<PAGE> 1
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.20549
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO
- - SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1995
OR
- - TRANSITION REPORT PURSUANT TO
SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______ to ______ .
Commission File Number:1-8944
CLEVELAND-CLIFFS INC
(Exact name of registrant as specified in its charter)
Ohio 34-1464672
(State or other jurisdiction of (I.R.S. Employer
incorporation) Identification No.)
1100 Superior Avenue, Cleveland, Ohio 44114-2589
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (216) 694-5700
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
YES X NO
---- ----
As of April 28, 1995, there were 11,965,842 Common Shares (par value $1.00 per
share) outstanding.
==============================================================================
<PAGE> 2
PART I - FINANCIAL INFORMATION
CLEVELAND-CLIFFS INC
STATEMENT OF CONSOLIDATED INCOME
<TABLE>
<CAPTION>
(In Millions,
Except Per
Share Amounts)
Three Months
Ended March 31,
----------------
1995 1994
----- -----
<S> <C> <C>
REVENUES:
Product sales and services $51.3 $40.1
Royalties and management fees 8.9 8.0
----- -----
Total operating revenues 60.2 48.1
Investment income (securities) 2.6 1.2
Other income 0.8 0.2
----- -----
TOTAL REVENUES 63.6 49.5
COSTS AND EXPENSES:
Cost of goods sold and operating expenses 49.8 39.5
Administrative, selling and general expenses 3.1 4.2
Interest expense 1.7 1.6
Other expenses 1.9 1.2
----- -----
TOTAL COSTS AND EXPENSES 56.5 46.5
----- -----
INCOME BEFORE INCOME TAXES 7.1 3.0
Income taxes
Currently payable 1.9 0.8
Deferred 0.2 -
----- -----
TOTAL INCOME TAXES 2.1 0.8
----- -----
NET INCOME $5.0 $2.2
===== =====
INCOME PER COMMON SHARE $0.41 $0.18
===== =====
See notes to financial statements
</TABLE>
2
<PAGE> 3
CLEVELAND-CLIFFS INC
STATEMENT OF CONSOLIDATED FINANCIAL POSITION
<TABLE>
<CAPTION>
(In Millions)
------------------------
March 31, December 31,
ASSETS 1995 1994
------ -------- ------------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $137.8 $140.6
Marketable securities 0.7 0.8
------ ------
138.5 141.4
Accounts receivable - net 23.9 65.9
Inventories:
Finished products 52.5 24.5
Work in process 0.8 0.6
Supplies 13.5 14.6
------ ------
66.8 39.7
Deferred income taxes 14.7 14.7
Other 6.0 7.4
------ ------
TOTAL CURRENT ASSETS 249.9 269.1
PROPERTIES 251.5 248.7
Less allowances for depreciation and depletion (139.6) (138.3)
------ ------
TOTAL PROPERTIES 111.9 110.4
INVESTMENTS IN ASSOCIATED COMPANIES 150.7 151.7
OTHER ASSETS
Long-term investments 25.7 27.1
Deferred income taxes 8.7 8.7
Other 51.7 49.5
------ ------
TOTAL OTHER ASSETS 86.1 85.3
------ ------
TOTAL ASSETS $598.6 $616.5
====== ======
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES
Current portion of long-term obligations $5.0 $5.0
Other 80.2 94.6
------ ------
TOTAL CURRENT LIABILITIES 85.2 99.6
LONG-TERM OBLIGATIONS 70.0 70.0
POST EMPLOYMENT BENEFITS 74.5 74.4
RESERVE FOR CAPACITY RATIONALIZATION 24.0 25.7
OTHER LIABILITIES 35.9 35.4
SHAREHOLDERS' EQUITY
Preferred Stock
Class A - No Par Value
Authorized - 500,000 shares; Issued - None - -
Class B - No Par Value
Authorized - 4,000,000 shares; Issued - None - -
Common Shares - Par Value $1 a share
Authorized - 28,000,000 shares 16.8 16.8
Issued - 16,827,941 shares
Capital in excess of par value of shares 64.9 63.1
Retained income 344.9 343.8
Foreign currency translation adjustments 0.4 0.9
Net unrealized (loss) on marketable securities 0.9 1.5
Cost of 4,796,549 Common Shares in treasury
(1994 - 4,728,081) (116.1) (113.4)
Unearned Compensation (2.8) (1.3)
------ ------
TOTAL SHAREHOLDERS' EQUITY 309.0 311.4
------ ------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $598.6 $616.5
====== ======
<FN>
See notes to financial statements
</TABLE>
3
<PAGE> 4
<TABLE>
CLEVELAND-CLIFFS INC
CONSOLIDATED STATEMENT OF CASH FLOWS
<CAPTION>
Increase (Decrease)
in Cash and Cash
Equivalents for
Three Months Ended
March 31,
(In Millions)
-------------------
1995 1994
-------- --------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $5.0 $2.2
Depreciation and amortization:
Consolidated 1.4 0.5
Share of associated companies 2.7 2.7
Provision for deferred income taxes 0.3
Charges to capacity rationalization reserve (1.1) 0.7
Other (2.4) 1.4
-------- --------
Total Before Changes in Operating Assets and Liabilities 5.9 7.5
Changes in operating assets and liabilities
Marketable securities decrease 0.1 0.6
Other (1.3) (6.8)
-------- --------
NET CASH FROM OPERATING ACTIVITIES 4.7 1.3
INVESTMENT ACTIVITIES
Sale (Purchase) of long-term investments-net 0.8 (1.0)
Capital expenditures:
Consolidated (2.9) (0.3)
Share of associated companies (0.8) (0.6)
-------- --------
NET CASH (USED BY) INVESTMENT ACTIVITIES (2.9) (1.9)
FINANCING ACTIVITIES
Dividends (3.9) (3.6)
Other (0.2) 0.3
-------- --------
NET CASH (USED BY) FINANCING ACTIVITIES (4.1) (3.3)
EFFECT OF EXCHANGE RATE CHANGES ON CASH (0.5) (0.4)
-------- --------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (2.8) (4.3)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 140.6 67.9
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $137.8 $63.6
======== ========
Income taxes paid $2.5 $3.8
Interest paid on debt obligations $1.6 $1.6
<FN>
See notes to financial statements
</TABLE>
4
<PAGE> 5
CLEVELAND-CLIFFS INC
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1995
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited financial statements have been prepared in
accordance with the instructions to Form 10-Q and should be read in conjunction
with the financial statement footnotes and other information in the Company's
1994 Annual Report on Form 10-K. In management's opinion, the quarterly
unaudited financial statements present fairly the Company's financial position
and results. References to the "Company" mean Cleveland-Cliffs Inc and
consolidated subsidiaries, unless otherwise indicated. Quarterly results are
not necessarily representative of annual results due to seasonal and other
factors.
Certain prior year amounts have been reclassified to conform to
current year classifications.
NOTE B - SHAREHOLDERS' EQUITY
The 1987 Incentive Equity Plan authorizes the Company to make grants
and awards of stock options, stock appreciation rights and restricted or
deferred stock awards to officers and key employees, for up to 839,045 Common
Shares. The 1992 Incentive Equity Plan authorizes the Company to issue up to
595,000 Common Shares upon the exercise of Option Rights, as Restricted Shares,
in payment of Performance Shares or Performance Units that have been earned, as
Deferred Shares, or in payment of dividend equivalents paid with respect to
awards made under the Plan. Such shares may be shares of original issuance or
treasury shares or a combination of both. Transactions since December 31, 1994
are summarized as follows:
<TABLE>
<CAPTION>
Stock Options: 1987 Plan 1992 Plan
--------- ---------
<S> <C> <C>
Options outstanding as of 12/31/94 68,682 13,500
Granted -0- -0-
Exercised (4,532) (500)
Cancelled -0- -0-
------- -------
Options outstanding as of 3/31/95 64,150 13,000
Options exercisable as of 3/31/95 64,150 13,000
Restricted Awards:
Awarded and restricted as of 12/31/94 3,996 9,268
Awarded -0- -0-
Vested (180) (208)
Cancelled -0- -0-
------- -------
Awarded and Restricted as of 3/31/95 3,816 9,060
Performance Shares:
Allocated as of 12/31/94 -0- 41,317
Allocated -0- 47,450
Forfeited -0- -0-
------- -------
Performance Shares as of 3/31/95 -0- 88,767
Reserved for future grants or awards
as of 3/31/95 4,501 469,956
</TABLE>
5
<PAGE> 6
NOTE C - INVESTMENTS IN ASSOCIATED COMPANIES
In February, 1994, the Company reached general agreement with Algoma
Steel Inc. ("Algoma") and Stelco Inc. to restructure and simplify the Tilden
Mine operating agreement effective January 1, 1994. The principal terms of the
new agreement are (1) the participants' tonnage entitlements and cost-sharing
are based on a 6.0 million ton target normal production level instead of the
previous 4.0 million ton base production level, (2) the Company's interest in
the Tilden Magnetite Partnership has increased from 33.33% to 40.0% with an
associated increase in the Company's obligation for its share of mine costs,
(3) the Company is receiving a higher royalty, (4) the Company has the right to
supply any additional iron ore pellet requirements of Algoma from Tilden or the
Company, and (5) any partner may take additional production with payment of
certain fees to the Partnership. The parties implemented the general agreement
effective January 1, 1994 and are resolving the detailed provisions of the
definitive agreement. The agreement has not had a material financial effect on
the Company's consolidated financial statements.
