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Exhibit 10.10
CONFIDENTIAL
AMENDED AND RESTATED PELLET SALE AND PURCHASE AGREEMENT
THIS
AGREEMENT ("Agreement"), is entered into as of October 14, 2004 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"), CLIFFS SALES COMPANY, an Ohio
corporation
("Sales", and together with Iron, Mining, Northshore and Sales,
"Cliffs"), and
WCI STEEL, INC., an Ohio corporation ("WCI").
RECITALS
WHEREAS, Cliffs and WCI are parties to that certain Pellet Sale
and
Purchase Agreement dated January 1, 1999, as amended, (the
"Original Contract"),
pursuant to which Cliffs provided WCI with iron ore pellets in
connection with
WCI's steel manufacturing and processing activities;
WHEREAS, on September 16, 2003, WCI filed for protection under
Chapter 11
of the United States Bankruptcy Code in the bankruptcy case styled
In re: WCI
Steel, Inc., et al., case number 03-44662 (the "Bankruptcy Case")
in the United
States Bankruptcy Court for the Northern District of Ohio, Eastern
Division (the
"Bankruptcy Court");
WHEREAS, Cliffs and Cleveland-Cliffs Inc have asserted a claim for
WCI's
alleged default under the Original Contract in the amount of
$5,801,612.55 (the
"Cure Amount");
WHEREAS, in order to
secure the consent of Cliffs to the assumption by WCI
of the Original Contract, Cliffs and WCI have agreed to the terms
and conditions
set forth herein
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by which the Cure Amount would be paid to Cliffs and the Original
Contract would
be amended and restated; and
WHEREAS, Cliffs desires to continue to sell to WCI and WCI desires
to
continue to purchase from Cliffs certain quantities (based on
estimates of WCI's
requirements provided by WCI) of grades of iron ore standard
pellets and iron
ore flux pellets as follows: (i) such grades of iron ore standard
pellets
produced at the Northshore Mining Company iron ore pellet plant
("Northshore
Pellets"), located in Silver Bay, Minnesota; (ii) such grades of
iron ore
standard pellets produced at the Hibbing Taconite Company Joint
Venture iron ore
pellet plant ("Hibbing Pellets"), located in Hibbing, Minnesota;
(iii) such
grades of iron ore flux pellets produced at the Tilden Mining
Company, L.C. iron
ore pellet plant ("Tilden Pellets"), located in Tilden, Michigan;
(iv) such
grades of iron ore partially fluxed pellets produced at the United
Taconite LLC
iron ore Pellet plant ("UTAC Pellets"), located in Eveleth,
Minnesota; or (v)
such other pellet grades as may be mutually agreed to by the
parties hereto
(such Northshore Pellets, Hibbing Pellets, Tilden Pellets, UTAC
Pellets and
other mutually agreed upon pellets collectively being referred to
herein as
"Cliffs Pellets"), all upon the terms and subject to the conditions
contained
herein;
WHEREAS, WCI has informed Cliffs that WCI expects its annual
requirements
for pellets during the term of this Agreement may be up to
[*****](1) million
tons and Cliffs has informed WCI that, for the years 2006 and
thereafter during
the term of this Agreement, Cliffs expects to be able to provide to
WCI 100% of
WCI's pellet requirements (up to [*****]
----------
(1) CONFIDENTIAL
MATERIALS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION. ASTERISKS DENOTE SUCH OMISSION.
Page 2 of 37
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million tons) provided Cliffs timely completes the planned
expansions of its
production capacity.
NOW,
THEREFORE, in consideration of the mutual covenants hereinafter
set
forth, Cliffs and WCI agree as follows:
SECTION 1 - DEFINITIONS.
The
terms quoted in the above parentheses of the first introductory
paragraph of this Agreement and the WHEREAS clauses, and other
terms quoted
throughout the Agreement shall have the meanings assigned to them
for purposes
of this Agreement. The term "year" or "years" as used herein shall
mean a year
commencing January 1 and ending December 31. Attached as Appendix I
to this
Agreement is a locator list of defined terms used throughout the
Agreement.
SECTION 2 - SALE AND PURCHASE.
Cliffs shall sell and by these presents does sell and shall deliver
to WCI
the tonnages and grades of Cliffs Pellets upon the terms and
subject to the
conditions as hereinafter provided. WCI shall purchase and by these
presents
does purchase and shall receive and pay for such tonnages and
grades of Cliffs
Pellets upon the terms and subject to the conditions hereinafter
provided.
