Form of Lump-sum Design-build Agreement

Exhibit 10.16

Confidential treatment has been requested for portions of this exhibit. The copy filed herewith omits the information subject to the confidentiality request. Omissions are designated as [*]. A complete version of this exhibit has been filed separately with the Securities and Exchange Commission.

FORM OF LUMP SUM DESIGN-BUILD AGREEMENT BETWEEN

(" OWNER" )

AND

FAGEN, INC. (" DESIGN-BUILDER" )

, 2006

TABLE OF CONTENTS

Page

Article 1 Definitions; Rules of Interpretation 1

1.1 Rules of Construction 1

1.2 Defined Terms 2

Article 2 The Project 6

2.1 Services to be Performed 6

2.2 Extent of Agreement 6

2.3 Conflicting Provisions 7

Article 3 Design-Builder Responsibilities 8

3.1 Design-Builder' s Services in General 8

3.2 Design Development and Services 8

3.3 Standard of Care 9

3.4 Government Approvals and Permits 10

3.5 Subcontractors 10

3.6 Maintenance of Site 11

3.7 Project Safety 11

3.8 Submission of Progress Reports 11

3.9 Training and Manuals 11

Article 4 Owner' s Responsibilities 12

4.1 Duty to Cooperate 12

4.2 Furnishing of Services and Information 13

4.3 Financial Information; Cooperation with Lenders; Failure to Obtain Financial Closing 13

4.4 Owner' s Representative 14

4.5 Government Approvals and Permits 14

4.6 Owner' s Separate Contractors 14

Article 5 Ownership of Work Product; Risk of Loss 15

5.1 Work Product 15

5.2 Owner' s Limited License Upon Payment in Full 15

5.3 Owner' s Limited License Upon Owner' s Termination for Convenience or Design-Builder' s Election to Terminate 15

5.4 Owner' s Limited License Upon Design-Builder' s Default 16

5.5 Owner' s Indemnification for Use of Work Product 16

5.6 Risk of Loss 16


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Article 6 Commencement and Completion of the Project 17

6.1 Work Schedule 17

6.2 Phase I and Phase II Engineering 17

6.3 Notice to Proceed; Commencement 17

6.4 Project Start-Up and Testing 18

6.5 Substantial Completion 18

6.6 Final Completion 20

6.7 Post Completion Support 21

6.8 Sunset Date 21

Article 7 Performance Testing and Liquidated Damages 21

7.1 Performance Guarantee 21

7.2 Performance Testing 22

7.3 Liquidated Damages 23

7.4 Bonds and Other Performance Security 23

Article 8 Warranties 24

8.1 Design-Builder Warranty 24

8.2 Correction of Defective Work 25

8.3 Warranty Period Not Limitation to Owner' s Rights 25

Article 9 Contract Price 26

9.1 Contract Price 26

Article 10 Payment Procedures 26

10.1 Payment at Financial Closing 26

10.2 Progress Payments 26

10.3 Final Payment 28

10.4 Failure to Pay Amounts Due 28

10.5 Design-Builder' s Payment Obligations 28

10.6 Record Keeping and Finance Controls 28

Article 11 Hazardous Conditions and Differing Site Conditions 29

11.1 Hazardous Conditions 29

11.2 Differing Site Conditions; Inspection 30

Article 12 Force Majeure; Change in Legal Requirements 30

12.1 Force Majeure Event 30

12.2 Effect of Force Majeure Event 31

12.3 Change in Legal Requirements 31


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Article 13 Changes to the Contract Price and Scheduled Completion Dates 32

