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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the period ended June 30, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 1-6986
PUBLIC SERVICE COMPANY OF NEW MEXICO
(Exact name of registrant as specified in its charter)
New Mexico 85-0019030
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Alvarado Square, Albuquerque, New Mexico 87158
(Address of principal executive offices)
(Zip Code)
(505) 241-2700
(Registrant's telephone number, including area code)
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Common Stock--$5.00 par value 41,774,083 shares
Class Outstanding at August 1, 1995
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PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES
INDEX
Page No.
PART I. FINANCIAL INFORMATION:
Report of Independent Public Accountants 3
ITEM 1. FINANCIAL STATEMENTS
Consolidated Statements of Earnings--
Three Months and Six Months Ended June 30, 1995 and 1994 4
Consolidated Balance Sheets--
June 30, 1995 and December 31, 1994 5
Consolidated Statements of Cash Flows--
Six Months Ended June 30, 1995 and 1994 6
Notes to Consolidated Financial Statements 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS 9
PART II. OTHER INFORMATION:
ITEM 1. LEGAL PROCEEDINGS 16
ITEM 5. OTHER INFORMATION 17
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 18
Signature 19
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REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders
of Public Service Company of New Mexico:
We have reviewed the accompanying condensed consolidated balance sheet of
Public Service Company of New Mexico (a New Mexico corporation) and
subsidiaries as of June 30, 1995, and the related condensed consolidated
statements of earnings for the three-month and six-month periods ended June
30, 1995 and 1994, and the condensed consolidated statements of cash flows
for the six-month periods ended June 30, 1995 and 1994. These financial
statements are the responsibility of the Company's management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures
to financial data and making inquiries of persons responsible for financial
and accounting matters. It is substantially less in scope than an audit
conducted in accordance with generally accepted auditing standards, the
objective of which is the expression of an opinion regarding the financial
statements taken as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that
should be made to the financial statements referred to above for them to be
in conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of Public Service Company of New
Mexico and subsidiaries as of December 31, 1994 (not presented herein), and,
in our report dated February 23, 1995, we expressed an unqualified opinion on
that statement. In our opinion, the information set forth in the
accompanying condensed consolidated balance sheet as of December 31, 1994, is
fairly presented, in all material respects, in relation to the consolidated
balance sheet from which it has been derived.
ARTHUR ANDERSEN LLP
Albuquerque, New Mexico
August 7, 1995
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<TABLE>
ITEM 1. FINANCIAL STATEMENTS
PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30
------------------ ----------------
1995 1994 1995 1994
---- ---- ---- ----
(In thousands except per share amounts)
<S>
Operating revenues: <C> <C> <C> <C>
Electric $136,698 $149,856 $278,306 $298,524
Gas 51,126 50,959 137,326 160,378
Water 3,708 3,445 6,135 6,165
-------- -------- -------- --------
Total operating revenues 191,532 204,260 421,767 465,067
-------- -------- -------- --------
Operating expenses:
Fuel and purchased power 32,923 32,078 64,789 64,236
Gas purchased for resale 20,414 22,411 63,996 85,704
Other operation and maintenance 78,037 82,869 159,248 162,525
Depreciation and amortization 20,737 17,516 41,252 36,253
Taxes, other than income taxes 8,869 9,439 18,538 19,632
Income taxes 5,528 7,797 15,189 21,896
-------- -------- -------- --------
Total operating expenses 166,508 172,110 363,012 390,246
-------- -------- -------- --------
Operating income 25,024 32,150 58,755 74,821
-------- -------- -------- --------
Other income and deductions, net of taxes: 13,118 4,717 14,693 4,670
-------- -------- -------- --------
Income before interest charges 38,142 36,867 73,448 79,491
-------- -------- -------- --------
Interest charges:
Interest on long-term debt 12,957 16,300 28,391 33,482
Other interest charges 1,766 1,413 3,454 2,818
Allowance for borrowed funds used
during construction - (94) - (160)
-------- -------- -------- --------
Net interest charges 14,723 17,619 31,845 36,140
-------- -------- -------- --------
Net earnings 23,419 19,248 41,603 43,351
Preferred stock dividend requirements 1,534 1,677 3,072 3,358
-------- -------- -------- --------
Net earnings applicable to common stock $ 21,885 $ 17,571 $ 38,531 $ 39,993
======== ======== ======== ========
Average shares of common stock outstanding 41,774 41,774 41,774 41,774
======== ======== ======== ========
Net earnings per share of common stock $ 0.52 $ 0.42 $ 0.92 $ 0.96
======== ======== ======== ========
Dividends paid per share of common stock $ - $ - $ - $ -
======== ======== ======== ========
The accompanying notes are an integral part of these financial statements.
/TABLE
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<TABLE>
PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<CAPTION>
June 30, December 31,
1995 1994
-------- -----------
(Unaudited)
<S> (In thousands)
ASSETS <C> <C>
Utility plant $2,515,970 $2,587,592
Accumulated provision for depreciation and amortization (889,304) (890,905)
---------- ----------
Net utility plant 1,626,666 1,696,687
---------- ----------
Other property and investments 33,745 34,523
---------- ----------
Current assets:
Cash 14,973 21,029
Temporary investments, at cost 160,085 74,521
Receivables 96,496 129,048
Income taxes receivable - 4,182
Fuel, materials and supplies 48,653 51,068
Gas in underground storage 8,141 8,744
Other current assets 12,250 9,549
---------- ----------
Total current assets 340,598 298,141
---------- ----------
Deferred charges 134,176 173,914
---------- ----------
$2,135,185 $2,203,265
========== ==========
CAPITALIZATION AND LIABILITIES
Capitalization:
Common stock equity:
Common stock $ 208,870 $ 208,870
Additional paid-in capital 469,722 469,648
Excess pension liability, net of tax (1,106) (1,106)
Retained earnings (deficit) since January 1, 1989
(appropriated $0.6 million as of June 30, 1995) (7,475) (46,006)
---------- ----------
Total common stock equity 670,011 631,406
Cumulative preferred stock:
Without mandatory redemption requirements 13,000 59,000
With mandatory redemption requirements - 17,975
Long-term debt, less current maturities 742,763 752,063
---------- ----------
Total capitalization 1,425,774 1,460,444
---------- ----------
Current liabilities:
Short-term debt 35,550 -
Accounts payable 75,490 105,213
Current maturities of long-term debt 15,954 148,532
Accrued interest and taxes 75,048 28,073
Other current liabilities 108,060 43,662
---------- ----------
Total current liabilities 310,102 325,480
---------- ----------
Deferred credits 399,309 417,341
---------- ----------
$2,135,185 $2,203,265
========== ==========
The accompanying notes are an integral part of these financial statements.
/TABLE
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<TABLE>
PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<CAPTION>
Six Months Ended
June 30
----------------
1995 1994
---- ----
<S> (In thousands)
CASH FLOWS FROM OPERATING ACTIVITIES: <C> <C>
Net earnings $41,603 $43,351
Adjustments to reconcile net earnings to net cash
flows from operating activities:
Depreciation and amortization 49,621 42,581
Gain on sale of plant and property (28,126) (6,576)
Reserves for bad debts - 526
Accumulated deferred investment tax credit (2,325) (4,788)
Accumulated deferred income tax (40,113) (2,953)
Changes in certain assets and liabilities:
Receivables 36,734 33,749
Fuel, materials and supplies (33,050) (6,959)
Deferred charges 11,418 9,920
Accounts payable (29,723) (30,680)
Accrued interest and taxes 46,975 13,130
Deferred credits 22,415 (9,286)
Other 5,542 5,927
Other, net 3,583 4,100
------- -------
Net cash flows from operating activities 84,554 92,042
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Utility plant additions (49,127) (50,503)
Utility plant sales 154,087 39,725
Other property additions (107) (4,777)
Temporary investments, net (85,564) (5,580)
------- -------
Net cash flows from investing activities 19,289 (21,135)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Redemptions of PV lease obligation bonds (132,663) -
Redemptions and repurchases of preferred stock (208) (1,439)
Redemption of first mortgage bonds - (45,000)
Bond redemption premium and costs (253) (2,222)
Proceeds from asset securitization 18,758 -
Repayments of other long-term debt (28,007) (22,123)
Net increase in short-term debt 35,550 -
Dividends paid (3,076) (3,393)
------- -------
Net cash flows from financing activities (109,899) (74,177)
------- -------
Decrease in cash (6,056) (3,270)
Cash at beginning of period 21,029 20,510
------- -------
Cash at end of period $14,973 $17,240
======= =======
SUPPLEMENTAL CASH FLOW DISCLOSURES:
Interest paid $30,820 $37,846
======= =======
Income taxes paid $15,200 $ 5,000
======= =======
The accompanying notes are an integral part of these financial statements.
</TABLE>
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PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) General Accounting Policy
In the opinion of management, the accompanying unaudited consolidated
financial statements contain all adjustments necessary for a fair
presentation of the consolidated financial statements. The accounting
policies followed by Public Service Company of New Mexico (the "Company") are
set forth in note (1) of notes to the Company's consolidated financial
statements in the Company's Annual Report on Form 10-K for the year ended
December 31, 1994 (the "1994 Form 10-K") filed with the Securities and
Exchange Commission.
(2) Palo Verde Nuclear Generating Station ("PVNGS") Lease Obligation Bonds
("LOBs") Redemption
On March 8, 1995, $121 million of PVNGS LOBs were retired. The retired LOBs
consisted of $58 million of 10.30% LOBs due 2014 retired at a price of 100%
of par and $63 million of 10.15% LOBs due 2016 retired at a price of 97.8% of
par. Additionally, $4.4 million and $4.8 million of LOBs due 1996 and 1997
at interest rates of 9.125% and 8.95%, respectively, were retired at par on
March 22, 1995. In connection with the LOB retirements, $65 million was
borrowed under the Company's liquidity arrangements and $19 million was
obtained under the securitization facility related to amounts being recovered
from gas customers relating to certain gas contract settlements. In July
1995, the Company repaid the borrowings with proceeds from asset sales. In
conjunction with these retirements, the Company wrote off $1.5 million of net
costs related to these transactions. The retirement of the LOBs, which were
the Company's highest cost debt, will save the Company approximately $11
million annually in interest expense over the next five years.
(3) Sale of Certain Gas Assets
In February 1994, an agreement was reached with Williams Gas Processing-
Blanco, Inc. ("Williams") for the sale of substantially all of the gas
gathering and processing assets of the Company and its gas subsidiaries. On
June 30, 1995, the sale was consummated. As a result, the Company and its
gas subsidiaries received approximately $154.1 million from Williams and
recorded an after-tax gain of $13.1 million, or $.31 per share, in the second
quarter of 1995.
(4) Subsequent Events
Sale of Sangre de Cristo Water Company ("SDCW")
In February 1994, the Company and the City of Santa Fe (the "City") entered
into a purchase and sale agreement for the Company's water division. On
July 3, 1995, the sale was consummated. As a result, the Company received
$51.2 million (exclusive of current assets netted against current
liabilities) from the sale of assets and will record an after-tax gain of
$6.3 million, or $.15 per share, in the third quarter of 1995. As a part
of the sales agreement, the Company will continue to operate the water
utility for up to four years for a fee under a contract with the City.
Cumulative Preferred Stock
On August 7, 1995, the Company redeemed, at par, all of its 8.45% Series,
8.80% Series and 8.75% Series of cumulative preferred stock outstanding as
of July 6, 1995. The Company deposited the redemption price of $64 million
(including accrued dividends to the redemption date) with a redemption
agent.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The Company's 1994 Form 10-K PART II, ITEM 7.--"MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS" discussed
management's assessment of the Company's financial condition, results of
operations and other issues facing the Company. The following discussion
supplements the 1994 Form 10-K discussion and should be read in conjunction
with the consolidated financial statements presented herein and in the 1994
Form 10-K.
LIQUIDITY AND CAPITAL RESOURCES
During the first half of 1995, the Company generated $84.6 million from
operating activities and received proceeds of $154.1 million from the sale of
certain gas gathering and gas processing assets. In July 1995, the Company
also received proceeds of $51.2 million from the sale of the Company's water
division.
The Company's construction expenditures for the first half of 1995 were $49.1
million. During the remainder of 1995, the Company anticipates it will spend
approximately $61 million for additional construction expenditures. The
Company expects that construction expenditures for the remainder of 1995 are
to be met primarily through internally-generated cash. However, to cover
differences in the amounts and timing of cash generation and cash
requirements, the Company intends to utilize short-term borrowings under its
liquidity arrangements, which consist of a $100 million secured revolving
credit facility, a $40 million credit facility collateralized by the
Company's electric customer accounts receivable and $11 million in local
lines of credit.
In June 1995, the Company amended its $100 million secured revolving credit
facility (the "Prior Facility"). The amended credit facility (the
"Facility") contains improved pricing, a three-year term and some covenant
changes. The maximum allowed ratio of the Company's total debt to total
capitalization under the Prior Facility was 72% and the Company was allowed
to exclude from the calculation of total capitalization up to $200 million in
pre-tax write-offs resulting from the Company's restructuring efforts. Under
the Facility, the maximum allowed ratio was changed from 72% to 68% with no
provision for excluding write-off amounts. As of June 30, 1995, such ratio
was 65.4%.
In March 1995, the Company retired $130 million in long-term debt and on
August 7, 1995, the Company retired three series of its cumulative preferred
stock in the amount of $64 million. As of June 30, 1995, the Company had
short-term borrowings of $35.6 million and cash and temporary investments of
$175.1 million. The Company continues to evaluate its investment and debt
retirement options to optimize its financing strategy and earnings potential.
Credit Rating
Moody's Investors Service (Moody's) recently concluded its review of LOBs,
secured lease obligation bonds ("SLOBs") and preferred stock of certain
electric utilities. As a result, Moody's downgraded the Company's PVNGS LOBs
and cumulative preferred stock. Moody's stated that the downgrades were
based on their "assessment that increasing competition in the electricity
industry, concentrated in the generation sector, has impaired nuclear asset
collateral value". Moody's also stated that "as a result of the increase in
unsecured claims represented by the SLOB and LOB holders, the position of
preferred shareholders may be seriously impaired in bankruptcy". The Company
does not expect such downgrades will affect the Company's financial condition
or results of operations.
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RESULTS OF OPERATIONS
Resources excluded from New Mexico Public Utility Commission ("NMPUC")
jurisdictional rates continue to negatively impact the Company's results of
operation; however, operating income increased $1.3 million and $2.6 million
for the quarter and six months ended June 30, 1995, respectively, from the
corresponding periods a year ago. Such increases resulted from lower 1995
PVNGS operation and maintenance ("O&M") expenses partially offset by lower
gross margin as a result of poor wholesale power market conditions. However,
net earnings from such excluded resources decreased $4.6 million and $3.2
million for the quarter and six months ended June 30, 1995, respectively,
from a year ago. Such decreases resulted from the June 1994 gain from the
sale of generating facilities to Utah Associated Municipal Power Systems
("UAMPS"), partially offset by reduced 1995 interest expense due to certain
long-term debt retirements.
Operating results for the excluded resources for all these periods reflect
the allocation of interest charges based on average investment in excluded
net utility plant as a percent of total utility plant for the period.
Selected financial information for the excluded resources is shown below:
Three Months Ended Six Months Ended
June 30 June 30
------- -------
1995 1994 1995 1994
---- ---- ---- ----
(In thousands)
Operating revenues $ 8,113 $ 9,650 $ 17,174 $ 19,504
Operating income (loss) $ 532 $ (742) $ 1,870 $ (705)
Net earnings (loss) $ (870) $ 3,726 $ (1,013) $ 2,158
Net utility plant at end of
period $141,721 $ 132,452 $141,721 $132,452
Electric gross margin (electric operating revenues less fuel and purchased
power expense) decreased $14.0 million and $20.8 million for the quarter and
six months ended June 30, 1995, respectively, from the corresponding periods
a year ago. These decreases were attributable to: (1) the retail rate
reduction implemented in late 1994; (2) a difference between the estimated
unbilled revenues reported in the fourth quarter of 1993 and actual revenues
recorded in the first quarter of 1994; and (3) reduced off-system sales
margin as a result of the expiration of three sales contracts and generally
poor wholesale power market conditions. Partially offsetting such decreases
was the increase in retail revenues (net of the effect of the retail rate
reduction) resulting from increased load growth.
Gas gross margin (gas operating revenues less gas purchased for resale)
increased $2.2 million from last year's quarter due to higher retail sales
margin resulting from cooler weather experienced in the current quarter.
However, gas gross margin for the six month period decreased $1.3 million
from the corresponding period a year ago due to a decrease in gas deliveries
resulting from warmer than normal weather in the first quarter of 1995.
Other O&M expenses decreased $4.8 million for the quarter from the
corresponding period a year ago due to a decrease in San Juan Generating
Station ("SJGS") O&M expenses of $2.9 million resulting from two scheduled
outages in 1994 and a decrease in PVNGS O&M expenses of $1.6 million due to
a Unit 2 mid-cycle outage and a longer than expected outage of Unit 3 in
1994. In addition, the current quarter O&M expenses reflect a decrease in
administrative and general ("A&G") expenses of $1.4 million, which were
partially offset by higher production O&M expenses for the gas and oil-fired
units of $1.6 million resulting from the maintenance outages in 1995.
Other O&M expenses for the six months ended June 30, 1995 decreased $3.3
million from the corresponding period a year ago due to a decrease in SJGS
O&M expenses of $3.1 million resulting from two scheduled outages in 1994,
decreased PVNGS O&M expenses of $2.4 million as a result of a reduction in
scheduled maintenance outage hours in the current period and decreased Four
Corners Generating Station O&M expenses of $1.5 million resulting from
scheduled outages in 1994. Also, A&G expenses, which decreased by $1.3
million, contributed to the decrease in the current period. Such decreases
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were partially offset by higher production O&M expenses for the gas and oil-
fired units of $2.7 million resulting from the maintenance outages in 1995
and higher transmission expense of $1.5 million.
Depreciation and amortization expenses increased $3.2 million and $5.0
million for the quarter and six months ended June 30, 1995, respectively,
from the corresponding periods a year ago as a result of implementing the new
depreciation rates approved by the NMPUC.
Operating income taxes for the quarter and six months ended June 30, 1995
decreased $2.3 million and $6.7 million, respectively, from the corresponding
periods a year ago due primarily to decreased pre-tax earnings for the
current periods.
Other income and deductions, net of taxes, for the quarter and six months
ended June 30, 1995 increased $8.4 million and $10.0 million, respectively,
over the corresponding periods a year ago. Significant items, net of taxes,
for the quarter include the following: (i) the gain of $13.1 million from
the gas assets sale; (ii) income of $1.4 million related to adjusting
reclamation reserves for certain mining operations; and (iii) establishing a
1994 regulatory reserve of $1.2 million. Partially offsetting such increases
were the following: (i) the gain of $4.4 million from the sale of generating
facilities to UAMPS in 1994; (ii) the tax benefit of $1.7 million related to
sharing the UAMPS gain with jurisdictional customers; and (iii) an additional
1995 regulatory reserve of $1.5 million. In addition, significant year-to-
date items included an after-tax accrual of $2.6 million of income pertaining
to the carrying costs related to gas take-or-pay settlement amounts, which
was partially offset by an after-tax write off of debt retirement costs of
$.9 million.
Net interest charges decreased $2.9 million and $4.3 million for the quarter
and six months ended June 30, 1995, respectively, from the corresponding
periods a year ago. This was due to the retirement of $130 million of PVNGS
LOBs in March 1995 and the retirement of $45 million of first mortgage bonds
in April 1994.
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OTHER ISSUES FACING THE COMPANY
PVNGS--Steam Generator Tubes
As previously reported, Arizona Public Service Company ("APS"), as the
operating agent of PVNGS, has encountered tube cracking in the steam
generators and had taken, and will continue to take, remedial actions that it
believes have slowed the rate of tube degradation. The projected service
life of the steam generators is reassessed periodically in conjunction with
inspections made during scheduled outages of the PVNGS units. (See PART II,
ITEM 7.--"MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS--OTHER ISSUES FACING THE COMPANY--PVNGS-- STEAM
GENERATOR TUBES" in the 1994 Form 10-K.)
