Exhibit 10.7
CONFIDENTIAL TREATMENT INTERNATIONAL STEEL
GROUP INC HAS REQUESTED MARKED PORTIONS OF
THIS DOCUMENT BE ACCORDED CONFIDENTIAL
TREATMENT PURSUANT TO RULE 406 OF REGULATION
C PROMULGATED UNDER THE SECURITIES ACT OF
1933
PELLET SALE AND PURCHASE AGREEMENT
THIS AGREEMENT, entered into, dated and effective as of April 10, 2002
("Agreement"), by and among THE CLEVELAND-CLIFFS IRON COMPANY, an Ohio
corporation ("Iron"), CLIFFS MINING COMPANY, a Delaware corporation ("Mining"),
NORTHSHORE MINING COMPANY, a Delaware corporation ("Northshore"), NORTHSHORE
SALES COMPANY, an Ohio corporation ("Sales"; Iron, Mining, Northshore and Sales
being collectively referred to herein as "Cliffs"), INTERNATIONAL STEEL GROUP
INC., a Delaware corporation ("ISG"), ISG CLEVELAND INC., a Delaware
corporation, ("ISG Cleveland"), and ISG INDIANA HARBOR INC., a Delaware
corporation ("ISG Indiana Harbor"; ISG, ISG Cleveland and ISG Indiana Harbor
being collectively referred to herein as "Steel").
RECITALS
WHEREAS, Cliffs desires to sell to Steel and Steel desires to purchase
from Cliffs certain quantities of grades of iron ore standard pellets as
follows: (i) such grades of iron ore standard pellets being those produced at
the Empire Iron Mining Partnership iron ore pellet plant ("Empire Pellets"),
located in ▇▇▇▇▇▇, Michigan ("Empire Mine"); (ii) such grades of iron ore
standard pellets being those produced at the Northshore Mining Company iron ore
pellet plant ("Northshore Pellets"), located in Silver Bay, Minnesota
("Northshore Mine"); (iii) such grades of iron ore standard pellets being those
produced at the Hibbing Taconite Company Joint Venture iron ore pellet plant
("Hibbing Pellets"), located in Hibbing, Minnesota ("Hibbing Mine"); or (iv)
such other pellet grades as may be mutually agreed to by the parties hereto
(such Empire Pellets, Northshore Pellets, Hibbing Pellets, and other mutually
agreed upon pellets collectively being referred to herein as "Cliffs Pellets"),
all on the conditions contained herein.
NOW, THEREFORE, in consideration of the mutual covenants hereinafter
set forth, Cliffs and Steel agree as follows:
SECTION 1. DEFINITIONS.
The terms quoted in the above parentheses of the first introductory
paragraph of this Agreement and the WHEREAS clause, other terms quoted
throughout this Agreement, and the terms defined below in this Section 1 shall
have the meanings assigned to them for purposes of
this Agreement. Attached as Appendix I to this Agreement is a locator list of
all defined terms used throughout the Agreement.
(a) The words, "Steel's Annual Pellet Tonnage Requirements", as
used herein, shall mean for any year a tonnage amount equal to Steel's total
annual iron ore pellet tonnage requirements required for consumption in Steel's
iron and steel making facilities in any year at ISG Cleveland, located in
Cleveland, Ohio ("Cleveland Works") and at ISG Indiana Harbor, located in
Indiana Harbor, Indiana ("Indiana Harbor Works").
(b) The word "pellets", as used herein, shall mean iron-bearing
products obtained by the pelletizing of iron ore or iron ore concentrates,
suitable for making iron in blast furnaces.
(c) The word "ton", as used herein, shall mean a gross ton of
2,240 pounds avoirdupois natural weight.
(d) The words "net ton", as used herein, shall mean a ton of 2,000
pounds avoirdupois natural weight.
(e) The word "year", as used herein, shall mean a calendar year
commencing on January 1 and ending December 31.
(f) The words "shuttle tons", as used herein, shall mean pellets
which are destined for Cleveland Works deliveries, which are first unloaded from
vessel onto a dock which is not a Steel dock or a dock designated by Steel
pursuant to Section 8(a).
SECTION 2. SALE AND PURCHASE/TONNAGE.
During each of the years 2002 through 2016, and each year thereafter as
long as this Agreement remains in effect, Cliffs shall sell and deliver to Steel
and Steel shall purchase and receive from Cliffs and pay for a tonnage of Cliffs
Pellets which tonnage shall be equal to Steel's Annual Pellet Tonnage
Requirements for each such year.
SECTION 3. QUALITY.
(a) Cliffs Pellets when loaded for shipment will be consistent
with the typical specifications and analysis limits set forth in Exhibit 1.
(b) In the event the monthly average vessel analysis exceeds one
standard deviation as set forth in Exhibit 1, Cliffs will take such actions as
shall be necessary to achieve specification conformity. If specification
conformity cannot be achieved, Steel and Cliffs shall negotiate in good faith to
determine what actions or remedies, if any, are appropriate. If any two vessel
shipments made during any calendar month have analysis that exceeds the analysis
limits in the specifications set forth in Exhibit 1, Steel may refuse any
subsequent vessel shipments during that calendar month, and Steel shall not be
required to accept any subsequent shipments until Cliffs has taken action to
remedy the non-conformity so that future shipments will be within the analysis
limits. If more than two vessel shipments made during any calendar month have
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analysis that exceeds such limits, Cliffs and Steel shall negotiate an
appropriate cost adjustment (if any) for the cargoes in excess of the first
cargo that exceeded the analysis limits, based upon the additional costs (if
any) to Steel associated with the quality specifications in the additional
vessel shipments made during that calendar month that exceeded such analysis
limits.
