Exhibit No. 10.85
[*] indicates that the confidential portion has been omitted from this filed
exhibit and filed separately with the Securities and Exchange Commission.
Underground Coal Sales Agreement
--------------------------------
Among
San Juan Coal Company
And
Public Service Company of New Mexico
And
Tucson Electric Power Company
Table of Contents
Section 0 - Parties and Recitals.............................................1
Section 1 - Definitions......................................................2
1.1 Alternate Coal...................................................2
1.2 Cimarron Coal Assignment.........................................2
1.3 Coal Leases......................................................2
1.4 Fruitland Coal Sublease..........................................2
1.5 Guarantee........................................................2
1.6 Mineable Coal....................................................2
1.7 Non-SJCC Coal....................................................3
1.8 Processed Coal...................................................3
1.9 Remnant Coal.....................................................3
1.10 Reserve of Coal..................................................3
1.11 SJCC Site Area...................................................3
1.12 San Juan Station.................................................4
1.13 Ton..............................................................4
1.14 Ute ROW..........................................................4
1.15 Definitions of Other Terms.......................................4
Section 2 - Obligations of the Parties and Term of Agreement.................6
2.1 Obligations of SJCC..............................................6
2.2 Obligations of Utilities.........................................6
2.3 Term.............................................................7
2.4 Conditions Precedent.............................................7
2.5 Extension........................................................7
2.6 Representations and Warranties...................................7
Section 3 - Coal Supply......................................................8
3.1 Ownership of Coal................................................8
3.2 Alternate Coal...................................................8
Section 4 - Delivery of Coal.................................................9
4.1 Delivery Points..................................................9
4.2 Delivery Rates...................................................9
4.3 Utilities' Coal Storage.........................................10
Section 5 - Coal Specifications and Weighing, Sampling, and Analysis........11
5.1 Coal Size.......................................................11
5.2 Coal Quality....................................................11
5.3 Utilities' Right of Rejection...................................11
5.4 Weighing and Analysis Facilities and Methods....................12
i
Section 6 - Coal Leases, Land, and Land Rights..............................13
6.1 Dedicated Reserves..............................................13
6.2 SJCC's Facilities...............................................13
6.3 Utilities' Rights Vis-a-Vis the SJCC Site Area..................13
6.4 Waste Disposal Area.............................................14
6.5 Compliance with Leases and Other Instruments....................14
6.6 Restrictions on SJCC............................................15
6.7 Site Area Lease Management......................................15
Section 7 - Operations......................................................17
7.1 Mining Plans and Methods........................................17
7.2 Processing Methods..............................................17
7.3 Reclamation Activities..........................................17
Section 8 - SJCC Compensation...............................................19
8.1 Compensation Components.........................................19
8.2 Mining and Reclamation Component................................19
8.3 Coal Processing Component.......................................24
8.4 Non-SJCC Coal and Alternate Coal Costs..........................27
8.5 Other Costs.....................................................28
8.6 Inflation - Deflation Adjustment................................29
8.7 Invoicing and Settlement........................................30
Section 9 - Coordinating Committee..........................................33
9.1 Purpose.........................................................33
9.2 Designation.....................................................33
9.3 Procedures and Practices........................................33
9.4 Coordinating Committee Decisions................................34
9.5 Relationship to Joint Committee and Arbitration.................34
Section 10 - Joint Committee................................................35
10.1 Purpose.........................................................35
10.2 Designation.....................................................35
10.3 Authority.......................................................35
10.4 Decisions by the Joint Committee................................36
10.5 Relationship to Arbitration.....................................37
Section 11 - Dispute Resolution.............................................38
11.1 Matters To Be Arbitrated; Notice of Claims and Defenses;
Party Arbitrator Designation....................................38
11.2 Arbitrators; Selection of Neutral Arbitrator....................38
11.3 Arbitration Hearings, Procedures and Timing.....................38
11.4 Choice of Law...................................................38
11.5 Award and Enforcement...........................................39
11.6 Performance Pending Arbitration Decision........................39
11.7 Definition of "Party" for this Section..........................39
ii
Section 12 - Non-Normal Conditions, Right to Cure, Termination
and Expiration.................................................40
12.1 Utilities' Right to Mine........................................40
12.2 Uncontrollable Forces...........................................40
12.3 Non-Normal Conditions, Right to Cure, and Offers
of Non-SJCC Coal................................................40
12.4 Material Default................................................43
12.5 Termination.....................................................44
12.6 Expiration......................................................46
Section 13 - Indemnity......................................................48
13.1 Indemnity.......................................................48
Section 14 - General Provisions.............................................49
14.1 Compliance with Applicable Laws.................................49
14.2 Labor Force.....................................................49
14.3 Confidentiality / Non-disclosure................................51
14.4 The Utilities' Duties and Obligations
Shall be Joint and Several......................................51
14.5 Permits and Approvals...........................................51
14.6 Waivers.........................................................51
14.7 Insurance.......................................................51
14.8 Notices.........................................................52
14.9 Choice of Law...................................................53
14.10 Assignment......................................................53
14.11 Successors and Assigns..........................................54
14.12 Authorizations..................................................54
14.13 Amendments......................................................54
14.14 Construction....................................................54
14.15 Entire Agreement................................................54
14.16 Waiver of Consequential Damages.................................55
14.17 Severability....................................................55
14.18 Survival of Provisions..........................................55
Section 15 - Signatures.....................................................56
Exhibits and Attachment
Attachment "1" Guarantee
Exhibit "A" Coal Leases
Exhibit "B" Delivery Points
Exhibit "C" Mining Plans and Methods
Exhibit "D" Delivery Rates
Exhibit "E" SJCC Site Area
Exhibit "F" Operating Costs
Exhibit "G" Tax Calculations
Exhibit "H" San Juan Station Minimum Deliveries 2003-2017
iii
Section 0 - Parties and Recitals
--------------------------------
THIS AGREEMENT ("Agreement") is dated August 31, 2001, to become effective on
January 1, 2003, as provided herein, between SAN JUAN COAL COMPANY, a Delaware
corporation ("SJCC"), and PUBLIC SERVICE COMPANY OF NEW MEXICO, a New Mexico
corporation, and TUCSON ELECTRIC POWER COMPANY, an Arizona corporation (herein
collectively referred to as "Utilities"), (with SJCC and Utilities herein
sometimes collectively referred to as "Parties").
WHEREAS, SJCC has acquired coal leases and surface rights known as the Coal
Leases which are more particularly described in Exhibit "A" "Coal Leases";
WHEREAS, Utilities own, in part, a coal-burning power plant in the vicinity of
the Coal Leases (hereinafter referred to as the "San Juan Station");
WHEREAS, the San Juan Station currently consists of four generating units (as
hereinafter defined);
WHEREAS, Utilities desire to have SJCC sell Utilities coal that has been mined
from an underground coal mine (the "UG Mine") on the Coal Leases and delivered
to the delivery point(s) shown on Exhibit "B" "Delivery Points" and SJCC is
willing to undertake such obligation upon the terms and conditions hereinafter
set forth, and;
WHEREAS, the purpose of this Agreement is to set forth the agreement between the
Parties relating to the supply of coal by SJCC to the San Juan Station.
NOW, THEREFORE, in consideration of the terms, covenants and agreements
contained in this Agreement, Utilities jointly and severally agree with SJCC as
follows:
1
Section 1 - Definitions
-----------------------
When used in this Agreement, the terms defined in this Section 1 shall
have the following meanings.
1.1 Alternate Coal
"Alternate Coal" shall mean coal other than Mineable Coal or Non-SJCC
Coal that is acquired pursuant to Section 3.2 "Alternate Coal" that
meets the following criteria:
A) It has been approved by the Joint Committee for processing and
delivery or inclusion in the Reserve of Coal;
B) It is reasonable to expect that it can be processed to meet
the Coal Quality and Coal Size requirements described in
Section 5 "Coal Specifications and Weighing, Sampling, and
Analysis";
C) It has been severed from sources other than the Coal Leases;
and,
D) It may be intended for short-term supply.
1.2 Cimarron Coal Assignment
"Cimarron Coal Assignment" shall mean that particular Assignment
Agreement, dated October 30, 1979, originally between Cimarron Coal
Company and Western Coal Company and assigned to SJCC, as amended and
modified.
1.3 Coal Leases
"Coal Leases" shall refer to those certain coal leases (some whole coal
leases and some portions of other coal leases) which are described in
Exhibit "A" "Coal Leases".
1.4 Fruitland Coal Sublease
"Fruitland Coal Sublease" shall mean that particular Sublease dated
August 18, 1980, between Western Coal Company as Sublessor and Utah
International Inc. as Sublessee.
1.5 Guarantee
"Guarantee" shall mean the Guarantee, of even date herewith, made by
BHP Minerals International Inc. and guaranteeing to Utilities SJCC's
performance of its obligations hereunder.
1.6 Mineable Coal
"Mineable Coal" shall mean that coal which is Remnant Coal or meets the
following four criteria:
A) Is within the Coal Leases (as herein defined);
B) Can reasonably be expected to be mined utilizing the Mining
Plans and Methods herein defined;
C) Can reasonably be expected to meet the heating value
specifications described in Section 5.2 "Coal Quality" (unless
the Utilities' Coordinating Committee representative agrees
that a lower heating value is acceptable); and,
2
D) Is contained in the Number 8 coal seam referenced in Exhibit
"C" "Mining Plans and Methods" and is at least the thickness
of the minimum operating height of the longwall shearer,
excluding local anomalies.
1.7 Non-SJCC Coal
"Non-SJCC Coal" shall mean coal that is offered to Utilities pursuant
to Section 12.3 "Non-Normal Conditions, Right to Cure, and Offers of
Non-SJCC Coal" and meets the following criteria:
A) It has been approved by the Joint Committee for processing and
delivery or inclusion in the Reserve of Coal;
B) It is reasonable to expect that it can be processed to meet
the Coal Quality and Coal Size requirements described in
Section 5 "Coal Specifications and Weighing, Sampling, and
Analysis";
C) It has been severed from sources other than the Coal Leases;
and,
D) It is intended for short-term supply.
1.8 Processed Coal
"Processed Coal" shall mean coal that has been processed according to
Section 7.2 "Processing Methods".
1.9 Remnant Coal
"Remnant Coal" shall mean coal uncovered by SJCC at its discretion
utilizing mining methods other than the Mining Plans and Methods
described herein from coal leases on the SJCC Site Area before January
1, 2004, and that was not bought out by the Utilities pursuant to the
Coal Sales Agreement Buy Out Agreement of even date herewith.
1.10 Reserve of Coal
"Reserve of Coal" shall mean all Mineable Coal, Non-SJCC Coal, and
Alternate Coal on the SJCC Site Area that is mined coal in storage or
un-mined coal from which the overburden has been removed.
1.11 SJCC Site Area
"SJCC Site Area" is identified in Exhibit "E" "SJCC Site Area" and
includes the following:
A) Coal Leases as described in Exhibit "A" "Coal Leases".
B) San Juan Mine and facilities including coal receiving,
handling, delivery, and crushing facilities, coal weighing and
sampling facilities, service road, maintenance and office
buildings, fencing and auxiliary facilities.
C) La Plata Mine and facilities including coal weighing
facilities, service road, maintenance and office buildings,
fencing and auxiliary facilities.
D) Transportation Corridor facilities including the haul road,
water system, fencing and auxiliary facilities.
3
1.12 San Juan Station
That certain coal-fired power plant currently operated by Public
Service Company of New Mexico and owned, in part, by Utilities,
presently consisting of four generating units. The First Unit has a net
rated capacity of approximately 327,000 kW. The Second Unit has a net
rated capacity of approximately 316,000 kW. The Third Unit has a net
rated capacity of approximately 497,000 kW. The Fourth Unit has a net
rated capacity of approximately 507,000 kW.
1.13 Ton
Equal to 2,000 pounds and the same as a short ton when used herein.
1.14 Ute ROW
"Ute ROW" shall mean that particular right of way agreement dated July
29, 1981, between Western Coal Company (which interest has been
assigned to SJCC) and the Ute Mountain Ute Tribe of the Ute Mountain
Ute Reservation, as amended.
