HomeMy WebLinkAboutL and H Farms-2/22/2010OPTION EXCHANGE AGREEMENT
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THIS OPTION EXCHANGE AGREEMENT is entered into this r day of February,
2010, by and between the City of Waterloo, a municipal corporation ("City"), and L and H
Farms, Ltd., an Iowa general partnership ("LHF").
WHEREAS, City and LHF are entering into an Exchange Agreement contemporaneously
with this Option Exchange Agreement in which City will convey approximately 112 acres of
Black Hawk County agricultural land to LHF in exchange for LHF's conveyance of
approximately 20.4 acres of development land to City; and
WHEREAS, the Exchange Agreement is subject to and conditioned upon City and LHF
entering into this Option Exchange Agreement, and neither party would enter into the Exchange
Agreement without the other party also entering into this Option Exchange Agreement; and
WHEREAS, City and LHF have reached agreement on the terms under which they will
exchange the options contemplated in the Exchange Agreement and desire to incorporate the
terms into this Option Exchange Agreement.
NOW, THEREFORE, in consideration of the mutual covenants herein contained and for
other good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties agree as follows:
Section 1. City's Option to Purchase.
As consideration for the option granted to LHF in Section 2 below, LHF hereby grants City an
option to purchase the development land shaded in blue and depicted on the aerial photograph
attached hereto as Exhibit "B" (legal description to be added to Exhibit "B" upon completion of a
Plat of Survey pursuant to Section 5 below), subject to the following conditions:
A. City must convey like -kind agricultural land to LHF as consideration for LHF's
conveyance of the development land to City;
B. The like -kind agricultural land must be acceptable to LHF in its sole and absolute
discretion;
C. The number of tillable acres of agricultural land that LHF must receive in
exchange for its conveyance of development land to City shall be determined pursuant to the
following formula:
87.9 ; CSR of acceptable agricultural land x 3.21 = the "Exchange Ratio"
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In the above formula, the number 87.9 is the average corn suitability rating (CSR) for the
development land subject to City's option to purchase. Said figure shall be divided by the
average CSR of the replacement agricultural land and then multiplied by 3.21. The figure 3.21 is
the Exchange Ratio agreed upon between City and LHF for agricultural land acceptable to LHF
having an average CSR identical to the development land subject to City's option to purchase
(87.9). City must convey 3.21 tillable acres of acceptable agricultural land with an average CSR
of 87.9 for every tillable acre of development land conveyed by LHF to City pursuant to this
Agreement. The above formula is intended to adjust the Exchange Ratio for variations in the
average CSR for the replacement agricultural land. For example, if the average CSR for the
replacement agricultural land is 84.5, then the Exchange Ratio for the transaction between City
and LHF is adjusted to 3.34. In other words, City must convey 3.34 tillable acres of agricultural
land to LHF in exchange for every tillable acre of development land conveyed by LHF to City
pursuant to City's exercise of its option.
D. City's option to purchase the development land from LHF shall remain in effect
for a period of eight (8) years from and after the date this Option Exchange Agreement is
approved by the City Council for City.
E. City shall not be required to purchase all of the development land subject to its
option in a single purchase. City may exercise its purchase option on multiple occasions through
the purchase of portions of the development land provided that each exercise must occur before
City's option lapses.
F. Each successive purchase by City shall be for land contiguous to land previously
acquired by City from LHF.
G. If City purchases all of the development land subject to its option, it is likely that
the final exchange between City and LHF will result in LHF receiving more or less tillable acres
of agricultural land than it is entitled to pursuant to the Exchange Ratio applicable to the
exchange based upon the formula set forth in subparagraph C above, since finding a parcel of
agricultural land acceptable to LHF with precisely the number of tillable acres that LHF is
entitled to under the terms of this Agreement is unlikely. In that event, LHF will pay cash to City
for any excess tillable acres received by LHF in the exchange, or City will be required to pay
cash to-LITF-foranyshortfall in -tillable acres. The amoun of cash consideration due from one
party to the other will be determined by multiplying the purchase price per tillable acre for the
replacement agricultural land times the excess number of tillable acres received by LHF or the
shortfall in tillable acres.
