exv10w3



 






Exhibit 10.3




[U.S. Energy Logo]




AGENCY AUTHORIZATION AGREEMENT



NEK-SEN Energy, LLC (“Client”), 205 South 8th Street, Suite #2, Sabetha, KS 66534,
desires to engage the services of U.S. Energy Services, Inc. (“U.S. Energy”), 1000 Superior Blvd,
Suite 200, Wayzata, MN 55391, to manage its energy supplies for its facilities.



Client and U.S. Energy agree on the following terms and conditions:





	 	1.	 	APPOINTMENT OF U.S. ENERGY AS CLIENT’S AGENT — Client agrees to appoint U.S.
Energy as its agent, for purposes of managing its energy supplies for its facilities
referred to above. U.S. Energy accepts its appointment as Client’s agent for these
purposes.
	 
	 	2.	 	LIMITATIONS ON THE AUTHORITY OF U.S. ENERGY — U.S. Energy has the authority to
deal with third parties on behalf of Client, in connection with energy-related matters,
in its capacity as Client’s agent.
	 
	 	3.	 	COMMUNICATION AND INFORMATION SHARING — U.S. Energy shall keep Client fully
informed on a regular basis with regard to U.S. Energy’s activities as the manager of
Client’s energy supplies. At the request of Client, U.S. Energy shall immediately
provide Client with any and all or other information related to U.S. Energy’s
activities as the manger of Client’s energy supplies.
	 
	 	4.	 	RELEASE OF ENERGY CONSUMPTION RECORDS AND BILLS — This Agency Agreement serves
as authorization for the release of Client’s energy consumption records and bills from
utilities, pipelines and suppliers to U.S. Energy.
	 
	 	5.	 	TERM — This Agreement shall begin upon execution of the Agreement. Either
party shall have the right to terminate this Agreement for any reason, with 30 days
notice in writing, without recourse to the other party. 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.
	 
	 	6.	 	SERVICES — U.S. Energy shall perform the following services for Client:






	 	(a)	 	Solicit bids for, negotiate, execute and administer energy supply contracts.
Administration of said contracts shall include:






	 	•	 	Placing daily and monthly nominations




 









 






	 	•	 	Reviewing invoices for accuracy and approving for payment
	 
	 	•	 	Providing timely notices






	 	(b)	 	Negotiate, execute and administer interstate transportation contracts. Administration of
said contracts shall include:






	 	•	 	Providing daily and monthly nominations
	 
	 	•	 	Receiving curtailment notifications
	 
	 	•	 	Managing daily and monthly imbalances
	 
	 	•	 	Requesting and negotiating pipeline taps
	 
	 	•	 	Reviewing invoices for accuracy and approving for payment
	 
	 	•	 	Providing timely notices






	 	(c)	 	Negotiate, execute and administer LDC transportation contracts. Administration of said
contracts shall include:






	 	•	 	Providing daily and monthly nominations
	 
	 	•	 	Receiving curtailment notifications
	 
	 	•	 	Managing daily and monthly imbalances
	 
	 	•	 	Reviewing invoices for accuracy and approving for payment
	 
	 	•	 	Negotiating and resolving all discrepancies including imbalances
	 
	 	•	 	Providing timely notices






	 	(d)	 	Perform other related services requested by Client.






	 	7.	 	CONFIDENTIALITY —






	 	(a)	 	Nondisclosure — U.S. Energy shall not divulge to any other
person or party any information developed by U.S. Energy hereunder or revealed
to U.S. Energy pursuant o this Agreement, unless such information is (a)
already in U.S. Energy’s possession if 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 the
supplier, or (d) is required by U.S. Energy to be disclosed by court order, or
(e) is permitted by Client. All such information shall be and remain the
property of Client unless such information is subject to another
Confidentiality Agreement, and upon the termination of this Agreement, U.S.
Energy shall return all such information upon Client’s request.
	 
	 	(b)	 	Protection of Information about Client — U.S. Energy agrees to
inform its employees who work with Client of the requirements of




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	 	 	 	this Section. U.S. Energy also agrees to protect information about Client
with the same degree of diligence that U.S. Energy uses to protect its own
confidential information.




ENTIRE AGREEMENT — This Agreement constitutes the entire agreement among the parties pertaining to
the subject matter hereof and supersedes all prior Agreements and understandings pertaining hereto.




Agreed to and Accepted by:





NEK-SEN ENERGY, LLC




	 	 	 
	By:

	 	/s/Gary Edelman
	 

	 	 
	 
	 	 
	Name:

	 	Gary Edelman
	 

	 	 
	(Print)
	 	 
	 
	 	 
	Title:

	 	President
	 

	 	 
	 
	 	 
	Date:

	 	2/7/06
	 

	 	 
	 
	 	 
	U.S. ENERGY SERVICES, INC.
	 
