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7TH JUDICIAL DISTRICT COURT

SIERRA COUNry NM
FILED IN MY OFFICE

1W1l2U5 1:40:13 PIt/


DISTRICT COURT CLERK

/s/ Lindsey

SEYENTH JUDICIAL DISTRICT COURT


COUNTY OF SIERRA
STATE OF NEW MEXICO

Huston

IIOT SPRINGS LAND DEVELOPMENT, LLC,


A New Mexico Limited Liability Company, and
HOT SPRINGS MOTORPLEX DEYELOPMENT, LLC,
A New Mexico Limited Liability Company,
Plaintiffs,

Y.

No. D-721-CV-2014-00073

CITY OF TRUTH OR CONSEQUENCES,


A New Mexico Municipality,
Defendant.

DEF'ENDANT,S MOTION foT SUMMARY JUDGMENT


on COUI{TS I and tr and MEMORANDUM in SUPPORT

COMES NOW Defendant, the City of Truth or Consequences ("the City"), through
undersigned counsel, and hereby moves

for summary judgment pursuant to Rule 1-056(8),

NMRA on Counts I and tr of Plaintiffs' Complaint for Damages. The grounds for this motion
are that the Option Agreement

for Purchase and Sale of Rights referenced in Counts

I and II

terminated by its own terms, and Plaintiff Hot Springs Motorplex Development, LLC ("Hot
Springs") failed

to

exercise

its option under the

agreement. Therefore, no breach

of

contract

occurred.

Plaintiff Hot Springs Land Development, LLC is not a party to the agreement.

I.INTRODUCTION
The Option Agreementwhich is the subject of these claims related to a grant of sole and
exclusive option by the City to Hot Springs Motorplex Development,LLC to purchase water and
sewer capacity at set prices for a set duration. Plaintiff paid two hundred thousand dollars

10/1/2015

($200,000) under the Agreement, and the City held the water and sewer capacity for the benefit

of Hot Springs for the entire period of the Agreement. Plaintiff never exercised any option
pursuant to the agreement. The Option Agreement expired under its durational terms, and each

party received the benefit of its bargain. The Option Agreement for Purchase and Sale of Rights

is attached as Exhibit

to this motion. The Option Agreement was amended once to extend the

duration of the option to purchase for ninety (90) days from February 73,2011 until August 13,

2011. The First Amendment to Option Agreement for Purchase and Sale of Rights is attached as
Exhibit 2.
Count

I of Plaintiffs' Complaint alleges Breach of Option

Agreement as a claim for

money damages. Complaint, p. 12. Count tr alleges Breach of Option Agreement and asks for
the equitable relief of rescission. Complaint, pp. l4-15. Neither remedy is available to Plaintiff
because the City was in

full compliance with the Agreement terms,

and the options expired under

the durational term of the Agreement. Additionally, Plaintiff irrevocably waived any right to
damages in the event of a default by the City, absent strict compliance
agreement, which procedures were not

followed. Ex.

with procedures under the

1, fl9.

Hot Springs Motorplex Development, LLC notified the City on or about August 9, 2011
that

it wanted to exercise a partial option under the Agreement. However, for numerous

described below, the August

g,

reasons

2Ol1 letter was not effective to exercise any option under the

terms of the Agreement; and, therefore, the options to purchase sewer and water capacity expired
on August 13,2011.

Plaintiffs correspondence of August 9,2A11 is attached

as

Exhibit

3.

The

City's response to this letter from the City Attorney denying the purported exercise of an option
is attached as Exhibit 4.

The Affidavit of the City Manager and the Affidavit of the City Water/lVastewater
Director in support of this motion are attached as Exhibits 5 and 6, respectively.

Other claims in the Complaint have been dismissed based upon the expiration of the
statute of limitations. The instant motion only addresses the two counts which are not barred by
the three year statute of limitations.

Standard for Summary Judsment

"A party

against whom a claim

ffidavits for a summary judgment

as

... is asserted ... may move with or without

supporting

to all or any part thereof." Rule 1-056(8), NMRA.

"Summary judgment is appropriate where there are no genuine issues of material fact and
the movant is entitled to judgment as a matter of law. Where reasonable minds will not
differ as to an issue of material fact, the courl may properly gmnt summary judgment.
All reasonable inferences are construed in favor of the non-moving party."

Montsomery v. Lomos Altos. Inc., 2007-NMSC-2, fl8, 141 N.M 21, 150 P.3d 97 I.

II. STATEMENT OF UNDISPUTED MATERIAL FACTS


1.

Hot Springs Motorplex Development, LLC ("Hot Springs") and the City of Truth or
Consequences entered into an Option Agreement for Purchase or Sale of Rights ("Option

Agreement" or "the contract") on August


2.

77

,2007

Complaint,

l2l. Exhibit I hereto.

The Option Agreement granted an option to Hot Springs to purchase available sewer
capacity, a right of first refusal to purchase future sewer capacity and available water
capacity, and a right of refusal to purchase future water capacity from the City for prices
set in the agreement, paragraph 3, and more specifically delineated in Ex.

Agreement. Ex.

l,

B to the Option

and Ex. B thereto.

As consideration for the Option Agreement, the City agreed to hold the current sewer and
water capacity and future capacities off the market for the period of the agreement, unless

,:

Hot Springs gave written permission to release any portion of the capacities covered by
the Option Agreement. Ex.

4.

I, ll l.

As consideration for the Option Agreement, Hot Springs paid two hundred thousand
dollars ($200,000) to the City. Ex.

5.

fl2; Ex. 5,

Fx.l,

n3.A.

The Option Agreement set the purchase price for available water capacity at four million

l, Recital A;

Ex. A and Ex. B to Ex.

and B to the

1.

The right to purchase water capacity granted under the Option Agreement is the right to
purchase eighty percent (80%)

utility

9.

Er. I, n3.8.

The right to purchase available sewer capacity is defined in Exhibits


agreement. Ex.

8.

Affidnvit of Juan A. Fuentes.

fifty-five thousand seven hundred twenty-eight dollars ($2,755,728.00).

eighty-thousand dollars ($4,080,000.00).

7.

fl7 ,

The Option Agreement set the purchase price for available sewer capacity at two million
seven hundred

6.

l,

system.

fu. A.13

to Ex.

of the existing annual capacity of the municipal water

l.

The water capacity reserved under the Option Agreement amounted to six hundred eighty

(680) acre feet per year at a price of six thousand dollars ($6,000.00) per acre foot per
year. Ex. B to

fu. l.

10. The contract states that

"This Agreement shall expire and shall be deemed terminated if

Hot Springs fails to exercise its option, or any part thereof, on or before February
2011

."

Ex.

l,

13,

Jl5.

11. The parties agreed

to an extension of the contract until August i3, 2011 in the First

Amendment to Option Agreement for Purchase and Sale of Rights. Ex. 2,

\Lb

12. The First Amendment to the Option Agreement states "Any failure by either Party at any

point in time during the term of the Option Agreement, as amended, to insist upon strict
and timely compliance with the terms and provisions

of such document shall not

deemed a waiver either expressly or impliedly by either Party

be

or [sic] any of their

respective rights under any such document nor shall the same excuse the other Parly's
obligation to strictly and timely perform its obligation hereunder and therein."
13. The contract states that

b.

2, n4.

"This Agreement, including Exhibits A and B attached hereto,

contains the entire Agreement between the

City and Hot Springs and a1l other

representations, negotiations and agreements, written and oral, including any letters

of

intent which pre-date the Effective Date hereof, with respect to Rights or any portion

thereof, are superseded by this Agreement and are

of no force and effect.

This

Agreement may be amended and modified only by instrument, in writing, executed by all
parties hereto." Ex.

l, \16.

14. The contract specifies the manner

agreement

in

paragraph

in which Hot Springs exercises any option under the

4. It requires 1) written notice given within the time of the

Agreement,2)by U.S. Mail, facsimile, or hand delivery 3) to the City Manager 4) with a
copy to Jay Rubin, EsO, 5) specifying the number and nature of rights to which the
option is being exercised, 6) indicatin g
notice. Ex.

l,

datefor closing within 10 to sixty days of the

n14, 24.

15. The "closing" of a purchase of rights requires payment of "good funds" to the City

Utilities Departinent, which are defined as "immediately availa.ble U.S. federal funds."
Ex. t,!T.]T3.C and

6.

15. Greg Neal, on behalf of

Hot Springs, sent a letter to the then City Manager on or about

August 9,2011 that "Hot Springs wishes to purchase $200,000 worth of non-adjudicated
transferable water" "pursuant to Section 4 of the Option Agreement .- Ex.
17. This letter did not contain the information required to be specified

3.

in a notice of exercise

of option: specifically the number and nature of the rights being exercised, and a date for
closing. Er.
18.

3.

This leuer indicated that Hot Springs wished to purchase $200,000 worth of nonadjudicated water. The Option Agreement was for eighty percent (80%) of the City's
available water capacity, and has no reference to "non-adjudicated" water. Ex. 3; Ex. A to

Fx. l.
19. The Option Agreement states that

"All Deposits shall

apply to and be credited against the

Purchase Price, and shall be equally divided between the Sewer Purchase Price and the

Water Purchase Price at the exercise of the Seventh Option (as these terms are defined
below;."E Ex.

