Exhibit 10.1
Confidential Treatment Requested. Confidential portions of this document have
been redacted and have been separately filed with the Commission.
(U.S. ENERGY LOGO) [c89386c8938600.gif]
ENERGY MANAGEMENT SERVICES AGREEMENT
The purpose of this Agreement, dated July 9, 2009 is to set forth the
understanding and agreement between U.S. Energy Services, Inc. (“U.S. Energy”)
and Homeland Energy Solutions, LLC (“Client”) related to the provision of energy
management services. Each may also be referred to as “Party” or collectively as
“Parties.”
DESCRIPTION OF CLIENT: Client owns and operates a 100 million gallon per year
ethanol facility in Chickasaw County, Iowa. Natural gas is provided by Northern
Natural Gas Pipeline. Electricity is provided by Heartland Power Cooperative.
Constellation New Energy Gas Division currently provides natural gas supply and
pricing.
GENERAL DESCRIPTION OF SERVICES: Client has retained U.S. Energy to assist with
natural gas and electric energy management as more fully described in Part I of
this Agreement. U.S. Energy will work with Client to develop an energy strategy
that will develop energy cost control opportunities, prioritize these
opportunities in a work plan, and assist Client in implementing the plan.
Part I. Scope of Services Provided by U.S. Energy
Section 1.01 Supply Management — Natural Gas. The following services are
available to Client for the acquisition and management of Client’s natural gas
supply for Client’s Facilities subject to this Agreement.

  (A)  
Procurement of Supply: U.S. Energy will assist Client in the procurement of
natural gas supplies for Client’s Facilities:

  (i)  
U.S. Energy will work with Client to determine the required daily or monthly
supply volumes and corresponding receipt point(s) for gas delivery.

  (ii)  
U.S. Energy will administer a procurement process to create competition among
suppliers.

  (iii)  
U.S. Energy will assess whether gas utility tariff sales supply, Client
transported supply, third party-transported supply or U.S. Energy-transported
supply will provide the most reliable and economic supply of natural gas to the
Facilities.
    (iv)  
U.S. Energy will administer and monitor Client’s gas supply contracts.

  (B)  
Logistics: U.S. Energy will manage Client’s supply and transportation assets.

  (i)  
U.S. Energy will provide nomination and scheduling of Client’s gas supply with
the supplier(s), the pipeline and/or local gas utility.

  (ii)  
Where necessary and where available, U.S. Energy will obtain Client’s metered
natural gas consumption data for each Facility.

  (iii)  
Client will provide U.S. Energy with estimated usage volumes for each Facility
on request and make a reasonable effort to notify U.S. Energy when Client’s
usage will be interrupted or changed.

  (iv)  
U.S. Energy will make reasonable efforts to release any excess firm pipeline
capacity held by Client in the capacity release market. Revenue for such
released capacity will be the property of Client. U.S. Energy may purchase the
release capacity from the Client at prevailing market rates.

  (v)  
U.S. Energy will evaluate gas storage alternatives available to Client. If
Client desires, U.S. Energy will facilitate the acquisition of such storage and
will manage the use of storage for Client.

 

 

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  (vi)  
U.S. Energy manages and owns a portfolio of assets (including but not limited to
storage, firm transportation entitlement, imbalance pools, etc.). From time to
time, it may be in Client’s best interest to have their assets managed as part
of U.S. Energy’s larger portfolio of assets resulting in lower natural gas costs
to Client than would have otherwise been incurred. Client authorizes U.S. Energy
to manage their assets within the larger portfolio to achieve operational
optimization by execution of the “Base Agreement” as shown in Exhibit B. The
terms of the Base Agreement are made part of this Agreement. Client understands
that benefits may accrue to U.S. Energy as a result of U.S. Energy’s management
of this portfolio of assets.

  (C)  
Negotiations: U.S. Energy will negotiate natural gas related agreements with
third parties on the Client’s behalf.

  (i)  
U.S. Energy will provide negotiation services to establish transportation rates
on interstate pipelines and gas utilities, contractual terms with suppliers and
transporters, trade credit with suppliers, and new tariffs where applicable with
utilities.

  (ii)  
U.S. Energy will strive to create competition among service providers where
possible.

  (D)  
Acquisition of Trade Credit: U.S. Energy will advise Client of credit issues for
gas facilities, transportation contracts and gas supply.

  (i)  
Client will provide U.S. Energy with the necessary financial information
required to obtain trade credit with various vendors.

  (ii)  
U.S. Energy will share Client’s financial documents with third parties as
directed and in any manner as restricted by Client in order to establish trade
credit.

  (iii)  
U.S. Energy will work to establish trade credit with suppliers on Client’s
behalf. Depending on Client’s gas usage, multiple sources of trade credit may be
established.

  (iv)  
U.S. Energy makes no guarantee that adequate unsecured trade credit will be
obtained from third parties. In the event adequate trade credit cannot be
secured, U.S. Energy will discuss various credit instruments with Client, such
as letter of credit, parental guarantees, prepayment, etc. It will be the
Client’s responsibility to provide the necessary security to obtain adequate
trade credit.

  (E)  
Evaluation of Delivery Options: U.S. Energy will evaluate Client’s delivery
options for natural gas facilities from the pipeline and gas utility.

  (i)  
When possible and feasible, U.S. Energy will provide an analysis for alternate
pipeline or gas facility options, including bypass of the gas utility. U.S.
Energy will provide an economic analysis for estimated facility costs,
operations and maintenance costs and commodity cost for various transportation
options. This analysis will be used for negotiating with existing and potential
service providers.

  (F)  
Tariff Review: Each meter or facility will be evaluated to determine the most
beneficial rate structure available that best fits Client’s needs. In addition,
U.S. Energy will monitor natural gas service tariffs to determine if new or
modified tariffs will have an impact on Client.

  (G)  
Budget Preparation: Upon request by Client, U.S. Energy will provide an annual
energy budget.

  (H)  
Cost and Usage Analysis: Where the utility or pipeline has provided Client’s
metered usage data, U.S. Energy will:

  (i)  
Post Client’s gas usage for each Facility to the U.S. Energy secure website for
Client access.

