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Exhibit 10.2

LUMP SUM DESIGN-BUILD AGREEMENT

BETWEEN

SIOUXLAND ETHANOL, LLC (“ OWNER ”)

AND

FAGEN, INC. (“ DESIGN-BUILDER ”)

January 5, 2006

 

 

 

 

*

 

Portions omitted pursuant to a request for confidential treatment and filed separately with the Securities and Exchange Commission.

 


 

TABLE OF CONTENTS

 

 

 

 

 

 

 

Page

 

Article 1 Definitions; Rules of Interpretation

 

 

1

 

 

 

 

 

 

1.1 Rules of Construction

 

 

1

 

1.2 Defined Terms

 

 

1

 

 

 

 

 

 

Article 2 The Project

 

 

6

 

 

 

 

 

 

2.1 Services to be Performed

 

 

6

 

2.2 Extent of Agreement

 

 

6

 

2.3 Conflicting Provisions

 

 

6

 

 

 

 

 

 

Article 3 Design-Builder Responsibilities

 

 

7

 

 

 

 

 

 

3.1 Design-Builder’s Services in General

 

 

7

 

3.2 Design Development and Services

 

 

7

 

3.3 Standard of Care

 

 

8

 

3.4 Government Approvals and Permits

 

 

9

 

3.5 Subcontractors

 

 

9

 

3.6 Maintenance of Site

 

 

9

 

3.7 Project Safety

 

 

9

 

3.8 Submission of Reports

 

 

10

 

3.9 Training

 

 

10

 

 

 

 

 

 

Article 4 Owner’s Responsibilities

 

 

11

 

 

 

 

 

 

4.1 Duty to Cooperate

 

 

11

 

4.2 Furnishing of Services and Information

 

 

11

 

4.3 Financial Information; Cooperation with Lenders; Failure to Obtain Financial Closing

 

 

12

 

4.4 Owner’s Representative

 

 

12

 

4.5 Government Approvals and Permits

 

 

13

 

4.6 Owner’s Separate Contractors

 

 

13

 

4.7 Security

 

 

13

 

 

 

 

 

 

Article 5 Ownership of Work Product; Risk of Loss

 

 

13

 

 

 

 

 

 

5.1 Work Product

 

 

13

 

5.2 Owner’s Limited License Upon Payment in Full

 

 

13

 

5.3 Owner’s Limited License Upon Owner’s Termination for Convenience or Design-Builder’s Election to Terminate

 

 

14

 

5.4 Owner’s Limited License Upon Design-Builder’s Default

 

 

15

 

5.5 Owner’s Indemnification for Use of Work Product

 

 

15

 

5.6 Risk of Loss

 

 

15

 

 

 

 

 

 

Article 6 Commencement and Completion of the Project

 

 

15

 

 

 

 

 

 

6.1 Work Schedule

 

 

15

 

6.2 Phase I and Phase II Engineering

 

 

16

 

6.3 Notice to Proceed; Commencement

 

 

16

 

6.4 Project Start-Up and Testing

 

 

16

 

 

 

 

 

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6.5 Substantial Completion

 

 

17

 

6.6 Final Completion

 

 

18

 

6.7 Post Completion Support

 

 

19

 

 

 

 

 

 

Article 7 Performance Testing and Liquidated Damages

 

 

20

 

 

 

 

 

 

7.1 Performance Guarantee

 

 

20

 

7.2 Performance Testing

 

 

20

 

7.3 Liquidated Damages

 

 

21

 

7.4 Bonds and Other Performance Security

 

 

22

 

 

 

 

 

 

Article 8 Warranties

 

 

23

 

 

 

 

 

 

8.1 Design-Builder Warranty

 

 

23

 

8.2 Correction of Defective Work

 

 

23

 

8.3 Warranty Period Not Limitation to Owner’s Rights

 

 

24

 

 

 

 

 

 

Article 9 Contract Price

 

 

24

 

 

 

 

 

 

9.1 Contract Price

 

 

24

 

 

 

 

 

 

Article 10 Payment Procedures

 

 

24

 

 

 

 

 

 

10.1 Payment at Financial Closing

 

 

24

 

10.2 Progress Payments

 

 

24

 

10.3 Final Payment

 

 

26

 

10.4 Failure to Pay Amounts Due

 

 

26

 

10.5 Design-Builder’s Payment Obligations

 

 

26

 

10.6 Record Keeping and Finance Controls

 

 

26

 

 

 

 

 

 

Article 11 Hazardous Conditions and Differing Site Conditions

 

 

26

 

 

 

 

 

 

11.1 Hazardous Conditions

 

 

26

 

11.2 Differing Site Conditions; Inspection

 

 

27

 

 

 

 

 

 

Article 12 Force Majeure; Change in Legal Requirements

 

 

28

 

 

 

 

 

 

12.1 Force Majeure Event

 

 

28

 

12.2 Effect of Force Majeure Event

 

 

28

 

12.3 Change in Legal Requirements

 

 

29

 

12.4 Time Impact And Availability

 

 

29

 

 

 

 

 

 

Article 13 Changes to the Contract Price and Scheduled Completion Dates

 

 

29

 

 

 

 

 

 

13.1 Change Orders

 

 

29

 

13.2 Contract Price Adjustments

 

 

30

 

13.3 Emergencies

 

 

31

 

13.4 Requests for Contract Adjustments and Relief

 

 

31

 

 

 

 

 

 

Article 14 Indemnity

 

 

31

 

 

 

 

 

 

14.1 Tax Claim Indemnification

 

 

31

 

14.2 Payment Claim Indemnification

 

 

31

 

14.3 Design-Builder’s General Indemnification

 

 

31

 

14.4 Owner’s General Indemnification

 

 

32

 

 

 

 

 

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Article 15 Stop Work; Termination for Cause

 

 

33

 

 

 

 

 

 

15.1 Owner’s Right to Stop Work

 

 

33

 

15.2 Owner’s Right to Perform and Terminate for Cause

 

 

33

 

