Document:

exv10w21

 

Exhibit 10.21

	 	 	 	 	 	 	 
	

 

         May 17, 2007

	 	 
	 	CONSULTANTS

•     GEOTECHNICAL

•     MATERIALS

•     ENVIRONMENTAL
	 	

MinnErgy, LLC — Renewable fuels PO Box 186

Winona, MN 55987

Attn: Dan Arnold/Ron Scherbring

	 	 	 
	RE:

	 	Proposal for Additional Geotechnical Services

Proposed Ethanol Plant

Eyota, MN

AET#11-04152

Dear Mr. Arnold / Mr. Scherbring,

Introduction

American Engineering Testing, Inc. is pleased to offer you additional subsurface exploration and
geotechnical review services for your Proposed Ethanol Plant in Eyota, MN. This proposal is being
submitted per our telephone conversation of May 16, 2007. This letter is intended to define our
scope of work, and to present you with an estimate of our fee, the anticipated schedule and other
information regarding our services.

Purpose of Study

The purpose of this geotechnical work is to explore the subsurface conditions at the site based
upon the proposed new plant site layout, and based on our characterization of the obtained data,
to prepare a geotechnical engineering report presenting comments and recommendations to assist
you and your design team in planning and construction of the project.

Project Information

We understand you have redesigned the proposed corn ethanol production plant in Eyota, MN and
require additional subsurface exploration and geotechnical review services.

The new plant will include the construction of grain storage tanks, exterior process tanks,
fermentation tanks, a process building, evaporation, distillation equipment, a rail road spur,
parking and drive areas. We anticipate soil bearing pressure for these structures supported on
shallow frost depth spread footings are on the order of 1(ksf) to 6 (ksf). Based upon the
topographic information provided, it appears the site generally slopes downward from the south
approximately elevation 1290’ towards the north to approximately elevation 1275’. The proposed
plan finished floor elevation will be 1287.0’

Background Information

Base upon our previous subsurface exploration work performed at the site, AET anticipates a
general soil profiled of lean clay topsoil, underlain by variable clayey, sandy alluvium and till
deposits with weathered bedrock deposits at depth. It appears the bedrock at the site is Galena
group formation, possibly Prosser Limestone.

 

 

Scope of Services

     Field Work

Our proposed scope of field work includes advancing thirty-one (31) (SB) soil borings at the site,
as indicated on the attached site sketches. Based upon our previous boring information we estimate
our borings will be between 5’ to 25’ deep.

The test borings will be sampled with a split-spoon sampler utilizing standard penetration test
methods per ASTM:D1586. Our services will include arranging clearance of underground public
utilities through the Gopher State One Call System.

We assume that the proposed boring locations will be staked in the field by the project surveyor
and will be accessible to our truck mounted equipment which will likely require clearing portions
of the southern 1/4 of the site for access to our proposed boring locations.

     Soil Laboratory Testing

Our services will include mechanical laboratory testing of selected soil samples to aid in judging
engineering properties of the soils. In this proposal we have budgeted $500.00 for geotechnical
laboratory testing. If conditions are encountered which indicate the laboratory program should be
expanded for proper evaluation, we will review the recommended tests and associated cost with you
prior to proceeding.

     Engineering Report 

Following the field and laboratory work, a formal engineering report will be prepared and
submitted. This report will include logs of the test borings, the laboratory test results, a
review of engineering properties of the on-site soils, and our geotechnical engineering opinions
and recommendations regarding the following:

	•	 	Grading procedures to prepare the building areas for structural support, including comments on the suitability of the
on-site soils for reuse as fill
	 
	•	 	Foundation types and depths, including allowable soil bearing capacity and estimates of foundation settlement
	 
	•	 	Ground floor slab support, including recommendations on the need for a vapor or capillary water barrier
	 
	•	 	Backfilling procedures with drain tile recommendations and estimates of lateral earth pressures
	 
	•	 	Preparation of the subgrade for pavements and rail road spurs
	 
	•	 	Pavement section thickness designs
	 
	•	 	Comments on other items which may affect final performance or constructability, such as frost heave and drainage
considerations

The scope of work defined in this proposal is intended for geostructural purposes only. This scope
is not intended to explore for the presence or extent of environmental contamination at the site.
However, we will note obvious contamination encountered which can be detected by human sight or
smell sensing.

 

 

Fees

The scope of work defined in this proposal will be performed on a time and materials basis
according to our current schedule of fees. A short form copy of this schedule is attached. For the
scope of work described, we estimate a cost in the range of $11,000.00 to $15,000.00. 

In the event the scope of our work needs to be revised due to unanticipated conditions or for
proper evaluation, we will review such adjustments and the associated fees with you; and receive
your approval before proceeding.

Schedule

Weather permitting, we anticipate drilling operations can begin within about one (1) to two (2)
weeks after receiving authorization to proceed. Verbal results of the drilling activities can be
obtained shortly after completion of the drilling. We anticipate the geotechnical report can be
prepared within about one (1) to two (2) weeks after completion of the field work. We are available
to review special schedule needs with you.

Terms

Our services will be performed per the attached “Service Agreement,” along with the “Subsurface
Boring Supplement.” Client and its authorized representatives agree that verbal authorization of
our services is formal acceptance of the terms and conditions contained herein.

Acceptance

Please indicate your acceptance of this proposal by endorsing the enclosed copy and returning it to
us. The original proposal is intended for your records.

Remarks

This proposal is valid for a period of 90 days.

We appreciate the opportunity to submit this proposal to you and look forward to working with you
on this project. If you have any questions regarding our services, or need additional information,
please do not hesitate to contact me.

Sincerely,

American Engineering Testing, Inc.

/s/ Alec J. Hovick

 

Alec J. Hovick

Manager — Rochester

Phone: (507) 281-3547

Fax: (507) 281-4941

AJH:acl

Attachments

ACCEPTANCE:

 

 

	 	 	 	 	 
	Client:	Minnergy
 	 	 
	 
	Authorized	
 	 	 
	Signature:	 /s/ Daniel H. Arnold
 	 	 
	 
	Typed
	
 	 	 
	Name:
	Daniel H. Arnold
 	 	 
	 
	Title:
	Chairman 	 	 
	 
	Date:
	5-23-07 	  	
 

 

 

	 	 	 	 	 

SERVICE AGREEMENT — TERMS AND CONDITIONS

SECTION 1 — RESPONSIBILITIES

1.1 — The party to whom the proposal/contract is addressed is considered the Client of
American Engineering Testing, Inc. (AET). The terms and conditions state are binding, upon
acceptance, on the Client, its successors, assignees, joint ventures and third party beneficiaries.
Oral proposal acceptance or authorizing purchase orders from the Client are considered formal
acceptance of AET’s terms and conditions.

1.2 Prior to AET performing work, Client will provide AET with all information that may
affect the cost, progress, safety and performance of the work. This includes, but is not limited
to, information on proposed and existing construction, all pertinent sections of contracts between
Client and property owner, site safety plans or other documents which may control or affect AET’s
work. If new information becomes available during AET’s work, Client will provide such information
to AET in a timely manner. Also, Client will provide a representative for timely answers to
project-related questions by AET.

1.3 Work by AET will not relieve other persons of their responsibility to perform work
according to the contract documents or specifications, and AET will not be held responsible for
work or omissions by Client and other persons. AET will not be responsible for directing or
supervising the work of others, unless specifically authorized and agreed to in writing.

1.4 Work by AET often includes sampling at specific locations. Inherent with such sampling
is variation of conditions between sampling locations. Client recognizes this uncertainty and the
associated risk, and acknowledges that opinions developed by AET, based on the samples, are
qualified to that extent.

1.5 AET is not responsible for interpretations or modifications of AET’s recommendations by
other persons.

1.6 Should changed conditions be alleged, Client agrees to notify AET before evidence of
alleged change is no longer accessible for evaluation.

SECTION 2 — SITE ACCESS AND RESTORATION

2.1 — Client will furnish AET safe and legal site access.

2.2 — It is understood by Client that in the normal course of the work, some damage to the
site or materials may occur. AET will take reasonable precautions to minimize such damage.
Restoration of the site is the responsibility of the Client.