  (ii)  
Upon request by Client, U.S. Energy will provide Client with detailed cost
analysis of transportation and commodity costs for each Facility.

  (iii)  
U.S. Energy will negotiate with the pipeline or utility regarding measurement
discrepancies, advising Client of options for Client to pursue with assistance
from U.S. Energy.

 

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  (I)  
Energy Tax Exemption: U.S. Energy will evaluate energy tax exemption
opportunities and, if evidence proves an audit to be beneficial, with Client’s
approval and payment, U.S. Energy will arrange for a third party energy tax
exemption audit. U.S. Energy will assist Client with filing for the tax rebate,
if applicable, and will further utilize the results for tax exemption filings.

Section 1.02 Supply Management — Electricity. The following services are
available to Client for the acquisition and management of Client’s electricity
supply for each Facility subject to this Agreement.

  (A)  
Procurement of Supply: U.S. Energy will investigate the market conditions for
third party purchase of electricity in Client’s specified Facilities as
applicable:

  (i)  
U.S. Energy will work with Client to determine the required daily or monthly
electricity supply volumes and corresponding regional transmission organization.

  (ii)  
U.S. Energy will conduct a procurement process that will create competition
among suppliers.

  (iii)  
U.S. Energy will assess whether utility-provided electricity or third party
supply will provide the most reliable and economic supply of electricity to the
facilities.

  (iv)  
U.S. Energy will administer and manage the necessary electricity contracts

  (B)  
Evaluation of Electric Delivery Options: U.S. Energy will evaluate available
delivery voltages such as primary, secondary and transmission voltage if
applicable. U.S. Energy may also include on-site generation in the analysis, if
warranted. As regulatory conditions change in each state, the electric
procurement process will be reevaluated to take advantage of the changes.

  (C)  
Negotiations: U.S. Energy will conduct negotiations with third parties on behalf
of Client:

  (i)  
U.S. Energy will provide negotiation services to establish electricity costs,
contractual terms and trade credit.

  (ii)  
U.S. Energy will assist Client with understanding the structure of electric
contracts and comparison to industry norms.

  (iii)  
U.S. Energy will strive to create competition among service providers where
possible.

  (D)  
Acquisition of Trade Credit: U.S. Energy will advise Client of trade credit
issues for electric facilities, infrastructure and electricity supply contracts:

  (i)  
Client will provide U.S. Energy with the necessary financial information
required to obtain trade credit with various vendors.

  (ii)  
U.S. Energy will share Client’s financial documents with third parties as
directed and in any manner as restricted by Client in order to establish trade
credit.

  (iii)  
U.S. Energy will work to establish trade credit with suppliers on Client’s
behalf. Depending on Client’s electric usage, multiple sources of trade credit
may be established.

  (iv)  
U.S. Energy makes no guarantee that adequate unsecured trade credit will be
obtained from third parties. In the event adequate trade credit cannot be
secured, U.S. Energy will discuss various credit instruments with Client, such
as letter of credit, parental guarantees, prepayment, etc. It will be the
Client’s responsibility to provide the necessary security to obtain adequate
trade credit.

  (E)  
Tariff Review: Each Client Facility will be evaluated to determine the most
beneficial rate structure available that best fits Client’s needs. U.S. Energy
will determine whether firm, interruptible, or a blend of services will provide
the lowest cost. In addition, U.S. Energy will continue to monitor electric
tariffs to determine if new tariffs or changes to the tariffs will have an
impact on Client.

  (F)  
Budget Preparation: Upon request, U.S. Energy will provide an annual electricity
budget.

 

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  (G)  
Cost and Usage Analysis: Where the utility has provided Client’s metered usage
data, U.S. Energy will:

  (i)  
Archive the monthly electric billing information in the U.S. Energy secure
database.

  (ii)  
Upon request by Client, U.S. Energy will provide Client with detailed cost
analysis of electricity usage and costs.

  (H)  
Energy Tax Exemption Analysis: U.S. Energy will evaluate energy tax exemption
opportunities and if evidence proves an audit to be beneficial, with Client’s
approval and payment, U.S. Energy will arrange for a third party energy tax
exemption audit. U.S. Energy will assist Client with filing for the tax rebate,
if applicable, and will further utilize the results for tax exemption filings.

Section 1.03 Price Risk Management. The following services are available to
Client for the management of price risk related to energy purchases, if so
elected by Client.

  (A)  
Energy Plan Development: U.S. Energy will work with Client to develop a plan to
mitigate price risk to meet Client’s goals. The plan will include the definition
of price risk objectives, methodologies (fixed forward, options, etc.), and
triggering methods. U.S. Energy will actively work with Client to update the
plan as changes dictate.

  (B)  
Energy Plan Execution: U.S. Energy will execute the energy plan based upon the
criteria defined within the plan.

  (C)  
Communication: U.S. Energy will provide price risk management information on a
periodic basis via multiple means which presently include the items listed
below. U.S. Energy reserves the right to modify the content, frequency and means
of communication during the term of the Agreement.

  (i)  
Access to a monthly conference call at which industry experts discuss trends in
the energy market.

  (ii)  
Updates are provided to Client on a regular basis containing gas and power
market prices, NYMEX, hedge recommendations, and other related energy data.

  (iii)  
Client is invited to attend an annual two-day Energy Conference at which energy
industry experts and economists speak on pertinent issues.

  (iv)  
Communication will occur as needed between U.S. Energy and Client to discuss
changes in the gas markets and associated recommendations for action.

Section 1.04 Information Management. The following services are available to
Client for the processing of Client’s energy invoices, if so elected by Client.

  (A)  
Invoice processing: U.S. Energy will process Client’s energy invoices, which may
include invoices from suppliers, utilities and pipelines:

  (i)  
Vendor invoices are imaged into U.S. Energy’s secure data base.

  (ii)  
If Client desires online display of this data, invoices are further processed to
extract key data fields and prepare the invoice view for online display.

  (iii)  
Invoices are reviewed for accuracy. Rate, volumetric and service level
discrepancies are resolved directly with the vendor.

