CONFIDENTIAL TREATMENT HAS BEEN
OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION.
ASTERISKS DENOTE SUCH OMISSIONS
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William R.
Calfee
Executive Vice President — Commercial
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Direct: (216) 694-5547
Fax: (216) 694-5534
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Mr. Matthew A. Bernstein
Vice President-Procurement
Mittal Steel USA
3300 Dickey Road
East Chicago, IN 46312
This letter confirms the agreements
that were reached between Mike Rippey and you, representing Mittal
Steel USA, and Don Gallagher and me, representing Cleveland-Cliffs,
on Monday, March 20, in your offices. In that regard, it
modifies the three existing contracts for Cliffs’ supply of
iron ore pellets to Mittal Steel USA-Cleveland and Indiana Harbor
West, Mittal Steel USA-Indiana Harbor East and Mittal Steel
USA-Weirton. These three contracts will remain in effect, but the
agreement reached between Mittal Steel USA and Cliffs, as
memorialized in this letter and thereafter incorporated into a
definitive agreement, will serve as an umbrella agreement that will
amend and override the three separate contracts in the following
respects:
1.
Minimum Annual Tonnage Purchase Obligation. Mittal will
purchase from Cliffs for use at any Mittal facility iron ore
pellets in the following minimum amounts in the following calendar
years (January 1 to December 31):
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[ ** ]
million gross tons
[ ** ] million gross tons
[ ** ] million gross tons
[ ** ] million gross tons
[ ** ] million gross tons
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These minimum tonnage amounts include the tonnage that Mittal
purchases from the Empire Iron Mining Partnership for its Indiana
Harbor East facility but exclude the tonnage that Mittal receives
in connection with its equity interest in the Hibbing Taconite
Joint Venture. In the event Mittal nominates tonnage from the
Wabush Mines Joint Venture under the Indiana Harbor East contract
in any year and such tonnage is not available due to reasons of (i)
force majeure, as defined in the Indiana Harbor East contract, or
(ii) as a result of mine closure, then Mittal’s [
** ] million gross ton annual
CONFIDENTIAL TREATMENT HAS BEEN
OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION.
ASTERISKS DENOTE SUCH OMISSIONS
purchase obligation and Cliffs’ corresponding obligation to
sell [ ** ] million gross tons in such year shall not be
reduced. Except to the extent provided for in Section 3 of
this letter agreement, Mittal will be required to pay for any
portion of the minimum tonnage that it is required to take under
this Section 1 but does not take.
2.
Pricing. The price to be paid for the tonnage will be
determined by the contract applicable to the facility to which the
tonnage is delivered. Except as provided in Section 3 below,
the price to be paid for any tonnage not taken by Mittal that is
required to be taken under Section 1 above will be the price
in effect for the calendar year in which Mittal is required to take
such tonnage at the Mittal facility to which the smallest portion
of the minimum tonnage is delivered for that calendar year. In the
event that any tonnage is directed to any facilities other than
Indiana Harbor East, Indiana Harbor West, Cleveland or Weirton,
pricing will be agreed to in advance and will be based on either
Mittal Steel USA-Cleveland and Indiana Harbor West or Mittal Steel
USA-Indiana Harbor East contracts.
3.
Tonnage Deferral and Buyout Options. Down-opt modifications
to the above minimum annual tonnage purchase obligations may be
made by Mittal as follows. In 2006, Mittal may elect to buy out up
to [ ** ] million tons at [***** ] per gross ton. In
the calendar years 2007, 2008 and 2009, Mittal may defer up to [
*** ] of the [ ** ] million gross ton minimum
purchase obligation ([ ******* ] gross tons) into the
following calendar year, which then is added to the following
calendar year’s minimum tonnage purchase obligation.
Furthermore, in the calendar years 2007, 2008 and 2009, Mittal may
buy out up to [ ** ] of the [ ** ] million gross ton
minimum purchase obligation ([ ******* ] gross tons) at
[**** ] per gross ton. If Mittal exercises the deferral
right in any of the calendar years 2007, 2008 or 2009, the deferred
tonnage must either (i) be purchased in the following calendar
year, in addition to the purchase of that following calendar
year’s minimum tonnage, at that following calendar
year’s contract pricing; or (ii) may be bought out at [
**** ] per gross ton in that following calendar year. If
Mittal elects to defer all or any portion of the [ *** ] of
its minimum tonnage obligation for any of the calendar years 2007
or 2008, then it will not be allowed to defer any tonnage in the
following calendar year. There cannot be consecutive tonnage
deferrals without first discharging the obligation to purchase the
minimum tonnage and the deferred tonnage. Further, if Mittal
decides to buy out any tonnage deferred from the prior calendar
year that does not reinstate any deferral right for tonnage in the
then current calendar year. Finally, in calendar year 2010, Mittal
may elect to reduce its minimum tonnage purchase obligation by up
to [ **** ] ([ ** ] million tons), but only if it has
not deferred any tonnage from 2009. Any deferred tonnage from 2009
may be bought out in 2010 at [ *** ] per gross ton. In
addition, if Mittal has deferred tonnage from 2009, it may elect to
buy out up to [**
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