Exhibit No. 10.83
[*] indicates that the confidential portion has been omitted from this filed
exhibit and filed separately with the Securities and Exchange Commission.
Transportation Agreement
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Buy Out Agreement
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Among
San Juan Transportation Company
Public Service Company of New Mexico
Tucson Electric Power Company
Table of Contents
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Section 0 - Parties and Recitals.............................................1
Section 1 - Definitions and Term.............................................1
1.1 EFFECTIVE DATE...................................................1
1.2 OUTSTANDING SJTA OBLIGATIONS.....................................1
1.3 SJTC COSTS.......................................................1
1.4 TERM.............................................................2
Section 2 - Conditions Precedent, Representations and Warranties.............2
2.1 CONDITIONS PRECEDENT.............................................2
2.2 REPRESENTATIONS AND WARRANTIES...................................2
Section 3 - SJTC Compensation................................................2
3.1 SJTA BUY OUT VALUE...............................................2
3.2 INFLATION - DEFLATION ADJUSTMENT.................................3
3.3 PAYMENT OF TBOV..................................................3
3.4 PAYMENT OF SJTC COSTS............................................4
Section 4 - SJTA Termination.................................................5
4.1 SJTA TERMINATION.................................................5
Section 5 - SJTC Obligations.................................................5
5.1 SJTC OBLIGATIONS.................................................5
Section 6 - Dispute Resolution...............................................6
6.1 MATTERS TO BE ARBITRATED; NOTICE OF CLAIMS AND DEFENSES;
PARTY ARBITRATOR DESIGNATION.....................................6
6.2 ARBITRATORS; SELECTION OF NEUTRAL ARBITRATOR.....................6
6.3 ARBITRATION HEARINGS, PROCEDURES AND TIMING......................6
6.4 CHOICE OF LAW....................................................6
6.5 AWARD AND ENFORCEMENT............................................7
6.6 PERFORMANCE PENDING ARBITRATION DECISION.........................7
6.7 DEFINITION OF "PARTIES" FOR THIS SECTION.........................7
Page i
Section 7 - Joint Committee..................................................7
7.1 PURPOSE..........................................................7
7.2 DESIGNATION......................................................7
7.3 AUTHORITY........................................................7
7.4 DECISIONS........................................................8
7.5 RELATIONSHIP TO ARBITRATION......................................8
Section 8 - General Provisions...............................................8
8.1 CONFIDENTIALITY..................................................8
8.2 JOINT AND SEVERAL................................................8
8.3 ENTIRE AGREEMENT.................................................8
8.4 SUCCESSORS AND ASSIGNS...........................................9
8.5 CONSTRUCTION.....................................................9
8.6 WAIVER OF CONSEQUENTIAL DAMAGES..................................9
8.7 NOTICES..........................................................9
Section 9 - Signatures......................................................11
Attachment 1 Guarantee
Page ii
Section 0 - Parties and Recitals
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This Transportation Agreement Buy Out Agreement ("Agreement") is dated August
31, 2001, to become effective on December 31, 2002, as provided herein, by and
between San Juan Transportation Company, a Delaware corporation ("SJTC"), Public
Service Company of New Mexico, a New Mexico corporation ("PNM"), and Tucson
Electric Power Company, an Arizona corporation ("TEP") (PNM and TEP are referred
to collectively as "Utilities"), (with SJTC and Utilities herein sometimes
collectively referred to as "Parties").
Whereas, SJTC and Utilities are parties to the Transportation Agreement dated
April 30, 1984 between SJTC and Utilities, as amended ("SJTA"), which has a term
through 2017;
Whereas, Utilities have ongoing obligations under the SJTA;
Whereas, SJTC and the Utilities desire to terminate the SJTA and provide
compensation to SJTC for the Utilities' remaining obligations under the SJTA;
Whereas, SJTC, San Juan Coal Company ("SJCC"), and Utilities are parties to the
Underground Letter Agreement dated August 31, 2000 ("UG Letter Agreement"); and,
Whereas, SJCC and Utilities are parties to the Underground Coal Sales Agreement
("UG-CSA") dated August 31, 2001.
NOW, THEREFORE, in consideration of the terms, covenants and agreements
contained in this Agreement, Utilities jointly and severally agree with SJTC as
follows:
Section 1 - Definitions and Term
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1.1 Effective Date
Subject to Section 2.1 "Conditions Precedent", the Effective Date of
this Agreement shall be December 31, 2002.
