Document:

<PAGE>

July 18, 2000

Mr. Gary Kramer
Badger State Ethanol
12139 Howardsville Road
Lena, IL 61048

Subject:          Proposal for Air Pollution Control Permit Application
                  Badger State Ethanol, Monroe, Wisconsin
                  RMT Proposal No. 90-99854.47

Dear Mr. Kramer:

This letter presents RMT, Inc.'s (RMT) proposal to assist Badger State Ethanol
with the preparation of a NR 406 Air Pollution Control Permit application for
the proposed Monroe, Wisconsin, facility. This proposal has been developed in
response to the meeting held on July 14, 2000.

-------------------------------------------
PROJECT OBJECTIVE

RMT's proposal has been developed to accomplish the following Badger State
Ethanol objective:

-    To prepare a complete NR 406, Wisconsin Administrative Code Air Pollution
     Control Permit application for a proposed ethanol production facility in
     Monroe, Wisconsin.

-------------------------------------------
SCOPE OF SERVICES

RMT will perform the following tasks:

AIR POLLUTION CONTROL PERMIT APPLICATION

-    Attend a pre-application project kick-off meeting between Badger State
     Ethanol and its design firm to discuss proposed project.

-    Attend a pre-application meeting with representatives of the Wisconsin
     Department of Natural Resources (WDNR), Badger State Ethanol and its design
     firm to discuss the project and develop an understanding of WDNR
     expectations regarding the permit application.

-    Based upon emissions data supplied by Badger State Ethanol or one of its
     representatives, evaluate the regulatory implications of expected types and
     levels of air pollutant emissions to be generated by the proposed facility
     including the following potentially applicable regulations.

<PAGE>

Mr. Gary Kramer
Badger State Ethanol
July 18, 2000
Page 2

-      NR 406 Construction Permits

-      NR 407 Operating Permits

-      NR 424 Control of Organic Compound Emissions from Process Lines

-      NR 429 Malodorous Emissions

-      NR 440 Standards of Performance for New Stationary Sources

-      NR 445 Control of Hazardous Air Pollutants

- Inform and discuss with Badger State Ethanol permitting options based upon the
  regulatory review.

- If necessary, conduct a NR 424 Latest Available Control Technique organic
  compound emissions control evaluation.

- If required by the WDNR, estimate emissions of fugitive dust from facility
  roadways.

- Evaluate existing odor sampling data provided by Badger State Ethanol or
  its representatives for applicability to the Monroe facility.

- Conduct a dispersion modeling analysis to evaluate potential impact of
  facility on odors in the surrounding area.

- Conduct necessary dispersion modeling analysis of criteria air pollutants
  in support of the facility's air pollution control permit application.

- Prepare appropriate state of Wisconsin Air Pollution Control Permit
  Application Forms for the proposed facility.

- Prepare a draft permit application package for review by Badger State Ethanol.

- Prepare a final permit application package for submittal to the WDNR.

- Act as a regulatory liaison during the permit review process and the public
  comment period.

-------------------------------------------
DELIVERABLES

RMT will provide Badger State Ethanol with the following deliverables:

- Three copies of the draft permit application package for review.

<PAGE>

Mr. Gary Kramer
Badger State Ethanol
July 18, 2000
Page 3

- Four copies of the final permit application package.

-----------------------------
FEE PROPOSAL

RMT proposes to perform the Scope of Services on a time-and-expenses basis in
accordance with the attached Schedule of Charges. The estimated total fees will
be approximately $14,100. Should Badger State Ethanol request RMT to make
changes in the services or to perform additional services, RMT will prepare a
Change Order for Badger State Ethanol's acceptance. Additional services will
also be performed in accordance with the attached Schedule of Charges.

This Proposed Fee is based on the following assumptions:

- State hazardous air pollutant issues (s. NR 445), federal MACT standards or
  PSD regulations will not be applicable to this project.

- Cost estimate does not include start-up assistance activities such as
  compliance stack testing, implementation of record keeping systems, or
  preparation of a malfunction prevention and abatement plan (required under
  s. NR 439). Separate cost estimates for these tasks can be provided when
  extent of required activities is better defined within written permit
  conditions.

- Cost estimate does not include commissioning of a new odor panel
  evaluation. A separate cost estimate can be provided if such an evaluation
  is warranted.

-----------------------------
TERMS OF CONTRACT

RMT proposes to perform the services under the terms of the enclosed Work
Authorization. To accept this proposal, please sign and return one copy of the
Work Authorization.

-----------------------------
SCHEDULE

RMT can begin work on the project immediately after receiving your notice to
proceed. A final air pollution control permit application will be completed and
ready for submittal to the WDNR by August 31, 2000.

<PAGE>

Mr. Gary Kramer
Badger State Ethanol
July 18, 2000
Page 4

-----------------------------
HEALTH & SAFETY CONSIDERATIONS

RMT subscribes to Occupational Safety and Health Administration (OSHA)- and
United States Environmental Protection Agency (USEPA)-mandated Health and Safety
standards. Because of the wide range of potential exposures for our employees,
RMT must make conservative judgments as to potential health risks. The services
outlined in this proposal are offered on the basis of providing Level D health
and safety protection (coveralls, safety shoes, hard hats, and eye protection
only). If additional protection is required for RMT employees to perform these
services, then RMT will advise Badger State Ethanol of the needed protection and
any associated increase in compensation before proceeding with the work.

