<PAGE> 1
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SCHEDULE 14A
(RULE 14A)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
<TABLE>
<S> <C>
/ / Preliminary Proxy Statement / / CONFIDENTIAL, FOR USE OF THE COMMISSION
ONLY (AS PERMITTED BY RULE 14A-6(E)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
</TABLE>
CLEVELAND-CLIFFS INC
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
XXXXXXXXXXXXXXXX
(NAME OF PERSON(S) FILING PROXY STATEMENT, IF OTHER THAN THE REGISTRANT)
Payment of filing fee (Check the appropriate box):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:______
(2) Aggregate number of securities to which transaction applies:________
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):__________
(4) Proposed maximum aggregate value of transaction:____________________
(5) Total fee paid:_______________________________________________
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:____________________
(2) Form, Schedule or Registration Statement No.:____________________
(3) Filing Party:____________________________________________________
(4) Date Filed: _____________________________________________________
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
[Cleveland-Cliffs Inc Letterhead]
March 25, 1996
To the Shareholders of
CLEVELAND-CLIFFS INC
The Annual Meeting of Shareholders of Cleveland-Cliffs Inc will be held at
The Forum Conference Center, located in One Cleveland Center, 1375 East Ninth
Street, Cleveland, Ohio 44114 on Tuesday, May 14, 1996 at 8:00 A.M. (Cleveland
time).
At the meeting, shareholders will act upon the election of Directors, a
proposal to approve a new Nonemployee Directors' Compensation Plan and a
proposal to ratify the appointment of Ernst & Young LLP as independent public
accountants. An explanation of each of these matters is contained in the
attached Proxy Statement.
The Board of Directors and management believe that the proposed actions are
in the best interests of your Company. Whether or not you expect to be present
at the Annual Meeting, we urge you to exercise your voting right by signing and
dating the enclosed proxy card and returning it in the accompanying envelope to
ensure that your shares will be represented. Please note that failure to vote
surrenders voting power to those who exercise their voting right. If you attend,
you will be entitled to vote in person.
We look forward to meeting with you at the Annual Meeting.
Sincerely,
/s/ M. Thomas Moore
M. THOMAS MOORE
Chairman and Chief Executive Officer
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE MEETING. WHETHER
OR NOT YOU INTEND TO BE PRESENT, PLEASE SIGN AND DATE THE ENCLOSED PROXY CARD
AND RETURN IT IN THE ENCLOSED POSTAGE-PREPAID ENVELOPE, WHICH REQUIRES NO
POSTAGE IF MAILED IN THE UNITED STATES.
<PAGE> 3
[Cleveland-Cliffs Inc Letterhead]
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
March 25, 1996
Dear Shareholder:
The Annual Meeting of Shareholders of Cleveland-Cliffs Inc, an Ohio
corporation ("Company"), will be held at The Forum Conference Center, located in
One Cleveland Center, 1375 East Ninth Street, Cleveland, Ohio 44114 on Tuesday,
May 14, 1996 at 8:00 A.M. (Cleveland time) for the purpose of considering and
acting upon:
1. A proposal to elect 13 Directors to hold office until the next
Annual Meeting of Shareholders and until their successors are
elected;
2. A proposal to approve the Cleveland-Cliffs Inc Nonemployee
Directors' Compensation Plan;
3. A proposal to ratify the appointment of Ernst & Young LLP as the
firm of independent public accountants to examine the financial
statements of the Company and its consolidated affiliates for the
year 1996; and
4. Such other matters as may properly come before the Annual Meeting
and any adjournment or adjournments thereof.
Shareholders of record at the close of business on March 18, 1996, are
entitled to notice of and to vote at such meeting and any adjournment or
adjournments thereof.
Very truly yours,
/s/ John E. Lenhard
John E. Lenhard
Secretary and Assistant General
Counsel
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE MEETING. WHETHER
OR NOT YOU INTEND TO BE PRESENT, PLEASE SIGN AND DATE THE ENCLOSED PROXY CARD
AND RETURN IT IN THE ENCLOSED POSTAGE-PREPAID ENVELOPE, WHICH REQUIRES NO
POSTAGE IF MAILED IN THE UNITED STATES.
<PAGE> 4
[Cleveland-Cliffs Inc Letterhead]
------------------------------
PROXY STATEMENT
------------------------------
MARCH 25, 1996
SOLICITATION, USE AND REVOCATION OF PROXIES
The accompanying proxy is solicited by the Board of Directors of
Cleveland-Cliffs Inc, an Ohio corporation ("Company"), for use at the Annual
Meeting of Shareholders to be held on May 14, 1996, and any adjournment or
adjournments thereof ("Meeting"). Any proxy may be revoked by a later proxy, by
notice to the Company in writing or in open meeting, without affecting any vote
previously taken.
OUTSTANDING SHARES AND VOTING RIGHTS
As of March 18, 1996, the record date for the determination of persons
entitled to vote at the Meeting, there were 11,832,767 of the Company's Common
Shares, par value $1.00 per share ("Common Shares"), outstanding. Each Common
Share is entitled to one vote. This Proxy Statement and accompanying proxy card
are being first mailed or otherwise distributed to shareholders on or about
March 25, 1996.
ELECTION OF DIRECTORS
(PROPOSAL NO. 1)
It is intended that proxies received will be voted, unless contrary
instructions are given, to elect the 13 nominees named in the following table to
serve until the next Annual Meeting of Shareholders and until their successors
shall be elected.
Should any nominee decline or be unable to accept such nomination to serve
as Director, an event which the Company does not currently anticipate, the
persons named as proxies reserve the right, in their discretion, to vote for a
lesser number or for substitute nominees designated by the Directors, to the
extent consistent with the Company's Regulations.
<PAGE> 5
INFORMATION CONCERNING DIRECTORS AND NOMINEES
Based upon information received from the respective Directors and nominees
as of February 29, 1996 (except as otherwise indicated), the following
information is furnished with respect to each person nominated for election as a
Director.
<TABLE>
<CAPTION>
NAME, AGE AND PRINCIPAL OCCUPATION AND FIRST BECAME
EMPLOYMENT DURING PAST FIVE YEARS DIRECTOR
- ---------------------------------------------------------------------------------------------
<S> <C>
RONALD C. CAMBRE, 57, Chairman of the Board of Newmont Mining Corporation and Nominee
Newmont Gold Company (international gold mining companies) since January,
1995, President since June, 1994 and Chief Executive Officer since November,
1993 of both companies; Mr. Cambre served as Vice Chairman of both companies
from November, 1993 to December, 1994; from June, 1988 through September,
1993 Mr. Cambre served as Vice President and Senior Technical Advisor to the
Office of the Chairman of Freeport-McMoRan Inc., a natural resources
company. Mr. Cambre is a Director of Newmont Mining Corporation and Newmont
Gold Company.
ROBERT S. COLMAN, 54, Founder and Partner since February, 1991 of Colman, Furlong 1991
& Co., a private merchant banking firm; previously Mr. Colman formed R. S.