13.1 Change Orders 32

13.2 Contract Price Adjustments 32

13.3 Emergencies 33

13.4 Requests for Contract Adjustments and Relief 33

Article 14 Indemnity 33

14.1 Patent and Copyright Infringement 33

14.2 Tax Claim Indemnification 34

14.3 Payment Claim Indemnification 34

14.4 Design-Builder' s General Indemnification 34

14.5 Owner' s General Indemnification 35

Article 15 Stop Work; Termination for Cause 36

15.1 Owner' s Right to Stop Work 36

15.2 Owner' s Right to Perform and Terminate for Cause 36

15.3 Owner' s Right to Terminate for Convenience 37

15.4 Design-Builder' s Right to Stop Work 38

15.5 Design-Builder' s Right to Terminate for Cause 38

15.6 Bankruptcy of Owner or Design-Builder 39

15.7 Lenders' Right to Cure 39

Article 16 Representatives of the Parties 39

16.1 Designation of Owner' s Representatives 39

16.2 Designation of Design-Builder' s Representatives 40

Article 17 Insurance 41

17.1 Insurance 41

17.2 Design-Builder' s Insurance Requirements 41

17.3 Owner' s Liability Insurance 43

17.4 Owner' s Builder' s Risk Insurance 43

17.5 Coordination with Loan Documents 44

Article 18 Representations and Warranties 45

18.1 Design-Builder and Owner Representations and Warranties 45

18.2 Design-Builder Representation and Warranties 45

Article 19 Dispute Resolution 45

19.1 Dispute Avoidance and Mediation 45

19.2 Arbitration 46

19.3 Duty to Continue Performance 46

19.4 Consequential Damages 46


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Article 20 Confidentiality of Shared Information 47

20.1 Non-Disclosure Obligation 47

20.2 Publicity and Advertising 47

20.3 Term of Obligation 47

Article 21 Miscellaneous 48

21.1 Assignment 48

21.2 Successors 48

21.3 Governing Law 48

21.4 Severability 48

21.5 No Waiver 48

21.6 Headings 48

21.7 Notice 48

21.8 No Privity with Design Consultant/Subcontractors 50

21.9 Amendments 50

21.10 Entire Agreement 50

21.11 Third-Party Beneficiaries 50

21.12 Counterparts 50

21.13 Survival 50

SCHEDULE 4.2.1 52

EXHIBIT A Performance Guarantee Criteria A-1

EXHIBIT B General Project Scope B-1

EXHIBIT C Owner' s Responsibilities C-1

EXHIBIT D ICM License Agreement D-1

EXHIBIT E Schedule of Values E-1

EXHIBIT F Form of Monthly Progress Report F-1

EXHIBIT G Required Permits G-1

EXHIBIT H Form of Performance Bond H-1

EXHIBIT I Form of Payment Bond I-1

EXHIBIT J Work Schedule J-1

EXHIBIT K Preliminary Construction Documents K-1

EXHIBIT L Design-Builder' s Subcontractors Performing any Portion of the Work in Excess of $500,000 L-1


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EXHIBIT M Phase I and Phase II Engineering Services Agreement M-1

EXHIBIT N Draw (Payment) Schedule N-1

EXHIBIT O Air Emissions Application or Permit O-1

EXHIBIT P Performance Test Run Procedures P-1

EXHIBIT Q Form of Lien Waivers Q-1

EXHIBIT R Form of Application for Payment R-1

EXHIBIT S Weighting Schedule S-1


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FORM OF LUMP SUM DESIGN-BUILD CONTRACT This FORM OF LUMP SUM DESIGN-BUILD CONTRACT (the " Agreement" ) is made as of , 2006, (the " Effective Date" ) by and between , a limited liability company (the " Owner" ) and Fagen, Inc., a Minnesota corporation (the " Design-Builder" ) (each, a " Party" and collectively, the " Parties" ).

RECITALS A. The Owner desires to develop, construct, own and operate a one hundred (100) million gallons per year (" MGY" ) dry grind ethanol production facility located at (the " Plant" ); and

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

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

AGREEMENT

Article 1

Definitions; Rules of Interpretation

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

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

(b) References to " Articles," " Sections," " Schedules," " Exhibits," " Recitals," or " Preamble" shall be to Articles or Sections of, or Schedules, Exhibits, Recitals or the Preamble to this Agreement.

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


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

AAA is defined in Section 19.1. Additional Sum is defined in Section 5.3.2. Agreement is defined in the Preamble.

