Exhibit 10.4
OPTION AGREEMENT
THIS OPTION AGREEMENT ("Option Agreement") is entered into as of May
15, 2002, by Oregon Trail Ethanol Coalition, L.L.C., a Nebraska limited
liability company ("Purchaser") and Xxx X. Xxxxxxx and Xxxxxxx X. Xxxxxxx, X.X.
0, Xxx 000, Xxxxxxxxx, XX 00000 ("Owner")
1. GRANT OF OPTION. Owner owns an undivided one-quarter interest in
approximately 60 acres of real property located in Xxxxxx County, Nebraska,
which real property is described in Exhibit A, attached hereto and incorporated
herein (the "Owner's Parcel"). In consideration of the payment of the Option Fee
(as defined below) to Owner by Purchaser, Owner hereby grants to Purchaser the
sole, exclusive and irrevocable right and option (the "Option") to purchase
Owner's Parcel, together with all improvements and appurtenances thereto.
Owner's Parcel to be purchased by Purchaser is herein referred to as the
"Premises."
2. TERM AND EXERCISE OF OPTION. The Option may be exercised by
Purchaser at any time on or before 5:00 P.M. on June 30, 2003. Purchaser shall
exercise the Option by giving written notice to Owner at the following address
by hand delivery, or by registered or certified mail, return receipt requested,
deposited in the United States mail or by air express delivery at any time
during the term of the Option:
Don R. and Xxxxxxx X. Xxxxxxx
X.X. 0, Xxx 000
Xxxxxxxxx, XX 00000
Owner acknowledges that Purchaser intends to use the Premises to construct and
operate a 40 million gallon per year ethanol plant.
3. OPTION FEE. On the date hereof, Purchaser agrees to deliver to Owner
the sum of One Thousand ($1,000.00) (the "Option Fee"). In the event that
Purchaser exercises the Option, the Option Fee shall not be applied to the
purchase price of the Premises. If Purchaser does not exercise the Option, Owner
shall retain the Option Fee.
4. PURCHASE PRICE. The total purchase price for Owner's one-quarter
portion of the Premises shall be One Hundred Eighty Thousand Dollars ($180,000).
Purchaser shall pay the purchase price to Owner pursuant to the terms of a Real
Estate Purchase Agreement to be entered into between the parties following
Purchaser's exercise of the Option (the "Purchase Agreement").
5. POSSESSION. Owner will cause fee simple title to each parcel of the
Premises purchased to be conveyed to Purchaser, or to Purchaser's nominee or
assign, at closing, by General Warranty Deed in customary form properly
executed, free and clear of all liens and encumbrances but subject to easements,
restrictions and covenants of record reasonably acceptable to Purchaser in its
sole discretion. Possession shall be delivered to Purchaser at the date of
closing, subject to the terms of any lease agreement between Purchaser and
Owner. Until closing, all risk of loss to the Premises to be purchased shall be
with Owner.
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6. PURCHASE AGREEMENT. The purchase price, contingencies and other
terms of acquiring the Premises, should Purchaser exercise the Option, shall be
contained in the Purchase Agreement containing the following terms:
a. Conveyance. The Premises shall be conveyed to Purchaser, or its
nominee, by general warranty deed, free and clear of all liens and encumbrances
whatsoever, except for real estate taxes and general and special assessments not
then due and payable and such easements, reservations, limitations and
restrictions as Purchaser shall approve.
b. Closing. The transaction shall close on a date (the "Closing
Date") set by Purchaser, which date shall be not more than sixty (60) days
following the date Purchaser exercises the Option. The closing shall be held and
deed shall be delivered at the offices of Purchaser in Xxxxxx County, or such
other place as the parties may hereafter agree upon.
c. Physical Plant Location. The Purchase Agreement shall provide
that the core physical ethanol plant ("Core Plant") to be located on the
Premises shall be located on the east one-half of the Premises, and in the event
that the Core Plant is initially built after closing under the Purchase
Agreement such that any portion of its external structural walls intrude beyond
the east one-half of the Premises when completed, without the prior written
consent of Owner, then Purchaser shall pay to Owner upon completion of the Core
Plant as liquidated damages hereunder an additional cash payment of One Hundred
Thousand Dollars ($100,000), which shall comprise Owner's sole remedy. The east
one-half of the Premises shall be determined by a line running from the half-way
point on the northern boundary of the Premises to the half-way point on the
southern boundary of the Premises. This restriction and payment of liquidated
damages shall apply solely to the initial construction of the ethanol plant, and
shall not apply to other functional aspects of the ethanol plant, including
without limitation, the building of one or more rail spurs servicing the ethanol
plant, the construction and placement of utilities, roads and parking lots to
service the ethanol plant, and the administrative building for the ethanol
plant; provided, however, that the main access road to the ethanol plant from
Highway 4 shall not be located on the west one half of the Premises on Highway
4. This restriction shall not apply to future additions, improvements or other
operations constructed on the Premises after the completion of the initial
ethanol plant.
