Document:

Exhibit
10.6

LUMP SUM DESIGN-BUILD
AGREEMENT

BETWEEN

ABE NORTHFIELD, LLC (“OWNER”)

AND

FAGEN, INC. (“DESIGN-BUILDER”)

February 7, 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 The Project

  	
   

  	
  6

  
	
   

  	
   

  	
   

  
	
  2.1

  	
  Services to be Performed

  	
   

  	
  6

  
	
  2.2

  	
  Extent of Agreement

  	
   

  	
  6

  
	
  2.3

  	
  Conflicting Provisions

  	
   

  	
  7

  
	
   

  	
   

  	
   

  	
   

  
	
  Article 3 Design-Builder Responsibilities

  	
   

  	
  7

  
	
   

  	
   

  	
   

  
	
  3.1

  	
  Design-Builder’s Services in General

  	
   

  	
  7

  
	
  3.2

  	
  Design Development and Services

  	
   

  	
  8

  
	
  3.3

  	
  Standard of Care

  	
   

  	
  9

  
	
  3.4

  	
  Government Approvals and Permits

  	
   

  	
  9

  
	
  3.5

  	
  Subcontractors

  	
   

  	
  9

  
	
  3.6

  	
  Maintenance of Site

  	
   

  	
  10

  
	
  3.7

  	
  Project Safety

  	
   

  	
  10

  
	
  3.8

  	
  Submission of Reports

  	
   

  	
  11

  
	
  3.9

  	
  Training

  	
   

  	
  11

  
	
   

  	
   

  	
   

  	
   

  
	
  Article 4 Owner’s Responsibilities

  	
   

  	
  11

  
	
   

  	
   

  	
   

  
	
  4.1

  	
  Duty to Cooperate

  	
   

  	
  11

  
	
  4.2

  	
  Furnishing of Services and Information

  	
   

  	
  11

  
	
  4.3

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

  	
   

  	
  12

  
	
  4.4

  	
  Owner’s Representative

  	
   

  	
  13

  
	
  4.5

  	
  Government Approvals and Permits

  	
   

  	
  13

  
	
  4.6

  	
  Owner’s Separate Contractors

  	
   

  	
  13

  
	
  4.7

  	
  Security

  	
   

  	
  13

  
	
   

  	
   

  	
   

  	
   

  
	
  Article 5 Ownership of Work Product; Risk of
  Loss

  	
   

  	
  13

  
	
   

  	
   

  	
   

  
	
  5.1

  	
  Work Product

  	
   

  	
  13

  
	
  5.2

  	
  Owner’s Limited License Upon Payment in Full

  	
   

  	
  14

  
	
  5.3

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

  	
   

  	
  14

  
	
  5.4

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

  	
   

  	
  15

  
	
  5.5

  	
  Owner’s Indemnification for Use of Work Product

  	
   

  	
  15

  
	
  5.6

  	
  Risk of Loss

  	
   

  	
  15

  
	
   

  	
   

  	
   

  	
   

  
	
  Article 6 Commencement and Completion of the
  Project

  	
   

  	
  15

  
	
   

  	
   

  	
   

  
	
  6.1

  	
  Phase I and Phase II Engineering

  	
   

  	
  15

  

 

 i
 

 

	
  

  	
   

  	
  Page

  
	
  6.2

  	
  Notice to Proceed; Commencement

  	
   

  	
  16

  
	
  6.3

  	
  Project Start-Up and Testing

  	
   

  	
  16

  
	
  6.4

  	
  Substantial Completion

  	
   

  	
  17

  
	
  6.5

  	
  Final Completion

  	
   

  	
  18

  
	
  6.6

  	
  Post Completion Support

  	
   

  	
  19

  
	
   

  	
   

  	
   

  	
   

  
	
  Article 7 Performance Testing and Liquidated
  Damages

  	
   

  	
  20

  
	
   

  	
   

  	
   

  
	
  7.1

  	
  Performance Guarantee

  	
   

  	
  20

  
	
  7.2

  	
  Performance Testing

  	
   

  	
  20

  
	
  7.3

  	
  Liquidated Damages

  	
   

  	
  21

  
	
  7.4

  	
  Bonds and Other Performance Security

  	
   

  	
  22

  
	
   

  	
   

  	
   

  	
   

  
	
  Article 8 Warranties

  	
   

  	
  23

  
	
   

  	
   

  	
   

  
	
  8.1

  	
  Design-Builder Warranty

  	
   

  	
  23

  
	
  8.2

  	
  Correction of Defective Work

  	
   

  	
  23

  
	
  8.3 

  	
  Warranty Period Not Limitation to Owner’s Rights

  	
   

  	
  24

  
	
   

  	
   

  	
   

  	
   

  
	
  Article 9 Contract Price

  	
   

  	
  24

  
	
   

  	
   

  	
   

  
	
  9.1

  	
  Contract Price

  	
   

  	
  24

  
	
  9.2

  	
  Effect of Construction Cost Index Increase on
  Contract Price

  	
   

  	
  25

  
	
   

  	
   

  	
   

  	
   

  
	
  Article 10 Payment Procedures

  	
   

  	
  25

  
	
   

  	
   

  	
   

  
	
  10.1

  	
  Payment at Financial Closing Prior to Notice to
  Proceed

  	
   

  	
  25

  
	
  10.2

  	
  Progress Payments

  	
   

  	
  26

  
	
  10.3

  	
  Final Payment

  	
   

  	
  27

  
	
  10.4

  	
  Failure to Pay Amounts Due

  	
   

  	
  27

  
	
  10.5

  	
  Design-Builder’s Payment Obligations

  	
   

  	
  27

  
	
  10.6

  	
  Record Keeping and Finance Controls

  	
   

  	
  28

  
	
   

  	
   

  	
   

  	
   

  
	
  Article 11 Hazardous Conditions and Differing
  Site Conditions

  	
   

  	
  28

  
	
   

  	
   

  	
   

  
	
  11.1

  	
  Hazardous Conditions

  	
   

  	
  28

  
	
  11.2

  	
  Differing Site Conditions; Inspection

  	
   

  	
  29

  
	
   

  	
   

  	
   

  	
   

  
	
  Article 12 Force Majeure; Change in Legal
  Requirements

  	
   

  	
  29

  
	
   

  	
   

  	
   

  
	
  12.1

  	
  Force Majeure Event

  	
   

  	
  29

  
	
  12.2

  	
  Effect of Force Majeure Event

  	
   

  	
  30

  
	
  12.3

  	
  Change in Legal Requirements

  	
   

  	
  31

  
	
  12.4

  	
  Time Impact And Availability

  	
   

  	
  31

  
	
  12.5

  	
  Effect of Industry-Wide Disruption on Contract Price

  	
   

  	
  31

  
	
   

  	
   

  	
   

  	
   

  
	
  Article 13 Changes to the Contract Price and
  Scheduled Completion Dates

  	
   

  	
  32

  
	
   

  	
   

  	
   

  
	
  13.1

  	
  Change Orders

  	
   

  	
  32

  
	
  13.2

  	
  Contract Price Adjustments

  	
   

  	
  32

  
	
  13.3

  	
  Emergencies

  	
   

  	
  33

  
	
  13.4

  	
  Failure to Complete Owner’s Milestones

  	
   

  	
  33

  

 

 ii
 

 

	
  

  	
   

  	
  Page

  
	
  Article 14 Indemnity

  	
   

  	
  33

  
	
   

  	
   

  	
   

  
	
  14.1

  	
  Tax Claim Indemnification

  	
   

  	
  33

  
	
  14.2

  	
  Payment Claim Indemnification

  	
   

  	
  33

  
	
  14.3

  	
  Design-Builder’s General Indemnification

  	
   

  	
  34

  
	
  14.4

  	
  Owner’s General Indemnification

  	
   

  	
  35

  
	
  14.5

  	
  Patent and Copyright Infringement

  	
   

  	
  35

  
	
   

  	
   

  	
   

  	
   

  
	
  Article 15 Stop Work; Termination for Cause

  	
   

  	
  36

  
	
   

  	
   

  	
   

  
	
  15.1

  	
  Owner’s Right to Stop Work

  	
   

  	
  36

  
	
  15.2

  	
  Owner’s Right to Perform and Terminate for Cause

  	
   

  	
  36

  
	
  15.3

  	
  Owner’s Right to Terminate for Convenience

  	
   

  	
  37

  
	
  15.4

  	
  Design-Builder’s Right to Stop Work

  	
   

  	
  38

  
	
  15.5

  	
  Design-Builder’s Right to Terminate for Cause

  	
   

  	
  38

  
	
  15.6

  	
  Bankruptcy of Owner or Design-Builder

  	
   

  	
  39

  
	
  15.7

  	
  Lenders’ Right to Cure

  	
   

  	
  40

  
	
   

  	
   

  	
   

  	
   

  
	
  Article 16 Representatives of the Parties

  	
   

  	
  40

  
	
   

  	
   

  	
   

  
	
  16.1

  	
  Designation of Owner’s Representatives

  	
   

  	
  40

  
	
  16.2

  	
  Designation of Design-Builder’s Representatives

  	
   

  	
  40

  
	
   

  	
   

  	
   

  	
   

  
	
  Article 17 Insurance

  	
   

  	
  41

  
	
   

  	
   

  	
   

  
	
  17.1

  	
  Insurance

  	
   

  	
  41

  
	
  17.2

  	
  Design-Builder’s Insurance Requirements

  	
   

  	
  42

  
	
  17.3

  	
  Owner’s Liability Insurance

  	
   

  	
  43

  
	
  17.4

  	
  Owner’s Property Insurance

  	
   

  	
  43

  
	
  17.5

  	
  Coordination with Loan Documents

  	
   

  	
  45

  
	
   

  	
   

  	
   

  	
   

  
	
  Article 18 Representations and Warranties

  	
   

  	
  45

  
	
   

  	
   

  	
   

  
	
  18.1

  	
  Design-Builder and Owner Representations and
  Warranties

  	
   

  	
  45

  
	
  18.2

  	
  Design-Builder Representations and Warranties

  	
   

  	
  46

  
	
   

  	
   

  	
   

  	
   

  
	
  Article 19 Dispute Resolution

  	
   

  	
  46

  
	
   

  	
   

  	
   

  
	
  19.1

  	
  Dispute Avoidance and Mediation

  	
   

  	
  46

  
	
  19.2

  	
  Arbitration

  	
   

  	
  46

  
	
  19.3

  	
  Duty to Continue Performance

  	
   

  	
  47

  
	
  19.4

  	
  No Consequential Damages

  	
   

  	
  47

  
	
  19.5

  	
  Limitation of Liability

  	
   

  	
  47

  
	
   

  	
   

  	
   

  	
   

  
	
  Article 20 Confidentiality of Shared Information

  	
   

  	
  48

  
	
   

  	
   

  	
   

  
	
  20.1

  	
  Non-Disclosure Obligation

  	
   

  	
  48

  
	
  20.2

  	
  Publicity and Advertising

  	
   

  	
  49

  
	
  20.3

  	
  Term of Obligation

  	
   

  	
  49

  
	
   

  	
   

  	
   

  	
   

  
	
  Article 21 Miscellaneous

  	
   

  	
  49

  
	
   

  	
   

  	
   

  
	
  21.1

  	
  Assignment

  	
   

  	
  49

  
	
  21.2

  	
  Successors

  	
   

  	
  50

  
	
  21.3

  	
  Governing Law

  	
   

  	
  50

  

 

 iii
 

 

	
  

  	
   

  	
  Page

  
	
  21.4

  	
  Severability

  	
   

  	
  50

  
	
  21.5

  	
  No Waiver

  	
   

  	
  50

  
	
  21.6

  	
  Headings

  	
   

  	
  50

  
	
  21.7

  	
  Notice

  	
   

  	
  50

  
	
  21.8

  	
  No Privity with Design Consultant/Subcontractors

  	
   

  	
  51

  
	
  21.9

  	
  Amendments

  	
   

  	
  51

  
	
  21.10

  	
  Entire Agreement

  	
   

  	
  52

  
	
  21.11

  	
  Third-Party Beneficiaries

  	
   

  	
  52

  
	
  21.12

  	
  Counterparts

  	
   

  	
  52

  
	
  21.13

  	
  Survival

  	
   

  	
  52

  
	
   

  	
   

  	
   

  	
   

  
	
  EXHIBIT A Performance Guarantee Criteria

  	
   

  	
  A-1

  
	
   

  	
   

  	
   

  
	
  EXHIBIT B General Project Scope

  	
   

  	
  B-1

  
	
   

  	
   

  	
   

  
	
  EXHIBIT C Owner’s Responsibilities

  	
   

  	
  C-1

  
	
   

  	
   

  	
   

  
	
  EXHIBIT D ICM License Agreement

  	
   

  	
  D-1

  
	
   

  	
   

  	
   

  
	
  EXHIBIT E Schedule of Values

  	
   

  	
  E-1

  
	
   

  	
   

  	
   

  
	
  EXHIBIT F Form of Informational Report

  	
   

  	
  F-1

  
	
   

  	
   

  	
   

  
	
  EXHIBIT G Required Permits

  	
   

  	
  G-1

  
	
   

  	
   

  	
   

  
	
  EXHIBIT H Form of Performance Bond

  	
   

  	
  H-1

  
	
   

  	
   

  	
   

  
	
  EXHIBIT I Form of Payment Bond

  	
   

  	
  I-1

  
	
   

  	
   

  	
   

  
	
  EXHIBIT J Draw (Payment) Schedule

  	
   

  	
  J-1

  
	
   

  	
   

  	
   

  
	
  EXHIBIT K Air Emissions Application or Permit

  	
   

  	
  K-1

  
	
   

  	
   

  	
   

  
	
  EXHIBIT L Phase I and Phase II Engineering
  Services Agreement

  	
   

  	
  L-1

  
	
   

  	
   

  	
   

  
	
  EXHIBIT M Form of Application for Payment

  	
   

  	
  M-1

  
	
   

  	
   

  	
   

  
	
  EXHIBIT N Form of Lien Waiver

  	
   

  	
  N-1

  
	
   

  	
   

  	
   

  
	
  EXHIBIT O Form of Consent to Assignment

  	
   

  	
  O-1

  

 

 iv

LUMP SUM
DESIGN-BUILD CONTRACT

This LUMP SUM DESIGN-BUILD CONTRACT (the “Agreement”)
is made as of February 7, 2007, (the “Effective Date”) by and between
ABE Northfield, LLC, a Delaware limited liability company (the “Owner”)
and Fagen, Inc., a Minnesota corporation (the “Design-Builder”) (each a “Party”
and collectively, the “Parties”).

RECITALS

A.    The Owner
desires to develop, construct, own and operate a one hundred (100)  million gallons per year (“MGY”) dry
grind denatured ethanol production facility located near Northfield, Minnesota
(the “Plant”); and

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

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

AGREEMENT

Article 1

Definitions; Rules of Interpretation

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

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

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

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

  
  
 

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

AAA is defined in Section 19.1.

Agreement is defined in the Preamble.

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

Applicable
Law means

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

(b)                                 any
and all orders, judgments, writs, decrees, injunctions, Governmental Approvals
or other decisions of a Governmental Authority; and

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

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

Application
for Payment is defined in Section 10.2.1.

As Built
Plans is defined in Section 5.2.

Bankrupt
Party is defined in Section 15.6.1.  

Baseline
Index is defined in Section 9.2.1.

Change
Order is defined in Section 13.1.1.

CCI
is defined in Section 9.2.

Certificate
of Substantial Completion is defined in Section 6.4.3.

Commitment
Fee is defined in Section 10.1.1.

Confidential
Information is defined in Section 20.1.

Construction
Documents is defined in Section 3.2.1.

 2
 

Contract
Documents is defined in Section 2.2.

Contract
Price is defined in Section 9.1.

Contract
Time(s) means scheduled dates provided for in the Contract
Documents including Scheduled Substantial Completion Date and Final Completion
Date.

Damages
is defined in Section 14.3.1.

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

Design-Builder
is defined in the Preamble.

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

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

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

Differing
Site Conditions is defined in Section 11.2.1.

Early
Completion Bonus is defined in Section 6.4.4.

Effective
Date is defined in the Preamble.

Fagen
Engineering is defined in Section 6.1.

Final
Application for Payment is defined in Section 10.3. 

Final
Completion is defined in Section 6.5.2.

Final
Completion Date is defined in Section 6.5.1.

Final
Payment is defined in Section 10.3.

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

Financing
Documents means the final loan documents with the Lender or
Lenders providing financing for the construction or term financing of the Plant
and any and all agreements

 3
 

necessary to
demonstrate a binding commitment of Owner or Lenders to fund the construction
of the Plant.

Force
Majeure Event is defined in Section 12.1. 

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

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

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

ICM
means ICM, Inc., a Kansas corporation.

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

Indemnified
Parties is defined in Section 5.2.

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

Industry-Wide
Disruption is defined in Section 12.4.

Informational
Report is defined in Section 3.8.

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

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

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

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

 4
 

MGY
is defined in the Recitals.

Notice to
Proceed is defined in Section 6.2.

Operating
Procedures means, without limitation, the process equipment
and specifications manuals, standards of quality, service protocols, data
collection methods, construction specifications, training methods, engineering
standards and any other information prescribed by Design-Builder and ICM from
time to time concerning the ownership, operation, maintenance and repair of the
Plant, subject to the limitations provided in the Agreement and in the ICM
License Agreement.

Owner
is defined in the Preamble.

Owner
Indemnified Parties is defined in Section 14.3.1.

Owner’s
Milestones is defined in Section 13.4.

Owner’s
Operator means the entity that Owner identifies, upon written
notice to Design-Builder, as operator of the Project or any other entity that
Owner chooses, upon notice to Design-Builder, to replace such entity as
operator of the Project.

Owner’s
Representative is defined in Section 16.1.

Owner’s
Senior Representative is defined in Section 16.1.

Party or
Parties is defined in the Preamble.

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

Pay
Period means, with respect to a given Application for
Payment, the one (1) month period following the last day of the previous Pay
Period to which the immediately prior Application for Payment is applied;
provided that the initial Pay Period shall commence on the date of delivery of
the Notice to Proceed and end on the twenty-fourth (24th) day of the calendar month during which
the Notice to Proceed is issued.

Payment
Bond is defined in Section 7.4.2. 

Performance
Bond is defined in Section 7.4.1. 

Performance
Guarantee Criteria means the criteria listed in Exhibit A. 

Performance
Tests is defined in Section 7.2.1. 

Phase I is
defined in Exhibit L.

Phase I
and Phase II Engineering Services Agreement is defined in
Section 6.1.

 5
 

Phase II is
defined in Exhibit L.

Plant is
defined in the Recitals.

Project is
defined in Section 2.1.

Project
Scope is defined in Exhibit B.

Punch
List is defined in Section 6.4.3.

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

Safety
Representative is defined in Section 3.7.1.

Schedule
of Values is defined in Section 10.2.5.

Scheduled
Substantial Completion Date is defined in Section 6.4.1. 

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

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

Substantial
Completion is defined in Section 6.4.2.

Work is
defined in Section 3.1.

Work
Product is defined in Section 5.1. 

Article 2

The Project

2.1          Services
to be Performed.

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

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

 6
 

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

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

	
  List of Exhibits

  
	
   

  
	
  Exhibit A

  	
   

  	
  Performance Guarantee Criteria

  
	
  Exhibit B

  	
   

  	
  General Project Scope

  
	
  Exhibit C

  	
   

  	
  Owner’s Responsibilities

  
	
  Exhibit D

  	
   

  	
  ICM License Agreement

  
	
  Exhibit E

  	
   

  	
  Schedule of Values

  
	
  Exhibit F

  	
   

  	
  Form of Informational Report

  
	
  Exhibit G

  	
   

  	
  Required Permits

  
	
  Exhibit H

  	
   

  	
  Form of Performance Bond

  
	
  Exhibit I

  	
   

  	
  Form of Payment Bond

  
	
  Exhibit J

  	
   

  	
  Draw (Payment) Schedule

  
	
  Exhibit K

  	
   

  	
  Air Emissions Application or Permit

  
	
  Exhibit L

  	
   

  	
  Phase I and Phase II Engineering Services Agreement

  
	
  Exhibit M

  	
   

  	
  Form of Application for Payment

  
	
  Exhibit N

  	
   

  	
  Form of Lien Waiver

  
	
  Exhibit O

  	
   

  	
  Form of Consent to Assignment

  

 

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

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

Article 3

Design-Builder Responsibilities

3.1          Design-Builder’s
Services in General.  Except for services
and information to be provided by Owner and specifically set forth in Article 4
and Exhibit C, Design-Builder shall perform or cause to be performed all
design, engineering, procurement, construction services, supervision, labor,
inspection, testing, start-up, material, equipment, machinery, temporary
utilities and other temporary facilities to complete construction of the
Project consistent with the Contract Documents (the “Work”).  All design and engineering and construction
services and

 7
 

other Work of the
Design-Builder shall be performed in accordance with (i) the Project Scope set
forth in Exhibit B, (ii) the Construction Documents, (iii) all Legal
Requirements, and (iv) generally accepted construction and design-build
standards of the fuel ethanol industry in the United States during the relevant
time period.  Any design and engineering
or other professional service to be performed pursuant to this Agreement, which
under Applicable Law must be performed by licensed personnel, shall be
performed by licensed personnel as required by Law.  The enumeration of specific duties and
obligations to be performed by the Design-Builder under the Contract Documents
shall not be construed to limit in any way the general undertakings of the
Design-Builder as set forth herein. 
Design-Builder’s Representative shall be reasonably available to Owner
and shall have the necessary expertise and experience required to supervise the
Work.  Design-Builder’s Representative
shall communicate regularly with Owner and shall be vested with the authority
to act on behalf of Design-Builder.

3.2          Design
Development and Services.

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

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

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

3.2.4       Except as provided elsewhere in this
Agreement, it is understood and agreed that review, comment and/or approval by
Owner (or its designees) or Independent Engineer of any documents or submittals
that Design-Builder is required to submit to Owner (or its designees) or
Independent Engineer hereunder for their review, comment and/or approval
(including without limitation the Construction Documents pursuant to Sections
3.2.1 and 3.2.3 hereof) shall not relieve or release Design-Builder from any of
its duties, obligations or liabilities 

 8
 

provided
for under the terms of this Agreement or transfer any design liability from
Design-Builder to Owner.

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

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

3.5          Subcontractors.

3.5.1       Design-Builder may subcontract portions of
the Work in accordance with the terms hereof.

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

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

 9
 

 

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

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

3.7          Project
Safety.

3.7.1       Design-Builder recognizes the importance of
performing the Work in a safe manner so as to prevent damage, injury or loss to
(i) any individuals at the Site, whether working or visiting, (ii) the Work,
including materials and equipment incorporated into the Work or stored on-Site
or off-Site, and (iii) any other property at the Site or adjacent thereto.  Design-Builder assumes responsibility for
implementing and monitoring all safety precautions and programs related to the
performance of the Work.  Design-Builder
shall, prior to commencing construction, designate a representative (the “Safety
Representative”) with the necessary qualifications and experience to
supervise the implementation and monitoring of all safety precautions and
programs related to the Work. Unless otherwise required by the Contract
Documents, Design-Builder’s Safety Representative shall be an individual
stationed at the Site who may have responsibilities on the Project in addition
to safety.  The Safety Representative
shall make routine daily inspections of the Site and shall hold weekly safety
meetings with Design-Builder’s personnel, Subcontractors and others as
applicable.

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

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

 10
 

3.8          Submission
of Reports.   Design-Builder shall provide Owner with a
monthly informational report substantially in the form of Exhibit F attached
hereto (“Informational Report”).

3.9          Training.  At a mutually agreed time prior to start-up,
Design-Builder shall provide up to two (2) weeks of training at a facility
designated by ICM for all of Owner’s employees and Owner Operator’s employees
required for the operation and maintenance of the Plant in accordance with all
design specifications therefor contained in the Contract Documents and
necessary in order to maintain the Performance Guarantee Criteria, including
operators, laboratory personnel, general, plant and maintenance managers. Other
personnel of Owner and Owner Operator may receive such training by separate
arrangement between Owner and Design-Builder and as time is available.  All training personnel and costs associated
with such training personnel, including labor and all training materials will
be provided to Owner and Owner Operator within the Contract Price at no
additional cost. Owner and Owner Operator will be responsible for all travel
and expenses of their employees and the Owner and Owner Operator will pay all
wages and all other expenses for their personnel during the training. The
training services will include training on computers, laboratory procedures,
field operating procedures, and overall plant section performance
expectations.  Prior to the start-up
training, Design-Builder shall provide Owner training manuals and operating
manuals and other documents reasonably necessary for the start-up process.

Article 4

Owner’s Responsibilities

4.1          Duty
to Cooperate.

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

4.1.2       Owner shall pay all reasonable costs incurred
by Design-Builder for frost removal so that winter construction can
proceed.  Such costs may include, but are
not limited to, equipment costs, equipment rental costs, sheltering costs,
special material costs, fuel costs and associated labor costs.  Owner acknowledges and agrees that such costs
are in addition to, and not included in, the Contract Price, and that the
payment of such costs, which shall be billed on a weekly basis, shall not
require the issuance of a Change Order or the obtaining of any Owner approval
prior to the issuance of invoices for such costs.

4.2          Furnishing
of Services and Information.

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

 11
 

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

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

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

(d)                                 A
legal description of the Site;

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

(f)                                    all
environmental studies, reports and impact statements describing the
environmental conditions, including Hazardous Conditions, in existence at the
Site that have been conducted or performed.

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

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

4.3          Financial
Information; Cooperation with Lenders; Failure to Obtain Financial Closing.  Design-Builder acknowledges that Owner is
seeking financing for the Project. 
Design-Builder agrees to cooperate with Owner in good faith in order to
satisfy the reasonable requirements of Owners’ financing arrangements,
including, where appropriate and reasonable, the execution and delivery of
documents or instruments necessary to accommodate the Financial Closing.  Owner agrees to pay all documented costs
incurred by Design-Builder incurred prior to and at Financial Closing, and
thereafter during the term of this Agreement, in connection with satisfying the
requirements of Owners’ financing arrangements including all documented
attorney’s fees.  Design-Builder and
Owner also acknowledge that the Lenders, as a condition to providing financing
for the Plant, shall require Owner to provide the Independent Engineer with
certain reasonable participation and review rights with respect to
Design-Builder’s performance of the Work. 
Design-Builder acknowledges and agrees that such reasonable
participation and review rights shall consist of the right to (i) enter the
Site and inspect the Work upon reasonable notice to Design-Builder; (ii) attend
all start-up and testing procedures; and (iii) review and approve such other
items for which Owner is required by Lenders to obtain the concurrence, opinion
or a certificate of the Independent Engineer or the Lenders pursuant to the
Financing Documents which items do not alter the rights or impose additional
obligations on Design-

 12
 

Builder.  Nothing in this Section 4.3 shall be deemed
to require Design-Builder to agree to any amendments to this Agreement that
would adversely affect Design-Builder’s risks, rights or obligations under this
Agreement.  Upon Financial Closing, Owner
shall promptly provide to Design-Builder an officer’s certificate certifying
that Financial Closing has occurred and such Owner’s officer’s certificate
shall constitute evidence satisfactory to Design-Builder that Owner has
adequate funds available and committed to fulfill its obligations under the
Contract Documents for all purposes hereunder. 
Owner must provide such officer’s certificate prior to issuing the
Notice to Proceed.

4.4          Owner’s
Representative.  Owner’s
Representative, as set forth in Section 16.1 hereof, shall be responsible for
providing Owner-supplied information and approvals in a timely manner to permit
Design-Builder to fulfill its obligations under the Contract Documents.  Owner’s Representative shall also provide
Design-Builder with prompt notice if it observes any failure on the part of
Design-Builder to fulfill its contractual obligations, including any errors,
omissions or defects in the performance of the Work.  Owner’s Representative shall be vested with
the authority to act on behalf of Owner and Design-Builder shall be entitled to
rely on written communication from Owner’s Representative with respect to a
Project matter.

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

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

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

Article 5

Ownership of Work Product; Risk of Loss

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

 13
 

5.2          Owner’s
Limited License Upon Payment in Full. 
Upon Owner’s payment in full for all Work performed under the Contract
Documents, Design-Builder shall grant Owner a limited license to use the Work
Product in connection with Owner’s occupancy and repair of the Plant.  Design-Builder acknowledges and agrees that
the limited license to use the Work Product granted hereby shall provide Owner
sufficient rights in and to the Work Product as shall be necessary for Owner to
operate and maintain the Plant and shall include any Pass Through Warranties in
connection therewith.  Design-Builder
shall provide Owner with a copy of the plans of the Plant, as built, (the “As
Built Plans”) conditioned on Owner’s express understanding that its use of
the Work Product and its acceptance of the As Built Plans is at Owner’s sole
risk and without liability or legal exposure to Design-Builder or anyone
working by or through Design-Builder, including Design Consultants of any tier
(collectively the “Indemnified Parties”); provided, however, that any
performance guarantees and warranties (of equipment or otherwise) shall remain
in effect according to the terms of this Agreement.

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

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

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

 14

(b)                                 If
the termination for convenience is by Owner in accordance with Section 15.3
hereof, or if Design-Builder elects to terminate this Agreement in accordance
with Section 15.5, then Owner agrees to pay Design-Builder the additional sum
of Two Million Five Hundred Thousand Dollars ($2,500,000.00) as compensation
for the limited right to use the Work Product completed “as is” on the date of
termination in accordance with this Article 5.

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

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

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

Article 6

Commencement and Completion of the Project

6.1          Phase
I and Phase II Engineering.  Owner shall
have entered into that certain Phase I and Phase II Engineering Services
Agreement dated January 9, 2007 between Owner and Fagen Engineering, LLC (“Fagen
Engineering”) and attached hereto as Exhibit L (“Phase I and Phase II
Engineering Services Agreement”). The Phase I and Phase II Engineering
Services Agreement provides for Fagen Engineering to commence work on the Phase
I and Phase II

 15
 

engineering for
the Project as set forth therein.  Owner
has agreed to pay Fagen Engineering Ninety-two Thousand Five Hundred Dollars
($92,500.00) for such engineering services pursuant to the terms of that
agreement, the full amount of which shall be included in and credited to the
Contract Price.  Notwithstanding the
foregoing sentence, if a Notice to Proceed is not issued pursuant to Section
6.2, or Financial Closing is not obtained pursuant to Section 4.3, then no
amount paid under the Phase I and Phase II Engineering Services Agreement shall
be refunded to Owner.

6.2          Notice
to Proceed; Commencement.  The Work shall
commence within five (5) Days of Design-Builder’s receipt of Owner’s written
valid notice to proceed (“Notice to Proceed”) unless the Parties
mutually agree otherwise in writing.  The
Parties agree that a valid Owner’s Notice to Proceed cannot be given
until:  (1) Owner has title to the real
estate on which the Project will be constructed; (2) the Phase I and Phase II
Site work required of Owner, as described in Exhibit L is completed along with
redline drawings and such Phase I and Phase II Site work and redline drawings
have been reviewed and deemed adequate by Design-Builder;  (3)
the air permit(s) and/or other applicable local, state or federal permits
necessary so that construction can begin, as listed on Exhibit G, have been
obtained; (4) Owner has obtained Financial Closing pursuant to Section 4.3; (5)
if applicable, Owner has executed a sales tax exemption certificate and
provided the same to Design-Builder; (6) Owner has provided the name of its
property/all-risk insurance carrier and the specific requirements for fire
protection; (7) Owner has provided an insurance certificate or copy of
insurance policy demonstrating that Owner has obtained builder’s risk insurance
pursuant to Section 17.4.3 hereof, and (8) Design-Builder provides Owner
written notification of its acceptance of the Notice to Proceed, provided that
Design-Builder shall not be required to accept the Notice to Proceed prior to
October 8, 2007. Owner and Design-Builder mutually agree that time is of the
essence with respect to the dates and times set forth in the Contract
Documents. Owner must complete the prerequisites to the issuance of a valid
Notice to Proceed, as listed in items number (1) through (7) of this Section
6.2 and submit a Notice to Proceed to Design-Builder for Design-Builder’s
acceptance by October 15, 2007; otherwise, this Agreement may be terminated, at
Design-Builder’s sole option.  If
Design-Builder chooses to terminate this Agreement pursuant to its right under
the immediately preceding sentence, then Design-Builder shall have no further
obligations hereunder.

6.2.1       Notice to Proceed shall be delivered by Owner to Design-Builder
pursuant to the notice requirements set forth in Section 21.7 hereof, with a
copy to:

Fagen, Inc.

501 W. Highway 212

P. O. Box 159

Granite Falls, MN  56241

Attention: Becky Dahl

Fax:  (320) 564-3278

6.3          Project
Start-Up and Testing.  Owner shall
provide, at Owner’s cost, equipment, tools, instruments and materials necessary
for Owner to comply with its obligations under Exhibit C, raw materials,
consumables and personnel necessary for start-up and testing of the Plant, and
Design-Builder shall provide supervision, standard and special test
instruments, tools, equipment and materials required to perform component and
equipment checkout and testing, 

 16
 

initial start-up,
operations supervision and corrective maintenance of all permanent Plant
equipment within the scope of the Work. 
Notwithstanding the foregoing sentence, Design-Builder shall be
responsible for raw materials and consumables to the extent such amounts
provided by Owner are destroyed or damaged (as opposed to consumed in the
ordinary course of start-up and testing) by Design-Builder or its personnel
during start-up and testing. Design-Builder shall supervise and direct Owner’s
employees and Owner Operator’s personnel who shall participate in the start-up activities
with Design-Builder’s personnel to become familiar with all aspects of the
Plant. Owner and the Independent Engineer may witness start-up and testing
activities.  Performance testing will be
conducted in accordance with the provisions of Section 7.2 hereof.

6.4          Substantial
Completion.

6.4.1       Substantial Completion of the entire Work shall be achieved no later
than six hundred thirty-five (635) Days after the date of the Notice to
Proceed, subject to adjustment in accordance with the Contract Documents hereof
(the “Scheduled Substantial Completion Date”).

6.4.2       “Substantial Completion” shall be deemed to occur on the date on
which the Work is sufficiently complete so that Owner can occupy and use the
Plant for its intended purposes. 
Substantial Completion shall be attained at the point in time when the
Plant is ready to grind the first batch of corn and begin operation for its
intended use.  No production is
guaranteed on the date of Substantial Completion.

6.4.3       Procedures.  Design-Builder shall
notify Owner in writing when it believes Substantial Completion has been
achieved with respect to the Work. 
Within five (5) Days of Owner’s receipt of Design-Builder’s notice,
Owner and Design-Builder will jointly inspect such Work to verify that it is
substantially complete in accordance with the requirements of the Contract
Documents.  If such Work is deemed
substantially complete, Design-Builder shall 
prepare and issue a “Certificate of Substantial Completion” for
the Work that will set forth (i) the date of Substantial Completion, (ii) the
remaining items of Work that have to be completed before Final Payment (“Punch
List”), (iii) provisions (to the extent not already provided in this
Agreement) establishing Owner’s and Design-Builder’s responsibility for the
Project’s security, maintenance, utilities and insurance pending Final Payment,
and (iv) an acknowledgment that warranties with respect to the Work commence on
the date of Substantial Completion, except as may otherwise be noted in the
Certificate of Substantial Completion. 
Upon Substantial Completion of the entire Work and satisfaction of the
Performance Guarantee Criteria listed in Exhibit A, Owner shall release to
Design-Builder all retained amounts, less an amount equal to One Hundred Fifty
Percent (150%) of the reasonable value of all remaining or incomplete items of
Work as noted in the Certificate of Substantial Completion, and less an amount
equal to the value of any Subcontractor lien waivers not yet obtained. Owner,
at its option, may use a portion of the Work prior to completion of the entire
Work; provided, that (i) a Certificate of Substantial completion has been
issued for the portion of Work addressing the items set forth in Section 6.4.3
above, (ii) Design-Builder and Owner have, to the extent required, obtained the
consent of their sureties and insurers and the appropriate government 

 17
 

authorities having jurisdiction over the Project
or Site, and (iii) Owner and Design-Builder agree that
Owner’s use or occupancy will not interfere with Design-Builder’s completion of
the remaining Work in accordance with the Contract Documents.

6.4.4       Early Completion Bonus.  If
Substantial Completion is attained within four hundred eighty-five (485) Days
after the date of the Notice to Proceed, Owner shall pay Design-Builder at the
time of Final Payment under Section 10.3 hereof an early completion bonus (“Early
Completion  Bonus”) of Twenty Thousand Dollars ($20,000.00) per Day
for each Day that Substantial Completion occurred in advance of four hundred eighty-five
(485) Days up to a maximum bonus of Two Million Dollars ($2,000,000).  Owner shall not be liable for any amount in
excess of Two Million Dollars ($2,000,000) pursuant to this Section 6.4.4.

6.4.5       In all events, payment of said bonus, if applicable, at the time of
Final Payment is subject to release of funds by senior lender.  If senior lender does not allow release of
funds at the time of Final Payment to pay said early completion bonus in full,
any unpaid balance shall be converted to an unsecured promissory note payable
by Owner to Design-Builder, accruing interest at Ten Percent (10%).  On each anniversary of the note, any unpaid
accrued interest shall be converted to principal and shall accrue interest as
principal thereafter.  Owner shall pay said
promissory note as soon as allowed by senior lender; in any event, the note,
plus accrued interest, shall be paid in full before Owner pays or makes any
distributions to or for the benefit of its owners (shareholders, members,
partners, etc.).  All payments shall be
applied first to accrued interest and then to principal.

6.5          Final
Completion.

6.5.1       Final Completion of the Work shall be achieved within ninety (90) Days
after the earlier of the actual date of Substantial Completion or the Scheduled
Substantial Completion Date (the “Final Completion Date”).

6.5.2       “Final Completion” shall be achieved when the Owner reasonably
determines that the following conditions have been met:

(a)                                  Substantial Completion has been achieved;

(b)                                 any outstanding amounts owed by
Design-Builder to Owner have been paid in full;

(c)                                  the items identified on the Punch List and
all other Work have been completed by Design-Builder;

(d)                                 clean-up of the Site has been completed;

 18
 

(e)                                  all permits required to have been obtained by
Design-Builder have been obtained;

(f)                                    the information in Section 6.5.4 has been
provided to Owner;

(g)                                 release
and waiver of all claims and liens from Design-Builder and Subcontractors have
been provided; and

(h)                                 the
Performance Tests have been successfully completed.

6.5.3       After receipt of a Final Application for Payment from Design-Builder,
Owner shall make Final Payment in accordance with Section 10.3, less an amount
equal to the value of any Subcontractor lien waivers not yet obtained.

6.5.4       At the time of submission of its Final Application for Payment,
Design-Builder shall provide the following information:

(a)                                  an affidavit that there are no claims,
obligations or liens outstanding or unsatisfied for labor, services, material,
equipment, taxes or other items performed, furnished or incurred for or in
connection with the Work which will in any way affect Owner’s interests;

(b)                                 a general release executed by Design-Builder
waiving, upon receipt of final payment by Design-Builder, all claims for
payment, additional compensation, or damages for delay, except those previously
made to Owner in writing and remaining unsettled at the time of Final Payment
provided such general release shall not waive defenses to claims that may be
asserted by Owner after payment or claims arising after payment;

(c)                                  consent of Design-Builder’s surety, if any,
to Final Payment; and

(d)                                 a hard copy of the As Built Plans; provided,
however, that such plans will remain the Work Product of the Design-Builder and
subject in all respects to Article 5.

6.5.5       Upon making Final Payment, Owner waives all claims against
Design-Builder except claims relating to (i) Design-Builder’s failure to
satisfy its payment obligations, (ii) Design-Builder’s failure to complete the
Work consistent with the Contract Documents, including defects appearing within
one (1) year after Substantial Completion, and (iii) the terms of any
warranties required by the Contract Documents.

6.6          Post
Completion Support.  Adequate personnel
to complete all Work within the Contract Time(s) will be maintained on-Site by
Design-Builder or a Subcontractor until Final Completion has been
achieved.  In addition to prosecuting the
Work until Final Completion has

 19
 

been achieved,
Design-Builder or its Subcontractor will provide one (1) month of on-Site
operational support for Owner’s and Owner Operator’s personnel after successful
completion of the Performance Tests and, from the date of Substantial
Completion, will provide six (6) months of off-Site technical and operating
procedure support by telephone and other electronic data transmission and
communication.

Article 7

Performance Testing and Liquidated Damages

7.1          Performance
Guarantee.  The Design-Builder guarantees
that the Plant will meet the performance criteria listed in Exhibit A (the “Performance
Guarantee Criteria”) during a performance test conducted and concluded
pursuant to the terms hereof not later than ninety (90) Days after the date of
Substantial Completion.  If there is a
performance shortfall, Design-Builder will pay all design and construction
costs associated with making the necessary corrections.  Design-Builder retains the right to use its
sole discretion in determining the method (which shall be in accordance with
generally accepted construction and design-build standards of the fuel ethanol
industry in the Midwest United States) to remedy any performance related
issues.

7.2          Performance
Testing.

7.2.1       The Design-Builder shall direct and supervise the tests and, if
necessary, the retests of the Plant using Design-Builder’s supervisory
personnel and the Air Emissions Tester shall conduct the air emissions test, in
each case, in accordance with the testing procedures set forth in Exhibit A
(the “Performance Tests”), to demonstrate, at a minimum, compliance with
the Performance Guarantee Criteria. 
Owner is responsible for obtaining Air Emissions Tester and for ensuring
Air Emissions Tester’s timely performance. 
Design-Builder shall cooperate with the Air Emissions Tester to
facilitate performance of all air emissions tests.  Design-Builder shall not be held responsible
for the actions of Owner’s employees and third parties involved in the
Performance Testing, including but not limited to Air Emissions Tester.

7.2.2       No later than thirty (30) Days prior to the earlier of the Scheduled
Substantial Completion Date or Substantial Completion, Design-Builder shall
provide to Owner for review a detailed testing plan for the Performance Tests
(other than for air emissions).  Owner
and Design-Builder shall agree upon a testing plan that shall be consistent
with the Performance Test Protocol contained in Exhibit A hereto.  After such agreement has been reached,
Design-Builder shall notify the Owner five (5) business days prior to the date
Design-Builder intends to commence the Performance Tests and shall notify the
Owner upon commencement of the Performance Tests. Owner and Independent
Engineer each have the right to witness all testing, including the Performance
Tests and any equipment testing, whether at the Site or at the Subcontractor’s
or equipment supplier’s premises during the course of this Agreement.  Notwithstanding the foregoing sentence, Owner
shall bear the costs of providing a witness to any such testing and all such
witnesses shall comply at all times with Design-Builder’s, Subcontractor’s or
equipment supplier’s safety and security procedures and other

 20
 

reasonable requirements, and
otherwise conduct themselves in a manner that does not interfere with
Design-Builder’s, Subcontractor’s or equipment supplier’s activities or operations.

