EXHIBIT 10.12
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U.S. ENERGY SERVICES, INC.: 0000 XXXXXXXX XXXX, XXXXX 000
XXXXXXX, XX 00000
November 22, 2002
Xxxxx Xxxxx
United Wisconsin Grain Producers
PO Box 247
Friesland Wi 53935
Dear Xx. Xxxxx:
The purpose of this letter is to set forth the understanding and agreement
between U.S. Energy Services, Inc. (U.S. Energy) and United Wisconsin Grain
Producers (CUSTOMER) regarding the provision of energy management and
engineering services.
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 Alternative Pipeline (Pipeline) sources for facility sites
under consideration. U.S. Energy will provide CUSTOMER with engineering
cost estimates, route drawings, and a project timeline related to
constructing pipeline facilities directly connecting CUSTOMER with
PIPELINE.
In the event that a direct connect pipeline option is selected, U.S. Energy
will submit a tap request to PIPELINE. Engineering and construction
management services related to constructing facilities, which will
interconnect with PIPELINE, can be provided by U.S. Energy Services on a
fee basis.
2. Determine whether firm, interruptible, or a blend of transportation
entitlement with PIPELINE will provide the lowest burnertip cost for
CUSTOMER. Factors that will be considered include PIPELINE credits for the
new interconnect, cost of an alternate fuel system, and availability of
specific receipt point capacity. Analysis of the costs and benefits will
require U.S. Energy to negotiate as CUSTOMER's agent with PIPELINE and
other potential third party shippers.
3. U.S. Energy will procure and manage all natural gas supplies required by
CUSTOMER. Supplies will be purchased from natural gas producers with
sufficient market presence and financial capability to insure reliable
service. U.S. Energy will procure natural gas supply as Agent for CUSTOMER.
CUSTOMER and U.S. Energy will jointly develop natural gas procurement plans
and strategies that are consistent with CUSTOMER'S desired level of
involvement. (Some customers prefer to be presented with multi-source
vendor procurement results and assist in vendor selection; other customers
prefer to let U.S. Energy procure and manage supplies with little
involvement. U.S. Energy is amenable to either or a combination of each
option.)
4. Negotiate directly with PIPELINE, other shippers, and suppliers to provide
transportation, balancing, and supply agreements that meet CUSTOMER's
performance criteria at the lowest possible cost.
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U.S. ENERGY SERVICES, INC.: 0000 XXXXXXXX XXXX, XXXXX 000
XXXXXXX, XX 00000
CUSTOMER
March 17, 2003
Page 2
5. Provide daily nominations to PIPELINE and other applicable parties for
CUSTOMER. This will include daily written confirmations to CUSTOMER 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 CUSTOMER regarding electric pricing and
service agreements. Such services will include, but are not limited to, the
following:
a. Evaluation of regulatory 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 CUSTOMER.
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 CUSTOMER'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 cost (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.
12. Provide value-added information to CUSTOMER such as usage, futures prices,
hedge recommendations, transaction summaries via U.S. Energy's secure web
application.
FEES: U.S. Energy's fee for services described in items 1-12 during the initial
term of this agreement shall be $2,000 per month, plus pre-approved travel
expenses not to exceed $2,000 during the initial term of this agreement. 50% of
monthly fees, except for out-of-pocket travel expenses, will be deferred and
collected only when and if the plant is financed. In the event the plant is not
financed, this Agreement shall become null and void and both parties will be
relieved of professional and/or financial obligations due the other party,
including the accrued monthly charges.
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U.S. ENERGY SERVICES, INC.: 0000 XXXXXXXX XXXX, XXXXX 000
XXXXXXX, XX 00000
CUSTOMER
March 17, 2003
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TERM: The initial term of this Agreement shall be from December 1, 2002 through
November 30, 2003, and thereafter for successive one year terms unless and until
terminated by either party with thirty (30) days notice.
TERMINATION: CUSTOMER 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 with 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 shall invoice
CUSTOMER. CUSTOMER 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 CUSTOMER in any
manner, unless specifically directed by CUSTOMER.
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 CUSTOMER.
All such information shall be and remain the property of CUSTOMER 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 CUSTOMER' 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 CUSTOMER, or
enable U.S. Energy to benefit from its relationship with CUSTOMER, except as
provided in this Agreement or approved by CUSTOMER.
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:
CUSTOMER: United Wisconsin Grain Producers
Box 247
Friesland, Wi 53935
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U.S. ENERGY SERVICES, INC.: 0000 XXXXXXXX XXXX, XXXXX 000
XXXXXXX, XX 00000
CUSTOMER
November 12,2002
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U.S. Energy: X.X.Xxxxxx 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.
0000 Xxxxxxxx Xxxx, Xxxxx 000
Xxxxxxx, XX 00000
Attn: Xxxxx Xxxxxx
ASSIGNMENT OR AMENDMENT: The Agreement, may not be assigned or amended without
the written consent of U.S. Energy and CUSTOMER.
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 CUSTOMER's understanding of the Agreement,
please so indicate in the spaces below and return one copy to U.S. Energy,
Attention: Xxxxx Xxxxxx.
Sincerely,
U.S. ENERGY SERVICES, INC.
By: Xxxxx X. Xxxxxx
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Title: V.P.
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ACCEPTED AND DATED TO THIS 22nd
DAY OF NOVEMBER, 2002.
CUSTOMER
By
Title:_President Xxxxx Xxxxx
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