Exhibit 10.3
CONSTRUCTION AGREEMENT
THIS CONSTRUCTION AGREEMENT (the “Agreement”) is made and entered in to on the
10th day of May, 2010 by and between Cardinal Ethanol, LLC, an Indiana limited
liability company (“Owner”) and LAH Development, LLC, an Ohio limited liability
company (“Contractor”).
WHEREAS, Owner is constructing a bushel bin storage system, as outlined in
project specifications dated April 14, 2010 (the “Specifications”) (the “Bin”);
and
WHEREAS, Owner wishes to engage Contractor and Contractor wishes to accept such
engagement to provide materials and construction services as provided for in
this Agreement.
NOW THEREFORE, in consideration of the mutual promises contained herein and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged. The parties hereby agree as follows:
1. Scope of Work. Contractor agrees to provide all of the material and labor
required to construct the Bin, including but not limited to all electrical work.
2. Date of Commencement and Completion. Commencement of construction of the Bin
shall begin on June 1, 2010 and construction of the Bin shall, be completed no
later than October 1, 2010. The “Completion of Construction” shall mean
Contractor’s completion of construction of the Bin in accordance with the
Specifications and Owner’s acceptance thereof.
3. Contract Sum. The Owner shall pay to the Contractor one million seven hundred
forty-six thousand dollars ($1,746,000.00) (the “Contract Sum”) for the
Contractor’s construction of the Bin in accordance with the terms of this
Agreement. The Contract Sum shall be equitably adjusted in accordance with any
Change Orders that are required; however, such Change Orders shall be effective
only upon prior written agreement by the Owner and Contractor.
4. Payments. The Contract Sum shall be payable as follows:

  a.  
Twenty-five percent (25%) of the Contract Sum or four hundred thirty-six
thousand five hundred dollars ($436,500.00) shall be due upon execution of this
Agreement.

  b.  
Contractor shall provide an invoice to Owner not later than the Thirtieth (30)
day of each month. The invoice shall indicate the percentage of completion of
the construction of the Bin as of the end of the period covered by the invoice.
Owner shall have fifteen (15) business days to pay the percentage of the
Contract Sum equal to the percentage of completion of construction of the Bin
since the previous invoice.

  c.  
The entire Contract Sum shall be paid in full no later than thirty (30) days
after the Completion of Construction.

 

 

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  d.  
The Owner may adjust or reject an invoice or nullify a previously approved
invoice, in whole or in part, as may reasonably be necessary to protect the
Owner from loss or damage based upon the following:

  i.  
Contractor’s failure to construct the Bin as required by this Agreement and the
Specifications;

  ii.  
loss or damage arising out of or relating to this Agreement and caused by the
Contractor to the Owner, or others to whom the Owner may be liable;

  iii.  
the Contractor’s failure to pay the Architect/Engineer or Subcontractors for
labor, materials, equipment or supplies properly furnished in connection with
the construction of the Bin, provided that the Owner is making payments to the
Contractor in accordance with the terms of this Agreement;

  iv.  
defective work not corrected in a timely fashion; and

  v.  
reasonable evidence demonstrating that the unpaid balance of the Contract Sum is
insufficient to fund the cost to complete the construction of the Bin.

When the above reasons for disapproving or nullifying an invoice are removed,
payment will be made for the amounts previously withheld.
5. Construction. Contractor agrees to provide and pay for all necessary
construction supervision, inspection, construction equipment, construction
labor, materials, tools and subcontracted items for the construction of the Bin.
6. Liquidated Damages for Delay in Completion. Without prejudice to any other
right or remedy, if the Completion of Construction does not occur on or before
October 1, 2010, Contractor shall pay liquidated damages (the “Liquidated
Damages”) to the Owner as follows:

  a.  
If the Completion of Construction does not take place on or before October 1,
2010, Contractor shall pay to the Owner five thousand dollars ($5,000).

  b.  
If the Completion of Construction does not take place on or before October 8,
2010, Contractor shall pay to the Owner ten thousand dollars ($10,000).

  c.  
If the Completion of Construction does not take place on or before October 15,
2010, Contractor shall pay to the Owner fifteen thousand dollars ($15,000).

  d.  
If the Completion of Construction does not take place on or before October 22,
2010, Contractor shall pay to the Owner twenty-five thousand dollars ($25,000).

