Exhibit 10.65

PELLET SALE AND PURCHASE AGREEMENT

THIS AGREEMENT, entered into, dated and effective as of April 10, 2002
(“Agreement”), by and among THE CLEVELAND-CLIFFS IRON COMPANY, an Ohio
corporation (“Iron”), CLIFFS MINING COMPANY, a Delaware corporation (“Mining”),
NORTHSHORE MINING COMPANY, a Delaware corporation (“Northshore”), NORTHSHORE
SALES COMPANY, an Ohio corporation (“Sales”; Iron, Mining, Northshore and Sales
being collectively referred to herein as “Cliffs”), INTERNATIONAL STEEL GROUP
INC., a Delaware corporation (“ISG”), ISG CLEVELAND INC., a Delaware
corporation, (“ISG Cleveland”), and ISG INDIANA HARBOR INC., a Delaware
corporation (“ISG Indiana Harbor”; ISG, ISG Cleveland and ISG Indiana Harbor
being collectively referred to herein as “Steel”).

RECITALS

WHEREAS, Cliffs desires to sell to Steel and Steel desires to purchase from
Cliffs certain quantities of grades of iron ore standard pellets as follows:
(i) such grades of iron ore standard pellets being those produced at the Empire
Iron Mining Partnership iron ore pellet plant (“Empire Pellets”), located in
Palmer, Michigan (“Empire Mine”); (ii) such grades of iron ore standard pellets
being those produced at the Northshore Mining Company iron ore pellet plant
(“Northshore Pellets”), located in Silver Bay, Minnesota (“Northshore Mine”);
(iii) such grades of iron ore standard pellets being those produced at the
Hibbing Taconite Company Joint Venture iron ore pellet plant (“Hibbing
Pellets”), located in Hibbing, Minnesota (“Hibbing Mine”); or (iv) such other
pellet grades as may be mutually agreed to by the parties hereto (such Empire
Pellets, Northshore Pellets, Hibbing Pellets, and other mutually agreed upon
pellets collectively being referred to herein as “Cliffs Pellets”), all on the
conditions contained herein.

 

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NOW, THEREFORE, in consideration of the mutual covenants hereinafter set forth,
Cliffs and Steel agree as follows:

Section 1.—Definitions.

The terms quoted in the above parentheses of the first introductory paragraph of
this Agreement and the WHEREAS clause, other terms quoted throughout this
Agreement, and the terms defined below in this Section 1 shall have the meanings
assigned to them for purposes of this Agreement. Attached as Appendix I to this
Agreement is a locator list of all defined terms used throughout the Agreement.

(a). The words, “Steel’s Annual Pellet Tonnage Requirements”, as used herein,
shall mean for any year a tonnage amount equal to Steel’s total annual iron ore
pellet tonnage requirements required for consumption in Steel’s iron and steel
making facilities in any year at ISG Cleveland, located in Cleveland, Ohio
(“Cleveland Works”) and at ISG Indiana Harbor, located in Indiana Harbor,
Indiana (“Indiana Harbor Works”).

(b). The word “pellets”, as used herein, shall mean iron-bearing products
obtained by the pelletizing of iron ore or iron ore concentrates, suitable for
making iron in blast furnaces.

(c). The word “ton”, as used herein, shall mean a gross ton of 2,240 pounds
avoirdupois natural weight.

 

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(d). The words “net ton”, as used herein, shall mean a ton of 2,000 pounds
avoirdupois natural weight.

(e). The word “year”, as used herein, shall mean a calendar year commencing on
January 1 and ending December 31.

(f). The words “shuttle tons”, as used herein, shall mean pellets which are
destined for Cleveland Works deliveries, which are first unloaded from vessel
onto a dock which is not a Steel dock or a dock designated by Steel pursuant to
Section 8(a).

Section 2.—Sale and Purchase/Tonnage.

During each of the years 2002 through 2016, and each year thereafter as long as
this Agreement remains in effect, Cliffs shall sell and deliver to Steel and
Steel shall purchase and receive from Cliffs and pay for a tonnage of Cliffs
Pellets which tonnage shall be equal to Steel’s Annual Pellet Tonnage
Requirements for each such year.

Section 3.—Quality

(a). Cliffs Pellets when loaded for shipment will be consistent with the typical
specifications and analysis limits set forth in Exhibit 1.

(b). In the event the monthly average vessel analysis exceeds one standard
deviation as set forth in Exhibit 1, Cliffs will take such actions as shall be
necessary to achieve specification conformity. If specification conformity
cannot be achieved, Steel and Cliffs shall negotiate in good faith to determine
what actions or remedies, if any, are appropriate.

 

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(c). If any two vessel shipments made during any calendar month have analysis
that exceeds the analysis limits in the specifications set forth in Exhibit 1,
Steel may refuse any subsequent vessel shipments during that calendar month, and
Steel shall not be required to accept any subsequent shipments until Cliffs has
taken action to remedy the non-conformity so that future shipments will be
within the analysis limits. If more than two vessel shipments made during any
calendar month have analysis that exceeds such limits, Cliffs and Steel shall
negotiate an appropriate cost adjustment (if any) for the cargoes in excess of
the first cargo that exceeded the analysis limits, based upon the additional
costs (if any) to Steel associated with the quality specifications in the
additional vessel shipments made during that calendar month that exceeded such
analysis limits.

(d). Shuttle tons from the Cleveland Bulk Terminal shall be sampled and analyzed
for the – 1/4” size fraction as they are being loaded into a vessel for delivery
to Steel’s dock. Shuttle tons shall not have a significant increase in the –
1/4” size fraction versus the non-shuttle tons delivered to the Cleveland Works
pursuant to Section 8(a). In the event that two shuttle tons vessel shipments
during any month display an increase in the – 1/4” size fraction of 5% or more
versus non-shuttle delivered tons, Steel and Cliffs shall meet to determine the
cause of the significant increase and the corrective action to reduce the
significant increase. If a corrective action cannot be implemented to reduce the
– 1/4” size fraction below the 5% increase, then Steel and Cliffs shall meet to
work out a good faith adjustment.