I,12.D.

The"Purchase Price" is defined as the "Sewer Purchase Price, the

Future Sewer Purchase Price


Purchase Price

(if

any), the Water Purchase Price, and the Future Water

(if any)." Ex. 1, n3.C.

20. The Option Agreement indicates that the "Purchase Price" is the sum of the purchase

prices for water and sewer capacities, or six million eight-hundred thirty-five thousand
seven hundred twenty-eight dollars ($6,835,728.00). Ex.

21. The Option Agreement requires the payment

1,l3.A;

See also

Ex. C to Fx.

l.

of a "Purchase Price" relating to water

capacity and/or sewer capacity in order for any deposit to be credited against a "purchase

price,' and the deposits "are nonrefundable to Hot Springs unless the City defaults

The Option Agreement does not contain any definition or reference to the "seventh Option"

hereunder or cannot deliver any or all of the Rights pursuant to the fOption Agreement]."

Ex. t, 12.D.

22.Hot Springs did not pay or

agree

to pay to the City "the Purchase Price for the Rights

then being purchased, in certified United States funds...." as required by the contract.
Ex.

l, n2.C.; Ex. 5, nl1, Affidqvit of Juan A. Fuentes.

23.Hot Springs never extended any water or sewer transmission lines from its property to
connect to City water or sewer lines as required by the contract to receive City services.

Ex. l,110.C; Ex. 5,

n1^3,

Afrtdavit of Juan A. Fuentes.

24.The Option Agreement expires and is deemed terminated if Hot Springs fails to exercise

its option, or any part thereof on or before August 13,2011. Ex.


[extends date /rom February ] 3,

20 I

l,

n5; Ex. 2, nl.b

until August I 3, 201 il.

25.The contract requires Hot Springs to give the City "a reasonably detailed notice
specifying...breach," and a thirty day period to cure. Ex.

l, \9.

26. The City did not receive a notice of a breach of the Option Agreement or an opporfunity

to cure the alleged breach.


27 .

The contract provides that the City has thirty (30) days to cure a breach.

If the City

does

not do so, Hot Springs must give the City notice of its election of remedies, either
specific performance or return of the "deposit" within thirfy (30) days of the City's

default. If Hot Springs does not give notice of its election of remedies to the City, it
cannot demand specific performance and
any right to damages." Ex.

l,

fl9.

"Hot Springs

agrees that

it irrevocably

waives

28.

At all times of the duration of the Option Agreement, the City possessed the water
sewer capacity indicated in Exhibits
same to the benefit of

and

and

B to the Option Agreemenl and reserved the

Hot Springs. Ex. 6, 18, Affidavit of Jesus A. Salayandia.

29. The Option Agreement provides that the prevailing party in litigation regarding the
enforcement of the Agreement shall be awarded attorney's fees and costs

of suit. Ex. l,

12s.

III. MEMORANDUM

A.

of POINTS and AUTHORITIES

Law Resardins Ontion Contracts


This case requires the interpretation of an option contract. "An option is a contract

whereby one party agrees to keep an offer open for a stated period of time upon specified terms
and conditions, and may become binding upon both parties, depending on whether the optionee
exercises his

right." Zobel v. Bellamah Land Co.. 1967-NMSC-269,fl9,78 N.M 586,

205, citing Hoffmann v. McCanlies. 76 N.M.

2I8,220,

413 P.2d 697

435 P. 2d

"An option is

698 (1996).

'a continuing and irrevocable offer which the optionor cannot withdraw during a stated period. It
vests the optionee

with a power of acceptance, and when the optionee accepts the offer in the

prescribed manner, the option is deemed to have been exercised as to create a binding bilateral

contract."' Fru-Con Construction Com. v. KFX. Inc.,

153 F.3d 1150, 1157-1158 (1Oth

Cir

1998)

(citation omitted). "To be valid, an option must be supported by consideration, and'the


consideration for the option [must be] a thing apart from the consideration for the [underlying]

sale."' Id., p. 1158, citing lo Ragan v. Schreffler" 306

W.2d 494,499 (Mo. 1957).

To be legally enforceable, a contract requires consideration exchanged between the


parties. See Garcia v. Middle Rio Grande Conservanclz Dist., 1996-NMSC-029,

'lT

9, 121 N.M.

728,978P.zd7. Consideration sufficientto support a contract may be money payment or cafl

"be either a detriment incurred by promise or a benefit to the promisor." Fru-Con Construction
Corp.,

ll58

(citations omitted).

In order to exercise an option granted pursuant to an option contract, the optionee must

give an "unequivocal and unqualified expression of intention to exercise an option


affirmative performance of the expressed method of exercising

it.''

and

Northcutt v. McPherson,

1970-NMSC-099, fl 9, 81 N.M. 743,473 P.2d357, (citations amitted). "The language of the


agreement itself controls as to what act or acts constitute an election to exercise an

B.

option." Id.

Hot Sprinss Did Not Exercise its Ontion Under the Contract and so the Option
Agreement Expired Under its Own Terms.

Hot Springs required the assurance of certain utility services in order to proceed with
development plans for real property

in Sierra County. Therefore, Hot Springs requested

obtained the sole and exclusive rights to connect to City water and sewer services
equal

and

in an amount

to a portion of the available supply. The full and complete agreement for these option

rights is contained in the Option Agreement for Purchase and Sale of Rights, Exhibit 1. Fact 13.

As consideration for the contract, the City agreed to hold the agreed upon cuffent

and

future sewer and water capacities off the market for the four (4) years of the agreement, for the
sole and exclusive benefit of

Hot Springs. Er.

l;

Facts 2-3. The First Amendment to Option

Agreement for Purchase and Sale of Rights extended the option contract for an additional ninety

(90) day period, until August 13,2011. Ex. 2,

T.b; Fact 11. As consideration for the contract,

Hot Springs paid the City two hundred thousand dollars. Fact 4. This payment is referenced in
the contract as "Deposits." Ex.

Ir12.

The contract calls forpayments of "purchase prices" for

available sewer connections and available water capacity in U.S. federal funds. Fact

15.

The

contract allows for Hot Springs to exercise purchase options in increments, or portions. Ex.

l,

nn4,

5;Fact24. If Hot

Springs fails to exercise its options by the termination date of the option

contract, the contract expires and is deemed terminated. Ffr. 1, fl5; Fact 24.

1.

Hot Sprinss' letter of August 9" 2011 is invalid to exercise anv option under
the contract.

Although Plaintiffs allege that Hot Springs attempted to exercise its options under the
contract on August 9,2071 (Complaint,

n6n, the letter by Greg Neal to the then City Manager,

Ellen Lindsey on that date, (Ey. 3) does not comply with the terms for exercise of an option to
purchase water under the contract. Although the leuer specifically references Section 4 of the

Option Agreement, Mr. Neal failed to comply with that paragraph in several respects. The letter
refers to "non-adjudicated, transferable water." The water rights capacity refers to increments

water owned by the City in units of


dollars per acre foot. Er. B to Ftx.

l.

"AFY'

of

(acre feet per year), at the price of six thousand

There is no reference in the contract to "non-adjudicated"

water. F'act 18. The only manner in which water is sold under the contract is through water
transmission lines, which lines are the responsibility of Hot Springs to construct. Fx. 1,110 C;

Bact 23. No such lines have been constructed. Fact

23.

Thus, the letter fails to specify the

"nature of rights" required under the notice provision of the contract. Ex. I , 14; Fact 14.
The letter failed to specify "the number" of the rights sought.to be exercised, but merely

statedthe desire to "purchase $200,000 worth" of water. Fact 16. The letterfailed to specify a

"closing" date for the purported purchase as required by the contract. Ex.

I, \4;

Fact 17. A

"closing" is required for the purchase of rights, which requires payment of "good funds" to the
City's Utilify Department, on a date stipulated in the notice of exercise of an option . Ex.

l, J1J13-

7; Facts 14 and 15. The August 9, 2011 letter did not reference any payment of funds to the
City for

a "purchase

price." Fx. 3;Facts 17,

2l and22.

10

The Option Agreement expressly grants the parties the right to insist upon strict and

timely compliance with the contract terms. Ex. 2, 14; Fact 12. The City is entitled to the
affirmative performance of the expressed method of the exercise of an option by Hot Springs.
Northcutt v. McPherson. Hot Springs failed to timely comply with the notice requirements of
the contract in order to exercise an option to purchase water under the agreement.

The Option Agreement provides that

if Hot Springs fails to exercise any option, the

contract terminates or expires on the agreed upon date, August 13,2011. Ex.

Fact 24. Because the letter of August 9, 2011 was not

15; Ex. 2, fll.b;

valid exercise of any option, the Option

Agreement terminated by its own terms, both parties received the benefit of their bargain, and
neither party has liability to the other party.

C.

Even if the August 9, 2011 Letter Were a Valid Exercise of a Partial Option Under
the Contract. Hot Sprines is l{ot Entitled to Anv Damases From the Citv Pursuant
to the Express Contract Terms.

The City Attorney, Jaime F. Rubin, responded to the Hot Springs letter on or about
August 29,2077. Ex.

4.