SECTION 3 — SAFETY

3.1 — Client shall inform AET of any known or suspected hazardous materials or unsafe
conditions at the work site. If, during the course of AET’s work, such materials or conditions are
discovered, AET reserves the right to take measures to protect AET personnel and equipment or to
immediately terminate services. Client shall be responsible for payment of such additional
protection costs.

3.2 — AET shall only be responsible for safety of AET employees at the work site. The
Client or other persons shall be responsible for the safety of all other persons at the site.

SECTION 4 — SAMPLES

4.1 — Client is responsible for information AET of any known or suspected hazardous
materials prior to submittal to AET. All samples obtained by, or submitted to, AET remain the
property of the Client during and after the work. Any known or suspected hazardous material
samples will be returned to the Client at AET’s discretion.

4.2 — Non-hazardous samples will be held for 30 days and then discarded unless, within 30
days’ of the report date, the Client provides a written request that AET store or ship the samples,
at the Client’s expense.

SECTION 5 — PROJECT RECORDS

The original project records prepared by AET will remain the property of AET. AET shall retain
these original records for a period of three years following submission of the report, during which
period the project records can be made available to Client at AET’s office at reasonable times.

SECTION 6 — STANDARD OF CARE

AET will perform services consistent with the level of care and skill normally performed by other
firms in the profession at the time of this service and in this geographic area, under similar
budgetary constraints. No other warranty is implied or intended.

SECTION 7 — INSURANCE

AET carries Worker’s Compensation, Comprehensive General Liability, Automobile Liability and
Professional Liability insurance. AET will furnish certificates of insurance to Client upon
request.

 

 

2007 GEOTECHNICAL/ENVIRONMENTAL FEE SCHEDULE 

	 	 	 	 	 	 	 	 	 	 	 
	I.	 	Engineering/Technical Personnel Rates	 	 
	 	 	A.	 	Work Processing Specialist	 	53.00/hr
	 	 	B.	 	Draftperson	 	65.00/hr
	 	 	C.	 	Senior Engineering Technician	 	69.00/hr
	 	 	D.	 	Drill Technician	 	78.00/hr
	 	 	E.	 	Environmental Technician	 	83.00/hr
	 	 	F.	 	Engineering Assistant	 	93.00/hr
	 	 	G.	 	Engineer I/Geologist I	 	99.00/hr
	 	 	H.	 	Engineer II/Geologist II	 	114.00/hr
	 	 	I.	 	Senior Engineer/Geologist	 	126.00/hr
	 	 	J.	 	Principal Engineer/Geologist	 	151.00/hr
	 
	 	 	 	 	 	 	 	 	 	 
	II.	 	Vehicle Mileage	 	 
	 	 	A.	 	Personal Automobile/Truck	 	0.60/mile
	 	 	B.	 	Auxiliary Truck	 	0.80/mile
	 	 	C.	 	1-ton Truck with Drill Rig	 	0.95/mile
	 	 	D.	 	1 1⁄2-ton to 2 1⁄2-ton Truck with Drill Rig	 	1.15/mile
	 	 	E.	 	CPT Truck Rig (20-ton push capacity)	 	1.30/mile
	 	 	F.	 	Tractor/Lowboy Trailer	 	1.50/mile
	 
	 	 	 	 	 	 	 	 	 	 
	III.	 	Site Exploration Equipment Rental	 	 
	 	 	A.	 	Drill Rig Rental	 	 
	 	 	 	 	1.	 	Rotary Drill on 1-ton Truck	 	57.00/hr
	 	 	 	 	2.	 	Rotary Drill on 1 1⁄2 to 2 1⁄2 ton Truck	 	67.00/hr
	 	 	 	 	3.	 	Rotary Drill on All-Terrain Vehicle	 	97.00/hr
	 	 	 	 	4.	 	Portable, Non-rotary Rig	 	67.00/hr
	 	 	B.	 	Auxiliary Vehicle Rental	 	14.50/hr
	 	 	C.	 	Cone (CPT) Rig/Equipment Rental	 	 
	 	 	 	 	1.	 	CPT Truck Rig (20-ton push capacity)	 	120.00/hr
	 	 	 	 	2.	 	All-Terrain Rig (10-ton push capacity)	 	97.00/hr
	 	 	 	 	3.	 	Electronic Cone w/Computer	 	35.00/hr
	 	 	 	 	4.	 	Soil Sampler	 	3.00/hr
	 	 	 	 	5.	 	Water Sampler	 	20.00/hr
	 	 	D.	 	Geotechnical Equipment Rental	 	 
	 	 	 	 	1.	 	Field Vane Shear	 	280.00/day
	 	 	 	 	2.	 	Inclinometer Reading Equipment	 	290.00/day
	 	 	 	 	3.	 	Pneumatic Transducer Reading

Equipment (pore pressure, settlement

Or earth pressure)	 	145.00/day
	 	 	 	 	4.	 	Bore Hole Permeability	 	 
	 	 	 	 	 	 	a.     Open End Casing MEthold	 	105.00/day
	 	 	 	 	 	 	b.     HQ Wireline Packer	 	280.00/hr
	 	 	 	 	5.	 	Borehole Pressuremeter	 	48.00/hr
	 	 	 	 	6.	 	Dougle Ring Infiltrometer	 	225.00/day
	 	 	 	 	7.	 	Pile Driving Analyzer (PDA)	 	650.00/day
	 	 	 	 	8.	 	Auxiliary PDA Equipment	 	 
	 	 	 	 	 	 	a.     Generator	 	39.00/day
	 	 	 	 	 	 	b.     Calibrated SPT Rod	 	165.00/day
	 	 	E.	 	Bit Wear	 	 
	 	 	 	 	1.	 	Diamond Bit — Sedimentary Rock	 	 
	 	 	 	 	 	 	a.     B, NQ 	 	10.00/foot 
	 	 	 	 	 	 	b.     HQ 	 	12.00/foot 
	 	 	 	 	2.	 	Diamond Bit — Metamorphic & Igneous	 	 
	 	 	 	 	 	 	a.     B, NQ	 	17.00/foot

 

 

	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	b.     HQ	 	20.00/foot
	 
	 	 	 	 	 	 	 	 	 	 
	IV.	 	Laboratory Tests of Soil	 	 
	 	 	A.	 	Water Content	 	13.00/test
	 	 	B.	 	Dry Density (includes water content)	 	48.00/test
	 	 	C.	 	Atterberg Limits (ASTM:D4318)	 	 
	 	 	 	 	1.	 	Plasticity Index	 	100.00/test
	 	 	 	 	2.	 	Liquid Limit or Plastic Limit Separately	 	75.00/test
	 	 	D.	 	Shrinkage Limit (ASTM:D427)	 	95.00/test
	 	 	E.	 	Sieve Analysis (includes -#200)	 	85.00/test
	 	 	F.	 	Hydrometer Analysis (sieve included)	 	225.00/test
	 	 	G.	 	Specific Gravity (ASTM:D854)	 	 
	 	 	 	 	1.	 	Mineral Soil	 	115.00/test
	 	 	 	 	2.	 	Organic Soil	 	130.00/test
	 	 	H.	 	Hand Penetrometer/Trovane	 	10.00/test
	 	 	I.	 	Unconfined Compression	 	72.00/test
	 	 	J.	 	Permeability Test	 	 
	 	 	 	 	1.	 	Clay Permeability	 	222.00/test
	 	 	 	 	2.	 	Remolded Clay Permeability	 	322.00/test
	 	 	 	 	3.	 	Sand Permeasbility	 	192.00/test
	 	 	K.	 	Electric Resistivity	 	77.00/test
	 	 	L.	 	Organic Content of Soil	 	70.00/test
	 	 	M.	 	Topsoil Borrow Test (Mn/DOT 3877)	 	320.00/test
	 	 	N.	 	Soil pH	 	47.00/test
	 	 	O.	 	R.value (Hveem Stabilometer)	 	340.00/test
	 	 	P.	 	California Bearing Ratio	 	 
	 	 	 	 	1.	 	Granular	 	550.00/test
	 	 	 	 	2.	 	Cohesive	 	620.00/test
	 	 	Q.	 	Miscellaneous	 	 
	 	 	 	 	1.	 	Thin-wall Samples (extrusion only)	 	25.00/tube
	 
	 	 	 	 	 	 	 	 	 	 
	V.	 	Expenses	 	 
	 	 	A.	 	Direct Project Expenses: includes out-of-
Town per diem; plowing & towing; special
Materials & supplies; special travel, transportation
& freight; subcontracted services, and
Miscellaneous costs	 	Cost + 15%
	 	 	B.	 	Equipment Replacement (when abandonment

Is more feasible than recovery)	 	Cost
	 	 	C.	 	Equipment Recovery (when required by
Regulatory agencies of project specifications)	 	Cost + 15%
	 
	 	 	 	 	 	 	 	 	 	 
	VI.	 	Expert Witness Service Rates	 	 
	 	 	A.	 	Litigation Preparation	 	198.00/hr
	 	 	B.	 	Deposition or Court Time

(4-hour minimum)	 	245.00/hr

The rates presented are portal-to-portal with vehicle mileage, expenses and equipment rentals being
additional.