 

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Section 4.—Notification and Nomination.

(a). With respect to the tonnage of Cliffs Pellets to be purchased by Steel for
the year 2002, as provided in Section 2, on or before April 30 of the current
year, Steel shall notify Cliffs in writing of Steel’s preliminary tonnage of
Steel’s Annual Pellet Tonnage Requirements which Steel shall purchase from
Cliffs. Such notification shall include: (i) Steel’s Annual Operating Plan for
the balance of the current year detailed by months, as such Annual Operating
Plan relates to Steel’s planned monthly consumption of all pellets for such
year; (ii) the tonnage of Cliffs Pellets which Steel expects to purchase in the
current year from Cliffs; and (iii) Steel’s planned monthly pellet consumption
for the first four months of the year 2003.

(b). With respect to the tonnage of Cliffs Pellets to be purchased by Steel for
each of the years 2003 through 2016, as provided in Section 2, on or before
November 1 of each of the years prior to the years above, Steel shall notify
Cliffs in writing of Steel’s preliminary tonnage of Steel’s Annual Pellet
Tonnage Requirements which Steel shall purchase from Cliffs. Such notification
shall include: (i) Steel’s Annual Operating Plan for the following year detailed
by months, as such Annual Operating Plan relates to Steel’s planned monthly
consumption of all pellets for such year (“Steel’s AOP”); (ii) the tonnage of
Cliffs Pellets which Steel expects to purchase in the following year from
Cliffs; (iii) Steel’s expected total pellet inventory as of December 31 for the
then current year; (iv) Steel’s planned total pellet inventory on December 31
for the following year; and (v) Steel’s planned monthly pellet consumption for
the first four months of the year which succeeds the following year.

 

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(c). With respect to the tonnage of Empire Pellets, Northshore Pellets and
Hibbing Pellets which Cliffs will have available for sale to Steel in 2002, on
or before May 31, 2002, and in each succeeding year on or before December 31 of
each year prior to the years in Section 4(b) above, Cliffs shall notify Steel in
writing as to the tonnage of Empire Pellets, Northshore Pellets and Hibbing
Pellets Cliffs shall sell to Steel, which tonnage shall equal Steel’s Annual
Pellet Tonnage Requirements for such year.

(d). With respect to Steel’s Annual Pellet Tonnage Requirements as provided for
in Sections 4(a) and 4(b) above, Steel shall notify Cliffs by the 15th day of
each month for the year in determination: (i) Steel’s actual consumption of all
pellets for the previous month, and (ii) Steel’s planned monthly consumption of
all pellets for the balance of the year and the first four months of the
following year. In the first month’s notice of each such year, as provided for
under this Section (d), Steel shall also advise Cliffs of Steel’s actual total
pellet inventory as of December 31 for the previous year.

(e). If during the course of the year, Steel’s Annual Pellet Tonnage
Requirements decrease from Steel’s preliminary nomination provided pursuant to
Section 4(b) above, then the tonnage of Cliffs Pellets which Steel shall
purchase from Cliffs shall be reduced by an amount equal to the shortfall of the
actual pellet consumption versus the nominated pellet consumption. In addition,
Steel’s Annual Pellet Tonnage Requirements shall not be modified so as to change
Steel’s planned total pellet inventory at the end of the then current year
unless such modification is agreed to by Cliffs.

 

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(f). If, during the course of the year, Steel’s Annual Pellet Tonnage
Requirements increase from Steel’s preliminary nomination provided pursuant to
Section 4(b) above, then Steel shall notify Cliffs in writing of any such
increase in Steel’s Annual Pellet Tonnage Requirements. Cliffs shall advise
Steel in writing within fifteen (15) days of receipt of Steel’s notice as to
Cliffs’ ability to supply all or any portion of such increased tonnage, which
Cliffs shall sell and Steel shall purchase as provided for in Cliffs notice at
the contract prices provided for in this Agreement. In the event Cliffs cannot
supply any portion of such increased tonnage, Steel and Cliffs shall work
together to attempt to procure such additional tonnage for Steel.

(g). In each year after 2004, upon reasonable notification and by mutual
agreement, Steel may, for trial purposes, substitute up to 5% of Steel’s Annual
Pellet Tonnage Requirements for Northshore Pellets and/or Empire Pellets with
another grade of Cliffs’ produced pellets (“Substitute Pellets”). In the event
an additional cost is incurred by Cliffs in producing or delivering the
Substitute Pellets, then an appropriate price adjustment shall be made to the
contract price for the tonnage of Substitute Pellets.

Section 5.—Price, Adjustments and Special Payment.

(a). The price for the Cliffs Pellets, either currently at or to be delivered to
Steel’s Cleveland Works or other dock area designated by Steel pursuant to
Section 8(a), shall be as follows: (i) for the year 2002, the first 107,535 tons
of

 

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Northshore Pellets and Hibbing Pellets (which are currently located at Steel’s
Cleveland Works blast furnace ore yard) sold by Cliffs and purchased by Steel
shall be $32.40 per ton; (ii) the price for the next 186,200 tons of Northshore
Pellets and Hibbing Pellets (which are currently located at the Lorain Pellet
Terminal, Lorain, Ohio) sold by Cliffs and purchased by Steel shall be $37.40
per ton; and (iii) except for the price and quantity as provided for the
specific Cliffs Pellets as described in Sections 5(a)(i) and 5(a)(ii) above, all
other Cliffs Pellets sold by Cliffs and purchased by Steel in the year 2002
shall have a final year 2002 price of $.6312 per iron unit (which at the
expected natural iron content of 63.21% for Northshore pellets equals $39.90 per
ton).

(b). The price for the Cliffs Pellets, either currently at or to be delivered to
Steel’s Indiana Harbor Works shall be as follows: (i) for the year 2002, the
first 111,198 tons of Empire Pellets (which are currently located at Steel’s
Indiana Harbor Works blast furnace ore yard) sold by Cliffs and purchased by
Steel shall be $30.40 per ton; and (ii) except for the price and quantity for
the specific Cliffs Pellets described in Section 5(b)(i) above, all other Cliffs
Pellets sold by Cliffs and purchased by Steel in the year 2002, shall have a
final year 2002 price of $.5971 per iron unit (which at the expected natural
iron content of 63.47% for Empire pellets equals $37.90 per ton).