d. Other Conditions. The parties shall agree to such other terms and
conditions as are necessary and appropriate to close the transaction
contemplated by this Option. In the event of a disagreement over such terms,
those terms and conditions as are customary in similar real estate purchase
agreements in Xxxxxx County, Nebraska shall control to the extent not
inconsistent with the terms and conditions contained herein.
7. CASH SETTLEMENT. In the event of the exercise of the Option granted
hereunder, and upon payment of the purchase price for the Premises under Section
4 above, Purchaser shall pay to Owner Five Thousand Dollars ($5,000) in cash in
consideration of the diminution in value of Owner's current residence located
contiguous to the Premises, and the release set forth in Section 8 below (the
"Release Payment"). The Release Payment shall be paid to Owner concurrent with
payment of purchase price for Premises pursuant to Paragraph 4 above. Owner
expressly acknowledges that except for the Release Payment, Purchaser shall have
no further obligation to Owner relating to this Agreement; provided that this
shall not release Purchaser from its obligation to comply with applicable local,
state and federal laws and regulations in its use of the Premises. In the event
Purchaser fails to exercise the Option, this
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Option Agreement terminates, Owner defaults under this Option Agreement or the
Purchase Agreement, the parties never close the property purchase transaction,
Purchaser shall have no obligation to pay Owner the Release Payment.
8. RELEASE. In consideration for the Release Payment, Owner fully and
forever releases and discharges Purchaser, and its subsidiaries, successors,
assigns, agents and employees from any and all claims, demands, causes of
action, duties, obligations or liabilities whatsoever, whether known or unknown,
in law or equity, which Owner ever had, now has or hereafter can, shall or may,
have against Purchaser arising out of or in any way connected with this Option
Agreement, the diminution in value in Owner's residence, Purchaser's purchase of
the Premises, or Purchaser's construction and operation of the proposed ethanol
plant, whether presently asserted or unasserted, known or unknown, including
nuisance claims, or claims relating to the noise or odor of Purchaser's plant
operations; provided, however, that this release shall not apply to Purchaser's
use of the Premises which are in violation of any applicable local, state or
federal law or regulation, any loss from fire or chemicals which may occur to
Owner or his property resulting from Purchaser's use of the Premises, or any
motor vehicle accident involving Purchaser, its employees, agents or business
invitees. The parties mutually agree that they intend this release to
permanently release the covered claims set forth above which Owner has or may
have against Purchaser.
9. RENTAL OPTION.
a. In the event Purchaser exercises the Option granted hereunder,
Purchaser agrees to rent to Owner for an initial term of six (6) years, and on
an biennial (two-year) basis thereafter, such portion of the Premises, if any,
which Purchaser determines in its sole discretion that it does not need, or
intend to use, in connection with the construction and operation of the proposed
ethanol plant for $75/per acre for irrigated farming, and $50/per acre for dry
land farming; provided, however, Purchaser's obligation to rent such property to
Owner shall be subject to the terms and conditions of a written lease agreement
acceptable to Purchaser in its sole discretion. Purchaser may include in the
written lease agreement the option to apply from time to time a portion of
Purchaser's blowdown water, provided that such water does not contain chemicals
that will harm the crops. Blowdown water shall be applied to land subject to
irrigation land rental as designated in the lease agreement on or before April 1
of each year. Purchaser shall provide Owner notice no later than April 1 of each
year commencing April 1, 2003, as to that portion of the Premises, if any, which
Purchaser determines to be available for Owner to farm in 2003 and, in the event
Purchaser exercises the Option hereunder Purchaser shall provide Owner notice no
later than September 1, 2007, as to whether Purchaser intends to renew Owner's
biennial lease agreement.
b. Purchaser understands and agrees that Owner intends to farm all of
the Premises in the year 2002 and in the event Purchaser takes any action with
respect to the Premises which causes a loss in crop production to the 2002 crop,
Purchase shall reimburse Owner $350 per acre for Owner's loss of crops incurred.
