Contract for Sale and Purchase of Coal - Shell Oil Co. and City of Springfield, Illinois
CONTRACT FOR
SALE AND PURCHASE OF COAL
DATED
JULY 1, 1980
BETWEEN
SHELL OIL COMPANY
AND
CITY OF SPRINGFIELD, ILLINOIS
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TABLE OF CONTENTS
To Contract for Sale and Purchase of Coal
Dated July 1, 1980 Between SHELL OIL COMPANY
and CITY of SPRINGFIELD, ILLINOIS
ARTICLE NO. ARTICLE PAGE NO.
----------- ------- --------
1 Period 1
2 General Definitions 1
3 Coal-Source 2
4 Quantities 2
4.1 Base Annual Quantity 2
4.2 Option for Quantity Reduction 4
5 Deliveries 5
5.1 Place-Title Risk 5
5.2 Scheduling 6
5.3 Detention-Defaults 6
6 Weighing, Sampling and Analyses 7
6.1 Weighing 7
6.2 Sampling and Analysis 8
6.3 Information 10
7 Price 10
7.1 Determination 10
7.1.1 Labor 11
7.1.2 Materials, Supplies and Power 13
7.1.3 Capital Costs 13
7.1.4 Taxes 14
7.1.5 Royalty 15
7.1.6 Return on Capital, Income Taxes
and Indirect Costs 15
7.1.7 New Costs 15
7.1.8 Indexes 17
7.1.9. Reduced Transportation Cost 18
7.1.10 Calorific Value 18
7.1.11 Sulfur Content 19
7.1.12 Estimated Changes 25
7.1.13 Price Revisions for Option for
Quantity Reduction 25
7.2 Price Redetermination 25
7.3 Payment 29
7.3.1 Invoices 29
7.3.2 Payment 29
7.4 Audits 30
8 Excused Non-Performance 31
8.1 General 31
8.2 Partial Non-Performance 33
8.3 Procedure-Termination 33
8.4 Make-up Sales and Purchases 34
9 Unexcused Non-Performance 34
10 Special Provisions 35
10.1 Adequacy of Reserves 35
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TABLE OF CONTENTS
To Contract for Sale and Purchase of Coal
Dated July 1, 1980 Between SHELL OIL COMPANY
and CITY of SPRINGFIELD, ILLINOIS
10.2 Other Sales by Shell 36
10.3 Annual Reports by Shell 36
10.4 Alternate Source 36
10.5 Agreements Implementing Operations 37
10.6 Hardship 37
10.7 Progress Reports 37
10.8 State of Interpretation 37
11 Succession 37
12 Communications 38
13 Entirety-Changes 38
14 Permits 38
15 Headings Effect 39
EXHIBIT EXHIBIT TITLE
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A Elkhart Mining Area
B Quality
C Manning Table
C-1 Number of Workers and Job Classifications
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CONTRACT FOR SALE AND PURCHASE OF COAL
This is a CONTRACT dated July 1, 1980 between SHELL OIL COMPANY, a
Delaware corporation ("Shell") with offices at Two Shell Plaza (P. O. Box 2099)
in Houston, Texas 77001, and the City of Springfield, Illinois on behalf of City
Water, Light and Power ("City"), with offices in the Municipal Building at
Seventh and Monroe Streets, Springfield, Illinois 62757.
1. PERIOD. This Contract shall be in effect from its date and for a
performance period beginning January 1, 1983 and extending until the sum of the
quantities delivered hereunder equals 32.050 million tons, (unless revised
pursuant to article 4.2) or December 31, 2007 (unless extended pursuant to
article 4.2), whichever occurs first.
2. GENERAL DEFINITIONS. In this Contract: (a) "Initial Period" means the
one-year period from January 1, 1983 to December 31, 1983 consisting of four (4)
quarters: January 1 - March 31; April 1 - June 30; July 1 - September 30;
October 1 - December 31. (b) "Contract Year" means any year beginning at the
beginning of the day on January 1, 1984 or any anniversary thereof, and ending
at the end of the day of the next following December 31. (c) "Last Period" means
the period, which is less than a Contract Year, beginning on the day following
the end of the last Contract Year and ending on the last day of the term of the
Contract. The Initial Period or Last Period are sometimes referred to as
"Period" or "Periods". (d) A "month" and "day" mean calendar month and calendar
day respectively. (e) A "week" means any successive seven (7) days from Monday
through the next following Sunday. (f) A "quarter" means one of a set of four
consecutive three (3) month divisions of a Period or Contract Year, the first of
which starts at the beginning of the first day of a Period or Contract Year. (g)
A "ton" means 2,000 pounds avoirdupois. (h) "Btu" means British Thermal Unit as
determined on an "as-received" basis using an American Society of Testing
Materials (ASTM) standard method. (i) "As-received" refers to coal in its
natural condition after crushing and washing. (j) "Power Stations" means the
existing coal-fired electric generating stations designated Lakeside Units 5, 6,
7, and 8 and Dallman Units 1, 2 and 3 operated by City Water, Light and Power
Department, City of Springfield,
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Springfield, Illinois and located 6.5 kilometers south-east of Springfield,
Illinois and on the northwest shore of Lake Springfield and any future power
generating stations or units, which replace or are in addition to the existing
generating stations. (k) "Delivery Date" means a day on which coal is to be
delivered to City at Shell's storage-loading facilities. (l) "Full and Regular
Performance" means that a party is continuously selling and delivering or
purchasing and accepting, as applicable, the quantities of coal specified in
article 4.
3. COAL-SOURCE. Shell will sell and deliver to City, and City shall
purchase and accept from Shell, coal mined from the Elkhart mine ("Mine") in the
Elkhart Mining Area located in Logan County, Illinois, as shown in Exhibit A to
this Contract ("Mining Area"). The coal shall be 2" x 0" washed, and is expected
to have the typical quality shown in Exhibit B to this Contract; but City
understands that the quality of individual deliveries may vary from the expected
averages, because of variations in the quality of the coal being mined.
4. QUANTITIES.
4.1. Base Annual Quantity. Unless otherwise agreed to by the parties, the
quantity (all quantities being in tons) of the coal to be sold and purchased
during each Period or Contract Year shall be the Base Quantity specified in the
following table for such Period or Contract Year as adjusted pursuant to this
article 4. By giving Shell notice at least six (6) months before the beginning
of each Period or Contract Year, City may increase or decrease the Base Quantity
for such Period or Contract Year by not more than five percent (5%) ("Nominated
Quantity"). Such increase or decrease in the Base Quantity for the Initial
Period of not more than five percent (5%) will apply to each of the four (4)
quarters in such Period. If City does not give Shell such notice, then the
Nominated Quantity for such Period or Contract Year shall be the Base Quantity
for such Period or Contract Year. Shell's sale and delivery obligations
hereunder ("Required Quantity") for each month during such Period or Contract
Year shall be not less than 97.5% of the prorata monthly share of the Nominated
Quantity. To the extent practicable, the quantities to be delivered and accepted
throughout each week and day will be in substantially equal quantities
consistent with the Required Quantity. City recognizes that Shell's delivery
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capability may not be uniform while the Mine is being developed to its capacity.
The quantity (Base Quantity) is set out in the following table:
Base Quantity Table
Year Tons
---- ----
Initial Period
January 1, 1983 - March 31, 1983 160,000
April 1, 1983 - June 30, 1983 135,000
July 1, 1983 - September 30, 1983 165,000
October 1, 1983 - December 31, 1983 190,000
Each Contract Year Beginning January 1,
1984 850,000
1985 900,000
1986 950,000
1987 through 1989 1,000,000
1990 1,100,000
1991 through 1994 1,200,000
1995 1,300,000
1996 through 1998 1,400,000
1999 1,500,000
2000 and each succeeding Contract Year 1,600,000
Last Period See Last Paragraph of
this Article 4.1
The quantity to be delivered during the Last Period shall be delivered at
the respective averages of the monthly, weekly and daily delivery rates in
effect during the preceding Contract Year disregarding any reduction therein for
any excused or unexcused non-performance. Nothing in this article 4.1 shall
increase the total quantity delivery obligation specified in article 1.
4.2. Option for Quantity Reduction. City shall have the Option, beginning
January 1, 1990 to take coal hereunder at less than the quantity specified in
the Base Quantity Table in article 4.1 according to the following provisions of
this article 4.2, and subject to the pricing provisions of article 7.1
(including article 7.1.13). City must exercise its Option under this article 4.2
by giving Shell notice before December 31, 1989 specifying either Schedule A, B,
or C or before December 31, 1987, if selecting Schedule D.
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Option Base Quantities (Tons)
-----------------------------
Contract Year Schedule A Schedule B Schedule C Schedule D
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1990 1,100,000 1,100,000 1,100,000 1,000,000
1991 1,200,000 1,200,000 1,200,000 1,000,000
1992 1,200,000 1,200,000 1,200,000 1,000,000
1993 1,200,000 1,200,000 1,200,000 1,000,000
1994 1,200,000 1,200,000 1,200,000 1,000,000
1995 1,200,000 1,200,000 1,200,000 1,000,000
1996 1,200,000 1,200,000 1,200,000 1,000,000
1997 1,200,000 1,200,000 1,200,000 1,000,000
1998 1,200,000 1,200,000 1,200,000 1,000,000
1999 1,200,000 1,200,000 1,200,000 1,000,000
2000 1,200,000 1,200,000 1,300,000 1,000,000
2001 1,200,000 1,200,000 1,400,000 1,000,000
2002 1,200,000 1,200,000 1,400,000 1,000,000
2003 1,200,000 1,200,000 1,400,000 1,000,000
2004 1,200,000 1,200,000 1,400,000 1,000,000
2005 1,200,000 1,300,000 1,400,000 1,000,000
2006 1,200,000 1,400,000 1,400,000 1,000,000
2007 1,200,000 1,400,000 1,400,000 1,000,000
2008 1,200,000 1,400,000 1,400,000 1,000,000
2009 1,200,000 1,400,000 1,300,000 1,000,000
2010 1,200,000 900,000 - 1,000,000
2011 600,000 - - 1,000,000
The quantities to be delivered pursuant to the selected Option Schedule
throughout each week and day will be in substantially equal quantities
consistent with the Option Base Quantities, and in accordance with the other
terms and conditions of the Contract when not inconsistent with this article
4.2.
Nothing in this article 4.2 shall increase the maximum delivery obligation
in article 1 or alter the Base Quantity provisions as specified in article 4.1
for coal to be taken prior to January 1, 1990. If City exercises its option
under this article 4.2, then the December 31, 2007 expiration date in article 1
shall be revised (a) to June 30, 2011 if City selects Schedule A, (b) to August
31, 2010 if City selects Schedule B, (c) to November 30, 2009 if City selects
Schedule C, or (d) to December 31, 2011 if City selects Schedule D.
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5. DELIVERIES.
5.1. Place-Title-Risk.
a) The coal shall be delivered to City at Shell's storage-loading
facilities (currently planned to be located in Section 20 as shown in Exhibit A)
into trucks there tendered by or for the account of City to receive the same.
Shell's storage-loading facilities shall be capable of loading sixteen (16)
hours per day, five (5) days per week (from Monday through Friday) excluding
holidays, subject to labor agreement provisions in which case those provisions
would apply. Title to, and all risk of loss or damage of or by the coal
delivered shall pass to City when the coal is delivered into the trucks tendered
by or for the account of City.
b) At its election, Shell may relocate its storage-loading facilities from
the currently planned location (as shown in Exhibit A) to an alternate location
which will reduce the total truck haul distance to City's truck unloading
facility at the Power Stations.
5.2. Scheduling. At least three (3) months before the beginning of each
Period or Contract Year, City shall furnish Shell a schedule of the estimated
monthly quantities to be delivered during those Periods or Contract Years; and
at least twenty (20) days before the beginning of each month, City shall furnish
Shell a definitive schedule of the quantities to be delivered during that month,
together with estimates of the quantities to be delivered the next two (2)
succeeding months. Deliveries shall be made by Shell as thus definitely
scheduled by City, provided the scheduled quantities are consistent with article
4, and subject to City's timely and orderly tendering of trucks which shall be
of sufficient capacity and in proper working order so as not to hinder Shell's
delivery obligations hereunder. City and Shell will work together to coordinate
the scheduling of equipment maintenance to minimize the disruption of scheduled
deliveries hereunder.
5.3. Detention-Defaults. Shell shall reimburse City for any demurrage or
other freight penalties incurred and paid by City to the extent due to Shell's
failure to load trucks in accordance with the provisions hereof and of the truck
tariffs applicable to loading time, minimum weight per truck and minimum annual
tonnages, unless caused by an event of excused non-performance as specified in
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article 8.1; however, Shell's obligations to reimburse City under this article 5
shall be subject to Shell's concurrence with the tariff provisions that apply to
delivery and receipt of coal. If City, in lieu of payment of such excess freight
penalties required by the applicable tariff, can instead pay the freight
charges, at the tariff rate, on the amount of coal which Shell was obligated
hereunder to ship, but did not ship, for the time period in question, and if
such freight charges on such unshipped coal are less than the above-described
excess freight penalties, then Shell shall be obligated hereunder to pay City
only the amount of such freight charges on such unshipped coal. Such
reimbursement shall be made by Shell by appropriate credit to City upon Shell's
receipt of City's detailed statement of the demurrage or freight penalties
incurred and paid. City shall reimburse Shell for any additional costs incurred
by Shell due to any failure by City to comply with the provisions of article 4
and this article 5. Such reimbursement shall be made by City upon receipt of
Shell's invoice, together with a detailed statement verifying the additional
costs incurred by it.
6. WEIGHING, SAMPLING AND ANALYSES
6.1. Weighing. Shell will determine the quantities delivered using Shell's
truck scales located near its storage-loading facilities, or when such scales
are inoperative, by a means mutually agreeable to Shell and City. Each of Shell
and City may have a representative present to witness any weighing, and if
either elects not to have such a representative present, the quantity
determination shall be conclusive unless adjusted pursuant to the following
provisions of this article 6.1. Shell will notify City as far in advance as
practicable of all scale inspections and calibration tests. Such scales shall be
inspected and certified by the Bureau of Products Inspection and Standards at
least annually.
If either party questions the accuracy of Shell's truck scales, it may
request a certification test and Shell will schedule such test as promptly as
possible. The results of such certification test shall be certified by the
Bureau of Products Inspection and Standards. The costs of such certification
test will be paid by the requesting party unless the test reveals an error in
weights benefiting Shell in excess of five-tenths of one percent (0.5%), in
which case Shell shall bear the costs of such certification test.
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If a certification test (whether annual or requested by either party)
reveals an error in the accuracy of such scales, the scales shall be
recalibrated. If such error is in excess of plus or minus five-tenths of one
percent (+ 0.5%), then an appropriate adjustment shall be made in the weights
and related invoices and payments from the point in time when the error
developed, if such point can be ascertained, to the time of the recalibration
arising out of the certification test which revealed the error. If such point in
time cannot be determined, then such adjustment shall be made for a period as
both parties shall mutually agree to. If an adjustment period is not ascertained
or agreed upon within thirty (30) days from the date of the determination of the
error, then the weights, related invoices and payments will be adjusted in the
amount of the error on one-half (1/2) of the coal shipped during the period
commencing with the last certification test of the scales and ending with the
date such scales are recalibrated as a result of the certification test which
revealed the error.
6.2. Sampling And Analysis. The as-received weighted average calorific
value and sulfur content, in Btu's per pound and pounds sulfur per million Btu,
respectively, of the coal in Shell's storage-loading facilities shall be
determined by analysis of the samples taken at the Mine using Shell's sampling
facilities and shall be considered as the quality of the coal delivered
hereunder. Such sampling facilities shall be designed in accordance with
American Society of Testing Materials (ASTM) standards or in conformance with
generally recognized industry practice. Whenever Shell's facilities for so
taking samples are inoperative, samples shall be taken at the Mine by procedures
mutually agreeable to Shell and City. All samples shall be analyzed by Shell's
qualified technician stationed at the Mining Area, who shall comply with
procedures based on ASTM standards as agreed upon between Shell and City from
time to time or such other procedures as agreed upon between Shell and City, and
whose determinations shall be conclusive except as provided in the following
provisions of this article 6.2. The expenses of the foregoing routine samplings
and analyses shall be borne by Shell. Each of Shell and City may have a
representative present to witness any sampling and/or analysis. If either elects
not to have a representative present, the sampling determination shall be
conclusive. Each sample collected by Shell shall be divided into three (3)
parts, with one (1) such part to be used for the first analysis of the sample
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by Shell's qualified technician at the Mine. The remaining two (2) parts shall
be put into suitably labeled and sealed containers and retained for a maximum of
thirty (30) days. At City's request and expense, one (1) of these containers
shall be forwarded to City. If the analysis of City's part ("second analysis")
is within acceptable ASTM tolerances of the first analysis, then the analysis of
the first part shall be binding. If the second analysis is not within acceptable
ASTM tolerances of the first analysis, then the analysis of the first part shall
be binding, unless either Shell or City disputes the results of the first
analysis. If the first analysis is so disputed, an analysis of the retained
third part ("third analysis") shall be made, at Shell's expense, by Shell's
qualified technician at the Mining Area or, if requested by City, by a qualified
technician who shall be provided by an independent commercial laboratory
selected by Shell and acceptable to City, such technician to comply with the
analysis procedures as provided above for the first and second analysis. If the
third analysis is within acceptable ASTM tolerances of the first analysis, the
first analysis shall be binding. In the event the third analysis is not within
acceptable ASTM tolerances of the first analysis, the average of the two closest
analyses shall be binding.
6.3. Information. Shell will promptly inform City of all quantity and
quality determinations as to the coal delivered during each day.
7. PRICE.
7.1. Determination.
a) The delivered price of the coal shall be the Base Price of $24.800 per
ton, adjusted, as of the Delivery Date, in accordance with the following
provisions of this article 7.1. Each adjustment (except the adjustments in
articles 7.1.4, 7.1.5, 7.1.10 and 7.1.11) of the Base Price shall be made
independently of each other adjustment thereof; and each adjustment under this
article 7.1 shall be calculated to the nearest 0.01 of one cent and rounded to
the nearest 0.10 of one cent, or, if there is no nearest 0.10, to the nearest
even 0.10 of one cent. The failure of the parties to agree on price adjustments
as hereinafter set forth shall in no way relieve either party of its respective
obligations of performance under this Contract.
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b) The Base Price consists of the following price components:
Price Components Per Ton
---------------- -------
Labor (Article 7.1.1.a)) $8.773
1974 Pension Trust (7.1.1.b)) .085
Materials, Supplies and Power
Mine Roof Bolts (7.1.2.a)) 1.325
Other Materials and Supplies (7.1.2.b)) 4.478
Power (7.1.2.c)) .713
Capital (7.1.3) 2.081
Taxes
Property Plant and Equipment (7.1.4.a)) .151
Federal Reclamation Fee (7.1.4.b)) .150
Black Lung (7.1.4.c)) .496
Royalty (7.1.5) .789
Return on Capital, Income Taxes and
Indirect Costs (7.1.6) 5.759
-------
Base Price $24.800
=======
7.1.1. Labor.
a) The Base Price shall be increased or decreased by an amount
calculated as follows: multiply $8.773 per ton by the percentage change in the
weighted average cost per hour for hourly workers and salaried employees on the
Delivery Date, determined in accordance with the Manning Table which is Exhibit
C to this Contract, from $18.32 per hour (such estimated average wage rate as of
January 1979, derived as shown in Exhibit C). The weighted average hourly cost
for salaried employees at the Mining Area shall be adjusted by the percentage
change in such cost for hourly workers. The parties to this Contract recognize
that the purpose of the Manning Table is to periodically recalculate the
weighted average hourly cost for hourly workers and salaried employees, and that
it does not necessarily reflect the number of persons at the Mine at any given
time. The number of persons used in the Manning Table shall not be changed,
except as may be required pursuant to article 7.1.7 or to the following
provisions of this article 7.1 1.a). The Manning Table is based upon the
collective bargaining agreement between the United Mine Workers of America
(UMWA) and the Bituminous Coal Operators' Association (BCOA) in effect in
January 1979 and will always be based on such collective bargaining agreement as
is in effect on the Delivery Date unless: (i) Shell becomes subject to a
bargaining agreement other than the bargaining agreement between the UMWA and
the BCOA, in which case the Manning Table will be
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based on Shell's bargaining agreement; or (ii) a collective bargaining agreement
between the UMWA and the BCOA ceases to exist or the UMWA ceases to represent
coal mine workers in Central Illinois, in either case the Manning Table shall be
changed by Shell and based on another representative collective bargaining
agreement.
b) The Base Price shall be increased or decreased by the same amount
by which the 1974 Pension Trust as in effect on the Delivery Date is more or
less than $0.085 per ton, such cost as of January 1979, as per the collective
bargaining agreement between UMWA and BCOA. Such cost is in addition to the 1974
Pension Trust cost included in the weighted average cost per hour in the Manning
Table as provided for in article 7.1.1.a). The $0.085 per ton will be applied to
the tons sold unless subsequent collective bargaining agreements specify
otherwise, in which case the cost per ton will be adjusted accordingly.
c) The Base Price does not include costs associated with the 1950
Pension and Benefit Trusts as Shell, based on an outside legal opinion, does not
consider itself liable for such costs. If Shell is judged liable for such costs,
Shell will add such cost to the price, and thereafter increase or decrease the
price by the amount by which that cost, on the Delivery Date, is more or less
than the amount originally added to the price.
d) Whenever the collective bargaining agreement being used as the
basis for the Manning Table in effect on the Delivery Date includes a labor or
labor-related cost expressed on a per-ton basis and such cost is not otherwise
reflected in the Manning Table or articles 7.1.l.b) and 7.1.1.c), Shell will add
that cost as such to the price, and thereafter increase or decrease the price by
the amount by which that cost, on the Delivery Date, is more or less than the
amount originally added to the price. If the addition of such per-ton cost
results in a duplication of any cost component of the price then in effect under
articles 7.1.1 a), 7.1.1.b) or 7.1.1.c) that cost component of the price shall
be adjusted as required to eliminate such duplication.
7.1.2. Materials, Supplies and Power.
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a) Mine Roof Bolts. The Base Price shall be increased or decreased
by an amount calculated as follows: multiply $1.325 per ton by the percentage
change in the Producer Price Index for Mine Roof Bolts (BLS Code 1081.0141.05),
as of the Delivery Date, from 176.7 (such Index for January 1979).
b) Other Materials and Supplies. The Base Price shall be increased
or decreased by an amount calculated as follows: multiply $4.478 per ton by the
percentage change in the Producer Price Index for Underground Mining Machinery
and Equipment (BLS Code 1192.01), as of the Delivery Date, from 282.5 (such
Index for January 1979).
c) Power. The Base Price shall be increased or decreased by an
amount calculated as follows: multiply $0.713 per ton by the percentage change
in the total per kilowatt hour cost of electricity, as of the Delivery Date,
from 2.66 cents per kilowatt hour (2.66(cent)/kwh) (such cost as of January
1979). This cost per kilowatt hour is for delivered electric power to the
surface facilities to be supplied by the appropriate electrical utility
certified to serve the Mine, and is based on 12,000 KW per month demand and
4,600,000 kilowatt hours usage per month. The power cost per kilowatt hour will
always be based on 12,000 KW per month demand and 4,600,000 kilowatt hours usage
per month using the rate schedule of the utility certified to serve the Mine as
is in effect on the Delivery Date.