Overtime for personnel charged at above cost plus 25% for over 8 hours per day or Saturday; and at
above cost plus 50% for Sundays or Holidays. Hazardous work charged at an additional 25%. Night
time shift work will include a premium charge of $30.00 per person per shift.

 

 

SUBSURFACE BORING SUPPLEMENT

TO TERMS AND CONDITIONS

 

SECTION 1 — UNDERGROUND UTILITY AND STRUCTURE CLEARANCE

1.1 It is necessary that borings, excavations and other penetrations be located such that
they maintain a minimum safe distance from underground utilities or other man-made objects. Client
shall advise AET of all utilities that service or are located on the site, as well as any
underground improvements located on the site. AET will contact state notification centers, where
available, or individual utility owners where a state notification center is not available prior to
drilling.

1.2 Public utility owners may not provide the locating service on private property. In
such situations, the Client is responsible for location of such utilities prior to drilling.

1.3 The property owner may have private underground improvements which cannot be cleared
through the state notification center or public utility owners. The Client is responsible for
location of these improvements.

1.4 AET will not be responsible for any damages to “non-located” or incorrectly located
underground utilities or other man-made improvements.

SECTION 2 — SITE RESTORATION

2.1 — Client accepts that in the normal course of field exploration work, certain types of
damage to the site may occur which are inherent with this type of work, such as tire indentations
to lawns and landscape areas. It is the responsibility of AET to take reasonable precautions to
minimize such damage. It is also AET’s responsibility to patch boreholes placed through pavement
or slab areas after performance of borings. Otherwise, restoration of the site is the
responsibility of the client.

SECTION 3 — CONTAMINATION

3.1 — Client acknowledges and accepts that avoidable contamination risks may be associated
with AET’s subsurface drilling, sampling and installation of monitoring devices. Risks include,
but are not limited to, cross contamination created by linking contamined zones to uncontaminated
zones during the drilling process; containment and proper disposal of known or suspected hazardous
materials, drill cuttings and drill fluids; and decontamination of equipment and disposal and
replacement of contaminated consumables. Client and AET agree that the discovery of unanticipated
actual or suspected hazardous materials may make it necessary for AET to take immediate measures,
including regulatory notification, to protect human health and safety, and/or the environment.
Client and AET also agree that the discovery of such materials constitutes a changed condition
which may result in added costs to the Client, and may require a renegotiation of work scope or
termination of services.

3.2 — Pursuant to risks set forth in Section 3.1, which are inherent with AET’s work
performed on the Client’s behalf, Client agrees to hold harmless and indemnify AET from and against
liability associated with contamination resulting therefrom.

SECTION 4 — LOST EQUIPMENT

Equipment lost in bore holes may be required to be required to be retrieved or properly abandoned
by government agencies. Client agrees to pay AET all costs related to retrieving and/or abandoning
such equipment at AET fee schedule rates, unless agree otherwise.

SECTION 5 — LIMITATIONS ON SUBSURFACE EXPLORATION

Client recognizes that unavoidable risks occur whenever engineering or related disciplines are
applied to identify subsurface conditions. Variations in soil conditions usually occur between and
beyond sampled/tested locations. Even a comprehensive sampling and testing program performed in
accordance with a professional standard of care may fail to detect certain conditions, because the
variability of conditions cannot be seen. For similar reasons, actual environmental, geologic and
geotechnical conditions that AET characterizes to exist between sampling points may differ
significantly from those that actually exist. The passage of time also must be considered, and
Client recognizes that, due to natural occurrences or direct or indirect human activities at the
site or distant from it, actual conditions discovered may change. Client recognizes that nothing
can be done to eliminate the risks associated with these limitations.exv10w22

 

Exhibit 10.22

PHASE I AND PHASE II

ENGINEERING SERVICES AGREEMENT

BETWEEN

MINNERGY, LLC

AND

FAGEN ENGINEERING, LLC

May 23, 2007

 

			
	*	 	Portions omitted pursuant to a request for confidential treatment and filed separately with
the SEC.

 

 

TABLE OF CONTENTS

	 	 	 	 	 	 	 
	 	 	 	 	Page
	 
	Article 1

	 	Definitions; Rules of Interpretation
	 	 	1	 
	1.1

	 	Rules of Construction
	 	 	1	 
	1.2

	 	Defined Terms
	 	 	2	 
	 
	Article 2

	 	Retention of Agent
	 	 	3	 
	2.1

	 	Retention of Services
	 	 	3	 
	 
	Article 3

	 	Engineer Responsibilities
	 	 	4	 
	3.1

	 	Services
	 	 	4	 
	3.2

	 	Phase I Design Package
	 	 	4	 
	3.3

	 	Delivery of Phase I Design Package
	 	 	4	 
	3.4

	 	The Phase II Design Package
	 	 	4	 
	3.5

	 	Delivery of Phase II Design Package
	 	 	5	 
	3.6

	 	Delays
	 	 	5	 
	3.7

	 	Utility Routing and Design Services Limited
	 	 	5	 
	 
	Article 4

	 	Client Responsibilities
	 	 	5	 
	4.1

	 	Client’s Representative
	 	 	5	 
	4.2

	 	Client’s Requirements
	 	 	5	 
	4.3

	 	Other Information
	 	 	6	 
	4.4

	 	Access to Property
	 	 	6	 
	4.5

	 	Review of Documents
	 	 	6	 
	4.6

	 	Consents, Approvals, Licenses, and Permits
	 	 	6	 
	4.7

	 	Bids
	 	 	6	 
	4.8

	 	Other Services
	 	 	6	 
	4.9

	 	Services Outside Scope of Engineer’s Services
	 	 	6	 
	4.10

	 	Deviation from Design
	 	 	6	 
	4.11

	 	Developments Affecting Scope or Timing of Services
	 	 	7	 
	 
	Article 5

	 	Compensation And Payment
	 	 	7	 
	5.1

	 	Compensation
	 	 	7	 
	5.2

	 	Reimbursement of Engineer Expenses
	 	 	7	 
	5.3

	 	Reimbursement of Subcontractor Expenses
	 	 	7	 
	5.4

	 	Fees for Work Outside Scope of Services
	 	 	7	 
	5.5

	 	Collection of Unpaid Amounts
	 	 	7	 
	5.6

	 	Reimbursement Schedules Subject to Change
	 	 	7	 
	5.7

	 	Invoices
	 	 	7	 
	5.8

	 	Payment
	 	 	8	 
	5.9

	 	Late Payment and Interest
	 	 	8	 
	5.10

	 	Suspension for Failure to Pay
	 	 	8	 
	5.11

	 	Payment from Lawful Sources
	 	 	8	 
	5.12

	 	Withholding Payments
	 	 	8	 

MinnErgy, LLC

Phase I and Phase II Engineering Agreement

May 23, 2007

i

 

Table of Contents

(continued)