NOTE D - ENVIRONMENTAL MATTERS
The Company's policy is to conduct business in a manner that promotes
environmental quality. The Company's obligations for any environmental problems
at wholly-owned active mining operations and idle and closed mining and other
sites have been recognized based on specific estimates for known conditions and
required investigations. Environmental costs of associated companies for active
operations are included in current operating and capital costs. Any potential
insurance recoveries have not been reflected in the determination of the
financial reserve.
At March 31, 1995, the Company has an environmental reserve of $8.1
million, of which $1.5 million is current. The reserve includes the Company's
obligations related to:
o Federal and State Superfund and Clean Water Act sites where the
Company is named as a potential responsible party, including
Cliffs-Dow and Kipling sites in Michigan, the Arrowhead Refinery
site in Minnesota, the Summitville mine site in Colorado, and the
Rio Tinto mine site in Nevada, all of which sites are independent
of the Company's iron mining operations. The reserves are based on
the Company's share of engineering study estimates prepared by
outside consultants engaged by the potential responsible parties.
The Company continues to evaluate the recommendations of the
studies and other means for site clean-up. Significant site
clean-up activities have taken place at Cliffs-Dow since
late-1993. An agreement in principle has been reached among the
federal and state governments and approximately 224 individuals
and companies wherein clean-up at the Arrowhead site will begin in
1995 with significant funding provided by the federal and state
governments. The agreement has been lodged with the U.S. District
Court. The Company's share of Arrowhead costs is expected to total
approximately $145,000 which includes $31,000 of funded
remediation costs and $114,000 of incurred legal and other costs.
6
<PAGE> 7
o Wholly-owned active and idle operations, including the recently
acquired Northshore mine and Silver Bay power plant in Minnesota
and the idled Republic mine and processing facilities in Michigan.
The Northshore/Silver Bay reserve is based on an environmental
investigation conducted by the Company and an outside consultant
in connection with the purchase and reflects expected future
Company expenditures, primarily for asbestos abatement and power
plant fly ash disposal. The Republic Mine reserve primarily
reflects the cost of underground fuel oil storage tank removal and
related soil remediation.
o Other sites, including former operations, for which reserves are
based on the Company's estimated cost of investigation and
remediation of sites where expenditures may be incurred.
Environmental expenditures under current laws and regulations are not expected
to materially impact the Company's consolidated financial statements.
NOTE E - ACCOUNTING CHANGES
Certain prior year amounts have been reclassified to conform to
current year classifications.
NOTE F - INVESTMENTS
On October 4, 1994, the Financial Accounting Standards Board issued
Statement 119 entitled, "Disclosure about Derivative Financial Instruments and
Fair Value of Financial Instruments", which requires expanded footnote
disclosure about certain financial instruments. Presently, the Company's
exposure to risk associated with derivative instruments is limited to forward
foreign exchange contracts. These forward exchange contracts are hedging
transactions that have been entered into with the objective of managing the
risk associated with currency fluctuations with respect to the on-going
obligations of the Company's Australian and Canadian operations denominated in
those currencies. Gains and losses are recognized in the same period as the
hedged transactions. At March 31, 1995, the Company had $27.2 million of
forward exchange contracts with a fair value, based on the March 31, 1995
forward rate, of $26.6 million.
On March 20, 1995, the Company received a second and final
distribution of 22,689 shares of LTV Common Stock from the Company's bankruptcy
claim against LTV Steel Company. This brings the total number of shares
retained by the Company as an available-for-sale investment to approximately
842,000 shares with a market value at March 31, 1995 of $12.8 million.
7
<PAGE> 8
MANAGEMENT'S DISCUSSION AND ANALYSIS
------------------------------------
RESULTS OF OPERATIONS
---------------------
COMPARISON OF FIRST QUARTER - 1995 AND 1994
- -------------------------------------------
Net income for the first quarter of 1995 was $5.0 million, or $.41 per
share. Comparable earnings in the first quarter of 1994 were $2.2 million, or
$.18 per share. First quarter results are traditionally not representative of
annual results due to seasonal effects.
The increase of $2.8 million in first quarter results was mainly due
to higher North American sales volume, lower operating and administrative
costs, increased investment income, and higher royalties and management fees,
partially offset by lower Australian earnings and increased mine development
expenses. An extension of the 1994 Great Lakes shipping season into January,
1995, and the acquisition of Northshore Mining Company on September 30, 1994,
contributed to the improvement in first quarter earnings.
* * *
The Company's North American pellet sales in the first quarter of 1995
were 1.2 million tons versus .7 million tons in 1994. Pellet inventory at March
31, 1995 was 1.7 million tons versus 1.2 million tons one year ago. The
Company's pellet sales, including resale of purchased ore, for the year 1995
are estimated to be 10.0 million tons versus 8.2 million tons in 1994. Sales
volume in excess of production volume in 1994 was satisfied from inventory and
purchased ore.
The Company's managed mines in North America produced 9.0 million tons
of iron ore pellets in the first quarter of 1995 versus 7.7 million tons in
1994. Production nominations for the full year 1995, which have not changed
from the beginning of the year, total 39.6 million tons, a 13 percent increase
from the 35.2 million tons produced in 1994. The Company's share of scheduled
production is 10.0 million tons in 1995 compared with 6.8 million tons in 1994.
Capital and leasing outlays for mining and processing equipment are
being significantly increased in 1995 to satisfy orebody development
requirements and reduce operating costs. The Company's share of capital
equipment additions is expected to approximate $24 million, including a $6
million Northshore expansion.
LIQUIDITY
- ---------
At March 31, 1995, the Company had cash and marketable securities of
$138.5 million, including $12.1 million dedicated to fund Australian mine
obligations.
Annual payments on the Company's $75.0 million, medium-term, unsecured
senior notes will commence on May 1, 1995. Payments of principal in 1995 and
1996 are $5.0 million and $12.1 million, respectively.
Effective March 1, 1995, the Company terminated its $75 million
three-year revolving credit agreement, due to expire on April 30, 1995, and
entered into a five-year, $100 million agreement. No borrowings are outstanding
under the agreement.
Since December 31, 1994, cash and marketable securities have decreased
$2.9 million due to dividends, $3.9 million, and capital expenditures, $3.7
million, partially offset by cash flow from operating activities, $4.7 million.
These changes since year-end 1994 reflect the normal seasonal pattern.
8
<PAGE> 9
As announced in January, 1995, the Company commenced the periodic
repurchase of up to 600,000 shares of its common stock. As of March 31, 1995,
73,500 shares have been repurchased.
Pursuant to the Coal Industry Retiree Health Benefit Act of 1992
("Benefit Act"), the Trustees of the UMWA Combined Benefit Fund have assigned
responsibility to the Company for premium payments with respect to retirees,
dependents and "orphans" (unassigned beneficiaries), representing less than
one-half of one percent of all "assigned beneficiaries". The Company is making
premium payments under protest and is contesting the assignments that it
believes were incorrect. At March 31, 1995, the Company continues to pay
premiums on 338 assigned retirees and dependents and 116 "orphans".
Additionally, in December, 1993, a complaint was filed in U. S. District Court
by the Trustees of the United Mine Workers of America 1992 Benefit Plan against
the Company demanding the payment of premiums on an additional 79 beneficiaries
related to two formerly operated joint venture coal mines. The Company is
actively contesting the complaint. Monthly premium payments are being paid into
an escrow account (80% by a former joint venture participant and 20% by the
Company) by joint agreement with the Trustees, pending outcome of the
litigation. At March 31, 1995, the coal retiree reserve maintained by the
Company is $11.0 million, of which $.9 million is current. In the first quarter
of 1995, the Company increased its coal retiree reserve by $.2 million
(reflecting accretion of discount), and made payments of $.2 million. The
reserve is reflected at present value, utilizing an assumed discount rate of
8.5%. Constitutional and other legal challenges to various provisions of the
Benefit Act by other former coal producers are pending in the Federal Courts.
CAPITALIZATION
- --------------
Long-term obligations effectively serviced by the Company at March 31,
1995, including the current portion, totalled $85.1 million. The Company
guarantees Empire mine debt obligations of LTV and Wheeling-Pittsburgh Steel
Corporation ("Wheeling") which totalled $13.7 million at March 31, 1995. The
following table sets forth information concerning long-term obligations
guaranteed and effectively serviced by the Company.
<TABLE>
<CAPTION>
(Millions)
-----------------------------------------------------------------
March 31, 1995 December 31, 1994
---------------------------- ----------------------------
Total Total
Long-Term Long-Term
Obligations Obligations Obligations Obligations
Effectively and Effectively and
Serviced Guarantees Serviced Guarantees
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
CONSOLIDATED $ 75.0 $ 75.0 $ 75.0 $ 75.0
SHARE OF UNCONSOLIDATED
AFFILIATES 10.1 23.8* 9.2 22.9*
------ ------- ------- -------
TOTAL $ 85.1 $ 98.8 $ 84.2 $ 97.9
====== ======= ======= =======
RATIO TO SHAREHOLDERS'
EQUITY .3:1 .3:1 .3:1 .3:1
<FN>
* Includes $13.7 million of Empire Mine debt obligations which are serviced by LTV and Wheeling.
