EXHIBIT 10.1

 
THE LIMITED LIABILITY COMPANY INTERESTS EVIDENCED BY THIS DOCUMENT ARE SUBJECT
TO RESTRICTIONS ON ASSIGNMENT AND TRANSFER SET FORTH HEREIN.  THE INTERESTS HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR ANY STATE SECURITIES
LAWS AND MAY NOT BE SOLD OR OTHERWISE TRANSFERRED UNTIL REGISTERED OR UNTIL THE
BOARD OF MANAGERS HAS RECEIVED AN OPINION OF LEGAL COUNSEL, OR OTHER ASSURANCES
SATISFACTORY TO THE BOARD, THAT AN INTEREST MAY LEGALLY BE SOLD OR OTHERWISE
TRANSFERRED WITHOUT REGISTRATION, ALL AS PROVIDED IN THIS DOCUMENT.
 
AMENDED AND RESTATED
 
OPERATING AGREEMENT
 
OF
 
MAGNETATION LLC
 
Dated as of October 4, 2011
 

 

 
 
 

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TABLE OF CONTENTS
   
Page
ARTICLE 1.
ORGANIZATIONAL MATTERS
1
1.1
Formation of the Company; Term
1
1.2
Name
2
1.3
Purpose of the Company
2
1.4
Powers of the Company
3
1.5
Principal Place of Business
3
1.6
Supersedes Prior Agreements
3
1.7
Exclusivity
3
     
ARTICLE 2.
INITIAL CAPITAL CONTRIBUTIONS AND MEMBERSHIP UNITS
4
2.1
Capital Contributions
4
2.2
Membership Units
6
2.3
Failure to Make Article 2 Capital Contributions
6
     
ARTICLE 3.
ADDITIONAL CAPITAL CONTRIBUTIONS
7
3.1
Additional Capital Contributions
7
     
ARTICLE 4.
CAPITAL ACCOUNTS AND ALLOCATIONS
10
4.1
Capital Accounts
10
4.2
Allocations of Book Income and Loss
10
4.3
Tax Allocations
10
4.4
Membership Units
10
4.5
No Interest
10
4.6
No Withdrawal
10
     
ARTICLE 5.
DISTRIBUTIONS
10
5.1
Tax Distributions
10
5.2
Quarterly Distributions
11
5.3
Limitations on Distributions
11
5.4
Limitation on Payment of Distributions
11
5.5
Other Distributions
12
     
ARTICLE 6.
MANAGEMENT AND GOVERNANCE
12
6.1
Board of Managers
12

 
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TABLE OF CONTENTS
(continued)
   
Page
6.2
Authority of the Board of Managers
13
6.3
Actions by the Board of Managers
14
6.4
Meetings of the Board of Managers
18
6.5
Officers of the Company
19
6.6
Duties of the Officers
19
6.7
Project Teams
20
6.8
Insurance
21
     
ARTICLE 7.
POWERS AND DUTIES OF AND LIMITATIONS ON THE MEMBERS
21
7.1
No Participation in Management
21
7.2
Rights of the Members
21
7.3
Limited Liability of the Members
21
7.4
Voting Rights of Members
21
7.5
Exercise of Rights over Affiliate Agreements; Indemnification
21
7.6
Conflict of Interest
22
7.7
Fiduciary Duties
22
7.8
Indemnification by the Members
22
     
ARTICLE 8.
TRANSFERS OF INTEREST; CHANGE OF CONTROL; OFFER TO PURCHASE OR SELL
23
8.1
General Restriction
23
8.2
Involuntary Transfers
23
8.3
Certain Permitted Transfers
23
8.4
Requirements for Transfer
24
8.5
Bona Fide Offer
24
8.6
Closing of the Bona Fide Offer
25
     
ARTICLE 9.
TERMINATION EVENTS, DISSOLUTION OF THE COMPANY AND DISTRIBUTIONS UPON
TERMINATION OR DISSOLUTION
26
9.1
Dissolution
26
9.2
Consequences of Dissolution
27

 
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TABLE OF CONTENTS
(continued)
   
Page
9.3
Termination Events
27
9.4
Consequences of Termination Event
27
9.5
Winding-up and Liquidation of the Company
28
9.6
Time for Winding-Up
29
9.7
Final Accounting
29
     
ARTICLE 10.
AMENDMENT OF AGREEMENT
29
10.1
Amendments to This Agreement
29
     
ARTICLE 11.
MEMBER REPRESENTATIONS AND WARRANTIES
29
11.1
Organization and Authority
30
11.2
Enforceability
30
11.3
Consents
30
11.4
No Conflicts
30
11.5
Litigation
30
11.6
Member Interest Not Subject to Lien or Security Interest
31
11.7
Investment Experience
31
     
ARTICLE 12.
MAGNETATION REPRESENTATIONS AND WARRANTIES
31
12.1
Sufficiency of Assets; Authorization
31
12.2
Financial Statements
31
12.3
No Undisclosed Liabilities
32
12.4
Compliance with Laws; Permits. As of the Effective Date and as of the dates
Magnetation makes its Plant 1 Capital Contributions and contributes Plant 1:
32
12.5
Environmental Matters
32
12.6
Insurance
33
12.7
Majority Ownership of Magnetation
33
12.8
Full Disclosure
33
     
ARTICLE 13.
COVENANTS
33
13.1
Further Assurances
33
     
ARTICLE 14.
CLOSING CONDITIONS
34

 

 
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TABLE OF CONTENTS
(continued)
   
Page
14.1
Conditions Precedent to Obligations of AKS
34
14.2
Conditions Precedent to Obligations of Magnetation
34
     
ARTICLE 15.
DEFAULTS AND REMEDIES
35
15.1
Events of Default
35
15.2
Notice and Rights upon Default
35
     
ARTICLE 16.
CONFIDENTIALITY
35
16.1
Confidentiality — Company Information
35
16.2
Definitions – Company Information and Other
36
16.3
Certain Exceptions
36
16.4
Permitted Disclosure to Advisors
37
16.5
Continuing Protection Under Law
37
16.6
Attorney-Client Privilege
37
     
ARTICLE 17.
REPORTING AND ACCOUNTING PROVISIONS
38
17.1
Books and Records
38
17.2
Other Accounting and Tax Provisions
38
17.3
Distribution of Annual Operating and Capital Budgets, Financial Statements and
Tax Information
38
17.4
Right of Inspection
39
     
ARTICLE 18.
MISCELLANEOUS PROVISIONS
40
18.1
Notices
40
18.2
Indemnification of AKS
40
18.3
Tax Matters Partner; Notice of Tax Examinations
41
18.4
Entire Agreement
41
18.5
Governing Law
41
18.6
Settlement of Disputes
41
18.7
Binding Nature
42
18.8
Invalidity
42
18.9
Counterparts
43
18.10
Construction
43
18.11
No Third-Party Beneficiaries
43
     

 
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TABLE OF CONTENTS
(continued)
   
Page
18.12
Press Releases
43
     
ARTICLE 19.
DEFINITIONS
43
     
APPENDIX A
MAGNETATION LLC TAX MATTERS
1

 
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APPENDICES
 
     
Appendix A
Tax Matters
 
       

 
SCHEDULES
Schedule 2.1(a)
Initial Capital Contributions
 
Schedule 2.2
Membership Units
 
Schedule 5.4
Magnetation Capital Reserve Account
 
Schedule 9.4
Procedure for Purchasing the Other Member’s Interest
 

 

 
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AMENDED AND RESTATED
OPERATING AGREEMENT
OF MAGNETATION LLC
 
This Amended and Restated Operating Agreement (“Agreement”) is made and entered
effective as of the 4th day of  October, 2011 (the “Effective Date”), by and
among Magnetation LLC, a Delaware limited liability company (“Company”),
Magnetation, Inc., a Minnesota corporation (“Magnetation”) and AK Iron
Resources, LLC, a Delaware limited liability company (“AKS”) (Magnetation and
AKS may individually be referred to as a “Member” and collectively as the
“Members”).
 
RECITALS
 
WHEREAS, Magnetation is a producer of iron ore concentrate and has developed a
patented mineral reclamation process to extract iron oxide particles from
hematite materials contained within impoundment basins;

WHEREAS, AKS’ affiliates are fully-integrated producers of flat-rolled carbon,
stainless and electrical steels and tubular products primarily for automotive,
infrastructure and manufacturing, construction and electrical power generation
and distribution markets;

WHEREAS, Magnetation and AKS desire to enter into a joint venture (the “Joint
Venture”) for the purpose of owning and operating an existing iron oxide
production plant and developing, constructing, owning and operating additional
iron oxide production plants as well as an iron conversion facility capable of
producing iron ore flux pellets useable in AKS’ affiliates’ operations;

WHEREAS, the Company has been formed under the Delaware Limited Liability
Company Act (the “Act”);

WHEREAS, AKS and Magnetation desire to enter into this Agreement to set forth
certain agreements relating to the funding, ownership, management and operation
of the Company; and
 

 
WHEREAS, certain capitalized terms are used in this Agreement as defined in
Article 19 or other provisions of this Agreement set forth below.
 

 
NOW, THEREFORE, in mutual consideration of the promises contained in this
Agreement, and subject to the terms and conditions hereof, the Company and the
Members agree as follows:
 
ARTICLE 1.
ORGANIZATIONAL MATTERS
 
1.1 Formation of the Company; Term.
 
(a) The Company was organized as a Delaware limited liability company by filing
a Certificate of Formation with the Secretary of State of the State of Delaware
on May 26,
 
 
 

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2010 pursuant to Section 18-201 of the Act.  Unless dissolved pursuant to
Article 9, the duration of the Company is perpetual.
 
(b) Subject to Section 6.3(b)(11), the Company shall file and record any
amendments or restatements to the Certificate of Formation of the Company as are
required by the Act to reflect the terms and conditions of this Agreement.  The
Company shall be qualified in any jurisdiction in which the Company conducts
business where such qualification is required.  The Company shall also file all
other documents as may be required or appropriate under the Laws of the State of
Delaware and of any other jurisdiction in which the Company may conduct
business.  The Company shall, on request, provide any Member with copies of each
such document as filed and recorded.
 
(c) Each Officer of the Company appointed by the Board pursuant to Section 6.5
is hereby designated as an “authorized person,” within the meaning of Section
18-201 of the Act, to execute, deliver and file, or cause the execution,
delivery and filing of, all certificates, notices or other instruments (and any
amendments or restatements thereof) required or permitted by the Act to be filed
in the office of the Secretary of State of the State of Delaware in connection
with the formation of the Company and any other certificate, notice or other
instrument (and any amendment or restatement thereof) that is necessary for the
Company to do business in a jurisdiction in which the Company may wish to
conduct business and where such qualification is required.
 
(d) The Members shall have the rights and liabilities as provided in the Act,
except as is otherwise expressly provided herein.  As of the Effective Date,
Magnetation shall continue as a Member of the Company and AKS is admitted as a
Member of the Company.
 
(e) This Agreement constitutes the limited liability company agreement (as
defined in the Act) of the Company.
 
1.2 Name.  The name of the Company is:  Magnetation LLC.
 
1.3 Purpose of the Company.  The purposes for which the Company is organized are
to:
 
(a) design, develop, construct, own and operate (1) facilities (each
individually, a “Plant”) to produce iron oxide concentrate from iron-bearing
hematite materials contained within impoundment basins and other iron-bearing
materials (“Basins”), including, without limitation, by utilizing Intellectual
Property and Technology licensed by Magnetation to the Company pursuant to the
Technology License Agreement (collectively, the “Licensed Technology”) and (2) a
facility to produce iron ore flux pellets, each such activity as described in
more detail below;
 
(b) own and operate the existing Plant currently owned and operated by
Magnetation located south of Keewatin, Minnesota (“Plant 1”) and to complete
construction of and own and operate an additional Plant located in between the
Holman and East Trout Lake Basins south of Taconite, Minnesota (“Plant 2”)
(collectively, “Phase I”);
 
 
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(c) identify, secure rights to, design, develop, construct, own and operate (1)
no less than two (2) additional Plants (“Plant 4” and “Plant 5”), and (2) one
(1) pellet plant (“Pellet Plant”) capable of producing approximately three
million tons of iron ore flux pellets annually, or such other conversion plant
as the Members may agree upon (collectively, “Phase II”); and
 
(d) engage in all lawful activities and to enter into, exercise the rights to
enjoy the benefits under, and discharge the obligations of the Joint Venture
pursuant to, all contracts, agreements and other instruments which the Company
shall determine (pursuant to such approvals, if any, required of the Board of
Managers or of the Members contemplated by this Agreement or required by the
Act) to be necessary or suitable for or incidental to the accomplishment and
conduct of the foregoing purposes set forth in clauses (a), (b), and (c) above
(collectively the “Business”).
 
1.4 Powers of the Company.  The Company shall possess and may exercise all the
powers and privileges granted by the Act, by any other applicable Law, and by
this Agreement, together with any powers incidental thereto, including such
powers and privileges as may be necessary or suitable for or convenient to the
conduct, promotion or attainment of the business, purposes or activities of the
Company.
 
1.5 Principal Place of Business.  The principal place of business and mailing
address of the Company is Red Rock Business Center, 832 First Street, Suite 130,
Nashwauk, Minnesota 55769, or at such other location as may be specified from
time to time by the Board of Managers.  The Company also may establish
additional places of business or offices for maintenance of records as the Board
of Managers determines are necessary or appropriate.
 
1.6 Supersedes Prior Agreements.  This Agreement supersedes and replaces all
prior versions of any operating agreement or limited liability company agreement
for the Company.
 
1.7 Exclusivity.  Other than (a) a certain Technology  License Agreement dated
August 19, 2011 (“MR License”), existing as of the Effective Date between
Magnetation and Mining Resources, LLC and (b) any license or licenses that
Magnetation may elect to provide to or in connection with joint ventures with
Cargill, Inc. (“Cargill Licenses”), consistent with a certain Letter of Intent
between Magnetation and Cargill, Inc., dated December 9, 2010, a true and
correct copy of which has been provided to AKS, Magnetation agrees that, as
further set forth in and subject to the terms and conditions of the Technology
License Agreement, it will not use the Licensed Technology in the United States
or license or grant any rights under or to the Licensed Technology to any other
Person for such use in the United States for the production of iron ore
concentrate for a period that shall commence on the Effective Date and terminate
on the earliest of (w) an Uncured AKS Contribution Default, (x) the Phase II
Abandonment Date, (y) the Phase II Completion Date, or (z) the tenth (10th)
anniversary of the Effective Date. Magnetation further agrees not to amend or
otherwise modify the MR License in any manner, through amendment, waiver,
modification, or otherwise, if such amendment would adversely and materially
impact the Company, without prior written consent from AKS, which consent may be
withheld, conditioned or delayed by AKS in its sole discretion, provided that,
for purposes of clarity, the foregoing restriction does not apply to any
extensions or renewals of the MR License or any of the Cargill Licenses in
accordance with their terms. The Parties acknowledge that the
 
 
3

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aforementioned exclusivity restriction shall not limit Magnetation and AKS from
mutually agreeing, each in their sole discretion, to collaborate on projects,
whether within the Company or to be governed by other future binding agreements,
which could include, inter alia, granting a license to the Licensed Technology
to other Persons.
 
ARTICLE 2.
INITIAL CAPITAL CONTRIBUTIONS AND MEMBERSHIP UNITS
 
2.1 Capital Contributions.
 
(a) Magnetation has previously made the Capital Contributions described on
Schedule 2.1(a) and on the AKS Initial Funding Date will make the Capital
Contributions described on Schedule 2.1(a) relating to Plant 1 (“Plant 1 Capital
Contributions”) pursuant to the JV Formation Agreement.  On or prior to January
3, 2012, Magnetation will take all necessary actions to make a Capital
Contribution of Plant 1, as such asset is described on Schedule 2.1(a), pursuant
to the JV Formation Agreement (Plant 1, together with the Capital Contributions
in the preceding sentence, the “Contributed Magnetation Assets”).
 
(b) AKS will make an aggregate Capital Contribution of Two Hundred Ninety-Seven
Million Five Hundred Thousand Dollars ($297,500,000.00) (“AKS Capital
Contributions”), allocated One Hundred Forty-Seven Million Five Hundred Thousand
Dollars ($147,500,000.00) to Phase I (the “Phase I Portion”) and One Hundred
Fifty Million Dollars ($150,000,000.00) to Phase II (the “Phase II Portion”),
which shall be made in cash and in accordance with the following schedules:
 
(1) One Hundred Million Dollars ($100,000,000.00) of the Phase I Portion on
October 4, 2011 (the “AKS Initial Funding Date”), subject to the satisfaction
(or waiver by AKS, in its sole discretion) of the conditions set forth in
Article 14;
 
(2) Forty Seven Million Five Hundred Thousand Dollars ($47,500,000.00) (the
“Phase I Balance”) of the Phase I Portion not later than the tenth (10th) day
following the satisfaction (or waiver by AKS, in its sole discretion) of the
conditions set forth in the Supplemental Letter (the “Phase I Conditions”) and
the receipt by AKS of the documents set forth in Section 2.1(c) below; and
 
(3) The Phase II Portion (“Phase II Portion”) upon the satisfaction (or waiver
by AKS, in its sole discretion) of the conditions set forth in the Supplemental
Letter (the “Phase II Conditions”) and at the times and upon the receipt by AKS
of the documents set forth in Section 2.1(d) below.  Notwithstanding the
foregoing, AKS shall not be obligated to pay any portion of the Phase II Portion
if all of the Phase II Conditions have not been satisfied or waived by AKS on or
prior to the fifth (5th) anniversary of the Effective Date.
 
(c) The obligation of AKS to make the Phase I Balance Capital Contribution is
subject to its receipt of a certificate executed on behalf of the Board of
Managers to the
 
 
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effect that the Board of Managers has determined that the Phase I Conditions
have been satisfied.
 
(d) (1) Other than as provided in Section 2.1(d)(2) below, the obligation of AKS
to make the Phase II Portion Capital Contribution is subject to its receipt of
one or more written requests from the Board of Managers for all or a portion of
the Phase II Portion as specified in such written requests.  Each such request
of the Board of Managers (i) must be accompanied by a certificate executed on
behalf of the Board of Managers to the effect that (A) the Board of Managers has
determined that the Phase II Conditions have been satisfied (which certification
need accompany only the first request made pursuant to this Section 2.1(d)(1))
and (B) the Company has a present need for the cash funds specified in the
request to meet its capital and operating expenses as they will become due and
payable and (ii) may not direct AKS to make the specified Capital Contribution
prior to the date that is the tenth (10th) day following the date of AKS’
receipt of such request.
 
(2)           Notwithstanding that AKS may not have received written requests
pursuant to Section 2.1(d)(1) above for the following amounts by the following
times, AKS shall make the following Phase II Portion Capital Contributions no
later than the corresponding dates indicated below:
 
Amount
Date of Capital Contribution
$50 million
Six (6) months after the satisfaction (or waiver by AKS, in its sole discretion)
of the Phase II Conditions
$50 million
Twelve (12) months after the satisfaction (or waiver by AKS, in its sole
discretion) of the Phase II Conditions
$50 million
Twenty Four (24) months after the satisfaction (or waiver by AKS, in its sole
discretion) of the Phase II Conditions

 
(3)           Phase II Portion Capital Contributions made by AKS pursuant to
Section 2.1(d)(1) above shall be credited against AKS’ obligations pursuant to
Section 2.1(d)(2).
 
(e) For the avoidance of doubt, the failure of either or both of the Phase I
Conditions and the Phase II Conditions to be satisfied and the consequence that
AKS does not make either or both of the Phase I Balance or Phase II Portion
Capital Contributions shall not affect or dilute AKS’ Percentage Interest.
 
(f) The Capital Contributions described in Section 2.1(a) have an agreed value
as of the Effective Date of this Agreement of $298,692,400.  Immediately after
the occurrence of the last of the AKS Capital Contributions of the Phase II
Portion, there shall be a revaluation of all Company property in accordance with
Section 2.02 of Appendix A with any appreciation or depreciation being allocated
between Magnetation and AKS so as to
 
 
5

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cause the Capital Account balances of Magnetation and AKS to stand in the same
ratio to one another as their respective Percentage Interests bear to one
another to the maximum extent possible.
 
2.2 Membership Units.  In consideration of the Capital Contributions made or to
be made by the Members pursuant to Section 2.1 hereof, Magnetation and AKS will
be issued effective on the Effective Date the respective number of Units of
ownership interest in the Company set forth opposite its name in Schedule
2.2(inclusive, with respect to Magnetation, of any Interest currently held by
Magnetation in the Company).
 