	 	 	 	 	 	 	 
	 	 	 	 	Page
	 
	5.13

	 	Purchase Orders
	 	 	8	 
	5.14

	 	Changes in Project
	 	 	8	 
	 
	Article 6

	 	Construction Cost And Cost Estimates
	 	 	8	 
	6.1

	 	Cost Estimates
	 	 	8	 
	 
	Article 7

	 	Termination
	 	 	8	 
	7.1

	 	Termination Upon Default
	 	 	8	 
	7.2

	 	Termination Upon Abandonment of Plant
	 	 	9	 
	 
	Article 8

	 	Ownership of Work Product
	 	 	9	 
	8.1

	 	Work Product
	 	 	9	 
	8.2

	 	Copies Provided to Client
	 	 	9	 
	8.3

	 	Prohibited Use of Work Product
	 	 	9	 
	8.4

	 	Derogation of Engineer’s Rights to Work Product
	 	 	9	 
	 
	Article 9

	 	Successors and Assigns
	 	 	9	 
	9.1

	 	Successors
	 	 	9	 
	9.2

	 	Written Consent Required
	 	 	9	 
	9.3

	 	No Third-Party Beneficiaries
	 	 	10	 
	 
	Article 10

	 	Warranty
	 	 	10	 
	10.1

	 	No Warranty Extended
	 	 	10	 
	10.2

	 	No Responsibility for Construction
	 	 	10	 
	 
	Article 11

	 	Indemnification
	 	 	10	 
	11.1

	 	Engineer’s Indemnification
	 	 	10	 
	11.2

	 	Client’s Indemnification
	 	 	10	 
	11.3

	 	Hazardous Materials Indemnification
	 	 	10	 
	 
	Article 12

	 	Dispute Resolution
	 	 	11	 
	12.1

	 	Arbitration
	 	 	11	 
	 
	Article 13

	 	Confidentiality
	 	 	12	 
	13.1

	 	Non-Disclosure Obligation
	 	 	12	 
	13.2

	 	Publicity and Advertising
	 	 	12	 
	13.3

	 	Term of Obligation
	 	 	12	 
	 
	Article 14

	 	Miscellaneous
	 	 	12	 
	14.1

	 	Governing Law
	 	 	12	 
	14.2

	 	Severability
	 	 	12	 
	14.3

	 	No Waiver
	 	 	13	 
	14.4

	 	Captions and Headings
	 	 	13	 
	14.5

	 	Engineer’s Accounting Records
	 	 	13	 
	14.6

	 	Counterparts
	 	 	13	 
	14.7

	 	Survival
	 	 	13	 

MinnErgy, LLC

Phase I and Phase II Engineering Agreement

May 23, 2007

ii

 

Table of Contents

(continued)

	 	 	 	 	 	 	 
	 	 	 	 	Page
	 
	14.8

	 	No Privity with Client’s Contractors
	 	 	13	 
	14.9

	 	Amendments
	 	 	13	 
	14.10

	 	Entire Agreement
	 	 	13	 
	14.11

	 	Notice
	 	 	13	 
	14.12

	 	Extent of Agreement
	 	 	14	 
	14.13

	 	Subrogation Waiver
	 	 	14	 
	 
	EXHIBIT A

	 	Reimbursement Schedule
	 	 	16	 
	 
	EXHIBIT B

	 	Reimbursable Expense Schedule
	 	 	17	 
	 
	EXHIBIT C

	 	Client’s Deliverable Site Obligations
	 	 	18	 

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PHASE I AND PHASE II

ENGINEERING SERVICES AGREEMENT

     THIS PHASE I AND PHASE II ENGINEERING SERVICES AGREEMENT (the “Agreement”) is made as
of May 23, 2007, (the “Effective Date”) by and between MinnErgy, LLC, a Minnesota Limited
Liability Company (the “Client”) and Fagen Engineering, LLC a Minnesota Limited Liability
Company (the “Engineer”). Each of the Client and Engineer are referred to herein
individually as a “Party” and collectively as the “Parties.”

RECITALS

     WHEREAS, Client is developing a fifty (50) million gallons per year dry grind ethanol
production facility to be located in Eyota, Minnesota (the “Plant”) to be owned and
operated by Client; and

     WHEREAS, Client and Fagen, Inc. (“Design — Builder”) intend to enter into that certain
Lump-Sum Design-Build Agreement (“Design-Build Agreement”) under which Fagen, Inc., an
affiliate of Engineer, will serve as the design-builder for the Plant and provide design,
engineering, procurement and construction services for the development and construction of the
Plant; and

     WHEREAS, Client wishes to retain an entity in advance of entering into the Design-Build
Agreement to perform certain engineering and design work that will be required under the
Design-Build Agreement on the terms and conditions set forth in this Agreement, and Engineer
desires to act as such entity upon the terms and conditions set forth 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, and intending
to be legally bound by this Agreement, the parties do hereby agree as follows:

Article 1

Definitions; Rules of Interpretation

     1.1 Rules of Construction. The capitalized terms listed in this Article 1 shall have the
meanings set forth herein whenever the terms appear in this Agreement, whether in the singular or
the plural or in the present or past tense. Other terms used in this Agreement but not listed in
this Article shall have meanings as commonly used in the English language and, where applicable, in
generally accepted construction and design-build industry standards. Words not otherwise defined
herein that have well known and generally accepted technical or trade meanings are used herein in
accordance with such recognized meanings. In addition, the following rules of interpretation shall
apply:

	 	(a)	 	The masculine shall include the feminine and neuter.

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	 	(b)	 	References to “Articles,” “Sections,” “Schedules,” or “Exhibits” shall be to
Articles, Sections, Schedules or Exhibits of this Agreement.
	 
	 	(c)	 	This Agreement was negotiated and prepared by each of the Parties with the
advice and participation of counsel. The Parties have agreed to the wording of this
Agreement and none of the provisions hereof shall be construed against one Party on the
ground that such Party is the author of this Agreement or any part hereof. The
following definitions will apply in this Agreement:

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

Agreement will have the meaning given to such term in the Preamble to this Agreement.

Applicable Law means

	 	(a)	 	any and all laws, legislation, statutes, codes, acts, rules, regulations,
ordinances, treaties or other similar legal requirements enacted, issued or promulgated
by a Governmental Authority;
	 
	 	(b)	 	any and all orders, judgments, writs, decrees, injunctions, Governmental
Approvals or other decisions of a Governmental Authority; and
	 
	 	(c)	 	any and all legally binding announcements, directives or published practices or
interpretations, regarding any of the foregoing in (a) or (b) of this definition,
enacted, issued or promulgated by a Governmental Authority;

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

Client will have the meaning given to such term in the Preamble to this Agreement.

Client’s Representative will have the meaning given to such term in Section 4.1

Design-Build Agreement will have the meaning given to such term in the Recitals to this Agreement.

Effective Date will have the meaning given to such term in the Preamble to this Agreement.

Engineer will have the meaning given to such term in the Preamble to this Agreement.

Engineer Responsible Parties will have the meaning given to such term in Section 4.10.

Governmental Approvals will mean any material authorizations or permissions issued or granted by
any Governmental Authority to the Project, the Client, the Engineer, subcontractors and their
affiliates in connection with any activity related to the Services.

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

Monthly Invoice will have the meaning given to such term in Section 5.7.

Party or Parties will have the meaning given to such term in the Preamble to this Agreement.

Phase I Design Package will have the meaning given to such term in Section 3.2.

Phase I Owner Deliverables will mean the Client’s deliverable obligations pursuant to Exhibit C to
this Agreement.

Phase II Design Package will have the meaning given to such term in Section 3.4.

Phase II Owner Deliverables will mean the Client’s deliverable obligations pursuant to Exhibit C to
this Agreement.

Plant will have the meaning given to such term in the Recitals to this Agreement.

Project will mean the Plant, together with all equipment, labor, services and materials furnished
under the Design-Build Agreement.

Services will have the meaning given to such term in Section 3.1.

Site will mean the land or premises on which the Plant is located.

Subcontractor will mean any person or entity, including but not limited to independent engineers,
associates, and consultants, retained by Engineer, or by any person or entity retained directly or
indirectly by Engineer, in each case as an independent contractor, to perform a portion of the
Services.

Work Product will have the meaning given to such term in Section 8.1.

Article 2

Retention of the Agent

     2.1 Retention of Services. On the terms and subject to the conditions hereinafter set forth,
Client hereby retains Engineer to perform, and Engineer hereby agrees to perform, the Services.
Engineer will provide such Services solely pursuant to the terms and conditions set forth herein
including any indemnifications and limitations on liability.

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Article 3

Engineer Responsibilities

     3.1 Services. Engineer shall perform the Phase I Design Package and Phase II Design Package
engineering services necessary to facilitate Client’s completion of the Phase I and Phase II Site
work required of Client prior to the issuance of a Notice to Proceed pursuant to the Design-Build
Agreement (collectively, the “Services”).