</TABLE>
9
<PAGE> 10
At March 31, 1995, the Company was in compliance with all financial
covenants and restrictions related to its $75.0 million, medium- term,
unsecured senior note agreement.
The fair value of the Company's long term debt (which had a carrying
value of $75.0 million) at March 31, 1995, was estimated at $77.0 million based
on a discounted cash flow analysis and estimates of current borrowing rates.
In addition, on March 1, 1995, the Company terminated its existing $75
million three-year revolving credit agreement, originally due to expire on
April 30, 1995, and entered into a five-year, $100 million agreement.
Following is a summary of common shares outstanding:
<TABLE>
<CAPTION>
1995 1994 1993
---------- ---------- ----------
<S> <C> <C> <C>
March 31 12,031,392 12,079,885 11,992,804
June 30 12,080,560 12,008,065
September 30 12,091,310 12,038,092
December 31 12,099,860 12,064,117
</TABLE>
OUTLOOK FOR 1995
- ----------------
There has been little change from the 1995 outlook described in the
Company's recent Annual Report. While there have been some signs of a slowdown
in the automotive industry and there are surplus inventories in some steel
products, North American steel producers continue to operate at high levels and
the forecasts of industry shipments remain level with the 110 million tons
shipped in 1994. Declining U.S. and Canadian currency exchange rates and
strengthening offshore economies are increasing the price of offshore imports
while improving export opportunities.
The North American iron ore industry continues to schedule the
production of 85 million tons of pellets in 1995, equal to full capacity.
Company-managed mines are expected to produce 39.6 million tons, or 47 percent
of the industry total. The Company's related sales projection remains at 10.0
million tons versus the 8.2 million tons sold in 1994. Therefore, higher
operating earnings in 1995 are expected.
OTHER DEVELOPMENTS
- ------------------
The $6 million expansion of Northshore Mining Company, which will
raise the mine's annual production capacity by 25 percent, is progressing on
schedule and budget.
Development of a commercial reduced iron project is a significant
pursuit of the Company. Various activities continue toward this objective as
described in the Annual Report.
10
<PAGE> 11
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
- ----------------------------------------
(a) List of Exhibits - Refer to Exhibit Index on page 12.
(b) There were no reports on Form 8-K filed during the three
months ended March 31, 1995.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CLEVELAND-CLIFFS INC
<TABLE>
<S> <C> <C>
Date May 2, 1995 By /s/ J. S. Brinzo
----------------------- -----------------------------------
J. S. Brinzo
Senior Executive-Finance and
Principal Financial Officer
</TABLE>
11
<PAGE> 12
<TABLE>
EXHIBIT INDEX
-------------
Exhibit
Number Exhibit
- ------- ----------------------------------------------------- ------
<S> <C> <C>
10(a) Cleveland-Cliffs Inc Voluntary Non-Qualified Deferred Filed
Compensation Plan, Amended and Restated as of Herewith
January 1, 1995
10(b) Cleveland-Cliffs Inc Supplemental Retirement Benefit Filed
Plan, Amended and Restated Effective January 1, 1995 Herewith
11 Statement re computation of earnings per share Filed
Herewith
27 Consolidated Financial Data Schedule submitted for --
Securities and Exchange Commission information
</TABLE>
12
<PAGE> 1
EXHIBIT 10(a)
CLEVELAND-CLIFFS INC
--------------------
VOLUNTARY NON-QUALIFIED
DEFERRED COMPENSATION PLAN
(AMENDED AND RESTATED AS OF JANUARY 1, 1995)
--------------------------------------------
ARTICLE I
---------
PURPOSE
-------
1.1 STATEMENT OF PURPOSE; EFFECTIVE DATE. This is the
Cleveland-Cliffs Inc Voluntary Non-Qualified Deferred Compensation Plan (the
"Plan") made in the form of this Plan and in related agreements between an
Employer and certain management and highly compensated employees. The purpose
of the Plan is to provide management and highly compensated employees of the
Employers with the option to defer the receipt of a portion of their regular
compensation or bonuses payable for services rendered to the Employer. It is
intended that the Plan will assist in attracting and retaining qualified
individuals to serve as officers and key managers of the Employers. The Plan,
originally effective as of June 1, 1989, as amended, is amended and restated as
of January 1, 1995.
ARTICLE II
---------
DEFINITIONS
-----------
When used in this Plan and initially capitalized, the
following words and phrases shall have the meanings indicated:
2.1 ACCOUNT. "Account" means the sum of a Participant's
Deferral Account and Matching Account under the Plan.
2.2 BASE SALARY. "Base Salary" means a Participant's base
earnings paid by an Employer to a Participant without regard to any increases
or decreases in base earnings as a result of an election to defer base earnings
under this Plan, or an election between benefits or cash provided under a plan
of an Employer maintained pursuant to Section 125 or 401(k) of the Code.
2.3 BENEFICIARY. "Beneficiary" means the person or persons
designated or deemed to be designated by the Participant pursuant to Article
VII to receive benefits payable under the Plan in the event of the
Participant's death.
2.4 BOARD. "Board" means the Board of Directors of the
Company.
<PAGE> 2
2
2.5 BONUS. "Bonus" means a Participant's annual bonus paid
by an Employer to a Participant under the Cleveland-Cliffs Inc Management
Performance Incentive Plan without regard to any decreases as a result of an
election to defer all or any portion of a bonus under this Plan, or an election
between benefits or cash provided under a plan of an Employer maintained
pursuant to Section 401(k) of the Code.
2.6 CHANGE IN CONTROL. "Change in Control" means the date on
which any of the following is effective:
(a) The Company shall merge into itself, or be merged or
consolidated with, another corporation and as a result of such merger
or consolidation less than 70% of the outstanding voting securities of
the surviving or resulting corporation shall be owned in the aggregate
by the former shareholders of the Company as the same shall have
existed immediately prior to such merger or consolidation;
(b) The Company shall sell or transfer to one or more persons,
corporations or entities, in a single transaction or a series of
related transactions, more than one-half of the assets accounted for
on the Statement of Consolidated Financial Position of the Company as
"properties" or "investments in associated companies" (or such
replacements for these accounts as may be adopted from time to time)
unless by an affirmative vote of two-thirds of the members of the
Board of Directors, the transaction or transactions are exempted from
the operation of this provision based on a good faith finding that the
transaction or transactions are not within the intended scope of this
definition for purposes of this instrument;
(c) A person, within the meaning of Section 3(a)(9) or of
Section 13(d)(3) (as in effect on the date hereof) of the Securities
Exchange Act of 1934, shall become the beneficial owner (as defined in
Rule 13d-3 of the Securities and Exchange Commission pursuant to the
Securities Exchange Act of 1934) of 30% or more of the outstanding
voting securities of the Company (whether directly or indirectly); or
(d) During any period of three consecutive years, individuals
who at the beginning of any such period constitute the Board of
Directors of the Company cease, for any reason, to constitute at least
a majority thereof, unless the election, or the nomination for
election by the shareholders of the Company, of each Director first
elected during any such period was approved by a vote of at least
one-third of the Directors of the Company who are Directors
<PAGE> 3
3
of the Company on the date of the beginning of any such period.
2.7 CODE. "Code" means the Internal Revenue Code of 1986,
as amended.
2.8 COMMITTEE. "Committee" has the meaning set forth in
Section 8.1.
2.9 COMPANY. "Company" means Cleveland-Cliffs Inc and any
successor thereto.
2.10 COMPENSATION. "Compensation" means the Base Salary and
Bonus payable with respect to an Eligible Employee for each calendar year.
2.11 DECLARED RATE. "Declared Rate" for any period means the
Moody's Corporate Average Bond Yield, as adjusted on the first business day of
each January, April, July and October.
2.12 DEFERRAL ACCOUNT. "Deferral Account" means the account
maintained on the books of the Employer for the purpose of accounting for (i)
the amount of Compensation that each Participant elects to defer under the
Plan, (ii) an Employment Agreement Contribution (if any) made on behalf of a
Participant, and (iii) the amount of interest credited thereto for each
Participant pursuant to Article V.
2.13 DEFERRAL BENEFIT. "Deferral Benefit" means the benefit
payable to a Participant or his or her Beneficiary pursuant to Article VI.
2.14 DETERMINATION DATE. "Determination Date" means a date
on which the amount of a Participant's Account is determined as provided in
Article V. The 15th day and the last day of each month shall be a
Determination Date.
2.15 ELIGIBLE EMPLOYEE. "Eligible Employee" means a senior
corporate officer of the Company or a full-time salaried employee of an
Employer who has a Management Performance Incentive Plan Salary Grade EX-28 or
above.
2.16 EMERGENCY BENEFIT. "Emergency Benefit" has the meaning
set forth in Section 6.2.
2.17 EMPLOYER. "Employer" means, with respect the
Participant, the Company or the Selected Affiliate which pays such
Participant's Compensation.