H. Each transaction must be structured in a manner that qualifies the exchange for
like -kind exchange treatment under Internal Revenue Code (IRC) §1031, and only City's final
acquisition of the development land shall involve any cash consideration.
Section 2. LHF's Option to Compel a Purchase of Its Land.
As consideration for the option granted to City in Section 1 above, City grants LHF an option to
put any of the development land that remains =purchased by City at the time City's option to
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purchase the development land lapses in 8 years. For a period of 8 years after the lapse of City's
option to purchase the development land, LHF shall have the right to require City to purchase any
unpurchased development land which was previously subject to City's purchase option pursuant
to Section 1 above. If LHF is able to identify suitable replacement agricultural land within the 8 -
year period following the lapse of City's option, LHF shall have the right to require City to
purchase said agricultural land for the purpose of exchanging the agricultural land with LHF for
all or part of the remaining development land. LHF shall not be required to put all of its
remaining development land in a single exercise of the option provided for herein. LHF may
exercise its option on multiple occasions by requiring City to acquire portions of the
development land in exchange for acceptable agricultural land. The Exchange Ratio will be
determined using the same formula set forth in Section 1 above for City's exercise of its purchase
option. The final exchange between LHF and City pursuant to LHF's exercise of the option to
put granted herein may result in LIF receiving more or less tillable acres than it is entitled to
pursuant to the applicable Exchange Ratio since finding a parcel acceptable to LHF with
precisely the number of tillable acres that LHF is entitled to in exchange for the last parcel of
development land is unlikely. In that event, LHF will pay cash to City for any excess tillable
acres received by LHF, or City will be required to pay cash to LHF for any shortfall in tillable
acres. The amount of cash consideration will be determined by multiplying the price per tillable
acre times the excess (or shortfall) in tillable acres.
Section 3. Exchanges.
Each transaction contemplated herein shall be structured to qualify for like -kind exchange
treatment under IRC §1031. The parties agree to execute any additional documents required to
allow the transactions to so qualify. LHF agrees to bear any expenses associated with document
preparation necessary to qualify the contemplated transactions for like -kind exchange treatment.
Section 4. Conveyances.
City agrees to require the owners of any replacement agricultural land acceptable to LHF to
convey the replacement agricultural land directly to LHF by warranty deed as consideration for
LHF's conveyance of the development land to City by warranty deed. Title shall be merchantable
title in accordance with the Iowa Title Standards. All liens or clouds on title shall be removed
prior -to completing the exchanges. If title cannot be made ilthantAble within a reasonable
period of time, the exercise of the options provided for herein shall be rendered null and void;
however, the options shall remain in effect provided they have not lapsed through the passage of
time.
Section 5. Surveys.
LHF shall have the right to procure the surveys necessary to provide a legal description for the
land subject to City's option, said legal description to be incorporated into Exhibit "B", and any
additional surveys of the development land necessary to complete the transactions
contemplated herein. City shall reimburse LHF the cost of procuring the plats of survey. Any
plats of survey necessary to complete the transactions contemplated herein shall be filed in the
office of the Black Hawk County Recorder prior to completion of the exchanges.
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Section 6. Abstracting.
City shall provide counsel for LHF with an updated abstract of title for any agricultural land
to be conveyed to LBF in exchange for its development land pursuant to the terms of this
Agreement. Legal counsel for LHF shall examine the abstract of title and confirm that the current
titleholder of the replacement agricultural Land possesses marketable title to the real estate as
required by this Agreement. LHF will provide City with abstracts of title for any and all
parcels of development land City acquires from LHF. City will reimburse LHF the cost of
procuring the abstract of title for City. Legal counsel for City shall examine the abstract of
title and confirm that LHF possesses marketable title to the land to be acquired by City.
Section 7. Other Closing Costs.