APS's ongoing analyses indicate that it will be economically desirable for
APS to replace the Unit 2 steam generators, which have been most affected by
tube cracking, in five to ten years. APS expects that the steam generator
replacement can be accomplished within financial parameters established
before replacement was a consideration. Based on APS's analyses, the Company
believes that its share of the replacement costs (in 1995 dollars and
including installation and replacement power costs) would be between $10.5
million and $17.5 million, most of which would be incurred after the year
2000. APS expects that the replacement would be performed in conjunction
with a normal refueling outage in order to limit incremental outage time to
approximately 50 days. Based on the latest available data, APS estimates
that the Unit 1 and Unit 3 steam generators should operate for their designed
life of 40 years (until 2025 and 2027, respectively), although APS will
continue its normal periodic assessment of these steam generators.
While APS believes that replacement of the Unit 2 steam generators within
five to ten years will be economically desirable, the Company is not
convinced that future benefits to the Company would exceed the costs of the
replacement, and is evaluating its options in regards to this issue.
Transmission Issues
Ojo Line Extension ("OLE") Transmission Project
As previously reported, plans to construct the OLE transmission line, a
proposed 345 Kv line connecting the existing Ojo 345 Kv line to the Norton
station in northern New Mexico, had faced considerable opposition by persons
concerned primarily about the environmental impacts of the project. OLE was
designed to provide a needed improvement to the Company's northern
transmission system and to allow greater delivery of power into the Company's
two largest service territories, the greater Albuquerque area and the Santa
Fe/Las Vegas area. (See PART II, ITEM 7.--"MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS--OTHER ISSUES
FACING THE COMPANY--TRANSMISSION ISSUES--OLE Transmission Project" in the
1994 Form 10-K.)
In July 1995, the NMPUC hearing examiner issued a recommended decision,
recommending disapproval of the project. The Company filed exceptions to the
recommended decision on August 7, 1995. The Company strongly believes that
OLE is still the least cost technical solution for the New Mexico bulk power
systems' need that was not contested by the intervenors in this case. The
Company has spent approximately $16 million on the project to date. The
Company has reviewed the costs related to OLE and established accounting
reserves as deemed appropriate. The Company is not able to predict the
outcome of the NMPUC's final decision.
Transmission Right-of-Way
As previously reported, the Company has easements for right-of-way with the
Navajo Nation for portions of several transmission lines that deliver the
Company's generation resources to load centers. One grant of easement for
approximately 4.2 miles of right-of-way for two parallel 345 Kv transmission
lines expired in January 1993. Prior to expiration, the Company had
unsuccessfully attempted to renew the grant. (See PART II, ITEM 7.--
"MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS--OTHER ISSUES FACING THE COMPANY--TRANSMISSION ISSUES--
Transmission Right-of-Way" in the 1994 Form 10-K.)
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The new Navajo Nation Administration recently authorized a negotiating team
to recommence discussions with the Company for settlement of right-of-way
issues. The parties have met three times and are currently drafting the
provisions of a settlement agreement. There are issues remaining to be
resolved. If those issues are resolved, the parties expect to execute the
settlement by September 1, 1995.
Transmission Disputes
The Company receives approximately $14.0 million annually for the provision
of firm transmission service to several customers. Most of these customers,
through various actions, have recently initiated formal Federal Energy
Regulatory Commission ("FERC") investigations into the transmission service
billing units and transmission rates charged by the Company. The Company
believes that the rate reduction allegations are based on erroneous
interpretations of recently proposed FERC pricing policies and is responding
to these allegations according to FERC guidelines. If these various
allegations and alleged rate reductions are approved by the FERC, the
Company's revenues for transmission services could be reduced by as much as
$9.0 million annually. The Company is not able to predict the outcome of this
issue but does not anticipate any material adverse impacts on the Company's
financial condition or results of operation.
Environmental Issues
Santa Fe Station
As previously reported, the New Mexico Environment Department ("NMED") has
been conducting an investigation of the groundwater contamination detected
beneath the Santa Fe Station site to determine the source of the
contamination under a settlement agreement between the Company and the NMED.
(See PART II, ITEM 7.--"MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS--OTHER ISSUES FACING THE COMPANY--
ENVIRONMENTAL ISSUES--Electric Operations--Santa Fe Station" in the 1994 Form
10-K.)
In May 1995, the Company received a letter from the NMED indicating that the
NMED had made a determination that Santa Fe Station was the source of
gasoline-contaminated groundwater at the site and vicinity. The Company has
contested NMED's determination and believes insufficient data exists to
definitively identify the sources of groundwater contamination. The Company
is continuing to cooperate with the NMED to conduct site investigations to
identify any on site sources of gasoline and other contamination pursuant to
a settlement agreement between the Company and the NMED. Although the
Company is unable to predict the ultimate outcome of the investigation or the
ultimate action by the NMED, after consideration of established reserves, the
Company does not expect that the ultimate resolution of this environmental
issue will have a material adverse effect on the Company's financial
condition or results of operations.
Gas Wellhead Pit Remediation
As previously reported, the New Mexico Oil Conservation Commission ("NMOCC")
issued an order effective on January 14, 1993, that affected the natural gas
gathering facilities located in the San Juan Basin in Northwestern New
Mexico. These facilities werepreviously owned by the Company and Sunterra
Gas Gathering Company ("Gathering Company"), a wholly-owned subsidiary of the
Company. The NMOCC ruling prohibits the further discharge of fluids
associated with the production of natural gas into unlined earthen pits in
certain specified areas of the San Juan Basin. The NMOCC ruling required the
cessation of discharge of production fluids in three specified areas within
specific time frames. In addition, the ruling required the submission of
closure plans for the closure of pits in which production fluids were
previously discharged. The Bureau of Land Management ("BLM") has issued a
similar ruling. The Company and Gathering Company have ceased discharge in
the first two areas identified by the NMOCC and are proceeding to cease
discharge in the final area identified in the NMOCC ruling. The Company and
Gathering Company have also submitted and received approval of their pit
closure plans from the Oil Conversation Division of the New Mexico Energy,
Minerals and Natural Resources Department ("NMOCD"), as well as the BLM.
(See PART II, ITEM 7.--"MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS--OTHER ISSUES FACING THE COMPANY--
ENVIRONMENTAL ISSUES--Gas Operations--Gas Wellhead Pit Remediation" in the
<PAGE>
<PAGE>
1994 Form 10-K.) As a result of an agreement reached in connection with the
closing of the sale of gas assets to Williams, the Company and Gathering
Company will proceed to meet the cease discharge requirement for the third
and final area identified in the NMOCC's ruling.
On June 13, 1995, the Company received a letter from the NMOCD directing the
Company to determine if certain unlined discharge pits located at two
specific well sites in San Juan County, New Mexico, have contributed to the
groundwater contamination plume that has been identified at those sites. The
Company has historically operated discharge pits at these well sites. NMOCD
also requested that the Company assess one additional well site in San Juan
County, New Mexico, to determine if there has been contamination of the
groundwater at that site. The Company is proceeding to respond to NMOCD's
directive. Although the Company is unable to predict the ultimate outcome of
this investigation, after consideration of established reserves, the Company
does not expect the ultimate resolution of this environmental matter will
have a material adverse effect on the Company's financial condition or
results of operations.
Possible City Election on Municipalization
A bill regarding possible municipalization was sponsored by two Albuquerque
city councilors calling for a special election to run concurrent with the
October 3, 1995 municipal election. The bill would have included on the
ballot municipalization of the Company's electric distribution system by the
City of Albuquerque (the "City") either by condemnation or a negotiated
purchase. In addition, groups consisting of Concerned Citizens, United We
Stand America and Coalition for Lower Electric Rates, indicated that they
would take this matter to a special election if the proposition was excluded
from the October 3 ballot.
The City Council rejected the municipalization bill at the August 7, 1995
City Council meeting, and no measure will be placed before the voters on the
October 3, 1995 ballot. Whether a task force may be formed as discussed by
the City Mayor, or whether a citizens' initiative will be undertaken for a
special election, remains uncertain at this time.
While the Company remains firmly opposed to a City takeover of the Company's
system, the Company was willing to support a vote at the regular municipal
election in order to determine the sentiment of local voters and to resolve
the issue as quickly as possible.
The Company will continue to participate in any new developments that may
occur and will continue its opposition to a City takeover.
Gas Assets Sale
As previously reported, in February 1994, an agreement was executed with
Williams, for the sale of substantially all of the assets of Gathering
Company and Processing Company, and for the sale of Northwest and Southeast
gas gathering and processing facilities of the Company. (See PART II, ITEM
7.--"MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS--OTHER ISSUES FACING THE COMPANY--SALE OF GAS GATHERING AND
PROCESSING ASSETS" in the Company's 1994 Form 10-K, PART I, ITEM 2.--
"MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS--OTHER ISSUES FACING THE COMPANY--Gas Assets Sale" in the
Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 1995
and ITEM 5.--"Other Events--Gas Assets Sale" in the Company's Current Report
on Form 8-K dated June 27, 1995).
On June 30, 1995, the Company and Williams consummated the closing of the gas
gathering and processing assets sale. As a result, the Company and its gas
subsidiaries received approximately $154.1 million from Williams and recorded
an after-tax gain of $13.1 million in the second quarter of 1995.
Sale of SDCW
As previously reported, in February 1994, the Company and the City of Santa
Fe (the "City") executed a purchase and sale agreement for the Company's
water division. (See PART II, ITEM 7.--"MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS--OTHER ISSUES FACING THE
COMPANY--SALE OF SDCW" in the 1994 Form 10-K.) On July 3, 1995, the closing
of the sale was consummated. As a result, the Company received $51.2 million
<PAGE>
<PAGE>
(exclusive of current assets netted against current liabilities) from the
sale and will record an after-tax gain of approximately $6.3 million in the
third quarter of 1995. As a part of the sales agreement, the Company will
continue to operate the water utility for up to four years for a fee under a
contract with the City.
El Paso Electric Company ("El Paso") Bankruptcy
As previously reported, El Paso, a joint owner in the PVNGS and Four Corners
Generating Station, has been operating under chapter 11 of the Bankruptcy
Code since 1992. (See PART II, ITEM 7.--"MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS--OTHER ISSUES
FACING THE COMPANY--El Paso Electric Company Bankruptcy" in the 1994 Form 10-
K.) On June 9, 1995, Central and South West Corporation filed with the
bankruptcy court a revocation of the previously confirmed merger plan
whereby, among other things, certain issues would have been resolved, and El
Paso would have assumed the joint facilities operating agreements.
<PAGE>
<PAGE>
PART II--OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Comprehensive Environmental Response, Compensation and Liability Act
("CERCLA")
As previously reported, the Company received a CERCLA Section 104(e) request
for information from the United States Environmental Protection Agency
("EPA") Region VIII regarding the Hansen Container Site in Grand Junction,
Colorado ("Hansen Site"). The EPA investigated the site and requested
information relating to the number and contents of drums, barrels, and other
materials that were sent to the Hansen Site for reconditioning, disposal, or
storage. After an internal investigation, the Company filed its response to
the EPA's request for information on March 2, 1995, and provided information
from the Company's records indicating that the Company sold empty scrap drums
to a drum recycler in the 1980's who has been linked to the Hansen Site by
the EPA. (See PART II, ITEM 7.--"MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS--OTHER ISSUES FACING THE
COMPANY--ENVIRONMENTAL ISSUES--Electric Operations--CERCLA" in the 1994 Form
10-K.) On June 30, 1995, the EPA issued its final de minimis settlement
order and final volumetric ranking report, in which EPA identified the
Company as a potentially responsible party for clean-up at the Hansen Site.
The EPA's order offered the Company an opportunity to participate in a de
minimis settlement for the Hansen Site in the amount of approximately $400.
The Company will accept the EPA's offer and participate in the de minimis
settlement for this amount.
Air Permits
As previously reported, on August 30, 1994, the Company submitted its permit
modification application for the Lybrook Gas Processing Plant ("Lybrook").
On November 14, 1994, the Company received a Notice of Violation ("NOV") from
the NMED for Lybrook for alleged violations of air quality control
regulations requiring permits for modification of stationary sources. (See
PART II, ITEM 7.--"MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS--OTHER ISSUES FACING THE COMPANY--
ENVIRONMENTAL ISSUES--Gas Operations--Air Permits" in the 1994 Form 10-K.)
In June 1995, the Company accepted a settlement offer from the NMED for the
Lybrook NOV in the amount of $7,000. This constituted final settlement of
the Lybrook NOV.
Sunterra Gas Processing Company, a wholly-owned subsidiary of the Company,
submitted an air permit modification application for the Kutz Canyon Gas
Processing Plant ("Kutz") in the first quarter of 1995. While the Company
cannot be certain, the Kutz filing, which was similar to the Lybrook filing,
may also result in a NOV from the NMED due to apparent permit discrepancies
in the Kutz air permit. To date, the Company has not received notice of a
NOV on the Kutz application. The Company is not able to predict the outcome
of this issue but does not anticipate any material adverse impact on the
Company's financial condition or results of operation.
Archaeological Site Damage
As previously reported, in March 1995, a contractor installing gas pipeline
on behalf of the Company damaged an archaeological site located in the New
Mexico State Highway and Transportation Department ("NMSHTD") right-of-way on
New Mexico State Road 14. The contractor was installing the gas pipeline at
the direction of the Company. The Company notified both the NMSHTD and the
New Mexico State Historic Preservation Office ("SHPO"). The Company
conducted an investigation and provided additional information regarding the
site damage and remedial measures in response to requests from the NMSHTD.
(See PART II, ITEM 1. "LEGAL PROCEEDINGS--Archaeological Site Damage" in the
Company's Quarterly Report on Form 10-Q for the quarter ended March 31,
1995.)
In June 1995, the NMSHTD issued a permit to the Company for the gas pipeline
installed at this location. Both the NMSHTD and the SHPO approved the
Company's proposal for remedial measures at the archaeological site. To
date, there has been no administrative enforcement action taken by either the
NMSHTD or the SHPO. The Company has no reason to believe that any
enforcement action will be undertaken in the future.
<PAGE>
<PAGE>
ITEM 5. OTHER INFORMATION
Kirtland Air Force Base ("KAFB")
As previously reported, the Company's largest retail customer, KAFB, was
recommended by the Department of the Air Force for realignment, which could
have resulted in a maximum potential reduction of approximately 12,000 jobs
(both direct and indirect) over the 1996-2001 time period in the Bernalillo
County area of New Mexico. (See PART I, ITEM 1.--"BUSINESS--ELECTRIC
OPERATIONS--Service Area and Customers" in the 1994 Form 10-K.)
In July 1995, the Department of Defense reversed its original recommendation
to close KAFB. The President of the United States subsequently affirmed the
Department of Defense's revised recommendation for the base closure and
realignment.
<PAGE>
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits:
2.2.7 Seventh Amendment to Agreement to Purchase and Sell Between the
City of Santa Fe, New Mexico and Public Service Company of New
Mexico
10.57.1 Amendment No. 1, dated June 7, 1995 to the U.S. $100,000,000
Revolving Credit Agreement Dated as of December 14, 1993 Among
Public Service Company of New Mexico (Borrower) and certain
Banks (Banks) and Chemical Bank and Citibank, N.A. (Co-Agents)
10.64 Agreement for Contract Operation and Maintenance of the City of
Santa Fe Water Supply Utility System, dated July 3, 1995
15.0 Letter Re Unaudited Interim Financial Information
27 Financial Data Schedule
b. Reports on Form 8-K:
Report dated May 22, 1995 and filed June 2, 1995 relating to the sale of
Sangre de Cristo Water Company.
Report dated June 27, 1995 and filed July 19, 1995 relating to the gas
assets sale, the sale of Sangre de Cristo Water Company, application of
a portion of asset sales proceeds and the Ojo Line Extension transmission
project. <PAGE>
<PAGE>
Signature
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PUBLIC SERVICE COMPANY OF NEW MEXICO
(Registrant)
Date: August 9, 1995 /s/ Donna M. Burnett
-----------------------------------
Donna M. Burnett
Corporate Controller and
Chief Accounting Officer
<TABLE> <S> <C>
<ARTICLE> UT
<LEGEND>
This schedule contains summary financial information extracted from the
Company's Consolidated Statements of Earnings, Consolidated Balance Sheets and
Consolidated Statements of Cash Flows for the period ended June 30, 1995 and is
qualified in its entirely by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> JUN-30-1995
<EXCHANGE-RATE> 1
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 1,626,666
<OTHER-PROPERTY-AND-INVEST> 33,745
<TOTAL-CURRENT-ASSETS> 340,598
<TOTAL-DEFERRED-CHARGES> 134,176
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 2,135,185
<COMMON> 208,870
<CAPITAL-SURPLUS-PAID-IN> 468,616
<RETAINED-EARNINGS> (7,475)
<TOTAL-COMMON-STOCKHOLDERS-EQ> 670,011
0
13,000
<LONG-TERM-DEBT-NET> 742,763
<SHORT-TERM-NOTES> 35,550
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 15,954
63,767
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<OTHER-ITEMS-CAPITAL-AND-LIAB> 594,140
<TOT-CAPITALIZATION-AND-LIAB> 2,135,185
<GROSS-OPERATING-REVENUE> 421,767
<INCOME-TAX-EXPENSE> 31,179
<OTHER-OPERATING-EXPENSES> 347,823
<TOTAL-OPERATING-EXPENSES> 363,012
<OPERATING-INCOME-LOSS> 58,755
<OTHER-INCOME-NET> 14,693
<INCOME-BEFORE-INTEREST-EXPEN> 73,448
<TOTAL-INTEREST-EXPENSE> 31,845
<NET-INCOME> 41,603
3,072
<EARNINGS-AVAILABLE-FOR-COMM> 38,531
<COMMON-STOCK-DIVIDENDS> 0
<TOTAL-INTEREST-ON-BONDS> 27,092
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<EPS-PRIMARY> 0.92
<EPS-DILUTED> 0
</TABLE>
<PAGE>
<PAGE>
ARTHUR
ANDERSEN
ARTHUR ANDERSEN LLP
August 9, 1995 Authur Andersen LLP
Suite 400
6501 Americas Parkway NE
Albuquerque, NM 87110-5372
505 889-4700
Public Service Company of New Mexico
Alvarado Square
Albuquerque, NM 87158
Gentlemen:
We are aware that Public Service Company of New Mexico has incorporated by
reference in its Registration Statement No. 33-65418 its Form 10-Q for the
quarter ended June 30, 1995, which includes our report dated August 7, 1995
covering the unaudited interim financial information contain therein.
Pursuant to Regulation C of the Securities Act of 1933, that report is not
considered a part of the registration statement prepared or certified by our
firm or a report prepared or certified by our firm within the meaning of
Sections 7 and 11 of the Act.
Very truly yours,
/s/ Arthur Andersen LLP
---------------------------------
Arthur Andersen LLP
<PAGE>
<PAGE>
AGREEMENT FOR CONTRACT OPERATION AND
MAINTENANCE OF THE CITY OF SANTA FE
WATER SUPPLY UTILITY SYSTEM
THIS AGREEMENT (this "Agreement") is made and entered into as of
this 3rd day of July 1995 (the "Effective Date"), by and between the
CITY OF SANTA FE, NEW MEXICO ("Owner"), a municipal corporation, and
PUBLIC SERVICE COMPANY OF NEW MEXICO ("Contractor"), a New Mexico
corporation.
