DocumentEncodingDefault
AGREEMENT
dated as of September 30, 1998
BY AND AMONG
PEABODY NATURAL RESOURCES COMPANY ("PNRC"),
a Delaware general partnership,
GALLO FINANCE COMPANY ("Gallo"),
a Delaware corporation and
CHACO ENERGY COMPANY ("Chaco"),
a New Mexico corporation
iii
INDEX
Section Page
RECITALS 1
1 Sale and Purchase of the Assets
1.1 Assets 2
1.2 Closing Date 2
1.3 Disclaimer of Warranties 2
2 Prepayment of Advance Royalties and Purchase Price; Payment of
Net Payment
2.1 Prepayment of Advance Royalties 3
2.2 Adjustment to Net Payment 4
2.3 Payment at Closing 4
3 Representations and Warranties
3.1 Chaco's Representations and Warranties 5
3.2 Gallo's and PNRC's Representations and Warranties 9
4 Due Diligence 11
5 Covenants of Chaco
5.1 Conduct of Business Pending Closing 12
5.2 Access 12
5.3 Certain Electric Power Options 13
5.4 Consents Not Obtained 13
5.5 Delivery and Maintenance of Records 13
5.6 No Liquidation, Dissolution or Bankruptcy 14
6 Conditions Precedent
6.1 Gallo's and PNRC's Conditions 14
6.2 Chaco's Conditions 15
7 Closing
7.1 The Closing 16
7.2 Documents to be Delivered at Closing 16
7.3 Execution of Assignment, Notice, and Transfer Documents 17
7.4 Payment of Net Payment 17
8 Assumptions by Gallo 17
9 Tax Prorations 18
10 Termination
10.1 Termination Events 19
10.2 Effect of Termination 19
11 Survival, Indemnification and Liability
11.1 Survival 19
11.2 Gallo's and PNRC's Indemnification 19
11.3 Chaco's Indemnification 20
11. 4 Release and Covenant Not to Sue by Gallo and PNRC 20
11.5 Release and Covenant Not to Sue by Chaco 21
11.6 Limitation of Liability 21
12 Further Assurances 21
13 Access to Records by Chaco 22
14 Notices 22
15 Assignment 22
16 Governing Law 23
17 Expenses and Fees 23
18 Integration 23
19 Modification 23
20 Independent Investigation 23
21 Multiple Originals 24
22 Announcements 24
23 Negotiation of Agreement 25
EXHIBITS, ATTACHMENTS AND SCHEDULES
EXHIBIT A Schedule of Contracts
EXHIBIT B Description of Properties
EXHIBIT C Description of Other Interests
ATTACHMENT I Assignment, Conveyance, Assumption, Consent And Release Agreement
ATTACHMENT II Special Warranty Deed
2
AGREEMENT
THIS AGREEMENT ("Agreement") is made effective as of the 30th day of
September, 1998 (the "Effective Date") between Chaco Energy Company, a New
Mexico corporation ("Chaco"), Peabody Natural Resources Company, a Delaware
general partnership (formerly called Hanson Natural Resources Company) ("PNRC")
and Gallo Finance Company, a Delaware corporation and an affiliate of PNRC
("Gallo"). Chaco, PNRC and Gallo will be individually referred to herein as a
"Party" and collectively as the "Parties."
RECITALS:
WHEREAS, Chaco is the lessee under that certain Coal Lease dated and
effective as of April 15, 1977 from Hospah Coal Company, as lessor, to Chaco, as
amended by Modification No. 1 dated February 12, 1981, as amended and restated
by Modification No. 2 effective as of February 28, 1990, and as further amended
by Amendment To Coal Lease dated June 25, 1993 (the Coal Lease, as so amended,
being referred to in this Agreement as the "Lease"); Memoranda of the Lease
being recorded with the Clerk of McKinley County, New Mexico in Book 47 of
Leases, Pages 338 through 342; in Book 52 of Leases, Pages 302 through 305; and
in Book 1 COMP, Pages 6051 through 6054; and
WHEREAS, PNRC has succeeded to the rights of Hospah Coal Company as lessor
under the Lease; and WHEREAS, Chaco is a wholly-owned subsidiary of Texas
Utilities Company ("TUC"), which assured the performance of certain of Chaco's
obligations under the Lease pursuant to that surety agreement dated April 15,
1977, as amended and restated by Amended and Restated Surety Agreement effective
February 28, 1990 between TUC and Hospah Coal Company (the original surety
agreement, as amended and restated, being referred to in this Agreement as the
"Surety Agreement"); and
WHEREAS, Chaco wishes to prepay the net present value of all remaining
advance royalties that may become payable under the Lease and PNRC wishes to
accept such payment; and
WHEREAS, Gallo wishes to acquire from Chaco and to assume all obligations
and liabilities on or after the Closing Date with respect to, and Chaco wishes
to assign to Gallo, all of Chaco's interest in: (i) the Lease, (ii) certain
related contracts and (iii) certain related properties in McKinley County, New
Mexico; and Gallo and PNRC wish to release Chaco and TUC from: (a) all such
obligations and liabilities relating to the Lease, the contracts, the
properties; and (b) the Surety Agreement, as hereinafter described.
NOW, THEREFORE, in consideration of the premises, together with other good
and valuable consideration, the receipt and sufficiency of which are
acknowledged by all Parties, Chaco, PNRC and Gallo agree as follows:
1. Sale and Purchase of the Assets.
1.1 Assets. Subject to the terms and conditions in this Agreement,
Chaco agrees to sell, assign, convey and deliver to Gallo, and Gallo agrees
to accept and receive and to pay $27,500,000.00 (the "Purchase Price") for,
all of Chaco's interest in and to the following (collectively, the
"Assets"):
1.1.1 the Lease;
1.1.2 the contracts (the "Contracts") described in Exhibit A
attached to and made a part of this Agreement;
1.1.3 certain surface lands, oil, gas, coal, mineral and other
interests in McKinley County, New Mexico (the "Properties"), which are
described in Exhibit B attached to and made a part of this Agreement;
and
1.1.4 certain coal leases and rights of way (the "Other
Interests"), which are described in Exhibit C attached to and made a
part of this Agreement.
1.2 Closing Date. The transfer of the Assets from Chaco to Gallo will
occur and be effective at the date of Closing (the "Closing Date").
1.3 Disclaimer of Warranties. Except as specifically set forth in this
Agreement and the Assignment (which is described in Section 7.2.1), the
Deed (which is described in Section 7.2.3), and the Transfer Documents
(which are described in Section 7.2.4), the Assets will be conveyed without
warranties of any kind and EXCEPT TO THE EXTENT SET FORTH IN THIS
AGREEMENT, THE ASSIGNMENT, THE DEED, AND THE TRANSFER DOCUMENTS TO THE
CONTRARY, CHACO EXPRESSLY DISCLAIMS ALL WARRANTIES OF ANY KIND, EITHER
STATUTORY, EXPRESS OR IMPLIED, WITH RESPECT TO THE ASSETS, INCLUDING,
WITHOUT LIMITATION, THE DISCLAIMER OF ANY WARRANTIES AS TO TITLE,
HABITABILITY, MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, OR THE
PRESENCE OF COAL ON THE LEASED PREMISES, AND ASSIGNEE ACCEPTS THE ASSETS
"WITH ALL FAULTS," "AS-IS," WITHOUT ANY WARRANTIES OF ANY KIND AND WITHOUT
REPRESENTATION OR WARRANTY BY CHACO WITH REGARD TO PHYSICAL DEFECTS
(WHETHER LATENT OR PATENT).
2. Prepayment of Advance Royalties and Purchase Price; Payment of Net Payment.
2.1 Prepayment of Advance Royalties. At Closing, subject to adjustment
as provided in Section 2.2 and the offset of the Purchase Price as provided
in Section 2.3, Chaco will pay to PNRC the "Advance Royalty Prepayment" in
the amount of $163,402,961.00, which is the amount that the Parties agree
is the net present value on September 30, 1998 of the future advance
royalties payable under the Lease, calculated based on an interest rate of
8.1% per annum.