7.1.3. Capital Costs. The Base Price shall be increased or decreased
by an amount calculated as follows: multiply $2.081 per ton by the percentage
change in the Producer Price Index for Underground Mining Machinery and
Equipment (BLS Code 1192.01), as of the Delivery Date, from 282.5 (such Index
for January 1979).
7.1.4. Taxes.
a) The Base Price includes $0.151 per ton for all federal, state or
local taxes or fees, (the estimated total of such taxes and fees as of January
1979) excluding income taxes, Black Lung Tax and the Federal Reclamation Fee.
The Base Price shall be increased or decreased by the same amount by which any
federal, state or local taxes or fees (excluding income taxes, Black Lung Tax
and the Federal Reclamation Fee) applicable to the Mine or the coal delivered
hereunder, including all severance and ad
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valorem taxes, sales, use, value added, or other excise taxes (including the
Illinois Retail Occupation Tax, if applicable) which Shell is required to pay on
coal delivered hereunder as in effect on the Delivery Date, total more or less
than $0.151 per ton. In determining taxes payable, effect shall be given to all
price adjustments.
b) The Base Price shall be increased or decreased by the same amount
by which the Federal Reclamation Fee pursuant to the Surface Mine Control and
Reclamation Act of 1977, as in effect on the Delivery Date, is more or less than
$0.150 per ton (such fee as of January 1979).
c) The Base Price shall be increased or decreased by the same amount
by which the Black Lung Tax pursuant to the Black Lung Benefits Act of 1977, as
in effect on the Delivery Date, is more or less than $0.496 per ton (such tax as
of January 1979).
d) The price shall be increased by the same number of percentage
points by which the depletion allowance applicable to coal for United States
Income Tax purposes, as in effect on the Delivery Date, is less than ten percent
(10%) (the rate of that allowance as of January 1979).
7.1.5. Royalty. The Base Price shall be increased or decreased by
the same amount by which gross royalty payable on the Delivery Date on the coal
delivered under this Contract is more or less than $0.789 per ton (such cost for
January 1979). Gross royalty payable will include: (a) amounts payable on tons
sold and purchased, including Shell's fee properties at the generally prevailing
royalty rate negotiated in the area at the time of acquisition and (b) amounts
equal to the recovery of previously paid advance royalty. In determining gross
royalty payable, effect shall be given to all price adjustments.
7.1.6. Return on Capital, Income Taxes and Indirect Costs. The Base
Price shall be increased or decreased by an amount calculated as follows:
multiply $5.759 per ton by the percentage change in the Department of Commerce,
Bureau of Economic Analysis, Implicit Price Deflator for the Gross National
Product, as of the Delivery Date, from 156.68 (such Gross National Product
Deflator for the fourth quarter 1978).
7.1.7. New Costs. If Shell ever incurs any new labor or
labor-related cost, or materials, supplies or power cost, or capital, tax or
other cost, whether of the type enumerated herein or of any other
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type which (a) arises by reason of any new or amended law, regulation,
interpretation, assessment, rule, order or changed enforcement policy of any
governmental authority, or any change in the collective bargaining agreement
used herein, or any other like change after January 1, 1980 and (b) is not a
duplication of a cost in this article 7.1: each such new cost, appropriately
computed on a per-ton basis, shall be added to the price, effective when first
incurred; and the price shall thereafter be increased or decreased with changes
of such cost, using the same method as provided in this article 7.1 for changes
of that particular kind of cost. If the cost is not similar to a particular kind
identified herein, it shall be added to the component of the price in and
thereafter increased or decreased pursuant to Return on Capital, Income Taxes
and Indirect Costs in article 7.1.6.
Any new labor or labor-related cost shall include as Shell's
overhead and administrative cost a cost of ten percent (10%). Such overhead and
administrative cost shall be added to the component of the price in, and
thereafter increased or decreased pursuant to, the Return on Capital, Income
Taxes and Indirect Costs in article 7.1.6.
Any new capital cost shall consist of the required additional
capital investment and the return on such required additional capital which will
result collectively in an eight percent (8%) real rate of return after tax
calculated on a discounted cash flow basis. This new capital cost shall be
computed by Shell on a per-ton basis (giving effect to the total base quantities
of coal from the Mining Area which Shell has committed to sell and deliver,
including commitments to other parties), added to the component of the price in,
and thereafter increased or decreased pursuant to, the applicable Capital Costs
and Return on Capital, Income Taxes and Indirect Costs provisions in article
7.1.3 and 7.1.6.
Any new tax cost shall not include any change in investment tax
credits for United States Income Tax purposes or any other changes in income
taxes, except as provided in article 7.1.4.d).
The Base Price includes all costs believed necessary to comply with
state and federal regulations in effect on January 1, 1980 under the Surface
Mining Control and Reclamation Act of 1977 and the 1977 Amendments to the Clean
Air Act, but does not include any additional costs which may be necessary to
comply with: subsequent interpretations of the regulations; finally adopted
regulations
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14
different from the regulations in effect on January 1, 1980 or subsequent
interpretations thereof; or any other amendments or revisions, effective after
January 1, 1980, to these Acts or regulations or interpretations relating
thereto.
7.1.8. Indexes.
a) The Indexes cited herein are those published by the United States
Bureau of Labor Statistics, or by the Department of Commerce, Bureau of Economic
Analysis, (or successor or replacement bureau) or any revision or equivalent of
such Indexes or bases hereafter published by that Bureau. If such Indexes (or
revision or equivalent) cease to be so published, they shall be replaced by any
substantially equivalent indexes or other alternative bases for the affected
adjustments under this article 7.1, which are mutually agreeable to Shell and
City; provided that any such alternative Indexes or bases (including any
revision or equivalent published by that Bureau) shall be appropriately
reconciled with the index and/or base which it replaced.
b) At the request of either Shell or City by notice to the other at
least sixty (60) days before January 1, 1983 or January 1 of each year
thereafter, any one or more of the Indexes cited herein shall be reviewed, and
replaced by other Indexes or by other bases, to be effective as of that date, if
and as Shell and City may agree in writing to be necessary to effect the
respective price adjustments more accurately and fairly.
7.1.9. Reduced Transportation Cost. If Shell exercises its election
in article 5.1.b), the Base Price as of January 1979 shall include a component
("Reduced Transportation Cost") which shall be $0.008 per ton for each one-tenth
(0.1) mile that such alternate location reduces the total truck-haul distance.
Such Reduced Transportation Cost shall thereafter be increased or decreased by
an amount calculated as follows: multiply the Reduced Transportation Cost by the
percentage change in City's transportation cost per ton-mile for coal delivered
hereunder, as of the Delivery Date, from $0.08 per ton-mile (such cost as of
January 1979).
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15
7.1.10. Calorific Value.
a) The price of the coal, as determined pursuant to article 7.1.1.
through 7.1.9 shall be adjusted by adding thereto a Calorific Adjustment Factor.
The Calorific Adjustment Factor, which may be either positive or negative, shall
be determined in accordance with the following formula:
CAF = AC x a/b - AC
Where:
i) "CAF" is the Calorific Adjustment Factor,
ii) "AC" is the aggregate of the components of the price of
the coal included in article 7.1.1, 7.1.2, 7.1.3, 7.1.6,
7.1.7, 7.1.8 and 7.1.9;
iii) "a" is the calorific value of the coal pursuant to
article 6.2.
iv) "b" is 10450.
b) if the weighted average calorific value of deliveries during a
quarter is below 10,000 Btu's per pound ("nonconforming quarter"), then the
price for coal delivered during such nonconforming quarter determined pursuant
to articles 7.1.1 through 7.1.10.a) will be reduced by two (2) percent of the
sum of the components of the price of the coal included in articles 7.1.1,
7.1.2, 7.1.3, 7.1.6, 7.1.7, 7.1.8, 7.1.9, 7.1.10.a) ("Adjusted Amount");
provided however, if due to either party's excused or unexcused non-performance,
some coal was not delivered and accepted during the nonconforming quarter, such
quarter will be referred to as a ("nonperforming quarter"). The weighted average
calorific value of the coal delivered during a nonperforming quarter will be
adjusted by a quantity delivered during the quarter(s) immediately following the
nonperforming quarter ("correcting deliveries"), equal to the quantity scheduled
but not delivered, due to either party's excused or unexcused non-performance,
during such nonperforming quarter. Correcting deliveries shall begin with the
first coal delivered following the nonperforming quarter and end when the
quantity equals the quantity not delivered during the nonperforming quarter due
to either party's excused or unexcused non-performance. If the weighted average
calorific value of the coal delivered during the nonperforming quarter when
averaged with the
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16
correcting deliveries is below 10,000 Btu's per pound, then the price for coal
delivered during such nonperforming quarter and correcting deliveries will be
the Adjusted Amount.
Shell will reimburse City for the difference between the amount
billed by Shell pursuant to article 7.3.1 for the coal delivered during such
nonconforming quarter or nonperforming quarter (as the case may be) and the
Adjusted Amount as determined in this article 7.1.10.b) within thirty (30) days
after the end of a nonconforming quarter or correcting deliveries (as the case
may be).
7.1.11. Sulfur Content. For purposes of this article 7.1.11,
adjusted sulfur content shall mean the sulfur content (as determined pursuant to
article 6.2) reduced by the sulfur retained in the ashes when the coal is burned
in the Power Stations; and sulfur dioxide shall be deemed to be such adjusted
sulfur content multiplied by two (2). City will supply Shell the data needed to
ascertain the amount of sulfur retained with the ashes when the coal is burned
in the Power Stations.
The parties recognize that the Power Stations have different sulfur
dioxide emission limits, therefore:
a) If the weighted average of such sulfur dioxide from a week's
delivery of coal for the Lakeside Units 5, 6, 7 and 8 and
Dallman Units 1 and 2 is greater than 6.0 pounds sulfur
dioxide per million Btu ("nonconforming coal"), then Shell
will have the right, within the next seven (7) days of Full
and Regular Performance, to deliver coal ("correcting coal")
which when averaged with the nonconforming coal has a weighted
average sulfur dioxide of 6.0 pounds or less per million Btu.
If the nonconforming coal, when averaged with the correcting
coal, continues to have weighted average sulfur dioxide of
greater than 6.0 pounds per million Btu, the price to be paid
for the nonconforming coal and any correcting coal deliveries
for these Units shall be computed by determining the price of
such deliveries pursuant to articles 7.1.1 through 7.1.10 and
reducing such determined price by
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17
two (2) percent of the sum of the components of the price of
the coal included in articles 7.1.1, 7.1.2, 7.1.3, 7.1.6,
7.1.7, 7.1.8, 7.1.9, and 7.1.10.
b) If the weighted average of such sulfur dioxide from coal
deliveries for the Dallman Unit 3 for a Period or Contract
Year is less than 4.91 or greater than 5.40 pounds sulfur
dioxide per million Btu, then the price determined pursuant to
articles 7.1.1 through 7.1.10. and to 7.1.11.c) for such coal
deliveries for such Period or Contract Year shall be adjusted
according to the following Sulfur Adjustment Table. Such
adjustment shall be made within ninety (90) days after the end
of such Period or Contract Year with the appropriate credit to
City or payment to Shell (as the case may be). Such adjustment
shall be the difference between the amount invoiced City (paid
Shell) under article 7.3 for such Contract Year and the amount
calculated by multiplying the "Adjustment Factor", as provided
in the following Sulfur Adjustment Table, by the sum of the
components of the price of the coal included in articles
7.1.1, 7.1.2, 7.1.3, 7.1.6, 7.1.7, 7.1.8, 7.1.9, 7.1.10 and
7.1.11.c) for such Period or Contract Year.
Dallman Unit 3
Sulfur Adjustment Table
Sulfur Dioxide
(Pounds Sulfur Dioxide Per Million Btu) Adjustment Factor
--------------------------------------- -----------------
3.90 or less 1.042
3.91 to 4.10 1.036
4.11 to 4.30 1.030
4.31 to 4.50 1.024
4.51 to 4.70 1.018
4.71 to 4.90 1.012
4.91 to 5.40 1.000
5.41 to 5.60 .988
5.61 to 5.80 .982
5.81 to 6.00 .976
6.01 to 6.20 .970
6.21 to 6.40 .945
6.41 or greater .939
<PAGE>
18
For purposes of the above table, determinations of sulfur
dioxide will be rounded to the nearest one-hundredth (0.01)
pounds per million Btu or, if there is no nearest
one-hundredth, to the nearest even one-hundredth (0.01) pound
per million Btu.
c) If the weighted average of such sulfur dioxide from coal
deliveries for the Power Stations for a two (2) month period
in a Contract Year (as defined below) is greater than 5.80
pounds per million Btu ("high sulfur period"), the price for
such coal will be the price determined pursuant to articles
7.1.1 through 7.1.11.a) less the component of the price in
article 7.1.6. In addition, City may elect to terminate,
pursuant to the provisions of this article 7.1.11.c) the
Contract by giving notice.
For purposes of this article 7.1.11.c), each Contract Year
will consist of six (6) consecutive (2) month periods the
first of which begins January 1, 1984. The six (6) periods in
a Contract Year will be: January - February; March - April;
May - June; July - August; September - October; November -
December.
If, due to either party's excused or unexcused
non-performance, some coal was not delivered and accepted
during the high sulfur period, such period will be referred to
as a ("nonperforming high sulfur period"). The weighted
average sulfur dioxide of coal delivered during such a
nonperforming high sulfur period will be adjusted by a
quantity delivered during the month(s) immediately following
the nonperforming high sulfur period ("correcting coal"),
equal to the quantity scheduled but not delivered, due to
either party's excused or unexcused non-performance during the
nonperforming high sulfur period. Correcting coal deliveries
shall begin with the first coal delivered following the
nonperforming
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19
high sulfur period and end when the quantity equals the
quantity not delivered during the nonperforming high sulfur
period due to either party's excused or unexcused
non-performance.
If the weighted average of sulfur dioxide from the coal
delivered during the nonperforming high sulfur period when
averaged with the correcting coal is greater than 5.8 pounds
per million Btu, the price for such coal will be the price
determined pursuant to articles 7.1.1 through 7.1.11.a) less
the component of the price in article 7.1.6. In addition, City
may elect to terminate, pursuant to the provisions of this
article 7.1.11.c), the Contract by giving notice.
If City elects to terminate this Contract under this article
7.1.11.c), Shell will have thirty (30) days from Shell's
receipt of such notice to give City adequate assurances that
future deliveries will meet the sulfur dioxide requirements of
this article 7.1.11.c). If within said thirty (30) days Shell
does not give City such adequate assurances, City may cancel
this Contract.
d) If at any of the Lakeside Units 5, 6, 7, or 8, or the Dallman
Units 1 or 2, City either i) installs emissions control
equipment pursuant to article 8.l.b) or otherwise, ii) ceases
to operate or iii) replaces any of such Units, then the sulfur
dioxide provisions in article 7.1.11.a) and 7.1.11.c) shall
not apply to the coal delivered hereunder which is being
burned in such Units, but the provisions of article 7.1.11.b)
shall apply to all coal delivered hereunder which is being
burned in such Units. The remaining Units covered by this
article 7.1.11.d) if any, which are not affected by parts i),
ii) or iii) hereof shall continue to be covered by the
provisions of articles 7.1.11.a) and 7.1.11.c) as to the coal
delivered hereunder which is being burned in such remaining
Units; provided, however,
<PAGE>
20
City's election to terminate the Contract and Shell's election
to forestall such termination under the last paragraph of
article 7.1.11.c) shall apply either (1) to the entire
Contract if the quantity of coal from all suppliers to such
remaining Units on a regular and continuing basis is equal to
or greater than twenty percent (20%) of the total quantity of
coal being burned at the Power Stations or, (2) only to the
quantities of coal delivered hereunder which is being burned
in such remaining Units if the quantity of coal from all
suppliers to such remaining Units on a regular and continuing
basis is less than twenty percent (20%) of the total quantity
of coal being burned at the Power Stations.
7.1.12. Estimated Changes. Changes in indexes used herein, which
would effect Base Price adjustments, will be estimated quarterly by Shell, based
on Shell's estimate of the applicable index for the first month in such quarter,
with retroactive amendments to said Base Price adjustments for each month within
a quarter to be made after actual index changes become available for all the
months of the applicable quarter. Taxes will be estimated quarterly by Shell
with retroactive amendments to said Base Price adjustments to be made as actual
taxes are determined for the applicable quarter.
7.1.13. Price Revisions for Option for Quantity Reduction. If City
exercises its Option under article 4.2 and: (a) elects to take coal according to
Schedule A, then the Return on Capital, Income Taxes and Indirect Costs in
article 7.1.6 shall be increased by $0.71 per ton or; (b) elects to take coal
according to Schedule B, then the Return on Capital, Income Taxes and Indirect
Costs in article 7.1.6 shall be increased by $0.59 per ton or, (c) elects to
take coal according to Schedule C, then the Return on Capital, Income Taxes and
Indirect Costs in article 7.1.6 shall be increased by $0.50 per ton, or (d)
elects to take coal according to Schedule D, then the Return on Capital, Income
Taxes and Indirect Costs in article 7.1.6 shall be increased by $2.76 per ton.
Such increase shall be added to the price effective January 1, 1979 and shall
thereafter be increased or decreased using the same method as provided in
article 7.1.6.
<PAGE>
21
7.2. Price Redetermination. In accordance with the provisions of
this article 7.2, the Base Price and any or all of the adjustment provisions of
article 7.1 are subject, at the request of either Shell or City, to
redetermination from time to time, and at any time, effective January 1, 1986 or
thereafter ("Effective Date"). The Base Price may be redetermined to the then
fair market value of the coal delivered and accepted hereunder. Such fair market
value shall be based on commitments for sale and purchase of coal of comparable
quality (after making appropriate adjustments therefor) during the period for
which the redetermined price is to be effective, in quantities, and otherwise on
terms and conditions substantially like those of this Contract. The adjustment
provisions may be redetermined to the then current, fair or recognized methods
of adjusting the price hereunder. Either Shell or City may request a
redetermination of the Base Price and/or adjustment provisions in article 7.1
(hereinafter collectively referred to as a redetermination) by giving notice to
the other specifying in detail the redetermination requested accompanied by
material supporting such redetermination. A notice requesting a redetermination
must be given by the requesting party at least ninety (90) days but not more
than one hundred eighty (180) days preceding the Effective Date. If a
redetermination notice is given hereunder, Shell and City shall diligently
endeavor in good faith to reach accord in writing concerning the proposed
redetermination. If Shell and City reach an accord as to the redetermination, it
will become effective on the Effective Date and continue in effect for a minimum
of three (3) years and until the next requested redetermination becomes
effective or until the Contract terminates as applicable. If Shell and City are
unable to reach accord by the day preceding the Effective Date, then the matter
of the redetermination will be submitted to non-binding arbitration, which Shell
and City agree shall not be subject to the Illinois Uniform Commercial
Arbitration Act but said arbitration shall conform generally to the Commercial
Arbitration Rules of the American Arbitration Association. The non-binding
arbitration shall be arbitrated by three (3) arbitrators, one (1) appointed by
Shell, one (1) by City and one (1) by the two (2) so appointed (each appointment
to be made promptly). The arbitrators shall proceed to redetermine the price
(i.e., the fair market value of the coal), including such provisions as they
deem appropriate for subsequent adjustments thereof. The arbitrators shall
consider commitments for sale and purchase of coal
<PAGE>
22
of comparable quality (after making appropriate adjustments therefor), during
the period for which the redetermined price is to be effective, in quantities,
and otherwise on terms and conditions substantially like those of this Contract
and the arbitrators shall have primary regard to the reasonably probable
conditions of the market for the coal during such period. As soon as reasonably
possible but, in any event, not later than ninety (90) days after the Effective
Date: the arbitrators shall report the redetermined price, and such provisions
as they deem appropriate for subsequent adjustments thereof, as agreed by at
least two (2) of them; or, if at least two (2) of them cannot agree, they shall
report the median of the three (3) prices and subsequent adjustments thereof as
redetermined by the respective arbitrators and the redetermined price and
subsequent adjustments thereof as so reported shall become effective
retroactively as of the Effective Date. However, if such report is not
acceptable to either Shell or City, it may request, by giving notice to the
other within ten (10) days after receipt of the arbitrators' written report,
that Shell and City attempt within the next thirty (30) days to determine a
mutually agreeable price and provisions for subsequent adjustments thereof. If
Shell and City establish a mutually satisfactory redetermination, it will be
retroactive to the Effective Date and continue in effect for a minimum of three
(3) years and until the next requested redetermination becomes effective or
until the Contract terminates as applicable. If Shell and City fail to establish
a mutually satisfactory redetermination within thirty (30) days of receipt of
notice, then either may elect to terminate this Contract, effective twenty-four
(24) months from the Effective Date, by giving notice to the other within sixty
(60) days after its receipt of the arbitrators' written report (which shall,
nevertheless, have become effective as above provided.) City's election to
terminate the Contract pursuant to the provisions of this article 7.2 shall be
predicated upon City's intent to sign a new coal contract with another party to
replace the coal supplied to the Power Stations hereunder. If City so elects to
terminate this Contract, then City shall, before signing such new coal contract
with another party, certify to Shell the terms of said new contract and by so
doing, give Shell the option, by notice given to City within thirty (30) days of
Shell's receipt of City's notice certifying the terms of such new coal contract,
to supply coal from the Mining Area or from an alternate source at a cost to
City, including shipping costs and quality adjustments, not exceeding the
comparable cost to City
<PAGE>
23
under the terms of the new contract. Shell's election to terminate the Contract
pursuant to the provisions of this article 7.2 shall be predicated upon Shell's
intent to offer the coal hereunder to another party. If Shell so elects to
terminate this Contract, then Shell will, before offering such coal to another
party, first offer the coal to City on the terms and conditions which Shell
would, in good faith, reasonably offer to another party. City has thirty (30)
days after Shell's offer to notify Shell whether City elects to commit to
purchase such coal on Shell's specified terms and conditions.
If City does not elect to commit to purchase such coal, Shell may
immediately sell or commit to sell such coal to others on essentially no more
favorable terms and conditions than were offered to City. If Shell thereafter
elects to change the terms or conditions of its original offer to City to the
material benefit of a third party purchaser, Shell will reoffer such coal to
City on such materially changed terms or conditions in the same manner as
provided above prior to making any sale or commitment to sell to a third party.
7.3. Payment.
7.3.1. Invoices. Shell will invoice City three (3) times per month
for coal delivered from the 1st through the 10th, 11th through the 20th and 21st
through the last day of the month for amounts due hereunder; and each invoice
shall be accompanied by statements showing the quantities delivered and the
determination of the amounts due hereunder, including, in reasonable detail, the
data supporting every adjustment pursuant to article 7.1. If City gives Shell
prompt notice that any invoice delivered pursuant to this Contract and/or its
supporting data are, in City's judgment, incorrect or inadequate, Shell will
promptly furnish such verifications and/or additional information as City may
request; or Shell may, instead, furnish City a certificate by Shell's regular
certified public accountants that the invoice and all supporting data are
correct, which shall be conclusive unless questioned by the audit for the Period
or Contract Year pursuant to article 7.4.
