EXHIBIT 10.42
OPTION AGREEMENT
(Parcel B)
THIS OPTION AGREEMENT (the "Agreement") is made and entered into this 21st
day of November, 1994, by and between Pangolin Corporation, a California
corporation ("Buyer"), and U.S. Energy Corp./Crested Corp. ("Seller").
WITNESSETH:
WHEREAS, Seller is the owner of certain real property located in Gunnison
County, Colorado (the "Property") more particularly described on Exhibit A
attached hereto, subject to verification by survey and title inspection;
WHEREAS, Buyer desires to obtain an option to purchase the Property from
Seller; and WHEREAS, upon the terms, covenants and conditions contained in this
Agreement, Seller is willing to grant such option to Buyer.
NOW, THEREFORE, in consideration of the mutual promises set forth herein
and for other good and valuable consideration, the receipt, sufficiency and
legal adequacy of which are hereby acknowledged, Buyer and Seller agree as
follows:
1. Grant. Seller hereby grants to Buyer an option to purchase fee title
to the Property and all rights appurtenant thereto (including without
limitation, water rights or shares, mineral rights, governmental approvals,
utility hook-ups, licenses, leases, easements and rights of way) upon the terms,
covenants and conditions set forth in this Agreement (the "Option").
2. Term. The Option hereby granted is for a term commencing on the date
of this Agreement and expiring at midnight (Mountain) 90 days from the date
hereof (the "Option Period").
3. Purchase Price. Buyer tenders herewith the nonrefundable, full option
purchase price of Ten Thousand Dollars ($10,000). Upon exercise of this Option,
the total purchase price for the Property shall be Eight Hundred Fifty One
Thousand Nine Hundred Twenty Dollars ($851,920), or $1,803 per acre subject to
adjustment to reflect the exact acreage which shall be determined in accordance
with the survey described in paragraph 4(i) below (the "Purchase Price"). Any
funds paid for this Option shall be applied to the Purchase Price paid at
Closing. The Purchase Price shall be paid as follows:
(i) $10,000 as the option purchase price delivered upon the execution
of this Agreement by Seller; plus
(ii) $40,000 payable in cash at the "Closing" (as hereafter defined).
Upon Closing and payment of the cash portion of the Purchase Price, Seller
shall deed 22.19 acres,
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as designated by Buyer at that time, to Buyer free and clear of any liens
or encumbrances, these acres to be valued at the rate of 125% of the $1,803
per acre (subject to adjustment in accordance with the survey of the
Property) purchase price (or $2,253.75 per acre); plus
(iii) $150,000 evidenced by a purchase money promissory note and trust
deed encumbering 66.56 acres of the Property, as designated by Buyer at the
time of Closing, in favor of Seller to be delivered at the Closing
containing the following specific terms in addition to other standard or
statutory terms (including Seller's rights as a secured party to foreclose
thereon under applicable law in the event of default):
(a) Requiring payment in full of the principal balance and all
interest accrued thereon at the rate of seven and one-half percent
(7.5 %) per annum, on the 90th day after the date of Closing; provided
that if such note paid in full by that date, Buyer shall not be in
default thereunder if Buyer makes a principal payment of $35,000 on
the first anniversary of the date of closing and if such note is paid
in full on the third (3rd) anniversary of the date of Closing, with
interest accruing from the 90th day after the date of closing until
paid in full at the rate of twelve percent (12%) per annum. There
shall be no prepayment penalty. All accrued but unpaid interest shall
be due and payable in full upon final payment of the principal balance
of the Note.
(b) Partial Lien Release provision requiring Seller to release
or make request to the public trustee for reconveyance of whole or
fractional acreage upon payment of principal under the Note at the
rate of 125% of the $1,803 per acre (subject to adjustment in
accordance with the survey of the Property) purchase price (or
$2,253.75 per acre). Buyer shall designate the property to be released
at the time of payment of the principal.
(c) Seller would promptly consent in writing to any plat maps,
subdivisions or other instruments necessary for rezoning, subdivision,
annexation, recordation, or other development requirements, and to
release without prepayment any acreage that is needed for public
improvements; i.e. roads, sidewalks, utility easements, parks or
trails. Such consent may not be unreasonably withheld or delayed.
(e) Nonrecourse provision; plus
(iv) $651,920 evidenced by a purchase money promissory note and trust
deed encumbering that portion of the Property not conveyed free and clear
pursuant to subparagraph 3 (ii) above and not subject to the trust deed
described in subparagraph 3(iii) above, in favor of Seller to be delivered
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at the Closing containing the following specific terms in addition to other
standard or statutory terms (including Seller's rights as a secured party
to foreclose thereon under applicable law in the event of default):
(a) Interest only payments at the rate of seven and one-half
percent (7.5%) per annum payable annually on the anniversary of the
date of Closing, with any accrued but unpaid interest due and payable
in full upon final payment of the principal balance of the Note.