His letter explained the multiple grounds

as to

why Hot Springs did not

comply with the Option Agreement terms, and an implied attempt to convert the "deposif' to a
purchase price was invalid.

Plaintiffs' Complaint alleges that the City breached the Option Agreement by rejecting
Hot Springs attempt to exercise its options. Complaint, llBB. However, the Complaint fails to
allege that Plaintiff provided the City with a reasonably detailed notice

of a breach of the

contract, nor the opportunity to cure a breach, as required under the agreem ent. Ex.

l,

119;

Facts

25-26. No such notice was received, and this contract provision works to prohibit any claim for
damages, or specific perlormance under the contract. Facts 26-27.

11

D.

Hot Sprinqs is Not Entitled to Rescission of the Contract.


Counts

I and tr of the Complaint allege that "[u]pon information

and

belief' the City did

not have ability or authority to provide Plaintiffs with eighty percent of the City's current excess
water and sewer capacity and ninety-five percent of the City's future water and sewer capacity.
Complaint,'ulT 100, 107. The Complaint fails to specify the source of this information or belief,
and Defendant is unaware of any basis for

it.

Fact 28. Because the City reserved the water and

sewer connection availability for Hot Springs during the period of the Agreement, its forbearance

of allocating these utilities to other developers constituted sufficient consideration under

the

contract. Plaintiffs are, therefore, not entitled to the remedy of rescission as requested in Count

II because they have received the full benefit of their bargain.

E.

The Citv is Entitled to Pavment of its Attorneys' Fees bv Hot Springs.

The Option Agreement provides that the prevailing parly in litigation to enforce the
contract shall be awarded reasonable attorneys' fees. Ex. 1,

fl 25; Fact 29. Should the Court

grant this Motion for Summary Judgment on Counts I and tr relating to disputed claims under the

Option Agreement, Defendant asks for an award of its reasonable attorneys' fees and expenses

incurred. Where a contact contains an unambiguous provision for attorneys' fees to

the

prevailing party, the failure to enforce it is an abuse of discretion. Dennison v. Marlowe, 1989NMSC-041, flfl6, 8, 108 N.M. 524,755 p.2d726.

IV. CONCLUSION
Count
based upon

I of the Complaint

asks for money damages for breach of the Option Agreement

Plaintiffs' claim that the City falsely warranted that it could provide the option for

designated sewer and water capacity, and that

it breached the agreement by refusing to honor

an

attempted exercise of its option. There is no factual basis for the allegation that the City did not

L2

have ability and authority

to provide the utilities to Hot

Springs under the terms

of

the

Agreement. Therefore, the City provided good and sufficient consideration under the Option
Agreement and no breach is stated.
Fufiher, Hot Springs did not strictly comply with the requirements to exercise any option
for water service, and because the parties and the case law require strict compliance with contract
terms to exercise an option, this claim for breach against the City also

fails. Even if the City

were in breach, the Option Agreement has strict notice provisions, requiring an opportunity to
cure, and timely election of a remedy against the City in event of default. These provisions were

not followed by Hot Springs, and so the very terms of the contract prohibit any award of
damages or return of its deposit to Hot Springs.

Hot Springs claims this remedy of rescission on the basis of alleged failure of
consideration. However, this remedy is based upon an allegation that the City did not have the

ability to deliver the available excess sewer and water capacity referenced in the contract. Hot
Springs has provided no factual support for this allegation, made "upon information and belief."

Hot Springs has the burden to demonstrate specific evidentiary facts to require a trial on this
claim, and cannot merely rest on the Complaint allegations. Romero v. Philip Monis Inc..
2010-NMSC- 035, fll0, 148 N.M 713, 242P.3d280. (Citations omitted).
Therefore, on the basis of undisputed facts, the City is entitled to summary judgment in
its favor on Counts I and tr of the Complaint.

WHEREFORE Defendant respectfully requests that this Court grant its Motion for
Summary Judgment on Counts

and

II, for its attorneys'

fees and expenses

in connection with

this motion, and for such other and further relief that the Court deems just and proper.

13

Resp

By.

ectfully

sub

mitted,

/s/ Robvn Hoffinan

Robyn Hoffman, Esq.

ROBYNHOFFMAN, Esq. LLC


Post Office Box 836
Tijeras, New Mexico 87059

AND
James P. Sullivan, Esq.

BRENNAN &

SIILryAN,

P.A.

128 East DeVargas

Salta Fe, New Mexico 87501


(s0s) ees-8s14
Attorney

for Defendant

CERTIFICATE OB SBRVICE
The undersigned hereby certifies that on this 1't day of October, 2015, the foregoing was
served electronically through the Seventh Judicial District Court's electronic file and serve
system to the following:

Luis G. Stelzner, Esq.


Jaime L. Dawes, Esq.
Stelzner, Winter, Warburton
Flores, Sanchez, Dawes, P.A.
Post Office Box 528
Albuquerque, NM 87103
505-938-7770

505-938-7781 FAX
idrEstelzner.com

Attorneysfor Plaintffi

By:

/s/ Robvn Hoffinan

Robyn Hoffman
't4

THIS OyrrON AGREEIffiNT'FOR PURCHASE AND SALE OF RI0I{TS (lA$eemeat} is


rnade by. aud berween the CITI{ 0F TRtm{ OR CONSEQUENCES, 8ry"rt, f,vlelco m-Untoipal
*rporatirn (hereinafter refened to a* ihe 'Cili') at{ Hot,spriqgs Motorplex_Develorpment,
"HEt Sp:ing$ ')'
u N** iM+xico timitsd }iahility conrpaay ftereinafter referted to as

tti,

RECITAI-S
The City is the orvher of certain right$ putainTg lo fr: Cityt municipal utility systeus'
rSlghts't
flr defmed and more particularly described an Exhibit A,
lhese

A.

Tte Cigy is desirous of:granting to Hat Springs, and Hot Sl"try is desirous of purchasing
*a oUhj"i*g ilom the City, the exc.lusive optior to Flrrchase the Right* from the City as set
forth below.

B.

AffREEI\.ENI
NOW TIIEREFOE{E,

i[ consideration of the mutual covenants hereinafter set forth, the parties

hereto agree as follows:

1,

Cif-y granls to Hot Springs the sole and exclusiw optioa


Opfo:r Period defined below, to purchase tlre Righlsi suljr,ct to the terms
irevocable
and conditions of this Aglcement. The option hereby granted shall be exercisable dt any ti&e'
and from tt*. to tiue, in-*hole Or in part, dUring the Option Period defined below.

OmION, Ihe

witfrU

2,

.OP'IIOND.ryOsrr:

A,

the Cfiy rhe

hitial Dpposit On or before August 22,2007, Hot Springs slall gay.tg


su:u ,)f T.wEhry ffious+ad Dsllars ($20,000.00) as a initial _d+otit (the 'lloitial

G?"rirf- within its possas*ioi tsHst

Springs concerningrthe quaufity, oatwe, and. quality of the

Rights,

B,

Seco,nd DeEsit. Hot Spritrgs shall pay the City the tum. of One Hundred
pottars
($1S0;000-00) on or before (i) Fchntqy ,ry, 2l#8 oJ (1) fi've (5)
Eighty Thousaurd
tulines* days after rhe clo_$ing dare:cf, Hot Spriugs's caotempllted gi$ticlf$v$e land exchange
hetrxeen Uot Spr;ag$ and tne Nelv lvlexico State Land Offit+ ('l$ecpud l.and Exqhaq$e"),

w.hicheqer occurr

firtt.

Extension.of Secoad Deposits. Jf the Second Lmd Exchaoge does not


patagraph ? due io del*ys ca-ujed by. eithe the
occur withln ttr" time period d.*ignated io tnis
initiallaud exchange bet*nesn the Bureau of Land Management and tle New Mexico Statetrarid
to: ltt--y!
which is projected .t9 b1[*neml*t 2ry1'
Office t
pmjected
is
to be
eausrd Ufttitq"* Mexico [;ad Office in the Second I"and Exchaage, whieh
in December 200?, Hot Spring$ may extend pnymtnt +f the' Seti)trd Dgfglit by purchasing up, to
Gi* **t-**ion periodr. Hot Sprhg$ mfly puritrase an exteu*ion period by providing notice in

C,,

@),

:'

EXHIB]T

ten (10) days of the second


the manner for giving'notice provided ra this Agreement within
extension
fees:
n.po*itt due d*tl togither with paytn*t of the following

(ii
(ir)
(iii)

FirstExtension:

$2,000.00

Second Exteasion: $2,000'00

ThirdExtensioul

$2,000-00

date of the
Any such extension period shall last either (i) ninely (90] days or {ii) uutil the closing

Second l-and Exchange, whichever oceurs first.


and all extension fees, if any' shall be
be oedited against the
ref+rred to colleetively as "Dpg0E{q.u ,{ll Depositi shatl apply to and
purchase price, and snaU ue divided equally berwesn ths Sewer Purchase Price and the Water
purchase price at exercjse of the scheduted Seveath Option (as these teuns are defioed below).
Except as
The City need not separately ilccount for the Deposits, of, pay intereq thereo:r.
rurless the
Hot
Springs
otheri,iise expressly piovided-herein, thc Depositl. at-e_nog$rnAable to
or cannct deliver *y or all of ,rh: Ri8hts pwsulT to the terns hereof' If
cioy AJ*rtr-n

D,

the First Deposit, Second Deposit,

*r*i*r

the Deposits flre not paid by Hot springi


Apeement shall be null and void.