7.3.2. Payment. City shall pay each invoice within twenty (20) days
from date of invoice by interbank transfer of immediately available funds to
Shell's account at such bank as Shell will have designated by at least 30 thirty
(30) days' prior notice to City. If City defaults in any payment, and
<PAGE>
24
fails to remedy the default within fifteen (15) days after its receipt of notice
thereof from Shell, City shall pay interest thereon, from the date the payment
was due until it is made, at whichever is the greater of one and one-half
percent (l-1/2%) per month or one percent (1%) above the Irving Trust Company of
New York prime rate (such rate to vary when and as such prime interest rate
varies), but in no event shall such rate be greater than the maximum lawful
rate, if any, at the time the Contract is made.
7.4. Audits. Within ninety (90) days after the end of each Period or
Contract Year, City shall have the right to cause an audit to be made with
respect to the immediately preceding Period or Contract Year by (a) City's staff
auditors or (b) a firm of independent public accountants selected by City and
acceptable to Shell, who shall have access to Shell's records pertaining to such
data for that purpose during Shell's regular business hours, and whose charges
for the audit shall be paid by City. If Shell determines that the auditor's
request for such data involves the disclosure of proprietary or confidential
information, then Shell will so notify City, and City shall have the option,
within thirty (30) days of such notice, to elect whether it wishes such
proprietary or confidential information to be verified by Shell's regular
certified public accountants or to be reviewed by a firm of independent public
accountants, if any, appointed pursuant to (b) of this article 7.4, who shall
nevertheless agree to keep such data confidential. Each audit provided for in
this article 7.4 shall be pursued diligently to its conclusion and each audit
and appropriate adjustments, if any, shall be concluded no later than twelve
(12) months following the end of the applicable Period or Contract Year being
audited. If, as a result of the auditor's review, City in good faith believes an
error has been made in the price adjustments, quantity, or other calculations
hereunder, it may substantiate such error to Shell. Shell and City shall
endeavor in good faith, within forty-five (45) days after the receipt by Shell
of such notice, to resolve the claimed error and make the necessary corrections
and adjustments therefor. If the parties are unable to resolve the claimed error
within said forty-five (45) days, City may within thirty (30) days submit the
matter to binding arbitration in accordance with the Commercial Arbitration
Rules of the American Arbitration Association by three (3) arbitrators, one (1)
appointed by Shell, one (1) by City, and one (1) by the two (2) so appointed.
City's
<PAGE>
25
failure to submit the matter to arbitration within said thirty (30) days shall
constitute a waiver of any right to dispute the dollar amount claimed.
Within ninety (90) days after the end of each Period or Contract
Year, Shell will have the right to cause an audit to be made with respect to the
quantity determination in articles 7.1.9, 7.1.11, 8.l.b) and 8.2.
8. EXCUSED NON-PERFORMANCE.
8.1. General.
a) Either Shell or City shall be excused from performance of its
obligations under this Contract in the event and to the extent that such
performance is delayed or prevented in the Mining Area, at the Power Stations,
or otherwise by any circumstance reasonably beyond its control and without its
fault or negligence including: (i) fire, explosion, storms, floods, cave-ins,
landslides, washouts, strikes or other labor disputes, riots or other civil
disturbances, accidental breakdowns of facilities or unavailability of power,
transportation or other services essential to its performance; (ii) diminution
or exhaustion of economically extractable coal reserves available to Shell in
the Mining Area; (iii) compliance with any law, regulation, rule or order of any
governmental authority or any party purporting to be or act for such an
authority; or (iv) by delay or inability to acquire at reasonable cost, and
notwithstanding exercise of reasonable diligence, any rights in land, permits or
licenses, or any labor, materials, transportation, equipment and supplies, which
are essential to its performance.
b) Notwithstanding Article 8.l.a) above, if any new or amended laws,
rules, regulations or orders of any governmental authority having jurisdiction
require City to install additional or modified equipment in order to continue to
use coal delivered under this Contract, said laws, rules, regulations or orders
will not be deemed as excused non-performance if City would replace the coal to
be delivered under this Contract with coal from another source. If such
additional or modified equipment is required at the Lakeside Units 5, 6, 7 and
8, and/or Dallman Units 1 and 2 in order to Comply with said laws, rules,
regulations or orders, but such cost is prohibitive, City will proceed to
exhaust all legal, administrative and similar remedies available to it to avoid
the installation of such cost prohibitive
<PAGE>
26
additional or modified equipment. If after City has attempted all reasonable
steps to avoid the installation of such cost prohibitive additional or modified
equipment or there are no reasonable steps to avoid the installation of such
cost prohibitive additional or modified equipment, then the said laws, rules,
regulations or orders will be deemed as excused non-performance for the coal to
be purchased for said Units: this quantity to be determined by City and
acceptable to Shell.
c) Except as specifically provided for in this article 8.1,
non-performance as a result of economic determinations shall not be deemed to be
excused non-performance.
8.2. Partial Non-Performance. If Shell's performance is only
partially prevented by an excusing circumstance under article 8.1, Shell's
available supply of the coal shall be apportioned ratably among all of its
regular consumers according to those regular consumers' respective shares of the
total of the annual base quantity commitments in effect for all such consumers
from the Mining Area during the period of such partial non-performance, and City
shall have the right to purchase coal from other parties to the extent that
Shell's performance is so prevented, subject to Shell's prior rights under
article 10.4; and if City's performance is only partially so prevented, the
purchases which City is able to make for its Power Stations, shall be similarly
apportioned ratably among all of its regular suppliers of coal for its Power
Stations during the period of such partial non-performance, and Shell will have
the right to sell coal to other parties to the extent that City's performance is
so prevented.
8.3. Procedure-Termination. Either Shell or City, as the case may
be, (a) shall give the other notice, as soon as reasonably practicable, of the
occurrence, or anticipated occurrence, of any event of excused non-performance,
as specified in article 8.1, affecting it, (b) shall exercise all reasonable
efforts to mitigate or eliminate such circumstance, however neither Shell nor
City shall be required to settle labor differences with employees, to settle
with unions or to settle governmental claims by acceding to any demands when in
the discretion of the party whose performance is interfered with, it would be
inadvisable to accede to such demands, and c) shall give the other, at its
request, periodic reports of the progress of those efforts. However, if Shell's
or City's Full and Regular Performance (as the case may be) continues to be
delayed or prevented (a) for more than three hundred sixty-five (365) days from
<PAGE>
27
January 1, 1983 or (b) for more than three hundred sixty-five (365) consecutive
days after initial deliveries have begun, either Shell or City may terminate
this Contract by giving at least ninety (90) days' prior notice; but such
termination shall not occur if within such ninety (90) day notice period: (a)
Shell or City (as the case may be) has commenced or resumed, and is then
continuing, Full and Regular Performance or can commence or resume Full and
Regular Performance but is unable to do so as a result of the other party's
excused non-performance (as specified in article 8.1) or (b) Shell has given
City adequate assurance that it will promptly deliver to City coal pursuant to
article 10.4.
8.4. Make-up Sales and Purchases. After resumption of Full and
Regular Performance following any period of excused or unexcused non-performance
by either City or Shell, the quantities not sold and purchased by reason of such
non-performance may be made up only by mutual agreement; provided however, the
maximum quantity specified in article 1 shall be decreased by the difference
between the Base Quantity, prorated on a monthly basis, and quantities actually
sold and purchased during any month of such non-performance.
9. UNEXCUSED NON-PERFORMANCE. In the event that (a) either party
defaults in a payment obligation hereunder and fails to remedy such default
within fifteen (15) days of receipt from the other party of notice thereof, (b)
either party defaults in any other obligation hereunder and fails to remedy
default, within thirty (30) days of receipt from the other party of notice of
such default, or (c) either party initiates bankruptcy, insolvency, receivership
or other similar proceedings, or in the event either party incurs an adverse
judgment in any such proceedings and fails to have such judgment dismissed,
satisfied, vacated or stayed within sixty (60) days of such judgment being
entered, the other party may, in addition to any other rights or remedies it may
have hereunder or by law, terminate this Contract by giving notice. No waiver by
either Shell or City of any one provision of this Contract shall be construed as
a waiver of any other prior or subsequent like or different default; and neither
Shell nor City shall ever have any liability to the other, on account of any
default hereunder, for loss of use, loss of profit, or any other consequential
damages (except as expressly provided for elsewhere in this Contract).
<PAGE>
28
10. SPECIAL PROVISIONS.
10.1. Adequacy of Reserves. Shell has delivered to City a written
statement, signed by authorized representative of Shell, of (a) its estimate of
the total reserves of economically extractable coal in the Mining Area, and (b)
the aggregate quantity of coal from the Mining Area which Shell is contractually
committed to sell and deliver, and the duration of its respective commitments.
City may, at its option, have an estimate made, by reputable independent experts
selected by it and acceptable to Shell, of the total reserves of economically
extractable coal in the Mining Area. City shall furnish Shell a copy of the
estimate as reported in writing by those experts; and if, in City's reasonable
judgment, such reserves as so estimated are not adequate to enable Shell to meet
its aggregate commitments to sell and deliver coal from the Mining Area, City
may terminate this Contract by giving Shell notice not later than sixty (60)
days following receipt of Shell's reserve estimate. City's failure to so dispute
Shell's estimate of total reserves within said sixty (60) days shall constitute
a waiver of any right to terminate this Contract under this article 10.1.
10.2. Other Sales by Shell. Shell will not sell or commit to sell to
other parties coal from the Mining Area in such quantities as to jeopardize its
ability to sell and deliver to City the quantities specified in this Contract,
but Shell will remain otherwise free to sell such coal.
10.3. Annual Reports by Shell. Within ninety (90) days after the end
of the first Contract Year and of each calendar year thereafter during the term
of this Contract, Shell will deliver to City a written report, signed by an
authorized representative of Shell, of (a) the aggregate quantity of all coal
from the Mining Area sold and delivered by Shell during that year, (b) the
aggregate quantity of coal from the Mining Area which Shell is contractually
committed to sell and deliver, and the durations of its commitments, and (c)
Shell's estimate of the total remaining reserves of economically extractable
coal in the Mining Area.
10.4. Alternate Source. The coal to be delivered hereunder shall be
produced from the Mining Area or, at Shell's election, Shell may deliver coal
from such alternate source as Shell may designate, provided that such coal shall
be delivered under the terms of this Contract, in equivalent
<PAGE>
29
quantities (adjusted for Btu content), and that the cost per million Btu
inclusive of shipping costs incurred by City, shall not exceed the comparable
cost for coal from the Mining Area.
10.5. Agreements Implementing Operations. Shell and City shall
confer from time to time as necessary or desirable to develop mutual agreements
regarding operating procedures and practices required to fully implement the
provisions of this Contract.
10.6. Hardship. This Contract is intended always to be mutually
fair. Accordingly, if either Shell or City ever gives notice to the other that,
by reason of previously unforeseen changes of circumstances, its performance of
this Contract has become a hardship to it, Shell and City shall thereupon
endeavor, diligently and in good faith, to reach agreement on modifications of
this Contract that will eliminate or mitigate such hardship.
10.7. Progress Reports. During the period prior to January 1, 1983,
Shell and City shall give to the other, at the other's request, periodic reports
of the progress of its preparation to commence performance of this Contract on
that date.
10.8. State of Interpretation. This Contract and the rights and
obligations hereunder shall be interpreted, construed and enforced in accordance
with the laws of the State of Illinois. This Contract is subject to and governed
by the Illinois Fair Employment Practices Act.
11. SUCCESSION. Neither Shell nor City shall ever assign this
Contract or any of its rights or claims hereunder, without the other's prior
written consent, except to any partnership or corporation in which the assignor
has an ownership interest or to any corporation which succeeds to all or
substantially all of the assignor's assets by merger, consolidation or
conveyance; provided that any such permitted assignee shall assume in writing,
all of the assignor's obligations hereunder, and that the assignor shall not
thereby be relieved from those obligations. Subject to the foregoing, this
Contract shall bind and benefit the successors and assigns of Shell and City
respectively.
12. COMMUNICATIONS. Every notice hereunder shall be given by
certified or registered letter or telegram; and every such notice, as well as
every schedule, invoice or other communication, shall be directed to Shell or
City (as the case may be) at its address first herein specified,
<PAGE>
30
to the attention, if to Shell, of its Mining Department, or, if to City of the
Finance Manager, City Water, Light and Power or to such other address and/or
attention as it may have substituted therefor, for any one or more of those
purposes, by at least fifteen (15) days' prior notice so given to the other.
13. ENTIRETY - CHANGES. This Contract and the Exhibits attached
hereto and incorporated herein for all purposes comprise the entire agreement
and merges and supersedes all prior understandings and representations between
Shell and City concerning the subject matter or in consideration thereof; and
EACH PARTY HEREBY DISCLAIMS ANY RELIANCE ON IMPLIED WARRANTIES OF WHATEVER KIND
AND NATURE, and no subsequent agreement amending, supplementing or terminating
this Contract shall be binding on either Shell or City unless in writing and
executed by both their respective authorized representatives.
14. PERMITS. This Contract, as well as any amendments and/or
supplements hereto, shall be binding on Shell and City unless and until Shell
has made the determinations that it cannot obtain the necessary permits in
sufficient time to allow delivery of coal to begin as provided herein. Shell and
City shall meet within one (1) year after the date of execution of this Contract
to determine if satisfactory progress is being made toward obtaining such
permits; and if it is mutually determined in good faith by the parties at that
time that such permits could not be obtained within the following twelve (12)
months, then either party may terminate this Contract by giving sixty (60) days'
notice. If for a continuous period of twelve (12) months after the date of such
meeting, construction of the mine or any essential component of the mine
facilities is suspended or prevented by reason of the lack of any necessary or
legally required permit, license or approval, then either party may terminate
this Contract by giving sixty (60) days' notice.
15. HEADINGS EFFECT. The headings of the articles contained in this
Contract are for convenient reference only, and shall not in any way affect the
meaning or interpretation of this Contract.
<PAGE>
31
EXECUTED as of the date first herein specified.
SHELL OIL COMPANY
ATTEST:
/s/ Donna R. Moore By /s/ Jack Mahaffey
----------------------------------- --------------------------------
Assistant Secretary
------------------------------------
ATTEST:
By /s/ J. Michael Housteen
---------------------------------
/s/ Candice D. Trees
-----------------------------------
<PAGE>
[ELKHART MINING AREA MAP]
EXHIBIT A
TO CONTRACT FOR SALE AND PURCHASE OF COAL DATED JULY 1, 1980 BETWEEN SHELL OIL
COMPANY CITY OF SPRINGFIELD, ILLINOIS
<PAGE>
EXHIBIT B
TO CONTRACT FOR SALE AND PURCHASE OF
COAL DATED JULY 1, 1980
BETWEEN SHELL OIL COMPANY AND
CITY OF SPRINGFIELD, ILLINOIS
TYPICAL STEAM COAL QUALITY DATA
Mine &
Property Name Elkhart Mining Area Niantic Property Seam Name Illinois No. 5
U.S. Coal
District 10 County Logan State Illinois
Projected Washed
Drill Core Data Product (C)
--------------- -----------
Washed (B) Washed
Raw (A) @ 1.70 SP. GR. @ 1.71 SP. GR.
------- -------------- --------------
(Dry) (Dry) "As Received"
Proximate Analysis
Moisture -% -% 18.6%
Ash 14.41% 11.59% 8.6%
Volatile 39.36% 39.57% -%
Fixed Carbon 46.23% 48.84% -%
BTU/Lb. 12,108 12,456 10,450
Sulphur 4.20% 3.72% 2.70%
Ultimate Analysis
Moisture -% -%
Carbon 68.03% 69.58%
Hydrogen 4.86% 5.07%
Nitrogen 1.21% 1.36%
Chlorine 0.09% 0.22%
Sulphur 4.20% 3.72%
Ash 13.33% 11.59%
Oxygen (Diff) 8.28% 8.52%
Ash Mineral Analysis
Si02 32.12% 45.71%
A12O3 10.23% 12.61%
Fe2O3 23.58% 19.00%
Ti02 0.35% 0.78%
CaO 14.81% 8.41%
MgO 0.44% 0.71%
<PAGE>
Projected Washed
Drill Core Data Product (C)
--------------- -----------
Washed (B) Washed
Raw (A) @ 1.70 SP. GR. @ 1.71 SP. GR.
------- -------------- --------------
(Dry) (Dry) "As Received"
Na2O 1.08% 1.12%
K2O 1.37% 1.55%
P2O5 1.11% 0.13%
SO3 13.62% 8.7%
Undetermined 1.29% 1.26%
Fusion Temperature of Ash
Raw Washed @ 1.70 SP. GR.
------------------------------ --------------------------------
(Reducing) (Oxidizing) (Reducing) (Oxidizing)
Initial
Deformation 1923 degreesF 2160 degreesF 1940 degreesF 2200 degreesF
Hemispherical
(H = 1/2W) 2064 degreesF 2328 degreesF 2220 degreesF 2360 degreesF
Fluid 2150 degreesF 2414 degreesF 2560 degreesF 2580 degreesF
Grindability = 56.8
T250 = 2180 degreesF
Sulphur Form (Raw, Dry): Organic 1.94
Pyritic 2.20
Sulfate 0.06
----
Total 4.20
<PAGE>
Exhibit C Consists of 8 Pages
EXHIBIT C
TO CONTRACT FOR SALE AND
PURCHASE OF COAL dated
between SHELL OIL COMPANY
and CITY WATER, LIGHT & POWER
SPRINGFIELD, ILLINOIS
MANNING TABLE - JANUARY 1979
Labor costs shown in the attached Manning Table, except as noted, are
based upon the National Bituminous Coal Wage Agreement of 1978 between the
International Union, United Mine Workers of America and the Bituminous Coal
Operators Association.
The Elkhart Mine will operate 241 days per year with coal mined 10 shifts
per week and maintenance performed 5 shifts per week. The preparation plant will
operate 15 shifts per week and the coal loadout facilities will operate 10
shifts per week.
The following summarizes the attached Manning Table.
MANNING TABLE SUMMARY
411 Hourly Workers
Average Annual Labor Cost
Base Wage - Item 1, Page 2 $15,859.52
Overtime Pay - Item 2, Page 3 1,993.95
Premium Pay - Item 3, Page 3 66.22
Benefits - Item 5, Page 4 7,210.14
Worker's Compensation - Item 6, Page 5 6,904.83
----------
Total per Worker $32,034.66
Average Hours Worked Per Year
Base Hours - Item 1, Page 2 1798.13 hours
Overtime Hours - Item 2, Page 3 150.17 hours
--------
Total per Worker 1948.30 hours
Average Labor Cost Per Hour Per Worker $ 16.44 per hour
========
95 Salaried Employees
Average Annual Salary and Benefits - Item 9, Page 6 $48,725.87
Average Hours Worked Per Year - Item 10, Page 6 1,840 hours
Average Labor Cost Per Hour Per Employee $ 26.48 per hour
==========
Total Hourly Workers and Salaried Employees
Average Labor Cost Per Hour/Person $ 18.32 per hour
==========
<PAGE>
Page 2 of 8
MANNING TABLE JANUARY 1979
HOURLY WORKERS
1. Average Base Rate Calculation
(1) (2) (3) (1) x (2+3)
No. of Workers Base Rate Shift Diff. Total Per Day
-------------- --------- ----------- -------------
$/day $/day (c) $/day
A. Underground Workers (a)
Grade 5 134 $ 73.32 $1.33 $10,003.10
Grade 4 20 70.08 1.33 1,428.20
Grade 3 93 67.14 1.33 6,367.71
Grade 2 17 65.36 1.33 1,133.73
Grade 1 86 64.78 1.33 5,685.46
----- ----------
Subtotal 350 $24,618.20
B. Surface Workers (a) (b)
Grade 4 6 $ 66.07 $1.21 $ 403.68
Grade 3 8 64.30 1.21 524.08
Grade 1 8 61.67 1.21 503.04
---- ----------
Subtotal 22 $ 1,430.80
C. Preparation Plant Workers (a)(b)
Grade 4 12 $ 66.07 $1.21 $ 807.36
Grade 3 18 64.30 1.21 1,179.18
Grade 1 9 61.67 1.21 565.92
---- ----------
Subtotal 39 $ 2,552.46
---- ----------
TOTAL 411 Hourly Workers $28,601.46
==========
(a) See Exhibit C-1 for assignment of workers to job classifications
(b) Based on 7-1/4 hours per day
(c) Based on an additional 20(cent) per hour for afternoon shift and 30(cent)
per hour for midnight shift
Average = 0 + $0.20 + $0.30
----------------- = $0.1667/hr. or
3
Underground workers = $0.1667/hr. x 8 hrs. = $1.33/day
Surface and Preparation Plant Workers $0.1667/hr x 7.25 hrs. = $1.21/day
<PAGE>
Page 3 of 8
Average base hourly rate = $28,601.46
------------------------------- = $8.82/hr.
(350 x 8) + (22 + 39) x 7.25
Average base hours per day = (350 x 8) + (22 + 39) x 7.25
------------------------------- = 7.89 hrs/day
411
Average base hourly rate for underground workers is: $24,618.20
------------ = $8.79/hr
350 x 8
Average base hourly rate for surface and preparation plant workers is:
$1,430.80 + $2,552.46
------------------------- = $9.01/hr
61 x 7.25
Average Annual Base Workings Days =
(5 x 52) - 10 holiday - 17* vacation - 5 sick leave - 0.1 Misc. = 227.9 days
*10 days (regular) + 4 days (floating) + 3(a) days (graduated)
Average Annual Base Hours per worker:
227.9 days worked x 7.89 hrs/day = $ 1,798.13 hours
===========
Average Annual Base Wage per worker:
1798.13 hrs x $8.82/hr = $ 15,859.52
-----------
2. Overtime Pay
Overtime at 1.5 times average base rate for all hours worked over the
basic workday or basic work week.
A. Regularly scheduled overtime pay for surface and preparation plant
workers
61 x .75 hrs x 227.9 days
----------------------------- = $9.01/hr x 1.5 = $342.85
411
61 x .75 hrs x 227.9 days
----------------------------- = 25.37 O.T. Hours
411
B. Non-regular scheduled overtime pay for all hourly workers:
13.1* shifts per year for 100% of work force =
13.1 x 8.00 hrs/day x (1.5 x $8.82) = $ 1386.50
13.1 x 8.00 hrs/day = 104.80 O.T. hrs.
<PAGE>
Page 4 of 8
*13.1 shifts of non-scheduled overtime is calculated as follows:
Mine Operating Days (52 x 5) - 9 holidays
- 10 misc = 241.0 days
Average Annual Base Working Days = 227.9 days
-----
Non-regularly scheduled overtime 13.1 days/shifts
(a) Based on assumption that average longevity of the workers falls in 8 to 9
year category for determination of earned graduated vacation.