-----------------------------
PROJECT TEAM

We offer Karin Greenacre as the project manager for the proposed Scope of
Services. Key members of the project team will include Dave Fox, consulting
meteorologist, and Gina Rau, project engineer.

We are pleased to offer this assistance to Badger State Ethanol. Please feel
free to call me at (262) 879-1212 if you have any questions.

Sincerely,

RMT, Inc.

/s/ MJS for Karin Greenacre

Karin M. Greenacre, P.E.
Project Manager

ljn

Attachments:          Work Authorization
                      General Terms and Conditions
                      Schedule of Charges

cc:        Dave Fox, RMT, Inc.
           Gina Rau, RMT, Inc.

<PAGE>

                             WORK AUTHORIZATION FORM

RMT, Inc. ("RMT")
150 N. Patrick Boulevard, Suite 180
Brookfield, WI  53045-5854
Tel. (262) 879-1212  -  Fax (262) 879-1220

<TABLE>
---------------------------------------------------------------------------
<S>     <C>                                        <C>
DATE:   July 18, 2000                              CLIENT NUMBER:  TBD

TO:     Mr. Gary Kramer
        Badger State Ethanol ("Client")
        12139 Howardsville
        Lena, IL 61048
PROJECT NAME:  Preparation of Air Pollution Control Permit Application
FACILITY LOCATION:  Monroe, Wisconsin
RMT PROPOSAL NUMBER:  90-99854.47                  RMT PROJECT NUMBER:  TBD
---------------------------------------------------------------------------
</TABLE>

THE AGREEMENT CONSISTS OF THE FOLLOWING DOCUMENTS:

         (a)      This Work Authorization Form

         (b)      Proposal for Air Pollution Control Permit Application, letter
                  dated July 18, 2000 ("Proposal") (attached)

         (c)      Terms and Conditions
                  -  RMT General Terms and Conditions (attached)

         (d)      Change orders that may be authorized at various times
                  throughout the Project

         (e)      Schedule of Charges:  Flat Rate Schedule (attached)

SCHEDULE:
Approximate Start Date:             Immediately upon notice to proceed
Approximate Complexion Date:        August 31, 2000

BASIS FOR PAYMENT:
Flat Rate Time and Expense

                          SUMMARY OF SCOPE OF SERVICES
<TABLE>
<CAPTION>
-------------------------------------------------------- --------------------------
                        DESCRIPTION                          ESTIMATED TASK COST
-------------------------------------------------------- --------------------------
<S>                                                          <C>
Preparation of Air Pollution Control Permit Application            $14,100
-------------------------------------------------------- --------------------------
                           TOTAL                                   $14,100
-------------------------------------------------------- --------------------------
</TABLE>

                                       1
<PAGE>

                               WORK AUTHORIZATION
                          PROPOSAL NUMBER: 90-99854.47

PROJECT MANAGERS:
RMT                                                  Badger State Ethanol
Karin M. Greenacre, P.E.                             Gary Kramer

THIS PROPOSAL IS VALID UNTIL AUGUST 18, 2000.

ACCEPTANCE:

Authorization for RMT to commence work included in the Proposal constitutes
acceptance of this Agreement. Acceptance can be made by signing in the place
provided below, by accepting or using work product within the Scope of Services,
or by written or oral authorization to RMT to commence work prior to signing.
Acceptance is limited to the terms stated herein, and any additional or
different terms are rejected unless expressly agreed to in writing by RMT.

APPROVED AND ACCEPTED AS OF THE DATE SHOW BELOW:
RMT, INC.                                    BADGER STATE ETHANOL
/s/ MJS for Karin Greenacre                  /s/ Gary L. Kramer
----------------------------------           ----------------------------------
Signature                                    Signature

KARIN M. GREENACRE, P.E.                     GARY L. KRAMER
----------------------------------           ----------------------------------
Printed Name                                 Printed Name

PROJECT MANAGER                              PRESIDENT
----------------------------------           ----------------------------------
Title                                        Title

JULY 18, 2000                                7/22/00
----------------------------------           ----------------------------------
Date                                         Date

                                       2
<PAGE>

                          GENERAL TERMS AND CONDITIONS

                                       RMT

1.       SERVICES TO BE PERFORMED

         1.1      Generally

                  The Agreement ("Agreement") consists of the documents
                  identified in the Work Authorization. The services to be
                  performed by RMT are set forth in the Scope of Services
                  ("Services") as defined in the Work Authorization Form. A
                  project for which Services are to be performed is referred to
                  as the "Project."

         1.2      Estimates

                  Unless the Agreement provides otherwise, the estimated costs
                  required to complete the Services to be performed are made by
                  RMT on the basis of its experience, qualifications, and
                  professional judgment, but are not guaranteed. If the costs
                  appear likely to exceed the estimate, RMT will notify Client
                  before proceeding. If Client does not object to additional
                  costs within at least three (3) days of notification, the
                  increased costs are approved.

