EXHIBIT 10.11
OPTION TO PURCHASE
MINERAL LEASE
Prepared by:
Xxxxx X. Xxxxx
Attorney at Law
X.X. Xxxxxx X
Xx. Xxxxxx, Xxxxxxxx 00000
OPTION TO PURCHASE MINERAL LEASE
This option to purchase Mineral Lease (herein "this Option") is made this
3rd. day of November, 2003, by and between the COUNTY OF CLINTON OF THE STATE OF
ILLINOIS, Clinton County Courthouse, 000 Xxxxxxx Xxxxxx, Xxxxxxx, Xxxxxxxx
00000, (herein "Optionor") and BPI INDUSTRIES, INC., of 000 Xxxx XxXxxxx Xxxxxx,
Xxxxxx, Xxxxxxxx, 00000, (herein "BPI").
WHEREAS, Optionor may own all or a portion of the coal bed methane, coal
seam gas, all gas desorbed from coal or captured in the coal seam, and all gas
in abandoned mines, void spaces, and zones in communication therewith, as to the
following described lands (herein "Coal Bed Gas"); and,
WHEREAS, Optionor may own all or a portion of the oil, liquid
hydrocarbons, all gases and their constituent products (except Coal Bed Gas as
defined herein) as to the following described lands (herein "Oil and Gas"); and,
WHEREAS, for purposes of this Option, the Coal Bed Gas and the Oil and Gas
may be referred to jointly as ("the Minerals"); and,
WHEREAS, in addition to owning a possible interest in the Minerals,
Optionor would also own the right to explore, drill for, and produce the
Minerals; and,
WHEREAS, Optionor desires to grant to BPI and BPI desires to receive from
Optionor, an Option to purchase a Mineral Lease as to Optionor's interest in the
Minerals; and,
WHEREAS, in the event the Option is timely exercised by BPI, the Option
shall be consummated by the execution and delivery by Optionor to BPI of a
Mineral Lease in the form as attached hereto as Exhibit A (herein the "Mineral
Lease"); and,
-1-
WHEREAS, Optionor and BPI desire to enter into this writing for purposes
of setting forth the terms and conditions of this Option.
NOW, THEREFORE, for and in consideration of the foregoing recitals, the
mutual benefits to be derived herefrom and One Dollar and other valuable
consideration, Optionor and BPI agree as follows:
1. OPTION.
For and in consideration of THIRTY THREE THOUSAND DOLLARS
($33,000.00), herein "the Option Payment"), the receipt of which is hereby
acknowledged, Optionor gives and grants to BPI the exclusive option to obtain a
Mineral Lease corresponding to Optionor's interest in the Minerals pursuant to
and upon the terms and conditions as set forth herein. In the event the Option
is exercised, the Option Payment shall be applied to any amounts that may be due
and owing pursuant to the Mineral Lease.
2. PERIOD OF OPTION.
This Option may be exercised by BPI by giving notice of the exercise
thereof (herein the "Option Notice") to Optionor at any time during the period
from the date of this Option until the (insert date to 24 months) 3rd. day of
November, 2005, at 12:00 o'clock, P.M., (herein the "Exercise Period"). Notice
shall be given and may be sent by personal delivery or by depositing the same in
the United States Mail addressed to Optionor, postage prepaid and registered or
certified with return receipt requested with notice being deemed to have been
given and received upon the date of BPI's posting in the United States Mail as
shown on the postal receipt or the date of personal delivery if delivered in
this manner. In the alternative, the notice may be given by prepaid courier
service addressed to Optionor and requiring the signature of Optionor upon
delivery with said notice being deemed to have been given and received upon the
date of BPI's delivery to the courier service as shown on the signed receipt of
the courier service.
3. MINERAL LEASE.
Contemporaneous with the execution of this Option, Optionor executes
the Mineral Lease in the form as set forth on Exhibit A attached hereto. In the
event this Option is timely exercised as provided herein, BPI shall execute the
Mineral Lease and said lease shall be deemed delivered to BPI and shall cover
and be effective as to all interest of Optionor in the Minerals as of the date
of this Option.