3,

in

Good Fmds (defiued belorv) when due, this

PURCTIASE PRICE

A,

purchase.-Price Relating to SewS,I.

Tte purchase price for Available Sewer

l'sewu Purdaqg-Eigq")' The sewer Purqhase Price


capacrty shall be $2,?55,?28"00 (lhu
*rirorfy inclu,rles u ifghi of first refiisat to ptxchas-e -f.umt" Sewer'Capacity as it becomes
at a pricre equal to the
available for Connecti#s after the Effective bate of fhis Agreeme.l:t

p"tfirn*

Erige").
price for such Ccnnections'kp or hoakup fees (the "Future Sewff Euchage

B.

pu$chase Price Relajing to .Water. The purchaseprice_for Available'Water

as may bi deteminecl in accorilanace with


g'(thu
the Water Purshase Price expressly
'@').
e.tibii A *A f*riUit
the actual
at d-ptice
Capaeity
Water
ilil; a right of first refirsal to purcn*" nutore
*-4tq
after the
Portfolio
Riehu
City's
lYater
to
the
pJ* pxa fi tl* purchase of waier rights added
("Fu!ue
purchase
agteement
*
Eff."iu" Date of r}is Ageement, as su"h price is evideaced by

capacity shall be

$+,@

lVuerPurp,b$ePrice").

C,

,,purchase

lltipe'' De.frlqd The Sewer Purchase Price,, the Future Sewer


Funre Water Purchase Price (if any)
Rrrchase price (if *yi, rfrc Wut*r f*.nuil-Prh", andthe
*'Pulchaie
Pnce." On any. closing Date (as
are referred to in this Agre+meut collectively as the
and
5 hereto, Hot Springs aErees to pay
hereinafter,defined) andla accordance with Paragraph* 4
t, tl" City the purchase Pnce for the Rights then legg_purchased, in certified United States
The
fuod*, Uy wire transfer or other irymediately available ll'Saj{erat funds {"gqqdl$rnd$")'
neposits *trall be credited against the Purchase Pnce at the Fina[ Closing'

4.

E)CER.CISE

pF OPTION. Hot Springs may exergise its option in wholeor in part

by grving *itter*otGEe-r*ofto the Crty at anytime on or before the expilation or lermination

such aotice shall


of fhis Agreement in the :lranser for giving notice provided,i* this Agreernent.
*p*ify tf,e auurber aud nature of Rights io which the option is being exercised and a date for
(a ''e-lggi:rg" or "Clssing Date'), which date shaIl not be lsss thar ten
.,'r,o*iof on the purchase
-th*
sixty (60) days after the date of the nodce of exffcise of option. Upon
(10) Jor *or"
i"iir".y of *ch notice, tiis Agreemeat and the notise of exercise of option shall constitutq in its
entirety, the conkact for sale of the Rights b+ing purchased'

5.

FINAL CLpSING. No iater than Febraary 73,2Ll7,notwithstaflding Closings


any
otr any po.tioo of th* option previorqly-exercisefl Hot Springs shall Close on its option fot
po$ioflof
.**Jitig Sewer Purcdase Price and Water Purchase Price ("Final-ebdgg'). If no
pay $6,635,728.00 at
the optioi is exercised inpartprior to February 13, 2011, Hot ftnings will
the
Closing.
This Agreement
Fiaal
upon
shall
terminate
the Ffual Closrng. fhis agreement
its
option,
or any part
fails
exercise
to
if
Hot
Springs
shall expire flftil sha1 be deemed terrninated
thereof, on orbefore February 13' 2011.

6"

shaE be haudled througlr the City's Utilities Deparfment.


parries need noibe proseat at Ciosing so long as Good Funds are timely received by the Citls
Utilities Departrnent. For a1l purpo*ts herein, the "Closi!g-tr4!c" or "el@g" shall bs the date

CLOSINS. Closing

pop;dy specified by H* Springs in the r*pectivlgotice of exercise. After Closing on


Righte iucluaing tut not limited to the Final Closing, Hot Springs may, in its sole discretion,

that is

*y

use such Rigfuts or allow others to use suehRights'

cLosING PROCEpURES. At each closing, the Rights thgn being purchryjd


hg*11rr*yETy th" Ciry to Hot Springs by a bill of sale, whi+h shali be prepared by Hot

7.

shatl
Springs.

iI

g.

Nohroithstanding anything to the contrary


the
contained in t1l* ggreemsf,t, Hot Springs shall not be in lrreach or default hereuader udess
(ii Hot
City is not in defauli hereunder, and within 20 days aftu H$ Springs's receipt of lotice
Agreement
under
this
Springs
Hot
of
any
obligation
Springs fails to cure any material breaeh of
*ni*ii* set forth in sulh notice or (ii) Hot Springs fails or refrrsfl.s to complete the punchase of
such
auy Rights as to which Hot Springs has exercieed its option to purchase herouuder. If any
retain
the
and
Agreernent,
this
terminate
may
period,
rhe
Ciry
failure-contiaues beyond sucbcw"
as
of
the
slipulate
that
an{
agree
The-pmties
Deposits as the ugried-upo, liquidired damages.
the
off
the
hotding
Rights
for
of
darnages
Edective D*te of-this Agreement, the exact amount
market rpould be exueilely dfficult to ascerlain aad that 1trs lsffiaining uneamed Deposits
constituts a reasonable andiair approximation of sudr damages alrd is not a penalty' The City
agrees that it irtevocably waives any other dght to darnages'

HOT SPRINGS'S DEFAULT.

g.

TIEJCIIY'S DEFAULT. Notwithstandirg anythine to the c0Etary coiltained_ iil


thi* Agr*e*"rrg 6"Effiuil oot be ia ilefault hereunder and Hot Springs shall rot be entitled to
o*r"iir *y remedies hereuuder unless Hot Springs ny rytl*flrlted hereunder, md the City (il
herein is or beco:nes false in
has howledge that eny repre$effation or warranly made by the Crty
made or
any mrterial respect; tir (ii) fam to eure its breeih of a material coye.nant or obligation
.,rriertak*o by tie Ciry here*rder withirr thirty (30) days of the City's receipt of a reascrably
detailed toti+e specifying surfo breach; or (iii) refuees t9 colvey aly Rights in accordance
herewirh, within rhirry-(3g) aays of the
)

Cilfs

receipr of notice of such breach. Any Closing shall

'

auromatically by extended to allorv the City to effect the abov+ referenced cures,
(30) day$
City's
After ths expiration of the cure period provided above, atd within thirry
!J the
of
the
one
of
Spryq1s
Hot
of
flotice
gtecti.on
defaulr, HoiSprings shall givc iU" Ci* rvritten
(ii)
or
hereunder'
obligations
of
thecitt's
folto.xdng ,"miai# (il to ieek specific perfomrance
to termirlate this Agreement and thereupon receive aretum of theDeposit'

(30) day period,


Sprirrgs fails to cause the City to receive sueh election within such thirty
Springs
agress th*t
Hot
perforrrance.
ffJSp*rg*Ihil huu* no further right to demand specific
a
if
following
it inroo*utiy waives any right to damages. Notwithstanding the foregoing rights,
d* City a*tiuu, tue citylai cr:red thsbreach priorto the City's exercise any remedy provided in
&i* egr*r**ot, tfr" Ciry shall have no further rig$tto exercise any temedy for the cwed default'

if Hot

10.

to ons anoth+r that


behalf af
each has capacity to eoil ioto-thrs Agreement and that the person signing below. on
rfoi spriog, o, ti* ciry represents rhfl l* or she is duiy authorized to executs this Agreement
and tobind the party for which he or she is simi:rg'

Authoritv. The parties hereby reprEsflnt

aucl ruauant

B.

The City's.'Wmrailty. The City r#arrailt$ that it is fhe owner of the Rights
that it has
identified in Exhibit B wldch-"vrflership is unencumbered. The Ciry flrrfher .wanatrt!
1aw or
*ny
viulation
of
any
Rights,
Bor
such
of
condition
no knowledge of any material defestive
regulation affecting such Righis

Mutual Acknowledement. The paties agree and acknowled-ge that it is


Hot Spring*,s ,*spoosibility io ext"od the sewer anil water tsn$mission system lines to Hot
tp"**rt froperty*om rhJclosest point that the Cify has its sewer and water transmission iines
that
at the time that Hot Sprinp elects io establish those Connecrions. It is frrrther understood
of
extension
iJ
the
liaes
Eansmission
the City may participuL irim* cost of the sewer and water
other
from
reiubursement
entitled
to
those line$ Uenents itre city. Further, Hot Spdngs will be
pnoplrty o*"*rs that connect to the selvsr und water tensmission liaes imtalled by l{ot Spnngs'
L uAaiiioo, the City:rill provide ss\rer and water service to Hot Spriugs as long as Hot Spriugs
A* c"mp5rd wirh att *ppii.aht*.tate and local regulations related to such consftuction.

C,

D.