1.2 Outstanding SJTA Obligations
"Outstanding SJTA Obligations" shall be defined as any payments,
costs, audit adjustments (including 3rd party audits), or other
obligations arising from or related to performance under the SJTA
prior to the SJTA termination.
1.3 SJTC Costs
"SJTC Costs" shall be defined as:
A) Any and all rentals, royalties, overriding royalties, other
retained interests, charges, fees and all other payments paid or
incurred by SJTC in connection with this Agreement;
B) Any Outstanding SJTA Obligations; and,
C) Any and all actual costs incurred by SJTC (including reasonable
attorney fees and expenses) relating to all claims other than
those between Utilities and SJTC which arise from the payment of
TBOV as defined in Section 3.1 "SJTA Buy Out Value".
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1.4 Term
This Agreement shall terminate after all payments have been received
in full by SJTC in accordance with the terms of this Agreement and
all obligations under this Agreement have been satisfied or otherwise
resolved pursuant to Section 6 "Dispute Resolution".
Section 2 - Conditions Precedent, Representations and Warranties
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2.1 Conditions Precedent
The Conditions Precedent to this Agreement becoming effective are:
A) Satisfaction of the conditions precedent contained in the UG-CSA.
B) Final approval of this Agreement by the San Juan Fuels Committee
pursuant to the requirements of the San Juan Project
Participation Agreement dated as of October 27, 1999, to be
obtained no later than September 28, 2001, and written
notification of such approval to SJTC by the Utilities.
C) Execution of the Guarantee by the Guarantor in the form attached
to this Agreement as Attachment 1 and incorporated herein, to be
obtained no later than September 28, 2001, and provided to
Utilities by SJTC.
2.2 Representations and Warranties
As of the execution of this Agreement and subject to satisfaction of
the applicable conditions precedent described in this Agreement, each
party warrants and represents that:
A) It is a corporation duly organized and in good standing in its
state of incorporation and is qualified to do business and is in
good standing in those states where necessary in order to carry
out the purposes of this Agreement;
B) It has the capacity to enter into and perform this Agreement and
all transactions contemplated in this Agreement, and that all
corporate actions required to authorize it to enter into and
perform this Agreement have been taken properly; and
C) This Agreement has been duly executed and delivered by it and is
valid and binding upon it in accordance with its terms.
Section 3 - SJTC Compensation
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3.1 SJTA Buy Out Value
The Utilities shall pay to SJTC [*] adjusted per Section 3.2
"Inflation - Deflation Adjustment" ("TBOV"), on December 31, 2002, to
buy out the value of the SJTA Capital Investment Element and to
extinguish any further obligations under the SJTA.
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3.2 Inflation - Deflation Adjustment
A) The amount of [*] will be adjusted for inflation according to the
following formula:
TBOV = [*] x D1 / D0
(1 & 0 are subscripts)
D1 and D0 are defined herein.
In no event shall the inflation-deflation adjustment cause TBOV
to be less than [*].
B) The "Inflation Index", calculated to three decimal places, shall
be equal to the sum of sixty-five percent (65%) times the
"Producer Price Index- Commodities for Construction Machinery and
Equipment (Series Id WPU112)" not seasonally adjusted, as
published by the United States Department of Labor, Bureau of
Labor Statistics ("Index"), plus thirty-five percent (35%) times
the "Implicit Price Deflator, Gross Domestic Product", as
published by the United States Department of Commerce, Bureau of
Economic Analysis ("Deflator").
i D0 shall be the Inflation Index calculated using the most
recently published values for June 2000, for the Index and
Deflator described above.
ii D1 shall be the Inflation Index calculated using the most
recently published values available for the date when the
payment is due, for the Index and Deflator described above.
In the event that there is a revision of a base index figure, the
base index figure will be revised in accordance with pertinent
published instructions regarding such revision, or if such
instructions are not published, the base index figure will be
revised in a manner, which fairly reflects the revision.
In the event that publication of any of the indices specified for
use under this Section 3.2 (B) should be discontinued or in the
event the items or categories upon which such published index is
based should be so modified or changed as to make the further use
of such index inequitable, the Parties agree to develop a
mutually acceptable substitute index (either published or
compiled or arranged by the Parties).
3.3 Payment of TBOV
A) There will not be an invoice generated by SJTC for payment made
pursuant to Section 3.1.
B) Utilities agree to make an electronic funds transfer of TBOV due
to SJTC, and all applicable taxes, to SJTC's nominated account
(to be nominated in writing by SJTC at least 60 days before the
payment date) on or before the payment date described herein.