7.2.3       Design-Builder shall provide to Owner a Performance Test report
(excluding results from air emissions testing), including all applicable test
data, calculations and certificates indicating the results of the Performance
Tests and, within five (5) business days of Owner’s receipt of such results,
Owner, Independent Engineer and Design-Builder will jointly inspect such Work
and review the results of the Performance Tests to verify that the Performance
Guarantee Criteria have been met.   If
Owner or Independent Engineer reasonably determines that the Performance
Guarantee Criteria have not been met, Owner shall notify Design-Builder the
reasons why Owner determined that the Performance Guarantee Criteria have not
been met and Design-Builder shall promptly take such action or perform such
additional work as will achieve the Performance Guarantee Criteria and shall
issue to the Owner another notice in accordance with Section 7.2.2; provided
however that if the notice relates to a retest, the notice may be provided no
less than two (2) business days prior to the Performance Tests.  Such procedure shall be repeated as necessary
until Owner and Independent Engineer verifies that the Performance Guarantee
Criteria have been met.

7.2.4       If Owner, for whatever reason, prevents Design-Builder from
demonstrating the Performance Guarantee Criteria within thirty (30) Days of
Design-Builder’s notice that the Plant is ready for Performance Testing, then
Design-Builder shall be excused from demonstrating compliance with the
Performance Guarantee Criteria during such period of time that Design-Builder
is prevented from demonstrating compliance with the Performance Guarantee
Criteria; provided however that Design-Builder will be deemed to have fulfilled
all of its obligations to demonstrate that the Plant meets the Performance
Guarantee Criteria should such period of time during which Design-Builder is
prevented from demonstrating the Performance Criteria exceed thirty (30) Days
or extend beyond the Final Completion Date.

7.3          Liquidated
Damages.

7.3.1       Design-Builder understands that if Final Completion is not attained by
the Final Completion Date, Owner will suffer damages which are difficult to
determine and accurately specify. 
Design-Builder agrees that if Final Completion is not attained by the
end of the Final Completion Date, Design-Builder shall pay Owner Twenty
Thousand Dollars ($20,000.00) as liquidated damages, and not as a penalty, for
each Day that Final Completion extends beyond the Final Completion Date.  Owner, at its discretion, may elect to offset
any such liquidated damages from any retainage. 
Liquidated damages shall be paid by Design-Builder by the fifteenth (15th) Day of the month following the month in which the liquidated damages
were incurred.  The liquidated damages
provided herein shall be in lieu of all liability for any and all extra costs,
losses, loss of profits, expenses, claims, penalties and any other damages,
whether special or consequential, and of whatsoever nature incurred by Owner which
are occasioned solely by any delay in achieving Final Completion.

 21
 

7.3.2       Maximum Liquidated Damages.  Design-Builder’s liability for liquidated
damages under Section 7.3.1 shall be capped at and shall not exceed One Million
Dollars ($1,000,000).

7.3.3       The liquidated damages provided herein shall be in lieu of all
liability for any and all extra costs, losses, loss of profits, expenses,
claims, penalties and any other damages, whether special or consequential, and
of whatsoever nature incurred by Owner which arise solely due to a delay in
achieving Final Completion by the Final Completion Date; provided that such
liquidated damages shall not in any way detract from or limit Owner’s remedies
or Design-Builder’s liabilities in connection with any default by
Design-Builder under Section 15.2 hereof.

7.3.4       Design-Builder shall not be liable for liquidated damages during any
period of time for which an extension of the Scheduled Substantial Completion
Date and/or  Final Completion Date is
available pursuant to Article 12.

7.4          Bonds and
Other Performance Security.

7.4.1       On or prior to the date of Financial Closing, if requested by Owner,
the Design-Builder shall deliver to Owner a bond substantially in the form
attached as Exhibit H (the “Performance Bond”) in an initial amount
equivalent to the Contract Price.  Owner shall pay on the date of
Financial Closing all costs of obtaining such bond, plus pay Design-Builder a
fee of seven and one half percent (7.5%) for obtaining such bond, such fee to
be calculated by multiplying seven and one half percent (7.5%) times the cost
of the Performance Bond.  Any amounts
payable to the surety due to Design-Builder’s default under this Agreement or
the Performance Bond shall be for the account of Design-Builder.

(a)                                  Design-Builder shall post additional bonds or
security (which must be in form and substance satisfactory to Owner and the
Lenders) or shall increase the amount of the Performance Bond by the amount of
any increases to the Contract Price; provided, however, that Owner shall pay
all costs of obtaining such bonds or security, plus pay Design-Builder a fee of
seven and one half percent (7.5%) for obtaining such bonds or security, such
fee to be calculated by multiplying seven and one half percent (7.5%) times the
cost of the bonds or security.

(b)                                 The Performance Bond shall secure the
Design-Builder’s obligations to complete the Work in accordance with this
Agreement.

7.4.2       On or prior to the date of Financial Closing, if requested by Owner,
the Design-Builder shall deliver to Owner a bond substantially in the form
attached as Exhibit I (the “Payment Bond”) in an initial amount
equivalent to the Contract Price.  Owner shall pay on the date of
Financial Closing all costs of obtaining such bond, plus pay Design-Builder a
fee of seven and one half percent (7.5%) for obtaining such bond, such fee to
be calculated by multiplying seven and one half percent (7.5%) times the cost
of the Payment Bond but any

 22
 

amounts payable to the surety due to Design-Builder’s default under
this Agreement or the Payment Bond shall be for the account of Design-Builder.

(a)                                  Design-Builder shall post additional bonds or
security (which must be in form and substance reasonably satisfactory to Owner
and the Lenders) or shall increase the amount of the Payment Bond by the amount
of any increase to the Contract Price.

(b)                                 The Payment Bond shall secure the
Design-Builder’s obligations to pay its Subcontractors, vendors and suppliers.

(c)                                  The Payment Bond shall provide the conditions
upon which Subcontractors, vendors and suppliers may draw upon such Payment
Bond following Design-Builder’s failure to pay amounts due such Subcontractors,
vendors and suppliers.

Article 8

Warranties

8.1          Design-Builder
Warranty.  Design-Builder warrants to
Owner that the construction, including all materials and equipment furnished as
part of the construction, shall be new, of good quality, in conformance with
the Contract Documents and all Legal Requirements, free of defects in materials
and workmanship.  Design-Builder’s
warranty obligation excludes defects caused by abuse, alterations, or failure
to maintain the Work by persons other than Design-Builder or anyone for whose
acts Design-Builder may be liable. Nothing in this warranty is intended to
limit any Manufacturer’s Warranty which provides Owner with greater warranty
rights than set forth in this Section 8.1 or the Contract Documents.  Design-Builder will provide to Owner all
manufacturers’ and Subcontractors’ warranties upon the earlier of Substantial
Completion or termination of this Agreement.  
Owner’s failure to comply with all Operating Procedures shall void those
guarantees, representations and warranties, whether expressed or implied, that
were given by Design-Builder to Owner, concerning the performance of the Plant
that are reasonably determined by Design-Builder to be affected by such
failure.  If Design-Builder reasonably
determines that all damage caused by such failure can be repaired and Owner
makes all repairs needed to correct such damage, as reasonably determined by
Design-Builder, all guarantees, representations and warranties shall be
reinstated for the remaining term thereof, if any, from the date of the repair.

8.2          Correction of
Defective Work.

8.2.1       Design-Builder agrees to correct any Work that is found to not
be in conformance with the Contract Documents, including that part of the Work
subject to Section 8.1, within a period of one (1) year from the date of
Substantial Completion of the Work; provided that Owner must report such
non-conformance within ten (10) days of the earlier of (i)  the date that Owner becomes aware of such
failure or non-conformance, or (ii) the date Owner should have become aware of
such failure or non-conformance had Owner acted in a reasonable manner and
operated pursuant to applicable operating manuals, inspection requirements, and

 23
 

maintenance logs as provided by
Design-Builder or the appropriate vendor; and that such one (1)-year period
shall be extended one (1) Day for any part of the Work that is found to be not
in conformance with the Contract Documents for each Day that such part of the
Work is not operating in conformity with the Contract Documents, including
any  time during which any part of the
Work is repaired or replaced pursuant to this Article 8.

8.2.2       Design-Builder shall, within seven (7) Days of receipt of written
notice from Owner that the Work is not in conformance with the Contract
Documents, take meaningful steps to commence correction of such nonconforming
Work, including the correction, removal or replacement of the nonconforming
Work and correction or replacement of any Work damaged by such nonconforming
Work.  If Design-Builder fails to
commence the necessary steps within such seven (7) Day period or fails to
continue to perform such steps through completion, Owner, in addition to any
other remedies provided under the Contract Documents, may provide
Design-Builder with written notice that Owner will commence or assume
correction of such nonconforming Work and repair of such damaged Work with its
own resources.  If, following such
written notice, Owner performs such corrective and repair Work, Design-Builder
shall be responsible for all reasonable costs incurred by Owner in performing
the correction.  If, following such
written notice, Owner performs such corrective and repair Work, Design-Builder
shall be responsible for all reasonable costs incurred by Owner in performing
the correction. If the nonconforming Work creates an emergency requiring an
immediate response, the seven (7) Day periods identified herein shall be
inapplicable and Design-Builder shall immediately correct, remove or replace
the nonconforming Work.

8.3          Warranty
Period Not Limitation to Owner’s Rights. 
The one (1)-year period referenced in Section 8.2 above applies only to
Design-Builder’s obligation to correct nonconforming Work and is not intended
to constitute a period of limitations for any other rights or remedies Owner
may have regarding Design-Builder’s other obligations under the Contract
Documents.

Article 9

Contract Price

9.1          Contract
Price.  As full consideration to
Design-Builder for full and complete performance of the Work and all costs
incurred in connection therewith, Owner shall pay Design-Builder in accordance
with the terms of Article 10, the sum of One Hundred Twenty-two Million Five
Hundred Forty-two Thousand Three Hundred Sixty-three Dollars ($122,542,363.00)
(“Contract Price”), subject to adjustments made in accordance with
Article 13.  The Contract Price does not
include the water pre-treatment system and the fire protection system which
shall be provided by Design-Builder pursuant to a separate side-letter
agreement executed by Owner and Design-Builder at Design-Builder’s standard
time plus material rates during the relevant time period and at the relevant
locale.  Owner acknowledges that it has
taken no action which would impose a union labor or prevailing wage requirement
on Design-Builder, Owner or the Project. 
The Parties acknowledge and agree that if after the date hereof, an Owner’s
action, a change in Applicable Law, or a Governmental Authority acting pursuant
to a change in Applicable Law shall require Design-Builder to employ union
labor or compensate labor at prevailing wages, the Contract Price shall be
adjusted upwards to include any increased

 24
 

costs associated
with such labor or wages.  Such
adjustment shall include, but not be limited to, increased labor,
subcontractor, and material and equipment costs resulting from any union or
prevailing wage requirement; provided, however, that if an option is made
available to either employ union labor, or to compensate labor at prevailing
wages, such option shall be at Design-Builder’s sole discretion and that if
such option is executed by Owner without Design-Builder’s agreement,
Design-Builder shall have the right to terminate this agreement and shall be
entitled to compensation pursuant to Section 15.3.1 hereof.

9.2          Effect
of Construction Cost Index Increase on Contract Price.  The Contract Price shall be subject to
adjustment by Design-Builder as follows:

9.2.1       Construction Cost Index Increase.  The Baseline Index for this
Agreement shall be 7882.53 (October 2006) (“Baseline Index”).  If between the Effective Date and the date on
which a valid Notice to Proceed is given to Design-Builder the Construction
Cost Index published by Engineering News-Record Magazine (“CCI”)
increases over the Baseline Index, Design-Builder shall notify Owner in writing
that it is adjusting the Contract Price and the Contract Price shall be
increased by a percentage amount equal to the percentage increase in CCI.

Article 10

Payment Procedures

10.1        Payment at
Financial Closing Prior to Notice to Proceed.

10.1.1     Commitment Fee.  As soon as possible after
execution of this Agreement, but in any event, no later than April 30, 2007,
Owner shall pay Design-Builder Two Million Dollars ($2,000,000) as a
non-refundable commitment fee (“Commitment Fee”).  The Commitment Fee will be credited against
the Contract Price upon the acceptance of Notice to Proceed pursuant to Section
6.2.  If Owner fails to provide timely
Notice to Proceed pursuant to Section 6.2, Design-Builder, in addition to other
remedies available under the Agreement, shall retain the full amount of the
Commitment Fee and Owner shall not be entitled to any refund or credit.  Should Owner fail to pay the Commitment Fee
as provided herein, Design-Builder shall have the right to terminate this
Agreement and shall be entitled to compensation pursuant to Section 15.3.1 hereof.

10.1.2     As part of the Contract Price, Owner shall pay Design-Builder Twenty
Million Dollars ($20,000,000.00), as a mobilization fee, as soon as allowed by
its organizational documents and any other agreements or Laws and at the
latest, at the earlier to occur of Financial Closing or the issuance of a
Notice to Proceed. The Twenty Million Dollar ($20,000,000.00) mobilization fee
payment shall be subject to retainage as provided by Section 10.2.7.

 25
 

10.2        Progress Payments.

 

10.2.1     Application for Payment.  Following the issuance of Notice
to Proceed pursuant to Section 6.2, Design-Builder shall submit to Owner, on or
before the twenty-fifth (25th) Day of each month, its request for payment for
all Work performed and not paid for during the previous Pay Period (the “Application
for Payment”).  The Application for
Payment shall be substantially in the form attached hereto as Exhibit M.  Design-Builder shall submit to Owner, along
with each Application for Payment, signed lien waivers, substantially in the
form attached hereto as Exhibit N, received from Subcontractors and suppliers for
the Work included in the Application for Payment submitted for the immediately
preceding Pay Period and for which payment has been received..

10.2.2     The Application for Payment shall constitute Design-Builder’s
representation that the Work has been performed consistent with the Contract
Documents and has progressed to the point indicated in the Application for
Payment.  The Parties agree that the work
completed at the Site, the comparison of the Application for Payment against
the work schedule, and the Schedule of Values shall provide sufficient
substantiation of the accuracy of the Application for Payment and that no
additional documentation will be provided to Owner or Independent Engineer in
support of an Application for Payment. 
Title to the Work, including Work reflected in an Application for
Payment which is in process, is in transit, is in storage, or has been
incorporated into the Site, shall pass to Owner free and clear of all claims,
liens, encumbrances, and security interests upon Design-Builder’s receipt of
payment therefor.

10.2.3     Within ten (10) Days after Owner’s receipt of each Application for
Payment, Owner shall pay Design-Builder all amounts properly due, but in each
case less the total of payments previously made, and less amounts properly
withheld under this Agreement.

10.2.4     The Application for Payment may request payment for equipment and
materials not yet incorporated into the Project; provided that (i) Owner is
satisfied that the equipment and materials are suitably stored at either the
Site or another acceptable location, (ii) the equipment and materials are
protected by suitable insurance, and (iii) upon payment, Owner will receive the
equipment and materials free and clear of all liens and encumbrances except for
liens of the Lenders and other liens and encumbrances permitted under the
Financing Documents.

10.2.5     Schedule of Values.  The schedule of values attached
hereto as Exhibit E (the “Schedule of Values”) (i) subdivides the Work
into its respective parts, (ii) includes values for all items comprising the
Work, and (iii) serves as the basis for monthly progress payments made to
Design-Builder throughout the Work.

10.2.6     Withholding of Payments.  On or
before the date set forth in Section 10.2.3, Owner shall pay Design-Builder all
amounts properly due.  If Owner
determines that Design-Builder is not entitled to all or part of an Application
for Payment, it will notify Design-Builder in writing at least five (5) Days
prior to the date payment is due.  The
notice shall indicate the specific amounts Owner intends to withhold, the
reasons and contractual basis for the withholding, and the specific measures
Design-Builder must take to rectify Owner’s 

 26
 

concerns.  Design-Builder and
Owner will attempt to resolve Owner’s concerns prior to the date payment is
due.  If the Parties cannot resolve such
concerns, Design-Builder may pursue its rights under the Contract Documents,
including those under Article 19.  Notwithstanding
anything to the contrary in the Contract Documents, Owner shall pay
Design-Builder all undisputed amounts in an Application for Payment within the
times required by the Agreement.

10.2.7     Retainage on Progress Payments.  Owner will retain ten percent
(10%) of each payment up to a maximum of Six Million One Hundred Twenty-seven
Thousand One Hundred Eighteen Dollars ($6,127,118.00). Once Six Million One
Hundred Twenty-seven Thousand One Hundred Eighteen Dollars ($6,127,118.00) has
been retained, in total, Owner will not retain any additional amounts from any
subsequent payments. Owner will also reasonably consider reducing retainage for
Subcontractors completing their work early in the Project.  Upon Substantial Completion of the Work Owner
shall release to Design-Builder all retained amounts less an amount equal to
the reasonable value of all remaining or incomplete items of Work and less an
amount equal to the value of any Subcontractor lien waivers not yet obtained,
as noted in the Certificate of Substantial Completion, provided that such
payment shall only be made if Design-Builder has met the Performance Guarantee
Criteria listed in Exhibit A.

10.3        Final
Payment.  Design-Builder shall deliver to
Owner a request for final payment (the “Final Application for Payment”)
when Final Completion has been achieved in accordance with Section 6.5. Owner
shall make final payment within thirty (30) Days after Owner’s receipt of the
Final Application for Payment (“Final Payment”).

10.4        Failure to Pay
Amounts Due.

10.4.1     Interest.  Payments which are due
and unpaid by Owner to Design-Builder, whether progress payments or Final
Payment, shall bear interest commencing five (5) Days after payment is due at
the rate of eighteen percent (18%) per annum, or  the maximum rate allowed by Law.

10.4.2     Right to Suspend Work.  If Owner
fails to pay Design-Builder any undisputed amount that becomes due,
Design-Builder, in addition to all other remedies provided in the Contract
Documents, may stop Work pursuant to Section 15.4 hereof.  All payments properly due and unpaid shall
bear interest at the rate set forth in Section 10.4.1.

10.4.3     Failure to Make Final Payment.  Owner’s failure to make Final Payment
pursuant to Section 10.3 hereof shall void any and all warranties, whether
express or implied, provided by Design-Builder pursuant to this Agreement.

10.5        Design-Builder’s
Payment Obligations.  Design-Builder will
pay Design Consultants and Subcontractors, in accordance with its contractual
obligations to such parties, all the amounts Design-Builder has received from
Owner on account of their work.  Design-Builder
will impose similar requirements on Design Consultants and Subcontractors to
pay those parties with whom they have contracted.  Design-Builder will indemnify and defend
Owner against any claims for payment and mechanic’s liens as set forth in
Section 14.2 hereof.

 27
 

10.6        Record
Keeping and Finance Controls. With respect to changes in the Work performed on
a cost basis by Design-Builder pursuant to the Contract Documents,
Design-Builder shall keep full and detailed accounts and exercise such controls
as may be necessary for proper financial management, using accounting and
control systems in accordance with generally accepted accounting principles and
as may be provided in the Contract Documents. 
During the performance of the Work and for a period of three (3) years
after Final Payment, Owner and Owner’s accountants shall be afforded access
from time to time, upon reasonable notice, to Design-Builder’s records, books,
correspondence, receipts, subcontracts, purchase orders, vouchers, memoranda
and other data relating to changes in the Work performed on a cost basis in
accordance with the Contract Documents, all of which Design-Builder shall
preserve for a period of three (3) years after Final Payment.

Article 11

Hazardous Conditions and Differing Site Conditions

11.1        Hazardous
Conditions.

11.1.1     Unless otherwise expressly provided in the Contract Documents to be
part of the Work, Design-Builder is not responsible for any Hazardous
Conditions encountered at the Site.  Upon
encountering any Hazardous Conditions, Design-Builder will stop Work
immediately in the affected area and as promptly as practicable notify Owner
and, if Design-Builder is specifically required to do so by Legal Requirements,
all Governmental Authorities having jurisdiction over the Project or Site.  Design-Builder shall not remove, remediate or
handle in any way (except in case of emergency) any Hazardous Conditions
encountered at the Site without prior written approval of Owner.

11.1.2     Upon receiving notice of the presence of suspected Hazardous
Conditions, Owner shall take the necessary measures required to ensure that the
Hazardous Conditions are remediated or rendered harmless.  Such necessary measures shall include Owner
retaining Qualified Independent Experts to (i) ascertain whether Hazardous
Conditions have actually been encountered, and, if they have been encountered,
(ii) prescribe the remedial measures that Owner is required under applicable
Legal Requirements to take with respect to such Hazardous Conditions in order
for the Work to proceed.  Owner’s choice
of such Qualified Independent Experts shall be subject to the prior approval of
Design-Builder, which approval shall not be unreasonably withheld or delayed.

11.1.3     Design-Builder shall be obligated to resume Work at the affected area
of the Project only after Owner’s Qualified Independent Expert provides it with
written certification that (i) the Hazardous Conditions have been removed or
rendered harmless, and (ii) all necessary approvals have been obtained from all
government entities having jurisdiction over the Project or Site and a
remediation plan has been undertaken permitting the Work to proceed.

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11.1.4     Design-Builder will be entitled, in accordance with this Article 11, to
an adjustment in its Contract Price and/or Contract Time(s) to the extent
Design-Builder’s cost and/or time of performance have been adversely impacted
by the presence of Hazardous Conditions, provided that such Hazardous Materials
were not introduced to the Site by Design-Builder, Subcontractors or anyone for
whose acts they may be liable.

11.1.5     To the fullest extent permitted by Law, Owner shall indemnify, defend
and hold harmless Design-Builder, Design Consultants, Subcontractors, anyone
employed directly or indirectly for any of them, and their officers, directors,
employees and agents, from and against any and all claims, losses, damages,
liabilities and expenses, including attorneys’ fees and expenses, arising out
of or resulting from the presence, removal or remediation of Hazardous
Conditions at the Site.

11.1.6     Notwithstanding the preceding provisions of this Section 11.1, Owner is
not responsible for Hazardous Conditions introduced to the Site by
Design-Builder, Subcontractors or anyone for whose acts they may be
liable.  Design-Builder shall indemnify,
defend and hold harmless Owner and Owner’s officers, directors, employees and
agents from and against all claims, losses, damages, liabilities and expenses,
including attorneys’ fees and expenses, arising out of or resulting from those
Hazardous Conditions introduced to the Site by Design-Builder, Subcontractors
or anyone for whose acts they may be liable.

11.2        Differing Site
Conditions; Inspection.

11.2.1     Concealed or latent physical conditions or subsurface conditions at the
Site that (i) differ from the conditions indicated in the Contract Documents,
or (ii) are of an unusual nature, differing from the conditions ordinarily
encountered and generally recognized as inherent in the Work are collectively
referred to herein as “Differing Site Conditions.”  If Design-Builder encounters a Differing Site
Condition, Design-Builder will be entitled to an adjustment in the Contract Price
and/or Contract Time(s) to the extent Design-Builder’s cost and/or time of
performance are adversely impacted by the Differing Site Condition.

11.2.2     Upon encountering a Differing Site Condition, Design-Builder shall
provide prompt written notice to Owner of such condition, which notice shall
not be later than fourteen (14) business days after such condition has been
encountered.  Design-Builder shall, to
the extent reasonably possible, provide such notice before the Differing Site
Condition has been substantially disturbed or altered.

Article 12

Force Majeure;
Change in Legal Requirements

12.1        Force
Majeure Event.  A force Majeure event
shall mean a cause or event beyond the reasonable control of, and without the
fault or negligence of a Party claiming Force Majeure, including, without
limitation, an emergency, floods, earthquakes, hurricanes, tornadoes, adverse
weather conditions not reasonably anticipated or acts of God; sabotage;
vandalism beyond that

 29
 

which could
reasonably be prevented by a Party claiming Force Majeure; terrorism; war;
riots; fire; explosion; blockades; insurrection; strike; slow down or labor
disruptions (even if such difficulties could be resolved by conceding to the
demands of a labor group); delay in the delivery of materials or equipment that
is beyond the control of a Party claiming Force Majeure, and action or failure
to take action by any Governmental Authority after the Effective Date
(including the adoption or change in any rule or regulation or environmental
constraints lawfully imposed by such Governmental Authority), but only if such
requirements, actions, or failures to act prevent or delay performance; and
inability, despite due diligence, to obtain any licenses, permits, or approvals
required by any Governmental Authority (any such event, a “Force Majeure
Event”).   Economic hardship (except
to the extent caused by a Force Majeure Event) is explicitly excluded as a
Force Majeure Event and is solely the responsibility of the affected party.

12.2        Effect
of Force Majeure Event.  Neither Party
shall be considered in default in the performance of any of the obligations
contained in the Contract Documents, except for the Owners or the
Design-Builder’s obligations to pay money (including but not limited to,
Progress Payments and payments of liquidated damages which become due and
payable with respect to the period prior to the occurrence of the Force Majeure
Event), when and to the extent the failure of performance shall be caused by a
Force Majeure Event.  If either Party is
rendered wholly or partly unable to perform its obligations under the Contract
Documents because of a Force Majeure Event, such Party will be excused from
performance affected by the Force Majeure Event to the extent and for the
period of time so affected; provided that:

(a)           the nonperforming Party, within forty-eight (48) hours after the
nonperforming Party actually becomes aware of the occurrence and impact of the
Force Majeure Event, gives the other Party written notice describing the event
or circumstance in detail, including an estimation of its expected duration and
probable impact on the performance of the affected Party’s obligations
hereunder and continues to furnish timely regular reports with respect thereto
during the continuation of and upon the termination of the Force Majeure Event;

(b)           the suspension of performance is of no greater scope and of no longer
duration than is reasonably required by the Force Majeure Event;

(c)           the obligations of either Party that arose before the occurrence
causing the suspension of performance and the performance that is not prevented
by the occurrence, shall not be excused as a result of such occurrence;

(d)           the nonperforming Party uses its best efforts to remedy its inability
to perform and mitigate the effect of such event and resumes its performance at
the earliest practical time after cessation of such occurrence or until such
time that performance is practicable;

 30
 

(e)           when the nonperforming Party is able to resume performance of its
obligations under the Contract Documents, that Party shall give the other Party
written notice to that effect; and

(f)            Design-Builder shall be entitled to a
Day-for-Day time extension for those events set forth in Section 12.1 to the
extent the occurrence of such event delayed Design-Builder’s performance of its
obligations under this Agreement.

12.3        Change
in Legal Requirements.  The Contract
Price and/or the Contract Time(s) shall be adjusted to compensate
Design-Builder for the effects of any changes to the Legal Requirements that occur
after the date of this Agreement and as a result of such change, the
performance of the Work is adversely affected. 
Such effects may include, without limitation, revisions Design-Builder
is required to make to the Construction Documents because of changes in Legal
Requirements.

12.4        Time Impact And
Availability.  If the Design-Builder is
delayed at any time in the commencement or progress of the Work due to a delay
in the delivery of, or unavailability of, essential materials or labor to the
Project as a result of a significant industry-wide economic fluctuation or
disruption beyond the control of and without the fault of the Design-Builder or
its Subcontractors which is experienced or expected to be experienced by
certain markets providing essential materials and equipment to the Project
during the performance of the Work and such economic fluctuation or disruption
adversely impacts the price, availability, and delivery timeframes of essential
materials, equipment, or labor (such event an “Industry-Wide Disruption”),
the Design-Builder shall be entitled to an equitable extension of the Contract
Time(s) on a day-for-day basis equal to such delay.  The Owner and Design-Builder shall undertake
reasonable steps to mitigate the effect of such delays.  Notwithstanding any other provision to the
contrary, the Design-Builder shall not be liable to the Owner for any expenses,
losses or damages arising from a delay, or unavailability of, essential
materials or labor to the Project as a result of an Industry-Wide Disruption.

12.5        Effect
of Industry-Wide Disruption on Contract Price. 
In the event of an Industry-Wide Disruption, the Contract Price shall be
adjusted to allocate the risk of such market conditions between the Owner and
Design-Builder through the following equitable escalation in the Contract
Price:

12.5.1     If during the course of the Project the CCI increases over the Baseline
Index established in Section 9.2.1, Design-Builder shall notify Owner in
writing that it is adjusting the Contract Price.

12.5.2     In the event that the CCI increases over the Baseline Index, the
Contract Price shall be adjusted to reflect such increase, but only with
respect to those Applications for Payment submitted after the date on which
written notice of the adjustment in Contract Price is given.

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12.5.3     Payment for any adjustment in the Contract Price as a result of this
Article 12 shall be made in accordance with the terms of this Agreement.

Article 13

Changes to the
Contract Price and Scheduled Completion Dates

13.1        Change Orders.

13.1.1     A change order (“Change Order”) is a written instrument issued
after execution of this Agreement signed by Owner and Design-Builder, stating
their agreement upon all of the following:

(a)           the scope of the change in the Work;

(b)           the amount of the adjustment to the Contract Price; and

(c)           the extent of the adjustment to the Contract Time(s).

13.1.2     All changes in the Work authorized by an applicable Change Order shall
be performed under the applicable conditions of the Contract Documents.  Owner and Design-Builder shall negotiate in
good faith and as expeditiously as possible the appropriate adjustments for
such changes.  Prior to incurring any
costs with respect to estimating services, design services and any other
services involved in the preparation of the proposed revisions to the Contract
Documents, Design-Builder must obtain the written approval of Owner for such
costs.

13.1.3     If Owner requests a proposal for a change in the Work from
Design-Builder and subsequently elects not to proceed with the change, a Change
Order shall be issued to reimburse Design-Builder for reasonable costs incurred
for estimating services, design services and any other services involved in the
preparation of proposed revisions to the Contract Documents; provided that such
costs were previously approved by Owner pursuant to Section 13.1.2.

13.2        Contract Price
Adjustments.

13.2.1     The increase or decrease in Contract Price resulting from a change in
the Work shall be a mutually accepted lump sum, properly itemized and supported
by sufficient substantiating data to permit evaluation by Owner.

13.2.2     If Owner and Design-Builder disagree upon whether Design-Builder is
entitled to be paid for any services required by Owner, or if there are any
other disagreements over the scope of Work or proposed changes to the Work,
Owner and Design-Builder shall

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resolve
the disagreement pursuant to Article 19 hereof. 
As part of the negotiation process, Design-Builder shall furnish Owner
with a good faith estimate of the costs to perform the disputed services in
accordance with Owner’s interpretations. 
If the Parties are unable to agree and Owner expects Design-Builder to
perform the services in accordance with Owner’s interpretations, Design-Builder
shall proceed to perform the disputed services, conditioned upon Owner issuing
a written order to Design-Builder (i) directing Design-Builder to proceed, and
(ii) specifying Owner’s interpretation of the services that are to be
performed.  If this occurs,
Design-Builder shall be entitled to submit in its Applications for Payment an
amount equal to fifty percent (50%) of its reasonable estimated direct cost to
perform the services, and Owner agrees to pay such amounts, with the express
understanding that (x) such payment by Owner does not prejudice Owner’s right
to argue that it has no responsibility to pay for such services, and (y)
receipt of such payment by Design-Builder does not prejudice Design-Builder’s
right to seek full payment of the disputed services if Owner’s order is deemed
to be a change to the Work.

13.3        Emergencies.  In any emergency affecting the safety of
persons and/or property, Design-Builder shall act, at its discretion, to
prevent threatened damage, injury or loss and shall notify the Owner as soon as
practicable and in any event within forty-eight (48) hours after Design-Builder
becomes aware of the emergency.  The
notice to Owner shall describe the emergency in detail, including a reasonable
estimation of its expected duration and impact, if any, on the performance of
Design-Builder’s obligations hereunder. 
Any change in the Contract Price and/or the Contract Time(s) on account
of emergency work shall be determined as provided in this Article 13.

13.4        Failure
to Complete Owner’s Milestones.  The
dates when Owner’s obligations are required to be completed to enable
Design-Builder to achieve the Contract Time(s) are identified in Table 3 in
Exhibit C (“Owner’s Milestones”). 
The Contract Time(s) shall be revised to provide a Day-for-Day extension
of the Contract Time(s) for completion of the Work for each full Day during
which Owner fails to timely complete its obligations pursuant to the Owner’s
Milestones.  In the event of Owner’s
failure to timely complete its obligations pursuant to Owner’s Milestones
results in the extension of the Contract Time(s), the Contract Price shall be
adjusted to compensate Design-Builder for the effects, if any, of such change,
that are established by Design-Builder and could not have reasonably been
mitigated by Design-Builder.

Article 14

Indemnity

14.1        Tax
Claim Indemnification.  If, in accordance
with Owner’s direction, an exemption for all or part of the Work is claimed for
taxes, Owner shall indemnify, defend and hold harmless Design-Builder (and its
officers, directors, agents, successors and assigns) from and against any and
all damages, claims costs, losses, liabilities, and expenses (including
penalties, interest, fines, taxes of any kind, attorneys’ fees, accountants and
other professional fees and associated expenses) incurred by Design-Builder in
connection with or as a result of any action taken by Design-Builder in
accordance with Owner’s directive.

14.2        Payment
Claim Indemnification.  To the extent
Design-Builder has received payment for the Work, Design-Builder shall
indemnify, defend and hold harmless Owner

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Indemnified
Parties from any claims or mechanic’s liens brought against Owner Indemnified
Parties or against the Project as a result of the failure of Design-Builder, or
those for whose acts it is responsible, to pay for any services, materials,
labor, equipment, taxes or other items or obligations furnished or incurred for
or in connection with the Work.  Within
three (3) business days of receiving written notice from Owner that such a
claim or mechanic’s lien has been filed, Design-Builder shall commence to take
the steps necessary to discharge such claim or lien, including, if necessary,
the furnishing of a mechanic’s lien bond. If Design-Builder fails to do so,
Owner will have the right to discharge the claim or lien and hold Design-Builder
liable for costs and expenses incurred, including attorneys’ fees.

14.3        Design-Builder’s
General Indemnification.

14.3.1     Design-Builder, to the fullest extent permitted by Law, shall
indemnify, hold harmless and defend Owner, Lenders, Lenders’ Agent, and their
successors, assigns, officers, directors, employees and agents (“Owner
Indemnified Parties”) from and against any and all losses, costs, damages,
injuries, liabilities, claims, demands, penalties, interest and causes of
action, including without limitation attorney’s fees (collectively, the “Damages”)
for bodily injury, sickness or death, and property damage or destruction (other
than to the Work itself) to the extent resulting from the negligent or
intentionally wrongful acts or omissions of Design-Builder, Design Consultants,
Subcontractors, anyone employed directly or indirectly by any of them or anyone
for whose acts any of them may be liable.

14.3.2     If an employee of Design-Builder, Design Consultants, Subcontractors,
anyone employed directly or indirectly by any of them or anyone for whose acts
any of them may be liable has a claim against Owner Indemnified Parties,
Design-Builder’s indemnity obligation set forth in Section 14.3.1 above shall
not be limited by any limitation on the amount of damages, compensation or
benefits payable by or for Design-Builder, Design Consultants, Subcontractors,
or other entity under any employee benefit acts, including workers’
compensation or disability acts.

14.3.3     Without limiting the generality of Section 14.3.1 hereof,
Design-Builder shall fully indemnify, save harmless and defend the Owner
Indemnified Parties from and against any and all Damages in favor of any
Governmental Authority or other third party to the extent caused by (a) failure
of Design-Builder or any Subcontractor to comply with Legal Requirements as
required by this Agreement, or (b) failure of Design-Builder or any
Subcontractor to properly administer and pay any taxes or fees required to be
paid by Design-Builder under this Agreement.

14.3.4     Nothing in the Design-Builder’s General Indemnification contained in
this Section 14.3 shall be read to limit in any way any entitlement
Design-Builder shall have to insurance coverage under any insurance policy,
including any insurance policy required by either Party under this Agreement.

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14.4        Owner’s
General Indemnification.  Owner, to the
fullest extent permitted by Law, shall indemnify, hold harmless and defend
Design-Builder and any of Design-Builder’s officers, directors, employees, or
agents from and against claims, losses, damages, liabilities, including
attorneys’ fees and expenses, for bodily injury, sickness or death, and
property damage or destruction (other than to the Work itself) to the extent
resulting from the negligent acts, willful misconduct, or omissions of Owner,
its officers, directors, employees, agents, or anyone for whose acts any of
them may be liable.

14.4.1     Without limiting the generality of Section 14.4 hereof, Owner shall
fully indemnify, save harmless and defend the Design-Builder and any of
Design-Builder’s officers, directors, employees, or agents from and against any
and all Damages in favor of any Governmental Authority or other third party to
the extent caused by (a) failure of Owner or any of Owner’s agents to comply
with Legal Requirements as required by this Agreement, or (b) failure of Owner
or Owner’s agents to properly administer and pay any taxes or fees required to
be paid by Owner under this Agreement.

14.4.2     Nothing in the Owner’s General Indemnification contained in this
Section 14.4 shall be read to limit in any way any entitlement Owner shall have
to insurance coverage under any insurance policy, including any insurance
policy required by either Party under this Agreement.

14.5        Patent and Copyright
Infringement.

14.5.1     Design-Builder shall indemnify, hold harmless and defend Owner
Indemnified Parties from and against any and all Damages based on any claim
that the Work, the Work Product, or any part thereof, or the operation or use
of the Work or any part thereof, constitutes infringement of any United States
or foreign patent, copyright or other intellectual property, now or hereafter
issued. Owner shall give prompt written notice to Design-Builder of any such
action or proceeding and will reasonably provide authority, information and
assistance in the defense of same. Design-Builder shall indemnify and hold
harmless Owner Indemnified Parties from and against all damages and costs,
including but not limited to, attorneys’ fees and expenses awarded against Owner
or Design-Builder in any such action or proceeding.

14.5.2     If Owner is enjoined from the operation or use of the Work, Work
Product, the Project, or any part thereof, as the result of any patent or
copyright suit, claim, or proceeding, Design-Builder shall at its sole expense
take reasonable steps to procure the right to operate or use the Work, Work
Product or the Project. If Design-Builder cannot so procure such right within a
reasonable time, Design-Builder shall promptly, at Design-Builder’s option and
at Design-Builder’s expense, (i) modify the Work or Work Product so as to avoid
infringement of any such patent or copyright or (ii) replace the Work or Work
Product with Work or Work Product that does not infringe or violate any such
patent, copyright, trade secret, proprietary right, confidential information or
intellectual property right.

14.5.3     Sections 14.5.1 and 14.5.2 above shall not be applicable to any suit,
claim or proceeding based on infringement or violation of a patent or copyright
(i) relating solely to a

 35
 

particular process or product of a particular manufacturer specified by
Owner and not offered or recommended by Design-Builder to Owner, or (ii)
arising from modifications to the Work by Owner or its agents after acceptance
of the Work, or (iii) relating to the operation or use of the Work by the Owner
in a manner not permitted by this Agreement or the ICM License Agreement. If
the suit, claim or proceeding is based upon events set forth in the preceding
sentence, Owner shall defend, indemnify and hold harmless Design-Builder to the
same extent Design-Builder is obligated to defend, indemnify and hold harmless
Owner in Section 14.5.1 above.

Article 15

Stop Work; Termination for Cause

15.1        Owner’s
Right to Stop Work.  Owner may, without
cause and for its convenience, order Design-Builder in writing to stop and
suspend the Work.  Such suspension shall
not exceed sixty (60) consecutive Days or aggregate more than ninety (90) Days
during the duration of the Project. 
Design-Builder is entitled to seek an adjustment of the Contract Price
and/or the Contract Time(s) if its cost or time to perform the Work has been
adversely impacted by any suspension or stoppage of work by Owner.

15.2        Owner’s Right to
Perform and Terminate for Cause.

15.2.1     If Design-Builder persistently fails to: (i) provide a sufficient
number of skilled workers; (ii) supply the materials required by the Contract
Documents; (iii) comply with applicable Legal Requirements; (iv) timely pay,
without cause, Design Consultants or Subcontractors; (v)  perform the Work with promptness and
diligence to ensure that the Work is completed by the Contract Time(s), as such
times may be adjusted in accordance with this Agreement; or (vi) perform
material obligations under the Contract Documents; then Owner, in addition to
any other rights and remedies provided in the Contract Documents or by law or
equity, shall have the rights set forth in Sections 15.2.2 and 15.2.3 below.

15.2.2     Upon the occurrence of an event set forth in Section 15.2.1 above,
Owner may provide written notice to Design-Builder that it intends to terminate
the Agreement unless the problem cited is cured, or commenced to be cured
within seven (7) Days of Design-Builder’s receipt of such notice.  If Design-Builder fails to cure, or
reasonably commence to cure such problem and thereafter diligently pursue such
cure to completion, then Owner may give a second written notice to
Design-Builder of its intent to terminate following an additional seven (7) Day
period.  If Design-Builder, within such
second seven (7) Day period, fails to cure, or reasonably commence to cure such
problem and thereafter diligently pursue such cure to completion, then Owner
may declare the Agreement terminated for default by providing written notice to
Design-Builder of such declaration.  If
(i) the insurance coverage required by Design-Builder pursuant Article 17
hereof is suspended or cancelled without Design-Builder providing immediate
replacement coverage (and, in any case, within fourteen (14) Days of the
occurrence thereof) meeting the requirements specified in Article 17 hereof;
(ii) if applicable, a default occurs under the Performance Bond or the Payment
Bond, or the Performance Bond or Payment Bond is revoked or terminated and such
Performance Bond or the Payment Bond is not immediately

 36
 

replaced (and, in any case, within fourteen (14) Days of the occurrence
thereof) by Design-Builder with a Performance Bond or a Payment Bond providing
at least the same level of coverage in a form and from a surety acceptable to
Owner and Lenders, or the surety under the Performance Bond or Payment Bond
institutes or has instituted against it a case under the United States
Bankruptcy Code; (iii) Design-Builder purports to make an assignment of this
Agreement in breach of the provisions of Section 21.1 hereof, or (iv) any
representation or warranty made by Design-Builder under Section 18.1 hereof was
false or materially misleading when made, then Owner may terminate this
Agreement upon written notice to Design-Builder.

15.2.3     Upon declaring the Agreement terminated pursuant to Section 15.2.2
above, Owner may enter upon the premises and take possession, for the purpose
of completing the Work, of all materials, equipment, scaffolds, tools,
appliances and other items thereon, which have been purchased for the
performance of the Work, all of which Design-Builder hereby transfers, assigns
and sets over to Owner for such purpose, and to employ any person or persons to
complete the Work and provide all of the required labor, services, materials,
equipment and other items.  In the event
of such termination, Design-Builder shall not be entitled to receive any
further payments under the Contract Documents until the Work shall be finally
completed in accordance with the Contract Documents.  At such time, if the unpaid balance of the
Contract Price exceeds the cost and expense incurred by Owner in completing the
Work, Design-Builder will be paid promptly by Owner for Work performed prior to
its default.  If Owner’s cost and expense
of completing the Work exceeds the unpaid balance of the Contract Price, then
Design-Builder shall be obligated to promptly pay the difference to Owner.  Such costs and expense shall include not only
the cost of completing the Work, but also losses, damages, costs and expenses,
including attorneys’ fees and expenses, incurred by Owner in connection with
the re-procurement and defense of claims arising from Design-Builder’s default,
subject to the waiver of consequential damages set forth in Section 19.4 and
the limitation of liability set forth in Section 19.5 hereof.

15.2.4     If Owner improperly terminates the Agreement for cause, the termination
for cause will be converted to a termination for convenience in accordance with
the provisions of Section 15.3.

15.3        Owner’s Right to
Terminate for Convenience.

15.3.1     Upon ten (10) Days’ written notice to Design-Builder, Owner may, for
its convenience and without cause, elect to terminate this Agreement.  In such event, Owner shall pay Design-Builder
for the following:

(a)           to the extent not already paid, all Work executed, and for proven loss,
cost or expense in connection with the Work;

(b)           the reasonable costs and expenses attributable to such termination,
including demobilization costs;

 37
 

(c)           amounts due in settlement of terminated contracts with Subcontractors
and Design Consultants;

(d)           overhead and profit margin in the amount of fifteen percent (15%) on
the sum of items (a) and (b) above; and

(e)           all retainage withheld by Owner on account of Work that has been
completed in accordance with the Contract Documents.