2.3 Failure to Make Article 2 Capital Contributions.
 
(a) If Magnetation fails to make the Plant 1 Capital Contributions to the
Company as required by Section 2.1(a), and such failure has not been cured on or
prior to January 11, 2012, then, beginning January 12, 2012, distributions that
would have otherwise accrued to Magnetation under this Agreement shall instead
be credited to AKS’ Capital Account at a rate of Fifteen Thousand Dollars
($15,000) per calendar day, continuing until Magnetation makes the Plant 1
Capital Contributions to the Company as required by Section 2.1(a), and, in
addition, in the event such failure by Magnetation is not cured on or prior to
April 1, 2012, AKS shall have allocated to it ten thousand one (10,001)
additional Units above those specified in Section 2.2 for each day that such
failure exists after April 1, 2012 without the need for payment by AKS of any
additional consideration or Capital Contribution to the Company.  Such
allocation of additional Units to AKS shall not affect Magnetation’s obligation
to contribute Plant 1 to the capital of the Company or the provisions of Section
15.1 as they relate to Magnetation’s failure to make such Capital
Contribution.  Notwithstanding the foregoing, in the event that Magnetation is
unable to fully contribute the Plant 1 Capital Contributions to the Company as
the result of its inability to procure required consents to transfer the assets
or a similar event which is beyond the control of Magnetation, and in the event
Magnetation and AKS mutually agree in good faith to an alternative to transfer
which provides the Company with substantially the same economic benefit as if
the Plant 1 Capital Contribution had been fully made, then from and after the
date of the implementation of such agreed upon alternative, Magnetation shall be
deemed to have satisfied its obligations to make the Plant 1 Capital
Contributions and shall not be in breach such obligations, and the remedies set
forth in this Section 2.3(a) shall not apply.  For purposes of this Section
2.3(a), AKS shall not unreasonably withhold, condition or delay its agreement to
any alternative that may be proposed by Magnetation, provided that AKS may in
its sole discretion withhold its agreement if such alternative is incapable of
being implemented by July 1, 2012.
 
(b) If AKS fails to make the Phase I Balance or all or any part of the Phase II
Portion Capital Contributions when due and (1) AKS is not disputing in good
faith its obligation to make such Capital Contributions pursuant to the
provisions of Section 18.6 and (2) such failure continues for sixty (60) days
after such contributions are due hereunder, then, effective on the sixty-first
(61st) day after such contributions were due, Magnetation shall be allocated two
(2) additional Units above those specified in Section 2.2 for each $1 of Capital
Contribution that AKS has failed to make without the need for payment by
 
 
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Magnetation of any additional consideration or Capital Contribution to the
Company, provided that AKS’ Percentage Interest shall not, by reason of this
Section 2.3(b), be reduced to less than thirty-three percent (33%).  Such
allocation of additional Units to Magnetation shall be deemed to cure the
default resulting from AKS’ failure to make its Capital Contributions pursuant
to Article 2 and, from and after the sixty-first (61st) day referenced above,
the provisions of Section 15.1 shall no longer be applicable to such past
default.
 
(c) If (i) AKS fails to contribute the Phase I Balance or all or any portion of
the Phase II Portion Capital Contributions when due and (ii) AKS is not
disputing in good faith its obligation to make such Capital Contributions
pursuant to the provisions of Section 18.6 and (iii) such failure continues for
sixty (60) days after such contributions are due, then Magnetation may take the
action of a Member who has participated in a call for Additional Capital
Contributions pursuant to Section 3.1(h).
 
ARTICLE 3.
ADDITIONAL CAPITAL CONTRIBUTIONS
 
3.1 Additional Capital Contributions.
 
(a) From time to time, the Board will consider and discuss whether the Company
is in need of additional cash funds beyond those funds made available through
the AKS Phase I Balance and the Phase II Portion Capital Contributions.  If the
Board determines that the Company has such need, the Board shall consider and
discuss the amounts of the needed additional funds and the most appropriate
funding of those needed amounts (e.g., whether such amounts should be obtained
through borrowings, additional cash contributions from the Members or through
other means).  If, following such consultations, the Board determines that
Capital Contributions beyond those contemplated by Article 2 (“Additional
Capital Contributions”) are necessary for the Company to pay its capital and
operating expenses as they will become due and payable, then the Board may make
one (1) or more calls for Additional Capital Contributions from the
Members.  Calls for Additional Capital Contributions made by the Board pursuant
to this Section 3.1(a) shall be made by written notice delivered to the Members
and will be due and owing sixty (60) days after the date of such call.
 
(b) In addition to the foregoing, at any time following the satisfaction of the
Phase II Conditions and prior to the Phase II Abandonment Date, in the event
either Member determines that the Company is in need of additional cash funds in
order for the Company to complete Phase II, such Member may request a meeting of
the Board to discuss such funding needs.  The Board shall consider in good faith
such needs and shall determine the most beneficial method for meeting the
funding needs, which may include securing loans from third party financing
sources, securing loans from Members, or calling for Additional Capital
Contributions pursuant to Section 3.1(c).
 
(c) If within ninety (90) days of the date of any meeting of the Board held
pursuant to Section 3.1(b), the Company has not obtained all of the additional
funding and either Member reasonably determines that any material aspect of
Phase II is being altered or
 
 
7

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delayed in any material manner as a result of insufficient cash resources, then
such Member (the “Calling Member”) may seek additional financing sources for the
Company pursuant to Section 3.1(d).
 
(d) The Calling Member may seek the additional funds from the following sources,
provided it shall seek such funds solely in the following order:
 
(i) The Board or the Calling Member shall first make a call for an Additional
Capital Contribution from the Members up to the amount of funds equal to 1.996
times the amount of funds in the Magnetation Capital Reserve Account, until such
funds are exhausted, and pursuant to such call, Magnetation and AKS shall make
Additional Capital Contributions as described in Sections 3.1(g)(1) and (2);
 
(ii) If the funds provided pursuant to clause (i) above are not sufficient, then
the Board or the Calling Member on behalf of the Company shall seek a loan from
a third party financing source or sources on commercially reasonable terms;
 
(iii) If the funds provided pursuant to clause (i) and, if available, clause
(ii) above are not sufficient, then the Board or the Calling Member on behalf of
the Company shall seek a loan from a Member or Members on commercially
reasonable terms, which either Member is entitled to decline in its sole
discretion; and
 
(iv) If the funds provided pursuant to clause (i), and, if available, clauses
(ii) and (iii) above are not sufficient, then the Board or the Calling Member
may make one (1) or more calls for Additional Capital Contributions in excess of
the amount set forth in clause (i) above from the Members by written notice to
the Members; provided, however, that AKS shall not be entitled to call for
Additional Capital Contributions pursuant to this Section 3.1(d)(iv) unless AKS
has provided a loan to the Company pursuant to Section 3.1(d)(iii) in at least
the original principal amount of $25 million.
 
(e) Any Additional Capital Contributions pursuant to Section 3.1(d)(i) or
3.1(d)(iv) will be due and owing thirty (30) days after the date of such
call.  The other provisions of this Section 3.1 shall apply to any calls for
Additional Capital Contributions made by a Calling Member pursuant to such
sections to the same extent as calls for Additional Capital Contributions made
by the Board pursuant to Section 3.1(a).
 
(f) Unless agreed to otherwise by all of the Members at such time, each Member
shall fund its pro rata portion of the aggregate Additional Capital
Contributions specified in the notice delivered pursuant to Section 3.1(a) or
3.1(d) in accordance with its respective Percentage Interests at the time of the
call.  Each Member making Additional Capital Contributions pursuant to this
Article 3 shall receive one (1) additional Unit for each dollar of Additional
Capital Contributions made by such contributing Member. For
 
 
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purposes of clarity, the limitations on dilution of AKS’ Percentage Interest
contemplated by Section 2.3(b) hereof shall not apply to any dilution with
respect to Additional Capital Contributions.
 
(g) 
 
(1) With respect to Magnetation, Additional Capital Contributions up to the
amount of funds held by the Company in the Magnetation Capital Reserve Account
shall be mandatory, and the Company, on behalf of Magnetation, shall release
funds from the Magnetation Capital Reserve Account in the amounts for which
Magnetation is responsible pursuant to this Article 3 to an unrestricted account
of the Company (unless Magnetation for some or all of its pro rata portion of
the Additional Capital Contributions in its discretion contributes cash or other
assets acceptable to AKS, in its sole discretion, valued at the fair market
value thereof as of the applicable dates, in which event the amount released
from the Magnetation Capital Reserve Account shall be adjusted
accordingly).  Additional Capital Contributions by Magnetation in excess of the
amounts held in the Magnetation Capital Reserve Account shall be voluntary,
subject to clause (3) below.
 
(2) With respect to AKS, Additional Capital Contributions up to ninety nine and
six tenths percent (99.6%) of the amount of funds held in the Magnetation
Capital Reserve Account (the “AKS Matching Amount”) shall be
mandatory.  Additional Capital Contributions by AKS in excess of such amount
shall be voluntary, subject to clause (3) below.
 
(3) The Calling Member shall be obligated to fund its pro rata portion of the
aggregate Additional Capital Contributions specified in its notice delivered
pursuant to Section 3.1(d)(iv).
 
(h) If any Member does not participate in any call for Additional Capital
Contributions or participates in an amount that is less than its pro rata amount
as set forth in Section 3.1(f) above, then each other Member who has so
participated may, at its sole discretion and option, fund such amounts that have
not been contributed to the capital of the Company by:
 
(1) Making Additional Capital Contributions on a pro rata basis in accordance
with the Percentage Interests of all Members participating in making up such
shortfall, or
 
(2) In lieu of making Additional Capital Contributions, causing the shortfall
amount to be funded by loans extended by the participating Member(s) to the
Company, such loans to have commercially reasonable terms (and which loans shall
not be subject to the provisions of Section 6.3(b)(6) or otherwise subject to
the approval of the Board of Managers).
 
 
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ARTICLE 4.
CAPITAL ACCOUNTS AND ALLOCATIONS
 
4.1 Capital Accounts. Each Member will have a Capital Account maintained as set
forth in Appendix A.
 
4.2 Allocations of Book Income and Loss.  Except as stated in Appendix A and
Section 2.1(f):
 
(a) Book Income:  Except for the components of the Company’s Book income that
are specially allocated pursuant to Section 4.1(c) below, the Company’s Book
income for any Fiscal Year shall be allocated between the Members in proportion
to their respective Percentage Interests.
 
(b) Book Loss:  Except for the components of the Company’s Book loss that are
specially allocated pursuant to Section 4.1(c) below, the Company’s Book loss
for any Fiscal Year shall be allocated between the Members in proportion to
their respective Percentage Interests.
 
(c) Book Depreciation, Amortization and Loss on Disposition In Respect of
Section 2.1(a) Assets:  For any Fiscal Year, Book depreciation and amortization
in respect of the assets contributed by Magnetation pursuant to Section 2.1(a)
and any loss on disposition of such assets shall be allocated (i) first, 100% to
Magnetation until the Capital Account balances of the Members stand in the same
ratio to one another as their respective Percentage Interests bear to one
another, and (ii) thereafter, between the Members in proportion to their
respective Percentage Interests.
 
4.3 Tax Allocations.  Except as stated in Appendix A, each item of income, gain,
loss and deduction is to be allocated for federal income tax purposes in the
same manner as the corresponding allocation for Book purposes.
 
4.4 Membership Units.  A Member’s limited liability company interest in the
Company shall be represented by the “Units” held by such Member.  With respect
to capital contributions made by the Members as contemplated in Articles 2 and 3
of this Agreement, each Unit represents one U.S. dollar of capital contributed
to the Company (in cash or other property or in services, in which case such
other property or services shall be valued at its fair market value as
determined by the Board of Managers).  Each Unit shall have equal rights and
preferences except as otherwise provided herein.
 
4.5 No Interest.  No interest shall be paid by the Company on Capital
Contributions, balances in a Member’s Capital Account or any other funds
contributed to the Company as capital or distributed by the Company under this
Agreement.
 
4.6 No Withdrawal.  In accordance with the Act, a Member, under certain
circumstances, may be required to return to the Company, for the benefit of the
Company or the Company’s creditors, amounts previously wrongfully distributed to
such Member out of such Member’s Capital Account.
 
 
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ARTICLE 5.
DISTRIBUTIONS
 
5.1 Tax Distributions.
 
(a) Within thirty (30) days after the end of each calendar quarter, the Company
shall make a distribution in cash to the Members in proportion to their
respective Percentage Interests.  The aggregate amount of such distribution
shall be the smallest amount necessary so that each Member’s share of the
distribution is not less than the product of (i) the Effective Tax Rate,
multiplied by (ii) the amount of the Company’s expected net taxable income (if
any) allocated to such Member for the applicable calendar quarter, as determined
by the Board of Managers in good faith.
 
(b) After the filing of the Company’s tax return for each Fiscal Year, the Board
of Managers shall reconcile the estimated tax distributions actually made to
each Member under Section 5.1(a) for such Fiscal Year against the tax
distributions that would have been distributable to such Member under Section
5.1(a) on the basis of the amount of net taxable income actually reported on
federal Schedule K-1, Form 1065, as issued to such Member with respect to such
Fiscal Year, and the Board of Managers shall cause to be distributed to such
Member the excess, if any, of such amount over the estimated tax distributions
made to such Member under Section 5.1(a) during such Fiscal Year; provided,
however, that all distributions pursuant to this Section 5.1(b) shall be made to
the Members in proportion to their respective Percentage Interests.
 
(c) In the event that a Member Transfers all or part of its Interest in
accordance with this Agreement, amounts allocated or distributed hereunder to
the transferor Member during the year of transfer in respect of the transferred
Interest shall be treated as being previously allocated or distributed, as the
case may be, to the transferee Member.
 
(d) Each of Magnetation and AKS represent to the Company that it is not subject
to any requirement that the Company withhold taxes from distributions to it.
 
5.2 Quarterly Distributions.  Unless otherwise agreed by the Members, and
subject to the provisions of Sections 5.3 and 5.4, on the first Business Day of
each calendar quarter (commencing April 2, 2012), the Company shall distribute
the Net Available Cash of the Company to the Members in accordance with their
respective Percentage Interests.
 
5.3 Limitations on Distributions.  All distributions to the Members under this
Agreement shall be subject in all respects to, and limited or prohibited to the
extent provided by, applicable Law (including, without limitation, § 18-607 of
the Act, as the same may be amended from time to time) or loan or other
agreements entered into by the Company from time to time.  Distributions of cash
under this Article 5 are to be made only to the extent cash is available to the
Company without requiring (a) the sale of Company assets or the pledge of
Company assets at a time or on terms that the Board of Managers believes are not
in the best interests of the Company, or (b) a reduction in reserves that the
Board of Managers determines are necessary or desirable for working capital,
capital expenditures or other Company purposes.
 
 
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5.4 Limitation on Payment of Distributions.  The Company shall not make
distributions to Magnetation under Section 5.2 or 5.5 which, in the aggregate,
exceed Thirty Million Dollars ($30,000,000.00) prior to the earlier of the Phase
II Abandonment Date or the Phase II Completion Date. (For purposes of
clarification, distributions made pursuant to Section 5.1 shall not be included
for purposes of calculating such Thirty Million Dollar ($30,000,000.00)
limitation.)  Nothing in this Section 5.4 is intended to prevent the Company
from authorizing a pro rata distribution for the account of Magnetation pursuant
to the provisions of Sections 5.2 or 5.5; rather, any such amounts in excess of
Thirty Million Dollars ($30,000,000.00) shall not be distributed to Magnetation
but instead shall be held by the Company in a segregated account (the
“Magnetation Capital Reserve Account”) as a source for Additional Capital
Contributions to be made by Magnetation pursuant to Section 3.1 until such time
as the limitations of this Section 5.4 are lifted (“Deferred
Distributions”).  Funds held in the Magnetation Capital Reserve Account shall be
invested only in the instruments set forth in Schedule 5.4.  Prior to the
earlier of (i) the Phase II Abandonment Date, (ii) the Phase II Completion Date,
(iii) the tenth (10th) anniversary of the date of this Agreement, or (iv) the
date of any Uncured AKS Contribution Default, no such funds shall be released
from such account except pursuant to Article 3 or with the consent of AKS;
provided that to the extent the income (if any) on the Deferred Distributions is
allocable to Magnetation, then the Company shall distribute to Magnetation
within thirty (30) days of each calendar quarter that portion of the Deferred
Distributions equal to the Effective Tax Rate multiplied by the amount of such
allocated income to the extent such distributions were not previously made or
duplicated pursuant to Section 5.1(a).  Within five (5) Business Days of the
earlier of (i) the Phase II Abandonment Date, (ii) the Phase II Completion Date,
(iii) the tenth (10th) anniversary of the date of this Agreement, or (iv) the
date of any Uncured AKS Contribution Default, any funds held in the Magnetation
Capital Reserve Account shall be released to Magnetation.  Notwithstanding the
foregoing, the limitations in this Section 5.4 shall not apply to any
distributions pursuant to Section 5.1 or Section 9.5(b) of this Agreement.
 
5.5 Other Distributions.  Subject to the provisions of Sections 5.3 and 5.4, the
Company shall distribute such other amounts in addition to the distributions
described in Section 5.2 as determined from time to time by the Board of
Managers by a Super Majority Vote of the Board, to the Members pro rata in
accordance with their Percentage Interests;  provided, however, that
notwithstanding anything to the contrary contained herein, (a) the Company shall
make no distribution of the assets contributed by Magnetation pursuant to
Section 2.1(a) (or the proceeds thereof) prior to the earlier of (i) the
occurrence of Capital Account Proportionality or (ii) the liquidation of the
Company, and (b) distributions in connection with a liquidation of the Company
shall be made exclusively pursuant to Section 9.5(b)(5).
 
ARTICLE 6.
MANAGEMENT and GOVERNANCE
 
6.1 Board of Managers.
 
(a) The Company shall be managed by a Board of Managers consisting of seven (7)
individuals.  The members of the Board of Managers are sometimes referred to
herein as a “Manager” or “Board Representative”.
 
 
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(b) The Member owning a majority of the Units shall appoint four (4) individuals
to the Board of Managers and the Member owning a minority of the Units shall
appoint three (3) individuals to the Board of Managers.  Each Manager shall, to
the maximum extent permitted by Law, be entitled to represent solely the
interests of the Member that shall have appointed such Manager.  Each Manager
appointed by a Member shall be an employee of, or otherwise affiliated with,
such Member or its Affiliates and shall otherwise be familiar with the Business.
 
(c) As of the date of this Agreement, the Board of Managers consists of the
following seven (7) Managers: Larry Lehtinen, Matthew Lehtinen, David Chappie
and Danilo Bibancos, appointed by Magnetation, and John F. Kaloski, Roger K.
Newport and Maurice A. Reed, appointed by AKS.
 
(d) Each Board Representative is to serve until the earlier of his or her death,
resignation or removal.  Each Member shall have the exclusive right to (1)
remove (with or without cause and with or without prior notice) any of its
appointed Managers at any time and appoint their respective successors, and (2)
appoint an individual to fill any vacancies created by reason of the removal,
resignation, or death of such Member’s appointed Manager.  Appointments and
removals of Managers made pursuant to this Section 6.1(d) shall be evidenced by
an instrument in writing signed by a duly authorized representative of the
appointing Member.
 
(e) No Manager shall be entitled to any form of remuneration or reimbursement of
expenses from the Company, and no former Manager nor the family members or
dependents thereof shall have any right to receive benefits from the Company, in
each case in such Person’s capacity as Manager or former Manager.  Nothing
contained in this Agreement shall be construed to preclude any Manager from
serving the Company in any other capacity and receiving compensation for such
service.
 
(f) In the event that the Member holding a majority of the outstanding Units is
diluted (the “Diluted Member”) pursuant to the provisions of this Agreement such
that it no longer holds a majority of the Units, then, effective on the first
Business Day of the next succeeding calendar quarter, one (1) Manager appointed
by such Diluted Member shall resign and the other Member shall appoint an
individual to fill such vacancy.  The Diluted Member shall thereafter be
entitled to appoint three (3) individuals to the Board while the other Member
shall be entitled to appoint four (4) individuals to the Board.
 