(b) Partial Lien Release provision requiring Seller to release
or make request to the public trustee for reconveyance of whole or
fractional acreage upon payment of principal under the Note at the
rate of 125% of the $1,803 per acre (subject to adjustment in
accordance with the survey of the Property) purchase price (or
$2,253.75 per acre). Buyer shall designate the property to be released
at the time of payment of the principal.
(c) Payment of entire principal balance and all accrued but
unpaid interest due and payable on the third (3rd) anniversary of the
date Seller executes this Agreement, without prepayment penalty
(d) Seller would promptly consent in writing to any plat maps,
subdivisions or other instruments necessary for rezoning, subdivision,
annexation, recordation, or other development requirements, and to
release without prepayment any acreage that is needed for public
improvements; i.e. roads, sidewalks, utility easements, parks or
trails. Such consent may not be unreasonably withheld or delayed.
(e) Nonrecourse provision.
The trust deed and promissory note to be executed, delivered and recorded in
connection with the foregoing purchase money financing shall be on State of
Colorado approved forms, as modified for the provisions contained herein.
4. Survey. Property and Title Inspection.
(i) Sufficiently prior to Closing to permit Buyer's review thereof,
Seller, at its expense, shall obtain and deliver to Buyer a certified
survey which shall identify any encroachments or property boundary
discrepancies and shall determine the actual legal description of the
Property which legal description shall be consistent with the drawing
attached to this Agreement as Exhibit "A" and the understanding of the
parties (the "Survey"). Buyer shall prior to the termination of the Option
Period give Seller written objections and proposed modifications to the
Survey. If Buyer has not given Seller written notice of its objections
within the Option Period, the Survey shall be deemed to have been
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accepted by Buyer as the legal description for the Property. If the Survey
and the resulting legal description of the Property do not vary materially
from the description of the Property represented in Exhibit "A", Buyer may
not object to the Survey except for reasonable objections based upon
reasonable development requirements for the remainder of the Property or
upon requirements of Buyer's lender or applicable regulatory or
governmental authorities.
(ii) Seller hereby grants to Buyer and persons designated by Buyer the
right and permission at any time to enter upon the Property to inspect,
appraise and verify surveys thereof. Seller shall also make available to
Buyer for inspection all records of operations on the Property, including,
but not limited to, all records and documents concerning water and mineral
rights, governmental permits, surveys, engineering studies, water surveys
or data, seismic studies, environmental studies, designs, plats, maps,
licenses and allotments. Buyer agrees that it will not interfere, in any
material respect, with Seller's use of the Property in conducting such
inspections.
(iii) Within 20 calendar days of Buyer's written notice to Seller,
Seller, at its expense, shall obtain and deliver to Buyer a commitment for
the issuance of a policy of title insurance with extended coverage on the
Property, with copies of all documents identified as exceptions therein.
Buyer shall prior to the termination of the Option Period give Seller
written objections to the status of title. If Buyer has not given Seller
written notice of its objections within the Option Period, the commitment
for title insurance shall be deemed to have been accepted by Buyer and
Buyer shall accept such a title policy in compliance therewith as
satisfaction of Seller's commitment in that respect hereunder. If Buyer
reasonably objects to any item or exception in the commitment, Seller shall
remove or cure such objection or exception prior to Closing. To the extent
that such objectionable items can be removed by the payment of the amount
of any such lien or encumbrance, Seller agrees to have the proceeds paid by
Buyer at Closing applied to such liens in order to obtain their removal. In
the event Seller fails to cure any such objections or exceptions, Buyer may
refuse to Close and the Closing date shall be extended until such objection
or exception is cured or Buyer terminates this Agreement, at its
discretion, whereupon Seller shall reimburse the Option purchase price to
Buyer. In the event that this Option is not exercised by Buyer, all such
evidences of title shall be immediately returned to Seller.
5. Exercise of Option. Buyer may exercise the Option at any time from and
after the date hereof and prior to the expiration of the Option Period by giving
to Seller notice of exercise in writing by certified mail, postage prepaid
thereon at the address indicated in paragraph 14(ix) of this Agreement, which
notice must be postmarked on or before the expiration of the Option Period, or
by
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hand-delivery or courier service. Within 10 calendar days of the date Seller
executes this Agreement, Buyer shall designate a Gunnison County, Colorado
escrow agent (the "Escrow Agent") and identify a closing date to be not later
than 90 calendar days after the date Seller executes this Agreement.
6. Title At Closing, Seller shall execute and deliver to Buyer a good and
sufficient warranty deed conveying fee simple title to the Property to Buyer,
subject only to those easements, rights of way, reservations, restrictions,
encumbrances and other matters accepted or not objected to or waived by Buyer.
