EXHIBIT 10.6
[The Cleveland-Cliffs Iron Company Letterhead]
May 16, 2002
Xx. Xxxx X. Xxxxxxxxxxx
Vice Chairman and Chief Financial Officer
Rouge Steel Company
0000 Xxxxxx Xxxx
X.X. Box 6009
Dearborn, MI 48121-1699
Dear Xx. Xxxxxxxxxxx:
By this restated letter agreement, The Cleveland-Cliffs Iron Company
("Cliffs") and Rouge Steel Company ("Rouge") hereby consolidate all previous
understandings, modify and further amend, effective as of May 1, 2002, the
Pellet Sales and Purchase and Trade Agreement, between Cliffs and Rouge, dated
as of January 1, 1991, as amended by Letter Agreements, dated as of July 1,
1996, April 7, 1997, June 3, 1997, March 31, 1998, and August 17, 2001
(collectively "Agreement"), so as to implement the following:
1. Tonnage and Grades
(a). Beginning in the year 2003 and continuing through year 2007,
Cliffs shall sell to Rouge and Rouge shall purchase from
Cliffs all of Rouge's annual iron ore pellet tonnage
requirements ("Rouge's Annual Pellet Tonnage Requirements"),
such of Rouge's Annual Pellet Tonnage Requirements being equal
to Rouge's total annual iron ore pellet tonnage requirements
required for consumption in Rouge's iron and steelmaking
facilities in any year.
(b). The iron ore pellets to be purchased by Rouge during the years
2003 through 2007 (and during any years after 2007 the
Agreement is extended for pursuant to Section 5) shall consist
of (i) Cliffs' Xxxxxx Flux Pellets ("Xxxxxx Flux Pellets") and
(ii) Cliffs' Wabush Standard Pellets With Approximately 2%
Manganese Content ("Wabush Standard Pellets") produced at the
Wabush Mine Joint Venture iron ore pellet plant located at
Pointe Noire, Canada (the Xxxxxx Flux Pellets and the Wabush
Standard Pellets collectively referred to as "Cliffs'
Pellets") provided that Cliffs has available for sale Wabush
Standard Pellets. In the event Cliffs has Wabush Standard
Pellets available, Rouge may purchase up to [__]*% of Rouge's
Annual Pellet Tonnage Requirements in Wabush Standard Pellets.
In the event Cliffs does not have sufficient Wabush Standard
* - Confidential information has been omitted and filed separately with the
Securities and Exchange Commission.
Pellets available, Rouge and Cliffs shall mutually agree on
another acceptable Cliffs' iron ore pellet, which substituted
pellet shall be priced at a per ton iron unit that would yield
a comparable delivered cost to Rouge had Rouge been able to
purchase the Wabush Standard Pellets.
(c). During the years 2003 through 2007, Rouge shall purchase from
Cliffs a [__]* tonnage of [__]* tons of Cliffs' Pellets and
shall purchase in each year of the years 2003 through 2007 a
[__]* of [__]* tons of Cliffs' Pellets.
(d). During the years 2008 through 2012, in the event Rouge
requires iron ore pellets for consumption in Rouge's iron and
steelmaking facilities in any year, Rouge shall purchase from
Cliffs all of Rouge's Annual Pellet Tonnage Requirements for
each of the years 2008 through 2012.
2. Price and Adjustments
(a). The price for the first [__]* tons of Xxxxxx Flux Pellets
purchased in the years 2003 through 2012 shall be calculated
as provided for in the Letter Agreement between Rouge and
Cliffs, dated as of August 17, 2001 ("August 17, 2001
Letter"). The price for all tonnage of Xxxxxx Flux Pellets
purchased in excess of [__]* tons in any year shall be
calculated as provided for in the August 17, 2001 Letter,
[__]* per iron unit.
(b). The price for any tonnage of Wabush Standard Pellets purchased
in the years 2003 through 2012 shall be the same as the price
calculated for the Xxxxxx Flux Pellets, as provided for in the
August 17, 2001 Letter, [__]* per iron unit.