6.2 Authority of the Board of Managers.
 
(a) The Board shall, subject to provisions of this Agreement, and except for
matters or decisions requiring Member approval under the Act, have full and
complete discretion and authority to manage and control (and, as provided in
this Agreement, delegate the management or control of) the business and affairs
of the Company, to make all decisions affecting the business and affairs of the
Company and to take all such actions as it deems necessary or appropriate to
accomplish the purposes of the Company as set forth herein.  The Board, acting
as a body pursuant to this Agreement, shall constitute a “manager” for
 
 
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purposes of the Act, and the actions of the Board taken in accordance with the
provisions of this Agreement shall bind the Company.
 
(b) The Board will act only as a body, and no Board Representative will have any
power to bind the Company or authorize any action, except as a part of the
Board.
 
(c) The Board of Managers may delegate to the Officers, other employees,
committees, professional managers and agents of the Company the authority to
conduct the business of the Company in the ordinary course in accordance with
this Agreement and any policy of delegation, which may be adopted and revised
from time to time by the Board of Managers by a Super Majority Vote of the
Board.
 
(d) Subject to Section 6.3(b)(24), the Board may establish one or more
committees. Each such committee shall contain such number of Managers or other
individuals as shall be designated by the Board in resolutions establishing such
committee.  Any such committee shall have such powers and authority as the Board
may provide by resolution.  Unless provided otherwise by Board Approval, any
action of such committee shall require approval by the majority vote of the
members of the committee.
 
6.3 Actions by the Board of Managers.
 
(a) Majority Vote of the Board.  Each Board Representative shall have one (1)
vote.  Subject to Section 6.3(b) or as otherwise expressly set forth in this
Agreement, wherever Approval by or authorization of the Board is required by
this Agreement or by the Act or otherwise the Board takes action or a vote, such
Approval or authorization shall consist of a Majority Vote of the Board.
 
(b) Actions Requiring Super Majority Vote of the Board for
Approval.  Notwithstanding anything contained herein to the contrary, the Super
Majority Vote of the Board is required to authorize the Company to take the
following actions:
 
(1) engaging in a business other than the Business;
 
(2) approving the annual budget (or a budget for any other timeframe) and
strategic plan for the Company (“Approved Budget”), provided, however, that if
such annual budget and strategic plan is not approved by Super Majority Vote of
the Board prior to the first calendar day of any Fiscal Year (the “Relevant
Year”), the operating budget of the Company contained in the Approved Budget for
the previous Fiscal Year (annualized, if such previous year’s Approved Budget is
in respect of a period less than one year) shall be the operating budget for the
Relevant Year, adjusted to increase by five percent (5%) over the preceding
Fiscal Year each line item set forth in the operating budget for the preceding
Fiscal Year unless and until an annual budget and strategic plan for the
Relevant Year shall be approved by Super Majority Vote of the Board;
 
(3) admitting a new Member to the Company;
 
 
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(4) other than as otherwise specifically provided for in this Agreement, issuing
any additional Units to a Member;
 
(5) other than as otherwise specifically provided for in this Agreement,
redemption by the Company of any Units from a Member;
 
(6) incurring debt for borrowed money other than as contemplated in the Approved
Budget or Section 3.1(d)(ii) or Section 3.1(h);
 
(7) making in any fiscal year any individual capital expenditures (other than as
contemplated in the Approved Budget) in excess of $2,000,000;
 
(8) selling all or substantially all the assets of the Company;
 
(9) using the name “Magnetation” or “AK Steel,” collectively or separately in
connection with the Business, provided that as long as Magnetation holds more
than fifty percent (50%) of the Units, approval by the Super Majority Vote of
the Board regarding the use of the name “Magnetation” by the Company in the
ordinary course of business is not required;
 
(10) guaranteeing the indebtedness of a third party, other than as set forth in
financial instruments entered into in the ordinary course of business;
 
(11) amending this Agreement or the JV Formation Agreement;
 
(12) obligating the Company to be party to a reorganization, merger, share
exchange, consolidation, combination or other similar transaction;
 
(13) entering into voluntary Bankruptcy;
 
(14) the making of any acquisitions, investments or disposals (including
sale-leasebacks) (other than as contemplated in the Approved Budget) with a
value in excess of $2,000,000;
 
(15) the entering into any sales contracts (other than as contemplated in the
Approved Budget) that contemplate the sale or commitment of twenty-five percent
(25%) or more of the Company’s then-current total design capacity with a term in
excess of two (2) years;
 
(16) the entering into, modification or termination of any single agreement or
arrangement (other than as contemplated in the Approved Budget) with a value in
excess of $2,000,000;
 
(17) the entering into of any partnership, joint venture, strategic alliance or
profit sharing arrangement with any person;
 
(18) commencing, settling or approving any strategy with respect to any
litigation or arbitration proceedings, other than litigation with a Member of
the
 
 
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Company, with (i) any person where the aggregate amount in dispute
exceeds  $250,000 or (ii) any government agency;
 
(19) the entering into, material modification or termination of any labor
agreement that, pursuant to its terms, directly or indirectly imposes any
obligations on AK Steel or any of its Affiliates with respect to their
employees;
 
(20) appointing or removing any Officer of the Company or the delegation of any
powers of the Board to any Officer of the Company;
 
(21) the remuneration and compensation of any Officer of the Company (other than
pursuant to a Project Agreement), or alteration of any terms of employment or
benefits of any Officer of the Company;
 
(22) the indemnification by the Company of any Board Representative, Officer,
committee member, employee, or agent of the Company and any employee or
Affiliate of any Member, other than as required by any applicable Law;
 
(23) the taking of any action by the Tax Matters Partner that could have a
material impact on the other Members, the making (or modification) of any
agreement with any revenue authorities or other taxing authority or the making,
granting, modifying or allowing of any claim, disclaimer, surrender, election or
consent for taxation purposes, the adoption (or modification) of any position in
respect of any tax matter (by way of the filing of a tax return or
otherwise) and the approval of any strategy with respect to any tax matter;
 
(24) appointing any committee of the Board or delegating any of the powers of
the Board of Managers to any committee;
 
(25) other than as otherwise specifically provided for in this Agreement, the
determination to make a call for Additional Capital Contributions;
 
(26) other than as otherwise specifically provided in this Agreement, making any
distributions to the Members;
 
(27) the entering into or the amendment, modification or termination of any
agreement, arrangement or understanding with (i) any Member or any of the
respective Affiliates of a Member, (iii) directors, officers or supervisors of
any Member, any of the respective Affiliates of a Member or the Company, (iv)
shareholders holding or having the ability to exercise control over more than
five percent (5%) of any class of securities of either Member, their respective
Affiliates or the Company, or (v) any person or entity controlled by the
aforementioned persons;
 
(28) appointment and dismissal of the Company’s independent outside auditor;
 
 
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(29) knowingly taking any action or omitting to take any action that would cause
the Company to become an association taxable as a corporation for U.S. income
tax purposes;
 
(30) any agreement (other than as contemplated in the Approved Budget) relating
to any swap, cap, floor, collar, option, forward, cross right or obligation, or
combination thereof or similar transaction, with respect to interest rate,
foreign exchange, currency, commodity (including without limitation iron ore or
energy), credit or equity risk;
 
(31) making any research and development expenditures (other than as
contemplated in the Approved Budget) in excess of $200,000; and
 
(32) dissolving or liquidating the Company (other than as provided in Article
9).
 
(c) Additional Actions Requiring Super Majority Vote of the Board for Approval
During Phase II.  Notwithstanding anything contained herein to the contrary,
from and after the commencement of Phase II, the Super Majority Vote of the
Board is required to authorize the Company to take the following actions, which
are in addition to the requirements under Section 6.3(b):
 
(1) approval of the design of the Pellet Plant;
 
(2) approval of the Pellet Plant capital budget;
 
(3) approval of the Pellet Plant general arrangement and flow sheet;
 
(4) approval of any material changes to the Pellet Plant; and
 
(5) approval of site selection for the Pellet Plant.
 
(d) Material Operational Decisions.  The Chief Executive Officer of the Company,
or such other Officer as delegated by the Board, shall have the general
authority for ordinary course operational decisions, provided that any material
operational decision shall be discussed in advance with a designated AKS Board
Representative and a designated Magnetation Board Representative, and if
approved by such designees, shall be deemed approved and acceptable to AKS and
Magnetation, respectively.  The Chief Executive Officer will use his or her best
efforts to send a confirmation message via electronic mail within three (3)
Business Days of each such approval to all of the Managers summarizing the
material facts of the approved decision in order to maintain a proper record
that such decision was duly authorized.  The following actions shall be deemed
to be, but are not an exclusive listing of, material operational decisions
requiring approval pursuant to this Section (unless approval is required
pursuant to Section 6.3(b)):
 
(1) making in any fiscal year any individual capital expenditures (other than as
contemplated in the Approved Budget) in excess of $500,000;
 
 
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(2) the making of any acquisitions, investments or disposals (including
sale-leasebacks) (other than as contemplated in the Approved Budget) with a
value in excess of $500,000;
 
(3) the entering into any sales contracts (other than as contemplated in the
Approved Budget) that contemplate the sale or commitment of ten percent (10%) or
more of the Company’s then-current total design capacity with a term in excess
of one (1) year;
 
(4) the entering into, modification or termination of any single agreement or
arrangement (other than as contemplated in the Approved Budget) with a value in
excess of $500,000; and
 
(5) making any research and development expenditures (other than as contemplated
in the Approved Budget) in excess of $50,000.
 
6.4 Meetings of the Board of Managers.
 
(a) Board Meetings; Regular and Special Meetings.
 
(1) Regular Meetings.  Regular meetings of the Board of Managers are to be held
at such times and places as may be fixed upon reasonable notice by the Board of
Managers.
 
(2) Special Meetings.  Special meetings of the Board may be called by any single
Board Representative.  Notice of the time and place of a special meeting of the
Board is effective if delivered to each Board Representative by hand, telephone,
electronic mail (with return receipt) or recognized overnight delivery service
at least 48 hours (two (2) days) prior to the time of such special
meeting.  Notices of special meetings of the Board shall identify the purpose of
the special meeting.  No actions other than those specified in the notice may be
considered at a special meeting unless approved by a Super Majority Vote of the
Board.  Notice of adjournment of a meeting and the time and place of the
adjourned meeting shall be given to all members of the Board, unless such time
and place were announced at the meeting at which the adjournment was taken.
 
(b) Location of Board Meetings; Participation by Telephone.  Board meetings may
be held at any location, within or without the United States, as shall be
specified in the notice of such meeting; provided, however, that for each
calendar year, at least one (1) Board meeting shall be held in (1) the office of
Magnetation in or near Grand Rapids, Minnesota or such other office of
Magnetation within the United States, and (2) the office of AKS in West Chester,
Ohio.  Managers may participate in a meeting of the Board by means of telephone
or video conference or similar communications equipment by means of which all
Managers participating in the meeting can hear each other (collectively “Remote
Participation”), and such participation in a meeting is presence in person at
the meeting.
 
 
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(c) Waiver of Notice of Meeting.  Whenever notice of a Board meeting is required
to be given under this Agreement, a written waiver of notice, signed by the
Board Representative entitled to notice, whether before or after the time of the
meeting, is equivalent to notice.  A Board Representative’s attendance at a
meeting, whether in person or by Remote Participation, is a waiver of notice of
that meeting unless the Board Representative at the beginning of the meeting (or
promptly upon the Board Representative’s arrival) objects to holding the meeting
or transacting business at the meeting and does not thereafter vote for or
assent to any action taken at the meeting.
 
(d) Quorum for Board Meetings.  The presence of at least three (3) Board
Representatives appointed by Magnetation and two (2) Board Representatives
appointed by AKS shall constitute a quorum for the transaction of business at a
meeting of the Board.
 
(e) Voting.  No Board Representative is disqualified from voting or otherwise
acting on any matter because the Member that appointed him or her is interested
in the matter to be acted upon by the Board.
 
(f) Action of the Board of Managers Without a Meeting.  Any action required or
permitted to be taken at a meeting of the Board of Managers may be taken without
a meeting if one or more proposed written consents, setting forth the action so
taken or to be taken, (i) is sent to all of the Managers, (ii) is signed by at
least three (3) of the Magnetation Board Representatives and at least two
(2)  of the AKS Board Representatives, and (iii) is delivered to the Secretary
to be included in the Company’s permanent records.  Unless the written consent
specifies that it is effective as of an earlier or later date, action taken
under this Section 6.4(f) will be effective when all Managers (or the duly
authorized representatives thereof) have been provided a copy of the proposed
written consent, and the Managers required to Approve the action have signed the
proposed written consent or counterpart thereof and delivered the same to the
Secretary.  The written consent (which may be signed in one or more
counterparts) of the Board of Managers on any matter under this Section 6.4(f)
has the same force and effect as if that matter were voted upon at a duly called
and constituted meeting of the Board of Managers and may be described as such in
any document or instrument.
 
6.5 Officers of the Company.
 
(a) The Company may have such officers as are appointed, from time to time, by
the Board of Managers, including, without limitation, the following:  Chief
Executive Officer, Chief Financial Officer and Secretary (each, an “Officer”).
 
(b) Each Officer is to hold office until his or her successor is appointed or
elected or until his or her earlier death, resignation or removal.  The Board of
Managers, by Super Majority Vote of the Board, may remove an Officer at any
time.  Any officer may resign at any time by delivering his or her written
resignation to the Board.
 
(c) The Officers shall have the authority, responsibilities and duties as the
Board, by Super Majority Vote of the Board, may delegate, from time to time, to
the Officers.  
 
 
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From time to time, the Board may establish, increase, reduce or otherwise modify
responsibilities for the Officers or may create or eliminate offices, as the
Board considers appropriate.  The same person may hold any number of offices.
 
6.6 Duties of the Officers.  In addition to obligations imposed by other
provisions of this Agreement and any employment agreement to which an Officer
might be a party, each Officer is to devote to the Company such time as is
reasonably necessary and his or her reasonable best efforts to carry out the
business of the Company and to accomplish its purposes.
 
(a) The Chief Executive Officer, either personally or through such Persons as he
or she may designate, shall carry out such actions and perform such duties as
the Board of Managers may from time to time direct.
 
(b) The Chief Financial Officer either personally or through such Persons as he
or she may designate, shall:
 
(1) furnish to each Member the financial statements and reports described in
Article 17;
 
(2) arrange for the preparation and filing of all necessary federal, state and
local tax forms and returns required to be filed by or on behalf of the Company;
 
(3) maintain such financial and accounting internal and disclosure controls with
respect to the Company as may be required for the Company to comply with
applicable Law, including without limitation the Sarbanes-Oxley Act of 2002; and
 
(4) carry out such actions and perform such duties as the Board of Managers may
from time to time direct.
 
(c) The Secretary shall carry out such actions and perform such duties as the
Board of Managers may from time to time direct.
 
6.7 Project Teams.  During Phase II, and subject to (i) AKS being current in its
obligations to contribute the Phase II Portion and (ii) Magnetation or its Board
Representatives not preventing the contribution from the Magnetation Capital
Reserve Account of all amounts due and owing for Magnetation’s pro rata portion
of an Additional Capital Call pursuant to Section 3.1(g) hereof up to the
balance in the Magnetation Capital Reserve Account, Magnetation and AKS shall
cooperate in establishing a project team (“Project Team”) comprised of an equal
number of members appointed by each of Magnetation and AKS with the
responsibility for the construction and operation of the Pellet Plant (and such
other projects as the Board of Managers may designate) and with the following
authority:
 
(a) Major Decisions:  Each Project Team shall have the responsibility to
evaluate and make recommendations to the Board of Managers with respect to
decisions that would reasonably be expected to be material to the applicable
project, including without limitation, the following matters (“Major
Decisions”):
 
 
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(1) Equipment selection;
 
(2) Selection of sites for additional Plants;
 
(3) Grade and quality of concentrate;
 
(4) Expenditures in excess of $500,000 (other than those approved in the Annual
Budget);
 
(5) Transportation of products from the Plants; and
 
(6) Engineering matters.
 
(b) Ordinary Course Decisions:  Other than the Major Decisions and the matters
set forth in Sections 6.3(b) and (c), each Project Team will be authorized to
make such decisions in the ordinary course of the project delegated to such
Project Team.
 
(c) Decision Approval and Deadlocks:  Any decision by a Project Team shall be
made by majority vote of the members of the Project Team, with each Project Team
member having one (1) vote, provided that at least one (1) member appointed by
each of the Members approves each decision.  In the event that the Project Team
is deadlocked after reasonable efforts to resolve such deadlock, the matter
shall be submitted to the Board of Managers for action.
 
6.8 Insurance.  The Company may purchase and maintain insurance on behalf of any
Person who is or was or has agreed to become a Board Representative against any
liability asserted against him or her and incurred by him or her or on his or
her behalf arising out of his or her status as a Board Representative, whether
or not the Company would otherwise have the power to indemnify him or her
against the liability under the provisions of this Agreement.
 
ARTICLE 7.
POWERS AND DUTIES OF AND LIMITATIONS ON THE MEMBERS
 
7.1 No Participation in Management.  Subject to any requirements of applicable
Law, no Member (in its capacity as a Member) has the right to take any part
whatsoever in the management and control of the business of the Company or sign
for or bind the Company, compel a sale or appraisal of Company assets, or sell
or assign its Interest in the Company, except as otherwise provided in this
Agreement.
 
7.2 Rights of the Members.  Each Member is entitled to receive the financial
statements and tax reporting information referred to in Section ‎6.6(b) and
Article 17 and has such additional rights as are elsewhere provided in this
Agreement or mandated by applicable Law.
 
7.3 Limited Liability of the Members.  Except for contributions specifically
required under Articles 2 and 3 and as otherwise specifically agreed in writing
by the Members or as provided elsewhere herein, the Members have no obligation
to make Capital Contributions and no liability for any Company obligations.
 
 
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7.4 Voting Rights of Members.  For purposes of this Agreement, a vote of the
Members is only required if required by the Act or this Agreement.
 
7.5 Exercise of Rights over Affiliate Agreements;
Indemnification.  Notwithstanding anything to the contrary contained in this
Agreement or any Project Agreement, (a) if the Company shall have any claim,
right or remedy of whatever nature against a Member or any Affiliate of a Member
(a “Related Counterparty”) arising under or relating to a Related Party
Transaction, then the other Member shall have the right (at its election) to
exercise or enforce any such claim, right or remedy on behalf of and at the
Company’s reasonable cost and expense; and (b) if the Company becomes involved
in any action against any Related Counterparty or becomes a defendant in any
action brought by any Related Counterparty based upon or relating to any Related
Party Transaction, the other Member shall have the right (at its election) to
control the commencement, defense, management and disposition of such legal
proceeding on behalf of the Company, and shall be reimbursed by the Company for
its reasonable costs and expenses incurred in connection therewith.  The
provisions of this Section 7.5 also apply to any matter for which the Company is
entitled to be indemnified pursuant to Sections 7.8 or 18.2.
 
7.6 Conflict of Interest.  Without in any way limiting each Member’s obligations
under this Agreement and the Project Agreements, to the maximum extent permitted
by the Act and any other applicable Law, the doctrine of corporate opportunity,
or any analogous doctrine, shall not apply with respect to each Member, and each
Member or any of its respective Affiliates, shall not be obligated to present to
the Company any particular investment or business opportunity, regardless of
whether such investment or opportunity is of a character that the Company could
take advantage of if it were presented to the Company, but instead each Member
or its respective Affiliates, shall have the right to pursue such opportunity
independently and for its own account, and neither the Company nor any other
Member shall have, by virtue of this Agreement, any rights or interests in or to
such opportunity or the revenue, income or profit derived therefrom.  Except as
provided in this Agreement, any Project Agreement or any other legally binding
commitment, neither Member nor its respective Affiliates has any obligation to
refrain from any activities that are the same as or similar to those conducted
by the Company or from developing or exploiting any products or services that
are or may be competitive with those of the Company or investing or otherwise
having an interest in any other entity engaged in such
activities.  Notwithstanding the foregoing, this Section 7.6 shall not affect
the provisions of Section 1.7.
 