4. REVIEW DURING EXERCISE.
During the Exercise Period of the Option, Optionor will cooperate
with BPI for purposes of determining the title of Optionor as to the Minerals
and for purposes of conducting field tests as to the Minerals. Optionor, upon
request, shall provide to BPI all title materials corresponding to Optionor's
interest in the Minerals. Optionor shall also cooperate with BPI in providing
access to the Minerals for purposes of conducting any test deemed necessary by
BPI to determine the extent and nature of the Minerals. Such testing may include
the utilization of the surface corresponding to the Minerals, the drilling for
core samples or for the conducting of seismic, and other operations pertaining
thereto. BPI shall indemnify and hold Optionor harmless from any claim for
damages that may be asserted against Optionor with respect to BPI's operations
pursuant to the matters set forth in this paragraph.
-2-
5. MEMORANDUM OF OPTION:
Optionor and BPI shall execute a memorandum of this option and
record the same in the County Clerk and Recorder's Office in the county where
the Minerals are located. All parties dealing with Optionor with respect to the
Minerals shall deal and take any interest subject to the rights of BPI and the
obligations of Optionor as set forth herein.
6. SUCCESSION OF ASSIGNMENT.
This Option and the Mineral Lease resulting from the exercise
thereof shall be binding upon and inure to the benefit of the parties hereto
together with their successors and assigns. All rights of the parties under this
Option may be assigned without restriction but notice of such assignment should
be given in writing to the other party.
EXECUTED the day and year above written.
OPTIONOR
CLINTON COUNTY, ILLINOIS
BY /s/ Xxx Kloeckrer
---------------------------
Its
----------------------
BPI
BPI INDUSTRIES, INC.
BY /s/ Xxxxx Xxxxxx
---------------------------
Its President
-3-
MINERAL LEASE
Prepared by:
BPI Industries, Inc.
000 Xxxx XxXxxxx Xxxxxx
Xxxxxx, Xxxxxxxx 00000
MINERAL LEASE
This Mineral Lease (herein "this Lease") is made and entered into this
3rd. day of November, 2003, by and between CLINTON COUNTY, ILLINOIS, Clinton
County Courthouse, 000 Xxxxxxx Xxxxxx, Xxxxxxx, Xxxxxxxx 00000, (herein the
"Lessor"), and BPI INDUSTRIES, INC., of 000 Xxxx XxXxxxx Xxxxxx, Xxxxxx,
Xxxxxxxx 00000, (herein the "Lessee").
THIS INDENTURE WITNESSETH:
1. The Lessor, for and in consideration of Ten Dollars and other valuable
consideration, the receipt of which is hereby acknowledged, and for and in
consideration of the covenants and agreements herein provided on the part of the
Lessee, has granted, demised, leased, and let, and by these presents does grant,
demise, lease and let unto Lessee, all of Lessor's title and interest, but only
to the extent in fact actually legally owned or held by Lessor, in the Coal Bed
Gas (as herein defined) and the Oil and Gas (as herein defined) underlying the
following described land:
See Attached Exhibit For Legal Descriptions
"Coal Bed Gas" shall mean herein all coal bed methane, coal seam gas, all
gas desorbed from coal or captured in the coal seam, all gas produced from
abandoned mines, void spaces, and zones in communication therewith and all
associated hydrocarbons contained therein, with the right to investigate,
explore, drill, operate, produce, save, take care of, treat, process, and
transport, and market the Coal Bed Gas.
"Oil and Gas" shall mean all oil, liquid hydrocarbons, gases, and their
constituent produces except for Coal Bed Gas together with the right to
investigate, explore, drill, operate, produce, save, take care of, treat,
process, and transport and market the Oil and Gas
Lessor excludes and expressly reserves the right to explore for, mine,
operate, produce, remove or market coal and other hard minerals. The right to
explore for, mine, operate, produce,
1
remove and market coal and other hard minerals shall not interfere with any
operation by Lessee with respect to Coal Bed Gas or Oil and Gas.
For purposes of this lease, Coal Bed Gas and Oil and Gas may jointly be
referred to as "Minerals".
2. For the same consideration as set forth above, Lessor grants, demises,
leases, and lets to Lessee the right (a) to use the seismograph and other
geophysical and geological methods of exploration; (b) to inject gas, water, and
other fluids and air into the subsurface strata; (c) to lay pipelines, establish
and utilize facilities for the disposition of produced substances; (d) to build
roads, bridges, tanks, utility lines, power stations and other structures; (e)
to undertake recovery by primary and secondary or other methods; (f) to have the
right of ingress and egress as to lands described herein or other lands under
lease to Lessee; and (g) to utilize the surface to the extent of Lessor's title
for all purposes as described herein.