No Waiver of Dcvelopment.Fees. The parties agrec. and acl<towledge


Hot Springs'
that tle City has not *aiu*a or forgiu*n ary fees and regulatiors relating to
provided,
developmeni project, and that such feei or regulations are not a part of this Agreement,
h;;;;-{rui flot Springs shall not be required to pay any "fe&s" that effectively duplicate
payment of the Purchase Price.
RIGHTS OFF TIIE MARKET. Prior to the expiratioB of termiEation of thit
agetrts, mernbers
Agreernent, tdcityJo, it*"H *.iits officers, directors, employe+s, advisors,
or negoliate
not
solicit
shall
(its
'BdaIed-Pg{tigg)
behalf
on
its
person
acting
or affiliares, or any
Capacity,
Current
Sewer
the
portion
of
th* t **f*rlor *ale of *y iuterest in any
E?
lyatff Capaciry, the Future $ewer Capacity or ihe Futffo Water Capacity to any third parfy

11.

9**t

without Hat Springs's pdor wriuen conseilt.

CONFmENTIALITY. The City and Hot Springs hereby agree to treat (and shall

lL.

to so treal} this Agreement as con{idential.


pJoi ro executiofi of &is Agreement and any Closing theforegoing $ontetrce will noJ be
Parties
consar*A to prohibit auy ofthe undersigned from disclosing to its respective Related
to be
neeessary
as
are
the
Ri$ts
about
information
Closingor
such terms of the Agreernentor
without
includirrg,
Closing
or
disclosed ta them iaorder to consurmate the Agreement
governing body and
limitation, the City's obligations to reveal the tertrs of such agreemeats to its
*iai*"fo*re obligaticnl mandated by the New Mexico Inspection of Public Recotds Act aad

**

gofi f*itn &-.rt* to raus* its RelatedParties

aay other applicable laws, rules or regulations.

SURRENDEts. IIot Springs may surrender all or part of the Rights to the City at
Springs shallhave
any time p,io, to[Gffioo *och Rights.-For any Riglris so su:=Endered, Hot
,o Clo**in *och surieadered Rights nor to p|{ the respective Sewer Purchase
Price shall
"o'ouiisutioo
Frice or"Water Furchase pricB relating to such surrendered Rights, and the Purehase
ffiinimum
the
from
amounts
leduced
deduct
such
be teduced accordingly. Hoi Springs may
discretion.
sole
Hot
Springs's
Closing requirements of subsequelrt siheddea Closings at

13.

RELEASE Upon written reque$t of the City, providing +vidence to Hot Springs
City of
of the need of futur* out*. capacrty or future sewer capacity for developments within-the
shall release to
Truth or Consequences that me unrelated to Hot Springs s_ptoporty, IIot Springs
ot amounts of
respect
the
aEouflt
to
refusal
with
the City, at no cost to the City, its right of flrst
ihe CitS at
re_quested
by
total Future Sewer Capacity anO/or the total Future Watm Capaciry

14.

the
u

reductioo-io *oy Hrhue Sewer Purchase Price or Future Wate{ Pruchase Price.

"oo**pording
15. gAPTION$. The captions contained herein are for coRvetience only and are not

a part of this Agreement.

ENTIRE AGREEMENT. Ttjs Agreement, including Exhibits A and-B attached


Agr.em"nt benreen the City and Hot Springs and all otler
hereto, cootrios th*
"otirc
letters of intent
representatiorls, negotiations arrd agreemrnts, rvrifien and oral, iecluding any
are
portion.thereof'
or
any
t9
the
*ti"n prr.datethe Effective Date fereof, witlt respect
$Shts
amended
may
be
This Agreement
supersedea by this Agreement and are of no force afld effect.
parties
hereto'
by
all
executed
in
writing,
insUurnent
and modifiedonly hy

16,

ASSIGNMENT. Except for an assignment to an afflrliate thereof, no pariy hereto


her+urrder to auy
shall have tU" ttght to assign this Agreement or any of its rights or obligations
parties' which
other
of
the
approval
writteu
the
without
entifi
p*r*o*, *rporalio* o, olth*,
approval shall not be unreasouably withheld-

ll,

PARTIES BOIIND. This Agfeement shall be binding upon the^parties, their


set forth above .
sucsessor$ *nd **igns, subj**t ta the provisions and limirations on assignment

lg.

APPLIC.ABLE I,AH. This Agreement shall


uuder the iaws of the State of Nsw Mexico'

19,

20.
Agreemeut

ir

te

consEued

by and eontrolleil

PARTIAL IFWAL4)ruY. Lr the event that any paragraph or-portion of ths


Uet*in"a to U* unconstitrrtional, urmfiforceable or invalid, such paragraph or

ftom and construedfor all purpotes not to.tortstitute a


?ortion of this A$eement sball bs sEicken
portion of this-Agreement shall rerrain ilr full force
the
remaiuing
Bod
i,urt *f thie Agrirnent,
und effect and shall, for all pqposes, coE$titute this eatire Agreement.
gONSTRUCTION OF AGRFEh,iENT. All parties hertto acknowledgo thatthey
and that this
have had tt t*o"tit of ind"prodeut counsel with regmd to this Agreernent
respective
parties
and
joint
their
"
efforts of all
as a resrrlt af the
Agrr"**ot has been prepared
^a1l
not be
shall
gccordingly,
prntio agee that the provisions of this Agreement
;;;i,
consilued or intqpreted for or agairst any party hereto based upoa authorship'

Zl.

COUNTERPARTS. This Agreement may be executed in any number of


all suc'h
csunterpa*s, J"tr of which when executed and delivered shall be ur original, but

22.

counterparts shall constitutE one andthe same instrnment.

23. TE{E Time is of the esse'nce of this Agreeme'tt'


forth_telow and
24, NOTICES. Notices hereunder shall he given to the partres setrnail
ff grven by

shall be *.d.Ilffid-de1iroy, facsimile, overnight delivery or by regular


in
i*g.l* mail, thelotice shall be rleemed to have beer givenwithin a reEu-red time if deposited
tnIU,S. Mail, postage prepaid, within the tine limit. For the purpory of calculating time limits
actual receipt
whieh run ftom tne gifing of a particular notice the time shall be calculated from
of the notice. Notices shall be addressed as follows:

If to the CitY:
Mr. Jaime Aguilera
City Managor
City of Truttr or Consequences

505 Sims Street

Ttuth or Consequences, New Mexico 87901


Tet 505-89466?3
Fax: 505-894-7767
'With a copy to (rvhich will not constihrte notice)
Jay Rubin, Esquire
P.O. Drawer 151
Truth or Consequences,

NM

87901

TeL 505-894-3031
Fax 505-894'3282

ff tc Hot

sPrffii"

***ory B. Nea1, c.E.o.


Hot Springs Motoqplex Development, LLC
3E16 W. Linebaug! Aveuue
SuitE 210

Tampa,

FL

33618

Te1: 813-961-8400

-'
Wiih

Fax:813'96i'8410

a eopy

io (which will not constitute notice)


Michelle lIenrie, Esquire
Brownstein, IIyatt, Farber & Schreck
201 Thtud StreetNW

Suite 1700
Albuquerque,

NM

87L42

Tel; 505-244'0??0

Fax:505-24+9266

25.

ATTORNtrY'S FEES. In the event litigation or arbi*ation is required by either


pafiy to enforce the terms of this Agreemeut, the prevailins pffiy iu such action or proceeding,
it uti, io addition to all other relief panted or awarded by the coud or arbittator, reeover its
reasonabie attomeyis' fees incurred by reason of such action or proce,eding md all costs of suit or
arbiuation and thoie ineuned in prepmation thereof at both the trial and appellate levels.

26.

FEES. DEpqSiTS, REBATES AND REFUNDJ. Notwithrtaniling any contrary


provision of this Agreement, all utility and other sircilar refuuds and relate$ of eosts, fees or
'Atpo*it*
having beei paid by the Cify, shall be th+ sole property of and shall be rehuned to the
City.

7|7.

NONBUSINESS DAY. If a Closing Date hereir is to occur on a holiday or other


nonbusiness dan or any period of time set forih in this Conhact expires on a holiday or other
nonbusiness;day, ilren such Closing Date or expiration date shall be the next business day.

E*r"pt

as

$t*iedin this Pmagraph,

"d*,"

as used

in this Agreement, ,oeafi$ a calendar day,

FORCE B,IAJEURE. In &e event that either party is rendered whotly or in parE by
forc+ majeue unable to caffy out its obligations under this Agreemen! it is ageed that on such
party's Siri"g rictics and fu]l particulars of such force majeure to the other parfy as soofl as
such
occlrrrence of the causes relied ol, ihen the obligations of thp prytq
io**iUf*-rtt*.*tf.*
'"oir*, so far as they are a.ffected by such force majerua shall be suspended rying
during the
cantinuance of any inatitity sc caused, but for ao longer perlod, and such cause shall, so far as
possiblg be rernedied with atl reasonable dispatch. Tle te_1n "force ruaj.qlfg" as used hereln
it utt 111"* acts of God, strikes. lockouts or other industrial disturbarrces, acts of the public
enemy, rvars, blockades, insurrections, riot$, epidemics, landslides,liglrtning, earthquakes, fires,
stonns, floods, vrashouts, arrest and.resilaint of mltrs aad peoples, eivil disturbaaces, enplosion$,
Ur*aUlu or aicident to m.achinery, failwe to obtain materials and supplies due to governmeatal
regutatlom and causes of Like or similat kind, whether herein eflumerated orrot, and not within
such party
thJ connol of the party claiming suspension, and why by the exercise of due diligence

28.

is unable to ovsrco.Ee.

