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PELLET SALE AND PURCHASE AGREEMENT
THIS AGREEMENT, entered into,
dated November 10, 2006 and effective as of January 1,
2007 (“Agreement”), by and among THE
CLEVELAND-CLIFFS IRON COMPANY, an Ohio corporation
(“Iron”), CLIFFS SALES COMPANY , an Ohio
corporation (“Sales”; and together with Iron, referred
to herein as “Cliffs”), AK STEEL CORPORATION, a
Delaware corporation (“AK Steel”).
WHEREAS, Cliffs desires to
sell to AK Steel and AK Steel desires to purchase from Cliffs
certain quantities of grades of iron ore [ ***** ] pellets
such grades of iron ore [ ***** ] pellets being produced at
the [ ***** ], located in [ ***** ] or such other [
***** ] pellet grades as may be mutually agreed to by the
parties hereto (such [ ***** ] 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.
NOW, THEREFORE, in
consideration of the mutual covenants hereinafter set forth, Cliffs
and AK 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.
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(a). The words, “AK
Steel’s Annual Pellet Tonnage”, as used herein, shall
mean: (i) for the year 2007 a tonnage amount equal to 1.0
gross tons plus or minus ten percent (10%); and (ii) for the years
2008 through and including 2013 a tonnage amount between 1.0 gross
tons and 1.3 gross tons plus or minus ten percent (10%), for
consumption in AK Steel’s iron and steel making facilities in
any year at any of AK Steel’s facilities in North America
owned or controlled at the time of execution of this
Agreement.
(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 “Upper Lake
Docks”, as used herein, shall mean [ ***** ] or other
mutually agreeable port.
(e). The word “year”, as
used herein, shall mean a calendar year commencing on January 1 and
ending December 31.
Section 2. — Sale and Purchase/Tonnage
.
During each of the years 2007 through
2013, and each year thereafter as long as this Agreement remains in
effect, Cliffs shall sell and deliver to AK Steel and AK Steel
shall purchase and receive from Cliffs and pay for a tonnage of
Cliffs Pellets which tonnage shall be equal to AK Steel’s
Annual Pellet Tonnage for each such year.
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Section 3. — Pellet
[ ***** ]
(a). Cliffs Pellets when loaded for
shipment will be consistent with the typical specifications and
analysis limits set forth in Exhibit I to this
Agreement.
Section 4. — Notification and Nomination
.
(a). With respect to the tonnage of
Cliffs Pellets to be purchased by AK Steel for its facilities for
each of the years 2007 through 2013, as provided in Section 2,
on or before November 1 of each of the years prior thereto (e.g.,
November 1, 2007 for the 2008 year), AK Steel shall
notify Cliffs in writing of AK Steel’s preliminary tonnage of
AK Steel’s Annual Pellet Tonnage for such year (“Annual
Nomination”).
(i). Beginning in the year 2008, in the event AK Steel requires
tonnage in addition to the maximum 1.3 million gross tons plus
ten percent (10%), Cliffs is not obligated to provide such excess
tonnage. However, as part
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of its preliminary nomination AK Steel may request additional
tonnage, and shall notify Cliffs in writing of such requested
excess tonnage on or before November 1 of the preceding year.
Cliffs shall have thirty (30) days from the date of the
request to determine whether Cliffs will supply all or any portion
of such request. In the event Cliffs is able to comply with such
request, AK Steel shall be obligated to purchase such tonnage that
Cliffs is able to provide.
(ii) If at any time during the term of the Agreement AK
Steel’s Ashland blast furnace requires a reline, then AK
Steel’s Annual Pellet Tonnage shall be adjusted downwards on
a pro rata basis during the time in which the reline takes place.
AK Steel shall provide Cliffs with written notice of such planned
reline with its Annual Nomination in the year prior to the planned
reline.
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(b).
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(i). With respect to the Annual
Nomination for the year 2007, such Annual Nomination is fixed at
1.0 million gross tons, subject to the adjustments process set
forth below.
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(ii). With respect to each Annual Nomination for each year
beginning with 2008, on or before [ ***** ] of the then
current year of the purchase and sale, AK Steel may, by written
notification to Cliffs, adjust its Annual Nomination for the then
current year by not more than [ *****] up or down. [
*****]
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If, however, AK Steel has not
adjusted its Annual Nomination for the then current year and
thereafter as provided for above, then on or before [ *****
] of the then current year of the purchase and sale (e.g. [
***** ]), AK Steel may, by written notification to Cliffs,
adjust its Annual Nomination for the current year, as made under
Section 4(a), by not more than [ ***** ] up or down. [
*****]
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(iii). In order to provide Cliffs with the necessary information to
plan for the production of Cliffs Pellets, between [ ***** ]
of the then current year, AK Steel shall notify Cliffs of AK
Steel’s current estimate of AK Steel’s annual iron ore
pellets Tonnage for such year.
(iv). In order to provide Cliffs with the necessary information to
plan shipments of Cliffs Pellets, on [ ***** ] of the then
current year, AK Steel shall provide Cliffs with a monthly shipping
schedule for the then current year’s shipping season (the
“Shipping Schedule”). Thereafter, AK Steel shall
provide an updated Shipping Schedule on the [ ***** ] of
each month through [ ***** ] of the then current
year.
(v). Notwithstanding the foregoing, nothing contained in this
Section 4 shall permit AK Steel to adjust its Annual
Nomination in any manner which would result in a Final Nomination
that is beyond the [ ***** ] of AK Steel’s Annual
Pellet Tonnage set forth in Section 1(a) of this
Agreement.