(c) Shuttle tons from the Cleveland Bulk Terminal shall be sampled
and analyzed for the - 1/4" size fraction as they are being loaded into a vessel
for delivery to Steel's dock. Shuttle tons shall not have a significant increase
in the - 1/4" size fraction versus the non-shuttle tons delivered to the
Cleveland Works pursuant to Section 8(a). In the event that two shuttle tons
vessel shipments during any month display an increase in the - 1/4" size
fraction of [* * * *] or more versus non-shuttle delivered tons, Steel and
Cliffs shall meet to determine the cause of the significant increase and the
corrective action to reduce the significant increase. If a corrective action
cannot be implemented to reduce the - 1/4" size fraction below the [* * * *]
increase, then Steel and Cliffs shall meet to work out a good faith adjustment.
SECTION 4. NOTIFICATION AND NOMINATION.
(a) With respect to the tonnage of Cliffs Pellets to be purchased
by Steel for the year 2002, as provided in Section 2, on or before April 30 of
the current year, Steel shall notify Cliffs in writing of Steel's preliminary
tonnage of Steel's Annual Pellet Tonnage Requirements which Steel shall purchase
from Cliffs. Such notification shall include: (i) Steel's Annual Operating Plan
for the balance of the current year detailed by months, as such Annual Operating
Plan relates to Steel's planned monthly consumption of all pellets for such
year; (ii) the tonnage of Cliffs Pellets which Steel expects to purchase in the
current year from Cliffs; and (iii) Steel's planned monthly pellet consumption
for the first four months of the year 2003.
(b) With respect to the tonnage of Cliffs Pellets to be purchased
by Steel for each of the years 2003 through 2016, as provided in Section 2, on
or before November 1 of each of the years prior to the years above, Steel shall
notify Cliffs in writing of Steel's preliminary tonnage of Steel's Annual Pellet
Tonnage Requirements which Steel shall purchase from Cliffs. Such notification
shall include: (i) Steel's Annual Operating Plan for the following year detailed
by months, as such Annual Operating Plan relates to Steel's planned monthly
consumption of all pellets for such year ("Steel's AOP"); (ii) the tonnage of
Cliffs Pellets which Steel expects to purchase in the following year from
Cliffs; (iii) Steel's expected total pellet inventory as of December 31 for the
then current year; (iv) Steel's planned total pellet inventory on December 31
for the following year; and (v) Steel's planned monthly pellet consumption for
the first four months of the year which succeeds the following year.
(c) With respect to the tonnage of Empire Pellets, Northshore
Pellets and Hibbing Pellets which Cliffs will have available for sale to Steel
in 2002, on or before May 31, 2002, and in each succeeding year on or before
December 31 of each year prior to the years in Section 4(b) above, Cliffs shall
notify Steel in writing as to the tonnage of Empire Pellets, Northshore Pellets
and Hibbing Pellets Cliffs shall sell to Steel, which tonnage shall equal
Steel's Annual Pellet Tonnage Requirements for such year.
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(d) With respect to Steel's Annual Pellet Tonnage Requirements as
provided for in Sections 4(a) and 4(b) above, Steel shall notify Cliffs by the
15th day of each month for the year in determination: (i) Steel's actual
consumption of all pellets for the previous month, and (ii) Steel's planned
monthly consumption of all pellets for the balance of the year and the first
four months of the following year. In the first month's notice of each such
year, as provided for under this Section (d), Steel shall also advise Cliffs of
Steel's actual total pellet inventory as of December 31 for the previous year.
(e) If during the course of the year, Steel's Annual Pellet
Tonnage Requirements decrease from Steel's preliminary nomination provided
pursuant to Section 4(b) above, then the tonnage of Cliffs Pellets which Steel
shall purchase from Cliffs shall be reduced by an amount equal to the shortfall
of the actual pellet consumption versus the nominated pellet consumption. In
addition, Steel's Annual Pellet Tonnage Requirements shall not be modified so as
to change Steel's planned total pellet inventory at the end of the then current
year unless such modification is agreed to by Cliffs.
(f) If, during the course of the year, Steel's Annual Pellet
Tonnage Requirements increase from Steel's preliminary nomination provided
pursuant to Section 4(b) above, then Steel shall notify Cliffs in writing of any
such increase in Steel's Annual Pellet Tonnage Requirements. Cliffs shall advise
Steel in writing within fifteen (15) days of receipt of Steel's notice as to
Cliffs' ability to supply all or any portion of such increased tonnage, which
Cliffs shall sell and Steel shall purchase as provided for in Cliffs notice at
the contract prices provided for in this Agreement. In the event Cliffs cannot
supply any portion of such increased tonnage, Steel and Cliffs shall work
together to attempt to procure such additional tonnage for Steel.
(g) In each year after 2004, upon reasonable notification and by
mutual agreement, Steel may, for trial purposes, substitute up to 5% of Steel's
Annual Pellet Tonnage Requirements for Northshore Pellets and/or Empire Pellets
with another grade of Cliffs' produced pellets ("Substitute Pellets"). In the
event an additional cost is incurred by Cliffs in producing or delivering the
Substitute Pellets, then an appropriate price adjustment shall be made to the
contract price for the tonnage of Substitute Pellets.
SECTION 5. PRICE, ADJUSTMENTS AND [****].
(a) The price for the Cliffs Pellets, either currently at or to be
delivered to Steel's Cleveland Works or other dock area designated by Steel
pursuant to Section 8(a), shall be as follows: (i) for the year 2002, the
[* * * *] Northshore Pellets and Hibbing Pellets (which are currently located at
Steel's Cleveland Works blast furnace ore yard) sold by Cliffs and purchased by
Steel shall be [* * * *] per ton; (ii) the price for the [* * * *] Northshore
Pellets and Hibbing Pellets (which are currently located at the Lorain Pellet
Terminal, Lorain, Ohio) sold by Cliffs and purchased by Steel shall be [* * * *]
per ton; and (iii) except for the price [* * * *] as provided for the specific
Cliffs Pellets as described in Sections 5(a)(i) and 5(a)(ii) above, all other
Cliffs Pellets sold by Cliffs and purchased by Steel in the year 2002 shall have
a final year 2002 price of [* * * *] per iron unit (which at the expected
natural iron content of [* * * *] for Northshore pellets equals [* * * *] per
ton).