The parties shall agree upon mutually acceptable escrow instructions for the
Escrow Agent to protect the Buyer and Seller.
7. Title Insurance. At Closing, Seller shall furnish to Buyer, at
Seller's expense, an owner's policy of title insurance, in extended coverage
form, in the amount of the Purchase Price, insuring title in Buyer subject to
standard printed exceptions and those easements, rights of way, reservations,
restrictions, encumbrances and other matters accepted or not objected to or
waived by Seller.
8. Closing. In the event of exercise of this Option, the closing
contemplated herein (the "Closing") shall occur at the offices of the Escrow
Agent or at such other location agreed upon by Buyer and Seller on the date
designated by the Buyer under paragraph 5 above. Buyer and Seller agree to each
pay one half of the standard reasonable recording, documentation and closing
fees of the Escrow Agent, other than the cost of the title insurance policy
which shall be paid by Seller. Real property taxes, utility and other charges or
assessments for the current year, rents and profits shall be prorated as of the
date of Closing. Any greenbelt rollback taxes for periods prior to Closing shall
be allocated to and paid by Seller at Closing. All other taxes, including
documentary taxes, if any, and all assessments, mortgage liens, encumbrances or
charges against the Property of any nature, shall be paid by Seller at Closing,
unless waived or assumed by Buyer.
9. Risk of Loss. All risk of loss and destruction of the Property and
expenses and insurance shall be born by Seller until the date of Closing.
10. Possession. Seller shall deliver possession of the Property to Buyer
on the date of Closing, unless otherwise agreed to by Buyer and Seller.
11. Representations Warranties Covenants and Conditions.
(i) As of the date hereof and as of the date of Closing, Seller hereby
represents and warrants to Buyer that (a) Seller has all requisite power
and authority to enter into this Agreement and all documents contemplated
hereby (collectively, the "Purchase and Sale Documents"); (b) there are no
claims, actions, suits or other proceedings pending with respect to the
Property or against Seller which would affect the Property
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or Seller's ability to convey the same as required hereunder, (c) the
Property complies with all applicable laws and regulations and will pass
all applicable governmental inspections; (d) Seller owns marketable fee
simple title to the Property not encumbered by any interest in a third
party which is not of record; (e) Seller is not in default of any
obligations secured by the Property or under any leases with respect to the
Property; (f) Seller has received no demands from any governmental agency
that the Property contains any hazardous or toxic substance or that any
such substance has been discharge from or onto the Property, and the
Property has not been used as a processing, storage or handling facility
for any "hazardous substance", as defined in any government statute, code
or regulation, and there are no hazardous substances existing anywhere on
or running onto or off of the Property, except as disclosed by Seller to
Buyer in writing within 30 days of the date of this Agreement (Seller
agrees to fully indemnify, defend and save Buyer harmless from any loss or
injury suffered by Buyer in the event such hazardous substances are
discovered to have existed on the Property as of Closing which have not
been disclosed by Seller in accordance herewith, which obligation of Seller
shall survive Closing), (g) the Property is in full compliance with, and
Seller has received no notice from any federal, state, county, municipal or
other governmental body or agency of any violation of any law, ordinance,
rule or regulation applicable to the Property, or of any proposed, pending
or outstanding changes or violations of existing zoning or use regulations,
and (h) the Property and all improvements and fixtures thereon are in good
working order, without material defects.
(ii) Buyer hereby represents and warrants to Seller that Buyer has all
requisite power and authority to enter into the Purchase and Sale
Documents.
(iii) All covenants, warranties and representations contained in this
Agreement shall survive Closing and the delivery of the consideration and
deed and shall not be merged therein; provided, however that as to
representations made herein, said survival shall be applicable only as to
the truth thereof at the time of Closing, but not as to any time subsequent
to Closing.
(iv) At Closing, Seller shall provide to Buyer an Affidavit to satisfy
Internal Revenue requirements, stating that the Seller is not a foreign
person (as that term is defined in Section 1445 of the Internal Revenue
Code) and providing Seller's employer identification number. In the event
that Seller does not provide such an Affidavit, Buyer shall withhold from
the Purchase Price such amount as may be required by the Internal Revenue
Service and pay such amount to the Internal Revenue Service as required by
applicable law.
(v) Seller shall provide such information and shall be responsible for
filing such reports as shall be required under
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the reporting requirements of the Tax Reform Act of 1986, and shall
indemnify and hold harmless Buyer should it fail to comply.
(vi) Buyer's obligation to close under this Agreement shall be subject
to its receipt of a general warranty deed in recordable form, and the full
performance by Seller of all covenants imposed on it hereunder, and full
satisfaction of all other conditions to closing set forth herein.
(vii) Seller's obligation to close under this Agreement shall be
subject to its receipt of the Purchase Price as required hereunder, and the
full performance by Seller of all covenants imposed on it hereunder, and
full satisfaction of all other conditions to closing set forth herein.
