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CONSTRUCTION AND DESIGN AGREEMENT BETWEEN OWNER PROJECT MANAGER

Design Contract

CONSTRUCTION AND DESIGN AGREEMENT BETWEEN OWNER  PROJECT MANAGER | Document Parties: SOY ENERGY, LLC | Ball Construction Services, LLC | Ball Industrial Services, LLC You are currently viewing:
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SOY ENERGY, LLC | Ball Construction Services, LLC | Ball Industrial Services, LLC

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Title: CONSTRUCTION AND DESIGN AGREEMENT BETWEEN OWNER PROJECT MANAGER
Governing Law: Iowa     Date: 9/14/2010

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Exhibit 10.5

CONSTRUCTION AND DESIGN AGREEMENT
BETWEEN OWNER & PROJECT MANAGER

THIS CONSTRUCTION AND DESIGN AGREEMENT BETWEEN OWNER & PROJECT MANAGER (together with its Exhibits, this “Agreement”) is made effective on August 11, 2010 (the “Effective Date”) between:

 

 

 

 

 

Owner:

 

Soy Energy, LLC

 

 

 

PO Box 663

 

 

 

Marcus, IA 51035

 

 

 

Designated Representative: RICK DAVIS

 

 

 

E-Mail: rdavis@midlands.net

 

 

 

 

 

and Project Manager:

 

Ball Industrial Services, LLC

 

 

 

590 Market Street

 

 

 

West Des Moines, IA 50266

 

 

 

Designated Representative: JIM HAGBERG

 

 

 

E-Mail: jhagberg@ball-construction.com

 

 

 

 

 

 

 

Ball Construction Services, LLC

 

 

 

590 Market Street

 

 

 

West Des Moines, IA 50266

 

 

 

Designated Representative: BOB SODDERS

 

 

 

E-Mail: bsodders@ball-construction.com

 

 

 

 

 

for the following Project:

 

Biodiesel Plant Modifications

 

 

 

4172 19th St SW

 

 

 

Mason City, IA 50402.

 

 

 

 

 

 

 

 

TABLE OF ARTICLES

 

 

 

 

 

 

 

1

 

GENERAL PROVISIONS

 

3

 

 

 

 

 

2

 

PROJECT MANAGER’S RESPONSIBILITIES

 

6

 

 

 

 

 

3

 

OWNER’S RESPONSIBILITIES

 

17

 

 

 

 

 

4

 

HAZARDOUS MATERIALS AND EMERGENCIES

 

18

 

 

 

 

 

5

 

COMPENSATION

 

19

 

 

 

 

 

6

 

COST OF THE WORK

 

20

 

 

 

 

 

7

 

PAYMENTS

 

23

 

 

 

 

 

8

 

INSURANCE AND BONDS

 

26

 

 

 

 

 

9

 

DISPUTE RESOLUTION

 

27

 

 

 

 

 

10

 

TERMINATION OR SUSPENSION

 

28

 

 

 

 

 

11

 

MISCELLANEOUS PROVISIONS

 

30

 

 

 

 

 

 

 

EXHIBITS

 

 

 

 

 

 

 

A

 

Initial CSO, Feedstock Biodiesel Specifications

 

 

 

 

 

 

 

B

 

Preliminary Arrangements

 

 

 


 

 

 

 

 

C

 

Guaranteed Maximum Price Amendment

 

 

 

 

 

 

 

D

 

Soy Energy – Biodiesel Plant Modification Budget

 

 

 

 

 

 

 

E

 

Ball Industrial Rate Sheet

 

 

 

 

 

 

 

F

 

Initial Project Timeline

 

 

 

 

 

 

 

G

 

Key Consultants and Subcontractors

 

 

Page 2 of 34


RECITALS

Owner desires to retain Project Manager to provide, and Project Manager wishes to provide, Owner certain design, engineering, procurement, testing, training, and construction services, labor, materials and supplies and equipment for modifications to Owner’s existing biodiesel plant located at 4172 19th St SW, Mason City, Iowa (the “Plant”), as required to provide Owner the ability to operate the Plant with multiple feedstocks for production at an annualized production rate of 30,000,000 gallons of 100% biodiesel satisfying ASTM D6571 specifications per year based upon a 345-day year, all as more specifically provided in this Agreement.

AGREEMENT

Owner and Project Manager agree as follows:

ARTICLE 1  GENERAL PROVISIONS

 

 

 

§ 1.1

DEFINITIONS

 

Capitalized terms used in the Contract Documents have the meanings set forth in the preamble, this section and elsewhere in this Agreement. Unless otherwise defined, words that have well-known technical or construction industry meanings are used in accordance with such meanings.

 

 

 

 

§ 1.1.1

APPLICATION FOR PAYMENT

 

 

Application for Payment is defined in Section 7.2.1.

 

 

 

 

§ 1.1.2

CHANGE ORDER

 

 

Change Order is defined in Section 2.7.

 

 

 

 

§ 1.1.3

CONSTRUCTION DOCUMENTS

 

 

Construction Documents is defined in Section 2.3.3.

 

 

 

 

§ 1.1.4

CONSTRUCTION PHASE

 

 

The Construction Phase is the period commencing at the end of the second month of Detailed Engineering and ending at Final Completion.

