AMENDMENT NUMBER EIGHT TO COAL SALES AGREEMENT
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This Amendment Number Eight to Coal Sales Agreement ("this Amendment") is made
effective as of the 1st day of September, 1995 between SAN XXXX COAL COMPANY, a
Delaware corporation ("SJCC"), PUBLIC SERVICE COMPANY OF NEW MEXICO, a New
Mexico corporation and TUCSON ELECTRIC POWER COMPANY, an Arizona corporation
(collectively, "Utilities").
RECITALS:
1. SJCC and Utilities are parties to that certain Coal Sales Agreement
dated August 18, 1980, as amended and supplemented (the "CSA") which
provides for the delivery of coal to the San Xxxx Generating Station
("SJGS").
2. The CSA describes specific coal sources for SJGS, including the
Fruitland Leases and the La Plata Leases. Under the terms of the
various subleases and assignment agreements that give SJCC the right to
mine coal from the Fruitland and La Plata Leases, SJCC and BHP Minerals
International Inc. ("BHP") are obligated to make the following
payments, among others, to third parties:
a) A Retained Economic Interest ("REI") is payable by BHP on each
ton of coal mined and delivered from the Fruitland Leases or
on an Annual Tonnage (the "REI Minimum"), as set forth in
Article VI of the Sublease between Western Coal Co. ("WCC")
and BHP (formerly Utah International Inc.) dated August 18,
1980, as amended (the "BHP Sublease"), whichever is greater.
An amount equal to the REI is payable by SJCC to BHP on each
ton of coal mined and delivered from the Fruitland Leases
under the provisions of the Sublease between SJCC and BHP
dated August 18, 1980, as amended (the "SJCC Sublease").
b) An Overriding Royalty and/or Net Profits Interest
(collectively, "NPI") is payable by SJCC on each ton of coal
mined and delivered from the La Plata Leases or on a minimum
annual tonnage (the "NPI Minimum"), whichever is greater, all
as set forth in the Assignment Agreement between WCC and
Cimarron Coal Company dated October 30, 1979, as amended (the
"Assignment Agreement"). The rights and obligations of WCC
under the Assignment Agreement were assigned to and assumed by
SJCC by Assignment of Leases dated November 24, 1981.
c) Under the terms of the CSA, Utilities reimburse SJCC for
amounts equal to payments of REI made by SJCC pursuant to the
SJCC Sublease and for payments of NPI made by SJCC pursuant to
the Assignment Agreement.
3. The parties wish to provide flexibility among coal sources, with the
objective of lowering the total delivered cost of coal to SJCS, by
providing for payment by Utilities to SJCC of amounts equal to REI or
NPI payments made by BHP or SJCC, respectively, with respect to the REI
Minimum or the NPI Minimum to the extent that lower cost coal replaces
coal which would otherwise have been mined and delivered from the
Fruitland Leases and/or the La Plata Leases.
CSA Amendment Eight
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 Utilities hereby amend the CSA as follows:
DEFINITIONS:
(A) La Plata Minimum is the "La Plata Surface Mine La Plata Leases Annual
Tons" as set forth in Column 4 of Exhibit H of the CSA.
(B) Fruitland Tons is the actual number of tons mined and delivered from
the Fruitland Leases during the year.
(C) Fruitland Substitute Tons are any Replacement Tons delivered to SJGS by
SJCC, provided, however, that the number of Fruitland Substitute Tons
is any year will not exceed the greater of (i) the REI Minimum plus the
ending REI Shortfall Balance for the previous year (as defined in
paragraph (E) below) less the Fruitland Tons, or (ii) zero (0).
(D) REI Shortfall Tons means for any year the REI Minimum for that year
less the sum of Fruitland Tons and Fruitland Substitute Tons for the
year. (REI Shortfall Tons may be negative.)
(E) REI Shortfall Balance for 1994 year end is 377,828. The ending REI
Shortfall Balance for each year thereafter will be greater of (i) the
sum of the ending REI Shortfall Balance for the previous year and the
REI Shortfall Tons for the year, or (ii) zero (0).
(F) La Plata Tons is the actual number of tons mined and delivered from the
La Plata Leases during the year.
