Document:

Exhibit
10.11

 

AGREEMENT

BETWEEN
OWNER AND DESIGN/BUILDER

ON THE BASIS OF A STIPULATED PRICE

 

THIS
AGREEMENT is made and
entered into this 9th day of August, 2004 by and between East
Kansas Agri-Energy, LLC, a Kansas limited liability company (hereinafter called
OWNER) and ICM, Inc., a Kansas
corporation (hereinafter called DESIGN/BUILDER).

 

OWNER
and DESIGN/BUILDER, in consideration of the mutual covenants hereinafter set
forth, agree as follows:

 

Article 1.                                            THE PROJECT AND WORK.

 

1.01.                        DESIGN/BUILDER shall complete all Work for
the Project as specified or indicated in the Contract Documents. The Project is
generally described as the design and construction of a dry mill fuel-grade
ethanol plant to be located in or near Garnett, Kansas, as more accurately described
in Exhibit B to this Agreement.  The
Design/Builder’s Work includes all engineering services, labor, materials, and
equipment to design, construct and startup a dry mill ethanol plant capable of
producing no less than 35 million gallons per year of denatured fuel-grade
ethanol and no less than 68,000 tons per year of dried distillers’ grains.  A more specific statement of the scope of
work to be provided by DESIGN/BUILDER is described in Exhibits A through G
(other than OWNER’s responsibilities set forth in Exhibit E).

 

Article 2.                                            CONTRACT TIMES.

 

2.01.                        Days to Achieve Substantial
Completion and Final Payment.  The Work will be Substantially Completed
within 345 days after the date when the Contract Times commence to run as
provided in paragraph 2.01.A of the General Conditions, and completed and ready
for final payment of the Contract Price in accordance with paragraph 13.08 of
the General Conditions within 60 days after Substantial Completion, unless
otherwise provided in the Contract Documents.

 

Article 3.                                            CONTRACT PRICE.

 

3.01.                        OWNER shall pay DESIGN/BUILDER the Contract
Price for completion of the Work in accordance with the Contract
Documents.  The Contract Price may be
adjusted as provided by the General Conditions. 
For all Work, OWNER shall pay to DESIGN/BUILDER a price equal to
Thirty-Five Million Nine Hundred Thousand Dollars ($35,900,000)

 

3.02.                        Unless otherwise expressly agreed by the
parties, the Work to be performed by DESIGN/BUILDER shall not include those
items designated as OWNER’s responsibilities in Exhibit E or in the General
Conditions.

 

3.03                           DESIGN/BUILDER shall provide to OWNER the
training described in Exhibit G.

 

3.04                           DESIGN/BUILDER agrees to maintain the
insurance coverages, limits, and deductibles set forth in Exhibit H.

 

Article 4.                                            PAYMENT PROCEDURES

 

4.01                           Payment of Contract Price.  DESIGN/BUILDER shall submit and OWNER will process Applications for
Payment of the Contract Price in accordance with Article 13 of the General
Conditions and Sections 4.01.A. through C. below.

 

 

A.            Down Payment.
At financial closing on the Project or, if earlier, delivery of the Notice to
Proceed, OWNER shall make a down payment of Four Million Dollars ($4,000,000)
to DESIGN/BUILDER which shall be applied toward the first progress payment
discussed below (with excess amounts, if any, of such deposit being applied
toward each immediately successive progress payment thereafter).

 

B.                                     Progress Payments; Retainage.  OWNER
shall make progress payments on account of the Contract Price on the basis of
DESIGN/BUILDER’s Applications for Payment, as provided in Sections 4.01.B.1 and
B.2 below.  Progress payments shall be
due and payable in accordance with 13.04 of the General Conditions.  All such payments will be measured by the
acceptable Schedule of Values established under paragraph 2.06.A of the
General Conditions.

 

1.                                       Prior to Substantial Completion, such
progress payments will be made in an amount equal to the percentage indicated
below, but, in each case, less the aggregate of payments previously made and
less such amounts as OWNER may withhold in accordance with paragraph 13.04.B of
the General Conditions.

 

a.                                       Ninety percent (90%) of Work completed (with
the balance being retainage).  Once the
Work has been fifty percent (50%) completed as determined by OWNER, there will
be no additional retainage on account of Work completed.

 

b.                                      Ninety percent (90%) (with the balance being
retainage) of the cost of materials and equipment not incorporated in the Work
(but delivered, suitably stored and accompanied by documentation satisfactory
to OWNER as provided in paragraph 13.02.A of the General Conditions).  Once the Work has been fifty percent (50%)
completed as determined by OWNER, there will be no additional retainage on
account of such costs and materials.

 

2.                                       Upon Substantial Completion, payment will be
made in an amount sufficient to increase total payments to DESIGN/BUILDER to
One Hundred percent (100%) of the Contract Price, less Five Hundred Thousand
Dollars ($500,000.00) and such amounts as OWNER may withhold in accordance with
paragraph 13.04.B of the General Conditions.

 

C.                                     Final Payment.  OWNER
shall pay the remaining $500,000 of the Contract Price to DESIGN/BUILDER in
accordance with paragraph 13.08 of the General Conditions.

 

Under
Exhibit A, DESIGN/BUILDER’s obligations include design and construction of the
Project to comply with the atmospheric emissions specifications prescribed by
the applicable State Department of Environmental Quality as of the Effective
Date of this Agreement as such specifications relate to a plant having the
capacity of producing thirty-five (35) million gallons of fuel-grade ethanol
per year.  If different specifications
are implemented (including, without limitation, emission limitations,
performance test methods, compliance procedures, or monitoring, reporting or
record keeping) after the Effective Date, then the cost of additional design,
labor, materials and equipment required to meet such specifications, if any,
shall be paid by OWNER to DESIGN/BUILDER as a Change Order cost.

 

Article 5.                                            INTEREST.

 

5.01.                        All moneys not paid by OWNER to
DESIGN/BUILDER when due hereunder shall bear interest at the rate of Eighteen
Percent (18%) per annum, compounded monthly, from the due date thereof.

 

2

 

Article 6.                                            DESIGN/BUILDER’S REPRESENTATIONS.

 

6.01.                        DESIGN/BUILDER makes the following
representations:

 

A.                                   DESIGN/BUILDER has examined and carefully
studied the Contract Documents listed in Sections 7.01.A through C, and, to the
extent prepared (but not yet approved by OWNER) prior to the Effective Date,
the documents described in Section 7.01.D.3 and .4.

 

B.                                     DESIGN/BUILDER is familiar with and is
satisfied as to all federal, state and local Laws and Regulations in existence
on the Effective Date that may affect cost, progress, performance, furnishing,
and completion of the Work in accordance with the Contract Documents.

 

C.                                     DESIGN/BUILDER is familiar with the work to
be performed by OWNER and others at the Site that relates to the Work as indicated
in the Contract Documents.

 

D.                                    DESIGN/BUILDER has correlated the information
known to DESIGN/BUILDER, reports and drawings identified in the Contract
Documents, and all additional examinations, investigations, tests, studies and
data with the Contract Documents.

 

E.                                      DESIGN/BUILDER has given OWNER written notice
of all conflicts, errors, ambiguities or discrepancies that DESIGN/BUILDER has
discovered in the Contract Documents and the written resolution thereof by
OWNER is acceptable to DESIGN/BUILDER, and the Contract Documents are
sufficient to indicate and convey understanding of all terms and conditions for
performance and furnishing of the Work.

 

F.                                      The completed Project will satisfy each of
the performance criteria set forth in Exhibit A.

 

Article 7.                                            CONTRACT DOCUMENTS.

 

7.01.                        The Contract Documents which comprise the
entire agreement between OWNER and DESIGN/BUILDER concerning the Work consist
of the following:

 

A.                                   This Agreement (pages 1 to 5, inclusive).

 

B.                                     Exhibits to this Agreement (A to H,
inclusive).

 

C.                                     General Conditions of the Contract Between
Owner and Design/Builder (pages 1 to 36, inclusive).

 

D.                                    The following which may be delivered,
prepared, or issued after the Effective Date of this Agreement and are not
attached hereto.

 

1.                                       Notice to Proceed.

 

2.                                       All Written Amendments and other documents
amending, modifying or supplementing the Contract Documents pursuant to
paragraph 3.03.A of the General Conditions.

 

3.                                       Specifications as defined in paragraph
1.01.A.32 of the General Conditions.

 

4.                                       Drawings as defined in paragraph 1.01.A.16 of
the General Conditions.

 

3

 

7.02.                        There are no Contract Documents other than
those listed above in this Article 7. 
The Contract Documents may only be amended, modified or supplemented as
provided in paragraph 3.03.A of the General Conditions.

 

Article 8.                                            EXPANSION OPTION.

 

8.01                           If requested by OWNER within two (2) years
after the date of Substantial Completion, DESIGN/BUILDER will design and
construct an expansion of the Project so that it is capable of producing not
less than forty (40) million gallons of fuel-grade ethanol per year.  For all Work performed in connection with
such expansion, OWNER shall pay to DESIGN/BUILDER a price equal to the sum of
(i) the Performance Adjustment (as defined below), and (ii) the Metal
Adjustment (as defined below) (the “Expansion Contract Price”).  “Performance Adjustment” shall mean the
amount determined by multiplying $.50 by the excess, if any, of the Added
Capacity (as defined below) over Thirty-Five Million (35,000,000).  “Added Capacity” shall mean the average
annual number of gallons of denatured fuel-grade ethanol that the Project is
capable of producing as reasonably determined by DESIGN/BUILDER based upon the
thirty (30) day performance test to be performed by DESIGN/BUILDER during or
after the third month of production after such expansion.     DESIGN/BUILDER determined the portion of
the Expansion Contract Price listed in clause (i) above in whole or part on the
costs associated with the construction of the ethanol plant for Western Plains
Energy.  Due to the subsequent increase
in the cost of metals, the Expansion Contract Price includes in clause (ii)
above an adjustment for the increased cost (if any) associated with items used
in the expansion that are metal or contain metal parts or components.  For purposes of clause (ii) above, the “Metal
Adjustment” shall equal the amount (if any) that (i) the cost for items
containing metal (including, without limitation, materials, equipment,
furnishings, tanks, values and controls) used in the expansion, exceed (ii) the
cost for such items used in the construction of the ethanol plant for Western
Plains Energy.  In connection therewith,
DESIGN/BUILDER will permit OWNER to review any and all relevant invoices and
quotes pertaining to such items used in the expansion and the construction of
the plant for Western Plains Energy.  All
of the terms and provisions of the Contract Documents shall apply to such
expansion; provided, however, OWNER shall pay to DESIGN/BUILDER Five Hundred
Thousand Dollars ($500,000.00) of the Expansion Contract Price as a down
payment under Section 4.01A., In addition to such down payment, an
additional Two Million Dollars ($2,000,000) of the Expansion Contract Price
shall be paid as progress payments under Section 4.01B (without any
retainage), and the remainder of the Expansion Contract Price (after
determination of the actual amount of the Expansion Contract Price as provided
above), if any, as final payment.

 

Article 9.                                            MISCELLANEOUS.

 

9.01.                        The attached General Conditions of the
Contract between Owner and Design/Builder are referred to herein as the General
Conditions.

 

9.02.                        Terms used in this Agreement which are
defined in Article 1 of the General Conditions will have the meanings
indicated therein.

 

9.03.                        No assignment by a party hereto of any rights
under or interests in the Contract Documents will be binding on another party
hereto without the written consent of the party sought to be bound, which
consent shall not be unreasonably withheld; and, specifically but without
limitation, moneys that may become due and moneys that are due may not be
assigned without such consent (except to the extent that the effect of this
restriction may be limited by law), and unless specifically stated to the
contrary in any written consent to an assignment no assignment will release or
discharge the assignor from any duty or responsibility under the Contract
Documents.

 

4

 

9.04.                        OWNER and DESIGN/BUILDER each binds itself,
its successors, assigns and legal representatives to the other party hereto,
its successors, assigns and legal representatives in respect to all covenants,
agreements and obligations contained in the Contract Documents.

 

9.05.                        Any provision or part of the Contract
Documents held to be void or unenforceable under any Law or Regulation shall be
deemed stricken, and all remaining provisions shall continue to be valid and
binding upon OWNER and DESIGN/BUILDER, who agree that the Contract Documents
shall be reformed to replace such stricken provision or part thereof with a
valid and enforceable provision that comes as close as possible to expressing
the intention of the stricken provision.

 

9.06.                        This Agreement may be executed in any number
of counterparts, each of which shall be deemed to be an original and all of
which shall constitute one agreement that is binding upon all of the parties
hereto, notwithstanding that all parties are not signatories to the same
counterpart.  Facsimile signatures of the
parties hereto shall be binding.

 

9.07.                        This Agreement will be effective on the date
first written above.  Within ninety (90)
days of such effective date, OWNER shall provide to DESIGN/BUILDER the Notice
to Proceed and evidence, acceptable to DESIGN/BUILDER, of funding for the
Project.

 

IN
WITNESS WHEREOF, OWNER and DESIGN/BUILDER have signed this Agreement on the
date first written above.

 

	
  OWNER: East Kansas Agri-Energy, LLC

  	
   

  	
  DESIGN/BUILDER: ICM, Inc.

  
	
   

  	
   

  	
   

  
	
  By:
  

  	
  /s/
  William Pracht

  	
   

  	
  By:
  

  	
  /s/
  Dave Vander Griend

  
	
  Title:
  

  	
  Chairman

  	
   

  	
  Title:
  

  	
  CEO

  
	
   

  	
   

  	
   

  
	
  Addresses
  for giving notices and representatives:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Name:
  

  	
  Dianne
  Allen

  	
   

  	
  Name:
  

  	
  Bob
  Shank

  
	
  Title:
  

  	
  Project
  Coordinator

  	
   

  	
  Title:
  

  	
  Project
  Manager

  
	
  Address:
  

  	
  P.O.
  Box 225 Garnett, KS 66032

  	
   

  	
  Address:

  	
  310
  N. First Street, Colwich, KS

  
	
  Phone:
  

  	
  785-448-2888

  	
   

  	
  Phone:
  

  	
  316-796-0900

  
	
  Facsimile:
  

  	
  785-448-2884

  	
   

  	
  Facsimile:
  

  	
  316-796-0570

  
															

 

5

 

GENERAL CONDITIONS OF THE

CONTRACT BETWEEN

OWNER AND DESIGN/BUILDER

 

ARTICLE 1—DEFINITIONS

 

1.01                        Defined Terms

 

A.                                   Wherever used in these General Conditions or
in the other Contract Documents the following terms have the meanings indicated
which are applicable to both the singular and plural thereof:

 

1.                    Agreement—The Agreement Between Owner and
Design/Builder on the Basis of a Stipulated Price covering the Work.  Other Contract Documents are incorporated
into the Agreement and made a part thereof as provided therein.

 

2.                    Application for Payment—The form which is to be used by
DESIGN/BUILDER in requesting progress or final payments and which is to be
accompanied by such supporting documentation as is required by the Contract
Documents.

 

3.                    Asbestos—Any material that contains more than one
percent (1%) asbestos and is friable or is releasing asbestos fibers into the
air above current action levels established by the United States Occupational
Safety and Health Administration.

 

4.                    Bonds—Performance and payment bonds and other
instruments of security.

 

5.                    Cash Flow Projection—A schedule prepared by DESIGN/BUILDER
estimating that portion of the Contract Price to be due during each month of
performance.

 

6.                    Change Order—A written order which is signed by
DESIGN/BUILDER and OWNER which authorizes an addition, deletion or revision in
the Work, or an adjustment in the Contract Price or the Contract Times, issued
on or after the Effective Date of the Agreement.

 

7.                    Construction—The performing or furnishing of labor, the
furnishing and incorporating of materials and equipment into the Work and the
furnishing of services (other than Design Professional Services) and documents,
all as required by the Contract Documents. 
Construction includes the materials and equipment incorporated into the
Project.

 

8.                    Construction Subagreement—A written agreement between DESIGN/BUILDER
and a construction contractor for provision of Construction.

 

9.                    Contract Documents—The Agreement and related exhibits, the
Notice to Proceed, these General Conditions, the Specifications and the Drawings
together with all Change Orders, and Written Amendments, issued on or after the
Effective Date of the Agreement.

 

10.              Contract Price—The moneys payable by OWNER to DESIGN/BUILDER
for completion of the Work in accordance with the Contract Documents.

 

11.              Contract Times—The number of days or the dates stated in the
Agreement (i) to achieve Substantial Completion, and (ii) to complete the Work
so that it is ready for final payment of the Contract Price in accordance with
paragraph 13.08.

 

1

 

12.              defective—An adjective which when modifying the term
Construction refers to Construction that is unsatisfactory, faulty or
deficient, in that it does not conform to the Contract Documents, or does not
meet the requirements of any inspection, reference standard, test or approval
referred to in the Contract Documents, or has been damaged prior to OWNER’s
final payment.

 

13.              DESIGN/BUILDER—ICM, Inc., a Kansas corporation.

 

14.              Design Subagreement—A written agreement between DESIGN/BUILDER
and a design professional for provision of Design Professional Services.

 

15.              Design Professional Services—Services provided by or for licensed design
professionals during Construction, or operational phases of the Project,
including the development of drawings, Specifications, and other design
submittals specified by the Contract Documents and required to be performed by
licensed design professionals.

 

16.              Drawings—Those portions of the Contract Documents
prepared by or for DESIGN/BUILDER and approved by OWNER consisting of drawings,
diagrams, illustrations, schedules and other data which show the scope, extent,
and character of the Work.

 

17.              Effective Date of the Agreement—The date indicated in the Agreement on which
it becomes effective, but if no such date is indicated it means the date on
which the Agreement is signed and delivered by the last of the two parties to
sign and deliver.

 

18.              Engineer—A duly licensed individual or entity
designated by DESIGN/BUILDER to perform or furnish specified Design
Professional Services in connection with the Work.

 

19.              Hazardous Condition—The presence at the Site of Asbestos,
Hazardous Waste, PCB’s, Petroleum Products or Radioactive Materials in such
quantities or circumstances deemed to be hazardous under applicable Laws or
Regulations.

 

20.              Hazardous Waste—The term Hazardous Waste shall have the
meaning provided in Section 1004 of the Solid Waste Disposal Act (42 USC Section 6903).

 

21.              Laws and Regulations; Laws or
Regulations—Any and all
applicable laws, rules, regulations, ordinances, codes, permits, and orders of
any and all governmental bodies, agencies, authorities and courts having
jurisdiction.

 

22.              Liens—Charges, security interests or encumbrances
upon real property or personal property.

 

23.
Notice to Proceed—A written notice
given by OWNER to DESIGN/BUILDER fixing the date on which the Contract Times
will commence to run.

 

24.              OWNER—The public body, or authority, individual or
entity with whom DESIGN/BUILDER has entered into the Agreement and for whom the
Work is to be provided.

 

25.              PCBs—Polychlorinated biphenyls.

 

26.              Petroleum—Petroleum, including crude oil or any
fraction thereof which is liquid at standard conditions of temperature and
pressure (60 degrees Fahrenheit and 14.7 pounds per square inch absolute), such
as oil, petroleum, fuel oil, oil sludge, oil refuse, gasoline, kerosene, and
oil mixed with other non-Hazardous Wastes and crude oils.

 

2

 

27.              Project—The Construction to be provided under the
Contract Documents as provided in paragraph 1.01 of the Agreement.

 

28.              Radioactive Material—Source, special nuclear, or byproduct
material as defined by the Atomic Energy Act of 1954 (42 USC Section 2011
et seq.) as amended from time to time.

 

29.              Schedule of Values—A schedule prepared by DESIGN/BUILDER
and acceptable to OWNER indicating that portion of the Contract Price to be
paid for each major component of the Work.

 

30.              Site—Lands or other areas designated in the
Contract Documents as being furnished by OWNER for the performance of the
Construction, storage, or access.

 

31.              Specifications—Those portions of the Contract Documents
prepared by or for DESIGN/BUILDER and approved by OWNER consisting of written
technical descriptions of materials, equipment, construction systems, standards
and workmanship as applied to the Construction and certain administrative
details applicable thereto.