3. This Lease shall and does include all lands and interest therein
contiguous to or appurtenant to the lands specifically described herein, and
owned or claimed by Lessor including all interest in which Lessor has a
preferential right of acquisition or acquires by reversion or otherwise, whether
or not specifically described herein. This Lease shall also include all lands
underlying all alleys, streets, roads or highways and if the land is riparian
to, bounds, or embraces within its boundaries a stream, lake, or other body of
water, then all of Lessor's interest in the lands under said bodies of water and
all area now or hereafter added by accretion. This Lease shall cover all
interest in the lands covered hereby now owned or hereafter vested in or claimed
by Lessor.
4. This Lease shall remain in force for a primary term of five (5) years
from the date hereof and as long thereafter as Minerals, or any of them, are
being produced from the lands described herein or land with which said land is
pooled or unitized.
5. If operations for the exploration of Minerals are not commenced on the
lands described herein or on land pooled therewith on or before one year from
the date of this Lease, Lessee shall pay or tender to Lessor an advance royalty
computed based upon 50 cents per net acre of Coal Bed Gas interest (with
ownership based on coal record title) and 50 cents per net acre of Oil and Gas
interest (with ownership based on oil and gas record title) owned by Optionor
which shall cover the privilege of deferring commencement of such operations for
a period of 12 months. In like manner and upon like payments or tenders on an
annual basis thereafter, the commencement of said operations may be further
deferred for successive periods of the same number of months, each during the
primary term. Payment or tender of the advance royalty shall be made to the
Lessor at the following address:
Clinton County Treasurer
Clinton County Courthouse
000 Xxxxxxx Xx.
Xxxxxxx, XX 00000
The payment or render of the advance royalty may be made by check, draft, or
other means of payment and mailed or delivered to Lessor or either Lessor, if
more than one, on or before the advance royalty payment date. Notwithstanding
the death of the Lessor or Lessor's successors in
2
interest, the payment or tender of advance royalty in the manner provided herein
shall be binding on the successors and assigns of the Lessor or Lessor's
successors in interest. All advance royalties paid by Lessee shall be recouped
from actual royalties which may be due and owing to Lessor and which royalties
correspond to production.
6. If, prior to the discovery of Minerals, or any of them, on the lands
described herein or on land pooled therewith, Lessee should drill and abandon a
dry hole or holes thereon, or if, after discovery of Minerals, or any of them,
the production thereof should cease from any cause for 120 consecutive days,
this Lease shall not terminate if Lessee commences additional drilling or
reworking operations within 120 days thereafter or (if it be within the primary
term) commences or resumes the payment or tender of advance royalties on or
before the advance royalty paying date next ensuing after the expiration of 12
months from the date of completion and abandonment of said dry hole or holes or
the cessation of production as defined herein. If at the expiration of the
primary term, Minerals, or any of them, are not being produced on the lands
described herein or land pooled therewith but Lessee is then engaged in
operations for drilling or reworking of any well or xxxxx thereon, this Lease
shall remain in full force so long as such operations or said additional
operations are commenced and prosecuted, (whether on the same or successive
xxxxx) with no cessation of more than 120 consecutive days and if they result in
production, so long thereafter as Minerals or any of them are produced from the
lands described herein or lands pooled therewith.
7. The Lessee shall pay to the Lessor the following royalties:
(a) One-Eighth (1/8) of the amount realized by Lessee from the
sale of Coal Bed Gas. The payment of this royalty shall be
based upon the assumption that the interest of Lessor in the
Coal Bed Gas is based upon Lessor's ownership of the coal as
to the lands described herein. The royalty provided for herein
shall be paid notwithstanding any future determination as to
the ownership of coalbed gas by any court decision, statute or
otherwise.
(b) One-eighth (1/8) of the oil and liquid hydrocarbons within the
Oil and Gas produced and saved with the same to be delivered
at the well or to the credit of the lessor in the pipeline to
which a well may be connected, based upon Lessor's ownership
of the oil within the Oil and Gas as to the lands described
herein.
(c) The market value at the mouth of the well of one-eight (1/8)
of the gas within the Oil and Gas sold or used or one-eight
(1/8) of the amount realized from the sale thereof at the
well, based upon Lessor's ownership of the gas within the Oil
and Gas as to the lands described herein.