(c). The prices for the specific grades of Cliffs Pellets sold and purchased in
each of the years 2003 and thereafter for the Cleveland Works or other dock area
designated by Steel pursuant to Section 8(a), and the Indiana Harbor Works shall
be based on the 2002 base prices per iron unit as described in

 

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Section 5(a) (iii) and 5(b)(ii) above (“2002 base prices per iron unit for each
of the Cleveland Works and the Indiana Harbor Works”), which 2002 base prices
per iron unit for each of the Cleveland Works and the Indiana Harbor Works shall
then be adjusted, up or down, in the year 2003 and each year thereafter by an
amount as determined in accordance with Section 5(d) below.

(d). In order to determine the adjusted prices to be paid each year for the
Cliffs Pellets, as provided for under Section 5(c), the 2002 base prices per
iron unit for each of the Cleveland Works and the Indiana Harbor Works and each
of the following respective year’s then adjusted prices per iron unit for each
of the Cleveland Works and the Indiana Harbor Works shall be further adjusted,
up or down, each year for the year in determination as follows:

 

  (1) Divide (x) the numerator, which is the amount by which the Producer Price
Index—All Commodities Series Id: WPU00000000 Annual Average published by the
United States Department of Labor (“PPI”) for the calendar year in determination
changes (up or down) from the immediately preceding calendar year’s PPI; by
(y) the denominator, which is the immediately preceding calendar year’s PPI, and
multiply the result obtained by 50%; and

 

  (2) Multiply the results determined in (1) above by the preceding year’s
adjusted prices per iron unit for each of the Cleveland Works and the Indiana
Harbor Works which will then equal the current year’s price adjustment per iron
unit for each of the Cleveland Works and the Indiana Harbor Works; and

 

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  (3) Add the result determined in (2) above to the preceding year’s adjusted
price per iron unit for each of the Cleveland Works and the Indiana Harbor
Works, which then will equal the current year’s adjusted prices per iron unit
for each of the Cleveland Works and the Indiana Harbor Works.

Those adjusted prices per iron unit for each of the Cleveland Works and the
Indiana Harbor Works shall then become the contract’s year final price for the
Cliffs Pellets delivered to the Cleveland Works and the Indiana Harbor Works for
the year in determination, and shall be the starting base for determining the
following year’s adjusted prices per iron unit for the Cleveland Works and the
Indiana Harbor Works.

(e). The price for all tons sold by Cliffs to Steel shall be based on actual
natural iron content shipped. Notwithstanding the previous sentence, payments
for the years 2002 through 2004, as described in Section 6(a), shall be based on
actual natural iron content consumed by Steel.

(f). Attached as Exhibit 2 is an example of the adjustment formula applying the
provisions of Sections 5(c) and 5(d).

(g). (i) Beginning in 2003, an annual special steel pricing payment (“Special
Payment”) shall be made in each year, wherein Cliffs shall pay Steel or Steel
shall pay Cliffs, as the case may be, if Steel’s average annual unprocessed

 

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hot band steel pricing for actual sales in any contract year is below $230 per
net ton or above $290 per net ton. The amount of the Special Payment shall be
determined as follows:

 

  (1) In any contract year in which Steel’s average unprocessed hot band steel
pricing for actual sales is below $230 per net ton, Cliffs shall pay Steel an
amount equal to: (w) the amount below $230 per net ton, (x) multiplied by .19%,
(y) multiplied by the contract year’s average weighted pellet price per ton for
the Cliffs Pellets consumed by Steel, (z) multiplied by the total tons of Cliffs
Pellets which Steel consumed in the contract year.

 

  (2) In any contract year in which Steel’s average unprocessed hot band steel
pricing for actual sales is above $290 per net ton, Steel shall pay Cliffs an
amount equal to: (w) the amount above $290 per net ton, (x) multiplied by .19%,
(y) multiplied by the contract year’s average weighted pellet price per ton for
the Cliffs Pellets consumed by Steel, (z) multiplied by the total tons of Cliffs
Pellets which Steel consumed in the contract year.

 

  (3)

For the purpose of estimating the Special Payment, a steel pricing payment
calculation shall be made by Steel following the end of each quarter, using the
formula provided for in Sections 5(g)(i)(1) and 5(g)(i)(2) above for each
quarter. This

 

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  calculation (and payment, if any) shall be based on Steel’s average
unprocessed hot band steel pricing for actual sales for the quarter and the
pellet tonnage consumed by Steel in that quarter. Within 30 days following each
quarter Steel shall notify Cliffs in writing of the amount (if any) payable by
Cliffs to Steel or Steel to Cliffs, and a quarterly payment, if any, shall be
made by Cliffs to Steel or Steel to Cliffs, as the case may be, within 45 days
after the end of each quarter.

 

  (4) The final Special Payment calculation shall be made after the end of the
year in accordance with Sections 5(g)(i)(1) and 5(g)(i)(2) above which will
reflect Steel’s actual average annual unprocessed hot band steel pricing per net
ton for actual sales for the full calendar year, and an adjustment will be made
to reflect any difference between the actual year’s Special Payment and the
quarterly estimated payments that were made during the year. Payment due, from
either party, as a result of the actual annual calculation shall be made by
February 15 of the year following the contract year.

 

  (5) Attached as Exhibits 3 and 4 are examples of the calculations applying the
provisions of Sections 5(g)(i) and 5(g)(ii).

(ii) In the event that in any year Steel’s annual total unprocessed hot band
steel sales are less than 15% of Steel’s total annual steel sales, then Cliffs
and Steel agree to substitute another grade of steel

 

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for the unprocessed hot band steel which substituted grade of steel comprises an
amount in excess of 15% of Steel’s total annual sales in order to determine the
Special Payment. The $230 per net ton and $290 per net ton which are used for
the price ranges, as provided for in Section 5(g)(i) above, shall be adjusted as
follows: (i) the actual average price per net ton of Steel’s substituted grade
of steel sales from the previous year, less (ii) the unprocessed hot band steel
sales from the previous year, (iii) with the difference between (i) and
(ii) above being added to both the $230 per net ton and the $290 per net ton to
determine the revised ranges for the substituted steel grade in order to
determine the Special Payment.