29.

EFFECTI\E DATE The "EffEgiire_Date" or the "dAte,hgICQfu shall be Augusi

L7,20W.

IN WffNESS WHEREOF, the


.)

said parties have exe+uted this irstnrment as

of the Effective

Date of this Agreement'

CITY:

crrY

OF TRUTIT OR CONSEQUENCES

By:

Date:

IIOT SPRING$:
HOT SPRINGS MOTORPLH(
DEVELOPIyIENT,LLC,
a New Mexico limited liability company

Eshi-bitA

nRi#s"

7.

RiBhJ to Purchase Se-,ver CapacilY. As used in this Agrcemeut, "Al3iiabtg-Sewet

City's.'Wastewaier
ee&Agiry," rneans eighty perceot (S0%) of the existing daily capacity of the
friitmj"t Plmt ("Efug["). As descrihed on Exhibit B, the Available Sewer Capacity is 918.57
sewf, Connectian uuits. A "epurEgl&g" meaxs a billing unit (whether residerttial, commercial,
or othenvise) for which the City comrnits to provide sewer servics fiom the Plant. Connections
n$errice agreelnests,"
also are cororrronly called "tap$" or

2.

Rieht to Purchq$p Future Sew.er Capaciry. As used in this Agreement" "Futurg


Sgr,ryer Capaclty" ffieans uinety five percerrt (95%) of the futrue expanded daily capacity of the
Plaot reached at any time before the expiration or termination of this Ageement.

3.

RiE&t to P.urctrase.Water Capacity. As used in this Agreement, "Av@le-5la{ed


'Watet
Rights
.&p$ciry" meaos eighty percent (809o) of the existing annual capacity of the Ciry's

Portfolio- The City's "H$ter, Rishts Portfolio" is the collectiou of all water rigfrts owned or
leased by ihe City for rnunicipal purposes that are distributed througfu a water utility system. As

dascribed ou Exhibit B, the Available Water Capacity is approximately 850 acre feet per year. If
the City determines that thp Available Water Capacity was greater than or less than the estimated
850 acre feet per year ar of the Effective Date of this Agreement, the Riglits identified herein
sha]I include (a) the right to purcLase 809o of the actual Avaiiable Watr Capacity at the price
the Water Putchase
Fer affe foot of capacity established in Exhibit B, and O) the right to adjust

Price accordingly.

4.

Risht to Pffchase Fuhre Water Capgc-its. As used in this Agreernent, "Erhrq


Water Cgpacity" flsans uinety five perceirt (9580) of the urnual capaclty of the City's Water
Righrs Porfolioheld at anytimebefore the expiration or termiilation of this Agreement.

Exhibit.B.
The below-described

"eggggb

Cgp4i$ ' relates to the treatment capacify of the City of


Waste Waler Treatmsnt pi*at ("Plant') ard the estimated number of

Truth or Consequences
fnwsr Connections that rhe Plant can procsss it a ?4 hour period. The Plant is rated as a
1,000,000 gallon per day Plant, The curtenr number of active Connections use appraximateiy
?50,000 galions per day of the rated capacity. The remaining 250,0il0 gallons per day that the
Flant can proce$s equate approximately to 1,148.22 Cormections.

100?oofcurrerfsewerConnectionCapacity-....
80fo of crurent sewer
$3,000 per

ConnectionCapaciry.....

tap,.......
price.......,

.,,.7,148,22
.,,...,..918.576

.....x $.3.000.00
.......,"...$2,755,?28.0O

Total purchase

The "lVaierlRil#E Be$erse C3qap.ily" reiate.s to the amount of ressrye capacity of water that the
Seller cunentiy owns. The is presently unused Water Right$ Reserve Capacity is approximateiy
850 acre feet per year (AFY).
100% of cuffent Watff Rights Reserve Capacity..................850 AFY
80flo of current Water Rights Reserve Capacity......,,...........680 AFy
..............x $6.000.00
Price per acre foot of
.$4,080,000.00
Total purchase

capacity..
price........

)
10

Exhibit C
Summery of Key Dates fJ$der this Aqrm.en[

tlhis Sunwery

is

for

convenietwe anly and does nat sutrErede the termt

o! thi* Agreemenr,)

Effective Date of fiis

OptionDerosit

Agreerneot.,

........,.......August 1?, ?007

ff2)

Deposiil
..,.-.....

$20,0S0...

Initial
..
...,....,........August 22, 2007
SecondDepe$it
.......+$180.000. ................February 13,2008
Total Deposit (wir&out extensions].".........$200,000
Purchase

Bics (qt3]

Total Sewer Purchase Price................ ... fi2.7 55,7 28


Total Water huchase Pries......,,......... +14,080S90
Total, PurchasePriee.....
$6,835J28

..

Paylne+t of

)
'

Pur&aselti* ft[5)

Closingr

puymeetatFinal
PIus TotalDeposits ......-............ ...
Total

Paid..

$6.635.728.
...S200S00

.,......

$dS35JZe

11

...........February 13,2011

*r.r**u
(Ihis Sammary

1.
2.
3.
4,

is

for

or**,ffi*

oriu

ou***:

convenienee only and does not supercede the terms

Hot Springs will pay

a fee

of

thls Agreement.)

for the exelusive option to acquire certain '*rights."

This fee is payable in two installments totaling $200,000.


The option expires after

rnaximum of 210 days, uuless extended (for additionat feas).

Before the option expires. Hot $prings must decide whether to forfeit the option or

exercise the option.

5,
6.
7.

If Hot Springs forfeits

If IIot Springs

the option,

it lcses all fees paid'to date.

exercises the option, it must pay more in order to receive the "rights.',

The 'tights" are come*tiors to the Citt's water and $ewer system, also calied "laps,,
agf gelheflts. "

01.

"sefyice

B,
)

HotSprings is notbuying the City's waterrights or its sewereffluent.

Hot Spriugs !S payfig up ftont to raserve capacity in the City's water and sewer sy$terr
for IIot Springo'future use in its project.

?.

10.

Hot Sptings is not buying atl of the capacity rn the City'e water and sewer systern. ft is
buytng oniy patt of the capacity. The City can do whatever it wants with the reuaining capacity,

11.

If the City expands its capacity, Hot Springs would have a reseryation for a share of
expruded capacity udess the CitynqIls ir.

tle

12.
ac.re

Hot Spriags is paying fair market value for these taps: $3000 per seuror tap and $d000 per
foot of water connecticns.

y.

For the optioned $Fu* of &e City's current capacity, Hot Springs.would pay a total of

$2,755,728 for sewer and $4,080,0S0 for water.

74.

The purchase price can be paid over a three-year period. Hot Springs cao use only the
anrount of tap#cannectiors that ithas paid for.

15.

Hot Sprinp must pay its finai payment of the full purch*se priceby February 13, 20L1.

T2

rlfi$T

ltis

FIR$T

AA.{E}{DSTET.ITT.O OPTISX AGREEIYIE}TI FOR.


PURCITASB A}ID SALE OF RIGTITE

Affi{Ehl$ff !r{ OPfiO},.i

FOR FUR#HASE A}.ID SAI.E OF

RISIIfS (lhe Tiffit im&EdJ


RISIrrS
eateqed ihto
.Am&Ed1 idic' eateued
Es d
of. WE
tirtq ry
--_-X&11 by aud btfwem &e Cigr of
TruthcrComquwe,g Nex Marico, annmicipal cwpu*ion (the*CiIy1, ald llotSpringsMotorpl*
Dareloprrurt,I^LCr aNew Mexico limitedli*ilitycomprryfEc*.Springsf'utd togefter withtheCity,
the'?artie*oot eOch gcy le rferred to hffeh as a&qy], sd Agreqe'&d $Eitah OPTIOi{
ASRffiil{EI{T FOR PUR#IABB AED SA.I.E OF RlGtIlE, datd A]AH$t 1 7, 20U7 {*le n0pticm
AgprnenE),
nEcrrAr^s

The CiIy arrd Hot$paings ea{r*ed into the Option

g,

The City and liat Spriugs believc it is in eqsh nf$cir tuts(estn:ta mmrd &e
Agrwtrrert 6s Bd fo$h iu &is First fuutnilmeml

C.

furc*enl

The Opticm. $,geemeil BFc+itw Fetr*rarf 13. 201 1 as lhe date

rFffi

frtion

or @fue whkh Ho*

Spfinest ftas ihe ridrt but uot fte ot{igdioc ts 0{Hde6 its fli{Er

E. I}ts Citf

a{d Hot SpriEgs dssft& tff astBnd ttreoptim.dErffiffirt to eGtend ihe final date sa
or before which Hat Spriugs has the light buE not the &ligation lo emcscire its qtion"