(c). The price for any other mutually agreed upon Xxxxxx' iron ore
pellets (which will then be deemed as Cliffs' Pellets), which
are substituted for the Wabush Standard Pellets, shall be
priced so as to provide Rouge with a delivered price [__]* for
the substituted Wabush Standard Pellets, as the case may be.
(d). From and after March 1, 2003 and each March 1 thereafter, for
all tons shipped hereunder in each such year in which Xxxxx
has elected immediate title for any tons pursuant to section
3(e). below, Rouge shall pay, as an addition to the prices
provided herein, the sum of [__]* per ton for every [__]*, or
part thereof, of credit effectively elected for such year
pursuant to section 3(e). below.
* - Confidential information has been omitted and filed separately with the
Securities and Exchange Commission.
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3. Delivery, Credit and Payments
With respect to the sales and purchase tonnage, the following shall
apply:
(a)(i). For the year 2002, for all Cliffs' Pellets shipped to Rouge
during the period May 1, 2002 through May 15, 2002, title to
the Cliffs' Pellets shall pass to Rouge f.o.b. vessel at the
Port of Marquette, Marquette, Michigan ("Port of Marquette").
Rouge shall pay Cliffs for all the Cliffs' Pellets shipped
during May 1 through May 15 in accordance with the adjusted
price provided for in the August 17, 2001 Letter, such payment
to be made to Cliffs by [__]*.
(ii). For the year 2002, for all Cliffs' Pellets shipped to
Rouge during the period May 16, 2002 through May 31, 2002,
Xxxxxx shall retain title to the Cliffs' Pellets so shipped
until Rouge makes payment for the Cliffs' Pellets. Rouge shall
pay Cliffs for all Cliffs' Pellets shipped during May 16
through May 31, by wire transfer to Cliffs no later than
[__]*. Title for each such cargo of Cliffs' Pellets shipped
shall pass to Rouge simultaneously with receipt of payment by
Cliffs for each such cargo.
(b)(i). For the year 2002, for all Cliffs' Pellets shipped to Rouge
during the period June 1, 2002 through June 15, 2002 and July
1, 2002 through July 15, 2002, title to the Cliffs' Pellets
shall pass to and payment shall be made for the Cliffs'
Pellets in accordance with the provisions provided for in
(a)(i) above, except that payment by Rouge for the shipments
made through June 15, 2002 shall be made by [__]*, and the
payment by Rouge for the shipments made through July 15, 2002
shall be made by [__]*.
(ii). For the year 2002, for all Cliffs' Pellets shipped
during the period June 16, 2002 through June 30, 2002 and July
16, 2002 through July 31, 2002, title shall pass to and
payment shall be made for the Cliffs' Pellets by wire transfer
in accordance with provisions provided for in (a)(ii) above,
except that payment by Rouge for the shipments made through
June 30, 2002 shall be made no later than [__]*, and payment
by Rouge for the shipments made through July 31, 2002 shall be
made no later than [__]*. Title for each such cargo of Cliffs'
Pellets shipped shall pass to Rouge simultaneously with
receipt of payment by Cliffs for each such cargo.
(c)(i). For year 2002, for all Cliffs' Pellets shipped to Rouge during
the period August 1, 2002 through August 8, 2002, title to the
Cliffs' Pellets shall pass to and payment shall be made for
the Cliffs' Pellets in accordance with the provisions provided
for in (a)(i) above, except that payment by Rouge for the
shipments made August 1, 2002 through August 8, 2002 shall be
made by [__]*.
(ii). For the year 2002, for all cargoes of Cliffs' Pellets
shipped to Rouge during the period August 9, 2002 through
August 31, 2002, Cliffs shall
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retain title to the cargoes of Cliffs' Pellets so shipped
until Rouge makes payment for each cargo of Cliffs' Pellets
shipped . Rouge shall pay Cliffs for all the Cliffs' Pellets
shipped during the period August 9 through August 31 by wire
transfer to Cliffs no later than [__]*. Title to the Cliffs'
Pellets for each such cargo of Cliffs' Pellets shipped shall
pass to Rouge simultaneously with receipt of payment by Cliffs
for each such cargo.