15.3.2     If Owner terminates this Agreement pursuant to this Section 15.3 and
proceeds to design and construct the Project through its employees, agents or
third parties, Owner’s rights to use the Work Product shall be as set forth in
Section 5.3.

15.4        Design-Builder’s Right
to Stop Work.

15.4.1     Design-Builder may, in addition to any other rights afforded under the
Contract Documents or at Law, stop work for Owner’s failure to pay amounts
properly due under Design-Builder’s Application for Payment.

15.4.2     If any of the events set forth in Section 15.4.1 above occur,
Design-Builder has the right to stop work by providing written notice to Owner
that Design-Builder will stop work unless such event is cured within seven (7)
Days from Owner’s receipt of Design-Builder’s notice. If Owner fails to cure or
reasonably commence to cure such problem and thereafter diligently pursue such
cure to completion, then Design-Builder may give a second written notice to
Owner of its intent to stop work within an additional seven (7) Day
period.  If Owner, within such second
seven (7) Day period, fails to cure, or reasonably commence to cure such
problem and thereafter diligently pursue such cure to completion, then
Design-Builder may stop work.  In such
case, Design-Builder shall be entitled to make a claim for adjustment to the
Contract Price and Contract Time(s) to the extent it has been adversely
impacted by such stoppage.

15.5        Design-Builder’s Right
to Terminate for Cause.

15.5.1     Design-Builder, in addition to any other rights and remedies provided
in the Contract Documents or by Law, may terminate the Agreement for cause for
the following reasons:

(a)           The Work has been
stopped for sixty (60) consecutive Days, or more than ninety (90) Days during
the duration of the Project, because of court order, any Governmental Authority
having jurisdiction over the Work, or orders by Owner under Section 15.1
hereof, provided that such stoppages are not due to the acts or omissions of
Design-Builder, Design Consultant and their respective officers,

 38
 

agents, employees, Subcontractors or any other person
for whose acts the Design-Builder may be liable under Law.

(b)           Owner’s failure to
provide Design-Builder with any information, permits or approvals that are
Owner’s responsibility under the Contract Documents which result in the Work
being stopped for sixty (60) consecutive Days, or more than ninety (90) Days
during the duration of the Project, even though Owner has not ordered
Design-Builder in writing to stop and suspend the Work pursuant to Section 15.1
hereof.

(c)           Owner fails to meet its
obligations under Exhibit C and such failure results in the Work being stopped
for sixty (60) consecutive Days, or more than ninety (90) Days during the
duration of the Project even though Owner has not ordered Design-Builder in
writing to stop and suspend the Work pursuant to Section 15.1 hereof.

(d)           Owner’s failure to cure
the problems set forth in Section 15.4.1 above within seven (7) Days after
Design-Builder has stopped the Work.

15.5.2     Upon the occurrence of an event set forth in Section 15.5.1 above,
Design-Builder may elect to terminate this Agreement by providing written
notice to Owner that it intends to terminate the Agreement unless the problem
cited is cured within seven (7) Days of Owner’s receipt of such notice.  If Owner fails to cure, or reasonably
commence to cure, such problem, then Design-Builder may give a second written
notice to Owner of its intent to terminate within an additional seven (7) Day
period.  If Owner, within such second
seven (7) Day period, fails to cure such problem, then Design-Builder may
declare the Agreement terminated for default by providing written notice to
Owner of such declaration.  In such case,
Design-Builder shall be entitled to recover in the same manner as if Owner had
terminated the Agreement for its convenience under Section 15.3.

15.6        Bankruptcy of Owner or
Design-Builder.

15.6.1     If either Owner or Design-Builder institutes or has instituted against
it a case under the United States Bankruptcy Code (such Party being referred to
as the “Bankrupt  Party”), such event may impair or frustrate the
Bankrupt Party’s ability to perform its obligations under the Contract
Documents.  Accordingly, should such
event occur:

(a)           The Bankrupt Party, its trustee or other successor, shall furnish, upon
request of the non-Bankrupt Party, adequate assurance of the ability of the
Bankrupt Party to perform all future obligations under the Contract Documents,
which assurances shall be provided within ten (10) Days after receiving notice
of the request; and

(b)           The Bankrupt Party shall file an appropriate action within the
bankruptcy court to seek assumption or rejection of the Agreement within sixty
(60) Days of the institution of the bankruptcy filing and shall diligently
prosecute such action.

15.6.2     If the Bankrupt Party fails to comply with its foregoing obligations,
the non-Bankrupt Party shall be entitled to request the bankruptcy court to
reject the Agreement,

 39
 

declare the Agreement terminated and pursue any other recourse
available to the non-Bankrupt Party under this Article 15.

15.6.3     The rights and remedies under this Section 15.6 shall not be deemed to
limit the ability of the non-Bankrupt Party to seek any other rights and remedies
provided by the Contract Documents or by Law, including its ability to seek
relief from any automatic stays under the United States Bankruptcy Code or the
right of Design-Builder to stop Work under any applicable provision of this
Agreement.

15.7        Lenders’
Right to Cure.  At any time after the
occurrence of any event set forth in Section 15.4.1 or Section 15.5.1, but
within the timeframes set forth therein, the Lenders shall have the right, but
not the obligation, to cure such default on behalf of Owner.

Article 16

Representatives of the Parties

16.1        Designation
of Owner’s Representatives.  Owner
designates the individual listed below as its senior representative (“Owner’s
Senior Representative”), which individual has the authority and
responsibility for avoiding and resolving disputes under Article 19:

Revis L. Stephenson III

Chairman & CEO

10201 Wayzata Blvd.  Suite 250

Minneapolis, MN  55305

Telephone: 763.226.2702

Facsimile: 763.226.2703

Owner designates the individual listed below as its representative (“Owner’s
Representative”), which individual has the authority and responsibility set
forth in Section 4.4:

Donald Gales

President & COO

10201 Wayzata Blvd.  Suite 250

Minneapolis, MN  55305

Telephone: 763.226.2702

Facsimile: 763.226.2703

16.2        Designation
of Design-Builder’s Representatives. 
Design-Builder designates the individual listed below as its senior
representative (“Design-Builder’s Senior Representative”), which
individual has the authority and responsibility for avoiding and resolving
disputes under Article 19:

 40
 

Roland “Ron”
Fagen

CEO and President

501 W. Highway 212

P.O. Box 159

Granite Falls, MN 56241

Telephone:  (320) 564-3324

Facsimile: (320) 564-3278

Design-Builder designates the individual
listed below as its representative (“Design-Builder’s  Representative”),
which individual has the authority and responsibility set forth in Section 3.1:

Aaron
Fagen

Chief Operating Officer

501 W. Highway 212

P.O. Box 159

Granite Falls, MN 56241

Telephone:  (320) 564-3324 

Facsimile: (320) 564-3278

Article 17

Insurance

17.1        Insurance.  Design-Builder shall procure and maintain in
force through the Final Completion Date the following insurance coverages with
the policy limits indicated, and otherwise in compliance with the provisions of
this Agreement:

Commercial General
Liability:

	
  General Aggregate

  	
   

  	
   

  
	
  Products-Comp/Op
  AGG

  	
   

  	
  $

  	
  2,000,000

  
	
  Personal &
  Adv Injury

  	
   

  	
  $

  	
  1,000,000

  
	
  Each Occurrence

  	
   

  	
  $

  	
  1,000,000

  
	
  Fire Damage (Any
  one fire)

  	
   

  	
  $

  	
  50,000

  
	
  Med Exp (Any one
  person)

  	
   

  	
  $

  	
  5,000

  

 

Automobile Liability:

	
  Combined Single Limit

  	
   

  	
   

  
	
  Each Occurrence

  	
   

  	
  $1,000,000

  

 

 41
 

Excess Liability – Umbrella Form:

	
  Each Occurrence

  	
   

  	
  $20,000,000

  
	
  Aggregate

  	
   

  	
  $20,000,000

  

 

Workers’ Compensation

Statutory limits as required by the state in which the
Work is performed.

Employers’
Liability:

	
  Each Accident

  	
   

  	
  $1,000,000

  
	
  Disease-Policy
  Limit

  	
   

  	
  $1,000,000

  
	
  Disease-Each
  Employee

  	
   

  	
  $1,000,000

  

 

Professional
Errors and Omissions

	
  Per Claim

  	
   

  	
  $5,000,000

  
	
  Annual

  	
   

  	
  $5,000,000

  

 

17.2        Design-Builder’s
Insurance Requirements.

17.2.1     Design-Builder is responsible for procuring and maintaining from
insurance companies authorized to do business in the state in which the Project
is located, the following insurance coverages for certain claims which may
arise from or out of the performance of the Work and obligations under the
Contract Documents:

(a)           coverage for claims arising under workers’ compensation, disability and
other similar employee benefit Laws applicable to the Work;

(b)           coverage for claims by Design-Builder’s employees for bodily injury,
sickness, disease, or death;

(c)           coverage for claims by any person other than Design-Builder’s employees
for bodily injury, sickness, disease, or death;

(d)           coverage for usual personal injury liability claims for damages
sustained by a person as a direct or indirect result of Design-Builder’s
employment of the person, or sustained by any other person;

(e)           coverage for claims for damages (other than to the Work) because of
injury to or destruction of tangible property, including loss of use;

(f)            coverage for claims of damages because of
personal injury or death, or property damage resulting from ownership, use and
maintenance of any motor vehicle; and

 42
 

(g)           coverage for contractual liability claims arising out of Design-Builder’s
obligations under Section 14.2.

17.2.2     Design-Builder’s liability insurance required by this Section 17.2
shall be written for the coverage amounts set forth in Section 17.1 and shall
include completed operations insurance for the period of time set forth in the
Agreement.

17.2.3     Design-Builder’s liability insurance set forth in Sections 17.2.1 (a)
through (g) above shall specifically delete any design-build or similar
exclusions that could compromise coverages because of the design-build delivery
of the Project.

17.2.4      To the extent Owner requires Design-Builder or any Design Consultant
to provide professional liability insurance for claims arising from the
negligent performance of design services by Design-Builder or the Design
Consultant, the coverage limits, duration and other specifics of such insurance
shall be as set forth in the Agreement. 
Any professional liability shall specifically delete any design-build or
similar exclusions that could compromise coverages because of the design-build
delivery of the Project.  Such policies
shall be provided prior to the commencement of any design services hereunder.

17.2.5     Prior to commencing any construction services hereunder, Design-Builder
shall provide Owner with certificates evidencing that (i) all insurance
obligations required by the Contract Documents are in full force and in effect
and will remain in effect for the duration required by the Contract Documents
and (ii) no insurance coverage required hereunder will be canceled, renewal
refused, or changed unless at least thirty (30) Days prior written notice is
given to Owner.

17.3        Owner’s
Liability Insurance.  Owner shall procure
and maintain from insurance companies authorized to do business in the state in
which the Project is located such liability insurance to protect Owner from
claims which may arise from the performance of Owner’s obligations under the
Contract Documents or Owner’s conduct during the course of the Project.  The general and professional liability
insurance obtained by Owner shall name Design-Builder, Design Consultants,
Subcontractors, the Lenders and Lenders’ Agent as additional insureds, without
application of deductible, retention or retrospective premiums as to the additional
insureds.

17.4        Owner’s Property
Insurance.

17.4.1     Unless otherwise provided in the Contract Documents, Owner shall
procure from insurance companies authorized to do business in the state in
which the Project is located, and maintain through Final Completion, property
insurance upon the entire Project in a minimum amount equal to the full
insurable value of the Project, including professional fees, overtime premiums
and all other expenses incurred to replace or repair the insured property.  The property insurance obtained by Owner
shall include as additional insureds the interests of Owner, Design-Builder,
Design Consultants, Subcontractors, the Lenders and Lenders’ Agent and shall

 43
 

insure against the perils of fire and extended coverage, theft, vandalism,
malicious mischief, collapse, flood, earthquake, debris removal and other
perils or causes of loss as called for in the Contract Documents and without
application of any deductible, retention or retrospective premium.  Owner shall maintain coverage equal to or in
excess of the value of each of Design-Builder’s, Design Consultants’, and
Subcontractors’ property on the Site. 
The property insurance shall include physical loss or damage to the
Work, including materials and equipment in transit, at the Site or at another
location as may be included in Design-Builder’s Application for Payment
approved by Owner.  Notwithstanding the
foregoing, the property insurance provided by Owner hereunder shall not be
required to include Design-Builder’s, Design Consultants’, and Subcontractors’
tools or construction equipment.

17.4.2     Unless the Contract Documents provide otherwise, Owner shall procure
and maintain boiler and machinery insurance that will include as additional
insureds the Owner, Design-Builder, Design Consultants, and Subcontractors, in
an amount not less than Contract Price and without application of any
deductible, retention or retrospective premium as to the additional insureds.
Owner shall maintain coverage equal to or in excess of the value of each of
Design-Builder’s, Design Consultants’, and Subcontractors’ interest or
investment in boiler or machinery equipment on the Site.

17.4.3     Prior to Design-Builder commencing any Work, Owner shall obtain a
builder’s risk insurance policy naming Owner as the insured, with
Design-Builder, Design Consultants and Subcontractors as additional insureds,
in an amount not less than the Contract Price and without application of
deductible, retention or retrospective premium as to the additional insureds.

17.4.4     Owner shall also obtain, prior to Design-Builder commencing any Work,
terrorism coverage as described by the Terrorism Risk Insurance Act of 2002,
Pub. L. No. 107-297, 116 Stat. 2322 (2002), as extended by the Terrorism Risk
Insurance Extension Act of 2005, Pub. L. No. 109-144 (2005), or any successor
act or renewing act for the period during which the Terrorism Risk Insurance
Act or any successor act or renewing act is in effect.

17.4.5     Prior to Design-Builder commencing any Work, Owner shall provide
Design-Builder with copies of the insurance certificates reflecting coverages
required under this Section 17.4 evidencing that (i) all Owner’s insurance
obligations required by the Contract Documents are in full force and in effect
and will remain in effect until Design-Builder has completed all of the Work
and has received Final Payment from Owner, and (ii) no insurance coverage will
be canceled, renewal refused, or changed unless at least thirty (30) Days prior
written notice is given to Design-Builder. 
Owner’s property insurance shall not lapse or be cancelled during the
term of this Agreement.  Promptly after
Owner’s receipt thereof, Owner shall be required to provide Design-Builder with
copies of all insurance policies to which Design-Builder, Design Consultants,
and Subcontractors are named as additional insureds.  In the event Owner replaces insurance
providers for any policy required under this Section, revises policy coverages,
or otherwise modifies any applicable insurance policy in any way, Owner shall

 44
 

provide Design-Builder, for its review or possession as provided under
this Section 17.4.5, the certificate of insurance and a copy of such new,
revised or modified policy when available.

17.4.6     Any loss covered under Owner’s property insurance shall be adjusted
with Owner and Design-Builder and made payable to both of them as trustees for
the insureds as their interests may appear, subject to any applicable mortgage
clause.  All insurance proceeds received
as a result of any loss will be placed in a separate account and distributed in
accordance with such agreement as the interested parties may reach.  Any disagreement concerning the distribution
of any proceeds will be resolved in accordance with Article 19 hereof.

17.4.7     Owner and Design-Builder waive against each other and Owner’s separate
contractors, Design Consultants, Subcontractors, agents and employees of each
and all of them all damages covered by property insurance provided herein,
except such rights as they may have to the proceeds of such insurance.  Design-Builder and Owner shall, where
appropriate, require similar waivers of subrogation from Owner’s separate
contractors, Design Consultants, Subcontractors, and insurance providers and
shall require each of them to include similar waivers in their contracts or
policies.

17.5        Coordination with Loan
Documents.

17.5.1     Notwithstanding anything herein to the contrary, all provisions
relating to insurance and insurance proceeds shall be conformed to the
requirements of the Lenders in connection with any financing.

Article 18

Representations and Warranties

18.1        Design-Builder
and Owner Representations and Warranties. 
Each of Design-Builder and Owner represents that:

(a)           it is duly organized,
validly existing and in good standing under the Laws of its formation and has
all requisite power and authority to execute and deliver this Agreement, to
perform its obligations hereunder and to consummate the transactions
contemplated hereby;

(b)           this Agreement has been
duly executed and delivered by such Party and constitutes the legal, valid and
binding obligations of such Party, enforceable against such Party in accordance
with their respective terms, except as enforcement may be limited by
bankruptcy, insolvency, moratorium or similar Laws affecting creditor’s rights
or by general equitable principles;

(c)           the execution, delivery
and performance of this Agreement and the consummation of the transactions
contemplated hereby do not and will not conflict with or violate (a) the
certificate of incorporation or bylaws or equivalent organizational documents
of such Party, or (b) any Law applicable to such Party and other than

 45
 

the permits listed on
Exhibit G, such execution, delivery and performance of this Agreement does not
require any Governmental Approval; and

(d)           there is no action
pending or, to the knowledge of such Party, threatened, which would hinder,
modify, delay or otherwise adversely affect such Party’s ability to perform its
obligations under the Contract Documents.

18.2        Design-Builder
Representations and Warranties. 
Design-Builder further represents that it has the necessary financial
resources to fulfill its obligations under this Agreement.

Article 19

Dispute Resolution

19.1        Dispute
Avoidance and Mediation.  The Parties are
fully committed to working with each other throughout the Project and agree to
communicate regularly with each other at all times so as to avoid or minimize
disputes or disagreements.  If disputes
or disagreements do arise, Design-Builder and Owner each commit to resolving
such disputes or disagreements in an amicable, professional and expeditious
manner so as to avoid unnecessary losses, delays and disruptions to the Work.

Design-Builder and
Owner will first attempt to resolve disputes or disagreements at the field
level through discussions between Design-Builder’s Representative and Owner’s
Representative.

If a dispute or
disagreement cannot be resolved through Design-Builder’s Representative and
Owner’s Representative, Design-Builder’s Senior Representative and Owner’s
Senior Representative, upon the request of either Party, shall meet as soon as
conveniently possible, but in no case later than thirty (30) Days after such a
request is made, to attempt to resolve such dispute or disagreement.  Prior to any meetings between the Senior
Representatives, the Parties will exchange relevant information that will
assist the Parties in resolving their dispute or disagreement.

If, after meeting,
the Senior Representatives determine that the dispute or disagreement cannot be
resolved on terms satisfactory to both Parties, the Parties shall submit the
dispute or disagreement to non-binding mediation.  The 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
(“AAA”) 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.

19.2        Arbitration.  Any claims, disputes or controversies between
the Parties arising out of or relating to the Agreement, or the breach thereof,
which have not been resolved in accordance with the procedures set forth in
Section 19.1 above shall be decided by arbitration to be conducted in
Minneapolis, Minnesota in accordance with the Construction Industry Arbitration
Rules and Mediation Procedures of the AAA then in effect, unless the Parties
mutually agree otherwise.

 46

The award of the
arbitrator(s) shall be final and binding upon the Parties without the right of
appeal to the courts.  Judgment may be
entered upon it in accordance with Applicable Law by any court having
jurisdiction thereof.

Design-Builder and
Owner expressly agree that any arbitration pursuant to this Section 19.2 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 Design-Builder and
Owner will include appropriate provisions in all contracts they execute with
other parties in connection with the Project 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.

19.3        Duty
to Continue Performance.  Unless provided
to the contrary in the Contract Documents, Design-Builder shall continue to
perform the Work and Owner shall continue to satisfy its payment obligations to
Design-Builder, pending the final resolution of any dispute or disagreement
between Design-Builder and Owner.

19.4        No Consequential
Damages.

19.4.1     Notwithstanding anything herein to the contrary (except as set forth in
Section 19.4.2 below), neither Design-Builder nor Owner shall be liable to the
other for any consequential losses or damages, whether arising in contract,
warranty, tort (including negligence), strict liability or otherwise, including
but not limited to, losses of use, profits, business, reputation or financing,
except that Design-Builder does not waive any such damages resulting from or
arising out of any breach of Owner’s duties and obligations under the limited
license granted by Design-Builder to Owner pursuant to Article 5.

19.4.2     The consequential damages limitation set forth in Section 19.4.1 above
is not intended to affect the payment of liquidated damages, if any, set forth
in Section 7.3 of the Agreement, which both Parties recognize has been
established, in part, to reimburse Owner for some damages that might otherwise
be deemed to be consequential.

19.5        Limitation
of Liability. 
Notwithstanding anything else in this Agreement to the contrary, the
aggregate liability of Design-Builder, its Subcontractors, vendors, suppliers,
agents and employees,  to Owner (or any
successor thereto or assignee thereof) for any and all claims and/or
liabilities arising out of or relating in any manner to the Work or to
Design-Builder’s performance or non-performance of its obligations hereunder,
whether based in contract, tort (including negligence), strict liability, or
otherwise, shall not exceed, in the aggregate, the Contract Price and shall be
reduced, upon the issuance of each Application for Payment, by seventy-five
percent (75%) of the total value of such Application for Payment; provided,
however, that upon the earlier of Substantial Completion or such point in time
requests for payment pursuant to Article 10 have been made for ninety percent
(90%) of the Contract Price,

 47
 

Design-Builder’s
aggregate liability shall be limited to the greater of (1) Ten Percent (10%) of
the Contract Price or (2) the amount of insurance coverage available to respond
to the claim or liability under any policy of insurance provided by
Design-Builder under this Agreement. The aggregate liability of Design-Builder
shall not include increased costs of purchasing equipment, materials, supplies,
or services, except to the extent Owner has terminated the Agreement pursuant
to Section 15.2 and such equipment, materials, supplies, and services are
required to complete the Work or to the extent that any of such equipment,
materials, supplies, and services may be included in the payment of liquidated
damages pursuant to Section 7.3 hereof. 
Notwithstanding the foregoing, the maximum aggregate liability of
Design-Builder for failure to achieve the Contract Time(s) shall be as set
forth in Section 7.3.

Article 20

 

Confidentiality of Shared
Information

 

20.1        Non-Disclosure
Obligation.  Except as required by court
order, subpoena, or Applicable Law, the Parties will hold in confidence, and
will use only for the purposes of completing, maintaining, repairing,
modifying, and operating the Project (but not for expansion and all related
activities), performing their respective obligations under this Agreement, and
obtaining financing for the development of the Project, any and all
Confidential Information disclosed to each other.  Neither Party shall otherwise disclose to
third parties any Confidential Information without the express written consent
of the other Party, which consent shall not be unreasonably withheld.  The Parties shall at all times use their
respective reasonable efforts to keep all Confidential Information and
information regarding the terms and conditions of this Agreement confidential,
except that Owner is authorized to publicly file this Agreement as necessary in
connection with seeking or selling or registering securities (after obtaining
the written consent of Design-Builder, which must not be unreasonably withheld
or delayed).  However, the Parties may
disclose Confidential Information to their respective lenders, lenders’ agents,
advisors and/or consultants only as reasonably necessary in connection with the
financing of the Plant or to enable them to advise the Parties with regard to
the Contract Documents and the Project, provided that prior to such disclosure
any party to whom Confidential Information is disclosed is informed by the
disclosing Party of the existence of this confidentiality obligation and agrees
to be obligated to maintain the confidentiality of any information received.
The term “Confidential Information” will mean (i) confidential or
proprietary information regarding the other Party’s business affairs, finances,
technology, processes, plans or installations, product information, know-how,
or other information that is received from the other Party pursuant to this
Agreement or the Parties’ relationship prior thereto or is developed pursuant
to this Agreement, (ii) any and all information concerning the Contract
Documents, the Agreement, or the terms thereof, and (iii) all information which
one Party, directly or indirectly, may acquire from another Party;
however,    Confidential Information will
not include information falling into any of the following categories:

(a)                                  information
that, at the time of disclosure hereunder, is in the public domain;

(b)                                 information
that, after disclosure hereunder, enters the public domain other than by breach
of this Agreement or the obligation of confidentiality;

 48
 

(c)                                  information
that, prior to disclosure hereunder, was already in the recipient’s possession,
either without limitation on disclosure to others or subsequently becoming free
of such limitation;

(d)                                 information
obtained by the recipient from a third party having an independent right to
disclose this information; and

(e)                                  information
that is available through discovery by independent research without use of or
access to the Confidential Information acquired from the other Party; and

(f)                                    photographs
and descriptive information regarding the Project, including Plant capacity,
Owner’s name, Design-Builder’s name, the names of others performing portions of
the Work, and the Project location, as used by Owner or Design-Builder for
purposes of marketing and promotion or for meeting legal requirements.

Each Party’s
obligation to maintain Confidential Information in confidence will be deemed
performed if such Party observes with respect thereto the same safeguards and
precautions which such Party observes with respect to its own Confidential
Information of the same or similar kind. 
It will not be deemed to be a breach of the obligation to maintain
Confidential Information in confidence if Confidential Information is disclosed
upon the order of a court or other authorized Governmental Authority, or
pursuant to other Legal Requirements. 
However, if Owner is required to file the Contract Documents or a
portion thereof with a Governmental Authority, it agrees that it will not do so
without first informing Design-Builder of the requirement and seeking
confidential treatment of the Contract Documents prior to filing the documents
or a portion thereof.

20.2        Publicity
and Advertising.  Neither Owner nor
Design-Builder shall make or permit any of their 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 other Party unless prior written
consent is obtained from the other Party, which consent shall not be
unreasonably withheld.

20.3        Term
of Obligation.  The confidentiality
obligations of the Parties pursuant to this Article 20 shall survive the
expiration or other termination of this Agreement for a period of five (5)
years.

Article 21

 

Miscellaneous

 

21.1        Assignment.  This Agreement shall be binding upon, shall
inure to the benefit of, and may be performed by, the successors and permitted
assigns of the Parties, except that neither Design-Builder nor Owner shall,
without the written consent of the other, assign or transfer this Agreement or
any of the Contract Documents. 
Design-Builder’s subcontracting portions of the

 49
 

Work in accordance
with this Agreement shall not be deemed to be an assignment of this
Agreement.  Owner may assign all of its
rights and obligations under the Contract Documents to its Lenders or Lenders’
Agent as collateral security in connection with Owner obtaining or arranging
any financing for the Project; provided, however, Owner shall deliver, at least
ten (10) Days prior to any such assignment, to Design-Builder (i) written
notice of such assignment and (ii) a copy of the instrument of assignment in
form and substance reasonably acceptable to Design-Builder, whose approval
shall not be unreasonably withheld.  The
Lenders or Lenders’ Agent may assign the Contract Documents or their rights
under the Contract Documents, including without limitation in connection with
any foreclosure or other enforcement of their security interest.  Design-Builder shall execute, if requested, a
consent to assignment for the benefit of the Lenders and/or the Lenders’ Agent
in form and substance reasonably acceptable to Design-Builder, which form is
attached hereto as Exhibit O, provided that with respect to any such
assignments such assignee demonstrates to Design-Builder’s satisfaction that it
has the capability to fulfill Owner’s obligations under this Agreement.

21.2        Successors.  Design-Builder and Owner intend that the
provisions of the Contract Documents are binding upon the Parties, their
employees, agents, heirs, successors and assigns.

21.3        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.

21.4        Severability.  If any provision or any part of a provision
of the Contract Documents 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
validity, legality, or enforceability of the remaining provision or parts of
the provision of the Contract Documents, which shall remain in full force and
effect as if the unenforceable provision or part were deleted.

21.5        No
Waiver.  The failure of either
Design-Builder or Owner to insist, in any one (1) or more instances, on the
performance of any of the obligations required by the other under the Contract
Documents shall not be construed as a waiver or relinquishment of such
obligation or right with respect to future performance.

21.6        Headings.  The table of contents and the headings used
in this Agreement or any other Contract Document, 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.

21.7        Notice.  Whenever the Contract Documents require 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 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.

 50
 

 

	
  If to Design-Builder, to:

  
	
   

  
	
  Fagen, Inc.

  
	
  501 W. Highway
  212

  
	
  P. O. Box 159

  
	
  Granite Falls,
  MN 56241

  
	
  Attention: Aaron
  Fagen

  
	
  Fax: (320)
  564-3278

  
	
   

  
	
  with a copy to:

  
	
   

  
	
  Fagen, Inc.

  
	
  501 W. Highway
  212

  
	
  P. O. Box 159

  
	
  Granite Falls,
  MN 56241

  
	
  Attention:
  Jennifer Johnson

  
	
  Fax: (320)
  564-3278

  
	
   

  
	
  and to:

  
	
   

  
	
  Fagen, Inc.

  
	
  501 W. Highway
  212

  
	
  P. O. Box 159

  
	
  Granite Falls,
  MN 56241

  
	
  Attention: Ryan
  Manthey

  
	
  Fax: (320)
  564-5190

  
	
   

  
	
  If to Owner, to:

  
	
   

  
	
  ABE Northfield,
  LLC

  
	
  10201 Wayzata
  Blvd. Suite 250

  
	
  Minneapolis, MN
  55305

  
	
  Attention: Revis
  L. Stephenson III

  
	
  Fax: (763)
  226-2725

  
	
   

  
	
  and

  
	
  Lender’s Agent
  at the address provided for Lender’s Agent to Design-Builder by Owner by
  notice within five (5) Days following the Financial Closing.

  

 

21.8        No
Privity with Design Consultant/Subcontractors. 
Nothing in the Contract Documents is intended or deemed to create any
legal or contractual relationship between Owner and any Design Consultant or
Subcontractor.

21.9        Amendments.  The Contract Documents may not be changed,
altered, or amended in any way except in writing signed by a duly authorized
representative of each Party.

 51
 

21.10      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.

21.11      Third-Party
Beneficiaries.  Except as expressly
provided herein, this Agreement is intended to be solely for the benefit of the
Owner, the Design-Builder and permitted assigns, and is not intended to and
shall not confer any rights or benefits on any person not a signatory hereto.

21.12      Counterparts.  This Agreement may be executed in one (1) 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.

21.13      Survival.   Notwithstanding any provisions herein to the
contrary, the Work Product provisions set forth in Article 5 and the indemnity
obligations set forth herein shall survive (in full force and effect) 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.

[The next page is
the signature page.]

 52
 

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 February 7, 2007.

	
  OWNER:

  	
   

  	
  DESIGN-BUILDER:

  
	
   

  	
   

  	
   

  
	
  ABE Northfield,
  LLC

  	
   

  	
  Fagen, Inc.

  
	
  (Name
  of Owner)

  	
   

  	
  (Name of Design-Builder)

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   /s/ Revis L. Stephenson III

  	
   

  	
  /s/ Ron Fagen

  
	
  (Signature)

  	
   

  	
  (Signature)

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Revis L.
  Stephenson III

  	
   

  	
  Roland “Ron” Fagen

  
	
  (Printed
  Name)

  	
   

  	
  (Printed Name)

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Chairman

  	
   

  	
  CEO and President

  
	
  (Title)

  	
   

  	
  (Title)

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Date: 

  	
  2/7/07

  	
   

  	
  Date: 

  	
  2/13/07

  
					

 

 53

AMENDMENT NUMBER
ONE

to

LUMP SUM DESIGN-BUILD AGREEMENT (“DBA”)

DATED February 7, 2007

by and between

FAGEN, INC. (“FAGEN”)

and

ABE NORTHFIELD, LLC (“OWNER”)

This Amendment Number One is entered into this 6th day of June,
2007, by and between Fagen, Inc., a Minnesota Corporation (“Fagen”) and ABE
Northfield, LLC, a Delaware Limited Liability Company (“Owner”).

Anything to the
contrary contained in the DBA between the parties hereto, and in consideration
of the mutual promises, covenants, and conditions contained in the DBA and
contained herein, and for other good valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto covenant and
agree that the terms and conditions of this Amendment Number One shall prevail.

The parties hereto
agree as follows:

1.  Article 9 of the DBA shall be amended and
replaced as follows:

9.1 Contract Price.  As full consideration to Design-Builder for
full and complete performance of the Work and all costs incurred in connection
therewith, Owner shall pay Design-Builder in accordance with the terms of
Article 10, the sum of One Hundred Twenty-two Million Five Hundred Forty-two
Thousand Three Hundred Sixty-three Dollars ($122,542,363.00) (“Contract
Price”), subject to adjustments made in accordance with Article 13.  The Contract Price does not include the water
pre-treatment system and the fire protection system which shall be provided by
Design-Builder pursuant to a separate side-letter agreement executed by Owner
and Design-Builder at Design-Builder’s standard time plus material rates during
the relevant time period and at the relevant locale.  Owner acknowledges that it has taken no
action which would impose a union labor or prevailing wage requirement on Design-Builder,
Owner or the Project.  The Parties
acknowledge and agree that if after the date hereof, an Owner’s action, a
change in Applicable Law, or a Governmental Authority acting pursuant to a
change in Applicable Law shall require Design-Builder to employ union labor or
compensate labor at prevailing wages, the Contract Price shall be adjusted
upwards to include any increased costs, of any kind or nature, associated with
such labor or wages including but not limited to site security and personnel
costs.  Such adjustments shall include,
but not be limited to, increased labor, subcontractor, and material and
equipment costs resulting from any union or prevailing wage requirement;
provided, however, that if an option is made available to either employ union
labor, or to compensate labor at prevailing wages, such option shall be at
Design-Builder’s sole discretion and that if such option is executed by Owner
without Design-Builder’s agreement, Design-Builder shall have the right to
terminate this agreement and shall be entitled to compensation pursuant to
Section 15.3.1 hereof.

 1
 

9.2  Effect
of Cost Increase on Contract Price.  The Contract Price shall be subject to
adjustment by Design-Builder as follows:

9.2.1                               Construction
Cost Index Increase.  The Baseline
Index for this Agreement shall be 7882.53 (October 2006) (“Baseline Index”).  The Baseline Index is based on the
Construction Cost Index published by Engineering News-Record Magazine (“CCI”).  If between the Effective Date and the date on
which a valid Notice to Proceed is given to Design-Builder the CCI
increases over the Baseline Index, Design-Builder shall notify Owner in writing
that it is adjusting the Contract Price and the Contract Price shall be
increased by a percentage amount equal to the percentage increase in CCI.

9.2.2                               Specialty
Materials Fee.  Due to rapidly
accelerating costs of certain specialty materials required for Plant
Construction, in addition to any Contract Price escalation set pursuant to
Section 9.2.1, effective June 1, 2007, Design-Builder shall also add a surcharge
to the Contract Price of one half of one percent (0.50%) for each calendar
month that has passed between the month establishing the Baseline Index
referenced in Section 9.2.1 and the month in which a valid Notice to Proceed is
given to Design-Builder.

9.2.3                               Adjustments
Cumulative.  The Contract Price
adjustment provided for in Section 9.2.2 shall be in addition to any adjustment
provided for in Section 9.2.1.  By way of
example, if a valid Notice to Proceed is given one year after the month establishing
the Baseline Index and the CCI has increased two percent (2%) over such period
of time, the total adjustment to the Contract Price shall be two percent (2%)
in accordance with Section 9.2.1 plus one half of one percent (0.50%) for each
of the twelve months from the establishment of the Baseline Index to the
delivery of a valid Notice to Proceed in accordance with Section 9.2.2, for a
total adjustment of eight percent (8%).

2.  Article 10.1.1 of the DBA shall be deleted in
its entirety and replaced as follows:

10.1.1 [Reserved].

3.  Article 1.2 shall be
amended to delete  “Commitment
Fee is defined in Section 10.1.1.”

The other provisions of
the DBA shall remain unchanged and in full force and effect.

 2
 

IN WITNESS WHEREOF, the
parties hereto have executed this Amendment Number One on the date set forth
above.

 

	
  FAGEN, INC.

  	
  ABE NORTHFIELD, LLC

  
	
   

  	
   

  	
   

  
	
  By /s/ Ron Fagen

  	
   

  	
  By /s/ Donald Gales

  
	
  Title CEO and
  President

  	
   

  	
  Title President

  

 

 

 3

EXHIBIT A

Performance Guarantee Criteria

	
  Criteria

  	
   

  	
  Specification

  	
   

  	
  Testing Statement

  	
   

  	
  Documentation

  
	
  Plant Capacity – fuel grade ethanol

  	
   

  	
  Operate at a rate of 100 million gallons per year of
  denatured fuel grade ethanol meeting the specifications of ASTM 4806 based on
  353 days of operation per calendar year and 4.76% denaturant.

  	
   

  	
  Seven day performance test

  	
   

  	
  Production records and written report by
  Design-Builder.

  
	
  Corn to Ethanol Conversion ratio; [*]

  	
   

  	
  Not be less than 2.80 denatured gallons of ethanol
  per bushel (56#) of corn

  	
   

  	
  As determined by meter readings during a seven day
  performance test.

  	
   

  	
  Production records and written analysis by
  Design-Builder.

  
	
  Electrical Energy

  	
   

  	
  0.75 kWh per denatured gallon of fuel grade ethanol
  [*]

  	
   

  	
  As determined by meter readings during a seven day
  performance test.

  	
   

  	
  Production records and written analysis by
  Design-Builder.

  
	
  Natural Gas

  	
   

  	
  Shall not exceed 34,000 Btu per denatured gallon of
  fuel grade ethanol. (This Performance Criteria relates to production of
  ethanol and excludes any natural gas usage that may occur for drying corn.)

  	
   

  	
  As determined by meter readings during a seven day
  performance test.

  	
   

  	
  Production records and written analysis by
  Design-Builder.

  
	
  Process Water Discharge (not including cooling tower
  and boiler blowdown and water pre-treatment (RO) discharge)

  	
   

  	
  Zero gallons under normal operations.

  	
   

  	
  Process discharge meter.

  	
   

  	
  Control System reports.

  
	
  Air Emissions

  	
   

  	
  Must meet the requirements prescribed as of the 

  	
   

  	
  Must meet the requirements as prescribed in the Air 

  	
   

  	
  Written report by Owner’s Air Emission Tester.

  

 

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

 A-1
 

 

	
   

  	
   

  	
  date hereof by the State of Minnesota Pollution
  Control Agency, Air Quality Division.

  	
   

  	
  Permit Application to be provided by Owner, approved
  in a separate signed writing by Design-Builder, and attached as Exhibit K. At
  least five (5) business days prior to submission to all appropriate
  Governmental Authorities, Owner shall provide a copy of such proposed Air
  Permit Application to Design-Builder for its review.

  	
   

  	
   

  

As part of the Performance Guarantee Criteria
the Plant shall operate in accordance with all Legal Requirements.

DISCLAIMER:

Owner’s failure to materially comply with the
operating procedures issued by ICM, Inc./Fagen, Inc. shall void all performance
guaranties and warranties set forth in this Design-Build Agreement to the
extent affected by Owner’s failure to comply as reasonably determined by
Design-Builder.

Owner understands that the
startup of the plant requires resources and cooperation of the Owner, vendors
and other suppliers to the project. 
Design-Builder disclaims any liability and Owner indemnifies
Design-Builder for non-attainment of the Performance Guarantee Criteria
directly or indirectly caused by material non-performance or negligence of
third parties not retained by Design-Builder.

 A-2

EXHIBIT B

General Project Scope

Construct a one hundred (100) MGY dry mill
fuel ethanol plant near Northfield, Minnesota. 
The plant will grind approximately thirty-five million eight hundred
thousand (35,800,000) bushels of corn per year to produce approximately one
hundred (100) MGY of denatured fuel ethanol. 
The plant will also produce approximately three hundred twenty-one
thousand (321,000) tons per year of 11% moisture dried distillers grains with
solubles (DDGS), and approximately two hundred eighty-five thousand seven
hundred (285,700) tons per year of raw carbon dioxide (CO2) gas.

Delivered corn will be dumped in the
receiving building.  The receiving
building will have two truck grain receiving bays and a rail receiving bay,
including an underground conveyor from the rail pit to the second truck
receiving bay both of which share a common receiving leg.  The truck driver will drive onto one of two
pitless scales located near the administration building, be weighed and
sampled, then drive to the receiving building, dump the grain, then proceed
back to one of two pitless scales and obtain a final weight ticket from the
scale operator.  Two independent 20,000
-bushel legs will lift the corn to one of two 500,000 — bushel concrete storage
bins.  A dust collection system will be
installed on the grain receiving system to limit particulate emissions as
described in the Air Quality Permit application.

Ground corn will be mixed in a slurry tank,
routed through a pressure vessel and steam flashed off in a flash vessel.  Cooked mash will continue through
liquefaction tanks and into one of the fermenters.  Simultaneously, propagated yeast will be
added to the mash as the fermenter is filling. 
After batch fermentation is complete, the beer will be pumped to the beer
well and then to the beer column to vaporize the alcohol from the mash.

Alcohol streams are dehydrated in the
rectifier column, the side stripper and the molecular sieve system.  Two hundred proof alcohol is pumped to the
tank farm day tank and blended with five percent natural gasoline as the
product is being pumped into one of two one million five hundred thousand
(1,500,000) gallon final storage tanks. 
Loading facilities for truck and rail cars will be provided.  Tank farm tanks include:  one tank for 190 proof storage, one tank for
200 proof storage, one tank for denaturant storage and two one million five
hundred thousand (1,500,000) gallon tanks for denatured ethanol storage.

Corn mash from the beer stripper is dewatered
in the centrifuge(s).  Wet cake from the
centrifuge(s) is conveyed to the DDGS dryer system. Wet cake is conveyed from
the centrifuges to the dryer(s) where the water is removed from the cake and
the product is dried to 11% moisture.  A
modified wet or wet cake pad is located along side the DDGS dryer building to
divert modified wet or wet cake to the pad when necessary or for limited
production of modified wet or wet cake for sales.  Water in the thin stillage is evaporated and
recycled by the Bio-Methanation system. 
Syrup is added to the wet cake entering the dryer(s).  DDGS is cooled and

 B-1
 

conveyed to flat storage in
the DDGS storage building.  Shipping is
accomplished by scooping and pushing the product with a front-end loader into
an in-floor conveyor system.  The DDGS
load out pit has capacity for approximately one semi-trailer load.  DDGS is weighed as it is loaded for shipment
through a bulk-weigh system.

Fresh water for the boilers, cooking, cooling
tower and other processes will be obtained from the Owner supplied water pretreatment
system.  Boiler water conditioned in
regenerative softeners will be pumped through a deaerator scrubber and into a
deaerator tank.  Appropriate boiler
chemicals will be added as preheated water is sent to the boiler.

Steam energy will be provided by two Thermal
Oxidizer (TO) driven boiler systems utilizing a high percentage of condensate
return to a condensate receiver tank.

The TO/Heat Recovery Steam Generator is a
process used to thermally oxidize the exhaust gasses from the Dryers.  This process will be used to reduce VOCs and
particulates that are in the dryer exhaust and ensure compliance with
environmental regulations.  The energy
required to complete thermal oxidization will then be ducted to a waste heat
boiler that will produce 100% of the steam requirements of the ethanol
plant.  The exhaust gasses from the waste
heat boiler will be ducted through stack gas economizer(s) to recover the
maximum amount of energy possible from the exhaust gas stream.  After the economizer(s), the gas stream will
be vented to atmosphere through a stack.

The process will be cooled by circulating
water through heat exchangers, a chiller, and a cooling tower.

The design includes a compressed air system
consisting of air compressor(s), a receiver tank, pre-filter, coalescing
filter, and double air dryer(s).

