Exhibit No. 10.9.8.
[*] indicates that the confidential portion has been omitted from this filed
exhibit and filed separately with the Securities and Exchange Commission.
Amendment 11
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To The
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Coal Sales Agreement
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This Amendment Number Eleven to Coal Sales Agreement ("Amendment") is dated
August 31, 2001, to become effective as described herein, by and among San ▇▇▇▇
Coal Company, a Delaware corporation ("SJCC"), and Public Service Company of New
Mexico, a New Mexico corporation ("PNM") and Tucson Electric Power Company, an
Arizona corporation ("TEP") (collectively, the "Utilities"), (with SJCC and
Utilities herein sometimes collectively referred to as "Parties").
RECITALS
Whereas, SJCC and the Utilities are parties to that certain Coal Sales
Agreement, dated August 18, 1980, as amended (the "CSA");
Whereas, SJCC, San ▇▇▇▇ Transportation Company, and the Utilities are parties to
the Underground Letter Agreement dated August 31, 2000 ("UGLA");
Whereas, through this amendment the Parties wish to implement a portion of the
UGLA and modify the CSA; and,
Whereas, the Parties intend to address other elements of the UGLA through other
agreements.
Now, therefore, in consideration of the promises contained herein and other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, SJCC and the Utilities hereby agree as follows:
AGREEMENT
1. The terms of this Amendment become effective upon execution by all Parties
and satisfaction of the conditions precedent.
2. The conditions precedent to this Amendment becoming effective are:
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Final approval of this Amendment by the San ▇▇▇▇ Fuels Committee pursuant
to the requirements of the San ▇▇▇▇ 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.
Execution of the Consent of Guarantor in the form attached to this
Agreement and incorporated herein to be obtained no later than September
28, 2001, and provided to Utilities by SJCC.
3. Paragraph 2.4 of the CSA, "Options of Utilities" is deleted in its entirety.
4. Paragraph 9.8(b) of the CSA "Payments" is superseded and is replaced in its
entirety with the following:
"9.8(b) Payments. Invoices submitted by SJCC in accordance with
Subparagraph 9.8(a) 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."
5. Paragraph 8.3 of the CSA, "Reserve of Stripped Coal" is superseded and is
replaced in its entirety with the revised Paragraph 8.3 as follows:
"8.3 Reserve of Coal - "Reserve of Coal" shall mean all coal on SJCC's
premises that is mined coal in storage or un-mined coal from which the
overburden has been removed."
6. A new Paragraph 17.11 "Waiver of Consequential Damages" is hereby added to
Paragraph 17 "General Provisions" of the CSA. The new paragraph in its
entirety follows:
"17.11 Waiver of Consequential Damages - The Parties waive any
recovery of consequential damages related to breach of this
Agreement."
7. Paragraph 16 of the CSA, "Termination", is superseded and is replaced in
its entirety with the revised Paragraph 16 as follows:
"16.1 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 Paragraph 16.1 shall be
utilized before notice of Material Default Conditions is
provided pursuant to Paragraph 16.2.
(a) Non-Normal Conditions. Non-Normal Conditions exist when any of
the following three conditions are present:
(1) The Reserve of Coal is below the level of 1.2 million Tons,
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(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
Paragraph 17.1 "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 ▇▇▇▇ 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 ▇▇▇▇ 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 pursuant to Paragraph
17.1, then such Non-SJCC Coal will be priced [*]. If
there is a dispute whether the Non-Normal Conditions are
caused by uncontrollable forces, the Non-SJCC Coal will
be priced [*] and will be adjusted 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 at [*]. SJCC will provide 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.
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(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 Paragraph 5.2.
(6) As part of its Cure Plan, SJCC will provide weekly
written notice to the Utilities of the daily inventory
levels of 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 ▇▇▇▇ 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 and/or previously acquired
Non-SJCC Coal;
(3) SJCC can meet normal coal quality specifications; and
(4) SJCC gives written notice of the termination of
Non-Normal Conditions.
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16.2 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 Paragraph
3.1 such that:
(i) A ten percent (10%) per month or greater shortfall
in deliveries as set forth in Exhibit "D" "San ▇▇▇▇
Generation Station" occurs in any six (6)
consecutive months (as adjusted pursuant to
Paragraph 16.1(f) and (g)); or
(ii) A cumulative shortfall of sixty percent (60%) in
deliveries as set forth in Exhibit "D" "San ▇▇▇▇
Generation Station" occurs over any three (3) month
period (as adjusted pursuant to Paragraph 16.1(f)
and (g));
(2) Failure of SJCC to comply with the requirements of
Paragraph 5.2 "Coal Quality" (as amended by Paragraph
16.1(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 these three conditions is not itself
a Material Default.