 

 

 

 

§ 1.1.5

CONTINGENCY FUND

 

 

Contingency Fund is defined in Section 5.3.

 

 

 

 

§ 1.1.6

CONTRACT DOCUMENTS

 

 

Contract Documents include only the following: this Agreement (including its exhibits); written modifications, amendments and Change Orders to this Agreement executed by Owner and Project Manager after the Effective Date, and, upon completion by Project Manager and acceptance by Owner, the Preliminary Construction Documents and Construction Documents.

 

 

 

 

§ 1.1.7

CONTRACT TIME

 

 

Contract Time is the period of time, including any adjustments authorized by Owner, allotted in the Contract Documents for Substantial Completion of the Work.

 

 

 

 

§ 1.1.8

COST OF THE WORK

 

 

Cost of the Work is defined in Section 6.1.

Page 3 of 34


 

 

 

 

 

§ 1.1.9

DESIGN ENGINEER

 

 

Design Engineer shall mean CJS Group Inc., the firm retained and paid by Project Manager (subject to reimbursement by Owner as Cost of the Work) to provide all professional engineering and other professional design services for the Project, directly or through subconsultants approved by Owner, including the key consultants listed in attached Exhibit G. Project Manager shall not replace the Design Engineer or any of its key consultants without the approval of Owner.

 

 

 

 

§ 1.1.10

DETAILED ENGINEERING

 

 

Detailed Engineering begins when the Project Manager receives an unrestricted Notice to Proceed.

 

 

 

 

§ 1.1.11

DRAWINGS

 

 

Drawings are the graphic and pictorial portions of the Contract Documents showing the design, location and dimensions of the Work, generally including plans, elevations, sections, details, schedules and diagrams. Exhibit B provides Preliminary Arrangements of the new equipment, additions and modifications, which are the basis of the Guaranteed Maximum Price and shall be the basis of the final Construction Documents.

 

 

 

 

§ 1.1.12

FINAL COMPLETION

 

 

Final Completion is defined in Section 2.4.3.

 

 

 

 

§ 1.1.13

GUARANTEED MAXIMUM PRICE

 

 

Guaranteed Maximum Price is defined in Section 5.2.

 

 

 

 

§ 1.1.14

INDEPENDENT ENGINEER

 

 

Independent Engineer is defined in Section 3.7.

 

 

 

 

§ 1.1.15

NOTICE TO PROCEED

 

 

Project Manager will begin Detailed Engineering when it receives an unrestricted Notice To Proceed from the Owner. Notice To Proceed will be the point in time when this Agreement has been executed, the acquisition of the Plant by Owner has been consummated and Owner has closed on financing necessary to fund the Project. Owner can begin Project activities sooner with a restricted Notice to Proceed by funding activities shown in Exhibit F.

 

 

 

 

§ 1.1.16

OWNER

 

 

Owner is Soy Energy, LLC and where action is required by “Owner” such action may be taken by its Designated Representative as defined in Section 3.5.

 

 

 

 

§ 1.1.17

OWNER INDEMNIFIED PARTIES

 

 

Owner Indemnified Parties is defined in Section 2.15.1.

 

 

 

 

§ 1.1.18

OWNER’S LENDER

 

 

Owner’s Lender is OSM-REO FF, LLC, a Minnesota limited liability company.

 

 

 

 

§ 1.1.19

PERFORMANCE GUARANTEE CRITERIA

 

 

Performance Guarantee Criteria is defined in Section 2.13 and consist of all the guarantees listed in Exhibit A.

 

 

 

 

§ 1.1.20

PERFORMANCE TEST

 

 

Performance Test is defined in Section 2.14 and includes the Performance Tests described in Exhibit A.

Page 4 of 34


 

 

 

 

 

§ 1.1.21

PRELIMINARY ARRANGEMENT

 

 

Preliminary Arrangement means the schematic diagram of the Project prepared by Project Manager and accepted by Owner before the Effective Date, attached to this Agreement as Exhibit B.

 

 

 

 

§ 1.1.22

PRELIMINARY CONSTRUCTION DOCUMENTS

 

 

Preliminary Construction Documents is defined in Section 2.3.2.

 

 

 

 

§ 1.1.23

PROJECT

 

 

The Project is the design and construction of modifications of Owner’s biodiesel plant required to operate the biodiesel plant with the capability to use multiple feedstocks for production (including, without limitation, the ability to use 100% Corn Stillage Oil (CSO) for all of its production needs alone or in combination with suitable quality and quantity of animal fats, other free fatty acids (up to 15% FFA), or crude or refined soybean oil) at an annualized production rate of 30,000,000 gallons of 100% biodiesel satisfying ASTM D6571 specifications, per year based upon a 345-day year. The modifications shall be in accordance with the requirements of the Contract Documents as more specifically provided in Exhibit A.

 

 

 

 

§ 1.1.24

PROJECT MANAGER

 

 

Project Manager collectively refers to Ball Industrial Services, LLC and Ball Construction Services, LLC.

 

 

 

 

§ 1.1.25

SCHEDULE OF VALUES

 

 

Schedule of Values is attached as Exhibit D. The Schedule of Values is an estimate based on budgeted costs and may be modified to reflect costs set forth in final subcontracts and supply contracts.