<PAGE> 4
4
2.17A EMPLOYMENT AGREEMENT. "Employment Agreement" means a
written agreement between an Employer and an Eligible Employee that provides
for the deferral of compensation, and that may also provide for vesting, the
crediting of earnings and other terms and conditions with respect to such
deferred compensation.
2.17B EMPLOYMENT AGREEMENT CONTRIBUTION. "Employment
Agreement Contribution" means any amount contributed to the Plan by an Employer
pursuant to an Employment Agreement.
2.18 MATCHING ACCOUNT. "Matching Account" means the account
maintained on the books of an Employer for the purpose of accounting for the
Matching Amount and for the amount of interest credited thereto for each
Participant pursuant to Article V.
2.19 MATCHING AMOUNT. "Matching Amount" means the amount
credited to a Participant's Matching Account under Section 4.3.
2.20 MATCHING PERCENTAGE. "Matching Percentage" means the
matching contribution percentage in effect for a specific Plan Year under the
Savings Plan.
2.21 PARTICIPANT. "Participant" means any Eligible Employee
who elects to participate by filing a Participation Agreement as provided in
Section 3.2.
2.22 PARTICIPATION AGREEMENT. "Participation Agreement"
means the agreement filed by a Participant, in the form prescribed by the
Committee, pursuant to Section 3.2.
2.23 PLAN. "Plan" means the Cleveland-Cliffs Inc Voluntary
Non-Qualified Deferred Compensation Plan, as amended from time to time.
2.24 PLAN YEAR. "Plan Year" means a twelve-month period
commencing January 1 and ending the following December 31.
2.25 SAVINGS PLAN. "Savings Plan" means, with respect to a
Participant, the Cliffs and Associated Employers Salaried Employees
Supplemental Retirement Savings Plan for which he is eligible to contribute.
2.26 SELECTED AFFILIATE. "Selected Affiliate" means (1) any
corporation in an unbroken chain of corporations beginning with the Company if
each of the corporations other than the last corporation in the chain owns or
controls, directly or indirectly, stock possessing not less than 50 per cent of
the total combined voting power of all classes of stock in one of the other
corporations, or (2) any partnership or joint venture in
<PAGE> 5
5
which one or more of such corporations is a partner or venturer, each of which
shall be selected by the Committee.
ARTICLE III
-----------
ELIGIBILITY AND PARTICIPATION
-----------------------------
3.1 ELIGIBILITY. Eligibility to participate in the Plan for
any Plan Year is limited to those Eligible Employees who have elected to make
the maximum elective contributions permitted them under the terms of the
Savings Plan for such Plan Year.
3.2 PARTICIPATION. Participation in the Plan shall be
limited to Eligible Employees who elect to participate in the Plan by filing a
Participation Agreement with the Committee, or on whose behalf an Employment
Agreement Contribution is made to the Plan by an Employer. A properly
completed and executed Participation Agreement shall be filed on or prior to
the December 31 immediately preceding the Plan Year in which the Participant's
participation in the Plan will commence. The election to participate shall be
effective on the first day of the Plan Year following receipt by the Committee
of the Participation Agreement. In the event that an Eligible Employee first
becomes eligible to participate in the Plan or first commences employment
during the course of a Plan Year, a Participation Agreement shall be filed with
the Committee not later than 30 days following his eligibility date or date of
employment. Each Participation Agreement shall be effective only with regard
to Compensation earned and payable following the later of the effective date of
the Participation Agreement or the date the Participation Agreement is filed
with the Committee.
3.3 TERMINATION OF PARTICIPATION. A Participant may elect to
terminate his or her participation in the Plan by filing a written notice
thereof with the Committee. The termination shall be effective at any time
specified by the Participant in the notice but not earlier than the first day
of the Plan Year immediately succeeding the Plan Year in which such notice is
filed with the Committee. Amounts credited to such Participant's Account with
respect to periods prior to the effective date of such termination shall
continue to be payable pursuant to, receive interest on, and otherwise governed
by, the terms of the Plan.
3.4 INELIGIBLE PARTICIPANT. Notwithstanding any other
provisions of this Plan to the contrary, if the Committee determines that any
Participant may not qualify as a "management or highly compensated employee"
within the meaning of the Employee Retirement Income Security Act of 1974, as
amended
<PAGE> 6
6
("ERISA"), or regulations thereunder, the Committee may determine, in its sole
discretion, that such Participant shall cease to be eligible to participate in
this Plan. Upon such determination, the Employer shall make an immediate lump
sum payment to the Participant equal to the vested amount credited to his
Account. Upon such payment no benefit shall thereafter be payable under this
Plan either to the Participant or any Beneficiary of the Participant, and all
of the Participant's elections as to the time and manner of payment of his
Account will be deemed to be cancelled.
ARTICLE IV
----------
DEFERRAL OF COMPENSATION
------------------------
4.1 AMOUNT OF DEFERRAL. With respect to each Plan Year, a
Participant may elect to defer a specified dollar amount or percentage of his
or her Compensation, provided the amount the Participant elects to defer under
this Plan and the Savings Plan shall not exceed, in the aggregate, the sum of
25% of his or her Base Salary net of such Participant's pretax elective
deferrals under the Savings Plan, if any, plus 100% of his or her Bonus. A
Participant may choose to have amounts deferred under this Plan deducted from
his Base Salary, Bonus or a combination of both. A Participant may change the
percentage of his or her Compensation to be deferred by filing a written notice
thereof with the Committee. Any such change shall be effective as of the first
day of the Plan Year immediately succeeding the Plan Year in which such notice
is filed with the Committee. Notwithstanding the foregoing, any Employment
Agreement Contribution shall be deferred in accordance with the terms of the
Employment Agreement.
4.2 MATCHING AMOUNTS. An Employer shall provide Matching
Amounts under this Plan with respect to each Participant who is eligible to be
allocated matching contributions under the Savings Plan. The total Matching
Amounts under this Plan on behalf of a Participant for each Plan Year shall not
exceed (i) the Matching Percentage of the Compensation deferred by a
Participant under Section 4.1, up to a maximum of 7% of Compensation, less (ii)
the Employer matching contributions allocated to the Participant under the
Savings Plan for such Plan Year.
4.3 CREDITING DEFERRED COMPENSATION, MATCHING AMOUNTS AND
EMPLOYMENT AGREEMENT CONTRIBUTIONS. The amount of Compensation that a
Participant elects to defer under the Plan shall be credited by the Employer to
the Participant's Deferral Account semi-monthly. The amount of the Employment
Agreement
<PAGE> 7
7
Contribution (if any) contributed for a Participant shall be credited by the
Employer to the Participant's Deferral Account in accordance with the terms of
the Employment Agreement. To the extent that the Employer is required to
withhold any taxes or other amounts from a Participant's deferred Compensation
or Employment Agreement Contribution pursuant to any state, federal or local
law, such amounts shall be withheld from the Participant's Compensation before
such amounts are credited hereunder. The Matching Amount under the Plan for
each Participant shall be credited by the Employer at the same time that
matching contributions are allocated under the Savings Plan.
ARTICLE V
---------
BENEFIT ACCOUNTS
----------------
5.1 INVESTMENT OF ACCOUNTS. As soon as practicable after the
crediting of any amount to a Participant's Account, the Company may, in its
sole discretion, direct that the Company invest the amount credited, in whole
or in part, in such property (real, personal, tangible or intangible), other
than securities of the Company, (collectively the "Investments"), as the
Committee shall direct, or may direct that the Company retain the amount
credited as cash to be added to its general assets. The Committee may, but is
under no obligation to, direct the investment of amounts credited to a
Participant's Account in accordance with requests made by the Participant and
communicated to the Committee. Earnings from Investments shall be credited to
a Participant's Account and shall be reinvested, as soon as practicable, in the
manner provided above. The Company shall be the sole owner and beneficiary of
all Investments, and all contracts and other evidences of the Investments shall
be registered in the name of the Company. The Company, under the direction of
the Committee, shall have the unrestricted right to sell any of the Investments
included in any Participant's Account, and the unrestricted right to reinvest
the proceeds of the sale in other Investments or to credit the proceeds of the
sale to a Participant's Account as cash. Amounts credited to a Participant's
Account that are not invested in Investments shall be credited to a
Participant's Account as cash.
5.2 DETERMINATION OF ACCOUNT. As of each Determination Date,
a Participant's Account shall consist of the following: (i) the balance of the
Participant's Account as of the immediately preceding Determination Date, plus
(ii) the Participant's deferred Compensation, Matching Amounts and Employment
Agreement Contribution (if any) credited pursuant to Section 4.3 since the
immediately preceding Determination Date and any earnings and/or income
credited to such amounts pursuant
<PAGE> 8
8
to Sections 5.1 and 5.3 as of such Determination Date, minus (iii) any losses
or other diminution in the value of assets in such Account since the
immediately preceding Determination Date, minus (iv) the aggregate amount of
distributions, if any, made from such Participant's Account since the
immediately preceding Determination Date.
5.3 CREDITING OF INTEREST. As of each Determination Date,
the amounts credited to a Participant's Account as cash shall be increased by
the amount of interest earned since the immediately preceding Determination
Date. Interest shall be credited at the Declared Rate as of such Determination
Date based on the balance of the cash amounts credited to the Account since the
immediately preceding Determination Date, but after such Account has been
adjusted for any contributions or distributions to be credited or deducted for
such period. Interest for the period prior to the first Determination Date
applicable to a Participant's Account shall be deemed earned ratably over such
period.