1.15 Definitions of Other Terms
Definitions of terms used predominantly in Section 8, appear in Section
8.2(F) "Definitions". Definitions of other terms appear elsewhere
throughout this Agreement. These include:
A) "Administration Element", defined in Section 8.2(D);
B) "Agreement", defined in Section 0;
C) "Annual CIE Amount", defined in Section 8.2(E);
D) "Annual Processing Tons", defined in Section 8.3(A)(5);
E) "Base CIE Amount", defined in Section 8.2;
F) "Base CIEOriginal", defined in Section 8.2(A)(1);
G) "Base CIEtax adj.", defined in Section 8.2(A)(1);
H) "Base CIEtrue up adj.", defined in Section 8.2(A)(1);
I) "BMT", defined in Section 8.2(A)(3);
J) "CIE Reconciliation Amount", defined in Section 8.2;
K) "Coal Costs", defined in Section 8.1;
L) "Cure Plan", defined in Section 12.3(E)(1);
M) "Deflator", defined in Section 8.6(A);
N) "Delivery Points", defined in Section 4.1(A);
O) "Depletion-eligible Reimbursable SJCC Coal Processing Costs",
defined in Section 8.3(B)(2);
P) "Depletion-ineligible Reimbursable SJCC Coal Processing Costs"
defined in Section 8.3(B)(3);
4
Q) "Eligible Processing Administration Element", defined in
Section 8.3(C)(1);
R) "Emergency Situation", defined in Section 12.1(A);
S) "IMT", defined in Section 8.2(B)(3);
T) "Incremental CIE Amount", defined in Section 8.2;
U) "Index", defined in Section 8.6(A);
V) "Inferior Coal", defined in Section 5.3;
W) "Inflation Index", defined in Section 8.6(A);
X) "Material Default Conditions", defined in Section 12.3;
Y) "Monthly Eligible Processing Tons", defined in Section
8.3(A)(5);
Z) "Monthly Non-Eligible Processing Tons", defined in Section
8.3(A)(5);
AA) "Monthly Processing Tons", defined in Section 8.3(A)(5);
BB) "NBMT", defined in Section 8.2(A)(3);
CC) "NIMT", defined in Section 8.2(B)(3);
DD) "Non-Eligible Processing Administration Element", defined in
Section 8.3(C)(2);
EE) "Processing Administration Element", defined in Section
8.3(C);
FF) "Processing CIE Amount", defined in Section 8.3;
GG) "Processing CIE Reconciliation Amount", defined in Section
8.3;
HH) "Processing CIEEligible", defined in Section 8.3(A)(2);
II) "Processing CIEEligible-Adj", defined in Section 8.3(A)(3);
JJ) "Processing CIEEligible-Org", defined in Section 8.3(A)(1);
KK) "Processing CIENon-eligible", defined in Section 8.3(A)(2);
LL) "Processing CIENon-elg-Adj.", defined in Section 8.3(A)(3);
MM) "Processing CIENon-elg-Org", defined in Section 8.3(A)(2);
NN) "Reimbursable Operating Costs", defined in Section 8.2;
OO) "Reimbursable Processing Costs", defined in Section 8.3;
PP) "Uncontrollable Forces" is defined in Section 12.2;
QQ) "Utilities' Coal Storage", defined in Section 4.2(B); and,
RR) "Waste", defined in Section 6.4.
5
Section 2 - Obligations of the Parties and Term of Agreement
------------------------------------------------------------
2.1 Obligations of SJCC
Pursuant to the provisions of this Agreement, the obligations of SJCC
include:
A) To produce Mineable Coal from the Coal Leases,
B) To process and crush Mineable Coal, Non-SJCC Coal and/or
Alternate Coal in the facilities of SJCC to a size and quality
specified in Sections 5.1 "Coal Size" and Section 5.2 "Coal
Quality",
C) To deliver and sell, at the request of Utilities, Processed
Coal to Utilities at the Delivery Point(s) as defined in
Section 4.1 "Delivery Points" and at the Delivery Rates as
defined in Section 4.2 "Delivery Rates", and,
D) To perform reclamation activities on the SJCC Site Area.
SJCC recognizes that Utilities are relying on SJCC to perform all of
its obligations hereunder in order for Utilities to operate the San
Juan Station and that Utilities' access to other sources of fuel for
the San Juan Station is limited. SJCC, therefore, agrees to accept full
responsibility for delivery of Processed Coal to the San Juan Station
in accordance with Section 4 "Delivery of Coal". SJCC further
acknowledges that Utilities are relying on the Mining Plans and Methods
to recover coal and that SJCC has designed its Mining Plans and Methods
to:
1) Maximize recovery of Mineable Coal, subject to good
minerlike practices and to the terms of the Coal Leases;
and
2) Efficiently and economically mine and deliver coal to
Utilities.
SJCC will exercise good faith efforts to achieve two (2) consecutive
months of Mineable Coal production equivalent to 550,000 Tons per month
from the UG Mine on or before December 31, 2002.
2.2 Obligations of Utilities
Pursuant to the provisions of this Agreement, the obligations of
Utilities include:
A) To purchase all coal required for the operation of the San
Juan Station from SJCC subject to the provisions of and
consistent with the terms of this Agreement; provided however,
that Utilities may during periods, if any, when SJCC may be
unable, whether due to Uncontrollable Forces or otherwise, to
furnish coal to the Delivery Point(s), obtain coal from other
sources to maintain and protect full capacity operation of the
San Juan Station,
B) To compensate SJCC for all reclamation activity, including
ongoing and post term reclamation of the SJCC Site Area
pursuant to Section 7.3 "Reclamation Activities"; and
C) To make payments as specified in Section 8 "SJCC
Compensation".
6
2.3 Term
This Agreement shall expire December 31, 2017, unless such term is
extended by mutual written agreement of the Parties.
2.4 Conditions Precedent
The conditions precedent to this Agreement becoming effective on
January 1, 2003, are:
A) The 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.
B) The final approval of the Capital True Up 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 and incorporated herein as
Attachment 1, to be obtained no later than September 28, 2001,
and provided to Utilities by SJCC.
2.5 Extension
Utilities may, by written notice to SJCC given on or before December
31, 2007, indicate their intent to extend the term of this Agreement
for an additional period of not less than five (5) years. If such
notice is given, SJCC and Utilities shall negotiate diligently and in
good faith to reach agreement on such extension. If the Parties have
not agreed to an extension prior to the expiration of the initial term
of this Agreement, or such other date as they may establish, this
Agreement shall terminate as provided for herein.
2.6 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.
7
Section 3 - Coal Supply
-----------------------
3.1 Ownership of Coal
All coal contained in the Coal Leases, Reserve of Coal, and Remnant
Coal shall at all times be and remain the property of SJCC (subject in
the case of coal contained in the Fruitland Coal Sublease to certain
security interests therein retained by other parties). Once said coal
is delivered to Utilities pursuant to Section 4.1 "Delivery Points",
title thereto shall pass to Utilities free and clear of all claims,
liens and encumbrances.
3.2 Alternate Coal
A) In the event that during the Term of this Agreement
1) the Joint Committee concludes that SJCC may be able to
deliver Alternate Coal to Utilities with an acquisition
cost that is less than the Reimbursable Operating Costs
as defined in Section 8.2(C) "Reimbursable Operating
Costs" for Mineable Coal or,
2) if the Parties agree that Alternate Coal should otherwise
be substituted for Mineable Coal,
then, subject to final Joint Committee approval, SJCC shall use its
best efforts to acquire Alternate Coal for delivery under this
Agreement and to substitute such Alternate Coal for that amount of
Mineable Coal otherwise deliverable hereunder which the Joint Committee
or the Parties (as the case may be) have agreed upon; provided that,
such Alternate Coal shall be priced as described in Section 8 "SJCC
Compensation" including a Base CIE or an Incremental CIE, as
applicable, and full reimbursement of acquisition costs, and any
Operating Costs as defined in Exhibit "F" "Operating Costs" adjusted
for depletion if appropriate, and shall meet the specifications
identified in Section 5 "Coal Specifications and Weighing, Sampling,
and Analysis" or such specifications as shall be agreed upon by
Utilities.
8
Section 4 - Delivery of Coal
----------------------------
4.1 Delivery Points
A) SJCC will deliver Processed Coal to delivery point(s) on the
San Juan Station situated in the location(s) shown as
"Delivery Points" on Exhibit "B" "Delivery Points".
B) Processed Coal shall be deemed delivered when it is deposited
in one of the Utilities' coal surge piles at the Delivery
Point(s), and title shall pass to Utilities at the point of
entry into said coal surge piles; thereafter, Utilities shall
be responsible for all such delivered coal.
C) Matters of mutual interest in connection with the coal
handling facilities, and specific methods and locations of
delivery are hereby made a responsibility of the Coordinating
Committee, such responsibility to be carried out as provided
for in Section 9 "Coordinating Committee".
4.2 Delivery Rates
A) SJCC shall deliver coal to the Utilities at the Delivery
Point(s) pursuant to Sections 4.2(B) and 4.2(C) hereof, such
deliveries, to the extent practicable, to be at approximate
uniform rates during the delivery periods and in annual
amounts as shown in Exhibit "D" "Delivery Rates" as may be
adjusted; provided, however, that in no event shall SJCC at
any time be obligated to mine coal in a manner inconsistent
with the Mining Plans and Methods. The annual amounts shown in
Exhibit "D" "Delivery Rates" will be adjusted as provided for
in Sections 4.2(B) and 4.2(C); provided, however, that such
amounts may not be adjusted upward to exceed 130,000 Tons per
week or 6,760,000 Tons per year, unless otherwise agreed to by
the Joint Committee.
B) During the term of this Agreement, Utilities will provide SJCC
annually, on or about September 1st, a schedule of monthly and
annual planned coal consumption for operation of the San Juan
Station and for Utilities' Coal Storage (defined in Section
4.3 "Utilities' Coal Storage"). This annual consumption
forecast provided by the Utilities will supercede the tonnage
specified in Exhibit "D" "Delivery Rates" for that year, if
the annual schedule is consistent with the provisions of
Section 4.2(A). Utilities will notify SJCC promptly and, if
possible, in advance, of any changes in such scheduled amounts
due to outage of generating units or other causes. In the
event of an increase in said scheduled amounts upon less than
eight (8) weeks' notice, SJCC agrees to use its best efforts
to meet such increase at the date scheduled, and in any event,
subject to the limitations of Section 4.2(A), it will meet
such increase within eight (8) weeks of notice thereof.
C) The Joint Committee may, in accordance with the provisions of
Section 10 "Joint Committee", adjust either upward or downward
the tonnage specified in this Section 4.2 "Delivery Rates",
provided such adjustment is not in conflict with any other
provision of this Agreement and does not materially impact the
Mining Plans and Methods.
9
4.3 Utilities' Coal Storage
Utilities intend to maintain at the San Juan Station site a storage
pile of Processed Coal ("Utilities' Coal Storage"). The amount of such
storage will be determined by Utilities from time to time in the future
and may be varied from time to time. Should any part of this coal
storage pile be depleted or should the size of the pile be increased as
provided for herein, subject to the limitations on SJCC's delivery
obligations contained herein, SJCC agrees to deliver replacement or
additional coal at the earliest practicable time in order that the
amount of coal will reach the required level, as determined by the
Utilities and consistent with this Agreement. Delivery of Processed
Coal for Utilities' Coal Storage will not be required if such delivery
would trigger Non-Normal Conditions.
10
Section 5 - Coal Specifications and Weighing, Sampling, and Analysis
--------------------------------------------------------------------
5.1 Coal Size
Crusher settings will be established by the Coordinating Committee. No
selected sizes shall be removed from the Processed Coal.
5.2 Coal Quality
Coal to be delivered pursuant to this Agreement shall have been mined
with diligence and care, and in accordance with good minerlike
practice, to minimize contamination of coal by material extraneous to
the coal seam being mined. Subject to the provisions of this Section 5
and Section 12 "Non-Normal Conditions, Right to Cure, Termination, and
Expiration", SJCC will deliver to Utilities coal which shall have an
average heating value of not less than 9,000 BTU per pound, as
received, averaged over any 24-hour period when SJCC is delivering
coal, unless a variance from such standard shall have previously been
agreed upon by the Coordinating Committee in accordance with Section 9
"Coordinating Committee". Such 24-hour period shall be from midnight to
midnight, unless the Coordinating Committee shall agree otherwise in
accordance with Section 9 "Coordinating Committee"
5.3 Utilities' Right of Rejection
Subject to the provisions of Section 12 "Non-Normal Conditions, Right
to Cure, Termination and Expiration", in the event that coal delivered
during any 24-hour period referred to in Section 5.2 "Coal Quality"
shall have an average heating value of less than 9,000 BTU per pound,
as received, ("Inferior Coal") and such delivery shall not have been
authorized by prior agreement of the Utilities' Coordinating Committee
Representative or the Joint Committee, then SJCC shall give the
Utilities prompt notice of the delivery of such Inferior Coal, and the
Utilities may then choose either one of the two options described below
and promptly notify SJCC of such decision. Such election shall
constitute an exclusive remedy for delivery of Inferior Coal, unless a
dispute arises under Section 5.3(A) or Section 5.3(B), in which case
either party may demand arbitration pursuant to Section 11 "Dispute
Resolution".
