Exhibit 10.3

 

AGREEMENT BETWEEN

 

OWNER AND DESIGN BUILDER

 

THIS AGREEMENT

 

made as of this 25th day of October in the year of 2005.

 

BETWEEN the Owner:

 

Northern Lights Ethanol, LLC

48416 144th St

Big Stone City, SD 57216

 

And the Design Builder

 

Broin and Associates. Inc.

2209 East 57th Street North

Sioux Falls, SD 57104

 

For the following Project:

 

Expansion from 40 to 75 MMGPY

 

The Owner and Design Builder, In consideration of the mutual covenants
hereinafter set forth, agree as follows:

 

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ARTICLE I - GENERAL PROVISIONS

 

1.1          BASIC DEFINITIONS

 

1.1.1         The Contract Documents consist of this Agreement, the Design
Builder’s Exhibits and written addenda identified in Artlcle.14, the
Construction Documents approved by the Owner and Modifications issued after
execution of this Agreement.  A Modification is a Change Order or a written
amendment to this Agreement signed by both parties, or a Construction Change
Directive issued by the Owner in accordance with Paragraph 8.3.

 

1.1.2         The term “Work” means the construction and services provided by
the Design Builder to fulfill the Design Builder’s obligations.

 

1.2          EXECUTIONS, CORRELATION AND INTENT

 

1.2.1         It is the Intent of the Owner and Design Builder that the Contract
Documents include all items necessary for proper execution and completion of the
Work. The Contract Documents are complimentary, and what is required by one
shall be as binding as if required by all; performance by the Design Builder
shall be required only to the extent consistent with and reasonably inferable
from the Contract Documents as being necessary to produce the Intended results.
Words that have well-known technical or construction industry meanings are used
in the Contract Documents in accordance with such recognized meanings.

 

1.2.2         If the Design Builder believes or is advised by another design
professional retained by the Design Builder to provide services on the Project
that implementation of any instruction received from the Owner would cause a
violation of any applicable law, the Design Builder shall notify the Owner in
writing.  Neither the Design Builder nor another design professional retained by
the Design Builder shall be obligated to perform any act which either believes
will violate any applicable law.

 

1.2.3         Nothing contained in this Agreement shall create a contractual
relationship between the Owner and any person or entity other than the Design
Builder.

 

1.3          OWNERSHIP AND USE OF DOCUMENTS

 

1.3.1         Drawings, specifications, and other documents and electronic data
furnished by the Design Builder and other design professionals retained by the
Design Builder, are instruments of service.  The Design Builder and other
providers of professional services shall retain all common law, statutory and
other reserved rights, including copyright in those instruments of service
furnished by them.  Drawings, specifications, and other documents and electronic
data are furnished for use solely with respect to this Agreement.  The Owner
shall be permitted to retain copies, including reproducible copies, of the
drawings, specifications, and other documents and electronic data furnished by
the Design Builder for information and reference in connection with the Project
except as provided In Subparagraphs 1.3.2 and 1.3.3.

 

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1.3.2         Drawings, specifications, and other documents and electronic data
furnished by the Design Builder shall not be used by the Owner or others on
other projects, for additions to this Project or for completion of this Project
by others, except by agreement in writing and with appropriate compensation to
the Design Builder.

 

1.3.3         Submission or distribution of the Design Builder’s documents to
meet official regulatory requirements or for similar purposes In connection with
the Project is not to be construed as publication in derogation of the rights
reserved in subparagraph 1.3.1.

 

ARTICLE 2-OWNER

 

2.1          The Owner shall designate a representative authorized to act on the
Owner’s behalf with respect to the Project.  The Owner or such authorized
representative shall examine documents submitted by the Design Builder and shall
render decisions in a timely manner and in accordance with the schedule accepted
by the Owner.  The Owner may obtain independent review of the Contract Documents
by a separate architect, engineer, contractor, or cost estimator under contract
to or employed by the Owner.  Such independent review shall be undertaken at the
Owner’s expense in a timely manner and shall not delay the orderly progress of
the Work.

 

2.2          The Owner shall cooperate with the Design Builder in securing
building and other permits, licenses and inspections.  The Owner shall not be
required to pay the fees for such permits, licenses and inspections unless the
cost of such fees is excluded from the Design Builder’s Scope of Services.

 

2.3          The Owner shall furnish services of land surveyors, geotechnical
engineers, and other consultants for subsoil, air and water conditions, when
such services are deemed necessary by the Design Builder to properly carry out
the design services required by this Agreement.

 

2.4          The Owner shall disclose, to the extent known to the Owner, the
results and reports of prior tests, inspections or investigations conducted for
the Project involving: structural or mechanical systems; chemical; air and water
pollution; hazardous materials; or other environmental and subsurface
conditions.  The Owner shall disclose all information known to the Owner
regarding the presence of pollutants at the Project’s site.

 

2.5          The Owner shall furnish all legal, accounting and insurance
counseling services as may be necessary at any time for the Project, including
such auditing services as the Owner may require to verify the Design Builder’s
Applications for Payment.

 

2.6          Those services, information, surveys and reports required by
Paragraphs 2.3 through 2.5 which are within the Owner’s control shall be
furnished at the Owner’s expense.  The Design Builder shall be entitled to rely
upon the accuracy and completeness thereof, except to the extent the Owner
advises the Design Builder to the contrary in writing.

 

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2.7          If the Owner requires the Design Builder to maintain any special
insurance coverage, policy, amendment, or rider, the Owner shall pay the
additional cost thereof, except as otherwise stipulated in this Agreement.

 

2.8          If the Owner observes or otherwise becomes aware of a fault of
defect in the Work or nonconformity with the Design Builder’s Scope of Services
or the Construction Documents, the Owner shall give prompt written notice
thereof to the Design Builder.

 

2.9          The Owner shall promptly upon the request of the Design Builder,
furnish to the Design Builder reasonable evidence that financial arrangements
have been made to fulfill the Owner’s obligations under the Contract.

 

2.10        The Owner shall communicate with persons or entities employed or
retained by the Design Builder through the Design Builder, unless otherwise
directed by the Design Builder.

 

ARTICLE 3— DESIGN BUILDER

 

3.1          SERVICES AND RESPONSIBILITIES

 

3.1.1         Standard of Care: Design Builder shall perform or furnish Design
Professional Services and related services in all phases of the project.  The
standard of care for all such services performed or furnished under this
Agreement will be the care and skill ordinarily used by members of the
engineering profession practicing under similar conditions at the same time and
locality.

 

3.1.2         The Design Builder shall be responsible to the Owner for acts and
omissions of the Design Builder’s employees, subcontractors and their agents and
employees, and other persons, including other design professionals, performing
any portion of the Design Builder’s obligations under this Agreement.

 

3.2          BASIC SERVICES

 

3.2.1         The Design Builder’s Basic Services are described below and in
Article 14.

 

3.2.2         The Design Builder shall designate a representative authorized to
act on the Design Builder’s behalf with respect to the Project.

 

3.2.3         The Design Builder, with the assistance of the Owner, shall file
documents required to obtain necessary approvals of governmental authorities
having jurisdiction over the Project.

 

3.2.4         Unless otherwise provided in the Contract Documents, the Design
Builder shall provide or cause to be provided and shall pay for design services,
labor, materials, equipment, tools, construction equipment and machinery, water,
heat, utilities,

 

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transportation and other facilities and services necessary for proper execution
and completion of the Work, whether temporary or permanent and whether or not
incorporated or to be incorporated in the Work.

 

3.2.5         Design Builder shall supervise, inspect and direct the
Construction competently and efficiently, devoting such attention thereto and
applying such skills and expertise as may be necessary to provide the
Construction in accordance with the Contract Documents.  Design Builder shall be
solely responsible for the means, methods, techniques, sequences and procedures
employed for the provision of Construction. Design Builder shall be responsible
to see that the complete Construction complies accurately with the Contract
Documents and shall keep Owner advised as to the quality and progress of the
Construction.

 

3.2.6         The Design Builder shall keep the Owner informed of the progress
and quality of the Work.

 

3.2.7         The Design Builder shall be responsible for correcting Work which
does not conform to the Contract Documents.