(d). For all cargoes of Cliffs' Pellets shipped to Rouge beginning
September 1, 2002, Cliffs shall retain title to the cargoes of
Cliffs' Pellets so shipped until Rouge makes payment for the
Cliffs' Pellets. Rouge shall pay Cliffs for each cargo of
Cliffs' Pellets shipped beginning September 1, 2002, by wire
transfer to Cliffs no later than the [__]* following shipment
of a cargo. Title to the Cliffs' Pellets for each such cargo
of Cliffs' Pellets shipped shall pass to Rouge simultaneously
with receipt of payment by Cliffs for each such cargo.
(e). Rouge may, prior to March 1, in any year beginning after 2002,
notify Cleveland-Cliffs of the amount of effective trade
credit it requires for the balance of such year, not to exceed
[__]* at any time. Such effective credit shall be designated
by Rouge specifying the dollar amount of Cliffs' pellets that
Rouge requests title to f.o.b. vessel at the Port of Marquette
notwithstanding (d) above. To the extent that Rouge makes
payment, such that the credit outstanding to Rouge is less
than the amount elected for that year, Xxxxx will receive
immediate title to Xxxxxx' pellets FOB vessel at the Port of
Marquette up to the available credit at that time.
(f). Rouge's rights pursuant to (e). above shall remain in effect
so long as the Subordinated Loan and Security Agreement dated
2002 between Rouge and Cleveland-Cliffs Inc remains in effect
and Rouge is not in default thereunder.
4. Employment of Vessels
Rouge shall continue to assume the obligation for arranging, providing,
and paying for the appropriate vessels for the transportation of all of
the Cliffs' Pellets delivered by Cliffs to Rouge.
5. Term
The initial term of the Agreement is extended by two years to December
31, 2007. In the event Rouge has Rouge's Annual Pellet Tonnage
Requirements for the years 2008 through 2012, the Agreement is extended
for an additional five years to December 31, 2012 for the obligation
for Rouge to purchase from Cliffs all of Rouge's Annual Pellet Tonnage
Requirements from 2008 through 2012,
* - Confidential information has been omitted and filed separately with the
Securities and Exchange Commission.
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and the Agreement shall continue annually each year thereafter, unless
with respect to each year after December 31, 2012, either party gives
two years' prior written notification to the other party that the
Agreement shall terminate at the end of the second succeeding year.
Notwithstanding the above, in the event in any of the years following
the year 2007, Rouge purchases less than 1,000,000 tons of Cliffs'
Pellets in any such year, Cliffs shall have the right to terminate the
Agreement by written notice six months prior to the end of the
following year.
6. Effective Date
This Letter Agreement is dated May 16, 2002, and the provisions
contained herein shall become effective as of May 1, 2002.
7. Amendment and Restatement
Rouge and Xxxxxx agree to amend and restate the Agreement to only
integrate the applicable provisions contained in the Agreement, as
revised by the applicable terms of Letter Agreement, dated July 1,
1996; Letter Agreement, dated April 7, 1997; Letter Agreement, dated
June 3, 1997; Letter Agreement, dated March 31, 1998, Letter Agreement,
dated August 17, 2001, and this Letter Agreement, dated May 16, 2002.
If you are in accord with the above modifications to the Agreement,
please return one executed copy of this letter agreement to me.
Very truly yours,
Agreed to by:
THE CLEVELAND-CLIFFS IRON COMPANY
/s/ X.X. Xxxxxxxxx
---------------------------
X. X. Xxxxxxxxx
Vice President-Sales
ROUGE STEEL COMPANY
By /s/ Xxxx X Xxxxxxxxxxx 7/12/02
-------------------------------------
Xxxx X. Xxxxxxxxxxx
Vice Chairman and Chief Financial Officer
Attachment