A) If the Utilities choose to accept the Inferior Coal, they may
request a price reduction for such Inferior Coal. Such price
reduction shall be determined by the following formula and
credited against the Interim Invoice and the UG-CSA Invoice
for the month that the Inferior Coal was delivered:
Price Reduction = 24-hour Tons X price X grade factor
Where:
"24-hour Tons" is equal to the Tons of coal sold in the
24-hour period in which the Inferior Coal was delivered;
"price" is equal to the UG-CSA Invoice price for the month in
which the Inferior Coal was delivered; and,
11
"grade factor" is equal to the [the contract grade minus the
grade of the Inferior Coal for the 24-hour period] divided by
the contract grade. The contract grade is 9,000 BTU per pound
or as otherwise agreed by the Coordinating Committee.
B) If the Utilities choose to reject such Inferior Coal, the
Coordinating Committee shall develop a plan to mitigate the
situation. SJCC at its own expense will use reasonable efforts
to implement the mitigation measures.
5.4 Weighing and Analysis Facilities and Methods
Facilities for the weighing, sampling and analysis of coal shall be
owned, operated and maintained by SJCC.
A) Methods shall be established for determining the weight and
BTU content of coal delivered, in accordance with accepted
good practice and applicable portions of the ASTM standards,
or such other procedures as the Coordinating Committee may
determine with due regard for overall economy in investment
and in operation, including splitting of samples and bias
testing by an independent commercial firm qualified to conduct
such testing.
B) Utilities may at any time observe the weighing, sampling and
analysis operations of SJCC as herein provided and report
thereon to the Coordinating Committee.
12
Section 6 - Coal Leases, Land, and Land Rights
----------------------------------------------
6.1 Dedicated Reserves
The coal reserves contained within the Coal Leases are dedicated to
production for the San Juan Station except as provided otherwise
herein.
Before SJCC acquires any coal leases contiguous with the Coal Leases,
SJCC will offer to dedicate such coal leases to production for the San
Juan Station. Upon approval (which approval shall not be withheld
unreasonably) by the Joint Committee of the terms for incorporating
such leases into this Agreement, those coal leases if acquired, will
become dedicated to production for the San Juan Station except as
provided otherwise herein.
6.2 SJCC's Facilities
A) SJCC has, or will use its best efforts to further secure by
January 1, 2003, right of use of the SJCC Site Area, either by
right, deed, lease, or other instrument.
B) It is understood that the boundaries of the SJCC Site Area
that are adjacent to the San Juan Station may, with the
consent of Utilities, be enlarged as SJCC's needs expand. Any
such enlargement shall be a responsibility of the Joint
Committee, to be carried out as provided for in Section 10
"Joint Committee".
C) Utilities hereby agree that as among Utilities and SJCC and
their respective successors and assigns, the coal mining, coal
processing and mining reclamation equipment and related assets
owned by SJCC and located on the San Juan Station site are and
shall remain personal property of SJCC. Utilities agree to
grant to any purchaser of such equipment and assets from SJCC
such easements and rights-of-way as shall be necessary to
enable such purchaser to enter upon the lands of Utilities to
remove same.
6.3 Utilities' Rights Vis-a-Vis the SJCC Site Area
A) In the event that Utilities-authorized persons wish to enter
the SJCC Site Area, Utilities shall first give notice to the
mine manager, or his representative, or follow Coordinating
Committee guidelines in order to facilitate compliance with
safety requirements.
B) SJCC grants to Utilities such rights as SJCC may have to
install, maintain and operate and the right to permit others,
including but not limited to affiliated companies of the
Utilities, to install, maintain and operate roads, railroads,
overland conveyors, electric power-lines, water pipelines and
other facilities over and upon the SJCC Site Area; provided,
however, that such installation, maintenance and operation
shall not interfere with SJCC's operations and obligations
under this Agreement and provided further that such activity
shall comply with applicable law and lease terms.
13
6.4 Waste Disposal Area
In connection with the Waste Disposal Agreement dated July 27, 1992, as
amended, SJCC will maintain, to the extent permitted by, and in
compliance with, applicable laws, regulations and permits, suitable
waste disposal areas within the SJCC Site Area. "Waste" shall be
defined as material disposed of pursuant to the Waste Disposal
Agreement.
6.5 Compliance with Leases and Other Instruments
A) SJCC shall not perform any act or undertake any activity which
would violate any covenant under any of the Coal Leases or
other leases, rights of way grants and easements, or other
agreements, licenses or permits required for the mining,
processing, transportation, delivery and sale of coal, Waste
disposal, reclamation, and other activities of SJCC under this
Agreement, and which could have the effect of causing
forfeiture of SJCC's rights under said leases and other
instruments, including nonpayment of rentals or royalties due
under the provisions of such leases and instruments.
B) In the event that any regulatory requirement shall impose upon
SJCC an obligation to produce coal in an amount which cannot
be produced using the Mining Plans and Methods, then the Joint
Committee shall approve such changes to the Mining Plans and
Methods as are reasonably required to enable SJCC to comply
with such obligation and the Utilities' representatives on the
Joint Committee shall not unreasonably withhold their approval
of such changes.
C) It is agreed that, in the event there is attached to SJCC's
interest in the Coal Leases or other leases, rights of way
grants and easements, or other agreements, licenses or permits
required for the mining, processing, transportation, delivery
and sale of coal, Waste disposal, reclamation, and other
activities of SJCC under this Agreement, a judgment lien
against SJCC resulting from a final judgment issued by any
court of competent jurisdiction, which judgment is not
appealable to any court, or a lien created by statute, which
statutory lien is not being contested by SJCC and which SJCC
does not intend to contest, and legal procedure has been
commenced for the sale of SJCC's interest in the Coal Leases
or other leases, rights of way grants and easements, or other
agreements, licenses or permits required for the mining,
processing, transportation, delivery and sale of coal, Waste
disposal, reclamation, and other activities of SJCC under this
Agreement, pursuant to such judgment, lien or statutory lien,
Utilities, after giving SJCC written demand to pay such
judgment or discharge such lien and SJCC having failed to do
so within a reasonable time after such demand, shall have the
right at their option to pay and discharge said judgment or
lien prior to such sale or to redeem the Coal Leases or other
14
leases, rights of way grants and easements, or other
agreements, licenses or permits required for the mining,
processing, transportation, delivery and sale of coal, Waste
disposal, reclamation, and other activities of SJCC under this
Agreement, after such sale as provided by law, in which event
all sums expended by Utilities to discharge said lien or to
redeem said property, as provided by law, shall be payable by
SJCC to Utilities upon demand.
6.6 Restrictions on SJCC
A) Subject to Section 6.7 "Site Area Lease Management", SJCC
shall not assign, transfer, convey, mortgage, encumber or
otherwise dispose of interests or rights in the Coal Leases or
other leases, rights of way grants and easements, or other
agreements, licenses or permits required for the mining,
processing, transportation, delivery and sale of coal, Waste
disposal, reclamation, and other activities of SJCC under this
Agreement, except as contemplated by Section 14.10
"Assignment", without the prior written consent of Utilities.
SJCC may sell to parties other than Utilities, coal mined from
the Coal Leases and any approved contiguous lease additions
which is not required by SJCC to meet its obligations
hereunder and SJCC shall have no liability to Utilities by
reason of such sale; provided, however, that no said sale
shall be made without the prior written consent of the
Utilities' representatives on the Joint Committee.
B) Notwithstanding the foregoing provisions of this Section 6.6,
if for a period of thirty-six (36) consecutive months,
Utilities shall be entirely excused pursuant to the provisions
of Section 12.2 "Uncontrollable Forces" hereof from their
obligation to accept deliveries of and to pay for coal from
the Coal Leases, then SJCC shall attempt to sell coal from the
Coal Leases to persons other than Utilities. Utilities agree
that they will consent to such sales
1) if such sales will not, in Utilities' reasonable
judgment, interfere with the provision of the then
anticipated annual and total estimated fuel needs of the
San Juan Station, but not to exceed the tonnage specified
in Section 4.2 "Delivery Rates", through the remaining
Term (unless otherwise agreed by the Parties), and
2) appropriate amendments are made to the components of
compensation set forth in Section 8 "SJCC Compensation"
to reflect the decreased tonnage of coal that will be
delivered to Utilities from the Coal Leases.
To the extent necessary to maintain the Coal Leases by
production, SJCC may sell coal from the Coal Leases to persons
other than Utilities during the thirty-six (36) month period.
C) Except for incidental uses, SJCC will use underground
facilities within the UG Mine solely to meet SJCC's
obligations under this Agreement.
6.7 Site Area Lease Management
SJCC shall have the responsibility and authority to manage all leases,
rights of way grants and easements, or other agreements, licenses or
permits for the SJCC Site Area. Management of the Coal Leases and other
areas required for the mining, processing, transportation, delivery,
Waste disposal, reclamation, and sale of coal pursuant to this
Agreement is restricted pursuant to Section 6.6 "Restrictions on SJCC".
15
Section 7 - Operations
----------------------
7.1 Mining Plans and Methods
A) SJCC will mine and deliver coal in accordance with the mining
methods set forth in Exhibit "C" "Mining Plans and Methods"
incorporated herein by reference. To mine Remnant Coal, SJCC
at its discretion may use mining methods other than those
described in Exhibit "C" "Mining Plans and Methods". SJCC
agrees that it will not significantly amend, revise or modify
the Mining Plans and Methods, unless necessary to comply with
applicable statutes, regulations and rulings, without first
gaining Joint Committee approval if the effect of such
amendment, revision or modification would be to increase the
cost of coal sold to the Utilities or significantly reduce the
recoverable reserves hereunder.
B) Power System - SJCC shall provide or contract for its electric
power requirements for mining by separate agreement.
7.2 Processing Methods
A) SJCC shall process Mineable Coal, Alternate Coal, and/or
Non-SJCC Coal in its facilities in accordance with accepted
coal processing methods to meet Section 5.1 "Coal Size" and
Section 5.2 "Coal Quality" requirements.
B) Power System - SJCC shall provide or contract for its electric
power requirements for processing by separate agreement.
7.3 Reclamation Activities
A) SJCC will reclaim lands on the SJCC Site Area as required by
and in compliance with all applicable laws, regulations and
conditions of applicable permits, licenses and approvals.
Utilities will compensate SJCC for all reclamation and related
liabilities, obligations and costs associated with disturbance
on the SJCC Site Area resulting in any way from the supply of
coal to the San Juan Station; provided, however, that the
Utilities' reclamation liability after any termination (but
not expiration) is further limited to surface reclamation and
related liabilities, obligations and costs, as more
specifically provided in Section 12.5(D) "Liabilities Upon
Termination".
B) Post Term Reclamation - At a time designated by the Joint
Committee, which in any event shall be no later than ten (10)
years prior to expiration of this Agreement, Utilities agree
to make arrangements, acceptable to SJCC to assure that
Utilities' obligation to fully compensate SJCC for all
reclamation obligations of SJCC for all of the SJCC Site Area
will be satisfied. Unless otherwise agreed, such assurance
shall include at least one or more of the following: bonding
or other financial assurance, or funding of a secure
reclamation account. SJCC's acceptance of such assurance shall
not be unreasonably withheld.
16
C) Regulatory Costs - If SJCC is required by the provisions of
agreements relating to the SJCC Site Area, or any regulations
or directives issued pursuant thereto, or by the provisions of
any statute, ordinance, regulation or other directive of any
governmental body to undertake any reclamation, environmental
protection or related work, compensation for which would not
be covered under the provisions of Section 8 "SJCC
Compensation", SJCC shall receive compensation from Utilities
for complying with such reclamation, environmental protection
or related work consistent with the compensation provisions of
Section 8 "SJCC Compensation" to the extent that such activity
is associated with disturbance on the SJCC Site Area resulting
in any way from the supply of coal to the San Juan Station;
provided, however, that the Utilities' liability for such work
after any termination (but not expiration) is further limited
to work related to surface mining and the surface effects of
underground mining. The procedures for determining such
compensation shall be agreed to by the Parties.
17
Section 8 - SJCC Compensation
-----------------------------
8.1 Compensation Components
The Utilities shall pay to SJCC the sales price for coal delivered to
Utilities ("Coal Costs"), and in addition shall reimburse SJCC for
Other Costs as described in Section 8.5 "Other Costs".
The Coal Costs to be paid by the Utilities is comprised of the
following components:
A) The Mining and Reclamation Component as described in Section
8.2 "Mining and Reclamation Component".
B) The Coal Processing Component as described in Section 8.3
"Coal Processing Component".
C) Non-SJCC Coal and Alternate Coal Costs as described in Section
8.4 "Non-SJCC Coal and Alternate Coal Costs".
8.2 Mining and Reclamation Component
The Mining and Reclamation Component shall be the sum of the Base
Capital Investment Element Amount ("Base CIE Amount") as described in
Section 8.2(A), the Incremental Capital Investment Element Amount
("Incremental CIE Amount") as described in Section 8.2(B), SJCC's
Reimbursable Operating Costs ("Reimbursable Operating Costs") as
described in Section 8.2(C), the Administration Element as described in
Section 8.2(D), and the Capital Investment Element Reconciliation
Amount ("CIE Reconciliation Amount") as described in Section 8.2(E).
