Document:

SXCQ3201310-QEx10.3

Exhibit 10.3

SPECIFIC TERMS IN THIS EXHIBIT HAVE BEEN REDACTED BECAUSE CONFIDENTIAL TREATMENT FOR THOSE TERMS HAS BEEN REQUESTED. THE REDACTED MATERIAL HAS BEEN SEPARATELY FILED WITH THE SECURITIES AND EXCHANGE COMMISSION, AND THE TERMS HAVE BEEN MARKED AT THE APPROPRIATE PLACE WITH FIVE ASTERISKS (*****).

SUPPLEMENT TO THE COKE PURCHASE AGREEMENT

This SUPPLEMENT TO THE COKE PURCHASE AGREEMENT (this “Supplement”), dated as of February 3, 2011, is by and between Indiana Harbor Coke Company, L.P. (“IHCC”) and ArcelorMittal USA LLC (formerly known as ArcelorMittal USA Inc. and successor to Inland Steel Company) (“AMUSA”). IHCC and AMUSA are referred to herein individually as a “Party” and collectively as the “Parties.”

WHEREAS, IHCC and AMUSA are party to that certain Amended and Restated Coke Purchase Agreement dated as of February 19, 1998 (as may have been amended, modified or otherwise supplemented, the “Coke Purchase Agreement”); and

WHEREAS, IHCC and AMUSA desire to supplement and memorialize certain policies and procedures associated with the Coke Purchase Agreement.

NOW THEREFORE, in consideration of the promises and the mutual agreements herein contained and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties hereto, intending to be legally bound, agree as follows:
1.Effective Date.  This Supplement shall become effective and enforceable as of January 1, 2011, and its term shall be the remainder of the Initial Term as set forth in Section 2.1 of the Coke Purchase Agreement.
2.    Definitions.  Except as otherwise provided herein, capitalized terms used in this Supplement that are not otherwise defined herein shall have the meanings set forth in the Coke Purchase Agreement.
3.    Supplements to the Coke Purchase Agreement.
3.1    Pad Coal.  The Parties shall account for Pad Coal (as defined in Attachment A) in accordance with Attachment A.
3.2    Billing Yield Adjustments.  The Parties shall continue to have yield tests as set forth in Section 5.1(a)(2) of the Coke Purchase Agreement.  However, the Parties acknowledge that it is impractical and costly to perform a yield test to determine the screened Coke yield standard used to convert coal price to coke cost pursuant to Section 5.1(a) (the “Billing Yield”) every time there is a change in the coal blend at the Coke Plant.  Therefore, between yield tests, the Parties shall adjust the Billing Yield for changes in the coal blend as set forth on Attachment B.

3.3    Budgeting for Yield Tests.
		
	(a)
	For the 2011 Contract Year, IHCC shall pay for the next yield test and shall not pass any costs associated with such yield test through to AMUSA, as operating costs or otherwise.  Such yield test shall be scheduled once protocols for such yield test have been agreed to between the Parties (such agreement not to be unreasonably conditioned, withheld or delayed) and any conditions precedent set forth therein have been fully met.  In addition, the Parties shall adjust the Annual Budget for the 2011 Contract Year to budget for an additional yield test, which shall be paid for according to the terms of the Coke Purchase Agreement.

		
	(b)
	In Contract Year 2012 and Contract Year 2013, the Parties agree to budget for two (2) yield tests each Contract Year in the Annual Budget established pursuant to Section 5.1(b)(1) of the Coke Purchase Agreement.  In the event that more than two (2) yield tests are performed in either Contract Year 2012 or Contract Year 2013, the costs of such additional yield tests shall be considered operating costs and shall be allocated between the Parties as set forth in Section 5.1(b)(1) of the Coke Purchase Agreement.

