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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_________
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For fiscal year ended December 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)
<TABLE>
<S> <C>
OHIO 34-1464672
(STATE OR OTHER JURISDICTION OF INCORPORATION) (I.R.S. EMPLOYER 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
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SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
Name of Each Exchange
Title of Each Class on Which Registered
------------------- -------------------
Common Shares - par value $1.00 per share New York Stock Exchange
and Chicago Stock Exchange
</TABLE>
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: NONE
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
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of the Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ X ]
As of March 18, 1996, the aggregate market value of the voting stock held by
non-affiliates of the registrant, based on the closing price of $43.50 per
share as reported on the New York Stock Exchange - Composite Index was
$497,695,375 (excluded from this figure is the voting stock beneficially owned
by the registrant's officers and directors).
The number of shares outstanding of the registrant's $1.00 par value common
stock was 11,832,767 as of March 18, 1996.
-----------------------------------------
DOCUMENTS INCORPORATED BY REFERENCE
1. Portions of registrant's 1995 Annual Report to Shareholders are filed as
Exhibits 13(a) through 13(j) and are incorporated by reference into Parts I,
II and IV.
2. Portions of registrant's Proxy Statement for the Annual Meeting of
Shareholders scheduled to be held May 14, 1996 are incorporated by reference
into Part III.
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PART I
ITEMS 1 AND 2. BUSINESS AND PROPERTIES.
INTRODUCTION
Cleveland-Cliffs Inc (including its consolidated subsidiaries, the
"Company") is the successor to business enterprises whose beginnings can be
traced to earlier than 1850. The Company's headquarters are at 1100 Superior
Avenue, Cleveland, Ohio 44114-2589, and its telephone number is (216) 694-5700.
BUSINESS
The Company owns, directly or indirectly, four major operating
subsidiaries, The Cleveland-Cliffs Iron Company ("CCIC"), Cliffs Mining Company
("CMC") (formerly known as Pickands Mather & Co.), Northshore Mining Company
("Northshore"), and Pickands Mather & Co. International ("PMI"). CCIC and CMC
hold interests in various independent iron ore mining ventures ("mining
ventures") and act as managing agent. The operations of Northshore and PMI are
entirely owned by the Company. CCIC, CMC, Northshore, and PMI's business
during 1995 was the production and sale of iron ore, principally iron ore
pellets. Collectively, CCIC, CMC, Northshore, and PMI control, develop, and
lease reserves to mine owners; manage and own interests in mines; sell iron
ore; and provide ancillary services to the mines. The operations of each mine
are independent of the other mines. Iron ore production activities are
conducted in the United States, Canada and Australia. Iron ore is marketed by
the subsidiaries in the United States, Canada, Europe, Asia and Australia.
For information on the iron ore business, including royalties and
management fees for the years 1993-1995, see Note C in the Notes to the
Company's Consolidated Financial Statements in the Company's Annual Report to
Security Holders for the year ended December 31, 1995, which Note C is
contained in Exhibit 13(g) and incorporated herein by reference and made a part
hereof. For information subsequent to the issuance of the Company's
Consolidated Financial Statements for the year ended December 31, 1995, see
discussion of events occurring on March 15, 1996 with respect to McLouth Steel
Products Company in paragraph three on page four and in Management's Discussion
and Analysis of Financial Condition and Results of Operations.
For information concerning operations of the Company, see material
under the heading "Summary of Financial and Other Statistical Data" in the
Company's Annual Report to Security Holders for the year ended December 31,
1995, which Summary of Financial and Other Statistical Data is contained in
Exhibit 13(j) and incorporated herein by reference and made a part hereof.
NORTH AMERICA. CCIC owns or holds long-term leasehold interests in
active North American properties containing approximately 1.6 billion tons of
crude iron ore reserves. CCIC, CMC and Northshore manage six active mines in
North America with a total rated annual capacity of 41.1 million tons and own
equity interests in five of these mines (see Table on page 5).
CCIC, CMC and Northshore's United States properties are located on the
Marquette Range of the Upper Peninsula of Michigan, which has two active
open-pit mines and pellet plants, and the Mesabi Range in Minnesota, which has
three active open-pit mines and pellet plants. CMC acts only in the capacity of
manager at one of the Mesabi Range facilities. Two railroads, one of which is
99.5% owned by a subsidiary of the Company, link the Marquette Range with Lake
Michigan at the loading port of Escanaba and with Lake Superior at the loading
port of Marquette. From the Mesabi Range, pellets are transported by rail to
shiploading ports at Superior, Wisconsin and Taconite Harbor, Minnesota. At
Northshore, crude ore is shipped by rail from the mine to the processing
facilities at Silver Bay, Minnesota, which is also the upper lakes port of
shipment. In addition, in
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Canada, there is an open-pit mine and concentrator at Wabush, Labrador,
Newfoundland and a pellet plant and dock facility at Pointe Noire, Quebec. At
Wabush Mines, concentrates are shipped by rail from the Scully Mine at Wabush
to Pointe Noire, Quebec, where they are pelletized for shipment via vessel to
Canada, United States and Europe or shipped as concentrates for sinter feed to
Europe.
CCIC leases or subleases its reserves to certain mining ventures which
pay royalties to CCIC on such reserves based on the tonnage and the iron
content of iron ore produced. The royalty rates on leased or subleased reserves
per ton are subject to periodic adjustments based on changes in the Bureau of
Labor Statistics producer price index for all commodities or on certain iron
ore and steel price indices. The mining ventures, except for LTV Steel Mining
Company which is wholly-owned by LTV Steel Company, include as participants
CCIC or CMC and steel producers (who are "participants" either directly or
through subsidiaries).
CCIC and CMC, pursuant to management agreements with the participants
having operating interests in the mining ventures, manage the development,
construction and operation of iron ore mines and concentrating and pelletizing
plants to produce iron ore pellets for steel producers. CCIC and CMC are
reimbursed by the participants of the mining ventures for substantially all
expenses incurred by CCIC and CMC in operating the mines and mining ventures.
In addition, CCIC and CMC are paid management fees based on the tonnage of iron
ore produced. A substantial portion of such fees is subject to escalation
adjustments in a manner similar to the royalty adjustments.
With respect to the active mines in which CCIC and CMC have an equity
interest, such interests range from 7.7% to 40.0% (see Table on page 5).
Pursuant to certain operating agreements at each mine, each participant is
generally obligated to take its share of production for its own use. CCIC and
CMC's share of production is resold to steel manufacturers pursuant to
multi-year contracts, usually with price escalation provisions, or one-year
contracts. Pursuant to operating agreements at each mine, each participant is
entitled to nominate the amount of iron ore which will be produced for its
account for that year. During the year, such nomination generally may be
increased (subject to capacity availability) or decreased (subject to certain
minimum production levels) by a specified amount. During 1995, the North
American mines operated at or near capacity levels.
In February, 1994, CCIC reached agreement with Algoma Steel, Inc.
("Algoma") and Stelco Inc. ("Stelco") 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 million ton target normal production level instead of the
previous 4 million ton base production level; (2) CCIC's interest in Tilden has
increased from 33.3% to 40.0% with an associated increase in CCIC's obligation
for its share of mine costs; (3) CCIC is receiving a higher royalty; (4) CCIC
has the right to supply any additional iron ore pellet requirements of Algoma
from Tilden or from CCIC; and (5) any partner may take additional production
with payment of certain fees to Tilden. The parties implemented the general
agreement effective January 1, 1994 and finalized the detailed provisions of
the definitive agreement on September 30, 1995, which included the combining of
all of the assets and liabilities of Tilden Magnetite Partnership and the
Tilden Mining Company Joint Venture (entities in which CCIC, Algoma and Stelco
had ownership interests in the Tilden Mine) into the Tilden Mining Company
L.C., a Michigan limited liability company. The agreement has not had a
material effect on the Company's Consolidated Financial Statements.
On September 30, 1994, Cliffs Minnesota Minerals Company, a subsidiary
of the Company, completed a stock acquisition of Cyprus Amax Minerals Company's
("Cyprus Amax") iron ore operation ("Northshore") and power plant (Silver Bay
Power Company ("Silver Bay Power")) in Minnesota for $66 million, plus net
working capital of $28 million. The principal assets acquired were 4 million
annual tons of active capacity for production of standard pellets (equivalent
to 3.5 million tons of flux pellet capacity), supported
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by 6 million tons of active concentrate capacity, a 115 megawatt power
generation plant, and an estimated 1.2 billion tons of magnetite crude iron ore
reserves, leased mainly from the Mesabi Trust. Additional payments to Cyprus
Amax are required as a result of certain favorable expansion conditions which
payments would not be material in any year. In June, 1995, a $6 million pellet
expansion project at Northshore, which involved the re-commissioning of an
idled pelletizing unit, was completed. On an annualized basis, the expansion
added approximately 900,000 tons of pellets, a 23% expansion of Northshore
capacity. Production in 1995 was 3.8 million tons of standard and flux
pellets.
In 1992, the Company purchased $1.0 million worth of steel from LCG
Funding Corporation, an entity owned by the principal owner of Sharon Steel
Corporation ("Sharon"), which had filed for protection under Chapter 11 of the
U.S. Bankruptcy laws, and affiliated with Castle Harlan, Inc. In connection
with the transaction, LCG Funding Corporation agreed to indemnify the Company
for any loss incurred upon resale of the steel. Following ultimate resale of
the steel, LCG Funding Corporation and Castle Harlan, Inc. refused to honor
that commitment, and in 1995, the Company filed suit against Castle Harlan,
Inc. and LCG Funding Corporation in Federal District Court. During 1995, the
Company, Castle Harlan, Inc. and LCG Funding Corporation settled the legal
proceedings out of court with full payment of the loss expected to be made to
the Company in 1996.
On June 28, 1993, LTV Steel Company, Inc., a significant partner of
the Company, and its parent corporation, The LTV Corporation ("LTV Corp")
emerged from Chapter 11 bankruptcy. In final settlement of its $200 million
allowed claim, the Company received 2.3 million shares of LTV Corp Common Stock
and 4.4 million Contingent Value Rights, which were issued by the Pension
Benefit Guaranty Corporation. On July 13, 1993, the Company distributed to its
shareholders a special dividend consisting of 1.5 million shares of LTV Corp
Common Stock and $12.0 million ($1.00 per share) cash.
On September 29, 1995, McLouth Steel Products Company ("McLouth"), a
significant customer, petitioned for protection under Chapter 11 of the U.S.
Bankruptcy laws. At the time of the filing, the Company had an unreserved
receivable from McLouth of $5.0 million, secured by liens on certain McLouth
fixed assets. A $2.7 million reserve against the receivable was recorded in
September, 1995, resulting in a $1.8 million after-tax charge. The Company's
total shipments in 1995 were not affected by McLouth's bankruptcy filing.
Pellet sales to McLouth were 1.3 million tons in 1995 which represented 12.5%
of the Company's sales volume and accounted for 11% of the Company's total
revenues. The Company included in its December 31, 1995 inventory .1 million
tons of pellets consigned to McLouth in accordance with long-standing practice.
The Company provided certain additional credit to McLouth since the bankruptcy
filing, and unreserved amounts are secured by liens on McLouth's assets. Until
March 15, 1996, McLouth had maintained operations and the Company continued
pellet shipments. On March 15, 1996, McLouth announced that it has begun a
shutdown of its operations due to inadequate funds and that discussions with
potential buyers for McLouth assets are in progress which could lead to a
resumption of operations. McLouth plans to maintain its facilities in a
"hot-idle" status. The Company had supplied approximately 120,000 tons of
pellets per month to McLouth in 1996 prior to shutdown. The Company expects to
maintain its total sales volume in the current strong iron ore market; however,
a near-term adverse earnings impact could occur and replacement tonnage is not
assured. The Company periodically has significant changes in customer mix and
strives to maintain its substantial base of multi-year contracts. Loss of any
significant sales contract has a materially adverse effect on earnings if the
tonnage is not replaced and related production costs are not reduced.
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Following is a table of production, current defined capacity, and
implied exhaustion dates for the iron ore mines managed or owned by CCIC, CMC,
Northshore and PMI. The exhaustion dates are based on estimated mineral
reserves and full production rates, which could be affected by future industry
conditions and ongoing mine planning. Maintenance of effective production
capacity or implied exhaustion dates could require increases in capital and
development expenditures. Alternatively, changes in economic conditions or the
expected quality of ore reserves could decrease capacity or accelerate
exhaustion dates. Technological progress could alleviate such factors or
increase capacity or mine life.
<TABLE>
<CAPTION>
Company's Current
Current Pellet Production Current Operating Implied
Operating ---------------------- Annual Continuously Exhaustion
Name and Location Type of Ore Interest 1993 1994 1995 Capacity Since Date (1)
- ----------------- -------------- -------- ------ ------ ----- -------- ------------ ----------
(Tons in Thousands)(2)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Mining Ventures
---------------
Michigan
--------
Marquette Range
*Empire Iron Mining
Partnership (3) Magnetite 22.56% 7,209 7,306 7,910 8,000 1963 2023
*Tilden Mining Hematite and
Company L.C.(3) Magnetite 40.00%(4)(5) 5,369 6,246 6,186 6,000(4)(5) 1974 2043
Minnesota
---------
Mesabi Range
*Hibbing Taconite
Joint Venture (6) Magnetite 15.00% 7,544 8,355 8,615 8,270 1976 2029
*LTV Steel Mining
Company (6) Magnetite 0.00% 7,668 7,809 7,757 8,000 1957 2059
Canada
------
*Wabush Mines
(Newfoundland and Specular
Quebec) (6)(7) Hematite 7.69% 4,492 4,654 5,295 6,000(7) 1965 2048
Wholly-Owned Entities
---------------------
Minnesota
---------
Mesabi Range
*Northshore Mining
Company (8) Magnetite 100.00% (8) 865(8) 3,791 4,800(9) 1989 2072
Australia
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*Savage River Mines
(Tasmania) Magnetite 100.00% 1,488 1,483 1,557 1,500 1967 1997
------ ----- ----- ------
TOTAL 33,770 36,718 41,111 42,570
====== ====== ====== ======
<FN>
(1) Based on full production at current annual capacity without regard to economic feasibility.
(2) Tons are long tons of 2,240 pounds.
(3) CCIC receives royalties and management fees.
(4) In 1993, CCIC's ownership interest in the Tilden Mining Company and Tilden Magnetite Partnership was 60.0% and 33.3%,
respectively. Design capacity for exclusive production of hematite ore was 8 million tons annually. The Tilden Mining
Company and the Tilden Magnetite Partnership established certain leasing and shared usage arrangements relating to production
and other facilities at the Tilden Mine.
(5) As a result of the restructuring of the Tilden Mining Company and the Tilden Magnetite Partnership into the Tilden Mining
Company L.C., effective as of January 1, 1994 and as discussed on page 3, CCIC's entitlement ownership in the Tilden Mine
increased from 33.3% to 40.0%. As a result of these arrangements, annual production capacity is targeted at 6 million tons
annually, and could be increased to 8 million tons, depending on type of ore production. The predominate ore reserves are
hematite.
(6) CMC received no royalty payments with respect to such mine, but did receive management fees.
(7) In 1991, the mine's annual production capacity was reduced to 4.5 million tons per year and will be increased to 6 million
tons in 1996. For the years 1995 and 1996, annual production was increased to 5.3 million tons and 5.7 million tons,
respectively.
(8) Acquired by the Company on September 30, 1994. Pellet production for Northshore for the three months ending December
31, 1994 was 865,000 tons. Pellet production for Northshore for the years ending 1993, 1994 and 1995 was 3,483,000 tons,
3,481,000 tons and 3,791,000 tons, respectively.
(9) Includes 900,000 annual tons of expansion completed in June, 1995.
</TABLE>
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With respect to the Empire Mine, CCIC owns directly approximately
one-half of the remaining mineral reserves and CCIC leases the balance of the
reserves from their owners; with respect to the Tilden Mine, CCIC owns all of
the mineral reserves; with respect to the Hibbing Mine, Wabush Mines,
Northshore Mine, and Savage River Mines, all of the mineral reserves are owned
by others and leased or subleased directly to those mines.
Each of the mines contains crushing, concentrating, and pelletizing
facilities. The Empire Iron Mining Partnership facilities were constructed
beginning in 1962 and expanded in 1966, 1974 and 1980 with a total cost of
approximately $367 million; the Tilden Mine facilities were constructed
beginning in 1972, expanded in 1979 and modified in 1988 with a total cost of
approximately $523 million; the LTV Steel Mining Company facilities were
constructed beginning in 1954 and expanded in 1967 with a total cost of
approximately $250 million; the Hibbing Taconite Joint Venture facilities were
constructed beginning in 1973 and expanded in 1979 with a total cost of
approximately $302 million; the Northshore Mining Company facilities were
constructed beginning in 1951, expanded in 1963 and significantly modified in
1979 with a total cost estimated in excess of $500 million; the Wabush Mines
facilities were constructed beginning in 1962 with a total cost of
approximately $103 million; and the Savage River Mines facilities were
constructed beginning in 1965 with a total cost of approximately $57 million.
The Company believes the facilities at each site are in satisfactory condition.
However, the older facilities require more capital and maintenance expenditures
on an ongoing basis.
Production and Sales Information
--------------------------------
With the acquisition and expansion of Northshore, the Company's
managed capacity has increased to approximately 41.1 million tons, or 47% of
total pellet capacity in North America, and the Company's annual North American
pellet sales capacity increased in 1995 from 9.8 to 10.7 million tons. In
1995, the Company produced 9.9 million tons of pellets in North America for its
own account.
In 1995, the Company produced 29.7 million gross tons of iron ore in the United
States and Canada for participants other than the Company. The share of
participants having the five largest amounts, Bethlehem Steel Corporation,
Algoma, Inland Steel Company, LTV and Stelco aggregated 26.6 million gross
tons, or 89.6%. The largest such participant accounted for 32.8% of such
production.
During 1995, 100% of the Company's sales of iron ore and pellets, that
were produced in the United States and Canada for its own account or purchased
from others, were to 13 U.S., Canadian and European iron and steel
manufacturing companies.
In 1995, AK Steel, McLouth, and Weirton Steel Company, directly and
indirectly accounted for 17%, 11%, and 10%, respectively, of total revenues.
AUSTRALIA. PMI owns 100% of Savage River Mines, an open pit iron ore
mining operation and concentrator at Savage River, Tasmania, and a pellet plant
with offshore loading facilities at Port Latta, Tasmania. Concentrate slurry is
pumped from the minesite through a 53 mile pipeline to Port Latta where it is
pelletized and shipped by vessel to customers in the Pacific Rim region. The
operation was downsized in 1990 to produce approximately 1.5 million tons per
year and long term sales agreements were signed with customers in Australia,
Japan and Korea to support the operation until the exhaustion of economic ore
reserves in 1997. Savage River Mines will terminate operations in the first
quarter of 1997 after economically recoverable iron ore from surface mining is
exhausted.
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RAIL TRANSPORTATION. The Company, through a wholly-owned subsidiary,
owns a 99.5% stock interest in Lake Superior & Ishpeming Railroad Company. The
railroad operates approximately 49 miles of track in the Upper Peninsula of
Michigan, principally to haul iron ore from the Empire and Tilden Mines to Lake
Superior at Marquette, Michigan, where the railroad has an ore loading dock, or
to interchange points with another railroad for delivery to Lake Michigan at
Escanaba, Michigan. In 1995, 89.3% of the railroad's revenues were derived from
hauling iron ore and pellets and other services in connection with mining
operations managed by CCIC. The railroad's rates are subject to regulation by
the Surface Transportation Board of the Department of Transportation.
Other Activities and Resources
------------------------------
REDUCED IRON. The Company's strategy is to grow its basic iron ore
business domestically and internationally and to extend its business scope to
produce and supply "reduced iron ore feed" for steel and iron production.
Reduced iron products contain approximately 90% iron versus 65% for traditional
iron ore pellets and contain less undesirable chemical elements than most scrap
steel feed. The market for reduced iron is relatively small, but is projected
to increase at a greater rate than other iron ore products.
The Company's wholly-owned subsidiary, Cliffs Reduced Iron
Corporation, is exploring various technologies and markets for reduced iron
products, including the investigation of domestic and international site
alternatives. Commercial plants are estimated to require capital expenditures
of up to $200 million, depending on location, process, and capacity.
The Company is arranging an international joint venture to produce and
market a premium grade briquetted iron product. The Company would manage the
project and be responsible for sales by the venture company. Initial
production would be targeted for 1998.
The Company continues to investigate several coal-based technologies
for the potential production of a reduced iron product in the U.S. A
coal-based process might be feasible on the Gulf Coast, at the Company's
Northshore Mine in Minnesota, or at a location near a steel company consumer.
Product from certain coal-based processes would be suitable feed for electric
furnaces, foundries, and blast furnaces.
During 1995, the Company suspended its iron carbide development
activities but continues to believe that iron carbide has long-term potential.
The Company is a joint holder of iron carbide process licenses in Venezuela
with North Star Steel and in Australia with Mitsubishi Corporation.
OIL SHALE. Cliffs Synfuel Corp., a wholly-owned subsidiary of the
Company, significantly enhanced its Utah oil shale holdings when it acquired in
1994 for $700,000 the oil shale mineral rights on approximately 16,000 acres
which it previously held under a long-term lease. The acquisition gave the
Company title "in fee" to one of the most attractive oil shale properties in
the United States which contains an estimated one billion barrels of
recoverable shale oil with associated conditional water rights. While
commercialization of U.S. oil shale is currently uneconomical, the Company's
holding costs are minimal. If oil prices rise significantly and new technology
being applied to other world oil shale deposits is successful, the Company's
property could have substantial value.
Cliffs Oil Shale Corp., another wholly-owned subsidiary of the
Company, owns a 15% interest in a smaller Colorado oil shale property. The
remaining 85% is owned by a Mobil Corporation subsidiary.
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Credit Agreement and Senior Notes
---------------------------------
On March 1, 1995 the Company entered into a new Credit Agreement
("Credit Agreement") with Chemical Bank, as Agent for a six-bank lending group,
pursuant to which the Company may borrow up to $100 million as revolving loans
until March 1, 2000, which Credit Agreement replaced the April 30, 1992 credit
facility scheduled to expire on April 30, 1995. Interest on borrowings will be
based on various interest rates as defined in the Credit Agreement and as
selected by the Company pursuant to the terms of the Credit Agreement. There
were no borrowings under either of the revolving credit facilities.
On December 15, 1995, the Company placed privately with a group of
institutional lenders $70 million 7% Senior Notes, due December 15, 2005, the
proceeds of which Senior Notes were used to retire the Company's $20 million
8.51% Senior Notes and $50 million 8.84% Senior Notes.
COMPETITION
The iron ore mines, which the Company's subsidiaries operate in North
America, Canada and Australia, produce various grades of iron ore which is
marketed in the United States, Canada, Great Britain, Italy, Australia, Japan
and Korea. In North America, the Company is in competition with several iron
ore producers, including Oglebay Norton Company, Iron Ore Company of Canada,
Quebec Cartier Mining Company, and USX Corporation, as well as other major
steel companies which own interests in iron ore mines and/or have excess iron
ore purchase commitments. In addition, significant amounts of iron ore have,
since the early 1980s, been shipped to the United States from Venezuela and
Brazil in competition with iron ore produced by the Company.
Other competitive forces have in the last decade become a large factor
in the iron ore business. With respect to a significant portion of steelmaking
in North America, electric furnaces built by "minimills" have replaced the use
of iron ore pellets with scrap metal in the steelmaking process. In addition,
operators of sinter plants produce iron agglomerates which substitute for iron
ore pellets. Imported steel slabs also replace the use of iron ore pellets in
producing finished steel products. Imported steel produced from iron ore
supplied by international competitors also effectively competes with the
Company's iron ore pellets.
Competition among the sellers of iron units is predicated upon the
usual competitive factors of price, availability of supply, product
performance, service and cost to the consumer.
ENVIRONMENT, EMPLOYEES AND ENERGY
ENVIRONMENT. In the construction of the Company's facilities and in
its operating arrangements, substantial costs have been incurred and will be
incurred to avoid undue effect on the environment. The Company's commitment to
environmental preservation resulted in North American capital expenditures of
$3,696,000 in 1994 and $3,674,000 in 1995. It is estimated that approximately
$2,533,000 will be spent in 1996 for environmental control facilities.
The Company received notice in 1983 from the U.S. Environmental
Protection Agency ("U.S. EPA") that the Company is a potentially responsible
party with respect to the Cliffs-Dow Superfund Site, located in the Upper
Peninsula of the State of Michigan, which is not related to the Company's iron
ore mining business. The Cliffs-Dow site was used prior to 1973 for the
disposal of wastes from charcoal production by a joint venture of the Company,
the Dow Chemical Company and afterward by a successor in interest,
Georgia-Pacific Corporation. The Company and certain other potentially
responsible parties have agreed upon allocation of the costs for
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investigation and remediation. The Company and other potentially responsible
parties voluntarily participated in the preparation of a Remedial Investigation
and Feasibility Study ("RI/FS") with respect to the Cliffs-Dow site, which
concluded with the publication by the U.S. EPA of a Record of Decision dated
September 27, 1989 ("ROD"), setting forth the selected remedial action plan
adopted by the U.S. EPA for the Cliffs-Dow site. The Company and other
potentially responsible parties have largely implemented remedial action
satisfactory to the U.S. EPA at an estimated total cost of $8 million, of which
the Company's share is $1.7 million. Upon the advice of counsel, the Company
believes it has a right to continued contribution from the other potentially
responsible parties for the costs of any further remedial action required at
the Cliffs-Dow site. A second disposal area at the Cliffs-Dow charcoal
production plant is on the list of priority sites issued by the Michigan
Department of Natural Resources. The Company and certain other potentially
responsible parties have agreed upon allocation of investigation and
remediation costs at this site. The Company is participating in a RI/FS of
this site, but that study has not yet been completed. The Company has joined
with the other potentially responsible parties in an interim removal action at
the site which has been completed at an estimated total cost of $18 million, of
which the Company's share is $4.5 million. The Company has sufficient
financial reserves at December 31, 1995 to provide for its expected share of
the cost of the remedial actions at the above mentioned sites. (See "Legal
Proceedings" for additional information concerning environmental matters).
Generally, various legislative bodies and federal and state agencies
are continually promulgating numerous new laws and regulations affecting the
Company, its customers, and its suppliers in many areas, including waste
discharge and disposal; hazardous classification of materials, products, and
ingredients; air and water discharges; and many other matters. Although the
Company believes that its environmental policies and practices are sound and
does not expect a material adverse effect of any current laws or regulations,
it cannot predict the collective adverse impact of the rapidly expanding body
of laws and regulations.
EMPLOYEES. As of December 31, 1995, CCIC and CMC and the North
American independent mining ventures had 5,272 employees, of which 4,347 were
hourly employees. The hourly employees are represented by the United
Steelworkers of America ("United Steelworkers") which have collective
bargaining agreements. The United Steelworkers labor agreement at Hibbing
Taconite Company, Tilden and Empire Mines, expired on August 1, 1993, and the
United Steelworkers struck those mines and facilities for six weeks. In 1993,
a new six-year "no strike" labor agreement was entered between those Mines and
the United Steelworkers covering the period to July 31, 1999, but with
provisions for a limited economic reopener on August 1, 1996. In 1994, a new
United Steelworkers labor agreement was entered into covering employees of LTV
Steel Mining Company, which agreement will expire on July 31, 1999. In 1994, a
new United Steelworkers labor agreement covering Wabush was entered into, which
agreement will expire on March 1, 1996.
As of December 31, 1995, Northshore had 474 employees, of which 340
were hourly employees, none of whom are represented by a union.
As of December 31, 1995, the Savage River Mines operations had 184
employees, 124 of whom are represented by several unions, whose contracts are
renegotiated from time to time.
In addition, as of December 31, 1995, Cleveland-Cliffs Inc and its
wholly-owned subsidiary, Cliffs Mining Services Company, had 294 salaried
executive, managerial, administrative and technical employees.
9
<PAGE> 10
ENERGY. Electric power supply contracts between Wisconsin Electric
Power Company ("WEPCo") and the Empire and Tilden Mines, entered into in
December 1987, provide that WEPCo shall furnish electric power to these Mines,
within specific demand limits, pursuant to price formulas. The primary term of
these contracts covers ten years through 1997. In return for a substantial
reduction in rates, the Tilden Mine converted a portion of its firm power
contract to curtailable power beginning in 1993. In January, 1996, CCIC, as
managing agent for the Empire and Tilden Mines, entered into new seven-year
power supply contracts with WEPCo, which included the two years remaining on
the current contracts. Various terms and conditions of the power contracts
were revised to better accommodate the operation of those Mines. The new power
supply contracts, became effective March 1, 1996.
Electric power for Hibbing Taconite is supplied by Minnesota Power and
Light under an agreement which can be terminated with four years' notice. In
1994, Minnesota Power and Light filed and was granted a power rate increase
with the Minnesota Public Utility Commission's approval. A large part of the
increase was negated by reason of a three year extension of Hibbing Taconite's
power contract with Minnesota Power and Light. In December, 1995, a contract
amendment became effective, extending the contract an additional year and
lowering firm demand requirements. Electric power requirements will continue
to be specified annually by the Hibbing Taconite venturers corresponding to
Hibbing's operating requirements.
LTV Steel Mining Company completed reactivation of its power plant in
1992, and is currently generating the majority of its requirements, and an
interchange agreement with Minnesota Power and Light provides backup power and
allows sale of excess capacity to the Midwestern Area Power Pool. Effective
May 1, 1995, the interchange agreement was extended to April 30, 2000 to
provide additional backup power and other cost-effective services.
Silver Bay Power Company, an indirect subsidiary of the Company,
provides the majority of Northshore's energy requirements, has an interchange
agreement with Minnesota Power and Light for backup power and sells power to
Northern States Power Company. Effective November 1, 1995, the interchange
agreement was extended to October 31, 2000 to provide additional backup power
and other cost-effective services.
Wabush Mines owns a portion of the Twin Falls Hydro Generation
facility which provides power for Wabush's mining operations in Newfoundland. A
twenty year agreement with Newfoundland Power allows an interchange of water
rights in return for the power needs for Wabush's mining operations. The Wabush
pelletizing operations in Quebec are served by Quebec Hydro on an annual
contract.
Savage River Mines obtains its power from the local Government Power
Authority on a special contract for the expected life of the mine.
The Company has contracts providing for the transport of natural gas
for its North American iron ore operations. Several interruptions of supply of
natural gas occurred during early 1995, requiring use of alternate fuels.
Empire and Tilden Mines have the capability of burning natural gas,
oil, or, to a lesser extent, coal. Wabush and Savage River Mines have the
capability of burning oil or, to a lesser extent, coal. Hibbing Taconite,
Northshore and LTV Steel Mining Company have the capability of burning natural
gas and oil. During 1995 the U.S. mines burned natural gas as their primary
fuel due to favorable pricing. Wabush and Savage River Mines used oil,
supplemented with coal or coke breeze.
10
<PAGE> 11
Any substantial interruption of operations or substantial price
increase resulting from future government regulations or energy taxes,
injunctive order, or fuel shortages could be materially adverse to the Company.
11
<PAGE> 12
In the paper format version of this document, this page contains a
map. The map is entitled, "Cleveland-Cliffs Inc and Associated
Companies Location of Iron Ore Operations". The map has an outline
of the United States, Canada and Tasmania (Australia). Located
specifically on the map are arrows and dots representing the
location of the properties described in the Table on page 5 to this
report.
12
<PAGE> 13
ITEM 3. LEGAL PROCEEDINGS.
Arrowhead.
- ---------
CMC, which has a 15 percent ownership interest in and acts as Managing
Agent for Hibbing Taconite Company, a joint venture, has been included as a
named defendant in a suit captioned United States of America v. Arrowhead
Refining Company, et al., which was filed on or about September 29, 1989 in the
United States District Court for the District of Minnesota, Fifth Division. In
that suit, the United States seeks declaratory relief and recovery of costs
incurred in connection with the study and remedial plan conducted or to be
conducted by the U.S. EPA at the Arrowhead Refinery Superfund Site near Duluth,
St. Louis County, Minnesota. In that suit, the United States has alleged that
CMC and the other 14 named defendants, including former and present owners of
the Arrowhead site, are jointly and severally liable for $1.9 million, plus
interest, representing the amount incurred for actions already taken by or on
behalf of the U.S. EPA at the Arrowhead site, and are jointly and severally
liable for the cost attributable to implementation of a remedial plan adopted
by the U.S. EPA with respect to the Arrowhead site, which remedial action is
estimated by the U.S. EPA to cost $30 million. CMC has filed an answer to the
suit denying liability. Since January 31, 1991, CMC and 13 of the other named
defendants have filed a counter claim against the United States and further
complaints naming additional parties as third party defendants. The counter
claim and third party complaints allege that the parties named therein are
jointly and severally liable for such costs. In 1995, a Consent Decree among
the parties, including 224 third-party defendants named in the lawsuit, was
entered into by the United States District Court. The Decree provides for
funding for remediation of the Site, with a substantial portion of the funding
to be provided by the U.S. EPA and the State of Minnesota. It is estimated
that Hibbing Taconite's share of the funding will be approximately $230,000, of
which CMC's share is 15 percent.
Rio Tinto.
- ---------
On July 21, 1993, CCIC and Cliffs Copper Corp, a subsidiary of the Company,
each received Findings of Alleged Violation and Order from the Department of
Conservation and Natural Resources, Division of Environmental Protection, State
of Nevada. The Findings allege that tailings materials left at the Rio Tinto
Mine, located near Mountain City, Nevada, are entering State waters which the
State considers to be in violation of State water quality laws. The Rio Tinto
Mine was operated by Cliffs Copper Corp from 1971 to 1975 and by other
companies prior to 1971. The Order requires remedial action to eliminate water
quality impacts. The Company does not believe the potential liability, if any,
to be material. The Company believes that it has substantial defenses to claims
of liability.
Summitville.
- -----------
On January 12, 1993, CCIC received from the United States Environmental
Protection Agency a Notice of Potential Liability at the Summitville mine site,
located at Summitville, Colorado, where CCIC, as one of three joint venturers,
conducted an unsuccessful copper ore exploration activity from 1966 through
1969. On June 25, 1993, CCIC received from the U.S. EPA a Notice of Potential
Involvement in certain portions of the Summitville mine site. The mine site has
been listed on the National Priorities List under the Comprehensive
Environmental Response Compensation and Liability Act. The Company does not
believe the potential liability, if any, to be material. The Company has
substantial defenses to these claims of liability. The Company conducted no
production activities at the Summitville mine site.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
13
<PAGE> 14
EXECUTIVE OFFICERS OF THE REGISTRANT
<TABLE>
<CAPTION>
Position with the Company
as of March 15, 1996
--------------------------
Name Age
---- ---
<S> <C> <C>
M. T. Moore Chairman, President and Chief 61
Executive Officer
J. S. Brinzo Executive Vice President-Finance 54
W. R. Calfee Executive Vice President-Commercial 49
T. J. O'Neil Executive Vice President-Operations 55
J. W. Sanders Senior Vice President-Technical 53
A. S. West Senior Vice President-Sales 59
</TABLE>
There is no family relationship between any of the executive officers of the
Company, or between any of such executive officers and any of the Directors of
the Company. Officers are elected to serve until successors have been elected.
All of the above-named executive officers of the Company were elected effective
on the effective dates listed below for each such officer.
The business experience of the persons named above for the last five years
is as follows:
<TABLE>
<S> <C>
M. T. Moore President and Chief Executive Officer, Company,
January 1, 1987 to May 9, 1988.
Chairman, President and Chief Executive Officer, Company,
May 10, 1988 to date.
J. S. Brinzo Executive Vice President-Finance, Company,
September 1, 1989 to September 30, 1993.
Senior Executive-Finance, Company,
October 1, 1993 to September 30, 1995.
Executive Vice President-Finance, Company,
October 1, 1995 to date.
W. R. Calfee Senior Executive Vice President, Company,
September 1, 1989 to September 30, 1993.
Senior Executive-Commercial, Company,
October 1, 1993 to September 30, 1995.
Executive Vice President-Commercial, Company
October 1, 1995 to date.
</TABLE>
14
<PAGE> 15
<TABLE>
<S> <C>
T. J. O'Neil Vice President/General Manager,
Cyprus Sierrita Corp.,
August, 1989 to April, 1991.
Vice President-Engineering and Development,
Cyprus Copper Company,
April, 1991 to November, 1991.
Senior Vice President-Technical, Company,
November 18, 1991 to September 30, 1994.
Executive Vice President-CCI Operations and
Technology, Company,
October 1, 1994 to September 30, 1995.
Executive Vice President-Operations, Company,
October 1, 1995 to date.
J. W. Sanders Senior Vice President and General Manager,
Quintette Coal Limited,
April, 1984 to April, 1991.
Senior Vice President and General Manager,
Copper Range Company,
June, 1991 to June, 1994.
President and Chief Operating Officer,
Copper Range Company,
July, 1994 to September 30, 1995.
Senior Vice President-Technical, Company,
October 1, 1995 to date.
A. S. West Senior Vice President-Sales, Company,
July 1, 1988 to date.
</TABLE>
15
<PAGE> 16
PART II
ITEM 5. MARKET FOR REGISTRANTS' COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
The information required by this item is incorporated herein by
reference and made a part hereof from that portion of the Company's Annual
Report to Security Holders for the year ended December 31, 1995 contained in
the material under the headings, "Common Share Price Performance and
Dividends", "Investor and Corporate Information" and "Summary of Financial and
Other Statistical Data", such information filed as a part hereof as Exhibits
13(h), 13(i) and 13(j), respectively.
ITEM 6. SELECTED FINANCIAL DATA.
The information required by this item is incorporated herein by
reference and made a part hereof from that portion of the Company's Annual
Report to Security Holders for the year ended December 31, 1995 contained in
the material under the headings, "Summary of Financial and Other Statistical
Data" and "Notes to Consolidated Financial Statements", such information filed
as a part hereof as Exhibits 13(j) and 13(g), respectively.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
The information required by this item is incorporated herein by
reference and made a part hereof from that portion of the Company's Annual
Report to Security Holders for the year ended December 31, 1995 contained in
the material under the heading "Management's Discussion and Analysis of
Financial Condition and Results of Operations", which such Management's
Discussion and Analysis of Financial Condition and Results of Operations was
subsequently amended by this Annual Form 10-K to reflect events occurring on
March 15, 1996 with respect to McLouth Steel Products Company, such
information, as amended, filed as a part hereof as Exhibit 13(a).
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The information required by this item is incorporated herein by
reference and made a part hereof from that portion of the Company's Annual
Report to Security Holders for the year ended December 31, 1995 contained in
the material under the headings "Statement of Consolidated Financial Position",
"Statement of Consolidated Income", "Statement of Consolidated Cash Flows",
"Statement of Consolidated Shareholders' Equity", "Notes to Consolidated
Financial Statements" and "Quarterly Results of Operations", such information
filed as a part hereof as Exhibits 13(c), 13(d), 13(e), 13(f), 13(g) and 13(h),
respectively.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
16
<PAGE> 17
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The information regarding Directors required by this Item is
incorporated herein by reference and made a part hereof from the Company's
Proxy Statement to Security Holders, dated March 25, 1996, from the material
under the heading "Election of Directors". The information regarding executive
officers required by this item is set forth in Part I hereof under the heading
"Executive Officers of the Registrant", which information is incorporated
herein by reference.
ITEM 11. EXECUTIVE COMPENSATION.
The information required by this Item is incorporated herein by
reference and made a part hereof from the Company's Proxy Statement to Security
Holders, dated March 25, 1996 from the material under the headings "Executive
Compensation (excluding the Compensation Committee Report on Executive
Compensation)", "Pension Benefits", and the first five paragraphs under
"Agreements and Transactions".
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The information required by this Item is incorporated herein by
reference and made a part hereof from the Company's Proxy Statement to Security
Holders, dated March 25, 1996, from the material under the heading "Securities
Ownership of Management and Certain Other Persons".
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information required by this Item is incorporated herein by
reference and made a part hereof from the Company's Proxy Statement to Security
Holders, dated March 25, 1996, from the material under the last paragraph of
the heading "Directors' Compensation".
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(a)
(1) and (2)-List of Financial Statements and Financial Statement
Schedules.
The following consolidated financial statements of the Company,
included in the Annual Report to Security Holders for the year ended December
31, 1995, are incorporated herein by reference from Item 8 and made a part
hereof:
Statement of Consolidated Financial Position -
December 31, 1995 and 1994
Statement of Consolidated Income - Years ended
December 31, 1995, 1994 and 1993
Statement of Consolidated Cash Flows - Years ended
December 31, 1995, 1994 and 1993
Statement of Consolidated Shareholders' Equity - Years ended
December 31, 1995, 1994 and 1993
Notes to Consolidated Financial Statements
17
<PAGE> 18
The following consolidated financial statement schedule of the
Company is included herein in Item 14(d) and attached as Exhibit 99(a).
Schedule II - Valuation and Qualifying accounts
All other schedules for which provision is made in the applicable
accounting regulation of the Securities and Exchange Commission are not
required under the related instructions or are inapplicable, and therefore have
been omitted.
(3) List of Exhibits - Refer to Exhibit Index on pages 20-26 which
is incorporated herein by reference.
(b) There were no reports on Form 8-K filed during the three months
ended December 31, 1995.
(c) Exhibits listed in Item 14(a)(3) above are included herein.
(d) Financial Statements and Schedule listed above in Item 14(a)(1) and
(2) are incorporated herein by reference.
SIGNATURES
Pursuant to the requirements of Section 13 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
By: /s/ John E. Lenhard
---------------------------------------
John E. Lenhard,
Secretary and Assistant General Counsel
Date: March 26, 1996
18
<PAGE> 19
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signatures Title Date
- ---------- ----- ----
<S> <C> <C>
M. T. Moore Chairman, March 26, 1996
President and Chief
Executive Officer and
Principal Executive Officer
and Director
J. S. Brinzo Executive Vice President- March 26, 1996
Finance and Principal
Financial Officer
R. Emmet Vice President and March 26, 1996
Controller and Principal
Accounting Officer
R. S. Colman Director March 26, 1996
J. D. Ireland, III Director March 26, 1996
G. F. Joklik Director March 26, 1996
E. B. Jones Director March 26, 1996
L. L. Kanuk Director March 26, 1996
J. C. Morley Director March 26, 1996
S. B. Oresman Director March 26, 1996
A. Schwartz Director March 26, 1996
S. K. Scovil Director March 26, 1996
J. H. Wade Director March 26, 1996
By: /s/ John E. Lenhard
--------------------------------------
(John E. Lenhard, as Attorney-in-Fact)
</TABLE>
Original powers of attorney authorizing Messrs. M. Thomas Moore, John S.
Brinzo, Frank L. Hartman, and John E. Lenhard and each of them, to sign this
Annual Report on Form 10-K and amendments thereto on behalf of the above-named
officers and Directors of the Registrant have been filed with the Securities
and Exchange Commission.
19
<PAGE> 20
EXHIBIT INDEX
<TABLE>
<CAPTION>
Pagination by
Sequential
Exhibit Numbering
Number System
- ------- -------------
<S> <C> <C>
Articles of Incorporation and By-Laws
of Cleveland-Cliffs Inc
-----------------------
3(a) Amended Articles of Incorporation of Cleveland-Cliffs Inc Filed Herewith
3(b) Regulations of Cleveland-Cliffs Inc Filed Herewith
Instruments defining rights of security
holders, including indentures
-----------------------------
4(a) Restated Indenture, between Empire Iron Mining Partnership, Inland
Steel Company, McLouth Steel Corporation, The Cleveland-Cliffs Iron
Company, International Harvester Company, WSC Empire, Inc. and
Chemical Bank, as Trustee, dated as of December 1, 1978 (See
Footnote (A)) Not Applicable
4(b) First Supplemental Indenture, between Empire Iron Mining
Partnership, Inland Steel Company, McLouth Steel Corporation, The
Cleveland-Cliffs Iron Company, International Harvester Company, WSC
Empire Inc. and Chemical Bank, as Trustee, dated as of February 14,
1981 (See Footnote (A)) Not Applicable
4(c) Second Supplemental Indenture, between Empire Iron Mining
Partnership, Inland Steel Company, McLouth Steel Corporation, The
Cleveland-Cliffs Iron Company, International Harvester Company, and
Chemical Bank, as Trustee, dated as of May 1, 1982 (See Footnote
(A)) Not Applicable
4(d) Third Supplemental Indenture, between Empire Iron Mining
Partnership, Inland Steel Company, McLouth Steel Corporation, The
Cleveland-Cliffs Iron Company, and Chemical Bank, as Trustee, dated
as of June 21, 1982 (See Footnote (A)) Not Applicable
<FN>
_______________
(A) This document has not been filed as an exhibit hereto because the
long-term debt of the Company represented thereby, either directly or through
its interest in an affiliated or associated entity, does not exceed 10% of
the total assets of the Company and its subsidiaries on a consolidated basis.
The Company agrees to furnish a copy of this document to the Securities and
Exchange Commission upon request.
</TABLE>
20
<PAGE> 21
<TABLE>
<S> <C> <C>
4(e) Fourth Supplemental Indenture, between Empire Iron Mining
Partnership, Inland Steel Company, The Cleveland-Cliffs Iron
Company, Cliffs IH Empire, Inc., Cliffs MC Empire, Inc., Jones &
Laughlin Ore Mining Company, J&L Empire, Inc. and Chemical Bank, as
Trustee, dated as of February 1, 1983 (See Footnote (A)) Not Applicable
4(f) Fifth Supplemental Indenture, between Empire Iron Mining
Partnership, Inland Steel Company, The Cleveland-Cliffs Iron
Company, Cliffs IH Empire, Inc., J&L Empire, Inc., Wheeling-
Pittsburgh/Cliffs Partnership, and Chemical Bank, as Trustee, dated Not Applicable
as of October 1, 1983 (See Footnote (A))
4(g) Sixth Supplemental Indenture, between Empire Iron Mining
Partnership, Inland Steel Company, The Cleveland-Cliffs Iron
Company, J&L Empire, Inc., Wheeling-Pittsburgh/Cliffs Partnership,
McLouth-Cliffs Partnership, Cliffs Empire, Inc. and Chemical Bank,
as Trustee, dated as of July 1, 1984 (See Footnote (A)) Not Applicable
4(h) Form of Guaranty of Payment of 9.55% Secured Guaranteed Notes of Not Applicable
Empire Iron Mining Partnership due September 1, 1998 (Footnote (A))
4(i) Form of Guarantee of Payment, dated January 20, 1984 relating to Not Applicable
Notes of Empire Iron Mining Partnership (See Footnote (A))
4(j) Form of Guarantee of Payment, dated August 12, 1986 relating to Not Applicable
Notes of Empire Iron Mining Partnership (See Footnote (A))
4(k) Form of Common Stock Certificate Filed Herewith
4(l) Rights Agreement, dated September 8, 1987, and amended and restated
as of November 19, 1991, by and between Cleveland-Cliffs Inc and
Society National Bank (successor to Ameritrust Company National Filed Herewith
Association)
_______________
<FN>
(A) This document has not been filed as an exhibit hereto because the
long-term debt of the Company represented thereby, either directly or through
its interest in an affiliated or associated entity, does not exceed 10% of
the total assets of the Company and its subsidiaries on a consolidated basis.
The Company agrees to furnish a copy of this document to the Securities and
Exchange Commission upon request.
</TABLE>
21
<PAGE> 22
<TABLE>
<S> <C> <C> <C>
4(m) Credit Agreement, dated as of March 1, 1995 among Cleveland-Cliffs
Inc, the Banks named therein and Chemical Bank, as Agent (filed as
Exhibit 4(o) to Form 10-K of Cleveland-Cliffs Inc, filed on March
27, 1995 and incorporated by reference) Not Applicable
4(n) Note Agreement, dated as of December 15, 1995 among Cleveland-
Cliffs Inc and each of the Purchasers named in Schedule I thereto Filed Herewith
Material Contracts
------------------
10(a) * Cleveland-Cliffs Inc Supplemental Retirement Benefit Plan Amended
and Restated, effective January 1, 1995 (filed as Exhibit 10(b) to
Form 10-Q of Cleveland-Cliffs Inc filed on May 2, 1995 and
incorporated by reference) Not Applicable
10(b) * The Cleveland-Cliffs Iron Company Plan for Deferred Payment of
Directors' Fees, dated as of July 1, 1981, assumed by Cleveland-
Cliffs Inc effective July 1, 1985 Filed Herewith
10(c) * Amendment No. 1 to Cleveland-Cliffs Inc Plan for Deferred Payment
of Directors' Fees, dated March 9, 1992 Filed Herewith
10(d) * Consulting Agreement, dated as of June 23, 1987, by and between
Cleveland-Cliffs Inc and S. K. Scovil Filed Herewith
10(e) * Amendment to Consulting Agreement with S. K. Scovil, dated as of
June 18, 1991 Filed Herewith
10(f) * Amendment to Consulting Agreement with S. K. Scovil, dated as of
December 28, 1995 Filed Herewith
10(g) * Form of contingent employment agreements with certain executive
officers (filed as Exhibit 10(f) to Form 10-K of Cleveland-Cliffs
Inc filed on March 30, 1992 and incorporated by reference) Not Applicable
10(h) * Cleveland-Cliffs Inc and Subsidiaries Management Performance
Incentive Plan, dated as of January 1, 1994 (Summary Description)
(filed as Exhibit 10(g) to Form 10-K of Cleveland-Cliffs Inc filed
on March 27, 1995 and incorporated by reference) Not Applicable
__________________
<FN>
* Reflects management contract or other compensatory arrangement required to be
filed as an Exhibit pursuant to Item 14(c) of this Report.
</TABLE>
22
<PAGE> 23
<TABLE>
<S> <C> <C> <C>
10(i) Instrument of Assignment and Assumption dated as of July 1, 1985,
by and between The Cleveland-Cliffs Iron Company and Cleveland-
Cliffs Inc Filed Herewith
10(j) Form of indemnification agreements with directors
Filed Herewith
10(k) * 1987 Incentive Equity Plan (filed as Exhibit 10(k) to Form 10-K of
Cleveland-Cliffs Inc filed on March 30, 1992 and incorporated by
reference) Not Applicable
10(l) * 1992 Incentive Equity Plan (filed as Appendix A to Proxy Statement
of Cleveland-Cliffs Inc filed on March 13, 1992 and incorporated by
reference) Not Applicable
10(m) * Amended and Restated Cleveland-Cliffs Inc Retirement Plan for Non-
Employee Directors dated as of January 1, 1988 (filed as Exhibit
10(n) to Form 10-K of Cleveland-Cliffs Inc filed on March 29, 1993
and incorporated by reference) Not Applicable
10(n) * Amended and Restated Trust Agreement No. 1 dated as of March 9,
1992, by and between Cleveland-Cliffs Inc and Key Trust Company of
Ohio, N.A. (successor trustee to Society National Bank) with
respect to the Supplemental Retirement Benefit Plan and certain
contingent employment agreements Filed Herewith
10(o) * Amended and Restated Trust Agreement No. 2 dated as of March 9,
1992, by and between Cleveland-Cliffs Inc and Key Trust Company of
Ohio, N.A. (successor trustee to Society National Bank) with
respect to the Severance Pay Plan for Key Employees of Cleveland-
Cliffs Inc and certain contingent employment agreements Filed Herewith
10(p) * Trust Agreement No. 4 dated as of October 28, 1987, by and between
Cleveland-Cliffs Inc and Key Trust Company of Ohio, N.A. (successor
trustee to Society National Bank) with respect to the Plan for
Deferred Payment of Directors' Fees Filed Herewith
10(q) * First Amendment to Trust Agreement No. 4 dated as of April 9, 1991,
by and between Cleveland-Cliffs Inc and Key Trust Company of Ohio,
N.A. (successor trustee to Society National Bank) and Second
Amendment to Trust Agreement No. 4 dated as of March 9, 1992 by and
between Cleveland-Cliffs Inc and Key Trust Company of Ohio, N.A.
(successor trustee to Society National Bank) Filed Herewith
_______________
<FN>
* Reflects management contract or other compensatory arrangement required to
be filed as an Exhibit pursuant to Item 14(c) of this Report.
</TABLE>
23
<PAGE> 24
<TABLE>
<S> <C> <C> <C>
10(r) * Trust Agreement No. 5 dated as of October 28, 1987, by and between
Cleveland-Cliffs Inc and Key Trust Company of Ohio, N.A. (successor
trustee to Society National Bank) with respect to the Cleveland-
Cliffs Inc Voluntary Non-Qualified Deferred Compensation Plan Filed Herewith
10(s) * First Amendment to Trust Agreement No. 5 dated as of May 12, 1989,
by and between Cleveland-Cliffs Inc and Key Trust Company of Ohio,
N.A. (successor trustee to Society National Bank), Second Amendment
to Trust Agreement No. 5 dated as of April 9, 1991 by and between
Cleveland-Cliffs Inc and Key Trust Company of Ohio, N.A. (successor
trustee to Society National Bank) and Third Amendment to Trust
Agreement No. 5 dated as of March 9, 1992, by and between
Cleveland-Cliffs Inc and Key Trust Company of Ohio, N.A. (successor
trustee to Society National Bank) Filed Herewith
10(t) * Amended and Restated Trust Agreement No. 6 dated as of March 9,
1992, by and between Cleveland-Cliffs Inc and Key Trust Company of
Ohio, N.A. (successor trustee to Society National Bank) with
respect to certain indemnification agreements with directors and
certain officers Filed Herewith
10(u) * Trust Agreement No. 7 dated as of April 9, 1991, by and between
Cleveland-Cliffs Inc and Key Trust Company of Ohio, N.A. (successor
trustee to Society National Bank) with respect to the Cleveland-
Cliffs Inc Supplemental Retirement Benefit Plan, as amended by
First Amendment to Trust Agreement No. 7 Filed Herewith
10(v) * Trust Agreement No. 8 dated as of April 9, 1991, by and between
Cleveland-Cliffs Inc and Key Trust Company of Ohio, N.A. (successor
trustee to Society National Bank) with respect to the Cleveland-
Cliffs Inc Retirement Plan for Non-Employee Directors, as amended
by First Amendment to Trust Agreement No. 8 Filed Herewith
10(w) * Severance Pay Plan for Key Employees of Cleveland-Cliffs Inc,
effective as of February 1, 1992 (filed as Exhibit 10(y) to Form
10-K of Cleveland-Cliffs Inc filed on March 30, 1992 and
incorporated by reference) Not Applicable
10(x) * First Amendment to Severance Pay Plan for Key Employees of
Cleveland-Cliffs Inc, dated November 18, 1994 (filed as Exhibit
10(y) to Form 10-K of Cleveland-Cliffs Inc filed on March 27, 1995
and incorporated by reference) Not Applicable
_______________
<FN>
* Reflects management contract or other compensatory arrangement required to
be filed as an Exhibit pursuant to Item 14(c) of this Report.
</TABLE>
24
<PAGE> 25
<TABLE>
<S> <C> <C> <C>
10(y) * Cleveland-Cliffs Inc Voluntary Non-Qualified Deferred Compensation
Plan, Amended and Restated as of January 1, 1996 Filed Herewith
10(z) * Fourth Amendment to Trust Agreement No. 5, dated November 18, 1994,
by and between Cleveland-Cliffs Inc and Key Trust Company of Ohio,
N.A. (successor trustee to Society National Bank) (filed as Exhibit
10(dd) to Form 10-K of Cleveland-Cliffs Inc filed on March 27, 1995
and incorporated by reference) Not Applicable
10(aa) * Second Amendment to Trust Agreement No. 7, dated November 18, 1994,
by and between Cleveland-Cliffs Inc and Key Trust Company of Ohio,
N.A. (successor trustee to Society National Bank) (filed as Exhibit
10(ee) to Form 10-K of Cleveland-Cliffs Inc filed on March 27, 1995
and incorporated by reference) Not Applicable
10(bb) * Cleveland-Cliffs Inc Long-Term Performance Share Program, dated as
of January 1, 1996 (Summary Description) Filed Herewith
10(cc) * Cleveland-Cliffs Inc Nonemployee Directors Retirement Plan, dated
as of July 1, 1995 (Summary Description) Filed Herewith
10(dd) Stock Purchase Agreement, dated as of September 30, 1994, among
Cleveland-Cliffs Inc, Cliffs Minnesota Minerals Company and Cyprus
Amax Minerals Company (filed as Exhibit 2 to Form 8-K of Cleveland-
Cliffs Inc filed on October 13, 1994 and incorporated by reference,
and to which certain portions of which were accorded "Confidential
Information" pursuant to order of the Securities and Exchange
Commission, dated December 21, 1994) Not Applicable
11 Statement re computation of per share earnings Filed Herewith
(Page 27-28)
13 Selected portions of 1995 Annual Report to Security Holders
13 (a) Management's Discussion and Analysis of Financial Condition
and Results of Operations Filed Herewith
(Page 29-37)
13 (b) Report of Independent Auditors Filed Herewith
(Page 38)
_______________
<FN>
* Reflects management contract or other compensatory arrangement required to
be filed as an Exhibit pursuant to Item 14(c) of this Report.
</TABLE>
25
<PAGE> 26
<TABLE>
<S> <C> <C>
13 (c) Statement of Consolidated Financial Position Filed Herewith
(Page 39-40)
13 (d) Statement of Consolidated Income Filed Herewith
(Page 41)
13 (e) Statement of Consolidated Cash Flows Filed Herewith
(Page 42)
13 (f) Statement of Consolidated Shareholders' Equity Filed Herewith
(Page 43)
13 (g) Notes to Consolidated Financial Statements Filed Herewith
(Page 44-61)
13 (h) Quarterly Results of Operations/Common Share Price Performance and Filed Herewith
Dividends (Page 62)
13 (i) Investor and Corporate Information Filed Herewith
(Page 63)
13 (j) Summary of Financial and Other Statistical Data Filed Herewith
(Page 64-65)
21 Subsidiaries of the registrant Filed Herewith
(Page 66-68)
23 Consent of independent auditors Filed Herewith
(Page 69)
24 Power of Attorney Filed Herewith
(Page 70)
27 Consolidated Financial Data Schedule submitted for Securities and
Exchange Commission information --
99 Additional Exhibits
99 (a) Schedule II - Valuation and Qualifying Accounts Filed Herewith
(Page 71)
</TABLE>
26
<PAGE> 1
EXHIBIT 3(a)
As of 9/1/85
ARTICLES OF INCORPORATION, AS AMENDED
OF
CLEVELAND-CLIFFS INC
FIRST: The name of the Corporation shall be Cleveland-Cliffs Inc
SECOND: The location of the principal office of the Corporation in the
State of Ohio shall be at 14th Floor Huntington Building, Cleveland, Ohio.
THIRD: The purpose for which the Corporation is formed is to engage in any
lawful act or activity for which corporations may be formed under Sections
1701.01 through 1701.98, inclusive, of the Ohio Revised Code.
FOURTH: The maximum number of shares the Corporation is authorized to have
outstanding is Thirty-Five Million (35,000,000) shares, consisting of the
following:
(a) Three Million (3,000,000) shares of Serial Preferred Stock,
Class A, without par value ("Class A Preferred Stock");
(b) Four Million (4,000,000) shares of Serial Preferred Stock,
Class B, without par value ("Class B Preferred Stock"); and
(c) Twenty-Eight Million (28,000,000) Common Shares, par value
$1.00 per share ("Common Shares").
DIVISION A
EXPRESS TERMS OF THE SERIAL PREFERRED STOCK,
CLASS A, WITHOUT PAR VALUE
The Class A Preferred Stock shall have the following express terms:
SECTION 1. Series The Class A Preferred Stock may be issued from time to
time in one or more series. All shares of Class A Preferred Stock shall be of
equal rank and shall be identical, except in respect of the matters that may be
fixed by the Directors as hereinafter provided, and each share of each series
shall be identical with all other shares of such series, except as to the date
from which dividends are cumulative. All shares of Class A Preferred Stock
shall also be of equal rank and shall be identical with shares of Class B
Preferred Stock except in respect of (i) the particulars that may be fixed and
determined by the Directors as hereinafter provided, (ii) the voting rights and
provisions for consent relating to Class A Preferred Stock as fixed and
determined by Section 5 of this Division A and (iii) the conversion rights of
any series of Class A Preferred Stock which may be fixed and determined by the
Directors subject to the provisions of Section 6 of this Division A. Subject
to the provisions of Sections 2 to 7, inclusive, of this Division A, which
provisions shall apply to all Class A Preferred Stock, the Directors hereby are
authorized to cause such shares to be issued in one or more series and with
respect to each such series to fix:
(a) The designation of the series, which may be by distinguishing
number, letter and/or title.
(b) The number of shares of the series, which number the Directors
may (except where otherwise provided in the creation of the series)
increase or decrease (but not below the number of shares thereof then
outstanding).
(c) The dividend rights of the series which may be: cumulative or
non-cumulative; at a specified rate, amount or proportion; or with or
without further participation rights.
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<PAGE> 2
(d) The dates at which dividends, if declared, shall be payable,
and the dates from which dividends, if cumulative, shall accumulate.
(e) The redemption rights and price or prices, if any, for shares
of the series.
(f) The terms and amount of any sinking fund provided for the
purchase or redemption of shares of the series.
(g) The amounts payable on shares of the series in the event of any
voluntary or involuntary liquidation, dissolution or winding up of the
affairs of the Corporation.
(h) Whether the shares of the series shall be convertible into
shares of any other class or series of the Corporation, and if so, the
specification of such other class or series, the conversion price or prices
or rate or rates, any adjustments thereof, the date or dates as of which
such shares shall be convertible, and other terms and conditions upon which
such conversion may be made.
(i) Restrictions (in addition to those set forth in Section 5(c) of
this Division) on the issuance of shares of the same series or of any other
class or series.
The Directors are authorized to adopt from time to time amendments to the
Articles of Incorporation fixing, with respect to each such series, the matters
described in clauses (a) to (i), inclusive, of this Section 1.
SECTION 2. DIVIDENDS.
---------
(a) The holders of Class A Preferred Stock of each series, in
preference to the holders of Common Shares and of any other class of shares
ranking junior to the Class A Preferred Stock, shall be entitled to receive
out of any funds legally available therefor and when and as declared by the
Directors dividends in cash at the rate for such series fixed in accordance
with the provisions of Section 1 of this Division A and no more, payable on
the dividend payment dates fixed for such series. Such dividends may be
cumulative, in the case of shares of each particular series, from and after
the date or dates fixed with respect to such series. No dividend may be
paid upon or set apart for any of the Class A Preferred Stock on any
dividend payment date unless (i) all dividends upon all Class A Preferred
Stock then outstanding and all classes of stock then outstanding ranking
prior to or on a parity with the Class A Preferred Stock for all dividend
payment dates prior to such date shall have been paid or funds therefor set
apart and (ii) at the same time a like dividend upon all series of Class A
Preferred Stock then outstanding and all classes of stock then outstanding
ranking prior to or on a parity with the Class A Preferred Stock and having
a dividend payment date on such date, ratably in proportion to the
respective dividend rates of each such series or class, shall be paid or
funds therefor set apart. Accumulations of dividends, if any, shall not
bear interest.
(b) For the purpose of this Division A, a dividend shall be deemed
to have been paid or funds therefor set apart on any date if on or prior to
such date the Corporation shall have deposited funds sufficient therefor
with a bank or trust company and shall have caused checks drawn against
such funds in appropriate amounts to be mailed to each holder of record
entitled to receive such dividend at such holder's address then appearing
on the books of the Corporation.
(c) In no event so long as any Class A Preferred Stock shall be
outstanding shall any dividends, except a dividend payable in Common Shares
or other shares ranking junior to the Class A Preferred Stock, be paid or
declared or any distribution be made except as aforesaid on the Common
Shares or any other shares ranking junior to the Class A Preferred Stock,
nor shall any Common Shares or any other shares ranking junior to the Class
A Preferred Stock be purchased, retired or otherwise acquired by the
Corporation (except out of the proceeds of the sale of Common Shares or
other shares ranking junior to the Class A Preferred Stock received by the
Corporation on or subsequent to the date on which shares of any series of
Class A Preferred Stock are first issued), unless (i) all accrued and
unpaid dividends upon all Class
2
<PAGE> 3
A Preferred Stock then outstanding for all dividend payment dates on or
prior to the date of such action shall have been paid or funds therefor set
apart and (ii) as of the date of such action there shall be no arrearages
with respect to the redemption of Class A Preferred Stock of any series
from any sinking fund provided for shares of such series in accordance with
the provisions of Section 1 of this Division A.
SECTION 3. REDEMPTION.
(a) Subject to the express terms of each series and to the
provisions of Section 5(c)(iii) of this Division A, the Corporation (i) may
from time to time redeem all or any part of the Class A Preferred Stock of
any series at the time outstanding at the option of the Directors at the
applicable redemption price for such series fixed in accordance with the
provisions of Section 1 of this Division A, and (ii) shall from time to
time make such redemptions of the Class A Preferred Stock of any series as
may be required to fulfill the requirements of any sinking fund provided
for shares of such series at the applicable sinking fund redemption price,
fixed in accordance with the provisions of Section 1 of this Division A,
together in each case with (A) all then accrued and unpaid dividends upon
such shares for all dividend payment dates on or prior to the redemption
date and (B) if the redemption date is not a dividend payment date for such
series, a proportionate dividend, based on the number of elapsed days, for
the period from the day after the most recent such dividend payment date
through the redemption date.
(b) Notice of every such redemption shall be mailed, postage
prepaid, to the holders of record of the Class A Preferred Stock to be
redeemed at their respective addresses then appearing on the books of the
Corporation, not less than 30 days nor more than 60 days prior to the date
fixed for such redemption. At any time before or after notice has been
given as above provided, the Corporation may deposit the aggregate
redemption price of the shares of Class A Preferred Stock to be redeemed,
together with an amount equal to the aggregate amount of dividends payable
upon such redemption, with any bank or trust company in Cleveland, Ohio, or
New York, New York, having capital and surplus of more than $50,000,000,
named in such notice, and direct that such deposited amount be paid to the
respective holders of the shares of Class A Preferred Stock so to be
redeemed upon surrender of the stock certificate or certificates held by
such holders. Upon the giving of such notice and the making of such deposit
such holders shall cease to be shareholders with respect to such shares and
shall have no interest in or claim against the Corporation with respect to
such shares except only the right to receive such money from such bank or
trust company without interest or to exercise, before the redemption date,
any unexpired privileges of conversion. In case less than all of the
outstanding shares of any series of Class A Preferred Stock are to be
redeemed, the Corporation shall select, pro rata or by lot, the shares so
to be redeemed in such manner as shall be prescribed by the Directors.
(c) If the holders of shares of Class A Preferred Stock which shall
have been called for redemption shall not, within six years after such
deposit, claim the amount deposited for the redemption thereof, any such
bank or trust company shall, upon demand, pay over to the Corporation such
unclaimed amounts and thereupon such bank or trust company and the
Corporation shall be relieved of all responsibility in respect thereof to
such holder.
(d) Any shares of Class A Preferred Stock which are (i) redeemed by
the Corporation pursuant to the provisions of this Section 3, (ii)
purchased and delivered in satisfaction of any sinking fund requirements
provided for shares of any series of Class A Preferred Stock, (iii)
converted in accordance with the express terms of any such series, or (iv)
otherwise acquired by the Corporation, shall resume the status of
authorized and unissued shares of Class A Preferred Stock without serial
designation; provided, however, that any such shares which are converted in
accordance with the express terms thereof shall not be reissued as
convertible shares.
3
<PAGE> 4
SECTION 4. LIQUIDATION.
(a) (1) The holders of Class A Preferred Stock of any series,
shall, in case of voluntary or involuntary liquidation, dissolution or
winding up of the affairs of the Corporation, be entitled to receive in
full out of the assets of the Corporation, including its capital, before
any amount shall be paid or distributed among the holders of the Common
Shares or any other shares ranking junior to the Class A Preferred Stock,
the amounts fixed with respect to shares of such series in accordance with
Section 1 of this Division, plus an amount equal to (i) all then accrued
and unpaid dividends upon such shares for all dividend payment dates on or
prior to the date of payment of the amount due pursuant to such
liquidation, dissolution or winding up, and (ii) if such date is not a
dividend payment date for such series, a proportionate dividend, based on
the number of elapsed days, for the period from the day after the most
recent dividend payment date through the date of payment of the amount due
pursuant to such liquidation, dissolution or winding up. In case the net
assets of the Corporation legally available therefor are insufficient to
permit the payment upon all outstanding shares of Class A Preferred Stock
and all outstanding shares of stock of all classes ranking on a parity with
the Class A Preferred Stock of the full preferential amount to which they
are respectively entitled, then such net assets shall be distributed
ratably upon outstanding shares of Class A Preferred Stock and all
outstanding shares of stock of all classes ranking on a parity with the
Class A Preferred Stock in proportion to the full preferential amount to
which each such share is entitled.
(2) After payment to holders of Class A Preferred Stock of the full
preferential amounts as aforesaid, holders of Class A Preferred Stock as
such shall have no right or claim to any of the remaining assets of the
Corporation.
(b) The merger or consolidation of the Corporation into or with any
other corporation, or the merger of any other corporation into it, or the
sale, lease or conveyance of all or substantially all the property or
business of the Corporation, shall not be deemed to be a dissolution,
liquidation or winding up for the purposes of this Division A.
SECTION 5. Voting.
(a) The holders of Class A Preferred Stock shall be entitled to one
vote for each share of such stock upon all matters presented to the
shareholders; and, except as otherwise provided herein or required by law,
the holders of Class A Preferred Stock and the holders of Common Shares
shall vote together as one class on all matters presented to the
shareholders.
(b) (1) If, and so often as, the Corporation shall be in default in
the payment of dividends on any series of Class A Preferred Stock at the
time outstanding, or funds therefor have not been set apart, in an amount
equivalent to six full quarterly dividends on any such series of Class A
Preferred Stock whether or not consecutive and whether or not earned or
declared, the holders of Class A Preferred Stock of all series, voting
separately as a class, and in addition to any other rights which the shares
of any series of Class A Preferred Stock may have to vote for Directors,
shall thereafter be entitled to elect, as herein provided, two Directors of
the Corporation; provided, however, that the special class voting rights
provided for in this paragraph when the same shall have become vested shall
remain so vested (i) in the case of cumulative dividends, until all accrued
and unpaid dividends on the Class A Preferred Stock of all series then
outstanding shall have been paid or funds therefor set apart, or (ii) in
the case of non-cumulative dividends, until full dividends on the Class A
Preferred Stock of all series then outstanding shall have been paid or
funds therefor set apart regularly for a period of one year, whereupon the
holders of Class A Preferred Stock shall be divested of their special class
voting rights in respect of subsequent elections of Directors, subject to
the revesting of such special class voting rights in the event hereinabove
specified in this paragraph.
(2) In the event of default entitling the holders of Class A
Preferred Stock to elect two Directors as specified in paragraph (1) of
this subsection, a special meeting of such holders for the purpose of
electing such Directors shall be called by the Secretary of the Corporation
upon
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<PAGE> 5
written request of, or may be called by, the holders of record of at least
ten percent (10%) of the shares of Class A Preferred Stock of all series at
the time outstanding, and notice thereof shall be given in the same manner
as that required for the annual meeting of shareholders; provided, however,
that the Corporation shall not be required to call such special meeting if
the annual meeting of shareholders or any other special meeting of
shareholders called or to be called for a different purpose shall be held
within 120 days after the date of receipt of the foregoing written request
from the holders of Class A Preferred Stock. At any meeting at which the
holders of Class A Preferred Stock shall be entitled to elect Directors,
the holders of thirty-five percent (35%) of the then outstanding shares of
Class A Preferred Stock of all series, present in person or by proxy, shall
be sufficient to constitute a quorum, and the vote of the holders of a
majority of such shares so present at any such meeting at which there shall
be such a quorum shall be sufficient to elect the Directors which the
holders of Class A Preferred Stock are entitled to elect as hereinabove
provided. Notwithstanding any provision of these Articles of Incorporation
or the Regulations of the Corporation or any action taken by the holders of
any class of shares fixing the number of Directors of the Corporation, the
two Directors who may be elected by the holders of Class A Preferred Stock
pursuant to this subsection shall serve in addition to any other Directors
then in office or proposed to be elected otherwise than pursuant to this
subsection. Nothing in this subsection shall prevent any change otherwise
permitted in the total number of Directors of the Corporation or require
the resignation of any Director elected otherwise than pursuant to this
subsection. Notwithstanding any classification of the other Directors of
the Corporation, the two Directors elected by the holders of Class A
Preferred Stock shall be elected annually for the terms expiring at the
next succeeding annual meeting of shareholders; provided, however, that
whenever the holders of Class A Preferred Stock shall be divested of the
voting power as above provided, the terms of office of all persons elected
as Directors by the holders of the Class A Preferred Stock as a class shall
immediately terminate and the number of Directors shall be reduced
accordingly.
(c) Except as hereinafter provided, the affirmative vote of the
holders of at least two-thirds of the shares of Class A Preferred Stock at
the time outstanding, given in person or by proxy at a meeting called for
the purpose at which the holders of Class A Preferred Stock shall vote
separately as a class, shall be necessary to effect, any one or more of the
following (but so far as the holders of Class A Preferred Stock are
concerned, such action may be effected with such vote):
(i) Any amendment, alteration or repeal of any of the
provisions of the Articles of Incorporation or of the Regulations of
the Corporation which affects adversely the preferences or voting or
other rights of the holders of Class A Preferred Stock; provided,
however, that for the purpose of this paragraph 5(c)(i) only, neither
the amendment of the Articles of Incorporation so as to authorize,
create or change the authorized or outstanding amount of Class A
Preferred Stock or of any shares of any class ranking on a parity with
or junior to the Class A Preferred Stock nor the amendment of the
provisions of the Regulations so as to change the number of Directors
of the Corporation shall be deemed to affect adversely the preferences
or voting or other rights of the holders of Class A Preferred Stock;
and provided further, that if such amendment, alteration or repeal
affects adversely the preferences or voting or other rights of one or
more but not all series of Class A Preferred Stock at the time
outstanding, the affirmative vote or consent of the holders of at
least two-thirds of the number of shares at the time outstanding of
each series so affected, each such affected series voting separately
as a series, shall also be required;
(ii) The authorization, creation or the increase in the
authorized amount of any shares of any class or any security
convertible into shares of any class, in either case, ranking prior to
the Class A Preferred Stock; or
(iii) The purchase or redemption (for sinking fund purposes
or otherwise) of less than all of the Class A Preferred Stock then
outstanding except in accordance with a stock
5
<PAGE> 6
purchase offer made to all holders of record of Class A Preferred
Stock, unless all dividends on all Class A Preferred Stock then
outstanding for all previous dividend periods shall have been declared
and paid or funds therefor set apart and all accrued sinking fund
obligations applicable thereto shall have been complied with;
provided, however, that in the case of any authorization, creation or
increase in the authorized amount of any shares of any class or security
convertible into shares of any class, in either case, ranking prior to the
Class A Preferred Stock no such consent of the holders of Class A Preferred
Stock shall be required if the holders of Class A Preferred Stock have
previously received adequate notice of redemption to occur within 90 days.
The foregoing proviso shall not apply and such consent of the holders of
Class A Preferred Stock shall be required if any such redemption will be
effected, in whole or in part, with the proceeds received from the sale of
any such stock or security convertible into shares of any class, in either
case, ranking prior to the Class A Preferred Stock.
(d) The affirmative vote of the holders of at least a majority of
the share of Class A Preferred Stock at the time outstanding, given in
person or by proxy at a meeting called for the purpose at which the holders
of Class A Preferred Stock shall vote separately as a class, shall be
necessary to effect any one or more of the following (but so far as the
holders of the Class A Preferred Stock are concerned, such action may be
effected with such vote):
(i) The consolidation or merger of the Corporation with
or into any other corporation to the extent any such consolidation or
merger shall be required, pursuant to any applicable statute, to be
approved by the holders of the shares of Class A Preferred Stock
voting separately as a class; or
(ii) The authorization of any shares ranking on a parity
with the Class A Preferred Stock or an increase in the authorized
number of shares of Class A Preferred Stock.
(e) Neither the vote, consent nor any adjustment of the voting
rights of holders of shares of Class A Preferred Stock shall be required
for an increase in the number of Common Shares authorized or issued or for
stock splits of the Common Shares or for stock dividends on any class of
stock payable solely in Common Shares, and none of the foregoing actions
shall be deemed to affect adversely the preferences or voting or other
rights of Class A Preferred Stock within the meaning and for the purpose of
this Division A.
SECTION 6. Conversion.
(a) If and to the extent that there are created series of Class A
Preferred Stock which are convertible (hereinafter called "convertible
series") into Common Shares, as such shares shall be constituted as of the
date of conversion, or into shares of any other class or series of the
Corporation (hereinafter collectively called "conversion shares"), the
following terms and provisions shall be applicable to all of such series,
except as may be otherwise expressly provided in the terms of any such
series.
(1) The maximum amount of Common Shares which may be
authorized to be received upon conversion by the holders of any shares
of a convertible series shall not exceed one Common Share for each
share of such convertible series, subject to any adjustments which
shall be required pursuant to any antidilution mechanism which the
Directors may approve in respect of such convertible series.
(2) The holder of each share of a convertible series may
exercise the conversion privilege in respect thereof by delivering to
any transfer agent for the respective series
6
<PAGE> 7
the certificate for the share to be converted and written notice that
the holder elects to convert such share. Conversion shall be deemed to
have been effected immediately prior to the close of business on the
date when such delivery is made, and such date is referred to in this
Section as the "conversion date". On the conversion date or as
promptly thereafter as practicable the Corporation shall deliver to
the holder of the stock surrendered for conversion, or as otherwise
directed by such holder in writing, a certificate for the number of
full conversion shares deliverable upon the conversion of such stock
and a check or cash in respect of any fraction of a share as provided
in subsection (3) of this Section. The person in whose name the stock
certificate is to be registered shall be deemed to have become a
holder of the conversion shares of record on the conversion date. No
adjustment shall be made for any dividends on shares of stock
surrendered for conversion or for dividends on the conversion shares
delivered on conversion.
(3) The Corporation shall not be required to deliver
fractional shares upon conversion of shares of a convertible series.
If more than one share of a convertible series shall be surrendered
for conversion at one time by the same holder, the number of full
conversion shares deliverable upon conversion thereof shall be
computed on the basis of the aggregate number of shares so
surrendered. If any fractional interest in a conversion share would
otherwise be deliverable upon the conversion, the Corporation shall in
lieu of delivering a fractional share therefor make an adjustment
therefor in cash at the current market value thereof, computed (to the
nearest cent) on the basis of the closing price of the conversion
share on the last business day before the conversion date.
(4) For the purpose of this Section, the "closing price
of the conversion shares" on any business day shall be the last
reported sales price per share on such day, or, in case no such
reported sale takes place on such day, the average of the reported
closing bid and asked prices, in either case on the New York Stock
Exchange, or, if the conversion shares are not listed or admitted to
the trading on such Exchange, on the principal national securities
exchange on which the conversion shares are listed or admitted to
trading as determined by the Directors, which determination shall be
conclusive, or, if not listed or admitted to trading on any national
securities exchange, as quoted by the automated quotation system of
the National Association of Securities Dealers, Inc., or, if not so
quoted, the mean between the average bid and asked prices per
conversion share in the over-the-counter market as furnished by any
member of the National Association of Securities Dealers, Inc.
selected from time to time by the Directors for that purpose; and
"business day" shall be each day on which the New York Stock Exchange
or other national securities exchange or automated quotation system or
over-the-counter market used for purposes of the above calculation is
open for trading.
(b) Upon conversion of any convertible series the stated capital of
the conversion shares delivered upon such conversion shall be the aggregate
par value of the shares so delivered having par value, or, in the case of
conversion shares without par value, shall be an amount equal to the stated
capital represented by each such share outstanding at the time of such
conversion. The stated capital of the Corporation shall be correspondingly
increased or reduced to reflect the difference between the stated capital
of the shares of the convertible series so converted and the stated capital
of the conversion shares delivered upon such conversion.
(c) In case of any reclassification or change of outstanding
conversion shares (except a split or combination, or a change in par value,
or a change from par value to no par value, or a change from no par value
to par value), provision shall be made as part of the terms of such
reclassification or change that the holder of each share of each
convertible series then outstanding shall have the right to receive upon
the conversion of such share, at the conversion rate or price which
otherwise would be in effect at the time of conversion, with substantially
the same protection against dilution as is provided in the terms of such
convertible series, the same kind and amount of stock and other securities
and property as such holder would have
7
<PAGE> 8
owned or have been entitled to receive upon the happening of any of the
events described above had such share been converted immediately prior to
the happening of the event.
(d) In case the Corporation shall be consolidated with or shall
merge into any other corporation, provision shall be made as a part of the
terms of such consolidation or merger whereby the holder of each share of
each convertible series outstanding immediately prior to such event shall
thereafter be entitled to such conversion rights with respect to securities
of the corporation resulting from such consolidation or merger as shall be
substantially equivalent to the conversion rights specified in the terms of
such convertible series; provided, however, that the provisions of this
subsection (d) shall be deemed to be satisfied if such consolidation or
merger shall be approved by the holders of Class A Preferred Stock in
accordance with the provisions of Section 5(d) of this Division A.
(e) The issue of stock certificates on conversions of shares of
each convertible series shall be without charge to the converting
shareholder for any tax in respect of the issue thereof. The Corporation
shall not, however, be required to pay any tax which may be payable in
respect of any transfer involved in the registration of shares in any name
other than that of the holder of the shares converted, and the Corporation
shall not be required to deliver any such stock certificate unless and
until the person or persons requesting the delivery thereof shall have paid
to the Corporation the amount of such tax or shall have established to the
satisfaction of the Corporation that such tax has been paid.
(f) The Corporation hereby reserves and shall at all times reserve
and keep available, free from preemptive rights, out of its authorized but
unissued shares or treasury shares, for the purpose of delivery upon
conversion of shares of each convertible series, such number of conversion
shares as shall from time to time be sufficient to permit the conversion of
all outstanding shares of all convertible series of Class A Preferred
Stock.
SECTION 7. Definitions. For the purpose of this Division A:
(a) Whenever reference is made to shares "ranking prior to the
Class A Preferred Stock", such reference shall mean and include all shares
of the Corporation in respect of which the rights of the holders thereof
either as to the payment of dividends or as to distributions in the event
of a voluntary or involuntary liquidation, dissolution or winding up of the
Corporation are given preference over the rights of the holders of Class A
Preferred Stock.
(b) Whenever reference is made to shares "on a parity with the
Class A Preferred Stock", such reference shall mean and include all shares
of Class B Preferred Stock and all other shares of the Corporation in
respect of which the rights of the holders thereof (i) are not given
preference over the rights of the holders of Class A Preferred Stock either
as to the payment of dividends or as to distributions in the event of a
voluntary or involuntary liquidation, dissolution or winding up of the
Corporation and (ii) either as to the payment of dividends or as to
distribution in the event of a voluntary or involuntary liquidation,
dissolution or winding up of the Corporation, or as to both, rank on an
equality (except as to the amounts fixed therefor) with the rights of the
holders of Class A Preferred Stock.
(c) Whenever reference is made to shares "ranking junior to the
Class A Preferred Stock" such reference shall mean and include all shares
of the Corporation in respect of which the rights of the holders thereof
both as to the payment of dividends and as to distributions in the event of
a voluntary or involuntary liquidation, dissolution or winding up of the
Corporation are junior and subordinate to the rights of the holders of the
Class A Preferred Stock.
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<PAGE> 9
SUBDIVISION A-1
EXPRESS TERMS OF THE $2.00
CONVERTIBLE EXCHANGEABLE
PREFERRED STOCK
There is hereby established a series of Class A Preferred Stock to
which the following provisions shall be applicable:
SECTION 1. DESIGNATION OF SERIES. The stock shall be designated "$2.00
Convertible Exchangeable Preferred Stock" (hereinafter called "Series A-1
Preferred Stock").
SECTION 2. NUMBER OF SHARES. The number of shares of Series A-1
Preferred Stock shall be 2,500,000, which number the Directors may decrease
(but not below the number of shares of the series then outstanding).
SECTION 3. DIVIDENDS. The dividend rate for the Series A-1 Preferred
Stock shall be $2.00 per share per annum. Cash dividends at such rate shall be
payable in quarterly installments on each March 15, June 15, September 15, and
December 15, commencing December 15, 1985. Such dividends shall be cumulative
from the date of initial issuance of the Series A-1 Preferred Stock and will be
payable to holders of record as they appear on the stock books of the
Corporation on such record dates, not more than 60 days nor less than 20 days
preceding the payment dates, as shall be fixed by the Directors. Dividends
payable for any partial dividend period shall be computed on the basis of a
360-day year of twelve 30-day months.
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<PAGE> 10
SECTION 4. REDEMPTION RIGHTS.
(a) Subject to the provisions of Section 5(c)(iii) of Division A,
shares of the Series A-1 Preferred Stock may be redeemed at the following
redemption prices, provided that the Series A-1 Preferred Stock may not be
redeemed before September 15, 1988, unless the closing price of the Common
Shares (determined as provided in Section 6(a)(4) of Division A) on each of 20
consecutive trading days ending within ten days before the date notice of
redemption is given equals or exceeds 150% of the Conversion Price (as defined
in Section 7(a) of this Subdivision A-1).
If redeemed from the date of issuance to September 14, 1986 at $22.00
and if redeemed during the 12-month period beginning September 15:
Year Price Year Price
- ---- ----- ---- -----
1986 . . . . . . . . . . . . . . $21.80 1991 . . . . . . . . . . $20.80
1987 . . . . . . . . . . . . . . $21.60 1992 . . . . . . . . . . $20.60
1988 . . . . . . . . . . . . . . $21.40 1993 . . . . . . . . . . $20.40
1989 . . . . . . . . . . . . . . $21.20 1994 . . . . . . . . . . $20.20
1990 . . . . . . . . . . . . . . $21.00 1995 and thereafter . . . $20.00
together in each case with all then accrued and unpaid dividends thereon for
(i) all dividend payment dates on or prior to the redemption date and (ii) if
the redemption date is not a dividend payment date, a proportionate dividend,
based on
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<PAGE> 11
the number of elapsed days, for the period from the day after the most recent
such dividend payment date through the redemption date. Upon the redemption
date, dividends shall cease to accumulate on the shares of Series A-1 Preferred
Stock called for redemption, such shares of the Series A-1 Preferred Stock
shall cease to be convertible and the holders of the shares of Series A-1
Preferred Stock called for redemption shall cease to be shareholders with
respect to such shares and shall have no interest in or claim against the
Corporation with respect to such shares except only the right to receive the
applicable redemption price.
SECTION 5. NO SINKING FUND. The Series A-1 Preferred Stock
shall not be entitled to the benefits of any retirement or sinking fund.
SECTION 6. LIQUIDATION. The holders of the Series A-1
Preferred Stock shall, in case of voluntary or involuntary liquidation,
dissolution or winding up of the affairs of the Corporation, be entitled to
receive in full out of the assets of the Corporation, including its capital,
before any amount shall be paid or distributed among the holders of Common
Shares or any other shares ranking junior to the Class A Preferred Stock, the
amount of $20.00 per share, plus an amount equal to (i) all then accrued and
unpaid dividends thereon for all dividend payment dates on or prior to the date
of payment of the amount due pursuant to such liquidation, dissolution or
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<PAGE> 12
winding up, and (ii) if such date is not a dividend payment date, a
proportionate dividend, based on the number of elapsed days, for the period
from the day after the most recent dividend payment date through the date of
payment of the amount due pursuant to such liquidation, dissolution or winding
up.
SECTION 7. CONVERSION RIGHTS. Subject in all respects to, and upon
compliance with, the provisions of Section 6 of Division A, the holders of
shares of Series A-1 Preferred Stock shall have the right, at their option, to
convert all or any part of such shares into Common Shares of the Corporation at
any time on and subject to the following terms and conditions:
(a) The number of Common Shares issued upon conversion of each
share of the Series A-1 Preferred Stock shall be equal to $20 divided by the
Conversion Price (as hereinafter defined) then in effect. The price at which
Common Shares shall be delivered upon conversion (herein called the "Conversion
Price") shall be $24; provided, however, that such Conversion Price shall be
subject to adjustment from time to time in certain instances as hereinafter
provided. If the Corporation calls for redemption any shares of Series A-1
Preferred Stock, such right of conversion shall cease and terminate, as to the
shares designated for redemption, at the close of business on the date
immediately preceding the redemption date, unless the Corporation defaults in
the payment of the redemption price due on such redemption date.
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<PAGE> 13
(b) The Conversion Price in effect at any time shall be subject to
adjustment as follows:
(i) In case the Corporation shall (1) declare a dividend
on its Common Shares in shares of its capital stock, (2) subdivide its
outstanding Common Shares, or (3) combine its outstanding Common
Shares into a smaller number of shares, the Conversion Price in effect
at the time of the record date for such dividend or of the effective
date of such subdivision or combination shall be proportionately
adjusted so that the holder of any share of Series A-1 Preferred Stock
surrendered for conversion after such time shall be entitled to
receive the kind and amount of shares which such holder would have
owned or have been entitled to receive had such share of Series A-1
Preferred Stock been converted immediately prior to such time. Such
adjustment shall be made successively whenever any event listed above
shall occur. If, as a result of an adjustment made pursuant to this
paragraph (i) or Section 6(c) of Division A, the holder of any share
of Series A-1 Preferred Stock thereafter surrendered for conversion
shall become entitled to receive shares of two or more classes of
capital stock or Common Shares and other capital stock of the
Corporation, the Directors (whose determination shall be conclusive
and shall be described in a Board resolution filed with the transfer
agent for the Series A-1 Preferred
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<PAGE> 14
Stock by the Corporation as soon as practicable) shall determine the
allocation of the adjusted Conversion Price between or among shares of
such classes of capital stock or Common Shares and other capital
stock.
(ii) In case the Corporation shall fix a record date for
the issuance of rights or warrants to all holders of its Common Shares
entitling them to subscribe for or purchase Common Shares (or
securities convertible into Common Shares) at a price per share (or
having a conversion price per share) less than the Current Market
Price (as defined in paragraph (iv) below), on such record date the
Conversion Price shall be adjusted so that the Conversion Price after
such record date shall equal the price determined by dividing the
Conversion Price in effect immediately prior to the close of business
on such record date by a fraction of which the numerator shall be the
number of Common Shares outstanding at the close of business on such
record date plus the number of Common Shares so offered for
subscription or purchase (or into which the convertible securities so
offered are initially convertible) and of which the denominator shall
be the number of Common Shares outstanding at the close of business on
such record date plus the number of Common Shares which the aggregate
of the offering price of the total number of Common Shares so offered
for subscription
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<PAGE> 15
or purchase (or the aggregate initial conversion price of the
convertible securities so offered) would purchase at such Current
Market Price, such adjustment to become effective immediately prior to
the opening of business on the day following such record date. Such
adjustment shall be made successively whenever such a record date is
fixed; and in the event that such rights or warrants are not so issued
or to the extent such rights or warrants are not so exercised prior to
the expiration therefor, the Conversion Price shall again be adjusted
to be the Conversion Price which would then be in effect if such
record date had not been fixed.
(iii) In case the Corporation shall fix a record date for
the making of a distribution to all holders of its Common Shares
(including any such distribution made in connection with a
consolidation or merger in which the Corporation is the continuing
corporation) of evidences of indebtedness or assets (excluding rights
and warrants, cash dividends or other distributions paid out of earned
surplus and dividends payable in stock for which adjustment is made
pursuant to paragraph (i) above), the Conversion Price shall be
adjusted so that after such record date the Conversion Price shall
equal the price determined by dividing the Conversion Price in effect
immediately prior to the close of business on such record date by a
fraction
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<PAGE> 16
of which the numerator shall be the Current Market Price (as defined
in paragraph (iv) below) on such record date and of which the
denominator shall be such Current Market Price, less the then fair
market value (as determined by the Directors, whose determination
shall be conclusive and shall be described in a Board resolution filed
with the transfer agent for the Series A-1 Preferred Stock by the
Corporation as soon as practicable) of the portion of the assets or
evidences of indebtedness so distributed applicable to one Common
Share, such adjustment to become effective immediately prior to the
opening of business on the day following such record date. Such
adjustment shall be made successively whenever such a record date is
fixed; and in the event that such distribution is not so made, the
Conversion Price shall again be adjusted to the Conversion Price which
would then be in effect if such record date had not been fixed.
(iv) For the purpose of any computation under paragraphs
(ii) and (iii) above, the "Current Market Price" on any date shall be
deemed to be the average of the daily closing prices per Common Share
for any 30 consecutive business days selected by the Corporation
commencing not more than 45 business days before such date. The
closing price for the Common Shares shall be determined in accordance
with Section 6(a)(4) of Division A.
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<PAGE> 17
(v) All calculations under this Section 7(b) shall be
made to the nearest cent or to the nearest one-hundredth of a share,
as the case may be.
(vi) No adjustment in the Conversion Price shall be
required unless such adjustment would require a change of at least 1%
in such price: PROVIDED, HOWEVER, that any adjustments which by reason
of this paragraph (vi) are not required to be made shall be carried
forward and taken into account in any subsequent adjustment.
(vii) Anything in this Section 7(b) to the contrary
notwithstanding, the Corporation shall be entitled to make such
reductions in the Conversion Price, in addition to those required by
this Section 7(b), as it in its discretion shall determine to be
advisable in order that any stock dividend, subdivision of shares,
distribution of rights to purchase stock or securities, or
distribution of securities convertible into or exchangeable for stock
hereafter made by the Corporation to its stockholders shall not be
taxable to the recipient for United States Federal income tax
purposes, but not below the par value of the Common Shares.
(viii) No adjustment in the Conversion Price shall be
required for a change in the par value of the Common Shares.
(ix) In the event that at any time as a result of an
adjustment made pursuant to Section 7(b)(i) of this
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<PAGE> 18
Subdivision A-1, the holder of any share of Series A-1 Preferred
Stock thereafter surrendered for conversion shall become entitled to
receive any shares of the capital stock of the Corporation other than
Common Shares, thereafter the Conversion Price allocable to such other
shares or receivable upon conversion of any share of Series A-1
Preferred Stock shall be subject to adjustment from time to time in a
manner and on terms as nearly equivalent as practicable to the
provisions with respect to Common Shares contained in this Section 7
as determined by the Directors (whose determination shall be
conclusive and shall be described in a Board resolution filed with the
transfer agent by the Corporation as soon as practicable).
(c) In case of any sale or conveyance to another corporation of
the property of the Corporation as an entirety or substantially as an
entirety, or in case of any statutory exchange of securities with another
corporation, there will be no adjustment of the Conversion Price, but the
holder of each share of Series A-1 Preferred Stock shall have the right to
convert such share of Series A-1 Preferred Stock into the kind and amount of
shares of stock and other securities and property which such holder would have
been entitled to receive upon such sale, conveyance or statutory exchange if
such holder had held the Common Shares issuable upon the conversion of such
share of Series A-1 Preferred Stock immediately prior to such sale,
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<PAGE> 19
conveyance or statutory exchange, assuming such holder of Common Shares failed
to exercise his rights of election, if any, as to the kind or amount of
securities, cash or other property receivable upon such sale, conveyance or
statutory exchange (provided that if the kind or amount of securities, cash or
other property receivable upon such sale, conveyance or statutory exchange is
not the same for each non-electing share, then the kind and amount of
securities, cash or other property receivable upon such sale, conveyance or
statutory exchange for each non-electing share shall be deemed to be the kind
and amount so receivable per share by a plurality of the non-electing share).
Thereafter, the holders of the Series A-1 Preferred Stock shall be entitled to
appropriate adjustments with respect to their conversion rights to the end that
the provisions set forth in Section 7 of this Subdivision A-1 and Section 6 of
Division A shall correspondingly be made applicable, as nearly as may
reasonably be, in relation to any shares of stock or other securities or
property thereafter deliverable on the conversion of the Series A-1 Preferred
Stock. Any such adjustment shall be approved by the Directors (whose
determination shall be conclusive and shall be described in a Board resolution
filed with the transfer agent for the Series A-1 Preferred Stock by the
Corporation as soon as practicable).
(d) Whenever the Conversion Price is adjusted as herein provided:
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<PAGE> 20
(i) the Corporation shall promptly file with the
transfer agent for the Series A-l Preferred Stock a certificate of the
Treasurer of the Corporation setting forth the adjusted Conversion
Price and showing in reasonable detail the facts upon which such
adjustment is based; and
(ii) a notice stating that the Conversion Price has been
adjusted and setting forth the adjusted Conversion Price shall
forthwith be mailed, first class postage prepaid, by the Corporation
to the holders of record of outstanding shares of Series A-1 Preferred
Stock.
(e) In case:
(i) the Corporation shall authorize the distribution to
all holders of its Common Shares of evidences of indebtedness or
assets (other than cash dividends or other distributions paid out of
earned surplus and the dividends payable in stock for which adjustment
made pursuant to Section 7(b)(i) of this Subdivision A-1); or
(ii) the Corporation shall authorize the granting to the
holders of its Common Shares of rights or warrants to subscribe for or
purchase any shares of its capital stock of any class or of any other
rights; or
(iii) of any reclassification of the Common Shares of the
Corporation (except a split or combination, or a change in the par
value of the Common Shares), or of any
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<PAGE> 21
consolidation or merger to which the Corporation is a party and for
which approval of any stockholders of the Corporation is required, or
of the sale or conveyance to another corporation of the property of
the Corporation as an entirety or substantially as an entirety, or in
case of any statutory exchange or securities with another corporation;
or
(iv) of the voluntary or involuntary dissolution,
liquidation or winding up of the Corporation;
then, in each case, the Corporation shall cause to be filed with the transfer
agent for the Series A-1 Preferred Stock, and shall cause to be mailed, first
class postage prepaid, to the holders of record of the outstanding shares of
Series A-1 Preferred Stock, at least 10 days prior to the applicable record
date hereinafter specified, a notice stating (x) the date on which a record is
to be taken for the purpose of such distribution, rights or warrants, or, if a
record is not to be taken, the date as of which the holders of Common Shares of
record to be entitled to such distribution, rights or warrants, are to be
determined, or (y) the date on which such reclassification, consolidation,
merger, sale, conveyance, statutory exchange, dissolution, liquidation or
winding up is expected to become effective, and the date as of which it is
expected that holders of Common Shares of record shall be entitled to exchange
their Common Shares for securities or
21
<PAGE> 22
other property deliverable upon such reclassification, consolidation, merger,
sale, conveyance, statutory exchange, dissolution, liquidation or winding-up.
Failure to give such notice or any defect therein shall not affect the
legality or validity of the proceedings described in clause (i), (ii), (iii) or
(iv) of this Section 7(e).
(f) Before taking any action which would cause an adjustment
reducing the Conversion Price below the then par value (if any) of the Common
Shares deliverable upon conversion of the Series A-1 Preferred Stock, the
Corporation will take any corporate action which may, in the opinion of its
counsel, be necessary in order that the Corporation may validly and legally
issue fully paid and nonassessable Common Shares at such adjusted Conversion
Price.
SECTION 8. EXCHANGE PROVISIONS.
(a) The Corporation shall have the right to redeem the shares of
the Series A-1 Preferred Stock in exchange for convertible subordinated
debentures due 2015 of the Corporation (the "Debentures") in whole on any
dividend payment date beginning September 15, 1988 subject to the following
terms and conditions:
(i) The shares of Series A-1 Preferred Stock shall be
exchangeable at the office of the exchange agent for such series, and
at such other place or places, if any, as the Directors of the
Corporation may designate. Holders of
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<PAGE> 23
outstanding shares of the Series A-l Preferred Stock will be entitled
to receive in exchange for each share of Series A-1 Preferred Stock
held by them at the date fixed for exchange $20 principal amount of
Debentures together with all then accrued and unpaid dividends on such
share of Series A-1 Preferred Stock for (A) all dividend payment dates
on or prior to the date fixed for exchange and (B) if the date fixed
for exchange is not a dividend payment date, a proportionate dividend,
based on the number of elapsed days, for the period from the day after
the most recent such dividend payment date through the date fixed for
exchange. The Debentures shall bear interest at the rate per annum
which is equal to the dividend rates or the Series A-1 Preferred Stock
and shall be convertible into Common Shares of the Corporation at the
Conversion Price applicable to the Series A-1 Preferred Stock at the
time of exchange, subject to further adjustment in certain cases as
provided in the Indenture referred to in clause (iii) below, and shall
have such other terms and conditions as are set forth in such
Indenture.
(ii) The Corporation will mail written notice of its
intention to exchange to each holder of record of the Series A-1
Preferred Stock not less than 30 nor more than 60 days prior to the
date fixed for exchange. The Series A-1 Preferred Stock will be
convertible up to the close of business on the date fixed for
exchange.
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<PAGE> 24
(iii) Prior to giving notice of intention to exchange, the
Corporation shall execute and deliver, with a bank or trust company
selected by the Corporation, the Indenture substantially in form filed
as an exhibit to the Registration Statement relating to the Series A-1
Preferred Stock with such changes as may be required by law, stock
exchange rule or usage or that do not adversely affect the interests
of the holders of the Debentures. Prior to the giving of any notice
of intention to exchange provided above, the Corporation shall file at
the office of the exchange agent for such series an opinion of counsel
to the effect that the Indenture has been duly authorized, executed
and delivered by the Corporation, has been duly qualified under the
Trust Indenture Act of 1939 (or that such qualification is not
necessary), and constitutes valid and binding instrument enforceable
against the Corporation in accordance with its terms (subject, as to
the enforcement, to bankruptcy, insolvency, reorganization and other
laws of general applicability relating to or affecting creditors'
rights and to general principles of equity, and subject to such other
qualifications as are then customarily contained in opinions of
counsel experienced in such matters); that the Debentures have been
duly authorized and, when executed and authenticated in accordance
with the provisions of the Indenture and
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<PAGE> 25
delivered in exchange for the shares of Series A-1 Preferred Stock,
will constitute valid and binding obligations of the Corporation
entitled to the benefits of the Indenture (subject as aforesaid); that
the exchange of the Debentures for the Series A-1 Preferred Stock
shall not violate the laws of the state of incorporation of the
Corporation; and that the exchange of the Debentures for the shares of
Series A-1 Preferred Stock is exempt from the registration
requirements of the Securities Act of 1933 or, if no such exemption is
available, that the Debentures have been duly registered for such
exchange under such Act.
(iv) Upon the date fixed for exchange, dividends shall
cease to accumulate on the Series A-1 Preferred Stock, such shares
shall cease to be convertible and the holders of the Series A-1
Preferred Stock shall cease to be shareholders with respect to such
shares and shall have no interest in or claim against the Corporation
with respect to such shares except only the right to receive the
Debentures and accrued and unpaid dividends on the Series A-1
Preferred Stock to the date fixed for exchange.
(v) Before any holder of shares of Series A-1 Preferred
Stock shall be entitled to receive Debentures, such holder shall
surrender the certificate or certificates therefor, at the office of
the exchange agent for such
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series or at such other place or places, if any, as the Directors
shall have designated, and shall state in writing the name or names
(with addresses) in which he wishes the certificate or certificates
for the Debentures to be issued. The Corporation will, as soon as
practicable thereafter, issue and deliver at said office or place to
such holder of shares of Series A-1 Preferred Stock, or to his nominee
or nominees, certificates for the number of Debentures to which he
shall be entitled as aforesaid. Shares of Series A-1 Preferred Stock
shall be deemed to have been exchanged as of the close of business on
the date fixed for exchange as provided above, and the person or
persons entitled to receive the Debentures issuable upon such exchange
shall be treated for all purposes as the record holder or holders of
such Debentures as of the close of business on such date.
(b) The Corporation will pay any and all documentary, stamp or
similar issue or transfer tax that may be payable in respect of the issue or
delivery of Debentures on exchange of shares of Series A-1 Preferred Stock
pursuant hereto. The Corporation shall not, however, be required to pay any
such tax which may be payable in respect to any transfer involved in the issue
or transfer and delivery of Debentures in a name other than that in which the
shares of Series A-1 Preferred Stock so exchanged were registered, and no such
issue or delivery shall be made unless and until the person requesting such
issue has paid to the Corporation the amount of any such tax or has established
to the satisfaction of the Corporation that such tax has been paid.
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DIVISION B
EXPRESS TERMS OF THE SERIAL PREFERRED STOCK,
CLASS B, WITHOUT PAR VALUE
The Class B Preferred Stock shall have the following express terms:
SECTION 1. SERIES. The Class B Preferred Stock may be issued from time to
time in one or more series. All shares of Class B Preferred Stock shall be of
equal rank and shall be identical, except in respect of the matters that may be
fixed by the Directors as hereinafter provided, and each share of each series
shall be identical with all other shares of such series, except as to the date
from which dividends are cumulative. All shares of Class B Preferred Stock
shall also be of equal rank and shall be identical with shares of Class A
Preferred Stock except in respect of (i) the particulars that may be fixed and
determined by the Directors as hereinafter provided, (ii) the voting rights and
provisions for consent relating to Class B Preferred Stock, as fixed and
determined by Section 5 of this Division B and (iii) any conversion rights
which the Directors may grant any series of Class A Preferred Stock which
rights shall not be granted in respect of any series of Class B Preferred
Stock. Subject to the provisions of Sections 2 to 7, inclusive, of this
Division B, which provisions shall apply to all Class B Preferred Stock, the
Directors hereby are authorized to cause such shares to be issued in one or
more series and with respect to each such series to fix:
(a) The designation of the series, which may be by distinguishing
number, letter and/or title.
(b) The number of shares of the series, which number the Directors
may (except where otherwise provided in the creation of the series)
increase or decrease (but not below the number of shares thereof then
outstanding).
(c) The dividend rights of the series which may be: cumulative or
non-cumulative; at a specified rate, amount or proportion; or with or
without further participation rights.
(d) The dates at which dividends, if declared, shall be payable,
and the dates from which dividends, if cumulative, shall accumulate.
(e) The redemption rights and price or prices, if any, for shares
of the series.
(f) The terms and amount of any sinking fund provided for the
purchase or redemption of shares of the series.
(g) The amounts payable on shares of the series in the event of any
voluntary or involuntary liquidation, dissolution or winding up of the
affairs of the Corporation.
(h) Restrictions (in addition to those set forth in Section 5(c) of
this Division) on the issuance of shares of the same series or of any other
class or series.
The Directors are authorized to adopt from time to time amendments to the
Articles of Incorporation fixing, with respect to each such series, the matters
described in clauses (a) to (h), inclusive, of this Section 1.
SECTION 2. DIVIDENDS.
(a) The holders of Class B Preferred Stock of each series, in
preference to the holders of Common Shares and of any other class of shares
ranking junior to the Class B Preferred Stock, shall be entitled to receive
out of any funds legally available therefor and when and as declared by the
Directors dividends in cash at the rate for such series fixed in accordance
with the provisions of Section 1 of this Division B and no more, payable on
the dividend payment dates fixed for such series. Such dividends may be
cumulative, in the case of shares of each particular series, from and after
the date or dates fixed with respect to such series. No dividend may be
paid upon or set apart for any of the Class B Preferred Stock on any
dividend payment date unless (i) all dividends upon all series of Class B
Preferred Stock then outstanding and all
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classes of stock then outstanding ranking prior to or on a parity with the
Class B Preferred Stock for all dividend payment dates prior to such date
shall have been paid or funds therefor set apart and (ii) at the same time
a like dividend upon all series of Class B Preferred Stock then outstanding
and all classes of stock then outstanding ranking prior to or on a parity
with the Class B Preferred Stock and having a dividend payment date on such
date, ratably in proportion to the respective dividend rates of each such
series or class, shall be paid or funds therefor set apart. Accumulations
of dividends, if any, shall not bear interest.
(b) For the purpose of this Division B, a dividend shall be deemed
to have been paid or funds therefor set apart on any date if on or prior to
such date the Corporation shall have deposited funds sufficient therefor
with a bank or trust company and shall have caused checks drawn against
such funds in appropriate amounts to be mailed to each holder of record
entitled to receive such dividend at such holder's address then appearing
on the books of the Corporation.
(c) In no event so long as any Class B Preferred Stock shall be
outstanding shall any dividends, except a dividend payable in Common Shares
or other shares ranking junior to the Class B Preferred Stock, be paid or
declared or any distribution be made except as aforesaid on the Common
Shares or any other shares ranking junior to the Class B Preferred Stock,
nor shall any Common Shares or any other shares ranking junior to the Class
B Preferred Stock be purchased, retired or otherwise acquired by the
Corporation (except out of the proceeds of the sale of Common Shares or
other shares ranking junior to the Class B Preferred Stock received by the
Corporation on or subsequent to the date on which shares of any series of
Class B Preferred Stock are first issued), unless (i) all accrued and
unpaid dividends upon all Class B Preferred Stock then outstanding for all
dividend payment dates on or prior to the date of such action shall have
been paid or funds therefor set apart and (ii) as of the date of such
action there shall be no arrearages with respect to the redemption of Class
B Preferred Stock of any series from any sinking fund provided for shares
of such series in accordance with the provisions of Section 1 of this
Division B.
SECTION 3. REDEMPTION.
(a) Subject to the express terms of each series and to the
provisions of Section 5(c)(iii) of this Division B, the Corporation (i) may
from time to time redeem all or any part of the Class B Preferred Stock of
any series at the time outstanding at the option of the Directors at the
applicable redemption price for such series fixed in accordance with the
provisions of Section 1 of this Division B, and (ii) shall from time to
time make such redemptions of the Clan B Preferred Stock of any series as
may be required to fulfill the requirements of any sinking fund provided
for shares of such series at the applicable sinking fund redemption price,
fixed in accordance with the provisions of Section 1 of this Division B,
together in each case with (A) all then accrued and unpaid dividends upon
such shares for all dividend payment dates on or prior to the redemption
date and (B) if the redemption date is not a dividend payment date for such
series, a proportionate dividend, based on the number of elapsed days, for
the period from the day after the most recent such dividend payment date
through the redemption date.