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(b) The price for the Cliffs Pellets, either currently at or to be
delivered to Steel's Indiana Harbor Works shall be as follows: (i) for the year
2002, the [* * * *] Empire Pellets (which are currently located at Steel's
Indiana Harbor Works blast furnace ore yard) sold by Cliffs and purchased by
Steel shall be [* * * *] per ton; and (ii) except for the price [* * * *] for
the specific Cliffs Pellets described in Section 5(b)(i) above, all other Cliffs
Pellets sold by Cliffs and purchased by Steel in the year 2002, shall have a
final year 2002 price of [* * * *] per iron unit (which at the expected natural
iron content of [* * * *] for Empire pellets equals [* * * *] per ton).
(c) The prices for the specific grades of Cliffs Pellets sold and
purchased in each of the years 2003 and thereafter for the Cleveland Works or
other dock area designated by Steel pursuant to Section 8(a), and the Indiana
Harbor Works shall be based on the 2002 base prices per iron unit as described
in Section 5(a) (iii) and 5(b)(ii) above ("2002 base prices per iron unit for
each of the Cleveland Works and the Indiana Harbor Works"), which 2002 base
prices per iron unit for each of the Cleveland Works and the Indiana Harbor
Works shall then be adjusted, up or down, in the year 2003 and each year
thereafter by an amount as determined in accordance with Section 5(d) below.
(d) In order to determine the adjusted prices to be paid each year
for the Cliffs Pellets, as provided for under Section 5(c), the 2002 base prices
per iron unit for each of the Cleveland Works and the Indiana Harbor Works and
each of the following respective year's then adjusted prices per iron unit for
each of the Cleveland Works and the Indiana Harbor Works shall be further
adjusted, up or down, each year for the year in determination as follows:
(1) Divide (x) the numerator, which is the amount by
which the [* * * *] for the calendar year in
determination changes (up or down) from the
immediately preceding calendar year's [* * * *]; by
(y) the denominator, which is the immediately
preceding calendar year's [* * * *], and multiply the
result obtained by [* * * *]; and
(2) Multiply the results determined in (1) above by the
preceding year's adjusted prices per iron unit for
each of the Cleveland Works and the Indiana Harbor
Works which will then equal the current year's price
adjustment per iron unit for each of the Cleveland
Works and the Indiana Harbor Works; and
(3) Add the result determined in (2) above to the
preceding year's adjusted price per iron unit for
each of the Cleveland Works and the Indiana Harbor
Works, which then will equal the current year's
adjusted prices per iron unit for each of the
Cleveland Works and the Indiana Harbor Works.
Those adjusted prices per iron unit for each of the Cleveland Works and
the Indiana Harbor Works shall then become the contract's year final price for
the Cliffs Pellets delivered to the Cleveland Works and the Indiana Harbor Works
for the year in determination, and shall be the starting base for determining
the following year's adjusted prices per iron unit for the Cleveland Works and
the Indiana Harbor Works.
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(e) The price for all tons sold by Cliffs to Steel shall be based
on actual natural iron content shipped. Notwithstanding the previous sentence,
payments for the years 2002 through 2004, as described in Section 6(a), shall be
based on actual natural iron content consumed by Steel.
(f) Attached as Exhibit 2 is an example of the adjustment formula
applying the provisions of Sections 5(c) and 5(d).
(g) (i) Beginning in 2003, an [* * * *] shall be made in each
year, wherein Cliffs shall pay Steel or Steel shall pay Cliffs, as the case may
be, if [* * * *] average annual [* * * *] for actual [* * * *] in any contract
year is [* * * *] or [* * * *]. The amount of the [* * * *] shall be determined
as follows:
(1) In any contract year in which [* * * *] average
[* * * *] for actual [* * * *] is [* * * *], Cliffs
shall pay Steel an amount equal to: (w) the amount
[* * * *], (x) multiplied by [* * * *], (y)
multiplied by the contract year's average weighted
pellet price per ton for the Cliffs Pellets consumed
by Steel, (z) multiplied by the total tons of Cliffs
Pellets which Steel consumed in the contract year.
(2) In any contract year in which [* * * *] average
[* * * *] for actual [* * * *] is [* * * *], Steel
shall pay Cliffs an amount equal to: (w) the amount
[* * * *] (x) multiplied by [* * * *], (y) multiplied
by the contract year's average weighted pellet price
per ton for the Cliffs Pellets consumed by Steel, (z)
multiplied by the total tons of Cliffs Pellets which
Steel consumed in the contract year.
(3) For the purpose of estimating the [* * * *], a
[* * * *] payment calculation shall be made by
[* * * *] following the end of each quarter, using
the formula provided for in Sections 5(g)(i)(1) and
5(g)(i)(2) above for each quarter. This calculation
(and payment, if any) shall be based on [* * * *]
average [* * * *] for actual [* * * *] for the
quarter and the pellet tonnage consumed by Steel in
that quarter. Within 30 days following each quarter
[* * * *] shall notify [* * * *] in writing of the
amount (if any) payable by Cliffs to Steel or Steel
to Cliffs, and a quarterly payment, if any, shall be
made by Cliffs to Steel or Steel to Cliffs, as the
case may be, within 45 days after the end of each
quarter.