A) Base CIE Amount
Each month, Utilities shall pay to SJCC a base capital investment
element that will be calculated and adjusted as herein provided. All
adjustment results will be rounded to three decimal places unless
specified otherwise.
1) For Mineable Coal and Alternate Coal, the Base Capital
Investment Element is [*] per Ton ("Base CIEOriginal").
There are three adjustments that cumulatively comprise
the Base CIE Adjustments. The Base CIEOriginal shall be
adjusted in the order recited, as follows:
(i) Capital True Up Adjustment.
A one-time capital true up adjustment will be made, in
dollars per Ton, pursuant to the Capital True Up
Agreement. The Capital True Up Adjustment will be made
according to the following formula:
Base CIEtrue up adj = Base CIEOriginal + Capital True Up
Adjustment (TRUE UP ADJ & ORIGINAL ARE SUBSCRIPTS)
Where the Capital True Up Adjustment will be determined
as provided for in the Capital True Up Agreement, if it
is positive it will increase the Base CIEOriginal and if
it is negative it will decrease the Base CIEOriginal.
18
(ii) Tax and Depletion Adjustment.
In the event the tax ("T") and/or depletion ("PD")
factors, as defined in Exhibit "G" "Tax Calculations",
change, the Base CIEtrue up adj will be adjusted, as
follows:
Base CIEtax adj = Base CIEtrue up adj X [OBJECT OMITTED]
Where Madj = [OBJECT OMITTED]
Where, the Moriginal, NPVC, and NPVD values shall be
determined as provided for in the Capital True Up
Agreement.
If T and PD have not changed, Base CIEtax adj shall be
equal to the Base CIEtrue up adj.
[TAX ADJ & TRUE UP ADJ ARE SUBSCRIPTS]
(iii) Inflation-Deflation Adjustment.
The Base CIEtax adj shall be further adjusted monthly,
according to the following formula:
Base CIE = Base CIEtax adj x D1 / D0
[1 AND 0 ARE SUBSCRIPTS]
D1 and D0 are defined in Section 8.6 "Inflation -
Deflation Adjustment".
In no event shall the inflation-deflation adjustment
cause the Base CIE to be less than the Base CIEtax adj.
2) For Non-SJCC Coal the Non-SJCC Base CIE will be
determined each month as follows:
(i) If the costs to SJCC of the Non-SJCC Coal plus the
Base CIE is less than or equal to the Annual Interim
Invoice Agreement Price (as defined in Section
8.7(B) "Interim Invoice"), the Non-SJCC Base CIE
will be equal to the Base CIE.
(ii) If the costs to SJCC of the Non-SJCC Coal plus the
Base CIE is greater than the Annual Interim Invoice
Agreement Price (as defined in Section 8.7(B)
"Interim Invoice"), the Non-SJCC Base CIE will be
the greater of:
a) The Annual Interim Invoice Agreement Price
minus the costs to SJCC of the Non-SJCC Coal or
b) Zero (0).
19
3) Base Tons
The SJCC Base Monthly Tons ("BMT") and the Non-SJCC Base
Monthly Tons ("NBMT") shall be determined as follows:
(i) The BMT shall be equal to the MMT unless the NMS are
greater than zero and the SMS are less than the MMT,
in which case the BMT shall be equal to the MMT
minus the NBMT.
(ii) The NBMT shall be equal to zero (0) unless the SMS
is less than the MMT, in which case the NBMT shall
be equal to the lesser of
a) The MMT minus the SMS; or
b) The NMS.
4) Monthly Base CIE Amount.
The Monthly Base CIE Amount shall be the sum of:
The Base CIE times the BMT; plus,
The Non-SJCC Base CIE times the NBMT.
B) Incremental CIE
Each month, Utilities shall pay to SJCC, for each Ton of coal delivered
during that month by SJCC above the MMT (defined herein), an
incremental capital investment element calculated as described below:
1) For Mineable Coal and Alternate Coal the Incremental CIE
is [*] and will not be subject to inflation or deflation.
2) For Non-SJCC Coal the Non-SJCC Incremental CIE shall be
determined as follows. In each month that Non-SJCC Coal
is sold under Non-Normal Conditions where an
Uncontrollable Forces situation has not been declared,
the Non-SJCC Incremental CIE will be equal to zero (0).
If the Non-SJCC Coal is sold under Non-Normal Conditions
where an Uncontrollable Forces situation has been
declared, the Non-SJCC Coal will receive the Incremental
CIE.
3) Incremental Tons
The SJCC Incremental Monthly Tons ("IMT") and the
Non-SJCC Incremental Monthly Tons ("NIMT") shall be
determined as follows:
(i) If the SMS are greater than the MMT, the IMT shall
be equal to the SMS minus the MMT; otherwise the IMT
shall be equal to zero (0).
(ii) The NIMT shall be equal to the NMS minus the NBMT.
20
4) Monthly Incremental CIE Amount.
The Monthly Incremental CIE Amount shall be the sum of:
The Incremental CIE times the IMT; plus,
The Non-SJCC Incremental CIE times the NIMT.
C) Reimbursable Operating Costs
Each month, Utilities shall pay to SJCC, SJCC's Reimbursable Operating
Costs which shall be all Operating Costs defined in Exhibit "F"
"Operating Costs" paid or incurred in connection with the sale of
Mineable Coal including mining related reclamation costs incurred by
SJCC hereunder.
1) Operating Costs that are eligible for the depletion
allowance as defined in Exhibit "G" "Tax Calculations"
shall be adjusted for income tax and depletion as
provided below:
Reimbursable Operating Costs = Operating Costs X [OBJECT
OMITTED]
Where T and PD are as defined in Exhibit "G" "Tax
Calculations".
2) All other Operating Costs shall be reimbursed at 100%.
D) Administration Element
Each month, Utilities shall pay to SJCC, an Administration Element
equal to [*] per month. The Administration Element shall be calculated
and adjusted for i) tax and depletion, and ii) inflation and deflation
as herein provided.
Administration Element = [*] X [OBJECT OMITTED]
Where T and PD are as defined in Exhibit "G" "Tax Calculations", and D1
and D0 are defined in Section 8.6 "Inflation - Deflation Adjustment".
E) CIE Reconciliation Amount
In the invoice for December of each year a CIE Reconciliation will be
made if NAS are greater than zero (0) or if the SMS are less than the
MMT for any month during the year. The CIE Reconciliation Amount (which
can be negative) will be added to the December Invoice. The CIE
Reconciliation Amount will be determined as follows:
CIE Reconciliation Amount = Annual CIE Amount - CIE Amount Invoiced.
Where;
The CIE Amount Invoiced is equal to the sum of the Monthly Base CIE
Amounts and the Monthly Incremental CIE Amounts invoiced during the
year (including the December amounts).
And,
21
The Annual CIE Amount is equal to the sum of:
1) The AA Base CIE multiplied by the BAT; plus,
2) The AA Non-SJCC Base CIE multiplied by the NBAT; plus
3) The Incremental CIE multiplied by the IAT; plus,
4) The AA Non-SJCC Incremental CIE multiplied by the NIAT.
F) Definitions:
1) SJCC Monthly Sales ("SMS") shall be equal to the Tons of
Mineable Coal and Alternate Coal delivered in a month.
2) Annual SJCC Sales ("SAS") shall be equal to the sum of
the SMS for a calendar year.
3) Non-SJCC Monthly Sales ("NMS") shall be equal to the
Non-SJCC Coal delivered in a month.
4) Non-SJCC Annual Sales ("NAS") shall be equal to the sum
of the NMS for a calendar year.
5) Total Monthly Sales ("TMS") shall be the sum of the SMS
and the NMS.
6) Total Annual Sales ("TAS") shall be the sum of the SAS
and the NAS.
7) Minimum Annual Tons ("MAT") shall be defined as the Tons
shown in column 2 labeled "Minimum Annual Tons" on
Exhibit "H" "San Juan Station Minimum Deliveries 2003 -
2017" for each calendar year.
8) Minimum Monthly Tons ("MMT") shall be defined as the
monthly portion of the MAT prorated based on the monthly
tonnages provided pursuant to Section 4.2(B) "Delivery
Rates" or as agreed to by the Parties. If there is not a
monthly tonnage allocation of the MAT, the MMT shall be
1/12 of the MAT for each month.
9) Short Fall Tons ("SFT"), for any year, shall be defined
as zero (0), unless SJCC has not declared an
Uncontrollable Forces event and the TAS are less than the
MAT in any year in which SJCC is obligated under the
terms of this Agreement, to deliver coal in such amounts
that the total Tons requested for said year would be
greater than or equal to the MAT; in which case the SFT
for such year shall be the MAT minus the TAS.
10) Weighted Average Annual Base CIE ("AA Base CIE") shall be
equal to the sum of the products of the monthly Base CIE
multiplied by the MMT for each of the 12 months, all
divided by the MAT.
11) Weighted Average Annual Non-SJCC Base CIE ("AA Non-SJCC
Base CIE") shall be equal to the sum of the products of
the Non-SJCC Base CIE multiplied by the NBMT invoiced
each month for each of the 12 months, all divided by the
sum of the NBMT.
22
12) Weighted Average Annual Non-SJCC Incremental CIE ("AA
Non-SJCC Incremental CIE") shall be equal to the sum of
the products of the Non-SJCC Incremental CIE multiplied
by the NIMT invoiced each month for each of the 12
months, all divided by the sum of the NIMT.
13) The Non-SJCC Base Annual Tons ("NBAT") shall be equal to
zero unless the SAS is less than the MAT minus the SFT in
which case the NBAT shall be equal to the lesser of:
(i) The MAT minus the SFT minus the SAS or
(ii) The NAS.
14) The SJCC Base Annual Tons ("BAT") shall be equal to the
MAT minus the SFT, unless the NAS is greater than zero
(0) and the SAS are less than the MAT minus the SFT, in
which case the BAT shall be equal to the MAT minus SFT
minus the NBAT.
15) If the SAS are greater than the MAT, the SJCC Incremental
Annual Tons ("IAT") shall be equal to the SAS minus the
MAT; otherwise the IAT shall be equal to zero (0).
16) The Non-SJCC Incremental Annual Tons ("NIAT") shall be
equal to the NAS minus the NBAT.
8.3 Coal Processing Component
The Coal Processing Component shall be the sum of the Processing
Capital Investment Element Amount ("Processing CIE Amount") as
described in Section 8.3(A), SJCC's Reimbursable Processing Costs
("Reimbursable Processing Costs") as described in Section 8.3(B), the
Processing Administration Element as described in Section 8.3(C), and
the Processing Capital Investment Element Reconciliation Amount
("Processing CIE Reconciliation Amount") as described in Section
8.3(D).
A) Processing CIE Amount
Each month, Utilities shall pay to SJCC, a Processing Capital
Investment Element determined as described below:
1) The Processing CIEEligible-Org for the processing of Tons
that are eligible for the depletion allowance as
described in Exhibit "G" "Tax Calculations" shall be
calculated to five decimal places monthly, as described
below:
[OBJECT OMITTED]
Where:
T and PD are as defined in Exhibit "G" "Tax
Calculations".
23
2) Processing CIE for processing of Tons that are not
eligible for the depletion allowance ("Processing
CIENon-elg-Org") as described in Exhibit "G" "Tax
Calculations" shall be calculated to five decimal places
monthly as described below:
[OBJECT OMITTED]
Where:
T and PD are as defined in Exhibit "G" "Tax
Calculations".
3) Inflation - Deflation Adjustment - The Processing
CIEEligible-Org and Processing CIENon-elg-Org shall be
adjusted to three decimal places, monthly, as described
below:
Processing CIEEligible-Adj = Processing CIEEligible-Org x
D1 / D0
[ELIGIBLE-ADJ, ELIGIBLE-ORG, 1 & 0 ARE SUBSCRIPTS]
And
Processing CIENon-elg-Adj = Processing CIENon-elg-Org x
D1 / D0
[NON-ELG-ADJ & NON-ELG-ORG ARE SUBSCRIPTS]
Where:
D1 and D0 are defined in Section 8.6 "Inflation -
Deflation Adjustment".
In no event shall the inflation-deflation adjustment
cause the Processing CIEEligible-Adj to be less than the
Processing CIEEligible-Org or the Processing
CIENon-elg-Adj. to be less than the Processing
CIENon-elg-Org.
4) Underground Adjustment. The Processing CIEEligible-Adj
and the Processing CIENon-elg-Adj, will be further
reduced by [*] per Ton. This [*] reduction will not be
subject to inflation or deflation adjustment.
Processing CIEEligible = Processing CIEEligible-Adj - [*]
[ELIGIBLE & ELIGIBLE-ADJ ARE SUBSCRIPTS]
Processing CIENon-eligible = Processing
CIENon-elg-Adj - [*]
[NON-ELIGIBLE & NON-ELG-ADJ ARE SUBSCRIPTS]
5) The "Monthly Processing Tons" shall be one twelfth (1/12)
of the annual tonnage set forth in Column 3 ("Annual
Processing Tons") of Exhibit "H" "San Juan Station
Minimum Deliveries 2003-2017" for said calendar year.