RECITALS
WHEREAS, Owner owns a water supply utility system (the "Water
System") acquired from Contractor on July 3, 1995, pursuant to an
Agreement to Purchase and Sell dated as of February 28, 1994, as
amended, (the "Purchase Agreement"), and consisting of dams and water
storage reservoirs, water treatment and filtration facilities, water
transmission facilities, covered water storage tanks, wells, booster
station facilities, a treated water distribution system, customer
service lines and meters, water rights, easements and rights of way,
vehicles, mobile machines and equipment, a testing laboratory, a
commercial office, an operations center and warehouse, and other
equipment and facilities now existing or hereafter acquired by Owner
related to the production and delivery of water to the citizens of Santa
Fe, New Mexico and surrounding areas; and
WHEREAS, Contractor is a corporation doing business in the State
of New Mexico, experienced in the management and operation of water
utility systems, and offering professional services for the operation
and maintenance of the Water System; and
WHEREAS, Owner desires to engage Contractor for the operation and
maintenance of the Water System;
AGREEMENTS
NOW, THEREFORE, in consideration of the premises and their mutual
agreements, promises and undertakings, and upon the terms and conditions
set forth herein, the parties hereby agree:
ARTICLE I. ENGAGEMENT
1.01 Owner hereby engages Contractor as an independent contractor
to furnish the services hereinafter described at and for the comp-
ensation herein provided, and Contractor hereby accepts said engagement
upon said terms. Contractor shall furnish the services of those of its
employees and their successors ("Contractor's Employees") employed in
Contractor's operating division known as Sangre de Cristo Water Company
("SDCW") in the operation and maintenance of the Water System on the day
immediately preceding the Commencement Date (as hereinafter defined). A
staffing table identifying the numbers and positions of Contractor's
Employees currently employed by Contractor in operating the Water
System is attached as Schedule 1.01 to this Agreement and incorporated
herein by reference. In the performance of its duties under this
Agreement, and only for the performance of such duties (except as set
forth in Section 15.02 hereof), Contractor may use and occupy the
property, facilities and equipment comprising the Water System at no
cost to Contractor on the terms and conditions set forth in this
Agreement.
ARTICLE II. TERM, FISCAL YEARS
2.01 Term. The term (the "Term") of this Agreement shall
commence at 12:01 a.m., Santa Fe time, on the Closing Date (as defined
in the Purchase Agreement) (the "Commencement Date") and expire at 12:01
a.m. on the fourth anniversary of the Commencement Date. This Agreement
is subject to termination as provided in Section 8.01.
2.02 Fiscal Year. For purposes of this Agreement, the fiscal
year of the Water System ("Fiscal Year") shall be Owner's fiscal year
which commences on July 1 and ends on June 30 of the year. The first
Fiscal Year (the "First Fiscal Year") will include the period beginning
on the Commencement Date and ending on June 30, 1995.
ARTICLE III. CONTRACTOR'S RESPONSIBILITIES
3.01 Operating Agent. Owner hereby designates Contractor as its
operating agent to operate, maintain, replace and extend the facilities
of the Water System, including those which hereafter may be constructed
or acquired by or on behalf of Owner by Contractor, all on the terms and
conditions set forth in this Agreement.
3.02 Obligation to Provide Employees. Contractor shall employ
and supervise Contractor's Employees in sufficient numbers and
possessing sufficient skills to perform the services required of
Contractor under this Agreement. Contractor shall provide proper
training for Contractor's Employees in the performance of their work
under this Agreement. Contractor shall assure that Contractor's
Employees are qualified to perform their work and to operate and
maintain the Water System in accordance with this Agreement, and
Contractor shall give due consideration to any comments of Owner with
respect to the performance of specific employees. Contractor shall
advise Owner as requested by Owner with respect to the assessment,
status and screening of potential employees of Contractor prior to their
employment by Contractor. At all times, Contractor shall comply with
all applicable federal, state and local labor laws with respect to
Contractor's Employees and with respect to Contractor's obligations
under this Agreement, including, but not limited to, ERISA, wage
withholding, social security, equal employment opportunity, age and
disability discrimination, unemployment insurance, hours of labor,
wages, working conditions, OSHA, immigration control and other
employer-employee related subjects. Contractor shall provide to Owner
copies of Contractor's salary administration plan and the job
descriptions for each of Contractor's Employees within 60 days prior to
the anticipated Commencement Date and shall thereafter provide copies of
all subsequent amendments and changes thereto.
3.03 Standard of Performance. Contractor shall provide all
services required of Contractor under this Agreement in accordance with
all applicable federal, state and local laws, regulations and
ordinances, and with sound and generally accepted water utility industry
standards and practices, including standards and practices approved by
the American Water Works Association, Contractor's customary standards
and practices, and the standards and practices reasonably required by
Owner, and those specifically required by this Agreement. Contractor
shall operate and maintain the Water System in a safe, reliable,
economical and efficient manner.
3.04 Source of Supply Systems. Contractor shall operate and
maintain Owner's various dams, reservoirs, wells, storage tanks, booster
and pipeline systems, and water treatment systems to provide the
necessary supply of water to Owner's customers.
3.05 Water Treatment Plant. Contractor shall operate and
maintain the water treatment plant on Canyon Road, and other water
treatment plants which may be added to the Water System. If abnormal
conditions occur, Contractor shall notify Owner as soon as possible and,
consistent with the Annual Budget (as defined in Section 3.09) and any
instructions of Owner, use its best efforts to correct such abnormal
conditions, prevent violations of environmental or other applicable laws
or regulations, and minimize the number and duration of such violations.
Contractor shall be responsible for the security of the Water System,
including, but not limited to, the water treatment facilities.
3.06 Water Transmission and Distribution System. Contractor
shall operate, maintain and repair Owner's water transmission and
distribution systems, including water service lines and meters.
Contractor shall respond to major water system leaks, breaks or
emergencies as soon as possible, and use its best efforts to respond
within two hours of being notified or otherwise learning of such leak or
break.
3.07 Water System Engineering and Design. Contractor shall
provide those normal and customary engineering and design services
advisable or necessary to operate, maintain and expand the Water System.
The use of outside services for the engineering and design of major
facilities will be subject to approval by Owner and shall be managed by
and through Contractor's engineering group.
3.08 Maintenance and Repair.
(a) Consistent with each Annual Budget, Contractor shall
provide normal maintenance and repair (as defined in subparagraphs (d)
and (e) hereof) of the equipment and facilities comprising the Water
System to prevent abnormal wear, tear and usage. Such maintenance and
repairs shall not include costs associated with flood, fire or other
unexpected, abnormal or extraordinary occurrences not caused by the
gross negligence or intentional misconduct of Contractor, or
circumstances not within the control of Contractor. Contractor shall
use due diligence and generally accepted industry standards to implement
a program of regular preventive maintenance and shall report to Owner
quarterly with regard to such maintenance program.
(b) Consistent with the provisions for repair and
maintenance in the Annual Budget, Contractor shall be authorized to make
expenditures for repair or maintenance up to a maximum of $20,000 per
project or occurrence without specific authorization or approval by
Owner. Owner may require that the Annual Budget set forth, on a project
basis, anticipated repairs or maintenance in excess of $5,000.
(c) Except in those circumstances in which Contractor
must act immediately to avoid or minimize significant interruption of
service or to prevent or minimize immediate risk to the public health,
welfare or safety, Contractor shall provide proposals to, and obtain
prior written authorization from, Owner for repair or maintenance
projects not set forth in the Annual Budget if the projected cost
therefor is reasonably estimated to exceed $20,000.
(d) As used herein, "maintenance" means those routine
and/or repetitive activities required or recommended by the equipment or
facility manufacturer, or by Owner or by Contractor, or customary in the
industry to maximize the useful life of property, plant, equipment or
other capital items.
(e) As used herein, "repair" means those
non-routine/non-repetitive activities required for operational
continuity, safety and performance generally due to failure or to avert
a failure of the Water System or any of its components.
(f) All fixed assets added to the Water System or
purchased in conjunction or for use with any part of the Water System
during the term of this Agreement shall be the property of Owner.
Contractor shall maintain, and provide to Owner, a perpetual inventory
of all furniture, fixtures, equipment, vehicles or other capital items
purchased, installed or constructed with Owner's funds with a value of
$500 or more.
(g) Contractor and Owner shall jointly decide whether to
replace or repair parts, equipment, or other facilities costing more
than $20,000 if the same have not been approved in the Annual Budget,
and Contractor shall prepare a repair-or-replace analysis therefor for
Owner.
(h) Consistent with the Annual Budget, Contractor shall
repair and maintain all non-disposable items of the Water System,
including, but not limited to, vehicles, tools and equipment, as well as
buildings and other fixed facilities of the Water System.
3.09 Planning and Budgeting.
(a) For each Fiscal Year Contractor shall prepare a five
year capital improvements plan (the "5-year Plan") for the Water System
and an annual operating and capital budget (the "Annual Budget") to be
submitted for Owner's review and approval in accordance with this
section. Each Annual Budget approved by Owner pursuant to subparagraph
(c) hereof, and all amendments to such Annual Budgets, shall constitute
and be deemed a part of this Agreement.
(b) Within twelve months after the Commencement Date,
Contractor shall, if requested by Owner, prepare or cause to be prepared
under Owner's direction and supervision, a Water System Master Plan (the
"Master Plan"). The Master Plan will address subjects reasonably
requested by Owner, including, but not limited to: population and
customer projections; analysis of source of supply, total water
production and peak-day capabilities; transmission and distribution
system capabilities and shortfalls, if any; storage capabilities and
future requirements; water rights status and projected needs; and
proposed future source of supply additions.
(c) For each Fiscal Year Contractor shall prepare and
submit to Owner for consideration and approval a proposed Annual Budget
in such form and detail as requested by Owner, together with the 5-year
Plan. The Annual Budget shall include expenditures budgeted for
personnel and labor (including number of employees, positions and pay
grades authorized), headquarters services, management fees, operation
and maintenance of the Water System, materials and supplies, normal
renewals and replacements, repair and maintenance, equipment and major
capital improvements or additions, inclusive of annual demand contracts,
and a reserve for emergencies and abnormal conditions. Except for the
Annual Budget for the First Fiscal Year, which shall be submitted in
accordance with paragraph (d), below, the Annual Budget for each Fiscal
Year shall be submitted to Owner by January 1 of the preceding Fiscal
Year. Owner shall review the proposed Annual Budget in accordance with
Owner's customary budgetary processes, including preliminary review and
consideration by Owner's Finance Committee at least sixty (60) days
prior to the commencement of the applicable Fiscal Year. Owner shall
provide Contractor with an Annual Budget approved by Owner's City
Council at least thirty (30) days prior to the commencement of the
applicable Fiscal Year. Except as otherwise provided by this Agreement
or authorized by Owner's Representative (appointed pursuant to Section
7.02 hereof), Contractor shall be bound by the Annual Budget so approved
and shall perform its duties and responsibilities under this Agreement
pursuant to such Annual Budget.
(d) Contractor shall submit the proposed Annual Budget
for the First Fiscal Year to Owner no later than sixty (60) days prior
to the anticipated Commencement Date. Owner shall, within forty-five
(45) days after submission, complete its review of the proposed Annual
Budget and provide Contractor with an approved Annual Budget for the
First Fiscal Year, which Contractor shall then follow.
(e) Each Annual Budget approved by Owner shall authorize
expenditures for personnel and labor, operations, maintenance and
repairs, materials and supplies, additions, extensions, renewals and
replacements during the applicable Fiscal Year sufficient to operate and
maintain a safe, efficient and reliable Water System and provide safe
and reliable service.
(f) Owner may modify any Annual Budget proposed by
Contractor after consulting with Contractor concerning the impact on
the safe, reliable, economical and efficient provision of service and
operation
and maintenance of the Water System. In no case shall Owner reduce
budgeted wage and salary rates proposed by Contractor if such rates are
in conformity with Contractor's company-wide salary administration plan.
(g) Contractor shall operate and maintain the Water
System in accordance with, and not in excess of, the approved Annual
Budget or line items set forth therein. To the extent required for the
safe, reliable, economical and efficient operation and maintenance of
the Water System by Contractor, Owner shall not unreasonably withhold
its approval of such amendments or modifications of an Annual Budget as
Contractor may reasonably request. In evaluating proposed
modifications, Owner may consider all relevant factors, including, but
not limited to,
the impact on Owner's service rates, financing capabilities, and Water
System, and any adverse impact thereto may affect Owner's approval,
except to the extent the proposed modification is required to correct an
unsafe or potentially unsafe condition of the Water System.
3.10 Capital Improvements and Additions. As part of each Annual
Budget, Contractor shall recommend to Owner, and Owner shall review and
approve as Owner deems appropriate, necessary capital improvements to
the Water System and the manner and methods of constructing the same.
Each individual capital improvement project shall be approved in writing
by Owner before construction shall commence, and Owner shall instruct
Contractor concerning the manner and methods of financing the same.
Customer extensions made in accordance with Owner's approved procedures
shall not require additional approval by Owner other than
through the Annual Budget process. Owner may reserve the right to
review and approve bids and the award of contracts to third-party
contractors. Prior to initiating any capital improvements to be
constructed by Contractor, Contractor shall submit to Owner a proposed
work order which, if agreed to by Owner, shall form the basis for
payment by Owner to Contractor, in addition to a performance bond in an
amount customary for such projects and in a form reasonably acceptable
to Owner. All work order costs shall be broken down on a per unit basis
which shall include allowances for labor, equipment, engineering, and
any other costs incurred by Contractor. All per unit costs shall be
based upon Contractor's actual cost of labor, equipment, engineering,
and other costs. Contractor's current per unit construction cost shall
be updated annually and submitted with the proposed Annual Budget and
shall be itemized with each proposed work order. All work orders shall
specify the units of property to be added and/or retired. Contractor
shall be responsible for inspecting and accepting work performed by
third-party contractors. All construction shall be in accordance with
applicable contract provisions, procedures, and generally accepted water
utility construction practices or the construction practices of Owner,
as determined by Owner where the practices conflict.
3.11 Customer Services, Rates and Rules of Service.
(a) Contractor shall perform normal and customary
customer services, including, but not limited to: customer account
service and maintenance; account inquiry work; customer assistance;
credit and collection services; cashiering; account cut-in and cut-out;
and conservation advice.
(b) Contractor shall read all customer meters monthly,
or at such other periods of time as shall be directed by Owner, and
shall, according to the schedule of rates (the "Schedule of Rates") then
in effect, render bills to all customers in the name of Owner for water
service delivered. As of the Commencement Date, the Schedule of Rates
shall be the rates and rules for service effective for SDCW on the day
preceding the Commencement Date. Thereafter, Owner may implement
changes in the rates, rules of service, regulations and procedures
comprising the Schedule of Rates by giving written notice to Contractor
not later than forty-five (45) days prior to the effective date of such
change.
(c) Pursuant to Section 8.04 hereof, Owner may assume
full responsibility for rendering customer bills in the name of Owner.
Upon the effective date of the assumption by Owner of such
responsibility, Contractor shall be relieved of all responsibilities,
duties and obligation respecting the activities and functions assumed by
Owner arising after the effective date of Owner assuming such functions.
(d) Contractor shall, during the time it is obligated
to perform customer billing under this Agreement, provide computer
processing necessary to perform customer billing in a timely and
efficient manner. Contractor shall implement any reasonable request by
Owner for modification of the customer billing format, and Owner shall
pay Contractor's reasonable, actual costs for implementing such
modifications. Owner shall pay the reasonable cost of customer billing
performed by Contractor in accordance with the Annual Budget and the
compensation provisions of this Agreement.
(e) At such time as Contractor transfers to Owner its
customer billing duties, Owner shall not be liable to Contractor for any
further costs or expenses related to customer billing services.
Contractor shall provide reasonable assistance to Owner in transferring
customer billing duties, including, but not limited to, transferring
historical records, data, and customer account information.
(f) Until Owner assumes responsibility for rendering
customer bills, Contractor shall maintain such records as Owner
reasonably requests setting forth in accurate and reasonable detail the
actual meter readings, billing determinants, charges made to Owner's
customers in accordance with the Schedule of Rates, and payments
received from each of Owner's customers. At a minimum, Contractor shall
maintain the records in a manner such that data by various customer
classifications can be readily reported on a monthly basis for the
fiscal year to date and for the most recent twelve-month period. In no
event, however, shall Contractor be required to maintain records in a
manner which would require Contractor to implement a new accounting
system, substantially modify its existing accounting system, or purchase
or install new accounting software. Contractor shall retain any records
that it is required to maintain pursuant to this subparagraph for the
term of this Agreement and shall deliver them to Owner upon Owner's
request.
(g) Contractor shall exercise due diligence to collect
all amounts due Owner for water delivered to customers or for other
services in accordance with applicable rates, tariffs and policies for
the periods in which services were provided or other monies owed to
Owner pursuant to the operation of the Water System, including, after
receiving the consent of Owner, the institution of legal proceedings in
Owner's name to collect utility billings and other monies owed Owner
related to the Water System. Until Owner assumes responsibility for
rendering customer bills, Contractor shall provide current and
historical billing information concerning customers of the Water System
to Owner monthly in such form as reasonably requested by Owner. All
monies collected by Contractor shall be deposited immediately in Owner's
"City of Santa Fe Water Utility Account" as set forth in Section 3.12.
(h) The business office of the Water System shall be
operated by Contractor and shall be open, at a minimum, during the same
hours and on the same business days as those observed by Owner or as
mutually agreed upon to reflect local custom and practice.
(i) Contractor shall provide new customer connection
services, which include customer request analysis, system design and
estimation, construction contract preparation and administration, and
on-site construction.
3.12 Fiscal Affairs, Accounting and Record Keeping.
(a) Contractor shall retain possession of operating
equipment, buildings, materials and supplies, maps, plans and
specifications, and customer billing records during the term of this
Agreement and shall duly account to Owner as a fiduciary therefor for
possession until the time Owner assumes the responsibilities relating
to the respective function for which the property was retained by
Contractor.
(b) All cash held by Contractor for the account of
Owner and all cash collected by Contractor for the account of Owner
after the Effective Date shall be deposited on each business day in bank
accounts in such bank as Owner may direct and upon such terms and
conditions as may be specified by Owner. Such deposits shall be made
as:
City of Santa Fe
Water Utility Account
Public Service Company of New Mexico
Operating Agent
(c) Contractor shall maintain Owner's water utility
books and records for those activities performed by Contractor in
general conformity with municipal utility accounting standards or such
other standards as may be mutually agreed upon between Contractor and
Owner. When requested by Owner, Contractor shall make reasonable
changes in Contractor's standard accounting practices and procedures
applied to the books and records of the Water System. All such books
and records and all supporting documents shall be available in Santa Fe
and/or in Albuquerque at reasonable times for inspection and copying by
authorized representatives and auditors of Owner.
(d) As soon as reasonably possible, but not later
than thirty (30) days after the end of the preceding calendar month,
Contractor shall deliver to Owner the following monthly financial state-
ments related to the Water System certified by an officer of Contractor.
(i) A balance sheet as of the last day of
the preceding month;
(ii) A statement of income showing in reasonable
detail as requested by Owner the revenues and expenses of the Water
System for the preceding month and the twelve months ended the last day
of the preceding month (or applicable period during the First Fiscal
Year);
(iii) A statement of cash flows for the preceding
month;
(iv) Such statistical information for the
preceding month and preceding twelve- month period then ended as may be
reasonably requested by Owner;
(v) A summary statement of the preceding
month's receipts and disbursements for each cash account maintained by
Contractor on behalf of Owner as provided within this Agreement;
(vi) A fiscal year-to-date comparison of
actual expenses and revenue to the Annual Budget; and
(vii) Any other information or statement which
is requested by Owner and which may be reasonably produced from records
maintained by Contractor in the normal course of business.
(e) The balance sheet prepared as of the end of each
Fiscal Year, and the related statements of income and cash flows for
such year shall be certified by an officer of Contractor and an
independent public accountant who is experienced in water utility system
accounting and shall be delivered to Owner within ninety (90) days after
the end of the Fiscal Year. In addition, the books and records upon
which such statements and the invoices submitted pursuant to Section
6.06 are prepared, shall be made available by Contractor to Owner for
audit by Owner or Owner's designated independent auditor for a period
not to exceed twelve (12) months, which audit may include, but not be
limited to, the proper allocation of overhead, expenses and headquarters
services between services performed by Contractor under this Agreement
and other businesses of Contractor. Upon completion of Owner's audit or
upon expiration of said twelve-month period, the statements, invoices
and records shall be deemed to be correct, provided no written protest
by Owner has been provided to Contractor. If Owner's audit establishes
that Owner has overpaid Contractor, then Contractor shall immediately
refund the overpayment to Owner with interest at 8% per annum from the
time such overpayment was made by Owner to Contractor until repaid to
Owner. If Owner's audit establishes that Owner has underpaid
Contractor, then Owner shall immediately pay Contractor the
underpayment, but no interest shall be due thereon.