 

3.2.8         The Design Builder warrants to the Owner that materials and
equipment furnished under the Contract will be of good quality and new unless
otherwise required or permitted by the Contract Documents, that the construction
will be free from faults and defects, and that the construction will conform
with the requirements of the Contract Documents. Construction not conforming to
these requirements, including substitutions not properly approved by the Owner,
shall be corrected in accordance with Article 9.

 

3.2.9         The Design Builder shall pay all state sales, consumer, use and
similar taxes which had been legally enacted prior to the date of this
Agreement, and shall secure and pay for building and other permits and
governmental fees, licenses and inspections necessary for the proper execution
and completion of the Work which are either customarily secured after execution
of a contract for construction or are legally required prior to the date of this
Agreement.

 

3.2.10       Laws and Regulations

 

1.             Design Builder shall give all notices and comply with all Laws
and Regulations of the place of the Project which are applicable to furnishing
and performance of the Work. Except where otherwise expressly required by
applicable Laws and Regulations, Owner shall not be responsible for monitoring
Design Builder’s compliance with any Laws or Regulations.

 

2.             If Design Builder performs any Work knowing or having reason to
know that it is contrary to Laws or Regulations, Design Builder shall bear all
costs arising therefrom.

 

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3.             Changes in Laws and Regulations not known or foreseeable on the
date of receipt of Proposals having an effect on the cost or time of performance
may be the subject of a claim under Article 8.

 

3.2.11       Design Builder shall pay all license fees and royalties and assume
all costs incident to the use in the performance of the Work or the
incorporation in the Work of any invention, design, process, product or device
which is subject of patent rights or copyrights held by others.  If a particular
invention, design, process, product or device is specified in the Conceptual
Documents for use in the performance of the Construction and if to the actual
knowledge of Owner its use is subject to patent rights or copyrights calling for
the payment of any license fee or royalty to others, the existence of such
rights shall be disclosed by Owner in the Conceptual Documents.  To the fullest
extent permitted by Laws and Regulations, Design Builder shall indemnify and
hold harmless Owner, from and against all claims, costs, losses and damages
(including but not limited to all fees and charges of engineers, architects,
attorneys and other professionals and all court or arbitration or other dispute
resolution costs) arising out of or resulting from any infringement of patent
rights or copyrights incident to the use in the performance of the Work or
resulting from the incorporation in the Work of any invention, design, process,
product or device not specified in the Conceptual Documents.

 

3.2.12       Use of Site and Other Areas

 

1.             Design Builder shall confine construction equipment, the storage
of materials and equipment and the operations of construction workers to those
lands and areas permitted by the Owner and other land and areas permitted by
Laws and Regulations, rights-of-way, permits and easements, and shall not
unreasonably encumber the premises with construction equipment or other
materials or equipment.  Design Builder shall assume full responsibility for any
damage to any such land or area, or to the owner or occupant thereof or of any
adjacent land or areas, resulting from the performance of the Construction. 
Should any claim be made by any such owner or occupant because of the
performance of the Construction, Design Builder shall promptly settle with such
other party by negotiation or otherwise resolve the claim by arbitration or
other dispute resolution proceeding or at law.  Design Builder shall, to the
fullest extent permitted by Laws and Regulations, indemnify and hold harmless
Owner, Owner’s Consultants and anyone directly or indirectly employed by any of
them from and against all claims, costs, losses and damages (including, but not
limited to, fees of engineers, architects, attorneys and other professionals and
court and arbitration or other dispute resolution costs) arising out of or
resulting from any claim or action, legal or equitable, brought by any such
owner or occupant against Owner, or any other party indemnified hereunder to the
extent caused by or based upon Design Builder’s performance of the Construction.

 

2.             During the performance of the Construction, Design Builder shall
keep the premises free from accumulations of waste materials, rubbish and other
debris resulting from the Construction.  At the completion of the Construction
Design

 

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Builder shall remove all waste materials, rubbish and debris from and about the
premises as well as all tools, appliances, construction equipment, temporary
construction and machinery and surplus materials.  Design Builder shall leave
the Site clean and ready for occupancy by Owner at Substantial Completion. 
Design Builder shall restore to original condition all property not designated
for alteration by the Contract Documents.

 

3.             Design Builder shall not load nor permit any part of any
structure to be loaded in any manner that will endanger the structure, nor shall
Design Builder subject any part of the Work or adjacent property to stresses or
pressures that will endanger it.

 

3.2.13       The Design Builder shall notify the Owner when the Design Builder
believes that the Work or an agreed upon portion thereof is substantially
completed.  If the Owner concurs, the Design Builder shall issue a Certificate
of Substantial Completion which shall establish the Date of Substantial
Completion, shall state the responsibility of each party for security,
maintenance, heat, utilities, damage to the Work and Insurance, shall include a
list of items to be completed or corrected and shall fix the time within which
the Design Builder shall complete items listed therein.  Disputes between the
Owner and Design Builder regarding the Certificate of Substantial Completion
shall be resolved in accordance with provisions of Article 10.

 

3.2.14       The Design Builder shall maintain at the site for the Owner one
record copy of the drawings, specifications, product data, samples, shop
drawings, Change Orders and other modifications, in good order and regularly
updated to record the completed construction. These shall be delivered to the
Owner upon completion of construction and prior to final payment.

 

3.2.15       Unless otherwise provided in the Contract Documents, Design Builder
shall directly or through one or more Subcontractors obtain and pay for all
permits and licenses necessary for construction. Owner shall assist Design
Builder, when necessary, in obtaining such permits and licenses.  Design Builder
shall pay all governmental charges and inspection fees necessary for the
prosecution of the Construction, which are applicable on the date of this
Agreement.  The Owner is responsible for paying any and all utility company
connection charges and/or capital costs related thereto.

 

3.2.16       Design Builder’s General Warranty and Guarantee

 

1.             Design Builder warrants and guarantees to Owner that all
Construction will be in accordance with the Contract Documents and will not be
defective.  This warranty shall be effective for a period of twelve months from
the date of substantial completion and will cover all labor and materials to
correct any deficiencies.  Design Builder’s warranty and guarantee hereunder
excludes defects or damage caused by:

 

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a.            Abuse, modification or improper maintenance or operation by
persons other than Design/Builder, Subcontractors or Suppliers; or

 

b.            Normal wear and tear under normal usage.

 

2.               Design Builder’s obligation to perform and complete the Work in
accordance with the Contract Documents shall be absolute.  None of the following
will constitute an acceptance of Work that is not in accordance with the
Contract Documents or a release of Design Builder’s obligation to perform the
Work in accordance with the Contract Documents:

 

a.            Observations by Owner:

 

b.            The making of any progress or final payment;

 

c.            The issuance of a certificate of Substantial Completion;

 

d.            Use or occupancy of the Work or any part thereof by Owner;

 

e.            Any acceptance by Owner or any failure to do so;

 

f.             Any review and approval of a Submittal;

 

g.            Any inspection, test or approval by others; or

 

h.            Any correction of defective Construction by Owner

 

3.2.17       Operational Phase:  During the Operations Phase, Design Builder
shall:

 

1.            Provide assistance in connection with the start-up, testing,
refining and adjusting of any equipment or system.

 

2.            Assist Owner in training staff to operate and maintain the
Project.

 

3.            Assist Owner in developing systems and procedures for control of
the operation and maintenance of and record keeping for the Project.

 

3.3   ADDITIONAL SERVICES

 

3.3.1         The services described in this Paragraph 3.3 are not included in
Basic Services unless so identified in Article 14, and they shall be paid for by
the Owner as provided in this Agreement, in addition to the compensation for
Basic Services. The services described in this Paragraph 3.3 shall be provided
only if authorized or confirmed in writing by the Owner.

 

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3.3.2         Making revisions in drawings, specifications, and other documents
or electronic data when such revisions are required by the enactment or revision
of codes, laws or regulations subsequent to the preparation of such documents or
electronic data.

 

3.3.3         Providing consultation concerning replacement of Work damaged by
fire or other cause during construction and furnishing services required in
connection with the replacement of such Work.

 

3.3.4         Providing services in connection with a public hearing,
arbitration proceeding or legal proceeding, except where the Design Builder is a
party thereto.

