Document:

exv10w5

 

Exhibit 10.5

NATURAL RESOURCE GROUP, INC.

AGREEMENT FOR PROFESSIONAL SERVICES

(Minergy)

	DATE: 	 	 April 26, 2006
	 
	PARTIES: 	 	Natural Resource Group, Inc., a corporation Organized under and pursuant to the
laws or the Stale of Minnesota (hereinafter “NRG”)
	 
	 	 	Minergy, a corporation organized under and pursuant to the laws of the State
of Minnesota (hereinafter “Client”)

In consideration of the mutual covenants and agreements hereinafter contained, and intending
to be bound legally thereby, it is agreed as follows:

1. Services. During the term of this Agreement, NRO will provide
professional environmental services (hereinafter “Services”) at the request of Client
pursuant to work orders (hereinafter “Order” if singular and “Orders” if plural) front
Client, which Order or Orders cumulatively become part of this Agreement as Exhibit
A. Each Order will set forth specifically the Services requested and the charges for the
Services.

NRG will be responsible for obtaining any local, state, or federal licenses or permits
needed to perform the Services under this Agreement. NRG will obtain landowner permission to
enter private property as needed to perform the Services under this Agreement.

Unless directed otherwise, materials specifically required by regulatory agencies will he
submitted by NRG to Client, and Client then will submit the materials to the appropriate
agency.

2. No Assignment. No part of this Agreement will be assigned by NRG without the
written approval of Client.

3. Term; Termination. The term of this Agreement shall be from the date of this
Agreement until terminated in accordance with the provisions of this Agreement. This
Agreement may be terminated by either Party upon seven (7) days written notice to the other
party. Upon such termination, Client will pay NRG in accordance with Paragraph 4 the charges
for all Services performed and expenses incurred hereunder up to the date of such
termination,

4. Payment. Payment will be made by Client to NRG pursuant to monthly invoices
itemizing the Services performed. All NRG invoices will be paid within thirty (30) days
following receipt by Client.

5. Insurance. NRG will purchase and maintain such professional liability and other
insurance as is appropriate for the Services being performed and burnished.

The insurance required by this Paragraph 5 shall include the specific coverages and be
written for not less than the Mints of liability and coverages as hereinafter provided, or
required by law, whichever is greater:

	 	a.	 	Workers’ compensation insurance for the statutory limits and Employer’s
Liability Limits of 51,000,000. Each Accident; $1,000,000. Disease-Policy Limit and
$1,000,000. Disease-Each Employee.
	 
	 	b.	 	Commercial General liability insurance, including bodily injury, property
damage and personal injury/advertising injury, with limits of not less than
$1,000,000 for each occurrence, $2,000,000 general aggregate and $2,000,000 products
& completed operations aggregate.
	 
	 	c.	 	Comprehensive Automobile liability insurance with combined single limit
of $1,000,000.
	 
	 	d.	 	Professional liability including Pollution Incident Liability Coverage
with limits of $1,000,000 per claim/aggregate.

Certificates for all such policies of insurance shall be provided to the Client upon written
request. Certificates shall contain a provision that the coverage afforded will not be
canceled, or non-renewed without at least thirty (30) days prior written notice has been
given to Client. All such insurance shall remain in effect during the term of this
Agreement.

6. Indemnification/Limitation of Liability. Subject to arty limitations stated in
this Agreement, NEC will indemnify and hold harmless Client, its officers, directors,
employees, agents and representatives, from and against liability for all claims,

 

 

 losses, damages and expenses, including reasonable attorneys fees, to the extent they are
caused by a negligent act, error, or omission of NRG or any of its officers, directors,
employees, agents, subcontractors or anyone else for whom NEC is legally responsible.. NRG
wilt not be responsible for any loss, damage, or liability arising from any contributing
negligent acts by Client, its officers, directors, employees, agents, subcontractors or
anyone else from whom Client is legally responsible. Neither party will be responsible to
the other for consequential damages including, but not limited to, loss of profit, loss of
investment or business interruption. Client will seek recourse only against NRG and not
against its employees, officers, directors or shareholders. NRG’s limit of liability due to
breach of contract, warranty, or negligent acts, errors or omissions of NRG shall be Fifty
Thousand & 00/100 Dollars ($50,000.00) or the fee paid to NRG under this Agreement,
whichever is greater.