2.2 Adjustment to Net Payment. If Closing does not occur on September
30, 1998, the Advance Royalty Prepayment will be adjusted as follows:
2.2.1 if Closing occurs before September 30, 1998, the Advance
Royalty Prepayment (i.e., the amount of $163,402,961.00) will be
reduced by an amount equal to $36,262.03 multiplied by the number of
days between the Closing Date (including the Closing Date) and
September 30, 1998; and
2.2.2 if Closing occurs after September 30, 1998, the Advance
Royalty Prepayment (i.e., the amount of $163,402,961.00) will be
increased by an amount equal to $36,262.03 multiplied by the number of
days between September 30, 1998 and the Closing Date (including the
Closing Date).
2.3 Payment at Closing. At Closing, Chaco will pay PNRC by wire
transfer in immediately available funds the "Net Payment," which is the
amount of the Advance Royalty Prepayment (as adjusted in accordance with
Section 2.2) offset and reduced by the amount of the Purchase Price to be
paid to Chaco by Gallo. PNRC and Gallo have made appropriate arrangements
between themselves so that such netting may occur. The Net Payment amount
will be $135,902,961.00, if no adjustment is required under Section 2.2.
3. Representations and Warranties.
3.1 Chaco's Representations and Warranties. Chaco represents and
warrants to Gallo and PNRC as follows:
3.1.1 Authority and Enforceability. Chaco is a corporation, duly
formed, validly existing, and in good standing under the laws of the
State of New Mexico. Chaco has full power and authority to enter into
this Agreement, the Deed and the related instruments and agreements
pursuant hereto (the "Related Instruments") and to perform its
obligations under this Agreement, the Deed and the Related
Instruments. The execution, delivery and performance of this
Agreement, the Deed and the Related Instruments by Chaco has been duly
and validly authorized by all requisite action on the part of Chaco.
This Agreement has been duly executed and delivered on behalf of Chaco
and constitutes, and the Deed and the Related Instruments, when
executed and delivered on behalf of Chaco, will constitute, the legal,
valid and binding obligations of Chaco, enforceable in accordance with
their terms, except as enforceability may be limited by applicable
bankruptcy, reorganization or moratorium statutes, equitable
principles or other similar laws affecting Chaco or the rights of
creditors generally.
3.1.2 Litigation and Claims. (a) Chaco has received no notice of
any pending claim, demand, filing, cause of action, administrative
proceeding, lawsuit or other litigation, and (b) to the best knowledge
of Chaco there is no claim, demand, filing, cause of action,
administrative proceeding, lawsuit or other litigation, threatened,
that in either case (a) or (b) would reasonably be expected to: (i)
adversely affect the consummation of this transaction by Chaco; or
(ii) adversely affect the ownership or operation of any of the Assets
to a material extent, other than proceedings relating to the coal
mining industry generally and as to which Chaco is not a named party.
3.1.3 No Violation. This Agreement and the execution and delivery
hereof by Chaco do not, and the fulfillment of and compliance with the
terms and conditions hereof and the consummation of the transactions
contemplated hereby will not:
3.1.3.1 Violate or conflict with any provision of the
certificate of incorporation or bylaws, each as amended to date,
of Chaco;
3.1.3.2 To the best knowledge of Chaco, violate or conflict
with or require any consent, authorization or approval under any
provision of any law or administrative regulation or any
judicial, administrative or arbitration order, award, judgment,
writ, injunction or decree applicable to or binding upon Chaco;
3.1.3.3 Result in a breach of, constitute a default or
violation under (whether with notice or lapse of time or both) or
require any consent, authorization or approval under any
mortgage, indenture, loan or credit agreement or any other
agreement or instrument evidencing indebtedness for money
borrowed to which Chaco is a party or by which any of its
properties or assets is bound;
3.1.3.4 Except with respect to the Other Interests or that
appear of record, require any consent, authorization or approval
by any other third party with respect to which the Assets are
bound; or
3.1.3.5 Result in the creation or imposition of any lien,
charge, security interest or other encumbrance upon the Assets.
3.1.4 Compliance with Laws and Regulations. To the best knowledge
of Chaco, Chaco's ownership of the Assets is in compliance with all
applicable laws, regulations, orders, judgments or decrees of any
Governmental Authority having jurisdiction over the Assets. For the
purposes of this Agreement, "Governmental Authority" shall mean the
United States of America, any state, commonwealth, territory or
possession thereof and any tribe, and any political subdivision of any
of the foregoing, including, but not limited to, courts, departments,
commissions, boards, bureaus, agencies or other instrumentalities.
3.1.5 Taxes. All taxes, assessments and charges by Governmental
Authorities which are currently due and payable by Chaco with respect
to the Assets have been paid.
3.1.6 Environmental.
3.1.6.1 For the purposes of this Agreement, "Environmental
Laws" shall mean federal, state or municipal laws, rules and
regulations governing, regulating or relating to pollution or the
protection of the environment, including, but not limited to, the
Resource Conservation and Recovery Act of 1976, as amended, the
Comprehensive Environmental Response, Compensation, and Liability
Act of 1980, as amended, the Superfund Amendments and
Reauthorization Act of 1986, as amended, and all similar state,
municipal and local laws, ordinances, rules, regulations, orders,
directives, determinations and requirements each as in effect on
the Effective Date for purposes of the representations given on
the Effective Date and as in effect on the Closing Date for all
other purposes of this Agreement;
3.1.6.2 Chaco has not received written notice from any
Governmental Authority of any unresolved violation of or pending
or threatened action, suit, inquiry, proceeding or investigation
relating to any Environmental Law applicable to the Assets; and
3.1.6.3 Chaco has not received any currently outstanding
written notice from any Governmental Authority of any license
required under any Environmental Law or legally required
environmental removal, remediation or clean-up obligation with
respect to the Assets.
3.1.7 Contracts; No Notice of Contract Breach. The Contracts
listed in Exhibit A hereto are, to the best knowledge of Chaco, all of
the contracts to which Chaco is a party which in any way relate to the
Lease, the Properties, or the Other Interests; such Contracts, to the
best knowledge of Chaco, are in full force and effect; and Chaco has
not received any notice, whether written or, to the best knowledge of
Chaco, oral, of any breach of any of the Contracts by any party
thereto.
3.1.8 Properties; Encumbrances. The Properties listed in Exhibit
B hereto are all of the properties of Chaco in McKinley County, New
Mexico, which in any way relate to the Lease, the Contracts, or the
Other Interests. Chaco has disclosed to Gallo all unrecorded
mortgages, liens, charges, security interests, overriding royalty
interests or other encumbrances on the Assets. No adverse title claims
are pending or, to the knowledge of Chaco, threatened, with respect to
any portion of the Assets, which are not of record.
3.1.9 No Third Party Options. To the best knowledge of Chaco,
there are no unrecorded existing agreements, options, commitments, or
rights with or to any person to acquire any of the Assets, except as
are referenced in any exhibits to this Agreement.
3.1.10 Funds Available. Chaco has, or will have on the Closing
Date, sufficient cash, available lines of credit or other sources of
immediately available funds to enable it to pay the Net Payment.
3.1.11 Mining Permits. Chaco represents and warrants that there
are no mining permits currently in effect with respect to any of the
Assets.
3.1.12 Chaco's Assets. Chaco represents and warrants that the
Assets being conveyed constitute all or substantially all of Chaco's
assets.
3.1.13 Surface Transportation Board. To the best of Chaco's
knowledge, Chaco represents and warrants that Chaco holds no
certificates or permits from the Federal Surface Transportation Board.