The design also incorporates the use of a
clean-in-place (CIP) system for cleaning cook, fermentation, distillation,
evaporation, centrifuges, and other systems. 
Fifty percent caustic soda is received by truck and stored in a tank.

Under normal operating circumstances, the
plant will not have any wastewater discharges that have been in contact with
corn, corn mash, cleaning system, or contact process water.  An ICM/Phoenix Bio-Methanator will reduce the
BOD in process water allowing complete reuse within the plant.  The plant will have blowdown discharges from
the cooling tower and may have water discharge from any water pre-treatment
processes.  Owner shall provide on-site
connection to sanitary sewer or septic system.

Most plant processes are computer controlled
by a Siemens/Moore APACS distributed control system with graphical user
interface and three workstations.  The
control room control console

 B-2
 

will have dual monitors to
facilitate operator interface between two graphics screens at the same
time.  Additional programmable logic
controllers (PLCs) will control certain process equipment.  Design-Builder provides lab equipment.

The cooking system requires the use of
anhydrous ammonia, and other systems require the use of sulfuric acid.  Therefore, a storage tank for ammonia and a
storage tank for acid will be on site to provide the quantities necessary.  The ammonia storage requires that plant
management implement and enforce a Process Safety Management (PSM) program.  The plant design may require additional
programs to ensure safety and to satisfy regulatory authorities.

NOTE:  This Exhibit B is a general description of
the Plant’s basic design and operation only. 
It is not intended to be the final Project scope or to establish the
final specifications.  The final design
of the Plant, including equipment incorporated, and equipment specifications
will be reflected in the As Built Plans.

 B-3

EXHIBIT C

Owner’s Responsibilities

The Owner shall perform and provide the
permits, authorizations, services and construction as specifically described
hereafter:

1)              Land
and Grading — Owner shall provide a site near Northfield, Minnesota.  Owner shall obtain all legal authority to use
the site for its intended purpose and perform technical due diligence to allow
Design-Builder to perform including, but not limited to, proper zoning
approvals, building permits, elevation restrictions, soil tests, and water
tests. The site shall be rough graded per Design-Builder specifications and be
+/- three inches of final grade including the rough grading for Site
roadways.  The site soils shall be
modified as required to provide a minimum allowable soil bearing pressure as
described in Table 1.

Other items to be provided by the Owner include, but
are not limited to, the following: initial site survey (boundary and
topographic) as required by the Design-Builder, layout of the property corners
including two construction benchmarks, Soil Borings and subsequent Geotechnical
Report describing recommendation for Roads, foundations and if required, soil
stabilization/remediation, land disturbance permit, erosion control permit,
site grading as described above with minimum soil standards, placement of
erosion control measures, plant access road from a county, state or federal
road designed to meet local county road standards, plant storm and sanitary
sewers, fire water system with hydrants and plant water main branches taken from
the system to be within five feet of the designated building locations, all
tanks, motors and other equipment associated with or necessary to operate the
fire water loop and associated systems, plant roads as specified and designed
for the permanent elevations and effective depth, spill containment and
drainage systems from both rail and truck loading spots into the tank farm or
other location, “construction” grading plan as drawn (including site retention
pond), plant water well and associated permit(s).  The Owner shall provide for Design-Builder
aggregate covered areas for construction trailers and parking along with
adequate aggregate covered area or areas for material laydown purposes.  The recommended aggregate specifications
shall be as specified by the Owner’s geotechnical engineer.  Owner shall also provide the final grading,
seeding, and mulching, and the site fencing at the site.

Owner is encouraged to obtain preliminary
designs/information and estimates of the cost of performing all Owner required
permits and services as stated in this Exhibit C.  Specifically, the cost of the fire water
systems (including associated fire water pumps, required tank, building (if
required), sprinklers, and all other equipment and materials associated with
the fire water delivery systems) is estimated being in excess of
$2,000,000.  The requirements of each
state and the decisions of each Owner will increase or decrease the actual
cost.  Additionally, the cost of the
required soil stabilization in Table 1 can be in the range of, or may exceed,
$2.5MM which cost is not included in the Contract Price.  The specific soil stabilization requirements
for the grain and DDGS areas will be developed in coordination with the
grain/DDGS area subcontractor.  Owner
shall prepare site according to Design-Builder’s engineering plans provided for
the site work under the Phase I and Phase II Engineering Services Agreement.

 C-1
 

2)              Permits
- Owner shall obtain all Operating Permits including, but not limited to, air
quality permits, in a timely manner to allow construction and startup of the
plant as scheduled by Design-Builder.

3)              Storm Water
Runoff Permit – Owner shall obtain the construction storm-water
runoff permit, permanent storm-water runoff permit, and erosion control/land
disturbance permit.

4)              Minnesota
Pollutant Elimination Discharge Permit – Owner shall obtain a permit
to discharge cooling tower water, reverse osmosis (“R.O.”) reject water, and
any other waste water directly to a designated waterway or other location.  If required by item 9 below, Owner will
secure appropriate permits for emergency process water discharges.

5)              Natural Gas
Supply and Service Agreement – Continuous supply of natural gas of
at least 3.2 billion cubic feet per year, at a minimum rate of 450-550 MCF per
hour and at a minimum pressure of 75 – 200 psi at the plant site.  Pressure reducing stations must be located so
as to provide stable pressure at the point of use.  Owner shall provide all gas piping to the use
points and supply meters and regulators to provide burner tip pressures as
specified by Design-Builder.  Owner shall
also supply a digital flowmeter on-site with appropriate output for monitoring
by the plant’s computer control system.

6)              Temporary
Electrical Service – Owner shall secure electrical service to supply
a minimum 750 KW of electrical power during construction.  Owner shall procure, install, and maintain
temporary service to up to three 3-phase, 480/277 volt temporary service
transformers and one 1-Phase, 240/120 volt temporary service transformer
located throughout the site.  The
transformer sizing, locations, and underground electrical feed routing layout
are to be determined jointly by the Owner, the Design-Builder and the energy
supplier.  Design-Builder shall pay
energy demand and usage charges up to Substantial Completion.

7)              Permanent
Electrical Service – (1) Owner is responsible to secure
continuous service from an energy supplier to serve the facility.  The service from the energy supplier shall be
of sufficient size to provide at a minimum 12.5 MW of electrical capacity to
the site.  (2) The Owner is responsible
for procurement, installation and maintenance of the site supply and
distribution system, including but not limited to the required substation and
all associated distribution lines.  An
on-site digital meter is also to be supplied for monitoring of electrical
usage.  (3) The responsibility of the
Design-Builder starts at the secondary electrical terminals of the site
distribution system transformers that have been installed by Owner (i.e., the
480 volt terminals for the process building transformers; the 480 volt
terminals for the energy center transformers; the 480 volt terminals for the
grains transformer; the 480 volt terminals for the pumphouse transformer; and
the 4160 volt terminals for the chiller transformer). (4)  The site distribution system requirements,
layout, and meters are to be determined jointly by the Owner, the
Design-Builder and the energy supplier.

Design-Builder will be providing soft start motor
controllers for all motors greater than 150 horsepower and where demanded by
process requirements.  Owner is
encouraged to discuss

 C-2
 

with its electrical supplier whether additional soft
start motor controllers are advisable for this facility and such can be added,
with any increased cost being an Owner’s cost.

Design-Builder will provide power factor correction to
0.92 lagging at plant nameplate capacity. 
Owner is encouraged to discuss with its electrical service supplier any
requirements for power factor correction above 0.92 lagging.  Additional power factor correction can be
added with any increased cost being an Owner’s cost.

8)              Water
Supply, Service Agreement, and Pre-Treatment System – Owner shall
supply on-site process wells or other water source that is capable of providing
a quantity of raw water satisfying the needs of the Plant.  Owner should consider providing a redundant
water supply source.  Owner will supply
one process fresh water supply line terminating within five (5) feet of the
point of entry designated by Design-Builder, and one potable supply line
terminating within five (5) feet of the process building and to the
administration building at a point of entry designated by administration
building contractor.

Owner shall pay for a water pre-treatment system to be
designed and constructed by Design-Builder and to be integrated into the
Plant.  The pre-treatment system will be
designed to provide the Plant with the quantity and quality of raw and treated
water needed to supply the Plant’s process needs. Owner shall maintain and use
the water pre-treatment system, including the use of all chemicals specified
for the operation of such water pre-treatment system, for the entirety of the
warranty period set forth in the Design-Build agreement as such may be extended
in accordance therewith.  Owner’s failure
to maintain and to properly use such water pre-treatment system for the
warranty period set forth in the Design-Build Agreement shall void any and all
warranties affected by such failure.  The
pre-treatment system shall be supplied by a vendor selected and approved by
Design-Builder and shall meet specifications and designs approved by
Design-Builder.  The water pre-treatment
system design will be required to meet the discharge requirements under the
Plant’s wastewater discharge permit. 
Owner shall execute side-letter agreements with Design-Builder as
necessary for the design and construction of such water pre-treatment
system.  Design-Builder shall recover
costs for the design and construction of such system from the Owner at
Design-Builder’s standard time plus material rates during the relevant time
period and at the relevant locale.

9)              Wastewater
Discharge System, Permits and/or Service Agreement – Owner to
provide discharge piping, septic tank and drainfield system or connect to
municipal system as required for the sanitary sewer requirements of the
Plant.  These provisions shall comply
with all federal, state, and local regulations, including any permitting issues.

10)        Roads and
Utilities  – Owner shall
provide and maintain the ditches and permanent roads, including the gravel,
pavement or concrete, with the roads passing standard compaction tests.  (Design-Builder will maintain aggregate
construction roads during construction of the Plant and will return to original
pre-construction condition prior to Owner completing final grade and
surfacing.)

 C-3
 

Except as otherwise specifically stated herein the
Owner shall install all utilities so that they are within five (5) feet of the
designated building/structure locations.

11)        Administration
Building  – The
administration building – one story
free standing, office computer system, telephone system, office copier and fax
machine and office furniture and any other office equipment and personal
property for the administration building shall be the sole and absolute cost
and responsibility of Owner and Design-Builder shall have no responsibility in
regards thereto.

12) Maintenance
and Power Equipment  – The
maintenance and power equipment as described in Table 2 and any other
maintenance and power equipment as required by the plant or desired by Owner
shall be the sole and absolute cost and responsibility of Owner and
Design-Builder shall have no responsibility in regards thereto.

13)        Railroads – Owner is
responsible for any costs associated with the railroads including, but not
limited to, all rail design and engineering and construction and Design-Builder
shall have no responsibility in regards thereto.  Owner shall supply drawings and Phase II
redline drawings to Design-Builder.

14)        Drawings  – Owner shall supply drawings to Design-Builder of items
supplied under items 11) and 13) and also supply Phase II redline drawings.

15)        Fire Protection System –
Fire Protection System requirements vary by governmental requirements per
location and by insurance carrier requirements. 
Owner is responsible to provide the required fire protection system for
the Plant.  This may include storage
tanks, pumps, underground fire water mains, fire hydrants, foam or water
monitor valves, sprinkler systems, smoke and heat detection, deluge systems, or
other provisions as required by governmental codes or Owner’s insurance carrier’s
fire protection criteria.

Owner shall pay for a Fire Protection System to be
designed and constructed by Design-Builder and to be integrated into the
Plant.  The Fire Protection System shall
be designed and constructed to meet the governmental and insurance
requirements.  Owner is to execute side-letter
agreements as necessary for the design and construction of such Fire Protection
System.  Design-Builder shall recover
costs for the design and construction of such system from Owner at
Design-Builder’s standard time plus material rates during the relevant time
period and at the relevant locale.  A
side-letter agreement between Owner and Design-Builder shall be executed by
Owner and Design-Builder to compensate Design-Builder, at Design-Builder’s
standard time plus materials rates during the relevant time period and at the
relevant locale, for any costs and expenses related to such Fire Protection
System.

 C-4
 

Table 1 Minimum Soil Bearing
Pressure – Responsibility of Owner

** Subject to revision based on detailed design and engineering.

	
  Description

  	
   

  	
  Required Allowable Soil Bearing

  Pressure (pounds per square foot)

  	
   

  
	
  Grain Storage
  Silos

  	
   

  	
  7,000

  	
   

  
	
  DDGS Storage
  Silos

  	
   

  	
  6,000

  	
   

  
	
  Corn/DDGS
  Building

  	
   

  	
  4,000

  	
   

  
	
  Cook Water Tank

  	
   

  	
  3,500

  	
   

  
	
  Methanator Feed
  Tank

  	
   

  	
  3,500

  	
   

  
	
  Liquefaction
  Tank #1

  	
   

  	
  3,500

  	
   

  
	
  Liquefaction
  Tank #2

  	
   

  	
  3,500

  	
   

  
	
  Fermentation
  Tank #1

  	
   

  	
  5,000

  	
   

  
	
  Fermentation Tank
  #2

  	
   

  	
  5,000

  	
   

  
	
  Fermentation
  Tank #3

  	
   

  	
  5,000

  	
   

  
	
  Fermentation
  Tank #4

  	
   

  	
  5,000

  	
   

  
	
  Fermentation
  Tank #5

  	
   

  	
  5,000

  	
   

  
	
  Fermentation
  Tank #6

  	
   

  	
  5,000

  	
   

  
	
  Fermentation
  Tank #7

  	
   

  	
  5,000

  	
   

  
	
  Beerwell

  	
   

  	
  5,000

  	
   

  
	
  Whole Stillage
  Tank

  	
   

  	
  3,500

  	
   

  
	
  Thin Stillage
  Tank

  	
   

  	
  3,500

  	
   

  
	
  Syrup Tank

  	
   

  	
  3,500

  	
   

  
	
  190 Proof Day
  Tank

  	
   

  	
  3,000

  	
   

  
	
  200 Proof Day
  Tank

  	
   

  	
  3,000

  	
   

  
	
  Denaturant Tank

  	
   

  	
  3,000

  	
   

  
	
  Fire Water Tank

  	
   

  	
  3,000

  	
   

  
	
  Denatured
  Ethanol Tank #1

  	
   

  	
  3,000

  	
   

  
	
  Denatured
  Ethanol Tank #2

  	
   

  	
  3,000

  	
   

  
	
  All Other Areas

  	
   

  	
  3,000

  	
   

  

 

 C-5
 

Table 2 Maintenance and Power Equipment – Responsibility
of Owner

	
  Description

  	
   

  	
  Additional Description

  	
   

  	
   

  
	
  Spare Parts

  	
   

  	
  Spare parts

  Parts bins

  Misc. materials, supplies and equipment

  	
   

  	
   

  
	
  Shop supplies and equipment

  	
   

  	
  One shop welder

  One portable gas welder

  One plasma torch

  One acetylene torch

  One set of power tools

  Two sets of hand tools with tool boxes

  Carts and dollies

  Hoists (except centrifuge overhead crane)

  Shop tables

  Maintenance office furnishings & supplies

  Fire Extinguishers

  Reference books

  Safety manuals

  Safety cabinets & supplies, etc.

  Safety showers as required

  	
   

  	
   

  
	
  Rolling stock

  	
   

  	
  Used 1 1⁄2 yard front end loader

  New Skid loader

  Used Fork lift

  Used Scissors lift, 30 foot

  Used Pickup truck

  Track Mobile

  	
   

  	
   

  

 

 C-6
 

Table 3 Owner’s Milestones

	
  Owner’s Responsibilities

  	
   

  	
  Number Of Days To Be

  Completed After Notice To

  Proceed

  
	
  Temporary Electrical Service In Place

  	
   

  	
  [*]

  
	
  Obtain Builder’s Risk policy in the amount of the
  Contract Price, obtain Boiler and Machinery Insurance, and obtain Terrorism
  Coverage per TRIA as long as it is required under Article 17 of the
  Agreement.

  	
   

  	
  [*]

  
	
  Storm Water Permits Complete: Modify the existing
  storm water discharge permit to reflect the ethanol plant, if required.

  	
   

  	
  [*]

  
	
  Natural Gas/Propane Transportation / Storage
  Agreement Complete

  	
   

  	
  [*]

  
	
  Water Supply and Service Agreements Complete

  	
   

  	
  [*]

  
	
  Electrical Service Arrangement

  	
   

  	
  [*]

  
	
  Wastewater Discharge System Complete

  	
   

  	
  [*]

  
	
  TTB Operating Permits Complete

  	
   

  	
  [*]

  
	
  Discharge Permits Complete

  	
   

  	
  [*]

  
	
  Pumphouse/Water System Complete

  	
   

  	
  [*]

  
	
  Fire Protection System Complete

  	
   

  	
  [*]

  
	
  Paving (Plant Roads) Complete

  	
   

  	
  [*]

  
	
  Rail Spur Complete

  	
   

  	
  [*]

  
	
  Permanent Electrical Service Complete

  	
   

  	
  [*]

  
	
  Maintenance and Power Equipment Onsite (Table 2)

  	
   

  	
  [*]

  
	
  Employees Hired and Ready for Training

  	
   

  	
  [*]

  
	
  Natural Gas Pipeline/Delivery System Complete

  	
   

  	
  [*]

  

 

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

 

 C-7

EXHIBIT D

ICM License Agreement

THIS
LICENSE AGREEMENT (this “License Agreement”) is entered into
and made effective as of the 7th day of February, 2007 (“Effective Date”) by
and between ABE Northfield, LLC, a Delaware limited liability company (“OWNER”),
and ICM, Inc., a Kansas corporation (“ICM”).

WHEREAS, OWNER has
entered into that certain Design-Build Lump Sum Contract dated February 7, 2007
(the “Contract”) with Fagen, Inc., a Minnesota corporation (“Fagen”), under
which Fagen is to design and construct a 100 million gallon per year ethanol
plant for OWNER to be located in or near Northfield, Minnesota (the “Plant”);

WHEREAS, ICM has
granted Fagen the right to use certain proprietary technology and information
of ICM in the design and construction of the Plant; and

WHEREAS, OWNER
desires from ICM, and ICM desires to grant to OWNER, a license to use such
proprietary technology and information in connection with OWNER’s ownership,
operation, maintenance and repair of the Plant, all upon the terms and conditions
set forth herein;

NOW, THEREFORE,
the parties, in consideration of the foregoing premises and the mutual promises
contained herein and for other good and valuable consideration, receipt of
which is hereby acknowledged, agree as follows:

1.     Upon
substantial completion of the Plant by Fagen pursuant to the terms of the
Contract or, if later, payment by OWNER of all amounts due and owing to Fagen
under the Contract, ICM grants to OWNER a perpetual limited license to use the
Proprietary Property (hereinafter defined) solely in connection with the
ownership, operation, maintenance and repair of the Plant, subject to the
limitations provided herein (the “Purpose”).

2.     The
“Proprietary Property” means, without limitation, documents, Operating
Procedures (hereinafter defined), materials and other information that are
furnished by ICM to OWNER in connection with the Purpose, whether orally,
visually, in writing, or by any other means, whether tangible or intangible,
directly or indirectly (including, without limitation, through Fagen) and in
whatever form or medium including, without limitation, the design, arrangement,
configuration, and specifications of (i) the combinations of distillation,
evaporation, and alcohol dehydration equipment (including, but not limited to,
pumps, vessels, tanks, heat exchangers, piping, valves and associated
electronic control equipment) and all documents supporting those combinations;
(ii) the combination of the distillers grain drying (DGD), and heat recovery
steam generation (HRSG) equipment (including, but not limited to, pumps,
vessels, tanks, heat exchangers, piping and associated electronic control
equipment) and all documents supporting those combinations; and (iii) the
computer system, known as the distributed control system (DCS and/or PLC)
(including, but not limited to, the software configuration, programming,
parameters, set points, alarm points, ranges, graphical interface, and system
hardware connections) and all documents supporting that system.  The “Operating Procedures” means, without
limitation, the process equipment and specifications manuals, standards of
quality, service protocols, data collection methods, construction
specifications, training methods, engineering standards and any other
information prescribed by ICM from time to time concerning the Purpose.  Proprietary Property shall not include any
information or materials that OWNER can demonstrate by clear and convincing
written evidence:  (i) was lawfully in
the possession of OWNER prior to disclosure by ICM or Fagen; (ii) was in the
public domain prior to disclosure by ICM or Fagen; (iii) was disclosed to OWNER
by a third party other than Fagen having the legal right to

 D-1
 

possess and disclose such information or
materials; or (iv) after disclosure by ICM or Fagen comes into the public
domain through no fault of OWNER or its members, directors, officers,
employees, agents, contractors, consultants or other representatives
(hereinafter collectively referred to as “Representatives”).  Information and materials shall not be deemed
to be in the public domain merely because such information is embraced by more
general disclosures in the public domain, and any combination of features shall
not be deemed to be within the foregoing exceptions merely because individual
features are in the public domain if the combination itself and its principles
of operation are not in the public domain.

3.     OWNER
shall not use the Proprietary Property for any purpose other than the
Purpose.  OWNER shall not use the
Proprietary Property in connection with any expansion or enlargement of the
Plant.  ICM and its Representatives shall
have the express right at any time to enter upon the premises of the Plant to
inspect the Plant and its operation to ensure that OWNER is complying with the
terms of this License Agreement.

4.     OWNER’s
failure to materially comply with the Operating Procedures shall void all
guarantees, representations and warranties, whether expressed or implied, if
any, that were given by ICM to OWNER, directly or indirectly through Fagen,
concerning the performance of the Plant that ICM reasonably determines are
materially affected by OWNER’s failure to materially comply with such Operating
Procedures.  OWNER agrees to indemnify,
defend and hold harmless ICM, Fagen and their respective Representatives from
any and all losses, damages and expenses including, without limitation,
reasonable attorneys’ fees resulting from, relating to or arising out of Owner’s
or its Representatives’ (a) failure to materially comply with the Operating
Procedures or (b) negligent use of the Proprietary Property.

5.     Any
and all modifications to the Proprietary Property made by OWNER or its
Representatives shall be the property of ICM. 
OWNER shall promptly notify ICM of any such modification and OWNER
agrees to assign all right, title and interest in such modification to ICM;
provided, however, OWNER shall retain the right, at no cost, to use such
modification in connection with the Purpose.

6.     ICM
has the exclusive right and interest in and to the Proprietary Property and the
goodwill associated therewith.  OWNER
will not, directly or indirectly, contest ICM’s ownership of the Proprietary
Property.  OWNER’s use of the Proprietary
Property does not give OWNER any ownership interest or other interest in or to
the Proprietary Property except for the limited license granted to OWNER
herein.  Goodwill created by the
operation of the Plant and all financial benefits therefrom shall be the
property of OWNER.

7.     OWNER
shall pay no license fee or royalty to ICM for OWNER’s use of the Proprietary
Property pursuant to this License Agreement, the consideration for the
perpetual limited license granted herein is included in the amounts payable by
OWNER to Fagen for the construction of the Plant under the Contract.

8.     OWNER
may not assign the perpetual limited license granted herein, in whole or in
part, without the prior written consent of ICM, which will not be unreasonably
withheld or delayed.  Prior to any
assignment, OWNER shall obtain from such assignee a written instrument, in form
and substance

 D-2
 

reasonably acceptable to ICM, agreeing to be
bound by all the terms and provisions of this License Agreement.  Any assignment of this License Agreement
shall not release OWNER from (i) its duties and obligations hereunder
concerning the disclosure and use of the Proprietary Property by OWNER or its
Representatives, or (ii) damages to ICM resulting from, or arising out of, a
breach of such duties or obligations by OWNER or its Representatives.  ICM may assign its right, title and interest
in the Proprietary Property, in whole or part, subject to the limited license
granted herein.

9.     The
Proprietary Property is confidential and proprietary.  OWNER shall keep the Proprietary Property
confidential and shall use all reasonable efforts to maintain the Proprietary
Property as secret and confidential for the sole use of OWNER and its
Representatives for the Purpose.  OWNER
shall retain all Proprietary Property at its principal place of business and/or
the Plant.  OWNER shall not at any time
without ICM’s prior written consent, copy, duplicate, record, or otherwise
reproduce the Proprietary Property, in whole or in part, or otherwise make the
same available to any unauthorized person provided, OWNER shall be permitted to
copy, duplicate or otherwise reproduce the Proprietary Property in whole or in
part in connection with, and to the extent it is necessary and essential for,
the Purpose so long as all such copies, duplicates or reproductions are kept at
its principal place of business and/or the Plant and are treated the same as
any other Proprietary Property.  OWNER
shall not disclose the Proprietary Property except to its Representatives who
are directly involved with the Purpose, and even then only to such extent as is
necessary and essential for such Representative’s involvement.  OWNER shall inform such Representatives of
the confidential and proprietary nature of such information and, if requested
by ICM, OWNER shall obtain from such Representative a written instrument, in form
and substance reasonably acceptable to ICM, agreeing to be bound by all of the
terms and provisions of this License Agreement to the same extent as
OWNER.  OWNER shall make all reasonable
efforts to safeguard the Proprietary Property from disclosure by its Representatives
to anyone other than permitted hereby. 
OWNER shall notify ICM immediately upon discovery of any unauthorized
use or disclosure of the Proprietary Property, or any other breach of this
License Agreement by OWNER or its Representatives, and shall cooperate with ICM
in every reasonable way to help ICM regain possession of the Proprietary
Property and prevent its further unauthorized use or disclosure.  In the event that OWNER or its
Representatives are required by law to disclose the Proprietary Property, OWNER
shall provide ICM with prompt written notice of same so that ICM may seek a
protective order or other appropriate remedy. 
In the event that such protective order or other appropriate remedy is
not obtained, OWNER or its Representatives will furnish only that portion of
the Proprietary Property which in the reasonable opinion of its or their legal
counsel is legally required and will exercise its reasonable efforts to obtain
reliable assurance that the Proprietary Property so disclosed will be accorded
confidential treatment.

10.   OWNER agrees to indemnify ICM for any and all
damages (including, without limitation, reasonable attorneys’ fees) arising out
of or resulting from any unauthorized disclosure or use of the Proprietary
Property by OWNER or its Representatives. 
OWNER agrees that ICM would be irreparably damaged by reason of a
violation of the provisions contained herein and that any remedy at law for a
breach of such provisions would be inadequate. 
OWNER agrees that ICM shall be entitled to seek injunctive or other
equitable relief in a court of competent jurisdiction against OWNER or its
Representatives for any unauthorized disclosure or use of the Proprietary
Property without the necessity of proving actual monetary loss or posting any
bond.  It is expressly understood that
the remedy described herein shall not be the exclusive remedy of ICM for any
breach of such covenants, and ICM shall be entitled to seek such other relief
or remedy, at law or in equity, to which it may be entitled as a consequence of
any breach of such duties or obligations.

 D-3
 

11.   The duties and obligations of OWNER under
this License Agreement, and all provisions relating to the enforcement of such
duties and obligations shall survive and remain in full force and effect
notwithstanding any termination or expiration of the Contract or this License
Agreement.

12.   ICM may terminate this License Agreement upon
written notice to OWNER if OWNER willfully or wantonly (a) uses the Proprietary
Property for any purpose, or (b) discloses the Proprietary Property to anyone,
in each case other than permitted herein. 
Upon termination of this License Agreement, OWNER shall cease using the
Proprietary Property for any purpose (including the Purpose) and, upon request
by ICM, shall promptly return to ICM all documents or other materials in OWNER’s
or its Representatives’ possession that contain Proprietary Property in
whatever format, whether written or electronic, including any and all copies or
reproductions of the Proprietary Property. 
OWNER shall permanently delete all such Proprietary Property from its
computer hard drives and any other electronic storage medium (including any
backup or archive system).  OWNER shall
deliver to ICM a written certificate which certifies that all electronic copies
or reproductions of the Proprietary Property have been permanently deleted.

13.   The laws of
the State of Kansas, United States of America (or US), shall govern the
validity of the provisions contained herein, the construction of such provisions,
and the interpretation of the rights and duties of the parties.  Any legal action brought to enforce or
construe the provisions of this License Agreement shall be brought in the
federal or state courts located in Wichita, Kansas, and the parties agree to
and hereby submit to the exclusive jurisdiction of such courts and agree that
they will not invoke the doctrine of forum non conveniens or other similar
defenses in any such action brought in such courts.  Notwithstanding the foregoing, nothing in
this License Agreement will affect any right ICM may otherwise have to bring
any action or proceeding relating to this License Agreement against OWNER or
its properties in the courts of any jurisdiction.

14.   OWNER hereby agrees to waive all claims against ICM and ICM’s
Representatives for any consequential damages that may arise out of or relate
to this License Agreement, the Contract or the Proprietary Property whether
arising in contract, warranty, tort (including negligence), strict liability or
otherwise, including but not limited to losses of use, profits, business,
reputation or financing.  OWNER further
agrees that the aggregate recovery of OWNER and Fagen (and everyone claiming by
or through OWNER and Fagen), as a whole, against ICM and ICM’s Representatives,
collectively, for any and all claims that arise out of, relate to or result
from this License Agreement, the Proprietary Property or the Contract, whether
arising in contract, warranty, tort (including negligence), strict liability or
otherwise, shall not exceed One Million US Dollars ($1,000,000).

15.   The terms and conditions of
this License Agreement constitute the entire agreement between the parties with
respect to the subject matter hereof and supersede any prior understandings,
agreements or representations by or between the parties, written or oral.  Any rule of construction to the effect that
any ambiguity is to be resolved against the drafting party shall not be
applicable in the interpretation of this License Agreement.  This License Agreement may not be modified or
amended at any time without the written consent of the parties.

16.   All notices, requests,
demands, reports, statements or other communications (herein referred to
collectively as “Notices”) required to be given hereunder or relating to this
License Agreement shall be in writing and shall be deemed to have been duly
given if transmitted by personal delivery or

 D-4
 

mailed by certified mail, return receipt requested, postage prepaid, to
the address of the party as set forth below. 
Any such Notice shall be deemed to be delivered and received as of the
date so delivered, if delivered personally, or as of the third business day
following the day sent, if sent by certified mail.  Any party may, at any time, designate a
different address to which Notices shall be directed by providing written
notice in the manner set forth in this paragraph.

17.   In the event that any of the
terms, conditions, covenants or agreements contained in this License Agreement,
or the application of any thereof, shall be held by a court of competent
jurisdiction to be invalid, illegal or unenforceable, such term, condition,
covenant or agreement shall be deemed void ab initio and shall be deemed
severed from this License Agreement.  In
such event, and except if such determination by a court of competent
jurisdiction materially changes the rights, benefits and obligations of the
parties under this License Agreement, the remaining provisions of this License
Agreement shall remain unchanged unaffected and unimpaired thereby and, to the
extent possible, such remaining provisions shall be construed such that the
purpose of this License Agreement and the intent of the parties can be achieved
in a lawful manner.

18.   The duties and obligations
herein contained shall bind, and the benefits and advantages shall inure to,
the respective successors and permitted assigns of the parties hereto.

19.   The waiver by any party
hereto of the breach of any term, covenant, agreement or condition herein
contained shall not be deemed a waiver of any subsequent breach of the same or
any other term, covenant, agreement or condition herein, nor shall any custom,
practice or course of dealings arising among the parties hereto in the
administration hereof be construed as a waiver or diminution of the right of
any party hereto to insist upon the strict performance by any other party of
the terms, covenants, agreement and conditions herein contained.

20.   In this License Agreement,
where applicable, (i) references to the singular shall include the plural and
references to the plural shall include the singular, and (ii) references to the
male, female, or neuter gender shall include references to all other such
genders where the context so requires.

 D-5
 

IN WITNESS WHEREOF, the parties hereto have
executed this License Agreement, the Effective Date of which is indicated on
page 1 of this License Agreement.

 

	
  OWNER:

  	
   

  	
  ICM:

  
	
   

  	
   

  	
   

  
	
  ABE
  Northfield, LLC

  	
   

  	
  ICM, Inc.

  
	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
  By:

  
	
   

  	
   

  	
   

  
	
  Title:

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  
	
  Date Signed:

  	
   

  	
  Date Signed:

  
	
   

  	
   

  	
   

  
	
  Address for
  giving notices:

  	
   

  	
  Address for giving notices:

  
	
   

  	
   

  	
   

  
	
  10201 Wayzata
  Blvd, Suite 250

  Minneapolis, MN 55305

  	
   

  	
  301 N First Street

  Colwich, KS 67030

  

 

 D-6

EXHIBIT E 

Schedule of Values

Schedule of Values for:

ABE
NORTHFIELD, LLC

Northfield,
MN

100 MGY
Dry Grind Ethanol Plant

 

	
  

  	
   

  	
  DESCRIPTION

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1

  	
   

  	
  MOBILIZATION

  	
   

  	
  $

  	
  [*]

  	
   

  
	
  2

  	
   

  	
  ENGINEERING

  	
   

  	
  $

  	
  [*]

  	
   

  
	
  3

  	
   

  	
  GENERAL CONDITIONS

  	
   

  	
  $

  	
  [*]

  	
   

  
	
  4

  	
   

  	
  SITEWORK

  	
   

  	
  $

  	
  [*]

  	
   

  
	
  5

  	
   

  	
  CONCRETE

  	
   

  	
  $

  	
  [*]

  	
   

  
	
  6

  	
   

  	
  MASONRY / ARCHITECTURAL

  	
   

  	
  $

  	
  [*]

  	
   

  
	
  7

  	
   

  	
  STRUCTURAL STEEL - MISC. METALS

  	
   

  	
  $

  	
  [*]

  	
   

  
	
  8

  	
   

  	
  PRE-ENGINEERED BUILDINGS

  	
   

  	
  $

  	
  [*]

  	
   

  
	
  9

  	
   

  	
  GRAIN HANDLING SYSTEM

  	
   

  	
  $

  	
  [*]

  	
   

  
	
  10

  	
   

  	
  PROCESS TANKS & VESSELS

  	
   

  	
  $

  	
  [*]

  	
   

  
	
  11

  	
   

  	
  FIELD ERECTED TANKS

  	
   

  	
  $

  	
  [*]

  	
   

  
	
  12

  	
   

  	
  HEAT EXCHANGERS

  	
   

  	
  $

  	
  [*]

  	
   

  
	
  13

  	
   

  	
  PROCESS EQUIPMENT

  	
   

  	
  $

  	
  [*]

  	
   

  
	
  14

  	
   

  	
  CENTRIFUGES

  	
   

  	
  $

  	
  [*]

  	
   

  
	
  15

  	
   

  	
  CHILLER

  	
   

  	
  $

  	
  [*]

  	
   

  
	
  16

  	
   

  	
  TRUCK SCALES & PROBE

  	
   

  	
  $

  	
  [*]

  	
   

  
	
  17

  	
   

  	
  ETHANOL LOADOUT & FLARE SYSTEM

  	
   

  	
  $

  	
  [*]

  	
   

  
	
  18

  	
   

  	
  COOLING TOWER

  	
   

  	
  $

  	
  [*]

  	
   

  
	
  19

  	
   

  	
  DRYER SYSTEM

  	
   

  	
  $

  	
  [*]

  	
   

  
	
  20

  	
   

  	
  THERMAL OXIDIZER

  	
   

  	
  $

  	
  [*]

  	
   

  
	
  21

  	
   

  	
  METHANATOR

  	
   

  	
  $

  	
  [*]

  	
   

  
	
  22

  	
   

  	
  PROCESS PIPING & VALVES

  	
   

  	
  $

  	
  [*]

  	
   

  
	
  23

  	
   

  	
  PAINTING

  	
   

  	
  $

  	
  [*]

  	
   

  
	
  24

  	
   

  	
  INSULATION

  	
   

  	
  $

  	
  [*]

  	
   

  
	
  25

  	
   

  	
  PLUMBING & HVAC

  	
   

  	
  $

  	
  [*]

  	
   

  
	
  26

  	
   

  	
  ELECTRICAL

  	
   

  	
  $

  	
  [*]

  	
   

  
	
  27

  	
   

  	
  START-UP

  	
   

  	
  $

  	
  [*]

  	
   

  
	
  28

  	
   

  	
  DEMOBILIZATION

  	
   

  	
  $

  	
  [*]

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  $

  	
  —

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  TOTAL

  	
   

  	
  $

  	
  122,542,363

  	
   

  

 

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

 

 E-1

EXHIBIT F

Form of
Informational Report

	
  

  	
  PROJECT MEETING: 
  Two-Week Look Ahead(s)  

  

 

	
  JOBSITE:

  	
   

  	
   

  	
  MEETING

  DATE:

  	
   

  

 

	
  q MANPOWER

  	
  TOTALS q

  
	
  Fagen, Inc.

  	
  0

  
	
  (sub)

  	
  0

  
	
   

  	
  0

  
	
   

  	
  0

  
	
   

  	
  0

  
	
   

  	
  0

  
	
   

  	
  0

  
	
   

  	
  0

  
	
   

  	
  0

  
	
   

  	
  0

  
	
  JOBSITE TOTAL

  	
  0

  

 

	
  q SAFETY ISSUES

  	
   

  	
   

  
	
  1. text

  	
   

  	
   

  
	
  2. text

  	
   

  	
   

  

 

	
  q WAREHOUSE ISSUES

  	
   

  	
   

  
	
  1. text

  	
   

  	
   

  
	
  2. text

  	
   

  	
   

  

 

	
  q PROCUREMENT ISSUES

  	
   

  	
   

  
	
  1. text

  	
   

  	
   

  
	
  2. text

  	
   

  	
   

  

 

	
  q OPERATIONS ISSUES

  	
   

  	
   

  
	
  1. text

  	
   

  	
   

  
	
  2. text

  	
   

  	
   

  

 

	
  q CIVIL

  	
   

  	
   

  
	
  1. text

  	
   

  	
   

  
	
  2. text

  	
   

  	
   

  

 

 F-1
 

 

	
  q STRUCTURAL

  	
   

  	
   

  
	
  Area

  	
   

  	
   

  
	
  1. text

  	
   

  	
   

  
	
  2. text

  	
   

  	
   

  

 

	
  q SIDING / INSULATION

  	
   

  	
   

  
	
  Area

  	
   

  	
   

  
	
  1. text

  	
   

  	
   

  
	
  2.

  	
   

  	
   

  

 

	
  q MILLWRIGHT

  	
   

  	
   

  
	
  Area

  	
   

  	
   

  
	
  1. text

  	
   

  	
   

  
	
  2.

  	
   

  	
   

  

 

	
  q PIPE

  	
   

  	
   

  
	
  Area

  	
   

  	
   

  
	
  1. text

  	
   

  	
   

  
	
  2.

  	
   

  	
   

  

 

	
  q ELECTRICAL

  	
   

  	
   

  
	
  Area

  	
   

  	
   

  
	
  1. text

  	
   

  	
   

  
	
  2.

  	
   

  	
   

  

 

	
  q DELIVERIES

  	
   

  	
   

  
	
  Area

  	
   

  	
   

  
	
  1. text

  	
   

  	
   

  

 

	
  q SUBCONTRACTOR

  	
   

  	
   

  
	
  Subcontractor Name

  	
   

  	
   

  
	
  1. text

  	
   

  	
   

  

 

 F-2

EXHIBIT G

Required Permits

	
  No.

  	
  Type of Application/Permit

  	
  Responsibility for

  Obtaining Permit

  	
  Assistance in

  Preparation

  	
  Notes

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1

  	
  Underground Utility Locating Service

  	
  Design-Builder/Owner

  	
   

  	
  Notification service for underground work.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2

  	
  Septic Tank & Drain Field Permit

  	
  Owner

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  3

  	
  Railroad Permit/Approval

  	
  Owner

  	
  Design-Builder

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  4

  	
  Archeological Survey

  	
  Owner

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  5

  	
  Highway Access Permit

  	
  Owner

  	
   

  	
  State Department of Transportation or County

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  6

  	
  Building Permits

  	
  Design-Builder

  	
   

  	
   

  
	
   

  	
  Mechanical

  	
  Design-Builder

  	
   

  	
   

  
	
   

  	
  Electrical

  	
  Design-Builder

  	
   

  	
   

  
	
   

  	
  Structures

  	
  Design-Builder

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  7

  	
  Construction Air Permit

  	
  Owner

  	
  Design-Builder

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  8

  	
  Construction Permit

  	
  Owner

  	
  Design-Builder

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  9

  	
  Operations Permit

  	
  Owner

  	
  Design-Builder

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  10

  	
  Wastewater Permit

  	
  Owner

  	
  Design-Builder

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  11

  	
  Water Appropriation Permit

  	
  Owner

  	
  Design-Builder

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  12

  	
  Fire Protection

  	
  Owner

  	
  Design-Builder

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  13

  	
  Above Ground Storage Tank Permit

  	
  Owner

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  14

  	
  TTB Permit

  	
  Owner

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  15

  	
  Industrial Wastewater Treatment Pond Permit

  	
  Owner

  	
   

  	
   

  

 

 G-1

EXHIBIT H

Form of
Performance Bond

PERFORMANCE BOND

The American Institute of Architects,

AIA Document No. A312 (December, 1984 Edition)

Any singular reference to Contractor, Surety, Owner or other

party shall be considered plural where applicable.

	
  CONTRACTOR
  (Name and Address):

  	
   

  	
  Amount: [Amount]

  
	
  Fagen, Inc.

  	
   

  	
  Description (Name and Location):

  
	
  P. O. Box 159

  	
   

  	
  [Project Name and Location]

  
	
  Granite Falls, MN 56241

  	
   

  	
  OWNER (Name and Address):

  
	
  CONSTRUCTION CONTRACT

  	
   

  	
  [Owner Name/Address]

  
	
  Date:

  	
   

  	
  SURETY (Name and Principal Place of

  
	
   

  	
   

  	
  Business): [Name/Place of Business]

  

BOND#

Date (Not earlier than Construction Contract Date): 

Amount:

	
  Modifications to this Bond:

  	
  o
  None

  	
   

  	
  o
  See Page 2

  
	
  CONTRACTOR AS PRINCIPAL

  	
   

  	
  SURETY

  	
   

  
	
  Company:

  	
  (Corporate Seal)

  	
   

  	
  Company:

  	
  (Corporate Seal)

  
	
  Fagen, Inc.

  	
   

  	
   

  	
   

  	
   

  
	
  Signature:

  	
   

  	
   

  	
  Signature:

  	
   

  
	
  Name and Title:

  	
   

  	
   

  	
  Name and Title:

  	
   

  
	
  (Any additional signatures appear an page 2.)

  	
   

  	
   

  	
   

  
	
  (FOR INFORMATION Only- Name, Address and
  Telephone)

  	
   

  	
  OWNER’S REPRESENTATIVE (Architect, Engineer or other
  party):

  
										

AGENT or BROKER:

1.             The Contractor and the Surety, jointly and severally,
bind themselves, their heirs, executors, administrators, successors and assigns
to the Owner for the performance of the Construction Contract, which is
incorporated herein by reference.

2.             If the Contractor performs the Construction Contract,
the Surety and the Contractor shall have no obligation under this Bond, except
to participate in conferences as provided in Subparagraph 3.1.

3.             If there is no Owner Default, the Surety’s obligation
under this Bond shall arise after:

3.1           The Owner has notified the Contractor
and the Surety at its address described in Paragraph 10 below that the Owner is
considering declaring a Contractor Default and has requested and attempted to
arrange a conference with the Contractor and the Surety to be held not later
than fifteen days after receipt of such notice to discuss methods of performing
the Construction Contract.  If the Owner,
the Contractor and the Surety agree, the Contractor shall be allowed a
reasonable time to perform the Construction Contract, but such an agreement
shall not waive the Owner’s right, if any, subsequently to declare a Contractor
Default; and

3.2           The Owner has
declared a Contractor Default and formally terminated the Contractor’s right to
complete the contract.  Such Contractor
Default shall not be declared earlier than twenty days after the Contractor and
Surety have received notice as provided in Subparagraph 3.1; and

 

 H-1
 

3.3           The Owner has agreed to pay the
Balance of the Contract Price to the Surety in accordance with the terms of the
Construction Contract or to a contractor selected to perform the Construction
Contract in accordance with the terms of the contract with the Owner.