7. Hazardous Substances/Hazardous Waste. Client represents that if Client knows or
has reason to suspect that hazardous substances, pollution or contamination may exist at any
site where NRG is to perform Services for Client (“project site”), Client has fully informed
NRG in writing. In the event NRG encounters hazardous substances, pollution or contamination
beyond that disclosed by Client to NRG in writing, NRG may suspend its Services or terminate
this Agreement. Client acknowledges that NRG has no responsibility as a generator, treater,
storer, or disposer of hazardous or toxic substances found or identified at a project site.
Client will defend, indemnify, and hold harmless NRG from any claim or liability arising out
of NRG’s performance of Services under tins Agreement and made or brought against NRG for
any actual or threatened environmental pollution or contamination except in the extent that
NRG has negligently caused or contributed to any such pollution or contamination. This
indemnification includes reasonable attorney fees and expenses incurred by NRG in defense of
such claim.

8. Sample Ownership. All samples and cuttings of materials containing hazardous
contaminants are the property and responsibility of Client. Removal of cuttings from the
project site will remain the obligation of Client. Absent direction from Client, NRG may
return all contaminated samples and laboratory byproducts to Client for proper disposal or
treatment.

9. Buried Utilities. In those situations where NRG performs subsurface exploration,
Client to the extent of its knowledge, will furnish to NRG information identifying the type
and location of utilities and other man-made objects beneath the surface of the project
site. NRG will take reasonable precautions to avoid damaging these utilities or objects.
Prior to penetrating the project site’s surface, NRG will furnish Client a plan indicating
the locations intended for penetration. Client will approve the location of these
penetrations and authorize NRG to proceed.

10. Standard of Care. All work performed under the terms of this Agreement by NRG
will meet or exceed the care and skill exercised by reputable members of its profession
practicing under similar circumstances at the same time and in the same locality.

11. Confidentiality. All information related to the Orders and the Services pursuant
to this Agreement will remain confidential. NRG will not divulge to anyone communication (or
part or substance thereof) received from or given to Client in connection with NRG’s
Services pursuant to this Agreement, except: (a) at the express and specific direction of
Client; or (b) in compliance with the final order of a court of appropriate jurisdiction or
of an administrative body of appropriate jurisdiction; or (c) as may be required by
applicable rule, regulation, ordinance or law. Upon termination of this Agreement, NRG, if
requested, will return to Client all maps, books, or other information or materials supplied
by Client to facilitate the Services.

12. Headings. The various headings in this Agreement are inserted for convenience
only and shall not affect the meaning or interpretation of this Agreement or any section
or provision hereof.

13. Attorneys’ Fees. In the event either party shall he successful in any suit for
damages for breach of this Agreement, including nonpayment of invoices, or to enforce this
Agreement or to enjoin the other party from violating this Agreement, such party shall be
entitled to recover as part of its damages its reasonable legal costs and expenses for
bringing and maintaining any such action.

14. Waiver of Terms and Conditions. The failure of either party in any one or more
instances to enforce one or more of the terms or conditions of this Agreement or to exercise
any right or privilege in this Agreement, or the waiver by either party of any breach of the
terms or conditions of this Agreement, shall not be construed as thereafter waiving any such
terms, conditions, rights, or privileges, and the same shall continue and remain in force
and effect as if no such failure to enforce had occurred.

15. Governing Law. This Agreement shall he deemed to be an Agreement made under the
laws of the State of Minnesota, and for all purposes it, plus any related or supplemental
exhibits, schedules, documents, or notices, shall be construed in accordance with and
governed by the laws of such state.

 

 

16. Construction. Wherever possible, each provision of this Agreement shall he
interpreted in such a manner as to be effective and valid under applicable law, but if any
provision of this Agreement or any related document shall be invalid under applicable law,
such provision shall be ineffective only to the extent of such invalidity without
invalidating the remainder of such provision or the remaining provisions of this Agreement
or such related document.

17. Survival. All express representations, indemnifications, or limitations of
liability included in this Agreement will survive its completion or termination for any
reason and NRG’s completion of the Services contemplated herein.

18. Notices. All notices given with respect to this Agreement shall be in writing to
the parties at their respective addresses as shown in this Agreement.

19. Entire Agreement. This Agreement together with its Exhibit A constitutes and
expresses the entire agreement and understanding between the parties hereto, and all
previous discussions, promises, representations, and understandings between the parties
hereto are merged herein.

The parties hereto have caused this Agreement to be appropriately executed as of the day and
year first above written.