3.1.14 Rail Facilities Agreement. Chaco represents and warrants
that it has not modified or amended, and has not knowingly waived or
relinquished, any of its rights under the Amended and Restated Rail
Facilities Agreement identified on Exhibit A hereto, including,
without limitation, the right (if certain events occur or fail to
occur as specified) to receive certain payments from Star Lake
Railroad Company pursuant to Section 3.2(b) thereof. 3.2 Gallo's and
PNRC's Representations and Warranties. Gallo and PNRC represent and
warrant to Chaco as follows: 3.2.1 Authority and Enforceability. Gallo
is a corporation, duly formed, validly existing, and in good standing
under the laws of the state of Delaware and is authorized to do
business and in good standing under the laws of the State of New
Mexico. PNRC is a general partnership duly formed and validly existing
under the laws of Delaware and is authorized to do business under the
laws of the State of New Mexico. Each of Gallo and PNRC has full power
and authority to enter into this Agreement and to perform its
obligations under this Agreement. The execution, delivery and
performance of this Agreement and the Related Instruments by Gallo and
PNRC has been duly and validly authorized by all requisite action on
the part of Gallo and PNRC, respectively. This Agreement has been duly
executed and delivered on behalf of Gallo and PNRC and constitutes,
and the Related Instruments, when executed and delivered on behalf of
Gallo and PNRC, will constitute, the legal, valid and binding
obligations of each of Gallo and PNRC, enforceable in accordance with
its terms, except as enforceability may be limited by applicable
bankruptcy, reorganization or moratorium statutes, equitable
principles or other similar laws affecting Gallo and PNRC or the
rights of creditors generally. 3.2.2 Independent Investigation. As of
Closing, Gallo and PNRC agree and represent that each of them: (i) has
been given the opportunity to conduct complete and independent
inspections and investigations of the Assets, including, without
limitation, inspections and investigations with respect to title to
the Assets and with respect to environmental conditions; (ii) has
consummated the transactions contemplated by this Agreement on the
basis of its own independent investigation and inspection of the
physical, chemical, and environmental condition of the Assets, as well
as on the basis of the representations, warranties and agreements of
Chaco in this Agreement, the Assignment, the Deed, and the Transfer
Documents; and (iii) with full knowledge of the foregoing and after
conducting its own independent investigation and inspection, EXCEPT TO
THE EXTENT SET FORTH IN THIS AGREEMENT, THE ASSIGNMENT, THE DEED, AND
THE TRANSFER DOCUMENTS, GALLO IS ACQUIRING THE ASSETS AS-IS, WHERE-IS,
WITH ALL FAULTS. 3.2.3 Litigation and Claims. Gallo and PNRC have not
received any notice of any pending claim, demand, filing, cause of
action, administrative proceeding, lawsuit or other litigation, and to
the best knowledge of Gallo and PNRC, there is no claim, demand,
filing, cause of action, administrative proceeding, lawsuit or other
litigation, threatened, that in either case would reasonably be
expected to adversely affect the consummation of this transaction by
Gallo and PNRC, and there are no approvals or consents necessary for
Gallo and PNRC to perform their obligations hereunder that Gallo and
PNRC have not obtained or, unless waived by Chaco, will not have been
obtained prior to Closing.
4. Due Diligence.
4.1 From the date of this Agreement until the earlier of: one day
prior to the date of Closing or November 7, 1998, Gallo and PNRC will have
the right, subject to consent from Chaco, to: (a) inspect the Lease
premises and the Properties; (b) to review documents or records pertaining
to the Lease, the Contracts and the Properties; (c) to conduct an
environmental review of the Lease premises and the Properties; and (d) to
conduct such other reasonable investigations and review of the Assets as
Gallo and PNRC consider appropriate. Subject to Chaco's consent and subject
to the terms of that Confidentiality Agreement dated September 8, 1998
between Chaco and P&L Coal Holdings, Inc., Chaco will: (i) assemble and
make available at reasonable times all records, lease agreements,
transportation agreements, other documents and data related to the Assets;
(ii) allow Gallo, PNRC and their consultants to make physical inspections
of the Lease premises and Properties at reasonable times; and (iii)
reasonably cooperate with Gallo and PNRC's other reasonable due diligence
requests.
4.2 If Gallo and PNRC should determine, in their sole and absolute
discretion, that the Lease, the Contracts and the Properties are not
satisfactory to Gallo or PNRC for any reason, Gallo or PNRC may terminate
this Agreement by delivering written notice of such termination to Chaco
one day prior to Closing. If Gallo or PNRC properly elect to terminate this
Agreement pursuant to the terms hereof, thereafter no Party shall have any
further rights, liabilities or obligations hereunder.
4.3 Should Gallo or PNRC elect to conduct an environmental
investigation of the Lease premises or the Properties, a copy of any
written report will be furnished to Chaco immediately upon Gallo or PNRC's
receipt of same.
4.4 Gallo and PNRC shall not permit any liens to attach to any of the
Assets by reason of the exercise of their rights under this Agreement.
Gallo and PNRC agree to indemnify and hold Chaco harmless from and against
any and all liens by employees, agents, representatives, contractors,
subcontractors, materialmen, laborers and consultants performing such work
and tests for Gallo or PNRC and from and against any and all claims for
damages by Chaco, by Chaco's employees, or by third parties arising out of
the conduct of such tests and entry upon any Chaco property.
5. Covenants of Chaco
5.1 Conduct of Business Pending Closing. Chaco covenants that, from
the date hereof to the Closing Date, Chaco shall: (a) deal with the Assets
in its usual and customary manner, in the ordinary and regular course of
its business; and (b) not otherwise dispose of or encumber any of the
Assets.
5.2 Access. From the date hereof to the Closing Date, Chaco shall
provide Gallo and PNRC and their authorized representatives reasonable
access to the Assets during normal business hours. Chaco shall use best
reasonable efforts to provide accurate and complete information and
documents, but makes no warranties or representations as to the accuracy or
completeness of any information or documents so furnished.
5.3 Certain Electric Power Options. Chaco agrees to facilitate
discussions between Enserch Energy Services ("EES"), an affiliate of Chaco,
and Citizens Power LLC ("Citizens Power"), an affiliate of Gallo and PNRC,
concerning a potential agreement granting Citizens Power the option to
purchase certain electric power options in various locations, although not
within the state of Texas, with the option price and other terms to be as
agreed in the option agreement; provided, however, the Closing of the other
transactions contemplated by this Agreement is not contingent upon EES and
Citizens Power reaching any agreement.
5.4 Consents Not Obtained. To the extent that Chaco is unable to
obtain a third party consent or approval to transfer any interest
constituting a part of the Assets and consequently does not assign or
transfer same to Gallo, Chaco shall reasonably cooperate with Gallo in
obtaining such consent or approval, and shall expeditiously transfer such
asset to Gallo upon obtaining such consent or approval, or otherwise use
its reasonable efforts to make all benefits of such non-assigned interests
available to Gallo without any administrative cost to Gallo, and Chaco
shall not be obligated to incur any cost or expense after the Closing with
respect to such Assets, all of which shall be for the account of Gallo.
5.5 Delivery and Maintenance of Records. As promptly as practicable,
but in any case within 90 days after the Closing Date, or, with respect to
Restricted Records, within 90 days after the date that such Restricted
Records cease to be Restricted Records, Chaco will deliver or cause to be
delivered to Gallo to a location designated by Gallo all such Records;
provided, however, that Chaco may retain:
5.5.1 Originals of all accounting, financial and tax Records for
the Assets attributable to all periods prior to the Closing Date;
provided, however, that Chaco shall provide Gallo with copies of all
such accounting, financial and tax Records that Gallo may reasonably
request; and
5.5.2 Copies of any other Records that Chaco elects to retain.
For the purposes, of this Agreement, "Records" shall mean all existing
financial, accounting, tax, business and other files, documents,
instruments, papers, core drilling records in electronic media format
if requested by Gallo, books, ledgers and records relating to the
Assets but excluding (a) work product of legal counsel, (b) documents
relating to the negotiation and consummation of the transactions
contemplated by this Agreement, (c) computer software and (d)
documents whose disclosure or transfer is prohibited or restricted by
third party agreement, unless the necessary consent of the third party
or parties has been obtained. "Restricted Records" shall mean any
Records that are subject to any transfer restriction. If any
Restricted Records may be transferred to Gallo upon the payment of a
fee or the satisfaction of another condition, and Gallo pays such fee
or satisfies such condition, such Records shall cease to be Restricted
Records.
5.6 No Liquidation, Dissolution or Bankruptcy. Chaco shall cause its
articles of incorporation and by-laws to be amended to provide that Chaco
shall not liquidate, dissolve or file, or permit to be filed, bankruptcy
for a period of three years from the date of this Agreement; and further
covenants that it shall not take any action to liquidate, dissolve or file,
or permit to be filed, bankruptcy within this time period.