7.7 Fiduciary Duties.  The Members acknowledge and agree that (a) the Managers
are designees of the Members that appoint them, and are acting as proxies for
such Members with respect to the management of the Company, and (b) the Members
and the Managers do not have any duties (including fiduciary duties) to any
other Member or the Company, and that any duties or implied duties (including
fiduciary duties) of a Member or Manager to the Company or to any other Member
that would otherwise apply at Law or in equity are hereby eliminated to the
maximum extent permitted under the Act and any other applicable Law, and each
Member hereby waives all rights to, and releases each other Member and Manager
from, any such duties; provided, however, that (1) the foregoing shall not
eliminate the obligation of the Members to act in compliance with the express
terms of this Agreement and (2) the foregoing shall not be deemed to eliminate
the implied contractual covenant of good faith and fair dealing of the
Members.  Notwithstanding anything to the contrary contained in this Agreement,
each Member hereby acknowledges and agrees that each Member or Manager, in
determining whether or not to
 
 
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vote in support of or against any particular decision for which Member or Board
consent, respectively, is required, may act in and consider its own best
interest or the best interest of the Member who appointed such Manager,
respectively, and shall not be required to act in or consider the best interests
of the Company or the other Members.  Except as otherwise expressly provided in
this Agreement, nothing contained in this Agreement shall be deemed to
constitute any Manager or Member an agent or legal representative of any other
Member or to create any fiduciary relationship for any purpose
whatsoever.  Except as otherwise expressly provided in this Agreement, a Member
shall not have any authority to act for, or to assume any obligation or
responsibility on behalf of, any other Member or the Company.
 
7.8 Indemnification by the Members.  Each Member hereby agrees to indemnify and
hold harmless the Company and each other Member from and against any and all
losses, claims, damages, liabilities, charges, costs and expenses (including
reasonable attorneys’ fees) actually sustained by any such Person arising out of
any breach by such indemnifying Member of any of its representations, covenants,
obligations or agreements contained in this Agreement or any Project Agreement.
 
ARTICLE 8.
TRANSFERS OF INTEREST; CHANGE OF CONTROL; OFFER TO PURCHASE OR SELL
 
8.1 General Restriction.  Except as expressly and specifically provided in this
Article 8, no Member may sell, exchange, transfer, pledge as security or
collateral for a debt, grant or otherwise allow a lien or other security
interest to attach to, or otherwise dispose of (each a “Transfer”) all or any
portion of such Member’s Interest. The Company shall not recognize any Transfer
of Interest otherwise than in accordance with the terms and provisions of this
Agreement.  Notwithstanding the foregoing, a general grant of a security
interest by a Member in all of its personal property or general intangibles
shall not constitute a Transfer so long as the secured party does not have
possession of any certificate of membership interest, has not made a UCC filing
specifically identifying the Interest and does not notify the Company of any
such lien or security interest.
 
8.2 Involuntary Transfers.
 
(a) In the event a third party shall become the owner of Interests through a
Transfer not in accordance with the terms of this Agreement, including as a
result of an involuntary Transfer, then the transferee shall be deemed an
“Assignee” of Interests subject to such Transfer and shall assume all of the
rights and obligations of the transferring Member under this Agreement,
provided, however, that the transferring Member shall remain fully liable for
all of its obligations under this Agreement unless the non-assigning Member has
given its consent to such Transfer, which consent may be given or withheld in
the non-assigning Member’s discretion.  Further, any such Assignee shall not
possess any of the rights previously held by the transferring Member other than
the right to receive distributions allocated to the transferring Member’s Units
hereunder.  An Assignee shall have no right to vote on any issues relating to
the Company (including, without limitation, issues governed by Section 6.3(b) of
this Agreement), to appoint a
 
 
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Board Representative or to participate in the management of the business and
affairs of the Company.
 
(b) If a Transfer described in Section 8.2(a) is effected, then the Managers
appointed by the transferring Member shall resign, the Board shall be
reconstituted to be comprised of such number of Managers appointed solely by the
non-assigning Member as the non-assigning Member determines in its sole
discretion, and the Assignee shall have the right to appoint one (1) observer to
the Board.
 
8.3 Certain Permitted Transfers.  No Member may Transfer its Interest except for
Transfers of all, but not less than all, its Interest:  (a) to any of its
controlled Affiliates; (b) in accordance with Section 8.5 below; or (c) pursuant
to Approval by a Super Majority Vote of the Board.  Notwithstanding the
foregoing, (1) during the pendency of an Uncured AKS Contribution Default,
Magnetation shall not be bound by the restriction on transfers provided by this
Article 8 and (2) notwithstanding the provisions of Section 8.5, Magnetation
shall not, for so long as it is a Member, Transfer its Interest to a Person
engaged in the production of iron ore or steel or to a Person who is an
Affiliate of any such Person engaged in the production of iron ore or steel.
 
8.4 Requirements for Transfer.  If there is to be any Transfer of Units pursuant
to Section 8.3, such Transfer shall be permitted only after compliance with the
following requirements:  (a) the transferee must execute and deliver to the
Company such documents as the Company may require, including, without
limitation, (1) an opinion of counsel in form and substance satisfactory to the
Company, to the effect that the Transfer of the Units does not violate the
Securities Act or any state securities law and (2) evidence, reasonably
satisfactory to the Company, that the transferee has the financial capacity to
carry out its obligations under this Agreement and (b) the transferee must
execute and deliver a counterpart of this Agreement and expressly assume the
duties and obligations of the transferor hereunder.  Upon compliance with the
foregoing conditions and Transfer of the Units, the transferee will be admitted
as a Member and the transferor will cease to be a Member, provided that, unless
otherwise agreed by a Super Majority Vote of the Board, the transferor shall
remain liable for any liabilities arising from a breach of this Agreement or
other actions by such transferor prior to the Transfer of its Units.
 
8.5 Bona Fide Offer.
 
(a) If, at any time after the Phase II Abandonment Date or Phase II Completion
Date, as applicable, a Member (the “Selling Member”) receives a Bona Fide Offer
to purchase all, but not less than all, of the Selling Member’s Interest, the
Selling Member shall give the other Member (the “Non-Selling Member”) written
notice of the Bona Fide Offer (the “Bona Fide Offer Notice”) which notice shall
include an offer to sell the Selling Member’s Interest to the Non-Selling Member
on the same terms and conditions set forth in the Bona Fide Offer (subject to
the last sentence of this Section 8.5(a)).  The Bona Fide Offer Notice shall
also include the name and address of the person or entity making the Bona Fide
Offer and shall state the price, terms and conditions set forth in the Bona Fide
Offer.  The Non-Selling Member shall have the right, but not the obligation, for
a period of ninety-five (95) days beginning on the date the Non-Selling Member
receives the Bona Fide Offer Notice, to accept the Selling Member’s offer
therein.  The Non-Selling
 
 
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Member shall accept the Selling Member’s offer, if at all, by delivery of
written notice to the Company and the Selling Member, of its intent to purchase
the Selling Member’s Interest, and in such event the Selling Member shall be
obligated to sell its Interest to the Non-Selling Member.  Any provision in the
Bona Fide Offer to the effect that the prospective purchaser reserves the right
to make a further offer or give additional monetary consideration, any
non-monetary term and any side agreement or separate arrangement shall be
disregarded for purposes of this Agreement.  No offer for less than all of a
Member’s Interest shall be considered a Bona Fide Offer.
 
(b) If the Non-Selling Member does not accept the Selling Member’s offer made
pursuant to Section 8.5(a) within the time provided therein, or notifies the
Selling Member in writing before the end of the time provided in Section 8.5(a)
that it will not purchase the offered Interest, then the Selling Member that
received the Bona Fide Offer shall be free to sell its Interest to the person or
entity making the Bona Fide Offer in accordance with the price, terms and
conditions of the Bona Fide Offer upon first giving the Non-Selling Member
written notice if its intention to accept the Bona Fide Offer (the “Acceptance
Notice”); provided, however, (1) the Selling Member shall permit the Non-Selling
Member to participate in such Bona Fide Offer on a pro rata basis in accordance
with their respective Percentage Interests on the same terms and conditions and
(2) if such sale is not completed within ninety (90) days after the date the
Non-Selling Member receives the Bona Fide Offer Notice or if the terms of sale
change in any material respect from the terms set forth in the Bona Fide Offer
Notice, then the Member that received the Bona Fide Offer shall not Transfer its
Interest without again complying with the terms and conditions of this Section
8.5.  A sale is “completed,” for this purpose, when the Selling Member has
received the full consideration (a note is “received,” for this purpose, when it
is delivered, even if installments are to be paid at a later date).
 
8.6 Closing of the Bona Fide Offer.
 
(a) The closing (the “Closing”) of the purchase by the Non-Selling Member of the
Selling Member’s Interest pursuant to Section 8.5(a) will take place on or
before the thirtieth (30th) day following the date on which the Selling Member
receives written notice of the Non-Selling Member’s intent to purchase the
Selling Member’s Interest in accordance with Section 8.5(a) above, or, if that
day is not a business day, on the next following business day (the “Closing
Date”).  The Closing Date will be extended to the extent necessary for either
party to secure any required governmental approval or consent to a date five (5)
Business Days following the approval or consent so long as the party is using
its best efforts to pursue the approval or consent and every thirty (30) days
during the extension delivers to the other party a certificate that such
approval is being so pursued.  For purposes of this provision, “governmental
approval or consent” includes expiration of the Hart-Scott-Rodino waiting period
and similar merger control provisions that do not constitute formal approvals or
consents.
 
(b) At the Closing, the Selling Member will deliver to the Non-Selling Member
the following executed documentation in form reasonably acceptable to other
Member:
 
(1) an assignment of its Interest to the Selling Member;
 
 
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(2) the resignation of each of its Board Representatives who are acting as
members of the Board;
 
(3) representations and warranties by the Selling Member that it owns and has
good title to its Interest free and clear of all liens, claims and encumbrances,
and has the proper authority to transfer the Interest, which representations and
warranties will survive the Closing and will continue indefinitely;
 
(4) all confidential documents relating to the Company in Selling Member’s
possession;
 
(5) all property belonging to the Company; and
 
(6) such other documentation as the Non-Selling Member may reasonably require in
order to vest in the Selling Member full right, title and interest in and to the
Selling Member’s Interest, free and clear of all liens, claims, and
encumbrances.
 
(c) At the Closing, the Non-Selling Member will deliver to the Selling Member:
 
(1) the Purchase Price in immediately available funds, subject to the following:
 
(A) if the Selling Member owes money to the Company, then the purchase price
will be reduced by the amount of the principal and accrued but unpaid interest
on such indebtedness; and
 
(B) if the Company owes money to the Selling Member, then the Company will pay
to the Selling Member the full amount of the principal and accrued but unpaid
interest on such indebtedness.
 
(2) an indemnity agreement, in form reasonably acceptable to the Selling Member,
indemnifying the Selling Member against any claims arising from the conduct of
the Business of the Company from and after the Closing.
 
ARTICLE 9.
TERMINATION EVENTS, DISSOLUTION OF THE COMPANY AND DISTRIBUTIONS UPON
TERMINATION OR DISSOLUTION
 
9.1 Dissolution.  The Company dissolves only upon the occurrence of any of the
following events, whether or not the event would cause a dissolution under the
Act:
 
(a) the sale of all or substantially all of the Company’s assets pursuant to the
terms of this Agreement;
 
(b) the Board elects to dissolve pursuant to a Super Majority Vote by the Board;
 
 
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(c) the Bankruptcy of the Company;
 
(d) the entry of a decree of judicial dissolution; or
 
(e) a Member elects to dissolve the Company pursuant to Section 9.4.
 
9.2 Consequences of Dissolution.  Upon dissolution of the Company pursuant to
Section 9.1, the Company shall be liquidated in accordance with Section 9.5,
unless otherwise mutually agreed by the Members.
 
9.3 Termination Events.  Each of the following shall constitute a “Termination
Event” hereunder:
 
(a) at the election of AKS, in the event of Larry Lehtinen’s retirement or his
voluntary removal from active and regular involvement in management with
Magnetation and the Company, without the prior consent of AKS, prior to the
earliest of (1) the Phase II Abandonment Date, (2) the Phase II Completion Date,
(3) the fifth (5th) anniversary of the Effective Date, or (4) the date of an
Uncured AKS Contribution Default.  (For purposes of clarity, the death or
disability of Larry Lehtinen shall not give rise to a Termination Event.)
 
(b) at the election of a non-defaulting Member, in the event the defaulting
Member is in breach of a representation and warranty or covenant set forth
herein or in a Project Agreement, which breach has not been cured for a period
of ninety (90) days from the date of notice of such default from the
non-defaulting Member and which default has resulted in a Material Adverse
Effect;
 
(c) at the election of the non-Bankrupt Member, in the event of a Bankruptcy of
any Member, or in the case of a Member that does not have substantial assets
other than its Interest, a Bankruptcy of an Affiliate controlling such Member;
 
(d) at the election of AKS, in the event of a Sale of Magnetation, provided that
the right of AKS to make such election is subject to there being no Uncured AKS
Contribution Default; or
 
(e) at the election of Magnetation, in the event of an AKS Change of Control,
provided that upon the date of the consummation of such AKS Change of Control
Magnetation in not in default under this Agreement pursuant to the provisions of
Article 15.
 
9.4 Consequences of Termination Event.  Upon the election of the electing Member
to treat any of the events set forth in Section 9.3 as a Termination Event, such
Member (the “Electing Member”) shall have the right and option, in its sole and
absolute discretion, by written notice to the other Member (the “Other Member”),
to either:
 
(a) dissolve the Company;
 
 
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(b) if the Termination Event occurs pursuant to Section 9.3(a), (b), or (c), or
pursuant to Section 9.3(d) or (e) prior to the fifth anniversary of the
Effective Date, the Electing Member may exercise its right to purchase the Other
Member’s Interest at a price equal to ninety percent (90%) of the fair market
value of the Other Member’s Interest pursuant to the valuation and other
procedures set forth on Schedule 9.4 (“Initial Price”), provided that if within
three (3) years of the closing of such purchase the Electing Member sells all or
a portion of the Other Member’s Interest at a price (“Subsequent Sale Price”) in
excess of the Initial Price (determined on a per Unit basis and adjusted (if
applicable) for any splits or recapitalizations), then within five (5) Business
Days of the closing of such subsequent sale or sales, the Electing Member shall
pay the Other Member as additional consideration for the Other Member’s Interest
an amount equal to (1) the positive difference (if any) between the Subsequent
Sale Price and the Initial Price on a per Unit basis, times (2) the number of
Units previously owned by the Other Member sold in such subsequent sale, times
(3) the following percentages as applicable: (i) ninety percent (90%) if the
subsequent sale occurs on or prior to the first anniversary of the closing of
the initial sale, (ii) fifty percent (50.00%) if the subsequent sale occurs on
or prior to the second anniversary of the closing of the initial sale, and (iii)
twenty five percent (25.00%) if the subsequent sale occurs on or prior to the
third anniversary of the closing of the initial sale; or
 
(c) if the Termination Event occurs pursuant to Section 9.3(d) or (e) on or
after the fifth anniversary of the Effective Date, the Electing Member may
exercise its right to purchase the Other Member’s Interest at a price equal to
one hundred percent (100%) of the fair market value of the Other Member’s
Interest pursuant to the valuation and other procedures set forth on Schedule
9.4; or
 
(d) if the Termination Event occurs pursuant to Section 9.3 (b) or (c), or
pursuant to Section 9.3(d) prior to the fifth anniversary of the Effective Date,
the Electing Member may elect to continue the Joint Venture but to thereafter
treat the Other Member as an Assignee with the consequences set forth in Section
8.2 hereof; for the avoidance of doubt, this Section 9.4(d) shall be
inapplicable to a Termination Event pursuant to Section 9.3(a); or
 
(e)  if the Termination Event occurs pursuant to Section 9.3(d) on or after the
fifth anniversary of the Effective Date, and if the Sale of Magnetation has
resulted in Control of Magnetation by a Person engaged in the production of iron
ore or steel or a Person who is an Affiliate of any such Person engaged in the
production of iron ore or steel, the Electing Member may elect to continue the
Joint Venture but to thereafter treat the Other Member as an Assignee with the
consequences set forth in Section 8.2 hereof.
 
9.5 Winding-up and Liquidation of the Company.
 
(a) Upon an event of dissolution described in Section 9.1, the Board of Managers
shall diligently proceed to cause the Company to wind up its affairs and
liquidate and distribute its assets in accordance with this Agreement.  During
the time prior to liquidation, the Company shall continue as a continuing
limited liability company bound
 
 
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by the terms of this Agreement and the Board of Managers shall have the right to
do all acts authorized by Law for the purpose of winding up the affairs of the
Company.
 
(b) In connection with the liquidation of the Company, the Board of Managers
shall take the following steps:
 
(1) first, use its reasonable best efforts to sell the business of the Company
as a going concern;
 
(2) second, to the extent the Board of Managers determines not to sell the
Company in its entirety as a going concern, dispose of all Company properties
and assets at the best cash price obtainable therefor;
 
(3) third, pay the debts and liabilities of the Company and the expenses of
liquidation and establish any reserves deemed necessary by the Board of
Managers;
 
(4) fourth, repay any loans and advances by Members and all accrued interest
thereon; and
 
(5) fifth, distribute any remaining Company assets to the Members in accordance
with their respective positive Capital Account balances; provided, however, that
liquidating distributions made after the occurrence of Capital Account
Proportionality shall be made in proportion to the Members' Percentage
Interests.
 
(c) If any reserves are established in connection with the liquidation, the
Board of Managers may pay over the amounts reserved to an escrow agent to be
held by it for the purposes of disbursing the reserves in payment of any
contingencies that may arise and, at the expiration of any period as the Board
of Managers considers advisable, for distribution of the balance of the funds in
the same manner and with the same priorities as are provided in Section
‎9.5(b)(5).  The Members are to look solely to the assets of the Company for the
return of their Capital Contributions.
 
9.6 Time for Winding-Up.  A reasonable time will be allowed for the orderly
liquidation of assets of the Company and the discharge of liabilities to
creditors so as to enable the Board of Managers to minimize the normal losses
attendant upon liquidation.
 
9.7 Final Accounting.  Each of the Members is to be furnished with a statement
setting forth the assets and liabilities, if any, of the Company as of the date
of the complete liquidation, which is to be audited and certified to by the
Company’s independent public accountants.  Upon compliance by the Board of
Managers with the distribution provisions of this Agreement, the Members shall
cease to be Members and the Company shall cease to exist.
 
 
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ARTICLE 10.
AMENDMENT OF AGREEMENT
 
10.1 Amendments to This Agreement.  This Agreement may be amended only by
unanimous written consent of all of the Members.
 
ARTICLE 11.
MEMBER REPRESENTATIONS AND WARRANTIES
 
Each Member hereby represents and warrants to the other Member as follows:
 
11.1 Organization and Authority.  The Member is a legal entity duly organized
and validly existing under the Laws of the state of its incorporation or
organization.  The Member has the requisite legal capacity, power and authority
to (a) execute, deliver and perform its obligations under this Agreement and
each Project Agreement to which it is a party and (b) consummate the
transactions contemplated hereby and thereby.
 
11.2 Enforceability.  This Agreement and each of the Project Agreements to which
it is a party have been duly authorized, executed and delivered by the Member
and constitutes the legal, valid and binding obligation of the Member,
enforceable against it in accordance with its terms, except as such
enforceability may be affected by bankruptcy, reorganization, insolvency,
moratorium or similar Laws affecting the enforcement of creditors’ rights
generally and the possible unavailability of certain equitable remedies,
including the remedy of specific performance.
 
11.3 Consents.  All authorizations, approvals and consents, if any, required to
be obtained from, and all registrations, declarations and filings, if any,
required to be made with, all governmental authorities and regulatory bodies to
permit the Member to execute and deliver, and to perform its obligations under,
this Agreement and each of the Project Agreements to which it is a party have
been obtained or made, as the case may be, and all such authorizations,
approvals, consents, registrations, declarations and filings are in full force
and effect.  All terms and conditions contained in, or existing in respect of,
such authorizations, approvals, consents, registrations, declarations and
filings have been, to the extent necessary prior to the date of this Agreement,
duly satisfied and performed.
 
11.4 No Conflicts.  Neither the execution or delivery by the Member of this
Agreement nor any of the Project Agreements to which it is a party nor the
consummation by the Member of the transactions contemplated hereby and thereby,
nor the fulfillment by the Member of the terms and provisions hereof, (a) will
conflict with, violate or result in a breach of any of the terms, conditions or
provisions of any Law applicable to the Member, (b) will conflict with, violate
or result in a breach of, or constitute a default under, any of the terms,
conditions or provisions of its organizational documents or of any loan
agreement, indenture, trust deed, or other agreement or instrument to which it
is a party or by which it or any of its assets is bound, or (c) except as
provided herein, result in the creation or imposition of any lien, charge,
security interest or encumbrance of any nature whatsoever upon any of its
properties or assets.
 