 

3.3.5         Providing coordination of construction performed by the Owner’s
own forces or separate contractors employed by the Owner, and coordination of
services required in connection with construction performed and equipment
supplied by Owner.

 

3.3.6         Submitting Construction Documents for review and approval by the
Owner. Construction Documents may include drawings, specifications, and other
documents and electronic data setting forth in detail the requirements for
construction of the Work.

 

3.3.7         Preparing a set of reproducible record documents or electronic
data showing significant changes in the Work made during construction.

 

3.3.8         Providing additional assistance for training personnel, preparing
manuals or consulting during operation outside of the Scope of Basic Services.

 

ARTICLE 4 - TIME

 

4.1          Unless otherwise indicated, the Owner and the Design Builder shall
perform their respective obligations as expeditiously as is consistent with
reasonable skill and care and the orderly progress of the Project.

 

4.2          Time limits stated in the Contract Documents are of the essence.
The Work to be performed under this Agreement shall commence upon receipt of a
Notice To Proceed unless otherwise agreed and, subject to authorized
Modifications, Substantial Completion shall be achieved on or before the date
established in Article 14.

 

4.3          Substantial Completion is the stage in the progress of the Work
when the Work or designated portion thereof is sufficiently complete in
accordance with the Contract Documents so the Owner can occupy or utilize the
Work for its intended use.

 

4.4          Based on the Design Builder’s Scope of Services, a construction
schedule shall be provided consistent with Paragraph 4.2 above.

 

4.5          If the Design Builder is delayed at any time in the progress of the
Work by an act or neglect of the Owner, Owner’s employees, or separate
contractors employed by the

 

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Owner, or by changes ordered in the Work, or by labor disputes, fire, unusual
delay in deliveries, adverse weather conditions not reasonably anticipatable,
unavoidable casualties or other causes beyond the Design Builder’s control, or
by delay authorized by the Owner pending arbitration, or by other causes which
the Owner and Design Builder agree may justify delay, then Contract Time shall
be reasonably extended by Change Order.

 

ARTICLE 5 - PAYMENTS

 

5.1          PROGRESS PAYMENTS

 

5.1.1         The Design Builder shall deliver to the Owner itemized
Applications for Payment in such detail as indicated in Article 14.

 

5.1.1.1      Application shall be made on AIA forms G702 and 6703 or similar
documents.  Two percent retainage shall be held by the owner on up to fifty
percent value of the original contract value after which no additional retainage
will be held.

 

5.1.2         Within ten (10) days of the Owner’s receipt of a properly
submitted and correct Application for Payment, the Owner shall make payment to
the Design Builder.

 

5.1.3         The Application for Payment shall constitute a representation by
the Design Builder to the Owner that the design and construction have progressed
to the point indicated; the quality of Work covered by the application is in
accordance with the Contract Documents; and the Design Builder is entitled to
payment in the amount requested.

 

5.1.4         Upon receipt of payment from the Owner, the Design Builder shall
promptly pay the other design professionals and each contractor the amount to
which each is entitled in accordance with the terms of their respective
contracts.

 

5.1.5         The Owner shall have no obligation under this Agreement to pay or
to be responsible in any way for payment to another design professional, or a
contractor performing portions of the Work.

 

5.1.6         Neither progress payment nor partial or entire use or occupancy of
the Project by the Owner shall constitute acceptance of Work not in accordance
with the Contract Documents.

 

5.1.7         The Design Builder warrants that title to all construction covered
by an Application for Payment will pass to the Owner no later than the time of
payment. The Design Builder further warrants that upon submittal of an
Application for Payment all construction for which payments have been received
from the Owner shall be free and clear of liens, claims, security interests or
encumbrances in favor of the Design Builder or any other person or entity
performing construction at the site or furnishing materials or equipment
relating to the construction.

 

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5.1.8         Upon compliance with the Process Guarantee, the Owner shall pay
the Design Builder the retainage, if any, less the reasonable cost to correct or
complete incorrect or incomplete Work.  Final payment of such withheld sum shall
be made upon correction or completion of such Work.

 

5.2.         FINAL PAYMENT

 

5.2.1         When the Work has been completed and the contract fully performed,
the Design Builder shall submit a final application for payment to the Owner,
who shall make final payment within ten (10) days of receipt.

 

5.2.2         The making of final payment shall constitute a waiver of claims by
the Owner except those arising from:

 

5.2.2.1     liens, claims, security interests or encumbrances arising out of the
Contract and unsettled;

 

5.2.2.2     failure of the Work to comply with the requirements of the Contract
Documents; or

 

5.2.2.3     terms of special warranties required by the Contract Documents.

 

5.2.3         Acceptance of final payment shall constitute a waiver of all
claims by the Design Builder except those previously made in writing and
identified by the Design Builder as unsettled at the time of final Application
for Payment.

 

5.3          INTEREST PAYMENTS

 

5.3.1         Payments due to the Design Builder under this Agreement which are
not paid when due shall bear interest from the date due at the rate specified in
Article 13, or in the absence of a specified rate, at the legal rate prevailing
where the Project is located.

 

ARTICLE 6- PROTECTION OF PERSONS AND PROPERTY

 

6.1           The Design Builder shall be responsible for initiating,
maintaining and providing supervision of safety precautions and programs in
connection with the performance of this Agreement.

 

6.2           The Design Builder shall take reasonable precautions for the
safety of, and shall provide reasonable protection to prevent damage, injury or
loss to: (1) employees on the Work and other persons who may be affected
thereby; (2) the Work and materials and equipment to be incorporated therein,
whether in storage on or off the site, under care, custody, or control of the
Design Builder or the Design Builder’s contractors; and (3) other property at or
adjacent thereto,

 

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such as trees, shrubs, lawns, walks, pavements, roadways, structures and
utilities not designated for removal relocation, or replacement in the course of
construction.

 

6.3           The Design Builder shall give notices and comply with applicable
laws, ordinances, rules, regulations and lawful orders of public authorities
bearing on the safety of persons or property or their protection from damage,
injury or loss.

 

6.4           The Design Builder shall promptly remedy damage and loss (other
than damage or loss insured under property insurance provided or required by the
Contract Documents) to property at the site caused in whole or in part by the
Design Builder, a contractor of the Design Builder or anyone directly or
indirectly employed by any of them, or by anyone for whose acts they may be
liable.

 

ARTICLE 7- INSURANCE AND BONDS

 

7.1          PERFORMANCE, PAYMENT AND OTHER BONDS

 

7.1.1         If it is required by the Primary Lender, Design Builder shall
furnish performance and payment Bonds, each in an amount at least equal to the
Contract Price as security for the faithful performance and payment of all
Design Builder’s obligations to furnish, provide and pay for Construction and
related materials under the Contract Documents. These Bonds shall remain in
effect at least until one year after the date when final payment becomes due,
except as provided otherwise by Laws or Regulations or by the Contract
Documents.  Design Builder shall also furnish such other Bonds as are required
by Article 14.  All Bonds shall be in the form prescribed by the Contract
Documents except as provided otherwise by Laws or Regulations, and shall be
executed by such sureties as are named in the current list of “Companies Holding
Certificates of Authority as Acceptable Surety Companies” as published in
Circular 570 (amended) by the Audit Staff, Bureau of Government Financial
Operations, U.S. Treasury Department.  All Bonds signed by an agent must be
accompanied by a certified copy of such agent’s authority to act.  The cost of
the performance and payment bonds shall be paid by the Owner.

 

7.1.2         If the surety on any Bond furnished by Design Builder is declared
bankrupt or becomes insolvent or its right to do business is terminated in any
state where any part of the Project is located or it ceases to meet the
requirements of paragraph 7.1.1, Design Builder shall within thirty days
thereafter substitute another Bond and surety meeting the requirements of
paragraphs 7.1.1 and 7.9.

 

7.2          DESIGN/BUILDER’S LIABILITY INSURANCE

 

7.2.1         The Design Builder shall purchase from and maintain, in a company
or companies lawfully authorized to do business in the jurisdiction in which the
Project is located, such insurance as will protect the Owner and Design Builder
from claims set forth below which may arise out of or result from operations
under this Agreement by the Design Builder.