 

 

 

 

§ 1.1.26

SPECIFICATIONS

 

 

Specifications are the written requirements for materials, equipment, systems, standards and workmanship for the Work, and performance of related services to be prepared by Project Manager and approved by Owner. Owner shall promptly review and respond to any requests for approval of specifications in order to keep the Project on the timeline for Scheduled Substantial Completion.

 

 

 

 

§ 1.1.27

SUBCONTRACTOR

 

 

Subcontractor means any person or entity retained by Project Manager to perform a portion of the Work pursuant to Section 2.5, including without limitation, the Design Engineer, any other consultant, trade contractors, and suppliers of materials and equipment for the Project.

 

 

 

 

§ 1.1.28

SCHEDULED SUBSTANTIAL COMPLETION DATE

 

 

Scheduled Substantial Completion Date is defined in Section 2.4.2.

 

 

 

 

§ 1.1.29

SUBSTANTIAL COMPLETION

 

 

Substantial Completion is defined in Section 2.4.2.

 

 

 

 

§ 1.1.30

WORK

 

 

Work means all engineering, design, procurement, construction management, construction, testing, training on the plant modifications, inspection, labor and other services, and all materials, tools, equipment, and machinery, which are required to complete the design, construction and equipping of the Project and that are related to, associated with, or incidental to Project Manager’s obligations under the Contract Documents, including those not shown in

Page 5 of 34


 

 

 

 

 

 

the Drawings and Specifications that are otherwise necessary or advisable to complete the Project in accordance with the standard of care provided in Contract Documents.

 

 

 

§ 1.2

PRE-CONSTRUCTION PHASE MATTERS

 

Project Manager’s Pre-Construction Phase responsibilities, compensation and payments are set forth in a separate Agreement entitled “Phase 1 Engineering Services – Scope Definition.”

 

 

 

§ 1.3

CONFLICTING PROVISIONS

 

The body of this Agreement and the Exhibits are intended to be complementary and interpreted to avoid conflict, with words and phrases interpreted in a manner consistent with construction and design industry standards, and shall be interpreted, if possible, to give effect to each part and to avoid or minimize conflicts. If there is nevertheless any conflict or inconsistency between the body of this Agreement and any Exhibit, (1) such conflict or inconsistency shall be resolved in a manner that is consistent with the Performance Guarantee Criteria and reasonably acceptable to Owner and (2) the terms of this Agreement shall prevail for purposes of determining whether Project Manager is entitled to an adjustment in the Guaranteed Maximum Price or the Scheduled Substantial Completion Date as a result of any changes in the Work required to resolve any conflict or inconsistency. Project Manager shall prepare Construction Documents that are consistent with this Agreement. If there is a conflict or inconsistency between this Agreement (including the Exhibits) and the Construction Documents that Owner has not authorized or approved in writing, Project Manager shall at Project Manager’s expense (1) revise the Construction Documents to reconcile the conflict or inconsistency in a manner that is consistent with the Performance Guarantee Criteria and reasonably acceptable to Owner and (2) correct Work, if any, Project Manager has performed that does not conform with the revised Construction Documents.

 

 

 

ARTICLE 2  PROJECT MANAGER’S RESPONSIBILITIES

 

 

 

§ 2.1

GENERAL

 

Project Manager accepts the relationship of trust and confidence established by this Agreement and covenants with Owner to exercise Project Manager’s skill and judgment in furthering the interests of Owner; to furnish through duly licensed professionals all civil, structural, mechanical, electrical and other engineering services, surveying services, and, to the extent necessary to complete the Project, architecture and other professional design services; to furnish efficient construction administration, management services and supervision; to furnish at all times an adequate supply of workers and materials; and to perform the Work in an expeditious and economical manner consistent with Owner’s interests. Project Manager shall perform, directly or through Subcontractors, all Work and provide all services, labor, materials, supplies, tools and equipment, necessary to complete the Project in accordance with applicable law, the Performance Guarantee Criteria and the Contract Documents. The enumeration of specific duties and obligations to be performed by Project Manager in this Agreement and in the Contract Documents shall not limit the general undertakings of Project Manager.

 

 

 

§ 2.2

STANDARD OF CARE

 

Project Manager (including its consultants and Subcontractors) shall perform all professional engineering, construction and related services under this Agreement with the care, skill, competence, expertise and efficiency ordinarily used and accepted in the industry by those practicing under similar circumstances for similar projects in the Midwest.

 

 

 

§ 2.3

PROFESSIONAL SERVICES

 

 

 

 

§ 2.3.1

General

 

 

Project Manager shall provide all engineering, testing, consulting and other professional services required to complete the Work through the Design Engineer, who shall cause such

Page 6 of 34


 

 

 

 

 

 

 

services to be provided by properly licensed design professionals, whose signature and seal shall appear on all Drawings, Specifications, calculations, certifications, shop drawings and other submittals prepared by such professionals. Shop drawings and other submittals related to the Work designed or certified by such professional, if prepared by others, shall bear such professional’s written approval when submitted to Owner. Owner shall be entitled to rely upon the adequacy, accuracy and completeness of the services, certifications and approvals performed or provided by Project Manager through the Design Engineer.