     3.2 Phase I Design Package. (Grading and Drainage). The Phase I Design Package to be provided
by Engineer shall consist of the engineering and design of the Plant Site and shall include the
following drawings:

	 	a)	 	Cover Sheet
	 
	 	b)	 	Property Layout Drawing
	 
	 	c)	 	Grading, Drainage and Erosion Control Plan Drawing (Multiple Drawings if
Required)
	 
	 		 	i.     Used for Land Disturbance Permitting

	 
	 		 	ii.     Site grading is held 6-inches low for topsoil and seeding
	 
	 	d)	 	Roadway Alignment Drawing
	 
	 	e)	 	Culvert Cross Sections and Details (Multiple Drawings)
	 
	 	f)	 	Seeding and Landscaping (If Required)
	 
	 	g)	 	Geometric layout drawing (includes contractor’s trailer, parking and laydown
areas)

Plan sets along with a Bid Tabulation Sheet will be supplied to the Client so all contractors bid
the same quantities. A telephone conference call for a Phase I pre-bid meeting will be provided
upon Client’s request.

     3.3 Delivery of Phase I Design Package. Engineer shall deliver the completed Phase I Design
Package no later than sixty (60) days after the receipt of all the Phase I Owner Deliverables,
however, the sixty (60) day timeframe provided for in this section will commence no sooner than
October 4, 2007.

     3.4 Phase II Design Package. The Phase II Design Package to be provided by Engineer shall
provide the engineering and design of Site work and utilities for the Plant, all within the property line of Plant, and
shall consist of the following:

	 	a)	 	Cover Sheet
	 
	 	b)	 	Property Layout Drawing
	 
	 	c)	 	Site Grading and Drainage Drawing (Final Interior Plant Grading)
	 
	 	d)	 	Roadway Alignment
	 
	 	e)	 	Utility Layout (Fire Loop)
	 
	 	f)	 	Utility Layout (Potable Water)
	 
	 	g)	 	Utility Layout (Well Water) if using on-Site wells
	 
	 	h)	 	Utility Layout (Sanitary Sewer)
	 
	 	i)	 	Utility Layout (Utility Water Blowdown)

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	 	j)	 	Utility Layout (Natural Gas)

	 	i.	 	Fagen Engineering provides a preferred routing through the Site, line
size and pipe specifications are typically provided by the gas supplier.

	 	k)	 	Geometric Layout (For Project Control Verification)
	 
	 	l)	 	Site Utility Piping Tables Drawing
	 
	 	m)	 	Tank Farm Layout Drawing
	 
	 	n)	 	Tank Farm Details Drawing
	 
	 	o)	 	 Sections and Details Drawing (If required)
	 
	 	p)	 	Miscellaneous Details Drawing (If required)

A telephone conference call for a Phase II pre-bid meeting will be provided upon Client’s request.

     3.5 Delivery of Phase II Design Package. Engineer shall deliver the completed Phase II Design
Package no later than sixty (60) days after the receipt of all Phase II Owner Deliverables, but no
earlier than sixty (60) days after delivery of the Phase I Design Package.

     3.6 Delays. The Parties agree that Engineer shall not be responsible for delays in providing
the Services under this Agreement due to factors beyond Engineer’s control.

     3.7 Utility Routing and Design Services Limited. The Parties agree that Engineer shall
provide the routing and design for the utilities necessary for the Plant only within the Plant
property line and up to the Plant property line, and that, for purposes of this Agreement, Engineer
assumes a tie-in point to a city utility. The Parties agree that, if there is no city tie-in
point, Engineer will route the utilities to the Plant property line and stop. Any special tie-in
requirements necessary to connect the utilities at the Plant property line are not included in the
compensation or the scope of this Agreement and shall only be designed and engineered by Engineer
as change in the Project which affects the Services hereunder.

Article 4

Client Responsibilities

     4.1 Client’s Representative. Client shall, prior to the commencement of Services by Engineer,
name a representative (“Client’s Representative”) with authority to receive information and
transmit instructions for Client. Client’s Representative shall be vested with authority to act on
behalf of Client and Engineer shall be entitled to rely on Client’s Representative’s communications
with regard to the Services.

     4.2 Client’s Requirements. Client shall, prior to the commencement of Services by Engineer,
provide Engineer with Client’s requirements for the Project, including objectives and constraints,
design and construction standards, bonding and insurance requirements, and contract forms.
Engineer shall be compensated as set forth in Section 5.4 of this Agreement for any and all Client
requirements which are agreed to by Engineer and incorporated into the Phase I Design Package and
Phase II Design Package.

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     4.3 Other Information. Prior to the commencement of Services by Engineer, Client shall
provide Engineer with all other information available to Client and pertinent to the Project and
the Services including, but not limited to, all items required pursuant to Exhibit C. The items
required by Client pursuant to this Section 4.3 shall be furnished at Client’s expense, and
Engineer shall be entitled to rely upon the accuracy and completeness thereof.

     4.4 Access to Property. Prior to the commencement of Services and as necessary during the
performance of Services, Client shall arrange for access by Engineer upon public and private
property, as required for the performance of the Services under this Agreement.

     4.5 Review of Documents. As related to the performance of Services hereunder, Client shall
examine documents presented by Engineer, obtain legal and other advice as Client deems appropriate,
and render written decisions within reasonable time. The items required by Client pursuant to this
Section 4.5 shall be furnished at Client’s expense, and Engineer shall be entitled to rely upon the
accuracy and completeness thereof.

     4.6 Consents, Approvals, Licenses and Permits. Prior to the commencement of Services and as
necessary during the performance of the Services, Client shall obtain all consents, approvals,
licenses, permits, and other Governmental Approvals necessary for the Project and for the
performance of the Services. The items required by Client pursuant to this Section 4.6 shall be
furnished at Client’s expense, and Engineer shall be entitled to rely upon the accuracy and
completeness thereof.

     4.7 Bids. Client shall advertise for and open bids when scheduled.

     4.8 Other Services Client shall furnish all legal, accounting and insurance counseling
services as may be necessary at any time for the Services, including auditing services the Client
may require to verify the monthly invoices or to ascertain how or for what purposes the Engineer
and/or Subcontractors have used the money paid by or on behalf of the Client.

     4.9 Service Outside Scope of Engineer’s Services. Client shall, at its own expense, as
necessary for the performance and completions of the Services, provide any additional services
necessary for the Project that are outside the scope of the Services provided by Engineer under
this Agreement. Engineer shall be entitled to rely upon, as applicable, the completeness and
accuracy of such additional services.

     4.10 Deviation from Design. Client shall indemnify and hold harmless Engineer, its
employees, its agents, its affiliates, and any other persons or entities within its control or for
whom Engineer would otherwise be responsible (“Engineer Responsible Parties”) against
claims arising out of Engineer’s design, if there has been, in the completion of the Phase I and
Phase II Site work required of Client prior to the issuance of a Notice to Proceed pursuant to the
Design-Build Agreement, a failure to follow Engineer’s recommendation and such deviation or failure
caused the claims.

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     4.11 Developments Affecting Scope or Timing of Services. Client shall promptly notify
Engineer, in writing, when Client learns of contractor error or any development that affects the
scope or timing of Engineer’s Services.

Article 5

Compensation and Payment

     5.1 Compensation. In consideration of its performance of the Services, Client shall pay
Engineer for Engineer’s time in the performance of the Services at a fixed fee of One Hundred Ten
Thousand Dollars ($110,000.00) (“Fixed Fee”) as compensation. The full amount of compensation paid
by Client under this Section 5.1 shall be included in and credited to the Design-Build Agreement’s
contract price if entered into upon payment in full by Client.

     5.2 Reimbursement of Engineer Expenses. In addition to the fixed fee in 5.1, Client shall
reimburse Engineer for its expenses related to the performance of the Services in accordance with
Engineer’s current reimbursable expense schedule attached hereto as Exhibit B.

     5.3 Reimbursement of Subcontractor Expenses.

          5.3.1 Subcontractor charges related to time spent in the performance of the Services shall not
be marked-up by Engineer. Client shall reimburse Engineer for costs related to Subcontractors’
time in accordance with the Subcontractors’ invoices for the work.