All

Eff,pitalimd tetms u6ed but not tlefinsd herein

*aH

harre rhe

nlranirig set forth in rhe

OptiorAgreemeen
AGREBI\,IBTT

NOW TIIEREF'O*E, iu eonsideratior of the muffil oovurrnre hge$na&s sEt ft,rtt, tho parties
fullcws:

ragrce as

#
.Ae-**qfr, a-q
& ftr{,9-,ffi14
HOT SPRIf\dGS,OOOOOI

'pa'-*w

:@
EXHIBIT

All o&sr Wisiotrs of ihe

Op,tiun

Agre* t ffit

qple$Ely flGrtdcd terSry mrnsit in tuH

Heither&aFirstArrlepdmfituoranyprov$imkerf arofauy,sther dscwnmt$ gr'lrffi in


comilrctisn herewitL +hall csxtihrte cr ghall bs o$suued ts sflnstifite a waiver ef any
deffftq, iighq, or,remedy by ei&er Psrty lindr trc Oft*xr Agreffiqct, as wq&{
sshseqtrpt to fiB daic hereo,f. Atly faitulB by either Party at amy pairt in rim* druing fu trmr
ofthe0ptbnAgrm.rd, rs afiteilded, to inskt upur sg{tt flid tilrply co6plimc* wi6 ths
entrs Bnd proyisi@ of mrch ihcurptr shltnrrt he {EEmd a rvaivs sithereqpesslyu

iruptidly byeithrPartyu anryofthebrnWec$wrigltsundmany such docuueg mrshslt


$eshffiexr$re*eothrr?artjr's obligeiiesto+Aicflf andtimclyperfuum ie obtigatim
hermrder afid ftEr$itr. Nottring t!treifl contained etratl be corersed

fio

limit or irnpoir any

riEhtg #F,Ei[s &ateiftErParfy ranenjoys oruaryliwealta'erjrry rruder&;

Agrecrr:reilt

aB

arffid*d

Stim

aild dpptlctlhl+vr,

Tti* Hret i-{rydrnent rnay bc cxo+utod ia any mrm}er of conntqqpu'tq caet sf *hieh sihall
bt deqled- ffi. ffigjrral sud dl tfwhi* *hdl tosettfr effstitute +ne md {he asne agretffiit
STGHATLIRB PAf'E TO

FOLI,0\{I

C[IY:

IXITSP.RIITIGS:

HOT SPRINGS. ICIOTOKFTE}(

DSVEr-Op[ffiIqT,IJ,e
a,Ne:tr Mnicolfuaitd liahfiit1trsmptrU,

HOT SFRINGS,O00002

:l-tot$pljrqs

Augr.lst9;2.011
tuls" Ellen Lindsey

Ciry Mailagr of Trutir o; Ccnsequenses

SiroeStrest
Truth orCorrseqrreflsrs, t{M
5G5

tfsnf

[& Liridsey,
As pu arc aware, the fity
Seaf

of Truth or Consequences {the "fiqru and Hot Sprines Motofplex


Developrnent, LIC fFlot Springf! entered into a certain Option Agreement for Furchase and
Srie of Ri$hts and rnr+ Firut Aroehdment xhich erprtes oF AtifrJst i3, e$itr" We- have rrrade
nurnerous attempts to adrnnce ngo'tiations wH*r your" predecesgrs rrirhich haq gone
unansneredr
We are nour hopeful of movingforward and formally aotifu the Citythat, flrrsrlrntto Sedion 4
of the Option Aereement Hot Springs wishes to exercise a partial option to purdrase $ZoO,OOO
worttr of non-adjudisated, transferable $latpt';
Furtheq tlot Springs is formally notiffingthe City that it is hereby surrendering the remainder
i5 fghts to the Sty pursuant to Sectiar L3 of the Sption A6reernent"

of

We are awart, bastd on our rec*rtt mrrver,sttons that there may be ost$de legal issues
regprding *rE partial option exercise and the surendering of fie reiltairringoptfons-

We are eager to conclude this transaction and ewsit your respoflse" Thank you for laur
ronsideraliou,

H-

l.?to

r#hibheadr

unds*ed'8erd$rE

-d

J.

Bubifir N, larnorielkl B. NrneE A" Papre, .l. Beed,

Ifornlils4tl

EErftE{{t sun+ tg*! ft$35lT?:

R,

arretson

&@86$J0i0{lrl;5x5.E?rL7t08{lrspcreahtryr$tEitde.ni

HOT $PRINGS OilO1O3

EXHIBTT 3

,il"tf''g**gu.

5?58*4EBE

1.1.;rfs FFstnl'JtfY RUEIJ{

Iarfi5?{{4*41

P,E/3

ffi*p *$ Tru**t: s,r ffm:msss{B*xr**$


SfiS Sims,$tte$t
Truffi Br,0$n$eEu*ncs$, {tsw, Mexica S?901
City ts?$)SS4-ss73 Fax {sIS} e**+*es

A,rgrul29,tflll

I,ew Ofliee *{

IJ,S. TS'ST*T, S,ERYICE

trffir,p t, Whilehed

Att{otiqfs . sfls. W.hi*ahe*d,&_q"


f,$" Spx lSS$

Ber

*il1+H$Ltr,CI$tiee&g$uent

-$rulds, Whit*hEndl
0n ,hehqlf of thc Clty +f T',f.urh +r ftosequtrre+r, [.a{r r,eapox*iug rn lt$t Ftr
purportd atlnnryt t* r,ueraim it+ u3l,itrn es rxpr*rrxd ia tts turei of Arrypst 9,
?01i.
dq nnt r:ursidct the A.uplrt 9. ?Sl I Isttsf Io hs e vatrid exarcise uf m trptiu*r,
Ttri* is drrt U xurnsr, u$'r*t6o46, imludiag [1[rt norn$**s*ril liEif*d t+ tha

Ifu'e

frIoxring:

l) As, you *nntv, II$IJ] peid $20B,Stltl,SS l* dqf$sitr is rousider*fiqn Gn


tfte f,ig.to hold, rryu the rryfinr. of'uliowing l{$Ln kr pur$h*x rp+er caF*eify
.orrd tcwrr cqps*iry, l*o ifur&er firuds hsw ken peid axl *r+ Augurt 9, 30It
kxtr dp'gs qstmentica &e pyucni ofnuy fur&er,frrrrd*, [l-uderN*rry'&!+wjco teru
ss nptis*,sgffi*fi$er$,,(1&lr*trnpl+rkx thrt $/hf;* *n option llo,ld*t Eive* aqtitqn tXre
optioner sbsll hgg the .tubj++t Frupsref &om *e optinme" &prqreq v.,r, S$ttl,
98 N.M. S96 t t {S2}. E I{*LD kd rE+, *tght tor rhe psq &ur f,ffi$ to }rs*h*s"
Bl$S,ffi0,Sfi rnvr,lh,of'#Ehts, d:g mp*mr th*t co,rcnsid*rati*n rvl,lr p*i8 for thc
,Cityns sCInsid*rsisuia keip tha,opti*n *Ben
1 do ra*ognim thai lhe yfinl.teitn prt" ii prc$et la &e ags*ment. To *e exunr
thir c*xetrs s$ ffi,higuibf, i calt ynur art*ntiq* t F*mSfeFn ofs af Erfrtbtr $Hr?
*If II*t Spriup ffiryc.i.srt rhe opdaU it
fursgs{cd try your qtient}, x.biuk sHh$,
muupay FffiHS is od*rto ecrhe fte "ri*ht*." i*m$rnsir nddrd). Thc Augu*
9. SSlt t*tte.r,di$ **l r{I*r:tu IW morr, and, wir$ruuH,objeffi'$ asy *ugq$ f*
l$odify ot sr$Erd thc,Augu*, *, *Str,I, Irr,ter,as *e tima f*r fl&roptlsl exomise has

T+ ths sxtnt th# the sonirsci d*es all*w fur o $2$ft,6llfi.0S *xercise, thr Augusc

$,,3SlI l+*t*ri* sdlj,i$?di4

&r

toi ths

ftil*wirtg

HOT.SPR]51s5'8fffl1,42

EXHIBIT

+iqr*:i*i-eH11 1tr34 t-lrrann;JRY FtElIi{

trity

5:?5S?sgBE

To15,f5'?s4q44i

mf Yrnsth mr

#sms#qusft*ss

Sfi5:$ims ${rmt
Truth or Cor*sequsflees, filew fulexics 8trS0{
f;ity (5?s) 8$4sS?3 Fax t575i SS44*#3

ffi
Prrg'e.n

J{r; (liry -ff-ll/} Oprtoa dgrrancni


n{lgtrr{ 16, }fitl

fl

FxAgryplr Nrg,:EP: oli rfuc.agr.ralnret, futi*a &gr**m*et spqifisrl


th*t"Atl S+poni6 r$nll appty m esd b*'*rditxt ag+innt tlrs P*rchu*e Prics, axl
+qll bsdividsd eqmlly bftwm.r the Suwer Furdruse Prirc irrd Water furchasr
Bicr..-." thb&c.:s$&tt$l00,00S.Stlwould'vebcroaprpil*rtto*ewer*agceiry.
Asft Au$ils e 2{rII let[as iidh, Hr indis$fr s desiry rc Brrcha*e *ewar.sspae$f,
dref opfion foflx cxpire.d.