 

32.              Subcontractor—An individual or entity other than a Supplier
or Engineer having a direct contract with DESIGN/BUILDER or with any other
Subcontractor for the performance of a part of the Work.

 

33.              Submittal—A written or graphic document prepared by or
for DESIGN/BUILDER which is required by the Contract Documents to be submitted
to OWNER by DESIGN/BUILDER.  Submittals
may include Drawings, Specifications, progress schedules, shop drawings,
samples, Cash Flow Projections, and Schedules of Values.  Submittals other than Drawings and
Specifications are not Contract Documents.

 

34.              Substantial Completion—The time at which the Construction (or a
specified part) has progressed to the point where it is sufficiently complete,
in accordance with the Contract Documents, so that ethanol and distiller’s
grains can be produced.  The terms “substantially
complete” and “substantially completed” as applied to the Construction refer to
Substantial Completion of Construction.

 

35.              Supplier—A manufacturer, fabricator, supplier,
distributor, materialman or vendor having a direct contract with DESIGN/BUILDER
or with any Subcontractor to furnish materials or equipment to be incorporated
in the Work by DESIGN/BUILDER or any Subcontractor.

 

36.              Work—The entire completed construction or the
various separately identifiable parts thereof required to be performed or
furnished under the Contract Documents. 
Work includes and is the result of performing or furnishing Design
Professional Services and Construction required by the Contract Documents.

 

37.              Written Amendment—A written amendment of the Contract
Documents, signed by OWNER and DESIGN/BUILDER on or after the Effective Date of
the Agreement and normally dealing with the nonengineering or nontechnical
rather than strictly design or construction-related aspects of the Contract
Documents.

 

3

 

ARTICLE 2—PRELIMINARY
MATTERS

 

2.01                        Commencement of Contract Times;
Notice to Proceed

 

A.                The Contract Times
will commence to run on the day indicated in the Notice to Proceed.  A Notice to Proceed may be given at any time
within the period of time set forth in Section 9.07 of the Agreement.

 

2.02                        Starting the Work

 

A.                DESIGN/BUILDER shall start to perform the
Work on the date when the Contract Times commence to run.

 

2.03                        Before Starting Construction

 

A.                DESIGN/BUILDER shall submit the following for
review within ten (10) days after commencement of the Contract Times:

 

1.                    A preliminary progress schedule indicating
the times (number of days or dates) for starting and completing the various
stages in the design and construction of the Work;

 

2.                    A preliminary Schedule of Values for all
of the Work, which will include quantities and prices of items aggregating the
Contract Price and will subdivide the Work into component parts in sufficient
detail acceptable to OWNER to serve as the basis for progress payments during
performance of the Work.  Such prices
will include a pro rata amount of overhead and profit applicable to each item
of Work; and

 

3.                    A preliminary Cash Flow Projection.

 

B.                  Before any Work is started, DESIGN/BUILDER
and OWNER shall each deliver to the other, with copies to each additional
insured, certificates of insurance (and other evidence of insurance which
either of them or any additional insured may reasonably request) which
DESIGN/BUILDER and OWNER respectively are required to purchase and maintain in
accordance with paragraphs 5.02.A, 5.04.A and 5.04.B.

 

2.04                        Initial Conference

 

A.                Within twenty (20) days after the Contract
Times start to run, a conference by telephone or in person with OWNER,
DESIGN/BUILDER and others as appropriate will be held to establish a working
understanding among the parties as to the Work and to discuss the design
concepts, schedules referred to in paragraph 2.03.A, procedures for handling
Submittals, processing Applications for Payment, maintaining required records,
items required pursuant to paragraph 8.01.A.6 and other matters.

 

2.05                        Initially Acceptable Schedules

 

A.                At least ten (10) days before submission of
the first Application for Payment a conference by telephone or in person with
DESIGN/BUILDER, OWNER and others as appropriate will be held to review for
acceptability the schedules submitted in accordance with paragraph 2.03.A.  DESIGN/BUILDER shall have an additional ten
(10) days to make corrections and adjustments and to complete and resubmit the
schedules.  No progress payment shall be
made to DESIGN/BUILDER until the schedules are submitted to and acceptable to
OWNER as provided below. The progress schedule will 

 

4

 

be acceptable to OWNER as
providing an orderly progression of the Work to completion within the Contract
Times, but such acceptance will neither impose on OWNER responsibility for the
sequencing, scheduling or progress of the Work nor interfere with or relieve
DESIGN/BUILDER from DESIGN/BUILDER’s full responsibility therefor.  The format and structure of the progress schedule will
be acceptable to OWNER.  OWNER’s
acceptance shall not be deemed to confirm that the schedule is a
reasonable plan for performing the Work. 
DESIGN/BUILDER’s Schedule of Values and Cash Flow Projection will
be acceptable to OWNER as to form and substance.

 

ARTICLE 3—CONTRACT
DOCUMENTS:  INTENT, AMENDING, REUSE

 

3.01                        Intent

 

A.                The Contract Documents comprise the entire
agreement between OWNER and DESIGN/BUILDER concerning the Work.  The Contract Documents are complementary;
what is called for by one is as binding as if called for by all.  The Contract Documents will be construed in
accordance with the laws of the State of Kansas.  Except as otherwise required by applicable
Laws and Regulations, the Contract Documents shall govern the obligations of
the parties regarding the Work and Project.

 

B.                  It is the intent of the Contract Documents to
describe a functionally complete Project to be designed and constructed in accordance
with the Contract Documents.  Any Work,
materials or equipment that may reasonably be inferred from the Contract
Documents or from prevailing custom or trade usage as being required to produce
the intended result will be furnished and performed whether or not specifically
called for.  When words or phrases which
have a well-known technical or construction industry or trade meaning are used
to describe work, materials or equipment, such words or phrases shall be
interpreted in accordance with that meaning.

 

3.02                        References

 

A.                Reference to standards, specifications,
manuals or codes of any technical society, organization or association, or to
the Laws or Regulations of any governmental authority, whether such reference
be specific or by implication, shall mean the latest standard, specification,
manual, code or Laws or Regulations in effect on the Effective Date of the
Agreement except as may be otherwise specifically stated in the Contract
Documents.

 

B.                  No provision of any standard, specification,
manual, code or instruction shall be effective to change the duties and
responsibilities of OWNER, DESIGN/BUILDER or any of their subcontractors,
consultants, agents, or employees from those set forth in the Contract
Documents, nor shall it be effective to assign to OWNER any duty or authority
to supervise or direct the furnishing or performance of the Work or any duty or
authority to undertake responsibility inconsistent with the provisions of Article 8
or any other provision of the Contract Documents.

 

3.03                     Amending and Supplementing
Contract Documents

 

A.                The Contract Documents may be amended to
provide for additions, deletions and revisions in the Work or to modify the
terms and conditions thereof in one or more of the following ways:

 

1.                    A Change Order; or

 

2.                    A formal Written Amendment.

 

5

 

3.04                        Reuse of Documents

 

A.                All documents including Drawings and
Specifications prepared or furnished by DESIGN/BUILDER pursuant to the Contract
Documents are instruments of service in respect of the Project and
DESIGN/BUILDER shall retain an ownership and property interest therein whether
or not the Project is completed.  OWNER
may make and retain copies for information and reference in connection with the
use and occupancy of the Project by OWNER and others; however, such documents
are not intended or represented to be suitable for reuse by OWNER or others on
extensions of the Project or on any other project.  Any reuse without written verification or
adaptation by DESIGN/BUILDER for the specific purpose intended will be at OWNER’s
sole risk and without liability or legal exposure to DESIGN/BUILDER, and OWNER
shall indemnify and hold harmless DESIGN/BUILDER, Subcontractors, and Engineer
from all claims, damages, losses and expenses including attorneys’ fees arising
out of or resulting therefrom.  Any such
verification or adaptation will entitle DESIGN/BUILDER to further compensation
at rates to be agreed upon by OWNER and DESIGN/BUILDER.

 

B.                  In addition to paragraph 3.04.A, all
documents including Drawings and Specifications prepared or furnished by
DESIGN/BUILDER pursuant to the Contract Documents are subject to the use and
disclosure restrictions set forth in Exhibit F attached to the Agreement.  Nothing contained in paragraph 3.04.A. shall
be construed or interpreted as granting OWNER any rights or interest in the
PROPRIETARY PROPERTY (as defined in Exhibit F) other than as expressly provided
in Exhibit F attached to the Agreement.

 

ARTICLE 4—AVAILABILITY
OF LANDS; DIFFERING SITE CONDITIONS; REFERENCE POINTS; HAZARDOUS CONDITIONS

 

4.01                        Availability of Lands

 

A.                OWNER shall furnish, as indicated in the
Contract Documents, the lands upon which the Construction is to be performed,
rights-of-way and easements for access thereto, and such other lands which are
designated for the use of DESIGN/BUILDER.

 

B.                  Upon reasonable written request, OWNER shall
furnish DESIGN/BUILDER with a correct statement of record legal title and legal
description of the lands upon which the Construction is to be performed and
OWNER’s interest therein.  OWNER shall
identify any encumbrances or restrictions not of general application but
specifically related to use of lands so furnished with which DESIGN/BUILDER
will have to comply in performing the Work. 
Easements for permanent structures or permanent changes in existing
facilities will be obtained and paid for by OWNER, unless otherwise provided in
the Contract Documents.

 

C.                  OWNER shall provide any of its lands and
access thereto that may be required for temporary construction facilities or
storage of materials and equipment.

 

4.02                        Differing Site Conditions

 

A.                DESIGN/BUILDER shall promptly, and before the
conditions are disturbed, give a written notice to OWNER of (i) subsurface or
latent physical conditions at the Site which differ materially from those
indicated in the OWNER’s geotechnical report for the Project site or the land
and grading specifications listed in Exhibit E, or (ii) unknown physical
conditions at the Site, of an unusual nature, which differ materially from
those ordinarily encountered and generally recognized as inhering in work of
the character called for by the Contract Documents.

 

6

 

B.                  OWNER will investigate the site conditions
promptly after receiving the notice.  If
the conditions do materially so differ and cause an increase or decrease in the
DESIGN/BUILDER’s cost of performing any part of the Work, an equitable
adjustment shall be made under this clause and the Contract Price modified in
writing by Change Order in accordance with Article 9.

 

C.                  No request by DESIGN/BUILDER for an equitable
adjustment under paragraph 4.02 shall be allowed unless DESIGN/BUILDER has
given the written notice required; provided that the time prescribed in
paragraph 9.02.A for giving written notice may be extended by OWNER.

 

4.03                        Reference Points

 

A.                DESIGN/BUILDER shall be responsible for
laying out the construction and shall protect and preserve the reference points
established by OWNER pursuant to paragraph 8.01.A.6.e and shall make no changes
or relocations without the prior written approval of OWNER.  DESIGN/BUILDER shall report to OWNER whenever
any reference point or property monument is lost or destroyed or requires
relocation because of necessary changes in grades or locations, and shall be
responsible for the accurate replacement or relocation of such reference points
or property monuments by professionally qualified personnel.

 

4.04                        Hazardous Conditions

 

A.                OWNER represents and warrants that there is
no Hazardous Condition or materials that could create a Hazardous Condition
existing at the Site as of the Effective Date of the Agreement that has not
been disclosed in writing to DESIGN/BUILDER and that OWNER or OWNER’s officers,
directors, employees, agents, other consultants or subcontractors shall not
bring to the Site during the term of the Agreement any materials creating a
Hazardous Condition.  OWNER will be
responsible for any Hazardous Condition encountered at the Site which was not
identified in the Contract Documents to be within the scope of the Work.  OWNER shall not be responsible for materials
creating a Hazardous Condition brought to the Site by DESIGN/BUILDER,
Subcontractors, Suppliers or anyone else for whom DESIGN/BUILDER is responsible.

 

B.                  DESIGN/BUILDER and any affected Subcontractor
shall immediately (i) stop all Construction in connection with such Hazardous
Condition and in any area affected thereby (except in an emergency as required
by paragraph 6.15), and (ii) notify OWNER (and thereafter confirm such notice
in writing).  OWNER shall promptly
determine the necessity of retaining a qualified expert to evaluate such
Hazardous Condition or take corrective action, if any.  DESIGN/BUILDER shall not be required to
resume Construction in connection with such Hazardous Condition or in any such
affected area until after OWNER has obtained any required permits related
thereto and delivered to DESIGN/BUILDER special written notice (i) specifying
that such Hazardous Condition and any affected area is or has been rendered
safe for the resumption of Construction, or (ii) specifying any special
conditions under which such Construction may be resumed safely.  If OWNER and DESIGN/BUILDER cannot agree as
to entitlement to or the amount or extent of an adjustment, if any, in Contract
Price as a result of such Construction stoppage or such special conditions
under which Construction is agreed by DESIGN/BUILDER to be resumed, either
party may make a claim therefor as provided in Article 9.

 

C.                  To the fullest extent permitted by Laws and
Regulations, OWNER shall indemnify and hold harmless DESIGN/BUILDER,
Subcontractors, Suppliers, Engineers and the officers, directors, employees,
agents, other consultants and subcontractors of each and any of them from and
against all claims, costs, losses and damages (including but not limited to all
reasonable fees and charges of engineers, architects, attorneys and other
professionals and all court or arbitration or other dispute resolution costs)
arising out of or resulting from such Hazardous Condition.  Nothing in this paragraph 

7

 

4.04.C shall obligate OWNER to indemnify any
individual or any entity, including DESIGN/BUILDER, from and against the
consequences of that individual’s or entity’s own negligence or willful
misconduct.  OWNER shall not be obligated
to indemnify or hold harmless DESIGN/BUILDER, Subcontractors, Suppliers or any
other individual or any entity for any such claim, cost, loss or damage arising
out of or resulting from materials creating a Hazardous Condition brought to
the Site by DESIGN/BUILDER, Subcontractors, Suppliers or any other party for
whom DESIGN/BUILDER is responsible. 
DESIGN/BUILDER shall indemnify and hold harmless OWNER and OWNER’s officers,
directors, employees, agents, other consultants and subcontractors of each and
any of them from and against all claims, costs, losses and damages (including
reasonable attorney fees) arising out of or resulting from materials creating a
Hazardous Condition brought to the Site by DESIGN/BUILDER, Subcontractors,
Suppliers or any other party for whom DESIGN/BUILDER is responsible.

 

ARTICLE 5—BONDS
AND INSURANCE

 

5.01                        Performance, Payment and Other
Bonds

 

A.                DESIGN/BUILDER shall not be required to furnish
a performance, payment or any other Bonds.

 

5.02                        DESIGN/BUILDER’s Liability
Insurance

 

A.                DESIGN/BUILDER shall purchase and maintain
such Commercial General Liability (subject to customary exclusions in respect
of professional liability), Automobile Liability and Worker’s Compensation
insurance as is appropriate for the Work being performed and furnished and as
will provide protection from claims set forth below which may arise out of or
result from DESIGN/BUILDER’s performance and furnishing of the Work and
DESIGN/BUILDER’s other obligations under the Contract Documents, whether it is
to be performed or furnished by DESIGN/BUILDER, any Subcontractor or Supplier,
or by anyone directly or indirectly employed by any of them to perform or
furnish any of the Work, or by anyone for whose acts any of them may be liable:

 

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

 

2.                    Claims for damages because of bodily injury,
occupational sickness or disease, or death of DESIGN/BUILDER’s employees;

 

3.                    Claims for damages because of bodily injury,
sickness or disease, or death of any person other than DESIGN/BUILDER’s
employees;

 

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

 

5.                    Claims for damages, other than to the Work
itself, because of injury to or destruction of tangible property wherever
located other than claims under paragraph 5.02.A.7. below, including loss of
use resulting therefrom;

 

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

 

7.                    Claims for professional errors and omissions
arising from the Design Professional Services provided for the Project.

 

8

 

B.                  The policies of insurance required by
paragraph 5.02.A shall:

 

1.                    With respect to insurance required by
paragraphs 5.02.A.3 through 5.02.A.6 inclusive, include as additional insureds
OWNER and any other persons or entities identified in writing by OWNER, all of
whom shall be listed as additional insureds, and include coverage for the
respective officers and employees of all such additional insureds;

 

2.                    Include at least the specific coverages and
be written for not less than the limits of liability set forth in Exhibit H or
required by Laws or Regulations, whichever is greater;

 

3.                    Include completed operations insurance;

 

4.                    Include contractual liability insurance
covering DESIGN/BUILDER’s indemnity obligations under paragraphs 6.06, 6.10 and
6.19;

 

5.                    Contain a provision or endorsement that the
coverage afforded will not be cancelled, materially changed or renewal refused
until at least thirty (30) days prior written notice has been given to OWNER
and each other additional insured to whom a certificate of insurance has been
issued (and the certificates of insurance furnished by the DESIGN/BUILDER
pursuant to paragraph 5.08.B will so provide);

 

6.                    Remain in effect at least until final payment
and at all times thereafter when DESIGN/BUILDER may be correcting, removing or
replacing defective Construction in accordance
with paragraphs 12.06 and 12.07;

 

7.                    With respect to completed operations
insurance, remain in effect for at least one year after final payment (and
DESIGN/BUILDER shall furnish OWNER and each other additional insured to whom a
certificate of insurance has been issued evidence satisfactory to OWNER and any
such additional insured of continuation of such insurance at final payment);
and

 

8.                    DESIGN/BUILDER shall maintain in effect all
insurance coverage required under this paragraph at the DESIGN/BUILDER’S sole
expense with insurance companies (and policies) approved by OWNER and lawfully
authorized to do business in the jurisdiction in which the Project is
located.  If the DESIGN/BUILDER fails to
obtain or maintain any insurance coverage required under this Agreement, the
OWNER may purchase such coverage and charge the expense to the DESIGN/BUILDER,
or terminate this Agreement for cause in accordance with paragraph 14.02 below.

 

5.03                        OWNER’s Liability Insurance

 

A.                In addition to the insurance required to be
provided by DESIGN/BUILDER under paragraph 5.02, OWNER, at OWNER’s option, may
purchase and maintain at OWNER’s expense OWNER’s own liability insurance as
will protect OWNER against claims which may arise from operations under the
Contract Documents.

 

9

 

5.04                        Property Insurance

 

A.                OWNER shall purchase and maintain property
insurance upon the Construction at the Site in the amount of the full
replacement cost thereof at the OWNER’s sole expense with insurance companies
(and policies) approved by DESIGN/BUILDER and lawfully authorized to do
business in the jurisdiction in which the Project is located (subject to such
deductible amounts as may be agreed to by OWNER and DESIGN/BUILDER or as may be
required by Laws and Regulations).  This
insurance will:

 

1.                    Include the interests of OWNER,
DESIGN/BUILDER, Subcontractors, and any other persons or entities listed as an
insured or additional insured;

 

2.                    Be written on a Builder’s Risk “all-risk” or
equivalent policy form that shall at least include insurance for physical loss
and damage to the Construction, temporary buildings, falsework and all
materials and equipment in transit, and shall insure against at least the
following perils or causes of loss: 
fire, lightning, extended coverage, theft, vandalism and malicious
mischief, earthquake, collapse, debris removal, demolition occasioned by
enforcement of Laws and Regulations, water damage, flood, system testing, and
such other perils or causes of loss as may be agreed in writing by
DESIGN/BUILDER and OWNER;

 

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

 

4.                    Cover materials and equipment stored at the
Site or at another location that was agreed to in writing by OWNER prior to
being incorporated in the Construction, provided that such materials and
equipment have been included in an Application for Payment approved by OWNER; and

 

5.                    Be maintained in effect until final payment
is made unless otherwise agreed to in writing by OWNER and DESIGN/BUILDER with
thirty (30) days written notice to each other additional insured to whom a
certificate of insurance has been issued.

 

B.                  OWNER shall purchase and maintain such boiler
and machinery insurance or additional property insurance as DESIGN/BUILDER may
reasonably require or required by Laws and Regulations which will include the
interests of OWNER, DESIGN/BUILDER, Subcontractors, and other individuals and
entities listed as an insured or additional insured.

 

C.                  All the policies of insurance (and the
certificates or other evidence thereof) required to be purchased and maintained
by OWNER in accordance with paragraph 5.04 will contain a provision or
endorsement that the coverage afforded will not be cancelled or materially
changed or renewal refused until at least thirty (30) days prior written notice
has been given to DESIGN/BUILDER and to each other additional insured to whom a
certificate of insurance has been issued.