SECTION 3 - TONNAGE.
During each of the years 2005 through 2014, and each year
thereafter as
long as this Agreement remains in effect, Cliffs shall sell and
deliver to WCI
and WCI shall purchase and receive from Cliffs and pay for a
tonnage of Cliffs
Pellets, which tonnage shall for the
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year 2005 only, be equal to [*****] million tons (the "2005 Cap")
and (b) for
each year thereafter shall be equal to the lesser of (i) WCI's
annual iron ore
pellet tonnage required for consumption by WCI in each such year or
(ii) [*****]
million tons (the "Annual Cap" and collectively with the 2005 Cap,
the "Caps").
(The word "ton", as used herein, shall mean a gross ton of 2,240
pounds
avoirdupois natural weight). Cliffs shall use all reasonable
commercial efforts
to assist WCI in procuring any amount of WCI's annual iron ore
pellet tonnage
required for consumption by WCI in any given year in excess of the
Caps, but
shall have no obligation to sell any additional tonnage beyond the
Caps, nor
will Cliffs be limited in the price charged to WCI for such
additional amounts.
The
Cliffs Pellets shall consist of the grades and specifications and
shall
have approximately the same general average chemical and physical
structure, all
as described in Exhibit 1 attached hereto, unless otherwise
mutually agreed.
SECTION 4 - GRADES AND QUALITY.
The
Cliffs Pellets shall consist of the grades and specifications and
shall
have approximately the same general average chemical and physical
structure, all
as described in Exhibit I attached hereto, unless otherwise
mutually agreed.
SECTION 5 - NOTIFICATION AND NOMINATION/EXCESS TONNAGE
REQUIREMENTS.
(a)
With respect to the tonnage of Cliffs Pellets to be purchased by
WCI
for each of the years 2006 through 2014, on or before December 1 of
each of the
years prior thereto (e.g., December 1, 2005 for the 2006 year) WCI
shall notify
Cliffs in writing of WCI's
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preliminary annual iron ore pellet tonnage requirements for such
year (the
"Annual Nomination").
(b)(i) With respect to each Annual Nomination for each year after
2005, on
or before June 1 of the then current year of the purchase and sale,
WCI may, by
written notification to Cliffs, adjust its Annual Nomination for
the then
current year by not more than [*****] down or [*****] up. If, by
June 1 of the
then current year (e.g. June 1, 2006 for the 2006 year), WCI shall
have adjusted
its Annual Nomination, either up or down, then such adjusted Annual
Nomination
shall be deemed WCI's final annual iron ore pellet tonnage
requirements
nomination for such year (a "Final Nomination"), and WCI shall be
obligated to
purchase and Cliffs shall be obligated to sell such tonnage of
Cliffs Pellets in
accordance with such Final Nomination.
If,
however, WCI has not adjusted its Annual Nomination for years
after
2005 as provided for above, then on or before September 1 of the
then current
year of the purchase and sale, WCI may, by written notification to
Cliffs,
adjust its Annual Nomination for the current year, as made under
Section 5(a),
by not more than [*****] down or [*****] up. If, by September 1 of
the then
current year, WCI shall have adjusted its Annual Nomination, either
up or down,
then such adjusted Annual Nomination shall be deemed to be WCI's
Final
Nomination for such year, and WCI shall be obligated to purchase
and Cliffs
shall be obligated to sell such tonnage of Cliffs Pellets in
accordance with
such Final Nomination.
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If
no adjustment is made on or before September 1 of the then current
year
of the purchase and sale, then the Annual Nomination for such year,
as made
under Section 5(a), shall be deemed to be WCI's Final Nomination
for such year,
and WCI shall be obligated to purchase and Cliffs shall be
obligated to sell
such tonnage of Cliffs Pellets in accordance with such Annual
Nomination.
(ii)
In order to provide Cliffs with the necessary information to plan
for
the production of Cliffs Pellets, between February 1 and March 31
of the then
current year after 2005, WCI shall notify Cliffs of WCI's current
estimate of
WCI's annual iron ore pellet tonnage requirements for such
year.