(b) Notice of every such redemption shall be mailed, postage
prepaid, to the holders of record of the Class B Preferred Stock to be
redeemed at their respective addresses then appearing on the books of the
Corporation, not less than 30 days nor more than 60 days prior to the (late
fixed for such redemption. At any time before or after notice has been
given as above provided, the Corporation may deposit the aggregate
redemption price of the shares of Class B Preferred Stock to be redeemed,
together with an amount equal to the aggregate amount of dividends payable
upon such redemption, with any bank or trust company in Cleveland, Ohio, or
New York, New York, having capital and surplus of more than $50,000,000,
named in such notice, and direct that such deposited amount be paid to the
respective holders of the shares of Class B Preferred Stock so to be
redeemed upon surrender of the stock certificate or certificates held by
such holders. Upon the giving of such notice and the making of such
deposit such
28
<PAGE> 29
holders shall cease to be shareholders with respect to such shares and
shall have no interest in or claim against the Corporation with respect to
such shares except only the right to receive such money from such bank or
trust company without interest or to exercise, before the redemption date,
any unexpired privileges of conversion. In case less than all of the
outstanding shares of any series of Class B Preferred Stock are to be
redeemed, the Corporation shall select, pro rata or by lot, the shares so
to be redeemed in such manner as shall be prescribed by the Directors.
(c) If the holders of shares of Class B Preferred Stock which shall
have been called for redemption shall not, within six years after such
deposit, claim the amount deposited for the redemption thereof, any such
bank or trust company shall, upon demand, pay over to the Corporation such
unclaimed amounts and thereupon such bank or trust company and the
Corporation shall be relieved of all responsibility in respect thereof to
such holders.
(d) Any shares of Class B Preferred Stock which are (i) redeemed by
the Corporation pursuant to the provisions of this Section 3, (ii)
purchased and delivered in satisfaction of any sinking fund requirements
provided for shares of any series of Class B Preferred Stock, (iii)
converted in accordance with the express terms of any such series, or (iv)
otherwise acquired by the Corporation, shall resume the status of
authorized and unissued shares of Class B Preferred Stock without serial
designation; provided, however, that any such shares which are converted in
accordance with the express terms thereof shall not be reissued as
convertible shares.
SECTION 4. LIQUIDATION.
(a) (1) The holders of Class B Preferred Stock of any series,
shall, in case of voluntary or involuntary liquidation, dissolution or
winding up of the affairs of the Corporation, be entitled to receive in
full out of the assets of the Corporation, including its capital, before
any amount shall be paid or distributed among the holders of the Common
Shares or any other shares ranking junior to the Class B Preferred Stock,
the amounts fixed with respect to shares of such series in accordance with
Section 1 of this Division, plus an amount equal to (i) all then accrued
and unpaid dividends upon such shares for all dividend payment dates on or
prior to the date of payment of the amount due pursuant to such
liquidation, dissolution or winding up, and (ii) if such date is not a
dividend payment date for such series, a proportionate dividend, based on
the number of elapsed days, for the period from the day after the most
recent dividend payment date through the date of payment of the amount due
pursuant to such liquidation, dissolution or winding up. In case the net
assets of the Corporation legally available therefor are insufficient to
permit the payment upon all outstanding shares of Class B Preferred Stock
and all outstanding shares of stock of all classes ranking on a parity with
the Class B Preferred Stock of the full preferential amount to which they
are respectively entitled, then such net assets shall be distributed
ratably upon outstanding shares of Class B Preferred Stock and all
outstanding shares of stock of all classes ranking on a parity with the
Class B Preferred Stock in proportion to the full preferential amount to
which each such share is entitled.
(2) After payment to holders of Class B Preferred Stock
of the full preferential amounts as aforesaid, holder of Class B Preferred
Stock as such shall have no right or claim to any of the remaining assets
of the Corporation.
(b) The merger or consolidation of the Corporation into or with any
other corporation, or the merger of any other corporation into it, or the
sale, lease or conveyance of all or substantially all the property or
business of the Corporation, shall not be deemed to be a dissolution,
liquidation or winding up for the purposes of this Division B.
SECTION 5. VOTING.
(a) Except as otherwise provided herein or required by law, the
holders of Class B Preferred Stock shall not be entitled to vote.
29
<PAGE> 30
(b) (1) If, and so often as, the Corporation shall be in default in
the payment of dividends on any series of Class B Preferred Stock at the
time outstanding, or funds therefor have not been set apart, in an amount
equivalent to six full quarterly dividends on any such series of Class B
Preferred Stock, whether or not consecutive and whether or not earned or
declared, the holders of Class B Preferred Stock of all series, voting
separately as a class, shall thereafter be entitled to elect, as herein
provided, two Directors of the Corporation; provided, however, that the
special class voting rights provided for in this paragraph when the same
shall have become vested shall remain so vested (i) in the case of
cumulative dividends, until all accrued and unpaid dividends on the Class B
Preferred Stock of all series then outstanding shall have been paid or
funds therefor set apart, or (ii) in the case of non-cumulative dividends,
until full dividends on the Class B Preferred Stock of all series then
outstanding shall have been paid or funds therefor set apart regularly for
a period of one year, whereupon the holders of Class B Preferred Stock
shall be divested of their special class voting rights in respect of
subsequent elections of Directors, subject to the revesting of such special
class voting rights in the event hereinabove specified in this paragraph.
(2) In the event of default entitling the holders of Class B
Preferred Stock to elect two Directors as specified in paragraph (1) of
this subsection, a special meeting of such holders for the purpose of
electing such Directors shall be called by the Secretary of the Corporation
upon written request of, or may be called by, the holders of record of at
least ten percent ( 10%) of the shares of Class B Preferred Stock of all
series at the time outstanding, and notice thereof shall be given in the
same manner as that required for the annual meeting of shareholders;
provided, however, that the Corporation shall not be required to call such
special meeting if the annual meeting of shareholders or any other special
meeting of shareholders called or to be called for a different purpose
shall be held within 120 days after the date of receipt of the foregoing
written request from the holders of Class B Preferred Stock. At any meeting
at which the holders of Class B Preferred Stock shall be entitled to elect
Directors, the holders of thirty-five percent (35%) of the then outstanding
shares of Class B Preferred Stock of all series, present in person or by
proxy, shall be sufficient to constitute a quorum, and the vote of the
holders of a majority of such shares so present at any such meeting at
which there shall be such a quorum shall be sufficient to elect the
Directors which the holders of Class B Preferred Stock are entitled to
elect as hereinabove provided. Notwithstanding any provision of these
Articles of Incorporation or the Regulations of the Corporation or any
action taken by the holders of any class of shares fixing the number of
Directors of the Corporation, the two Directors who may be elected by the
holders of Class B Preferred Stock pursuant to this subsection shall serve
in addition to any other Directors then in office or proposed to be elected
otherwise than pursuant to this subsection. Nothing in this subsection
shall prevent any change otherwise permitted in the total number of
Directors of the Corporation or require the resignation of any Director
elected otherwise than pursuant to this subsection. Notwithstanding any
classification of the other Directors of the Corporation, the two Directors
elected by the holders of Class B Preferred Stock shall be elected annually
for the terms expiring at the next succeeding annual meeting of
shareholders; provided, however, that whenever the holders of Class B
Preferred Stock shall be divested of the voting power as above provided,
the terms of office of all persons elected as Directors by the holders of
the Class B Preferred Stock as a class shall immediately terminate and the
number of Directors shall be reduced accordingly.
(c) Except as hereinafter provided, the affirmative vote of the
holders of at least two-thirds of the shares of Class B Preferred Stock at
the time outstanding, given in person or by proxy at a meeting called for
the purpose at which the holders of Class B Preferred Stock shall vote
separately as a class, shall be necessary to effect any one or more of the
following (but so far as the holders of Class B Preferred Stock are
concerned, such action may be affected with such vote):
(i) Any amendment, alteration or repeal of any of the
provisions of the Articles of Incorporation or of the Regulations of
the Corporation which affects adversely the prefer-
30
<PAGE> 31
ences or voting or other rights of the holders of Class B Preferred
Stock; provided, however, that for the purpose of this paragraph
5(c)(i) only, neither the amendment of the Articles of Incorporation
so as to authorize, create or change the authorized or outstanding
amount of Class B Preferred Stock or of any shares of any class
ranking on a parity with or junior to the Class B Stock nor the
amendment of the provisions of the Regulations so as to change the
number of Directors of the Corporation shall be deemed to affect
adversely the preferences or voting or other rights of the holders of
Class B Preferred Stock; and provided further, that if such amendment,
alteration or repeal affects adversely the preference or voting or
other rights of one or more but not all series of Class B Preferred
Stock at the time outstanding, the affirmative vote or consent of the
holders of at least two-thirds of the number of shares at the time
outstanding of each series so affected, each such affected series
voting separately as a series, shall also be required;
(ii) The authorization, creation or the increase in the
authorized amount of any shares of any class or any security
convertible into shares of any class, in either case, ranking prior to
the Class B Preferred Stock; or
(iii) The purchase or redemption (for sinking fund purposes
or otherwise) of less than all of the Class B Preferred Stock then
outstanding except in accordance with a stock purchase offer made to
all holders of record of Class B Preferred Stock unless all dividends
on all Class B Preferred Stock then outstanding for all previous
dividend periods shall have been declared and paid or funds therefor
set apart and all accrued sinking fund obligations applicable thereto
shall have been complied with;
provided, however, that in the case of any authorization, creation or
increase in the authorized amount of any shares of any class or security
convertible into shares of any class, in either case, ranking prior to the
Class B Preferred Stock no such consent of the holders of Class B Preferred
Stock shall be required if the holders of Class B Preferred Stock have
previously received adequate notice of redemption to occur within 90 days.
The foregoing provised shall not apply and such consent of the holders of
Class B Preferred Stock shall be required if any such redemption will be
effected, in whole or in part, with the proceeds received from the sale of
any such stock or security convertible into shares of any class, in either
case, ranking prior to the Class B Preferred Stock.
(d) The affirmative vote of the holders of at least a majority of
the shares of Class B Preferred Stock at the time outstanding, given in
person or by proxy at a meeting called for the purpose at which the holders
of Class B Preferred Stock shall vote separately as a class, shall be
necessary to effect any one or more of the following (but so far as the
holders of the Class B Preferred Stock are concerned, such action may be
effected with such vote):
(i) The consolidation or merger of the Corporation with
or into any other corporation to the extent any such consolidation or
merger shall be required, pursuant to any applicable statute, to be
approved by the holders of the shares of Class B Preferred Stock
voting separately as a class; or
(ii) The authorization of any shares ranking on a parity
with the Class B Preferred Stock or an increase in the authorized
number of shares of Class B Preferred Stock.
(e) Neither the vote or consent of the holders of shares of Class B
Preferred Stock shall be required for an increase in the number of Common
Shares authorized or issued or for stock splits of the Commons Shares or
for stock dividends on any class of stock payable solely in Common Shares,
and none of the foregoing actions shall be deemed to affect adversely the
31
<PAGE> 32
preferences or voting or other rights of Class B Preferred Stock within the
meaning and for the purpose of this Division B.
SECTION 6. CONVERSION. There Shall not be created any series of Class B
Preferred Stock which will be convertible into Common Shares or into shares of
any other class or series of the Corporation.
SECTION 7. DEFINITIONS. For the purpose of this Division B:
(a) Whenever reference is made to shares "ranking prior to the
Class B Preferred Stock", such reference shall mean and include all shares
of the Corporation in respect of which the rights of the holders thereof
either as to the payment of dividends or as to distribution in the event of
a voluntary or involuntary liquidation, dissolution or winding up of the
Corporation are given preference over the rights of the holders of Class B
Preferred Stock.
(b) Whenever reference is made to shares "On a Parity With the
Class B Preferred Stock", Such reference shall mean and include all Shares
of Class A Preferred Stock and all other Shares of the Corporation in
respect of which the rights of the holders thereof (i) are not given
preference over the right of the holders of Class B Preferred Stock either
as to the payment of dividends or as to distributions in the event of a
voluntary or involuntary liquidation, dissolution or winding up of the
Corporation and (ii) either as to the payment of dividends or as to
distribution in the event of a voluntary or involuntary liquidation,
dissolution or winding up of the Corporation, or as to both, rank on an
equality (except as to the amounts fixed therefor) with the rights of the
holders of Class B Preferred Stock.
(c) Whenever reference is made to shares "ranking junior to the
Class B Preferred Stock" such reference shall mean and include all shares
of the Corporation in respect of which the rights of the holders thereof
both as to the payment of dividends and as to distributions in the event of
a voluntary or involuntary liquidation, dissolution or winding up of the
Corporation are junior and subordinate to the rights of the holders of the
Class B Preferred Stock.
DIVISION C
EXPRESS TERMS OF COMMON SHARES,
PAR VALUE $1.00 PER SHARE
The Common Shares shall be subject to the express terms of the Class A
Preferred Stock and the Class B Preferred Stock and of any series of such
classes. Each Common Share shall be equal to every other Common Share. The
holders of Common Shares shall have such rights as are provided by law and
shall be entitled to one vote for each share held by them upon all matters
presented to the shareholders.
FIFTH: The amount of stated capital with which the Corporation will begin
business is Five Hundred Dollars ($500.00).
SIXTH: No holders of any class of shares of the Corporation shall have any
preemptive right to purchase or to have offered to them for purchase, any
shares or other securities of the Corporation, whether now or hereafter
authorized.
SEVENTH: The Corporation may from time to time, pursuant to authorization
by the Directors and without action by the shareholders, purchase or otherwise
acquire shares of the Corporation of any class or classes in such manner, upon
such terms and in such amounts as the Directors shall determine, subject
however, to such limitation or restriction, if any, as is contained in the
express terms of any class of shares of the Corporation outstanding at the time
of the purchase or acquisition in question.
32
<PAGE> 33
EIGHTH: Any and every statute of the State of Ohio hereafter enacted
whereby the rights, powers or privileges of corporations or of the shareholders
of corporations organized under the laws of the State of Ohio are increased or
diminished or are in any way affected, or whereby effect is given to the action
taken by any number, less than all, of the shareholders of any such
corporation, shall apply to the Corporation and shall be binding not only upon
the Corporation but upon every shareholder of the Corporation to the same
extent as if such statute had been in force at the date of filing of these
Articles of Incorporation of the Corporation in the office of the Secretary of
State of Ohio.
NINTH: The right to amend, alter, change or repeal any clause or provision
of these Articles of Incorporation, in the manner now or hereafter prescribed
by law, is hereby reserved to the Corporation; and all rights conferred on
officers, Directors and shareholders herein are granted subject to such
reservation.
33
<PAGE> 1
EXHIBIT 3(b)
REGULATIONS
OF
CLEVELAND-CLIFFS INC
(These Regulations were adopted by the sole shareholder by unanimous written
action pursuant to Section 1701.54 of the Ohio Revised Code on February 25,
1985.)
ARTICLE I
SHAREHOLDERS' MEETINGS
SECTION 1. ANNUAL MEETING
The annual meeting of shareholders shall be held at 3:00 o'clock p.m., on
the fourth Wednesday in April in each year, if not a legal holiday, and if a
legal holiday, then on the next day not a legal holiday, or, if in any
particular year the date and time so determined for the annual meeting shall
not be acceptable to a majority of the Directors, then such annual meeting
shall be held on such other date and time during such year as shall be fixed
and approved by a majority of the Directors, for the election of Directors and
the consideration of reports to be laid before such meeting. Upon due notice,
there may also be considered and acted upon at an annual meeting any matter
which could properly be considered and acted upon at a special meeting, in
which case and for which purpose the annual meeting shall also be considered
as, and shall be, a special meeting. When the annual meeting is not held or
Directors are not elected thereat, they may be elected at a special meeting
called for that purpose.
SECTION 2. SPECIAL MEETINGS
Special meetings of shareholders may be called by the Chairman or the
President or a Vice President, or by the Directors by action at a meeting, or
by three or more of the Director acting without a meeting, or by the person or
persons who hold not less than twenty-five percent of all shares outstanding
and entitled to be voted on any proposal to be subjected at said meeting.
Upon request in writing delivered either in person or by registered mail to
the president or Secretary by any person or persons entitled to call a meeting
of shareholders, such officer shall forthwith cause to be given, to the
shareholders entitled thereto, notice of a meeting to be held not less than
twenty nor more than sixty days after the receipt of such request, as such
officer shall fix. If such notice is not given within twenty days after the
delivery or mailing of such request, the person or persons calling the meeting
may fix the time of meeting and give, or cause to be given, notice in the
manner hereinafter provided.
SECTION 3. PLACE OF MEETINGS
Any meeting of shareholders may be held either at the principal office of
the Company or at such other place within or without the State of Ohio as may
be designated in the notice of said meeting.
SECTION 4. NOTICE OF MEETINGS
Not more than sixty days nor less than twenty days before the date fixed
for a meeting of shareholders, whether annual or special, written notice of the
time, place and purposes of such meeting shall be given by or at the direction
of the Chairman, the President, a Vice President, the Secretary or an Assistant
Secretary. Such notice shall be given either by personal delivery or by mail to
each shareholder of record entitled to notice of such meeting. If such notice
is mailed, it shall be addressed to the shareholders at their respective
addresses as they appear on the records of the
<PAGE> 2
Company, and notice shall be deemed to have been given on the day so mailed.
Notice of adjournment of a meeting need not be given if the time and place to
which it is adjourned are fixed and announced at such meeting.
SECTION 5. SHAREHOLDERS ENTITLED TO NOTICE AND TO VOTE
If the record date shall not be fixed pursuant to statutory authority, the
record date for the determination of the shareholders who are entitled to
notice of a Meeting of shareholders shall be the close of business on the date
next preceding the day on which such notice is given and the record date for
the determination of shareholders who are entitled to vote at such a meeting of
shareholders shall be the close of business on the date next preceding the day
on which the meeting is held.
SECTION 6. QUORUM
To constitute a quorum at any meeting of shareholders, there shall be
present in person or by proxy shareholders of record entitled to exercise not
less than a majority of the voting power of the Company in respect of any one
of the purposes for which the meeting is called.
The shareholders present in person or by proxy, whether or not a quorum be
present, may adjourn the meeting from time to time.
ARTICLE II
DIRECTORS
SECTION 1. ELECTION, NUMBER AND TERM OF OFFICE
The Directors shall be elected at the annual meeting of shareholders, or if
not so elected. at a special meeting of shareholders called for that purpose,
and each Director shall hold office until the date fixed by these Regulations
for the next succeeding annual meeting of shareholders and until his successor
is elected, or until his earlier resignation, removal from office, or death. At
any meeting of shareholders at which Directors are to be elected, only persons
nominated as candidates shall be eligible for election.
The number of Directors, which shall not be less than three, may be fixed
or changed at a meeting of the shareholders called for the purpose of electing
Directors at which a quorum is present, by the affirmative vote of the holders
of a majority of the shares represented at the meeting and entitled to vote on
such proposal. In case the shareholders at any meeting for the election of
Directors shall fail to fix the number of Directors to be elected, the number
elected shall be deemed to be the number of Directors so fixed.
The number of Directors fixed as hereinabove in this Section provided may
also be increased or decreased by the Directors at a meeting or by action
without a meeting, and the number of Directors as so changed shall be the
number of Directors until further changed in accordance with this Section;
provided, that no such decrease in the number of Directors shall result in the
removal of any incumbent Director or in the reduction of the term of any
incumbent Director. Any decrease in the number of Directors to less than the
number of Directors then in office shall become effective as the resignation,
removal from office, death or expiration of the term of any incumbent Director
occurs. In the event that the Directors increase the number of Directors, the
Directors who are in office may fill any vacancy created thereby.
SECTION 2. QUORUM
A majority of the number of Directors then in office shall be necessary to
constitute a quorum for the transaction of business, but if at any meeting of
the Directors there shall be less than a quorum present, a majority of those
present may adjourn the meeting from time to time without notice other than
announcement at the meeting until a quorum shall attend.
<PAGE> 3
SECTION 3. COMMITTEES
The Directors may from time to time create a committee or committees of
Directors to act in the intervals between meetings of the Directors and may
delegate to such committee or committees any of the authority of the Directors
other than that of filling vacancies among the Directors or in any committee of
the Directors. No committee shall consist of less than three Directors. The
Directors may appoint one or more Directors as alternate members of any such
committee, who may take the place of any absent member or members at any
meeting of such committee.
Unless otherwise ordered by the Directors, a majority of the members of any
committee appointed by the Directors pursuant to this Section shall constitute
a quorum at any meeting thereof, and the act of a majority of the members
present at a meeting at which a quorum is present shall be the act of such
committee. Action may be taken by any such committee without a meeting by a
writing or writings signed by all of its members. Any such committee may
prescribe its own rules for calling and holding meetings and its method of
procedure, subject to any rules prescribed by the Directors, and shall keep a
written record of all action taken by it.
ARTICLE III
OFFICERS
SECTION 1. OFFICERS
The Company may have a Chairman and shall have a President (both of whom
shall be Directors), a Secretary and a Treasurer. The Company may also have one
or more Vice Presidents and such other officers and assistant officers as the
Directors may deem necessary. All of the officers and assistant officers shall
be elected by the Directors.
SECTION 2. AUTHORITY AND DUTIES OF OFFICERS
The officers of the Company shall have such authority and shall perform
such duties as are customarily incident to their respective offices, or as may
be specified from time to time by the Directors regardless of whether such
authority and duties are customarily incident to such office.
ARTICLE IV
INDEMNIFICATION AND INSURANCE
SECTION 1. INDEMNIFICATION
The Company shall indemnify, to the full extent then permitted by law, any
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative, by reason of the fact that he is or
was a Director, officer, employee or agent of the Company, or is or was serving
at the request of the Company as a director, trustee, officer, employee or
agent of another corporation, domestic or foreign, nonprofit or for profit,
partnership, joint venture, trust or other enterprise; provided, however, that
the Company shall indemnify any such agent (as opposed to any director, officer
or employee) of the Company to an extent greater than that required by law only
if and to the extent that the Directors may, in their discretion, so determine.
The indemnification provided hereby shall not be deemed exclusive of any other
rights to which those seeking indemnification may be entitled under any law,
the Articles of Incorporation or any agreement, vote of shareholders or of
disinterested Directors or otherwise, both as to action in official capacities
and as to action in another capacity while he is a Director, officer, employee
or agent, and shall continue as to a person who has ceased to be a Director,
trustee, officer, employee or agent and shall inure to the benefit of heirs,
executors and administrators of such a person.
<PAGE> 4
SECTION 2. INSURANCE
The Company may, to the full extent then permitted by law and authorized by
the Directors, purchase and maintain insurance on behalf of any persons
described in Section 1 of this Article IV against any liability asserted
against and incurred by any such person in any such capacity, or arising out of
his status as such, whether or not the Company would have the power to
indemnify such person against such liability.
ARTICLE V
MISCELLANEOUS
SECTION 1. TRANSFER AND REGISTRATION OF CERTIFICATES
The Directors shall have authority to make or adopt such rules and
regulations as they deem expedient concerning the issuance, transfer and
registration of certificates for shares and the shares represented thereby and
may appoint transfer agents and registrars thereof.
SECTION 2. SUBSTITUTED CERTIFICATES
Any person claiming a certificate for shares to have been lost, stolen or
destroyed shall make an affidavit or affirmation of that fact and, if required
by the Directors, shall give the Company and its registrar or registrars and
its transfer agent or agents a bond of indemnity satisfactory to the Directors
or to the President or a Vice President and the Secretary or the Treasurer,
and, if required by the Directors or such officers, shall advertise the same in
such manner as may be required, whereupon a new certificate may be executed and
delivered of the same tenor and for the same number of shares as the one
alleged to have been lost, stolen or destroyed.
SECTION 3. CORPORATE SEAL
The seal of the Company shall be circular in form with the name of the
Company stamped around the margin and the words "Corporate Seal" stamped across
the center.
SECTION 4. AMENDMENTS
These Regulations may be amended by the affirmative vote of the share
holders of record entitled to exercise a majority of the voting power on such
proposal.
<PAGE> 1
EXHIBIT 4(k)
NUMBER
CU 17750 COMMON SHARES
THIS CERTIFICATE IS TRANSFERABLE
IN CLEVELAND OR IN NEW YORK
CUSIP 185896 10 7
See Reverse For Certain Definitions
Incorporated Under The Laws Of The State of Ohio.
CLEVELAND-CLIFFS INC
========================================================================
| Certificate Number | Reference | Date | Shares |
| | | | |
========================================================================
THIS CERTIFIES THAT
IS THE OWNER OF
FULLY PAID AND NON-ASSESSABLE COMMON SHARES OF THE PAR VALUE OF
ONE DOLLAR EACH OF
Cleveland-Cliffs Inc, transferable on the books of the Company by the
registered holder in person or by duly authorized attorney, upon surrender of
this certificate properly endorsed. This certificate and the shares
represented hereby are issued and shall be held subject to all the provisions
of the Articles of the Company filed in the office of the Secretary of State of
Ohio / copies of which are on file with the Company and with the Transfer Agent
/ to which the holder by acceptance hereof assents. This certificate is not
valid unless countersigned by the Transfer Agent and registered by the
Registrar.
Witness the seal of the Company and the signatures of its duly
authorized officers.
/s/ John E. Lenhard /s/ M. Thomas Moore
Secretary [CORPORATE SEAL] Chairman and Chief
[CLEVELAND-CLIFFS INC] Executive Officer
Countersigned and registered:
SOCIETY NATIONAL BANK
(Cleveland, Ohio) Transfer Agent
by And Registrar
/s/ R. Halliz
Authorized Signature
<PAGE> 2
The following abbreviations, when used in the inscription on the face
of this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
<TABLE>
<S> <C>
TEN COM - as tenants in common UNIF GIFT MIN ACT - ................Custodian.................
(Cust) (Minor)
TEN ENT - as tenants by the entireties under Uniform Gifts to Minors
JT TEN - as joint tenants with right of Act........................
survivorship and not as tenants (State)
in common
Additional abbreviations may also be used though not in the above list.
</TABLE>
CLEVELAND-CLIFFS INC
A COPY OF THE EXPRESS TERMS OF THE SHARES REPRESENTED BY THIS
CERTIFICATE AND OF ALL OTHER CLASSES AND SERIES OF SHARES WHICH
CLEVELAND-CLIFFS INC IS AUTHORIZED TO ISSUE WILL BE MADE TO ANY SHAREHOLDER
WITHOUT CHARGE WITHIN FIVE DAYS AFTER RECEIPT FROM SUCH SHAREHOLDER OF A WRITTEN
REQUEST THEREFOR, SUCH REQUESTS SHOULD BE ADDRESSED TO THE SECRETARY OF
CLEVELAND-CLIFFS INC, 18TH FLOOR, DIAMOND BUILDING, 1100 SUPERIOR AVENUE,
CLEVELAND, OHIO 44114-2589.
For value received_________hereby sell, assign and transfer under
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
____________________________
| |
|____________________________| _______________________________________________
_______________________________________________________________________________
PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS INCLUDING POSTAL ZIP CODE OF
ASSIGNEE.
_______________________________________________________________________________
_______________________________________________________________________________
_________________________________________________________________________Shares
represented by the within Certificate and do hereby irrevocably constitute and
appoint_________________________________________________________________________
________________________________________________________________________________
Attorney to transfer the said shares on the books of the within named Company
with full power of substitution in the premises.
Dated____________________________________
X______________________________________
This Certificate also evidences and entitles the holder hereof to
certain Rights as set forth in a Rights Agreement between Cleveland-Cliffs Inc
and Society National Bank, dated as of September 8, 1987, amended and restated
as of November 19, 1991 and as may be further amended from time to time (the
"Rights Agreement"), the terms of which are hereby incorporated herein by
reference and a copy of which is on file at the principal executive offices of
Cleveland-Cliffs Inc. Under certain circumstances, as set forth in the Rights
Agreement, such Rights will be evidenced by separate certificates and will no
longer be evidenced by this Certificate. Cleveland-Cliffs Inc will mail to the
holder of this Certificate a copy of the Rights Agreement without charge within
five business days after receipt of a written request therefor. Under certain
circumstances, Rights benefically owned by an Acquiring Person or any Affiliate
or Associate thereof (as such terms are defined in the Rights Agreement) and any
subsequent holder of such Rights may become null and void.
NOTICE: THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH
X THE NAME AS WRITTEN UPON THE FACE OF THE CERTIFICATE, IN EVERY
PARTICULAR, WITHOUT ALTERATION OR ENLARGEMENT, OR ANY CHANGE
WHATEVER.
<PAGE> 1
EXHIBIT 4(l)
______________________________________________________________________________
CLEVELAND-CLIFFS INC
and
AMERITRUST COMPANY NATIONAL ASSOCIATION
RIGHTS AGREEMENT
Dated as of September 8, 1987
Amended and Restated as of November 19, 1991
______________________________________________________________________________
<PAGE> 2
<TABLE>
TABLE OF CONTENTS
<CAPTION>
PAGE
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<S> <C> <C>
RECITALS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1. Certain Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 2. Appointment of Rights Agent . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 3. Issue of Right Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 4. Form of Right Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 5. Countersignature and Registration . . . . . . . . . . . . . . . . . . . . . . . 13
Section 6. Transfer, Split Up, Combination and
Exchange of Right Certificates;
Mutilated, Destroyed, Lost or Stolen
Right Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 7. Exercise of Rights; Purchase Price;
Expiration Date of Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 8. Cancellation and Destruction of
Right Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 9. Reservation and Availability of
Common Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 10. Common Shares Record Date . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 11. Adjustment of Purchase Price, Number
and Type of Shares or Number of Rights . . . . . . . . . . . . . . . . . . . . 24
Section 12. Certificate of Adjusted Purchase
Price or Number of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Section 13. Notice of Adjusted Purchase Price
or Number or Type of Shares to
Holders of Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Section 14. Fractional Rights and Fractional Shares . . . . . . . . . . . . . . . . . . . . 46
Section 15. Rights of Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Section 16. Agreement of Rights Holders . . . . . . . . . . . . . . . . . . . . . . . . . . 49
</TABLE>
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<PAGE> 3
<TABLE>
TABLE OF CONTENTS
(continued)
<CAPTION>
PAGE
----
<S> <C> <C>
Section 17. Right Certificate Holder Not Deemed
a Shareholder . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Section 18. Concerning the Rights Agent . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Section 19. Merger or Consolidation or Change
of Name of Rights Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Section 20. Duties of Rights Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
Section 21. Change of Rights Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
Section 22. Issuance of New Right Certificates . . . . . . . . . . . . . . . . . . . . . . 60
Section 23. Redemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
Section 24. Notice of Certain Events . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
Section 25. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
Section 26. Supplements and Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . 65
Section 27. Exchange . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
Section 28. Successors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
Section 29 Benefits of this Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . 69
Section 30. Action by Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
Section 31. Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
Section 32. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
Section 33. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
Section 34. Descriptive Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
Exhibit A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-1
Exhibit B . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-1
</TABLE>
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<PAGE> 4
Rights Agreement, dated as of September 8, 1987, amended and restated
as of November 19, 1991 ("Agreement"), between Cleveland-Cliffs Inc, an Ohio
corporation (the "Company"), and Ameritrust Company National Association (the
"Rights Agent").
RECITALS
--------
The Directors of the Company have authorized and declared a dividend
consisting of one right ("Right") for each Common Share, $1.00 par value, of
the Company ("Common Share") outstanding as of the Close of business on
September 18, 1987 (the "Record Date"), each Right representing the right to
purchase one-hundredth of one Common Share, and have authorized the issuance of
one Right with respect to each Common Share issued after the Record Date but
prior to the earlier of the Distribution Date (in the case of Common Shares
issued upon conversion of the Company's convertible securities, prior to the
tenth day after the Distribution Date), and the Expiration Date (each as
hereinafter defined), including, without limitation, Common Shares issued upon
conversion of the Company's convertible securities and upon exercise of
employee stock options and Common Shares which are treasury shares as of the
Record Date and subsequently become outstanding.
Accordingly, in consideration of the premises and the mutual
agreements herein set forth, the parties hereby agree as follows:
<PAGE> 5
Section 1. CERTAIN DEFINITIONS. For purposes of this Agreement, the
following terms have the meanings indicated:
(a) "Acquiring Person" shall mean any Person (other than
the Company or any Subsidiary or any employee benefit or stock
ownership plan of the Company or of any Subsidiary or any entity
holding Common Shares for or pursuant to the terms of any such plan)
who or which, together with all Affiliates and Associates of such
Person, shall be the Beneficial Owner of 15% or more of the Common
Shares than outstanding; PROVIDED, HOWEVER, that a Person shall not be
deemed to have become an Acquiring Person solely as a result of a
reduction in the number of Common Shares outstanding unless and until
(i) such time as such Person or any Affiliate or Associate of such
Person shall thereafter become the Beneficial Owner of any additional
Common Shares, other than as a result of a stock dividend, stock split
or similar transaction effected by the Company in which all holders of
Common Shares are treated equally, or (ii) any other Person who is the
Beneficial Owner of any Common Shares shall thereafter become an
Affiliate or Associate of such person.
(b) "Affiliate" and "Associate" shall have the
respective meanings ascribed to such terms in Rule 12b-2 of the
General Rules and Regulations under the Securities Exchange Act of
1934, as amended (the "Exchange Act"), as in effect on the date
hereof.
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<PAGE> 6
(c) A Person shall be deemed the "Beneficial Owner" of,
and to "beneficially own," any securities:
(i) which such Person or any of such Person's
Affiliates or Associates, directly or indirectly, has the
right to acquire (whether such right is exercisable
immediately or only after the passage of time) pursuant to any
agreement, arrangement or understanding (whether or not in
writing), or upon the exercise of conversion rights, exchange
rights, rights, warrants or options, or otherwise (in each
case, other than upon exercise or exchange of the Rights);
PROVIDED, HOWEVER, that a Person shall not be deemed the
Beneficial Owner of, or to beneficially own, securities
tendered pursuant to a tender or exchange offer made by or on
behalf of such Person or any of such Person's Affiliates or
Associates until such tendered securities are accepted for
purchase or exchange; or
(ii) which such Person or any of such Person's
Affiliates or Associates, directly or indirectly, has the
right to vote or dispose of, including pursuant to any
agreement, arrangement or understanding (whether or not in
writing); or
(iii) of which any other Person is the Beneficial
Owner, if such Person or any of such Person's Affiliates or
Associates has any agreement,
-3-
<PAGE> 7
arrangement or understanding (whether or not in writing) with
such other Person (or any of such other Person's Affiliates or
Associates) with respect to acquiring, holding, voting or
disposing of any securities of the Company;
PROVIDED, HOWEVER, that a Person shall not be deemed the Beneficial
Owner of, or to beneficially own, any security (A) if such Person has
the right to vote such security pursuant to an agreement, arrangement
or understanding (whether or not in writing) which (1) arises solely
from a revocable proxy given to such Person in response to a public
proxy or consent solicitation made pursuant to, and in accordance
with, the applicable rules and regulations of the Exchange Act and (2)
is not also then reportable on Schedule 13D under the Exchange Act (or
any comparable or successor report), or (B) if such beneficial
ownership arises solely as a result of such Person's status as a
"clearing agency," as defined in Section 3(a)(23) of the Exchange Act;
and PROVIDED, FURTHER, that nothing in this paragraph (c) shall cause a
Person engaged in business as an underwriter of securities to be the
Beneficial Owner of, or to beneficially own, any securities acquired
through such Person's participation in good faith in an underwriting
syndicate until the expiration of 40 calendar days after the date of
such acquisition, or such later date as the Board of Directors; of the
Company may determine in any specific case.
-4-
<PAGE> 8
(d) "Business Day" shall mean any day other than a
Saturday, Sunday, or a day on which banking institutions in the States
of Ohio and New York are authorized or obligated by law or executive
order to close.
(e) "Close of business" on any given date shall mean 5:00
P.M., Cleveland, Ohio time, on such date; PROVIDED, HOWEVER, that if
such date is not a Business Day it shall mean 5:00 P.M., Cleveland,
Ohio time, on the next succeeding Business Day.
(f) "Common Shares" when used with reference to the
Company shall mean the Common Shares, par value, $1.00 per share, of
the Company; PROVIDED that, if the Company is the continuing or
surviving corporation in a transaction described in Section 11(d)(ii)
hereof, "Common Shares" when used with reference to the Company shall
mean the capital stock with the greatest aggregate voting power of the
Company, or, if the Company is a subsidiary of another corporation or
business trust, the corporation or business trust which ultimately
controls the Company. "Common Shares" when used with reference to any
corporation or business trust, other than the Company, shall mean the
capital stock with the greatest aggregate voting power of such
corporation or business trust, or, if such corporation or business
trust is a subsidiary of another corporation or
-5-
<PAGE> 9
business trust, the corporation or business trust which ultimately
controls such first-mentioned corporation or business trust.
(g) "Distribution Date" shall mean the earliest of: (i)
the close of business on the tenth Business Day (or, unless the
Distribution Date shall have previously occurred, such later date as
may be specified by the Board of Directors of the Company) after the
Share Acquisition Date, (ii) the close of business on the tenth
Business Day (or, unless the Distribution Date shall have previously
occurred, such later date as may be specified by the Board of
Directors of the Company) after the date of the commencement of a
tender or exchange offer by any Person (other than the Company or any
Subsidiary or any employee benefit or stock ownership plan of the
Company or of any Subsidiary or any entity holding Common Shares for
or pursuant to the terms of any such plan), if upon the consummation
thereof such Person would be the Beneficial Owner of 15% or more of
the outstanding Common Shares, and (iii) the close of business on the
tenth Business Day after the first date of public announcement by the
Company or an Acquiring Person (by press release, filing made with the
Securities and Exchange Commission or otherwise) of the first
occurrence of a Triggering Event.
-6-
<PAGE> 10
(h) "Expiration Date" shall mean the earliest of (i) the
close of business on the Final Expiration Date, (ii) the time at which
the Rights are redeemed as provided in Section 23 hereof, and (iii)
the time at which all exercisable Rights are exchanged as provided in
Section 27 hereof.
(i) "Final Expiration Date" shall mean the tenth
anniversary of the Record Date.
(j) "Flip-in Event" shall mean any event described in
clauses (A), (B) or (C) of Section 11(a)(ii) hereof.
(k) "Flip-over Event" shall mean any event described in
clauses (i), (ii) or (iii) of Section 11(d) hereof.
(l) "Person" shall mean any individual, firm, corporation
or other entity, and shall include any successor (by merger or
otherwise) of such entity.
(m) "Share Acquisition Date" shall mean the first date of
public announcement by the Company or an Acquiring Person (by press
release, filing made with the Securities and Exchange Commission or
otherwise) that an Acquiring Person has become such.
(n) "Subsidiary" shall mean any corporation or other
entity of which a majority of the voting power of the voting equity
securities or equity interests is owned, directly or indirectly, by
the Company.
(o) "Triggering Event" shall mean any Flip-in Event or
Flip-over Event.
-7-
<PAGE> 11
Section 2. APPOINTMENT OF RIGHTS AGENT. The Company hereby appoints
the Rights Agent to act as agent for the Company and the holders of the Rights
(who, in accordance with Section 3 hereof, shall also be, prior to the
Distribution Date, the holders of the Common Shares) in accordance with the
terms and conditions here on, and the Rights Agent hereby accepts such
appointment and hereby certifies that it complies with the requirements of the
New York Stock Exchange governing transfer agents and registrars. The Company
may from time to time act as Co-Rights Agent or appoint such Co-Rights Agents
as it may deem necessary or desirable. Any actions which may be taken by the
Rights Agent pursuant to the terms of this Agreement may be taken by any such
Co-Rights Agent. To the extent that any Co-Rights Agent takes any action
pursuant to this Agreement, such Co-Rights Agent shall be entitled to all of
the rights and protections of, and subject to all of the applicable duties and
obligations imposed upon, the Rights Agent pursuant to the terms of this
Agreement.
Section 3. ISSUE OF RIGHT CERTIFICATES. (a) Until the Distribution
Date (x) the Rights will be evidenced (subject to the provisions of paragraph
(b) of this Section 3) by the certificates for Common Shares registered in the
names of the record holders thereof (which certificates for Common Shares shall
also be deemed to be Right Certificates) and not by separate Right
Certificates, and (y) the right to receive
-8-
<PAGE> 12
Right Certificates will be transferable only in connection with the transfer of
Common Shares in the stock transfer books of the Company maintained by the
Company or its appointed transfer agent. As soon as practicable after the
Distribution Date, the Rights Agent will send, by first class, insured, postage
prepaid mail, to each record holder of Common Shares as of the close of
business on the Distribution Date, at the address of such holder shown on the
records of the Company, a Right Certificate, in substantially the form of
Exhibit A hereto, evidencing one Right for each Common Share so held, subject
to adjustment, together with a notice setting forth the Purchase Price (as
defined in Section 4 hereof) as in effect on the Distribution Date. As of the
Distribution Date, the Rights will be evidenced solely by such Right
Certificates.
Any Right Certificate issued pursuant to this Section 3 that
represents Rights beneficially owned by an Acquiring Person or any Associate or
Affiliate thereof and any Right Certificate issued at any time upon the
transfer of any Rights to an Acquiring Person or any Associate or Affiliate
thereof or to any nominee of such Acquiring Person, Associate or Affiliate, and
any Right Certificate issued pursuant to Sections 6 or 11 hereof upon transfer,
exchange, replacement or adjustment of any other Right Certificate referred to
in this sentence, shall be subject to and contain the following legend or such
similar legend as the Company may deem appropriate and
-9-
<PAGE> 13
as is not inconsistent with the provisions of this Agreement, or as may be
required to comply with any applicable law or with any rule or regulation made
pursuant thereto or with any rule or regulation of any stock exchange on which
the Rights may from time to time be listed, or to conform to usage:
The Rights represented by this Right Certificate were issued
to or acquired by a Person who was an acquiring Person or an
Affiliate or an Associate of an Acquiring Person (as such
terms are defined in the Rights Agreement). This Right
Certificate and the Rights represented hereby may become null
and void in the circumstances specified in Section 11(a)(ii)
or Section 11(d) of the Rights Agreement.
(b) On the Record Date or as soon as practicable
thereafter, the Company will send a copy of a Summary of Rights to Purchase
Common Shares, in substantially the form attached hereto as Exhibit B (the
"Summary of-Rights"), by first-class, postage prepaid mail, to each record
holder of Common Shares as of the close of business on the Record Date, at the
address of such holder shown on the records of the Company as of such date.
With respect to certificates for Common Shares outstanding as of the Record
Date, until the Distribution Date, the Rights will be evidenced by such
certificates for Common Shares registered in the names of the holders thereof.
Until the earlier of the Distribution Date and the Expiration Date, the
surrender for transfer of any certificate for Common Shares outstanding on the
Record Date shall also constitute the transfer of the Rights associated with
the Common Shares represented thereby.
-10-
<PAGE> 14
(c) Certificates for Common Shares issued (including,
without limitation, any certificates for Common Shares issued upon conversion
of the Company's convertible securities or upon exercise of stock options) or
surrendered for transfer or exchange after the Record Date but prior to the
earlier of the Distribution Date or the Expiration Date, shall have stamped on,
impressed on, printed on, written on or otherwise affixed to them the following
legend or such similar legend as the Company may deem appropriate and as is not
inconsistent with the provisions of this Agreement, or as may be required to
comply with any applicable law or with any rule or regulation made pursuant
thereto or with any rule or regulation of any stock exchange on which the
Common Shares or the Rights may from time to time be listed, or to conform to
usage:
This Certificate also evidences and entitles the holder hereof
to certain Rights as set forth in a Rights Agreement between
Cleveland-Cliffs Inc and AmeriTrust Company National
Association, dated as of September 8, 1987, amended and
restated as of November 19, 1991 and as may be further amended
from time to time (the "Rights Agreement"), the terms of which
are hereby incorporated herein by reference and a copy of
which is on file at the principal executive offices of
Cleveland-Cliffs Inc. Under certain circumstances, as set
forth in the Rights Agreement, such Rights will be evidenced
by separate certificates and will no longer be evidenced by
this Certificate. Cleveland-Cliffs Inc will mail to the holder
of this Certificate a copy of the Rights Agreement without
charge within five business days after receipt of a written
-11-
<PAGE> 15
request there for. Under certain circumstances, Rights
beneficially owned by an Acquiring person or any Affiliate or
Associate thereof (as such terms are defined in the Rights
Agreement) and any subsequent holder of such Rights may become
null and void.
With respect to certificates containing the legend described above, until the
Distribution Date, the Rights associated with the Common Shares represented by
such certificates shall be evidenced by such certificates alone, and the
surrender for transfer of any such certificate shall also constitute the
surrender for transfer of the Rights associated with the Common Shares
represented thereby.
Section 4. FORM OF RIGHT CERTIFICATES. The Right Certificates (and the
forms of election to purchase shares and of assignment to be printed on the
reverse thereof) shall be substantially the same as Exhibit A hereto with such
changes, marks of identification or designation and such legends, summaries or
endorsements printed thereon as the Company may deem appropriate and as are not
inconsistent with the provisions of this Agreement, or as may be required to
comply with any applicable law or with any rule or regulation made pursuant
thereto or with any rule or regulation of any stock exchange on which the
Rights may from time to time be listed, or to conform to usage. Subject to the
provisions of Sections 11 and 22 hereof, the Right Certificates, whenever
issued, shall be dated as of the Record Date, and on their face shall entitle
the holders thereof to purchase such number of Common
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<PAGE> 16
Shares as shall be set forth therein at the price per whole share set forth
therein (the "Purchase Price"), but the number of such shares and the Purchase
Price shall be subject to adjustment as provided herein.
Section 5. COUNTERSIGNATURE AND REGISTRATION. The Right Certificates
shall be executed on behalf of the Company by its Chairman of the Board,
President or any Vice President, either manually or by facsimile signature, and
have affixed thereto the Company's seal or a facsimile thereof which shall be
attested by the Secretary or an Assistant Secretary of the Company, either
manually or by facsimile signature. The Right Certificates shall be manually
countersigned by the Rights Agent and shall not be valid for any purpose unless
so countersigned. In case any officer of the Company who shall have signed any
of the Right Certificates shall cease to be such officer of the Company before
countersignature by the Rights Agent and issuance and delivery by the Company,
such Right Certificates, nevertheless, may be countersigned by the Rights
Agent, and issued and delivered by the Company with the same force and effect
as though the person who signed such Right Certificates had not ceased to be
such officer of the Company; and any Right Certificate may be signed on behalf
of the Company by any person who, at the actual date of the execution of such
Right Certificate, shall be a proper officer of the company to sign such Right
Certificate, although at the
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<PAGE> 17
date of the execution of this Rights Agreement any such person was not such an
officer.
Following the Distribution Date, the Rights Agent will keep or cause
to be kept, at one of its offices in Cleveland, Ohio, books for registration
and transfer of the Right Certificates issued hereunder. Such books shall show
the names and addresses of the respective holders of the Right Certificates,
the number of Rights evidenced on its face by each of the Right Certificates
and the date of each of the Right Certificates.
Section 6. TRANSFER, SPLIT UP, COMBINATION AND EXCHANGE OF RIGHT
CERTIFICATES; MUTILATED, DESTROYED, LOST OR STOLEN RIGHT CERTIFICATES. Subject
to the provisions of Sections 7(e) and 14 hereof, at any time after the close
of business on the Distribution Date, and at or prior to the close of business
on the Expiration Date, any Right Certificate or Certificates may be
transferred, split up, combined or exchanged for another Right Certificate or
Right Certificates, entitling the registered holder to purchase a like number
of Common Shares as the Right Certificate or Right Certificates surrendered
then entitled such holder to purchase. Any registered holder desiring to
transfer, split up, combine or exchange any Right Certificate, shall make such
request in writing delivered to the Rights Agent, and shall surrender the Right
Certificate or Right Certificates to be transferred,
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<PAGE> 18
split up, combined or exchanged at the principal office of the Rights Agent in
Cleveland, Ohio. Thereupon the Rights Agent shall countersign and deliver to
the person entitled thereto a Right Certificate or Right Certificates, as the
case may be, as so requested. The Company may require payment of a sum
sufficient to cover any tax or governmental charge that may be imposed in
connection with any transfer, split up, combination or exchange of Right
Certificates.
Upon receipt by the Company and the Rights Agent of evidence
reasonably satisfactory to them of the loss, theft, destruction or mutilation
of a Right Certificate, and, in case of loss, theft or destruction, of
indemnity or security reasonably satisfactory to them, and reimbursement to the
Company and the Rights Agent of all reasonable expense incidental thereto, and
upon surrender to the Rights Agent, and cancellation of the Right Certificate
if mutilated, the Company will make and deliver a new Right Certificate of like
tenor to the Rights Agent for delivery to the registered owner in lieu of the
Right Certificate so lost, stolen, destroyed or mutilated.
Section 7. EXERCISE OF RIGHTS; PURCHASE PRICE; EXPIRATION DATE OF
RIGHTS (a) The registered holder of any Right Certificate may exercise the
Rights evidenced thereby (except as otherwise provided herein) in whole or in
part at any time after the Distribution Date and prior to the
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<PAGE> 19
Expiration Date, upon surrender of the Right Certificate, with the form of
election to purchase on the reverse side thereof duly executed, to the Rights
Agent at the principal office of the Rights Agent in Cleveland, Ohio, together
with payment in cash, in lawful money of the United States of America by
certified check or bank draft payable to the order of the Company, equal to the
sum of (i) the exercise price for the total number of securities as to which
such surrendered Rights are exercised and (ii) an amount equal to any
applicable transfer tax required to be paid by the holder of such Right
Certificate in accordance with the provisions of Section 9 hereof. In lieu of
the cash payment referred to in the immediately preceding sentence, following
the occurrence of a Triggering Event the registered holder of a Right
Certificate may exercise the Rights evidenced thereby (except as otherwise
provided herein) in whole or in part upon surrender of the Right Certificate as
described above together with an election to exercise such Rights without
payment of cash on the reverse side thereof duly completed. With respect to any
Rights as to which such an election made, the holder shall receive a number of
Common Shares or other securities having a value equal to the difference
between (i) the value of the Common Shares or other securities that would have
been issuable upon payment of the cash amount as described above, and (ii) the
amount of such cash payment. For purposes of this
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<PAGE> 20
Section 7(a), the value of any security shall be the current per share market
price thereof determined pursuant to the applicable provisions of Section 11(e)
hereof, on the Trading Day (as defined in Section 11(e)) immediately preceding
the date of the first occurrence of a Triggering Event.
(b) The Purchase Price shall initially be $85 (equivalent
to $.85 for each one-hundredth of a Common Share), and shall be subject to
adjustment from time to time as provided in Section 11 hereof and shall be
payable in lawful money of the United States of America in accordance with
paragraph (c) below.
(c) Upon receipt of a Right Certificate representing
exercisable Rights, with the form of election to purchase duly executed,
accompanied by (y) a duly completed election to exercise without payment of
cash or (z) payment of the Purchase Price for the shares to be purchased and an
amount equal to any applicable transfer tax in cash, or by certified check or
bank draft payable to the order of the Rights Agent, the Rights Agent shall
thereupon promptly (i) requisition from any transfer agent of the Common Shares
(or make available, if the Rights Agent is the transfer agent) certificates for
the number of whole Common Shares to be purchased and the Company hereby
irrevocably authorizes its transfer agent to comply with all such requests,
(ii) when appropriate, requisition from the
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<PAGE> 21
Company the amount of cash to be paid or depositary receipts to be issued in
lieu of the issuance of fractional shares in accordance with Section 14 hereof
or the amount of cash to be paid in lieu of the issuance of Common Shares in
accordance with Sections 11(a)(iii) or 11(d) hereof, (iii) promptly after
receipt of such certificates (or depositary receipts, when appropriate), cause
the same to be delivered to or upon the order of the registered holder of such
Right Certificate, registered in such name or names as may be designated by
such holder and (iv) when appropriate, after receipt promptly deliver such cash
to or upon the order of the registered holder of such Right Certificate.
(d) In case the registered holder of any Right
Certificate shall exercise less than all the Rights evidenced thereby, a new
Right Certificate evidencing Rights equivalent to the Rights remaining
unexercised shall be issued by the Rights Agent to the registered holder of
such Right Certificate or to his duly authorized assigns, subject to the
provisions of Section 14 hereof.
(e) Notwithstanding anything in this Agreement to the
contrary, neither the Rights Agent nor the Company shall be obligated to
undertake any action with respect to any purported transfer, split up,
combination or exchange of any Right Certificate pursuant to Section 6 hereof
or the exercise
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of a Right Certificate as set forth in this Section 7 unless the registered
holder of such Right Certificate shall have (i) completed and signed the
certificate following the form of assignment or form of election to purchase,
as applicable, set forth on the reverse side of the Right Certificate
surrendered for such transfer, split up, combination, exchange or exercise, and
(ii) provided such additional evidence of the identity of the Beneficial Owner
(or former Beneficial Owner) or Affiliates or Associates thereof as the Company
shall have reasonably requested.
Section 8. CANCELLATION AND DESTRUCTION OF RIGHT CERTIFICATES. All
Right Certificates surrendered for the purpose of exercise, transfer, split up,
combination or exchange shall, if surrendered to the Company or to any of its
stock transfer agents, be delivered to the Rights Agent for cancellation or in
cancelled form, or, if surrendered to the Rights Agent, shall be cancelled by
it, and no Right Certificates shall be issued in lieu thereof except as
expressly permitted by any of the provisions of this Agreement. The Company
shall deliver to the Rights Agent for cancellation and retirement, and the
Rights Agent shall so cancel and retire, any other right Certificate purchased
or acquired by the Company otherwise than upon the exercise thereof. The Rights
Agent shall deliver all cancelled Right Certificates to the Company, or shall,
at the written request
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of the Company, destroy such cancelled Right Certificates, and in such case
shall deliver a certificate of destruction thereof to the Company.
Section 9. RESERVATION AND AVAILABILITY OF COMMON SHARES. The Company
covenants and agrees that it will cause to be reserved and kept available out
of its authorized and unissued Common Shares or any authorized and issued
Common Shares held in its treasury the number of Common Shares that will be
sufficient to permit the exercise pursuant to Section 7 hereof of all
outstanding Rights; such number of Common Shares reserved and kept available
shall be adjusted from time to time, if and to the extent required, upon the
occurrence of any of the events described in Section 11 hereof.
So long as the Company's Common Shares are listed on a national
securities exchange, the Company shall endeavor to cause, from and after such
time as the Rights become exercisable, all Common Shares reserved for issuance
upon exercise of the Rights to be listed on such exchange upon official notice
of issuance.
The Company covenants and agrees that it will take all such action as
may be necessary to ensure that all Common Shares delivered upon exercise of
Rights shall be, at the time of delivery of the certificates for such shares
(subject to payment of the Purchase Price), duly and validly authorized and
issued, fully paid, non assessable and freely tradeable shares,
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free and clear of any liens, encumbrances and other adverse claims and not
subject to any rights of call or first refusal.
The Company further covenants and agrees that it will pay when due and
payable any and all federal and state transfer taxes and charges which may be
payable in respect of the issuance or delivery of the Right Certificates or of
any Common Shares upon the exercise of Rights. The Company shall not, however,
be required to pay any transfer tax which may be payable in respect of any
transfer or delivery of Right Certificates to a person other than, or the
issuance or delivery of certificates for the Common Shares in a name other than
that of, the registered holder of the Right Certificates evidencing Rights
surrendered for exercise, or to issue or deliver any certificates for Common
Shares upon the exercise of any Rights until any such tax shall have been paid
(any such tax being payable by the holder of such Right Certificate at the time
of surrender) or until it has been established to the Company's satisfaction
that no such tax is due.
The Company also shall use its best efforts (i) to file on an
appropriate form, as soon as practicable following the later of the first
occurrence of a Triggering Event or the Distribution Date, a registration
statement under the Securities Act of 1933, as amended (the "Securities Act"),
with respect to the securities issuable upon exercise of the Rights, (ii) to
cause such registration statement to become effective
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as soon as practicable after such filing, and (iii) to cause such registration
statement to remain effective (with a prospectus at all times meeting the
requirements of the Securities Act) until the earlier of (A) the date as of
which the Rights are no longer exercisable for such securities and (B) the
Expiration Date. The Company shall also take such action as may be appropriate
under, or to ensure compliance with, the securities or "blue sky" laws of the
various states in connection with the exercisability of the Rights. The Company
may temporarily suspend, for a period of time after the date set forth in
clause (i) of the first sentence of this paragraph, the exercisability of the
Rights in order to prepare and file such registration statement and to permit
it to become effective. Upon any such suspension, the Company shall issue a
public announcement stating that the exercisability of the Rights has been
temporarily suspended, as well as a public announcement at such time as the
suspension is no longer in effect. In addition, if the Company shall determine
that a registration statement should be filed under the Securities Act or any
state securities laws following the Distribution Date, the Company may
temporarily suspend the exercisability of the Rights in each relevant
jurisdiction until such time as a registration statement has been declared
effective and, upon any such suspension, the Company shall issue a public
announcement stating that the exercisability of the Rights has
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been temporarily suspended, as well as a public announcement at such time as
the suspension is no longer in effect. Notwithstanding anything in this
Agreement to the contrary, the Rights shall not be exercisable in any
jurisdiction if the requisite registration or qualification in such
jurisdiction shall not have been effected or the exercise of the Rights shall
not be permitted under applicable law.
Notwithstanding anything in this Agreement to contrary, after the
Distribution Date the Company shall not, except as permitted by Section 23 or
Section 26 hereof, take (or permit any Subsidiary to take) any action if at the
time such action is taken it is reasonably foreseeable that such action will
eliminate or otherwise diminish the benefits intended to be afforded by the
Rights.
In the event that the Company is obligated to pay cash pursuant to
Sections 11 or 14 hereof, it shall make all arrangements necessary so that such
cash is available for distribution by the Rights Agent, if and when
appropriate.
Section 10. COMMON SHARES RECORD DATE. Each person in whose name any
certificate for Common Shares is issued upon the exercise of Rights shall for
all purposes be deemed to have become the holder of record of the Common Shares
represented thereby on, and such certificate shall be dated, the date upon
which the Right Certificate evidencing such Rights was duly surrendered and
payment of the Purchase Price (and any
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<PAGE> 27
applicable transfer taxes) was made; provided, however, that if the date of
such surrender and payment is a date upon which the Common Shares transfer
books of the Company are closed, such person shall be deemed to have become the
record holder of such shares on, and such certificate shall be dated, the next
succeeding Business Day on which the Common Shares transfer books of the
Company are open. Prior to the exercise of the Rights evidenced thereby, the
holder of a Right Certificate shall not be entitled to any rights of a
shareholder of the Company with respect to shares for which the Rights shall be
exercisable, including, without limitation, the right to vote, to receive
dividends or other distributions or to exercise any preemptive rights, and
shall not be entitled to receive any notice of any proceedings of the Company,
except as provided herein.
Section 11. ADJUSTMENT OF PURCHASE PRICE, NUMBER AND TYPE OF SHARES OR
NUMBER OF RIGHTS. The Purchase Price, the number and type of shares covered by
each Right and the number of Rights outstanding are subject to adjustment from
time to time as provided in this Section 11.
(a)(i) In the event that the Company shall at any time after
the date of this Agreement (A) declare a dividend on the Common Shares payable
in Common Shares, (B) subdivide the outstanding Common Shares, (C) combine the
outstanding Common Shares into a smaller number of shares or
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(D) issue any shares of its capital stock in a reclassification of the Common
Shares (including any such reclassification in connection with a consolidation
or merger in which the Company is the continuing or surviving corporation),
except as otherwise provided in this Section 11(a) or in Section 11(d) hereof,
the Purchase Price in effect at the time of the record date for such dividend
or of the effective date of such subdivision, combination or reclassification,
and/or the number and/or kind of shares of capital stock issuable on such date,
shall be proportionately adjusted so that the holder of any Right exercised
after such time shall be entitled to receive the aggregate number and kind of
shares of capital stock which, if such Right had been exercised immediately
prior to such date and at a time when the Common Shares transfer books of the
Company were open, he would have owned upon such exercise and been entitled to
receive by virtue of such dividend, subdivision, combination or
reclassification. If an event occurs which would require an adjustment under
both this Section 11(a)(i) and Section 11(a)(ii) hereof or Section 11(d)
hereof, the adjustment provided for in this Section 11(a)(i) shall be in
addition to, and shall be made prior to, any adjustment required pursuant to
Section 11(a)(ii) or Section 11(d) hereof.
(ii) In the event that
(A) any Acquiring Person or any Associate or Affiliate of
any Acquiring Person, at any time after the
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date of this Agreement, directly or indirectly, shall (1) merge into
the Company or otherwise combine with the Company and the Company
shall be the continuing or surviving corporation of such merger or
combination, other than in a transaction subject to Section 11(d)(ii)
(2) merge or otherwise combine with any Subsidiary, (3) in one or more
transactions, transfer any assets to the Company or any Subsidiary in
exchange (in whole or in part) for shares of any class of capital
stock of the Company or any Subsidiary or for securities exercisable
for or convertible into shares of any class of capital stock of the
Company or any Subsidiary, or otherwise obtain from the Company or any
Subsidiary, with or without consideration, any additional shares of
any class of capital stock of the Company or any Subsidiary or
securities exercisable for or convertible into shares of any class of
capital stock of the Company or any Subsidiary (other than as part of
a pro rata distribution to all holders of such shares of any class of
capital stock of the Company or any Subsidiary), (4) sell, purchase,
lease, exchange, mortgage, pledge, transfer or otherwise dispose (in
one or more transactions), to, from or with, as the case may be, the
Company or any Subsidiary, other than in a transaction subject to
Section 11(d) hereof, assets on terms and conditions less favorable to
the Company than the Company
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would be able to obtain in arm's-length negotiation with an
unaffiliated third party, (5) receive any compensation from the
Company or any Subsidiary other than compensation for full-time
employment as a regular employee at rates in accordance with the
Company's (or its Subsidiaries') past practices, or (6) receive the
benefit, directly or indirectly (except proportionately as a
shareholder), of any loans, advances, guarantees, pledges or other
financial assistance or any tax credits or other tax advantage
provided by the Company or any Subsidiaries; or
(B) during such time as there is an Acquiring Person,
there shall be any reclassification of securities (including any
reverse stock split), or recapitalization of the Company, or any
merger or consolidation of the Company with any Subsidiary or any
other transaction or series of transactions (whether or not with or
into or otherwise involving an Acquiring Person), other than a
transaction subject to Section 11(d), hereof, which has the effect,
directly or indirectly, of increasing by more than 1% the
proportionate share of the outstanding shares of any class of equity
securities or of securities exercisable for or convertible into equity
securities of the Company or any Subsidiary which is directly or
indirectly beneficially owned by any Acquiring Person or any Associate
or Affiliate of any Acquiring Person; or
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(C) any Person (other than the Company or any Subsidiary
or any employee benefit or stock ownership plan of the Company or of
any Subsidiary or any entity holding Common Shares for or pursuant to
the terms of any such plan) who or which, together with all Affiliates
and Associates of such Person, shall at any time after the date of
this Agreement, become the Beneficial Owner of 20% or more of the
Common Shares then outstanding (other than pursuant to any transaction
set forth in Section 11(d) hereof); provided, however, that a Person
shall not be deemed to have become the Beneficial Owner of 20% or more
of the Common Shares then outstanding for the purposes of this Section
11(a)(ii)(C) solely as a result of a reduction in the number of Common
Shares outstanding unless and until such time as (1) such Person or
any Affiliate or Associate of such Person shall thereafter become the
Beneficial Owner of any additional Common Shares other than as a
result of a stock dividend, stock split or similar transaction
effected by the Company in which all holders of Common Shares are
treated equally, or (2) any other Person who is the Beneficial Owner
of any common Shares shall thereafter become an Affiliate or Associate
of such Person,
then, and in each such case, proper provision shall be made so that each holder
of a Right, except as provided below, shall thereafter have a right to receive,
upon exercise thereof in accordance with the terms of this Agreement at an
exercise
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<PAGE> 32
price per Right equal to the product of one hundred (100) times the
then-current Purchase Price multiplied by the number of Common Shares for which
a Right was exercisable immediately prior to the first occurrence of a
Triggering Event, such number of Common Shares as shall equal the result
obtained by (x) multiplying the product of one hundred (100) times the
then-current Purchase Price by the number of Common Shares for which a Right
was exercisable immediately prior to the first occurrence of a Triggering
Event, and dividing that product by (y) 50% of the current per share market
price of the Common Shares (determined pursuant to Section 11(e) hereof) on the
date of the first occurrence of a Triggering Event. Notwithstanding anything in
this Agreement to the contrary, from and after the later of the Distribution
Date and the first occurrence of a Flip-in Event, (1) any Rights that are or
were acquired or beneficially owned by any Acquiring Person (or any Affiliate
or Associate of such Acquiring Person) shall be void and any holder of such
Rights shall thereafter have no right to exercise such Rights under any
provision of this Agreement, (2) no Right Certificate shall be issued pursuant
to this Agreement that represents Rights beneficially owned by an Acquiring
Person or any Affiliate or Associate thereof, (3) no Right Certificate shall be
issued at any time upon the transfer of any Rights to an Acquiring Person or
any Affiliate or Associate thereof or to any nominee of such Acquiring Person
or Affiliate thereof, and (4) any Right Certificate delivered to the Rights
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Agent for transfer to an Acquiring Person or any Affiliate or Associate thereof
shall be cancelled.
(iii) In the event that there shall not be sufficient authorized but
unissued Common Shares or authorized and issued Common Shares held in Treasury
to permit the exercise in full of the Rights in accordance with the foregoing
subparagraph (ii), the Company shall take all such action as may be necessary
to authorize additional Common Shares for issuance upon exercise of the Rights;
PROVIDED, HOWEVER, that if at any time after 90 calendar days after the first
occurrence of a Flip-In Event, there shall not be sufficient Common Shares
available for issuance upon the exercise of a Right, then the Company shall
deliver, upon the surrender of such Right and without requiring payment of the
Purchase Price, Common Shares (to the extent available), and then cash (to the
extent permitted by applicable law and any agreements or instruments to which
the Company is a party in effect immediately prior to the first occurrence of
any Flip-In Event), which Common Shares and cash shall have an aggregate value
equal to the excess of (1) the aggregate current per share market price of all
the Common Shares (determined pursuant to Section 11(e) hereof) issuable in
accordance with subsection (ii) of this Section 11(a) upon the exercise of a
Right over (2) the product of one hundred (100) times the then-current Purchase
Price multiplied by the number of Common Shares for which a Right was
exercisable immediately the first occurrence of a Triggering Event. To the
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extent that any legal or contractual restrictions prevent the Company from
paying the full amount of cash payable in accordance with the foregoing
sentence, the Company shall pay to holders of the Rights as to which such
payments are being made all amounts which are not then restricted on a pro rata
basis. The Company shall continue to make payments on a pro rata basis as funds
become available until such payments have been paid in full.
(b) In the event that the Company shall fix a record date
for the issuance of rights, options or warrants to all holders of Common Shares
entitling them (for a period expiring within 45 calendar days after such record
date) to subscribe for or purchase Common Shares (or shares having the same
rights, privileges and preferences as the Common Shares ("equivalent common
shares")) or securities convertible into Common Shares or equivalent common
shares at a price per Common Share or equivalent common share (or having a
conversion price per share, if a security convertible into Common Shares or
equivalent common shares) less than the current per share market price of the
Common Shares (as determined pursuant to Section 11(e) hereof) on such record
date, the Purchase Price to be in effect after such record date shall be
determined by multiplying the Purchase Price in effect immediately prior to
such record date by a fraction, the numerator of which shall be the number of
Common Shares outstanding on such record date plus the number of Common Shares
which the aggregate offering price of the total number of Common Shares and/or
equivalent
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<PAGE> 35
common shares so to be offered (and/or the aggregate initial conversion price
of the convertible securities so to be offered) would purchase at such current
market price and the denominator of which shall be the number of Common Shares
outstanding on such record date plus the number of additional Common Shares
and/or equivalent common shares to be offered for subscription or purchase (or
into which the convertible securities so to be offered are initially
convertible). In case such subscription price may be paid in a consideration
part or all of which shall be in a form other than cash, the value of such
consideration shall be as determined in good faith by the Directors of the
Company, whose determination shall be described in a statement filed with the
Rights Agent and shall be conclusive for all purposes. Common Shares owned by
or held for the account of the Company shall not be deemed outstanding for the
purpose of any such computation. Such adjustment shall be made successively
whenever such a record date is fixed; and in the event that such rights,
options or warrants are not so issued, the Purchase Price shall be adjusted to
be the Purchase Price which would then be in effect if such record date had not
been fixed.
(c) In the event that the Company shall fix a record date
for the making of a distribution to all holders of the Common Shares (including
any such distribution made in connection with a consolidation or merger in
which the Company is the continuing or surviving corporation) of evidences of
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<PAGE> 36
indebtedness, cash (other than a regular periodic cash dividend at a rate not
in excess of 125% of the rate of the last cash dividend theretofore paid),
assets, stock (other than a dividend payable in Common shares) or subscription
rights, options or warrants (excluding those referred to in Section 11(b)
hereof), the Purchase Price to be in effect after such record date shall be
determined by multiplying the Purchase Price in effect immediately prior to
such record date by a fraction, the numerator of which shall be the current per
share market price of the Common Shares (as determined pursuant to Section
11(e) hereof) on such record date, less the fair market value (as determined in
good faith by the Directors of the Company, whose determination shall be
described in a statement filed with the Rights Agent and shall be conclusive
for all purposes) of the portion of the cash, assets, stock or evidences of
indebtedness so to be distributed (in the case of regular periodic cash
dividends at a rate in excess of 125% of the rate of the last cash dividend
theretofore paid, only that portion in excess of 125% of such rate) or of such
subscription rights, options or warrants applicable to one Common Share, and
the denominator of which shall be such current per share market price of the
Common Shares. Such adjustments shall be made successively whenever such a
record date is fixed; and in the event that such distribution is not so made,
the Purchase Price shall again be adjusted to be the Purchase Price which would
then be in effect if such record date had not been fixed.
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<PAGE> 37
(d) In the event that, following the Share Acquisition
Date, directly or indirectly:
(i) the Company shall consolidate with, or merge with or
into, any other Person and the Company shall not be the continuing or
surviving corporation of such consolidation or merger; or
(ii) any Person shall consolidate with the Company, or
merge with or into the Company and the Company shall be the continuing
or surviving corporation of such merger or consolidation and, in
connection with such merger or consolidation, all or part of the
Common Shares shall be changed into or exchanged for stock or other
securities of any other Person or cash or any other property; or
(iii) the Company shall sell or otherwise transfer (or one
or more Subsidiaries shall sell or otherwise transfer), in one or more
transactions, assets or earning power (including, without limitation,
securities creating any obligation on the part of the Company and/or
any Subsidiaries) representing in the aggregate more than 50% of the
assets or earning power of the Company and the Subsidiaries (taken as
a whole) to any Person or Persons,
then, and in each such case, proper provision shall be made so that (A) except
as provided below, each holder of a Right shall thereafter have the right to
receive, upon the exercise thereof
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<PAGE> 38
in accordance with the terms of this Agreement at an exercise price per Right
equal to the product of one hundred (100) times the then-current Purchase Price
multiplied by the number of Common Shares for which a Right was exercisable
immediately prior to the first occurrence of a Triggering Event, such number of
validly authorized and issued, fully paid, non assessable and freely tradeable
Common Shares of such surviving, resulting or acquiring Person (including the
Company as the continuing or surviving corporation of a transaction described
in clause (ii) above), as the case may clear of any liens, encumbrances and
other adverse claims and not subject to any rights of call or first refusal, as
shall be equal to the result obtained by (x) multiplying the product of one
hundred (100) times the then-current Purchase Price by the number of Common
Shares for which a Right was exercisable immediately prior to the first
occurrence of a Triggering Event and dividing that product by (y) 50% of the
current per share market price of the Common Shares of such Person (determined
pursuant to Section 11(e) hereof) on the date of consummation of such Flip-over
Event; (B) the issuer of such Common Shares shall thereafter be liable for, and
shall assume, by virtue of the consummation of such Flip-over Event, all the
obligations and duties of the Company pursuant to this Agreement; (C) the term
"Company" shall thereafter be deemed to refer to such issuer; and (D) such
issuer shall take such steps (including,
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but not limited to, the reservation of a sufficient number of its Common Shares
in accordance with Section 9 hereof) in connection with such consummation as
may be necessary to assure that the provisions hereof shall thereafter be
applicable, as nearly as reasonably may be possible, in relation to its Common
Shares thereafter deliverable upon the exercise of the Rights. Notwithstanding
the foregoing, if the surviving, resulting or acquiring Person in any Flip-over
Event, is not a corporation or business trust, then, and in each such case, if
such surviving, resulting or acquiring Person is directly or indirectly wholly
owned by a corporation or business trust, then all references to Common Shares
of such surviving, resulting or acquiring Person in this Section 11(d) shall be
deemed to be references to the Common Shares of the corporation or business
trust which ultimately controls such Person, and if there is no such
corporation or business trust, (Y) proper provision shall be made so that such
surviving, resulting or acquiring Person shall create or otherwise make
available for purposes of the exercise of the Rights in accordance with the
terms of this Agreement, a type or types of security or securities having a
fair market value at least equal to the economic value of the Common Shares
which each holder of a Right would have been entitled to receive if such
surviving, resulting or acquiring Person had been a corporation or a business
trust; and (Z) all other provisions of this Section
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11(d) shall apply to the issuer of such securities as if such securities were
Common Shares. The Company shall not consummate any Flip-over Event, unless the
issuer of the Common Shares or other securities, as the case may be, shall have
a sufficient number of authorized Common Shares or other securities which have
not been issued or reserved for issuance to permit the exercise in full of the
Rights in accordance with this Section 11(d) and unless prior to such
consummation the Company and such issuer shall have executed and delivered to
the Rights Agent a supplemental agreement providing for the terms set forth in
this Section 11 and further providing that as promptly as practicable after the
consummation of any Flip-over Event, the issuer shall:
(I) prepare and file a registration statement under the
Securities Act, with respect to the Rights and the securities issuable
upon exercise of the Rights on an appropriate form, and shall use its
best efforts to cause such registration statement to (A) become
effective as soon as practicable after such filing and (B) remain
effective (with a prospectus at all times meeting the requirements of
the Securities Act) until the Expiration Date;
(II) take all such action as may be appropriate under, or
to ensure compliance with, the securities or "blue sky" laws of the
various states in connection with the excercisibility of the Rights;
and
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(III) deliver to holders of the Rights historical financial
statements for such issuer and each of its Affiliates which comply in
all respects with the requirements for registration on Form 10 under
the Exchange Act.
Notwithstanding the foregoing, upon the occurrence of any Flip-over Event, any
Rights that are or were at any time beneficially owned by any Acquiring Person
or any Associate or Affiliate of such Acquiring Person (which Acquiring Person,
Associate or Affiliate is, directly or indirectly, causing such Flip-over Event
to occur) after the date upon which such Acquiring Person became such shall
become void and any holder of such Rights shall thereafter have no right to
exercise such Rights under any provision of this Agreement. The provisions of
this Section 11(d) shall similarly apply to successive mergers or
consolidations or sales or other transfers.
(e) For the purpose of any computation hereunder, the
"current per share market price" of Common Shares on any date shall be deemed
to be the average of the daily closing prices per share of such Common Shares
for the 30 consecutive Trading Days (as such term is hereinafter defined)
immediately prior to such date; provided, however, that in the event that the
current per share market price of the Common Shares is determined during a
period following the announcement by the issuer of such Common Shares (i) of a
dividend or distribution on such Common Shares payable in such Common
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Shares or securities convertible into such Common Shares or (ii) any
subdivision, combination or reclassification of such Common Shares, and prior
to the expiration of 30 Trading Days after the ex-dividend date for such
dividend or distribution or the record date for such subdivision, combination
or reclassification, then, and in each such case, the "current market price"
shall be appropriately adjusted to take into account ex-dividend trading or to
reflect the current market price per Common Share equivalent. The closing price
for each day shall be the last sale price, regular way, or, in case no such
sale takes place on such day, the average of the closing bid and asked prices,
regular way, in either case as reported in the principal consolidated
transaction reporting system with respect to securities listed or admitted to
trading on the New York Stock Exchange or, if the Common Shares are not listed
or admitted to trading on the New York Stock Exchange, as reported in the
principal consolidated transaction reporting system with respect to securities
listed on the principal national securities exchange on which the Common Shares
are listed or admitted to trading or, if the Common Shares are not listed or
admitted to trading on any national securities exchange, the last quoted price
or, if not so quoted, the average of the high bid and low asked prices in the
over-the-counter market, as reported by the National Association of Securities
Dealers, Inc. Automated Quotation System ("NASDAQ") or such other system then
in use, or, if on any such date the Common Shares are not
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quoted by any such organization, the average of the closing bid and asked
prices as furnished by a professional market maker making a market in the
Common Shares selected by the Directors of the Company. The term "Trading Day"
shall mean any day on which the principal national securities exchange on which
the Common Shares are listed or admitted to trading is open for the transaction
of business or, if the Common Shares are not listed or admitted to trading on
any national securities exchange, a Monday, Tuesday, Wednesday, Thursday or
Friday on which banking institutions in the State of New York are not
authorized or obligated by law or executive order to close. If the Common
Shares are not publicly held or not so listed or traded, or not the subject of
available bid and asked quotes, "current per share market price" shall mean the
fair value per share as determined in good faith by the Directors of the
Company, whose determination shall be described in a statement filed with the
Rights Agent and shall be conclusive for all purposes.
(f) Except as set forth below, no adjustment in the
Purchase Price shall be required unless such adjustment would require an
increase or decrease of at least 1% in such price; PROVIDED, HOWEVER, that any
adjustments which by reason of this Section 11(f) are not required to be made
shall be carried forward and taken into account in any subsequent adjustment.
All calculations under this Section 11 shall be made to the nearest cent or to
the nearest thousandth of a share as the case may be. Notwithstanding the first
sentence
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of this Section 11(f), any adjustment required by this Section 11 shall be made
no later than the earlier of (i) three years from the date of the transaction
which requires such adjustment and (ii) the Expiration Date.
(g) If as a result of an adjustment made pursuant to
Section 11(a) hereof, the holder of any Right thereafter exercised shall become
entitled to receive any shares of capital stock of the Company other than
Common Shares, thereafter the number of such other shares so receivable upon
exercise of any Right shall be subject to adjustment from time to time in a
manner and on terms as nearly equivalent as practicable to the provisions with
respect to the shares contained in this Section 11 and the provisions of
Sections 7, 9, 10 and 14 hereof with respect to the Common Shares shall apply
on like terms to any such other shares.
(h) All Rights originally issued by the Company
subsequent to any adjustment made to the Purchase Price hereunder shall
evidence the right to purchase, at the adjusted Purchase Price, the number of
Common Shares purchasable from time to time hereunder upon exercise of the
Rights, all subject to further adjustment as provided herein.
(i) Unless the Company shall have exercised its election
as provided in Section 11(j) hereof, upon each adjustment of the Purchase Price
as a result of the calculations made in Sections 11(b) and (c) hereof, each
Right outstanding immediately prior to the making of such adjustment
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shall thereafter evidence the right to purchase, at the adjusted Purchase
Price, that number of shares (calculated to the nearest thousandth) obtained by
(i) multiplying (x) the number of shares covered by a Right immediately prior
to this adjustment by (y) the Purchase Price in effect immediately prior to
such adjustment of the Purchase Price and (ii) dividing the product so obtained
by the Purchase Price in effect immediately after such adjustment of the
Purchase Price.
(j) The Company may elect, on or after the date of any
adjustment of the Purchase Price, to adjust the number of Rights in
substitution for any adjustment in the number of Common Shares purchasable upon
the exercise of a Right. Each of the Rights outstanding after such adjustment
of the number of Rights shall be exercisable for the number of Common Shares
for which a Right was exercisable immediately prior to such adjustment. Each
Right held of record prior to such adjustment of the number of Rights shall
become that number of Rights (calculated to the nearest thousandth) obtained by
dividing the Purchase Price in effect immediately prior to adjustment of the
Purchase Price by the Purchase Price in effect immediately after adjustment of
the Purchase Price. The Company shall make a public announcement of its
election to adjust the number of Rights, indicating the record date for the
adjustment, and, if known at the time, the amount of the adjustment to be made.
This record date may be the date on which the Purchase Price is adjusted or any
day thereafter, but, if the Right Certificates
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have been issued, shall be at least 10 calendar days later than the date of the
public announcement. If Right Certificates have been issued, upon each
adjustment of the number of Rights pursuant to this Section 11(j), the Company
shall, as promptly as practicable, cause to be distributed to holders of record
of Right Certificates on such record date Right Certificates evidencing,
subject to Section 14 hereof, the additional Rights to which such holders shall
be entitled as a result of such adjustment, or, at the option of the Company,
shall cause to be distributed to such holders of record in substitution and
replacement for the Right Certificates held by such holders prior to the date
of adjustment, and upon surrender thereof, if required by the Company, new
Right Certificates evidencing all the Rights to which such holders shall be
entitled after such adjustment. Right Certificates so to be distributed shall
be issued, executed and countersigned in the manner provided for herein (and
may bear, at the option of the Company, the adjusted Purchase Price) and shall
be registered in the names of the holders of record of Right Certificates on
the record date specified in the public announcement.
(k) Irrespective of any adjustment or change in the
Purchase Price or the number or type of shares issuable upon the exercise of
the Rights, the Right Certificates theretofore and thereafter issued may
continue to express the Purchase Price per share and the number of shares which
were expressed in the initial Right Certificate issued hereunder.
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(l) Before taking any action that would cause an
adjustment reducing the Purchase Price below the then par value, if any, of the
Common Shares issuable upon exercise of the Rights, the Company shall take any
corporate action which may, in the opinion of its counsel, be necessary in
order that the Company may validly and legally issue fully paid and non
assessable Common Shares at such adjusted Purchase Price.
(m) In any case in which this Section 11 shall require
that an adjustment in the Purchase Price be made effective as of a record date
for a specified event, the Company may elect to defer until the occurrence of
such event the issuing to the holder of any Right exercised after such record
date the Common Shares and other capital stock or securities of the Company, if
any, issuable upon such exercise over and above the Common Shares and other
capital stock or securities of the Company, if any, issuable upon such exercise
on the basis of the Purchase Price in effect prior to such adjustment;
PROVIDED, HOWEVER, that the Company shall deliver to such holder a due bill or
other appropriate instrument evidencing such holder's right to receive such
additional shares upon the occurrence of the event requiring such adjustment.
(n) Anything in Sections 11 (a) through (m), inclusive,
hereof to the contrary notwithstanding, the Company shall be entitled to make
such reductions in the Purchase
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Price, in addition to those adjustments expressly required by this Section 11,
as and to the extent that it in its sole discretion shall determine to be
advisable in order that any consolidation or subdivision of the Common Shares,
issuance wholly for cash of any of the Common Shares at less than the current
market price, issuance wholly for cash of Common Shares or securities which by
their terms are convertible into or exchangeable for Common Shares, stock
dividends or issuance of rights, options or warrants referred to hereinabove in
this Section 11, hereafter made by the Company to holders of its Common Shares
shall not be taxable to such shareholders.
(o) Notwithstanding any other provision of this
Agreement, no adjustment to the Purchase Price, the number of shares of Common
Stock (or fractions of a share) for which a Right is exercisable or the number
or Rights outstanding shall be made or be effective if such adjustment would
have the effect of reducing or limiting the benefits the holders of the Rights
would have had absent: such adjustment, including, without limitation, the
benefits under Sections 11(a)(ii) and 11(d) hereof, unless the terms of this
Agreement are amended so as to preserve such benefits.
Section 12. CERTIFICATE OF ADJUSTED PURCHASE PRICE OR NUMBER OF SHARES.
Whenever an adjustment is made as provided in Section 11 hereof, the Company
shall promptly prepare a certificate setting forth such adjustment, (including
a
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description of any Rights which have become void as a result thereof), and a
brief statement of the facts accounting for such adjustment and promptly file
with the Rights Agent and with each transfer agent for the Common Shares a copy
of such certificate.
Section 13. NOTICE OF ADJUSTED PURCHASE PRICE OR NUMBER OR TYPE OF
SHARES TO HOLDERS OF RIGHTS. Whenever an adjustment is made as provided in
Section 11 hereof after the Distribution Date, the Company shall mail a brief
summary of such adjustment to each holder of a Right Certificate in accordance
with Section 25 hereof.
Section 14. FRACTIONAL RIGHTS AND FRACTIONAL SHARES. (a) The Company
shall not be required to issue fractions of Rights or to distribute Right
Certificates which evidence fractional Rights. In lieu of such fractional
Rights, there shall be paid as promptly as practicable to the registered
holders of the Right Certificates with regard to which such fractional Rights
would otherwise be issuable, an amount in cash equal to the same fraction of
the current market value of a whole Right. For the purposes of this Section
14(a), the current market value of a whole Right shall be the closing price of
the Rights for the Trading Day immediately prior to the date on which such
fractional Rights would have been otherwise issuable. The closing price for any
day shall be the last sale price, regular way, or, in case no such sale takes
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place on such day, the average of the closing bid and asked prices, regular
way, in either case as reported in the principal consolidated transaction
reporting system with respect to securities listed or admitted to trading on
the New York Stock Exchange or, if the Rights are not listed or admitted to
trading on the New York Stock Exchange, as reported in the principal
consolidated transaction reporting system with securities listed on the
principal national securities exchange on which the Rights are listed or
admitted to trading or, if the Right, are not listed or admitted to trading on
any national securities exchange, the last quoted price or, if not so quoted,
the average of the high bid and low asked prices in the over-the-counter
market, as reported by NASDAQ or such other system then in use or, if on any
such date the Rights are not quoted by any such organization, the average of
the closing bid and asked prices as furnished by a professional market maker
making a market in the Rights selected by the Directors of the Company. If on
any such date no such market maker is making a market in the Rights the fair
value of the Rights on such date as determined in good faith by the Directors
of the Company shall be used and shall be conclusive for all purposes.
(b) The Company shall not be required to issue fractions
of shares upon exercise of the Rights or to distribute certificates which
evidence fractional shares.
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Fractions of Common Shares may, at the election of the Company, be evidenced by
depositary receipts, pursuant to an appropriate agreement between the Company
and a depositary selected by it, provided that such agreement shall provide
that the holders of such depositary receipts shall have all the rights,
privileges and preferences to which they are entitled as beneficial owners of
Common Shares. In lieu of fractional shares, the Company may pay to the
registered holders of Right Certificates at the time such Rights are exercised
as herein provided an amount in cash equal to the same fraction of the current
market value of one Common Share. For purposes of this Section 14(b), the
current market value of a Common Share shall be the closing price of a Common
Share (as determined pursuant to the second sentence of Section 11(e) hereof)
for the Trading Day immediately prior to the date of such exercise
(c) The holder of a Right by the acceptance of the Rights
expressly waives his right to receive any fractional Rights or any fractional
shares upon exercise of a Right.
Section 15. RIGHTS OF ACTION. All rights of action in respect
of this Agreement are vested in the respective registered holder, of the Right
Certificates (and, prior to the Distribution Date, the registered holders of
the Common Shares); and any registered holder of any Right Certificate (or,
prior to the Distribution Date, of the Common Shares), without the consent of
the Rights Agent or of the
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holder of any other Rights certificate (or, prior Distribution Date, of the
Common Shares), may, in his own behalf and for his own benefit, enforce, and
may institute and maintain any suit, action or proceeding against the Company
to enforce, or otherwise act in respect of, his right to exercise the Rights
evidenced by such Right Certificate in the manner provided in such Right
Certificate and in this Agreement. Without limiting the foregoing or any
remedies available to the holders of Rights, it is specifically acknowledged
that the holders of Rights would not have an adequate remedy at law for any
breach of this Agreement and will be entitled to specific performance of the
obligations under this Agreement, and injunctive relief against actual or
threatened violations of the obligations of any Person subject to this
Agreement.
Section 16. AGREEMENT OF RIGHTS HOLDERS. Every holder of a
Right by accepting the same consents and agrees with the Company and the Rights
Agent and with every other holder of a Right that:
(a) prior to the Distribution Date, the Rights will be
transferable only in connection with the transfer of the Common Shares;
(b) after the Distribution Date, the Right Certificates
are transferable only on the registry books of the Rights Agent if surrendered
at the principal office of the Rights Agent in Cleveland, Ohio, duly endorsed
or accompanied by a proper instrument of transfer;
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(c) the Company and the Rights Agent may deem and treat
the person in whose name the Right Certificate (or, prior to the Distribution
Date, the associated Common Share certificate) is registered as the absolute
owner thereof and of the Rights evidenced thereby (notwithstanding any
notations of ownership or writing on the Right Certificate or the associated
Common Share certificate made by anyone other than the Company or the Rights
Agent) for all purposes whatsoever, and neither the Company nor the Rights
agent shall be affected by any notice to the contrary; and
(d) Notwithstanding anything in this Agreement to the
contrary, neither the Company nor the Rights Agent shall have any liability to
any holder of a Right or other Person as a result of its inability to perform
any of its obligations under this Agreement by reason of any preliminary or
permanent injunction or other order, decree or ruling issued by a court of
competent jurisdiction or by a governmental, regulatory or administrative
agency or commission, or any statute, rule, regulation or executive order
promulgated or enacted by any governmental authority, prohibiting or otherwise
restraining performance of such obligation; PROVIDED, HOWEVER, that the Company
shall use its best efforts to have any such order, decree or ruling lifted or
otherwise overturned as soon as possible.
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Section 17. RIGHT CERTIFICATE HOLDER NOT DEEMED A SHAREHOLDER.
No holder, as such, of any Right Certificate shall be entitled to vote, receive
dividends or be deemed for any purpose the holder of the Common Shares or any
other securities of the Company which may at any time be issuable on the
exercise of the Rights represented thereby, nor shall anything contained herein
or in any Right Certificate be construed to confer upon the holder of any Right
Certificate, as such, any of the rights of a shareholder of the Company or any
right to vote for the election of directors or upon any matter submitted to
shareholders at any meeting thereof, or to give or withhold consent to any
corporate action, or to receive notice of meetings or other actions affecting
shareholders (except as provided in Section 24 hereof), or to receive dividends
or subscription rights, or otherwise, until the Right or Rights evidenced by
such Right Certificate shall have been exercised in accordance with the
provisions hereof or exchanged pursuant to the provisions of Section 27 hereof.
Section 18. CONCERNING THE RIGHTS AGENT. The Company agrees to
pay to the Rights agent reasonable compensation for all services rendered by it
hereunder and, from time to time, on demand of the Rights Agent, its reasonable
expenses and counsel fees and other disbursements incurred in the
administration and execution of this Agreement and the exercise and performance
of its duties hereunder. The Company also
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agrees to indemnify the Rights Agent for, and to hold it harmless against, any
loss, liability, suit, action, proceeding or expense, incurred without
negligence, bad faith or willful misconduct on the part of the Rights Agent,
for anything done or omitted by the Rights Agent in connection with the
acceptance and administration of this Agreement, including the costs and
expenses of defending against any claim of liability.
The Rights Agent shall be protected and shall incur no
liability for or in respect of any action taken, suffered or omitted by it in
connection with its administration of this Agreement in reliance upon any Right
Certificate or certificate for Common Shares or for other securities of the
Company, instrument of assignment or transfer, power of attorney, endorsement,
affidavit, letter, notice, direction, consent, certificate, statement, or other
paper or document believed by it to be genuine and to be signed, executed and,
where necessary, verified or acknowledged, by the proper Person or Persons.
Section 19. MERGER OR CONSOLIDATION OR CHANGE OF NAME OF
RIGHTS AGENT. Any corporation into which the Rights Agent or any successor
Rights Agent may be merged or with which it may be consolidated, or any
corporation resulting from any merger or consolidation to which the Rights
Agent or any successor Rights Agent shall be a party, or any corporation
succeeding to the corporate trust business of the Rights Agent
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or any successor Rights Agent, shall be the successor to the Rights Agent under
this Agreement without the execution or filing of any paper or any further act
on the part of any of the parties hereto, provided that such corporation would
be eligible for appointment as a successor Rights Agent under the provisions of
Section 21 hereof. In case at the time such successor Rights Agent shall
succeed to the agency created by this Agreement, any of the Right Certificates
shall have been countersigned but not delivered, any such successor Rights
Agent may adopt the countersignature of the predecessor Rights Agent and
deliver such Right Certificates so countersigned; and in case at that time any
of the Rights Certificates shall not have been countersigned, any successor
Rights Agent may countersign such Right Certificates either in the name of the
predecessor Rights Agent or in the name of the successor Rights Agent; and in
all such cases such Right Certificates shall have the full force provided in
the Right Certificates and in this Agreement.
In case at any time the name of the Rights Agent shall be
changed and at such time any of the Right Certificates shall have been
countersigned but not delivered, the Rights Agent may adopt the
countersignature under its prior name and deliver Right Certificates so
countersigned; and in case at that time any of the Right Certificates shall not
have been countersigned, the Rights Agent may countersign such Right
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Certificates either in its prior name or in its changed name; and in all such
cases such Right Certificates shall have the full force provided in the Right
Certificates and in this Agreement.
Section 20. DUTIES OF RIGHTS AGENT. The Rights Agent
undertakes the duties and obligations imposed by this Agreement upon the
following terms and conditions, by all of which the Company and the holders of
Right Certificates, by their acceptance thereof, shall be bound:
(a) The Rights Agent may consult with legal
counsel (who may be legal counsel for the Company), and the opinion of such
counsel shall be full and complete authorization and protection to the Rights
Agent as to any action taken or omitted by it in good faith and in accordance
with such opinion.
(b) Whenever in the performance of its duties
under this Agreement the Rights Agent shall deem it necessary or desirable that
any fact or matter be proved or established by the Company prior to taking or
suffering any action hereunder, such fact or matter (unless other evidence in
respect thereof be herein specifically prescribed) may be deemed to be
conclusively proved and established by a certificate signed by any one of the
Chairman of the Board, the President, any Vice President, the Treasurer or the
Secretary of the Company and delivered to the Rights Agent; and such
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certificate shall be full authorization to the Rights Agent for any action
taken or suffered in good faith by it under the provisions of this Agreement in
reliance upon such certificate.
(c) The Rights Agent shall be liable hereunder
only for its own negligence, bad faith or willful misconduct.
(d) The Rights Agent shall not be liable for or
by reason of any of the statements of fact or recitals contained in this
Agreement or in the Right Certificates (except its countersignature thereof) or
be required to verify the same, but all such statements and recitals are and
shall be deemed to have been made by the Company only.
(e) The Rights Agent shall not be under any
responsibility in respect of the validity of this Agreement or the execution
and delivery hereof (except the due execution and delivery hereof by the Rights
Agent) or in respect of the validity or execution of any Right Certificate
(except its countersignature thereof); nor shall it be responsible for any
breach by the Company of any covenant or condition contained in this Agreement
or in any Right Certificate; nor shall it be responsible for any adjustment
required under the provisions of Section 11 hereof (including any adjustment
which results in Rights becoming void) or responsible for the manner, method or
amount of any such adjustment or the ascertaining of the existence of facts
that would require any such adjustment (except with respect to the exercise of
Rights evidenced by
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Right Certificates after actual notice of any such adjustment or voidance); nor
shall it by any act hereunder be deemed to make any representation or warranty
as to the authorization or reservation of any Common shares to be issued
pursuant to this Agreement or any Right Certificate or as to whether any Common
Shares will, when issued, be validly authorized and issued, fully paid and non
assessable.
(f) The Company agrees that it will perform,
execute, acknowledge and deliver or cause to be performed, executed,
acknowledged and delivered all such further and other acts, instruments and
assurances as may reasonably be required by the Rights Agent for the carrying
out or performing by the Rights Agent of the provisions of this Agreement.
(g) The Rights Agent is hereby authorized and
directed to accept instructions with respect to the performance of its duties
hereunder from any one of the Chairman of the Board, the President, the
Secretary, the Treasurer, the Chief Financial Officer or any Assistant General
Counsel of the Company, and to apply to such officers for advice or
instructions in connection with its duties, and it shall not be liable for any
action taken or suffered to be taken by it in good faith in accordance with
instructions of any such officer.
(h) The Rights Agent and any stockholder,
director, officer or employee of the Rights Agent may buy, sell or deal in any
of the Rights or other securities of the Company
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or become pecuniarily interested in any transaction in which the Company may be
interested, or contract with or lend money to the Company or otherwise act as
fully and freely as though it were not Rights Agent under this Agreement.
Nothing herein shall preclude the Rights Agent from acting in any other
capacity for the Company or for any other legal entity.
(i) The Rights Agent may execute and exercise any
of the rights or powers hereby vested in it or perform any duty hereunder
either itself or by or through its attorneys or agents, and the Rights Agent
shall not be answerable or accountable for any act, default, neglect or
misconduct of any such attorneys or agents or for any loss to the Company
resulting from any such act, default, neglect or misconduct, provided
reasonable care was exercised in the selection and continued employment
thereof. The Rights Agent shall not be under any duty or responsibility to
insure compliance with any applicable federal or state securities laws in
connection with the issuance, transfer or exchange of Right Certificates.
(j) The Rights Agent shall promptly remit to the
Company any funds paid to it upon exercise of the Rights pursuant to Section 7
hereof.
(k) If, with respect to any Right Certificate
surrendered to the Rights Agent for exercise, transfer, split up, combination
or exchange, the certificate attached to the form of assignment or form of
election to purchase, as the case
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may be, has either not been completed or indicates an affirmative response to
clause 1 or 2 thereof, the Rights Agent shall not take any further action with
respect requested exercise, transfer, split up, combination or exchange,
without first consulting with the Company.
Section 21. CHANGE OF RIGHTS AGENT. The Rights Agent or any
successor Rights Agent may resign and be discharged from its duties under this
Agreement upon 30 days' notice in writing mailed to the Company and to each
transfer agent of the Common Shares by registered or certified mail, and to the
holders of the Right Certificates by first-class mail. The Company may remove
the Rights Agent or any successor Rights Agent upon 30 days' notice in writing,
mailed to the Rights Agent or successor Rights Agent, as the case may be, and
to each transfer agent of the Common Shares by registered or certified mail,
and to the holders of the Right Certificates by first-class mail. If the Rights
Agent shall resign or be removed or shall otherwise become incapable of acting,
the Company shall appoint a successor to the Rights Agent. If the Company shall
fail to make such appointment within a period of 30 days after giving notice of
such removal or after it has been notified in writing of such resignation or
incapacity by the resigning or incapacitated Rights Agent or by the holder of a
Right Certificate (who shall, with such notice, submit his Right Certificate
for inspection by the Company), then the
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registered holder of any Right Certificate may apply to any court of competent
jurisdiction for the appointment of a new Rights Agent. Any successor Rights
Agent, whether appointed by the Company or by such a court, shall be a
corporation organized and doing business under the laws of the United States or
of the States of Ohio or New York (or of any other state of the United States
so long as such corporation is authorized to do business as a banking
institution in the States of Ohio or New York), in good standing, having a
principal office in the states of Ohio or New York, which is authorized under
such laws to exercise corporate trust powers and is subject to supervision or
examination by federal or state authority and which has at the time of its
appointment as Rights Agent a combined capital and surplus of at least $50
million and which shall otherwise meet any requirements imposed by the New York
Stock Exchange on transfer agents and registrars. After appointment, the
successor Rights Agent shall be vested with the same powers, rights, duties and
responsibilities as if it had been originally named as Rights Agent without
further act or deed; but the predecessor Rights Agent shall deliver and
transfer to the successor Rights Agent any property at the time hell by it
hereunder, and execute and deliver any further assurance, conveyance, act or
deed necessary for the purpose. Not later than the effective date of any such
appointment, the Company shall file notice thereof
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in writing with the predecessor Rights Agent and each transfer agent of the
Common Shares, and mail a notice thereof in writing to the registered holders
of the Right Certificates. Failure to give any notice provided for in this
Section 21, however, or any defect therein, shall not affect the legality or
validity of the resignation or removal of the Rights Agent or the appointment
of the successor Rights Agent, as the case may be.
Section 22. ISSUANCE OF NEW RIGHT CERTIFICATES.
Notwithstanding any of the provisions of this Agreement or of the Rights to the
contrary, the Company may, at its option, issue new Right Certificates
evidencing Rights in such form as may be approved by its Directors to reflect
any adjustment or change in the Purchase Price and the number or kind or class
of shares or other securities or property purchasable under the Right
Certificates made in accordance with the provisions of this Agreement. In
addition, in connection with the issuance or sale by the Company of Common
Shares following the Distribution Date and prior to the Expiration Date, the
Company (a) shall, with respect to Common Shares so issued or sold pursuant to
the exercise or conversion of securities issued prior to the Distribution Date
which are exercisable for, or convertible into, Common Shares, and (b) may, in
any other case, if deemed necessary, appropriate or desirable by the Board of
Directors of the Company, issue Right Certificates
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representing an equivalent number of Rights as would have been issued in
respect of such Common Shares if they had been issued or sold prior to the
Distribution Date, as appropriately adjusted as provided herein as if they had
been so issued or sold; PROVIDED, HOWEVER, that (i) no such Right Certificate
shall be issued if, and to the extent that, in its good faith judgment the
Board of Directors of the Company shall have determined that the issuance of
such Right Certificate could have a material adverse tax consequence to the
Company or to the Person to whom or which such Right Certificate otherwise
would be issued, and (ii) no such Right Certificate shall be issued if, and to
the extent that, appropriate adjustment otherwise shall have been made in lieu
of the issuance thereof.
Section 23. REDEMPTION. (a) Prior to the Expiration Date, the
Board of Directors of the Company may, at its option, redeem all but not less
than all of the then-outstanding Rights at a redemption price of $.05 per
Right, appropriately adjusted to reflect any stock split, stock dividend or
similar transaction occurring after the date hereof (the "Redemption Price"),
at any time prior to the close of business on the later of (i) the Distribution
Date and (ii) the first occurrence of a Triggering Event.
(b) Immediately upon the action of the Directors
of the Company ordering the redemption of the Rights, and without any further
action and without any notice, the right to
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exercise the Rights will terminate and the only right thereafter of the holders
of Rights shall be to receive the Redemption Price. Promptly after the action
of the Directors ordering the redemption of the Rights, the Company shall
publicly announce such action. Within 10 calendar days after ordering the
redemption of the Rights, the Company shall give notice of such redemption to
the holders of the then-outstanding Rights by mailing such notice to all such
holders at their last addresses as they appear upon the registry books of the
Rights Agent or, prior to the Distribution Date, on the registry books of the
transfer agent for the Common Shares. Any notice which is mailed in the manner
herein provided shall be deemed given, whether or not the holder receives the
notice. Each such notice of redemption will state the method by which the
payment of the Redemption Price will be made.
(c) At any time, the Directors of the Company may
relinquish their rights to redeem the Rights under paragraphs (a) or (b) above,
or both, by duly adopting a resolution to that effect. Immediately upon
adoption of such resolution, the rights of the Directors under the portions of
this Section 23 specified in such resolution shall terminate without further
action and without any notice.
Section 24. NOTICE OF CERTAIN EVENTS. In case, after the
Distribution Date, the Company shall propose (a) to pay any dividend payable in
stock of any class to the holders of Common
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Shares or to make any other distribution to the holders of Common Shares (other
than a regular periodic cash dividend at a rate not in excess of 125% of the
rate of the last cash dividend theretofore paid) or (b) to offer to the holders
of Common Shares rights, options or warrants to subscribe for or to purchase
any additional Common Shares or shares of stock of any class or any other
securities, rights or options, or (c) to effect any reclassification of its
Common Shares (other than a reclassification involving only the subdivision of
outstanding Common Shares), or (d) to effect any consolidation or merger into
or with, or to effect any sale or other transfer (or to permit one or more of
its Subsidiaries to effect any sale or other transfer), in one or more
transactions, of more than 50% of the assets or earning power of the Company
and its Subsidiaries, taken as a whole, to any other Person or Persons, or (e)
to effect the liquidation, dissolution or winding up of the Company, then, in
each such case, the Company shall give to each holder of a Right Certificate,
in accordance with Section 25 hereof, a notice of such proposed action, which
shall specify the record date for the purposes of such stock dividend,
distribution or offering of rights, options or warrants, or the date on which
such reclassification, consolidation, merger, sale, transfer, liquidation,
dissolution or winding up is to take place and the date of participation
therein by the holders of the Common Shares, if any such date
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is to be fixed, and such notice shall be so given, in the case of any action
covered by clause (a) or (b) above, at least 20 calendar days prior to the
record date for determining holders of the Common Shares for purposes of such
action, and, in the case of any such other action, at least 20 calendar days
prior to the date of the taking of such proposed action or the date of
participation therein by the holders of the Common Shares, whichever shall be
the earlier.
In case any Triggering Event shall occur, then, in any such
case, the Company shall as soon as practicable thereafter give to the Rights
Agent and each holder of a Right Certificate, in accordance with Section 25
hereof, a notice of the occurrence of such event, which shall specify the event
and the consequences of the event to holders of Rights.
Section 25. NOTICES. Notices or demands authorized by this
Agreement to be given or made by the Rights Agent or by the holder of any Right
Certificate to or on the Company shall be sufficiently given or made if sent by
first-class mail, postage prepaid, addressed (until another address is filed in
writing with the Rights Agent) as follows:
Cleveland-Cliffs Inc
18th Floor, Diamond Building
1100 Superior Avenue
Cleveland, Ohio 44114-2589
Attention: Myron E. Jackson
Subject to the provisions of Section 21 hereof, any notice or
demand authorized by this Agreement to be given or made by the Company or by
the holder of any Right Certificate
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<PAGE> 68
to or on the Rights Agent shall be sufficiently given or made if sent by
first-class mail postage prepaid, addressed (until another address is filed in
writing with the Company) as follows:
Ameritrust Company National Association
Corporate Trust Division
P.O. Box 6477
Cleveland, Ohio 44101
Attention: B. William Bedy
Notices or demands authorized by this Agreement to be given or
made by the Company or the Rights Agent to the holder of any Right Certificate
shall be sufficiently given or made if sent by first-class mail, postage
prepaid, addressed to such holder at the address of such holder as shown on the
registry books of the Rights Agent.
Section 26. SUPPLEMENTS AND AMENDMENTS. Prior to the
Distribution Date and subject to the last sentence of this Section 26, if the
Company so directs, the Company and the Rights Agent shall supplement or amend
any provision of this Agreement without the approval of any holders of
certificates representing Common Shares. From and after the Distribution Date
and subject to the last sentence of this Section 26, if the Company so directs,
the Company and the Rights Agent shall supplement or amend this Agreement
without the approval of any holders of Right Certificate; in order (i) to cure
any ambiguity, (ii) to correct or supplement any provision contained herein
which may be defective or inconsistent with
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<PAGE> 69
any other provisions herein, (iii) to shorten or lengthen any time period
hereunder, or (iv) to supplement or amend the provisions hereunder in any
manner which the Company may deem desirable, including, without limitation, the
addition of other events requiring adjustment to the Rights under Sections
11(a)(ii) or 11(d) hereof or procedures relating to the redemption of the
Rights, which supplement or amendment shall not, in the good faith
determination of the Board of Directors of the Company, adversely affect the
interests of the holders of Right Certificates (other than an Acquiring Person
or an Affiliate or Associate of an Acquiring Person). Upon the delivery of a
certificate from an officer of the Company which states that the proposed
supplement or amendment is in compliance with the terms of this Section 26, the
Rights Agent shall execute such supplement or amendment; PROVIDED, HOWEVER,
that the failure or refusal of the Rights Agent to execute such supplement or
amendment shall not affect the validity of any supplement or amendment adopted
by the Company, any of which shall be effective in accordance with the terms
thereof. Notwithstanding anything in this Agreement to the contrary, no
supplement or amendment shall be made which (x) changes the stated Redemption
Price or the period of time remaining until the Final Expiration Date, (y)
reduces the number of Common Shares for which a Right is then exercisable, or
(z) modifies a time period relating to when the Rights may be redeemed at such
time as the Rights are not then redeemable.
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<PAGE> 70
Section 27. EXCHANGE. (a) The Board of Directors of the Company may, at
its option, at any time after the later of the Distribution Date and the first
occurrence of a Triggering Event, exchange all or part of the then-outstanding
and exercisable Rights (which shall not include Rights that have become void
pursuant to the provisions of Section 11(a)(ii) hereof) for Common Shares at an
exchange ratio of one Common Share per Right, appropriately adjusted to reflect
any stock split, stock dividend or similar transaction occurring after the date
hereof (such exchange ratio being hereinafter referred to as the "Exchange
Ratio"). Notwithstanding the foregoing, the Board of Directors shall not be
empowered to effect such exchange at any time after any Person (other than the
Company, any Subsidiary, any employee benefit plan of the Company or any
Subsidiary, or any entity holding Common Shares for or pursuant to the terms of
any such plan), who or which, together with all Affiliates and Associates of
such Person, becomes the Beneficial Owner of 50% or more of the Common Shares
then outstanding.
(b) Immediately upon the action of the Board of
Directors of the Company ordering the exchange of any Rights pursuant to
Section 27(a) hereof, and without any further action and without any notice,
the right to exercise such Rights shall terminate and the only right with
respect to such Rights thereafter of the holder of such Rights shall be to
-67-
<PAGE> 71
receive that number of Common Shares equal to the number of such Rights held by
such holder multiplied by the Exchange Ratio. Promptly after the action of the
Board of Directors of the Company ordering the exchange of any Rights pursuant
to Section 27(a) hereof, the Company shall publicly announce such action, and
within 10 calendar days thereafter shall give notice of any such exchange to
all of the holders of such Rights at their last addresses as they appear upon
the registry books of the Rights Agent; PROVIDED, HOWEVER, that the failure to
give, or any defect in, such notice shall not affect the validity of such
exchange. Any notice which is mailed in the manner herein provided shall be
deemed given, whether or not the holder receives the notice. Each such notice
of exchange shall state the method by which the exchange of the Common Shares
for Rights will be effected and, in the event of any partial exchange, the
number of Rights which will be exchanged. Any partial exchange shall be
effected pro rata based on the number of Right; (other than Rights which have
become void pursuant to the provisions of Section 11(a)(ii) hereof) held by
each holder of Rights.