15.3 Owner’s Right to Terminate for Convenience

 

 

34

 

15.4 Design-Builder’s Right to Stop Work

 

 

35

 

15.5 Design-Builder’s Right to Terminate for Cause

 

 

35

 

15.6 Bankruptcy of Owner or Design-Builder

 

 

36

 

15.7 Lenders’ Right to Cure

 

 

36

 

 

 

 

 

 

Article 16 Representatives of the Parties

 

 

37

 

 

 

 

 

 

16.1 Designation of Owner’s Representatives

 

 

37

 

16.2 Designation of Design-Builder’s Representatives

 

 

37

 

 

 

 

 

 

Article 17 Insurance

 

 

38

 

 

 

 

 

 

17.1 Insurance

 

 

38

 

17.2 Design-Builder’s Insurance Requirements

 

 

38

 

17.3 Owner’s Liability Insurance

 

 

39

 

17.4 Owner’s Property Insurance

 

 

40

 

17.5 Coordination with Loan Documents

 

 

41

 

 

 

 

 

 

Article 18 Representations and Warranties

 

 

41

 

 

 

 

 

 

18.1 Design-Builder and Owner Representations and Warranties

 

 

41

 

18.2 Design-Builder Representation and Warranties

 

 

42

 

 

 

 

 

 

Article 19 Dispute Resolution

 

 

43

 

 

 

 

 

 

19.1 Dispute Avoidance and Mediation

 

 

43

 

19.2 Arbitration

 

 

43

 

19.3 Duty to Continue Performance

 

 

44

 

19.4 Consequential Damages

 

 

44

 

 

 

 

 

 

Article 20 Confidentiality of Shared Information

 

 

44

 

 

 

 

 

 

20.1 Non-Disclosure Obligation

 

 

44

 

20.2 Publicity and Advertising

 

 

45

 

20.3 Term of Obligation

 

 

45

 

 

 

 

 

 

Article 21 Miscellaneous

 

 

45

 

 

 

 

 

 

21.1 Assignment

 

 

45

 

21.2 Successors

 

 

45

 

21.3 Governing Law

 

 

45

 

21.4 Severability

 

 

45

 

21.5 No Waiver

 

 

46

 

21.6 Headings

 

 

46

 

21.7 Notice

 

 

46

 

21.8 No Privity with Design Consultant/Subcontractors

 

 

47

 

21.9 Amendments

 

 

47

 

21.10 Entire Agreement

 

 

47

 

21.11 Third-Party Beneficiaries

 

 

47

 

 

 

 

 

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21.12 Counterparts

 

 

47

 

21.13 Survival

 

 

47

 

 

 

 

 

 

EXHIBIT A Performance Guarantee Criteria

 

 

A-1

 

 

 

 

 

 

EXHIBIT B General Project Scope

 

 

B-1

 

 

 

 

 

 

EXHIBIT C Owner’s Responsibilities

 

 

C-1

 

 

 

 

 

 

EXHIBIT D ICM License Agreement

 

 

D-1

 

 

 

 

 

 

EXHIBIT E Schedule of Values

 

 

E-1

 

 

 

 

 

 

EXHIBIT F Form of Progress Report

 

 

F-1

 

 

 

 

 

 

EXHIBIT G Required Permits

 

 

G-1

 

 

 

 

 

 

EXHIBIT H Form of Performance Bond

 

 

H-1

 

 

 

 

 

 

EXHIBIT I Work Schedule and Owner’s Milestones

 

 

I-1

 

 

 

 

 

 

EXHIBIT J Preliminary Construction Documents

 

 

J-1

 

 

 

 

 

 

EXHIBIT K Draw (Payment) Schedule

 

 

K-1

 

 

 

 

 

 

EXHIBIT L Air Emissions Application or Permit

 

 

L-1

 

 

 

 

 

 

EXHIBIT M Phase I and Phase II Engineering Services Agreement

 

 

M-1

 

 

 

 

 

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LUMP SUM DESIGN-BUILD CONTRACT

     This LUMP SUM DESIGN-BUILD CONTRACT (the “ Agreement ”) is made as of January 5, 2006, (the “ Effective Date ”) by and between Siouxland Ethanol, LLC, a Nebraska limited liability company (the “ Owner ”) and Fagen, Inc., a Minnesota corporation (the “Design-Builder”) (each a “Party” and collectively, the “Parties”).

RECITALS

     A. The Owner desires to develop, construct, own and operate a fifty (50) million gallons per year (“ MGY ”) dry grind ethanol production facility located at Jackson, Nebraska (the “ Plant ”); and

     B. Design-Builder desires to provide design, engineering, procurement and construction services for the Plant.

     NOW, THEREFORE, in consideration of the mutual covenants and obligations contained herein and for other good and valuable consideration, Owner and Design-Builder agree as follows.

AGREEMENT

Article 1
Definitions; Rules of Interpretation

      1.1 Rules of Construction. The capitalized terms listed in this Article shall have the meanings set forth herein whenever the terms appear in this Agreement, whether in the singular or the plural or in the present or past tense. Other terms used in this Agreement but not listed in this Article shall have meanings as commonly used in the English language and, where applicable, in generally accepted construction and design-build standards of the fuel ethanol industry in the Midwest United States. Words not otherwise defined herein that have well known and generally accepted technical or trade meanings are used herein in accordance with such recognized meanings. In addition, the following rules of interpretation shall apply:

 

(a)

 

The masculine shall include the feminine and neuter.

 

 

 

 

 

(b)

 

References to “Articles,” “Sections,” “Schedules,” or “Exhibits” shall be to Articles, Sections, Schedules or Exhibits of this Agreement.

 

 

 

 

 

(c)

 

This Agreement was negotiated and prepared by each of the Parties with the advice and participation of counsel. The Parties have agreed to the wording of this Agreement and none of the provisions hereof shall be construed against one Party on the ground that such Party is the author of this Agreement or any part hereof.

      1.2 Defined Terms. In addition to definitions appearing elsewhere in this Agreement, the following terms have the following meanings:

 

 

 

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AAA is defined in Section 19.1.

