Document:

exv10w3

 

EXHIBIT
10.3

MINNERGY LETTERHEAD

July 11, 2006

Isabelle O. Timm

15 Second Street NW

Utica, MN 55979

Jerry Kellum

1600 Gilmore Avenue

Winona, MN 55987

Re: Real Estate Option Agreement dated May 17, 2006 between Isabelle O. Timm, a
single person (the “Optionor”) and MinnErgy, LLC, a Minnesota limited liability
company (the “Optionee”)

Dear Ms. Timm and Mr. Kellum:

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. Kellum to deliver to the Optionor the Additional
Option Payment) of Twenty-seven Thousand Dollars ($27,000.00) held by him. As so extended the
option shall expire at 12:00 midnight on May 17, 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 $27,000.00, and extension of the
Option to May 17, 2007.

/s/ Isabelle O. Timm     

Isabelle O. Timm

 

 

SPACE ABOVE THIS LINE FOR RECORDER

REAL ESTATE OPTION AGREEMENT

     THIS AGREEMENT is made this 17th day of May, 2006, by and between Isabelle O. Timm, 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 Winona 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 Three Thousand Dollars
($3,000.00) (the “Initial Option Payment” and, together with any Additional Option
Payment, the “Option Consideration”). Optionee further agrees to deposit in escrow,
with Optionor’s attorney, Jerry Kellum, the additional sum of Twenty-seven Thousand
Dollars ($27,000.00) 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.
	 
	 	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 Thirty Thousand Dollars ($30,000.00). escrow amount of
twenty-seven thousand dollars ($27,000.00). 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 an additional year, by
written notice to Optionor given before expiration of the extended term accompanied by
payment of the additional sum (an Additional Option Payment) of Thirty Thousand Dollars
($30,000.00). Such extension period shall expire at 12:00 midnight on the second
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 another additional year, by
written notice to Optionor given before expiration of the extended term accompanied by
payment of the additional sum (an Additional Option Payment) of Thirty Thousand Dollars
($30,000.00). Such extension period shall expire at 12:00 midnight of the third
anniversary of 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 One Million Three Hundred Eighty Thousand Dollars ($1,380,000.00). 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.
	 
	 	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

2

 

	 	 	 	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
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 cost of correcting the title or the reduction in value of the Property
resulting from the condition of 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. Consent of
Optionee shall not be required for a lease that may be terminated by Optionee
upon the closing, subject to payment for any growing crops as provided in the
next subsection.

	 	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 growing upon the Property 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), less the
estimated costs of growing, harvesting and selling such crops that were not incurred as a result of the
delivery of possession.

3

 

	 	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.
	 
	 	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.

	 	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).
	 
	 	9.	 	REPRESENTATIONS OF OPTIONOR. Optionor represents and warrants that
Optionor has not caused the Property to be contaminated by any hazardous substance in
violation of any environmental law or regulation, and does not have knowledge or the
presence of any hazardous substance upon the Property.
	 
	 	10.	 	RECORDING OF OPTION: This Option Agreement may be recorded by either
party.
	 
	 	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

4

 

	 	 	 	and served either personally or given by prepaid United States
certified mail, return receipt requested, and addressed to the following addresses:

	 	 	 	 	 
	 

	 	If to Optionor:
	 	Isabelle O. Timm
	 

	 	 	 	15 Second Street NW
	 

	 	 	 	Utica, MN 55979
	 
	 	 	 	 
	 

	 	with a copy to:
	 	Jerry Kellum
	 

	 	 	 	1600 Gilmore Avenue
	 

	 	 	 	Winona, MN 55987
	 
	 	 	 	 
	 

	 	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,
Winona County, Minnesota (except an action to enforce the judgment of such court).
	 
	 	14.	 	ENTIRE AGREEMENT; BINDING EFFECT. This Agreement contains the entire
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.

5

 

	 	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 Property consists of one or more parcels represented by Optionor
to contain a total area of 138 acres, exclusive of roads and rights of way. The
Purchase Price is based on Ten Thousand Dollars per acre for the land. IF a
survey determines that the land area, exclusive of roads and rights of way, is
more or less than 138 acres the Purchase Price shall be adjusted accordingly.

[Signature page follows.]

6

 

IN WITNESS WHEREOF, the parties have executed this Agreement.