(G) Replacement Tons means tons delivered from the South Lease Extension,
from the La Plata Leases in excess of the La Plata Minimum, and from
other sources approved pursuant to paragraph 7 of this Amendment.
(H) South Lease Extension means the San Xxxx Mine Permit Area (as shown in
Exhibit 1.1 of State Mining Permit 94-01 issued to SJCC on 26 September
1994) outside of the Fruitland Leases and the N1/2 of Sec. 3, T.29N.,
R.15W., New Mexico
Prime Meridian.
(I) CSA Invoice is the monthly invoice prepared in accordance with the CSA.
(J) Other Terms. Capitalized terms not otherwise defined herein shall have
the meanings assigned thereto in the CSA.
CSA Amendment Eight
AGREEMENT:
1. SJCC agrees to deliver and Utilities agree to purchase Replacement Tons
in accordance with the provisions of the CSA, as amended by this
Amendment.
2. An amount equal to the REI multiplied by "X" (which may be negative)
will be added to each CSA Invoice. (Such additions to monthly CSA
Invoices will be based on the projected number of Fruitland Substitute
Tons and Fruitland Tons for the year and may be changed through the
year as appropriate.)
Where
X=A-G
And
A=The number of Fruitland Substitute Tons;
B=The aggregate cumulative number of Make-up Tons (as defined
in the BHP Sublease) as of the previous year end;
C=The RIE Shortfall Balance as of the previous year
end;
D=The number of Fruitland Tons;
E=The REI Minimum;
F=(D-E-C), or zero (0), whichever is greater and
G=(B-C), or F, whichever is less.
3. No year during which SJCC delivers coal to SJGS from any source(s) in
aggregate quantities and at times which are consistent with paragraph
4.2 of the CSA shall be a "NonPerformance Year" as defined in paragraph
9.2(b)(3) and paragraph 9.3(c) of the CSA, so long as said deliveries
are otherwise in accordance with the CSA, as amended by this Amendment.
4. If the total tons mined and delivered from all sources in accordance
with the CSA, as amended by this Amendment, are less than the sum of
the Minimum Annual Tons as described in paragraph 9.2(b)(3) and
paragraph 9.3(c) of the CSA, (the Minimum Total Tons") in any year in
which SJCC was directed, consistent with paragraph 4.2 of the CSA, to
mine and deliver coal in such amounts that the total tons requested for
said year would be greater than or equal to the Minimum Total Tons,
said year shall be defined as a Non-Performance Year as described in
paragraph 9.2(b)(3) and 9.3(c) of the CSA.
CSA Amendment Eight
5. SJCC will deliver Replacement Tons pursuant to mining plans approved by
the Joint Committee showing that the projected total cost to Utilities
of Replacement Tons is less than the projected total cost to Utilities
for an equal number of tons to be delivered under then current
operating plans. Notwithstanding any other provision of this Amendment
or the CSA, decisions of the Joint Committee about mining plans for
Replacement Tons shall not be subject to arbitration. All costs of
mining and delivering Replacement Tons will be included in the annual
operating cost budget submitted pursuant to paragraph 12.3(a) of the
CSA and will be subject to the provisions thereof. If SJCC desires to
deliver Replacement Tons for which plans and budgets have not been
approved pursuant to paragraph 12.3(a) of the CSA, SJCC shall give
Utilities as much advance notice thereof as possible (not to be less
than fifteen (15) days) and shall include plans and budgets thereof
said notice. Utilities shall approve or disapprove said plans and
budgets within fifteen (15) days of receipt of notification. If
Utilities fail to approve or to disapprove said plans and budgets
within fifteen (15) days, or if they approve them, said plans and
budgets shall be deemed to be part of the annual operating cost budget,
and shall be subject to all of the provisions of paragraph 12.3(a) of
the CSA.
6. Replacement Tons will be priced as follows:
a) Replacement Tons mined from the South Lease Extension will be
priced in accordance with paragraph 9.2(a) of the CSA and
paragraph 8 of this Amendment.
b) Replacement Tons minded from the La Plata Leases will be
priced in accordance with paragraph 9.3(a) of the CSA and
paragraph 8 of this Amendment.
7. Notwithstanding any other provisions of this Amendment, SJCC may not
deliver Replacement Tons from sources other than the South Lease
Extension and the La Plata Leases without prior approval by the Joint
Committee of each additional source of Replacement Tons.