          5.3.2 Subcontractor reimbursable expenses will be marked up in accordance with the current
reimbursable expense schedule attached hereto as Exhibit B.

     5.4 Fees for Work Outside Scope of Services. Fees for all work outside the scope of
Engineer’s responsibilities described in Article 3 and 4, including change order work and
acceptable Client requirements, shall be computed in accordance with Engineer’s current fee
schedules, attached hereto as Exhibits A and B, as such schedules may be revised from time to time,
unless otherwise agreed to in writing. Any compensation paid to Engineer pursuant to this Section
5.4 shall not be included in or credit to the Design-Build Agreement’s contract price.

     5.5 Collection of Unpaid Amounts. If any amount due is not paid in accordance with this
Agreement and Engineer must collect that amount, Engineer shall be entitled to recover, in addition
to the amount due, the cost of collection, including reasonable attorney’s fees in connection with
those collection efforts.

     5.6 Reimbursement Schedules Subject to Change. Engineer’s reimbursement schedule and
reimbursable expense schedule attached hereto as Exhibits A and B are subject to change on January
1 of each year.

     5.7 Invoices. Engineer shall submit a monthly invoice (“Monthly Invoice”) for
Services provided and for reimbursable expenses incurred by Engineer and any Subcontractors.

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     5.8 Payment. Within thirty (30) days after Client’s receipt of each Monthly Invoice, Client
shall pay Engineer all amounts due.

     5.9 Late Payment and Interest. If Client fails to make payment within thirty (30) days after
receipt of Monthly Invoice, interest at the maximum legal rate or at an annual rate of 18%,
whichever is less, shall accrue

     5.10 Suspension for Failure to Pay. If Client fails to make payment within thirty (30) days
after receipt of Monthly Invoice, Engineer may, at its option, after giving seven (7) days’ written
notice, suspend Services until all amounts due to Engineer by Client have been paid in full.

     5.11 Payments from Lawful Sources. Client shall provide for payment from one or more lawful
source of all sums to be paid Engineer.

     5.12 Withholding Payments. Engineer’s compensation shall not be reduced on account of any
amounts withheld from payment to Subcontractors.

     5.13 Purchase Orders. If Client issues a purchase order or other document to initiate the
commencement of Services hereunder, it is expressly agreed that any terms and conditions appearing
thereon shall have no application and only the provisions of this Agreement shall apply.

     5.14 Changes in Project. If Client requests changes in the Project which affect the Services,
compensation for and time of performance of Engineer’s services shall be adjusted appropriately.

Article 6

Construction Cost and Cost Estimates

     6.1 Cost Estimates. Client and Engineer acknowledge that Engineer has no control over cost of
labor, materials, equipment or services furnished by others, over contractors’ methods of
determining prices, or other competitive bidding or market conditions and that Engineer’s estimates
of Project construction cost will be made on the basis of its employees’ experience and
qualifications and will represent Engineer’s employees’ best judgment as experienced and qualified
professionals, familiar with the construction industry. Engineer does not guarantee that proposal,
bids, or actual construction cost will not vary from its estimates of Project cost and Client
acknowledges the same.

Article 7

Termination

     7.1 Termination Upon Default. Either party may terminate this Agreement upon twenty (20)
days’ written notice if the non-terminating party has defaulted through no fault of the terminating
party.

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     7.2 Termination Upon Abandonment of Plant. Client may terminate Engineer’s obligation to
provide further services upon twenty (20) days’ written notice if Client abandons development of
the Plant. In such event, all past due amounts for services rendered (including Subcontractor’s
fees, if any) and any unpaid reimbursable expenses shall be immediately due and payable by Client.

Article 8

Ownership of Work Product

     8.1 Work Product. All tangible items prepared by Engineer, including but not limited to all
drawings, specifications, calculations, data, notes and other materials and documents, including
electronic data furnished by Engineer to Client and to Subcontractors under this Agreement
(“Work Product”) shall be instruments of service, and Engineer shall retain the ownership
and property interests therein, including the copyrights thereto.

     8.2 Copies Provided to Client. Client may retain copies of Work Product for reference;
provided, however, that Client may not make copies of the Work Product available without Engineer’s
written permission, and, granted such permission, may only do so to the extent the use of such
copies of the Work Product directly pertains to the Services, the Plant, or the construction
thereof. Pursuant to Section 8.1 of this Agreement, Engineer retains ownership of and property
interests in any Work Product made available and/or copied.

     8.3 Prohibited Use of Work Product. Reuse of the Work Product on any another Project without
Engineer’s written consent is prohibited. Client shall indemnify and hold harmless Engineer
Responsible Parties against claims resulting from such prohibited reuse. Said items are not
intended to be suitable for completion of this Project by others.

     8.4 Derogation of Engineer’s Rights to Work Product. Submittal or distribution of Work
Product in connection with the performance and completion of the Services and the construction of
the Project does not constitute publication in derogation of Engineer’s rights and does not in any
way diminish Engineer’s Work Product rights established herein.

Article 9

Successors and Assigns

     9.1 Successors. The Parties intend that the provisions of this Agreement are binding upon the
Parties, their employees, agents, heirs, successors and assigns.

     9.2 Written Consent Required. Neither Party shall assign, sublet, or transfer any interest in
this Agreement without written consent of the other; provided, however, that Engineer may employ
such Subcontractors as it may deem appropriate and may transfer or assign any interest in this
Agreement or the Work Product to Design-Builder without consent of Client.

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     9.3 No Third-Party Beneficiaries. None of the provisions of this Agreement will be for the
benefit of or enforceable by any person other than the Parties hereto, their successors and
permitted assigns and legal representatives

Article 10

Warranty

     10.1 No Warranty Extended. Engineer shall use reasonable care to reflect requirements of all
Applicable Laws, rules, or regulations of which Engineer has knowledge or about which Client
specifically advises in writing, which are in effect on the date of this Agreement. ENGINEER
INTENDS TO RENDER SERVICES IN ACCORDANCE WITH GENERALLY ACCEPTED PROFESSIONAL STANDARDS, BUT NO
OTHER WARRANTY IS EXTENDED, EITHER EXPRESS OR IMPLIED, IN CONNECTION WITH SUCH SERVICES. Engineer
shall maintain professional liability insurance in the amount of five million dollars ($5,000,000)
and shall provide proof of such insurance to Client upon request. Client’s rights and remedies in
this Agreement are exclusive.

     10.2 No Responsibility for Construction. Engineer shall not be responsible for construction
of the Plant, contractors’ construction means, methods, techniques, sequences, or procedures, or
for contractors’ safety precautions and programs, or for contractors’ failure according to contract
documents.

Article 11

Indemnification

     11.1 Engineer’s Indemnification. To the fullest extent permitted by law, Engineer shall
indemnify and hold harmless Client, Client’s officers, directors, partners, employees, and agents
from and against any and all claims for bodily injury and for damage to tangible property caused
solely by the negligent acts or omissions of Engineer or Engineer Responsible Parties and
Engineer’s Engineers in the performance and furnishing of Engineer’s Services under this Agreement.
Any indemnification shall be limited to the terms and amounts of coverage of the Engineer’s
insurance policies. Engineer shall maintain general comprehensive liability insurance with a
single limit of one million dollars ($1,000,000) and shall maintain workers’ compensation insurance
as required by law, and shall provide proof of such insurance to Client upon request.

     11.2 Client’s Indemnification. To the fullest extent permitted by law, Client shall indemnify
and hold harmless Engineer, Engineer’s officers, directors, partners, employees, and agents and
Engineer’s Engineers from and against any and all claims for bodily injury and for damage to
tangible property caused solely by the negligent acts of omission of Client or Client’s officers, directors, partners,
employees, agents, and Client’s Engineers with respect to this Agreement or the Project.

     11.3 Hazardous Materials Indemnification. In addition to the indemnity provided under this
section, and to the fullest extent permitted by law, Client shall indemnify and hold

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harmless Engineer and its officers, directors, partners, employees, and agents and Engineer’s Engineers 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) caused by, arising out of, or relating to the presence,
discharge, release, or escape of asbestos, PCBs, petroleum, hazardous waste, or radioactive
materials at, on, under, or from the Site.