In the event Purchaser exercises the Option hereunder, Purchaser shall provide
Owner notice no later than April 1 of each year as to that portion of the
Premises, if any, which Purchaser determines to be available for Owner to farm
in that calendar year. In the event Owner thereafter is farming such portion of
the Premises, and Purchaser determines during such year that it needs all or any
portion of such land being farmed by Owner, then Purchaser may take such action
as it deems appropriate, desirable or necessary for its business operations, but
shall reimburse Owner $350 per acre for the loss of crops by Owner for that
year.
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10. TITLE COMMITMENT. At any time during the term of this Option,
Purchaser may, upon prior written notice to Owner, and at Purchaser's initial
expense, request Owner to furnish Purchaser a currently certified written title
insurance commitment (the "Title Commitment"), issued by a title insurance
company acceptable to Purchaser. Such Title Commitment shall be provided within
20 days of Purchaser's request, and shall show in Owner a good and marketable
title in fee simple to the Premises subject only to defects, if any, which are
acceptable to Purchaser in Purchaser's sole judgment. Such Title Commitment
shall also provide that all standard exceptions to coverage will be deleted from
the final title policy, as agreed to between Owner and Purchaser. Within fifteen
(15) days after receipt of the Title Commitment, Purchaser shall notify Owner
whether such Title Commitment discloses, in the opinion of Purchaser's attorney,
defects in title that are not acceptable to Purchaser. Owner shall have 30 days
to cure such title defects. If such defects are not corrected within 30 days,
Purchaser shall have the option of terminating this Option Agreement and the
parties will be relieved of further obligation hereunder, or Purchaser may
extend the cure period for a reasonable period to allow Owner to correct any
such defects. In the event of any title defects which are not corrected by Owner
as provided above, or in the event the Title Commitment or survey of the
Premises is not satisfactory to Purchaser for any reason, including without
limitation, matters relating to the Highway 4 right-of-way set forth below,
Purchaser's sole remedy shall be the termination or non-exercise of this Option,
and Owner shall not have any further liability to Purchaser. An owner's title
insurance policy, in the amount of the purchase price for the Premises
purchased, shall be paid for initially by Purchaser, and shall be issued to
Purchaser in conformity with such title insurance commitment upon delivery of
the deed and as a condition of Purchaser's obligation to close this purchase and
sale. Owner shall cause to be delivered to Purchaser at or prior to closing and
as a condition thereof, a "marked-up" copy of the Title Commitment dated as of
the Closing Date, deleting therefrom standard exceptions to coverage, as agreed
to between Owner and Purchaser, and showing compliance with all requirements for
issuance of the title insurance policy. Upon Closing, Owner shall reimburse
Purchaser for one-half of the amount of the Title Commitment, provided that
Owner's payment obligation for the Title Commitment shall be based on a Title
Commitment cost for the purchase price of Premises. Owner has disclosed to
Purchaser that Highway 4 originally ran on the north side of the Premises rather
than on its current location on the south side of the Premises. Purchaser shall
have the right to take such steps are necessary to determine the impact, if any,
of the Highway 4 right-of-way or easements on the Premises prior to the exercise
of the Option; provided, that if Purchaser exercises the Option, Owner shall
have no liability with respect to any matter arising out of the Highway 4 former
or current location and its impact on the Premises.
11. LAND SURVEY. At any time during the term of this Option, Purchaser
may have prepared, at Purchaser's cost, a survey of the Premises by a registered
land surveyor (the "Survey"). The Survey shall be used to compute the legal
description of the real property to be purchased pursuant to this Option. In the
event such Survey discloses any defects in Owner's title, Purchaser shall so
notify Owner and Owner shall endeavor to cure the same within 30 days after such
notice, or such other period agreed to by Purchaser and prior to closing. If
such defects are not cured by the Closing Date, Purchaser shall have the same
remedies as are allowed in Section 10 above for title defects disclosed in the
Title Commitment.
12. OWNER COMMITMENTS. Owner agrees that from the date hereof until the
expiration of this Option, it will not lease or rent the Premises or any part
thereof to any person or entity, other than Purchaser, or grant any person or
entity any rights to use or occupy the Premises. Owner shall not grant any
easement on the Premises and nor will Owner mortgage or
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encumber the Premises without Purchaser's prior written consent. During the term
of this Option, Owner agrees to support, assist and cooperate with Purchaser
with respect to Purchaser's objective of constructing an ethanol plant at the
Premises, including obtaining any necessary regulatory approvals, obtaining
necessary zoning, and to take such actions as are reasonably necessary or
desirable in furtherance of the intents and purposes of this Option Agreement
upon request of Purchaser from time to time; provided, that all costs related to
such actions shall be borne by Purchaser.