Colman Company, also a merchant banking firm; from September, 1978 through
December, 1988 Mr. Colman was founding partner of Robertson, Colman &
Stephens, an investment banking firm. Mr. Colman is a Director of HealthCare
COMPARE Corp., New Image Industries, Inc. and Van Wagoner Funds, Inc.
JAMES D. IRELAND III, 46, Managing Director since January 1, 1993 of Capital One 1986
Partners, Inc., a private merchant banking firm; Mr. Ireland is also
President since before 1991 of Briseis Capital Corporation, a private
merchant banking firm. Mr. Ireland is a Director of Sun Coast Industries,
Inc.
G. FRANK JOKLIK, 67, President and Chief Executive Officer since November, 1995 1994
of MK Gold Company, an international mining company; from March, 1980
through June, 1993 Mr. Joklik served as President and Chief Executive
Officer of Kennecott Corporation, an international mining company. Mr.
Joklik is a Director of First Security Corporation and MK Gold Company. Mr.
Joklik is also Chairman of the Salt Lake City Organization Committee for the
2002 Olympic Winter Games.
E. BRADLEY JONES, 68, Retired. Former Chairman and Chief Executive Officer from 1985
July 1, 1982 through December 31, 1984 of LTV Steel Company, a major steel
manufacturer. During the same period, Mr. Jones was a Group Vice President
and Director of The LTV Corporation, a diversified manufacturer of steel,
aerospace and defense products. Mr. Jones is a Director of Birmingham Steel
Corporation, Consolidated Rail Corporation, RPM, Inc. and TRW Inc. Mr. Jones
is also a trustee of Fidelity Funds and First Union Real Estate Equity and
Mortgage Investments.
LESLIE L. KANUK, 66, Professor of Marketing since before 1991 at Baruch College, 1991
City University of New York. Dr. Kanuk is a former Chairman of the Federal
Maritime Commission and, since before 1991, a Director of the
Containerization and Intermodal Institute; member of the Board of Visitors,
Maine Maritime Academy; Board of Trustees, United Seamen's Service; and
since 1994, Board of Advisors, Weissman Center for International Business.
</TABLE>
2
<PAGE> 6
<TABLE>
<CAPTION>
NAME, AGE AND PRINCIPAL OCCUPATION AND FIRST BECAME
EMPLOYMENT DURING PAST FIVE YEARS DIRECTOR
- ---------------------------------------------------------------------------------------------
<S> <C>
FRANCIS R. MCALLISTER, 53, Executive Vice President-Copper Operations since May, Nominee
1993 of ASARCO Incorporated, an international nonferrous metals mining
company; Mr. McAllister served as Executive Vice President and Chief
Financial Officer from April, 1992 through April, 1993 and as Vice
President-Finance & Administration and Chief Financial Officer from April,
1986 through March, 1992 of ASARCO Incorporated. Mr. McAllister is a
Director of ASARCO Incorporated, Grupo Mexico, S.A. de C.V. and Southern
Peru Copper Corporation.
M. THOMAS MOORE, 61, Chairman and Chief Executive Officer of the Company since 1986
May 10, 1988 and President and Chief Executive Officer since January 1,
1987. Mr. Moore is a Director of Capitol American Financial Corporation,
KeyCorp, and The LTV Corporation. Mr. Moore is also a Director of the
American Iron and Steel Institute, American Iron Ore Association, and
National Mining Association.
JOHN C. MORLEY, 64, President since July, 1995 of Evergreen Ventures, Ltd., a 1995
private investment firm. Retired, President and Chief Executive Officer and
Director since before 1991 of Reliance Electric Company, a manufacturer of
electrical, mechanical power transmission and telecommunications products
and systems. Mr. Morley is a Director of AMP Incorporated, Ferro Corporation
and KeyCorp.
STEPHEN B. ORESMAN, 63, President since January, 1991 of Saltash, Ltd., 1991
management consultants; from September, 1988 through December, 1990 Mr.
Oresman served as Vice President of The Canaan Group, Ltd., management
consultants. Mr. Oresman was with Booz-Allen & Hamilton, Inc., management
consultants, for 19 years where he was Senior Vice President and Chairman of
Booz-Allen & Hamilton International. Mr. Oresman is a Director of
Grossman's, Inc., Gryphon Pharmaceuticals Inc., Technology Solutions Company
and TriNet Corporate Realty Trust Inc.
ALAN SCHWARTZ, 55, Professor of Law at the Yale Law School and Professor at the 1991
Yale School of Management since before 1991. Mr. Schwartz was a Professor of
Law and Social Science at the California Institute of Technology since
before 1987 through July, 1987.
JEPTHA H. WADE, 71, Retired. Former partner in the law firm of Choate, Hall & 1957
Stewart since before 1991; from January 1, 1988 through December 31, 1989
Mr. Wade was of counsel to that law firm. Mr. Wade is a trustee of the State
Street Research and Management Mutual Funds.
ALTON W. WHITEHOUSE, 68, Retired. Former Chairman and Chief Executive Officer 1972
since before 1991 of The Standard Oil Company (Ohio), an integrated
petroleum company. Mr. Whitehouse is a Director of The Timken Company.
</TABLE>
In accordance with the Company's retirement policy, Mr. Samuel K. Scovil,
currently a Director of the Company, is not standing for re-election.
THE DIRECTORS RECOMMEND A VOTE FOR EACH OF THE NOMINEES LISTED ABOVE.
BOARD OF DIRECTORS AND BOARD COMMITTEES
The members of the Board of Directors have diversified professional
experience in general management, mining, finance, law, education, and other
fields. There is no family relationship among any of the nominees and executive
officers of the Company. Twelve of the thirteen nominees have no present or
former
3
<PAGE> 7
employment relationship with the Company. None of the nominees have any business
relationship with the Company. All nominees are independent Directors except Mr.
Moore. The average age of the nominees is 61, ranging from 46 to 71. The average
service of the nominees is 9 years, ranging from no service to 38 years of
service.
The Company has maintained a progressive Board governance process for many
years and has formal governance guidelines. During 1995, six regularly scheduled
meetings of the Board of Directors were held and twenty-two meetings of all
standing Board committees were held. Directors also discharge their
responsibilities by review of Company reports to Directors, visits to Company
facilities, correspondence with the Chairman, and telephone conferences with the
Chairman, Directors, and others regarding matters of interest and concern to the
Company. The members of the Board of Directors have Executive, Audit, Board
Affairs, Compensation and Organization, Finance, Long Range Planning, and Public
Affairs Committees. All committees regularly report their activities, actions,
and recommendations to the Board. Eight Directors attended 100 percent of the
meetings of the Board of Directors and Board Committees of which they were a
member; three Directors attended at least 85 percent of such meetings; and Mr.
Colman attended under 75 percent of such meetings due to temporary business
requirements elsewhere.
The Executive Committee consists of Messrs. Moore (chairman), Ireland,
Jones, Oresman, Scovil and Wade. This Committee normally meets only when action
is required before a regular Board meeting. It is empowered to act for the full
Board of Directors on all matters, except it has no authority to fill vacancies
among Directors or in any Committee of Directors, change officers of the
Company, or declare dividends. Its members presently consist of the chairmen of
the other standing committees. The Committee held no meetings during 1995.