6. Conditions Precedent.
6.1 Gallo's and PNRC's Conditions. The obligations of Gallo and PNRC
to be performed at Closing are subject to the fulfillment by Chaco, or the
waiver by Gallo and PNRC, before or at Closing, of each of the following
conditions:
6.1.1 the representations and warranties of Chaco set forth in
this Agreement shall be true and correct in all material respects on
the date of this Agreement and as of the Closing Date;
6.1.2 Chaco must have performed and complied in all material
respects with each of the covenants and conditions required by this
Agreement of which performance or compliance is required prior to or
at the Closing;
6.1.3 Gallo and PNRC receiving approvals from their respective
Boards of Directors;
6.1.4 completion of Gallo's and PNRC's due diligence review in
accordance with Section 4 with results satisfactory to them;
6.1.5 the receipt of all necessary Federal, state and local
governmental and regulatory approvals for the transactions
contemplated by this Agreement;
6.1.6 the receipt of any necessary consents from third parties;
and
6.1.7 the receipt of a legal opinion from Worsham, Forsythe &
Wooldridge, L.L.P. confirming the matters in Section 3.1.1 above.
6.2 Chaco's Conditions. The obligations of Chaco to be performed at
Closing are subject to each of the following conditions, unless waived by
Chaco:
6.2.1 the representations and warranties of Gallo and PNRC set
forth in this Agreement shall be true and correct in all material
respects as of the date of this Agreement and as of the Closing Date;
6.2.2 Gallo and PNRC must have performed and complied in all
material respects with each of the covenants and conditions required
by this Agreement of which performance or compliance is required prior
to or at the Closing;
6.2.3 Chaco receiving approval from its Board of Directors;
6.2.4 the receipt of all necessary Federal, state and local
governmental and regulatory approvals for the transactions
contemplated by this Agreement;
6.2.5 the receipt of any necessary consents from third parties;
and
6.2.6 the receipt of a legal opinion from the general counsel of
PNRC and Gallo confirming the matters in Section 3.2.1 above.
7. Closing.
7.1 The Closing. The closing of the transactions described in this
Agreement shall be consummated (the "Closing") in Dallas, Texas, at the
offices of Worsham, Forsythe & Wooldridge, L.L.P., 1601 Bryan Street, 30th
Floor, Dallas, Texas 75201 before 2:00 p.m. on the 30th day of September,
1998, or as soon as practicable after receipt or waiver of all necessary
consents and approvals and the satisfaction or waiver of other conditions
precedent (the "Closing Date"); provided that, if Closing does not occur by
December 15, 1998, this Agreement will terminate to the extent set forth in
Section 10.2.
7.2 Documents to be Delivered at Closing. At the Closing, Chaco shall
deliver to Gallo:
7.2.1 an Assignment, Conveyance, Assumption, Consent and Release
Agreement, in the form attached as Attachment I (the "Assignment"),
properly executed and acknowledged by Chaco;
7.2.2 a Notice of Assignment of the Assignment, Conveyance,
Assumption, Consent and Release Agreement (the "Notice") properly
executed and acknowledged by Chaco;
7.2.3 a Special Warranty Deed, in the form attached as Attachment
II (the "Deed"), properly executed and acknowledged by Chaco; and
7.2.4 such forms of transfer documents (the "Transfer Documents")
properly executed by Chaco that are required by the appropriate
federal or state authorities to transfer or assign, without warranties
of any kind, the Other Interests.
7.3 Execution of Assignment, Notice, and Transfer Documents. At the
Closing, Gallo and PNRC shall cause the Assignment, the Notice, and the
Transfer Documents to be properly executed and acknowledged on behalf of
Gallo and PNRC, and shall then cause the fully executed Notice to be
properly recorded in the records of McKinley County, New Mexico. Gallo
shall also obtain the complete execution of the Transfer Documents by any
required parties, and Gallo will properly file or record the fully executed
Transfer Documents and the Deed.
7.4 Payment of Net Payment. At the Closing, Chaco shall pay to PNRC
the Net Payment by wiretransfer in immediately available funds. Account
Name: Peabody Natural Resources Company; Account Number: 323-037259; Bank
Name: Chase Manhattan Bank; Bank Address: New York, New York; ABA Number:
21000021.
8. Assumptions by Gallo. As of the Closing, Gallo assumes: (a) all of the costs,
obligations and liabilities that relate to the Assets and arise on or after the
Closing Date, other than obligations or liabilities incurred, but not yet
required to be performed, or caused by Chaco prior to the Closing Date,
including, without limitation, obligations and liabilities under the Lease and
the Contracts and obligations and liabilities relating to the Properties; (b)
the obligation to comply with any preferential rights to purchase the Assets
that have not been complied with prior to Closing which preferential rights have
been fully disclosed to Gallo by Chaco or appear of record and which arise only
under Contracts shown on Exhibit A; and (c) the obligation to obtain any
consents (subject to the obligation of Chaco hereunder to reasonably cooperate
with Gallo without compensation in obtaining any such consent) that have not
been obtained prior to Closing. Such assumed obligations are hereinafter
referred to as the "Gallo Assumed Obligations". Included in the costs,
obligations and liabilities assumed by Gallo as of the Closing, without limiting
such costs, obligations and liabilities, are all liabilities, obligations,
penalties, fines, losses, costs or expenses, whether direct, indirect, pending,
threatened, contingent or otherwise (collectively, "Costs"), arising from, based
on, associated with, or related to the presence, handling, management, storage,
transportation, processing, treatment, disposal, release, migration or escape of
Environmental Contaminants on or relating to the Assets, resulting from any
action of Gallo on or after the Closing Date, and whether based on negligence,
strict liability or otherwise (collectively, "Environmental Liabilities"). As
used herein, the term "Environmental Contaminants" shall mean any pollutant,
waste, contaminant, or hazardous or toxic material, substance or waste.
9. Tax Prorations. Real and personal property taxes for the Assets for calendar
year 1998 shall be prorated between Gallo and Chaco, as appropriate, as of the
Closing Date. Chaco shall pay Gallo such amounts within thirty (30) days of
receipt of any invoicing by Gallo, showing such amounts being actually paid by
Gallo. Any taxes in addition to the amounts prorated shall be the obligation of
Gallo.
10. Termination.
10.1 Termination Events. Except as otherwise stated herein, if: (i)
any condition to Gallo's or PNRC's obligations hereunder is not satisfied
and such condition is not waived by Gallo or PNRC (as the case may be) at
or prior to the Closing; or (ii) any condition to Chaco's obligations
hereunder is not satisfied and such condition is not waived by Chaco at or
prior to the Closing, then the Party whose obligations are subject to such
unwaived condition, may terminate this Agreement at its option, at or prior
to the Closing Date, by written notice to the other Parties. Closing shall
be deemed conclusive waiver of any conditions precedent(s) to Closing by
the Parties.
This Agreement is also subject to termination as provided in Sections
4.2 and 7.1.
10.2 Effect of Termination. In the event of the termination of this
Agreement as provided or referred to in this Section 10, this Agreement
will terminate and no Party will owe any further obligations to any other
Party, except that the terms of Sections 4 and 17 will survive the
termination of this Agreement.
11. Survival, Indemnification and Liability.
11.1 Survival. The liability of Chaco, Gallo and PNRC under each of
their respective representations, warranties, covenants, agreements and
indemnities shall survive Closing, together with execution and delivery of
the Deed, the Assignment, and the Transfer Documents.
11.2 Gallo's and PNRC's Indemnification. To the extent permitted by
law, Gallo and PNRC, from and after Closing, shall defend, indemnify and
hold Chaco and TUC, or either of them, and each of Chaco's and TUC's
affiliates, together with each of their respective shareholders, officers,
directors, employees and agents (collectively the "Chaco Indemnitees"),
harmless from and against any and all claims, demands, actions,
obligations, and other liabilities threatened against or suffered by the
Chaco Indemnitees as a result of the following ("Claims"): (i) any
Environmental Liabilities arising from the actions of Gallo or PNRC
relating to the Assets on or after the Closing Date; (ii) the ownership or
operation of the Assets by Gallo or PNRC (excluding Environmental
Liabilities) on or after the Closing Date; (iii) any liability or
obligation expressly assumed by Gallo or PNRC pursuant to this Agreement;
or (iv) any fees or commissions arising with respect to brokers or finders
retained or engaged by Gallo or PNRC and resulting from or relating to the
transactions contemplated in this Agreement.
