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Exhibit 10.3
OPTION TO PURCHASE REAL PROPERTY
FOR THE SUM OF $1.00 AND OTHER GOOD AND VALUABLE CONSIDERATION, the CITY OF
GARNETT, KANSAS, a municipal corporation organized and existing under the laws
of Kansas, ("Seller") hereby GIVES and GRANTS to East Kansas Agri-Energy, LLC
("Purchaser") the exclusive option to purchase the following described real
estate, situated in Anderson County, Kansas, to-wit:
1. All of Lots Three (3), Four (4) and Five (5), except the west 450
feet of said Lot Three (3), in the Golden Prairie Industrial Park of the
City of Garnett, Kansas.
2. An easement for railroad right of way to the Union Pacific
Railroad Co. over, across the through Lot Two (2) in the Golden Prairie
Industrial Park of the City of the City of Garnett, Kansas, to allow a spur
from said railroad company's main line to the Plant site on the tract
described in the immediately preceding paragraph.
3. A site of adequate size, anticipated to be on Lot Two (2) in the
Golden Prairie Industrial Park of the City of Garnett, Kansas, to permit
such necessary pumping equipment and storage basin as may be required to
facilitate or permit delivery of raw water to your group at the Plant site
from the City's existing line.
This option is given on the following terms and conditions:
SECTION ONE
PERIOD OF OPTION
This option may be exercised by giving notice thereof to Seller at City
Hall, Garnett, Kansas, at any time after the date hereof up to and including
December 1, 2002, at which time it shall expire. Seller may extend the period,
upon Buyer's application, upon such terms and conditions as appear appropriate
or necessary.
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SECTION TWO
PRICE AND TERMS OF PAYMENT
The purchase price for the property shall be $1.00 which shall be paid at
closing.
SECTION THREE
TITLE
If the option is exercised, Seller shall within 15 days after the delivery
of the notice of exercise, secure and submit to Purchaser evidence of title by
preliminary title report of the Anderson County Abstract Company. Within 10 days
thereafter, Purchaser shall notify Seller in writing of any defects in or
objections to the title. Seller shall have a reasonable time to clear the title
of the defects and objections specified.
If Seller fails to clear the title defects or objections so as to make the
title merchantable, or to submit evidence of his ability to do so prior to
closing, Purchaser may clear title to the extent so required and charge the cost
of clearing to seller or, at his option, may terminate the contract by giving 10
days notice to Seller.
Title to the real estate shall be fully merchantable, free and clear of all
liens, encumbrances, restrictions, and easements except as appear of record;
provided, however, such conveyance shall be subject to Buyer's completing
construction and putting into operation an ethanol refining plant upon said
property. Such plant shall be completed without unnecessary delay following
closing of this transaction. If construction is not commenced within one year
from the date of closing, the title to the property shall revert to Seller.
Appropriate language to carry out these provisions shall be contained in the
warranty deed.
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SECTION FOUR
CLOSING AND POSSESSION
Closing shall be at Anderson County Abstract. Seller and Purchaser shall
execute any necessary escrow instructions reasonably required by said title
company.
Taxes and assessments for the current year shall be pro rated between the
parties as of the date of closing. All other costs, including fees for the
owner's policy of title insurance, shall be paid by Buyer.
Seller shall continue in possession of the property until closing.
SECTION FIVE
OTHER CONDITIONS AND UNDERSTANDINGS
Raw water, electrical energy, natural gas and waste water treatment utility
services to the said real estate shall be provided to the property by Seller in
its capacity as the utility supplier at rates to be determined. Seller states
its intent to be competitive in fixing such rates and shall base them on
engineering norms common to the industry, which among other considerations,
shall allow Seller to recover its capital costs of extending all utility
services to the property. In no case shall any of such rates be higher than the
most favorable rate at which such utility commodity or service is presently
sold. The volumes of such utility commodities and services shall be as called
for in the information presented by Buyer to the Seller in the August 8th, 2001,
meeting with the City Manager and the City Attorney. Potable water for drinking
and sanitation shall be provided to the property at the City's prevailing rate
as fixed by ordinance.
The parties have discussed a variety of economic assistance measures that
Seller might provide or allow to Buyer to facilitate location of Buyer's ethanol
refining plant in the City of Garnett. An earlier letter of intent issued by
Seller to Buyer made specific reference to the parties' discussing this issue.
But, the value of the fee interest covered by this option agreement has been
appraised for Seller at $7,500 per acre. There are 23 acres, more or less, in
said
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description. The fee simple interest in said 23 acres, together with
easement rights which were not a part of said appraisal, have a value, if this
option is exercised by Buyer and the plant timely built to extinguish the
possibility of reverter, in excess of $172,500. Therefore, Seller states that it
intends this economic development incentive to be the only such incentive to be
offered to Buyer. Seller anticipates there will be matters on a project of this
magnitude that arise, some of which will involve either action(s) to be
performed by Seller or acquisition of other property or rights in property owned
by Seller. Seller states its intention to address these matters in the same
spirit of cooperation and encouragement evidenced by its allowance of the above
economic incentive. To that end, provision of any services by Seller shall be
provided at its cost and any rights in other property shall be transferred at
fair market value, as determined by the parties hereto or, failing that, by a
qualified appraiser.
SECTION SIX
ASSIGNMENT AND SUCCESSION
This option and the contract resulting from the exercise thereof shall bind
and inure to the benefit of the heirs, administrators, executors, successors,
and assigns of the respective parties.
IN WITNESS WHEREOF, the parties have subscribed their names the day and
year first above written.
CITY OF GARNETT, KANSAS EAST KANSAS AGRI-ENERGY, LLC
by by
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R.G. Doran, City Manager President
Seller Buyer
STATE OF KANSAS )
) ss:
ANDERSON COUNTY )
SUBSCRIBED and SWORN to me before me on this ____ day of May, 2002, by
_________________________, President of East Kansas Agri-Energy, LLC.
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Notary Public
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My appointment expires
______________________________.
STATE OF KANSAS )
) ss:
ANDERSON COUNTY )
SUBSCRIBED and SWORN to me before me on this ______ day of May, 2002, by
R.G. Doran, City Manager of the City of Garnett, Kansas, a municipal
corporation.
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Notary Public
My appointment expires
________________________.