(f) Contractor shall provide a fidelity bond
acceptable to Owner which covers employees involved with customer
account payments and who have access to bank accounts of Owner or other
financial assets of Owner in such form and amount as are
reasonably required by Owner.
(g) Owner may establish and maintain such special
bank accounts as may be necessary or desirable, including, but not
limited to, petty cash funds and local accounts funds, and shall
establish the rules and procedures for access to any such accounts by
Contractor and certain of its designated employees.
(h) Contractor shall retain physical possession of
all maps, plans and specifications, and records pertaining to the Water
System in the possession of Contractor on the Commencement Date. During
the term of this Agreement, Contractor shall continue to maintain such
maps, plans and specifications, and records in accordance with
Contractor's customary practices prior to the Commencement Date, or in
such manner as Owner shall require. At the expiration of this Agreement
or at such time that Owner assumes the functions requiring the same,
Contractor shall transfer to Owner all maps, plans and specifications,
and records pertaining to the Water System in its possession at that
time. Notwithstanding Contractor's possession of such maps, plans and
specifications, and records, Contractor acknowledges that the same
remain and are the property of Owner.
(i) If Owner elects to assume any of the duties
described in Section 8.04 of this Agreement, Owner shall furnish
Contractor data associated with such assumed duties to enable Contractor
to comply with the record keeping duties of this Section.
3.13 Reports/Permits.
(a) As reasonably requested by Owner, Contractor shall
prepare appropriate reports concerning matters reasonably related to the
operation of or planning for the Water System, including, but not
limited to: source of supply production; water quality; sales and
volumes of water consumed by customers; environmental requirements and
compliance; snow pack and expected production of the Canyon area.
(b) Contractor shall identify for Owner, and assist
Owner in the preparation and filing of, all reports and permits which
may be required by any governmental agency having jurisdiction, and
shall provide record copies to Owner.
(c) In the event this Agreement is terminated,
Contractor will furnish to Owner, at such time as the Water System or
components thereof are returned to the control of Owner, all information
and computer software, if transferrable, which was used in the
preparation of reports and other data necessary for Owner to operate the
Water System.
3.14 Inventory Control. Contractor shall, in consultation with
and with approval of Owner, establish a policy for maintaining an
appropriate inventory of equipment, spare parts, materials and supplies,
including the implementation and documentation of an inventory control
program. Contractor shall comply with the materials and supplies policy
approved by Owner, and purchase and store inventory in a manner
consistent with the Annual Budget. No later than June 30 of each year,
Contractor shall complete a physical inventory of the equipment, spare
parts, materials and supplies and reconcile the same with the inventory
assets carried on the balance sheet and provide the information to
Owner.
3.15 Fixed Assets Control.
(a) Within 90 days after the Commencement Date, Owner and
Contractor shall complete a fixed assets inventory of all items with
an original acquisition cost of more than $500 and a remaining useful
life of greater than one year.
(b) Annually, no later than the end of each Fiscal
Year, Contractor shall provide to Owner a list of all additions and
deletions of capital equipment and improvements from the inventory set
forth in subparagraph (a), with detail as requested by Owner for
maintenance of these records.
(c) Annually, no later than the end of each Fiscal
Year, Contractor shall work with Owner to complete a physical inventory
of all capital equipment.
(d) Contractor shall not dispose of, trade or sell
any fixed assets without Owner's prior written approval.
(e) Contractor shall forward all titles with
appropriate documents for transfer of title for vehicles or other
equipment to Owner within 30 days after the Commencement Date. All
additional vehicles and equipment shall be purchased in the name of
Owner and title shall be so issued. As additional vehicles or other
equipment are acquired by Contractor for Owner, Contractor shall forward
all titles to Owner within 30 days.
3.16 Insurance .
In connection with the preparation of each Annual Budget
(including the Annual Budget for the First Fiscal Year), Contractor
shall consult with and advise Owner regarding appropriate hazard,
casualty and liability insurance coverage for the Water System and
activities associated with the performance of this Agreement, the
conduct of the water utility business and the operation of the Water
System, including types of coverage, costs, limits and appropriate
deductible or retention levels. As and when requested or authorized by
Owner, and to the extent available, Contractor shall purchase the
following insurance coverage for itself and for Owner (as the named
insured or as an additional insured as appropriate or directed by
Owner):
(a) Workers compensation and employers liability;
(b) Commercial general liability insurance, or the
equivalent, with a combined single limit of not less than One Million
Dollars ($1,000,000) each occurrence/aggregate, including coverage for
personal injury, bodily injury, broad form property damage, blanket
contractual, products/completed operations, owners and contractors
protective liability, and coverage for the hazards commonly referred to
as XCU;
(c) Business auto liability, or the equivalent, with a
combined single limit of not less than One Million Dollars ($1,000,000)
each occurrence with respect to Contractors' vehicles whether owned,
hired, or non-owned;
(d) Excess liability insurance with a limit of not less
than Thirty Five Million Dollars ($35,000,000) aggregate;
(e) All risk property insurance, written at replacement
cost, including earthquake, flood, boiler and machinery, covering all
building, contents and equipment of the Water System; and
(f) Fidelity and crime insurance with employee theft
coverage of not less than Five Million ($5,000,000).
Contractor shall furnish Owner with satisfactory proof of
all such insurance so purchased by Contractor. Each policy
shall require 90 days' prior written notice to be given
Owner and Contractor before any change or cancellation may
take effect. All policies to be purchased by Contractor for
the First Fiscal Year shall be in effect as of the
Commencement Date. Contractor shall, in any event, be
entitled to purchase and maintain as a reimbursable direct
expense such insurance coverage as is reasonable and prudent
for Contractor's protection against losses, claims,
liabilities and damages related to Contractor's activities
and performance of services under this Agreement; provided
that such coverage shall not duplicate insurance coverage
otherwise purchased and maintained by Owner for Contractor's
benefit.
3.17 Warranties.
(a) Contractor shall maintain and enforce any warranties
or guarantees on any facilities, vehicles, equipment or other items
owned by Owner or purchased on behalf of Owner and used by Contractor in
carrying out this Agreement, and shall not, by act or omission,
invalidate in whole or part such warranties or guarantees.
(b) Contractor represents that Contractor's Employees
shall be qualified to perform their duties and responsibilities to Owner
using reasonable care and satisfying standards that meet or exceed those
customary in the industry.
(c) Owner shall neither seek nor be entitled to
consequential damages for events or occurrences which result in damage
or loss to Owner's systems which are the result of error or omission of
Contractor's employees, subcontractors or agents, unless the same
results from the gross negligence or willful misconduct of such
employees, subcontractors or agents.
3.18 Technical Assistance. Contractor may contract for the
services of outside consultants, suppliers, manufacturers, or experts
pursuant to the limits of expenditure described in this Agreement or as
provided in Annual Budgets, provided that Contractor shall remain
responsible for the performance or omissions of the same.
3.19 Subcontractors. Contractor shall not delegate or
subcontract any of its duties or responsibilities under this Agreement
if the subcontractor thereof shall be entitled to compensation in excess
of $20,000, or if the term of the contract is greater than one year,
without the prior written approval of Owner. Contractor shall remain
responsible for the acts or omissions of its subcontractors, and shall
obtain such performance bonds as are customary or reasonably requested
by Owner. Contractor shall advise Owner as requested by Owner with
respect to the assessment, status, and screening of potential
subcontractors prior to entering into the contract.
3.20 Plant Additions or Modifications.
(a) Additions to plant or facilities will normally be
recommended by Contractor at the time of presentation of the Annual
Budget for Owner's review and approval. If unusual or unexpected
circumstances arise requiring plant additions or modifications outside
of the normal budget process, Contractor shall prepare a written recom-
mendation for Owner's consideration in its reasonable discretion.
(b) To the extent possible, construction or modification
of Owner's facilities shall not interrupt the business or the
performance of Contractor's duties and responsibilities under this
Agreement.
3.21 Labor Relations.
(a) Owner acknowledges that certain of Contractor's
Employees are organized and represented by the International Brotherhood
of Electrical Workers. Contractor shall maintain a current strike plan
to minimize the effect on service resulting from labor action.
(b) Except as set forth on Schedule 3.21, Contractor is
not, with respect to Contractor's Employees, a party to or bound by any
contract with any labor organization, and has not recognized, agreed to
recognize or been required to recognize any union or other collective
bargaining unit. Except as set forth on Schedule 3.21, no union or
other collective bargaining unit has been certified as representing any
of Contractor's Employees nor has Contractor received any written
request from any party for recognition as a representative of such
employees for collective bargaining purposes. To the best knowledge of
Contractor, none of Contractor's Employees is engaged in organizing
activity with respect to any labor organization. During the term of
this Agreement, Contractor shall comply with all terms of any collective
bargaining agreements covering Contractor's Employees, and shall
indemnify and hold harmless Owner from Contractor's breach of any such
agreements, including damages and costs and expenses of defense,
including attorneys' fees. Contractor shall promptly notify Owner of
any breach or event which with the passing of time or giving of notice
would be a breach under such agreements or any events which may
materially adversely affect Contractor's labor relations.
In addition, Contractor shall promptly notify and keep Owner informed
during the course of any negotiations with any unions or collective
bargaining unit representing Contractor's Employees and shall solicit
and consider Owner's comments with regard to the effects of any changes
in Contractor's collective bargaining agreements on the operation of the
Water System. Contractor represents and warrants that there are no
breaches or events which with the passage of time or giving of notice
would be a breach of its collective bargaining agreements with respect
to Contractor's Employees. Contractor further represents and warrants
that there are no labor controversies pending or, to the knowledge of
Contractor, threatened by any employees of Contractor which would impede
or impair Contractor's performance under the Agreement or result in
actual or potential liability to Owner.
(c) If Contractor has knowledge that any actual or
potential labor dispute is delaying or threatens to delay the timely
performance of this Agreement, Contractor shall immediately give notice
with all relevant information to Owner.
3.22 Purchase of Equipment, Materials and Services. Consistent
with each Annual Budget, Contractor shall arrange for the purchase or
rental for the account of Owner of equipment, materials, and supplies
and services which are not purchased directly by Owner or other items
necessary to properly operate and maintain the Water System and to
maintain the records of Owner, and to make such additions and extensions
to the Water System, all as may be required from time to time by Owner.
Any information systems software acquired or developed by Contractor for
the performance of this Agreement shall be deemed to be the property of
Owner and shall be transferred or assigned to Owner upon termination of
this Agreement or Owner's earlier assumption of responsibility for the
functions to which the software relates. During and after the term of
this Agreement, Owner shall, nevertheless, allow Contractor to use such
software for purposes other than the performance of this Agreement to
the extent that such use is otherwise permitted by the terms of the
applicable license for such software. Any contracts let by Contractor
shall be in conformity with competitive bidding laws or regulations
applicable to Contractor, and no such contract shall extend for a term
greater than one year without the prior authorization of Owner.
3.23 Other Services.
(a) Contractor shall timely pay all bills related to
the Water System which it has authority to pay and shall assure that, to
the extent within Contractor's control, no mechanic's liens are filed
against any portion of the Water System.
(b) Consistent with the Annual Budget, Contractor shall
maintain the aesthetic appearance of the facilities comprising the Water
System and shall keep the same free and clear of all trash and debris.
(c) Contractor shall attend meetings of Owner, customers
of Owner, suppliers of Owner and others as reasonably requested by
Owner.
3.24 Plans.
(a) Contractor represents and warrants that all its
Plans (as hereinafter defined) affecting or related to the Contractor's
Employees or Contractor's performance of this Agreement are listed on
Schedule 3.24. During the term of this Agreement, Contractor shall not
contribute to, or be required to contribute to, any "multi-employer
plan" (as defined in Section 4001(a)(3) of ERISA). During the term of
this Agreement, Contractor shall not, with respect to Contractor's
Employees, have any liability (including withdrawal liability) under any
multi-employer plan. During the term of this Agreement, Contractor
shall not (i) incur in connection with the termination of any Plan, any
liability to the Pension Benefit Guaranty Corporation ("PBGC"),
(ii) terminate any Plan in a manner which might result in the imposition
of an encumbrance, lien or other charge on the Water System, (iii) incur
any "accumulated funding deficiency" (as defined in Section 302 of
ERISA) with respect to any Plan, whether or not waived, or (iv) be
subject of a "reportable event" (as defined in Section 4043 of ERISA)
with respect to any Plan, as to which a report or notice would be
required to be filed with the PBGC. During the term of this Agreement,
each Plan shall be administered so that (i) no prohibited transaction
under Section 4975 of the Code or Section 406 of ERISA will or could
result, (ii) no breach of fiduciary duty or violation of Part 4 of
Title I of ERISA will or could result, and (iii) no liability of
Contractor or any affiliate of Contractor pursuant to Title IV or ERISA
will or could result. There is no litigation, arbitration, governmental
or other proceeding, investigation or claim pending, or to the knowledge
or Contractor, threatened, with respect to any Plan or with respect to
any fiduciary, administrator or sponsor (in its capacity as such) of any
Plan (other than routine claims for benefits). During the term of this
Agreement, Contractor shall make full payment or accrual of all amounts
which Contractor is required, under the terms of any fully insured
employee plans which are "welfare plans" as defined in Section 3(1) of
ERISA, to have paid as contribution or premiums with respect to such
Plans.
As used herein, "Plan" means any bonus, deferred compensation,
profit sharing, pension or retirement, stock bonus, stock option, stock
purchase, stock appreciation right, performance share, bonus, savings,
severance, death benefit, disability, medical, hospitalization, life or
other insurance and any other incentive or fringe benefit plan, program,
arrangement or practice, formal or informal, oral or written, and
whether covering one person or entity or more than one person or entity,
providing employee or executive benefits, including, but not limited to,
any "employee welfare benefit plan" (as defined in Section 3(1) of
ERISA) and any "employee pension benefit plan" (as defined in Section
3(2) of ERISA).
(b) Contractor shall promptly give notice to Owner of any
default under any Plans, or event which with the passage of time or
giving of notice would be a default under any Plan and shall not permit
or suffer an event by Contractor which with the passage of time or
giving of notice would be a default under any Plan.
3.25 Cooperation and Coordination with Owner.
(a) Contractor shall work closely with, and cooperate
with, Owner in the execution of all construction projects, whether such
projects are initiated by Owner or Contractor, in order to assure
continued traffic flow and unimpeded response by public police and fire
protection services. In the event Contractor's construction projects
would, in the sole opinion of Owner, interfere with traffic flow or
response by public police and fire protection services, Owner may upon
written request to the Contractor, require Contractor to submit its
traffic control plans for the duration of a construction project for
review and approval by Owner, said approval to be provided in advance of
any construction. Contractor may, however, upon notifying Owner's
designated representative in a manner agreed upon by both parties, be
authorized to undertake immediate construction, including provision for
traffic control, in emergencies where a dangerous condition exists or
where it is necessary to restore service which has been interrupted.
(b) Owner is responsible for providing fire protection
service to the citizens of the City of Santa Fe. The installation,
inspection and maintenance of fire hydrants are a necessary part of the
requirements to enable Owner to provide this service. Contractor
acknowledges that fire hydrants are an integral part of the Water System
and shall be installed and maintained by Contractor.
Owner shall be responsible for determining the proper
spacing and location of fire hydrants within the water system.
Contractor shall install fire hydrants within the water system at
locations designated by Owner.
Contractor and Owner agree to undertake inspection of each
of Owner's fire hydrants. Owner shall conduct an annual inspection and
Contractor shall conduct an annual inspection in such a manner that each
fire hydrant is inspected approximately every six months. Owner shall
submit written reports to Contractor, detailing any maintenance
requirements or needed repairs found by its inspection. Contractor
shall submit written reports to Owner detailing results of its annual
inspection.
Contractor shall undertake maintenance and repair of fire
hydrants as may be indicated by Owner's or Contractor's inspection
reports, such maintenance and repair to be undertaken upon Contractor's
receipt of the inspection reports. Upon completion of maintenance or
repair work performed on any hydrant, Contractor shall notify Owner's
designated representative in a time and manner to be agreed upon by
Contractor and Owner. Written reports describing maintenance and repair
work required shall be provided to Owner in a time and manner to be
agreed upon by Contractor and Owner.
(c) Contractor shall cooperate with Owner regarding the
relocation of water facilities within the boundaries of any right-of-way
or easement for any street, avenue, alley, highway, sidewalk, bridge or
other structure or place owned or controlled by Owner, where relocation
may be required because of any specific regrading, rerouting, improving
or widening within that right-of-way or easement, or when the relocation
of water facilities is required to accommodate the construction,
reconstruction, removal or relocation of utilities owned and operated by
Owner or of utilities authorized by Owner through a franchise agreement.
3.26 Performance Bond. As security for performance of its
obligations under this Agreement, and not as liquidated damages or in
full payment of any damages caused by Contractor's breach of this
Agreement, Contractor shall, if requested by Owner, provide Owner with a
performance bond in an amount equal to the Annual Budget minus the
approved capital requirements in a form and from an insurer reasonably
acceptable to Owner. Contractor shall, as requested by Owner, maintain
such performance bond through the term of this Agreement. The premium
for such bond shall be a direct cost reimbursable in accordance with
Section 6.03.
3.27 Performance, Assignability of Contracts. Contractor shall
pay and perform all of Contractor's material obligations and duties
under all contracts for products and services made by Contractor in
connection with Contractor's operation and management of the Water
System, including Service Agreements (as defined in the Purchase
Agreement) in effect on the Effective Date, and except as expressly
provided herein all such duties and obligations shall be those of
Contractor and not of Owner. All such contracts shall, however, be
assignable to Owner upon termination of this Agreement or upon Owner's
assumption of responsibility, pursuant to Section 8.04, for the
functions to which the contracts relate.
ARTICLE IV. OWNER'S RESPONSIBILITIES
4.01 Policies, Procedures and Rates
(a) Owner shall have sole authority to establish a
manual of policies and procedures related to the operation, maintenance
and expansion of the Water System. Owner shall complete a policies and
procedures manual within six (6) months after the Commencement Date.
Until Owner completes such a policies and procedures manual, the
policies and procedures of SDCW in effect immediately prior to the
Commencement Date shall be used in the operation of the Water System.
In establishing and maintaining such policies and procedures, including
the Schedule of Rates, Owner shall follow and apply generally accepted
and sound practices in order to permit the prudent, safe, efficient and
reliable operation and maintenance of the Water System and the provision
of safe and reliable water service in accordance with all applicable
federal, state and local laws, regulations and ordinances.
(b) Owner shall have sole authority for adopting and
implementing water rates. Prior to the adoption of each Annual Budget,
Owner shall perform a review of the adequacy of the water rates and
shall establish and, in conjunction with the adoption of an Annual
Budget, implement new water rates in a timely manner if a change in
rates is necessary to insure the financial integrity of the Water System
or to maintain adequate, safe and reliable service. Notwithstanding the
foregoing sentence, Owner shall have the right at any time and in its
sole discretion to change the water rates. Contractor shall provide
such information as reasonably requested by Owner to assist Owner in
setting such rates.
(c) Within 90 days after the Commencement Date, Contractor
shall submit to Owner for its written approval procedures, policies and
practices and subsequent amendments for:
1. Preventive Maintenance Program - Buildings and
Fixed Equipment
2. Preventive Maintenance Program - Vehicles and
Mobile Equipment
3. Financial Procedures and Internal Control
4. Safety Manual
5. Inventory Control.
Upon written requests from Owner, Contractor shall cause such
procedures, policies and practices to be amended to reflect changes
reasonably requested by Owner. Contractor shall follow the approved
submitted procedures, policies and practices in its operations.