 

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7.2.1.1     Claims under workers’ compensation, disability benefits and other
similar employee benefit acts;

 

7.2.1.2     Claims for damages because of bodily injury, occupational sickness
or disease, or death of Design Builder’s employees;

 

7.2.1.3     Claims for damages because of bodily injury, sickness or disease, or
death of any person other than Design Builder’s employees;

 

7.2.1.4     Claims for damages insured by customary personal injury liability
coverage which are sustained (i) by any person as a result of an offense
directly or indirectly related to the employment of such person by Design
Builder, or (ii) by any other person for any other reason;

 

7.2.1.5     Claims for damages, other than to the Work itself, because of injury
to or destruction of tangible property wherever located, including loss of use
resulting therefrom; and

 

7.2.1.6     Claims for damages because of bodily injury or death of any person
or property damage arising out of the ownership, maintenance or use of any motor
vehicle.

 

7.2.2         The policies of insurance required by paragraph 7.2.1 shall:

 

7.2.2.1     With respect to insurance required by paragraphs 7.2.1.3 through
7.2.1.6 inclusive, include as additional insureds Owner and any other persons or
entitles indicated in Article 14, all of whom shall be listed as additional
insureds, and include coverage for the respective officers and employees of all
such additional insureds;

 

7.2.2.2     Include at least the specific coverages and be written for not less
than the limits of liability provided In 7.2.2.2.a through 7.2.2.2.c or required
by Laws or Regulations, whichever is greater;

 

a.            Worker’s Compensation under Paragraph 7.2.1.1 of the General
Conditions:

 

1.

State:

 

Statutory

2.

Applicable Federal:

 

Statutory

3.

Employer’s Liability:

 

$500,000

 

b.            Design Builder’s General Liability (under paragraphs 7.2.1.2
through 7.2.1.6) which shall include completed operations and product liability
coverages.

 

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1.

General Aggregate:

 

 

 

 

 

(Except Products — Completed Operations)

 

$

2,000,000

 

 

 

 

 

 

 

 

2.

Products — Completed Operations Aggregate

 

$

2,000,000

 

 

 

 

 

 

 

 

3.

Personal and Advertising Injury

 

 

 

 

 

(Per Person/Organization)

 

$

1,000,000

 

 

 

 

 

 

 

 

4.

Each Occurrence

 

 

 

 

 

(Bodily Injury and Property Damages)

 

$

1,000,000

 

 

 

 

 

 

 

 

5.

Property Damage liability insurance will provide Explosion, Collapse and
Underground coverages where applicable.

 

 

 

 

 

 

 

 

 

 

6.

Excess Liability

 

 

 

 

 

 

 

 

 

 

 

General Aggregate

 

$

5,000,000

 

 

 

Each Occurrence

 

$

5,000,000

 

 

 

 

 

 

 

c.

Automobile Liability:

 

 

 

 

Combine Single

 

 

 

 

Limit (Bodily Injury and Property Damage)

 

$

1,000,000

 

 

7.2.2.3     Include completed operations insurance;

 

7.2.2.4     Include contractual liability insurance covering Design Builder’s
indemnity obligations under paragraphs 3.2.11, 3.2.12 and 11.4;

 

7.2.2.5     Contain a provision or endorsement that the coverage afforded will
not be canceled until at least 30 days’ prior written notice has been given to
Owner and each other additional insured indicated in Article 14 to whom a
Certificate of insurance has been Issued (and the Certificate of Insurance
furnished by the Design Builder pursuant to paragraph 7.9.2 will so provide);

 

7.2.2.6.    Remain in effect at least until final payment and at all times
thereafter when Design Builder may be correcting, removing or replacing
defective Construction in accordance with Article 9; and

 

7.2.2.7     With respect to completed operations insurance, and any other
insurance coverage written on a claims-made basis, this insurance shall remain
in effect for at least one year after final payment.

 

7.2.3         Design Builder’s insurance agency shall agree in writing to give
to owner notice of cancellation of insurance by either party.

 

14

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7.3          OWNER’S LIABILITY INSURANCE

 

7.3.1         The Owner shall be responsible for purchasing and maintaining the
Owner’s General, Auto and Workmen’s Compensation liability insurance. 
Optionally, the Owner may purchase and maintain other insurance for
self-protection against claims which may arise from operations under this
Agreement.  The Design Builder shall not be responsible for purchasing and
maintaining this optional Owner’s liability insurance unless specifically
required by the Contract Documents.

 

7.4          PROPERTY INSURANCE

 

7.4.1         Unless otherwise provided in Article 14, Owner shall purchase and
maintain property insurance upon the Construction at the Site in the amount of
the full replacement cost thereof (subject to deductible amounts not exceeding
$5000 per occurrence). This insurance will:

 

7.4.1.1     Include the interests of Owner, Design/Builder, Subcontractors, and
any other persons or entitles Indicated in the Supplementary Conditions, each of
whom is deemed to have an insurable interest and shall be listed as an insured
or additional insured;

 

7.4.1.2     Be written on a Builder’s Risk “all-risk” or open peril or special
causes of loss policy form that shall at least include insurance for physical
loss and damage to the Construction, temporary buildings, falsework and all
materials and equipment in transit, and shall insure against at least the
following perils or causes of loss: fire, lightning, extended coverage, theft,
vandalism and malicious mischief, collapse, debris removal, demolition
occasioned by enforcement of Laws and Regulations, and such other perils or
causes of loss as may be specifically required by the Supplementary Conditions;

 

7.4.1.3     Include expenses incurred in the repair or replacement of any
insured property (including but not limited to fees and charges of engineers and
design professionals);

 

7.4.1.4     Be maintained in effect until final payment is made unless otherwise
agreed to in writing by Owner and Design/Builder with thirty days written notice
to each other additional Insured to whom a certificate of insurance has been
issued; and

 

7.4.1.5     Allow partial utilization in accordance with paragraph 7.8.

 

7.4.2         All the policies of insurance (and the certificates or other
evidence thereof) required to be purchased and maintained by Owner in accordance
with paragraph 7.4 will contain a provision or endorsement that the coverage
afforded will not be canceled until at least 30 days’ prior written notice has
been given to Design Builder and to each other

 

15

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additional insured to whom a Certificate of Insurance has been issued and will
contain waiver provisions in accordance with paragraph 7.5.1.  In addition, the
insurance agency representing the Owner shall agree in writing to give to Design
Builder notice of cancellation by either party.

 

7.4.3.        Owner shall not be responsible for purchasing and maintaining any
property insurance to protect the interests of Design Builder, Subcontractors,
Supplies, Engineers or others in the Work to the extent of any deductible
amounts. The risk of loss within such identified deductible amount, will be
borne by Design Builder, Subcontractor or others suffering any such loss and if
any of them wishes property insurance coverage within the limits of such
amounts, each may purchase and maintain it at the purchaser’s own expense.

 

7.5          WAIVER OF RIGHTS

 

7.5.1         Owner and Design Builder intend that all policies purchased in
accordance with paragraph 7.4 will protect Owner, Design Builder, Engineers,
Subcontractors, and all other individuals or entities indicated in Article 14 to
be listed as insured or additional insureds in such policies and will provide
primary coverage for all losses and damages caused by the perils or causes of
loss covered thereby.  All such policies shall contain provisions to the effect
that in the event of payment of any loss or damage the insurers will have no
rights of recovery against any of the insureds or additional insureds
thereunder.  Owner and Design Builder waive all rights against each other and
their respective officers, directors, employees and agents for all losses and
damages caused by, arising out of or resulting from any of the perils or causes
of loss covered by such policies and any other property insurance applicable to
the Work; and, in addition, waive all such rights against Subcontractors,
Suppliers, Engineers and all other individuals or entitles indicated in the
Supplementary Conditions to be listed as insureds or additional insureds under
such policies for losses and damages so caused.  None of the above waivers shall
extend to the rights that any party making such waiver may have to the proceeds
of insurance held by Owner as trustee or otherwise payable under any policy so
issued.  In addition, Owner waives all rights against Design Builder,
Subcontractors, Engineers and Suppliers and the officers, directors, employees
and agents of any of them for business interruption, loss of use of Owner’s
property and any other consequential damages caused by, arising out of or
resulting from any of such insured perils or causes of loss or any other peril
or cause of loss whether or not insured.

