Due to the volatility in commodity pricing of key materials used to manufacture transformers, Pacific Crest Transformers, Inc. (“PCT”) has developed a Price Adjustment Plan as described herein. The Price Adjustment Plan will serve to equitably share the risk of future commodity price volatility both for PCT’s customers and for PCT, to the extent reasonably possible and consistent with sound commercial business practices.

When a customer requests the price on a quotation or the price on an accepted order not yet released for production to remain valid for an extended period of time, PCT will invoke its Price Adjustment Plan whereby a commodity price adjustment index is calculated and applied to maintain price validity during such extended periods.

The price adjustment index has been created based upon the indices of the six (6) main commodities used to produce transformers: 1) Copper; 2) Insulating Fluids; 3) Grain Oriented Steel (“GOS”), e.g. core steel; 4) Mild Steel; 5) Aluminum; and, 6) Energy. The price adjustment index will be maintained and updated monthly by PCT and published on PCT’s web site. The price adjustment index values will reflect the prior month’s commodity price points. The weighting factor of each commodity used to produce transformers will be updated annually.

PCT uses the recognized data bases of the London Metals Exchange (LME) and the Energy Information Administration (EIA) from which to draw the individual commodity indices used in the Price Adjustment Plan.

When a customer requests that PCT maintain its price validity for an extended period outside customary validity limits, the corresponding quotation or the corresponding order acceptance will declare the price adjustment index value at the time of quotation (Iq) or at the time of order acceptance (Io).

As a prerequisite of acceptance by PCT, customer’s purchase order must expressly acknowledge and accept the methodology of PCT’s Price Adjustment Plan as described herein when placing an order with extended price validity.

Price Adjustment Plan methodology:

Ps = Pq (Is / Iq) or Ps = Po (Is / Io)

Where:

Ps = Final invoiced price at time of shipment, e.g. as adjusted by the price adjustment index
Pq = Price at the time of quotation
Po = Price at the time of order acceptance
Is = Price adjustment index value at time of shipment
Iq = Price adjustment index value at time of last valid quotation
Io = Price adjustment index value at time of order acceptance

2015

Dec – .971
Nov – .999
Oct – 1.035
Sept – 1.051
August – 1.029
July – 1.071
June – 1.115
May – 1.0129
April – 1.102
March – 1.083
Feb. – 1.094
Jan – 1.097

2014

Dec – 1.165
Nov – 1.235
Oct – 1.270
Sept. – 1.309
Aug – 1.330
July – 1.346
June – 1.342
May – 1.336
April – 1.323
March – 1.311
Feb – 1.336
Jan – 1.318