(iii) In order to provide Cliffs with the necessary information to
plan
shipments of Cliffs Pellets, on April 15 of the then current year,
WCI shall
provide Cliffs with a monthly shipping schedule for the then
current year's
shipping season (the "Shipping Schedule"). Thereafter, WCI shall
provide an
updated Shipping Schedule on the fifteenth day of each month
through December 15
of the then current year.
(iv)
Notwithstanding the foregoing, nothing contained in this Section
5
shall permit WCI to adjust its Annual Nomination in any manner
which would
result in the Final Nomination exceeding the 2005 Cap in 2005 or
the Annual Cap
in any subsequent year.
(v)
The Annual Nomination for the year 2005 is hereby fixed at
[*****]
million tons and shall not be adjusted by WCI without the written
consent of
Cliffs, which consent may be provided or withheld in Cliffs' sole
discretion.
SECTION 6 - PRICE AND ADJUSTMENTS.
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(a)
The prices and the price adjustments for all sales of Cliffs
Pellets
made to WCI during 2004 shall continue to be governed by the terms
and
conditions of Section 6 of the Original Contract notwithstanding
the execution
and effectiveness of this Agreement; provided, however, that the
provisions of
Section 9 of this Agreement shall apply to the sale of all Cliffs
Pellets
occurring on and after the effective date of this Agreement.
(b)
The 2004 price per iron unit for Cliffs Pellets, to be delivered
by
Cliffs to vessels determined under Section 12 hereof at the Upper
Lake Port (as
defined in Section 12 below) (the "2004 Base Price per Iron Unit")
shall be as
follows: Northshore Pellets shall have a 2004 Base Price per Iron
Unit of
[*****] (which at the expected natural iron content of 63.57% for
Northshore
Pellets equals [*****] per ton); Hibbing Pellets shall have a 2004
Base Price
per Iron Unit of [*****] (which at the expected natural iron
content of 64.50%
for Hibbing Pellets equals [*****] per ton); Tilden Pellets shall
have a 2004
Base Price per Iron Unit of [*****] (which at the expected natural
iron content
of 60.58% for Tilden Pellets equals [*****] per ton); and UTAC
Pellets shall
have a 2004 Base Price per Iron Unit of [*****] (which at the
expected natural
iron content of 64.22% for UTAC Pellets equals [*****] per ton).
The 2004 Base
Price per Iron Unit for Cliffs Pellets shall be adjusted, up or
down, in
accordance with the provisions of Section 6(c) below.
(c)
In order to determine escalator element adjustments to the final
price
for the years 2005 through 2014, and each year thereafter if the
Agreement is
extended beyond 2014, as provided for under Section 16(c) below,
the 2004 Base
Price per Iron Unit for Cliffs Pellets and each of the following
respective
year's then adjusted final price per iron
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unit for Cliffs Pellets shall be adjusted, up or down, each year
for the year in
determination, by an amount equal to the sum of items (1), (2), (3)
and (4) as
calculated below:
(1) [*****] of the amount obtained by multiplying the preceding
year's final adjusted price per iron unit for Cliffs Pellets times
the
decimal determined by:
(x) dividing the numerator, which is the amount by which the
arithmetical average of the Producer Price Index ("PPI") For
[*****] - Series ID: [*****] and the PPI for [*****] - Series
ID:
[*****], both published by the United States Department of
Labor
(collectively, the "Average PPI [*****]"), for the year in
determination changes (up or down) from the immediately
preceding
year's Average PPI [*****];
(y) by the denominator, which is the immediately preceding
year's Average PPI [*****];
plus
(2) [*****] of the amount obtained by multiplying the preceding
year's final adjusted price per iron unit for Cliffs Pellets times
the
decimal determined by:
(x) dividing the numerator, which is the amount by which the
arithmetical average of the per gross ton [*****] prices in
U.S.