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	NATURAL RESOURCE GROUP, INC.	 	 	 	Minergy	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	By:	 	/s/ Todd A. Potas	 	 	 	By:	 	/s/ Daniel H. Arnold	 	 
	 	 	 	 	 	 	 	 	 	 	 
	 

	 	Its:
	 	Principal
	 	 
	 	 	 	Its:
	 	Chairman	 	 
	 

	 	Date:
	 	5/25/06
	 	 	 	 	 	Date:
	 	5/30/06	 	 
	1000 IDS Center	 	 	 	4455 Theurer Blvd.	 	 
	80 South Eighth Street	 	 	 	Winona, MN 55987-7304	 	 
	Minneapolis, MN 55402	 	 	 	 	 	 
	Attn: Todd Potas	 	 	 	Attn: Dan Arnold	 	 
	Phone: (612) 339-4815	 	 	 	Phone: (507) 452-4043	 	 
	Fax: (612) 347-6780	 	 	 	E-mail: danarnold@dcm-tech.comexv10w6

 

Exhibit 10.6

MINNERGY, LLC LETTERHEAD

August 7, 2006

Gary D. Allen and Linda M. Allen

3922 125th Ave SE

Eyota, MN 55934

Dana Allen

11304 19th Street SE

Eyota, MN 55934

William Oehler

Ward & Oehler, Ltd.

1765 Greenview Drive SW

Rochester, MN 55902

Re:     Real Estate Option Agreement dated June 12, 2006 between Gary D. Allen and
Linda M. Allen, husband and wife, and Dana Allen, a single person (the “Optionor”)
and MinnErgy, LLC, a Minnesota limited liability company (the “Optionee”)

Dear Optionors:

We hereby extend the term of the option granted by the Agreement referenced above, to a period of
one year, and we hereby authorize and instruct Mr. Oehler to deliver to Optionor the Additional
Option Payment of One Hundred Thousand Dollars ($100,000.00) held by him. As so extended the
option shall expire at 12:00 midnight on June 12, 2007, unless further extended according to the
Agreement.

Sincerely,

/s/ Daniel H. Arnold

Daniel H. Arnold, Chairman

RECEIPT

I hereby acknowledge receipt of the Additional Option Payment of $100,000.00, and extension of the
Option to July 12, 2007.

	 	 	 
	/s/ Gary D. Allen

	 	/s/ Dana M. Allen
	 

	 	 
	Gary D. Allen

	 	Dana Allen
	 
	 	 
	/s/ Linda M. Allen
	 	 
	 	 	 
	Linda M. Allen
	 	 

 

 

MEMORANDUM OF OPTION AGREEMENT

THIS MEMORANDUM OF OPTION AGREEMENT is made and entered into as of June 12, 2006, by and between
Gary D. Allen and Linda M. Allen, husband and wife, and Dana Allen, a single person (the
“Optionor”) and MinnErgy, LLC, a Minnesota limited liability company (the “Optionee”).

     1. The parties hereto entered into a Real Estate Option Agreement, dated as of this date,
granting to Optionee the exclusive right and option to purchase certain real estate situated in
Olmsted County, Minnesota.

     2. The initial term of the Option begins on June 12, 2006, and ends on August 11, 2006.
Optionee has the right to extend the Option, the last extension ending on December 12, 2007.

     3. The real estate that is the subject of the Option is situated in Olmsted County, Minnesota,
legally described in Exhibit A attached hereto.

     4. This Memorandum is made to record evidence of the existence of the Option.

     5. In the event that Optionee does not extend the initial term of the Option, or the Option
otherwise terminates, Optionor may file for record an affidavit establishing such failure to extend
the Option term or termination of the Option. Upon such filing, this Memorandum and the Option
shall be of no further force or effect.

IN WITNESS WHEREOF, the parties have executed this Agreement.

	 	 	 	 	 
	OPTIONOR:	 	OPTIONEE:
	 	 	MinnErgy, LLC
	 
	 	 	 	 
	/s/ Gary D. Allen

	 	By
	 	/s/ Daniel H. Arnold
	 

	 	 	 	 
	Gary D. Allen
	 	 	 	 
	 
	 	 	 	 
	/s/ Linda M. Allen
	 	 	 	 
	 
	 	 	 	 
	Linda M. Allen
	 	 	 	 
	 
	 	 	 	 
	/s/ Dana M. Allen
	 	 	 	 
	 
	 	 	 	 
	Dana Allen
	 	 	 	 

2

 

	 	 	 	 	 	 	 
	STATE OF MINNESOTA

	 	 	)	 	 	 
	 

	 	 	)	 	 	ss.
	COUNTY OF OLMSTED

	 	 	)	 	 	 

     The foregoing instrument was acknowledged before me this 29th day of June, 2006, by
Gary D. Allen and Linda M. Allen, husband and wife, Optionor.