(c) In any exchange pursuant to this Section 27,
the Company, at its option, may substitute for any Common Share exchangeable
for a Right, (i) cash, (ii) debt securities of the Company, (iii) other assets,
or (iv) any combination of the foregoing, in any event having an aggregate
value which the
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<PAGE> 72
Board of Directors of the Company shall have determined in good faith to be
equal to the current market value of one Common Share (determined pursuant to
Section 11(e) hereof) on the Trading Day immediately preceding the date of
exchange pursuant to this Section 27.
Section 28. SUCCESSORS. All the covenants and provisions of
this Agreement by or for the benefit of the Company or the Rights Agent shall
bind and inure to the benefit of their respective successors and assigns
hereunder.
Section 29. BENEFITS OF THIS AGREEMENT. Nothing in this
Agreement shall be construed to give to any Person other than the Company, the
Rights Agent and the registered holders of the Right Certificates (and, prior
to the Distribution Date, the Common Shares) any legal or equitable right,
remedy or claim under this Agreement; but this Agreement shall be for the sole
and exclusive benefit of the Company, the Rights Agent and the registered
holders of the Right Certificates (or prior to the Distribution Date, the
Common Shares).
Section 30. ACTION BY DIRECTORS. Whenever any action hereunder
or in connection with the Rights is required or permitted to be taken by the
Directors of the Company, such action may be taken by the Executive Committee
of the Directors or by any other duly authorized committee thereof.
-69-
<PAGE> 73
Section 31. SEVERABILITY. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction or
other authority to be invalid, void or unenforceable, the remainder of the
terms, provisions, covenants and restrictions of this Agreement shall remain in
full force and effect and shall in no way be affected, impaired or invalidated.
Section 32. GOVERNING LAW. This Agreement and each Right
Certificate issued hereunder shall be deemed to be a contract made under the
laws of the State of Ohio and for all purposes shall be governed by and
construed in accordance with the laws of such State applicable to contracts to
be made and performed entirely within such State.
Section 33. COUNTERPARTS. This Agreement may be executed in
any number of counterparts and each of such counterparts shall for all purposes
be deemed to be an original, and all such counterparts shall together
constitute but one and the same instrument.
Section 34. DESCRIPTIVE HEADINGS. Descriptive headings of the
several Sections of this Agreement are inserted for convenience only and shall
not control or affect the meaning or construction of any of the provisions
hereof.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed and their respective
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<PAGE> 74
corporate seals to be hereunto affixed and attested, this 19th day of November,
1991.
CLEVELAND-CLIFFS INC
By /s/ M. Thomas Moore
------------------------
Chairman and Chief
Executive Officer
AMERITRUST COMPANY NATIONAL
ASSOCIATION
By /s/ Caroline Lukez-Byrne
---------------------------
Trust Officer II/Assistant
Secretary
0980C
-71-
<PAGE> 75
Exhibit A
---------
[Form of Right Certificate]
Certificate No. R- _____________ Rights
NOT EXERCISABLE AFTER SEPTEMBER 18, 1997 OR EARLIER IF
REDEEMED. THE RIGHTS ARE SUBJECT TO REDEMPTION, AT THE OPTION
OF THE COMPANY, AT $.05 PER RIGHT ON THE TERMS SET FORTH IN
THE RIGHTS AGREEMENT. [THE RIGHTS REPRESENTED BY THIS
CERTIFICATE WERE ISSUED TO OR ACQUIRED BY A PERSON WHO WAS AN
ACQUIRING PERSON OR AN AFFILIATE OR ASSOCIATE OF AN ACQUIRING
PERSON (AS SUCH TERMS ARE DEFINED IN THE RIGHTS AGREEMENT).
THIS RIGHT CERTIFICATE AND THE RIGHTS REPRESENTED HEREBY MAY
BECOME VOID IN THE CIRCUMSTANCES SPECIFIED IN SECTION
11(a)(ii) OR SECTION 11(d) OF THE RIGHTS AGREEMENT.*]
Right Certificate
CLEVELAND-CLIFFS INC
This certifies that ______________________________, or
registered assigns, is the registered owner of the number of Rights set forth
above, each of which entitles the owner thereof, subject to the terms,
provisions and conditions of the Rights Agreement dated as of September 8,
1987, amended and restated as of November 19, 1991 (the "Rights Agreement"),
between Cleveland-Cliffs Inc, an Ohio corporation (the "Company"), and
Ameritrust Company National Association (the "Rights Agent"), to purchase from
the Company at any time after
____________________
* The portion of the legend in brackets shall be inserted only if
applicable.
A-1
<PAGE> 76
the Distribution Date (as such term is defined in the Rights Agreement) and
prior to 5:00 P.M. (Cleveland, Ohio time) on September 18, 1997 at the
principal office of the Rights Agent, or its successors as Rights Agent, in
Cleveland, Ohio, one-hundredth of one fully paid non assessable Common Share,
par value $1.00 per share (a "Common Share") of the Company, at a purchase
price of $85 per whole Common Share (the "Purchase Price"), upon presentation
and surrender of this Right Certificate with the Form of Election to Purchase
and related Certificate duly executed. The number of Rights evidenced by this
Right Certificate (and the number of shares which may be purchased upon
exercise thereof) set forth above, and the Purchase Price set forth above, are
the number and Purchase Price as of November 12, 1991, based on the Common as
constituted at such date.
As provided in the Rights Agreement, the Purchase Price and
the number of Common Shares which may be purchased upon the exercise of the
Rights evidenced by this Right Certificate are subject to modification and
adjustment upon the happening of certain events.
This Right Certificate is subject to all of the terms,
provisions and conditions of the Rights Agreement, which terms, provisions and
conditions are hereby incorporated herein by reference and made a part hereof
and to which Rights Agreement reference is hereby made for a full description
of the rights, limitations of rights, obligations, duties and immunities
hereunder of the Rights Agent, the Company and the holders of
A-2
<PAGE> 77
the Right Certificates. Copies of the Rights Agreement are on file at the
above-mentioned office of the Rights Agent.
Pursuant to the Rights Agreement, from and after the later of
the Distribution Date and the first occurrence of a Flip-in Event (as such
terms are defined in the Right Agreement), (i) any Rights that are or were
acquired or beneficially owned by any Acquiring Person (or any Affiliate or
Associate of such Acquiring Person) shall be void and any holder of such Rights
shall thereafter have no right to exercise such Rights under any provision of
the Rights Agreement, (ii) no Right Certificate shall be issued pursuant to the
Rights Agreement that represents Rights beneficially owned by an Acquiring
Person or any Affiliate or Associate thereof, (iii) no Right Certificate shall
be issued at any time upon the transfer of any Rights to an Acquiring Person or
any Affiliate or Associate thereof, and (iv) any Right Certificate delivered to
the Rights Agent for transfer to an Acquiring Person or any Affiliate or
Associate thereof shall be cancelled.
This Right Certificate, with or without other Right
Certificates, upon surrender at the principal office of the Rights Agent in
Cleveland, Ohio, may be exchanged for another Right Certificate or Right
Certificates of like tenor and date evidencing Rights entitling the holder to
purchase a like aggregate number of Common Shares as the Rights evidenced by
the Right Certificate or Right Certificates surrendered shall have entitled
such holder to purchase. If this Right Certificate shall be exercised in part,
the holder shall be
A-3
<PAGE> 78
entitled to receive upon surrender hereof another Right Certificate or Right
Certificates for the number of whole Rights not exercised.
Subject to the provisions of the Rights Agreement, the Rights
evidenced by this Certificate may be redeemed by the Company at its option at a
redemption price of $.05 per Right.
Subject to the provisions of the Rights Agreement, the Board
of Directors of the Company may exchange the Rights (other than any Rights
which have become void), in whole or in part, at an exchange ratio of one
Common Share per Right (subject to adjustment). Under certain circumstances set
forth in the Rights Agreement, Rights may be exercised, at the option of the
holder thereof, without the payment of the Purchase Price in cash that would
otherwise be required. In any such case, the number of securities which such
person would otherwise be entitled to receive upon the exercise of such Rights
will be reduced as provided in the Rights Agreement.
No fractional Common Shares will be issued upon the exercise
of any Right or Rights evidenced hereby (other than fractions which may, at the
election of the Company, be evidenced by depositary receipts), but in lieu
thereof a cash payment will be made, as provided in the Rights Agreement.
No holder of this Right Certificate shall be entitled to vote
or receive dividends or be deemed for any purpose the holder of the Common
Shares or of any other securities of the Company which may at any time be
issuable on the exercise
A-4
<PAGE> 79
hereof, nor shall anything contained in the Rights Agreement or herein be
construed to confer upon the holder hereof, as such, any of the rights of a
shareholder of the Company or any right to vote for the election of directors
or upon any matter submitted to shareholders at any meeting thereof, or to give
or withhold consent to any corporate action, or, to receive notice of meetings
or other action; affecting shareholders (except as provided in the Rights
Agreement), or to receive dividends or subscription rights, or otherwise, until
the Right or Rights evidenced by this Right Certificate shall have been
exercised as provided in the Rights Agreement.
This Right Certificate shall not be valid or obligatory for
any purpose until it shall have been countersigned by the Rights Agent.
WITNESS the facsimile signature of the proper officers of the
Company and its corporate seal. Dated as of_______________, 19__ .
ATTEST: CLEVELAND-CLIFFS INC
______________________________
By______________________________
Secretary Title:
Countersigned:
By____________________________
Authorized Signature
A-5
<PAGE> 80
Form of Reverse Side of Right Certificate
FORM OF ASSIGNMENT
------------------
(To be executed by the registered holder if such
holder desires to transfer the Right Certificate)
FOR VALUE RECEIVED, ___________________________ hereby sells, assigns
and transfers unto _____________________________________________________________
________________________________________________________________________________
(Please print name and address of transferee)
______________________________________________________________________________
this Right Certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint ___________________________
Attorney, to transfer the within Right Certificate on the books of the
within-named Company, with full power of substitution.
Dated: ___________________________, 19___
______________________________
Signature
Signature Guaranteed:
CERTIFICATE
The undersigned hereby certifies by checking the appropriate
boxes that:
(1) the Rights evidenced by this Right Certificate [ ] are [ ] are
not being sold, assigned, transferred, split up, combined or exchanged by or on
behalf of a Person who is or was an Acquiring Person or an Affiliate or
Associate of any such Person (as such terms are defined in the Rights
Agreement);
(2) after due inquiry and to the best knowledge of the
undersigned, it [ ] did [ ] did not acquire the Rights evidenced by this Right
Certificate from any Person who is, was or became an Acquiring Person or an
Affiliate or Associate of an Acquiring Person.
Dated: ____________________________, 19___
______________________________
Signature
A-6
<PAGE> 81
FORM OF ELECTION TO PURCHASE
----------------------------
(To be executed if holder desires to
exercise the Right Certificate)
To Cleveland-Cliffs Inc:
The undersigned hereby irrevocably elects to exercise
____________________ Rights represented by this Right Certificate to purchase
the one one-hundredth of a Common Share or other securities issuable upon the
exercise of such Rights and requests that certificates for such securities be
issued in the name of:
Please insert social security
or other identifying number:_________________________________________________
_____________________________________________________________________________
(Please print name and address)
_____________________________________________________________________________
If such number of Rights Shall not be all the Rights evidenced by this Right
Certificate, a new Right Certificate for the balance remaining of such Rights
shall be registered in the name of and delivered to:
Please insert social security
or other identifying number:_________________________________________________
______________________________________________________________________________
(Please print name and address
______________________________________________________________________________
Optional Election to Exercise without Payment of Cash:
With respect to the exercise of ____________________ of the
Rights specified above, the Undersigned hereby elects to exercise such Rights
without payment of cash and to receive a number of Common Shares or other
securities having a value (as determined pursuant to the Rights Agreement)
equal to the difference between (i) the value of the Common Shares or other
securities that would have been issuable upon the exercise thereof upon payment
of the cash amount as provided in the Rights Agreement, and (ii) the amount of
such cash payment.
Dated: ____________________________, 19___
______________________________
Signature
Signature Guaranteed:
A-7
<PAGE> 82
CERTIFICATE
-----------
The undersigned hereby certifies by checking the appropriate
boxes that:
(1) the Rights evidenced by this Right Certificate [ ] are [ ] are
not being exercised by or on behalf of a Person who is or was an Acquiring
Person or an Affiliate or Associate of any such Person (as such terms are
defined pursuant to the Rights Agreement);
(2) after due inquiry and to the best knowledge of the
undersigned, it [ ] did [ ] did not acquire the Rights evidenced by this Right
Certificate from any Person who is, was or became an Acquiring Person or an
Affiliate or Associate of an Acquiring Person.
Dated: ____________________________, 19___
______________________________
Signature
NOTICE
------
Signatures on the foregoing Form of Assignment and Form of
Election to Purchase and in the related Certificates must correspond to the
name as written upon the face of this Right Certificate in every particular,
without alteration or enlargement or any change whatsoever.
Signatures must be guaranteed by a member firm of a registered
national securities exchange, a member of the National Association of
Securities Dealers, Inc., or a commercial bank or trust company having an
office or correspondent in the United States.
A-8
<PAGE> 83
Exhibit B
---------
SUMMARY OF RIGHTS TO PURCHASE
COMMON SHARES
On September 8, 1987, the Board of Directors of
Cleveland-Cliffs Inc (the "Company") declared a dividend distribution of one
right (a "Right") for each outstanding Common Share, $1.00 par value (the
"Common Shares"), of the Company. The distribution was payable on September 18,
1987 (the "Record Date") to the shareholders of record as of the close of
business on the Record Date. Each Right entitles the registered holder to
purchase from the Company one-hundredth of one Common Share at a price of $85
per whole share, subject to adjustment (the "Purchase Price"). The description
and terms of the Rights are set forth in a Rights Agreement dated as of
September 8, 1987, amended and restated as of November 19, 1991 (the "Rights
Agreement"), between the Company and Ameritrust Company National Association,
as Rights Agent (the "Rights Agent").
Until the earliest to occur of (i) the close of business on
the tenth business day (or such later date as may be specified by the Board of
Directors) following a public announcement that a person or group of affiliated
or associated persons has acquired, or obtained the right to acquire,
beneficial ownership of 15%-or more of the outstanding Common Shares (an
"Acquiring Person"), (ii) the close of business on the tenth business day (or
such later date as may be specified by the Board of Directors) following the
commencement of a tender offer or exchange offer by a person or group of
affiliated or associated persons, the consummation of which would result in
beneficial ownership by such person or group of 15% or more of the outstanding
Common Shares, or (iii) the close of business on the tenth business day
following the first date of public announcement of the first occurrence of a
Flip-in Event or a Flip-over Event (as such terms are hereinafter defined) (the
earliest of such dates being hereinafter called the "Distribution Date"), the
Rights will be evidenced, with respect to any of the Common Share certificates
outstanding as of the Record Date, by such Common Share certificates.
The Rights Agreement provides that, until the Distribution
Date, the Rights will be transferred with and only with the Common Shares.
Until the Distribution Date (or earlier redemption or expiration of the
Rights), or, in the case of Common Shares issued upon conversion of the
Company's convertible securities, until the tenth day after the Distribution
Date, new Common Share certificates issued after the Record Date upon transfer
or new issuance of Common Shares will contain a notation incorporating the
Rights Agreement by reference. Until the Distribution Date (or earlier
redemption
<PAGE> 84
or expiration of the Rights), the surrender for transfer of any certificates
for Common Shares in respect of which Rights have been issued will also
constitute the transfer of the Rights associated with the Common Shares
represented by such certificate. As soon as practicable following the
Distribution Date, separate certificates evidencing the Rights (the "Right
Certificates") will be mailed to holders of record of the Common Shares as of
the close of business on the Distribution Date and such separate Right
Certificates alone will evidence the Rights.
The Rights are not exercisable until the Distribution Date.
The Rights will expire on September 18, 1997 (the "Final Expiration Date"),
unless earlier redeemed or exchanged by the Company as described below.
The Purchase Price payable, and the number of Common Shares or
other property issuable, upon exercise of the Rights are subject to adjustment
from time to time to prevent dilution (i) in the event of a stock dividend on,
or a subdivision, combination or reclassification of, the Common Shares; (ii)
upon the grant to holders of the Common Shares of certain rights, options or
warrants to subscribe for Common Shares or convertible securities at less than
the current market price of the Common Shares; or (iii) upon the distribution
to holders of the Common Shares of evidences of indebtedness, cash (excluding
regular periodic cash dividends at a rate not in excess of 125% of the rate of
the last cash dividend theretofore paid), assets, stock (other than dividends
payable in Common Shares) or of subscription rights, options or warrants (other
than those referred to above).
In the event (a "Flip-in Event"), that (i) any person or group
or affiliated or associated persons becomes the beneficial owner of 20% or more
of the outstanding Common Shares, (ii) any Acquiring Person merges into or
combines with the Company and the Company is the surviving corporation or any
Acquiring Person effects certain other transactions with the Company, as
described in the Rights Agreement, or (iii) during such time as there is an
Acquiring Person, there shall be any reclassification of securities or
recapitalization or reorganization of the Company which has the effect of
increasing by more than 1% the proportionate share of the outstanding shares of
any class of equity securities of the Company or any of its Subsidiaries
beneficially owned by the Acquiring Person, proper provision shall be made so
that each holder of a Right, other than Rights that are or were owned
beneficially by the Acquiring Person (which, from and after the later of the
Distribution Date and the date of the earliest of any such events, will be
void), will thereafter have the right to receive, upon exercise thereof at the
then current Purchase
<PAGE> 85
Price, that number of Common Shares having a market value of two times the
Purchase Price.
With certain exceptions, no adjustment in the Purchase Price
will be required until cumulative adjustments require an adjustment of at least
1% in such Purchase Price. No fractional shares will be issued (other than
fractions which may, at the election of the Company, be evidenced by depositary
receipts), and in lieu thereof, a payment in cash will be made based on the
market price of the Common Shares on the last trading day prior to the date of
exercise.
In the event (a "Flip-Over Event") that, following the first
date of public announcement that a person has become an Acquiring Person, (i)
the Company merges with or into any person and the Company is not the surviving
corporation, (ii) any person merges with or into the Company and the Company is
the surviving corporation, but its Common Shares are changed or exchanged, or
(iii) 50% or more of the Company's assets or earning power, including without
limitation securities creating obligations of the Company, are sold, proper
provision shall be made so that each holder of a Right, other than Rights that
are or were beneficially owned by the Acquiring Person after the date upon
which the Acquiring Person became such (which will thereafter be void), shall
thereafter have the right to receive, upon the exercise thereof at the then
current Purchase Price of the Right, that number of shares of common stock (or,
under certain circumstances, an economically equivalent security or securities)
of such other person which at the time of such transaction would have a market
value of two times the Purchase Price of the Right.
At any time after the later of the Distribution Date and the
first occurrence of a Flip-in Event or a Flip-over Event and prior to the
acquisition by any person or group of affiliated or associated persons of 50%
or more of the outstanding Common Shares, the Board of Directors of the Company
may exchange the Rights (other than any Rights which have become void), in
whole or in part, at an exchange ratio of one Common Share per Right (subject
to adjustment).
The Company may redeem the Rights in whole, but not in part,
at a price of $.05 per Right (the "Redemption Price"), at any time prior to the
close of business on the later of (i) the Distribution Date and (ii) the first
occurrence of a Flip-in Event or a Flip-over Event. Immediately upon the action
of the Board of Directors electing to redeem the Rights, the right to exercise
the Rights will terminate and the only right of the holders of Rights will be
to receive the Redemption Price. The Company will give notice of such
redemption to the holders of the then outstanding Rights by mailing such notice
to all such holders at their last addresses as they appear on the registry
books of the Rights Agent.
<PAGE> 86
Until a Right is exercised, the holder thereof, as such, will
have no rights as a shareholder of the Company, including, without limitation,
the right to vote or to receive dividends.
Following the later of the Distribution Date and the first
occurrence of a Flip-in Event or a Flip-over Event, Rights may be exercised, at
the option of the holder thereof, without the payment of the Purchase Price in
cash that would otherwise be required. In any such case, the number of
securities which such person would otherwise be entitled to receive upon the
exercise of such Rights will be reduced as provided in the Rights Agreement.
The Rights Agreement may be amended by the Company without the
approval of any holders of Rights, including amendments which add other events
requiring adjustment to the Purchase Price payable and the number of Common
Shares or other securities issuable upon the exercise of the Rights or which
modify procedures relating to the redemption of the Rights, provided that no
amendment may be made which (i) changes the stated Redemption Price or the
period of time remaining until the Final Expiration Date, (ii) reduces the
number of Common Shares for which a Right is then exercisable, or (iii)
modifies a time period relating to when the Rights may be redeemed at such time
as the Rights are not then redeemable.
A copy of the Rights Agreement has been filed with the
Securities and Exchange Commission as an Exhibit to a Form 8 dated November 19,
1991. A copy of the Rights Agreement is available free of charge from the
Company. This summary description of the Rights does not purport to be complete
and is qualified in its entirety by reference to the Rights Agreement, which is
hereby incorporated herein by reference.
<PAGE> 1
Exhibit 4(n)
================================================================================
CLEVELAND-CLIFFS INC
NOTE AGREEMENT
Dated as of December 15, 1995
Re: $70,000,000 7.00% Senior Notes
Due December 15, 2005
================================================================================
<PAGE> 2
TABLE OF CONTENTS
(Not a part of the Agreement)
<TABLE>
<CAPTION>
SECTION HEADING PAGE
<S> <C> <C>
SECTION 1. DESCRIPTION OF NOTES AND COMMITMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.1. Description of Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.2. Commitment, Closing Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.3. Other Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
SECTION 2. PREPAYMENT OF NOTES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 2.1. No Required Prepayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 2.2. Optional Prepayment with Premium . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 2.3. Prepayment on Change of Control Event . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 2.4. Notice of Optional Prepayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 2.5. Application of Prepayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 2.6. Direct Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 2.7. Payments Due on Non-Business Days . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
SECTION 3. REPRESENTATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 3.1. Representations of the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 3.2. Representations of the Purchaser . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 3.3. Transfers of Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
SECTION 4. CLOSING CONDITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 4.1. Conditions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 4.2. Waiver of Conditions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
SECTION 5. COMPANY COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 5.1. Corporate Existence, Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 5.2. Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 5.3. Taxes, Claims for Labor and Materials, Compliance with Laws . . . . . . . . . . . . . . . . 10
Section 5.4. Maintenance, Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 5.5. Nature of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 5.6. Consolidated Adjusted Net Worth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 5.7. Limitations on Funded Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 5.8. Limitation on Basket Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 5.9. Limitation on Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 5.10. Mergers, Consolidations and Sales of Assets . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 5.11. Guaranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 5.12. Repurchase of Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 5.13. Transactions with Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
</TABLE>
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<PAGE> 3
<TABLE>
<S> <C> <C>
Section 5.14. Termination of Pension Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 5.15. Reports and Rights of Inspection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
SECTION 6. EVENTS OF DEFAULT AND REMEDIES THEREFOR . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 6.1. Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 6.2. Notice to Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 6.3. Acceleration of Maturities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 6.4. Rescission of Acceleration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
SECTION 7. AMENDMENTS, WAIVERS AND CONSENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 7.1. Consent Required . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 7.2. Solicitation of Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 7.3. Effect of Amendment or Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
SECTION 8. INTERPRETATION OF AGREEMENT; DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 8.1. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 8.2. Accounting Principles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Section 8.3. Directly or Indirectly . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
SECTION 9. MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 9.1. Registered Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 9.2. Exchange of Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 9.3. Loss, Theft, Etc. of Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 9.4. Expenses, Stamp Tax Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 9.5. Powers and Rights Not Waived; Remedies Cumulative . . . . . . . . . . . . . . . . . . . . . 33
Section 9.6. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 9.7. Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 9.8. Survival of Covenants and Representations . . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 9.9. Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 9.10. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 9.11. Captions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 9.12. Additional Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Signature . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
</TABLE>
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<PAGE> 4
Attachments to Note Agreement:
Schedule I -- Names and Addresses of Note Purchasers and
Amounts of Commitments
Exhibit A -- Form of 7.00% Senior Note due December 15, 2005
Exhibit B -- Representations and Warranties of the Company
Exhibit C -- Description of Special Counsel's Closing Opinion
Exhibit D -- Description of Closing Opinion of General Counsel
to the Company
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<PAGE> 5
CLEVELAND-CLIFFS INC
1100 Superior Avenue
Cleveland, Ohio 44114-2589
NOTE AGREEMENT
Re: $70,000,000 7.00% Senior Notes
Due December 15, 2005
Dated as of
December 15, 1995
To the Purchaser named in Schedule I
hereto which is a signatory of this
Agreement
Gentlemen:
The undersigned, Cleveland-Cliffs Inc, an Ohio corporation
(the "Company"), agrees with you as follows:
SECTION 1. DESCRIPTION OF NOTES AND COMMITMENT.
Section 1.1. Description of Notes. The Company will authorize
the issue and sale of $70,000,000 aggregate principal amount of its 7.00%
Senior Notes (the "Notes"), to be dated the date of issue, to bear interest
from such date at the rate of 7.00% per annum, payable semi-annually in arrears
on the fifteenth day of each June and December in each year (commencing June
15, 1996) and at maturity and to bear interest on overdue principal (including
any overdue required or optional prepayment of principal) and Make-Whole
Amount, if any, and (to the extent legally enforceable) on any overdue
installment of interest at the rate of 9.00% per annum after the date due,
whether by acceleration or otherwise, until paid, to be expressed to mature on
December 15, 2005, and to be substantially in the form attached hereto as
Exhibit A.
Interest on the Notes shall be computed on the basis of a
360-day year of twelve 30-day months. The Notes are not subject to prepayment
or redemption at the option of the Company prior to their expressed maturity
dates except on the terms and conditions and in the amounts and with the
Make-Whole Amount, if any, set forth in Section 2 of this Agreement. The term
"Notes" as used herein shall include each Note delivered pursuant to this
Agreement and the separate agreements with the other purchasers named in
Schedule I. You and the other purchasers named in Schedule I are hereinafter
sometimes referred to as the "Purchasers."
Section 1.2. Commitment, Closing Date. Subject to the terms
and conditions hereof and on the basis of the representations and warranties
hereinafter set forth, the Company agrees to issue and sell to you, and you
agree to purchase from the Company, Notes in the principal amount set forth
opposite your name on Schedule I hereto at a price of 100% of the principal
amount thereof on the Closing Date hereafter mentioned.
<PAGE> 6
Cleveland-Cliffs Inc Note Agreement
Delivery of the Notes will be made at the offices of Chapman and
Cutler, 111 West Monroe, Chicago, Illinois 60603, against payment therefor in
Federal Reserve or other funds current and immediately available at the
principal office of Society National Bank, Cleveland, Ohio, ABA No. 0410-0103-9
for credit to the Company's Account No. 10005-83223 in the amount of the
purchase price at 10:00 A.M., Chicago time, on December 19, 1995 or such later
date (not later than December 27, 1995) as shall mutually be agreed upon by the
Company and the Purchasers (the "Closing Date"). The Notes delivered to you on
the Closing Date will be delivered to you in the form of a single registered
Note in the form attached hereto as Exhibit A for the full amount of your
purchase (unless different denominations are specified by you), registered in
your name or in the name of your nominee, all as you may specify at any time
prior to the Closing Date.
Section 1.3. Other Agreements. Simultaneously with the
execution and delivery of this Agreement, the Company is entering into similar
agreements with the other Purchasers under which such other Purchasers agree to
purchase from the Company the principal amount of Notes set opposite such
Purchasers' names in Schedule I, and your obligation and the obligations of the
Company hereunder are subject to the execution and delivery of the similar
agreements by the Purchasers. This Agreement and said similar agreements with
the other Purchasers are herein collectively referred to as the "Agreements."
The obligations of each Purchaser shall be several and not joint and no
Purchaser shall be liable or responsible for the acts of any other Purchaser or
the failure of any other Purchaser to act and the obligations of the Company to
you hereunder and to each other Purchaser under such Purchaser's Agreement
shall be several and not joint, and the Company shall not be liable or
responsible to you except with respect to any action taken or any failure to
act by the Company with regard to you or the Notes purchased by you hereunder.
SECTION 2. PREPAYMENT OF NOTES.
Section 2.1. No Required Prepayments. The Notes are not
subject to any scheduled or installment prepayments of principal.
Section 2.2. Optional Prepayment with Premium. Upon compliance
with Section 2.4 the Company shall have the right, at any time and from time to
time, of prepaying the outstanding Notes, either in whole or in part (but if in
part then in a minimum principal amount of $1,000,000) by payment of the
principal amount of the Notes, or portion thereof to be prepaid, and accrued
interest thereon to the date of such prepayment, together with the Make-Whole
Amount, determined as of three (3) Business Days prior to the date of such
prepayment pursuant to this Section 2.2.
Section 2.3. Prepayment on Change of Control Event. (a) In
the event that the Company shall have advance notice of a Change of Control
Event which the Company determines in good faith is likely to occur no less
than 60 days or more than 120 days from the date of such notice, then it shall
provide written notice (a "Section 2.3(a) Notice") to all holders of the Notes
of such proposed Change of Control Event, which Section 2.3(a) Notice shall
include the information specified in Section 2.3(c) and shall contain the
agreement of the Company to either (i) prepay all the Notes held by such
holders accepting the prepayment offer
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<PAGE> 7
Cleveland-Cliffs Inc Note Agreement
concurrently with the closing of the transaction which causes or constitutes a
Change of Control Event (the "Prepayment Offer") or (ii) increase the interest
rate on the Notes by 2.00% per annum concurrently with the closing of the
transaction which causes or constitutes a Change of Control Event. In the event
the Company elects to increase the interest rate on the Notes, each of the
holders of the Notes shall be deemed to have agreed to such increase. In the
case of a Prepayment Offer, the holder of any Notes that wishes to accept such
Prepayment Offer shall notify the Company in writing of the acceptance of the
Prepayment Offer upon the Change of Control Event within 45 days of receipt of
the Section 2.3(a) Notice. In the case of Prepayment Offer, on the date 30 days
prior to the date of the closing of the proposed transaction, the Company shall
provide to each holder of Notes which has not yet responded to the Section
2.3(a) Notice, a duplicate copy of the Section 2.3(a) Notice originally sent to
such holder. Not less than five days prior to the date of the closing of the
proposed transaction, the Company will furnish to each holder of Notes a written
confirmation of the date of the Change of Control Event. On the date the Change
of Control Event occurs the Company shall in accordance with the Section 2.3(a)
Notice either (i) prepay the principal amount of the Notes held by the holders
that have delivered such notice of acceptance of the Prepayment Offer, together
with accrued interest thereon to the date of such prepayment or (ii) issue to
all holders of Notes new Notes bearing interest at the rate of 9.00% per annum,
and bearing interest on any overdue principal, and (to the extent legally
enforceable) on interest and Make-Whole Amount, if any, at the rate of 11.00%
per annum and otherwise to be in substantially the form of Exhibit A hereto.
Such obligation to prepay the Notes or deliver new Notes with respect to a
particular proposed Change of Control Event described in a Section 2.3(a) Notice
shall terminate in the event that such Change of Control Event does not occur
within 120 days of the date of the Section 2.3(a) Notice relating to such
proposed Change of Control Event upon substantially the terms described in such
Section 2.3(a) Notice. If either (i) the Company shall have at least 45 days
advance notice that, in the case of any Change of Control Event approved of or
authorized by the Company notwithstanding the best efforts of the Company to
complete the proposed Change of Control Event within the 120-day period after
the initial Section 2.3(a) Notice with respect thereto, the proposed Change of
Control Event will occur more than 120 days after the initial Section 2.3(a)
Notice with respect to such proposed Change of Control Event or (ii) the terms
applicable to the proposed Change of Control Event previously described in the
initial Section 2.3(a) Notice with respect thereto are materially different from
the terms initially described, the Company shall give additional Section 2.3(a)
Notices and the holders of the Notes shall have the rights of prepayment or
increased interest rate as contemplated herein. In the event the interest rate
on the Notes has been increased as contemplated hereinabove, the Company and the
holders of the Notes shall enter into appropriate amendments to this Agreement
to the extent necessary to reflect such amended interest rate.
(b) In the event (i) the Company shall not have sufficient advance
notice of a Change of Control Event to timely furnish a Section 2.3(a) Notice,
and (ii) a Change of Control Event shall occur, the Company will, as soon as
reasonably practicable and in any event within five (5) days after such Change
of Control Event, give notice of such event to all holders of the Notes (a
"Section 2.3(b) Notice") which shall include the information specified in
Section 2.3(c) and shall contain the agreement of the Company to either (i)
prepay all Notes held by such holders accepting the prepayment offer or (ii)
increase the interest rate on the Notes
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<PAGE> 8
Cleveland-Cliffs Inc Note Agreement
as of the effective date of the Change of Control Event by 2.00%. In the event
the Company elects to increase the interest rate on the Notes, each of the
holders of the Notes shall be deemed to have agreed to such increase. In the
event that the Company elects to increase the interest rate on the Notes, the
Company shall, as soon as reasonably practicable, and in no event later than 15
days after the Change of Control Event, deliver new Notes to each holder of
Notes in the form described in Section 2.3(a). In the event the interest rate
on the Notes has been increased as contemplated hereinabove, the Company and the
holders of the Notes shall enter into appropriate amendments to this Agreement
to the extent necessary to reflect such amended interest rate. In the case of
any offer of prepayment, the holder of any Notes may notify the Company in
writing of the acceptance of the offer of prepayment at least five days prior to
the date specified for prepayment in the Section 2.3(b) Notice. On the date 30
days prior to the prepayment date, the Company shall provide to each holder of
Notes which has not yet responded to the Section 2.3(a) Notice, a duplicate copy
of the Section 2.3(a) Notice originally sent to such holder. On the date
designated in the Section 2.3(b) Notice, the Company shall prepay the principal
amount of all Notes held by all holders that have delivered such notice of
acceptance of the prepayment offer, together with accrued interest thereon to
the date of such prepayment.
(c) The Section 2.3(a) Notice and Section 2.3(b) Notice required
to be given by the Company pursuant to and in accordance with the provisions
of Sections 2.3(A) and (B), respectively, shall, in each case, be in
writing and shall set forth, (i) a summary of the transaction or transactions
causing or proposed to cause the Change of Control Event (including, without
limitation, a reasonably detailed calculation of the ratio of Consolidated
Funded Debt to Consolidated Total Capitalization immediately after giving
effect to the consummation of the Change of Control), (ii) the Company's
election as to whether it will offer to prepay the Notes or increase the
interest rate thereon (iii) in the event that the Company offers to prepay the
Notes, such financial or other information as the Company in good faith
determines is appropriate for each holder to make an informed decision as to
whether to require a prepayment of such holder's Notes, (iv) in the event that
the Company offers to prepay the Notes, in the case of any Section 2.3(b)
Notice, the date set for prepayment, if any, of the Notes which date shall not
be less than 45 days or more than 60 days after the date of such notice, (v) in
the event that the Company offers to prepay the Notes, that the Notes will be
prepayable at a price equal to the principal amount thereof together with
accrued interest to the date of prepayment, without a Make-Whole Amount and
(vi) in the event that the Company offers to prepay the Notes, the amount of
accrued interest applicable to the prepayment. In the event the Company offers
to prepay the Notes, thereafter and prior to the Change of Control Event the
Company shall provide such other information as each holder of the Notes shall
reasonably determine is necessary for such holder to make an informed decision
as to whether to require a prepayment of such holder's Notes.
(d) As used herein, the term "Change of Control" shall mean and
include any Person or related Persons constituting a "group" for the purposes
of Section 13(d) of the Securities Exchange Act of 1934, as amended, becoming
the beneficial owner or owners, directly or indirectly, of a majority of the
Voting Stock (determined by number of votes) of the Company (the "Beneficial
Owners"); provided that a Change of Control shall not have
-4-
<PAGE> 9
Cleveland-Cliffs Inc Note Agreement
occurred if the Beneficial Owner or Owners include, and are under the general
direction and control of, a member or members of the Current Management Group.
As used herein, the term "Change of Control Event" shall mean the
occurrence of a Change of Control if, after giving effect thereto, Consolidated
Funded Debt shall exceed 45% of Consolidated Total Capitalization.
As used herein, the term "Current Management Group" shall mean M. Thomas
Moore, William R. Calfee, John S. Brinzo and Thomas J. O'Neil and any successors
thereto who are appointed by a majority of the Continuing Directors, which
appointment is approved by the holders of not less than 66-2/3% of the aggregate
principal amount of the Notes outstanding (which approval shall not be
unreasonably withheld). A "Continuing Director" shall mean any director of the
Company who either (x) is a director of the Company on the date of issuance of
the Notes or (y) becomes a director of the Company subsequent to the date of the
issuance of the Notes but prior to the date of the Change of Control and whose
election or nomination for election by the shareholders of the Company was duly
approved by at least two-thirds of the Continuing Directors who were such
immediately prior to that time of election or nomination, either by a specific
vote of such Continuing Directors or by approval of the proxy statement issued
by the Company in which such individual was named as a nominee for director of
the Company.
Section 2.4. Notice of Optional Prepayments. The Company will
give notice of any prepayment of the Notes pursuant to Section 2.2 to each
holder thereof not less than 30 days nor more than 60 days before the date
fixed for such optional prepayment specifying (i) such date, (ii) the principal
amount of the holder's Notes to be prepaid on such date, (iii) that a
Make-Whole Amount may be payable, (iv) the date when such Make-Whole Amount
will be calculated, (v) the estimated Make-Whole Amount, including reasonably
detailed calculations thereof, and (vi) the accrued interest applicable to the
prepayment. Such notice of prepayment shall also certify all facts, if any,
which are conditions precedent to any such prepayment. Notice of prepayment
having been so given, the aggregate principal amount of the Notes specified in
such notice, together with accrued interest thereon and the Make-Whole Amount,
if any, payable with respect thereto shall become due and payable on the
prepayment date specified in said notice. Not later than three (3) Business
Days prior to the prepayment date specified in such notice (which shall be
sent by facsimile transmission), the Company shall provide each holder of a
Note written notice of the Make-Whole Amount, if any, payable in connection
with such prepayment and, whether or not any Make-Whole Amount is payable, a
reasonably detailed computation of the Make-Whole Amount.
Section 2.5. Application of Prepayments. All partial
prepayments pursuant to Section 2.2 shall be applied on all outstanding Notes
being prepaid ratably in accordance with the unpaid principal amounts thereof.
Section 2.6. Direct Payment. Notwithstanding anything to the
contrary contained in this Agreement or the Notes, in the case of any Note
owned by you or your nominee or owned by any subsequent Institutional Holder
which has given written notice to the Company requesting that the provisions of
this Section 2.6 shall apply, the Company will punctually pay
-5-
<PAGE> 10
Cleveland-Cliffs Inc Note Agreement
when due the principal thereof, interest thereon and Make-Whole Amount, if any,
due with respect to said principal, without any presentment thereof, directly to
you, to your nominee or to such subsequent Institutional Holder at your address
or your nominee's address set forth in Schedule I hereto or such other address
as you, your nominee or such subsequent Institutional Holder may from time to
time designate in writing to the Company or, if a bank account with a United
States bank is designated for you or your nominee on Schedule I hereto or in any
written notice to the Company from you, from your nominee or from any such
subsequent Institutional Holder, the Company will make such payments in
immediately available funds to such bank account, marked for attention as
indicated, or in such other manner or to such other account in any United States
bank as you, your nominee or any such subsequent Institutional Holder may from
time to time direct in writing.
Section 2.7. Payments Due on Non-Business Days. Anything in
this Agreement or the Notes to the contrary notwithstanding, any payment of
principal of, Make-Whole Amount, if any, or interest on any Note shall be paid
and received by the holders of the Notes not later than 12:00 Noon New York,
New York time, and any payment of principal of, Make-Whole Amount, if any, or
interest on any Note that is due on a date other than a Business Day shall be
made on the next succeeding Business Day and shall include all interest accrued
to, but not including, such succeeding Business Day.
SECTION 3. REPRESENTATIONS.
Section 3.1. Representations of the Company. The Company
represents and warrants that all representations and warranties set forth in
Exhibit B are true and correct as of the date hereof and are incorporated
herein by reference with the same force and effect as though herein set forth
in full.
Section 3.2. Representations of the Purchaser. You represent,
and in entering into this Agreement, and in issuing the Notes hereunder and
thereunder the Company has relied and will be relying on its understanding that
you (i) are an "accredited investor" as such term is defined in Rule 501 of
Regulation D promulgated under the Securities Act of 1933, as amended (the
"1933 Act"), (ii) have such knowledge and experience in financial and business
matters, alone or together with your advisors, that you are capable of
evaluating the merits and risks of the investment in the Notes to be made by
you hereunder, and (iii) are acquiring the Notes for the purpose of investment
and not with a view to the distribution thereof, have no present intention of
selling, negotiating or otherwise disposing of the Notes being acquired by you
hereunder and shall not sell, negotiate or otherwise dispose of such Notes
unless such sale is pursuant to an effective registration statement under the
1933 Act or is exempt from the registration requirements under the 1933 Act as
of the time of any proposed sale; it being understood, however, that the
disposition of your property shall at all times be and remain within your
control. You further represent that the source of funds to be used by you to
pay the purchase price of the Notes is an "insurance company general account"
within the meaning of Department of Labor Prohibited Transaction Exemption
95-60 ("PTE") (issued July 12, 1995) and the purchase of the Notes by you is
eligible for and satisfies the requirements of PTE 95-60.
-6-
<PAGE> 11
Cleveland-Cliffs Inc Note Agreement
Section 3.3. Transfers of Notes. You covenant that you will
not transfer any Notes to any Person unless such Person shall represent and
warrant as follows (it being understood that such Person shall be deemed to
have so represented and warranted by its acceptance of such Note, and except in
the case of disclosure pursuant to clause (b), (c), (d) or (f) below, no
written statement of such Person shall be necessary):
At least one of the following statements concerning each source of
funds to be used by the proposed transferee to acquire the Notes is accurate:
(a) the source of funds is an "insurance company general account"
within the meaning of Department of Labor Prohibited Transaction Exemption
("PTE") 95-60 (issued July 12, 1995) and the purchase of the Notes by such
Note Purchaser is eligible for and satisfies the requirements of PTE
95-60;
(b) all or a part of such funds constitute assets of one or more
separate accounts, trusts or a commingled pension trust maintained by the
Purchaser, and the Purchaser has disclosed to the Company the names of
such employee benefit plans whose assets in such separate account or
accounts or pension trusts exceed 10% of the total assets or are expected
to exceed 10% of the total assets of such account or accounts or trusts as
of the date of such purchase (for the purpose of this clause (b), all
employee benefit plans maintained by the same employer or employee
organization are deemed to be a single plan);
(c) all or part of such funds constitute assets of a bank collective
investment fund maintained by the Purchaser, and the Purchaser has
disclosed to the Company the names of such employee benefit plans whose
assets in such collective investment fund exceed 10% of the total assets
or are expected to exceed 10% of the total assets of such fund as of the
date of such purchase (for the purpose of this clause (c), all employee
benefit plans maintained by the same employer or employee organization are
deemed to be a single plan);
(d) all or part of such funds constitute assets of one or more
employee benefit plans, each of which has been identified to the Company
in writing;
(e) the Purchaser is acquiring the Notes for the account of one or
more pension funds, trust funds or agency accounts, each of which is a
"governmental plan" as defined in Section 3(32) of ERISA;
(f) the source of funds is an "investment fund" managed by a
"qualified professional asset manager" or "QPAM" (as defined in Part V of
PTE 84-14, issued March 13, 1984), provided that no other party to the
transactions described in this Agreement and no "affiliate" of such other
party (as defined in Section V(c) of PTE 84-14) has at this time, and
during the immediately preceding one year has exercised the authority to
appoint or terminate said QPAM as manager of the assets of any plan
identified in writing to the Company pursuant to this clause (f) or to
negotiate the terms of said QPAM's management agreement on behalf of any
such identified plans; or
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Cleveland-Cliffs Inc Note Agreement
(g) all or a portion of such funds consists of funds which
do not constitute "plan assets".
If any proposed transferee makes any disclosure pursuant to clause
(b), (c), (d) or (f) above in connection with any proposed transfer, such
transfer shall not occur until the fifth Business Day following such
disclosure and then only if the transferring Purchaser and such proposed
transferee shall not have received a statement in writing that the Company
is unable to make the following representation:
The Company represents and warrants that (x) it is neither a
"party in interest" (as defined in Title I, Section 3(14) of
ERISA) nor a "disqualified person" (as defined in Section
4975(e)(2) of the Internal Revenue Code of 1986, as amended), with
respect to any plan identified pursuant to paragraphs (b), (c) or
(d) above, or (y) with respect to any plan identified pursuant to
paragraph (f) above, neither it nor any "affiliate" (as defined in
Section V(c) of PTE 84-14) is described in the proviso to said
paragraph (f).
If the Company fails to otherwise respond in such five-Business
Day period, it shall be deemed to have made the foregoing representation
and warranty. As used in this Section 3.3, the terms "separate account"
and "employee benefit plan" shall have the respective meanings assigned to
them in ERISA and the term "plan assets" shall have the meaning assigned to
it in Department of Labor Regulation 29 C.F.R. Section 2510.3-101.
SECTION 4. CLOSING CONDITIONS.
Section 4.1. Conditions. Your obligation to purchase the Notes
on the Closing Date shall be subject to the performance by the Company of its
agreements hereunder which by the terms hereof are to be performed at or prior
to the time of delivery of the Notes and to the following further conditions
precedent:
(a) Closing Certificate. You shall have received a certificate
dated the Closing Date, signed by the President or a Vice President of
the Company, the truth and accuracy of which shall be a condition to your
obligation to purchase the Notes proposed to be sold to you and to the
effect that (i) the representations and warranties of the Company set forth
in Exhibit B hereto are true and correct on and with respect to the Closing
Date (other than such representations and warranties that are made with
reference to an identified date or dates, which shall continue to be true
and correct with respect to such identified date or dates on the Closing
Date), (ii) the Company has performed all of its obligations hereunder which
are to be performed on or prior to the Closing Date, and (iii) no Default or
Event of Default has occurred and is continuing.
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Cleveland-Cliffs Inc Note Agreement
(b) Legal Opinions. You shall have received from Chapman and
Cutler, who are acting as your special counsel in this transaction, from
F. L. Hartman, Vice President and General Counsel for the Company, their
respective opinions dated the Closing Date, in form and substance
satisfactory to you, and covering the matters set forth in Exhibits C and D,
respectively, hereto.
(c) Related Transactions. The Company shall have consummated the
sale of all of the Notes on the Closing Date pursuant to this Agreement
and the other Agreements referred to in Section 1.3.
(d) Private Placement Number. On or prior to the Closing Date, a
private placement number shall been applied for the Notes from Standard &
Poor's Corporation.
(e) Application of Proceeds. Concurrently with the issuance of
the Notes hereunder, the Company shall have provided to the holders thereof
prepayment notice with respect to the 1992 Notes.
(f) Satisfactory Proceedings. All proceedings taken in connection
with the transactions contemplated by this Agreement, and all documents
necessary to the consummation thereof, shall be satisfactory in form and
substance to you and your special counsel, and you shall have received a
copy (executed or certified as may be appropriate) of all legal documents or
proceedings taken in connection with the consummation of said transactions.
Section 4.2. Waiver of Conditions. If on the Closing Date the
Company fails to tender to you the Notes to be issued to you on such date or if
the conditions specified in Section 4.1 have not been fulfilled, you may
thereupon elect to be relieved of all further obligations under this Agreement.
Without limiting the foregoing, if the conditions specified in Section 4.1 have
not been fulfilled, you may waive compliance by the Company with any such
condition to such extent as you may in your sole discretion determine. Nothing
in this Section 4.2 shall operate to relieve the Company of any of its
obligations hereunder or to waive any of your rights against the Company
(except to the extent that fulfillment of any conditions specified in Section
4.1 has been waived); provided, however that the Company shall not be obligate
to tender to you the Notes to be issued on the Closing Date unless the
Purchasers are willing to purchase 100% of the Notes on such date.
SECTION 5. COMPANY COVENANTS.
From and after the Closing Date and continuing so long as any amount
remains unpaid on any Note:
Section 5.1. Corporate Existence, Etc. The Company will preserve and
keep in full force and effect, and will cause each Subsidiary to preserve and
keep in full force and effect, its corporate existence and all licenses and
permits necessary to the proper conduct of its business; provided, however, that
(i) the foregoing shall not prevent any transaction
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Cleveland-Cliffs Inc Note Agreement
permitted by Section 5.10, and (ii) nothing in this Section 5.1 shall prevent
the abandonment or termination of the corporate existence or franchise of any
Subsidiary (except CCI) if, at the time of any such transactions or after giving
effect thereto, no Default or Event of Default exists and such abandonment or
termination does not materially and adversely effect the condition or operations
of the Company and its Subsidiaries.
Section 5.2. Insurance. The Company will maintain, and will
cause each Subsidiary to maintain, insurance coverage by financially sound and
reputable insurers in such forms and amounts and against such risks as are
customary for corporations of established reputation engaged in the same or
similar business and owning and operating similar properties. The Company will
provide an officer's certificate to each holder of Notes within the periods set
forth in Section 5.15(a) and (B) stating that the Company is in compliance with
this Section 5.2.
Section 5.3. Taxes, Claims for Labor and Materials, Compliance with
Laws. The Company will promptly pay and discharge, and will cause each
Subsidiary promptly to pay and discharge, all lawful taxes, assessments and
governmental charges or levies imposed upon the Company or such Subsidiary,
respectively, or upon or in respect of all or any part of the property or
business of the Company or such Subsidiary, all trade accounts payable in
accordance with usual and customary business terms, and all claims for work,
labor or materials, which if unpaid might become a Lien upon any property of the
Company or such Subsidiary not permitted by the provisions of Section 5.9;
provided, however, that the Company or such Subsidiary shall not be required to
pay any such tax, assessment, charge, levy, account payable or claim if (i) the
validity, applicability or amount thereof is being contested in good faith by
appropriate actions or proceedings which will prevent the forfeiture or sale of
any property of the Company or such Subsidiary or any material interference with
the use thereof by the Company or such Subsidiary, and (ii) the Company or such
Subsidiary shall set aside on its books, reserves deemed by it to be adequate
with respect thereto. The Company will promptly comply and will cause each
Subsidiary to comply with all laws, ordinances or governmental rules and
regulations to which it is subject including, without limitation, the
Occupational Safety and Health Act of 1970, as amended, ERISA and all laws,
ordinances, governmental rules and regulations relating to environmental
protection in all applicable jurisdictions, the violation of which would
reasonably be expected to have a Material Adverse Effect or would result in any
Lien not permitted under Section 5.9.
Section 5.4. Maintenance, Etc. The Company will maintain,
preserve and keep, and will cause each Subsidiary to maintain, preserve and
keep, its properties which are material to the conduct of its business (whether
owned in fee or a leasehold interest) in good repair and working order and from
time to time will make all necessary repairs, replacements, renewals and
additions thereto so that at all times the efficiency thereof shall be
maintained.
Section 5.5. Nature of Business. The Company will not, and
will not permit CCI to, engage in any business activities or operations which
are substantially different in nature from and unrelated to the activities and
operations of the Company and its Subsidiaries engaged in on the Closing Date.
The Company shall at all times own 80% of the capital
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Cleveland-Cliffs Inc Note Agreement
stock of each of CCI, Cliffs Mining Company, a Delaware corporation and
Northshore Mining Company, a Delaware corporation and a Wholly-owned Subsidiary
of Cliffs Minnesota Minerals Company, a Minnesota corporation, which is a
Wholly-owned Subsidiary of the Company.
Section 5.6. Consolidated Adjusted Net Worth. The Company will at
all times keep and maintain Consolidated Adjusted Net Worth at an amount not
less than the sum of (i) $200,000,000 plus (ii) 25% of Consolidated Net Earnings
for each fiscal quarter of the Company commencing with the fiscal quarter ending
March 31, 1996 (it being agreed that, for the purposes of this clause (ii),
Consolidated Net Earnings which is a deficit for any such fiscal quarter
included in any calculation hereunder shall be deemed to be zero and,
accordingly, shall not reduce the level of Consolidated Adjusted Net Worth
otherwise required to be maintained pursuant to this Section 5.6).
Section 5.7. Limitations on Funded Debt. (a) The Company will not,
and will not permit any Subsidiary to, create, assume or incur or in any manner
be or become liable in respect of any Funded Debt, except:
(1) Funded Debt evidenced by the Notes;
(2) Funded Debt of the Company and its Subsidiaries
outstanding as of the date of this Agreement and reflected on Annex 2
to Exhibit B hereto; and additional Funded Debt incurred for the
purpose of extending, renewing or refunding such Funded Debt, provided
that the aggregate amount of such additional Funded Debt shall not
exceed the aggregate amount of the Funded Debt which is the subject of
such extension, renewal or refunding; and
(3) Funded Debt of the Company and its Subsidiaries, provided
that at the time of issuance thereof and after immediately giving
effect thereto and to the application of the proceeds thereof:
(i) Consolidated Funded Debt shall not exceed 60% of
Consolidated Total Capitalization; and
(ii) in the case of the incurrence of Subsidiary Funded Debt,
total Subsidiary Funded Debt shall not exceed 20% of Consolidated
Adjusted Net Worth.
(b) Any corporation which becomes a Subsidiary after the date
hereof shall for all purposes of this Section 5.7 be deemed to have created,
assumed or incurred at the time it becomes a Subsidiary all Debt of such
corporation existing immediately after it becomes a Subsidiary and, in any such
event, compliance with Section 5.7(a)(3) shall be determined on a consolidated
basis after giving effect to such corporation becoming a Subsidiary.
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Cleveland-Cliffs Inc Note Agreement
Section 5.8. Limitation on Basket Obligations. The Company
will not at any time permit Basket Obligations to exceed an amount equal to 15%
of Consolidated Adjusted Net Worth.
Section 5.9. Limitation on Liens. The Company will not, and
will not permit any Subsidiary to, create or incur, or suffer to be incurred or
to exist, any Lien on its or their property or assets, whether now owned or
hereafter acquired, or upon any income or profits therefrom, except:
(a) Liens for taxes and assessments or other governmental
charges or levies, provided payment thereof is not at the time required
by Section 5.3;
(b) Liens of or resulting from any judgment or award, the
time for the appeal or petition for rehearing of which shall not have
expired, or in respect of which the Company or a Subsidiary shall at
any time in good faith be prosecuting an appeal or proceeding for a
review and in respect of which a stay of execution pending such appeal
or proceeding for review shall have been secured;
(c) Liens incidental to the normal conduct of the business of
the Company or any Subsidiary or the ownership of its property which
Liens are not incurred in connection with the incurrence of
Indebtedness and which do not in the aggregate materially impair the
use of such property in the operation of the business of the Company
and its Subsidiaries, taken as a whole, or the value of such property
for the purposes of such business;
(d) Liens securing Indebtedness of a Subsidiary to the
Company or to another Subsidiary;
(e) Liens existing as of December 15, 1995 and reflected on
Annex 2 to Exhibit B;
(f) Liens (including Liens of Capitalized Leases of the
Company or any Subsidiary) incurred after the Closing Date (1) given to
secure the payment of the purchase price or costs of construction
incurred contemporaneously with, or within 120 days after, the
acquisition or construction of assets useful and intended to be used in
carrying on the business of the Company or a Subsidiary, or (2)
existing on assets useful and intended to be used in carrying on the
business of the Company or a Subsidiary at the time of acquisition
thereof or at the time of acquisition by the Company or a Subsidiary of
any business entity then owning such assets, whether or not such
existing Liens were given to secure the payment of the purchase price
of the assets to which they attach; provided that in the case of Liens
described in either of the foregoing clauses (1) or (2), (i) the Lien
shall attach solely to the assets so acquired or constructed, (ii) at
the time of acquisition of such assets (or at the time the entity
owning such assets was acquired by the Company or a Subsidiary), the
aggregate amount remaining unpaid on all Debt secured by Liens on such
assets, whether or not assumed by the Company or a Subsidiary, shall
not exceed an amount equal to the
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Cleveland-Cliffs Inc Note Agreement
lesser of (i) the purchase price of such assets at such time or
(ii) the fair market value of such assets at such time (as determined
in good faith by the Board of Directors of the Company), and (iii) all
such Debt shall have been incurred within the applicable limitations
provided in Section 5.7(a)(3);
(g) any extension, renewal or replacement of any Lien
described in Section 5.9(E) or Section 5.9(F) provided that (i) the
Lien so extended, renewed or replaced (the "New Lien") shall not
encumber any property of the Company or any Subsidiary which was not
previously subject to the prior Lien, and (ii) at the time of such
extension, renewal or replacement and after giving effect thereto and
to the application of the proceeds of any Debt secured thereby, the
Debt secured by the New Lien shall not exceed the principal amount of
Debt secured by the prior Lien as of the date of any such extension,
renewal or replacement; and
(h) other Liens incurred in the ordinary course of business
subsequent to the Closing Date provided that the obligations secured
thereby are permitted by Section 5.8.
Notwithstanding the foregoing provisions of this Section 5.9, in
the event any property of the Company or its Subsidiaries is subjected to a
Lien in violation Section Section 5.9(A) through (G), inclusive, but in
violation of no other provision of this Agreement (an "Excess Lien"), such
transaction will not constitute a Default or Event of Default hereunder if,
concurrently with and as a condition precedent to the creation of such Excess
Lien (1) the Company shall give notice of such Excess Lien, including, a
reasonably detailed description of the property upon which such Excess Lien was
placed, (2) the Company or such Subsidiary makes or causes to be made provision
whereby the obligations of the Company under the Notes and this Agreement will
be secured equally and ratably with all other obligations secured by such
Excess Lien pursuant to security arrangements reasonably satisfactory in form,
scope and substance to the holder or holders of not less than 66-2/3% in
aggregate principal amount of the Notes and (3) the Company or such Subsidiary
delivers or causes to be delivered an opinion of counsel reasonably
satisfactory to the holders of not less than 66-2/3% of the Notes regarding the
validity and priority of such security interest and to the effect that the Notes
are equally and ratably secured. In the case of any Excess Lien, said
obligations of the Company under the Notes and this Agreement shall have the
benefit, to the full extent that the holders may be entitled thereto under
applicable law, of an equitable lien on such property securing said obligations
of the Company under the Notes and this Agreement.
Section 5.10. Mergers, Consolidations and Sales of Assets. (a)
The Company will not, and will not permit any Subsidiary to, (i) consolidate
with or be a party to a merger with any other corporation or (ii) sell, lease or
otherwise dispose of all or substantially all of the assets of the Company and
its Subsidiaries; provided, however, that:
(1) any Subsidiary may merge or consolidate with or into (i)
the Company or any Subsidiary so long as in any merger or consolidation
involving the Company, the Company shall be the surviving or continuing
corporation, or (ii) any other corporation so long as (x) at the time
of such merger or consolidation and after giving effect thereto, each
of the conditions described in Sections 5.10(A)(2)(II), (III) and
(IV)
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Cleveland-Cliffs Inc Note Agreement
are satisfied and (y) if the surviving corporation shall not be a
Subsidiary, the assets of such Subsidiary shall not constitute a
substantial part of the assets of the Company and its Subsidiaries as
defined in Section 5.10(B);
(2) the Company may consolidate or merge with any other
corporation if:
(i) the purchasing, surviving or continuing corporation (the
"Surviving Corporation") shall be either the Company or an entity
organized under the laws of the United States or any jurisdiction
thereof, and in the case of any such consolidation or merger in
which the Company is not the Surviving Corporation, the Surviving
Corporation shall (x) expressly assume in writing the due and
punctual payment of the principal of, Make-Whole Amount, if any,
and the interest on all of the Notes outstanding according to
their tenor and the due and punctual performance and observance of
all of the covenants in the Notes and this Agreement to be
performed or observed by the Company, and (y) furnish to the
holders of the Notes an opinion of independent counsel to the
effect that the instrument of assumption has been duly authorized,
executed and delivered and constitutes the legal, valid and
binding contract and agreement of the Surviving Corporation
enforceable in accordance with its terms, subject to terms and
qualifications reasonably satisfactory to holders of not less than
66 2/3% in aggregate principal amount of the then outstanding
Notes;
(ii) at the time of such consolidation or merger and after
giving effect thereto no Default or Event of Default shall have
occurred and be continuing;
(iii) such consolidation or merger does not result in a
Material Adverse Effect; and
(iv) after giving effect to such consolidation or merger, the
Company would be permitted to incur at least $1.00 of additional
Funded Debt under the provisions of Section 5.7(A)(3); and
(3) any Subsidiary may sell, lease or otherwise dispose of
all or substantially all of its assets to the Company or any
Subsidiary.
(b) The Company will not and will not permit any Subsidiary to sell,
lease or otherwise dispose of (other than in the ordinary course of business)
any substantial part (as defined in Section 5.10(C) below) of the assets of the
Company and its Subsidiaries, taken as a whole, provided that any Subsidiary may
sell, lease or otherwise dispose of a substantial part of its assets to the
Company or a Specified Subsidiary. For the purposes of any determination under
this Section 5.10, a sale or other disposition of assets of the Company and its
Subsidiaries shall include, but not be limited to, the creation of any Minority
Interests and any other sale, transfer or other disposition of the capital stock
or assets of any Subsidiary (other than to the Company or another Specified
Subsidiary), including any merger, consolidation or sale of all or substantially
all of the assets of any Subsidiary if the surviving corporation or the
transferee corporation of such assets is not a Subsidiary.
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Cleveland-Cliffs Inc Note Agreement
(c) As used in this Section 5.10, and subject to the provisions of
the following paragraph, a sale, lease or other disposition of assets shall be
deemed to be a "substantial part" of the assets of the Company and its
Subsidiaries, taken as a whole, if the book value of such assets, when added to
the book value of all other assets sold, leased or otherwise disposed of by the
Company and its Subsidiaries (other than in a transaction permitted
by Section 5.10(A) or in the ordinary course of business) (i) during the
twelve-month period ending with the date on which such sale, lease or other
disposition was consummated exceeds 10% of Consolidated Total Assets,
determined as of the end of the immediately preceding fiscal quarter, or (ii)
since the Closing Date, exceeds 25% of Consolidated Total Assets, determined as
of the end of the immediately preceding fiscal quarter.
For the purpose of making any determination of "substantial part," any
sale, lease or other dispositions of assets of the Company and its Subsidiaries
shall not be included if the net proceeds are segregated from the general
accounts of the Company or any Subsidiary and within twelve months after such
sale, lease or other disposition such net proceeds are (1) used to acquire
assets employed in any of the then existing lines of business of the Company and
its Subsidiaries to the extent such lines of business (including the reduced
iron business) were described in the 1994 Annual Report on Form 10-K of the
Company or other assets usable or salable in one or more lines of business
similar or related to such lines of business described in said 1994 Annual
Report on Form 10-K, in each case, pursuant to a good faith determination by the
Board of Directors of the Company that such reinvestment is consistent with the
Company's long-term strategic business plan, or (2) except to the extent that
the net proceeds are required to be applied to the payment of any Debt secured
by a Lien on such assets, applied to the payment or a prepayment of other Senior
Debt (such other Senior Debt being referred to as "Excess Senior Debt"),
provided that in the event of such a payment or prepayment of Excess Senior
Debt, the Company shall prepay the Notes pursuant to Section 2.2 in an aggregate
principal amount not less than an amount which bears the same ratio to the
aggregate unpaid principal amount of all Notes then outstanding as the aggregate
principal amount of all Notes then outstanding bears to the aggregate principal
amount of all Excess Senior Debt then outstanding.
Section 5.11. Guaranties. The Company will not, and will not permit
any Subsidiary to, become or be liable in respect of any Guaranty except (i)
Guaranties of the Company or any Subsidiary guaranteeing obligations of any
Subsidiary incurred in the ordinary course of business which obligations do not
constitute Debt and are not otherwise prohibited hereunder, or (ii) Guaranties
of the Company or any Subsidiary which constitute Debt, are limited in amount to
a stated maximum dollar exposure or contribution and are permitted by the
provisions of this Agreement including, without limitation, Section 5.7 and 5.8.
Section 5.12. Repurchase of Notes. Neither the Company nor any
Subsidiary or Affiliate, directly or indirectly, may repurchase or make any
offer to repurchase any Notes unless an offer has been made to repurchase Notes,
pro rata, from all holders of the Notes at the same time and upon the same
terms. In case the Company or any Subsidiary repurchases or otherwise acquires
any Notes, such Notes shall immediately thereafter be cancelled and no Notes
shall be issued in substitution therefor. Without limiting the foregoing, upon
the repurchase or other acquisition of any Notes by any Affiliate, such Notes
shall no longer be
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Cleveland-Cliffs Inc Note Agreement
outstanding for purposes of any section of this Agreement relating to the
taking by the holders of the Notes of any actions with respect hereto,
including, without limitation, Section 6.3, Section 6.4 and Section 7.1.
Section 5.13. Transactions with Affiliates. The Company will not,
and will not permit any Subsidiary to, enter into or be a party to any
transaction or arrangement with any Affiliate (including, without limitation,
the purchase from, sale to or exchange of property with, or the rendering of any
service by or for, any Affiliate), except (i) in the ordinary course of and
pursuant to the reasonable requirements of the Company's or such Subsidiary's
business and (ii) upon fair and reasonable terms no less favorable to the
Company or such Subsidiary than would obtain in a comparable arm's-length
transaction with a Person other than an Affiliate; provided that a transaction
or arrangement with an Affiliate which is a Joint Venture shall be permitted so
long as such transaction or arrangement satisfies the requirement of clause (i)
of this Section 5.13 and is on terms fair and reasonable to the Company, and
provided further that all transactions or arrangements with Affiliates shall be
assessed in light of, and taking into consideration, all related transactions
with the relevant Affiliate or Affiliates (including its or their Affiliates).
Section 5.14. Termination of Pension Plans. The Company will not
and will not permit any Subsidiary to withdraw from any Multiemployer Plan or
permit any employee benefit plan maintained by it to be terminated if such
withdrawal or termination could result in withdrawal liability (as described in
Part 1 of Subtitle E of Title IV of ERISA) in excess of $3,000,000 or the
imposition of a Lien on any property of the Company or any Subsidiary pursuant
to Section 4068 of ERISA.
Section 5.15. Reports and Rights of Inspection. The Company will
keep, and will cause each Subsidiary to keep, proper books of record and
account in which full and correct entries will be made of all dealings or
transactions of, or in relation to, the business and affairs of the Company or
such Subsidiary, in accordance with GAAP consistently applied (except for
changes disclosed in the financial statements furnished to you pursuant to this
Section 5.15 and concurred in by the independent public accountants referred to
in Section 5.15(B) hereof), and will furnish to you so long as you are the
holder of any Note and to each other Institutional Holder of the then
outstanding Notes (in duplicate if so specified below or otherwise requested):
(a) Quarterly Statements. As soon as available and in any
event within 45 days after the end of each quarterly fiscal period
(except the last) of each fiscal year, copies of:
(1) consolidated balance sheets of the Company and its
Subsidiaries as of the close of such quarterly fiscal period,
setting forth in comparative form the consolidated figures for
the fiscal year then most recently ended,
(2) consolidated statements of income of the Company and its
Subsidiaries for such quarterly fiscal period and for the portion
of the fiscal year ending with such quarterly fiscal period, in
each case setting forth in
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Cleveland-Cliffs Inc Note Agreement
comparative form the consolidated figures for the corresponding
periods of the preceding fiscal year, and
(3) consolidated statements of cash flows of the Company and
its Subsidiaries for the portion of the fiscal year ending with
such quarterly fiscal period, setting forth in comparative form
the consolidated figures for the corresponding period of the
preceding fiscal year,
all in reasonable detail and certified as complete and correct
by an authorized financial officer of the Company (it being agreed
that if the foregoing is included in the quarterly report of the
Company on Form 10-Q, the delivery of such report within the 45 day
period after each of the first three fiscal quarters of the Company
shall constitute satisfaction of the requirements of this Section
5.15(A));
(b) Consolidated Annual Statements. As soon as available
and in any event within 90 days after the close of each fiscal year of
the Company, copies of:
(1) consolidated balance sheets of the Company and its
Subsidiaries as of the close of such fiscal year, and
(2) consolidated statements of income and retained earnings and
cash flows of the Company and its Subsidiaries for such fiscal
year,
in each case setting forth in comparative form the consolidated
figures for the preceding fiscal year, all in reasonable detail and
accompanied by a report thereon of a firm of independent public
accountants of recognized national standing selected by the Company to
the effect that the consolidated financial statements present fairly,
in all material respects, the consolidated financial position of the
Company and its Subsidiaries as of the end of the fiscal year being
reported on and the consolidated results of the operations and cash
flows for said year in conformity with GAAP and that the examination
of such accountants in connection with such financial statements has
been conducted in accordance with generally accepted auditing
standards and included such tests of the accounting records and such
other auditing procedures as said accountants deemed necessary in the
circumstances (it being agreed that if the foregoing is included in
the annual report of the Company on Form 10-K, the delivery of such
report within the 90 day period after the end of each fiscal year of
the Company shall constitute satisfaction of the requirements of this
Section 5.15(B));
(c) Consolidating Annual and Quarterly Statements. In the
event that the Company produces consolidating balance sheets of the
Company and its Subsidiaries and/or its Joint Ventures as of the close
of a fiscal year or for any fiscal quarter of the Company or
consolidating statements of income and retained earnings and cash
flows of the Company and its Subsidiaries and/or its Joint Ventures
for any fiscal year or for any fiscal quarter of the Company, a copy
of such consolidating statements as soon as available, provided,
however, that in no event shall the Company be required to deliver to
the holders of the Notes internal working papers;
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Cleveland-Cliffs Inc Note Agreement
(d) Audit Reports. Promptly upon receipt thereof, one copy of
each interimor special audit made by independent accountants of the
books of the Company or any Subsidiary and any management letter
received from such accountants which audit or management letter
pertains to an event or circumstance which could have a Material
Adverse Effect ;
(e) SEC and Other Reports. Promptly upon their becoming
available, one copy of each financial statement, report, notice or
proxy statement sent by the Company to stockholders generally and of
each regular or periodic report, and any registration statement or
prospectus filed by the Company or any Subsidiary with any securities
exchange or the Securities and Exchange Commission or any successor
agency, and copies of any orders in any proceedings to which the
Company or any of its Subsidiaries is a party, issued by any
governmental agency, Federal or state, having jurisdiction over the
Company or any of its Subsidiaries;
(f) ERISA Reports. Promptly upon the occurrence thereof,
written notice of (i) a Reportable Event with respect to any Plan as
to which the Company or any ERISA Affiliate is required to file a
report with the PBGC; (provided that the loss of qualification of a
Plan and the failure to meet the minimum funding standard of Section
412 of the Code or Section 302 of ERISA shall be a Reportable Event
regardless of the issuance of any waiver of the reporting requirement
by the PBGC); (ii) the institution of any steps by the Company, any
ERISA Affiliate, the PBGC or any other person to terminate any Plan
that is subject to Title IV of ERISA; (iii) the institution of any
steps by the Company or any ERISA Affiliate to withdraw from any
Multiemployer Plan or Plan subject to Section 4063 or 4064 of ERISA;
(iv) a non-exempt "prohibited transaction" within the meaning of
Section 406 of ERISA in connection with any Plan; or(v) the taking of
any action by, or the threatening of the taking of any action by, the
Internal Revenue Service, the Department of Labor or the PBGC with
respect to any of the foregoing;
(g) Officer's Certificates. Within the periods provided in
paragraphs (a) and (b) above, a certificate of an authorized financial
officer of the Company stating that such officer has reviewed the
provisions of this Agreement and setting forth: (i) the information
and computations (in sufficient detail) required in order to establish
whether the Company was in compliance with the requirements of Section
5.6 through Section 5.11 at the end of the period covered by the
financial statements then being furnished, and (ii) whether there
existed as of the date of such financial statements and whether, to
the best of such officer's knowledge, there exists on the date of the
certificate or existed at any time during the period covered by such
financial statements any Default or Event of Default and, if any such
condition or event exists on the date of the certificate, specifying
the nature and period of existence thereof and the action the Company
is taking and proposes to take with respect thereto and (iii) a
reasonably detailed review of any changes in GAAP since September 30,
1995 to the extent applicable to a determination of compliance with
the requirements of Section 5.5 through Section 5.11, which review
shall include a calculation of the relevant ratios in said
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Cleveland-Cliffs Inc Note Agreement
sections based upon GAAP and, separately, 1995 GAAP (the review
described in this clause (iii) being referred to as the "GAAP
Reconciliation");
(h) Accountant's Certificates. Within the period provided
in paragraph (b) above, a certificate of the accountants who render an
opinion with respect to such financial statements, stating that they
have reviewed this Agreement and stating further whether, in making
their audit, such accountants have become aware of any Default or
Event of Default under any of the terms or provisions of this
Agreement insofar as any such terms or provisions pertain to or
involve accounting matters or determinations, and if any such
condition or event then exists, specifying the nature and period of
existence thereof; and
(i) Requested Information. With reasonable promptness, such
other data and information as you or any such Institutional Holder may
reasonably request.
Without limiting the foregoing, the Company will permit you, so long as you are
the holder of any Note, and each Institutional Holder of not less than
$1,000,000 principal amount of the then outstanding Notes (or such Persons as
either you or such Institutional Holder may designate), to visit and inspect,
under the Company's guidance, any of the properties of the Company or any
Subsidiary, to examine all of their books of account, records, reports and
other papers, to make copies and extracts therefrom and to discuss their
respective affairs, finances and accounts with their respective officers,
employees, and independent public accountants (and by this provision the
Company authorizes said accountants to discuss with you the finances and
affairs of the Company and its Subsidiaries) all at such reasonable times and
as often as may be reasonably requested. The Company shall promptly upon
demand pay or reimburse any such holder for all expenses which such holder may
incur in connection with any such visitation or inspection during the
continuance of any Default or Event of Default.
The Company has made available to you financial statements, documents
and information (collectively "Materials"), and has agreed to furnish in the
future certain additional Materials, in reliance on your commitment to use such
information only for purposes reasonably related to your investment in the
Notes issued hereunder and not to disclose any of such Materials which have
been designated as "Confidential" by the Company, other than (A) Materials that
already were known to you prior to the time they were made available to you by
or on behalf of the Company or any Subsidiary, (B) Materials that are or become
publicly available by reason other than disclosure by or through you or (C)
Materials that you obtain from third parties who, to your knowledge, are not
thereby breaching fiduciary or confidentiality obligations owed to the Company
or any Subsidiary; provided, you may disclose such Materials to (i) your
directors, officers, employees, agents, attorneys and professional consultants
(after advising any such agents or professional consultants of the use and
non-disclosure restrictions set forth above), (ii) any other holder of any
Note, (iii) any Person to which you offer to sell a Note or Notes or any part
thereof (if such Person has agreed in writing prior to its receipt of such
materials to be bound by the provisions of this paragraph), (iv) any federal or
state regulatory authority having jurisdiction over you, (v) the National
Association of Insurance Commissioners or
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Cleveland-Cliffs Inc Note Agreement
any similar organization or any other entity utilizing such information to rate
or classify your debt or equity Securities or (vi) any other Person to which
such delivery or disclosure may be necessary (a) in compliance with any law,
rule, regulation or order applicable to you, (b) in response to any subpoena or
other legal process or informal investigative command, (c) in connection with
any litigation to which you are a party or (d) in order to preserve or protect
your investment in the Notes.
SECTION 6. EVENTS OF DEFAULT AND REMEDIES THEREFOR.
Section 6.1. Events of Default. Any one or more of the
following shall constitute an "Event of Default" as such term is used herein:
(a) Default shall occur in the payment of interest on any
Note when the same shall have become due and such default shall
continue for more than five (5) days; or
(b) Default shall occur in the making of any payment of the
principal of any Note or Make-Whole Amount, if any, thereon at
the expressed or any accelerated maturity date or at any date
fixed for prepayment; or
(c) Default shall be made in the payment when due (whether
by lapse of time, by declaration, by call for redemption or
otherwise) of any principal of or interest on Material Debt
(other than the Notes) and such default shall continue beyond the
period of grace, if any, allowed with respect thereto; or
(d) The acceleration of the maturity of any Material Debt of
the Company or any Subsidiary; or
(e) Default shall occur in the observance or performance of
(i) any of the provisions of Section 5.6, 5.7(A)(3)(I), or 5.10
through 5.12, inclusive, or (ii) any other provision of this
Agreement which other provision is not remedied within 30 days
after the earlier of (A) the day on which an Executive Officer
first obtains actual knowledge of such default, or (B) the day on
which written notice thereof is given to the Company by the
holder of any Note; or
(f) Any representation or warranty made by the Company
herein, or made by the Company in any statement or certificate
furnished by the Company in connection with the consummation of
the issuance and delivery of the Notes or furnished by the
Company pursuant hereto, is untrue in any material respect as of
the date of the issuance or making thereof; or
(g) Final judgment or final judgments (to the extent no
solvent, non-affiliated insurer has acknowledged liability
therefor) for the payment of money aggregating in excess of
$5,000,000 is or are outstanding against the Company or any
Subsidiary or against any property or assets of either and such
final judgment or final judgments have remained unpaid,
unvacated, unbonded or unstayed by appeal or otherwise for a
period of 30 days from the date of its entry; or
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Cleveland-Cliffs Inc Note Agreement
(h) The Company or any Subsidiary makes an assignment for
the benefit of creditors or admits in writing its inability to
pay or is generally not paying its debts as such debts become
due; or
(i) any decree or order for relief is entered under any
bankruptcy, reorganization, compromise, arrangement, insolvency,
readjustment of debt, dissolution, winding-up or liquidation or
similar law whether now or hereafter in effect (herein called the
"Bankruptcy Law") of any jurisdiction in respect of the Company
or any Subsidiary without the consent or acquiescence of the
Company or such Subsidiary and such order remains unstayed and in
effect for more than 60 days; or
(j) The Company or any Subsidiary petitions or applies to
any tribunal for, or consents to the appointment of or taking
possession by, a fiscal agent, administrator, receiver,
custodian, liquidator or similar official, of the Company or any
Subsidiary, or of the major part of the assets of the Company or
any Subsidiary, or commences a voluntary case under the
Bankruptcy Law of the United States or any proceedings (other
than proceedings for the voluntary liquidation and dissolution
of a Subsidiary) relating to the Company or any Subsidiary, under
the Bankruptcy Law of any other jurisdiction; or
(k) any such petition or application is filed, or any such
proceedings are commenced, against the Company or any Subsidiary,
and the Company or any Subsidiary by any act indicates its
approval thereof, consent thereto, or acquiescence therein, or an
order, judgment or decree is entered appointing any fiscal agent,
administrator, receiver, custodian, liquidator or similar
official, or approving the petition in any such proceedings, and
such order judgment or decree remains unstayed and in effect for
more than 60 days; or
(l) any order, judgment or decree is entered in any
proceedings against the Company or any Subsidiary decreeing the
dissolution, liquidation or winding-up of such corporation and
such order, judgment or decree remains unstayed and in effect for
more than 60 days; or
(m) any order, judgment or decree is entered in any
proceedings against the Company or any Subsidiary decreeing a
split-up of the Company or any Subsidiary which requires the
divestiture of the major part of the property of the Company or
such Subsidiary, or the divestiture of the stock of a Subsidiary
which constitutes the major part of the Company's assets, and
such order, judgment or decree remains unstayed and in effect for
more than 60 days.
Section 6.2. Notice to Holders. When any Executive Officer
becomes aware that any Default or Event of Default described in the
foregoing Section 6.1 has occurred, or that the holder of any Note or of any
other evidence of Material Debt of the Company has given any notice or has taken
any other action with respect to a claimed default, the Company agrees to give
notice
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Cleveland-Cliffs Inc Note Agreement
within three (3) Business Days of such event to all holders of the Notes then
outstanding.
Section 6.3. Acceleration of Maturities. When any Event of
Default described in paragraph (a) or (b) of Section 6.1 has happened and is
continuing, any holder of any Note may, by notice to the Company, declare the
entire principal and interest on such holder's Notes to be, and such holder's
Notes shall thereupon become, forthwith due and payable without any
presentment, demand, protest or other notice of any kind, all of which are
hereby expressly waived. In addition to, and not in limitation of, the
foregoing, when any Event of Default described in paragraphs (a) through (g),
inclusive, of said Section 6.1 has happened and is continuing, the holder or
holders of 66-2/3% or more of the principal amount of Notes at the time
outstanding may, by notice to the Company, declare the entire principal and all
interest accrued on all Notes to be, and all Notes shall thereupon become,
forthwith due and payable, without any presentment, demand, protest or other
notice of any kind, all of which are hereby expressly waived. When any Event
of Default described in any of paragraphs (h) through (m), inclusive, of
Section 6.1 has occurred, then all outstanding Notes shall immediately become
due and payable without presentment, demand or notice of any kind. Upon the
Notes becoming due and payable as a result of any Event of Default as
aforesaid, the Company will forthwith pay to the holders of the Notes the
entire principal and interest accrued on the Notes and, to the extent not
prohibited by applicable law, an amount as liquidated damages for the loss of
the bargain evidenced hereby (and not as a penalty) equal to the Make-Whole
Amount, determined as of the date on which the Notes shall so become due and
payable. No course of dealing on the part of the holder or holders of any
Notes nor any delay or failure on the part of any holder of Notes to exercise
any right shall operate as a waiver of such right or otherwise prejudice such
holder's rights, powers and remedies. The Company further agrees, to the
extent permitted by law, to pay to the holder or holders of the Notes all costs
and expenses reasonably incurred by them in the collection of any Notes upon
any Default or Event of Default hereunder or thereon, including reasonable
compensation to such holder's or holders' attorneys for all services rendered
in connection therewith.
Section 6.4. Rescission of Acceleration. The provisions
of Section 6.3 are subject to the condition that if the principal of and accrued
interest on all or any outstanding Notes have been declared immediately due and
payable by reason of the occurrence of any Event of Default described in
paragraphs (a) through (g), inclusive, of Section 6.1, the holders of 66-2/3% in
aggregate principal amount of the Notes then outstanding may, by written
instrument filed with the Company, rescind and annul such declaration and the
consequences thereof, provided that at the time such declaration is annulled
and rescinded:
(a) no judgment or decree has been entered for the payment of
any monies due pursuant to the Notes or this Agreement;
(b) all arrears of interest upon all the Notes and all other
sums payable under the Notes and under this Agreement (except any
principal, interest or Make-Whole Amount on the Notes which has become
due and payable solely by reason of such declaration underSection 6.3)
shall have been duly paid; and
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Cleveland-Cliffs Inc Note Agreement
(c) each and every other Default and Event of Default shall
have been made good, cured or waived pursuant to Section 7.1;
and provided further, that no such rescission and annulment shall extend to or
affect any subsequent Default or Event of Default or impair any right consequent
thereto.
SECTION 7. AMENDMENTS, WAIVERS AND CONSENTS.
Section 7.1. Consent Required. Any term, covenant, agreement
or condition of this Agreement may, with the consent of the Company, be amended
or compliance therewith may be waived (either generally or in a particular
instance and either retroactively or prospectively), if the Company shall have
obtained the consent in writing of the holders of at least 66-2/3% in aggregate
principal amount of outstanding Notes; provided that without the written consent
of the holders of all of the Notes then outstanding, no such amendment or waiver
shall be effective (i) which will change the time of payment (including any
prepayment required by Section 2.1) of the principal of or the interest on any
Note or change the principal amount thereof or change the rate of interest
thereon, or (ii) which will change any of the provisions with respect to
optional prepayments, or (iii) which will change the percentage of holders of
the Notes required to consent to any such amendment or waiver of any of the
provisions of this Section 7 or Section 6.
Section 7.2. Solicitation of Holders. So long as there are any
Notes outstanding, the Company will not solicit, request or negotiate for or
with respect to any proposed waiver or amendment of any of the provisions of
this Agreement or the Notes unless each holder of Notes (irrespective of the
amount of Notes then owned by it) shall be informed thereof by the Company and
shall be afforded the opportunity of considering the same and shall be supplied
by the Company with the same information and opportunity to obtain information
as furnished by or on behalf of the Company to any other holder of the Notes.
The Company will not, directly or indirectly, pay or cause to be paid any
remuneration, whether by way of supplemental or additional interest, fee or
otherwise, to any holder of Notes as consideration for or as an inducement to
entering into by any holder of Notes of any waiver or amendment of any of the
terms and provisions of this Agreement or the Notes unless such remuneration is
concurrently paid, on the same terms, ratably to the holders of all Notes then
outstanding. Nothing contained in this Section 7.2 shall restrict or limit the
Company in making any prepayment on the Notes in accordance with Section 2.
Section 7.3. Effect of Amendment or Waiver. Any such amendment or
waiver shall apply equally to all of the holders of the Notes and shall be
binding upon them, upon each future holder of any Note and upon the Company,
whether or not such Note shall have been marked to indicate such amendment or
waiver. No such amendment or waiver shall extend to or affect any obligation
not expressly amended or waived or impair any right consequent thereon.
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Cleveland-Cliffs Inc Note Agreement
SECTION 8. INTERPRETATION OF AGREEMENT; DEFINITIONS.
Section 8.1. Definitions. Unless the context otherwise requires,
the terms hereinafter set forth when used herein shall have the following
meanings and the following definitions shall be equally applicable to both the
singular and plural forms of any of the terms herein defined:
"Affiliate" shall mean any Person (other than a Subsidiary) (i) which
directly or indirectly through one or more intermediaries controls, or is
controlled by, or is under common control with, the Company, (ii) which
beneficially owns or holds 5% or more of any class of the Voting Stock of the
Company or (iii) 5% or more of the Voting Stock (or in the case of a Person
which is not a corporation, 5% or more of the equity interest) of which is
beneficially owned or held by the Company or a Subsidiary. The term "control"
means the possession, directly or indirectly, of the power to direct or cause
the direction of the management and policies of a Person, whether through the
ownership of Voting Stock, by contract or otherwise.
"Agreements" shall have the meaning set forth in Section 1.3.
"Basket Obligations" of the Company and its Subsidiaries shall mean, as
of the date of any determination thereof, an amount equal to the sum of (i) the
aggregate amount of all obligations of the Company and its Subsidiaries secured
by Liens other than Liens permitted by Section 5.9(A) through (G) or the final
paragraph of Section 5.9 plus (ii) the aggregate book value of all property of
the Company or any Subsidiary sold by the Company or any Subsidiary and,
substantially concurrently, leased back by the Company or any Subsidiary.
"Beneficial Owners" shall have the meaning set forth in Section 2.3(D).
"Business Day" shall mean any day other than a Saturday, Sunday, legal
holiday or other day on which commercial banks located in Cleveland, Ohio and
New York, New York are not authorized or required by law to be closed.
"Capitalized Lease" shall mean any lease the obligation for Rentals with
respect to which is required to be capitalized on a consolidated balance sheet
of the lessee and its subsidiaries in accordance with 1995 GAAP.
"Capitalized Rentals" of any Person shall mean as of the date of any
determination thereof the amount at which the aggregate Rentals due and to
become due under all Capitalized Leases under which such Person is a lessee
would be reflected as a liability on a consolidated balance sheet of such
Person.
"CCI" shall mean The Cleveland-Cliffs Iron Company, an Ohio corporation,
and any Person who succeeds to all, or substantially all, of the assets and
business of The Cleveland-Cliffs Iron Company.
"Change of Control" shall have the meaning set forth in Section 2.3(D).
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Cleveland-Cliffs Inc Note Agreement
"Change of Control Event" shall have the meaning set forth in
Section 2.3(D).
"Closing Date" shall have the meaning set forth in Section 1.2.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Company" shall mean Cleveland-Cliffs Inc, an Ohio corporation, and any
Person who succeeds to all, or substantially all, of the assets and business of
Cleveland-Cliffs Inc.
"Consolidated Adjusted Net Worth" shall mean, as of the date of any
determination thereof, the aggregate amount of stockholders' equity, preferred
stock and Minority Interests of the Company as determined in accordance with
1995 GAAP and excluding any adjustments for Financial Accounting Standards
Bulletins 52, 106, 109, and 112.
"Consolidated Funded Debt" shall mean all Funded Debt of the Company and
its Subsidiaries, determined on a consolidated basis eliminating intercompany
items.
"Consolidated Net Earnings" for any period shall mean the net after tax
earnings of the Company and its Subsidiaries for such period, determined on a
consolidated basis in accordance with 1995 GAAP, but excluding adjustments for
Financial Accounting Standards Bulletins 106, 109 and 112.
"Consolidated Total Assets" shall mean, as of the date of any
determination thereof, the total assets of the Company and its Subsidiaries,
determined on a consolidated basis according to 1995 GAAP.
"Consolidated Total Capitalization" shall mean, as of the date of
determination thereof, the sum of (i) Consolidated Adjusted Net Worth plus (ii)
Consolidated Funded Debt.
"Continuing Director" shall have the meaning set forth in
Section 2.3(D).
"Current Management Group" shall have the meaning set forth in
Section 2.3(D).
"Debt" of any Person shall mean, as of the date of any determination
thereof (without duplication):
(i) all Indebtedness for borrowed money or evidenced by
notes, bonds, debentures or similar evidences of Indebtedness of such
Person;
(ii) obligations secured by any Lien upon property owned by
such Person or created or arising under any conditional sale or other
title retention agreement with respect to property acquired by such
Person, notwithstanding the fact that the rights and remedies of the
seller, lender or lessor under any such arrangement in the event of
default are limited to repossession or sale of property including,
without limitation, obligations secured by Liens arising from the sale
or transfer of notes or accounts receivable, but, in all events,
excluding trade payables and accrued expenses constituting current
liabilities;
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Cleveland-Cliffs Inc Note Agreement
(iii) Capitalized Rentals;
(iv) reimbursement obligations in respect of credit
enhancement instruments including letters of credit (excluding,
however, short-term letters of credit and surety bonds issued in
commercial transactions in the ordinary course of business); and
(v) (without duplication of any of the foregoing) Guaranties
of (a) obligations of others of the character referred to hereinabove
in this definition, and (without duplication) (b) all other obligations
of Joint Ventures.
Debt of the Company and its Subsidiaries shall be determined on a
consolidated basis after eliminating intercompany items. In no event shall Debt
include any unfunded obligations of the Company or any Subsidiary which may
exist on or after the date hereof in respect of any Plan.
"Default" shall mean any event or condition the occurrence of which
would, with the lapse of time or the giving of notice, or both, constitute an
Event of Default.
"Empire" shall mean Empire Iron Mining Partnership, a Michigan general
partnership.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended, and any successor statute of similar import, together with the
regulations thereunder, in each case as in effect from time to time. References
to Sections of ERISA shall be construed to also refer to any successor
Sections.
"ERISA Affiliate" shall mean any corporation, trade or business that is,
along with the Company, a member of a controlled group of corporations or a
controlled group of trades or businesses, as described in Section 414(b) and
414(c), respectively, of the Code or Section 4001 of ERISA.
"Event of Default" shall have the meaning set forth in Section 6.1.
"Excess Senior Debt" shall have the meaning set forth in Section
5.10(C).
"Executive Officer" shall mean the President, Executive Vice President -
Finance, Treasurer, Controller, or any other officer serving as the principal
financial officer or the principal accounting officer, of the Company.
"Funded Debt" shall mean, as of the date of any determination thereof,
all Debt (including Guaranties) constituting long-term debt in accordance with
1995 GAAP, including (i) Debt having a final maturity of more than one year from
the date of issuance thereof; (ii) all Debt outstanding under any credit line,
revolving credit or similar agreement (and renewals and extensions thereof)
providing for borrowings which may occur over a period of more than one year
(notwithstanding that any such Debt may be payable on demand or within one year
after the creation thereof), (iii) all Capitalized Rentals, and (iv) all
Guaranties of Funded Debt of others. In addition, "Funded Debt" shall
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Cleveland-Cliffs Inc Note Agreement
include (x) the portion of Debt of any Included Joint Venture that is allocable
to the Company or any Subsidiary under the agreement of association or related
agreements entered into by the Company or any Subsidiary in connection with such
Included Joint Venture and (y) Debt described in clause (v)(b) of the definition
thereof. "Funded Debt" shall not include Debt outstanding under any credit
line, revolving credit or similar agreement which Debt is fully paid for a
period of not less than 30 consecutive days in each twelve-month period pursuant
to the terms of such agreement.
"GAAP" shall mean generally accepted accounting principles at the time
in the United States.
"Guaranties" by the Company or any Subsidiary shall mean all liabilities
of the Company or any Subsidiary under any agreement by which the Company or any
Subsidiary assumes, guaranties, endorses, contingently agrees to purchase or
provide funds for the payment of, or otherwise becomes liable upon the
obligations of, any other Person, or agrees to maintain the net worth or working
capital or other financial condition of any other Person or otherwise assures
any creditor of such other Person against loss, and shall include, without
limitation, the contingent liability of the Company or any Subsidiary under any
letter of credit or commercial equivalent thereof (other than trade letters of
credit or the commercial equivalent thereof) for which the Company or any
Subsidiary is in any way liable. For the purposes of all computations made
under this Agreement, a Guaranty in respect of any Indebtedness for borrowed
money shall be deemed to be Indebtedness equal to the principal amount of such
Indebtedness for borrowed money which has been guaranteed, and a Guaranty in
respect of any other obligation or liability or any dividend shall be deemed to
be Indebtedness equal to the maximum aggregate amount of such obligation,
liability or dividend. The foregoing notwithstanding, in no event shall
Guaranties include obligations of the Company or any Subsidiary incurred in
connection with the management, administration or operation of Joint Ventures
which obligations (i) do not constitute Debt described in any of clauses (i)
through (iv) of the definition thereof, (ii) are incurred in the ordinary course
of the business of the Company or such Subsidiary in connection with such Joint
Venture and not pursuant to a guaranty agreement, and (iii) the Company or such
Subsidiary reasonably expects reimbursement from other members of the Joint
Venture or Affiliates of such members.
"Hibbing" shall mean Hibbing Taconite Company, an unincorporated joint
venture.
"Included Joint Venture" shall mean and include each of Empire, Hibbing
and Tilden.
"Indebtedness" of any Person shall mean and include all obligations of
such Person which in accordance with 1995 GAAP shall be classified upon a
balance sheet of such Person as liabilities of such Person, and in any event
shall include all Debt. In no event shall Indebtedness include (a) any
obligation guaranteed by a Subsidiary to the Company or another Subsidiary and
no other Person, or (b) any unfunded obligations of the Company or any
Subsidiary which may exist on or after the date hereof in respect of any Plan.
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Cleveland-Cliffs Inc Note Agreement
"Institutional Holder" shall mean any insurance company, bank, savings
and loan association, trust company, investment company, charitable foundation,
employee benefit plan (as defined in ERISA) or other institutional investor or
financial institution.
"Joint Venture" shall mean, as of the date of any determination thereof,
any partnership, joint venture, limited liability company or other similar
entity associated with the Company or any Subsidiary under agreements of
association, partnership agreements, joint venture agreements, or similar
arrangements.
"Lien" shall mean any interest in property securing an obligation owed
to, or a claim by, a Person other than the owner of the property, whether such
interest is based on the common law, statute or contract, and including but not
limited to the security interest lien arising from a mortgage, encumbrance,
pledge, conditional sale or other title retention device or trust receipt or a
lease, consignment or bailment for security purposes. The term "Lien" shall
include reservations, exceptions, encroachments, easements, rights-of-way,
covenants, conditions, restrictions, leases and other title exceptions and
encumbrances (including, with respect to stock, stockholder agreements, voting
trust agreements, buy-back agreements and all similar arrangements) affecting
property; provided, that (i) the right of an issuer to redeem its Securities
upon payment of an amount not less than the issuance price thereof, (ii) rights
of first refusal or similar rights granted to any issuer of such Securities or
to any partner (or any Affiliates of such partner) of the issuer of such
Securities or of the Person holding such Securities, and (iii) any rights or
restrictions applicable to any securities issued in a bankruptcy reorganization,
which rights or restrictions are created pursuant to the applicable court
approved plan of reorganization, shall not be considered to be a Lien. For the
purposes of this Agreement, the Company or a Subsidiary shall be deemed to be
the owner of any property which it has acquired or holds subject to a
conditional sale agreement, Capitalized Lease or other arrangement pursuant to
which title to the property has been retained by or vested in some other Person
for security purposes and such retention or vesting shall constitute a Lien.
"Make-Whole Amount" shall mean in connection with any prepayment or
acceleration of the Notes the excess, if any, of (i) the aggregate present value
as of the date of such prepayment of each dollar of principal being prepaid and
the amount of interest (exclusive of interest accrued to the date of prepayment)
that would have been payable in respect of such dollar if such prepayment had
not been made, determined by discounting such amounts at the Reinvestment Rate
from the respective dates on which they would have been payable (which date
shall be December 15, 2005 in the case of any determination with respect to the
principal amount of the Notes), over (ii) 100% of the principal amount of the
outstanding Notes being prepaid. If the Reinvestment Rate is equal to or higher
than 7.00%, the Make-Whole Amount shall be zero. For purposes of any
determination of the Make-Whole Amount:
"Reinvestment Rate" means (1) .60% plus the yield to maturity of
the United States Treasury obligations having a maturity (as compiled
by and published on Telerate Page 500 or its successor ("Telerate")
more than three (3) Business Days immediately preceding the payment
date at 11:00 A.M. New York City time)
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<PAGE> 33
Cleveland-Cliffs Inc Note Agreement
(rounded to the nearest month) corresponding to the remaining
term of the Notes being prepaid or paid or (2) if such rate shall not
have been so published by Telerate, the Reinvestment Rate in respect of
such payment date shall mean .60% plus the yield to maturity of the
United States Treasury obligations having a maturity (as compiled by
and published on page "USD" of the Bloomberg Financial Market Services
("Bloomberg") three (3) Business Days immediately preceding the payment
date at 11:00 A.M. New York City time) (rounded to the nearest month)
corresponding to the remaining term of the Notes being prepaid or paid,
or (3) if such rate shall not have been so published by either Telerate
or Bloomberg, the Reinvestment Rate in respect of such payment date
shall mean .60% plus the arithmetic mean of the yields for the two
columns under the heading "Week Ending" published in the Statistical
Release under the caption "Treasury Constant Maturities" for the
maturity (rounded to the nearest month) corresponding to the remaining
term of the Notes being prepaid or paid. If no maturity exactly
corresponding to remaining term of the Notes shall appear in either
Telerate, Bloomberg or the Statistical Release, as the case may be, (a)
if necessary, U.S. Treasury bill quotations shall be converted to
bond-equivalent yields in accordance with accepted financial practice
and (b) yields for the published maturity next longer than the Weighted
Average Life to Maturity and the published maturity next shorter than
the Weighted Average Life to Maturity shall be calculated pursuant to
the foregoing sentence and the Reinvestment Rate shall be interpolated
or extrapolated from such yields on a straight-line basis, rounding in
each of the relevant periods to the nearest month. For purposes of
calculating the Reinvestment Rate pursuant to clause (3) above, the
most recent Statistical Release published prior to the date of
determination of the Make-Whole Amount shall be used.
"Statistical Release" shall mean the then most recently
published statistical release designated "H.15(519)" or any successor
publication which is published weekly by the Federal Reserve System and
which establishes yields on actively traded U.S. Government Securities
adjusted to constant maturities or, if such statistical release is not
published at the time of any determination hereunder, then such other
reasonably comparable index which shall be designated by the holders of
66-2/3% in aggregate principal amount of the outstanding Notes.
"Material Adverse Effect" shall mean a material adverse effect on (x)
the consolidated financial condition of the Company and its Subsidiaries, taken
as a whole, or the ability of the Company to perform its obligations under the
Note Agreements or the Notes, or (y) on the legality, validity or enforceability
of the obligations of the Company under the Note Agreements or the Notes.
"Material Debt" shall mean, as of the date of any determination
thereof, one or more obligations evidenced in Debt of the Company or any
Subsidiary which have, or relate to, in the aggregate, an unpaid principal
amount (or aggregate liability) of more than $5,000,000 or the equivalent
thereof in any other currency.
"Materials" shall have the meaning set forth in Section 5.15.
-29-
<PAGE> 34
Cleveland-Cliffs Inc Note Agreement
"Minority Interests" shall mean any shares of stock of any class of a
Subsidiary (other than directors' qualifying shares as required by law) that are
not owned by the Company and/or one or more of its Subsidiaries. Minority
Interests shall be valued by valuing Minority Interests constituting preferred
stock at the voluntary or involuntary liquidating value of such preferred stock,
whichever is greater, and by valuing Minority Interests constituting common
stock at the book value of capital and surplus applicable thereto adjusted, if
necessary, to reflect any changes from the book value of such common stock
required by the foregoing method of valuing Minority Interests in preferred
stock.
"Multiemployer Plan" shall have the same meaning as in ERISA.
"1995 GAAP" shall mean generally accepted accounting principles in
effect in the United States as of September 30, 1995.
"1992 Notes" shall mean the 8.51% Senior Notes, Series A, due May 1,
1999 and 8.84% Senior Notes, Series B, due December 15, 2002 of the Company
issued pursuant to the Note Agreements dated as of December 15, 1995.
"1933 Act" shall have the meaning set forth in Section 3.2.
"Notes" shall have the meaning set forth in Section 1.1.
"PBGC" means the Pension Benefit Guaranty Corporation and any entity
succeeding to any or all of its functions under ERISA.
"Person" shall mean an individual, partnership, corporation, trust or
unincorporated organization, and a government or agency or political subdivision
thereof.
"Plan" means a "pension plan," as such term is defined in ERISA,
established or maintained by the Company or any ERISA Affiliate or as to which
the Company or any ERISA Affiliate contributed or is a member or otherwise may
have any liability.
"Purchasers" shall have the meaning set forth in Section 1.1.
"Rentals" shall mean and include as of the date of any determination
thereof all fixed payments (including as such all payments which the lessee is
obligated to make to the lessor on termination of the lease or surrender of the
property) payable by the Company or a Subsidiary, as lessee or sublessee under a
lease of real or personal property, but shall be exclusive of any amounts
required to be paid by the Company or a Subsidiary (whether or not designated as
rents or additional rents) on account of maintenance, repairs, insurance, taxes
and similar charges. Fixed rents under any so-called "percentage leases" shall
be computed solely on the basis of the minimum rents, if any, required to be
paid by the lessee regardless of sales volume or gross revenues.
"Reportable Event" shall have the same meaning as in ERISA.
-30-
<PAGE> 35
Cleveland-Cliffs Inc Note Agreement
"Security" shall have the same meaning as in Section 2(1) of the
Securities Act of 1933, as amended.
"Senior Debt" shall mean, as of the date of any determination thereof,
all Funded Debt of the Company (other than Funded Debt due or owing to any
Subsidiary, Joint Venture or Affiliate), except any of such Funded Debt of the
Company which by its terms or by agreement is subordinate in right of payment
to the Notes.
"Specified Subsidiaries" shall mean a Subsidiary of which at least 95%
of the issued and outstanding shares of stock (except shares required as
directors' qualifying shares) shall be owned by the Company and/or one or more
of its Specified Subsidiaries.
The term "subsidiary" shall mean as to any particular parent corporation
(i) any corporation of which more than 50% (by number of votes) of the Voting
Stock shall be beneficially owned, directly or indirectly, by such parent
corporation or (ii) any partnership of which more than 50% of the general
partnership capital interest is held by such parent corporation. The term
"Subsidiary" shall mean a subsidiary of the Company.
"Subsidiary Funded Debt" shall mean, as of the date of determination
thereof, all Funded Debt of any Subsidiary of the Company except (i) Funded Debt
of any Included Joint Venture which is incurred prior to the Closing Date and is
allocable to any Subsidiary under the provisions of an agreement of association
or related agreements entered into by such Subsidiary in connection with such
Included Joint Venture, (ii) Funded Debt incurred by any Subsidiary prior to the
Closing Date through a guaranty of Funded Debt of the type described in clause
(i), and (iii) any Funded Debt of any Subsidiary incurred after the Closing Date
for the purpose of extending, renewing, replacing or refinancing Funded Debt
referred to in clauses (i) or (ii), provided that the principal amount of such
additional Funded Debt shall not exceed the aggregate principal amount of the
Funded Debt which is the subject of such extension, renewal, replacement or
refinancing.
"Surviving Corporation" shall have the meaning set forth in Section
5.10(a)(2)(i).
"Tilden" shall mean Tilden Mining Company L.C., a Michigan limited
liability company.
"Voting Stock" shall mean Securities of any class or classes, the
holders of which are ordinarily, in the absence of contingencies, entitled to
elect a majority of the corporate directors (or Persons performing similar
functions).
Section 8.2. Accounting Principles. Where the character or amount
of any asset or liability or item of income or expense is required to be
determined or any consolidation or other accounting computation is required to
be made for the purposes of this Agreement, the same shall be done in accordance
with GAAP, to the extent applicable, except where such principles are
inconsistent with the requirements of this Agreement.
Section 8.3. Directly or Indirectly. Where any provision in this
Agreement refers to action to be taken by any Person, or which such Person is
prohibited from taking, such
-31-
<PAGE> 36
Cleveland-Cliffs Inc Note Agreement
provision shall be applicable whether the action in question is taken directly
or indirectly by such Person.
SECTION 9. MISCELLANEOUS.
Section 9.1. Registered Notes. The Company shall cause to be kept
at its principal office a register for the registration and transfer of the
Notes (hereinafter called the "Note Register") and the Company will register or
transfer or cause to be registered or transferred as hereinafter provided any
Note issued pursuant to this Agreement.
At any time and from time to time the registered holder of any Note
which has been duly registered as hereinabove provided may transfer (in
compliance with the applicable provisions hereof) such Note upon surrender
thereof at the principal office of the Company duly endorsed or accompanied by a
written instrument of transfer duly executed by the registered holder of such
Note or its attorney duly authorized in writing.
Prior to due presentment for registration of transfer, the Company may
treat the Person in whose name any Note is registered in the Note Register as
the owner and holder of such Note for the purpose of receiving payment of
principal of, Make-Whole Amount, if any, and interest with respect to such Note
and for all other purposes whatsoever, whether or not such Note shall be
overdue, and the Company shall not be affected by any notice to the contrary.
Payment of or with respect to the principal, Make-Whole Amount, if any, and
interest on any registered Note shall be made to or upon the written order of
such registered holder.
Section 9.2. Exchange of Notes. At any time and from time to time,
upon not less than ten days' notice to that effect given by the registered
holder of any Note initially delivered or of any Note substituted therefor
pursuant to Section 9.1, this Section 9.2 or Section 9.3, and, upon surrender of
such Note at its office, the Company will deliver in exchange therefor, without
expense to such holder, except as set forth below, a Note for the same aggregate
principal amount as the then unpaid principal amount of the Note so surrendered,
or Notes in the denomination of $100,000 or any amount in excess thereof as such
holder shall specify, dated as of the date to which interest has been paid on
the Note so surrendered or, if such surrender is prior to the payment of any
interest thereon, then dated as of the date of issue, registered in the name of
such Person or Persons as may be designated by such holder, and otherwise of the
same form and tenor as the Notes so surrendered for exchange. The Company may
require the payment of a sum sufficient to cover any stamp tax or governmental
charge imposed upon such exchange or transfer.
Section 9.3. Loss, Theft, Etc. of Notes. Upon receipt of evidence
satisfactory to the Company of the loss, theft, mutilation or destruction of any
Note, and in the case of any such loss, theft or destruction upon delivery of a
bond of indemnity in such form and amount as shall be reasonably satisfactory to
the Company, or in the event of such mutilation upon surrender and cancellation
of the Note, the Company will make and deliver without expense to the registered
holder thereof, a new Note, of like tenor, in lieu of such lost, stolen,
destroyed or mutilated Note. If the Purchaser or any subsequent Institutional
Holder is the
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<PAGE> 37
Cleveland-Cliffs Inc Note Agreement
owner of any such lost, stolen or destroyed Note, then the affidavit of an
authorized officer of such owner, setting forth the fact of loss, theft or
destruction and of its ownership of such Note at the time of such loss, theft or
destruction shall be accepted as satisfactory evidence thereof and no further
indemnity shall be required as a condition to the execution and delivery of a
new Note other than the written agreement of such owner to indemnify the
Company.
Section 9.4. Expenses, Stamp Tax Indemnity. Whether or not the
transactions herein contemplated shall be consummated, the Company agrees to pay
directly all of your reasonable out-of-pocket expenses in connection with the
preparation, execution and delivery of this Agreement and the transactions
contemplated hereby, including but not limited to the reasonable professional
fees and separately charged items of Chapman and Cutler, your special counsel,
duplicating and printing costs and charges for shipping the Notes, adequately
insured to you at your home office or at such other place as you may designate,
and all such expenses relating to any amendment, waivers or consents requested
by the Company pursuant to the provisions hereof, including, without limitation,
any amendments, waivers, or consents requested by the Company resulting from any
work-out, renegotiation or restructuring relating to the performance by the
Company of its obligations under this Agreement and the Notes (including,
without limitation, the reasonable fees and expenses of any investment banker or
financial consultant engaged by the holders of the Notes in connection with any
work-out, restructuring or reorganization). The Company also agrees that
subject to Section 9.3 it will pay and save you harmless against any and all
liability with respect to stamp and other taxes, if any, which may be payable or
which may be determined to be payable in connection with the execution and
delivery of this Agreement or the Notes, whether or not any Notes are then
outstanding. The Company agrees to protect and indemnify you against any
liability for any and all brokerage fees and commissions payable or claimed to
be payable to any Person (other than any brokerage fees and commissions of any
Person retained by you except as otherwise provided herein) in connection with
the transactions contemplated by this Agreement.