C. Random Fill-In Overtime
Fill in 2.5* shifts average for all workers
2.5 x 8.00 (1.5 x $8.82) = $ 264.60
2.5 x 8.00 hrs/day = 20.00 O.T. hours
*Training - 1 shift
Misc. - 1.5 shifts
Average Annual Overtime Hours Per Worker
Regularly Scheduled 25.37 O.T. hours
Non-scheduled 104.80 O.T. hours
Fill-in 20.00 O.T. hours
------
Total overtime hours 150.17 O.T. hours
======
Average Annual Overtime Pay Per Worker
Regularly Scheduled $ 342.85
Non-scheduled $1,286.50
Fill-in $ 264.60
---------
Total overtime hours $1,993.95
=========
3. Premium Pay
Premium pay at 2.0* times average base rate for Saturday (over 7-1/4 or
8 hours) and Sunday work. Estimated 10% of the overtime hours for
premium pay:
10% x 150.17 hrs x (0.5* x $8.82) = $ 66.22
Total annual premium pay per worker = $ 66.22
=========
*1.5 times average base rate included in overtime pay therefore
2.0 times average base rate less 1.5 times average base rate = 0.5
<PAGE>
5. Benefits Computation (Excluding Worker's Compensation)
Vacation pay - 19 (a) days x $71.09 (b) = $1,350.71
Holiday - 10 days x $71.09 (b) = 710.90
Sick leave and misc. - 5.1 days x $71.09 (b) = 362.56
FICA (6.13% x 22,900 as of 1/1/79) = 1,403.77
State Unemployment Ins. (3% of $6000) (c) = 180.00
Federal Unemployment Ins. (.7% of $6000) (c) = 42.00
Life Ins. estimated at $120/yr/worker (c) = 120.00
Medical and hospitalization
(estimated at $120/man month x 12) (c) = 1,440.00
Clothing allowance = 100.00
UMWA 1974 Pension Trust - $.75 x 1948.30 hours = 1,461.23
UMWA 1974 Benefit Trust - $.02 x 1948.30 hours = 38.97
---------
Total annual benefits (excluding Worker's Compensation) = $7,210.84
=========
(a) 19 days paid vacation = 12 (regular) + 4 (floating) + 3 (graduated).
3 days graduated vacation based on assumption that average longevity
of the workers falls in 8 to 9 year category for determination of
earned graduated vacation.
(b) $8.82 (average base hourly rate) x 7.89 (average hours per day)
= $69.59 day + $1.50*/day = $71.09/day/worker
*1.50/day = scheduled overtime pay + days worked or $342.85 + 227.9 =
$1.50/day/worker.
(c) Estimated figure is subject to change based on actual costs.
6. Worker's Compensation
Based on rate of $37.62 (d) per $100 of payroll (base and regularly scheduled
overtime hours at straight time wage rate including vacations, holidays sick and
misc.).
(d) Estimated based on present commercial insurance rates which are
subject to change.
<PAGE>
Page 6 of 8
4. Summation of Annual Wages Per Worker
Hours Amount
----- ------
Base Wage 1798.13 $15,859.52
Overtime Pay 150.17 1,993.95
Premium Pay - 66.22
------- ----------
Total 1948.30 hours $17,919.69
======= ==========
A. Underground workers
(Daily wages for 350 workers) x (5 days/week x 52 weeks/yr.)
($24,618.20/day) x (260 days/yr) = $6,400,732.00/yr.
Total underground Worker's Compensation payroll = $6,400,732.00/yr
B. Surface workers
(Daily wage for 22 workers) x (5 days/week x 52 week/yr) +
regularly scheduled overtime.
1. Base
$1,430.80/day x 260 days/yr = $372,008.00/yr
2. Regularly scheduled overtime
22 workers x .75 hrs/day x $9.01/hr x 260 day/yr = $38,652.90
Total surface workers Worker's Compensation payroll
= $410,660.90/yr.
C. Preparation Plant
(Daily wage for 39 workers) x (5 days/week) x (52 weeks/yr)
1. Base
$2,552.46/day x 260 days/yr = $663,639.60/yr
2. Regularly scheduled overtime
39 workers x .75 hrs/day x $9.01/hr x 260 days/yr = $68,521.05
Total preparation plant Worker's Compensation payroll
= $732,160.65/yr.
D. Summation Payroll for Worker's Compensation
1. Underground Workers $6,400,732.00/yr
2. Surface workers 410,660.90/yr
3. Preparation Plant 732,160.65/yr
-------------
$7,543,553.55/yr
<PAGE>
Page 7 of 8
E. Average Annual Worker's Compensation per Worker
$7,543,553.55 x .3762 = $ 6,904.83
------------------------------ ============
411
7. Average Per Hour Labor Cost For Hourly Workers
Annual wage (base wage, overtime + premium) = $ 17,919.69
Benefits (excluding Worker's Compensation) 7,210.14
Worker's Compensation 6,904.83
------------
Total = $ 32,034.66
Total Hours = 1,948.30 hours
Average wage and benefits (including
Worker's Compensation) per hour per
worker = $ 16.44/hour
============
SALARIED EMPLOYEES
8. Salary and Benefits
A. Base Salary $2,725,000.00
Mine Manager 1
Mine Operation 53
Engineering 6
Admin. & Support 35
--
Total 95 employees
B. Shell Benefits @ 69.87% = $1,903,957.50
-------------
Total Salary & Benefits = $4,628,957.50
9. Average Annual Salary and Benefits per Employee
$4,628,957.50 = $ 48,725.87
------------- =============
95
<PAGE>
Page 8 of 8
10. Average Annual Hours per Employee
(5 x 52) - 10 (holidays) - 15 (vacation) -
5 (sick leave) = 1,840 hrs./yr.
-----
230 days x 8 hrs./day =
11. Average per Hour Labor Cost for Salaried Employees
Annual Salary and Benefits
Annual Hours
$48,725.87 = $26.48/hr
---------- ======
1840 hrs.
SUMMARY HOURLY WORKERS AND SALARIED EMPLOYEES
12. Average Labor Cost per Hour
Total Hourly Workers x $/hr + Total Salaried Employees x $/hr
-------------------------------------------------------------
Total Hourly Workers and Salaried Employees
411 ($16.44/hr) + 95 ($26.48/hr) = $18.32/hr
-------------------------------- ======
411 + 95
<PAGE>
Exhibit C-1 Consists of 1 Page
EXHIBIT C-1
TO CONTRACT FOR SALE AND PURCHASE OF
COAL DATED JULY 1, 1980
BETWEEN SHELL OIL COMPANY AND
CITY OF SPRINGFIELD, ILLINOIS
Number of Workers and Job Classification
Underground
Grade Classification No. of Workers
------------ -------------------------------------------- --------------
5 Miner operator, roof bolter, repairman,
mechanics, mine examiner, etc. 134
4 Miner operator helper, roof bolter helper.
Maintenance and electrician trainee etc. 20
3 Shuttle car operator, precision mason face 93
man etc.
2 Motor man, ride dust man mechanic and 17
electrician helper, etc.
1 Beltman, Ankerman, Maintenance man trackman,
wireman, unskilled labor, etc. 86
---
350
Surface and Preparation
Plant Grade
-----------------------
4 Electrician, mechinists, shop mechanic
preparation plant central control, etc. 18
3 Repairman, Mobile equipment operator,
hoistman, maintenance and electrician 26
trainee, etc.
1 Lampman, janitor, truck driver, utility man,
sampler, general labor, etc. 17
--
61
<PAGE>
AMENDMENT TO CONTRACT FOR SALE AND PURCHASE OF COAL
This Amendment to Contract for Sale and Purchase of coal is entered into
this 4th day of March, 1986, by and between Turris Coal Company, a Delaware
corporation, whose address is P. O. Box 21, Elkhart, Illinois 62634 ("Turris")
and the City of Springfield, Illinois on behalf of City, Water, Light & Power,
with offices in the Municipal Building at Seventh and Monroe Streets,
Springfield, Illinois 62757 ("City").
WHEREAS, City and Shell Oil Company ("Shell Oil") executed that certain
Contract for Sale and Purchase of Coal ("Contract") effective July 1, 1980; and
WHEREAS, Shell Oil assigned its rights and obligations under the Contract
to Turris on October 16, 1980; and
WHEREAS, City notified Turris by letter dated August 7, 1985 that it
intended to exercise its right to request a price redetermination under article
7.2 of the Contract; and
WHEREAS, in addition to redetermining the price under the Contract, the
parties have agreed to amend certain portions of the Contract.
NOW, THEREFORE, for and in consideration of the mutual covenants contained
herein, the parties hereto agree as follows:
I
Article I of the Contract, entitled "PERIOD," shall be amended in its
entirety to read as follows:
1. Period. This Contract shall be in effect from its date and for a
performance period beginning January 1, 1983 and extending until the sum of
quantities delivered hereunder subsequent to December 31, 1985 equals 26.000000
million tons, or December 31, 2011, whichever occurs first.
II
Article 4.1 of the Contract, entitled "Base Annual Quantity," shall be
amended in its entirety to read as follows:
4.1. Base Annual Quantity. Unless otherwise agreed to by the parties, the
minimum quantity (all quantities being in tons) of coal to be sold and purchased
during each Contract Year ("Base Quantity") shall be 700,000 tons. In addition,
City shall purchase up to a total quantity of 902,500 tons in
<PAGE>
2
1986 and 950,000 tons in each Contract Year thereafter, before purchasing coal
from any other coal supplier pursuant to article 4.2.
The quantity to be delivered during the Last Period shall be delivered at
the respective averages of the monthly, weekly, and daily delivery rates in
effect during the preceding Contract Year, disregarding any reduction therein
for any excused non-performance. Nothing in this article 4.1 shall increase the
total quantity delivery obligation specified in article 1.
III
Article 4.2 entitled "Option for Quantity Reduction," shall be deleted in
its entirety. An article 4.2 entitled "Right of First Refusal," shall be
incorporated into the Contract and shall read in its entirety as follows:
4.2 Right of First Refusal. The price for deliveries of quantities in
excess of 902,500 in 1986 or 950,000 tons in any succeeding Contract Year, shall
be the Base Price per ton, adjusted as of the delivery date, or such other price
as the parties mutually agree to. If the parties cannot agree upon a price for
such coal then before committing to purchase such additional coal from another
supplier, the City shall, 60 days prior to the date upon which the excess
quantity is scheduled to be delivered, certify to Turris the price and terms
offered by such other supplier, and by so doing, give Turris the option to
supply such coal at a cost per million BTU, including adjustments for sulphur
content pursuant to the sulfur adjustment table in article 7.1.11.b) and
including shipping costs equal to the comparable cost to City under the terms of
the other offer. Turris must exercise their option to supply the additional coal
45 days prior to the date upon which the excess quantity is scheduled to be
delivered.
IV
New article 4.3, entitled "Quantity/Fixed Cost Adjustment," is
incorporated into the Contract and shall read in its entirety as follows:
4.3 Quantity/Fixed Cost Adjustment. As consideration for anticipated
deviations for the Base Quantities specified in the Contract dated July 1, 1980
and in addition to all other price adjustments hereunder, a price adjustment
("Quantity/Fixed Cost Adjustment") shall be added to, or deducted from, the Base
Price per ton, adjusted as of the Delivery Date in accordance with article 7.1.,
according to the following table:
<PAGE>
3
700,001 - 800,001 - 900,001 -
Contract Year 0 - 700,000 Tons 800,000 Tons 900,000 Tons 950,000 Tons
------------- ---------------- ------------- ------------- -------------
1986 Add Deduct Deduct N/A
$.50 per Ton $1.25 per Ton $2.25 per Ton
1987 and All Add Deduct Deduct Deduct
Subsequent $.75 per Ton $1.50 per Ton $2.25 per Ton $3.00 per Ton
Contract Years
The Quantity/Fixed Cost Adjustment amounts specified in this article 4.3,
shall not be subject to the adjustment provisions of article 7.1. However, from
time to time, and at any time, when the Base Price is redetermined pursuant to
article 7.2., Price Redetermination, the amounts specified in this article 4.3
above will be increased or decreased by the same percentages as the then
redetermined Base Price changes from $30.35 per ton.
V
Article 5.2 of the Contract, entitled "Scheduling," shall be amended in
its entirety to read as follows:
5.2 Scheduling. At least three (3) months before the beginning of each
Period or Contract Year, City shall furnish Turris a schedule of the estimated
monthly quantities to be delivered during those periods or Contract Years, which
schedule shall reflect to the extent practicable Turris' need for approximately
equal monthly deliveries throughout the year. At least twenty (20) days before
the beginning of each month, City shall furnish Turris a definitive schedule of
the quantities to be delivered during that month, together with estimates of the
quantities to be delivered the next two (2) succeeding months. Deliveries shall
be made by Turris as thus scheduled by City, provided the scheduled quantities
are consistent with article 4., and subject to City's timely and orderly
tendering of trucks which shall be of sufficient capacity and in proper working
order so as not to hinder Turris' delivery obligations hereunder. City and
Turris will work together to coordinate the scheduling of equipment maintenance
to minimize the disruption of scheduled deliveries hereunder.
VI
In article 7, entitled "PRICE", articles 7.1.1 through 7.1.6. shall be
amended in their entireties to read as follows:
<PAGE>
4
7.1. Determination.
a) The delivered price of the coal shall be the Base Price of $30.35
per ton, adjusted, as of the Delivery Date, in accordance with the following
provisions of this article 7.1. Each adjustment (except the adjustments in
articles 7.1.4., 7.1.5., 7.1.10. and 7.1.11.) of the Base Price shall be made
independently of each other adjustment thereof; and each adjustment under this
article 7.1. shall be calculated to the nearest 0.01 of one cent and rounded to
the nearest 0.10 of one cent, or, if there is no nearest 0.10, to the nearest
even 0.10 of one cent. The failure of the parties to agree on price adjustments
as hereinafter set forth shall in no way relieve either party of its respective
obligations of performance under this Contract.
b) The Base Price consists of the following price components:
Price Components Per Ton
-------------------------------------------------- -------
Labor (article 7.1.1. (a)) $10.744
Materials, Supplies and Power
Mine Roof Bolts (7.1.2. (a)) 1.123
Other Materials and Supplies (7.1.2. (b)) 5.524
Power (7.1.2. (c)) 1.730
Capital (7.1.3.) 2.580
Taxes
Property Plant and Equipment (7.1.4. (a)) .210
Federal Reclamation Fee (7.1.4. (b)) .150
Black Lung (7.1.4. (c)) 1.000
Royalty (7.1.5.) 1.155
Return on Capital, Income Tax and
Indirect Costs (7.1.6. (a)) 3.734
Fixed (7.1.6. (b)) 2.400
-------
Base Price $ 30.35
-------
7.1.1. Labor.
a) The Base Price shall be increased or decreased by an amount
calculated as follows: multiply $10.744 per ton by the percentage change in the
weighted average cost per hour for hourly workers and salaried employees on the
Delivery Date, determined in accordance with the Manning Table which is Exhibit
C to this Contract, from $30.60 per hour (such average wage rate as of January
<PAGE>
5
1986, derived as shown in Exhibit C). The weighted average hourly cost for
salaried employees at the Mining Area shall be adjusted by the percentage change
in such cost for hourly workers. The parties to this Contract recognize that the
purpose of the Manning Table is to periodically recalculate the weighted average
hourly cost for hourly workers and salaried employees, and that it does not
necessarily reflect the number of persons at the Mine at any given time. The
number of persons used in the Manning Table shall not be changed, except as may
be required pursuant to article 7.1.7. or to the following provisions of this
article 7.1.1. (a). The Manning Table is based upon the collective bargaining
agreement between the United Mine Workers of America (UMWA) and the Bituminous
Coal Operators' Association (BCOA) in effect in January 1986 and will always be
based on such collective bargaining agreement as is in effect on the Delivery
Date unless: (i) Turris becomes subject to a bargaining agreement other than the
bargaining agreement between the UMWA and BCOA, in which case the Manning Table
will be based on Turris' bargaining agreement; or (ii) a collective bargaining
agreement between the UMWA and the BCOA ceases to exist or the UMWA ceases to
represent coal mine workers in Central Illinois, in either case the Manning
Table shall be changed by Turris and based on another representative collective
bargaining agreement.
b) The Base Price does not include costs associated with the 1950
Pension and Benefit Trusts as Turris, based on an outside legal opinion, does
not consider itself liable for such costs. If Turris is judged liable for such
costs, Turris will add such cost to the price, and thereafter increase or
decrease the price by the amount by which that cost, on the Delivery Date, is
more or less than the amount originally added to the price.
c) Whenever the collective bargaining agreement being used as the
basis for the Manning Table in effect on the Delivery Date includes a labor or
labor-related cost expressed on a per-ton basis and such cost is not otherwise
reflected in the Manning Table or articles 7.1.1. (b), Turris will add that cost
as such to the price, and thereafter increase or decrease the price by the
amount by which that cost, on the Delivery Date, is more or less than the amount
originally added to the price. If the addition of such per-ton cost results in a
duplication of any cost component of the price then in effect under articles
7.1.1. (a) or 7.1.1. (b), that cost component of the price shall be adjusted as
required to eliminate such duplication.
7.1.2. Materials, Supplies and Power.
a) Mine Roof Bolts. The Base Price shall be increased or decreased
by an amount calculated as follows: multiply $1.123 per ton by the percentage
change in the Producer Price Index for Mine Roof Bolts (BLS Code 1081.0141.05),
as of the Delivery Date, from 203.5 (such estimated Index
<PAGE>
6
for January 1986.) (The estimated indexes used herein shall be replaced with
actual indexes for January 1986 when such indexes become available).
b) Other Materials and Supplies. The Base Price shall be increased
or decreased by an amount calculated as follows: multiply $5.524 per ton by the
percentage change in the Producer Price Index for Underground Mining Machinery
and Equipment (BLS Code 1192.01), as of the Delivery Date, from 457.7 (such
estimated Index for January 1986). (The estimated indexes used herein shall be
replaced with actual indexes for January 1986 when such indexes become
available.)
c) Power. The Base Price shall be increased by an amount calculated
as follows: multiply $1.730 per ton by the percentage increase in the total per
kilowatt hour cost of electricity, as of the Delivery Date, from 8.460 cents per
kilowatt hour (8.460(cent)/kwh) (such cost as of January 1986). This cost per
kilowatt hour is for delivered electric power to the surface facilities to be
supplied by the appropriate electrical utility certified to serve the Mine, and
is based on 12,000 KW per month demand and 4,600,000 kilowatt hours usage per
month using the rate schedule of the utility certified to serve the Mine as is
in effect on the Delivery Date.
d) Capital Costs. The Base Price shall be increased or decreased by
an amount calculated as follows: multiply $2.580 per ton by the percentage
change in the Producer Price Index for Underground Mining Machinery and
Equipment (BLS Code 1192.01), as of the Delivery Date, from 457.7 (such
estimated Index for January 1986). (The estimated indexes used herein shall be
replaced with actual indexes for January 1986 when such indexes become
available.)
7.1.4. Taxes.
a) The Base Price includes $0.210 per ton for all federal, state or
local taxes or fees, (the estimated total of such taxes and fees as of January
1986) excluding income taxes, Black Lung Tax and the Federal Reclamation Fee.
The Base Price shall be increased or decreased by the same amount by which any
federal, state or local taxes for fees excluding income taxes, Black Lung Tax
and the Federal Reclamation Fee) applicable to the Mine or the coal delivered
hereunder, including all severance and ad valorem taxes, sales, use, value
added, or other excise taxes (including the Illinois Retail Occupation Tax, if
applicable) which Turris is required to pay on coal delivered hereunder as in
effect on the Delivery Date, total more or less than $0.210 per ton. In
determining taxes payable, effect shall be given to all price adjustments.
b) The Base Price shall be increased or decreased by the same amount
by which the Federal Reclamation Fee pursuant to the Surface Mine Control and
Reclamation Act of 1977, as in effect on the Delivery Date, is more or less than
$0.150 per ton (such fee as of January 1986).
<PAGE>
7
c) The Base Price shall be increased or decreased by the same amount
by which the Black Lung Tax pursuant to the Black Lung Benefits Act of 1977, as
in effect on the Delivery date, is more or less than $1,000 per ton (such tax as
of January 1986).
d) The Base Price, as adjusted as of the Delivery Date, shall be
increased or decreased by one-half the number of percentage points by which the
effective rate of the gross depletion allowance applicable to coal for United
States Income Tax purposes decreases or increases, as applicable, from eight and
one-half percent (8.5%). For example, if the effective rate of the depletion
allowance is decreased by one percent to 7.5%, the Base Price shall be increased
by one-half of one percent (0.5%); or if the effective rate of the depletion
allowance is increased by one percent to 9.5%, the Base Price shall be decreased
by one-half of one percent (0.5%).
7.1.5. Royalty. The Base Price shall be increased or decreased by the same
amount by which gross royalty payable on the Delivery Date on the coal delivered
under this Contract is more or less than $1.155 per ton (such cost for January
1986). Gross royalty payable will include: (a) amounts payable on tons sold and
purchased, including Turris' fee properties at the generally prevailing royalty
rate negotiated in the area at the time of acquisition and (b) amounts equal to
the recovery of previously paid advance royalty. In determining gross royalty
payable, effect shall be given to all price adjustments.
7.1.6. a) Return On Capital, Income Tax and Indirect Costs. The Base Price
shall be increased or decreased by an amount calculated as follows: multiply
$3.734 per ton by the percentage change in the Department of Commerce, Bureau of
Economic Analysis, Implicit Price Deflator for the Gross National Product, as of
the Delivery Date, from 234.400 (such Gross National Product Deflator for
January 1986). (The estimated indexes used herein shall be replaced with actual
indexes for January 1986 when such indexes become available.)
7.1.6. b) Fixed Costs. The Base Price includes a component of $2.400 per
ton which shall not be subject to adjustment for the effect of inflation or
deflation, but shall be included in the price for purposes of calorific and
sulfur price adjustments pursuant to articles 7.1.10 and 7.1.11.
VII
Article 7.1.9 of the Contract, entitled "Reduced Transportation Cost"
shall be amended in its entirety to read as follows:
7.1.9. Reduced Transportation Cost. If Turris should ever exercise its
election in article 5.1 (b), the parties will meet and establish an adjustment
to the Base Price which causes City to maintain the same delivered price as it
would have had if Turris had not made the election.
<PAGE>
8
VIII
Article 7.1.13 of the Contract, entitled "Price Revisions for Option for
Quantity Reduction," shall be deleted from the Contract in its entirety.
IX
Article 10.2 of the Contract, entitled "Other Sales by Shell," shall be
amended in its entirety to read as follows:
10.2. Other Sales by Turris. Turris will not sell or commit to sell to
other parties coal from the Mining Area in such quantities as to jeopardize its
ability to sell and deliver to City the quantities specified in this Contract,
but Turris will remain otherwise free to sell such coal. If at any time City
believes that, as a result of sales to other parties a change in the size
consist of coal delivered by Turris has materially affected the operation of its
power plants, it will notify Turris of its concern and the basis for it. Turris
and City will then attempt to arrive at a mutually acceptable resolution of the
concerns. If Turris and City are unable to reach accord, either party may
request binding arbitration. Turris and City agree that the binding arbitration
shall not be subject to the Illinois Uniform Commercial Arbitration Act but said
arbitration shall conform generally to the Commercial Arbitration Rules of the
American Arbitration Association. The binding arbitration shall be arbitrated by
three (3) arbitrators, one (1) appointed by Turris, one (1) by City and one (1)
by the two (2) so appointed (each appointment to be made promptly). The
arbitrators shall proceed to determine whether the size consist of the coal
delivered by Turris is materially affecting the operation of City's power
plants, and if so, what level of fines would not materially affect the operation
of the power plants. In reaching their decision, the arbitrators shall consider
any relevant information submitted by the parties. If the arbitrators cannot
agree, the decision of the independent arbitrator shall prevail.
X
The intent of this Amendment to the Contract is only to amend those
provisions of the Contract that are herein specified. Except as herein
specifically amended, all the terms, conditions, and provisions of the Contract,
including the contingency agreements entered into in November, 1984, shall
remain the same.