 

 

 

 

 

§ 2.3.2

Preliminary Construction Documents

 

 

Within Five (5) business days after the Effective Date, Project Manager shall provide the current revision of the following documents to Owner (together with any other documents Project Manager and Owner reasonably agree are necessary to document the preliminary design of the Project, the “Preliminary Construction Documents”), which shall be prepared by the Design Engineer and be consistent with the Preliminary Arrangements and, upon approval by Owner, shall be part of the Contract Documents:

 

 

 

 

 

(a)

major equipment lists, with sizes;

 

 

 

 

 

 

(b)

process flow diagram;

 

 

 

 

 

 

(c)

process design criteria and/or process description; and

 

 

 

 

 

 

(d)

site layout.

 

 

 

 

 

 

Owner shall within Ten (10) business days after receipt of the Preliminary Construction Documents review and approve such documents. The Preliminary Construction Documents shall establish performance standards for the completed Project and identify components required to meet those performance standards. Project Manager shall have the right to revise the layout of the equipment and substitute specific pieces of equipment, provided the completed Project shall conform to or exceed the performance standards established by the Contract Documents.

 

 

 

 

 

§ 2.3.3

Construction Documents

 

 

Project Manager shall provide through qualified, licensed design professionals employed by Project Manager, or procured from qualified, independent licensed Design Consultants, the necessary design services, including architectural, engineering and other design professional services, for the preparation of the required drawings, specifications and other design submittals required to otherwise facilitate construction of the Work in accordance with this Agreement, the Performance Guarantee Criteria and the Preliminary Construction Documents (such Drawings, Specifications and design submittals collectively and together with the Preliminary Construction Documents, are the “Construction Documents”).

 

 

 

 

 

§ 2.3.4

Construction Administration

 

 

Project Manager shall cause the Design Engineer to provide construction administration services to ensure that the construction of the Work conforms with the Construction Documents, which services shall include, without limitation: observation of the construction of the Work as it progresses; review of test and inspection reports; certification of Applications For Payment, Project Manager’s notices of Substantial Completion and Final Completion; and review and approval of shop drawings and other submittals.

Page 7 of 34


 

 

 

 

§ 2.4

CONTRACT TIME

 

 

 

 

§ 2.4.1

General

 

 

Time is of the essence with respect to the dates and times set forth in the Contract Documents, including Exhibit F hereto. Project Manager shall commence the Work when it receives the Notice to Proceed unless the parties mutually agree otherwise in writing. Project Manager, directly and through its Subcontractors, shall maintain adequate personnel, equipment, and materials to complete all Work within the Contract Time until Final Completion has been achieved.

 

 

 

 

§ 2.4.2

Substantial Completion; Re-commissioning of the Plant

 

 

Substantial Completion of the Work shall be achieved no later than two hundred seventy (270) days after the date the Notice to Proceed has been delivered to Project Manager (the “Scheduled Substantial Completion Date”). Substantial Completion shall be deemed to occur on the date on which the Work satisfies the Performance Guarantee Criteria and is sufficiently complete so that Owner can occupy and use the Project for its intended purposes. The actual Substantial Completion shall be determined, and the Scheduled Substantial Completion Date may be adjusted, in accordance with this Section 2.4.2.

 

 

 

 

 

No later than sixty (60) days before the date that Project Manager expects to achieve Substantial Completion, Project Manager will notify Owner of the estimated date of Substantial Completion. Owner, with the cooperation and assistance of Project Manager, will re-commission the existing Plant and bring it up to full capacity converting crude soybean oil to ASTM-quality biodiesel at an annualized rate of 30,000,000 gallons within sixty (60) days after notice from Project Manager. If Project Manager does not achieve Substantial Completion on or before the Scheduled Substantial Completion Date solely due to Owner’s failure to successfully re-commission the Plant, there will be a one-day extension of the Scheduled Substantial Completion Date for each day of such Owner-caused delay. However, no extension to the Scheduled Substantial Completion Date will be made if Owner was delayed or prevented from re-commissioning the Plant by acts or omissions of Project Manager.

 

 

 

 

 

 

§ 2.4.3

Final Completion

 

 

Final Completion of the entire Work shall be achieved on the date Owner reasonably determines that:

 

 

 

 

 

(a)

Substantial Completion has been achieved;

 

 

 

 

 

 

(b)

all outstanding items of Work have been completed by Project Manager;

 

 

 

 

 

 

(c)

clean-up of the Plant has been completed;

 

 

 

 

 

 

(d)

release and waiver of all claims and liens from Project Manager and Subcontractors have been provided.

 

 

 

 

 

§ 2.4.4

Substantial Completion Notice and Procedures

 

 

Project Manager shall notify Owner in writing when it believes Substantial Completion has been achieved with respect to the Work, which notice shall include a certification by the Design Engineer that the Work is complete in accordance with the Contract Documents, Performance Testing pursuant to Section 2.14 has been completed, and the Work satisfies the Performance Guarantee Criteria. Within five (5) Days of Owner’s receipt of Project Manager’s notice, Owner, Independent Engineer and Project Manager will jointly inspect such Work to verify that the Work satisfies the Performance Guarantee Criteria and is sufficiently complete so that

Page 8 of 34


 

 

 

 

 

 

Owner can occupy and use the Project for its intended purposes. If Owner, Independent Engineer and Project Manager agree such Work is deemed Substantially Complete, Project Manager shall prepare and issue a “Certificate of Substantial Completion” for the Work that will set forth (i) the date of Substantial Completion, which will be the date that Owner has accepted the Work, (ii) certification by Project Manager and Design Engineer that the Work satisfies the Performance Guarantee Criteria and (iii) an acknowledgment by Owner that warranties with respect to the Work commence on the date of Substantial Completion.