11.5 Litigation.  There is no action, suit or proceeding pending or, to the
Member’s knowledge, threatened, against the Member or any of its properties in
any court or before or by
 
 
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any governmental department, board, agency, instrumentality or arbitrator which,
if adversely determined, would materially impair its ability to perform its
obligations under this Agreement or any of the Project Agreements to which it is
a party, and it is not in default under any applicable order, writ, injunction,
decree or award of any court, any governmental department, board, agency,
instrumentality or any arbitrator, other than any such violations that,
individually or in the aggregate, do not impair in any material way (or involve
any substantial possibility, so far as the Member can foresee, of impairing in
any material way) the Member’s ability to perform its obligations under this
Agreement or any of the Project Agreements.
 
11.6 Member Interest Not Subject to Lien or Security Interest.  The Member owns
its Interest free and clear of any liens, security interests, or
encumbrances.  Without limiting the foregoing, the Member has not pledged as
collateral or granted or otherwise allowed a lien or security interest in or to
attach to the Member’s Interest.
 
11.7 Investment Experience.  The Member:  (a) has sufficient knowledge,
sophistication and experience in financial and business matters as are necessary
to evaluate the risks and merits of an investment in the Company; (b) is
acquiring its Interest for its own account for the purpose of investment and not
with a view to or for sale in connection with any distribution thereof; and (c)
understands that (1) the Interest have not been registered under the Securities
Act and are being offered and sold in reliance upon federal and state exemptions
for transactions not involving any public offering and (2) its Interest must be
held indefinitely unless a subsequent disposition thereof is registered under
the Securities Act or is exempt from such registration.
 
ARTICLE 12.
MAGNETATION REPRESENTATIONS AND WARRANTIES
 
Magnetation hereby represents and warrants to AKS as of the Effective Date and
as of any other dates specifically set forth below (as applicable), subject to
the matters disclosed in the Supplemental Letter, as follows:
 
12.1 Sufficiency of Assets; Authorization.  As of the Effective Date and as of
the dates Magnetation makes its Plant 1 Capital Contributions and contributes
Plant 1, the Contributed Magnetation Assets and the Licensed Technology
constitute all of the assets (including, without limitation, Technology) and
Intellectual Property, rights and privileges which, when considering the
Technology License Agreement, have been held by Magnetation and are necessary
for the Company to conduct the Business as it has been conducted by Magnetation
and the Company through each of such dates.  After contribution of the
Contributed Magnetation Assets, the Company will have good and marketable title
to, or will hold pursuant to valid and binding leases, all of the Contributed
Magnetation Assets, free and clear of any and all liens, security interests or
encumbrances.  All such Contributed Magnetation Assets which, individually or in
the aggregate, are necessary to the operation of the business as it has been
conducted by Magnetation through each of such dates, are in good condition and
in a state of good maintenance and repair (ordinary wear and tear excepted) and
are suitable for the purposes used.
 
12.2 Financial Statements.  AKS has been provided with (a) the audited
consolidated balance sheets of Magnetation as at December 31, 2008, 2009 and
2010 and the related audited consolidated statements of income, stockholders’
equity and cash flows of Magnetation for the fiscal years then ended, together
with the notes thereto and the report thereon of RSM
 
 
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McGladrey and (b) the unaudited consolidated balance sheets of Magnetation as at
August 31, 2011 and the related unaudited consolidated statements of income,
stockholders’ equity and cash flows of Magnetation for the eight-month period
then ended (such audited and unaudited statements, including the related notes
and schedules thereto, are referred to herein as the “Financial
Statements”).  Each of the Financial Statements is complete and correct in all
material respects, has been prepared in accordance with GAAP and presents fairly
in all material respects the consolidated financial position, results of
operations and cash flows of Magnetation as at the dates and for the periods
indicated therein, subject (1) in the case of the audited Financial Statements,
as set forth in the notes thereto and (2) in the case of the unaudited Financial
Statements, the absence of footnote disclosures and other presentation items and
changes resulting from normal year-end adjustments.
 
12.3 No Undisclosed Liabilities.  The Company currently does not have, and
following the contribution of the Contributed Magnetation Assets will not have,
any indebtedness or liabilities or obligations other than those incurred in the
ordinary course of business prior to the date of this Agreement or incurred as
part of Phase I.
 
12.4 Compliance with Laws; Permits. As of the Effective Date and as of the dates
Magnetation makes its Plant 1 Capital Contributions and contributes Plant 1:
 
(a) Each of Magnetation and the Company is in compliance, in all material
respects, with all Laws applicable to the Business as it has been conducted by
Magnetation through each of such dates.  Neither Magnetation nor the Company has
received any notice of or been charged with the violation of any Laws with
respect to the Business as it has been conducted by Magnetation through each of
such dates and the Contributed Magnetation Assets.  To the knowledge of
Magnetation, (1) neither Magnetation nor the Company is under investigation with
respect to the violation of any Laws with respect to the Business as it has been
conducted by Magnetation through each of such dates or the Contributed
Magnetation Assets, (2) there are no facts or circumstances which could form the
basis for any such violation and (3) no facts, circumstances or conditions
currently exist that could adversely affect such continued compliance with any
Laws with respect to the Business as it has been conducted by Magnetation
through each of such dates.
 
(b) Each of Magnetation and the Company has all permits required for the
operation of the Business as it has been conducted by Magnetation through each
of such dates and the Company will have all such required permits after
contribution of the Contributed Magnetation Assets, each of which is duly issued
to Magnetation or the Company, and each of which is in full force and effect in
all material respects, other than those the failure of which to possess is
immaterial to the operation of the business as it has been conducted by
Magnetation through each of such dates.  Neither Magnetation nor the Company is
in default or violation, and no event has occurred which, with or without notice
or lapse of time or both, would constitute a default or violation, in any
material respect, of any term, condition or provision of any such permit
described in this Section 12.4(b) and no action or proceeding is pending or, to
the knowledge of Magnetation, threatened to revoke, modify or terminate any such
permit and there are no facts or circumstances that could form the basis for any
such default or violation.  None of such
 
 
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permits will be impaired or in any way affected by the consummation of the
transactions contemplated by this Agreement or any of the Project Agreements.
 
12.5 Environmental Matters.  As of the Effective Date and as of the dates
Magnetation makes its Plant 1 Capital Contributions and contributes Plant 1:
 
(a) Each of Magnetation and the Company is, and to the reasonable knowledge of
Magnetation has been for the three (3) years prior to the Effective Date, in
compliance, in all material respects, with all environmental Laws applicable to
the Business as it has been conducted by Magnetation and the Company through
each of such dates, which compliance includes obtaining and maintaining all
permits required under such environmental Laws.
 
(b) To the knowledge of Magnetation, no facts, circumstances or conditions exist
with respect to Magnetation or the Company, any of their respective
predecessors, or any of the Contributed Magnetation Assets which is real
property, which resulted in arrangements for the disposal or treatment of
Hazardous Materials that could reasonably be expected to result in Magnetation
or the Company incurring Environmental Costs or Liabilities.
 
(c) There are no investigations of the Business or the Contributed Magnetation
Assets pending or, to the knowledge of Magnetation, threatened which could lead
to the imposition on the Company of any Environmental Costs or Liabilities or
liens under any applicable Law.
 
12.6 Insurance.  As of the Effective Date and as of the dates Magnetation makes
its Plant 1 Capital Contributions and contributes Plant 1, each of Magnetation
and the Company has insurance policies in full force and effect for such amounts
as are sufficient, in all material respects, for all requirements of Law and all
agreements to which each of Magnetation and the Company is a party or by which
it is bound, in each case with respect to the Business as it has been conducted
by Magnetation and the Company through each of such dates and such insurance
policies will be in full force and effect as described in this Section 12.6
after contribution of the Contributed Magnetation Assets (the “Applicable
Insurance Policies”).  No event has occurred, including the failure by each of
Magnetation and the Company to give any notice or information, or Magnetation or
the Company giving any inaccurate or erroneous notice or information, which
limits or impairs the rights of Magnetation or the Company under any such
Applicable Insurance Policies.
 
12.7 Majority Ownership of Magnetation.  As of the Effective Date, Larry
Lehtinen and his Affiliates collectively own or control the vote of a majority
in voting shares of capital stock issued and outstanding in Magnetation.
 
12.8 Full Disclosure.  No representation or warranty of Magnetation contained in
this Agreement or any of the Project Agreements and no written statement made by
or on behalf of Magnetation to AKS or any of its Affiliates pursuant to this
Agreement or any of the Project Agreements contains an untrue statement of a
material fact or omits to state a material fact necessary to make the statements
contained herein or therein not misleading.  Magnetation has
 
 
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no knowledge of any fact which is not in the public domain and which Magnetation
has not disclosed to AKS in writing, which could reasonably be expected to have
a Material Adverse Effect.
 
ARTICLE 13.
COVENANTS
 
13.1 Further Assurances.  The Members and the Company shall use their
commercially reasonable efforts to take, or cause to be taken, all actions
necessary or appropriate to consummate the transactions contemplated by this
Agreement.  As promptly as practicable after the date of this Agreement, the
Members and the Company shall (a) make all filings and give all notices
reasonably required to be made and given by such party in connection with the
transactions contemplated by this Agreement, and (b) use all commercially
reasonable efforts to obtain all consents required to be obtained (pursuant to
any applicable Law, contract or otherwise) by such party in connection with the
transactions contemplated by this Agreement.
 
ARTICLE 14.
CLOSING CONDITIONS
 
14.1 Conditions Precedent to Obligations of AKS.  The obligation of AKS to make
its Capital Contribution on the AKS Initial Funding Date is subject to the
fulfillment, on or prior to such date, of each of the following conditions
precedent (any or all of which may be waived in writing by AKS in whole or in
part to the extent permitted by applicable Law):
 
(a) the representations and warranties of Magnetation qualified as to
materiality shall be true and correct in all respects, and those not so
qualified shall be true and correct in all material respects, in each case, as
of the date of this Agreement and as of the AKS Initial Funding Date, except to
the extent such representations and warranties expressly speak as of an earlier
date (in which case such representations and warranties qualified as to
materiality shall be true and correct, and those not so qualified shall be true
and correct in all material respects, on and as of such earlier date);
 
(b) Magnetation and the Company shall have performed and complied in all
material respects with all obligations and agreements required in this Agreement
to be performed or complied with by them as of the AKS Initial Funding Date; and
 
(c) Magnetation and the Company shall have duly executed and delivered to AKS
each Project Agreement to which they are a party.
 
14.2 Conditions Precedent to Obligations of Magnetation.  The obligation of
Magnetation to make its Capital Contribution pursuant to Section 2.1(a) is
subject to the fulfillment, on or prior to the AKS Initial Funding Date, of each
of the following conditions precedent (any or all of which may be waived in
writing by Magnetation in whole or in part to the extent permitted by applicable
Law):
 
(a) the representations and warranties of AKS set forth herein and in each of
the Project Agreements qualified as to materiality shall be true and correct in
all respects, and those not so qualified shall be true and correct in all
material respects, in each case, as of
 
 
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the date of this Agreement and as of the AKS Initial Funding Date, except to the
extent such representations and warranties expressly speak as of an earlier date
(in which case such representations and warranties qualified as to materiality
shall be true and correct, and those not so qualified shall be true and correct
in all material respects, on and as of such earlier date);
 
(b) AKS shall have performed and complied in all material respects with all
obligations and agreements required in this Agreement to be performed or
complied with by it as of the AKS Initial Funding Date; and
 
(c) AKS shall have duly executed and delivered to Magnetation each Project
Agreement to which it is a party.
 
ARTICLE 15.
DEFAULTS AND REMEDIES
 
15.1 Events of Default.  A Member shall be in default under this Agreement upon
the failure by any Member to perform or satisfy any of its material obligations
or liabilities under this Agreement, or a material violation or material breach
by any such Member of any provision of this Agreement or the JV Formation
Agreement (including the representations and warranties contained herein or
therein).
 
15.2 Notice and Rights upon Default.
 
(a) If any Member is in default as provided in Section 15.1, any other Member
shall be entitled to notify in writing such Member of such default.  Failure of
any Member to give any such notice shall not waive such default or release the
defaulting Member from any of its obligations or liabilities under this
Agreement.  In the case of defaults of payment obligations under Articles 2 and
3, the defaulting Member shall owe interest on past due amounts at a rate that
is twice the prime rate as published in the “Money Rates” section of the Wall
Street Journal (“Prime Rate”) commencing on the date such payment was due and
continuing through and including the date payment is made or the default is
deemed cured.
 
(b) If a default shall continue for a period of thirty (30) days after such
notice, then, unless and until such failure shall have been cured, unless
otherwise agreed to by the non-defaulting Members, the defaulting Member shall
not receive distributions under this Agreement during the period of such
default; provided, however, that any distributions that otherwise would have
been due and owing to the defaulting Members during such period of default shall
be paid to such defaulting Member upon cure of such default.
 
 
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ARTICLE 16.
CONFIDENTIALITY
 
16.1 Confidentiality — Company Information.  Except as otherwise expressly
permitted by this Article 16:
 
(a) Obligations of the Members.  Each Member shall keep confidential the Company
Information and shall not use or exploit such Company Information other than for
the benefit of the Company.
 
(b) Obligations of the Company.  The Company shall keep confidential the Company
Information.  The Company shall adopt written commercially reasonable procedures
in connection with its use of Company Information that are reasonably expected
to prevent the Company Information from becoming disclosed to any Person other
than the Members, other than as permitted by such procedures.  The foregoing
does not limit the Company’s obligations otherwise set forth in this Article 16,
including those in Section 16.4 (Permitted Disclosures to Advisors).
 
16.2 Definitions – Company Information and Other.
 
(a) Company Information.  “Company Information” means all information (whether
written, oral or in another form) that consists of, or includes, Trade Secrets
and Confidential Information as defined in Section 16.2(b) and Section 16.2(c)
below.
 
(b) Trade Secrets.  “Trade Secrets” means trade secrets under applicable trade
secret or other Law of the Company and, to the extent available for use by the
Company, of each of its Members; and includes, however documented, concepts,
ideas, designs, know-how, methods, data, processes, formulae, compositions,
improvements, inventions, discoveries, product specifications, past, current and
planned research and development and manufacturing or distribution methods and
processes, lists of actual or potential customers or suppliers, current and
anticipated customer requirements, price lists, market studies, business plans,
computer software and programs (including object code and source code), computer
software and database technologies, systems, and structures and architectures.
 
(c) Confidential Information.  “Confidential Information” means confidential or
proprietary information of or concerning the Company and, to the extent
available for use by the Company, concerning each Member; and, to the extent
consistent with the foregoing definition, includes historical financial
statements, financial projections and budgets, historical and projected sales,
capital spending budgets and plans.
 
16.3 Certain Exceptions.  The prohibitions in Section 16.1 do not apply to the
extent that:
 
(a) Becomes Public.  The Company Information is currently publicly available or
has become publicly available and such public availability does not result from
(1) the misappropriation or improper disclosure of such Company Information by
the disclosing Person or (2) the obtaining of such Company Information by
improper means of the disclosing Person;
 
 
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(b) Independently Developed.  The disclosing Person demonstrates that the
Company Information was developed independently by the disclosing Person without
the use of the Company Information;
 
(c) Legal Obligation to Disclose.  The disclosing Person demonstrates that
applicable Law requires it to disclose the Company Information, but then only
(1) to the extent disclosure is required and (2) after giving the Company and
each Member notice of the obligation so that it may seek a protective order or
other similar or appropriate relief;
 
(d) Enforcement of Agreement.  The disclosing Person demonstrates that it is
reasonably necessary for the disclosing Person to make the disclosure to enforce
this Agreement, and then only if the disclosing Person undertakes in good faith
to limit the manner and extent of disclosure;
 
(e) Stock Exchange Rules and Securities Laws.  The disclosure is necessary or
desirable in order to comply with applicable stock exchange rules or federal or
state securities Laws; or
 
(f) Sale of Member Interest.  Disclosure is made by a Member or the Company in
connection with the sale, transfer or other disposition, in whole or in part, of
an Interest or the assets of the Company in accordance with this Agreement (but
then only if disclosure is subject to (i) a non-disclosure agreement then
customary in such transactions and, (ii) if the proposed sale is to a competitor
of the Company, a non-competition agreement, all as to which the Company, the
other Member and each of its Affiliates is a third party beneficiary).
 
16.4 Permitted Disclosure to Advisors.  Notwithstanding the prohibitions of this
Article 16, each Member and the Company may disclose the terms of this Agreement
and Company Information to its Advisors directly involved with the Company but:
 
(a) only to the extent necessary for the Advisor to accomplish his or her
assigned tasks and otherwise strictly on a need to know basis; and
 
(b) only if the Advisor is advised or is otherwise aware (1) that he or she is
obligated to keep confidential, not disclose and retain in strictest confidence
the Company Information strictly in accordance with terms of this Article 16 and
(2) that the Company or any Member may directly enforce the obligation.
 
Each disclosing Person will be responsible for violations of this Article 16 by
its Advisors regardless of whether the Company or any Member has rights against
the Advisor.  The term “Advisors” means a Person’s directors, officers,
employees, agents, consultants, advisors or other representatives, including
lawyers, accountants and financial advisors.
 
16.5 Continuing Protection Under Law.  This Agreement does not limit any rights
or remedies that the Company may have in connection with any Company Information
under applicable Law.
 
 
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16.6 Attorney-Client Privilege.  To the extent that any Company Information
includes materials subject to the attorney-client privilege, the Company is not
waiving and will not be deemed to have waived or diminished its attorney
work-product protections, attorney-client privileges or similar protections and
privileges as a result of disclosing any Company Information (including Company
Information related to pending or threatened litigation) to a Member, whether or
not the Company has asserted, or is or may be entitled to assert, those
privileges and protections.  The Company and the Members: (a) share a common
legal and commercial interest in all such Company Information that is subject to
such privileges and protections; (b) are or may become joint defendants in
proceedings to which such Company Information covered by those protections and
privileges relates; and (c) intend that those privileges and protections remain
intact if the Company or any Member becomes subject to any actual or threatened
proceeding to which such Company Information covered by such protections and
privileges relates.  In furtherance of the foregoing, no Member shall claim or
contend, in proceedings involving the Company or any Member that the Company
waived its attorney work-product protections, attorney-client privileges or
similar protections and privileges as a result of disclosing any Company
Information (including Company Information related to pending or threatened
litigation) to the Member.
 
ARTICLE 17.
REPORTING AND ACCOUNTING PROVISIONS
 
17.1 Books and Records.  The Company shall make and keep the records required by
the Act, as may be amended from time to time. Such books and records shall
include separate books of account for each Member that shall show a true and
accurate record of all costs and expenses incurred, all charges made, all
credits made and received and all income derived in connection with the
operation of the Business in accordance with GAAP (or such other then-generally
accepted accounting standard having replaced GAAP (e.g., International Financial
Reporting Standards)) to the standard required for US public companies
consistently applied, and, to the extent not inconsistent therewith, in
accordance with this Agreement.  In addition, such books and records shall at
all times be kept at the Company’s principal office or such other locations as
approved by the Board.
 
17.2 Other Accounting and Tax Provisions.  Appendix A contains additional
accounting and tax provisions applicable to the Company.
 
17.3 Distribution of Annual Operating and Capital Budgets, Financial Statements
and Tax Information.
 
(a) Annual Operating and Capital Budgets.  No later than fifteen (15) days after
the Effective Date, the Company and Magnetation shall jointly establish an
initial budget for the portion of the calendar year ending December 31, 2011
remaining after the Effective Date.  For each Fiscal Year beginning with the
Fiscal Year commencing on January 1, 2012, the Chief Financial Officer shall
deliver an annual operating budget and an annual capital budget to the Board for
approval no later than forty-five (45) days prior to the end of each Fiscal Year
of operation of the Company.  As soon as practical and in any event, within five
(5) Business Days following the adoption of such annual operating budget and
annual capital budget by the Board, including each Approved Budget, copies
 
 
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of such annual operating budget and annual capital budget will be distributed to
each Member.
 
(b) Auditing.  The audit of the Company shall be conducted by an independent
outside auditor approved by the Board (the “Company Auditor”) in accordance with
Section 6.3(b)(28). Audit reports prepared by the Company Auditor shall be
submitted to the Board and each Member no later than forty-five (45) days
following the last day of each Fiscal Year.
 