5.4 STATEMENT OF ACCOUNTS. The Committee shall cause to be
kept a detailed record of all transactions affecting each Participant's Account
and shall provide to each Participant, within 120 days after the close of each
Plan Year, a written statement setting forth a description of the Investments
in such Participant's Account and the cash balance, if any, of such
Participant's Account as of the last day of the preceding Plan Year and showing
all adjustments made thereto during such Plan Year.
5.5 VESTING OF ACCOUNT. Subject to the provisions of any
Employment Agreement relating to an Employment Agreement Contribution (if any),
a Participant shall be 100% vested in his or her Account at all times.
ARTICLE VI
----------
PAYMENT OF BENEFITS
-------------------
6.1 PAYMENT OF DEFERRAL BENEFIT ON TERMINATION OF SERVICE OR
DEATH. Upon the earlier of (i) termination of service of the Participant as an
employee of the Employer and all Selected Affiliates, for reasons other than
death, or (ii) the death of a Participant, the Employer shall, in accordance
with this Article VI, pay to the Participant or his Beneficiary, as the case
may be, a Deferral Benefit equal to the balance of his or her vested Account
determined pursuant to Article V, less any amounts previously distributed.
<PAGE> 9
9
6.2 EMERGENCY BENEFIT. In the event that the Committee, upon
written petition of a Participant, determines, in its sole discretion, that the
Participant has suffered an unforeseeable financial emergency, the Employer
shall pay to the Participant, as soon as practicable following such
determination, an amount necessary to meet the emergency (the "Emergency
Benefit"), but not exceeding the aggregate balance of such Participant's vested
Deferral Account and Matching Account as of the date of such payment. For
purposes of this Section 6.2, an "unforeseeable financial emergency" shall mean
an unexpected need for cash arising from an illness, disability, casualty loss,
sudden financial reversal or other such unforeseeable occurrence. Cash needs
arising from foreseeable events such as the purchase of a house or education
expenses for children shall not be considered to be the result of an
unforeseeable financial emergency. The amount of the Deferral Benefit
otherwise payable under the Plan to such Participant shall be adjusted to
reflect the early payment of the Emergency Benefit.
6.3 IN-SERVICE DISTRIBUTION. A Participant may elect to
receive an in-service distribution of his or her deferred Compensation
beginning at any time at least four years after the date such Compensation
otherwise would have been first payable. A Participant's election for an
in-service distribution shall be filed in writing with the Committee before the
date his or her deferred Compensation otherwise would have been first payable.
The Participant may elect to receive such Compensation as an in-service
distribution as provided in Section 6.4(a); provided, however, that Section
6.4(b) of the Plan shall not apply to an in-service distribution. Any benefits
paid to the Participant as an in-service distribution shall reduce the amount
of Deferral Benefit otherwise payable to the Participant under the Plan.
6.4 FORM OF PAYMENT.
(a) The Deferral Benefit payable pursuant to
Section 6.1 or Section 6.3 shall be paid in one of the following
forms, as elected by the Participant in his or her Participation
Agreement or by written notice as provided in subsection (b) below:
(1) Annual payments of a fixed amount which
shall amortize the vested Account balance, or the in-service
distribution portion thereof, as of the payment commencement
date elected by the Participant over a period not to exceed
ten years (together, in the case of each annual payment, with
interest thereon credited after the payment commencement date
pursuant to Section 5.2).
<PAGE> 10
10
(2) A lump sum.
(3) A combination of (1) and (2) above. The
Participant shall designate the percentage payable under each
option.
(b) The Participant's election of the form of payment shall
be made by written notice filed with the Committee at least one (1)
year prior to the Participant's voluntary termination of employment
with, or retirement from, the Company and any affiliate of the
Company, whether or not such affiliate is a Selected Affiliate. Any
such election may be changed by the Participant at any time and from
time to time without the consent of any other person by filing a later
signed written election with the Committee; provided that any election
made less than one (1) year prior to the Participant's voluntary
termination of employment or retirement shall not be valid, and in
such case payment shall be made in accordance with the Participant's
prior election.
(c) The amount of each installment shall be equal to the
quotient obtained by dividing the Participant's Account balance as of
the date of such installment payment by the number of installment
payments remaining to be made to or in respect of such Participant at
the time of calculation.
(d) If a Participant fails to make an election in a timely
manner as provided in this Section 6.4, distribution shall be made in
cash in ten (10) annual installments.
(e) A Participant's Deferral Benefit (or the remaining
portion thereof if payment to the Participant had commenced) shall be
distributed to his or her Beneficiary in the form of a single lump sum
payment following his or her death.
6.5 COMMENCEMENT OF PAYMENTS. Commencement of payments under
Section 6.1 of the Plan shall begin as soon as practicable, and in accordance
with the payment commencement date elected by the Participant, following
receipt of notice by the Committee of an event which entitles a Participant (or
a Beneficiary) to payments under the Plan. Thereafter, a Participant who has
elected the installment form pursuant to Section 6.4(a) shall be permitted to
make an election to receive the balance of his Deferral Benefit in the form of
a lump sum payment if (and only if) the balance of his Deferral Benefit is
reduced by ten percent (10%).
6.6 SMALL BENEFIT. In the event the Committee determines
that the balance of the Participant's Account is less
<PAGE> 11
11
than $50,000 at the time of commencement of payments, the Employer may pay the
benefit in the form of a lump sum payment, notwithstanding any provision of the
Plan to the contrary. Such lump sum payment shall be equal to the balance of
the Participant's Account, or the portion thereof payable to a beneficiary.
ARTICLE VII
-----------
BENEFICIARY DESIGNATION
-----------------------
7.1 BENEFICIARY DESIGNATION. Each Participant shall have the
right, at any time, to designate any person or persons as his Beneficiary to
whom payment under the Plan shall be made in the event of his or her death
prior to complete distribution to the Participant of his or her Deferral
Benefit. Any Beneficiary designation shall be made in a written instrument
filed with the Committee and shall be effective only when received in writing
by the Committee.
7.2 AMENDMENTS. Any Beneficiary designation may be changed
by a Participant by the filing of a new Beneficiary designation, which will
cancel all Beneficiary designations previously filed.
7.3 NO DESIGNATION. If a Participant fails to designate a
Beneficiary as provided above, or if all designated Beneficiaries predecease
the Participant, then the Participant's designated Beneficiary shall be deemed
to be the Participant's estate.
7.4 EFFECT OF PAYMENT. Payment to a Participant's
Beneficiary (or, upon the death of a Beneficiary, to the
Beneficiary's estate) shall completely discharge the Employer's
obligations under the Plan.
ARTICLE VIII
------------
ADMINISTRATION
--------------
8.1 COMMITTEE. The administrative committee for the Plan
(the "Committee") shall be those members of the Compensation Committee of the
Board who are not Participants, as long as there are at least three such
members. If there are not at least three such non-participating persons on the
Compensation Committee, the chief executive officer of the Company shall
appoint other non-participating Directors or Company officers to serve on the
Committee. The Committee shall supervise the administration and
<PAGE> 12
12
operation of the Plan, may from time to time adopt rules and procedures
governing the Plan and shall have authority to give interpretive rulings with
respect to the Plan.
8.2 AGENTS. The Committee may appoint an individual, who may
be an employee of the Company, to be the Committee's agent with respect to the
day-today administration of the Plan. In addition, the Committee may, from
time to time, employ other agents and delegate to them such administrative
duties as it sees fit, and may from time to time consult with counsel who may
be counsel to the Company.
8.3 BINDING EFFECT OF DECISIONS. Any decision or action of
the Committee with respect to any question arising out of or in connection with
the administration, interpretation and application of the Plan shall be final
and binding upon all persons having any interest in the Plan.
8.4 INDEMNITY OF COMMITTEE. The Company shall indemnify and
hold harmless the members of the Committee and their duly appointed agents
under Section 8.2 against any and all claims, loss, damage, expense or
liability arising from any action or failure to act with respect to the Plan,
except in the case of gross negligence or willful misconduct by any such member
or agent of the Committee.
ARTICLE IX
----------
AMENDMENT AND TERMINATION OF PLAN
---------------------------------
9.1 AMENDMENT. The Company, on behalf of itself and of each
Selected Affiliate may at any time amend, suspend or reinstate any or all of
the provisions of the Plan, except that no such amendment, suspension or
reinstatement may adversely affect any Participant's Account, as it existed as
of the effective date of such amendment, suspension or reinstatement, without
such Participant's prior written consent. Written notice of any amendment or
other action with respect to the Plan shall be given to each Participant.
9.2 TERMINATION. The Company, on behalf of itself and of
each Selected Affiliate, in its sole discretion, may terminate this Plan at any
time and for any reason whatsoever. Upon termination of the Plan, the
Committee shall take those actions necessary to administer any Accounts
existing prior to the effective date of such termination; provided, however,
that a termination of the Plan shall not adversely affect the value of a
Participant's Account, the earnings from Investments credited to a
Participant's Account under Section 5.1, the interest on cash
<PAGE> 13
13
amounts credited to a Participant's Account under Section 5.3, or the timing or
method of distribution of a Participant's Account, without the Participant's
prior written consent.