This amendment shall be fully binding upon and effective as to the
interest of each of the parties hereto and shall be binding upon and inure to
the benefit of the respective successors and assigns of the parties hereto.
<PAGE>
9
IN WITNESS WHEREOF, the parties have executed this Amendment to Contract
for Sale and Purchase of Coal which shall be effective as of January 1, 1986.
TURRIS COAL COMPANY
Attest: /s/ Alberta M. Childress By /s/ Jack Mahaffey
----------------------------- --------------------------------
CITY OF SPRINGFIELD FOR CITY WATER,
LIGHT & POWER
Attest: /s/ Candice D. Trees By /s/ J. Michael Housteen
----------------------------- --------------------------------
City Clerk
<PAGE>
SECOND AMENDMENT TO CONTRACT FOR SALE AND PURCHASE OF COAL
This Amendment to Contract for Sale and Purchase of Coal is entered
into this 22nd day of April, 1986, by and between Turris Coal Company, a
Delaware corporation, whose address is P. O. Box 21, Elkhart, Illinois 62634
("Turris") and the City of Springfield, Illinois on behalf of City, Water, Light
& Power, with offices in the Municipal Building at Seventh and Monroe Streets,
Springfield, Illinois 62757 ("City").
WHEREAS, City and Shell Oil Company ("Shell Oil") executed that
certain Contract for Sale and Purchase of Coal ("Contract") effective July 1,
1980; and
WHEREAS, Shell Oil assigned its rights and obligations under the
Contract to Turris on October 16, 1980; and
WHEREAS, said Contract has previously been amended by Amendment to
Contract for Sale and Purchase of Coal dated effective January 1, 1986; and
WHEREAS, a typographical error has been found in said previous
Amendment regarding the average wage rate as of January 1986 derived from the
Manning Table included as Exhibit C of the Contract, and Turris and the City
desire to correct said error.
NOW, THEREFORE, in consideration of the mutual covenants of said
Contract as previously amended, the parties hereto agree as follows:
I
Article 7.1.1a) is hereby amended by deleting the amount $30.60 in
line 5 and adding the amount $30.39 in its stead.
II
It is the intent of this Second Amendment to only make the
corrective amendment specified herein.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Second amendment
to Contract for Sale and Purchase of Coal which shall be effective as of January
1, 1986.
TURRIS COAL COMPANY
Attest: /s/ George J. Kaysakis By /s/ J.W. Hughes
----------------------------- --------------------------------
CITY OF SPRINGFIELD FOR
CITY WATER, LIGHT & POWER
Attest: /s/ Candice D. Trees By /s/ J. Michael Housteen
----------------------------- --------------------------------
City Clerk Mayor
<PAGE>
Proposed Modification of Article 7.1.2
Contract For Sale And Purchase Of Coal
Between
Turris Coal Company & The City of Springfield
Article 7.1.2(a) Mine Roof Bolts. is deleted in its entirety and replaced with
the following:
Mine Roof Bolts. The Base Price shall be increased or decreased by an
amount calculated as follows: multiply $1.102 per ton (Mine Roof Bolts
Component - June 1986) by the percentage change in the Wholesale Price
Index for Steel Fasteners (BLS Code 1081.02), as of the Delivery Date,
from 1.048 (such Index for June 1986).
Recommend:
Signed: /s/ J.W. Hughes
------------------------------
Date: 6/8/87
Title: President
Concur: to the use of the new index.
Signed: /s/ J. Michael Housteen
-----------------------------
Date: May 22, 1987
Title: Mayor
<PAGE>
Proposed Modification of Article 7.1.2
Contract For Sale And Purchase Of Coal
Between
Turris Coal Company & The City of Springfield
Article 7.1.2(a) Mine Roof Bolts, is deleted in its entirety and replaced with
the following:
Mine Roof Bolts. The Base Price shall be increased or decreased by an
amount calculated as follows: multiply $1.127 per ton (Mine Roof Bolts
Component - January 1988) by the percentage change in the Wholesale Price
Index for Roof Bolts (BLS Code 1081.0241), as of the Delivery Date, from
101.5 (such Index for January, 1988).
Recommend:
Date: 11/1/88
Signed: /s/ George J. Oberlick
-----------------------------
Title: President
Concur: to the use of the new index.
Date: 11/4/88
Signed: _____________________________
Title: Chief Utilities Engineer
<PAGE>
AMENDMENT TO CONTRACT FOR SALE AND PURCHASE OF COAL
This Amendment to Contract for Sale and Purchase of Coal is entered into
this First day of January, 1989, by and between Turris Coal Company, a Delaware
corporation, whose address is P. O. Box 21, Elkhart, Illinois 62634 ("Turris")
and the City of Springfield, Illinois on behalf of City Water, Light & Power,
with offices in the Municipal Building at Seventh and Monroe Streets,
Springfield, Illinois 62757 ("City").
WHEREAS, City and Shell Oil Company ("Shell Oil") executed that certain
Contract for Sale and Purchase of Coal effective July 1, 1980, as amended
through December 31, 1988 ("Contract"); and
WHEREAS, Shell Oil assigned its rights and obligations under the Contract
to Turris on October 16, 1980; and
WHEREAS, City notified Turris by letter dated August 31, 1988 that it
intended to exercise its right to request a price redetermination under article
7.2 of the Contract.
NOW, THEREFORE, for and in consideration of the mutual covenants contained
herein, the parties hereto agree as follows:
I
In article 7, entitled "PRICE", articles 7.1, and 7.1.1 through 7.1.6
shall be amended in their entireties to read as follows:
7.1. Determination.
a) The delivered price of the coal shall be the Base Price of $24.93
per ton, adjusted, as of the Delivery Date, in accordance with the following
provisions of this article 7.1. Each adjustment (except the adjustments in
articles 7.1.4, 7.1.5, 7.1.10 and 7.l.11) of the Base Price shall be made
independently of each other adjustment thereof; and each adjustment under this
article 7.1 shall be calculated to the nearest 0.01 of one cent and rounded to
the nearest 0.10 of one cent, or, if there is no nearest 0.10, to the nearest
even 0.10 of one cent. The failure of the parties to agree on price adjustments
as hereinafter set forth shall in no way relieve either party of its respective
obligations of performance under this Contract.
<PAGE>
b) The Base Price consists of the following price components:
Price Components Per Ton
---------------- -------
Labor (article 7.1.1.a)) $ 9.046
Materials, Supplies and Power
Mine Roof Bolts (7.1.2.a)) .903
Other Materials and Supplies (7.1.2.b)) 4.387
Power (7.1.2.c)) 1.312
Capital (7.1.3) 2.049
Taxes
Property Plant and Equipment (7.1.4.a)) .180
Federal Reclamation Fee (7.1.4.b)) .143
Black Lung (7.1.4.c)) 1.050
Royalty (7.1.5) .969
Return on Capital, Income Tax and Indirect Costs (7.1.6.a)) 3.072
Fixed (7.1.6.b)) 1.819
-------
Base Price $ 24.93
7.1.1. Labor.
a) The Base Price shall be increased or decreased by an amount
calculated as follows: multiply $9.046 per ton by the percentage change in the
weighted average cost per hour for hourly workers and salaried employees on the
Delivery Date, determined in accordance with the Manning Table which is Exhibit
C to this Contract, from $33.900 per hour (such average wage rate as of January
1989, derived as shown in Exhibit C). The weighted average hourly cost for
salaried employees at the Mining Area shall be adjusted by the percentage change
in such cost for hourly workers. The parties to this Contract recognize that the
purpose of the Manning Table is to periodically recalculate the weighted average
hourly cost for hourly workers and salaried employees, and that it does not
necessarily reflect the number of persons at the Mine at any given time. The
number of persons used in the Manning Table shall not be changed, except as may
be required pursuant to article 7.1.7 or to the following provisions of this
article 7.1.1.a). The Manning Table is based upon the collective bargaining
agreement between the United Mine Workers of America (UMWA) and the Bituminous
Coal Operators' Association (BCOA) in effect in January 1989 and will always be
based on such collective bargaining agreement as is in effect on the Delivery
Date unless: (i) Turris becomes subject to a bargaining agreement other than the
bargaining agreement between the UMWA and the BCOA, in which case the Manning
Table will be based on Turris' bargaining agreement; or (ii) a collective
bargaining agreement between the UMWA and the BCOA ceases to exist or the UMWA
ceases to represent coal mine workers in Central Illinois, in either case the
Manning Table shall be changed by Turris and based on another representative
collective bargaining agreement.
<PAGE>
b) If Turris is judged liable for costs associated with the 1950
Benefit Trust, Turris will add such costs in excess of the amount in effect as
of January 1, 1989 (estimated at $1.83 per manhour) to the price, and thereafter
increase or decrease the price by the amount by which that cost, on the Delivery
Date, is more or less than the amount originally added to the price.
c) Whenever the collective bargaining agreement being used as the
basis for the Manning Table in effect on the Delivery Date includes a labor or
labor-related cost expressed on a per-ton basis and such cost is not otherwise
reflected in the Manning Table or article 7.1.1.b), Turris will add that cost as
such to the price, and thereafter increase or decrease the price by the amount
by which that cost, on the Delivery Date, is more or less than the amount
originally added to the price. Whenever the collective bargaining agreement
being used as the basis for the Manning Table in effect on the Delivery Date
excludes a labor or labor-related cost expressed on a per-ton basis and such
cost is reflected in the Manning Table or article 7.1.1.b), Turris will subtract
that cost as such from the price, and thereafter decrease or increase the price
by the amount by which that cost, on the Delivery Date, is more or less than the
amount originally subtracted from the price. If the addition or subtraction of
such per-ton cost results in a duplication of any cost component or reduction of
the price then in effect under articles 7.1.1.a) or 7.1.1.b), that cost
component or reduction of the price shall be adjusted as required to eliminate
such duplication.
7.1.2. Materials, Supplies and Power.
a) Mine Roof Bolts. The Base Price shall be increased or
decreased by an amount calculated as follows: multiply $0.903 per ton by the
percentage change in the Producer Price Index for Roof Bolts (BLS Code
1081.0241), as of the Delivery Date, from 111.5 (such estimated Index for
January 1989). (The estimated indexes used herein shall be replaced with actual
indexes for January 1989 when such indexes become available.)
b) Other Materials and Supplies. The Base Price shall be
increased or decreased by an amount calculated as follows: multiply $4.387 per
ton by the percentage change in the Producer Price Index for Underground Mining
Machinery and Equipment (BLS Code 1192.01), as of the Delivery Date, from 123.6
(such estimated Index for January 1989). (The estimated indexes used herein
shall be replaced with actual indexes for January 1989 when such indexes become
available.)
c) Power. The Base Price shall be increased by an amount
calculated as follows: multiply $1.312 per ton by the percentage increase in the
total per kilowatt hour cost of electricity, as of the Delivery Date, from 8.460
cents per kilowatt hour (8.460cents/kwh) (such cost as of January 1989). This
cost per kilowatt hour is for delivered electric power to the surface facilities
to be supplied by the
<PAGE>
appropriate electrical utility certified to serve the Mine, and is based on
12,000 KW per month demand and 4,600,000 kilowatt hours usage per month. The
power cost per kilowatt hour will always be based on 12,000 KW per month demand
and 4,600,000 kilowatt hours usage per month using the rate schedule of the
utility certified to serve the Mine as is in effect on the Delivery Date.
7.1.3. Capital Costs. The Base Price shall be increased or decreased by an
amount calculated as follows: multiply $2.049 per ton by the percentage change
in the Producer Price Index for Underground Mining Machinery and Equipment (BLS
Code 1192.01), as of the Delivery Date, from 123.6 (such estimated Index for
January 1989). (The estimated indexes used herein shall be replaced with actual
indexes for January 1989 when such indexes become available.)
7.1.4. Taxes.
a) The Base Price includes $0.180 per ton for all federal, state or
local taxes or fees, (the estimated total of such taxes and fees as of January
1989) excluding income taxes, Black Lung Tax and the Federal Reclamation Fee.
The Base Price shall be increased or decreased by the same amount by which any
federal, state or local taxes or fees (excluding income taxes, Black Lung Tax
and the Federal Reclamation Fee) applicable to the Mine or the coal delivered
hereunder, including all severance and ad valorem taxes, sales, use, value
added, or other excise taxes (including the Illinois Retail Occupation Tax, if
applicable) which Turris is required to pay on coal delivered hereunder as in
effect on the Delivery Date, total more or less than $0.180 per ton. In
determining taxes payable, effect shall be given to all price adjustments.
b) The Base Price shall be increased or decreased by the same amount
by which the Federal Reclamation Fee pursuant to the Surface Mine Control and
Reclamation Act of 1977, as in effect on the Delivery Date, is more or less than
$0.143 per ton (such fee as of January 1989).
c) The Base Price shall be increased or decreased by the same amount
by which the Black Lung Tax pursuant to the Black Lung Benefits Act of 1977, as
in effect on the Delivery Date, is more or less than $1.050 per ton (such tax as
of January 1989).
d) The Base Price, as adjusted as of the Delivery Date, shall be
increased or decreased by one-half the number of percentage points by which the
effective rate of the gross depletion allowance applicable to coal for United
States Income Tax purposes decreases or increases, as applicable, from eight and
one-half percent (8.5%). For example, if the effective rate of the depletion
allowance is decreased by one percent to 7.5%, the Base Price shall be increased
by one-half of one percent (0.5%); or if the effective rate of the depletion
allowance is increased by one percent to 9.5%, the Base Price shall be decreased
by one-half of one percent (0.5%).
<PAGE>
7.1.5. Royalty. The Base Price shall be increased or decreased by the same
amount by which gross royalty payable on the Delivery Date on the coal delivered
under this Contract is more or less than $0.969 per ton (such cost for January
1989). Gross royalty payable will include: (a) amounts payable on tons sold and
purchased, including Turris' fee properties at the generally prevailing royalty
rate negotiated in the area at the time of acquisition and (b) amounts equal to
the recovery of previously paid advance royalty. In determining gross royalty
payable, effect shall be given to all price adjustments.
7.1.6.
a) Return on Capital, Income Tax and Indirect Costs. The Base Price
shall be increased or decreased by an amount calculated as follows: multiply
$3.072 per ton by the percentage change in the Department of Commerce, Bureau of
Economic Analysis, Implicit Price Deflator for the Gross National Product, as of
the Delivery Date, from 120.5 (such estimated Gross National Product Deflator
for January 1989). (The estimated indexes used herein shall be replaced with
actual indexes for January 1989 when such indexes become available.)
b) Fixed Costs. The Base Price includes a component of $1.819 per
ton which shall not be subject to adjustment for the effect of inflation or
deflation, but shall be included in the price for purposes of calorific and
sulfur price adjustments pursuant to articles 7.1.10 and 7.1.11, respectively.
II
In article 7.1.7 entitled "New Costs", every occurrence of the date
January 1, 1980, shall be deleted and replaced with the date July 1, 1988.
III
Article 4.3 entitled "Quantity/Fixed Cost Adjustment" shall be amended in
its entirety to read as follows:
4.3. Quantity/Fixed Cost Adjustment. As consideration for anticipated
deviations from the Base Quantities specified in the Contract dated July 1, 1980
and in addition to all other price adjustments hereunder, a price adjustment
("Quantity/Fixed Cost Adjustment") shall be added to, or deducted from, the Base
Price per ton, adjusted as of the Delivery Date in accordance with article 7.1,
according to the following table:
<PAGE>
0 - 700,001 - 800,001 - 900,001 -
Contract Year 700,000 Tons 800,000 Tons 900,000 Tons 950,000 Tons
------------- ------------ ------------ ------------ ------------
1989 and all
Subsequent Add Deduct Deduct Deduct
Contract Years $0.616/Ton $1.232/Ton $1.848/Ton $2.464/Ton
The Quantity/Fixed Cost adjustment amounts specified in this article 4.3
shall not be subject to the adjustment provisions of article 7.1. However, from
time to time, and at any time, when the Base Price is redetermined pursuant to
article 7.2., Price Redetermination, the amounts specified in this article 4.3
above will be increased or decreased by the same percentages as the then
redetermined Base Price changes from $24.93 per ton.
IV
The intent of this Amendment to the Contract is only to amend those
provisions of the Contract that are herein specified. Except as herein
specifically amended, all the terms, conditions, and provisions of the Contract,
as amended, including the contingency agreements entered into in November, 1984,
shall remain the same.
This Amendment shall be fully binding upon and effective as to the
interest of each of the parties hereto and shall be binding upon and inure to
the benefit of the respective successors and assigns of the parties hereto.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Amendment to Contract
for Sale and Purchase of Coal which shall be effective as of January 1, 1989.
TURRIS COAL COMPANY
Attest:_____________________________ By /s/ Jack Mahaffey
---------------------------------
CITY OF SPRINGFIELD FOR
CITY WATER, LIGHT & POWER
Attest: /s/ Norma J. Graves
---------------------------- By__________________________________
<PAGE>
AMENDMENT TO CONTRACT FOR SALE AND PURCHASE OF COAL
This Amendment to Contract for Sale and Purchase of Coal is entered into
this 20th day of March, 1992, by and between Turris Coal Company, a Delaware
corporation, whose address is P.O. Box 21, Elkhart, Illinois 62634 ("Turris")
and the City of Springfield, Illinois, a municipal corporation, with offices in
the Municipal Building at Seventh and Monroe Streets, Springfield, Illinois
62757 ("City").
WHEREAS, the City and Shell Oil Company ("Shell Oil") executed that
certain Contract for Sale and Purchase of Coal, effective July 1, 1980, as
amended through December 31, 1991 ("Contract"); and
WHEREAS, Shell Oil assigned its rights and obligations under the Contract
to Turris on October 16, 1980; and
WHEREAS, the City notified Turris by letter dated July 22, 1991 that it
intended to exercise its right to request a price redetermination under Article
7.2 of the Contract.
NOW, THEREFORE, for and in consideration of the mutual covenants contained
herein, the parties hereto agree as follows:
I
In Article 7, entitled "PRICE", Article 7.1, and Articles 7.1.1 through
7.1.6 shall be amended in their entireties to read as follows:
7.1. Determination.
a) The delivered price of the coal shall be the Base Price of
$21.951 per ton, adjusted, as of the Delivery Date, in accordance with the
following provisions of this Article 7.1. Each adjustment (except the
adjustments in Articles 7.1.4, 7.1.5, 7.1.10 and 7.1.11) of the Base Price shall
be made independently of each other adjustment thereof; and each adjustment
under this Article 7.1 shall be calculated to the nearest 0.01 of one cent and
rounded to the nearest 0.10 of one cent, or, if there is no nearest 0.10, to the
nearest even 0.10 of one cent. The failure of the parties to agree on price
adjustments as hereinafter set forth shall in no way relieve either party of its
respective obligations of performance under this Contract.
b) The Base Price consists of the following price components:
Price Components Per Ton
---------------- -------
Labor (Article 7.1.1.a)) $ 8.069
Materials, Supplies and Power
Mine Roof Bolts (7.1.2.a)) .805
Other Materials and Supplies (7.1.2.b)) 3.913
Power (7.1.2.c)) 1.170
Capital (7.1.3) 1.828
Taxes
Property Plant and Equipment (7.1.4.a)) .180
Federal Reclamation Fee (7.1.4.b)) .143
Black Lung (7.1.4.c.)) 1.050
Royalty (7.1.5) 0.950
Return on Capital, Income Tax and Indirect Costs (7.1.6.a)) 0.550
Fixed (7.1.6.b)) 3.293
Base Price $21.951
-------
<PAGE>
7.1.1. Labor.
a) The Base Price shall be increased or decreased by an amount
calculated as follows: multiply $8.069 per ton by the percentage change in the
weighted average cost per hour for hourly workers and salaried employees on the
Delivery Date, determined in accordance with the Manning Table which is Exhibit
C to this Contract, from $38.48 per hour (such estimated average wage rate as of
January 1992, derived as shown in Exhibit C; the estimated average wage rate
used herein shall be replaced with the actual wage rate for January 1992 when
such rate becomes available). The weighted average hourly cost for salaried
employees at the Mining Area shall be adjusted by the percentage change in such
cost for hourly workers. The parties to this Contract recognize that the purpose
of the Manning Table is to periodically recalculate the weighted average hourly
cost for hourly workers and salaried employees, and that it does not necessarily
reflect the number of persons at the Mine at any given time. The number of
persons used in the Manning Table shall not be changed, except as may be
required pursuant to Article 7.1.7 or to the following provisions of this
Article 7.1.1.a). The Manning Table is based upon the collective bargaining
agreement between the United Mine Workers of America (UMWA) and the Bituminous
Coal Operators' Association (BCOA) in effect in January 1992 and will always be
based on such collective bargaining agreement as is in effect on the Delivery
Date unless: (i) Turris becomes subject to a bargaining agreement other than the
bargaining agreement between the UMWA and the BCOA, in which case the Manning
Table will be based on Turris' bargaining agreement; or (ii) a collective
bargaining agreement between the UMWA and the BCOA ceases to exist or the UMWA
ceases to represent coal mine workers in Central Illinois, in either case the
Manning Table shall be changed by Turris and based on another representative
collective bargaining agreement.
b) If Turris is judged liable for costs associated with the 1950
Benefit Trust, Turris will add such costs in excess of the amount in effect as
of January 1, 1992 (estimated at $1.85 per manhour) to the price, and thereafter
increase or decrease the price by the amount by which that cost, on the Delivery
Date, is more or less than the amount originally added to the price.
c) Whenever the collective bargaining agreement being used as the
basis for the Manning Table in effect on the Delivery Date includes a labor or
labor-related cost expressed on a per-ton basis and such cost is not otherwise
reflected in the Manning Table or Article 7.1.1.b), Turris will add that cost as
such to the price, and thereafter increase or decrease the price by the amount
by which that cost, on the Delivery Date, is more or less than the amount
originally added to the price. Whenever the collective bargaining agreement
being used as the basis for the Manning Table in effect on the Delivery Date
excludes a labor or labor-related cost expressed on a per-ton basis and such
cost is reflected in the Manning table or Article 7.1.1.b), Turris will subtract
that cost as such from the price, and thereafter decrease or increase the price
by the amount by which that cost, on the Delivery Date, is more or less than the
amount originally subtracted from the price. If the addition or subtraction of
such per-ton cost results in a duplication of any cost component or reduction of
the price then in effect under
- 2 -
<PAGE>
Articles 7.1.1.a) or 7.1.1.b), that cost component or reduction of the price
shall be adjusted as required to eliminate such duplication.
7.1.2. Materials, Supplies and Power.
a) Mine Roof Bolts. The Base Price shall be increased or decreased
by an amount calculated as follows: multiply $0.805 per ton by the percentage
change in the Producer Price Index for Roof Bolts (BLS Code 1081.0241), as of
the Delivery Date, from 98.1 (such estimated Index for January 1992). (The
estimated indexes used herein shall be replaced with actual indexes for January
1992 when such indexes become available.)
b) Other Materials and Supplies. The Base Price shall be increased
or decreased by an amount calculated as follows: multiply $3.913 per ton by the
percentage change in the Producer Price Index for Underground Mining Machinery
and Equipment (BLS Code 1192.01), as of the Delivery Date, from 137.0 (such
estimated Index for January 1992). (The estimated indexes used herein shall be
replaced with actual indexes for January 1992 when such indexes become
available.)
c) Power. The Base Price shall be increased by an amount calculated
as follows: multiply $1.170 per ton by the percentage increase in the total per
kilowatt hour cost of electricity, as of the Delivery Date, from 8.460 cents per
kilowatt hour (8.460 cents/kwh) (such cost as of January 1992). This cost per
kilowatt hour is for delivered electric power to the surface facilities to be
supplied by the appropriate electrical utility certified to serve the Mine, and
is based on 12,000 KW per month demand and 4,600,000 kilowatt hours usage per
month. The power cost per kilowatt hour will always be based on 12,000 KW per
month demand and 4,600,000 kilowatt hours usage per month using the rate
schedule of the utility certified to serve the Mine as is in effect on the
Delivery Date.