  (B)  
Payment of energy invoices: Client can elect to pay each of the energy invoices
directly or elect to have U.S. Energy pay the energy invoices on behalf of
Client.

  (i)  
If Client elects to pay the energy invoices directly, U.S. Energy will advise
Client of the appropriate amount to pay and provide the necessary documents for
Client to process the payments in a timely and accurate manner.

  (ii)  
If Client elects to have U.S. Energy pay the energy invoices on behalf of
Client, U.S. Energy will prepare a monthly consolidated invoice that summarizes
the appropriate Client’s energy costs from the prior month. This invoice may
include gas supply activity, financial hedging, gas transportation, storage, gas
distribution charges and electricity charges. Client agrees to remit funds to
U.S. Energy per the payment terms listed in Section 2.05 below. Upon receipt of
funds from Client, U.S. Energy will remit the appropriate payments to the
various vendors.

 

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  (C)  
Secure Client Web Site Access: Client will be provided access to U.S. Energy’s
secure client web site which includes:

  (i)  
Various reports such as gas nominations, purchased gas packages, actual usage,
load profiles, etc.

  (ii)  
Consolidated Energy Report listing usage and cost by individual facility,
region, division and corporate level, if applicable.

  (iii)  
Latest guidance from fundamental and technical analysts in regard to energy
market pricing movement and events.

Part II. General Terms and Conditions
Section 2.01 Agency Authorization. U.S. Energy shall act as Client’s agent while
managing the energy matters for the Facilities. In order for U.S. Energy to
fulfill its responsibility under this Agreement, an Agency Authorization must be
executed by Client. This Agency Authorization is attached as Exhibit A. The
purpose of the Agency Authorization is to provide third parties with the
necessary evidence that U.S. Energy has the proper authorization to act on
Client’s behalf for energy-related matters for the Facilities. Client remains
responsible for the cost of all gas supplies, transportation, distribution,
storage charges, balancing services and penalties, and cash-out charges levied
by the pipeline or utility for excess or additional gas. Where applicable to the
scope of services described in Part I of this Agreement, Client specifically
authorizes U.S. Energy to act as its agent for the following actions:

  (A)  
Energy Procurements and Agreements: U.S. Energy may transact with third party
energy suppliers, pipelines and utilities on behalf of Client as instructed
specifically or generally by Client. Client’s instructions may be communicated
in writing, electronically or orally. Client will be responsible for all
transactions and agreements executed by U.S. Energy on behalf of Client.

  (B)  
Trade Credit and Financials: U.S. Energy may share Client’s financial
information with third party suppliers, pipelines and utilities as necessary to
secure trade credit for energy procurements and agreements, subject to any
limitations established by Client under Section 1.01Section 1.01(D)(ii) above
and Section 1.02(D)(ii).

  (C)  
Natural Gas Scheduling and Imbalances: U.S. Energy may provide gas nominations,
obtain pipeline capacity and release pipeline capacity on Client’s behalf as is
necessary to manage the gas supply to the Facilities. Additionally, U.S. Energy
is authorized to manage the Client’s pipeline supply imbalances as U.S. Energy
reasonably deems to be in the best interest of Client.

  (D)  
Energy Consumption and Billing Records: U.S. Energy may obtain from the
appropriate vendors all relevant energy billing information for the Client’s
Facilities.

  (E)  
Bill Payment: If so elected by the Client, U.S. Energy is authorized to have the
Client’s invoices for energy consumption at the Facilities sent to U.S. Energy
for payment. As provided in Section 2.05, U.S. Energy is under no obligation to
pay any of the Client’s energy invoices until U.S. Energy receives payment from
the Client.

  (F)  
Sales Tax Exemptions: If Client’s energy purchases or consumption are eligible
for sales tax exemption and the Client has provided U.S. Energy with the proper
documentation evidencing this exemption, U.S. Energy is authorized to complete
and sign sales tax exemption forms and submit them to third-parties. U.S. Energy
is under no obligation to provide sales tax exemption forms absent proper
documentation from Client.

 

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      ***  
Confidential material redacted and filed separately with the Commission.

Section 2.02 U.S. Energy’s Fees. U.S. Energy’s fee for services during the term
of this Agreement shall be as follows:

  (A)  
Monthly Service Fee: The Client will pay U.S. Energy a monthly service fee of
$*** per month. U.S. Energy shall issue the service fee invoice to the Client on
or about the first of the month for fees for the current month.

  (B)  
Pre-approved Travel Expenses: Client will reimburse U.S. Energy for any
pre-approved travel expenses incurred by U.S. Energy related to the provision of
services under this Agreement. Pre-approved travel expenses may be billed
separately or included on Client’s monthly service fee invoice.

Section 2.03 U.S. Energy Transactions: Notwithstanding U.S. Energy’s primary
role as Client’s agent, from time to time U.S. Energy may purchase natural gas
from or sell natural gas to the Client, release U.S. Energy transportation
capacity to the Client, purchase release pipeline capacity from the Client or
provide imbalance services to the Client. These transactions are executed at
prevailing market rates and are generally considered when they result in a more
efficient means to manage the Client’s energy matters instead of conducting
these transactions strictly with third party vendors. In these transactions,
Client acknowledges that U.S. Energy is deemed a counterparty and that benefits
may accrue to U.S. Energy. All transactions under this section are governed by
the terms of the “Base Agreement in Exhibit B.
Section 2.04 Term. The initial term of this Agreement shall commence on
August 1, 2009 and continue on a month to month basis. Client shall remain
responsible for payment and performance associated with any and all
transportation, supply, and storage transactions entered into by U.S. Energy and
authorized by Client, prior to termination, as well as fees and charges for U.S.
Energy’s services occurring up until the termination date.
Section 2.05 Billing and Payment. The following payment terms apply to this
Agreement:

  (A)  
U.S. Energy Fees: On the first of the month, U.S. Energy will invoice Client for
the service fee for the current month and any applicable hedging fees and
pre-approved travel expenses from the prior month as defined in Section 2.02 of
this Agreement. Client shall pay U.S. Energy within ten (10) days of receipt of
this invoice. If Client has elected to have U.S. Energy process and pay the
Facilities’ energy invoices per the terms of Section 2.05 (B), Client
acknowledges that the U.S. Energy fees may be combined with the Client’s
consolidated energy invoice as one combined invoice.