Section 9.5. Powers and Rights Not Waived; Remedies Cumulative. No
delay or failure on the part of the holder of any Note in the exercise of any
power or right shall operate as a waiver thereof; nor shall any single or
partial exercise of the same preclude any other or further exercise thereof, or
the exercise of any other power or right, and the rights and remedies of the
holder of any Note are cumulative to, and are not exclusive of, any rights or
remedies any such holder would otherwise have.
Section 9.6. Notices. All communications provided for hereunder
shall be in writing and, if to you, delivered or mailed prepaid by registered or
certified mail or overnight air courier, or by facsimile communication, in each
case addressed to you at your address appearing on Schedule I to this Agreement
or such other address as you or the subsequent holder of any Note initially
issued to you may designate to the Company in writing, and if to the Company,
delivered or mailed by registered or certified mail or overnight air courier, or
by facsimile communication, to the Company at 1100 Superior Avenue, Cleveland,
Ohio 44114-2589, Attention: Secretary or to such other address as the Company
may in writing designate to you or to a subsequent holder of the Note initially
-33-
<PAGE> 38
Cleveland-Cliffs Inc Note Agreement
issued to you; provided, however, that a notice to you by overnight air courier
shall only be effective if delivered to you at a street address designated for
such purpose in Schedule I, and a notice to you by facsimile communication shall
only be effective if (i) made by confirmed transmission to you at a telephone
number designated for such purpose in Schedule I and (ii) such notice is
delivered by the next Business Day by overnight air courier, or, in either case,
as you or a subsequent holder of any Note initially issued to you may designate
to the Company in writing.
Section 9.7. Successors and Assigns. This Agreement shall be
binding upon the Company and its successors and assigns and shall be binding
upon and inure to the benefit of you and your successors and assigns, including
each successive holder or holders of any Notes.
Section 9.8. Survival of Covenants and Representations. All
covenants, representations and warranties made by the Company herein and in any
certificates delivered pursuant hereto, whether or not in connection with the
Closing Date, shall survive the closing and the delivery of this Agreement and
the Notes.
Section 9.9. Severability. Should any part of this Agreement for
any reason be declared invalid or unenforceable, such decision shall not affect
the validity or enforceability of any remaining portion, which remaining portion
shall remain in force and effect as if this Agreement had been executed with the
invalid or unenforceable portion thereof eliminated and it is hereby declared
the intention of the parties hereto that they would have executed the remaining
portion of this Agreement without including therein any such part, parts or
portion which may, for any reason, be hereafter declared invalid or
unenforceable.
Section 9.10. Governing Law. This Agreement and the Notes issued
and sold hereunder shall be governed by and construed in accordance with
Illinois law.
Section 9.11. Captions. The descriptive headings of the various
Sections or parts of this Agreement are for convenience only and shall not
affect the meaning or construction of any of the provisions hereof.
Section 9.12. Additional Indebtedness. Subject to the terms and
provisions hereof, the Company may, from time to time, issue and sell additional
senior promissory notes and may, in connection with the documentation thereof,
incorporate by reference various provisions of this Agreement. Such
incorporation by reference shall not modify, dilute or otherwise affect the
terms and provisions hereof including, without limitation, the priority of the
Notes and the percentage of the Notes required to approve an amendment or
effectuate a waiver under the provisions of Section 7 or the percentages of the
Notes required to accelerate the Notes or rescind such an acceleration under the
provisions of Section 6.
-34-
<PAGE> 39
Cleveland-Cliffs Inc Note Agreement
The execution hereof by you shall constitute a contract between us for
the uses and purposes hereinabove set forth, and this Agreement may be executed
in any number of counterparts, each executed counterpart constituting an
original but all together only one agreement.
CLEVELAND-CLIFFS INC
By /s/ John S. Brinzo
--------------------------------------
Its Executive Vice President-Finance
-35-
<PAGE> 40
<TABLE>
<CAPTION>
Cleveland-Cliffs Inc Note Agreement
<S> <C>
Accepted as of December 15, 1995.
THE MUTUAL LIFE INSURANCE COMPANY OF
NEW YORK
Accepted as of December 15, 1995
By /s/ Peter W. Oliver
----------------------------------
Its Peter W. Oliver
Managing Director
Accepted as of December 15, 1995
MONY LIFE INSURANCE COMPANY OF AMERICA
By /s/ Peter W. Oliver
----------------------------------
Its Peter W. Oliver
Authorized Agent
Accepted as of December 15, 1995
THE VARIABLE ANNUITY LIFE INSURANCE
COMPANY
By /s/ Julia S.Tucker
----------------------------------
Its Julia S. Tucker
Investment Officer
Accepted as of December 15, 1995
NORTHERN LIFE INSURANCE COMPANY
By /s/ Mark S. Jordahl
----------------------------------
Its Mark S. Jordahl
Assistant Treasurer
Accepted as of December 15, 1995
NORTHWESTERN NATIONAL LIFE INSURANCE
COMPANY
By /s/ Mark S. Jordahl
----------------------------------
Its Mark S. Jordahl
Authorized Representative
Accepted as of December 15, 1995
FIRST ALLMERICA FINANCIAL LIFE
INSURANCE COMPANY
By /s/ Jon E. Austad
----------------------------------
Its Jon E. Austad
Second Vice President
Accepted as of December 15, 1995
ALLMERICA FINANCIAL LIFE INSURANCE AND
ANNUITY COMPANY
By /s/ Jon E. Austad
----------------------------------
Its Jon E. Austad
Second Vice President
Accepted as of December 15, 1995
SUN LIFE ASSURANCE COMPANY OF CANADA
By /s/ John N. Whelihan
----------------------------------
Its John N. Whelihan, Vice President
U.S. Private Placements-for President
By /s/ Jeffrey J. Skerry
----------------------------------
Its Jeffrey J. Skerry, Associate
Counsel - for Secretary
Accepted as of December 15, 1995
SUN LIFE ASSURANCE COMPANY OF CANADA
(U.S.)
By /s/ L. Brock Thomson
----------------------------------
Its L. Brock Thomson - Treasurer
Accepted as of December 15, 1995
MASSACHUSETTS CASUALTY INSURANCE
COMPANY
By /s/ John N. Whelihan
----------------------------------
Its John N. Whelihan - Assistant
Treasurer
Accepted as of December 15, 1995
GREAT SOUTHERN LIFE INSURANCE COMPANY
By /s/ Angelo D'Urso
----------------------------------
Its Angelo D'Urso
Accepted as of December 15, 1995
THE UNION CENTRAL LIFE INSURANCE
COMPANY
By /s/ Joseph A. Tucker III
----------------------------------
Its Joseph A. Tucker III
Assistant Treasurer
Accepted as of December 15, 1995
PAN-AMERICAN LIFE INSURANCE COMPANY
By /s/ F. A. Stone
----------------------------------
Its F. A. Stone
Vice President Corporate Securities
Accepted as of December 15, 1995
STANDARD INSURANCE COMPANY
By /s/ Vicki R. Chase
----------------------------------
Its Vicki R. Chase
Vice President - Securities
Accepted as of December 15, 1995
WOODMEN ACCIDENT AND LIFE COMPANY
By /s/ M. F. Wilder
----------------------------------
Its M. F. Wilder
Senior Vice President and Treasurer
</TABLE>
-36-
<PAGE> 41
PRINCIPAL AMOUNT
NAME AND ADDRESS OF NOTES TO BE
OF PURCHASER PURCHASED
THE MUTUAL LIFE INSURANCE COMPANY $10,000,000
OF NEW YORK
1740 Broadway
New York, New York 10019
Attention: MONY Capital Management Unit
Payments
All payments on or in respect of the Notes to be by bank wire transfer of
Federal or other immediately available funds (identifying each payment as
"Cleveland-Cliffs Inc., 7.00% Senior Notes due 2005, PPN 185896 A @ 6, principal
or interest") to:
Chemical Bank (ABA #021000128)
New York, New York
for credit to: The Mutual Life Insurance Company of New York
Security Remittance Account Number 323-023803
Notices
All notices of payment on or in respect of the Notes and written confirmation
of each such payment to:
Glenpointe Marketing & Operations Center--MONY
Glenpointe Center West, 500 Frank W. Burr Blvd.
Teaneck, New Jersey 07666-6888
Attention: Securities Custody
Telecopy: (201) 907-6979
All notices and communications other than those in respect to payments to be
addressed as first provided above.
Name of Nominee in which Notes are to be issued: None
Taxpayer I.D. Number: 13-1632487
SCHEDULE I
(to Note Agreement)
<PAGE> 42
PRINCIPAL AMOUNT
NAME AND ADDRESS OF NOTES TO BE
OF PURCHASER PURCHASED
MONY LIFE INSURANCE COMPANY $4,000,000
OF AMERICA
c/o The Mutual Life Insurance Company of New York
1740 Broadway
New York, New York 10019
Attention: MONY Capital Management Unit
Payments
All payments on or in respect of the Notes to be by bank wire transfer of
Federal or other immediately available funds (identifying each payment as
"Cleveland-Cliffs Inc., 7.00% Senior Notes due 2005, PPN 185896 A@ 6, principal
or interest") to:
Chemical Bank (ABA #021000128)
New York, New York
for credit to: MONY Life Insurance Company of America
Account Number 323-161243
Notices
All notices of payment on or in respect of the Notes and written confirmation
of each such payment to:
Glenpointe Marketing & Operations Center--MONY
Glenpointe Center West, 500 Frank W. Burr Blvd.
Teaneck, New Jersey 07666-6888
Attention: Securities Custody
Telecopy: (201) 907-6979
All notices and communications other than those in respect to payments to be
addressed as first provided above.
Name of Nominee in which Notes are to be issued: None
Taxpayer I.D. Number: 86-0222062
I-2
<PAGE> 43
PRINCIPAL AMOUNT
NAME AND ADDRESS OF NOTES TO BE
OF PURCHASER PURCHASED
THE MUTUAL LIFE INSURANCE COMPANY $1,000,000
OF NEW YORK
c/o The Mutual Life Insurance Company of New York
1740 Broadway
New York, New York 10019
Attention: MONY Capital Management Unit
Payments
All payments on or in respect of the Notes to be by bank wire transfer of
Federal or other immediately available funds (identifying each payment as
"Cleveland-Cliffs Inc., 7.00% Senior Notes due 2005, PPN 185896 A@ 6, principal
or interest") to:
Chemical Bank
(ABA #021000128)
for credit to: The Mutual Life Insurance Company of New York
Account Number 323-161235
Notices
All notices and communications, including notices with respect to payments and
written confirmation of each such payment, to be addressed as first provided
above.
Name of Nominee in which Notes are to be issued: None
I-3
<PAGE> 44
PRINCIPAL AMOUNT
NAME AND ADDRESS OF NOTES TO BE
OF PURCHASER PURCHASED
THE VARIABLE ANNUITY LIFE INSURANCE $10,000,000
COMPANY
c/o American General Corporation
2929 Allen Parkway
Houston, Texas 77019
Attention: Private Placements, A37-01
Facsimile Number: (713) 831-1366
Payments
All payments on or in respect of the Notes to be by bank wire transfer of
Federal or other immediately available funds (identifying each payment as
"Cleveland-Cliffs Inc., 7.00% Senior Notes due 2005, PPN 185896 A@ 6, principal
or interest") to:
State Street Bank and Trust Company (ABA #011000028)
Boston, Massachusetts 02101
Re: The Variable Annuity Life Insurance Company
AC-0125-821-9
OBI=PPN# and Description of payment
Fund Number PA 54
Notices
All notices of payment on or in respect of the Notes and written confirmation
of each such payment to:
The Variable Annuity Life Insurance Company and PA 54
c/o State Street Bank and Trust Company
Insurance Services Custody (AH2)
1776 Heritage Drive
North Quincy, Massachusetts 02171
Facsimile Number: (617) 985-4923
Duplicate payment notices and all other correspondences to be addressed as
first provided above.
Name of Nominee in which Notes are to be issued: None
Taxpayer I.D. Number: 74-1625348
I-4
<PAGE> 45
PRINCIPAL AMOUNT
NAME AND ADDRESS OF NOTES TO BE
OF PURCHASER PURCHASED
NORTHERN LIFE INSURANCE COMPANY $5,000,000
c/o Washington Square Capital
100 Washington Square, Suite 800
Minneapolis, Minnesota 55401-2147
Attention: Securities Department
Telecopier Number: (612) 372-5368
Payments
All payments on or in respect of the Notes to be by bank wire transfer of
Federal or other immediately available funds (identifying each payment as
"Cleveland-Cliffs Inc., 7.00% Senior Notes due 2005, PPN 185896 A @ 6, principal
or interest") to:
First National Bank N.A./Mpls. (ABA #091000022)
601 2nd Avenue South
Attention: Securities Accounting
for credit to: Northern Life Insurance Company
Account Number 1602-3237-6105
Notices
All notices and communications, including notices with respect to payments and
written confirmation of each such payment, to be addressed as first provided
above.
Name of Nominee in which Notes are to be issued: None
Taxpayer I.D. Number: 41-1295933
I-5
<PAGE> 46
PRINCIPAL AMOUNT
NAME AND ADDRESS OF NOTES TO BE
OF PURCHASER PURCHASED
NORTHWESTERN NATIONAL LIFE $4,500,000
INSURANCE COMPANY
c/o Washington Square Capital
100 Washington Square, Suite 800
Minneapolis, Minnesota 55401-2147
Attention: Securities Department
Telecopier Number: (612) 372-5368
Payments
All payments on or in respect of the Notes to be by bank wire transfer of
Federal or other immediately available funds (identifying each payment as
"Cleveland-Cliffs Inc., 7.00% Senior Notes due 2005, PPN 185896 A@ 6, principal
or interest") to:
First National Bank N.A./Mpls. (ABA #091000022)
601 2nd Avenue South
Minneapolis, Minnesota 55402
Attention: Securities Accounting
for credit to: Northwestern National Life Insurance Company
Account Number 1102-4001-4461
Notices
All notices and communications, including notices with respect to payments and
written confirmation of each such payment, to be addressed as first provided
above.
Name of Nominee in which Notes are to be issued: None
Taxpayer I.D. Number: 41-0451140
I-6
<PAGE> 47
PRINCIPAL AMOUNT
NAME AND ADDRESS OF NOTES TO BE
OF PURCHASER PURCHASED
FIRST ALLMERICA FINANCIAL LIFE $4,500,000
INSURANCE COMPANY
440 Lincoln Street
Worcester, Massachusetts 01653
Attention: Jon E. Austad, Investment Research
Facsimile: (508) 852-6935
Payments
All payments on or in respect of the Notes to be by bank wire transfer of
Federal or other immediately available funds (identifying each payment as
"Cleveland-Cliffs Inc., 7.00% Senior Notes due 2005, PPN 185896 A@ 6, principal
or interest") to:
Bankers Trust Company
New York, New York 10005
ABA No. 021 001 033
Account No. 99-911-145 of Allmerica
for further credit to: First Allmerica Financial Life Insurance Company
Account Number 090232
Notices
All notices and communications, including notices with respect to payments and
written confirmation of each such payment, to be addressed as first provided
above.
Name of Nominee in which Notes are to be issued: None
Taxpayer I.D. Number: 04-1867050
I-7
<PAGE> 48
PRINCIPAL AMOUNT
NAME AND ADDRESS OF NOTES TO BE
OF PURCHASER PURCHASED
ALLMERICA FINANCIAL LIFE INSURANCE $5,000,000
AND ANNUITY COMPANY
440 Lincoln Street
Worcester, Massachusetts 01653
Attention: Jon E. Austad, Investment Research
Facsimile: (508) 852-6935
Payments
All payments on or in respect of the Notes to be by bank wire transfer of
Federal or other immediately available funds (identifying each payment as
"Cleveland-Cliffs Inc., 7.00% Senior Notes due 2005, PPN 185896 A@ 6, principal
or interest") to:
Bankers Trust Company
New York, New York 10005
ABA No. 021 001 033
Account No. 99-911-145 of Allmerica
for further credit to: Allmerica Financial Life Insurance and Annuity
Company
Account Number 090242
Notices
All notices and communications, including notices with respect to payments and
written confirmation of each such payment, to be addressed as first provided
above.
Name of Nominee in which Notes are to be issued: None
Taxpayer I.D. Number: 04-6145677
I-8
<PAGE> 49
PRINCIPAL AMOUNT
NAME AND ADDRESS OF NOTES TO BE
OF PURCHASER PURCHASED
SUN LIFE ASSURANCE COMPANY OF CANADA $3,000,000
One Sun Life Executive Park $1,000,000
Wellesley Hills, Massachusetts 02181 $1,000,000
Attention: Investment Department/Private Placements, SC #1303
Telecopier Number: (617) 446-2392
Payments
All payments on or in respect of the Notes to be by bank wire transfer of
Federal or other immediately available funds (identifying each payment as
"Cleveland-Cliffs Inc., 7.00% Senior Notes due 2005, PPN 185896 A@ 6, principal
or interest") to:
The Chase Manhattan Bank(ABA #021-000-021)
One New York Plaza
New York, New York 10015
for credit to: Sun Life Assurance Company of Canada
Account Number 949-1-087822
Notices
All notices of mandatory payment, on or in respect of the Notes and written
confirmation of each such payment to:
Sun Life Assurance Company of Canada
Three Sun Life Executive Park
Wellesley Hills, Massachusetts 02181
Attention: Manager, Securities Accounting SC #3327
All notices and communications other than those in respect to mandatory
payments to be addressed as first provided above.
Name of Nominee in which Notes are to be issued: None
Taxpayer I.D. Number: 38-1082080
I-9
<PAGE> 50
PRINCIPAL AMOUNT
NAME AND ADDRESS OF NOTES TO BE
OF PURCHASER PURCHASED
SUN LIFE ASSURANCE COMPANY OF $1,000,000
CANADA (U.S.)
One Sun Life Executive Park
Wellesley Hills, Massachusetts 02181
Attention: Investment Department/Private Placements, SC #1303
Telecopier Number: (617) 446-2392
Payments
All payments on or in respect of the Notes to be by bank wire transfer of
Federal or other immediately available funds (identifying each payment as
"Cleveland-Cliffs Inc., 7.00% Senior Notes due 2005, PPN 185896 A@ 6, principal
or interest") to:
Chemical Bank (ABA #021-000-128)
55 Water Street
New York, New York 10041
for credit to the account of: Sun Life Assurance Company of Canada
(U.S.)
Account Number 323-023177
Notices
All notices of mandatory payment on or in respect of the Notes and written
confirmation of each such payment to:
Sun Life Assurance Company of Canada (U.S.)
Three Sun Life Executive Park
Wellesley Hills, Massachusetts 02181
Attention: Manager, Securities Accounting, SC #3327
All notices and communications other than those in respect to mandatory
payments to be addressed as first provided above.
Name of Nominee in which Notes are to be issued: None
Taxpayer I.D. Number: 04-2461439
I-10
<PAGE> 51
PRINCIPAL AMOUNT
NAME AND ADDRESS OF NOTES TO BE
OF PURCHASER PURCHASED
MASSACHUSETTS CASUALTY INSURANCE $1,000,000
COMPANY
One Sun Life Executive Park
Wellesley Hills, Massachusetts 02181
Attention: Investment Department/
Private Placements, SC #1303
Telecopier Number: (617) 446-2392
Payments
All payments on or in respect of the Notes to be by bank wire transfer of
Federal or other immediately available funds (identifying each payment as
"Cleveland-Cliffs Inc., 7.00% Senior Notes due 2005, PPN 185896 A@ 6, principal
or interest") to:
Chemical Bank (ABA #021-000-128)
55 Water Street
New York, New York 10041
for credit to: Massachusetts Casualty Insurance Company
Account Number 323-265448
Notices
All notices of mandatory payment on or in respect of the Notes and written
confirmation of each such payment to:
Massachusetts Casualty Insurance Company
Three Sun Life Executive Park
Wellesley Hills, Massachusetts 02181
Attention: Manager, Securities Accounting, SC #3327
All notices and communications other than those in respect to mandatory
payments to be addressed as first provided above.
Name of Nominee in which Notes are to be issued: None
Taxpayer I.D. Number: 04-1589940
I-11
<PAGE> 52
PRINCIPAL AMOUNT
NAME AND ADDRESS OF NOTES TO BE
OF PURCHASER PURCHASED
GREAT SOUTHERN LIFE INSURANCE $5,000,000
COMPANY
300 West 11th Street
Kansas City, Missouri 64105
Attn: Investments
Payments
All payments on or in respect of the Notes to be by bank wire transfer of
Federal or other immediately available funds (identifying each payment as
"Cleveland-Cliffs Inc., 7.00% Senior Notes due 2005, PPN 185896 A@ 6, principal
or interest") to:
Commerce Bank of Kansas City
ABA #101 000 019
for credit to: Great Southern Life Insurance Company
Commerce Account Number 04911-00
Notices
All notices and communications to be addressed as first provided above with a
copy to:
Great Southern Life Insurance Company
P.O. Box 13487
Kansas City, Missouri 64199-3487
Attn: Accounting
Name of Nominee in which Notes are to be issued: Hare & Co.
Taxpayer I.D. Number: 74-2058261
I-12
<PAGE> 53
PRINCIPAL AMOUNT
NAME AND ADDRESS OF NOTES TO BE
OF PURCHASER PURCHASED
THE UNION CENTRAL LIFE $4,500,000
INSURANCE COMPANY
c/o Carillon Advisors Inc.
1876 Waycross Road
Cincinnati, Ohio 45240
Attention: Mr. Gary Rodmaker
Fax: (513) 595-2843
Payments
All payments on or in respect of the Notes to be by bank wire transfer of
Federal or other immediately available funds (identifying each payment as
"Cleveland-Cliffs Inc., 7.00% Senior Notes due 2005, PPN 185896 A@ 6, principal
or interest") to:
Hare BNF/IOC 566
New York, New York
ABA#: 021-000-018
for credit to: The Union Central Life Insurance Company
Account Number 367614
Attention: P&I Department
Subject: Cleveland-Cliffs Inc., 7% Senior Notes due 12/05/2005
Notices
All notices and communications to be addressed as first provided above, except
notices with respect to payment, and written confirmation of each such payment,
to be addressed:
The Union Central Life Insurance Company
Post Office Box 179
Cincinnati, Ohio 45201
Attention: Treasury Department
Fax: (513) 595-2843
Name of Nominee in which Notes are to be issued: Hare & Co.
Taxpayer I.D. Number: 31-0472910
I-13
<PAGE> 54
PRINCIPAL AMOUNT
NAME AND ADDRESS OF NOTES TO BE
OF PURCHASER PURCHASED
PAN-AMERICAN LIFE INSURANCE $4,500,000
COMPANY
Pan-American Life Center
601 Poydras Street
New Orleans, Louisiana 70130
Attention: Investment Department, 28th Floor
Fixed Income Securities
Telecopier Number: (504) 566-3459
Payments
All payments on or in respect of the Notes to be by bank wire transfer of
Federal or other immediately available funds (identifying each payment as
"Cleveland-Cliffs Inc., 7.00% Senior Notes due 2005, PPN 185896 A@ 6, principal
or interest") to:
First National Bank of Commerce (ABA #065000029)
210 Baronne Street
New Orleans, Louisiana 70112
for credit to: Pan-American Life Insurance Company
Account Number 1100-29496
Notices
All notices and communications to be addressed as first provided above, except
notices with respect to payments, and written confirmation of each such payment,
to be addressed Attention: Investment Department, 28th Floor, Bond and Stock
Accounting.
Name of Nominee in which Notes are to be issued: None
Taxpayer I.D. Number: 72-0281240
I-14
<PAGE> 55
PRINCIPAL AMOUNT
NAME AND ADDRESS OF NOTES TO BE
OF PURCHASER PURCHASED
STANDARD INSURANCE COMPANY $2,500,000
P.O. Box 711
Portland, Oregon 97207
Attention: Securities Department, P7A
Payments
All payments on or in respect of the Notes to be by bank wire transfer of
Federal or other immediately available funds (identifying each payment as
"Cleveland-Cliffs Inc., 7.00% Senior Notes due 2005, PPN 185896 A@ 6, principal
or interest") to:
The Chase Manhattan Bank, N.A.
ABA No. 021000021
A/C--900-9-002206
BBK--Chase Manhattan Bank, N.A.
Account Name: Standard Insurance Company
Account No. 75271900
Notices
All notices and communications, including notices with respect to payments and
written confirmation of each such payment, to be addressed to:
Atwell & Company
P.O. Box 456
Wallstreet Station
New York, New York 10005
with a copy to:
Standard Insurance Company
Securities Department, P7A
P.O. Box 711
Portland, Oregon 97207
Name of Nominee in which Notes are to be issued: ATWELL & COMPANY
I-15
<PAGE> 56
PRINCIPAL AMOUNT
NAME AND ADDRESS OF NOTES TO BE
OF PURCHASER PURCHASED
WOODMEN ACCIDENT AND LIFE COMPANY $2,500,000
P.O. Box 82288
Lincoln, Nebraska 68501
Attention: Securities Division
Telecopy Number: (402) 437-4392
Payments
All payments on or in respect of the Notes to be by bank wire transfer of
Federal or other immediately available funds (identifying each payment as
"Cleveland-Cliffs Inc., 7.00% Senior Notes due 2005, PPN 185896 A@ 6, principal
or interest") to:
FirsTier Bank Lincoln, N.A. (ABA #1040-0003-2)
13 and M Streets
Lincoln, Nebraska 68508
for credit to: Woodmen Accident and Life Company
General Fund, Account Number 092-909
Notices
All notices and communications, including notices with respect to payments and
written confirmation of each such payment, to be addressed as first provided
above; provided, however, all notices and communications delivered by overnight
courier shall be addressed as follows:
Woodmen Accident and Life Company
1526 K Street
Lincoln, Nebraska 68508
Attention: Securities Division
Name of Nominee in which Notes are to be issued: None
Taxpayer I.D. Number: 47-0339220
I-16
<PAGE> 57
CLEVELAND-CLIFFS INC
7.00% Senior Note
Due December 15, 2005
No.
_________, 19__
$
CLEVELAND-CLIFFS INC, an Ohio corporation (the "Company"), for
value received, hereby promises to pay to
or registered assigns
on the fifteenth day of December, 2005
the principal amount of
DOLLARS ($____________)
and to pay interest (computed on the basis of a 360-day year of twelve 30-day
months) on the principal amount from time to time remaining unpaid hereon at the
rate of 7.00% per annum from the date hereof until maturity, payable
semi-annually on the fifteenth day of each June and December in each year
(commencing on the first of such dates after the date hereof) and at maturity.
The Company agrees to pay interest on overdue principal (including any overdue
required or optional prepayment of principal) Make-Whole Amount, if any, and (to
the extent legally enforceable) on any overdue installment of interest, at the
rate of 9.00% per annum after the due date, whether by acceleration or
otherwise, until paid. Both the principal hereof and interest hereon are
payable at the principal office of the Company in Cleveland, Ohio in coin or
currency of the United States of America which at the time of payment shall be
legal tender for the payment of public and private debts.
This Note is one of the 7.00% Senior Notes due December 15, 2005 (the
"Notes") of the Company in the aggregate principal amount of $70,000,000 issued
or to be issued under and pursuant to the terms and provisions of the separate
Note Agreements, each dated as of December 15, 1995 (the "Note Agreements"),
entered into by the Company with the original Purchasers therein referred to and
this Note and the holder hereof are entitled equally and ratably with the
holders of all other Notes outstanding under the Note Agreements to all the
benefits provided for thereby or referred to therein. Reference is hereby made
to the Note Agreements for a statement of such rights and benefits.
This Note and the other Notes outstanding under the Note Agreements may
be declared due prior to their expressed maturity dates and certain prepayments
are required to
EXHIBIT A
(to Note Agreement)
<PAGE> 58
be made thereon, all in the events, on the terms and in the manner and amounts
as provided in the Note Agreements.
The Notes are not subject to prepayment or redemption at the option of
the Company prior to their expressed maturity dates except on the terms and
conditions and in the amounts and with the Make-Whole Amount, if any, set forth
in the Note Agreements.
This Note is registered on the books of the Company and is transferable
only by surrender thereof at the principal office of the Company duly endorsed
or accompanied by a written instrument of transfer duly executed by the
registered holder of this Note or its attorney duly authorized in writing.
Payment of or on account of principal, Make-Whole Amount, if any, and interest
on this Note shall be made only to or upon the order in writing of the
registered holder.
CLEVELAND-CLIFFS INC
By
----------------------------------
Its
A-2
<PAGE> 59
REPRESENTATIONS AND WARRANTIES
The Company represents and warrants to you as follows:
1. Subsidiaries. Annex 1 attached hereto states the name of each of
the Company's Subsidiaries, its jurisdiction of incorporation and the percentage
of its Voting Stock owned by the Company and/or its Subsidiaries. Those
Subsidiaries listed in Section 1 of said Annex 1 constitute Significant
Subsidiaries. The Company and each Subsidiary has good and marketable title to
all of the shares it purports to own of the stock of each Significant
Subsidiary, free and clear in each case of any Lien. All such shares have been
duly issued and are fully paid and non-assessable.
2. Corporate Organization and Authority. The Company, and each
Significant Subsidiary,
(a) is a corporation duly organized, validly existing and in
good standing under the laws of its jurisdiction of incorporation;
(b) has all requisite power and authority and all necessary
licenses and permits to own and operate its properties and to carry on
its business as now conducted and as presently proposed to be
conducted; and
(c) is duly licensed or qualified and is in good standing as
a foreign corporation in each jurisdiction wherein the nature of the
business transacted by it or the nature of the property owned or leased
by it makes such licensing or qualification necessary, except where the
failure to be so licensed, qualified or in good standing would not,
individually or in the aggregate, have a Material Adverse Effect.
3. Business and Property. You have heretofore been furnished with a
copy of the Confidential Placement Memorandum dated November 14, 1995 (the
"Memorandum") prepared by Salomon Brothers which generally sets forth the
business conducted and presently proposed to be conducted by the Company and its
Subsidiaries and the material properties of the Company and its Subsidiaries.
4. Financial Statements. (a) The consolidated balance sheets of the
Company and its consolidated Subsidiaries as of December 31 in each of the years
1990 to 1994, both inclusive, and the statements of income and retained earnings
and changes in financial position or cash flows for the fiscal years ended on
said dates (including, in each case, the notes accompanying such financial
statements), each accompanied by a report thereon containing an opinion
unqualified as to scope limitations imposed by the Company and otherwise without
qualification except as therein noted, by Ernst & Young, have been prepared in
accordance with GAAP as in effect during the relevant year consistently applied
except as therein noted, are correct and complete and present fairly the
financial position of the Company and its Subsidiaries as of such dates and the
results of their operations and changes in their financial position or cash
flows for such periods. The unaudited
EXHIBIT B
(to Note Agreement)
<PAGE> 60
consolidated balance sheets of the Company and its consolidated Subsidiaries as
of September 30, 1995 and the unaudited statements of income and retained
earnings and cash flows for the nine-month period ended on said date including,
in each case, notes thereto prepared by the Company, have been prepared in
accordance with generally accepted accounting principles consistently applied,
are correct and complete and present fairly the financial position of the
Company and its consolidated Subsidiaries as of said date and the results of
their operations and changes in their financial position or cash flows for such
period in accordance with generally accepted accounting principles.
(b) Since December 31, 1994, there has been no change in the
financial condition of the Company and its consolidated Subsidiaries as shown
on the consolidated balance sheet as of such date except changes which,
individually or in the aggregate, have not had a Material Adverse Effect.
5. Debt. Annex 2 attached hereto correctly describes all Debt
and any Liens securing such Debt of the Company and its Subsidiaries
outstanding on December 15, 1995.
6. Full Disclosure. Neither the financial statements referred to
in paragraph 4(a) hereof nor the Agreements, the Memorandum or any other
written statement concerning the Company, any Subsidiary or their respective
businesses furnished by the Company to you in connection with the negotiation
of the sale of the Notes, contains any untrue statement of a material fact or
omits a material fact necessary to make the statements contained therein or
herein, in light of the circumstances in which they were made, not misleading.
There is no fact peculiar to the Company or its Subsidiaries which the Company
has not disclosed to you in writing which constitutes a Material Adverse Effect
nor, so far as the Company can now reasonably foresee, will have a Material
Adverse Effect.
7. Pending Litigation. There are no proceedings pending or, to
the knowledge of the Company, threatened against or affecting the Company or
any Subsidiary in any court or before any governmental authority or arbitration
board or tribunal which would be reasonably expected to have a Material Adverse
Effect.
8. Title to Properties. The Company and each Subsidiary has good
and marketable title in fee simple (or its equivalent under applicable law) to
all material parcels of real property and has good title to all the other
material items of property it purports to own, including that reflected in the
most recent balance sheet referred to in paragraph 4(a) hereof, except as sold
or otherwise disposed of in the ordinary course of business and except for
Liens permitted by the Agreements.
9. Patents and Trademarks. The Company and each Subsidiary owns
or possesses all the patents, trademarks, trade names, service marks,
copyright, licenses and rights with respect to the foregoing necessary for the
present and planned future conduct of its business, without any known conflict
with the rights of others.
B-2
<PAGE> 61
10. Sale Is Legal and Authorized. The sale of the Notes and
compliance by the Company with all of the provisions of the Agreements and the
Notes --
(a) are within the corporate powers of the Company;
(b) assuming the accuracy of your representations, and those
of each of the other Purchasers, set forth in Section 3.2, will not
violate any provisions of any law or any order of any court or
governmental authority or agency and will not conflict with or result
in any breach of any of the terms, conditions or provisions of, or
constitute a default under the Certificate of Incorporation or By-laws
of the Company or any indenture or other agreement or instrument to
which the Company is a party or by which it may be bound or result in
the imposition of any Liens or encumbrances on any property of the
Company; and
(c) have been duly authorized by proper corporate action on
the part of the Company (no action by the stockholders of the Company
being required by law, by the Certificate of Incorporation or By-laws
of the Company or otherwise), executed and delivered by the Company
and the Agreements and the Notes constitute the legal, valid and
binding obligations, contracts and agreements of the Company
enforceable in accordance with their respective terms.
11. No Defaults. No Default or Event of Default has occurred and
is continuing. The Company is not in default in the payment of principal or
interest on any Debt and is not in default under any instrument or instruments
or agreements under and subject to which any Debt has been issued and no event
has occurred and is continuing under the provisions of any such instrument or
agreement which with the lapse of time or the giving of notice, or both, would
constitute an event of default thereunder.
12. Governmental Consent. Assuming the accuracy of your
representations, and those of each of the other Purchasers, set forth in
Section 3.2, no approval, consent or withholding of objection on the part of any
regulatory body, state, Federal or local, is necessary in connection with the
execution and delivery by the Company of the Agreements or the Notes or
compliance by the Company with any of the provisions of the Agreements or the
Notes.
13. Taxes. All tax returns required to be filed by the Company or
any Subsidiary in any jurisdiction have, in fact, been filed, and all taxes,
assessments, fees and other governmental charges upon the Company or any
Subsidiary or upon any of their respective properties, income or franchises,
which are shown to be due and payable in such returns have been paid. For all
taxable years ending on or before December 31, 1986, the Federal income tax
liability of the Company and its Subsidiaries has been satisfied and either the
period of limitations on assessment of additional Federal income tax has
expired or the Company and its Subsidiaries have entered into an agreement with
the Internal Revenue Service closing conclusively the total tax liability for
the taxable year. The Company does not know of any proposed additional tax
assessment against it, and no material controversy in respect of additional
Federal or state income taxes due since said date is pending or to the
knowledge of the Company threatened for which, in either case, reserves or
other provision
B-3
<PAGE> 62
deemed by the Company to be adequate has not been made on its accounts. The
provisions for taxes on the books of the Company and each Subsidiary are, in the
Company's determination, adequate for all open years, and for its current fiscal
period.
14. Use of Proceeds. The net proceeds from the sale of the Notes
will be used to retire the 1992 Notes. None of the transactions contemplated
in the Agreements (including, without limitation thereof, the use of proceeds
from the issuance of the Notes) will violate or result in a violation of
Section 7 of the Securities Exchange Act of 1934, as amended, or any regulation
issued pursuant thereto, including, without limitation, Regulations G, T and X
of the Board of Governors of the Federal Reserve System, 12 C.F.R., Chapter II.
None of the proceeds from the sale of the Notes will be used, directly or
indirectly, for the purposes, whether immediate, incidental or ultimate, of
purchasing or carrying any "margin stock" within the meaning of such Regulation
G or for the purpose of maintaining, reducing or retiring any indebtedness
which was originally incurred to purchase or carry any stock that is currently
a margin stock or for any other purpose which might constitute this transaction
a "purpose credit" within the meaning of such Regulation G.
15. Private Offering. Neither the Company, directly or indirectly,
nor any agent on its behalf has offered or will offer the Notes or any similar
Security or has solicited or will solicit an offer to acquire the Notes or any
similar Security from or has otherwise approached or negotiated or will
approach or negotiate in respect of the Notes or any similar Security with any
Person other than the Purchasers and not more than 100 other institutional
investors, each of whom was offered a portion of the Notes at private sale for
investment. Neither the Company, directly or indirectly, nor any agent on its
behalf has offered or will offer the Notes or any similar Security or has
solicited or will solicit an offer to acquire the Notes or any similar Security
from any Person so as to bring the issuance and sale of the Notes within the
provisions of Section 5 of the 1933 Act.
16. ERISA. Assuming the correctness of your representations, and
those of the other Purchasers set forth in Section 3.2 of the Agreements, the
consummation of the transactions provided for in the Agreements and compliance
by the Company with the provisions thereof and the Notes issued thereunder will
not involve any prohibited transaction within the meaning of ERISA or Section
4975 of the Internal Revenue Code of 1986, as amended. Except as has been
disclosed to you, each Plan complies in all material respects with all
applicable statutes and governmental rules and regulations, and (a) no
Reportable Event has occurred and is continuing with respect to any Plan as to
which the Company or any ERISA Affiliate is or was required to file a report
with the PBGC; provided that the loss of qualification of a Plan and the
failure to meet the minimum funding standard of Section 412 of the Code or
Section 302 of ERISA shall be a Reportable Event regardless of the issuance of
any waiver of the reporting requirement by the PBGC, (b) neither the Company
nor any ERISA Affiliate has withdrawn from any Multiemployer Plan or Plan
subject to Section 4063 or 4064 of ERISA or instituted steps to do so, and (c)
no steps have been instituted to terminate any Plan that is subject to Title IV
of ERISA. Except as has been disclosed to you in writing, no condition exists
or event or transaction has occurred in connection with any Plan which could
result in the incurrence by the Company or any ERISA Affiliate of any material
liability, fine or penalty. No Plan
B-4
<PAGE> 63
maintained by the Company or any ERISA Affiliate, nor any trust created
thereunder, has incurred any "accumulated funding deficiency" as defined in
Section 302 of ERISA nor does the accumulated benefit obligation under all
Plans, as determined by the Plans actuary or accuracies for purposes of the most
recent actuarial valuations for such Plans, exceed, as of the last annual
valuation date, the fair market value of the assets of the Plans (all determined
in accordance with Financial Accounting Standards Board Statement of Financial
Accounts Standard No. 87). Neither the Company nor any ERISA Affiliate has any
material contingent liability with respect to any post-retirement "welfare
benefit plan" (as such term is defined in ERISA) except as has been disclosed in
writing to the Purchasers.
17. Compliance with Law. Except with respect to ERISA, which is
treated separately under paragraph 16 of this Exhibit B, and to environmental
laws, which are treated separately under paragraph 18 of this Exhibit B, neither
the Company nor any Subsidiary (a) is in violation of any law, ordinance,
franchise, governmental rule or regulation to which it is subject; or (b) has
failed to obtain any license, permit, franchise or other governmental
authorization necessary to the ownership of its property or to the conduct of
its business, which violation or failure to obtain would have a Material Adverse
Effect. Neither the Company nor any Subsidiary is in default with respect to
any order of any court or governmental authority or arbitration board or
tribunal which default would have a Material Adverse Effect.
18. Compliance with Environmental Laws. The Company is not in
violation of any applicable Federal, state, or local laws, statutes, rules,
regulations or ordinances relating to public health, safety or the environment,
including, without limitation, relating to releases, discharges, emissions or
disposals to air, water, land or ground water, to the withdrawal or use of
ground water, to the use, handling or disposal of polychlorinated biphenyls
(PCBs), asbestos or urea formaldehyde, to the treatment, storage, disposal or
management of hazardous substances (including, without limitation, petroleum,
crude oil or any fraction thereof, or other hydrocarbons), pollutants or
contaminants, to exposure to toxic, hazardous or other controlled, prohibited or
regulated substances which violation would reasonably be expected to have a
Material Adverse Effect. The Company does not know of any liability or class of
liability of the Company or any Subsidiary under the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended (42 U.S.C. Section
9601 et seq.), or the Resource Conservation and Recovery Act of 1976, as amended
(42 U.S.C. Section 6901 et seq.) which would reasonably be expected to have a
Material Adverse Effect.
B-5
<PAGE> 64
SUBSIDIARIES OF THE COMPANY
<TABLE>
<CAPTION>
PERCENTAGE OF VOTING STOCK
OR PARTNERSHIP INTEREST
NAME OF JURISDICTION OF OWNED BY COMPANY AND
SIGNIFICANT SUBSIDIARY INCORPORATION EACH OTHER SUBSIDIARY
<S> <C> <C>
The Cleveland - Cliffs Iron Company Ohio 100%
Cliffs Mining Company Delaware 100
Cleveland - Cliffs Ore Corporation Ohio 100
Cliffs Empire, Inc. Michigan 100
Cliffs MC Empire, Inc. Michigan 100
Cliffs Tilden, Inc. Michigan 100
Cliffs TIOP, Inc. Michigan 100
Cliffs Resources, Inc. Delaware 100
Lake Superior & Ishpeming Michigan 99.30
Railroad Co.
Pickands Mather & Co. International Delaware 100
Cliffs Minnesota Minerals Company Minnesota 100
Northshore Mining Company Delaware 100
Silver Bay Power Company Delaware 100
PERCENTAGE OF VOTING STOCK
OR PARTNERSHIP INTEREST
NAME OF JURISDICTION OF OWNED BY COMPANY AND
OTHER SUBSIDIARY INCORPORATION EACH OTHER SUBSIDIARY
Cleveland - Cliffs Company Ohio 100%
Cleveland - Cliffs Foundation, the Ohio 100
Cleveland - Cliffs Steamship Company, the Delaware 100
Cliffs Biwabik Ore Corporation Minnesota 100
Cliffs Copper Corp. Ohio 100
Cliffs Engineering, Inc. Colorado 100
Cliffs Forest Products Company Michigan 100
Cliffs Fuel Service Company Michigan 100
Cliffs IH Empire, Inc. Michigan 100
Cliffs Marquette, Inc. Michigan 100
Cliffs Mining Services Company Delaware 100
Cliffs of Canada Limited Ontario, Canada 100
Cliffs Oil Shale Colorado 100
Cliffs Reduced Iron Corporation Delaware 100
Cliffs Synfuel Corp. Utah 100
Empire - Cliffs Partnership Michigan 100
Cliffs MC Empire, Inc. 99.50
Cliffs Empire, Inc. 0.50
Escanaba Properties Company Michigan 100
Escanaba Properties Partnership Michigan 87.5
</TABLE>
ANNEX 1
(to Exhibit B)
<PAGE> 65
<TABLE>
<CAPTION>
PERCENTAGE OF VOTING STOCK
OR PARTNERSHIP INTEREST
NAME OF JURISDICTION OF OWNED BY COMPANY AND
OTHER SUBSIDIARY INCORPORATION EACH OTHER SUBSIDIARY
<S> <C> <C>
Humboldt Mining Company Michigan 50%
Lasco Development Corporation Michigan 99.30
Marquette Iron Mining Partnership Michigan 100
Cliffs Marquette, Inc. 38
Cleveland - Cliffs Ore Corporation 62
Mattagami Mining Co. Ltd. Ontario, Canada 100
Mesaba - Cliffs Mining Company, the Minnesota 86.4
Mesabi Radio Corp. Minnesota 100
Hilton Mines, Ltd. Quebec, Canada 100
Midway Ore Company, Ltd. Quebec, Canada 100
Northshore Sales Company Ohio 100
Northwest Iron Co. Ltd. Delaware 72.41
Peninsula Land Corporation Michigan 100
Pickands Erie Corporation Minnesota 100
Pickands Hibbing Corporation Minnesota 100
Pickands Mather Coal Company Delaware 100
Kentucky Coal Company Delaware 100
Pickands Mather Services, Inc. Delaware 100
Pickands Radio Co. Ltd. Quebec, Canada 100
Robert Coal Company Delaware 100
Selgnelay Resources, Inc. Delaware 100
Syracuse Mining Company Minnesota 100
Tetapaga Mining Company Ltd. Ohio 100
Virginia Eastern Shore Land Co. Delaware 100
</TABLE>
-2-
<PAGE> 66
<TABLE>
<CAPTION>
DESCRIPTION OF DEBT AND LIENS
AMOUNT OUTSTANDING
DESCRIPTION OF DEBT AS OF DECEMBER 15, 1995 (000'S)
<S> <C> <C> <C>
Cleveland-Cliffs Inc 1992 Note Agreement $70,000
Total Consolidated $70,000(A)
Guaranteed Debt of Subsidiaries
The Cleveland-Cliffs Iron Company
Empire -- EIMP Term Notes*
Company's Share (22.5625%) $ 3,948
LTV Guarantee (25%) 4,375
Wheeling-Pittsburgh Guarantee (12.4375%) 2,177
------
$10,500
Marquette Range Coal Service
Term Loan (39.24%) 130
------
$ 130
Funded Debt of Joint Venture -------
Hibbing Taconite
Capitalized Leases (15%) $157
====
Tilden Capitalized Leases (40%) 2,120
=====
GRAND TOTAL $82,907
=======
</TABLE>
II. Liens
A. Liens Securing Debt of the Company and its Subsidiaries
Any lien arising under or pursuant to:
1. Indenture of Mortgage, dated September 2, 1980,
between Marquette Range Coal Service Company and
Aetna Life Insurance Company (the
__________________________________
A The $70 Million Note Agreement of 8.51% and 8.84% obligations is
being paid off on December 22, 1995.
* This category is guaranteed debt of Subsidiaries, with the Company's
Share also covered by a guarantee. LTV's share and Wheeling-
Pittsburgh's share are guaranteed by the Company's Subsidiaries,
but are effectively serviced by LTV and Wheeling-Pittsburgh.
ANNEX 2
(to Exhibit B)
<PAGE> 67
collateral is the real estate; at the Closing Date the aggregate
principal amount of the Debt under the indenture is $130,000).
2. Restated Indenture, between Empire Iron Mining Partnership, Inland
Steel Company, McLouth Steel Corporation, The Cleveland-Cliffs Iron
Company, International Harvester Company, WSC Empire, Inc. and
Chemical Bank, as Trustee, dated as of December 1, 1978, as amended by
the First through Sixth Supplemental Indentures (the collateral is the
rights of the partners and partnerships in agreements executed in
connection with the partnership and partnership interests of each
partner; at the Closing Date the aggregate principal amount of the
Debt under the Indenture attributable (whether by guaranty or
otherwise) to Cliffs or its Subsidiaries is $10,500,000).
3. Equipment Lease Agreements between Tilden Mining Company L.C. and NBD
Bank (The collateral is three used P&H 2100 Shovels. At the closing
date, the aggregate principal amount of Debt under these agreements is
$2,120,000).
4. An Equipment Lease Agreement between Hibbing Taconite Company and KDC
Financial (The collateral is 3 Dresser 830E Trucks. At the closing
date, the aggregate principal amount of Debt under these agreements is
$157,000).
B. Liens Not Securing Debt of the Company or its Subsidiaries
Any lien arising under or pursuant to: Partnership security agreements,
pursuant to which the Cliffs Subsidiaries who are partners in such
partnerships, together with all other partners in such partnerships, have
pledged their respective partnership interests (including their rights as
partners under the related partnership and operating agreements) to the
relevant partnership and their co-partners as collateral to secure the
performance by the pledging partner of such partners' obligations under the
relevant set of partnership and operating agreements (an example of this
type of arrangement is the Restated Empire Partnership Security Agreement
dated as of December 1, 1978, as amended); and leases of real property and
related mineral rights, pursuant to which lands and related rights to
extract ore, owned or held by Cliffs Subsidiaries, are leased to mining
partnerships (an example of this type of arrangement is the Third Mining
Lease-Empire Mine, dated as of December 1, 1978).
-2-
<PAGE> 68
DESCRIPTION OF SPECIAL COUNSEL'S CLOSING OPINION
The closing opinion of Chapman and Cutler, special counsel to the
Purchasers, called for by Section 4.1 of the Note Agreements, shall be dated the
Closing Date and addressed to the Purchasers, shall be satisfactory in form and
substance to the Purchasers and shall be to the effect that:
1. The Company is a corporation, validly existing and in good
standing under the laws of the State of Ohio and has the corporate
power and the corporate authority to execute and deliver the Note
Agreements and to issue the Notes.
2. The Note Agreements have been duly authorized by all
necessary corporate action on the part of the Company, have been duly
executed and delivered by the Company and constitute the legal, valid
and binding obligations of the Company enforceable in accordance with
their terms, subject to bankruptcy, insolvency, fraudulent conveyance
or similar laws affecting creditors' rights generally, and general
principles of equity (regardless of whether the application of such
principles is considered in a proceeding in equity or at law).
3. The Notes have been duly authorized by all necessary
corporate action on the part of the Company, have been duly executed
and delivered by the Company and constitute the legal, valid and
binding obligations of the Company enforceable in accordance with their
terms, subject to bankruptcy, insolvency, fraudulent conveyance or
similar laws affecting creditors' rights generally, and general
principles of equity (regardless of whether the application of such
principles is considered in a proceeding in equity or at law).
4. The issuance, sale and delivery of the Notes under the
circumstances contemplated by the Note Agreements do not, under
existing law, require the registration of the Notes under the
Securities Act of 1933, as amended, or the qualification of an
indenture under the Trust Indenture Act of 1939, as amended.
The opinion of Chapman and Cutler shall also state that the opinion of
F.L. Hartman, Vice President and General counsel for the Company, is
satisfactory in scope and form to Chapman and Cutler and that, in their opinion,
the Purchasers are justified in relying thereon.
In rendering the opinion set forth in paragraph 1 above, Chapman and
Cutler may rely solely upon an examination of the certified by, and a
certificate of good standing of the Company from, the Secretary of State of the
State of Ohio and the By-laws of the Company. The opinion of Chapman and
Cutler shall be limited to the laws of the State of Illinois and the federal
laws of the United States.
With respect to matters of fact upon which such opinion is based,
Chapman and Cutler may rely on appropriate certificates of public officials and
officers of the Company.
EXHIBIT C
(to Note Agreement)
<PAGE> 69
DESCRIPTION OF CLOSING OPINION OF
GENERAL COUNSEL TO THE COMPANY
The closing opinion of F. L. Hartman, Vice President and
General Counsel for the Company, which is called for by Section 4.1 of the Note
Agreements, shall be dated the Closing Date and addressed to the Purchasers,
shall be satisfactory in scope and form to the Purchasers and shall be to the
effect that:
1. The Company is a corporation, duly formed, validly
existing and in good standing under the laws of the State of Ohio, has
the corporate power and the corporate authority to own its properties,
to conduct its business as now conducted, enter into and perform its
obligation under the Note Agreements and to issue the Notes.
2. CCI is a corporation duly formed, validly existing and in
good standing under the laws of the State of Ohio. All of the
outstanding shares of capital stock of CCI are validly issued, fully
paid and non-assessable and are held of record by the Company.
3. Cliffs Mining Company is a corporation duly formed,
validly existing and in good standing under the laws of the State of
Delaware. All of the outstanding shares of capital stock of Cliffs
Mining Company are validly issued, fully paid and nonassessable and are
held of record by the Company.
4. Cleveland-Cliffs Ore Corporation is a corporation duly
formed, validly existing and in good standing under the laws of the
State of Ohio. All of the outstanding shares of capital stock of
Cleveland-Cliffs Ore Corporation are validly issued, fully paid and
nonassessable and are held of record by The Cleveland-Cliffs Iron
Company.
5. Cliffs Empire, Inc. is a corporation duly formed, validly
existing and in good standing under the laws of the State of Michigan.
All of the outstanding shares of capital stock of Cliffs Empire, Inc.
are validly issued, fully paid and nonassessable and are held of record
by The Cleveland-Cliffs Iron Company.
6. Cliffs MC Empire, Inc. is a corporation duly formed, valid
existing and in good standing under the laws of the State of Michigan.
All of the outstanding shares of capital stock of Cliffs MC Empire,
Inc. are validly issued, fully paid and nonassessable and are held of
record by The Cleveland-Cliffs Iron Company.
7. Cliffs Tilden, Inc. is a corporation duly formed, validly
existing and in good standing under the laws of the State of Michigan.
All of the outstanding shares of capital stock of Cliffs Tilden, Inc.
are validly issued, fully paid and nonassessable and are held of record
by The Cleveland-Cliffs Iron Company.
EXHIBIT D
(to Note Agreement)
<PAGE> 70
8. Cliffs TIOP, Inc. is a corporation duly formed, validly
existing and in good standing under the laws of the State of Michigan.
All of the outstanding shares of capital stock of Cliffs TIOP, Inc. are
validly issued, fully paid and nonassessable and are held of record by
The Cleveland-Cliffs Iron Company.
9. Cliffs Resources, Inc. is a corporation duly incorporated,
validly existing and in good standing under the laws of the State of
Delaware. All of the outstanding shares of capital stock of Cliffs
Resources, Inc. are validly issued, fully paid and nonassessable and
are held of record by the Company.
10. Pickands Mather & Co. International is a corporation duly
incorporated, validly existing and in good standing under the laws of
the State of Delaware. All of the outstanding shares of capital stock
of Pickands Mather & Co. International are validly issued, fully paid
and nonassessable and are held of record by the Company.
11. The Note Agreements have been duly authorized, executed
and delivered by the Company and are valid and binding obligations of
the Company, enforceable against the Company in accordance with its
terms, subject to bankruptcy, insolvency, fraudulent conveyance or
similar laws affecting creditors' rights generally, and general
principles of equity (regardless of whether the application of such
principles is considered in a proceeding in equity or at law).
12. The Notes being issued to you as contemplated in the Note
Agreements have been duly authorized, executed and delivered by the
Company and constitute valid and binding obligations of the Company
enforceable against the Company in accordance with their terms, subject
to bankruptcy, insolvency, fraudulent conveyance or similar laws
affecting creditors' rights generally, and general principles of equity
(regardless of whether the application of such principles is considered
in a proceeding in equity or at law).
13. No consent, approval, authorization or order of, or
filing, registration or qualification with, any governmental agency or
body is required for the issuance of the Notes being issued to you as
contemplated in the Note Agreements or the execution and delivery of
the Note Agreements.
14. Neither the issuance and sale by the Company of the Notes
nor the execution and delivery by the Company of, and performance by
the Company of its obligations under, the Note Agreements will result
in the violation of any State of Ohio, State of Illinois or federal
statute or regulation, or any order or decree known to us of any court
or governmental authority binding upon the Company or its property, or
conflict with or result in a default or in creation of a lien under any
of the provisions of the Company's Article of Incorporation or
Regulations or any indenture, loan agreement or other agreement
referenced on Annex 2 hereto.
D-2
<PAGE> 71
15. The Notes may be sold in the manner contemplated by the
Note Agreements without registration under the Securities Act of 1933,
as amended, or the qualification of an indenture under the Trust
Indenture Act of 1939, as amended.
D-3
<PAGE> 72
CLEVELAND-CLIFFS INC
7.00% Senior Note
Due December 15, 2005
No.
_________, 19__
$
CLEVELAND-CLIFFS INC, an Ohio corporation (the "Company"), for
value received, hereby promises to pay to
or registered assigns
on the fifteenth day of December, 2005
the principal amount of
DOLLARS ($____________)
and to pay interest (computed on the basis of a 360-day year of twelve 30-day
months) on the principal amount from time to time remaining unpaid hereon at the
rate of 7.00% per annum from the date hereof until maturity, payable
semi-annually on the fifteenth day of each June and December in each year
(commencing on the first of such dates after the date hereof) and at maturity.
The Company agrees to pay interest on overdue principal (including any overdue
required or optional prepayment of principal) Make-Whole Amount, if any, and (to
the extent legally enforceable) on any overdue installment of interest, at the
rate of 9.00% per annum after the due date, whether by acceleration or
otherwise, until paid. Both the principal hereof and interest hereon are
payable at the principal office of the Company in Cleveland, Ohio in coin or
currency of the United States of America which at the time of payment shall be
legal tender for the payment of public and private debts.
This Note is one of the 7.00% Senior Notes due December 15, 2005 (the
"Notes") of the Company in the aggregate principal amount of $70,000,000 issued
or to be issued under and pursuant to the terms and provisions of the separate
Note Agreements, each dated as of December 15, 1995 (the "Note Agreements"),
entered into by the Company with the original Purchasers therein referred to and
this Note and the holder hereof are entitled equally and ratably with the
holders of all other Notes outstanding under the Note Agreements to all the
benefits provided for thereby or referred to therein. Reference is hereby made
to the Note Agreements for a statement of such rights and benefits.
This Note and the other Notes outstanding under the Note Agreements may
be declared due prior to their expressed maturity dates and certain prepayments
are required to
EXHIBIT A
(to Note Agreement)
<PAGE> 73
be made thereon, all in the events, on the terms and in the manner and amounts
as provided in the Note Agreements.
The Notes are not subject to prepayment or redemption at the option of
the Company prior to their expressed maturity dates except on the terms and
conditions and in the amounts and with the Make-Whole Amount, if any, set forth
in the Note Agreements.
This Note is registered on the books of the Company and is transferable
only by surrender thereof at the principal office of the Company duly endorsed
or accompanied by a written instrument of transfer duly executed by the
registered holder of this Note or its attorney duly authorized in writing.
Payment of or on account of principal, Make-Whole Amount, if any, and interest
on this Note shall be made only to or upon the order in writing of the
registered holder.
CLEVELAND-CLIFFS INC
By
----------------------------------
Its
A-2
<PAGE> 74
REPRESENTATIONS AND WARRANTIES
The Company represents and warrants to you as follows:
1. Subsidiaries. Annex 1 attached hereto states the name of each of
the Company's Subsidiaries, its jurisdiction of incorporation and the percentage
of its Voting Stock owned by the Company and/or its Subsidiaries. Those
Subsidiaries listed in Section 1 of said Annex 1 constitute Significant
Subsidiaries. The Company and each Subsidiary has good and marketable title to
all of the shares it purports to own of the stock of each Significant
Subsidiary, free and clear in each case of any Lien. All such shares have been
duly issued and are fully paid and non-assessable.
2. Corporate Organization and Authority. The Company, and each
Significant Subsidiary,
(a) is a corporation duly organized, validly existing and in
good standing under the laws of its jurisdiction of incorporation;
(b) has all requisite power and authority and all necessary
licenses and permits to own and operate its properties and to carry on
its business as now conducted and as presently proposed to be
conducted; and
(c) is duly licensed or qualified and is in good standing as
a foreign corporation in each jurisdiction wherein the nature of the
business transacted by it or the nature of the property owned or leased
by it makes such licensing or qualification necessary, except where the
failure to be so licensed, qualified or in good standing would not,
individually or in the aggregate, have a Material Adverse Effect.
3. Business and Property. You have heretofore been furnished with a
copy of the Confidential Placement Memorandum dated November 14, 1995 (the
"Memorandum") prepared by Salomon Brothers which generally sets forth the
business conducted and presently proposed to be conducted by the Company and its
Subsidiaries and the material properties of the Company and its Subsidiaries.
4. Financial Statements. (a) The consolidated balance sheets of the
Company and its consolidated Subsidiaries as of December 31 in each of the years
1990 to 1994, both inclusive, and the statements of income and retained earnings
and changes in financial position or cash flows for the fiscal years ended on
said dates (including, in each case, the notes accompanying such financial
statements), each accompanied by a report thereon containing an opinion
unqualified as to scope limitations imposed by the Company and otherwise without
qualification except as therein noted, by Ernst & Young, have been prepared in
accordance with GAAP as in effect during the relevant year consistently applied
except as therein noted, are correct and complete and present fairly the
financial position of the Company and its Subsidiaries as of such dates and the
results of their operations and changes in their financial position or cash
flows for such periods. The unaudited
EXHIBIT B
(to Note Agreement)
<PAGE> 75
consolidated balance sheets of the Company and its consolidated Subsidiaries as
of September 30, 1995 and the unaudited statements of income and retained
earnings and cash flows for the nine-month period ended on said date including,
in each case, notes thereto prepared by the Company, have been prepared in
accordance with generally accepted accounting principles consistently applied,
are correct and complete and present fairly the financial position of the
Company and its consolidated Subsidiaries as of said date and the results of
their operations and changes in their financial position or cash flows for such
period in accordance with generally accepted accounting principles.
(b) Since December 31, 1994, there has been no change in the
financial condition of the Company and its consolidated Subsidiaries as shown
on the consolidated balance sheet as of such date except changes which,
individually or in the aggregate, have not had a Material Adverse Effect.
5. Debt. Annex 2 attached hereto correctly describes all Debt
and any Liens securing such Debt of the Company and its Subsidiaries
outstanding on December 15, 1995.
6. Full Disclosure. Neither the financial statements referred to
in paragraph 4(a) hereof nor the Agreements, the Memorandum or any other
written statement concerning the Company, any Subsidiary or their respective
businesses furnished by the Company to you in connection with the negotiation
of the sale of the Notes, contains any untrue statement of a material fact or
omits a material fact necessary to make the statements contained therein or
herein, in light of the circumstances in which they were made, not misleading.
There is no fact peculiar to the Company or its Subsidiaries which the Company
has not disclosed to you in writing which constitutes a Material Adverse Effect
nor, so far as the Company can now reasonably foresee, will have a Material
Adverse Effect.
7. Pending Litigation. There are no proceedings pending or, to
the knowledge of the Company, threatened against or affecting the Company or
any Subsidiary in any court or before any governmental authority or arbitration
board or tribunal which would be reasonably expected to have a Material Adverse
Effect.
8. Title to Properties. The Company and each Subsidiary has good
and marketable title in fee simple (or its equivalent under applicable law) to
all material parcels of real property and has good title to all the other
material items of property it purports to own, including that reflected in the
most recent balance sheet referred to in paragraph 4(a) hereof, except as sold
or otherwise disposed of in the ordinary course of business and except for
Liens permitted by the Agreements.
9. Patents and Trademarks. The Company and each Subsidiary owns
or possesses all the patents, trademarks, trade names, service marks,
copyright, licenses and rights with respect to the foregoing necessary for the
present and planned future conduct of its business, without any known conflict
with the rights of others.
B-2
<PAGE> 76
10. Sale Is Legal and Authorized. The sale of the Notes and
compliance by the Company with all of the provisions of the Agreements and the
Notes --
(a) are within the corporate powers of the Company;
(b) assuming the accuracy of your representations, and those
of each of the other Purchasers, set forth in Section 3.2, will not
violate any provisions of any law or any order of any court or
governmental authority or agency and will not conflict with or result
in any breach of any of the terms, conditions or provisions of, or
constitute a default under the Certificate of Incorporation or By-laws
of the Company or any indenture or other agreement or instrument to
which the Company is a party or by which it may be bound or result in
the imposition of any Liens or encumbrances on any property of the
Company; and
(c) have been duly authorized by proper corporate action on
the part of the Company (no action by the stockholders of the Company
being required by law, by the Certificate of Incorporation or By-laws
of the Company or otherwise), executed and delivered by the Company
and the Agreements and the Notes constitute the legal, valid and
binding obligations, contracts and agreements of the Company
enforceable in accordance with their respective terms.
11. No Defaults. No Default or Event of Default has occurred and
is continuing. The Company is not in default in the payment of principal or
interest on any Debt and is not in default under any instrument or instruments
or agreements under and subject to which any Debt has been issued and no event
has occurred and is continuing under the provisions of any such instrument or
agreement which with the lapse of time or the giving of notice, or both, would
constitute an event of default thereunder.
12. Governmental Consent. Assuming the accuracy of your
representations, and those of each of the other Purchasers, set forth in
Section 3.2, no approval, consent or withholding of objection on the part of any
regulatory body, state, Federal or local, is necessary in connection with the
execution and delivery by the Company of the Agreements or the Notes or
compliance by the Company with any of the provisions of the Agreements or the
Notes.
13. Taxes. All tax returns required to be filed by the Company or
any Subsidiary in any jurisdiction have, in fact, been filed, and all taxes,
assessments, fees and other governmental charges upon the Company or any
Subsidiary or upon any of their respective properties, income or franchises,
which are shown to be due and payable in such returns have been paid. For all
taxable years ending on or before December 31, 1986, the Federal income tax
liability of the Company and its Subsidiaries has been satisfied and either the
period of limitations on assessment of additional Federal income tax has
expired or the Company and its Subsidiaries have entered into an agreement with
the Internal Revenue Service closing conclusively the total tax liability for
the taxable year. The Company does not know of any proposed additional tax
assessment against it, and no material controversy in respect of additional
Federal or state income taxes due since said date is pending or to the
knowledge of the Company threatened for which, in either case, reserves or
other provision
B-3
<PAGE> 77
deemed by the Company to be adequate has not been made on its accounts. The
provisions for taxes on the books of the Company and each Subsidiary are, in the
Company's determination, adequate for all open years, and for its current fiscal
period.
14. Use of Proceeds. The net proceeds from the sale of the Notes
will be used to retire the 1992 Notes. None of the transactions contemplated
in the Agreements (including, without limitation thereof, the use of proceeds
from the issuance of the Notes) will violate or result in a violation of
Section 7 of the Securities Exchange Act of 1934, as amended, or any regulation
issued pursuant thereto, including, without limitation, Regulations G, T and X
of the Board of Governors of the Federal Reserve System, 12 C.F.R., Chapter II.
None of the proceeds from the sale of the Notes will be used, directly or
indirectly, for the purposes, whether immediate, incidental or ultimate, of
purchasing or carrying any "margin stock" within the meaning of such Regulation
G or for the purpose of maintaining, reducing or retiring any indebtedness
which was originally incurred to purchase or carry any stock that is currently
a margin stock or for any other purpose which might constitute this transaction
a "purpose credit" within the meaning of such Regulation G.
15. Private Offering. Neither the Company, directly or indirectly,
nor any agent on its behalf has offered or will offer the Notes or any similar
Security or has solicited or will solicit an offer to acquire the Notes or any
similar Security from or has otherwise approached or negotiated or will
approach or negotiate in respect of the Notes or any similar Security with any
Person other than the Purchasers and not more than 100 other institutional
investors, each of whom was offered a portion of the Notes at private sale for
investment. Neither the Company, directly or indirectly, nor any agent on its
behalf has offered or will offer the Notes or any similar Security or has
solicited or will solicit an offer to acquire the Notes or any similar Security
from any Person so as to bring the issuance and sale of the Notes within the
provisions of Section 5 of the 1933 Act.
16. ERISA. Assuming the correctness of your representations, and
those of the other Purchasers set forth in Section 3.2 of the Agreements, the
consummation of the transactions provided for in the Agreements and compliance
by the Company with the provisions thereof and the Notes issued thereunder will
not involve any prohibited transaction within the meaning of ERISA or Section
4975 of the Internal Revenue Code of 1986, as amended. Except as has been
disclosed to you, each Plan complies in all material respects with all
applicable statutes and governmental rules and regulations, and (a) no
Reportable Event has occurred and is continuing with respect to any Plan as to
which the Company or any ERISA Affiliate is or was required to file a report
with the PBGC; provided that the loss of qualification of a Plan and the
failure to meet the minimum funding standard of Section 412 of the Code or
Section 302 of ERISA shall be a Reportable Event regardless of the issuance of
any waiver of the reporting requirement by the PBGC, (b) neither the Company
nor any ERISA Affiliate has withdrawn from any Multiemployer Plan or Plan
subject to Section 4063 or 4064 of ERISA or instituted steps to do so, and (c)
no steps have been instituted to terminate any Plan that is subject to Title IV
of ERISA. Except as has been disclosed to you in writing, no condition exists
or event or transaction has occurred in connection with any Plan which could
result in the incurrence by the Company or any ERISA Affiliate of any material
liability, fine or penalty. No Plan
B-4
<PAGE> 78
maintained by the Company or any ERISA Affiliate, nor any trust created
thereunder, has incurred any "accumulated funding deficiency" as defined in
Section 302 of ERISA nor does the accumulated benefit obligation under all
Plans, as determined by the Plans actuary or accuracies for purposes of the most
recent actuarial valuations for such Plans, exceed, as of the last annual
valuation date, the fair market value of the assets of the Plans (all determined
in accordance with Financial Accounting Standards Board Statement of Financial
Accounts Standard No. 87). Neither the Company nor any ERISA Affiliate has any
material contingent liability with respect to any post-retirement "welfare
benefit plan" (as such term is defined in ERISA) except as has been disclosed in
writing to the Purchasers.
17. Compliance with Law. Except with respect to ERISA, which is
treated separately under paragraph 16 of this Exhibit B, and to environmental
laws, which are treated separately under paragraph 18 of this Exhibit B, neither
the Company nor any Subsidiary (a) is in violation of any law, ordinance,
franchise, governmental rule or regulation to which it is subject; or (b) has
failed to obtain any license, permit, franchise or other governmental
authorization necessary to the ownership of its property or to the conduct of
its business, which violation or failure to obtain would have a Material Adverse
Effect. Neither the Company nor any Subsidiary is in default with respect to
any order of any court or governmental authority or arbitration board or
tribunal which default would have a Material Adverse Effect.
18. Compliance with Environmental Laws. The Company is not in
violation of any applicable Federal, state, or local laws, statutes, rules,
regulations or ordinances relating to public health, safety or the environment,
including, without limitation, relating to releases, discharges, emissions or
disposals to air, water, land or ground water, to the withdrawal or use of
ground water, to the use, handling or disposal of polychlorinated biphenyls
(PCBs), asbestos or urea formaldehyde, to the treatment, storage, disposal or
management of hazardous substances (including, without limitation, petroleum,
crude oil or any fraction thereof, or other hydrocarbons), pollutants or
contaminants, to exposure to toxic, hazardous or other controlled, prohibited or
regulated substances which violation would reasonably be expected to have a
Material Adverse Effect. The Company does not know of any liability or class of
liability of the Company or any Subsidiary under the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended (42 U.S.C. Section
9601 et seq.), or the Resource Conservation and Recovery Act of 1976, as amended
(42 U.S.C. Section 6901 et seq.) which would reasonably be expected to have a
Material Adverse Effect.
B-5
<PAGE> 79
SUBSIDIARIES OF THE COMPANY
<TABLE>
<CAPTION>
PERCENTAGE OF VOTING STOCK
OR PARTNERSHIP INTEREST
NAME OF JURISDICTION OF OWNED BY COMPANY AND
SIGNIFICANT SUBSIDIARY INCORPORATION EACH OTHER SUBSIDIARY
<S> <C> <C>
The Cleveland - Cliffs Iron Company Ohio 100%
Cliffs Mining Company Delaware 100
Cleveland - Cliffs Ore Corporation Ohio 100
Cliffs Empire, Inc. Michigan 100
Cliffs MC Empire, Inc. Michigan 100
Cliffs Tilden, Inc. Michigan 100
Cliffs TIOP, Inc. Michigan 100
Cliffs Resources, Inc. Delaware 100
Lake Superior & Ishpeming Michigan 99.30
Railroad Co.
Pickands Mather & Co. International Delaware 100
Cliffs Minnesota Minerals Company Minnesota 100
Northshore Mining Company Delaware 100
Silver Bay Power Company Delaware 100
PERCENTAGE OF VOTING STOCK
OR PARTNERSHIP INTEREST
NAME OF JURISDICTION OF OWNED BY COMPANY AND
OTHER SUBSIDIARY INCORPORATION EACH OTHER SUBSIDIARY
Cleveland - Cliffs Company Ohio 100%
Cleveland - Cliffs Foundation, the Ohio 100
Cleveland - Cliffs Steamship Company, the Delaware 100
Cliffs Biwabik Ore Corporation Minnesota 100
Cliffs Copper Corp. Ohio 100
Cliffs Engineering, Inc. Colorado 100
Cliffs Forest Products Company Michigan 100
Cliffs Fuel Service Company Michigan 100
Cliffs IH Empire, Inc. Michigan 100
Cliffs Marquette, Inc. Michigan 100
Cliffs Mining Services Company Delaware 100
Cliffs of Canada Limited Ontario, Canada 100
Cliffs Oil Shale Colorado 100
Cliffs Reduced Iron Corporation Delaware 100
Cliffs Synfuel Corp. Utah 100
Empire - Cliffs Partnership Michigan 100
Cliffs MC Empire, Inc. 99.50
Cliffs Empire, Inc. 0.50
Escanaba Properties Company Michigan 100
Escanaba Properties Partnership Michigan 87.5
</TABLE>
ANNEX 1
(to Exhibit B)
<PAGE> 80
<TABLE>
<CAPTION>
PERCENTAGE OF VOTING STOCK
OR PARTNERSHIP INTEREST
NAME OF JURISDICTION OF OWNED BY COMPANY AND
OTHER SUBSIDIARY INCORPORATION EACH OTHER SUBSIDIARY
<S> <C> <C>
Humboldt Mining Company Michigan 50%
Lasco Development Corporation Michigan 99.30
Marquette Iron Mining Partnership Michigan 100
Cliffs Marquette, Inc. 38
Cleveland - Cliffs Ore Corporation 62
Mattagami Mining Co. Ltd. Ontario, Canada 100
Mesaba - Cliffs Mining Company, the Minnesota 86.4
Mesabi Radio Corp. Minnesota 100
Hilton Mines, Ltd. Quebec, Canada 100
Midway Ore Company, Ltd. Quebec, Canada 100
Northshore Sales Company Ohio 100
Northwest Iron Co. Ltd. Delaware 72.41
Peninsula Land Corporation Michigan 100
Pickands Erie Corporation Minnesota 100
Pickands Hibbing Corporation Minnesota 100
Pickands Mather Coal Company Delaware 100
Kentucky Coal Company Delaware 100
Pickands Mather Services, Inc. Delaware 100
Pickands Radio Co. Ltd. Quebec, Canada 100
Robert Coal Company Delaware 100
Selgnelay Resources, Inc. Delaware 100
Syracuse Mining Company Minnesota 100
Tetapaga Mining Company Ltd. Ohio 100
Virginia Eastern Shore Land Co. Delaware 100
</TABLE>
-2-
<PAGE> 81
<TABLE>
<CAPTION>
DESCRIPTION OF DEBT AND LIENS
AMOUNT OUTSTANDING
DESCRIPTION OF DEBT AS OF DECEMBER 15, 1995 (000'S)
<S> <C> <C> <C>
Cleveland-Cliffs Inc 1992 Note Agreement $70,000
Total Consolidated $70,000(A)
Guaranteed Debt of Subsidiaries
The Cleveland-Cliffs Iron Company
Empire -- EIMP Term Notes*
Company's Share (22.5625%) $ 3,948
LTV Guarantee (25%) 4,375
Wheeling-Pittsburgh Guarantee (12.4375%) 2,177
------
$10,500
Marquette Range Coal Service
Term Loan (39.24%) 130
------
$ 130
Funded Debt of Joint Venture -------
Hibbing Taconite
Capitalized Leases (15%) $157
====
Tilden Capitalized Leases (40%) 2,120
=====
GRAND TOTAL $82,907
=======
</TABLE>
II. Liens
A. Liens Securing Debt of the Company and its Subsidiaries
Any lien arising under or pursuant to:
1. Indenture of Mortgage, dated September 2, 1980,
between Marquette Range Coal Service Company and
Aetna Life Insurance Company (the
__________________________________
A The $70 Million Note Agreement of 8.51% and 8.84% obligations is
being paid off on December 22, 1995.
* This category is guaranteed debt of Subsidiaries, with the Company's
Share also covered by a guarantee. LTV's share and Wheeling-
Pittsburgh's share are guaranteed by the Company's Subsidiaries,
but are effectively serviced by LTV and Wheeling-Pittsburgh.
ANNEX 2
(to Exhibit B)
<PAGE> 82
collateral is the real estate; at the Closing Date the aggregate
principal amount of the Debt under the indenture is $130,000).
2. Restated Indenture, between Empire Iron Mining Partnership, Inland
Steel Company, McLouth Steel Corporation, The Cleveland-Cliffs Iron
Company, International Harvester Company, WSC Empire, Inc. and
Chemical Bank, as Trustee, dated as of December 1, 1978, as amended by
the First through Sixth Supplemental Indentures (the collateral is the
rights of the partners and partnerships in agreements executed in
connection with the partnership and partnership interests of each
partner; at the Closing Date the aggregate principal amount of the
Debt under the Indenture attributable (whether by guaranty or
otherwise) to Cliffs or its Subsidiaries is $10,500,000).
3. Equipment Lease Agreements between Tilden Mining Company L.C. and NBD
Bank (The collateral is three used P&H 2100 Shovels. At the closing
date, the aggregate principal amount of Debt under these agreements is
$2,120,000).
4. An Equipment Lease Agreement between Hibbing Taconite Company and KDC
Financial (The collateral is 3 Dresser 830E Trucks. At the closing
date, the aggregate principal amount of Debt under these agreements is
$157,000).
B. Liens Not Securing Debt of the Company or its Subsidiaries
Any lien arising under or pursuant to: Partnership security agreements,
pursuant to which the Cliffs Subsidiaries who are partners in such
partnerships, together with all other partners in such partnerships, have
pledged their respective partnership interests (including their rights as
partners under the related partnership and operating agreements) to the
relevant partnership and their co-partners as collateral to secure the
performance by the pledging partner of such partners' obligations under the
relevant set of partnership and operating agreements (an example of this
type of arrangement is the Restated Empire Partnership Security Agreement
dated as of December 1, 1978, as amended); and leases of real property and
related mineral rights, pursuant to which lands and related rights to
extract ore, owned or held by Cliffs Subsidiaries, are leased to mining
partnerships (an example of this type of arrangement is the Third Mining
Lease-Empire Mine, dated as of December 1, 1978).
-2-
<PAGE> 83
DESCRIPTION OF SPECIAL COUNSEL'S CLOSING OPINION
The closing opinion of Chapman and Cutler, special counsel to the
Purchasers, called for by Section 4.1 of the Note Agreements, shall be dated the
Closing Date and addressed to the Purchasers, shall be satisfactory in form and
substance to the Purchasers and shall be to the effect that:
1. The Company is a corporation, validly existing and in good
standing under the laws of the State of Ohio and has the corporate
power and the corporate authority to execute and deliver the Note
Agreements and to issue the Notes.
2. The Note Agreements have been duly authorized by all
necessary corporate action on the part of the Company, have been duly
executed and delivered by the Company and constitute the legal, valid
and binding obligations of the Company enforceable in accordance with
their terms, subject to bankruptcy, insolvency, fraudulent conveyance
or similar laws affecting creditors' rights generally, and general
principles of equity (regardless of whether the application of such
principles is considered in a proceeding in equity or at law).
3. The Notes have been duly authorized by all necessary
corporate action on the part of the Company, have been duly executed
and delivered by the Company and constitute the legal, valid and
binding obligations of the Company enforceable in accordance with their
terms, subject to bankruptcy, insolvency, fraudulent conveyance or
similar laws affecting creditors' rights generally, and general
principles of equity (regardless of whether the application of such
principles is considered in a proceeding in equity or at law).
4. The issuance, sale and delivery of the Notes under the
circumstances contemplated by the Note Agreements do not, under
existing law, require the registration of the Notes under the
Securities Act of 1933, as amended, or the qualification of an
indenture under the Trust Indenture Act of 1939, as amended.
The opinion of Chapman and Cutler shall also state that the opinion of
F.L. Hartman, Vice President and General counsel for the Company, is
satisfactory in scope and form to Chapman and Cutler and that, in their opinion,
the Purchasers are justified in relying thereon.
In rendering the opinion set forth in paragraph 1 above, Chapman and
Cutler may rely solely upon an examination of the certified by, and a
certificate of good standing of the Company from, the Secretary of State of the
State of Ohio and the By-laws of the Company. The opinion of Chapman and
Cutler shall be limited to the laws of the State of Illinois and the federal
laws of the United States.
With respect to matters of fact upon which such opinion is based,
Chapman and Cutler may rely on appropriate certificates of public officials and
officers of the Company.
EXHIBIT C
(to Note Agreement)
<PAGE> 84
DESCRIPTION OF CLOSING OPINION OF
GENERAL COUNSEL TO THE COMPANY
The closing opinion of F. L. Hartman, Vice President and
General Counsel for the Company, which is called for by Section 4.1 of the Note
Agreements, shall be dated the Closing Date and addressed to the Purchasers,
shall be satisfactory in scope and form to the Purchasers and shall be to the
effect that:
1. The Company is a corporation, duly formed, validly
existing and in good standing under the laws of the State of Ohio, has
the corporate power and the corporate authority to own its properties,
to conduct its business as now conducted, enter into and perform its
obligation under the Note Agreements and to issue the Notes.
2. CCI is a corporation duly formed, validly existing and in
good standing under the laws of the State of Ohio. All of the
outstanding shares of capital stock of CCI are validly issued, fully
paid and non-assessable and are held of record by the Company.
3. Cliffs Mining Company is a corporation duly formed,
validly existing and in good standing under the laws of the State of
Delaware. All of the outstanding shares of capital stock of Cliffs
Mining Company are validly issued, fully paid and nonassessable and are
held of record by the Company.
4. Cleveland-Cliffs Ore Corporation is a corporation duly
formed, validly existing and in good standing under the laws of the
State of Ohio. All of the outstanding shares of capital stock of
Cleveland-Cliffs Ore Corporation are validly issued, fully paid and
nonassessable and are held of record by The Cleveland-Cliffs Iron
Company.
5. Cliffs Empire, Inc. is a corporation duly formed, validly
existing and in good standing under the laws of the State of Michigan.
All of the outstanding shares of capital stock of Cliffs Empire, Inc.
are validly issued, fully paid and nonassessable and are held of record
by The Cleveland-Cliffs Iron Company.
6. Cliffs MC Empire, Inc. is a corporation duly formed, valid
existing and in good standing under the laws of the State of Michigan.
All of the outstanding shares of capital stock of Cliffs MC Empire,
Inc. are validly issued, fully paid and nonassessable and are held of
record by The Cleveland-Cliffs Iron Company.
7. Cliffs Tilden, Inc. is a corporation duly formed, validly
existing and in good standing under the laws of the State of Michigan.
All of the outstanding shares of capital stock of Cliffs Tilden, Inc.
are validly issued, fully paid and nonassessable and are held of record
by The Cleveland-Cliffs Iron Company.
EXHIBIT D
(to Note Agreement)
<PAGE> 85
8. Cliffs TIOP, Inc. is a corporation duly formed, validly
existing and in good standing under the laws of the State of Michigan.
All of the outstanding shares of capital stock of Cliffs TIOP, Inc. are
validly issued, fully paid and nonassessable and are held of record by
The Cleveland-Cliffs Iron Company.
9. Cliffs Resources, Inc. is a corporation duly incorporated,
validly existing and in good standing under the laws of the State of
Delaware. All of the outstanding shares of capital stock of Cliffs
Resources, Inc. are validly issued, fully paid and nonassessable and
are held of record by the Company.
10. Pickands Mather & Co. International is a corporation duly
incorporated, validly existing and in good standing under the laws of
the State of Delaware. All of the outstanding shares of capital stock
of Pickands Mather & Co. International are validly issued, fully paid
and nonassessable and are held of record by the Company.
11. The Note Agreements have been duly authorized, executed
and delivered by the Company and are valid and binding obligations of
the Company, enforceable against the Company in accordance with its
terms, subject to bankruptcy, insolvency, fraudulent conveyance or
similar laws affecting creditors' rights generally, and general
principles of equity (regardless of whether the application of such
principles is considered in a proceeding in equity or at law).
12. The Notes being issued to you as contemplated in the Note
Agreements have been duly authorized, executed and delivered by the
Company and constitute valid and binding obligations of the Company
enforceable against the Company in accordance with their terms, subject
to bankruptcy, insolvency, fraudulent conveyance or similar laws
affecting creditors' rights generally, and general principles of equity
(regardless of whether the application of such principles is considered
in a proceeding in equity or at law).
13. No consent, approval, authorization or order of, or
filing, registration or qualification with, any governmental agency or
body is required for the issuance of the Notes being issued to you as
contemplated in the Note Agreements or the execution and delivery of
the Note Agreements.
14. Neither the issuance and sale by the Company of the Notes
nor the execution and delivery by the Company of, and performance by
the Company of its obligations under, the Note Agreements will result
in the violation of any State of Ohio, State of Illinois or federal
statute or regulation, or any order or decree known to us of any court
or governmental authority binding upon the Company or its property, or
conflict with or result in a default or in creation of a lien under any
of the provisions of the Company's Article of Incorporation or
Regulations or any indenture, loan agreement or other agreement
referenced on Annex 2 hereto.
D-2
<PAGE> 86
15. The Notes may be sold in the manner contemplated by the
Note Agreements without registration under the Securities Act of 1933,
as amended, or the qualification of an indenture under the Trust
Indenture Act of 1939, as amended.
D-3
<PAGE> 1
EXHIBIT 10(b)
OO82-mea
6-1-81
218100-015-001
* THIS PLAN WAS ASSUMED BY
CLEVELAND - CLIFFS INC
----------------------
ON JULY 1, 1985.
THE CLEVELAND-CLIFFS IRON COMPANY *
PLAN FOR DEFERRED
PAYMENT OF DIRECTORS' FEES
--------------------------
1. Purpose of Plan.
---------------
It is the purpose of this Plan for Deferred Payment of Directors' Fees
(the "Plan") to enable each Director of The Cleveland-Cliffs Iron Company (the
"Company") to defer some or all fees which may be payable to the Director for
future services to be performed by him as a member of the Board of Directors of
the Company, or as a member of any committee thereof.
2. Eligibility.
-----------
Any director of the Company who is separately compensated for his
services on the Company's Board of Directors, or on any committee of such
Board, shall be eligible to participate in the Plan. Any Director who
participates in the Plan is referred to as a "Participant."
3. Manner of Election.
------------------
Any person wishing to participate in the Plan must file with the
Secretary of the Company at 1460 Union Commerce Building, Cleveland, Ohio
44115, a written notice, on the Notice of Election form attached as Exhibit A,
electing to defer payment
<PAGE> 2
2
of all or a portion of his compensation as a Director (an "Election"). If
filed not later than June 30, 1981, following the adoption on June 4, 1981 of
this Plan by the Board of Directors, the Election shall be effective with
respect to compensation as a Director of the Company earned on or after July 1,
1981 in the balance of such calendar year, and except as otherwise provided
below in subsequent calendar years. In other cases, a person from whom an
Election is not in effect may elect to Participate in the Plan as follows: (a)
with respect to Directors' fees payable for any calendar year by filing an
Election, in accordance with the procedure described above, on or before
December 31 of the preceding calendar year; and (b) with respect to Directors'
fees payable for any portion of a calendar year which remains at the time of
such person's initial election to the office of Director of the Company, or
any subsequent re-election if immediately prior thereto he was not serving as a
Director, by filing within 30 days subsequent to such election or re-election,
an Election, in accordance with the procedure described above. In that event,
such Election shall be effective only with respect to compensation earned in
the calendar quarter following such election and thereafter as such a Director.
An effective Election may not be revoked or modified with respect to directors'
fees payable for the calendar year or portion of a calendar year for which such
Election is effective and such Election, unless terminated or
<PAGE> 3
3
modified as described below, shall apply to Directors' fees payable with
respect to each subsequent calendar year. An effective Election may be
terminated or modified for any subsequent calendar year by the filing, as
described above, of either a new Election, in regard to modifications, or a
notice of Termination, on the form attached as Exhibit B, in regard to
terminations, on or before December 31 immediately preceding the calendar year
for which such modification or termination is to be effective. An effective
Election shall also terminate on the date a person ceases to be a Director. A
person for whom an effective Election is terminated may thereafter file a new
Election for future calendar years for which he is eligible to participate in
the Plan.
4. Deferred Compensation Accounts.
------------------------------
The amount of any Director's fees deferred in accordance with an
Election shall be credited to a deferred compensation account maintained by the
Company on its books in the name of the Director ("Deferred Compensation
Account").
In the case of a Participant who has elected that amounts credited to
his account under this Plan be invested in whole shares of Common Shares of the
Company, all amounts so credited to the account of such Participant under this
Plan, to the extent prescribed by the Participant in his election,
<PAGE> 4
4
shall be invested and reinvested quarterly by the Company in whole shares of
Common Shares of the Company;
In lieu of the cash dividends which would be payable on the shares of
the Common Shares of the Company credited to the account of a participant on
any dividend record date if such shares were then outstanding in the hands of
the public, the Company shall credit the account of such Participant, on the
dividend payment date, with an amount equivalent to such dividends ("dividend
equivalents"). The shares of Common Shares of the Company credited to the
account of a Participant shall be adjusted to reflect any stock dividends or
stock splits in respect to Common Shares. Further, if the Company shall issue
any other shareholder right, it shall, on the date of such issuance, credit to
the account of each Participant the amount of the value of the right which
would have been issued on the share of Common Shares of the Company credited to
such account on the record date for such distribution if such shares had been
owned by the Participant.
5. No Trust or Lien etc.
---------------------
Solely for convenience in administering the Plan and in describing the
cash and Common Shares of the Company attributable to the investment or
reinvestment of the amounts credited to the account of a Participant, the
amount of such
<PAGE> 5
5
cash, and the amount of such Common Shares shall be reflected in the account of
such Participant and shall be respectively referred to in the Plan as cash and
Common Shares of the Company "credited" to such account, or as assets
"credited" to such account. However, the purpose of the Plan is merely to
describe an unsecured promise by the Company to make the payments or
distributions described in the Plan and not to create any trust for the benefit
of any Participant or any other person, including, without limitation, any
death beneficiary described in Section 12 of the Plan. All right, title and
interest in cash and Common Shares of the Company referred to in the Plan and
credited to the account of a Participant shall remain at all times solely in
the Company (the account being merely a record of the Company's unsecured
contractual obligation under the Plan). No cash or Common Shares of the
Company credited under the Plan to a Participant's account on the books of the
Company shall be held in trust for such Participant or any other person,
including, without limitation, any death beneficiary referred to in Section
12, and neither such Participant nor any other person, including, without
limitation, any death beneficiary referred to in Section 12, shall have any
right, title or interest of any kind in any such cash or Common Shares.
6. Annual Report to Participants
-----------------------------
The Treasurer of the Company shall keep an accurate record of the cash
and Common Shares of the Company credited
<PAGE> 6
6
to the account of each Participant, and as of the end of each calendar year
shall deliver to each Participant a written statement showing the cash and such
Common Shares credited to his account.
7. Adjustment of Deferred Compensation Account.
-------------------------------------------
As of each Accounting Date (as defined below), the Deferred
Compensation Account for each Director shall be adjusted for the period elapsed
since the last preceding Accounting Date to reflect the adjustments required by
this Plan, including the following:
(a) FIRST, the account shall be charged with any distribution made during
the period in accordance with Section 10 below, and any taxes, costs
and expenses paid by the Company with respect to the sale of any
Common Shares credited to such account, as described in Section 9.
(b) THEN, the account shall be credited with the Interest Factor for that
period, as defined in Section 8, below, with respect to the amount
of any cash remaining in the account, and with respect to any "dividend
equivalents" or other amounts described in Section 4.
<PAGE> 7
7
(c) FINALLY, the account shall be credited with the amount, if any, of
any Director's fees deferred during that period in accordance
with an effective Election under Section 3, above.
For purposes of this Plan, the term "Accounting Date" means each March 31, June
30, September 30 and December 31.
8. Interest Factor.
---------------
As at any Accounting Date, the term "Interest Factor" means an amount,
if any, determined by multiplying (i) an amount equal to the cash credited to
the Director's Deferred Compensation Account for the period remaining credited
to such Account in such quarterly accounting period, by (ii) a percentage
determined by multiplying (A) the weighted average of the annual prime rates of
interest in effect at The AmeriTrust Company, Cleveland, Ohio for such
quarterly accounting period by (B) a fraction, the numerator of which is the
number of days in the period in which such amount of cash was credited to such
account; and the denominator of which is the total number of days in such year.
9. Sale of Common Shares preliminary to any distribution.
------------------------------------------------------
In anticipation of any distribution to a Participant, the Treasurer of
the Company shall convert into cash, through
<PAGE> 8
8
sale or otherwise, some or all of the common Shares of the Company which might
otherwise be distributed at the time of the ensuing distribution to the
Participant as provided in Section 10 below. In such event the account of the
Participant shall be appropriately adjusted and such cash proceeds (after
deduction of taxes or other costs and expenses, if any, paid by the Company
because of the sale) shall be paid to the Participant as provided in Section
10 below.
10. Manner of Payment.
-----------------
The amounts credited to a Participant's Deferred Compensation Account
under this Plan will be paid to him or, in the event of his death, to his
designated beneficiary, in accordance with his Election. If a participant
elects to receive payment of such account in installments rather than in a
lump-sum, the payment period shall not exceed ten years following the Payment
Commencement Date, as defined in Section 11 below.
If distributions are to be made in annual installments, each annual
distribution, after the first distribution, shall be made approximately one
year after the preceding annual distribution.
(a) At each annual date for distribution, there shall be distributed to
the Participant in cash an amount equal to the appropriate fraction of the sum
of the fair market value of Common Shares and the cash then credited to his
account.
<PAGE> 9
9
(b) The fraction referred to in (a) above of this Section 10 shall be
as follows:
The numerator shall be one; and the denominator shall be that number
determined by subtracting from (i) the original aggregate number of annual
installments previously elected as the period over which distributions are to
be made, (ii) the number of annual distributions, if any, theretofore made to
the Participant and, in the event of his death, to any of his death
beneficiaries.
(c) Notwithstanding the provisions of (a) and (b) of this Section 10,
the Plan Committee, in its absolute discretion exercised in good faith, may
accelerate the rate of distribution provided for in such (a) and (b), but only
in the case of financial hardship, as determined by and in the sole discretion
of the the Plan Committee. If there is no Plan Committee, such decision shall
be made by the Board. However, no member of the Board shall participate in any
such decision with respect to such member as a Participant.
The balance of the account shall be appropriately reduced in accordance
with this Section 10, above, to reflect the installment payments made
hereunder. Amounts of cash held pending distribution pursuant to this Section
10 shall continue to be credited with the Interest Factor as described in
Section 8 above.
<PAGE> 10
10
11. Payment Commencement Date.
-------------------------
Payments of amounts credited to the account of a Participant with
respect to Director fees deferred with respect to any calendar year Pursuant to
an election under the Plan, and any additional amounts credited to a
Participant's account under this Plan with respect to such amounts or
increments thereto under this Plan, shall commence on March 30 of the calendar
year following the calendar year in which the Participant ceases to be a
Director of the Company, unless the Participant, at the time of his or her
election to defer any fees earned for such calendar year, elected that such
amounts deferred pursuant to such election for such calendar year and any
additional amounts credited to such Participant's account under this Plan with
respect to such deferred amounts, elected that payments of all of such amounts
be made on March 30 of the calendar year following the calendar year in which
the Participant reaches his or her 65th birthday. Any such election with
respect to the amount of director fees for a given calendar year which are
deferred pursuant to this Plan shall be irrevocable.
12. Beneficiary Designation.
-----------------------
A Participant may designate, in the Beneficiary Designation form
attached as Exhibit C, any person or persons
<PAGE> 11
11
to whom payments are to be made if the Participant dies before receiving
payment of all amounts due hereunder, and the proportion or proportions in
which distributions of such amounts are to be made to each such person. A
beneficiary designation will be effective only after the signed Beneficiary
Designation form is filed with and accepted by the Secretary of the Company
while the Director is alive and will cancel all beneficiary designations signed
and filed earlier. Any person or persons so effectively designated are
referred to as death beneficiaries. Any such designation may be terminated or
modified from time to time by the Participant. If and to the extent that a
Participant fails to designate a death beneficiary or if all of the death
beneficiaries of the Participant die before the death of the Participant or
before complete payment of all amounts credited to the Participant's account
under this Plan, the remaining unpaid amounts shall be paid in one lump sum to
the estate of the last to die of the Participant or the Participant's
designated death beneficiaries, if any.
13. Non-Alienability of Benefits.
----------------------------
Neither any Participant nor any death beneficiary designated by him
pursuant to Section 12 of this Plan shall have any right to, directly or
indirectly, alienate, assign or encumber any amount that is or may be payable
hereunder, nor shall any such amounts be subject to alienation, assignment,
encumbrance
<PAGE> 12
12
or garnishment, voluntary or involuntary, by process of law or otherwise.
14. Administration of Plan.
----------------------
Full power and authority to construe, interpret and administer the Plan
shall be vested in (i) a committee of the Board of Directors consisting of
those Directors who are not Participants under the Plan, and selected by the
Board of Directors to serve as such Committee ("Plan Committee"), or (ii) if
each member of the Board is a Participant in the Plan, then, the entire Board,
but in such latter event, no member of the Board who is a Participant shall
participate in any decision affecting uniquely such member as a Participant.
Decisions of such committee, or such Board, as the case may be, made in good
faith, shall be final, conclusive and binding upon all parties.
15. Amendment or Discontinuance of Plan.
-----------------------------------
At the sole discretion of the Board this Plan may be discontinued or
changed at any time, and from time to time, at the sole discretion of the
Board, or the Plan Committee to the extent that the Board may delegate such
authority to such Plan Committee; provided that in the event of such
discontinuance or change in the Plan the amounts and Common Shares of the
Company theretofore credited to the account of
<PAGE> 13
13
such Participant prior to such discontinuance or change in the Plan (including,
without limiting the generality of the foregoing, amounts attributable to the
investment or reinvestment of the amounts theretofore credited thereto pursuant
to the Company's obligation under the Plan and all additions thereto) shall be
distributed at the time, and subject to the provisions and qualifications
hereinabove set forth. Notwithstanding the foregoing, the Board or such Plan
Committee may make any change in the Plan that, under all the Circumstances, is
beneficial and equitable to the Participant and is consistent with the spirit
and purposes of the Plan. However, no Director who is a Participant of the
Plan shall participate in any such decision uniquely applicable to such
Participant.
16. Exception.
---------
In the absence of bad faith or gross neglect of duty on his part, no
member or former member of the Plan Committee or the Board of directors shall
have any liability to the Company or to any other person, firm or corporation
arising out of or connected with the administration of the Plan for any
decision made in good faith.
<PAGE> 14
14
17. Governing Law.
-------------
The provisions of this Plan shall be interpreted and construed in
accordance with the laws of the State of Ohio.
18. Effective Date.
--------------
This Plan shall become effective on July 1, 1981.
<PAGE> 15
Exhibit A
Form #1*
NOTICE OF ELECTION*
------------------
The Cleveland-Cliffs Iron Company
Re: Plan for Deferred Payment of
Director's Fees (the "Plan")
----------------------------
1. Pursuant to the provisions of the Plan, I elect to have fees
payable to me for services on The Cleveland-Cliffs Iron Company Board of
Directors and on any committee of such Board of Directors deferred in the
manner specified below. I understand that if this election is filed on or
before June 30, 1981, it shall be irrevocable with respect to Director fees
earned by me on and after July 1, 1981 in balance of such calendar year and in
each subsequent calendar year, and shall continue in effect for subsequent
calendar years, except as provided below.
Any election described in the preceding paragraph shall be irrevocable
as to Director fees earned in any subsequent calendar year except to the extent
I file a Notice of Election or Notice of Termination on or before the December
31 prior to any such subsequent calendar year.
2. Percentage of Fees Deferred: ________ %
__________________
* This Form of Election to be used only by a person who is a member of the
Board of Director on June 4, 1981 and files this Form of Election on or
before June 30, 1981.
<PAGE> 16
2
3. Investment of Amounts Deferred.
------------------------------
I further elect that __________ percentage of all Director fees earned
for each year of services and deferred pursuant to my election, shall be
invested by the Company in whole shares of Common Shares of the Company,
pursuant to the terms of such Plan, and such Common Shares shall be credited to
my account as a Participant under such Plan, all pursuant to the terms and
conditions of such Plan.
4. Method of Payment:
-----------------
__________ Lump Sum, or
__________ Installments over a period of Years (not over ten).
5. Payment of deferred fees shall commence on March 30 of the Year of
Deferred Payment selected.
6. Installment payments:
--------------------
Installment payments of amounts credited to my account under the Plan
shall commence on March 30 of the calendar year following the calendar year in
which I cease to be a Director of the Company, unless I elect the following
commencement date:
__________ March 30 of the calendar year following the calendar year in
which I reach my 65th birthday, whether or not I previously ceased to be a
Director of the Company.
7. Lump Sum Payment:
----------------
If payment of amounts credited to my account is to be made in a lump
sum rather than in installments, pursuant to my election to have payments made
in a lump sum, such lump sum payment shall be made on March 30 of the calendar
year following the calendar year in which I cease to be a Director, unless I
elect following payment date:
__________ March 30 of the calendar year following the calendar year in
which I reach my 65th birthday, whether or not I previously ceased to be a
Director of the Company.
8. If election was made to have payments made in installments,
identify the frequency of installments: (Select One)
<PAGE> 17
3
Annually (payable on March 30) __________
Quarterly (Payment on March 30,
June 29, September 29, and
December 30) __________
Date _____________________________ Signature ______________________________
Date Election is received by the Secretary:
Date _____________________________ Signature ______________________________
Secretary of Company
<PAGE> 18
Exhibit A
Form #2*
NOTICE OF ELECTION*
------------------
The Cleveland-Cliffs Iron Company
Re: Plan for Deferred Payment of
Director's Fees (the "Plan")
----------------------------
1. Pursuant to the provisions of the Plan, I elect to have fees
payable to me for services on The Cleveland-Cliffs Iron Company Board of
Directors and on any committee of such Board of Directors deferred in the
manner specified below. With respect to any election filed on or after July 1,
1981, I understand that this election shall be irrevocable as to fees earned by
me during the next full calendar year and each subsequent calendar year, and
shall continue in effect for subsequent calendar years except as provided
below.
Any election described in the preceding paragraph shall be irrevocable
as to Director fees earned in any subsequent calendar year except to the extent
I file a Notice of Election or Notice of Termination on or before the December
31 prior to any such subsequent calendar year.
2. Percentage of Fees Deferred: __________ %
____________________
* This Form of Election to be used only by a member of the Board who files
this Form of Election on or after July 1, 1981, and for whom Form #3 is not
appropriate.
<PAGE> 19
2
3. Investment of Amounts Deferred.
------------------------------
I further elect that _____ percentage of all Director fees earned for
each year of Services and deferred pursuant to my election, shall be invested
by the Company in whole shares of Common Shares of the Company, pursuant to the
terms of such Plan, and such Common Shares shall be credited to my account as a
Participant under such Plan, all pursuant to the terms and conditions of such
Plan.
4. Method of Payment:
-----------------
__________ Lump Sum, or
__________ Installments over a period of Years (not over ten).
5. Payment of deferred fees shall commence on March 30 of the Year of
Deferred Payment selected.
6. Installment payments:
--------------------
Installment payments of amounts credited to my account under the Plan
shall commence on March 30 of the calendar year following the calendar year in
which I cease to be a Director of the Company, unless I elect the following
commencement date:
_______ March 30 of the calendar year following the calendar year in
which I reach my 65th birthday, whether or not I previously ceased to be a
Director of the Company.
7. Lump Sum Payments:
-----------------
If payment of amounts credited to my account is to be made in a lump
sum rather than in installments, pursuant to my election to have payments made
in a lump sum, such lump sum payment shall be made on March 30 of the calendar
year following the calendar year in which I cease to be a Director, unless I
elect following payment date:
____ March 30 of the calendar year following the calendar year in which
I reach my 65th birthday, whether or not I previously ceased to be a Director
of the Company.
8. If election was made to have payments made in installments,
identify the frequency of installments: (Select One)
<PAGE> 20
3
Annually (payable on March 30) _______
Quarterly (payable on March 30,
June 29, September 29, and
December 30) _______
Date ____________________________ Signature ______________________________
Date Election is received by the Secretary:
Date ____________________________ Signature ______________________________
Secretary of Company
<PAGE> 21
Exhibit A
Form #3*
NOTICE OF ELECTION*
The Cleveland-Cliffs Iron Company
Re: Plan for Deferred Payment of
Director's Fees (the "Plan")
----------------------------
1. Pursuant to the provisions of the Plan, I elect to have fees
payable to me for services on The Cleveland-Cliffs Iron Company Board of
Directors and on any committee of such Board of Directors deferred in the
manner specified below. With respect to Director fees earned by me for any
portion of a calendar year which remains at the time of my initial election to
the office of Director of the Company, or any subsequent reelection if
immediately prior thereto I was not serving as a Director, the election must be
made within 30 days subsequent to such election or re-election to be effective
with respect to such Director fees earned in the subsequent calendar quarters
of such calendar year. Such election shall be irrevocable with respect to such
portion of the calendar year which remains, and each subsequent calendar year,
and shall continue in effect for subsequent calendar years except as provided
below.
Any election described in the preceding paragraph shall be irrevocable
as to Director fees earned in any subsequent calendar year except to the extent
I file a Notice of Election or Notice of Termination on or before the December
31 prior to any such subsequent calendar year.
2. Percentage of Fees Deferred: __________ %
____________________
* This Form of Election to be used only by a person who is elected or
re-elected to the Board of Directors after July 1, 1981 and who immediately
prior to such election or re-election was not a member of the Board of
Directors.
<PAGE> 22
2
3. Investment of Amounts Deferred.
------------------------------
I further elect that __________ percentage of all Director fees earned
for each year of services and deferred pursuant to my election, shall be
invested by the Company in whole shares of Common Shares of the Company,
pursuant to the terms of such Plan, and such Common Shares shall be credited to
my account as a Participant under such Plan, all pursuant to the terms and
conditions of such Plan.
4. Method of Payment:
-----------------
__________ Lump Sum, or
__________ Installments over a period of Years (not over ten).
5. Payment of deferred fees shall commence on March 30 of the Year of
Deferred payment selected.
6. Installment payments:
--------------------
Installment payments of amounts Credited to my account under the Plan
shall commence on March 30 of the calendar year following the calendar year in
which I cease to be a Director of the Company, unless I elect the following
commencement date:
__________ March 30 of the calendar year following the calendar
year in which I reach my 65th birthday, whether or not I previously ceased to
be a Director of the Company.
7. Lump Sum Payment:
----------------
If payment of amounts credited to my account is to be made in a lump
sum rather than in installments, pursuant to my election to have payments made
in a lump sum, such lump sum payment shall be made on March 30 of the calendar
year following the calendar year in which I cease to be a Director, unless I
elect following payment date:
__________ March 30 of the calendar year following the calendar year in
which I reach my 65th birthday, whether or not I previously ceased to be a
Director of the Company.
8. If election was made to have payments made in installments,
identify the frequency of installments: (Select One)
<PAGE> 23
3
Annually (payable on March 30) __________
Quarterly (payable on March 30,
June 29, September 29, and
December 30) __________
Date __________________________ Signature ______________________________
Date Election is received by the Secretary:
Date __________________________ Signature ______________________________
Secretary of Company
<PAGE> 24
Exhibit B
NOTICE OF TERMINATION
---------------------
Secretary
The Cleveland-Cliffs Iron Company
1460 Union Commerce Building
Cleveland, Ohio 44115
The Cleveland-Cliffs Iron Company
Re: Plan for Deferred Payment of
Directors' Fees (the "Plan")
----------------------------
Pursuant to the provisions of the Plan, I hereby terminate my participation
in the Plan effective as of January 1, 19__.
Date __________________________ Signature ______________________________
<PAGE> 25
EXHIBIT C
DESIGNATION OF DEATH BENEFICIARIES
----------------------------------
Secretary
The Cleveland-Cliffs Iron Company
1460 Union Commerce Building
Cleveland, Ohio 44115
The Cleveland-Cliffs Iron Company
Re: Plan for Deferred Payment of
Directors' Fees (the "Plan")
----------------------------
Any amounts credited to my account under the Plan unpaid at my death
shall be paid to the following primary beneficiary or beneficiaries, in the
proportions designated:
<TABLE>
<S> <C> <C>
%
- -------------------------- --------- ------------------------
Name Proportion Relationship
- ------------------------------------------------------------------------------
Address
%
- -------------------------- --------- ------------------------
Name Proportion Relationship
- ------------------------------------------------------------------------------
Address
%
- -------------------------- --------- ------------------------
Name Proportion Relationship
- ------------------------------------------------------------------------------
Address
</TABLE>
<PAGE> 26
2
If any named primary beneficiary predeceases me, and I have not
otherwise provided for disposition of the balance of the payments credited to
my account to be paid to such primary beneficiary how such primary beneficiary
continued to have, then, in that event, the balance of such payments shall be
paid to the person or persons designated below, in each case, in the
proportions designated below:
<TABLE>
<S> <C> <C>
%
- -------------------------- --------- ------------------------
Name Proportion Relationship
- ------------------------------------------------------------------------------
Address
%
- -------------------------- --------- ------------------------
Name Proportion Relationship
- ------------------------------------------------------------------------------
Address
%
- -------------------------- --------- ------------------------
Name Proportion Relationship
- ------------------------------------------------------------------------------
Address
</TABLE>
This designation supercedes any previous beneficiary designation made
by me with respect to the amounts credited to my account under the Plan. I
hereby reserve the right to terminate or modify any designation made by this
Instrument, at any time or from time to time.