7.1.3. Capital Costs.
The Base Price shall be increased or decreased by an amount
calculated as follows: multiply $1.828 per ton by the percentage change in the
Producer Price Index for Underground Mining Machinery and Equipment (BLS Code
1192.01), as of the Delivery Date, from 117.4 (such estimated Index for January
1992). (The estimated indexes used herein shall be replaced with actual indexes
for January 1992 when such indexes become available.)
7.1.4. Taxes.
a) The Base Price includes $0.180 per ton for all federal, state or
local taxes or fees, (the estimated total of such taxes and fees as of January
1992) excluding income taxes, Black Lung Tax and the Federal Reclamation Fee.
The Base Price shall be increased or decreased by the same amount by which any
federal, state or local taxes or fees (excluding income taxes, Black Lung Tax
and the Federal Reclamation Fee) applicable to the Mine or the coal delivered
hereunder, including all severance and ad valorem taxes, sales, use, value
added, or other excise taxes (including the Illinois Retail Occupation Tax, if
applicable) which Turris is required to pay on coal delivered hereunder as in
effect on the Delivery Date, total more or less than $0.180 per ton. In
determining taxes payable, effect shall be given to all price adjustments.
b) The Base Price shall be increased or decreased by the same amount
by which the Federal Reclamation fee pursuant to the Surface Mine Control and
Reclamation Act of 1977, as in effect on the Delivery Date, is more or less than
$0.143 per ton (such fee as of January 1992).
- 3 -
<PAGE>
c) The Base Price shall be increased or decreased by the same amount
by which the Black Lung Tax pursuant to the Black Lung Benefits Act of 1977, as
in effect on the Delivery Date, is more or less than $1.050 per ton (such tax as
of January 1992).
d) Depletion Allowance.
i) The Base Price, as adjusted as of the Delivery Date, shall
be increased or decreased by one-half the number of percentage points by which
the effective rate of the gross depletion allowance applicable to coal for
United States Income Tax purposes decreases or increases, as applicable, from
the rate in effect on January 1, 1992. For example, if the effective rate of the
depletion allowance is 8.5%, and this is decreased by one percent to 7.5%, the
Base Price shall be increased by one-half of one percent (0.5%); or if the
effective rate of the depletion allowance is increased by one percent to 9.5%,
the Base Price shall be decreased by one-half of one percent (0.5%).
ii) The provisions in Article 7.1.4.d.i. shall be suspended
and of no force or effect during the period from January 1, 1992 until the next
subsequent price redetermination is implemented under Article 7.2 of this
Contract. At such time, the effective rate of the depletion allowance will be
reset to the rate established pursuant to the procedures set forth in Article
7.2.
7.1.5. Royalty.
The Base Price shall be increased or decreased by the same amount by which
gross royalty payable on the Delivery Date on the coal delivered under this
Contract is more or less than $0.950 per ton (such cost for January 1992). Gross
royalty payable will include: (a) amounts payable on tons sold and purchased,
including Turris' fee properties at the generally prevailing royalty rate
negotiated in the area at the time of acquisition and (b) amounts equal to the
recovery of previously paid advance royalty. In determining gross royalty
payable, effect shall be given to all price adjustments.
7.1.6.
a) Return on Capital, Income Tax and Indirect Costs. The Base Price
shall be increased or decreased by an amount calculated as follows: multiply
$0.550 per ton by the percentage change in the Department of Commerce, Bureau of
Economic Analysis, Implicit Price Deflator for the Gross National Product, as of
the Delivery Date, from 137.0 (such estimated Gross National Product Deflator
for January 1992). (The estimated indexes used herein shall be replaced with
actual indexes for January 1992 when such indexes become available.)
b) Fixed Costs.
i) The Base Price includes a component of $3.293 per ton which
shall not be subject to adjustment for the effect of inflation or deflation, but
shall be included in the price for purposes of calorific and sulfur price
adjustments pursuant to Articles 7.1.10 and 7.1.11, respectively.
ii) The $3.293 fixed component in i) above represents 15% of
the total Base Price redetermined as of the January 1992 Effective Date.
Effective on the date the next price redetermination is implemented under
Article 7.2 of this Contract, the fixed component of the Base Price pursuant to
this Article 7.1.6.b.i will be reset to 6.7% of the such total redetermined Base
Price or such other amount as may be negotiated by Turris and the City.
- 4 -
<PAGE>
II
In Article 7.1.7 entitled "New Costs," every occurrence of the date
January l, 1980, shall be deleted and replaced with the date July 1, 1991.
In Article 7.1.7, when Shell has a new labor or labor-related cost, the
paragraph that provides for inclusion as Shell's overhead and administrative
cost a cost of ten percent (10%) shall be suspended effective January 1, 1992.
Effective on the date the next price redetermination is implemented under
Article 7.2 of this Contract, the paragraph that, with a labor or labor-related
cost, provides for inclusion as Shell's overhead and administrative cost a cost
of ten percent (10%) will be restored to Article 7.1.7 and once again become
effective or such other amount as may be negotiated by Turris and the City.
III
Article 4.3 entitled "Quantity/Fixed Cost Adjustment" shall be amended is
its entirety to read as follows:
4.3 Quantity/Fixed Cost Adjustment. As consideration for anticipated
deviations from the Base Quantities specified in the Contract dated July 1, 1980
and in addition to all other price adjustments hereunder, a price adjustment
("Quantity/Fixed Cost Adjustment") shall be added to, or deducted from, the Base
Price per ton, adjusted as of the Delivery Date in accordance with Article 7.1,
according to the following table:
0 - 700,001 - 800,001 - 900,001 -
Contract Year 700,000 Tons 800,000 Tons 900,000 Tons 950,000 Tons
------------- ------------ ------------ ------------ ------------
1992 and all
Subsequent Add Deduct Deduct Deduct
$0.542/Ton $1.086/Ton $1.627/Ton $2.169/ton
The Quantity/Fixed Cost Adjustment amounts specified in this Article 4.3
shall not be subject to the adjustment provisions of Article 7.1. However, from
time to time, and at any time, when the Base Price is redetermined pursuant to
Article 7.2., Price Redetermination, the amounts specified in this Article 4.3
above will be increase or decreased by the same percentages as the then
redetermined Base Price changes from $21.951 per ton.
Effective January 1, 1992, this Article 4.3 providing for Quantity/Fix
Cost Adjustment additions or deductions from the Base Price per ton as of the
delivery date shall be suspended and no such adjustments shall be made to the
Base Price. If the City takes less than a Base Quantity of 950,000 tons in any
year beginning January l, 1992, or thereafter, the difference between the
tonnage taken in such year and 950,000 tons shall be added to the Base Quantity
of the following year for the purposes of determining when coal may be purchased
from another supplier pursuant to Article 4.2. If either party has given notice
of a redetermination with an Effective Date at the next following January 1,
then such tonnage will not be added to the Base Quantity of the following year.
Effective on the date the next price redetermination is implemented under
Article 7.2 of this Contract, Article 4.3 will be restored to the Contract and
once again become effective, and appropriate adjustments made to the per ton
amounts subject to the actual amount negotiated by Turris and the City.
- 5 -
<PAGE>
IV
Effective January l, 1992, and continuing until the next subsequent
Effective Date pursuant to a price redetermination under Article 7.2, Turris
agrees to maintain on-ground storage at the mine site to allow the City greater
flexibility of deliveries in order to more closely match the City's actual
needs.
V
The intent of this Amendment to the Contract is only to amend those
provisions of the Contract that are herein specified. Except as herein
specifically amended, all the terms, conditions, and provisions of the Contract,
as amended, including the contingency agreements entered into in November, 1984,
shall remain the same.
This Amendment shall be fully binding upon and effective as to the
interest of each of the parties hereto and shall be binding upon and inure to
the benefit of the respective successors and assigns of the parties hereto.
IN WITNESS WHEREOF, the parties have executed this Amendment to Contract
for Sale and Purchase of Coal which shall be effective as of January l, 1992.
TURRIS COAL COMPANY
Attest: /s/ R. P. Jezierski By:_______________________________
----------------------------
CITY OF SPRINGFIELD, ILLINOIS
Attest: /s/ Norma J. Graves
---------------------------- By:_______________________________
City Clerk Mayor
- 6 -
<PAGE>
AMENDMENT TO CONTRACT FOR SALE AND PURCHASE OF COAL
This Amendment to Contract for Sale and Purchase of Coal is entered into
this 21st day of March, 1995, by and between Turris Coal Company, a Delaware
corporation, whose address is P. O. Box 21, Elkhart, Illinois 62634 ("Turris")
and the City of Springfield, Illinois on behalf of City, Water, Light & Power,
with offices in the Municipal Building at Seventh and Monroe Streets,
Springfield, Illinois 62757 ("City").
WHEREAS, City and Shell Oil Company ("Shell Oil") executed that certain
Contract for Sale and Purchase of Coal effective July 1, 1980, as amended
through December 31, 1994 ("Contract"); and
WHEREAS, Shell Oil assigned its rights and obligations under the Contract
to Turris on October 16, 1980; and
WHEREAS, City notified Turris by letter dated September 28, 1994, that it
intended to exercise its right to request a price redetermination under article
7.2 of the Contract.
NOW, THEREFORE, for and in consideration of the mutual covenants contained
herein, the parties hereto agree as follows:
I
Effective January 1, 1995, and until the next subsequent Effective Date
pursuant to a price redetermination under article 7.2 of this Contract, the
first paragraph of article 4.1. Base Annual Quantity is replaced in its entirety
as follows:
4.1. Base Annual Quantity. Unless otherwise agreed by the parties, the
minimum quantity (all quantities being in tons) of coal to be sold and purchased
during each Contract Year ("Base Quantity") shall be 700,000 tons. In addition,
Turris shall supply all of the coal requirements of City, including quantities
in excess of 950,000 tons per year ("Excess Quantity"). The price for Excess
Quantities will be the Base Price per ton, adjusted as of the delivery date,
less $2.75 per ton.
Effective with the next subsequent Effective Date, the first paragraph of
article 4.1. Base Annual Quantity shall be restored and once again become
effective.
II
Effective January 1, 1995, and until the next subsequent Effective Date
pursuant to a price redetermination under article 7.2 of this Contract, article
4.2. Right of First Refusal is deleted in its entirety and article 4.2 is
intentionally omitted.
Effective with the next subsequent Effective Date, article 4.2. Right of
First Refusal shall be restored and once again become effective.
III
Article 4.3 entitled "Quantity/Fixed Cost Adjustment" shall be amended in
its entirety to read as follows:
<PAGE>
4.3. Quantity/Fixed Cost Adjustment. As consideration for anticipated
deviations from the Base Quantities specified in the Contract dated July 1, 1980
and in addition to all other price adjustments hereunder, a price adjustment
("Quantity/Fixed Cost Adjustment") shall be added to, or deducted from, the Base
Price per ton, adjusted as of the Delivery Date in accordance with article 7.1,
according to the following table:
0 - 700,001 - 800,001 - 900,001 -
Contract Year 700,000 Tons 800,000 Tons 900,000 Tons 950,000 Tons
------------- ------------ ------------ ------------ ------------
1995 and all
Subsequent Add Deduct Deduct Deduct
Contract Years $0.551/Ton $1.103/Ton $1.653/Ton $2.203/Ton
The Quantity/Fixed Cost adjustment amounts specified in this article 4.3
shall not be subject to the adjustment provisions of article 7.1. However, from
time to time, and at any time, when the Base Price is redetermined pursuant to
article 7.2., Price Redetermination, the amounts specified in this article 4.3
above will be increased or decreased by the same percentages as the then
redetermined Base Price changes from $22.30 per ton.
Effective January 1, 1995, this article 4.3 providing for Quantity/Fixed
Cost Adjustment additions or deductions from the Base Price per ton as of the
delivery date shall be suspended and no such adjustments shall be made to the
Base Price. Effective with the next subsequent Effective Date pursuant to a
price redetermination under article 7.2 of this Contract, article 4.3 will be
restored to the Contract and once again become effective, and appropriate
adjustments made to the per ton amounts.
IV
In article 7, entitled "PRICE", article 7.1, and articles 7.1.1 through
7.1.6 shall be amended in their entireties to read as follows:
7.1. Determination.
a) The delivered price of the coal shall be the Base Price of $22.30
per ton, adjusted, as of the Delivery Date, in accordance with the following
provisions of this article 7.1. Each adjustment (except the adjustments in
articles 7.1.4, 7.1.5, 7.1.10 and 7.1.11) of the Base Price shall be made
independently of each other adjustment thereof; and each adjustment under this
article 7.l shall be calculated to the nearest 0.01 of one cent and rounded to
the nearest 0.10 of one cent, or, if there is no nearest 0.10, to the nearest
even 0.10 of one cent. The failure of the parties to agree on price adjustments
as hereinafter set forth shall in no way relieve either party of its respective
obligations of performance under this Contract.
b) The Base Price consists of the following price components:
Price Components Per Ton
---------------- -------
Labor (article 7.1.1.a) $ 8.197
MS&P: Mine Roof Bolts (7.1.2.a)) 0.818
Other Materials and Supplies (7.1.2.b)) 3.975
Power (7.1.2.c)) 1.189
Capital (7.1.3) 1.857
Taxes: Property Plant and Equipment (7.1.4.a)) 0.180
Federal Reclamation Fee (7.1.4.b)) 0.143
Black Lung (7.1.4.c)) 0.940
Royalty (7.1.5) 1.050
Return On Capital Income Tax and Indirect Costs (7.1.6.a)) 1.721
Fixed (7.1.6.b)) 2.230
-------
Base Price $22.300
- 2 -
<PAGE>
7.1.1. Labor.
a) The Base Price shall be increased or decreased by an amount
calculated as follows: multiply $8.197 per ton by the percentage change in the
weighted average cost per hour for hourly workers and salaried employees on the
Delivery Date, determined in accordance with the Manning Table which is Exhibit
C to this Contract, from $44.14 per hour (such estimated average wage rate as of
January 1995, derived as shown in Exhibit C; the estimated average wage rate
used herein shall be replaced with the actual wage rate for January 1995 when
such rate becomes available.). The weighted average hourly cost for salaried
employees at the Mining Area shall be adjusted by the percentage change in such
cost for hourly workers. The parties to this Contract recognize that the purpose
of the Manning Table is to periodically recalculate the weighted average hourly
cost for hourly workers and salaried employees, and that it does not necessarily
reflect the number of persons at the Mine at any given time. The number of
persons used in the Manning Table shall not be changed, except as may be
required pursuant to article 7.1.7 or to the following provisions of this
article 7.1.1.a). The Manning Table is based upon the collective bargaining
agreement between the United Mine Workers of America (UMWA) and the Bituminous
Coal Operators' Association (BCOA) in effect in January 1995 and will always be
based on such collective bargaining agreement as is in effect on the Delivery
Date unless: (i) Turris becomes subject to a bargaining agreement other than the
bargaining agreement between the UMWA and the BCOA, in which case the Manning
Table will be based on Turris' bargaining agreement; or (ii) a collective
bargaining agreement between the UMWA and the BCOA ceases to exist or the UMWA
ceases to represent coal mine workers in Central Illinois, in either case the
Manning Table shall be changed by Turris and based on another representative
collective bargaining agreement.
b) Intentionally omitted.
c) Whenever the collective bargaining agreement being used as the
basis for the Manning Table in effect on the Delivery Date includes a labor or
labor-related cost expressed on a per-ton basis and such cost is not otherwise
reflected in the Manning Table or article 7.1.l.b), Turris will add that cost as
such to the price, and thereafter increase or decrease the price by the amount
by which that cost, on the Delivery Date, is more or less than the amount
originally added to the price. Whenever the collective bargaining agreement
being used as the basis for the Manning Table in effect on the Delivery Date
excludes a labor or labor-related cost expressed on a per-ton basis and such
cost is reflected in the Manning Table or article 7.1.l.b), Turris will subtract
that cost as such from the price, and thereafter decrease or increase the price
by the amount by which that cost, on the Delivery Date, is more or less than the
amount originally subtracted from the price. If the addition or subtraction of
such per-ton cost results in a duplication of any cost component or reduction of
the price then in effect under articles 7.1.l.a) or 7.1.1.b), that cost
component or reduction of the price shall be adjusted as required to eliminate
such duplication.
7.1.2. Materials, Supplies and Power.
a) Mine Roof Bolts. The Base Price shall be increased or decreased
by an amount calculated as follows: multiply $0.818 per ton by the percentage
change in the Producer Price Index for Roof Bolts (BLS Code 1081.0241), as of
the Delivery Date, from 109.5 (such estimated Index for January 1995). (The
estimated indexes used herein shall be replaced with actual indexes for January
1995 when such indexes become available.)
b) Other Materials and Supplies. The Base Price shall be increased
or decreased by an amount calculated as follows: multiply $3.975 per ton by the
percentage change in the Producer Price Index for Underground Mining Machinery
and Equipment (BLS Code 1192.01), as of the Delivery Date,
- 3 -
<PAGE>
from 149.0 (such estimated Index for January 1995). (The estimated indexes used
herein shall be replaced with actual indexes for January 1995 when such indexes
become available.)
c) Power. The Base Price shall be increased by an amount calculated
as follows: multiply $1.189 per ton by the percentage increase in the total per
kilowatt hour cost of electricity, as of the Delivery Date, from 8.235 cents per
kilowatt hour (8.235cents/kwh) (such cost as of January 1995). This cost per
kilowatt hour is for delivered electric power to the surface facilities to be
supplied by the appropriate electrical utility certified to serve the Mine, and
is based on 12,000 KW per month demand and 4,600,000 kilowatt hours usage per
month. The power cost per kilowatt hour will always be based on 12,000 KW per
month demand and 4,600,000 kilowatt hours usage per month using the rate
schedule of the utility certified to serve the Mine as is in effect on the
Delivery Date.
7.1.3. Capital Costs. The Base Price shall be increased or decreased
by an amount calculated as follows: multiply $1.857 per ton by the percentage
change in the Producer Price Index for Underground Mining Machinery and
Equipment (BLS Code 1192.01), as of the Delivery Date, from 149.0 (such
estimated Index for January 1995). (The estimated indexes used herein shall be
replaced with actual indexes for January 1995 when such indexes become
available.)
7.1.4. Taxes.
a) The Base Price includes $0.180 per ton for all federal, state or
local taxes or fees, (the estimated total of such taxes and fees as of January
1995) excluding income taxes, Black Lung Tax and the Federal Reclamation Fee.
The Base Price shall be increased or decreased by the same amount by which any
federal, state or local taxes or fees (excluding income taxes, Black Lung Tax
and the Federal Reclamation Fee) applicable to the Mine or the coal delivered
hereunder, including all severance and ad valorem taxes, sales, use, value
added, or other excise taxes (including the Illinois Retail Occupation Tax, if
applicable) which Turris is required to pay on coal delivered hereunder as in
effect on the Delivery Date, total more or less than $0.180 per ton. In
determining taxes payable, effect shall be given to all price adjustments.
b) The Base Price shall be increased or decreased by the same amount
by which the Federal Reclamation Fee pursuant to the Surface Mine Control and
Reclamation Act of 1977, as in effect on the Delivery Date, is more or less than
$0.143 per ton (such fee as of January 1995).
c) The Base Price shall be increased or decreased by the same amount
by which the Black Lung Tax pursuant to the Black Lung Benefits Act of 1977, as
in effect on the Delivery Date, is more or less than $0.940 per ton (such tax as
of January 1995).
d) Depletion Allowance.
i) The Base Price, as adjusted as of the Delivery Date, shall
be increased or decreased by one-half the number of percentage points by which
the effective rate of the gross depletion allowance applicable to coal for
United States Income Tax purposes decreases or increases, as applicable, from
the rate in effect on January 1, 1995. For example, if the effective rate of the
depletion allowance is 8.5%, and this is decreased by one percent to 7.5%, the
Base Price shall be increased by one-half of one percent (0.5%); or if the
effective rate of the depletion allowance is increased by one percent to 9.5%,
the Base Price shall be decreased by one-half of one percent (0.5%).
ii) The provision in article 7.1.4.d) is suspended and of no
force or effect during the period from January 1, 1995 until the next subsequent
Effective Date pursuant to a price redetermination under article 7.2 of this
Contract. At such time, the effective rate of the depletion allowance will be
reset to the rate then in effect.
7.1.5. Royalty. The Base Price shall be increased or decreased by
the same amount by which gross royalty payable on the Delivery Date on the coal
delivered under this Contract is more or less than $1.050 per ton (such cost for
January 1995). Gross royalty payable will include: (a) amounts payable on tons
sold and purchased, including Turris' fee properties at the generally prevailing
royalty rate negotiated in the area at the time of acquisition and (b) amounts
equal to the recovery of previously paid advance royalty. In determining gross
royalty payable, effect shall be given to all price adjustments.
- 4 -
<PAGE>
7.1.6.
a) Return On Capital, Income Tax and Indirect Costs. The Base Price
shall be increased or decreased by an amount calculated as follows: multiply
$1.721 per ton by the percentage change in the Department of Commerce, Bureau of
Economic Analysis, Implicit Price Deflator for the Gross National Product, as of
the Delivery Date, from 127.0 (such estimated Gross National Product Deflator
for January 1995). (The estimated indexes used herein shall be replaced with
actual indexes for January 1995 when such indexes become available.)
b) Fixed Costs.
i) The Base Price includes a component of $2.230 per ton which
shall not be subject to adjustment for the effect of inflation or deflation, but
shall be included in the price for purposes of calorific and sulfur price
adjustments pursuant to articles 7.1.10 and 7.1.11, respectively.
ii) The $2.230 fixed component in i) above represents 10% of
the total Base Price redetermined as of the January 1995 Effective Date.
Effective with the next subsequent Effective Date pursuant to a price
redetermination under article 7.2 of this Contract, the fixed component of the
Base Price pursuant to this article 7.1.6.b.i will be reset to 6.7% of the such
total redetermined Base Price.
V
In article 7.1.7 entitled "New Costs", every occurrence of the date
January 1, 1980, shall be deleted and replaced with the date July 1, 1994.
In article 7.1.7, when Turris has a new labor or labor-related cost, the
paragraph that provides for inclusion as Turris's overhead and administrative
cost a cost of ten percent (10%) shall be suspended effective January 1, 1995.
Effective with the next subsequent Effective Date pursuant to a price
redetermination under article 7.2 of this Contract, the paragraph that, with a
labor or labor-related cost, provides for inclusion as Turris's overhead and
administrative cost a cost of ten percent (10%) will be restored to article
7.1.7 and once again become effective.
