exv10w2



 











Exhibit 10.2









United States Department of Agriculture

Rural Development




November 7, 2005




Mr. Gary Edelman, President

205 S. 8th Street

Sabetha, KS 66534




	 	 	 
	SUBJECT:

	 	NEK-SEN Energy Partners
	 

	 	Value-Added Producer Grant (VAPG)





Dear Mr. Edelman:



This is to notify you that grant funds in the amount of $100,000.00 have been reserved for the
above subject project.



In accordance with our Letter of conditions dated October 12, 2005, the funding period of this
grant will begin on November 7, 2005 and will conclude within 365 days of the starting date. You
may charge to the grant only allowable costs resulting from obligations incurred during the funding
period.



Attached for your records is a signed copy of Form RD 1940-1, “Request for Obligation of Funds”.



If we may be of further service, please feel free to contact our office.




Sincerely,




/s/ Gary L. Smith




GARY L. SMITH

Director, Business and Community Programs




Attachment A/S





			
	cc:	 	William D. Moore, Area Director, USDA Rural Development, Manhattan, KS





GLSmith:jw




1303 SW First American Plan • Suite 100 • Topeka, KS 66604

(785) 271-2730 • Fax (785) 271-2771 • TTY (785) 271-2767 • www.rurdev.usda.gov/ks




Committed to the future of rural communities




“USDA is an equal opportunity employer and lender”




 









 










United States Department of Agriculture

Rural Development




October 12, 2005




NEK-SEN Energy Partners

Attn: Gary Edelman

205 S. 8th Street, Suite #2

Sabetha, KS 66534





			
	Re:	 	Letter of Conditions




Dear Mr. Edelman:



We are pleased to inform you that your proposal for a fiscal year 2005 Value-Added Producer Grant
(VAPG) has been selected for funding. This letter establishes conditions which must be understood
and agreed to by you before further consideration may be given to your VAPG application. The State
and Area staff of the United States Department of Agriculture, Rural Development, will administer
the grant on behalf of the Rural Business-Cooperative Service (RBS).



The docket may be completed on the basis of a grant not to exceed $100,000. The project must be
started by January 1, 2006 and be completed by December 31, 2006.



Please complete and sign the enclosed Form RD 1942-46, “Letter of Intent to Meet Conditions” and
Form RD 1940-1, “Request for Obligation of Funds” if you desire that further consideration be given
your application. If the conditions set forth in this letter are not met within 90 days from the
day hereof, RBS reserves the right to discontinue the processing of your application.



The grant will be considered approved on the date a signed (by Rural Development) copy of Form RD
1940-1, “Request for Obligation of Funds” is mailed to you.



1. Project Funding



NEK-SEN Energy Partners (Grantee) may use grant and matching funds to develop a final
infrastructure assessment and access plan, a business plan, marketing plan, risk management plan,
pro forma financial statements, and application for securities registration and review in Kansas,
Nebraska and Federal government.




1303 SW First American Plan • Suite 100 • Topeka, KS 66604

(785) 271-2730 • Fax (785) 271-2771 • TTY (785) 271-2767 • www.rurdev.usda.gov/ks




Committed to the future of rural communities




Rural Development is an Equal Opportunity Lender, Provider, and Employer. Complaints of discrimination should be send to

USDA, Director, Office of Civil Rights, Washington, D.C. 20250-9410




 









 





			
	NEK-SEN Energy Partners
	 	Page 2





The amount of grant funds expended cannot exceed $100,000. Grantee will match grant funding with
an amount equal to or greater than $100,000. The matching funds will be spent at a rate equal to
or in advance of grant funds, with the expenditure of matching funds not to occur unitl the date
the grant begins.



2. Availability of Funds



The funding period of this grant will begin on the date the grant has been obligated and will
conclude within 365 days of the starting date. The Grantee may charge to the grant only allowable
costs resulting from obligations incurred during the funding period.



3. Value-Added Produce Grant Agreement



By signing the Value-Added Producer Grant Agreement, NEK-SEN Energy Partners agrees with all the
terms and conditions contained in that agreement including those on fund disbursement and reporting
requirements. These terms and conditions are incorporated into this letter by reference.



4. Scope of Work



Any changes in project costs, source of funds, scope of services, or any other significant changes
in the project or applicant must be reported to and approved by Rural Development by written
amendment of this letter. Any changes not approved by Rural Development shall be cause for
terminating the grant.



5. Insurance and Bonding



The Grantee shall provide satisfactory evidence to USDA, Rural Development that bonding or
insurance for the amount of the grant covers all officers and employees of the grantee’s
organization authorized to receive or disburse Federal funds.