currency, as calculated from the per metric ton unit price
published in [*****], or in the event [*****] does not publish
such price, then as may
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be published in a comparable trade journal for such [*****]
prices, for the following merchants: [*****], for the year in
determination changes
(up or down) from the arithmetical average
of the per gross ton [*****] prices of the above two merchant
sellers published in [*****] for the immediately preceding
year;
(y) by the denominator, which is the arithmetical average of
the per gross ton [*****] prices of the above two merchant
sellers published in [*****] for the immediately preceding
year;
plus
(3) [*****] of the amount obtained by multiplying the preceding
year's final adjusted price per iron unit for Cliffs Pellets times
the
decimal determined by:
(x) dividing the numerator, which is the amount by which the
PPI - [*****] - Series ID: [*****] for the year in
determination
changes (up or down) from the immediately preceding year's PPI
-
[*****] - Series ID: [*****];
(y) by the denominator, which is the immediately preceding
year's PPI - [*****] - Series ID: [*****];
plus
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(4) [*****] of the amount obtained by multiplying the preceding
year's final adjusted price per iron unit for Cliffs Pellets times
the
decimal determined by:
(x) dividing the numerator, which is the amount by which the
PPI - [*****] - Series ID: [*****] for the year in
determination
changes (up or down) from the immediately preceding year's PPI
-
[*****] - Series ID: [*****];
(y) by the denominator, which is the immediately preceding
year's PPI - [*****] - Series ID: [*****].
(d)
On or about April 1 of each year in determination, Cliffs shall
provide
WCI with the estimated final adjusted price per iron unit for the
Cliffs Pellets
to be sold during such year. Notwithstanding the escalation
provisions provided
above, in no event will the final adjusted price per iron ton for
the Northshore
Pellets in the years [*****] and [*****] be (i) less than [*****]
per gross ton
below the ECWPP (as defined in Section 6(g)(i) below) for each of
the years
[*****] and [*****], or (ii) more than [*****] per gross ton higher
than the
ECWPP, at an estimated iron content of 63.57% for each of the years
[*****] and
[*****]. An adjustment to the Hibbing Pellets, Tilden Pellets and
UTAC Pellets
prices shall be made to maintain the same per ton pricing
relationship as with
the 2004 Base Prices above.
(e)(i) The price for all tons sold by Cliffs to WCI shall be based
on
actual natural iron content.
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(ii)
All prices herein are f.o.b. Vessel, Upper Lake Port and stated
in
U.S. dollar values.
(f)
Attached as Exhibit 2A is an example of the escalator element
adjustment calculation applying the provisions of Section 6(c)
hereof. Attached
as Exhibit 2B is an example of the comparison between final
adjusted Northshore
price per ton and the ECWPP for each of the years 2005 and
2006.
(g)(i) If, at the end of 2008, (1) WCI's final adjusted price per
iron unit
for Northshore Pellets exceeds [*****] of the per iron unit Eastern
Canadian
Pellet Price ("ECWPP") in 2008, or (2) WCI's final adjusted price
per iron unit
for Northshore Pellets is below [*****] of the per iron unit ECWPP
in 2008, then
either WCI or Cliffs may give notice to the other party on or
before March 1,
2009 requesting a price reopener. In the event that either WCI or
Cliffs
exercises its right to request a price reopener under (1) or (2)
above, then the
parties shall engage in good faith negotiations so as to establish
a new price
per iron unit for Northshore Pellets. If WCI and Cliffs are unable
to reach an
agreement on a mutually agreeable price by April 30, 2009, then
either party may
submit the determination of a price per iron unit for Northshore
Pellets for
determination by binding arbitration in accordance with the
provisions of
Section 23 below. The parties acknowledge that the prices for
Hibbing Pellets,
Tilden Pellets, UTAC Pellets and such other pellets as may be
mutually agreed to
by the parties are based on the price for Northshore Pellets and
the prices for
Hibbing Pellets, Tilden Pellets, UTAC Pellets and other agreed
pellets shall be
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adjusted on a pro rata basis to reflect either the mutually agreed
price for
Northshore Pellets, or the price for Northshore Pellets as
determined by the
arbitrator.
(ii)
If, at the end of 2012, (1) WCI's final adjusted price per iron
unit
for Northshore Pellets exceeds [*****] of the per iron unit ECWPP
in 2012, or
(2) WCI's final adjusted price per iron unit for Northshore Pellets
is below
[*****] of the per iron unit ECWPP in 2012, then either WCI or
Cliffs may give
notice to the other party on or before March 1, 2009 requesting a
price
reopener. In the event that either WCI or Cliffs exercises its
right to request
a price reopener under (1) or (2) above, then the parties shall
engage in good
faith negotiations so as to establish a new price per iron unit for
Northshore
Pellets. If WCI and Cliffs are unable to reach an agreement on a
mutually
agreeable price by April 30, 2012, then either party may submit
the
determination of a price per iron unit for Northshore Pellets for
determination
by binding arbitration in accordance with the provisions of Section
23 below.