ARTICLE X
---------
MISCELLANEOUS
-------------
10.1 FUNDING. Participants, their Beneficiaries, and their
heirs, successors and assigns, shall have no secured interest or claim in any
property or assets of the Employer. The Employer's obligation under the Plan
shall be merely that of an unfunded and unsecured promise of the Employer to
pay money in the future. Notwithstanding the foregoing, in the event of a
Change in Control, the Company shall create an irrevocable trust to hold funds
to be used in payment of the obligations of Employers under the Plan, and the
Company shall fund such trust in an amount equal to no less than the total
value of the Participants' Accounts under the Plan as of the Determination Date
immediately preceding the Change in Control, provided that any funds contained
therein shall remain liable for the claims of the respective Employer's general
creditors.
10.2 NONASSIGNABILITY. No right or interest under the Plan
of a Participant or his or her Beneficiary (or any person claiming through or
under any of them), other than the surviving spouse of any deceased
Participant, shall be assignable or transferable in any manner or be subject to
alienation, anticipation, sale, pledge, encumbrance or other legal process or
in any manner be liable for or subject to the debts or liabilities of any such
Participant or Beneficiary. If any Participant or Beneficiary (other than the
surviving spouse of any deceased Participant) shall attempt to or shall
transfer, assign, alienate, anticipate, sell, pledge or otherwise encumber his
or her benefits hereunder or any part thereof, or if by reason of his or her
bankruptcy or other event happening at any time such benefits would devolve
upon anyone else or would not be enjoyed by him or her, then the Committee, in
its discretion, may terminate his or her interest in any such benefit to the
extent the Committee considers necessary or advisable to prevent or limit the
effects of such occurrence. Termination shall be effected by filing a written
"termination declaration" with the Secretary of the Company and making
reasonable efforts to deliver a copy to the Participant or Beneficiary whose
interest is adversely affected (the "Terminated Participant").
As long as the Terminated Participant is alive, any benefits
affected by the termination shall be retained by the Employer and, in the
Committee's sole and absolute judgment, may
<PAGE> 14
14
be paid to or expended for the benefit of the Terminated Participant, his or
her spouse, his or her children or any other person or persons in fact
dependent upon him or her in such a manner as the Committee shall deem proper.
Upon the death of the Terminated Participant, all benefits withheld from him or
her and not paid to others in accordance with the preceding sentence shall be
disposed of according to the provisions of the Plan that would apply if he or
she died prior to the time that all benefits to which he or she was entitled
were paid to him or her.
10.3 LEGAL FEES AND EXPENSES. It is the intent of the
Company and each Selected Affiliate that no Eligible Employee or former
Eligible Employee be required to incur the expenses associated with the
enforcement of his rights under this Plan by litigation or other legal action
because the cost and expense thereof would substantially detract from the
benefits intended to be extended to an Eligible Employee hereunder.
Accordingly, if it should appear that the Employer has failed to comply with
any of its obligations under this Plan or in the event that the Employer or any
other person takes any action to declare this Plan void or unenforceable, or
institutes any litigation designed to deny, or to recover from, the Eligible
Employee the benefits intended to be provided to such Eligible Employee
hereunder, the Employer irrevocably authorizes such Eligible Employee from time
to time to retain counsel of his choice, at the expense of the Employer as
hereafter provided, to represent such Eligible Employee in connection with the
initiation or defense of any litigation or other legal action, whether by or
against the Employer or any director, officer, stockholder or other person
affiliated with the Employer in any jurisdiction. Notwithstanding any existing
or prior attorney-client relationship between the Employer and such counsel,
the Employer irrevocably consents to such Eligible Employee's entering into an
attorney-client relationship with such counsel, and in that connection the
Employer and such Eligible Employee agree that a confidential relationship
shall exist between such Eligible Employee and such counsel. The Employer
shall pay and be solely responsible for any and all attorneys' and related fees
and expenses incurred by such Eligible Employee as a result of the Employer's
failure to perform under this Plan or any provision thereof; or as a result of
the Employer or any person contesting the validity or enforceability of this
Plan or any provision thereof.
10.4 CAPTIONS. The captions contained herein are for
convenience only and shall not control or affect the meaning or construction
hereof.
<PAGE> 15
15
10.5 GOVERNING LAW. The provisions of the Plan shall be
construed and interpreted according to the laws of the State of Ohio.
10.6 SUCCESSORS. The provisions of the Plan shall bind and
inure to the benefit of the Company, its selected Affiliates, and their
respective successors and assigns. The term successors as used herein shall
include any corporate or other business entity which shall, whether by merger,
consolidation, purchase or otherwise, acquire all or substantially all of the
business and assets of the Company or a Selected Affiliate and successors of
any such corporation or other business entity.
10.7 RIGHT TO CONTINUED SERVICE. Nothing contained herein
shall be construed to confer upon any Eligible Employee the right to continue
to serve as an Eligible Employee of the Employer or in any other capacity.
10.8 PRIOR PLAN PROVISIONS. The provisions of the Plan in
effect prior to January 1, 1995 shall govern periods prior to such date.
Executed this 24th day of February, 1995.
CLEVELAND-CLIFFS INC
By: /s/ Richard F. Novak
------------------------------
Vice President-Human Resources
<PAGE> 1
EXHIBIT 10(b)
CLEVELAND-CLIFFS INC
SUPPLEMENTAL RETIREMENT BENEFIT PLAN
(as Amended and Restated Effective January 1, 1995)
---------------------------------------------------
WHEREAS, Cleveland-Cliffs Inc ("Cleveland-Cliffs") and its
subsidiary corporations and affiliates have established, or may hereafter
establish, one or more qualified retirement plans;
WHEREAS, the qualified retirement plans, pursuant to Sections
401(a) and 415 of the Internal Revenue Code of 1986, as amended, place certain
limitations on the amount of contributions that would otherwise be made
thereunder for certain participants;
WHEREAS, Cleveland-Cliffs now desires to provide for the
contributions which would otherwise have been made for such participants under
certain of its qualified retirement plans except for such limitations, in
consideration of services performed and to be performed by each such
participant for Cleveland-Cliffs and its subsidiaries and affiliates; and
WHEREAS, Cleveland-Cliffs has entered into, and
Cleveland-Cliffs and its subsidiary corporations and affiliates may in the
future enter into, agreements with certain executives providing for additional
service credit and/or other features for purposes of computing retirement
benefits, in consideration of services performed and to be performed by such
executives for Cleveland-Cliffs and its subsidiaries and affiliates.
NOW, THEREFORE, Cleveland-Cliffs hereby amends and restates
and publishes the Supplemental Retirement Benefit Plan heretofore established
by it, which shall contain the following terms and conditions:
1. DEFINITIONS. A. The following words and phrases when
used in this Plan with initial capital letters shall have the following
respective meanings, unless the context clearly indicates otherwise. The
masculine whenever used in this Plan shall include the feminine.
B. "AFFILIATE" shall mean any partnership or joint venture of
which any member of the Controlled Group is a partner or venturer and which
shall adopt this Plan pursuant to paragraph 6.
C. "BENEFICIARY" shall mean such person or persons (natural
or otherwise) as may be designated by the Participant as his Beneficiary under
this Plan. Such a designation may be made, and may be revoked or changed
(without the consent of any previously designated Beneficiary), only by an
instrument (in form acceptable to Cleveland-Cliffs) signed by the Participant
<PAGE> 2
2
and filed with Cleveland-Cliffs prior to the Participant's death. In the
absence of such a designation and at any other time when there is no existing
Beneficiary designated by the Participant to whom payment is to be made
pursuant to his designation, his Beneficiary shall be his beneficiary under the
Pension Plan. A person designated by a Participant as his Beneficiary who or
which ceases to exist shall not be entitled to any part of any payment
thereafter to be made to the Participant's Beneficiary unless the Participant's
designation specifically provided to the contrary. If two or more persons
designated as a Participant's Beneficiary are in existence, the amount of any
payment to the Beneficiary under this Plan shall be divided equally among such
persons unless the Participant's designation specifically provided to the
contrary.
D. "CODE" shall mean the Internal Revenue Code of 1986, as it
has been and may be amended from time to time.
E. "CODE LIMITATIONS" shall mean the limitations imposed by
Sections 401(a) and 415 of the Code, or any successor thereto, on the amount of
the benefits which may be payable to a Participant from the Pension Plan.
F. "CONTROLLED GROUP" shall mean Cleveland-Cliffs and any
corporation in an unbroken chain of corporations beginning with
Cleveland-Cliffs, if each of the corporations other than the last corporation
in the chain owns or controls, directly or indirectly, stock possessing not
less than fifty percent of the total combined voting power of all classes of
stock in one of the other corporations.
G. "EMPLOYER(S)" shall mean Cleveland-Cliffs and any other
member of the Controlled Group and any Affiliate which shall adopt this Plan
pursuant to paragraph 6.