Notwithstanding any other provision of this Amendment or the CSA,
decisions of the Joint Committee about sources of Replacement Tons
shall not be subject to arbitration.
8. The total payable to SJCC under the terms of paragraph 9.2(b) and
paragraph 9.3(b) and (c) of the CSA in any year during which
Replacement tons are delivered will be the sum of
a) the lesser of (i) the La Plata Minimum or (ii) of the sum of
the Fruitland Tons, the La Plata Tons, and the Replacement
Tons mined and delivered during the year from sources other
than the La Plata Leases (the "Total SJCC Tons"), multiplied
by the La Plata Capital Investment Element as described in
paragraph 9.3(b) of the CSA, plus
CSA Amendment Eight
b) the greater of (i) Total SJCC Tons less the Replacement Tons
mined and delivered from the La Plata Leases (the "La Plata
Replacement Tons") less the La Plata Minimum, or (ii) zero
(0), multiplied by the Fruitland Capital Investment Element as
described in paragraph 9.2(b) of the CSA (the "Fruitland
CIE"), plus
c) the La Plata Replacement Tons multiplied by the Fruitland CIE
less the Capital Investment Element payable for each ton of
coal transported from the La Plata Leases to SJGS in excess of
the La Plata Minimum in any calendar year under the terms of
paragraph 7.2(b) of the certain Transportation Agreement,
dated April 30, 1984, between San Xxxx Transportation Company
and Utilities, as amended, plus
d) the minimum aggregate capital investment element payable under
paragraph 9.2(b)(3) and paragraph 9.3(c) of the CSA.
All references in this paragraph 8 to paragraphs 9.2(b), 9,2(b)(3),
9.3(b), and 9.3(c) of the CSA are to such paragraphs as adjusted by the
First Supplement, dated as of July 27,1992, to the CSA, by the Interim
Invoicing Agreement dated June 1, 1995 between SJCC and Utilities (the
"Interim Invoicing Agreement"), and by this Amendment.
9. The phrase "total tons mined and delivered" as used in paragraph
9.2(b)(3) of the CSA shall mean (i) the difference between the Total
SJCC Tons and the La Plata Minimum, or (ii) zero (0), whichever is
greater.
10. The phrase "total tons mined and delivered" as used in paragraph 9.3(c)
of the CSA shall mean the La Plata Minimum or Total SJCC Tons,
whichever is less.
11. The phrase "from the Fruitland Leases and the La Plata Leases in at
least the quantities set forth for each of said sources" in the first
sentence of paragraph 2.1(b) of the CSA is hereby deleted, and the
phrase "in at least the sum of the quantities set forth for the
Fruitland Leases and the La Plata Leases" is inserted in place thereof.
12. Replacement Tons delivered to SJGS under the terms of this Amendment
from sources other than the La Plata Leases shall be added to the tons
mined and delivered from the Fruitland Leases and the La Plata Leases
to determine whether SJCC has satisfied the obligation to mine,
process, sell and deliver coal as set forth in paragraph 2.1(b) of the
CSA as amended by paragraph 11 of this Amendment.
13. Except as expressly amended hereby, the CSA and all prior amendments
are in all respects hereby confirmed and ratified.
CSA Amendment Eight
IN WITNESS WHEREOF, the parties have executed this Amendment as of the date
first written above.
SAN XXXX COAL COMPANY
By
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Vice President
PUBLIC SERVICE COMPANY OF NEW MEXICO
By
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Senior Vice President
TUCSON ELECTRIC POWER COMPANY
By
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Vice President
CSA Amendment Eight
BHP Minerals International Inc. (formerly BHP-Utah International Inc.), a
Delaware corporation and the guarantor of the obligations of SJCC under the Coal
Sales Agreement pursuant to Guaranty dated August 18, 1980 (the "Guaranty"),
herby consents to the foregoing Amendment Eight to Coal Sales Agreement and
agrees that all references in the Guaranty to the Coal Sales Agreement shall be
deemed to be references to the Coal Sales Agreement as amended by Amendments
Numbers One to Eight, inclusive.
BHP MINERALS INTERNATIONAL INC.
By
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Vice President