3.4    Governmental Impositions.  The Parties shall follow the procedures described in Attachment C for the reimbursement of certain Governmental Impositions.
4.    Miscellaneous.
4.1    Counterparts.  This Supplement may be executed in any number of counterparts and by different parties hereto on separate counterparts, each of which shall together one and the same instrument.
4.2    Law.  This Supplement shall be construed in accordance with and governed by, the laws of the State of Indiana without regard to its conflicts of law provisions, and the rights and remedies of the Parties hereunder will be determined in accordance with such laws.  Any action or proceeding brought under or pursuant to this Supplement shall be brought in accordance with Article XII (Arbitration) of the Coke Purchase Agreement.
4.3    Captions. The captions at the beginning of each of the numbered sections herein are for reference purposes only and will have no legal force or effect.  Such captions will not be considered a part of this Supplement for purposes of interpreting, construing or applying this Supplement and will not define limit, extend, explain or describe the scope or extent of this Supplement or any of its terms and conditions.
4.4    Terms and Conditions of the Coke Purchase Agreement; Conflicts.

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(a)    Except as expressly modified hereby, all terms and conditions of the Coke Purchase Agreement remain in full force and effect and are hereby in all respects ratified and confirmed.
(b)    To the extent that there is any conflict between the terms of the Coke Purchase Agreement and this Agreement, this Supplement shall control.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

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IN WITNESS WHEREOF, the parties hereto have caused this Supplement to be executed by their duly authorized representatives as of the date first set forth above.

	
		
	 
	INDIANA HARBOR COKE COMPANY, L.P.
By: Indiana Harbor Coke Company, 
   its General Partner

By:     /s/ Frederick A. Henderson 
   Name: Frederick A. Henderson 
   Title: Authorized Representative

	 
	 

	 
	ARCELORMITTAL USA LLC

By:      /s/ Om P. Mandhana 
   Name: Om P. Mandhana 
   Title: Vice President-Procurement and Supply Chain

[SUPPLEMENT TO THE COKE PURCHASE AGREEMENT]

ATTACHMENT A

Pad Coal Procedures

“Pad Coal” is defined as coal spillage which occurs when a coal blend is charged into the coke ovens as part of the coke making process at the Coke Plant.

Operating Procedures:

		
	1.
	Pad coal is collected and weighed using IHCC’s truck scale at the Coke Plant and sent to a coal pile dedicated to Pad Coal at Lakeshore’s coal handling facility.

		
	2.
	Subject to weather and quality concerns, Pad Coal is screened and re-introduced into the coal blend at *****% (*****% of agreed upon coal blend + *****% pad coal).

Billing Procedures:

		
	1.
	When calculating the Coal Price Component of the Contract Price, volume of coal charged into the coke ovens is based on the coal charge weight immediately prior to such coal being charged into the coke ovens.

		
	2.
	To the extent incorporated into the coal blend, Pad Coal shall be billed as part of the Coal Price Component of the Coke Price at a $***** value.

ATTACHMENT A 
PAGE 1

ATTACHMENT B

Billing Yield Adjustments

“Billing Yield” means the screened Coke yield standard used to convert coal price to coke cost pursuant to Section 5.1(a) of the Coke Purchase Agreement.

Between each yield test, the resulting agreed upon yield percentage shall become the basis for future adjustment of the Billing Yield for the coal blends used at the Coke Plant (the “Base Billing Yield”).  To calculate the Billing Yield each month, the Base Billing Yield will be adjusted for any change in the coal blends during such month to reflect the weighted average moisture and weighted average volatile matter percentage of the coal blend(s) charged during such month (the “Current Coal Blend”).  First, the Base Billing Yield shall be adjusted to a “dry” basis using the contractual coke moisture and the moisture content of the coal blend used to calculate Base Billing Yield (the “Dry Basis Base Billing Yield”).  Second, the Dry Basis Base Billing Yield shall be adjusted by calculating the difference between *****, the number shall be positive and, where if the *****, the number shall be negative) and adding it to the Dry Basis Base Billing Yield (the “Dry Basis Billing Yield”).  Third, the Dry Basis Billing Yield shall be adjusted to a “wet” basis using the contractual coke moisture and the moisture content of the Current Coal Blend.  The resulting percentage shall be the Billing Yield for the Current Coal Blend.  *****. 