3] The sFtio* agrsuffirrt firft&B{,latc$ tlre ealsi ulrr}r a proper


ex4i** +f wgtel *ig*cits and mwur {Emgtf,s', wa*q. i*}sf[:<*r _ui,ntt+r
righrs, vrfis nol thr ffi*tt of thc apmmeat Thelefrrrr, H$LtrI*s, puryaffwl
t
rx*+ipe *l:
wxsriu inYsl$d;
4)

:Farxgraptr

.{- of the Qrtien Agwem*rrr $fflEifie{l rbr

uolic* Tlae Augrut S, ?#i t lrt$Er


*cnFV vifh fttte rsglliremrnir,
'fhs
Fimlly. i rutl ta yOur atteario,n
F,rvisi,,ns of P*mgugh {*I$'Crt of &q
AglmmruL Ii is HoI Sprinp' rrlpomibility tu sxtesd the .,i*wrr ffd smf,er
trau:ui*ioa system Ihr* ts H{rt $Frings' Fr*Fe$y tit m ths c}osest p+iat thiit thr
ffrty ftar its se.wer aul water u'arrsrni$sion tfieli u fte time that FTot $prings *tecrr
to e^qtsbli*h *ro+e qcilnil*don$. 'Ihh appst k! hs lr canditiou p$eewlont rs.thle
Hiry ddiw{itrg iis :*ryaary,
rquircinsnts tu be rouMiasd iri {he o6iou
fuiled

t+:

{.1ity r&lt*m*y

ffi;sps1,

*ri

ftraft Fuerti*r

HST $PRING$

OSG143

P,;.j/S.

$EX/ENTF{ .TUMICE.EL &TSTRICT CCIUMT


CS{.JNTY SS'SIEHR-4
STATE OF F{EW KTEKtrCft

HS?

$PRENGS

t ANI! SEV$L,SFMENT, LLC,

A New Mexiep fl,imited l"imbitity Cormpamy, omd


HST SPRNNG$ MSTSR.}LEX MEVET.OP&flENT, LT,C,
A New &{exi*a Llmitrd l,imbilig Cormpamy.

Flninttrffs,
Y.

${*" $-72I-CV-3CII4-{}{}S?3

clTY sF

TRUT'E{ 0H. CSNSHQUENCE$,


A New Mexieo &{umieipali$r,
Sefemdamt.

&IflFEBAVIT

*F JtjAN

rq. TUEHTES

-[UAN A. FUEF{TES, being first duly swsrn upon aath, deposes a*d

L
:.
3.

sa-vs;

My name is.lusn A" Fu*ntes.


I affr the City Manager frlr the City cf Truth +r fr+nsequelrnes.
tr

have held the positiom of City h'lanager f+r the City of Truth

*r

C*nseqr.leners sinor

August 17,3S11.

4"

Pri*r to tfurt, tr was enrpluyed as the Fi*ance DirectCIr cf the City of Truth or

C*nsequences from June 34,2SlS

5.

t*

October 35, 2S1t.

In e*nn*ctian witli my duties as City Manager. I have read snd farnilinrized rnyseif with

the rlaims msde in the sh*ve referencsd lawsuit against ttre City of Trutir or Consequeltees.

6.

A.lth*ugh I

Furchase and Sale

r,vas

n*t t}rt {ity Man*ger in &ugust

2S{J? when the Optimn Agreement

far

cf Riglrts wff$ entersd intc. I have resear*hed tlre claims of the Conrplaini.

EXHIB]T

?.

I have venfied tl'l*t th* trv* <iep*sits totaling twcr hundrrd tircus;*d dc+llars

the Gptirn Agreement" pa agr*phs 2A and

.a-B

ret-*r*nrr in

wer* re,reil'ed ft*m H*t Spnngs and doposired in

City +ieenunt*.

S.

Exi:ibit 3 tq: tliis m*tiei: is a trur rind c*n"*et c*py

c,f the

August $, :0 i i istter trom ilreg

Ne*i in ra'liich h* attempted t* exercise un cpii*n i'*r u'ater u*der ttre fipti*n Ag:reernent.

S.

Exhibit.i ts thi$ nr+ticn is a tri.r* and cons*i e*py *f tl:e ietmr sent by the City's attsfilfly

ro the attorny ibr Fi+t Springs,

hictice und*r the

1tl.

Katkyn L" t+\"hit*I:s*ri,

Esq., t:r,plainlng itie dettcts in the aileged

*ptirn Agreer*e*i.

Althaugh the *ptian Ap'e*ment requires it, #r*g Neal di<i not cffer or agree tii

tr]ay.,

an].

fficrn*y f'or tire purcltase of any nghts under tlre &grr*me*t rvh*n he *tternpteri t+ exerrise a

psrtial *pti*n in ihe August 9, 201I letten


t

I.

Umtil ihe filing ot-the lawsuil against the City by thes* Plaintiffs, neither l-il:t Sprrngs

entii-v advjsed rr'le, nrlr u,n*s I nrirde &war* hy **yi;ne, t]r*r tirerc was ar! allegeiJ

iirabililr tt:

pr*virtre the water and sei,l,'er rights *nd servic*$ ilptiilned ferr umd*r ttre Agrrement.

i:"

I knaw c,f

Springs Fursuant

13.

n* in'tpedimeut to tlt* sale *f av*il*hle Heter *r ssrv*r eoffiections

t*

tire Opiion Agreemeni in

r*r Hat

l*8?-lill l.

T+ dat*, neit!:er ct'the Hot Spings Entities which are Plaintiffs ilt tilis case has

c*nstru*tcd watr or selver iines f*r any deveiopment upt:n the renl prspefry $wned by th*m.

14.

I have per.s*n*,| kn*ivlerlge *f th* fl*regoing, and arfi comp*teilt ti] tssfit3" iilereto.

STATE

*F

NEW IdEXTCS

l
]

fl*u},tTt" *F

siER&4

$uH'$cRgEfrfi

AH*

ss.

$Er*s"*tr

It$* S, iteqq{,s

t* bef*re rrr* tnie#day of $EFTEIvI$EF* 2sIS,

N*TARY PUBI-T*

x.

by

SEIUXT'H .trWICIAL SISTTEICT' C#LIR.T'


COL}"{'Y OF SII'RRA
STATE OF NEW I\,TEXICO

I,AND N}-f]\iELOPP[Tihi]" LLC"


A N'ew hfexico {,irrrited Liatriiity Comlrany, and
I{OT. -q Pft IN Gf ${T}TO EaP,I,IIX S E trti 1, OFhTENT, [,L C,
A hierv btexicu 'Lirnitert {,iabiiity CormpanS',

I{OT

SIJR.TNGS

Plainti[Ts,

Y.

Nc. D-721-CV-2S14-00073

cITl:

#B- TRUTI{ {}1{ C0Nri}1t}Utri1\{l}ls,


A Nerv }lexicu Municinraiity,
Ilefemd;arrt"

AYE]J T}A-1:I T.'

JESLIS
1

?,,

A. SALAYANDIA, heirg tirst

gLIEs UIi A. -fi 4 T, AY AI{T}I A

cl.iri1,

swo,rn upon oath, clepr:ses ancl says:

&{y name is Jesus A. Sa}:ryanclia.

I arn tlro Water,{rv aster&'ater f)'irei:.tor ft>r the City of Trutlt ar Cnnseqrtence"\. i have helri

this position since 2005.

l.

hi corirr.ecticu with mv rlirties as

!1"ate:'AArai;tervaterr

Director, I arn familiar r,vith ihe City

t:esoulcfli: Ibr l,rate:: snpirll antl se\,!er services.

4.

1'he'I'rLrth o1 Consequences Wast* H/aler Tr$alrnent Plant cumently has approxiraately

3500 a*iive $ewe{ cortlestions airri can !r'toijess aplxorimateiy 1,060,000 (one

ihous,lnil) galluris per:

5.

Il

ltillion sixty

riaS'.

Augr:st'zODi. tre Waste \4/atei'llrr*trnent Plant had oxeess capacity sufficient to

.suplxxi 1,i48.22 additional con.irectiuns b;rsed upon,apprcx.imately 250,0i)0 galions per riay
excers ciipacitl, at drilt tir;re.

EXH]B]T

6,.

Trtrth eir Coiroequpnces, cr.ilxentl]'ft$.'nri approxirnately 1,18-5.95 (one thousand c]ne

liundre,l eightl,-five lioinr 9l ) acre feet per. year of unused water c&pacity.

i.

trn Augusr

200?, rite Citl' o{ Trut}i or Consequerlce,* o$/r}ed more than 850 acre feer per

year af *xce,$s wate{ r,apiicity.

8,

'i'he water and/or $et!'ei connecticns designateri in tlre Option Agreement were available

to he puichased by Hoi Springs Mutorplex tlevelopment Springs iri 200?-2011.

9.

i harre personatr lororvledge of thelfrvegoing and am cornpeient

rcr

testify therera.

alal,andia

STATE OF NF,W MEXICO


}
(-]GUI-IT Y OF'

IERI{.q

t(Ii

'

S,iJ'BS{IRII}ED --\NIJ -t'WORN to trtfor'e nre this

iif*4ry 6f Seprenber. 2t,rl5, by

L{ @[irt] t

dr')