         1.3      Changes in the Scope of Services

                  If Client requests and RMT agrees to changes in the Services,
                  RMT and Client, shall execute a written change order. Client
                  may orally authorize changes in the Services, providing such
                  changes are confirmed in writing.

2.       TIME FOR PERFORMANCE

         2.1      Generally

                  The schedule for performance of the Services shall be as
                  agreed by the parties and reflected in the Agreement.

         2.2      Effect of Delay

                  If the Services to be performed by RMT are interrupted,
                  suspended, or delayed for any reason beyond the reasonable
                  control of RMT, the schedule of work and date for completion
                  shall be adjusted accordingly and RMT shall be compensated for
                  all reasonable increased costs resulting form such
                  interruption, suspension, or delay.

3.       COMPENSATION AND PAYMENT

         3.1      Method for Compensation

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<PAGE>

                  3.1.1    Client agrees that time is of the essence as to
                           payment of RMT's invoices, and that timely payment is
                           a material consideration for this Agreement.

                  3.1.2    Payment for services rendered hereunder shall be on a
                           time and expense basis in accordance with RMT's
                           Schedule of Charges current when the Services are
                           performed, unless otherwise specified in the
                           Agreement. All charges are net of any applicable
                           taxes (except income and payroll taxes). Any
                           additional costs due to such applicable taxes shall
                           be charged to Client.

                  3.1.3    Invoices will be submitted monthly by RMT, and shall
                           be due and payable thirty (30) calendar days after
                           the invoice date. These payment terms are subject to
                           RMT credit approval and may be changed by RMT upon
                           changes in Client's credit status.

                  3.1.4    Client shall pay an additional charges of one (1)
                           percent per month, or the maximum percentage allowed
                           by law, whichever is lower, of the overdue amount for
                           any payment received by RMT more than thirty (30)
                           calendar days from the date of the invoice, excepting
                           any portion of the invoiced amount in dispute and
                           resolved in favor of Client.

                  3.1.5    If any amount is not paid within thirty (30) calendar
                           days after the date of the invoice, RMT shall have
                           the right, after giving seven (7) days written
                           notice, to suspend all Services on the project until
                           all accounts (including charges and accrued interest)
                           have been paid. If any overdue amount is not paid
                           within forty-five (45) calendar days after the date
                           of the invoice, RMT shall have the right to terminate
                           this Agreement. Any attorney fees, court costs,
                           collection fees, or other costs incurred in
                           collecting any delinquent amounts shall be paid by
                           Client.

         3.2      Dispute Support Services

                  Client will pay RMT in accordance with RMT's then current
                  Schedule of Charges for dispute support services for any RMT
                  employee who appears, testifies, or performs any services in
                  connection with any court, administrative, arbitral, or other
                  legal proceeding arising out of work related to this
                  Agreement. This includes work and expenses incurred responding
                  to subpoenas and other discovery procedures related to RMT's
                  Services whether initiated by Client, Client's adversary, or
                  third parties. This does not apply to proceedings against RMT
                  alleging negligence, breach of professional standards, or
                  breach of contract by RMT, unless RMT is otherwise entitled to
                  reimbursement under this Agreement.

4.       RMT RESPONSIBILITIES

                                        2
<PAGE>

         4.1      Standard of Care

                  4.1.1    RMT will perform the Services in a manner consistent
                           with the level of care and skill ordinarily exercised
                           by members of the profession currently practicing in
                           the same locality under similar conditions.

                  4.1.2    RMT makes no other representation, express or
                           implied, and no warranty is included or intended in
                           any report, opinion, or document regarding the
                           results to be achieved upon completion of this
                           Agreement.

         4.2      Cooperation with Client

                  RMT will advise Client of the status of the Project and will
                  make reasonable efforts to coordinate its activities with
                  Client, and to accommodate other activities of Client at the
                  Project site. RMT shall designate an authorized representative
                  to be available for consultation, assistance, and coordination
                  of activities.

         4.3      Safety

                  RMT is responsible for the safety on site of its own
                  employees. This provision shall not be construed to relieve
                  Client or any of its officers, directors, employees, agents,
                  vendors, or contractors from their responsibility for
                  maintaining a safe worksite. Neither the professional services
                  of RMT, nor the presence of RMT's employees or subcontractors
                  shall be construed to imply RMT has any responsibility for any
                  activities on site performed by personnel other than RMT's
                  employees or subcontractors.

         4.4      Responsibility for Uncompleted Services

                  If any of the Services are eliminated, or if RMT is not
                  retained to perform subsequent phases, RMT's responsibility
                  shall extend only to the Services it completes.

5.       CLIENT RESPONSIBILITIES

         5.1      Information

                  Client shall provide all pertinent, available information
                  regarding its requirements, objectives, and criteria for the
                  Project, including, but not limited to, surveys, studies,
                  available descriptive information regarding historical use and
                  existing environmental conditions, investigations, compliance
                  and enforcement actions, records concerning the subject matter
                  of the Project, and communications with governmental
                  regulatory agencies relating to the Project.