6. Program Income



If program income is earned during the time period of the grant, it may be used to replace other
sources of matching funds if prior approval is received from the Agency. Program income that is
not used as matching funds for the grant project must first be added to the total project costs and
used to further eligible project or program objectives. Program income earned in excess of funds
that can be used for matching funds or eligible expenses must be deducted from the total project or
program allowable cost and will result in a reduction of the Federal share. Costs incident to the
generation of program income may be deducted from gross income to determine program income,
provided these costs not been charged to the award.



7. Legal Entity



Provide information that the applicant is a legally incorporated entity that is eligible for grant
funds. For all organizations, a copy of current articles of incorporation, bylaws, and a current






 









 








			
	NEK-SEN Energy Partners
	 	Page 3





certificate of good standing from the Kansas Secretary of State are to be furnished. The Board of
Directors shall provide a resolution showing that the entity is duly incorporated, has continued
legal existence, and has the legal capacity and authority to administer the grant funds as
proposed.



8. Executions



Before a grant can be obligated, the Grantee must:





	 	•	 	Provide a Resolution of Authority (signature authority of execution of Letter of Intent
to Meet Conditions, Request for Obligations, etc.)
	 
	 	•	 	Certify to Rural Development that at lest 51 percent of the outstanding interest in the
project has membership or is owned by those who are either citizens of the United States or
reside in the United States after being legally admitted for permanent residence.
	 
	 	•	 	Certify to Rural Development that Grantee is in compliance with and will continue to
comply with all applicable laws, regulations, Executive Order and other generally
applicable requirements, including those contained in 7 CFR part 4284 and 7 CFR parts 3015,
3016, 3017, 3018, 3019 and 3052 in effect on the date of grant approval, and the approved
letter of conditions.
	 
	 	•	 	Execute Form AD-1047, “Certification Regarding Debarment, Suspension, and Other
Responsibility Matters-Primary Covered Transactions,” to certify that your organization is
not debarred or suspended from Government assistance.
	 
	 	•	 	Execute Form AD-1049, “Certification Regarding a Drug-Free Workplace Requirements
(Grants)” to certify you will provide a drug-free awareness program for employees.
	 
	 	•	 	Execute From RD 400-1, “Equal Opportunity Agreement” and Form RD 400-4, “Assurance
Agreement.”





9. Prior to Release of Funds





	 	•	 	Obtain a certification on Form AD-1048, “Certification Regarding Debarment, Suspension,
Ineligibility and Voluntary Exclusion-Lower Tier Covered Transactions,” from anyone you do
business with as a result of this Government assistance.
	 
	 	•	 	If any proposed matching funds will be provided in cash by the applicant, provide an
updated bank statement or letter verifying a line of credit dated within 30 calendar days
of the expected start date of the grant period.
	 
	 	•	 	Provide all letters of support referenced in the application.
	 
	 	•	 	Provide a work plan and budget that includes a detailed breakdown of estimated costs
(both grant and matching) associated with each task, the personnel assigned to complete
each task, and the time frame for each task. The work plan and budget must include only
eligible expenses and meet the Agency’s approval.
	 
	 	•	 	Provide information proving that the number and individuals identified as
owner-producers in the application are correct.




 









 











			
	NEK-SEN Energy Partners
	 	Page 4







	 	•	 	Provide information verifying the amount of gross sales identified in the application.




10. Payment



The Grantee shall request reimbursement of grant funds, but not more frequently than once every 30
days, by using Standard Form 270, “Request for Advance or Reimbursement.” The Grantee must ensure
that matching funds are spent at a rate equal to or in advance of grant funds. Receipts, hourly
wage rate, personnel payroll records, or other documentation, as determined by the Agency, must be
provided with the request to justify the amount.



11. Audit 



The project will be audited by a Certified Public Accountant in accordance with Generally Accepted
Government Auditing Standards (GAGAS). This audit will be limited-scope audit focused only on the
expenditure of grant and matching funds. Rural Development is to receive a copy of this audit.



12. Reports and Record Keeping





	 	•	 	Standard Form 269A, “Financial Status Report” and lists of expenditures according to
agreed upon budget categories on a semi-annual basis. Semi-annual reporting periods end
each March 31 and September 30. Reports are due 30 days after the reporting period ends.
The final financial status report is due within 90 calendar days after the expiration or
termination of the grant.
	 
	 	•	 	Semi-annual performance reports which compare accomplishments to the objectives of the
grant are due 30 days after the reporting period ends. The final performance report is due
within 90 calendar days after the expiration or termination of the grant. If funds were
awarded for planning activities and the planning shows positive results, the grantee must
provide the projections on the number of jobs to be created and the increases in revenues
and customer base. This will only be required on the final report.
	 
	 	•	 	Upon completion of each task outlined in the proposal, deliver the results of the study
or activity to this office.
	 
	 	•	 	Collect and maintain data on race, sex, and national origin of your membership and
ownership.
	 