	 	 	 
	SEAL               ROBERT W. LECOCQ	 	 
	Notary Public Minnesota	 	 
	My Commission Expires Jan 31, 2010
	 	/s/ Robert W. Lecocq
	 
	 	 
	 
	 	Notary Public

	 	 	 	 	 	 	 
	STATE OF MINNESOTA

	 	 	)	 	 	 
	 

	 	 	)	 	 	ss.
	COUNTY OF OLMSTED

	 	 	)	 	 	 

     The foregoing instrument was acknowledged before me this 29th day of June, 2006, by
Dana Allen, a single person, Optionor.

	 	 	 
	SEAL               ROBERT W. LECOCQ	 	 
	Notary Public Minnesota	 	 
	My Commission Expires Jan 31, 2010
	 	/s/ Robert W. Lecocq
	 
	 	 
	 
	 	Notary Public

	 	 	 	 	 	 	 
	STATE OF MINNESOTA

	 	 	)	 	 	 
	 

	 	 	)	 	 	ss.
	COUNTY OF WINONA

	 	 	)	 	 	 

	 
	The foregoing instrument was acknowledged before me this 1st day of July 2006, by Daniel H.
Arnold, the Chairman of MinnErgy, LLC, a Minnesota limited liability company, Optionee, on behalf
of said company.

	 	 	 	 	 
	 	 	 
	 	                                  /s/ Kent A. Gernander
 	 
	 	Notary Public 	 
	 	 	 
	 

THIS INSTRUMENT DRAFTED BY:

Kent A. Gernander

64 East Fourth Street

P.O. Box 310

Winona, MN 55987

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Exhibit A

Description of Property

Dana Allen Parcel:

That part of the NW1/4 of Sec. 15, T106N, R12W, Olmsted County, Minnesota, described as follows:

Commencing at the SW corner of said NW1/4; thence Easterly on a Minnesota State Plane Grid Azimuth
from North of 90°00’26” along the South line of said NW1/4 1314.59 feet to the point of beginning;
thence continue Easterly 90°00’26” azimuth along said South line 270.07 feet; thence Northerly
359°38’36” azimuth 785.85 feet; thence Easterly 86°44’39” azimuth 28.19 feet; thence Northerly
01°14’28” azimuth 113.34 feet; thence Easterly 81°58’23” azimuth 46.98 feet; thence Northerly
00°08’02” azimuth 449.92 feet; thence Westerly 269°40’29” azimuth 617.34 feet; thence Southerly
180°08’36“azimuth 753.06 feet; thence Easterly 90°16’49” azimuth 268.02 feet; thence Southerly
179°14’55” azimuth 599.37 feet to the point of beginning.

Together with a 20.00 foot wide access easement for ingress and egress over part of the NE1/4 NW1/4 of
said Sec. 15, and part of the SE1/4 SW1/4 of Sec. 10, T106N, R12W, Olmsted County, Minnesota, which
centerline is described as follows:

Commencing at the NW corner of said NW1/4; thence Easterly on a Minnesota State Plane Grid Azimuth
from North of 89°54’08” along the North line of said NW1/4 1673.02 feet; thence Northerly 359°55’12”
azimuth 268.88 feet to the Southerly right-of-way line of 19th Street SE and the point of
beginning; thence Southerly 179°55’12” azimuth 268.88 feet to the North line of said NW1/4; thence
Southerly 180°20’47” azimuth 1284.13 feet to the North property line of said tract and there
terminating. Sidelines of said easement are to be lengthened or shortened to intersect with the
Southerly right-of-way line of 19th Street SE and the North property line of said tract.
(Described in Olmsted County real estate records as Parcel Number 62.15.24.073956).

Gary and Linda Allen Parcel:

Northwest Quarter of Section 15 (except Dana Allen parcel described above), and except that part
sold to Chatfield Railroad Company, and all that part of the Southwest Quarter, Section 10, South
of the Winona and St. Peter Railroad; all in T106N, R12W, Olmsted County, Minnesota. (Described in
Olmsted County real estate records as Parcel Numbers 62.15.21.073955 and 62.10.33.032684).

4

 

 

                    SPACE ABOVE THIS LINE FOR

REAL ESTATE OPTION AGREEMENT

     THIS AGREEMENT is made this 12th day of June, 2006, by and between Gary D. Allen
and Linda M. Allen, husband and wife, and Dana Allen, a single person (the “Optionor”) and
MinnErgy, LLC, a Minnesota limited liability company (the “Optionee”).

	 	1.	 	GRANT OF OPTION: Optionor hereby grants to Optionee the exclusive
right and option to purchase the real estate (the Property) situated in Olmsted County,
Minnesota, legally described as follows:
	 
	 	 	 	[See legal description attached.]