(c) Financial Information.  As soon as practical and in any event:
 
(1) within five (5) Business Days following the last day of each month, the
Company will distribute to each Member: a balance sheet as of, and profit and
loss statements and statements of income and cash flow for, the month then
ended, as applicable, prepared in accordance with GAAP and including a
comparison to the budgeted results for the periods then ended, and any other
information required by applicable Law;
 
(2) within five (5) Business Days following the last day of each quarter, the
Company will distribute to each Member: a balance sheet as of, profit and loss
statements and statements of income and cash flow for, the quarter then ended,
as applicable, prepared in accordance with GAAP and including a comparison to
the budgeted results for the periods then ended, and any other information
required by applicable Law;
 
(3) within seventy-five (75) days following the last day of the Fiscal Year for
2011 and within forty-five (45) days following the last day of each Fiscal Year
thereafter, the Company will distribute to each Member: an audited balance sheet
as of, and audited profit and loss statements and audited statements of income
and cash flow for, the Fiscal Year then ended, as applicable, prepared in
accordance with GAAP and including a comparison to the budgeted results for the
periods then ended, and any other information required by applicable Law. Such
financial statements shall have been audited and certified by the Company
Auditor under GAAP to the standards required for United States public companies,
at the Company’s cost;
 
(4) as promptly as possible, and no later than within one (1) Business Day of
the Company making any year-end changes to the financial statements provided
hereunder, the Company will provide each Member with such changes;
 
(5) within thirty (30) days following the last day of each Fiscal Year, the
Company will distribute to each Member a statement indicating each Member’s
share of each item of income, gain, loss, deduction or credit for such Fiscal
Year for income tax purposes, to the extent applicable;
 
(6) as promptly as possible, and no later than within ten (10) days following a
Member’s request, or as promptly as practicable thereafter, other information as
may be necessary to timely comply with all tax and accounting
 
 
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rules and regulations applicable to, and the reasonable requirements of auditors
and tax professionals of, the Members and their respective Affiliates; and
 
(7) as promptly as possible, and no later than within ten (10) days following
AKS’ request, or as promptly as practicable thereafter, the Company will
distribute any information that is reasonably necessary for AKS to comply with
its reporting obligations under the federal securities Laws.
 
(d) Annual Tax Returns.  The Company will cause its tax returns to be timely
prepared and filed in accordance with applicable U.S. federal, state and local
Law.  The Company will cause its tax returns to be reviewed by the Company’s
independent certified public accountants, and will timely distribute to each
Member that information which will be required to permit the Member to prepare
its tax return within sixty (60) days after the audited financial statements
have been prepared.
 
17.4 Right of Inspection.  At all reasonable times, each Member and its
representatives have the right (i) to inspect, audit and make copies of all
books, records, financial results, data, procedures and other information of the
Company (including without limitation all Company data concerning or in
connection with the Project Agreements) and (ii) to reasonable access to the
officers, employees and agents of the Company to discuss the Company’s
operations and the Business. In addition, the Company shall make all efforts to
cause the Company Auditor to provide reasonable access to their workpapers
prepared in conjunction with the audit of the Company’s financial statements or
any timely review of interim financial statements to the auditor of each Member,
as reasonably requested by the inspecting Member. The inspecting Member will
bear all expenses incurred in the inspection or examination.
 
ARTICLE 18.
MISCELLANEOUS PROVISIONS
 
18.1 Notices.  All notices to the Company are to be sent by nationally
recognized overnight courier or by facsimile (with confirmation of successful
transmission), addressed to the Board of Managers of the Company at the
Company’s principal place of business.  All notices to a Member are to be sent
by nationally recognized overnight courier or by facsimile (with confirmation of
successful transmission), addressed to such Member at the address as may be
specified by such Member from time to time in a notice to the Company or as set
forth below, with a copy of each material notice to be delivered concurrently to
such Member’s outside counsel, as specified by such Member from time to time in
a notice to the Company or as set forth below.  All notices given pursuant to
this Agreement shall be deemed to have been duly given (i) on the second (2nd)
business day following the day such notice was sent by nationally recognized
overnight courier, or (ii) on the date of service if delivered by facsimile
(with the confirmation of successful transmission acting as confirmation of
service).
 
 
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If to AKS:

AK Iron Resources, LLC
c/o AK Steel Corporation
Legal Department
9227 Centre Pointe Drive
West Chester, Ohio 45069
Attn: David C. Horn, Esq.
      Joseph C. Alter, Esq.
Fax:  513-425-2302

With a copy of each such notice to:
 
Weil, Gotshal & Manges LLP
767 Fifth Avenue
New York, NY 10153
Attn:  Raymond O. Gietz, Esq.
Phone:  (212) 310-8702
                                          Fax:  (212) 310-8007
 
If to Magnetation:

Magnetation, Inc.
832 1st Street, Suite 130
Red Rock Business Center
Nashwauk, MN  55769
Attention:  Larry Lehtinen, Chairman and CEO
Phone:  218-349-1277
E-mail: larry.lehtinen@magnetation.com

With a copy of each such notice to:

Krieg DeVault LLP
One Indiana Square, Suite 2800
Indianapolis, IN  46204-2079
Attn:  Gregory B. Coy, Esq.
Phone:  (317) 238-6323
Email: gcoy@kdlegal.com
Fax:  317-636-1507

 
18.2 Indemnification of AKS.  Magnetation agrees to defend, indemnify and hold
harmless the Company, AKS, its officers, directors, members and employees from
and against any liabilities or obligations of the Company arising out of, or
resulting from any business or operations of the Company or Magnetation
occurring prior to the Effective Date.  Any damages owed to AKS by Magnetation,
to the extent any amount remains unpaid on the date that is thirty (30) days
after such amounts are found by a court of competent jurisdiction to be payable,
shall
 
 
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be offset by any distributions to be made to Magnetation pursuant to the terms
of this Agreement.
 
18.3 Tax Matters Partner; Notice of Tax Examinations.  Magnetation is
specifically authorized to act as the “Tax Matters Partner” under the Code and
in any similar matter under the state Law.  Any Member receiving notice that any
governmental authority intends to examine any income tax return of the Company
is to promptly notify the Company and the other Member.
 
18.4 Entire Agreement.  This Agreement, together with the Project Agreements,
and any other agreements expressly referenced herein contain the entire
understanding between the parties and supersede any prior understanding and
agreements between any of them, including the Non-Binding Term Sheet dated as of
July 13, 2011, between Magnetation and AK Steel Corporation, as amended through
the date hereof.  As of the date hereof, there are no agreements, arrangements
or understandings, whether oral or written, between and among the Members
relating to the subject matter of this Agreement that are not set forth or
expressly referred to herein.
 
18.5 Governing Law.  This Agreement is governed by and is to be construed and
enforced in accordance with the Laws of the State of Delaware without giving
effect to its rules concerning conflicts of Laws.
 
18.6 Settlement of Disputes.
 
(a) The Members shall make every effort to settle amicably any and all disputes,
controversies, conflicts and claims arising out of or relating to or in
connection with the Company, this Agreement or any transactions contemplated
hereby, the performance or non-performance or timely performance of the
obligations set forth herein or asserted breach hereof (including any questions
regarding its existence, validity, interpretation, enforceability or
termination) (a “Dispute”).
 
(b) (1) Any Dispute among the Members or (2) any disagreement between the Board
Representatives appointed by AKS, on the one hand, and the Board Representatives
appointed by Magnetation, on the other hand, as to any particular matter voted
upon (or sought to be voted upon) at a meeting of the Board, in each case not
settled or resolved (a “Deadlock”), may be referred, by written notice setting
out brief details of the Dispute or Deadlock (a “Dispute/Deadlock Notice”) given
by a Member to the other Member, to Senior Representatives of each Member.
 
(c) In the event that the Senior Representatives do not amicably resolve a
Dispute or a Deadlock within forty-five (45) calendar days after the date of
dispatch of the Dispute/Deadlock Notice, the Dispute or Deadlock shall upon the
election of either Member be referred to the Chief Executive Officer of the
ultimate parent company of AKS and the Chief Executive Officer of
Magnetation.  Any solution for the Dispute or Deadlock agreed to by the
authorized representatives of each Member at any level of the Dispute or
Deadlock resolution process described in the preceding sentences of this Section
18.6(c) shall be deemed as final.
 
 
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(d) Other than claims for injunctive relief or a Deadlock, any Dispute which is
not resolved pursuant to Section 18.6(b) and (c) within seventy-five (75)
calendar days after the date of dispatch of the related Dispute/Deadlock Notice
may be referred by any Member to private arbitration conducted by a single
arbitrator (to be mutually agreed upon) in accordance with the then-current
Commercial Arbitration Rules of the American Arbitration Association.  Within
ten (10) days after a notice of intent to arbitrate, the parties shall agree on
a single arbitrator and if the parties cannot agree on a single arbitrator, each
party shall appoint one arbitrator who shall then jointly appoint a single
arbitrator.  Any arbitration proceeding shall be held in Indianapolis, Indiana,
and each party hereby consents to such jurisdiction.  Any judgment or decision
including without limitation an award of damages or an injunction, resulting
from the arbitration decision may be entered in any federal or state court of
competent jurisdiction.
 
(e) Arbitration proceedings shall be commenced by a party by serving the other
party with a written notice of intent to arbitrate in accordance with the
notification procedures set forth in Section 18.1 above.
 
(f) The decision of the arbitrator shall (i) be made within one hundred and
twenty (120) days after the arbitrator is selected; (ii) be in writing; and
(iii) set forth each of the factors considered by the arbitrator and the impact
of each such factor on its decision.
 
(g) All arbitration decisions shall be final and binding upon the parties.
Arbitration shall be the sole and exclusive right and remedy of the parties with
respect to any and all Disputes under this Agreement, and each party hereby
waives its right to institute any judicial proceedings with respect to any such
matters; provided, however, a party may institute judicial proceedings to
enforce a decision of the arbitrator rendered in accordance with this Section
18.6.  The arbitrator will have no authority to award any amount other than
amounts due and payable under this Agreement, such as punitive or consequential
damages, and any purported award of any such amounts shall not be enforceable
against any party.  The arbitrator shall have the authority to order the
specific performance by either party of its obligations under this Agreement.
 
(h) Each party shall bear its own costs and expenses (including, without
limitation, all attorneys’ fees, and all costs and expenses of presenting
evidence to and calling witnesses before the arbitrator).  The arbitrator shall
determine how the parties shall bear all other arbitration costs and expenses.
 
18.7 Binding Nature.  Except as otherwise provided in this Agreement, this
Agreement is binding upon and inures to the benefit of the Members and their
respective successors, personal representatives, heirs, devisees, guardians and
assigns.
 
18.8 Invalidity.  In the event that any provision of this Agreement is held to
be invalid, the validity of the remaining provisions of this Agreement shall not
in any way be affected thereby.
 
18.9 Counterparts.  This Agreement and any amendment hereto may be executed in
multiple counterparts, each of which is an original and all of which constitute
one agreement or amendment, as the case may be, notwithstanding that all of the
parties are not signatories to the
 
 
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original or the same counterpart, or that signature pages from different
counterparts are combined, and the signature of any party to any counterpart is
a signature to and may be appended to any other counterpart.
 
18.10 Construction.  The headings contained in this Agreement are for reference
purposes only and do not affect the meaning or interpretation of this
Agreement.  All personal pronouns used in this Agreement, whether used in the
masculine, feminine or neuter gender, include all other genders.  The singular
includes the plural and vice versa.  This Agreement has been jointly drafted by
the Members and shall not be construed against either Member.
 
18.11 No Third-Party Beneficiaries.  This Agreement is made solely and
specifically among and for the benefit of the parties hereto and their
respective successors and assigns, and no other Person, unless express provision
is made herein to the contrary, is to have any rights, interests or claims
hereunder or be entitled to any benefits under or on account of this Agreement
as a third-party beneficiary or otherwise.
 
18.12 Press Releases.  None of the Company nor the Members shall make any press
release or other public disclosure of information related to the Company or the
transactions contemplated hereby without the prior approval by a Super Majority
Vote of the Board.  Notwithstanding the foregoing, a Member that is, or that is
controlled by a Person that is, publicly traded may issue press releases or make
other public disclosures without approval by the Company, the Board or any other
Member, provided the other Members are given a reasonable opportunity to review
and comment thereon.
 
ARTICLE 19.
DEFINITIONS
 
“Acceptance Notice” has the meaning set forth in Section 8.5(b).
 
“Act” has the meaning set forth in the Recitals.
 
“Advisor” has the meaning set forth in Section 16.4.
 
“Additional Capital Contributions” means additional contributions to the capital
of the Company as provided in Section 3.1(a).
 
“Affiliate” or “affiliate” means, with respect to any Person, any other Person
directly or indirectly controlling or controlled by or under direct or indirect
common control with the specified Person.  A Person controls another Person if
such Person possesses, directly or indirectly, the power to direct or cause the
direction of the management and policies of the “controlled” Person, whether
through ownership of ten percent (10%) or more of the voting securities of the
“controlled” Person, by contract, or otherwise.  An immediate family member of a
Person includes such Person’s parents, siblings, spouse and children.
 
“Agreement” has the meaning set forth in the preamble.
 
“AKS” has the meaning set forth in the preamble.
 
“AKS Board” has the meaning set forth in the definition of “AKS Change of
Control”.
 
“AKS Capital Contributions” has the meaning set forth in Section 2.1(b).
 
 
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“AKS Change of Control” means (i) that individuals who on the date of this
Agreement constitute the Board of Directors of AK Steel Holding Corporation (the
“AKS Board”), and any new director whose election to the AKS Board or nomination
for election to the AKS Board by AK Steel Holding Corporation’s stockholders was
approved by a vote of a majority of the directors who either were directors on
the date of this Agreement or whose election or nomination for election was
previously so approved, cease for any reason to constitute a majority of the AKS
Board; or (ii) any individual or entity, or group of individuals or entities
acting as a group, acquire more than fifty percent (50%) of the outstanding
common stock of AK Steel Holding Corporation.
 
 “AKS Initial Funding Date” has the meaning set forth in Section 2.1(b)(1).
 
 “Applicable Insurance Policies” has the meaning set forth in Section 12.6.
 
“Approval” means, with respect to a Manager, either the affirmative vote of the
Board Representative at a meeting of the Board of Managers, or the written
consent of the Board Representative, to take the action for which the vote or
written consent is given.  To be “Approved by,” or receive the “Approval of,”
the Board of Managers means, with respect to a decision or action to be made or
taken by the Board of Managers, that decision or action receiving the level of
Approval of that number of the Managers required under this Agreement.
 
“Approved Budget” has the meaning set forth in Section 6.3(b)(2).
 
“Assignee” has the meaning set forth in Section 8.2.
 
“Bankruptcy” means, with respect to any Person:  (a) that Person’s filing a
petition or otherwise voluntarily commencing a case or proceeding, or filing an
answer not denying the material allegations of a complaint in any proceeding,
seeking relief under any federal or state bankruptcy, insolvency or debtors’
reorganization Law; (b) that Person’s being the voluntary or involuntary subject
of an order for relief by any court under any such Law; (c) that Person’s being
adjudicated a “bankrupt,” “debtor” or “insolvent” under any such Law; (d) there
being appointed under any such Law a “trustee,” “receiver” or “custodian” to
manage that Person’s business or properties; (e) there being commenced under any
such Law a case or proceeding proposing such an order for relief, adjudication
or appointment with respect to that Person or its business, which proceeding is
consented to by that Person or which is not dismissed within 90 days after being
commenced.
 
“Basins” has the meaning set forth in Section 1.3.
 
“Board” or “Board of Managers” means the Board of Managers created under Section
‎6.1.
 
“Board Representative” has the meaning set forth in Section ‎6.1(a).
 
“Book” has the meaning set forth in Appendix A.
 
“Bona Fide Offer” means an offer from a non Affiliated third party to purchase
all, but not less than all, the Interest of a Selling Member, which offer the
Selling Member intends to accept if the first right of refusal provided in
Section 8.5 is not exercised.
 
“Bona Fide Offer Notice” has the meaning set forth in Section 8.5(a).
 
“Business” has the meaning set forth in Section 1.3(d).
 
 
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“Business Day” means any day except a Saturday, Sunday or a day on which banks
in any of the States of New York, Ohio or Minnesota are required or permitted by
Law to close.
 
“Calling Member” has the meaning set forth in Section 3.1(c).
 
“Capital Account” means the capital account of a Member maintained in accordance
with Section ‎4.1.
 
"Capital Account Proportionality" shall be treated as having occurred at the
earliest time at which the Members' Capital Account balances bear the same ratio
to one another as do their Percentage Interests.
 
“Capital Contribution” means any cash, property, services rendered or other
obligation to contribute cash or property or to perform services, contributed to
the Company by any Member as provided in Articles 2 or 3.
 
“Cargill Licenses” has the meaning set forth in Section 1.7.
 
“Closing Date” has the meaning set forth in Section 8.6(a).
 
“Code” means the Internal Revenue Code of 1986, as amended, and the rules and
regulations promulgated thereunder.
 
“Company” has the meaning set forth in the preamble.
 
“Company Auditor” has the meaning set forth in Section 17.3(b).
 
“Company Information,” “Trade Secrets,” and “Confidential Information” have the
meanings set forth in Article 16.
 
“Contributed Magnetation Assets” has the meaning set forth in Section 2.1(a).
 
“Deadlock” has the meaning set forth in Section 18.6(b).
 
 “Deferred Distributions” has the meaning set forth in Section 5.4.
 
“Diluted Member” has the meaning set forth in Section 6.1(f).
 
“Dispute” has the meaning set forth in Section 18.6(a).
 
“Dispute/Deadlock Notice” has the meaning set forth in Section 18.6(b).
 
“Effective Date” has the meaning set forth in the preamble.
 
“Effective Tax Rate” means a blended rate representing the maximum marginal
United States federal, state and local income tax rate applicable to any Member,
taking into account the deduction of state and local income taxes for federal
income tax purposes, as determined in good faith by the Board of Managers.  The
Effective Tax Rate shall initially be forty-two and one-half percent (42.5%),
and may be revised from time to time by the Board of Managers to reflect changes
in federal, state or local income taxes.
 
“Electing Member” has the meaning set forth in Section 9.4.
 
“Environmental Costs or Liabilities” means, with respect to any person, all
losses (including punitive damages and consequential damages) and all reasonable
fees, disbursements and expenses of counsel, experts and consultants and costs
of investigation and feasibility studies), incurred as a result of any claim or
demand by any other person or in response to any violation of Law, whether known
or unknown, accrued or contingent, whether based in contract, tort, implied
 
 
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or express warranty, strict liability, criminal or civil statute or otherwise,
to the extent based upon, related to, or arising under or pursuant to any Law,
permit, order or agreement with any governmental body or other person, which
relates to any environmental, health or safety condition, violation of Law or a
release or threatened release of Hazardous Materials.
 
“Financial Statements” has the meaning set forth in Section 12.2.
 
“Fiscal Year” means the fiscal year of the Company as determined by the Board of
Managers from time to time and, initially, means a fiscal year ending on
December 31.
 
“GAAP” means the United States’ generally accepted accounting principles.
 
“Hazardous Material” means any substance, material or waste that is regulated,
classified, or otherwise characterized under or pursuant to any Law as
“hazardous,” “toxic” or “radioactive” or as a “pollutant” or “contaminant” or
words of similar meaning or effect, including petroleum and its by-products,
methane gas, asbestos and polychlorinated biphenyls.
 
“Intellectual Property” means all the following whether arising under the laws
of the USA or of any other jurisdiction: (a) patents, patent applications
(including patents issued thereon) and statutory invention registrations,
including reissues, divisions, continuations, continuations in part, extensions
and reexaminations thereof, and all rights therein provided by international
treaties or conventions; (b) copyrights, moral rights, mask work rights,
database rights and design rights, whether or not registered, and registrations
and applications for registration thereof, and all rights therein provided by
international treaties or conventions; (c) trade secrets; (d) all trademarks,
service marks, trade names, service names, brand names, trade dress rights,
logos, corporate names, trade styles, and other source or business identifiers
and general intangibles of a like nature, together with the goodwill associated
with any of the foregoing, along with all applications, registrations, renewals
and extensions thereof; (e) intellectual property rights arising from or in
respect of domain names; and (f) all other intellectual property rights arising
from or in respect of Technology.
 
“Interest” means a Member’s limited liability company interest in the Company,
including all of its Interest and all financial and governance rights, and any
and all benefits to which a Member may be entitled, and the obligations and
liabilities of a Member, under this Agreement.
 
“Joint Venture” has the meaning set forth in the Recitals.
 
“JV Formation Agreement” means the Formation Agreement Regarding Joint Venture
among Magnetation, AKS and the Company to be executed simultaneously with the
execution of this Agreement.
 
“Law” means any law, statute, ordinance, rule, regulation, order, writ, decree
or injunction having the force of law enacted, adopted, promulgated or applied
by any court or any federal, state, county, municipal, local or foreign
government or any governmental agency, bureau, commission, authority or body.
 
