Exhibit No. 10.84
[*] indicates that the confidential portion has been omitted from this filed
exhibit and filed separately with the Securities and Exchange Commission.
Coal Sales Agreement
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Buy Out Agreement
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Among
San Juan Coal 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 CSA OBLIGATIONS.......................................1
1.3 SJCC 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 - Coal Reserves Bought Out..........................................2
3.1 SAN JUAN MINE SURFACE RESERVES....................................2
3.2 LA PLATA MINE SURFACE RESERVES....................................3
Section 4 - SJCC Compensation.................................................3
4.1 CSA BUY OUT VALUE.................................................3
4.2 INFLATION - DEFLATION ADJUSTMENT..................................3
4.3 PAYMENT OF CBOV...................................................4
4.4 PAYMENT OF SJCC COSTS.............................................4
Section 5 - CSA Termination...................................................5
5.1 CSA TERMINATION...................................................5
Section 6 - SJCC Obligations..................................................6
6.1 SJCC OBLIGATIONS..................................................6
Section 7 - Dispute Resolution................................................6
7.1 MATTERS TO BE ARBITRATED; NOTICE OF CLAIMS AND DEFENSES;
PARTY ARBITRATOR DESIGNATION......................................6
7.2 ARBITRATORS; SELECTION OF NEUTRAL ARBITRATOR......................6
7.3 ARBITRATION HEARINGS, PROCEDURES AND TIMING.......................7
7.4 CHOICE OF LAW.....................................................7
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7.5 AWARD AND ENFORCEMENT.............................................7
7.6 PERFORMANCE PENDING ARBITRATION DECISION..........................7
7.7 DEFINITION OF "PARTIES" FOR THIS SECTION..........................7
Section 8 - Joint Committee...................................................7
8.1 PURPOSE...........................................................7
8.2 DESIGNATION.......................................................7
8.3 AUTHORITY.........................................................8
8.4 DECISIONS.........................................................8
8.5 RELATIONSHIP TO ARBITRATION.......................................8
Section 9 - General Provisions................................................8
9.1 CONFIDENTIALITY...................................................8
9.2 JOINT AND SEVERAL.................................................9
9.3 ENTIRE AGREEMENT..................................................9
9.4 SUCCESSORS AND ASSIGNS............................................9
9.5 CONSTRUCTION......................................................9
9.6 WAIVER OF CONSEQUENTIAL DAMAGES...................................9
9.7 NOTICES...........................................................9
Section 10 - Signatures......................................................11
List of Attachments and Exhibits
Attachment 1: Guarantee
Exhibit 1: San Juan Mine Surface Reserves
Exhibit 2: La Plata Mine Surface Reserves
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Section 0 - Parties and Recitals
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This Coal Sales 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 Coal Company, a Delaware corporation ("SJCC"), 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 SJCC and Utilities herein sometimes
collectively referred to as "Parties").
Whereas, SJCC and Utilities are parties to the Coal Sales Agreement dated August
18, 1980 between SJCC and Utilities, as amended ("CSA"), which has a term
through 2017;
Whereas, Utilities have ongoing obligations under the CSA;
Whereas, SJCC and the Utilities desire to terminate the CSA and provide
compensation to SJCC for the Utilities' remaining obligations under the CSA;
Whereas, SJCC, San Juan Transportation Company, 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 SJCC 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 CSA Obligations
"Outstanding CSA 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 CSA prior to the CSA
termination.
1.3 SJCC Costs
"SJCC 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 SJCC in connection with this Agreement;
B) Any Outstanding CSA Obligations; and,
C) Any and all actual costs incurred by SJCC (including
reasonable attorney fees and expenses) relating to all claims
other than those between Utilities and SJCC which arise from
the payment of CBOV as defined in Section 4.1 "CSA Buy Out
Value".
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1.4 Term
This Agreement shall terminate after all payments have been received
in full by SJCC in accordance with the terms of this Agreement and
all obligations under this Agreement have been satisfied or otherwise
resolved pursuant to Section 7 "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 SJCC 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 SJCC.
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 - Coal Reserves Bought Out
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3.1 San Juan Mine Surface Reserves
The San Juan Mine reserves shown for illustrative purposes on Exhibit 1
"San Juan Mine Surface Reserves" (attached and incorporated by
reference) are bought out by this Agreement. SJCC shall maintain
records sufficient to identify these reserves.
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3.2 La Plata Mine Surface Reserves
The La Plata Mine reserves shown for illustrative purposes on Exhibit 2
"La Plata Mine Surface Reserves" (attached and incorporated by
reference) are bought out by this Agreement. SJCC shall maintain
records sufficient to identify these reserves.
Section 4 - SJCC Compensation
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4.1 CSA Buy Out Value
The Utilities shall pay to SJCC [*], adjusted per Section 4.2
"Inflation - Deflation Adjustment" ("CBOV"), on December 31, 2002, to
buy out the value of the La Plata and Fruitland Capital Investment
Elements and to extinguish any further obligations under the CSA.
4.2 Inflation - Deflation Adjustment
A) The amount of [*] will be adjusted for inflation according to
the following formula:
CBOV = [*] x D1 / D0
(1 and 0 are subscripts)
D1 and D0 are defined herein.