[example on following page]

ATTACHMENT B 
PAGE 1

By way of example, using the agreed upon results of the yield test performed in June 2010:

Base Billing Yield = *****% (A) (based on a coal blend with a moisture content of *****% (B) and a volatile matter content of *****% (C))

Current Coal Blend = Coal blend(s) charged during the month with a weighted average moisture content of *****% (D) and a weighted average volatile matter content of *****% (E).

Contractual Coke Moisture = *****% (F)

	
				
	 
	 
	Percent
	Comments

	 
	Base Billing Yield
	*****%
	***** moisture content***** volatile matter content

	(G)
	Dry Basis Base Billing Yield
	*****%
	Adjusted using the moisture content of Base Billing Yield.
*****

	(H)
	Change in Volatile Matter Content
	*****%
	VM content of Base Billing Yield less the VM content of the Current Coal Blend
*****

	(I)
	Dry Basis Billing Yield
	*****%
	*****

	Billing Yield for the Current Coal Blend:
	*****%
	The Dry Basis Billing Yield adjusted back to a wet basis using the moisture content of the Current Coal Blend
*****

ATTACHMENT B 
PAGE 2

ATTACHMENT C

Governmental Impositions (Property Taxes)

Consistent with the previous agreement of the Parties and the current billing practices of IHCC, property taxes (including personal property taxes) representing Governmental Impositions under the Coke Purchase Agreement shall be reimbursed by AMUSA after such amounts become due and are paid by IHCC.  Such Governmental Impositions shall be included as a line item addition to the monthly invoice with the appropriate back-up following payment by IHCC.

ATTACHMENT C 
PAGE 1SXCQ3201310-QEx10.4

Exhibit 10.4

SPECIFIC TERMS IN THIS EXHIBIT HAVE BEEN REDACTED BECAUSE CONFIDENTIAL TREATMENT FOR THOSE TERMS HAS BEEN REQUESTED. THE REDACTED MATERIAL HAS BEEN SEPARATELY FILED WITH THE SECURITIES AND EXCHANGE COMMISSION, AND THE TERMS HAVE BEEN MARKED AT THE APPROPRIATE PLACE WITH FIVE ASTERISKS (*****).
Term Sheet
INDIANA HARBOR COKE CO. L.P. – ARCELOR MITTAL USA  
COKE PURCHASE AGREEMENT 
September 5, 2013
	
		
	Parties:
	ArcelorMittal USA (“AMUSA”)
Indiana Harbor Coke Company L.P. (“IHCC”)
AMUSA and IHCC will be known individually as “Party” and collectively as “Parties”

	Existing Agreement:
	“Existing Agreement” refers to the Amended and Restated Coke Purchase Agreement dated as of February 19, 1998 by and between Indiana Harbor Coke Company, L.P. and Inland Steel Company, predecessor to AMUSA, as amended and/or supplemented, including, without limitation, as amended by the Amendment to Coke Purchase Agreement and Letter Agreement, with an Effective Date of March 31, 2001.

	Term:
	The terms set forth in this Term Sheet and the subsequent agreement will commence on 10/1/2013 and continue through 10/1/2023 (the “Renewal Term”).  The Existing Agreement will be modified to incorporate the terms of this Term Sheet.

	Renewal Option:
	The Renewal Option for periods beyond October 1, 2023 shall mirror the terms of the Article II, Section 2.2 of the Existing Agreement, subject to replacing the referenced computer model with calculation examples and formulas in the schedules and the other changes specifically referenced herein.  AMUSA will have the right to rescind the exercise of any Renewal Option if, within ninety (90) days after receiving IHCC’s calculation of its incremental capital requirements and the resulting change in the rates proposed to be charged, including supporting documentation reasonably requested by AMUSA, AMUSA, in its sole discretion, rejects the amount of such incremental capital.  For the first five years of any extension beyond 2023 (i.e., from 2023 – 2028), there will be a continuation of the return on capital payment at the rate of $*****/net ton of furnace coke. This is in addition to the return on incremental capital for the extension period. 
In any case, after termination of the agreement, AMUSA will have no liability for the residual value of IHCC’s facilities.   