Article 12

Dispute Resolution

     12.1 Arbitration. In an effort to resolve any conflicts that arise out of or relate to this
Agreement, the Client and the Engineer agree that all disputes shall be submitted first to
nonbinding mediation. If mediation shall be conducted in Minneapolis, Minnesota by a mutually
agreeable impartial mediator or, if the Parties cannot so agree, a mediator designated by the
American Arbitration Association pursuant to its Construction Industry Arbitration Rules and
Mediation Procedures. The mediation will be governed by and conducted pursuant to a mediation
agreement negotiated by the Parties or, if the Parties cannot so agree, by procedures established
by the mediator. Mediation is a condition precedent to arbitration, unless the Parties agree
otherwise.

If mediation does not resolve the conflicts, the controversy shall be decided by final and binding
arbitration conducted in Minneapolis, Minnesota in accordance with the Construction Industry
Arbitration Rules of the American Arbitration Association then in effect, unless the Parties
mutually agree otherwise. A demand for arbitration shall be made within a reasonable time after
the dispute has arisen, and in no event shall it be made after the date when institution of legal
or equitable proceedings based on such dispute would be barred by the applicable statute of
limitations. The arbitration shall be governed by the Federal Arbitration Act.

The award of the arbitrator(s) shall be final and binding upon the Parties. Judgment may be
entered upon it by any court having jurisdiction thereof.

Engineer and Client expressly agree that any arbitration pursuant to this Section 12.1 may be
joined or consolidated with any arbitration involving any other person or entity (i) necessary to
resolve the claim, dispute or controversy, or (ii) substantially involved in or affected by such
claim, dispute or controversy. Both Engineer and Client will include appropriate provisions in all
contracts they execute with other parties in connection with the Services to require such joinder
or consolidation.

The prevailing Party in any arbitration, or any other final, binding dispute proceeding upon which
the Parties may agree, shall be entitled to recover from the other Party reasonable attorneys’ fees
and expenses incurred by the prevailing Party.

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Article 13

Confidentiality

     13.1 Non-Disclosure Obligation. Except as required by court order, subpoena, or Applicable
Law, the Client shall not disclose to third parties any confidential or proprietary information
regarding Engineer’s business affairs, finances, technology, processes, plans or installations,
product information, know-how, design drawings, specifications, inventions, ideas, or other
information that is received from Engineer pursuant to this Agreement or the Parties’ relationship
prior thereto or is developed pursuant to this Agreement, without the express written consent of
Engineer, which consent shall not be unreasonably withheld. The Client shall at all times use
their respective reasonable efforts to keep all information regarding the terms and conditions of
this Agreement confidential and shall disclose such information to third Persons only as reasonably
required for the permitting of the Project; financing the development, construction, ownership,
operation and maintenance of the Plant; or as reasonably required by Client for performing its
obligations hereunder and if prior to such disclosure, the Client informs such third Persons of the
existence of this confidentiality obligation and only if such third Persons agree to maintain the
confidentiality of any information received. This Article 13 shall not apply to information that
was already in the possession of Client prior to receipt from the other, that is now or hereafter
becomes a part of the public domain through no fault of the Client, or that corresponds in
substance to information heretofore or hereafter furnished by third parties without restriction on
disclosure.

     13.2 Publicity and Advertising. Neither Client nor Engineer shall make or permit any of its
subcontractors, agents, or vendors to make any external announcement or publication, release any
photographs or information concerning the Project or any part thereof, or make any other type of
communication to any member of the public, press, business entity, or any official body which names
the Engineer unless prior written consent is obtained from the Engineer, which consent shall not be
unreasonably withheld.

     13.3 Term of Obligation. The confidentiality obligations of the Client pursuant to this
Article 13 shall survive for a period five (5) years following the later to occur of termination of
this Agreement or completion of the Plant.

Article 14

Miscellaneous

     14.1 Governing Law. This Agreement shall be governed by and construed and enforced in
accordance with, the substantive laws of the state of Minnesota, without regard to the conflict of
laws provisions thereof.

     14.2 Severability. If any provision or any part of a provision of the Agreement shall be
finally determined to be superseded, invalid, illegal, or otherwise unenforceable pursuant to any
applicable Legal Requirements, such determination shall not impair or otherwise affect the

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validity, legality, or enforceability of the remaining provision or parts of the provision of the
Agreement, which shall remain in full force and effect as if the unenforceable provision or part
were deleted.

     14.3 No Waiver. The failure of either Engineer or Client to insist, in any one or more
instances, on the performance of any of the obligations required by the other under this Agreement
shall not be construed as a waiver or relinquishment of such obligation or right with respect to
future performance.

     14.4 Captions and Headings. The table of contents and the headings used in this Agreement are
for ease of reference only and shall not in any way be construed to limit, define, extend,
describe, alter, or otherwise affect the scope or the meaning of any provision of this Agreement.

     14.5 Engineer’s Accounting Records. Records of Engineer’s personnel time, reimbursable
expenses, and accounts between parties shall be maintained on a generally recognized accounting
basis.

     14.6 Counterparts. This Agreement may be executed in one or more counterparts, each of which
shall be deemed an original and all of which together shall be deemed one and the same Agreement,
and may be executed and delivered by facsimile signature, which shall be considered an original.

     14.7 Survival. Notwithstanding any provisions herein to the contrary, the Work
Product provisions set forth in Article 8 and the indemnity obligations set forth herein shall
survive (in full force) the expiration or termination of this Agreement, and shall continue to
apply to the Parties to this Agreement even after termination of this Agreement or the transfer of
such Party’s interest in this Agreement.

     14.8 No Privity with Client’s Contractors. Nothing in this Agreement is intended or deemed to
create any legal or contractual relationship between Engineer and any Client contractor or
subcontractor retained to perform the Phase I and Phase II Site work required of Client prior to
the issuance of a Notice to Proceed pursuant to the Design-Build Agreement.

     14.9 Amendments. This Agreement may not be changed, altered, or amended in any way except in
writing signed by a duly authorized representative of each Party.

     14.10 Entire Agreement. This Agreement consists of the terms and conditions set forth herein,
as well as the Exhibits hereto, which are incorporated by reference herein and made a part hereof.
This Agreement sets forth the full and complete understanding of the Parties as of the Effective
Date with respect to the subject matter hereof.

     14.11 Notice. Whenever the Agreement requires that notice be provided to a Party, notice
shall be delivered in writing to such party at the address listed below. Notice will be deemed to
have been validly given if delivered (i) in person to the individual intended to receive such
notice, (ii) by registered or by certified mail, postage prepaid to the address indicated in the

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Phase I and Phase II Engineering Agreement

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13

 

Agreement within four (4) days after being sent, or (iii) by facsimile, by the time stated in a
machine-generated confirmation that notice was received at the facsimile number of the intended
recipient.

     If to Engineer, to:

Fagen Engineering LLC

501 W. Highway 212

P. O. Box 159

Granite Falls, MN 56241

Attention: Terrin Torvik

Fax: (320) 564-4861

     with a copy to:

Fagen, Inc.

501 W. Highway 212

P. O. Box 159

Granite Falls, MN 56241

Attention: Bruce Langseth

Fax: (320) 564-3278

     If to Client, to:

MinnErgy, LLC

PO Box 186

Winona, MN 55987

Attention: Dan Arnold

Fax:                     

     14.12 Extent of Agreement. This Agreement and the Exhibits incorporated therein represent the
entire agreement between the Parties and may be amended only by written instrument signed by both
Parties.

     14.13 Subrogation Waiver. The Parties waive all rights against each other, and against the
contractors, Engineers, agents, and employees of the other for damages covered by any property
insurance during construction, and each shall require similar waivers from their contractors,
Engineers, and agents.

[THE NEXT PAGE IS THE SIGNATURE PAGE]

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Phase I and Phase II Engineering Agreement

May 23, 2007

14

 

IN WITNESS WHEREOF, the Parties hereto have caused their names to be hereunto subscribed by their
officers thereunto duly authorized, intending thereby that this Agreement shall be effective as of
this May 23, 2007.