Applicable taxes shall include any and all taxes (including
without limitation gross income, gross receipts, value added,
sales, use, occupation, franchise, personal property, stamp and
other taxes), levies, imposts, duties, charges or withholdings of
any nature whatsoever, together with any interest thereon (any of
the foregoing fees, taxes and interest being for purposes hereof
called "taxes") imposed by any sovereign political or
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governmental authority or taxing authority upon or in connection
with SJTC's operation and with any activities and transactions
under this Agreement (including reimbursements for SJTC Costs as
described hereunder) excepting only taxes which are measured by
net income (other than any such taxes measured by net income
which are imposed in lieu of taxes measured by gross income and
gross receipts).
C) Utilities shall provide SJTC with documentation of the Inflation
Index used to determine the payment amount with notification of
the electronic funds transfer.
3.4 Payment of SJTC Costs
A) Invoicing and Payment
SJTC will invoice the Utilities for SJTC Costs. Invoices
submitted by SJTC shall be due and payable by Utilities on the
twenty-second (22nd) day of the month succeeding the month for
which such invoice is submitted, or on the twelfth (12th) day
after receipt of the invoice by Utilities, whichever date is
later. Payment shall be made to SJTC by electronic funds transfer
to such bank account as SJTC may from time to time designate.
B) Disputed Invoices
In case any portion of any invoice concerning SJTC Costs is
disputed, the undisputed amount shall be paid when due; provided
however, that Utilities may also pay the disputed portion of such
invoice without thereby waiving their right to contest such
disputed portion. Disputed invoices for SJTC Costs shall be
referred initially to the Joint Committee for resolution.
C) Failure to Pay
In the event Utilities fail to pay any amount due and not in bona
fide dispute, SJTC shall be paid interest on all amounts owing
under any invoice submitted hereunder which are not paid when due
and payable, with said interest to be calculated at the Prime
Rate as published in the Wall Street Journal for corporate loans
posted by at least 75% of the nation's largest banks (or its
equivalent) plus three percent (3%) but not in excess of the
maximum rate of interest permitted by law and to be paid for the
actual number of days elapsed since the invoice was due and
payable. This right shall not be deemed an exclusive right or
remedy.
D) Audits
SJTC will keep books, records and accounts necessary to show all
information required for purposes of this Section 3.4. Upon
Utilities' request, SJTC shall supply Utilities, by report and/or
with actual source documents, the information reasonably
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necessary to verify any invoice for SJTC Costs issued pursuant to
this Agreement; provided, however, that SJTC shall not be
required to disclose information which in the opinion of SJTC is
of a confidential nature due to the relationship of such
information to SJTC's existing or contemplated operations. In the
event Utilities and SJTC are unable to agree that the invoice is
calculated correctly, a verification of such invoice shall be
prepared and certified by a nationally recognized firm of
certified public accountants, to be selected by Utilities from a
list of three (3) such firms submitted by SJTC, such verification
to set forth all data reasonably necessary to verify that the
invoice is calculated correctly. The findings of said
verification shall be accepted by both Utilities and SJTC as
final and binding with respect to that invoice. The accounting
firm selected for any such verification shall be bound not to
disclose and shall treat as confidential any and all proprietary
information of SJTC furnished to or examined by such firm in
connection with such audit. It is understood that such
verification shall not provide Utilities with nor entitle
Utilities access to SJTC's books or records.
If any such verification discloses that a calculation error has
occurred and that, as a result thereof, an amount is due to one
or the other party, such amount shall promptly be paid to whom it
is owed; provided, however, if there is a dispute relating to the
validity of a charge or adequacy of a payment either party may
submit such dispute to the Joint Committee. All expenses of any
such requested verification shall be paid by Utilities. Invoices
which are not contested by either party within twenty-four (24)
months from the date of the Invoice shall be deemed to be correct
and will not thereafter be subject to verification.
Section 4 - SJTA Termination
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4.1 SJTA Termination
Upon receipt of the TBOV payment by SJTC as adjusted and in
consideration of the terms and conditions set forth in this
Agreement, the SJTA and the associated Guarantee by BHP Minerals
International Inc. are terminated and all obligations under the
SJTA are satisfied.
Section 5 - SJTC Obligations
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5.1 SJTC Obligations
SJTC shall use reasonable efforts consistent with law to minimize
claims for costs referenced in Section 1.3(A) and to manage costs
referenced in Section 1.3(C).