“Magnetation” has the meaning set forth in the preamble.
 
“Magnetation Capital Reserve Account” has the meaning set forth in Section 5.4.
 
“Major Decisions” has the meaning set forth in Section 6.7(a).
 
 
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“Majority Vote of the Board” means, with respect to a decision to be made or an
action to be taken by a Majority Vote of the Board, the Approval by Managers
entitled to vote more than fifty percent (50%) of the total number of votes
eligible to be cast.
 
“Management Services Agreement” means the Management Services Agreement between
the Company and Magnetation to be executed simultaneously with the execution of
this Agreement.
 
“Manager” has the meaning set forth in Section 6.1(a).
 
“Material Adverse Effect” means any event, circumstance, change in or effect
that, either alone or in combination, is or would reasonably be expected to be
materially adverse to the Business, assets, properties, liabilities, results of
operations or condition (financial or otherwise) of the Company, including the
completion of Phase II.
 
“Members” means all of the Persons and their respective assigns and successors
in interest who are admitted from time to time as members of the Company,
including AKS and Magnetation.  A “Member” means any one of the Members so long
as that Person holds an Interest and any Member that was or is its predecessor
or successor in interest.
 
“MR License” has the meaning set forth in Section 1.7.
 
“Net Available Cash” means, at any time, all cash of the Company, subject to (a)
any mandatory provisions of applicable Law, (b) restrictions or payment
requirements set forth in any credit or other agreement that is binding on the
Company, and (c) a reasonable reserve requirement for, among other things,
estimated operating and capital expenses and expenditures contemplated in the
Approved Budget.  Net Available Cash shall not include any Capital Contributions
by a Member.
 
“Non-Selling Member” has the meaning set forth in Section 8.5(a).
 
“Officer” has the meaning set forth in Section 6.5(a).
 
“Offtake Agreement” means the Form of Pellet Purchase Agreement between the
Company and AKS (and/or an Affiliate of AKS), in a form agreed to by the
Parties.
 
“Other Member” has the meaning set forth in Section 9.4.
 
“Pellet Plant” has the meaning set forth in Section 1.3(c).
 
“Percentage Interest” of a Member means the ratio, expressed as a percentage, of
the Units held by such Member relative to the total number of Units held by all
Members.
 
“Person” or “person” means and includes any natural person and any corporation,
partnership, trust, estate, limited liability company or other entity.
 
“Phase I” has the meaning set forth in Section 1.3(b).
 
“Phase I Balance” has the meaning set forth in Section 2.1(b)(2).
 
“Phase I Conditions” has the meaning set forth in Section 2.1(b)(2).
 
“Phase I Portion” has the meaning set forth in Section 2.1(b).
 
“Phase II” has the meaning set forth in Section 1.3(c).
 
 
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“Phase II Abandonment Date” means the (a) date on which AKS and Magnetation, by
written agreement, agree not to complete Phase II or (b) fifth (5th) anniversary
of the Effective Date if the Phase II Conditions have not been waived or
satisfied by that date.
 
“Phase II Completion Date” means the date of the first commercial production of
iron ore flux pellets by the Pellet Plant for sale.
 
“Phase II Conditions” has the meaning set forth in Section 2.1(b)(3).
 
“Phase II Portion” has the meaning set forth in Section 2.1(b)(3).
 
“Plant” has the meaning set forth in Section 1.3(a).
 
“Plant 1” has the meaning set forth in Section 1.3(b).
 
“Plant 1 Capital Contributions” has the meaning set forth in Section 2.1(a).
 
“Plant 2” has the meaning set forth in Section 1.3(b).
 
“Plant 4” has the meaning set forth in Section 1.3(c).
 
“Plant 5” has the meaning set forth in Section 1.3(c).
 
“Prime Rate” has the meaning set forth in Section 15.2.
 
“Project Agreements” means (i) this Agreement, (ii) the Technology License
Agreement, (iii) the Offtake Agreement, (iv) the Sales and Marketing Agreement,
(vi) the Resource Agency Agreement, (vii) the Management Services Agreement and
(viii) the JV Formation Agreement.
 
“Project Team” has the meaning set forth in Section 6.7.
 
“Related Counterparty” has the meaning set forth in Section 7.5.
 
“Related Party Transaction” means any agreement, arrangement or understanding
(including any purchase, sale, lease, investment, loan, service or management
agreement or other transaction) of the Company, whether oral or written,
directly or indirectly, with (i) any Member, (ii) any of the respective
Affiliates of a Member, (iii) directors, officers or supervisors of any Member,
any of the respective Affiliates of a Member or the Company, (iv) shareholders
holding or having the ability to exercise control over more than five percent
(5%) of any class of securities of either Member, their respective Affiliates or
the Company, or (v) any person or entity controlled by the aforementioned
Persons.
 
“Relevant Year” has the meaning set forth in Section 6.3(b)(2).
 
“Remote Participation” has the meaning set forth in Section 6.4(b).
 
“Resource Agency Agreement” means that certain Resource Agency Agreement by and
between the Company and Magnetation to be executed simultaneously with the
execution of this Agreement.
 
“Sales and Marketing Agreement” means that certain Sales and Marketing Agreement
by and between the Company and Magnetation to be executed simultaneously with
the execution of this Agreement.
 
“Sale of Magnetation” means any occurrence that results in Larry Lehtinen, his
immediate family, and his and their Affiliates, ceasing to own, in the aggregate
(a) the largest percentage of outstanding voting stock of Magnetation owned by
any Person (together with its Affiliates) or (b)
 
 
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at least forty percent (40%) of the outstanding voting stock of Magnetation ((a)
and (b) shall constitute “Control of Magnetation”) other than such sales or
occurrences to which AKS shall have given its prior consent, in AKS’s sole
discretion.
 
“Securities Act” means the Securities Act of 1933, as amended.
 
“Selling Member” has the meaning set forth in Section 8.5.
 
“Senior Representative” with respect to a Member, means an authorized senior
representative of such Member, or Affiliate thereof, appointed and duly
authorized by such Member to act as a Senior Representative hereunder, who must
not be a Board Representative or Officer and shall not directly or indirectly
report to any Board Representative or Officer.
 
“Subsequent Sales Price” has the meaning set forth in Section 9.4(b).
 
“Super Majority Vote of the Board” means, with respect to a decision to be made
or an action to be taken by a Super Majority Vote of the Board, the Approval by
at least three (3) of the Magnetation Board Representatives and at least two (2)
of the AKS Board Representatives.
 
“Supplemental Letter” means that supplemental letter agreement between AKS,
Magnetation and the Company, dated of even date herewith.
 
“Technology” means all concepts, ideas, designs, know-how, methods, data,
processes, formulae, compositions, improvements, inventions (whether patentable
or unpatentable and whether or not reduced to practice), discoveries, product
specifications, past, current and planned research and development and
manufacturing or distribution methods and processes, lists of actual or
potential customers or suppliers, current and anticipated customer requirements,
price lists, market studies, business plans, computer software and programs
(including object code and source code), computer software and database
technologies, systems, structures and architectures, documentation and any other
embodiments of the above, in any form whether or not specifically listed herein.
 
“Technology License Agreement” means that certain nonexclusive Technology
License Agreement between Magnetation, Inc., as licensor and Company as licensee
to use the Technology to be executed simultaneously with the execution of this
Agreement.
 
“Termination Event” has the meaning set forth in Section 9.3.
 
“Transfer” has the meaning set forth in Section ‎8.1.
 
“Uncured AKS Contribution Default” means the failure of AKS to pay either (a)
the Phase I Balance when required by Section 2.1(b)(2) hereof or (b) the Phase
II Portion when required by Section 2.1(b)(3) hereof, but only if (1) AKS is not
disputing in good faith its obligation to make any such payments pursuant to the
provisions of Section 18.6 and (2) such failure continues for more than thirty
(30) days beyond (i) the due date for such payment as set forth in this
Agreement if AKS is not disputing in good faith its obligation to make such
payment or (ii) if AKS is so disputing such obligation, the resolution of such
dispute.
 
“Units” means all ownership interests in the Company, which shall be designated
and have the attributes specified in Section 4.4.
 

 
(Signature page follows)
 
 
 
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IN WITNESS WHEREOF, the undersigned have caused their respective duly authorized
officers to execute this Agreement as of the date first above written.
 

 
MAGNETATION LLC
 
MAGNETATION, INC.
 
By: 
/s/ Matthew Lehtinen
By: 
/s/Larry Lehtinen
 
Matthew Lehtinen, Vice President
 
Larry Lehtinen, Chairman and CEO

AK IRON RESOURCES, LLC
 
 
By: 
/s/ John F. Kaloski
   
John F. Kaloski, Vice President
 

 
 

 
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APPENDIX A

Magnetation LLC
 
 
TAX MATTERS
 
This Appendix A is attached to and is a part of the Amended and Restated
Operating Agreement dated October 4, 2011 (the “Agreement”) of Magnetation LLC
(the “Company”).  The parties to the Agreement intend that the Company be
classified as a partnership for federal income tax purposes pursuant to section
7701(a)(2) of the Code and the regulations thereunder.  The provisions of this
Appendix A are intended to comply with the requirements of Treas. Reg.
§ 1.704-l(b)(2)(iv) and Treas. Reg. § 1.704-2 with respect to maintenance of
capital accounts and allocations, and shall be interpreted and applied
accordingly.
 
ARTICLE 1.
DEFINITIONS
 
1.01 Definitions.  For purposes of this Appendix A, the capitalized terms listed
below shall have the meanings indicated.  Capitalized terms not listed below and
not otherwise defined in this Appendix A shall have the meanings specified in
the Agreement.
 
“Account Reduction Item” means (i) any adjustment described in Treas. Reg.
§ 1.704-1(b)(2)(ii)(d)(4); (ii) any allocation described in Treas. Reg.
§ 1.704-1(b)(2)(ii)(d)(5), other than a Nonrecourse Deduction or a Member
Nonrecourse Deduction; or (iii) any distribution described in Treas. Reg.
§ 1.704-1(b)(2)(ii)(d)(6), other than a Nonrecourse Distribution or a Member
Nonrecourse Distribution.
 
“Adjusted Capital Account Balance” means, as of the end of any taxable year, a
Member’s Capital Account balance as of the end of such taxable year (taking into
account all contributions made by such Member and distributions made to such
Member during such taxable year and any special allocations required by Sections
‎3.02, ‎3.03, ‎3.04(a), 3.04(b), ‎3.04(d), and ‎3.06 of this Appendix A,
increased by the sum of (i) such Member’s share of Company Minimum Gain and (ii)
such Member’s share of Member Nonrecourse Debt Minimum Gain, both determined
after taking into account any such special allocations.
 
“Adjusted Fair Market Value” of an item of Company property means the greater of
(i) the fair market value of such property (as determined by the Board of
Managers) or (ii) the amount of any nonrecourse indebtedness to which such
property is subject within the meaning of Section 7701(g) of the Code.
 
“Book” means the method of accounting prescribed for compliance with the capital
account maintenance rules set forth in Treas. Reg. § 1.704-1(b)(2)(iv) as
reflected in Articles 2 and 3 of this Appendix A, as distinguished from any
accounting method which the Company may adopt for other purposes such as
financial reporting.
 
 
 

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“Book Value” means, with respect to any item of Company property, the book value
of such property within the meaning of Treas. Reg. § l.704-l(b)(2)(iv)(g)(3);
provided, however, that if the Company adopts the remedial allocation method
described in Treas. Reg. § 1.704-3(d) with respect to any item of Company
property, the Book Value of such property shall be its book basis determined in
accordance with Treas. Reg. § 1.704-3(d)(2).
 
“Code” means the Internal Revenue Code of 1986, as amended.  References to
specific sections of the Code include references to corresponding provisions of
any succeeding internal revenue law of the United States of America.
 
“Company Minimum Gain” has the meaning set forth in Treas. Reg. § 1.704-2(d).
 
“Deemed Liquidation” means a liquidation of the Company that is deemed to occur
pursuant to Treas. Reg. § 1.708-l(b)(4) in the event of a termination of the
Company pursuant to Section 708(b)(1)(B) of the Code.
 
“Excess Deficit Balance” means the amount, if any, by which the balance in a
Member’s Capital Account as of the end of the relevant taxable year is more
negative than the amount, if any, of such negative balance that such Member is
treated as obligated to restore to the Company pursuant to Treas. Reg.
§ 1.704-l(b)(2)(ii)(c), Treas. Reg. § 1.704-1(b)(2)(ii)(h), Treas. Reg.
§ 1.704-2(g)(1), or Treas. Reg. § 1.704-2(i)(5).  Solely for purposes of
computing a Member’s Excess Deficit Balance, such Member’s Capital Account shall
be reduced by the amount of any Account Reduction Items that are reasonably
expected as of the end of such taxable year.
 
“Excess Nonrecourse Liabilities” means excess nonrecourse liabilities within the
meaning of Treas. Reg. § 1.752-3(a)(3).
 
“Exculpatory Liability” means a liability that is recourse to the Company as an
entity, and for which no Member or Related Person bears the economic risk of
loss under Treas. Reg. § 1.752-2.
 
“Member Nonrecourse Debt” has the meaning set forth in Treas. Reg. §
1.704-2(b)(4).
 
“Member Nonrecourse Debt Minimum Gain” means minimum gain attributable to Member
Nonrecourse Debt pursuant to Treas. Reg. § 1.704-2(i)(3).
 
“Member Nonrecourse Deduction” means any item of Book loss or deduction that is
a partner nonrecourse deduction within the meaning of Treas. Reg. §
1.704-2(i)(1) and (2).
 
“Member Nonrecourse Distribution” means a distribution to a Member that is
allocable to a net increase in such Member’s share of Member Nonrecourse Debt
Minimum Gain pursuant to Treas. Reg. § 1.704-2(i)(6).
 
“Nonrecourse Deduction” has the meaning set forth in Treas. Reg. § 1.704-2(c).
 
“Nonrecourse Distribution” means a distribution to a Member that is allocable to
a net increase in Company Minimum Gain pursuant to Treas. Reg. § l.704-2(h)(l).
 
“Nonparticipating Members” means each Member who (a) is entitled to receive
notice of the proceedings from the Service, (b) is a member of a notice group
defined in Section 6223(b)(2) of the Code, and (c) has timely filed a statement
with the Secretary of
 
 
2

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Treasury (or his delegate), provided that the Tax Matters Partner shall not have
authority to bind such Member.
 
“Regulatory Allocation” means (i) any allocation made pursuant to Section
‎3.04(a) of this Appendix A to the extent that such allocation is attributable
to a prior distribution that is treated as a Nonrecourse Distribution (after
taking into account Section ‎5.03(a) of this Appendix A); (ii) any allocation
made pursuant to Section ‎3.04(b) of this Appendix A to the extent that such
allocation is attributable to a prior distribution that is treated as a Member
Nonrecourse Distribution (after taking into account Section ‎5.03(b) of this
Appendix A); (iii) any reallocation made pursuant to Section 3.04(d) or ‎3.04(e)
of this Appendix A; or (iv) any allocation or reallocation made pursuant to
Section ‎3.05 of this Appendix A.
 
“Related Person” means, with respect to a Member, a person that is related to
such Member pursuant to Treas. Reg. § 1.752-4(b).
 
“Revaluation Event” means (i) a liquidation of the Company (within the meaning
of Treas. Reg. § 1.704-l(b)(2)(ii)(g) but not including a Deemed Liquidation);
or (ii) any other contribution of more than a de minimis amount of money or
other property to the Company by a new or existing Member or a distribution of
more than a de minimis amount of money or other property to a retiring or
continuing Member where such contribution or distribution alters the Percentage
Interest of any Member.
 
“Section 705(a)(2)(B) Expenditures” means nondeductible expenditures of the
Company that are described in Section 705(a)(2)(B) of the Code, and organization
and syndication expenditures and disallowed losses to the extent that such
expenditures or losses are treated as expenditures described in Section
705(a)(2)(B) of the Code pursuant to Treas. Reg. § 1.704-1(b)(2)(iv)(i).
 
“Section 751 Property” means unrealized receivables and substantially
appreciated inventory items within the meaning of Treas. Reg. § 1.751-l(a)(1).
 
“Service” means the Internal Revenue Service, or its successor administrative
agency, under the Laws of the United States.
 
“Tax Basis” means, with respect to any item of Company property, the adjusted
basis of such property as determined in accordance with the Code.
 
“Tax Matters Partner” means the Member appointed to that office by the Board of
Managers who has the rights and powers set forth in Article 6 of this Appendix
A.
 
“Treasury Regulation” or “Treas. Reg.” means the temporary or final
regulation(s) promulgated pursuant to the Code by the U.S. Department of the
Treasury.
 
ARTICLE 2.
CAPITAL ACCOUNTS
 
2.01 Maintenance.  A single Capital Account shall be maintained for each Member
in accordance with this Article 2.
 
 
3

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(a) Each Member’s Capital Account shall from time to time be increased by:
 
(i) the amount of money contributed by such Member to the Company (including the
amount of any Company liabilities which the Member assumes (within the meaning
of Treas. Reg. § l.704-1(b)(2)(iv)(c)), but excluding liabilities assumed in
connection with the distribution of Company property and excluding increases in
such Member’s share of Company liabilities pursuant to Section 752 of the Code);
 
(ii) the fair market value of property contributed by such Member to the Company
(as determined by the Board of Managers) (net of any liabilities secured by such
property that the Company is considered to assume or take subject to pursuant to
Section 752 of the Code);
 
(iii) allocations to such Member of Company Book income and gain (or the amount
of any item or items of income or gain included therein);
 
(iv) upon the revaluation of Company property pursuant to Section 2.02(a) of
this Appendix A, the Book gain (if any) that would have been allocated to such
Member if such Company property had been sold at its Adjusted Fair Market Value
as of the date of such revaluation except as otherwise provided in Section
2.1(f) of the Agreement; and
 
(v) upon the distribution of Company property to a Member, if Company property
is not revalued pursuant to Section ‎2.02(a) of this Appendix A, the Book gain
(if any) that would have been allocated to such Member if such Company property
had been sold at its Adjusted Fair Market Value immediately prior to the
distribution.
 
(b) Each Member’s Capital Account shall from time to time be reduced by:
 
(i) the amount of money distributed to such Member by the Company (including the
amount of such Member’s individual liabilities for which the Company becomes
personally and primarily liable but excluding liabilities assumed in connection
with the contribution of property to the Company and excluding decreases in such
Member’s share of Company liabilities pursuant to Section 752 of the Code);
 
(ii) the fair market value of property distributed to such Member by the Company
(as determined by the Board of Managers) (net of any liabilities secured by such
property that such Member is considered to assume or take subject to pursuant to
Section 752 of the Code);
 
 
4

--------------------------------------------------------------------------------

 
 
(iii) allocations to such Member of Company Book loss and deduction (or items
thereof, including, without limitation, the amounts specially allocated pursuant
to Section 4.2(c) of the Agreement);
 
(iv) upon the revaluation of Company property pursuant to Section ‎2.02(a) of
this Appendix A, the Book loss (if any) that would have been allocated to such
Member if such Company property had been sold at its Adjusted Fair Market Value
as of the date of such revaluation except as otherwise provided in Section 2.1
(f) of the Agreement; and
 
(v) upon the distribution of Company property to a Member, if Company property
is not revalued pursuant to Section ‎2.02(a) of this Appendix A, the Book loss
(if any) that would have been allocated to such Member if such Company property
had been sold at its Adjusted Fair Market Value immediately prior to the
distribution.
 
(c) The Company shall make such other adjustments to the Capital Accounts of the
Members as are necessary to comply with the provisions of Treas. Reg. §
1.704-1(b)(2)(iv).
 
2.02 Revaluation of Company Property.  Only to the extent not previously taken
into account under Section 2.01 of this Appendix A:
 
(a) Upon the occurrence of a Revaluation Event, the Board of Managers may
revalue all Company property (whether tangible or intangible) for Book purposes
to reflect the Adjusted Fair Market Value of Company property immediately prior
to the Revaluation Event.  In the event that Company property is so revalued,
the Capital Accounts of the Members shall be adjusted in accordance with Treas.
Reg. § 1.704-1(b)(2)(iv)(f).
 
(b) Upon the distribution of Company property to a Member, if Company property
is not revalued pursuant to Section ‎2.02(a) of this Appendix A, the property to
be distributed shall be revalued for Book purposes to reflect the Adjusted Fair
Market Value of such property immediately prior to such distribution, and the
Capital Accounts of all Members shall be adjusted in accordance with Treas. Reg.
§ 1.704-1(b)(2)(iv)(e).
 