Date ____________________ ______________________________
Signature
Date ____________________ ______________________________
Witness
<PAGE> 27
3
Date Designation is received by Secretary
____________________ ______________________________
Date Secretary of Company
<PAGE> 28
4
0082-mea
218100-015-001
6-2-81
SUMMARY
OF PLAN FOR DEFERRED
PAYMENT OF DIRECTORS' FEES
1. You may elect to defer some or all of your retainer and attendance fees by
completing and filing a Notice of Election (Exhibit "A") with the
Secretary.
2. Once you elect you may not revoke or modify the deferral for the remainder
of the then current calendar year.
3. On or before December 31st of any year, you may terminate or modify your
participation in the Plan for subsequent calendar years.
4. The amount which you defer will be credited to a deferred compensation
account in your name, and will earn quarterly interest as determined by the
prime rate at AmeriTrust Company (formerly The Cleveland Trust Company) or,
if and to the extent you so elect, the amounts credited to your account
will be invested in whole shares of Common Shares of the Company.
5. The amount which you defer and any interest credited to your account, or if
any amounts were invested in Common Shares of the Company, any dividend
equivalents with respect to such shares and the proceeds from the sale of
Common Shares of the Company will be paid to you or, in the event of your
death, your designated beneficiary, in a lump sum, or if you so elect, in
installments over a period not in excess of ten years.
6. You should complete and file a Beneficiary Designation (Exhibit "C") with
the Secretary.
7. Your participation in the Plan terminates on the date you no longer serve
as a Director. Your first deferred payment (or lump sum) will be paid on
March 30th of the year following the year you cease to be a Director, or
the year following your 65th birthday, as you select on Exhibit "A".
8. This Plan was adopted by the Board at its June 4, 1981 meeting and it
becomes effective as of July 1, 1981. To participate immediately you must
file Exhibit "A" with the Secretary on or before June 30, 1981.
9. In general, under current principles, the amount you defer and any
increments credited to your account will not be subject to U.S income
taxation until received.
<PAGE> 1
EXHIBIT 10(c)
1
2882F
CLEVELAND-CLIFFS INC
Amendment No. 1 to The
----------------------
Cleveland-Cliffs Iron Company
-----------------------------
Plan for Deferred Payment of Directors' Fees
--------------------------------------------
Cleveland-Cliffs Inc, an Ohio corporation, (the "Company"), which
assumed The Cleveland-Cliffs Iron Company Plan for Deferred Payment of
Directors' Fees (the "Plan") on July 1, 1985, pursuant to authorization granted
at a meeting of the Board of Directors of the Company on January 14, 1992,
hereby amends the Plan as set forth below in this Amendment No. 1.
1. The Plan is hereby amended by replacing the phrase
"Cleveland-Cliffs Iron Company", in the title of the Plan and in Section 1 of
the Plan, with the phrase "Cleveland-Cliffs Inc".
2. The Plan is hereby amended by replacing the phrase "1460 Union
Commerce Bank Building, Cleveland, Ohio 44115" in Section 3 of the Plan, with
the phrase "1100 Superior Avenue, Cleveland, Ohio 44114".
3. The Plan is hereby amended by deleting the last sentence of Section
5 of the Plan and adding in its place the following:
"No Participant or any other person, including, without limitation, any
death beneficiary referred to in Section 12, shall have any right, title
or interest of any kind in any such cash or Common Shares. Notwithstanding
the foregoing,
<PAGE> 2
2
the Company may create an irrevocable trust to hold the cash and Common
Shares of the Company credited to Participants under this Plan, provided
that any cash and Common Shares and any income earned thereon contained in
such trust shall remain subject to claims of the creditors of the Company."
4. The Plan is hereby amended by adding to the Plan a new Section 8A
immediately after Section 8 of the Plan, to read as follows:
"8A. Election Period for Conversion of Investment in Common Shares of
----------------------------------------------------------------
the company to Cash
-------------------
A Director or former Director who is a Participant in
this Plan between the dates of February 1, 1992 and March 31, 1992 (the
"Conversion Election Period") and who has previously elected that amounts
credited to his or her account under this Plan be invested in whole shares
of Common Shares of the Company may, during such Conversion Election
Period, elect to convert into cash all amounts then invested in whole
shares of Common Shares of the Company, regardless of the Payment
Commencement Date(s) applicable to the deferred amounts so invested. This
conversion election shall be made by filing, no later than March 31, 1992,
a written notice, on the Notice of Conversion form attached as Exhibit D to
this Plan, with the Secretary of the Company at 1100 Superior Avenue,
Cleveland, Ohio 44114. A conversion election properly made
<PAGE> 3
3
by a Participant shall be effective March 31, 1992, following which time no
amounts credited to the account of such Participant shall be invested or
reinvested by the Company in Common Shares of the Company as provided in
Section 4 of this Plan.
No later than April 15, 1992, the treasurer of
the Company shall convert into cash, through sale or otherwise, all of the
common Shares of the Company credited to the accounts of the Participants who
have properly made a conversion election under this Section 8A. The accounts
of such Participants shall be appropriately adjusted and the cash proceeds
(after deduction of taxes or other costs and expenses, if any, paid by the
Company because of such sales) shall be credited to the accounts of such
Participants. A Participant's Deferred Compensation Account, including such
cash proceeds, shall be adjusted in accordance with Section 7 and Section 8
of this Plan, and shall be paid to the Participant as otherwise provided in
this Plan and as previously elected by the Participant."
5. This amendment shall be effective as of January 14, 1992.
IN WITNESS WHEREOF, this Amendment No. 1 to the Plan has been duly
executed and delivered.
CLEVELAND-CLIFFS INC
By /s/ R. F. Novak
---------------
Title Vice President
--------------
March 9, 1992
<PAGE> 4
Exhibit D
NOTICE OF CONVERSION
Cleveland-Cliffs Inc
Re: Plan for Deferred Payment of
Directors' Fees (the "Plan")
----------------------------
1. Pursuant to Section 8A of the Plan, I hereby elect to have all amounts
credited to the Deferred Compensation Account in my name under the Plan
that are currently invested in shares of Common Shares of the Company
converted into the cash equivalent of the value of such Common Shares of
the Company, regardless of Payment Commencement Date(s) applicable to the
deferred amounts so invested.
2. I understand that all such amounts so converted shall be credited to the
Deferred Compensation Account in my name under the Plan as cash (after
deduction of taxes or other costs and expenses, if any, paid by the Company
because of the sale), shall not be invested or reinvested in shares of
Common Shares of the Company pursuant to the provisions of the Plan, and
shall be paid to me in accordance with the Election that I previously made
with respect to the deferred amounts.
Date ____________________________ Signature ______________________________
Date Notice of Conversion received by Secretary:
Date ____________________________ Signature ______________________________
2882F
<PAGE> 1
EXHIBIT 10(d)
105
061587
KDS
CONSULTING AGREEMENT
--------------------
THIS AGREEMENT made this 23rd day of June, 1987, by and between
CLEVELAND-CLIFFS INC, an Ohio corporation (hereinafter referred to as
"Cliffs"), and SAMUEL K. SCOVIL of Gates Mills, Ohio (hereinafter referred to
as "Consultant").
W I T N E S S E T H:
WHEREAS, Cliffs wishes to engage Consultant's services as specified
herein, and Consultant is ready, willing and able to undertake the performance
of such services.
NOW, THEREFORE, the parties agree as follows:
I. AGREEMENT
---------
Cliffs hereby agrees to retain the independent consulting and
advisory services of Consultant with respect to his expertise as past Chief
Executive Officer of Cliffs ("consulting and advisory services") and Consultant
agrees to perform such consulting and advisory services in respect of the
business affairs of Cliffs as Cliffs may from time to time request.
II. DUTIES OF CONSULTANT
--------------------
Consultant will render, at the specific request of the Chief
Executive Officer of Cliffs, consulting and advisory services during the term
of this Agreement and will provide Cliffs with the benefit of his special
knowledge, skill, contacts, and business experience to the extent
-1-
<PAGE> 2
relevant to Cliffs' business; and, as such advisor and consultant, promote its
financial welfare. All such consulting and advisory service assignments shall
be made to Consultant by Cliffs' Chief Executive Officer or his designee.
III. SERVICES AND COMPENSATION
-------------------------
Consultant agrees to provide to Cliffs, when and to the extent
reasonably required, consulting and advisory services during the term of this
Agreement, and Cliffs agrees to pay Consultant at the rate of Twenty Thousand
Dollars ($20,000.00) per year, payable quarterly in advance on the first day of
January, April, July and October of each year.
IV. REIMBURSEMENT OF EXPENSES
-------------------------
In addition to the compensation referred to in Section III.,
Cliffs agrees to reimburse Consultant for all reasonable expenses as shall be
incurred by him in the discharge of his duties hereunder. Consultant shall
submit an expense statement to Cliffs from time for expenses incurred. Cliffs
shall make prompt reimbursement there for, provided, however, that Consultant
agrees he will secure the prior approval of Cliffs before making any unusual
expenditures in the course of his services hereunder.
V. NON-DISCLOSURE OF INFORMATION
-----------------------------
Consultant shall keep secret and confidential such information
pertaining to Cliffs, its activities, products, organization or internal
affairs as Consultant may acquire while performing consulting and advisory
services during the term of this Agreement. Consultant shall not, without the
consent of Cliffs, during the term of this Agreement and any extensions hereof,
and for a period of one (1) year thereafter, directly
-2-
<PAGE> 3
or indirectly, enter the employment of, or render consulting and advisory
services to any person, partnership, association or corporation engaged in
competition with Cliffs, or aid any such person, partnership, association or
corporation engaged in competition with Cliffs regarding matters or subjects
dealt with in furnishing such services hereunder.
IV. INDEPENDENT CONTRACTOR
----------------------
Nothing in this Agreement shall be considered to create the
relationship of employer and employee between Cliffs and Consultant, and
Consultant shall at all times be deemed to be an independent contractor.
VII. AVAILABILITY
------------
Consultant agrees that during the term of this Agreement he will
keep Cliffs informed of his address and phone number or other place where he
may be contacted.
VIII. COMPLIANCE WITH LAWS
--------------------
Consultant will comply with all applicable laws and regulations
in the course of performing consulting and advisory services under this
Agreement.
IX. ASSIGNMENT
----------
Neither this Agreement nor any rights, interest or benefits
hereunder may be assigned, transferred, sold, or pledged in any way by
Consultant. Any such attempted assignment, transfer, sale, pledge, or other
disposition of such rights, interest or benefits hereunder shall be null and
void and without effect.
X. TERM
----
This Agreement shall become effective as of January 1, 1987 and, subject to the
other provisions hereof, shall terminate on December
-3-
<PAGE> 4
31, 1996. This Agreement shall also terminate upon Consultant's earlier death
whereupon the balance payable hereunder through December 31, 1996 shall
immediately become due and be paid to Consultant's estate within ninety (90)
days of the date of Consultant's death.
Notwithstanding the above, the termination of this Agreement
shall not terminate the obligations of Consultant as contained in Section V.
above.
IN WITNESS WHEREOF, this Agreement has been executed as of the
day and year first above written.
CLEVELAND-CLIFFS INC
By /s/ M.T. Moore /s/ Samuel K. Scovil
--------------------------- ---------------------
Chief Executive Officer Consultant
-4-
<PAGE> 1
EXHIBIT 10(e)
FLH63
CONFIDENTIAL
061391
AMENDMENT TO CONSULTING AGREEMENT
THIS AMENDMENT is entered into this 18th day of June, 1991, by
and between CLEVELAND-CLIFFS INC, an Ohio corporation (hereinafter referred to
as "Cliffs"), and SAMUEL K. SCOVIL of Gates Mills, Ohio (hereinafter referred
to as "Consultant").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, Cliffs and Consultant entered into a Consulting
Agreement, dated June 23, 1987, for a term ending on December 31, 1996; and
WHEREAS, the parties to that agreement wish to amend it in
certain respects.
NOW, THEREFORE, the parties agree to amend said Consulting
Agreement as follows:
1. Article III is amended in its entirety to read as follows:
III. SERVICES AND COMPENSATION
-------------------------
Consultant agrees to provide to Cliffs, when and to
the extent reasonably required, consulting and advisory
services during the term of this Agreement, and Cliffs
agrees to pay Consultant at the rate of Twenty Thousand
Dollars ($20,000.00) per year, payable quarterly in
advance on the first day of January, April, July and
October of each year, except that for the period
commencing July 1, 1991 through December 31, 1992,
<PAGE> 2
the annual rate shall be Eighty Thousand Dollars
($80,000.00), of which Sixty Thousand Dollars
($60,000.00) of such annual rate shall not be subject
to the penultimate sentence of Article X.
2. Except as provided herein, the Consulting Agreement
remains in full force and effect in accordance with its terms.
IN WITNESS WHEREOF, this Agreement has been executed on the day
and year first above written.
CLEVELAND-CLIFFS INC
By M. Thomas Moore
---------------
Consultant:
Samuel K. Scovil
----------------
SAMUEL K. SCOVIL
-2-
<PAGE> 1
EXHIBIT 10(f)
CONFIDENTIAL
============
AMENDMENT TO CONSULTING AGREEMENT
THIS AMENDMENT is entered into this 28th day of December, 1995, by and
between CLEVELAND-CLIFFS INC, an Ohio corporation (hereinafter referred to as
"Cliffs"), and SAMUEL K. SCOVIL of Gates Mills, Ohio (hereinafter referred to
as "Consultant").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, Cliffs and Consultant are parties to a Consulting Agreement,
dated June 23, 1987, as amended June 18, 1991, for a term ending on December
31, 1996; and
WHEREAS, the parties to that agreement wish to further amend it in
certain respects.
NOW THEREFORE, the parties agree to further amend said Consulting
Agreement as follows:
1. Article III is amended in its entirety to read as follows:
III. SERVICES AND COMPENSATION
-------------------------
Consultant agrees to provide to Cliffs, when and to the extent
reasonably required, consulting and advisory services during the term
of this Agreement, and Cliffs agrees to pay Consultant at the rate of
Twenty Thousand Dollars ($20,000.00) per year through the year 1995,
payable quarterly in advance on the first day of January, April, July
and October of each year, and agrees to pay $5,000 for the first
quarter of 1996, payable on January 1, 1996, except that for the period
commending July 1, 1991 through December 31, 1992, the annual rate
shall be Eighty Thousand Dollars ($80,000.00),
<PAGE> 2
of which Sixty Thousand Dollars ($60,000.00) of such annual
rate shall not be subject to the penultimate sentence of Article X.
2. Article X is amended in its entirety to read as follows:
X. TERM
----
This Agreement shall become effective as of January 1, 1987
and, subject to the other provisions hereof, shall terminate on March
31, 1996. This Agreement shall also terminate upon Consultant's
earlier death whereupon the balance payable hereunder through March 31,
1996 shall immediately become due and be paid to Consultant's estate
within ninety (90) days of the date of Consultant's death.
Notwithstanding the above, the termination of this Agreement
shall not terminate the obligations of Consultant as contained in
Section V. above.
3. Except as provided herein, the Consulting Agreement remains in full
force and effect in accordance with its terms.
IN WITNESS WHEREOF, this Agreement has been executed on the day and
year first above written.
CLEVELAND-CLIFFS INC
By /s/ M. Thomas Moore
------------------------------------
Chairman and Chief Executive Officer
Consultant:
/s/ Samuel K. Scovil
--------------------------------------
SAMUEL K. SCOVIL
- 2 -
<PAGE> 1
EXHIBIT 10(i)
INSTRUMENT OF
ASSIGNMENT AND ASSUMPTION
-------------------------
THIS INSTRUMENT OF ASSIGNMENT AND ASSUMPTION (this "Instrument"),
dated as of July 1, 1985, by and between The Cleveland-Cliffs Iron Company, an
Ohio corporation ("Cliffs") and Cleveland-Cliffs Inc, an Ohio corporation
("Holding").
KNOW ALL MEN BY THESE PRESENTS THAT Cliffs for good and valuable
consideration, receipt of which is hereby acknowledged, does hereby give,
grant, bargain, sell, convey, set-over, deliver, assign, transfer and confirm,
to Holding, its successors and assigns all of Cliffs' right, title and interest
in and to the plans, agreements, and arrangements ("Plans") of Cliffs listed on
Schedule I attached hereto and by this reference hereby incorporated herein by
reference, whether or not recorded on Cliffs' books, as the same exist as of
the commencement of business on the date hereof.
TO HAVE AND TO HOLD, the Plans hereby given, granted, bargained,
sold, conveyed, set-over, delivered, assigned, transferred and confirmed or
intended so to be, to Holding, its successors and assigns, to or for its and
their own use and benefit forever.
To the extent that the assignment of any Plan to be assigned to
Holding as herein provided shall require the consent of other parties, this
Instrument shall not constitute an attempt to assign the same if an attempted
<PAGE> 2
--2--
assignment without such consent would constitute a breach thereof. With respect
to all such Plans, Cliffs agrees to use its best efforts to obtain the consent
of the other parties thereto to the assignment thereof.
From and after the date hereof, Holding hereby assumes all of the
obligations of Cliffs relating to such Plans, and Cliffs and Holding shall,
promptly upon the request of the other, execute and deliver all such documents
and perform all such other acts as may be reasonably requested in order to
evidence or confirm the assignment to Holding of any and all of the Plans
referred to herein.
IN WITNESS WHEREOF, The Cleveland-Cliffs Iron Company and
Cleveland-Cliffs Inc have caused this Instrument of Assignment and Assumption
to be executed by their respective duly authorized officers at Cleveland, Ohio,
as of the date first written above.
THE CLEVELAND-CLIFFS IRON COMPANY
By John S. Bowen
---------------------
SENIOR VICE PRESIDENT
CLEVELAND-CLIFFS INC
By S. S. McMillan
---------------
VICE PRESIDENT
<PAGE> 3
SCHEDULE I
----------
1. Amendment and Restatement of Investment Credit Employee Stock
Ownership Plan for The Cleveland Cliffs Iron Company and
Participating Companies, dated as of July 1, 1985
2. The Cleveland-Cliffs Iron Company - Plan for Deferred Payment of
Directors' Fees, dated July 1, 1981
3. The Cleveland-Cliffs Iron Company - Retirement Plan for
Non-Employee Directors, dated June 1, 1984
4. The Cleveland-Cliffs Iron Company - Automatic Dividend
Reinvestment Plan, dated October, 1978
5. An Opportunity to Purchase The Cleveland-Cliffs Iron Company
Common Stock through Payroll Deductions
<PAGE> 1
EXHIBIT 10(j)
INDEMNIFICATION AGREEMENT
This indemnification Agreement ("Agreement") is made of the _____ day of
__________________, 1987, by and between Cleveland-Cliffs Inc, an Ohio
corporation (the "Company") and _____________________ (the "Indemnitee"), a
Director of the Company.
RECITALS
A. The Indemnitee is presently serving as a Director of the Company
and the Company desires the Indemnitee to continue in that capacity. The
Indemnitee is willing, subject to certain conditions including without
limitation the execution and performance of this Agreement by the Company, to
continue in that capacity.
B. In addition to the indemnification to which the Indemnitee is
entitled under the Regulations of the Company (the "Regulations"), the Company
has obtained, at its sole expense, insurance protecting the Company and its
officers and directors including the Indemnitee against certain losses arising
out of actual or threatened actions, suits, or proceedings to which such
persons may be made or threatened to be made parties. However, as a result of
circumstances having no relation to, and beyond the control of, the company and
the Indemnitee, the scope of that insurance has been reduced and there can be
no assurance of the continuation or renewal of that insurance.
Accordingly, and in order to induce the Indemnitee to continue to serve
in his present capacity, the Company and the Indemnitee agree as follows:
1. Continued Service. The Indemnitee shall continue to serve at the
will of the Company as a Director of the Company so long as he is duly elected
and qualified in accordance with the Regulations or until he resigns in writing
in accordance with applicable law.
2. Initial Indemnity. (a) The Company shall indemnify the
Indemnitee, if or when he is a party or is threatened to be made a party to any
threatened, pending, or completed action, suit, or proceeding, whether civil,
criminal, administrative, or investigative (other than an action by or in the
right of the Company), by reason of the fact that he is or was a Director of
the Company or is or was serving at the request of the Company as a director,
trustee, officer, employee, or agent of another corporation, domestic or
foreign, nonprofit or for profit, partnership, joint venture, trust, or other
enterprise, or by reason of any action alleged to have been taken or omitted in
any such capacity, against any and all costs, charges, expenses (including
without limitation fees and expenses of attorneys and/or others; all such
costs, charges and expenses being herein jointly referred to as "Expenses"),
judgments, fines, and amounts paid in settlement, actually and reasonably
incurred by the Indemnitee in connection therewith including any appeal of or
from any judgment or decision, unless it is proved by clear and convincing
evidence in a court of competent jurisdiction that the Indemnitee's action or
failure to act involved an act or omission undertaken with deliberate intent to
cause injury to the Company or Undertaken with reckless disregard for the best
interests of the Company.
1
<PAGE> 2
In addition, with respect to any criminal action or proceeding, indemnification
hereunder shall be made only if the Indemnitee had no reasonable cause to
believe his conduct was unlawful. The termination of any action, suit or
proceeding by judgment. order, settlement, or conviction, or upon a plea of no
lo contendere or its equivalent, shall not, of itself, create a presumption
that the Indemnitee did not satisfy the foregoing standard of conduct to the
extent applicable thereto.
(b) The Company shall indemnify the Indemnitee, if or when he is a
party or is threatened to be made a party to any threatened, pending, or
completed action, suit. or proceeding by or in the right of the Company to
procure a judgment in its favor, by reason of the fact that the Indemnitee is
or was a Director of the Company or is or was serving at the request of the
Company as a director, trustee, officer, employee, or agent of another
corporation, domestic or foreign, nonprofit or for profit, partnership, joint
venture, trust, or other enterprise, against any and all Expenses actually and
reasonably incurred by the Indemnitee in connection with the defense or
settlement thereof or any appeal of or from any judgment or decision, unless it
is proved by clear and convincing evidence in a court of competent jurisdiction
that the Indemnitee's action or failure to act involved an act or omission
undertaken with deliberate intent to cause injury to the Company or undertaken
with reckless disregard for the best interests of the Company, except that no
indemnification shall be made in respect of any action or suit in which the
only liability asserted against Indemnitee is pursuant to Section 1701.95 of
the Ohio Revised Code.
(c) Any indemnification under Section 2(a) or 2(b) (unless ordered by
a court) shall be made by the Company only as authorized in the specific case
upon a determination that indemnification of the Indemnitee is proper in the
circumstances because he has met the applicable standard of conduct set forth
in Section 2(a) or 2(b). Such authorization shall be made (i) by the Directors
of the Company (the "Boards") by a majority vote of a quorum consisting of
Directors who were not and are not parties to or threatened with such action,
suit, or proceeding or (ii) if such a quorum of disinterested Directors is not
available or if a majority of such quorum so directs, in a written opinion by
independent legal counsel (designated for such purpose by the Board) which
shall not be an attorney, or a firm having associated with it an attorney, who
has been retained by or who has performed services for the Company, or any
person to be indemnified, within the five years preceding such determination,
or (iii) by the shareholders of the Company (the "Shareholders"), or (iv) by
the court in which such action, suit, or proceeding was brought.
(d) To the extent that the Indemnitee has been successful on the
merits or otherwise, including without limitation the dismissal of an action
without prejudice, in defense of any action, suit, or proceeding referred to in
Section 2(a) or 2(b), or in defense of any claim, issue, or matter therein, he
shall be indemnified against Expenses actually and reasonably incurred by him
in connection therewith. Expenses actually and reasonably incurred by the
Indemnitee in defending any such action, suit, or proceeding shall be paid by
the Company as they are incurred in advance of the final disposition of such
action, suit, or proceeding under the procedure set forth in Section 4(b)
hereof.
2
<PAGE> 3
(e) For purposes of this Agreement, references to "other enterprises"
shall include employee benefit plans; references to "fines" shall include any
excise taxes assessed on the Indemnitee with respect to any employee benefit
plan; references to "serving at the request of the Company" shall include any
service as a director, officer, employee, or agent of the Company which imposes
duties on, or involves services by, the Indemnitee with respect to an employee
benefit plan, its participants or beneficiaries; references to the masculine
shall include the feminine; and references to the singular shall include the
plural and VICE VERSA.
3. Additional Indemnification. Pursuant to Section 1701.13(E)(6) of
the Ohio Revised Code (the "ORC"), without limiting any right which the
Indemnitee may have pursuant to Section 2 hereof or any other provision of this
Agreement or the Articles of Incorporation, the Regulations, the ORC, any
policy of insurance, or otherwise, but subject to any limitation on the maximum
permissible indemnity which may exist under applicable law at the time of any
request for indemnity hereunder and subject to the following provisions of this
Section 3, the Company shall indemnify the Indemnitee against any amount which
he is or becomes obligated to pay relating to or arising out of any claim made
against him because of any act, failure to act, or neglect or breach of duty,
including any actual or alleged error, misstatement, or misleading statement,
which he commits, suffers, permits, or acquiesces in while acting in his
capacity as a Director of the Company. The payments which the Company is
obligated to make pursuant to this Section 3 shall include without limitation,
judgments, fines, and amounts paid in settlement and any and all Expenses
actually and reasonably incurred by the Indemnitee in connection therewith
including any appeal of or from any judgment or decision; PROVIDED, HOWEVER,
that the Company shall not be obligated under this Section 3 to make any
payment in connection with any claim against the Indemnitee:
(a) to the extent of any fine or similar governmental
imposition which the Company is prohibited by applicable law from
paying which results from a final, nonappealable order; or
(b) to the extent based upon or attributable to the Indemnitee
having actually realized a personal gain or profit to which he was not
legally entitled, including without limitation profit from the purchase
and sale by the Indemnitee of equity securities of the Company which are
recoverable by the Company pursuant to Section 16(G) of the Securities
Exchange Act of 1934, or profit arising from transactions in publicly
traded securities of the Company which were effected by the Indemnitee
in violation of Section 10(b) of the Securities Exchange Act of 1934, or
Rule 10b-5 promulgated thereunder.
A determination as to whether the Indemnitee shall be entitled to
indemnification under this Section 3 shall be made in accordance with Section
4(a) hereof. Expenses incurred by the Indemnitee in defending any claim to
which this Section 3 applies shall be paid by the Company as they are actually
and reasonably incurred in advance of the final disposition of such claim under
the procedure set forth in Section 4(b) hereof.
4. Certain Procedures Relating to Indemnification. (a) For
purposes of pursuing his rights to indemnification under Section 3 hereof,
3
<PAGE> 4
the Indemnitee shall (i) submit to the Board a sworn statement of request for
indemnification substantially in the form of Exhibit I attached hereto and made
a part hereof (the "Indemnification Statement") averring that he is entitled to
indemnification hereunder; and (ii) present to the Company reasonable evidence
of all amounts for which indemnification is requested. Submission of an
Indemnification Statement to the Board shall create a presumption that the
Indemnitee is entitled to indemnification hereunder, and the Company shall,
within 60 calendar days after submission of the Indemnification Statement, make
the payments requested in the Indemnification Statement to or for the benefit
of the Indemnitee, unless (i) within such 60-calendar-day period the Board
shall resolve by vote of a majority of the Directors at a meeting at which a
quorum is present that the Indemnitee is not entitled to indemnification under
Section 3 hereof, (ii) such vote shall be based upon clear and convincing
evidence (sufficient to rebut the foregoing presumption), and (iii) the
Indemnitee shall have received within such period notice in writing of such
vote, which notice shall disclose with particularity the evidence upon which
the vote is based. The foregoing notice shall be sworn to by all persons who
participated in the vote and voted to deny indemnification. The provisions of
this Section 4(a) are intended to be procedural only and shall not affect the
right of Indemnitee to indemnification under Section 3 of this Agreement so
long as Indemnitee follows the prescribed procedure and any determination by
the Board that Indemnitee is not entitled to indemnification and any failure to
make the payments requested in the Indemnification Statement shall be subject
to judicial review by any court of competent jurisdiction.
(b) For purposes of obtaining payments of Expenses in advance of
final disposition pursuant to the second sentence of Section 2(d) or the last
sentence of Section 3 hereof, the Indemnitee shall submit to the Company a
sworn request for advancement of Expenses substantially in the form of Exhibit
2 attached hereto and made a part hereof (the "Undertaking"), averring that he
has reasonably incurred actual Expenses in defending an action, suit or
proceeding referred to in Section 2(a) or 2(b) or any claim referred to in
Section 3, or pursuant to Section 7 hereof. Unless at the time of the
Indemnitee's act or omission at issue, the Articles of Incorporation or
Regulations of the Company prohibit such advances by specific reference to ORC
Section 1701.13(E)(5)(a) and unless the only liability asserted against the
Indemnitee in the subject action, suit or proceeding is pursuant to ORC Section
1701.95, the Indemnitee shall be eligible to execute Part A of the Undertaking
by which he undertakes to (a) repay such amount if it is proved by clear and
convincing evidence in a court of competent jurisdiction that the Indemnitee's
action or failure to act involved an act or omission undertaken with deliberate
intent to cause injury to the Company or undertaken with reckless disregard for
the best interests of the Company and (b) reasonably cooperate with the Company
concerning the action, suit, proceeding or claim. In all cases, the Indemnitee
shall be eligible to execute Part B of the Undertaking by which he undertakes
to repay such amount if it ultimately is determined that he is not entitled to
be indemnified by the Company under this Agreement or otherwise. In the event
that the Indemnitee is eligible to and does execute both Part A and Part B of
the Undertaking, the Expenses which are paid by the Company pursuant thereto
shall be required to be repaid by the Indemnitee only if he is required to do
so under the terms of both Part A and Part B of the Undertaking. Upon receipt
of the Undertaking the Company
4
<PAGE> 5
shall thereafter promptly pay such Expenses of the Indemnitee as are noticed to
the Company in writing and in reasonable detail arising out of the matter
described in the Undertaking. No security shall be required in Connection with
any Undertaking.
5. Limitation on Indemnity. Notwithstanding anything contained
herein to the contrary, the Company shall not be required hereby to indemnify
the Indemnitee with respect to any action, suit, or proceeding that was
initiated by the Indemnitee unless (i) such action, suit, or proceeding was
initiated by the Indemnitee to enforce any rights to indemnification arising
hereunder and such person shall have been formally adjudged to be entitled to
indemnity by reason hereof, (ii) authorized by another agreement to which the
Company is a party whether heretofore or hereafter entered, or (iii) otherwise
ordered by the court in which the suit was brought.
6. Subrogation; Duplication of Payments. (a) In the event of any
payment under this Agreement, the Company shall be subrogated to the extent of
such payment to all of the rights of recovery previously vested in the
Indemnitee, who shall execute all papers required and shall do everything that
may be necessary to secure such rights, including the execution of such
documents necessary to enable the Company effectively to bring suit to enforce
such rights.
(b) The Company shall not be liable under this Agreement to make any
payment in connection with any claim made against Indemnitee to the extent
Indemnitee has actually received payment (under any insurance policy, the
Company's Regulations or otherwise) of the amounts otherwise payable hereunder.
7. Fees and Expenses of Enforcement. It is the intent of the
Company that the Indemnitee not be required to incur the expenses associated
with the enforcement of his rights under this Agreement by litigation or other
legal action because the cost and expense thereof would substantially detract
from the benefits intended to be extended to the Indemnitee hereunder.
Accordingly, if it should appear to the Indemnitee that the Company has failed
to comply with any of its obligations under this Agreement or in the event that
the Company or any other person takes any action to declare this Agreement void
or unenforceable, or institutes any action, suit or proceeding to deny, or to
recover from, the Indemnitee the benefits intended to be provided to the
Indemnitee hereunder, the Company irrevocably authorizes the Indemnitee from
time to time to retain counsel of his choice, at the expense of the Company as
hereafter provided, to represent the Indemnitee in connection with the
initiation or defense of any litigation or other legal action, whether by or
against the Company or any director, officer, shareholder, or other person
affiliated with the Company, in any jurisdiction. Regardless of the outcome
thereof, the Company shall pay and be solely responsible for any and all costs,
charges, and expenses, including without limitation fees and expenses of
attorneys and others, reasonably incurred by the Indemnitee pursuant to this
Section 7.
8. Merger or Consolidation. In the event that the Company shall be
a constituent corporation in a consolidation, merger, or other reorganization,
the Company, if it shall not be the surviving, resulting, or acquiring
corporation therein, shall require as a condition thereto that the
5
<PAGE> 6
surviving, resulting, or acquiring corporation agree to assume all of the
obligations of the Company hereunder and to indemnify the Indemnitee to the
full extent provided herein. Whether or not the Company is the resulting,
surviving, or acquiring corporation in any such transaction, the Indemnitee
shall also stand in the same position under this Agreement with respect to the
resulting, surviving, or acquiring corporation as he would have with respect to
the Company if its separate existence had continued.
9. Nonexclusivity and Severability. (a) The rights to
indemnification provided by this Agreement shall not be exclusive of any other
rights of indemnification to which the Indemnitee may be entitled under the
Articles of Incorporation, the Regulations, the ORC or any other statute, any
insurance policy, agreement, or vote of shareholders or directors or otherwise,
as to any actions or failures to act by the Indemnitee, and shall continue
after he has ceased to be a Director, officer, employee, or agent of the
Company or other entity for which his service gives rise to a right hereunder,
and shall inure to the benefit of his heirs, executors, and administrators.
(b) If any provision of this Agreement or the application of any
provision hereof to any person or circumstances is held invalid, unenforceable,
or otherwise illegal, the remainder of this Agreement and the application of
such provision to other persons or circumstances shall not be affected, and the
provision so held to be invalid, unenforceable, or otherwise illegal shall be
reformed to the extent (and only to the extent) necessary to make it
enforceable, valid, and legal.
10. Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Ohio, without giving effect to the
principles of conflict of laws thereof.
11. Modification. This Agreement and the rights and duties of the
Indemnitee and the Company hereunder may be modified only by an instrument in
writing signed by both parties hereto.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
as of the date first above written.
CLEVELAND-CLIFFS INC
By ______________________________
President and
Chief Executive Officer
______________________________
[Signature of Indemnitee]
6
<PAGE> 7
Exhibit 1
INDEMNIFICATION STATEMENT
STATE OF )
) ss:
COUNTY OF )
I, ___________________________ being first duly sworn, do depose and say
as follows:
1. This Indemnification Statement is submitted pursuant to the
Idemnification Agreement, dated __________________________, 1987, between
Cleveland-Cliffs Inc (the "Company"), an Ohio corporation, and the undersigned.
2. I am requesting indemnification against costs, charges, expenses
(which may include fees and expenses of attorneys and/or others), judgments,
fines, and amounts paid in settlement (collectively, "Liabilities"), which have
been actually and reasonably incurred by me in connection with a claim referred
to in Section 3 of the aforesaid Indemnification Agreement.
3. With respect to all matters related to any such claim, I am
entitled to be indemnified as herein contemplated pursuant to the aforesaid
Indemnification Agreement.
4. Without limiting any other rights which I have or may have, I am
requesting indemnification against Liabilities which have or may arise out of
________________________________________________________________________________
________________________________________________.
________________________________
[Signature of Indemnitee]
Subscribed and sworn to before me, a Notary Public in and for said
County and State, this _______ of _________________, 19____.
[Seal]
My commission expires the _____ day of ___________________, 19____.
7
<PAGE> 8
Exhibit 2
UNDERTAKING
STATE OF )
) ss:
COUNTY OF )
I, ______________________ being first duly sworn, do depose and say as
follows:
1. This Undertaking is submitted pursuant to the Indemnification
Agreement, dated ____________________, 1987, between Cleveland-Cliffs Inc (the
"Company"), an Ohio corporation, and the undersigned.
2. I am requesting payment of costs, charges, and expenses which I
have reasonably incurred or will reasonably incur in defending an action, suit
or proceeding, referred to in Section 2(a) or 2(b) or any claim referred to in
Section 3, or pursuant to Section 7, of the aforesaid Indemnification
Agreement.
3. The costs, charges, and expenses for which payment is requested
are, in general , all expenses related to ___________________________________
_____________________________________________________________________________.
4. Part A
I hereby undertake to (a) repay amounts paid pursuant hereto if it is
proved by clear and convincing evidence in a court of competent jurisdiction
that my action or failure to act which is the subject of the matter described
herein involved an act or omission undertaken with deliberate intent to cause
injury to the Company or undertaken with reckless disregard for the best
interests of the Company and (b) reasonably cooperate with the Company
concerning the action, suit, proceeding or claim.
______________________________________
(Signature of Indemnitee)
4. Part B
I hereby undertake to repay all amounts paid pursuant hereto if it
ultimately is determined that I am not entitled to be indemnified by the
Company under the aforesaid Indemnification Agreement or otherwise.
______________________________________
(Signature of Indemnitee)
Subscribed and sworn to before me, a Notary Public in and for said
County and State, this _____ day of ______________________________, 19___.
[Seal]
My commission expires the ________ day of ________________, 19____.
8
<PAGE> 1
EXHIBIT 10(n)
2914F
AMENDED AND RESTATED TRUST AGREEMENT No. 1
------------------------------------------
This Amended and Restated Trust Agreement No. 1 ("Trust Agreement
No. 1") is made on this 9th day of March, 1992, by and between Cleveland-Cliffs
Inc, an Ohio corporation ("Cleveland-Cliffs"), and Ameritrust Company National
Association, a national banking association, as trustee (the "Trustee").
WITNESSETH:
----------
WHEREAS, Cleveland-Cliffs has entered into an agreement with each
of the executives (the "Executives") listed (from time to time as provided in
Section 9(c) hereof) on Exhibit A hereto (the agreements are referred to herein
singularly as an "Agreement" and collectively as the "Agreements");
WHEREAS, pursuant to the provisions of the Cleveland-Cliffs Inc
Supplemental Retirement Benefit Plan (as Amended and Restated Effective January
1, 1991), as the same has been or may hereafter be supplemented, amended or
restated, or any successor thereto (the "Plan"), the Executives and
beneficiaries of the Executives (also listed on Exhibit A hereto from time to
time as provided in Section 9(c) hereof), may become entitled to certain
benefits;
WHEREAS, (a) the Agreements provide for the payment of
certain current and deferred compensation and other benefits to the Executives
or their beneficiaries thereunder following a
<PAGE> 2
2
"Change of Control", as that term is defined in Exhibit B hereto, and (b) the
Plan provides for the payment of certain benefits to the Executives and
beneficiaries of Executives that (i) would be payable pursuant to the qualified
retirement plans established by Cleveland-Cliffs and its subsidiary
corporations and affiliates were it not for certain limitations imposed by the
Internal Revenue Code of 1986, as amended (the "Code"), and (ii) are or may
become due under certain agreements entered into (or which may be entered into)
by Cleveland-Cliffs and its subsidiary corporations and affiliates granting
additional service credit or other features for purposes of computing
retirement benefits, and (c) Cleveland-Cliffs wishes specifically to assure the
payment to the Executives and beneficiaries of Executives (Executives and
beneficiaries of Executives are referred to herein singularly as a "Trust
Beneficiary" and collectively as the "Trust Beneficiaries") of amounts due
under the Agreements and the Plan (collectively referred to herein as the
"Benefits");
WHEREAS, subject to Section 9 hereof, the amounts and timing of
Benefits to which each Trust Beneficiary is presently or may become entitled to
are as provided in and determined under the Agreements and the Plan;
WHEREAS, on October 28, 1987 Cleveland-Cliffs and the Trustee
entered into a trust agreement ("Trust Agreement No. 1") to provide for the
payment of certain benefits that may become payable to certain executives,
beneficiaries of such executives, and their beneficiaries under agreements then
in
<PAGE> 3
3
effect between Cleveland-Cliffs and the executives and under the Plan, as it
was in effect at such time;
WHEREAS, Trust Agreement No. 1 was amended by a First Amendment
to Trust Agreement dated November 6, 1987 and a Second Amendment to Trust
Agreement No. 1 dated April 9, 1991;
WHEREAS, Cleveland-Cliffs desires to amend and restate Trust
Agreement No. 1 heretofore entered into and has transferred or will transfer to
the trust (the "Trust") established by this Trust Agreement No. 1 assets which
shall be held therein subject to the claims of the creditors of
Cleveland-Cliffs to the extent set forth in Section 3 hereof until paid in full
to all Trust Beneficiaries as Benefits in such manner and at such times as
specified herein unless Cleveland-Cliffs is Insolvent (as defined herein) at
the time that such Benefits become payable; and
WHEREAS, Cleveland-Cliffs shall be considered "Insolvent" for
purposes of this Trust Agreement No. 1 at such time as Cleveland-Cliffs (i) is
subject to a pending voluntary or involuntary proceeding as a debtor under the
United States Bankruptcy Code, as heretofore or hereafter amended, or (ii) is
unable to pay its debts as they mature.
NOW, THEREFORE, the parties amend and restate Trust Agreement No.
1 and agree that the Trust shall be comprised, held and disposed of as follows:
1. TRUST FUND: (a) Subject to the claims of its
creditors to the extent set forth in Section 3 hereof, Cleveland-Cliffs (i)
hereby deposits with the Trustee in trust
<PAGE> 4
4
Ten Dollars ($10.00) which shall become the principal of this Trust, and (ii)
Cleveland-Cliffs may from time to time make additional deposits of cash or
other property in the Trust to augment such principal. The principal of the
Trust shall be held, administered and disposed of by the Trustee as herein
provided, but no payments of all or any portion of the principal of the Trust
or earnings thereon shall be made to Cleveland-Cliffs or any other person or
entity on behalf of Cleveland-Cliffs except as herein expressly provided.
(b) The Trust hereby established shall be revocable by
Cleveland-Cliffs at any time prior to the date on which occurs a Change of
Control, and on or after such date (the "Irrevocability Date"), this Trust
shall be irrevocable. In the event that the Irrevocability Date has occurred,
Cleveland-Cliffs shall so notify the Trustee promptly.
(c) The principal of the Trust and any earnings thereon shall
be held in trust separate and apart from other funds of Cleveland-Cliffs
exclusively for the uses and purposes herein set forth. No Trust Beneficiary
shall have any preferred claim on, or any beneficial ownership interest in, any
assets of the Trust prior to the time that such assets are paid to a Trust
Beneficiary as Benefits as provided herein.
(d) The Trust is intended to be a grantor trust, within the
meaning of section 671 of the Code, or any successor provision thereto, and
shall be construed accordingly. The Trust is not designed to qualify under
Section 401(a) of the Code or to be subject to the provisions of the Employee
<PAGE> 5
5
Retirement Income Security Act of 1974, as amended ("ERISA"). The Trust
established under this Trust Agreement No. 1 does not fund and is not intended
to fund the Agreements or the Plan or any other employee benefit plan or
program of Cleveland-Cliffs. Such Trust is and is intended to be a depository
arrangement with the Trustee for the setting aside of cash and other assets of
Cleveland-Cliffs for the meeting of part or all of its future obligations with
respect to Benefits.
2. PAYMENTS TO TRUST BENEFICIARIES. (a) Provided that
the Trustee has not actually received notice as provided in Section 3 hereof
that Cleveland-Cliffs is Insolvent and commencing with the earlier to occur of
(i) appropriate notice by Cleveland-Cliffs to the Trustee, or (ii) the
Irrevocability Date, the Trustee shall make payments of Benefits to each Trust
Beneficiary from the assets of the Trust in accordance with the terms of the
Agreement applicable to such Trust Beneficiary and of the Plan and subject to
Section 9 hereof. The Trustee shall make provision for withholding of any
federal, state, or local taxes that may be required to be withheld by the
Trustee in connection with the payment of any Benefits hereunder.
(b) If the balance of a separate account maintained for a
Trust Beneficiary pursuant to Section 7(b) hereof is not sufficient to provide
for full payment of benefits to which a Trust Beneficiary is entitled as
provided herein, then an amount up to the amount of such deficiency shall be
allocated to such separate account from the Master Account maintained pursuant
to section 7(b) hereof to the extent of the balance in the Master Account. If,
after application of the preceding
<PAGE> 6
6
sentence, the balance of a Trust Beneficiary's separate account maintained
pursuant to Section 7(b) is not sufficient to provide for full payment of
benefits to which a Trust Beneficiary is entitled as provided herein, then
Cleveland-Cliffs shall make the balance of each such payment as provided in the
applicable provision of the Agreement or the Plan, as the case may be. No
payment to a Trust Beneficiary from the assets of the Trust shall exceed the
balance of such separate account.
(c) Any payments of Benefits by the Trustee pursuant to this
Trust Agreement No. 1 shall, to the extent thereof, discharge the obligation of
Cleveland-Cliffs to pay such Benefits under the Agreements and the Plan, it
being the intent of Cleveland-Cliffs that assets in the Trust established
hereby be held as security for the obligation of Cleveland-Cliffs to pay
Benefits under the Agreements and the Plan.
3. THE TRUSTEE'S RESPONSIBILITY REGARDING PAYMENTS TO A TRUST
BENEFICIARY WHEN CLEVELAND-CLIFFS IS INSOLVENT: (a) At all times during the
continuance of this Trust, the principal and income of the Trust shall be
subject to claims of creditors of Cleveland-Cliffs as set forth in this Section
3(a). The Board of Directors of Cleveland-Cliffs ("the Board") and the Chief
Executive Officer of Cleveland-Cliffs ("the CEO") shall have the duty to inform
the Trustee if either the Board or the CEO believes that Cleveland-Cliffs is
Insolvent. If the Trustee receives a notice from the Board, the CEO, or a
creditor of Cleveland-Cliffs alleging that Cleveland-Cliffs is
<PAGE> 7
7
Insolvent, then unless the Trustee independently determines that
Cleveland-Cliffs is not Insolvent, the Trustee shall (i) discontinue payments
to any Trust Beneficiary, (ii) hold the Trust assets for the benefit of the
general creditors of Cleveland-Cliffs, and (iii) promptly seek the
determination of a court of competent jurisdiction regarding the Insolvency of
Cleveland-Cliffs. The Trustee shall deliver any undistributed principal and
income in the Trust to the extent of the balances of the accounts maintained
hereunder necessary to satisfy the claims of the creditors of Cleveland-Cliffs
as a court of competent jurisdiction may direct. Such payments of principal
and income shall be borne by the Master Account to the extent thereof, and then
by the separate accounts of the Trust Beneficiaries in proportion to the
balances on the date of such court order of their respective accounts
maintained pursuant to Section 7(b) hereof; provided, however, that (iv) all
Account Excesses shall first be determined and allocated in accordance with
Sections 4 and 7(b) hereof, and (v) for this purpose the Threshold Percentage
shall be equal to 100%. If payments to any Trust Beneficiary have been
discontinued pursuant to this Section 3(a), the Trustee shall resume payments
to such Trust Beneficiary only after receipt of an order of a court of
competent jurisdiction. The Trustee shall have no duty to inquire as to
whether Cleveland-Cliffs is Insolvent and may rely on information concerning
the Insolvency of Cleveland-Cliffs which has been furnished to the Trustee by
any person. Nothing in this Trust Agreement No. 1 shall in any way
<PAGE> 8
8
diminish any rights of any Trust Beneficiary to pursue his rights as a general
creditor of Cleveland-Cliffs with respect to Benefits or otherwise, and the
rights of each Trust Beneficiary shall in no way be affected or diminished by
any provision of this Trust Agreement No. 1 or action taken pursuant to this
Trust Agreement No. 1, except as provided in Section 2(c).
(b) If the Trustee discontinues payments of Benefits from the Trust
pursuant to Section 3(a) hereof, the Trustee shall, to the extent it has liquid
assets, place cash equal to the discontinued payments (to the extent not paid
to creditors pursuant to Section 3(a) and not paid to the Trustee pursuant to
Section 10 hereof) in such interest-bearing deposit accounts or certificates of
deposit (including any such accounts or certificate issued or offered by the
Trustee or any successor corporation but excluding obligations of
Cleveland-Cliffs) as determined by the Trustee in its sole discretion. If the
Trustee subsequently resumes such payments, the first payment following such
discontinuance shall include the aggregate amount of all payments which would
have been made to the Trust Beneficiaries in accordance with this Trust
Agreement No. 1 during the period of such discontinuance, less the aggregate
amount of payments made to any Trust Beneficiary by Cleveland-Cliffs pursuant
to the Agreement applicable to such Trust Beneficiary and Plan during any such
period of discontinuance, together with interest on the net amount delayed
determined at a rate equal to the rate paid on the
<PAGE> 9
9
accounts or deposits selected by the Trustee; provided, however, that no such
payment shall exceed the balance of the respective Trust Beneficiary's account
as provided in Section 7(b) hereof.
4. PAYMENTS TO CLEVELAND-CLIFFS. Except to the extent
expressly contemplated by Section 1(b) and this Section 4, Cleveland-Cliffs
shall have no right or power to direct the Trustee to return any of the Trust
assets to Cleveland-Cliffs before all payments of Benefits have been made to
all Trust Beneficiaries as herein provided. From time to time, but in no event
before the third anniversary of the date on which occurs a Change of Control,
if and when requested by Cleveland-Cliffs to do so, the Trustee shall engage
the services of Hewitt Associates ("Hewitt") or such other independent actuary
as may be mutually satisfactory to Cleveland-Cliffs and to the Trustee to
determine the maximum actuarial present values of the future Benefits that
could become payable under the Plan and the Agreements with respect to the
Trust Beneficiaries. The Trustee shall determine the fair market values of the
Trust assets allocated to the account of each Trust Beneficiary and to the
Master Account pursuant to Section 7(b) hereof. Cleveland-Cliffs shall pay the
fees of such independent actuary and of any appraiser engaged by the Trustee to
value any property held in the Trust. The independent actuary shall make its
calculations based upon the assumption that each Executive will have base
salary and bonus increases from the date of calculation through the termination
<PAGE> 10
10
of his employment by Cleveland-Cliffs at the rate of the average increase in
such Executive's salary and bonus during the immediately preceding three years,
and that no Executive will leave the employ of Cleveland-Cliffs for any reason
other than (a) death prior to retirement or (b) retirement on or after age 62
or the corresponding date specified in the Agreement at the age that would
result in the maximum present value of Benefits payable to him or his Trust
Beneficiaries that is possible under the Plan and/or the Agreement. In
addition, the independent actuary shall use the 1983 Group Annuity Mortality
Table, an interest rate of 8%, Gross National Product Price Deflator increases
of 4%, or such other assumptions as are recommended by such actuary and
approved by Cleveland-Cliffs and, after the date of a Change of Control, a
majority of the Trust Beneficiaries (subject to the provisions of Sections
11(b)(i) and (b)(ii) hereof). For purposes of this Trust Agreement No. 1, the
"Fully Funded" amount with respect to the account of a Trust Beneficiary
maintained pursuant to Section 7(b) hereof shall be equal to the maximum
actuarial present value of the future Benefits that could become payable under
the Plan and the Agreements with respect to the Trust Beneficiary. The Trustee
shall then determine any allocations to and from the Master Account in
accordance with Section 7(b) hereof. Thereafter, upon the request of the
Company, the Trustee shall pay to Cleveland-Cliffs the excess, if any, of the
balance in the Master Account over 40% of the aggregate of all of the Fully
Funded amounts.
<PAGE> 11
11
5. INVESTMENT OF TRUST FUND. (a) The Trustee shall
invest and reinvest the principal of the Trust including any income accumulated
and added to principal, as directed by the Organization and Compensation
Committee of the Board of Directors of Cleveland-Cliffs (which direction may
not include investment in common shares of Cleveland-Cliffs). In the absence
of any such direction, the Trustee shall have sole power to invest the assets
of the Trust (excluding investment in common shares of Cleveland-Cliffs). The
Trustee shall act at all times, however, with the care, skill, prudence, and
diligence under the circumstances then prevailing that a prudent corporate
trustee, acting in a like capacity and familiar with such matters, would use in
the conduct of an enterprise of a like character and with like aims. The
investment objective of the Trustee shall be to preserve the principal of the
Trust while obtaining a reasonable total rate of return, measurement of which
shall include market appreciation or depreciation plus receipt of interest and
dividends. The Trustee shall be mindful, in the course of its management of
the Trust, of the liquidity demands on the Trust and any actuarial assumptions
that may be communicated to it from time to time in accordance with the
provisions of this Trust Agreement No. 1.
(b) In addition to authority given to the Trustee under
Section 8 hereof, the Trustee is empowered with respect to the assets of the
Trust:
<PAGE> 12
12
(i) To invest and reinvest all or any part of the Trust
assets, in each and every kind of property, whether real, personal or mixed,
tangible or intangible, whether income or non-income producing, whether secured
or unsecured, and wherever situated, including, but not limited to, real
estate, shares of common and preferred stock, mortgages and bonds, leases (with
or without option to purchase), notes, debentures, equipment or collateral
trust certificates, and other corporate, individual or government securities or
obligations, time deposits (including savings deposit and certificates of
deposit in the Trustee or its affiliates if such deposits bear a reasonable
rate of interest), common or collective funds or trusts, and mutual funds or
investment companies, including affiliated investment companies and 12 B-1
funds. Cleveland-Cliffs acknowledges and agrees that the Trustee may receive
fees as a participating depository institution for services relating to the
investment of funds in an eligible mutual fund;
(ii) At such time or times, and upon such terms and conditions
as the Trustee shall deem advisable, to sell, convert, redeem, exchange, grant
options for the purchase or exchange of, or otherwise dispose of, any property
held hereunder, at public or private sale, for cash or upon credit, with or
without security, without obligation on the part of any person dealing with the
Trustee to see to the application of the proceeds of or to
<PAGE> 13
13
inquire into the validity, expediency, or propriety of any such disposal;
(iii) To manage, operate, repair, partition, and improve and
mortgage or lease (with or without an option to purchase) for any length of
time any property held in the Trust; to renew or extend any mortgage or lease,
upon such terms as the Trustee may deem expedient; to agree to reduction of the
rate of interest on any mortgage; to agree to any modification in the terms of
any lease or mortgage or of any guarantee pertaining to either of them; to
exercise and enforce any right of foreclosure; to bid on property in
foreclosure; to take a deed in lieu of foreclosure with or without paying
consideration therefor and in connection therewith to release the obligation on
the bond secured by the mortgage; and to exercise and enforce in any action,
suit, or proceeding at law or in equity any rights, covenants, conditions or
remedies with respect to any lease or mortgage or to any guarantee pertaining
to either of them or to waive any default in the performance thereof;
(iv) To join in or oppose any reorganization, recapitalization,
consolidation, merger or liquidation, or any plan therefor, or any lease (with
or without an option to purchase), mortgage or sale of the property of any
organization the securities of which are held in the Trust; to pay from the
Trust any assessments, charges or compensation specified in any plan of
reorganization,
<PAGE> 14
14
recapitalization, consolidation, merger or liquidation; to deposit any property
allotted to the Trust in any reorganization, recapitalization, consolidation,
merger or liquidation, to deposit any property with any committee or
depository; and to retain any property allotted. Trust in any reorganization,
recapitalization, consolidation, merger or liquidation;
(v) To compromise, settle, or arbitrate any claim, debt or
obligation of or against the Trust; to enforce or abstain from enforcing any
right, claim, debt, or obligation; and to abandon any property determined by it
to be worthless;
(vi) To make, execute and deliver, as Trustee, any deeds,
conveyances, leases (with or without option to purchase), mortgages, options,
contracts, waivers or other instruments that the Trustee shall deem necessary
or desirable in the exercise of its powers under this Agreement; and
(vii) To pay out of the assets of the Trust all taxes imposed or
levied with respect to the Trust and in its discretion may contest the validity
or amount of any tax, assessment, penalty, claim, or demand respecting the
Trust and may institute, maintain, or defend against any related action or
proceeding either at law or in equity (and in such regard, the Trustee shall be
indemnified in accordance with Section 8(d) hereof).
<PAGE> 15
15
6. INCOME OF THE TRUST. Except as provided in Section 3
hereof, during the continuance of this Trust all net income of the Trust shall
be allocated not less frequently than monthly among the Trust Beneficiaries'
separate accounts in accordance with Section 7(b) hereof.
7. ACCOUNTING BY TRUSTEE. (a) The Trustee shall keep
records in reasonable detail of all investments, receipts, disbursements and
all other transactions required to be done, including such specific records as
shall be agreed upon in writing by Cleveland-Cliffs and the Trustee. All such
accounts, books and records shall be open to inspection and audit at all
reasonable times by Cleveland-Cliffs, by any Trust Beneficiary, or in the event
of a Trust Beneficiary's death or adjudged incompetence, by an agent or
representative of any of the foregoing (as to such Trust Beneficiary's
account). Within 60 calendar days following the close of each calendar year
and within 60 calendar days after the removal or resignation of the Trustee,
the Trustee shall deliver to Cleveland-Cliffs and, following the Irrevocability
Date, to each Trust Beneficiary, or in the event of a Trust Beneficiary's death
or adjudged incompetence, any agent or representative of the Trust Beneficiary
(as to his or her account), a written account of its administration of the
Trust during such year or during the period from the end of the last preceding
year to the date of such removal or resignation, setting forth all investments,
receipts, disbursements and other transactions effected by it, including a
description of all securities and investments
<PAGE> 16
16
purchased and sold with the cost or net proceeds of such purchases or sales
(accrued interest paid or receivable being shown separately), and showing all
cash, securities, rights and other property held in the Trust at the end of
such year or as of the date of such removal or resignation, as the case may be.
Such written accounts shall reflect the aggregate of the Trust accounts and
status of each separate account maintained for each Trust Beneficiary. Unless
Cleveland-Cliffs or any Trust Beneficiary shall have filed with the Trustee
written exception or objection to any such statement and account within 90 days
after receipt thereof, Cleveland-Cliffs and the Trust Beneficiary shall be
deemed to have approved such statement and account, and in such case, the
Trustee shall be forever released and discharged with respect to all matters
and things reported in such statement and account as though it had been settled
by a decree of a court of competent jurisdiction in an action or proceeding to
which Cleveland-Cliffs and the Trust Beneficiaries were parties.
(b)(i) The Trustee shall maintain a separate subaccount for each
Trust Beneficiary (a "Trust Beneficiary Account") and an account (the "Master
Account") that shall be kept separate from all Trust Beneficiary Accounts and
shall not be identified with any Trust Beneficiary. The Trustee shall credit
or debit each Trust Beneficiary Account and the Master Account as appropriate
to reflect the respective allocable portion of the Trust assets, as such Trust
assets may be adjusted from time to time pursuant to the terms of this Trust
<PAGE> 17
17
Agreement No. 1. Prior to the date of a Change of Control, all deposits of
principal pursuant to Section 1(a) shall be allocated and reallocated as
directed by Cleveland-Cliffs. On or after the date of a Change of Control
deposits of principal may be allocated, but not reallocated by
Cleveland-Cliffs. If any deposit of principal is not allocated by the Company,
such amount shall be allocated by the Trustee to the Master Account.
(ii) As further described in this Section 7(b)(ii), as of the
beginning of each calendar quarter ending after the Trust has become
irrevocable, the Trustee shall (A) ascertain (or cause to be determined) the
Fully Funded amounts (as defined in Section 4 hereof), (B) allocate the income
of the Trust, (C) determine the amount of all Account excesses (as hereinafter
defined), and (D) allocate amounts to and from the Master Account. The
"Account Excess" with respect to a Trust Beneficiary Account shall be equal to
the excess, if any, of the fair market value of the assets held in the Trust
allocated to a Trust Beneficiary Account over the respective Fully Funded
amount. The Trustee shall allocate the income of the Trust and all Account
Excesses to the Master Account. The balance in the Master Account shall then
be allocated to any Trust Beneficiary Accounts that are not Fully Funded in
proportion to the differences between the respective Fully Funded amount and
the balance of the Trust Beneficiary Account, insofar as possible, until all
Trust Beneficiary Accounts are Fully Funded.
(c) Nothing in this Section 7 shall preclude the commingling of
Trust assets for investment.
<PAGE> 18
18
8. RESPONSIBILITY OF TRUSTEE. (a) The Trustee shall act
with the care, skill, prudence and diligence under the circumstances then
prevailing that a prudent corporate trustee, acting in a like capacity and
familiar with such matters, would use in the conduct of an enterprise of a like
character and with like aims; provided, however, that the Trustee shall incur
no liability to any person for any action taken pursuant to a direction,
request or approval, contemplated by and complying with the terms of this
Trust. Agreement No. 1, given in writing by Cleveland-Cliffs or by a Trust
Beneficiary applicable to his or her beneficial interest herein; and provided,
further, that the Trustee shall have no duty to seek additional deposits of
principal from Cleveland-Cliffs for additional amounts accrued under the
Agreement or the Plan, and the Trustee shall not be responsible for the
adequacy of this Trust.
(b) The Trustee may vote any stock or other securities and
exercise any right appurtenant to any stock, other securities or other property
held hereunder, either in person or by general or limited proxy, power of
attorney or other instrument.
(c) The Trustee may hold securities in bearer form and may
register securities and other property held in the trust fund in its own name
or in the name of a nominee, combine certificates representing securities with
certificates of the same issue held by the Trustee in other fiduciary
capacities, and deposit, or arrange for deposit of property with any
depository; provided that the books and records of the Trustee
<PAGE> 19
19
shall at all times show that all such securities are part of the trust fund
under this Trust Agreement No. 1.
(d) If the Trustee shall undertake or defend any litigation
arising in connection with this Trust Agreement No. 1, it shall be indemnified
by Cleveland-Cliffs against its costs, expenses and liabilities (including
without limitation attorneys' fees and expenses) relating thereto.
(e) The Trustee may consult with legal counsel, independent
accountants and actuaries (who may be counsel, independent accountants or
actuaries for Cleveland-Cliffs) with respect to any of its duties or
obligations hereunder, and shall be fully protected in acting or refrain from
acting in accordance with the advice of such counsel, independent accountants
and actuaries.
(f) The Trustee may rely and shall be protected in acting or
refraining from acting within the authority granted by the terms of this Trust
Agreement No. 1 upon any written notice, instruction or request furnished to it
hereunder and believed by it to be genuine and to have been signed or presented
by the proper party or parties.
(g) The Trustee may hire agents, accountants, actuaries, and
financial consultants, who may be agents, accountants, actuaries, or financial
consultants, as the case may be, for Cleveland-Cliffs, and shall not be
answerable for the conduct of same if appointed with due care.
(h) The Trustee is empowered to take all actions necessary or
advisable in order to collect any benefits or payments of which the Trustee is
the designated beneficiary.
<PAGE> 20
20
(i) The Trustee shall have, without exclusion, all powers
conferred on trustees by applicable law unless expressly provided otherwise
herein.
9. AMENDMENTS, ETC., TO AGREEMENTS AND PLAN; COOPERATION OF
CLEVELAND-CLIFFS.
(a) Cleveland-Cliffs has previously furnished the Trustee a
complete and correct copy of each Agreement and of the Plan, and
Cleveland-Cliffs shall, and any Trust Beneficiary may, promptly furnish the
Trustee true and correct copies of any amendment, restatement or successor
thereto, whereupon such amendment, restatement or successor shall be
incorporated herein by reference, provided that such amendment, restatement or
successor shall not affect the Trustee's duties and responsibilities hereunder
without the consent of the Trustee.
(b) Cleveland-Cliffs shall provide the Trustee with all
information requested by the Trustee for purposes of determining payments to
the Trust Beneficiaries or withholding of taxes as provided in Section 2. Upon
the failure of Cleveland-Cliffs or any Trust Beneficiary to provide any such
information, the Trustee shall, to the extent necessary in the sole judgment of
the Trustee, (i) compute the amount payable hereunder to any Trust Beneficiary;
and (ii) notify Cleveland-Cliffs and the Trust Beneficiary in writing of its
computations. Thereafter this Trust Agreement No. 1 shall be construed as to
the Trustee's duties and obligations hereunder in accordance with such Trustee
determinations without further action; provided, however, that no such
determinations shall in
<PAGE> 21
21
any way diminish the rights of any Trust Beneficiary hereunder or under any
Agreement or the Plan; and provided, further, that no such determinations shall
be deemed to modify this Trust Agreement No. 1, any Agreement or the Plan.
Nothing in this Trust Agreement No. 1 shall restrict Cleveland-Cliffs' right to
amend, modify or terminate the Plan.
(c) At such times as may in the judgment of Cleveland-Cliffs
be appropriate, Cleveland-Cliffs shall furnish to the Trustee any amendment to
Exhibit A for the purpose of the addition of Trust Beneficiaries to Exhibit A
(or the deletion of Trust Beneficiaries from Exhibit A who have no Benefits
currently due or payable in the future); provided, however, that no such
amendment shall be made after the date of a Change of Control.
10. COMPENSATION AND EXPENSES OF TRUSTEE. The Trustee
shall be entitled to receive such reasonable compensation for its services as
shall be agreed upon by Cleveland-Cliffs and the Trustee. The Trustee shall
also be entitled to reimbursement of its reasonable expenses incurred with
respect to the administration of the Trust including fees and expenses incurred
pursuant to Sections 8(d), 8(e) and 8(g) and liabilities to creditors pursuant
to court direction as provided in Section 3(a) hereof. Such compensation and
expenses shall in all events be payable either directly by Cleveland-Cliffs or,
in the event that Cleveland-Cliffs shall refuse, from the assets of the Trust
and charged pro rata in proportion to each separate account balance. The Trust
shall
<PAGE> 22
22
have a claim against Cleveland-Cliffs for any such compensation or expenses so
paid.
11. REPLACEMENT OF THE TRUSTEE. (a) Prior to the date of a
Change of Control, the Trustee may be removed by Cleveland-Cliffs. On or after
the date of a Change of Control, the Trustee may be removed at any time by
agreement of Cleveland-Cliffs and a majority of the Trust Beneficiaries. The
Trustee may resign after providing not less than 90 days' notice to
Cleveland-Cliffs and to the Trust Beneficiaries. In case of removal or
resignation, a new trustee, which shall be independent and not subject to
control of either Cleveland-Cliffs or the Trust Beneficiaries, shall be
appointed as shall be agreed by Cleveland-Cliffs and a majority of the Trust
Beneficiaries. No such removal or resignation shall become effective until the
acceptance of the Trust by a successor trustee designated in accordance with
this Section 11. If the Trustee should resign, and within 45 days of the
notice of such resignation, Cleveland-Cliffs and the Executives shall not have
notified the Trustee of an agreement as to a replacement trustee, the Trustee
shall appoint a successor trustee, which shall be a bank or trust company,
wherever located, having a capital and surplus of at least $500,000,000 in the
aggregate.
(b) For purposes of the removal or appointment of a Trustee
under this Section 11, (i) if any Trust Beneficiary shall be deceased or
adjudged incompetent, such Trust Beneficiary's personal representative
(including his or her
<PAGE> 23
23
guardian, executor or administrator) shall participate in such Trust
Beneficiary's stead, and (ii) a Trust Beneficiary shall not participate if all
payments of benefits then currently due or payable in the future have been made
to such Trust Beneficiary.
12. AMENDMENT OR TERMINATION. (a) This Trust Agreement
No. 1 may be amended by Cleveland-Cliffs and the Trustee without the consent of
any Trust Beneficiary provided the amendment does not adversely affect any
Trust Beneficiary. This Trust Agreement No. 1 may also be amended at any time
and to any extent by a written instrument executed by the Trustee,
Cleveland-Cliffs and the Trust Beneficiaries, except to alter Section 12(b),
and except that amendments to Exhibit A contemplated by Section 9(c) hereof
shall be made as therein provided.
(b) The Trust shall terminate on the date on which the Trust
no longer contains any assets, or, if earlier, the date on which each Trust
Beneficiary is entitled to no further payments hereunder.
(c) Upon termination of the Trust as provided in Section 12(b)
hereof, any assets remaining in the Trust shall be returned to Cleveland-Cliffs
or as it directs.
13. SPECIAL DISTRIBUTION. (a) It is intended that
(i) the creation of, and transfer of assets to, the Trust will not cause any
Agreement or the Plan to be other than "unfunded" for purposes of title I of
ERISA; (ii) transfers of assets to the Trust will not be transfers of property
for purposes of
<PAGE> 24
24
section 83 of the Code, or any successor provision thereto, nor will such
transfers cause a currently taxable benefit to be realized by a Trust
Beneficiary pursuant to the "economic benefit" doctrine; and (iii) pursuant to
section 451 of the Code, or any successor provision thereto, amounts will be
includable as compensation in the gross income of a Trust Beneficiary in the
taxable year or years in which such amounts are actually distributed or made
available to such Trust Beneficiary by the Trustee.
(b) Notwithstanding anything to the contrary contained in this
Trust Agreement No. 1, in the event it is determined by a final decision of the
Internal Revenue Service, or, if an appeal is taken therefrom, by a court of
competent jurisdiction that (i) by reason of the creation of, and a transfer of
assets to the Trust, the Trust is considered "funded" for purposes of title I
of ERISA; or (ii) a transfer of assets to the Trust is considered a transfer of
property for purposes of section 83 of the Code or any successor provision
thereto; or (iii) a transfer of assets to the Trust causes a Trust Beneficiary
to realize income pursuant to the "economic benefit" doctrine; or (iv) pursuant
to section 451 of the Code or any successor provision thereto, amounts are
includable as compensation in the gross income of a Trust Beneficiary in a
taxable year that is prior to the taxable year or years in which such amounts
would, but for this Section 13, otherwise actually be distributed or made
available to such Trust Beneficiary by the Trustee, then (A) the assets held in
Trust shall be allocated
<PAGE> 25
25
in accordance with Section 7(b) hereof, and (B) promptly after the next
quarterly allocation and reallocation pursuant to Section 7(b) hereof, the
Trustee shall distribute to each affected Trust Beneficiary an amount equal to
the lesser of (i) the amount which, after taking into account the federal,
state and local income tax consequences of the special distribution itself, is
equal to the sum of any federal, state and local income taxes, interest due
thereon, and penalties assessed with respect thereto, which are attributable to
amounts that are includable in the income of such Trust Beneficiary, or (ii)
the balance of the Trust Beneficiary Account corresponding to such amount.
14. SEVERABILITY, ALIENATION, ETC. (a) Any provision
of this Trust Agreement No. 1 prohibited by law shall be ineffective to the
extent of any such prohibition without invalidating the remaining provisions
hereof.
(b) To the extent permitted by law, Benefits to Trust
Beneficiaries under this Trust Agreement No. 1 may not be anticipated, assigned
(either at law or in equity), alienated or subject to attachment, garnishment,
levy, execution or other legal or equitable process and no benefit provided for
herein and actually paid to any Trust Beneficiary by the Trustee shall be
subject to any claim for repayment by Cleveland-Cliffs or Trustee.
(c) This Trust Agreement No. 1 shall be governed by and
construed in accordance with the laws of the State of Ohio, without giving
effect to the principles of conflict of laws thereof.
<PAGE> 26
26
(d) This Trust Agreement No. 1 may be executed in two or more
counterparts, each of which shall be considered an original agreement. This
Trust Agreement No. 1 shall become effective immediately upon the execution by
Cleveland-Cliffs of at least one counterpart, it being understood that all
parties need not sign the same counterpart, but shall not bind any Trustee
until such Trustee has executed at least one counterpart.
15. NOTICES: IDENTIFICATION OF CERTAIN TRUST BENEFICIARIES.
(a) All notices, requests, consents and other communications hereunder shall be
in writing and shall be deemed to have been duly given when received:
If to the Trustee, to:
Ameritrust Company National Association
900 Euclid Avenue
Cleveland, Ohio 44115
Attention: Trust Department
Employee Benefit Administration
If to Cleveland-Cliffs, to:
Cleveland-Cliffs Inc
1100 Superior Avenue
Cleveland, Ohio 44114
Attention: Secretary
If to the Trust Beneficiaries, to the addresses listed on Exhibit A hereto
provided, however, that if any party or any Trust Beneficiary or his or its
successors shall have designated a different address by written notice to the
other parties, then to the last address so designated.
<PAGE> 27
27
(b) Cleveland-Cliffs shall provide the Trustee with the names
of any beneficiary or beneficiaries designated by the Executives (and who are,
therefore, Trust Beneficiaries hereunder).
IN WITNESS WHEREOF, Cleveland-Cliffs and the Trustee have caused
counterparts of this Amended and Restated Trust Agreement No. 1 to be executed
on their behalf on March 9, 1992, each of which shall be an original
agreement. ------------------
CLEVELAND-CLIFFS INC
By R. F. Novak
-----------
Its Vice President
------------------
AMERITRUST COMPANY NATIONAL
ASSOCIATION
By J. R. Russell
-------------
Its Vice President
--------------
<PAGE> 28
Exhibit A
---------
<TABLE>
<CAPTION>
Executive Title Trust Beneficiary
- --------- ----- -----------------
<S> <C> <C>
M. Thomas Moore Chairman and Chief M. T. Moore Family
Executive Officer Trust
The M. Thomas Moore
Family Trust
Dated 11/29/85
Co-Trustees are: Robert Bouhall
and William E. Reichard of the
Firm of Conway, Patton, Bouhall
and Reichard
1220 Huntington Building
Cleveland, OH 44115
William R. Calfee Senior Executive Society National Bank, or its
Vice President successor, as Trustee under the
William R. Calfee Revocable
Trust Agreement dated 5/9/89,
as the same may hereafter be
amended,
800 Superior Ave.,
Cleveland, OH 44114
Frank S. Forsythe Executive Vice Rita Vanyo Forsythe
President-Operations
John S. Brinzo Executive Vice Marlene J. Brinzo
President-Finance (wife)
</TABLE>
3448F
<PAGE> 29
Exhibit B
---------
"Change of Control" shall be deemed to have occurred if (i)
Cleveland-Cliffs 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
Cleveland-Cliffs as the same shall have existed immediately prior to such
merger or consolidation; (ii) Cleveland-Cliffs 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 Cleveland-Cliffs 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; (iii) 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 Cleveland-Cliffs
<PAGE> 30
2
(whether directly or indirectly); or (iv) during any period of three
consecutive years, including, without limitation, the year 1991, individuals
who at the beginning of any such period constitute the Board of Directors of
Cleveland-Cliffs cease, for any reason, to constitute at least a majority
thereof, unless the election, or the nomination for election by the
shareholders of Cleveland-Cliffs, of each Director first elected during any
such period was approved by a vote of at least one-third of the Directors of
Cleveland-Cliffs who are Directors of Cleveland-Cliffs on the date of the
beginning of any such period.
<PAGE> 1
EXHIBIT 10(o)
2923F
AMENDED AND RESTATED TRUST AGREEMENT NO. 2
This Amended and Restated Trust Agreement No. 2 ("Trust Agreement
No. 2") is made on this 9th day of March, 1992, by and between Cleveland-Cliffs
Inc, an Ohio corporation ("Cleveland-Cliffs"), and Ameritrust Company National
Association, a national banking association, as trustee (the "Trustee").
WITNESSETH:
WHEREAS, under the provisions of certain agreements between each
of the executives of Cleveland-Cliffs (the "Executives") listed (from time to
time as provided in Section 9(c) hereof) on Exhibit A hereto and
Cleveland-Cliffs (the "Executive Agreements"), as each of the same may
hereafter be amended or restated, or any successor thereto, the Executives may
become entitled to certain compensation, pension and other benefits;
WHEREAS, under the provisions of the Severance Pay Plan for Key
Employees of Cleveland-Cliffs Inc (the "Severance Plan"), effective February 1,
1992, as the same may be supplemented, amended, or restated, or any successor
thereto, certain key employees (the "Key Employees") also listed (from time to
time provided in Section 9(c) hereof) on Exhibit A hereto, may become entitled
to compensation, pension and other benefits;
<PAGE> 2
2
WHEREAS, under the provisions of the Cleveland-Cliffs Inc
Retention Plan for Salaried Employees (the "Retention Plan"), adopted January
14, 1992, as the same may be supplemented, amended, or restated, or any
successor thereto, certain salaried employees identified therein (the "Covered
Employees") may become entitled to compensation and other benefits;
WHEREAS, in addition to the compensation, pension and other
benefits provided by the Executive Agreements, the Severance Plan and the
Retention Plan, in order to ensure that the obligations of Cleveland-Cliffs
under the Executive Agreements, the Severance Plan and the Retention Plan can
be enforced by the Executives, the Key Employees, and the Covered Employees,
respectively, (referred to herein singularly as an "Indemnitee" and
collectively as the "Indemnitees") in the event of a "Change of Control" (as
defined herein), the Executive Agreements, the Severance Plan and the Retention
Plan all provide that Cleveland-Cliffs will establish a trust to fund
reasonable attorneys' and related fees and expenses associated with a lawsuit,
action or other proceeding brought by or on behalf of an Indemnitee to enforce
provisions of an Executive Agreement (referred to collectively herein as
"Expenses");
WHEREAS, the Executive Agreements, the Severance Plan and the
Retention Plan all provide that the foregoing trust arrangement will be
considered a part of the Executive Agreements, the Severance Plan and the
Retention Plan, and will
<PAGE> 3
3
set forth the terms and conditions relating to the payment of Expenses;
WHEREAS, Cleveland-Cliffs and the Trustee entered into a trust
agreement ("Trust Agreement No. 2"), dated October 28, 1987, to provide for the
payment of reasonable attorneys' and related fees and expenses incurred by
certain Executives in the enforcement of their rights under agreements between
such executives and Cleveland-Cliffs in effect at that time;
WHEREAS, Trust Agreement No. 2 was amended by a First Amendment
to Trust Agreement No. 2, dated April 9, 1991; and
WHEREAS, Cleveland-Cliffs desires to amend and restate this Trust
Agreement No. 2 heretofore entered into and has transferred or will transfer
to the trust (the "Trust") established by this Trust Agreement No. 2 assets
which shall be held therein until paid to Indemnitees with respect to Expenses
in such manner and at such times as specified herein.
NOW, THEREFORE, the parties amend and restate the Trust Agreement
No. 2 and agree that the Trust shall be comprised, held and disposed of as
follows:
1. TRUST FUND. (a) Cleveland-Cliffs hereby deposits
with the Trustee in trust Ten Dollars ($10.00), which shall become the
principal of this Trust, to be held, administered and disposed of by the
Trustee as herein provided.
(b) The Trust hereby established shall be revocable by
Cleveland-Cliffs at any time prior to the date on which occurs a "Change of
Control," as that term is defined in this Section 1(b); on or after such date,
this Trust shall be
<PAGE> 4
4
irrevocable Cleveland-Cliffs shall notify the Trustee promptly in the event
that a Change of control has occurred. The term "Change of Control" shall mean
the occurrence of any of the following events:
(i) Cleveland-Cliffs 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 Cleveland-Cliffs as the same shall have
existed immediately prior to such merger or consolidation;
(ii) Cleveland-Cliffs 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 Cleveland-Cliffs
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;
(iii) 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
<PAGE> 5
5
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 Cleveland-Cliffs
(whether directly or indirectly); or
(iv) during any period of three consecutive years, including,
without limitation, the year 1991, individuals who at the beginning of
any such period constitute the Board of Directors of Cleveland-Cliffs
cease, for any reason, to constitute at least a majority thereof, unless
the election, or the nomination for election by the shareholders of
Cleveland-Cliffs, of each Director first elected during any such period
was approved by a vote of at least one-third of the Directors of
Cleveland-Cliffs who are Directors of Cleveland-Cliffs on the date of
the beginning of any such period.
(c) The principal of the Trust and any earnings thereon shall
be held in trust separate and apart from other funds of Cleveland-Cliffs
exclusively for the uses and purposes herein set forth. No Indemnitee shall
have any preferred claim on, or any beneficial ownership interest in, any
assets of the Trust prior to the time that such assets are paid to an
Indemnitee as Expenses as provided herein.
(d) Any Company (as defined in paragraph (e) below) may at any
time or from time to time make additional deposits of cash or other property in
the Trust to augment the principal to be held, administered and disposed of by
the Trustee as
<PAGE> 6
6
herein provided, but no payments of all or any portion of the principal of the
Trust or earnings thereon shall be made to Cleveland-Cliffs or any other person
or entity on behalf of Cleveland-Cliffs except as herein expressly provided.
(e) The term "Company" as used herein shall mean
Cleveland-Cliffs, any wholly owned subsidiary or any partnership or joint
venture in which Cleveland-Cliffs and/or any wholly-owned subsidiary is a
partner or venturer and Empire Iron Mining Partnership, or any entity that is a
successor to Cleveland-Cliffs in ownership of substantially all of its assets.
(f) This Trust Agreement No. 2 shall be construed as a part of
the Executive Agreements, the Severance Plan and the Retention Plan.
(g) This Trust is intended to be a grantor trust, within the
meaning of Section 671 of the Internal Revenue Code of 1986, as amended (the
"Code"), or any successor provision thereto, and shall be construed
accordingly. The Trust is not designed to qualify under Section 401(a) of the
Code or to be subject to the provisions of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA").
2. PAYMENTS TO INDEMNITEES. (a) The Trustee shall
promptly pay Expenses to the Indemnitees from the assets of the Trust in
accordance with Section 13 of the Executive Agreements, Section 12 of the
Severance Plan, Article IX of the Retention Plan and this Section 2, provided
that (i) this Trust Agreement No. 2 has not been terminated pursuant to Section
12
<PAGE> 7
7
hereof; (ii) the Trust has become irrevocable; (iii) with respect to the first
demand for payment of Expenses hereunder received by the Trustee, the Trustee
shall immediately give appropriate notice thereof to all Indemnitees, and shall
make no payment of Expenses until the 21st day after such notice has been
given; and (iv) the requirements of Section 2(c) and 2(d) hereof have been
satisfied. The Trustee shall promptly inform the Company as to amounts paid to
any Indemnitee pursuant to this Section.
(b) It is the intention of Cleveland-Cliffs that during the
21-day period prescribed by Section 2(a)(iii) hereof, the Indemnitees will make
reasonable efforts to consult with each other and to take into account the
interests of all Indemnitees in deciding on how best to proceed to enforce the
provisions of the Executive Agreements, the Severance Plan, and/or the
Retention Plan such that the assets of the Trust are utilized most effectively;
provided, however, that this Section 2(b) is to be construed as precatory in
nature, and in the absence of any other agreement or arrangement, this Trust
Agreement No. 2 (without regard to this Section 2(b)) shall apply to the
payment of Expenses.
(c) A demand for payment by an Indemnitee hereunder must be
made within two months of the date on which the Indemnitee receives a bill,
invoice or other statement setting forth the Expenses that have been incurred.
In order to demand payment hereunder, the Indemnitee must deliver to the
Trustee (i) a certificate signed by or on behalf of such Indemnitee,
<PAGE> 8
8
certifying to the Trustee that the Company is in default in paying the
Indemnitee a specified amount which the Indemnitee states to be owed under an
Executive Agreement, the Severance Plan or the Retention Plan, and (ii) a
notice in writing and in reasonable detail of the Expenses that are to be paid
hereunder.
(d) To the extent payments hereunder may be made only from
funds held in the form of a deposit or obligation, such payments may be
postponed until such deposit or obligation shall have matured. Payments shall
be made to the Indemnitee in the full amount noticed until the Trust is
depleted; provided that if on the date such amount is to be paid from the Trust
other amounts have been claimed but not yet paid to the same or other
Indemnitees and the aggregate amount so claimed exceeds the amount available in
the Trust, the Trustee shall only pay that portion of the amount then payable
to each such Indemnitee determined by multiplying such amount by a fraction,
the numerator of which is the amount then in the Trust and the denominator of
which is the aggregate amount noticed by the Indemnitees to be owed but not yet
paid to that date.
3. RIGHTS OF INDEMNITEES. (a) Nothing in this Trust
Agreement No. 2 shall in any way diminish any rights of any Indemnitee to
pursue his rights as a general creditor of the Company with respect to Expenses
or otherwise, and (b) the rights of the Indemnitees under the Executive
Agreements, Severance Plan or Retention Plan shall in no way be affected or
diminished by any provision of this Trust Agreement No. 2 or action taken
pursuant to this Trust Agreement No. 2, it being
<PAGE> 9
9
the intent of Cleveland-Cliffs that rights of the Indemnitees be security for
obligations of the Company under the Executive Agreements, Severance Plan or
Retention Plan, except that any payment actually received by any Indemnitee
hereunder shall reduce dollar-per-dollar amounts otherwise due to such
Indemnitee pursuant to Section 13 of the Executive Agreements, Section 12 of
the Severance Plan, or Article IX of the Retention Plan, as applicable.
4. PAYMENTS TO CLEVELAND-CLIFFS. Except to the extent
expressly contemplated by Section 1(b), Cleveland-Cliffs shall have no right or
power to direct the Trustee to return any of the Trust assets to
Cleveland-Cliffs before all payments of Expenses have been made to all
Indemnitees as herein provided.
5. INVESTMENT OF TRUST FUND. The Trustee shall invest the
principal of the Trust including any income accumulated and added to principal
in (a) interest-bearing deposit accounts or certificates of deposit (including
any such accounts or certificates issued or offered by the Trustee or any
successor or affiliated corporation but excluding obligations of the Company),
(b) direct obligations of the United States of America, or obligations the
payment of which is guaranteed, as to both principal and interest, by the
government or an agency of the government of the United States of America, or
(c) one or more mutual funds or comingled funds, whether or not maintained by
the Trustee, substantially all of the assets of which is invested in
obligations the income from
<PAGE> 10
10
which is not subject to taxation; provided, however, that no such investment
may mature more than 90 days after the date of purchase. Nothing in this Trust
Agreement No. 2 shall preclude the comingling of Trust assets for investment.
The Trustee shall not be required to invest nominal amounts.
6. INCOME OF THE TRUST. During the continuance of this Trust
all net income of the Trust shall be retained in the Trust.
7. ACCOUNTING BY TRUSTEE. The Trustee shall keep
records in reasonable detail of all investments, receipts, disbursements and
all other transactions required to be done, including such specific records as
shall be agreed upon in writing by Cleveland-Cliffs and the Trustee All such
accounts, books and records shall be open to inspection and audit at all
reasonable times by Cleveland-Cliffs, by any Indemnitee or by any agent or
representative of any of the foregoing. Within 60 calendar days following the
end of each calendar year and within 60 calendar days after the removal or
resignation of the Trustee, the Trustee shall deliver to Cleveland-Cliffs and,
if such year end, removal or resignation occurs on or after the date on which a
Change of Control has occurred, to each Indemnitee a written account of its
administration of the Trust during such year or during the period from the end
of the last preceding year to the date of such removal or resignation, setting
forth all investments, receipts, disbursements and other transactions affected
by it, including a description of all securities and investments
<PAGE> 11
11
purchased and sold with the cost or net proceeds of such purchases or sales
(accrued interest paid or receivable being shown separately), and showing all
cash, securities, rights and other property held in the Trust at the end of
such year or as of the date of such removal or resignation, as the case may be.
The Trustee shall furnish to Cleveland-Cliffs on a quarterly basis (or as
Cleveland-Cliffs shall direct from time to time) and in a timely manner such
information regarding the Trust as Cleveland-Cliffs shall require for purposes
of preparing its statements of financial condition. Unless Cleveland-Cliffs or
any Indemnitee shall have filed with the Trustee written exception or objection
to any such statement and account within 90 days after receipt thereof,
Cleveland-Cliffs or the Indemnitee shall be deemed to have approved such
statement and account, and in such case the Trustee shall be forever released
and discharged with respect to all matters and things reported in such
statement and account as though it had been settled by a decree of a court of
competent jurisdiction in an action or proceeding to which Cleveland-Cliffs and
the Indemnitees were parties.
8. RESPONSIBILITY OF TRUSTEE. (a) The Trustee shall act
with the care, skill, prudence and diligence under the circumstances then
prevailing that a prudent corporate trustee, acting in like capacity and
familiar with such matters, would use in the conduct of an enterprise of a like
character and with like aims; provided, however, that the Trustee shall incur
no liability to any person for any action taken pursuant to a
<PAGE> 12
12
direction, request or approval which is contemplated by and in conformity and
compliance with the terms of this Trust Agreement No. 2, the Executive
Agreements, the Severance Plan and the Retention Plan, and is given in writing
by Cleveland-Cliffs or by an Indemnitee with respect to his beneficial interest
herein; and provided, further, that the Trustee shall have no duty to seek
additional deposits of principal from Cleveland-Cliffs, and the Trustee shall
not be responsible for the adequacy of this Trust.
(b) The Trustee shall not be required to undertake or to
defend any litigation arising in connection with this Trust Agreement No. 2
unless it be first indemnified by Cleveland-Cliffs against its prospective
costs, expenses, and liabilities (including without limitation attorneys' fees
and expenses) relating thereto, and Cleveland-Cliffs hereby agrees to indemnify
the Trustee and to be primarily liable for such costs, expenses and
liabilities.
(c) The Trustee may consult with legal counsel (which, after a
Change of Control, shall be independent with respect to the Company) with
respect to any of its duties or obligations hereunder, and shall be fully
protected in acting or refraining from acting in accordance with the advice of
such counsel.
(d) The Trustee may rely and shall be protected in acting or
refraining from acting within the authority granted by the terms of this Trust
Agreement No. 2 upon any written notice, instruction or request furnished to it
hereunder and
<PAGE> 13
13
believed by it to be genuine and to have been signed or presented by the proper
party or parties, including, without limiting the scope of this Section 8(d),
(i) the notice of a Change of Control required by Section 1(b) hereof, and (ii)
the certification and notice required by Section 2(c) hereof.
(e) The Trustee may hire agents, accountants and financial
consultants, who may be agent, accountant, or financial consultant, as the case
may be, for the Company, and shall not be answerable for the conduct of same if
appointed with due care.
(f) The Trustee shall have, without exclusion, all powers
conferred on trustees by applicable law unless expressly provided otherwise
herein.
(g) The Trustee is empowered to take all actions necessary or
advisable in order to collect any benefits or payment of which the Trustee is
the designated beneficiary.
9. AMENDMENTS, ETC. TO EXECUTIVE AGREEMENTS, THE SEVERANCE
PLAN AND THE RETENTION PLAN; COOPERATION OF CLEVELAND-CLIFFS. (a)
Cleveland-Cliffs has previously furnished the Trustee a complete and correct
copy of each Executive Agreement, the Severance Plan and the Retention Plan.
Any Indemnitee may, and Cleveland-Cliffs shall, provide the Trustee with true
and correct copies of any amendment, restatement or successor to any Executive
Agreement, the Severance Plan and the Retention Plan, whereupon such amendment,
restatement or successor shall be incorporated herein by reference, provided
that such amendment, restatement
<PAGE> 14
14
or successor shall not affect the Trustee's duties and responsibilities
hereunder without the consent of the Trustee.
(b) Cleveland-Cliffs shall provide the Trustee with all information
requested by the Trustee for purposes of determining payments to the
Indemnitees as provided in Section 2. Upon the failure of Cleveland-Cliffs or
any Indemnitee to provide any such information requested by the Trustee for
purposes of determining payments to the Indemnitees as provided in Section 2,
the Trustee shall, to the extent necessary in the sole judgment of the Trustee,
(i) compute the amount payable hereunder to any Indemnitee; and (ii) notify
Cleveland-Cliffs and the Indemnitee in writing of its computations. Thereafter
this Trust Agreement No. 2 shall be construed as to the Trustee's duties and
obligation hereunder in accordance with such Trustee determinations without
further action; provided, however, that no such determinations shall in any way
diminish the rights of the Indemnitees hereunder or under the Executive
Agreements, Severance Plan or Retention Plan, and provided, further, that no
such determination shall be deemed to modify this Trust Agreement No. 2 or any
Executive Agreement, the Severance Plan, or the Retention Plan.
(c) At such times as may in the judgment of Cleveland-Cliffs
be appropriate, Cleveland-Cliffs shall furnish to the Trustee any amendment to
Exhibit A for the purpose of the addition of Indemnitees to Exhibit A (or the
deletion of Indemnitees from Exhibit A who are not currently and shall not in
the future be entitled to Expenses); provided, however, that
<PAGE> 15
15
no such amendment shall be made after the date of a Change of Control, other
than to designate a different address pursuant to Section 14 hereof.
10. COMPENSATION AND EXPENSES OF TRUSTEE. The Trustee
shall be entitled to receive such reasonable compensation for its services as
shall be agreed upon by Cleveland-Cliffs and the Trustee. The Trustee shall
also be entitled to reimbursement of its reasonable expenses incurred with
respect to the administration of the Trust including fees and expenses incurred
pursuant to Sections 8(c) and 8(e) hereof. Such compensation and expenses
shall in all events be payable either directly by Cleveland-Cliffs or, in the
event that Cleveland-Cliffs shall refuse, from the assets of the Trust. The
Trust shall have a claim against Cleveland-Cliffs for any such compensation or
expenses so paid.
11. REPLACEMENT OF THE TRUSTEE. (a) The Trustee may
resign after providing not less than 90 days' notice to Cleveland-Cliffs and,
on or after the date on which a Change of Control has occurred, to the
Indemnitees. Prior to the date on which a Change of Control has occurred, the
Trustee may be removed at any time by Cleveland-Cliffs. On or after such date,
such removal shall also require the agreement of a majority of the Indemnitees
Prior to the date on which a Change of Control has occurred, a replacement or
successor trustee shall be appointed by Cleveland-Cliffs. On or after such
date, such appointment shall also require the agreement of a majority of the
Indemnitees. No such removal or resignation
<PAGE> 16
16
shall become effective until the acceptance of the trust by a successor trustee
designated in accordance with this Section 11. If the Trustee should resign,
and within 45 days of the notice of such resignation Cleveland-Cliffs and a
majority of the Indemnitees (if required) shall not have notified the Trustee
of an agreement as to a replacement trustee, the Trustee shall appoint a
successor trustee, which shall be a bank or trust company, wherever located,
having a capital and surplus of at least $500,000,000 in the aggregate.
Notwithstanding the foregoing, a new trustee shall be independent and not
subject to control of either Cleveland-Cliffs or the Indemnitees. Upon the
acceptance of the trust by a successor trustee, the Trustee shall release all
of the monies and other property in the Trust to its successor, who shall
thereafter for all purposes of this Trust Agreement No. 2 be considered to be
the "Trustee."
(b) For purposes of the removal or appointment of a trustee
under this Section 11, if any Indemnitee shall be deceased or adjudged
incompetent, such Indemnitee's personal representative (including his or her
guardian, executor or administrator) shall participate in such Indemnitee's
stead.
12. AMENDMENT OR TERMINATION. (a) This Trust Agreement
No. 2 may be amended at any time and to any extent by a written instrument
executed by the Trustee, Cleveland-Cliffs and, on or after the date on which a
Change of Control has occurred, a majority of the Indemnitees, except to make
the Trust revocable after it has become irrevocable in accordance
<PAGE> 17
17
with Section 1(b) hereof, or to alter Section 12(b) hereof, except that
amendments contemplated by Section 9 hereof shall be made as therein provided.
(b) The Trust shall terminate upon the earliest of (i) the
tenth anniversary of the date on which a Change of Control has occurred; (ii)
the third anniversary of the date on which a Change of Control has occurred,
provided that the Trustee has received no demand for payment of Expenses prior
to such anniversary; (iii) such time as the Trust no longer contains any
assets; (iv) such time as the Trustee shall have received consents from all
Indemnitees to the termination of this Trust Agreement No. 2; or (v) there is
no longer any living Indemnitee under this Trust Agreement No. 2 and there is
no pending demand by the estate of any Indemnitee against the Trust.
(c) Upon termination of the Trust as provided in Section 12(b)
hereof, any assets remaining in the Trust shall be returned to Cleveland-Cliffs
unless a determination is made by legal counsel experienced in such matters
that the assets of the Trust may not be returned to Cleveland-Cliffs without
violating Section 403(d)(2) of ERISA, or any successor provision thereto. If
such a determination is made, any assets remaining in the Trust, after
satisfaction of liabilities hereunder, pursuant to the written direction of
Cleveland-Cliffs, shall be (i) distributed to any welfare benefit plan (within
the meaning of ERISA) maintained by Cleveland-Cliffs at the time of
distribution so established at
<PAGE> 18
18
such time in order to receive such assets from this Trust, or (ii) otherwise
applied to provide benefits which may be provided by a welfare benefit plan
(within the meaning of ERISA), directly or through the purchase of insurance.
13. SEVERABILITY, ALIENATION, ETC. (a) Any provision
of this Trust Agreement No. 2 prohibited by law shall be ineffective to the
extent of any such prohibition without invalidating the remaining provisions
hereof.
(b) To the extent permitted by law, benefits to Indemnitees
under this Trust Agreement No. 2 may not be anticipated (except as herein
expressly provided), assigned (either at law or in equity), alienated or
subject to attachment, garnishment, levy, execution or other legal or equitable
process. No benefit actually paid to any Indemnitee by the Trustee shall be
subject to any claim for repayment by the Company or Trustee, except in the
event of (i) a false claim, or (ii) a payment is made to an incorrect
Indemnitee.
(c) This Trust Agreement No. 2 shall be governed by and
construed in accordance with the laws of the State of Ohio, without giving
effect to the principles of conflict of laws thereof.
(d) This Trust Agreement No. 2 may be executed in two or more
counterparts, each of which shall be considered an original agreement. This
Trust Agreement No. 2 shall become effective immediately upon the execution by
Cleveland-Cliffs of at least one counterpart, it being understood that all
parties need not sign the same counterpart, but shall not bind any
<PAGE> 19
19
Trustee until such Trustee has executed at least one counterpart.
14. NOTICES. All notices, requests, consents and other
communications hereunder shall be in writing and shall be deemed to have been
duly given when received:
IF TO THE TRUSTEE, TO:
Ameritrust Company National Association
900 Euclid Avenue
Cleveland, Ohio 44115
Attention: Trust Department
Employee Benefit Administration
IF TO CLEVELAND-CLIFFS, TO:
Cleveland-Cliffs Inc
1100 Superior Avenue
Cleveland, Ohio 44114
Attention: Secretary
IF TO AN INDEMNITEE, TO:
His or her last address shown on the records of the Company
provided, however, that if any party or his or its successor shall have
designated a different address by notice to the other parties, then to the last
address so designated.
<PAGE> 20
20
IN WITNESS WHEREOF, each of Cleveland-Cliffs and the Trustee have
caused counterparts of this Amended and Restated Trust Agreement No. 2 to be
executed on their behalf on March 9, 1992, each of which shall be an
original agreement.
CLEVELAND-CLIFFS INC
By: R. F. Novak
-----------
Its: Vice President
--------------
AMERITRUST COMPANY NATIONAL
ASSOCIATION, as Trustee
By: J. R. Russell
-------------
Its: Vice President
---------------
<PAGE> 21
Exhibit A
---------
Executives
- ----------
Name Title
---- -----
M. T. Moore Chairman and Chief Executive
Officer
W. R. Calfee Senior Executive Vice
President
F. S. Forsythe Executive Vice President-
Operations
J. S. Brinzo Executive Vice President-
Finance
Key Employees
- -------------
Name Title
---- -----
G. N. Carlson Senior Vice President-
Operations
T. J. O'Neil Senior Vice President-
Technical
A. S. West Senior Vice President-Sales
G. N. Chandler II Vice President
R. Emmet Vice President and Treasurer
F. L. Hartman Vice President and Corporate
Counsel
J. L. Kelley Vice President-Public Affairs
T. C. Levan Vice President-Corporate
Development
R. F. Novak Vice President-Human Resources
J. A. Trethewey Vice President and Controller
M. E. Jackson Secretary
R. C. Berglund General Manager-Tilden
Magnetite Partnership
J. A. Fegan General Manager-Empire Iron
Mining Partnership
D. K. Honsberger General Manager-Wabush Mine
J. D. Jeffries General Manager-Hibbing
Taconite Company
R. W. von Bitter General Manager-LTV Steel
Mining Company
3448F
<PAGE> 1
EXHIBIT 10(p)
#4
TRUST AGREEMENT
This Trust Agreement ("Trust Agreement") made this 28th day of August,
1987 by and between Cleveland-Cliffs Inc, an Ohio corporation
("Cleveland-Cliffs"), and AmeriTrust Company National Association, a national
banking association, as trustee (the "Trustee");
WITNESSETH:
WHEREAS, certain benefits are or may become payable under the
provisions of the Plan for Deferred Payment of Directors' Fees of The
Cleveland-Cliffs Iron Company, adopted June 4, 1981 and assumed by
Cleveland-Cliffs Inc, effective July 1, 1985, as the same has been or may
hereafter be supplemented, amended or restated, or any successor thereto (the
"Plan"), a current copy of which is attached hereto as Exhibit B and
incorporated herein by reference, to the persons (who may be directors
("Directors") or beneficiaries of Directors) listed (from time to time as
provided in Section 9(b) hereof) on Exhibit A hereto or to the beneficiaries of
such persons (Directors and Directors' beneficiaries are referred to herein as
"Trust Beneficiaries"), as the case may be;
<PAGE> 2
2
WHEREAS, the Plan provides for any Director who is separately
compensated for his services on the Board of Directors to elect to defer
payment of all or a portion of his compensation as a Director and
Cleveland-Cliffs wishes specifically to assure the payment to the Trust
Beneficiaries of amounts due thereunder (the amounts so payable being
collectively referred to herein as the "Benefits") in the event of a "Change of
Control" (as defined herein);
WHEREAS, subject to Section 9 hereof, the amounts and timing of
Benefits to which each Trust Beneficiary is presently or may become entitled
are as provided in the Plan;
WHEREAS, Cleveland-Cliffs wishes to establish a trust (the "Trust") and
to transfer to the Trust assets which shall be held therein subject to the
claims of the creditors of Cleveland-Cliffs to the extent set forth in Section
3 hereof until paid in full to all Trust Beneficiaries as Benefits in such
manner and at such times as specified herein unless Cleveland-Cliffs is
Insolvent (as defined herein) at the time that such Benefits become payable;
and
WHEREAS, Cleveland-Cliffs shall be considered "Insolvent" for purposes
of this Trust Agreement at such time as Cleveland-Cliffs (i) is subject to a
pending voluntary or involuntary proceeding as a debtor under the United States
Bankruptcy Code, as heretofore or hereafter amended, or (ii) is unable to pay
its debts as they mature.
<PAGE> 3
3
NOW, THEREFORE, the parties do hereby establish the Trust and agree
that the Trust shall be comprised, held and disposed of as follows:
1. TRUST FUND: (a) Subject to the claims of its creditors to the
extent set forth in Section 3 hereof. Cleveland-Cliffs hereby deposits with
the Trustee in trust Ten Dollars ($10.00) which shall become the principal of
this Trust, to be held, administered and disposed of by the Trustee as herein
provided, but no payments of all or any portion of the principal of the Trust
or earnings thereon shall be made to Cleveland-Cliffs or any other person or
entity on behalf of Cleveland-Cliffs except as herein expressly provided.
(b) The Trust hereby established shall be revocable by Cleveland-Cliffs
at any time prior to the date on which occurs a "Change of Control," as that
term is defined in this Section 1(b); on or after such date ("Irrevocability
Date"), this Trust shall be irrevocable. Cleveland-Cliffs shall notify the
Trustee promptly in the event that a Change of Control has occurred. The term
"Change of Control" shall mean the occurrence of any of the following events:
(i) a tender offer shall be made and consummated for the ownership of
30% or more of the outstanding voting securities of Cleveland-Cliffs;
(ii) Cleveland-Cliffs shall be merged or consolidated with another
corporation and as a result of
<PAGE> 4
4
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 Cleveland-Cliffs, other than affiliates
(within the meaning of the Securities Exchange Act of 1934) of any party to
such merger or consolidation, as the same shall have existed immediately prior
to such merger or consolidation;
(iii) Cleveland-Cliffs shall sell substantially all of its assets to
another corporation which is not a wholly owned subsidiary;
(iv) 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 acquire 30% or more of the outstanding voting securities of
Cleveland-Cliffs (whether directly, indirectly, beneficially or of record), or
(v) during any period of two consecutive years, individuals who at the
beginning of any such period constitute the Board of Directors of
Cleveland-Cliffs cease for any reason to constitute at least a majority
thereof, unless the election, or the nomination for election by the
shareholders of Cleveland-Cliffs, of each Director first elected during any
such period was approved by a vote of at least two-thirds of the Directors of
Cleveland-Cliffs then
<PAGE> 5
5
still in office who are Directors of Cleveland-Cliffs on the date at
the beginning of any such period.
For purposes hereof, ownership of voting securities shall take into account and
shall include ownership as determined by applying the provisions of Rule
13d-3(d)(1)(i) (as in effect on the date hereof) pursuant to the Securities
Exchange Act of 1934.
(c) Upon the earlier to occur of (i) a Change of Control or (ii) a
declaration by the Board of Directors of Cleveland-Cliffs that a Change of
Control is imminent, Cleveland-Cliffs shall promptly, and in any event within
five (5) business days, transfer to the Trustee to be added to the principal of
the Trust under this Agreement property or cash equal to the then value of the
separate accounts of the Directors under the provisions of the Plan. Any
payments by the Trustee pursuant to this Agreement shall, to the extent
thereof, discharge the obligation of Cleveland-Cliffs to pay benefits under the
Plan, it being the intent of Cleveland-Cliffs that assets in the Trust
established hereby be held as security for the obligation of Cleveland-Cliffs
to pay benefits under the Plan.
(d) The principal of the Trust and any earnings thereon shall be held
in trust separate and apart from other funds of Cleveland-Cliffs exclusively
for the uses and purposes herein set forth. No Trust Beneficiary shall have
any preferred claim on, or any beneficial ownership interest in,
<PAGE> 6
6
any assets of the Trust prior to the time that such assets are paid to a Trust
Beneficiary as Benefits as provided herein.
(e) Any Company may at any time or from time to time make additional
deposits of cash or other property in the Trust to augment the principal to be
held, administered and disposed of by the Trustee as herein provided, but no
payments of all or any portion of the principal of the Trust or earnings
thereon shall be made to Cleveland-Cliffs or any other person or entity on
behalf of Cleveland-Cliffs except as herein expressly provided.
(f) The term "Company" as used herein shall mean Cleveland-Cliffs, any
wholly owned subsidiary or any entity that is a successor to Cleveland-Cliffs
in ownership of substantially all its assets.
(g) The Trust is intended to be a grantor trust, within the meaning of
section 671 of the internal Revenue Code of 1986, as amended (the "Code"), or
any successor provision thereto, and shall be construed accordingly.
(h) This Agreement shall be construed as a part of the Plan, and shall
override the terms of the Plan (including, but not limited to, Section 5
thereof) to the extent inconsistent herewith.
2. PAYMENTS TO TRUST BENEFICIARIES. (a) Provided that
Cleveland-Cliffs is not Insolvent and commencing with the earliest to occur of
(i) appropriate notice by Cleveland-Cliffs to the Trustee, or (ii) the
Irrevocability Date, the Trustee
<PAGE> 7
7
shall make payments of Benefits to each Trust Beneficiary from the assets of
the Trust in accordance with the terms of the Plan and subject to Section 9
hereof. The Trustee shall make provision for withholding of any federal,
state, or local taxes that may be required to be withheld by the Trustee in
connection with the payment of any Benefits hereunder.
(b) If the balance of a Director's separate account maintained
pursuant to Section 7(b) hereof is not sufficient to provide for full payment
of Benefits to which such Director's Trust Beneficiaries are entitled as
provided herein, Cleveland-Cliffs shall make the balance of each such payment
as provided in the Plan. No payment from the Trust assets to a Trust
Beneficiary shall exceed the balance of such separate account.
3. THE TRUSTEE'S RESPONSIBILITY REGARDING PAYMENTS TO A TRUST
BENEFICIARY WHEN CLEVELAND-CLIFFS IS INSOLVENT: (a) At all times during the
continuance of this Trust, the principal and income of the Trust shall be
subject to claims of creditors of Cleveland-Cliffs. The Board of Directors
("Board") of Cleveland-Cliffs and its Chief Executive Officer ("CEO") shall
have the duty to inform the Trustee if either the Board or the CEO believes
that Cleveland-Cliffs is Insolvent. If the Trustee receives a notice from the
Board, the CEO, or a creditor of Cleveland-Cliffs alleging that
Cleveland-Cliffs is Insolvent, then unless the Trustee independently determines
that Cleveland-Cliffs is not Insolvent, the Trustee shall
<PAGE> 8
8
(i) discontinue payments to any Trust Beneficiary, (ii) hold the Trust assets
for the benefit of the general creditors of Cleveland-Cliffs and (iii) promptly
seek the determination of a court of competent jurisdiction regarding the
Insolvency of Cleveland-Cliffs. The Trustee shall deliver any undistributed
principal and income in the Trust to the extent necessary to satisfy the claims
of the creditors of Cleveland-Cliffs as a court of competent jurisdiction may
direct. Such payments of principal and income shall be borne by the separate
accounts of the Trust Beneficiaries in proportion to the balances on the date
of such court order of their respective accounts maintained pursuant to Section
7(b) hereof. If payments to any Trust Beneficiary have been discontinued
pursuant to this Section 3(a), The Trustee shall resume payments to such Trust
Beneficiary only after receipt of an order of a court of competent
jurisdiction. The Trustee shall have no duty to inquire as to whether
Cleveland-Cliffs is Insolvent and may rely on information concerning the
Insolvency of Cleveland-Cliffs which has been furnished to the Trustee by any
person. Nothing in this Trust Agreement shall in any way diminish any rights
of any Trust Beneficiary to pursue his rights as a general creditor of
Cleveland-Cliffs with respect to Benefits or otherwise, and the rights of each
Trust Beneficiary under the Plan shall in no way be affected or diminished by
any provision of this Trust Agreement or action taken pursuant to this Trust
Agreement except that any payment
<PAGE> 9
9
actually received by any Trust Beneficiary hereunder shall reduce
dollar-per-dollar amounts otherwise due to such Trust Beneficiary pursuant to
the Plan.