In no event shall the inflation-deflation adjustment cause
CBOV 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").
1) D0 shall be the Inflation Index calculated using the most
recently published values for June 2000, for the Index
and Deflator described above.
2) 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.
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In the event that publication of any of the indices specified
for use under this Section 4.2 (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).
4.3 Payment of CBOV
A) There will not be an invoice generated by SJCC for payment
made pursuant to Section 4.1.
B) Utilities agree to make an electronic funds transfer of CBOV
due to SJCC including all applicable taxes, to SJCC's
nominated account (to be nominated in writing by SJCC 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 governmental authority or taxing
authority upon or in connection with SJCC's operation and with
any activities and transactions under this Agreement
(including reimbursements for SJCC 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 SJCC with documentation of the
Inflation Index used to determine the payment amount with
notification of the electronic funds transfer.
4.4 Payment of SJCC Costs
A) Invoicing and Payment
SJCC will invoice the Utilities for SJCC Costs. Invoices submitted by
SJCC 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 SJCC by
electronic funds transfer to such bank account as SJCC may from time to
time designate.
B) Disputed Invoices
In case any portion of any invoice concerning SJCC 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 SJCC Costs shall be referred initially to the Joint
Committee for resolution.
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C) Failure to Pay
In the event Utilities fail to pay any amount due and not in bona fide
dispute, SJCC 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
SJCC will keep books, records and accounts necessary to show all
information required for purposes of this Section 4.4. Upon Utilities'
request, SJCC shall supply Utilities, by report and/or with actual
source documents, the information reasonably necessary to verify any
invoice for SJCC Costs issued pursuant to this Agreement; provided,
however, that SJCC shall not be required to disclose information which
in the opinion of SJCC is of a confidential nature due to the
relationship of such information to SJCC's existing or contemplated
operations. In the event Utilities and SJCC 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 SJCC, 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 SJCC 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 SJCC 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 SJCC'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 5 - CSA Termination
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5.1 CSA Termination
Upon receipt of the CBOV payment by SJCC as adjusted and in
consideration of the terms and conditions set forth in this Agreement,
the CSA and the associated Guarantee by BHP Minerals International Inc.
are terminated and all obligations under the CSA are satisfied.
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Section 6 - SJCC Obligations
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6.1 SJCC Obligations
SJCC 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).
Section 7 - Dispute Resolution
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7.1 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 CBOV 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.
7.2 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.
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7.3 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.
7.4 Choice of Law
The arbitrators shall apply the laws of the State of New Mexico.
7.5 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.
7.6 Performance Pending Arbitration Decision
During the arbitration, unless otherwise ordered by the arbitrators,
the parties agree to continued performance under this Agreement.
7.7 Definition of "Parties" for this Section
For purposes of this Section 7, the Utilities shall be considered a
single party. Specifically, and by example, the Utilities must act
collectively to select their party arbitrator under Section 7.2
"Arbitrators; Selection of Neutral Arbitrator".
Section 8 - Joint Committee
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8.1 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.
8.2 Designation
During the term of this Agreement, SJCC will, by notice to Utilities,
designate two (2) individuals as its representatives on the Joint
Committee, and Utilities will, by notice to SJCC, 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
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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 SJCC, may designate an alternate to act when said
representative is unavailable. Either Utilities, or SJCC, by notice to
the other, may change the designation of its (their) representatives.
8.3 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 CBOV. The Joint Committee shall not have any
authority with respect to disputes regarding the payment of CBOV and
such disputes shall be immediately subject to arbitration.
8.4 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.
8.5 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 8.3
"Authority" as responsibilities of the Joint Committee, such matters
shall be forthwith submitted to and determined by arbitration as
provided for in Section 7 "Dispute Resolution".
Section 9 - General Provisions
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9.1 Confidentiality
The terms and conditions, including those dealing with compensation,
set forth in this Agreement are considered by Utilities and SJCC 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 SJCC, 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 4 "SJCC
Compensation".
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Utilities shall maintain with the owners of the San Juan Station other
than the Utilities written confidentiality agreements that are
acceptable to SJCC prior to the disclosure of the terms of this
Agreement.
9.2 Joint and Several
The Utilities' duties and obligations under this Agreement shall be
joint and several.
9.3 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.
9.4 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.
9.5 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.
9.6 Waiver of Consequential Damages.
SJCC and the Utilities waive any recovery of consequential damages
related to the breach of this Agreement.
9.7 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 SJCC,
addressed as follows:
San Juan Coal Company
300 West Arrington, Suite 200
Farmington, NM 87401
Attention: President
with a copy addressed as follows:
San Juan Coal Company
Post Office Box 155
Fruitland, NM 87416
Attention: San Juan Mine Manager
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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
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 9.7. Any notice given in accordance
with the provisions of this Section 9.7 shall be deemed
effectively given as of the date of its deposit with the
United States Postal Service.
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Section 10 - Signatures
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IN WITNESS WHEREOF, SJCC, 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 COAL COMPANY
By: /s/ John W. Grubb 8/29/01
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John W. Grubb, President Date
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