11.3 Chaco's Indemnification. To the extent permitted by law, Chaco,
from and after Closing, shall defend, indemnify and hold Gallo and PNRC, or
either of them, and each of Gallo's and PNRC's affiliates, together with
each of their respective shareholders, officers, directors, employees and
agents (collectively the "Gallo Indemnitees"), harmless from and against
any and all claims, demands, actions, obligations and other liabilities
threatened against or suffered by the Gallo Indemnitees as a result of the
following: (i) any Environmental Liabilities arising from the actions of
Chaco relating to the Assets before the Closing Date; (ii) the ownership or
operation of the Assets by Chaco (excluding Environmental Liabilities)
before the Closing Date, (iii) any liability or obligation expressly
assumed by Chaco pursuant to this Agreement; or (iv) any fees or
commissions arising with respect to brokers or finders retained or engaged
by Chaco and resulting from or relating to the transactions contemplated by
this Agreement (collectively, the "Chaco Retained Obligations").
11.4 Release and Covenant Not to Sue by Gallo and PNRC. If Gallo
acquires the Assets, Gallo and PNRC hereby covenant and agree on behalf of
themselves, together with their successor owners and assigns of the Assets,
not to in any manner whatsoever sue or bring any other action against, or
join any third party's action against, the Chaco Indemnitees, or any of
them for or with respect to, and as of the Closing Date hereby fully
release the Chaco Indemnitees from, any and all Claims that Gallo or PNRC,
its successors and assigns, may now have or in the future may have against
the Chaco Indemnitees that in any way arise from the Gallo Assumed
Obligations; provided, that, with respect to Chaco's obligations to PNRC
under the Lease, this release and covenant not to sue shall extend to
Claims arising under the Lease before, on, or after the Closing Date.
11.5 Release and Covenant Not to Sue by Chaco. If Gallo acquires the
Assets, Chaco hereby covenants and agrees not to in any manner whatsoever
sue or bring any other action against, or join any third party's action
against, the Gallo Indemnitees, or any of them for or with respect to, and
as of the Closing Date hereby fully release the Gallo Indemnitees from, any
and all Claims that Chaco, its successors and assigns, may now have or in
the future may have against the Gallo Indemnitees that in any way arise
from the Lease or the Chaco Retained Obligations.
11.6 Limitation of Liability. Chaco, Gallo and PNRC each waive any
right to recover special, exemplary or consequential damages in any action
or proceeding relating to this Agreement.
12. Further Assurances. After the Closing, each of Chaco, Gallo and PNRC shall
execute, acknowledge and deliver, or cause to be executed, acknowledged and
delivered, such instruments, and take such other action, as reasonably may be
necessary to carry out their obligations under this Agreement, or any exhibit,
document, certificate or other instrument delivered pursuant hereto.
13. Access to Records by Chaco. After the Closing Date, Chaco and its authorized
representatives shall have reasonable access (including copying privileges at
Chaco's sole cost and expense) during Gallo's and PNRC's normal business hours
to the books and records of Gallo and PNRC pertaining to the Assets for periods
prior to the Closing Date.
14. Notices. Any notice, communication, request, instruction or other document
required or permitted hereunder shall be given in writing and delivered in
person or sent by U.S. Mail, postage prepaid, return receipt requested, or by
telex, facsimile or telecopy, to the addresses of the Parties set forth below.
Any such notice shall be effective upon receipt.
Chaco: Chaco Energy Company
1601 Bryan Street, 42nd Floor
Dallas, Texas 75201
Attention: Peter B. Tinkham
Gallo: Gallo Finance Company
701 Market Street
Suite 713
St. Louis, MO 63101
Attention: President
PNRC: Peabody Natural Resources Company
701 Market Street
Suite 718
St. Louis, MO 63101
Attention: General Partners
Any Party may, by written notice so delivered, change its address for notice
purposes hereunder.
15. Assignment. None of Chaco, Gallo and PNRC may assign its respective rights,
or delegate its respective duties or obligations, arising under this Agreement,
without the prior written consent of the other Parties.
16. Governing Law. This Agreement shall be governed and construed in accordance
with the laws of the State of New Mexico, without the effect of any principles
of conflicts of laws.
17. Expenses and Fees. Whether or not the transactions contemplated by this
Agreement are consummated, each of the Parties will pay the fees and expenses of
their respective counsel, accountants, engineers and other consultants retained
by them incident to the transactions contemplated by this Agreement. Gallo will
pay all fees for the recording of transfer documents, together with any sales,
transfer, stamp or other excise taxes resulting from the transfer of the Assets
to Gallo. All other costs shall be borne by the Party incurring them.
18. Integration. This Agreement, together with the Exhibits hereto and the other
agreements to be entered into by the Parties pursuant hereto, sets forth the
entire agreement and understanding of the Parties in respect to the transactions
referenced herein, and supersedes all other agreements, arrangements and
understandings relating to the subject matter hereof, except with respect to the
Confidentiality Agreement described in Section 4, which remains in full force
and effect.
19. Modification. This Agreement may be amended, modified, superseded or
canceled, and any of the terms, covenants, representations, warranties or
conditions hereof may be waived, only by a written instrument executed by duly
authorized officers of Chaco, Gallo and PNRC, or, in the case of a waiver or
consent, by or on behalf of the Party or Parties waiving compliance or giving
such consent.
20. Independent Investigation. Gallo and PNRC acknowledge that, in entering into
this Agreement, and consummating the transactions contemplated hereby, Gallo and
PNRC have relied on the basis of their own independent inspections and
investigations of the Assets, together with the express written representations
of Chaco set forth in this Agreement, the Assignment, the Deed and the Transfer
Documents. Except as expressly set forth in this Agreement, the Assignment, the
Deed and the Transfer Documents CHACO MAKES NO REPRESENTATIONS OR WARRANTIES
WITH RESPECT TO THE ASSETS. IN ADDITION, GALLO AND PNRC ACKNOWLEDGE THAT CHACO
HAS NOT MADE, AND HEREBY EXPRESSLY DISCLAIMS AND NEGATES, EXCEPT AS EXPRESSLY
PROVIDED FOR IN THIS AGREEMENT, THE DEED, THE ASSIGNMENT AND THE TRANSFER
DOCUMENTS, ANY AND ALL WARRANTIES OF ANY KIND, EXPRESS OR IMPLIED, AT COMMON LAW
OR STATUTORY, INCLUDING, WITHOUT LIMITATION, ANY REPRESENTATIONS OR WARRANTIES
RELATING TO TITLE, HABITABILITY, MERCHANTABILITY, FITNESS FOR A PARTICULAR
PURPOSE, OR CONFORMITY TO MODELS, SAMPLES OR MATERIALS, TOGETHER WITH ANY OTHER
REPRESENTATIONS OR WARRANTIES WITH RESPECT TO THE ASSETS, OR ANY AGREEMENT OR
INSTRUMENT RELATED THERETO.
21. Multiple Originals. This Agreement may be executed in any number of
identical originals. In making proof of this Agreement, it is not necessary to
produce or account for more than one original.
22. Announcements. Prior and subsequent to the Closing Date, none of Chaco,
Gallo and PNRC shall make written announcements or other written public
disclosures or issue press releases relating to the content of this Agreement or
the transactions contemplated hereby without the prior written approval of the
other Parties to this Agreement to the form and content of the release or
disclosure. Notwithstanding the foregoing, each Party shall be entitled to
disclose such information without limitation (i) to its affiliates, attorneys,
financial or lending institutions, outside auditors and insurers, (ii) as may be
required by law or by regulation or order of Governmental Authority, or
contract, or by the rules of any stock exchange applicable to such Party or its
affiliates, or as part of such Party's good faith attempt to comply with
disclosure obligations under any of the same, (iii) to the extent necessary for
such Party to obtain third party consents; and (iv) as may be necessary or
desirable to enforce such Party's rights hereunder.