 

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

 

E.                   If DESIGN/BUILDER requests in writing that
other special insurance be included in the property insurance policies provided
under paragraph 5.04, OWNER shall, if possible, include such insurance, and 

 

10

 

the cost thereof will be
charged to DESIGN/BUILDER by appropriate Change Order or Written
Amendment.  Prior to commencement of the
Work at the Site, OWNER shall in writing advise DESIGN/BUILDER whether or not
such other insurance has been procured by OWNER.

 

5.05                        Waiver of Subrogation Rights

 

A.                OWNER and DESIGN/BUILDER intend that all
policies purchased in accordance with paragraph 5.04 will protect OWNER, DESIGN/BUILDER,
Engineers, Subcontractors, others who may have a financial interest in the
Project, and all other individuals or entities listed as insureds or additional
insureds in such policies and will provide primary coverage for all losses and
damages caused by the perils or causes of loss covered thereby.  All such policies shall contain provisions to
the effect that in the event of payment of any loss or damage the insurers will
have no rights of recovery against any of the insureds or additional insureds
thereunder.  Each party waives all rights
against the other party and its officers, directors, employees, members, and
agents for all losses and damages caused by, arising out of or resulting from
any of the perils or causes of loss covered by such policies and any other
property insurance applicable to the Work.

 

5.06                        Receipt and Application of
Proceeds

 

A.                Any insured loss under the policies of
insurance required by paragraph 5.04 will be adjusted with OWNER and made
payable to OWNER as fiduciary for the benefit of insureds, as their interests
may appear, subject to the requirements of any applicable mortgage clause and
of paragraph 5.06.B.  OWNER shall deposit
in a separate account any money so received, and shall distribute it in
accordance with such agreement as the parties in interest may reach.  If no other special agreement is reached the
damaged Work shall be repaired or replaced, the moneys so received applied on
account thereof and the Work and the cost thereof covered by an appropriate
Change Order or Written Amendment.

 

B.                  OWNER as fiduciary shall have power to adjust
and settle any loss with the insurers unless one of the parties in interest
shall object in writing within fifteen (15) days after the occurrence of loss
to OWNER’s exercise of this power.  If
such objection be made, OWNER as fiduciary shall make settlement with the
insurers in accordance with such agreement as the parties in interest may
reach.  If no such agreement among the
parties in interest is reached, OWNER as fiduciary shall adjust and settle the
loss with the insurers and, if required in writing by any party in interest,
OWNER as fiduciary shall give bond for the proper performance of such duties..

 

5.07                        Acceptance of Insurance; Option
to Replace

 

A.                If either party has any objection to the
coverage afforded by or other provisions of the insurance required to be
purchased and maintained by the other party in accordance with Article 5
on the basis of their not complying with the Contract Documents, the objecting
party shall so notify the other party in writing within thirty (30) days after
receipt of the certificates (or other evidence requested) required by paragraph
2.03.B.  OWNER and DESIGN/BUILDER shall
each provide to the other such additional information in respect of insurance
provided as the other may reasonably request. 
If either party does not purchase or maintain all of the insurance
required of such party by the Contract Documents, such party shall notify the
other party in writing of such failure to purchase prior to the start of the
Work, or of such failure to maintain prior to any change in the required
coverage.  Without prejudice to any other
right or remedy, the other party may elect to obtain equivalent insurance to protect
such other party’s interests at the expense of the party who was supposed to
provide such coverage, and a Change Order or Written Amendment shall be issued
to adjust the Contract Price accordingly.

 

11

 

5.08                        Licensed Sureties and Insurers;
Certificates of Insurance

 

A.                All insurance required by the Contract
Documents to be purchased and maintained by OWNER or DESIGN/BUILDER shall be
obtained from insurance companies that are duly licensed or authorized in the
jurisdiction in which the Project is located to issue insurance policies for
the limits and coverages so required. 
Such insurance companies shall also meet such additional requirements
and qualifications as may be agreed in writing by DESIGN/BUILDER and OWNER.

 

B.                  DESIGN/BUILDER shall deliver to OWNER, with
copies to each additional insured, certificates of insurance (and other
evidence of insurance requested by OWNER or any other additional insured)
which  DESIGN/BUILDER is required to
purchase and maintain in accordance with paragraph 5.02.A.  OWNER shall deliver to DESIGN/BUILDER, with
copies to each additional insured, certificates of insurance (and other
evidence of insurance requested by DESIGN/BUILDER or any other additional
insured) which OWNER is required to purchase and maintain in accordance with
paragraphs 5.04.A and 5.04 B.

 

ARTICLE 6—DESIGN/BUILDER’S
RESPONSIBILITIES

 

6.01                        Design Professional Services

 

A.                Standard of Care: 
DESIGN/BUILDER shall perform or furnish Design Professional Services and
related services in all phases of the Project. 
The standard of care for all such services performed or furnished under
this Agreement will be the care and skill ordinarily used by members of the
engineering profession practicing under similar conditions at the same time and
locality.  Notwithstanding the foregoing,
if the parties agree in writing upon specific standards for the Work (i.e.,
Performance Guarantee Criteria), the Design Professional Services shall be
performed to achieve such standards.

 

B.                  Preliminary Design Phase: 
During the preliminary design phase, DESIGN/BUILDER shall:

 

1.                    Consult with OWNER to understand OWNER’s
requirements for the Project and review available data.

 

2.                    Advise OWNER as to the necessity of OWNER
providing or obtaining from others additional reports, data or services of the
types provided in paragraph 8.01.A.6.a-g and assist OWNER in obtaining such
reports, data, or services.

 

3.                    Identify and analyze requirements of
governmental authorities having jurisdiction to approve the portions of the
Project designed or specified by DESIGN/BUILDER with whom consultation is to be
undertaken in connection with the Project.

 

4.                    Obtain such additional geotechnical and
related information which it deems necessary for performance of the Work.

 

5.                    Prepare preliminary design documents
consisting of final design criteria, preliminary drawings, outline
specifications, and written descriptions of the Project.

 

6.                    Furnish the preliminary design documents to
and review them with OWNER within the time indicated in the schedules described
in paragraph 2.05.A.

 

12

 

C.                  Final Design Phase:  After
written acceptance by OWNER of the preliminary design phase documents
DESIGN/BUILDER shall:

 

1.                    On the basis of the accepted preliminary
design phase documents, prepare final Drawings showing the scope, extent, and
character of the Construction to be performed and furnished by DESIGN/BUILDER
and Specifications.

 

2.                    Provide technical criteria, written
descriptions and design data required for obtaining approvals of such
governmental authorities as have jurisdiction to review or approve the final
design of the Project, and assist OWNER in consultations with appropriate
authorities.

 

3.                    Furnish the above documents, Drawings and
Specifications to and review them with OWNER within the time indicated in the
schedules described in paragraphs 2.03.A and 2.05.A.

 

D.                 Construction Phase. 
During Construction, DESIGN/BUILDER shall provide Engineering and Design
Professional Services as necessary to complete the Project.

 

E.                   Operational Phase: 
During the operational phase, DESIGN/BUILDER shall:

 

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

 

2.                    Assist OWNER in training staff to operate and
maintain the Project as provided in Exhibit G.

 

Other
than assistance normally provided in the industry after final payment, nothing
in this paragraph 6.01.E. shall be interpreted or construed as obligating
DESIGN/BUILDER to perform or provide such assistance to OWNER after final
payment and acceptance of the Work under paragraph 13.09 below.

 

6.02                        Supervision and Superintendence
of Construction

 

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

 

B.                  DESIGN/BUILDER shall keep on the Site at all
times during construction a competent resident superintendent, who shall not be
replaced without written notice to OWNER except under extraordinary
circumstances.  The superintendent will
be DESIGN/BUILDER’s representative at the Site and shall have authority to act
on behalf of DESIGN/BUILDER.  All
communications to the superintendent shall be as binding as if given to
DESIGN/BUILDER.

 

6.03                        Labor, Materials and Equipment

 

A.                DESIGN/BUILDER shall provide competent, suitably
qualified personnel to survey and lay out the Construction and perform
Construction as required by the Contract Documents. DESIGN/BUILDER shall at all
times maintain good discipline and order at the Site.

 

B.                  Unless otherwise specified in the Contract
Documents, DESIGN/BUILDER shall furnish or cause to be furnished and assume
full responsibility for materials, equipment, labor, transportation,
construction equipment and machinery, tools, appliances, fuel, power, light,
heat, telephone, water, sanitary facilities, 

 

13

 

temporary facilities and
all other facilities and incidentals necessary for the furnishing, performance,
testing, start-up and completion of the Work. 
DESIGN/BUILDER will direct the checkout of utilities and operations of
systems and equipment.

 

C.                  All materials and equipment incorporated into
the Work shall be of good quality and new. 
All warranties and guarantees specifically called for by the Contract
Documents shall expressly run to the benefit of OWNER.  If reasonably required by OWNER,
DESIGN/BUILDER shall furnish satisfactory evidence (including reports of
required tests) as to the kind and quality of materials and equipment.  All materials and equipment shall be applied,
installed, connected, erected, used, cleaned and conditioned in accordance with
instructions of the applicable Supplier.

 

6.04                        Progress Schedule

 

A.                DESIGN/BUILDER shall adhere to the progress schedule established
in accordance with paragraph 2.05.A as it may be adjusted from time to time.

 

1.                    DESIGN/BUILDER shall submit to OWNER for
acceptance proposed adjustments in the progress schedule that will not
change the Contract Times.  Such
adjustments will conform generally to the progress schedule then in
effect.

 

2.                    Proposed adjustments in the progress schedule that
will change the Contract Times  shall be
submitted in accordance with the requirements of Article 11.  Such adjustments may only be made by a Change
Order or Written Amendment.

 

6.05 Concerning Subcontractors, Suppliers and Others

 

A.                DESIGN/BUILDER shall not employ any
Subcontractor, Engineer, Supplier or other individual or entity against whom
OWNER may have reasonable objection. 
DESIGN/BUILDER shall not be required to employ any Subcontractor,
Engineer, Supplier or other individual or entity to furnish or perform any of
the Work against whom DESIGN/BUILDER has reasonable objection.

 

B.                  DESIGN/BUILDER shall be fully responsible to
OWNER for all acts and omissions of the Subcontractors, Engineers, Suppliers and
other individuals or entities performing or furnishing any of the Work under a
direct or indirect contract with DESIGN/BUILDER.  Nothing in the Contract Documents shall
create for the benefit of any such Subcontractor, Engineer, Supplier or other
individual or entity any contractual relationship between OWNER and any such
Subcontractor, Engineer, Supplier or other individual or entity, nor shall it
create any obligation on the part of OWNER to pay or to see to the payment of
any moneys due any such Subcontractor, Engineer, Supplier or other individual
or entity except as may otherwise be required by Laws and Regulations.

 

C.                  DESIGN/BUILDER shall be solely responsible
for scheduling and coordinating Subcontractors, Engineers, Suppliers and other
individuals and entities performing or furnishing any of the Work under a
direct or indirect contract with DESIGN/BUILDER.  DESIGN/BUILDER shall require all
Subcontractors, Engineers, Suppliers and such other individuals and entities
performing or furnishing any of the Work to communicate with the OWNER through
DESIGN/BUILDER.

 

D.                 All services performed or provided to and
material and equipment supplied to DESIGN/BUILDER by a Subcontractor or
Supplier will be pursuant to an appropriate Design Subagreement or Construction
Subagreement between DESIGN/BUILDER and the Subcontractor, Engineer or Supplier
which specifically binds the Subcontractor, Engineer or Supplier to the
applicable terms and conditions of the Contract Documents for the benefit of
OWNER.  Whenever any such 

 

14

 

agreement is with a
Subcontractor, Engineer or Supplier who is listed as an additional insured on
the property insurance provided in paragraph 5.04.A or 5.04.B, the agreement
between the DESIGN/BUILDER and the Subcontractor, Engineer or Supplier will
contain provisions whereby the Subcontractor, Engineer or Supplier waives all
rights against OWNER, DESIGN/BUILDER, and all other additional insureds for all
losses and damages caused by any of the perils or causes of loss covered by
such policies and any other property insurance applicable to the Work.  If the insurers on any such policies require
separate waiver forms to be signed by any Subcontractor, Engineer or Supplier,
DESIGN/BUILDER will obtain the same.

 

6.06                        Patent Fees and Royalties

 

A.                DESIGN/BUILDER shall pay all license fees and
royalties and assume all costs incident to the use in the performance of the
Work or the incorporation in the Work of any invention, design, process,
product or device (other than any increased license fees, royalties and costs
arising out of or resulting from a Change Order) which is the subject of patent
rights or copyrights held by others.  To
the fullest extent permitted by Laws and Regulations,  DESIGN/BUILDER shall indemnify and hold
harmless OWNER, from and against all claims, costs, losses and damages
(including but not limited to all reasonable fees and charges of engineers,
architects, attorneys and other professionals and all court or arbitration or
other dispute resolution costs) arising out of or resulting from any
infringement of patent rights or copyrights incident to the use in the
performance of the Work or resulting from the incorporation in the Work of any
invention, design, process, product or device.

 

6.07                        Permits

 

A.                Unless otherwise provided in the Contract
Documents, OWNER shall obtain and pay for all necessary permits and
licenses.  DESIGN/BUILDER shall assist
OWNER, when necessary, in obtaining such permits and licenses.  DESIGN/BUILDER shall pay all governmental
charges and inspection fees necessary for the prosecution of the Construction,
which are applicable on the Effective Date of the Agreement.  DESIGN/BUILDER shall pay all charges of
utility owners for connections to the Work (other than those charges that are
required to be paid by OWNER to satisfy its obligations under Exhibit E), and
OWNER shall pay all charges of such utility owners for capital costs related
thereto.

 

6.08                        Laws and Regulations

 

A.                DESIGN/BUILDER shall give all notices and
comply with all Laws and Regulations of the place of the Project which are
applicable to furnishing and performance of the Work.  OWNER shall not be responsible for monitoring
DESIGN/BUILDER’s compliance with any Laws or Regulations.

 

B.                  If DESIGN/BUILDER performs any Work knowing
or having reason to know that it is contrary to Laws or Regulations,
DESIGN/BUILDER shall bear all costs arising therefrom.

 

C.                  Changes in Laws and Regulations not known on
the Effective Date of the Agreement having an effect on the cost or time of
performance may be the subject of a claim under Article 9.

 

6.09                        Taxes

 

A.                OWNER shall pay to DESIGN/BUILDER all sales,
consumer, use, gross receipts and other similar taxes which are applicable
during the performance of the Work and are either paid by DESIGN/BUILDER or are
required to be reimbursed by DESIGN/BUILDER to its Subcontractors, Suppliers,
or Engineers.

 

15

 

6.10                        Use of Site and Other Areas

 

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

 

B.                  During the performance of the Construction,
DESIGN/BUILDER shall keep the premises free from accumulations of waste
materials, rubbish and other debris resulting from the Construction.  At the completion of the Construction,
DESIGN/BUILDER shall remove all waste materials, rubbish and debris from and
about the premises as well as all tools, appliances, construction equipment,
temporary construction and machinery and surplus materials.  DESIGN/BUILDER shall leave the Site clean and
ready for occupancy by OWNER at Substantial Completion.  DESIGN/BUILDER shall restore to original
condition all property not designated for alteration by the Contract Documents.

 

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

 

6.11                        Record Documents

 

A.                DESIGN/BUILDER shall maintain in a safe place
at the Site one record copy of all Drawings, Specifications, Written
Amendments, and Change Orders, in good order and annotated to show all changes
made during Construction.  These record
documents together with all approved Submittals will be available to OWNER for
reference.  Upon completion of the Work,
these record documents and Submittals, including a reproducible set of record
drawings, will be delivered to OWNER.

 

6.12     Safety and
Protection

 

A.                                   DESIGN/BUILDER shall be responsible for
initiating, maintaining and supervising all safety precautions and programs in
connection with the Construction. 
DESIGN/BUILDER shall take all necessary precautions for the safety of,
and shall provide the necessary protection to prevent damage, injury or loss
to:

 

1.                    All persons on the Site or who may be
affected by the Construction;

 

2.                    All Work and materials and equipment to be
incorporated therein, whether in storage on or off the Site; and

 

16

 

3.                    Other property at the Site or adjacent
thereto, including trees, shrubs, lawns, walks, pavements, roadways,
structures, utilities and underground facilities not designated for removal,
relocation or replacement in the course of construction.

 

B.                  DESIGN/BUILDER shall comply with applicable
Laws and Regulations of any public body having jurisdiction for safety of
persons or property or to protect them from damage, injury or loss; and shall
erect and maintain all necessary safeguards for such safety and
protection.  DESIGN/BUILDER shall notify
owners of adjacent property and of underground facilities and utility owners
when prosecution of the Work may affect them, and shall cooperate with them in
the protection, removal, relocation and replacement of their property.  All damage, injury or loss to any property
caused, directly or indirectly, in whole or in part, by DESIGN/BUILDER, any
Subcontractor, Supplier or any other individual or entity directly or
indirectly employed by any of them to perform or furnish any of the Work or
anyone for whose acts any of them may be liable, shall be remedied by
DESIGN/BUILDER.  DESIGN/BUILDER’s duties
and responsibilities for safety and for protection of the construction shall
continue until (i) such time as all the Work is completed and OWNER has issued
a notice to DESIGN/BUILDER in accordance with paragraph 13.09 that the Work is
acceptable or, (ii) in the event DESIGN/BUILDER is excluded from the Site under
paragraph 13.05.B. after Substantial Completion, the date DESIGN/BUILDER is
excluded from the Site.

 

6.13                        Safety Representative

 

A.                DESIGN/BUILDER shall designate a qualified and
experienced safety representative at the Site whose duties and responsibilities
shall be the prevention of accidents and the maintaining and supervising of
safety precautions and programs.

 

6.14                        Hazard Communication Programs

 

A.                DESIGN/BUILDER shall be responsible for
coordinating any exchange of material safety data sheets or other hazard
communication information required to be made available to or exchanged between
or among employers at the Site in accordance with Laws or Regulations.

 

6.15                        Emergencies

 

A.                In emergencies affecting the safety or
protection of persons or the construction or property at the Site or adjacent
thereto, DESIGN/BUILDER, without special instruction or authorization from
OWNER, is obligated to act to prevent threatened damage, injury or loss.  DESIGN/BUILDER shall give OWNER prompt
written notice if DESIGN/BUILDER believes that any significant changes in the
Construction or variations from the Contract Documents have been caused
thereby.  If a change in the Contract
Documents is required because of the action taken by DESIGN/BUILDER in response
to such an emergency, a Change Order will be issued to document the
consequences of such action.

 

6.16                        Submittals

 

A.                OWNER will review and approve
Submittals.  OWNER’s review and approval
of required Submittals shall not relieve DESIGN/BUILDER from responsibility for
any variation from the requirements of the Contract Documents.

 

B.                  Where a Submittal is required by the Contract
Documents, any related Construction provided prior to OWNER’s review and
approval of the pertinent Submittal will be at the sole expense and
responsibility of DESIGN/BUILDER.

 

17

 

6.17                        Continuing the Work

 

A.                DESIGN/BUILDER shall carry on the Work and
adhere to the progress schedule during all disputes or disagreements with
OWNER.  No Work shall be delayed or
postponed pending resolution of any disputes or disagreements, except as
DESIGN/BUILDER and OWNER may otherwise agree in writing or as otherwise
provided in the Contract Documents.