	 	 
	By:

	 	/s/Gail McMinn
	 

	 	 
	 
	 	 
	Name:

	 	Gale McMinn
	 

	 	 
	(Print)
	 	 
	 
	 	 
	Title:

	 	Vice President
	 

	 	 
	 
	 	 
	Date:

	 	2-14-06
	 

	 	 





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[U.S. Energy Logo]




ENERGY MANAGEMENT AGREEMENT

(Site Development and Operations)





	 	 	The purpose of this Agreement is to set forth the understanding and agreement between U.S. Energy
Services, Inc. (“U.S. Energy”) and NEK-SEN Energy, LLC (“Client”) related to the provision of
energy management services.
	 
	 	 	PROJECT DESCRIPTION: Client is developing a 40-50 million gallon per year ethanol plant
(“Plant”) to be located in Falls City, Nebraska. The Plant will have approximately a 5 MW peak
usage in electricity and will have a thermal/heat load of approximately 4,200 MMBtu. The fuel
source for Thermal/heat loads will be coal, natural gas or fuel oil.
	 
	 	 	U.S. ENERGY RESPONSIBILITIES: U.S. Energy will provide consulting and energy management
services for supplies of fuel (natural gas, coal or fuel oil) and electricity for the Plant.
Theses services will be provided during the construction of the Plant (“Construction Period”), and
after the Construction Period when the Plant has been placed in service (“Completion Date”). The
Completion Date shall be determined when the Plant begins producing ethanol. These services will
be provided to Client upon request:
	 
	A.	 	Energy Infrastructure Advisory Services During the Construction Period






	1.	 	Provide an economic comparison of using natural gas, coal or fuel oil for each site
identified as a potential location for the plant.






	2.	 	Once a fuel source and site decision is made, U.S. Energy will solicit service proposals from
qualified suppliers, evaluate such proposals, and make recommendations to the Board regarding
supplier selections.






	3.	 	U.S. Energy will participate in final service agreement negotiations, then during the
construction period will insure contract compliance.
	 
	4.	 	Provide advisory services to Client regarding electric pricing and service agreements.







	 	a.	 	Analyze the electric service proposals along with primary, secondary and
generation options and recommend an electric sourcing strategy and plan. The plan may
include a combination of electric supplier agreement and/or installation of on-site
generation.
	 
	 	b.	 	Negotiate final electric service agreements that meet the pricing and
reliability requirements of Client, including options for third party access to
electric metering.




 









 






	 	c.	 	Prepare and implement a regulatory strategy, if required and if an alternative
power supplier is selected. Any attorney fees required for the specific purpose of
obtaining regulatory approval for an alternative power supplier, if any, will be over
and above U.S. Energy’s monthly fee herein, and must be pre-approved by Client.






	5.	 	Evaluate the proposed electric distribution infrastructure (substation) for reliability,
future growth potential and determination of the division of ownership of facilities between
the utility and the Plant.
	 
	6.	 	Investigate economic development rates, utility grants, equipment rebates and other utility
programs that may be available.





B. On-Going Energy Management Services Following the Completion Period



U.S. Energy will provide the following services at Client’s request:





	1.	 	Provide fuel information to minimize the cost of fuel purchased. This will include acquiring
multiple supply quotes and reporting to Client the various supply index and fixed prices.
U.S. Energy will not take title to Client fuel supplies, but will communicate supply prices
and potential buying strategies.






	2.	 	Negotiate with coal mines, railroads, terminals, pipelines, utilities, other shippers, and
suppliers to provide transportation, balancing, and supply agreements that meet Client’s
performance criteria at the lowest possible cost.






	3.	 	Develop and implement a price risk management plan that is consistent with Client’s pricing
objectives and risk profile.






	4.	 	Provide daily nominations to the suppliers, pipeline, railroad, terminals and other
applicable shippers for fuel deliveries to the Plant. This will include daily electronic
confirmations to Client of all nominations and shipments and actual daily usage.






	5.	 	Provide a consolidated monthly invoice to Client that reflects all applicable fuel and
electric energy costs. U.S. Energy will be responsible for reviewing, reconciling the paying
all shipper, supplier and utility invoices.






	6.	 	Provide a monthly usage report of electric energy consumption and costs. Also, where
applicable and available from the utility, obtain monthly interval electric load data and
provide monthly load profile graphs.






	7.	 	On-going review and renegotiation of eclectic service costs, as required. This may include:




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	 	a.	 	Completing and evaluating annual proposals to identify the most reliable and
economic third party electric energy supply.
	 
	 	b.	 	Identifying new service tariffs or opportunities to renegotiate the service
agreement to provide lower costs.
	 
	 	c.	 	Identifying on-site generation opportunities as market conditions change.
	 
	 	d.	 	Provide a monthly projection of energy (natural gas and electricity) and annual
summaries.