	 	•	 	Retain financial records, supporting documents, statistical records, and all other
records pertinent to the grant for a period of at least 3 years after grant closing or the
initial cash advance, whichever is later.





13. Site Visits



The Grantee will allow the Grantor to conduct site visits as needed for monitoring the Grantee’s
progress and auditing the Grantee’s financial records related to the performance under the Grant
Agreement. Failure to allow the Grantor to conduct site visits shall be grounds for terminating
the grant.




 









 








			
	NEK-SEN Energy Partners
	 	Page 5






14. Financial Management System:



Your financial management system must be in accordance with 7 CFR 3019, sections 3019.20, 3019.21,
3019.52 and 3019.53.



If you have any questions concerning the conditions set forth above, please contact F. Martin Fee
at (785) 271-2744.




Sincerely,




/s/Gary L. Smith

GARY L. SMITH

Director, Business and Community Programs




	 	 	 
	Enclosures:

	 	Form RD 1942-46
	 

	 	Form RD 1940-1 along with Attachment
	 

	 	Resolution
	 

	 	Value-Added Producer Grant Agreement
	 

	 	Value-Added Producer Grant Certifications
	 

	 	Interview With Applicant Concerning Relatives Employed by USDA
	 

	 	Form AD-1047
	 

	 	Form AD-1049
	 

	 	Form RD 400-1
	 

	 	Form RD 400-4
	 

	 	RD Instruction 1940-Q, Exhibit A-1
	 

	 	Form AD-1048
	 

	 	SF-3881







			
	cc:	 	Bobbie Purcell, Deputy Administrator, Cooperative Services, Washington, D.C.





 









 








UNITED STATES DEPARTMENT OF AGRICULTURE

RURAL BUSINESS-COOPERATIVE SERVICE



VALUE-ADDED PRODUCER GRANT AGREEMENT



This Grant Agreement (Agreement) dated October 21, 2005, between NEK-SEN Energy Partners
(Grantee), and the United States of America, acting through the Rural Business-Cooperative Service
of the Department of Agriculture (Grantor), for $100,000 in grant funds under the VAPG program,
delineates the agreement of the parties.



NOW, THEREFORE, in consideration of the grant;



The parties agree that all the terms and provisions of the VAPG NOSA and application submitted by
the Grantee for this VAPG grant, including any attachments or amendments, are incorporated and
included as part of this Agreement. Any changes to these documents or this Agreement must be
approved in writing by the Grantor.



The Grantor agrees to make available to the Grantee for the purpose of this Agreement funds in an
amount not to exceed the Grant funds, subject to the terms and conditions of this Agreement.



As a condition of the Agreement, the Grantee certifies that at least 51 percent of the outstanding
interest in the project has membership or is owned by those who are either citizens of the United
States or reside in the United States after being legally admitted for permanent residence.



As a condition of the Agreement, the Grantee certifies that it is in compliance with and will
comply in the course of the Agreement with all applicable laws, regulations, Executive Orders, and
other generally applicable requirements, including those contained in 7 CFR 3015, 7 CFR 3019, 7 CFR
4284, subparts A and J, and the VAPG NOSA, which are incorporated into this agreement by reference,
and such other statutory provisions as are specifically contained herein. The Grantee will comply
with title VI of the Civil Rights Act of 1964, section 504 of the Rehabilitation Act of 1973, the
Age Discrimination Act of 1975, the Americans with Disabilities Act, Executive Order 12898, and
Executive Order 12250.



As a condition of the Agreement, the Grantee certifies that its management has read and understands
the requirements of 7 CFR 3015, “Uniform Federal Assistance Regulations,” 7 CFR 3017, “Government
wide Debarment and Suspension Nonprocurement,” 7 CFR 3018, Restrictions on Lobbying,” 7 CFR part
3019, “Uniform Administrative Requirements for Grants and Agreements with Institutions of Higher
Learning,” and 7 CFR part 4284, subparts A and J.



NOW, THEREFORE, the parties do hereby agree as follows:



1. Grant



A. The total amount of grant funds payable to the Grantee by the Grantor shall not exceed $100,000
(Grant). Any unexpended Grant funds remaining at the time of project completion or termination of the Agreement shall be returned to the Grantor within 30 calendar days from the date
of project completion or termination of the Agreement.





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B. Grantee will match Grant funding with an amount equal to or grater than $100,000. The matching
funds will be spent at a rate equal to or in advance of grant funds, with the expenditure of
matching funds not to occur until the date the grant begins.



C. The funding period of this grant will being on the date the Agreement has been signed by both
parties and will conclude within 365 days of the starting date, but no later than December 31,
2006. The Grantee may charge to the grant only allowable costs resulting from obligations incurred
during the funding period.