(b) If the Trustee discontinues payments of Benefits from the Trust
pursuant to Section 3(a) hereof, the Trustee shall, to the extent it has liquid
assets, place cash equal to the discontinued payments (to the extent not paid
to creditors pursuant to Section 3(a) and not paid to the Trustee pursuant to
Section 10 hereof) in such interest-bearing deposit accounts or certificates of
deposit (including any such accounts or certificates issued or offered by the
Trustee or any successor corporation but excluding obligations of
Cleveland-Cliffs) as determined by the Trustee in its sole discretion. If the
Trustee subsequently resumes such payments. The first payment following such
discontinuance shall include the aggregate amount of all payments which would
have been made to the Trust Beneficiaries in accordance with this Trust
Agreement during the period of such discontinuance, less the aggregate amount
of payments made to any Trust Beneficiary by Cleveland-Cliffs pursuant to the
Plan during any such period of discontinuance, together with interest on the
net amount delayed determined at a rate equal to the rate paid on the accounts
or deposits selected by the Trustee; provided, however, that no such payment
shall exceed the balance of the respective Director's account as provided in
Section 7(b) hereof.
<PAGE> 10
10
4. PAYMENTS TO CLEVELAND-CLIFFS: Except to the extent expressly
contemplated by Section 1(b) hereof, Cleveland-Cliffs shall have no right or
power to direct the Trustee to return any of the Trust assets to
Cleveland-Cliffs before all payments of Benefits have been made to all Trust
Beneficiaries as herein provided.
5. INVESTMENT OF PRINCIPAL: The Trustee shall invest and reinvest the
principal of the Trust including any income accumulated and added to principal,
as directed by the Compensation Committee of the Board of Directors of
Cleveland- Cliffs (which direction may include investment in Common Shares of
Cleveland-Cliffs). In the absence of any such direction, the Trustee shall
have sole power to invest the assets of the Trust (including investment in
common shares of Cleveland-Cliffs). The Trustee shall act at all however, with
the care, skill, prudence, and diligence under the circumstances then
prevailing that a prudent corporate trustee, acting in a like capacity and
familiar with such matters, would use in the conduct of an enterprise of a like
character and with like aims. The investment objective of the Trustee shall be
to preserve the principal of the Trust while obtaining a reasonable total rate
of return, measurement of which shall include market appreciation or
depreciation plus receipt of interest and dividends. The Trustee shall not be
required to invest nominal amounts.
6. INCOME OF THE TRUST: Except as provided in Section 3 hereof,
during the continuance of this Trust all net
<PAGE> 11
11
income of the Trust shall be allocated not less frequently than monthly among
the Trust Beneficiaries' separate accounts in accordance with Section 7(b)
hereof.
7. ACCOUNTING BY TRUSTEE: (a) The Trustee shall keep records in
reasonable detail of all investments, receipts, disbursements and all other
transactions required to be done, including such specific records as shall be
agreed upon in writing by Cleveland-Cliffs and the Trustee. All such accounts,
books and records shall be open to inspection and audit at all reasonable times
by Cleveland-Cliffs, by any Director, or in the event of a Director's death or
adjudged incompetence, by his Trust Beneficiaries (as to his account), or by
any agent or representative of any of the foregoing. Within 60 calendar days
following the end of each calendar year and within 60 calendar days after the
removal or resignation of the Trustee, the Trustee shall deliver to
Cleveland-Cliffs and to each Director, or in the event of his death or adjudged
incompetence, his Trust Beneficiaries (as to his account) a written account of
its administration of the Trust during such year or during the period from the
end of the last preceding year to the date of such removal or resignation,
setting forth all investments, receipts, disbursements and other transactions
effected by it, including a description of all securities and investments
purchased and sold with the cost or net proceeds of such purchases or sales
(accrued interest paid or receivable being shown separately), and showing all
cash, securities,
<PAGE> 12
12
rights and other property held in the Trust at the end of such year or as of
the date of such removal or resignation, as the case may be. Such written
accounts shall reflect the aggregate of the Trust accounts and status of each
separate account maintained for each Director.
(b) The Trustee shall maintain a separate account for each Trust
Beneficiary. The Trustee shall credit or debit each Trust Beneficiary's account
as appropriate to reflect such Trust Beneficiary's allocable portion of the
Trust assets, as such Trust assets may be adjusted from time to time pursuant
to the terms of this Trust Agreement. Prior to the Irrevocability Date, all
deposits of principal pursuant to Section l(a) hereof shall be allocated as
directed by Cleveland-Cliffs; on or after such date deposits of principal, once
allocated, may not be reallocated by Cleveland-Cliffs. Income, expense, gain
or loss on assets allocated to the separate accounts of the Trust Beneficiaries
shall be allocated separately to such accounts by the Trustee in proportion to
the balances of the separate accounts of the Directors.
8. RESPONSIBILITY OF TRUSTEE: (a) The Trustee shall act with the
care, skill, prudence and diligence under the circumstances then prevailing
that a prudent corporate trustee, acting in a like capacity and familiar with
such matters, would the conduct of an enterprise of a like character and with
like aims; provided, however, that the Trustee shall incur no liability to any
person for any action taken pursuant to a direction, request or approval,
contemplated by and complying
<PAGE> 13
13
with the terms of this Trust Agreement, given in writing by Cleveland-Cliffs,
by the Compensation Committee or by a Trust Beneficiary applicable to his or
her beneficial interest herein; and provided, further, that the Trustee shall
have no duty to seek additional deposits of principal from Cleveland-Cliffs for
additional amounts accrued under the Plan, and the Trustee shall not be
responsible for the adequacy of this Trust.
(b) The Trustee may vote any stock or other securities and exercise
any right appurtenant to any stock, other securities or other property held
hereunder, either in person or by general or limited proxy, power of attorney
or other instrument.
(c) The Trustee may hold securities in bearer form and may register
securities and other property held in the trust fund in its own name or in the
name of a nominee, combine certificates representing securities with
certificates of the same issue held by the Trustee in other fiduciary
capacities, and deposit, or arrange for deposit of property with any
depository; provided that the books and records of the Trustee shall at all
times show that all such securities are part of the trust fund.
(d) If the Trustee shall undertake or defend any litigation arising in
connection with this Trust Agreement, it shall be indemnified by
Cleveland-Cliffs against its costs, expenses and liabilities (including without
limitation attorneys' fees and expenses) relating thereto.
<PAGE> 14
14
(e) The Trustee may consult with legal counsel, independent
accountants and actuaries (who may be counsel independent accountants or
actuaries for Cleveland-Cliffs) with respect to any of its duties or
obligations hereunder, and shall be fully protected in acting or refraining
from acting in accordance with the advice of such counsel, independent
accountants and actuaries.
(f) The Trustee may rely and shall be protected in acting or
refraining from acting within the authority granted by the terms of this Trust
Agreement upon any written notice, instruction or request furnished to it
hereunder and believed by it to be genuine and to have been signed or presented
by the proper party or parties.
(g) The trustee may hire agents, accountants, actuaries, and financial
consultants, who may be agents, accountants, actuaries, or financial
consultants, as the case may be, for Cleveland-Cliffs, and shall not be
answerable for the conduct of same if appointed with due care.
(h) The Trustee is empowered to take all actions necessary or
advisable in order to collect any benefits or payments of which the Trustee is
the designated beneficiary.
(i) The Trustee shall have, without exclusion, all powers conferred on
trustees by applicable law unless expressly provided otherwise herein.
<PAGE> 15
15
9. AMENDMENTS, ETC. TO AGREEMENTS AND PLAN; COOPERATION OF
CLEVELAND-CLIFFS:
(a) Cleveland-Cliffs has previously furnished the Trustee a complete
and correct copy of the Plan, and Cleveland-Cliffs shall, and any Trust
Beneficiary may, promptly furnish the Trustee true and correct copies of any
amendment, restatement or successor thereto, whereupon such amendment,
restatement or successor shall be incorporated herein by reference, provided
that such amendment, restatement or successor shall not affect the Trustee's
duties and responsibilities hereunder without the consent of the Trustee.
(b) Cleveland-Cliffs shall provide the Trustee with all information
requested by the Trustee for purposes of determining payments to the Trust
Beneficiaries or withholding of taxes as provided in Section 2. Upon the
failure of Cleveland-Cliffs or any Trust Beneficiary to provide any such
information, the trustee shall, to the extent necessary in the sole judgment of
the Trustee, (i) compute the amount payable hereunder to any Trust Beneficiary;
and (ii) notify Cleveland-Cliffs and the Trust Beneficiary in writing of its
computations. Thereafter this Trust Agreement shall be construed as to the
Trustee's duties and obligations hereunder in accordance with such Trustee
determinations without further action; provided, however, that no such
determinations shall in any way diminish the rights of any Trust Beneficiary
hereunder
<PAGE> 16
16
or under the Plan; and provided, further, that no such determinations shall be
deemed to modify this Trust Agreement or the Plan. Nothing in this Trust
Agreement shall restrict Cleveland-Cliffs right to amend, modify or terminate
the Plan.
(b) At such times as may in the judgment of Cleveland-Cliffs be
appropriate, Cleveland-Cliffs shall furnish to the Trustee any amendment to
Exhibit A for the purpose of the addition of additional Directors (or the
deletion of Directors who (together with their Trust Beneficiaries) have no
Benefits currently due or payable in the future) to Exhibit A; provided,
however, that no such amendment shall be made after the Irrevocability Date.
10. COMPENSATION AND EXPENSES OF TRUSTEE: The Trustee shall be
entitled to receive such reasonable compensation for its services as shall be
agreed upon by Cleveland-Cliffs and the Trustee. The Trustee shall also be
entitled to reimbursement of its reasonable expenses incurred with respect to
the administration of the Trust including fees and expenses incurred pursuant
to Sections 8(d), 8(e) and 8(g) and liabilities to creditors pursuant to court
direction as provided in Section 3(a) hereof. Such compensation and expenses
shall in all events be payable either directly by Cleveland-Cliffs or, in the
event that Cleveland-Cliffs shall refuse, from the assets of the Trust and
charged pro rata in proportion to each separate account balance. The Trust
shall have a claim against Cleveland-Cliffs for any such compensation or
expenses so paid.
<PAGE> 17
17
11. REPLACEMENT OF THE TRUSTEE: (a) Prior to the Irrevocability Date,
the Trustee may be removed by Cleveland-Cliffs. On or after the Irrevocability
Date, the Trustee may be removed at any time by agreement of Cleveland-Cliffs
and a majority of the Directors. The Trustee may resign after providing not
less than 90 days' notice to Cleveland-Cliffs and to the Directors. In case of
removal or resignation, a new trustee, which shall be independent and not
subject to control of either Cleveland-Cliffs or the Trust Beneficiaries, shall
be appointed as shall be agreed by Cleveland-Cliffs and a majority of the
Directors. No such removal or resignation shall become effective until the
acceptance of the trust by a successor trustee designated in accordance with
this Section 11. If the Trustee should resign, and within 45 days of the
notice of such resignation Cleveland-Cliffs and the Directors shall not have
notified the Trustee of an agreement as to a replacement trustee, the Trustee
shall appoint a successor trustee, which shall be a bank or trust company,
wherever located, having a capital and surplus of at least $500,000,000 in the
aggregate.
(b) For purposes of the removal or appointment of a Trustee under this
Section 11, (i) if any Director shall be deceased or adjudged incompetent, such
Director's Trust Beneficiaries shall participate in such Director's stead, and
(ii) a Trust Beneficiary shall not participate if all payments of Benefits then
currently due or payable in the future have been made to such Trust
Beneficiary.
<PAGE> 18
18
12. AMENDMENT OR TERMINATION: (a) This Trust Agreement may be amended
by Cleveland-Cliffs and the Trustee without the consent of any Trust
Beneficiaries provided the amendment does not adversely affect any Trust
Beneficiary. This Trust Agreement may also be amended at any time and to any
extent by a written instrument executed by the Trustee, Cleveland-Cliffs and
the Trust Beneficiaries, except to alter Section 12(b), and except that
amendments to Exhibit A contemplated by Section 9(b) hereof shall be made as
therein provided.
(b) The Trust shall terminate on the date on which the Trust no longer
contains any assets, or, if earlier, the date on which each Trust Beneficiary
is entitled to no further payments hereunder.
(c) Upon termination of the Trust as provided in Section 12(b) hereof,
any assets remaining in the Trust shall be returned to Cleveland-Cliffs.
13. SPECIAL DISTRIBUTION: (a) It is intended that (i) the creation of,
and transfer of assets to, the Trust will not cause the Plan to be other than
"unfunded" for purposes of title I of the Employee Retirement Income Security
Act of 1974, as amended, or any successor provision thereto ("ERISA"); (ii)
transfers of assets to the Trust will not be transfers of property for purposes
of section 83 of the Code, or any successor provision thereto, nor will such
transfers cause a currently taxable benefit to be realized by a Trust
Beneficiary
<PAGE> 19
19
pursuant to the "economic benefit" doctrine; and (iii) pursuant to section 451
of the Code, or any successor provision thereto, amounts will be includable as
compensation in the gross income of a Trust Beneficiary in the taxable year or
years in which such amounts are actually distributed or made available to such
Trust Beneficiary by the Trustee.
(b) Notwithstanding anything to the contrary contained in this Trust
Agreement, in the event it is determined by a final decision of the Internal
Revenue Service, or, if an appeal is taken therefrom, by a court of competent
jurisdiction that (i) by reason of the creation of, and a transfer of assets
to, the Trust, the Trust is considered "funded" for purposes of title I of
ERISA; or (ii) a transfer of assets to the Trust is considered a transfer of
property for purposes of section 83 of the Code or any successor provision
thereto; or (iii) a transfer of assets to the Trust causes a Trust Beneficiary
to realize income pursuant to the "economic benefit" doctrine; or (iv) pursuant
to section 451 of the Code or any successor provision thereto, amounts are
includable as compensation in the gross income of a Trust Beneficiary in a
taxable year that is prior to the taxable year or years in which such amounts
would, but for this Section 13, otherwise actually be distributed or made
available to such Trust Beneficiary by the Trustee, then (A) the assets held in
Trust shall be allocated in accordance with Section 7(b) hereof, and (B)
subject to the last sentence of Section 2(b) hereof, the
<PAGE> 20
20
Trustee shall promptly make a distribution to each affected Trust Beneficiary
which, after taking into account the federal, state and local income tax
consequences of the special distribution itself, is equal to the sum of any
federal, and local income taxes, interest due thereon, and penalties assessed
with respect thereto, which are attributable to amounts that are includable in
the income of such Trust Beneficiary for any of the reasons described in clause
(i), (ii), (iii) or (iv) of this Section 13(b).
14. SEVERABILITY, ALIENATION, ETC.: (a) Any provision of this Trust
Agreement prohibited by law shall be ineffective to the extent of any such
prohibition without invalidating the remaining provisions hereof.
(b) To the extent permitted by law, benefits to Trust Beneficiaries
under this Trust Agreement may not be, anticipated, assigned (either at law or
in equity), alienated or subject to attachment, garnishment, levy, execution or
other legal or equitable process and no benefit provided for herein and
actually paid to any Trust Beneficiary by the Trustee shall be subject to any
claim for repayment by Cleveland-Cliffs or Trustee.
(c) This Trust Agreement shall be governed by and construed in
accordance with the laws of the State of Ohio, without giving effect to the
principles of conflict of laws thereof.
<PAGE> 21
21
(d) This Trust Agreement may be executed in two or more counterparts,
each of which shall be considered an original agreement. This Trust Agreement
shall become effective immediately upon the execution by Cleveland-Cliffs of at
least one counterpart, it being understood that all parties need not sign the
same counterpart, but shall not bind any Trustee until such Trustee has
executed at least one counterpart.
15. NOTICES; IDENTIFICATION OF CERTAIN TRUST BENEFICIARIES: (a) All
notices, requests, consents and other communication hereunder shall be in
writing and shall be deemed to have been duly given when received:
If to the Trustee, to:
AmeriTrust Company National Association
900 Euclid Avenue
Cleveland, Ohio 44115
Attention: Trust Department
Employee Benefit Administration
If to Cleveland-Cliffs, to:
Cleveland-Cliffs Inc
1100 Superior Avenue
Cleveland, OH 44114
Attention: Secretary
If to the Directors or to any party or any Trust Beneficiaries, to the
addresses listed on Exhibit A hereto
provided, however, that if any party or any Trust Beneficiary or his or its
successors shall have designated a different
<PAGE> 22
22
address by written notice to the other parties, then to the
last address so designated.
(b) Cleveland-Cliffs shall provide the Trustee with the names of any
beneficiary or beneficiaries designated by Directors or beneficiaries under the
Plan (and who are, therefore, Trust Beneficiaries hereunder).
IN WITNESS WHEREOF, Cleveland-Cliffs has caused counterparts of this
Trust Agreement to be executed on its behalf at 4:08 p.m. Eastern Standard
Time on October 28, 1987, each of which shall be an original agreement, and the
Trustee has caused counterparts of this Trust Agreement to be executed on its
behalf at 4:09 p.m. Eastern Standard Time on October 28, 1987.
CLEVELAND-CLIFFS INC
By: Richard F. Novak
----------------
Its: Vice President - Human Resources
--------------------------------
AMERITRUST COMPANY NATIONAL ASSOCIATION
By: Gary W. Queen
--------------
Its: Senior Vice President
---------------------
5059C
<PAGE> 1
EXHIBIT 10(q)
[Conformed Copy]
FIRST AMENDMENT TO TRUST AGREEMENT NO. 4
This Amendment No. 1 to Trust Agreement made on April 9, 1991, by and between
Cleveland-Cliffs Inc, an Ohio corporation ("Cleveland-Cliffs") and Ameritrust
Company National Association, a national banking association, as trustee (the
"Trustee");
W I T N E S S E T H:
WHEREAS, on October 28, 1987, Cleveland-Cliffs and the Trustee entered
into a Trust Agreement ("Trust Agreement");
WHEREAS, the Trust Agreement is for the purpose of providing benefits
under the Plan for Deferred Payment of Directors' Fees of The Cleveland-Cliffs
Iron Company, adopted June 4, 1981 and assumed by Cleveland-Cliffs, effective
July 1, 1985; and
WHEREAS, Cleveland-Cliffs has reserved the right, with the Trustee,
pursuant to Section 12 of the Trust Agreement, to amend the Trust Agreement
without the consent of any Trust Beneficiaries, as defined in the Trust
Agreement
NOW, THEREFORE, Cleveland-Cliffs and the Trustee hereby agree that the
Trust Agreement shall be amended as follows:
<PAGE> 2
2
1. The Trust Agreement is hereby renamed "Trust Agreement No. 4," and
each reference in such Trust Agreement No 4 to "Trust Agreement" shall be
amended to read "Trust Agreement No. 4."
2. The second WHEREAS clause is amended by deleting the words "in the
event of a `Change of Control' (as defined herein)" from the end thereof.
3. Section 1(a) is amended to read as follows:
1. Trust Fund: (a) Subject to the claims of its creditors to
the extent set forth in Section 3 hereof, Cleveland-Cliffs (i)
hereby deposits with the Trustee in trust Ten Dollars ($10.00)
which shall become the principal of this Trust, and (ii)
Cleveland-Cliffs may from time to time make additional deposits of
cash or other property in the Trust to augment such principal. The
principal and income of the Trust shall be held, administered and
disposed of by the Trustee as herein provided, but no payment of
all or any portion of the principal of the Trust or earnings
thereon shall be made to Cleveland-Cliffs or any other person or
entity on behalf of Cleveland-Cliffs except as herein expressly
provided.
<PAGE> 3
3
4. The first sentence of Section 1(b) is amended to read as follows:
(b) The Trust hereby established shall be irrevocable.
5. Section 1(c) is amended to read as follows:
(c) Upon the earlier to occur of (i) a Change of Control or
(ii) a declaration by the Board of Directors of Cleveland-Cliffs
that a Change of Control imminent, Cleveland-Cliffs shall promptly,
and in any event within five (5) business days, transfer to the
Trustee to be added to the principal of the Trust under this Trust
Agreement No. 4 property or each equal to the then value of the
separate accounts of the Directors under the provisions of the
Plan, less the balances in the Directors' accounts provided in
Section 7(b) hereof as of the most recent completed valuation
thereof, as certified by the Trustee; provided, however, if the
Trustee does not so certify by the end of the fourth (4th) business
day after the earlier of (i) or (ii) above, then the balances of
such accounts shall be deemed to be zero. Any payments by the
Trustee pursuant to this Trust Agreement No. 4 shall, to the extent
thereof, discharge the
<PAGE> 4
4
obligation of Cleveland-Cliffs to pay benefits under the Plan.
6. Section 1(g) is amended by adding at the end thereof the
following:
The Trust is not designed to qualify under section 401(a) of
the Code or to be subject to the provisions of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"). The
Trust established under this Trust Agreement No. 4 does not fund
and is not intended to fund the Plan or any other employee benefit
plan or program of Cleveland-Cliffs. Such Trust is and is intended
to be a depository arrangement with the Trustee for the setting
aside of cash and other assets of Cleveland-Cliffs as and when it
so determines in its sole discretion for the meeting of part or all
of its future obligations with respect to Benefits to some or all
of the Trust Beneficiaries under the Plan.
7. Section 2(a) is amended to read as follows:
(a) Provided that the Trustee has not actually received notice
as provided in Section 3 hereof that Cleveland-Cliffs is Insolvent,
the Trustee shall make payments of Benefits to each Trust
Beneficiary from the assets of the Trust in
<PAGE> 5
5
accordance with the terms of the Plan and subject to Section 9
hereof. The Trustee shall make provision for withholding of any
federal, state, or local taxes that may be required to be withheld
by the Trustee in connection with the payment of any Benefits
hereunder.
8. Section 4 is amended to read as follows:
4. PAYMENTS TO CLEVELAND-CLIFFS:
Cleveland-Cliffs shall have no right or power to direct the
Trustee to return any of the Trust assets to Cleveland-Cliffs
before all payments of Benefits have been made to all Trust
Beneficiaries as herein provided.
9. Section 5 is amended by adding the following at the end of the
second sentence thereof:
, and including investments in common or collective funds or
trusts, and mutual funds or investment companies, including
affiliated investment companies and 12 B-1 funds. Cleveland-Cliffs
acknowledges and agrees that the Trustee may receive fees as a
participating depository institution for services relating to the
investment of funds in an eligible mutual fund.
<PAGE> 6
6
10. Section 7 is amended to read as follows:
7. ACCOUNTING BY TRUSTEE: (a) The Trustee shall maintain
such books, records and accounts as may be necessary for the proper
administration of the Trust assets, including such specific records
as shall be agreed upon in writing by Cleveland-Cliffs and the
Trustee, and shall render to Cleveland-Cliffs within 60 days
following the close of each calendar year following the date of
this Trust until the termination of this Trust or the removal or
resignation of the Trustee (and within 60 days after the date of
such termination, removal or resignation), an accounting with
respect to the Trust assets as of the end of the then most recent
calendar year (and as of the date of such termination, removal or
resignation, as the case may be). The Trustee shall furnish to
Cleveland-Cliffs on a quarterly basis (or as Cleveland-Cliffs shall
direct from time to time) and in a timely manner such information
regarding the Trust as Cleveland-Cliffs shall require for purposes
of preparing its statements of financial condition. The Trustee
shall at all times maintain separate bookkeeping accounts for each
Trust Beneficiary as prescribed by Section 7(b)
<PAGE> 7
7
hereof, and shall provide each Trust Beneficiary with an annual
statement of his account. Upon the written request of
Cleveland-Cliffs or, on or after the date on which a Change of
Control has occurred, a Trust Beneficiary, the Trustee shall
deliver to such Trust Beneficiary or Cleveland-Cliffs, as the case
may be, a written report setting forth the amount held in the Trust
and a record of the deposits made with respect thereto by
Cleveland-Cliffs. Unless Cleveland-Cliffs or any Trust Beneficiary
shall have filed with the Trustee written exception or objection to
any such statement and account within 90 days after receipt
thereof, Cleveland-Cliffs and the Trust Beneficiaries shall be
deemed to have approved such statement and account, and in such
case the Trustee shall be forever released and discharged with
respect to all matters and things reported in such statement and
account as though it had been settled by a decree of a court of
competent jurisdiction in an action or proceeding to which the
Company and the Trust Beneficiaries were parties.
(b) The Trustee shall maintain a separate account for each
Trust Beneficiary. The Trustee
<PAGE> 8
8
shall credit or debit each Trust Beneficiary's account as
appropriate to reflect such Trust Beneficiary's allocable portion
of the Trust assets, as such Trust assets may be adjusted from time
to time pursuant to the terms of this Trust Agreement No. 4. Prior
to the date of a Change of Control, all deposits of principal
pursuant to Section 1(a) hereof shall be allocated as directed by
Cleveland-Cliffs; on or after such date deposits of principal, once
allocated, may not be reallocated by Cleveland-Cliffs. Income,
expense, gain or loss on assets allocated to the separate accounts
of the Trust Beneficiaries shall be allocated separately to such
accounts by the Trustee in proportion to the balances of the
separate accounts of the Directors.
IN WITNESS WHEREOF, Cleveland-Cliffs and the Trustee have caused
counterparts of the First Amendment to Trust Agreement No. 4 to be executed on
April 9, 1991.
CLEVELAND-CLIFFS INC
By: Richard F. Novak
----------------
Its: V.P. of Human Resources
--------------------------------
AMERITRUST COMPANY NATIONAL
ASSOCIATION
By: /s/ J. R. Russell
---------------------------------
Its: Vice President
--------------------------------
8077B
<PAGE> 9
SECOND AMENDMENT TO TRUST AGREEMENT NO. 4
This Amendment No. 2 to Trust Agreement No. 4 is made on this 9th day of
March, 1992, by and between Cleveland-Cliffs Inc, an Ohio corporation
("Cleveland-Cliffs") and Ameritrust Company National Association, a national
banking association, as trustee (the "Trustee");
WITNESSETH:
WHEREAS, on October 28, 1987, Cleveland-Cliffs and the Trustee entered
into a trust agreement ("Trust Agreement No. 4");
WHEREAS, on April 9, 1991, Cleveland-Cliffs and the Trustee entered
into Amendment No. 1 to Trust Agreement No. 4
WHEREAS, Trust Agreement No. 4, as amended, is for the purpose of
providing benefits under the Cleveland-Cliffs Inc Plan for Deferred Payment of
Directors' Fees;
WHEREAS, Cleveland-Cliffs has reserved the right, with the Trustee,
pursuant to Section 12 of Trust Agreement No. 4, to amend Trust Agreement No. 4
without the consent of any Trust Beneficiaries, as defined in Trust Agreement
No. 4.
NOW, THEREFORE, Cleveland-Cliffs and the Trustee hereby agree that
Trust Agreement No. 4 shall be amended as follows:
1. The third sentence of Section 1(b) of Trust Agreement No. 4 is
hereby amended to read as follows:
"The term "Change of Control" shall mean the occurrence of any of the
following events:
<PAGE> 10
2
(i) Cleveland-Cliffs shall merge into itself, or be merged or
consolidated with, another corporation and 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 Cleveland-Cliffs as the same shall have existed
immediately prior to such merger or consolidation;
(ii) Cleveland-Cliffs 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 Cleveland-Cliffs 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;
(iii) 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
<PAGE> 11
3
outstanding voting securities of Cleveland-Cliffs (whether directly or
indirectly); or
(iv) during any period of three consecutive years, including, without
limitation, the year 1991, individuals who at the beginning of any such period
constitute the Board of Directors of Cleveland-Cliffs cease, for any reason, to
constitute at least a majority thereof, unless the election, or the nomination
for election by the shareholders of Cleveland-Cliffs, of each Director first
elected during any such period was approved by a vote of at least one-third of
the Directors of Cleveland-Cliffs who are Directors of Cleveland-Cliffs on the
date of the beginning of any such period."
IN WITNESS WHEREOF, Cleveland-Cliffs and the Trustee have caused
counterparts of this Amendment No. 2 to Trust Agreement No. 4 to be executed on
March 9, 1992.
CLEVELAND-CLIFFS INC
By: R. F. Novak
-----------
Its: Vice President
--------------
AMERITRUST COMPANY NATIONAL
ASSOCIATION
By: J. R. Russell
---------------
Its: Vice President
----------------
2993F
<PAGE> 1
EXHIBIT 10(r)
#5
TRUST AGREEMENT
---------------
This Trust Agreement ("Trust Agreement") made this 28th day of October,
1987 by and between Cleveland-Cliffs Inc, an Ohio corporation
("Cleveland-Cliffs"), and AmeriTrust Company National Association, a national
banking association, as trustee (the "Trustee");
WITNESSETH:
----------
WHEREAS, certain benefits are or may become payable under the provisions
of certain Deferred Compensation Agreements ("Agreements") between
Cleveland-Cliffs, or between The Cleveland-Cliffs Iron Company and assumed by
Cleveland-Cliffs, effective July 1, 1985, and certain executives
("Executives"), to the persons (who may be Executives or beneficiaries of
Executives) listed (from time to time as provided in Section 9(b) hereof) on
Exhibit A hereto or to the beneficiaries of such persons (Executives and
Executives' beneficiaries are referred to herein as "Trust Beneficiaries"), as
the case may be;
WHEREAS, the Agreements provide for certain deferred income
benefits, and Cleveland-Cliffs wishes specifically to assure the payment to the
Trust Beneficiaries of amounts due thereunder (the amounts so payable being
collectively referred to here in as the "Benefits") in the event of a "Change
of Control" (as defined herein);
<PAGE> 2
2
WHEREAS, subject to Section 9 hereof, the amounts and timing of Benefits
to which each Trust Beneficiary is presently or may become entitled are as
provided in the Agreement applicable to him or her ("Applicable Agreement");
WHEREAS, Cleveland-Cliffs wishes to establish a trust (the "Trust") and
to transfer to the Trust assets which shall be held therein subject to the
claims of the creditors of Cleveland-Cliffs to the extent set forth in Section
3 hereof until paid in full to all Trust Beneficiaries as Benefits in such
manner and at such times as specified herein unless Cleveland-Cliffs is
Insolvent (as defined herein) at the time that such Benefits become payable;
and
WHEREAS, Cleveland-Cliffs shall be considered "Insolvent" for purposes
of this Trust Agreement at such time as Cleveland-Cliffs (i) is subject to a
pending voluntary or involuntary proceeding as a debtor under the United States
Bankruptcy Code, as heretofore or hereafter amended, or (ii) is unable to pay
its debts as they mature.
NOW, THEREFORE, the parties do hereby establish the Trust and agree that
the Trust shall be comprised, held and disposed of as follows:
1. TRUST FUND: (a) Subject to the claims of its creditors to the extent
set forth in Section 3 hereof, Cleveland-Cliffs hereby deposits with the
Trustee in trust Ten Dollars ($10.00) which shall become the principal of this
Trust, to be held, administered and disposed of by the Trustee
<PAGE> 3
3
as herein provided, but no payments of all or any portion of the principal of
the Trust or earnings thereon shall be made to Cleveland-Cliffs or any other
person or entity on behalf of Cleveland-Cliffs except as herein expressly
provided.
(b) The Trust hereby established shall be revocable by
Cleveland-Cliffs at any time prior to the date on which occurs a "Change of
Control," as that term is defined in this Section 1(b); on or after such date
("Irrevocability Date"), this Trust shall be irrevocable. Cleveland-Cliffs
shall notify the Trustee promptly in the event that a Change of Control has
occurred. The term "Change of Control" shall mean the occurrence of any of the
following events:
(i) a tender offer shall be made and consummated for the
ownership of 30% or more of the outstanding voting securities of
Cleveland-Cliffs;
(ii) Cleveland-Cliffs shall 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 Cleveland-Cliffs, other than affiliates (within the
meaning of the Securities Exchange Act of 1934) of any party to such
merger or consolidation, as the same shall have existed immediately
prior to such merger or consolidation;
<PAGE> 4
4
(iii) Cleveland-Cliffs shall sell substantially all of its
assets to another corporation which is not a wholly owned
subsidiary;
(iv) 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 acquire 30% or more of
the outstanding voting securities of Cleveland-Cliffs (whether
directly, indirectly, beneficially or of record), or
(v) during any period of two consecutive years, individuals
who at the beginning of any such period constitute the Board of
Directors of Cleveland-Cliffs cease for any reason to constitute
at least a majority thereof, unless the election, or the
nomination for election by the shareholders of Cleveland-Cliffs,
of each Director first elected during any such period was
approved by a vote of at least two-thirds of the Directors of
Cleveland-Cliffs then still in office who are Directors of
Cleveland-Cliffs on the date at the beginning of any such
period.
For purposes hereof, ownership of voting securities shall take into account and
shall include ownership as determined by applying the provisions of Rule
13d-3(d)(1)(i) (as in effect on the date hereof) pursuant to the Securities
Exchange Act of 1934.
(c) Upon the earlier to occur of (i) a Change of Control or (ii) a
declaration by the Board of Directors of
<PAGE> 5
5
Cleveland-Cliffs that a Change of Control is imminent, Cleveland-Cliffs shall
promptly, and in any event within five (5) business days, transfer to the
Trustee to be added to the principal of the Trust under this Trust Agreement
property or cash equal to the then value of the separate accounts of the
Executives under the Agreements. Any payments by the Trustee pursuant to this
Trust Agreement shall, to the extent thereof, discharge the obligation of
Cleveland-Cliffs to pay benefits under the Agreements, it being the intent of
Cleveland-Cliffs that assets in the Trust established hereby be held as
security for the obligation of Cleveland-Cliffs to pay benefits under the
Agreements.
(d) The principal of the Trust and any earnings thereon shall be held
in trust separate and apart from other funds of Cleveland-Cliffs exclusively
for he uses and purposes herein set forth. No Trust Beneficiary shall have any
preferred claim on, or any beneficial ownership interest in, any assets of the
Trust prior to the time that such assets are paid to a Trust beneficiary as
Benefits as provided herein.
(e) Any Company may at any time or from time to time make additional
deposits of cash or other property in the Trust to augment the principal to be
held, administered and disposed of by the Trustee as herein provided, but no
payments of all or any portion of the principal of the Trust or earnings
thereon shall be made to Cleveland-Cliffs or any other person or entity
<PAGE> 6
6
on behalf of Cleveland-Cliffs except as herein expressly provided.
(f) The term "Company" as used herein shall mean Cleveland-Cliffs,
any wholly owned subsidiary or any entity that is a successor to
Cleveland-Cliffs in ownership of substantially all its assets.
(g) The Trust is intended to be a grantor trust, within the meaning
of section 671 of the Internal Revenue Code of 1986, as amended (the "Code"),
or any successor provision thereto, and shall be construed accordingly.
2. PAYMENTS TO TRUST BENEFICIARIES. (a) Provided that
Cleveland-Cliffs is not Insolvent and commencing with the earliest to occur of
(i) appropriate notice by Cleveland-Cliffs to the trustee, or (ii) the
Irrevocability Date, the Trustee shall make payments of Benefits to each Trust
Beneficiary from the assets of the Trust in accordance with the terms of the
Agreements and subject to Section 9 hereof. The Trustee shall make provision
for withholding of any federal, state, or local taxes that may be required to
be withheld by the Trustee in connection with the payment of any Benefits
hereunder.
(b) If the balance of an Executive's separate account maintained
pursuant to Section 7(b) hereof is not sufficient to provide for full payment
of Benefits to which such Executive's Trust Beneficiaries are entitled as
provided herein, Cleveland-Cliffs shall make the balance of each such payment
as provided in his Applicable Agreement. No payment from the Trust assets
<PAGE> 7
7
to a Trust Beneficiary shall exceed the balance of such separate account.
3. THE TRUSTEE'S RESPONSIBILITY REGARDING PAYMENTS TO A TRUST
BENEFICIARY WHEN CLEVELAND-CLIFFS IS INSOLVENT: (a) At all times during the
continuance of this Trust, the principal and income of the Trust shall be
subject to claims of creditors of Cleveland-Cliffs. The Board of Directors
("Board") of Cleveland-Cliffs and its Chief Executive Officer ("CEO") shall
have the duty to inform the Trustee if either the Board or the CEO believes
that Cleveland-Cliffs is Insolvent. If the Trustee receives a notice from the
Board, the CEO, or a creditor of Cleveland-Cliffs alleging that
Cleveland-Cliffs is Insolvent, then unless the Trustee independently determines
that Cleveland-Cliffs is not Insolvent, the Trustee shall (i) discontinue
payments to any Trust Beneficiary, (ii) hold the Trust assets for the benefit
of the general creditors of Cleveland-Cliffs, and (iii) promptly seek the
determination of a court of competent jurisdiction regarding the Insolvency of
Cleveland-Cliffs. The Trustee shall deliver any undistributed principal and
income in the Trust to the extent necessary to satisfy the claims of the
creditors of Cleveland-Cliffs as a court of competent jurisdiction may direct.
Such payments of principal and income shall be borne by the separate accounts
of the Trust Beneficiaries in proportion to the balances on the date of such
court order of their respective accounts maintained pursuant to Section 7(b)
hereof. If payments to any
<PAGE> 8
8
Trust Beneficiary have been discontinued pursuant to this Section 3(a), the
Trustee shall resume payments to such Trust Beneficiary only after receipt of
an order of a court of competent jurisdiction. The Trustee shall have no duty
to inquire as to whether Cleveland-Cliffs is Insolvent and may rely on
information concerning the Insolvency of Cleveland-Cliffs which has been
furnished to the Trustee by any person. Nothing in this Trust Agreement shall
in any way diminish any rights of any Trust Beneficiary to pursue his rights as
a general creditor of Cleveland-Cliffs with respect to Benefits or otherwise,
and the rights of each Trust Beneficiary under the Applicable Agreement shall
in no way be affected or diminished by any provision of this Trust Agreement or
action taken pursuant to this Trust Agreement except that any payment actually
received by any Trust Beneficiary hereunder shall reduce dollar-per-dollar
amounts otherwise due to such Trust Beneficiary pursuant to the Applicable
Agreement.
(b) If the Trustee discontinues payments of Benefits from the Trust
pursuant to Section 3(a) hereof, the Trustee shall, to the extent it has liquid
assets, place cash equal to the discontinued payments (to the extent not paid
to creditors pursuant to Section 3(a) and not paid to the Trustee pursuant to
Section 10 hereof) in such interest-bearing deposit accounts or certificates of
deposit (including any such accounts or certificates issued or offered by the
Trustee or any successor corporation but excluding obligations of
Cleveland-Cliffs) as
<PAGE> 9
9
determined by the Trustee in its sole discretion. If the Trustee subsequently
resumes such payments, the first payment following such discontinuance shall
include the aggregate amount of all payments which would have been made to the
Trust Beneficiaries in accordance with this Trust Agreement during the period
of such discontinuance, less the aggregate amount of payments made to any Trust
Beneficiary by Cleveland-Cliffs pursuant to the Applicable Agreement during any
such period of discontinuance, together with interest on the net amount delayed
determined at a rate equal to the rate paid on the accounts or deposits
selected by the Trustee; provided, however, that no such payment shall exceed
the balance of the respective Executive's account as provided in Section 7(b)
hereof.
4. PAYMENTS TO CLEVELAND-CLIFFS: Except to the extent expressly
contemplated by Section l(b) hereof, Cleveland-Cliffs shall have no right or
power to direct the Trustee to return any of the Trust assets to
Cleveland-Cliffs before all payments of Benefits have been made to all Trust
Beneficiaries as herein provided.
5. INVESTMENT OF PRINCIPAL: The Trustee shall invest and reinvest
the principal of the Trust, including any income accumulated and added to
principal, as directed by the Compensation Committee of the Board of Directors
of Cleveland-Cliffs (which direction may include investment in Common Shares of
Cleveland-Cliffs). In the absence of any such direction,
<PAGE> 10
10
the Trustee shall have sole power to invest the assets of the Trust (including
investment in Common Shares of Cleveland-Cliffs). The Trustee shall act at all
times, however, with the care, skill, prudence, and diligence under the
circumstances then prevailing that a prudent corporate trustee, acting in a
like capacity and familiar with such matters, would use in the conduct of an
enterprise of a like character and with like aims. The investment objective of
the Trustee shall be to preserve the principal of the Trust while obtaining a
reasonable total rate of return, measurement of which shall include market
appreciation or depreciation plus receipt of interest and dividends. The
Trustee shall not be required to invest nominal amounts.
6. INCOME OF THE TRUST: Except as provided in Section 3 hereof,
during the continuance of this Trust all net income of the Trust shall be
allocated not less frequently than monthly among the Trust Beneficiaries'
separate accounts in accordance with Section 7(b) hereof.
7. ACCOUNTING BY TRUSTEE: (a) The Trustee shall keep records in
reasonable detail of all investments, receipts, disbursements and all other
transactions required to be done, including such specific records as shall be
agreed upon in writing by Cleveland-Cliffs and the Trustee. All such accounts,
books and records shall be open to inspection and audit at all reasonable times
by Cleveland-Cliffs, by any Executive, or in the event of an Executive's death
or adjudged
<PAGE> 11
11
incompetence by his Trust Beneficiaries (as to his account), or by any agent or
representative of any of the foregoing. Within 60 calendar days following the
end of each calendar year and within 60 calendar days after the removal or
resignation of the Trustee, the Trustee shall deliver to Cleveland-Cliffs and
to each Executive, or in the event of his death or adjudged incompetence, his
Trust Beneficiaries (as to his account) a written account of its administration
of the Trust during such year or during the period from the end of the last
preceding year to the date of such removal or resignation, setting forth all
investments, receipts, disbursements and other transactions effected by it,
including a description of all securities and investments purchased and sold
with the cost or net proceeds of such purchases or sales (accrued interest paid
or receivable being shown separately), and showing all cash, securities, rights
and other property held in the Trust at the end of such year or as of the date
of such removal or resignation, as the case may be. Such written accounts
shall reflect the aggregate of the Trust accounts and status of each separate
account maintained for each Executive.
(b) The Trustee shall maintain a separate account for each Trust
Beneficiary. The Trustee shall credit or debit each Trust Beneficiary's
account as appropriate to reflect such Trust Beneficiary's allocable portion of
the Trust assets, as such Trust assets may be adjusted from time to time
pursuant to the terms of this Trust Agreement. Prior to the Irrevocability
<PAGE> 12
12
Date, all deposits of principal pursuant to Section 1(a) hereof shall be
allocated as directed by Cleveland-Cliffs; on or after such date deposits of
principal, once allocated, may not be reallocated by Cleveland-Cliffs. Income,
expense, gain or loss on assets allocated to the separate accounts of the Trust
Beneficiaries shall be allocated separately to such accounts by the Trustee in
proportion to the balances of the separate accounts of the Executives.
8. RESPONSIBILITY OF TRUSTEE: (a) The Trustee shall act with the
care, skill, prudence and diligence under the circumstances then prevailing
that a prudent corporate trustee, acting in a like capacity and familiar with
such matters, would use in the conduct of an enterprise of a like character and
with like aims; provided, however, that the Trustee shall incur no liability to
any person for any action taken pursuant to a direction, request or approval,
contemplated by and complying with the terms of this Trust Agreement, given in
writing by Cleveland-Cliffs, by the Compensation Committee or by a Trust
Beneficiary applicable to his or her beneficial interest herein; and provided,
further, that the Trustee shall have no duty to seek additional deposits of
principal from Cleveland-Cliffs for additional amounts accrued under the
Agreements, and the Trustee shall not be responsible for the adequacy of this
Trust.
(b) The Trustee may vote any stock or other securities and exercise
any right appurtenant to any stock,
<PAGE> 13
13
other securities or other property held hereunder, either in person or by
general or limited proxy, power of attorney or other instrument.
(c) The Trustee may hold securities in bearer form and may register
securities and other property held in the trust fund in its own name or in
the name of a nominee, combine certificates representing securities with
certificates of the same issue held by the Trustee in other fiduciary
capacities, and deposit, or arrange for deposit of property with any
depository; provided that the books and records of the Trustee shall at all
times show that all such securities are part of the trust fund.
(d) If the Trustee shall undertake or defend any litigation arising
in connection with this Trust Agreement, it shall be indemnified by
Cleveland-Cliffs against its costs, expenses and liabilities (including without
limitation attorneys' fees and expenses) relating thereto.
(e) The Trustee may consult with legal counsel, independent
accountants and actuaries (who may be counsel independent accountants or
actuaries for Cleveland-Cliffs) with respect to any of its duties or
obligations hereunder, and shall be fully protected in acting or refraining
from acting in accordance with the advice of such counsel, independent
accountants and actuaries.
(f) The Trustee may rely and shall be protected in acting or
refraining from acting within the authority granted
<PAGE> 14
14
by the terms of this Trust Agreement upon any written notice, instruction or
request furnished to it hereunder and believed by it to be genuine and to have
been signed or presented by the proper party or parties.
(g) The Trustee may hire agents, accountants, actuaries, and
financial consultants, who may be agents, accountants, actuaries, or financial
consultants, as the case may be, for Cleveland-Cliffs, and shall not be
answerable for the conduct of same if appointed with due care.
(h) The Trustee is empowered to take all actions necessary or
advisable in order to collect any benefits or payments of which the Trustee is
the designated beneficiary.
(i) The Trustee shall have, without exclusion, all powers conferred
on trustees by applicable law unless expressly provided otherwise herein.
9. AMENDMENTS, ETC. TO AGREEMENTS AND PLAN; COOPERATION OF
CLEVELAND-CLIFFS:
(a) Cleveland-Cliffs shall promptly furnish the Trustee a complete
and correct copy of each Agreement, and Cleveland-Cliffs shall, and any Trust
Beneficiary may, promptly furnish the Trustee true and correct copies of any
amendment, restatement or successor thereto, whereupon such amendment,
restatement or successor shall be incorporated herein by reference, provided
that such amendment, restatement or successor shall not affect the Trustee's
duties and responsibilities hereunder without the consent of the Trustee.
<PAGE> 15
15
(b) Cleveland-Cliffs shall provide the Trustee with all information
requested by the Trustee for purposes of determining payments to the Trust
Beneficiaries or withholding of taxes as provided in Section 2. Upon the
failure of Cleveland-Cliffs or any Trust Beneficiary to provide any such
information, the Trustee shall, to the extent necessary in the sole judgment of
the Trustee, (i) compute the amount payable hereunder to any Trust Beneficiary;
and (ii) notify Cleveland-Cliffs and the Trust Beneficiary in writing of its
computations. Thereafter this Trust Agreement shall be construded as to the
Trustee's duties and obligations hereunder in accordance with such Trustee
determinations without further action; provided, however, that no such
determinations shall in any way diminish the rights of any Trust Beneficiary
hereunder or under the applicable Agreement; and provided, further, that no
such determinations shall be deemed to modify this Trust Agreement or any
Agreement.
(c) At such times as may in the judgment of Cleveland-Cliffs be
appropriate, Cleveland-Cliffs shall furnish to the Trustee any amendment to
Exhibit A for the purpose of the addition of additional Executives (or the
deletion of Executives who (together with their Trust Beneficiaries) have no
Benefits currently due or payable in the future) to Exhibit A; provided,
however, that no such amendment shall be made after the Irrevocability Date.
<PAGE> 16
16
10. COMPENSATION AND EXPENSES OF TRUSTEE: The Trustee shall be
entitled to receive such reasonable compensation for its services as shall be
agreed upon by Cleveland-Cliffs and the Trustee. The Trustee shall also be
entitled to reimbursement of its reasonable expenses incurred with respect to
the administration of the Trust including fees and expenses incurred pursuant
to Sections 8(d), 8(e) and 8(g) and liabilities to creditors pursuant to court
direction as provided in Section 3(a) hereof. Such compensation and expenses
shall in all events be payable either directly by Cleveland-Cliffs or, in the
event that Cleveland-Cliffs shall refuse, from the assets of the Trust and
charged pro rata in proportion to each separate account balance. The Trust
shall have a claim against Cleveland-Cliffs for any such compensation or
expenses so paid.
11. REPLACEMENT OF THE TRUSTEE: (a) Prior to the Irrevocability Date,
the Trustee may be removed by Cleveland-Cliffs. On or after the Irrevocability
Date, the Trustee may be removed at any time by agreement of Cleveland-Cliffs
and a majority of the Executives. The Trustee may resign after providing not
less than 90 days' notice to Cleveland-Cliffs and to the Executives. In case
of removal or resignation a new trustee, which shall be independent and not
subject to control of either Cleveland-Cliffs or the Trust Beneficiaries, shall
be appointed as shall be agreed by Cleveland-Cliffs and a majority of the
Executives. No such
<PAGE> 17
17
removal or resignation shall become effective until the acceptance of the trust
by a successor trustee designated in accordance with this Section 11. If the
Trustee should resign, and within 45 days of the notice of such resignation
Cleveland-Cliffs and the Executives shall not have notified the Trustee of an
agreement as to a replacement trustee, the Trustee shall appoint a successor
Trustee, which shall be a bank or trust company, wherever located, having a
capital and surplus of at least $500,000,000 in the aggregate.
(b) For purposes of the removal or appointment of a Trustee under
this Section 11, (i) if any Executive shall be deceased or adjudged
incompetent, such Executive's Trust Beneficiaries shall participate in such
Executive's stead, and (ii) a Trust Beneficiary shall not participate if all
payments of Benefits then currently due or payable in the future have been made
to such Trust Beneficiary.
12. AMENDMENT OR TERMINATION: (a) This Trust Agreement may be amended
by Cleveland-Cliffs and the Trustee without the consent of any Trust
Beneficiaries provided the amendment does not adversely affect any Trust
Beneficiary. This Trust Agreement may also be amended at any time and to any
extent by a written instrument executed by the Trustee, Cleveland-Cliffs and
the Trust Beneficiaries, except to alter Section 12(b), and except that
amendments to Exhibit A contemplated by Section 9(b) hereof shall be made as
therein provided.
<PAGE> 18
18
(b) The Trust shall terminate on the date on which the Trust no
longer contains any assets, or, if earlier, the date on which each Trust
Beneficiary is entitled to no further payments hereunder.
(c) Upon termination of the Trust as provided in Section 12(b)
hereof, any assets remaining in the Trust shall be returned to
Cleveland-Cliffs.
13. SPECIAL DISTRIBUTION: (a) It is intended that (i) the creation
of, and transfer of assets to, the Trust will not cause the Plan to be other
than "unfunded" for purposes of title I of the Employee Retirement Income
Security Act of 1974, as amended, or any successor provision thereto ("ERISA");
(ii) transfers of assets to the Trust will not be transfers of property for
purposes of section 83 of the Code, or any successor provision thereto, nor
will such transfers cause a currently taxable benefit to be realized by a Trust
Beneficiary pursuant to the "economic benefit" doctrine; and (iii) pursuant to
section 451 of the Code, or any successor provision thereto, amounts will be
includable as compensation in the gross income of a Trust Beneficiary in the
taxable year or years in which such amounts are actually distributed or made
available to such Trust Beneficiary by the Trustee.
(b) Notwithstanding anything to the contrary contained in this Trust
Agreement, in the event it is determined by a final decision of the Internal
Revenue Service, or, if an appeal is taken therefrom, by a court of
<PAGE> 19
19
competent jurisdiction that (i) by reason of the creation of, and a transfer of
assets to, the Trust, the Trust is considered "funded" for purposes of title I
of ERISA; or (ii) a transfer of assets to the Trust is considered a transfer of
property for purposes of section 83 of the Code or any successor provision
thereto; or (iii) a transfer of assets to the Trust causes a Trust Beneficiary
to realize income pursuant to the "economic benefit" doctrine; or (iv) pursuant
to section 451 of the Code or any successor provision thereto, amounts are
includable as compensation in the gross income of a Trust Beneficiary in a
taxable year that is prior to the taxable year or years in which such amounts
would, but for this Section 13, otherwise actually be distributed or made
available to such Trust Beneficiary by the trustee, then (A) the assets held in
Trust shall be allocated in accordance with Sect on 7(b) hereof, and (B)
subject to the last sentence of Section 2(b) hereof, the Trustee shall promptly
make a distribution to each affected Trust Beneficiary which, after taking into
account the federal, state and local income tax consequences of the special
distribution itself, is equal to the sum of any federal, state and local income
taxes, interest due thereon, and penalties assessed with respect thereto, which
are attributable to amounts that are includable in the income of such Trust
Beneficiary for any of the reasons described in clause (i), (ii), (iii) or (iv)
of this Section 13(b).
<PAGE> 20
20
14. SEVERABILITY ALIENATION, ETC.: (a) Any provision of this Trust
Agreement prohibited by law shall be ineffective to the extent of any such
prohibition without invalidating the remaining provisions hereof.
(b) To the extent permitted by law, benefits to Trust Beneficiaries
under this Trust Agreement may not be anticipated, assigned (either at law or
in equity), alienated or subject to attachment, garnishment, levy, execution or
other legal or equitable process and no benefit provided for herein and
actually paid to any Trust Beneficiary by the Trustee shall be subject to any
claim for repayment by Cleveland-Cliffs or Trustee.
(c) This Trust Agreement shall be governed by and construed in
accordance with the laws of the State of Ohio, without giving effect to the
principles of conflict of laws thereof.
(d) This Trust Agreement may be executed in two or more counterparts,
each of which shall be considered an original agreement. This Trust Agreement
shall become effective immediately upon the execution by Cleveland-Cliffs of at
least one counterpart, it being understood that all parties need not sign the
same counterpart, but shall not bind any Trustee until such Trustee has
executed at least one counterpart.
15. NOTICES; IDENTIFICATION OF CERTAIN TRUST BENEFICIARIES: (a) All
notices, requests, consents and other
<PAGE> 21
21
communications hereunder shall be in writing and shall be deemed to have been
duly given when received:
If to the Trustee, to:
AmeriTrust Company National Association
900 Euclid Avenue
Cleveland, Ohio 44115
Attention: Trust Department
Employee Benefit Administration
If to Cleveland-Cliffs, to:
Cleveland-Cliffs Inc
1100 Superior Avenue
Cleveland, OH 44114
Attention: Secretary
If to the Executives or to the Trust Beneficiaries, to the
addresses listed on Exhibit A hereto
provided, however, that if any party or any Trust Beneficiary or his or its
successors shall have designated a different address by written notice to the
other parties, then to the last address so designated.
(b) Cleveland-Cliffs shall provide the Trustee with the names of any
beneficiary or beneficiaries designated by
<PAGE> 22
22
Executives or beneficiaries under the Plan (and who are, therefore, Trust
Beneficiaries hereunder).
IN WITNESS WHEREOF, Cleveland-Cliffs has caused counterparts of this
Trust Agreement to be executed on its behalf at 4:13 p.m. Eastern Standard
Time on October 28, 1987, each of which shall be an original agreement,
intending that the Trust shall be effective immediately, and the Trustee has
caused counterparts of this Trust Agreement to be executed on its behalf at
4:14 p.m. Eastern Standard Time on October 28, 1987.
CLEVELAND-CLIFFS INC
By: Richard F. Novak
----------------
Its: Vice President - Human Resources
--------------------------------
AMERITRUST COMPANY NATIONAL
ASSOCIATION
By: Gary W. Queen
-------------
Its: Senior Vice President
---------------------
5058C
<PAGE> 1
EXHIBIT 10(s)
AMENDMENT NO. 1 TO TRUST AGREEMENT
----------------------------------
This Amendment No. 1 to Trust Agreement made on May 12, 1989
by and between Cleveland-Cliffs Inc, an Ohio corporation ("Cleveland-Cliffs")
and Ameritrust Company National Association, a national banking association, as
trustee (the "Trustee");
WITNESSETH:
-----------
WHEREAS, on October 28, 1987, Cleveland-Cliffs and the Trustee entered
into a Trust Agreement ("Trust Agreement");
WHEREAS, the Deferred Compensation Agreements referred to in the first
WHEREAS clause of the Trust Agreement have been terminated and all accounts
thereunder have been paid to the executives or beneficiaries who are entitled
to payment thereunder;
WHEREAS, Cleveland-Cliffs has reserved the right, with the Trustee,
pursuant to Section 12 of the Trust Agreement, to amend the Trust Agreement
without the consent of any Trust Beneficiaries, as defined in the Trust
Agreement.
NOW, THEREFORE, Cleveland-Cliffs and the Trustee hereby adopt this
Amendment No. 1 to the Trust Agreement as follows:
1. The first "WHEREAS" clause of the Trust Agreement is hereby
amended to read as follows:
<PAGE> 2
2
WHEREAS, certain benefits are or may become payable under the
provisions of the Cleveland-Cliffs Inc Voluntary Non-Qualified
Deferred Compensation Plan, effective June 1, 1989 (the "Plan"),
and certain Participation Agreements entered into under the Plan
between Cleveland-Cliffs and certain executives ("Executives"),
to the persons (who may be Executives or beneficiaries of
Executives) listed (from time to time as provided in Section 9(b)
hereof) on Exhibit A hereto or to the beneficiaries of such
persons (Executives and Executives' beneficiaries are referred to
herein as "Trust Beneficiaries"), as the case may be;
2. The third "WHEREAS" clause of the Trust Agreement is hereby amended
to read as follows:
WHEREAS, subject to Section 9 hereof, the amounts and timing Or
Benefits to which each Trust Beneficiary is presently or may
become entitled are as provided in the Participation Agreement
applicable to him or her ("Applicable Agreement" or "Agreement");
<PAGE> 3
3
IN WITNESS WHEREOF, Cleveland-Cliffs and the Trustee have caused this
Amendment No. 1 to the Trust Agreement to be originally executed on May 12,
1989 and reexecuted on April 12, 1991.
CLEVELAND-CLIFFS INC
By: R. F. Novak
-----------
Its:___________________________________
Vice President - Human Resources
AMERITRUST COMPANY NATIONAL ASSOCIATION
By: J. R. Russell
-------------
Its: Vice President
--------------
Vice President
<PAGE> 4
<TABLE>
Exhibit A
Deferred Compensation Plan
--------------------------
Participants Beneficiaries
- ------------ -------------
<S> <C>
W. E. Dohnal AmeriTrust Company with account with William
E. Dohnal dated 13th day of December 1976.
H. S. Harrison 50% - Suzanne B. Harrison, Wife
16.67% - Mary Suzanne Harrison, Daughter
16.67% - Henry Stuart Harrison, Jr., Son
16.67% - Virginia Foster Harrison, Son
R. W. Hartwell 100% - Helen W. Hartwell, Wife
If deceased, 100% - Kenneth W. Hartwell, Son
E. B. Johnson 100% - Lois M. Johnson, Wife
If deceased, 100% - Scott M. Johnson, Son
T. A. Kauppila 100% - Ann S. Kauppila, Wife
If deceased, 33.33% - Matthew A. Kauppila, Son
33.33% - Franz R. Kauppila, Son
33.33% - Philip R. Kauppila, Son
H. J. Leach The Cleveland Trust Company as Trustee under
Agreement Entered into with Hugh J. Leach February 6, 1968.
M. T. Moore In accordance with the Insurance Trust
between M. T. Moore and The Cleveland Trust
Company Dated August 9, 1967.
T. E. McGinty 100% - June T. McGinty
If deceased, 33.33% - Thomas P. McGinty
33.33% - Michael J. McGinty
33.33% - Mathew J. McGinty
R. B. Pearson 100% - Rose Marie Pearson, Wife
If deceased, 33.33% - Jane Marie Pearson, Daughter
33.33% - John Gregory Pearson, Son
33.33% - Becky Jo Pearson, Daughter
S. K. Scovil 100% - Barbara B. Scovil, Wife
If deceased, Central National Bank of
Cleveland Ohio as Trustee under an Insurance
Trust Agreement with Samuel K. Scovil, dated
July 2, 1965.
</TABLE>
<PAGE> 5
<TABLE>
<CAPTION>
-2-
<S> <C>
J. C. Vickery 100% - Jane A. Vickery, Wife
If deceased, 25% - Pamela Sue Vickery, Daughter
25% - Linda Lou Vickery, Daughter
25% - Debra Lea Vickery, Daughter
25% - Dianna Lynn Vickery, Daughter
J. W. Villar The Miners' First National Bank and Trust
Company of Ishpeming, Michigan, Trustee under
the James W. Villar Life Insurance Trust
Indenture dated December 22, 1972.
J. S. Westwater 100% - Helen V. Westwater, Wife
If deceased, equal portions to living
children. If none of said children are living,
to Joan G. Rogerson, Sister.
</TABLE>
<PAGE> 6
SECOND AMENDMENT TO TRUST AGREEMENT NO. 5
------------------------------------------
This Second Amendment to Trust Agreement made on April 9, 1991, by and
between Cleveland-Cliffs Inc, an Ohio corporation ("Cleveland-Cliffs") and
Ameritrust Company National Association, a national banking association, as
trustee (the "Trustee");
W I T N E S S T H:
------------------
WHEREAS, on October 28, 1987, Cleveland-Cliffs and the Trustee entered
into a Trust Agreement ("Trust Agreement");
WHEREAS, on May 12, 1989, Cleveland-Cliffs and the Trustee entered into
Amendment No. 1 to Trust Agreement;
WHEREAS, the Trust Agreement, as so amended, is for the purpose of
providing benefits under the Cleveland-Cliffs Inc Voluntary Non-Qualified
Deferred Compensation Plan; and
WHEREAS, Cleveland-Cliffs has reserved the right, with the Trustee,
pursuant to Section 12 of the Trust Agreement, to amend the Trust Agreement
without the consent of any Trust Beneficiaries, as defined in the Trust
Agreement.
NOW, THEREFORE, Cleveland-Cliffs and the Trustee hereby agree that the
Trust Agreement shall be amended as follows:
<PAGE> 7
2
1. The Trust Agreement is hereby renamed "Trust Agreement No. 5, and
each reference in such Trust Agreement No. 5 to "Trust Agreement" shall be
amended to read "Trust Agreement No. 5."
2. The second WHEREAS clause is amended by deleting the words "in
the event of a 'Change of Control' (as defined herein)" from the end thereof.
3. Section 1(a) is amended to read as follows:
1. Trust Fund: (a) Subject to the claims of its creditors to
the extent set forth in Section 3 hereof, Cleveland-Cliffs (i)
hereby deposits with the Trustee in trust Ten Dollars ($10.00)
which shall become the principal of this Trust, and (ii)
Cleveland-Cliffs may from time to time make additional deposits
of cash or other property in the Trust to augment such principal.
The principal and income of the Trust shall be held, administered
and disposed of by the Trustee as herein provided, but no
payments of all or any portion of the principal of the Trust or
earnings thereon shall be made to Cleveland-Cliffs or any other
person or entity on behalf of Cleveland-Cliffs except as herein
expressly provided.
<PAGE> 8
3
4. The first sentence of Section l(b) is amended to read as follows:
(b) The Trust hereby established shall be irrevocable.
5. Section 1(c) is amended to read as follows:
(c) Upon the earlier to occur of (i) a Change of
Control or (ii) a declaration by the Board of Directors of
Cleveland-Cliffs that a Change of Control is imminent,
Cleveland-Cliffs shall promptly, and in any event within five (5)
business days, transfer to the Trustee to be added to the
principal of the Trust under this Trust Agreement No. 5 property
or cash equal to the then value of the separate accounts of the
Executives under the Agreements, less the balances in the
Executives' accounts provided in Section 7(b) hereof as of the
most recent completed valuation thereof, as certified by the
Trustee; provided, however, if the Trustee does not so certify by
the end of the fourth (4th) business day after the earlier of (i)
or (ii) above, then the balances of such accounts shall be deemed
to be zero. Any payments by the Trustee pursuant to this Trust
Agreement No. 5 shall, to the extent thereof, discharge the
obligation of Cleveland-Cliffs to pay benefits under the
Agreements.
<PAGE> 9
4
6. Section 1(g) is amended by adding at the end thereof the
following:
The Trust is not designed to qualify under section 401(a) of the
Code or to be subject to the provisions of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA").
The Trust established under this Trust Agreement No. 5 does not
fund and is not intended to fund the Plan or any other employee
benefit plan or program of Cleveland-Cliffs. Such Trust is and
is intended to be a depository arrangement with the Trustee for
the setting aside of cash and other assets of Cleveland-Cliffs as
and when it so determines in its sole discretion for the meeting
of part or all of its future obligations with respect to Benefits
to some or all of the Trust Beneficiaries under the Plan.
7. Section 2(a) is amended to read as follows:
(a) Provided that the Trustee has not received notice
as provided in Section 3 hereof that Cleveland-Cliffs is
Insolvent, the Trustee shall make payments of Benefits to each
Trust Beneficiary from the assets of the Trust in accordance with
the terms of the Agreements and subject to Section 9 hereof. The
Trustee shall make provision for withholding of any federal,
state, or local taxes that may be required to be
<PAGE> 10
5
withheld by the Trustee in connection with the payment of any
Benefits hereunder.
8. Section 4 is amended to read as follows:
4. Payments to Cleveland-Cliffs: Cleveland-Cliffs shall have no
right or power to direct the Trustee to return any of the Trust assets
to Cleveland-Cliffs before all payments of Benefits have been made to
all Trust Beneficiaries as herein provided.
9. Section 5 is amended by adding the following at the end of the
second sentence thereof:
, and including investments in common or collective funds or trusts, and
mutual funds or investment companies, including affiliated investment
companies and 12 B-l funds. Cleveland-Cliffs acknowledges and agrees
that the Trust may receive fees as a participating depository
institution for services relating to the investment of funds in an
eligible mutual fund.
10. Section 7 is amended to read as follows:
7. Accounting by Trustee: (a) The Trustee shall maintain
such books, records and accounts as may be necessary for the proper
administration of the Trust assets, including such specific records as
shall be agreed upon in writing by Cleveland-Cliffs and the Trustee,
and shall render to Cleveland-Cliffs within
<PAGE> 11
6
60 days following the close of each calendar year following the
date of this Trust until the termination of this Trust or the
removal or resignation of the Trustee (and within 60 days after
the date of such termination, removal or resignation), an
accounting with respect to the Trust assets as of the end of the
then most recent calendar year (and as of the date of such
termination, removal or resignation, as the case may be). The
Trustee shall furnish to Cleveland-Cliffs on a quarterly basis
(or as Cleveland-Cliffs shall direct from time to time) and in a
timely manner such information regarding the Trust as
Cleveland-Cliffs shall require for purposes of preparing its
statements of financial condition. The Trustee shall at all
times maintain separate bookkeeping accounts for each Trust
Beneficiary as prescribed by Section 7(b) hereof, and shall
provide each Trust Beneficiary with an annual statement of his
account. Upon the written request of Cleveland-Cliffs or, on or
after the date on which a Change of Control has occurred, a Trust
Beneficiary, the Trustee shall deliver to such Trust Beneficiary
or Cleveland-Cliffs, as the case may be, a written report setting
forth the amount held in the Trust and a record of the deposits
made with respect thereto by Cleveland-Cliffs. Unless
<PAGE> 12
7
Cleveland-Cliffs or any Trust Beneficiary shall have filed with
the Trustee written exception or objection to any such statement
and account within 90 days after receipt thereof,
Cleveland-Cliffs and the Trust Beneficiaries shall be deemed to
have approved such statement and account, and in such case the
Trustee shall be forever released and discharged with respect to
all matters and things reported in such statement and account as
though it had been settled by a decree of a court of competent
jurisdiction in an action or proceeding to which the Company and
the Trust Beneficiaries were parties.
(b) The Trustee shall maintain a separate account for
each Trust Beneficiary. The Trustee shall credit or debit each
Trust Beneficiary's account as appropriate to reflect such Trust
Beneficiary's allocable portion of the Trust assets, as such
Trust assets be adjusted from time to time pursuant to the terms
of this Trust Agreement No. 5. Prior to the date of Change of
Control, all deposits of principal pursuant to Section l(a)
hereof shall be allocated as directed by Cleveland-Cliffs; on or
after such date deposits of principal, once allocated, may not be
reallocated by Cleveland-Cliffs. Income, expense, gain or loss
on assets allocated to the separate accounts of the Trust
Beneficiaries shall be allocated separately to such accounts by
the Trustee in
<PAGE> 13
8
proportion to the balances of the separate accounts of the
Executives.
IN WITNESS WHEREOF, Cleveland-Cliffs and the Trustee have caused
this Second Amendment to Trust Agreement No. 5 to be executed on April 9, 1991.
CLEVELAND-CLIFFS INC
By: Richard F. Novak
----------------
Its: V.P. of Human Resources
---------------------------------
AMERITRUST COMPANY NATIONAL
ASSOCIATION
By: J. R. Russell
-------------
Its: Vice President
--------------
2282D
<PAGE> 14
THIRD AMENDMENT TO TRUST AGREEMENT NO. 5
----------------------------------------
This Third Amendment to Trust Agreement No. 5 is made on this 9th day of
March, 1992, by and between Cleveland-Cliffs Inc, an Ohio corporation
("Cleveland-Cliffs") and Ameritrust Company National Association, a national
banking association, as trustee (the "Trustee");
WITNESSETH:
-----------
WHEREAS, on October 28, 1987, Cleveland-Cliffs and the Trustee entered
into a trust agreement ("Trust Agreement No. 5");
WHEREAS, on May 12, 1989, Cleveland-Cliffs and the Trustee entered into
Amendment No. 1 to Trust Agreement No. 5;
WHEREAS, on April 9, 1991, Cleveland-Cliffs and the Trustee entered into
a Second Amendment to Trust Agreement No. 5;
WHEREAS, Trust Agreement No. 5, as amended, is for the purpose of
providing benefits under the Cleveland-Cliffs Inc Voluntary Non-Qualified
Deferred Compensation Plan; and
WHEREAS, Cleveland-Cliffs has reserved the right, with the Trustee,
pursuant to Section 12 of Trust Agreement No. 5, to amend Trust Agreement No. 5
without the consent of any Trust Beneficiaries, as defined in Trust Agreement
No. 5.
NOW, THEREFORE, Cleveland-Cliffs and the Trustee hereby agree that Trust
Agreement No. 5 shall be amended as follows:
<PAGE> 15
2
1. The third sentence of Section l(b) of Trust Agreement No. 5 is
hereby amended to read as follows:
"The term "Change of Control" shall mean the occurrence of any of the
following:
(i) Cleveland-Cliffs 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 Cleveland-Cliffs as the same shall have
existed immediately prior to such merger or consolidation;
(ii) Cleveland-Cliffs 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 Cleveland-Cliffs
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;
(iii) a person within the meaning of section 3(a)(9) or of
Section 13(d)(3) (as in effect on the date
<PAGE> 16
3
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 Cleveland-Cliffs
(whether directly or indirectly); or
(iv) during any period of three consecutive years, including,
without limitation, the year 1991, individuals who at the beginning of
any such period constitute the Board of Directors of Cleveland-Cliffs
cease, for any reason, to constitute at least a majority thereof, unless
the election, or the nomination for election by the shareholders of
Cleveland-Cliffs, of each Director first elected during any such period
was approved by a vote of at least one-third of the Directors of
Cleveland-Cliffs who are Directors of Cleveland-Cliffs on the date of
the beginning of any such period."
IN WITNESS WHEREOF, Cleveland-Cliffs and the Trustee have caused
counterparts of this Third Amendment to Trust Agreement No. 5 to be executed
on March 9, 1992.
CLEVELAND-CLIFFS INC
By: R. F. Novak
-----------
Its: Vice President
--------------
AMERITRUST COMPANY NATIONAL
ASSOCIATION
By: J. R. Russell
-------------
Its: Vice President
--------------
2996F
<PAGE> 1
EXHIBIT 10(t)
3234F
AMENDED AND RESTATED TRUST AGREEMENT NO. 6
------------------------------------------
This Amended and Restated Trust Agreement No. 6 ("Trust Agreement
No. 6") is made on this 9th day of March, 1992, by and between Cleveland-Cliffs
Inc, an Ohio corporation ("Cleveland-Cliffs"), and Ameritrust Company National
Association, a national banking association, as trustee (the "Trustee").
WITNESSETH:
WHEREAS, Cleveland-Cliffs has entered into and may from time to time
enter into separate indemnification agreements (substantially in the form
attached hereto as Exhibits A and B) with its directors and officers (as listed
on Exhibit C hereto) (each such indemnification agreement being hereinafter
referred to as an "Indemnification Agreement" and each of such persons being
hereinafter referred to as an "Indemnitee");
WHEREAS, each Indemnification Agreement provides, among other
things, for Cleveland-Cliffs to pay and be solely responsible for the expenses
associated with the enforcement of the Indemnitee's rights under the
Indemnification Agreement, including without limitation fees and expenses of
attorneys and others (referred to collectively herein as "Expenses");
WHEREAS, Cleveland-Cliffs and the Trustee entered into a trust
agreement ("Trust Agreement No. 6"), dated January 22,
<PAGE> 2
2
1988, to provide for the payment of Expenses associated with the enforcement of
the Indemnitees' rights under the Indemnification Agreements in effect at that
time;
WHEREAS, Trust Agreement No. 6 was amended by a First Amendment to
Trust Agreement No. 6, dated April 9, 1991; and
WHEREAS, Cleveland-Cliffs desires to amend and restate this Trust
Agreement No. 6 heretofore entered into and has transferred or will transfer
to the trust (the "Trust") established by this Trust Agreement No. 6 assets
which shall be held therein until paid to Indemnities with respect to Expenses
in such manner and at such times as specified herein.
NOW, THEREFORE, the parties amend and restate the Trust Agreement
No. 6 and agree that the Trust shall be comprised, held and disposed of as
follows:
1.TRUST FUND. (a) Cleveland-Cliffs hereby deposits with the Trustee
in trust Two Hundred Fifty Thousand Dollars ($250,000), which shall become the
principal of this Trust, to be held, administered and disposed of by the
Trustee as herein provided.
(b)The Trust hereby established shall be revocable by
Cleveland-Cliffs at any time prior to the date on which occurs a "Change of
Control," as that term is defined in this Section 1(b); on or after such date,
this Trust shall be irrevocable. Cleveland-Cliffs shall notify the Trustee
promptly in the event that a Change of Control has occurred. The term "Change
of Control" shall mean the occurrence of any of the following events:
<PAGE> 3
3
(i) Cleveland-Cliffs 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 Cleveland-Cliffs as the same shall have existed
immediately prior to such merger or consolidation;
(ii) Cleveland-Cliffs 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 Cleveland-Cliffs 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;
(iii) 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
Cleveland-Cliffs (whether directly or indirectly); or
<PAGE> 4
4
(iv) during any period of three consecutive years, including, without
limitation, the year 1991, individuals who at the beginning of any such
period constitute the Board of Directors of Cleveland-Cliffs cease, for
any reason, to constitute at least a majority thereof, unless the
election, or the nomination for election by the shareholders of
Cleveland-Cliffs, of each Director first elected during any such period
was approved by a vote of at least one-third of the Directors of
Cleveland-Cliffs who are Directors of Cleveland-Cliffs on the date of the
beginning of any such period.
(c) The principal of the Trust and any earnings thereon shall be held in
trust separate and apart from other funds of Cleveland-Cliffs exclusively for
the uses and purposes herein set forth. No Indemnitee shall have any preferred
claim on, or any beneficial ownership interest in, any assets of the Trust
prior to the time that such assets are paid to an Indemnitee as Expenses as
provided herein.
(d) Cleveland-Cliffs may at any time or from time to time make additional
deposits of cash or other property in the Trust to augment the principal to be
held, administered and disposed of by the Trustee as herein provided, but no
payments thereon shall be made to Cleveland-Cliffs or any other person or
entity on behalf of Cleveland-Cliffs except as herein expressly provided.
(e) This Trust is intended to be a grantor trust, within the meaning of
Section 671 of the Internal Revenue Code
<PAGE> 5
5
of 1986, as amended (the "Code"), or any successor provision thereto and shall
be construed accordingly. The Trust is not designed to qualify under Section
401(a) of the Code or to be subject to the provisions of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA").
2. PAYMENTS TO INDEMNITEES. (a) The Trustee shall promptly pay Expenses
to the Indemnitees from the assets of the Trust in accordance with Sections 2,
3, 4 and 7 of each Indemnification Agreement and this Section 2, provided that
(i) this Trust Agreement No. 6 has not been terminated pursuant to Section 12
hereof; (ii) the Trust has become irrevocable; (iii) with respect to the first
demand for payment of Expenses hereunder received by the Trustee, the Trustee
shall immediately give appropriate notice thereof to all Indemnitees, and shall
make no payment of Expenses until the 21st day after such notice has been
given; and (iv) the requirements of Section 2(c) and 2(d) hereof have been
satisfied. The Trustee shall promptly inform the Company as to amounts paid to
any Indemnitee pursuant to this Section.
(b) It is the intention of Cleveland-Cliffs that during the 21-day period
prescribed by Section 2(a)(iii) hereof, the Indemnitees will make reasonable
efforts to consult with each other and to take into account the interests of
all Indemnitees in deciding on how best to proceed to enforce the provisions of
the Indemnification Agreements such that the assets of the Trust are utilized
most effectively; provided, however, that this Section 2(b) is to be construed
as precatory
<PAGE> 6
6
in nature, and in the absence of any other agreement or arrangement, this Trust
Agreement No. 6 (without regard to this Section 2(b)) shall apply to the
payment of Expenses.
(c) A demand for payment by an Indemnitee hereunder must be made prior to
the sixth anniversary after termination of such Indemnitee's services as a
director or officer of Cleveland-Cliffs. In order to demand payment hereunder,
the Indemnitee must deliver to the Trustee (i) a certificate signed by or on
behalf of such Indemnitee, certifying to the Trustee that the Company is in
default in paying the Indemnitee a specified amount which the Indemnitee states
to be owed under the Indemnification Agreement, and (ii) a notice in writing
and in reasonable detail of the Expenses that are to be paid hereunder.
(d) To the extent payments hereunder may be made only from funds held in
the form of a deposit or obligation, such payments may be postponed until such
deposit or obligation shall have matured. Payments shall be made to the
Indemnitee in the full amount noticed until the Trust is depleted; provided
that if on the date such amount is to be paid from the Trust other amounts have
been claimed but not yet paid to the same or other Indemnitees and the
aggregate amount so claimed exceeds the amount available in the Trust, the
Trustee shall only pay that portion of the amount then payable to each such
Indemnitee determined by multiplying such amount by a fraction, the numerator
of which is the amount then in the Trust and the denominator of which is the
aggregate amount noticed by the Idemnitees to be owed but not yet paid to that
date.
<PAGE> 7
7
3. RIGHTS OF IDEMNITEES. (a) Nothing in this Trust Agreement No. 6 shall
in any way diminish any rights of any Indemnitee to pursue his rights as a
general creditor of the Company with respect to Expenses or otherwise, and (b)
the rights of each Indemnitee under the respective Indemnification Agreement,
shall in no way be affected or diminished by any provision of this Trust
Agreement No. 6 or action taken pursuant to this Trust Agreement No. 6, it
being the intent of Cleveland-Cliffs that rights of each Indemnitee hereunder
be security for obligations of Cleveland-Cliffs under the respective
Indemnification Agreement, except that any payment actually received by any
Indemnitee hereunder shall reduce dollar-per-dollar amounts otherwise due to
such Indemnitee pursuant to Sections 2, 3, 4 and 7 of the respective
Indemnification Agreement.
4. PAYMENTS TO CLEVELAND-CLIFFS. Except to the extent expressly
contemplated by Section 1(b), Cleveland-Cliffs shall have no right or power to
direct the Trustee to return any of the Trust assets to Cleveland-Cliffs before
all payments of Expenses have been made to all Indemnitees as herein provided.
5. INVESTMENT OF TRUST FUND. The Trustee shall invest the principal of
the Trust including any income accumulated and added to principal in (a)
interest-bearing deposit accounts or certificates of deposit (including any
such accounts or certificates issued or offered by the Trustee or any successor
or affiliated corporation but excluding
<PAGE> 8
8
obligations of Cleveland-Cliffs), (b) direct obligations of the United States
of America, or obligations the payment of which is guaranteed, as to both
principal and interest, by the government or an agency of the government of the
United States of America, or (c) one or more mutual funds or comingled funds,
whether or not maintained by the Trustee, substantially all of the assets of
which is invested in obligations the income from which is not subject to
taxation; provided, however, that no such investment may mature more than 90
days after the date of purchase. Nothing in this Trust Agreement No. 6 shall
preclude the comingling of Trust assets for investment. The Trustee shall not
be required to invest nominal amounts.
6. INCOME OF THE TRUST. During the continuance of this Trust all net
income of the Trust shall be retained in the Trust.
7. ACCOUNTING BY TRUSTEE. The Trustee shall keep records in reasonable
detail of all investments, receipts, disbursements and all other transactions
required to be done, including such specific records as shall be agreed upon in
writing by Cleveland-Cliffs and the Trustee. All such accounts books and
records shall be open to inspection and audit at all reasonable times by
Cleveland-Cliffs, by any Indemnitee or by any agent or representative of any
of the foregoing. Within 60 calendar days following the end of each calendar
year and within 60 calendar days after the removal or resignation of the
Trustee, the Trustee shall deliver to Cleveland-Cliffs and, if such year end,
removal or resignation
<PAGE> 9
9
occurs on or after the date on which a Change of Control has occurred, to each
Indemnitee a written account of its administration of the Trust during such
year or during the period from the end of the last preceding year to the date
of such removal or resignation, setting forth all investments, receipts,
disbursements and other transactions affected by it, including a description of
all securities and investments purchased and sold with the cost or net proceeds
of such purchases or sales (accrued interest paid or receivable being shown
separately), and showing all cash, securities, rights and other property held
in the Trust at the end of such year or as of the date of such removal or
resignation, as the case may be. The Trustee shall furnish to Cleveland-Cliffs
on a quarterly basis (or as Cleveland-Cliffs shall direct from time to time)
and in a timely manner such information regarding the Trust as Cleveland-Cliffs
shall require for purposes of preparing its statements of financial condition.
Unless Cleveland-Cliffs or any Indemnitee shall have filed with the Trustee
written exception or objection to any such statement and account within 90 days
after receipt thereof, Cleveland-Cliffs or the Indemnitee shall be deemed to
have approved such statement and account and in such case the Trustee shall be
forever released and discharged with respect to all matters and things reported
in such statement and account as though it had been settled by a decree of a
court of competent jurisdiction in an action or proceeding to which
Cleveland-Cliffs and the Indemnitees were parties.
<PAGE> 10
10
8. RESPONSIBILITY OF TRUSTEE. (a) The Trustee shall act with the care,
skill, prudence and diligence under the circumstances then prevailing that a
prudent corporate trustee, acting in like capacity and familiar with such
matters, would use in the conduct of an enterprise of a like character and with
like aims; provided, however, that the Trustee shall incur no liability to any
person for any action taken pursuant to a direction, request or approval which
is contemplated by and in conformity and compliance with the terms of this
Trust Agreement No. 6 and the Indemnification Agreements, and is given in
writing by Cleveland-Cliffs or by an Indemnitee with respect to his beneficial
interest herein; and provided, further, that the Trustee shall have no duty to
seek additional deposits of principal from Cleveland-Cliffs, and the Trustee
shall not be responsible for the adequacy of this Trust.
(b) The Trustee shall defend any litigation arising in connection with
this Trust Agreement No. 6 and Cleveland-Cliffs shall indemnify the Trustee and
be primarily liable for such costs, expenses and liabilities (including without
limitation attorneys' fees and expenses) incurred by reason of such litigation.
(c) The Trustee may consult with legal counsel (which, after a Change of
Control, shall be independent with respect to Cleveland-Cliffs) with respect to
any of its duties or obligations hereunder, and shall be fully protected in
acting or refraining from acting in accordance with the advice of such counsel.
<PAGE> 11
11
(d) The Trustee may rely and shall be protected in acting or refraining
from acting within the authority granted by the terms of this Trust Agreement
No. 6 upon any written notice, instruction or request furnished to it hereunder
and believed by it to be genuine and to have been signed or presented by the
proper party or parties, including, without limiting the scope of this Section
8(d), (i) the notice of a Change of Control required by Section 1(b) hereof,
and (ii) the certification and notice required by Section 2(c) hereof.
(e) The Trustee may hire agents accountants and financial consultants, who
may be agent, accountant, or financial consultant, as the case may be, for
Cleveland-Cliffs, and shall not be answerable for the conduct of same if
appointed with due care.
(f) The Trustee shall have, without exclusion, all powers conferred on
trustees by applicable law unless expressly provided otherwise herein.
(g) The Trustee is empowered to take all actions necessary or advisable in
order to collect any benefits or payment of which the Trustee is the designated
beneficiary.
9. AMENDMENTS, ETC. TO INDEMNIFICATION AGREEMENTS: COOPERATION OF
CLEVELAND-CLIFFS. (a) Cleveland-Cliffs shall, and any Indemnitee may, promptly
furnish the Trustee with true and correct copies of any amendment, restatement
or successor to Exhibits A and/or B, whereupon such amendment, restatement or
successor shall be incorporated herein by reference; provided, however, that
such amendment, restatement or
<PAGE> 12
12
successor shall not affect the Trustee's duties and responsibilities hereunder
without the consent of the Trustee, and provided, further, that the failure of
Cleveland-Cliffs to furnish any such amendment, restatement, or successor shall
in no way diminish the rights of any Indemnitee under this Trust Agreement No.
6 or under any Indemnification Agreement.
(b) Cleveland-Cliffs shall provide the Trustee with all information
requested by the Trustee for purposes of determining payments to the
Indemnitees as provided in Section 2. Upon the failure of Cleveland-Cliffs or
any Indemnitee to provide any such information requested by the trustee for
purposes of determining payments to the Indemnitees as provided in Section 2,
the Trustee shall, to the extent necessary in the sole judgment of the Trustee,
(i) compute the amount payable hereunder to any Indemnitee; and (ii) notify
Cleveland-Cliffs and the Indemnitee in writing of its computations. Thereafter
this Trust Agreement No. 6 shall be construed as to the Trustee's duties and
obligation hereunder in accordance with such Trustee determinations without
further action; provided, however, that no such determinations shall in any way
diminish the rights of the Indemnitees hereunder or under the Indemnification
Agreement, and provided, further, that no such determination shall be deemed to
modify this Trust Agreement No. 6 or any Indemnification Agreement.
(c) Amendments to Exhibit C may be made by Cleveland-Cliffs at any time
prior to the date of a Change of Control. On or after such date, no amendment
to Exhibit C may
<PAGE> 13
13
be made, other than to designate a different address pursuant to Section 14
hereof.
10.COMPENSATION AND EXPENSES OF TRUSTEE. The Trustee shall be entitled to
receive such reasonable compensation for its services as shall be agreed upon
by Cleveland-Cliffs and the Trustee. The Trustee shall also be entitled to
reimbursement of its reasonable expenses incurred with respect to the
administration of the Trust including fees and expenses incurred pursuant to
Sections 8(c) and 8(e) hereof. Such compensation and expenses shall in all
events be payable either directly by Cleveland-Cliffs or, in the event that
Cleveland-Cliffs shall refuse, from the assets of the Trust. The Trust shall
have a claim against Cleveland-Cliffs for any such compensation or expenses so
paid.
11.REPLACEMENT OF THE TRUSTEE. (a) The Trustee may resign after providing
not less than 90 days' notice to Cleveland-Cliffs and, on or after the date on
which a Change of Control has occurred, to the Indemnitees. Prior to the date
on which a Change of Control has occurred, the Trustee may be removed at any
time by Cleveland-Cliffs. On or after such date, such removal shall also
require the agreement of a majority of the Indemnitees. Prior to the date on
which a Change of Control has occurred, a replacement or successor trustee
shall be appointed by Cleveland-Cliffs. On or after such date, such
appointment shall also require the agreement of a majority of the Indemnitees.
No such removal or resignation shall become effective until the acceptance of
the trust by a
<PAGE> 14
14
successor trustee designated in accordance with this Section 11. If the
Trustee should resign, and within 45 days of the notice of such resignation
Cleveland-Cliffs and a majority of the Indemnitees (if required) shall not have
notified the Trustee of an agreement as to a replacement trustee, the Trustee
shall appoint a successor trustee, which shall be a bank or trust company,
wherever located, having a capital and surplus of at least $500,000,000 in the
aggregate. Notwithstanding the foregoing, a new trustee shall be independent
and not subject to control of either Cleveland-Cliffs or the Indemnitees. Upon
the acceptance of the trust by a successor trustee, the Trustee shall release
all of the monies and other property in the Trust to its successor, who shall
thereafter for all purposes of this Trust Agreement No. 6 be considered to be
the "Trustee."
(b) For purposes of the removal or appointment of a trustee under this
Section 11, if any Indemnitee shall be deceased or adjudged incompetent, such
Indemnitee's personal representative (including his or her guardian, executor
or administrator) shall participate in such Indemnitee's stead.
12.AMENDMENT OR TERMINATION. (a) This Trust Agreement No. 6 may be
amended at any time and to any extent by a written instrument executed by the
Trustee, Cleveland-Cliffs and, on or after the date on, which a Change of
Control has occurred, a majority of the Indemnitees, except to make the Trust
revocable after it has become irrevocable in accordance with Section 1(b)
hereof, or to alter Section 12(b) hereof,
<PAGE> 15
15
except that amendments contemplated by Section 9 hereof shall be made as
therein provided.
(b) The Trust shall terminate upon the earliest of (i) the tenth
anniversary of the date on which a Change of Control has occurred; (ii) the
sixth anniversary of the date on which a Change of Control has occurred,
provided that the Trustee has received no demand for payment of Expenses prior
to such anniversary; (iii) such time as the Trust no longer contains any
assets; (iv) such time as the Trustee shall have received consents from all
Indemnitees to the termination of this Trust Agreement No. 6; or (v) there is
no longer any living Indemnitee under this Trust Agreement No. 6 and there is
no pending demand by the estate of any Indemnitee against the Trust.
(c) Upon termination of the Trust as provided in Section 12(b) hereof, any
assets remaining in the Trust shall be returned to Cleveland-Cliffs unless a
determination is made by legal counsel experienced in such matters that the
assets of the Trust may not be returned to Cleveland-Cliffs without violating
Section 403(d)(2) of ERISA, or any successor provision thereto. If such a
determination is made, any assets remaining in the Trust, after satisfaction of
liabilities hereunder, pursuant to the written direction of Cleveland-Cliffs,
shall be (i) distributed to any welfare benefit plan (within the meaning of
ERISA) maintained by Cleveland-Cliffs at the time of distribution so
established at such time in order to receive such assets from this Trust, or
<PAGE> 16
16
(ii) otherwise applied to provide benefits which may be provided by a welfare
benefit plan (within the meaning of ERISA), directly or through the purchase of
insurance.
13.SEVERABILITY, ALIENATION, ETC. (a) Any provision of this Trust
Agreement No. 6 prohibited by law shall be ineffective to the extent of any
such prohibition without invalidating the remaining provisions hereof.
(b) To the extent permitted by law, benefits to Indemnitees under this
Trust Agreement No. 6 may not be anticipated (except as herein expressly
provided), assigned, (either at law or in equity) alienated or subject to
attachment, garnishment, levy, execution or other legal or equitable process.
No benefit actually paid to any Indemnitee by the Trustee shall be subject to
any claim for repayment by Cleveland-Cliffs or Trustee, except in the event of
(i) a false claim, or (ii) a payment is made to an incorrect Indemnitee.
(c) This Trust Agreement No. 6 shall be governed by and construed in
accordance with the laws of the State of Ohio, without giving effect to the
principles of conflict of laws thereof.
(d) This Trust Agreement No. 6 may be executed in two or more
counterparts, each of which shall be considered an original agreement. This
Trust Agreement No. 6 shall become effective immediately upon the execution by
Cleveland-Cliffs of at least one counterpart, it being understood that all
parties need not sign the same counterpart, but shall not bind any Trustee
until such Trustee has executed at least one counterpart.
<PAGE> 17
17
14.NOTICES. All notices, requests, consents and other communications
hereunder shall be in writing and shall be deemed to have been duly given when
received:
IF TO THE TRUSTEE, TO:
Ameritrust Company National Association
900 Euclid Avenue
Cleveland, Ohio 44115
Attention: Trust Department
Employee Benefit Administration
IF TO CLEVELAND-CLIFFS, TO:
Cleveland-Cliffs Inc
1100 Superior Avenue
Cleveland, Ohio 44114
Attention: Secretary
IF TO AN INDEMNITEE, TO:
His or her last address shown on
the records of Cleveland-Cliffs
provided, however, that if any party or his or its successors shall have
designated a different address by notice to the other parties, then to the last
address so designated.
<PAGE> 18
18
IN WITNESS WHEREOF, each of Cleveland-Cliffs and the Trustee have caused
counterparts of this Amended and Restated Trust Agreement No. 6 to be executed
on their behalf on March 9, 1992, each of which shall be an original agreement.
CLEVELAND-CLIFFS INC
By: R. F. Novak
-----------
Its: Vice President
--------------
AMERITRUST COMPANY NATIONAL
ASSOCIATION, as Trustee
By: J. R. Russell
-------------
Its: Vice President
--------------
<PAGE> 19
EXHIBIT A
INDEMNIFICATION AGREEMENT
This Indemnification Agreement ("Agreement") is made as of the day of
, 1987, by and between Cleveland-Cliffs Inc, an Ohio corporation
(the "Company"), and (the "Indemnitee"), a Director of
the Company.
RECITALS
A. The Indemnitee is presently serving as a Director of the Company and
the Company desires the Indemnitee to continue in that capacity. The
Indemnitee is willing, subject to certain conditions including without
limitation the execution and performance of this Agreement by the Company, to
continue in that capacity.
B. In addition to the indemnification to which the Indemnitee is entitled
under the Regulations of the Company (the "Regulations"), the Company has
obtained, at its sole expense, insurance protecting the Company and its
officers and directors including the Indemnitee against certain losses arising
out of actual or threatened actions, suits, or proceedings to which such
persons may be made or threatened to be made parties. However, as a result of
circumstances having no relation to, and beyond the control of, the Company and
the Indemnitee, the scope of that insurance has been reduced and there can be
no assurance of the continuation or renewal of that insurance.
Accordingly, and in order to induce the Indemnitee to continue to serve in
his present capacity, the Company and the Indemnitee agree as follows:
1. Continued Service. The Indemnitee shall continue to serve at the will
of the Company as a director of the Company so long as he is duly elected and
qualified in accordance with the Regulations or until he resigns in writing in
accordance with applicable law.
2. Initial Indemnity. (a) The Company shall indemnify the Indemnitee, if
or when he is a party or is threatened to be made a party to any threatened,
pending, or completed action, suit, or proceeding, whether civil, criminal,
administrative, or investigative (other than an action by or in the right of
the Company, by reason of the fact that he is or was a Director of the Company
or is or was serving at the request of the Company as a director, trustee,
officer, employee, or agent of another corporation, domestic or foreign,
nonprofit or for profit, partnership, joint venture, trust, or other
enterprise, or by reason of any action alleged to have been taken or omitted in
any such capacity, against any and all costs, charges, expenses (including
without limitation fees and expenses of attorneys and/or others; all such
costs, charges and expenses being herein jointly referred to as "Expenses"),
judgments, fines, and amounts paid in settlement, actually and reasonably
incurred by the Indemnitee in connection therewith including any appeal of or
from any judgment or decision, unless it is proved by clear and convincing
evidence in a court of competent jurisdiction that the Indemnitee's action or
failure to act involved an act or omission undertaken with deliberate intent to
cause injury to the Company or undertaken with reckless disregard for the best
interests of the Company.
1
<PAGE> 20
In addition, with respect to any criminal action or proceeding, indemnification
hereunder shall be made only if the Indemnitee had no reasonable cause to
believe his conduct was unlawful. The termination of any action, suit or
proceeding by judgment, order, settlement, or conviction, or upon a plea of
nolo contendere or its equivalent, shall not, of itself, create a presumption
that the Indemnitee did not satisfy the foregoing standard of conduct to the
extent applicable thereto.
(b) The Company shall indemnify the Indemnitee, if or when he is a party
or is threatened to be made a party to any threatened, pending, or completed
action, suit, or proceeding by or in the right of the Company to procure a
judgment in its favor, by reason of the fact that the Indemnitee is or was a
Director of the Company or is or was serving at the request of the Company as a
director, trustee, officer, employee, or agent of another corporation, domestic
or foreign, nonprofit or for profit, partnership, joint venture, trust, or
other enterprise, against any and all Expenses actually and reasonably incurred
by the Indemnitee in connection with the defense or settlement thereof or any
appeal of or from any judgment or decision, unless it is proved by clear and
convincing evidence in a court of competent jurisdiction that the Indemnitee's
action or failure to act involved an act or omission undertaken with deliberate
intent to cause injury to the Company or undertaken with reckless disregard for
the best interests of the Company, except that no indemnification shall be made
in respect of any action or suit in which the only liability asserted against
Indemnitee is pursuant to Section 1701.95 of the Ohio Revised Code.
(c) Any indemnification under Section 2(a) or 2(b) (unless ordered by a
court) shall be made by the Company only as authorized in the specific case
upon a determination that indemnification of the Indemnitee is proper in the
circumstances because he has met the applicable standard of conduct set forth
in Section 2(a) or 2(b). Such authorization shall be made (i) by the Directors
of the Company (the "Board") by a majority vote of a quorum consisting of
Directors who were not and are not parties to or threatened with such action
suit, or proceeding or (ii) if such a quorum of disinterested Directors is not
available or if a majority of such quorum so directs, in a written opinion by
independent legal counsel (designated for such purpose by the Board) which
shall not be an attorney, or a firm having associated with it an attorney, who
has been retained by or who has performed services for the Company, or any
person to be indemnified within the five years preceding such determination, or
(iii) by the shareholders of the Company (the "Shareholders"), or (iv) by the
court in which such action, suit, or proceeding was brought.
(d) To the extent that the Indemnitee has been successful on the merits or
otherwise, including without limitation the dismissal of an action without
prejudice, in defense of any action, suit, or proceeding referred to in Section
2(a) or 2(b), or in defense of any claim, issue, or matter therein, he shall be
indemnified against Expenses actually and reasonably incurred by him in
connection therewith. Expenses actually and reasonably incurred by the
Indemnitee in defending any such action, suit, or proceeding shall be paid by
the Company as they are incurred in advance of the final disposition of such
action, suit, or proceeding under the procedure set forth in Section 4(b)
hereof.
2
<PAGE> 21
(e) For purposes of this Agreement, references to "other enterprises"
shall include employee benefit plans; references to "fines" shall include any
excise taxes assessed on the Indemnitee with respect to any employee benefit
plan; references to "serving at the request of the Company" shall include any
service as a director, officer, employee, or agent of the Company which imposes
duties on, or involves services by, the Indemnitee with respect to an employee
benefit plan, its participants or beneficiaries; references to the masculine
shall include the feminine; and references to the singular shall include the
plural and vice versa.
3. Additional Indemnification. Pursuant to Section 1701.13(E)(6) of the
Ohio Revised Code (the "ORC"), without limiting any right which the Indemnitee
may have pursuant to Section 2 hereof or any other provision of this agreement
or the Articles of Incorporation, the Regulations, the ORC, any policy of
insurance, or otherwise, but subject to any limitation on the maximum
permissible indemnity which may exist under applicable law at the time of any
request for indemnity hereunder and subject to the following provisions of this
Section 3, the Company shall indemnify the Indemnitee against any amount which
he is or becomes obligated to pay relating to or arising out of any claim made
against him because of any act, failure to act, or neglect or breach of duty,
including any actual or alleged error, misstatement, or misleading statement,
which he commits, suffers, permits, or acquiesces in while acting in his
capacity as a Director of the Company. The payments which the Company is
obligated to make pursuant to this Section 3 shall include without limitation,
judgments, fines, and amounts paid in settlement and any and all Expenses
actually and reasonably incurred by the Indemnitee in connection therewith
including any appeal of or from any judgment or decision; provided, however,
that the Company shall not be obligated under this Section 3 to make any
payment in connection with any claim against the Indemnitee:
(a) to the extent of any fine or similar governmental imposition which the
company is prohibited by applicable law from paying which results from a final,
nonapplicable order; or
(b) to the extent: based upon or attributable to the Indemnitee having
actually realized a personal gain or profit to which he was not legally
entitled, including without limitation profit from the purchase and sale by the
Indemnitee of equity securities of the Company which are recoverable by the
Company pursuant to Section 16(b) of the Securities Exchange Act of 1934, or
profit arising from transactions in publicly traded securities of the Company
which were effected by the Indemnitee in violation of Section 10(b) of the
Securities Exchange Act of 1934, or Rule 10b-5 promulgated thereunder.
A determination as to whether the Indemnitee shall be entitled to
indemnification under this Section 3 shall be made in accordance with Section
4(a) hereof. Expenses incurred by the Indemnitee in defending any claim to
which this Section 3 applies shall be paid by the Company as they are actually
and reasonably incurred in advance of the final disposition of such claim under
the procedure set forth in Section 4(b) hereof.
4. Certain Procedures Relating to Indemnification. (a) For purposes of
pursuing his rights to indemnification under Section 3 hereof,
3
<PAGE> 22
the Indemnitee shall (i) submit to the Board a sworn statement of request for
indemnification substantially in the form of Exhibit 1 attached hereto and made
a part hereof (the "Indemnification Statement") averring that he is entitled to
indemnification hereunder; and (ii) present to the Company reasonable evidence
or all amounts for which indemnification is requested. Submission of an
indemnification Statement to the Board shall create a presumption that the
Indemnitee is entitled to indemnification hereunder, and the Company shall,
within 60 calendar days after submission of the Indemnification Statement, make
the payments requested in the Indemnification Statement to or for the benefit
of the Indemnitee, unless (i) within such 60-calendar-day period the Board
shall resolve by vote of a majority of the Directors at a meeting at which a
quorum is present that the Indemnitee is not entitled to indemnification under
Section 3 hereof, (ii) such vote shall be based upon clear and convincing
evidence (sufficient to rebut the foregoing presumption), and (iii) the
Indemnitee shall have received within such period notice in writing of such
vote, which notice shall disclose with particularity the evidence upon which
the vote is based. The foregoing notice shall be sworn to by all persons who
participated in the vote and voted to deny indemnification. The provisions of
this Section 4(a) are intended to be procedural only and shall not affect the
right of Indemnitee so indemnification under Section 3 of this Agreement so
long as Indemnitee follows the prescribed procedure and any determination by
the Board that Indemnitee is not entitled to indemnification and any failure to
make the payments requested in the Indemnification Statement shall be subject
to judicial review by any court of competent jurisdiction.
(b) For purposes of obtaining payments of Expenses in advance of final
disposition pursuant to the second sentence of Section 2(d) or the last
sentence or Section 3 hereof, the Indemnitee shall submit to the Company a
sworn request for advancement of Expenses substantially in the form of Exhibit
2 attached hereto and made a part hereof (the "Undertaking"), averring that he
has reasonably incurred actual Expenses in defending an action, suit or
proceeding referred to in Section 2(a) or 2(b) or any claim referred to in
Section 3, or pursuant to Section 7 hereof. Unless at the time of the
Indemnitee's act or omission at issue, the Articles of Incorporation or
Regulations of the Company prohibit such advances by specific reference to ORC
Section 1701.13(E)(5)(a) and unless the only liability asserted against the
Indemnitee in the subject action, suit or proceeding is pursuant to ORC Section
1701.95, the Indemnitee shall be eligible to execute Part A of the Undertaking
by which he undertakes to (a) repay such amount if it is proved by clear and
convincing evidence in a court of competent jurisdiction that the Indemnitee's
action or failure to act involved an act or omission undertaken with deliberate
intent to cause injury to the Company or undertaken with reckless disregard for
the best interests of the Company and (b) reasonably cooperate with the Company
concerning the action, suit, proceeding or claim. In all cases, the Indemnitee
shall be eligible to execute Part B of the Undertaking by which he undertakes
to repay such amount if it ultimately is determined that he is not entitled to
be indemnified by the Company under this Agreement or otherwise. In the event
that the Indemnitee is eligible to and does execute both Part A and Part B of
the Undertaking, the Expenses which are paid by the Company pursuant thereto
shall be required to be repaid by the Indemnitee only if he is required to do
so under the terms or both Part A and Part B of the Undertaking. Upon receipt
of the Undertaking the Company
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<PAGE> 23
shall thereafter promptly pay such Expenses of the Indemnitee as are noticed to
the Company in writing and in reasonable detail arising out of the matter
described in the Undertaking. No security shall be required in connection with
any Undertaking.
5. Limitation on Indemnity. Notwithstanding anything contained herein to
the contrary, the Company shall not be required hereby to indemnify the
Indemnitee with respect to any action, suit, or proceeding that was initiated
by the Indemnitee unless (i) such action. suit, or proceeding was initiated by
the Indemnitee to enforce any rights to indemnification arising hereunder and
such person shall have been formally adjudged to be entitled to indemnity by
reason hereof, (ii) authorized by another agreement to which the Company is a
party whether heretofore or hereafter entered, or (iii) otherwise ordered by
the court in which the suit was brought.
6. Subrogation: Duplication of Payments. (a) In the event of any
payment under this Agreement, the Company shall be subrogated to the extent of
such payment to all of the rights of recovery previously vested in the
Indemnitee, who shall execute all papers required and shall do everything that
may be necessary to secure such rights, including the execution of such
documents necessary to enable the Company effectively to bring suit to enforce
such rights.
(b) The Company shall not be liable under this Agreement to make any
payment in connection with any claim made against Indemnitee to the extent
Indemnitee has actually received payment (under any insurance policy, the
Company's Regulations or otherwise) of the amounts otherwise payable hereunder.
7. Fees and Expenses of Enforcement. It is the intent of the Company
that the Indemnitee not be required to incur the expenses associated with the
enforcement of his rights under this Agreement by litigation or other legal
action because the cost and expense thereof would substantially detract from
the benefits is intended to be extended to the Indemnitee hereunder.
Accordingly, if it should appear to the Indemnitee that the Company has failed
to comply with any of its obligations under this Agreement or in the event that
the Company or any other person takes any action to declare this Agreement void
or unenforceable, or institutes any action, suit or proceeding to deny, or to
recover from, the Indemnitee the benefits intended to be provided to the
Indemnitee hereunder, the Company irrevocably authorizes the Indemnitee from
time to time to retain counsel of his choice, at the expense of the Company as
hereafter profited, to represent the Indemnitee in connection with the
initiation or defense of any litigation or other legal action, whether by or
against the Company or any director, officer, shareholder, or other person
affiliated with the Company, in any jurisdiction. Regardless of the outcome
thereof, the Company shall pay and be solely responsible for any and all costs,
charges, and expenses, including without limitation fees and expenses of
attorneys and others, reasonably incurred by the Indemnitee pursuant to this
Section 7.
8. Merger or Consolidation. In the event that the Company shall be a
constituent corporation in a consolidation, merger, or other reorganization the
Company, if it shall not be the surviving, resulting, or acquiring corporation
therein, shall require as a condition there so that the
5
<PAGE> 24
surviving, resulting, or acquiring corporation agree to assume all of the
obligations of the Company hereunder and to indemnify the Indemnitee to the
full extent provided herein Whether or not the Company is the resulting,
surviving, or acquiring corporation in any such transaction, the Indemnitee
shall also stand in the same position under this Agreement with respect to the
resulting, surviving, or acquiring corporation as he would have with respect to
the Company if its separate existence had continued.
9. Nonexclusivity and Severability. (a) The e rights to indemnification
provided by this Agreement shall not be exclusive of any other rights of
indemnification to which the Indemnitee may be entitled under the Articles of
Incorporation, the Regulations, the ORC or any other statute, any insurance
policy, agreement, or vote of shareholders or directors or otherwise, as to any
actions or failures to act by the Indemnitee, and shall continue after he has
ceased to be a Director, officer, employee, or agent of the Company or other
entity for which his service gives rise to a right hereunder, and shall inure
to the benefit of his heirs, executors, and administrators.
(b) If any provision of this Agreement or the application of any provision
hereof to any person or circumstances is held invalid unenforceable, or
otherwise illegal, the remainder of this Agreement and the application of such
provision to other persons or circumstances shall not be affected, and the
provision so held to be invalid, unenforceable, or otherwise illegal shall be
reformed to the extent (and only to the extent) necessary to make it
enforceable, valid, and legal.
10. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Ohio, without giving effect to the
principles of conflict of laws thereof.
11. Modification. This Agreement and the rights and duties of the
Indemnitee and the company hereunder may be modified only by an instrument in
writing signed by both parties hereto.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the date first above written.
CLEVELAND-CLIFFS INC
By ___________________________________
President and
Chief Executive Officer
_______________________________________
[Signature of Indemnitee]
6
<PAGE> 25
Exhibit 1
INDEMNIFICATION STATEMENT
STATE OF )
) ss:
COUNTY OF )
I, ___________________, being first duly sworn, do depose and say as
follows:
1. This Indemnification Statement is submitted pursuant to the
Indemnification Agreement, dated ______________, 1987, between Cleveland-Cliffs
Inc (the "Company"), an Ohio corporation, and the undersigned.
2. I am requesting indemnification against costs, charges, expenses
(which may include fees and expenses of attorneys and/or others), judgments,
fines, and amounts paid in settlement (collectively, "Liabilities"), which have
been actually and reasonably incurred by me in connection with a claim referred
to in Section 3 of the aforesaid Indemnification Agreement.
3. With respect to all matters related to any such claim, I am entitled
to be indemnified as herein contemplated pursuant to the aforesaid
Indemnification Agreement.
4. Without limiting any other rights which I have or may have, I am
requesting indemnification against Liabilities which have or may arise out of
________________________________________________________________________________
__________________________________________.
_______________________________________
(Signature of Indemnitee)
Subscribed and sworn to before me, a Notary Public in and for said
County and State, this _______ day of _______________, 19___.
[Seal]
My commission expires the _________ day of _____________, 19____.
7
<PAGE> 26
Exhibit 2
UNDERTAKING
STATE OF )
) ss:
COUNTY OF )
I,____________________, being first duly sworn, do depose and say as
follows:
1. This Undertaking is submitted pursuant to the Indemnification
Agreement, dated ____________, 1987, between Cleveland-Cliffs Inc (the
"Company"), an Ohio Corporation, and the undersigned.