 

6.18                     DESIGN/BUILDER’s General Warranty
and Guarantee

 

A.                DESIGN/BUILDER warrants and guarantees to
OWNER that all Construction will be in accordance with the Contract Documents
and will not be defective. DESIGN/BUILDER’s
warranty and guarantee hereunder excludes defects or damage caused by:

 

1.                    Abuse, modification or improper maintenance
or operation by persons other than DESIGN/BUILDER, Subcontractors or Suppliers;
or

 

2.                    Normal wear and tear under normal usage.

 

B.                  DESIGN/BUILDER’s obligation to perform and
complete the Work in accordance with the Contract Documents shall be
absolute.  Except as provided in
paragraph 12.08, no action by OWNER will constitute an acceptance of Work that
is not in accordance with the Contract Documents or a release of DESIGN/BUILDER’s
obligation to perform the Work in accordance with the Contract Documents,
including but not limited to the following:

 

1.                    Observations by OWNER;

 

2.                    The making of any progress or final payment;

 

3.                    The issuance of a certificate of Substantial
Completion;

 

4.                    Use or occupancy of the Work or any part
thereof by OWNER;

 

5.                    Any acceptance by OWNER or any failure to do
so;

 

6.                    Any review and approval of a Submittal;

 

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

 

8.                    Any correction of defective
Construction by OWNER.

 

C.                  DESIGN/BUILDER shall, at final completion,
assign to OWNER all manufacturer’s warranties for materials and equipment
incorporated into the Project; provided, however, in the event of a claim by
OWNER against DESIGN/BUILDER, OWNER shall use its best efforts to cooperate
with DESIGN/BUILDER in the enforcement of any applicable warranty.

 

6.19                        Indemnification

 

OWNER and DESIGN/BUILDER are and will be throughout the term of the
Agreement independent contractors as to each other.  Each party recognizes that it shall be solely
responsible for its own conduct, including without limitation its own fault, as
to any aspect of the Agreement.  In the
event any claim is 

 

18

 

made or any action is
filed by a third party arising out of this Agreement or the services to be
performed under it, the parties anticipate that each will defend said claim or
action on its own behalf, and will pay, settle, or otherwise dispose of any
demand or judgment against it consistent with the provisions of the Kansas
comparative negligence statute, K.S.A. §60-258a, in effect on the date of this
Agreement.  In the event either party is
made to respond in damages for the fault of the other party, then the other
party agrees to indemnify and hold harmless the first party (including its
officers, directors, employees, and agents) from any payment that it has to
make, including without limitation the payment of reasonable attorneys’ fees
incurred in resisting, settling, or otherwise disposing of the demand, on
account of the other party’s fault.  In
regard to the indemnity obligation in this paragraph 6.19 or any other
provision of the General Conditions, neither party shall make a payment for
which indemnity will be sought from the other party without first providing
such other party written notice of the claim and an opportunity to assume the
defense.

 

ARTICLE 7—OTHER
CONSTRUCTION

 

7.01                        Related Construction at Site

 

A.                OWNER may perform other Work related to the
Project at the Site by OWNER’s own forces, or let other direct contracts
therefor or have other work performed by utility owners.  Written notice thereof will be given to
DESIGN/BUILDER prior to starting any such other work.

 

B.                  DESIGN/BUILDER shall afford each other
contractor who is a party to such a direct contract and each utility owner (and
OWNER, if OWNER is performing the additional work with OWNER’s employees)
proper and safe access to the Site and a reasonable opportunity for the
introduction and storage of materials and equipment and the execution of such
other work and shall properly connect and coordinate the Construction with
theirs.  DESIGN/BUILDER shall do all
cutting, fitting and patching of the Work that may be required to make its
several parts come together properly and integrate with such other work.  DESIGN/BUILDER shall not endanger any work of
others by cutting, excavating or otherwise altering their work and will only
cut or alter their work with the written consent of OWNER and the others whose
work will be affected.

 

C.                  If the proper execution or results of any
part of DESIGN/BUILDER’s Work depends upon work performed or services provided
by others under this Article 7, DESIGN/BUILDER shall inspect such other
work and appropriate instruments of service and promptly report to OWNER in
writing any delays, defects or deficiencies in such other work or services that
render it unavailable or unsuitable for the proper execution and results of
DESIGN/BUILDER’s Work.  DESIGN/BUILDER’s
failure so to report will constitute an acceptance of such other work as fit
and proper for integration with DESIGN/BUILDER’s Work except for latent or
nonapparent defects and deficiencies in such other work.

 

ARTICLE 8—OWNER’S
RESPONSIBILITIES

 

8.01                        General

 

A.                OWNER shall do the following in a timely
manner so as not to delay the services of DESIGN/BUILDER.

 

1.                    Designate in writing a person to act as OWNER’s
representative with respect to the services to be rendered under this
Agreement.

 

19

 

2.                    Provide such legal services as OWNER may
require with regard to land use and governmental permitting issues pertaining
to the Project including any such land use or governmental permitting issues
that may be raised by DESIGN/BUILDER.

 

3.                    If requested in writing by DESIGN/BUILDER,
furnish reasonable evidence satisfactory to DESIGN/BUILDER, that sufficient
funds are available and committed for the entire cost of the Project.  Unless such reasonable evidence is furnished,
DESIGN/BUILDER is not required to commence or continue any Work, or may, if
such evidence is not presented within a reasonable time, stop Work upon fifteen
(15) days’ notice to the Owner.

 

4.                    Make payments to DESIGN/BUILDER promptly when
they are due as provided in Article 13.

 

5.                    Furnish lands and easements as set forth in
paragraph 4.01.A.

 

6.                    Furnish to DESIGN/BUILDER, as required for
performance of DESIGN/BUILDER’s services the following, all of which
DESIGN/BUILDER may use and rely upon in performing services under this
Agreement:

 

a.          Environmental assessment and impact statements;

 

b.         Property, boundary, easement, right-of-way, topographic and utility
surveys;

 

c.          Property descriptions;

 

d.         Zoning, deed and other land use restrictions;

 

e.          Engineering surveys to establish reference points for design and
construction which in OWNER’s judgment are necessary to enable DESIGN/BUILDER
to  proceed with the Work;

 

f.            Assistance in filing documents required to
obtain necessary approvals of governmental authorities having jurisdiction over
the Project; and

 

g.         Subsurface data.

 

7.                    Review Submittals subject to OWNER review
pursuant to paragraph 6.16.A.

 

8.                    Provide information known to or in the
possession of OWNER relating to the presence of materials and substances at the
site which could create a Hazardous Condition.

 

9.                    Perform all items designated as OWNER’s
responsibilities in Exhibit E.

 

8.02               Scope of OWNER’s Safety and
Hazardous Waste Responsibilities

 

A.                OWNER shall not supervise, direct or have
control or authority over, nor be responsible for, DESIGN/BUILDER’s means,
methods, techniques, sequences or procedures of Construction or the safety
precautions and programs incident thereto, or for any failure of DESIGN/BUILDER
to comply with Laws and Regulations applicable to the furnishing or performance
of the Work.  OWNER will not be
responsible for DESIGN/BUILDER’s failure to perform or furnish the Work in
accordance with the Contract Documents.

 

20

 

ARTICLE 9—CHANGES IN THE WORK;
CLAIMS

 

9.01                     General—Rights and Obligations

 

A.     Without invalidating the Agreement, OWNER
may, at any time or from time to time, request additions, deletions or
revisions in the Work within the general scope of the contract by a Written
Amendment or a Change Order.  If
DESIGN/BUILDER agrees to such Written Amendment or Change Order, which
agreement shall not be unreasonably withheld, DESIGN/BUILDER shall promptly
proceed with the Work involved which will be performed under the applicable
provisions of the Contract Documents (except as otherwise specifically
provided).

 

9.02        Notice of Intent to Make Claim

 

A.     If OWNER and DESIGN/BUILDER are unable to
agree as to the extent, if any, of an adjustment in the Contract Price or an adjustment
of the Contract Times that should be allowed as a result of any order of OWNER
pursuant to paragraph 9.01.A or other occurrence for which the Contract
Documents provide that such adjustment(s) may be made, a claim may be made
therefor.  Written notice of intent to
make such a claim shall be submitted to the other party promptly and in no
event more than thirty (30) days after the start of the occurrence or event
giving rise to the claim.

 

9.03        Claim Documentation

 

A.     Substantiating documentation shall be
submitted by the claiming party within thirty (30) days after delivery of the
notice required by paragraph 9.02.A.

 

9.04        Decision

 

A.     The other party shall render a decision on
the claim no more than thirty (30) days after the receipt of the substantiating
documentation required by paragraph 9.03.A.  
This decision will be final and binding unless the claiming party gives
notice of intention to exercise its rights under Article 15 within thirty (30)
days of receipt of the decision and exercises such rights within thirty (30)
days of giving the notice of intent.

 

9.05        Time Limit Extension

 

A.     The time limits of paragraphs 9.03.A and
9.04.A may be extended by mutual agreement.

 

9.06        Exceptions

 

A.     DESIGN/BUILDER shall not be entitled to an
increase in the Contract Price with respect to any Work performed that is not
contemplated by the Contract Documents as amended, modified and supplemented as
provided in paragraph 3.03.

 

9.07        Execution of Change Orders

 

A.     OWNER and DESIGN/BUILDER shall execute
appropriate Change Orders or Written Amendments covering:

 

1.       changes in the Work which are (i) ordered
by OWNER pursuant to paragraph 9.01, (ii) required because of acceptance of defective Construction under paragraph 12.08 or correcting defective Work under paragraph 12.07A or (iii) agreed to by
the parties; and

 

21

 

2.       changes in the
Contract Price or Contract Times which are agreed to by the parties.

 

ARTICLE 10—CHANGE OF CONTRACT
PRICE

 

10.01      General

 

A.     The Contract Price constitutes the total
compensation (subject to authorized adjustments) payable to DESIGN/BUILDER for
performing the Work.

 

B.      The Contract Price may only be changed by
a Change Order or by a Written Amendment. 
Any claim for an adjustment in the Contract Price shall be based on
written notice delivered by the party making the claim to the other party
promptly in accordance with paragraph 9.02.A.

 

C.      The value of any Work covered by a Change
Order or of any claim for an increase or decrease in the Contract Price will be
determined as follows:

 

1.       By a mutually agreed lump sum (which may
include an allowance for overhead and profit not necessarily in accordance with
paragraph 10.02); or

 

2.       Where agreement to a lump sum is not
reached under paragraph 10.01.C.1, on the basis of the Cost of the Work
(determined as provided in paragraph 10.02) plus a DESIGN/BUILDER’s Fee for
overhead and profit (determined as provided in paragraph 10.02.C).

 

10.02      Cost of the Work

 

A.     Costs
Included:  The term
Cost of the Work means the sum of all costs necessarily incurred and paid by
DESIGN/BUILDER in the proper performance of work authorized only by a Change
Order or Written Amendment (together “Change Order Work”).  Except as otherwise may be agreed to in writing
by OWNER, such costs shall be in amounts no higher than those prevailing in the
locality of the Project, shall include only the following items and shall not
include any of the costs itemized in paragraph 10.02.B:

 

1.       Payroll
costs for employees in the direct employ of DESIGN/BUILDER in the performance
of the Change Order Work under the then current schedule of job classifications
and hourly rates of DESIGN/BUILDER.

 

2.       Cost
of all materials and equipment furnished and incorporated in the Change Order
Work, including costs of transportation and storage thereof, and Suppliers’
field services required in connection therewith.

 

3.       Payments
made by DESIGN/BUILDER to Subcontractors for Change Order Work performed or
furnished by Subcontractors.

 

4.       Payments
made by DESIGN/BUILDER to Engineers (not employees of DESIGN/BUILDER or its
affiliates) for Design Professional Services provided or furnished by Engineers
under a Design Subagreement for Change Order Work.

 

5.       Costs
of special consultants (including but not limited to testing laboratories and
surveyors, but excluding employees of DESIGN/BUILDER or its affiliates)
employed for services specifically related to Change Order Work.

 

22

 

6.       Supplemental
costs including the following items:

 

a.     The proportion of necessary transportation, travel and
subsistence expenses of DESIGN/BUILDER’s employees incurred in discharge of
duties connected with Change Order Work.

 

b.     Cost, including transportation and maintenance, of all
materials, supplies, equipment, machinery, appliances, office and temporary
facilities at the Site and hand tools not owned by the workers, which are
consumed in the performance of Change Order Work, and cost less market value of
such items used but not consumed which remain the property of DESIGN/BUILDER.

 

c.     Rentals of all Work equipment and machinery and the parts
thereof whether rented from DESIGN/BUILDER or others in accordance with rental
agreements approved by OWNER, and the costs of transportation, loading,
unloading, installation, dismantling and removal thereof—all in accordance with
the terms of said rental agreements.  The
rental of any such equipment, machinery or parts shall cease when the use
thereof is no longer necessary for Change Order Work.

 

d.     Sales, consumer, use or similar taxes related to Change Order
Work, paid by DESIGN/BUILDER or required to be reimbursed by DESIGN/BUILDER to
its Subcontractors, Suppliers, or Engineers.

 

B.      Costs Excluded:  The term Cost of the Work shall not include
any of the following:

 

1.       Payroll costs and other compensation of
DESIGN/BUILDER’s officers, executives, principals (of partnerships and sole
proprietorships), general managers, engineers, architects, estimators,
attorneys, auditors, accountants, purchasing and contracting agents,
expediters, timekeepers, clerks and other personnel employed by DESIGN/BUILDER
whether at the Site or in DESIGN/BUILDER’s principal or a branch office for
general administration of the Work and not specifically included in the agreed
upon schedule of job classifications referred to in paragraph 10.02.A.1 — all
of which are to be considered administrative costs covered by the
DESIGN/BUILDER’s fee.

 

2.       Expenses of DESIGN/BUILDER’s principal
and branch offices other than DESIGN/BUILDER’s office at the Site.

 

3.       Any part of DESIGN/BUILDER’s capital
expenses, including interest on DESIGN/BUILDER’s capital employed for the Work
and charges against DESIGN/BUILDER for delinquent payments.

 

4.       Costs due to the negligence of
DESIGN/BUILDER, any Subcontractor, or anyone directly or indirectly employed by
any of them or for whose acts any of them may be liable, including but not
limited to, the correction of defective Work,
disposal of materials or equipment wrongly supplied and making good any damage
to property.

 

5.       Other overhead or general expense costs
of any kind and the costs of any item not specifically and expressly included
in paragraph 10.02.A.

 

C.      Fee:

 

1.       A mutually agreed fee or, in the event
the parties can not agree upon a fee, DESIGN/BUILDER’s fee for overhead and
profit on Change Orders priced by paragraph 10.01.C.2 (whether additive or 

 

23

 

deductive)
shall be fifteen percent (15%) of the Cost of the Change Order Work for subcontracts,
materials and equipment.

 

2.       When both additions and credits are
involved in any one change, the adjustment in DESIGN/BUILDER’s fee shall be
computed on the basis of the net change in accordance with paragraph 10.02.C.1
above.

 

D.      Documentation:  Whenever the cost of any Work is to be
determined pursuant to paragraphs 10.02.A and 10.02.B, DESIGN/BUILDER will
establish and maintain records thereof in accordance with generally accepted
accounting practices and submit in a form acceptable to OWNER an itemized cost
breakdown together with supporting data.

 

ARTICLE 11—CHANGE OF CONTRACT
TIMES

 

11.01      General

 

A.     The Contract Times may only be changed by a
Change Order or a Written Amendment.  Any
claim for an adjustment of the Contract Times shall be based on written notice
pursuant to paragraph 9.02.

 

B.      All Contract Times are of the essence of
the Agreement.

 

11.02                 Time
Extensions

 

A.      Where DESIGN/BUILDER is prevented from
completing any part of the Work within the Contract Times due to delay beyond the
control of DESIGN/BUILDER, the Contract Times will be extended in an amount
equal to the time lost due to such delay if a claim is made therefor as
provided in Article 9.  Delays beyond the
control of DESIGN/BUILDER shall include, but not be limited to, acts or neglect
by OWNER, governmental agencies, acts or neglect of utility owners or other
contractors performing other construction work as contemplated by Article 7,
fires, floods, epidemics, abnormal weather conditions or acts of God.  Delays attributable to and within the control
of a Subcontractor or Supplier shall be deemed to be delays within the control
of DESIGN/BUILDER.

 

B.      Nothing in this paragraph 11.02 bars a
change in Contract Price pursuant to Article 10 to compensate for the direct
costs incurred by DESIGN/BUILDER due to delay, interference, or disruption
directly attributable to actions or inactions of OWNER.  However, OWNER shall not be liable to
DESIGN/BUILDER for costs or damages arising out of or resulting from (i) delays
caused by or within the control of DESIGN/BUILDER, or (ii) delays beyond the
control of both parties including but not limited to fires, floods, epidemics,
abnormal weather conditions, acts of God or acts or neglect by governmental
agencies, utility owners, or other contractors performing other work as
contemplated by Article 7.

 

ARTICLE 12—TESTS AND INSPECTIONS;
CORRECTION, REMOVAL OR ACCEPTANCE OF DEFECTIVE
CONSTRUCTION

 

12.01      Notice of Defects

 

A.     Each party shall give the other prompt
written notice of all defective
Construction of which such party has actual knowledge.  All defective
Construction may be rejected, corrected or accepted as provided in this Article
12.

 

24

 

12.02      Access to Construction

 

A.     Upon advance notice to and approval by
DESIGN/BUILDER, which will not be unreasonably withheld, OWNER, other
representatives and personnel of OWNER, independent testing laboratories and
governmental agencies with jurisdictional interests will have access to the
Construction at the Site at reasonable times for their observation, inspecting
and testing.  DESIGN/BUILDER shall
provide them proper and safe conditions for such access and advise them of
DESIGN/BUILDER’s Site safety procedures and programs so that they may comply
therewith as applicable.

 

12.03      Tests and Inspections

 

A.     If the Contract Documents or Laws or
Regulations of any public body having jurisdiction require any part of the
Construction specifically to be inspected, tested or approved, DESIGN/BUILDER
shall assume full responsibility for arranging and obtaining such inspections,
tests or approvals, pay all costs in connection therewith, and furnish OWNER
the required certificates of inspection or approval.  DESIGN/BUILDER shall also be responsible for
arranging and obtaining and shall pay all costs in connection with any
inspections, tests or approvals required for OWNER’s acceptance of materials or
equipment to be incorporated in the Construction or of materials, mix designs,
or equipment submitted for approval prior to DESIGN/BUILDER’s purchase thereof
for incorporation in the Construction. 
Nothing in this paragraph shall be interpreted or construed as
obligating DESIGN/BUILDER to obtain, furnish or pay the costs of any permit,
inspection, test or approval required by the applicable State or the United
States Environmental Protection Agency for the construction or operation of the
Project (including, without limitation, any atmospheric emissions compliance
reports), all of which shall be the responsibility of OWNER.

 

B.      DESIGN/BUILDER shall give OWNER reasonable
notice of the planned schedule for all required inspections, tests or
approvals.

 

C.      If any Construction (or the construction
work of others) that is required to be inspected, tested or approved is covered
by DESIGN/BUILDER without written concurrence of OWNER, it must, if requested
by OWNER, be uncovered for observation at DESIGN/BUILDER’s expense unless
DESIGN/BUILDER has given OWNER timely notice of DESIGN/BUILDER’s intention to
cover the same and OWNER has not acted with reasonable promptness in response
to such notice.

 

12.04      Uncovering Construction

 

A.     If any Construction is covered contrary to
the written request of OWNER, it must, if requested by OWNER, be uncovered for
OWNER’s observation and recovered at DESIGN/BUILDER’s expense.

 

B.      If OWNER considers it necessary or
advisable that covered Construction be observed by OWNER or inspected or tested
by others, DESIGN/BUILDER, at OWNER’s request, shall uncover, expose or
otherwise make available for observation, inspection or testing as OWNER may
require, that portion of the Construction in question, furnishing all necessary
labor, material and equipment.  If it is
found that such Construction is defective,
DESIGN/BUILDER shall pay all costs caused by or resulting from such uncovering,
exposure, observation, inspection and testing (including but not limited to all
reasonable fees and charges of engineers and other professionals) and OWNER
shall be entitled to an appropriate decrease in the Contract Price, and, if the
parties are unable to agree as to the amount thereof, may make a claim therefor
as provided in Article 9.  If
however, such Construction is not found to be defective,
DESIGN/BUILDER shall be allowed an increase in the Contract Price directly
attributable to such uncovering, exposure, observation, inspection, testing,
replacement and rework; and, if the parties 

 

25

 

are
unable to agree as to the amount or extent thereof, DESIGN/BUILDER may make a
claim therefor as provided in Article 9.