  (B)  
Client’s Consolidated Energy Invoices: If Client has elected to have U.S. Energy
process and pay the Facilities’ energy invoices, the following terms will apply.

  (i)  
After the first of the month U.S. Energy will issue a consolidated invoice to
Client for the appropriate energy costs from the previous month. Upon receipt of
Client funds, U.S. Energy will pay each of the vendor invoices as they become
due and payable.

  1)  
Each month, U.S. Energy will reconcile funds paid by Client and received by U.S.
Energy against payments made by U.S. Energy to Client’s vendors. U.S. Energy
will use commercially reasonable efforts to reconcile Client’s account to $0.
However, if U.S. Energy is unable to reasonably reconcile Client’s account to
$0, one of the following remedies will be used:

  2)  
If the reconciliation yields an amount that is within $100 or 1% of the
consolidated invoice total, whichever is less (“Threshold Amount”), then
Client’s account will be considered as reconciled to $0.

  3)  
If the reconciliation yields an amount that is greater than the Threshold Amount
and U.S. Energy is holding excess Client funds, these funds will be refunded to
Client with the proper documentation.

 

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  (ii)  
If the reconciliation yields an amount that is greater than the Threshold Amount
and U.S. Energy is short Client funds, Client will be invoiced for these
additional funds provided that U.S. Energy provides proper documentation
supporting its reconciliation.

  (iii)  
Client acknowledges and agrees that the funds paid by Client to U.S. Energy
become the property of U.S. Energy at such time they are deposited in U.S.
Energy’s bank account. U.S. Energy agrees that once Client’s funds are deposited
in U.S. Energy’s bank account, U.S. Energy has the obligation to pay Client’s
invoices associated with Client’s funds. Client further agrees that any interest
earned by U.S. Energy for funds held in U.S. Energy’s bank account shall belong
to U.S. Energy and become the property of U.S. Energy.

  (iv)  
Prior to paying Client’s energy invoices to vendors (utilities, suppliers and
pipelines), U.S. Energy must receive Client’s funds for these invoices. Client
will pay U.S. Energy within ten (10) days of receipt of U.S. Energy’s
consolidated invoice. Client understands that Client may incur late fees or
penalties from Client’s vendors if U.S. Energy does not receive Client’s funds
for energy invoice payments that are due and therefore cannot process the
payments on time. In order for funds to be available for payment to Client’s
vendors, Client will make payment to U.S. Energy by wire transfer or ACH. U.S.
Energy’s banking instructions are:

     
Bank:
  M&I Bank
Account Name:
  U.S. Energy Services, Inc.
Account Number:
  46620167 
ABA:
  091 001 157 

  (C)  
Late Payment Charge: If Client fails to remit the full amount payable for U.S.
Energy Fees (paragraph a, above) or Client’s Consolidated Invoice (paragraph b,
above) to U.S. Energy when due, Client will pay interest from the due date until
the date payment is made at the lesser of (i) 12% per annum or (ii) the maximum
rate allowed by law. Client will be responsible for all costs, fees, and
expenses (including reasonable attorney’s fees) incurred by U.S. Energy in
collecting the amount payable. If U.S. Energy does not receive payment from
Client when due, U.S. Energy, at its sole option, may discontinue any further
delivery of Services under this Agreement unless Client cures such default
within five (5) calendar days.

Section 2.06 Taxes. Client will be responsible for payment of all taxes
including, but not limited to, all sales, use, excise, BTU, heating value,
carbon, greenhouse reduction and other taxes (“Taxes”) associated with the
purchase and/or transport of energy and the provision of services hereunder. In
the event Client’s energy purchases or consumption are eligible for an exemption
from sales or use tax, it is Client’s responsibility to provide U.S. Energy with
the proper documentation for this exemption. U.S. Energy will use reasonable
efforts to determine that Taxes for Client’s purchases and consumption are
properly assessed by third parties. However, U.S. Energy is not a taxation
expert and is not responsible for any errors made by third parties in the
assessment of Taxes. In addition, U.S. Energy cannot and does not provide legal
advice or legal services for Taxes or other matters.
Section 2.07 Confidentiality. U.S. Energy shall not divulge to any other person
or party any of Client’s confidential information revealed to U.S. Energy
pursuant to this Agreement, unless such information is (a) already in U.S.
Energy’s possession and such information is not known by U.S. Energy to be
subject to another confidentiality agreement, or (b) is or becomes generally
available to the public other than as a result of an unauthorized disclosure by
U.S. Energy, its officers, employees, directors, agents or its advisors, or
(c) becomes available to U.S. Energy on a non-confidential basis from a source
which is not known to be prohibited from disclosing such information to U.S.
Energy by legal, contractual or fiduciary obligation to Client, or (d) is
required by U.S. Energy to be disclosed by court order, or (e) is permitted by
Client.

 

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Section 2.08 Indemnification. U.S. Energy shall indemnify, defend and hold
harmless Client from and against all claims, costs, charges, penalties and
overcharges arising out of or related to the services provided hereunder to the
extent the same are caused by U.S. Energy’s gross negligence or willful
misconduct. Client shall indemnify, defend and hold harmless U.S. Energy from
and against all claims, costs, charges, penalties and overcharges arising out of
or related to the services provided hereunder to the extent the same are caused
by Client’s gross negligence or willful misconduct.
Section 2.09 No Consequential Damages. In no event shall either party be liable
to the other for any consequential damages or lost profits arising from or
relating to the performance or non-performance of this Agreement.
Section 2.10 Notices. Any formal notice, request or demand which a Party may
desire to give to the other respecting this Agreement shall be in writing and
shall be considered as delivered as of the postmark date when mailed by
ordinary, registered or certified mail by one Party to the other Party at the
addresses listed below. Either Party may, from time-to-time, identify alternate
addresses at which they may receive notice during the term of this Agreement by
providing written notice to the other Party of such alternate addresses.