Section 6.—Payments and Adjustments.

(a). For the years 2002 through 2004 and for all tonnage delivered through
March 31, 2005, Steel shall pay Cliffs each Tuesday, via wire transfer, an
amount to be equal to the result of: (i) Steel’s planned pellet consumption for
the fourteen day period beginning with the following Wednesday, less (ii) the
pellets which Steel has in its inventory on that day for both the Cleveland
Works and the Indiana Harbor Works, (iii) with the difference between (i) and
(ii) above being multiplied by the appropriate estimated price per ton. The
appropriate estimated price per ton shall be calculated by multiplying the
contract year’s estimated price per iron unit with Steel’s estimated iron
content of the Cliffs Pellets being consumed during the following fourteen day
period.

 

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(b). Beginning with vessel deliveries on April 1, 2005, Cliffs shall invoice
Steel for an amount based on the estimated prices per ton for the contract year
for weekly pellet shipment deliveries (Saturday through Friday) to Steel’s
Cleveland Works and Indiana Harbor Works with payment to be made by Steel to
Cliffs via wire transfer on the fourth Wednesday following the week of pellet
deliveries.

(c). Following each contract year, final adjustments and payments shall be
determined as follows:

 

  (1) The adjustment for the actual average natural iron content of Cliffs
Pellets shall be determined by Cliffs and verified in detail in writing to Steel
by an officer of Cliffs, such verification due no later than January 31 of the
year following a contract year, and the payment from Cliffs to Steel or Steel to
Cliffs, as the case may be, shall be made by February 15 of that year;

 

  (2) The final Special Payment shall be determined by Steel and verified in
detail in writing to Cliffs by an officer of Steel, such verification due no
later than January 31 of the year following a contract year, and payment from
Cliffs to Steel or Steel to Cliffs, as the case may be, shall be made by
February 15 of that year; and

 

  (3)

The adjustment to the contract year’s price identified pursuant to Section 5(d)
shall be made by Cliffs by March 15 of the following year (using the most recent
final estimate of the PPI by the Bureau of Labor Statistics) which shall be
verified in

 

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  writing by an officer of Cliffs. Cliffs shall issue an invoice or credit memo,
as the case may be, to Steel, and payment from Cliffs to Steel or Steel to
Cliffs, as the case may be, shall be made by April 15 of that year.

(d). During each of the years 2002 through 2005, Cliffs shall have the right to
conduct a minimum of two pellet stockpile surveys each year at each of the
Cleveland Works and Indiana Harbor Works to verify (i) the tonnage of Cliffs
Pellets which Steel has consumed and (ii) the tonnage of Cliffs Pellets
currently owned by Cliffs in stockpile at the Cleveland Works and the Indiana
Harbor Works. In the event that the pellet stockpile survey results vary by more
than 5% (above or below) from Cliffs’ pellet book inventory (after taking into
account actual iron units shipped versus actual iron units consumed), then
Cliffs shall issue an invoice or credit memo, as the case may be, to Steel, for
the amount of the difference in the stockpile survey results that vary by more
than 5% above or below Cliffs’ pellet book inventory, and payment from Cliffs to
Steel or Steel to Cliffs, as the case may be, shall be made within 30 days
following the pellet stockpile survey. If the pellet stockpile survey results
vary by 10% or more (above or below) from Cliffs’ pellet book inventory (after
taking into account actual iron units shipped versus actual iron units
consumed), then Cliffs and Steel shall have an independent third party conduct
another pellet stockpile survey. The results of the independent third party
survey shall be final and Cliffs shall issue an invoice or credit memo, as the
case may be, to Steel, and payment from Cliffs to Steel or Steel to Cliffs, as
the case may be, shall be made within 30 days following the independent third
party’s pellet stockpile survey.

 

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(e). At their own expense, Cliffs and/or Steel shall have an annual right to
have the information and calculations relating to the contract price, Special
Payment, and adjustments verified by an independent third party auditor. In the
event Steel shall fail to make payment when due of all amounts, Cliffs, in
addition to all other remedies available to Cliffs in law or in equity, shall
have the right, but not the obligation, to withhold further performance by
Cliffs under this Agreement until all claims Cliffs may have against Steel under
this Agreement are fully satisfied.

(f). All payments shall be made in U.S. dollars.

Section 7.—Sampling and Analyses.

All pellet sampling procedures and analytical tests conducted on Cliffs Pellets
sold to Steel to demonstrate compliance with typical specifications and analysis
limits shall be performed on each pellet vessel shipment. Test methods to be
used shall be the appropriate ASTM or ISO standard methods published at the time
of testing or the customary procedures and practices, or any other procedures
and practices that may be mutually agreed to by Cliffs and Steel. Steel may, at
any time and from time to time through one or more authorized representatives,
and with prior notice to Cliffs be present during production, loading, or to
observe sampling and analysis of pellets being processed for shipment to Steel.

 

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Section 8.—Delivery, Storage and Transfer of Ownership.

(a). Cliffs shall deliver to Steel the annual tonnage of Cliffs Pellets for the
Cleveland Works to the Cleveland Work’s blast furnace ore yard or other vessel
dock in the Cleveland, Ohio area that Steel designates. Steel shall make dock
storage space available so that Cliffs can deliver and have in inventory in
Cliffs or Steel’s name up to 700,000 tons of pellets at any time and Steel will
work to make more dock storage space available if practicable.

(b). Cliffs shall deliver to Steel the annual tonnage of Cliffs Pellets for the
Indiana Harbor Works to the Indiana Harbor Works’ blast furnace ore yard and
Steel shall make dock storage space available so that Cliffs can deliver and
have in inventory in Cliffs or Steel’s name up to one million tons of pellets at
any time.