The Audit Committee, consisting of Mr. Oresman (chairman), Dr. Kanuk and
Mr. Schwartz, reviews with the Company's management, the internal auditors and
the independent public accountants, the Company's policies and procedures with
respect to internal control; reviews significant accounting matters; approves
the audited financial statements prior to public distribution; approves any
significant changes in the Company's accounting principles or financial
reporting practices; reviews independent public accounting services; and
recommends to the Board of Directors the firm of independent public accountants
to examine the Company's financial statements. The Committee held three meetings
during 1995.
The Board Affairs Committee, consisting of Messrs. Wade (chairman), Jones
and Whitehouse, administers the Company's compensation and benefit plans for
Directors; monitors the Board governance process and provides counsel to the
Board Chairman and Chief Executive Officer on Board governance and other
matters; recommends changes in membership and responsibility of Board
committees; and acts as the Board's Nominating Committee and Proxy Committee in
the election of Directors. Shareholders wishing to nominate director candidates
for consideration by the Committee can do so by writing to the Secretary of the
Company, giving the candidate's name, appropriate biographical data and
qualifications. The Committee held five meetings during 1995.
The Compensation and Organization Committee, consisting of Messrs. Jones
(chairman), Ireland, Joklik and Morley, recommends to the Board of Directors the
officers and compensation of officers; administers the Company's compensation
plans for officers; reviews organization and management development; evaluates
the performance of the Chief Executive Officer; and obtains the advice of
outside experts with regard to compensation matters. The Committee held five
meetings during 1995.
The Finance Committee, consisting of Messrs. Ireland (chairman), Schwartz
and Whitehouse, reviews the Company's financial condition, financial policies,
investment plans and benefit funds management. The Committee recommends dividend
and other actions to the Board of Directors. The Committee held four meetings
during 1995.
The Long Range Planning Committee, consisting of the full Board of
Directors with Mr. Moore serving as chairman, facilitates informed decisions by
the Board through comprehensive review of business strategy and other subjects.
The Committee held four meetings during 1995.
4
<PAGE> 8
The Public Affairs Committee, consisting of Mr. Scovil (chairman), Dr.
Kanuk, and Messrs. Colman and Joklik, reviews the Company's programs in regard
to public policy matters. The Committee held one meeting during 1995.
DIRECTORS' COMPENSATION
The Company has made the following changes in nonemployee Directors'
compensation in order to further align the interests of Directors and
shareholders. The Company believes that these changes provide a competitive and
well-balanced compensation program to support the Board's focus on shareholder
value and enable attraction and retention of a broad range of qualified
Directors.
Subject to Shareholder approval:
- Pay 50% of the annual retainer fee in Common Shares
- Allow Directors to receive up to 100% of their annual retainer fee in
Common Shares
- Award 1,000 Restricted Shares to Directors who are first elected to the
Board after June 30, 1995
- Discontinue stock options for Directors
Other actions:
- Increase annual retainer and meeting fees, which were last adjusted in
1990, by approximately 10%
- Eliminate health insurance for Directors
- Revise retirement plan to reduce payments to Directors who are first
elected to the Board after June 30, 1995
* * * * * * * * *
The Director compensation program is further described in the following
paragraphs.
Directors who are not employees of the Company receive an annual retainer
of $20,000 and a fee of $1,000 for each Board of Directors meeting and a fee of
$750 for each Board committee meeting attended. The committee chairmen, except
Mr. Moore, each receive an annual retainer of $2,500.
The Board of Directors of the Company has adopted, subject to shareholder
approval at the 1996 Annual Meeting, the Nonemployee Directors' Compensation
Plan. The Plan provides for the award of 1,000 Restricted Shares to nonemployee
Directors first elected to the Board after June 30, 1995. It also provides that
all Directors must take 50% of their retainer in Common Shares and may elect to
take up to 100% of the retainer in Common Shares. In addition, the Plan gives
nonemployee Directors the opportunity to defer all or a portion of their annual
retainer, whether payable in cash or common shares. See Proposal No. 2,
"Approval of Nonemployee Directors' Compensation Plan."
Under the Company's 1992 Incentive Equity Plan, each nonemployee Director
receives an option to purchase 500 Common Shares of the Company when such person
first becomes a nonemployee Director, and receives an additional option to
purchase 500 Common Shares immediately after each annual meeting thereafter for
so long as such person continues to be a non-employee Director. No new options
would be issued under this arrangement after July 1, 1996 if the proposed new
Nonemployee Directors' Compensation Plan is approved by the Company's
Shareholders.
During 1981, the Company established a Plan for Deferred Payment of
Directors' Fees pursuant to which any Director may elect to defer payment of all
or a portion of compensation earned as a Director. At the election of the
Director, compensation deferred is payable in a lump sum or installments over a
period of not more than ten years, and the payment may commence in the calendar
year following either the year in which the Director ceases to serve as a
Director or the year in which the Director attains his or her sixty-fifth
birthday. The Plan for Deferred Payment of Directors' Fees will be replaced by
the new Nonemployee Directors' Compensation Plan if that Plan is approved by the
Company's Shareholders.
5
<PAGE> 9
In order to attract and retain qualified Directors, the Company has had a
Retirement Plan for Non-Employee Directors since 1984. Upon completing five
years of service, a non-employee Director elected before July 1, 1995 receives
during his or her lifetime after retirement an amount equal to the annual
retainer then paid to non-employee Directors. In the event of a "change of
control" causing the Director's retirement, he or she receives the retirement
payment prorated for any service less than five years.
In 1995, a new retirement plan was established for Directors first elected
after June 30, 1995. Under such plan, a nonemployee Director with at least five
years of service receives after retirement a quarterly amount equal to fifty
percent of the stated quarterly retainer in effect at the time of retirement for
the period equal to the Director's service.
The Company has entered into trust agreements with Key Trust Company of
Ohio, N.A. relating to the Retirement Plan for Non-Employee Directors and the
Plan for Deferred Payment of Directors' Fees in order to establish arrangements
for the funding and payment of the Company's obligations to beneficiaries under
such Plans.
In addition to the annual retainer and meeting fees to which Mr. Scovil was
entitled, he received $20,000 in 1995 for consulting and advisory services. In
1996, Mr. Scovil will receive $5,000 for consulting and advisory services which
will conclude on March 31, 1996.