         5.2      Cooperation with RMT

                                        3
<PAGE>

                  Client will cooperate with RMT, so that the Project can be
                  completed in a timely, efficient, and cost-effective manner.
                  Client shall designate an authorized representative familiar
                  with the Project who shall be available to RMT and who shall
                  have the authority to make all decisions necessary for RMT to
                  perform its Services. Client shall also identify others who
                  may have information pertinent to the Project, and who may be
                  contacted or consulted by RMT. Client will provide RMT access
                  to the Project site, except that Client may impose reasonable
                  rules and restrictions to prevent avoidable interference with
                  other activities on the Project site and to promote safety and
                  security.

         5.3      Utilities

                  Unless otherwise required by law or set forth in this
                  Agreement, Client shall be responsible for accurately
                  locating, horizontally and vertically, and prominently marking
                  any buried or concealed pipes, tanks, cables, utilities, or
                  other manmade obstructions that may affect or may be affected
                  by RMT's Services. RMT may rely on such locations and markings
                  in planning and performing intrusive Services, such as
                  drilling or excavating.

6.       PERMITS, CERTIFICATIONS, AND OTHER APPROVALS

         6.1      Responsibility

                  RMT shall be responsible for obtaining and maintaining all
                  permits, and other approvals required to be in RMT's name.

7.       CONFIDENTIALITY

         7.1      Nondisclosure

                  7.1.1    For the purpose of this provision, confidential
                           information shall be proprietary business information
                           or trade secrets designated in writing to be
                           confidential.

                  7.1.2    RMT and Client shall maintain as confidential any
                           confidential information provided by the other party,
                           as defined in 7.1.1 This provision shall not apply to
                           information that

                           1.       is already known to the recipient as shown
                                    by written records in its possession at the
                                    time such information is received;

                           2.       is already part of the public domain at the
                                    time of disclosure, or subsequently becomes
                                    part of the public domain through no fault
                                    of the recipient;

                                        4
<PAGE>

                           3.       becomes available to the recipient from a
                                    third party who is not under obligation to
                                    the recipient with respect thereto; or

                           4.       is independently developed by an employee or
                                    consultant of the recipient who had no
                                    knowledge of or access to the information.

                  7.1.3    Each party may disclose confidential information if
                           the confidential information

                           1.       is required to be disclosed by law,
                                    subpoena, order of a court or governmental
                                    regulatory agency, or other legal process
                                    provided that the disclosing party gives the
                                    other party reasonable notice and
                                    opportunity to challenge the requirement to
                                    disclose;

                           2.       is disclosed to a party's contractor,
                                    subcontractor, consultant, agent, or
                                    employee who has signed a nondisclosure
                                    agreement;

                           3.       is disclosed to a third party who has signed
                                    a nondisclosure agreement, but only if both
                                    RMT and Client agree to such disclosure;

                           4.       is disclosed to avoid a risk of imminent
                                    harm to persons, property, or the
                                    environment; or

                           5.       is disclosed to protect either party from
                                    criminal or civil liability under applicable
                                    law.

         7.2      Use of Project Information

                  Client agrees that RMT may use Client's name and a general
                  description of the Project as a reference for other
                  prospective clients.

8.       OWNERSHIP OF DOCUMENTS AND MATERIALS

         8.1      Documents

                  8.1.1    Original survey data, field notes, maps,
                           computations, studies, reports, drawings,
                           specifications, and other documents generated by RMT
                           are instruments of Service and shall remain the
                           property of RMT. RMT shall provide a copy of those
                           deliverables specified in the Services.

                  8.1.2    Any documents generated by RMT are for the exclusive
                           use of Client and any use by third parties or use
                           beyond the intended purpose of the document, shall be
                           at the sole risk of Client, unless otherwise agreed
                           upon by RMT in writing. To the fullest extent
                           permitted by law, Client shall indemnify, defend, and
                           hold harmless RMT, its subcontractors,

                                        5
<PAGE>

                           consultants, officers, directors, employees, and
                           agents for any loss or damage arising out of the
                           unauthorized use of such documents.

         8.2      Samples and Other Materials

                  8.2.1    All materials at or removed from the Project site,
                           including, but not limited to, samples, soil, drill
                           cuttings, excavation spoils, and solid, liquid, or
                           hazardous wastes, shall remain the property of Client
                           at all times. Client recognizes and agrees that RMT
                           is acting as a bailee and at no time assumes title to
                           said materials or samples.

                  8.2.2    Client shall indemnify and hold harmless RMT and its
                           subcontractors, consultants, agents, officers,
                           directors, and employees from and against any and all
                           liability which arises out of the treatment, storage,
                           transport, or disposal of hazardous materials.

         8.3      Investigative, Remedial, and Treatment Technologies

                  Any investigative, remedial, treatment, or other environmental
                  or pollution control process, technology, or method used by
                  RMT in performing the Services, or that arise out of, or are
                  developed or improved during the course of, the Services,
                  shall remain the property of RMT. RMT retains the exclusive
                  right to patent or copyright any technology-related concept or
                  document arising out of the Services that may be patentable or
                  copyrightable.