23. Negotiation of Agreement. This Agreement was negotiated by all Parties, and
not by any Party to the exclusion of the other Parties. The Parties agree that
this Agreement shall not be construed against or interpreted to the disadvantage
of any Party by any court, or other governmental or judicial authority, because
of any Party having, or being deemed to have, prepared, structured or dictated
this Agreement, or any provision herein.
EXECUTED AND EFFECTIVE as of the date first set forth above.
CHACO: GALLO:
CHACO ENERGY COMPANY GALLO FINANCE COMPANY
By:/s/ Peter B. Tinkham By:/s/ W. Howard Carson
- ------------------------------- -----------------------
Name: Peter B. Tinkham Name: W. Howard Carson
Its: Executive Vice President Its: Vice President
PNRC:
PEABODY NATURAL RESOURCES
COMPANY, by its General Partners
Gold Fields Mining Corporation,
General Partner
By:/s/ W. Howard Carson
-----------------------
Name: W. Howard Carson
Its: Vice President
Peabody America, Inc.,
General Partner
By:/s/ W. Howard Carson
-----------------------
Name: W. Howard Carson
Its: Vice President
A-2
EXHIBIT A
Attached to and made a part of that certain Agreement between
Chaco Energy Company, Peabody Natural Resources
Company and Gallo Finance Company
Schedule of Contracts
1. Exchange Closing Agreement dated June 25, 1993 between Hospah Coal
Company, The Atchison, Topeka and Santa Fe Railroad Company, Chaco
Energy Company, Hanson Natural Resources Company and others.
2. Option to Acquire Interest in Fee and Private Easement Right-Of-Way for
the Baca Coal Spur dated June 25, 1993 between Chaco Energy Company and
Santa Fe Pacific Minerals Corporation.
3. Option to Acquire Interest in State Right-Of-Way for the Baca Coal Spur
dated June 25, 1993 between Chaco Energy Company and Santa Fe Pacific
Minerals Corporation.
4. Agreement to Provide Advance Notice to Chaco of Termination of Ground
Lease for the Baca Coal Spur dated June 25, 1993 between Chaco Energy
Company, Santa Fe Pacific Minerals Corporation and LRCS Limited
Partnership.
5. Amended and Restated Rail Facilities Agreement dated June 25, 1993,
between Chaco Energy Company, The Atchison, Topeka and Santa Fe Railway
Company, Star Lake Railroad Company and Hanson Natural Resources
Company and others.
6. Rail Transportation Agreement dated February 28, 1990 between The
Atchison Topeka and Santa Fe Railway Company and Chaco Energy Company,
as amended by First Amendment to Rail Transportation Agreement dated
June 25, 1993.
7. Amended and Restated San Juan Basin Agreement dated June 25, 1993
between Hospah Coal Company, Hanson Natural Resources Company and Chaco
Energy Company; a Notice and Memorandum of Amended and Restated San
Juan Basin Agreement being recorded with the Clerk of McKinley County,
New Mexico in Book 6 of COMP, pp.9193-9208.
8. Agreement entered into on July 22, 1981 between the Navajo Nation,
also known as the Navajo Tribe, and Chaco Energy Company.
9. Agreement dated October 24, 1980 between Jerry Elkins and Luann Elkins,
husband and wife (as successors to Rollin M. Albers and wife, Imogen
Albers and Betty Albers, individually and as Trustee under the Trust
established under the last Will and Testament of W. B. Albers,
Deceased, collectively doing business as Albers Brothers) and Chaco
Energy Company.
10. Agreement dated April 7, 1978 between Claude Fondaw and wife, Anna
Pauline Fondaw and Chaco Energy Company.
11. Grazing Permit between Tanner, Inc. and Chaco Energy Company dated July
1, 1983, as amended on October 18, 1988 and December 8, 1997.
12. Agreement, dated September 10, 1980, by and between the Pueblo Pintado,
the Whitehorse Lake Chapters, and Chaco Energy Company.
B-2
EXHIBIT B
Attached to and made a part of that certain Agreement between
Chaco Energy Company, Peabody Natural Resources
Company and Gallo Finance Company
Description of Properties
1. All of Chaco's right, title and interest in the Sections 1 and 3,
Township 16 North, Range 10 West, NMPM, McKinley County, New Mexico,
subject, however, to that certain Agreement dated October 24, 1980
between Jerry Elkins and Luann Elkins, husband and wife (as successors
to Rollin M. Albers and wife, Imogen Albers and Betty Albers,
individually and as Trustee under the Trust established under the last
Will and Testament of W. B. Albers, Deceased, collectively doing
business as Albers Brothers) and Chaco Energy Company.
2. All of Chaco's right, title and interest in that tract of land out of
the NW/4 NE/4 of Section 10, Township 19 North, Range 6 West, NMPM,
McKinley County, New Mexico, more particularly described in that
Warranty Deed dated April 7, 1978 from Claude Fondaw and wife, Anna
Pauline Fondaw, which Deed is recorded at Book 31, Page 911 of the Deed
Records of McKinley County, New Mexico, subject, however, to that
certain Agreement dated April 7, 1978 between Claude Fondaw and wife,
Anna Pauline Fondaw and Chaco Energy Company.
3. All of Chaco's right, title and interest in the following lands:
Township 19 North, Range 6 West, NMPM, McKinley County, New Mexico N/2
Section 9; and Sections 1, 3, 11 and 12; Township 20 North, Range 7
West, NMPM, McKinley County, New Mexico Sections 13, 14, 23, 24 and
25; Township 20 North, Range 6 West, NMPM, McKinley County, New Mexico
SW/4 Section 34 and Sections 29, 31, and 33; subject, however, to that
Agreement entered into on July 22, 1981 between the Navajo Nation,
also known as the Navajo Tribe, and Chaco Energy Company and to
certain option rights described in that Special Warranty Deed dated
July 22, 1981 from the Navajo Tribe to Chaco Energy Company, which is
recorded at Book 32, pp. 339-340 of the Deed Records of McKinley
County, New Mexico.
4. All of Chaco's right, title and interest in the NE/4 of Section 8,
Township 19 North, Range 6 West, NMPM, McKinley County, New Mexico.
5. All of Chaco's right, title and interest in the Section 32, Township
20 North, Range 6 West, NMPM, McKinley County, New Mexico.
C-1
EXHIBIT C
Attached to and made a part of that certain Agreement between
Chaco Energy Company, Peabody Natural Resources
Company and Gallo Finance Company
Description of Other Interests
1. Right of Way granted by the United States Department of the Interior,
Bureau of Land Management to Chaco Energy Company on October 10, 1980
(BLM ROW NM-041566).
2. Coal Mining Lease between the State of New Mexico and Chaco Energy
Company dated September 15, 1986, covering the S/2 of Section 2,
T19N-R6W, NMPM (Lease No. M-15596-4 (Renewal)).
3. Coal Mining Lease between the State of New Mexico and Chaco Energy
Company dated September 15, 1986, covering Lots 1, 2, 3, 4 and the S/2
N/2 of Section 2, T19N-R6W, NMPM (Lease No. M-15597-4 (Renewal)).
4. State of New Mexico Business Lease covering Section 2, T16N-R10W, NMPM
(BL-1021).
5. New Mexico State Engineer Office, Monitor Well Permit numbers:
SJ-989-1 through SJ989-6.
I-7
ATTACHMENT I
Attached to and made a part of that certain
Agreement between Chaco Energy Company,
Peabody Natural Resources Company and
Gallo Finance Company.
ASSIGNMENT, CONVEYANCE, ASSUMPTION,
CONSENT AND RELEASE AGREEMENT
THIS ASSIGNMENT, CONVEYANCE, ASSUMPTION, CONSENT AND RELEASE AGREEMENT
("Assignment") is dated this 30th day of September, 1998, by and between Chaco
Energy Company, a New Mexico corporation ("Chaco" or "Assignor"), whose address
is 1601 Bryan Street, Dallas, Texas 75201, Gallo Finance Company, a Delaware
corporation ("Assignee"), whose address is 701 Market Street, Suite 713, St.
Louis, Missouri 63101, and Peabody Natural Resources Company, a Delaware general
partnership ("Lessor" or "PNRC"). Chaco, Assignee and Lessor may be referred to
in this Assignment individually as a "Party" and collectively as the "Parties."