(i) The "Monthly Eligible Processing Tons" shall be
equal to the Monthly Processing Tons times the ratio
of Mineable Coal sold to the TMS (Total Monthly
Sales). If TMS is equal to zero (0), then Monthly
Eligible Processing Tons shall be equal to Monthly
Processing Tons.
(ii) The "Monthly Non-Eligible Processing Tons" shall be
equal to the Monthly Processing Tons times the ratio
of Alternate Coal and Non-SJCC Coal sold to the TMS
(Total Monthly Sales).
24
6) The Monthly Processing CIE Amount shall be the sum of:
(i) The Monthly Eligible Processing Tons times the
Processing CIEEligible; plus,
(ii) The Monthly Non-Eligible Processing Tons times the
Processing CIENon-eligible.
B) Reimbursable Processing Costs
Each month, Utilities shall pay to SJCC all Operating Costs defined in
Exhibit "F" "Operating Costs" paid or incurred in connection with the
processing of Mineable Coal, Non-SJCC Coal and Alternate Coal:
1) all Rental and Royalties and all Taxes, as defined in
Paragraphs A and G of Exhibit "F" "Operating Costs", paid
or incurred in connection with the processing of coal
mined by SJCC hereunder; plus,
2) all Operating Costs defined in Exhibit "F" "Operating
Costs" (excluding said Rentals and Royalties, and Taxes
referred to in Section 8.3(B)(1)) that are eligible for
the depletion allowance will be adjusted as described
below:
Depletion-eligible Reimbursable SJCC Coal Processing
Costs
= SJCC Processing Costs X [OBJECT OMITTED]
Where T and PD are as defined in Exhibit "G" "Tax
Calculations";
plus,
3) all of SJCC's Operating Costs, as defined in Exhibit "F"
"Operating Costs" (excluding said Rentals and Royalties,
and Taxes referred to in Section 8.3(B)(1)) that are not
eligible for the depletion allowance will be adjusted as
described below:
Depletion-ineligible Reimbursable SJCC Coal
Processing Costs = SJCC Processing Costs X [*].
C) Processing Administration Element
Each month, Utilities shall pay to SJCC a Processing Administration
Element comprised of the sum of the following elements:
1) The portion of the Processing Administration Element that
is eligible for the depletion allowance shall be
calculated and adjusted for i) tax and depletion, and ii)
inflation and deflation as follows:
25
Eligible Processing Administration Element =
[*] X [OBJECT OMITTED] X Mineable Coal %
Where T and PD are as defined in Exhibit "G" "Tax
Calculations", and D1 and D0 are defined in Section
8.6 "Inflation - Deflation Adjustment", and Mineable
Coal % is equal to the Tons of Mineable Coal sold
divided by the TMS (Total Monthly Sales) expressed
as a percentage. If TMS is equal to zero (0), then
Mineable Coal % shall be equal to one hundred
percent (100%).
2) The portion of the Processing Administration Element that
is not eligible for the depletion allowance shall be
calculated and adjusted for inflation and deflation as
follows:
Non-Eligible Processing Administration Element =
[*] X [OBJECT OMITTED] X Non-Eligible Coal %
Where, D1 and D0 are defined in Section 8.6
"Inflation - Deflation Adjustment", and Non-Eligible
Coal % is equal to one hundred percent (100%) minus
Mineable Coal %.
D) Processing CIE Reconciliation Amount
In any year in which Uncontrollable Forces have not been declared and
the TAS are less than the annual tonnage set forth in column 3 of
Exhibit "H" "San Juan Station Minimum Deliveries 2003-2017" for said
calendar year and in which SJCC was obligated under the terms of this
Agreement to process coal in such amounts that the total Tons requested
to be processed for said year would be equal to or greater than the
annual tonnage set forth in column 3 of Exhibit "H" "San Juan Station
Minimum Deliveries 2003-2017" SJCC shall make an adjustment to the
December invoice as herein follows:
Processing CIE Reconciliation Amount is equal to the average of monthly
Processing CIEs times [TAS minus the annual tonnage set forth in column
3 of Exhibit "H" "San Juan Station Minimum Deliveries 2003-2017" for
the applicable calendar year].
8.4 Non-SJCC Coal and Alternate Coal Costs
Each month, Utilities shall pay to SJCC all of SJCC's costs of
acquiring and selling Non-SJCC Coal and Alternate Coal for use by
Utilities in the San Juan Station, including, without limitation, all
costs described in Exhibit "F" "Operating Costs" incurred incident to
any agreement for the purchase of Non-SJCC Coal and Alternate Coal and
the negotiation thereof, provided that, the Joint Committee has
approved all costs associated with the acquisition of such Non-SJCC
Coal and Alternate Coal and such Non-SJCC Coal and Alternate Coal has
been acquired by SJCC for processing and delivery under this Agreement
as provided for herein.
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8.5 Other Costs
A) Other Reclamation
Each month, Utilities shall pay to SJCC all Operating Costs, as defined
in Exhibit "F" "Operating Costs" paid or incurred in connection with
performance of other SJCC Site Area reclamation pursuant to Section 7.3
"Reclamation Activities".
B) Substitute REI
Utilities shall pay to SJCC an amount that is annually equal to the REI
(as defined in the Fruitland Coal Sublease) multiplied by "X" (which
may be negative). The monthly invoiced amounts will be based on the
projected number of Fruitland Substitute Tons (defined below) and
Fruitland Tons (defined below) for the year.
Where:
X=A-G
And
A=The number of Fruitland Substitute Tons is defined as all
Tons except Fruitland Tons delivered to SJGS by SJCC,
excluding the first [*] Tons other than those subject to the
Fruitland Coal Sublease, provided, however, that the number of
Fruitland Substitute Tons in any year will not exceed the
greater of (i) the REI Minimum (as defined below) plus the REI
Shortfall Balance as of the previous year end (as defined
below) less the Fruitland Tons, or (ii) zero (0).
B=The aggregate cumulative number of Make-up Tons (as defined
in the Fruitland Coal Sublease) as of the previous year end.
C=The REI Shortfall Balance as of the previous year end. The
REI Shortfall Balance for 2002 year end is zero (0). The
ending REI Shortfall Balance for each year thereafter will be
the greater of (i) the sum of the ending REI Shortfall Balance
for the previous year and the REI Shortfall Tons (as defined
below) for the year, or (ii) zero (0).
D=The number of Fruitland Tons is defined as the actual number
of Tons mined and delivered from the Fruitland Leases (as
defined in the Fruitland Coal Sublease) during the year.
E=The REI Minimum, that shall be equal to the Annual Tonnage
defined in the Fruitland Coal Sublease.
F=(D-E-C), or zero (0), whichever is greater and
G=(B-C), or F, whichever is less.
REI Shortfall Tons means for any year the REI Minimum for that
year less the sum of Fruitland Tons and Fruitland Substitute
Tons for that year. (REI Shortfall Tons may be negative).
27
C) Payments under Cimarron Coal Assignment
Each month, Utilities shall pay to SJCC all of SJCC's costs and
obligations, if any, arising from the Cimarron Coal Assignment.
D) Payments under the Ute ROW
Each month, Utilities shall pay to SJCC all of SJCC's costs and
obligations, if any, arising from the Ute ROW.
E) Other Miscellaneous Costs
Each month, Utilities shall pay to SJCC all Operating Costs, as defined
in Exhibit "F" "Operating Costs" paid or incurred in connection with
Other Costs.
8.6 Inflation - Deflation Adjustment
A) The "Inflation Index", calculated to three decimal places,
shall be equal to the sum of [*] 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 [*] 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.
2) D1 shall be the Inflation Index calculated using the most
recently published values available for the date of the
invoice, for the Index and Deflator.
B) The factors D0 and D1 determined when the final UG-CSA invoice
is issued, as described above, will not be further adjusted
even though the Index and Deflator may be further revised.
C) The following matters are made a responsibility of the Joint
Committee to be carried out as provided for in Section 10
"Joint Committee":
1) Revision of a base index figure as derived from a
published index in the event of a change in the base
point of such latter index, in accordance with pertinent
published instructions regarding such revision, or if no
such instructions be published, a proportionate revision
which will fairly reflect any such change in the base
point.
2) Development of a mutually acceptable substitute index
(either published or compiled or arranged by the Parties)
in the event that publication of any of the published
indices specified for use under this Section 8 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, and any needed subsequent revisions of such
a substitute index.
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8.7 Invoicing and Settlement
The accounting and billing period under this Agreement shall be one
month. Such one-month period shall be a fiscal month (currently defined
as a calendar month) as adopted by SJCC unless the Joint Committee
shall specify a different one-month period. SJCC shall send to
Utilities monthly invoices for the compensation due to SJCC for the
month in question. Both Utilities and SJCC recognize that some of the
information applicable to an invoice may not be available at the time
the invoice is prepared by SJCC and submitted to Utilities. In such
event, the submitted invoice shall be based upon the best available
information. Upon receipt of such formerly unavailable information SJCC
shall prepare and furnish to Utilities a supplemental invoice.
SJCC shall prepare and provide the Utilities with a UG-CSA Invoice and
an Interim Invoice each month. Utilities shall make payments to SJCC
based on the Interim Invoice.
A) UG-CSA Invoice
UG-CSA Invoices submitted hereunder shall set forth in reasonable
detail the following in a format to be agreed upon by the Parties:
1) Coal Costs
(i) The Mining and Reclamation Component
a) Base CIE Amount
b) Incremental CIE Amount
c) Reimbursable Operating Costs
d) Administration Element
e) CIE Reconciliation Amount
(ii) The Coal Processing Component
a) Processing CIE Amount
b) Reimbursable Processing Costs
c) Processing Administration Element
d) Processing CIE Reconciliation Amount
(iii)Non-SJCC Coal and Alternate Coal Costs
2) Other Costs
(i) Other Reclamation
(ii) Substitute REI
(iii)Payments under Cimarron Coal Assignment
(iv) Payments under the Ute ROW
(v) Other Costs
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B) Interim Invoice
The Parties, by mutual agreement, shall negotiate an Annual Interim
Invoicing Agreement to govern the monthly invoicing of coal.
The Annual Interim Invoice Agreement Price shall be the average annual
price for all Mineable Coal pursuant to the Annual Interim Invoicing
Agreement.
In the event the Parties are unable to mutually agree on an Annual
Interim Invoicing Agreement the Interim Invoice will be determined as
follows:
1) The base price or equivalent from the prior year's
Interim Invoicing Agreement, adjusted for the prior year
UG-CSA Invoice to Interim Invoice true up, will be the
base price for the MMT.
2) The prior year's incremental price will be the
incremental price for all Tons above the MMT.
3) There will be an adjustment to the December Interim
Invoice to make the amounts received from the monthly
Interim Invoices equal to the amount that would have been
due based on the UG-CSA Invoices.
C) Settlement and Payment
Invoices submitted by SJCC in accordance with Section 8.7 "Invoicing
and Settlement" and any supplemental or true-up invoices 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.
D) Accounting Records
SJCC shall maintain its accounts and records in accordance with
generally accepted accounting principles consistently applied. SJCC
shall retain such accounts and records for any calendar year for five
(5) years following the end of such calendar year and for such
reasonable additional period as specifically requested by Utilities.
E) Disputed Invoices
In case any portion of an invoice shall be in dispute, 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.
F) Failure to Pay
In the event Utilities fail to pay any amount due and not in bona fide
dispute, Utilities shall pay SJCC 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
30
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
from and including the date the invoice was due and payable until funds
are received in SJCC's account. This right shall not be deemed an
exclusive right or remedy.
G) Suspension of Payment for Failure to Deliver
In the event SJCC fails to deliver coal, which failure to deliver is
not caused by Utilities, and which failure to deliver is not excused by
the provisions of Section 12.2 "Uncontrollable Forces" hereof, and if
such failure to deliver continues for ten (10) days after final demand
for delivery by Utilities, Utilities shall have the right to suspend
payment for any coal previously delivered by SJCC until coal deliveries
shall have been recommenced. This right shall not be deemed an
exclusive right or remedy.
H) Audits
SJCC will keep books, records and accounts necessary to show all
information required for purposes of this Agreement. Upon Utilities'
request, SJCC shall supply Utilities, by report and/or with actual
source documents, the information reasonably necessary to verify any
invoice rendered to Utilities 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 to
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.
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Section 9 - Coordinating Committee
----------------------------------
9.1 Purpose
The intent of the Parties in providing for a Coordinating Committee is
to establish an orderly and continuing means of dealing with certain
engineering and operating problems which may arise from time to time in
carrying out the provisions of this Agreement. The Coordinating
Committee shall have two (2) members and shall be responsible for
making decisions concerning said engineering and operating problems
which may arise from time to time under this Agreement, including those
matters expressly specified herein.