 

 

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  e.  
If the Completion of Construction does not take place on or before October 29,
2010, Contractor shall pay to the Owner forty thousand dollars ($40,000).

  f.  
If the Completion of Construction does not take place on or before November 5,
2010, Contractor shall pay to the Owner fifty-five thousand dollars ($55,000).

  g.  
If the Completion of Construction does not take place on or before November 12,
2010, Contractor shall pay to the Owner sixty thousand dollars ($60,000).

  h.  
If the Completion of Construction is after November 12, 2010, Contractor shall
pay to the Owner seventy-five thousand dollars ($75,000).

The Liquidated Damages, if any, shall be due and payable within fifteen
(15) business days following the Completion of Construction.
7. Access by Owner and Public Authorities. Owner, Owner’s representatives and
public authorities shall at all times have access to the site where the Bin is
being constructed.
8. Warranty. Contractor shall provide all required notices and shall at all
times comply with the requirements of all applicable laws, rules or regulations.
Contractor agrees to promptly re-execute any construction of the Bin which the
Owner determines does not comply with the Specifications, without any additional
charge to Owner. Contractor warrants the construction of the Bin and agrees to
promptly remedy any defects resulting from faulty materials or workmanship which
shall become evident during a period of one (1) year after the completion of the
construction of the Bin without any additional charge to Owner. This Section 8
regarding warranties of the Contractor shall survive the termination of this
Agreement.
9. Delays in Work Beyond Contractor’s Control. In the event Contractor is
delayed in the construction of the Bin by acts of God, fire, flood or any other
unavoidable casualties; or by labor strikes, late delivery of materials; or by
neglect of Owner; the time for completion of the construction of the Bin shall
be extended for the same period as the delay occasioned by any of the
aforementioned causes.
10. Clean-Up. The Contractor shall keep the premises and area surrounding the
Bin free from accumulation of waste materials or rubbish caused by operations
under this Agreement. Upon completion of the construction of the Bin, the
Contractor shall remove all waste materials, rubbish, the Contractor’s tools,
construction equipment machinery and surplus materials.
11. Safety. The Contractor shall be responsible for initiating, maintaining, and
supervising all safety precautions and programs in connection with the
performance of this Agreement and the construction of the Bin as provided for
herein.

 

 

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12. Termination or Suspension of the Agreement.

  a.  
Suspension by the Owner for Convenience.

  i.  
The Owner may order the Contractor, in writing, to suspend, delay or interrupt
all or any part of the construction of the Bin without cause for such period of
time as the Owner may determine to be appropriate for its convenience.

  ii.  
Adjustments caused by suspension, delay or interruption shall be made for
increases in the Contract Sum and/or the date of completion. No adjustment shall
be made if the Contractor is or otherwise would have been responsible for the
suspension, delay or interruption of the construction of the Bin, or if another
provision of this Agreement is applied to render an equitable adjustment.

  b.  
Owner’s Right to Perform Contractor’s Obligations and Termination by the Owner
for Cause.

  i.  
If the Contractor persistently fails to perform any of its obligations under
this Agreement, the Owner may, after five (5) days’ written notice, during which
period the Contractor fails to perform such obligation, undertake to perform
such obligations. The Contract Sum shall be reduced by the cost to the Owner of
performing such obligations.

  ii.  
Upon five (5) days’ written notice to the Contractor and the Contractor’s
surety, if any, the Owner may terminate this Agreement for any of the following
reasons:

  1.  
if the Contractor utilizes improper materials and/or inadequately skilled
workers;

  2.  
if the Contractor does not make proper payment to laborers, material suppliers
or contractors provided that the Owner is making payments to the Contractor in
accordance with the terms of this Agreement;

  3.  
if the Contractor fails to abide by the orders, regulations, rules, ordinances
or laws of governmental authorities having jurisdiction; or

  4.  
if the Contractor otherwise materially breaches this Agreement.

  iii.  
If the Contractor fails to cure or commence and continue to cure within the five
(5) days, the Owner, without prejudice to any other right or remedy, may take
possession of the worksite and complete the construction of the Bin utilizing
any reasonable means. In this event, the Contractor shall not have a right to
further payment until the Completion of Construction.