D. The Grantee shall use Grant funds and matching funds only for the purposes and activities
specified in detail in EXHIBIT A, entitled “GRANT WORK PLAN AND BUDGET” which is attached hereto
and incorporated herein. Any uses not provided for in EXHIBIT A must be approved in writing by the
Grantor in advance of expenditure of the Grantee.



2. Financial Management



A. The Grantee shall relate financial data to performance data and develop unit cost information
whenever practical.



B. The Grantee shall maintain a financial management system in accordance with 7 CFR 3019.21.



C. Payment shall be made in accordance with 7 CFR 3019.22. If the Grantee cannot maintain a
financial management system in accordance with 7 CFR 3019.21 or if Grantee fails to satisfactorily
meet any other conditions set forth in this Agreement, the Grantee may be paid on a reimbursement
basis, a the discretion of the Grantor.



i. If payment is to be made by advance, the Grantee shall request advance payment, but not more
frequently than one every 30 days, of grant funds by using Standard Form 270, “Request for Advance
or Reimbursement.” Receipts, hourly wage rate, personnel payroll records, or other documentation
must be provided upon request from the Agency.



ii. If payment is to be made by reimbursement, the Grantee shall request reimbursement of grant
funds, but no more frequently than one every 30 days, by using Standard Form 270, “Request for
Advance or Reimbursement.” Receipts, hourly wage rate, personnel payroll records, or other
documentation, as determined by the Agency, must be provided with the request to justify the
amount.



D. If program income is earned during the time period of the grant, it may be used to replace other
sources of matching funds if prior approval is received from the Agency. Program income that is
not used as matching funds for the grant project must first be added to the total project costs and
used to further eligible project or program objectives. Program income earned in excess of funds
that can be used for matching funds or eligible expenses must be deducted from the total project or program allowable cost and will result in a reduction of the Federal share.
Costs incident to the generation of program income may be deducted from gross income to determine
program income, provided these costs have not been charged to the award.




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E. The Grantee shall provide satisfactory evidence to the Grantor that the Grantee has complied
with the bonding or insurance requirements specified by EXHIBIT B, “BONDING COVERAGE,” which is
attached hereto and incorporated herein.



F. The Grantee is subject to the audit requirements specified in EXHIBIT C, “AUDIT REQUIREMENTS,”
which is attached hereto and incorporated herein.



3. Property Standards



The Grantee must adhere to the property standards outlined in 7 CFR 3019.31 through 3019.37.



4. Procurement Standards



The Grantee must adhere to the procurement standards outlined in 7 CFR 3019.41 through 3019.48.



5. Reports



The Grantee shall submit financial and project performance reports satisfactory to the Grantor in
accordance with EXHIBIT D, entitled “REPORTING REQUIREMENTS,” which is attached hereto and
incorporated herein.



6. Site Visits



The Grantee will allow the Grantor to conduct site visits as needed for monitoring the Grantee’s
progress and auditing the Grantee’s financial records related to the performance under the
Agreement. Failure to allow the Grantor to conduct site visits shall be grounds for terminating
the grant.



7. Records



The Grantee shall retain and provide access to records as required by 7 CFR 3019.53.



8. Termination



The award that is the subject of this Agreement shall only be terminated in accordance with 7 CFR
3019.61.



9. Enforcement



The terms and conditions of this award will be enforced using the provisions of 7 CFR 3019.62.



10. Other Conditions



If the Grantee is a farmer or rancher cooperative, the Grantee’s Board of Directors must take
director training on cooperative governance and the responsibilities of cooperative directors
during the time period of the Grant. Members on the Board of Directors that have taken this
training previously can certify, in writing, to the Grantor the specifics of the training and when
it




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was completed. Any new members or members who have not completed the training previously must complete the training as approved by the Grantor.



IN WITNESS WHEREOF, Grantee has this day authorized and caused this Agreement to be signed it its
name and its corporate seal to be hereunto affixed and attested by its duly authorized officers
thereunto, and the Grantor has caused this Agreement to be duly executed on its behalf by:




Grantor

UNITED STATES OF AMERICA

RURAL BUSINESS-COOPERATIVE SERVICE




	 	 	 
	 
	 	 
	 

	 	 
	Signature

	 	Date
	 
	 	 
	GARY L. SMITH
	 	 
	 
	 	 
	Name
	 	 
	 
	 	 
	Director, Business and Community Programs
	 	 
	 
	 	 
	Title
	 	 
	 
	 	 
	Grantee
	 	 
	 
	 	 
	NEK-SEN Energy Partners
	 	 
	 
	 	 
	 
	 	 
	/s/Gary D. Edelman

	 	October 21, 2005
	 

	 	 
	Signature

	 	Date
	 
	 	 
	Gary D. Edelman
	 	 
	 
	 	 
	Name
	 	 
	 
	 	 
	President
	 	 
	 
	 	 
	Title
	 	 






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