(c). Title, and all risk of loss, damage or destruction of Cliffs Pellets shall
transfer to Steel upon receipt of payment as provided for in Section 6(a) or
upon receipt of payment as provided for in Section 6(b), as the case may be.

Section 9.—Shipments.

Shipments of Cliffs Pellets shall be in approximately equal amounts over the
nine month period of April through December each year during the term of this
Agreement to ensure an adequate amount of inventory to allow a working pellet
pile at Steel’s blast furnace ore docks. Cliffs shall work to annually direct
ship a minimum of 20% of Steel’s pellet requirements for Steel’s Cleveland
Works.

 

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Section 10.—Weights.

(a). Except as set forth in Section 10(b) below, vessel bill of lading weight
determined by certified railroad scale weights, certified belt scale weights, or
certified bin scale weights in accordance with the procedures in effect from
time to time at each of the loading ports shall be accepted by the parties as
finally determining the amount of Cliffs Pellets delivered to Steel pursuant to
this Agreement.

(b). Steel shall have the right to have a draft survey performed on vessels by
an independent third party contractor at the loading port (where the pellets are
first loaded into a vessel for shipment) at Steel’s expense and Steel shall
afford Cliffs an opportunity to have a representative present by providing
Cliffs a minimum of two days’ notice prior to having any draft survey performed.
If the vessel bill of lading weight is more than 3% higher or more than 3% lower
than the draft survey weight, then the draft survey weight shall be the weight
used in calculating the value of the cargo. In the event that the variance is
greater than 3%, Cliffs and Steel will investigate and remedy the cause of the
variance.

Section 11.—Employment of Vessels.

Cliffs assumes the obligation for arranging and providing appropriate vessels
for the transportation of the Cliffs Pellets delivered by Cliffs to Steel
hereunder. Steel shall arrange for suitable pellet unloading facilities at the
Cleveland Works and Indiana Harbor Works blast furnace ore yards ports.

 

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Section 12.—Warranties.

THERE ARE NO WARRANTIES, EXPRESS OR IMPLIED, WHICH EXTEND BEYOND THE PROVISIONS
OF THIS AGREEMENT, INCLUDING ANY WARRANTIES OF MERCHANTABILITY OR FITNESS FOR
INTENDED PURPOSE. All notices for substantial variance in specifications of the
Cliffs Pellets from the specifications and analysis limits described in Exhibit
1 shall be given in writing delivered to Cliffs within sixty (60) calendar days
after completion of discharge of the Cliffs Pellets at the Cleveland Works or
Indiana Harbor Works blast furnace ore yards, or any claim arising from any
substantial variance shall be deemed waived by Steel. Each party shall afford
the other party prompt and reasonable opportunity to inspect the Cliffs Pellets
as to which any notice is given as above stated. No claim will be entertained
after the Cliffs Pellets have been consumed. The Cliffs Pellets shall not be
returned to Cliffs without prior written consent of Cliffs. In no event shall
Cliffs be liable for Steel’s cost of processing, lost profits, injury to good
will or any other special or consequential damages.

Section 13.—Force Majeure.

No party hereto shall be liable for damages resulting from failure to produce,
deliver or accept all or any of the Cliffs Pellets as described herein, if and
to the extent that such production, delivery or acceptance would be contrary to
or would constitute a violation of any regulation, order or requirement of a
recognized governmental body or agency, or if such failure is caused by or
results directly or indirectly from acts of God, war, insurrections,
interference by foreign powers,

 

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strikes, labor disputes, fires, floods, embargoes, accidents, acts of terrorism,
or uncontrollable delays at the mines or either steel plant, on the railroads,
docks or in transit, shortage of transportation facilities, disasters of
navigation, or other causes, similar or dissimilar, that are beyond the control
of the party charged with a failure to deliver or to accept the Cliffs Pellets.
A party claiming a force majeure shall give the other party prompt notice of the
force majeure, including the particulars thereof and, insofar as known, the
probable extent and duration of the force majeure. To the extent a force majeure
is claimed hereunder by a party hereto, such shall relieve the other party from
fulfilling its corresponding agreement hereunder to the party claiming such
force majeure, but only for the period affected by and to the extent of the
claimed force majeure, unless otherwise mutually agreed to by the parties. The
party that is subject to a force majeure shall use commercially reasonable
efforts to cure or remove the force majeure event as promptly as possible to
resume performance of its obligations under this Agreement.

Section 14.—Notices.

All notices, consents, reports and other documents authorized and required to be
given pursuant to this Agreement shall be given in writing and either personally
served on an officer of the parties hereto to whom it is given or mailed,
postage prepaid, or sent by telegram or facsimile addressed as follows:

If to Cliffs:

1100 Superior Avenue—15th Floor

Cleveland, Ohio 44114-2589

Attention: Secretary

cc: Vice President-Sales

Facsimile: (216) 694-5385

 

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If to Steel:

3100 East 45th Street

Cleveland, Ohio 44127

Attention: Vice President, Finance

       and Administration

Facsimile: (216) 429-6003

provided, however, that any party may change the address to which notices or
other communications to it shall be sent by giving to the other party written
notice of such change, in which case notices and other communications to the
party giving the notice of the change of address shall not be deemed to have
been sufficiently given or delivered unless addressed to it at the new address
as stated in said notice.

Section 15.—Term.

(a). The term of this Agreement shall commence as of April 10, 2002 and continue
through December 31, 2016. Unless either party has given written notice of
termination to the other party by December 31, 2014 (two years prior to
termination), this Agreement shall continue on an annual basis after
December 31, 2016 (original termination year) subject to subsequent termination
by either party upon not less than two years’ prior written notification to the
other party, in which case the Agreement shall terminate at the end of the
second succeeding year.

(b). This Agreement shall remain valid and fully enforceable for the fulfillment
of obligations incurred prior to termination.

Section 16.—Amendment.

This Agreement may not be modified or amended except by an instrument in writing
signed by the parties hereto.

 

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Section 17.—Merger, Transfer and Assignment.