 

	
		
	Capital Expenditure Finality
	IHCC has invested (or will invest) sufficient capital to provide service during the Renewal Term such that IHCC will continue to meet the Minimum Coke Purchase Requirement (***** Tons) of furnace coke meeting the quality specification as set forth in the Existing Agreement at the pricing set forth in the agreement as modified by this term sheet.  
For purposes of this Agreement, “Current Laws” means all laws and regulations, including without limitation environmental laws and regulations, in effect as of October 1, 2013, as well as permits in effect as of October 1, 2013 and as may be modified by the NOV negotiation discussed herein (“Current Laws”).  
The obligation of IHCC to meet the Minimum Coke Purchase Requirement will not be affected by IHCC’s compliance with Current Laws.
IHCC and Cokenergy are currently engaged in settlement negotiations with the United States Environmental Protection Agency and Indiana Department of Environmental Management for resolution of Notices of Violation (“NOV negotiation”).  The outcome is unknown. Notwithstanding the outcome of such NOV negotiation or IHCC’s compliance with Current Laws, the total contribution of capital for purposes of the pricing to AMUSA shall under no circumstances be increased. Even if IHCC is obligated to expend or contribute additional capital or fines as a result of the NOV negotiation, such additional capital expenditures or fines shall not be recoverable from AMUSA.   
For the avoidance of doubt, in the event that Cokenergy’s action or inaction causes IHCC to be non-compliant with Current Laws, IHCC shall continue to have an obligation to meet the Minimum Coke Purchase Requirement at the prices set forth herein. 

2

 

	
		
	Refurbishment expense Cap
	For purposes of this Agreement, the expense caps will be annualized.  Machinery consists of the pusher charger machines, Door Machines (for purposes of this Agreement, “utility car” means door machine), hot car and locomotive.   
For the period April 1, 2013 to December 31, 2013, the maximum AMUSA liability for repair and maintenance expense categorized as oven batteries shall be $*****/ton (based on the required minimum tonnage)
For the period April 1, 2013 to December 31, 2013, the maximum AMUSA liability for repair and maintenance expense categorized as total machinery shall be $*****/ton (based on the required minimum tonnage)
For the period January 1, 2014 to December 31, 2014, the maximum AMUSA liability for repair and maintenance expense categorized as oven batteries shall be $*****/ton (based on the required minimum tonnage). 
For the period January 1, 2014 to December 31, 2014, the maximum AMUSA liability for repair and maintenance expense categorized as total machinery shall be $*****/ton (based on the required minimum tonnage) 
For the period January 1, 2015 to December 31, 2015 the total reimbursable expenditures for O&M expenses shall not exceed $***** per ton unless labor rates are modified, electricity prices change, or natural gas prices are greater than or less than $***** mmbtu.  The maximum O&M value will be adjusted upward or downward for labor rates, electricity and natural gas prices. Personal property taxes will remain a direct reimbursable expense.
For the period January 1, 2016 to December 31, 2016, the total reimbursable expenditures for O&M expenses shall not exceed the 2015 value except as adjusted by the BLS All Industrial Commodities Less Fuels Index change plus adjustments for changes in labor rates, electricity and natural gas prices.  Personal property taxes will remain a direct reimbursable expense. 
For the period January 1, 2017 to December 31, 2017 the total reimbursable expenditures for O&M expenses shall not exceed the 2016 value except as adjusted by the BLS All Industrial Commodities Less Fuels Index change plus adjustments for labor rates, electricity and natural gas prices.  Personal property taxes will remain a direct reimbursable expense.
For the period January 1, 2018 through the end of the Renewal Term, the  

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	O&M reimbursement expenses shall be based upon the annual budgeting process in the Existing Agreement, except for machinery expenses which shall be subject to the line item cap below.  Personal property taxes will remain a direct reimbursable expense.                                                                                          

	 
	 For the period January 1, 2018 to September 30, 2023, the maximum AMUSA liability for repair and maintenance expense categorized as total machinery shall be $*****/ton (based on the required minimum tonnage) adjusted by the annual change in the BLS All Industrial Commodities Less Fuels Index using the 2014 annual average bases.