Each of the parties agrees to pay any closing costs not specifically addressed herein in the manner
customarily paid by buyers and sellers as part of real estate transactions in the State of Iowa.
Section 8. Option to Rent.
Lanehaven Farms, Inc., shall be entitled to rent any and all undeveloped portions of the
development land purchased by City at an annual rent of $190 per acre. Rent shall be payable in
December of each calendar year.
Section 9. Notices.
All notices, requests, demands, directions and other communications required or permitted to be
given pursuant to this Agreement shall be valid if in writing and if delivered personally, or sent
by certified or registered mail, return receipt requested, postage prepaid and addressed as follows:
To City:
To LHF:
Section 10. Amendments.
The City of Waterloo, a municipal corporation
Attention: Mayor
Attention: City Clerk
315 Mulberry Street
Waterloo,, Iowa50703 — —
L and H Farms, Ltd., an Iowa general partnership
Lanehaven Farms, Inc., Partner
Attention: President
7052 Hammond Avenue
Waterloo, Iowa 50702
This Agreement may not be modified except in a written instrument signed by the parties.
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Section 11. Enforceability.
This Agreement shall bind and inure to the benefit of the parties hereto and their respective
successors, executors, personal representatives and assigns. No party to this Agreement may
assign their/its rights or interests hereunder without the prior written consent of each of the other
parties.
Section 12. Counterparts.
This Agreement may be executed simultaneously in two or more counterparts, each of which
shall be deemed an original, but all of which taken together shall constitute one and the same
document.
Section 13. Limitation of Rights.
With the exception of the rights herein expressly conferred, nothing expressed in this Agreement
is intended or shall be construed to give to any person or entity, other than the parties hereto, any
legal or equitable right, remedy or claim under or in respect to this Agreement or any covenants,
agreements, conditions and provisions herein contained, this Agreement and all of the covenants,
agreements, conditions and provisions hereof being intended to be and being for the sole and
exclusive benefit of the parties hereto.
Section 14. Severability.
If any provision of this Agreement shall be held or deemed to be or shall, in fact, be inoperative
or unenforceable as applied in any particular case in any jurisdiction orjurisdictions or in all
jurisdictions, or in all cases because it conflicts with any other provision or provisions hereof or
any constitution or statute or rule of public policy, or for any other reason, such circumstances
shall not have the effect of rendering the provision in question inoperative or unenforceable in
any other case or circumstance, or of rendering any other provision or provisions herein
contained invalid, inoperative, or unenforceable to any extent whatever.
[Signature page follows.]
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IN WITNESS WHEREOF, City and LHF have each caused this Agreement to be
executed, sealed and delivered as of the day and year first above written.
THE CITY 1, WATERLOO, A MUNICIPAL CORPORATION
By:
Ernest G. Clark, Mayor
By: -
Suzy Schb.res, City Clerk
LANEHAVEN FARMS, INC., Partner
By:
Curtis G. Hollis, President
THE HURST HOLDING COMPANY, INC., Partner
By:
Richard H. Hurst, President
By:
Donald 5. Hurst, Secretary
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STATE OF IOWA )
) ss.
COUNTY OF BLACK HAWK )
This instrument was acknowledged before me on the day of ,
2010, by Ernest G. Clark as Mayor and Suzy Schares as City Clerk of the City of
Waterloo, Iowa, an Iowa municipal corporation.
Notary Public in and for Black Hawk County, Iowa
STATE OF IOWA )
) ss.
COUNTY OF BLACK HAWK )
This instrument was acknowledged before me on the day of
2010, by Curtis G. Hollis as President and General Partner of L and H Farms, Ltd., an
Iowa general partnership.
Notary Public in and for Black Hawk County, Iowa
STATE OF IOWA )
) ss.
COUNTY OF-BLA K HAWK )
This instrument was acknowledged before me on the day of
2010, by Richard H. Hurst and Donald J. Hurst as President and Secretary respectively
of The Hurst Holding Company, Inc., an Iowa corporation.
Notary Public in and for Black Hawk County, Iowa
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