	 	 	 	 	 
	CLIENT

	 	ENGINEER:	 	 
	 
	MinnErgy, LLC
 

(Name of Owner)

	 	Fagen Engineering, LLC
 

(Name of Design-Builder)
	 	 
	 
	 	 	 	 
	/s/ Daniel H. Arnold

	 	/s/Terrin B. Torvik	 	 
	 

	 	 	 	 
	(Signature)

	 	(Signature)	 	 
	 
	 	 	 	 
	Daniel H. Arnold

	 	Terrin B. Torvik	 	 
	 

	 	 	 	 
	(Printed Name)

	 	(Printed Name)	 	 
	 
	 	 	 	 
	Chairman

	 	Assistant V.P./Civil Eng. Dept Head	 	 
	 

	 	 	 	 
	(Title)

	 	(Title)	 	 
	 
	 	 	 	 
	Date: 6/5/07

	 	Date: 6/11/07	 	 

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15

 

EXHIBIT A

Reimbursement Schedule

FAGEN ENGINEERING LLC

Fee Schedule FY 2007

CONFIDENTIAL

	 	 	 	 	 	 	 	 	 
	 	 	BILLING	 	 
	TYPICAL ASSIGNMENT	 	CLASS	 	BILLING RATE
	Clerical / CADD Operator
	 	 	1	 	 	 	*	 
	Clerical / CADD Operator
	 	 	2	 	 	 	*	 
	CADD Operator / Designer
	 	 	3	 	 	 	*	 
	CADD Operator / Designer / Engineer
	 	 	4	 	 	 	*	 
	Designer / Engineer / PM
	 	 	5	 	 	 	*	 
	Engineer / Senior Engineer / PM
	 	 	6	 	 	 	*	 
	Senior Engineer / PM
	 	 	7	 	 	 	*	 
	Senior Engineer / PM
	 	 	8	 	 	 	*	 
	Senior Engineer / PM / Principal
	 	 	9	 	 	 	*	 
	PM / Principal
	 	 	10	 	 	 	*	 
	Principal
	 	 	11	 	 	 	*	 
	Principal
	 	 	12	 	 	 	*	 
	Principal
	 	 	13	 	 	 	*	 

Subject to Revision January 1, 2008

 

			
	*	 	Portions omitted pursuant to a request for confidential treatment and filed separately with
the SEC.

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Phase I and Phase II Engineering Agreement

July 20, 2006

16

 

EXHIBIT B

Reimbursable Expense Schedule

Fagen Engineering LLC

Reimbursable Expense Billing Schedule

Effective January 1, 2007

CONFIDENTIAL

	 	 	 	 	 	 	 	 	 
	Expense Code	 	Expense Description	 	Billing Rate
	 
	 	 	 	 	 	 	 	 
	BCA
	 	Blackline Print Copy — A	 	 	*	 
	BCB
	 	Blackline Print Copy — B	 	 	*	 
	BCC
	 	Blackline Print Copy — C	 	 	*	 
	BCD
	 	Blackline Print Copy — D	 	 	*	 
	BCE
	 	Blackline Print Copy — E	 	 	*	 
	BOA
	 	Paper Print Original — A	 	 	*	 
	BOB
	 	Paper Print Original — B	 	 	*	 
	BOC
	 	Paper Print Original — C	 	 	*	 
	BOD
	 	Paper Print Original — D	 	 	*	 
	BOE
	 	Paper Print Original — E	 	 	*	 
	DISK
	 	Floppy Disk 31/2”/ea	 	 	*	 
	FAX
	 	Fax Machine Usage/Page	 	 	*	 
	LD
	 	Long Distance Phone Calls	 	 	*	 
	LODGING
	 	Lodging	 	 	*	 
	MEALS
	 	Meal Expense	 	 	*	 
	MILEAGE
	 	Mileage/Mile	 	 	*	 
	PC1
	 	Photocopies 81/2x11 (<100)/ea	 	 	*	 
	PC2
	 	Photocopies 11x17/ea	 	 	*	 
	PC3
	 	Photocopies 8(1/2)x11 (>100)/ea	 	 	*	 
	PO
	 	Postage	 	 	*	 
	PROSVC
	 	Outside Professional Services	 	 	*	 
	PROSVCEXP
	 	Outside Professional Services Expenses	 	 	*	 
	FLM
	 	Film & Developing	 	 	*	 
	SPECCOV
	 	Specification Book - Cover & Binder/ea	 	 	*	 
	TRANS
	 	Transportation	 	 	*	 
	UPS
	 	Delivery Service Charges	 	 	*	 
	VELLUM
	 	Original Print/square foot	 	 	*	 

Subject to Revision January 1, 2008

 

			
	*	 	Portions omitted pursuant to a request for confidential treatment and filed separately with
the SEC.

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Phase I and Phase II Engineering Agreement

May 23, 2007

17

 

EXHIBIT C

Client’s Deliverable Site Obligations

Phase I Deliverables

          Prior to Engineer’s commencement of the Phase I Design Package work, the Client shall provide
Engineer with the following Phase I Deliverables:

	 	1.	 	A legal description of the Site
	 
	 	2.	 	Temporary and permanent easements, zoning, and other requirements and encumbrances
affecting land use or necessary to permit the proper design and construction of the Project
and enable Design-Builder to perform the Work
	 
	 	3.	 	To the extent available, as-built and record drawings of any existing structures at the
Site
	 
	 	4.	 	Environmental studies, reports and impact statements describing the environmental
conditions, including Hazardous Conditions, in existence at the Site
	 
	 	5.	 	Topographic Survey to one (1) foot contours including property boundaries and at least
two (2) benchmarks including existing service and utility lines.
	 
	 	6.	 	Any special sizing or other requirements for ethanol storage tank farm.
	 
	 	7.	 	Preliminary approval from Client’s Rail service provider of rail design as prepared by
Client’s Rail Designer.
	 
	 	8.	 	Preliminary location and design of administration building.
	 
	 	9.	 	Client’s written approval of final site layout including rail design and environmental
permitting emission points.
	 
	 	10.	 	Soil borings logs for all soil borings complete at Engineer’s specified locations.
	 
	 	11.	 	Geotechnical Report regarding subsurface conditions with Client’s Geotechnical
Engineer’s recommendations from Engineer approved Geotechnical Engineer (Terracon is
preferred) including soil borings, and any other surveys or information available
describing other latent or concealed physical conditions at the Site.
	 
	 	12.	 	Review, comment, and written approval of Client’s air permit application.
	 
	 	13.	 	Owner is required to provide approval of and understand the cost implications of the
soil stabilization and foundation systems required for the project. This approval will be
based on the recommendations of the geotechnical and structural engineers.
	 
	 	14.	 	Location and form for delivery of temporary electrical service.

	 
	 	15.	 	On-site location for Storm Water discharge.
	 
	 	16.	 	Preliminary NPDES discharge location for water discharges from utility discharges
including, but not limited to the water pre-treatment system, water softeners, and cooling
tower blowdown.
	 
	 	17.	 	Preliminary indication of source, analysis, and location of Client’s water supply.
	 
	 	18.	 	Client’s risk insurance provider’s specific requirements for fire protection or
approval to design fire protection to Liberty Insurance standards.
	 
	 	19.	 	Construction of a lined settling pond with wetland discharge for receiving the ethanol
plant non-contact waste streams and filter backwash (if applicable) is required. Provide
verification that an application for a permit to construct the settling pond has been
applied for. The approval process can take in excess of 6 months. Pond construction
cannot begin until receipt of permit.

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Phase I and Phase II Engineering Agreement

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Phase II Deliverables

          Prior to Engineer’s commencement of the Phase II Design Package work, the Client shall provide
Engineer with the following Phase II Deliverables:

	 	1.	 	Off-site utility tie-in locations at or near the property lines (this includes, but is
not limited to, gas supply, electrical supply, water supply if no on-site wells, on-site or
off-site sanitary sewer)
	 
	 	2.	 	Final NPDES discharge location for Utility Water Blowdown.
	 
	 	3.	 	An insurance provider to allow the proper positioning and number of required hydrants
and hydrants with monitors.
	 
	 	4.	 	Written approval of final rail design from the Client’s rail service provider.
	 
	 	5.	 	Final location and design (general arrangement) of the Client’s administration
building.
	 
	 	6.	 	Owner is to execute side-letter agreements with Design-Builder as necessary for the
design and construction of a water pre-treatment as outlined in Exhibit C of the
Design/Build Contract.
	 
	 	7.	 	Design and location of sanitary sewer discharge point of septic system.

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Phase I and Phase II Engineering Agreement

May 23, 2007

19

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