	 	2.	 	OPTION CONSIDERATION; PAYMENT: Optionee hereby agrees to pay to
Optionor upon the execution of this Option Agreement the sum of Ten Thousand Dollars
($10,000.00) (the “Initial Option Payment” and, together with any Additional Option
Payment, the “Option Consideration”).

	 	3.	 	TERM; EXPIRATION: This option shall commence upon its execution by
Optionor and continue for a period of Sixty (60) days. It shall expire if not
exercised or extended as provided herein at 12:00 midnight on the sixtieth day after
the date of execution of this Option Agreement.

	 	4.	 	EXTENSION; ADDITIONAL PAYMENTS. Optionee may extend the term of this
option to a period of one year, by written notice to Optionor given before expiration
of the initial period accompanied by payment of the additional sum (an Additional
Option Payment) of One Hundred Thousand Dollars ($100,000.00). Optionee further agrees
to deposit in escrow, with Optionor’s attorney, William Oehler, the said additional sum
of One Hundred Thousand Dollars ($100,000.00) upon the execution of this Option
Agreement. Such sum shall be held by the escrow agent and delivered to the Optionor
upon notice of Optionee’s election to extend the term of this option, or delivered to
Optionee if such election is not made. Such extension period shall expire at 12:00
midnight on the first anniversary of the date of execution of this Option Agreement.
If the term is so extended, Optionee may extend the term of this option for

5

 

	 	 	 	an additional six months, by written notice to Optionor given before expiration of the
extended term accompanied by payment of the additional sum (an Additional Option
Payment) of Fifty Thousand Dollars ($50,000.00). Such extension period shall expire at
12:00 midnight eighteen months after the date of execution of this Option Agreement.

	 	5.	 	NOTICE OF EXERCISE. Optionee may exercise or extend this option, as
provided herein, only by giving written notice thereof to Optionor at the address
indicated below, by registered or certified mail, or personal delivery, prior to its
expiration.

	 	6.	 	FAILURE TO EXERCISE. If Optionee does not exercise this option in the
manner and within the time specified herein, this option shall terminate, Optionor
shall retain the Option Consideration, free of any claim by Optionee; and neither party
shall have any claim or right against the other under this Agreement.

	 	7.	 	PURCHASE TERMS: If this option is exercised as provided herein,
Optionor shall sell and Optionee shall purchase the Property with improvements thereon
under the following terms and conditions:

	 	a.	 	Purchase Price: The Purchase Price for the Property shall be
the sum of Two Million Two Hundred Thousand Dollars ($2,200,000.00). The Option
Consideration paid by Optionee to Optionor shall by credited against the Purchase
Price. The Purchase Price shall be paid in cash at closing.

	 	b.	 	Closing. The closing of the purchase shall be at the offices
of Optionor’s attorneys, Streater & Murphy, P.A., 64 East Fourth Street, Winona,
Minnesota, on a date agreed upon by the parties that shall be not less than sixty
(60) nor more than ninety (90) days after exercise of the option. Optionor Dana
Allen may delay the closing on that portion of the Property owned by her until a
date not later than May 1, 2007, by a written notice given by her to Optionee
within thirty (30) days after exercise of the option, stating her intention to
delay the closing and specifying the closing date.

	 	c.	 	Evidence of Title. Optionor shall, within thirty (30) days
after execution of this Agreement, furnish an abstract of title certified to date,
including proper searches covering bankruptcies, and State and Federal judgments
and liens. Optionee shall be allowed 30 days after receipt thereof for
examination of title and the making of any objections thereto, said objections to
be made in writing or deemed to be waived. If any objections are so made the
Optionor shall be allowed 120 days to make title marketable. Pending correction
of title, if the option has been exercised, the closing shall be postponed, but
upon correction of title and within 10 days after written notice, Optionee shall
perform this agreement according to its terms.
	 
	 	 	 	If said title is not marketable and is not made so within 120 days from the date of
written objections thereto as above provided, this agreement shall be void, at the
election of the Optionee, and neither party shall be liable for damages hereunder
to the other party and all money theretofore paid by Optionee to Optionor shall be

6

 

	 	 	 	refunded; but this provision shall not deprive either party of the right of
enforcing the specific performance of this agreement provided such agreement shall
not be terminated as aforesaid, and provided action to enforce such specific
performance shall be commenced within six months after such right of action shall
arise. If title is not marketable and Optionor fails to correct the title,
Optionee may elect to exercise the option and close and to deduct from the Purchase
Price the reasonable cost of correcting the title.

	 	d.	 	Conveyance. Subject to performance by Optionee, Optionor
agrees to execute and deliver a Warranty Deed conveying marketable title to the
Property subject only to the following exceptions:

	 	(i)	 	Building and zoning laws, ordinances, State and Federal
regulations.