WHEREAS, Chaco is the lessee under that certain Coal Lease dated and
effective as of April 15, 1977 from Hospah Coal Company, as lessor, to Chaco, as
amended by Modification No. 1 dated February 12, 1981, as amended and restated
by Modification No. 2 effective as of February 28, 1990, and as further amended
by Amendment To Coal Lease dated June 25, 1993 (the Coal Lease, as so amended,
being referred to in this Assignment as the "Lease"); Memoranda of the Lease
being recorded with the Clerk of McKinley County, New Mexico in Book 47 of
Leases, Pages 338 through 342; in Book 52 of Leases, Pages 302 through 305; and
in Book 1 COMP, Pages 6051 through 6054; and
WHEREAS, Lessor has succeeded to the rights of Hospah Coal Company as
lessor under the Lease; and
WHEREAS, Assignee wishes to acquire from Chaco all of Chaco's interest
in the Lease and certain related contracts (as more particularly described
below, the "Contracts"), and Chaco wishes to assign and convey to Assignee,
without warranties of any kind except as specified in this Assignment, all of
Chaco's rights in the Lease and the Contracts; and
WHEREAS, Section 21(B) of the Lease provides that, without the prior
written approval of Lessor, Chaco will not assign, in whole or part, its rights
and obligations under the Lease; and
WHEREAS, Texas Utilities Company ("TUC") assured the performance of
certain of Chaco's obligations under the Lease pursuant to that surety agreement
dated April 15, 1977, as amended and restated by Amended and Restated Surety
Agreement effective February 28, 1990 between TUC and Hospah Coal Company (the
original surety agreement, as amended and restated, is referred to in this
Assignment as the "Surety Agreement"); and
WHEREAS, Chaco wishes to assign and convey all of its interest in the
Lease and the Contracts to Assignee, Assignee wishes to assume all obligations
under the Lease and the Contracts, and Lessor and Assignee wish to release Chaco
and TUC from: (a) certain obligations and liabilities under or related to the
Lease and the Contracts; and (b) the Surety Agreement.
NOW THEREFORE, in consideration of ten dollars and other valuable
consideration, the receipt and sufficiency of which is acknowledged by each
Party, Chaco, Assignee and Lessor agree as follows:
1. Subject to all of the other terms of this Assignment, Chaco hereby:
(a) with limited special warranty of title, only assigns, conveys,
transfers and sets over to the Assignee all of Assignor's right,
title and interest in and to the Lease; and
(b) assigns to Assignee, with no warranties of any kind, all of its
right, title and interest in and to the contracts described in
Exhibit A attached to and made a part of this Assignment (the
"Contracts").
2. The Lease and the Contracts (collectively, the "Assets") are assigned
and conveyed, and the limited special warranties of title made in Section 1, are
subject to the following terms, conditions, reservations and exceptions:
(a) all exceptions, conveyances, reservations, easements and
encumbrances that appear in the records of McKinley County, New
Mexico;
(b) all exceptions, limitations, restrictions and matters referenced
in any exhibit attached to this Assignment;
(c) easements, or claims of easements, on or across the Lease
(whether visible or not), which are not recorded in the public
records;
(d) general real estate taxes and special assessments for 1998 and
subsequent years not yet due and payable, and any subsequent tax
assessment, the payment of all of which Assignee assumes; and
(e) EXCEPT TO THE EXTENT SET FORTH IN THIS ASSIGNMENT TO THE CONTRARY
AND AS OTHERWISE PROVIDED FOR IN THE AGREEMENT (DEFINED BELOW),
CHACO EXPRESSLY DISCLAIMS ALL WARRANTIES OF ANY KIND, EITHER
STATUTORY, EXPRESS OR IMPLIED, WITH RESPECT TO THE LEASE AND THE
CONTRACTS, INCLUDING, WITHOUT LIMITATION, THE DISCLAIMER OF ANY
WARRANTIES AS TO TITLE, HABITABILITY, MERCHANTABILITY, FITNESS
FOR A PARTICULAR PURPOSE, OR THE PRESENCE OF COAL ON THE LEASED
PREMISES, AND ASSIGNEE ACCEPTS THE LEASE AND THE CONTRACTS "WITH
ALL FAULTS," "AS-IS," WITHOUT ANY WARRANTIES OF ANY KIND AND
WITHOUT REPRESENTATION OR WARRANTY BY CHACO WITH REGARD TO
PHYSICAL DEFECTS (WHETHER LATENT OR PATENT).
3. The Assignee hereby assumes, agrees to be bound by, and undertakes to
perform or to have performed each and every one of the terms, covenants, and
conditions contained in the Lease on and after the date of this Assignment.
4. PNRC hereby consents to and recognizes the Assignee as the Assignor's
successor in interest in and to the Lease. The Assignee hereby becomes entitled
to all right, title, and interest of the Assignor in and to the Lease in all
respects as if the Assignee were the original party to the Lease. The term
"Lessee" as used in the Lease shall be hereafter deemed to refer to the Assignee
rather than to the Assignor.
5. PNRC hereby fully releases Assignor, as the original Lessee, from any
and all liability of any kind relating to the Lease, including payment of all
advance royalties due and payable under the Lease.
6. PNRC hereby fully releases Texas Utilities Company from the Surety
Agreement, and the Surety Agreement is hereby deemed terminated.
7. PNRC hereby further releases Assignor from any and all liability
relating to the Lease for any events, actions or inactions of the Assignee
occurring under the Lease on or subsequent to the date of this Assignment.
8. The Assignor hereby releases PNRC from any and all liability relating to
the Lease for any events, actions or inactions of PNRC, as Lessor, under the
Lease occurring prior to, on or subsequent to the date of this Assignment.
9. All notices provided for under the Lease which had previously been given
to Assignor shall be given to Assignee at the following address, unless PNRC is
otherwise notified by Assignee:
Gallo Finance Company
701 Market Street, Ste. 713
St. Louis, Missouri 63101
Attention: President
10. Except as herein modified, the Lease shall otherwise remain in full
force and effect.
11. Assignee hereby accepts and assumes all obligations of Chaco under the
Lease, the Contracts and all instruments affecting the Assets and agrees that is
bound by the terms and conditions of the Lease and the Contracts and each
instrument affecting the Assets as if Assignee were an original signatory party
thereto.
12. Lessor hereby consents to the assignment of the Lease as set forth in
this Assignment.
13. This Assignment is further subject to the terms and conditions of that
Agreement dated September 30, 1998 ("Agreement") between Chaco, Assignee and
Lessor, including without limitation, terms and conditions relating to releases
and indemnifications by the Parties.
IN WITNESS WHEREOF, this Agreement is executed effective as of this 30th
day of September, 1998.
CHACO:
CHACO ENERGY COMPANY
By:____________________________
Name:__________________________
Title:___________________________
ASSIGNEE:
GALLO FINANCE COMPANY
By:_____________________________
Name:__________________________
Title:___________________________
LESSOR:
PEABODY NATURAL RESOURCES COMPANY,
by its General Partners
Gold Fields Mining Corporation,
General Partner
By:____________________________
Name:__________________________
Title:___________________________
Peabody America, Inc.,
General Partner
By:____________________________
Name:__________________________
Title:___________________________
State of Texas ss.
ss.
County of Dallas ss.
This instrument was acknowledged before me on September ___, 1998 by
_____________________________, _______ President of Chaco Energy Company, a
Texas corporation, on behalf of said corporation.
------------------------------
Notary Public, State of Texas
Printed Name:___________________
My Commission expires:__________
State of ________ ss.
ss.
County of ______ ss.
This instrument was acknowledged before me on September ___, 1998 by
_____________________________, _______ President of Gallo Finance Company, a
Delaware corporation, on behalf of said corporation.
------------------------------
Notary Public, State of ___________
Printed Name:___________________
My Commission expires:__________
State of ________ ss.
ss.
County of ______ ss.
This instrument was acknowledged before me on September ___, 1998 by
_____________________________, _______ President of Gold Fields Mining
Corporation, a general partner of Peabody Natural Resources Company, on behalf
of Peabody Natural Resources Company, a Delaware general partnership.