4.             When the Owner has satisfied the conditions of Paragraph
3, the Surety shall promptly and at the Surety’s expense take one of the
following actions:

4.1           Arrange for the Contractor with
consent of the Owner, to perform and complete the Construction Contract; or

4.2           Undertake to perform and complete the
Construction Contract itself, through its agents or through independent
contractors; or

4.3           Obtain bids or negotiated proposals
from qualified contractors acceptable to the Owner for a contract for
performance and completion of the Construction Contract, arrange for a contract
to be prepared for execution by the Owner and the contractor selected with the
Owner’s concurrence, to be secured with performance and payment bonds executed
by a qualified surety equivalent to the bonds issued on the Construction
Contract, and pay to the Owner the amount of damages as described in Paragraph
6 in excess of the Balance of the Contract Price incurred by the Owner
resulting from the Contractor’s default; or

4.4           Waive its right to perform and
complete, arrange for completion, or obtain a new contractor and with
reasonable promptness under the circumstances:

.1             After
investigation, determine the amount for which it may be liable to the Owner
and, as soon as practicable after the amount is determined, tender payment
therefor to the Owner; or

.2             Deny liability in
whole or in part and notify the Owner citing reasons therefor.

5.             If the Surety does not proceed as provided in Paragraph
4 with reasonable promptness, the Surety shall be deemed to be in default on
this Bond fifteen days after receipt of an additional written notice from the
Owner to the Surety demanding that the Surety perform its Obligations under
this Bond, and the Owner shall be entitled to enforce any remedy available to the
Owner.  If the Surety proceeds as
provided in Subparagraph 4.4, and the Owner refuses the payment tendered or the
Surety has denied liability, in whole or in part, without further notice the
Owner shall be entitled to enforce any remedy available to the Owner.

6.             After the Owner has terminated the Contractor’s right to
complete the Construction Contract, and if the Surety elects to act under
Subparagraph 4.1, 4.2, or 4.3 above, then the responsibilities of the Surety to
the Owner shall not be greater than those of the Contractor under the
Construction Contract, and the responsibilities of the Owner to the Surety
shall not be greater than those of the Owner under the Construction
Contract.  To the limit of the amount of
this Bond, but subject to commitment by the Owner of the Balance of the
Contract Price to mitigation of costs and damages on the Construction Contract,
the Surety is obligated without duplication for:

6.1           The responsibilities of the
Contractor for correction of defective work and completion of the Construction
Contract;

6.2           Additional legal design professional
and delay costs resulting from the Contractor’s Default, and resulting from the
actions or failure to act of the Surety under Paragraph 4; and

 H-2
 

6.3           Liquidated damages, or if no liquidated
damages are specified in the Construction Contract, actual damages caused by
delayed performance or non-performance of the Contractor.

7.             The Surety shall not be liable to the Owner or others
for obligations of the Contractor that are unrelated to the Construction
Contract and the Balance of the Contract Price shall not be reduced or set off
on account of any such unrelated obligations. No right of action shall accrue
on this Bond to any person or entity other than the Owner or its heirs,
executors, administrators or successors.

8.             The Surety hereby waives notice of any change, including
changes of time, to the Construction Contract or to related subcontracts,
purchase orders and other obligations.

9.             Any proceeding, legal or equitable, under this Bond may
be instituted in any court of competent jurisdiction in the location in which
the work or part of the work is located and shall be instituted within two
years after Contractor Default or within two years after the Contractor ceased
working or within two years after the Surety refuses or fails to perform its
obligations under this Bond, whichever occurs first.  If the provisions of this Paragraph are void
or prohibited by law, the minimum period of limitation available to sureties as
a defense in the jurisdiction of the suit shall be applicable.

10.           Notice to the Surety, the Owner or
the Contractor shall be mailed or delivered to the address shown on the
signature page.

11.           When this Bond has been furnished to
comply with a statutory or other legal requirement in the location where the
construction was to be performed, any provision in this Bond conflicting with
said statutory or legal requirement shall be deemed deleted herefrom and
provisions conforming to such statutory or other legal requirement shall be
deemed incorporated herein. The intent is that this Bond shall be construed as
a statutory bond and not as a common law bond.

12.           DEFINITIONS

12.1         Balance of the Contract Price: The
total amount payable by the Owner to the Contractor under the Construction
Contract after all proper adjustments have been made, including allowance to
the Contractor of any amounts received or to be received by the Owner in
settlement of insurance or other claims for damages to which the Contractor is
entitled, reduced by all valid and proper payments made to or on behalf of the
Contractor under the Construction Contract.

12.2         Construction Contract: The agreement
between the Owner and the Contractor identified on the signature page,
including all Contract Documents and changes thereto.

12.3         Contractor Default: Failure of the
Contractor, which has neither been remedied nor waived, to perform or otherwise
to comply with the terms of the Construction Contract.

12.4         Owner Default: Failure of the Owner,
which has neither been remedied nor waived, to pay the Contractor as required
by the Construction Contract or to perform and complete or comply with the
other terms thereof.

MODIFICATIONS TO THIS BOND ARE AS
FOLLOWS:

	
  This bond is subject to the
  attached Dual Obligee Rider dated

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  

(Space is provided below
for additional signatures of added parties other than those appearing on the
cover page.)

 H-3
 

 

	
  CONTRACTOR AS PRINCIPAL

  	
   

  	
  SURETY

  	 

	
   

  	
   

  	
  (Corporate Seal)

  	
   

  	
   

  	
   

  	
  (Corporate Seal)

  
	
  Company:

  	
   

  	
   

  	
  Company:

  	
   

  
	
  Address:

  	
   

  	
   

  	
  Address:

  	
   

  	 

	
  Name and Title:

  	
   

  	
   

  	
  Name and Title:

  	
   

  	 

	
  Signature:

  	
   

  	
   

  	
  Signature:

  	
   

  	 

													

 

 H-4
 

DUAL OBLIGEE RIDER

(TO BE ATTACHED TO BOND AT TIME OF ISSUANCE)

TO BE ATTACHED TO AND FORM PART OF Performance and Payment Bond NO. __________, dated concurrently
with the execution of this Rider, issued by the _______________,
a _____________ corporation, as Surety, on behalf of Fagen, Inc.,
as Principal, and in favor of _________________,
as Obligee.

IT IS HEREBY UNDERSTOOD AND AGREED that the above described
bond(s) are hereby amended to include the following paragraph:

Notwithstanding anything contained herein to the
contrary, there shall be no liability on the part of the Principal or Surety
under this bond to the Obligees, or either of them, unless the Obligees, or
either of them, shall make payments to the Principal or to the Surety in case
it arranges for completion of the Contract upon default of the Principal,
strictly in accordance with the terms of said Contract as to payments, and
shall perform all the other obligations required to be performed under said
Contract at the time and in the manner therein set forth.

IT IS FURTHER UNDERSTOOD AND AGREED that nothing
herein contained shall be held to change, alter or vary the terms of the above
described bond(s) except as hereinbefore set forth.

SIGNED, SEALED AND DATED
this ____ day of _____________, 200_.

	
   

  	
   

  	
  Fagen, Inc.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (Contractor)

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  [                           ]

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (Surety)

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
   

  

 

 H-5

EXHIBIT I

Form of Payment Bond

PAYMENT BOND

The American Institute of Architects,

AIA Document No. A312 (December, 1984 Edition)

Any singular reference to Contractor, Surety, Owner or other

party shall be considered plural where applicable.

	
  CONTRACTOR
  (Name and Address):

  Fagen, Inc.

  P. O. Box 159

  Granite Falls, MN 56241

  	
  SURETY (Name and Principal Place of Business):

  
	
  OWNER (Name and Address):

  [NAME AND ADDRESS]

  	
   

  
	
  CONSTRUCTION CONTRACT

  Date:

  Amount:

  Description (Name and Location):

  	
   

  
	
  BOND #

  Date (Not earlier than Construction Contract Date):

  Amount:

  	
   

  
	
  Modifications to this Bond:    o  None    o  See
  Page 2

  	
   

  
	
  CONTRACTOR AS PRINCIPAL

  	
  SURETY

  
	
  Company:              (Corporate
  Seal)              Company:              (Corporate
  Seal)

  
	
  Fagen, Inc.

  	
   

  
	
  Signature:

  	
   

  	
   

  	
  Signature:

  	
   

  
	
  Name and Title:

  	
   

  	
   

  	
  Name and Title:

  	
   

  
	
  (Any
  additional signatures appear an page 2.)

  
	
  (FOR INFORMATION Only—Name, Address and Telephone)

  	
  OWNER’S REPRESENTATIVE (Architect, Engineer or other
  party):

  
	
  AGENT or BROKER:

  	
   

  
							

 

1.             The Contractor and the Surety, jointly and severally,
bind themselves, their heirs, executors, administrators, successors and assigns
to the Owner to pay for labor, materials and equipment furnished for use in the
performance of the Construction Contract, which is incorporated herein by
reference.

2.             With respect to the Owner, this obligation shall be null
and void if the Contractor:

2.1           Promptly
makes payment, directly or indirectly, for all sums due Claimants, and

2.2           Defends, indemnifies and holds harmless
the Owner from claims, demands, liens or suits by any person or entity whose
claim, demand, lien or suit is for the payment for labor, materials or
equipment furnished for use in the performance of the Construction Contract,
provided the Owner has promptly notified the Contractor and the Surety

 

 I-1
 

(at the address described
in Paragraph 12) of any claims; demands, liens or suits and tendered defense of
such claims, demands, liens or suits to the Contractor and the Surety, and
provided there is no Owner Default.

3.             With respect to Claimants, this obligation shall be null
and void if the Contractor promptly makes payment, directly or Indirectly, for
all sums due.

4.             The Surety shall have no obligation to Claimants under
this Bond until:

4.1           Claimants
who are employed by or have a direct contract with the Contractor have given
notice to the Surety (at the address described in Paragraph 12) and sent a
copy, or notice thereof, to the owner, stating that a claim is being made under
this Bond and, with substantial accuracy, the amount of the claim.

4.2           Claimants
who do not have a direct contract with the Contractor:

4.2.1        Have
furnished written notice to the Contractor and sent a copy, or notice thereof,
to the Owner, within 90 days after having last performed labor or last
furnished materials or equipment included in the claim stating, with
substantial accuracy, the amount of the claim and the name of the party to whom
the materials were furnished or supplied or for whom the labor was done or
performed; and

4.2.2        Have
either received a rejection in whole or in part from the Contractor, or not
received within 30 days of furnishing the above notice any communication from
the Contractor by which the Contractor has indicated the claim will be paid
directly or Indirectly; and

4.2.3        Not
having been paid within the above 30 days, have sent a written notice to the
Surety (at the address described in Paragraph 12) and sent a copy, or notice
thereof, to the Owner, stating that a claim is being made under this Bond and
enclosing a copy of the previous written notice furnished to the Contractor.

5.             If a notice required by Paragraph 4 is given by the
Owner to the Contractor or to the Surety that is sufficient compliance.

6.             When the Claimant has satisfied the conditions of
Paragraph 4, the Surety shall promptly and at the Surety’s expense take the
following actions:

6.1           Send
an answer to the Claimant, with a copy to the Owner, within 45 days after
receipt of the claim, stating the amounts that are undisputed and the basis for
challenging any amounts that are disputed.

6.2           Pay
or arrange for payment of any undisputed amounts.

7.             The Surety’s total obligation shall not exceed the
amount of this Bond, and the amount of this Bond shall be credited for any
payments made in good faith by the Surety.

 I-2
 

8.             Amounts owed by the Owner to the Contractor under the
Construction Contract shall be used for the performance of the Construction
Contract and to satisfy claims, if any, under any Construction Performance
Bond.  By the Contractor furnishing and
the Owner accepting this Bond, they agree that all funds earned by the
Contractor in the performance of the Construction Contract are dedicated to
satisfy obligations of the Contractor and the Surety under this Bond, subject
to the Owner’s priority to use the funds for the completion of the work.

9.             The Surety shall not be liable to the Owner, Claimants
or others for obligations of the Contractor that are unrelated to the
Construction Contract.  The Owner shall
not be liable for payment of any costs or expenses of any Claimant under this
Bond, and shall have under this Bond no obligation to make payments to, give
notices on behalf of, or otherwise have obligations to Claimants under this
Bond.

10.           The Surety hereby waives notice of
any change, including changes of time, to the Construction Contract or to
related subcontracts, purchase orders and other obligations.

11.           No suit or action shall be commenced
by a Claimant under this Bond other than in a court of competent jurisdiction
in the location in which the work or part of the work is located or after the
expiration of one year from the date (1) on which the Claimant gave the notice
required by Subparagraph 4.1 or Clause 4.2.3, or (2) on which the last labor or
service was performed by anyone or the last materials or equipment were
furnished by anyone under the Construction Contract, whichever of (1) or (2)
first occurs. If the provisions of this Paragraph are void or prohibited by
law, the minimum period of limitation available to sureties as a defense in the
jurisdiction of the suit shall be applicable.

12.           Notice to the Surety, the Owner or
the Contractor shall be mailed or delivered to the address shown on the
signature page. Actual receipt of notice by Surety, the Owner or the
Contractor, however accomplished, shall be sufficient compliance as of the date
received at the address shown on the signature page.

13.           When this Bond has been furnished to
comply with a statutory or other legal requirement in the location where the
construction was to be performed, any provision in this Bond conflicting with
said statutory or legal requirement shall be deemed deleted herefrom and
provisions conforming to such statutory or other legal requirement shall be
deemed incorporated herein.  The intent
is that this Bond shall be construed as a statutory bond and not as a common
law bond.

14.           Upon request by any person or entity
appearing to be a potential beneficiary of this Bond, the Contractor shall
promptly furnish a copy of this Bond or shall permit a copy to be made.

15.           DEFINITIONS

15.1         Claimant:
An individual or entity having a direct contract with the Contractor or with a
subcontractor of the Contractor to furnish labor, materials or equipment for
use in the performance of the Contract. The intent of this Bond shall be to
include without limitation in the terms “labor, materials or equipment” that
part of water, gas, power, light, heat, oil, gasoline, telephone service or
rental equipment used in the Construction Contract,

 I-3
 

architectural and
engineering services required for performance of the work of the Contractor and
the Contractor’s subcontractors, and all other items for which a mechanic’s
lien may be asserted in the jurisdiction where the labor, materials or
equipment were furnished.

15.2         Construction
Contract: The agreement between the Owner and the Contractor identified on the
signature page, including all Contract Documents and changes thereto.

15.3         Owner
Default: Failure of the Owner, which has neither been remedied nor waived, to
pay the Contractor as required by the Construction Contract or to perform and
complete or comply with the other terms thereof.

MODIFICATIONS TO THIS BOND ARE AS
FOLLOWS:

	
  This bond is subject to the attached Dual Obligee
  Rider dated [                   ].

  	
   

  
	
   

  	
   

  
	
   

  	
   

  

(Space is provided below
for additional signatures of added parties other than those appearing on the
cover page.)

	
  CONTRACTOR AS PRINCIPAL

  	
  SURETY

  
	
  (Corporate Seal)

  	
   

  	
  (Corporate Seal)

  	
   

  
	
  Company:

  	
   

  	
   

  	
  Company:

  	
   

  
	
   

  	
   

  	
   

  
	
  Address:

  	
   

  	
   

  	
  Address:

  	
   

  
	
  Name and Title:

  	
   

  	
   

  	
  Name and Title:

  	
   

  
	
  Signature:

  	
   

  	
   

  	
  Signature:

  	
   

  
													

 

DUAL
OBLIGEE RIDER

(TO BE ATTACHED TO
BOND AT TIME OF ISSUANCE)

TO BE ATTACHED TO AND
FORM PART OF Performance and Payment Bond NO.                     ,
dated concurrently with the execution of this Rider, issued by the                               ,
a                           
corporation, as Surety, on behalf of Fagen, Inc., as
Principal, and in favor of                                   ,
as Obligee.

IT IS HEREBY UNDERSTOOD
AND AGREED that the above described bond(s) are hereby amended to include the
following paragraph:

Notwithstanding
anything contained herein to the contrary, there shall be no liability on the
part of the Principal or Surety under this bond to the Obligees, or either of
them, unless the Obligees, or either of them, shall make payments to the
Principal or to the Surety in case it arranges for completion of the Contract
upon default of the Principal, strictly in accordance with the terms of said
Contract as to payments, and shall perform all the other obligations required
to be performed under said Contract at the time and in the manner therein set
forth.

IT IS FURTHER UNDERSTOOD
AND AGREED that nothing herein contained shall be held to change, alter or vary
the terms of the above described bond(s) except as hereinbefore set forth.

SIGNED, SEALED AND DATED
this         
day of                           ,
200  .

 I-4
 

 

	
   

  	
  Fagen, Inc.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  (Contractor)

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  [                                ]

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  (Surety)

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  

 

 I-5
 

 

	
  

  	
  By:

  	
   

  

 

 I-6

EXHIBIT J

Draw (Payment) Schedule

ABE
NORTHFIELD, LLC

Northfield,

MN

Monthly Draw Schedule - 21 Month Project (635 Days)

 

	
   

  	
   

  	
   

  	
   

  	
  Previously

  	
   

  	
   

  	
   

  
	
  Month #

  	
   

  	
  This Month

  	
   

  	
  Completed

  	
   

  	
  Total

  	
   

  
	
  1

  	
   

  	
  $

  	
  [*]

  	
   

  	
  $

  	
  [*]

  	
   

  	
  $

  	
  [*]

  	
   

  
	
  2

  	
   

  	
  $

  	
  [*]

  	
   

  	
  $

  	
  [*]

  	
   

  	
  $

  	
  [*]

  	
   

  
	
  3

  	
   

  	
  $

  	
  [*]

  	
   

  	
  $

  	
  [*]

  	
   

  	
  $

  	
  [*]

  	
   

  
	
  4

  	
   

  	
  $

  	
  [*]

  	
   

  	
  $

  	
  [*]

  	
   

  	
  $

  	
  [*]

  	
   

  
	
  5

  	
   

  	
  $

  	
  [*]

  	
   

  	
  $

  	
  [*]

  	
   

  	
  $

  	
  [*]

  	
   

  
	
  6

  	
   

  	
  $

  	
  [*]

  	
   

  	
  $

  	
  [*]

  	
   

  	
  $

  	
  [*]

  	
   

  
	
  7

  	
   

  	
  $

  	
  [*]

  	
   

  	
  $

  	
  [*]

  	
   

  	
  $

  	
  [*]

  	
   

  
	
  8

  	
   

  	
  $

  	
  [*]

  	
   

  	
  $

  	
  [*]

  	
   

  	
  $

  	
  [*]

  	
   

  
	
  9

  	
   

  	
  $

  	
  [*]

  	
   

  	
  $

  	
  [*]

  	
   

  	
  $

  	
  [*]

  	
   

  
	
  10

  	
   

  	
  $

  	
  [*]

  	
   

  	
  $

  	
  [*]

  	
   

  	
  $

  	
  [*]

  	
   

  
	
  11

  	
   

  	
  $

  	
  [*]

  	
   

  	
  $

  	
  [*]

  	
   

  	
  $

  	
  [*]

  	
   

  
	
  12

  	
   

  	
  $

  	
  [*]

  	
   

  	
  $

  	
  [*]

  	
   

  	
  $

  	
  [*]

  	
   

  
	
  13

  	
   

  	
  $

  	
  [*]

  	
   

  	
  $

  	
  [*]

  	
   

  	
  $

  	
  [*]

  	
   

  
	
  14

  	
   

  	
  $

  	
  [*]

  	
   

  	
  $

  	
  [*]

  	
   

  	
  $

  	
  [*]

  	
   

  
	
  15

  	
   

  	
  $

  	
  [*]

  	
   

  	
  $

  	
  [*]

  	
   

  	
  $

  	
  [*]

  	
   

  
	
  16

  	
   

  	
  $

  	
  [*]

  	
   

  	
  $

  	
  [*]

  	
   

  	
  $

  	
  [*]

  	
   

  
	
  17

  	
   

  	
  $

  	
  [*]

  	
   

  	
  $

  	
  [*]

  	
   

  	
  $

  	
  [*]

  	
   

  
	
  18

  	
   

  	
  $

  	
  [*]

  	
   

  	
  $

  	
  [*]

  	
   

  	
  $

  	
  [*]

  	
   

  
	
  19

  	
   

  	
  $

  	
  [*]

  	
   

  	
  $

  	
  [*]

  	
   

  	
  $

  	
  [*]

  	
   

  
	
  20

  	
   

  	
  $

  	
  [*]

  	
   

  	
  $

  	
  [*]

  	
   

  	
  $

  	
  [*]

  	
   

  
	
  21

  	
   

  	
  $

  	
  [*]

  	
   

  	
  $

  	
  [*]

  	
   

  	
  $

  	
  122,545,363

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  $

  	
  122,545,363

  	
   

  	
   

  	
   

  

 

*** $20,000,000 Mobilization Fee
included in 1st Billing

 

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

 J-1

 EXHIBIT K

Air
Emissions Application or Permit

Air Permit Application to
be provided by Owner and approved in writing by Design-Builder.

 K-1

EXHIBIT L

Phase I
and Phase II Engineering Services Agreement

See attached Phase I and
Phase II Engineering Services Agreement

PHASE I AND PHASE II

ENGINEERING SERVICES AGREEMENT

BETWEEN

ADVANCED BIOENERGY, LLC

AND

FAGEN ENGINEERING, LLC

January 9, 2007

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

  	
   

  	
  4

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2.1

  	
   

  	
  Retention of Services

  	
   

  	
  4

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  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

  	
   

  	
  5

  
	
  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

  	
   

  	
  6

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  4.1

  	
   

  	
  Client’s Representative

  	
   

  	
  6

  
	
  4.2

  	
   

  	
  Client’s Requirements

  	
   

  	
  6

  
	
  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

  	
   

  	
  7

  
	
  4.9

  	
   

  	
  Services Outside Scope of Engineer’s Services

  	
   

  	
  7

  
	
  4.10

  	
   

  	
  Deviation from Design

  	
   

  	
  7

  
	
  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

  	
   

  	
  8

  
	
  5.5

  	
   

  	
  Collection of Unpaid Amounts

  	
   

  	
  8

  
	
  5.6

  	
   

  	
  Reimbursement Schedules Subject to Change

  	
   

  	
  8

  
	
  5.7

  	
   

  	
  Invoices

  	
   

  	
  8

  
	
  5.8

  	
   

  	
  Payment

  	
   

  	
  8

  

 

 i
 

 

	
  5.9

  	
   

  	
  Late Payment and Interest

  	
   

  	
  8

  
	
  5.10

  	
   

  	
  Suspension for Failure to Pay

  	
   

  	
  8

  
	
  5.11

  	
   

  	
  Payment

  	
   

  	
  8

  
	
  5.12

  	
   

  	
  Withholding Payments

  	
   

  	
  9

  
	
  5.13

  	
   

  	
  Purchase Orders

  	
   

  	
  9

  
	
  5.14

  	
   

  	
  Changes in Project

  	
   

  	
  9

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Article 6

  	
   

  	
  Construction
  Cost And Cost Estimates

  	
   

  	
  9

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  6.1

  	
   

  	
  Cost Estimates

  	
   

  	
  9

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Article 7

  	
   

  	
  Termination

  	
   

  	
  9

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  7.1

  	
   

  	
  Termination Upon Default

  	
   

  	
  9

  
	
  7.2

  	
   

  	
  Termination Upon Abandonment of Plant

  	
   

  	
  9

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Article 8

  	
   

  	
  Ownership
  of Work Product

  	
   

  	
  10

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  8.1

  	
   

  	
  Work Product

  	
   

  	
  10

  
	
  8.2

  	
   

  	
  Copies Provided to Client

  	
   

  	
  10

  
	
  8.3

  	
   

  	
  Prohibited Use of Work Product

  	
   

  	
  10

  
	
  8.4

  	
   

  	
  Derogation of Engineer’s Rights to Work Product

  	
   

  	
  10

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Article 9

  	
   

  	
  Successors
  and Assigns

  	
   

  	
  10

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  9.1

  	
   

  	
  Successors

  	
   

  	
  10

  
	
  9.2

  	
   

  	
  Written Consent Required

  	
   

  	
  10

  
	
  9.3

  	
   

  	
  No Third-Party Beneficiaries

  	
   

  	
  10

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Article 10

  	
   

  	
  Warranty

  	
   

  	
  11

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  10.1

  	
   

  	
  No Warranty Extended

  	
   

  	
  11

  
	
  10.2

  	
   

  	
  No Responsibility for Construction

  	
   

  	
  11

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Article 11

  	
   

  	
  Indemnification

  	
   

  	
  11

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  11.1

  	
   

  	
  Engineer’s Indemnification

  	
   

  	
  11

  
	
  11.2

  	
   

  	
  Client’s Indemnification

  	
   

  	
  11

  
	
  11.3

  	
   

  	
  Hazardous Materials Indemnification

  	
   

  	
  11

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Article 12

  	
   

  	
  Dispute
  Resolution

  	
   

  	
  12

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  12.1

  	
   

  	
  Arbitration

  	
   

  	
  12

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Article 13

  	
   

  	
  Confidentiality

  	
   

  	
  12

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  13.1

  	
   

  	
  Non-Disclosure Obligation

  	
   

  	
  12

  
	
  13.2

  	
   

  	
  Publicity and Advertising

  	
   

  	
  13

  
	
  13.3

  	
   

  	
  Term of Obligation

  	
   

  	
  13

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Article 14

  	
   

  	
  Miscellaneous

  	
   

  	
  13

  

 

 ii
 

 

	
  14.1

  	
   

  	
  Governing Law

  	
   

  	
  13

  
	
  14.2

  	
   

  	
  Severability

  	
   

  	
  13

  
	
  14.3

  	
   

  	
  No Waiver

  	
   

  	
  13

  
	
  14.4

  	
   

  	
  Captions and Headings

  	
   

  	
  14

  
	
  14.5

  	
   

  	
  Engineer’s Accounting Records

  	
   

  	
  14

  
	
  14.6

  	
   

  	
  Counterparts

  	
   

  	
  14

  
	
  14.7

  	
   

  	
  Survival

  	
   

  	
  14

  
	
  14.8

  	
   

  	
  No Privity with Client’s Contractors

  	
   

  	
  14

  
	
  14.9

  	
   

  	
  Amendments

  	
   

  	
  14

  
	
  14.10

  	
   

  	
  Entire Agreement

  	
   

  	
  14

  
	
  14.11

  	
   

  	
  Notice

  	
   

  	
  14

  
	
  14.12

  	
   

  	
  Extent of Agreement

  	
   

  	
  15

  
	
  14.13

  	
   

  	
  Subrogation Waiver

  	
   

  	
  15

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  EXHIBIT A

  	
   

  	
  Reimbursement Schedule

  	
   

  	
  17

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  EXHIBIT B

  	
   

  	
  Reimbursable Expense Schedule

  	
   

  	
  18

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  EXHIBIT C

  	
   

  	
  Client’s Deliverable Site Obligations

  	
   

  	
  19

  

 

 iii

PHASE I
AND PHASE II

ENGINEERING
SERVICES AGREEMENT

THIS PHASE I AND PHASE II ENGINEERING
SERVICES AGREEMENT (the “Agreement”) is made as of
January 9, 2007, (the “Effective Date”) by and between Advanced
BioEnergy, LLC, a Delaware 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 one hundred (100) million gallons per year dry grind ethanol
production facility to be located in Northfield, 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:

 1
 

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

1.1.2                         (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.

 2
 

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.

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.

 3
 

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.

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 Phase I Owner Deliverables, however, the sixty
(60) day timeframe provided for in this section will commence no sooner than
May 17, 2007.

 4
 

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)

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.

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.

 5
 

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 and Phase II Design Packages.

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.

 6
 

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.

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 Ninety-two Thousand
Five Hundred Dollars ($92,500.00) (“Fixed Fee”) as compensation.  Engineer’s compensation under this Section
5.1 shall be pursuant to the Fee schedule attached hereto as Exhibit A, as such
schedule may be modified from time to time. 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.

 7
 

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
Articles 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 credited 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.

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.

 8
 

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.

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.

 9
 

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.

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.

 10
 

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.  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.

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 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.

 11
 

Article
12

Article
2Dispute 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 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.

The award of
the arbitrator(s) shall be final and binding upon the Parties without the right
of appeal to the courts.  Judgment may be
entered upon it in accordance with Applicable Law 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.

2.1                               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.

Article
13

Confidentiality

13.1                        Non-Disclosure
Obligation.  Except as required by
court order, subpoena, or Applicable Law, neither Party shall disclose to third
parties any confidential or proprietary information regarding the other Party’s
business affairs, finances, technology, processes, plans or installations,
product information, know-how, or other information that is received from the
other Party pursuant to this Agreement or the Parties’ relationship prior
thereto or is developed pursuant to this Agreement, without the express written
consent of the other Party, which consent shall not be unreasonably
withheld.  The Parties 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 either Party for
performing its obligations hereunder and if prior to such disclosure, the
disclosing Party informs such third Persons of the

 12
 

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 one Party prior to receipt
from the other, that is now or hereafter becomes a part of the public domain
through no fault of the Party wishing to disclose, 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 their 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 other Party unless prior written consent is
obtained from the other Party, which consent shall not be unreasonably withheld.

13.3                        Term of
Obligation.  The confidentiality
obligations of the Parties 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 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.

 13
 

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 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.

 14
 

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:

Advanced BioEnergy, LLC

10201 Wayzata Blvd, Suite
250

Minneapolis, MN 55305

Attention:  Don Gales

Fax:  (763)
226-2725

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.

 15
 

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
January 9, 2007.

	
  CLIENT:

  	
   

  	
  ENGINEER:

  
	
   

  	
   

  	
   

  
	
  Advanced BioEnergy, LLC

  	
   

  	
  Fagen Engineering, LLC

  
	
  (Name of Owner)

  	
   

  	
  (Name of Design-Builder)

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  (Signature)

  	
   

  	
  (Signature)

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  (Printed Name)

  	
   

  	
  (Printed Name)

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  (Title)

  	
   

  	
  (Title)

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Date:

  	
   

  	
   

  	
  Date:

  	
   

  
					

 

 16

 

EXHIBIT
A

FAGEN
ENGINEERING LLC

Fee
Schedule FY 2007

CONFIDENTIAL

	
  

  TYPICAL ASSIGNMENT

  	
  

  BILLING 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.

 17
 

EXHIBIT
B

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.

 18
 

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.       Final
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.

 19
 

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.

 20

EXHIBIT M

Form of
Application for Payment

See attached Form of
Application for Payment

 M-1
 

 

	
  APPLICATION AND CERTIFICATE FOR PAYMENT

  

 

	
  TO (OWNER):

  	
  SAMPLE

  	
  PROJECT:

  	
  100 MGY Ethanol Plant

  	
  APPLICATION NO: 
  1

  	
  DISTRIBUTION TO:

  
	
   

  	
  123 Any Street

  	
   

  	
   

  	
   

  	
  o OWNER

  
	
   

  	
  Anywhere, US 12345-6789

  	
   

  	
  Granite Falls, MN

  	
  PERIOD TO: 
  10/25/2005

  	
  o ARCHITECT

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
  o CONTRACTOR

  
	
  FROM:

  	
  FAGEN, INC.

  	
  VIA (ARCHITECT):

  	
  SAMPLE

  	
  ARCHITECT’S 

  	
   

  
	
   

  	
  501 WEST HWY 212

  	
   

  	
   

  	
  PROJECT NO.: 
  SAMPLE

  	
   

  
	
   

  	
  GRANITE FALLS, MN 56241-0159

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  CONTRACT FOR:

  	
  100 MGY Ethanol Plant

  	
   

  	
  CONTRACT DATE:

  	
   

  
								

 

 

	
                                           

  
	
   

  
	
  CONTRACTOR’S APPLICATION FOR PAYMENT

  
	
   

  

 

	
  CHANGE ORDER SUMMARY

   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  ADDITIONS

  	
   

  	
  DEDUCTIONS

  	
   

  
	
  Change Orders approved
  in previous months by owner

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  TOTAL

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Approved this Month

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Number

  	
  Date Approved

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  TOTALS

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Net Change by Change Orders 

  	
   

  	
  $

  	
  .00

  	
   

  	
   

  	
   

  
								

 

The undersigned Contractor certifies that to
the best of the Contractor’s knowledge, information, and belief the Work
covered by this Application for Payment has been completed in accordance with
the Contract Documents, that all amounts have been paid by the Contractor for
Work for which previous Certificates for Payment were issued and payments
received from the Owner, and that current payment shown herein is now due.

 

 

	
  CONTRACTOR: FAGEN, INC.

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
  Date:

  	
   

  
					

 

Application is made for Payment, as shown
below, in connection with the contract.  Continuation
Sheet is attached.

 

	
  1.

  	
   

  	
  ORIGINAL CONTRACT SUM

  	
   

  	
   

  	
   

  	
  $

  	
  99500000.00

  	
   

  
	
  2.

  	
   

  	
  Net Change by Change Orders

  	
   

  	
   

  	
   

  	
  $

  	
  .00

  	
   

  
	
  3.

  	
   

  	
  CONTRACT SUM TO DATE

  	
   

  	
   

  	
   

  	
  $

  	
  99500000.00

  	
   

  
	
  4.

  	
   

  	
  TOTAL COMPLETED & STORED TO DATE

  (Column 6)

  	
   

  	
   

  	
   

  	
  $

  	
  00

  	
   

  
	
  5.

  	
   

  	
  RETAINAGE:

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  a.

  	
  10.00% of Completed Work

  (Column D&E0

  	
   

  	
  $

  	
  .00

  	
   

  	
   

  	
   

  
	
  

  	
   

  	
  b.

  	
  10.00% of Stored Material 

  (Column F)

  	
   

  	
  $

  	
  .00

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Total Retainage (Line 5a&5b) or

  (Total in Column I)

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  6.

  	
   

  	
  TOTAL EARNED LESS RETAINAGE

  (Line 4 less Line 5 Total)

  	
   

  	
   

  	
   

  	
  $

  	
  .00

  	
   

  
	
  7.
  

  	
   

  	
  LESS PREVIOUS CERTIFICATES FOR PAYMENT 

  (Line 6 from prior Certificate)

  	
   

  	
   

  	
   

  	
  $

  	
  .00

  	
   

  
	
  8.

  	
   

  	
  CURRENT PAYMENT DUE

  	
   

  	
   

  	
   

  	
  $

  	
  .00

  	
   

  
	
  9.

  	
   

  	
  BALANCE TO FINISH, PLUS RETAINAGE

  	
   

  	
   

  	
   

  	
  $

  	
  99500000.00

  	
   

  
	
  (Line 3 less Line 6)

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

 

 

	
   

  	
   

  
	
   

  	
   

  
	
  State of:

  	
  County of: 

  
	
  Subscribed and Sworn to
  before me this
                   
  day of
                                   ,
  

  	
   

  
	
  Notary Public

  	
   

  
	
  My Commission expires:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  ARCHITECT’S CERTIFICATE FOR PAYMENT

  	
  AMOUNT CERTIFIED                                 $

  
	
   

  	
  (Attach explanation if
  amount certified differs from the amount applied for.)

  
	
   

  	
   

  
	
   

  	
  ARCHITECT:  SAMPLE

  
	
  In accordance with the Contract Documents, based on on-

  	
  By:

  	
   

  	
  Date:

  	
   

  
	
  site observations and the data comprising the above 

  	
   

  	
   

  	
   

  	
   

  
	
  application, the Architect certifies to the Owner that to the best of
  the Architect’s knowledge, information, and belief the Work has progressed as
  indicated, the quality of the Work is in accordance with the Contract
  Documents, and the Contractor is entitled to payment of the AMOUNT CERTIFIED.

  	
  This Certificate is not
  negotiable.  The AMOUNT CERTIFIED is
  payable only to the Contractor named herein. 
  Issuance, payment and acceptance of payment are without prejudice to
  any rights of the Owner or Contractor under this contract.

  
						

 

 M-2
 

FAGEN, INC.

AIA CONTINUATION
SHEET

	
  

  	
   

  	
   

  	
   

  	
  Application No.

  	
  :

  	
  1

  
	
   

  	
   

  	
   

  	
   

  	
  Application Date

  	
  :

  	
  10/06/05

  
	
   

  	
   

  	
   

  	
   

  	
  Period to

  	
  :

  	
  10/25/2005

  
	
  Job : SAMPLE     100 MGY
  Ethanol Plant

  	
   

  	
  Architect Project No.

  	
  :

  	
  SAMPLE

  

 

	
  Item

  No.

  	
   

  	
  Description of Work

  	
   

  	
  Scheduled

  Value

  	
   

  	
  Previous

  Compltd

  	
   

  	
  Current

  Compltd

  	
   

  	
  Stored

  Material

  	
   

  	
  Tot

  Compl.

  & Stored

  	
   

  	
  % Comp

  	
   

  	
  Balance To

  Finish

  	
   

  	
  Retainage

  	
   

  
	
  000001

  	
   

  	
  Mobilization

  	
   

  	
  [*]

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  [*]

  	
   

  	
  0.00

  	
   

  
	
  000002

  	
   

  	
  Engineering

  	
   

  	
  [*]

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  [*]

  	
   

  	
  0.00

  	
   

  
	
  000003

  	
   

  	
  General Conditions

  	
   

  	
  [*]

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  [*]

  	
   

  	
  0.00

  	
   

  
	
  000004

  	
   

  	
  Sitework

  	
   

  	
  [*]

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  [*]

  	
   

  	
  0.00

  	
   

  
	
  000005

  	
   

  	
  Concrete

  	
   

  	
  [*]

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  [*]

  	
   

  	
  0.00

  	
   

  
	
  000006

  	
   

  	
  Masonry/Architectural

  	
   

  	
  [*]

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  [*]

  	
   

  	
  0.00

  	
   

  
	
  000007

  	
   

  	
  Structural Steel &
  Misc Metals

  	
   

  	
  [*]

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  [*]

  	
   

  	
  0.00

  	
   

  
	
  000008

  	
   

  	
  Girts Siding Roof Deck
  PE Build

  	
   

  	
  [*]

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  [*]

  	
   

  	
  0.00

  	
   

  
	
  000009

  	
   

  	
  Grain Handling System

  	
   

  	
  [*]

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  [*]

  	
   

  	
  0.00

  	
   

  
	
  000010

  	
   

  	
  DDG Storage
  Building

  	
   

  	
  [*]

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  [*]

  	
   

  	
  0.00

  	
   

  
	
  000011

  	
   

  	
  Process Tanks &
  Vessels

  	
   

  	
  [*]

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  [*]

  	
   

  	
  0.00

  	
   

  
	
  000012

  	
   

  	
  Field Erected Tanks

  	
   

  	
  [*]

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  [*]

  	
   

  	
  0.00

  	
   

  
	
  000013

  	
   

  	
  Heat Exchangers

  	
   

  	
  [*]

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  [*]

  	
   

  	
  0.00

  	
   

  
	
  000014

  	
   

  	
  Process Equipment

  	
   

  	
  [*]

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  [*]

  	
   

  	
  0.00

  	
   

  
	
  000015

  	
   

  	
  Centrifuges

  	
   

  	
  [*]

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  [*]

  	
   

  	
  0.00

  	
   

  
	
  000016

  	
   

  	
  Chiller

  	
   

  	
  [*]

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  [*]

  	
   

  	
  0.00

  	
   

  
	
  000017

  	
   

  	
  Truck Scales & Probe

  	
   

  	
  [*]

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  [*]

  	
   

  	
  0.00

  	
   

  
	
  000018

  	
   

  	
  Ethanol Loadout/Vapor
  Flare

  	
   

  	
  [*]

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  [*]

  	
   

  	
  0.00

  	
   

  
	
  000019

  	
   

  	
  Cooling Tower

  	
   

  	
  [*]

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  [*]

  	
   

  	
  0.00

  	
   

  
	
  000020

  	
   

  	
  Dryer System

  	
   

  	
  [*]

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  [*]

  	
   

  	
  0.00

  	
   

  
	
  000021

  	
   

  	
  Thermal Oxidizer

  	
   

  	
  [*]

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  [*]

  	
   

  	
  0.00

  	
   

  
	
  000022

  	
   

  	
  Methanatar

  	
   

  	
  [*]

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  [*]

  	
   

  	
  0.00

  	
   

  
	
  000023

  	
   

  	
  Process Piping &
  Valves

  	
   

  	
  [*]

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  [*]

  	
   

  	
  0.00

  	
   

  
	
  000024

  	
   

  	
  Painting

  	
   

  	
  [*]

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  [*]

  	
   

  	
  0.00

  	
   

  
	
  000025

  	
   

  	
  Insulation

  	
   

  	
  [*]

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  [*]

  	
   

  	
  0.00

  	
   

  
	
  000026

  	
   

  	
  Plumbing & HVAC

  	
   

  	
  [*]

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  [*]

  	
   

  	
  0.00

  	
   

  
	
  000027

  	
   

  	
  Electrical

  	
   

  	
  [*]

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  [*]

  	
   

  	
  0.00

  	
   

  
	
  000028

  	
   

  	
  Instrumentation

  	
   

  	
  [*]

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  [*]

  	
   

  	
  0.00

  	
   

  
	
  000029

  	
   

  	
  Start-Up

  	
   

  	
  [*]

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  [*]

  	
   

  	
  0.00

  	
   

  
	
  Totals

  	
   

  	
   

  	
   

  	
  99500000.00

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  99500000.00

  	
   

  	
  0.00

  	
   

  
	
  Percent:

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
   

  	
   

  	
  100.00

  	
   

  	
   

  	
   

  

 

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

 M-3

EXHIBIT N

Form of
Lien Waiver

GENERAL CONTRACTOR’S
PARTIAL WAIVER OF MECHANIC’S LIEN RIGHTS AND

AFFIDAVIT OF DEBTS AND CLAIMS

CONDITIONAL LIEN
WAIVER

STATE:  (  
INSERT STATE   )                                                                                                          FAGEN,
INC.

COUNTY:  (  
INSERT COUNTY   )

The undersigned is the
General Contractor (aka Design-Builder) regarding labor and materials for
construction and maintenance work performed for (   INSERT OWNER/PLANT NAME   ), at the Facility located at or near (   INSERT PLANT CITY & STATE   ) under the terms of a contract.

On condition of receiving
full payment for billings up to date hereof under the terms
of the above mentioned contract, and other good and valuable consideration, the
receipt of which is hereby acknowledged, the undersigned does hereby waive and
release any and all liens, and any and all claims and rights to lien on the
Facility  (including all buildings on the
premises) under the statutes of the State of (   INSERT STATE   ) relating to mechanic’s liens on
account of labor and materials furnished by the undersigned up to the date
hereof at the Facility, as located on real estate legally described as follows:

TRACT 1:  (  
INSERT LEGAL DESCRIPTION   )

TRACT 2:  (  
INSERT LEGAL DESCRIPTION   )

 N-1
 

The undersigned
further certifies that all obligations of General Contractor entered into
between suppliers/subcontractors and General Contractor regarding this Facility
are current as of this date, including all obligations of General Contractor
for all work, labor and services performed; materials and equipment furnished;
and all known indebtedness and claims against General Contractor for damages
arising in any manner in connection with General Contractor’s performance of
the contract mentioned above for which General Contractor or property of
General Contractor might in any way be held responsible.