 

7.6          RECEIPT AND APPLICATION OF PROCEEDS

 

7.6.1         Any insured loss under the policies of insurance required by
paragraph 7.4 will be adjusted with Owner and made payable to Owner as fiduciary
for the Insureds, as their interests may appear, subject to the requirements of
any applicable mortgage clause and of paragraph 7.6.3.

 

16

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7.6.2.        Owner shall deposit in a separate account any money so received,
and shall distribute it in accordance with such agreement as the parties in
interest may reach.  If no other special agreement is reached the damaged Work
shall be repaired or replaced, the moneys so received applied on account thereof
and the Work and the cost thereof covered by an appropriate Change Order or
Written Amendment.

 

7.6.3.        Owner as fiduciary shall have power to adjust and settle any loss
with the insurers unless one of the parties in interest shall object in writing
within fifteen days after the occurrence of loss to Owner’s exercise of this
power.  If such objection be made, Owner as fiduciary shall make settlement with
the insurers in accordance with such agreement as the parties in interest may
reach.  If no such agreement among the parties in interest is reached, Owner as
fiduciary shall adjust and settle the loss with the insurers and, if required in
writing by any party in interest, Owner as fiduciary shall give bond for the
proper performance of such duties.

 

7.7          ACCEPTANCE OF BONDS AND INSURANCE; OPTION TO REPLACE

 

7.7.1         If either party has any objection to the coverage afforded by or
other provisions of the Bonds or insurance required to be purchased and
maintained by the other party in accordance with Article 7 on the basis of their
not complying with the Contract Documents, the objecting party shall so notify
the other party in writing within ten days after receipt of the certificates.
Owner and Design Builder shall each provide to the other such additional
information in respect of insurance provided as the other may reasonably
request, if either party does not purchase or maintain all of the Bonds and
insurance required of such party by the Contract Documents, such party shall
notify the other party in writing of such failure to purchase prior to the start
of the Work, or of such failure to maintain prior to any change in the required
coverage.  Without prejudice to any other right or remedy, the other party may
elect to obtain equivalent Bonds or insurance to protect such other party’s
interests at the expense of the party who was supposed to provide such coverage,
and a Change Order or Written Amendment shall be issued to adjust the Contract
Price accordingly.

 

7.8          PARTIAL UTILIZATION — PROPERTY INSURANCE

 

7.8.1         If Owner finds it necessary to occupy or use a portion or portions
of the Work prior to Substantial Completion of all the construction, such use or
occupancy may be accomplished; provided that no such use or occupancy shall
commence before the insurers providing the property insurance have acknowledged
notice thereof and in writing effected any changes in coverage necessitated
thereby.  The insurers providing the property insurance shall consent by
endorsement on the policy or policies, but the property insurance shall not be
cancelled or permitted to lapse on account of any such partial use or occupancy.

 

17

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7.9 LICENSED SURETIES AND INSURERS; CERTIFICATES OF INSURANCE

 

7.9.1         All Bonds and insurance required by the Contract Documents to be
purchased and maintained by Owner or Design Builder shall be obtained from
surety or insurance companies that are duly licensed or authorized in the
jurisdiction in which the Project is located to issue Bonds or insurance
policies for the limits and coverage’s so required. Such surety and insurance
companies shall also meet such additional requirements and qualifications as may
be provided in Article 14.

 

7.9.2         Design Builder shall deliver to Owner, with copies to each
additional insured indicated in Article 14, certificates of insurance (and other
evidence of Insurance requested by Owner or any other additional insured) which
Design/Builder is required to purchase and maintain in accordance with paragraph
7.2.1.  Owner shall deliver to Design Builder, with copies to each additional
insured indicated in Article 14, certificates of insurance (and other evidence
of insurance requested by Design Builder or any other additional insured) which
Owner is required to purchase and maintain in accordance with paragraphs 7.4.1
and 7.4.2.

 

ARTICLE 8- CHANGES IN THE WORK

 

8.1          CHANGES

 

8.1.1         Changes in the Work may be accomplished after execution of this
Agreement, without invalidating this Agreement, by Change Order, Construction
Change Directive, or order for a minor change in the Work, subject to the
limitations stated in the Contract Documents.

 

8.1.2         A Change Order shall be based upon agreement between the Owner and
the Design Builder; a Construction Change Directive may be issued by the Owner
without the agreement of the Design Builder; an order for a minor change in the
Work may be issued by the Design Builder alone.

 

8.1.3         Changes in the Work shall be performed under applicable provisions
of the Contract Documents, and the Design Builder shall proceed promptly, unless
otherwise provided in the Change Order, Construction Change Directive, or order
for a minor change in the Work.

 

8.1.4         If unit prices are stated in the Contract Documents or
subsequently agreed upon, and if quantities originally contemplated are so
changed in a proposed Change Order or Construction Change Directive that
application of such unit prices to quantities of Work proposed will cause
substantial inequity to the Owner or the Design Builder, the applicable unit
prices shall be equitably adjusted.

 

18

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8.2          CHANGE ORDERS

 

8.2.1         A Change Order is a written instrument prepared by the Design
Builder and signed by the Owner and the Design Builder, stating their agreement
upon all of the following:

 

1.             a change in the Work

 

2.             the amount of the adjustment, if any, in the Contract Sum; and

 

3.             the extent of the adjustment, if any, in the Contract Time.

 

8.2.2         If the Owner requests a proposal for a change in the Work from the
Design Builder and subsequently elects not to proceed with the change, a Change
Order shall be issued to reimburse the Design Builder for any costs incurred for
estimating services, design services or preparation of proposed revisions to the
Contract Documents.

 

8.3 CONSTRUCTION CHANGE DIRECTIVES

 

8.3.1         A Construction Change Directive is a written order prepared and
signed by the Owner, directing a change in the Work prior to agreement on
adjustment, if any, in the Contract Sum or Contract Time, or both.

 

8.3.2         Except as otherwise agreed by the Owner and the Design Builder,
the adjustment to the Contract Sum shall be determined on the basis of
reasonable expenditures and savings of those performing the Work attributable to
the change, including the expenditures for design services and revisions to the
Contract Documents.  In such case, the Design Builder shall keep and present an
itemized accounting together with appropriate supporting data for inclusion in a
Change Order.  Unless otherwise provided in the Contract Documents, costs for
these purposes shall be limited to the following:

 

1.            costs of labor, including social security, old age and
unemployment insurance, fringe benefits required by agreement or custom, and
workers’ compensation insurance;

 

2.            costs of materials, supplies and equipment, including cost of
transportation, whether incorporated or consumed;

 

3.            rental costs of machinery and equipment exclusive of hand tools,
whether rented from the Design Builder or others;

 

4.            costs of premiums for all bonds and insurance permit fees, and
sales, use or similar taxes;

 

5.            additional costs of supervision and field office personnel
directly attributable to the change; and fees paid to other design
professionals.

 

19

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8.3.3         Pending final determination of cost to the Owner, amounts not in
dispute may be included in Applications for Payment.  The amount of credit to be
allowed by the Design Builder to the Owner for deletion or change which results
in a net decrease in the Contract Sum and Contract Time, such agreement shall be
effective immediately and shall be recorded by preparation and execution of an
appropriate Change Order.

 

8.4          MINOR CHANGES IN THE WORK

 

8.4.1         The Design Builder shall have authority to make minor changes in
the Construction Documents and construction consistent with the intent of the
Contract Documents when such minor changes do not involve adjustment in the
Contract Sum or extension of the Contract Time.  The Design Builder shall
promptly inform the Owner, in writing, of minor changes in the Construction
Documents and construction.

 

8.5          CONCEALED CONDITIONS

 

8.5.1         If conditions are encountered at the site which are (1) subsurface
or otherwise concealed physical conditions which differ materially from those
indicated in the Contract Documents, or (2) unknown physical conditions of an
unusual nature which differ materially from those ordinarily found to exist and
generally recognized as inherent in construction activities of the character
provided for in the Contract Documents, then notice by the observing party shall
be given to the other party promptly before conditions are disturbed and in no
event later than 21 days after first observance of the conditions. The Contract
Sum shall be equitably adjusted for such concealed or unknown conditions by
Change Order upon claim by either party made within 21 days after the claimant
becomes aware of the conditions.