 

12.05        OWNER May Stop the Construction

 

A.     If the Construction is defective,
or DESIGN/BUILDER fails to supply sufficient skilled workers or suitable
materials or equipment, or fails to furnish or perform the Construction in such
a way that the completed Construction will conform to the Contract Documents,
OWNER may order DESIGN/BUILDER to stop Construction or any portion thereof,
until the cause for such order has been eliminated; however, this right of
OWNER to stop Construction will not give rise to any duty on the part of OWNER
to exercise this right for the benefit of DESIGN/BUILDER or any other party.

 

12.06        Correction or Removal of Defective Construction

 

A.     Prior to acceptance and final payment under
paragraph 13.09 below, OWNER will have authority to disapprove or reject defective Construction and will have authority to require
special inspection or testing of the Construction whether or not the
Construction is fabricated, installed or completed.  DESIGN/BUILDER shall promptly, either correct all defective
Construction, whether or not fabricated, installed or completed, or, if the
Construction has been rejected by OWNER, remove it from the Site and replace it
with non-defective Construction. 
DESIGN/BUILDER shall bear all costs of such correction or removal
(including but not limited to reasonable fees and charges of engineers,
architects, attorneys and other professionals, all court or arbitration or
other dispute resolution costs, and all costs of repair or replacement of work
of others) made necessary thereby. 
Nothing in this paragraph shall be interpreted or construed as requiring
DESIGN/BUILDER to correct or remove and replace defective Construction accepted
by OWNER pursuant to paragraph 12.08 below.

 

12.07      Correction Period

 

A.     If within one (1) year after the date of
Substantial Completion or such longer period of time as may be prescribed by
Laws or Regulations or by the terms of any applicable special guarantee
required by the Contract Documents or by any specific provision of the Contract
Documents, any Construction is found to be defective,
DESIGN/BUILDER shall promptly, without cost to OWNER and in accordance with
OWNER’s written instructions, (i) correct such defective
Construction, or, if it has been rejected by OWNER, remove it from the Site and
replace it with Construction that is not defective, and
(ii) satisfactorily correct or remove and replace any damage to other
Construction or the work of others resulting therefrom.  If DESIGN/BUILDER does not promptly comply
with the terms of such instructions, or in an emergency where delay would cause
serious risk of loss or damage, OWNER may have the defective
Construction corrected or the rejected Construction removed and replaced, and
all costs and damages caused by or resulting from such removal and replacement
(including but not limited to all reasonable fees and charges of engineers,
architects, attorneys and other professionals, all court or arbitration or
other dispute resolution costs, and all costs of repair or replacement of work
of others) will be paid by DESIGN/BUILDER, subject to the provisions of
paragraph 16.06.  Nothing in this
paragraph shall be interpreted or construed as requiring DESIGN/BUILDER to
correct or remove and replace defective Construction accepted by OWNER pursuant
to paragraph 12.08 below.

 

B.      Where defective
Construction (and damage to other Construction resulting therefrom) has been
corrected, removed or replaced under this paragraph 12.07, the correction
period hereunder with respect to such Construction will be extended for an
additional period of one (1) year after such correction or removal and
replacement has been satisfactorily completed.

 

26

 

12.08              Acceptance of Defective Construction

 

A.     If, instead of requiring correction or
removal and replacement of defective
Construction, OWNER prefers to accept it, OWNER may do so.  If any such acceptance occurs prior to final
payment, a Change Order will be issued incorporating the necessary revisions in
the Contract Documents with respect to the Construction; and OWNER shall be
entitled to an appropriate decrease in the Contract Price, and, if the parties
are unable to agree as to the amount thereof, OWNER may make a claim therefor
as provided in Article 15, subject to the provisions of paragraph 16.06
below.  If the acceptance occurs after
final payment, an appropriate amount will be paid by DESIGN/BUILDER to OWNER,
and, if the parties are unable to agree as to the amount thereof, OWNER may
make a claim therefor as provided in Article 15, subject to the provisions of
paragraph 16.06 below.  Notwithstanding
the foregoing, any defective Construction known by OWNER and not disclosed to
DESIGN/BUILDER at the time of acceptance and final payment under paragraph
13.09 shall be deemed to be accepted by OWNER and DESIGN/BUILDER shall have no
obligation to correct, or remove and replace such defect, or make any payment
to OWNER with respect thereto.

 

ARTICLE 13—PAYMENTS TO
DESIGN/BUILDER AND COMPLETION

 

13.01      Schedule of Values

 

A.     The Schedule of Values established as
provided in paragraph 2.05.A will serve as the basis for progress payments and
will be incorporated into a form of Application for Payment acceptable to
OWNER.

 

13.02      Application for Progress Payment

 

A.     At least ten (10) days before the date
established for each progress payment (but not more often than once a month),
DESIGN/BUILDER shall submit to OWNER for review and approval an Application for
Payment filled out and signed by DESIGN/BUILDER covering the Work completed as
of the date of the Application and accompanied by such supporting documentation
as is required by the Contract Documents or as reasonably required by OWNER’s
lender.  The amount of retainage with
respect to progress payments will be as stipulated in the Agreement.

 

B.      With each Application for Payment,
DESIGNBUILDER shall submit interim lien waivers for all subcontractors and
first tier suppliers with a contract value in excess of $5,000.00.  The interim lien waivers shall be effective
through the immediately preceding payment. 
OWNER may withhold from any progress payment the amount applicable to
any lien waivers not received for any preceding Application for Payment for
which payment was made by OWNER.

 

13.03      DESIGN/BUILDER’s
Warranty of Title

 

A.     DESIGN/BUILDER warrants and guarantees that
title to all construction materials and equipment covered by any Application
for Payment, whether incorporated in the Project or not, will pass to OWNER no
later than the time of payment free and clear of all Liens.  This paragraph 13.03.A does not apply to any
documents covered by paragraph 3.04.

 

27

 

13.04        Progress Payments

 

A.     Progress payments shall be made by the
OWNER to the DESIGN/BUILDER according to the following procedure:

 

1.       OWNER
will, within ten (10) days of receipt of each Application for Payment, either
indicate in writing its acceptance of the Application and state that the
Application is being processed for payment, or return the Application to
DESIGN/BUILDER indicating in writing its reasons for refusing to accept the
Application and the exact amount(s) in dispute. 
All undisputed amounts will become due and be paid by OWNER to
DESIGN/BUILDER not more than ten (10) days after OWNER’s acceptance or
rejection of such Application, as the case may be.

 

2.       If
the OWNER should fail to pay the DESIGN/BUILDER at the time the payment of any
amount becomes due, then DESIGN/BUILDER may, at any time thereafter, upon
serving written notice that DESIGN/BUILDER will stop the Work within seven (7)
days after receipt of the notice by the OWNER, and after such seven (7) day
period, stop the Work until payment of the amount owing has been received,
including interest thereon.  Written
notice shall be deemed to have been duly served if sent by certified mail to
the last known business address of the OWNER.

 

3.       Payments
due but unpaid shall bear interest at the rate specified in the Agreement.  Any disputed payment shall be due at the time
mutually determined by the parties or, if applicable, the time determined by
the arbitrator under paragraph 15.01.

 

4.       No
Progress Payment nor any partial or entire use or occupancy of the Project by
the OWNER shall constitute an acceptance of any Work not in accordance with the
Contract Documents.

 

B.      OWNER may refuse to make the whole or any part of any such
payment or, because of subsequently discovered evidence or the results of
subsequent inspections or tests, nullify any previous payment, to the extent
that is reasonably necessary to protect OWNER from loss because:

 

1.       The Work is defective, or
completed Work has been damaged, requiring correction or replacement;

 

2.       The Contract Price has been reduced by Written Amendment or
Change Order;

 

3.       OWNER has been required to correct defective
Work or complete Work in accordance with paragraph 12.09.A;

 

4.       OWNER has actual knowledge of the occurrence of any of the
events enumerated in paragraphs 14.02.A.1 through A.3 inclusive;

 

5.       Claims have been made against OWNER on account of
DESIGN/BUILDER’s performance or furnishing of the Work;

 

6.       The provisions of paragraph 13.02.B are applicable; or

 

7.       Liens have been filed in connection with the Work, except
where DESIGN/BUILDER has delivered a specific Bond satisfactory to OWNER to
secure the satisfaction and discharge of such Liens.

 

13.05      Substantial Completion

 

A.     When DESIGN/BUILDER considers the
Construction ready for its intended use DESIGN/BUILDER shall notify OWNER in
writing that the Construction is substantially complete (except for items
specifically listed by DESIGN/BUILDER as incomplete) and request that OWNER
issue a certificate of Substantial Completion. 
Within a reasonable time thereafter, OWNER and 

 

28

 

DESIGN/BUILDER shall make an
inspection of the Construction to determine the status of completion.  If OWNER does not consider the Construction
substantially complete, OWNER will notify DESIGN/BUILDER in writing giving the
reasons therefor.  If OWNER considers the
Construction substantially complete, OWNER will prepare and deliver to
DESIGN/BUILDER a certificate of Substantial Completion which shall fix the date
of Substantial Completion.  There shall
be attached to the certificate a list of all items to be completed or corrected
before final payment, which may be amended by OWNER for a period of sixty (60)
days after delivery thereof. 
DESIGN/BUILDER shall not be responsible for correcting or completing punch
list items not disclosed in writing by OWNER to DESIGN/BUILDER within such
60-day period.  At the time of delivery
of the certificate of Substantial Completion OWNER will deliver to
DESIGN/BUILDER (i) a written determination as to division of responsibilities
pending final payment between OWNER and DESIGN/BUILDER with respect to
security, operation, safety, maintenance, heat, utilities, insurance and
warranties and guarantees, and (ii) the payment required by section 4.01.B.2. of the Agreement.

 

B.      OWNER will have the right to exclude
DESIGN/BUILDER from the Site after the date of Substantial Completion, but
OWNER will allow DESIGN/BUILDER reasonable access to complete or correct items
on the list of items to be completed.

 

13.06      Final Inspection

 

A.     Upon written notice from DESIGN/BUILDER that
the entire Construction (other than receipt of the written emissions report
documenting compliance with the atmospheric emission criteria set forth in
Exhibit A) or an agreed portion thereof is complete, OWNER will make a final
inspection with DESIGN/BUILDER and will notify DESIGN/BUILDER in writing of all
particulars in which this inspection reveals that the Construction is
incomplete or defective.  DESIGN/BUILDER shall immediately take such
measures as are necessary to complete such Construction or remedy such
deficiencies.

 

13.07      Final Application for
Payment

 

A.  After DESIGN/BUILDER has completed all such
corrections to the satisfaction of OWNER and delivered in accordance with the
Contract Documents all maintenance and operating instructions, schedules,
guarantees, certificates or other evidence of insurance required by paragraph
5.08.B, certificates of inspection, marked-up record documents (as provided in
paragraph 6.11) and other documents, DESIGN/BUILDER may make application for
final payment of the Contract Price following the procedure for progress
payments.  Such final Application for
Payment shall be accompanied (unless previously delivered) by:  (i) all documentation called for in the
Contract Documents, including but not limited to the evidence of insurance
required by subparagraph 5.02.B.7, (ii) consent of the surety, if any, to final
payment, and (iii) complete and legally effective releases or waivers
(satisfactory to OWNER) of all Liens arising out of or filed in connection with
the Work.  In lieu of such releases or
waivers of Liens and as approved by OWNER, DESIGN/BUILDER may furnish receipts
or releases in full and an affidavit of DESIGN/BUILDER that: (i) the
releases and receipts include all labor, services, material and equipment for which
a Lien could be filed, and (ii) all payrolls, material and equipment bills
and other indebtedness connected with the Work for which OWNER or OWNER’s
property might in any way be responsible have been paid or otherwise
satisfied.  If any Subcontractor or
Supplier fails to furnish such a release or receipt in full, DESIGN/BUILDER may
furnish a Bond or other collateral satisfactory to OWNER to indemnify OWNER
against any Lien.

 

29

 

 13.08     Final Payment and Acceptance

 

A.     If OWNER is satisfied that the Work has
been completed and DESIGN/BUILDER’s other obligations under the Contract
Documents have been fulfilled (other than receipt of the written emissions
compliance report documenting compliance with the atmospheric emission criteria
set forth in Exhibit A), OWNER will, within ten (10) days after receipt of such
final Application for Payment, give written notice to DESIGN/BUILDER that such
Work is acceptable.  Otherwise, OWNER
will return the Application to DESIGN/BUILDER, indicating in writing the
reasons for refusing to process final payment, in which case DESIGN/BUILDER
shall make the necessary corrections and resubmit the Application.  Thirty (30) days after the presentation to
OWNER of the acceptable Application and accompanying documentation, in
appropriate form and substance and with OWNER’s notice of acceptability,
$250,000 of the remaining amount of the Contract Price will become due and will
be paid by OWNER to DESIGN/BUILDER.  If
the written emissions compliance report documenting compliance with the
atmospheric emission critieria set forth in Exhibit A is received by OWNER on
or before OWNER’s receipt of such final Application for Payment, the remaining
$250,000 of the Contract Price will become due and will be paid by OWNER to
DESIGN/BUILDER on the same date as set forth in the immediately preceding
sentence.  If the written emissions
compliance report documenting compliance with the atmospheric emission critieria
set forth in Exhibit A is received by OWNER after OWNER’s receipt of such final
Application for Payment, the remaining $250,000 of the Contract Price will
become due and will be paid by OWNER to DESIGN/BUILDER thirty (30) days after
OWNER’s receipt of such report.  “As
built” drawings and OWNER’s manuals shall be delivered to OWNER within six (6)
months after receipt by DESIGN/BUILDER of such notice that the Work is
acceptable.

 

B.      If, through no fault of DESIGN/BUILDER,
final completion of the Work is significantly delayed, OWNER shall, upon
receipt of DESIGN/BUILDER’s final Application for Payment, and without
terminating the Agreement, make payment of the balance due for that portion of
the Work fully completed and accepted. 
If the remaining balance to be held by OWNER for Work not fully completed
or corrected is less than the retainage stipulated in the Agreement, the
written consent of the surety to the payment of the balance due for that
portion of the Work fully completed and accepted shall be submitted by
DESIGN/BUILDER to OWNER with the Application for such payment.  Such payment shall be made under the terms
and conditions governing final payment, except that it shall not constitute a
waiver of claims.

 

13.09      Waiver of Claims

 

A.     The making and acceptance of final payment
of the Contract Price will constitute:

 

1.       A waiver of all claims by OWNER against DESIGN/BUILDER, except
claims arising from unsettled Liens, from defective
Construction appearing after final inspection pursuant to paragraph 13.06, from
failure to comply with the Contract Documents or the terms of any special
guarantees specified therein, or from DESIGN/BUILDER’s continuing obligations
under the Contract Documents; and

 

2.       a waiver of all claims by
DESIGN/BUILDER against OWNER other than those previously made in writing and
still unsettled, or from OWNER’s continuing obligations under the Contract
Documents.

 

30

 

ARTICLE 14—SUSPENSION OF WORK AND
TERMINATION

 

14.01      Owner May Suspend Work

 

A.     At any time and without cause, OWNER may
suspend the Work or any portion thereof for a period of not more than ninety
(90) days by notice in writing to DESIGN/BUILDER which will fix the date on
which Work will be resumed. 
DESIGN/BUILDER shall resume the Work on the date so fixed.  DESIGN/BUILDER may be allowed an adjustment
in the Contract Price or an extension of the Contract Times, or both, directly
attributable to any such suspension if DESIGN/BUILDER makes a claim therefor as
provided in Article 9.

 

14.02      OWNER May Terminate for Cause

 

A.     The occurrence of any one or more of the
following events justifies termination for cause:

 

1.       DESIGN/BUILDER persistently fails to
perform the Work in accordance with the Contract Documents (including, but not
limited to, failure to supply sufficient skilled workers or suitable materials
or equipment or failure to adhere to the progress schedule established under
paragraph 2.05.A as revised from time to time.)

 

2.       DESIGN/BUILDER intentionally or willfully
disregards Laws or Regulations of any public body having jurisdiction.

 

3.       DESIGN/BUILDER otherwise breaches or
violates in any material way any provisions of the Contract Documents.

 

4.       DESIGN/BUILDER fails to timely pay its
Consultants or Subcontractors any undisputed amounts.

 

5.       DESIGN/BUILDER becomes financially
insolvent or files a voluntary petition of bankruptcy, or an involuntary
petition of bankruptcy is filed that is not dismissed within ninety (90) days
after the date of such filing.

 

B.      OWNER may, after giving DESIGN/BUILDER
written notice of the occurrence of an event in paragraph 14.02.A and twenty
(20) days therefrom to remedy such event (or, if such event is not capable of
being remedied within such twenty (20) days, such number of days as is
reasonably needed to remedy such event), and to the extent permitted by Laws
and Regulations, terminate the services of DESIGN/BUILDER, exclude
DESIGN/BUILDER from the Site and take possession of the Work incorporate in the
Work all materials and equipment stored at the Site or elsewhere for which
OWNER has paid DESIGN/BUILDER and finish the Work as OWNER may deem
expedient.  In such case DESIGN/BUILDER
shall not be entitled to receive any further payment other than reimbursement
for DESIGN/BUILDER’s payments to Subcontractors and Suppliers for labor,
services, equipment and materials prior to the date of termination, but only to
the extent not previously paid by OWNER. 
If the unpaid balance of the Contract Price exceeds all reasonable costs
incurred by OWNER resulting from completing the Work (including but not limited
to all reasonable fees and charges of engineers, architects, attorneys and
other professionals and all court or arbitration or other dispute resolution
costs) such excess will be paid to DESIGN/BUILDER.  If all reasonable costs incurred by OWNER to
complete the Work (including but not limited to all reasonable fees and charges
of engineers, architects, attorneys and other professionals and all court or
arbitration or other dispute resolution costs) exceed the unpaid balance of the
Contract Price, DESIGN/BUILDER shall pay the difference to OWNER subject to the
provisions of 

 

31

 

paragraph
16.06.  When exercising any rights or
remedies under this paragraph OWNER shall be required to obtain a reasonable
price for the Work performed.

 

C.      Where DESIGN/BUILDER’s services have been
so terminated by OWNER, the termination will not affect any rights or remedies
of OWNER against DESIGN/BUILDER then existing or which may thereafter
accrue.  Any payment of moneys due
DESIGN/BUILDER by OWNER will not release DESIGN/BUILDER from liability.

 

D.      Nothing in this paragraph shall be
interpreted or construed as requiring DESIGN/BUILDER to perform any additional
services after such termination including, without limitation, the creation of
any drawings, specifications or any other document necessary to complete the
Work.

 

14.03      OWNER May Terminate for Convenience

 

A.     Prior to the date on which concrete is
first poured at the Site by DESIGN/BUILDER, OWNER may, without cause and
without prejudice to any other right or remedy of OWNER, elect to terminate the
Agreement upon twenty (20) days written notice to DESIGN/BUILDER.  In such case, DESIGN/BUILDER shall be paid
(without duplication of any items) for:

 

1.                    Completed and acceptable Work executed in
accordance with the Contract Documents prior to the effective date of
termination, including fair and reasonable sums for overhead and profit on such
Work;

 

2.                    Expenses sustained prior to the effective
date of termination in performing services and furnishing labor, materials or
equipment as required by the Contract Documents in connection with uncompleted
Work, plus fair and reasonable sums for overhead and profit on such expenses;

 

3.                    Amounts paid in settlement of terminated
contracts with Subcontractors, Engineers, Suppliers and others (including but
not limited to all reasonable fees and charges of engineers, architects,
attorneys and other professionals and all court or arbitration or other dispute
resolution costs incurred in connection with termination of contracts with
Subcontractors, Engineers and Suppliers); and

 

4.                    Reasonable expenses directly attributable to
termination.

 

B.      Except as otherwise provided in the
Agreement, DESIGN/BUILDER shall not be paid on account of loss of anticipated
profits or revenue or other economic loss arising out of or resulting from such
termination.