13. TAXES AND ASSESSMENTS. Owner shall pay all special assessments for
any public improvements constructed or under construction at the Closing Date,
regardless of whether or not levied and regardless of whether or not then due,
and all real estate taxes, general and special, for prior years. General real
estate taxes which became due in the year in which the closing hereunder shall
occur (and which become delinquent in the year following closing), shall be
prorated between the parties as of the date of possession. If the amount of such
real estate taxes cannot be determined at the time of closing, such taxes will
be determined using the most current available assessment and tax levy rate for
the Premises. Owner shall pay all taxes for all years prior to the year in which
Closing occurs. Owner shall also pay any "greenbelt" or special agricultural
assessment tax recapture assessed against the Premises resulting from any change
in use by Owner prior to closing. Owner shall pay all documentary revenue tax on
any conveyance.
14. ENTRY FOR INSPECTION.
a. During the term of the Option, Owner shall provide Purchaser and
Purchaser's agents or representatives with complete access to the Owner's Parcel
for the purpose of conducting such inspections, engineering studies, surveys,
appraisals, test borings or any other activities reasonably required by
Purchaser in order to determine the suitability of the Owner's Parcel for
Purchaser's purposes (collectively, the "Inspections"). The right to conduct
Inspections shall include the right to enter upon any portion of the Owner's
Parcel to take measurements, make inspections, make boundary and topographical
survey maps, and to conduct geotechnical, environmental, groundwater, wetland
and other studies required by Purchaser, in its sole discretion, and to
determine the adequacy of utilities servicing the Owner's Parcel, zoning
ordinances and compliance with laws. No such Inspections shall constitute a
waiver or relinquishment on the part of Purchaser of its rights under any
covenant, condition, representation or warranty of Owner under this Option
Agreement.
b. Upon execution of this Option Agreement, Owner shall deliver to
Purchaser, at no cost to Purchaser, such of the following as are in the
possession of or available to Owner: existing soil and groundwater tests,
surveys, contracts, leases, title policies, environmental reports, underground
storage tank test results, waste disposal records, permit records, traffic
studies, other engineering tests and studies pertaining to the Owner's Parcel,
all existing site plans, drawings, architectural drawings or other plans related
to the development or proposed development of the Owner's Parcel. Owner shall
cooperate with Purchaser during the Inspections and hereby agrees to use best
efforts to attend all meetings in Xxxxxx County, Nebraska to which Owner is
invited by Purchaser relating to Purchaser's intended use of the Premises, and
site plan approval. Purchaser shall not be obligated to undertake any soil
borings or other invasive testing to determine the existence of hazardous
materials on the Owner's Parcel, it being the intention of the parties that if
noninvasive environmental inspections and testing indicate that the Owner's
Parcel may contain hazardous substances, Purchaser shall have the option to
terminate this Option Agreement, or, at Purchaser's sole election, to undertake
further soil borings or invasive testing. If in Purchaser's judgment, such
borings, surveys, studies, inspections or other tests indicate or
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determine that the Owner's Parcel contains any hazardous materials or substances
or the condition of the Owner's Parcel or utility systems is not acceptable to
Purchaser for any reason, then Purchaser may terminate this Option Agreement as
its sole remedy, and Owner shall not have any further liability to Purchaser.
c. In the event Purchaser conducts soil and groundwater tests,
surveys, title searches, environmental reports, underground storage tank tests,
or other engineering tests and studies with respect to the Premises prior to the
exercise of the Option, a copy of such test results and reports shall be
provided to Owner at no additional cost; provided that this obligation of
Purchaser shall terminate upon exercise of the Option. In the event Purchase
conducts tests on the Premises and does not exercise the Option, the Purchaser
shall return the condition of the Premises back to the same condition as found
prior to such tests, within 90 days after the expiration of this Option
Agreement.
d. Purchaser agrees that it purchase of the Premises with respect to
the physical condition of the Premises is "AS IS" and is based on Purchaser's
Inspections and not upon any representation or warranty of Owner or Owner's
agents or employees as to the physical condition of the Premises or as to the
fitness of the Premises for Purchaser's intends use of the Premises for the
location of an ethanol plant. Purchaser agrees that in the event of the exercise
of the Option provided for herein, Owner shall not be held responsible for
environmental problems and cleanup caused by the operation of the proposed
ethanol plant after the purchase of the Premises by Purchaser.