 

 

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  iv.  
If the Contractor files a petition under the Bankruptcy Code, this Agreement
shall terminate if the Contractor or the Contractor’s trustee rejects the
Agreement or, if there has been a default, the Contractor is unable to give
adequate assurance that the Contractor will perform as required by this
Agreement or otherwise is unable to comply with the requirements for assuming
this Agreement under the applicable provisions of the Bankruptcy Code.

  c.  
Termination by Owner Without Cause. If the Owner terminates this Agreement other
than as set forth in Section 12(b) herein, the Owner shall pay the Contractor
for all completed construction work on the Bin and for all proven loss, cost or
expense in connection with the construction of the Bin and the Contractor shall
have no other remedy, including but not limited to incidental or consequential
damages, against the Owner.

13. Insurance. Contractor agrees to obtain and maintain insurance coverage to
protect itself against claims for workers’ compensation, unemployment, property
damage, bodily injury or death due to its performance of this Agreement.
Contractor shall purchase and maintain commercial general liability insurance
with combined single limits of not less than one million dollars ($1,000,000)
which shall be endorsed to require at least thirty (30) days notice to Owner
prior to the effective date of any termination or cancellation of coverage.
Contractor shall provide a certificate of insurance to Owner to establish the
coverage maintained before commencement of the construction of the Bin. Also,
during the term of this Agreement, Contractor shall purchase and maintain
comprehensive automobile liability insurance, with combined single limits of not
less than one million dollars ($1,000,000), which shall be endorsed to require
at least thirty (30) days notice to Owner prior to the effective date of any
termination or cancellation of coverage. Contractor shall provide a certificate
of insurance to Owner to establish coverage maintained before the commencement
of the construction of the Bin.
14. Indemnity. To the fullest extent permitted by law, the Contractor shall
defend, indemnify and hold harmless the Owner, Owner’s officers, directors,
members, consultants, agents and employees from all claims for bodily injury and
property damage that may arise from the performance of this Agreement. The
Contractor shall not be required to defend, indemnify or hold harmless the
Owner, the Owner’s officers, directors, members, consultants, agents and
employees for any acts, omissions or negligence of the Owner, Owner’s officers,
directors, members, consultants, employees, agents or separate contractors. This
Section 14 regarding indemnity shall survive the termination of this Agreement.
15. Attorney’s Fees. In any action or proceeding brought to enforce or otherwise
arising out of or relating to this Agreement, the prevailing party will be
entitled to have its attorney’s fees paid by the non-prevailing party.
16. Time of the Essence. Time is of the essence in completion of this Agreement
and construction of the Bin as provided for herein.

 

 

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17. Miscellaneous. This Agreement, together with any exhibits and attachments
hereto and any documents incorporated herein, constitutes the entire
understanding between the parties concerning the subject matter hereof No prior
or contemporaneous representations, inducements, promises or agreements not
contained herein are of any force or effect. This Agreement shall be governed by
and construed in accordance with Indiana law, and shall not be modified except
in a writing signed by all parties. This Agreement is binding upon the parties
and their heirs, representatives, agents, successors and permitted assigns.
Neither this Agreement nor any parties’ rights, duties, responsibilities or
obligations shall be assigned by either party, in whole or in part, without the
prior written consent of the other party hereto. If any provision herein is held
to be invalid, unenforceable, or contrary to public policy, in whole or in part,
the remaining provisions shall not be affected. No omission or delay by either
party in enforcing any right or remedy or in requiring any performance hereunder
shall constitute a waiver of any such right, remedy or required performance, nor
shall it affect the right of either party to enforce such provision thereafter.
The remedies set forth herein are cumulative and in addition to all other
remedies available hereunder, at law and in equity. The headings contained
herein are for convenience only and shall not be considered in interpreting or
construing this Agreement. All covenants, warranties, representations and
indemnification obligations set forth in this Agreement shall survive the
termination or expiration hereof This Agreement may be executed in counterparts,
and facsimile signatures shall be binding upon the parties.
[Signature Page to Follow]

 

 

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IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the day
and year first above written.