(a). Steel shall not merge, consolidate or reorganize with any person,
partnership, corporation or other entity unless the surviving or resulting
person, partnership, corporation or other entity assumes in writing all of
Steel’s obligations under this Agreement. Any obligations required to be assumed
by a surviving or resulting person, partnership, corporation or entity in
accordance with this Section 17(a) shall be limited to the Steel obligations
under this Agreement, and this Section 17(a) is not intended (i) to impose and
shall not be deemed to impose upon any such surviving or resulting person,
partnership, corporation or entity, including Steel, any obligation with respect
to any pellet requirements it may have for any facility or facilities it owns or
operates other than the Cleveland Works and the Indiana Harbor Works, nor
(ii) to allow the surviving or resulting person, partnership, corporation or
other entity to substitute any other pellet tonnage available from any other
pellet purchase or pellet equity commitment of such surviving or resulting
person, partnership, corporation or other entity in order to satisfy the assumed
obligations under this Agreement for the Cleveland Works and Indiana Harbor
Works.

(b). Steel shall not sell or transfer all or any of the blast furnace operations
at (i) the Cleveland Works, (ii) the Indiana Harbor Works, or (iii) both the
Cleveland Works and the Indiana Harbor Works to any other person, partnership,
corporation, joint venture or other entity (“Transferee”) unless the Transferee
assumes in writing all of Steel’s obligations under this Agreement, as such
obligations relate to the Cleveland Works and/or the Indiana Harbor Works

 

22

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being sold or transferred. Any obligations required to be assumed by a
Transferee in accordance with this Section 17(b) shall be limited to the Steel
obligations under this Agreement relating to the particular facility or
facilities sold or transferred. This Section 17(b) is not intended (i) to impose
and shall not be deemed to impose upon any such Transferee any obligation with
respect to any pellet requirements such Transferee may have for any facility or
facilities such Transferee owns or operates other than the Cleveland Works
and/or the Indiana Harbor Works, nor (ii) to allow such Transferee to substitute
any other pellet tonnage available from any other pellet purchase or pellet
equity commitment of such Transferee in order to satisfy the assumed obligations
under this Agreement.

(c). Steel shall not assign its rights or delegate its obligations under this
Agreement except as provided in Section 17(a) or 17(b).

(d). Cliffs shall not merge, consolidate or reorganize with any person,
partnership, corporation or other entity unless the surviving or resulting
person, partnership, corporation or other entity assumes in writing all of
Cliffs’ obligations under this Agreement. Cliffs shall not sell or transfer all
or substantially all of its iron ore business to any other person, partnership,
corporation, joint venture or other entity (“Cliffs Transferee”) unless the
Cliffs Transferee assumes in writing all of Cliffs’ obligations under this
Agreement.

(e). Cliffs shall not assign its rights or delegate its obligations under this
Agreement except as provided in Section 17(d).

(f). All the covenants, stipulations and agreements herein contained shall inure
to the benefit of and bind the parties hereto and their respective successors,
transferees and permitted assigns, and any of the latter’s subsequent
successors, transferees and permitted assigns.

 

23

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Section 18.—Waiver.

No waiver of any of the terms of this Agreement shall be valid unless in
writing. No waiver or any breach of any provision hereof or default under any
provisions hereof shall be deemed a waiver of any subsequent breach or default
of any kind whatsoever.

Section 19.—Confidentiality.

(a). Cliffs and Steel acknowledge that this Agreement contains certain pricing,
adjustment and term provisions which are confidential, proprietary or of a
sensitive commercial nature and which would put Cliffs or Steel at a competitive
disadvantage if disclosed to the public, including without limitation, Sections
3(b) and (c), Section 5, Section 6 and all of the Schedules and Exhibits hereto
(“Confidential Information”). Cliffs and Steel agree that all provisions of this
Agreement shall be kept confidential and, without the prior written consent of
the other party, shall not be disclosed to any party not a party to this
Agreement except as required by law or governmental or judicial order and except
that disclosure of the existence of this Agreement shall not be precluded by
this Section 19.

(b). If either party is required by law or governmental or judicial order or
receives legal process or court or agency directive requesting or requiring
disclosure of any of the Confidential Information contained in this Agreement,
such party will promptly notify the other party prior to disclosure to permit
such party to

 

24

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seek a protective order or take other appropriate action to preserve the
confidentiality of such Confidential Information. If either party determines to
file this Agreement with the Securities and Exchange Commission (“Commission”)
or any other federal, state or local governmental or regulatory authority, or
with any stock exchange or similar body, such determining party will use its
best efforts to obtain confidential treatment of such Confidential Information
pursuant to any applicable rule, regulation or procedure of the Commission and
any applicable rule, regulation or procedure relating to confidential filings
made with any such other authority or exchange. If the Commission (or any such
other authority or exchange) denies such party’s request for confidential
treatment of such Confidential Information, such party will use its best efforts
to obtain confidential treatment of the portions thereof that the other party
designates. Each party will allow the other party to participate in seeking to
obtain such confidential treatment for Confidential Information.

Section 20.—Governing Law.

This Agreement shall in all respects, including matters of construction,
validity and performance, be governed by and be construed in accordance with the
laws of the State of Ohio.

Section 21.—Representations and Warranties.

(a). Steel represents and warrants to Cliffs that (i) the execution and delivery
of this Agreement by Steel and the performance of its obligations hereunder have
been duly authorized by all requisite corporate action, (ii) neither the
execution and delivery of this Agreement, nor the performance of its

 

25

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obligations hereunder by Steel shall, or after the lapse of time or giving of
notice shall, conflict with, violate or result in a breach of, or constitute a
default under the certificate of incorporation or bylaws of Steel or any law,
statute, rule or regulation applicable to it, or conflict with, violate or
result in a breach of or constitute a default under the material agreement to
which it is a party or by which it or any of its properties is bound, or any
judgment, order, award or decree to which Steel is a party or by which it is
bound, or require any approval, consent, authorization or other action by any
court, governmental authority or regulatory body or any creditor of Steel or any
other person or entity, and (iii) this Agreement constitutes a valid and binding
obligation of Steel and is enforceable against Steel in accordance with its
terms.

