2006-359
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ORDINANCE NO, 2006- 35'Q
AN ORDINANCE OF THE CITY OF DENTON, TEXAS AUTHORIZING THE
SETTLEMENT OF CONTRACTUAL CLAIMS BY AND BETWEEN THE CITY OF
DENTON, TEXAS AND W AUKESHA ELECTRIC SYSTEMS, INC,; AUTHORIZING THE
CITY MANAGER AND CITY ATTORNEYS TO ACT ON THE CITY'S BEHALF IN
EXECUTING ANY AND ALL DOCUMENTS PERTAINING THERETO, AND TO TAKE
SUCH OTHER ACTIONS THAT ARE NECESSARY TO FINALIZE THE SETTLEMENT;
AUTHORIZING THE EXPENDITURE OF FUNDS THEREFOR; AND DECLARING AN
EFFECTIVE DATE,
THE COUNCIL OF THE CITY OF DENTON HEREBY ORDAINS:
SECTION 1, The City Council hereby approves the Compromise and Settlement
Agreement attached hereto and made a part hereof, as to those disputed contractual claims
arising out of Bid No, 3105 and stated in said agreement by and between the city as purchaser
and Waukesha Electric Systems, Inc" as seller.
SECTION 2, The City Manager and City Attorneys are hereby authorized to act on the
City's behalf in approving and executing any and all documents, and to take other actions
necessary, to finalize the Compromise and Settlement Agreement.
SECTION 3, The City Manager is hereby authorized to expend the funds in accordance
with the Compromise and Settlement Agreement.
SECTION 4, This ordinance shall become effective immediately upon its passage and
approval.
PASSED AND APPROVED this the / qi!J.day of \.../Jeul11 be r , 2006,
(f ~rx tn ~ rle.1f
PERRY R, McNEILL, MAYOR
ATTEST:
JENNIFER WALTERS, CITY SECRETARY
By: Q;JJU IlL dVlAdMn/ (i/Ji;
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APPROVED AS TO LEGAL FORM:
EDWIN M, SNYDER, CITY ATTORNEY
By ro qA 9 .r
S:\Our Documents\Ordinances\06\Waukesha-Compromise and Settlement-Ordinance-Bid No 3] 05-121906.doc
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THE STA TE OF TEXAS
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COUNTY OF DENTON
Compromise and Settlement Agreement
City of Denton, Texas/Waukesha Electric Systems, Inc.
THIS Compromise and Settlement Agreement (hereafter the "Agreement") is entered
into by and between the City of Denton, Texas, a Texas municipal corporation (hereafter
"Denton") and Waukesha Electric Systems, Inc., a corporation (hereafter "Waukesha") and
represents their compro"mise and settlement regarding construction and interpretation of certain
provisions of that previous bid submitted to Denton by Waukesha (Bid NO.3] 05) for sale of
electric transformers to Denton, which bid was approved on December ], 2003 by the Denton
City Council (hereafter "Council"), as well as the bid specifications in connection therewith, the
modifications as contained by Council ordinance in February 2005, and all prior agreements
following the approval of the Council of the bid of Waukesha regarding the purchase of electric
transformers, from and after December], 2003. .
Denton has approved and agreed to accept this Agreement by and through its designated
City Manager, and pursuant to ordinance of the Council. Waukesha has approved and agreed to
accept this Agreement by and through its duly authorized officers.
IT IS AGREED BY DENTON AND WAUKESHA AS FOLLOWS:
1. This Agreement shall compromise and settle the terms of Denton's ordering up to three
(3) transformers from Waukesha under Bid NO.3] 05. This Agreement shall set the terms of sale
and prices only as to three (3) transformers which shall be delivered through January 3 I, 2008,
unless modified or altered by the mutual written consent of Denton and Waukesha.
2. Unless specifically changed herein, all terms of the bid specification and stipulations in
the bid accepted by Denton on December 1,2003 shall remain in full force and effect.
3. The prices for the three (3) transformers, the subject of this Agreement, are: FOB pad in
the station, assembled, oil filled, and tested, shall be set at maximums of $720,000 for single
voltage transformers and $793,440 for dual voltage transformers, including heat run tests at the
15 MV A and 25 MV A ratings. However, Denton and Waukesha agree that the heat run test shall
be waived for duplicates of designs that have been provided to Denton Municipal Electric
("DME") in the past, for which heat run tests have already been performed.
4. Denton shall have the option of canceling anyone of the three (3) purchase orders for
transformers until February 28, 2007; Denton and Waukesha agree that there shall be no
cancellation charge or fee of any amount for Denton's timely exercise of this option.
5. Waukesha's standard escalation/de-escalation price methodology as presented by, and
contained Luis Zendegui's, an authorized representative of Waukesha, August 3, 2006 e-mail to
Chuck Sears, Engineering Administrator of DME, and it is agreed, however, that said
methodology shall only apply to the maximum price as to price de-escalation. A sample of the
calculation is attached hereto as Exhibit ]. In consideration for this, the City of Denton hereby
authorizes Waukesha to present Denton with an invoice for payment of thirty (30%) percent of
the maximum price for each transformer, following Waukesha's order acknowledgement for
each transformer. It is further agreed that should the Denton elect to exercise its option to cancel
the order for the third transformer as referenced hereinabove, Waukesha shall apply the amount
invoiced for that cancelled order, equally to the remaining orders for transformers.