 

8.6          REGULATORY CHANGES

 

8.6.1         The Design Builder shall be compensated for changes in the
construction necessitated by the enactment or revisions of codes, laws or
regulations subsequent to the submission of the Design Builder’s Proposal.

 

ARTICLE 9 - CORRECTION OF WORK

 

9.1          The Design Builder shall promptly correct Work rejected by the
Owner or known by the Design Builder to be defective or falling to conform to
the requirements of the Contract Documents, whether observed before or after
Substantial Completion and whether or not fabricated, installed or completed. 
The Design Builder shall bear costs of correcting such rejected Work, including
additional testing and inspections.

 

9.2          If, within one (1) year after the date of Substantial Completion of
the Work or, after the date for commencement of warranties established in a
written agreement between the Owner and the Design Builder, or by terms of an
applicable special warranty required by the Contract Documents, any of the Work
is found to be not in accordance with the requirements of the Contract
Documents, the Design Builder shall correct it promptly

 

20

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after receipt of a written notice from the Owner to do so unless the Owner has
previously given the Design Builder a written acceptance of such condition.

 

9.3          Nothing contained in this Article 9 shall be construed to establish
a period of limitation with respect to other obligations which the
Design/Builder might have under the Contract Documents.  Establishment of the
time period of one (1) year as described in Subparagraph 9.2 relates only to the
specific obligation of the Design Builder to correct the Work, and has no
relationship to the time within which proceedings may be commenced to establish
the Design Builder’s liability with respect to the Design Builder’s obligations
other than specifically to correct the Work.

 

9.4          If the Design Builder fails to correct nonconforming Work as
required or fails to carry out Work in accordance with the Contract Documents,
the Owner by written order signed personally or by an Agent specifically so
empowered by the Owner in writing, may order the Design Builder to stop the
Work, or any portion thereof, until the cause for such order has been
eliminated; however, the Owner’s right to stop the Work shall not give rise to a
duty on the part of the Owner to exercise the right for benefit of the Design
Builder or other persons or entities.

 

9.5          If the Design Builder defaults or neglects to carry out the Work in
accordance with the Contract Documents and fails within fourteen (14) days after
receipt of written notice from the Owner to commence and continue correction of
such default or neglect with diligence and promptness, the Owner may give a
second written notice to the Design Builder and, fourteen (14) days following
receipt by the Design Builder of that second written notice and without
prejudice to other remedies the Owner may have, correct such deficiencies.  In
such case an appropriate Change Order shall be issued deducting from payments
then or thereafter due the Design Builder, the costs of correcting such
deficiencies, if the payments then or thereafter due the Design Builder are not
sufficient to cover the amount of the deduction, the Design Builder shall pay
the difference to the Owner.  Such action by the Owner shall be subject to
dispute resolution procedures as provided in Article 10.

 

ARTICLE 10 - DISPUTE RESOLUTION — MEDIATION AND ARBITRATION

 

10.1        Claims, disputes or other matters in question between the parties to
this Agreement arising out of or relating to this Agreement or breach thereof
shall be subject to and decided by mediation or arbitration.  Such mediation or
arbitration shall be conducted in accordance with the Construction Industry
Mediation or Arbitration Rules of the American Arbitration Association currently
in effect.

 

10.2        In addition to and prior to arbitration, the parties shall endeavor
to settle disputes by mediation.  Demand for mediation shall be filed in writing
with the other party to this Agreement and with the American Arbitration
Association.  A demand for mediation shall be made within a reasonable time
after the claim, dispute, or other matter in question has arisen.  In no event
shall the demand for mediation be made after the date when

 

21

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institution of legal or equitable proceedings based on such claim, dispute or
other matter in question would be barred by the applicable statutes or repose or
limitations.

 

10.3        Demand for arbitration shall be filed in writing with the other
party to this Agreement and with the American Arbitration Association.  A demand
for arbitration shall be made within a reasonable time after the claim, dispute
or other matter in question has arisen. In no event shall the demand for
arbitration be made after the date when institution of legal or equitable
proceedings based on such claim, dispute or other matter in question would be
barred by the applicable statutes of repose or limitations.

 

10.4        An arbitration pursuant to this Article may be joined with an
arbitration involving common issues of law or fact between the Design Builder
and any person or entity with whom the Design Builder has a contractual
obligation to arbitrate disputes.  No other arbitration arising out of or
relating to this Agreement shall include, by consolidation, joinder or in any
other matter, an additional person or entity not a party to this Agreement or
not a party to an agreement with the Design Builder, except by written consent
containing a specific reference to this Agreement signed by the Owner, the
Design Builder and any other person or entitles sought to be joined.  Consent to
arbitration involving an additional person or entity shall not constitute
consent to arbitration of any claim, dispute or other matter in question not
described in the written consent or with a person or entity not named or
described therein.  The foregoing agreement to arbitrate and other agreements to
arbitrate with an additional person or entity duly consented to by the parties
to this Agreement shall be specifically enforceable in accordance with
applicable law in any court having jurisdiction thereof.

 

10.5        The award rendered by the arbitrator or arbitrators shall be final,
and judgment may be entered upon it in accordance with applicable law in any
court having jurisdiction thereof. Any and all arbitration or mediation hearings
shall be held in Sioux Falls, SD.

 

ARTICLE 11 - MISCELLANEOUS PROVISIONS

 

11.1       Unless otherwise provided, this Agreement shall be governed by the
law of the place where the Project is located.

 

11.2       RELATED CONSTRUCTION OF SITE

 

11.2.1       Owner may perform other Work related to the Project at the Site by
Owner’s own forces, or let other direct contracts therefore or have other work
performed by utility owners.  If the fact that such other work is to be
performed was not noted in the Conceptual Documents then (i) written notice
thereof will be given to Design Builder prior to starting any such other work
and (ii) Design Builder may make a claim therefore as provided in Article 8 if
Design Builder believes that such performance will involve additional expense to
Design Builder or requires additional time and the parties are unable to agree
as to the amount or extent thereof.

 

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11.2.2       Design Builder shall afford each other contractor who is a party to
such a direct contract and each utility owner (and Owner, if Owner is performing
the additional work with Owner’s employees) proper and safe access to the Site
and a reasonable opportunity for the introduction and storage of materials and
equipment and the execution of such other work and shall properly connect and
coordinate the Construction with theirs.  Unless otherwise provided in the
Contract Documents, Design Builder shall do all cutting, fitting and patching of
the Work that may be required to make its several parts come together properly
and integrate with such other work.  Design Builder shall not endanger any work
of others by cutting, excavating or otherwise altering their work without the
written consent of Owner and the others whose work will be affected.  The duties
and responsibilities of Design Builder under this paragraph are for the benefit
of such utility owners and other contractors to the extent that there are
comparable provisions for the benefit of Design Builder in said direct contracts
between Owner and such utility owners and other contractors.

 

11.2.3       If the proper execution or results of any part of Design Builder’s
Work depends upon work performed or services provided by others under this
paragraph 11.2, Design Builder shall inspect such other work and appropriate
instruments of service and promptly report to Owner in writing any delays,
defects of deficiencies In such other work or services that render it
unavailable or unsuitable for the proper execution and results of Design
Builder’s Work.  Design Builder’s failure so to report will constitute an
acceptance of such other work as fit and proper for integration with Design
Builder’s Work except for latent or nonapparent defects and deficiencies in such
other work.

 

11.2.4       Coordination

 

11.2.4.1   If Owner contracts with others for the performance of other work on
the Project at the Site, the following will be set forth in Article 14:

 

a.     The individual or entity who will have authority and responsibility for
coordination of the activities among the various prime contractors will be
identified;

 

b.    The specific matters to be covered by such authority and responsibility
will be itemized; and

 

c.     The extent of such authority and responsibilities will be provided.

 

11.2.4.2   Unless otherwise provided in Article 14, Owner shall have sole
authority and responsibility in respect of such coordination.