Agreement is defined in the Preamble.

Air Emissions Tester means a third party entity engaged by Owner meeting all required state and federal requirements for such testing entities, to conduct air emissions testing of the Plant in accordance with Exhibit A.

Applicable Law means

 

(a)

 

any and all laws, legislation, statutes, codes, acts, rules, regulations, ordinances, treaties or other similar legal requirements enacted, issued or promulgated by a Governmental Authority;

 

 

 

 

 

(b)

 

any and all orders, judgments, writs, decrees, injunctions, Governmental approvals or other decisions of a Governmental Authority; and

 

 

 

 

 

(c)

 

any and all legally binding announcements, directives or published practices or interpretations, regarding any of the foregoing in (a) or (b) of this definition, enacted, issued or promulgated by a Governmental Authority;

to the extent, for each of the foregoing in (a), (b) and (c) of this definition, applicable to or binding upon (i) a Party, its affiliates, its shareholders, its members, it partners or their respective representatives, to the extent any such person is engaged in activities related to the Project; or (ii) the property of a Party, its affiliates, its shareholders, its members, its partners or their respective representatives, to the extent such property is used in connection with the Project or an activity related to the Project.

Application for Payment is defined in Section 10.2.1.

As Built Plans is defined in Section 5.2.

Bankrupt Party is defined in Section 15.6.1.

Certificate of Substantial Completion is defined in Section 6.5.3.

Construction Documents is defined in Section 3.2.2.

Contract Documents is defined in Section 2.2.

Contract Price is defined in Section 9.1.

Damages is defined in Section 14.3.1.

Day or Days shall mean calendar days unless otherwise specifically noted in the Contract Documents.

Design-Builder is defined in the Preamble.

 

 

 

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Design-Builder’s Representative is defined in Section 16.2.

Design-Builder’s Senior Representative is defined in Section 16.2.

Design Consultant is a qualified, licensed design professional that is not an employee of Design-Builder, but is retained by Design-Builder, or employed or retained by anyone under contract with Design-Builder or Subcontractor, to furnish design services required under the Contract Documents.

Differing Site Conditions is defined in Section 11.2.1.

Early Completion Bonus is defined in Section 6.5.4.

Effective Date is defined in the Preamble.

Final Application for Payment is defined in Section 10.3.

Final Completion is defined in Section 6.6.2.

Final Completion Date is the date that is 90 Days after the Substantial Completion Date.

Final Payment is defined in Section 10.3.

Financial Closing means the execution of the Financing Documents by all the parties thereto, and the fulfillment of all conditions precedent thereunder necessary to permit the advance of funds to pay amounts due under this Agreement.

Financing Documents means the final loan documents with the lender or lenders providing financing for the construction or term financing of the Plant.

Force Majeure Event is defined in Section 12.1.

Governmental Approvals are any material authorizations or permissions issued or granted by any Governmental Authority to the Project, its Owner, the Design-Builder, Subcontractors and their affiliates in connection with any activity related to the Project.

Governmental Authority means any federal, state, local or municipal governmental body; any governmental, quasi-governmental, regulatory or administrative agency, commission, body or other authority exercising or entitled to exercise any administrative, executive, judicial, legislative, policy, regulatory or taxing authority or power; or any court or governmental tribunal; in each case having jurisdiction over the Owner, the Design-Builder, the Project, or the Site.

Hazardous Conditions are any materials, wastes, substances and chemicals deemed to be hazardous under applicable Legal Requirements, or the handling, storage, remediation, or disposal of which are regulated by applicable Legal Requirements.

ICM is defined in Section 5.2.1.

 

 

 

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ICM License Agreement means the license agreement to be executed between Owner and ICM, Inc., substantially in the form attached hereto as Exhibit D.

Indemnified Parties is defined in Section 5.2.

Independent Engineer means Owner’s and Lenders’ independent engineer.

Industry Wide Disruption is defined in Section 12.4.

Legal Requirements or Laws are all applicable federal, state and local statutes, laws, codes, ordinances, rules, regulations, judicial decisions, orders, decrees, plans, injunctions, permits, tariffs, governmental agreements and governmental restrictions, whether now or hereafter in effect, of any government or quasi-government entity having jurisdiction over the Project or Site, the practices involved in the Project or Site, or any Work, including any consensus standards for materials, products, systems, and services established by ASTM International, any successor organization thereto, or any Governmental Authority.

Lenders means the lenders that are party to the Financing Documents.

Lenders’ Agent means an agent or agents acting on behalf of the Lenders.

Manufacturer’s Warranty shall mean a warranty provided by the original manufacturer or vendor of equipment used by Design-Builder in the Plant.

MGY is defined in the Recitals.

Notice to Proceed is defined in Section 6.3.

Oversight Items is defined in Section 4.3.

Owner is defined in the Preamble.

Owner Indemnified Parties is defined in Section 14.3.1.

Owner’s Representative is defined in Section 16.1.

Owner’s Senior Representative is defined in Section 16.1.

Pass Through Warranties mean any warranties provided to Design-Builder by a Subcontractor which are assigned to Owner.

Pay Period means, with respect to a given Application for Payment or Progress Report, the one month period following the last day of the previous Pay Period to which the immediately prior Application for Payment or Progress Report is applied; provided that the initial Pay Period shall commence on the date of delivery of the Notice to Proceed and end on the twenty fourth (24th) day of the calendar month during which the Notice to Proceed is issued.

Performance Bond is defined in Section 7.4.1.

 

 

 

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Performance Guarantee Criteria means the criteria listed in Exhibit A.

Performance Tests is defined in Section 7.2.1.

Phase I is defined in Exhibit C.

Phase II is defined in Exhibit C.

Plant is defined in the Recitals.

Preliminary Construction Documents is defined in Section 3.2.1.

Progress Report is defined in Section 3.8.

Project is defined in Section 2.1.

Project Scope is defined in Exhibit B.

Punch List is defined in Section 6.5.3.