 

14.04              DESIGN/BUILDER May Stop Work or Terminate

 

A.     If, through no act or fault of
DESIGN/BUILDER, the Work is suspended for a period of more than ninety (90)
days by OWNER or under an order of court or other public authority, or OWNER
fails to act on any Application for Payment within thirty (30) days after it is
submitted or OWNER fails for thirty (30) days to pay DESIGN/BUILDER any sum
finally determined to be due, then DESIGN/BUILDER may, upon seven (7) days
written notice to OWNER, and provided OWNER does not remedy such suspension or
failure within that time, terminate the Agreement and recover from OWNER
payment on the same terms as provided in paragraph 14.03.  In lieu of terminating the Agreement and
without prejudice to any other right or remedy, or OWNER has failed for thirty
days to pay DESIGN/BUILDER any sum finally determined to be due, DESIGN/BUILDER
may upon seven (7) days written notice to 

 

32

 

OWNER stop the Work until
payment is made of all such amounts due DESIGN/BUILDER, including interest
thereon.  The provisions of this
paragraph 14.04.A are not intended to preclude DESIGN/BUILDER from making claim
under Article 9 for an increase in Contract Price or Contract Times or otherwise for expenses or damage directly attributable to
DESIGN/BUILDER’s stopping Work as permitted by this paragraph.

 

ARTICLE 15—DISPUTE RESOLUTION

 

15.01  Dispute Resolution Agreement

 

A.  OWNER and DESIGN/BUILDER agree that they will
first submit any and all unsettled claims, counterclaims, disputes and other
matters in question between them arising out of or relating to the Contract
Documents or the breach thereof (“disputes”), to mediation 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 Mediation Rules, 
prior to either of them initiating against the other a demand for
arbitration pursuant to paragraph 15.01.B through 15.01.E, unless delay in
initiating arbitration would irrevocably prejudice one of the parties.  Any time limits within which to file a demand
for arbitration shall be suspended with respect to a dispute submitted to
mediation within those same applicable time limits and shall remain suspended
until 10 days after the termination of the mediation.  The mediator of any dispute submitted to
mediation under this Agreement shall not serve as arbitrator of such dispute
unless otherwise agreed.

 

B.      All claims, disputes and other matters in
question between OWNER and DESIGN/BUILDER arising out of or relating to the
Contract Documents or the breach thereof (except for claims which have been
waived by the making or acceptance of final payment as provided by paragraph
13.09) will be decided by binding arbitration in accordance with the
Construction Industry Arbitration Rules of the AAA then in effect, subject to the
limitations of this paragraph 15.01.  The
arbitrator shall have the discretion to award reasonable attorneys’ fees and
costs to the prevailing party.  This
agreement so to arbitrate and any other agreement or consent to arbitrate
entered into in accordance herewith as provided in this paragraph 15.01 will be
specifically enforceable under the prevailing law of any court having
jurisdiction.

 

C.      Notice of the demand for arbitration will
be filed in writing with the other party to the Agreement and with the
designated arbitration entity.  The
demand for arbitration will be made within a reasonable time after the claim,
dispute or other matter in question has arisen, and in no event shall any such
demand be made after the date when institution of legal or equitable
proceedings based on such claim, dispute or other matter in question would be
barred by the applicable statute of limitations.

 

D.      Except as provided in paragraph 15.01.E
below, no arbitration arising out of or relating to the Contract Documents shall
include by consolidation, joinder or in any other manner any other individual
or` entity who is not a party to this contract unless:

 

1.       the inclusion of
such other individual or entity is necessary if complete relief is to be
afforded among those who are already parties to the arbitration, and

 

2.       such other individual or entity is
substantially involved in a question of law or fact which is common to those
who are already parties to the arbitration and which will arise in such
proceedings, and

 

3.       the written consent of the other
individual or entity sought to be included and of OWNER and DESIGN/BUILDER has
been obtained for such inclusion, which consent shall make specific reference
to this paragraph; but no such consent shall constitute consent to arbitration
of any dispute 

 

33

 

not specifically described in such consent or to
arbitration with any party not specifically identified in such consent.

 

E.      Notwithstanding paragraph 15.01.D, if a
claim, dispute or other matter in question between OWNER and DESIGN/BUILDER
involves the Work of a Subcontractor, Supplier or Engineer either OWNER or
DESIGN/BUILDER may join such entity as a party to the arbitration between OWNER
and DESIGN/BUILDER hereunder.  DESIGN/BUILDER
shall include in all subcontracts required by paragraph 6.05.D a specific
provision whereby the Subcontractor consents to being joined in an arbitration between OWNER and DESIGN/BUILDER involving
the Work of such Subcontractor.  Nothing
in this paragraph 15.01.E nor in the provision of such
subcontract consenting to joinder shall create any claim, right or cause of
action in favor of Subcontractor, Supplier or Engineer against OWNER.

 

F.      Notwithstanding the foregoing, the
provisions of this Article 15 shall not apply to any claim by DESIGN/BUILDER of
any breach or threatened breach of any covenant contained in Exhibit F of the
Agreement or the provisions thereof.

 

ARTICLE 16—MISCELLANEOUS

 

16.01      Giving Notice

 

A.     Whenever any provision of the Contract
Documents requires the giving of written notice, it will be deemed to have been
validly given:

 

1.       If
delivered in person to the individual or to a member of the firm or to an
officer of the corporation for whom it is intended;

 

2.       If
delivered at or sent by registered or certified mail, postage prepaid, to the
last business address known to the giver of the notice; or

 

3.       If
transmitted by facsimile, the time at which a machine generated confirmation
states the notice was received at the facsimile telephone number of the
intended recipient last known by the sender.

 

16.02      Computation of Times

 

A.     When any period of time is referred to in
the Contract Documents by days, it will be computed to exclude the first and
include the last day of such period.  If
the last day of any such period falls on a Saturday or Sunday or on a day made
a legal holiday by the law of the applicable jurisdiction, such day will be
omitted from the computation.

 

B.      A calendar day of twenty-four hours
measured from midnight to the next midnight will constitute a day.

 

16.03      Notice of Claim

 

A.     Should OWNER or DESIGN/BUILDER suffer
injury or damage to person or property because of any error, omission or act of
the other party or of any of the other party’s employees or agents or others
for whose acts the other party is legally liable, claim will be made in writing
to the other party within a reasonable time of the first observance of such
injury or damage.  The provisions of this
paragraph 16.03.A shall not be construed as a substitute for or a waiver of the
provisions of any applicable statute of limitations or repose.

 

34

 

16.04      Cumulative Remedies

 

A.     Except as provided in paragraph 16.06 of
the General Conditions below, the duties and obligations imposed by these
General Conditions and the rights and remedies available hereunder to the
parties hereto, and, in particular but without limitation, any general or
specific warranties, guarantees and indemnities imposed upon a party and all of
the rights and remedies available to the other party thereunder, are in
addition to, and are not to be construed in any way as a limitation of, any
rights and remedies available to any or all of them which are otherwise imposed
or available by Laws or Regulations, by special warranty or guarantee or by
other provisions of the Contract Documents, and the provisions of this
paragraph will be as effective as if repeated specifically in the Contract
Documents in connection with each particular duty, obligation, right and remedy
to which they apply.

 

16.05      Survival of Obligations

 

A.     All representations, indemnifications,
warranties and guarantees made in, required by or given in accordance with the
Contract Documents, as well as all continuing obligations indicated in the
Contract Documents, will survive final payment, completion and acceptance of
the Work and termination or completion of the Agreement.

 

16.06  Limitation
on OWNER’s Recovery of Damages and Waiver of Consequential Damages

 

A.     OWNER’s maximum cumulative recovery, for
the Project as a whole, of damages from DESIGN/BUILDER for OWNER’s correction
of defective Construction under paragraph 12.07.A., acceptance of defective
Construction under paragraph 12.08 and/or termination for cause under paragraph
14.02 shall be limited to $2,500,000.00.

 

B.      Notwithstanding any other provision of the
Contract Documents, each party hereby waives all claims against the other party
and such other party’s employees and agents for any consequential damages that
may arise out of or relate to a breach of the Contract Documents (except for
any breach of the covenants contained in Exhibit F of the Agreement or any
provision thereof) or the performance of the Work 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.

 

35

 

Exhibit
A

to

Agreement Between Owner and Design/Builder

On the
Basis of a Stipulated Price

 

Performance
Criteria

 

DESIGN/BUILDER represents
and warrants to OWNER that the completed Project will satisfy each of the
following performance criteria.  Prior to
the reduction of retainage under paragraph 13.08 of the General Conditions,
DESIGN/BUILDER shall commission the Project and conduct a seven-day performance
test to establish compliance with each of the performance criteria except the
atmospheric emissions.  Compliance shall
be measured simultaneously for all criteria, and computed on the average over
the seven-day performance test.  If the
Project fails to reach any performance criterion, then DESIGN/BUILDER shall (at
no additional cost to OWNER) make such changes in design, construction, or
equipment as required to meet the criterion, and conduct another seven day
performance test.

 

Table 1  ethanol plant criteria —35 MGY capacity

 

	
  Criteria

  	
   

  	
  Specification

  	
   

  	
  Testing Statement

  	
   

  	
  Documentation

  
	
  Plant Capacity –
  fuel-grade ethanol

  	
   

  	
  Operate at a rate of 35
  million gallons per year of denatured fuel grade ethanol meeting the
  specifications of ASTM 4806

  	
   

  	
  Seven-day performance test

  	
   

  	
  Concurrence of production
  records and a written report from DESIGN/BUILDER.

  
	
  Dried Distillers Grains
  with Solubles (DDGS)

  	
   

  	
  Operate at rate of 68,000
  tons per year of approximately 10% moisture DDGS for one (1) dryer;

  	
   

  	
  Determined by calculation
  of mass flow from centrifuge and dryer(s) in a seven- day performance test

  	
   

  	
  Concurrence of production
  records and a written analysis from DESIGN/BUILDER.

  
	
  Carbon Dioxide

  	
   

  	
  Approximately 92,000 tons
  per year of CO2 gas.

  	
   

  	
  Determined as a function
  of fermented gallons in a seven-day performance test.

  	
   

  	
  Mass flow calculation by
  DESIGN/BUILDER.

  
	
  Grain to Ethanol
  Conversion ratio; Corn/Sorghum 56#/bu.,
  16% or less moisture, zero aflatoxin tolerance

  	
   

  	
  Not be less than 2.80
  denatured gallons (2.67 gallons undenatured) of ethanol per bushel of ground
  corn.

  	
   

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

  	
   

  	
  Concurrence of production
  records and written analysis by DESIGN/BUILDER.

  
	
  Electrical Energy

  	
   

  	
  .75 kw per denatured
  gallon of fuel grade ethanol. Does not include CO2plant, CO2
  gas system or grain handling system.

  	
   

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

  	
   

  	
  Concurrence of production
  records and written analysis by DESIGN/BUILDER.

  

 

	
  Natural Gas

  	
   

  	
  Consumption shall not
  exceed 34,000 Btu 

  	
   

  	
  As determined by meter
  readings during 

  	
   

  	
  Concurrence of production
  records 

  

 

 

	
   

  	
   

  	
  per denatured gallon of fuel-grade ethanol.

  	
   

  	
  a seven-day performance test.

  	
   

  	
  and written analysis by DESIGN/BUILDER.

  
	
  Process Water Discharge

  	
   

  	
  0 gallons under normal
  operations

  	
   

  	
  Process discharge meter

  	
   

  	
  Plant control system
  reports from DESIGN/BUILDER

  

 

	
  Atmospheric Emissions

  	
   

  	
  As prescribed by the
  applicable State Department of Environmental Quality as of the Effective Date
  of the Agreement.

  	
   

  	
  Written
  emissions compliance report from a third party selected by DESIGN/BUILDER
  confirming regulatory compliance of the air emissions performance tests prescribed by the applicable State
  Department of Environmental Quality as of the Effective Date of the
  Agreement.

  	
   

  	
  Written
  emissions compliance report from a third party selected by DESIGN/BUILDER
  confirming regulatory compliance of the air emissions performance tests prescribed by the applicable State Department
  of Environmental Quality as of the Effective Date of the Agreement.

  

 

 

Exhibit
B

to

Agreement Between Owner and Design/Builder

On the
Basis of a Stipulated Price

 

General
Project Scope

 

Construct a no less than 35 million gallon per year
(MGY) dry mill fuel-grade ethanol plant in or near Garnett, Kansas.  The plant will grind approximately 12.5
million bushels per year to produce approximately 35 MGY of fuel-grade ethanol
denatured with five percent gasoline (or a similar product).  The plant will also produce not less than
260,000 tons per year of 65% moisture wet distillers’ grains with solubles
(WDGS) and approximately 92,000 tons per year of raw carbon dioxide (CO2)
gas.

 

Arriving grain (corn or sorghum)
will be dumped into a double hopper operated dump pit in a receiving building.
Truck dump time is five minutes under normal operating conditions. Truck
drivers will start the grain system, dump the grain, and obtain a weigh ticket
from the scale operator. A 15,000-bushel per hour leg will lift the grain to
one of two 100,000-bushel concrete storage bins. A dust collection system with
bag house will be installed on the grain receiving system to limit particulate
emissions.

 

Ground grain 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 two liquefaction tanks and into one of
three 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 distillation column, the side
stripper and the molecular sieve system. 
Two hundred proof alcohol is pumped to the tank farm shift tanks and
blended with five percent denaturant as the product is being pumped into afinal
storage tank.  Loading facilities for
truck and rail cars will be provided. 
The farm tanks include: one (1) tank for 190 proof storage, one (1) tank
for 200 proof storage, one (1) tank for denaturant storage
and fuel additive, and one (1) tank for denatured ethanol storage. All
tanks are covered carbon steel tanks with one floating roof as required by the
Construction Permit.

 

Grain mash from the beer stripper is dewatered in one of the two (2)
decanter type centrifuges.  Wet cake from
the centrifuge is conveyed to the wet cake pad..  Water in the thin stillage is evaporated and
recycled by the Bio-Methanation system. 
Syrup may be added to the wet cake. 
Corn mash from the beer stripper is dewatered in decanter type
centrifuges.  Wet cake from the
centrifuge is conveyed to the DDGS dryer system.  Water in the thin stillage is evaporated and
recycled by the Bio-Methanation system. 
Syrup is added to the wet cake entering the dryer.  OWNER will also have the capacity to produce
the syrup as a segregated stream should they desire to do so. DDGS is
pneumatically 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 WDGS will consist of a wet cake including
approximately 34% solids off of the centrifuge. 
Syrup from the evaporators can be added back into the wet cake for sale
as a part of the WDGS. The system is also capable of producing a modified
wet product (partially dried).

Fresh water for the boilers,
cooking and other processes will be obtained from local sources that will
supply the needs of the plant.  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.

 

 

The design includes a compressed air system consisting of two 75 hp
compressors, a receiver tank, pre-filter, coalescing filter and air dryer.

 

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 two 7,500-gallon tanks.  The CIP system uses four tanks for receiving,
make-up, CIP return and CIP waste which is fed to the methanator. Those tanks
include one 17,600-gallon CIP Tank, two 7,500-gallon 50% Caustic tanks, and one
7,500-gallon Waste CIP tank.  A screen is
used to remove the solids.

 

DESIGN/BUILDER will be using a process to thermally oxidize the exhaust
gases from the dryer. This process will remove over 75% of the VOCs and
particulate that is in the dryer exhaust. The energy required to complete
thermal oxidation 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 two stack gas economizers to
recover the maximum amount of energy possible from the exhaust gas stream.
After the economizers, the gas stream will be vented to the atmosphere. The
Thermal Oxidizer waste heat boiler combination is designed to operate in
conjunction with the drying system or independent of the drying system. This
will allow for plant startups and shutdowns without affecting either dryer
operation or steam production capabilities. The dryer can bypass the Thermal
Oxidizer unit and vent directly to the atmosphere on an emergency basis.

 

Under normal operating circumstances, the plant will not have any
wastewater discharges that have been in contact with corn and sorghum mash,
cleaning system or contact process water. 
A DESIGN/BUILDER/Phoenix Bio-Methanator will reduce the organic acids in
process water allowing complete reuse within the plant.  The Bio-Methanator is included in the
Contract Price.  The plant will have
blowdown discharges from the cooling tower and boiler.

 

Most of the processes within the plant will be computer controlled by a
Siemens/Moore APACS distributed control system with graphical user interface
and three workstations which is included in the Contract Price.  It is estimated that the system will consist
of 200 discrete inputs, 200 discreet outputs, 175 analog inputs and 120 analog
outputs.   Programmable logic controllers (PLCs) will
control certain process equipment.

 

All design and work anticipated by this Exhibit B are included in the
Contract Price.  Design and work provided
by the DESIGN/BUILDER will meet specifications, criteria, and allowances as
provided in the construction permit and all other Laws and Regulations enacted
as of the Effective Date.

 

 

Exhibit
C

to

Agreement Between Owner and Design/Builder

On the
Basis of a Stipulated Price

 

The Contract Price includes the cost of the following:

 

Table 2 — Ancillary
Buildings

 

	
  Building

  	
   

  	
  Type

  	
   

  	
  Preliminary
  

  Dimensions

  	
   

  	
  Addition
  Info

  
	
  Process

  	
   

  	
  Structural steel or pre
  engineered metal, steel siding - Insulated

  	
   

  	
  60 x 140 x 35

  	
   

  	
  Includes laboratory,
  control room & offices, MCC Room

  
	
  Energy Center

  	
   

  	
  Structural steel or pre
  engineered metal, steel siding - Insulated

  	
   

  	
  As determined by
  Design/Builder

  	
   

  	
   

  
	
  Administrat-ion Building

  	
   

  	
  Wood framed

  	
   

  	
  37 x 70 x 10

  	
   

  	
   

  
	
  Evaporation

  	
   

  	
  Structural steel or pre
  engineered metal, steel siding - Insulated

  	
   

  	
  50 x 45 x 35

  	
   

  	
   

  
	
  Grain Receiving and
  Shipping

  	
   

  	
  Pre-engineered metal –
  roof insulation only

  	
   

  	
  25 x 75 x 25

  	
   

  	
   

  

 

The
Contract Price also includes the cost of a new skid loader (cost not to exceed
$30,000), used fork lift (cost not to exceed $12,000) and used scissors lift-30
foot (cost not to exceed $10,000).  Such
items shall be selected by DESIGN/BUILDER in its sole discretion.

 

 

Exhibit D  

to  

Agreement Between Owner
and Design/Builder  

On the Basis of a Stipulated Price

The Contract Price does not
include the cost of any furnishings for the Plant or ancillary buildings
including, without limitation, the following additional items:

 

Table 3 Administration Building 

 

	
  Description

  	
   

  	
  Additional Description

  	
   

  	
  Est. Amount

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Office Computer System

  	
   

  	
  Microsoft
  Windows 2000 network server and five personal computers, one laser printer.
  Includes setup, software, and labor.

  	
   

  	
  $

  	
  40,000

  	
   

  
	
  Telephone System

  	
   

  	
  Digital
  phone system with voice mail for office and plant.

  	
   

  	
  $

  	
  15,000

  	
   

  
	
  Office Copier & fax machine

  	
   

  	
  Black &
  white with sheet feeder and collator. Plain paper fax machine

  	
   

  	
  $

  	
  10,000

  	
   

  
	
  Office Furniture

  	
   

  	
  Office
  desks, chair & side chairs, conference room table & chairs, three
  four-drawer filing cabinets, 10 two-drawer filing cabinets.

  	
   

  	
  $

  	
  25,000

  	
   

  

 

Table 4
Maintenance and Power
Equipment  

 

	
  Description

  	
   

  	
  Additional
  Description

  	
   

  	
  Est.
  Amount

  	
   

  
	
  Spare Parts

  	
   

  	
  Spare parts
  Parts bins Misc. materials, supplies and equipment

  	
   

  	
  $ 250,000
  for spare parts needed for start-up.

  	
   

  
	
  Shop supplies and equipment

  	
   

  	
  One shop
  welder One portable gas welder One plasma torch One acetylene torch

  	
   

  	
  $ 50,000

  	
   

  

 

The foregoing prices are estimated based upon
recent projects of DESIGN/BUILDER and therefore the actual prices may vary.      