 

 

 

 

§ 2.4.5

Final Completion Notice and Procedures

 

 

Project Manager shall notify Owner in writing when it believes Final Completion has been achieved with respect to the Work. Within five (5) Days of Owner’s receipt of Project Manager’s notice, Owner and Project Manager will jointly inspect such Work to verify that it is finally complete in accordance with the requirements of the Contract Documents. If Owner, Independent Engineer and Project Manager agree the Work is finally complete, Project Manager shall prepare and issue a “Certificate of Final Completion” for the Work.

 

 

 

 

 

 

§ 2.4.6

Items Provided by Project Manager

 

 

At the time of submission of its Final Application for Payment, Project Manager shall provide:

 

 

 

 

 

 

(a)

an affidavit that there are no claims, obligations or liens outstanding or unsatisfied for labor, services, material, equipment, taxes or other items performed, furnished or incurred for or in connection with the Work;

 

 

 

 

 

 

(b)

a general release executed by Project Manager waiving, upon receipt of final payment by Project Manager, all claims for payment, additional compensation, or damages for delay, except those previously made to Owner in writing and remaining unsettled at the time of Final Payment;

 

 

 

 

 

 

(c)

consent of Project Manager’s surety, if any, to Final Payment; and

 

 

 

 

 

 

(d)

a hard copy of all Drawings, Specifications and any other Contract Documents developed after the Effective Date.

 

 

 

 

 

§2.4.7

Liquidated Damages

 

 

If Substantial Completion is not attained within forty-five (45) days of the Scheduled Substantial Completion Date, Owner will suffer damages which are difficult to determine and accurately specify. Project Manager shall pay Owner five thousand five hundred dollars ($5,500) as liquidated damages, and not as a penalty, for each day that Substantial Completion extends beyond forty-five (45) days after the Scheduled Substantial Completion Date; provided, however, that liquidated damages under this section shall not exceed an aggregate of $350,000. Owner, at its discretion, may elect to offset any such liquidated damages from the Project Manager’s Fee. Project Manager shall not be obligated to pay any liquidated damages if the cause for the delay is due to actions or omissions of Owner. The liquidated damages provided herein shall be in lieu of all liability occasioned solely by any delay in achieving Substantial Completion; however, liquidated damages shall not limit any of Owner’s remedies or Project Manager’s liabilities in connection with any other claims, including, without limitation, any claims arising in connection with satisfaction of the Performance Guarantee Criteria.

 

 

 

§ 2.5

SUBCONTRACTORS

 

Project Manager shall employ only Subcontractors that are duly licensed and qualified.

Page 9 of 34


 

 

 

 

 

§ 2.5.1

Generally; Responsibility

 

 

Those portions of the Work that Project Manager does not customarily perform with Project Manager’s own personnel shall be performed by Subcontractors under written subcontracts, purchase orders, subconsultant agreements, or other appropriate written agreements with Project Manager (“Subcontracts”). Project Manager shall coordinate the activities of all of Project Manager’s Subcontractors. Project Manager assumes responsibility for the proper performance of the Work of Subcontractors and any acts and omissions in connection with such performance. Nothing in the Contract Documents is intended or deemed to create any legal or contractual relationship between Owner and any Subcontractor, provided Owner shall be a third-party beneficiary of Project Manager’s rights under any Subcontract. Organization of the Specifications into divisions, sections and articles and the arrangement of Drawings shall not control Project Manager in dividing the Work among Subcontractors or in establishing the extent of Work to be performed by any trade.

 

 

 

 

§2.5.2

Bids; Selection

 

 

Project Manager shall obtain bids from Subcontractors and from suppliers of materials or equipment fabricated especially for the Work and shall review such bids with Owner. Project Manager shall select and accept bids with Owner’s prior approval, which shall not be unreasonably withheld. Project Manager represents that it has identified and provided information to Owner regarding all key Subcontractors and suppliers, and Owner has had an opportunity to review such information and make any objections known prior to execution of this Agreement, and a list of all such key Subcontractors and suppliers is attached to the Agreement as Exhibit G.

 

 

 

 

§ 2.5.3

Subcontract Provisions

 

 

Subcontracts or other agreements shall require the Subcontractor to perform its portion of the Work in accordance with the Contract Documents, to be bound to Project Manager by the Contract Documents to the same extent Project Manager is bound to Owner, and to conform to the applicable compensation and payment provisions of this Agreement. The Subcontract will provide Owner with the same audit rights with regard to the Subcontractor as Owner receives with regard to Project Manager under this Agreement. Each Subcontract shall require the Subcontractor to indemnify, defend and hold harmless Owner, name Owner an additional insured on its general liability policies, and to conform with the dispute resolution provisions of this Agreement. Project Manager shall ensure that each subcontract is assignable to Owner without consent of the Subcontractor or any other person or entity if Project Manager defaults on its obligations or the Agreement is terminated with cause. Project Manager shall provide Owner and Owner’s Lender with copies of each executed Subcontract within seven (7) days after execution of the Subcontract.