Qualified Independent Expert means an expert retained by Owner and approved by Design-Builder pursuant to Section 11.1.2.

Safety Representative is defined in Section 3.7.1.

Schedule of Values is defined in Section 10.2.5.

Scheduled Substantial Completion Date is defined in Section 6.5.1.

Site is the land or premises on which the Project is located.

Subcontractor is any person or entity retained by Design-Builder, or by any person or entity retained directly or indirectly by Design-Builder, in each case as an independent contractor to perform a portion of the Work and shall include materialmen and suppliers.

Substantial Completion is defined in Section 6.5.2.

Work is defined in Section 3.1.

Work Product is defined in Section 5.1.

Work Schedule is defined in Section 6.1.

 

 

 

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Article 2
The Project

      2.1 Services to be Performed. Pursuant to this Agreement, Design-Builder shall perform all work and services in connection with the engineering, design, procurement, construction startup, testing and training for the operation and maintenance of the Plant, and provide all material, equipment, tools and labor necessary to complete the Plant in accordance with the terms of this Agreement. The Plant, together with all equipment, labor, services and materials furnished hereunder is defined as the “Project.”

      2.2 Extent of Agreement. This Agreement consists of the following documents, and all exhibits, schedules, appendices and attachments hereto and thereto (collectively, the “ Contract Documents ”):

           2.2.1 All written modifications, amendments and change orders to this Agreement.

           2.2.2 This Agreement, including all exhibits and attachments, executed by Owner and Design-Builder, including those below:

 

 

 

 

 

 

 

 

 

List of Exhibits

 

 

 

 

 

 

 

 

 

Exhibit A

 

Performance Guarantee Criteria

 

 

 

 

Exhibit B

 

General Project Scope

 

 

 

 

Exhibit C

 

Owner’s Responsibilities

 

 

 

 

Exhibit D

 

ICM License Agreement

 

 

 

 

Exhibit E

 

Schedule of Values

 

 

 

 

Exhibit F

 

Progress Report

 

 

 

 

Exhibit G

 

Permits Required

 

 

 

 

Exhibit H

 

Form of Performance Bond

 

 

 

 

Exhibit I

 

Work Schedule and Owner’s Milestones

 

 

 

 

Exhibit J

 

Preliminary Construction Documents

 

 

 

 

Exhibit K

 

Draw (Payment) Schedule

 

 

 

 

Exhibit L

 

Air Emissions Application or Permit

 

 

 

 

Exhibit M

 

Phase I and Phase II Engineering Services Agreement

 

 

           2.2.3 Preliminary Construction Documents prepared by Design-Builder pursuant to Section 3.2.1 and the Construction Documents to be prepared by Design-Builder pursuant to Section 3.2.2 shall be incorporated in this Agreement.

           2.3 Conflicting Provisions. In the event of any conflict or inconsistency between the body of this Agreement and any Exhibit or Schedule hereto, the terms and provisions of this Agreement, as amended from time to time, shall prevail and be given priority. Subject to the foregoing, the several documents and instruments forming part of this Agreement are to be taken as mutually explanatory of one another and in the case of ambiguities or discrepancies within or between such parts the same shall be explained and interpreted, if possible, in a manner which gives effect to each part and which avoids or minimizes conflicts among such parts. No oral

 

 

 

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representations or other agreements have been made by the Parties except as specifically stated in the Contract Documents.

Article 3
Design-Builder Responsibilities

      3.1 Design-Builder’s Services in General. Except for services and information to be provided by Owner and specifically set forth in Article 4 and Exhibit C, Design-Builder shall perform or cause to be performed all design, engineering, procurement, construction services, supervision, labor, inspection, testing, start-up, material, equipment, machinery, temporary utilities and other temporary facilities to complete construction of the Project consistent with the Contract Documents (the “ Work ”). All design and engineering and construction services and other Work of the Design-Builder shall be performed in accordance with (i) the Project Scope as set forth in Exhibit B, (ii) the Construction Documents, (iii) all Legal Requirements, and (iv) generally accepted construction and design-build standards of the fuel ethanol industry in the Midwest United States. Any design and engineering or other professional service to be performed pursuant to this Agreement, which under Applicable Law must be performed by licensed personnel, shall be performed by licensed personnel as required by Law. The enumeration of specific duties and obligations to be performed by the Design-Builder under the Contract Documents shall not be construed to limit in any way the general undertakings of the Design-Builder as set forth herein. Design-Builder’s Representative shall be reasonably available to Owner and shall have the necessary expertise and experience required to supervise the Work. Design-Builder’s Representative shall communicate regularly with Owner and shall be vested with the authority to act on behalf of Design-Builder.

      3.2 Design Development and Services.

           3.2.1 As of the Effective Date, but in no event later than thirty (30) Days from the Effective Date, Design-Builder has or shall have provided to Owner the following documents, and any other documents reasonably agreed to by Design-Builder and Owner as applying to the conceptual design of the Project and required to apply for the construction air permit or completion of the Site layout in cooperation with Owner’s rail engineer (collectively, the “ Preliminary Construction Documents ”), which shall be consistent with the Project Scope and once approved by Owner, shall be part of this Agreement:

 

(a)

 

major equipment lists, with sizes;

 

 

 

 

 

(b)

 

process flow diagram;

 

 

 

 

 

(c)

 

process design criteria and/or process description; and

 

 

 

 

 

(d)

 

Site layout.

Owner shall have thirty (30) days from the date it receives the Preliminary Construction Documents to review and approve such documents. The Preliminary Construction Documents shall establish performance standards for the completed Project and identify components required to meet those performance standards. Any changes to the Preliminary Construction

 

 

 

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Documents shall be subject to the prior review and approval by Owner, such approval not to be unreasonably withheld or delayed.