Complete records shall be maintained to verify compliance with these
procedures, policies and practices. Owner has the right to inspect and
test to the extent practicable at all places and times, in a manner that
will not unduly delay services or disrupt the work areas. If compliance
is found to be inadequate, Owner may require compliance by a set date
and require assurance that future performance conforms to these
requirements.
4.02 System Planning. Notwithstanding the preparation of the
Master Plan by Contractor as described in Section 3.09, Owner shall
prepare, as it deems necessary, master expansion plans and comprehensive
municipal capital improvement programs. Owner may update its plans and
programs as it deems necessary, and such plans and programs will form
the basis for the system improvements, replacements, and expansions
undertaken by Contractor pursuant to each Annual Budget. Contractor
also shall use Owner's plans and programs in formulating Contractor's
proposed Annual Budget.
4.03 Periodic Performance Review. Owner shall cause to occur a
periodic review and examination of the operations of the Water System.
The review shall focus on the performance of Contractor and other areas
deemed important in the discretion of Owner to the operation of the
Water System. The reviews shall be performed by an independent third
party, and will be done no more frequently than annually, and no less
frequently than once each three (3) years. Each review shall include,
but not be limited to, an examination of Contractor's compliance with
the terms and conditions of the Agreement, the adequacy of Contractor's
operation, repair and maintenance practices, the condition of the Water
System, operation and maintenance expense levels, reliability of water
service, and other factors deemed pertinent by Owner to the successful
long-term operation of the Water System. The review may provide
recommended modifications to practices, procedures or policies, and
Owner shall consider such recommendations and may require their
implementation, as appropriate, by Owner and Contractor.
4.04 Owner's Direct Payments. Owner may, at Owner's option,
elect to pay directly charges for utility services, insurance,
assessments and charges by the United States Bureau of Reclamation for
water delivered through the San Juan-Chama Project, and similar
substantial and recurring expenses of operating the Water System. Owner
shall designate the expenses to be so paid by Owner in the Annual Budget
and shall arrange for all statements and billings related thereto to be
submitted to Owner rather than Contractor. Contractor shall have no
responsibility to Owner to review, audit, pay or otherwise account for
the expenses so designated by Owner, and such expenses shall not
constitute "direct expenses" or Reimbursable Costs (as hereinafter
defined) for purposes of determining Contractor's Compensation (as
hereinafter defined) or the Fixed Fee (as hereinafter defined) pursuant
to Article VI of this Agreement.
4.05 Right of Way Agent. Owner shall designate an agent for
purposes of giving, taking, vacating and licensing all rights of ways,
easements and other property interests which Contractor may be required
to transfer, acquire, terminate or amend in the course of Contractor's
operation under this Agreement. Said agent shall be duly delegated the
authority to bind Owner upon execution of such documents and shall
execute such documents in a timely and expeditious fashion so as to
facilitate Contractor's performance of its duties under this Agreement.
ARTICLE V. CONTRACTOR'S EMPLOYEES
5.01 General.
(a) Contractor's Employees shall be employees of
Contractor, not Owner, and Contractor shall retain sole and absolute
discretion over hiring, terms and conditions of employment, and
termination of Contractor's Employees.
(b) Contractor also shall be responsible for the
performance of all leased employees employed by it.
5.02 Owner's Obligations to Employ Contractor's Employees.
(a) Upon termination of this Agreement, and provided that
Cause for Termination (as defined by Section 8.02) does not exist
against Contractor, Contractor is not in "Default under any Plan" (as
defined below), and there is no event which, with the passage of time or
the giving of notice, would be a Default under any Plan, Owner shall
employ each of Contractor's Employees who wishes to become an employee
of Owner pursuant to Owner's applicable ordinances, resolutions,
policies, personnel rules, regulations, salary administration plans,
benefit plans and applicable state and federal law. Owner shall also
employ each of Contractor's Employees who is eligible and wishes to
become an employee of Owner in accordance with Section 8.04, provided
that Contractor is not in Default under any Plan and there is no event
which, with the passage of time or the giving of notice, would be a
Default under any Plan. Upon Owner providing notice to Contractor of
its intent to terminate this Agreement, Owner shall have the right to
communicate with Contractor's Employees. Upon request, Contractor shall
also make available to Owner the personnel records of Contractor's
Employees. Contractor shall cooperate in scheduling and coordinating
any meetings between Owner and Contractor's Employees. Owner and
Contractor shall cooperate with and assist each other in effecting the
orderly transition of Contractor's Employees to the employment of Owner,
and Contractor shall transfer to Owner all personnel records, job
descriptions, training records, compensation and efficiency studies and
other pertinent information relating to Contractor's Employees. For
purposes of this subparagraph (a), "Default under any Plan" means
Contractor's failure to pay or perform any obligation which Contractor
is required to pay or perform under the terms of a Plan with respect to
Contractor's Employees and which could result in a liability to Owner or
any encumbrance or other charge against any assets of Owner, including
the Water System.
(b) Notwithstanding paragraph (a), above, any of
Contractor's Employees who is scheduled to retire within the Term of
this Agreement may retire under Contractor's retirement system.
Contractor shall preserve the accumulated retirement benefits of any of
Contractor's Employees who subsequently become employees of Owner.
Contractor's Employees who are eligible to retire and receive early
retirement benefits may elect to do so at the time of transfer of
employment or at any time thereafter.
(c) Whenever Owner is required under this Agreement to
offer employment to any of Contractor's Employees, Owner shall, for
purposes of determining such employee's eligibility and entitlement to
participate in Owner's employee benefit plans and annual and sick leave
accrual plans, credit the employee for time of service in the employment
of Contractor as though it were time of service in the employment of
Owner; provided that with respect to pension benefit plans, such credit
will be determined in accordance with the Public Employees Retirement
Act and any other applicable retirement benefit statutes, ordinances,
resolutions, contracts or policies. As to Contractor's Employees, Owner
shall, in addition, waive any waiting periods and pre-existing condition
limitations applicable to eligibility for and participation in Owner's
employee benefit plans. Owner shall not be required to contribute to
any purchase of credited service under the Public Employees Retirement
Act. Owner shall comply with any applicable requirements of the Public
Employees Bargaining Act as to unionized Contractor's Employees. In the
event that said unionized Contractor's Employees become Owner's
employees and in the event that the City of Santa Fe enacts and
implements the City of Santa Fe Labor-Management Relations Ordinance
(Ord. #1993-2) (the "City Ordinance"), Owner shall not be required to
comply with the Public Employees Bargaining Act, but instead shall
comply with the applicable requirements of the City Ordinance.
(d) Owner shall reimburse Contractor for severance
benefits payable by Contractor pursuant to Contractor's company-wide
employee retention plan only with respect to any of Contractor's
Employees whom Owner is obligated to employ pursuant to this Agreement.
Reimbursement by Owner to Contractor for severance benefits shall be
made under the following conditions:
(i) In the event Owner offers employment at a level
of 90% or more of the employee's current base
wage or salary, Owner shall not be responsible
for any severance benefit without regard to the
employee's acceptance or refusal of employment
with Owner;
(ii) In the event Owner offers employment at a level
below 90% of the employee's current base wage or
salary, Owner shall be responsible for the
severance benefit only if the employee refuses
employment with Owner.
(e) Contractor shall be liable for and shall indemnify
Owner and hold Owner harmless for employment claims and benefits
accruing, arising or relating to Contractor's Employees prior to
termination of this Agreement. Owner shall be liable for and shall
indemnify Contractor and hold Contractor harmless against claims and
benefits first accruing as to Contractor's Employees from and after
their employment by Owner.
VI. CONTRACTOR'S COMPENSATION
6.01 Contractor's Compensation. In consideration for the
services to be provided hereunder by Contractor to Owner, Owner shall
pay to Contractor an amount as determined in this Article VI
("Contractor's Compensation") at the times and subject to the conditions
set forth in this Article VI. Contractor's Compensation shall equal
(a) the Fixed Fee (as hereinafter defined), plus (b) the difference
between the Reimbursable Costs (as hereinafter defined) less the Fixed
Fee (the "Remaining Compensation"). Owner shall, in addition,
reimburse Contractor for gross receipts tax applicable to Contractor's
Compensation and payable by Contractor. The Fixed Fee and Remaining
Compensation shall be paid pursuant to Section 6.06 hereof.
6.02 Fixed Fee. As part of each Annual Budget approved pursuant
to Section 3.09(c) hereof, Contractor and Owner shall agree on a fixed
fee to be paid by Owner to Contractor for the next fiscal year, which
amount shall be 75% of the Reimbursable Costs estimated for such Fiscal
Year to be paid by Owner to Contractor. Such agreed upon annual fixed
fee shall be divided by 12 and such resulting monthly amount shall be
the monthly "Fixed Fee" for the next Fiscal Year. Subject to Section
6.06(e), in the event that the Annual Budget is amended in any Fiscal
Year, the Fixed Fee shall remain equal to 75% of the Reimbursable Costs
estimated in such amended Annual Budget.
6.03 Reimbursable costs.
(a) As used in this Agreement, "Reimbursable Costs" means those
Direct Costs (as defined in Section 6.04) set forth in the Annual Budget
to reimburse Contractor in connection with:
(i) the operation and maintenance of the Water System;
(ii) the billing and collecting of customer accounts and
the keeping of the Water System's records and books of accounts;
(iii) any engineering work performed by Contractor in
connection with the Water System;
(iv) any construction work performed by Contractor or third
parties acting at the direction of Contractor in connection with the
Water System;
(v) the actual cost of all equipment, materials, supplies
and services and other items purchased, rented or leased for the account
of Owner and used or useful in the operation and maintenance of the
Water System or in connection with professional services or construction
of extensions to the Water System or in the maintenance of system
records;
(vi) the reimbursement of Contractor of such other amounts
associated with the operation, maintenance, renewal, and extension of
the Water System as may be directed by formal resolution of the City
Council of Santa Fe; and
(vii) the Management Fee (as hereinafter defined).
(b) As used in this Agreement, "Management Fee" means an amount
equal to ten percent (10%) of all Direct Costs associated with clauses
(i), (ii), (iii), (v) and (vi), and clause (iv) when work is
performed by Contractor's employees, and an amount equal to five percent
(5%) of all Direct Costs associated with clause (iv) when work is
performed by persons or agents other than Contractor's employees. The
Management Fee shall not be applied to any gross receipts tax paid by or
to Contractor.
(c) In no event shall Reimbursable Costs include amounts paid by
Owner pursuant to Section 4.04 of this Agreement.
6.04 Direct Costs. As used in this Agreement, "Direct Costs"
means:
(i) The labor cost of Contractor's Employees when such
labor is performed specifically to benefit the Water System. The labor
cost shall include any payroll additives normally assigned by Contractor
as part of the cost of labor in its regular labor distribution
accounting process, including, but not limited to, FICA taxes, leave
accrual, holiday accrual, workers' compensation and group life insurance
premiums, health and dental insurance premiums, pension and other
benefits where such cost is normally allocated on labor charges. As
part of the Annual Budget, Contractor shall submit to Owner for approval
the assumptions underlying the total labor costs to which the Annual
Budget relates. These assumptions will include total number of
employees, payroll, and benefits loadings.
(ii) The cost of materials and supplies issued from a
Contractor-owned storeroom and used in conjunction with work performed
specifically to benefit the Water System. The cost of Contractor's
materials and supplies shall include such reasonable handling charges as
Contractor normally adds to its stores issues in its regular materials
distribution accounting process. As part of the Annual Budget,
Contractor shall submit to Owner for approval the assumptions underlying
the total materials and supplies costs to which the Annual Budget
Relates. These assumptions will include explanation of any materials
and supplies carrying, handling or processing charges or similar
loadings. In no event shall materials and supplies be issued from a
Contractor-owned storeroom and the costs thereof be included as a Direct
Cost if such materials and supplies are available in Owner's Water
System storeroom or from Owner.
(iii) The cost of Contractor transportation and mobile
equipment, when used in conjunction with work performed specifically to
benefit the Water System, which cost is to be calculated in the same
manner as Contractor calculates the cost of such equipment in its
regular vehicle distribution accounting process. As part of the Annual
Budget, Contractor shall submit to Owner for approval the assumptions
underlying the total vehicle maintenance and repair costs to which the
Annual Budget relates. These assumptions will include maintenance,
repairs and fuel costs and usage rates for any leased vehicles used in
Contractor's Agreement.
(iv) The reasonable costs and expenses incurred by
Contractor in conjunction with work performed specifically to benefit
the Water System, as may be directed by Owner.
(v) The Costs set forth in Section 6.05 hereof.
In no event shall Direct Costs include amounts paid by Owner pursuant to
Section 4.04 of this Agreement.
6.05 Headquarters Services. Direct Costs shall include the
pro-rated overhead costs incurred by Contractor in connection with the
matters set forth in Section 6.04 (i-iv), including, labor costs and
appropriate overhead charges for office space, utilities, machines,
equipment, computer services, and the like, which are provided by
Contractor's headquarters staff and systems. Contractor shall identify
the services so provided in the Annual Budget and shall include detailed
supporting information for all costs associated with such services.
Without limiting the foregoing sentence, as part of the Annual Budget,
Contractor shall submit to Owner for Owner's approval the financial
assumptions underlying the proration of overhead for the Fiscal Year to
which the Annual Budget relates.
6.06 Payment of Contractor's Compensation.
(a) Fixed Fee Payment. On the first business day of each
calendar month of each Fiscal Year during the Term, Owner shall tender
to Contractor an amount equal to the Fixed Fee for the preceding month
plus applicable gross receipts tax as provided in Section 6.01.
(b) Third Party Construction Costs. On the first business
day of each week, Contractor may deliver to Owner an invoice for all
Direct Costs for construction work performed by third parties pursuant
to Section 6.03(a)(iv) hereof ("Third Party Construction Costs")
incurred, due and owing for the preceding week plus applicable gross
receipts tax as provided in Section 6.01. Such invoices shall be in a
form agreed to by Owner and Contractor, and shall include an itemized
statement of the services rendered, goods purchased or rented, or such
other costs which are approved or attributable to such construction
work. Subject to the Annual Budget, Owner shall pay the undisputed
portion of such invoice within one week after receipt thereof. Any such
invoice shall not include the Management Fee attributable to such Third
Party Construction Costs.
(c) Final Remaining Compensation Payment. By the tenth
business day of each month, Contractor shall submit to Owner an invoice
(certified by an officer of Contractor) of the Reimbursable Costs for
the preceding month (which invoice shall reflect as an offset or debit
the Third Party Construction Costs and the Fixed Fee which have been
paid for such month) plus applicable gross receipts tax as provided in
Section 6.01, all in a form mutually agreed by Owner and Contractor.
Subject to the limitations in an Annual Budget and this Agreement, Owner
shall pay to Contractor the amount set forth in such invoice by the
first business day of the month following the month in which it is
received; provided, however, that the payment deadline shall be extended
one Business Day for each Business Day that the invoice is submitted
after its due date.
(d) Past Due Payments. Any undisputed invoices pursuant
to this Section 6.06 not paid within 10 business days after the due date
will be considered past due. Payments received on undisputed amounts
after the past due date shall accrue a late charge at the rate of 1.5%
per month from the past due date.
(e) Limitation on Variable Payment. In no event shall the
Fixed Fee paid to Contractor in any Fiscal Year be less than 50% of the
actual Reimbursable Costs in any Fiscal Year.
VII. ADMINISTRATION
7.01 Owner's Employees. Owner shall have the right to select,
employ and supervise such personnel as it may require in connection with
any activities of Owner, which activities are not herein specifically
assigned to Contractor. Contractor shall have no control over or
responsibility for Owner's personnel or the activities in which they are
engaged. Any costs incurred in connection with Owner's personnel or
activities shall be the sole responsibility of Owner.
7.02 Owner's Representative. Owner shall designate in writing
prior to the Commencement Date an employee of Owner ("Owner's
Representative") who shall be the representative of Owner in all matters
pertaining to this Agreement insofar as Contractor is concerned, and
such person shall act as the official representative from whom
Contractor will receive communication from Owner and to whom Contractor
will deliver communication to Owner. Contractor may rely upon the
written directions of Owner's Representative in any action taken by
Contractor under this Agreement. Information delivered by Contractor to
Owner's Representative shall be considered as information delivered to
Owner. The provisions of this section are for the sole purpose of
identifying the party who may act for and on behalf of Owner in
connection with this Agreement, but the parties acknowledge that the
action of Owner's Representative shall be limited by the provisions of
this Agreement and do not in any way place Owner's Representative in the
position to give instructions relative to the activities which are
herein specifically assigned to Contractor. Any remuneration, salary,
or expenses of Owner's Representative shall be the responsibility of
Owner.
7.03 Contractor's Representative. Contractor shall designate in
writing an employee of Contractor ("Contractor's Representative") who
shall be the representative of Contractor in all matters pertaining to
this Agreement insofar as Owner is concerned, and such person will act
as the official representative from whom Owner will receive
communications from Contractor and to whom Owner will deliver
communications to Contractor. Owner may rely upon the written
directions of Contractor's Representative in any action taken by Owner
under this Agreement. Information delivered by Owner to Contractor's
Representative shall be considered as information delivered to
Contractor. The provisions of this section are for the sole purpose of
identifying the party who may act for and on behalf of Contractor in
connection with this Agreement, but the parties acknowledge that the
action of Contractor's Representative shall be limited by the provisions
of this Agreement and do not in any way place Contractor's
Representative in the position to give instructions relative to
activities which are herein specifically assigned to Owner. Any
remuneration, salary, or expenses of Contractor's Representative shall
be the responsibility of Contractor.
7.04 Designees. Owner's Representative and Contractor's
Representative may designate in writing to each other for a period not
to exceed 30 calendar days a designee who shall, for all purposes of
this Agreement, be treated as the Owner's Representative or Contractor's
Representative, as appropriate.
7.05 Duties of Representatives. Communication by either party to
the other done through either party's representative shall be delivered
to the representative's normal place of work either orally in person or
in writing. In the case that response and/or instruction from the other
party is required by the circumstances, such response or instruction
shall be delivered within a period of time determined by the
circumstances, but in no case shall that period be longer than
twenty-four (24) hours from the time communication was delivered. If no
response is received in a reasonable time after communication is
delivered, the party originating the communication shall be released to
take whatever action is necessary using reasonable care and judgment.
7.06 Representatives to Meet. At the request of either party and
after reasonable prior notice, Contractor's Representative and Owner's
Representative shall meet concerning matters pertaining to the
operations of the Water System or relating to business affairs of the
Water System, including, but limited to:
(i) Customer related activities;
(ii) Updates on any authorized work;
(iii) Service rules and regulations;
(iv) Reports on any major interruption of service;
(v) Water rationing or conservation activities; and
(vi) Construction activities.
ARTICLE VIII. TERMINATION, CAUSE FOR TERMINATION, REMEDIES
8.01 Termination. This Agreement may be terminated:
(a) By Owner as of the third anniversary of the
Commencement Date or any date thereafter by giving notice in writing to
Contractor of Owner's intention to so terminate at least twelve months
prior to the effective date of termination as specified in the notice.
(b) By Owner when Owner has Cause for Termination pursuant
to Section 8.02.
(c) By Contractor, when Contractor has Cause for
Termination pursuant to clauses (a) through (d) of Section 8.02.
(d) By Contractor, by giving notice in writing 180 days
prior to the proposed termination date, if Contractor shall conclude, in
its discretion, that by reason of Owner's exercise of rights of direct
payment pursuant to Section 4.04 and/or rights of substitution pursuant
to Section 8.04, further performance of this Agreement by Contractor is
uneconomic or impractical.
8.02 Cause for Termination. A party (the "Non-Defaulting Party")
shall have cause for termination ("Cause for Termination") upon the
occurrence of any of the following events:
(a) The other party (the "Defaulting Party") shall fail to
timely pay to or on behalf of the Non-Defaulting Party any monetary
obligation owed the Non-Defaulting Party under this Agreement and such
failure shall continue uncured for a period of ten (10) days after the
date on which written notice demanding such payment shall have been
given to the Defaulting Party by the Non-Defaulting Party; provided that
the foregoing shall not apply to disputed amounts, if written notice of
the grounds of the dispute has been given to the other party pursuant to
Section 15.06 and all amounts not in dispute, together with applicable
late charges, if any, have been paid.