(b). Cliffs represents and warrants to Steel that: (i) the execution and
delivery of this Agreement by Cliffs and the performance of its obligations
hereunder have been duly authorized by all requisite corporate actions,
(ii) neither the execution and delivery of this Agreement nor the performance of
its obligations hereunder by Cliffs shall, or after the lapse of time or giving
of notice shall, conflict with, violate or result in a breach of, or constitute
a default under the certificate of incorporation or bylaws of Cliffs or any law,
statute, rule or regulation applicable to it, or conflict with, violate or
result in the breach of or constitute a default under any material agreement to
which it is a party or by which it or any of its properties is bound, or any
judgment, order, award or decree to which Cliffs is a party or by which it is
bound, or require any approval, consent, authorization or other action by any
court, governmental authority or regulatory body or any creditor of Cliffs or
any other person or entity, and (iii) this Agreement constitutes a valid and
binding obligation of Cliffs and is enforceable against Cliffs in accordance
with its terms.

 

26

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Section 22.—Counterparts.

This Agreement may be executed in one or more counterparts, each of which shall
be deemed an original, but all of which together shall constitute one and the
same instrument.

 

27

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IN WITNESS WHEREOF, the parties have executed this Agreement effective as of
April 10th, 2002.

 

THE CLEVELAND-CLIFFS IRON COMPANY     INTERNATIONAL STEEL GROUP INC /s/ Donald
J. Gallagher     /s/ Rodney Mott Vice President     President CLIFFS MINING
COMPANY     ISG CLEVELAND INC. /s/ Donald J. Gallagher     /s/ Rodney Mott Vice
President     President NORTHSHORE MINING COMPANY     ISG INDIANA HARBOR INC /s/
Donald J. Gallagher     /s/ Rodney Mott Vice President     President NORTHSHORE
SALES COMPANY     /s/ Donald J. Gallagher     Vice President    

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APPENDIX 1

 

 

      Page  

2002 base prices per iron unit for each of the Cleveland Works and the Indiana
Harbor Works

     9   

Agreement

     1   

Cleveland Works

     2   

Cliffs

     1   

Cliffs Pellets

     2   

Cliffs Transferee

     23   

Commission

     25   

Confidential Information

     24   

Empire Mine

     1   

Empire Pellets

     1   

Hibbing Mine

     1   

Hibbing Pellets

     1   

Indiana Harbor Works

     2   

Iron

     1   

ISG

     1   

ISG Cleveland

     1   

ISG Indiana Harbor

     1   

Mining

     1   

net ton

     3   

Northshore

     1   

Northshore Pellets

     1   

pellets

     2   

PPI

     9   

Sales

     1   

shuttle tons

     3   

Special Payment

     10   

Steel

     1   

Steel’s Annual Pellet Tonnage Requirements

     2   

Steel’s AOP

     5   

Substitute Pellets

     7   

ton

     2   

Transferee

     22   

year

     3   

 

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EXHIBIT 1

CLEVELAND-CLIFFS STANDARD ACID PELLET TYPICAL ANALYSIS

AS LOADED TO VESSEL FOR SHIPMENT

 

          EMPIRE MINE             NORTHSHORE MINE           HIBBING TACONITE  
      Report
Frequency    Typical      S.D.      Analysis
Limits             Typical      S.D.      Analysis
Limits           Typical      S.D.      Analysis
Limits  

Moisture

   V      2.50                  2.75                  2.50         

A. DRY CHEMICAL ANALYSIS

                                   

Total Iron

   V      65.10                  65.0                  66.15         

SiO2

   V      5.57         +0.11         5.79 Max.            4.80         +0.13   
     5.15 Max.            4.50         +0.07         4.64 Max.   

Al2O3

   V      0.32                  0.40                  0.20         

CaO

   V      0.35                  0.85                  0.30         

MgO

   V      0.32                  0.55                  0.31         

Mn

   V      0.07                  0.20                  0.08         

Phos

   V      0.014         +0.003         0.020 Max.            0.022        
+0.003         0.028 Max       SA      0.011         

S

   SA      0.001                  0.003                  0.002         

TiO2

   SA      0.06                  0.07                  0.02         

Na2O

   V      0.030                  0.038                  0.019         

K2O

   V      0.040                  0.018                  0.016         

B. SIZING. Wt. %

                                   

% + 1/2"

   V      5.4                  7.0                  1.6         

%–1/2" x + 3/8"

   V      82.0                  81.4                  91.0         

%–3/8" x + 1/4"

   V      9.3                  9.1                  5.4         

%–1/4"

   V      3.3         +0.8         4.9 Max.            2.5         +0.8        
4.1 Max.            2.0         +0.6         3.2 Max.   

%–28 mesh

                                   

C. TUMBLE TEST

                                   

% + 1/4" before tumble

   V      96.7                  97.5                  98.4         

% + 1/4" after tumble

   V      96.1         -0.3         95.5 Min.            96.3         -0.5      
  95.3 Min.            95.7         -0.3         95.1 Min.   

Q Index

   V      92.9                  93.9                  94.2         

Tumble Index—28 mesh

   V      2.3                  3.0                  3.9         

D. COMPRESSION TEST (1)

                                   

Minus 1/2" by plus 7/16"

                           V      491         

Minus 1/2" by plus 3/8"

   SA      500               V         450                     

% -300 lbs.

                 V         12.0             V      8.0         

 

TYPICAL ANALYSIS

   —    2002 expected average cargo analysis

S.D.