	8.	 	Provide fuel and electric energy operating budgets for the Plant.






	9.	 	Perform initial sales tax exemption audits for energy consumption costs as required and
allowable by state tax laws.




TERM: The initial term of this Agreement shall commence on February 1, 2006 and continue
until twenty-four (24) months after the Plant’s Completion Date. The Agreement shall be
month-to-month after the initial term. This Agreement may be terminated by either party effective
after the initial term upon sixty (60) days prior written notice. 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.



FEES: U.S. Energy’s fee for services described above during the term of this Agreement
shall be $2900 per month, plus pre-approved travel expenses. U.S. Energy will perform activities
during the Construction Period unless Client suspends further work by U.S. Energy during the
Construction Period. Upon notice of suspension during the Construction Period, U.S. Energy will
suspend its activities and suspend invoicing Client for further work until U.S. Energy’s activities
resume. U.S. Energy will resume its activities during the Construction Period when requested by
Client or when the Completion Period begins and U.S. Energy will resume invoicing Client.



In the event that plant financing is not secured, this Agreement shall become null and void and
both parties will be relieved of further professional and/or financial obligations due the other
party. However, Client will still be responsible for fees incurred prior to work being suspended.



U.S. Energy’s fee will increase 4% per year on the annual anniversary date of the effective date of
this Agreement.



BILLING AND PAYMENT: On the first of the month, U.S. Energy shall invoice Client for
appropriate energy costs from the previous month and for the U.S. Energy retainer for the current
month. Client shall pay U.S. Energy within ten (10) days of receipt of invoice.



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TAXES: Client will be responsible for payment of all taxes including, but not limited to,
all sales, use, excise, BTU, heating value and other taxes associated with the purchase and/or
transport of natural gas or electricity and the provision of services hereunder.



CONFIDENTIALITY: U.S. Energy shall not divulger to any other person or party any
information developed by U.S. Energy hereunder or 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 the
supplier, or (d) is required by U.S. Energy to be disclosed by court order, or (e) is permitted by
Client. All such information shall be and remain the property of Client unless such information is
subject to another Confidentiality Agreement, and upon the termination of this Agreement, U.S.
Energy shall return all such information upon Client’s request. Notwithstanding anything to the
contrary herein, U.S. Energy shall not disclose any information which is in any way related to this
Agreement or U.S. Energy’s services hereunder without first discussing such proposed disclosure
with Client.



NOTICES: Any formal notice, request or demand which a party hereto may desire to give to
the other respecting this Agreement shall be in writing and shall be considered as duly delivered
as of the postmark date when mailed by ordinary, registered or certified mail by said party to 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:
	 	NEK-SEN Energy, LLC
	 
	 	Attn: Matt Crouse
	 
	 	205 South 8th Street, Suite 2
	 
	 	Sabetha, KS 66534
	 
	 	 
	U.S. Energy:
	 	U.S. Energy Services, Inc.
	(Payment)
	 	c/o US Bank SDS 12-1449
	 
	 	Account #: 173100561153
	 
	 	P.O. Box 86
	 
	 	Minneapolis, MN 55486
	 
	 	 
	(Notices):
	 	U.S. Energy Services, Inc.
	 
	 	1000 Superior Blvd, Suite 201
	 
	 	Wayzata, MN 55391
	 
	 	Attn: Contract Administration





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ASSIGNMENT OR AMENDMENT: The Agreement may not be assigned or amended without the written
consent of U.S. Energy and Client.



APPLICABLE LAW: The Agreement shall be construed in accordance with the laws of the State
of Minnesota.



ENTIRE AGREEMENT: This Agreement constitutes the entire Agreement among the parties
pertaining to the subject matter hereof and supersedes all prior Agreements and understanding
pertaining hereto.




Agreed to and Accepted by:





NEK-SEN ENERGY, LLC




	 	 	 	 	 	 	 
	By:

	 	/s/Gary Edelman	 	 	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	Name:

	 	Gary Edelman	 	 	 	 
	 

	 	 	 	 	 	 
	(Print)
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	Title:

	 	President
	 	Date:
	 	2/7/06
	 

	 	 
	 	 	 	 
	 
	 	 	 	 	 	 
	U.S. ENERGY SERVICES, INC.
	 
	 	 	 	 	 	 
	By:

	 	/s/Gail McMinn	 	 	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	Name:

	 	Gale McMinn	 	 	 	 
	 

	 	 	 	 	 	 
	(Print)
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	Title:

	 	Vice President
	 	Date:
	 	2-14-06
	 

	 	 
	 	 	 	 




SOPS  REV 1 - 032505



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