 

 

 

 

§2.5.4

Related Parties

 

 

If Project Manager engages a Subcontractor that may be considered a Related Party, then Project Manager shall promptly notify Owner in writing of such relationship and the specific nature of the contemplated transaction. “Related Party” includes a parent, subsidiary, affiliate or other entity having common ownership or management with Project Manager; any entity in which any stockholder in, or management employee of, Project Manager owns any interest in excess of ten percent in the aggregate; any person or entity which has the right to control the business or affairs of the Project; or any member of the immediate family of any of the foregoing.

Page 10 of 34


 

 

 

 

§ 2.6

ADMINISTRATION AND REPORTS

 

 

 

§ 2.6.1

Meetings

 

 

Before commencement of the Construction Phase services, Project Manager and Owner shall hold an initial meeting to review and discuss the Work. After the commencement of the Construction Phase services, Project Manager shall schedule and conduct meetings with Owner at least every 2 weeks to discuss such matters as procedures, progress, coordination, scheduling, and status of the Work. Project Manager shall prepare and promptly distribute minutes to Owner. In addition to such meetings, Project Manager shall communicate regularly with Owner regarding the status and condition of the Work.

 

 

 

 

§ 2.6.2

Progress Reports

 

 

Project Manager shall record the progress of the Project. On at least a monthly basis, Project Manager shall submit written progress reports to Owner, showing percentages of completion and other reasonable information requests made by Owner. Project Manager shall also keep, and make available to Owner, a daily log containing a record for each day of weather, portions of the Work in progress, number of workers on site, identification of equipment on site, problems that might affect progress of the Work, accidents, injuries, and other reasonable information requests made by Owner.

 

 

 

 

§ 2.6.3

Cost Control

 

 

Project Manager shall develop a system of cost control for the Work, including regular monitoring of actual costs for activities in progress and estimates for uncompleted tasks and proposed changes. Project Manager shall identify variances between actual and budgeted costs and report the variances to Owner and shall provide this information in its monthly reports to Owner. Nothing in this section shall affect Project Manager’s obligations with respect to the Guaranteed Maximum Price.

 

 

 

 

§ 2.6.4

Construction Documents

 

 

Project Manager shall maintain at the Plant a current, complete set of Construction Documents, as issued and approved for the building permit. Owner and Independent Engineer shall have the right to review such Construction Documents.

 

 

 

§ 2.7

CHANGES TO THE WORK

 

Owner and Project Manager may mutually agree in writing to changes to the Work that are within the general scope of this Agreement consisting of additions, deletions or other revisions (each written order, a “Change Order”). To be effective, any adjustment to the Scheduled Substantial Completion Date or Guaranteed Maximum Price because of changes in the Work must be specified in a written Change Order signed by Project Manager and Owner, specifying the work to be done, and any adjustments in the Guaranteed Maximum Price or the Scheduled Substantial Completion Date. A Change Order shall be executed before proceeding with the change in the Work except in the event of an emergency affecting the safety of persons or property, in which case Project Manager shall act at its discretion and shall be paid an amount equal to the reasonable Cost of the Work incurred in the event of the emergency plus a fee which shall be not more than a percentage that is proportional to the Project Manager’s Fee.

 

 

 

 

§ 2.7.1

Concealed Conditions

 

Project Manager represents that Project Manager has visited the existing Plant, is generally familiar with the local conditions under which the Work will be performed, and has correlated personal observations and information obtained from all known sources and accounted for such observations and information in the Construction Documents, the Project schedule and the Guaranteed Maximum Price. If Project Manager encounters concealed or unknown conditions of an unusual nature that affect the performance of the Work and vary from those reasonably anticipated by Project Manager below ground or in an

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existing structure, and those conditions are not ordinarily found to exist or differ from those generally recognized as inherent in work of the character provided for in this Agreement, the Project Manager shall promptly give notice of the conditions to Owner, and, if possible, before the conditions are disturbed, and provide Owner with a proposed Change Order for addressing such conditions. The Scheduled Substantial Completion Date shall be equitably extended (but in no event less than a one-day extension for each day the Work is delayed) to the extent of the interference with the Work for the concealed or unknown conditions by Change Order upon claim by either party.

 

 

 

 

§ 2.7.2

Delays

 

If Project Manager is delayed at any time in the progress of the Work by any act or neglect of Owner; or by any employee of Owner, or by any separate contractor employed by Owner, or by changes ordered in the Work, or by labor disputes, fire, unusual delay in transportation, fuel, material, or labor shortages or unavailability, unavoidable casualties, action or inaction of governmental authority, or any other causes beyond Project Manager’s control, the Date of Substantial Completion shall be extended by a period equal to such delay.

 

 

 

§ 2.8

GOVERNMENTAL APPROVALS

 

Project Manager shall obtain and pay for all necessary permits, approvals, licenses and inspection fees required by any government entity having jurisdiction over the Project for prosecution of the Work. Owner shall obtain and pay for all necessary permits, approvals, licenses and inspection fees required to properly own and operate the Project. Owner shall be responsible for obtaining and paying for all air permit issues related to the Plant. Project Manager will provide Owner any required information about the character and quantities of emissions from construction activities and the completed Project. Additionally, Project Manager and Owner shall work with and assist each other as they pursue their responsibilities related to this section.