 

 

Exhibit
E  

to  

Agreement Between
Owner and Design/Builder  

On the Basis of a Stipulated
Price

 

OWNER’S Required Permits and
Services List

 

OWNER shall provide all of the permits,
authorizations and services except building permits, but including but not
limited to:

 

1)                   Land and Grading – Land and
Grading – OWNER shall
provide a site near or in Garnett, Kansas. 
OWNER shall obtain all legal authority to use the site for its intended
purpose and perform technical due diligence for DESIGN/BUILDER to perform
including but not limited to proper zoning approvals, elevation restrictions,
soil tests, and water tests. The site shall be rough graded per DESIGN/BUILDER
specifications and be within six 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 of 3,000 pounds per square foot for all foundation elements.  The soils beneath the foundation elements
shall not exceed the total or differential settlements such that the facility
is unable to perform its intended purpose.

 

Other items to
be provided by OWNER include, but are not limited to, the following: initial
site survey (boundary and topographic) as required by the design engineers, 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, site engineering and detailed
drawings (to the extent not provided by DESIGN/BUILDER), 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 loop with hydrants and all required
fire protection equipment, plant water main branches taken from the loop to be
within five feet of the designated building locations, plant roads as specified
and designed for the permanent elevations and effective depth, paving if
desired, “construction” grading plan as drawn (including site retention pond),
plant water well and associated permit(s).

 

2)                   Roads – OWNER shall provide or have provided, access road of sufficient quality to withstand
semi-truck traffic of 25,000+ annual loads with weight of 80,000 lbs each.

 

3)                   Air Quality Permit  – OWNER shall
obtain a permit for construction from the proper authorities for a Notice to
Proceed to be valid.  OWNER shall obtain
an Operating Permit in timely manner to allow startup of the plant as scheduled
by DESIGN/BUILDER.

 

4)                   Storm Water Runoff Permit  – OWNER shall
obtain the permanent industrial storm water runoff permit.  DESIGN/BUILDER shall obtain the construction
storm water runoff permit.

 

5)                   Natural Gas Supply and Service
Agreement  – Continuous supply of natural gas of at least 1.3 Billion
cubic feet per year, at a rate of 135 MMBtu per hour and at a minimum pressure
of 200 psig at the plant site.  OWNER or
vendor shall provide supply meter and regulators to provide burner tip
pressures as specified by DESIGN/BUILDER. Owner will be responsible to deliver
the gas to the physical plant.

 

 

6)                   Electrical Service – Continuous supply of 12,000 kVA, 12,400-volt
electrical energy or more to a point immediately adjacent to the site.  OWNER shall supply a high voltage switch and,
if required, a substation.  OWNER or
vendor shall supply metering as specified by the power company.  This electrical capacity will be sufficient
to support an ethanol plant production at a rate of no less than Forty Five
(45) million gallons per year, and a standard CO2 processing plant. Owner will
be responsible to deliver electricity connections to the physical plant.

 

7)                   Water Supply and Service
Agreement – For process and
sanitary purposes, fresh water in such amounts and quality as may be specified
by DESIGN/BUILDER to OWNER.

 

8)                   Wastewater Discharge Permit - For discharges of cooling tower and boiler
blowdown under normal operating procedures. 
Process wastewater discharges during emergency failure of wastewater
treatment plant to treat all process wastewater.

 

9)                   Railroad – OWNER shall provide work necessary for
construction of the railroad track siding to the plant site, at grades
specified by DESIGN/BUILDER, including all necessary dirt work to properly
locate the track, preparation of the railroad track bed, and track, ties and
ballast to railroad company specifications and all required permits with
respect thereto.

 

10)             Regulatory Contingency – Until satisfactory atmospheric emissions compliance,  Owner shall maintain Two Hundred Fifty Thousand Dollars
($250,000.00) in its budget to cover any unforeseen governmental regulation
changes implemented after the Effective Date of the Agreement.  This contingency is not part of the Contract
Price, and its use may be authorized only by agreement of OWNER and
DESIGN/BUILDER.

 

11)             Water treatment –  OWNER shall provide such water treatment
equipment as deemed necessary by DESIGN/BUILDER. This might include reverse
osmosis and softening equipment.

 

12)             Road Paving  – If
particulate matter restrictions in the air permit require paving of the plant
roads, this will be part of the requirements of OWNER.

 

13)             BATF Application/Misc. Permits  – OWNER will be
responsible for completing, submitting and obtaining Bureau of Alcohol Tobacco
and Firearms permitting to produce fuel grade alcohol and any other permits
required with respect to the construction and/or operation of the Plant.

 

14)             Office Equipment –  With the exception of plant DCS control
systems, OWNER will be responsible for office furnishings, computers and
software to run the day to day business.

 

15)             Construction Power –  OWNER will provide and fund the on site
electricity needed during construction of the plant.

 

16)             Construction Water and Sewer  – Construction water and sewer needed
during the construction of the plant to be provided and funded by OWNER.

 

In the event OWNER desires that
DESIGN/BUILDER perform all or any part of the foregoing obligations of OWNER,
and DESIGN/BUILDER agrees to perform such obligations, a Change Order shall be
issued and the Contract Price shall be increased by the amount determined
pursuant to paragraph 10.01C.2. of the General
Conditions and DESIGN/BUILDER’s fee for overhead and profit under paragraph
10.02.C.1. shall be ten percent (10%) of the costs for
subcontracts, materials and equipment.

 

 

Exhibit
F

to

Agreement Between Owner and Design/Builder

On the Basis of a Stipulated
Price

 

LICENSE OF PROPRIETARY PROPERTY OF DESIGN/BUILDER

 

OWNER expressly understands, acknowledges and
agrees that:

 

1.                                       DESIGN/BUILDER is using certain technology
and information in the design and construction of the Project which is more
fully described in paragraphs 3 and 4 below (the “PROPRIETARY PROPERTY”).

 

2.                                       Upon OWNER’s payment to DESIGN/BUILDER of the
entire Contract Price, OWNER shall be granted a perpetual limited license to
use the PROPRIETARY PROPERTY in connection with OWNER’s operations of the
Project, subject to the limitations provided herein.  In the event the Agreement is terminated for
any reason under Article 14 of the General Conditions prior to payment of the
entire Contract Price and OWNER desires to use the PROPRIETARY PROPERTY in
connection with OWNER’s operation of the Project, DESIGN/BUILDER, at OWNER’s
written request, shall grant to OWNER a perpetual limited license to use the
PROPRIETARY PROPERTY in connection with OWNER’s operations of the Project,
subject to the limitations provided herein, upon payment in full by OWNER to
DESIGN/BUILDER of (i) all amounts due and payable to DESIGN/BUILDER under the
Contract Documents, and (ii) an a license fee of Two Million Dollars
($2,000,000).

 

3.                                       The PROPRIETARY PROPERTY includes, without
limitation, OPERATING PROCEDURES (hereinafter defined), operating methods,
techniques, protocols, procedures, plans and processes, and other information
relating to design, construction and operation of the Project including 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, values and
associated electronic control equipment) and all documents supporting those
combinations; (ii) the combination of the distillers grain drying (DGD),
thermal oxidization (TO) 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 Project computer system, known as the distributed
control system (DCS) (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” include, without limitation, the process equipment and
specifications manuals, standards of quality, service, protocols, data
collection methods, construction specifications, training methods, engineering
standards, advertising or promotional materials, and any other information
prescribed by DESIGN/BUILDER from time to time concerning the PROPRIETARY
PROPERTY.

 

4.                                       DESIGN/BUILDER has the exclusive right and
interest in and to the PROPRIETARY PROPERTY and the goodwill associated
therewith.  Notwithstanding the
foregoing, goodwill created by the operation of the Project and all financial
benefits derived therefrom shall be the property of OWNER.

 

 

5.                                       OWNER considers the PROPRIETARY PROPERTY to
be valid and will not directly or indirectly, contest the validity or the
ownership by DESIGN/BUILDER thereof.

 

6.                                       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.

 

7.                                       Except as otherwise provided in paragraph 2
above, OWNER shall not pay any separate license fee or royalty to
DESIGN/BUILDER for OWNER’s continual use of the PROPRIETARY PROPERTY pursuant
to the limited license granted to OWNER, the consideration for this license is
included in the Contract Price payable to DESIGN/BUILDER under the Contract
Document.

 

8.                                       OWNER’s failure to materially comply with the
OPERATING PROCEDURES shall void all representations and warranties set forth in
Exhibit A to the Agreement relating to the performance of the Project.

 

9.                                       The limited license granted to OWNER shall
not be assigned or sublicensed, in whole or in part, without the prior written
consent of DESIGN/BUILDER, which consent will not be unreasonably
withheld.  Prior to any such assignment
or sublicense, OWNER shall obtain from such assignee or sublicensee an agreement
to be bound by all of the provisions contained herein, in form and substance
acceptable to DESIGN/BUILDER.

 

10.                                 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.  OWNER shall not at any time without
DESIGN/BUILDER’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. 
OWNER agrees that DESIGN/BUILDER would be irreparably damaged by reason
of any violation of the confidentiality provisions contained herein and that
any remedy at law for a breach of such provisions would be inadequate.  Therefore, DESIGN/BUILDER shall be entitled
to seek injunctive or other equitable relief in a court of competent
jurisdiction against OWNER, its agents, employees, affiliates, partners,
members, stockholders, officers or other associates, for any breach or
threatened breach of the confidentiality covenants contained herein without the
necessity of proving actual monetary loss. 
It is expressly understood that the remedy described herein shall not be
the exclusive remedy of DESIGN/BUILDER for any breach of such covenants, and
DESIGN/BUILDER 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
covenants.

 

11.                                 Nothing herein or the AGREEMENT shall be
interpreted or construed as granting OWNER a license or right to use the
PROPRIETARY PROPERTY in the design or construction of any enlargement or
expansion of the Project.

 

12.                                 The laws of the State of Kansas 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 Exhibit shall be brought in courts
located in Kansas, and the parties agree to the exclusive 

 

 

jurisdiction of such courts and agree that they will not
invoke the doctrine of forum non conveniens or other similar defenses.

 

13.                                 The provisions of this Exhibit F shall
survive the termination or expiration of the Contract Documents

 

The foregoing provisions are part of, and
incorporated into, the Agreement and should be interpreted consistently
therewith.  Unless otherwise defined
herein or unless the context otherwise requires, capitalized terms used herein
shall have the meaning given to such terms in the Contract Documents.  In the event any of the foregoing provisions
is contrary to any provision in the Agreement (or any other document referenced
therein), the foregoing provision shall supercede and
have precedence over such contrary provision. 

 

 

Exhibit
G

to

Agreement Between
Owner and Design/Builder

On the Basis of a Stipulated
Price

 

ICM Training Classes

 

The Contract Price includes a commitment by
DESIGN/BUILDER to perform training for certain personnel of OWNER at the
ethanol plant owned by US Energy Partners, LLC, a Kansas limited liability
company (“U.S. Energy”), which is located in Russell, Kansas.

 

Employee training will be coordinated by
operational personnel of DESIGN/BUILDER with the support of personnel of US
Energy on location in Russell, KS. Vendor training will also occur in
conjunction with this program. The specific schedule, attendees and training
detail will be provided after the Project start up date is determined.

 

Such personnel of OWNER will have the
opportunity to operate the Russell plant under the supervision of operators of
US Energy assigned to comparable positions. It is anticipated that personnel
participating in such training will include the plant manager, laboratory
manager and shift supervisors who will work in Russell for a period of 1-3
weeks. There will be no cost to OWNER for this startup training and
DESIGN/BUILDER will provide all training materials.  All other costs and expenses for such
personnel of OWNER such as travel, compensation, rooms and meals will be the responsibility
of OWNER.

 

DESIGN/BUILDER will provide
such assistance to OWNER during the start-up of the plant as it customarily
provides.  Representative(s) of
DESIGN/BUILDER will be present at the plant during the performance testing
described in Exhibit A.  For a period of
thirty (30) days after Substantial Completion, DESIGN/BUILDER will provide its
customary on-site technical and operating support for a period of thirty (30)
days after Substantial Completion. 
DESIGN/BUILDER will provide its customary off-site technical and
operating support for a period of one hundred eighty (180) days after
Substantial Completion.  The foregoing
will be provided by DESIGN/BUILDER to OWNER at no additional cost. 

 

 

Exhibit
H

to

Agreement Between
Owner and Design/Builder

On the Basis of a Stipulated
Price

 

INSURANCE

 

DESIGN/BUILDER’S Employers’ Liability,
Business Automobile Liability, and Commercial General Liability policies, as
required in General Conditions paragraph 5.02 shall be written with at least
the following limits of liability:

 

1.             Employers’ Liability Insurance

 

a.       $1,000,000

Bodily Injury by Accident

Each Accident

 

b.      $1,000,000

Bodily Injury by Disease

Policy Limit

 

c.       $1,000,000

Bodily Injury by Disease 

Each Employee

 

2.             Business Automobile Liability Insurance

 

a.       $1,000,000

Each Accident

 

3.             Commercial General Liability
Insurance

 

a.       $1,000,000

Each Occurrence

 

b.      $2,000,000

General
Aggregate

 

c.       $2,000,000

Products/Completed

Operations
Aggregate

 

d.      $1,000,000

Personal and
Advertising

Injury Limit

 

4.             Liability Umbrella policy:  $4,000,000 (in addition to the underlying
limits).

 

5.             Professional Errors & Omissions
policy.  $1,000,000 per
policy year. 

 

6.             Workers Compensation (Statutory
Limits).Exhibit 10.12

 

UNIT
PURCHASE AND REDEMPTION AGREEMENT

 

THIS UNIT
PURCHASE AND REDEMPTION AGREEMENT, (the “Agreement”) dated
September 27, 2004, is made by and between East Kansas Agri-Energy, LLC (the “Company”),
ICM, Inc. (“ICM”) and Fagen, Inc. (“Fagen”) for the purpose of setting forth
the terms and conditions under which the Company shall issue its membership
units (“Units” as further described herein) to ICM and Fagen in exchange for
capital contributions from ICM and Fagen and the terms and conditions under
which the Company shall redeem such Units from ICM and Fagen.

 

W I T N E
S S E T H:

 

WHEREAS,
ICM and Fagen are providing design engineering and construction services to the
Company in connection with the Company’s construction and start-up operation of
an ethanol production facility near Garnett, Kansas (the “Plant”);

 

WHEREAS,
the Company has determined to increase the production capacity of the Plant
which has caused additional equity to be required for construction and start-up
operation of the Plant;

 

WHEREAS, ICM and Fagen have agreed to provide such
additional equity financing through the purchase of Units from the Company, but
only after the Company has used its current equity, which was raised from the
sale of membership units of the Company during its initial registered offering
(the “Initial Equity Funds”), to pay for the initial construction costs of the
Plant;

 

WHEREAS, the Company intends to redeem any Units
issued to ICM and Fagen and will finance the redemption by raising additional
equity through an additional registered offering of its Units; and

 

WHEREAS, once the Company has used its Initial
Equity Funds to pay for the initial construction costs and expenses, ICM
and Fagen shall purchase the Units on the terms and conditions set forth below.

 

NOW,
THEREFORE, in consideration of the mutual promises and
covenants set forth herein, and for other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the parties do hereby
agree as follows:

 

SECTION
1

 

PURCHASE AND ISSUANCE OF UNITS

 

1.1           Units.  All references to Units (capitalized term) in
this Agreement shall refer only to those membership interests/units purchased
by ICM and Fagen pursuant to the terms of this Agreement and shall specifically
exclude any membership interests/units of the Company currently held by ICM and
Fagen or purchased by ICM and Fagen subsequent to the date of this Agreement.

 

1.2           Units
to be Purchased by ICM.  Pursuant to
the terms of this Agreement, ICM shall purchase from the Company up to Three
Thousand One Hundred Twenty-Five (3,125) Units at a purchase price of One
Thousand Dollars ($1,000) per unit (“Per Unit Purchase Price”).

 

1.3           Units
to be Purchased by Fagen.  Pursuant
to the terms of this Agreement, Fagen shall purchase from the Company up to
Three Thousand One Hundred and Twenty-Five (3,125) Units at a purchase price of
One Thousand Dollars ($1,000) per unit (“Per Unit Purchase Price”).

 

 

1.4           Conditions
and Manner of Payment.  The closing
of the purchase of the Units by ICM and Fagen is conditioned on the cash
proceeds of the Initial Equity Funds being reduced to $1,000,000.  Once the cash proceeds of the Initial Equity
Funds is reduced to $1,000,000, the Company shall provide written notification
to ICM and Fagen of this fact and request the closing of the purchase of the
Units (the “Purchase Notification”).  The
Purchase Notification shall state the number of Units to be purchased by ICM
and Fagen (which number of Units shall be at the sole discretion of the Company);
provided, however, such number of Units to be purchased by each of ICM and
Fagen shall not exceed 3,125 Units (combined total of 6,250).  Within ten (10) days after receipt of the
Purchase Notification, ICM and Fagen shall each make its capital contribution
(up to $3,125,000.00 each) payable in cash to the Company in exchange for the
Units.  ICM’s and Fagen’s respective
capital contribution shall be calculated by multiplying the number of Units the
Company requests to be purchased by each party by the Per Unit Purchase
Price.  Upon payment in full of their
respective capital contribution, the Company shall deliver to ICM and Fagen a
certificate representing the number of Units purchased.  Prior to the issuance of the unit
certificates, ICM and Fagen shall each execute a member signature page to the
Amended and Restated Operating Agreement of the Company (in substantially the
same form as attached hereto as Exhibit “A”) and shall execute and deliver such
additional documents and instruments as are necessary to effect the issuance of
the Units to ICM and Fagen.

 

SECTION
2

 

REPRESENTATIONS
AND WARRANTIES OF COMPANY

 

The Company hereby makes
the following representations and warranties to ICM and Fagen, and agrees to
carry out the covenants and agreements hereinafter set forth:

 

2.1           Capitalization and Ownership of
Units.  The Company currently has
40,000 Units authorized, of which 14,707 Units are presently issued and
outstanding, all of which outstanding Units are fully paid and non-assessable
and have been legally issued.  There are
no existing options, calls or commitments of any character relating to any
Units or to in any manner issue any Units.

 

2.2           Organization.  The Company is a limited liability company
duly organized, validly existing and in good standing under the laws of the
State of Kansas.  The execution and
delivery of this Agreement does not, and the consummation of the transaction
contemplated hereby will not, violate any provision of the Company’s Articles
of Organization or Operating Agreement.

 

2.3           Marketable Title.  The Company has good and marketable title to
the Units being issued by it hereunder. 
The Units delivered by Company to ICM and Fagen shall be free and clear
of all liens, charges and encumbrances. 
The execution of this Agreement shall not constitute a violation or
default under any contract, indenture or other agreement or restriction of any
kind or character to which the Company is a party.

 

2.4           Authorization and Binding
Obligation.  This Agreement
constitutes a legal, valid, and binding obligation of Company, enforceable
against Company in accordance with its terms.

 

2

 

SECTION
3

 

REPRESENTATIONS
AND WARRANTIES OF ICM

 

ICM hereby makes the
following representations and warranties to the Company, and agrees to carry
out the covenants and agreements hereinafter set forth:

 

3.1           Organization, Standing and
Authority.  ICM is a corporation duly
incorporated, validly existing and in good standing under the laws of the State
of Kansas.  ICM has the necessary power
to execute, deliver, and perform this Agreement and the documents contemplated
hereby according to their respective terms.

 

3.2           Authorization.  This Agreement constitutes a legal, valid,
and binding obligation of ICM, enforceable against ICM in accordance with its
terms.

 

3.3           Legal and Governmental Proceedings.  ICM is not subject to any order of any court
or governmental authority or agency and there are no legal actions or
governmental proceedings or investigations pending or, to the best of ICM’s
knowledge, threatened, which would have a material adverse impact on ICM or
would adversely affect the Company or ICM’s ability to perform according to the
terms of this Agreement.

 

3.4           Review of Company Operating
Agreement.  ICM has reviewed a copy
of the Amended and Restated Operating Agreement of the Company (“Operating
Agreement”) and understands that the Operating Agreement contains certain
defined terms that are important to a complete understanding of it.  ICM understands that the Units it is
acquiring are governed by the terms of the Operating Agreement and agrees to be
bound, in all respects, by the terms of the Operating Agreement.