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

Applicable Law means

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

(b) any and all orders, judgments, writs, decrees, injunctions, Governmental Approvals or other decisions of a Governmental Authority; and (c) any and all legally binding announcements, directives or published practices or interpretations, regarding any of the foregoing in (a) or (b) of this definition, enacted, issued or promulgated by a Governmental Authority;

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

Application for Payment is defined in Section 10.2.1.

As Built Plans means, subject to Article 5, construction drawings (signed and sealed, to the extent required) reflecting such details of the design and construction necessary to completely cover all Work performed, including all changes from preliminary and construction phase drawings so as to reflect the actual Work completed.

Bankrupt Party is defined in Section 15.6.1.

Business Day means any Day other than a Saturday, Sunday or a Day on which banks in the State of New York are authorized or required to remain closed.

Certificate of Substantial Completion is defined in Section 6.5.3 Change Order is defined in Section 13.1.1. Construction Documents is defined in Section 3.2.2.


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Contract Documents is defined in Section 2.2.

Contract Price is defined in Section 9.1.

Contract Times means scheduled dates provided for in the Contract Documents including Substantial Completion, Final Completion, and the Sunset Date.

Damages is defined in Section 14.1.1.

Day or Days shall mean calendar days unless otherwise specifically noted in the Contract Documents. Design-Builder is defined in the Preamble.

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

Design-Builder' s Senior Representative is defined in Section 16.2. Design Consultant is a qualified, licensed design professional that is not an employee of Design-Builder, but is retained by Design-Builder, or employed or retained by anyone under contract with Design-Builder or Subcontractor, to furnish design services required under the Contract Documents.

Early Completion Bonus is defined in Section 6.5.5.

Effective Date is defined in the Preamble. Final Application for Payment is defined in Section 10.3.

Final Completion is defined in Section 6.6.2.

Final Payment is defined in Section 10.3. Financial Closing means the execution of the Financing Documents by all the parties thereto.

Financing Documents means the final loan documents with the Lender or Lenders providing financing for the construction or term financing of the Plant and any and all agreements necessary to demonstrate a binding commitment of Owner and/or Lenders to fund the construction of the Plant pursuant to this Agreement.

Force Majeure Event is defined in Section 12.1.

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

Governmental Authority means any federal, state, local or municipal governmental body; any governmental, quasi-governmental, regulatory or administrative agency, commission, body or other authority exercising or entitled to exercise any administrative, executive, judicial, legislative, policy, regulatory or taxing authority or power; or any court or governmental


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tribunal; in each case having jurisdiction over the Owner, the Design-Builder, the Project, or the Site. Hazardous Conditions are any materials, wastes, substances and chemicals deemed to be hazardous under applicable Legal Requirements, or the handling, storage, remediation, or disposal of which are regulated by applicable Legal Requirements.

ICM is defined in Section 5.2.1. ICM License Agreement means the license agreement to be executed between Owner and ICM, Inc., substantially in the form attached hereto as Exhibit D.

Indemnified Parties is defined in Section 5.5.

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

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

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

Lenders' Agent means an agent or agents acting on behalf of the Lenders. Manufacturer' s Warranty shall mean a warranty provided by the original manufacturer or vendor of equipment used by Design-Builder in the Plant.

Maximum Draw (Payment) Schedule is defined in Exhibit N.

MGY is defined in the Recitals.

Net Cash Flow means, with respect to a particular period, all revenue derived from the sale of ethanol and/or distillers grains, less all (a) operating and maintenance expenses incurred in the ordinary course of business and (b) interest accrued under the senior and subordinated debt facilities. Notice to Proceed is defined in Section 6.3.

Oversight Items is defined in Section 4.3.

Owner is defined in the Preamble.

Owner Indemnified Parties is defined in Section 14.1.1.

Owner' s Operator means UBE or any other entity that Owner chooses to replace UBE as operator of the Plant.


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Owner' s Representative is defined in Section 16.1. Owner' s Senior Representative is defined in Section 16.1.

Parties is defined in the Preamble.