8. If at any time there is a well or xxxxx on the lands which are capable
of producing Coal Bed Gas or gas within Oil and Gas and such well or xxxxx are
shut in, and if this Lease is not being continued in force by some other
provision hereof, then this Lease shall nevertheless continue in force for a
period of 90 days from the date such well or xxxxx are shut in and before the
expiration of any such 90 day period, Lessee may pay or tender an advance annual
royalty payment of $100.00 for each such well and if such payment or tender is
made, this Lease shall
3
continue in force and it shall be considered that Coal Bed Gas and gas within
Oil and Gas are being produced within the meaning of paragraph 4 hereof for one
year from the date such payment is made in a like manner, subsequent advance
annual royalty payments may be made or tendered and this Lease shall continue in
force and it should be considered that Coal Bed Gas and gas within Oil and Gas
are being produced within the meaning of paragraph 4 during any annual period or
which such royalty payment is so paid or tendered. Notwithstanding the
foregoing, payment of the aforedescribed royalties for any shut-in well or xxxxx
shall not exceed a period of 5 years. Perpetuation of this Lease by payment of
royalty as provided in this paragraph shall be in lieu of payment of advance
royalties as provided in paragraph 5 above. In addition, payment of any royalty
pursuant to this paragraph shall be recouped by Lessee from any royalty payment
otherwise payable to Lessor pursuant to actual production of Minerals or any of
them.
9. Lessee is granted the right to pool or unitize this Lease, the land
covered hereby or any part thereof, with other land or leases or parts thereof
for the production of Minerals, or any of them, covered hereby. No production
for Coal Bed Gas or gas with Oil and Gas shall embrace more than 160 acres plus
a tolerance of 10% thereof. No production for oil within Oil and Gas shall
embrace more than 80 acres plus a tolerance of 10% thereof. Notwithstanding, if
any federal or state law, executive order, rule, or regulation shall prescribe a
spacing pattern for the development of the field or allocate a producing
allowable on acreage per well, then any such unit may embrace as much additional
acreage as may be so prescribed or as may be used in such allocation or
allowable. Lessee shall execute in writing an instrument identifying and
describing the pooled or unitized acreage. Such unit shall be designated either
before or after the completion of any xxxxx. Operations and production on any
part of the pooled or unitized acreage shall be treated as if such operations
were upon or such production was from the land described in this Lease whether
the well or xxxxx be located on the land covered by this Lease or other lands.
The entire acreage so pooled into a unit shall be treated for all purposes,
except for the payment of royalties on production from the pooled or unitized
lands, as if it were included within this Lease. In lieu of the royalties herein
provided, Lessor shall receive on production from a unit so pooled or unitized
only such proportion of the royalty stipulated herein as the amount of Lessor's
acreage placed in the unit or Lessor's royalty interest therein on an acreage
basis bears to the total acreage so pooled or unitized.
10. Lessee shall have the right to use, free of costs, all Minerals
covered by this Lease for all operations hereunder except for water from
Lessor's xxxxx or tanks. Any royalty payment to the Lessor shall be computed
after deducting any amount so used. When requested by Lessor, Lessee shall bury
all pipelines below plow depth. Lessee shall pay for all damages caused by
Lessee's operations to growing crops on the land. The amount of any such damage
payment shall be based upon the fair market value of the actual crops destroyed.
Lessee shall have the right at any time to remove any equipment, property, or
fixtures placed on the land by Lessee together with the right to draw and remove
all casing and other downhole equipment.
11. The rights of either party to this Lease may be assigned in whole or
in part and the provisions hereof shall extend to the successors and assigns of
the parties but no change or division in ownership of the Minerals covered
hereby with respect to the lands or royalties, however accomplished, shall
operate to enlarge the obligations or diminish the rights of Lessee or require
the installation of separate measuring tanks or devices. No such change or
division in
4
the ownership of the Minerals in the lands or royalties shall be binding upon
Lessee for any purpose until such person acquiring any interest has furnished
Lessee with the instrument or certified copies thereof constituting said
person's chain of title from the original Lessor. Any assignment of this Lease
by Lessee, in whole or in part, shall, to the extent of such assignment, relieve
and discharge Lessee of any obligations hereunder and if any Assignee of any
part or parts hereof shall fail to comply with any provisions of this Lease,
such default shall not affect this Lease insofar as it covers the part retained
by Lessee or another assignee.