     
Client:
  Homeland Energy Solutions, LLC
 
  2779 IA Hwy 24
 
  Lawler, IA 52145
 
   
U.S. Energy:
  U.S. Energy Services, Inc.
 
  605 North Highway 169
 
  Suite 1200
 
  Plymouth, MN 55441
 
  Attn: Contract Administration

Section 2.11 Assignment and Amendment. The Agreement may not be assigned or
amended without the written consent of U.S. Energy and Client. Such consent
shall not be unreasonably withheld by either Party.
Section 2.12 Applicable Law and Jurisdiction. The Agreement shall be construed
in accordance with the laws of the State of Minnesota. Any claims or disputes
arising out of this Agreement shall be adjudicated in the Federal or State
courts of Minnesota.
Section 2.13 Independent Contractor. It is not the intent of U.S. Energy or
Client to form any partnership or joint venture relationship. Each party shall,
in relation to its obligations in this Agreement, act as an independent
contractor.
Section 2.14 Authorization. Each Party represents and warrants to the other that
it is fully empowered and authorized to execute this Agreement and the
individuals signing this Agreement each represent and warrant that they are
fully authorized to do so.
Section 2.15 Entire Agreement. This Agreement and Exhibits A and B constitute
the entire Agreement between U.S. Energy and Client pertaining to the subject
matter of this Agreement and supersedes all prior Agreements between U.S. Energy
and Client.

 

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Agreed to and Accepted by:
Homeland Energy Solutions, LLC

         
By:
/s/ Walter Wendland              
Name: 
Walter Wendland      
Title:
President      
Date: July 10, 2009
   
 
        U.S. Energy Services, Inc.    
 
       
By: 
/s/ Gail McMinn              
Name: 
Gail McMinn      
Title:
Executive Vice President      
Date: July 10, 2009
   

 

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EXHIBIT A
AGENCY AUTHORIZATION
The purpose of this Agency Authorization (this “Authorization”) dated May 21,
2009 is to set forth the authorization and agreement between U.S. Energy
Services, Inc. (“U.S. Energy”) and Homeland Energy Solutions, LLC (“Client”)
related to the provision of energy supply management services for Client’s
Lawler, Iowa ethanol plant (individually referred to as “Facility” and
collectively as “Facilities”). Client and U.S. Energy agree on the following
terms and conditions as they pertain to U.S. Energy’s role as Client’s agent to
transact with third-parties on Client’s behalf:

1.  
APPOINTMENT AND SCOPE — Client hereby appoints U.S. Energy as its exclusive
agent to deal with third-parties for energy-related matters for the Facility or
Facilities. U.S. Energy is authorized, without limitation, by Client to:

  •  
Negotiate and execute contracts for the acquisition of energy supply,
transportation services and distribution services (“Energy Contracts”) with any
counterparties as U.S. Energy reasonably determines to be acceptable;

  •  
Amend, extend, renew or cancel any Energy Contracts;

  •  
Procure and sell energy supplies, contract for transportation services, and
contract for distribution services (“Energy Procurements”) as required for
Client’s Facility or Facilities;

  •  
Review and sign energy supply transaction confirmations;

  •  
Place daily and monthly nominations for delivery of energy supplies;

  •  
Sign sales tax exemption certificates as they pertain to energy purchases or
consumption for Energy Procurements made under this Authorization;

  •  
Obtain trade credit from energy suppliers as needed for Energy Procurements; and

  •  
Receive, review, approve and pay Client’s energy invoices for Energy
Procurements made under this Authorization.

2.  
RELEASE OF ENERGY CONSUMPTION RECORDS AND BILLS — This Agreement serves as
authorization for the release of Client’s energy consumption records and bills
from pipelines and suppliers to U.S. Energy.

3.  
ADOPTION AND RATIFICATION — Client agrees that each and every act performed by
U.S. Energy in connection with any of the authorized powers designated in
Paragraph 1 will be valid and binding on Client as if the same act had been done
by Client. Client ratifies whatever U.S. Energy does pursuant to this
Authorization.

4.  
TERM — The term of this Authorization shall commence as of the date stated above
and shall continue until such time as either Client or U.S. Energy provide
written notice of termination of the Authorization to applicable third-parties.
Client will remain obligated for any actions performed by U.S. Energy prior to
the effective date of the notice of termination.

5.  
AUTHORITY — Each party represents and warrants to the other that it is fully
empowered and authorized to execute and deliver this Authorization, and the
individuals signing this Authorization each represent and warrant that he or she
is fully authorized to do so.

Agreed to and Accepted by:

                      Homeland Energy Solutions, LLC       U.S. Energy Services,
Inc.    
 
                   
By: 
/s/ Walter Wendland       By:  /s/ Gail McMinn    

 
     
 
   
 
Name:  Walter Wendland       Name:  Gail McMinn    

Title:  President       Title:  Executive Vice President      
Date:7/10/09
      Date: 7/10/09    

 

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EXHIBIT B
BASE AGREEMENT FOR THE PURCHASE AND SALE OF NATURAL GAS
(U.S. ENERGY LOGO) [c89386c8938601.gif]
605 North Highway 169, Suite 1200
Plymouth, MN 55441
763-543-4600

     
 
  Date: August 1, 2009
 
    CUSTOMER INFORMATION

 
   
Customer: Homeland Energy Solutions, LLC
  Billing Contact:
 
  Becky Williams
 
   
Contact Name:
  Billing Street Address:
Walter Wendland
  2779 IA Hwy 24
 
   
Address:
  Billing Town, State ZIP:
2779 IA Hwy 24, Lawler, IA 52154
  Lawler, IA 52154
 
   
Telephone: (563) 238-5555
  Telephone: (563) 238-5555
Fax: (563) 238-5557
  Fax: (563) 238-5557
Email: wwendland@etoh.us
  Email: rwilliams@etoh.us

This Natural Gas Sales Base Agreement ( “Agreement”) is made and entered into
between U. S. Energy Services, Inc. (“U.S. Energy”), and the customer named
above (“Customer”) (each a “Party” and jointly “Parties”). The primary purpose
of this Agreement is to address natural gas sales made by U.S. Energy to
Customer. However, this Agreement also addresses those transactions where
Customer has purchased excess natural gas, either from U.S. Energy or another
supplier, and sells this excess natural gas to U.S. Energy.