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Section 6 - Dispute Resolution
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6.1 Matters To Be Arbitrated; Notice of Claims and Defenses; Party
Arbitrator Designation
Either party may demand final and binding arbitration of any
dispute, claim or controversy arising out of or relating to this
Agreement, performance or actions pursuant to this Agreement, or
concerning the interpretation of this Agreement (whether such
matters sound in contract, tort or otherwise and including
without limitation repudiation, illegality, and/or fraud in the
inducement) by giving written notice to the other party of all
claims it desires to submit to arbitration; provided, however,
that matters within the authority of the Joint Committee must be
presented first to that committee for consideration. Disputes
regarding the payment of TBOV shall be immediately subject to
arbitration in accordance with this section. The notice shall
include: (a) the demanding party's designation of a party
arbitrator; and (b) a detailed statement of the facts and
theories supporting the claims. The party on whom the arbitration
demand is served shall have thirty days from receipt of the
notice to respond in writing to the demand and to submit any
additional claims it wishes to submit to arbitration at the same
time. The response also shall include: (a) the designation of the
party arbitrator for that party; and (b) a detailed statement of
the facts and theories supporting the claims and/or defenses
asserted. The party originally demanding arbitration shall reply
in writing to any additional claims submitted within ten days
from the receipt of response.
6.2 Arbitrators; Selection of Neutral Arbitrator
Any party who fails to designate timely its party arbitrator
shall forfeit its right to designate an arbitrator. If only one
arbitrator is timely designated, that single arbitrator shall
hear the dispute. If two arbitrators are timely designated, those
arbitrators shall, within thirty days, either agree on the
appointment of a third, disinterested arbitrator knowledgeable as
to the subject matter involved in the arbitration or petition the
Chief Judge of the United States District Court for the District
of New Mexico for the appointment of a third arbitrator. The
parties shall be equally liable for the reasonable fees and
expenses of the neutral arbitrator hearing the dispute. The
parties shall be responsible for the fees and expenses of their
respective party-appointed arbitrator.
6.3 Arbitration Hearings, Procedures and Timing
All reasonable efforts will be made to hold a hearing on the
claims submitted within sixty days after the appointment of the
last arbitrator. In conducting the hearing, the arbitrators are
directed, where feasible and where not inconsistent with the
provisions of this paragraph, to adhere to the then-existing
American Arbitration Association procedures and rules relating to
commercial disputes. Unless otherwise agreed by the parties, the
hearing shall be held in Farmington, New Mexico.
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6.4 Choice of Law
The arbitrators shall apply the laws of the State of New Mexico.
6.5 Award and Enforcement
The decision or award of the arbitrators shall be given in
writing within thirty days after the conclusion of the hearing.
The arbitrators are authorized to award money damages, injunctive
and declaratory relief and/or specific performance, if such
relief in their opinion is appropriate. In any arbitration, each
party shall bear its own costs, expenses, and attorneys' fees.
The arbitrators do not have authority to award costs, expenses,
or attorneys' fees to the prevailing party. The award or decision
of the arbitrators shall be subject to review or enforcement in
accordance with the New Mexico Uniform Arbitration Act, NMSA 1978
ss.ss. 44-7-1 et seq. Any party shall be entitled to recover
reasonable attorneys' fees and costs incurred in enforcing any
arbitration award or decision made pursuant to the arbitration
provisions of this Agreement.
6.6 Performance Pending Arbitration Decision
During the arbitration, unless otherwise ordered by the
arbitrators, the parties agree to continued performance under
this Agreement.
6.7 Definition of "Parties" for this Section
For purposes of this Section 6, the Utilities shall be considered
a single party. Specifically, and by example, the Utilities must
act collectively to select their party arbitrator under Section
6.2 "Arbitrators; Selection of Neutral Arbitrator".
Section 7 - Joint Committee
---------------------------
7.1 Purpose
The intent of the Parties in providing for a Joint Committee is
to establish an orderly and continuing means of dealing with
matters that may arise from time to time in carrying out the
provisions of this Agreement. The Joint Committee shall have four
(4) members.
7.2 Designation
During the term of this Agreement, SJTC will, by notice to
Utilities, designate two (2) individuals as its representatives
on the Joint Committee, and Utilities will, by notice to SJTC,
designate two (2) individuals as their representatives on the
Joint Committee; and each such representative shall be authorized
by the party(ies) by whom he is designated to act on its (their)
behalf with respect to matters herein specified to be
responsibilities of the Joint Committee. A representative may not
delegate his responsibilities to others, but Utilities, or SJTC,
may designate an alternate to act when said representative is
unavailable. Either Utilities, or SJTC, by notice to the other,
may change the designation of its (their) representatives.