Section 5. — Price [*****
]
.
(a). [ ***** ] shall have a [
***** ] price of [ ***** ] per gross ton iron unit,
which at an expected [ ***** ] equals [ ***** ] per
ton. (“Base Price”)
(b). The price for the Cliffs Pellets
sold and purchased in each of the years 2007 and thereafter by AK
Steel shall be based on the Base Price per iron unit as
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described in Section 5(a) above, which Base Price shall then be
adjusted, up or down, in the year 2007 and each year thereafter by
an amount as determined in accordance with Section 5(c)
below.
(c). In order to determine the
adjusted price to be paid each year for the Cliffs Pellets, as
provided for under Section 5(b) above, the Base Price and each of
the following respective year’s then adjusted prices per iron
unit shall be further adjusted, up or down, each year for the year
in determination as follows:
(i). divide (x) the numerator, which is the amount by which
the [ ***** ] for the [ ***** ]; by (y) the
denominator, which is the [ ***** ], and multiply the result
obtained by [ ***** ];
(ii). divide (x) the numerator, which is the amount by which
the [ ***** ] for the [ ***** ]; by (y) the
denominator, which is the [ ***** ], and multiply the result
obtained by [ ***** ];
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(iii). divide (x) the numerator, which is the amount by which
the [ ***** ] for the [ ***** ]; by (y) the
denominator, which is the [ ***** ], and multiply the result
obtained by [ ***** ];
(iv). divide (x) the numerator, which is the amount by which
the [ ***** ] for the calendar year in determination changes
(up or down) from [ ***** ]; by (y) the denominator, which
is the [ ***** ], and multiply the result obtained by [
***** ];
(v). [ ***** ] obtained in paragraphs (i) through
(iv);
(vi). [ ***** ] determined in (v) above by the [
***** ] per iron unit for AK Steel which will then equal the
[ ***** ] per iron unit for AK Steel;
(vii). [ ***** ] determined in (vi) above to the
preceding year’s adjusted price per iron unit for AK Steel,
which will then equal the current year’s adjusted prices per
iron unit for AK Steel; and
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(viii). [ ***** ] determined in (vii) above by the [
***** ], which will then equal the current year’s
estimated price per ton for AK Steel.
Those adjusted prices per ton for AK
Steel shall then become the contract’s year estimated price
for the Cliffs Pellets delivered to the Upper Lake Docks for the
year in determination.
(d). The price for all tons sold by
Cliffs to AK Steel shall be based on [ ***** ]
(e). Attached, as Exhibit II is
an example of the adjustment formula applying the provisions of
Sections 5(c).
Section 6. — Payments
[
*****
]
(a). Cliffs shall invoice AK Steel
for each shipment of Cliffs Pellets delivered to the Upper Lake
Docks and payment for shipments of Cliffs Pellets shall be made via
wire transfer [ ***** ] following delivery of the Cliffs
Pellets to the Upper Lake Docks. [ ***** ]
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(c). In the event AK Steel shall fail
to make payment when due of any or 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 AK Steel under this Agreement are fully
satisfied.
(d). All payments shall be made in
U.S. dollars.
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Section 7. — Sampling and Analyses
.
All pellet sampling procedures and
analytical tests conducted on Cliffs Pellets sold to AK Steel to
demonstrate compliance with typical specifications and analysis
limits shall be performed on each pellet vessel shipment. Sample
and test methods shall be in accordance with Cliffs’ existing
practice and based on 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 AK Steel. AK 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 AK Steel.
Section 8. — Delivery, Storage, Transfer of
Ownership
[ ***** ]
(a). Cliffs shall deliver to AK Steel
the annual tonnage of Cliffs Pellets for AK Steel F.O.B. to the
Upper Lake Docks. To the extent title to pellets has been
transferred to AK Steel in accordance with Section 8(b) of this
Agreement, inventory in dock storage may be held in AK
Steel’s name, but solely to the extent of such
payments.
(b). Title, and all risk of loss,
damage or destruction of Cliffs Pellets shall transfer to AK Steel
[ ***** ] as provided for in Section 6(a).
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Shipments of Cliffs Pellets shall be
in approximately equal amounts over the nine-month period of
March 25 through January 15 each year during the term of
this Agreement to ensure an adequate amount of inventory to allow a
working pellet pile at the Upper Lake Docks. Vessel Seasons are
determined by the U.S. Army Corps of Engineers and other
uncontrollable factors, such as weather, and are subject to change
by the U.S. Army Corps of Engineers.
The vessel bill 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 or Upper Lake Docks shall be accepted by the parties as
finally determining the amount of Cliffs Pellets shipped to the
Upper Lake Docks for AK Steel pursuant to this
Agreement.
Section 11. — Employment of Vessels
.
AK Steel assumes the obligation for
arranging and providing appropriate vessels for the transportation
of the Cliffs Pellets delivered by Cliffs to the Upper Lake Docks
for AK Steel hereunder.
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Section 13. — 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 I shall be given in
writing delivered to Cliffs within sixty (60) calendar days
after completion of discharge of the Cliffs Pellets at the Upper
Lake Docks, or any claim arising from any substantial variance
shall be deemed waived by AK 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
AK Steel’s cost of processing, lost profits, injury to good
will or any other special or consequential damages.
Section 14. — Force Majeure
.
(a). Force Majeure shall be defined
as any unforeseeable event that delays or prevents a Party from
performing, in whole or in part, any of its obligations under this
Agreement due to any cause beyond the reasonable control of and not
due to the fault
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