1.  
Purchase and Sale of Gas: The terms of this Agreement shall apply to all
purchases and sales (“Transaction” or “Transactions”) of natural gas (“Gas”)
between U.S. Energy and Customer. Generally, each Transaction will be documented
in an Exhibit or Transaction Confirmation signed by both Parties. In the event a
Transaction Confirmation does not exist for a particular Transaction and there
is sufficient evidence to show that a Transaction occurred, the Parties
acknowledge that the Transaction was completed at a market price commensurate
with the term and Delivery Point of the transaction. The Parties further agree
that for Transactions based on a market index price and for one month or less do
not need a Transaction Confirmation to be valid. All Exhibits and Transaction
Confirmations along with the Agreement shall form a single, integrated agreement
between the Parties. In the event a conflict arises between the terms of the
Agreement and the Transaction Confirmation or an Exhibit, the Transaction
Confirmation and Exhibit shall be the controlling documents. The term “Delivery
Point” shall mean the physical point or points where title to the Gas transfers
from the seller of the Gas to the purchaser of the Gas as identified in the
Transaction Confirmation. The actual Delivery Point shall be at the inlet side
of the metering station(s) specified in the Transaction Confirmation.

2.  
Performance: Customer shall purchase natural gas on an “Interruptible”, a “Firm”
or under a single transaction basis. “Firm” means that Customer or U.S. Energy
may interrupt its performance without liability only to the extent that such
performance is prevented for reasons of Force Majeure. “Interruptible” service
means that Customer’s deliveries can be interrupted during periods of
curtailment.
     
If U.S. Energy is required by Customer’s utility company (“Utility”) to curtail
or alter deliveries of Gas to Customer, in whole or in part, U.S. Energy will
direct Customer to curtail usage of Gas by the same amount. Customer will pay or
reimburse U.S. Energy for any penalties assessed due to Customer’s failure to
curtail usage as directed, unless the issuance of the curtailment or similar
order by the Utility was due to the fault of U.S. Energy.

 

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3.  
Term: The Agreement may be terminated by either Party upon 60 (sixty) days’
prior written notice; provided, however, that it will remain in effect with
respect to Transaction(s) entered into prior to the effective date of the
termination until both parties have fulfilled all of their obligations with
respect to the Transaction(s).

4.  
Creditworthiness: U.S. Energy’s acceptance of the Agreement and any Transaction
is conditioned on Customer maintaining its creditworthiness during the term of
the Agreement. If U.S. Energy determines in its good faith judgment that
Customer’s credit has been materially impaired, U.S. Energy may require
additional security (“Credit Assurance”) for the payment of sums due under the
Agreement, including collateral deposits, prepayments, letters of credit or
other guaranty of payment or performance reasonably acceptable to U.S. Energy.

5.  
Price: For Transactions where U.S. Energy is selling Gas to Customer, Customer
will pay to U.S. Energy the Purchase Price for all Gas purchased by Customer
pursuant to the terms of the executed Exhibit(s) and/or Transaction
Confirmation(s). For Transactions where U.S. Energy is purchasing excess Gas
from Customer, U.S. Energy will pay to Customer the Purchase Price for all Gas
purchased by U.S. Energy pursuant to the terms of the executed Transaction
Confirmations. For Transactions where no Transaction Confirmation was produced,
the price will be based on the market index price commensurate with the
Transaction term and Delivery Point or as mutually agreed by the Parties.

6.  
Billing and Payment: U.S. Energy will invoice Customer for gas delivered
according to the Transaction Confirmation for each calendar month. In the event
U.S. Energy has purchased excess Gas from Customer during the same calendar
month, U.S. Energy will net its obligations to Customer against amounts owed by
Customer and invoice Customer for the net amount owed to U.S. Energy. Customer
will make payment within ten (10) days of the date of U.S. Energy’s invoice. If
the volumes delivered cannot be verified by U.S. Energy at the time of the
invoice is issued, the invoice will be based on U.S. Energy’s good faith
estimate of the volumes delivered. U.S. Energy will adjust Customer’s account
following confirmation of the actual volumes delivered.

   
If Customer fails to remit the full amount payable by it when due, Customer will
pay interest from the due date until the date payment is made at the lesser of
(i) 12% per annum or (ii) the maximum rate allowed by law (“Interest Rate”).
Customer will be responsible for all costs, fees, and expenses (including
reasonable attorney’s fees) incurred by U.S. Energy in collecting the amount
payable. If U.S. Energy does not receive payment from Customer when due, U.S.
Energy, at its sole option, may discontinue any further delivery of Gas under
this Agreement unless Customer cures such default within five (5) calendar days
of U.S. Energy’s written notice to Customer of the default. All checks returned
for insufficient funds will incur a fee of fifty dollars ($50.00).

7.  
Force Majeure: The term “Force Majeure,” as used in this Agreement, shall
include, without limitation, the following: acts of God or the public enemy;
wars; blockades; civil unrest; rebellion; insurrections; riots; lockouts;
strikes; interruption of civil or public service; hurricanes; fires; floods;
explosions; breakage of pipelines; failure or freezing of wells or pipelines;
failure of local distribution company to accept delivery; any laws, orders,
rules, regulations, acts or restraints of any governmental authority, whether or
not lawfully made; and any other causes, whether of the kind herein enumerated
or otherwise; not within the control of the party claiming suspension as a
result of the shortage or unavailability. If either Party claims suspension,
wholly or in part, by Force Majeure to perform or comply with any obligations or
conditions of this Agreement, then upon giving notice in writing and providing
reasonably full particulars to the other Party, such obligations or conditions,
insofar as they are affected by such Force Majeure, shall be suspended during
the continuance of any restriction so caused but in no event for any longer
period, and such Party shall be relieved of liability and shall suffer no
prejudice for failure to perform the same during the period. The Force Majeure
condition shall be remedied so far as practicable with reasonable dispatch.