12. Brokerage. Seller and Buyer represent and warrant to each other that
they have not agreed to pay any brokerage or finder's fee or commissions with
respect to the sale of the Property, except as disclosed herein, and agree to
hold each other harmless from any claim by a third person to any brokerage
commission or finder's fee. Seller has agreed to pay V. L. Olsen & Company a
finder's fee of three percent (3%) of the principal portion of the Purchase
Price, and hereby directs and authorizes Buyer to deduct 3 % of each payment of
the Purchase Price from the payments to be made to Seller and pay such deducted
amount to or for the benefit of V. L. Olsen & Company.
13. Termination of Option. If this Option has not been exercised on or
before the expiration of the Option Period, the Option shall expire. In such
event, or if Buyer has exercised the Option but chooses to terminate under the
provisions of paragraph 4 or otherwise fails to close, this Agreement shall
terminate in which event Seller, if not in default hereunder, shall retain the
Option purchase price previously received from Buyer as full consideration for
the granting of this Option. Further, since the ascertainment of damages from a
failure to close would be difficult and burdensome for the parties, the Seller
shall retain the Option purchase price as full and complete liquidated damages
for failure to close if this Option is exercised. Seller shall not be entitled
to make any further claim against Buyer.
14. General Provisions.
(i) Binding Agreement. This Agreement shall be binding upon and shall
inure to the benefit of the heirs, legal representatives, successors and
assigns, as applicable, of the respective parties hereto, and any entities
resulting from the reorganization, consolidation or merger of any party
hereto.
(ii) Headings. The headings used in this Agreement are inserted for
reference purposes only and shall not be deemed to limit or affect in any
way the meaning or interpretation of any of the terms or provisions of this
Agreement.
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(iii) Time of the Essence. Time is of the essence of this Agreement.
Any deadline hereunder which falls on a weekend day or holiday shall
instead fall on the next following business day.
(iv) Severability. The provisions of this Agreement are severable, and
should any provision hereof be found to be void, voidable or unenforceable,
such void, voidable or unenforceable provision shall not affect any other
portion or provision of this Agreement.
(v) Waiver. Any waiver by any party hereto of any breach of any kind
or character whatsoever by any other party, whether such waiver be direct
or implied, shall not be construed as a continuing waiver or consent to any
subsequent breach of this Agreement on the part of the other party.
(vi) Modification. This Agreement may not be modified except by an
instrument in writing signed by the parties hereto.
(vii) Governing Law. This Agreement shall be interpreted, construed
and enforced according to the laws of the State of Colorado.
(viii) Attorney's Fees. In the event any action or proceeding is
brought by either party against the other under this Agreement, the
prevailing party shall be entitled to recover attorney's fees and costs in
such amount as the court may adjudge reasonable, whether incurred before,
during or after such proceeding is commenced and conducted.
(ix) Notice. Any notice, consent, request, objection or communication
to be given by either party to this Agreement shall be in writing and shall
be either delivered personally, by certified mail or by Airborne, Federal
Express or other commercial overnight delivery service addressed as
follows:
If to Buyer, to: Pangolin Corporation
Suite 218
Deer Valley Plaza
1351 Deer Valley Road South
Park City, Utah 84060
With a copy to: Steven W. Dougherty, Esq.
Anderson & Karrenberg
700 Bank One Tower
50 West Broadway
Salt Lake City, Utah 84101-2006
If to Seller, to: U.S. Energy Corp./Crested Corp.
877 N. 8th West
Riverton, Wyoming 82501
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(x) Recording. This Agreement shall not be recorded in the county land
records. However, the Buyer may record notice of this Agreement in such
records. (xi) Counterparts. This Agreement may be executed in any number of
counterparts, each of which, when executed and delivered, shall be deemed
an original, but all of which shall together constitute one and the same
instrument.
15. Assignment. Buyer may, at its option and with written notice to
Seller, assign its rights hereunder to any person or entity who shall assume all
obligations hereunder. Upon such assignment, Buyer shall no longer be obligated
hereunder, whereupon all references herein to Buyer shall be deemed to refer to
said assignee only. Seller shall thereafter attorn to such assignee as buyer
under this Agreement.
16. No Partnership or Agency. Seller and Buyer acknowledge that, by virtue
of this Agreement and the transactions contemplated hereby, Seller and Buyer are
not the agents or partners of each other, and that the transactions contemplated
hereby do not constitute any joint venture or partnership between Seller and
Buyer.
IN WITNESS WHEREOF, Buyer and Seller have executed this Option Agreement on
the date first above written.
BUYER:
Pangolin Corporation
By ___s/ Kitty Bennion_________
Its __Vice President___________
SELLER:
U.S. Energy Corp./Crested Corp.
By ___s/ Michael E. Sweeney____
Its __Vice President___________
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