6. _ The de-escalation method described in paragraph 5. above, will be applied to all
purchases using the values of the indices for August ], 2006 as the starting values. The table
below in this paragraph shows those raw materials that will be used in the de-escalation
calculation; the percentages that each represents as a part of the total cost of the transformer; and
the value of the starting points for the indices. It is agreed by Denton and Waukesha that the
price de-escalation shall be calculated for each transformer ordered using the starting index value
in the table below, and calculating the change of price based upon the relative decrease (if any)
in each index at the end of the month, prior to the month of shipment of the transformer(s)..
Table 1
Raw Material Startin!! Index Value Percenta!!e of Total Cost
Copper 353.06 9%
Core Steel 1.0 (See Note 1) 9%
Plate Steel 204.4 ] 6%
Oil 70.27 4%
Paper 750 2%
Note 1: The starting value for the core steel index shall be Waukesha's core steel cost in $/lb in the August 2006, nonnalized 10.a value
of 1.0. The ending value for the index shall be Waukesha's core steel cost in $/lb in the month prior to the month of shipment divided by
the starting core steel cost in $/Jb. For example, if the Waukesha's core steel price goes down 5% for the month prior to the month of
shipment, the ending index value shall be .95.
7. It is agreed that the mathematical formula for computing the final price with the de-
escalation amount (if any) shall be according to the formula set forth below. Note that the final
price shall be the maximum price if the escalation amount is positive.)
FINAL PRICE $ = MAXIMUM PRICE $ + (MAXIMUM PRICE $ * {[(Copper Index for
Month Prior to Shipment / 353.06)-] * .09] + ([Core Steel Index for Month Prior to Shipment
/ 1.0) -] * .09] + ([(Stee] Index for Month Prior to Shipment! 204.4])-] · .06] + [(Oil Index
for Month Prior to Shipment / 70.27)- I · .02] + [(Paper Insulation Index For Month Prior to
Shipment! 750)-1 · .04]})
8. The definition of the raw material indices to be used in calculating the de-escalation of
price (if any) shall be as follows:
Raw Material
Index (Web Site for the Index)
Copper
High grade copper "HG-Comex" (http://www.nymex.comlcoPJut_spot.aspx)
Site Instructions:
Select the time period
Use last figure in "Average Spot Settlement Month to Date" column
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Plate steel
American Metals Market "AMM No. I Heavy Melt, Chicago"
(www.amm.com)
Site Instructions:
Select "Pricing"
Select "H istorical"
Login
Select "By Grade"
Select "Scrap Iron & Steel", then "Consumer Buying", then "No. I Heavy
Melt", then "Monthly", then "Chicago"
Paper
American Pulp Paper "PIX U.S. NBSK" (www.foex.fi)
Site Instructions:
Select "PIX PULP" (upper left side)
Select "THE PIX US NBSK INDEX" (second in the list)
West Texas Crude
(http://www.uprr.com/customers/surcharge/wti. shtml)
Manufacturers norrnalized cost (see Note I below Table I)
Oil
Core steel
9. Upon execution of this Agreement by Denton and Waukesha, it is agreed that the
following actions shall be undertaken:
A. The City of Denton shall amend Purchase Orders Nos. 130339 and 130340 to reflect
those maximum prices that are stated in this Agreement and shall expressly refer to this
Agreement.
B. The City of Denton shall enter a purchase order for a third single voltage transformer at
the maximum price reflected in this Agreement.
C. Waukesha will accept all three (3) purchase orders in accordance with the terms
contained in this Agreement, agreeing to delivery by January 31,2008.
10. Both Denton and Waukesha have a mutual interest in avoiding the cost and uncertainties
of disputed litigation, and have agreed hereto to an acceptable clarification, compromise and
settlement regarding this transaction. Denton and Waukesha agree that that the volatility of the
present market make long term prices to purchase transformers difficult to establish. Denton and
Waukesha agree that this Compromise and Settlement Agreement shall set conditions for, and
only for, allowing Denton to purchase the three (3) transformers as referenced above.
I]. It is agreed that, in consideration of this Agreement that Waukesha shall not be restricted
ITom participating in future City of Denton transformer bids and shall remain on the approved
"active bidder" list of vendors.
12. Denton and Waukesha agree that, to the extent lawfully possible, this Compromise and
Settlement Agreement shall be confidential.
WITNESS OUR HANDS on this the] 9 day of December, 2006.
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ATTESTED:
JENNIFER WALTERS, CITY SECRETARY
By: (jj1f hdl fJ) dPrl, f1ut
APPROVED AS TO LEGAL FORM:
EDWIN M. SNYDER, CITY TTORNEY
ATTEST:
By: ()~
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By:
"DENTON"
City of Denton, Texas
A Texas Municipal Corporation
By:
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CITY MANAGER
"WAUKESHA"
Waukesha Electric Systems, Inc.
A Corporation
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Daniel C. Evans
Director - Sales Operations & Warranty
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