------------------------------
Notary Public, State of ___________
Printed Name:___________________
My Commission expires:__________
State of ________ ss.
ss.
County of ______ ss.
This instrument was acknowledged before me on September ___, 1998 by
_____________________________, _______ President of Peabody America, Inc., a
general partner of Peabody Natural Resources Company, on behalf of Peabody
Natural Resources Company, a Delaware general partnership.
-----------------------------
Notary Public, State of ___________
Printed Name:___________________
My Commission expires:__________
A-2
EXHIBIT A
Attached to and made a part of that certain Assignment,
Conveyance, Assumption, Consent and Release Agreement
between Chaco Energy Company,
Peabody Natural Resources Company and Gallo Finance Company
Schedule of Contracts
1. Exchange Closing Agreement dated June 25, 1993 between Hospah Coal Company,
The Atchison, Topeka and Santa Fe Railroad Company, Chaco Energy Company,
Hanson Natural Resources Company and others.
2. Option to Acquire Interest in Fee and Private Easement Right-Of-Way for the
Baca Coal Spur dated June 25, 1993 between Chaco Energy Company and Santa
Fe Pacific Minerals Corporation.
3. Option to Acquire Interest in State Right-Of-Way for the Baca Coal Spur
dated June 25, 1993 between Chaco Energy Company and Santa Fe Pacific
Minerals Corporation.
4. Agreement to Provide Advance Notice to Chaco of Termination of Ground Lease
for the Baca Coal Spur dated June 25, 1993 between Chaco Energy Company,
Santa Fe Pacific Minerals Corporation and LRCS Limited Partnership.
5. Amended and Restated Rail Facilities Agreement dated June 25, 1993, between
Chaco Energy Company, The Atchison, Topeka and Santa Fe Railway Company,
Star Lake Railroad Company and Hanson Natural Resources Company and others.
6. Rail Transportation Agreement dated February 28, 1990 between The Atchison
Topeka and Santa Fe Railway Company and Chaco Energy Company, as amended by
First Amendment to Rail Transportation Agreement dated June 25, 1993.
7. Amended and Restated San Juan Basin Agreement dated June 25, 1993 between
Hospah Coal Company, Hanson Natural Resources Company and Chaco Energy
Company; a Notice and Memorandum of Amended and Restated San Juan Basin
Agreement being recorded with the Clerk of McKinley County, New Mexico in
Book 6 of COMP, pp.9193-9208.
8. Agreement entered into on July 22, 1981 between the Navajo Nation, also
known as the Navajo Tribe, and Chaco Energy Company.
9. Agreement dated October 24, 1980 between Jerry Elkins and Luann Elkins,
husband and wife (as successors to Rollin M. Albers and wife, Imogen Albers
and Betty Albers, individually and as Trustee under the Trust established
under the last Will and Testament of W. B. Albers, Deceased, collectively
doing business as Albers Brothers) and Chaco Energy Company.
10. Agreement dated April 7, 1978 between Claude Fondaw and wife, Anna Pauline
Fondaw and Chaco Energy Company.
11. Grazing Permit between Tanner, Inc. and Chaco Energy Company dated July 1,
1983, as amended on October 18, 1988 and December 8, 1997.
B-2
II-2
ATTACHMENT II
Attached to and made a part of that certain
Agreement between Chaco Energy Company,
Peabody Natural Resources Company and
Gallo Finance Company.
RECORDING REQUESTED BY
AND WHEN RECORDED, MAIL
TO SUSAN MCCORMACK, ESQ.
KELEHER & MCLEOD, P.A.
P.O. DRAWER AA, ALBUQUERQUE, NM 87103
SPECIAL WARRANTY DEED
Chaco Energy Company, a New Mexico corporation, ("Grantor") for
consideration paid, grants, gives, bargains, sells, and conveys to Gallo Finance
Company, a Delaware corporation ("Grantee"), whose address is 701 Market Street,
Ste. 713, St. Louis, Missouri 63101 all of that real property situated in
McKinley County, New Mexico, which property is more particularly described in
Exhibit A attached hereto (the "Granted Premises"), subject to those matters
expressly set forth in the description thereof (the "Exceptions").
Grantor, for itself and its successors, covenants with Grantee, its
successors and assigns, that the Granted Premises are free from all encumbrances
made by Grantor, and that Grantor will, and its successors shall, warrant and
defend the same to Grantee, its successors and assigns, forever against the
lawful claims and demands of all persons claiming by, through or under Grantor,
but against none other, provided that any and all exceptions, conveyances,
reservations, easements and encumbrances that appear in the records of McKinley
County, New Mexico are excluded from this warranty.
IN WITNESS WHEREOF, Grantor has executed this SPECIAL WARRANTY DEED as of
the _____ day of September, 1998.
CHACO ENERGY COMPANY
By:____________________________
Name:__________________________
Title:___________________________
ACKNOWLEDGMENT FOR CORPORATION
State of Texas ss.
ss.
County of Dallas ss.
The foregoing instrument was acknowledged before me this _____ day of
September, 1998, by ______________________________________, ________ President
of Chaco Energy Company, a New Mexico corporation, on behalf of said
corporation.
------------------------------
Notary Public, State of ___________
Printed Name:___________________
My Commission expires:__________
A-2
EXHIBIT "A"
TO
SPECIAL WARRANTY DEED
BY AND BETWEEN
CHACO ENERGY COMPANY ("GRANTOR") AND
GALLO FINANCE COMPANY ("GRANTEE")
Any and all right, title and interest of Grantor in and to the real
property described below (the "Real Property") and all rights, interests,
privileges, hereditaments and appurtenances incident thereto, including, but not
limited to:
a) any and all right, title and interest in minerals, including, without
limitation, gold, coal, silver, precious metals, base metals, oil and
gas, and, to the extent considered minerals under applicable law,
sand, gravel, stone and geothermal steam, and rights appurtenant
thereto;
b) any and all right, title and interest in and to (and all rights to
use) the surface estate;
c) any and all easements, licenses, privileges, uses and rights-of-way;
d) any and all buildings, improvements, structures, fixtures and
facilities located in, on or under, affixed to or erected upon any of
the Real Property;
e) any and all water, water rights, and applications for water rights, in
and to the following Real Property:
1. Sections 1 and 3, Township 16 North, Range 10 West, NMPM, McKinley
County, New Mexico, subject, however, to that certain Agreement dated
October 24, 1980 between Jerry Elkins and Luann Elkins, husband and
wife (as successors to Rollin M. Albers and wife, Imogen Albers and
Betty Albers, individually and as Trustee under the Trust established
under the last Will and Testament of W. B. Albers, Deceased,
collectively doing business as Albers Brothers) and Chaco Energy
Company.
2. A tract of land out of the NW/4 NE/4 of Section 10, Township 19 North,
Range 6 West, NMPM, McKinley County, New Mexico, more particularly
described in that Warranty Deed dated April 7, 1978 from Claude Fondaw
and wife, Anna Pauline Fondaw, which Deed is recorded at Book 31, Page
911 of the Deed Records of McKinley County, New Mexico, subject,
however, to that certain Agreement dated April 7, 1978 between Claude
Fondaw and wife, Anna Pauline Fondaw and Chaco Energy Company.
3. The following lands:
Township 19 North, Range 6 West, NMPM, McKinley County, New Mexico N/2
Section 9; and Sections 1, 3, 11 and 12; Township 20 North, Range 7
West, NMPM, McKinley County, New Mexico
Sections 13, 14, 23, 24 and 25;
Township 20 North, Range 6 West, NMPM, McKinley County, New Mexico SW/4
Section 34 and Sections 29, 31, and 33;
subject, however, to that Agreement entered into on July 22, 1981
between the Navajo Nation, also known as the Navajo Tribe, and Chaco
Energy Company and to certain option rights described in that Special
Warranty Deed dated July 22, 1981 from the Navajo Tribe to Chaco Energy
Company, which is recorded at Book 32, pp. 339-340 of the Deed Records
of McKinley County, New Mexico.
4. The NE/4 of Section 8, Township 19 North, Range 6 West, NMPM, McKinley
County, New Mexico. 5. Section 32, Township 20 North, Range 6 West,
NMPM, McKinley County, New Mexico.
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