	 
	Examples of these calculations will be developed and approved as part of the Renewal Term documentation.

	Timing for 2014 AMUSA, IHCC Projects and Upgrades
	AMUSA reline of No. 7 Blast Furnace and timing for delivery and installation of two new Pusher Charger Machines and modification and upgrade of the Door Machines will impact 2014 coke production and will be reflected in the Minimum Coke Purchase Requirement for 2014, as set forth below.
During the reline of No. 7 Blast Furnace, AMUSA will use best efforts to utilize the Coke produced by IHCC in its other blast furnaces (per the existing contract).  This includes taking delivery of the coke produced on a mutually agreeable production schedule supporting agreement on the contractual minimum (per the next section).

4

 

	
		
	Minimum Coke Purchase Requirement:
	The Minimum Coke Purchase Requirement is ***** Tons per year (tpy) for the calendar year commencing January 1, 2015.  The contractual Minimum Coke Purchase Requirement for 2014 shall be determined by mutual agreement of IHCC and AMUSA, based on the timing for delivery and installation of two new Pusher Charger Machines and the modification and upgrade of the Door Machines, as well as AMUSA’s reline of No. 7 Blast Furnace. 
Commencing January 1, 2015, AMUSA agrees to take and pay for all coke production above the ***** tpy.  The price for the Coke above ***** tpy in any calendar year shall be reduced by *****% of the total Return on Capital charge (i.e., $*****). 
For the year commencing January 1, 2023, the Minimum Coke Purchase Requirement will be pro-rated for an October 1, 2023 contract end date, unless the Parties exercise a Renewal Option.  In the event of any production shortfalls after January 1, 2014, Section 3.1(d) of the Existing Agreement shall continue to govern, provided that AMUSA’s preference is, if possible, for IHCC to supply Coke meeting the Coke Quality Specifications from IHCC’s  affiliates.    

	incremental Return on Capital Charge
	During the Renewal Term, the incremental return on capital charge will be $*****/net Ton furnace coke,

	Current Return on Capital Charge extension
	AMUSA will continue to pay the current $*****/ton return on capital charge for the duration of the Renewal Term which will satisfy any ongoing maintenance capital and any liability for residual value of the facility.

	Coal Cost:
	Pass through (same as Existing Agreement), AMUSA and IHCC to jointly develop the blend of coals to be used by IHCC.  Coal blend development will cover all costs components of coal, including FOB mine coal costs, logistics and handling costs.

	Yield Test:
	AMUSA and IHCC shall make reasonable commercial efforts to negotiate a mutually agreeable coal to coke yield measurement process in lieu of the yield test.  Such negotiation and any coke yield measurement process shall also address issues of inventory control and spillage control.  Notwithstanding the foregoing, AMUSA and IHCC shall not have an obligation to agree to a new coke yield measurement process.

	O&M:
	Annual Budget (same as Existing Agreement) in 2014 and 2018-2023, 50/50 on variances.
In the years 2015-17 budget will equal the Refurbishment Expense Cap amounts for those years as described above.  IHCC is solely responsible for variance above the limits set forth in Refurbishment Expense Cap.  IHCC will share any variance below the Refurbishment Expense Cap with AMUSA on a 50/50 basis.  

	Inventory Risk:
	Pass through (same)

5

 

	
		
	Coal Handling and other coal charges:
	Pass through (same)

	LakeShore Coal Handling:
	Assuming IHCC purchase of Lakeshore, the rate shall be the 2013 rate ($*****), plus any capital recovery charge that both Parties mutually agree is beneficial through June 30, 2014, provided, however, that the Parties shall not have an obligation to agree to any capital recovery charge.  After June 30, 2014, the rate escalates by the factors shown in Schedule 4.1 of the Coal Handling Agreement dated August 30, 2013 between IHCC and SunCoke Lake Terminal LLC.