	 	(ii)	 	Restrictions relating to use or improvement of premises not
subject to unreleased forfeiture.

	 	(iii)	 	Reservation of any minerals or mineral rights to the State
of Minnesota.
	 
	 	(iv)	 	Utility easements of record or in use.
	 
	 	(v)	 	Public streets and roadways dedicated or in use.

	 	(vi)	 	Rights of tenants under tenancies existing on the date of
this Option Agreement and disclosed to Optionee, or entered into after the
date of this Option Agreement with the consent of Optionee.

	 	e.	 	Possession. Optionor shall be entitled to possess and use
the Property, including the right to farm the land, during the term of this Option
and until the closing. Optionor shall deliver possession of the Property to
Optionee at the time of closing. If there are crops upon the Property, planted
before the exercise of this option and unharvested at the time of closing,
Optionee may, at its sole election

	 	(i)	 	permit the crops to be harvested at the end of the growing
season, or

	 	(ii)	 	pay to their owner, for each acre of crops that are not
permitted to be harvested, the sum of Four Hundred Dollars ($400.00). If the
growing crop consists of hay, the said sum shall be prorated among four annual
cuttings, so the amount to be paid shall be reduced by One Hundred Dollars
($100.00) for each cutting made before the closing or permitted to be made
after the closing.

	 	f.	 	Taxes; Assessments. Real estate taxes due and payable in
years preceding the year in which the closing occurs and any unpaid special
assessments shall be paid by Optionor. Real estate taxes due and payable in the
year in which the closing occurs shall be prorated between the parties to the date
of closing. Real estate taxes due and payable in years after the year in which
the closing occurs shall be paid by Optionee.

7

 

	 	g.	 	Prorations. Pro rata adjustments of rents, interest,
insurance, utilities and current operating expenses shall be made as of the date
of closing.

	 	h.	 	Eminent Domain: In the event the property or any part
thereof is taken or threatened to be taken pursuant to eminent domain after the
notice of exercise of the above option, but prior to closing, the Optionee shall
have the right at its election to cancel and terminate this agreement or to
complete the purchase as set forth above with the Optionee being entitled to
receive all condemnation proceeds.

	 	i.	 	Personal Property: The sale and purchase shall include not
include any personal property of Optionor, but shall include all buildings,
improvements and fixtures, including the well, pump, engine, gearbox, water
rights, pivot and any other equipment necessary to get water out of the ground on
the subject property.

	 	j.	 	1031 Exchange: Optionee shall cooperate with Optionor in documenting
the sale of the Property as a like-kind exchange under Section 1031 of the
Internal Revenue Code, if requested by Optionor, provided that Optionee shall not
incur additional expense as a result of such cooperation.

	 	8.	 	INVESTIGATION. Optionee shall have the right, during the term of the
option, to investigate at its own expense the condition, quality, and suitability of
the Property, including surveys and site analyses, environmental analyses, soil
sampling, zoning and governmental permit requirements, utility services, and the like,
and may enter upon the property for such purposes, provided such entry does not
interfere with occupancy and use of the Property by Optionor or tenants. Optionee
shall defend, indemnify and save harmless Optionor from and against any claim,
liability or expense arising from or attributable to any act or omission of Optionee or
its employees, contractors or agents in connection with any such activities. If
Optionee damages any crop growing on the Property, or if its investigations or the
closing of the sale prevents the harvest of any growing crop, Optionee shall pay to the
owner of such crop the amount determined as provided in paragraph 7(e)(ii). If
Optionee causes any other damage to the Property, Optionee shall restore such damage or
pay Optionor for any diminution in its value, and any such payment shall be credited
against the Purchase Price at closing.

	 	9.	 	REPRESENTATIONS OF OPTIONOR. Optionor represents and warrants that
Optionor does not have knowledge of the presence of any hazardous substance upon the
Property in violation of any environmental law or regulation. Optionor has applied
customary agricultural chemicals to the Property from time to time pursuant to ordinary
farming practices.