Party is defined in the Preamble. Pass Through Warranties mean any warranties provided to Design-Builder by a Subcontractor or vendor which are assigned to Owner. Pay Period means, with respect to a given Application for Payment or Progress Report, the one (1) month period following the last day of the previous Pay Period to which the immediately prior Application for Payment or Progress Report is applied; provided that the initial Pay Period shall commence on the date of delivery of the Notice to Proceed and end on the twenty-fourth (24 th ) day of the calendar month during which the Notice to Proceed is issued. Payment Bond is defined in Section 7.4.2.

Performance Bond is defined in Section 7.4.1.

Performance Guarantee Criteria means the criteria listed in Exhibit A. Performance Tests is defined in Section 7.2.1.

Phase I is defined in Exhibit C.

Phase II is defined in Exhibit C.

Plant is defined in the Recitals.

Plant Maintenance Manual is defined in Section 3.9. Plant Operation Manual is defined in Section 3.9.

Preliminary Construction Documents is defined in Section 3.2.1.

Production Bonus is defined in Section 6.5.4.

Progress Report is defined in Section 3.8.

Project means the Plant, together with all equipment, labor, services and materials furnished hereunder.

Project Scope is defined in Exhibit B.

Punch List is defined in Section 6.5.3.

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


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Safety Representative is defined in Section 3.7.1. Schedule of Values is defined in Section 10.2.5.

Scheduled Final Completion Date is the date provided in Section 6.6.1.

Scheduled Substantial Completion Date is defined in Section 6.5.1.

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

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

Substantial Completion is defined in Section 6.5.2. Sunset Date is defined in Section 6.8.

UBE means United Bio Energy Management, LLC, a Kansas limited liability company.

Weighting Schedule means a tabular representation of the progress of the Work where relative task completion is weighted by value rather than duration. An example Weighting Schedule is attached as Exhibit S.

Work is defined in Section 3.1.

Work Product is defined in Section 5.1.

Work Schedule is defined in Section 6.1.

Article 2 The Project

2.1 Services to be Performed. Pursuant to this Agreement, Design-Builder shall perform all work and services in connection with the engineering, design, procurement, construction startup, testing (including Performance Tests) and training for the operation and maintenance of the Plant, and provide all material, equipment, tools and labor necessary to complete the Plant in accordance with the terms of this Agreement.

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

2.2.1 All written modifications, amendments and Change Orders to this Agreement.

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


List of Exhibits

Exhibit A Performance Guarantee Criteria

Exhibit B General Project Scope

Exhibit C Owner' s Responsibilities

Exhibit D ICM License Agreement

Exhibit E Schedule of Values

Exhibit F Form of Monthly Progress Report

Exhibit G Permits Required

Exhibit H Form of Performance Bond

Exhibit I Form of Payment Bond

Exhibit J Work Schedule

Exhibit K Preliminary Construction Documents

Exhibit L Design-Builder' s Subcontractors Performing any Portion of the Work in Excess of $500,000

Exhibit M Phase I and Phase II Engineering Services Agreement

Exhibit N Maximum Draw (Payment) Schedule

Exhibit O Air Emissions Application or Permit

Exhibit P Performance Test Run Procedures

Exhibit Q Form of Lien Waivers

Exhibit R Application for Payment

Exhibit S Weighting Schedule

2.2.3 Preliminary Construction Documents prepared by Design-Builder pursuant to Section 3.2.1 and the Construction Documents to be prepared by Design-Builder pursuant to Section 3.2.2 shall be incorporated in this Agreement.

2.3 Conflicting Provisions. The Contract Documents are intended to permit the Parties to complete the Work and all obligations required by the Contract Documents in accordance with the terms herein for the Contract Price. The Contract Documents are intended to be complementary and interpreted in harmony so as to avoid conflict, with words and phrases interpreted in a manner consistent with construction and design industry standards. In the event of any inconsistency, conflict, or ambiguity between or among the Contract Documents, the Contract Documents shall take precedence in the order in which they are listed in Section 2.2 hereof. No oral representations or other agreements have been made by the Parties except as specifically stated in the Contract Documents.