(b) The Defaulting Party shall fail to duly observe or
perform any duty or obligation, other than the payment of money,
required of the Defaulting Party under this Agreement, and such failure
shall continue uncured for a period of thirty (30) days after the date
on which written notice of such failure and demand for cure shall have
been given to the Defaulting Party by the Non-Defaulting Party;
provided, however, that if the Defaulting Party at the end of such
thirty-day period is diligently pursuing the cure of such default and it
is likely that such default can be cured by the continued diligent
efforts of the Defaulting Party, the Non-Defaulting Party shall allow
the Defaulting Party such additional time as is reasonably necessary to
complete the cure, but in no event shall the Non-Defaulting Party be
required to allow more than 10 additional days without the written
agreement of the Non-Defaulting Party.
(c) The entry of a decree or order by a court of competent
jurisdiction adjudging the Defaulting Party a bankrupt or insolvent, or
approving as properly filed a petition seeking reorganization,
arrangement, adjustment or composition of or in respect of the
Defaulting Party under the Federal Bankruptcy Code or any other
applicable federal or state law, or appointing a receiver, liquidator,
assignee, or sequestrator (or other similar official) of the Defaulting
Party or of any substantial part of the Defaulting Party's property, or
ordering the winding up or liquidation of the Defaulting Party's
affairs, and the continuation of any such decree or order unstayed and
in effect for a period of thirty consecutive days.
(d) The institution by the Defaulting Party of proceedings
to be adjudicated a bankrupt or insolvent, or the consent by it to the
institution of bankruptcy or insolvency proceedings against it, or the
filing by it of a petition or answer or consent seeking reorganization
or relief under the Federal Bankruptcy Code or any other similar
applicable federal or state law, or the consent by it to the filing of
any such petition or to the appointment of a receiver, liquidator,
assignee, trustee or sequestrator (or other similar official) of the
Defaulting Party or of any substantial part of the Defaulting Party's
property, or the making by the Defaulting Party of any assignment for
the benefit of creditors, or the admission by the Defaulting Party in
writing of its inability to pay its debts generally as they become due.
(e) With regard to Contractor's duties or obligations
under, or performance of, this Agreement:
(i) Contractor shall have criminal penalties imposed
against it by a governmental body;
(ii) Contractor shall have civil penalties or
sanctions imposed against it by the New Mexico Public Utilities
Commission.
(iii) Contractor shall have entered against it
monetary judgments of more than $1,000,000 in aggregate which remain
unsatisfied for more than 90 days; or
(f) Owner sells substantially all of the assets comprising
the Water System.
8.03 Surrender of Water System to Owner. Upon termination of
this Agreement, Contractor shall return possession to Owner of the Water
System, including, but not limited to, the Water System's facilities,
real property, books and records, materials and supplies, and any other
properties of Owner at that time held by Contractor under this Agree-
ment. Contractor shall, in addition, assign to Owner and Owner shall
assume all contracts then in effect for products and services related to
the operation and management of the Water System; except that Owner
shall not be obligated to accept, assume or perform any contract under
which Contractor is in default or under which any other party is in
default, or under which an event has occurred which, with the passage of
time, the giving of notice or both would place Contractor or another
party to the contract in default. Upon termination of this Agreement,
Contractor shall, at Owner's request and at Owner's expense, take all
steps reasonably necessary to put Owner in a position to operate the
Water System, including providing transitional assistance for a period
of sixty (60) days.
8.04 Substitution of Service Provider
(a) At least one hundred twenty days before commencement
of the applicable Fiscal Year, Owner may give notice to Contractor that
Owner intends to assume responsibility for performing any of the
functions listed in this paragraph. If Owner desires to assume such
responsibility, Owner shall give written notice to Contractor of the
function or functions to be assumed, and the Fixed Fee and estimated
Reimbursable Costs for such upcoming Fiscal Year shall not take into
account the costs of such functions. Owner shall assume such functions
as of the first day of the upcoming Fiscal Year. The functions which
Owner may assume are:
(i) Purchasing and warehousing of all materials,
supplies and equipment;
(ii) Meter reading, billing, collection and
customer account services;
(iii) Accounting and record keeping;
(iv) Engineering design;
(v) Motor vehicle maintenance;
(vi) Acquisition of land, easements, and
rights-of-way;
(vii) Building and grounds security; and
(viii) Custodial services and grounds maintenance.
(b) In the event of such a transfer of functions, Owner
shall offer each of Contractor's Employees performing such or similar
functions employment with Owner in accordance with Section 5.02 in order
to permit each such employee to continue performing the same functions
for Owner upon the effective date of the transfer of responsibility.
(c) As of the first day of the upcoming Fiscal Year, Owner
shall assume full and complete responsibility for the function or
functions specified in the notice, and Contractor shall be relieved of
all responsibility, duties and obligations with respect thereto arising
after such date; provided that Contractor, at Owner's expense, shall
take all steps reasonably necessary to put Owner in a position to
operate the function, including providing transitional assistance for a
period of sixty (60) days beyond the date specified in the notice.
Contractor shall, in addition, assign to Owner and Owner shall assume
any contracts then in effect for products and services related to the
functions for which Owner is assuming responsibility; except that Owner
shall not be obligated to accept, assume or perform any contract under
which Contractor is in default, under which any other party is in
default or under which an event has occurred which, with the passage of
time, the giving of notice or both would place Contractor or another
party to the contract in default.
(d) Owner shall grant Contractor access to and provide to
Contractor information and records concerning functions assumed by Owner
and allow Contractor use of facilities and equipment related to such
functions as reasonably necessary to enable Contractor to perform its
remaining duties under this Agreement.
8.05 Remedies Cumulative. Whenever a Non-Defaulting Party has
Cause for Termination, the Non-Defaulting Party may exercise its right
of termination pursuant to Section 8.01, in addition to all other rights
and remedies at law, equity or otherwise to which it may be entitled.
All rights and remedies of each of the parties to this Agreement shall
be cumulative, and the exercise of one or more rights or remedies will
not preclude the exercise of any other right or remedy available under
the Agreement or applicable law.
ARTICLE IX. INDEPENDENT CONTRACTOR
9.01 Contractor is contracting with Owner under this Agreement as
an independent contractor, and Contractor's Employees shall be employees
of Contractor and not of Owner. Nothing contained in this Agreement
shall constitute or be construed to be or create a partnership or joint
venture between Contractor and Owner.
ARTICLE X. ASSIGNMENTS
10.01 Contractor may assign this Agreement and its rights
hereunder to any corporation controlled by or under common control with
Contractor; provided, however, that no such assignment shall relieve
Contractor from liability for the performance of Contractor's duties and
obligations under this Agreement. Except as permitted by the preceding
sentence, Contractor may not assign this Agreement or its rights
hereunder without the prior written consent of Owner, which consent will
not be unreasonably withheld, and any such attempted assignment shall be
null and void.
ARTICLE XI. INDEMNIFICATION
11.01 Contractor shall indemnify Owner and hold Owner harmless
from damages, claims, losses and judgments, and for costs and expenses
incident thereto, including attorney fees, caused by the gross
negligence or intentional misconduct of Contractor (whether through acts
or omissions) or its employees, agents or subcontractors, except to the
extent such damages, claims, losses and judgments, and costs and
expenses incident thereto are caused by the gross negligence or
intentional misconduct of Owner or its employees or its agents.
Contractor specifically shall be responsible for paying, and
indemnifying Owner for the payment of, any fines and legal fees
resulting from Contractor's grossly negligent operation of the Water
System. Owner shall indemnify Contractor and hold Contractor harmless
from damages, claims, losses and judgments, and for costs and expenses
incident thereto, including attorney fees, caused by the gross
negligence or intentional misconduct of Owner or its employees, except
to the extent such damages, claims, losses and judgments and costs and
expenses thereto are caused by the gross negligence or intentional
misconduct of Contractor. Neither party intends by this Agreement to
shift or transfer to the other any part of its legal liability for its
own grossly negligent or intentional misconduct or the gross negligence
or intentional misconduct of its employees and persons acting under its
direct supervision and control.
ARTICLE XII. ARBITRATION
12.01 All claims and controversies, except for issues arising
from labor disputes otherwise governed by the Public Employee Bargaining
Act or, if adopted, the City Ordinance, between Owner and Contractor
concerning this Agreement or arising out of the performance of this
Agreement shall be submitted to binding arbitration in accordance with
the New Mexico Uniform Arbitration Act, NMSA 1978, Section 44-7-1 et
seq., and the rules of the American Arbitration Association applicable
to commercial disputes. The arbitration shall be conducted before a
panel of three arbitrators. Owner and Contractor shall each appoint one
arbitrator and the two arbitrators so appointed shall select the third.
The decision of the majority of the arbitrators so appointed shall be
binding and conclusive upon Owner and Contractor. Either Owner or
Contractor shall be entitled to confirmation of any award of the
arbitrators and to judgment thereon from any court of competent
jurisdiction of New Mexico in accordance with the aforementioned act.
ARTICLE XIII. FORCE MAJEURE
13.01 The term "Force Majeure" as used herein shall mean acts of
God, strikes, or other industrial disturbances (not including market or
similar economic conditions), acts of public enemies, wars, blockages,
insurrections, riots, arrests and restraints of rulers and people, civil
or military disturbances, explosions, sabotage, epidemics, landslides,
lightning, earthquakes, fires, storms, floods, washouts, inability of
either party to obtain necessary materials, supplies or permits due to
existing or future rules, orders and laws of governments or courts,
present and future orders of any regulatory body having jurisdiction,
breakage or accident to plant or equipment (except that caused by the
gross negligence or intentional misconduct of the party on whom the
obligation rested), or other unforeseen operational problems or any
other cause (not including market or similar economic conditions),
whether of the kind herein enumerated or otherwise, which is not
reasonably within the control of the party claiming Force Majeure. In
the event either party is rendered unable, wholly or in part, by Force
Majeure to carry out its obligations under this Agreement, such party,
upon giving notice describing in full the circumstances of the Force
Majeure to the other party, shall be excused from the performance of its
obligations under this Agreement insofar as such performance is affected
by the conditions of Force Majeure and for so long as such conditions
shall continue; provided, however, that such party shall not be relieved
of such obligation if caused by its own gross negligence or intentional
misconduct and during the course of such Force Majeure such party shall
exercise reasonable efforts and diligence in remedying the conditions of
Force Majeure.
ARTICLE XIV. NON-APPROPRIATION
14.01 Owner reasonably believes that funds can be obtained
sufficient to make all payments due Contractor under this Agreement.
Owner hereby covenants that it shall do all things lawfully within its
power to obtain and maintain funds from which such payments may be made.
Nevertheless, in the event that Owner is unable to obtain funding
sufficient to pay its obligations under this Agreement, Owner shall have
the right to terminate this Agreement by giving written notice to
Contractor and this Agreement shall terminate on the date specified in
such notice. Owner shall not be obligated to make payments after the
effective date of any such termination; provided, however, that Owner
shall make payment to Contractor for obligations incurred prior to such
effective date.
ARTICLE XV. MISCELLANEOUS
15.01 Confidentiality. Any information pertaining to
Contractor's services under this Agreement, or Contractor's Employees or
business interests, shall remain Contractor's property and under
Contractor's control and custody until this Agreement lapses, is
terminated, or Owner assumes certain functions pursuant to Section 8.04
of this Agreement. Unless one of those actions occurs, said information
shall remain confidential and shall not be released by Owner to any
other party without Contractor's written approval unless required to do
so by law or the order of any court or governmental authority or for
financial reporting. Any information provided by, or developed by Owner
shall not be made available by Contractor to any other party without the
prior, written approval of Owner, unless disclosure is required by law
or the order of any court or governmental authority. Contractor shall
not be considered an agent, officer, or employee of Owner for purposes
of the New Mexico Inspection of Public Records Act.
15.02 Conflict of Interest. Contractor presently has no
interest, and shall not acquire any interest, that would directly
interfere with its performance of services as required under this
Agreement. Contractor shall not provide to any other party services
similar to, or of the same nature as the services required to be
provided to Owner pursuant to Agreement, if such other party is
providing or is ready to provide water utility services in competition
with the water utilities services being provided by Owner to its
citizens. Contractor shall promptly notify Owner of any pending request
to provide services in Owner's water utility service area similar to, or
of the same nature as, the services required to be provided to Owner
pursuant to this Agreement. Subject to Contractor's compliance with the
limitations and restrictions set forth in this Section, and provided
that (i) Owner is reasonably compensated therefor (including, but not
limited to, a reallocation of headquarters services pursuant to
Section 6.05 hereof), (ii) such use does not in any material manner
interfere with Contractor's performance of this Agreement or with the
operation or business of the Water System, and (iii) such use imposes no
additional burden, risk or expense on Owner, Owner shall not
unreasonably refuse or deny permission to Contractor to use and occupy
the office space and necessarily related and integrated office equipment
(such as furniture, telephones, photocopiers and the like) of the Water
System in connection with Contractor's performance of agreements with
third parties similar in nature to this Agreement.
15.03 Amendment. This Agreement shall not be altered, changed or
amended except by instrument in writing executed by the parties hereto.
15.04 Representations and Warranties. Contractor hereby warrants
that it is in compliance with the Americans with Disabilities Act of
1990 (Pub.L. 101-336; 42 U.S.C.Section 12101 et seq.).
15.05 Parties Obligated and Benefitted. Subject to the
restrictions set forth in this Agreement on Contractor's rights of
assignment, this Agreement shall be binding upon and enforceable against
Owner and Contractor and their respective assigns and successors in
interest and shall enure solely to the benefit of Owner and Contractor
and their respective assigns and successors in interest, and no other
person shall be entitled to any of the benefits conferred by this
Agreement.
15.06 Notices. Unless otherwise expressly provided, any notice,
request, demand, waiver or other communication required or permitted to
be given under this Agreement shall be in writing and shall be deemed to
have been duly given only if delivered in person or by first class,
prepaid, registered or certified mail or sent by courier, or, if receipt
is confirmed, by telecopier to the receiving party at the address or
telecopy number set forth below:
If to Contractor:
Public Service Company of New Mexico
Attn: Corporate Secretary
Alvarado Square
Albuquerque, New Mexico 87158
Telecopy Number (505) 848-2368
If to Owner:
City of Santa Fe
Attn: City Manager
200 Lincoln Avenue
Post Office Box 909
Santa Fe, New Mexico 87504-0909
Telecopy Number (505) 984-6683
Either party may change the address to which notices are required to be
sent by giving notice of such change in the manner herein prescribed to
the other party. All notices will be deemed to have been received on
the date of delivery or on the third business day after mailing in
accordance with this section, except that any notice of a change of
address will be effective only upon actual receipt.
15.07 Attorney's Fees. In the event of any arbitration, action
or
suit based upon or arising out of the interpretation or enforcement of
this Agreement or any alleged breach by either party of any
representation, warranty, covenant or agreement contained in this
Agreement, the prevailing party will be entitled to recover, in addition
to any other amounts owing, reasonable attorneys' fees and other costs
of such action or suit from the other party.
15.08 Waiver. This Agreement or any of its provisions may not be
waived except in writing. The failure of any party to enforce any right
arising under this Agreement on one or more occasions will not operate
as a waiver of that or any other right on that or any other occasion.
15.09 Captions. The section captions of this Agreement are for
convenience only and do not constitute a part of this Agreement.
15.10 Choice of Law. This Agreement and the rights of the
parties hereunder will be governed by and construed in all respects in
accordance with the laws of the State of New Mexico, without regard to
the conflict of laws rules thereof.
15.11 Entire Agreement. This Agreement contains the entire
agreement of the parties and supersedes all prior oral and written
agreements and understandings with respect to the subject matter. This
Agreement may not be amended or modified except by a writing signed by
or on behalf of all the parties affected by such amendment or
modification.
15.12 Severability. Any term or provision of this Agreement
which is invalid or unenforceable will be ineffective to the extent of
such invalidity or unenforceability without rendering invalid or
unenforceable the remaining rights of the person intended to be
benefitted by such provision or any other provisions of this Agreement.
15.13 Construction. This Agreement has been negotiated by Owner
and Contractor and their respective legal counsel, and legal and
equitable principles that might require the construction of this
Agreement or any provision of this Agreement against the party drafting
this Agreement will not apply in any construction or interpretation of
this Agreement.
EXECUTED as of the date first above written.
APPROVED AS TO FORM: CITY OF SANTA FE
By
---------------------------------- ------------------------------
City Attorney Mayor
ATTEST:
----------------------------------
City Clerk
PUBLIC SERVICE COMPANY OF
NEW MEXICO
By
------------------------------
Its
------------------------------
<PAGE>
SCHEDULE 1.01
Contractor's Staffing Levels - 06/28/95
1 Director
1 Staff Assistant
1 Manager, Engineering, Transmission and Distribution
1 Senior Engineer
1 Senior Engineering Technician
3 Engineering Technicians
1 Senior Drafting Technician
1 Drafting Technician
1 Staff Assistant
1 Senior Engineer, Special Projects
1 Manager, Customer Services
1 Senior Customer Account Representative
4 Customer Service Representatives (1 vacant)
1 Cashier (vacant)
1 Staff Assistant
2 Senior Customer Service Representatives
1 Crafts Supervisor, Transmission and Distribution
1 Working Foreman
5 Journeyman Pipefitters
3 Journeyman, Equipment Operator
1 Cut-In/Cut-Out Service Technician
1 Warehouseman (vacant)
2 Helpers
1 Manager, Source of Supply
1 Working Foreman
1 Senior Treatment Plant Operator
2 Journeyman Pipefitter
2 Equipment Journeyman
3 Class IV Operators (1 vacant)
1 Senior Accountant
1 Accounting Technician
48 TOTAL COMPLEMENT
4 VACANCIES<PAGE>
SCHEDULE 3.21
Contracts or Agreements with Collective
Bargaining Unit, Union or Labor Organization
Agreement between Public Service Company of
New Mexico and International Brotherhood of
Electrical Workers Local Union No. 611 Effective
October 2, 1991 through April 1, 1994.
<PAGE>
SCHEDULE 3.24
Contractor's Employee Benefit Plans
Sangre de Cristo Water Company ("SDCW") employees are employed by
Public Service Company of New Mexico.
Salaries and wages of SDCW employees are contained in PNM's
Administrative and Regular Salary Plans, Results Pay Program and in the
Agreement between Public Service Company of New Mexico and the
International Brotherhood of Electrical Workers, Local Union No. 611.
These data are incorporated herein by reference.
The benefits enjoyed by SDCW employees are described in the PNM's
Human Resources Manual and Benefits Book. This Manual, Book and the
detailed Benefit Plan features, are also incorporated herein by
reference. Important Plan Facts are as follows:
<TABLE>
<CAPTION>
ERISA TYPE TYPE OF PLAN PLAN
BENEFIT OF PLAN ADMINISTRATION TRUSTEE ID. NO.
