EXHIBIT 10b. SYSTEM PURCHASE OPTION AND RATE GUARANTEE
This System Purchase Option and Rate Guarantee (the "Agreement") is
made this 25th day of August, 1994, at Las Cruces, New Mexico, by the City of
Las Cruces, New Mexico (the "City"), and Southwestern Public Service Company, a
New Mexico corporation ("Southwestern").
Recitals
WHEREAS, El Paso Electric Company ("EPE") owns and operates an electric
utility system serving the City, including distribution, subtransmission, and
transmission facilities, to provide electricity to the citizens of the City (the
"Facility"), and the City is a retail customer of EPE;
WHEREAS, on May 23, 1994, Central and South West Corporation ("CSW")
issued a public statement projecting a base rate for customers receiving
electric energy from the Facility that contained no increase in its existing
rates before 1998; then, beginning in 1998, CSW may seek a one-time base rate
increase no higher than 6 percent, with no further increase until 2002
(collectively, the "Projected Rate");
WHEREAS, the City intends to purchase the Facility from EPE through
condemnation procedures pursuant to the laws of the State of New Mexico and to
purchase power from Southwestern pursuant to the Power Sales Agreement between
the City and Southwestern dated August 22, 1994;
WHEREAS, the City desires the exclusive right and option to sell,
without becoming obligated to sell, the Facility to Southwestern at an agreed
price and under specified terms and conditions;
THEREFORE, in consideration of the sum of $10 and other good and
valuable consideration, it is agreed as follows:
Grant of Option
1. Southwestern grants to the City the option to sell to
Southwestern the Facility it obtains through condemnation proceedings pursuant
to the terms of this Agreement (the "Option").
Option Period
2. The Option to sell the Facility shall commence when the
City becomes the owner of the Facility and continue for three years thereafter;
provided, however, in no event shall the Option be exercisable after January 1,
2002.
Exercise of Option
3. The City may exercise the Option by delivering
written notice to Southwestern as set forth in Paragraph 7 below.
Asset Purchase Agreement
4. As soon as practicable after the City exercises the Option,
the City and Southwestern shall in good faith negotiate, execute, deliver, and
consummate a definitive asset purchase agreement (the "Purchase Agreement")
pursuant to which Southwestern will purchase the Facility for a total
consideration equal to the amount required to retire all outstanding debt
incurred by the City in acquiring the Facility from EPE and the reasonable costs
incurred by the City in connection with the acquisition of the Facility from
EPE. In addition, Southwestern shall charge a total rate which shall be less
than the Projected Rate and the cost of fuel EPE would bill to customers
receiving electric energy from the Facility. The City shall grant to
Southwestern a 25-year franchise, containing reasonable performance guarantees
by Southwestern, to operate the Facility under prudent utility practices at the
usual and customary franchise fees for similarly situated electric utilities.
The Purchase Agreement shall also contain representations, warranties,
covenants, conditions, and other terms customary or advisable for a transaction
involving the sale of the Facility and be subject to Section 3-54-1 et seq. NMSA
1978 (1994 Supp.).
Automatic Termination
5. If the City fails to exercise the Option in accordance with
the terms of this Agreement within the Option period, the Option and the City's
rights under this Agreement shall automatically and immediately terminate
without notice.
Termination by Southwestern
6. Southwestern may terminate the Option and this Agreement at
any time before the City no longer has the right to terminate the condemnation
proceedings by giving the City written notice (a) if, in Southwestern's sole
discretion, it deems the proposed condemnation award to be excessive, or (b) if
the City obtains immediate possession under Section 42A-1-22 NMSA 1978 (1994
Repl.). If the City abandons or dismisses its condemnation proceedings as a
consequence of Southwestern's termination of the Option and this Agreement,
Southwestern will reimburse the City for one-half of its reasonable litigation
expenses and for any of EPE's damages and litigation expenses which the City may
be obligated to pay by final order of a court having jurisdiction over the
proceeding pursuant to New Mexico's Eminent Domain Code, such expenses and
damages being ascertained as of the date of Southwestern's notice.
Notices
7. Unless otherwise provided, any notice, tender, or delivery
to be given by either party to the other may be effected by personal delivery in
writing or by registered or certified mail, postage prepaid, return receipt
requested, and shall be deemed received as of five days from mailing. Mailed
notices shall be addressed as set forth below, but each party may change its
address by written notice in accordance with this Paragraph.
To the City:
City of Las Cruces, New Mexico
200 N. Church Street (88004)
P.O. Drawer CLC
Las Cruces, New Mexico 88004
Attn: Bruno Zaldo, City Manager
To Southwestern:
Southwestern Public Service Company
Tyler at Sixth (79101)
P.O. Box 1261
Amarillo, Texas 79170
Attn: Gary L. Gibson,
Vice President, Marketing
Entire Agreement
8. This Agreement contains the entire agreement between
the parties relating to the Option. Any oral representations or modifications
concerning the Agreement shall be of no force and effect.
Time of the Essence
9. Time is of the essence of this Agreement.
Amendments
10. No change, amendment, or modification of this Agreement
shall be valid or binding unless the change, amendment, or modification is in
writing and is duly signed by each of the parties hereto.
Governing Laws
11. This Agreement shall be construed under and in accordance
with the laws of New Mexico.
Counterparts
12. The parties may sign any number of counterparts of this
Agreement, and each fully signed counterpart shall be deemed an original
instrument, but all counterparts together shall constitute only one instrument.
Binding Effect
13. This Agreement shall bind and inure to the benefit of
the successors and assigns of the parties except as expressly provided above.
IN WITNESS WHEREOF, the parties have executed this Agreement the day
and year first above written.
SOUTHWESTERN PUBLIC SERVICE COMPANY
By: Coyt Webb
President
ATTEST:
Mary Pullum
Assistant Secretary
(SEAL)
CITY OF LAS CRUCES, NEW MEXICO
By: Rueben Smith
Mayor
ATTEST:
Karen Stevens
Title: City Clerk
(SEAL)