement otherwise explicitly provides, the Principal specifically waives all remedies available to It at
law, in equity or otherwise, whether for any breach of contract andtor tort.
5.3 NAiCC shall not be deemed an indemnitor of the Principal or be bound in any manner to the
Contract. NAICC's actions and responsibilities shall relate only to the receipt and disbursement of funds
received pursuant to the Contract and as herein defined, and for no other purpose. NAICC does not
guarantee that sufficient funds are available to complete the Project, or that the Project will be
completed; or that all creditors of the Principal related to the Project will be paid.
5.4 NAICC shall be protected in acting upon any certification, statement, request, consent,
agreement, notification, document or other instrument which NAICC in good faith believes to be genuine
and to have been signed and delivered by the proper person or persons.
5.5 As soon as NAICC disburses any funds from the Disbursement Account pursuant to any term
of this Agreement, NAICC shall have no obligation to monitor or oversee the use of such funds, including
but not limited to whether or not the party utilizes any such funds for payroll, withholding, other taxes or
payments which such party is obligated to make. NAICC is entitled to conclusively assume that all such
funds were properly utilized for all appropriate purposes.
ARTICLE 6
TERMINATION
6.1 NAICC may terminate this Agreement upon thirty (30) days written notice to the Principal and
Surety. Upon termination, if the Principal is not in default under Article 7, any funds remaining in the
Disbursement Account shall be disbursed to the Principal. If the Principal is in default under Article 7 at
the time NAICC terminates this Agreement, any funds in the Disbursement Account shall be disbursed to
Surety. Upon NAICC's termination, NAICC shall provide copies of all records relating to the project to
Surety or any party directed by Surety. Upon such disbursement to Principal or Surety as provided
hereinabove, NAICC shall be discharged and this Agreement terminated.
6.2 After the Project has been completed and the conditions set forth in Article 4.6 have been
met, and all funds are disbursed from the Disbursement Account, NAICC shall furnish an itemized final
accounting report to the Principal and the Surety, whereupon NAICC shall be discharged and will have
no further responsibilities with respect to each completed project.
ARTICLE 7
DEFAULT
7,1 There shall be deemed to have been a default under this Agreement in the event of the
occurrence of any of the following;
a. Failure of Principal to perform any material obligation to be performed by Principal in
accordance with the Contract Documents or under this Agreement, or under the General
Indemnity Agreement executed in favor of Surety,
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b. Principars making of any untrue or misleading statement to NAICC as to any material fact
for the purpose of causing NAICC to disburse Contract Funds or to take other action or to
omit to take any action,
c. Failure of Principal to use and apply within a reasonable time funds paid to the
Disbursement Account for the purpose for which funds were paid,
d. Diversion to any other use of materials furnished, earmarked or obtained for use in
Project,
e. Filing of a petition by Principal or by Principal's creditors for bankruptcy reorganization, or
other relief under the United States Bankruptcy Code, Principal's making of an
assignment for benefit of creditors, the appointment of a receiver for the Principal or
Principal's property, or the insolvency of the Principal,
f. Transfer or assignment by Principal of Contract(s), or of this Agreement, or of any rights,
benefits or monies thereunder, except to persona entitled thereto by having furnished
labor, materials, or services In the construction of the project,
g. If Principal is an individual, and Principal dies or becomes incapacitated for any reason,
thereby preventing Principal from performing Principal's obligations under this Agreement,
or if Principal becomes a fugitive from justice or for any reason disappears and cannot be
found immediately by NAICC by use of the usual methods.
ARTICLE 8
MISCELLANEOUS PROVISIONS
8.1 Any and all disputes or claims between NAICC, on the one hand, and either the Principal
and/or Surety, on the other hand, relating to or arising out of this Agreement, shall be settled by
arbitration in accordance with the Commercial Arbitration Rules of the American Arbitration Association,
and judgment on the award rendered by the arbitrator may be entered in any court of competent
jurisdiction. The venue for such arbitration or other judicial proceedings shall be Los Angeles, California.
8.2 This Agreement constitutes the entire understanding among the parties. This Agreement
shall not be amended or modified except in writing and approved and signed by all parties hereto, No
covenant, representation or condition not otherwise expressed in this Agreement shall replace, modify,
Interpret, change or restrict the express provisions of thls Agreement.
8.3 The laws of the State of California shall govern all aspects of this Agreement.
8.4 Surety may at any time upon notice to NAICC, inspect and audit any records or documents
relating to this Agreement.
8.5 All exhibits (Exhibits A through G) attached to this Agreement are Incorporated into this
Agreement.
8.6 The article headings contained in this Agreement are inserted only as a matter of
convenience and shall in no way be construed to define, limit, extend or prescribe the scope
of this Agreement or the intent of any of its provisions.
8.7 The invalidity in whole or in part of any provision of this Agreement shall not affect the validity
of the remaining portions of this Agreement.
8.8 All notices under this Agreement shall be given in writing as follows:
a. By actual delivery to the respective parties; or
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b. by mailing such notice certfied mail, return receipt requested, in which case the notice
shall be deemed to be given on the date of mailing; or
c. by overnight delivery service, in which case the notice shall be deemed to be given on the
date next succeeding the date of its transmission; or
d. by facsimile transmission, In which case the notice shall be deemed given on the date
sent. All notices shall be given using the addresses and facsimile numbers listed below.
The parties have executed this Agreement on the date first above written.
Principal;__Robert C. Hauptly dba Robert C. Surety: American Safety Cas
Hauptly Construction Company
By:
Robert C. HauctIv. Owner
Name and Title
203 Bishop Avenue
Waterloo, IA 50707
Telephone: 319.830.7087
Fax
National American Insurance Company of California
By:
Steven R. Kay, Executive Vice President
Name and Title
23901 Calabasas Road, Suite 1085
Calabasas, CA 91302
Telephone: 818.871.1061
Fax: 818.880.8813
.r�
Aef
Keith Sandrock Jr. Atto a -fact
Name and Title
Insurance Co.
23901 Calabasas Road, Suite 1085
Calabasas, CA 91302
Telephone: 818.871.1087
Fax: 818.880.8813
MVO 11 0111
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