	 	 	 	 	 	 	 	 	 
	OPTIONOR:	 	 	 	OPTIONEE:	 	 
	 	 	 	 	MinnErgy, LLC	 	 
	 
	 	 	 	 	 	 	 	 
	/s/ Isabelle O. Timm
 

	 	 
	 	By:
	 	/s/ Daniel H. Arnold
 

	 	 
	 

	 	 	 	Its:
	 	Chairman
 
	 	 

STATE OF MINNESOTA          )

                                                        ) ss.

COUNTY OF WINONA             )

     The foregoing instrument was acknowledged before me this 17th day of May,
2006, by Isabelle O. Timm, a single woman, Optionor.

	 	 	 	 	 	 	 
	 	SEAL     CINDY K. TELSTAD

	 	 	/s/ Cindy K. Telstad
	 	 
	 	
                Notary Public Minnesota

	 	 	 

     Notary Public
	 	 
	 	My Commission Expires Jan 31, 2010
	 	 	 	 	 

STATE OF MINNESOTA          )

                                                        ) ss.

COUNTY OF OLMSTED            )

     The foregoing instrument was acknowledged before me this 17th day of May, 2006, by
Daniel H. Arnold, the Chairman of MinnErgy, LLC, a Minnesota limited liability company, Optionee,
on behalf of said company.

	 	 	 	 	 	 	 
	 	SEAL     CINDY K. TELSTAD

	 	 	/s/ Cindy K. Telstad
	 	 
	 	                Notary Public Minnesota

	 	 	 

     Notary Public
	 	 
	 	My Commission Expires Jan 31, 2010
	 	 	 	 	 

THIS INSTRUMENT DRAFTED BY:

Kent A. Gernander

64 East Fourth Street

P.O. Box 310

Winona, MN 55987

7

 

Exhibit A

Description of Property

The Southwest Quarter of Section 17, Township 106, Range 9, excepting the East 10 acres of the part
of said land lying North of what was formerly the Winona and St. Peter Railroad Company’s right of
way, being in that exception a strip of land about 100 rods long North and South, and 16 rods wide
East and West.

Also, excepting from this SW 1/4 of Section 17 the following parcel:

     Beginning at the northwest corner of the 10 acre parcel described as the exception in the deed
from Everett H. Timm and Isabelle O. Timm to Everett H. and Isabelle O. Timm, which deed was dated
July 12, 1995 and was recorded with the Winona County Recorder on July 13, 1995 as Document No.
380124; thence west along the north line of said Southwest Quarter a distance of 410 feet; thence
south on a line parallel with the west line of said exception a distance of 470 feet; thence east
on a line parallel with the north line of said Southwest Quarter to the west line of said
exception; thence north along the west line of said exception to the point of beginning. This
property contains approximately 4.36 acres. This property is subject to highway rights of way and
to the restrictions created by that Agricultural Preserve Restrictive Covenant Application and
Agreement between Everett Timm and Winona County, Minnesota, which was dated December 31, 1991 and
recorded with the Winona County Recorder on November 16, 1992 as Document No. 355739.

8exv10w4

 

Exhibit 10.4

 

SPACE ABOVE THIS LINE FOR RECORDER

REAL ESTATE OPTION AGREEMENT

     THIS AGREEMENT is made this ___day of May, 2006, by and between Dakota Minnesota and
Eastern Railroad Corporation (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:

Parcels 1 & 2 south of the DM&E Railroad’s main line right of way as shown on Exhibit A
attached hereto, totaling 12.73 acres more or less, together will all easements and
rights appurtenant thereto.

Optionee represents that it is considering the construction of a grain processing
facility upon property adjoining the Property, and agrees that the Property, if
purchased, will be used for that purpose.

	 	2.	 	OPTION CONSIDERATION; PAYMENT: Optionee hereby agrees to pay to
Optionor upon the execution of this Option Agreement the sum of Two Thousand Five
Hundred Dollars ($2,500.00) (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 one year. It shall expire if not exercised or
extended as provided herein at 12:00 midnight on the first anniversary of the date of
execution of this Option Agreement.
	 
	 	4.	 	EXTENSION; ADDITIONAL PAYMENTS. Optionee may extend the term of this
option for an additional 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 Two Thousand Five Hundred Dollars ($2,500.00). Such extension period shall
expire at 12:00 midnight on the second 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 another additional year, by written notice to Optionor given before
expiration of the extended term accompanied by payment of the additional sum (an
Additional Option Payment) of Two Thousand Five Hundred Dollars ($2,500.00). Such
extension period shall expire at 12:00 midnight on the third anniversary of 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 Twenty Five Thousand Dollars ($25,000.00). 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.
	 
	 	c.	 	Evidence of Title. Optionor shall not be obligated to
furnish an abstract of title of other evidence of title. Optionee may, at its own
expenses, obtain an abstract of title or title insurance commitment, and shall be
allowed a reasonable time after receipt thereof for examination of title and for
correcting any defects in title. Optionor shall secure and furnish releases of
the property from any mortgages, trust deeds or similar encumbrances created by
Optionor. Pending correction of title, the closing shall be postponed.