 

 

 

§ 2.9

WARRANTIES

 

 

 

 

§2.9.1

Project Manager Warranty of the Work

 

 

Project Manager warrants and guarantees to Owner that all of the Work completed by Project Manager, including all materials and equipment furnished as part of the construction, shall be new unless otherwise approved by Owner in Writing, of good quality, in conformance with the Contract Documents and all legal requirements, and free of defects in materials and workmanship. For twelve months from the date of Substantial Completion, Owner’s remedies for breach of this Warranty will include all labor and materials required to correct any deficiencies in the Work, provided that the warranty shall exclude remedies for damages caused by Owner’s abuse, Owner’s modifications not executed by Project Manager, improper or insufficient maintenance or service by Owner, improper operation by Owner, or normal wear and tear due to normal usage. Nothing in this warranty is intended to limit any manufacturer’s warranty which provides Owner with greater warranty rights than set forth in this section or to otherwise limit remedies available to Owner.

 

 

 

 

§2.9.2

Manufacturer and Subcontractor’s Warranties

 

 

Project Manager will provide to Owner all manufacturers’ and Subcontractors’ warranties upon the earlier of Substantial Completion or termination of this Agreement.

 

 

 

 

§ 2.9.3

Correction of Defective Work

 

 

For a period of one (1) year from the date of Substantial Completion of the Work, Project Manager will correct any Work that is not in conformance with the Contract Documents (such Work being “Defective Work”). Failure of the Plant to perform in accordance with the Performance Guarantee Criteria shall be presumed due to Defective Work unless due to: (a) the failure of Owner to maintain and operate the Plant in accordance with instructions provided by

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Project Manager and ordinary industry practices; or (b) a failure or limitation of pre-existing Plant equipment not attributable to the Work. If the Plant fails to perform in accordance with the Performance Guarantee Criteria due to Defective Work, such one (1)-year period shall be extended one (1) day for each day that the Plant is not operating in conformance with the Contract Documents due to the Defective Work. Project Manager shall, within seven (7) days of receipt of written notice of Defective Work from Owner, take meaningful steps to commence the correction, repair or replacement of the Defective Work and any Work damaged by Defective Work.

 

 

 

 

§2.9.4

No Limitation of Remedies

 

 

The warranty period applies only to Project Manager’s obligation to correct Defective Work and is not intended to constitute a limitation on remedies available to Owner against Project Manager for Defective Work, or a period of limitations for any rights or remedies Owner may have regarding any of Project Manager’s obligations under the Contract Documents.

 

 

 

 

§2.9.5

Disputed Warranty Claims

 

 

Project Manager shall have the right to dispute any Defective Work claim by Owner pursuant to Article 9 of this Agreement. If the claim arises from the failure of the Plant to perform in accordance with the Performance Guarantee Criteria, Project Manager shall endeavor to discover and correct the cause of such failure pending resolution of the dispute. The sole issue for resolution in any such dispute resolution process shall be whether such failure was caused by Defective Work. If such failure was not caused by Defective Work, Project Manager shall be entitled to compensation for its investigative and corrective work, including reasonable overhead and profit.

 

 

 

 

§ 2.9.6

No Consequential Damages

 

 

Project Manager shall not be liable to Owner for any special, punitive, incidental, indirect or consequential damages (including without limitation, loss of production, loss of profits, loss of use or loss of contracts) arising from the breach of any warranty contained herein, except to the extent covered by insurance.

 

 

 

§ 2.10

LICENSES

 

 

 

 

§ 2.10.1

General

 

 

Project Manager hereby grants to Owner a license to use the Work product and Construction Documents in connection with Owner’s occupancy, operation, maintenance and repair of the Project. Project Manager acknowledges and agrees that the license to use the Work product and Construction Documents granted hereby shall provide Owner sufficient rights in and to the Work product and Construction Documents as shall be necessary for Owner solely to operate and maintain the Project and shall not be used for any other purpose.

 

 

 

 

§ 2.10.2

License upon Termination or Default

 

 

If this Agreement is terminated prior to completion of the Project, the license granted under Section 2.10.1 shall automatically terminate and be replaced by a license to use the Work product and Construction Documents to complete the Project and subsequently occupy, operate, maintain and repair the Project, provided that if Project Manager is not then in default under this Agreement, Owner shall pay all amounts then due and payable though the date of termination to Project Manager.

 

 

 

§ 2.11

PROJECT START-UP AND TESTING

 

Project Manager shall provide supervision, standard and special test instruments, tools, equipment and materials required to perform component and equipment checkout and testing, initial start-up, operations

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supervision and corrective maintenance of all permanent Project equipment within the scope of the Work. Project Manager shall train, supervise and direct Owner’s employees and personnel who shall participate in the start-up activities with Project Manager’s personnel to become familiar with all aspects of the Project. Owner and the Independent Engineer may witness start-up and testing activities.