SECURITIES OWNERSHIP OF MANAGEMENT AND CERTAIN OTHER PERSONS
The following table sets forth the amount and percent of Common Shares
which, as of February 15, 1996 (except as otherwise indicated), are deemed under
the rules of the Securities and Exchange Commission ("SEC") to be "beneficially
owned" by each Director, excluding the Chief Executive Officer, by each nominee
for Director, by the Company's five most highly compensated executive officers
and one other executive officer who retired during the year, by such persons and
the other executive officers as a group, and by any person or "group" (as that
term is used in the Securities Exchange Act of 1934) known to the Company as of
that date to be a "beneficial owner" of more than 5% of the outstanding Common
Shares.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF "BENEFICIAL OWNERSHIP"(1)
DIRECTORS AND NOMINEES ---------------------------------------------------------------------------
(EXCLUDING DIRECTOR AND INVESTMENT POWER VOTING POWER
CHIEF EXECUTIVE OFFICER BENEFICIAL ------------------- ------------------- PERCENT OF
M.T. MOORE) OWNERSHIP(2) SOLE SHARED SOLE SHARED CLASS(3)
- ---------------------------- ------------ ------- ------- ------- ------- ----------
<S> <C> <C> <C> <C> <C> <C>
Ronald C. Cambre(4)......... -0- -0- -0- -0- -0- --
Robert S. Colman............ 2,155 2,155 -0- 2,155 -0- --
James D. Ireland III........ 271,339 4,697 266,642(5) 4,697 266,642(5) 2.29%
G. Frank Joklik............. 1,500 1,500 -0- 1,500 -0- --
E. Bradley Jones............ 2,500 2,500 -0- 2,500 -0- --
Leslie L. Kanuk............. 2,155 2,155 -0- 2,155 -0- --
Francis R. McAllister(4).... -0- -0- -0- -0- -0- --
John C. Morley.............. 1,500 1,500 -0- 1,500 -0- --
Stephen B. Oresman.......... 2,155 2,155 -0- 2,155 -0- --
Alan Schwartz............... 655 655 -0- 655 -0- --
Samuel K. Scovil............ 14,713 14,713 -0- 14,713 -0- --
Jeptha H. Wade.............. 7,000 7,000 -0- 7,000 -0- --
Alton W. Whitehouse......... 2,400 2,400 -0- 2,400 -0- --
</TABLE>
<TABLE>
<CAPTION>
NAMED EXECUTIVE OFFICERS
- ----------------------------
<S> <C> <C> <C> <C> <C> <C>
M. Thomas Moore............. 35,037 35,037 -0- 35,037 -0- --
John S. Brinzo.............. 26,854 17,993 8,861 17,993 8,861 --
William R. Calfee........... 17,105 17,105 -0- 17,105 -0- --
Frank S. Forsythe(6)........ 2,807 613 2,194 613 2,194 --
Thomas J. O'Neil............ 8,000 8,000 -0- 8,000 -0- --
A. Stanley West............. 12,171 12,171 -0- 12,171 -0- --
All Directors and Executive
Officers as a Group
(21 Persons).............. 423,684 145,987 277,697 145,987 277,697 3.58%
</TABLE>
6
<PAGE> 10
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF "BENEFICIAL OWNERSHIP"(1)
---------------------------------------------------------------------------------
INVESTMENT POWER VOTING POWER
BENEFICIAL ----------------------- --------------------- PERCENT OF
OTHER PERSONS OWNERSHIP(2) SOLE SHARED SOLE SHARED CLASS(3)
- ------------------------------------ ------------ --------- --------- ------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
Farmers Group, Inc. (7)
4680 Wilshire Boulevard
Los Angeles, CA 90010............. 1,154,500 -0- 1,154,500 -0- 1,154,500 9.76%
Neuberger & Berman L.P. (8)
605 Third Avenue
New York, NY 10158................ 1,068,500 -0- 1,068,500 634,400 231,900 9.03%
Merrill Lynch & Co., Inc. (9)
World Financial Center,
North Tower
250 Vesey Street
New York, NY 10281................ 913,315 -0- 913,315 -0- 913,315 7.72%
</TABLE>
- ---------------
(1) Under the rules of the SEC, "beneficial ownership" includes having or
sharing with others the power to vote or direct the investment of
securities. Accordingly, a person having or sharing the power to vote or
direct the investment of securities is deemed to "beneficially own" the
securities even if he or she has no right to receive any part of the
dividends on or the proceeds from the sale of the securities. Also, because
"beneficial ownership" extends to persons, such as co-trustees under a
trust, who share power to vote or control the disposition of the securities,
the very same securities may be deemed "beneficially owned" by two or more
persons shown in the table. Information with respect to "beneficial
ownership" shown in the table above is based upon information supplied by
the Directors, nominees and executive officers of the Company and filings
made with the SEC or furnished to the Company by any shareholder.
(2) Included in the shares shown are Common Shares subject to options granted by
the Company which entitle the holder to acquire said shares within 60 days
from February 15, 1996. Each of the Directors, except for Mr. Moore, has
such options as follows: Mr. Colman, 2,000; Mr. Ireland, 2,000; Mr. Joklik,
1,500; Mr. Jones, 2,000; Dr. Kanuk, 2,000; Mr. Morley, 500; Mr. Oresman,
2,000; Mr. Schwartz, 500; Mr. Scovil, -0-; Mr. Wade, 2,000 and Mr.
Whitehouse, 2,000; each of the executive officers named in the table has
such options as follows: Mr. Moore, 10,000; Mr. Brinzo, 7,000; Mr. Calfee,
4,375; Mr. Forsythe, -0-; Mr. O'Neil, -0-; and Mr. West, 2,000; and the
Directors and executive officers as a group have 47,875 options. Performance
shares awarded in 1995 to Messrs. Moore, Brinzo, Calfee, Forsythe, O'Neil
and West as described under "Long-Term Incentive Plans -- Awards in Last
Fiscal Year" on page 9 are not included in the shares shown in the table.
(3) Less than 1%, except as otherwise indicated.
(4) New nominees to the Board of Directors.
(5) Of the 271,339 shares deemed under the rules of the SEC to be beneficially
owned by Mr. Ireland, he is a beneficial holder of 4,697 shares. The
remaining 266,642 shares are held in trusts, substantially for the benefit
of a charitable foundation, as to which Mr. Ireland is a co-trustee with
shared voting and investment powers. Of such shares in trusts, Mr. Ireland
has an interest in the income or corpus with respect to 18,474 shares.
(6) Retired on September 30, 1995.
(7) Except for Percent of Class, the information shown above was taken from the
Amendment No. 1 to Schedule 13G, dated February 6, 1996, as filed by Farmers
Group, Inc. and BAT Industries p.l.c with the SEC.
(8) Except for Percent of Class, the information shown above was taken from the
Amendment No. 3 to Schedule 13G, dated February 12, 1996, as filed by
Neuberger & Berman L.P. with the SEC.
(9) Except for Percent of Class, the information shown above was taken from the
Amendment No. 3 to Schedule 13G, dated February 6, 1996, as filed by Merrill
Lynch & Co., Inc., Merrill Lynch Group, Inc., Princeton Services, Inc.,
Merrill Lynch Asset Management, L.P. and Merrill Lynch Capital Fund, Inc.
with the SEC.