(4) The final [* * * *] calculation shall be made after
the end of the year in accordance with Sections
5(g)(i)(1) and 5(g)(i)(2) above which will reflect
[* * * *] actual average annual [* * * *] for actual
[* * * *] for the full calendar year, and an
adjustment will be made to reflect any difference
between the actual year's [* * * *] and the quarterly
estimated payments that were made during the year.
Payment due, from either party, as a result of the
actual annual calculation shall be made by February
15 of the year following the contract year.
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(5) Attached as Exhibits 3 and 4 are examples of the
calculations applying the provisions of Sections
5(g)(i) and 5(g)(ii).
(ii) In the event that in any year [* * * *] annual total
[* * * *] are less than [* * * *] of [* * * *] total annual
[* * * *], then Cliffs and Steel agree to substitute another
[* * * *] for the [* * * *] which substituted [* * * *]
comprises an amount in excess of [* * * *] of [* * * *] total
annual [* * * *] in order to determine the [* * * *]. The
[* * * *] and [* * * *] which are used for the [* * * *], as
provided for in Section 5(g)(i) above, shall be adjusted as
follows: (i) the actual average [* * * *] of [* * * *]
substituted [* * * *] from the previous year, less (ii) the
[* * * *] from the previous year, (iii) with the difference
between (i) and (ii) above being added to both the [* * * *]
and the [* * * *] to determine the revised [* * * *] for the
substituted [* * * *] in order to determine the [* * * *].
SECTION 6. PAYMENTS AND ADJUSTMENTS.
(a) For the years 2002 through 2004 and for all tonnage delivered
through March 31, 2005, Steel shall pay Cliffs [* * * *], via wire transfer, an
amount to be equal to the result of: (i) Steel's planned pellet consumption for
the [* * * *] period beginning with the [* * * *], less (ii) the pellets which
Steel has in its inventory on [* * * *] for both the Cleveland Works and the
Indiana Harbor Works, (iii) with the difference between (i) and (ii) above being
multiplied by the appropriate estimated price per ton. The appropriate estimated
price per ton shall be calculated by multiplying the contract year's estimated
price per iron unit with Steel's estimated iron content of the Cliffs Pellets
being consumed during the following [* * * *] period.
(b) Beginning with vessel deliveries on April 1, 2005, Cliffs
shall invoice Steel for an amount based on the estimated prices per ton for the
contract year for [* * * *] pellet shipment deliveries [* * * *] to Steel's
Cleveland Works and Indiana Harbor Works with payment to be made by Steel to
Cliffs via wire transfer on the [* * * *] following the [* * * *] pellet
deliveries.
(c) Following each contract year, final adjustments and payments
shall be determined as follows:
(1) The adjustment for the actual average natural iron
content of Cliffs Pellets shall be determined by
Cliffs and verified in detail in writing to Steel by
an officer of Cliffs, such verification due no later
than January 31 of the year following a contract
year, and the payment from Cliffs to Steel or Steel
to Cliffs, as the case may be, shall be made by
February 15 of that year;
(2) The final [* * * *] shall be determined by [* * * *]
and verified in detail in writing to [* * * *] by an
officer of [* * * *], such verification due no later
than January 31 of the year following a contract
year, and payment from Cliffs to Steel or Steel to
Cliffs, as the case may be, shall be made by February
15 of that year; and
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(3) The adjustment to the contract year's price
identified pursuant to Section 5(d) shall be made by
[* * * *] by March 15 of the following year (using
the most recent final estimate of the [* * * *] which
shall be verified in writing by an officer of
[* * * *]. Cliffs shall issue an invoice or credit
memo, as the case may be, to Steel, and payment from
Cliffs to Steel or Steel to Cliffs, as the case may
be, shall be made by April 15 of that year.
(d) During each of the years 2002 through 2005, Cliffs shall have
the right to conduct a minimum of two pellet stockpile surveys each year at each
of the Cleveland Works and Indiana Harbor Works to verify (i) the tonnage of [*
* * *] which Steel has [* * * *] and (ii) the tonnage of [* * * *] currently [*
* * *] in stockpile at the Cleveland Works and the Indiana Harbor Works. In the
event that the pellet stockpile survey results vary by more than [* * * *]
(above or below) from [* * * *] (after taking into account actual iron units
shipped versus actual iron units consumed), then Cliffs shall issue an invoice
or credit memo, as the case may be, to Steel, for the amount of the difference
in the stockpile survey results that vary by more than [* * * *] above or below
[* * * *], and payment from Cliffs to Steel or Steel to Cliffs, as the case may
be, shall be made within 30 days following the pellet stockpile survey. If the
pellet stockpile survey results vary by [* * * *] or more (above or below) from
[* * * *] (after taking into account actual iron units shipped versus actual
iron units consumed), then Cliffs and Steel shall have an independent third
party conduct another pellet stockpile survey. The results of the independent
third party survey shall be final and Cliffs shall issue an invoice or credit
memo, as the case may be, to Steel, and payment from Cliffs to Steel or Steel to
Cliffs, as the case may be, shall be made within 30 days following the
independent third party's pellet stockpile survey.
(e) At their own expense, Cliffs and/or Steel shall have an annual
right to have the information and calculations relating to the contract price,
[* * * *], and adjustments verified by an independent third party auditor. In
the event Steel shall fail to make payment when due of all amounts, Cliffs, in
addition to all other remedies available to Cliffs in law or in equity, shall
have the right, but not the obligation, to withhold further performance by
Cliffs under this Agreement until all claims Cliffs may have against Steel under
this Agreement are fully satisfied.
(f) All payments shall be made in U.S. dollars.
SECTION 7. SAMPLING AND ANALYSES.
