EXHIBIT 10.4
July 12, 2002
Xxxxxx X. Xxxxxxxxx, Vice President-Sales
The Cleveland-Cliffs Iron Company
0000 Xxxxxxxx Xxxxxx
Xxxxxxxxx, XX 00000-0000
Re: Pellet Agreement
Dear Xxxxxx:
Reference is made to the Pellet Sale and Purchase and Trade
Agreement between The Cleveland-Cliffs Iron Company ("CLIFFS") and Rouge Steel
Company ("ROUGE"), dated as of January 1, 1991, as amended by certain letter
agreements dated as of July 1, 1996, April 7, 1997, June 3, 1997, March 31,
1998, and August 17, 2001 (as so amended, the "ORIGINAL PELLET AGREEMENT"). On
July 12, 2002, Cliffs and Rouge entered into a letter agreement further amending
the Original Pellet Agreement (the "2002 PELLET AGREEMENT AMENDMENT"; and the
Original Pellet Agreement, as amended by the 2002 Pellet Agreement Amendment and
as the same may from time to time be further amended, restated or otherwise
modified, will be referred to herein as the "PELLET AGREEMENT").
Rouge desires that Cliffs continue to supply iron ore pellets
to Rouge in accordance with the terms and conditions of the Pellet Agreement.
Rouge acknowledges and agrees that Cliffs is willing to enter into the 2002
Pellet Agreement Amendment and is willing to continue to supply such iron ore
pellets in accordance with the Pellet Agreement on certain terms and conditions,
one of which is that Rouge grant to Cliffs a purchase money security interest in
the Collateral (as defined below) as security for the Pellet Agreement
Obligations (as defined below). Rouge further acknowledges that the purchase
money security interest granted herein is being granted to enable Rouge to
finance the purchase of certain of the iron ore pellets being supplied by Cliffs
pursuant to the Pellet Agreement and for other valuable consideration.
In connection with the foregoing, Rouge hereby agrees and
represents as follows:
1. To secure the payment and performance of all obligations by Rouge due
to Cliffs pursuant to the Pellet Agreement with respect to each
shipment of iron ore pellets made by Cliffs to Rouge pursuant to
Section 3(b), (c) or (d) of the 2002 Pellet Agreement Amendment, as in
effect on the date hereof (collectively, the "PELLET AGREEMENT
OBLIGATIONS"), Rouge grants, pledges and assigns to Cliffs a purchase
money security interest ("PMSI") in all of Rouge's right, title and
interest in and to the following (collectively, the "COLLATERAL"): (A)
the inventory comprised of all grades of iron ore
Xxxxxx X. Xxxxxxxxx, Vice President-Sales
July 12, 2002
Page 2
pellets made available by Cliffs for shipment to Rouge pursuant to the
Pellet Agreement for which Cliffs has not been paid, but excluding
those iron ore pellets for which Rouge has elected to take title
pursuant to Section 3(e) of the 2002 Pellet Agreement Amendment, as in
effect on the date hereof; and (B) the proceeds of any of the
foregoing, including the proceeds of any insurance covering any of the
foregoing. The PMSI granted to Cliffs that attaches to a specific
shipment of inventory shall automatically terminate upon the date of
Cliffs' receipt from Rouge of payment in full for said shipment (the
"PMSI TERMINATION DATE").
2. Upon delivery of any of the Collateral to Rouge by Cliffs, the
Collateral shall be located at the addresses set forth on Attachment A
hereto. Rouge will deliver written notice to Cliffs at least thirty
(30) days prior to any change in the locations of any of the
Collateral.
3. Rouge confirms that: (A) the exact legal name of Rouge is as set forth
in the first paragraph of this letter agreement; (B) Rouge is a
corporation organized under the laws of the State of Delaware; (C) the
organizational identification number for Rouge is 0928077; (D) the
federal tax identification number of Rouge is 00-0000000; and (E) the
address of Rouge's chief executive office is 0000 Xxxxxx Xxxx,
Xxxxxxxx, Xxxxxxxx 00000.
4. The PMSI granted to Cliffs in the Collateral to secure the Pellet
Agreement Obligations pursuant to this letter agreement is (A)
permitted under each document, instrument or other agreement to which
Rouge is a party or by which any of its properties or assets are bound,
and (B) has the priority set forth in the Amended and Restated
Intercreditor and Subordination Agreement (the "INTERCREDITOR
AGREEMENT"), dated as of the date hereof, among Cliffs, Rouge, Congress
Financial Corporation, as agent for the Revolving Loan Lenders referred
to therein ("AGENT"), Ford Motor Company ("FORD"), and Cleveland Cliffs
Inc ("PARENT").
5. Prior to the applicable PMSI Termination Date, the Collateral will at
all times be, except as otherwise provided in the Intercreditor
Agreement, free and clear of any lien, security interest, mortgage,
charge or encumbrance created by or through Rouge that is senior to the
security interest granted to Cliffs pursuant to this letter agreement.
Rouge may grant security interests, mortgages, charges, or other
encumbrances on the Collateral to Agent, Parent, and Ford in accordance
with the Intercreditor Agreement.
6. Rouge hereby authorizes Cliffs to file UCC financing statements, and
any continuation statements thereto, that describe the Collateral, and
to include any information required for the sufficiency or filing
office acceptance of any such financing statements or continuation
statements.
7. Except as set forth in the Pellet Agreement, prior to the applicable
PMSI Termination Date, Rouge will keep and preserve the Collateral in a
commercially reasonable manner, and will not use, sell or offer to
sell, pledge or encumber (except as provided in paragraph 5 above),
process, destroy or consume the Collateral.
Xxxxxx X. Xxxxxxxxx, Vice President-Sales
July 12, 2002
Page 3
8. Rouge and Cliffs acknowledge that in the event of a default hereunder
or under the Pellet Agreement by Rouge, Cliffs will, subject to the
provisions of the Intercreditor Agreement, have all the rights and
remedies afforded a secured party under the Uniform Commercial Code as
adopted in the State of Ohio with respect to the Collateral.
When executed by Rouge and Cliffs, this letter agreement will
be part of the Pellet Agreement and will be subject to the terms and conditions
thereof, provided that nothing set forth herein will be deemed to have modified
any of the terms of the Pellet Agreement, and the Pellet Agreement remains in
full force and effect.
In addition, this letter agreement, and the PMSI described
herein, are subject to the terms and conditions of the Intercreditor Agreement.
In the event of any conflict between any of the terms or provisions of this
letter agreement and the Intercreditor Agreement, the Intercreditor Agreement
will prevail.
If you are in agreement with the foregoing agreements and
representations, please execute this letter on behalf of Cliffs in the space
provided below and return the executed copy to the undersigned.
Very truly yours,
ROUGE STEEL COMPANY
By: /s/ Xxxx X. Xxxxxxxxxxx
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Title: Vice Chairman and Chief Financial
Officer
AGREED AND ACCEPTED:
THE CLEVELAND-CLIFFS IRON COMPANY
By: /s/ X. X. Xxxxxxxxx
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Title: Vice President - Sales
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Date: July 12, 2002
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