7
<PAGE> 11
EXECUTIVE COMPENSATION
The following table sets forth all compensation earned by the Company's
five most highly compensated executive officers and one other executive officer
who retired during the year, with respect to the year shown for services
rendered to the Company and its subsidiaries.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
----------------------
AWARDS
ANNUAL COMPENSATION ----------------------
------------------------------------ RESTRICTED SECURITIES
OTHER ANNUAL STOCK UNDERLYING ALL OTHER
NAME AND SALARY BONUS COMPENSATION(1) AWARDS(2) OPTIONS COMPENSATION(3)
PRINCIPAL POSITION YEAR ($) ($) ($) ($) (#) ($)
- ----------------------------- ---- -------- -------- --------------- ---------- ---------- ------------------
<S> <C> <C> <C> <C> <C> <C> <C>
M. Thomas Moore 1995 $440,000 $310,000 $ -- $ -0- $ -0- $ 18,040
Chairman and Chief Executive 1994 431,250 222,000 -- -0- -0- 17,666
Officer 1993 422,500 175,000 -- 109,442(4) -0- 14,978
John S. Brinzo 1995 225,000 131,500 -- -0- -0- 9,221
Executive Vice President- 1994 217,500 105,000 -- -0- -0- 8,897
Finance 1993 210,000 65,000 -- 54,388(4) -0- 7,447
William R. Calfee 1995 250,000 131,500 -- -0- -0- 10,245
Executive Vice President- 1994 250,000 95,000 -- -0- -0- 10,245
Commercial 1993 250,000 60,000 -- 48,514(4) -0- 8,250
Frank S. Forsythe 1995 198,846(5) 87,500 -- -0- -0- 7,226
Retired Senior Executive- 1994 235,000 47,500 -- -0- -0- 9,625
Operations 1993 235,000 60,000 -- 28,607(4) -0- 11,599
Thomas J. O'Neil 1995 185,000 95,000 -- -0- -0- 7,585
Executive Vice President- 1994 158,750 45,000 -- 227,250(6) -0- 6,509
Operations 1993 147,500 30,000 -- -0-(4) -0- 5,236
A. Stanley West 1995 175,000 85,000 -- -0- -0- 7,167
Senior Vice President-Sales 1994 154,000 55,000 -- -0- -0- 6,314
1993 148,000 27,000 -- 19,145(4) -0- 5,254
<FN>
- ---------------
(1) The executive officers are reimbursed for business club membership expenses
and other business perquisites, in amounts that are less than the reporting
thresholds established by the Securities and Exchange Commission.
(2) The aggregate number of shares of Restricted Stock held by Messrs. Moore,
Brinzo, Calfee, Forsythe, O'Neil and West, as of December 31, 1995 was 470,
330, 205, -0-, 6,400 and 94, respectively. The aggregate value of such
shares as of December 31, 1995 was $19,270, $13,530, $8,405, $-0-, $262,400
and $3,854, respectively. Dividends are payable on the shares of Restricted
Stock reported in this column at the same rate as dividends on the Company's
other Common Shares.
(3) Amounts indicated for 1995 include cash contributed by the Company under the
Cliffs Salaried Employees Supplemental Retirement Savings Plan as follows:
$6,468, $5,970, $6,120, $4,530, $7,585 and $5,670 on behalf of Messrs.
Moore, Brinzo, Calfee, Forsythe, O'Neil and West, respectively; and cash
contributed by the Company under the Voluntary Non-Qualified Deferred
Compensation Plan as follows: $11,572, $3,251, $4,125, $2,696, $-0- and
$1,497 on behalf of Messrs. Moore, Brinzo, Calfee, Forsythe, O'Neil and
West, respectively.
(4) On July 28, 1993, the Company made awards to Messrs. Moore, Brinzo, Calfee,
Forsythe, O'Neil and West of 3,447, 1,713, 1,528, 901, -0- and 603 shares of
Restricted Stock, respectively. These awards of Restricted Stock are tied to
certain stock options granted in 1987, 1988 and 1990. The shares of
Restricted Stock vest in the same proportion as the underlying stock options
to which such shares are tied when such options are exercised by the
optionee; however, in no event will the shares of Restricted Stock vest
prior to one year following the date of the award.
(5) Includes cash in lieu of accrued vacation in the amount of $22,596 paid upon
retirement.
(6) On November 7, 1994, the Company awarded 6,000 Shares of Restricted Stock to
Mr. O'Neil. One-fifth of such Restricted Stock will vest on each of the
fifth, sixth, seventh, eighth and ninth anniversaries of the date of the
award.
</TABLE>
8
<PAGE> 12
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
The following table sets forth information about stock options exercised
during the last fiscal year by the Company's five most highly compensated
executive officers and one other executive officer who retired during the year,
and the number of Common Shares covered by unexercised options and the aggregate
value of options held at the end of such fiscal year.
<TABLE>
<CAPTION>
SHARES NUMBER OF SECURITIES VALUE OF UNEXERCISED
ACQUIRED UNDERLYING UNEXERCISED "IN-THE-MONEY" OPTIONS
ON VALUE OPTIONS AT FY-END (#) AT FY-END ($)
EXERCISE REALIZED ----------------------------- -----------------------------
NAME (#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- --------------------------- ---------- ------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
M. Thomas Moore 2,532 $48,127 10,000 -0- $ 208,825 -0-
John S. Brinzo 1,000 25,508 7,000 -0- 146,178 -0-
William R. Calfee -0- -0- 4,375 -0- 91,361 -0-
Frank S. Forsythe (Retired) -0- -0- -0- -0- -0- -0-
Thomas J. O'Neil -0- -0- -0- -0- -0- -0-
A. Stanley West 500 11,566 2,000 -0- 41,765 -0-
</TABLE>
LONG-TERM INCENTIVE PLANS -- AWARDS IN LAST FISCAL YEAR
The following table below sets forth information relating to the long-term
incentive awards that were made under the 1992 Incentive Equity Plan during the
last fiscal year for the Company's five most highly compensated executive
officers and one other executive officer who retired during the year.
<TABLE>
<CAPTION>
ESTIMATED FUTURE PAYOUTS
UNDER NON-STOCK PRICE-BASED
NUMBER OF PERFORMANCE PLANS(1)
SHARES, UNITS OR OTHER NUMBER OF SHARES
OR OTHER PERIOD UNTIL --------------------------------
NAME RIGHTS MATURATION OR PAYOUT THRESHOLD TARGET MAXIMUM
- --------------------------- ------------- -------------------- --------- ------ -------
<S> <C> <C> <C> <C> <C>
M. Thomas Moore 10,900 1/1/95 - 12/31/97 2,725 10,900 19,075
John S. Brinzo 4,500 1/1/95 - 12/31/97 1,125 4,500 7,875
William R. Calfee 4,100 1/1/95 - 12/31/97 1,025 4,100 7,175
Frank S. Forsythe (Retired) 1,000 1/1/95 - 12/31/97 250 1,000 1,750
Thomas J. O'Neil 3,000 1/1/95 - 12/31/97 750 3,000 5,250
A. Stanley West 2,700 1/1/95 - 12/31/97 675 2,700 4,725
- ---------------
<FN>
(1) Estimated payout if certain performance levels are achieved. No payout
occurs unless threshold performance is achieved.
</TABLE>
The above table presents information about performance shares awarded
during the year pursuant to the 1992 Incentive Equity Plan. Each performance
share that is earned entitles the holder to receive Common Shares in accordance
with the above table, 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 will be determined
by the Company's shareholder return relative to a predetermined group of mining
and metal companies. Achievement of the value added objective will be determined
by comparing the Company's actual and target value added. 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 175% 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. The number of Common Shares 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 granted. The first
possible payout under the program will be in early 1997 for the 1994-1996
performance period.