7.3 Authority
The Joint Committee shall have authority and responsibility to
address disputes arising from or related to this Agreement other
than disputes regarding the payment of TBOV. The Joint Committee
shall not have any authority with respect to disputes regarding
the payment of TBOV and such disputes shall be immediately
subject to arbitration.
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7.4 Decisions
Decisions by the Joint Committee shall require the unanimous
approval of all representatives of the Joint Committee and shall
be evidenced by the signatures of all said representatives.
7.5 Relationship to Arbitration
In case agreement should not be reached among the representatives
of the Joint Committee as to any of the matters referred to in
Section 7.3 "Authority" as responsibilities of the Joint
Committee, such matters shall be forthwith submitted to and
determined by arbitration as provided for in Section 6 "Dispute
Resolution".
Section 8 - General Provisions
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8.1 Confidentiality
The terms and conditions, including those dealing with
compensation, set forth in this Agreement are considered by
Utilities and SJTC to be confidential and proprietary information
and none of the parties shall disclose any such information to
any third party other than the attorneys, auditors and agents of
Utilities, other owners of the San Juan Station, and SJTC,
without the advance written consent of the other parties;
provided however, disclosure may be made without advance consent
where, in the opinion of counsel, such disclosure may be required
by order of court or regulatory agency, law or regulation or in
connection with judicial or administrative proceedings involving
a party hereto, in which event the party to make such disclosure
shall advise the other parties in advance as soon as possible and
cooperate to the maximum extent practicable to minimize the
disclosure of any such information, including, where practicable,
deletion of portions of this Agreement relating to compensation,
including, Section 3 "SJTC Compensation".
Utilities shall maintain with the owners of the San Juan Station
other than the Utilities written confidentiality agreements that
are acceptable to SJTC prior to the disclosure of the terms of
this Agreement.
8.2 Joint and Several
The Utilities' duties and obligations under this Agreement shall
be joint and several.
8.3 Entire Agreement
This Agreement supersedes all prior agreements and
representations between the Parties, whether written or oral,
with respect to the subject matter of this Agreement and is
intended as a complete and exclusive statement of the terms of
the agreement between the Parties with respect to the subject
matter. Except as specifically set forth in this Agreement, no
representations have been made to induce any of the Parties to
enter into this Agreement.
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8.4 Successors and Assigns
This Agreement and all of the rights and obligations of the
Parties described shall extend to and be binding upon, and shall
inure to the benefit of, the respective successors and assigns of
the respective Parties.
8.5 Construction
The terms and conditions of this Agreement are the result of
negotiation and drafting on an equal footing by the Parties and
their legal counsel. This Agreement shall be construed
evenhandedly and without favor or predisposition to any party.
8.6 Waiver of Consequential Damages.
SJTC and the Utilities waive any recovery of consequential
damages related to the breach of this Agreement.
8.7 Notices
A) Any notice, demand or request provided for in this Agreement, or
given or made in connection with this Agreement shall be in
writing, signed by an officer of the party giving such notice and
shall be deemed to be properly and sufficiently given or made if
sent by registered or certified mail, and if to SJTC, addressed
as follows:
San Juan Transportation Company
300 West Arrington, Suite 200
Farmington, NM 87401
Attention: President
with a copy addressed as follows:
San Juan Transportation Company
Post Office Box 155
Fruitland, NM 87416
Attention: Vice President
and if to Utilities, addressed as follows:
Public Service Company of New Mexico
Alvarado Square
Albuquerque, NM 87158
Attention: Corporate Secretary
and
Tucson Electric Power Company
Post Office Box 711
Tucson, AZ 85702
Attention: Secretary
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B) Any party hereto may change its address for notice by so advising
the other Parties hereto in accordance with the provisions of
this Section 8.7. Any notice given in accordance with the
provisions of this Section 8.7 shall be deemed effectively given
as of the date of its deposit with the United States Postal
Service.
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Section 9 - Signatures
IN WITNESS WHEREOF, SJTC and the Utilities, by their duly authorized
representatives, have entered into this Agreement.
PUBLIC SERVICE COMPANY OF NEW MEXICO
By: /s/ Patrick J. Goodman 8/29/01
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Patrick J. Goodman, Vice President Date
TUCSON ELECTRIC POWER COMPANY
By: /s/ Kevin Larson 8/31/01
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Kevin Larson, Vice President Date
SAN JUAN TRANSPORTATION COMPANY
By: /s/ John W. Grubb 8/29/01
---------------------------------------- -------
John W. Grubb, President Date
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