<S> <C> <C> <C> <C>
Benefits My Way Welfare- Self None 514
Cafeteria
Group Medical & Welfare Self Robert F. Curtis 504
Dental Insurance Duane G. Dimas
Plan Alexander J. Ivey
Lee Rougemont
Judy Zanotti
Jack Winters
Eugene Long
HMO Medical Plan Welfare Insured Claims Adminis- 513
trator,
Lovelace Health
Plan, 1st Nat'l
Bldg., Alb.,
NM 87125
HMO Medical Plan Welfare Insured Claims Adminis- 513
trator,
Health Plus
Plan
Group Term Life Welfare Insured CIGNA 501
Insurance Plan
Service Group Term Welfare Insured CIGNA 505
Life Insurance Plan
Management Term Welfare Insured CIGNA 506
Life Insurance
Plan
Master Employee Defined Self The Vanguard 005
Savings Plan Contribution Group
Pension 1400 Morris Drive
Wayne, Pennsylvania
Employee Stock Defined Self Mitch Marzec 003
Option Plan Contribution Zan James
Pension
Employment Option Welfare Self Ellen Wilson 507
Plan Barbara Barsky
Asset Sales Non-ERISA Self Barbara Barsky N/A
Incentive Plan Incentive Tom Sategna
Plan Al Lujan
Employee Assistance Welfare Self 525
Program
Voluntary Term Welfare Insured CIGNA 516
Life Insurance
Plan
Accidental Death Welfare Insured CIGNA 501
and Dismemberment
Insurance Plan
Voluntary Welfare Insured CIGNA 517
Accidental Death
and Dismemberment
Insurance Plan
Health Care Welfare Self None 514
Spending Account
Plan
Day Care Spending Welfare Self None 514
Account Plan
Long-Term Welfare- Insured Metropolitan 502
Disability Plan Disability Life Insurance
Company
Travel Accident Welfare- Insured Hartford 503
Death and Accident Accident and
Dismemberment Indemnity
Insurance Plan Company
Retirement Plan Defined Self Retirement 001
Benefit Committee:
Pension Robert Wilson
Don Sevieri
Mitch Marzec
Barbara Bursky
Robert Grossarth
Employee Welfare- Self PNM 511
Retention Severance
Plan Pay
Dependent Group Welfare- Insured Equitable Life 515
Life Insurance Life Assurance
Plan Society of the
United States
Non-Union Welfare Self N/A 512
Severance Pay
Plan
Educational Welfare Self N/A 509
Reimbursement
Plan
Performance NM-ERISA Self N/A N/A
Stock Plan Plan
</TABLE>
Full payment or accrual has been made of all amounts which Seller is required,
under the terms of any fully-insured employee plans (labeled "Insured" above)
which are "welfare plans" as defined in Section 3(1) of ERISA, to have been
paid as contributions or premiums with respect to such employee plans; all
material liabilities relating to any self-insured welfare plans (labeled
"self" above) have been accrued by Seller.
<PAGE>
TABLE OF CONTENTS
Page
RECITALS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
AGREEMENTS. . . .. . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE I. ENGAGEMENT. . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II. TERM, FISCAL YEARS . . . . . . . . . . . . . . . . . . 2
2.01 Term. . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.02 Fiscal Year . . . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE III. CONTRACTOR'S RESPONSIBILITIES . .. . . . . . . . . . . 2
3.01 Operating Agent . . . . . . . . . . . .. . . . . . . . . . . 2
3.02 Obligation to Provide Employees . . . .. . . . . . . . . . . 2
3.03 Standard of Performance . . . . . . . .. . . . . . . . . . . 3
3.04 Source of Supply Systems. . . . . . . .. . . . . . . . . . . 3
3.05 Water Treatment Plant . . . . . . . . .. . . . . . . . . . . 3
3.06 Water Transmission and Distribution System.. . . . . . . . . 3
3.07 Water System Engineering and Design . . . .. . . . . . . . . 3
3.08 Maintenance and Repair. . . . . . . . . . .. . . . . . . . . 4
3.09 Planning and Budgeting. . . . . . . . . . .. . . . . . . . . 5
3.10 Capital Improvements and Additions. . . . .. . . . . . . . . 6
3.11 Customer Services, Rates and Rules of Service .. . . . . . . 7
3.12 Fiscal Affairs, Accounting and Record Keeping .. . . . . . . 9
3.13 Reports/Permits . . . . . . . . . . . . . . . .. . . . . . . 11
3.14 Inventory Control . . . . . . . . . . . . . . .. . . . . . . 12
3.15 Fixed Assets Control. . . . . . . . . . . . . .. . . . . . . 12
3.16 Insurance . . . . . . . . . . . . . . . . . . .. . . . . . . 12
3.17 Warranties. . . . . . . . . . . . . . . . . . .. . . . . . . 14
3.18 Technical Assistance. . . . . . . . . . . . . .. . . . . . . 14
3.19 Subcontractors. . . . . . . . . . . . . . . . .. . . . . . . 14
3.20 Plant Additions or Modifications. . . . . . . .. . . . . . . 14
3.21 Labor Relations . . . . . . . . . . . . . . . .. . . . . . . 15
3.22 Purchase of Equipment, Materials and Services .. . . . . . . 16
3.23 Other Services. . . . . . . . . . . . . . . . .. . . . . . . 16
3.24 Plans . . . . . . . . . . . . . . . . . . . . .. . . . . . . 16
3.25 Cooperation and Coordination with Owner . . . .. . . . . . . 17
3.26 Performance Bond. . . . . . . . . . . . . . . .. . . . . . . 19
3.27 Performance, Assignability of Contracts . . . .. . . . . . . 19
ARTICLE IV. OWNER'S RESPONSIBILITIES . . . . . . . . . . . . . . . . 19
4.01 Policies, Procedures and Rates. . . . . . . . . . . . . . . . 19
4.02 System Planning . . . . . . . . . . . . . . . . . . . . . . . 20
4.03 Periodic Performance Review . . . . . . . . . . . . . . . . . 20
4.04 Owner's Direct Payments . . . . . . . . . . . . . . . . . . . 21
4.05 Right of Way Agent. . . . . . . . . . . . . . . . . . . . . . 21
ARTICLE V. CONTRACTOR'S EMPLOYEES. . . . . . . . . . . . . . . . . . 21
5.01 General . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
5.02 Owner's Obligations to Employ Contractor's Employees. . . . . 22
VI. CONTRACTOR'S COMPENSATION. . . . . . . . . . . . . . . . . . . . 23
6.01 Contractor's Compensation . . . . . . . . . . . . . . . . . . 23
6.02 Fixed Fee . . . . . . . . . . . . . . . . . . . . . . . . . . 24
6.03 Reimbursable costs. . . . . . . . . . . . . . . . . . . . . . 24
6.04 Direct Costs. . . . . . . . . . . . . . . . . . . . . . . . . 25
6.05 Headquarters Services . . . . . . . . . . . . . . . . . . . . 26
6.06 Payment of Contractor's Compensation. . . . . . . . . . . . . 26
VII. ADMINISTRATION. . . . . . . . . . . . . . . . . . . . . . . . . 27
7.01 Owner's Employees . . . . . . . . . . . . . . . . . . . . . . 27
7.02 Owner's Representative. . . . . . . . . . . . . . . . . . . . 27
7.03 Contractor's Representative. . . . . . . . . . . . . . . . . 28
7.04 Designees . . . . . . . . . . . . . . . . . . . . . . . . . . 28
7.05 Duties of Representatives . . . . . . . . . . . . . . . . . . 28
7.06 Representatives to Meet . . . . . . . . . . . . . . . . . . . 28
ARTICLE VIII. TERMINATION, CAUSE FOR TERMINATION, REMEDIES . . . . . 29
8.01 Termination . . . . . . . . . . . . . . . . . . . . . . . . . 29
8.02 Cause for Termination . . . . . . . . . . . . . . . . . . . . 29
8.03 Surrender of Water System to Owner. . . . . . . . . . . . . . 31
8.04 Substitution of Service Provider. . . . . . . . . . . . . . . 31
8.05 Remedies Cumulative . . . . . . . . . . . . . . . . . . . . . 32
ARTICLE IX. INDEPENDENT CONTRACTOR . . . . . . . . . . . . . . . . . 33
ARTICLE X. ASSIGNMENTS . . . . . . . . . . . . . . . . . . . . . . . 33
ARTICLE XI. INDEMNIFICATION. . . . . . . . . . . . . . . . . . . . . 33
ARTICLE XII. ARBITRATION . . . . . . . . . . . . . . . . . . . . . . 34
ARTICLE XIII. FORCE MAJEURE. . . . . . . . . . . . . . . . . . . . . 34
ARTICLE XIV. NON-APPROPRIATION . . . . . . . . . . . . . . . . . . . 35
ARTICLE XV. MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . 35
15.01 Confidentiality. . . . . . . . . . . . . . . . . . . . . . . 35
15.02 Conflict of Interest . . . . . . . . . . . . . . . . . . . . 35
15.03 Amendment. . . . . . . . . . . . . . . . . . . . . . . . . . 36
15.04 Representations and Warranties . . . . . . . . . . . . . . . 36
15.05 Parties Obligated and Benefitted . . . . . . . . . . . . . . 36
15.06 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . 36
15.07 Attorney's Fees. . . . . . . . . . . . . . . . . . . . . . . 37
15.08 Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
15.09 Captions . . . . . . . . . . . . . . . . . . . . . . . . . . 37
15.10 Choice of Law. . . . . . . . . . . . . . . . . . . . . . . . 37
15.11 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . 37
15.12 Severability . . . . . . . . . . . . . . . . . . . . . . . . 37
15.13 Construction . . . . . . . . . . . . . . . . . . . . . . . . 37
<PAGE>
EXHIBIT A"
SCHEDULE 9.8
OPERATING AGREEMENT
(See Agreement Section 9.8)
<PAGE>
<PAGE>
AMENDMENT NO. 1 to the Credit Agreement
and
AMENDMENT NO. 1 to the Pledge Agreement
Dated as of June 7, 1995
AMENDMENT NO. 1 to the Credit Agreement referred to below
among Public Service Company of New Mexico, a New Mexico corporation
(the "Borrower"), the lenders party to the Credit Agreement (the
"Lenders") and Chemical Bank and Citibank, N.A., as co-agents (the "Co-
Agents") for the Lenders thereunder and AMENDMENT NO. 1 to the Pledge
Agreement referred to below between Public Service Company of New Mexico
(in such capacity, the "Pledgor") and Citibank, N.A. (in such capacity,
the "Collateral Agent").
PRELIMINARY STATEMENTS:
(1) The Borrower, the Lenders and the Co-Agents are
parties to a short-term Revolving Credit Agreement dated as of December
14, 1993 (the "Credit Agreement"). Capitalized terms not otherwise
defined in this Amendment shall have the same meanings as specified in
the Credit Agreement.
(2) The Pledgor and the Collateral Agent are parties to a
Pledge Agreement dated as of December 14, 1993 (the "Pledge Agreement")
made by the Pledgor to the Collateral Agent for the benefit of the
Lenders pursuant to the Credit Agreement.
(3) The Borrower desires to amend interest and fee
provisions and extend the maturity of the Credit Agreement to reflect
the Borrower's improved financial and business condition and to take
advantage of current bank market conditions. The Borrower has requested
further amendments consistent with its current financial and business
strategy. In addition, the Credit Agreement and Pledge Agreement
require updates of certain Schedules as set forth below.
(4) The Lenders are, on the terms and conditions stated
below, willing to agree to amend the Credit Agreement and the Pledge
Agreement as hereinafter set forth.
SECTION 1. Amendments to the Credit Agreement. The Credit
Agreement is, effective as of the date hereof and subject to the
satisfaction of the conditions precedent set forth in Section 3 hereof,
hereby amended as follows:
(a) The definition of "Applicable Margin" in Section 1.01
of the Credit Agreement is amended in full to read as follows:
"Applicable Margin" means, as of any date, a percentage per
annum determined by reference to the Bond Rating in effect on such
date as set forth below:
<TABLE>
<CAPTION>
Applicable Margin Applicable Margin Applicable Margin
Bond Rating For Base Rate for Adjusted CD for Eurodollar
Moody's/S&P Advances Rate Advances Rate Advances
-------------- ----------------- ----------------- -----------------
<S> <C> <C> <C>
Baa3 or BBB- or above 0% 3/4 of 1% 5/8 of 1%
below Baa3 and BBB-
but at least Ba1 or BB+ 0% 1 1/8% 1%
below Ba1 and BB+
but at least Ba2 or BB 1/4 of 1% 1 3/8% 1 1/4%
below Ba2 and BB 3/4 of 1% 1 7/8% 1 3/4%
</TABLE>
(b) The definition of "Bond Rating" in Section 1.01 of the
Credit Agreement is amended by deleting the text up to the first
proviso thereof and replacing therefor the following:
"`Bond Rating' means, as of any date, the higher of
the ratings that have been most recently announced by either
Moody's or S&P, as the case may be, for First Mortgage Bonds
in effect on such date,"
(c) The definition of "Designated Subsidiary" in Section
1.01 of the Credit Agreement is amended in full to read as
follows:
"`Designated Subsidiary' means any Person that becomes
a Subsidiary of the Borrower on or after June 7, 1995.".
(d) The definition of "Investment" in Section 1.01 of the
Credit Agreement is amended by deleting the words "of existing
Indebtedness" in the last line thereof and replacing therefor the
following:
"or retirement of existing Indebtedness or lease obligation
bonds under the Palo Verde Leases, or the renewal or
replacement of credit support for existing Indebtedness".
(e) The definition of "Supplemental Indentures" in Section
1.01 of the Credit Agreement is amended in full to read as
follows:
"`Supplemental Indentures' means all supplemental
indentures to the FMB Indenture in effect from time to time
relating to this Agreement."
(f) The definition of "Termination Date" in Section 1.01
of the Credit Agreement is amended by deleting the date "June 13,
1995" in the first line thereof and replacing therefor the date
"June 30, 1998".
(g) Section 2.03(a) of the Credit Agreement is amended by
deleting subclauses (i) through (iv) thereof and replacing
therefor the following:
(i) 1/4 of 1% during such times as the Bond Rating by
Moody's or S&P is at least Baa3 or BBB-, respectively, (ii)
3/10 of 1% during such times as clause (a)(i) of this
Section 2.03 is not applicable and the Bond Rating by
Moody's or S&P is at least Ba1 or BB+, respectively, (iii)
3/8 of 1% during such times as clauses (a)(i) and (a)(ii) of
this Section 2.03 are not applicable and the Bond Rating by
Moody's or S&P is at least Ba2 or BB, respectively, and (iv)
1/2 of 1% at all other times.
(h) Section 2.03(b) of the Credit Agreement is amended by
deleting the percentage "1/4 of 1%" in the third line thereof and
replacing therefor the percentage "1/10 of 1%" and further by
deleting the phrase "the date hereof" in the last line thereof and
replacing therefor the date "June 7, 1995".
(i) Section 2.06 of the Credit Agreement is amended in
full to read as follows:
SECTION 2.06. Interest. (a) The Borrower shall pay
interest on the unpaid principal amount of each Advance
owing to each Lender from the date of such Advance until
such principal amount shall be paid in full, at the
following rates per annum:
(i) Base Rate Advances. During such periods
as such Advance is a Base Rate Advance, a rate per
annum equal at all times during each Interest Period
for such Advance to the sum of (A) the Base Rate in
effect from time to time plus (B) the Applicable
Margin in effect from time to time, payable in arrears
on the last day of such Interest Period and on the
date such Advance shall be Converted or paid in full.
(ii) Adjusted CD Rate Advances. During such
periods as such Advance is an Adjusted CD Rate
Advance, a rate per annum equal at all times during
each Interest Period for such Advance to the sum of
(A) the Adjusted CD Rate in effect from time to time
plus (B) the Applicable Margin in effect from time to
time, payable in arrears on the last day of such
Interest Period and on the date such Advance shall be
Converted or paid in full.
(iii) Eurodollar Rate Advances. During such
periods as such Advance is a Eurodollar Rate Advance,
a rate per annum equal at all times during each
Interest Period for such Advance to the sum of (A) the
Eurodollar Rate for such Interest Period for such
Advance plus (B) the Applicable Margin in effect from
time to time, payable in arrears on the last day of
such Interest Period and on the date such Advance
shall be Converted or paid in full.
(b) Upon the occurrence and during the continuance of
any Event of Default, the Borrower shall pay interest on the
unpaid principal amount of each Advance owing to each Lender
and on the unpaid amount of all interest, fees and other
amounts payable hereunder that is not paid when due, payable
in arrears on the dates referred to in clauses (a)(i)
through (iii) above and on demand, at a rate per annum equal
at all times to 1% above the rate per annum otherwise
required to be paid on such Advances pursuant to clauses
(a)(i) through (iii) above or in the case of such other
amounts, 1% above the rate per annum required to be paid on
Base Rate Advances pursuant to clause (a)(i) above.
(j) Section 3.01(a)(iii) of the Credit Agreement is
amended by deleting the parenthetical "(the `Supplemental
Indentures')" in the last line thereof.
(k) Section 4.01(f) of the Credit Agreement is amended by
(i) deleting the date "December 31, 1992" in the fourth line
thereof and replacing therefor the date "December 31, 1994", (ii)
deleting the date "September 30, 1993" in the second sentence
thereof and replacing therefor the date "March 31, 1995" and (iii)
deleting the last sentence thereof in its entirety and replacing
therefor the following:
Since December 31, 1994, there has been no material adverse
change in the condition (financial or otherwise), results of
operations, assets, business or prospects of the Borrower
and its Designated Subsidiaries, except as disclosed in the
Borrower's 1994 Form 10-K, Form 10-Q for the three months
ending on March 31, 1995 and Forms 8-K delivered to the Co-
Agents prior to
June 7, 1995.
(l) Section 4.01(i) of the Credit Agreement is amended by
deleting the exception clause up to, but not including, the
parenthetical "(the `Disclosed Litigation')" in lines eight
through twelve thereof and replacing therefor the following:
", except as disclosed in the Borrower's 1994 Form 10-K,
Form 10-Q for the three months ending on March 31, 1995 and
Forms 8-K delivered to the Co-Agents prior to June 7, 1995".
(m) Section 4.01(m) of the Credit Agreement is amended by
deleting the billing period "September 1993" in the seventh line
thereof and replacing therefor the billing period "March 1995".
(n) Section 4.01(q) of the Credit Agreement is amended by
deleting reference to the "1992 annual report" in the first line
thereof and replacing therefor reference to the "1993 annual
report".
(o) Section 4.01(x) of the Credit Agreement is amended by
deleting the date "October 31, 1993" in the seventh and ninth
lines thereof and replacing therefor the date "May 31, 1995".
(p) Section 5.01(h) of the Credit Agreement is amended by
deleting the ratio "0.72 to 1" in the fifth line thereof and
replacing therefor the ratio "0.70 to 1" and is further amended by
deleting the proviso at the end thereof in its entirety.
(q) Section 5.02(a) of the Credit Agreement is amended by
(i) deleting the word "and" in the last line of subclause (x)
thereof, (ii) deleting the following text from subclause (xi)
thereof:
"signing and filing financing statements under the Uniform
Commercial Code of the applicable jurisdictions and",
(iii) deleting the period at the end of subclause (xi) thereof and
replacing therefor a semicolon followed by the word "and" and (iv)
adding at the end thereof a new subclause (xii) to read as
follows:
"(xii)signing and filing appropriate financing statements
under the Uniform Commercial Code of the applicable
jurisdictions to the extent required in connection
with transactions not otherwise prohibited
hereunder.".
(r) Section 5.02(c)(iii)(C) of the Credit Agreement is
amended by deleting the phrase "San Juan Unit 4 Capacity to UAMPS"
and replacing therefor the phrase "the Borrower's gas gathering
and processing assets to Williams Gas Processing-Blanco, Inc."
(s) Section 5.02(d) of the Credit Agreement is amended by
(i) deleting the word "and" in the last line of subclause (vi)
thereof, (ii) deleting the period at the end of subclause (vii)
thereof and replacing therefor a semicolon followed by the word
"and" and (iii) adding at the end thereof a new subclause (viii)
to read as follows:
"(viii) other Investments by the Borrower and
Designated Subsidiaries not to exceed an aggregate amount
equal to $7,000,000 in any fiscal year.".
(t) Section 5.02(e)(ii) of the Credit Agreement is amended
by deleting the figure "$2,000,000" in the last line thereof and
replacing therefor the figure "$7,000,000".
(u) Schedules II, III, IV, V, VI, VII and VIII of the
Credit Agreement are amended in full to read as set forth on the
corresponding Schedules hereto.
SECTION 2. Amendment to the Pledge Agreement. Schedule I
of the Pledge Agreement is, effective as of the date hereof and subject
to the satisfaction of the conditions precedent set forth in Section 3
hereof, hereby amended in full to read as set forth on Schedule I
hereto.
SECTION 3. Conditions of Effectiveness. This
Amendment shall become effective as of the date first above written
when, and only when, the following conditions shall have been satisfied:
(a) The Co-Agents shall have received on or before the
date hereof the following, each dated such day, in form and
substance satisfactory to the Lenders:
(i) Counterparts of this Amendment duly executed by
the Borrower and the Lenders or, as to any of the Lenders,
advice satisfactory to the Co-Agents that such Lender has
executed this Amendment.