9.       ALLOCATION OF RISK

         RMT and Client acknowledge that, prior to the start of this Agreement,
         RMT has not generated, handled, stored, treated, transported, disposed
         of, or in any way whatsoever taken responsibility for any toxic or
         hazardous substance or other material found, identified, or as yet
         unknown at the Project premises. RMT and Client further acknowledge and
         understand that the evaluation, management, and other actions involving
         toxic or hazardous substances that may be undertaken as part of the
         Services to be performed by RMT, including subsurface excavation or
         sampling, entails uncertainty and risk of injury or damage. RMT and
         Client further acknowledge and understand that RMT has not been
         retained to serve as an insurer of the safety of the Project to the
         Client, third parties, or the public.

         Client acknowledges that the discovery of certain conditions and/or
         taking of preventative measures relative to these conditions may result
         in a reduction of the property's value. Accordingly, Client waives any
         claim against RMT and agrees to indemnify, defend, and hold harmless
         RMT and its subcontractors, consultants, agents, officers, directors,
         and employees from any claim or liability for injury or loss allegedly
         arising from procedures associated with environmental site assessment
         (ESA) activities or the discovery of actual or suspected hazardous
         materials or conditions.

                                        6
<PAGE>

         Client releases RMT from any claim for damages resulting from or
         arising out of any pre-existing environmental conditions at the site
         where the work is being performed which was not directly or indirectly
         caused by and did not result from, in whole or in part, any act or
         omission of RMT or subcontractor, their representatives, agents,
         employees, and invitees.

         If, while performing the Services set forth in any Scope of Services,
         pollutants are discovered that pose unanticipated or extraordinary
         risks, it is hereby agreed that the Scope of Services, schedule, and
         costs will be reconsidered and that this Agreement shall immediately
         become subject to renegotiation or termination. Client further agrees
         that such discovery of unanticipated hazardous risks may require RMT to
         take immediate measures to protect health and safety or report such
         discovery as may be required by law or regulation. RMT shall promptly
         notify Client upon discovery of such risks. Client, however, hereby
         authorizes RMT to take all measures RMT believes necessary to protect
         RMT and Client personnel and the public. Furthermore, Client agrees to
         compensate RMT for any additional costs associated with such measures.

         RMT and Client agree that the apportionment of the risk of loss and
         other limitations set forth in the Allocation of Risk provisions of
         this Agreement are essential terms of this Agreement and a condition of
         RMT's willingness to perform the Services.

10.      INSURANCE

         RMT agrees to purchase and maintain at its own expense worker's
         compensation insurance, employer liability insurance, general liability
         insurance, professional liability insurance, and automobile liability
         insurance. Certificates of insurance shall be provided to Client upon
         request in writing. RMT agrees to purchase additional insurance as
         requested by the Client (presuming such insurance is available)
         provided the premiums for such additional insurance are reimbursed by
         the Client.

11.      INDEMNIFICATION

         11.1     RMT agrees to indemnify, defend, and hold harmless Client and
                  its agents, officers, directors, and employees from and
                  against those claims, suits, damages, or losses incurred by
                  Client, to the extent that such damages or losses are directly
                  caused by the negligent acts or willful misconduct of RMT or
                  its agents, officers, directors, or employees. This Agreement
                  to indemnify, defend, and hold harmless shall not extend to
                  any suits, claims, damages, or losses caused by the acts,
                  omissions, or conduct of Client or any other person.

         11.2     Client agrees to indemnify, defend, and hold harmless RMT and
                  its subcontractors, consultants, agents, officers, directors,
                  and employees from and against all claims, suits, damages, and
                  losses, including, but not limited to, those claims, suits,
                  damages, or losses arising out of, relating to, or based upon
                  the following: (1) the acts, omissions, or other conduct of
                  Client; (2) the acts, omissions or other conduct of persons
                  other than Client or RMT or RMT's

                                        7
<PAGE>

                  subcontractors; (3) the actual or threatened dispersal,
                  discharge, escape, release, or saturation of smoke, vapors,
                  soot, fumes, acids, alkalis, toxic chemicals, liquids,
                  gases, or any other materials, irritants, contaminants, or
                  pollutants in or into the atmosphere or on, onto, upon, in,
                  or into the surface or subsurface of soil, water or water
                  course, objects, or any tangible or intangible matter,
                  abated or not; or (4) RMT's status as a generator, storer,
                  treater, arranger, transporter, operator, or disposal
                  facility as defined in any federal, state, or local
                  statute, regulation, or rule governing treatment, storage,
                  transporter, and/or disposal of hazardous materials, except
                  to the extent that such damage or loss is directly caused
                  by the negligent acts or willful misconduct of RMT or its
                  agents, officers, directors, or employees.

12.      LIMITATION OF LIABILITY

         12.1     To the fullest extent permitted by law, RMT's total liability
                  under this Agreement shall not exceed the greater of

                           1.       RMT's charges for the Services under this
                                    Agreement; or

                           2.       Fifty thousand dollars ($50,000).

         12.2     Neither party to this Agreement shall be liable to the other
                  party for any special, indirect, punitive, or consequential
                  damages.