15. FAILURE OR REFUSAL TO CONVEY. Subject to the provisions regarding
Purchaser's remedies set forth in Section 10 and 14 above, in the event, through
no fault of Purchaser, Owner fails, refuses or is unable to convey to Purchaser
the Premises as required herein, or otherwise defaults hereunder, after
Purchaser exercises this Option to Purchase, Purchaser may terminate this Option
to Purchase and recover all damages that Purchaser shall have suffered as a
result of Owner's default. Purchaser may also elect not to terminate this Option
to Purchase, in which event Purchaser shall be entitled to seek specific
performance of Owner's obligations hereunder.
16. EMINENT DOMAIN. In the event, either before or after exercise of
the Option, but prior to closing, any portion of the Premises is taken by
eminent domain, or by a deed in lieu thereof, this Option shall terminate as to
the portion of the Premises so taken. In such event, and if such portion of the
Premises adversely impacts Purchaser's ability to construct and operate an
ethanol plant on the Premises, Purchaser may terminate this Option Agreement by
notice to Owner, and the parties will be relieved of further obligation
hereunder. If Purchaser does not terminate this Option Agreement, all amounts
received by Owner as a result of such taking or deed in lieu thereof, shall be
credited against the purchase price set forth in Section 4 above.
17. SHORT FORM NOTICE. A short form notice of this Option to Purchase
for recording in the public records shall be executed by the parties at the
election of Purchaser and may be recorded at Purchaser's expense.
18. NOTICE. All notices provided for herein shall be personally
delivered, by United States certified mail, return receipt requested or sent by
a nationally recognized overnight package carrier delivered to Purchaser at XX
Xxx 000, Xxxxxxxxx, Xxxxxxxx, 00000 is mailed
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otherwise 000 Xxxxxxx Xxxxxx, Xxxxxx, Xxxxxxxx 00000, Attn: Xxxx Xxxxxx,
Chairman , and to Owner at the address specified in Section 2 above. Either
party shall have the right to designate a new address for the receipt of such
notices by written notice given as aforesaid.
19. ASSIGNMENT. Neither party may assign this Option Agreement without
the prior written consent of the other party, which consent shall not be
unreasonably withheld.
20. MISCELLANEOUS. This Option Agreement may not be changed or
modified, either in whole or in part, except by initialing changes herein by the
parties or by an agreement in writing signed by all parties hereto. When used in
this instrument, unless the Option Agreement requires otherwise, words importing
the masculine gender include the feminine and neuter, words importing the
singular number include the plural, and words importing the plural number
include the singular. It is mutually agreed by and between the parties hereto
that the covenants and agreements herein contained shall extend to and be
obligatory upon the heirs, legal representative, successors, and permitted
assigns of the respective parties, and that time is of the essence of this
Option Agreement. This Option Agreement shall be interpreted under the laws of
the State of Nebraska. If Owner is a corporation or a partnership, the persons
executing this Option Agreement for Owner warrant that they have authority to do
so.
EXECUTED as of the date first above written.
OWNER:
/s/ Xxx X. Xxxxxxx
----------------------------------------
Xxx X. Xxxxxxx
/s/ Xxxxxxx X. Xxxxxxx
----------------------------------------
Xxxxxxx X. Xxxxxxx
PURCHASER:
Oregon Trail Ethanol Coalition. L.L.C.,
a Nebraska limited liability company
By: /s/ Xxxx X. Xxxxxx
------------------------------------
Xxxx X. Xxxxxx, its Chairman
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NOTARIZATION OF OWNER SIGNATURE:
STATE OF NEBRASKA )
) ss.
COUNTY OF XXXXXX )
The foregoing instrument was acknowledged before me this 15th of May,
2002 by Xxx X. Xxxxxxx and Xxxxxxx X. Xxxxxxx as their voluntary act and deed.
[STAMP] /s/ Xxxxxx X. Xxxxxxx
---------------------------
Notary Public
My commission expires: 11/23/04
---------
NOTARIZATION OF PURCHASER SIGNATURE:
STATE OF NEBRASKA )
) ss.
COUNTY OF XXXXXX )
The foregoing instrument was acknowledged before me this 15th day of
May, 2002 by Xxxx X. Xxxxxx, Chairman of Oregon Trail Ethanol Coalition, L.L.C.,
a Nebraska limited liability company on behalf of the company.
[STAMP] /s/ Xxxxxx X. Xxxxxxx
---------------------------
Notary Public
My commission expires: 11/23/04
---------
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Exhibit A
NW 1/4 of 21-4-4, Xxxxxx County, commonly known as the land
between the Union Pacific railroad and Highway 4, consisting of approximately 60
acres, per the attached picture.
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