(ii) The promissory notes, in substantially the form
of Exhibit A hereto (collectively, the "1995 Notes"), of the
Borrower payable to the order of each of the Lenders,
respectively, evidencing the aggregate indebtedness of the
Borrower to such Lender resulting from the Advances made by
such Lender and reflecting the extension of maturity of the
Credit Agreement through June 30, 1998.
(iii) The forty-third and forty-fourth supplemental
indentures, in substantially the forms of Exhibits B-1 and
B-2 hereto (collectively, the "1995 Supplemental
Indentures"), to the FMB Indenture, each duly executed by
the Borrower and The Bank of New York, as trustee (the
"Trustee") under the FMB Indenture, providing for the
creation of two new issues of first mortgage bonds payable
to Citibank, N.A. to be due on June 30, 1998 (collectively,
the "1998 Bonds").
(iv) The 1998 Bonds duly executed and delivered by
the Borrower, together with the respective certificates of
authentification duly executed by the Trustee.
(v) Certified copies of the resolutions of the
Board of Directors of the Borrower approving this Amendment,
and of all documents evidencing other necessary corporate
action and governmental approvals, including, without
limitation, the required approval of PUC permitting the
extension of the Termination Date under the Credit
Agreement, with respect to this Amendment and the other
documents to be delivered hereunder.
(vi) A certificate of the Secretary or an Assistant
Secretary of the Borrower certifying the names and true
signatures of the officers of the Borrower authorized to
sign this Amendment and the other documents to be delivered
hereunder.
(vii) A certificate signed by a duly authorized
officer of the Borrower stating that on the date hereof (A)
the representations and warranties contained in Section 4.01
of the Credit Agreement and in Section 4 of the Pledge
Agreement are true and correct and (B) no event has occurred
and is continuing which constitutes a Default.
(viii)A favorable opinion of Keleher & McLeod, P.A.,
counsel for the Borrower, in substantially the form of
Exhibit C hereto.
(b) The Borrower shall have paid all fees and expenses of
the Co-Agents and the Lenders, including, without limitation, the
participation fee referred to in Section 2.03(b) of the Credit
Agreement, as amended hereby.
SECTION 4. Reference to and Effect on the Loan Documents.
(a) On and after the effectiveness of this Amendment, (i) each
reference in the Credit Agreement to "this Agreement", "hereunder",
"hereof" or words of like import referring to the Credit Agreement, and
each reference in the other Loan Documents to "the Credit Agreement",
"thereunder", "thereof" or words of like import referring to the Credit
Agreement, shall mean and be a reference to the Credit Agreement, as
amended hereby, and (ii) each reference in the Pledge Agreement to "this
Agreement", "hereunder", "hereof" or words of like import referring to
the Pledge Agreement, and each reference in the other Loan Documents to
"the Pledge Agreement", "thereunder", "thereof" or words of like import
referring to the Pledge Agreement, shall mean and be a reference to the
Pledge Agreement, as amended hereby.
(b) Except as specifically amended by this Amendment, the
Credit Agreement, the Notes and each of the other Loan Documents are and
shall continue to be in full force and effect and are hereby in all
respects ratified and confirmed. Without limiting the generality of the
foregoing, the Pledge Agreement and all of the collateral described
therein do and shall continue to secure the payment of all Secured
Obligations (as defined therein) of the Borrower under the Loan
Documents, in each case as amended hereby.
(c) The execution, delivery and effectiveness of this
Amendment shall not, except as expressly provided herein, operate as a
waiver of any right, power or remedy of any Lender, the Co-Agents or the
Collateral Agent under any of the Loan Documents, nor constitute a
waiver of any provision of any of the Loan Documents.
SECTION 5. Costs and Expenses. The Borrower agrees to pay
on demand all costs and expenses of the Co-Agents in connection with the
preparation, execution, delivery and administration, modification and
amendment of this Amendment (including, without limitation, the
reasonable fees and expenses of counsel for the Co-Agents) in accordance
with the terms of Section 8.04 of the Credit Agreement.
SECTION 6. Execution in Counterparts. This Amendment may
be executed in any number of counterparts and by different parties
hereto in separate counterparts, each of which when so executed shall be
deemed to be an original and all of which taken together shall
constitute one and the same agreement. Delivery of an executed
counterpart of a signature page to this Amendment by telecopier shall be
effective as delivery of a manually executed counterpart of this
Amendment.
SECTION 7. Governing Law. This Amendment shall be governed
by, and construed in accordance with, the laws of the State of New York.<PAGE>
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be executed by their respective officers thereunto duly
authorized, as of the date first above written.
PUBLIC SERVICE COMPANY OF
NEW MEXICO, as Borrower and
Pledgor
By___________________________________
Title:
CHEMICAL BANK, individually, as Co-Agent
and as Administrative Agent
By___________________________________
Title:
CITIBANK, N.A., individually, as Co-Agent
and as Collateral Agent
By___________________________________
Title:
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION
By___________________________________
Title:
THE BANK OF CALIFORNIA, N.A.
By___________________________________
Title:
CIBC INC.
By___________________________________
Title:
THE CHASE MANHATTAN BANK,
NATIONAL ASSOCIATION
By___________________________________
Title:
MELLON BANK, N.A.
By___________________________________
Title:
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK
By___________________________________
Title:
THE LONG-TERM CREDIT BANK OF
JAPAN LIMITED, Los Angeles Agency
By___________________________________
Title:
<PAGE>
<PAGE>
SCHEDULE I
Attached to and forming part of the Pledge Agreement dated as of
December 14, 1993, as amended or otherwise modified from time to time,
by PUBLIC SERVICE COMPANY OF NEW MEXICO, as Pledgor, to CITIBANK, N.A.,
as Collateral Agent
<TABLE>
<CAPTION>
Debt Issuer Description of Debt Debt Certificate Final Maturity Original Principal
No(s). Amount
-------------- ------------------- ---------------- -------------- ------------------
<S> <C> <C> <C> <C>
Public Service First Mortgage Bonds, 1 June 30, 1998 $41,859,900
Company of New 1995 Series A
Mexico
Public Service First Mortgage Bonds, 1 June 30, 1998 $58,140,100
Company of New
Mexico
</TABLE>
<PAGE>
Schedules II, III, IV, V, VI, VII and VIII to be updated and provided by the
Borrower.
Closing Document No. 2.1
SEVENTH AMENDMENT TO AGREEMENT TO PURCHASE AND SELL
THIS SEVENTH AMENDMENT TO AGREEMENT TO PURCHASE AND SELL (this
"Amendment") is made as of the 30th day of June 1995, by and between the
City of Santa Fe, New Mexico ("Purchaser"), and Public Service Company of
New Mexico ("Seller"). Unless otherwise defined herein, any term which its
initial letter capitalized shall have the meaning ascribed to it in that
certain Agreement to Purchase and Sell (the "Agreement"), dated February 28,
1994, by and between Purchaser and Seller, as amended by that certain First
Amendment to Agreement to Purchase and Sell (the "First Amendment"), dated
April 29, 1994, that certain Second Amendment to Agreement to Purchase and
Sell (the "Second Amendment"), dated June 29, 1994, that certain Third
Amendment to Agreement to Purchase and Sell (the "Third Amendment"), dated
June 30, 1994, that certain Fourth Amendment to Agreement to Purchase and
Sell (the "Fourth Amendment"), dated August 30, 1994, that certain Fifth
Amendment to Agreement to Purchase and Sell (the "Fifth Amendment"), dated
October 31, 1994, and that certain Sixth Amendment to Agreement to Purchase
and Sell (the "Sixth Amendment"), dated December 31, 1994. All references
to the Agreement shall be as amended by the First Amendment, Second
Amendment, Third Amendment, Fourth Amendment, Fifth Amendment and Sixth
Amendment.
RECITALS
WHEREAS, Purchaser and Seller executed the First Amendment, Third
Amendment, Fourth Amendment, Fifth Amendment and Sixth Amendment to, among
other things, extend the time for performance or exercise of certain of
Seller's and Purchaser's rights under the Agreement; and
WHEREAS, Purchaser and Seller desire to extend further the time for
performance or exercise of certain of those rights, and to amend and clarify
their respective rights and obligations by further amending the Agreement
and confirming certain matters, all as provided in this Amendment.
NOW, THEREFORE, in consideration of the foregoing, the mutual promises
and agreements contained herein and other good and valuable consideration,
the receipt and adequacy of which are hereby acknowledged, the parties
hereto agree as follows:
AGREEMENT
1. Materials and Supplies, and Service Agreements shall not be
included in the Assets and shall be Excluded Assets. Accordingly, Section
1.1.4 of the Agreement is hereby amended to delete the phrases "Materials
and Supplies," and "Service Agreements," and Section 1.1.21 of the Agreement
is hereby amended to insert the phrase "Materials and Supplies, Service
Agreements, Plans, those contracts listed on Schedule 1.1.21," immediately
after the phrase "Common Plant,". Section 1.1.14 and Section 11.2.5 of the
Agreement are hereby amended to delete the phrase "Service Agreements"
wherever it appears. In the last sentence of Section 1.1.4 the phrase "or
Excluded Obligations" is hereby added after the phrase "Excluded Assets".
2. Section 1.1.73 of the Agreement is hereby amended to read:
1.1.73 UCC Filings. As defined in Section 7.7.
3. Section 1.1.77 of the Agreement is hereby amended to read:
1.1.77 Transactions. The purchase and sale of the
Assets and the execution of the Operating Agreement
pursuant to this Agreement.
4. Section 3.2.1 of the Agreement is hereby amended to substitute
the word "two (2)" for the word "fifteen (15)".
5. Section 5.8.2 of the Agreement is hereby amended to insert the
following phrase in the second sentence immediately after the phrase "To
Seller's Knowledge," and in the third sentence immediately before the phrase
"are all the certificates . . .":
. . . except for the possible requirement for a
special use permit from the United States Bureau of
Land Management as described in Schedule 5.8.1,
. . .
6. Sections 5.16.3(A)(2), (3) and (4), 5.16.3(B)(v), 5.16.4, 5.16.6
and 5.16.7 of the Agreement are hereby amended to add the following phrase:
. . . provided, however, that the parties expressly
acknowledge that the SEO has proposed changes to
its dedication policy that may affect existing and
future dedications and offset requirements and that
such changes in policy, if adopted, and any
resulting effects on dedications and offset
requirements will not constitute a breach of any
warranty or representation made by Seller in this
Agreement.
7. Section 5.16.3(A)(2) of the Agreement is further amended to
insert the phrase:
. . . subject to claims by the SEO, the New Mexico
Attorney General's office or any other third party
that notice of the SEO application resulting in
Permit No. RG-20516 et al. was in any way
insufficient or illegal, and . . .
between the phrase "10,000 acre feet of water per year," and the phrase
"subject to the operation of New Mexico law".
8. Section 5.16.3(A)(8) is hereby amended to insert the following
phrase at the beginning of clauses (iii) and (iv):
Except for any use of water appropriated from the
Country Club Estates well prior to December 20,
1994, which would not be permitted by the cease and
desist order set forth in the letter of that date
from the SEO to SDCW, . . .
In addition, Section 5.16.4 is hereby amended to insert the same phrase
immediately preceding the phrase "all conditions of approval".
9. Purchaser and Seller hereby amend Section 7.4.2 of the Agreement
to provide that (i) the Inspection Deadline is hereby extended to June 30,
1995, (ii) Purchaser's right to terminate the Agreement pursuant to Section
7.4.2 shall expire if not exercised on or before June 30, 1995, (iii) if
Purchaser elects not to terminate the Agreement pursuant to Section 7.4.2,
Purchaser shall deliver a Waiver Notice to Seller on or before June 30,
1995, and (iv) the deadline for Purchaser to notify Seller of an
Environmental Condition shall be extended until June 30, 1995. If Purchaser
fails to deliver a Waiver Notice to Seller on or before June 30, 1995,
Purchaser shall conclusively be deemed to have elected to terminate the
Agreement. The effect of such a termination shall be as provided in Section
7.4.2. If Purchaser notifies Seller of an Environmental Condition on or
before June 30, 1995, Purchaser and Seller shall have their respective
rights to correct such matters, indemnify Purchaser, pay costs, remediate,
or undertake some other alternative, in the case of Seller, or waive such
matters or terminate the Agreement, in the case of Purchaser, on the time
frames set forth in Section 7.5.2 of the Agreement. Even though this
Amendment is executed after February 28, 1995, the parties intend that it
be effective as of February 28, 1995, and accordingly, the Agreement shall
not be deemed to have terminated pursuant to Section 7.4.2 of the Agreement
on or after February 28, 1995.
10. Purchaser and Seller hereby amend Section 7.6 of the Agreement
to extend the Governmental Permit Deadline to June 30, 1995; provided,
however, Purchaser's right to terminate the Agreement pursuant to Section
7.6 shall terminate unless Purchaser notifies Seller, on or before June 30,
1995, that it has determined that it will be unable to obtain the
transference or issuance of any Governmental Permits or Non-Transferrable
Governmental Permits necessary to use the Assets as they currently are being
used or to operate the Business as it currently is being operated.
11. The amount "$5,900,000" appearing in Section 5.11(ix) and
Section 7.1.1 of the Agreement is hereby increased to "$9,000,000".
12. The phrase "Within 90 Days" in the first sentence of
Section 7.2.1 of the Agreement is hereby amended to "Not later than the
Closing Date".
13. Sections 9.7.2 and 11.2.2 of the Agreement and Schedule 9.7.2,
all relating to the Cerro Gordo Road Easement, are hereby deleted in their
entirety. The phrase "Reserved for future use" shall be substituted for the
text of Section 7.2. A new Section 11.2.2 is hereby added to the Agreement,
providing:
11.2.2 UHF Communication Link Easement. The
easement required by Section 9.7.3 of this
Agreement, executed and acknowledged by Seller and
accepted by Purchaser.
14. Section 11.2.11 of the Agreement is hereby amended to read:
11.2.11 Seller's Required Consents. Copies of
Seller's Required Consents.
15. Section 11.2.21 of the Agreement is hereby amended to read:
11.2.21 Updated Title Insurance Commitment and
Other Documents. The updated title insurance
commitment and ALTA closing protection letter in
accordance with Section 7.3.1 of the Agreement, and
such other documents to be delivered by Seller
hereunder, or as Purchaser or its counsel may
reasonably request to carry out the purposes of
this Agreement.
16. The text of Section 11.3.9 of the Agreement is hereby deleted
in its entirety, and the phrase "Reserved for future use" is inserted in
lieu thereof.
17. Replace Section 11.4.1(i) in its entirety with the following:
"i. Notwithstanding anything to the contrary
herein, (A) real estate and personal property taxes
shall be prorated on the basis of the 1994
valuations and the 1994 mill levies, and shall be
subject to readjustment as soon as the actual 1995
valuations and mill levies are conclusively
determined, and (B) Seller shall be responsible to
pay at or prior to Closing any special assessments
which may be a lien on the Property. As the owner
of real or personal property pursuant to this
Agreement, the Purchaser may have no or reduced
(with respect to the liability of Seller) real or
personal property tax liability. No proration of
real or personal property tax liability shall make
the Purchaser liable for any tax not owed by the
Purchaser."
18. Section 9.3 of the Agreement is hereby amended to change "11:59
p.m. (Mountain Standard Time)" to "12:01 a.m. (Mountain Daylight Time)".
19. Schedule 9.8 of the Agreement (the Operating Agreement) is
hereby amended and restated in the form attached hereto as Exhibit "A".
20. Without waiving any of Purchaser's rights with respect to
Encumbrances, Seller shall remain liable for, and hold harmless and
indemnify Purchaser for, any mechanic's liens for work done or materials
furnished prior to the Closing Date with respect to (i) the property
identified as the "Agua Fria Booster and Well" on Schedule 1.1.38A-1, and
(ii) the property being acquired by City on the date hereof pursuant to that
certain Agreement Relating to the Sale of Real Estate, dated February 28,
1994, between Seller and Purchaser.
21. Section 14.9 of the Purchase Agreement is hereby amended by
adding the following sentence at the end of the section:
Without limiting the generality of the foregoing,
in the event that Seller or Purchaser discover
additional Assets, including, but not limited to,
Real Property, easements, licenses and
rights-of-way, that were not specifically included
in any of the transfer documents set forth in
Section 11.2 hereof, then (i) in the case of such
a discovery by Seller, Seller shall immediately
notify Purchaser and, upon the request of
Purchaser, deliver to Purchaser the appropriate
transfer document duly executed and, if
appropriate, ready for recordation, and (ii) in the
case of discovery by Purchaser and notification by
Purchaser to Seller, Seller shall immediately
delivery to Purchaser the appropriate transfer
document duly executed and, if appropriate, ready
for recordation.
Subject to Seller's obligations under Section 14.9 of the Agreement, Seller
and Purchaser acknowledge and affirm that the transfer documents executed
and delivered at Closing are intended to convey all of the Assets, but only
the Assets, which Seller is required to convey to Purchaser pursuant to the
Purchase Agreement.
22. Section 11.2.4 of the Agreement is amended in its entirety to
read:
"Assignment of Real Estate Leases. An assignment
of all of Seller's right, title and interest in and
to Seller's interests in real property in the form
attached as Schedule 11.2.4, duly executed and
acknowledged by Seller and Purchaser assigning to
Purchaser the interests of Seller in Real Property
subject thereto, together with the original
executed copy of each lease."
23. Seller, at Purchaser's request, is not making express exception
in the deeds delivered pursuant to Section 11.2.1 of the Agreement for the
Permitted Encumbrances listed in Schedule 1.1.48. Purchaser acknowledges
and affirms, nevertheless, that (i) all matters listed in Schedule 1.1.48
are Permitted Encumbrances, (ii) notwithstanding the special warranty
covenants from Seller in applicable deeds Purchaser is accepting title to
the Assets for itself and its successors and assigns subject to the
Permitted Encumbrances, and (iii) the Permitted Encumbrances shall never
constitute a violation or breach in any respect of Seller's special warranty
covenants by Purchaser or by any person claiming by, through or under
Purchaser.
24. Purchaser, as of the date of this Amendment, hereby waives its
rights of termination under Sections 7.4.2, 7.5.2, and 7.6 of the Agreement.
This paragraph shall constitute Purchaser's Waiver Notice under Section
7.4.2 of Agreement.
25. Purchaser hereby waives any applicable requirement under Section
7.1.2 for Purchaser's prior written consent to the making of any contract
listed on the most recent updated version of Schedule 1.1.14 to the
Agreement provided to Purchaser, to the making of any amendments to any such
contracts disclosed to Purchaser prior to the date of this Amendment and to
the cancellation of any contract if such cancellation was disclosed to
Purchaser prior to the effective date of this Amendment. As to the
contracts listed on the most recent updated version of Schedule 1.1.14 of
Agreement, Purchaser further acknowledges that, to its knowledge, Seller has
complied with the notice requirements of Section 7.1.6 of the Agreement.
26. Seller or Purchaser's failure to comply with the terms of this
Amendment shall be a breach of that Section of the Agreement to which such
failure relates and Purchaser or Seller, as the case may be, shall have all
rights and remedies provided to Purchaser or Seller, as the case may be, by
the Agreement for such breach. As amended by this Amendment and by the
First Amendment, Second Amendment, Third Amendment, Fourth Amendment, Fifth
Amendment and Sixth Amendment, the Agreement is hereby ratified and declared
to be in full force and effect.
IN WITNESS WHEREOF, the undersigned have executed this Seventh
Amendment to Agreement to Purchase and Sell as of the date first above
written.
PUBLIC SERVICE COMPANY OF NEW MEXICO,
Seller
By:
---------------------------------
M. PHYLLIS BOURQUE
Senior Vice President,
Energy Services
CITY OF SANTA FE, NEW MEXICO,
Purchaser
By:
---------------------------
DEBBIE JARAMILLO, Mayor
ATTEST:
By:
----------------------------
YOLANDA Y. VIGIL, City Clerk