   —    Based on one sigma standard deviation of annual vessel by vessel cargo
analysis

ANALYSIS LIMITS

   —    Based on two sigma standard deviation of annual vessel by vessel cargo
analysis

LETTER "V" DENOTES

   —    Analysis to be provided on each Vessel Shipment of Pellets

LETTER "SA" DENOTES

   —    Analysis to be done on a composite sample of semi-annual Vessel
Shipments

 

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EXHIBIT 2

PRICE ADJUSTMENT FORMULA

EMPIRE, HIBBING, AND NORTHSHORE PELLETS

FOR YEARS 2003 THROUGH 2016

 

Current Year’s Price Adjustment Calculation

1. Section 5 (d)

Current Year’s PPI All Commodities—Preceding Year’s PPI All Commodities

       ×     50.00% = A

Preceding Year’s PPI All Commodities

  

A         ×     Preceding Year’s Adjusted Price Per Iron Unit

  

    =    Current Year’s Price Adjustment Per Iron Unit

Current Year’s Adjusted Price Per Iron Unit

   Current Year’s Price Adjustment Per Iron Unit   + Preceding Year’s Adjusted
Price Per Iron     Unit   

    =    CurrentYear’s Adjusted Price Per Iron Unit

Current Year’s Estimated Pellet Price Per Ton

Current Year’s Adjusted Price Per Iron Unit   × Current Year’s Expected Natural
Iron     Content   

    =    CurrentYear’s Estimated Pellet Price Per Ton

 

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EXHIBIT 3

SPECIAL PAYMENT FORMULA

EMPIRE, HIBBING, AND NORTHSHORE PELLETS

FOR YEARS 2003 THROUGH 2016

 

     Example 1     Example 2     Example 3     Example 4     Example 5    
Example 6  

Contract Year’s Average Weighted Pellet Price Per GT

   $ 39.10      $ 39.10      $ 39.10      $ 39.10      $ 39.10      $ 39.10   

First Quarter

            

ISG’s Average Quarterly Hot Band Steel Price (HBSP)

   $ 245.25      $ 245.25      $ 295.50      $ 295.50      $ 260.75      $
260.75   

HBSP Difference vs. Min / Max Steel Price ($230 / $290 Per NT)

     —          —          5.50        5.50        —          —     

Pellet Price Adjustment Factor: 0.19% per $ HBSP Difference

     0.00 %      0.00 %      1.05 %      1.05 %      0.00 %      0.00 % 

Cliffs Pellets (GT) Consumed by ISG During Quarter

     1,250,000        1,250,000        1,250,000        1,250,000       
1,250,000        1,250,000   

Quarterly Special Payment To (From) ISG

   $ 0      $ 0      ($ 510,744 )    ($ 510,744 )    $ 0      $ 0   

Second Quarter

            

ISG’s Average Quarterly Hot Band Steel Price (HBSP)

   $ 227.25      $ 227.25      $ 297.75      $ 292.25      $ 250.50      $
280.50   

HBSP Difference vs. Min / Max Steel Price ($230 / $290 Per NT)

     (2.75 )      (2.75 )      7.75        2.25        —          —     

Pellet Price Adjustment Factor: 0.19% per $ HBSP Difference

     -0.52 %      -0.52 %      1.47 %      0.43 %      0.00 %      0.00 % 

Cliffs Pellets (GT) Consumed by ISG During Quarter

     1,250,000        1,250,000        1,250,000        1,250,000       
1,250,000        1,250,000   

Quarterly Special Payment To (From) ISG

   $ 255,372      $ 255,372      ($ 719,684 )    ($ 208,941 )    $ 0      $ 0   

Third Quarter

            

ISG’s Average Quarterly Hot Band Steel Price (HBSP)

   $ 220.50      $ 228.50      $ 292.25      $ 291.75      $ 229.75      $
290.75   

HBSP Difference vs. Min / Max Steel Price ($230 / $290 Per NT)

     (9.50 )      (1.50 )      2.25        1.75        (0.25 )      0.75   

Pellet Price Adjustment Factor: 0.19% per $ HBSP Difference

     -1.81 %      -0.29 %      0.43 %      0.33 %      -0.05 %      0.14 % 

Cliffs Pellets (GT) Consumed by ISG During Quarter

     1,250,000        1,250,000        1,250,000        1,250,000       
1,250,000        1,250,000   

Quarterly Special Payment To (From) ISG

   $ 882,194      $ 139,294      ($ 208,941 )    ($ 162,509 )    $ 23,216     
($ 69,647 ) 

Year

            

ISG’s Average Annual Hot Band Steel Price (HBSP)

   $ 225.20      $ 230.75      $ 294.10      $ 289.50      $ 240.50      $
282.50   

HBSP Difference vs. Min / Max Steel Price ($230 / $290 Per NT)

     (4.81 )      —          4.10        —          —          —     

HBSP Difference Multiplied by 0.19% (Pellet Price Adjustment)

     -0.91 %      0.00 %      0.78 %      0.00 %      0.00 %      0.00 % 

Cliffs Pellets (GT) Consumed by ISG During Year

     5,000,000        5,000,000        5,000,000        5,000,000       
5,000,000        5,000,000   

Total Annual Special Payment To (From) ISG

   $ 1,784,817      $ 0      ($ 1,522,945 )    $ 0      $ 0      $ 0   

Annual Adjustment vs. Quarterly Special Payments To (From) ISG

   $ 647,252      ($ 394,666 )    ($ 594,320 )    $ 371,450      ($ 23,216 )   
$ 69,647      

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

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EXHIBIT 4

SUBSTITUTE STEEL GRADE EXAMPLE

SPECIAL PAYMENT

FOR YEARS 2002 THROUGH 2016

Contract Special Steel Payment Grade—Unprocessed Hot Band

Contract Special Steel Payment Price Band—$230 to $290 per net ton

In The Event That Steel’s Annual Total Unprocessed Hot Rolled Steel Sales Are
Less Than 15%, Then Steel And Cliffs Agree To Substitute Another Grade of Steel

For the Unprocessed Hot Band Steel—Substitute Grade of Steel

Determine Substitute Grade of Steel Special Steel Payment Price Band

 

  (1) Current Year’s Actual Average Price Per Net Ton of Substituted Grade of
Steel Sales—Prior Year’s Price Per Net Ton of Unprocessed Hot Band Sales = A

 

  (2) A + $230 = Lower Price Band of Substitute Grade of Steel For Special Steel
Payment

 

  (3) A + $290 = Upper Price Band of Substitute Grade of Steel For Special Steel
Payment

 

Results From (2) and (3) Above Determine Substitute Grade of Steel’s Special
Steel Payment Price Band