Dated this ______
day of ___________________, 200__

	
  

  	
  GENERAL CONTRACTOR:

  
	
   

  	
   

  
	
   

  	
  FAGEN, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By (Print):

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  (Signature):

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Witness (Print):

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  (Signature):

  	
   

  
						

 

In the alternative (or if requested):

Subscribed and
sworn to before me this

_______ day of
_______________, 200__.

	
  

  	
   

  
	
  

  	
   

  	
  Notary Public

  
				

 

My Commission Expires: ____________________

 N-2

EXHIBIT O

Form of
Consent to Assignment

FAGEN CONSENT TO
ASSIGNMENT

THIS CONSENT TO
ASSIGNMENT (this “Consent”), dated as of February 7, 2007, is made among
FAGEN, INC., a Minnesota corporation (the “Obligor”), ABE Northfield,
LLC, a Delaware limited liability company (“Assignor”), and the
financial institution party to this Agreement, not in its individual capacity,
but acting solely in the capacity of collateral agent on behalf of the below
defined Lenders (such financial institution in such capacity, or such other
financial institution acting in such capacity, the “Collateral Agent”).

The Assignor seeks to construct and operate a one
hundred (100) million gallon per year fuel-grade ethanol production plant in
Northfield, Minnesota (the “Project”). 
The Obligor and the Assignor have entered into the Lump-Sum Design-Build
Agreement dated as of February 7, 2007 (as amended, modified, supplemented and
in effect from time to time, the “Assigned Agreement”).  The Assignor and certain other financial
institutions (the “Lenders”) intend to finance certain costs of the
Assignor for the development, construction and operation of the Project
pursuant to various financing arrangements (the “Financing Arrangements”).  The Assignor and the Collateral Agent (on
behalf of the Lenders) intend to enter into certain security arrangements (the “Security
Documents”), pursuant to which the Assignor will pledge and assign to the
Collateral Agent a lien on and a security interest in all of the Assignor’s
right, title and interest in, among other things, the Assigned Agreement.

SECTION 1.                                CONSENT
TO ASSIGNMENTS; LIABILITY; CURE RIGHTS; ETC.

1.1                                 Acknowledgments
and Consents. The Obligor (i) acknowledges that the Assigned Agreement is
in full force and effect and that there are no other amendments, modifications
or supplements thereto, either oral or written; (ii) represents and warrants
that it has not assigned, transferred or pledged the Assigned Agreement to any
third party; (iii) represents and warrants that it has no knowledge of any
existing default by the Assignor in the performance of any provision of the
Assigned Agreement; (iv) acknowledges and consents to the Assignor’s pledge and
assignment of the Assigned Agreement to the Collateral Agent; (v) acknowledges
the right of the Collateral Agent in the exercise of its rights and remedies
under the Security Documents to take all actions and exercise all rights of the
Assignor under the Assigned Agreement as if it were the Assignor; (vi)
acknowledges and agrees that this Consent satisfies Section 21.1 of the
Assigned Agreement; and (vii) acknowledges and agrees that the Collateral Agent
is entitled to notices under the Assigned Agreement pursuant to Section 21.7
thereof.

1.2                                 Limitation
on Assumption of Obligations.  The
Collateral Agent shall not be liable for the performance or observance of any
of the obligations or duties of the Assignor under the Assigned Agreement, nor
shall the Security Documents give rise to any duties or obligations whatsoever,
except that, insofar as the Collateral Agent exercises any of Assignor’s rights
under the Assigned Agreement and/or makes any claims with respect to any
payments, deliveries or

 O-1
 

other obligations under
the Assigned Agreement, the satisfaction of the terms and conditions of the
Assigned Agreement applicable to such exercise of rights or such claims shall
be a condition precedent to the Obligor’s obligations with respect
thereto.  Upon any transfer to a third
party of the rights of the Collateral Agent under the Assigned Agreement
pursuant to its exercise of its remedies under the Security Documents as
described in Section 1.4 below which transfer of the Assigned Agreement
shall be subject in all respects  to the
terms and conditions of the Assigned Agreement, including Section 21.1 thereof
(i) the transferee shall succeed to all right, title and interest of the
Assignor and the Collateral Agent and (ii) the Collateral Agent shall have no
further liabilities, duties or obligations to the Assignor under the Assigned
Agreement.

1.3                                 Cure
Periods.  The Obligor hereby confirms
that it will provide to the Collateral Agent the same notices as are to be
provided to the Assignor pursuant to Sections 15.4.2, 15.5.1(d), and 15.5.2 of
the Assigned Agreement.

1.4                                 Substitute
Owner.  The Obligor acknowledges that
upon an event of default by the Assignor under the Financing Arrangements and
an exercise of remedies by the Collateral Agent under the Security Documents,
the Collateral Agent may (but shall not be obligated to) assume, or cause any
purchaser at any foreclosure sale or any assignee or transferee under any
instrument of assignment or transfer in lieu of foreclosure to assume, all of
the interests, rights and obligations of the Assignor thereafter arising under
the Assigned Agreement.  Each assuming
party shall agree in writing to be bound by, and to assume the terms and
conditions of, the Assigned Agreement pursuant to an assignment agreement in
form and substance satisfactory to the Obligor pursuant to Section 21.1 of the
Assigned Agreement, and the Obligor shall continue to perform its obligations
under the Assigned Agreement in favor of the assuming party as if such party
had been an original party to the Assigned Agreement; provided, that the
assuming party shall cure any  defaults,
whether monetary or otherwise, then existing under the Assigned Agreement in
such assuming party’s capacity as “Owner” under the Assigned Agreement (as
defined in such agreement) after giving effect to assignment of Assignor’s
rights and obligations to such assuming party; but provided, further,
that the liability of the Collateral Agent (or any entity acting on behalf of
the Collateral Agent or any of the other Secured Parties) shall not exceed all
of its right, title and interest in and to the Project.

1.5                                 No
Amendments.  The Obligor acknowledges
that under the terms of the Financing Arrangements, the Assignor is required to
obtain the consent of the Lenders for certain amendments to the Assigned
Agreement.

SECTION
2.                                NOTICES.  The first paragraph
of Section 21.7 of the Assigned Agreement is hereby incorporated in this
Consent, as if set forth herein in its entirety.  For purposes of Section 21.7 of the Assigned
Agreement, the initial address for notice to the Collateral Agent shall be as
follows:

[BANK]

[ADDRESS]

Attn: [NAME/TITLE]

Fax:  [FAX NUMBER]

 O-2
 

The
Obligor acknowledges and agrees that the delivery of the Collateral Agent’s
notice information in this Section 2 shall be deemed to satisfy the requirement
of the Owner in Section 21.7 of the Assigned Agreement to deliver such
information to the Obligor.

SECTION 3.                                MISCELLANEOUS.

THIS CONSENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK AND SHALL BE BINDING UPON THE
PARTIES HERETO AND THEIR PERMITTED SUCCESSORS AND ASSIGNS AND SHALL INURE TO
THE BENEFIT OF THE PARTIES HERETO AND THEIR RESPECTIVE SUCCESSORS AND
ASSIGNS.  THE PARTIES HERETO HEREBY AGREE
TO EXECUTE AND DELIVER ALL SUCH INSTRUMENTS AND TAKE ALL SUCH ACTION AS MAY BE
REASONABLY NECESSARY TO EFFECTUATE FULLY THE PURPOSES OF THIS CONSENT.

[THE NEXT PAGE IS THE
SIGNATURE PAGE]

 O-3
 

IN WITNESS WHEREOF, the parties hereto have caused
this Consent to be duly executed and delivered by their respective officers
thereunto duly authorized as of the date first above written.

FAGEN, INC.,

as Obligor

	
  By:

  	
   

  	
   

  	
   

  	
   

  
	
  Name:

  	
   

  	
   

  
	
  Title:

  	
   

  	
  [BANK NAME]

  
	
   

  	
   

  	
  not in its
  individual capacity, but solely as

  
	
  Address for
  Notices:

  	
   

  	
  Collateral Agent

  
	
   

  	
   

  	
  By: 

  	
   

  	
   

  
	
  Fagen, Inc.

  	
   

  	
  Name:

  
	
  501 W. Highway
  212

  	
   

  	
  Title:

  
	
  P.O. Box 159

  	
   

  	
   

  
	
  Granite Falls, MN
  56241

  	
   

  	
  Address for
  Notices:

  
	
  Attn: Aaron
  Fagen

  	
   

  	
   

  
	
  Fax: (320)
  564-3278

  	
   

  	
  [BANK]

  
	
   

  	
   

  	
  [ADDRESS]

  
	
  With a copy to:

  	
   

  	
  Attn:
  [NAME/TITLE]

  
	
   

  	
   

  	
  Fax: [FAX
  NUMBER]

  
	
  Fagen, Inc.

  	
   

  	
   

  
	
  501 W. Highway
  212

  	
   

  	
  Consented and
  Agreed to:

  
	
  P.O. Box 159

  	
   

  	
   

  
	
  Granite Falls,
  MN 56241

  	
   

  	
  ABE NORTHFIELD,
  LLC

  
	
  Attn: Bruce
  Langseth

  	
   

  	
  as Assignor

  
	
  Fax: (320)
  564-3278

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
  And a copy to:

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
  Fagen, Inc.

  	
   

  	
   

  
	
  501 W. Highway
  212

  	
   

  	
  ABE Northfield,
  LLC

  
	
  P.O. Box 159

  	
   

  	
  10201 Wayzata
  Blvd. Suite 250

  
	
  Granite Falls,
  MN 56241

  	
   

  	
  Minneapolis, MN
  55305

  
	
  Attn: Jennifer
  Johnson

  	
   

  	
  Attn: Revis L.
  Stephenson III

  
	
  Fax (320)
  564-3278

  	
   

  	
  Fax: (763)
  226-2725

  

 

 O-4Exhibit
4.1

FORM OF

AMENDED
AND RESTATED DECLARATION OF TRUST

AND

TRUST
AGREEMENT

OF

AIRSHARESTM EU CARBON ALLOWANCES FUND

Dated as of              , 2007

By and Among

XSHARES ADVISORS LLC,

WILMINGTON TRUST COMPANY

and

THE
SHAREHOLDERS

from time to time hereunder

 1

 

TABLE OF CONTENTS

	
  

  	
   

  	
  Page

  
	
   

  	
   

  
	
  ARTICLE I DEFINITIONS; THE TRUST

  	
  5

  
	
  SECTION 1.1

  	
  Definitions

  	
  5

  
	
  SECTION 1.2

  	
  Name

  	
  10

  
	
  SECTION 1.3

  	
  Delaware Trustee; Business Offices

  	
  10

  
	
  SECTION 1.4

  	
  Declaration of Trust

  	
  11

  
	
  SECTION 1.5

  	
  Purposes and Powers

  	
  11

  
	
  SECTION 1.6

  	
  Tax Treatment

  	
  11

  
	
  SECTION 1.7

  	
  General Liability of the Sponsor

  	
  12

  
	
  SECTION 1.8

  	
  Legal Title

  	
  12

  
	
  ARTICLE II THE TRUSTEE

  	
  12

  
	
  SECTION 2.1

  	
  Term; Resignation

  	
  12

  
	
  SECTION 2.2

  	
  Powers

  	
  13

  
	
  SECTION 2.3

  	
  Compensation and Expenses of the Trustee

  	
  13

  
	
  SECTION 2.4

  	
  Indemnification

  	
  13

  
	
  SECTION 2.5

  	
  Successor Trustee

  	
  14

  
	
  SECTION 2.6

  	
  Liability of Trustee

  	
  14

  
	
  SECTION 2.7

  	
  Reliance; Advice of Counsel

  	
  16

  
	
  SECTION 2.8

  	
  Payments to the Trustee

  	
  17

  
	
  ARTICLE III SHARES; CAPITAL CONTRIBUTIONS

  	
  17

  
	
  SECTION 3.1

  	
  General

  	
  17

  
	
  SECTION 3.2

  	
  Offer of Limited Shares

  	
  18

  
	
  SECTION 3.3

  	
  Procedures for Creation and Issuance of Creation
  Baskets

  	
  19

  
	
  SECTION 3.4

  	
  Book-Entry-Only System, Global Security

  	
  21

  
	
  SECTION 3.5

  	
  Escrow Agreement

  	
  24

  
	
  SECTION 3.6

  	
  Termination of the Trust

  	
  24

  
	
  SECTION 3.7

  	
  Assets

  	
  24

  
	
  SECTION 3.8

  	
  Liabilities

  	
  24

  
	
  SECTION 3.9

  	
  Distributions

  	
  24

  
	
  SECTION 3.10

  	
  Voting Rights

  	
  25

  
	
  SECTION 3.11

  	
  Equality

  	
  25

  
	
  ARTICLE IV THE SPONSOR

  	
  25

  
	
  SECTION 4.1

  	
  Management of the Trust

  	
  25

  
	
  SECTION 4.2

  	
  Authority of Sponsor

  	
  25

  
	
  SECTION 4.3

  	
  Obligations of the Sponsor

  	
  26

  
	
  SECTION 4.4

  	
  Liability of Covered Persons

  	
  28

  
	
  SECTION 4.5

  	
  Fiduciary Duty

  	
  28

  
	
  SECTION 4.6

  	
  Indemnification of the Sponsor

  	
  29

  
	
  SECTION 4.7

  	
  Expenses and Limitations Thereon

  	
  31

  
	
  SECTION 4.8

  	
  Compensation to the Sponsor

  	
  32

  
	
  SECTION 4.9

  	
  Other Business of Shareholders

  	
  32

  
	
  SECTION 4.10

  	
  Voluntary Withdrawal of the Sponsor

  	
  32

  
	
  SECTION 4.11

  	
  Authorization of Registration Statements

  	
  32

  

 

 

	
  SECTION 4.12

  	
  Litigation

  	
  33

  
	
  ARTICLE V TRANSFERS OF SHARES

  	
  33

  
	
  SECTION 5.1

  	
  General Prohibition

  	
  33

  
	
  SECTION 5.2

  	
  Transfer of Sponsor’s General Shares

  	
  33

  
	
  SECTION 5.3

  	
  Transfer of Limited Shares

  	
  34

  
	
  ARTICLE VI RESERVED

  	
  34

  
	
  SECTION 6.1

  	
  Reserved

  	
  34

  
	
  ARTICLE VII REDEMPTIONS

  	
  34

  
	
  SECTION 7.1

  	
  Redemption of Redemption Baskets

  	
  34

  
	
  SECTION 7.2

  	
  Other Redemption Procedures

  	
  36

  
	
  ARTICLE VIII THE LIMITED OWNERS

  	
  36

  
	
  SECTION 8.1

  	
  No Management or Control; Limited Liability;
  Exercise of Rights through DTC

  	
  36

  
	
  SECTION 8.2

  	
  Rights and Duties

  	
  37

  
	
  SECTION 8.3

  	
  Limitation on Liability

  	
  37

  
	
  ARTICLE IX BOOKS OF ACCOUNT AND REPORTS

  	
  38

  
	
  SECTION 9.1

  	
  Books of Account

  	
  38

  
	
  SECTION 9.2

  	
  Annual Reports and Monthly Statements

  	
  39

  
	
  SECTION 9.3

  	
  Calculation of Net Asset Value

  	
  39

  
	
  SECTION 9.4

  	
  Maintenance of Records

  	
  39

  
	
  SECTION 9.5

  	
  Certificate of Trust

  	
  39

  
	
  ARTICLE X FISCAL YEAR

  	
  39

  
	
  SECTION 10.1

  	
  Fiscal Year

  	
  39

  
	
  ARTICLE XI AMENDMENT OF TRUST AGREEMENT; MEETINGS

  	
  40

  
	
  SECTION 11.1

  	
  Amendments to the Trust Agreement

  	
  40

  
	
  SECTION 11.2

  	
  Meetings of the Trust

  	
  41

  
	
  SECTION 11.3

  	
  Action Without a Meeting

  	
  42

  
	
  ARTICLE XII TERM

  	
  42

  
	
  SECTION 12.1

  	
  Term

  	
  42

  
	
  ARTICLE XIII TERMINATION

  	
  42

  
	
  SECTION 13.1

  	
  Events Requiring Dissolution of the Trust

  	
  42

  
	
  SECTION 13.2

  	
  Distributions on Dissolution

  	
  44

  
	
  SECTION 13.3

  	
  Termination; Certificate of Cancellation

  	
  44

  
	
  ARTICLE XIV POWER OF ATTORNEY

  	
  45

  
	
  SECTION 14.1

  	
  Power of Attorney Executed Concurrently

  	
  45

  
	
  SECTION 14.2

  	
  Effect of Power of Attorney

  	
  45

  
	
  SECTION 14.3

  	
  Limitation on Power of Attorney

  	
  46

  
	
  ARTICLE XV MISCELLANEOUS

  	
  46

  
	
  SECTION 15.1

  	
  Governing Law

  	
  46

  
	
  SECTION 15.2

  	
  Provisions In Conflict With Law or Regulations

  	
  47

  
	
  SECTION 15.3

  	
  Construction

  	
  47

  
	
  SECTION 15.4

  	
  Notices

  	
  47

  
	
  SECTION 15.5

  	
  Counterparts

  	
  48

  
	
  SECTION 15.6

  	
  Binding Nature of Trust Agreement

  	
  48

  
	
  SECTION 15.7

  	
  No Legal Title to Trust Estate

  	
  48

  

 

 3
 

 

	
  SECTION 15.8

  	
  Creditors

  	
  48

  
	
  SECTION 15.9

  	
  Integration

  	
  48

  
	
  SECTION 15.10

  	
  Goodwill; Use of Name

  	
  48

  
	
   

  	
   

  	
   

  
	
  EXHIBIT A

  	
  Form of Certificate of Trust of AirSharesTM EU Carbon Allowances Fund

  	
   

  
	
  EXHIBIT B

  	
  Form of Global Certificate

  	
   

  
	
  EXHIBIT C

  	
  Form of Participant Agreement

  	
   

  

 

 4

 

AIRSHARESTM EU CARBON ALLOWANCES FUND

AMENDED AND RESTATED DECLARATION
OF TRUST

AND TRUST
AGREEMENT

This AMENDED AND RESTATED
DECLARATION OF TRUST AND TRUST AGREEMENT of AIRSHARESTM EU CARBON ALLOWANCES FUND is made and entered
into as of the          day of
        , 2007, by and among XSHARES
ADVISORS, LLC, a Delaware limited liability company, as sponsor, WILMINGTON
TRUST COMPANY, a Delaware banking corporation, as trustee, and the SHAREHOLDERS
from time to time hereunder.

WHEREAS, XShares
Advisors, LLC and Wilmington Trust Company have heretofore created a Delaware
statutory trust pursuant to the Delaware Trust Statute (as hereinafter defined)
by entering into a declaration of trust, dated as of August 13, 2007 (the “Original
Trust Agreement”), and by executing and filing with the Secretary of State of
the State of Delaware the Certificate of Trust; and

WHEREAS, the parties
hereto desire to amend and restate the Original Trust Agreement in its entirety
and to provide for the matters set forth herein;

NOW, THEREFORE, in
consideration of the agreements and obligations set forth herein and for other
good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, each party, hereby amends and restates the Original Trust
Agreement in its entirety and agrees as follows:

ARTICLE I

DEFINITIONS;
THE TRUST

SECTION
1.1         Definitions.
As used in this Trust Agreement, the following terms shall have the following
meanings unless the context otherwise requires:

“Administrator” means any
Person from time to time engaged to provide administrative services to the
Trust pursuant to authority delegated by the Sponsor.

“Affiliate” — An “Affiliate”
of a “Person” means (i) any Person directly or indirectly owning, controlling
or holding with power to vote 10% or more of the outstanding voting securities
of such Person, (ii) any Person 10% or more of whose outstanding voting
securities are directly or indirectly owned, controlled or held with power to
vote by such Person, (iii) any Person, directly or indirectly, controlling,
controlled by or under common control of such Person, (iv) any employee,
officer,

 

director, member, manager
or partner of such Person, or (v) if such Person is an employee, officer,
director, member, manager or partner, any Person for which such Person acts in
any such capacity.

“Basket” means a Creation
Basket or a Redemption Basket, as the context may require.

“Business Day” means a
day other than a day when banks in New York City or London are required or
permitted to be closed.

“Capital Contributions”
means the amounts of cash contributed and agreed to be contributed to the Trust
by any Participant or by the Sponsor, as applicable, in accordance with Article
III hereof.

“Carbon Futures Contract”
means any futures contract providing for the delivery or receipt at a future
date of a specified amount of EUAs at a specified price and delivery point, or
any other EUA-related futures contract approved for trading for U.S. persons.

“CE Act” means the
Commodity Exchange Act, as amended.

“Certificate of Trust”
means the Certificate of Trust of the Trust in the form attached hereto as
Exhibit A, filed with the Secretary of State of the State of Delaware pursuant
to Section 3810 of the Delaware Trust Statute.

“CFTC” means the United
States Commodity Futures Trading Commission.

“Code” means the United
States Internal Revenue Code of 1986, as amended.

“Commodity Trading
Advisor” means any Person from time to time who engages in commodity trading
and related activities for the benefit of the Trust pursuant to authority
delegated by the Sponsor.

“Continuous Offering
Period” means the period following the conclusion of the Initial Offering
Period, during which additional Limited Shares may be sold in Baskets pursuant
to this Trust Agreement.

“Corporate Trust Office”
means the principal office at which at any particular time the corporate trust
business of the Trustee is administered, which office at the date hereof is
located at Rodney Square North, 1100 North Market Street, Wilmington, Delaware
19890, Attention: Corporate Trust Administration.

“Covered Person” means
the Trustee, the Sponsor and their respective Affiliates.

“Creation Basket” means a
basket of 100,000 Limited Shares, or such greater or lesser number of Limited
Shares as the Sponsor may determine from time to time.

 6
 

 

“Creation Basket Capital
Contribution” means a Capital Contribution made by a Participant in connection
with a Purchase Order Subscription Agreement and the creation of a Creation
Basket in an amount equal to the product obtained by multiplying (i) the number
of Creation Baskets set forth in the relevant Purchase Order Subscription
Agreement by (ii) the Net Asset Value Per Basket as of the closing time of NYSE
Arca or the last to close of the exchanges on which the Fund’s futures
contracts are traded, whichever is later, on the Purchase Order Subscription
Date.

“Delaware Trust Statute”
means the Delaware Statutory Trust Act, Chapter 38 of Title 12 of the Delaware
Code, 12 Del. C. § 3801 et seq., as the same may be amended from time to time.

“Depository” means The
Depository Trust Company, New York, New York, or such other depository of
Limited Shares as may be selected by the Sponsor as specified herein.

“Depository Agreement”
means the Letter of Representations from the Sponsor to the Depository, dated
as of
                    ,
as the same may be amended or supplemented from time to time.

“Distributor” means any
Person from time to time engaged to provide distribution services or related
services to the Trust pursuant to authority delegated by the Sponsor.

“DTC” shall have the
meaning assigned to such term in Section 3.4(b).

“DTC Participants” shall
have the meaning assigned to such term in Section 3.4(c).

“ERISA” means the
Employee Retirement Income Security Act of 1974, as amended.

“EUA” means an allowance
issued under the EU Emissions Trading Scheme, representing the right to emit
one metric ton of carbon equivalent during the five-year period from 2008
through 2012.

“Event of Withdrawal”
shall have the meaning assigned to such term in Section 13.1(a).

“Exchange” means NYSE
Arca or, if the Limited Shares shall cease to be listed on the NYSE Arca and
are listed on one or more other exchanges, the exchange on which the Shares are
principally traded, as determined by the Sponsor.

“Fiscal Quarter” shall
mean each period ending on the last day of each March, June, September and
December of each Fiscal Year.

“Fiscal Year” shall have
the meaning set forth in Article X hereof.

 7
 

 

“General Shares” means
the Shares that represent the Sponsor’s Capital Contributions.

“Global Security” means
the global certificate or certificates issued to the Depository as provided in
the Depository Agreement, each of which shall be in substantially the form
attached hereto as Exhibit B.

 “Indirect Participants” shall have the meaning
assigned to such term in Section 3.4 (c).

“Initial Offering Period”
means the period commencing with the initial effective date of the Prospectus
and terminating no later than the [      (    th)]
day following such date unless extended for up to an additional ninety (90)
days at the sole discretion of the Sponsor.

“Internal Revenue Service”
or “IRS” means the U.S. Internal Revenue Service or any successor thereto.

“Limited Owner” means any
person or entity who owns Limited Shares.

“Limited Shares” means
Shares that represent a Limited Owner’s Capital Contributions.

“Liquidating Trustee”
shall have the meaning assigned thereto in Section 13.2.

“Minimum Subscription
Amount” shall have the meaning assigned thereto in Section 3.2(c).

“Net Asset Value” at any
time means the total assets of the Trust 
including, but not limited to, all cash and cash equivalents or other
debt securities less total expenses and liabilities of the Trust, each
determined on the basis of generally accepted accounting principles in the
United States, consistently applied under the accrual method of accounting.

“Net Asset Value Per
Basket” means the product obtained by multiplying the Net Asset Value Per Share
by the number of Limited Shares comprising a Basket at such time.

“Net Asset Value Per
Share” means the Net Asset Value divided by the number of Shares outstanding on
the date of calculation.

“NFA” means the National
Futures Association.

“Order Cut-Off Time”
means 10:00 a.m., New York time, on a Business Day.

“Organization and
Offering Expenses” shall have the meaning assigned thereto in Section
4.7(a)(ii).

 8
 

 

“Participant” means a
Person that is a DTC Participant and has entered into a Participant Agreement
which, at the relevant time, is in full force and effect.

“Participant Agreement”
means an agreement among the Distributor and a Participant, substantially in
the form of Exhibit C hereto, as it may be amended or supplemented from time to
time in accordance with its terms.

“Person” means any
natural person, partnership, limited liability company, statutory trust,
corporation, association, or other legal entity.

“Prospectus” means the
final prospectus and disclosure document of the Trust, constituting a part of a
Registration Statement, as filed with the SEC and declared effective thereby,
as the same may at any time and from time to time be amended or supplemented.

“Purchase Order
Subscription Agreement” shall have the meaning assigned thereto in Section
3.3(a)(i).

“Purchase Order
Subscription Date” shall have the meaning assigned thereto in Section
3.3(a)(i).

“Reconstituted Trust”
shall have the meaning assigned thereto in Section 13.1(a).

“Redemption Basket” means
the minimum number of Limited Shares that may be redeemed pursuant to Section
7.1, which shall be the number of Limited Shares constituting a Creation Basket
on the relevant Redemption Order Date.

“Redemption Distribution”
means the cash to be delivered in satisfaction of a redemption of a Redemption
Basket as specified in Section 7.1(c).

“Redemption Order” shall
have the meaning assigned thereto in Section 7.1(a).

“Redemption Order Date”
shall have the meaning assigned thereto in Section 7.1(b).

“Redemption Settlement
Time” shall have the meaning assigned thereto in Section 7.1(d).

“Registration Statement”
means a registration statement filed with the SEC on Form S-1, as may be
amended or supplemented, pursuant to which the Trust registered the Limited
Shares.

 “SEC” means the Securities and Exchange
Commission.

“Shareholders” means the
Sponsor and all Limited Owners, as holders of Shares, where no distinction is
required by the context in which the term is used.

 9
 

 

“Shares” means the units
of fractional undivided beneficial interest in the profits, losses,
distributions, capital and assets of, and ownership of, the Trust, such units
collectively the Limited Shares and the General Shares, and individually as the
context may require.

“Sponsor” means XShares
Advisors LLC, any successor thereto, or any substitute therefor as provided
herein.

“Subscribing Participant”
means a Participant who has submitted a Purchase Order Subscription Agreement
to create one or more Creation Baskets that has not yet been filled or accepted
by the Trust.

“Suspended Redemption
Order” shall have the meaning assigned thereto in Section 7.1(d).

“Transaction Fee” shall
have the meaning assigned thereto in Section 3.3(d).

“Treasury Regulations”
means regulations, including proposed or temporary regulations, promulgated
under the Code. References herein to specific provisions of proposed or
temporary regulations shall include analogous provisions of final Treasury
Regulations or other successor Treasury Regulations.

“Trust” means AirSharesTM EU Carbon Allowances Fund, the Delaware
statutory trust formed pursuant to the Certificate of Trust, the business and
affairs of which are governed by this Trust Agreement.

“Trust Agreement” means
this Amended and Restated Declaration of Trust and Trust Agreement as the same
may at any time or from time to time be amended.

“Trustee” means Wilmington
Trust Company or any successor thereto as provided herein, acting not in its
individual capacity but solely as trustee of the Trust.

“Trust Estate” means all
property and cash held by the Trust, and all proceeds therefrom.

SECTION 1.2          Name.

(a)           The
name of the Trust shall continue to be “AirSharesTM EU Carbon Allowances Fund”
in which name the Trustee and the Sponsor may engage in the business of the
Trust, make and execute contracts and other instruments on behalf of the Trust
and sue and be sued on behalf of the Trust.

SECTION 1.3          Delaware Trustee; Business
Offices.

(a)           The
sole Trustee of the Trust is Wilmington Trust Company, which is located at the
Corporate Trust Office or at such other address in the State of Delaware as the
Trustee may designate in writing to the Sponsor.  The Trustee

 10
 

 

shall receive service of process on the Trust in the State of Delaware
at the foregoing address.  In the event
Wilmington Trust Company resigns or is removed as the Trustee, the Trustee of
the Trust in the State of Delaware shall be the successor Trustee.

(b)           The
principal office of the Trust, and such additional offices as the Sponsor may
establish, shall be located at such place or places inside or outside the State
of Delaware as the Sponsor may designate from time to time in writing to the
Trustee and the Shareholders.  Initially,
the principal office of the Trust shall be at 420 Lexington Ave., New York, New
York 10170.

SECTION
1.4        Declaration
of Trust.  The Trustee hereby
acknowledges that the Trust has received the sum of $1,000 in bank accounts in
the name of the Trust controlled by the Sponsor from the Sponsor as grantor of
the Trust, and hereby declares that it shall hold such sum in trust, upon and
subject to the conditions set forth herein for the use and benefit of the
Shareholders.  It is the intention of the
parties hereto that the Trust shall continue to be a statutory trust under the
Delaware Trust Statute and that this Trust Agreement shall constitute the governing
instrument of the Trust.  The parties
hereto expressly agree that this Trust Agreement completely amends and restates
the Original Trust Agreement in its entirety. 
It is not the intention of the parties hereto to create a general
partnership, limited partnership, limited liability company, joint stock
association, corporation, bailment or any form of legal relationship other than
a Delaware statutory trust.  Nothing in
this Trust Agreement shall be construed to make the Shareholders partners or
members of a joint stock association. 
Effective as of the date hereof, the Trustee and the Sponsor shall have
all of the rights, powers and duties set forth herein and, to the extent not
inconsistent with this Trust Agreement, in the Delaware Trust Statute with
respect to accomplishing the purposes of the Trust.  The Trustee has filed the certificate of
trust required by Section 3810 of the Delaware Trust Statute in connection with
the formation of the Trust under the Delaware Trust Statute.

SECTION
1.5        Purposes and
Powers.  The purpose and
powers of the Trust shall be: (a) directly or indirectly to trade, buy, sell,
spread or otherwise acquire, hold or dispose of Carbon Futures Contracts, with
a view to achieving investment results which correspond generally, before
payment of expenses and liabilities, to the performance of the nearest December
expiration exchange traded futures contracts for EUAs;  (b) to enter into any lawful transaction and
engage in any lawful activities in furtherance of or incidental to the
foregoing purposes; and (c) as determined from time to time by the Sponsor, to
engage in any other lawful business or activity for which a statutory trust may
be organized under the Delaware Trust Statute. 
The Trust shall have all of the powers specified in this
Section 1.5 hereof, including, without limitation, all of the powers which
may be exercised by a Trustee or Sponsor on behalf of the Trust under this
Trust Agreement.

SECTION
1.6        Tax
Treatment.  The Sponsor shall
make the necessary election to cause the Trust to be treated as a corporation
for Federal tax purposes.   The Sponsor
shall prepare or cause to be prepared and filed the Trust’s tax

 11
 

 

returns as an association
taxed as a corporation for Federal, state and local tax purposes.  Subject to Section 4.6, the Trust hereby
indemnifies, to the full extent permitted by law, the Sponsor from and against
any damages or losses (including attorneys’ fees) arising out of or incurred in
connection with any action taken or omitted to be taken by it in carrying out
its responsibilities under this Section 1.6, provided such action taken or
omitted to be taken does not constitute fraud, negligence or misconduct.

SECTION
1.7         General
Liability of the Sponsor.

(a)         The Sponsor shall be liable for the
acts, omissions, obligations and expenses of the Trust, to the extent not paid
out of the assets of the Trust, to the same extent the Sponsor would be so
liable if the Trust were a partnership under the Delaware Revised Uniform
Limited Partnership Act and the Sponsor were a general partner of such partnership.  The foregoing provision shall not, however,
limit the ability of the Sponsor to limit its liability by contract.  The obligations of the Sponsor under this
Section 1.7 shall be evidenced by its ownership of the General Shares which,
solely for purposes of the Delaware Trust Statute, will be deemed to be a
separate class of Shares.

(b)         Subject to Sections 8.1 and 8.3 hereof,
no Shareholder, other than the Sponsor, to the extent set forth above, shall
have any personal liability for any liability or obligation of the Trust.

SECTION
1.8         Legal Title.  Legal title to all of the Trust Estate shall
be vested in the Trust as a separate legal entity; provided,
however, that where applicable law in any jurisdiction requires any
part of the Trust Estate to be vested otherwise, the Sponsor may cause legal
title to the Trust Estate or any portion thereof to be held by or in the name
of the Sponsor or any other Person (other than a Shareholder) as nominee.

ARTICLE
II

THE
TRUSTEE

SECTION
2.1         Term;
Resignation.

(a)         Wilmington Trust Company has been
appointed and hereby agrees to serve as the Trustee of the Trust.  The Trust shall have only one trustee unless
otherwise determined by the Sponsor.  The
Trustee shall serve until such time as the Sponsor removes the Trustee or the
Trustee resigns and a successor Trustee is appointed by the Sponsor in
accordance with the terms of Section 2.5 hereof.

 12
 

 

(b)         The Trustee may resign at any time upon
the giving of at least 60 days’ advance written notice to the Trust; provided,
that such resignation shall not become effective unless and until a successor
Trustee shall have been appointed by the Sponsor in accordance with Section 2.5
hereof.  If the Sponsor does not appoint
a successor trustee within such sixty (60) day period, the Trustee may apply,
at the expense of the Trust, to the Court of Chancery of the State of Delaware
for the appointment of a successor Trustee.

SECTION
2.2           Powers.
Except to the extent expressly set forth in Section 1.3(a) and this Article II,
the duty and authority to manage the business and affairs of the Trust is
hereby vested in the Sponsor, which duty and authority the Sponsor may delegate
as provided herein, all pursuant to Section 3806(b)(7) of the Delaware Trust
Statute.  Notwithstanding any other
provision of this Trust Agreement, the Trustee shall not be entitled to exercise
any of the powers, nor shall the Trustee have any of the duties and
responsibilities, of the Sponsor or the Liquidating Trustee described in this
Trust Agreement.  The Trustee shall be a
Trustee for the sole and limited purpose of fulfilling the requirements of  Section 3807 of the Delaware Trust
Statute.  The Trustee shall have only the
rights, obligations and liabilities specifically provided for herein and shall
have no implied rights, duties, obligations and liabilities with respect to the
business and affairs of the Trust.  The
Trustee shall have the power and authority to execute and file certificates as
required by the Delaware Trust Statute and to accept service of process on the
Trust in the State of Delaware.  The
Trustee shall provide prompt notice to the Sponsor of its performance of any of
the foregoing.  The Sponsor shall
reasonably keep the Trustee informed of any actions taken by the Sponsor with
respect to the Trust that would reasonably be expected to affect the rights,
obligations or liabilities of the Trustee hereunder or under the Delaware Trust
Statute.

SECTION
2.3           Compensation
and Expenses of the Trustee. The Trustee shall be entitled to
receive from the Sponsor or an Affiliate of the Sponsor (including the Trust)
reasonable compensation for its services hereunder as set forth in a separate
fee agreement and shall be entitled to be reimbursed by the Sponsor or an
Affiliate of the Sponsor (including the Trust) for reasonable out-of-pocket
expenses incurred by it in the performance of its duties hereunder, including
without limitation, the reasonable compensation, out-of-pocket expenses and
disbursements of counsel and such other agents as the Trustee may employ in
connection with the exercise and performance of its rights and duties
hereunder.

SECTION
2.4           Indemnification.
The Sponsor agrees (and any additional Sponsor admitted pursuant to Section
4.2(j) will be deemed to agree), whether or not any of the transactions
contemplated hereby shall be consummated, to assume liability for, and does
hereby indemnify, protect, save and keep harmless Wilmington Trust Company (in
its capacity as Trustee and individually) and its successors, assigns, legal
representatives, officers, directors, shareholders, employees, agents and
servants (the “Indemnified Parties”) from and against any and all liabilities,
obligations, losses, damages, penalties, taxes (excluding any taxes payable by
the Trustee on or measured by any compensation received by the Trustee for its
services hereunder or any indemnity

 13

 

payments received by the Trustee pursuant to this
Section 2.4), claims, actions, suits, costs, expenses or disbursements
(including legal fees and expenses) of any kind and nature whatsoever
(collectively, “Expenses”), which may be imposed on, incurred by or asserted
against the Indemnified Parties in any way relating to or arising out of the
formation, operation or termination of the Trust, the execution, delivery and
performance of any other agreements to which the Trust is a party or the action
or inaction of the Trustee hereunder or thereunder, except for Expenses
resulting from the gross negligence or willful misconduct of the Indemnified
Parties.  The indemnities contained in
this Section 2.4 shall survive the termination of this Trust Agreement or the
removal or resignation of the Trustee. 
The Indemnified Parties shall not be entitled to indemnification from
any Trust Estate.

SECTION
2.5             Successor
Trustee. Upon the resignation or removal of the Trustee, the Sponsor
shall appoint a successor Trustee by delivering a written instrument to the
outgoing Trustee.  Any successor Trustee
must satisfy the requirements of Section 3807 of the Delaware Trust
Statute.  Any resignation or removal of
the Trustee and appointment of a successor Trustee shall not become effective
until a written acceptance of appointment is delivered by the successor Trustee
to the outgoing Trustee and the Sponsor and any fees and expenses due to the
outgoing Trustee are paid.  Following
compliance with the preceding sentence, the successor Trustee shall become
fully vested with all of the rights, powers, duties and obligations of the
outgoing Trustee under this Trust Agreement, with like effect as if originally
named as Trustee, and the outgoing Trustee shall be discharged of its duties
and obligations under this Trust Agreement.

SECTION
2.6             Liability of
Trustee. Except as otherwise provided in this Article II, in
accepting the trust continued hereby, Wilmington Trust Company acts solely as
Trustee hereunder and not in its individual capacity, and all Persons having
any claim against Wilmington Trust Company by reason of the transactions
contemplated by this Trust Agreement and any other agreement to which the Trust
is a party shall look only to the Trust Estate for payment or satisfaction
thereof; provided, however, that in no event is the foregoing
intended to affect or limit the liability of the Sponsor as set forth in
Section 1.7 hereof.  The Trustee shall
not be liable or accountable hereunder to the Trust or to any other Person or
under any other agreement to which the Trust is a party, except for the Trustee’s
own gross negligence or willful misconduct. 
In particular, but not by way of limitation:

(a)           The Trustee shall
have no liability or responsibility for the validity or sufficiency of this
Trust Agreement, any agreement contemplated hereunder, or for the form,
character, genuineness, sufficiency, value or validity of any Trust Estate or
the Shares;

(b)           The Trustee shall
not be liable for any actions taken or omitted to be taken by it in accordance
with the instructions of the Sponsor or the Liquidating Trustee;

 14
 

 

(c)                                 The
Trustee shall not have any liability for the acts or omissions of the Sponsor
or its delegatees, the Liquidating Trustee, or any other Person;

(d)                                The
Trustee shall not have any duty or obligation to supervise the performance of
any obligations of the Sponsor or its delegatees or any Participant;

(e)                                 No
provision of this Trust Agreement shall require the Trustee to act or expend or
risk its own funds or otherwise incur any financial liability in the
performance of any of its rights or powers hereunder if the Trustee shall have
reasonable grounds for believing that such action, repayment of such funds or
adequate indemnity against such risk or liability is not reasonably assured or
provided to it;

(f)                                   Under
no circumstances shall the Trustee be liable for indebtedness evidenced by or
other obligations of the Trust arising under this Trust Agreement or any other
agreements to which the Trust is a party;

(g)                                The
Trustee shall be under no obligation to exercise any of the rights or powers
vested in it by this Trust Agreement, or to appear in, institute, conduct or
defend any action or litigation under this Trust Agreement or any other
agreements to which the Trust is a party, at the request, order or direction of
the Sponsor or the Liquidating Trustee unless the Sponsor or the Liquidating
Trustee has offered to Wilmington Trust Company (in its capacity as Trustee and
individually) security or indemnity satisfactory to it against the costs,
expenses and liabilities that may be incurred by Wilmington Trust Company
(including, without limitation, the reasonable fees and expenses of its
counsel) therein or thereby;

(i)            Notwithstanding
anything contained herein to the contrary, the Trustee shall not be required to
take any action in any jurisdiction other than in the State of Delaware if the
taking of such action will (x) require the consent or approval or
authorization or order of or the giving of notice to, or the registration with
or taking of any action in respect of, any state or other governmental
authority or agency of any jurisdiction other than the State of Delaware, (y)
result in any fee, tax or other governmental charge under the laws of any
jurisdiction or any political subdivision thereof in existence as of the date
hereof other than the State of Delaware becoming payable by the Trustee or (z)
subject the Trustee to personal jurisdiction, other than in the State of
Delaware, for causes of action arising from personal acts unrelated to the
consummation of the transactions by the Trustee, as the case may be,
contemplated hereby; and

(ii)           To the extent that,
at law (common or statutory) or in equity, the Trustee has duties (including
fiduciary duties) and

 15
 

 

liabilities relating thereto to the Trust, the Shareholders or to any
other Person, the Trustee acting under this Trust Agreement shall not be liable
to the Trust, the Shareholders or to any other Person for its good faith
reliance on the provisions of this Trust Agreement.  The provisions of this Trust Agreement, to
the extent that they restrict the duties and liabilities of the Trustee
otherwise existing at law (common or statutory) or in equity, are agreed by the
parties hereto to replace such other duties and liabilities of the Trustee.

(h)           The Trustee shall
incur no liability if, by reason of any provision of any present or future law
or regulation thereunder, or by any force majeure event, including but not
limited to natural disaster, war or other circumstances beyond its reasonable
control, the Trustee shall be prevented or forbidden from doing or performing
any act or thing which the terms of this Trust Agreement provide shall or may
be done or performed, or by reason of any exercise of, or failure to exercise,
any discretion provided for in this Trust Agreement.