2. I am requesting payment of costs, charges, and expenses which I have
reasonably incurred or will reasonably incur in defending an action, suit or
proceeding, referred to in Section 2(a) or 2(b) or any claim referred to in
Section 3, or pursuant to Section 7, of the aforesaid Indemnification
Agreement.
3. The costs, charges, and expenses for which payment is requested are,
in general, all expenses related to_____________________________________________
________________________________________________________________________________
.
4. Part A
I hereby undertake to (a) repay all amounts paid pursuant hereto if it is
proved by clear and convincing evidence in a court of Competent jurisdiction
that my action or failure to act which is the subject of the matter described
herein involved an act or omission undertaken with deliberate intent to cause
injury to the Company or undertaken with reckless disregard for the best
interests of the Company and (b) reasonably cooperate with the Company
concerning the action, suit, proceeding or claim.
_______________________________________
[Signature of Indemnitee]
4. Part B
I hereby undertake to repay all amounts paid pursuant hereto if it
ultimately is determined that I am not entitled to be indemnified by the
Company under the aforesaid Indemnification Agreement or otherwise
_______________________________________
[Signature of Indemnitee]
Subscribed and sworn to before me, a Notary Public in and for said County
and State, this ______ day of ________, 19___.
[Seal]
My commission expires the ______ day of _________, 19___.
8
<PAGE> 27
Exhibit B
INDEMNIFICATION AGREEMENT
This Indemnification Agreement ("Agreement") is made as of the day of
, 1987, by and between Cleveland-Cliffs Inc, an Ohio corporation
(the "Company"), and (the "Indemnitee"), an Officer of the
Company.
RECITALS
A. The Indemnitee is presently serving as an Officer of the Company and
the Company desires the Indemnitee to continue in that capacity. The
Indemnitee is willing, subject to certain conditions including without
limitation the execution and performance of this Agreement by the Company, to
continue in that capacity.
B. In addition to the indemnification to which the Indemnitee is entitled
under the Regulations of the Company (the "Regulations"), the Company has
obtained, at its sole expense, insurance protecting the Company and its
officers and directors including the Indemnitee against certain losses arising
out of actual or threatened actions, suits, or proceedings to which such
persons may be made or threatened to be made parties. However, as a result of
circumstances having no relation to, and beyond the control of, the Company and
the Indemnitee, the scope of that insurance has been reduced and there can be
no assurance of the continuation or renewal of that insurance.
Accordingly, and in order to induce the Indemnitee to continue to serve in
his present capacity, the Company and the Indemnitee agree as follows:
1. Continued Service. The Indemnitee shall continue to serve at the will
of the Company as a Officer of the Company until he resigns in writing in
accordance with applicable law.
2. Initial Indemnity. (a) The Company shall indemnify the Indemnitee, if
or when he is a party or is threatened to be made a party to any threatened,
pending, or completed action, suit, or proceeding, whether civil, criminal,
administrative, or investigative (other than an action by or in the right of
the Company), by reason of the fact that he is or was a Director of the Company
or is or was serving at the request of the Company as a director, trustee,
officer, employee, or agent of another corporation, domestic or foreign,
nonprofit or for profit, partnership, joint venture, trust, or other
enterprise, or by reason of any action alleged to have been taken or omitted in
any such capacity, against any and all costs, charges, expenses (including
without limitation fees and expenses of attorneys and/or others; all such
costs, charges and expenses being herein jointly referred to as "Expenses"),
judgments, fines, and amounts paid in settlement, actually and reasonably
incurred by the Indemnitee in connection therewith including any appeal of or
from any judgment or decision, unless it is proved by clear and convincing
evidence in a court of competent jurisdiction that the Indemnitee's action or
failure to act involved an act or omission undertaken with deliberate intent to
cause injury to the Company or undertaken with reckless disregard for the best
interests of the Company.
1
<PAGE> 28
In addition, with respect to any criminal action or proceeding, indemnification
hereunder shall be made only if the Indemnitee had no reasonable cause to
believe his conduct was unlawful. The termination of any action, suit or
proceeding by judgment, order, settlement, or conviction, or upon a plea of
nolo contendere or its equivalent, shall not, of itself, create a presumption
that the Indemnitee did not satisfy the foregoing standard of conduct to the
extent applicable thereto.
(b) The Company shall indemnify the Indemnitee, if or when he is a party
or is threatened to be made a party to any threatened, pending, or completed
action, suit, or proceeding by or in the right of the Company to procure a
judgment in its favor, by reason of the fact that the Indemnitee is or an
Officer of the Company or is or was serving at the request of the Company as a
director, trustee, officer, employee, or agent of another corporation, domestic
or foreign, nonprofit or for profit, partnership, joint venture, trust, or
other enterprise, against any and all Expenses actually and reasonably incurred
by the Indemnitee in connection with the defense or settlement thereof or any
appeal of or from any judgment or decision, unless it is proved by clear and
convincing evidence in a court of competent jurisdiction that the Indemnitee's
action or failure to act involved an act or omission undertaken with deliberate
intent to cause injury to the Company or undertaken with reckless disregard for
the best interests of the Company.
(c) Any indemnification under Section 2(a) or 2(b) (unless ordered by a
court) shall be made by the Company only as authorized in the specific case
upon a determination that indemnification of the Indemnitee is proper in the
circumstances because he has met the applicable standard of conduct set forth
in Section 2(a) or 2(b). Such authorization shall be made (i) by the Directors
of the Company (the "Board") by a majority vote of a quorum consisting of
Directors who were not and are not parties to or threatened with such, action
suit, or proceeding or (ii) if such a quorum of disinterested Directors is not
available or if a majority of such quorum so directs, in a written opinion by
independent legal counsel (designated for such purpose by the Board) which
shall not be an attorney, or a firm having associated with it an attorney, who
has been retained by or who has performed services for the Company, or any
person to be indemnified, within the five years preceding such determination,
or (iii) by the shareholders of the Company (the "Shareholders"), or (iv) by
the court in which such action, suit, or proceeding was brought.
(d) To the extent that the Indemnitee has been successful on the merits or
otherwise, including without limitation the dismissal of an action without
prejudice, in defense of any action, suit, or proceeding referred to in Section
2(a) or 2(b), or in defense of any claim, issue, or matter therein, he shall be
indemnified against Expenses actually and reasonably incurred by him in
connection therewith. Expenses actually and reasonably incurred by the
Indemnitee in defending any such action; suit, or proceeding shall be paid by
the Company as they are incurred in advance of the final disposition of such
action, suit, or proceeding under the procedure set forth in Section 4(b)
hereof.
2
<PAGE> 29
(e) For purposes of this Agreement, references to "other enterprises"
shall include employee benefit plans; references to "fines" shall include any
excise taxes assessed on the Indemnitee with respect to any employee benefit
plan; references to "serving at the request of the Company" shall include any
service as a director, officer, employee, or agent of the Company which imposes
duties on, or involves services by, the Indemnitee with respect to an employee
benefit plan, its participants or beneficiaries; references to the masculine
shall in elude the feminine; and references to the singular shall include the
plural and vice versa.
3. Additional Indemnification. Pursuant to Section 1701.13(E)(6) of the
Ohio Revised Code (the "ORC"), without limiting any right which the Indemnitee
may have pursuant to Section 2 hereof or any other provision of this Agreement
or the Articles of Incorporation, the Regulations, the ORC, any policy of
insurance, or otherwise, but subject to any limitation on the maximum
permissible indemnity which may exist under applicable law at the time of any
request for indemnity hereunder and subject to the following provisions of this
Section 3, the Company shall indemnify the Indemnitee against any amount which
he is or becomes obligated to pay relating to or arising out of any claim made
against him because of any act, failure to act, or neglect or breach of duty,
including any actual or alleged error, misstatement, or misleading statement,
which he commits, suffers, permits, or acquiesces in while acting in his
capacity as a Officer of the Company. The payments which the Company is
obligated to make pursuant to this Section 3 shall include without limitation,
judgments, fines, and amounts paid in settlement and any and all Expenses
actually and reasonably incurred by the Indemnitee in connection therewith
including any appeal of or from any judgment or decision; provided, however,
that the Company shall not be obligated under this Section 3 to make any
payment in connection with any claim against the Indemnitee:
(a) to the extent of any fine or similar governmental imposition which
the Company is prohibited by applicable law from paying which results from
a final, nonapplicable order; or
(b) to the extent based upon or attributable to the Indemnitee having
actually realized a personal gain or profit to which he was not legally
entitled, including without limitation profit from the purchase and sale
by the Indemnitee of equity securities of the Company which are
recoverable by the Company pursuant to Section 16(b) of the Securities
Exchange Act of 1934, or profit arising from transactions in publicly
traded securities of the Company which were effected by the Indemnitee in
violation of Section 10(b) of the Securities Exchange Act of 1934, or Rule
10b-5 promulgated thereunder.
A determination as to whether the Indemnitee shall be entitled to
indemnification under this Section 3 shall be made in accordance with Section
4(a) hereof. Expenses incurred by the Indemnitee in defending any claim to
which this Section 3 applies shall be paid by the Company as they are actually
and reasonably incurred in advance of the final disposition of such claim under
the procedure set forth in Section 4(b) hereof.
4. Certain Procedures Relating to Indemnification. (a) For purposes of
pursuing his rights to indemnification under Section 3 hereof,
3
<PAGE> 30
the Indemnitee shall (i) submit to the Board a sworn statement of request for
indemnification substantially in the form of Exhibit I attached hereto and made
a part hereof (the "Indemnification Statement") averring that he is entitled to
indemnification hereunder; and (ii) present to the Company reasonable evidence
of all amounts for which indemnification is requested. Submission of an
indemnification Statement to the Board shall create a presumption that the
Indemnitee is entitled to indemnification hereunder, and the Company shall,
within 60 calendar days after submission of the Indemnification Statement, make
the payments requested in the Indemnification Statement to or for the benefit
of the Indemnitee, unless (i) within such 60-calendar-day period the Board
shall resolve by vote of a majority of the Directors at a meeting at which a
quorum is present that the Indemnitee is not entitled to indemnification under
Section 3 hereof, (ii) such vote shall be based upon clear and convincing
evidence (sufficient to rebut the foregoing presumption), and (iii) the
Indemnitee shall have received within such period notice in writing of such
vote, which notice shall disclose with particularity the evidence upon which
the vote is based. The foregoing notice shall be sworn to by all persons who
participated in the vote and voted to deny indemnification. The provisions of
this Section 4(a) are intended to be procedural only and shall not affect the
right of Indemnitee to indemnification under Section 3 of this Agreement so
long as Indemnitee follows the prescribed procedure and any determination by
the Board that Indemnitee is not entitled to indemnification and any failure to
make the payments requested in the Indemnification Statement shall be subject
to judicial review by any court of competent jurisdiction.
(b) For purposes of obtaining payments of Expenses in advance of final
disposition pursuant to the second sentence of Section 2(d) or the last
sentence or Section 3 hereof, the Indemnitee shall submit to the Company a
sworn request for advancement of Expenses substantially in the form of Exhibit
2 attached hereto and made a part hereof (the "Undertaking")(i), averring that
he has reasonably incurred actual Expenses in defending an action, suit or
proceeding referred to in Section 2(a) or 2(b) or any claim referred to in
Section 3, or pursuant to Section 7 hereof; and (ii) undertakes to repay such
amount if it ultimately is determined that he is not entitled to be indemnified
by the Company under this Agreement or otherwise. Upon receipt of the
Undertaking, the Company shall thereafter promptly pay such Expenses of the
Indemnitee as are noticed to the Company in writing and in reasonable detail
arising out of the matter described in the Undertaking. No security shall be
required in connection with any Undertaking.
5. Limitation on Indemnity. Notwithstanding anything contained herein to
the contrary, the Company shall not be required hereby to indemnify the
Indemnitee with respect to any action, suit, or proceeding that was initiated
by the Indemnitee unless (i) such action, suit, or
4
<PAGE> 31
proceeding was initiated by the Indemnitee to enforce any rights to
indemnification arising hereunder and such person shall have been formally
adjudged to be entitled to indemnity by reason hereof, (ii) authorized by
another agreement to which the Company is a party whether heretofore or
hereafter entered, or (iii) otherwise ordered by the court in which the suit
was brought.
6. Subrogation: Duplication of Payments. (a) In the event of any
payment under this Agreement, the Company shall be subrogated to the extent of
such payment to all of the rights of recovery previously vested in the
Indemnitee, who shall execute all papers required and shall do everything that
may be necessary to secure such rights, including the execution of such
documents necessary to enable the Company effectively to bring suit to enforce
such rights.
(b) The Company shall not be liable under this Agreement to make any
payment in connection with any claim made against Indemnitee to the extent
Indemnitee has actually received payment (under any insurance policy, the
Company's Regulations or otherwise) of the amounts otherwise payable hereunder.
7. Fees and Expenses of Enforcement. It is the intent of the Company
that the Indemnitee not be required to incur the expenses associated with the
enforcement of his rights under this Agreement by litigation or other legal
action because the cost and expense thereof would substantially detract from
the benefits intended to be extended to the Indemnitee hereunder. Accordingly,
if it should appear to the Indemnitee that the Company has failed to comply
with any of its obligations under this Agreement or in the event that the
Company or any other person takes any action to declare this Agreement void or
unenforceable, or institutes any action, suit or proceeding to deny, or to
recover from, the Indemnitee the benefits intended to be provided to the
Indemnitee hereunder, the Company irrevocably authorizes the Indemnitee from
time to time to retain counsel of his choice, at the expense of the Company as
hereafter provided, to represent the Indemnitee in connection with the
initiation or defense of any litigation or other legal action, whether by or
against the Company or any director, officer, shareholder, or other person
affiliated with the Company, in any jurisdiction. Regardless of the outcome
thereof, the Company shall pay and be solely responsible for any and all costs,
charges, and expenses, including without limitation fees and expenses of
attorneys and others, reasonably incurred by the Indemnitee pursuant to this
Section 7.
8. Merger or Consolidation. In the event that the Company shall be a
constituent corporation in a consolidation, merger, or other reorganization,
the Company, if it shall not be the surviving, resulting, or acquiring
corporation therein, shall require as a condition thereto that the surviving,
resulting, or acquiring corporation agree to assume all of the obligations of
the Company hereunder and to indemnify the Indemnitee to the full extent
provided herein. Whether or not the Company is the resulting, surviving, or
acquiring corporation in any such transaction, the Indemnitee shall also stand
in the same position under this Agreement with respect to the resulting,
surviving, or acquiring corporation as he would have with respect to the
Company if its separate existence had continued.
5
<PAGE> 32
9. Nonexclusivity and Severability. (a) The rights to indemnification
provided by this Agreement shall not be exclusive of any other rights of
indemnification to which the Indemnitee may be entitled under the Articles of
Incorporation, the Regulations, the ORC or any other statute, any insurance
policy, agreement, or vote of shareholders or directors or otherwise, as to any
actions or failures to act by the Indemnitee, and shall continue after he has
ceased to be a Director, officer, employee, or agent of the Company or other
entity for which his service gives rise to a right hereunder, and shall inure
to the benefit of his heirs, executors, and administrators.
(b) If any provision of this Agreement or the application of any provision
hereof to any person or circumstances is held invalid unenforceable, or
otherwise illegal, the remainder of this Agreement and the application of such
provision to other persons or circumstances shall not be affected, and the
provision so held to be invalid, unenforceable, or otherwise illegal shall be
reformed to the extent (and only to the extent) necessary to make it
enforceable, valid, and legal.
10. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Ohio, without giving effect to the
principles of conflict of laws thereof.
11. Modification. This Agreement and the rights and duties of the
Indemnitee and the Company hereunder may be modified only by an instrument in
writing signed by both parties hereto.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the date first above written.
CLEVELAND-CLIFFS INC
By _____________________________________
President and
Chief Executive Officer
_______________________________________
[Signature of Indemnitee]
6
<PAGE> 33
Exhibit 1
INDEMNIFICATION STATEMENT
STATE OF )
) ss:
COUNTY OF )
I, ___________________, being first duly sworn, do depose and say as
follows:
1. This Indemnification Statement is submitted pursuant to the
Indemnification Agreement, dated ______________, 1987, between Cleveland-Cliffs
Inc (the "Company"), an Ohio corporation, and the undersigned.
2. I am requesting indemnification against costs, charges, expenses
(which may include fees and expenses of attorneys and/or others), judgments,
fines, and amounts paid in settlement (collectively, "Liabilities"), which have
been actually and reasonably incurred by me in connection with a claim referred
to in Section 3 of the aforesaid Indemnification Agreement.
3. With respect to all matters related to any such claim, I am entitled
to be indemnified as herein contemplated pursuant to the aforesaid
Indemnification Agreement.
4. Without limiting any other rights which I have or may have, I am
requesting indemnification against Liabilities which have or may arise out of
________________________________________________________________________________
_____________________________________.
_______________________________________
(Signature of Indemnitee)
Subscribed and sworn to before me, a Notary Public in and for said
County and State, this _______ day of _______________, 19___.
[Seal]
My commission expires the _________ day of _____________, 19____.
7
<PAGE> 34
Exhibit 2
UNDERTAKING
STATE OF )
) ss:
COUNTY OF )
I,____________________, being first duly sworn, do depose and say as
follows:
1. This Undertaking is submitted pursuant to the Indemnification
Agreement, dated ____________, 1987, between Cleveland-Cliffs Inc (the
"Company"), an Ohio Corporation, and the undersigned.
2. I am requesting payment of costs, charges, and expenses which I have
reasonably incurred or will reasonably incur in defending an action, suit or
proceeding, referred to in Section 2(a) or 2(b) or any claim referred to in
Section 3, or pursuant to Section 7, of the aforesaid Indemnification
Agreement.
3. The costs, charges, and expenses for which payment is requested are,
in general, all expenses related to ______________________________
________________________________________________________________________________
_____________________________________________.
4. I hereby undertake to repay all amounts paid pursuant hereto if it
ultimately is determined that I am not entitled to be indemnified by the
Company under the aforesaid Indemnification Agreement or otherwise.
_______________________________________
[Signature of Indemnitee]
Subscribed and sworn to before me, a Notary Public in and for said County
and State, this ______ day of ________, 19___.
[Seal]
My commission expires the ______ day of _________, 19___.
8
<PAGE> 1
EXHIBIT 10(u)
TRUST AGREEMENT NO. 7
---------------------
This Trust Agreement ("Trust Agreement No. 7") made this 9th day
of April, 1991 by and between Cleveland-Cliffs Inc, an Ohio corporation
("Cleveland-Cliffs"), and Ameritrust Company National Association, a national
banking association (the "Trustee");
WITNESSETH:
-----------
WHEREAS, certain benefits are or may become payable under the
provisions of the Cleveland-Cliffs Inc Supplemental Retirement Benefit Plan, as
Amended and Restated Effective January 1, 1991 as the same may hereafter be
supplemented, amended or restated, or any successor thereto (the "Plan"), a
current copy of which is attached hereto as Exhibit B and incorporated herein
by reference, to the participants in the Plan (the "Participants") listed (from
time to time as provided in Section 9(b) hereof) on Exhibit A hereto or to the
beneficiaries of such Participants (the "Beneficiaries") as the case may be;
WHEREAS, the Plan provides for the payment of benefits resulting
from contributions made to the Plan which would have been made for the
Participants to the qualified retirement plans established by Cleveland-Cliffs
and its subsidiary corporations and affiliates were it not for certain
limitations imposed by the Internal Revenue Code of 1986, as amended (the
<PAGE> 2
2
"Code"), and the Plan also provides for the payment of benefits due under
agreements entered into by Cleveland-Cliffs (and which may be entered into in
the future by Cleveland-Cliffs and its subsidiary corporations and affiliates)
with certain executives providing for additional service credit and/or other
features for purposes of computing retirement benefits;
WHEREAS, Cleveland-Cliffs wishes specifically to assure the
payment to the Participants and Beneficiaries of amounts due under the Plan
(the amounts so payable being collectively referred to herein as the
"Benefits");
WHEREAS, subject to Section 9 hereof, the amounts and timing of
Benefits to which each Participant or Beneficiary is presently or may become
entitled are as provided in the Plan;
WHEREAS, Cleveland-Cliffs wishes to establish a trust (the
"Trust") under which Cleveland-Cliffs and each of its subsidiaries or
affiliates that executes a Participating Subsidiary Deposit Agreement ("Deposit
Agreement") as provided in Section 14 hereof (a "Participating Subsidiary"; and
"Participating Employer" shall mean Cleveland-Cliffs or any Participating
Subsidiary) may transfer to the Trust assets which shall be held therein
subject to the claims of the creditors of each Participating Employer to the
extent set forth in Section 3 hereof until paid in full to all Participants and
Beneficiaries as Benefits in such manner and at such times as specified herein
unless the Participating Employer with respect to the Participant or
Beneficiary is Insolvent (as defined herein) at the time that such Benefits
become payable;
<PAGE> 3
3
WHEREAS, each Participating Subsidiary that executes a Deposit
Agreement has irrevocably appointed Cleveland-Cliffs its agent and attorney for
purposes of acting on its behalf with respect to this Trust; and
WHEREAS, a Participating Employer shall be considered "Insolvent"
for purposes of this Trust Agreement at such time as such Participating
Employer (i) is subject to a pending voluntary or involuntary proceeding as a
debtor under the United States Bankruptcy Code, as heretofore or hereafter
amended, or (ii) is unable to pay its debts as they mature.
NOW, THEREFORE, the parties do hereby establish the Trust and
agree that the Trust shall be comprised, held and disposed of as follows:
1. TRUST FUND: (a) Subject to the claims of creditors of
Participating Employers to the extent set forth in Section 3 hereof,
Cleveland-Cliffs hereby deposits with the Trustee in trust Ten Dollars ($10.00)
which shall become the principal of this Trust, to be held, administered and
disposed of by the Trustee as herein provided, but no payments of all or any
portion of the principal of the Trust or earnings thereon shall be made to
Cleveland-Cliffs or any other person or entity on behalf of Cleveland-Cliffs
except as herein expressly provided. The Trust hereby established shall be
irrevocable.
(b) Cleveland-Cliffs shall notify the Trustee promptly in the
event that a "Change of Control", (as defined herein) has occurred. The term
"Change of Control" shall mean the occurrence of any of the following events:
<PAGE> 4
4
(i) a tender offer shall be made and consummated for
the ownership of 30% or more of the outstanding voting securities of
Cleveland-Cliffs;
(ii) Cleveland-Cliffs shall 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 Cleveland-Cliffs, other than affiliates (within the
meaning of the Securities Exchange Act of 1934) of any party to such
merger or consolidation, as the same shall have existed immediately
prior to such merger or consolidation;
(iii) Cleveland-Cliffs shall sell substantially all of
its assets to another corporation which is not a wholly owned
subsidiary;
(iv) 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 acquire 30% or more of the outstanding
voting securities of Cleveland-Cliffs (whether directly, indirectly,
beneficially or of record), or
(v) during any period of two consecutive years,
individuals who at the beginning of any such period constitute the Board
of Directors of Cleveland-Cliffs cease for any reason to constitute at
least a majority thereof,
<PAGE> 5
5
unless the election, or the nomination for election by the shareholders
of Cleveland-Cliffs, of each Director first elected during any such
period was approved by a vote of at least two-thirds of the Directors of
Cleveland-Cliffs then still in office who are Directors of
Cleveland-Cliffs on the date at the beginning of any such period.
For purposes hereof, ownership of voting securities shall take into account
and shall include ownership as determined by applying the provisions of Rule
13d-3(d)(1)(i) (as in effect on the date hereof) pursuant to the Securities
Exchange Act of 1934.
(c) Any payments by the Trustee pursuant to this Agreement
shall, to the extent thereof, discharge the obligation of the Participating
Employers to pay benefits under the Plan, it being the intent of the
Participating Employers that assets in the Trust established hereby be held as
security for the obligation of the Participating Employers to pay benefits
under the Plan.
(d) The principal of the Trust and any earnings thereon shall
be held in trust separate and apart from other funds of each Participating
Employer exclusively for the uses and purposes herein set forth. No
Participant or Beneficiary shall have any preferred claim on, or any beneficial
ownership interest in, any assets of the Trust prior to the time that such
assets are paid to a Participant or Beneficiary as Benefits as provided herein.
<PAGE> 6
6
(e) A Participating Employer may at any time or from time to
time make additional deposits of cash or other property in the Trust to augment
the principal to be held, administered and disposed of by the Trustee as herein
provided, but no payments of all or any portion of the principal of the Trust
or earnings thereon shall be made to a Participating Employer or any other
person or entity on behalf of a Participating Employer except as herein
expressly provided.
(f) The Trust is intended with respect to each Participating
Employer, to be a grantor trust, within the meaning of Section 671 of the Code,
or any successor provision thereto, and shall be construed accordingly. The
Trust is not designed to qualify under Section 401(a) of the Code or to be
subject to the provisions of the Employee Retirement Income Security Act Or
1974, as amended ("ERISA"). The Trust established under this Trust Agreement
No. 7 does not fund and is not intended to fund the Plan or any other employee
benefit plan or program of a Participating Employer. Such Trust is and is
intended to be a depository arrangement with the Trustee for the setting aside
of cash and other assets of the Participating Employers as and when each of the
so determines in its sole discretion for the meeting of part or all of its
future obligations with respect to Benefits to some or all of the Participants
under the Plan.
2. PAYMENTS TO PARTICIPANTS OR BENEFICIARIES.
(a) Provided that the Trustee has not actually received notice as provided
in Section 3 hereof that a Participant's or
<PAGE> 7
7
Beneficiary's Participating Employer is Insolvent, the Trustee shall make
payments of Benefits to each Participant or Beneficiary from the assets of the
Trust in accordance with the term of the Plan and subject to Section 9 hereof.
The Trustee shall make provision for withholding of any federal, state, or
local taxes that may be required to be withheld by the Trustee in connection
with the payment of any Benefits hereunder.
(b) If the balance of a Participant's separate account
maintained pursuant to Section 7(b) hereof is not sufficient to provide for
full payment of Benefits to which a Participant or Beneficiary is entitled as
provided herein, the respective Participating Employer shall make the balance
of each such payment as provided in the Plan. No payment from the Trust assets
to a Participant or Beneficiary shall exceed the balance of such separate
account.
3. THE TRUSTEE'S RESPONSIBILITY REGARDING PAYMENTS TO A
PARTICIPANT OR BENEFICIARY WHEN A PARTICIPATING EMPLOYER IS INSOLVENT:
(a) At all times during the continuance of this Trust, the
principal and income of the Trust with respect to accounts maintained hereunder
on behalf of a Participating Employer shall be subject to claims of creditors
of such Participating Employer as set forth in this Section 3(a). The Board of
Directors ("Board") of Cleveland-Cliffs and of each Participating Subsidiary
and the Chief Executive Officer ("CEO") of Cleveland-Cliffs and of each
Participating Subsidiary shall have the duty to inform the Trustee if either
<PAGE> 8
8
the Board or the CEO believes that his or their respective Participating
Employer is Insolvent. If the Trustee receives a notice from the Board, the
CEO, or a creditor of a Participating Employer alleging that such Participating
Employer is insolvent, then unless the Trustee independently determines that
such Participating Employer is not Insolvent, the Trustee shall (i) discontinue
payments to any Participant or his Beneficiary from accounts maintained
hereunder on behalf of such Participating Employer (the "Identified
Participating Employer"), (ii) determine and allocate all Account Excesses in
accordance with Sections 4 and 7(b) hereof for the accounts of the Participants
then employed by the Identified Participating Employer, or for whom such
Identified Participating Employer has obligations and liabilities pursuant to a
Deposit Agreement, treating such accounts solely for this purpose as if they
comprised all of the accounts of the Trust, and provided that for this purpose
the Threshold Percentage shall be equal to 100%, (iii) hold the Trust assets
attributable to accounts maintained hereunder on behalf of Participants then
employed by the Identified Participating Employer, or for whom such Identified
Participating Employer has obligations and liabilities or has assumed
obligations and liabilities pursuant to a Deposit Agreement, for the benefit of
the general creditors of such Identified Participating Employer, and (iv)
promptly seek the determination of a court of competent jurisdiction regarding
the Insolvency of the Identified Participating Employer. The Trustee shall
deliver any
<PAGE> 9
9
undistributed principal and income in the Trust to the extent of the balances
of the accounts maintained hereunder on behalf of the Identified Participating
Employer to the extent necessary to satisfy the claims of the creditors of such
Identified Participating Employer as a court of competent jurisdiction may
direct. Such payments of principal and income shall be borne by the separate
accounts of the Participants in proportion to the balances on the date of such
court order of their respective accounts maintained pursuant to Section 7(b)
hereof. If payments to any Participant or Beneficiary have discontinued
pursuant to this Section 3(a), the Trustee shall resume payments to such
Participant or Beneficiary only after receipt of an order of a court of
competent jurisdiction. The Trustee shall have no duty to inquire as to
whether a Participating Employer is Insolvent and may rely on information
concerning the Insolvency of a Participating Employer which has been furnished
to the Trustee by any creditor of a Participating Employer or by any person.
Nothing in this Trust Agreement shall in any way diminish any rights of any
Participant or Beneficiary to pursue his rights as a general creditor of the
Participant's or Beneficiary's Participating Employer with respect to Benefits
or otherwise, and the rights of each Participant or Beneficiary under the Plan
shall in no way be affected or diminished by any provision of this Trust
Agreement No. 7 or action taken pursuant to this Trust Agreement No. 7 except
that any payment actually received by any Participant or Beneficiary hereunder
shall reduce
<PAGE> 10
10
dollar-per-dollar amounts otherwise due to such Participant or Beneficiary
pursuant to the Plan.
(b) If the Trustee discontinues payment of Benefits from the
Trust pursuant to Section 3(a) hereof, the Trustee shall, to the extent it has
liquid assets, place cash equal to the discontinued payments (to the extent not
paid to creditors pursuant to Section 3(a) and not paid to the Trustee pursuant
to Section 10 hereof) in such interest-bearing deposit accounts or certificates
of deposit (including any such accounts or certificates issued or offered by
the Trustee or any successor corporation but excluding obligations of any
Participating Employer) as determined by the Trustee in its sole discretion.
If the Trustee subsequently resumes such payments, the first payment following
such discontinuance shall include the aggregate amount of all payments which
would have been made to the Participants and Beneficiaries in accordance with
this Trust Agreement No. 7 during the period of such discontinuance, less the
aggregate amount of payments made to any Participant or Beneficiary by the
Participating Employer pursuant to the Plan during any such period of
discontinuance, together with interest on the net amount delayed determined at
a rate equal to the rate paid on the accounts or deposits selected by the
Trustee; provided, however, that no such payment shall exceed the balance of
the respective Participant's or Beneficiary's account as provided in Section
7(b) hereof.
4. PAYMENTS TO PARTICIPATING EMPLOYERS: Except to the
extent expressly contemplated by this Section 4, no
<PAGE> 11
11
Participating Employer shall have any right or power to direct the Trustee to
return any of the Trust assets to such Participating Employer before all
payments of Benefits have been made to all Participants or Beneficiaries of
such Participating Employer as herein provided. From time to time, if and when
requested by Cleveland-Cliffs to do so and/or in order to comply with Section
7(b) hereof, the Trustee shall engage the services of Hewitt Associates or such
other independent actuary as may be mutually satisfactory to Cleveland-Cliffs
and to the Trustee to determine the maximum actuarial present values of the
future Benefits that could become payable by each Participating Employer under
the Plan with respect to the Participants and Beneficiaries. The Trustee shall
determine the fair market values of the Trust assets allocated to the account
of each Participant pursuant to Section 7(b) hereof Cleveland-Cliffs shall pay
the fees of such independent actuary and of any appraiser engaged by the
Trustee to value any property held in the Trust. The independent actuary shall
make its calculations using the 1983 Group Annuity Mortality Table, an interest
rate of 8%, Gross National Product Price Deflator increases of 4%, or such
other assumptions as are recommended by such actuary and approved by
Cleveland-Cliffs and, after the date of a Change of Control, a majority of the
Participants (subject to the provisions of Sections 11(b)(i) and (b)(ii)
hereof). For purposes or this Trust Agreement, (A) the "Fully Funded" amount
with respect to the account of a Participant or Beneficiary maintained pursuant
<PAGE> 12
12
to Section 7(b) hereof shall be equal to the "Threshold Percentage," as defined
below, multiplied by the maximum actuarial present value of the future Benefits
that could become payable under the Plan with respect to the Participants and
Beneficiaries, (B) the "Account Excess" with respect to such account shall be
equal to the excess, if any, of the fair market value of the assets held in the
Trust allocated to a Participant's account over the respective Fully Funded
amount, and (C) the "Aggregate Account Excess" with respect to a Participating
Employer shall be equal to the excess, if any, of the aggregate account
balances of Participants then employed by the Participating Employer, or for
whom such Participating Employer has obligations and liabilities or has assumed
obligations and liabilities or has assumed obligations and liabilities pursuant
to a Deposit Agreement, over their aggregate Fully Funded amounts. Unless
otherwise provided, prior to a Change of Control the Threshold Percentage shall
be equal to 110%, and following a Change of Control the Threshold Percentage
shall be equal to 140%. The Trustee shall allocate any Account Excess in
accordance with Section 7(b) hereof. Thereafter, upon the request of
Cleveland-Cliffs, the Trustee shall pay to the Participating Employer its
Aggregate Account Excess computed upon the basis of a Threshold Percentage
equal to 140%.
5. INVESTMENT OF PRINCIPAL: (a) The Trustee shall
invest and reinvest the principal of the Trust including any income accumulated
and added to principal, as directed by the
<PAGE> 13
13
Compensation Committee of the Board of Directors of Cleveland Cliffs (which
direction may include investment in Common Shares of Cleveland-Cliffs). In the
absence of any such direction, the Trustee shall have sole power to invest the
assets of the Trust (including investment in common shares of
Cleveland-Cliffs). The Trustee shall act at all times however, with the care,
skill, prudence, and diligence under the circumstances then prevailing that a
prudent corporate trustee, acting in a like capacity and familiar with such
matters, would use in the conduct of an enterprise of a like character and with
like aims. The investment objective of the Trustee shall be to preserve the
principal of the Trust while obtaining a reasonable total rate of return,
measurement of which shall include market appreciation or depreciation plus
receipt of interest and dividends. The Trustee shall not be required to invest
nominal amounts. The Trustee shall be mindful, in the course of its management
of the Trust, of the liquidity demands on the Trust and any actuarial
assumptions that may be communicated to it from time to time in accordance with
the provisions of this Trust Agreement No. 7.
(b) In addition to authority given to the Trustee under
Section 8 hereof, the Trustee is empowered with respect to the assets of the
Trust:
(i) To invest and reinvest all or any part of the Trust
assets, in each and every kind of property, whether real, personal or
mixed, tangible or intangible, whether income or non-income producing,
whether secured or
<PAGE> 14
14
unsecured, and wherever situated, including, but not limited to, real
estate, shares of common and preferred stock, mortgages and bonds,
leases (with or without option to purchase), notes, debentures,
equipment or collateral trust certificates, and other corporate,
individual or government securities or obligations, time deposits
(including savings deposit and certificates of deposit in the Trustee or
its affiliates if such deposits bear a reasonable rate of interest),
common or collective funds or trusts, and mutual funds or investment
companies, including affiliated investment companies and 12 B-l funds.
Cleveland-Cliffs acknowledges and agrees that the Trustee may receive
fees as a participating depository institution for service relating to
the investment of funds in an eligible mutual fund.
(ii) At such time or times, and upon such terms and
conditions as the Trustee shall deem advisable, to sell, convert,
redeem, exchange, grant options for the purchase or exchange of, or
otherwise dispose of, any property held hereunder, at public or private
sale, for cash or upon credit, with or without security, without
obligation on the part of any person dealing with the Trustee to see to
the application of the proceeds of or to inquire into the validity,
expediency, or propriety of any such disposal;
(iii) To manage, operate, repair, partition, and improve
and mortgage or lease (with or without an option to
<PAGE> 15
15
purchase) for any length of time any property held in the Trust; to
renew or extend any mortgage or lease, upon such terms as the Trustee
may deem expedient; to agree to reduction of the rate of interest on any
mortgage; to any modification in the terms of any lease or mortgage or
of any guarantee pertaining to either of them; to exercise and enforce
any right of foreclosure; to bid on property in foreclosure; to take a
deed in lieu of foreclosure with or without paying consideration
therefor and in connection therewith to release the obligation on the
bond secured by the mortgage; and to exercise and enforce in any action,
suit, or proceeding at law or in equity any rights, covenants,
conditions or remedies with respect to any lease or mortgage or to any
guarantee pertaining to either of them or to waive any default in the
performance thereof;
(iv) To join in or oppose any reorganization,
recapitalization, consolidation, merger or liquidation, or any plan
therefor, or any lease (with or without an option to purchase), mortgage
or sale of the property of any organization the securities of which are
held in the Trust; to pay from the Trust any assessments, charges or
compensation specified in any plan of reorganization, recapitalization,
consolidation, merger or liquidation; to deposit any property allotted
to the Trust in any reorganization, recapitalization, consolidation,
merger or liquidation; to deposit any property with any committee or
<PAGE> 16
16
depository; and to retain any property allotted to the Trust in any
reorganization, recapitalization, consolidation, merger or liquidation;
(v) To compromise settle, or arbitrate any claim, debt
or obligation of or against the Trust; to enforce or abstain from
enforcing any right, claim, debt, or obligation; and to abandon any
property determined by it to be worthless;
(vi) To make, execute and deliver, as Trustee, any
deeds, conveyances, leases (with or without option to purchase),
mortgages, options, contracts, waivers or other instruments that the
Trustee shall deem desirable in the exercise of its powers under this
Agreement; and
(vii) To pay out of the assets of the Trust all taxes
imposed or levied with respect to the Trust and in its discretion may
contest the validity or amount of any tax, assessment, penalty, claim,
or demand respecting the Trust and may institute, maintain, or defend
against any related action or proceeding either at law or in equity (and
in such regard, the Trustee shall be indemnified in accordance with
Section 8(d) hereof).
6. INCOME OF THE TRUST: Except as provided in Section 3
hereof, during the continuance of this Trust all net income of the Trust shall
be allocated not less frequently than monthly among the Participants' separate
accounts in accordance with Section 7(b) hereof.
<PAGE> 17
17
7. ACCOUNTING BY TRUSTEE: (a) The Trustee shall
maintain books, records and accounts as may be necessary for the proper
administration of Trust assets, including such specific records as shall be
agreed upon in writing by Cleveland-Cliffs and the Trustee, and shall render to
Cleveland-Cliffs within 60 days following the close of each calendar year
following the date of this Trust until the termination of this Trust or the
removal or resignation of the Trustee (and within 60 days after the date of
such termination, removal or resignation), an accounting with respect to the
Trust assets as of the end of the then most recent calendar year (and as of the
date of such termination, removal or resignation, as the case may be). The
Trustee shall furnish to each Participating Employer on a quarterly basis (or
as Cleveland-Cliffs shall direct from time to time) and in a timely manner such
information regarding the Trust as each Participating Employer shall require
for purposes of preparing its statements of financial condition. The Trustee
shall at all times maintain separate bookkeeping accounts for each
Participating Employer and for each Participant as prescribed by Section 7(b)
hereof, and, upon the written request of a Participant, shall provide to him an
annual statement of his account. Upon the written request of Cleveland-Cliffs
or, on or after the date of a Change of Control, a Participant, the Trustee
shall deliver to such Participant or Cleveland-Cliffs, as the case may be, a
written report setting forth the amount held in the Trust and a record of the
deposits made with respect thereto by each Participating
<PAGE> 18
18
Employer. Unless Cleveland-Cliffs or any Participant shall have filed with the
Trustee written exception or objection to any such statement and account within
90 days after receipt thereof, Cleveland-Cliffs and the Participants shall be
deemed to have approved such statement and account, and in such case the
Trustee shall be forever released and discharged with respect to all matters
and things reported in such statement and account as though it had been settled
by a decreee of acourt of competent jurisdiction in an action or proceeding to
which Cleveland-Cliffs, the Participating Employers and the Participants were
parties.
(b) The Trustee shall maintain a separate account for each
Participating Employer (a "Participating Employer Account") and within such
Participating Employer Account, a separate account for each Participant who
performs services for such Participating Employer and from whom such
Participant is entitled to Benefits (a "Participant account"). Each asset of
the Trust shall be allocated to the account of a Participating Employer.
Participant accounts within a Participating Employer Account shall reflect
undivided portions of each asset in such Account. The Trustee shall credit or
debit each Participant account as appropriate to reflect such Participant's
allocable portion of the Trust assets allocated to each Participating Employer
Account, as such Trust assets may be adjusted from time to time pursuant to the
terms of this Trust Agreement No. 7. Except as otherwise provided in this
Section 7(b), the Trustee shall allocate the income (or loss) of the Trust with
<PAGE> 19
19
respect to each Participating Employer Account, and within such Account, to the
separate Participant accounts maintained thereunder in proportion to the
balances of the separate accounts of the Participants. Prior to the date of a
Change of Control, all deposits of principal pursuant to Section 1(a) and 1(e)
shall be allocated and reallocated as directed by the Participating Employer
making such deposit. On or after such date of a Change of Control deposits of
principal shall be allocated as Account Excess in accordance with this Section
7(b). Prior to the date of a Change of Control, at the request of
Cleveland-Cliffs the Trustee shall determine the amount of all Account
Excesses. On or after the date of a Change of Control, the Trustee shall
determine annually the amount of all Account Excesses. The Trustee shall
allocate the aggregate amount of the Account Excess of a Participating Employer
to any accounts of Participants then employed by such Participating Employer
that are not Fully Funded, as defined in Section 4 hereof, in proportion to the
differences between the respective Fully Funded amount and account balance,
insofar as possible until all accounts of Participants then employed by such
Participating Employer are Fully Funded. Any then remaining aggregate Account
Excess of a Participating Employer shall be allocated to all the accounts of
Participants then employed by such Participating Employer, in proportion to the
respective Fully Funded amounts.
(c) Nothing in this Section 7 shall preclude the commingling
of Trust assets for investment.
<PAGE> 20
20
8. RESPONSIBILITY OF TRUSTEE: (a) The Trustee shall act
with the care, skill, prudence and diligence under the circumstances then
prevailing that a prudent corporate trustee, acting in a like capacity and
familiar with such matters, would use in the conduct of an enterprise of a like
character and with like aims; provided, however, that the Trustee shall incur
no liability to any person for any action taken pursuant to a direction,
request or approval, contemplated by and complying with the terms of this Trust
Agreement No. 7, given in writing by any Participating Employer, by the
Compensation Committee or by a Participant or Beneficiary applicable to his or
her beneficial interest herein; and provided, further, that the Trustee shall
have no duty to seek additional deposits of principal from any Participating
Employer for additional amounts accrued under the Plan, and the Trustee shall
not be responsible for the adequacy of this Trust.
(b) The Trustee may vote any stock or other securities and
exercise any right appurtenant to any stock, other securities or other property
held hereunder, either in person or by general or limited proxy, power of
attorney or other instrument.
(c) The Trustee may hold securities in bearer form and may
register securities and other property held in the trust fund in its own name
or in the name of a nominee, combine certificates representing securities with
certificates of the same issue held by the Trustee in other fiduciary
capacities, and deposit, or arrange for deposit of property with any
<PAGE> 21
21
depository; provided that the books and records of the Trustee shall at all
times show that all such securities are part of the trust fund.
(d) If the Trustee shall undertake or defend any litigation
arising in connection with this Trust Agreement No. 7, it shall be
indemnified jointly and severally by Cleveland-Cliffs and each Participating
Subsidiary against its costs, expenses and liabilities (including without
limitation attorneys' fees and expenses) related thereto.
(e) The Trustee may consult with legal counsel, independent
accountants and actuaries (who may be counsel, independent accountants or
actuaries for any Participating Employer) with respect to any of its duties or
obligations hereunder, and shall be fully protected in acting or refraining
from acting in accordance with the advice of such counsel, independent
accountants and actuaries.
(f) The Trustee may rely and shall be protected in acting or
refraining from acting within the authority granted by the terms of this Trust
Agreement No. 7 upon any written notice, instruction or request furnished to it
hereunder and believed by it to be genuine and to have been signed or presented
by the proper party or parties.
(g) The Trustee may hire agents, accountants, actuaries, and
financial consultants, who may be agents, accountants, actuaries, or financial
consultants, as the case may be, for any Participating Employer, and shall not
be answerable for the conduct of same if appointed with due care.
<PAGE> 22
22
(h) The Trustee is empowered to take all actions necessary or
advisable in order to collect any benefits or payments of which the Trustee is
the designated beneficiary.
(i) The Trustee shall have, without exclusion, all powers
conferred on trustees by applicable law unless expressly provided otherwise
herein.
9. AMENDMENTS, ETC. TO PLAN; COOPERATION OF PARTICIPATING
EMPLOYERS:
(a) Cleveland-Cliffs has previously furnished the Trustee a
complete and correct copy of the Plan, and Cleveland-Cliffs shall, and any
Participating Subsidiary, Participant, or Beneficiary may, promptly furnish the
Trustee true and correct copies of any amendment, restatement or successor
thereto, whereupon such amendment, restatement or successor shall be
incorporated herein by reference, provided that such amendment, restatement or
successor shall not affect the Trustee's duties and responsibilities hereunder
without the consent of the Trustee.
(b) Cleveland-Cliffs shall provide the Trustee with all
information requested by the Trustee for purposes of determining payments to
the Participants and Beneficiaries or withholding of taxes as provided in
Section 2. Upon the failure of Cleveland-Cliffs or any Participant or
Beneficiary to provide any such information, the Trustee shall, to the extent
necessary in the sole judgment of the Trustee, (i) compute the amount payable
hereunder to any Participant or Beneficiary; and (ii) notify Cleveland-Cliffs
and the
<PAGE> 23
23
Participant or Beneficiary in writing of its computations. Thereafter this
Trust Agreement No. 7 shall be construed as to the Trustee's duties and
obligations hereunder in accordance with such Trustee determinations without
further action; provided, however, that no such determinations shall in any way
diminish the rights of any Participant or Beneficiary hereunder or under the
Plan; and provided, further, that no such determinations shall be deemed to
modify this Trust Agreement No. 7 or the Plan. Nothing in this Trust Agreement
No. 7 shall restrict Cleveland-Cliffs' right to amend, modify or terminate the
Plan.
(c) At such times as may in the judgment of Cleveland-Cliffs
be appropriate, Cleveland-Cliffs shall furnish to the Trustee any amendment to
Exhibit A for the purpose of the addition of Participants (or the deletion of
Participants who (together with their Beneficiaries) have no Benefits currently
due or payable in the future)) to Exhibit A; provided, however, that no such
amendment shall be made after the date of a Change of Control.
10. COMPENSATION AND EXPENSES OF TRUSTEE: The Trustee
shall be entitled to receive such reasonable compensation for its services as
shall be agreed to upon by Cleveland-Cliffs and the Trustee. The Trustee shall
also be entitled to reimbursement of its reasonable expenses incurred with
respect to the administration of the Trust including fees and expenses incurred
pursuant to Sections 8(d), 8(e) and 8(g) and liabilities to creditors pursuant
to court direction as
<PAGE> 24
24
provided in Section 3(a) hereof. Such compensation and expenses shall in all
events be payable either directly by Cleveland-Cliffs or, in the event that
Cleveland-Cliffs shall refuse, from the assets of the Trust and charged pro
rata in proportion to each separate account balance. The Trust shall have a
claim against Cleveland-Cliffs for any such compensation or expenses so paid.
11. REPLACEMENT OF THE TRUSTEE: (a) Prior to the date of a
Change of Control, the Trustee may be removed by Cleveland-Cliffs. On or after
the date of a Change of Control, the Trustee may be removed at any time by
agreement of Cleveland-Cliffs and a majority of the Participants. The Trustee
may resign after providing not less than 90 days' notice to Cleveland-Cliffs
and to the Participants. In case of removal or resignation, a new trustee,
which shall be independent and not subject to control of either Cleveland
Cliffs or the Participants and Beneficiaries, shall be appointed as shall be
agreed by Cleveland-Cliffs and a majority of the Participants. No such removal
or resignation shall become effective until the acceptance of the trust by a
successor trustee designated in accordance with this Section 11. If the
Trustee should resign, and within 45 days of the notice of such resignation
Cleveland-Cliffs and the Participants shall not have notified the Trustee of an
agreement as to a replacement trustee, the Trustee shall appoint a successor
trustee, which shall be a bank or trust company, wherever located, having a
capital and surplus of at least $500,000,000 in the aggregate.
<PAGE> 25
25
(b) For purposes of the removal or appointment of a Trustee
under this Section 11, (i) if any Participant shall be deceased or adjudged
incompetent, such Participant's Beneficiaries shall participate in such
Participant's stead, and (ii) a Participant shall not participate if all
payments of Benefits then currently due or payable in the future have been made
to such Participant or his Beneficiary.
12. AMENDMENT OR TERMINATION: (a) This Trust Agreement
No. 7 may be amended by Cleveland-Cliffs and the Trustee without the consent of
any Participant or Beneficiary provided the amendment does not adversely affect
any Participant or Beneficiary. This Trust Agreement No. 7 may also be amended
at any time and to any extent by a written instrument executed by the Trustee,
all Participating Employers, and a majority of the Participants, except to
alter Section 12(b), and except that amendments to Exhibit A contemplated by
Section 9(b) hereof shall be made as therein provided.
(b) The Trust shall terminate on the date on which the Trust
no longer contains any assets, or, if earlier, the date on which no Participant
or Beneficiary is entitled to further payments hereunder.
(c) Upon termination of the Trust as provided in Section 12(b)
hereof, any assets remaining in the Trust shall be returned to Cleveland-Cliffs
or as it directs.
13. SPECIAL DISTRIBUTION: (a) It is intended that
(i) the creation of, and transfer of assets to, the Trust will
<PAGE> 26
26
not cause the Plan to be other than "unfunded" for purposes of title I of the
Employee Retirement Income Security Act of 1974, as amended, or any successor
provision thereto ("ERISA"); (ii) transfers of assets to the Trust will not be
transfers of property for purposes of section 83 of the Code, or any successor
provision thereto, nor will such transfers cause a currently taxable benefit to
be realized by a Participant or Beneficiary pursuant to the "economic benefit
doctrine; and (iii) pursuant to section 451 of the Code, or any successor
provision thereto, amounts will be includable as compensation in the gross
income of a Participant or Beneficiary in the taxable year or years in which
such amounts are actually distributed or made available to such Participant or
Beneficiary by the Trustee.
(b) Notwithstanding anything to the contrary contained in this
Trust Agreement No. 7, in the event it is determined by a final decision of the
Internal Revenue Service, or, if an appeal is taken therefrom, by a court of
competent jurisdiction that (i) by reason of the creation of, and a transfer of
assets to, the Trust, the Trust is considered "funded" for purposes of title I
of ERISA; or (ii) a transfer of assets to the Trust is considered a transfer of
property for purposes of section 83 of the Code or any successor provision
thereto; or (iii) a transfer of assets to the Trust causes a Participant or
Beneficiary to realize income pursuant to the "economic benefit" doctrine; or
(iv) pursuant to section 451 of the Code or any successor provision thereto,
amounts are
<PAGE> 27
27
includable as compensation in the gross income of a Participant or Beneficiary
in a taxable year that is prior to the taxable year or years in which such
amounts would, but for this Section 13, otherwise actually be distributed or
made available to such Participant or Beneficiary by the Trustee, then (A) the
assets held in Trust shall be allocated in accordance with Section 7(b) hereof,
and (B) subject to the last sentence of Section 2(b) hereof, the Trustee shall
promptly make a distribution to each affected Participant or Beneficiary which,
after taking into account the federal, state and local income tax consequences
of the special distribution itself, is equal to the sum of any federal, state
and local income taxes, interest due thereon, and penalties assessed with
respect thereto, which are attributable to amounts that are includable in the
income of such Participant or Beneficiary for any of the reasons described in
clause (i), (ii), (iii) or (iv) of this Section 13(b).
14. PARTICIPATING SUBSIDIARY DEPOSIT AGREEMENT: (a)
Upon execution of a Deposit Agreement in the form of Exhibit C hereto, a
Subsidiary may at any time or from time to time make deposits of cash or other
property in the Trust pursuant to Section 1(d) hereof. Such Deposit Agreement
shall provide, among other things, for the designation of Cleveland-Cliffs as
agent and attorney for the Participating Subsidiary for all purposes under this
Trust Agreement No. 7, including consenting to any amendments hereto,
consenting to any Trustee accounts and consenting to anything requiring the
approval or consent of a Participating Employer hereunder.
<PAGE> 28
28
(b) Cleveland-Cliffs is the sponsoring grantor for this Trust
Agreement No. 7. It reserves to itself, and each Subsidiary by execution of a
Deposit Agreement delegates to Cleveland-Cliffs, the power to amend or
terminate this Trust Agreement No. 7 in accordance with its terms.
15. SEVERABILITY ALIENATION, ETC.: (a) Any provision
of this Trust Agreement No. 7 prohibited by law shall be ineffective to the
extent of any such prohibition without invalidating the remaining provisions
hereof.
(b) To the extent permitted by law, benefits to Participants
and Beneficiaries under this Trust Agreement No. 7 may not be anticipated,
assigned (either by law or in equity), alienated or subject to attachment,
garnishment, levy, execution or other legal or equitable process and no benefit
provided for herein and actually paid to any Participant or Beneficiary by the
Trustee shall be subject to any claim for repayment by any Participating
Employer or the Trustee.
(c) This Trust Agreement No. 7 shall be governed by and
construed in accordance with the laws of the State of Ohio, without giving
effect to the principles of conflict of laws thereof.
(d) This Trust Agreement No. 7 may be executed in two or more
counterparts, each of which shall be considered an original agreement. This
Trust Agreement No. 7 shall become effective immediately upon the execution by
Cleveland-Cliffs of at least one counterpart, it being understood that all
parties need not sign the same counterpart, but shall not bind any
<PAGE> 29
29
Trustee until such Trustee has executed at least one counterpart.
(e) Each action taken by Cleveland-Cliffs hereunder shall,
unless otherwise designated in such action by Cleveland-Cliffs or unless the
context or this Trust Agreement No. 7 requires otherwise, be deemed to be an
action of Cleveland-Cliffs on behalf of each Participating Subsidiary pursuant
to the authority granted to Cleveland-Cliffs by such Participating Subsidiary
in the Deposit Agreement.
16. NOTICES; IDENTIFICATION OF CERTAIN PARTICIPANTS OR
BENEFICIARIES: (a) All notices, requests, consents and other
communications hereunder shall be in writing and shall be deemed to have been
duly given when received:
If to the Trustee, to:
Ameritrust Company National Association
900 Euclid Avenue
Cleveland, Ohio 44115
Attention: Trust Department
Employee Benefit Administration
If to Cleveland-Cliffs, to:
Cleveland-Cliffs Inc
1100 Superior Avenue
Cleveland, OH 44114
Attention: Secretary
If to the Participants, to the addresses listed on Exhibit A
hereto; and if to the Beneficiaries, to the addresses provided
to the Trustee by Cleveland-Cliffs;
provided, however, that if any party or any Participant or Beneficiary or his
or its successors shall have designated a different address by written notice
to the other parties, then to the last address so designated.
<PAGE> 30
30
IN WITNESS WHEREOF, Cleveland-Cliffs and the Trustee have caused
counterparts of this Trust Agreement No. 7 to be executed on their behalf on
April 9, 1991, each of which shall be an original agreement.
CLEVELAND-CLIFFS INC
By: Richard F. Novak
----------------
Its: V.P. of Human Resources
---------------------------------
AMERITRUST COMPANY NATIONAL ASSOCIATION
By: J. R. Russell
-------------
Its: Vice President
--------------
2225D
<PAGE> 31
EXHIBIT A
---------
All Senior Officers and Other Full-Time
Salaried Employees Grade 18 and Above/
Eligible Participants in SERP
-------------------------------------------
Grade Name Title
- ----- ---- -----
56 M. T. Moore Chairman and Chief Executive Officer
43 W. R. Calfee Senior Executive Vice President
36 F. S. Forsythe Executive Vice President-Operations
33 J. S. Brinzo Executive Vice President-Finance
28 G. N. Carlson Senior Vice President-Operations
J. W. Villar Senior Vice President-Technical
A. S. West Senior Vice President-Sales
22 R. Emmet Vice President and Treasurer
F. L. Hartman Vice President and Corporate Counsel
J. D. Kucera Corporate Medical Director
R. F. Novak Vice President-Human Resources
J. A. Trethewey Vice President and Controller
20 G. N. Chandler II Vice President
J. L. Kelley Vice President-Public Affairs
T. C. Levan Vice President-Corporate Development
18 J. A. Fegan General Manager-Empire Mine
J. D. Jeffries General Manager-Hibbing Taconite
R. C. Berglund General Manager-Tilden Mine
W. H. Muloin General Manager-Wabash Mines
R. W. von Bitter General Manager-LTV Steel Mining
Company
17 M. E. Jackson Secretary
<PAGE> 32
EXHIBIT B
CLEVELAND-CLIFFS INC
SUPPLEMENTAL RETIREMENT BENEFIT PLAN
(as Amended and Restated Effective January 1, 1991)
---------------------------------------------------
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
<PAGE> 33
2
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
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
<PAGE> 34
3
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.
<PAGE> 35
4
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 18 or above, and (ii) 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.
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.
<PAGE> 36
5
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, 1991 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, 1991 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
<PAGE> 37
6
Pension Plan did not contain a 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, 1991
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, 1991, the
Supplemental Pension Plan Benefit includes any "Retirement Plan Augmentation
Benefit" which the Participant shall have accrued under the Deferred
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.
<PAGE> 38
7
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 a
lump sum amount of equivalent actuarial value determined by the actuary
selected by Cleveland-Cliffs and based on the actuarial factors and assumptions
then set forth in the Pension Plan for the purpose of determining the lump sum
equivalent of a monthly benefit payable under the Pension Plan, or if no such
factors and assumptions are therein set forth, then based on the Pension
Benefit Guaranty Corporation interest rate for immediate annuities then in
effect (the "Pension Plan Lump Sum Amount"). The Participant's former Employer
shall pay the Pension Plan Lump Sum Amount to such Participant or his
Beneficiary on the first day of February of the calendar year following the
calendar year in which the Participant's retirement or death shall have
occurred or such earlier time prior thereto, after the Participant's retirement
or death, as shall be fixed by Cleveland-Cliffs.
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
<PAGE> 39
8
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,
<PAGE> 40
9
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 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 consents to such
inapplicability, which consent shall not unreasonably be withheld.
<PAGE> 41
10
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 canceled.
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
<PAGE> 42
11
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. Cleveland-Cliffs shall
interpret where necessary, in its reasonable and good faith judgment, the
provisions of the Supplemental Retirement Benefit Plan and, except as otherwise
provided in the Plan, shall determine the rights and status of Participants and
Beneficiaries hereunder (including, without limitation, the amount of any
Supplemental Benefit to which a Participant or Beneficiary may be entitled
under the Plan). 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.
B. Cleveland-Cliffs may, from time to time, delegate all or
part of the administrative powers, duties and authorities delegated to it under
this Plan to such person or persons, office of committee as it shall select by
written notice to the Participants. For the purposes of ERISA,
Cleveland-Cliffs shall be the plan sponsor and the plan administrator.
C. 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
<PAGE> 43
12
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
<PAGE> 44
13
(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 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.
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-Cliff 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
<PAGE> 45
14
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 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
<PAGE> 46
15
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. EFECTIVE DATE. The amended and restated
Supplemental Retirement Benefit Plan shall be effective as of January 1, 1991.
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 9th day of April, 1991.
CLEVELAND-CLIFFS INC
By ________________________________
Vice President - Human Resources
2291D
<PAGE> 47
Exhibit C
Deposit Agreement for Participating Subsidiary
----------------------------------------------
WITNESSETH:
-----------
WHEREAS, the undersigned is a subsidiary corporation or affiliate
of Cleveland-Cliffs Inc and contributes to the Plan as defined in a certain
Trust Agreement No. 7 dated April 9, 1991, by and between Cleveland-Cliffs Inc,
an Ohio corporation ("Cleveland-Cliffs"), and Ameritrust Company National
Association, a national banking association ("Trustee"); and
WHEREAS, the undersigned wishes to become a Participating
Subsidiary and Participating Employer pursuant to the terms of Trust Agreement
No. 7.
NOW, THEREFORE, in consideration of the premises the undersigned
("Subsidiary") hereby adopts Trust Agreement No. 7 and agrees to be bound by
its terms effective the ____ day of __________________, 199_____. In addition:
1. Capitalized terms in this Deposit Agreement shall have the
meanings set forth in Trust Agreement No. 7 unless the context clearly requires
otherwise.
2. The Subsidiary by its signature hereto irrevocably makes,
constitutes and appoints Cleveland-Cliffs its agents and its true and lawful
attorney in its name, place and stead, with the power from time to time to
substitute or resubstitute one or more others as such attorney, and to make,
execute, swear
<PAGE> 48
2
to, acknowledge, verify, deliver, file, record and publish any or all of the
following:
(a) All documents, agreements, requests, undertakings,
certificates or other instruments which may be required or deemed
desirable by Cleveland-Cliffs to effectuate the provisions of any
part of Trust Agreement No. 7 and by way of extension and not in
limitation to do all such other things as shall be necessary to
continue the Trust under the laws of the State of Ohio.
(b) Amendments to Trust Agreement No. 7 authorized or
approved in accordance with Sections 4, 9 and 14 thereof and all
documents, certificates or other instruments deemed desirable by
Cleveland-Cliffs or required in connection therewith.
3. It is expressly intended by the Subsidiary that the
foregoing power of attorney is a special power of attorney coupled with an
interest in favor of Cleveland-Cliffs appointed as attorney-in-fact on the
Subsidiary's behalf, and as such shall be irrevocable and shall survive the
Subsidiary's merger, dissolution or other termination of existence.
4. In the event a Participant is transferred from the employ
of the Subsidiary to another Participating Employer, effective on the date of
such transfer, the Subsidiary may agree to assign assets with a value equal to,
or greater or lesser than, the value of the transferred Participant's account
under Section 7(b) of the Trust to the successor Participating Employer in
exchange for such Participating Employer assuming and being responsible for the
Subsidiary's liabilities and obligations to such transferred Participant under
the Plan.
<PAGE> 49
3
5. In the event a Participant is transferred from the employ
of another Participating Employer to the Subsidiary, effective on the date of
such transfer, the Subsidiary may agree that upon the assignment by such
Participating Employer to the Subsidiary of assets with a value equal to, or
greater or lesser than, the value of the transferred Executive's account under
Section 7(b) of the Trust, in exchange therefor, the Subsidiary will assume and
be responsible for the Participating Employer's liabilities and obligations to
such participant under the Plan.
6. The Subsidiary agrees to bear its pro rata share (as
determined by Cleveland-Cliffs) of any and all expenses of the Trust.
IN WITNESS WHEREOF, the Subsidiary has caused this Deposit Agreement,
to be executed on its behalf on _________________, 199____.
Subsidiary
By: __________________________________
Its: __________________________________
Accepted CLEVELAND-CLIFFS INC
By: __________________________________
Its: _________________________________
AMERITRUST COMPANY, NATIONAL
ASSOCIATION
By: __________________________________
Its: _________________________________
<PAGE> 50
FIRST AMENDMENT TO TRUST AGREEMENT NO. 7
----------------------------------------
This First Amendment to Trust Agreement No. 7 is made on this 9th
day of March, 1992, by and between Cleveland-Cliffs Inc, an Ohio corporation
("Cleveland-Cliffs") and Ameritrust Company National Association, a national
banking association, as trustee (the "Trustee");
WITNESSETH:
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WHEREAS, on April 9, 1991, Cleveland-Cliffs and the Trustee
entered into a trust agreement ("Trust Agreement No. 7") for the purpose of
providing benefits under the Cleveland-Cliffs Inc Supplemental Retirement
Benefit Plan, as Amended and Restated (Effective January 1, 1991), to certain
employees of Cleveland-Cliffs and its subsidiary corporations and affiliates;
and
WHEREAS, Cleveland-Cliffs has reserved the right, with the
Trustee, pursuant to Section 12 of Trust Agreement No. 7, to amend Trust
Agreement No. 7 without the consent of any Trust Beneficiaries, as defined in
Trust Agreement No. 7.
NOW, THEREFORE, Cleveland-Cliffs and the Trustee hereby agree
that Trust Agreement No. 7 shall be amended as follows:
1. The second sentence of Section l(b) of Trust Agreement No.
7 is hereby amended to read as follows:
"The term "Change of Control" shall mean the occurrence of any
of the following events:
<PAGE> 51
2
(i) Cleveland-Cliffs shall merge into itself, or be merged or
consolidated with, another corporation and a as 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 Cleveland-Cliffs as the same shall have existed
immediately prior to such merger or consolidation;
(ii) Cleveland-Cliffs 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 Cleveland-Cliffs 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;
(iii) 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
<PAGE> 52
3
outstanding voting securities of Cleveland-Cliffs (whether directly or
indirectly); or
(iv) during any period of three consecutive years, including,
without limitation, the year 1991, individuals who at the beginning of any such
period constitute the Board of Directors of Cleveland-Cliffs cease, for any
reason, to constitute at least a majority thereof, unless the election, or the
nomination for election by the shareholders of Cleveland-Cliffs, of each
Director first elected during any such period was approved by a vote of at
least one-third of the Directors of Cleveland-Cliffs who are Directors of
Cleveland-Cliffs on the date of the beginning of any such period."
IN WITNESS WHEREOF, Cleveland-Cliffs and the Trustee have caused
counterparts of this First Amendment to Trust Agreement No. 7 to be executed on
March 9, 1992.
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CLEVELAND-CLIFFS INC
By: R. F. Novak
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Its: Vice President
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AMERITRUST COMPANY NATIONAL
ASSOCIATION
By: J. R. Russell
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Its: Vice President
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2999F
<PAGE> 1
EXHIBIT 10(v)
TRUST AGREEMENT No. 8
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This Trust Agreement ("Trust Agreement No. 8") made this 9th day of
April, 1991 by and between Cleveland-Cliffs Inc, an Ohio corporation
("Cleveland-Cliffs"), and Ameritrust Company National Association, a national
banking association (the "Trustee");
WITNESSETH:
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WHEREAS, certain benefits are or may become payable under the
provisions of the Amended and Restated Cleveland-Cliffs Inc Retirement Plan for
Non-Employee Directors, effective June 1, 1984 and amended and restated
effective January 1, 1988, as the same may hereafter be supplemented, amended
or restated, or any successor thereto (the "Plan"), a current copy of which is
attached hereto as Exhibit B and incorporated herein by reference, to the
non-employee Directors listed (from time to time as provided in Section 9(c)
hereof) on Exhibit A hereto ("Directors");
WHEREAS, the Plan provides for the payment, following retirement
from the Board of Directors of Cleveland-Cliffs Inc (the "Board"), of an annual
retainer to all non-employee Directors with five years of active service or
with less than five years of active service in the event of a "Change of
Control" (as defined herein);
<PAGE> 2
2
WHEREAS Cleveland-Cliffs wishes specifically to assure the
payment to the Directors of amounts due under the Plan (the amounts so payable
being collectively referred to herein as the "Benefits");
WHEREAS, subject to Section 9 hereof, the amounts and timing of
Benefits to which each Director is presently or may become entitled are as
provided in the Plan;
WHEREAS, Cleveland-Cliffs wishes to establish a trust (the
"Trust") and to transfer to the Trust assets which shall be held therein
subject to the claims of the creditors of Cleveland-Cliffs to the extent set
forth in Section 3 hereof until paid in full to all Directors as Benefits in
such manner and at such times as specified herein unless Cleveland-Cliffs is
Insolvent (as defined herein) at the time that such Benefits become payable;
and
WHEREAS, Cleveland-Cliffs shall be considered "Insolvent" for
purposes of this Trust Agreement at such time as Cleveland-Cliffs (i) is
subject to a pending voluntary or involuntary proceeding as a debtor under the
United States Bankruptcy Code, as heretofore or hereafter amended, or (ii) is
unable to pay its debts as they mature.
NOW, THEREFORE, the parties do hereby establish the Trust and
agree that the Trust shall be comprised, held and disposed of as follows:
1. TRUST FUND: (a) Subject to the claims of its
creditors to the extent set forth in Section 3 hereof, Cleveland-Cliffs hereby
deposits with the Trustee in trust Ten
<PAGE> 3
3
Dollars ($10.00) which shall become the principal of this Trust, to be held,
administered and disposed of by the Trustee as herein provided, but no payments
of all or any portion of the principal of the Trust or earnings thereon shall
be made to Cleveland-Cliffs or any other person or entity on behalf of
Cleveland-Cliffs except as herein expressly provided. The Trust hereby
established shall be irrevocable.
(b) Cleveland-Cliffs shall notify the Trustee promptly in the
event that a "Change of Control," (as defined herein) has occurred. The term
"Change of Control" shall mean the occurrence of any of the following events:
(i) a tender offer shall be made and consummated for
the ownership of 30% or more of the outstanding voting securities of
Cleveland-Cliffs;
(ii) Cleveland-Cliffs shall 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 Cleveland-Cliffs, other than affiliates (within the
meaning of the Securities Exchange Act of 1934) of any party to such
merger or consolidation, as the same shall have existed immediately
prior to such merger or consolidation;
(iii) Cleveland-Cliffs shall sell substantially all of
its assets to another corporation which is not a wholly owned
subsidiary;
<PAGE> 4
4
(iv) 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 acquire 30% or more of the outstanding
voting securities of Cleveland-Cliffs (whether directly, indirectly,
beneficially or of record), or
(v) during any period of two consecutive years,
individuals who at the beginning of any such period constitute the Board
of Directors of Cleveland-Cliffs cease for any reason to constitute at
least a majority thereof, unless the election, or the nomination for
election by the shareholders of Cleveland-Cliffs, of each Director first
elected during any such period was approved by a vote of at least
two-thirds of the Directors of Cleveland-Cliffs then still in office who
are Directors of Cleveland-Cliffs on the date at the beginning of any
such period.
For purposes hereof, ownership of voting securities shall take into account and
shall include ownership as determined by applying the provisions of Rule
13d-3(d)(1)(i) (as in effect on the date hereof) pursuant to the Securities
Exchange Act of 1934.
(c) Any payments by the Trustee pursuant to this Agreement
shall, to the extent thereof, discharge the obligation of Cleveland-Cliffs to
pay benefits under the Plan, it being the intent of Cleveland-Cliffs that
assets in the Trust established hereby be held as security for the obligation
of Cleveland-Cliffs to pay benefits under the Plan.
<PAGE> 5
5
(d) The principal of the Trust and any earnings thereon shall
be held in trust separate and apart from other funds of Cleveland-Cliffs
exclusively for the uses and purposes herein set forth. No Director shall have
any preferred claim on, or any beneficial ownership interest in, any assets of
the Trust prior to the time that such assets are paid to a Trust Beneficiary as
Benefits as provided herein.
(e) The Company may at any time or from time to time make
additional deposits of cash or other property in the Trust to augment the
principal to be held, administered and disposed of by the Trustee as herein
provided, but no payments of all or any portion of the principal of the Trust
or earnings thereon shall be made to Cleveland-Cliffs or any other person or
entity on behalf of Cleveland-Cliffs except as herein expressly provided.
(f) The Trust is intended to be a grantor trust, within the
meaning of section 671 of the Internal Revenue Code of 1986, as amended (the
"Code"), or any successor provision thereto, and shall be construed
accordingly. The Trust is not designed to qualify under Section 401(a) of the
Code or to be subject to the provisions of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"). The Trust established under this
Trust Agreement No. 8 does not fund and is not intended to fund the Plan or any
other employee benefit plan or program of Cleveland-Cliffs. Such Trust is and
is intended to be a depository arrangement with the Trustee for the setting
aside of cash and other assets of Cleveland-Cliffs as
<PAGE> 6
6
and when it so determines in its sole discretion for the meeting of part or all
of its future obligations with respect to Benefits to some or all of the Trust
Beneficiaries under the Plan.
2. PAYMENTS TO TRUST BENEFICIARIES. (a) Provided that
the Trustee has not actually received notice as provided in Section 3 hereof
that Cleveland-Cliffs is Insolvent, the Trustee shall make payments of Benefits
to each Director from the assets of the Trust in accordance with the terms of
the Plan and subject to Section 9 hereof. The Trustee shall make provision for
withholding of any federal, state, or local taxes that may be required to be
withheld by the Trustee in connection with the payment of any Benefit
hereunder.
(b) If the balance of a Director's separate account maintained
pursuant to Section 7(b) hereof is not sufficient to provide for full payment
of Benefits to which such Director is entitled as provided herein,
Cleveland-Cliffs shall make the balance of each such payment as provided in the
Plan. No payment from the Trust assets to a Director shall exceed the balance
of such separate account.
3. THE TRUSTEE'S RESPONSIBILITY REGARDING PAYMENTS TO A TRUST
BENEFICIARY WHEN CLEVELAND-CLIFFS IS INSOLVENT: (a)At all times during the
continuance of this Trust, the principal and income of the Trust shall be
subject to claims of creditors of Cleveland-Cliffs. The Board and the Chief
Executive Officer ("CEO") of Cleveland-Cliffs shall have the duty to inform the
Trustee if either the Board or the CEO believes that Cleveland-Cliffs is
Insolvent. If the Trustee
<PAGE> 7
7
receives a notice from the Board, the CEO, or a creditor of Cleveland-Cliffs
alleging that Cleveland-Cliffs is Insolvent, then unless the Trustee
independently determines that Cleveland-Cliffs is not Insolvent, the Trustee
shall (i) discontinue payments to any Director, (ii) hold the Trust assets for
the benefit of the general creditors of Cleveland-Cliffs, and (iii) promptly
seek the determination of a court of competent jurisdiction regarding the
Insolvency of Cleveland-Cliffs. The Trustee shall deliver any undistributed
principal and income in the Trust to the extent necessary to satisfy the claims
of the creditors of Cleveland-Cliffs as a court of competent jurisdiction may
direct. Such payments of principal and income shall be borne by the separate
accounts of the Directors in proportion to the balances on the date of such
court order of their respective accounts maintained pursuant to Section 7(b)
hereof; and provided further, that for this purpose the Threshold Percentage
shall be equal to 100%. If payments to any Director have discontinued pursuant
to this Section 3(a), the Trustee shall resume payments to such Director only
after receipt of an order of a court of competent jurisdiction. The Trustee
shall have no duty to inquire as to whether Cleveland-Cliffs is Insolvent and
may rely on information concerning the Insolvency of Cleveland-Cliffs which has
been furnished to the Trustee by any person. Nothing in this Trust Agreement
shall in any way diminish any rights of any Director to pursue his rights as a
general creditor of Cleveland-Cliffs with respect to Benefits or otherwise, and
the rights of each Director under the
<PAGE> 8
8
Plan shall in no way be affected or diminished by any provision of this Trust
Agreement or action taken pursuant to this Trust Agreement except that any
payment actually received by any Director hereunder shall reduce
dollar-per-dollar amounts otherwise due to such Director pursuant to the Plan.
(b) If the Trustee discontinues payments of Benefits from the
Trust pursuant to Section 3(a) hereof, the Trustee shall, to the extent it has
liquid assets, place cash equal to the discontinued payments (to the extent not
paid to creditors pursuant to Section 3(a) and not paid to the Trustee pursuant
to Section 10 hereof) in such interest-bearing deposit accounts or certificates
of deposit (including any such accounts or certificates issued or offered by
the Trustee or any successor corporation but excluding obligations of
Cleveland-Cliffs) as determined by the Trustee in its sole discretion. If the
Trustee subsequently resumes such payments, the first payment following such
discontinuance shall include the aggregate amount of all payments which would
have been made to the Directors in accordance with this Trust agreement during
the period of such discontinuance, less the aggregate amount of payments made
to any Director by Cleveland-Cliffs pursuant to the Plan during any such period
of discontinuance, together with interest on the net amount delayed determined
at a rate equal to the rate paid on the accounts or deposits selected by the
Trustee; provided, however, that no such payment shall exceed the balance of
the respective Director's account as provided in Section 7(b) hereof.
<PAGE> 9
9
4. PAYMENTS TO CLEVELAND-CLIFFS: Except to the extent
expressly contemplated by this Section 4, Cleveland-Cliffs shall have no right
or power to direct the Trustee to return any of the Trust assets to
Cleveland-Cliffs before all payments of Benefits have been made to all
Directors as herein provided. From time to time, if and when requested by
Cleveland-Cliffs to do so and/or in order to comply with Section 7(b) hereof,
the Trustee shall engage the services of Hewitt Associates or such other
independent actuary as may be mutually satisfactory to Cleveland-Cliffs and to
the Trustee to determine the maximum actuarial present values of the future
Benefits that could become payable under the Plan and the Agreements with
respect to each Director. The Trustee shall determine the fair market values of
the Trust assets allocated to the account of each Director pursuant to Section
7(b) hereof. Cleveland-Cliffs shall pay the fees of such independent actuary
and of any appraiser engaged by the Trustee to value any property held in the
Trust. The independent actuary shall make its calculations based upon the
assumptions that (i) the Annual Retainer payable to each active Director shall
increase by ten percent per year, and (ii) each Director shall retire from the
Board at aye 70. In addition, the independent actuary shall use the 1983 Group
Annuity Mortality Table, an interest rate of 8%, Gross National Product Price
Deflator increases of 4%, or such other assumptions as are recommended by such
actuary and approved by Cleveland-Cliffs and, after the date of a Change of
Control, a majority of the Directors (subject to the provisions of
<PAGE> 10
10
Sections 11(b) hereof). For purposes of this Trust Agreement, (A) the "Fully
Funded" amount with respect to the account of a Director maintained pursuant to
Section 7(b) hereof shall be equal to the "Threshold Percentage," as defined
below, multiplied by the maximum actuarial present value of the future Benefits
that could become payable under the Plan with respect to the Director, and (B)
the "Account Excess" with respect to such account shall be equal to the excess,
if any, of the fair market value of the assets held in the Trust allocated to a
Director's account over the respective Fully Funded amount. Unless otherwise
provided, prior to a Change of Control the Threshold Percentage shall be equal
to 110%, and following a Change of Control the Threshold Percentage shall be
equal to 140%. The Trustee shall allocate any Account Excess in accordance with
Section 7(b) hereof. Thereafter, upon the request of Cleveland-Cliffs, the
Trustee shall pay to Cleveland-Cliffs the excess, if any, of the aggregate
account balances over the aggregate Fully Funded amounts computed upon the
basis of a Threshold Percentage equal to 140%.
5. INVESTMENT OF PRINCIPAL: (a) The Trustee shall
invest and reinvest the principal of the Trust including any income accumulated
and added to principal, as directed by the Compensation Committee of the Board
(which direction may include investment in Common Shares of Cleveland-Cliffs).
In the absence of any such direction, the Trustee shall have sole power to
invest the assets of the Trust (including investment in common shares of
Cleveland-Cliffs). The Trustee shall act at
<PAGE> 11
11
all times, however, with the care, skill, prudence, and diligence under the
circumstances then prevailing that a prudent corporate trustee, acting in a
like capacity and familiar with such matters, would use in the conduct of an
enterprise of a like character and with like aims. The investment objective of
the Trustee shall be to preserve the principal of the Trust while obtaining a
reasonable total rate of return, measurement of which shall include market
appreciation or depreciation plus receipt of interest and dividends. The
Trustee shall not be required to invest nominal amounts. The Trustee shall be
mindful, in the course of its management of the Trust, of the liquidity demands
on the Trust and any actuarial assumptions that may be communicated to it from
time to time in accordance with the provisions of this Trust Agreement No. 8.
(b) In addition to authority given to the Trustee under
Section 8 hereof, the Trustee is empowered with respect to the assets of the
Trust:
(i) To invest and reinvest all or any part of the Trust
assets, in each and every kind of property, whether real, personal or
mixed, tangible or intangible, whether income or non-income producing,
whether secured or unsecured and wherever situated, including, but not
limited to, real estate, shares of common and preferred stock, mortgages
and bonds, leases (with or without option to purchase), notes,
debentures, equipment or collateral trust certificates, and other
corporate, individual or government securities or obligations, time
deposits (including savings
<PAGE> 12
12
deposit and certificates of deposit in the Trustee or its affiliates if
such deposits bear a reasonable rate of interest), common or collective
funds or trusts, and mutual funds or investment companies, including
affiliated investment companies and 12 B-1 funds. Cleveland-Cliffs
acknowledges and agrees that the Trustee may receive fees as a
participating depository institution for services relating to the
investment of funds in an eligible mutual fund.
(ii) At such time or times, and upon such terms and
conditions as the Trustee shall deem advisable, to sell, convert,
redeem, exchange, grant options for the purchase or exchange of, or
otherwise dispose of, any property held hereunder, at public or private
sale, for cash or upon credit, with or without security, without
obligation on the part of any person dealing with the Trustee to see to
the application of the proceeds of or to inquire into the validity,
expediency, or propriety of any such disposal;
(iii) To manage, operate, repair, partition, and improve
and mortgage or lease (with or without an option to purchase) for any
length of time any property held in the Trust; to renew or extend any
mortgage or lease, upon such terms as the Trustee may deem expedient; to
agree to reduction of the rate of interest on any mortgage; to agree to
any modification in the terms of any lease or mortgage or of any
guarantee pertaining to either of them; to exercise and enforce any
right of foreclosure; to bid on property in foreclosure; to take a deed
in lieu of foreclosure with or
<PAGE> 13
13
without paying consideration therefor and in connection therewith to
release the obligation on the bond secured by the mortgage; and to
exercise and enforce in any action, suit, or proceeding at law or in
equity any rights, covenants, conditions or remedies with respect to any
lease or mortgage or to any guarantee pertaining to either of them or to
waive any default in the performance thereof;
(iv) To join in or oppose any reorganization,
recapitalization, consolidation, merger or liquidation, or any plan
therefor, or any lease (with or without an option to purchase), mortgage
or sale of the property of any organization the securities of which are
held in the Trust; to pay from the Trust any assessments, charges or
compensation specified in any plan of reorganization, recapitalization,
consolidation, merger or liquidation; to deposit any property allotted
to the Trust in any reorganization, recapitalization, consolidation,
merger or liquidation; to deposit: any property with any committee or
depository; and to retain any property allotted to the Trust in any
reorganization, recapitalization, consolidation, merger or liquidation;
(v) To compromise, settle, or arbitrate any claim, debt
or obligation of or against the Trust; to enforce or abstain from
enforcing any right, claim, debt, or obligation; and to abandon any
property determined by it to be worthless;
<PAGE> 14
14
(vi) To make, execute and deliver, as Trustee, any
deeds, conveyances, leases (with or without option to purchase),
mortgages, options, contracts, waivers or other instruments that the
Trustee shall deem necessary or desirable in the exercise of its powers
under this Agreement; and
(vii) To pay out of the assets of the Trust all taxes
imposed or levied with respect to the Trust and in its discretion may
contest the validity or amount of any tax, assessment, penalty, claim,
or demand respecting the Trust and may institute, maintain, or defend
against any related action or proceeding either at law or in equity (and
in such regard, the Trustee shall be indemnified in accordance with
Section 8(d) hereof).
6. INCOME OF THE TRUST: Except as provided in Section 3
hereof, during the continuance of this Trust all net income of the Trust shall
be allocated not less frequently than monthly among the Directors' separate
accounts in accordance with Section 7(b) hereof.
7. ACCOUNTING BY TRUSTEE: (a) The Trustee shall
maintain books, records and accounts as may be necessary for the proper
administration of Trust assets, including such specific records as shall be
agreed upon in writing by Cleveland-Cliffs and the Trustee, and shall render to
Cleveland-Cliffs within 60 days following the close of each calendar year
following the date of this Trust until the termination of this Trust or the
removal or resignation of the Trustee and within 60 days after
<PAGE> 15
15
the date of such termination, removal or resignation) an accounting with
respect to the Trust assets as of the end of the then most recent calendar year
(and as of the date of such termination, removal or resignation, as the case
may be). The Trustee shall furnish to Cleveland-Cliffs on a quarterly basis (or
as Cleveland-Cliffs shall direct from time to time) and in a timely manner such
information regarding the Trust as Cleveland-Cliffs shall require for purposes
of preparing its statements of financial condition. The Trustee shall at all
times maintain separate bookkeeping accounts for each Director as prescribed by
Section 7(b) hereof, and, upon the written request of a Director, shall provide
to him an annual statement of his account. Upon the written request of
Cleveland-Cliffs or, on or after the date of Change of Control, a Director, the
Trustee shall deliver to such Director or Cleveland-Cliffs, as the case may be,
a written report setting forth the amount held in the Trust and a record of the
deposits made with respect thereto by Cleveland-Cliffs. Unless Cleveland-Cliffs
or any Director shall have filed with the Trustee written exception or
objection to any such statement and account within 90 days after receipt
thereof, Cleveland-Cliffs and the Directors shall be deemed to have approved
such statement and account, and in such case, the Trustee shall be forever
released and discharged with respect to all matters and things reported in such
statement and account as though it had been settled by a degree of a court of
competent jurisdiction in an action or proceeding to which Cleveland-Cliffs and
the Directors were parties.
<PAGE> 16
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(b) The Trustee shall maintain a separate account for each
Director. The Trustee shall credit or debit each Director's account as
appropriate to reflect such Director's allocable portion of the trust assets,
as such Trust assets may be adjusted from time to time pursuant to the terms of
this Trust Agreement No. 8. Except as provided in this Section 7(b), all
allocations shall be made in proportion to the balances of the separate
accounts of the Directors. Prior to the date of a Change of Control, all
deposits of principal pursuant to Section 1(a) and 1(e) hereof shall be
allocated as directed by Cleveland-Cliffs. On or after such date deposits of
principal shall be allocated as an Account Excess in accordance with this
Section 7(b). Income, expense, gain or loss on assets allocated to the separate
accounts of the Directors shall be allocated separately to such accounts by the
Trustee in proportion to the balances of the separate accounts of the
Directors. Prior to the date of a Change of Control, at the request of
Cleveland-Cliffs the Trustee shall determine the amount of all Account
Excesses. On or after the date of a Change of Control, the Trustee shall
determine annually the amount of all Account Excesses. The Trustee shall
allocate the aggregate amount of the Account Excesses to any accounts that are
not Fully Funded, as defined in Section 4 hereof, in proportion to the
differences between the respective Fully Funded amount and account balance,
insofar as possible until all accounts are Fully Funded. Any remaining
aggregate Account Excess shall be allocated to all the accounts in proportion
to the respective Fully Funded amounts.
(c) Nothing in this Section 7 shall preclude the commingling
of Trust assets for investment.
<PAGE> 17
17
8. RESPONSIBILITY OF TRUSTEE: (a) The Trustee shall act
with the care, skill, prudence and diligence under the circumstances then
prevailing that a prudent corporate trustee, acting in a like capacity and
familiar with such matters, would use in the conduct of an enterprise of a like
character and with like aims; provided, however, that the Trustee shall incur
no liability to any person for any action taken pursuant to a direction,
request or approval, contemplated by and complying with the terms of this Trust
Agreement No. 8, given in writing by Cleveland-Cliffs, by the Compensation
Committee or by a Director applicable to his or her beneficial interest herein;
and provided, further, that the Trustee shall have no duty to seek additional
deposits of principal from Cleveland-Cliffs for additional amounts accrued
under the Plan, and the Trustee shall not be responsible for the adequacy of
this Trust.
(b) The Trustee may vote any stock or other securities and
exercise any right appurtenant to any stock, other securities or other property
held hereunder, either in person or by general or limited proxy, power of
attorney or other instrument.
(c) The Trustee may hold securities in bearer form and may
register securities and other property held in the trust fund in its own name
or in the name of a nominee, combine certificates representing securities with
certificates of the same issue held by the Trustee in other fiduciary
capacities, and deposit, or arrange for deposit of property with any
depository; provided that the books and records of the Trustee shall at all
times show that all such securities are part of the trust fund.
<PAGE> 18
18
(d) If the Trustee shall undertake or defend any litigation
arising in connection with this Trust Agreement No. 8, it shall be indemnified
by Cleveland-Cliffs against its costs, expenses and liabilities (including
without limitation attorneys' fees and expenses) relating thereto.
(e) The Trustee may consult with legal counsel, independent
accountants and actuaries (who nay be counsel, independent accountants or
actuaries for Cleveland-Cliffs) with respect to any of its duties or
obligations hereunder, and shall be fully protected in acting or refraining
from acting in accordance with the advice of such counsel, independent
accountants and actuaries.
(f) The Trustee may rely and shall be protected in acting or
refraining from acting within the authority granted by the terms of this Trust
Agreement No. 8 upon any written notice, instruction or request furnished to it
hereunder and believed by it to be genuine and to have been signed or presented
by the proper party or parties.
(g) The Trustee may hire agents, accountants, actuaries, and
financial consultants, who may be agents, accountants, actuaries, or financial
consultants, as the case may be, for Cleveland-Cliffs, and shall not be
answerable for the conduct of same if appointed with due care.
(h) The Trustee is empowered to take all actions necessary or
advisable in order to collect any benefits or payments of which the Trustee is
the designated beneficiary.
<PAGE> 19
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(i) The Trustee shall have, without exclusion, all powers
conferred on trustees by applicable law unless expressly provided otherwise
herein.
9. AMENDMENTS, ETC. TO PLAN; COOPERATION OF CLEVELAND-CLIFFS:
(a) Cleveland-Cliffs has previously furnished the Trustee a
complete and correct copy of the Plan, and Cleveland-Cliffs shall, and any
Director may, promptly furnish the Trustee true and correct copies of any
amendment, restatement or successor thereto, whereupon such amendment,
restatement or successor shall be incorporated herein by reference, provided
that such amendment, restatement or successor shall not affect the Trustee's
duties and responsibilities hereunder without the consent of the Trustee.
(b) Cleveland-Cliffs shall provide the Trustee with all
information requested by the Trustee for purposes of determining payments to
the Directors or withholding of taxes as provided in Section 2. Upon the
failure of Cleveland-Cliffs or any Director to provide any such information,
the Trustee shall, to the extent necessary in the sole judgment of the Trustee,
(i) compute the amount payable hereunder to any Director; and (ii) notify
Cleveland-Cliffs and the Director in writing of its computations. Thereafter
this Trust Agreement No. 8 shall be construed as to the Trustee's duties and
obligations hereunder in accordance with such Trustee determinations without
further action; provided, however, that no such determinations shall in any way
diminish the rights of any Director hereunder or under
<PAGE> 20
20
the Plan; and provided, further, that no such determinations shall be deemed to
modify this Trust Agreement No. 8 or the Plan. Nothing in this Trust Agreement
No. 8 shall restrict Cleveland-Cliffs' right to amend, modify or terminate the
Plan.
(c) At such times as may in the judgment of Cleveland-Cliffs
be appropriate, Cleveland-Cliffs shall furnish to the Trustee any amendment to
Exhibit A for the purpose of the addition of Directors to Exhibit A (or the
deletion of Directors from Exhibit A who have no Benefits currently due or
payable in the future) to Exhibit A; provided, however, that no such amendment
shall be made after the date of a Change of Control.
10. COMPENSATION AND EXPENSES OF TRUSTEE: The Trustee
shall be entitled to receive such reasonable compensation for its services as
shall be agreed to upon by Cleveland-Cliffs and the Trustee. The Trustee shall
also be entitled to reimbursement of its reasonable expenses incurred with
respect to the administration of the Trust including fees and expenses incurred
pursuant to Sections 8(d), 8(e) and 8(g) and liabilities to creditors pursuant
to court direction as provided in Section 3(a) hereof. Such compensation and
expenses shall in all events be payable either directly by Cleveland-Cliffs or,
in the event that Cleveland-Cliffs shall refuse, from the assets of the Trust
and charged pro rata in proportion to each separate account balance. The Trust
shall have a claim against Cleveland-Cliffs for any such compensation or
expenses so paid.
11. REPLACEMENT OF THE TRUSTEE: (a) Prior to the date of a
Change of Control, the Trustee may be removed by
<PAGE> 21
21
Cleveland-Cliffs. On or after the date of a Change of Control, the Trustee may
be removed at any time by agreement of Cleveland-Cliffs and a majority of the
Directors. The Trustee may resign after providing not less than 90 days' notice
to Cleveland-Cliffs and to the Directors. In case of removal or resignation, a
new trustee, which shall be independent and not subject to control of either
Cleveland-Cliffs or the Directors, shall be appointed as shall be agreed by
Cleveland-Cliffs and a majority of the Directors. No such removal or
resignation shall become effective until the acceptance of the trust by a
successor trustee designated in accordance with this Section 11. If the Trustee
should resign, and within 45 days of the notice of such resignation
Cleveland-Cliffs and the Directors shall not have notified the Trustee of an
agreement as to a replacement trustee, the Trustee shall appoint a successor
trustee, which shall be a bank or trust company, wherever located, having a
capital and surplus of at least $500,000,000 in the aggregate.
(b) For purposes of the removal or appointment of a Trustee
under this Section 11, a Director shall not participate if all payments of
Benefits then currently due or payable in the future have been made to such
Director.
12. AMENDMENT OR TERMINATION: (a) This Trust Agreement
No. 8 may be amended by Cleveland-Cliffs and the Trustee without the consent of
any Director provided the amendment does not adversely affect any Director.
This Trust Agreement No. 8 may also be amended at any time and to any extent by
a written instrument executed by the Trustee,
<PAGE> 22
22
Cleveland-Cliffs and a majority of the Directors, except to alter Section
12(b), and except that amendments to Exhibit A contemplated by Section 9(b)
hereof shall be made as therein provided.
(b) The Trust shall terminate on the date on which the Trust
no longer contains any assets, or, if earlier, the date on which each Director
is entitled to no further payments hereunder.
(c) Upon termination of the Trust as provided in Section 12(b)
hereof, any assets remaining in the Trust shall be returned to
Cleveland-Cliffs.
13. SPECIAL DISTRIBUTION: (a) It is intended that
(i) the creation of, and transfer of assets to, the Trust will not cause the
Plan to be other than "unfunded" for purposes of title I of the Employee
Retirement Income Security Act of 1974, as amended, or any successor provision
thereto ("ERISA"); (ii) transfers of assets to the Trust will not be transfers
of property for purposes of section 83 or the Code, or any successor provision
thereto, nor will such transfers cause a currently taxable benefit to be
realized by a Director pursuant to the "economic benefit" doctrine; and (iii)
pursuant to section 451 of the Code, or any successor provision thereto,
amounts will be includable as compensation in the gross income of a Director in
the taxable year or years in which such amounts are actually distributed or
made available to such Director by the Trustee.
(b) Notwithstanding anything to the contrary contained in this
Trust Agreement No. 8, in the event it is determined by
<PAGE> 23
23
a final decision of the Internal Revenue Service, or, if an appeal is taken
therefrom, by a court of competent jurisdiction that (i) by reason of the
creation of, and a transfer of assets to, the Trust, the Trust is considered
"funded" for purposes of title I of ERISA; or (ii) a transfer of assets to the
Trust is considered a transfer of property for purposes of section 83 of the
Code or any successor provision thereto; or (iii) a transfer of assets to the
Trust causes a Director to realize income pursuant to the "economic benefit"
doctrine; or (iv) pursuant to section 451 of the Code or any successor
provision thereto, amounts are includable as compensation in the gross income
of a Director in a taxable year that is prior to the taxable year or years in
which such amounts would, but for this Section 13, otherwise actually be
distributed or made available to such Director by the Trustee, then (A) the
assets held in Trust shall be allocated in accordance with Section 7(b) hereof,
and (B) subject to the last sentence of Section 2(b) hereof, the Trustee shall
promptly make a distribution to each affected Director which, after taking into
account the federal, state and local income tax consequences of the special
distribution itself, is equal to the sum of any federal, state and local income
taxes, interest due thereon, and penalties assessed with respect thereto, which
are attributable to amounts that are includable in the income of such Director
for any of the reasons described in clause (i), (ii), (iii) or (iv) of this
Section 13(b).
<PAGE> 24
24
14. SEVERABILITY, ALIENATION, ETC.: (a) Any provision
of this Trust Agreement No. 8 prohibited by law shall be ineffective to the
extent of any such prohibition without invalidating the remaining provisions
hereof.
(b) To the extent permitted by law, benefits to Directors
under this Trust Agreement No. 8 may not be anticipated, assigned (either at
law or in equity), alienated or subject to attachment, garnishment, levy,
execution or other legal or equitable process and no benefit provided for
herein and actually paid to any director by the Trustee shall be subject to any
claim for repayment by Cleveland-Cliffs or Trustee.
(c) This Trust Agreement No. 8 shall be governed by and
construed in accordance with the laws of the State of Ohio, without giving
effect to the principles of conflict of laws thereof.
(d) This Trust Agreement No. 8 may be executed in two or more
counterparts, each of which shall be considered an original agreement. This
Trust Agreement No. 8 shall become effective immediately upon the execution by
Cleveland-Cliffs of at least one counterpart, it being understood that all
parties need not sign the same counterpart, but shall not bind any Trustee
until such Trustee has executed at least one counterpart.
15. NOTICES; IDENTIFICATION OF CERTAIN TRUST BENEFICIARIES:
All notices, requests, consents and other communications hereunder shall be in
writing and shall be deemed to have been duly given when received:
<PAGE> 25
25
If to the Trustee, to:
Ameritrust Company National Association
900 Euclid Avenue
Cleveland, Ohio 44115
Attention: Trust Department
Employee Benefit Administration
If to Cleveland-Cliffs, to:
Cleveland-Cliffs Inc
1100 Superior Avenue
Cleveland, OH 44114
Attention: Secretary
If to the Director's, to the addresses listed on
Exhibit A hereto;
provided, however, that if any party or any Director or his or its successors
shall have designated a different address by written notice to the other
parties, then to the last address so designated.
IN WITNESS WHEREOF, Cleveland-Cliffs and the Trustee have caused
counterparts of this Trust Agreement No. 8 to be executed on their behalf on
April 9, 1991, each of which shall be an original agreement.
CLEVELAND-CLIFFS INC
By: Richard F. Novak
----------------
Its: V.P. of Human Resources
---------------------------------
AMERITRUST COMPANY NATIONAL ASSOCIATION
By: J. R. Russell
-------------
Its: Vice President
--------------
2224D
<PAGE> 26
26
Exhibit A
---------
Name Address
Harry J. Bolwell 3305 Roundwood Road
Chagrin Falls, OH 44022
E. Mandell de Windt 25299 Cedar Road
Lyndhurst, OH 44122
Richard J. Flynn 77 Fiske Hill
Sturbridge, MA 01566
James D. Ireland III 121 East 69th Street
New York, New York 10021
E. Bradley Jones 2775 Lander Road
Pepper Pike, OH 44124
David V. Ragone 8 Hillside Road
Wellesley, MA 02181
Richard S. Sheetz 22040 McCauley Road
Shaker Heights, OH 44122
Jeptha H. Wade 251 Old Billerica Street
Bedford, MA 01730
Alton W. Whitehouse 34700 Cedar Road
Gates Mills, OH 44040
<PAGE> 27
FIRST AMENDMENT TO TRUST AGREEMENT NO. 8
----------------------------------------
This First Amendment to Trust Agreement No. 8 is made on this 9th
day of March, 1992, by and between Cleveland-Cllffs Inc, an Ohio corporation
("Cleveland-Cliffs") and Ameritrust Company National Association, a national
banking association, as trustee (the "Trustee");
WITNESSETH:
----------
WHEREAS, on April 9, 1991, Cleveland-Cliffs and the Trustee
entered into a trust agreement ("Trust Agreement No. 8") for the purpose of
providing benefits under the Cleveland-Cliffs Inc Retirement Plan for
Non-Employee Directors (Effective June 1, 1984 and amended and restated
effective January 1, 1988) to retired non-employee directors of
Cleveland-Cliffs; and
WHEREAS, Cleveland-Cliffs has reserved the right, with the
Trustee, pursuant to Section 12 of Trust Agreement No. 8, to amend Trust
Agreement No. 8 without the consent of any Trust Beneficiaries, as defined in
Trust Agreement No. 8.
NOW, THEREFORE, Cleveland-Cliffs and the Trustee hereby agree
that Trust Agreement No. 8 shall be amended as follows:
1. The second sentence of Section 1(b) of Trust Agreement No. 8
is hereby amended to read as follows:
"The term "Change of Control" shall mean the occurrence of any of
the following events:
<PAGE> 28
2
(i) Cleveland-Cliffs 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 Cleveland-Cliffs as the same
shall have existed immediately prior to such merger or consolidation;
(ii) Cleveland-Cliffs 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
Cleveland-Cliffs 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;
(iii) 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
<PAGE> 29
3
outstanding voting securities of Cleveland-Cliffs (whether directly or
indirectly); or
(iv) during any period of three consecutive years,
including, without limitation, the year 1991, individuals who at the
beginning of any such period constitute the Board of Directors of
Cleveland-Cliffs cease, for any reason, to constitute at least a
majority thereof, unless the election, or the nomination for election by
the shareholders of Cleveland-Cliffs, of each Director first elected
during any such period was approved by a vote of at least one-third of
the Directors of Cleveland-Cliffs who are Directors of Cleveland-Cliffs
on the date of the beginning of any such period."
IN WITNESS WHEREOF, Cleveland-Cliffs and the Trustee have caused
counterparts of this First Amendment to Trust Agreement No. 8 to be executed on
March 9, 1992.
CLEVELAND-CLIFFS INC
By: /s/ R. F. Novak
--------------------------------
Its:
------------------------------
AMERITRUST COMPANY NATIONAL
ASSOCIATION
By: /s/ J. R. Russell
--------------------------------
Its: Vice President
------------------------------
3000F
<PAGE> 1
Exhibit 10(y)
CLEVELAND-CLIFFS INC
--------------------
VOLUNTARY NON-QUALIFIED
DEFERRED COMPENSATION PLAN
(AMENDED AND RESTATED AS OF JANUARY 1, 1996)
--------------------------------------------
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, bonuses
or performance shares 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, 1996.
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.
<PAGE> 2
2
2.4 BOARD. "Board" means the Board of Directors of the Company.
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 CASH AWARD. "Cash Award" means any compensation payable in cash to an
Eligible Employee for his or her services to the Company or a Selected
Affiliate pursuant to the Company's 1992 Incentive Equity Plan.
2.7 CASH DIVIDEND BENEFIT. "Cash Dividend Benefit" means an in-service
distribution described in Section 6.4(c).
2.8 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
<PAGE> 3
3
(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 of
the Company on the date of the beginning of any such period.
2.9 CODE. "Code" means the Internal Revenue Code of 1986, as amended.
2.10 COMMITTEE. "Committee" has the meaning set forth in Section 8.1.
2.11 COMPANY. "Company" means Cleveland-Cliffs Inc and any successor
thereto.
2.12 COMPENSATION. "Compensation" means the Base Salary and Bonus payable
with respect to an Eligible Employee for each calendar year.
2.13 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.
2.14 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 a Participant elects to defer under the Plan, (ii) the
portion of a Cash Award that a Participant elects to defer under the Plan,
(iii) an Employment Agreement Contribution (if any) made on behalf of a
Participant, and (iv) the amount of interest credited thereto for each
Participant pursuant to Article V.
2.15 DEFERRAL BENEFIT. "Deferral Benefit" means the benefit payable to a
Participant or his or her Beneficiary pursuant to Article VI and based on such
Participant's Account.
2.16 DEFERRED SHARE AWARD ACCOUNT. "Deferred Share Award Account" means
the account maintained on the books of the Employer for a Participant pursuant
to Article V.
2.17 DEFERRED SHARE AWARD BENEFIT. "Deferred Share Award Benefit" means
the benefits payable in Shares to a Participant or his or her Beneficiary
pursuant to Article V and based on such Participant's Deferred Share Award
Account.
2.18 DETERMINATION DATE. "Determination Date" means a date on which the
amount of a Participant's Account is determined
<PAGE> 4
4
as provided in Article V. The 15th day and the last day of each month shall be
a Determination Date.
2.19 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.
2.20 EMERGENCY BENEFIT. "Emergency Benefit" has the meaning set forth in
Section 6.3.
2.21 EMPLOYER. "Employer" means, with respect the Participant, the Company
or the Selected Affiliate which pays such Participant's Compensation.
2.22 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.
2.23 EMPLOYMENT AGREEMENT CONTRIBUTION. "Employment Agreement
Contribution" means any amount contributed to the Plan by an Employer pursuant
to an Employment Agreement.
2.24 FAIR MARKET VALUE. "Fair Market Value" means the average of the
highest and lowest sales prices of a Share on the specified date (or, if no
Share was traded on such date, on the next preceding date on which it was
traded) as reported in The Wall Street Journal.
2.25 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.
2.26 MATCHING AMOUNT. "Matching Amount" means the amount credited to a
Participant's Matching Account under Section 4.3.
2.27 MATCHING PERCENTAGE. "Matching Percentage" means the matching
contribution percentage in effect for a specific Plan Year under the Savings
Plan.
2.28 PARTICIPANT. "Participant" means any Eligible Employee who elects to
participate by filing a Participation Agreement as provided in Section 3.2.
2.29 PARTICIPATION AGREEMENT. "Participation Agreement" means the
agreement filed by a Participant, in the form prescribed by the Committee,
pursuant to Section 3.2.
<PAGE> 5
5
2.30 PLAN. "Plan" means the Cleveland-Cliffs Inc Voluntary Non-Qualified
Deferred Compensation Plan, as amended from time to time.
2.31 PLAN YEAR. "Plan Year" means a twelve-month period commencing January
1 and ending the following December 31.
2.32 SAVINGS PLAN. "Savings Plan" means, with respect to a Participant,
one or more of the Cliffs and Associated Employers Salaried Employees
Supplemental Retirement Savings Plan and the Northshore Mining Company and
Silver Bay Power Company Retirement Savings Plan for which he or she is
eligible to contribute.
2.33 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 which one or more of such
corporations is a partner or venturer, each of which shall be selected by the
Committee.
2.34 SHARE. "Share" means a share of common stock of the Company.
2.35 SHARE AWARD. "Share Award" means any compensation payable in Shares
to an Eligible Employee for his or her services to the Company or a Selected
Affiliate pursuant to the Company's 1992 Incentive Equity Plan.
2.36 UNIT. "Unit" means an accounting unit equal in value to one (1)
Share. The number of Units included in any Deferred Share Award Account shall
be adjusted as appropriate to reflect any stock dividend, stock split,
recapitalization, merger or other similar event affecting Shares.
ARTICLE III
-----------
ELIGIBILITY AND PARTICIPATION
-----------------------------
3.1 ELIGIBILITY. Eligibility to participate in the Plan for any Plan Year
with respect to deferral of Compensation 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. Any Eligible Employee
is eligible to participate in the Plan for any Plan Year with respect to
deferral of a Cash Award and/or a Share Award.
3.2 PARTICIPATION. Participation in the Plan shall be limited to Eligible
Employees who elect to participate in the
<PAGE> 6
6
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 (i) 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, and (ii) a Cash Award
and/or a Share Award the payment of which, if subsequently earned, is not
earlier than the beginning of the second Plan Year following 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 (i) with respect to deferral of Compensation not
earlier than the first day of the Plan Year immediately succeeding the Plan
Year in which such notice is filed with the Committee, and (ii) with respect to
deferral of a Cash Award and/or a Share Award, only with respect to a Cash
Award and/or a Share Award which becomes vested not earlier than the last day
of the Plan Year which next follows the Plan Year in which such notice is filed
with the Committee. Amounts credited to such Participant's Account or Deferred
Share Award Account with respect to periods prior to the effective date of such
termination shall continue to be payable pursuant to, receive interest on
(where applicable), 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 ("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 and
Deferred Share Award 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
<PAGE> 7
7
the Participant's elections as to the time and manner of payment of his Account
and Deferred Share Award Account will be deemed to be cancelled.
ARTICLE IV
----------
DEFERRAL OF COMPENSATION, CASH AWARDS AND SHARE AWARDS
------------------------------------------------------
4.1 DEFERRAL OF COMPENSATION. 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 of Compensation 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 of Compensation deferred
under this Plan deducted from his Base Salary, Bonus or a combination of both.
A Participant may change the dollar amount or 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 DEFERRAL OF CASH AWARDS. A Participant may elect to defer all or a
specified dollar amount or percentage of his or her Cash Award with respect to
a Plan Year, to be credited to his or her Deferral Account. A Participant may
change the dollar amount or percentage of his or her Cash Award to be deferred
by filing a written notice thereof with the Committee, which shall be effective
only with respect to Cash Awards which become vested not earlier than the last
day of the Plan Year which next follows the Plan Year in which such notice is
filed with the Committee.
<PAGE> 8
8
4.4 CREDITING DEFERRED COMPENSATION, MATCHING AMOUNTS, CASH AWARDS AND
EMPLOYMENT AGREEMENT CONTRIBUTIONS.
(a) The amount of Compensation that a Participant elects to defer shall be
credited by the Employer to the Participant's Deferral Account semi-monthly.
(b) The amount of the Employment Agreement 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.
(c) The amount of any Cash Award that a Participant elects to defer shall
be credited to the Participant's Deferral Account as of the time such Cash
Award would otherwise become payable to the Participant.
(d) The Matching Amount under the Plan for each Participant shall be
credited by the Employer to the Participant's Matching Account at the same
time that matching contributions are allocated under the Savings Plan.
4.5 DEFERRAL OF SHARE AWARDS. A Participant may elect to defer all or a
specified number of Shares, or percentage of his or her Share Award with
respect to a Plan Year, to be credited to his or her Deferred Share Award
Account in Units. A Participant may change the percentage of his or her Share
Awards to be deferred by filing a written notice thereof with the Committee,
which shall be effective only with respect to Share Awards which become vested
not earlier than the last day of the Plan Year which next follows the Plan Year
in which such notice is filed with the Committee. No fractional Shares shall
be deferred, but the number of Shares deferred shall be rounded down to the
nearest whole Share.