13.      TERMINATION

         This Agreement may be terminated by either party upon ten (10) days
         written notice for (1) failure of the other party to substantially
         perform its responsibilities under this Agreement, (2) substantial
         violation of any provision of this Agreement, or (3) discovery of
         conditions that differ materially from those ordinarily found to exist
         in, or generally recognized as inherent in, the work contemplated to be
         performed under this Agreement. In the event of termination, RMT shall
         be paid on a time and expenses basis at RMT's standard rates for
         services performed prior to the termination notice date plus reasonable
         termination expenses, including the cost of completing analyses,
         records, and reports necessary to document job status at the time of
         termination. RMT shall also be reimbursed for reasonable costs
         associated with untimely demobilization and reassignment of personnel
         and equipment.

14.      DISPUTE RESOLUTION

         14.1     Mediation

                  Except where provisional or temporary remedies are sought, no
                  action may be commenced concerning any claim arising out of or
                  connected with this Agreement or the Services unless it has
                  first been submitted to non-binding mediation at the written
                  request of either party. Such requests shall include the

                                       8
<PAGE>

                  grounds of the dispute and the nature of the relief sought.
                  The mediator shall be appointed under the auspices of the Lex
                  Mundi College of Mediators.

                  Where provisional or temporary remedies are sought, the
                  parties shall engage in mediation before a Lex Mundi mediator
                  within ninety (90) days after institution of such suit. The
                  prevailing party in the court action shall be entitled to
                  recover its dispute resolution expenses, including, but not
                  limited to, reasonable attorney's fees, costs, expenses, and
                  damages incurred in connection with any dispute arising out of
                  this Agreement. RMT shall have the right to suspend all or a
                  portion of the Services during the pendency of any dispute
                  regarding compensation for Services.

         14.2     Limitations on Actions

                  No claim may be asserted by either party against the other
                  party unless an action on the claim is commenced within two
                  (2) years after the date of RMT's final invoice to Client.

15.      MISCELLANEOUS

         15.1     Third Parties

                  15.1.1   This Agreement shall be binding on RMT and Client,
                           and their successors, trustees, legal
                           representatives, and assigns. Neither party shall
                           assign or transfer any rights, responsibilities, or
                           interest in this Agreement without the written
                           consent of the other party and any attempt to do so
                           without such consent shall be void.

                  15.1.2   Nothing in this section shall prevent RMT from
                           employing any subcontractor or consultant to assist
                           in the performance of Services under this Agreement.

                  15.1.3   All duties, responsibilities, rights, and interests
                           created by this Agreement are for the sole and
                           exclusive benefit of RMT and Client, and not for the
                           benefit of any third party.

         15.2     Notices

                  Any written notice required or authorized to be given may be
                  personally delivered, or sent by courier service or facsimile
                  to the authorized representative designated under this
                  Agreement.

         15.3     Survival of Sections

                  Provisions 3, 4, 7, 8, 9, 11, 12, 14, and 16 of this Agreement
                  shall survive completion of performance or termination under
                  this Agreement.

                                       9
<PAGE>

         15.4     Substance Abuse

                  RMT has a vital interest in maintaining a safe, healthful, and
                  efficient working environment for our employees, customers,
                  suppliers, contractors, subcontractors, vendors, visitors, and
                  the general public. The presence of illegal or improperly used
                  drugs or other mood-altering substances is unacceptable. RMT
                  strictly prohibits using, possessing, manufacturing, selling,
                  transporting, distributing, storing, concealing, or dispensing
                  of any controlled or illegal substances, as defined by federal
                  or state law, other than pursuant to a valid prescription,
                  while on the premises of RMT (including parking lots), while
                  conducting RMT business (including travel), or during
                  RMT-sponsored activities. Client is hereby notified that all
                  Client's employees will be required to abide by this policy
                  whenever on RMT's premises and agree that such employees are
                  subject to a search, testing, or removal from the project in
                  accordance with RMT's substance abuse policy.

16.      INTERPRETATION

         16.1     Severability

                  If any provision of this Agreement is determined to be void or
                  unenforceable by a court, all remaining provisions shall
                  continue to be valid and enforceable. The court shall reform
                  or replace any void or unenforceable provision with a valid
                  and enforceable provision that comes as close as possible to
                  expressing the intention of the void or unenforceable
                  provision.

         16.2     Governing Law

                  This Agreement shall be governed by the laws of the State of
                  Wisconsin.

         16.3     Paragraph Headings

                  The paragraph headings in these General Terms and Conditions
                  are included solely for convenient reference, and shall not
                  define, limit, or affect the construction or interpretation of
                  this Agreement.

         16.4     Waiver

                  Failure or delay by either party to insist on the strict
                  performance of any covenant, term, provision or condition
                  hereunder, or to exercise any option herein contained, or to
                  pursue any claim or right arising hereform, will not
                  constitute or be construed as a waiver of such covenant, term,
                  provision, condition, option, claim, or right. Any waiver by
                  either party will not constitute or be construed a continuing
                  waiver of any subsequent default.