           3.2.2 Where required by Law, Design-Builder shall provide through qualified, licensed design professionals employed by Design-Builder, or procured from qualified, independent licensed Design Consultants, the necessary design services, including architectural, engineering and other design professional services, for the preparation of the required drawings, specifications and other design submittals required to permit construction and completion of the Work in accordance with this Agreement and the Preliminary Construction Documents (such drawings, specifications and design submittals collectively and together with the Preliminary Construction Documents, the “ Construction Documents ”). To the extent not prohibited by Legal Requirements, Design-Builder may prepare Construction Documents for a portion of the Work to permit construction to proceed on that portion of the Work prior to completion of the Construction Documents for the entire Work.

           3.2.3 Construction of the Plant shall be consistent with the Construction Documents.

           3.2.4 Design-Builder shall maintain a current, complete set of drawings and specifications at the Site. Owner shall the right to review such drawings and specifications. Owner and Independent Engineer may not make copies of the available drawings and specifications without Design-Builder’s written permission, and, granted such permission, may only do so to the extent such drawings and specifications directly pertain to the Plant; provided however that, pursuant to Section 5.1 of this Agreement, Design-Builder retains ownership of and property interests in any drawing or specifications made available and/or copied.

           3.2.5 Except as provided elsewhere in this Agreement, it is understood and agreed that review, comment and/or approval by Owner (or its designees) or Independent Engineer of any documents or submittals that Design-Builder is required to submit to Owner (or its designees) or Independent Engineer hereunder for their review, comment and/or approval (including without limitation the Preliminary Construction Documents pursuant to Section 3.2.1 hereof or other Construction Documents pursuant to Sections 3.2.2 and 3.2.4 hereof) shall not relieve or release Design-Builder from any of its duties, obligations or liabilities provided for under the terms of this Agreement or transfer any design liability from Design-Builder to Owner.

      3.3 Standard of Care. All services performed by the Design-Builder and its Subcontractors pursuant to the Construction Documents shall be performed in accordance with the standard of care and skill generally accepted in the fuel ethanol industry in the Midwest United States during the relevant time period or in accordance with any of the practices, methods and acts that in the exercise of reasonable judgment in light of the facts known at the time the decision was made, could have been expected to accomplish the desired result at a reasonable cost consistent with good business practices, safety and expedition. This standard of care is not intended to be limited to the optimum practice, method or act to the exclusion of all others, but rather to be acceptable practices, methods or acts generally accepted in the construction and design-build standards of the fuel ethanol industry in the Midwest United States. Design-Builder and its Subcontractors shall perform all construction activities efficiently and with the requisite expertise, skill, competence, resources and care to satisfy the requirements of the Contract

 

 

 

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Documents and all applicable Legal Requirements. Design-Builder shall at all times exercise complete and exclusive control over the means, methods, sequences and techniques of construction.

      3.4 Government Approvals and Permits. Except as identified in Exhibit C and, with respect to items identified as Owner’s responsibility, in Exhibit G (which items shall be obtained by Owner pursuant to Section 4.5), Design-Builder shall obtain and pay for all necessary permits, approvals, licenses, government charges and inspection fees required for the prosecution of the Work by any government or quasi-government entity having jurisdiction over the Project. Design-Builder shall provide reasonable assistance to Owner in obtaining those permits, approvals and licenses that are Owner’s responsibility.

      3.5 Subcontractors.

           3.5.1 Design-Builder may subcontract portions of the Work in accordance with the terms hereof. Design-Builder shall employ only Subcontractors who are duly licensed and qualified to perform the Work consistent with the Contract Documents.

           3.5.2 Design-Builder assumes responsibility to Owner for the proper performance of the Work of Subcontractors and any acts and omissions in connection with such performance. Nothing in the Contract Documents is intended or deemed to create any legal or contractual relationship between Owner and any Subcontractor, including but not limited to any third-party beneficiary rights.

           3.5.3 Design-Builder shall coordinate the activities of all of Design-Builder’s Subcontractors. If Owner performs other work on the Project or at the Site with separate contractors under Owner’s control, Design-Builder agrees to reasonably cooperate and coordinate its activities with those separate contractors so that the Project can be completed in an orderly and coordinated manner without unreasonable disruption.

           3.5.4 Design-Builder shall ensure that each subcontract with a Subcontractor is assignable to Owner without consent of the Subcontractor or any other person or entity in the event that Design-Builder shall be in an uncured default or terminated with cause under the terms of this Agreement.

      3.6 Maintenance of Site. Design-Builder shall keep the Site reasonably free from debris, trash and construction wastes to permit Design-Builder to perform its construction services efficiently, safely and without interfering with the use of adjacent land areas. Upon Substantial Completion of the Work, or portion of the Work, as applicable, Design-Builder shall remove all debris, trash, construction wastes, materials, equipment, machinery and tools arising from the Work or applicable portions thereof to permit Owner to occupy the Project for its intended use.

      3.7 Project Safety.

           3.7.1 Design-Builder recognizes the importance of performing the Work in a safe manner so as to prevent damage, injury or loss to (i) any individuals at the Site, whether working or visiting, (ii) the Work, including materials and equipment incorporated into the Work

 

 

 

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or stored on-Site or off-Site, and (iii) any other property at the Site or adjacent thereto. Design-Builder assumes responsibility for implementing and monitoring all safety precautions and programs related to the performance of the Work. Design-Builder shall, prior to commencing construction, designate a representative (the “ Safety Representative ”) with the necessary qualifications and experience to supervise the implementation and monitoring of all safety precautions and programs related to the Work. Unless otherwise required by the Contract Documents, Design-Builder’s Safety Representative shall be an individual stationed at the Site who may have responsibilities on the Project in addition to safety. The Safety Representative shall make routine daily inspections of the Site and shall hold weekly safety meetings with Design-Builder’s personnel, Subcontractors and others as applicable.

           3.7.2 Design-Builder and Subcontractors shall comply with all Legal Requirements relating to safety, as well as any Owner-specific safety requirements set forth in the Contract Documents; provided, that such Owner-specific requirements do not violate any applicable Legal Requirement. As promptly as practicable, Design-Builder will report in writing any safety-related injury, loss, damage or accident arising from the Work to Owner’s Representative and, to the extent mandated by Legal Requirements, to all government or quasi-government authorities having jurisdiction over safety-related matters involving the Project or the Work.