All pellet sampling procedures and analytical tests conducted on Cliffs
Pellets sold to Steel to demonstrate compliance with typical specifications and
analysis limits shall be performed on each pellet vessel shipment. Test methods
to be used shall be the appropriate ASTM or ISO standard methods published at
the time of testing or the customary procedures and practices, or any other
procedures and practices that may be mutually agreed to by Cliffs and Steel.
Steel may, at any time and from time to time through one or more authorized
representatives, and with prior notice to Cliffs be present during production,
loading, or to observe sampling and analysis of pellets being processed for
shipment to Steel.
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SECTION 8. DELIVERY, STORAGE AND TRANSFER OF OWNERSHIP.
(a) Cliffs shall deliver to Steel the annual tonnage of Cliffs
Pellets for the Cleveland Works to the Cleveland Work's blast furnace ore yard
or other vessel dock in the Cleveland, Ohio area that Steel designates. Steel
shall make dock storage space available so that Cliffs can deliver and have in
inventory in [* * * *] name up to [* * * *] tons of pellets at any time and
Steel will work to make more dock storage space available if practicable.
(b) Cliffs shall deliver to Steel the annual tonnage of Cliffs
Pellets for the Indiana Harbor Works to the Indiana Harbor Works' blast furnace
ore yard and Steel shall make dock storage space available so that Cliffs can
deliver and have in inventory in [* * * *] up to [* * * *] tons of pellets at
any time.
(c) Title, and all risk of loss, damage or destruction of Cliffs
Pellets shall transfer to Steel upon [* * * *] or upon [* * * *], as the case
may be.
SECTION 9. SHIPMENTS.
Shipments of Cliffs Pellets shall be in approximately equal amounts over the
nine month period of April through December each year during the term of this
Agreement to ensure an adequate amount of inventory to allow a working pellet
pile at Steel's blast furnace ore docks. Cliffs shall work to annually direct
ship a minimum of [* * * *] of Steel's pellet requirements for Steel's Cleveland
Works.
SECTION 10. WEIGHTS.
(a) Except as set forth in Section 10(b) below, vessel ▇▇▇▇ of
lading weight determined by certified railroad scale weights, certified belt
scale weights, or certified bin scale weights in accordance with the procedures
in effect from time to time at each of the loading ports shall be accepted by
the parties as finally determining the amount of Cliffs Pellets delivered to
Steel pursuant to this Agreement.
(b) Steel shall have the right to have a draft survey performed on
vessels by an independent third party contractor at the loading port (where the
pellets are first loaded into a vessel for shipment) at Steel's expense and
Steel shall afford Cliffs an opportunity to have a representative present by
providing Cliffs a minimum of two days' notice prior to having any draft survey
performed. If the vessel ▇▇▇▇ of lading weight is more than [* * * *] higher or
more than [* * * *] lower than the draft survey weight, then the draft survey
weight shall be the weight used in calculating the value of the cargo. In the
event that the variance is greater than [* * * *], Cliffs and Steel will
investigate and remedy the cause of the variance.
SECTION 11. EMPLOYMENT OF VESSELS.
Cliffs assumes the obligation for arranging and providing appropriate
vessels for the transportation of the Cliffs Pellets delivered by Cliffs to
Steel hereunder. Steel shall arrange for
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suitable pellet unloading facilities at the Cleveland Works and Indiana Harbor
Works blast furnace ore yards ports.
SECTION 12. WARRANTIES.
THERE ARE NO WARRANTIES, EXPRESS OR IMPLIED, WHICH EXTEND BEYOND THE
PROVISIONS OF THIS AGREEMENT, INCLUDING ANY WARRANTIES OF MERCHANTABILITY OR
FITNESS FOR INTENDED PURPOSE. All notices for substantial variance in
specifications of the Cliffs Pellets from the specifications and analysis limits
described in Exhibit 1 shall be given in writing delivered to Cliffs within
sixty (60) calendar days after completion of discharge of the Cliffs Pellets at
the Cleveland Works or Indiana Harbor Works blast furnace ore yards, or any
claim arising from any substantial variance shall be deemed waived by Steel.
Each party shall afford the other party prompt and reasonable opportunity to
inspect the Cliffs Pellets as to which any notice is given as above stated. No
claim will be entertained after the Cliffs Pellets have been consumed. The
Cliffs Pellets shall not be returned to Cliffs without prior written consent of
Cliffs. In no event shall Cliffs be liable for Steel's cost of processing, lost
profits, injury to good will or any other special or consequential damages.
SECTION 13. FORCE MAJEURE.
No party hereto shall be liable for damages resulting from failure to
produce, deliver or accept all or any of the Cliffs Pellets as described herein,
if and to the extent that such production, delivery or acceptance would be
contrary to or would constitute a violation of any regulation, order or
requirement of a recognized governmental body or agency, or if such failure is
caused by or results directly or indirectly from acts of God, war,
insurrections, interference by foreign powers, strikes, labor disputes, fires,
floods, embargoes, accidents, acts of terrorism, or uncontrollable delays at the
mines or either steel plant, on the railroads, docks or in transit, shortage of
transportation facilities, disasters of navigation, or other causes, similar or
dissimilar, that are beyond the control of the party charged with a failure to
deliver or to accept the Cliffs Pellets. A party claiming a force majeure shall
give the other party prompt notice of the force majeure, including the
particulars thereof and, insofar as known, the probable extent and duration of
the force majeure. To the extent a force majeure is claimed hereunder by a party
hereto, such shall relieve the other party from fulfilling its corresponding
agreement hereunder to the party claiming such force majeure, but only for the
period affected by and to the extent of the claimed force majeure, unless
otherwise mutually agreed to by the parties. The party that is subject to a
force majeure shall use commercially reasonable efforts to cure or remove the
force majeure event as promptly as possible to resume performance of its
obligations under this Agreement.
SECTION 14. NOTICES.