         16.5     Whole Agreement

                                       10
<PAGE>

                  The Agreement, including these General Terms and Conditions,
                  constitutes the complete and final contract between RMT and
                  Client. This contract supersedes all prior or contemporaneous
                  agreements, communications, representations, undertakings, or
                  understandings between the parties, whether oral or written,
                  including but not limited to, purchase orders relating to the
                  Project, except as expressly incorporated into this Agreement.
                  Modifications to this Agreement shall not be binding unless
                  made in writing and signed by authorized representatives of
                  RMT and Client.

                  16.5.1   If Client's Purchase Order form or acknowledgment or
                           similar form is issued to identify the Agreement,
                           authorize work, open accounts for invoicing, provide
                           notices, or document change orders, the preprinted
                           terms and conditions of said Purchase Order shall be
                           void and of no effect.

                  16.5.2   To the extent that they are inconsistent or
                           contradictory, the express provisions of these
                           General Terms and Conditions shall take precedence
                           over all other documents, except amendments expressly
                           revising these General Terms and Conditions.

                  16.5.3   Any term and/or condition set forth in a change order
                           executed after the date of this Agreement that is
                           inconsistent with or contradictory to this Agreement
                           shall take precedence over the inconsistent or
                           contradictory term in this Agreement.

                                       11
<PAGE>

                         SCHEDULE OF CHARGES - FLAT RATE
                       JANUARY 1, 2000 - DECEMBER 31, 2000
<TABLE>
<CAPTION>

HOURLY PERSONNEL CHARGES *
<S>                                                                        <C>
Senior Consultant................................................          $159
Consultant, Project, and Technical Management....................           132
Senior Project Technical.........................................           123
Project Technical II.............................................           102
Project Technical I..............................................            93
Staff Technical II...............................................            77
Staff Technical I................................................            67
Senior Technician, Designer......................................            77
Technician II....................................................            62
Technician I.....................................................            57
Field/O&M Technician.............................................            46
Senior Project Administration....................................            57
Administration...................................................            46
</TABLE>
*    Personnel include direct and contract employees

DISPUTE RESOLUTION SUPPORT:  Services in support of disputes (arbitration,
litigation, etc.) involving client's information or interests, such as
responding to discovery requests and subpoenas, are chargeable at the above
rates.

Testimony rates (court, deposition, or hearing time) are 1.75 times the above
rates, with a minimum of 4 hours per day.

<TABLE>
<CAPTION>

OTHER CHARGES
<S>                                                                          <C>
Equipment Use..............................................................   Std. Rate Sheet
Prints: Blueline, per square foot..........................................          0.15
Color Copies/sheet.........................................................          1.50
Reproduction, per sheet....................................................          0.15
Communication/Shipping Charge: includes telephone, fax,                      2.9% of personnel
         CADD, postage, high-speed internet access, and courier services...       charges
Vehicles:       Car, per mile..............................................          0.40
                Field vehicle..............................................      50.00/day
                                                                              plus .035/mile
</TABLE>

Outside services, equipment, and facilities not furnished directly by RMT, Inc.,
will be billed at cost plus 15%, and may include, but are not limited to, the
following:

 Aerial photography and mapping          Bonds required by project or client
 Meals and lodging                       Sample shipment
 Laboratory testing                      Special fees, permits, insurance, etc.
 Printing and photographic reproduction  Subcontractors to RMT, Inc.
 Rental of equipment and vehicles        Supplies
 Sample disposal                         Transportation on public carriers

Payment:          Net thirty (30) days.  Thereafter, one percent (1%) interest
                  per month on the unpaid balance will be charged.<PAGE>

June 14, 2000

Gary Kramer
Badger State Ethanol
12139 Howardsville Rd.
Lena, IL 61048

Dear Mr. Kramer:

The purpose of this letter is to set forth the understanding and agreement
between U.S. Energy Services, Inc. ("U.S. Energy") and Badger State Ethanol
regarding the provision of energy management and engineering services.

TERM: The initial term of this Agreement shall be from __________ through
___________, and thereafter for successive one year terms unless and until
terminated by either party with thirty (30) days notice.

U.S. ENERGY SHALL:

1)       Provide a detailed economic comparison of receiving natural gas
         transportation service from a Local Distribution Company (LDC), or
         directly connecting with Northern Natural Gas (NNG) for facility sites
         under consideration. U.S. Energy will provide BADGER STATE ETHANOL with
         engineering cost estimates, route drawings, and a project timeline
         related to constructing pipeline facilities directly connecting BADGER
         STATE ETHANOL with NNG.

         In the event that the direct connect pipeline option is selected, U.S.
         Energy will submit a tap request to NNG. Engineering and construction
         management services related to constructing a pipeline which will
         interconnect with NNG can be provided by U.S. Energy Services on a fee
         basis.

2)       Determine whether firm, interruptible, or a blend of transportation
         entitlement with NNG will provide the lowest burnertip cost for BADGER
         STATE ETHANOL. Factors that will be considered include NNG credits for
         the new interconnect, cost of an alternative fuel system, and
         availability of specific receipt point capacity. Analysis of the costs
         and benefits will require U.S. Energy to negotiate as BADGER STATE
         ETHANOL' agent with NNG and other potential third party shippers.