                      Cardinal Ethanol, LLC       LAH Development, LLC    
 
                   
By:
  /s/ Jeffrey L. Painter
 
Its: CEO/President       By:   /s/ Sy Hart
 
Its:
 
   
 
  5/11/2010                

 

 

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Cardinal Ethanol, LLC
Grain Bin Project Specifications
April 2, 2010
General Specifications:
Design and Engineering

  •  
Nu Way to supply design drawings
    •  
Finish design will be approved by owner (Cardinal Ethanol, LLC) prior to start
of project

Excavation and Concrete

  •  
Excavate for bin footer and walls (dirt left on property)
    •  
13′ x 2′5″ footer
    •  
10′ high x 18″ wide exterior wall
    •  
8′ x 8′ access tunnel
    •  
Quad “F” aeration floor
    •  
Stone and compaction
    •  
Required concrete and rebar

105′ x 34 Ring System

  •  
90′ — 10″ Eave height; 119′ — 10″ peak height
    •  
730,245 bushel capacity
    •  
25,000 LB. peak load roof
    •  
2 ring commercial walk in door
    •  
Inside and outside ladder system
    •  
Roof stairs
    •  
10′ peak walk around
    •  
16′ center discharge with electric gate
    •  
(10) 12″ intermediate manual gates
    •  
1/10 CFM/BU Quad “F” aeration monorail flush floor system
    •  
(4) 30 hp. 3 ph 230/460 V centrifugal fans
    •  
(45) grill vents
    •  
(10) 24″ exhausters, 2 hp, 3 ph explosion proof fans
    •  
(24) temperature cable supports
    •  
10K BPH series 2 bin sweep (Zero Entry, One Pass sweep)

 

 

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Top Fill System

  •  
6′ wide x 125′ handrail truss catwalk w24″ grip strut walkway on one side

  •  
(1) 4 legged support tower

  •  
(1) 2 legged support tower tied to bin

  •  
Support structure at bin top

  •  
40,000 BPH GSI En-Masse conveyor

  •  
(2) 50 hp, 3 ph TEFC Motors

  •  
Duel TA9415 Dodge Reducers

  •  
3/16″ AR Bolt on bottom

  •  
10 ga. AR side liner

  •  
Lined head discharge

  •  
Slack chain detection with limit switch

  •  
End relief door with limit switch

  •  
Transition from new conveyor to new bin

  •  
Agri dry spreader system as per request

Unloading System

  •  
10,000 BPH GSI En-Masse Conveyor

  •  
30hp, 3 ph TEFC motor
    •  
3/16″ AR bolt on bottom
    •  
10 ga. AR side liner
    •  
Lined head discharge
    •  
Slack chain detection with limit switch
    •  
End relief door with limit switch

  •  
(11) Inlet transitions
    •  
Lined transition from new conveyor to the existing conveyor

Wireless Temperature Detection System

  •  
(24) Detection cables with hardware
    •  
PCI interface with software
    •  
Control wire
    •  
Remote Multiplexer
    •  
Point to point wireless radio
    •  
Thermocouple lead wires
    •  
Operation Manual

 

 

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Notes:
All new steel will be primed painted
Job site will be maintained in a clean and professional manner at all times
All OSHA safety rules will be met or exceeded

         
PROJECT COST
  $ 1,490,000  

Option:

  •  
40,000 GSI Enclosed Belt conveyor

  •  
90 ft. c/c
    •  
40 hp drive system
    •  
5 deg. Incline
    •  
1/2″ UHMW bottom liner
    •  
Plug switch
    •  
Shaft monitor

         
DEDUCT
  $ 30,000  

 

 

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Cardinal Ethanol, LLC
Grain Bin Project Specifications
April 14, 2010
Revisions to Grain 3 in quote of April 2, 2010:

  •  
Extending the existing bottom unload drag
    •  
Revising the tunnel height to 6′ — 6″

  •  
Extending existing top fill drag with new platform (10′ long with 12′x12′
platform) Support system from new tower and ladder access to new top catwalk

  •  
Two (2) 4 legged support towers

  •  
Price increases of equipment.

  •  
Motion detection equipment, rub sensors and other applicable safety equipment as
required

  •  
Bin Bob level indicator and high level indicator included in pricing.

         
Revised Price
  $ 1,561,000  

Electrical

  •  
Furnish all material, equipment, labor, evaluation/study, etc. that is necessary
to complete the project.

         
Electrical Cost
  $ 185,000  

         
Total revised complete project cost
  $ 1,746,000