(i)            The Trustee shall
not be required to take any action hereunder or otherwise if the Trustee shall
have reasonably determined, or shall have been advised by counsel, that such
action is likely to result in liability on the part of the Trustee or is
contrary to the terms hereof or is otherwise contrary to law.

(j)            Whenever the
Trustee is unable to decide between alternative courses of action permitted or
required by the terms of this Trust Agreement, or is unsure as to the
application, intent, interpretation or meaning of any provision of this Trust
Agreement, the Trustee shall promptly give notice (in such form as shall be
appropriate under the circumstances) to the Sponsor requesting instruction as
to the course of action to be adopted, and, to the extent the Trustee acts in
good faith in accordance with any such instruction received, the Trustee shall
not be liable on account of such action to any Person.  If the Trustee shall not have received
appropriate instructions within ten calendar days of sending such notice (or
within such shorter period of time as reasonably may be specified in such
notice or may be necessary under the circumstances) it may, but shall be under
no duty to, take or refrain from taking such action which is consistent, in its
view, with this Trust Agreement, and the Trustee shall have no liability to any
Person for any such action or inaction.

SECTION
2.7             Reliance;
Advice of Counsel.

(a)           In the absence of
bad faith, the Trustee may conclusively rely upon certificates or opinions
furnished to the Trustee and conforming to the requirements of this Trust
Agreement in determining the truth of the statements and the correctness of the
opinions contained therein, and shall incur no liability to anyone in acting on
any signature, instrument, notice, resolutions, request, consent, order,
certificate, report, opinion, bond or other document or paper

 16
 

 

believed by it to be genuine and believed by it to be signed by the
proper party or parties and need not investigate any fact or matter pertaining
to or in any such document; provided, however, that the Trustee shall have
examined any certificates or opinions so as to reasonably determine compliance
of the same with the requirements of this Trust Agreement.  The Trustee may accept a certified copy of a
resolution of the board of directors or other governing body of any corporate
party as conclusive evidence that such resolution has been duly adopted by such
body and that the same is in full force and effect.  As to any fact or matter the method of the
determination of which is not specifically prescribed herein, the Trustee may
for all purposes hereof rely on a certificate, signed by the president or any
vice president or by the treasurer or other authorized officers of the relevant
party, as to such fact or matter, and such certificate shall constitute full
protection to the Trustee for any action taken or omitted to be taken by it in
good faith in reliance thereon.

(b)           In the exercise or
administration of the Trust hereunder and in the performance of its duties and
obligations under this Trust Agreement, the Trustee, at the expense of the
Sponsor or an Affiliate of the Sponsor (including the Trust) (i) may act
directly or through its agents, attorneys, custodians or nominees pursuant to
agreements entered into with any of them, and the Trustee shall not be liable
for the conduct or misconduct of such agents, attorneys, custodians or nominees
if such agents, attorneys, custodians or nominees shall have been selected by
the Trustee with reasonable care and (ii) may consult with counsel, accountants
and other skilled professionals to be selected with reasonable care by it.  The Trustee shall not be liable for anything
done, suffered or omitted in good faith by it in accordance with the opinion or
advice of any such counsel, accountant or other such Persons.

SECTION 2.8         Payments to the Trustee. Any amounts paid to the Trustee
pursuant to this Article shall be deemed not to be a part of the Trust Estate
immediately after such payment.

ARTICLE III

SHARES; CAPITAL CONTRIBUTIONS

SECTION 3.1         General.  The Sponsor shall have the power and
authority, without Limited Owner approval, to issue Shares from time to time as
it deems necessary or desirable.  The
number of Shares authorized shall be unlimited, and the Shares so authorized
may be represented in part by fractional Shares, calculated to four decimal
places.  From time to time, the Sponsor
may divide or combine the Shares into a greater or lesser number without thereby
changing the proportionate beneficial interests.  The Sponsor may issue Shares for such
consideration and on such terms as it may determine (or for no consideration if
pursuant to a Share dividend or split-up), all without action or approval of
the Limited Owners.  All Shares when so
issued on the terms determined by the Sponsor shall be fully paid and
non-assessable.  The Shares initially

 17
 

 

shall be divided into two classes: General Shares and
Limited Shares.  Every Shareholder, by
virtue of having purchased or otherwise acquired a Share, shall be deemed to
have expressly consented and agreed to be bound by the terms of this Trust
Agreement.

 

SECTION 3.2             Offer of Limited Shares.

(a)           Initial Offering
Period.  During the Initial Offering
Period, the Trust shall offer Limited Shares to Participants in Creation
Baskets pursuant to SEC Rule 415, at an offering price of $25.00  per Limited Share ($2.5 million per
Creation Basket), up to a maximum of [TBD] Limited Shares ([$     ]).  The offering shall be made on the terms and
conditions set forth in the Prospectus. 
The Sponsor shall make such arrangements for the sale of the Limited
Shares as it deems appropriate.

(b)           Effect of the
Sale of at least [TBD] Limited Shares. In the event that at least [TBD]
Limited Shares ([TBD] Creation Baskets) are sold during the Initial Offering
Period, the Sponsor will admit all accepted Subscribing Participants pursuant
to the Prospectus into the Trust as Limited Owners, by causing such Limited
Owners to execute this Trust Agreement, pursuant to the Power of Attorney set
forth in the Purchase Order Subscription Agreement, and otherwise in accordance
with Sections 3.3 and 3.4 of this Trust Agreement and with the Participant
Agreements.

(c)           Effect of the
Sale of Less than [TBD]  Limited
Shares. In the event that at least [TBD]  Limited
Shares ([TBD] Creation Baskets) (hereinafter referred to as the Minimum
Subscription Amount) are not sold during the Initial Offering Period, all
proceeds of the sale of Limited Shares, together with any interest earned
thereon, will be returned to the Subscribing Participants on a pro rata basis (taking into account
the amount and time of deposit), as promptly as practicable but in no event
more than seven days after the conclusion of the Initial Offering Period for
the Shares.

(d)           Offer of Limited
Shares After Initial Offering Period. In the event that the Minimum
Subscription Amount or more of the Limited Shares are sold during the Initial
Offering Period for the Shares, the Trust may continue to offer Limited Shares
to Participants in Creation Baskets and admit additional Limited Owners and/or
accept additional contributions from existing Limited Owners, in accordance
with Sections 3.3 and 3.4 of this Trust Agreement and the Participant
Agreements; provided that all such offers and sales of Shares are in compliance
with all applicable securities and other laws.

 18
 

 

SECTION 3.3             Procedures for Creation and Issuance of Creation
Baskets.

(a)           General. The
following procedures, as supplemented by the more detailed procedures specified
in the attachment to the Participant Agreement, which may be amended from time
to time in accordance with the provisions of the Participant Agreement (and any
such amendment will not constitute an amendment of this Trust Agreement), will
govern the Trust with respect to the creation and issuance of additional
Creation Baskets.  Subject to the
limitations upon and requirements for issuance of Creation Baskets stated
herein and in such procedures, the number of Creation Baskets which may be
issued by the Trust is unlimited.

(i)            On any Business
Day, a Participant may submit to the Sponsor or its designee a purchase order
and subscription agreement to subscribe for and agree to purchase one or more
Creation Baskets (such request by a Participant, a “Purchase Order Subscription
Agreement”) in the manner provided in the Participant Agreement. Purchase Order
Subscription Agreements must be received by the Order Cut-Off Time on a
Business Day (the “Purchase Order Subscription Date”).  The Sponsor or its designee will process
Purchase Order Subscription Agreements only from Participants with respect to
which the Participant Agreement is in full force and effect.  The Sponsor or its designee will maintain and
make available at the Trust’s principal offices during normal business hours a
current list of the Participants with respect to which the Participant
Agreement is in full force and effect. 
The Sponsor or its designee will deliver (or cause to be delivered) a
copy of the Prospectus to each Participant prior to its execution and delivery
of the Participant Agreement and prior to accepting any Purchase Order
Subscription Agreement.

(ii)           Any Purchase Order
Subscription Agreement is subject to rejection by the Sponsor or its designee
pursuant to Section 3.3(c).

(iii)          After accepting a
Participant’s Purchase Order Subscription Agreement, the Sponsor or its
designee will issue and deliver Creation Baskets to fill a Participant’s
Purchase Order Subscription Agreement as of noon New York time on the Business
Day immediately following the Purchase Order Subscription Date, but only if by
such time the Sponsor or its designee has received (A) for its own account, the
Transaction Fee, and (B) for the account of the Trust the Creation Basket
Capital Contribution due from the Participant submitting the Purchase Order
Subscription Agreement.

(b)           Deposit with the
Depository.  Upon issuing a Creation
Basket pursuant to a Purchase Order Subscription Agreement, the Sponsor will
cause the Trust to deposit the Creation Basket with the Depository in
accordance with the

 19
 

 

Depository’s customary procedures, for credit to the account of the
Participant that submitted the Purchase Order Subscription Agreement.

(c)           Rejection.  The Sponsor or its designee shall have the
absolute right, but shall have no obligation, to reject any Purchase Order
Subscription Agreement or Capital Contribution: (i) determined by the Sponsor
not to be in proper form; (ii) the acceptance or receipt of which would, in the
opinion of counsel to the Sponsor, be unlawful; or (iii) if circumstances
outside the control of the Sponsor make it for all practical purposes not
feasible to process creations of Creation Baskets.  The Sponsor shall not be liable to any person
by reason of the rejection of any Purchase Order Subscription Agreement or
Creation Basket Capital Contribution.

(d)           Transaction Fee.  A non-refundable transaction fee will be
payable by a Participant to the Sponsor for its own account in connection with
each Purchase Order Subscription Agreement pursuant to this Section 3.3
and in connection with each Redemption Order of such Participant pursuant to
Section 7.1 (each a “Transaction Fee”). 
The Transaction Fee charged in connection with each such creation and
redemption shall be initially [$    ], but may be changed
as provided below.  Even though a single
Purchase Order Subscription Agreement or Redemption Order may relate to
multiple Creation Baskets, only a single Transaction Fee will be due for each
Purchase Order or Redemption Order.  The
Transaction Fee may subsequently be waived, modified, reduced, increased or
otherwise changed by the Sponsor, but will not in any event exceed  [    %] of the Net
Asset Value Per Basket at the time of creation of a Creation Basket or
redemption of a Redemption Basket, as the case may be.  The Sponsor shall notify the Depository of
any agreement to change the Transaction Fee and shall not implement any
increase for redemptions of outstanding Shares until [   ] days
after the date of that notice.

(e)           Global
Certificate Only. Certificates for Creation Baskets will not be issued,
other than the Global Security issued to the Depository.  So long as the Depository Agreement is in
effect, Creation Baskets will be issued and redeemed and Limited Shares will be
transferable solely through the book-entry systems of the Depository and the
DTC Participants and their Indirect Participants as more fully described in
Section 3.4.  The Depository may
determine to discontinue providing its service with respect to Creation Baskets
and Limited Shares by giving notice to the Sponsor pursuant to and in
conformity with the provisions of the Depository Agreement and discharging its
responsibilities with respect thereto under applicable law.  Under such circumstances, the Sponsor shall
take action either to find a replacement for the Depository to perform its
functions at a comparable cost and on terms acceptable to the Sponsor or, if
such a replacement is unavailable, to terminate the Trust.

 20
 

 

SECTION 3.4             Book-Entry-Only System, Global Security.

(a)           Global Security.
The Trust and the Sponsor will enter into the Depository Agreement pursuant to
which the Depository will act as securities depository for Limited Shares.  Limited Shares will be represented by the
Global Security (which may consist of one or more certificates as required by
the Depository), which will be registered, as the Depository shall direct, in
the name of Cede & Co., as nominee for the Depository and deposited with,
or on behalf of, the Depository.  No
other certificates evidencing Limited Shares will be issued.  The Global Security shall be in the form
attached hereto as Exhibit B and shall represent such Limited Shares as shall
be specified therein, and may provide that it shall represent the aggregate
amount of outstanding Limited Shares from time to time endorsed thereon and
that the aggregate amount of outstanding Limited Shares represented thereby may
from time to time be increased or decreased to reflect creations or redemptions
of Baskets.  Any endorsement of a Global
Security to reflect the amount, or any increase or decrease in the amount, of
outstanding Limited Shares represented thereby shall be made in such manner and
upon instructions given by the Sponsor on behalf of the Trust as specified in
the Depository Agreement.

(b)           Legend.  Any Global Security issued to The Depository
Trust Company or its nominee shall bear a legend substantially to the following
effect: “Unless this certificate is presented by an authorized representative
of The Depository Trust Company, a New York corporation (“DTC”), to the Trust
or its agent for registration of transfer, exchange, or payment, and any
certificate issued is registered in the name of Cede & Co. or in such other
name as is requested by an authorized representative of DTC (and any payment is
made to Cede & Co. or to such other entity as is required by an authorized
representative of DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner
hereof, Cede & Co., has an interest herein.”

(c)           The Depository.  The Depository has advised the Trust and the
Sponsor as follows: The Depository is a limited-purpose trust company organized
under the laws of the State of New York, a member of the U.S. Federal Reserve
System, a “clearing corporation” within the meaning of the New York Uniform
Commercial Code, and a “clearing agency” registered pursuant to the provisions
of Section 17A of the Securities Exchange Act of 1934, as amended.  The Depository was created to hold securities
of its participants (the “DTC Participants”) and to facilitate the clearance
and settlement of securities transactions among the DTC Participants in such
securities through electronic book-entry changes in accounts of the DTC Participants,
thereby eliminating the need for physical movement of securities
certificates.  DTC Participants include
securities brokers and dealers, banks, trust companies, clearing corporations,
and certain other organizations, some of whom (and/or their representatives)
own the Depository.  Access to the
Depository’s system is also available to others such as banks, brokers, dealers
and trust companies that clear through or maintain a

 21
 

 

custodial relationship with a DTC Participant, either directly or indirectly
(“Indirect Participants”).

(d)           Beneficial Owners.  As provided in the Depository Agreement, upon
the settlement date of any creation, transfer or redemption of Limited Shares,
the Depository will credit or debit, on its book-entry registration and transfer
system, the number of Limited Shares so created, transferred or redeemed to the
accounts of the appropriate DTC Participants. 
The accounts to be credited and charged shall be designated by the
Sponsor on behalf of the Trust and each Participant, in the case of a creation
or redemption of Baskets.  Ownership of
beneficial interest in Limited Shares will be limited to DTC Participants,
Indirect Participants and persons holding interests through DTC Participants
and Indirect Participants.  Owners of beneficial
interests in Limited Shares will be shown on, and the transfer of beneficial
ownership by Limited Owners will be effected only through, in the case of DTC
Participants, records maintained by the Depository and, in the case of Indirect
Participants and Limited Owners holding through a DTC Participant or an
Indirect Participant, through those records or the records of the relevant DTC
Participants.  Limited Owners are
expected to receive, from or through the broker or bank that maintains the
account through which the Limited Owner has purchased Limited Shares, a written
confirmation relating to their purchase of Limited Shares.

(e)           Reliance on
Procedures. So long as Cede & Co., as nominee of the Depository, is the
registered owner of Limited Shares, references herein to the registered or
record owners of Limited Shares shall mean Cede & Co. and shall not mean
the Limited Owners.  Limited Owners will
not be entitled to have Limited Shares registered in their names, will not
receive or be entitled to receive physical delivery of certificates in
definitive form and will not be considered the record or registered holder of
Limited Shares under this Trust Agreement. 
Accordingly, to exercise any rights of a holder of Limited Shares under
the Trust Agreement, a Limited Owner must rely on the procedures of the
Depository and, if such Limited Owner is not a DTC Participant, on the
procedures of each DTC Participant or Indirect Participant through which such
Limited Owner holds its interests.  The
Trust and the Sponsor understand that under existing industry practice, if the
Trust requests any action of a Limited Owner, or a Limited Owner desires to
take any action that the Depository, as the record owner of all outstanding
Limited Shares, is entitled to take, in the case of a Trust request, the
Depository will notify the DTC Participants regarding such request, such DTC
Participants will in turn notify each Indirect Participant holding Limited
Shares through it, with each successive Indirect Participant continuing to
notify each person holding Limited Shares through it until the request has
reached the Limited Owner, and in the case of a request or authorization to act
being sought or given by a Limited Owner, such request or authorization is
given by the Limited Owner and relayed back to the Trust through each Indirect
Participant and DTC

 22
 

 

Participant through which the Limited Owner’s interest in the Limited
Shares is held.

(f)            Communication
between the Trust and the Limited Owners. As described above, the Trust
will recognize the Depository or its nominee as the owner of all Limited Shares
for all purposes except as expressly set forth in this Trust Agreement.  Conveyance of all notices, statements and
other communications to Limited Owners will be effected as follows. Pursuant to
the Depository Agreement, the Depository is required to make available to the
Trust upon request and for a fee to be charged to the Trust a listing of the
Limited Share holdings of each DTC Participant. 
The Trust shall inquire of each such DTC Participant as to the number of
Limited Owners, directly or indirectly, through such DTC Participant.  The Trust shall provide each such DTC
Participant with sufficient copies of such notice, statement or other
communication, in such form, number and at such place as such DTC Participant
may reasonably request, in order that such notice, statement or communication
may be transmitted by such DTC Participant, directly or indirectly, to such
Limited Owners.  In addition, the Trust
shall pay to each such DTC Participant an amount as reimbursement for the
expenses attendant to such transmittal, all subject to applicable statutory and
regulatory requirements.

(g)           Distributions.
While the Sponsor does not currently intend to cause the Trust to make distributions,
any distributions on Limited Shares pursuant to Section 3.9 would be made to
the Depository or its nominee, Cede & Co., as the registered owner of all
Limited Shares.  The Trust and the
Sponsor expect that the Depository or its nominee, upon receipt of any payment
of distributions in respect of Limited Shares, shall credit immediately DTC
Participants’ accounts with payments in amounts proportionate to their
respective beneficial interests in Limited Shares as shown on the records of
the Depository or its nominee.  The Trust
and the Sponsor also expect that payments by DTC Participants to Indirect
Participants and Limited Owners held through such DTC Participants and Indirect
Participants will be governed by standing instructions and customary practices,
as is now the case with securities held for the accounts of customers in bearer
form or registered in a “street name,” and will be the responsibility of such
DTC Participants and Indirect Participants. 
None of the Trust, the Trustee or the Sponsor will have any
responsibility or liability for any aspects of the records relating to or
notices to Limited Owners, or payments made on account of beneficial ownership
interests in Limited Shares, or for maintaining, supervising or reviewing any
records relating to such beneficial ownership interests or for any other aspect
of the relationship between the Depository and the DTC Participants or the
relationship between such DTC Participants and the Indirect Participants and
Limited Owners owning through such DTC Participants or Indirect Participants or
between or among the Depository, any Limited Owner and any person by or through
which such Limited Owner is considered to own Limited Shares.

 23

 

(h)           Limitation of Liability. The
Global Security to be issued hereunder is executed and delivered solely on
behalf of the Trust by the Sponsor, as Sponsor, in the exercise of the powers
and authority conferred and vested in it by this Trust Agreement.  The representations, undertakings and
agreements made on the part of the Trust in the Global Security are made and
intended not as personal representations, undertakings and agreements by the
Sponsor or the Trustee, but are made and intended for the purpose of binding
only the Trust.  Nothing in the Global
Security shall be construed as creating any liability on the Sponsor or the
Trustee, individually or personally, to fulfill any representation, undertaking
or agreement other than as provided in this Trust Agreement.

(i)            Successor Depository.  If a successor to The Depository Trust
Company shall be employed as Depository hereunder, the Trust and the Sponsor
shall establish procedures acceptable to such successor with respect to the
matters addressed in this Section 3.4.

SECTION 3.5          Escrow Agreement. All proceeds from the
sale of Limited Shares offered pursuant to the Prospectus shall be deposited in
an interest bearing escrow account with an escrow agent to be selected by the
Sponsor until the conclusion of the Initial Offering Period.  In the event subscriptions for at least [              ]
Shares are received and accepted during the Initial Offering Period, all
interest earned on the proceeds of subscriptions from accepted Subscribing
Participants for Limited Shares during its Initial Offering Period will be
contributed to the Trust, for which the Limited Owners will receive additional
Shares on a pro rata basis (taking into account time and amount of deposit).

SECTION 3.6          Termination of the Trust. If the minimum
number of Shares being offered are not sold during the Initial Offering Period,
then the Trust shall be dissolved and terminated in accordance with Article
XIII.

SECTION 3.7          Assets. 
All consideration received by the Trust for the issue or sale of Shares
together with all of the Trust Estate in which such consideration is invested,
all income, earnings, profits, and proceeds thereof, including any proceeds
derived from the sale, exchange or liquidation of such assets, shall belong to
the Trust for all purposes, subject only to the rights of creditors of the
Trust and except as may otherwise be required by applicable tax laws, and shall
be so recorded upon the books of account of the Trust.

SECTION 3.8          Liabilities.  The Trust Estate shall be charged with the
liabilities of the Trust, and all expenses, costs, charges and reserves
attributable to the Trust.

SECTION 3.9          Distributions.

(a)           The Sponsor does not currently intend
to cause the Trust to make distributions. 
However, distributions on Shares may be paid with such frequency 

 24
 

 

as the Sponsor
may determine, which may be daily or otherwise, to the Shareholders, from such
of the income and capital gains, accrued or realized, from the Trust Estate,
after providing for actual and accrued liabilities.  All distributions on Shares thereof shall be
distributed pro rata to the Shareholders in proportion to the total outstanding
Shares held by such Shareholders at the date and time of record established for
the payment of such distribution and in accordance with Section 3.4(g).  Such distributions may be made in cash or
Shares as determined by the Sponsor or pursuant to any program that the Sponsor
may have in effect at the time for the election by each Shareholder of the mode
of the making of such distribution to that Shareholder.

(b)           The Shares shall represent Shares of
beneficial interest in the Trust Estate. In the event of a distribution, each Shareholder
shall be entitled to receive its pro rata share of distributions of income and
capital gains in accordance with Section 3.9(a).

SECTION 3.10        Voting Rights. Notwithstanding any other
provision hereof, on each matter submitted to a vote of the Shareholders, each
Shareholder shall be entitled to a proportionate vote based upon the number of
Shares, or fraction thereof, standing in its name on the books of the Trust in
accordance with Section 3.4(g).

SECTION 3.11        Equality. Except as provided herein, all
Shares shall represent an equal proportionate beneficial interest in the assets
of the Trust subject to the liabilities of the Trust, and each Share shall be
equal to each other Share.  The Sponsor
may from time to time divide or combine the Shares into a greater or lesser
number of Shares without thereby changing the proportionate beneficial interest
in the assets of the Trust or in any way affecting the rights of Shareholders.

ARTICLE IV

THE SPONSOR

SECTION 4.1          Management of the Trust.  Pursuant to Section 3806(b)(7) of the
Delaware Trust Statute, the Trust shall be managed by the Sponsor and the
conduct of the Trust’s business shall be controlled and conducted solely by the
Sponsor in accordance with this Trust Agreement.

SECTION 4.2          Authority of Sponsor.  In addition to and not in limitation of any
rights and powers conferred by law or other provisions of this Trust Agreement,
and except as limited, restricted or prohibited by the express provisions of
this Trust Agreement or the Delaware Trust Statute, the Sponsor shall have and
may exercise on behalf of the Trust, all powers and rights necessary, proper, convenient
or advisable to effectuate and carry out the purposes, business and objectives
of the Trust, which shall include, without limitation, the following:

(a)           To enter into, execute, deliver and
maintain, and to cause the Trust to perform its obligations under, contracts,
agreements and any or all other 

 25
 

 

documents and
instruments, and to do and perform all such things as may be in furtherance of
Trust purposes or necessary or appropriate for the offer and sale of the Shares
and the conduct of Trust activities;

(b)           To establish, maintain, deposit into,
sign checks and/or otherwise draw upon accounts on behalf of the Trust with
appropriate banking and savings institutions, and execute and/or accept any
instrument or agreement incidental to the Trust’s business and in furtherance
of its purposes, any such instrument or agreement so executed or accepted by
the Sponsor in the Sponsor’s name shall be deemed executed and accepted on
behalf of the Trust by the Sponsor;

(c)           To deposit, withdraw, pay, retain and
distribute the Trust Estate or any portion thereof in any manner consistent
with the provisions of this Trust Agreement;

(d)           To supervise the preparation and
filing of the Registration Statement and supplements;

(e)           To adopt disclosure and financial
reporting information gathering and control policies and procedures;

(f)            To make any necessary determination
or decision in connection with the preparation of the Trust’s financial
statements and amendments thereto, and the Prospectus;

(g)           To prepare, file and distribute, if
applicable, any periodic reports or updates that may be required under the
Securities Exchange Act of 1934, the CE Act, or the rules and regulations
thereunder;

(h)           To pay or authorize the payment of
distributions to the Shareholders and expenses of the Trust;

(i)            To make any elections on behalf of
the Trust under the Code, or any other applicable U.S. federal or state tax law
as the Sponsor shall determine to be in the best interests of the Trust; and

(j)            In the sole discretion of the
Sponsor, to admit an Affiliate or Affiliates of the Sponsor as additional
Sponsors.

SECTION 4.3          Obligations of the Sponsor.  In addition to the obligations expressly
provided by the Delaware Trust Statute or this Trust Agreement, the Sponsor
shall:

(a)           devote such of its time to the
business and affairs of the Trust as it shall, in its discretion exercised in
good faith, determine to be necessary to conduct the business and affairs of
the Trust for the benefit of the Trust and the Limited Owners;

 26
 

 

(b)           execute, file, record and/or publish
all certificates, statements and other documents and do any and all other
things as may be appropriate for the formation, qualification and operation of
the Trust and for the conduct of its business in all appropriate jurisdictions;

(c)           appoint and remove independent public
accountants to audit the accounts of the Trust;

(d)           employ attorneys to represent the
Trust;

(e)           adopt, implement or amend, from time
to time, such disclosure and financial reporting information gathering and control
policies and procedures as are necessary or desirable to ensure compliance with
applicable disclosure and financial reporting obligations under any applicable
securities laws;

(f)            use its best efforts to maintain the
status of the Trust as a “statutory trust” for state law purposes;

(g)           have fiduciary responsibility for the
safekeeping and use of the Trust Estate, whether or not in the Sponsor’s
immediate possession or control;

(h)           enter into a Distribution Agreement
with the Distributor and discharge the duties and responsibilities of the Trust
and the Sponsor thereunder;

(i)            receive from Participants and
process, or cause the Distributor to process, properly submitted Purchase Order
Subscription Agreements, as described in Section 3.3(a)(i);

(j)            in connection with Purchase Order
Subscription Agreements, receive Creation Basket Capital Contributions from
Participants;

(k)           in connection with Purchase Order
Subscription Agreements, deliver or cause the delivery of Creation Baskets to
the Depository for the account of the Participant submitting a Purchase Order
Subscription Agreement for which the Sponsor has received the requisite
Transaction Fee and the Trust has received the requisite Capital Contribution,
as described in Section 3.3(d);

(l)            receive from Participants and
process, or cause the Distributor to process, properly submitted Redemption
Orders, as described in Section 7.1(a), or as may from time to time be
permitted by Section 7.2;

(m)          in connection with Redemption Orders,
receive from the redeeming Participant through the Depository, and thereupon
cancel or cause to be cancelled, Limited Shares corresponding to the Redemption
Baskets to be redeemed as described in Section 7.1, or as may from time to time
be permitted by Section 7.2;

 27
 

 

(n)           interact with the Depository as
required;

(o)           make any necessary determination or
decision in connection with the preparation of the financial statements of the
Trust; and

(p)           delegate those of its duties
hereunder as it shall determine from time to time to one or more Administrators
or Commodity Trading Advisors; provided, however, any such delegatee shall be
required to provide supporting documentation to the Sponsor, as to the
applicable disclosure and financial reporting controls and procedures used by
such delegate with respect to the functions delegated by the Sponsor to such
delegatee.

SECTION 4.4          Liability of Covered Persons.  A Covered Person shall have no liability to
the Trust or to any Shareholder or other Covered Person for any loss suffered
by the Trust which arises out of any action or inaction of such Covered Person
if such Covered Person, in good faith, determined that such course of conduct
was in the best interest of the Trust and such course of conduct did not
constitute negligence (and in the case of the Trustee, gross negligence) or
misconduct of such Covered Person. 
Subject to the foregoing, neither the Sponsor nor any other Covered
Person shall be personally liable for the return or repayment of all or any
portion of the capital or profits of any Shareholder or assignee thereof, it
being expressly agreed that any such return of capital or profits made pursuant
to this Trust Agreement shall be made solely from the assets of the Trust
without any rights of contribution from the Sponsor or any other Covered
Person.  A Covered Person shall not be
liable for the conduct or misconduct of any Administrator or other delegatee
selected by the Sponsor with reasonable care, provided, however, that the
Trustee and its Affiliates shall not, under any circumstances be liable for the
conduct or misconduct of any Administrator or other delegatee or any other
Person selected by the Sponsor to provide services to the Trust.

SECTION 4.5          Fiduciary Duty.

(a)           To the extent that, at law (common or
statutory) or in equity, the Sponsor has duties (including fiduciary duties)
and liabilities relating thereto to the Trust, the Shareholders or to any other
Person, the Sponsor acting under this Trust Agreement shall not be liable to
the Trust, the Shareholders or to any other Person for its good faith reliance
on the provisions of this Trust Agreement subject to the standard of care in
Section 4.4 herein.  The provisions of
this Trust Agreement, to the extent that they restrict the duties and
liabilities of the Sponsor otherwise existing at law or in equity, are agreed
by the parties hereto to replace such other duties and liabilities of the
Sponsor.  Any material changes in the
Trust’s basic investment policies or structure shall occur only upon the
written approval or affirmative vote of Limited Owners holding a majority (over
50%) of the Shares, excluding Shares held by the Sponsor and its Affiliates, of
the Trust pursuant to Section 11.1(a) below.

(b)           Unless otherwise expressly provided
herein:

 28
 

 

(i)            whenever a conflict of interest
exists or arises between the Sponsor or any of its Affiliates, on the one hand,
and the Trust or any Shareholder or any other Person, on the other hand; or

(ii)           whenever this Trust Agreement or any
other agreement contemplated herein or therein provides that the Sponsor shall
act in a manner that is, or provides terms that are, fair and reasonable to the
Trust, any Shareholder or any other Person, the Sponsor shall resolve such
conflict of interest,

take such action or provide such terms, considering in each case the
relative interest of each party (including its own interest) to such conflict,
agreement, transaction or situation and the benefits and burdens relating to
such interests, any customary or accepted industry practices, and any applicable
generally accepted accounting practices or principles.  In the absence of bad faith by the Sponsor,
the resolution, action or terms so made, taken or provided by the Sponsor shall
not constitute a breach of this Agreement or any other agreement contemplated
herein or of any duty or obligation of the Sponsor at law or in equity or
otherwise.

(c)           The Sponsor and any Affiliate of the
Sponsor may engage in or possess an interest in other profit-seeking or
business ventures of any nature or description, independently or with others,
whether or not such ventures are competitive with the Trust and the doctrine of
corporate opportunity, or any analogous doctrine, shall not apply to the
Sponsor.  If the Sponsor acquires knowledge
of a potential transaction, agreement, arrangement or other matter that may be
an opportunity for the Trust, it shall have no duty to communicate or offer
such opportunity to the Trust, and the Sponsor shall not be liable to the Trust
or to the Shareholders for breach of any fiduciary or other duty by reason of
the fact that the Sponsor pursues or acquires for, or directs such opportunity
to another Person or does not communicate such opportunity or information to
the Trust.  Neither the Trust nor any Shareholder
shall have any rights or obligations by virtue of this Agreement or the trust
relationship created hereby in or to such independent ventures or the income or
profits or losses derived therefrom, and the pursuit of such ventures, even if
competitive with the activities of the Trust, shall not be deemed wrongful or
improper.  Except to the extent expressly
provided herein, the Sponsor may engage or be interested in any financial or
other transaction with the Trust, the Shareholders or any Affiliate of the
Trust or the Shareholders.

SECTION 4.6          Indemnification of the Sponsor.

(a)           The Sponsor shall be indemnified by
the Trust against any losses, judgments, liabilities, expenses and amounts paid
in settlement of any claims sustained by it in connection with its activities
for the Trust, provided that (i) the Sponsor was acting on behalf of or
performing services for the Trust and has 

 29
 

 

determined, in
good faith, that such course of conduct was in the best interests of the Trust
and such liability or loss was not the result of negligence, misconduct, or a
breach of this Trust Agreement on the part of the Sponsor and (ii) any such
indemnification will only be recoverable from the Trust Estate.  All rights to indemnification permitted
herein and payment of associated expenses shall not be affected by the
dissolution or other cessation to exist of the Sponsor, or the withdrawal,
adjudication of bankruptcy or insolvency of the Sponsor, or the filing of a
voluntary or involuntary petition in bankruptcy under Title 11 of the
Bankruptcy Code by or against the Sponsor. 
The source of payments made in respect of indemnification under this
Trust Agreement shall be the assets of the Trust.

(b)           Notwithstanding the provisions of
Section 4.6(a) above, the Sponsor and any Person acting as broker-dealer for
the Trust shall not be indemnified for any losses, liabilities or expenses
arising from or out of an alleged violation of U.S. federal or state securities
laws unless (i) there has been a successful adjudication on the merits of each
count involving alleged securities law violations as to the particular
indemnitee and the court approves the indemnification of such expenses
(including, without limitation, litigation costs), (ii) such claims have been
dismissed with prejudice on the merits by a court of competent jurisdiction as
to the particular indemnitee and the court approves the indemnification of such
expenses (including, without limitation, litigation costs) or (iii) a court of
competent jurisdiction approves a settlement of the claims against a particular
indemnitee and finds that indemnification of the settlement and related costs
should be made.

(c)           The Trust shall not incur the cost of
that portion of any insurance which insures any party against any liability,
the indemnification of which is herein prohibited.

(d)           Expenses incurred in defending a
threatened or pending civil, administrative or criminal action suit or
proceeding against the Sponsor shall be paid by the Trust in advance of the
final disposition of such action, suit or proceeding, if (i) the legal
action relates to the performance of duties or services by the Sponsor on
behalf of the Trust; (ii) the legal action is initiated by a third party who is
not a Limited Owner or the legal action is initiated by a Limited Owner and a
court of competent jurisdiction specifically approves such advance; and (iii)
the Sponsor undertakes to repay the advanced funds with interest to the Trust
in cases in which it is not entitled to indemnification under this Section 4.6.

(e)           The term “Sponsor” as used only in
this Section 4.6 shall include, in addition to the Sponsor, any other Covered
Person performing services on behalf of the Trust and acting within the scope
of the Sponsor’s authority as set forth in this Trust Agreement.

 30
 

 

(f)            In the event the Trust is made a
party to any claim, dispute, demand or litigation or otherwise incurs any loss,
liability, damage, cost or expense as a result of or in connection with any
Limited Owner’s (or assignee’s) obligations or liabilities unrelated to Trust
business, such Limited Owner (or assignees cumulatively) shall indemnify,
defend, hold harmless, and reimburse the Trust for all such loss, liability,
damage, cost and expense incurred, including attorneys’ and accountants’ fees.

SECTION 4.7          Expenses and Limitations Thereon.

(a)           (i) 
The Sponsor or an Affiliate of the Sponsor shall be responsible for the
payment of all Organization and Offering Expenses incurred in connection with
the creation of the Trust and sale of Shares.

(ii)           “Organization and Offering Expenses”
shall mean those expenses incurred in connection with the formation,
qualification and registration of the Trust and the Shares and in offering,
distributing and processing the Shares under applicable U.S. federal and state
law, and any other expenses actually incurred and, directly or indirectly,
related to the organization of the Trust or the initial and continuous offering
of the Shares, including, but not limited to, expenses such as: (i) initial and
ongoing registration fees, filing fees, escrow fees and taxes, (ii) costs of
preparing, printing (including typesetting), amending, supplementing, mailing
and distributing the Registration Statement, the Exhibits thereto and the
Prospectus during the Initial Offering Period and the Continuous Offering
Period, (iii) the costs of qualifying, printing, (including typesetting),
amending, supplementing, mailing and distributing sales materials used in
connection with the offering and issuance of the Shares during the Initial
Offering Period and the Continuous Offering Period, (iv) travel, telegraph,
telephone and other expenses in connection with the offering and issuance of
the Shares during the Initial Offering Period and the Continuous Offering
Period, (v) accounting, auditing and legal fees (including disbursements
related thereto) incurred in connection therewith, and (vi) any extraordinary
expenses (including, but not limited to, legal claims and liabilities and
litigation costs and any permitted indemnification associated therewith)
related thereto.

(b)           Except as set forth in Article II,
all ongoing charges, costs and expenses of the Trust’s operation shall be
billed to and/or paid by the Trust.  Such
costs and expenses shall include, but not limited to, the routine expenses
associated with (i) preparation of monthly, quarterly, annual and other reports
required by applicable U.S. federal and state regulatory authorities; (ii) preparing,
printing and transmitting reports to 

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Shareholders;
(iii) the payment of any distributions related to redemption of Shares; (iv)
routine services of the Trustee, legal counsel and independent accountants; (v)
routine accounting and bookkeeping services, whether performed by an outside
service provider or by Affiliates of the Sponsor; (vi) postage and insurance;
(vii) client relations and services; (viii) computer equipment and system
maintenance; (ix) the Management Fee; (x) the payment of all federal,
state, local or foreign taxes payable on the income, assets or operations of the
Trust and the preparation of all tax returns related thereto; and
(xi) extraordinary expenses (including, but not limited to, legal claims
and liabilities and litigation costs and any indemnification related thereto).

(c)           The Sponsor or any Affiliate of the
Sponsor may only be reimbursed for the actual cost to the Sponsor or such
Affiliate of any expenses which it advances on behalf of the Trust for which
payment the Trust is responsible.  In
addition, payment to the Sponsor or such Affiliate for indirect expenses
incurred in performing services for the Trust in its capacity as the Sponsor of
the Trust, such as salaries and fringe benefits of officers and directors, rent
or depreciation, utilities and other administrative items generally falling
within the category of the Sponsor’s “overhead,” is prohibited.

SECTION 4.8          Compensation to the Sponsor. The Sponsor
shall be entitled to compensation for its services as Sponsor of the Trust as
set forth in the Prospectus.

SECTION 4.9          Other Business of Shareholders. Except as
otherwise specifically provided herein, any of the Shareholders and any
shareholder, officer, director, employee or other person holding a legal or
beneficial interest in an entity which is a Shareholder, may engage in or
possess an interest in other business ventures of every nature and description,
independently or with others, and the pursuit of such ventures, even if
competitive with the business of the Trust, shall not be deemed wrongful or
improper.

SECTION 4.10        Voluntary Withdrawal of the Sponsor.
The Sponsor may withdraw voluntarily as the Sponsor of the Trust only upon one
hundred and twenty (120) days’ prior written notice to all Limited Owners and
the Trustee.  If the withdrawing Sponsor
is the last remaining Sponsor, Limited Owners holding a majority (over 50%) of
the Shares (not including Shares held by the Sponsor or its Affiliates) may
vote to elect and appoint, effective as of a date on or prior to the
withdrawal, a successor Sponsor who shall carry on the business of the Trust.  In the event of its withdrawal, the Sponsor
shall be entitled to a redemption of its Shares at the Net Asset Value.  If the Sponsor withdraws and a successor
Sponsor is named, the withdrawing Sponsor shall pay all expenses as a result of
its withdrawal.

SECTION 4.11        Authorization of Registration Statements.
Each Limited Owner (or any permitted assignee thereof) hereby agrees that the
Sponsor is authorized to execute, deliver and perform the agreements, acts,
transactions and matters 

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contemplated hereby or described in or contemplated by the Registration
Statements on behalf of the Trust without any further act, approval or vote of
the Limited Owners of the Trust, notwithstanding any other provision of this
Trust Agreement, the Delaware Trust Statute or any applicable law, rule or
regulation.

SECTION 4.12        Litigation.  The Sponsor is hereby authorized to
prosecute, defend, settle or compromise actions or claims at law or in equity
as may be necessary or proper to enforce or protect the Trust’s interests.  The Sponsor shall satisfy any judgment,
decree or decision of any court, board or authority having jurisdiction or any
settlement of any suit or claim prior to judgment or final decision thereon,
first, out of any insurance proceeds available therefor, next, out of the Trust’s
assets and, thereafter, out of the assets (to the extent that it is permitted
to do so under the various other provisions of this Agreement) of the Sponsor.

ARTICLE V

TRANSFERS OF SHARES

SECTION 5.1          General Prohibition. A Limited Owner may
not sell, assign, transfer or otherwise dispose of, or pledge, hypothecate or
in any manner encumber any or all of his Shares or any part of his right, title
and interest in the capital or profits in the Trust except as permitted in this
Article V and any act in violation of this Article V shall not be binding upon
or recognized by the Trust (regardless of whether the Sponsor shall have
knowledge thereof), unless approved in writing by the Sponsor.

SECTION 5.2          Transfer of Sponsor’s General Shares.

(a)           Upon an Event of Withdrawal (as
defined in Section 13.1), the Sponsor’s General Shares shall be purchased by
the Trust for a purchase price in cash equal to the Net Asset Value
thereof.  The Sponsor will not cease to
be a Sponsor of the Trust merely upon the occurrence of its making an
assignment for the benefit of creditors, filing a voluntary petition in
bankruptcy, filing a petition or answer seeking for itself any reorganization,
arrangement, composition, readjustment, liquidation, dissolution or similar relief
under any statute, law or regulation, filing an answer or other pleading
admitting or failing to contest material allegations of a petition filed
against it in any proceeding of this nature or seeking, consenting to or
acquiescing in the appointment of a trustee, receiver or liquidator for itself
or of all or any substantial part of its properties.

(b)           To the full extent permitted by law,
and on sixty (60) days’ prior written notice to the Limited Owner and the
Trustee, of their right to vote thereon, if the transaction is other than with
an Affiliate, nothing in this Trust Agreement shall be deemed to prevent the
merger of the Sponsor with another corporation or other entity, the
reorganization of the Sponsor into or with any other corporation or other
entity, the transfer of all the capital stock of the Sponsor or the assumption
of the rights, duties and liabilities of the Sponsor by, in the case of a

 

 33

 

merger,
reorganization or consolidation, the surviving corporation or other entity by
operation of law or the transfer of the Sponsor’s Shares to an Affiliate of the
Sponsor. Without limiting the foregoing, none of the transactions referenced in
the preceding sentence shall be deemed to be a voluntary withdrawal for
purposes of Section 4.10 or an Event of Withdrawal or assignment of Shares for
purposes of Sections 5.2(a) or 5.2(c).

(c)           Upon assignment of all of its Shares,
the Sponsor shall not cease to be a Sponsor of the Trust, or to have the power
to exercise any rights or powers as a Sponsor, or to have liability for the
obligations of the Trust under Section 1.7 hereof, until an additional Sponsor,
who shall carry on the business of the Trust, has been admitted to the Trust.

SECTION 5.3          Transfer of Limited Shares.  Limited Owners that are not DTC Participants
may transfer Limited Shares by instructing the DTC Participant or Indirect
Participant holding the Limited Shares for such Limited Owner in accordance
with standard securities industry practice. 
Limited Owners that are DTC Participants may transfer Limited Shares by
instructing the Depository in accordance with the rules of the Depository and
standard securities industry practice.