3)       Provide natural gas supply information to minimize the cost of natural
         gas purchased by BADGER STATE ETHANOL. This will include acquiring
         multiple supply quotes and reporting to BADGER STATE ETHANOL the
         various supply index and fixed prices. U.S. Energy will not take title
         to BADGER STATE ETHANOL gas supplies, but will communicate supply
         prices and potential buying strategies.

<PAGE>

4)       Negotiate directly with NNG, other shippers, and suppliers to provide
         transportation, balancing, and supply agreements that meet BADGER STATE
         ETHANOL's performance criteria at the lowest possible cost.

5)       Provide daily nominations to NNG and other applicable parties for
         BADGER STATE ETHANOL. This will include daily written confirmations to
         BADGER STATE ETHANOL of all nominations and actual daily usage. U.S.
         Energy will utilize telemetering to obtain actual usage on a real time
         basis.

6)       Provide advisory services to BADGER STATE ETHANOL regarding electric
         pricing and service agreements. Such services will include, but are not
         limited to, the following:

         a)   Evaluation of regulator and legislative precedent regarding
              electric supplier choice options.
         b)   Identification of qualified electric suppliers.
         c)   Evaluation of self-generation options
         d)   Development and implementation of an electric sourcing strategic
              plan.  Such plan may include a competitive bid process and/or
              installation of on-site generation.
         e)   Negotiation of electric service agreements that meet the pricing
              and reliability requirements of BADGER STATE ETHANOL.

7)       Prepare detailed cost estimates for substation, transformation and
         distribution equipment required for service options proposed by service
         providers.

8)       Prepare, implement and modify, as required, an electric and natural gas
         price risk management plan. The objective of the plan is to achieve
         stable forward prices that are consistent with BADGER STATE ETHANOL's
         risk profile and pricing objectives.

9)       U.S. Energy will also evaluate on an ongoing basis other options that
         may reduce energy costs.

10)      Provide a monthly projection of energy (natural gas and electricity)
         and annual summaries.

11)      Provide a consolidated monthly invoice that reflects all applicable
         costs. U.S. Energy will be responsible for reconciling and paying all
         shipper and supplier invoices.

FEES: U.S. Energy's fee for services described in items 1-11 during the initial
term of this Agreement shall be $3,000 per month, plus pre-approved travel
expenses not to exceed $2,500 during the initial term of this Agreement. The
monthly retainer and out of pocket expenses will begin to accrue on the
commencement date of this Agreement. BADGER STATE ETHANOL will not be invoiced
until financing for the plant has been secured. In the event that plan
financing is not secured, this Agreement shall become null and void and both
parties will be relieved of professional and/or financial obligations due the
other party.

<PAGE>

TERMINATION: BADGER STATE ETHANOL shall have the unilateral right to terminate
this Agreement, with or without cause, at any time during the initial term and
any subsequent term of the Agreement within thirty (30) days written
notification if not satisfied with U.S. Energy's service.

BILLING AND PAYMENT:  On the first of the month, U.S. Energy will invoice
BADGER STATE ETHANOL.  BADGER STATE ETHANOL shall pay U.S. Energy within ten
(10) days of receipt of invoice.

INDEPENDENT CONTRACTOR:  U.S. Energy shall be and remain an independent
contractor-consultant during the term of this Agreement, and U.S. Energy, its
directors, officers and employees, shall not act for, or bind BADGER STATE
ETHANOL in any manner, unless specifically directed by BADGER STATE ETHANOL.

CONFIDENTIALITY: 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 to 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
BADGER STATE ETHANOL. All such information shall be and remain the property of
BADGER STATE ETHANOL 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 BADGER STATE ETHANOL' request.

CONFLICT OF INTEREST: U.S. Energy will not, directly or indirectly, engage in
any activities which would result in any conflict of interest with BADGER STATE
ETHANOL, or enable U.S. Energy to benefit from its relationship with BADGER
STATE ETHANOL, except as provided in this Agreement or approved by BADGER STATE
ETHANOL.

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 following addresses:

         BADGER STATE ETHANOL:      Gary Kramer
                                    Badger State Ethanol
                                    12139 Howardsville Road
                                    Lena, IL 61048

         U.S. ENERGY:               U.S. Energy Services, Inc.
                  (Payment)         c/o US Bank SDS 12-1449
                                    Account #173100561153

<PAGE>

                                    P.O. Box 86
                                    Minneapolis, MN 55486

                  (Notices)         U.S. Energy Services, Inc.
                                    1000 Superior Blvd., Suite 201
                                    Wayzata, MN 55391
                                    Attn:  Casey Whelan

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

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.

If the above correctly sets forth BADGER STATE ETHANOL's understanding of the
Agreement, please so indicate in the spaces below and return one copy to U.S.
Energy, Attention: Casey Whelan.

Sincerely,

By:  /s/ Casey Whelan
    -------------------------

Title: V.P.
      -----------------------

ACCEPTED AND DATED THIS 1ST
DAY OF JULY, 2000.

BADGER STATE ETHANOL

By:   /s/ Gary L. Kramer
     -------------------------
Title: President
       -----------------------

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