 

11.3       CLAIMS FOR DAMAGES

 

11.3.1       If either party to this Agreement suffers injury or damage to
person or property because of an act or omission of the other party, of any of
the other party’s employees or agents, or of others for whose acts such party is
legally liable, written notice of such

 

23

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injury or damage, whether or not insured, shall be given to the other party
within a reasonable time not exceeding 21 days after first observance.  The
notice shall provide sufficient detail to enable the other party to investigate
the matter.  If a claim of additional cost or time related to this claim is to
be asserted, it shall be filed in writing.

 

11.4       INDEMNIFICATION

 

11.4.1       To the fullest extent permitted by law, the Design Builder shall
indemnify and hold harmless the Owner’s, the Board of Managers, Officers,
Owner’s consultants, and agents and employees of any of them from and against
claims, damages, losses and expenses, including but not limited to attorney’s
fees, arising out of or resulting from performance of the Work, provided that
such claim, damage, loss or expense is attributable to bodily injury, sickness,
disease or death, or to injury to or destruction of tangible property (other
than the Work itself) including loss of use resulting therefrom, but only to the
extent caused in whole or in part by negligent acts or omissions of the Design
Builder, anyone directly or indirectly employed by the Design Builder or anyone
for whose acts the Design Builder may be liable.  Such obligation shall not be
construed to negate, abridge, or reduce other rights or obligations of indemnity
which would otherwise exist as to a party or person described in this Paragraph
11.4.

 

11.4.2       To the fullest extent permitted by law, the Owner shall indemnify
and hold harmless the Design Builder, Broin’s Board of Directors and Officers,
Design Builder’s consultants, and agents and employees of any of them from and
against claims, damages, losses and expenses, including but not limited to
attorney’s fees, arising out of or resulting from performance of the Work,
provided that such claim, damage, loss or expense is attributable to bodily
injury, sickness, disease or death, or to injury to or destruction of tangible
property (other than the Work itself) including loss of use resulting therefrom,
but only to the extent caused in whole or in part by negligent acts or omissions
of the Owner, anyone directly or indirectly employed by the Owner or anyone for
whose acts the Owner may be liable.  Such obligation shall not be construed to
negate, abridge, or reduce other rights or obligations of Indemnity which would
otherwise exist as to a party or person described in this Paragraph 11.4.

 

11.4.3       In claims against any person or entity indemnified under this
Paragraph 11.4 by an employee of the Design Builder, anyone directly or
indirectly employed by the Design Builder or anyone for whose acts the Design
Builder may be liable, the indemnification obligation under this Paragraph 11.4
shall not be limited by a limitation on amount or type of damages, compensation
or benefits payable by or for the Design Builder under worker’s compensation
acts, disability benefit acts or other employee benefit acts.

 

11.5       SUCCESSORS AND ASSIGNS

 

11.5.1       The Owner and Design Builder, respectively, bind themselves, their
partners, successors, assigns and legal representatives to the other party to
this Agreement and to the partners, successors and assigns of such other party
with respect to all covenants of this Agreement.  Neither the Owner nor the
Design Builder shall assign this Agreement

 

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without the written consent of the other.  The Owner may assign this Agreement
to any institutional lender providing construction financing, and the Design
Builder agrees to execute all consents reasonably required to facilitate such an
assignment. if either party makes such an assignment, that party shall
nevertheless remain legally responsible for all obligations under this
Agreement, unless otherwise agreed by the other party.

 

11.6       EXTENT OF AGREEMENT

 

11.6.1       This Agreement represents the entire agreement between the Owner
and the Design Builder and supersedes prior negotiations, representations or
agreements, either written or oral.  This Agreement may be amended only by
written instrument and signed by both the Owner and the Design Builder.

 

ARTICLE 12 - TERMINATION OF THE AGREEMENT

 

12.1       TERMINATION BY THE OWNER

 

12.1.1       This Agreement may be terminated by the Owner upon 14 days’ written
notice to the Design Builder in the event that the Project is abandoned.  If
such termination occurs, the Owner shall pay the Design Builder for Work
completed and for proven loss sustained upon materials, equipment, tools, and
construction equipment machinery, including reasonable profit and applicable
damages.

 

12.1.2       If the Design Builder defaults or persistently fails or neglects to
carry out the Work in accordance with the Contract Documents or fails to perform
the provisions of this Agreement, the Owner may give written notice that the
Owner intends to terminate this Agreement.  If the Design Builder fails to
correct the defaults, failure or neglect within fourteen (14) days after being
given notice, the Owner may then give a second written notice and, after an
additional fourteen (14) days the Owner may without prejudice to any other
remedy terminate the employment of the Design Builder and take possession of the
site and of all materials, equipment and finish the Work by whatever method the
Owner may deem expedient.  If the unpaid balance of the Contract Sum exceeds the
expense of finishing the Work and all damages incurred by the Owner, such excess
shall be paid to the Design Builder.  If the expense of completing the Work and
all damages incurred by the Owner exceeds the unpaid balance, the Design Builder
shall pay the difference to the Owner.  This obligation for payment shall
survive termination of this Agreement.

 

12.2        TERMINATION BY THE DESIGN/BUILDER

 

12.2.1   If the Owner falls to make payment when due, the Design Builder may
give written notice of the Design Builder’s intention to terminate this
Agreement.  If the Design Builder fails to receive payment within fourteen (14)
days after receipt of such notice by the Owner, the Design Builder may give a
second written notice and, fourteen (14) days after receipt of such second
written notice by the Owner, may terminate this Agreement and recover from the
Owner payment for Work executed and for proven

 

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losses sustained upon materials, equipment, tools, and construction equipment
and machinery, including reasonable profit and applicable damages.

 

ARTICLE 13 - BASIS OF COMPENSATION

 

The Owner shall compensate the Design Builder in accordance with Article 5,
Payments, and the other provisions of this Agreement as described below.

 

13.1        COMPENSATION

 

13.1 .1      For the Design Builder’s performance of the Work, as described in
Paragraph 3.2 and including any other services listed in Article 14 as part of
Basic Services, the Owner shall pay the Design Builder in current funds the
Contract Sum as follows:

 

Thirty Eight Million Two Hundred Sixty Two Thousand Nine Hundred Twenty Nine
Dollars and no Cents ($38,262,929.00).  This price Includes sales and excise tax
and will remain valid as long as construction is started by January 1, 2006.  A
Start date after that time will cause the price to be reviewed and adjusted
accordingly.

 

13.1.2       For Additional Services, as described in Paragraph 3.3 and
including any other services listed in Article 14 as Additional Services,
compensation shall be at a negotiated price.

 

13.2        REIMBURSABLE EXPENSES

 

1 3.2.1      Reimbursable Expenses are In addition to the compensation for Basic
and Additional Services, and include actual expenditures made by the Design
Builder and the Design/Builder’s employees and contractors in the interest of
the Project.

 

13.2.2       FOR REIMBURSABLE EXPENSES, compensation shall be a multiple of
(1.1) times the amounts expended.

 

13.3        INTEREST PAYMENTS

 

13.3.1       The rate of interest for past due payments shall be as follows:

 

(1.5%) one and one half percent per month.

 

ARTICLE 14 - OTHER CONDITIONS AND SERVICES

 

14.1         The Basic Services to be performed shall be commenced on issuance
of Notice to Proceed and, subject to authorized adjustments and to delays not
caused by the Design Builder, Substantial Completion shall be achieved in Twenty
(20) months following the start of concrete work.

 

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14.2         The Basic Services beyond those described in Article 3 are as
follows:

 

None

 

14.3        Additional Services beyond those described In Article 3 are as
follows:

 

None

 

14.4        The Design Builder shall submit an Application for Payment on or
about the 15th day of each month.

 

14.5        The Design Builders Exhibits include the following documents:

 

Title

 

Date

 

 

 

Exhibit 1 -

 

Scope of work consisting of one (1) page

Exhibit 2 -

 

Schedule of Contract Values and Project Estimate consisting of two (2) pages

Exhibit 3 -

 

Notice to Proceed consisting of one (1) page

Exhibit 4 -

 

Process Guarantee consisting of one (1) page

 

14.6        OTHER CONDITIONS

 

14.6.1               A payment of Three Hundred Thousand Dollars ($300,000) will
be due and payable for Preliminary Engineering for the Project within 15 days
upon signing of this document.