4.6 CREDITING OF DEFERRED SHARE AWARDS. The number of Shares in a Share
Award or percentage of Share Awards that a Participant elects to defer shall be
credited to the Participant's Deferred Share Award Account in Units as of the
time such Share Award would otherwise become payable to the Participant. The
number of Units credited to the Participant's Deferred Share Award Account
shall be equal to the number of Shares of a Participant's Share Award which the
Participant has elected to defer.
ARTICLE V
---------
BENEFIT ACCOUNTS
----------------
5.1 INVESTMENT OF DEFERRAL AND MATCHING ACCOUNTS. As soon as practicable
after the crediting of any amount to a
<PAGE> 9
9
Participant's Deferral Account or Matching 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 Deferral Account or Matching Account in accordance with requests
made by the Participant and communicated to the Committee. Earnings from
Investments shall be credited to a Participant's Deferral Account or Matching
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 Deferral Account or Matching 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 Deferral Account or Matching
Account as cash. Amounts credited to a Participant's Deferral Account or
Matching 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, deferred Cash
Awards and Employment Agreement Contribution (if any) credited pursuant to
Section 4.4 since the immediately preceding Determination Date and any earnings
and/or income credited to such amounts pursuant 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.
<PAGE> 10
10
5.4 DETERMINATION OF DEFERRED SHARE AWARD ACCOUNT. On any particular date,
a Participant's Deferred Share Award Account shall consist of the aggregate
number of Units credited thereto pursuant to Section 4.6, plus any dividend
equivalents credited pursuant to Section 5.5, minus the aggregate amount of
distributions, if any, made from such Deferred Share Award Account.
5.5 CREDITING OF DIVIDEND EQUIVALENTS. Each Deferred Share Award Account
shall be credited, as of the payment date of any cash dividend paid on Shares,
with additional Units equal in value to the amount of cash dividends paid by
the Company on that number of Shares equivalent to the Units in such Deferred
Share Award Account on such payment date. Such dividend equivalents shall be
valued using Fair Market Value. A Participant may elect to convert the Units
representing such dividend equivalents to cash to be credited to his or her
Deferral Account by filing a written notice thereof with the Committee, which
shall be effective only with respect to cash dividends paid after the Plan Year
in which such notice is filed with the Committee. Until a Participant or his
or her Beneficiary receives his or her entire Deferred Share Award Account, the
unpaid balance thereof credited in Units shall earn dividend equivalents as
provided in this Section 5.5, except as provided in Section 6.4(c).
5.6 STATEMENTS. The Committee shall cause to be kept a detailed record of
all transactions affecting each Participant's Account and Deferred Share Award
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 and Units in such Participant's Account and Deferred Share Award
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.
5.7 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 and Deferred Share Award
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 or her Beneficiary, as the case may be, a
Deferral Benefit equal to the
<PAGE> 11
11
balance of his or her vested Account determined pursuant to Article V, less any
amounts previously distributed.
6.2 PAYMENT OF DEFERRED SHARE AWARD 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 or her Beneficiary, as the
case may be, a Deferred Share Award Benefit equal to the balance of the Units
in his or her Deferred Share Award Account determined pursuant to Article V,
less any amounts previously distributed.
6.3 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, Matching Account and Deferred Share Award Account as of the
date of such payment. For purposes of this Section 6.3, 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 and Deferred Share Award Benefit otherwise
payable under the Plan to such Participant shall be adjusted to reflect the
early payment of the Emergency Benefit.
6.4 IN-SERVICE DISTRIBUTION.
(a) A Participant may elect to receive an in-service distribution of his
or her deferred Compensation, Matching Amount and earnings thereon with
respect to a Plan Year 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 from his or her Account
with respect to a Plan Year shall be filed in writing with the Committee
before the first day of the Plan Year in which his or her deferred
Compensation otherwise would have been first payable. The Participant may
elect to receive an in-service distribution as provided in Section 6.5(a);
provided, however, that Section 6.5(c) shall not apply to an in-service
distribution. Any Deferral Benefit paid to the Participant as an in-service
distribution shall reduce the amount of Deferral Benefit otherwise payable to
the Participant under the Plan.
<PAGE> 12
12
(b) A Participant may elect to receive an in-service distribution of his or
her deferred Share Award and earnings with respect to a Plan Year beginning
at any time at least four (4) years after the date such deferred Share Award
otherwise would have been first payable. A Participant's election for an
in-service distribution from his or her Deferred Share Award Account with
respect to a Plan Year shall be filed in writing with the Committee not later
than during the second Plan Year preceding the date the Share Award otherwise
would have been first payable. The Participant may elect to receive such
Deferred Share Award Benefit as an in-service distribution as provided in
Section 6.5(b); provided, however, that Section 6.5(c) of the Plan shall not
apply to such an in-service distribution. Any Deferred Share Award Benefit
paid to the Participant as an in-service distribution shall reduce the amount
of Deferred Share Award Benefit otherwise payable to the Participant under
the Plan.
(c) A Participant may elect to receive an in-service distribution of his or
her deferred Cash Award and earnings with a respect to a Plan Year beginning
at any time at least four (4) years after the date such deferred Cash Award
otherwise would have been first payable. A Participant's election for an
in-service distribution from his or her Account with respect to a Cash Award
for a Plan Year shall be filed in writing with the Committee not later during
the second Plan Year preceding the date the Cash Award otherwise would have
been first payable. The Participant may elect to receive such Deferral
Benefit as an in-service distribution as provided in Section 6.5(a);
provided, however, that Section 6.5(c) shall not apply to such an in-service
distribution. Any Deferral Benefit paid to the Participant is an in-service
distribution shall reduce the amount of Deferral Benefits otherwise payable
to the Participant under the Plan.
(d) A Participant may elect to receive an in-service distribution of a Cash
Dividend Benefit equal to the amount of the dividend equivalent to be
credited to his or her Deferred Share Award Account pursuant to Section 5.5
as of the payment date of a cash dividend on Shares. A Participant's
election for a Cash Dividend Benefit shall be filed in writing with the
Committee not later than during the second Plan Year preceding the date the
dividend equivalent otherwise would be so credited to his or her Deferred
Share Award Account.
6.5 FORM OF PAYMENT.
(a) The Deferral Benefit payable pursuant to
Section 6.1, Section 6.4(a) or Section 6.4(c) shall be paid in one of the
following forms, as elected by the Participant
<PAGE> 13
13
in his or her Participation Agreement or by written notice as provided in
subsection (c) 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 5.3).
(2) A lump sum.
(3) A combination of (1) and (2) above. The Participant shall
designate the percentage payable under each option.
(b) The Deferred Share Award Benefit payable pursuant to Section 6.2 or
Section 6.4(b) shall be paid in whole Shares plus cash equal in value to any
fractional Share in one of the forms set forth in Section 6.5(a), without
interest, but with dividend equivalents reinvested as provided in Section
5.5; subject, however, to Section 6.4(d). For the purpose of this Section
6.5(b), each distribution from a Deferred Share Award Account shall be valued
on the basis of the Fair Market Value of the Shares on the date prior to the
date payment of such distribution is made.
(c) 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.
(d) The amount of each installment under Section 6.5(a) 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.
<PAGE> 14
14
(e) The Cash Dividend Benefit payable pursuant to Section 6.4(c) shall be
in the form of a lump sum.
(f) If a Participant fails to make an election with respect to his or her
Account in a timely manner as provided in this Section 6.4, distribution
shall be made in ten (10) annual installments of cash or Shares, as
applicable.
(g) A Participant's Deferral Benefit and Deferred Share Award Benefit (or
the remaining portions 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.
6.6 COMMENCEMENT OF PAYMENTS. Commencement of payments under Section 6.1
or Section 6.2 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.
6.7 SPECIAL DISTRIBUTIONS. Notwithstanding any other provision of this
Article VI, a Participant may elect to receive a distribution of part or all of
his or her Account or Deferred Share Award Account in one or more distributions
if (and only if) the amount in either of such accounts subject to such
distribution is reduced by ten percent (10%). Any distribution made pursuant
to such an election shall be made within 60 days of the date such election is
submitted to the Committee. The remaining ten percent (10%) of the portion of
the electing Participant's account subject to such distribution shall be
forfeited.
6.8 SMALL BENEFIT. In the event the Committee determines that the balance
of the Participant's Account and Deferred Share Award Account is less 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 or Deferred
Share Award Benefit. Any Beneficiary designation shall be made
<PAGE> 15
15
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 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
<PAGE> 16
16
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 or Deferred Share
Award 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 or Deferred Share Award
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 or Deferred Share Award Account, the earnings from
Investments credited to a Participant's Account under Section 5.1, the interest
on cash amounts credited to a Participant's Account under Section 5.3, the
crediting of dividend equivalents to a Participant's Deferred Share Award
Account under Section 5.5, or the timing or method of distribution of a
Participant's Account, or Deferred Share Award 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 or Deferred Share Award Accounts under the
<PAGE> 17
17
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 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
<PAGE> 18
18
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 WITHHOLDING TAXES. If the Employer is required to withhold any taxes
or other amounts from a Participant's deferred Compensation, Employment
Agreement Contribution, deferred Cash Award or deferred Share Award pursuant to
any state, federal or local law, such amounts shall, to the extent possible, be
withheld from the Participant's Compensation, Cash Award or Share Award before
such amounts are credited under the Plan. Any additional withholding amount
required shall be paid by the Participant to the Employer as a condition to the
crediting of deferred Compensation, deferred Cash Award or deferred Share Award
to the Participant's Account and Deferred Share Award Account, respectively.
The Employer may withhold any required state, federal or local taxes or other
amounts from any benefits payable in cash or Shares to a Participant or
Beneficiary.
10.5 CAPTIONS. The captions contained herein are for convenience only and
shall not control or affect the meaning or construction hereof.
10.6 GOVERNING LAW. The provisions of the Plan shall be construed and
interpreted according to the laws of the State of Ohio.
10.7 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
<PAGE> 19
19
Selected Affiliate and successors of any such corporation or other business
entity.
10.8 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.
10.9 PRIOR PLAN PROVISIONS. The provisions of the Plan in effect prior to
January 1, 1996 shall govern periods prior to such date.
Executed this 13th day of December, 1995.
CLEVELAND-CLIFFS INC
By: /s/ R. F. Novak
------------------------------
Vice President-Human Resources
<PAGE> 1
EXHIBIT 10(bb)
CLEVELAND-CLIFFS INC
LONG-TERM PERFORMANCE SHARE PROGRAM
JANUARY 1, 1996
(SUMMARY DESCRIPTION)
1. The Long-Term Performance Share Program ("Performance
Share Program") operates under the Cleveland-Cliffs Inc ("Company") 1992
Incentive Equity Plan ("1992 ICE Plan").
2. The Compensation and Organization Committee
("Committee") of the Board of Directors of the Company, which Committee is
composed of non-employee Directors, administers the Performance Share Program
under which performance shares ("Performance Shares") are awarded under the
1992 ICE Plan.
3. Pursuant to the 1992 ICE Plan, the Performance Share
Program was approved in 1994 to further align the interest of designated key
management employees with the shareholders in increasing return on invested
capital and long-term shareholder value. The Performance Share Program
provides the participants the opportunity to receive Company Shares based on
Company performance against specified objectives.
4. Under the Performance Share Program, the Committee
authorizes awards of Performance Shares, which become wholly or partially
payable to the participant upon the achievement of specified Company objectives
in accordance with the following provisions:
a. Each award specifies the number of
Performance Shares to which it pertains.
b. The performance period, normally a three-year
period, with respect to each Performance Share is determined
by the Committee on the date of award, and may be subject to
earlier termination in the event of a change in control of the
Company or other similar transaction or event.
c. Each award specifies the performance
objectives of the Company and a minimum acceptable level of
achievement below which no payment will be made. Each award
sets forth a formula for determining the amount of any payment
to be made if performance is at or above the minimum
acceptable level and also specifies the maximum amount of any
payment to be made. The Committee may adjust the objectives
in certain circumstances.
d. The number of Common Shares that will be
earned will be reduced to the extent necessary to prevent the
value of the Common Shares paid to any participant from
exceeding twice the market value of the Common Shares covered
by the participant's award on the date it was made.
e. The Committee may award equivalent cash value
instead of the Company's Common Shares at its discretion.
<PAGE> 2
5. Each Performance Share that is earned entitles the
holder to receive Common Shares of the Company, depending on the degree of
achievement of specified Company objectives. The objectives, weighted equally
at the target level, are total shareholder return (share price plus reinvested
dividends) and value added (earnings less the cost of capital employed) over a
three-year performance period. Achievement of the total shareholder return
objective is determined by the Company's shareholder return relative to a
predetermined group of mining and metal companies. Achievement of the value
added objective is determined by comparing the Company's actual and target
value added.
6. The target payout is calculated at 100% of the
Performance Shares awarded and represents the number of Common Shares that
would be earned if a target level of the objectives is achieved by the Company;
maximum payout is calculated at 150% for performance year beginning 1994 and
175% for performance years beginning 1995 and 1996, of the Performance Shares
awarded and represents the number of Common Shares that would be earned if an
above superior level of the objectives is achieved by the Company; and
threshold payout is calculated at 25% of the Performance Shares awarded and
represents the number of Common Shares that would be earned if a minimum level
of the objectives is achieved by the Company. If achievement of one objective
is below threshold, achievement of the other objective must be at least at
threshold for any payout to occur.
<PAGE> 1
EXHIBIT 10(cc)
CLEVELAND-CLIFFS INC
NONEMPLOYEE DIRECTORS RETIREMENT PLAN
JULY 1, 1995
(SUMMARY DESCRIPTION)
Directors joining the Board of Directors of Cleveland-Cliffs Inc
("Company") after June 30, 1995 will receive in cash a quarterly retirement
amount equal to 50 percent of the stated Board retainer fee in effect at time
of retirement from the Company, in accordance with the following:
1. Director eligibility occurs after 5 years service, or earlier
if a change-of-control occurs.
2. Retirement benefit is payable for number of years service on
the Board.
3. Director may elect an actuarially equivalent lower payment for
a surviving spouse.
4. Retirement benefit is reduced proportionately if a
change-of-control occurs before 5 years of service as a
Director.
5. Mandatory retirement age for a Director is 72, but there is no
minimum retirement age.
6. Benefit payment to a Director begins upon retirement
(voluntary or involuntary) but not before age 65, except in
case of disability.
7. A Director who is not renominated or re-elected is deemed to
retire with Board consent.
<PAGE> 1
Exhibit 11
Computation of Earnings Per Share
CLEVELAND-CLIFFS INC AND CONSOLIDATED SUBSIDIARIES
<TABLE>
<CAPTION>
(In Millions, Except Per
Share Amounts)
Year Ended December 31
1995 1994 1993
------- ------- -------
<S> <C> <C> <C>
Earnings per share, as reported:
Average shares outstanding 11.9 12.1 12.0
======= ======= =======
Income before extraordinary item $ 60.9 $ 42.8 $ 54.6
Extraordinary item (3.1) -- --
------- ------- -------
Net income $ 57.8 $ 42.8 $ 54.6
======= ======= =======
Income per share:
Income before extraordinary item $ 5.10 $ 3.54 $ 4.55
Extraordinary item (.26) -- --
------- ------- -------
Net income $ 4.84 $ 3.54 $ 4.55
======= ======= =======
Primary earnings per share:
Average shares outstanding 11.9 12.1 12.0
Net effect of dilutive stock options -
based on the treasury stock method
using average market price .1 -- .1
------- ------- -------
Average shares and equivalents 12.0 12.1 12.1
======= ======= =======
Income before extraordinary item $ 60.9 $ 42.8 $ 54.6
Extraordinary item (3.1) -- --
------- ------- -------
Net income $ 57.8 $ 42.8 $ 54.6
======= ======= =======
Income per share:
Income before extraordinary item $ 5.08 $ 3.54 $ 4.51
Extraordinary item (.26) -- --
------- ------- -------
Net income $ 4.82 $ 3.54 $ 4.51
======= ======= =======
</TABLE>
27
<PAGE> 2
<TABLE>
<CAPTION>
(In Millions, Except Per
Share Amounts)
Year Ended December 31
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Fully diluted earnings per share:
Average shares outstanding 11.9 12.1 12.0
Net effect of dilutive stock options -
based on the treasury stock method
using higher of year-end or average
market price .1 -- .1
------- ------- -------
Average fully diluted shares 12.0 12.1 12.1
======= ======= =======
Income before extraordinary item $ 60.9 $ 42.8 $ 54.6
Extraordinary item (3.1) -- --
------- ------- -------
Net income $ 57.8 $ 42.8 $ 54.6
======= ======= =======
Income per share:
Income before extraordinary item $ 5.08 $ 3.54 $ 4.51
Extraordinary item (.26) -- --
------- ------- -------
Net income $ 4.82 $ 3.54 $ 4.51
======= ======= =======
</TABLE>
Common stock options do not have a material dilutive effect and therefore
were not included in the computation of earnings per share as reported.
28
<PAGE> 1
MANAGEMENT'S DISCUSSION AND ANALYSIS Exhibit 13(a)
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
In 1995, Cleveland-Cliffs earned $57.8 million, or $4.84 a share, including an
extraordinary after-tax charge of $3.1 million and the effects of two
significant "special items." Excluding the extraordinary charge and the
special items, earnings were $55.4 million, or $4.64 a share. Comparable
earnings for the year 1994 were $42.8 million, or $3.54 per share.
Following is a summary of results for the years 1995, 1994, and 1993:
<TABLE>
<CAPTION>
(In Millions, Except Per Share)
-------------------------------
1995 1994 1993
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Income Before Special Items and
Extraordinary Charge
- Amount $55.4 $42.8 $31.4
- Per Share 4.64 3.54 2.62
Special Items
Prior Years' Tax Credit 12.2
Environmental Reserve (6.7)
Gain on LTV Steel Company, Inc.
Bankruptcy Settlement 23.2
----- ----- -----
5.5 23.2
----- ----- -----
Net Income Before Extraordinary Item
- Amount 60.9 42.8 54.6
- Per Share 5.10 3.54 4.55
Extraordinary Loss
on Early Extinguishment of Debt (3.1)
----- ----- -----
Net Income
- Amount $57.8 $42.8 $54.6
===== ===== =====
- Per Share $4.84 $3.54 $4.55
===== ===== =====
</TABLE>
1995 VERSUS 1994
- ----------------
Revenues were $473.1 million in 1995, an increase of $84.2 million from 1994.
Revenues from product sales and services in 1995 totaled $411.2 million, an
increase of $76.4 million from 1994, mainly due to higher North American sales
volume reflecting the full year effect of the acquisition of Northshore Mining
Company on September 30, 1994. North American iron ore sales were 10.4 million
tons in 1995 compared to 8.2 million tons in 1994. Royalty and management fee
revenue in 1995 totaled $49.5 million, an increase of $4.8 million due
primarily to increased production at Empire Mine in 1995.
Net income for the year 1995 was $57.8 million, or $4.84 a share, including an
extraordinary after-tax charge of $3.1 million incurred in December, 1995 on
the early extinguishment of debt as part of a $70 million long-term debt
refinancing. Net income in 1994 was $42.8 million, or $3.54 a share.
29
<PAGE> 2
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - CONTINUED
Net income before the extraordinary item for the year 1995 was $60.9 million,
an increase of $18.1 million from 1994. Included in 1995 earnings were two
large special items recorded in the second quarter: a $12.2 million tax credit
resulting from the settlement of prior years' tax issues, and a $6.7 million
after-tax increase in the reserve for environmental expenditures.
Excluding the special items and the extraordinary charge, earnings for 1995
were $55.4 million, an increase of $12.6 million from 1994. The increase was
mainly due to the full year effect of the Northshore acquisition, higher
Australian earnings, and increased royalties and management fees, partially
offset by a higher effective income tax rate.
1994 VERSUS 1993
- ----------------
Revenues were $388.9 million in 1994, an increase of $33.0 million from 1993.
Revenues in 1993 included a $35.7 million pre-tax recovery on the LTV Steel
Company, Inc. (an integrated steel company subsidiary of The LTV Corporation,
or collectively "LTV") bankruptcy claim. Without this item, revenues in 1994
were $68.7 million higher than 1993. Revenues from product sales and services
in 1994 totaled $334.8 million, an increase of $66.7 million from 1993, mainly
due to higher North American sales volume and prices and increased Australian
sales volume. North American iron ore sales were 8.2 million tons in 1994
compared to 6.4 million tons in 1993. Royalty and management fee revenue in
1994 totaled $44.7 million, an increase of $5.0 million due primarily to
increased production in 1994 over strike-depressed 1993.
Net income for the year 1994 was $42.8 million, an increase of $11.4 million
from 1993, excluding the $23.2 million gain on the LTV bankruptcy settlement.
The increase was due to higher sales volume and prices in North America,
increased royalties and management fees, higher Australian earnings, and the
$5.4 million after-tax cost of the labor strike in 1993. These gains were
partly offset by higher operating costs, certain non-recurring costs, lower
investment income, and a favorable income tax adjustment in 1993.
CASH FLOW AND LIQUIDITY
- -----------------------
At December 31, 1995, the Company had cash and marketable securities totaling
$148.8 million. In addition, the full amount of a $100.0 million unsecured
revolving credit facility was available.
In 1995, cash and marketable securities increased $7.4 million due to cash flow
from operating activities (before changes in operating assets and liabilities),
$84.7 million, largely offset by capital expenditures, $22.5 million, increased
working capital, $18.6 million, dividends, $15.5 million, repurchase of 284,500
of the Company's Common Shares in open market transactions, $10.7 million, and
a $9.3 million reduction in long-term obligations.
The working capital increase primarily reflected a decrease in income taxes
payable, $14.0 million, and an increase in product inventories, $13.5 million,
partially offset by higher accounts payable and accrued expenses, $7.2 million.
30
<PAGE> 3
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - CONTINUED
North American pellet inventory investment at December 31, 1995 was $25.5
million, an increase of $8.6 million from December 31, 1994, which primarily
reflected a planned increase in inventory during normal seasonal suspension of
Great Lakes shipping. Inventories at the Savage River Mine in Australia
increased $4.7 million, reflecting higher pellet inventory and crude ore
stockpiled in preparation for the planned closure of operations.
<TABLE>
<CAPTION>
FOLLOWING IS A SUMMARY OF 1995 CASH FLOW:
(In Millions)
-------------
<S> <C>
Cash Flow from Operations
Before Changes in Operating Assets and Liabilities.............. $ 84.7
Increases in Operating Assets and Liabilities:
Marketable Securities ...................................... (8.1)
Other ...................................................... (18.6)
-------
Net Cash From Operations................................. 58.0
Capital Expenditures.............................................. (22.5)
Dividends......................................................... (15.5)
Repurchase of Common Shares....................................... (10.7)
Debt Payments - Net of $70 Million Refinancing.................... (9.3)
Other (net)....................................................... (.7)
-------
Net Decrease in Cash and Cash Equivalents....................... (.7)
Increase in Short-term Marketable Securities...................... 8.1
-------
Net Increase in Cash and Marketable Securities.................. $ 7.4
=======
</TABLE>
FOLLOWING IS A SUMMARY OF KEY LIQUIDITY MEASURES:
<TABLE>
<CAPTION>
At December 31
(In Millions)
-------------------------------------
1995 1994 1993
------ ------ ------
<S> <C> <C> <C>
Cash and Temporary Investments
Cash and Cash Equivalents ................. $139.9 $140.6 $ 67.9
Marketable Securities...................... 8.9 .8 93.1
------ ------ ------
Total $148.8 $141.4 $161.0
====== ====== ======
Working Capital.............................. $189.2 $169.5 $186.0
====== ====== ======
Ratio of Current Assets to Current
Liabilities................................ 2.9:1 2.7:1 3.7:1
</TABLE>
Additionally, at December 31, 1995, the Company had long-term investments as
follows:
o LTV Common Stock, .8 million shares with a market value of $11.6
million.
o Long-term government and corporate bonds (denominated primarily in
Australian currency), $4.7 million, largely dedicated to fund the
planned shutdown of the Savage River Mine.
In 1995, $8.3 million of Australian government securities matured and were
converted to cash. The redemption of these investments, previously classified
as held-to-maturity securities, did not result in the recognition of gain or
loss.
31
<PAGE> 4
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - CONTINUED
In 1995, the Company and the Internal Revenue Service reached agreement on
several issues raised during the examination of the Company's Federal income
tax returns for the tax years 1986 through 1988. The income tax settlement
favorably resolved a number of audit issues primarily arising from the
Company's restructuring program in the late 1980s when mining partnerships were
reorganized to cope with steel company bankruptcies and non-core businesses
were divested. During that period, the Company had reserved the potential tax
liabilities. Accordingly, a tax credit of $12.2 million was recorded in the
second quarter of 1995. As a result of the settlement and its related impact on
the tax years 1989 through 1993, the Company made additional tax and interest
payments of $11.8 million in the third quarter of 1995 and is entitled to tax
and interest refunds of $5.3 million. Additional cash benefits of the tax
settlement will be realized for the tax year 1994 and thereafter.
NORTH AMERICAN IRON ORE
- -----------------------
The North American steel industry experienced high operating rates and
generally positive financial results in 1994 and 1995. The Company's integrated
steel company partners and customers have generally improved their financial
condition over the two-year period as a result of continued earnings and
increased equity capital.
The improvement in most steel companies' financial positions has significantly
reduced the major business risk faced by the Company in recent years, i.e., the
potential financial failure and shutdown of significant customers or partners
with a resulting unmitigated loss of ore sales or royalty and management fee
income.
If any such shutdown were to occur without mitigation through replacement sales
or cost reduction, it would represent a significant adverse financial
development to the Company. The iron ore mining business has high operating
leverage because "fixed" costs are a large portion of the cost structure.
Therefore, loss of sales or other income due to failure of a customer or
partner would have an adverse income effect proportionately greater than the
revenue effect.
On September 29, 1995, McLouth Steel Products Company ("McLouth"), a
significant customer, petitioned for protection under Chapter 11 of the U.S.
Bankruptcy Code. The Company has periodically extended credit to McLouth. At
the time of the bankruptcy filing, the Company had an unreserved receivable
from McLouth of $5.0 million, secured by liens on certain McLouth fixed assets.
A $2.7 million reserve against the receivable was recorded in September,
resulting in a $1.8 million after-tax charge.
The Company's total shipments in 1995 were not affected by McLouth's bankruptcy
filing. Sales to McLouth were 1.3 million tons in 1995 which represented 12.5
percent of the Company's sales volume. Included in the Company's December 31,
1995 inventory was .1 million tons (which increased to a peak .2 million tons
in January, 1996) consigned to McLouth in accordance with long-standing
practice.
32
<PAGE> 5
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - CONTINUED
The Company provided certain additional credit to McLouth since the bankruptcy
filing, and unreserved amounts are secured by liens on McLouth's assets. Until
March 15, 1996, McLouth had maintained operations and the Company continued
pellet shipments. On March 15, 1996, McLouth announced that it had begun a
shutdown of its operations due to inadequate funds and that discussions with
potential buyers for McLouth assets are in progress which could lead to a
resumption of operations. McLouth plans to maintain its facilities in a
"hot-idle" status. The Company had supplied approximately 120,000 tons of
pellets per month to McLouth in 1996 prior to shutdown. The Company expects to
maintain its total sales volume in the current strong iron ore market; however,
a near-term adverse earnings impact could occur and replacement tonnage is not
assured.
In February, 1994, the Company reached agreement with Algoma Steel Inc. and
Stelco Inc. to restructure and simplify the Tilden Mine operating agreement.
The parties implemented the general agreement effective January 1, 1994 and
finalized the detailed provisions of the definitive agreement on September 30,
1995. The agreement has not had a material effect on the Company's consolidated
financial statements.
On June 28, 1993, LTV, a significant partner of the Company, emerged from
Chapter 11 bankruptcy. In final settlement of its allowed claim, the Company
received 2.3 million shares of LTV Common Stock and 4.4 million Contingent
Value Rights. The settlement, reflected in the Company's year 1993 operating
results, totaled $35.7 million before tax and $23.2 million after-tax. On July
13, 1993, the Company distributed to its shareholders a special dividend
consisting of 1.5 million shares of LTV Common Stock and $12.0 million ($1.00
per share) cash.
Three U.S. iron ore mining operations managed by subsidiaries of the Company
are operating under six-year, no strike labor agreements with the United
Steelworkers of America. The contracts, which were effective August 1, 1993,
cover the Empire and Tilden mines in Michigan and the Hibbing mine in
Minnesota. The agreements call for a limited economic re-opener in 1996, with
interest arbitration in the event the parties are unable to reach a negotiated
settlement. A labor agreement with the Wabush Mines' bargaining unit reached in
March, 1994, expires on March 1, 1996. Negotiations have begun toward a new
Wabush agreement.
North American steel shipments increased from 110 million tons in 1994 to 112
million tons in 1995, the highest level since 1979. Industry analysts are
projecting North American steel production and shipments in 1996 to remain
strong resulting in the North American iron ore mining industry operating at
near capacity levels again. The six North American mines managed by the Company
are scheduled to operate at nearly full capacity again in 1996, producing 40.6
million tons of iron ore. The Company's share of scheduled production is 10.3
million tons. In 1995, total production at the Company's managed mines was 39.6
million tons and the Company's share was 9.8 million tons. Production schedules
are subject to change throughout the year and could be affected by the
extremely adverse weather conditions at the start of 1996.
33
<PAGE> 6
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - CONTINUED
The Company's North American sales in 1996 are expected to approximate its
share of production. More than 90 percent of such sales have been committed
under contracts. The Company's current contracts expire in various future
years, starting in 1997. Continuation of high sales volume is dependent on
renewal of such contracts and the general iron ore demand level. The Company
has demonstrated its ability to sustain sales volume through renewed or new
contracts. The Company recently obtained two such contracts aggregating over 2
million tons per year for a four-year period.
AUSTRALIA
- ---------
Savage River Mines in Tasmania, Australia operated at its capacity of
approximately 1.5 million tons in 1995 and 1994. Net income increased to $9.0
million in 1995 from $4.6 million in 1994 due to a 13 percent pellet price
increase and lower development costs as the mine approaches the planned
termination of its operations. Australian sales are projected to be about 1.5
million tons in 1996. The international pellet price is expected to increase in
1996, reflecting strong international demand for pellets.
The Company continues to project that its Savage River shipments will terminate
in the first quarter of 1997 due to exhaustion of the economically recoverable
iron ore from surface mining. This is two years beyond the original schedule
established when the Company acquired full ownership in 1990. Mine closure
costs have been provided in the Capacity Rationalization Reserve and have been
funded.
COAL
- ----
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. Premium payments by the Company in 1995 were $.7
million ($1.3 million in 1994). Additionally, in December, 1993, a complaint
was filed by the Trustees of the United Mine Workers of America 1992 Benefit
Plan against the Company demanding the payment of premiums on additional
beneficiaries related to two formerly operated joint venture coal mines. The
Company is actively contesting the complaint. Monthly premiums are being paid
into an escrow account (80% by a former joint venture participant and 20% by
the Company) by joint agreement with the Trustee, pending outcome of the
litigation. Company payments in 1995 and 1994 were approximately $.1 million.
At December 31, 1995, the Company's coal retiree reserve was $10.1 million, of
which $.8 million was current. The reserve is reflected at present value, using
a discount rate of 7.25%. Constitutional and other legal challenges to various
provisions of the Benefit Act by other former coal producers are pending in the
Federal Courts.
34
<PAGE> 7
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - CONTINUED
ACTUARIAL ASSUMPTIONS
- ----------------------
As a result of a decrease in long-term interest rates, the Company re-evaluated
the interest rates used to calculate its pension and other postretirement
benefit ("OPEB") obligations. Financial accounting standards require that the
discount rate used to calculate the actuarial present value of such benefits
reflect the rate of interest on high-quality fixed income securities. The
discount rate used to calculate the Company's pension and OPEB obligations was
decreased to 7.25% at December 31, 1995 from 8.50% at December 31, 1994. The
Company increased its assumed long-term rate of return on pension assets from
8.5% at December 31, 1994 to 8.75% at December 31, 1995. The Company also
adjusted its assumed long-term rate of return on deposits on life insurance
contracts to fund retiree life insurance benefits to 8.0% at December 31, 1995
from 5.5% at December 31, 1994 to reflect contract provisions. Additionally, as
a result of recent experience, the Company has changed the medical cost trend
rate assumption used in the calculation of its OPEB obligation. The new
assumption reflects medical cost growth of 8.5% in 1996, decreasing by .5% per
year to a growth rate of 5% for the year 2003 and annually thereafter. The
previous assumption reflected medical cost growth of 7% in 1996, decreasing to
5% in 1997 and annually thereafter.
The changes in actuarial assumptions did not affect 1995 financial results;
however, in 1996 and subsequent years, the change is projected to increase
pension and OPEB expense by approximately $1.5 million.
The Company has increased pension plan funding to the maximum amount deductible
for income tax purposes. For Plan Year 1995 (largely funded in calendar year
1996), the Company plans to contribute $5.1 million, including its share of
associated companies' funding, an increase of $3.5 million from Plan Year 1994.
ENVIRONMENTAL COSTS
- -------------------
The Company has a formal code of environmental conduct which promotes
environmental protection and restoration. The Company's obligations for known
environmental problems at active mining operations, idle and closed mining
operations and other sites have been recognized based on estimates of the cost
of required investigation and remediation at each site. If the cost can only be
estimated as a range of possible amounts with no specific amount being most
likely, the minimum of the range is accrued in accordance with generally
accepted accounting principles. Estimates may change as additional information
becomes available. Actual costs incurred may vary from the estimates due to the
inherent uncertainties involved. Any potential insurance recoveries have not
been reflected in the determination of the financial reserves.
At December 31, 1995, the Company had an environmental reserve of $22.9 million
($12.0 million at December 31, 1994), of which $4.4 million was current. In the
second quarter of 1995, the Company provided $9.9 million of additional
environmental reserves which resulted in a $6.7 million special after-tax
charge. The additional provision reflected a comprehensive review of the
available information on all known sites. Additional environmental reserves of
$3.3 million were provided in other quarters as a result of other environmental
reviews and determinations. Net payments in 1995 were $2.4 million.
35
<PAGE> 8
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - CONTINUED
CAPITAL INVESTMENT
- ------------------
North American Iron Ore
- -----------------------
The Company and its North American mine partners have substantially increased
capital expenditures in recent years to reduce operating costs and satisfy
orebody development requirements for maintenance of high production rates.
Capital equipment additions and replacements, including equipment acquired
through lease, totaled approximately $104 million in 1995 at the six
Company-managed mines in North America, of which $71 million was classified as
capital expenditures. The Company's share of the capital expenditures was $22.5
million ($10.9 million in 1994), including $6.0 million to expand Northshore
annual pelletizing capacity by .9 million tons. Capital additions and
replacements, including leased equipment, are projected to total approximately
$108 million in 1996, with approximately $70 million classified as capital
expenditures, at the six Company-managed mines in North America. The Company's
share of such 1996 capital expenditures is expected to approximate $19 million.
The Company periodically examines opportunities to increase profitability and
strengthen its business position by increasing its ownership of existing iron
ore mining ventures.
Reduced Iron
- ------------
The Company's strategy includes extending its business scope to produce and
supply reduced iron ore products to steelmakers. Reduced iron products contain
approximately 90% iron versus 65% for traditional iron ore pellets and are
higher quality than most scrap steel feed. The market for reduced iron is
presently small, but is projected to increase at a higher rate than other iron
ore products. The Company is investigating various possible projects, including
an international joint venture to produce approximately 500,000 metric tons of
premium reduced iron briquettes per year. The Company's share of construction
expenditures in 1996 would be approximately $15 to $20 million. No project
financing is anticipated.
Other
- -----
The Company continually seeks investment opportunities to broaden its scope as
a supplier of high-quality "iron units" to the steel industry in North America
and internationally. Although no transactions are in process, the Company's
activities could lead to significant investments.
36
<PAGE> 9
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - CONTINUED
CAPITALIZATION
- --------------
In December, 1995, the Company completed a private placement of $70 million of
senior unsecured notes to an insurance company group. The notes bear a fixed
interest rate of 7.0 percent and are scheduled to be repaid with a single
principal payment in December, 2005. Proceeds from the placement were utilized
to retire $70 million of existing notes with an average interest rate of 8.77
percent and remaining annual principal repayments of $12.1 million per year in
the years 1996 through 1999 and $7.2 million in the years 2000 through 2002. A
$3.1 million after-tax ($4.8 million before tax) extraordinary charge was
incurred in the early extinguishment of the debt retired. Following is a
summary of long-term obligations:
<TABLE>
<CAPTION>
LONG-TERM OBLIGATIONS AT DECEMBER 31
(In Millions)
-------------------------------------------------------------------------------------
Effectively Serviced Obligations
----------------------------------
Share of
Associated Guaranteed Total
Consolidated Companies Total Obligations Obligations
------------ ---------- ----- ----------- -----------
<S> <C> <C> <C> <C> <C>
1995 $ 70.0 $ 6.3 $ 76.3 $ 6.6 $ 82.9
1994 75.0 9.2 84.2 13.7 97.9
1993 75.0 13.6 88.6 20.8 109.4
</TABLE>
Effective 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. No borrowings are
outstanding under the revolving credit facilities.
At December 31, 1995, guaranteed obligations principally represented Empire
Mine debt obligations of LTV and Wheeling-Pittsburgh Steel Corporation. The
Empire Mine long-term debt is scheduled to be fully extinguished in December,
1996 (the Company's share of Empire long-term debt principal payments was $4.3
million in 1994 and 1995 and is $3.9 million in 1996).
The ratio of effectively serviced long-term obligations to shareholders' equity
was .2:1 at December 31, 1995 and .3:1 at December 31, 1994 and 1993. In
January, 1995, the Company announced a program to repurchase up to 600,000 of
its Common Shares in the open market or in negotiated transactions. Under the
continuing program, the Company repurchased 284,500 shares at an average price
of $37.71 per share in open market transactions throughout 1995, representing
approximately 2.4% of outstanding shares. The shares will initially be retained
as Treasury Stock.
(The "Management's Discussion and Analysis of Financial Condition and Results
of Operations" contains two graphs, one entitled, "Cumulative Earnings &
Dividends" and the other entitled "Components of Invested Capital". For a
description of the graph of "Cumulative Earnings & Dividends" see Graph A in
Appendix A to this exhibit, and for a description of the graph of "Components
of Invested Capital" see Graph B in Appendix A to this exhibit.)
37
<PAGE> 10
APPENDIX A - IMAGE AND GRAPHIC MATERIAL
---------------------------------------
Item 7 - Management's Discussion and Analysis of Financial Condition and
- ------------------------------------------------------------------------
Results of Operations (Graphs)
- ------------------------------
GRAPH A
- -------
This graph is captioned "Cumulative Earnings & Dividends". The graph contains
two lines depicting cumulative earnings and cumulative dividends over the
six-year period 1990-1995. Cumulative earnings were $73.8 million, $127.6
million, $158.4 million, $213.0 million, $255.8 million, and $313.6 million,
respectively, for the years 1990-1995. Cumulative dividends were $9.3 million,
$68.4 million, $82.5 million, $108.9 million, $123.7 million, and $139.2
million, respectively, for the years 1990-1995. The graph also indicates that
the cumulative payout ratio of dividends to earnings was 44% for the six-year
period.
GRAPH B
- -------
This graph is captioned "Components of Invested Capital". The area graph
depicts the components of invested capital at December 31, 1986, 1987, 1988,
1989, 1990, 1991, 1992, 1993, 1994, and 1995, as follows:
<TABLE>
<CAPTION>
Amount (Millions) Percent
----------------------------------------------- ------------------------------------------------
Effectively Effectively
Serviced Shareholders' Serviced Shareholders'
December 31 Debt Equity Total Debt Equity Total
- ----------- ----------- ------------- ----- ------------ ------------- -----
<S> <C> <C> <C> <C> <C> <C>
1986 $305.3 $325.5 $630.8 48.4% 51.6% 100.0%
1987 183.5 395.4 578.9 31.7 68.3 100.0
1988 145.7 168.6 314.3 46.4 53.6 100.0
1989 93.4 226.0 319.4 29.2 70.8 100.0
1990 82.4 290.8 373.2 22.1 77.9 100.0
1991 65.0 290.8 355.8 18.3 81.7 100.0
1992 92.1 269.6 361.7 25.5 74.5 100.0
1993 88.6 280.7 369.3 24.0 76.0 100.0
1994 84.2 311.4 395.6 21.3 78.7 100.0
1995 75.6 342.6 418.2 18.1 81.9 100.0
</TABLE>
37-A
<PAGE> 1
Exhibit 13(b)
REPORT OF INDEPENDENT AUDITORS
------------------------------
Shareholders and Board of Directors
Cleveland-Cliffs Inc
We have audited the accompanying statement of consolidated financial position
of Cleveland-Cliffs Inc and consolidated subsidiaries as of December 31, 1995
and 1994, and the related statements of consolidated income, shareholders'
equity and cash flows for each of the three years in the period ended December
31, 1995. Our audits also included the financial statement schedule listed in
the index at Item 14(a). These financial statements and schedule are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements and schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Cleveland-Cliffs
Inc and consolidated subsidiaries at December 31, 1995 and 1994, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1995, in conformity with generally
accepted accounting principles. Also, in our opinion, the related financial
statement schedule, when considered in relation to the basic financial
statements taken as a whole, presents fairly in all material respects the
information set forth therein.
ERNST & YOUNG LLP
Cleveland, Ohio
February 13, 1996
38
<PAGE> 1
STATEMENT OF CONSOLIDATED FINANCIAL POSITION Exhibit 13(c)
Cleveland-Cliffs Inc and Consolidated Subsidiaries
<TABLE>
<CAPTION>
(In Millions)
December 31
--------------------
1995 1994
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $139.9 $140.6
Marketable securities 8.9 .8
------ ------
148.8 141.4
Trade accounts receivable
(net of allowance, $7.7 in 1995 and $19.5 in 1994) 45.2 50.3
Receivables from associated companies 16.6 15.6
Inventories
Finished products 38.0 24.5
Work in process .7 .6
Supplies 17.0 14.6
------ ------
55.7 39.7
Deferred income taxes 14.1 14.7
Other 12.3 7.4
------ ------
TOTAL CURRENT ASSETS 292.7 269.1
PROPERTIES
Plant and equipment 240.3 228.5
Minerals 19.7 20.2
------ ------
260.0 248.7
Allowances for depreciation and depletion (140.0) (138.3)
------ ------
TOTAL PROPERTIES 120.0 110.4
INVESTMENTS IN ASSOCIATED COMPANIES 152.0 151.7
OTHER ASSETS
Long-term investments 16.3 27.1
Deferred charges 8.3 7.2
Deferred income taxes 11.2 8.7
Miscellaneous 44.1 34.4
------ ------
TOTAL OTHER ASSETS 79.9 77.4
------ ------
TOTAL ASSETS $644.6 $608.6
====== ======
</TABLE>
39
<PAGE> 2
STATEMENT OF CONSOLIDATED FINANCIAL POSITION
Cleveland-Cliffs Inc and Consolidated Subsidiaries
<TABLE>
<CAPTION>
(In Millions)
December 31
----------------------
1995 1994
- -----------------------------------------------------------------------------------------------------
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Trade accounts payable $ 16.0 $ 15.1
Payables to associated companies 17.3 15.6
Accrued employment costs 27.2 21.2
Accrued expenses 17.5 16.3
Income taxes payable .3 14.3
Current portion of long-term obligations -- 5.0
Reserve for capacity rationalization 10.5 1.5
Other 14.7 10.6
------ ------
TOTAL CURRENT LIABILITIES 103.5 99.6
LONG-TERM OBLIGATIONS 70.0 70.0
POSTEMPLOYMENT BENEFIT LIABILITIES 67.3 66.5
RESERVE FOR CAPACITY RATIONALIZATION 17.2 25.7
OTHER LIABILITIES 44.0 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;
Issued - 16,827,941 shares 16.8 16.8
Capital in excess of par value of shares 65.2 63.1
Retained income 386.1 343.8
Foreign currency translation adjustments .3 .9
Unrealized gain on available for sale securities,
net of tax .1 1.5
Cost of 4,998,674 Common Shares in
treasury (1994 - 4,728,081 shares) (123.8) (113.4)
Unearned compensation (2.1) (1.3)
------ ------
TOTAL SHAREHOLDERS' EQUITY 342.6 311.4
------ ------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $644.6 $608.6
====== ======
</TABLE>
See notes to consolidated financial statements.
40
<PAGE> 1
STATEMENT OF CONSOLIDATED INCOME
Exhibit 13(d)
Cleveland-Cliffs Inc and Consolidated Subsidiaries
<TABLE>
<CAPTION>
(In Millions, Except Per Share Amounts)
Year Ended December 31
-------------------------------------------------
1995 1994 1993
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
REVENUES
Product sales and service $411.2 $334.8 $268.1
Royalties and management fees 49.5 44.7 39.7
------ ------ ------
Total Operating Revenues 460.7 379.5 307.8
Recoveries on bankruptcy claims -- -- 35.7
Investment income (securities) 9.3 7.9 9.1
Other income 3.1 1.5 3.3
------ ------ ------
Total Revenues 473.1 388.9 355.9
COSTS AND EXPENSES
Cost of goods sold and operating expenses 356.4 299.9 252.8
Administrative, selling and general expenses 15.1 15.9 15.7
Interest expense 6.5 6.6 6.6
Other expenses 23.5 9.0 5.1
------ ------ ------
Total Costs and Expenses 401.5 331.4 280.2
------ ------ ------
INCOME BEFORE INCOME TAXES AND
EXTRAORDINARY ITEM 71.6 57.5 75.7
INCOME TAXES 10.7 14.7 21.1
------ ------ ------
INCOME BEFORE EXTRAORDINARY ITEM 60.9 42.8 54.6
EXTRAORDINARY LOSS
ON EARLY EXTINGUISHMENT OF DEBT
(NET OF TAX BENEFIT, $1.7 MILLION) (3.1) -- --
------ ------ ------
NET INCOME $ 57.8 $ 42.8 $ 54.6
====== ====== ======
NET INCOME PER COMMON SHARE
Before Extraordinary Item $ 5.10 $ 3.54 $ 4.55
Extraordinary Item (.26) -- --
------ ------ ------
Net Income $ 4.84 $ 3.54 $ 4.55
====== ====== ======
</TABLE>
See notes to consolidated financial statements.
41
<PAGE> 1
STATEMENT OF CONSOLIDATED CASH FLOWS Exhibit 13(e)
Cleveland-Cliffs Inc and Consolidated Subsidiaries
<TABLE>
<CAPTION>
(In Millions,
Brackets Indicate Cash Decrease)
Year Ended December 31
-----------------------------------------
1995 1994 1993
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income $ 57.8 $ 42.8 $ 54.6
Adjustments to reconcile net income
to net cash from operations:
Depreciation and amortization:
Consolidated 6.1 3.7 2.6
Share of associated companies 10.7 10.7 10.9
Provision for deferred income taxes 5.5 (1.8) 2.2
Recovery on bankruptcy claims -- -- (31.6)
Increases to capacity rationalization reserve .5 3.8 2.5
Tax credit (12.2) -- --
Increases to environmental reserve 13.2 2.2 .9
Extraordinary loss on debt extinguishment 4.8 -- --
Other (1.7) (6.9) (7.3)
------- ------ ------
Total before changes in operating assets and liabilities 84.7 54.5 34.8
Changes in operating assets and liabilities:
Marketable securities (8.1) 92.3 (93.1)
Inventories and prepaid expenses (15.7) 13.6 22.3
Receivables 3.9 (11.6) 2.7
Payables and accrued expenses (6.8) 19.1 10.5
------- ------ ------
Total changes in operating assets and liabilities (26.7) 113.4 (57.6)
------- ------ ------
Net cash from (used by) operating activities 58.0 167.9 (22.8)
INVESTING ACTIVITIES
Acquisition of Northshore Mining -- (97.3) --
Weirton Preferred Stock redemption -- 25.0 --
Purchase of property, plant and equipment:
Consolidated (16.6) (6.9) (2.8)
Share of associated companies (5.9) (4.0) (2.2)
Sale (purchase) of long-term investments 8.8 5.3 (3.6)
Other (4.4) -- .3
------- ------ ------
Net cash (used by) investing activities (18.1) (77.9) (8.3)
FINANCING ACTIVITIES
Principal payments on long-term debt:
Consolidated (75.0) -- (.1)
Share of associated companies (4.3) (4.3) (4.3)
Debt prepayment fees (4.8) -- --
Proceeds from long-term debt 70.0 -- --
Repurchases of Common Shares (10.7) -- --
Dividends * (15.5) (14.8) (26.4)
Other .3 .6 1.2
------- ------ ------
Net cash (used by) financing activities (40.0) (18.5) (29.6)
EFFECT OF EXCHANGE RATE CHANGES ON CASH (.6) 1.2 --
------- ------ ------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (.7) 72.7 (60.7)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 140.6 67.9 128.6
------- ------ ------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 139.9 $140.6 $ 67.9
======= ====== ======
Taxes paid on income $ 29.0 $ 17.6 $ 16.6
Interest paid on debt obligations $ 7.2 $ 6.5 $ 6.5
<FN>
*The 1993 dividends exclude the non-cash distribution of 1.5 million shares ($20.4 million) of the
2.3 million shares of LTV Corporation common stock received in the 1993 bankruptcy settlement.
</TABLE>
See notes to consolidated financial statements.
42
<PAGE> 1
STATEMENT OF CONSOLIDATED SHAREHOLDERS' EQUITY Exhibit 13(f)
Cleveland-Cliffs Inc and Consolidated Subsidiaries
<TABLE>
<CAPTION>
(In Millions)
---------------------------------------------------------------------------------------------
Capital In Foreign
Excess of Currency Available Common
Common Par Value Retained Translation For Sale Shares Unearned
Shares Of Shares Income Adjustments Securities In Treasury Compensation Total
------ --------- -------- ----------- ---------- ----------- ------------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE December 31, 1992 $ 16.8 $ 61.2 $308.0 $ (.3) $ -- $(116.1) $ (.1) $269.5
Net income 54.6 54.6
Cash dividends:
Regular - $1.20 a share (14.4) (14.4)
Special - $1.00 a share (12.0) (12.0)
Non-cash dividend - $1.70 a share (20.4) (20.4)
Change in unrealized gains,
net of tax 1.3 1.3
Stock plans
Restricted stock/stock options .2 1.8 (.2) 1.8
------ ------ ------ ----- ------ ------- ------ ------
BALANCE December 31, 1993 16.8 61.4 315.8 (.3) 1.3 (114.3) (.3) 280.4
Net income 42.8 42.8
Cash dividends - $1.23 a share (14.8) (14.8)
Change in unrealized gains,
net of tax .2 .2
Stock plans
Restricted stock/stock options .2 .9 1.1
Performance shares 1.5 (1.0) .5
Other 1.2 1.2
------ ------ ------ ----- ------ ------- ------ ------
BALANCE December 31, 1994 16.8 63.1 343.8 .9 1.5 (113.4) (1.3) 311.4
Net income 57.8 57.8
Cash dividends - $1.30 a share (15.5) (15.5)
Change in unrealized gains,
net of tax (1.4) (1.4)
Stock plans
Restricted stock/stock options .3 .3
Performance shares 2.1 (.8) 1.3
Repurchases of Common Shares (10.7) (10.7)
Other (.6) (.6)
------ ------ ------ ----- ------ ------- ------ ------
BALANCE December 31, 1995 $ 16.8 $ 65.2 $386.1 $ .3 $ .1 $(123.8) $ (2.1) $342.6
====== ====== ====== ===== ====== ======= ====== ======
</TABLE>
See notes to consolidated financial statements.
43
<PAGE> 1
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Exhibit 13(g)
Cleveland-Cliffs Inc and Consolidated Subsidiaries
ACCOUNTING POLICIES
BASIS OF CONSOLIDATION: The consolidated financial statements include the
accounts of the Company and its majority-owned subsidiaries, and references to
the "Company" include the Company and consolidated subsidiaries. "Investments
in Associated Companies" are comprised of partnerships and unconsolidated
companies which the Company does not control. Such investments are accounted by
the equity method (see Note C). The Company's share of earnings of mining
partnerships and companies from which the Company purchases iron ore production
is credited to cost of goods sold upon sale of the product.
BUSINESS: The Company's dominant business is the production and sale of iron
ore pellets. The Company controls, develops, and leases reserves to mine
owners; manages and owns interests in mines; sells iron ore; and owns interests
in ancillary companies providing services to the mines. Iron ore production
activities are conducted in the United States, Canada and Australia. The
wholly-owned Australian operations had total revenues and pre-tax operating
profit of $45.8 million and $13.0 million, $43.5 million and $5.4 million, and
$41.9 million and $4.4 million, in 1995, 1994 and 1993, respectively. Total
Australian assets, including long-term investments ($4.6 million, 1995, and
$12.9 million, 1994) to fund eventual shutdown cost, were $31.8 million at
December 31, 1995 (1994 - $38.8 million).
Iron ore is marketed in North America, Europe, Asia, and Australia. The three
largest steel company customers' contributions to the Company's revenues were
17%, 11% and 10% in 1995; 14%, 14% and 12% in 1994; and 14%, 12% and 11% in
1993.
BUSINESS RISK: The North American steel industry experienced high operating
rates and generally positive financial results in 1995 and 1994. The Company's
integrated steel company partners and customers have generally improved their
financial condition over the two-year period as a result of continued earnings
and increased equity capital.
The improvement in most steel companies' financial positions has significantly
reduced the major business risk faced by the Company in recent years, i.e., the
potential financial failure and shutdown of significant customers or partners
with a resulting unmitigated loss of ore sales or royalty and management fee
income.
If any such shutdown were to occur without mitigation through replacement sales
or cost reduction, it would represent a significant adverse financial
development to the Company. The iron mining business has high operating
leverage because "fixed" costs are a large portion of the cost structure.
Therefore, loss of sales or other income due to failure of a customer or
partner would have an adverse income effect proportionately greater than the
revenue effect (see Note E - McLouth Bankruptcy).
44
<PAGE> 2
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Cleveland-Cliffs Inc and Consolidated Subsidiaries
USE OF ESTIMATES: The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
CASH EQUIVALENTS: The Company considers investments in highly liquid debt
instruments with an initial maturity of three months or less, to be cash
equivalents.
INVESTMENTS: The Company determines the appropriate classification of debt and
equity securities at the time of purchase and reevaluates such designation as
of each financial statement date.
Securities are classified as held-to-maturity when the Company has the intent
and ability to hold the securities to maturity. Held-to-maturity securities are
stated at cost and investment income is included in earnings.
The Company classifies certain highly liquid securities as trading securities.
Trading securities are stated at fair value and unrealized holding gains and
losses are included in income.
Securities that are not classified as held-to-maturity or trading are
classified as available-for-sale. Available-for-sale securities are carried at
fair value, with the unrealized holding gains and losses, net of tax, reported
as a separate component of shareholders' equity.
FORWARD CURRENCY EXCHANGE CONTRACTS: The Company had $4.5 million and $6.0
million of Australian forward currency exchange contracts at December 31, 1995
and 1994, respectively, and $4.8 million and $6.0 million of Canadian forward
currency exchange contracts at December 31, 1995 and 1994, respectively. These
forward exchange contracts are hedging transactions that have been entered into
with the objective of managing the risk of exchange rate fluctuations with
respect to the ordinary local currency obligations of the Company's Australian
and Canadian operations. Gains and losses are recognized in the same period as
the hedged transaction. The fair value of these currency exchange contracts,
which have varying maturity dates to December 30, 1996, is estimated to be $4.7
million for the Australian contracts and $4.8 million for the Canadian
contracts, based on the December 31, 1995 forward rates.
The Company's exposure to risk associated with derivatives is limited to the
above forward currency exchange contracts.
45
<PAGE> 3
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Cleveland-Cliffs Inc and Consolidated Subsidiaries
INVENTORIES: Product inventories, primarily finished products, are stated at
the lower of cost or market. The cost of product inventories is determined
using the last-in, first-out ("LIFO") method. The excess of current cost over
LIFO cost of product inventories was $1.2 million and $.9 million at December
31, 1995 and 1994, respectively. The cost of other inventories is determined by
the average cost method.
PROPERTIES: Depreciation of plant and equipment is computed principally by the
straight-line method based on estimated useful lives. Depreciation is not
reduced when operating units are temporarily idled. Depletion of mineral lands
is computed using the units of production method based upon proven mineral
reserves.
EXPLORATION, RESEARCH AND DEVELOPMENT COSTS: Exploration, research and
continuing development costs of mining properties are charged to operations as
incurred. Development costs which benefit extended periods are deferred and
amortized over the period of benefit. At December 31, 1995, deferred
development costs were less than $1.0 million. Startup costs of major new
facilities are deferred and amortized over five years from commencement of
commercial production.
INCOME PER COMMON SHARE: Income per common share is based on the average
number of common shares outstanding during each period.
RECLASSIFICATIONS: Certain prior year amounts have been reclassified to
conform to current year classifications.
NOTE A - ACCOUNTING AND DISCLOSURE CHANGES
In March, 1995, the Financial Accounting Standards Board issued Statement 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets
to be Disposed Of," which requires the review for impairment of long-lived
assets and certain identifiable intangibles whenever significant events or
changes in circumstances indicate that the carrying amount of an asset may not
be recoverable. Although Statement 121 is effective for years beginning after
December 15, 1995, the Company has elected to adopt the provisions of this
standard for the year ended December 31, 1995. The Company has determined that
no event or change in circumstance occurred in 1995 to indicate that a review
for asset impairment was required.
In October, 1995, the Financial Accounting Standards Board issued Statement
123, entitled, "Accounting for Stock-Based Compensation," which establishes
financial accounting and reporting standards for stock-based employee
compensation plans. The standard is effective for years that begin after
December 15, 1995. Management is evaluating the accounting and disclosure
alternatives; however, no significant financial statement effect is expected.
46
<PAGE> 4
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
Cleveland-Cliffs Inc and Consolidated Subsidiaries
NOTE B - NORTHSHORE MINE AND POWER PLANT ACQUISITION
On September 30, 1994, Cliffs Minnesota Minerals Company, a subsidiary of
Cleveland-Cliffs Inc, acquired Cyprus Amax Minerals Company's iron ore
operation and power plant (renamed Northshore Mining Company or "Northshore")
in Minnesota. The principal Northshore assets acquired were 4 million annual
tons of active capacity for production of standard pellets (equivalent to 3.5
million tons of flux pellet capacity), supported by 6 million tons of active
concentrate capacity, a 115 megawatt power generation plant, and an estimated
1.2 billion tons of magnetite crude iron ore reserves, leased mainly from the
Mesabi Trust. Northshore has a long-term contract to sell 40 megawatts of
excess capacity to an electric utility with approximately 16 years remaining at
December 31, 1995.
The acquisition has been accounted for as a purchase transaction. Pro forma
results of the Company's operations, assuming the acquisition had occurred at
the beginning of 1993, are shown in the following table.
<TABLE>
<CAPTION>
ProForma
(Unaudited)
---------------
1994 1993*
------ ------
<S> <C> <C>
Total Revenues (Millions) $466.7 $415.0
====== ======
Net Income
----------
Amount (Millions) $ 47.0 $ 36.5
====== ======
Per Common Share $ 3.89 $ 3.04
====== ======
<FN>
* Year 1993 results exclude the Company's $35.7 million before-tax ($23.2 million after-tax or $1.93 per share) recovery on the
settlement of the Company's bankruptcy claim against LTV Steel Company, Inc. (an integrated steel company subsidiary of The LTV
Corporation, or collectively "LTV").
</TABLE>
The pro forma results have been prepared for illustrative purposes only and do
not purport to be indicative of what would have occurred had the acquisition
actually been made at the beginning of 1993, nor of results which may occur in
the future. Actual results could be significantly different under the Company's
ownership due to, among other matters, differences in marketing, operating and
investment actions which have been or may be taken by the Company.
In June 1995, a $6.0 million pellet expansion project, at Northshore, which
involved the re-commissioning of an idled pelletizing unit, was completed. On
an annualized basis, the expansion added approximately .9 million tons of
pellets, a 23 percent expansion of Northshore production.
47
<PAGE> 5
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
Cleveland-Cliffs Inc and Consolidated Subsidiaries
NOTE C - INVESTMENTS IN ASSOCIATED COMPANIES
The Company's investments in associated mining companies ("ventures") are
accounted by the equity method and consist primarily of its 22.5625% interest
in Empire Iron Mining Partnership ("Empire"), 15% interest in Hibbing Taconite
Company ("Hibbing"), 40% interest in Tilden Mining Company L.C. ("Tilden";
formerly 33.33% interest in Tilden Magnetite Partnership and 60% interest in
Tilden Mining Company), and 7.69% (7.01% in 1994) interest in Wabush Mines
("Wabush"). These ventures are managed by the Company in North America. The
other interests are owned by U.S. and Canadian integrated steel companies.
Following is a summary of combined financial information of the operating
ventures.
<TABLE>
<CAPTION>
(In Millions)
--------------------------------------
1995 1994 1993
--------------------------------------
<S> <C> <C> <C>
INCOME
Gross revenue $1,025.9 $ 968.2 $ 896.5
Equity income 143.3 99.5 82.2
FINANCIAL POSITION
Properties - net $ 761.5 $ 774.5 $ 812.4
Other assets 138.6 107.1 95.8
Debt obligations (22.5) (39.8) (61.0)
Other liabilities (163.9) (147.4) (123.1)
-------- ------- -------
Net assets $ 713.7 $ 694.4 $ 724.1
======== ======= =======
Company's equity in
underlying net assets $ 185.1 $ 253.6 $ 266.8
Company's investment $ 152.0 $ 151.7 $ 152.2
</TABLE>
The Company manages and operates all of the ventures and leases or subleases
mineral rights to certain ventures. In addition, the Company is required to
purchase its applicable current share, as defined, of the production decided by
the venture participants. The Company purchased $217.8 million in 1995
(1994-$212.5 million; 1993-$196.0 million) of iron ore from certain ventures.
During 1995, the Company earned royalties and management fees of $49.5 million
(1994-$44.7 million; 1993-$39.5 million) from ventures, of which $13.7 million
in 1995 (1994-$12.7 million; 1993-$10.7 million) was paid by the Company as a
participant in the ventures.
48
<PAGE> 6
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
Cleveland-Cliffs Inc and Consolidated Subsidiaries
Costs and expenses incurred by the Company, on behalf of the ventures, are
charged to such ventures in accordance with management and operating
agreements. The Company's equity in the income of the ventures is credited to
the cost of goods sold and includes the amortization to income of the excess of
the Company's equity in the underlying net assets over its investment on the
straight-line method based on the useful lives of the underlying assets. The
difference between the Company's equity in underlying net assets and recorded
investment results from the assumption of interests from former participants in
the ventures, acquisitions, and the Tilden reorganization. The Company's equity
in the income of ventures was $24.3 million in 1995 (1994-$19.5 million;
1993-$23.5 million).
In February, 1994, the Company reached 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
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
Tilden 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 Tilden.
The parties implemented the general agreement effective January 1, 1994 and
finalized the detailed provisions of the definitive agreement on September 30,
1995. The agreement has not had a material effect on the Company's consolidated
financial statements.
The Company's effectively serviced share of long-term obligations of ventures,
including current portion, was $6.3 million as of December 31, 1995 (1994-$9.2
million). In addition, the Company guaranteed $6.6 million of Empire long-term
obligations which are effectively serviced by LTV and Wheeling-Pittsburgh Steel
Corporation. The fair value of the guarantees is nominal because advances
against the guarantees would be supported by ownership interests in Empire. The
Company's share of the final principal payment, due in 1996, of the Empire
long-term obligation is $3.9 million. The Company's share of plant and
equipment and other property interests which secure the effectively serviced
obligations was $45.0 million at December 31, 1995.
49
<PAGE> 7
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
Cleveland-Cliffs Inc and Consolidated Subsidiaries
NOTE D - INVESTMENTS
Following is a summary of investment securities:
<TABLE>
<CAPTION>
(In Millions)
--------------------------------------------
Gross Estimated
Unrealized Fair
Cost Gains (Losses) Value
---- -------------- ---------
<S> <C> <C> <C>
December 31, 1995
- -----------------------------------
Long-Term Investments
- ---------------------
Available-for-Sale
------------------
Debt Securities $ .1 $ -- $ .1
LTV Common Stock 11.5 .1 11.6
----- ---- -----
11.6 .1 11.7
Held-to-Maturity
-----------------
Australian Government Securities 4.6 .3 4.9
----- ---- -----
Total Long-Term Investments $16.2 $ .4 $16.6
===== ==== =====
Marketable Securities
- ---------------------
Trading
-------
Debt Securities $ 8.9 $ -- $ 8.9
===== ==== =====
December 31, 1994
- -----------------------------------
Long-Term Investments
- ---------------------
Available-for-Sale
-------------------
Debt Securities $ .7 $ -- $ .7
LTV Common Stock 11.2 2.3 13.5
----- ---- -----
11.9 2.3 14.2
Held-to-Maturity
-----------------
Australian Government Securities 12.9 (.3) 12.6
----- ---- -----
Total Long-Term Investments $24.8 $2.0 $26.8
===== ==== =====
Marketable Securities
- ---------------------
Available-for-Sale
------------------
Debt Securities $ .8 $ -- $ .8
===== ==== =====
</TABLE>
50
<PAGE> 8
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
Cleveland-Cliffs Inc and Consolidated Subsidiaries
The contractual maturities of the Available-for-Sale and Held-to-Maturity
securities at December 31, 1995 and 1994 are shown below.
<TABLE>
<CAPTION>
December 31, 1995 December 31, 1994
(In Millions) (In Millions)
----------------------------- -----------------------
Estimated Estimated
Fair Fair
Cost Value Cost Value
----- --------- ----- ---------
<S> <C> <C> <C> <C>
Available-for-Sale
- ------------------
Debt Instruments:
Due in one year or less $ .1 $ .1 $ .8 $ .8
Due after three years -- -- .7 .7
----- ----- ----- -----
.1 .1 1.5 1.5
LTV Common Stock 11.5 11.6 11.2 13.5
----- ----- ----- -----
$11.6 $11.7 $12.7 $15.0
===== ===== ===== =====
Held-to-Maturity
- ----------------
Debt Instruments:
Due in one year or less $ 3.9 $ 4.1 $ 8.7 $ 8.6
Due after one year through three years .7 .8 4.2 4.0
----- ----- ----- -----
$ 4.6 $ 4.9 $12.9 $12.6
===== ===== ===== =====
</TABLE>
In 1995, $8.3 million of Australian government securities matured and were
converted to cash and cash equivalents. The redemption of these investments,
previously classified as held-to-maturity securities, did not result in the
recognition of gain or loss.
NOTE E - MCLOUTH BANKRUPTCY
On September 29, 1995, McLouth Steel Products Company ("McLouth"), a
significant customer, petitioned for protection under Chapter 11 of the U.S.
Bankruptcy Code. The Company has periodically extended credit to McLouth. At
the time of the bankruptcy filing, the Company had an unreserved receivable
from McLouth of $5.0 million, secured by liens on certain McLouth fixed assets.
A $2.7 million reserve against the receivable was recorded in September, 1995
resulting in a $1.8 million after-tax charge. Since the petition, McLouth has
maintained operations and the Company has continued pellet shipments. McLouth's
liquidity is limited, and there is no assurance that McLouth will continue to
operate. Future operating results would be adversely affected if the Company's
total sales declined due to McLouth developments. The extent of such effect
would be dependent on the timing and degree of replacement sales to other
customers.
Sales to McLouth totaled 1.3 million tons for the year 1995 representing 12.5
percent of the Company's sales volume. Included in the Company's December 31,
1995 inventory was .1 million tons (which increased to a peak .2 million tons
in January, 1996) consigned to McLouth in accordance with long-standing
practice.
51
<PAGE> 9
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
Cleveland-Cliffs Inc and Consolidated Subsidiaries
NOTE F - RESERVE FOR CAPACITY RATIONALIZATION
The Company initially established a reserve of $70 million in 1983 to provide
for expected costs of reorienting its mining joint ventures and facilities to
adjust to changed market conditions. During 1990, the Company increased the
reserve by $24.7 million as a result of a restructuring of Savage River Mines
under which the previous participants in the venture paid $19.0 million to the
Company for closedown obligations. In 1993, $5.6 million, was charged to the
reserve. During 1994 and 1995, $3.8 million and $.5 million, respectively, were
credited to the reserve. The balance at December 31, 1995 was $34.8 million,
with $7.1 million classified as a reduction of other current assets.
The reserve balance is principally for the planned shutdown of Savage River
Mines in the first quarter of 1997 and the permanent shutdown of the Republic
Mine. The Republic Mine shutdown was announced on January 30, 1996. The Savage
River Mines shutdown provision has been funded.
NOTE G - ENVIRONMENTAL RESERVES
The Company has a formal code of environmental conduct which promotes
environmental protection and restoration. The Company's obligations for known
environmental problems at active mining operations, idle and closed mining
operations and other sites have been recognized based on estimates of the cost
of required investigation and remediation at each site. If the cost can only be
estimated as a range of possible amounts with no specific amount being most
likely, the minimum of the range is accrued in accordance with generally
accepted accounting principles. Estimates may change as additional information
becomes available. Actual costs incurred may vary from the estimates due to the
inherent uncertainties involved. Any potential insurance recoveries have not
been reflected in the determination of the financial reserves.
In the second quarter of 1995, the Company provided $9.9 million of additional
environmental reserves which resulted in a $6.7 million special after-tax
charge. The additional provision reflected a comprehensive review of available
information on all known sites. Additional environmental reserves of $3.3
million were provided in other quarters as a result of other environmental
reviews and determinations. Net payments in 1995 were $2.4 million.
52
<PAGE> 10
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
Cleveland-Cliffs Inc and Consolidated Subsidiaries
At December 31, 1995, the Company had an environmental reserve of $22.9 million
($12.0 million at December 31, 1994), of which $4.4 million was current. The
reserve includes the Company's obligations for:
o Federal and state Superfund and Clean Water Act sites where the
Company is named as a potential responsible party, including the
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
engineering studies prepared by outside consultants engaged by the
potential responsible parties. The Company continues to evaluate
the recommendations of the studies and other means of site
clean-up. Significant site clean-up activities have taken place at
Cliffs-Dow since late 1993. A Consent Decree has been reached
among the federal and state governments and approximately 224
individuals and companies with respect to the Arrowhead site.
Clean-up began in 1995 with significant funding provided by the
federal and state governments. The Consent Decree has been entered
by the U.S. District Court. The Company's share of Arrowhead costs
totaled approximately $149,000, which included $23,000 of funded
remediation costs and $126,000 of incurred legal and other costs.
o Wholly-owned active and idle operations, including the Northshore
mine and Silver Bay power plant in Minnesota, acquired on
September 30, 1994. The Northshore/Silver Bay reserve is based on
an environmental investigation conducted by the Company and an
outside consultant in connection with the purchase. Expenditures
in 1995 totalled $.6 million.
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.
Estimated environmental expenditures under current laws and regulations are not
expected to materially impact the Company's consolidated financial statements.
NOTE H - LONG-TERM OBLIGATIONS
<TABLE>
<CAPTION>
(In Millions)
December 31
---------------------
1995 1994
----- -----
<S> <C> <C>
Term notes $70.0 $75.0
Less current portion -- 5.0
----- -----
$70.0 $70.0
===== =====
</TABLE>
53
<PAGE> 11
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
Cleveland-Cliffs Inc and Consolidated Subsidiaries
In December, 1995, the Company completed a private placement of $70.0 million
of senior unsecured notes to an insurance company group. The proceeds were used
to retire existing notes in the same amount, held by another group of insurance
companies. The new notes due in December, 2005, have a fixed interest rate of
7.0 percent, and replace the existing notes, which had an average interest rate
of 8.77 percent and remaining annual principal payments of $12.1 million per
year in the years 1996 through 1999 and $7.2 million in the years 2000 through
2002. The retiring of the existing notes resulted in an extraordinary charge
of $3.1 million after-tax ($4.8 million before-tax).
The senior unsecured note agreement requires the Company to meet certain
covenants related to net worth ($200.0 million at December 31, 1995), leverage,
and other provisions. The Company was in compliance with the debt covenants at
December 31, 1995.
Effective March 1, 1995, the Company terminated its $75 million three-year
revolving credit agreement, which was scheduled to expire on April 30, 1995,
and entered into a five-year, $100 million agreement. No borrowings are
outstanding under the agreements.
NOTE I - RETIREMENT BENEFITS
Pensions
- --------
The Company and its managed ventures sponsor defined benefit pension plans
covering substantially all employees. The plans are noncontributory and
benefits generally are based on employees' years of service and average
earnings for a defined period prior to retirement.
Pension costs, including the Company's proportionate share of the costs of
ventures, were credits of $1.2 million and $2.7 million, in 1995 and 1993,
respectively, and a cost of $ .2 million in 1994. The (credits) cost included
credits of $3.6 million, $3.4 million, and $3.2 million in 1995, 1994, and
1993, respectively, related to a shutdown operation which increased the
Capacity Rationalization Reserve and were not credited to income. Components of
the pension (credits) costs were as follows:
<TABLE>
<CAPTION>
(In Millions)
------------------------------------------
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Service cost $ 3.4 $ 3.7 $ 3.0
Interest cost 15.3 14.4 13.4
Actual loss (return) on plan assets (42.6) 1.5 (27.7)
Net amortization and deferral 22.7 (19.4) 8.6
------ ------ ------
$ (1.2) $ .2 $( 2.7)
====== ====== ======
</TABLE>
54
<PAGE> 12
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
Cleveland-Cliffs Inc and Consolidated Subsidiaries
Most of the Company's pension funds are held in diversified collective trusts
with the funds contributed by partners in the ventures. Plan assets principally
include diversified marketable equity securities and corporate and government
debt securities, which are selected by professional asset managers.
The following table presents a reconciliation of the funded status of the
Company's plans, including its proportionate share of the plans of ventures, at
December 31, 1995 and 1994.
<TABLE>
<CAPTION>
(In Millions)
------------------------
1995 1994
---------- ---------
<S> <C> <C>
Plan assets at fair value $ 249.1 $ 228.4
Actuarial present value of benefit
obligation:
Vested benefits 187.9 156.7
Nonvested benefits 22.4 23.4
------- --------
Accumulated benefit obligation 210.3 180.1
Effect of projected compensation levels 23.3 13.3
------- -------
Projected benefit obligation 233.6 193.4
------- -------
Plan assets in excess of projected
benefit obligation 15.5 35.0
Unrecognized prior service costs 8.3 11.1
Unrecognized net asset at date of adoption
of FAS 87, net of amortization (26.2) (34.1)
Unrecognized net loss 25.9 9.0
------- -------
Prepaid cost $ 23.5 $ 21.0
======= =======
</TABLE>
At December 31, 1995, the Company recorded an additional liability of $1.6
million for certain plans where the fair value of plan assets was less than the
accumulated benefit obligation. The minimum liability recognition resulted in
the recording of a $1.6 million intangible asset.
The discount rate and weighted average rate of increase in compensation levels
used in determining the actuarial present value of the projected benefit
obligation were 7.25% and 4.1% at December 31, 1995 (8.5% and 4.0% at December
31, 1994), respectively. The expected long-term rate of return assumption
utilized for determining pension (credit) cost for the years 1995, 1994 and
1993 was 8.5%, 8% and 9%, respectively. The assumption was changed to 8.75% on
December 31, 1995 for year 1996 pension cost (credit) determination.
55
<PAGE> 13
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
Cleveland-Cliffs Inc and Consolidated Subsidiaries
The Company has increased pension plan funding to the maximum amount deductible
for income tax purposes. For Plan Year 1995 (largely funded in calendar year
1996), the Company expects to contribute $5.1 million, including its share of
ventures' funding, an increase of $3.5 million from Plan Year 1994. In the
event of plan termination, the sponsors could be required to fund shutdown and
early retirement obligations which are not included in the accumulated benefit
obligation.
Other Postretirement Benefits ("OPEB")
- ------------------------------------
In addition to the Company's defined benefit pension plans, the Company and its
managed ventures currently provide retirement health care and life insurance
benefits to most full-time employees who meet certain length of service and age
requirements (a portion of which are pursuant to collective bargaining
agreements). These benefits are provided through programs administered by
insurance companies whose charges are based on the benefits paid during the
year. If such benefits are continued, most active employees would become
eligible for these benefits when they retire.
The following table presents a reconciliation of the funded status of the
Company's OPEB obligations, including its proportionate share of the
obligations of ventures, at December 31, 1995 and 1994.
<TABLE>
<CAPTION>
(In Millions)
-----------------------------
1995 1994
------ ------
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees $ 67.5 $ 46.7
Fully eligible active plan participants 3.2 2.2
Other active plan participants 24.8 16.8
------ ------
95.5 65.7
Plan assets (12.1) (10.4)
------ ------
Accumulated postretirement benefit cost
obligation in excess of plan assets 83.4 55.3
Unrecognized prior service credit (cost) (.1) .1
Unrecognized gain (loss) (9.2) 17.3
------ ------
Accrued postretirement benefit cost $ 74.1 $ 72.7
====== ======
</TABLE>
Net periodic postretirement benefit cost, including the Company's
proportionate share of the costs of ventures, includes the following components:
<TABLE>
<CAPTION>
(In Millions)
-----------------------------------
1995 1994 1993
----- ----- -----
<S> <C> <C> <C>
Service cost $ 1.2 $ 1.1 $ 1.2
Interest cost 5.8 5.6 5.7
Return on plan assets (.6) (.5) --
Net amortization and deferral (.4) .1 --
----- ----- -----
Net periodic postretirement benefit cost $ 6.0 $ 6.3 $ 6.9
===== ===== =====
</TABLE>
56
<PAGE> 14
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
Cleveland-Cliffs Inc and Consolidated Subsidiaries
As a result of recent experience, the Company has changed the medical cost
trend rate assumption used in the calculation of its OPEB obligation at
December 31, 1995. The new assumption reflects medical cost growth of 8.5% in
1996 decreasing by .5% per year to a growth rate of 5% for the year 2003 and
annually thereafter. The previous assumption reflected medical cost growth of
13% in 1993, 11% in 1994, 9% in 1995, 7% in 1996, 5% in 1997 and annually
thereafter. The medical cost trend rate assumption has a significant effect on
the amounts reported. For example, changing the assumed medical cost trend rate
by one percentage point in each year would change the accumulated
postretirement benefit obligation, as of December 31, 1995 by $20.4 million,
and the aggregate of the service and interest cost components of net periodic
postretirement benefit cost for 1995 by $1.3 million. Amounts include the
Company's proportionate share of the costs of ventures.
Plan assets include $9.3 million of deposits, relating to funded life insurance
contracts, at January 1, 1994, that the Company determined were available to
fund retired employees' life insurance obligations. As part of the 1993 labor
contracts at Empire, Hibbing, and Tilden, Voluntary Employee Benefit
Association Trusts ("VEBAs") have been established. Funding of the VEBAs began
in 1994 to cover a portion of the postretirement benefit obligations of these
ventures. As a participant, the Company's minimum annual contribution is $.8
million per year. The Company's estimated actual contribution will approximate
$1.4 million per year based on its share of tons produced. The discount rate
used in determining the accumulated postretirement benefit obligation was 7.25%
at December 31, 1995 (8.5% and 7.25% at December 31, 1994 and 1993,
respectively). The expected long-term rate of return on life insurance contract
deposits was increased to 8.0% at December 31, 1995 from 5.5% at December 31,
1994 to reflect contract provisions. The expected return on VEBAs remained at
5.5%.
NOTE J - INCOME TAXES
<TABLE>
<CAPTION>
Significant components of the Company's deferred tax assets and liabilities as of December 31, 1995 and 1994 are as follows:
(In Millions)
------------------
1995 1994
------ -----
<S> <C> <C>
Deferred tax assets:
Postretirement benefits other than pensions $20.9 $21.4
Other liabilities 20.1 19.3
Deferred development 9.2 9.4
Reserve for capacity rationalization 7.3 6.7
Current liabilities 6.7 4.4
Product inventories 3.6 2.5
Other 2.4 7.4
----- -----
Total deferred tax assets 70.2 71.1
Deferred tax liabilities:
Investment in associated companies 24.5 26.2
Other 20.4 21.5
----- -----
Total deferred tax liabilities 44.9 47.7
----- -----
Net deferred tax assets $25.3 $23.4
===== =====
</TABLE>
57
<PAGE> 15
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
Cleveland-Cliffs Inc and Consolidated Subsidiaries
<TABLE>
<CAPTION>
The components of provisions for income taxes before the extraordinary item are as follows:
(In Millions)
--------------------------------
1995 1994 1993
------ ------ -----
<S> <C> <C> <C>
Current $11.9 $16.5 $19.0
Deferred (1.2) (1.8) 2.1
----- ----- -----
$10.7 $14.7 $21.1
===== ===== =====
</TABLE>
In 1995, the Company and the Internal Revenue Service reached agreement on
several issues raised during the examination of the Company's federal income
tax returns for the tax years 1986 through 1988. The income tax settlement
favorably resolved a number of audit issues primarily arising from the
Company's restructuring program in the late 1980s when mining partnerships were
reorganized to cope with steel company bankruptcies and non-core businesses
were divested. During that period, the Company had reserved the potential tax
liabilities. Accordingly, a tax credit of $12.2 million was recorded in the
second quarter of 1995. As a result of the settlement and its related impact on
the tax years 1989 through 1993, the Company made additional tax and interest
payments of $11.8 million in the third quarter of 1995 and is entitled to tax
and interest refunds of $5.3 million. Additional cash benefits of the tax
settlement will be realized for the tax year 1994 and thereafter.
The provision for income taxes included Australian federal income taxes of $3.7
million, $1.9 million, and $.9 million for the years 1995, 1994 and 1993,
respectively.
The reconciliation of effective income tax rate before the extraordinary item
and United States statutory rate is as follows:
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Statutory tax rate 35.0% 35.0% 35.0%
Increase (decrease) due to:
Percentage depletion in excess
of cost depletion (7.8) (7.9) (4.5)
Effect of foreign taxes 1.7 .2 --
Prior years' tax adjustment (15.2) (1.5) (3.0)
Corporate dividends received -- (1.0) (1.0)
Other items - net 1.3 .8 1.3
----- ----- -----
Effective tax rate 15.0% 25.6% 27.8%
===== ===== =====
</TABLE>
Prior years' tax adjustment in 1995 includes the effect of the $12.2 million
tax credit.
58
<PAGE> 16
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Cleveland-Cliffs Inc and Consolidated Subsidiaries
NOTE K - BANKRUPTCY SETTLEMENT
Following a 1986 filing, LTV emerged from bankruptcy in June, 1993. In final
settlement of its allowed claim, the Company received 2.3 million shares of LTV
Common Stock and 4.4 million Contingent Value Rights, valued at $31.6 million
and $4.1 million, respectively, resulting in a total gain in 1993 of $35.7
million ($23.2 million after-tax, or $1.93 per share). On July 13, 1993, the
Company distributed to its common stockholders, a special dividend of 1.5
million shares of LTV Common Stock, valued at $20.4 million, and $12.0 million
($1.00 per share) cash.
On March 20, 1995, the Company received a second and final distribution of
22,689 shares of LTV Common Stock. The Company has retained the approximately
842,000 shares as an investment.
NOTE L - FAIR VALUES OF FINANCIAL INSTRUMENTS
The carrying amount and fair value of the Company's financial instruments at
December 31, 1995 are as follows:
<TABLE>
<CAPTION>
(In Millions)
-----------------------
Carrying Fair
Amount Value
-------- ------
<S> <C> <C>
Cash and cash equivalents $139.9 $139.9
Marketable securities:
Available-for-Sale 11.7 11.7
Held-to-Maturity 4.6 4.9
Trading 8.9 8.9
------ ------
Total securities 25.2 25.5
Long-term debt 70.0 71.9
</TABLE>
The fair value of the Company's long-term debt was determined based on a
discounted cash flow analysis and estimated borrowing rates.
The Company also has forward currency contracts at December 31, 1995 of $9.3
million with a fair value of $9.5 million.
59
<PAGE> 17
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Cleveland-Cliffs Inc and Consolidated Subsidiaries
NOTE M - STOCK PLANS
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 750,000 Common Shares (plus an
additional 89,045 Common Shares reserved for issuance, but not issued, under
the Company's 1979 Restricted Stock Plan). The 1992 Incentive Equity Plan
authorizes the Company to issue up to 595,000 Common Shares upon the exercise
of Options 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. Stock options may be granted at a price not less than the fair market
value of the stock on the date the option is granted and must be exercisable
not later than ten years and one day after the date of grant. Stock
appreciation rights may be granted either at or after the time of grant of a
stock option. Common Shares may be awarded or sold to certain employees with
restrictions as to disposition over specified periods. The market value of
restricted stock awards and Performance Shares is charged to expense over the
vesting period. Option prices were adjusted in 1991 and 1993 to recognize the
effect of special dividends to shareholders. Stock option, restricted stock
award, and performance share activities are summarized as follows:
<TABLE>
<CAPTION>
1995 1994 1993
------------------------ ----------------------- -----------------------
Shares Price Shares Price Shares Price
-------- ------------ -------- ------------ -------- -----------
<S> <C> <C> <C> <C> <C> <C>
Stock options:
Options outstanding
beginning of year 82,182 $ 8.51-37.13 105,125 $ 8.51-34.80 160,650 $6.68-37.50
Granted 5,000 39.44-40.56 5,500 35.50-37.13 5,000 32.56
Exercised (14,407) 8.51-35.50 (27,943) 8.51-34.80 (60,525) 6.68 26.31
Cancelled -- -- (500) 35.50 -- --
------- ------- -------
Options outstanding at end of year 72,775 8.51-40.56 82,182 8.51-37.13 105,125 8.51-34.80
Options exercisable at end of year 72,775 8.51-40.56 82,182 8.51-37.13 105,125 8.51-34.80
Restricted awards:
Awarded and restricted at beginning
of year 13,264 20,218 10,990
Awarded during the year -- 8,000 15,277
Vested (2,410) (14,954) ( 6,049)
Cancelled -- -- --
------- ------- -------
Awarded and restricted at end of year 10,854 13,264 20,218
Performance shares:
Allocated at beginning of year 41,317 --
Allocated during the year 47,450 42,067
Forfeited -- (750)
------- -------
Allocated end of year 88,767 41,317
Reserved for future grants or awards at end
of year 469,457 521,907 576,224
</TABLE>
60
<PAGE> 18
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Cleveland-Cliffs Inc and Consolidated Subsidiaries
NOTE N - SHAREHOLDERS' EQUITY
As of December 31, 1995, the Company is authorized to issue up to 500,000
shares of Class A voting preferred stock, without par value, and up to
4,000,000 shares of Class B non-voting preferred stock, without par value.
A share purchase right ("Right") is attached to each of the Company's Common
Shares outstanding as of December 31, 1995, or subsequently issued. Each Right
entitles the holder to buy from the Company eleven one-thousandths (.011) of
one Common Share at an exercise price per whole share of $39.11. The Rights
become exercisable if a person or group acquires, or tenders for, 20% or more
of the Company's Common Shares. The Company is entitled to redeem the Rights at
5 cents per Right at any time until ten days after any person or group has
acquired 20% of the Common Shares and in certain circumstances thereafter. If a
party owning 20% or more of the Company's Common Shares merges with the Company
or engages in certain other transactions with the Company, each Right, other
than Rights held by the acquiring party, entitles the holder to buy $78.22
worth of the shares of the surviving company at a 50% discount. The Rights
expire on September 18, 1997 and are not exercisable until the occurrence of
certain triggering events, which include the acquisition of, or a tender or
exchange offer for, 15% or more of the Company's Common Shares. There are
approximately 185,000 Common Shares reserved for these Rights.
In January, 1995, the Company announced a program to repurchase up to 600,000
of its Common Shares in the open market or in negotiated transactions. Under
the continuing program, the Company repurchased 284,500 shares at an average
price of $37.71 per share in open market transactions throughout 1995. The
shares will initially be retained as Treasury Stock.
NOTE O - LITIGATION
The Company and its managed ventures are periodically involved in litigation
incidental to their operations. Management believes that any pending litigation
will not result in a material liability in relation to the Company's
consolidated financial statements.
61
<PAGE> 1
Exhibit 13(h)
QUARTERLY RESULTS OF OPERATIONS - (Unaudited)
(In Millions, Except Per Share Amounts)
<TABLE>
<CAPTION>
1995
---------------------------------------------------
Quarters
---------------------------------------
First Second Third Fourth Year
----- ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Total Revenues $63.6 $118.9 $144.6 $146.0 $473.1
Gross Profit 10.4 26.4 33.4 34.1 104.3
Net Income Before Extraordinary Item
Amount 5.0 20.9 17.3 17.7 60.9
Per Common Share .41 1.75 1.45 1.49 5.10
Extraordinary Item -- -- -- (3.1) (3.1)
----- ------ ------ ------ ------
Net Income
Amount 5.0 20.9 17.3 14.6 57.8
Per Common Share .41 1.75 1.45 1.23 4.84
</TABLE>
Second quarter results included two special items: a $12.2 million tax credit
resulting from the settlement of prior years' tax issues, and a $6.7 million
after-tax increase in the reserve for environmental expenditures. Third quarter
results included a $1.8 million reserve against McLouth receivables. The fourth
quarter included an extraordinary after-tax charge of $3.1 million for
refinancing long-term debt. The 1995 results include the effects of operating
Northshore for the full year.
<TABLE>
<CAPTION>
1994
--------------------------------------------------
Quarters
---------------------------------------
First Second Third Fourth Year
----- ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Total Revenues $49.5 $ 85.0 $111.0 $143.4 $388.9
Gross Profit 8.6 19.6 23.6 27.8 79.6
Net Income
Amount 2.2 10.4 14.8 15.4 42.8
Per Common Share .18 .86 1.23 1.27 3.54
</TABLE>
Fourth quarter results of operations included Northshore beginning October 1,
1994.
- --------------------------------------------------------------------------------
Common Share Price Performance and Dividends
<TABLE>
<CAPTION>
Price Performance
--------------------------------------------------
1995 1994 Dividends
------------------- ----------------- ---------------
High Low High Low 1995 1994
---- --- ---- --- ---- ----
<S> <C> <C> <C> <C> <C> <C>
First Quarter $40-1/8 $36-1/2 $45-1/2 $36-3/8 $ .325 $ .30
Second Quarter 40-5/8 36-1/8 42-7/8 34-3/8 .325 .30
Third Quarter 46-3/4 38-5/8 42-1/8 35-5/8 .325 .30
Fourth Quarter 41-1/8 37 40-1/8 36-1/8 .325 .325
------ ------
Year 46-3/4 36-1/8 45-12 34 $1.30 $1.225
===== ======
</TABLE>
62
<PAGE> 1
INVESTOR AND CORPORATE INFORMATION
Exhibit 13(i)
STOCK EXCHANGE INFORMATION
The principal market for Cleveland-Cliffs Inc common shares (ticker symbol CLF)
is the New York Stock Exchange. The common shares are also listed on the
Chicago Stock Exchange.
63
<PAGE> 1
SUMMARY OF FINANCIAL AND OTHER STATISTICAL DATA Exhibit 13(j)
CLEVELAND-CLIFFS INC AND CONSOLIDATED SUBSIDIARIES
<TABLE>
<CAPTION>
1995 1994 1993
=================================================================================================================================
<S> <C> <C> <C>
FINANCIAL (IN MILLIONS EXCEPT PER SHARE AMOUNTS)
FOR THE YEAR
Operating Earnings From Continuing Operations:
Operating Revenues - Product Sales and Services $ 411.2 $ 334.8 $ 268.1
- Royalties and Management Fees 49.5 44.7 39.7
------------------------------------------------------
- Total 460.7 379.5 307.8
Cost of Goods Sold and Operating Expenses and AS&G Expenses 371.5 315.8 268.5
------------------------------------------------------
Operating Earnings 89.2 63.7 39.3
Net Income (Loss) - From Continuing Operations (a) 57.8 42.8 54.6
- From Discontinued Operations -- -- --
------------------------------------------------------
- Total 57.8 42.8 54.6
Net Income (Loss) Per Common Share - From Continuing Operations (a) 4.84 3.54 4.55
- From Discontinued Operations -- -- --
------------------------------------------------------
- Total 4.84 3.54 4.55
Distributions to Common Shareholders:
Quarterly Cash Dividends - Per Share 1.30 1.23 1.20
- Total 15.5 14.8 14.4
Special Dividends - Per Share -- -- 2.70 (b)
- Total -- -- 32.4 (b)
Spin-off of Securities - Per Share -- -- --
- Total -- -- --
Repurchase (Sale) of Common Shares 10.7 -- --
Capital Expenditures (c) 22.5 10.9 5.0
AT YEAR-END
Cash and Marketable Securities 148.8 141.4 161.0
Total Assests 644.6 608.6 549.1
Long-Term Obligations Effectively Serviced (c) 76.3 84.2 88.6
Shareholders' Equity 342.6 311.4 280.4
Book Value Per Common Share 28.96 25.74 23.25
Market Value Per Common Share 41.00 37.00 37.38
=================================================================================================================================
IRON ORE PRODUCTION AND SALES STATISTICS (MILLIONS OF GROSS TONS)
Production From Mines Managed by Cliffs:
North America 39.6 35.2 32.3
Australia 1.5 1.5 1.5
------------------------------------------------------
Total 41.1 36.7 33.8
Cliffs' Share 11.3 8.3 6.8
Cliffs' Sales From:
North American Mines 10.4 8.2 6.4
Austalian Mine 1.5 1.5 1.4
------------------------------------------------------
Total 11.9 9.7 7.8
=================================================================================================================================
OTHER INFORMATION
Common Shares Outstanding (Millions) - Average For Year 11.9 12.1 12.0
Common Shares Outstanding (Millions) - At Year End 11.8 12.1 12.1
Common Shares Price Range - High $46-3/4 $45-1/2 $37-1/2
Common Shares Price Range - Low 36-1/8 34 28-3/4
Employees at Year-End (d) 6,224 6,309 5,973
<FN>
(a) Results include after-tax net contributions of special items and extraordinary charge of $2.4 million in 1995,
recoveries on bankruptcy claims of $23.2 million ($1.93 per share) and $47.1 million ($4.03 per share) in 1993 and
1990, respectively, and a $38.7 million ($3.23 per share) after-tax charge for accounting changes in 1992. In
addition, see notes B and E to the consolidated financial statements.
</TABLE>
64
<PAGE> 2
<TABLE>
<CAPTION>
1992 1991 1990 1989 1988 1987
===============================================================================================
<C> <C> <C> <C> <C> <C>
$266.9 $271.6 $272.2 $294.9 $247.9 $303.5
43.8 45.8 37.7 55.6 50.2 40.8
- ----------------------------------------------------------------------------------------------
310.7 317.4 309.9 350.5 298.1 344.3
275.5 275.0 279.7 257.8 227.6 327.5
- ----------------------------------------------------------------------------------------------
35.2 42.4 30.2 92.7 70.5 16.8
(7.9) 53.8 73.8 62.5 42.6 30.2
-- -- -- (1.9) (3.4) (17.5)
- ----------------------------------------------------------------------------------------------
(7.9) 53.8 73.8 60.6 39.2 12.7
(.66) 4.55 6.31 5.37 3.12 1.88
-- -- -- (.17) (.26) (1.31)
- ----------------------------------------------------------------------------------------------
(.66) 4.55 6.31 5.20 2.86 .57
1.18 1.03 .80 .40 -- --
14.1 12.1 9.3 4.7 -- --
-- 4.00 -- -- .79 (b) --
-- 47.0 -- -- 12.8 (b) --
-- -- -- -- 3.55 (b) --
-- -- -- -- 41.3 (b) --
-- -- -- -- 125.2 (62.4)
5.2 7.3 11.2 14.6 8.4 2.0
128.6 95.9 96.0 95.5 52.4 109.8
537.2 478.7 510.9 415.2 390.6 665.6
92.1 65.0 82.4 93.4 145.7 183.5
269.5 290.8 290.8 226.0 168.6 395.4
22.47 24.40 24.88 19.36 14.53 21.02
35.63 36.13 27.13 29.00 26.63 14.88
===============================================================================================
32.9 32.1 31.7 39.3 39.0 34.3
1.5 1.3 2.2 2.3 2.4 2.0
- ----------------------------------------------------------------------------------------------
34.4 33.4 33.9 41.6 41.4 36.3
7.3 7.0 6.6 8.9 9.1 5.0
6.0 6.0 6.5 7.5 6.7 5.5
1.3 1.3 0.3 -- -- --
- ----------------------------------------------------------------------------------------------
7.3 7.3 6.8 7.5 6.7 5.5
===============================================================================================
12.0 11.8 11.7 11.6 13.2 13.4
12.0 11.9 11.7 11.7 11.6 16.4
$40-3/8 $36-1/2 $35 $34 $28 $21-3/8
29-1/2 25 19-5/8 25-3/4 14-1/4 9-1/4
6,388 6,500 6,695 7,522 7,638 8,328
<FN>
(b) Includes securities at market value on distribution date.
(c) Includes Cliffs' share of associated companies and equipment acquired on operating leases.
(d) Includes employees of managed mining ventures.
At December 31, 1995, the Company had 3,185 shareholders of record.
</TABLE>
65
<PAGE> 1
Exhibit 21
Subsidiaries of Cleveland-Cliffs Inc
<TABLE>
<CAPTION>
Jurisdiction
of
Incorporation
or
Name of Subsidiary Organization
- ------------------ ------------
<S> <C>
Cleveland-Cliffs Company (1) Ohio
Cleveland-Cliffs Ore Corporation (1), (2) Ohio
Cliffs Biwabik Ore Corporation (2) Minnesota
Cliffs Copper Corp. Ohio
Cliffs Empire, Inc. (1), (3) Michigan
Cliffs Engineering, Inc. (1) Colorado
Cliffs Forest Products Company (1) Michigan
Cliffs Fuel Service Company (1) Michigan
Cliffs IH Empire, Inc. (1) Michigan
Cliffs Marquette, Inc. (1), (2) Michigan
Cliffs MC Empire, Inc. (1), (3) Michigan
Cliffs Mining Company (9) Delaware
Cliffs Mining Services Company Delaware
Cliffs Minnesota Minerals Company Minnesota
Cliffs Oil Shale Corp. Colorado
Cliffs of Canada Limited (1) Ontario, Canada
Cliffs Reduced Iron Corporation Delaware
Cliffs Resources, Inc. (6) Delaware
Cliffs Synfuel Corp. Utah
Cliffs Tilden, Inc. (1), (15) Michigan
Cliffs TIOP, Inc. (1), (15) Michigan
Empire-Cliffs Partnership (3) Michigan
Empire Iron Mining Partnership (7) Michigan
Escanaba Properties Company (1), (8) Michigan
Escanaba Properties Partnership (8) Michigan
Hibbing Taconite Company, a joint venture (9) Minnesota
Kentucky Coal Company Delaware
Lake Superior & Ishpeming Railroad Company (6) Michigan
Lasco Development Company (6) Michigan
Marquette Iron Mining Partnership (2) Michigan
Mattagami Mining Co. Limited (10) Ontario, Canada
Mesabi Radio Corporation (10) Minnesota
Minerais Midway Ltee-Midway Ore Company Ltd. (10) Quebec, Canada
Mines Hilton Ltee-Hilton Mines, Ltd. (10) Quebec, Canada
Northshore Mining Company (4) Delaware
Northshore Sales Company (5) Ohio
Northwest Iron Co. Ltd. (11) Delaware
Peninsula Land Corporation (10) Michigan
</TABLE>
_____________________________________________________
See footnote explanation on pages 67-68.
66
<PAGE> 2
<TABLE>
<CAPTION>
Jurisdiction
of
Incorporation
or
Name of Subsidiary Organization
- ------------------ ------------
<S> <C>
Pickands Erie Corporation (10) Minnesota
Pickands Hibbing Corporation (9) Minnesota
Pickands Mather & Co. International Delaware
Pickands Mather Services Inc. (10) Delaware
Pickands Radio Co. Ltd. (10) Quebec, Canada
Robert Coal Company (12) Delaware
Savage River Motor Inn Pty. Ltd. (13) Tasmania
Seignelay Resources, Inc. (10) Delaware
Silver Bay Power Company (5) Delaware
Syracuse Mining Company (10) Minnesota
Tetapaga Mining Company Limited (1) Ohio
The Cleveland-Cliffs Iron Company Ohio
The Cleveland-Cliffs Steamship Company (1) Delaware
The Mesaba-Cliffs Mining Company (14) Minnesota
Tilden Mining Company L.C. (15) Michigan
Virginia Eastern Shore Land Co. (1) Delaware
</TABLE>
________________________________________________________________________________
(1) The named subsidiary is a wholly-owned subsidiary of The
Cleveland-Cliffs Iron Company, which in turn is a wholly-owned
subsidiary of Cleveland-Cliffs Inc.
(2) Marquette Iron Mining Partnership is a Michigan partnership.
Cleveland-Cliffs Ore Corporation and Cliffs Marquette, Inc.,
wholly-owned subsidiaries of The Cleveland-Cliffs Iron Company, have
a combined 100% interest in Marquette Iron Mining Partnership.
Cleveland-Cliffs Ore Corporation also owns 100% of Cliffs Biwabik Ore
Corporation.
(3) Empire-Cliffs Partnership is a Michigan partnership. Cliffs MC
Empire, Inc. and Cliffs Empire, Inc., wholly-owned subsidiaries of
The Cleveland-Cliffs Iron Company, have a combined 100% interest in
Empire-Cliffs Partnership.
(4) The named subsidiary is a wholly-owned subsidiary of Cliffs Minnesota
Minerals Company, which in turn is a wholly-owned subsidiary of
Cleveland-Cliffs Inc.
(5) The named subsidiary is a wholly-owned subsidiary of Northshore
Mining Company, which in turn is a wholly-owned subsidiary of Cliffs
Minnesota Minerals Company.
(6) Cliffs Resources, Inc. owns a 99.5% interest in Lake Superior &
Ishpeming Railroad Company. Lasco Development Company is a
wholly-owned subsidiary of Lake Superior & Ishpeming Railroad
Company.
67
<PAGE> 3
(7) Empire Iron Mining Partnership is a Michigan partnership. The
Cleveland-Cliffs Iron Company has a 22.56% indirect interest in the
Empire Iron Mining Partnership.
(8) Escanaba Properties Partnership is a Michigan partnership. Escanaba
Properties Company, a wholly-owned subsidiary of The Cleveland-Cliffs
Iron Company, has a 87.5% interest in the Escanaba Properties
Partnership.
(9) Cliffs Mining Company has a 10% and Pickands Hibbing Corporation, a
wholly-owned subsidiary of Cliffs Mining Company, has a 5% interest
in Hibbing Taconite Company, a joint venture.
(10) The named subsidiary is a wholly-owned subsidiary of Cliffs Mining
Company, which in turn is a wholly-owned subsidiary of
Cleveland-Cliffs Inc.
(11) Cliffs Mining Company owns a 72.4% interest in Northwest Iron Co.
Ltd.
(12) The named subsidiary is a wholly-owned subsidiary of Kentucky Coal
Company, which in turn is a wholly-owned subsidiary of
Cleveland-Cliffs Inc.
(13) The named subsidiary is a wholly-owned subsidiary of Pickands Mather
& Co. International, which in turn is a wholly-owned subsidiary of
Cleveland-Cliffs Inc.
(14) The Cleveland-Cliffs Iron Company owns a 86.4% interest in The
Mesaba-Cliffs Mining Company.
(15) Tilden Mining Company L.C. is a Michigan limited liability company.
Cliffs Tilden, Inc. and Cliffs TIOP, Inc., wholly-owned subsidiaries
of The Cleveland-Cliffs Iron Company, have a combined 40% interest in
Tilden Mining Company L.C.
68
<PAGE> 1
Exhibit 23
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in Post-Effective Amendment Number
1 to the Registration Statement (Form S-8 No. 33-4555) pertaining to the
Restricted Stock Plan of Cleveland-Cliffs Inc, in the Registration Statement
(Form S-8 No. 33-208033) pertaining to the 1987 Incentive Equity Plan of
Cleveland-Cliffs Inc and the related prospectus and in the Registration
Statement (Form S-8 No. 33-48357) pertaining to the 1992 Incentive Equity Plan
and the related prospectus and in the Registration Statement (Form S-8 No.
33-56661) pertaining to the Northshore Mining Company and Silver Bay Power
Company Retirement Savings Plan and the related prospectus of our report dated
February 13, 1996, with respect to the consolidated financial statements and
schedule of Cleveland-Cliffs Inc and consolidated subsidiaries included in this
Annual Report (Form 10-K) for the year ended December 31, 1995.
ERNST & YOUNG LLP
Cleveland, Ohio
March 22, 1996
69
<PAGE> 1
Exhibit 24
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS, that the undersigned Directors
and officers of Cleveland-Cliffs Inc, an Ohio corporation ("Company"), hereby
constitute and appoint M. Thomas Moore, John S. Brinzo, Frank L. Hartman, and
John E. Lenhard and each of them, their true and lawful attorney or
attorneys-in-fact, with full power of substitution and revocation, for them and
in their name, place and stead, to sign on their behalf as a Director or
officer of the Company, or both, as the case may be, an Annual Report pursuant
to Section 13 or 15(d) of the Securities Exchange Act of 1934 on Form 10-K for
the fiscal year ended December 31, 1995, and to sign any and all amendments to
such Annual Report, and to file the same, with all exhibits thereto, and other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorney or attorneys-in-fact, and each of them, full power
and authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully to all intents and
purposes as they might or could do in person, hereby ratifying and confirming
all that said attorney or attorneys-in-fact or any of them or their substitute
or substitutes, may lawfully do or cause to be done by virtue hereof.
Executed as of the 12th day of March, 1996.
/s/M. T. Moore /s/S. B. Oresman
- ------------------------------ -----------------------------
M. T. Moore S. B. Oresman, Director
Chairman, President and Chief
Executive Officer and Director
(Principal Executive Officer) /s/A. Schwartz
----------------------------
A. Schwartz, Director
/s/R. S. Colman
- ------------------------------
R. S. Colman, Director /s/S. K. Scovil
-----------------------------
S. K. Scovil, Director
/s/J. D. Ireland III
- ------------------------------
J. D. Ireland III, Director /s/J. H. Wade
-----------------------------
J. H. Wade, Director
/s/G. F. Joklik
- ------------------------------
G. F. Joklik, Director /s/J. S. Brinzo
-----------------------------
J. S. Brinzo
Executive Vice President-Finance
/s/E. B. Jones (Principal Financial Officer)
- ------------------------------
E. B. Jones, Director
/s/R. Emmet
-----------------------------
/s/L. L. Kanuk R. Emmet
- ------------------------------ Vice President and Controller
L. L. Kanuk, Director (Principal Accounting Officer)
/s/J. C. Morley
- ------------------------------
J. C. Morley, Director
70
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM STATEMENTS
OF CONSOLIDATED INCOME, CONSOLIDATED FINANCIAL POSITION AND COMPUTATION OF
EARNING 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> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 140
<SECURITIES> 9
<RECEIVABLES> 62
<ALLOWANCES> 8
<INVENTORY> 56
<CURRENT-ASSETS> 293
<PP&E> 260
<DEPRECIATION> (140)
<TOTAL-ASSETS> 645
<CURRENT-LIABILITIES> 104
<BONDS> 0
<COMMON> 17
0
0
<OTHER-SE> 326
<TOTAL-LIABILITY-AND-EQUITY> 645
<SALES> 411
<TOTAL-REVENUES> 473
<CGS> 356
<TOTAL-COSTS> 372
<OTHER-EXPENSES> 23
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6
<INCOME-PRETAX> 72
<INCOME-TAX> 11
<INCOME-CONTINUING> 61
<DISCONTINUED> 0
<EXTRAORDINARY> (3)
<CHANGES> 0
<NET-INCOME> 58
<EPS-PRIMARY> 4.84
<EPS-DILUTED> 0
</TABLE>
<PAGE> 1
Exhibit 99(a)
CLEVELAND-CLIFFS INC AND CONSOLIDATED SUBSIDIARIES
Schedule II - Valuation and Qualifying Accounts
(Dollars in Millions)
<TABLE>
<CAPTION>
Additions
-------------------
Charged
Balance at to Cost Charged Balance at
Beginning and to Other End
Classification Of Year Expenses Accounts Deductions Of Year
-------------- --------- -------- -------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Year Ended December 31, 1995:
Reserve for Capacity
Rationalization $ 34.3 $ -- $ 5.8 $ 5.3 $ 34.8
Allowance for Doubtful
Accounts 19.5 -- .2 12.0 7.7
Other 18.6 2.5 2.2 10.5 12.8
Year Ended December 31, 1994:
Reserve for Capacity
Rationalization $ 30.5 $ -- $ 6.9 $ 3.1 $ 34.3
Allowance for Doubtful
Accounts 19.5 -- -- -- 19.5
Other 13.7 .4 5.8 1.3 18.6
Year Ended December 31, 1993:
Reserve for Capacity
Rationalization $ 36.1 $ -- $ 1.3 $ 6.9 $ 30.5
Allowance for Doubtful
Accounts 20.8 -- -- 1.3 19.5
Other 8.3 -- 5.4 -- 13.7
</TABLE>
Additions charged to other accounts in 1995, 1994 and 1993 were charged to
revenues.
Deductions to the reserve for capacity rationalization represent charges
associated with idle expense in 1995, 1994 and 1993. Deductions to the
allowance for doubtful accounts in 1995 represent write-off of bankruptcy
receivables against the reserve.
71
