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





















 


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





















 


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





















 


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





















 


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





















 


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





















 


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





















 


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





















 


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.


 


22





















 


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





















 


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 


 


24





















 


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


 


25





















 


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.


 


26





















 


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.


 


27





















 


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

  	
   

  
										



 


28





















 


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





















 


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





















 


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





















 


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