If said title is not marketable and cannot be made so, Optionee may (i) declare
this agreement void, if which case neither party shall be liable for damages
hereunder to the other party and all money theretofore paid by Optionee to Optionor
shall be refunded, or (ii) waive any defect and close the purchase. 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.

2

 

	 	d.	 	Conveyance. Subject to performance by Optionee, Optionor
agrees to execute and deliver a Quitclaim Deed conveying all its right, title and
interest to the property.
	 
	 	e.	 	Possession. Optionor shall be entitled to possess and use
the Property during the term of this Option and until the closing. Optionor shall
deliver possession of the Property to Optionee at the time of 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.
	 
	 	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 not include
any personal property of Optionor. Optionor shall remove all personal property
and all debris from the Property before the closing.

	 	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.
	 
	 	9.	 	REPRESENTATIONS OF OPTIONOR. Optionor represents and warrants that
Optionor has not caused the Property to be contained by any hazardous substance in
violation of any environmental law or regulation, and does not have knowledge of the
presence of any hazardous substance upon the Property.
	 
	 	10.	 	RECORDING OF OPTION: This Option Agreement may be recorded by either
party.

3

 

	 	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:
	 	Dakota Minnesota and Eastern Railraod Corporation
	 

	 	 	 	140 N Phillips Ave
	 

	 	 	 	Sioux Falls SD 57101
	 

	 	 	 	Attn: Tim Carlson, Real Estate Manager
	 
	 	 	 	 
	 

	 	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,
Winona County, Minnesota (except an action to enforce the judgment of such court).
	 
	 	14.	 	ENTIRE AGREEMENT; BINDING EFFECT. This Agreement contains the entire
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.

4

 

	 	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.

[Execution page follows.]

5

 

IN WITNESS WHEREOF, the parties have executed this Agreement.

	 	 	 	 	 	 	 	 	 	 	 
	OPTIONOR:	 	 	 	OPTIONEE:	 	 
	 	 	 	 	 	 	MinnErgy, LLC	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	/s/ (illegible)	 	 	 	By	 	/s/ Daniel H. Arnold	 	 
	 	 	 	 	 	 	 	 	 
	Its

	 	SVP Marketing
	 	 	 	Its
	 	Chairman	 	 
	 

	 	 

	 	 
	 	 	 	 

	 	 

	 	 	 	 	 	 	 
	STATE OF SOUTH DAKOTA

	 	 	)	 	 	 
	 

	 	 	) ss.	 	 	 
	COUNTY OF MINNEHAHA

	 	 	)	 	 	 

     The foregoing instrument was acknowledged before me this 23rd day of May, 2006, by Dakota
Minnesota & Eastern Railroad Optionor.

	 	 	 	 	 	 	 	 	 
	 SEAL

	 	LINDA M. ARTER
	 	 	 	 	 	 
	 

	 	NOTARY PUBLIC	 	 	 	 	 	 
	 

	 	SOUTH DAKOTA
	 	 	 	/s/ Linda M. Arter
 

	 	 	 	 	 	 	Notary Public	 	 

	 	 	 	 	 	 	 
	STATE OF MINNESOTA

	 	 	)	 	 	 
	 

	 	 	) ss.	 	 	 
	COUNTY OF WINONA

	 	 	)	 	 	 

     The foregoing instrument was acknowledged before me this 26 day of May, 2006, by Daniel H.
Arnold, the Chairman of MinnErgy, LLC, a Minnesota limited liability company, Optionee, on behalf
of said company.

	 	 	 	 	 	 	 	 	 
	 SEAL

	 	THERESA A. WALTHER	 	 	 	 	 	 
	 

	 	NOTARY PUBLIC — Minnesota
	 	 	 	/s/ Theresa A. Walther
 

	 	 
	 My Commission Expires Jan 31, 2010	 	 	 	Notary Public	 	 

THIS INSTRUMENT DRAFTED BY:

Kent A. Gernander

64 East Fourth Street

P.O. Box 310

Winona, MN 55987

6

 

Exhibit A

Description of Property

[Drawing of property]

7

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