 

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8.  
Title and Ownership: Title to, possession of, and risk of loss in the Gas
delivered, shall pass from seller of the Gas to and vest in the buyer at the
Delivery Point as identified in the Transaction Confirmation(s).

9.  
Assignment: This Agreement shall inure to the benefit of and be binding upon the
successors of the Parties. Neither Party may assign this Agreement in whole or
in part except with the written consent of the other Party, however, such
consent shall not be unreasonably withheld or delayed.

10.  
Notices: All notices, demands, or requests pertaining to the Agreement will be
made in writing and may be delivered by hand delivery, first class mail (postage
prepaid), overnight courier service, or by facsimile, to the Party’s address
listed at the beginning of the Agreement. Notices sent by facsimile will be
deemed to have been received upon sending Party’s receipt of its facsimile’s
confirmation. Notice by overnight mail or courier will be deemed to have been
received on the next business day after it was sent or such earlier time as it
is confirmed by the receiving Party. Notice via first class mail will be
considered delivered three (3) business days after mailing.

11.  
Failure to Deliver or Receive Gas/Plant Closure(s): If U.S. Energy fails to
deliver all or part of the Gas pursuant to a Transaction Confirmation and the
failure is not excused under the terms of the Agreement, then (i) U.S. Energy
shall use reasonable efforts to obtain alternate supplies of Gas at the Delivery
Point (“Replacement Supply”) and (ii) U.S. Energy will reimburse Customer for
the cost of Replacement Supply, provided such cost is commercially reasonable,
in excess of the total cost Customer would have otherwise paid for Gas had U.S.
Energy fully performed under this Agreement. If Customer fails to receive all or
part of the Gas pursuant to a Transaction Confirmation and the failure is not
excused under the terms of the Agreement, then Customer will pay U.S. Energy an
amount for each dekatherm of Gas not received equal to the positive difference,
if any, between: (i) the price U.S. Energy would have received for the Gas under
this Agreement, and (ii) the price at which U.S. Energy is, or would be, able to
sell comparable quantities of Gas at the Delivery Point, provided such price is
commercially reasonable price.

12.  
Events of Default: “Event of Default” means (i) the failure of either Party (or
its guarantor) to make payment required by the applicable due date and the
failure is not remedied with in five (5) days of receipt of written demand for
cure; (ii) the failure of Customer to provide satisfactory Credit Assurance, per
the terms of Section 4, within five (5) days of U.S. Energy’s demand;
(iii) either Party (or its guarantor) is or becomes Bankrupt, and (iv) the
failure of either Party to perform any obligation not specifically addressed
above and the failure is not cured within ten (10) days of receipt of written
demand for cure, except for the failure of a Party to deliver or receive Gas
under any Transaction Confirmation, which deficiency is cured by payment of the
amount due, if any, under Section 11 of the Agreement.
     
“Bankrupt” means with respect to either Party, the Party (i) files a petition or
otherwise commences, authorizes, or acquiesces in the commencement of a
proceeding or cause of action under any bankruptcy, insolvency, reorganization,
or similar law, or has any such petition filed or commenced against it,
(ii) makes an assignment or any general arrangement for the benefit of
creditors, (iii) otherwise becomes bankrupt or insolvent (however evidenced),
(iv) has a liquidator, administrator, receiver, trustee, conservator or similar
official appointed with respect to it or any substantial portion of its property
or assets, or (v) is generally unable to pay its debts as they fall due.

 

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13.  
Remedies in the Event of Default: Upon the occurrence and during the
continuation of an Event of Default, the non-defaulting Party may (i) withhold
any payments or suspend any deliveries due hereunder; (ii) upon written notice
at least one (1) day in advance, accelerate any or all amounts owing between the
Parties under the Agreement and terminate and liquidate any or all Transactions;
(iii) determine a settlement amount for each Transaction by calculating the
gains, losses, and costs (including reasonable attorney’s fees and the costs of
obtaining, maintaining, and liquidating commercially reasonable hedges) incurred
as a result of the liquidation, and (iv) calculate a net settlement amount by
aggregating into one amount all settlement amounts and all other amounts owing
between the Parties under the Agreement. Any net settlement amount due from the
defaulting Party to the non-defaulting Party will be paid within three (3) days
of receipt of written notice from the non-defaulting Party. To the extent that a
settlement amount would be due to the defaulting Party, the settlement amount
will be deemed to be zero. Interest on any unpaid portion of the net settlement
amount will accrue daily at the Interest Rate. The gain or loss for each
liquidated transaction may be calculated by any commercially reasonable method
chosen by the non-defaulting Party, including by determining the difference
between the Purchase Price and the Market Price of the Contract Quantities
remaining to be delivered during the Purchase period. “Market Price” means the
price of similar quantities of Gas at the Delivery Point.

14.  
Remedies in the Event of Bankruptcy: In the event either Party is Bankrupt
during any term of this Agreement, the Parties agree the following shall apply:
     
(a) Each Party acknowledges and agrees that (i) the Agreement and all
Transaction(s), both together and separately, constitute “forward contracts”
within the meaning of Title 11 of the United States Code (the “Bankruptcy
Code”); (ii) each Party is a “forward contract merchant” within the meaning of
the Bankruptcy Code with respect to the Agreement and any transactions
thereunder; (iii) all payments made or to be made by one Party to the other
Party, and/or credits, offsets, liquidation of collateral, drawdowns, or any
other similar settlement of the transactions and Credit Assurance pursuant to
this Agreement, of whatever nature or character, physical or financial,
constitute “settlement payments” within the meaning of the Bankruptcy Code;
(iv) all transfers, directly or indirectly, by one Party to the other Party
arising under or related to Section 4 of this Agreement constitute “margin
payments” within the meaning of the Bankruptcy Code; and (v) each Party’s rights
under Sections 13 and 14(c) of this Agreement constitute a “contractual right to
liquidate, accelerate, offset and/or terminate” the transactions within the
meaning of the Bankruptcy Code.
     