9
<PAGE> 13
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
COMPENSATION POLICIES
The Company's philosophy is to maintain competitive total compensation
opportunity for all employees based on job responsibilities and other
comparative factors. The compensation structure places a significant portion of
management compensation at risk with the performance of the Company, the
organizational unit, and the individual, with the risk portion increasing with
responsibility level. The structure also assists in retention of experienced
employees. The Company's officers average 26 years of experience in the mining
and steel industries.
Executive compensation consists of salary, current year incentive
opportunity, long-term incentive opportunity, general employee benefits, and
certain minor executive benefits. In determining executive compensation, the
Committee reviews industry survey data, Company and individual performance, the
general business environment, and recommendations of the Chief Executive
Officer. Survey data represents a broad group of industrial companies of
comparable scope.
The Company has selected the S&P Steel Group Index and the S&P
Miscellaneous Metals Group Index for the comparative stock price performance
graph on page 13 because no meaningful iron ore peer group index is available.
For statistical validity, the survey group for executive compensation is larger
than the industry groups used for the stock price performance comparison.
The Committee periodically obtains advice from independent compensation
consultants. In 1994, a consultant assisted the Committee in designing the
long-term Performance Share Program for designated key management employees
under the 1992 Incentive Equity Plan. In 1995, a consultant provided advice
regarding competitive compensation of officers.
Under the regulations implementing the federal income tax legislation
enacted in 1993 which limits the deductibility of certain executive compensation
in excess of $1 million, the Company does not expect non-deductible payments in
1996. If non-deductible payments would become likely in a future year, the
Committee would determine appropriate action in light of the Company's
circumstances at that time. Deferral of any non-deductible compensation until
retirement is a potential action in such event.
SALARIES
The Company strives to maintain salary range midpoints at the 50th
percentile of industry survey data. Actual salaries reflect responsibility,
performance, and experience. Salary increases are awarded periodically based on
individual performance when economic conditions allow.
Executive officers received no salary increases in 1991 and 1992 except for
certain promotional increases. On January 1, 1993, executive officers received
merit increases totaling approximately 5 percent and their annual bonus targets
were reduced by approximately offsetting dollar amounts. In 1994, salary and
annual incentive opportunity structures were updated for all salaried employees,
including executive officers, based on industry survey data. As a result,
executive officers received a total salary increase of 4 percent on July 1, 1994
and their total annual target incentive was reduced by 12.6 percent. Executive
officers received no further salary increases through December 31, 1995, except
for salary increases accompanying certain promotions.
ANNUAL INCENTIVE OPPORTUNITY
The Company maintains a Management Performance Incentive Plan ("MPI Plan")
which provides the opportunity for eligible management employees to earn an
annual cash bonus. The MPI Plan was established in 1993 as a successor plan to
the previous Incentive Bonus and Management Bonus Plans. The MPI Plan
essentially adopted the principles of the previous plans but consolidated the
eligible employee groups. In 1994, separate incentive plans were installed for
salaried personnel at operating units, thereby reducing the number of
participants in the MPI Plan and restricting it to corporate management and
certain other management employees. This change was designed to more closely
align annual incentives with the respective employee units and responsibilities.
Under the MPI Plan, each participant has a designated target bonus
reflecting the participant's responsibility level. As a result of the salary and
incentive restructuring mentioned above, the target for executive officers in
1994 and 1995 ranged from 32 to 50 percent of the officer's salary range
midpoint versus the previous range of 30 to 70 percent. Actual awards may range
from zero to 200 percent of the target amount for a participant. The previous
target range was zero to 150 percent.
10
<PAGE> 14
Company and executive officer objectives are reviewed by the Board of
Directors at the beginning of each year, and performance reports are reviewed at
regular Board meetings throughout the year. At the end of each year, the
Committee reviews Company, unit, and individual performance for the year in
relation to past results, current year objectives, strategic plans, and the
competitive and economic environment. The Committee also considers the
recommendations of the Chief Executive Officer in regard to other participants.
The Committee then determines the total bonus pool for the participants and the
individual awards to the officers.
A composite judgment is made by the Committee in determining awards under
the MPI Plan. The Company's earnings are a key determinant, but other
accomplishments or disappointments with implications for future Company results
may be more important in any year. MPI Plan awards reflect the Committee's
judgment of individual and unit performance in such areas as sales, new business
development, operations, technology, product and process quality, safety and
environmental management, expenditure control, human resource programs,
financial management, legal activities, and public affairs. The benefit to the
Company of the cumulative performance and experience of the executive may also
be considered. All such matters are evaluated collectively without assignment of
weights.
Bonuses for the executive officers, excluding the Chief Executive Officer,
totaled $545,500 for 1995 (137 percent of average target bonus) versus $347,500
for 1994 (93 percent of average target bonus) and $242,000 for 1993 (65 percent
of average target bonus). In determining the 1995 bonuses for these officers,
the factors described above were considered, including the Company's record
earnings before unusual items, the Company's performance on numerous business
objectives, and each officer's performance in regard to his or her
responsibilities and objectives.
LONG-TERM INCENTIVE OPPORTUNITY
All officers are shareholders of the Company.
The Incentive Equity Plans of 1987 and 1992, approved by the shareholders,
are intended to align the interests of management and the shareholders.
Individual awards under such Plans are scaled in accordance with responsibility
level.
Under the 1992 Incentive Equity Plan, a long-term performance share program
("Performance Share Program") was installed in 1994 to further align the
interests of designated key management employees and the shareholders in
increasing return on invested capital and long-term shareholder value. The
Performance Share Program provides the participants the opportunity to receive
shares of Company stock based on Company performance against specified
objectives.
Awards of "performance shares" are made annually based on responsibility
level. Performance for the 1994 and 1995 awards will be measured for the
three-year periods 1994-1996 and 1995-1997, respectively, with the first
earnings opportunity to occur in early 1997 for the 1994 awards. The percentage
of performance share awards earned as actual shares in 1997 can range from zero
to 150 percent and in 1998 can range from zero to 175 percent. The Committee may
award equivalent cash value at its discretion. For 1995 and 1994, the executive
officers, excluding the Chief Executive Officer, were awarded 15,300 and 14,667
performance shares, respectively. For a detailed description of the 1995 awards,
objectives and estimated future payout opportunities, see "Long-Term Incentive
Plans -- Awards in Last Fiscal Year" on page 9.
Other than certain special situations, no general award of restricted stock
to executive officers has been made since 1988 and no stock options have been
awarded to executive officers since 1990. There is no current program of general
awards of stock options or restricted stock to executive officers. However, the
Committee may use such incentives in the future if appropriate.
The exercise price of all stock options has been the market price when
awarded, adjusted for business spinoffs and special distributions to
shareholders. Options have not been repriced for "under water" situations. In
1993, the price of unexercised options was reduced and restricted stock awards
were made to reflect the equivalent value of the Company's bankruptcy claim
recovery from The LTV Corporation which was distributed to the Company's
shareholders. The executive officers were awarded 8,192 shares of restricted
stock in 1993 to reflect the LTV claim recovery distribution and to correct a
deficiency in prior option price adjustments for a special distribution to
shareholders in 1991.