All notices, consents, reports and other documents authorized and
required to be given pursuant to this Agreement shall be given in writing and
either personally served on an officer of the parties hereto to whom it is given
or mailed, postage prepaid, or sent by telegram or facsimile addressed as
follows:
10
If to Cliffs:
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ - ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: Secretary
cc: Vice President-Sales
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
If to Steel:
▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
Attention: Vice President, Finance
and Administration
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
provided, however, that any party may change the address to which notices or
other communications to it shall be sent by giving to the other party written
notice of such change, in which case notices and other communications to the
party giving the notice of the change of address shall not be deemed to have
been sufficiently given or delivered unless addressed to it at the new address
as stated in said notice.
SECTION 15. TERM.
(a) The term of this Agreement shall commence as of April 10, 2002
and continue through December 31, 2016. Unless either party has given written
notice of termination to the other party by December 31, 2014 (two years prior
to termination), this Agreement shall continue on an annual basis after December
31, 2016 (original termination year) subject to subsequent termination by either
party upon not less than two years' prior written notification to the other
party, in which case the Agreement shall terminate at the end of the second
succeeding year.
(b) This Agreement shall remain valid and fully enforceable for
the fulfillment of obligations incurred prior to termination.
SECTION 16. AMENDMENT.
This Agreement may not be modified or amended except by an instrument
in writing signed by the parties hereto.
SECTION 17. MERGER, TRANSFER AND ASSIGNMENT.
(a) Steel shall not merge, consolidate or reorganize with any
person, partnership, corporation or other entity unless the surviving or
resulting person, partnership, corporation or other entity assumes in writing
all of Steel's obligations under this Agreement. Any obligations required to be
assumed by a surviving or resulting person, partnership, corporation or entity
in accordance with this Section 17(a) shall be limited to the Steel obligations
under this Agreement, and this Section 17(a) is not intended (i) to impose and
shall not be deemed to impose upon any
11
such surviving or resulting person, partnership, corporation or entity,
including Steel, any obligation with respect to any pellet requirements it may
have for any facility or facilities it owns or operates other than the Cleveland
Works and the Indiana Harbor Works, nor (ii) to allow the surviving or resulting
person, partnership, corporation or other entity to substitute any other pellet
tonnage available from any other pellet purchase or pellet equity commitment of
such surviving or resulting person, partnership, corporation or other entity in
order to satisfy the assumed obligations under this Agreement for the Cleveland
Works and Indiana Harbor Works.
(b) Steel shall not sell or transfer all or any of the blast
furnace operations at (i) the Cleveland Works, (ii) the Indiana Harbor Works, or
(iii) both the Cleveland Works and the Indiana Harbor Works to any other person,
partnership, corporation, joint venture or other entity ("Transferee") unless
the Transferee assumes in writing all of Steel's obligations under this
Agreement, as such obligations relate to the Cleveland Works and/or the Indiana
Harbor Works being sold or transferred. Any obligations required to be assumed
by a Transferee in accordance with this Section 17(b) shall be limited to the
Steel obligations under this Agreement relating to the particular facility or
facilities sold or transferred. This Section 17(b) is not intended (i) to impose
and shall not be deemed to impose upon any such Transferee any obligation with
respect to any pellet requirements such Transferee may have for any facility or
facilities such Transferee owns or operates other than the Cleveland Works
and/or the Indiana Harbor Works, nor (ii) to allow such Transferee to substitute
any other pellet tonnage available from any other pellet purchase or pellet
equity commitment of such Transferee in order to satisfy the assumed obligations
under this Agreement.
(c) Steel shall not assign its rights or delegate its obligations
under this Agreement except as provided in Section 17(a) or 17(b).
(d) Cliffs shall not merge, consolidate or reorganize with any
person, partnership, corporation or other entity unless the surviving or
resulting person, partnership, corporation or other entity assumes in writing
all of Cliffs' obligations under this Agreement. Cliffs shall not sell or
transfer all or substantially all of its iron ore business to any other person,
partnership, corporation, joint venture or other entity ("Cliffs Transferee")
unless the Cliffs Transferee assumes in writing all of Cliffs' obligations under
this Agreement.
(e) Cliffs shall not assign its rights or delegate its obligations
under this Agreement except as provided in Section 17(d).
(f) All the covenants, stipulations and agreements herein
contained shall inure to the benefit of and bind the parties hereto and their
respective successors, transferees and permitted assigns, and any of the
latter's subsequent successors, transferees and permitted assigns.
SECTION 18. WAIVER.
No waiver of any of the terms of this Agreement shall be valid unless
in writing. No waiver or any breach of any provision hereof or default under any
provisions hereof shall be deemed a waiver of any subsequent breach or default
of any kind whatsoever.
12
SECTION 19. CONFIDENTIALITY.
(a) Cliffs and Steel acknowledge that this Agreement contains
certain pricing, adjustment and term provisions which are confidential,
proprietary or of a sensitive commercial nature and which would put Cliffs or
Steel at a competitive disadvantage if disclosed to the public, including
without limitation, Sections 3(b) and (c), Section 5, Section 6 and all of the
Schedules and Exhibits hereto ("Confidential Information"). Cliffs and Steel
agree that all provisions of this Agreement shall be kept confidential and,
without the prior written consent of the other party, shall not be disclosed to
any party not a party to this Agreement except as required by law or
governmental or judicial order and except that disclosure of the existence of
this Agreement shall not be precluded by this Section 19.
(b) If either party is required by law or governmental or judicial
order or receives legal process or court or agency directive requesting or
requiring disclosure of any of the Confidential Information contained in this
Agreement, such party will promptly notify the other party prior to disclosure
to permit such party to seek a protective order or take other appropriate action
to preserve the confidentiality of such Confidential Information. If either
party determines to file this Agreement with the Securities and Exchange
Commission ("Commission") or any other federal, state or local governmental or
regulatory authority, or with any stock exchange or similar body, such
determining party will use its best efforts to obtain confidential treatment of
such Confidential Information pursuant to any applicable rule, regulation or
procedure of the Commission and any applicable rule, regulation or procedure
relating to confidential filings made with any such other authority or exchange.