H. "PARTICIPANT" shall mean each person (i) who is a
participant in the Pension Plan, (ii) who is a senior corporate officer of
Cleveland-Cliffs or a full-time salaried employee of an Employer who has an
Incentive Bonus Salary Grade of EX-28 or above, and (iii) who as a result of
participation in this Plan is entitled to a Supplemental Benefit under this
Plan. Each person who is as a Participant under this Plan shall be notified in
writing of such fact by his Employer, which shall also cause a copy of the Plan
to be delivered to such person.
I. "PARTICIPATION AGREEMENT" shall mean the agreement
filed by the Participant, in the form prescribed by Cleveland-Cliffs, pursuant
to paragraph 3.
J. "PENSION PLAN" shall mean, with respect to any
Participant, the defined benefit plan specified on Exhibit A hereto in which he
participates.
<PAGE> 3
3
K. "SUPPLEMENTAL AGREEMENT" shall mean, with respect to
any Participant, an agreement between the Participant and an Employer, and
approved by Cleveland-Cliffs if it is not the Employer, which provides for
additional service credit and/or other features for purposes of computing
retirement benefits.
L. "SUPPLEMENTAL BENEFIT" or "SUPPLEMENTAL PENSION PLAN
BENEFIT" shall mean a retirement benefit determined as provided in paragraph 2.
M. "SUPPLEMENTAL RETIREMENT BENEFIT PLAN" or "PLAN"
shall mean this Plan, as the same may hereafter be amended or restated from
time to time.
2. DETERMINATION OF THE SUPPLEMENTAL PENSION PLAN
BENEFIT. Each Participant or Beneficiary of a deceased Participant whose
benefits under the Pension Plan payable on or after January 1, 1995 are reduced
(a) due to the Code Limitations, or (b) due to deferrals of compensation by
such Participant under the Cleveland-Cliffs Inc Voluntary Non-Qualified
Deferred Compensation Plan (the "Deferred Compensation Plan"), and each
Participant who has entered into a Supplemental Agreement with his Employer
(and, where applicable a Beneficiary of a deceased Participant), shall be
entitled to a Supplemental Pension Plan Benefit, which shall be determined as
hereinafter provided. A Supplemental Pension Plan Benefit shall be a monthly
retirement benefit equal to the difference between (i) the amount of the
monthly benefit payable on and after January 1, 1995 to the Participant or his
Beneficiary under the Pension Plan, determined under the Pension Plan as in
effect on the date of the Participant's termination of employment with the
Controlled Group and any Affiliate (and payable in the same optional form as
his Actual Pension Plan Benefit, as defined below), but calculated without
regard to any reduction in the Participant's compensation pursuant to the
Deferred Compensation Plan, and as if the Pension Plan did not contain a
provision (including any phase-in or extended wear away provision) implementing
the Code Limitations, and after giving effect to the provisions of any
Supplemental Agreement, and (ii) the amount of the monthly benefit in fact
payable on and after January 1, 1995 to the Participant or his Beneficiary
under the Pension Plan. If the benefit payable to a Participant or Beneficiary
pursuant to clause (ii) of the immediately preceding sentence (herein referred
to as "Actual Pension Plan Benefit") is payable in a form other than a monthly
benefit, such Actual Pension Plan Benefit shall be adjusted to a monthly
benefit which is the actuarial equivalent of such Actual Pension Plan Benefit
for the purpose of calculating the monthly Supplemental Pension Plan Benefit of
the Participant or Beneficiary pursuant to the preceding sentence. For any
Participant whose benefits become payable under the Pension Plan on or after
January 1, 1995, the Supplemental Pension Plan Benefit includes any "Retirement
Plan Augmentation Benefit" which the Participant shall have accrued under the
Deferred
<PAGE> 4
4
Compensation Plan prior to the amendment of such Plan as of January 1, 1991 to
delete such Benefit. The acceptance by the Participant or his Beneficiary of
any Supplemental Pension Plan Benefit pursuant to paragraph 3 shall constitute
payment of the Retirement Plan Augmentation Benefit included therein for
purposes of the Deferred Compensation Plan prior to such amendment.
3. PAYMENT OF THE SUPPLEMENTAL PENSION PLAN BENEFIT. A
Participant's (or his Beneficiary's) Supplemental Pension Plan Benefit
(calculated as provided in paragraph 2) shall be converted, at the time of his
termination of employment with the Controlled Group and any Affiliate, into ten
annual installment payments (the "Ten Installment Payments") of equivalent
actuarial value. The equivalent actuarial value shall be determined by the
actuary selected by Cleveland-Cliffs based on the 1971 TPF&C Forecast Mortality
Table set back one year and the Pension Benefit Guaranty Corporation interest
rate for immediate annuities then in effect. The Participant's former Employer
shall pay the Ten Installment Payments to the Participant beginning on the
first day of the month following the Participant's last day of work and on each
anniversary thereafter until the Ten Installment Payments have been made. A
Participant may elect to receive his Supplemental Pension Plan Benefit in one
of the following forms in lieu of the Ten Installment Payments:
(a) Lump sum payment at the end of the first month of
retirement or following death.
(b) Annual installments over 5 years, beginning with the
first day of the month following the Participant's
last day of work.
(c) Annual installments over 15 years, beginning with the
first day of the month following the Participant's
last day of work.
The payments made under these forms shall be of equivalent actuarial value to
the Ten Installment Payments as determined by the actuary selected by
Cleveland-Cliffs based on the actuarial factors and assumptions used to
calculate the Ten Installment Payments. If the participant dies before
receiving all of the installment payments, the remaining installment payments
shall be paid in a lump sum to the Participant's Beneficiary. The
Participant's election of one of the forms of distribution set forth above
shall be made by written notice filed with the Administrator at least one (1)
year prior to the Participant's voluntary termination of employment or
retirement, or prior to the Participant's termination of employment because of
involuntary termination or retirement, death or disability. Any such election
may be changed by the Participant at any time and from time to time without the
consent of any other person by filing a later signed written election with the
Administrator;
<PAGE> 5
5
provided that any election made less than one (1) year prior to the
Participant's voluntary termination of employment or retirement shall not be
valid, and in such case payment shall be made in accordance with the
Participant's prior election.
4. FORFEITABILITY. Anything herein to the contrary
notwithstanding, if the Board of Directors of Cleveland-Cliffs shall determine
in good faith that a Participant who is entitled to a benefit hereunder by
reason of termination of his employment with Cleveland-Cliffs, during the
period of 10 years after termination of his employment or until he attains age
65, whichever period is shorter, has engaged in a business competitive with
Cleveland-Cliffs or any member of the Controlled Group or any Affiliate without
the prior written consent of Cleveland-Cliffs, such Participant's rights to a
supplemental Pension Plan Benefit hereunder and the rights, if any, of his
Beneficiary shall be terminated and no further Supplemental Benefit shall be
paid to him or his Beneficiary hereunder.
5. GENERAL. A. The entire cost of this Supplemental
Retirement Benefit Plan shall be paid from the general assets of one or more of
the Employers. It is the intent of the Employers to so pay benefits under the
Plan as they become due; provided, however, that Cleveland-Cliffs may, in its
sole discretion, establish or cause to be established a trust account for any
or each Participant pursuant to an agreement, or agreements, with a bank and
direct that some or all of a Participant's benefits under the Plan be paid from
the general assets of his Employer which are transferred to the custody of such
bank to be held by it in such trust account as property of the Employer subject
to the claims of the Employer's creditors until such time as benefit payments
pursuant to the Plan are made from such assets in accordance with such
agreement; and until any such payment is made, neither the Plan nor any
Participant or Beneficiary shall have any preferred claim on, or any beneficial
ownership interest in, such assets. No liability for the payment of benefits
under the Plan shall be imposed upon any officer, director, employee, or
stockholder of Cleveland-Cliffs or other Employer.
B. No right or interest of a Participant or his
Beneficiary under this Supplemental Retirement Benefit Plan shall be
anticipated, assigned (either at law or in equity) or alienated by the
Participant or his Beneficiary, nor shall any such right or interest be subject
to attachment, garnishment, levy, execution or other legal or equitable process
or in any manner be liable for or subject to the debts of any Participant or
Beneficiary. If any Participant or Beneficiary shall attempt to or shall
alienate, sell, transfer, assign, pledge or otherwise encumber his benefits
under the Plan or any part thereof, or if by reason of his bankruptcy or other
event happening at any time such benefits would devolve upon anyone else or
would not be enjoyed by him, then Cleveland-Cliffs may terminate his interest
in any such benefit and hold or apply it to or for his benefit or
<PAGE> 6
6
the benefit of his spouse, children or other person or persons in fact
dependent upon him, or any of them, in such a manner as Cleveland-Cliffs may
deem proper; provided, however, that the provisions of this sentence shall not
be applicable to the surviving spouse of any deceased Participant if
Cleveland-Cliffs consent: to such inapplicability, which consent shall not
unreasonably be withheld.
C. Employment rights shall not be enlarged or affected
hereby. The Employers shall continue to have the right to discharge or retire
a Participant, with or without cause.
D. Notwithstanding any other provisions of this Plan to
the contrary, if Cleveland-Cliffs determines that any Participant may not
qualify as a "management or highly compensated employee" within the meaning of
the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), or
regulations thereunder, Cleveland-Cliffs may determine, in its sole discretion,
that such Participant shall cease to be eligible to participate in this Plan.