 

14.6.2               A payment of Seventy-five Thousand Dollars ($75,000) for
permitting and initial design will be due and payable for the Project within 15
days upon signing of this document

 

14.6.3               Owner will apply for and receive any applicable state sales
or excise tax refunds. Design Builder will assist the Owner in compiling
necessary documentation.

 

14.6.4               The Process Guarantee attached as Exhibit 4, shall be met
within 90 days following the date of substantial completion.

 

NO OTHER CONDITIONS ARE NEITHER EXPRESSED NOR IMPLIED OTHER THAN THOSE STATED
ABOVE.

 

IN WITNESS WHEREOF, OWNER and DESIGN BUILDER have signed this Agreement in
duplicate.  One counterpart each has been delivered to OWNER and DESIGN BUILDER.
All portions of the Contract Documents have been signed, Initialed or Identified
by OWNER and DESIGN BUILDER.

 

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This Owner — Design Builder Agreement will be effective on the day and year
first written above.

 

 

OWNER: Northern Lights Ethanol, LLC

 

 

DESIGN BUILDER: Broin and Associates, Inc.

 

 

 

 

 

 

BY:

/s/ Delton Strasser

 

 

BY:

/s/ Mark Melander

 

Name:

Delton Strasser

 

 

Name:

Mark D. Melander

 

Title:

Chairman of the Board

 

 

Title:

COO

 

 

 

[CORPORATE SEAL]

 

[CORPORATE SEAL]

 

 

 

 

 

 

Attest:

 

 

Attest:

 

 

 

Address for giving notice:

 

Address for giving notices:

 

 

 

 

 

 

 

 

Northern Lights Ethanol

 

 

Broin and Associates, Inc.

 

48416 144th Street

 

 

2209 East 57th Street North

 

Big Stone City, SD 57216

 

 

Sioux Falls, SD 57104

 

 

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Exhibit 1

40 to 75 MMgpy Expansion

 

Equipment Required:

 

1]            Additional distillation and molecular sieve capacity

 

2]            Additional evaporation capacity

 

3]            Additional syrup tank

 

4]            Additional four fermenters

 

5]            Additional fermentation scrubber

 

6]            Additional cooling tower

 

7]             Additional air compressor and air dryer

 

8]            Additional DDG dryer

 

9]            Additional centrifuge capacity

 

10]           Additional RTO

 

11]          Additional 430K bushel corn bin

 

12]          Additional DOG Silo

 

13]           Roskamp hammermills

 

14]          Additional scale

 

15]          Expansion of reclaim RO/filter system

 

16]          Sulfuric acid tank & containment

 

17]          Additional 4160 V electrical service

 

29

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Exhibit 2

 

NLE-E1 SCHEDULE OF CONTRACT VALUES AND PROJECT ESTIMATE

 

100 SITE

 

$

310,000

 

 

 

 

 

200 BUILDINGS, STRUCTURES, CONCRETE AND MILLWRIGHT

 

$

5,175,000

 

 

 

 

 

300 MECHANICAL

 

$

5,780,000

 

 

 

 

 

400 PROCESS SYSTEMS

 

$

13,200,000

 

 

 

 

 

500 ELECTRICAL

 

$

3,100,000

 

 

 

 

 

600 INSTRUMENTATION

 

$

702,000

 

 

 

 

 

700 GRAIN SYSTEMS

 

$

1,675,000

 

 

 

 

 

800 GENERAL CONSTRUCTION, TAX, FREIGHT, COATINGS, MISC,

 

$

2,107,326

 

 

 

 

 

900 OTHER PROJECT EQUIPMENT COSTS (ALLOWANCES)

 

$

100,000

 

 

 

 

 

1000 DESIGN, ENGINEERING, MANAGEMENT. MISC. LABOR, ETC.

 

$

6,113,603

 

 

 

 

 

TOTAL CONTRACT COST

 

$

30,262,929

 

 

SCHEDULE OF CONTRACT VALUES

 

 

100 SITE WORK

 

$

310,000

 

 

 

 

 

200 BUILDINGS

 

$

5,175,000

 

 

 

 

 

300 MECHANICAL

 

$

5,780,000

 

 

 

 

 

400 PROCESS SYSTEMS

 

$

13,200,000

 

 

 

 

 

500 ELECTRICAL

 

$

3,100,000

 

 

 

 

 

600 INSTRUMENTATION

 

$

702,000

 

 

 

 

 

700 GRAIN SYSTEMS

 

$

1,675,000

 

 

 

 

 

800 GENERAL CONSTRUCTION, TAX, FREIGHT, COATINGS, M

 

$

2,107,326

 

 

 

 

 

900 OTHER PROJECT EQUIPMENT, COSTS

 

$

100,000

 

 

 

 

 

1000 DESIGN, ENGINEERING, MANAGEMENT, MISC. LABOR, E1

 

$

6,113,603

 

 

 

 

 

TOTAL CONTRACT COST

 

 

$

38,262,929

 

 

30

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Exhibit 3

 

NOTICE TO PROCEED

 

Dated: October 25, 2005

 

TO:

 

Broin and Associates

 

 

 

ADDRESS:

 

2209 East 57th Street North

 

 

 

 

 

Sioux Falls, SD 57104

 

 

 

Contract:

 

Agreement Between Owner and Design Builder

 

 

 

Project:

 

To perform and furnish design, engineering, and Construction services to expand
the existing Northern Lights Ethanol facility to a 75 million gallon per year
nameplate dry mill fuel ethanol processing plant. The project is located at
48416 144th St. Big Stone City, South Dakota 57216.

 

You are notified that the Contract times under the above contract will commence
to run on November 1, 2005.  By that date, you are to start performing your
obligations under the contract Documents.  In accordance with Article 14 of the
Agreement the date of Substantial Completion is 20 months following the start of
concrete work.

 

Before you may start any Work, you must deliver to the Owner (with copies to
other identified additional insureds) certificates of insurance which you are
required to purchase and maintain in accordance with the Contract Documents.

 

Also, before you may start any Work at the Site, you must

 

 

 

 

 

Northern Lights Ethanol, LLC

 

 

(Owner)

 

 

 

 

 

By:

/s/ Del Strasser

 

 

(Authorized Signature)

 

 

 

Chairman of the Board

 

 

(Title)

 

31

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Exhibit 4

 

PROCESS GUARANTEE

 

The following Process Guarantee is provided by Broin and Associates, Inc. in
relation to the Northern Lights Ethanol, LLC ethanol plant expansion project
located at 48416 144th St, Big Stone City, South Dakota 57216 (The Project).

 

Broin and Associates guarantees the following:

 

1.      Project Performance Specification

 

The Project is guaranteed to produce an average of 8929 gallons per hour of fuel
grade (Williams Pipeline Standard) ethanol including the contained denaturant
(gasoline).  The Project is guaranteed to have the ability to evaporate all
necessary thin stillage and dry all distillers’ grains produced at 100%
guaranteed capacity.  The plant is guaranteed to yield at least 2.7 gallons of
ethanol (denatured) per 56 lb. bushel of corn (test weight 54 pounds or
greater).

 

2.      Testing Period

 

The project is guaranteed to reach performance specifications for a period of
seven (7) days before the Design/Builder will leave the site. The testing period
will be completed with the Owners personnel and raw materials.

 

3.      Remedies

 

If the Project does not meet the above guarantees during the timeframe described
in the Owners Agreement, Broin and Associates, Inc. will perform the following
at their expense; 1) use Broth and Associates, Inc.’s best effort to correct any
problem, 2) repair or replace any failing component(s) or system(s) and 3)
obtain any additional resources needed to satisfy guarantees.

 

This document contains the entire Process Guarantee provided by Broth and
Associates, Inc. No oral statements, representations or prior written matter not
contained in this document shall have any effect regarding Process Guarantee.

 

BROIN AND ASSOCIATES, INC.

NORTHERN LIGHTS, LLC

 

 

 

 

Name

/s/ Mark D. Melander

 

Name:

/s/ Delton Strasser

 

 

 

Title

COO

 

Title:

Chairman of the Board

 

 

32

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