           3.7.3 Design-Builder’s responsibility for safety under this Section 3.7 is not intended in any way to relieve Subcontractors of their own contractual and legal obligations and responsibility for (i) complying with all Legal Requirements, including those related to health and safety matters, and (ii) taking all necessary measures to implement and monitor all safety precautions and programs to guard against injury, losses, damages or accidents resulting from their performance of the Work.

      3.8 Submission of Reports. Design-Builder shall provide Owner with regular communication (no less frequently than monthly) regarding the progress (“ Progress Report ”) and any revisions to the drawings and specifications of the Work, including whether (i) the Work is proceeding according to schedule, (ii) discrepancies, conflicts, or ambiguities exist in the Contract Documents that require resolution, (iii) health and safety issues exist in connection with the Work, and (iv) other items require resolution so as not to jeopardize Design-Builder’s ability to complete the Work for the Contract Price and within the contract time(s). Progress Reports shall be in the form of Exhibit F attached hereto.

      3.9 Training. At a mutually agreed time prior to start-up, Design-Builder shall provide two (2) weeks of training at a plant in Russell, Kansas (or other location) for all of Owner’s employees required for the operation and maintenance of the Plant in accordance with all design specifications therefor contained in the Contract Documents and necessary in order to maintain the Performance Guarantee Criteria, including operators, laboratory personnel, general, plant and maintenance managers. Other personnel of Owner may receive such off-site training by separate arrangement between Owner and Design-Builder and as time is available. All training personnel and costs associated with such training personnel, including labor and all training materials will be provided to Owner within the Contract Price at no additional cost. Owner will be responsible for all travel and expenses of their employees and the Owner will pay all wages and all other expenses for their personnel during the training. The training services will include

 

 

 

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training on computers, laboratory procedures, field operating procedures, and overall plant section performance expectations. Prior to the start-up training, Design-Builder shall provide Owner training manuals and operating manuals and other documents reasonably necessary for the start-up process.

Article 4
Owner’s Responsibilities

      4.1 Duty to Cooperate.

           4.1.1 Owner shall, throughout the performance of the Work, cooperate with Design-Builder and perform its responsibilities, obligations and services in a timely manner to facilitate Design-Builder’s timely and efficient performance of the Work and so as not to delay or interfere with Design-Builder’s performance of its obligations under the Contract Documents.

           4.1.2 Owner shall provide timely review and approval of Preliminary Construction Documents subject to Section 3.2.1.

           4.1.3 Owner shall have no responsibility for any winter construction related activities, including but not limited to, special material costs, sheltering, heating, and equipment rental, except Owner shall pay all the reasonable costs incurred by Design-Builder for frost removal so that winter construction can proceed. Such costs may include but are not limited to, equipment costs, equipment rental costs, and associated labor costs. Owner acknowledges and agrees that such costs are in addition to, and not included in, the Contract Price.

      4.2 Furnishing of Services and Information.

           4.2.1 Prior to the issuance of the Notice to Proceed, Owner shall provide to Design-Builder, at Owner’s own cost and expense, for Design-Builder’s information and use, the following, all of which Design-Builder is entitled to rely upon in performing the Work:

 

(a)

 

surveys describing the property, boundaries, topography and reference points for use during construction, including existing service and utility lines;

 

 

 

 

 

(b)

 

geotechnical studies describing subsurface conditions including soil borings, and other surveys describing other latent or concealed physical conditions at the Site;

 

 

 

 

 

(c)

 

temporary and permanent easements, zoning and other requirements and encumbrances affecting land use, or necessary to permit the proper design and construction of the Project and enable Design-Builder to perform the Work;

 

 

 

 

 

(d)

 

A legal description of the Site;

 

 

 

 

 

(e)

 

to the extent available, as-built and record drawings of any existing structures at the Site;

 

 

 

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(f)

 

environmental studies, reports and impact statements describing the environmental conditions, including Hazardous Conditions, in existence at the Site;

           4.2.2 Owner shall provide to Design-Builder all Owner’s deliverables under Exhibit C pursuant to Owner’s Milestones. Such deliverables shall be provided, at Owner’s own cost and expense, for Design-Builder’s information and use. Design-Builder is entitled to rely upon such deliverables in performing the Work.

           4.2.3 Owner is responsible for securing and executing all necessary agreements with adjacent land or property owners that are necessary to enable Design-Builder to perform the Work and that have been identified and notified in writing by Design-Builder to Owner prior to the Effective Date. Owner is further responsible for all costs, including attorneys’ fees, incurred in securing these necessary agreements.

      4.3 Financial Information; Cooperation with Lenders; Failure to Obtain Financial Closing. Design-Builder acknowledges that Owner is seeking financing for the Project. Design-Builder agrees to cooperate with Owner in good faith in order to satisfy the requirements of Owners’ financing arrangements, including, where appropriate, the execution and delivery of documents or instruments necessary to accommodate the Financial Closing. Owner agrees to pay all documented costs incurred by Design-Builder incurred prior to and at Financial Closing, and thereafter during the term of this Agreement, in connection with satisfying the requirements of Owners’ financing arrangements including all documented attorney’s fees, and Design-Builder shall provide written Notice to Owner prior to incurring such costs. Design-Builder and Owner also acknowledge that the Lenders, as a condition to providing financing for the Plant, shall require Owner to provide the Independent Engineer with certain participation and review rights with respect to Design-Builder’s performance of the Work. Design-Builder acknowledges and agrees that such participation and review rights shall consist of the right to (i) enter the Site and inspect the Work upon reasonable notice to Design-Builder; (ii) attend all start-up and testing procedures; and (iii) review and approve such other items for which Owner is required by Lenders to obtain the concurrence, opinion or a certificate of the Independent Engineer or the Lenders pursuant to the Financing Documents which items do not alter the rights or impose additional obligations on Design-Builder (collectively, the “ Oversight Items ”). Nothing in this Section 4.3 shall be deemed to require Design-Builder to agree to any amendments to this Agreement that would adversely affect Design-Builder’s risks, rights or obligations under this Agreement. Upon Financial Closing, Owner shall promptly provide to Design-Builder an officer’s certificate certifying that Financial Closing has occurred and such Owner’s officer’s certificate shall constitute evidence satisfactory to Design-Builder that Owner has adequate funds available and committed to fulfill its obligations under the Contract Documents for all purposes hereunder. Owner must obtain Financial Closing prior to issuing the Notice to Proceed.