Upon such determination, the Employer shall make an immediate lump sum payment
to the Participant equal to his then vested Supplemental Benefit. Upon such
payment, no benefits shall thereafter be payable under this Plan either to the
Participant or any Beneficiary of the Participant, and all of the Participant's
elections as to the time and manner of payment of his Supplemental Benefit
shall be deemed to be cancelled.
6. ADOPTION OF SUPPLEMENTAL RETIREMENT BENEFIT PLAN.
Any member of the Controlled Group or any Affiliate which is an employer under
the Pension Plan may become an Employer hereunder with the written consent of
Cleveland-Cliffs if such member or such Affiliate executes an instrument
evidencing its adoption of the Supplemental Retirement Benefit Plan and files a
copy thereof with Cleveland-Cliffs. Such instrument of adoption may be subject
to such terms and conditions as Cleveland-Cliffs requires or approves.
7. MISCELLANEOUS. A. The Plan shall be administered by
the Plan Administrator (the "Administrator"). The Administrator shall have
such powers as may be necessary to discharge his duties hereunder, including,
but not by way of limitation, to construe and interpret the Plan and determine
the amount and time of payment of any benefits hereunder. The Administrator
may, from time to time, employ agents and delegate to them such administrative
duties as it sees fit, and may from time to time consult with legal counsel who
may be counsel to Cleveland-Cliffs. The Administrator shall have no power to
add to, subtract from or modify any of the terms of the Plan, or to change or
add to any benefits provided under the Plan, or to waive or fail to apply any
requirements of eligibility for a benefit under the Plan. No member of the
Administrator shall act in respect of his own benefits. All decisions and
determinations
<PAGE> 7
7
by the Administrator shall be final and binding on all parties. All decisions
of the Administrator shall be made by the vote of the majority, if applicable,
including actions and writing taken without a meeting. All elections, notices
and directions under the Plan by a Participant shall be made on such forms as
the Administrator shall prescribe.
B. Cleveland-Cliffs shall be the "Administrator" and the
"Plan Sponsor" under the Plan for purposes of ERISA.
C. Except to the extent federal law controls, all
questions pertaining to the construction, validity and effect of the provisions
hereof shall be determined in accordance with the laws of the State of Ohio.
D. Whenever there is denied, whether in whole or in
part, a claim for benefits under the Plan filed by any person (herein referred
to as the "Claimant"), the plan administrator shall transmit a written notice
of such decision to the Claimant, which notice shall be written in a manner
calculated to be understood by the Claimant and shall contain a statement of
the specific reasons for the denial of the claim and statement advising the
Claimant that, within 60 days of the date on which he receives such notice, he
may obtain review of such decision in accordance with the procedures
hereinafter set forth. Within such 60-day period, the Claimant or his
authorized representative may request that the claim denial be reviewed by
filing with the plan administrator a written request therefor, which request
shall contain the following information:
(i) the date on which the Claimant's request was filed
with the plan administrator; provided, however, that the date on which
the Claimant's request for review was in fact filed with the plan
administrator shall control in the event that the date of the actual
filing is later than the date stated by the Claimant pursuant to this
paragraph;
(ii) the specific portions of the denial of his claim
which the Claimant requests the plan administrator to review;
(iii) a statement by the Claimant setting forth the basis upon
which he believes the plan administrator should reverse the previous
denial of his claim for benefits and accept his claim as made; and
(iv) any written material (offered as exhibits) which the
Claimant desires the plan administrator to examine in its
consideration of his position as stated pursuant to clause (iii)
above.
Within 60 days of the date determined pursuant to clause (i) above, the plan
administrator shall conduct a full and fair
<PAGE> 8
8
review of the decision denying the Claimant's claim for benefits. Within 60
days of the date of such hearing, the plan administrator shall render its
written decision on review, written in a manner calculated to be understood by
the Claimant, specifying the reasons and Plan provisions upon which its
decision was based.
E. Supplemental Pension Plan Benefits shall be subject
to applicable withholding and such other deductions as shall at the time of
payment be required or appropriate under any Federal, State or Local law. In
addition, Cleveland-Cliffs may withhold from a Participant's "other income" (as
hereinafter defined) any amount required or appropriate to be currently
withheld from such Participant's other income pursuant to any Federal, State or
Local law. For purposes of this subparagraph E, "other income" shall mean any
remuneration currently paid to a Participant by an Employer.
8. AMENDMENT AND TERMINATION. A. Cleveland-Cliffs has
reserved and does hereby reserve the right to amend, at any time, any or all of
the provisions of the Supplemental Retirement Benefit Plan for all Employers,
without the consent of any other Employer or any Participant, Beneficiary or
any other person. Any such amendment shall be expressed in an instrument
executed by Cleveland-Cliffs and shall become effective as of the date
designated in such instrument or, if no such date is specified, on the date of
its execution.
B. Cleveland-Cliffs has reserved, and does hereby reserve,
the right to terminate the Supplemental Retirement Benefit Plan at any time for
all Employers, without the consent of any other Employer or of any Participant,
Beneficiary or any other person. Such termination shall be expressed in an
instrument executed by Cleveland-Cliffs and shall become effective as of the
date designated in such instrument, or if no date is specified, on the date of
its execution. Any other Employer which shall have adopted the Plan may, with
the written consent of Cleveland-Cliffs, elect separately to withdraw from the
Plan and such withdrawal shall constitute a termination of the Plan as to it,
but it shall continue to be an Employer for the purposes hereof as to
Participants or Beneficiaries to whom it owes obligations hereunder. Any such
withdrawal and termination shall be expressed in an instrument executed by the
terminating Employer and shall become effective as of the date designated in
such instrument or, if no date is specified, on the date of its execution.
C. Notwithstanding the foregoing provisions hereof, no
amendment or termination of the Supplemental Retirement Benefit Plan shall,
without the consent of the Participant (or, in the case of his death, his
Beneficiary), adversely affect (i) the benefit under the Plan of any
Participant or Beneficiary then entitled to receive a benefit under the Plan or
(ii) the right of
<PAGE> 9
9
any other Participant to receive upon termination of his employment with the
Controlled Group and any Affiliate (or the right of his Beneficiary to receive
upon such Participant's death) that benefit which would have been received
under the Plan if such employment of the Participant had terminated immediately
prior to the amendment or termination of the Plan. Upon any termination of the
Plan, each affected Participant's Supplemental Benefit shall be determined and
distributed to him or, in the case of his death, to his Beneficiary as provided
in paragraph 3 as if the employment of the Participant with the Controlled
Group and any Affiliate had terminated immediately prior to the termination of
the Plan.
9. EFFECTIVE DATE. The amended and restated Supplemental
Retirement Benefit Plan shall be effective as of January 1, 1995.
IN WITNESS WHEREOF, Cleveland-Cliffs Inc, pursuant to the
order of its Board of Directors, has executed this amended and restated
Supplemental Retirement Benefit Plan at Cleveland, Ohio, this 7th day of
February, 1995.
CLEVELAND-CLIFFS INC
By /s/ R. F. Novak
--------------------------------
Vice President - Human Resources
<PAGE> 10
Exhibit A
---------
Pension Plans
- -------------
Pension Plan for Salaried Employees of Cleveland-Cliffs Inc
Pension Plan for Salaried Employees of the Cleveland-Cliffs Iron Company and
its Associated Employers
<PAGE> 1
<TABLE>
Exhibit 11
COMPUTATION OF EARNINGS PER SHARE
CLEVELAND-CLIFFS INC AND CONSOLIDATED SUBSIDIARIES
<CAPTION>
(In Millions,
Except Per
Share Amounts)
Three Months
Ended March 31,
<S> <C> <C>
---------------------
1995 1994
-------- --------
Primary and fully diluted earnings per share:
Average shares outstanding 12.1 12.1
Net effect of dilutive stock options - based on
treasury stock method using average mark - -
-------- --------
Average shares and equivalents 12.1 12.1
======== ========
Net income applicable to average shares and equivalents: $5.0 $2.2
======== ========
Income per share: $0.41 $0.18
======== ========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from statements
of consolidated income, consolidated financial position and computation of
earnings per share and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<CIK> 0000764065
<NAME> Cleveland-Cliffs Inc
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 3-Mos
<FISCAL-YEAR-END> Dec-31-1995
<PERIOD-START> Jan-01-1995
<PERIOD-END> Mar-31-1995
<CASH> 138
<SECURITIES> 1
<RECEIVABLES> 24
<ALLOWANCES> 20
<INVENTORY> 67
<CURRENT-ASSETS> 250
<PP&E> 252
<DEPRECIATION> (140)
<TOTAL-ASSETS> 599
<CURRENT-LIABILITIES> 85
<BONDS> 0
0
0
<COMMON> 17
<OTHER-SE> 292
<TOTAL-LIABILITY-AND-EQUITY> 599
<SALES> 51
<TOTAL-REVENUES> 64
<CGS> 50
<TOTAL-COSTS> 53
<OTHER-EXPENSES> 2
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2
<INCOME-PRETAX> 7
<INCOME-TAX> 2
<INCOME-CONTINUING> 5
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5
<EPS-PRIMARY> 0.41
<EPS-DILUTED> 0.41
</TABLE>