	IHCC-Cokenergy Contract
	Cokenergy owns and operates the heat recovery steam generators, flue gas desulfurization system, and associated equipment.  IHCC will continue to try to reach an agreement with Cokenergy, and a new agreement with Cokenergy may not be reached on or before October 1, 2013.  However, this Agreement is not dependent upon, or subject to revisions based on, any such agreement between IHCC and Cokenergy.  In no event shall any amounts payable by IHCC to Cokenergy be passed through to AMUSA as operating or capital costs or otherwise.

	Governmental Impositions:
	Operating costs shall include all Governmental Impositions occurring on or after October 1, 2013 (excluding any imposed as a result of or in connection with the NOV negotiations) which IHCC is not reasonably able to mitigate plus actual costs incurred by the IHCC in the course of such mitigation.  Governmental Imposition shall have the definition in Section 1.30 of the Existing Agreement, with an additional clause that Governmental Impositions shall not include any assessment, charge, impost or levy, however denominated, that are a result of events occurring or conditions existing, including any failure to comply with Current Laws.

6

 

	
		
	Government Regulations affecting IHCC:
	To the extent that Current Laws may result in the need for a shutdown or curtailment of AMUSA and/or IHCC’s facility, irrespective of when such a shutdown or curtailment occurs, AMUSA and/or IHCC shall not be excused or in any way released from its obligation to perform under this agreement.  

While AMUSA and IHCC know of no future laws or regulations to be enacted or instituted after October 1, 2013 that may result in the need for a shutdown or curtailment of AMUSA’s facility or IHCC’s facility, if EPA or IDEM orders shutdown or curtailment of either facility, AMUSA and IHCC will make best efforts to obtain relief from such order, and will work to reach a resolution that will prevent shutdown or curtailment of AMUSA’s and/or IHCC’s operations.   Only if such order results from laws or regulations enacted after October 1, 2013, or from the enforcement of National Ambient Air Quality Standard regulations enacted prior to October 1, 2013, no liquidated damages or default will be assigned to or imposed upon AMUSA and/or IHCC for such shut down or curtailment.  

If, as a result of laws or regulations enacted after October 1, 2013, EPA or IDEM orders the installation of new equipment for IHCC on a no-fault basis, separately from any past, current or future enforcement action, IHCC and AMUSA will either negotiate to reach mutual agreement to continue operating, with mutually agreed upon adjustments to the Agreement, or cease operations at by an agreed-upon date.  If, after 60 days, the Parties cannot reach mutual agreement, either Party may elect to terminate the agreement, provided, however, that if IHCC elects to terminate, IHCC first must offer AMUSA the opportunity to take over IHCC’s facility for $1.  IHCC will assume any new liabilities that arise on or after the start of such 60 day period related to IHCC.    

	Confidential Information:
	The definition of “Confidential Information” and Section 15.11 (“Confidentiality”) in the Existing Agreement will be updated to incorporate the definition and terms of the current Confidentiality Agreement between AMUSA and IHCC.

7

 

	
		
	Additional Agreement Terms:
	This term sheet is intended to be binding and enforceable.  AMUSA and IHCC will negotiate in good faith to execute an amendment and/or amendment and restatement to the Existing Agreement incorporating the terms of this term sheet, including any modifications to the remaining terms of the Existing Agreement, with the understanding that limited or no modification will likely be needed for the majority of remaining terms, including but not limited to Force Majeure, Arbitration, Warranties, Assignability, Audit of Records, etc., except as otherwise modified or limited in this Term Sheet.  Article XIV, Conditions Precedent, will be substantially modified given that the Conditions Precedent at the time of the Existing Agreement entry have been met or expired. Until the Parties agree to such amendment, and in the event that the Parties are unable to agree to such amendment, this Term Sheet shall represent the binding agreement of the Parties.