	 	10.	 	RECORDING OF OPTION: This Option Agreement may be recorded by either
party.

8

 

	 	11.	 	NOTICES: Any notice, demand or other document which either party is
required or may desire to give or deliver to or make upon the other party shall be
given in writing and served either personally or given by prepaid United States
certified mail, return receipt requested, and addressed to the following addresses:

	 	 	 	 	 
	 

	 	If to Optionor:
	 	Gary D. Allen and Linda M. Allen
	 

	 	 	 	3922 125th Ave. SE
	 

	 	 	 	Eyota, MN 55934
	 

	 	 	 	          and
	 

	 	 	 	Dana Allen
	 

	 	 	 	11304 19th Street SE
	 

	 	 	 	Eyota, MN 55934
	 
	 	 	 	 
	 

	 	with a copy to:
	 	William Oehler
	 

	 	 	 	Ward & Oehler, Ltd.
	 

	 	 	 	1765 Greenview Drive SW
	 

	 	 	 	Rochester, MN 55902
	 
	 	 	 	 
	 

	 	If to Optionee:
	 	MinnErgy, LLC
	 

	 	 	 	4455 Theurer Blvd.
	 

	 	 	 	Winona, MN 55987
	 

	 	 	 	Attn: Dan Arnold, Chairman
	 
	 	 	 	 
	 

	 	with a copy to:
	 	Kent A. Gernander
	 

	 	 	 	Streater & Murphy, P.A.
	 

	 	 	 	64 East Fourth Street
	 

	 	 	 	Winona, MN 55987

	 	 	 	Either party hereto may designate a different address for itself, or additional persons
to whom copies thereof are to be sent, by notice similarly given.

	 	12.	 	BROKERS. Each of the parties represents and warrants to the other that
it has not entered into any agreement or arrangement under which any broker will be
entitled to commission or compensation as a result of this agreement or the sale of the
Property hereunder, and each agrees to defend, indemnify and save harmless the other
party from and against any claim, and any resulting liability or expense, of a broker
under an agreement with or as a result of any act or omission of such party.

	 	13.	 	GOVERNING LAW; FORUM. This Agreement is entered into and is to be
performed in the State of Minnesota. It shall be governed by and interpreted in
accordance with the laws of the State of Minnesota. Any action arising from or
concerning this Agreement shall be brought only in the Third Judicial District Court,
Olmsted County, Minnesota (except an action to enforce the judgment of such court).

	 	14.	 	ENTIRE AGREEMENT; BINDING EFFECT. This Agreement contains the entire

9

 

	 	 	 	agreement of the parties concerning its subject matter; and there are no other
understandings between them. This Agreement shall be binding upon and shall inure to
the benefit of the parties hereto and their respective heirs and representatives or
successors and assigns. Optionee may assign this Agreement and the rights of Optionee
hereunder to a party that assumes and agrees to perform all obligations of Optionee
hereunder, but no such assignment shall relieve Optionee of any obligation hereunder
incurred prior to such assignment. Optionee shall notify Optionor in writing of any
such assignment.

	 	15.	 	TIME. Time is of the essence as to the performance of all of the terms
and conditions of this Agreement.

	 	16.	 	GENERAL. The captions and titles herein are for reference only and are
not to be considered a part of this Agreement or in the interpretation hereof. This
Agreement shall not be valid until signed by both parties. The phrase “execution and
delivery hereof,” as used above, shall be the date the last party hereto signs this
Agreement and serves it upon the other party in the same manner as set forth for
notices. Time is of the essence.

	 	17,	 	ADDITIONAL TERMS.

	 	a.	 	The Option Consideration and Purchase Price and other payments
hereunder shall be allocated between the Optionor as the Optionor may agree. If
the Optionor fail to agree, an amount equal to $10,000 per acre shall be allocated
to Gary D. Allen and Linda M. Allen, and the remainder shall be allocated to Dana
Allen.

	 	c.	 	The warranties and covenants of each Optionor shall apply to their
respective interests in the Property. However, Optionee’s obligations hereunder
depend upon full performance by Optionor and conveyance of the entire Property.

[Signature page follows.]

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IN WITNESS WHEREOF, the parties have executed this Agreement.

	 	 	 	 	 
	OPTIONOR:	 	OPTIONEE:
	 	 	MinnErgy, LLC
	 
	 	 	 	 
	/s/ Gary D. Allen

	 	By
	 	/s/ Daniel H. Arnold
	 

	 	 	 	 
	Gary D. Allen
	 	 	 	 
	 
	 	 	 	 
	/s/ Linda M. Allen
	 	 	 	 
	 
	 	 	 	 
	Linda M. Allen
	 	 	 	 
	 
	 	 	 	 
	/s/ Dana M. Allen
	 	 	 	 
	 
	 	 	 	 
	Dana Allen
	 	 	 	 

	 	 	 	 	 	 	 
	STATE OF MINNESOTA

	 	 	)	 	 	 
	 

	 	 	)	 	 	ss.
	COUNTY OF OLMSTED

	 	 	)	 	 	 

     The foregoing instrument was acknowledged before me this 12th day of June, 2006, by
Gary D. Allen and Linda M. Allen, husband and wife, Optionor.