(b) Each Party acknowledges and agrees that, for purposes of this Agreement; the
other Party is not a “utility” as such term is used in Section 366 of the
Bankruptcy Code.
     
(c) Each Party acknowledges and agrees that upon an Event of Default, the
non-defaulting Party may terminate the Agreement and Transactions, and all
obligations arising under or related to the Agreement and Transactions, of
whatever nature or character, financial, physical or otherwise, may be
liquidated, accelerated and settled at the option of the non-defaulting Party
pursuant to the terms of this Agreement and applicable state law and, if a case
is initiated under the Bankruptcy Code, such termination shall occur pursuant to
the provisions in the Bankruptcy Code applicable to “forward contracts”. In that
regard, unless the Parties have entered into a separate master netting agreement
covering all Transactions, this Agreement shall constitute a “master netting
agreement” under the applicable provisions of the Bankruptcy Code, including
Section 561.

15.  
Warranties: U.S. Energy warrants (i) it has good title to all Gas delivered,
(ii) it has the right to sell the Gas, and (iii) the Gas will be free from all
royalties, liens, encumbrances, and all applicable Taxes that are imposed upon
the production or removal of Gas prior to passage of title. All other
warranties, express or implied, including any warranty of merchantability or
fitness for any particular purpose, are disclaimed.

 

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16.  
Indemnification: Customer will defend and indemnify U.S. Energy against all
losses, costs and expenses, including court costs and reasonable attorney’s
fees, arising out of claims regarding personal injury, lost profits, or property
damage from the Gas or other charges thereon which attach after title passes to
Customer. U.S. Energy will defend and indemnify Customer against any losses,
costs and expenses, including court costs and reasonable attorney’s fees,
arising out of claims of title, personal injury, lost profits, or property
damage from the Gas or other charges thereon which attach before title passes to
Customer.

17.  
Limitation of Liability: Neither Party will be liable to the other Party for
indirect, special, consequential, or punitive damages or for loss of profit of
any kind.

18.  
Waiver/Cumulative Remedies: All waivers must be in writing. No failure by either
Party to insist upon compliance with any term of the Agreement, to exercise any
option, enforce any right, or seek any remedy upon any Event of Default of the
other Party shall affect, or constitute a waiver of, the first Party’s right to
insist upon such strict compliance, exercise that option, enforce that right, or
seek that remedy with respect to that Event of Default or any prior,
contemporaneous, or subsequent Event of Default. No custom or practice of the
Parties at variance with any provision of this Agreement shall affect or
constitute a waiver of either Party’s right to demand strict compliance with all
provisions of this Agreement. All remedies will be without prejudice and in
addition to any right of setoff, recoupment, combination of accounts, lien, or
other right to which any Party or any of its affiliates is at any time otherwise
entitled (whether by operation of law or in equity, under contract or
otherwise).

19.  
No Third Party Benefit: This Agreement is intended for the exclusive benefit of
the Parties and their respective successors and assigns, and nothing contained
in this Agreement shall create any rights or benefits in or to any third party.

20.  
Governing Law: All questions concerning the validity or interpretation of this
Agreement or relating to the rights and obligations of the Parties with respect
to performance under this Agreement shall be construed and resolved under the
laws of the State of Minnesota, except to the extent specifically regulated by
federal laws.

21.  
Venue: All Parties to this Agreement designate the Court of Hennepin County,
Minnesota as a court of proper jurisdiction and venue for any actions or
proceedings relating to this Agreement and irrevocably consent to such
designation, jurisdiction or venue with respect to any action or proceeding
initiated in the Court of Hennepin County in any pleas of any County in
Minnesota.

22.  
Captions: The section headings are for convenience only and shall not be
interpreted in any way to limit or change the subject matter of this Agreement.

23.  
Severability: If and to the extent that any Court of competent jurisdiction
holds any provision of this Agreement to be invalid or unenforceable, such
holding shall in no way affect the validity of the other provisions of this
Agreement, which shall remain in full force and effect.

24.  
Confidentiality: It is mutually agreed by the Parties that the terms and
conditions of this Agreement are unique and therefore, shall be considered
confidential and shall not be disclosed to any third party except as required
by, and then only to the extent necessary in, the normal course of that Party’s
business if disclosed in advance to the other Party, except as required by an
existing contractual obligation of either Party or by law.

25.  
Taxes: U.S. Energy shall pay any and all applicable federal, state, and local
taxes (Taxes) associated with the Gas sold under this Agreement prior to the
Delivery Point. Customer shall pay all Taxes associated with the Gas sold under
this Agreement at and after the Delivery Point. The Purchase Price does not
include Taxes that are or may be the responsibility of the Customer. Customer
will reimburse U.S. Energy for any Taxes that U.S. Energy is required to collect
and pay on Customer’s behalf. Any new Tax which may be imposed during the term
of this Agreement at or after the Delivery Point shall be the responsibility of
the Customer. Customer will furnish U.S. Energy with any necessary documentation
showing its exempt or direct payment status for Taxes. Absent such
documentation, U.S. Energy will charge and collect from Buyer the full amount of
Taxes as required by U.S. Energy.

 

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26.  
Entire Agreement: The Agreement, Transaction Confirmations and/or Exhibits
constitute the entire agreement between the Parties relating to the purchase and
sale of natural gas. The Transactions are “forward contracts” and the Parties
are “forward contract merchants”, as those terms are used in the Bankruptcy
Code. Except to the extent provided for by this Agreement, no amendment or
modification to the Agreement will be enforceable unless reduced to writing and
executed by both Parties.

The Agreement is made as of the first day written above, and may be executed in
one or more counterparts, each of which will be deemed an original and all of
which together will form one agreement.

                      U.S. Energy Services, Inc.       Homeland Energy
Solutions, LLC    
 
                   
By: 
/s/ Gail McMinn       By:  /s/ Walter Wendland    
 
 
       
 
   
 
Print:  Gail McMinn         Print:  Walter Wendland    
 
Title:  Executive Vice President         Title:  President    

 

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