	
   

  	
   

  	
  ARTICLE VI

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  RESERVED

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  SECTION 6.1

  	
   

  	
  Reserved.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  ARTICLE
  VII

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  REDEMPTIONS

  	
   

  

 

SECTION 7.1          Redemption of Redemption Baskets. The following procedures, as supplemented by the more
detailed procedures specified in the attachment to the Participant Agreement,
which may be amended from time to time in accordance with the provisions of the
Participant Agreement (and any such amendment will not constitute an amendment
of this Trust Agreement), will govern the Trust with respect to the redemption
of Redemption Baskets.

(a)           On any Business Day, a Participant
with respect to which a Participant Agreement is in full force and effect (as
reflected on the list maintained by the Sponsor pursuant to Section 3.3(a)(i))
may redeem one or more Redemption Baskets standing to the credit of the
Participant on the records of the Depository by delivering a request for
redemption to the Sponsor (such request, a “Redemption Order”) in the manner
specified in the procedures specified in the attachment to the Participant
Agreement, as amended from time to time in accordance with the provisions of
the Participant Agreement (and any such amendment will not constitute an
amendment of this Agreement).

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(b)           To be effective, a Redemption Order
must be submitted on a Business Day by the Order Cut-Off Time in form
satisfactory to the Sponsor (the Business Day on which the Redemption Order is
so submitted, the “Redemption Order Date”). 
The Sponsor shall reject any Redemption Order the fulfillment of which
its counsel advises may be illegal under applicable laws and regulations, and
the Sponsor shall have no liability to any person for rejecting a Redemption
Order in such circumstances.

(c)           Subject to deduction of any tax or
other governmental charges due thereon, the redemption distribution (“Redemption
Distribution”) shall consist of cash in an amount equal to the product obtained
by multiplying (i) the number of Redemption Baskets set forth in the relevant
Redemption Order by (ii) the Net Asset Value Per Basket as of the closing time
of the Exchange or the last to close of the exchanges on which the Fund’s
futures contracts are traded, whichever is later, on the Redemption Order Date.

(d)           By noon, New York time, on the
Business Day immediately following the Redemption Order Date (the “Redemption
Settlement Time”), if the Distributor’s account at the Depository has by noon,
New York time, on such day been credited with the Redemption Baskets being
tendered for redemption and the Sponsor has by such time received the
Transaction Fee, the Sponsor shall deliver the Redemption Distribution through
the Depository to the account of the Participant as recorded on the book entry
system of the Depository.  If by such
Redemption Settlement Time the Sponsor has not received from a redeeming
Participant all Redemption Baskets comprising the Redemption Order, the Sponsor
will (i) settle the Redemption Order to the extent of whole Redemption Baskets
received from the Participant with the Transaction Fee and (ii) keep the redeeming
Participant’s Redemption Order open until noon, New York time, on the first
Business Day following the Redemption Settlement Date as to the balance of the
Redemption Order (such balance, the “Suspended Redemption Order”).  If the Redemption Basket(s) comprising the
Suspended Redemption Order are credited to the Distributor’s account at the
Depository by noon, New York time, on such following Business Day, the
Redemption Distribution with respect to the Suspended Redemption Order shall be
paid in the manner provided in the second preceding sentence.  If by such Redemption Settlement Time the
Sponsor has not received from the redeeming Participant all Redemption Baskets
comprising the Suspended Redemption Order, the Sponsor will settle the
Suspended Redemption Order to the extent of whole Redemption Baskets then
received and any balance of the Suspended Redemption will be cancelled.  Notwithstanding the foregoing, when and under
such conditions as the Sponsor may from time to time determine, the Sponsor shall
be authorized to deliver the Redemption Distribution notwithstanding that a
Redemption Basket has not been credited to the Distributor’s account at the
Depository if the Participant has collateralized its obligation to deliver the
Redemption Basket on such terms as the Sponsor may, in its sole discretion,
from time to time agree.

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(e)           The Sponsor may, in its discretion,
suspend the right of redemption, or postpone the Redemption Settlement Date,
(i) for any period during which the Exchange is closed other than customary
weekend or holiday closings, or trading is suspended or restricted; (ii) for
any period during which an emergency exists as a result of which delivery,
disposal or evaluation of the Trust’s assets is not reasonably practicable; or
(iii) for such other period as the Sponsor determines to be necessary for the
protection of Limited Owners.  The
Sponsor is not liable to any person or in any way for any loss or damages that
may result from any such suspension or postponement.

(f)            Redemption Baskets effectively
redeemed pursuant to the provisions of this Section 7.1 shall be cancelled by
the Trust in accordance with the Depository’s procedures, and no longer be
deemed outstanding for purposes of this Trust Agreement and the Delaware Trust
Statute.

(g)           Baskets may not be redeemed during
the Initial Offering Period.

SECTION 7.2          Other Redemption Procedures. The Sponsor from time to time may, but shall have no
obligation to, establish procedures with respect to redemption of Limited
Shares in lot sizes smaller than the Redemption Basket and permitting the
Redemption Distribution to be in a form, and delivered in a manner, other than
that specified in Section 7.1.

ARTICLE VIII

THE LIMITED OWNERS

SECTION 8.1          No Management or Control; Limited Liability; Exercise
of Rights through DTC. The Limited Owners shall not participate in
the management or control of the Trust’s business nor shall they transact any
business for the Trust or have the power to sign for or bind the Trust, said
power being vested solely and exclusively in the Sponsor.  Except as provided in Section 8.3 hereof, no
Limited Owner shall be bound by, or be personally liable for, the expenses,
liabilities or obligations of the Trust in excess of his Capital Contribution
plus his share of any Trust Estate in which such Limited Owner owns a Share and
profits remaining, if any.  Except as
provided in Section 8.3 hereof, each Limited Share owned by a Limited Owner
shall be fully paid and no assessment shall be made against any Limited
Owner.  No salary shall be paid to any
Limited Owner in his capacity as a Limited Owner, nor shall any Limited Owner
have a drawing account or earn interest on his Capital Contribution.  By the purchase and acceptance or other lawful
delivery and acceptance of Limited Shares, each Limited Owner shall be deemed
to be a beneficiary of the Trust and vested with beneficial undivided interest
in the Trust to the extent of the Limited Shares owned beneficially by such
Limited Owner, subject to the terms and conditions of this Trust
Agreement.  The rights of Limited Owners
under this Trust Agreement must be exercised by DTC Participants acting on
their behalf in accordance with the rules and procedures of the Depository, as
provided in Section 3.4.

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SECTION 8.2          Rights and Duties. The Limited Owners
shall have the following rights, powers, privileges, duties and liabilities:

(a)           The Limited Owners shall have the
right to obtain from the Sponsor information of all things affecting the Trust,
provided that such is for a purpose reasonably related to the Limited Owner’s
interest as a beneficial owner of the Trust, including, without limitation,
such reports as are set forth in Article IX and the list of Participants
contemplated by Section 3.3(a)(i).  In
the event that the Sponsor neglects or refuses to produce or mail to a Limited
Owner a copy of the list of Participants contemplated by Section 3.3(a)(i), the
Sponsor shall be liable to such Limited Owner for the costs, including
reasonable attorney’s fees, incurred by such Limited Owner to compel the
production of such information, and for any actual damages suffered by such
Limited Owner as a result of such refusal or neglect; provided, however, it
shall be a defense of the Sponsor that the actual purpose of the Limited Owner’s
request for such information was not reasonably related to the Limited Owner’s
interest as a beneficial owner in the Trust (e.g., to secure such information
in order to sell it, or to use the same for a commercial purpose unrelated to
the participation of such Limited Owner in the Trust).  The foregoing rights are in addition to, and
do not limit, other remedies available to Limited Owners under U.S. federal or
state law.

(b)           Except for the Limited Owners’
redemption rights set forth in Article VII hereof, Limited Owners shall have
the right to demand the return of their capital only upon the dissolution and
winding up of the Trust and only to the extent of funds available
therefor.  In no event shall a Limited
Owner be entitled to demand or receive property other than cash.  No Limited Owner shall have priority over any
other Limited Owner either as to the return of capital or as to profits, losses
or distributions.  No Limited Owner shall
have the right to bring an action for partition against the Trust.

(c)           Limited Owners holding a majority
(over 50%) of the Shares (not including Shares held by the Sponsor and its
Affiliates) may vote to approve on 60 days’ prior written notice, a material
change in the trading policies, as set forth in the Prospectus.  Limited Owners shall have such other voting
and approval rights as are set forth in the Trust Agreement, including Sections
4.10, 11.1, 13.1(a), and 13.1(e) thereof.

Except as expressly provided in this Trust Agreement,
the Limited Owners shall have no voting or other rights with respect to the
Trust.

SECTION 8.3          Limitation on Liability.

(a)           Except as otherwise provided under
Delaware law, the Limited Owners shall be entitled to the same limitation of
personal liability extended to stockholders of private corporations for profit
organized under the general corporation law of Delaware and no Limited Owner
shall be liable for claims 

 37
 

 

against, or
debts of the Trust in excess of his Capital Contribution and his share of the
applicable Trust Estate and undistributed profits.  In addition, and subject to the exceptions
set forth in the immediately preceding sentence, the Trust shall not make a
claim against a Limited Owner with respect to amounts distributed to such
Limited Owner or amounts received by such Limited Owner upon redemption unless,
under Delaware law, such Limited Owner is liable to repay such amount.

(b)           The Trust shall indemnify to the full
extent permitted by law and the other provisions of this Agreement, and to the
extent of the applicable Trust Estate, each Limited Owner (excluding the
Sponsor to the extent of its ownership of any Limited Shares) against any
claims of liability asserted against such Limited Owner solely because he is a
beneficial owner of one or more Shares as a Limited Owner.

(c)           Every written note, bond, contract,
instrument, certificate or undertaking made or issued by the Sponsor on behalf
of the Trust shall give notice to the effect that the same was executed or made
by or on behalf of the Trust and that the obligations of such instrument are
not binding upon the Limited Owners individually but are binding only upon the
assets and property of the Trust, and no resort shall be had to the Limited
Owners’ personal property for satisfaction of any obligation or claim
thereunder, and appropriate references may be made to this Trust Agreement and
may contain any further recital which the Sponsor deems appropriate, but the
omission thereof shall not operate to bind the Limited Owners individually or
otherwise invalidate any such note, bond, contract, instrument, certificate or
undertaking.  Nothing contained in this
Section 8.3 shall diminish the limitation on the liability of the Trust to the
extent set forth in Section 3.7 and 3.8 hereof.

ARTICLE IX

BOOKS OF ACCOUNT AND REPORTS

SECTION 9.1          Books of Account. Proper books of account
for the Trust shall be kept and shall be audited annually by an independent
certified public accounting firm selected by the Sponsor in its sole
discretion, and there shall be entered therein all transactions, matters and
things relating to the Trust’s business as are required by the CE Act and
regulations promulgated thereunder, and all other applicable rules and
regulations, and as are usually entered into books of account kept by Persons
engaged in a business of like character. 
The books of account shall be kept at the principal office of the Trust
and each Limited Owner (or any duly constituted designee of a Limited Owner)
shall have, at all times during normal business hours, free access to and the
right to inspect and copy the same for any purpose reasonably related to the
Limited Owner’s interest as a beneficial owner of the Trust, including such
access as is required under CFTC rules and regulations.  Such books of account shall be kept in
accordance with the accrual method of accounting for financial accounting
purposes on a Fiscal Year basis as described in Article X.

 38
 

 

SECTION 9.2          Annual Reports and Monthly Statements. Each
Limited Owner shall be furnished as of the end of each month and as of the end
of each Fiscal Year with (a) such reports (in such detail) as are required to
be given to Limited Owners by the CFTC and the NFA, including an annual report
of the Trust containing financial statements that will be prepared by the
Sponsor and audited by independent accountants designated by the Sponsor, (b)
any other reports (in such detail) required to be given to Limited Owners by
any other governmental authority which has jurisdiction over the activities of
the Trust and (c) any other reports or information which the Sponsor, in its
discretion, determines to be necessary or appropriate.

SECTION 9.3          Calculation of Net Asset Value. Net Asset
Value shall be calculated at such times as the Sponsor shall determine from
time to time.

SECTION 9.4          Maintenance of Records. The Sponsor shall
maintain: (a) for a period of at least six Fiscal Years all books of account
required by Section 9.1 hereof; a list of the names and last known address of,
and number of Shares owned by, all Shareholders, a copy of the Certificate of
Trust and all certificates of amendment thereto, together with executed copies
of any powers of attorney pursuant to which any certificate has been executed;
copies of the Trust’s federal, state and local income tax returns and reports,
if any; and (b) for a period of at least six Fiscal Years copies of any
effective written trust agreements, subscription agreements and any financial
statements of the Trust.  The Sponsor may
keep and maintain the books and records of the Trust in paper, magnetic,
electronic or other format at the Sponsor may determine in its sole discretion,
provided the Sponsor uses reasonable care to prevent the loss or destruction of
such records.

SECTION 9.5          Certificate of Trust. Except as otherwise
provided in the Delaware Trust Statute or this Trust Agreement, the Sponsor
shall not be required to mail a copy of any Certificate of Trust filed with the
Secretary of State of the State of Delaware to each Limited Owner; however,
such certificates shall be maintained at the principal office of the Trust and
shall be available for inspection and copying by the Limited Owners in
accordance with this Trust Agreement.

ARTICLE X

FISCAL YEAR

SECTION 10.1        Fiscal Year. The Fiscal Year shall begin
on the 1st day of January and end on the 31st day of December of each year.  The first Fiscal Year of the Trust shall
commence on the date of filing of the Certificate of Trust and end on the 31st day of December 2007.  The Fiscal Year in which the Trust shall
terminate shall end on the date of termination.

 39
 

 

ARTICLE XI

AMENDMENT OF TRUST AGREEMENT; MEETINGS

SECTION 11.1        Amendments to
the Trust Agreement.

(a)           Amendments to this Trust Agreement
may be proposed by the Sponsor or by Limited Owners holding at least 10% of the
Shares of the Trust. Following such proposal, the Sponsor shall submit to the
Limited Owners a verbatim statement of any proposed amendment, and statements
concerning the legality of such amendment and the effect of such amendment on
the limited liability of the Limited Owners. 
The Sponsor shall include in any such submission its recommendations as
to the proposed amendment.  The
solicitation shall be effected by notice to each shareholder given in the
manner provided in Section 15.4.  The
amendment shall become effective only upon receipt by the Trust within 60 days
after notice of solicitation is effected of (i) the written approval or
affirmative vote of Limited Owners holding at least a majority (over 50%) of
the Shares (excluding Shares held by the Sponsor and its Affiliates) or such
higher percentage as may be required by applicable law, and (ii) an opinion of
independent legal counsel to the effect that the amendment is legal, valid and binding
and will not adversely affect the limitations on liability of the Limited
Owners as described in Section 8.3 of this Trust Agreement.  Notwithstanding the foregoing, where any
action taken or authorized pursuant to any provision of this Trust Agreement
requires the approval or affirmative vote of Limited Owners holding a greater
interest in Limited Shares than is required to amend this Trust Agreement under
this Section 11.1, and/or the approval or affirmative vote of the Sponsors, an
amendment to such provision(s) shall be effective only upon the written
approval or affirmative vote of the minimum number of Shareholders which would
be required to take or authorize such action, or as may otherwise be required
by applicable law, and upon receipt of an opinion of independent legal counsel
as set forth above in this Section 11.1. 
In addition, except as otherwise provided below, reduction of the
capital account of any assignee or modification of the percentage of profits,
losses or distributions to which an assignee is entitled hereunder shall not be
affected by amendment to this Trust Agreement without such assignee’s approval.

(b)           Notwithstanding any provision to the
contrary contained in Section 11.1(a) hereof, the Sponsor may, without the
approval of the Limited Owners, make such amendments to this Trust Agreement
which (i) are necessary to add to the representations, duties or obligations of
the Sponsor or surrender any right or power granted to the Sponsor herein, for
the benefit of the Limited Owners, (ii) are necessary to cure any ambiguity, to
correct or supplement any provision herein which may be inconsistent with any
other provision herein or in the Prospectus, or to make any other provisions
with respect to matters or questions arising under this Trust Agreement or the
Prospectus which will not be inconsistent with the provisions of the Trust
Agreement or the Prospectus, or (iii) the Sponsor deems advisable, provided,
however, that no amendment shall be 

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adopted
pursuant to this clause (iii) unless the adoption thereof (A) is not adverse to
the interests of the Limited Owners; (B) is consistent with Section 4.1 hereof;
(C) does not adversely affect the limitations on liability of the Limited
Owners, as described in Article VIII hereof. 
Amendments to this document which adversely affect the rights of Limited
Owners shall occur only upon the written approval or affirmative vote of
Limited Owners holding at least a majority (over 50%) of the Shares (excluding
Shares held by the Sponsor and its Affiliates) pursuant to Section 11.1(a)
above.

(c)           Upon amendment of this Trust
Agreement, the Certificate of Trust shall also be amended, if required by the
Delaware Trust Statute, to reflect such change.

(d)           No amendment shall be made to this
Trust Agreement without the consent of the Trustee if it reasonably believes
that such amendment adversely affects any of the rights, duties or liabilities
of the Trustee.  At the expense of the
Sponsor, the Trustee shall execute and file any amendment to the Certificate of
Trust if so directed by the Sponsor or if such amendment is required in the
opinion of the Trustee.

(e)           The Trustee shall be under no
obligation to execute any amendment to the Trust Agreement or to any agreement
to which the Trust is a party until it has received an instruction letter from
the Sponsor, in form and substance reasonably satisfactory to the Trustee (i)
directing the Trustee to execute such amendment, (ii) representing and
warranting to the Trustee that such execution is authorized and permitted by
the terms of the Trust Agreement and (if applicable) such other agreement to
which the Trust is a party and does not conflict with or violate any other
agreement to which the Trust is a party and (iii) confirming that such
execution and acts related thereto are covered by the indemnity provisions of
the Trust Agreement in favor of the Trustee.

(f)            No provision of this Agreement may
be amended, waived or otherwise modified orally but only by a written
instrument adopted in accordance with this Section.

SECTION 11.2        Meetings of the Trust. Meetings of the
Shareholders may be called by the Sponsor and will be called by it upon the
written request of Limited Owners holding at least 10% of the Shares.  Such call for a meeting shall be deemed to
have been made upon the receipt by the Sponsor of a written request from the
requisite percentage of Limited Owners. 
The Sponsor shall deposit in the United States mail, within 15 days
after receipt of said request, written notice to all Shareholders thereof of the
meeting and the purpose of the meeting, which shall be held on a date, not less
than 30 nor more than 60 days after the date of mailing of said notice, at a
reasonable time and place.  Any notice of
meeting shall be accompanied by a description of the action to be taken at the
meeting and an opinion of independent counsel as to the effect of such 

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proposed
action on the liability of Limited Owners for the debts of the Trust.  Shareholders may vote in person or by proxy
at any such meeting.

SECTION 11.3        Action Without a Meeting. Any action
required or permitted to be taken by Shareholders by vote may be taken without
a meeting by written consent setting forth the actions so taken.  Such written consents shall be treated for
all purposes as votes at a meeting.  If
the vote or consent of any Shareholder to any action of the Trust or any
Shareholder, as contemplated by this Agreement, is solicited by the Sponsor,
the solicitation shall be effected by notice to each Shareholder given in the
manner provided in Section 15.4.  The
vote or consent of each Shareholder so solicited shall be deemed conclusively
to have been cast or granted as requested in the notice of solicitation,
whether or not the notice of solicitation is actually received by that
Shareholder, unless the Shareholder expresses written objection to the vote or
consent by notice given in the manner provided in Section 15.4 below and
actually received by the Trust within 20 days after the notice of solicitation
is effected.  The Sponsor and all persons
dealing with the Trust shall be entitled to act in reliance on any vote or
consent which is deemed cast or granted pursuant to this Section and shall be
fully indemnified by the Trust in so doing. 
Any action taken or omitted in reliance on any such deemed vote or
consent of one or more Shareholders shall not be void or voidable by reason of
timely communication made by or on behalf of all or any of such Shareholders in
any manner other than as expressly provided in Section 15.4.

ARTICLE XII

TERM

SECTION 12.1        Term. The term for which the Trust is to
exist shall commence on the date of the filing of the Certificate of Trust, and
shall terminate pursuant to the provisions of Article XIII hereof or as
otherwise provided by law.

ARTICLE XIII

TERMINATION

SECTION 13.1        Events Requiring Dissolution of the Trust. The
Trust shall dissolve at any time upon the happening of any of the following
events:

(a)           The filing of a
certificate of dissolution or revocation of the Sponsor’s charter (and the
expiration of 90 days after the date of notice to the Sponsor of revocation
without a reinstatement of its charter) or upon the withdrawal, adjudication or
admission of bankruptcy or insolvency of the Sponsor (each of the foregoing
events an “Event of Withdrawal”) unless at the time there is at least one
remaining Sponsor and that remaining Sponsor carries on the business of the
Trust or (ii) within 90 days of such Event of Withdrawal all the remaining
Shareholders agree in writing to continue the business of the Trust and to select,
effective as of the date of such event, one or more successor Sponsors.

 42
 

 

If the Trust is terminated as the result of an Event of Withdrawal and
a failure of all remaining Shareholders to continue the business of the Trust
and to appoint a successor Sponsor as provided in clause (a)(ii) above, within
120 days of such Event of Withdrawal, Limited Owners holding at least a
majority (over 50%) of the Shares (not including Shares held by the Sponsor and
its Affiliates) may elect to continue the business of the Trust by forming a
new statutory trust (the “Reconstituted Trust”) on the same terms and
provisions as set forth in this Trust Agreement (whereupon the parties hereto
shall execute and deliver any documents or instruments as may be necessary to
reform the Trust).  Any such election
must also provide for the election of a Sponsor to the Reconstituted
Trust.  If such an election is made, all
Limited Owners of the Trust shall be bound thereby and continue as Limited
Owners of the Reconstituted Trust.

(b)           The occurrence of any event which
would make unlawful the continued existence of the Trust.

(c)           In the event of the suspension,
revocation or termination of the Sponsor’s registration as a commodity pool
operator under the CE Act, or membership as a commodity pool operator with the
NFA (if, in either case, such registration is required under the CE Act or the
rules promulgated thereunder) unless at the time there is at least one
remaining Sponsor whose registration or membership has not been suspended, revoked
or terminated.

(d)           The Trust becomes insolvent or
bankrupt.

(e)           The Limited Owners holding at least
seventy percent (70%) of the Shares (which excludes the Shares of the Sponsor)
vote to dissolve the Trust, upon notice to the Sponsor not less than ninety
(90) days prior to the effective date of termination.

(f)            Upon written notice to the Trustee
and the Shareholders, by the Sponsor of its determination that the aggregate
net assets of the Trust in relation to the operating expenses of the Trust make
it unreasonable or imprudent to continue the business of the Trust, or, in the
exercise of its reasonable discretion, the determination by it to dissolve the
Trust because the aggregate Net Asset Value of the Trust as of the close of business
on any Business Day declines below $10 million.

(g)           The Trust is required to be
registered as an investment company under the Investment Company Act of 1940.

(h)           DTC is unable or unwilling to
continue to perform its functions, and a comparable replacement is unavailable.

(i)            The return to Subscribing
Participants of the proceeds from the sale of Limited Shares and interest
thereon pursuant to Section 3.2(c), due to the

 

 43

 

failure to
sell the Minimum Subscription Amount during the Initial Offering Period.

The death, legal disability, bankruptcy, insolvency,
dissolution, or withdrawal of any Limited Owner (as long as such Limited Owner
is not the sole Limited Owner of the Trust) shall not result in the termination
of the Trust, and such Limited Owner, his estate, custodian or personal
representative shall have no right to withdraw or value such Limited Owner’s
Shares.  Each Limited Owner (and any
assignee thereof) expressly agrees that in the event of his death, he waives on
behalf of himself and his estate, and he directs the legal representative of
his estate and any person interested therein to waive the furnishing of any
inventory, accounting or appraisal of the assets of the Trust and any right to
an audit or examination of the books of the Trust, except for such rights as
are set forth in Article IX hereof.

SECTION 13.2        Distributions on Dissolution. Upon the
dissolution of the Trust, the Sponsor (or in the event there is no Sponsor,
such person (the “Liquidating Trustee”) as the majority in interest of the
Limited Owners may propose and approve) shall take full charge of the Trust
Estate.  Any Liquidating Trustee so
appointed shall have and may exercise, without further authorization or
approval of any of the parties hereto, all of the powers conferred upon the
Sponsor under the terms of this Trust Agreement, subject to all of the
applicable limitations, contractual and otherwise, upon the exercise of such
powers, and provided that the Liquidating Trustee shall not have general
liability for the acts, omissions, obligations and expenses of the Trust.  Thereafter, in accordance with Section
3808(e) of the Delaware Trust Statute, the business and affairs of the Trust
shall be wound up and all assets shall be liquidated as promptly as is
consistent with obtaining the fair value thereof, and the proceeds therefrom
shall be applied and distributed in the following order of priority: (a) to the
expenses of liquidation and termination and to creditors, including
Shareholders who are creditors, to the extent otherwise permitted by law, in
satisfaction of liabilities of the Trust (whether by payment or the making of
reasonable provision for payment thereof) other than liabilities for distributions
to Shareholders, and (b) to the Sponsor and each Limited Owner pro rata in
accordance with his positive book capital account balance, less any amount
owing by such Shareholder.

SECTION 13.3        Termination; Certificate of Cancellation.
Following the dissolution and distribution of the assets of the Trust, the
Trust shall terminate and Sponsor or Liquidating Trustee, as the case may be,
shall instruct the Trustee to execute and cause such certificate of
cancellation of the Certificate of Trust pursuant to Section 3810(d) to be
filed in accordance with the Delaware Trust Statute.  Notwithstanding anything to the contrary
contained in this Trust Agreement, the existence of the Trust as a separate
legal entity shall continue until the filing of such certificate of
cancellation.

 44
 

 

ARTICLE XIV

POWER OF ATTORNEY

SECTION 14.1        Power of Attorney Executed Concurrently.
Concurrently with the written acceptance and adoption of the provisions of this
Trust Agreement, each Limited Owner shall execute and deliver to the Sponsor a
Power of Attorney as part of the Purchase Order Subscription Agreement, or in
such other form as may be prescribed by the Sponsor.  Each Limited Owner, by its execution and
delivery hereof, irrevocably constitutes and appoints the Sponsor and its
officers and directors, with full power of substitution, as the true and lawful
attorney-in-fact and agent for such Limited Owner with full power and authority
to act in his name and on his behalf in the execution, acknowledgment, filing
and publishing of Trust documents, including, but not limited to, the
following:

(a)           Any certificates and other
instruments, including but not limited to, any applications for authority to do
business and amendments thereto, which the Sponsor deems appropriate to qualify
or continue the Trust as a business or statutory trust in the jurisdictions in
which the Trust may conduct business, so long as such qualifications and
continuations are in accordance with the terms of this Trust Agreement or any
amendment hereto, or which may be required to be filed by the Trust or the
Shareholders under the laws of any jurisdiction;

(b)           Any instrument which may be required
to be filed by the Trust under the laws of any state or by any governmental
agency, or which the Sponsor deems advisable to file; and

(c)           This Trust Agreement and any
documents which may be required to effect an amendment to this Trust Agreement
approved under the terms of the Trust Agreement, and the continuation of the
Trust, the admission of the signer of the Power of Attorney as a Limited Owner
or of others as additional or substituted Limited Owners, or the termination of
the Trust, provided such continuation, admission or termination is in
accordance with the terms of this Trust Agreement.

SECTION 14.2        Effect of Power of Attorney. The Power of
Attorney concurrently granted by each Limited Owner to the Sponsor:

(a)           Is a special, irrevocable Power of
Attorney coupled with an interest, and shall survive and not be affected by the
death, disability, dissolution, liquidation, termination or incapacity of the
Limited Owner;

(b)           May be exercised by the Sponsor for
each Limited Owner by a facsimile signature of one of its officers or by a
single signature of one of its officers acting as attorney-in-fact for all of
them; and

 45
 

 

(c)           Shall survive the delivery of an
assignment by a Limited Owner of the whole or any portion of his Limited
Shares; except that where the assignee thereof has been approved by the Sponsor
for admission to the Trust as a substituted Limited Owner, the Power of
Attorney of the assignor shall survive the delivery of such assignment for the
sole purpose of enabling the Sponsor to execute, acknowledge and file any
instrument necessary to effect such substitution.

Each Limited Owner agrees to be bound by any
representations made by the Sponsor and by any successor thereto, determined to
be acting in good faith pursuant to such Power of Attorney and not constituting
negligence or misconduct.

SECTION 14.3        Limitation on Power of Attorney. The Power
of Attorney concurrently granted by each Limited Owner to the Sponsor shall not
authorize the Sponsor to act on behalf of Limited Owners in any situation in
which this Trust Agreement requires the approval of Limited Owners unless such
approval has been obtained as required by this Trust Agreement.  In the event of any conflict between this
Trust Agreement and any instruments filed by the Sponsor pursuant to this Power
of Attorney, this Trust Agreement shall control.

ARTICLE XV

MISCELLANEOUS

SECTION 15.1        Governing Law. The validity
and construction of this Trust Agreement and all amendments hereto shall be
governed by the laws of the State of Delaware, and the rights of all parties
hereto and the effect of every provision hereof shall be subject to and
construed according to the laws of the State of Delaware without regard to the
conflict of laws provisions thereof; provided, however, that the parties hereto
intend that the provisions hereof shall control over any contrary or limiting
statutory or common law of the State of Delaware (other than the Delaware Trust
Statute) and that, to the maximum extent permitted by applicable law, there
shall not be applicable to the Trust, the Trustee, the Sponsor, the
Shareholders or this Trust Agreement any provision of the laws (statutory or
common) of the State of Delaware (other than the Delaware Trust Statute)
pertaining to trusts which relate to or regulate in a manner inconsistent with
the terms hereof: (a) the filing with any court or governmental body or agency
of trustee accounts or schedules of trustee fees and charges, (b) affirmative
requirements to post bonds for trustees, officers, agents, or employees of a
trust, (c) the necessity for obtaining court or other governmental approval
concerning the acquisition, holding or disposition of real or personal
property, (d) fees or other sums payable to trustees, officers, agents or
employees of a trust, (e) the allocation of receipts and expenditures to income
or principal, (f) restrictions or limitations on the permissible nature, amount
or concentration of trust investments or requirements relating to the titling,
storage or other manner of holding or investing of trust assets, or (g) the
establishment of fiduciary or other standards or responsibilities or
limitations on the acts or powers of trustees or managers that are inconsistent
with the limitations on liability or 

 46
 

 

authorities and powers of the Trustee or the Sponsor set forth or
referenced in this Trust Agreement. 
Section 3540 of Title 12 of the Delaware Code shall not apply to the
Trust.  The Trust shall be of the type
commonly called a “statutory trust,” and without limiting the provisions
hereof, as determined from time to time by the Sponsor, the Trust may exercise
all powers that are ordinarily exercised by such a trust under Delaware
law.  The Trust specifically reserves the
right to exercise any of the powers or privileges afforded to statutory trusts
and the absence of a specific reference herein to any such power, privilege or
action shall not imply that the Trust may not exercise such power or privilege
or take such actions.

SECTION 15.2        Provisions In Conflict With Law or Regulations.

(a)           The provisions of this Trust
Agreement are severable, and if the Sponsor shall determine, with the advice of
counsel, that any one or more of such provisions (the “Conflicting Provisions”)
are in conflict with the Code, the Delaware Trust Statute or other applicable
U.S. federal or state laws, the Conflicting Provisions shall be deemed never to
have constituted a part of this Trust Agreement, even without any amendment of
this Trust Agreement pursuant to this Trust Agreement; provided, however, that
such determination by the Sponsor shall not affect or impair any of the
remaining provisions of this Trust Agreement or render invalid or improper any
action taken or omitted prior to such determination.  No Sponsor or Trustee shall be liable for
making or failing to make such a determination.

(b)           If any provision of this Trust
Agreement shall be held invalid or unenforceable in any jurisdiction, such
holding shall not in any manner affect or render invalid or unenforceable such
provision in any other jurisdiction or any other provision of this Trust
Agreement in any jurisdiction.

SECTION 15.3        Construction. In this Trust Agreement, unless
the context otherwise requires, words used in the singular or in the plural
include both the plural and singular and words denoting any gender include all
genders.  The title and headings of
different parts are inserted for convenience and shall not affect the meaning,
construction or effect of this Trust Agreement.

SECTION 15.4        Notices. All notices or
communications under this Trust Agreement (other than requests for redemption
of Shares, notices of assignment, transfer, pledge or encumbrance of Shares,
and reports and notices by the Sponsor to the Limited Owners) shall be in
writing and shall be effective upon personal delivery, or if sent by mail,
postage prepaid, or if sent electronically, by facsimile or by overnight
courier; and addressed, in each such case, to the address set forth in the
books and records of the Trust or such other address as may be specified in
writing, of the party to whom such notice is to be given, upon the deposit of
such notice in the United States mail, upon transmission and electronic
confirmation thereof or upon deposit with a representative of an overnight
courier, as the case may be. Requests for redemption, notices of assignment, 

 47
 

 

transfer, pledge or encumbrance of Shares shall be effective upon
timely receipt by the Sponsor in writing.

SECTION 15.5        Counterparts. This Trust Agreement may be
executed in several counterparts, and all so executed shall constitute one
agreement, binding on all of the parties hereto, notwithstanding that all the
parties are not signatory to the original or the same counterpart.

SECTION 15.6        Binding Nature of Trust Agreement.
The terms and provisions of this Trust Agreement shall be binding upon and
inure to the benefit of the heirs, custodians, executors, estates,
administrators, personal representatives, successors and permitted assigns of
the respective Shareholders. For purposes of determining the rights of any
Shareholder or assignee hereunder, the Trust and the Sponsor may rely upon the
Trust records as to who are Shareholders and permitted assignees, and all
Shareholders and assignees agree that the Trust and the Sponsor, in determining
such rights, shall rely on such records and that Limited Owners and assignees
shall be bound by such determination.

SECTION 15.7        No Legal Title to Trust Estate.
Subject to the provisions of Section 1.8 in the case of the Sponsor, the
Shareholders shall not have legal title to any part of the Trust Estate.

SECTION 15.8        Creditors. No creditors of
any Shareholders shall have any right to obtain possession of, or otherwise
exercise legal or equitable remedies with respect to the Trust Estate.

SECTION 15.9        Integration. This Trust
Agreement constitutes the entire agreement among the parties hereto pertaining
to the subject matter hereof and supersedes all prior agreements and
understandings pertaining thereto.

SECTION 15.10      Goodwill; Use of Name. No value shall be placed on the name or goodwill of the
Trust, which shall belong exclusively to XShares Advisors LLC.

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

	
  

  	
   

  
	
   

  	
  WILMINGTON
  TRUST 

  
	
   

  	
  COMPANY,

  
	
   

  	
  as Trustee

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  

 48
 

 

	
  

  	
   

  	
   

  
	
   

  	
  XSHARES ADVISORS LLC,

  
	
   

  	
  as Sponsor

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
  All Limited
  Owners now and hereafter admitted as Limited Owners of the Trust and
  reflected in the records maintained by the Depository, the DTC Participants
  or the Indirect Participants, as the case may be, as Limited Owners from time
  to time, pursuant to powers of attorney now and hereafter executed in favor
  of, and granted and delivered to, the Sponsor by each of the Limited Owners

  
	
   

  	
   

  
	
   

  	
  By:

  	
  XSHARES
  ADVISORS LLC, 

  
	
   

  	
   

  	
  as
  attorney-in-fact

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  
						

 

 49

 

EXHIBIT A

CERTIFICATE
OF TRUST 

OF

AIRSHARESTM EU CARBON ALLOWANCES FUND 

THIS Certificate of Trust of AirSharesTM EU Carbon Allowances Fund (the “Trust”) is
being duly executed and filed on behalf of the Trust by the undersigned, as
trustee, to form a statutory trust under the Delaware Statutory Trust Act (12 Del.
C. § 3801 et  seq.)
(the “Act”).

1. Name. The name of the statutory trust formed
by this Certificate of Trust is AirSharesTM EU
Carbon Allowances Fund.

2. Delaware Trustee. The name and business address
of the trustee of the Trust in the State of Delaware are Wilmington Trust
Company, 1100 North Market Street, Wilmington, DE 19890.

3. Effective Date. This Certificate of Trust
shall be effective upon filing.

IN WITNESS WHEREOF, the undersigned has duly executed
this Certificate of Trust in accordance with Section 3811(a)(1) of the Act.

	
  

  	
  WILMINGTON TRUST 

  
	
   

  	
  COMPANY, not in its individual 

  
	
   

  	
  capacity but solely as Trustee

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  

 

 

EXHIBIT B

FORM OF GLOBAL CERTIFICATE

CERTIFICATE
OF BENEFICIAL INTEREST

-Evidencing-

All
Limited Shares

-in-

AIRSHARESTM EU CARBON ALLOWANCES FUND

UNLESS
THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY
TRUST COMPANY, A NEW YORK CORPORATION (“DTC”), TO THE TRUST OR ITS AGENT FOR
REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY CERTIFICATE ISSUED IS
REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED
BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE &
CO. OR TO SUCH OTHER ENTITY AS IS REQUIRED BY AN AUTHORIZED REPRESENTATIVE OF
DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO
ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO.,
HAS AN INTEREST HEREIN.

This is
to certify that CEDE & CO. is the owner and registered holder of this
Certificate evidencing the ownership of all issued and outstanding Limited
Shares (“Shares”), each of which represents a fractional undivided Share of
beneficial interest in AirSharesTM EU
Carbon Allowances Fund (the “Trust”), a Delaware statutory trust formed under
the Delaware Statutory Trust Act (12 Del. C. § 3801 et seq.) pursuant to a Certificate of
Trust, dated as of and filed in the offices of the Secretary of State of the
State of Delaware on August 13, 2007, and an Amended and Restated Declaration
of Trust and Trust Agreement, dated as of August       ,
2007, by and among XShares Advisors LLC, a Delaware limited liability company,
as Sponsor, Wilmington Trust Company, a Delaware banking corporation, as
trustee, and the Shareholders from time to time thereunder (hereinafter called
the “Trust Agreement”), copies of which are available at the principal offices
of the Trust.

At any given time this Certificate shall represent all
Limited Shares of beneficial interest in the Trust, which shall be the total
number of Limited Shares that are outstanding at such time.  The Trust Agreement provides for the deposit
of cash with the

 

 

Trust
from time to time and the issuance by the Trust of additional Creation Baskets
representing the undivided Limited Shares of beneficial interest in the assets
of the Trust.  At the request of the
registered holder this Certificate may be exchanged for one or more
Certificates issued to the registered holder in such denominations as the
registered holder may request, provided, however, that, in the aggregate, the
Certificates issued to the registered holder hereof shall represent all Shares
outstanding at any given time.

Each Participant hereby grants and conveys all of its
rights, title and interest in and to the Trust to the extent of the undivided
interest represented hereby to the registered holder of this Certificate
subject to and in pursuance of the Trust Agreement, all the terms, conditions
and covenants of which are incorporated herein as if fully set forth at length.

The registered holder of this Certificate is entitled
at any time upon tender of this Certificate to the Trust, endorsed in blank or
accompanied by all necessary instruments of assignment and transfer in proper
form, at its principal office in the State of New York and, upon payment of any
tax or other governmental charges, to receive at the time and in the manner
provided in the Trust Agreement, such holder’s ratable portion of the assets of
the Trust for each Redemption Basket tendered and evidenced by this
Certificate.

The holder of this Certificate, by virtue of the
purchase and acceptance hereof, assents to and shall be bound by the terms of
the Trust Agreement, copies of which are on file and available for inspection
at reasonable times during business hours at the principal office of the Trust,
to which reference is made for all the terms, conditions and covenants thereof.

The Trust may deem and treat the person in whose name
this Certificate is registered upon the books of the Trust as the owner hereof
for all purposes and the Trust shall not be affected by any notice to the
contrary.

The Trust Agreement permits, with certain exceptions
as therein provided, the amendment thereof, by the Sponsor with the consent of
the Limited Owners holding Shares (excluding Shares held by the Sponsor and its
Affiliates) equal to at least a majority (over 50%) of the net asset value of
the Shares or such higher percentage as may be required by applicable law, and
upon receipt of an opinion of independent legal counsel to the effect that the
amendment is legal, valid and binding and will not adversely affect the
limitations on liability of the Limited Owners; provided, however that the
Sponsor may, without the approval of the Limited Owners, make such amendments
to the Trust Agreement which (i) are necessary to add to the representations,
duties or obligations of the Sponsor or surrender any right or power granted to
the Sponsor in the Trust Agreement, for the benefit of the Limited Owners, (ii)
are necessary to cure any ambiguity, to correct or supplement any provision in
the Trust Agreement which may be inconsistent with any other provision in the
Trust Agreement or in the Prospectus, or to make any other provisions with
respect to matters or questions arising under the Trust Agreement or the
Prospectus which will not be inconsistent with the provisions of the 

 52
 

 

Trust
Agreement or the Prospectus, or (iii) the Sponsor deems advisable, provided,
however, that no amendment shall be adopted pursuant to clause (iii) unless the
adoption thereof (A) is not adverse to the interests of the Limited Owners; (B)
is consistent with Sponsor’s control of and power to conduct the business of
the Trust; and (C) does not affect the allocation of profits and losses among
the Limited Owners or between the Limited Owners and the Sponsor.  Any such consent or waiver by the holder of
Shares shall be conclusive and binding upon such holder of Shares and upon all
future holders of Shares, and shall be binding upon any Shares, whether
evidenced by a Certificate or held in uncertificated form, issued upon the
registration or transfer hereof whether or not notation of such consent or
waiver is made upon this Certificate and whether or not the Shares evidenced
hereby are at such time in uncertificated form. 
The Agreement also permits the amendment thereof, in certain limited
circumstances, without the consent of any holders of Shares.

The Trust Agreement, and this Certificate, are
executed and delivered by XShares Advisors LLC, as Sponsor, in the exercise of
the powers and authority conferred and vested in it by the Trust
Agreement.  The representations,
undertakings and agreements made on the part of the Trust in the Trust
Agreement or this Certificate are made and intended not as personal
representations, undertakings and agreements by XShares Advisors LLC, but are
made and intended for the purpose of binding only the Trust.  Nothing in the Agreement or this Certificate
shall be construed as creating any liability on XShares Advisors LLC,
individually or personally, to fulfill any representation, undertaking or
agreement other than as provided in the Trust Agreement or this Certificate.

This Certificate shall not become valid or binding for
any purpose until properly executed by the Sponsor pursuant to the Trust
Agreement.

Terms not defined herein have the same meaning as in
the Trust Agreement.

IN WITNESS WHEREOF, XShares Advisors LLC, as Sponsor,
has caused this Certificate to be executed in its name by the manual or
facsimile signature of one of its Authorized Officers.

	
  

  	
  XShares Advisors
  LLC, 

  
	
   

  	
  as Sponsor

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Authorized Officer

  	
   

  
	
   

  	
   

  
	
   

  	
  Date:                   ,
  2007

  
						

 

 53

 

EXHIBIT C

FORM OF PARTICIPANT AGREEMENT

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