11
<PAGE> 15
CHIEF EXECUTIVE OFFICER COMPENSATION
M. Thomas Moore has 36 years of experience in the iron and steel
industries, including 29 years with the Company. Mr. Moore has served as a
senior officer of the Company since 1968, as Chief Executive Officer since
January 1, 1987, and as Chairman since May 10, 1988.
Under the competitive compensation restructuring described above, Mr.
Moore's annual target bonus under the MPI Plan for 1994 was reduced by $83,300
(from 70 percent to 50 percent of his salary range midpoint) at his
recommendation, and the Board of Directors increased his annual salary by 4.1
percent or $17,500 on July 1, 1994.
The MPI Plan award to Mr. Moore for 1995 was $310,000 (142 percent of his
target bonus) compared to $222,000 or 104 percent of his target bonus in 1994
and $175,000 or 59 percent of his target bonus in 1993. The Committee determined
the 1995 award in view of the Company's and Mr. Moore's performance in 1995 on
the factors described above, including the Company's record earnings before
unusual items, the Company's performance on numerous business and operational
objectives, and his performance in regard to such objectives and his
responsibilities. The Committee considered all matters collectively in
accordance with its policy.
No stock options or restricted stock was awarded to Mr. Moore during 1994
or 1995. Mr. Moore was awarded 10,900 and 9,500 performance shares in 1995 and
1994, respectively, under the Performance Share Program.
The Chief Executive Officer is not present when the Committee reviews his
performance and determines his compensation.
OTHER
In 1987, after the depressed industry conditions of the 1982-1986 period
which had severely impacted the Company's performance and financial condition,
the Company began a major restructuring program to stabilize and focus the
Company and foster a renewal of business growth. For the period 1987 through
1995, net income totaled $387 million, cash flow from operating activities
(before working capital changes) totaled $502 million, and the growth in
shareholder value, measured by the increase in the market value of the Company's
Common Shares, plus special distributions to shareholders, was $500 million.
The total return, from share price appreciation and assumed reinvested
dividends, on the Company's Common Shares for the nine year period from December
31, 1986 to December 31, 1995, was 686 percent, which substantially exceeded the
total returns of the S&P 500 Stock Index, the S&P Steel Group Index, and the S&P
Miscellaneous Metals Group Index as shown on the accompanying graph. For the
same period, personal income on stock option exercises and restricted stock
awards under the Incentive Equity Plans for the Chief Executive Officer and all
participants equaled a modest .06 percent and 3.1 percent, respectively, of the
growth in shareholder value.
For the five-year period ended December 31, 1995, the total return on the
Company's Common Shares was 119 percent which exceeded the three comparative
indices as shown on the accompanying graph. For the year 1995, the total return
was 14 percent which exceeded the return of the S&P Steel Group Index and the
S&P Miscellaneous Metals Group Index and trailed the return for the S&P 500
Stock Index.
The Committee believes that the long-term and cyclical nature of the
Company's business, as contrasted to independent fluctuations in the stock
market, can make short-term comparison of executive compensation and stock
prices misleading. The Committee believes that the Company's compensation
structure provides appropriate alignment of the long-term interests of key
management, the Company, and its shareholders.
The foregoing report has been furnished by the members of the Compensation
and Organization Committee as set forth below:
E. B. Jones, Chairman
J. D. Ireland III
G. F. Joklik
J. C. Morley
12
<PAGE> 16
SHAREHOLDER RETURN PERFORMANCE
The following graphs show changes over the past five-year and nine-year
periods in the value of $100 invested in: (1) Cliffs' Common Shares; (2) S&P 500
Stock Index; (3) S&P Steel Group Index; and (4) S&P Miscellaneous Metals Group
Index. The values of each investment are based on price change plus reinvestment
of all dividends. Cliffs' values include the reinvestment of proceeds from
securities distributed to shareholders in 1988 and 1993.
FIVE-YEAR CUMULATIVE TOTAL RETURNS
VALUE OF $100 INVESTED AT DECEMBER 31, 1990
<TABLE>
<CAPTION>
MEASUREMENT PERIOD CLIFF'S S&P STEEL S&P MISC.
(FISCAL YEAR COVERED) COMMON S&P 500 GROUP METALS GROUP
<S> <C> <C> <C> <C>
1990 100 100 100 100
1991 156 130 123 113
1992 159 140 161 121
1993 187 155 212 135
1994 191 157 206 157
1995 219 215 191 174
</TABLE>
VALUE AT DECEMBER 31
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Cliffs'Common 100 156 159 187 191 219
S&P 500 100 130 140 155 157 215
S&P Steel Group 100 123 161 212 206 191
S&P Misc. Metals Group 100 113 121 135 157 174
</TABLE>
NINE-YEAR CUMULATIVE TOTAL RETURNS
VALUE OF $100 INVESTED AT DECEMBER 31, 1986
<TABLE>
<CAPTION>
MEASUREMENT PERIOD CLIFF'S S&P STEEL S&P MISC.
(FISCAL YEAR COVERED) COMMON S&P 500 GROUP METALS GROUP
<S> <C> <C> <C> <C>
1986 100 100 100 100
1987 157 105 160 176
1988 339 123 195 232
1989 374 161 189 267
1990 359 156 159 253
1991 561 204 195 286
1992 572 220 255 307
1993 672 242 336 342
1994 687 245 326 399
1995 786 337 303 441
</TABLE>
VALUE AT DECEMBER 31
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Cliffs' Common 100 157 339 374 359 561 572 672 687 786
S&P 500 100 105 123 161 156 204 220 242 245 337
S&P Steel Group 100 160 195 189 159 195 255 336 326 303
S&P Misc. Metals Group 100 176 232 267 253 286 307 342 399 441
</TABLE>
13
<PAGE> 17
PENSION BENEFITS
The following table shows the approximate maximum annual pension benefit
under the Company's qualified pension plans, together with the Supplemental Plan
described below, which would be payable to employees in various compensation
classifications at age 65 with representative years of service. The amounts
listed in the table are computed on an automatic joint and survivorship annuity
basis and are subject to an offset for Social Security benefits through December
31, 1995 and the equivalent offset thereafter.
<TABLE>
<CAPTION>
AVERAGE ANNUAL
COMPENSATION FOR 60
HIGHEST CONSECUTIVE ANNUAL BENEFITS FOR
MONTHS IN LAST 120 YEARS OF SERVICE INDICATED
MONTHS PRECEDING -------------------------------------------------------------------------------------------
RETIREMENT 15 YRS. 20 YRS. 25 YRS. 30 YRS. 35 YRS. 40 YRS.