9.2 Designation
During the term of this Agreement, SJCC will, by notice to Utilities,
designate an individual as its representative on the Coordinating
Committee and Utilities will, by notice to SJCC, together designate one
(1) individual as their representative on the Coordinating 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 the responsibilities of the Coordinating
Committee, but shall have no authority to amend this Agreement. A
representative may not delegate his responsibilities to others, but
Utilities, or SJCC, may designate an alternate to act when the
representative is unavailable. Either Utilities, or SJCC, by notice to
the other, may change the designation of its (their) representative.
9.3 Procedures and Practices
It shall be the responsibility of the Coordinating Committee to
establish or approve, for the guidance of the local operating personnel
of the respective Parties, procedures and standard practices,
consistent with the provisions of this Agreement, with respect to:
A) Changes in the 24-hour period used in computing the average
heating value of coal delivered pursuant to Section 5.2 "Coal
Quality".
B) Operations involved in the delivery of coal per Section 4
"Delivery of Coal" and in the weighing, sampling and analysis
of coal pursuant to Section 5.4 "Weighing and Analysis
Facilities and Methods".
C) Operating, accounting and reporting details required to carry
out the provisions of this Agreement with respect to invoicing
and settlement pursuant to Section 8.7 "Invoicing and
Settlement".
D) Exchange of technical information and data pertinent to coal
mining, reclamation and delivery operations under this
Agreement.
E) Any other matters expressly made the responsibility of the
Coordinating Committee under the terms of this Agreement.
32
9.4 Coordinating Committee Decisions
The establishment or approval of a procedure or standard practice shall
be evidenced by the signatures of both representatives of the
Coordinating Committee.
9.5 Relationship to Joint Committee and Arbitration
If the Coordinating Committee fails to resolve matters referred to it
pursuant to this Agreement, such matters shall be submitted to the
Joint Committee for resolution as provided for in Section 10 "Joint
Committee".
33
Section 10 - Joint Committee
----------------------------
10.1 Purpose
The intent of the Parties in providing for a Joint Committee is to
establish an orderly and continuing means of dealing with major matters
which may arise from time to time in carrying out the provisions of
this Agreement and for the resolution of matters which cannot be
resolved by the Coordinating Committee, as more specifically defined
below. The Joint Committee shall have four (4) members.
10.2 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
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.
10.3 Authority
The Joint Committee shall have the following authority, and shall have
the responsibility to act if appropriate, with respect to the following
matters:
A) Review and approval of an annual operating cost budget, which
shall be proposed and submitted by SJCC prior to October 1 of
each calendar year. The annual operating cost budget shall
include a schedule of service contracts with an annual value
greater than $1,000,000. It is recognized that this dollar
limit may not be sufficient throughout the duration of this
Agreement, and it shall therefore be the responsibility of the
Joint Committee to review said dollar limit, no less often
than every five (5) years, and to determine adequate dollar
limits for the then current conditions. Utilities shall
approve or disapprove the annual operating cost budget within
thirty (30) days after submission by SJCC. Unless Utilities
shall disapprove the annual operating cost budget within said
time period, the same shall be deemed approved. However, in
the event that Utilities shall not approve the annual
operating cost budget, SJCC shall nonetheless be empowered to
make such operating expenditures as it shall reasonably deem
necessary in order to perform its obligations hereunder, and
the reasonableness of such expenditures shall be submitted to
and determined by arbitration as provided for in Section 11
"Dispute Resolution". With regard to any approved annual
operating cost budget, SJCC shall be paid its Operating Costs
in accordance with this Agreement as follows:
1) in the event that Operating Costs paid or incurred by
SJCC do not exceed one hundred fifteen percent (115%) of
the Operating Costs contained in said budget, SJCC shall
be paid all of its Operating Costs;
34
2) in the event Operating Costs paid or incurred by SJCC
exceed in amount the Operating Costs payable to SJCC
pursuant to the immediately preceding Section 10.3(A)(1),
then SJCC shall be paid its Operating Costs to the extent
that the same would be payable in accordance with the
immediately preceding Section 10.3(A)(1), and either
Utilities or SJCC may submit to the Joint Committee the
question of the appropriateness of the Operating Costs in
excess of such reimbursed amount.
In conjunction with said approval of the annual operating cost budget,
SJCC shall give Utilities a map showing the areas planned to be mined
by SJCC in the following year and the sequence of mining planned by
SJCC in each such area.
B) Review of changes not anticipated in the latest annual
operating cost budget if budgeted expenditures are materially
affected.
C) Review a capital budget that shall be provided by SJCC at the
same time as the annual operating cost budget for
informational purposes.
D) Establish policies, programs and procedures for:
1) determination of the level of reimbursement, if any, of
SJCC's Operating Costs to be paid during periods when
SJCC is unable to mine, process and sell coal by reason
of Uncontrollable Forces, and;
2) determination of the level of coal to be purchased and
paid for by Utilities, if any, during periods when
operation of the San Juan Station is materially curtailed
or prevented by Uncontrollable Forces (it being agreed
that in such event the obligation of Utilities to
purchase and pay for coal, and to make any other payments
under this Agreement, shall be deferred unless otherwise
determined by the Joint Committee).
E) Consider and attempt to resolve any disputes which may be
referred to the Joint Committee.
F) Consider the enlargement of the space made available to SJCC
at the San Juan Station site pursuant to Section 6.2 "SJCC's
Facilities".
G) Consider any other matters expressly made the responsibility
of the Joint Committee under the terms of this Agreement,
including, but not limited to, the responsibilities set forth
in Section 3.2 "Alternate Coal".
10.4 Decisions by the Joint Committee
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.
35
10.5 Relationship to Arbitration
If the Joint Committee fails to resolve matters referred to it pursuant
to this Agreement, such matters may be submitted to and determined by
arbitration as provided for in Section 11 "Dispute Resolution".
36
Section 11 - Dispute Resolution
-------------------------------
11.1 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. 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 such
response.
11.2 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.
11.3 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
section, 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.
11.4 Choice of Law
The arbitrators shall apply the laws of the State of New Mexico.
37
11.5 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.
11.6 Performance Pending Arbitration Decision
During the arbitration, unless otherwise ordered by the arbitrators,
the parties shall continue to perform under this Agreement.
11.7 Definition of "Party" for this Section
For purposes of this Section 11 the Utilities shall be considered a
single party. Specifically, and by example, Utilities must act
collectively to select their party-appointed arbitrator under Section
11.3 "Arbitration Hearings, Procedures and Timing".
38
Section 12 - Non-Normal Conditions, Right to Cure, Termination and Expiration
-----------------------------------------------------------------------------
12.1 Utilities' Right to Mine
A) Emergency Situation. An emergency situation shall be deemed to
have arisen if, for any reason, including Uncontrollable
Forces, SJCC shall be unable to maintain deliveries of coal as
required of SJCC hereunder and BHP Minerals International Inc.
shall fail to cause such deliveries to be made pursuant to the
Guarantee ("Emergency Situation").
B) Mining and Delivery of Coal by Utilities. In the event that an
Emergency Situation as set forth in Section 12.1(A) above
should arise and Utilities are able to cause such deliveries
to be made, then in such event Utilities may go upon the SJCC
Site Area and, using SJCC's equipment, mine coal therefrom and
deliver such coal. If Utilities undertake such operations,
SJCC will have its supervisory personnel direct and assist
Utilities in such operation.
C) Termination of Emergency Situation. Such operations by
Utilities shall terminate on notice from SJCC when SJCC is
able to resume normal coal deliveries to Utilities.
12.2 Uncontrollable Forces
Neither party shall be deemed in default of any obligation under this
Agreement, and performance of such obligation shall be deferred during
such period as and to the extent that performance is prevented by
reason of Uncontrollable Forces, the term "Uncontrollable Forces"
meaning any cause beyond the control of the party affected which by
exercise of due diligence it shall be unable to overcome, including,
without limitation, failure of plant or facilities, flood, earthquake,
storm, lightning, fire, explosion, epidemic, war, riot, civil
disturbance, labor stoppage, sabotage, restraint by court or public
authority, or the necessity for compliance with any applicable law,
regulation, ordinance or resolution. Neither party shall, however, be
relieved of liability for failure of performance if such failure be due
to causes arising out of its own negligence or to causes which it
could, but fails to, remove or remedy with reasonable dispatch. Nothing
herein contained shall be construed to obligate a party to forestall or
settle a labor dispute against its will. All times and periods for the
performance of any obligation in this Agreement shall be extended by
the period during which performance is prevented by Uncontrollable
Forces.
12.3 Non-Normal Conditions, Right to Cure, and Offers of Non-SJCC Coal.
The Parties intend that in the effort to avoid Material Default, the
provisions of this Section 12.3 shall be utilized before notice of
Material Default Conditions (defined in Section 12.4(A) "Material
Default Conditions") is provided pursuant to Section 12.4(C) "Notice of
Material Default Condition(s)".
A) Non-Normal Conditions. Non-Normal Conditions exist when any of
the following three conditions are present:
39
1) The Reserve of Coal is below the level of 1.2 million
Tons,
2) SJCC has determined that there is a reasonable
probability that the Reserve of Coal will in the near
future fall below the level of 1.2 million Tons, or
3) SJCC anticipates or is experiencing any other condition
that may prevent SJCC from delivering coal according to
this Agreement.
B) Notice. SJCC shall provide written notice to the Utilities if
any Non-Normal Conditions exist, or the Joint Committee may
determine that Non-Normal Conditions exist, which shall
constitute notice to SJCC and the Utilities as of the date of
such written determination.
C) Prevention Due to Uncontrollable Forces. In addition to
providing written notice of Non-Normal Conditions, SJCC may
elect to declare that the performance is prevented by reason
of Uncontrollable Forces in accordance with the terms of
Section 12.2 "Uncontrollable Forces".
D) Coal Usage Forecast. Within fifteen (15) days after receipt of
notice of Non-Normal Conditions, the Utilities will review
dispatch at San Juan Station and provide to SJCC an updated
coal usage forecast.
E) Cure of Non-Normal Conditions. The Parties intend that
cooperation among the Parties in developing and agreeing upon
a Cure Plan (as defined below) is preferable to pursuing
termination of this Agreement. The Parties will provide
reasonable cooperation to facilitate SJCC's cure of Non-Normal
Conditions to avoid Material Default while allowing the
Utilities to continue operation of the San Juan Station. To
initiate and effectuate cure of the Non-Normal Condition, SJCC
shall do the following:
1) Provide within fifteen (15) days after notice of
Non-Normal Conditions, or as otherwise agreed to by the
Parties, a written cure plan to the Joint Committee
describing SJCC's proposed means of curing the Non-Normal
Conditions and its proposed deliveries in the interim
("Cure Plan");
2) Within thirty (30) days after notice of Non-Normal
Conditions, or as otherwise agreed to by the Parties,
SJCC may provide written offers to the Utilities to
supply Non-SJCC Coal. If the Non-Normal Conditions are
caused by Uncontrollable Forces, then such Non-SJCC Coal
will be priced as Alternate Coal. If there is a dispute
whether the Non-Normal Conditions are caused by
Uncontrollable Forces, the Non-SJCC Coal will be priced
as Alternate Coal and will be re-priced as Non-SJCC Coal
if necessary when the dispute is resolved. If the
Non-Normal Conditions are not caused by Uncontrollable
Forces, then, the Non-SJCC Coal shall be priced as
described in Section 8 "SJCC Compensation".
40
SJCC will provide coal quality information for the
Non-SJCC Coal with the written offers and will propose
the delivery schedule and quantity of Non-SJCC Coal to be
supplied.
3) Within fifteen (15) days after receipt of a proposed Cure
Plan, the Joint Committee shall meet to consider and act
on the Cure Plan.
4) Within fifteen (15) days after receipt of an offer to
supply Non-SJCC Coal, the Joint Committee will meet to
approve or reject the Non-SJCC Coal offer. Failure to
approve the offer shall constitute its rejection.
5) For offers of Non-SJCC Coal only, SJCC will meet the
revised coal minimum quality standard of at least 8700
BTU per pound measured as provided in Section 5.2 "Coal
Quality".
6) As part of its Cure Plan, SJCC will provide weekly
written notice to the Utilities of daily inventory levels
of the Reserve of Coal.
F) Rejection of Non-SJCC Coal. If the Joint Committee rejects an
offer of Non-SJCC Coal that is proposed, and if the price of
that Non-SJCC Coal offer is [*], then the offer of Non-SJCC
Coal will be credited as coal delivered for the sole purpose
of determining whether a Material Default Condition exists,
unless the Joint Committee agrees that the Non-Normal
Condition is due to Uncontrollable Forces, in which case
Material Default provisions are inapplicable.