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Article 3

Design-Builder Responsibilities

3.1 Design-Builder' s Services in General. Except for services and information specifically set forth in Article 4 and Exhibit C to be provided by the Owner, Design-Builder shall perform or cause to be performed all design, engineering, procurement, construction services, supervision, labor, inspection, testing (including Performance Tests), start-up, material, equipment, machinery, temporary utilities and other temporary facilities to complete construction of the Project consistent with the Contract Documents (the " Work" ). All design and engineering and construction services and other Work of the Design-Builder shall be performed in accordance with (i) the Project Scope, (ii) the Construction Documents, (iii) all Legal Requirements, and (iv) generally accepted construction and design-build standards of the fuel ethanol industry in the Midwest United States during the relevant time period. Any design and engineering or other professional service to be performed pursuant to this Agreement, which under Applicable Law must be performed by licensed personnel, shall be performed by licensed personnel as required by Law. The enumeration of specific duties and obligations to be performed by the Design-Builder under the Contract Documents shall not be construed to limit in any way the general undertakings of the Design-Builder as set forth herein. Design-Builder' s Representative shall be reasonably available to Owner and shall have the necessary expertise and experience required to supervise the Work. Design-Builder' s Representative shall communicate regularly with Owner and shall be vested with the authority to act on behalf of Design-Builder. 3.2 Design Development and Services.

3.2.1 As of this date or within thirty (30) Days from the Effective Date, Design-Builder has or shall have provided to Owner the following documents, and any other documents reasonably agreed to by Design-Builder and Owner as applying to the conceptual design of the Project and required to apply for the construction air permit or completion of the Site layout in cooperation with Owner' s rail engineer (collectively, the " Preliminary Construction Documents" ), which shall be consistent with the Project Scope and once approved by Owner, shall be part of this Agreement:

(a) major equipment lists, with sizes;

(b) process flow diagram;

(c) process design criteria and/or process description;

(d) heat and material balance;

(e) motor lists and electric loads; and

(f) Site layout.

Owner shall have thirty (30) Days from the date it receives the Preliminary Construction Documents to 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. Any changes to the Preliminary Construction


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Documents (a) shall be subject to the prior review and approval by Owner, such approval not to be unreasonably withheld or delayed, and (b) shall not adversely impact the Performance Guarantee Criteria.

3.2.2 Where required by Law, Design-Builder shall provide through qualified, licensed design professionals employed by Design-Builder, or procured from qualified, independent licensed Design Consultants, the necessary design services, including architectural, engineering and other design professional services, for the preparation of the required drawings, specifications and other design submittals required to permit construction of the Work in accordance with this Agreement and the Preliminary Construction Documents (such drawings, specifications and design submittals collectively and together with the Preliminary Construction Documents, the " Construction Documents" ). To the extent not prohibited by Legal Requirements, Design-Builder may prepare Construction Documents for a portion of the Work to permit construction to proceed on that portion of the Work prior to completion of the Construction Documents for the entire Work. 3.2.3 Construction of the Plant shall be consistent with the Construction Documents. 3.2.4 Design-Builder shall maintain a current, complete set of drawings and specifications at the Site. Owner may review such drawings and specifications. Owner and Independent Engineer may not make copies of the available drawings and specifications without Design-Builder' s written permission, and, granted such permission, may only do so to the extent such drawings and specifications directly pertain to the Plant; provided, however, that pursuant to Section 5.1 of this Agreement Design-Builder retains ownership of and property interests in any drawing or specifications made available and/or copied.

3.2.5 Unless specified in a Change Order, it is understood and agreed that review, comment and/or approval by Owner (or its designees) or Independent Engineer of any documents or submittals that Design-Builder is required to submit to Owner (or its designees) or Independent Engineer hereunder for their review, comment and/or approval (including without limitation the Preliminary Construction Documents pursuant to Section 3.2.1 hereof or other Construction Documents pursuant to Sections 3.2.2 and 3.2.4 hereof) shall not relieve or release Design-Builder from any of its duties, obligations or liabilities provided for under the terms of this Agreement or transfer any design liability from Design-Builder to Owner.

3.3 Standard of Care. All services performed by the Design-Builder and its Subcontractors pursuant to the Construction Documents shall be performed in accordance with the standard of care and skill generally accepted in the fuel ethanol ...