If the Commission (or any such other authority or exchange) denies such party's
request for confidential treatment of such Confidential Information, such party
will use its best efforts to obtain confidential treatment of the portions
thereof that the other party designates. Each party will allow the other party
to participate in seeking to obtain such confidential treatment for Confidential
Information.
SECTION 20. GOVERNING LAW.
This Agreement shall in all respects, including matters of
construction, validity and performance, be governed by and be construed in
accordance with the laws of the State of Ohio.
SECTION 21. REPRESENTATIONS AND WARRANTIES.
(a) Steel represents and warrants to Cliffs that (i) the execution
and delivery of this Agreement by Steel and the performance of its obligations
hereunder have been duly authorized by all requisite corporate action, (ii)
neither the execution and delivery of this Agreement, nor the performance of its
obligations hereunder by Steel shall, or after the lapse of time or giving of
notice shall, conflict with, violate or result in a breach of, or constitute a
default under the certificate of incorporation or bylaws of Steel or any law,
statute, rule or regulation applicable to it, or conflict with, violate or
result in a breach of or constitute a default under the material agreement to
which it is a party or by which it or any of its properties is bound, or any
judgment, order, award or decree to which Steel is a party or by which it is
bound, or require any approval, consent, authorization or other action by any
court, governmental authority or regulatory body or
13
any creditor of Steel or any other person or entity, and (iii) this Agreement
constitutes a valid and binding obligation of Steel and is enforceable against
Steel in accordance with its terms.
(b) Cliffs represents and warrants to Steel that: (i) the
execution and delivery of this Agreement by Cliffs and the performance of its
obligations hereunder have been duly authorized by all requisite corporate
actions, (ii) neither the execution and delivery of this Agreement nor the
performance of its obligations hereunder by Cliffs shall, or after the lapse of
time or giving of notice shall, conflict with, violate or result in a breach of,
or constitute a default under the certificate of incorporation or bylaws of
Cliffs or any law, statute, rule or regulation applicable to it, or conflict
with, violate or result in the breach of or constitute a default under any
material agreement to which it is a party or by which it or any of its
properties is bound, or any judgment, order, award or decree to which Cliffs is
a party or by which it is bound, or require any approval, consent, authorization
or other action by any court, governmental authority or regulatory body or any
creditor of Cliffs or any other person or entity, and (iii) this Agreement
constitutes a valid and binding obligation of Cliffs and is enforceable against
Cliffs in accordance with its terms.
SECTION 22. COUNTERPARTS.
This Agreement may be executed in one or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
14
IN WITNESS WHEREOF, the parties have executed this Agreement effective
as of April 10th, 2002.
THE CLEVELAND-CLIFFS IRON COMPANY INTERNATIONAL STEEL GROUP INC
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ /s/ ▇▇▇▇▇▇ ▇▇▇▇
--------------------------- --------------------------------------------
Vice President Vice President
CLIFFS MINING COMPANY ISG CLEVELAND INC.
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ /s/ ▇▇▇▇▇▇ ▇▇▇▇
--------------------------- --------------------------------------------
Vice President Vice President
NORTHSHORE MINING COMPANY ISG INDIANA HARBOR INC
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ /s/ ▇▇▇▇▇▇ ▇▇▇▇
--------------------------- --------------------------------------------
Vice President Vice President
NORTHSHORE SALES COMPANY
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
---------------------------
Vice President
15
CONFIDENTIAL MATERIAL HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION. ASTERISKS DENOTE SUCH OMISSION.
APPENDIX 1
PAGE
2002 base prices per iron unit for each of the Cleveland Works and the Indiana Harbor Works.................... 5
Agreement...................................................................................................... 1
Cleveland Works................................................................................................ 2
Cliffs......................................................................................................... 1
Cliffs Pellets................................................................................................. 1
Cliffs Transferee.............................................................................................. 12
Commission..................................................................................................... 13
Confidential Information....................................................................................... 13
Empire Mine.................................................................................................... 1
Empire Pellets................................................................................................. 1
Hibbing Mine................................................................................................... 1
Hibbing Pellets................................................................................................ 1
Indiana Harbor Works........................................................................................... 2
Iron........................................................................................................... 1
ISG............................................................................................................ 1
ISG Cleveland.................................................................................................. 1
ISG Indiana Harbor............................................................................................. 1
Mining......................................................................................................... 1
net ton........................................................................................................ 2
Northshore..................................................................................................... 1
Northshore Pellets............................................................................................. 1
pellets........................................................................................................ 2
[* * * *]...................................................................................................... 3
Sales.......................................................................................................... 1
shuttle tons................................................................................................... 2
[* * * *]...................................................................................................... 6
Steel.......................................................................................................... 1
Steel's Annual Pellet Tonnage Requirements..................................................................... 2
Steel's AOP.................................................................................................... 3
Substitute Pellets............................................................................................. 4
ton............................................................................................................ 2
Transferee..................................................................................................... 12
year........................................................................................................... 2
i
CONFIDENTIAL MATERIAL HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION. ASTERISKS DENOTE SUCH OMISSION.