G) Rejection of Non-SJCC Coal after Initial Approval. If the
Utilities determine and the Joint Committee agrees that
delivery of coal from a certain Non-SJCC Coal source is shown
to materially impair operations at the San Juan Station, the
Utilities may reject the unburned portion of that coal and, if
so, SJCC shall terminate delivery of that coal. The remainder
of such rejected coal shall not be credited as coal delivered
for purposes of determining whether a Material Default
Condition exists.
H) Termination of Non-Normal Conditions. The Non-Normal
Conditions will terminate when all of the following occur:
1) The Reserve of Coal exceeds 1.2 million Tons;
2) SJCC can supply the quantities of coal required by this
Agreement from the Coal Leases, Remnant Coal, or
Alternate Coal and/or previously acquired Non-SJCC Coal;
3) SJCC can meet the coal quality specifications described
in Section 5.2 "Coal Quality"; and
4) SJCC gives written notice of the termination of
Non-Normal Conditions.
41
12.4 Material Default.
A) Material Default Conditions. The existence of any of the
following material default conditions ("Material Default
Conditions") may result in a Material Default by SJCC:
1) Failure of SJCC to deliver coal as specified in Section
4.2 "Delivery Rates" such that:
(i) A ten percent (10%) per month or greater shortfall
in deliveries as set forth in Exhibit "D" "Delivery
Rates" occurs in any six (6) consecutive months (as
adjusted pursuant to Section 12.3(F) "Rejection of
Non-SJCC Coal"); or
(ii) A cumulative shortfall of sixty percent (60%) in
deliveries as set forth in Exhibit "D" "Delivery
Rates" occurs over any three (3) month period (as
adjusted pursuant to Section 12.3(F) "Rejection of
Non-SJCC Coal");
2) Failure of SJCC to comply with the requirements of
Section 5.2 "Coal Quality" (as amended by Section
12.3(E)(5) in the event that Non-SJCC Coal is supplied
under Non-Normal Conditions);
3) Failure of SJCC to maintain a Reserve of Coal greater
than 250,000 Tons.
The occurrence of any of the above conditions is not itself a
Material Default
B) Material Default exists when:
1) One or more of the Material Default Conditions exist;
2) Notice is provided pursuant to Section 12.4(C) "Notice of
Material Default Condition(s)", and,
3) SJCC fails to avoid Material Default under Section
12.4(D) "Avoidance of Material Default".
C) Notice of Material Default Condition(s). SJCC shall not be in
Material Default under this Agreement unless and until SJCC
shall have received from Utilities written notice of one or
more Material Default Conditions specifying the particulars.
SJCC may seek to avoid or cure the Material Default
Condition(s) pursuant to the provisions of Section 12.4(D)
"Avoidance of Material Default". SJCC shall not be
conclusively deemed in Material Default if SJCC disputes the
existence of any alleged Material Default unless and until
there is a final resolution pursuant to Section 11 "Dispute
Resolution" of this Agreement to determine the existence or
non-existence of Material Default.
D) Avoidance of Material Default. SJCC can prevent any of the
Material Default Conditions from becoming a Material Default
by any one or more of the following actions:
42
1) SJCC proceeds with due diligence to cure the alleged
Material Default Condition(s) within thirty (30) days
after receipt of the notice of Material Default
Condition(s);
2) BHP Minerals International Inc. proceeds with due
diligence to cure the alleged default within thirty (30)
days of receipt of the notice of Material Default
Condition(s);
3) SJCC declares prevention of performance by reason of
Uncontrollable Forces pursuant to Section 12.2
"Uncontrollable Forces", and that declaration is not
subsequently invalidated by arbitration;
4) SJCC gives notice of Non-Normal Conditions and operates
according to a Cure Plan approved by the Joint Committee;
or
5) SJCC disputes the existence of Material Default
Condition(s), and there is a final resolution pursuant to
Section 11 "Dispute Resolution" that SJCC was not in
Material Default hereunder.
E) Utilities' Remedies for SJCC's Material Default. Upon a
Material Default caused by the existence of a Material Default
Condition that is not avoided pursuant to Section 12.4(D)
"Avoidance of Material Default", the Utilities shall have the
following remedies:
1) The Utilities may terminate this Agreement for Material
Default. Upon termination for Material Default, the
Utilities shall have the options set forth in Section
12.5 "Termination".
2) Only in the event of an Emergency Situation as provided
in Section 12.1 "Utilities' Right to Mine", Utilities or
Utilities' agents may, in lieu of seeking termination or
any other remedy, go upon the SJCC Site Area, use SJCC's
equipment to mine coal therefrom, and deliver such coal
to the Delivery Points. The compensation to be paid by
Utilities to SJCC for such use of SJCC's equipment shall
be agreed upon by the Joint Committee. Such operations by
Utilities shall terminate when SJCC gives notice and is
able to assume normal deliveries.
3) In addition to the rights provided in Section 12.5
"Termination" to termination and the limited right to
mine, Utilities shall have any other remedies provided by
law, subject to the waiver of consequential damages in
Section 14.16 "Waiver of Consequential Damages".
12.5 Termination
A) Options of Utilities Upon Termination.
Upon termination of this Agreement for Material Default, in addition to
other remedies provided in Section 12.4(E) "Utilities' Remedies for
SJCC's Material Default" the Utilities shall have the option to:
43
1) Acquire SJCC's rights, title and interest in and to any
or all of SJCC's plant and capital equipment used by SJCC
in carrying out its obligations under this Agreement and
the Coal Leases and other leases within the SJCC Site
Area including all of SJCC's permits and reclamation
bonds, paying SJCC therefore in cash the greater of the
fair market value of SJCC's plant and capital equipment,
and Coal Leases as determined by the Joint Committee, or
SJCC's book cost net of depreciation of said plant and
capital equipment, and the net value of the acquisition
cost of the Coal Leases and other leases in the SJCC Site
Area;
2) Require SJCC to dispose of any or all of SJCC's plant and
capital equipment used by SJCC in carrying out its
obligations under this Agreement, and interest in the
Coal Leases and other leases in the SJCC Site Area
including all of SJCC's permits and reclamation bonds,
for cash at prevailing market prices and to pay SJCC all
costs of disposal plus the amount, if any, by which
SJCC's book cost net of depreciation of said plant and
capital equipment, and the net value of the acquisition
cost of the Coal Leases and other leases in the SJCC Site
Area exceed the amount received by SJCC on account of the
disposal thereof; or
3) Exercise neither of the above options, in which case SJCC
shall retain such property interests as are necessary for
the time required to satisfy all reclamation and other
obligations, including, without limitation, the
obligations pursuant to Section 7.3 "Reclamation
Activities".
B) Notice of Election. Within thirty (30) days after termination
of this Agreement, the Joint Committee will determine fair
market value and book value of SJCC's plant, capital equipment
and the Coal Leases and other leases in the SJCC Site Area,
including all of SJCC's permits and reclamation bonds. The
Joint Committee will not disband until it determines such
values. Within thirty (30) days after receipt of the Joint
Committee determination of value, the Utilities shall notify
SJCC in writing which of the above three options the Utilities
elect. In the event the Utilities elect the option identified
in Section 12.5(A)(1), SJCC shall, within thirty (30) days
after written notice of said election, deliver to Utilities a
sufficient bill of sale or other appropriate instrument of
conveyance, together with an invoice showing in reasonable
detail the amount due, whereupon Utilities shall, within sixty
(60) days thereafter, remit to SJCC the amount due. In the
event Utilities shall elect the option identified in Section
12.5(A)(2), SJCC shall undertake to promptly dispose of its
plant and capital equipment, and interest in the Coal Leases
and other leases in the SJCC Site Area, including all of
SJCC's permits and reclamation bonds, and shall thereafter
invoice Utilities for the amount due SJCC (said invoice to
show in reasonable detail the amount, if any, received as a
result of said disposition, SJCC's book cost (net of
depreciation) and the balance due), whereupon Utilities shall,
within sixty (60) days after receipt of said invoice, remit to
SJCC the amount due SJCC.
44
C) Terms of Transfer. Any transfer of all of SJCC's rights, title
and interest in and to the Coal Leases and other leases in the
SJCC Site Area, including all of SJCC's permits and
reclamation bonds shall be by an appropriate instrument of
conveyance, with special warranty covenants, subject to
necessary consents, and such assignment and/or transfer will
become effective at the earliest possible time after the
termination of this Agreement or extension thereof.
D) Liabilities Upon Termination. Upon termination the Utilities
shall assume all financial obligations, if any, attributable
to
1) The then remaining term of the Cimarron Coal Assignment;
and,
2) All leases and subleases that are Coal Leases and other
leases in the SJCC Site Area as of August 30, 2000
(including private royalty obligations or retained
interests).
In addition, after termination of this Agreement, the
Utilities remain obligated to pay for all surface reclamation
associated with disturbance on the SJCC Site Area resulting in
any way from the supply of coal to the San Juan Station prior
to termination of this Agreement (including reclamation of
surface mining and the surface effects of underground mining)
and related liabilities, obligations and costs.
12.6 Expiration.
A) In the event the Parties fail to agree to extend this
Agreement pursuant to Section 2.5 "Extension", the Parties
have the obligation to negotiate diligently and in good faith
with a view to concluding a new agreement for the purchase and
sale of coal to be effective commencing at the expiration of
this Agreement.
B) Upon expiration as provided in Section 2 "Obligations of the
Parties and Term of Agreement", and in the event the Parties
have not reached agreement pursuant to Section 12.6(A), the
Utilities may elect one of the options identified in Section
12.5(A)(1), Section 12.5(A)(2) and Section 12.5(A)(3).
C) Notice of Election. Within thirty (30) days after expiration
of this Agreement, the Joint Committee will determine fair
market value and book value of SJCC's plant, capital equipment
and the Coal Leases and other leases in the SJCC Site Area,
including all of SJCC's permits and reclamation bonds. The
Joint Committee will not disband until it determines such
values. Within thirty (30) days after receipt of the Joint
Committee determination of value, the Utilities shall notify
SJCC in writing which of the above three options the Utilities
elect. In the event the Utilities elect the option identified
in Section 12.5(A)(1), SJCC shall, within thirty (30) days
after written notice of said election, deliver to Utilities a
sufficient bill of sale or other appropriate instrument of
conveyance, together with an invoice showing in reasonable
45
detail the amount due, whereupon Utilities shall, within sixty
(60) days thereafter, remit to SJCC the amount due. In the
event Utilities shall elect the option identified in Section
12.5(A)(2), SJCC shall undertake to promptly dispose of its
plant and capital equipment, and interest in the Coal Leases
and other leases in the SJCC Site Area, including all of
SJCC's permits and reclamation bonds, and shall thereafter
invoice Utilities for the amount due SJCC (said invoice to
show in reasonable detail the amount, if any, received as a
result of said disposition, SJCC's book cost (net of
depreciation) and the balance due), whereupon Utilities shall,
within sixty (60) days after receipt of said invoice, remit to
SJCC the amount due SJCC.
D) Terms of Transfer and Liabilities Upon Expiration. Any
transfer of all of SJCC's rights, title and interest in and to
the Coal Leases and other leases in the SJCC Site Area,
including all of SJCC's permits and reclamation bonds, shall
be by an appropriate instrument of conveyance, with special
warranty covenants, subject to necessary consents, and such
assignment and/or transfer will become effective at the
earliest possible time after the expiration of this Agreement
or extension thereof. After expiration of this Agreement, the
Utilities remain obligated to pay for all reclamation and
related liabilities, obligations and costs pursuant to Section
7.3 "Reclamation Activities".
46
Section 13 - Indemnity
----------------------
13.1 Indemnity
SJCC shall indemnify and save Utilities harmless from and shall defend
them against any and all claims, demands or liabilities arising out of
the operations of SJCC under this Agreement at the San Juan Station
site or the SJCC Site Area, excepting those specified in Exhibit "F"
"Operating Costs", and those claims, demands or liabilities arising out
of the acts of Utilities, their employees, agents, contractors, and
representatives.
Utilities shall indemnify and save SJCC harmless from and defend it
against any and all claims, demands or liabilities arising out of the
operations of Utilities under this Agreement at the San Juan Station
site or the SJCC Site Area, excepting those claims, demands or
liabilities arising out of the acts of SJCC, its employees, agents,
contractors and representatives.
If a court of competent jurisdiction determines that the provisions of
ss.56-7-1 or 2, N.M.S.A. (1978 Comp.), are applicable to this
Agreement, then only to the extent that any indemnity agreement or any
portion of an indemnity agreement contained herein would be deemed void
or unenforceable under said provision(s), then to the narrowest extent
possible, that portion of the agreement shall not extend to indemnify
against liability, claims, damages, losses or expenses, including
attorneys' fees, for or arising out of:
A) In the case that ss56-7-1, N.M.S.A. (1978 Comp.), is so
determined to be applicable,
1) the preparation or approval of maps, drawings, opinions,
reports, surveys, change orders, designs or
specifications by the indemnified party or the agents or
employees of the indemnified party; or
2) the giving of or the failure to give directions or
instructions by the indemnified party, or the agents or
employees of the indemnified party, where such giving or
failure to give directions or instructions is the primary
cause of bodily injury to persons or damage to property;
and,
B) In the case that ss56-7-2, N.M.S.A. (1978 Comp.), is so
determined to be applicable,
1) the sole or concurrent negligence of the indemnified
party or the agents or employees of the indemnified party
or any independent contractor who is directly responsible
to the indemnified party; or
2) any accident which occurs in operations carried on at the
direction or under the supervision of the indemnified
party or an employee or representative of the indemnified
party or in accordance with methods and means specified
by the indemnified party or employees or representatives
of the indemnified party.
