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EXHIBIT 10.12
OPTION TO PURCHASE
MINERAL LEASE
Prepared by:
Craig R.
Hedin
Attorney at
Law
P.O. Drawer
C
Mt. Vernon,
Illinois 62864
OPTION TO PURCHASE MINERAL LEASE
This option to purchase Mineral Lease (herein "this Option") is
made
this 9th day of September, 2003, by and
between THE COUNTY OF WASHINGTON, OF THE
STATE OF ILLINOIS, (herein "Optionor") and
BPI INDUSTRIES, INC., of 501 East
DeYoung Street, Marion, Illinois, 62959,
(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,
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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,
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 FIFTY THOUSAND DOLLARS
($50,000.00), 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, Fifty Percent (50%) of the
Option Payments 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 36 months) 9th day
of September, 2006, 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
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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.
5. ADDITIONAL RIGHTS
In the event that this options is exercised as provided
herein, BPI agrees that it is BPI's sole
responsibility to negotiate any
additional surface rights required for
BPI's operations and further that
Washington County shall have no involvement
in those negotiations.
6. 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.
7. 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
WASHINGTON COUNTY, ILLINOIS
BY /s/
David A. Meyer
----------------------------
Its Chairman
----------------------------
OPTIONEE
BPI INDUSTRIES, INC.
BY /s/ James
Azlein
----------------------------
Its President
----------------------------
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MINERAL LEASE
This Mineral Lease (herein "this Lease") is made and entered into
this
____ day of __________, 200_, by and
between THE COUNTY OF WASHINGTON OF THE
STATE OF ILLINOIS, Washington County
Courthouse, Nashville, Illinois 62263
(herein the "Lessor"), and BPI INDUSTRIES,
INC., of 501 East DeYoung Street,
Marion, Illinois 62959, (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. It being
distinctly understood and agreed that the
mining and removal of coal by any
method, now known or which may hereafter be
developed, and the transportation
thereof to market is of prime importance to
Lessor and that the coal measures
and seams in, upon and under said lands and
the mining, removal, and
transportation thereof, are, and shall
continue to be, the dominant estate and
the coal bed methane estate therein and the
extraction, mining, removal and
transportation thereof are made servient
thereto. To that end, Lessor
particularly reserves the right to enter
into coal mining leases without the
concurrence of Lessee and Lessee in its
operations shall not interfere or
conflict with the operations of any of said
coal mining lessees, sublessees,
assignees or other contractors under their
respective leases or contracts
relating thereto whether such coal mining
leases are in effect prior to or
subsequent to the effective date of this
mineral lease, with each coal mining
lessee having the absolute right to
terminate, suspend, idle, modify or continue
its coal mining operations in accordance
with its respective agreements with
Lessor, without liability for loss or
damage to Lessee.
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Any Coal Mining Lessees shall have the right to mine through
any
coalbed methane well when necessary for the
conducting of its mining activity.
At least 90 days prior to mining within 200
feet of any coalbed methane well,
any Coal Mining Lessee shall notify the
Lessee in writing if the well must be
plugged for mine through. The lessee, at
its sole cost, will plug said well
within 90 days of receipt of such written
notice.
If a well is not required to be plugged for mine-through, but
mining is
to occur within 100 feet of the wellbore,
any Coal Mining Lessee shall so notify
Lessee in writing 90 days prior to mining
within 100 feet of the well and within
said 90 day period Lessee shall, at it own
expense, temporarily plug the well at
a point below the seam being mined but
above the next lower coalbed methane
producing zone and the well will be vented
to the atmosphere until mining has
passed. Upon the Coal Mining Lessee's
operations proceeding at least 200 feet
past the well, the Lessee, at its expense,
shall, if practicable remove the
temporary plug and attempt to restore
production from the well. Lessee agrees to
comply with all local, state and federal
regulations.
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 for