EXHIBIT 1
CLEVELAND-CLIFFS STANDARD ACID PELLET TYPICAL ANALYSIS
AS LOADED TO VESSEL FOR SHIPMENT
EMPIRE MINE NORTHSHORE MINE
Report [* * * *]
Frequency Typical [* * * *] [* * * *] Typical [* * * *] [* * * *]
MOISTURE V [* * * *] [* * * *]
A. DRY CHEMICAL ANALYSIS
Total Iron V [* * * *] [* * * *]
SiO2 V [* * * *] [* * * *] [* * * *] [* * * *] [* * * *] [* * * *]
AI2O3 V [* * * *] [* * * *]
CaO V [* * * *] [* * * *]
MgO V [* * * *] [* * * *]
Mn V [* * * *] [* * * *]
Phos V [* * * *] [* * * *] [* * * *] [* * * *] [* * * *] [* * * *]
S SA [* * * *] [* * * *]
TiO2 SA [* * * *] [* * * *]
Na2O V [* * * *] [* * * *]
K2O V [* * * *] [* * * *]
B. SIZING, WT. %
% + 1/2" V [* * * *] [* * * *]
% - 1/2" x + 3/8" V [* * * *] [* * * *]
% - 3/8" x + 1/4" V [* * * *] [* * * *]
% - 1/4" V [* * * *] [* * * *] [* * * *] [* * * *] [* * * *] [* * * *]
% - 28 mesh
C. TUMBLE TEST
% + 1/4" before tumble V [* * * *] [* * * *]
% + 1/4" after tumble V [* * * *] [* * * *] [* * * *] [* * * *] [* * * *] [* * * *]
Q Index V [* * * *] [* * * *]
Tumble Index - 28 mesh V [* * * *] [* * * *]
D. COMPRESSION TEST (1)
Minus 1/2" by plus 7/16"
Minus 1/2" by plus 3/8" SA [* * * *] V[* * * *]
% -300 lbs. V[* * * *]
CONFIDENTIAL MATERIAL HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION. ASTERISKS DENOTE SUCH OMISSION.
HIBBING TACONITE
[Analysis
Typical [* * * *] Limits]
MOISTURE [* * * *]
A. DRY CHEMICAL ANALYSIS
Total Iron [* * * *]
SiO2 [* * * *] [* * * *] [* * * *]
AI2O3 [* * * *]
CaO [* * * *]
MgO [* * * *]
Mn [* * * *]
Phos SA [* * * *]
S [* * * *]
TiO2 [* * * *]
Na2O [* * * *]
K2O [* * * *]
B. SIZING, WT. %
% + 1/2" [* * * *]
% - 1/2" x + 3/8" [* * * *]
% - 3/8" x + 1/4" [* * * *]
% - 1/4" [* * * *] [* * * *] [* * * *]
% - 28 mesh
C. TUMBLE TEST
% + 1/4" before tumble [* * * *]
% + 1/4" after tumble [* * * *] [* * * *] [* * * *] Q Index [* * * *] Tumble
Index - 28 mesh [* * * *]
D. COMPRESSION TEST (1)
Minus 1/2" by plus 7/16" V [* * * *]
Minus 1/2" by plus 3/8"
% -300 lbs. V [* * * *]
TYPICAL ANALYSIS - 2002 EXPECTED AVERAGE CARGO ANALYSIS
[* * * *] - [* * * *]
[* * * *] - [* * * *]
LETTER "V" DENOTES - ANALYSIS TO BE PROVIDED ON EACH VESSEL SHIPMENT OF PELLETS
LETTER "SA" DENOTES - ANALYSIS TO BE DONE ON A COMPOSITE SAMPLE OF SEMI-ANNUAL
VESSEL SHIPMENTS
CONFIDENTIAL MATERIAL HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION. ASTERISKS DENOTE SUCH OMISSION.
EXHIBIT 2
PRICE ADJUSTMENT FORMULA
EMPIRE, HIBBING, AND NORTHSHORE PELLETS
FOR YEARS 2003 THROUGH 2016
CURRENT YEAR'S PRICE ADJUSTMENT CALCULATION
1. SECTION 5(d)
[* * * *] X [* * * *] = A
[* * * *]
A X Preceding Year's Adjusted = Current Year's Price
Price Per Iron Unit Adjustment Per Iron Unit
CURRENT YEAR'S ADJUSTED PRICE PER IRON UNIT
Current Year's Price + Preceding Year's = Current Year's Adjusted
Adjustment Per Iron Unit Adjusted Price Per Iron Price Per Iron Unit
Unit
CURRENT YEAR'S ESTIMATED PELLET PRICE PER TON
Current Year's Adjusted X Current Year's Expected = Current Year's Estimated
Price Per Iron Unit Natural Iron Content Pellet Price Per Ton
CONFIDENTIAL MATERIAL HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION. ASTERISKS DENOTE SUCH OMISSION.
EXHIBIT 3
[* * * *] FORMULA
EMPIRE, HIBBING, AND NORTHSHORE PELLETS
FOR YEARS 2003 THROUGH 2016
EXAMPLE 1 EXAMPLE 2 EXAMPLE 3 EXAMPLE 4 EXAMPLE 5 EXAMPLE 6
[* * * *] [* * * *] [* * * *] [* * * *] [* * * *] [* * * *] [* * * *]
CONFIDENTIAL MATERIAL HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION. ASTERISKS DENOTE SUCH OMISSION.
EXHIBIT 4
SUBSTITUTE [* * * *] EXAMPLE
[* * * *]
FOR YEARS 2002 THROUGH 2016
Contract [* * * *]
Contract [* * * *]
In The Event That [* * * *] Annual Total [* * * *] Are Less Than [* * * *], Then
Steel And Cliffs Agree To Substitute Another [* * * *]
- Substitute [* * * *]
DETERMINE SUBSTITUTE [* * * *]
(1) Current Year's Actual Average [* * * *] of Substituted
[* * * *] - Prior Year's [* * * *] = A
(2) A + [* * * *] = [* * * *]
(3) A + [* * * *] = [* * * *]
RESULTS FROM (2) AND (3) ABOVE DETERMINE SUBSTITUTE[* * * *]