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EXHIBIT 10.8
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
10TH. day of October 10, 2002, by and
between the COUNTY OF MONTGOMERY,
ILLINOIS, with and address of Montgomery
County Courthouse, Hillsboro, 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,
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,
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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 FORTY ONE THOUSAND FIVE HUNDRED
DOLLARS
($41,500.00), 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
14th.. day of July, 2004, 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.
The
Exercise Period may be extended, at BPI's sole discretion, for
a
period of 540 days. The Exercise Period may
be so extended by BPI paying to the
optionor the sum of FIFTY ONE THOUSAND
SEVEN HUNDRED DOLLARS ($51,700.00) on or
before 5:00 P.M., on the last day of the
Exercise Period. If said payment is
timely made, then the Exercise Period, as
provided herein, shall continue and be
extended until 5:00 P.M. on the 540th day
from the last day of the Exercise
Period.
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
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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.
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
MONTGOMERY COUNTY, ILLINOIS
BY /s/ Mike Havera
---------------------------------
ITS
---------------------------
OPTIONEE
BPI INDUSTRIES, INC.
BY /s/ James Azlein
---------------------------------
ITS President
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MINERAL LEASE
Prepared by
and
Return to:
Dan J. Anderson
BPI Industries, Inc.
501 East DeYoung Street
Marion, Illinois 62959
MINERAL
LEASE
This
Mineral Lease (herein "this Lease") is made and entered into
this
______ day
of _____________, 2003, by and between the COUNTY OF
MONTGOMERY, ILLINOIS, with the address of Montgomery County
Courthouse,
Hillsboro,
Illinois (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:
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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 or
its assigns hereby excludes and expressly reserves the right to
explore
for, mine, operate, produce, remove or market coal and other
hard
minerals.
It is
agreed that the right of Lessor or its assigns to explore for,
mine,
operate,
produce, remove and market coal or other hard minerals shall
take
precedence and that BPI's rights
hereunder shall be subordinate to those
mining
rights. BPI's operations shall not interfere with any operations
by
Lessor or
it's assigns with respect to the coal and other hard minerals.
Coal
Mining Operations. Lessee acknowledges that the coal and other
hard
minerals
located in and under the land, and the right to mine and remove
the same,
are of great value and importance to Lessor and its lessees
("Mineral
Tenants"). The right to mine and remove said coal and other
hard
minerals,
whether by underground methods, surface-mining methods, or
other
methods,
shall be paramount to all rights granted to Lessee hereunder.
There are
excepted from the Land and the Depth and from the mining and
appurtenant rights, waivers and immunities granted to Lessee
hereunder,
and hereby
reserved to Lessor, the right drill and maintain openings
through
the Land and the Depth for purposes of exploring for,
developing,
working,
mining, removing, shipping and transporting any and all coal,
clay and
other hard minerals under and within the Land. Lessee shall use
composite
casing in conjunction with its operations. Within sixty (60)
days after
receiving notice from a Mineral Tennant under such leases that
any
operation being conducted or facility being maintained by Lessee
has
or within
ninety (90) days will become an interference with the coal
mining
operations of a Mineral Tenant under such leases, Lessee shall,
at
Lessee's
expense, take such steps as may be required to eliminate or
prevent
such interference, including the plugging of wells and/or
removal
of such
facilities in order to provide for mine-through conditions in
accordance
with applicable laws. In the event lessee plugs any wells
pursuant
to its operations which have not previously been the subject of
a
notice
from a Mineral Tenant, said wells shall be plugged in such a
manner
so as to
provide for mine-through conditions in accordance with
applicable
laws.
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Because full extraction mining (e.g.
longwall) may be used and subsidence may
result, Lessee agrees that all surface
facilities (including pipelines) will
either be designed to withstand the effects
of subsidence or will be removed
prior to mining or left in place but with
no liability to Mineral Tenant if
damage occurs.
Lessee further agrees that:
Lessor shall be notified of any proposed well location, and if
Lessor is the surface owner, Lessor shall have the right to
approve
any roads, equipment and facility locations, pipelines and all
other
improvements required by Lessee hereunder;
Lessee shall use its best efforts to drill holes and maintain
wells
as close to the vertical as possible and shall furnish Lessor
with
information (including without limitation, downhole surveys)
concerning the locations of all holes in the seam and all holes
on
the adjacent Land and adjacent properties if Pooling and
Unitization
is used;
Lessee shall make every effort to prevent infiltration of oil
and
gas, brine, water, and other fluids into any workable coal seam
except by way of an initial hydraulic "frac treatment" and any
breach in the integrity of the well shall be rectified by the
Lessee
as soon as possible;
After bonding or providing other security in accordance with
all
Laws, Lessee shall plug all abandoned wells in strict
accordance
with all Laws;
Lessee shall protect the Land from drainage as a reasonable and
prudent operator and drill such offsetting wells as a reasonable
and
prudent operator in the same or similar circumstances.
Water Disposal. Lessor grants to Lessee the
right to dispose of water in the
association with production of Covered
Hydrocarbons from wells drilled pursuant
to this agreement. Those rights are limited
to water thus produced and Lessee
shall not be permitted to dispose of