VI
New Article 4.4, entitled "Additional Tons", is incorporated into the
Contract and shall read in its entirety as follows:
4.4. Additional Tons. From time to time, Turris may choose to make
additional coal available for sale to City at prices agreed to at such time by
both parties. This additional coal is to provide City the ability to execute new
spot market electricity sales on any hourly basis that would be in addition to
City's existing native load sales and any sales to customers under contract as
of January 1, 1995 ("Additional Tons"). Additional Tons shall be approved by
Turris and may be discontinued at any time upon telephone notification by an
authorized Turris representative. Such new spot electricity sales shall be
conducted by an authorized representative of City, but not by representatives
from City's established dispatch system who conduct traditional electrical
sales. Concurrent with each ten day billing period under this Contract, City
will provide documentation as requested by Turris of any such new electricity
sales, including, but not limited to, the customer, the megawatts sold, power
dispatched, and the total tons of coal consumed per individual sale. The price
of coal sold pursuant to this article 4.4 shall not exceed the Excess Quantity
price as determined pursuant to article 4.1. If the parties are unable to agree
on a price for Additional Tons, and City nevertheless desires to purchase
Additional Tons, then City may purchase such Additional Tons at the Contract
price, pursuant to Article 4.1.
Effective with the next subsequent Effective Date, this article 4.4. shall
be deleted.
- 5 -
<PAGE>
VI
The intent of this Amendment to the Contract is only to amend those
provisions that are herein specified; and, except as herein specifically
amended, all the terms, conditions, and provisions of the Contract, as amended,
including the contingency agreements entered into in November, 1984, shall
remain the same. The defined terms used herein have the same meaning as those in
the Contract and are incorporated herein by reference.
This Amendment shall be fully binding upon and effective as to the
interest of each of the parties hereto and shall be binding upon and inure to
the benefit of the respective successors and assigns of the parties hereto.
IN WITNESS WHEREOF, the parties have executed this Amendment to Contract
for Sale and Purchase of Coal which shall be effective as of January 1, 1995.
Attest: /s/ Scott K. Fowler TURRIS COAL COMPANY
-----------------------------
By /s/ Roger Dennison
--------------------------------
CITY OF SPRINGFIELD FOR CITY
WATER, LIGHT & POWER
Attest: /s/ Norma J. Graves By_________________________________
-----------------------------
- 6 -
<PAGE>
AMENDMENT TO CONTRACT FOR SALE AND PURCHASE OF COAL
This Amendment to Contract for Sale and Purchase of Coal is entered into
this 10th day of May, 1996, by and between Turris Coal Company, a Delaware
corporation, whose address is P. O. Box 21, Elkhart, Illinois 62634 ("Turris")
and the City of Springfield, Illinois on behalf of City, Water, Light & Power,
with offices in the Municipal Building at Seventh and Monroe Streets,
Springfield, Illinois 62757 ("City").
WHEREAS, City and Shell Oil Company ("Shell Oil") executed that certain
Contract for Sale and Purchase of Coal effective July 1, 1980, as amended
through December 31, 1994 ("Contract"); and
WHEREAS, Shell Oil assigned its rights and obligations under the Contract
to Turris on October 16, 1980; and
WHEREAS, City and Turris agreed by letter dated April 25, 1996, to revise
the amount of certain components in the price; and, also the parties recognize
that one of the price adjustment indexes has been rebased.
NOW, THEREFORE, for and in consideration of the mutual covenants contained
herein, the parties hereto agree as follows:
I
Effective on May 1, 1996, in article 7, article 7.1.b, and 7.1.5 shall be
amended in their entireties to read as follows:
b) The Base Price consists of the following price components:
Price Components Per Ton
---------------- -------
Labor (article 7.1.1.a)) $ 8.197
MS&P: Mine Roof Bolts (7.1.2.a)) 0.818
Other Materials and Supplies (7.1.2.b)) 3.975
Power (7.1.2.c)) 1.189
Capital (7.1.3) 1.857
Taxes: Property Plant and Equipment (7.1.4.a)) 0.180
Federal Reclamation Fee (7.1.4.b)) 0.143
Black Lung (7.1.4.c)) 0.940
Royalty (7.1.5) 0.950
Return On Capital Income Tax and Indirect Costs (7.1.6.a)) 1.721
Fixed (7.1.6.b)) 2.330
-------
Base Price $22.300
7.1.5. Royalty. The Gross Royalty payable shall be fixed at $0.950 per
ton, effective May 1, 1996. Effective with the next Effective Date, the article
7.1.5 language will be restored to that existing prior to this amendment and the
price will once again be adjusted for changes in actual Gross Royalty payable.
<PAGE>
II
Effective as noted below, in article 7, article 7.1.6.a and 7.1.6.b.i and
shall be amended in their entireties to read as follows:
7.1.6.
a) Return On Capital, Income Taxes and Indirect Costs. The Base
Price shall be increased or decreased by an amount calculated as follows:
multiply $1.721 per ton by the percentage change in the Department of Commerce,
Bureau of Economic Analysis, Implicit Price Deflator for the Gross National
Product, as of the Delivery Date, from 106.6 (the January 1, 1995 value, 1992 =
100). This paragraph shall be effective for price adjustments as of July 1,
1995.
b) Fixed Costs.
i) Effective May 1, 1996, The Base Price includes a component
of $2.330 per ton which shall not be subject to adjustment for the effect of
inflation or deflation, but shall be included in the price for purposes of
calorific and sulfur price adjustments pursuant to articles 7.1.10 and 7.1.11,
respectively.
III
The intent of this Amendment to the Contract is only to amend those
provisions that are herein specified; and, except as herein specifically
amended, all the terms, conditions, and provisions of the Contract, as amended,
including the contingency agreements entered into in November, 1984, shall
remain the same. The defined terms used herein have the same meaning as those in
the Contract and are incorporated herein by reference.
This Amendment shall be fully binding upon and effective as to the
interest of each of the parties hereto and shall be binding upon and inure to
the benefit of the respective successors and assigns of the parties hereto.
IN WITNESS WHEREOF, the parties have executed this Amendment to Contract
for Sale and Purchase of Coal which shall be effective as of the dates
hereinbefore noted.
TURRIS COAL COMPANY
Attest: /s/ Barbara Fisher By /s/ Roger Dennison
--------------------------------- --------------------------
CITY OF SPRINGFIELD FOR CITY
WATER, LIGHT & POWER
Attest: /s/ Norma J. Graves By /s/ Karen Hasaia
----------------------------------- --------------------------
- 2 -
<PAGE>
AMENDMENT TO CONTRACT FOR SALE AND PURCHASE OF COAL
This Amendment to Contract for Sale and Purchase of Coal is entered into
this 20th day of August, 1998, by and between Turris Coal Company, a Delaware
corporation, whose address is P. O. Box 21, Elkhart, Illinois 62634 ("Turris")
and the City of Springfield, Illinois on behalf of City, Water, Light & Power,
with offices on the Fourth Floor in the Municipal Center East, 800 East Monroe
Street, Springfield, Illinois 62757 ("City").
WHEREAS, City and Shell Oil Company ("Shell Oil") executed that certain
Contract for Sale and Purchase of Coal effective July 1, 1980, as amended
through December 31, 1997 ("Contract"); and
WHEREAS, Shell Oil assigned its rights and obligations under the Contract
to Turris on October 16, 1980; and
WHEREAS, City notified Turris by letter dated September 16, 1997, that it
intended to exercise its right to request a price redetermination under article
7.2 of the Contract.
NOW, THEREFORE, for and in consideration of the mutual covenants contained
herein, the parties hereto agree as follows:
I
Effective January 1, 1998, Article I "Period" is amended in its entirety
to read as follows:
1. Period. This Contract shall be in effect from its date and for a performance
period beginning January 1, 1983 and extending until the sum of the quantities
delivered hereunder subsequent to December 31, 1985 (including any tons
delivered by Turris' affiliate Franklin Coal Sales Company) equals 26.000000
million tons, or December 31, 2011, whichever occurs last.
II
Effective January 1, 1998, the first paragraph of Article 4.1. "Base
Annual Quantity" is amended in its entirety to read as follows:
4.1. Base Annual Quantity. Unless otherwise agreed to by the parties, the
quantity (all quantities being in tons) of coal to be sold and purchased during
each Contract Year shall be the minimum quantity ("Base Quantity"). In addition,
City shall purchase up to a total quantity requirement ("Requirements"), before
purchasing coal from any other coal supplier pursuant to article 4.2. Such
quantities are as follows:
Contract Year Minimum Base Quantity Requirements
------------- --------------------- ------------
1998 & 1999 700,000 950,000
1998 - 1999 60,000 (Exxon coal)
2000 700,000
250,000 (Exxon Coal) 825,000
2001 550,000
250,000 (Exxon Coal) Dallman 3
2002 and all
Subsequent
Contract Years 550,000 Dallman 3
<PAGE>
After Contract Year 2000, if City adds flue gas desulfurization
equipment ("Scrubbers") to existing units or builds a new Scrubbed unit(s), the
requirements shall be increased to the lesser of the Scrubbed unit(s)
requirements or 950,000 tons per year. Turris will deliver the 60,000 tons of
coal purchased from Exxon as shown in the above table between September 1, 1998
and August 31, 1999.
III
Effective January 1, 1998, Article 4.2 "Right of First Refusal" is amended
in its entirety as follows:
4.2 Right of First Refusal. The price for deliveries of quantities in
excess of the Requirements as defined in article 4.1 shall be the Base Price per
ton, adjusted as of the delivery date, or such other price as the parties
mutually agree. If the parties cannot agree upon a price for such coal then
before committing to purchase such additional coal from another supplier, the
City shall, give Turris the option to supply such coal as follows:
During the Contract Years 1998 - 2000, City will provide 45 days notice to
Turris prior to the intended commencement of deliveries, of its intent to
purchase spot coal during any of the six two-month intervals in a Contract Year
(i.e., January-February, March-April, etc.). Such notice will include
certification to Turris of the price and the right of first refusal price. The
right of first refusal price shall be equal to the comparable cost to City for
the price of such spot coal to be delivered. The right of first refusal price
shall be determined of a cost per million BTU basis, including adjustments for
sulfur content pursuant to the sulfur adjustment table in article 7.1.11.b, and
including shipping costs under the spot coal offer for coal to be delivered
under the terms of this Contract. Turris shall have until 30 days prior to the
beginning of any such-two month interval to accept the right of first refusal
price and deliver such coal. If during any Contract Year from 1998-2000, City
buys spot coal under this provision and does not purchase its Requirements
pursuant to article 4.1, City will pay Turris the Base Price per ton, adjusted
as of December 31 of the year in which such Requirements were not met, for all
Requirements tons not delivered, and title to such undelivered coal shall pass
to the City. Such coal shall be stored by Turris at no charge to City.
After December 31, 2000, the price for coal that Turris must match
pursuant to this article 4.2 shall be adjusted, up or down as the case may be,
for: l) heat content (based upon dollars per million BTU delivered to City), 2)
sulfur content (based upon the then current Cantor-Fitzgerald Environmental
Brokerage Services Monthly Price Index for sulfur dioxide emission allowances),
and 3) incremental operating costs for additional quantities (e.g., such as, but
not limited to, the cost of adding limestone when burning a lower sulfur coal).
IV
Article 4.3 entitled "Quantity/Fixed Cost Adjustment" shall be amended in
its entirety to read as follows:
2
<PAGE>
4.3 Quantity/Fixed Cost Adjustment. As consideration for anticipated
deviations from the Base Quantities specified in the Contract dated July 1, 1980
and in addition to all other price adjustments hereunder, a price adjustment
("Quantity/Fixed Cost Adjustment") shall be added to, or deducted from, the Base
Price per ton, adjusted as of the Delivery Date in accordance with article 7.1,
according to the following table:
0 to 700,001 to 800,001 to 900,001 to
Contract Year 700,000 Tons 800,000 Tons 900,000 Tons 950,000 Tons
------------- ------------ ------------ ------------ ------------
1998 - 2000 Add $0.509 Deduct $1.018 Deduct $1.526 Deduct $2.033
The Quantity/Fixed Cost adjustment amounts specified in this article 4.3
shall not be subject to the adjustment provisions of article 7.1. However, from
time to time, and at any time, when the Base Price is redetermined pursuant to
article 7.2., Price Redetermination, the amounts specified in this article 4.3
above will be increased or decreased by the same percentages as the then
redetermined Base Price changes from $20.58 per ton.
Effective January 1, 1998, this article 4.3 providing for Quantity/Fixed
Cost Adjustment additions or deductions from the Base Price per ton as of the
delivery date shall be suspended and no such adjustments shall be made to the
Base Price. Effective with the next subsequent Effective Date pursuant to a
price redetermination under article 7.2 of this Contract, article 4.3 will be
restored to the Contract and once again become effective, and appropriate
adjustments made to the per ton amounts if the Base Quantity is increased beyond
700,000 tons per Contract Year.
V
In article 7, entitled "PRICE", article 7.1, and articles 7.1.1 through
7.1.6 shall be amended in their entireties to read as follows:
7.1. Determination.
a) The delivered price of the coal F.O.B. mine for Contract Years 1998 and
1999 shall be the Base Price of $20.58 per ton adjusted as of the Delivery Date,
in accordance with the following provisions of this article 7.l. The delivered
price of the coal F.O.B. mine for Contract Year 2000 shall be the Base Price of
$20.58 per ton adjusted as of the Delivery Date, in accordance with the
following provisions of this article 7.1, less $0.76 per ton. The price
components in article 7.1.b for the year 2000 and thereafter will then be
appropriately recalculated and the price adjusted thereafter per the terms of
this article 7.1. Each adjustment (except the adjustments in articles 7.1.4.,
7.1.5, 7.1.10 and 7.1.11) of the Base Price shall be made independently of each
other adjustment thereof; and each adjustment under this article 7.1 shall be
calculated to the nearest 0.01 of one cent and rounded to the nearest 0.10 of
one cent, or, if there is no nearest 0.10, to the nearest even 0.10 of one cent.
The failure of the parties to agree on price adjustments as hereinafter set
forth shall in no way relieve either party of its respective obligations of
performance under this Contract.
b) The Base Price consists of the following price components:
Price Components Per Ton
---------------- --------
Labor (article 7.1.1.a) $7.640
MS&P: Mine Roof Bolts (7.1.2.a) 0.762
Other Materials and Supplies (7.1.2.b) 3.705
Power (7.1.2.c) 1.108
Capital (7.1.3) 1.731
3
<PAGE>
Taxes: Property Plant & Equipment (7.1.4.a) 0.102
Federal Reclamation Fee 0.143
Black Lung (7.1.4.c) 0.867
Royalty (7.1.5) 0.860
Return on Capital, Income Tax and Indirect Costs (7.1.6.a) 1.604
Fixed (7.1.6.b) 2.058
--------
Base Price $20.580
c) Other Coal Price. The F.O.B. mine price per ton for all coal purchased
from Exxon for delivery to City during the 1998 through 2001 period shall be
fixed as follows:
1998 and 1999 $21.50
2000 $21.75
2001 $22.00
7.1.1. Labor.
a) The Base Price shall be increased or decreased by an amount calculated
as follows : multiply $7.640 per ton by the percentage change in the weighted
average cost per hour for hourly workers and salaried employees on the Delivery
Date, determined in accordance with the Manning Table which is Exhibit C to this
Contract, from $39.502 per hour (such estimated average wage rate as of January
1998, derived as shown in Exhibit C; the estimated average wage rate used herein
shall be replaced with the actual wage rate for January 1998 when such rate
becomes available). The weighted average hourly cost for salaried employees at
the Mining Area shall be adjusted by the percentage change in such cost for
hourly workers. The parties to this Contract recognize that the purpose of the
Manning Table is to periodically recalculate the weighted average hourly cost
for hourly workers and salaried employees, and that it does not necessarily
reflect the number of persons at the Mine at any given time. The number of
persons used in the Manning Table is based upon the collective bargaining
agreement between the United Mine Workers of America (UMWA) and the Bituminous
Coal Operators' Association (BCOA) in effect in January 1998 and will always be
based on such collective bargaining agreement as is in effect on the Delivery
Date unless: (i) Turris becomes subject to a bargaining agreement other than the
bargaining agreement between the UMWA and the BCOA, in which case the Manning
Table will be based on Turris' bargaining agreement; or (ii) a collective
bargaining agreement between the UMWA and the BCOA ceases to exist or the UMWA
ceases to represent coal mine workers in Central Illinois, in either case the
Manning Table shall be changed by Turris and based on another representative
collective bargaining agreement.
b) Intentionally omitted.
c) Whenever the collective bargaining agreement being used as the basis
for the Manning Table in effect on the Delivery Date includes a labor or
labor-related cost expressed on a per-ton basis and such cost is not otherwise
reflected in the Manning Table, Turris will add that cost as such to the price,
and thereafter increase or decrease the price by the amount by which that cost,
on the Delivery Date, is more or less than the amount originally added to the
price. Whenever the collective bargaining agreement begin used as the basis for
the Manning Table in effect on the Delivery Date excludes a labor or
labor-related cost expressed on a per-ton basis and such cost is reflected in
the Manning Table, Turris will subtract that cost as such from the price, and
thereafter decrease or increase the price by the amount by which that cost, on
the Delivery Date, is more or less than the amount originally subtracted from
the price. If the addition or subtraction of such per-ton cost results in a
duplication of any cost component or reduction of the price then in effect under
articles 7.1.1.a, that cost component or reduction of the price shall be
adjusted as required to eliminated such duplication.
4
<PAGE>
7.1.2. Materials, Supplies and Power.
a) Mine Roof Bolts. The Base Price shall be increased or decreased by an
amount calculated as follows: multiply $0.762 per ton by the percentage change
in the Producer Price Index for Bolts, Screws, Nuts and Washers (BLS Code 1081),
as of the Delivery Date, from 127.6 (such final Index for January 1998).
b) Other Materials and Supplies. The Base Price shall be increased or
decreased by an amount calculated as follows: multiply $3.705 per ton by the
percentage change in the Producer Price Index for Underground Mining Machinery
and Equipment (BLS Code 1192.01), as of the Delivery Date, from 162.8 (such
final Index for January 1998).
c) Power. The Base Price shall be increased or deceased by an amount
calculated as follows: multiply $1.108 per ton by the percentage change in the
total per kilowatt hour cost of electricity, as of the Delivery Date, from 8.235
cents per kilowatt hour (such cost as of January 1998). This cost per kilowatt
hour is for delivered electric power to the surface facilities to be supplied by
the appropriate electrical utility certified to serve the Mine, and is based on
12,000 KW per month demand and 4,600,000 kilowatt hours usage per month. The
power cost per kilowatt hour will always be based on 12,000 KW per month demand
and 4,600,000 kilowatt hours usage per month using the rate schedule of the
utility certified to serve the Mine as is in effect on the Delivery Date.
7.1.3. Capital Costs. The Base Price shall be increased or decreased by an
amount calculated as follows: multiply $1.731 per ton by the percentage change
in the Producer Price Index for Underground Mining Machinery and Equipment (BLS
Code 1192.01), as of the Delivery Date, from 163.5 (such estimated Index for
January 1998). (The estimated indexes used herein shall be replaced with actual
indexes for January 1998 when such indexes become available.)
7.1.4. Taxes.
a) The Base Price includes $0.102 per ton for all federal, state or local
taxes or fees, (the total of such taxes and fees as of January 1998) excluding
income taxes, Black Lung Tax and the Federal Reclamation Fee. The Base Price
shall be increased or decreased by the same amount by which any federal, state
or local taxes or fees (excluding income taxes, Black Lung Tax and the Federal
Reclamation Fee) applicable to the Mine or the coal delivered hereunder,
including all severance and ad valorem taxes, sales, use, value added, or other
excise taxes (including the Illinois Retail Occupation Tax, if applicable) which
Turris is required to pay on coal delivered hereunder as in effect on the
Delivery Date, total more or less than $0.102 per ton. In determining taxes
payable, effect shall be given to all price adjustment.
b) The Base Price shall be increased or decreased by the same amount by
which the Federal Reclamation Fee pursuant to the Surface Mine Control and
Reclamation Act of 1977, as in effect on the Delivery Date, is more or less than
$0.143 per ton (such fee as of January 1998).
c) The Base Price shall be increased or decreased by the same amount by
which the Black Lung Tax pursuant to the Black Lung Benefits Act of 1977, as in
effect on the Delivery Date, is more or less than $0.867 per ton (such tax as of
January 1998).
d) Depletion Allowance.
i) The Base Price, as adjusted as of the Delivery Date, shall be
increased or decreased by one-half the number of percentage points by which the
effective rate of the gross depletion allowance applicable to coal for United
States Income Tax purposes decrease or increases, as applicable, from the rate
in effect on January 1, 1998. For example, if the effective rate of the
depletion allowance is 8.5%, and this is decreased by one percent to 7.5%, the
Base Price shall be increased by one-half of one percent (0.5%); or if the
effective rate of the depletion allowance is increased by one percent to 9.5%,
the Base Price shall be decreased by one-half of one percent (0.5%).
ii) The provision in article 7.1.4.d is suspended and of no force or
effect during the period from January 1, 1998 until the next subsequent
Effective Date pursuant to a price redetermination under article 7.2 of this
Contract. At such time, the effective rate of the depletion allowance will be
reset to the rate then in effect.
5
<PAGE>
7.1.5. Royalty. The Base Price shall be increased or decreased by the same
amount by which gross royalty payable on the Delivery Date on the coal delivered
under this Contract is more or less than $0.860 per ton (such cost for January
1998). Gross royalty payable will include: (a) amounts payable on tons sold and
purchased, including Turris' fee properties at the generally prevailing royalty
rate negotiated in the area at the time of acquisition and (b) amounts equal to
the recovery of previously paid advance royalty. In determining gross royalty
payable, effect shall be given to all price adjustments.
7.1.6.
a) Return of Capital, Income Tax and Indirect Costs. The Base Price shall
be increased or decreased by an amount calculated as follows: multiply $1.604
per ton by the percentage change in the Department of Commerce, Bureau of
Economic Analysis, Implicit Price Deflator for the Gross National Product, as of
the Delivery Date, from 113.25 (such estimated Gross National Product Deflator
for January 1998). (The estimated indexes used herein shall be replaced with
actual indexes for January 1998 when such indexes become available.)
b) Fixed Costs.
i) The Base Price includes a component of $2.058 per ton which shall not
be subject to adjustment, for the effect of inflation or deflation, but shall be
included in the price for purposes of calorific and sulfur price adjustments
pursuant to article 7.1.10 and 7.1.11, respectively.
ii) The $2.058 fixed component in i) above represents 10% of the total
Base Price redetermined as of the January 1998 Effective Date. Effective with
the next subsequent Effective Date pursuant to a price redetermination under
article 7.2 of this Contract, the fixed component of the Base Price pursuant to
this article 7.1.6.b.i will be reset to 6.7% of such total redetermined Base
Price.
VI
In article 7.1.7 entitled "New Costs", every occurrence of the date
January 1, 1980 shall be deleted and replaced with the date October 1, 1997.
In article 7.1.7, when Turris has a new labor or labor-related cost, the
paragraph that provides for inclusion as Turris' overhead and administrative
cost, a cost of ten percent (10%) shall be suspended effective January 1, 1998.
Effective with the next subsequent Effective Date pursuant to a price
redetermination under article 7.2 of this Contract, the paragraph that, with a
labor or labor-related cost, provides for inclusion as Turris' overhead and
administrative cost, a cost of ten percent (10%) will be restored to article
7.1.7 and once again become effective.