2.03 Restoration of Negative Balances.  No Member with a deficit balance in its
Capital Account shall have any obligation to the Company, to any other Member or
to any third party to restore or repay said deficit balance.
 
2.04 Transfers of Interest.
 
(a) Upon the transfer of a Member’s entire Interest in the Company, the Capital
Account of such Member shall carry over to the transferee.
 
 
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--------------------------------------------------------------------------------

 
 
(b) Upon the transfer of a portion of a Member’s Interest in the Company, the
portion of such Member’s Capital Account attributable to the transferred portion
shall carry over to the transferee.  In the event that the document effecting
such transfer specifies the portion of such Member’s Capital Account to be
transferred, such portion shall be deemed to be the portion attributable to the
transferred portion of such Member’s Interest for purposes of this
Section 2.04(b).
 
ARTICLE 3.
ALLOCATION OF BOOK INCOME AND LOSS
 
3.01 Book Income And Loss.
 
(a) The Book income or loss of the Company for purposes of determining
allocations to the Capital Accounts of the Members shall be determined in the
same manner as the determination of the Company’s taxable income, except that
(i) items that are required by Section 703(a)(1) of the Code to be separately
stated shall be included; (ii) items of income that are exempt from inclusion in
gross income for federal income tax purposes shall be treated as Book income,
and related deductions that are disallowed under Section 265 of the Code shall
be treated as Book deductions; (iii) Section 705(a)(2)(B) Expenditures shall be
treated as deductions; (iv) items of gain, loss, depreciation, amortization, or
depletion that would be computed for federal income tax purposes by reference to
the Tax Basis of an item of Company property shall be determined by reference to
the Book Value of such item of property; (v) the effects of upward and downward
revaluations of Company property pursuant to Section ‎2.02 of this Appendix A
shall be treated as gain or loss respectively from the sale of such property;
and (vi) items that are specially allocated under this Article 3 or Section
4.2(c) of the Agreement shall be excluded from Book income or loss.
 
(b) Subject to the special allocation provisions contained in this Article 3, in
the event that the Book Value of any item of Company property differs from its
Tax Basis, the amount of Book depreciation, depletion, or amortization for a
period with respect to such property shall be computed so as to bear the same
relationship to the Book Value of such property as the depreciation, depletion,
or amortization computed for tax purposes with respect to such property for such
period bears to the Tax Basis of such property.  If the Tax Basis of such
property is zero, the Book depreciation, depletion, or amortization with respect
to such property shall be computed by using a method consistent with the method
that would be used for tax purposes if the Tax Basis of such property were
greater than zero.
 
(c) Allocations to the Capital Accounts of the Members shall be based on the
Book income or loss of the Company as determined pursuant to this Section
3.01.  Such allocations shall be made as provided in Section 4.2 of the
Agreement except to the extent modified by the provisions of this Article 3.
 
 
6

--------------------------------------------------------------------------------

 
 
3.02 Allocation of Nonrecourse Deductions.  Notwithstanding any other provisions
of the Agreement, Nonrecourse Deductions shall be allocated among the Members in
proportion to their respective Percentage Interests.
 
3.03 Allocation Of Member Nonrecourse Deductions.  Notwithstanding any other
provisions of the Agreement, any item of Member Nonrecourse Deduction with
respect to a Member Nonrecourse Debt shall be allocated to the Member or Members
who bear the economic risk loss for such Member Nonrecourse Debt in accordance
with Treas. Reg. § 1.704-2(i).
 
3.04 Chargebacks Of Income And Gain.  Notwithstanding any other provisions of
the Agreement:
 
(a) Company Minimum Gain.  In the event that there is a net decrease in Company
Minimum Gain for a taxable year of the Company, then before any other
allocations are made for such taxable year, each Member shall be allocated items
of Book income and gain for such year (and, if necessary, for subsequent years)
to the extent required by Treas. Reg. § 1.704-2(f).
 
(b) Member Nonrecourse Debt Minimum Gain.  In the event that there is a net
decrease in Member Nonrecourse Debt Minimum Gain for a taxable year of the
Company, then after taking into account allocations pursuant to paragraph (a)
immediately preceding, but before any other allocations are made for such
taxable year, each Member with a share of Member Nonrecourse Debt Minimum Gain
at the beginning of such year shall be allocated items of Book income and gain
for such year (and, if necessary, for subsequent years) to the extent required
by Treas. Reg. § 1.704-2(i)(4).
 
(c) Application for Waiver.  In the event that the Board of Managers determines
that the application of the provisions of Section 3.04(a) or Section 3.04(b) of
this Appendix A would cause a distortion in the economic arrangement among the
Members, any Officer may, on behalf of the Company, request a waiver of the
application of either or both of such provisions pursuant to Treas. Reg.
§ 1.704-2(f)(4) or Treas. Reg. § 1.704-2(i)(4).
 
(d) Qualified Income Offset.  In the event that any Member unexpectedly receives
any Account Reduction Item that results in an Excess Deficit Balance at the end
of any taxable year after taking into account all other allocations and
adjustments under this Agreement other than allocations under Section 3.04(e) of
this Appendix A, then items of Book income and gain for such year (and, if
necessary, for subsequent years) will be reallocated to each such Member in the
amount and in the proportions needed to eliminate such Excess Deficit Balance as
quickly as possible.
 
(e) Gross Income Allocation.  If, at the end of any taxable year, the Capital
Accounts of any Members have Excess Deficit Balances after taking into
 
 
7

--------------------------------------------------------------------------------

 
account all other allocations and adjustments under this Agreement, then items
of Book income and gain for such year will be reallocated to such Members in the
amount and in the proportions needed to eliminate such Excess Deficit Balances
as quickly as possible.
 
3.05 Reallocation To Avoid Excess Deficit Balances.  Notwithstanding any other
provisions of the Agreement, no Book loss or deduction shall be allocated to any
Member to the extent that such allocation would cause or increase an Excess
Deficit Balance in the Capital Account of such Member.  Such Book loss or
deduction shall be reallocated away from such Member and to the other Members in
accordance with the Agreement, but only to the extent that such reallocation
would not cause or increase Excess Deficit Balances in the Capital Accounts of
such other Members.
 
3.06 Corrective Allocation.  Subject to the provisions of Sections ‎3.02, ‎3.03,
‎3.04 and ‎3.05 of this Appendix A, but notwithstanding any other provision of
the Agreement, in the event that any Regulatory Allocation is made pursuant to
this Appendix A for any taxable year, then remaining Book items for such year
(and, if necessary, Book items for subsequent years) shall be allocated or
reallocated in such amounts and proportions as are appropriate to restore the
Adjusted Capital Account Balances of the Members to the position in which such
Adjusted Capital Account Balances would have been if such Regulatory Allocation
had not been made.
 
3.07 Other Allocations.
 
(a) If during any taxable year of the Company there is a change in any Member’s
Interest in the Company, allocations of Book income or loss for such taxable
year shall take into account the varying Interests of the Members in the Company
in a manner consistent with the requirements of Section 706 of the Code.
 
(b) If and to the extent that any distribution of Section 751 Property to a
Member in exchange for property other than Section 751 Property is treated as a
sale or exchange of such Section 751 Property by the Company pursuant to Treas.
Reg. § l.751-l(b)(2), any Book gain or loss attributable to such deemed sale or
exchange shall be allocated only to Members other than the distributee Member.
 
(c) If and to the extent that any distribution of property other than Section
751 Property to a Member in exchange for Section 751 Property is treated as a
sale or exchange of such other property by the Company pursuant to Treas. Reg.
§ l.751-l(b)(3), any Book gain or loss attributable to such deemed sale or
exchange shall be allocated only to Members other than the distributee Member.
 
 
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ARTICLE 4.
ALLOCATION OF TAX ITEMS
 
4.01 In General.  Except as otherwise provided in this Article 4, all items of
income, gain, loss, and deduction shall be allocated among the Members for
federal income tax purposes in the same manner as the allocation for Book
purposes.
 
4.02 Section 704(c)(1)(A) Allocations.  In the event that the Book Value of an
item of Company property differs from its Tax Basis, allocations of
depreciation, depletion, amortization, gain, and loss with respect to such
property will be made for federal income tax purposes in a manner that takes
account of the variation between the Tax Basis and Book Value of such property
in accordance with Section 704(c)(1)(A) of the Code and Treas. Reg. § 1.704-1
(b)(4)(i).  The Board of Managers shall use the traditional method with curative
allocations (as provided in Treas. Reg. § 1.704-3(c)) to correct (to the maximum
extent possible) the distortions created by the ceiling rule in respect of the
assets contributed by Magnetation pursuant to Section 2.1(a);  provided,
however, that such curative allocations shall be limited to (a) allocations of
gain from the disposition of such contributed assets, and (b) allocations of
gain or loss from the disposition of any assets in connection with the
liquidation of the Company (or the sale of all or substantially all of the
Company’s assets).
 
4.03 Tax Credits.  Tax credits shall be allocated among the Members in
accordance with Treas. Reg. § l.704-1(b)(4)(ii).
 
ARTICLE 5.
OTHER TAX MATTERS
 
5.01 Excess Nonrecourse Liabilities.  For the purpose of determining the
Members’ Percentage Interests of the Company’s Excess Nonrecourse Liabilities
pursuant to Treas. Reg. §§ l.752-3(a)(3) and 1.707-5(a)(2)(ii), and solely for
such purpose, the Members’ Interests in profits are hereby specified to be their
respective Percentage Interests.
 
5.02 Exculpatory Liabilities.  The Board of Managers may (a) treat deductions
attributable to Exculpatory Liabilities as deductions that are not Nonrecourse
Deductions, and (b) disregard Exculpatory Liabilities in the determination of
Company Minimum Gain.
 
5.03 Treatment Of Certain Distributions.
 
(a) In the event that (i) the Company makes a distribution that would (but for
this Subsection (a)) be treated as a Nonrecourse Distribution; and (ii) such
distribution does not cause or increase a deficit balance in the Capital Account
of the Member receiving such distribution as of the end of the Company’s taxable
year in which such distribution occurs; then the Board of Managers may treat
 
9

--------------------------------------------------------------------------------

 
 
such distribution as not constituting a Nonrecourse Distribution to the extent
permitted by Treas. Reg. § 1.704-2(h)(3).
 
(b) In the event that (i) the Company makes a distribution that would (but for
this Subsection (b)) be treated as a Member Nonrecourse Distribution; and (ii)
such distribution does not cause or increase a deficit balance in the Capital
Account of the Member receiving such distribution as of the end of the Company’s
taxable year in which such distribution occurs; then the Board of Managers may
treat such distribution as not constituting a Member Nonrecourse Distribution to
the extent permitted by Treas. Reg. § 1.704-2(i)(6).
 
5.04 Reduction Of Basis.  In the event that a Member’s Interest in the Company
may be treated in whole or in part as depreciable property for purposes of
reducing such Member’s basis in such Interest pursuant to Section 1017(b)(3)(C)
of the Code, the Board of Managers may, upon the request of such Member, make a
corresponding reduction in the basis of its depreciable property with respect to
such Member.  Such request shall be submitted to the Company in writing, and
shall include such information as may be reasonably required in order to effect
such reduction in basis.
 
5.05 Entity Classification.  Neither the Company nor any Member shall file or
cause to be filed any election, the effect of which would be to cause the
Company to be classified as other than a partnership for federal income tax
purposes, without the prior written consent of all Members.
 
ARTICLE 6.
TAX MATTERS PARTNER
 
6.01 Authority and Duties.  Subject to Section 6.3(b)(23), the Tax Matters
Partner has the power to (i) enter into a settlement agreement with the Service
with respect to determinations of Company tax items which shall bind each Member
other than the Nonparticipating Members, which settlement may be on such terms
as the Tax Matters Partner determines in its sole discretion to be in the best
interests of the Members as a class; (ii) in its sole discretion, decide whether
or not to commence judicial action for review of Company items included in a
notice of final Company administrative adjustment, with the selection of the
appropriate court and the Company items to be contested to be determined in the
sole discretion of the Tax Matters Partner; (iii) in its sole discretion,
determine whether to appeal from an adverse decision in an action commenced
under clause (ii) immediately preceding and prosecute any such appeal; (iv) in
its sole discretion, intervene on behalf of the Company in any judicial action
commenced by any other Member or notice group defined in Section 6223(b)(2) of
the Code as to Company tax items; (v) file a request with the Service for an
administrative adjustment as a substituted Company return, or otherwise, and to
request judicial review on behalf of the Company as to any part of a request for
administrative adjustment not allowed by the Service, with the selection of the
appropriate court, the Company items to be contested, and the decision whether
to appeal from an adverse decision in any such action to be determined in the
sole discretion of the Tax Matters Partner; (vi) in its sole
 
 
10

--------------------------------------------------------------------------------

 
 
discretion, enter into an agreement with respect to all present or former
Members to extend the period for assessing any tax which is attributable to any
Company item (and no other person is authorized to enter into such an
agreement); (vii) upon receipt of a notice of the commencement of administrative
proceedings by the Service, furnish to the Service the name, address, profits
interest, and taxpayer identification number of each person who was a Member in
the Company at any time during the applicable Company taxable year and such
revised or additional information as may be required by Law; and (viii) conform
to any tax administrative requirements as may be placed on the Tax Matters
Partner by Treasury Regulations adopted after the date hereof as to income tax
or any other federal tax applicable to the Company. If the Tax Matters Partner
receives notice that any governmental authority intends to examine any income
tax return of the Company, the Tax Matters Partner shall promptly notify the
Company and the other Members.
 
 
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Schedule 2.1(a)
 
Magnetation LLC
 
Magnetation, Inc. Capital Contributions
 
Capital Contributions to the Company on or Prior to Effective Date
 
    Cash:           $2,194,397.98
 
    Other non-booked assets and value associated with establishing business and
development of operational platform as reflected in part by the list of Purchase
Order Commitments generated through the actions by Magnetation for the benefit
of the Company as described more fully in the Supplemental Letter.
 
    The transactions contemplated by this Agreement, including the Technology
License Agreement.
 

 
Plant 1 Capital Contributions on or prior to January 3, 2012
 
 
Non-Cash Assets (as described more fully in the Supplemental Letter):
 
Building:
$
  2,788,344.78
Capitalized Interest:
$
  1,396,310.69
Land and Leasehold:
$
  331,927.95
Mobile Equipment:
$
  6,483,045.62
Plant Equipment:
$
  23,965,114.58
Vehicles:
$
  37,884.25      

    Contracts and Permits (as more fully described in the Supplemental Letter)
 
Goodwill (allocated across all contributions): $261,495,374.15
 
TOTAL VALUE:    $298,692,400

 
 

--------------------------------------------------------------------------------

 
 
Schedule 2.2
 
Magnetation LLC
 
Membership Units
 
The following table reflects the number of Units and the Percentage Interest as
of the Effective Date and is subject to update pursuant to the terms of the
Operating Agreement:
 

 
Member
Units
Percentage Interest
Magnetation, Inc.
298,692,400
50.1%
AK Iron Resources, LLC
297,500,000
49.9%
TOTAL
596,192,400
100.0%

 

 

 
2 
 

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Schedule 5.4
 
Magnetation LLC
 
Magnetation Capital Reserve Account
 
Funds held in the Magnetation Capital Reserve Account shall be invested only in
the instruments as set forth below:
 
(a)  
marketable obligations of, or obligations guaranteed by, the United States of
America;

 
(b)  
U.S. Money Market Funds (as defined below);

 
(c)  
certificates of deposit, bank repurchase agreements or banker’s acceptances of
commercial banks with capital exceeding $1 billion (based on the most recent
financial statement of such bank which are then publicly available); and

 
(d)  
other investments mutually determined in writing by Magnetation and AK Iron.

 
The term “U.S. Money Market Funds” means interests in any open-end or closed-end
management type investment company or investment trust registered under the
Investment Company Act of 1940, the portfolio of which is limited to obligations
of, or obligations guaranteed by, the United States or any agency thereof
(“Federal Obligations”) and to agreements to repurchase Federal Obligations that
are 100% collateralized by Federal Obligations marked to market on a daily basis
with daily liquidity.

 

 
 
 

--------------------------------------------------------------------------------

 

Schedule 9.4
 
Magnetation LLC
 
Procedure for Purchasing the Other Member’s Interest
 
The following terms and provisions will apply to the exercise of the Electing
Member’s right and option to purchase the Other Member’s Interest pursuant to
Section 9.4(b) or Section 9.4(c) of this Agreement:
 
(e)  
The Electing Member will exercise its right and option to purchase the Other
Member’s Interest pursuant to Section 9.4(b) or Section 9.4(c) of this Agreement
by the giving of notice of exercise to the Other Member (the “Election
Notice”).  The Election Notice will specify the number of Units as to which the
option is exercised.

 
(f)  
The closing of the purchase of the Other Member’s Interest shall take place on
the thirtieth (30th) day following the date of delivery of the Election Notice,
or, if there is an appraisal of Fair Market Value, fifteen (15) days after
receipt of the appraisal of the Interest to be purchased (or if such date is not
a Business Day, the first day thereafter that is a Business Day) at 10:00 a.m.,
CDT, in the principal office of the Company, or on such other date and at such
other time and place as may be agreed to by the Electing Member and the Other
Member (the “Closing”).

 
(g)  
For the purposes of this Schedule 9.4, “Fair Market Value” means the fair market
value as determined in good faith by mutual agreement of the Electing Member and
the Other Member.  Within thirty (30) days following delivery of an Election
Notice, the Electing Member and the Other Member shall negotiate in good faith
in determining the Fair Market Value of the Other Member’s Interest to be
acquired.

 
(h)  
If the Electing Member and the Other Member fail to agree on the Fair Market
Value of the Other Member’s Interests to be acquired pursuant to Subsection (c)
above, either the Electing Member or the Other Member may deliver to the other
Party a written notice of objection (the “Objection Notice”) within ten (10)
days following the end of the thirty (30) day period referenced in paragraph
(c).  Upon receipt of such Objection Notice, such Fair Market Value shall be
determined by an independent appraiser (the “Independent Appraiser”) jointly
selected by the Electing Member and the Other Member.  If the Electing Member
and the Other Member are unable to agree on an Independent Appraiser within
fifteen (15) days after delivery of the Objection Notice, within seven (7) days
after the end of such fifteen (15) day period, each of the Electing Member and
the Other Member shall submit the names of two independent appraisers, and each
Party shall be entitled to strike one name from the other Party’s list of firms,
and the Independent Appraiser shall

 
 
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be selected by lot from the remaining firms.  Such Independent Appraiser shall
submit to the Electing Member and the Other Member a written report within
thirty (30) days of its engagement setting forth such determination, based upon
an analysis of comparable companies in the same line of business and size as the
Company and other characteristics deemed relevant by the Independent
Appraiser.  The expenses of the Independent Appraiser shall be borne by the
Company.  The determination of such Independent Appraiser as to Fair Market
Value shall be final and binding upon the Company, the Electing Member and the
Other Member.

 
(i)  
At the Closing, the Other Member will deliver to the Electing Member the
following executed documentation in form reasonably acceptable to the Electing
Member:

 
(1)  
an assignment of its Interest to the Electing Member;

 
(2)  
the resignation of each of its Board Representatives who are acting as members
of the Board;

 
(3)  
representations and warranties by the Other Member that it owns and has good
title to its Interest free and clear of all liens, claims, and encumbrances, and
has the proper authority to transfer the Interest, which representations and
warranties will survive the closing and will continue indefinitely;

 
(4)  
all confidential documents relating to the Company in the Other Member’s
possession;

 
(5)  
all property belonging to the Company; and

 
(6)  
such other documentation as the Electing Member may reasonably require in order
to vest in the Electing Member full right, title and interest in and to the
Other Member’s Interest free and clear of all liens, claims and encumbrances.

 
(j)  
At the Closing, the Electing Member will deliver to the Other Member:

 
(1)  
the purchase price in immediately available funds, subject to (A) if the Other
Member owes money to the Company, then the purchase price will be reduced by the
amount of the principal and accrued but unpaid interest on such indebtedness and
(B) if the Company owes money to the Other Member, then the Company will pay to
the Other Member the full amount of the principal and accrued but unpaid
interest on such indebtedness; and

 
 
 
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(2)  
an indemnity agreement, in form proposed by the Other Member and reasonably
acceptable to the Electing Member, indemnifying the Other Member against any
claims arising from the conduct of the Business of the Company from and after
the Closing.

 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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