EXHIBIT 10.17
MINERAL LEASE
Prepared by:
BPI Industries, Inc.
501 East DeYoung Street
Marion, Illinois 62959
MINERAL LEASE
This Mineral Lease (herein "this Lease") is made and entered into this 7th
day of June, 2007, by and between COUNTY OF MARION, ILLINOIS, with the address
of Marion County Courthouse, 100 East Main St., Salem, 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 lands and containing approximately 17,882 acres more or
less:
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.
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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.
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 Lessor
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:
County of Marion, Illinois
100 East Main St.
Salem, Illinois 62881
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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 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 wells 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
wells) 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.
(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-eighth (1/8)
of the gas within the Oil and Gas sold or used or one-eighth
(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 wells on the lands which are capable
of producing Coal Bed Gas or gas within Oil and Gas and such well or wells 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 wells 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 continue in force and it shall be considered that Coal
Bed Gas and gas within Oil and Gas are
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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 wells 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 wells. 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 wells 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 wells 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 the ownership of the Minerals in the lands or royalties shall be
binding upon Lessee for any
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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 to 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 result of any state, federal, or municipal
law, ordinance, executive order, rule, or regulation, then
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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 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 wells or prior to the connection of any
wells 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. Lessor shall have the right at any time, at Lessor's expense to:
a. Inspect by all appropriate means Lessee's facilities on the Land;
b. Test Lessee's meters and other measuring and testing devices;
c. Sample, test measure and gage production of the wells, inclusing the
right, but not the obligation, to install meters on lines;
d. Observe Lessee in the performance of Lessee's obligations under this
lease; and
e. By appointment, examine or audit, during the term of this lease and
for three years thereafter, the books, records, supporting
documents, files and correspondence of Lessee maintained in
connection with the lease and the production and/or sale of the coal
gas or coal gas products from the Land at Lessee's place of
business.
21. Lessee agrees to purchase all materials and/or services when and if
available at competitive rates within Marion County, Illinois for all of its
operations within Marion County, Illinois.
22. Special Operating Methods: Lessee shall provide to Lessor, upon
request and at Lessor's expense, all survey information which Lessee may now
have or hereafter obtain to inform Lessor fully as to the exact location of any
well drilled and copies of all logs, drill stem test records, core analyses,
pressure tests, or any other information obtained by Lessee in the course of
drilling any well.
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23. Lessee agrees that no well will be drilled within 300 feet of any
personal residence, or building used in a commercial business.
24. 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.
LESSOR
COUNTY OF MARION, ILLINOIS
BY /s/ Sam Nall
--------------------------
Its Board Chairman
LESSEE
BPI INDUSTRIES, INC.
BY /s/ James G. Azlein
--------------------------
Its President and CEO
----------------------
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