      4.4 Owner’s Representative. Owner’s Representative, as set forth in Section 16.1 hereof, shall be responsible for providing Owner-supplied information and approvals in a timely manner to permit Design-Builder to fulfill its obligations under the Contract Documents.

 

 

 

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Owner’s Representative shall also provide Design-Builder with prompt notice if it observes any failure on the part of Design-Builder to fulfill its contractual obligations, including any errors, omissions or defects in the performance of the Work. Owner’s Representative shall be vested with the authority to act on behalf of Owner and Design-Builder shall be entitled to rely on written communication from Owner’s Representative with respect to a Project matter.

      4.5 Government Approvals and Permits. Owner shall obtain and pay for all necessary Governmental Approvals required by Law, including permits, approvals, licenses, government charges and inspection fees set forth in Exhibit C and, to the extent identified as Owner’s responsibility, Exhibit G. Owner shall provide reasonable assistance to Design-Builder in obtaining those permits, approvals and licenses that are Design-Builder’s responsibility pursuant to Exhibits G and Section 3.4.

      4.6 Owner’s Separate Contractors. Owner is responsible for all work, including such work listed on Exhibit C, performed on the Project or at the Site by separate contractors under Owner’s control. Owner shall contractually require its separate contractors to cooperate with, and coordinate their activities so as not to interfere with, Design-Builder in order to enable Design-Builder to timely complete the Work consistent with the Contract Documents.

      4.7 Security.

           4.7.1 Owner shall be responsible for Site security (including fencing, alarm systems, security guarding services and the like) at all times during the term of this Agreement to prevent vandalism, theft and danger to the Project, the Site, and personnel. Owner shall coordinate and supervise ingress and egress from the Site so as to minimize disruption to the Work.

           4.7.2 Design-Builder shall at all times conduct its operations in a manner to minimize the risk of loss, theft, or damage by vandalism, sabotage, or any other means. Design-Builder shall continuously inspect all Work, materials, and equipment to discover and determine any conditions that might involve such risks and shall be solely responsible for discovery, determination, and correction of any such conditions.

Article 5
Ownership of Work Product; Risk of Loss

      5.1 Work Product. All drawings, specifications, calculations, data, notes and other materials and documents, including electronic data furnished by Design-Builder to Owner under this Agreement (“ Work Product ”) shall be instruments of service and Design-Builder shall retain the ownership and property interests therein, including the copyrights thereto.

      5.2 Owner’s Limited License Upon Payment in Full. Upon Owner’s payment in full for all Work performed under the Contract Documents, Design-Builder shall grant Owner a limited license to use the Work Product in connection with Owner’s use, operation, occupancy and repair of the Plant. Design-Builder acknowledges and agrees that the limited license to use the Work Product granted hereby shall provide Owner sufficient rights in and to the Work Product as shall be necessary for Owner to operate and maintain the Plant and shall include any

 

 

 

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Pass Through Warranties in connection therewith. Design-Builder shall provide Owner with a copy of the plans of the Plant, as built, (the “ As Built Plans ”) conditioned on Owner’s express understanding that its use of the Work Product and its acceptance of the As Built Plans is at Owner’s sole risk and without liability or legal exposure to Design-Builder or anyone working by or through Design-Builder, including Design Consultants of any tier (collectively the “ Indemnified Parties ”); provided, however, that any performance guarantees, and warranties (of equipment or otherwise) shall remain in effect according to the terms of this Agreement.

           5.2.1 Owner shall be entitled to use the Work Product solely for purposes relating to the Plant, but shall not be entitled to use the Work Product for any other purposes whatsoever, including without limitation, expansion of the Plant. Notwithstanding the foregoing sentence, Owner shall be entitled to use the Work Product for the operation, maintenance and repair of the plant including the interconnection of, but not the design of, any future expansions to the Plant. The limited license granted to Owner under Sections 5.2, 5.3 or 5.4 to use the Work Product shall be limited by and construed according to the same terms contained in the ICM License Agreement between Owner and ICM, Inc., attached hereto as Exhibit D and incorporated herein by reference thereto, except (i) references in such ICM License Agreement to ICM and Proprietary Property shall refer to Design-Builder and Work Product, respectively, (ii) the Laws of the State of Minnesota shall govern such limited license, and (iii) the dispute resolution provisions contained in Article 19 hereof shall apply to any breach or threatened breach of Owner’s duties or obligations under such limited license, except that Design-Builder shall have the right to seek injunctive relief in a court of competent jurisdiction against Owner or its Representatives for any such breach or threatened breach. Design-Builder is utilizing certain proprietary property and information of ICM, Inc., a Kansas corporation (“ ICM ”), in the design and construction of the Project, and Design-Builder may incorporate proprietary property and information of ICM into the Work Product. Owner’s use of the proprietary property and information of ICM shall be governed by the terms and provisions of the License Agreement between Owner and ICM, attached hereto as Exhibit D, to be executed by such parties in connection with the execution of this Agreement. This paragraph also applies to Articles 5.3 and 5.4 below.