The parties acknowledge that the prices for Hibbing Pellets, Tilden
Pellets,
UTAC Pellets, and such other pellets as may be mutually agreed to
by the parties
are based on the price for Northshore Pellets and the prices for
Hibbing
Pellets, Tilden Pellets, UTAC Pellets and other agreed pellets
shall be adjusted
on a pro rata basis to reflect either the mutually agreed price for
Northshore
Pellets, or the price for Northshore Pellets as determined by the
arbitrator.
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SECTION 7 - PAYMENTS AND ADJUSTMENTS.
(a)
The payment terms for all sales of Cliffs Pellets made to WCI
during
2004, including all 2004 price adjustments, shall continued to be
governed by
the terms and conditions of Section 7 of the Original Contract
notwithstanding
the execution and effectiveness of this Agreement; provided,
however, that the
provisions of Section 9 of this Agreement shall apply to the sale
of all Cliffs
Pellets occurring on and after the effective date of this
Agreement.
(b)
WCI shall pay Cliffs all amounts due for the Cliffs Pellets
purchased
under Section 5 by wire transfer of funds no later than [*****]
days following
delivery of each such cargo of Cliffs Pellets into the vessel or
following
delivery by loading of the Cliffs Pellets in rail cars or trucks,
if applicable.
(c) Prices for Cliffs
Pellets shall be adjusted on a calendar quarterly
basis based upon estimated and actual changes in the published
indices specified
in Section 6(c) ("Quarterly Price Adjustment"). Cliffs shall
calculate the
Quarterly Price Adjustment and provide WCI with such Quarterly
Price Adjustment
by the 15th day following the end of each calendar quarter, or on
such later
date as may be mutually agreed between Cliffs and WCI. Cliffs shall
issue an
invoice or credit memo, as the case may be, to WCI concurrently
with the
Quarterly Price Adjustment, and payment from Cliffs to WCI or WCI
to Cliffs, as
the case may be, shall be made by the [*****] day following
issuance of the
invoice or credit memo, as the case may be.
Page
13 of 37
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(d)
For years subsequent to year 2005, on or before May 15 each year,
or on
such later date as may be fixed by mutual agreement of Cliffs and
WCI, Cliffs
will furnish WCI with an invoice reflecting the final price
adjustments for the
preceding year, if any, on the deliveries to WCI for the preceding
year, and any
overpayment by WCI or balances due from WCI in connection with such
year's
deliveries shall be promptly adjusted by cash payment by wire
transfer of funds
between the parties within [*****] days of the invoice date.
(e)
In the event WCI shall fail to make payment when due of all
amounts,
including payment required pursuant to Section 24 below, 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
under this
Agreement until all claims Cliffs may have against WCI under this
Agreement are
fully satisfied.
(f)
All payments shall be made in U.S. dollars.
SECTION 8 - ANALYSES.
The
Cliffs Pellets (or such other mutually agreed grades of iron
ore
pellets) delivered hereunder will be sampled at the mine or port,
in accordance
with the usual and customary practice, and analyzed by mine
chemists, and said
analyses shall be final.
SECTION 9 - DELIVERY, STORAGE AND TRANSFER OF OWNERSHIP; GRANT OF
SECURITY
INTEREST.
(a)
Cliffs shall deliver to WCI the annual specified tonnage of
Cliffs
Pellets, as provided for in Section 5 above to vessels at Upper
Lake Port
designated by WCI in accordance with the provisions of Section 12
below.
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(b)
Title, and all risk of loss, damage or destruction of Cliffs
Pellets
shall transfer to WCI upon receipt of payment as provided for in
Section 7(b).
WCI shall keep all of the Cliffs Pellets adequately insured in all
material
respects against loss, damage and hazards at commercially
reasonable levels for
businesses engaging in similar activities or lines of business or
owning similar
assets. The insurance policies shall (i) be satisfactory in form
and substance
to Cliffs, (ii) name Cliffs as loss payee or additional insured
thereunder, as
applicable, with respect to the Cliffs Pellets and (iii) expressly
provide that
they cannot be altered, amended, modified, canceled or terminated
in a manner
adverse to the interest of Cliffs without thirty (30) calendar
days' prior
written notice to Cliffs, and that they inure to the benefit of
Cliffs,
notwithstanding any action or omission or negligence of or by WCI.
WCI shall
furnish Cliffs not less frequently than annually a certificate of
insurance
showing Cliffs as a loss