47
Section 14 - General Provisions
-------------------------------
14.1 Compliance with Applicable Laws
SJCC shall conduct all of its operations under this Agreement in full
compliance with all applicable laws, ordinances, regulations and
directives of any and all governmental authorities having jurisdiction
over such operations in conformity with the provisions of all licenses,
permits and approvals; provided, however, that nothing herein shall be
construed as prohibiting SJCC from contesting any such law, ordinance,
regulation or directive or the provisions of any such license, permit
or approval by appropriate judicial or administrative proceedings.
14.2 Labor Force
A) SJCC shall comply with the requirements of all civil rights
statutes and other federal and state employment laws which may
be applicable to its operations under this Agreement.
B) Except for any preferential treatment which may be accorded
Native American Indians (which treatment shall not violate
SJCC's obligations under Section 14.2(A), during the
performance of this contract SJCC agrees as follows:
1) SJCC will not discriminate against any employee or
applicant for employment because of race, color,
religion, sex or national origin. SJCC will take
affirmative action to ensure that applicants are
employed, and that employees are treated during
employment, without regard to their race, color,
religion, sex or national origin. Such action shall
include, but not be limited to, the following:
employment; upgrading; demotion or transfer; recruitment
or recruitment advertising; layoff or termination; rates
of pay or other forms of compensation; and selection for
training, including apprenticeship. SJCC agrees to post
in conspicuous places, available to employees and
applicants for employment, notices to be provided by the
contracting officer setting forth the provisions of this
nondiscrimination clause.
2) SJCC will, in all solicitations or advertisements for
employees placed by or on behalf of SJCC, state that all
qualified applicants will receive consideration for
employment without regard to race, color, religion, sex
or national origin.
3) SJCC will send to each labor union or representative of
workers with which it has a collective bargaining
agreement or other contract or understanding, a notice to
be provided by the agency contracting officer, advising
the labor union or workers' representative of SJCC's
commitments under Section 202 of Executive Order No.
11246 of September 24, 1965, and shall post copies of the
notice in conspicuous places available to employees and
applicants for employment.
48
4) SJCC will comply with all provisions of Executive Order
No. 11246 of September 24, 1965, and of the rules,
regulations and relevant orders of the Secretary of
Labor.
5) SJCC will furnish all information and reports required by
Executive Order No. 11246 of September 24, 1965, and by
the rules, regulations and orders of the Secretary of
Labor, or pursuant thereto, and will permit access to its
books, records and accounts by the Secretary of Labor for
purposes of investigation to ascertain compliance with
such rules, regulations and orders.
6) In the event of SJCC's noncompliance with the
nondiscrimination clauses of this contract or with any of
the said rules, regulations or order, this contract may
be canceled, terminated or suspended, in whole or in
part, and SJCC may be declared ineligible for further
Government contracts in accordance with procedures
authorized in Executive Order No. 11246 of Sept. 24,
1965, and such other sanctions may be imposed and
remedies invoked as provided in Executive Order No. 11246
of September 24, 1965, or by rule, regulation or order of
the Secretary of Labor, or as otherwise provided by law.
7) SJCC will include the provisions of Sections 14.2 (B)(1)
through (7) in every subcontract or purchase order unless
exempted by rules, regulations or orders of the Secretary
of Labor issued pursuant to Section 204 of Executive
Order No. 11246 of September 24, 1965, so that such
provisions will be binding upon each subcontractor or
vendor. SJCC will take such action with respect to any
subcontract or purchase order as may be directed by the
Secretary of Labor as a means of enforcing such
provisions, including sanctions for noncompliance;
provided, however, that in the event SJCC becomes
involved in, or is threatened with, litigation with a
subcontractor or vendor as a result of such direction,
SJCC may request the United States to enter into such
litigation to protect the interest of the United States.
C) The Parties agree to the extent authorized by law that no
party will seek an independent contractual remedy based upon
Section 14.2(B)(6) of this Agreement unless such remedy is
necessary to effectuate a party's compliance with Federal law
or applicable regulations. The Parties acknowledge that this
Section 14.2(C) is not intended to conflict with Federal law
or limit enforcement authority of the Secretary of Labor or
other governmental authority. If this Section 14.2(C) is ever
legally determined to violate or conflict with Executive Order
No. 11246 of September 24, 1965, its implementing regulations,
or other Federal laws or regulations, then this Section 14.2
(C) will be of no force and effect, and will be severed from
this Agreement, and, the remainder of the Agreement will be
treated pursuant to Section 14.17 "Severability".
49
14.3 Confidentiality / Non-disclosure
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 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, and, specifically, Section 8 "SJCC Compensation").
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.
14.4 The Utilities' Duties and Obligations Shall be Joint and Several
The Utilities' duties and obligations under this Agreement shall be
joint and several.
14.5 Permits and Approvals
SJCC will use its best efforts to acquire any and all permits, licenses
and approvals required by any governmental agency or regulatory body to
enable SJCC to carry on the operations contemplated by this Agreement,
including but without limitation, permits under the "Surface Mining
Control and Reclamation Act of 1977" (Pub.L. 95-87, August 3, 1977);
provided however, that Utilities will cooperate fully with SJCC and
supply information necessary to obtain all permits, licenses and
approvals.
14.6 Waivers
A waiver by a party at any time of its rights with respect to a default
under this Agreement, or with respect to any other matter in connection
with this Agreement, shall not be deemed a waiver with respect to any
other subsequent default or matter. No delay, short of the statutory
period of limitation, in asserting or enforcing any right hereunder
shall be deemed a waiver of or limitation on such right.
14.7 Insurance
SJCC and Utilities, for the benefit of the other, shall take out and
maintain in force during the term of this Agreement the insurance
described below covering their operations in respect of which this
Section 14.7 applies. The Parties shall insure with one or more
insurance companies satisfactory to the other or self insure by means
of a self insurance program acceptable to the other, and each party
shall submit to the other satisfactory evidence of said insurance or
self insurance. Said insurance shall not be cancelled or materially
changed with less than thirty (30) days prior written notice to the
other party hereto and the certificates shall so provide. The insurance
required is the following:
50
A) Workmen's Compensation and Employer's Liability Insurance as
required under applicable law, including, as appropriate,
obligation to provide Black Lung disease benefits under the
Federal Coal Mine Health and Safety Act.
B) Automobile Liability Insurance, or the equivalent, covering
claims from third parties arising from the operation of
automobiles.
C) Property Insurance providing all risk replacement cost
coverage for real and personal property damage, including
damage to equipment.
D) Commercial General Liability Insurance, or the equivalent,
(including blanket contractual liability coverage with respect
to this Agreement) including defense costs for claims for
damages to third parties because of bodily injury, property
damage, personal and advertising injury, including products
and completed operations.
E) Umbrella and /or Excess Liability Insurance, or the
equivalent, including claims in excess of scheduled underlying
policies.
F) Fidelity Insurance, or the equivalent, covering loss arising
out of fraudulent or dishonest acts of employees.
G) ERISA Fidelity, or the equivalent, covering loss arising out
of fraudulent or dishonest acts of employees related to
retirement plans as required by ERISA.
H) Fiduciary Liability Insurance, or the equivalent, covering
claims arising from wrongful acts.
It shall be the responsibility of the Joint Committee to review the
insurance coverage before July 31, 2003, and then no less often than
every five (5) years thereafter, and to determine adequate limits and
coverages for the then current conditions.
14.8 Notices
A) Any notice, demand or request provided for in this Agreement,
or given or made in connection with this Agreement, except
those normal exchanges of information required by the
Coordinating Committee and the Joint Committee, 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:
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San Juan Coal Company
Post Office Box 155
Fruitland, NM 87416
Attention: San Juan Mine Manager
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 14.8. Any notice given in
accordance with the provisions of this Section 14.8 shall be
deemed effectively given as of the date of its deposit with
the United States Postal Service.
C) Exchanges of information required by the Coordinating
Committee and the Joint Committee shall be by procedures set
forth by the respective committee.
14.9 Choice of Law
The terms and provisions of this Agreement shall be interpreted and
construed in accordance with the laws of the State of New Mexico,
without regard to conflict of law principles.
14.10 Assignment
A) This Agreement may not be assigned or subcontracted by SJCC
without the consent of Utilities, except that no consent shall
be required in event of an assignment of amounts receivable
hereunder to a bank or lending institution, or a collateral
assignment for purposes of securing indebtedness, or a
transfer under or pursuant to a mortgage, deed of trust or
indenture (including, without limitation, a transfer by
foreclosure or a sale under the power of sale contained in any
such mortgage, deed of trust or indenture), or a transfer to a
successor in interest, by merger, consolidation, sale and
transfer, or otherwise, acquiring all or substantially all of
the assets and business of SJCC, and except for transfer to a
subsidiary as herein below provided; provided, however, that
any assignee, successor in interest or transferee hereunder
shall first guarantee performance of this Agreement in a
manner satisfactory to Utilities.
B) This Agreement may not be assigned by Utilities without the
consent of SJCC, except that no consent shall be required in
event of an assignment or transfer under and pursuant to a
52
mortgage, deed of trust or indenture (including, without
limitation, a transfer by foreclosure or a sale under the
power of sale contained in any such mortgage, deed of trust or
indenture), or an assignment to a successor in interest, by
merger, consolidation, sale and transfer, or otherwise,
acquiring all or substantially all of the business and assets
of any of the Utilities and except for transfer to a
subsidiary as herein below provided; provided, however, that
any assignee, successor in interest or transferee hereunder
shall first guarantee performance of this Agreement in a
manner satisfactory to SJCC.
C) Any party hereto may without the consent of any other party,
assign this Agreement to a majority-owned subsidiary
corporation or to a wholly-owned subsidiary of its parent
provided that the assigning party shall guarantee performance
of this Agreement by such subsidiary.
D) Consent to assignment hereunder shall not be unreasonably
withheld by any party hereto.
14.11 Successors and Assigns
Subject to Section 14.10 "Assignment", this Agreement and all of the
obligations and rights herein established shall extend to and be
binding upon, and shall inure to the benefit of, the respective
successors and assigns of the respective Parties.
14.12 Authorizations
The execution and performance by the Parties of this Agreement have
been duly authorized for each party by all necessary corporate action,
require no other authorization, consent or approval and do not
contravene any law or contractual restriction binding on the Parties.
14.13 Amendments
This Agreement may be amended only by written instrument executed by
all of the Parties with the same formality as this Agreement.
14.14 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. The titles of sections in
this Agreement have been inserted as a matter of convenience or for
reference only, and they shall not control or affect the meaning or
construction of any of the terms and provisions hereof.
14.15 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. All Exhibits are incorporated by
reference as part of this Agreement.
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14.16 Waiver of Consequential Damages.
SJCC and the Utilities waive any recovery of consequential damages
related to the breach of this Agreement.
14.17 Severability
In the event that any of the terms or conditions of this Agreement, or
the application of any such term or condition to any person or
circumstance, shall be held invalid by an arbitration panel constituted
under this Agreement or any court having jurisdiction in the premises,
the remainder of this Agreement, and the application of such terms or
conditions to persons or circumstances other than those as to which it
is held invalid, shall not be affected thereby, except that the
provisions in the remainder of this Agreement shall be construed, and
modified where necessary, to effectuate the intentions of the Parties
and provide them with the benefit of their bargain.
14.18 Survival of Provisions
The Parties agree that those provisions that describe the Parties'
post-expiration and post-termination rights and obligations shall
survive termination or expiration of this Agreement. In addition, those
provisions and Exhibits referenced in, or necessary to implement, the
provisions that describe the Parties' post-termination or
post-expiration rights and obligations also shall survive.
54
Section 15 - Signatures
-----------------------
IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to
be executed on their behalf by their respective officers, thereunto
duly authorized.
PUBLIC SERVICE COMPANY OF NEW MEXICO
By: /s/ Patrick J. Goodman. 8/29/01
---------------------------------------- -------
Patrick J. Goodman, Vice President Date
TUCSON ELECTRIC POWER COMPANY
By: /s/ Kevin Larson....... 8/31/01
------------------------------------------------- -------
Kevin Larson, Vice President Date
SAN JUAN COAL COMPANY
By: /s/ John W. Grubb...... 8/29/01
---------------------------------------- -------
John W. Grubb, President Date
55