 

3.5           Access to Information.  ICM has been given full and complete access
to information, financial or otherwise, regarding the Company and has utilized
such access to its satisfaction and has obtained any other relevant information
it has requested regarding the Company. ICM has been given the opportunity to
ask questions of, and receive answers from, the Company concerning the terms
and conditions of this offering of the Company’s Units and other matters
pertaining to this investment.

 

3.6           Independent Investigation.  In making the decision to purchase the Units,
ICM has relied solely upon independent investigations. ICM is not relying on
the Company or its directors or officers with respect to tax, business, risk,
economic and other considerations involved in this investment.

 

3.7           Understanding of Risks.  ICM understands that the Company is a
developmental-stage company and has no operating history.  ICM understands the difficulties that are
encountered by new businesses and that the Company faces all the risks inherent
in any new business. ICM understands the likelihood of the success of the
Company must be considered in light of the problems, expenses, and delays
frequently encountered in connection with a new business and that since the
Company does not intend to enter into other types of business, there will be no
diversification of risk.  ICM understands
the high risk of this investment and the financial hazard involved, including
tax risks, the risk of loss of its entire investment, and the lack of liquidity
of its investment.

 

3.8           Understanding of Stock
Restrictions.  ICM understands that
the Company has no obligation or intention to register any Units for resale or
transfer under the Securities Act of 1933 (the

 

3

 

“Act”) or any state
securities laws or to take any action (including the filing of reports or the
publication of information as required by Rule 144 under the Act) which would
make available any exemption from the registration requirements of any such
laws.  ICM further understands that, in
addition to federal and state law, the transfer of Units is restricted by the
Operating Agreement and that there will be no public market for the Units and
that if the Company has insufficient cash flow, the Company may not be able to
redeem the Units in accordance with this agreement.  ICM may therefore be excluded from selling or
otherwise transferring or disposing of any Units or any portion thereof for an
indefinite period of time or at any particular time.

 

3.9           Sufficient Knowledge and
Experience.  ICM has sufficient
knowledge and experience in financial and business matters to be capable of
evaluating the merits and risks of the prospective investment in the Units.

 

3.10         Ability to Bear Economic Risk.  ICM is able to bear the economic risk of this
investment, including a total loss of the investment.  ICM has adequate means of providing for its
current needs and personal contingencies, has no need for liquidity in its
investment in the Company and has no reason to anticipate any circumstances,
financial or otherwise, which might cause or require any sale or distribution
of the Units.

 

3.11         Investment Intention.  It is ICM’s intention to acquire the Units
for its own account, for investment purposes, and not with a view to, or for,
resale in connection with any distribution thereof. ICM understands that no federal
or state agency has passed upon the Units or made any findings or determination
as to the fairness of this investment. ICM understands and acknowledges that
the Units have not been registered under the Securities Act of 1933 or under
state securities laws and that the offering of the Units is being made pursuant
to exemptions from registration that may depend upon ICM’s investment intention.
ICM acknowledges that the Company will rely on our representations and that the
Company is not required to recognize any transfer of the Units if, in the
opinion of counsel, such transfer would result in a violation of any federal or
state law, rule or regulation regarding the offering or sale of securities.

 

SECTION 4

 

REPRESENTATIONS AND WARRANTIES OF FAGEN

 

Fagen hereby makes the
following representations and warranties to the Company, and agrees to carry
out the covenants and agreements hereinafter set forth:

 

4.1           Organization, Standing and
Authority.  Fagen is a corporation
duly incorporated, validly existing and in good standing under the laws of the
State of Minnesota.  Fagen has the
necessary power to execute, deliver, and perform this Agreement and the
documents contemplated hereby according to their respective terms.

 

4.2           Authorization.  This Agreement constitutes a legal, valid,
and binding obligation of Fagen, enforceable against Fagen in accordance with
its terms.

 

4.3           Legal and Governmental Proceedings.  Fagen is not subject to any order of any
court or governmental authority or agency and there are no legal actions or
governmental proceedings or investigations pending or, to the best of Fagen’s
knowledge, threatened, which would have a material

 

4

 

adverse impact on Fagen
or would adversely affect the Company or Fagen’s ability to perform according
to the terms of this Agreement.

 

4.4           Review of Company Operating
Agreement.  Fagen has reviewed a copy
of the Amended and Restated Operating Agreement of the Company (“Operating
Agreement”) and understands that the Operating Agreement contains certain
defined terms that are important to a complete understanding of it.  Fagen understands that the Units it is
acquiring are governed by the terms of the Operating Agreement and agrees to be
bound, in all respects, by the terms of the Operating Agreement.

 

4.5           Access to Information.  Fagen has been given full and complete access
to information, financial or otherwise, regarding the Company and has utilized
such access to its satisfaction and has obtained any other relevant information
it has requested regarding the Company. Fagen has been given the opportunity to
ask questions of, and receive answers from, the Company concerning the terms
and conditions of this offering of the Company’s Units and other matters
pertaining to this investment.

 

4.6           Independent Investigation.  In making the decision to purchase the Units,
Fagen has relied solely upon independent investigations. Fagen is not relying
on the Company or its directors or officers with respect to tax, business, risk,
economic and other considerations involved in this investment.

 

4.7           Understanding of Risks.  Fagen understands that the Company is a
developmental-stage company and has no operating history.  Fagen understands the difficulties that are
encountered by new businesses and that the Company faces all the risks inherent
in any new business. Fagen understands the likelihood of the success of the
Company must be considered in light of the problems, expenses, and delays
frequently encountered in connection with a new business and that since the
Company does not intend to enter into other types of business, there will be no
diversification of risk.  Fagen
understands the high risk of this investment and the financial hazard involved,
including tax risks, the risk of loss of its entire investment, and the lack of
liquidity of its investment.

 

4.8           Understanding of Stock
Restrictions.  Fagen understands that
the Company has no obligation or intention to register any Units for resale or
transfer under the Securities Act of 1933 (the “Act”) or any state securities
laws or to take any action (including the filing of reports or the publication
of information as required by Rule 144 under the Act) which would make
available any exemption from the registration requirements of any such
laws.  Fagen further understands that, in
addition to federal and state law, the transfer of Units is restricted by the
Operating Agreement and that there will be no public market for the Units and
that if the Company has insufficient cash flow, the Company may not be able to
redeem the Units in accordance with this agreement.  Fagen may therefore be excluded from selling
or otherwise transferring or disposing of any Units or any portion thereof for
an indefinite period of time or at any particular time.

 

4.9           Sufficient Knowledge and
Experience.  Fagen has sufficient
knowledge and experience in financial and business matters to be capable of
evaluating the merits and risks of the prospective investment in the Units.

 

4.10         Ability to Bear Economic Risk.  Fagen is able to bear the economic risk of
this investment, including a total loss of the investment.  Fagen has adequate means of providing for its
current needs and personal contingencies, has no need for liquidity in its
investment in the Company and has no reason to anticipate any circumstances,
financial or otherwise, which might cause or require any sale or distribution
of the Units.

 

5

 

4.11         Investment Intention.  It is Fagen’s intention to acquire the Units
for its own account, for investment purposes, and not with a view to, or for,
resale in connection with any distribution thereof. Fagen understands that no
federal or state agency has passed upon the Units or made any findings or
determination as to the fairness of this investment. Fagen understands and
acknowledges that the Units have not been registered under the Securities Act
of 1933 or under state securities laws and that the offering of the Units is
being made pursuant to exemptions from registration that may depend upon Fagen’s
investment intention. Fagen acknowledges that the Company will rely on our
representations and that the Company is not required to recognize any Transfer
of the Units if, in the opinion of counsel, such Transfer would result in a
violation of any federal or state law, rule or regulation regarding the
offering or sale of securities.

 

SECTION 5

 

COVENANTS
OF COMPANY

 

The Company hereby
covenants and agrees to the following:

 

5.1           Rights of Unit Holders.  ICM and Fagen shall have the right to jointly
appoint one (1) director to the Company’s Board of Directors for every
$2,000,000 of capital contributions made to the Company by ICM and Fagen under
this Agreement.  For purposes of this
Section, capital contribution shall be the combined capital contributions of
ICM and Fagen.  The directors appointed
jointly by ICM and Fagen shall serve at the pleasure ICM and Fagen so long as
ICM and Fagen continue to own Units; provided, however, that the number of
directors so appointed shall be progressively decreased on a one director per
$2,000,000 basis as Units are redeemed. 
Any and all Units purchased by ICM and Fagen hereunder shall not be
voted in the election of directors to the Company’s Board of Directors.  ICM and Fagen will have all the rights of
Unit Holders as provided for in the Company’s Operating Agreement in all other
respects.

 

5.2           Restrictions on Transferability of
Units. The Units shall not be transferable absent registration or
applicable exemption.  In addition, the
Units shall not be transferable except for transfers to related parties or
affiliates of the Unit Holders as provided in the Company’s Operating
Agreement.  All transfers must be made in
accordance with the terms and conditions of transfer set forth in the Company’s
Operating Agreement.  The Unit
certificates shall contain a legend describing these transfer restrictions.

 

5.3           Registered Offering of Units.  Within one hundred fifty (150) days of the
date of this Agreement, the Company shall register with the Securities and
Exchange Commission and one or more state securities commissions (including,
without limitation, the state of Kansas), a minimum of 2,000 units and a
maximum of 10,000 units of the Company at an offering price of $1,100 per Unit.  The Company intends to sell the units
directly to investors without the use of an underwriter.  The Company shall use its best efforts to
sell such registered units and shall hold a minimum of 25 investor meetings in
the state of Kansas to promote the sale of the units.

 

5.4           Proceeds from the Sale of Units.  Proceeds from the sale of Units in the
registered offering shall be deposited in escrow until the minimum offering
amount of $2,000,000 has been attained. 
Once subscription proceeds deposited in escrow exceed the minimum
offering amount of $2,000,000, the funds in escrow may be released at the
discretion of the Company.  The timing of
the release of funds from escrow shall be at the sole discretion of the
Company.  The offering shall be

 

6

 

terminated upon the earlier of (i) the Company’s
election, at its sole discretion, to terminate the offering at the time all the
Units are redeemed in accordance with Section 6.1 below, (ii) the sale of the
maximum offering amount of $10,000,000, or (iii) the offering termination date.
Proceeds from the sale of Units received after release of funds from escrow
shall be payable directly to the Company.

 

SECTION
6

 

REDEMPTION
OF UNITS

 

6.1           Redemption of Units from Offering
Proceeds.  Proceeds from the sale of
units in the offering contemplated in Section 5.3 shall be used first to redeem
the Units owned by ICM and Fagen.  The
redemption price for the Units shall be equal to $1,100 per Unit.  Within twenty (20) days of the release of the
offering proceeds from escrow, the Company shall use such proceeds to redeem
Units from ICM and Fagen on a prorata basis. 
After the initial receipt of proceeds from escrow, the Company, at its
election, may either (i) continue redeeming Units on a piece meal basis as
proceeds from the sale of Units are received, or (ii) redeem the Units from
proceeds one time upon the termination of the offering.  Any proceeds in excess of the amount
necessary to redeem the Units shall be retained by the Company.  

 

6.2           Redemption of Units from Company
Cash Flow.  In the event the
registered offering contemplated in Section 6.3 of this Agreement does not
result in the necessary proceeds to redeem all of the Units held by ICM and
Fagen, the Company shall redeem the remaining Units from its net cash flow from
operations prior to any distributions to the Members of the Company.  The redemption of Units from the net cash
flow of the Company shall be made annually in April or May of each year after
audited financial statements have been prepared and provided to the Company’s
lender.  The redemption price of the
Units made pursuant to this Section 6.2 shall be equal to the fair market value
of the Unit as of the date of redemption (“Fair Market Value Per Unit”).  For purposes of this Section 6.2, Fair Market
Value Per Unit shall be calculated as follows: (a)  If the parties mutually agree that a
sufficient number of trades of units has occurred during the calendar quarter
immediately preceding the redemption (“Valuation Period”), the Fair Market
Value Per Unit shall be determined by taking the weighted average price per
unit of all units sold during the Valuation Period; (b)  If the parties do not agree that a sufficient
number of trades has occurred during the Valuation Period, then the Fair Market
Value Per Unit may be determined at a price mutually agreed upon by the
parties; or (c) If the parties are unable to mutually agree on a Fair Market
Value Per Unit, the Fair Market Value Per Unit shall be determined by an
independent qualified appraiser chosen by mutual agreement of the parties.  If the parties are unable to agree on an
appraiser, then ICM and Fagen shall select an appraiser and the Company shall
select an appraiser which appraisers shall then jointly select an independent
qualified third appraiser who shall determine the Fair Market Value Per Unit,
and such determination shall be final, conclusive and binding on the
parties.  The expense of any appraisal
made hereunder shall be divided equally among the parties.  Within twenty (20) days of the determination
of the Fair Market Value Per Unit, the Company shall redeem the Units on a pro
rata basis from ICM and Fagen at the Fair Market Value Per Unit.  The redemption payments shall be made in
cash.  The Company shall continue to
redeem the Units from its net cash flow from operations each year pursuant to
the terms of this Section 6.2 until the complete redemption of the Units.

 

6.3           Exception for Tax Distributions.  Notwithstanding any provision in Section 6.3
to the contrary, the parties to this Agreement each agree that prior to any
redemption of Units, the Company may make distributions to the Members of the
Company (including ICM and Fagen) in an aggregate amount equal to forty percent
(40%) of the net income of the Company for the purpose of paying income

 

7

 

taxes related to the ownership of the units of the
Company.  The amount of net cash flow
available for redemption of Units shall be reduced by the amount of the tax distribution.

 

6.4           Compliance with Debt Financing
Agreements and Consent of Company’s Lender. 
The Company’s duties and obligations hereunder shall, at all times, be
subject to the terms and conditions of any and all debt financing agreements
executed between the Company and its lenders. 
The Company shall not be required to redeem any Units from ICM and Fagen
if such redemption would cause the Company to breach or violate the provisions
of any debt financing agreement including, without limitation, any promissory
notes, loan agreements, indentures, mortgages and other agreements or documents
pertaining to monies borrowed by the Company, including all amendments and
modifications thereto.  The parties
further acknowledge that the net cash flow from operations available for
redemption of Units will be reduced each year by an amount equal to the greater
of seventy-five percent (75%) of any CCC Bio-Energy Income payments received
during such year or twenty-five percent (25%) of the Company’s free cash
flow.  Pursuant to the terms of the
Company’s financing agreement with its lender, this amount shall be paid to the
lender as an accelerated amortization of the Company’s loan.    

 

SECTION
7

 

DEFAULT

 

In the event ICM and
Fagen, or any one of them, default or are in breach of their obligations under
this Agreement by failing to close and consummate each and every purchase and
sale as noted herein, or ICM and Fagen, or any one of them, shall fail to
perform or observe any other term or condition of this Agreement, then this
Agreement shall be in default and the Company shall be entitled to pursue all
remedies available at law or in equity.

 

SECTION
8

 

ADDITIONAL
UNDERTAKINGS

 

8.1           Additional Instruments.  Each party to this Agreement shall execute
and deliver or use its best efforts to cause to be executed and delivered such
additional instruments and documents as any other party may reasonably request
for the purpose of carrying out this Agreement.

 

SECTION
9

 

SURVIVAL OF COVENANTS,
REPRESENTATIONS AND WARRANTIES

 

9.1           Covenants.  All covenants contained in this Agreement
shall survive the effective date of this Agreement.

 

9.2           Representations and Warranties.  All representations and warranties contained
in this Agreement shall be deemed continuing representations and warranties and
shall survive the effective date of this Agreement.

 

8

 

SECTION
10

 

INDEMNIFICATIONS

 

10.1         Indemnification by the Company.  The Company shall indemnify and hold ICM and
Fagen harmless against and with respect to, and shall reimburse ICM and Fagen
any and all losses, liabilities or damages resulting from any untrue
representation, breach of warranty or nonfulfillment of any covenant by the
Company contained herein or in any certificate, document or instrument
delivered to ICM and Fagen hereunder.

 

10.2         Indemnifications by ICM and Fagen.  ICM and Fagen shall indemnify and hold the
Company harmless against and with respect to, and shall reimburse the Company
for any and all losses, liabilities or damages resulting from any untrue
representation, breach of warranty or nonfulfillment of any covenant by ICM and
Fagen contained herein or in any certificate, document or instrument delivered
to the Company hereunder.

 

10.3         Attorneys’ Fees.  The indemnity set forth in Sections 10.1 and
10.2 above shall include providing reasonable attorneys’ fees and costs to the
other party as required to enforce the terms of said indemnity.

 

10.4         Notices.  The Company and ICM and Fagen shall provide
the other with as much notice as possible of a potential claim pursuant to this
Section.

 

SECTION
11

 

MISCELLANEOUS

 

11.1         Notices.  Any notice or communication required or
performed hereunder shall be sufficiently given if sent by registered or
certified mail, postage prepaid to the following individuals:

 

	
  To Company:

  	
  East Kansas
  Agri-Energy, LLC

  
	
   

  	
  2011⁄2 East 4th
  Avenue

  
	
   

  	
  P.O.
  Box 225

  
	
   

  	
  Garnett, KS 66032

  
	
   

  	
   

  
	
  To ICM:

  	
  Dave Vander Griend

  
	
   

  	
  310 N. First Street

  
	
   

  	
  P.O. Box 397

  
	
   

  	
  Colwich, KS 67030

  
	
   

  	
   

  
	
  To Fagen:

  	
  O. Wayne Mitchell

  
	
   

  	
  501 West Highway 212

  
	
   

  	
  P.O. Box 159

  
	
   

  	
  Granite Falls, MN 56241

  

 

Any such notice
shall become effective on the third day after the day of mailing thereof,
postage prepaid, registered or certified mail.

 

11.2         Contents of Agreement.  This Agreement sets forth the entire
understanding of the parties and supersedes any prior agreement or
understanding relating to the subject matter of this

 

9

 

Agreement.  It shall be changed or terminated only by an
instrument executed by all parties hereto in writing.

 

11.3         No Assignments.  No party may assign nor delegate any of its
rights or obligations hereunder without first obtaining the written consents of
the other parties to this Agreement.

 

11.4         Binding on Successors.  All the terms and provisions of this
Agreement shall be binding upon and inure to the benefit of and be enforceable
by the respective successors, personal representatives, heirs and permitted
assigns of the parties hereto.

 

11.5         Governing Law.  This Agreement is being delivered and is
intended to be performed in the State of Kansas and shall be construed and
enforced in accordance with the laws of the State of Kansas.

 

11.6         Interpretation.  Wherever used herein the masculine gender
shall include the feminine and neuter genders, and vice versa, as the context
shall require.  The paragraph headings
are included solely for convenience and shall in no event affect, or be used in
connection with, the interpretation of this Agreement.

 

11.7         Counterparts.  This Agreement may be executed in any number
of counterparts, each of which shall be an original but all of which together
shall constitute one and the same instrument. 
This Agreement shall become effective at such time as counterparts
thereof have been executed by each of the parties and it shall not be a
condition to its effectiveness that each of the parties has executed the same
counterpart.

 

11.8         Construction.  Each party hereto has had the opportunity to
fully negotiate the terms hereof and modify the draftsmanship of this
Agreement.  Therefore, the terms of this
Agreement shall not be construed and interpreted with any presumption,
inference or rule requiring construction or interpretation of any provision of
this Agreement against the interest of the party causing this Agreement to be
drafted.

 

 

[Signature Page Follows]

 

10

 

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

 

	
  COMPANY:

  	 

	
  East
  Kansas Agri-Energy, LLC

  	 

	
   

  	 

	
   

  	 

	
  By:

  	
  /s/ William Pracht

  	
   

  
	
  Its:

  	
  Chairman

  	
   

  
	
   

  	 

	
   

  	 

	
  ICM:

  	 

	
  ICM,
  Inc.

  	 

	
   

  	 

	
   

  	 

	
  By:

  	
   /s/ Dave Vander Griend

  	
   

  
	
  Its:

  	
  CFO

  	
   

  
	
   

  	 

	
   

  	 

	
  FAGEN:

  	 

	
  Fagen, Inc.

  	 

	
   

  	 

	
   

  	 

	
  By:

  	
  /s/ Jennifer A. Jackson

  	
   

  	 

	
  Its:

  	
  CFO

  	
   

  
					

 

11

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