8

 

This Term Sheet has been executed by duly authorized representatives of the Parties as of the date first written above. 

ArcelorMittal USA LLC 

By:                     
Name:                     
Title:                    

ArcelorMittal USA LLC 

By:                     
Name:                     
Title:        

Indiana Harbor Coke Co L.P. 
By:  Indiana Harbor Coke Company, its General Partner 

By:                     
Name:                     
Title:                    

9

Schedule 4.1 to the Coal Handling Agreement
Adjustment of Contract Price
(a)    The Contract Price shall be adjusted on an annual basis effective July 1st of each year starting July 1st, 2014 in accordance with the provisions of this Schedule 4.1.
(b)    The Contract Price for the first 2.0 million tons of coal received and stockpiled at the Work Site in any Calendar Year is divided into fixed and variable costs in percentage weights as follows:  
	
						
	COMPONENT
	$/TON
	COMPONENT WEIGHT
	ESCALATION INDEX NAME & NUMBER
	INDEX BASE 6/1/2012

	Fixed Cost
	*****
	*****
	 
	 

	Variable Costs
	 
	 
	 
	 

	Labor
	*****
	*****
	Wage Rage (straight time) and Fringe 
Benefits for Plant Operators per Collective 
Bargaining Agreement between 
International Union of Operating 
Engineers, Local 150 and SXCP affiliate
	*****

	Fuel
	*****
	*****
	#2 Diesel Fuel 
0573-03 (PPI) from Bureau of Labor Statistics average for the year
	*****

	Materials
	*****
	*****
	PPILFE (Less food and energy) from Bureau of Labor Statistics average for the year
	*****

	Total Variable Costs
	*****
	*****
	 
	 

	Base Price
	*****
	*****
	 
	 

(c)    The Contract Price shall be adjusted on in the following manner:
(1)    The Fixed Cost component shall not be adjusted
(2)    The Variable Cost components shall be adjusted on an annual basis in respect of changes in the index applicable to the weighted percentages of the respective cost component.
(3)    Adjustments to the Variable Cost components shall be made applicable to coal delivered to the Work Site on or after July 1st of each year. The initial adjustment will be made on July 1st, 2014 reflecting the changes between 2013 calendar year average index values and the 2012 base index values.

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(4)    Each Contract Price component adjustment shall be calculated separately and rounded to the nearest tenth of a cent ($0.001) per ton; then all of the components shall be combined to obtain the necessary adjustment, which shall be stated to the nearest tenth of a cent ($0.001) per ton.
(5)    Each adjustment to each Contract Price component shall be calculated using the formula:
(6)    
where:
CC    is the Cumulative Change in            *****
component price

CV    is the current value of the index as
first published for adjustment of the component.

IB    is the index base value

CP    is the sum of the value of the variable cost components of the
Contract Price

PC    is the component percentage of each variable cost components.
SAMPLE CALCULATION
	
		
	Contract Price
	$***** per ton

	Fixed Element of Contract Price
	$***** per ton

	Variable Element of Base Price
	$***** per ton

	Labor Cost Component
	*****% of Contract Price 
Variable Cost Element

	Index Base of Labor Cost
	$*****

	Current Value of Labor Cost
	$*****

	Increase in Labor Cost Component
	 

*****
	
		
	 
	= $***** per ton

Assuming that at the Contract Price adjustment date there were no increases or decreases in the other variable costs, the revised Contract Price would be equal to the following sum:

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	Fixed Element of Contract Price
	$*****  per ton

	Variable Cost Element of Contract Price
	$*****  per ton

	Contract Price Adjustment
	$*****  per ton

	Revised Contract Price
	$*****  per ton

(d)    The Contract Price for tons of coal in excess of 2.0 million tons received and stockpiled at the Work Site in any Calendar Year shall be only the Variable Cost components adjusted at the same percentage rate as that calculated for the first 2.0 million tons.

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