 

 

 

§ 2.12

POST COMPLETION SUPPORT

 

Project Manager will provide (a) two (2) months of on-site operational support for Owner’s personnel after successful completion of the Performance Tests; (b) one on-site inspection of the Plant to confirm that the Plant is capable of operating in accordance with the Performance Guarantee Criteria in each of the third, sixth, ninth, and twelfth months following the date of Substantial Completion; and (c) for one (1) year from the date of Substantial Completion, will provide up to two hundred (200) hours of off-site technical and operating procedure support by telephone and other electronic data transmission and communication. Any additional support services not otherwise required by this Section and not required to correct Defective Work pursuant to Section 2.9.3 shall be compensated by Owner at Project Manager’s stated rates or as otherwise agreed by the parties.

 

 

 

§ 2.13

PERFORMANCE GUARANTEE

 

Project Manager guarantees that the Project will meet the performance criteria listed in Exhibit A (the “Performance Guarantee Criteria”) during a Performance Test conducted and concluded pursuant to the terms hereof prior to the Scheduled Substantial Completion Date and for a period of one (1)-year after the date of Substantial Completion. If the Project fails to meet the Performance Guarantee Criteria prior to the Scheduled Substantial Completion Date, Project Manager will make the necessary corrections and re-test until the Project meets the Performance Guarantee Criteria, which correction and retesting shall be reimbursable as a Cost of the Work, subject to the Guaranteed Maximum Price. For a period of one (1)-year after the date of Substantial Completion, Project Manager shall be responsible for correction and retesting at Project Manager’s expense, pursuant to Section 2.9.3.

 

 

 

§ 2.14

PERFORMANCE TESTING

 

Project Manager shall direct tests and, if necessary, any re-tests, of the Project to demonstrate, at a minimum, compliance with the Performance Guarantee Criteria (the “Performance Tests”). No later than Forty-five (45) Days prior to the earlier of the Scheduled Substantial Completion Date or Substantial Completion, Project Manager shall provide to Owner for review a detailed testing plan for the Performance Tests. Owner and Project Manager shall agree upon a testing plan that shall be consistent with the Performance Guarantee Criteria and Test Protocols contained in Exhibit A hereto. After such agreement has been reached, Project Manager shall notify Owner five (5) business days prior to the date Project Manager intends to commence the Performance Tests. Project Manager shall provide to Owner a Performance Test report, including all applicable test data, calculations and certificates indicating the results of the Performance Tests and, within five (5) business days of Owner’s receipt of such results, Owner, Independent Engineer and Project Manager will jointly inspect such Work and review the results of the Performance Tests to verify that the Performance Guarantee Criteria have been met. If Owner or Independent Engineer reasonably determines that the Performance Guarantee Criteria have not been met, Owner shall notify Project Manager in writing stating the reasons why Owner determined that the Performance Guarantee Criteria have not been met. Project Manager shall, within seven (7) days of receipt of such written notice from Owner, undertake correction and retesting. Notice and testing procedures shall be repeated as necessary until Project Manager, Owner and Independent Engineer verify that the Performance Guarantee Criteria have been met. Project Manager shall have the right to dispute any determination by Owner or Independent Engineer that the Performance Guarantee Criteria have not been met pursuant to Article 9 of this Agreement. The sole issue for resolution in any such dispute resolution process shall be (1) whether the Performance Guarantee Criteria have or have not been met and (2) if the Performance Guarantee Criteria have not been met, whether that failure is due to: (a) the failure of Owner to maintain and operate the Plant in accordance with the instructions provided by Project Manager, the “Crude CSO Specifications” or other standards to which Project

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Manager and Owner may agree, and ordinary industry practices or (b) due to a failure or limitation of pre-existing Plant equipment not attributable to the Work. If the Performance Guarantee Criteria have been met, or if the Performance Guarantee Criteria have not been met due to the failure of Owner or pre-existing Plant equipment, then Project Manager shall be entitled to compensation for its re-testing and any unnecessary corrective work, including reasonable overhead and profit.

 

 

 

§ 2.15

INDEMNIFICATION

 

 

 

 

§ 2.15.1

Project Manager’s General Indemnification

 

 

Project Manager, to the fullest extent permitted by law, shall indemnify, defend and hold harmless Owner and their successors, assigns, officers, directors, employees and agents (“Owner Indemnified Parties”) from and against losses, costs, damages, injuries, liabilities, claims, demands, penalties, interest and causes of action, including without limitation, attorney’s fees for bodily injury, sickness or death, and property damage or destruction (other than to the Work itself) to the extent resulting from the negligent or wrongful acts or omissions of Project Manager, Subcontractors, anyone employed directly or indirectly by any of them or anyone for whose acts any of them may be liable. Without limiting the generality of the foregoing, Project Manager shall fully indemnify, defend and save harmless Owner Indemnified Parties from and against losses, costs, damages, injuries, liabilities, claims, demands, penalties interest and causes of action, including without limitation attorney’s fees, in favor of any governmental authority or other third party to the extent caused by (a) failure of Project Manager or any Subcontractor to comply with legal requirements as required by this Agreement, or (b) failure of Project Manager or any Subcontractor to properly administer and pay any taxes or fees required to be paid by Project Manager under this Agreement.

 

 

 

 

 

 

§ 2.15.2

Payment Claim Indemnification

 

 

(a)

To the extent Project Manager has received payment for the Work, Project Manager shall indemnify, defend and hold harmless Owner Indemnified Parties from


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