	 	 	 
	SEAL               ROBERT W. LECOCQ	 	 
	Notary Public Minnesota	 	 
	My Commission Expires Jan 31, 2010	 	 
	 
	 	/s/ Robert W. Lecocq
	 
	 	 
	 
	 	Notary Public

	 	 	 	 	 	 	 
	STATE OF MINNESOTA

	 	 	)	 	 	 
	 

	 	 	)	 	 	ss.
	COUNTY OF OLMSTED

	 	 	)	 	 	 

     The foregoing instrument was acknowledged before me this 12th day of June, 2006, by
Dana Allen, a single person, Optionor.

	 	 	 
	SEAL                ROBERT W. LECOCQ	 	 
	Notary Public Minnesota	 	 
	My Commission Expires Jan 31, 2010	 	 
	 
	 	/s/ Robert W. Lecocq
	 
	 	 
	 
	 	Notary Public

11

 

	 	 	 	 	 	 	 
	STATE OF MINNESOTA

	 	 	)	 	 	 
	 

	 	 	)	 	 	ss.
	COUNTY OF WINONA

	 	 	)	 	 	 

     The foregoing instrument was acknowledged before me this 12th day of June 2006, by
Daniel H. Arnold, the Chairman of MinnErgy, LLC, a Minnesota limited liability company, Optionee,
on behalf of said company.

	 	 	 
	SEAL                KENT A. GERNANDER	 	 
	Notary Public Minnesota	 	 
	My Commission Expires Jan 31, 2010
	 	/s/ Kent A. Gernander
	 
	 	 
	 
	 	Notary Public

THIS INSTRUMENT DRAFTED BY:

Kent A. Gernander

64 East Fourth Street

P.O. Box 310

Winona, MN 55987

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Exhibit A

Description of Property

Dana Allen Parcel:

That part of the NW1/4 of Sec. 15, T106N, R12W, Olmsted County, Minnesota, described as follows:

Commencing at the SW corner of said NW1/4; thence Easterly on a Minnesota State Plane Grid Azimuth
from North of 90°00’26” along the South line of said NW1/4 1314.59 feet to the point of beginning;
thence continue Easterly 90°00’26” azimuth along said South line 270.07 feet; thence Northerly
359°38’36” azimuth 785.85 feet; thence Easterly 86°44’39” azimuth 28.19 feet; thence Northerly
01°14’28” azimuth 113.34 feet; thence Easterly 81°58’23” azimuth 46.98 feet; thence Northerly
00°08’02” azimuth 449.92 feet; thence Westerly 269°40’29” azimuth 617.34 feet; thence Southerly
180°08’36“azimuth 753.06 feet; thence Easterly 90°16’49” azimuth 268.02 feet; thence Southerly
179°14’55” azimuth 599.37 feet to the point of beginning.

Together with a 20.00 foot wide access easement for ingress and egress over part of the NE1/4 NW1/4 of
said Sec. 15, and part of the SE1/4 SW1/4 of Sec. 10, T106N, R12W, Olmsted County, Minnesota, which
centerline is described as follows:

Commencing at the NW corner of said NW1/4; thence Easterly on a Minnesota State Plane Grid Azimuth
from North of 89°54’08” along the North line of said NW1/4 1673.02 feet; thence Northerly 359°55’12”
azimuth 268.88 feet to the Southerly right-of-way line of 19th Street SE and the point of
beginning; thence Southerly 179°55’12” azimuth 268.88 feet to the North line of said NW1/4; thence
Southerly 180°20’47” azimuth 1284.13 feet to the North property line of said tract and there
terminating. Sidelines of said easement are to be lengthened or shortened to intersect with the
Southerly right-of-way line of 19th Street SE and the North property line of said tract.
(Described in Olmsted County real estate records as Parcel Number 62.15.24.073956).

Gary and Linda Allen Parcel:

Northwest Quarter of Section 15 (except Dana Allen parcel described above), and except that part
sold to Chatfield Railroad Company, and all that part of the Southwest Quarter, Section 10, South
of the Winona and St. Peter Railroad; all in T106N, R12W, Olmsted County, Minnesota. (Described in
Olmsted County real estate records as Parcel Numbers 62.15.21.073955 and 62.10.33.032684).

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