      5.3 Owner’s Limited License Upon Owner’s Termination for Convenience or Design-Builder’s Election to Terminate. If Owner terminates the Project for its convenience as set forth in Section 15.3 hereof, or if Design-Builder elects to terminate this Agreement in accordance with Section 15.5, Design-Builder shall, upon Owner’s payment in full of the amounts due Design-Builder under this Agreement, grant Owner a limited license to use the Work Product to complete the Plant and subsequently occupy and repair the Plant, subject to the following:

 

(a)

 

Use of the Work Product is at Owner’s sole risk without liability or legal exposure to any Indemnified Party; provided, however, that any Pass Through Warranties regarding equipment or express warranties regarding equipment provided by this Agreement shall remain in effect according to their terms; and

 

 

 

 

 

(b)

 

If the termination for convenience is by Owner in accordance with Section 15.3 hereof, or if Design-Builder elects to terminate this Agreement in accordance with Section 15.5, then Owner agrees to pay Design-Builder the additional sum of One

 

 

 

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Million Two Hundred Thousand Dollars ($1,200,000.00) as compensation for the limited right to use the Work Product completed “as is” on the date of termination in accordance with this Article 5.

      5.4 Owner’s Limited License Upon Design-Builder’s Default. If this Agreement is terminated due to Design-Builder’s default pursuant to Section 15.2 and (i) it is adjudged that Design-Builder was in default, and (ii) Owner has fully satisfied all of its obligations under the Contract Documents through the time of Design-Builder’s default, then Design-Builder shall grant Owner a limited license to use the Work Product in connection with Owner’s completion and occupancy and repair of the Plant. This limited license is conditioned on Owner’s express agreement that its use of the Work Product is at Owner’s sole risk without liability or legal exposure to any Indemnified Party; provided, however, that any Pass Through Warranties regarding equipment or express warranties regarding equipment provided by this Agreement shall remain in effect according to their terms. This limited license grants Owner the ability to repair the Plant at Owner’s discretion.

      5.5 Owner’s Indemnification for Use of Work Product. If Owner uses the Work Product or Plant under any of the circumstances identified in this Article 5, to the fullest extent allowed by Law, Owner shall defend, indemnify and hold harmless the Indemnified Parties from and against any and all claims, damages, liabilities, losses and expenses, including attorneys’ fees, arising out of or resulting from the use of the Work Product and Plant; provided, however, that any Pass Through Warranties regarding equipment or express warranties regarding equipment provided by this Agreement shall remain in effect according to their terms.

      5.6 Risk of Loss. Design-Builder shall have no liability for a physical loss of or damage to the Work unless such loss or damage is caused by Design-Builder or someone acting under its direction or control. Design-Builder shall not be liable for physical loss of or damage to the Work where such loss or damage is caused by the willful misconduct or gross negligence of Owner’s employees or third parties who are not Subcontractors. Design-Builder shall have no liability for losses or damages for which insurance coverage under this Agreement is available to Owner; in such circumstances, Design Builder’s liability for losses and damages as described in this Section 5.6 shall be limited to losses or damages which exceed insurance coverage available to the Owner.

Article 6
Commencement and Completion of the Project

      6.1 Work Schedule. The preliminary schedule for the execution of the Work is attached as Exhibit I hereto (the “ Work Schedule ”). The final schedule for execution of the Work shall be provided within thirty (30) Days after receipt of the Notice to Proceed. The Work Schedule provides the scheduled dates for the commencement and completion of the various stages of Work, including the dates when Owner’s obligations are required to be complete to enable Design-Builder to achieve the contract time(s). The Work Schedule shall be revised as required by conditions and progress of the Work but such revisions shall not relieve Design-Builder of its obligations to complete the Work within the contract time(s), unless such revisions to the Work Schedule are required as a result of any delay in the completion of Owner’s

 

 

 

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obligations or as a result of a Force Majeure Event. In such event, the Work Schedule shall be revised to provide, without penalty to Design-Builder, a Day-for-Day extension of the contract time(s) for completion of the Work for each Day during which Owner’s failure to complete its obligations or a Force Majeure Event causes such delay.

      6.2 Phase I and Phase II Engineering. Owner and Design-Builder have entered into that certain Phase I and Phase II Engineering Services Agreement dated September 28, 2005 and attached hereto as Exhibit M. The Phase I and Phase II Engineering Services Agreement provides for Design-builder to commence work on the Phase I and Phase II engineering for the Project as set forth therein. Owner has agreed to pay Design-Builder Ninety-Two Thousand Five hundred Dollars ($92,500.00) for such engineering services pursuant to the terms of that agreement, the full amount of which shall be included in and credited to the Contract Price. Notwithstanding the foregoing sentence, if a Notice to Proceed is not issued pursuant to Section 6.2, or Financial Closing is not obtained pursuant to Section 4.3, then Design-Builder shall keep the full amount paid under the Phase I and Phase II Engineering Services Agreement as compensation for the services provided thereunder.

      6.3 Notice to Proceed; Commencement. The Work shall commence within five (5) Days of Design-Builder’s receipt of Owner’s written valid notice to proceed (“ Notice to Proceed ”) unless the Parties mutually agree otherwise in writing. The Parties agree that a valid Owner’s Notice to Proceed cannot be given until: [*] Design-Builder must receive a valid Owner’s Notice to Proceed within one hundred and eighty (180) Days of the Effective Date; otherwise, the Contract Price referred to in Section 9.1 is shall be subject to a price increase, or this Agreement shall terminate, either at Design-Builder’s sole option. If Design-Builder chooses to terminate this Agreement pursuant to its right under the immediately preceding sentence, then Design-Builder shall have no further obligations hereunder.

      6.4 Project Start-Up and Testing. Owner shall provide, at Owner’s cost, equipment, tools, instruments and materials necessary for Owner to comply with its obligations under Exhibit C, raw materials, consumables and personnel, necessary for start-up and testing of the Plant, and Design-Builder shall provide supervision, standard and special test instruments, tools, equipment and materials required to perform component and equipment checkout and testing, initial start-up, operations supervision and corrective maintenance of all permanent Plant equipment within the scope of the Work. Notwithstanding the foregoing sentence, Design-Builder shall be responsible for raw materials and consumables to the extent such amounts provided by Owner are destroyed or damaged (as opposed to consumed in the ordinary course of

 

 

 

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[*] Portion omitted pursuant to a


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