(b) A Material Default exists when
(1) one or more of the Material Default Conditions exist;
(2) notice is provided pursuant to Paragraph 16.2(c) "Notice
of Material Default Conditions;" and
(3) SJCC fails to avoid Material Default under Paragraph
16.2(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 Paragraph 16.2(d).
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
Paragraph 14 to determine the existence or non-existence of
Material Default.
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(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:
(1) SJCC proceeds with due diligence to cure the alleged
Material Default Condition(s) within thirty (30) days of
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 Paragraph 17.1
"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
Paragraph 14 "Arbitration" of this Agreement 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 Paragraph 16.1(c),
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 Paragraph
16.3 "Termination."
(2) Only in the event of an emergency situation as provided
in Paragraph 13.1, Utilities or Utilities' agents may, in
lieu of seeking termination or any other remedy, go upon
SJCC's facilities, 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 that SJCC is able to assume normal
deliveries.
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(3) In addition to the rights provided in Paragraph 16.3 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 Paragraph 17.11 of
this Agreement.
16.3 Termination.
(a) Options of Utilities Upon Termination. Upon termination of
this Agreement for Material Default, in addition to other
remedies provided in Paragraph 16.2(e) "Remedies," the
Utilities shall have the option to:
(i) 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
in the SJCC premises including all 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 and
other leases in the SJCC premises 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 premises;
(ii) 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 premises including all 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 premises exceed the amount received by SJCC on
account of the disposal thereof; or
(iii) 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
Paragraph 8.7 "Reclamation".
(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 premises,
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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 option (a)(i), SJCC
shall, within thirty (30) days of written notice of said
election, deliver to Utilities a sufficient ▇▇▇▇ 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 option
(a)(ii), SJCC shall undertake to promptly dispose of its plant
and capital equipment, and interest in the Coal Leases and
other leases in the SJCC premises, 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 of receipt of said invoice, remit to SJCC the amount due
SJCC.
(c) Terms of Transfer. Any transfer of all of SJCC's right, title
and interest in and to the Coal Leases and other leases in the
SJCC premises , 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 Assignment Agreement dated
October 30, 1979, originally between Cimarron Coal
Company and Western Coal Company and assigned to SJCC, as
amended and modified; and,
2) All leases and subleases that are Coal Leases and other
leases in the SJCC premises 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 premises resulting in
any way from the supply of coal to the San ▇▇▇▇ 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.
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16.4 Expiration.
(a) In the event the Parties fail to agree to extend this
Agreement pursuant to Paragraph 2.3, Parties have the
obligation to negotiate diligently and in good faith with a
view to concluding a new or revised agreement to be effective
commencing at the expiration of this Agreement.
(b) Upon expiration as provided in Paragraph 2, and in the event
the Parties have not reached agreement pursuant to Paragraph
16.4(a) or upon expiration of this Agreement (or any extension
or revision hereof) for any other reason, the Utilities may
elect one of the options identified in Paragraph 16.3(a)(i),
Paragraph 16.3(a)(ii) and Paragraph 16.3(a)(iii) of this
Agreement.
(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, 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 option 16.3 (a)(i), SJCC shall, within thirty (30) days
of written notice of said election, deliver to Utilities a
sufficient ▇▇▇▇ 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 option 16.3 (a)(ii), SJCC shall
undertake to promptly dispose of its plant and capital
equipment, and interest in the Coal Leases, 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 of 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 premises,
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
Paragraph 8.7 "Reclamation".
8. Except as expressly amended herein, the CSA is in all respects hereby
confirmed and ratified.
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IN WITNESS WHEREOF, SJCC, and the Utilities, by their duly authorized
representatives, have entered into this Amendment.
PUBLIC SERVICE COMPANY OF NEW MEXICO
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ 8/29/01
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▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Vice President Date
TUCSON ELECTRIC POWER COMPANY
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇ 8/31/01
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▇▇▇▇▇ ▇▇▇▇▇▇, Vice President Date
SAN ▇▇▇▇ COAL COMPANY
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇ 8/29/01
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▇▇▇▇ ▇. ▇▇▇▇▇, President Date
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