VII
New Article 4.4, entitled "Additional Tons", is incorporated into the
Contract and shall read in its entirety as follows:
4.4. Additional Tons. From time to time, Turris may choose to make
additional coal available for sale to City at prices agreed to at such time by
both parties. This additional coal is to provide City the ability to execute new
spot market electricity sales on any hourly basis that would be in addition to
City's existing native load sales and any sales to customers under contract as
of January l, 1998 ("Additional Tons"). Additional Tons shall be approved by
Turris and may be discontinued at any time upon telephone notification by an
authorized Turris representative. Such new spot electricity sales shall be
conducted by an authorized representative of City, but not by representatives
from City's established dispatch system who conduct traditional electrical
sales. Concurrent with each ten day billing period under this Contract, City
will provide documentation as requested by Turris of any such new electricity
6
<PAGE>
sales, including, but not limited to, the customer, the megawatts sold, power
dispatched, and the total tons of coal consumed per individual sale. If the
parties are unable to agree on a price for Additional Tons, and City
nevertheless desires to purchase Additional Tons, then City may purchase such
Additional Tons at the Contract price pursuant to Article 4.1. Additional Tons
purchased at or above the adjusted Base Price per ton shall be included in the
total tons calculation in article 1, while those purchased below the adjusted
Base Price per ton shall not be so included.
Effective with the next subsequent Effective Date, this article 4.4. shall
be deleted.
VIII
Turris and City will attempt to negotiate a revised price redetermination
procedure pursuant to article 7.2 prior to July 1, 2000. If the parties are
unable to mutually agree on a new procedure by such date, then the current
procedure shall remain in place.
IX
The intent of this Amendment to the Contract is to amend only those
provisions that are herein specified; and, except as herein specifically
amended, all the terms, conditions, and provisions of the Contract, as amended,
including the contingency agreements entered into in November, 1984, shall
remain the same. The defined terms used herein have the same meaning as those in
the Contract and are incorporated herein by reference.
This Amendment shall be fully binding upon and effective as to the
interest of each of the parties hereto and shall be binding upon and inure to
the benefit of the respective successors and assigns of the parties hereto.
IN WITNESS WHEREOF, the parties have executed in duplicate this Amendment
to Contract for Sale and Purchase of Coal which shall be effective as of January
1, 1998.
TURRIS COAL COMPANY
Attest: /s/ Tony Harris By /s/ Roger Dennison
-------------------- --------------------------
CITY OF SPRINGFIELD FOR CITY
WATER, LIGHT & POWER
Attest: /s/ Norma Graves By /s/ Karen Hasaia
-------------------- --------------------------
7
<PAGE>
AMENDMENT TO CONTRACT FOR SALE AND PURCHASE OF COAL
Effective Date January 1, 2001
This Amendment to Contract for Sale and Purchase of Coal is entered into
this 30 day of May, 2001, by and between Turris Coal Company, a Delaware
corporation, whose address is 8100 East Main Street, Williamsville, Illinois
62693 ("Turris") and the City of Springfield, Illinois on behalf of City, Water,
Light & Power, with offices on the Fourth Floor in the Municipal Center East,
800 East Monroe Street, Springfield, Illinois 62757 ("City").
WHEREAS, City and Shell Oil Company ("Shell Oil") executed that certain
Contract for Sale and Purchase of Coal effective July 1, 1980, as amended
through December 31, 2000, ("Contract"); and
WHEREAS, Shell Oil assigned its rights and obligations under the Contract
to Turris on October 16, 1980; and
WHEREAS, Turris notified City by letter dated September 25, 2000, that it
intended to exercise its right to request a price redetermination under Article
7.2 of the Contract; and
WHEREAS, in addition to redetermining the price under the Contract, the
parties have agreed to amend certain portions of the Contract.
NOW THEREFORE, for and in consideration of the mutual covenants contained
herein, the parties hereto agree as follows:
Effective January 1, 2001, Article 1 "Period" is amended in its entirety
to read as follows:
I
1. Period. This Contract shall be in effect from its date and for a performance
period beginning January 1, 1983 and extending until the sum of quantities
delivered hereunder from Turris' Elkhart Mine inclusive of any tons delivered to
City through Turris, subsequent to December 31, 1985 equals 34.550 million tons,
or December 31, 2020, whichever occurs last.
II
Effective January 1, 2001, the first paragraph of Article 4.1. "Base
Annual Quantity" is amended in its entirety to read as follows:
4.1. Base Annual Quantity. Unless otherwise agreed by the parties, the
quantity (all quantities being in tons) of coal to be sold and purchased during
each Contract Year shall be the City's total requirements. Such quantities are
as follows:
<PAGE>
AMENDMENT TO CONTRACT FOR SALE AND PURCHASE OF COAL
Effective Date January 1, 2001
Contract Year Requirements
------------- --------------------------------------
2001 All required tons less tons to be
delivered by Turris from the Exxon
Monterey mine up to a total of 250,000
Monterey tons.
2002 and all subsequent
Contract Years All required tons
From January 1, 2001, through December 31, 2006, the tons required to be taken
are 6.1 million tons. Any shortfall of tons from 2001 to 2006 will be carried
over into 2007 as the first tons shipped to City in 2007. The price of such coal
shall be the current price as of December 31, 2006 until the full 6.1 million
tons are taken.
III
Effective January 1, 2001, Article 4.2 "Right of First Refusal" shall be
amended in its entirety as follows and subsequently suspended due to Turris
having all required tons.
4.2 Right of First Refusal. The price for deliveries of quantities in
excess of the Requirements as defined in Article 4.1 shall be the Base Price per
ton, adjusted as of the delivery date, or such other price as the parties
mutually agree. If the parties cannot agree upon a price for such coal then
before committing to purchase such additional coal from another supplier, the
City shall, give Turris the option to supply such coal as follows:
City will provide 45 days notice to Turris prior to the intended
commencement of deliveries, of its intent to purchase spot coal during any of
the six two-month intervals in a Contract Year (i.e., January-February,
March-April, etc.). Such notice will include certification to Turris of the
price and the right of first refusal price. The right of first refusal price
shall be equal to the comparable cost to City for the price of such spot coal to
be delivered. The right of first refusal price shall be determined on a cost per
million BTU delivered to the City basis, including adjustments for: 1) heat
content (based upon dollars per million BTU delivered to City), 2) sulfur
content (based upon the then current TradeSpark SO2 Market Price Index for
sulfur dioxide emission allowances or such other Index agreed to by the City and
Turris), and 3) incremental operating costs such as, but not limited to, the
cost of adding limestone when burning a lower sulfur coal.
Turris shall have until 30 days prior to the beginning of any such
two-month interval to accept the right of first refusal price and deliver such
coal. If during any Contract Year, City buys spot coal under this provision and
does not purchase its Requirements pursuant to Article 4.1 City will pay Turris
the Base Price per ton, adjusted as of December 31 of the year in which such
Requirements were not met, for all Requirements tons not delivered, and title to
such undelivered coal shall pass to the City. These tons shall be the first tons
shipped in the subsequent year.
IV
Article 4.3 entitled "Quantity/Fixed Cost Adjustment" shall be amended in
its entirety as follows and subsequently suspended due to Turris having all
required tons.
Page 2 of 7
<PAGE>
AMENDMENT TO CONTRACT FOR SALE AND PURCHASE OF COAL
Effective Date January 1, 2001
4.3 Quantity/Fixed Cost Adjustment. As consideration for anticipated
deviations from the Base Quantities specified in the Contract dated July 1,
1980, and in addition to all other price adjustments hereunder, a price
adjustment ("Quantity/Fixed Cost Adjustment") shall be added to, or deducted
from, the Base Price per ton, according to the following table:
0 to 700,001 to 800,001 to 900,001 to
Contract Year 700,000 Tons 800,000 Tons 900,000 Tons 950,000 Tons
--------------------- ------------ ------------- ------------- -------------
2001 and thereafter - Add $0.532 Deduct $1.064 Deduct $1.595 Deduct $2.124
Dallman units
0 to 100,001 to 125,001 to
Contract Year 100,000 Tons 125,000 Tons 150,000 Tons
--------------------- ------------ ------------ --------------
2001 and thereafter - Add $0.482 Deduct $.643 Deduct $ 1.285
Lakeside units
The Quantity/Fixed Cost adjustment amounts specified in this Article 4.3
shall not be subject to the adjustment provisions of Article 7.1. However, from
time to time, and at any time, when the Base Price is redetermined pursuant to
Article 7.2., Price Redetermination, the amounts specified in this Article 4.3
above will be increased or decreased by the same percentages as the then
redetermined Base Price changes from $21.50 per ton (Dallman) or $19.50 per ton
(Lakeside).
V
Article 4.4 entitled "Additional Tons", is deleted in its entirety.
VI
In Article 7, entitled "PRICE", Article 7.1, and Articles 7.1.1 through
7.1.6 shall be amended in their entireties to read as follows:
7.1. Determination.
a) The delivered price of the coal F.O.B. mine for use in all Dallman
units shall be the Base Price of $21.50 per ton (Dallman Base Price) adjusted as
of the Delivery Date, in accordance with the following provisions of this
Article 7.1. The delivered price of the coal F.O.B. mine for use in all Lakeside
units beginning January 1, 2002, shall be the Base Price of $19.50 per ton
(Lakeside Base Price) adjusted as of the Delivery Date, in accordance with the
following provisions of this Article 7.1. Each adjustment (except the
adjustments in Articles 7.1.4, 7.1.5, 7.1.10 and 7.1.11) of the Base Price shall
be made independently of each other adjustment thereof; and each adjustment
under this Article 7.1 shall be calculated to the nearest 0.01 of one cent and
rounded to the nearest 0.10 of one cent, or, if there is no nearest 0.10, to the
nearest even 0.10 of one cent. The failure of the parties to agree on price
adjustments as hereinafter set forth shall in no way relieve either party of its
respective obligations of performance under this Contract.
b) The Base Price consists of the following price components for all tons
delivered for use in the Dallman units:
Page 3 of 7
<PAGE>
AMENDMENT TO CONTRACT FOR SALE AND PURCHASE OF COAL
Effective Date January 1, 2001
ARTICLE # PRICE COMPONENTS FOR DALLMAN TONS PER TON
--------------------------------------------------------------------------------
7.1.1.a Labor $8.045
7.1.2.a Mine Roof Bolts $1.000
7.1.2.b Other Materials and Supplies $4.150
7.1.2.c Power $1.000
7.1.3 Capital $1.805
7.1.4.a Taxes - Property Plant and Equipment $0.158
7.1.4.b Taxes - Federal Reclamation Fee $0.145
7.1.4.c Taxes - Black Lung $0.906
7.1.5 Royalty $0.700
7.1.6.a Return on Capital, Income Taxes and Indirect Costs $2.150
7.1.6.b Fixed $1.441
--------------------------------------------------------------------------------
DALLMAN BASE PRICE $21.500
--------------------------------------------------------------------------------
c) The Base Price for tons used in the Lakeside units was determined
utilizing a price of $170 per allowance for sulfur dioxide emission allowances
and consists of the following price components:
ARTICLE # PRICE COMPONENTS FOR LAKESIDE TONS PER TON
--------------------------------------------------------------------------------
7.1.1.a Labor $7.207
7.1.2.a Mine Roof Bolts $0.907
7.1.2.b Other Materials and Supplies $3.760
7.1.2.c Power $0.907
7.1.3 Capital $1.638
7.1.4.a Taxes - Property Plant and Equipment $0.158
7.1.4.b Taxes - Federal Reclamation Fee $0.145
7.1.4.c Taxes - Black Lung $0.822
7.1.5 Royalty $0.700
7.1.6.a Return on Capital, Income Taxes and Indirect Costs $1.949
7.1.6.b Fixed $1.307
--------------------------------------------------------------------------------
BASE PRICE $19.50
--------------------------------------------------------------------------------
d) Other Coal Price. The F.O.B. mine price per ton for all coal purchased
from Exxon for delivery to City during calendar year 2001 shall be fixed at
$22.00 per ton.
7.1.1. Labor.
a) The Dallman & Lakeside Base Prices, respectively, shall be increased or
decreased by an amount calculated as follows: multiply $8.045 per ton (Dallman)
or $7.207 per ton (Lakeside) by the percentage change in the average cost per
hour for hourly workers and salaried employees on the Delivery Date, determined
in accordance with the Manning Table which is Exhibit C to this Contract, from
$43.030 per hour (such average wage rate as of January 2001). The weighted
average hourly cost for salaried employees at the Mining Area shall be adjusted
by the percentage change in such cost for hourly workers. The parties to this
Contract recognize that the purpose of the Manning Table is to periodically
recalculate the weighted average hourly cost for hourly workers and salaried
employees, and that it does not necessarily reflect the number of persons at the
Mine at any given time. The number of persons used in the Manning Table is based
upon the collective bargaining agreement between the United Mine Workers of
America (UMWA) and the Bituminous Coal Operators' Association (BCOA) in effect
in January 2001 and will always be based on such collective bargaining agreement
as is in effect on the Delivery Date unless: (i) Turris becomes subject to a
bargaining agreement other than the bargaining
Page 4 of 7
<PAGE>
AMENDMENT TO CONTRACT FOR SALE AND PURCHASE OF COAL
Effective Date January 1, 2001
agreement between the UMWA and the BCOA, in which case the Manning Table will be
based on Turris' bargaining agreement; or (ii) a collective bargaining agreement
between the UMWA and the BCOA ceases to exist or the UMWA ceases to represent
coal mine workers in Central Illinois, in either case the Manning Table shall be
changed by Turris and based on another representative collective bargaining
agreement.
b) Intentionally omitted.
c) Whenever the collective bargaining agreement being used as the basis
for the Manning Table in effect on the Delivery Date includes a labor or
labor-related cost expressed on a per-ton basis and such cost is not otherwise
reflected in the Manning Table, Turris will add that cost as such to the price,
and thereafter increase or decrease the price by the amount by which that cost,
on the Delivery Date, is more or less than the amount originally added to the
price. Whenever the collective bargaining agreement being used as the basis for
the Manning Table in effect on the Delivery Date excludes a labor or
labor-related cost expressed on a per-ton basis and such cost is reflected in
the Manning Table, Turris will subtract that cost as such from the price, and
thereafter decrease or increase the price by the amount by which that cost, on
the Delivery Date, is more or less than the amount originally subtracted from
the price. If the addition or subtraction of such per-ton cost results in a
duplication of any cost component or reduction of the price then in effect under
Articles 7.1.1 .a, that cost component or reduction of the price shall be
adjusted as required to eliminated such duplication.
7.1.2. Materials, Supplies and Power.
a) Mine Roof Bolts. The Base Price shall be increased or decreased by an
amount calculated as follows: multiply $1.000 per ton (Dallman) or $.907 per ton
(Lakeside) by the percentage change in the Producer Price Index for Bolts, Nuts,
Screws, Rivets, and Washers (BLS Code 1081), as of the Delivery Date pursuant to
Article 7.1.8, from 127.9 (such final Index for January 2000).
b) Other Materials and Supplies. The Base Price shall be increased or
decreased by an amount calculated as follows: multiply $4.150 per ton (Dallman)
or $3.760 per ton (Lakeside) by the percentage change in the Producer Price
Index for Underground Mining Machinery and Equipment (BLS Code 1192.01), as of
the Delivery Date pursuant to Article 7.1.8, from 166.2 (such final Index for
January 2000).
c) Power. The Base Price shall be increased or decreased by an amount
calculated as follows: multiply $1.000 per ton (Dallman) or $.907 per ton
(Lakeside) by the percentage change in the total per kilowatt hour cost of
electricity, as of the Delivery Date, from 4.51 cents per kilowatt hour (such
cost as of January 2001). This cost per kilowatt hour is for delivered electric
power to the surface facilities to be supplied by the appropriate electrical
utility certified to serve the Mine, and is based on Turris' actual cost of
electricity as determined from the invoices Turris receives from its electrical
utility. If Turris is not taking electricity from an electric supplier as
defined under the Electric Supplier Act, Turris and City agree to meet to
discuss the power adjustment calculation.
7.1.3. Capital Costs. The Base Price shall be increased or decreased by an
amount calculated as follows: multiply $1.805 per ton (Dallman) or $1.638 per
ton (Lakeside) by the percentage change in the Producer Price Index for
Underground Mining Machinery and Equipment (BLS Code 1192.01), as of the
Delivery Date pursuant to Article 7.1.8, from 166.2 (such final Index for
January 2000).
7.1.4. Taxes.
a) The respective Base Prices include $0.158 per ton for all federal,
state or local taxes or fees, (the total of such taxes and fees as of January
2001) excluding income taxes, Black Lung Tax and the Federal Reclamation Fee.
The Base Price shall be increased or decreased by the same amount by which any
federal, state or local taxes or fees (excluding income taxes, Black Lung Tax
and the Federal Reclamation Fee) applicable to the Mine or the coal delivered
hereunder, including but not limited to all
Page 5 of 7
<PAGE>
AMENDMENT TO CONTRACT FOR SALE AND PURCHASE OF COAL
Effective Date January 1, 2001
severance, ad valorem, sales, use, value added or other excise taxes (including
the Illinois Retail Occupation Tax, if applicable) which Turris is required to
pay on coal delivered hereunder as in effect on the Delivery Date, total more or
less than $0.158 per ton. In determining taxes payable, effect shall be given to
all price adjustment.
b) The respective Base Prices shall be increased or decreased by the same
amount by which the Federal Reclamation Fee pursuant to the Surface Mine Control
and Reclamation Act of 1977, as of the most recent completed return in effect on
the Delivery Date, is more or less than $0.145 per ton (such fee as of the
fourth quarter 2000).
c) The respective Base Prices shall be increased or decreased by the same
amount by which the Black Lung Tax pursuant to the Black Lung Benefits Act of
1977, as in effect on the Delivery Date, is more or less than $0.906 per ton
(Dallman) or $.822 per ton (Lakeside) (such tax as of January 2001).
d) Depletion Allowance.
i) The respective Base Prices, as adjusted as of the Delivery Date, shall
be increased or decreased by one-half the number of percentage points by which
the effective rate of the gross depletion allowance applicable to coal for
United States Income Tax purposes decreases or increases, as applicable, from
the rate in effect on January 1, 2001. For example, if the effective rate of the
depletion allowance is 8.5%, and this is decreased by one percent to 7.5%, the
Base Price shall be increased by one-half of one percent (0.5%); or if the
effective rate of the depletion allowance is increased by one percent to 9.5%,
the Base Price shall be decreased by one-half of one percent (0.5%).
ii) The provision in Article 7.1.4.d is suspended and of no force or
effect during the period from January 1, 2001 until the next subsequent
Effective Date pursuant to a price redetermination under Article 7.2 of this
Contract. At such time, the effective rate of the depletion allowance will be
reset to the rate then in effect.
7.1.5. Royalty. The respective Base Prices shall be increased or decreased
by the same amount by which gross royalty payable on the Delivery Date on the
coal delivered under this Contract is more or less than $0.700 per ton (such
average for this reopener period). Gross royalty payable will include: (a)
amounts payable on tons sold and purchased, including Turris' fee properties at
the generally prevailing royalty rate negotiated in the area at the time of
acquisition and (b) amounts equal to the recovery of previously paid advance
royalty. In determining gross royalty payable, effect shall be given to all
price adjustments.
7.1.6.
a) Return of Capital, Income Tax and Indirect Costs. The Base Price shall
be increased or decreased by an amount calculated as follows: multiply $2.150
per ton (Dallman) or $1.949 per ton (Lakeside) by the percentage change in the
Department of Commerce, Bureau of Economic Analysis, Implicit Price Deflator for
the Gross National Product, as of the Delivery Date, pursuant to Article 7.1.8,
from 106.07 (such final Index for January 2000).
b) Fixed Costs.
i) The Base Price includes a component of $1.441 per ton (Dallman)
or $1.307 per ton (Lakeside) which shall not be subject to adjustment for the
effect of inflation or deflation, but shall be included in the price for
purposes of calorific and sulfur price adjustments pursuant to Articles 7.1.10
and 7.1.11, respectively.
ii) The $1.441 and the $1.307 fixed components in i) above
represents 6.7% of the total respective Base Prices redetermined as of the
January 1, 2001 Effective Date.
7.1.8. Indexes. The following paragraph shall be incorporated into Article
7.1.8 and shall become part of the Contract.
Page 6 of 7
<PAGE>
AMENDMENT TO CONTRACT FOR SALE AND PURCHASE OF COAL
Effective Date January 1, 2001
Each adjustment in Articles 7.1.2, 7.1.3, and 7.1.6 will lag the indexes
used for price adjustments by 12 months from the Effective Date, i.e. for the
Effective Date January 1, 2001 the index for January 2000 will be used. For
February 2001 deliveries the index for February 2000 will be used, etc.
7.2. Price Redetermination. Both parties agree to extend the minimum
effective period for this price redetermination from three (3) years to six (6)
years thereby waiving their right to request a redetermination until July 4,
2006 (180 days preceding the Effective Date), pursuant to Article 7.2. Effective
with the next Effective Date the minimum length for a redetermination period
shall once more be three (3) years.
VII
The intent of this Amendment to the Contract is to amend only those
provisions that are herein specified; and, except as herein specifically
amended, all the terms, conditions, and provisions of the Contract, as amended,
including the contingency agreements entered into in November, 1984, shall
remain the same. The defined terms used herein have the same meaning as those in
the Contract and are incorporated herein by reference.
This Amendment shall be fully binding upon and effective as to the
interest of each of the parties hereto and shall be binding upon and inure to
the benefit of the respective successors and assigns of the parties hereto.
IN WITNESS WHEREOF, the parties have executed in duplicate this Amendment
to Contract for Sale and Purchase of Coal, which shall be effective as of
January 1, 2001.
Turris Coal Company
Attest: /s/ Tony Harris By: /s/ Roger Dennison
-------------------- ------------------------
City of Springfield For City
Water, Light & Power
Attest: /s/ Norma Graves By: /s/ Karen Hasaia
-------------------- ------------------------
Page 7 of 7
<PAGE>
ICG, LLC
2000 Ashland Drive
Ashland, KY 41101
October 8, 2004
VIA FACSIMILE AND U. S. MAIL
Mr. William Murray
Springfield City Water light & Power
800 East Monroe Street
4th Floor Municipal Building
Springfield, IL 62757
RE: CONTRACT FOR SALE AND PURCHASE OF COAL DATED JULY 1, 1980, AS AMENDED,
BETWEEN CITY OF SPRINGFIELD, ILLINOIS ON BEHALF OF CITY WATER LIGHT AND
POWER AND TURRIS COAL COMPANY (AS ASSIGNED BY SHELL OIL COMPANY OCTOBER
16, 1980)
Pursuant to Order of the Bankruptcy Court for the Eastern District of Kentucky,
Ashland Division, in Case No. 02 - 14261, Horizon Natural Resources Company, et
al., jointly administered, the captioned contract was assumed and assigned to
ICG ILLINOIS, LLC in accordance with the Third Amended Plan of Reorganization
effective October 1, 2004.
All future correspondence, notifications, etc., with respect to the contract
should be directed to ICG, LLC, attention Vice President - Sales, at 2000
Ashland Drive, Ashland, KY 41101. If you have any questions, please contact me
at (606) 920 - 7420. Thank you for your attention to this matter.
Sincerely,
/s/ Bud Runyon
Bud Runyon
Vice President Sales
Cc: Jim Ketron
Kyle Young