for DBEs Risk Management Caterpillar 2011 Build Your Future Conference February 15, 2011 Presented by: Boyd O. Roberts III Hasselberg, Williams, Grebe, Snodgrass & Birdsall 124 SW Adams Street Suite 360 Peoria, IL Phone: (309) Fax: (309)

for DBEs YOUR TEAM OF GOOD PEOPLE Commercial Banker Accountant Attorney

for DBEs Commercial Banker Commercial Loans –Cash advance to repaid within a defined time frame –Collateral is put up to secure the loan Facilities Equipment Other non-business assets (car, home, etc.) Personal guaranty –Interest rate – based on certain percentage above or below the prime rate

for DBEs –Financial Statements Balance sheet –Snapshot of value of business (cost less depreciation) –Includes cash, accounts receivable, equipment –Offset by debts and liabilities Profit and Loss statement (P&L) –Financial story of business for a specific time frame –Shows revenue, expenses and net profit or loss Cash Flow statement –shows how your business spends cash

for DBEs Bank is trying to make money on the deal also Types of Loans –Revolving line of credit –Traditional loan Watch for covenants or restriction in loan terms

for DBEs Accountant Bookkeeper Tax payments Employee withholdings Unemployment Insurance premiums Debt expenditures Payroll –Consider a payroll service Want someone to regularly examine your business and provide ideas/suggestions

for DBEs Attorney Incorporation v. limited liability company v. sole proprietorship –Incorporation benefits Perpetual existence Shareholders not liable for debts of corporation Ownership easily transferred (shares) Tax advantages

for DBEs –Corporate formalities must be observed By-laws Annual meetings w/ minutes Annual reports with Secretary of State Articles of Incorporation Capitalization Board of Directors and officers

for DBEs LLC (Limited Liability Corporations) –Taxed like partnership (each member taxed) –Same liability insulation enjoyed by corporations –Perpetual existence –Ownership easily transferred –Easier to manage then corporation

for DBEs Sole proprietorship –No personal liability protection –No tax advantages

for DBEs Partnership –Partnership agreement specifies management –Each general partner is liable for actions of another –Each partner is taxed individually

for DBEs Employment issues Filing of mechanics liens or other claims Respond to claims filed against business All Corporations and LLCs must be represented by an attorney in court under Illinois law.

for DBEs Bidding a Job Remember that you are bound by your bid numbers. Key is to adequately determine your break even point and then add in profit. Adequately pricing the job is key

for DBEs Labor Cost –Wage rate –Man hours to complete job Equipment Cost –Fuel –Insurance –Depreciation –Debt –Upkeep (maintenance, repair, storage) –Increased costs for materials Consider an escalation rider Buy in volume while price is lower

for DBEs Overhead –Utilities –Debt –Taxes –Insurance –Permits –Bonding

for DBEs Meet with People Associated with Project –Owner –General Contractor –Architect Competitors Pricing –Dont price yourself out of the job –Check other contractors web sites, advertising, prior jobs.

for DBEs Insurance Have your own personal, professional insurance agent who specializes in working with contractors. Property Insurance –Similar to home insurance –Protects your facilities from fire, theft, storms, etc.

for DBEs Liability Insurance –Protects from lawsuits by third parties Personal injury due to your negligence Property damage due to your negligence Consider a Business Owners Policy (BOP) –Includes all essential coverages in one policy –Also consider an umbrella policy for catastrophic accidents

for DBEs Auto Insurance –Vehicles used for personal and business use should have a policy written in the name of the entity that holds title to the vehicle –Policy should cover all vehicles used for company business, including employees vehicles. –Equipment Replacement cost coverage Current fair market value coverage

for DBEs Workers Compensation (Work Comp) –In Illinois, you must carry work comp insurance –State can order that you cease all work –Class 4 felony

for DBEs Reducing Insurance Premiums –Properly secure equipment at job sites –DONT LET EMPLOYEES USE COMPANY VEHICLES FOR THEIR OWN PERSONAL USE –Drug testing programs –Experience in field

for DBEs Bonding Three party instrument –Surety –Contractor –Project owner

for DBEs Cost of Bond –Contract price –Companys financial strength –Risk on project

for DBEs Types of Bonds –Bid Bond Guarantees that you will produce a payment and performance bond if bid is accepted –Payment Bond Insures that you will pay all your vendors and suppliers –Performance Bond Guarantees that you will perform work on time and on budget

for DBEs ALWAYS GET CONTRACT IN WRITING Contract Clauses (Read Everything!!!)

for DBEs Residential or commercial project Scope of work –Specifically described –Attached spec sheet(s) if necessary –Design build contract? Payment –Periodic installments –End of job

for DBEs Insurance requirements –What kinds are required? –Additional Insurance –Minimum Policy Limits –Cancellation Clauses –Waiver of Subrogation rights

for DBEs Risk Transference –Hold Harmless Agreements Broad Indemnity clauses Intermediate Indemnity clauses Limited Indemnity clause Continuation of work –Job must be completed even if there is dispute

for DBEs Change Orders –More problems in this area than any other –In writing –Before additional or changed work commences –End of job

for DBEs Mechanics Liens (Secret lien) –Contractors liens v. Subcontractors liens –Recording of lien with Recorder of deeds –Notice to owner –Statue of limitations within 4 months after completion of work file suit within 2 years after completion date

for DBEs Notice provision –Where to send notice of default –Right to cure default

for DBEs Venue/choice of law –Watch for foreign state venue provision –Mandatory Arbitration

for DBEs Attorneys Fees –Prevailing party language is typical –Whats good for the goose should be good for the gander –Watch for distinction in commercial settings though

for DBEs Signatures –Make sure you have an original signed copy by both parties –Signed by officer of business authorized to execute contracts