12. In the event Lessor considers that Lessee has not complied with its
obligations hereunder, both express and implied, including the obligation of
production as provided in paragraph 4, Lessor shall give written notice to
Lessee setting forth specifically in what respects Lessee has failed to comply
with Lessee's obligations pursuant to this Lease. Lessee shall then have 60 days
from receipt of such notice to commence and thereafter pursue with reasonable
diligence such action as may be necessary or proper to satisfy the obligation of
Lessee, if any, with respect to Lessor's notice. Neither the service of the
notice nor the doing of any acts by Lessee intended to satisfy any of the
alleged obligations shall be deemed an admission or presumption that Lessee has
failed to perform all of its obligations hereunder. No judicial action may be
commenced by Lessor with respect o any of said obligations until after the 60
day period as provided herein. Lessee shall be given a reasonable opportunity
after judicial ascertainment to prevent the forfeiture or termination of this
Lease by discharging its express or implied obligation as established by the
court.
13. Lessor warrants and agrees to defend title to the Minerals covered
hereby as to the lands and agrees that Lessee, at its option, may discharge any
tax, mortgage, or other lien upon the interest and in the event Lessee does so,
it should be subrogated to such lien with the right to enforce same and apply
royalties accruing hereunder towards satisfying the same. Without impairment of
Lessee's rights under the warranty in the event of failure of title, it is
agreed that, if Lessor owns an interest in the Minerals covered hereby as to the
lands less than the entire fee simple estate, then the royalties and other
payments to be paid lessor shall be reduced proportionately. This Lease shall be
binding upon all who execute it and they shall be considered lessors, whether or
not they are named in the granting clause hereof and whether or not all parties
named in the granting clause execute this Lease.
14. To the extent that Lessor owns no interest in the surface as to the
lands described herein, the provisions set forth herein with respect to surface
obligations shall not be applicable except to the extent as may be required by
law.
15. Lessee may at any time surrender this Lease as to all or any part
thereof by delivering or mailing a release to Lessor and if surrendered only as
to a part thereof, any payments based upon acreage shall be reduced
proportionately.
16. Lessee shall comply with all applicable federal, state, and local law,
statutes, ordinances, regulations, and orders applicable to Lessee's operations
and the conditions created thereby.
17. When any operation contemplated by this Lease is delayed or
interrupted as a result of any cause whatsoever beyond the control of Lessee or
any event of force majeure, or as a
5
result of any state, federal, or municipal law, ordinance, executive order,
rule, or regulation, then the time for such delay or interruptions shall not be
counted against Lessee as to any timeframe required by this Lease. Lessee shall
not be held liable in damages because of any such delay or interruption.
18. In the event the interest of the Lessor as to the Coal Bed Gas is
based upon Lessor's ownership of a coal interest, and in the event the coal
interest is the subject of a coal mining lease or other agreement authorizing
the mining and removal of coal, the Lessor acknowledges that the operations for
the mining and removal of coal may involve the venting of Coal Bed Gas into the
atmosphere as a waste product for the protection and efficiency of the mining
operation. Lessee shall have no obligation to recover any gas as may be vented
during such coal development and Lessee shall have no liability or obligation to
Lessor for any royalties on such vented gas. The parties further acknowledge
that Coal Bed Gas may be vented and lost during repairs to or the testing of
xxxxx or prior to the connection of any xxxxx to gathering and/or transmission
lines in conjunction with Lessee's operations. Under such circumstances, Lessee
shall not be liable or obligated to Lessor for any royalties on such vented and
lost gas.
19. Lessor shall pay a proportionate part of any and all taxes levied or
assessed upon the production of Minerals covered hereby and Lessee is authorized
to pay such taxes and assessments on behalf of Lessor and to deduct the same so
paid from any monies otherwise payable to the Lessor. Lessor's proportionate
part shall correspond to the amount of royalty corresponding to Lessor's
interest in the Minerals.
20. This Lease shall be binding upon and inure to the benefit of the
parties hereto together with their successors and assigns. To the extent that
the interest covered by this Lease constitutes any part of the homestead estate
of Lessor, then the Lessor releases and waives all rights under and by virtue of
the homestead exemption laws of the State of Illinois.
EXECUTED the day and year above written.
XXXXXX
XXXXXXX COUNTY, ILLINOIS
BY /s/ Xxx Kloeckrer
-----------------------
Its
-------------------
LESSEE
BPI INDUSTRIES, INC.
BY /s/ Xxxxx Xxxxxx
-----------------------
Its President
6