- ------------------------ ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
$100,000 $ 27,225 $ 35,100 $ 42,975 $ 50,850 $ 58,725 $ 66,600
150,000 39,038 50,850 62,663 74,475 86,288 98,100
200,000 50,850 66,600 82,350 98,100 113,850 129,600
250,000 62,663 82,350 102,038 121,725 141,413 161,100
300,000 74,475 98,100 121,725 145,350 168,975 192,600
350,000 86,288 113,850 141,413 168,975 196,537 224,100
400,000 98,100 129,600 161,100 192,600 224,100 255,600
450,000 109,913 145,350 180,788 216,225 251,662 287,100
500,000 121,725 161,100 200,475 239,850 279,225 318,600
550,000 133,538 176,850 220,163 263,475 306,788 350,100
600,000 145,350 192,600 239,850 287,100 334,350 381,600
650,000 157,163 208,350 259,538 310,725 361,913 413,100
675,000 163,069 216,225 269,381 322,538 375,694 428,850
</TABLE>
The table is based on a 1 1/2% pension formula, includes the impact of a 5%
add-on for employees who retire at age 65 under the 30 year retirement provision
or under the normal retirement provision, with at least ten years of service,
between January 1, 1994 and December 31, 1999, and includes a $300 monthly
pension supplement payable for 12 months after retirement for employees who
retire at age 65 under the 30 year retirement provision or under the normal
retirement provision, with at least ten years of service, after January 1, 1994
and prior to January 1, 1997. The Internal Revenue Code of 1986 ("Code") places
limitations on the benefits which may be paid from a qualified pension plan. The
Company has a nonqualified Supplemental Retirement Benefit Plan ("Supplemental
Plan") providing for the payment from general funds of the benefits which would
be lost by Supplemental Plan participants as a result of present or future Code
or other government limitations.
The compensation used to determine benefits under the Company's pension
plans is the sum of salary and bonus paid to a participant during a calendar
year. Pensionable earnings for each of the Company's named executive officers
during 1995 include the amount shown for 1995 in the Salary column of the
Summary Compensation Table on page 8, plus the amount of bonus earned in 1994
and paid in 1995, as shown in the Bonus column of the Summary Compensation Table
for 1994. Pensionable earnings in 1995 for Messrs. Moore, Brinzo, Calfee,
Forsythe, O'Neil and West were $662,000, $330,000, $345,000, $223,750, $230,000
and $230,000, respectively. Messrs. Moore, Brinzo, Calfee, Forsythe, O'Neil and
West have 29, 26, 23, 19, 4 and 28 years, respectively, of credited service
under the Company's qualified pension plan.
14
<PAGE> 18
AGREEMENTS AND TRANSACTIONS
The Company has agreements ("Agreements") dated February 1, 1992 with M.
Thomas Moore, Chairman and Chief Executive Officer, John S. Brinzo, Executive
Vice President-Finance and William R. Calfee, Executive Vice
President-Commercial, which specify certain financial arrangements that the
Company will provide upon the termination of such individuals' employment with
the Company under certain circumstances. The Agreements are intended to ensure
continuity and stability of executive management of the Company. The Agreements
provide that, in the event of a "change of control" of the Company (as defined
in the Agreements), such individuals would continue their employment with the
Company in their then current positions for a period of 3 years following such
"change of control".
Under the Agreements, during the 3-year period following a "change of
control", each officer would be entitled to receive base pay and incentive
compensation equivalent to that received prior to the "change of control", and
to continue participation in employee benefit plans. The Agreements also provide
that the officer would receive age and service pension credit through the 3-year
term for pension benefit purposes and provide 1 year of prior actual "industry
service" credit for every 2 years of service with the Company for the sole
purpose of determining when the officer would be eligible for commencement of a
30-year pension benefit. If during the 3-year period, the officer is terminated
by the Company without "cause", becomes disabled, or resigns after (i) not being
maintained in his prior position, (ii) being reduced in compensation or
benefits, (iii) determining he is unable to carry out his duties and
responsibilities, or (iv) being relocated or required to travel excessively
without his consent, such officer would be entitled to lump sum payments of the
then present value of the base pay, incentive compensation, and pension benefits
that he would be entitled to receive under the agreement for the remainder of
the 3-year period, and would be entitled to continue participation in medical
and other welfare benefit plans. The Agreements also entitle the officers to
welfare benefit continuation for life upon retirement or following termination,
unless the termination was for "cause". In addition, the Agreements provide that
officers are eligible for reimbursement of reasonable outplacement expenses. The
aggregate payments to any officer under the Agreements may not exceed the
maximum amount the Company can deduct for Federal income tax purposes, taking
into account the rules applicable under the Code.
None of these arrangements create employment obligations for the Company
unless a "change of control" has occurred, prior to which time the Company and
such officer each reserves the right to terminate their employment relationship.
Both before and after the occurrence of a "change of control", the Company may
terminate the employment of any of such officers for "cause", without an
obligation to pay severance compensation or benefits.
During 1994, the Board of Directors of the Company approved the renewal to
January 1, 1998 of the February 1, 1992 Severance Pay Plan for Key Employees
("Severance Plan") which presently covers 18 key employees. The Severance Plan
is designed to assure continuity, stability, and fair treatment of employees in
key positions in the event of a "change of control" of the Company (as defined
in the Severance Plan). Under the Severance Plan, if during the 3-year period
following a "change of control" a participant is terminated by the Company
without "cause" or resigns after (i) not being maintained in his or her prior
position, (ii) being reduced in compensation or benefits, (iii) determining he
or she is unable to carry out his or her duties and responsibilities, or (iv)
being relocated or required to travel excessively without consent, he or she is
entitled to receive (a) a lump sum payment in the amount of 1 or 2 years of base
pay and incentive compensation (depending upon position), (b) age and service
credit for the full 3-year term for pension benefit purposes, and (c) 1 year of
prior actual "industry service" credit for every 2 years of service with the
Company for the purpose of determining eligibility for commencement of 30-year
pension and other benefits. Participants are entitled to continue participation
in health and life insurance plans for 1 or 2 years or (if earlier) until
covered by similar plans sponsored by a subsequent employer, and are entitled to
medical and other welfare benefit continuation for life following termination,
beginning upon the date that the participant would have had 30 years of service
with the Company without such termination (including credit for the 3-year term
and "industry service" as described above). Also, participants are eligible for
reimbursement of reasonable outplacement expenses. Individuals who would be
covered by the Severance Plan, but who receive severance pay and benefits
pursuant to a "change of control" employment agreement or another plan or
agreement signed on behalf of the Company, are not entitled to benefits under
the Severance Plan. All benefits payable
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<PAGE> 19
under the Severance Plan are to be derived from the Company's then current
operating funds. The aggregate payments to any participant under the Severance
Plan may not exceed the maximum amount the Company can deduct for Federal income
tax purposes, taking into account the rules applicable under the Code. None of
the obligations of the Company described above exist unless a "change of
control" has occurred.
The Company has two trust agreements with Key Trust Company of Ohio, N.A.
which relate to the Agreements and the Severance Plan. The first such trust
agreement provides for the payment of the benefits arising under the Agreements,
and the second trust agreement provides for reimbursement of legal fees and
expenses incurred by the officers in enforcing their rights under the Agreements
and by the the key employees under the Severance Plan.
The Company has indemnification agreements ("Indemnification Agreements")
with each current member of the Board of Directors. The form and execution of
the Indemnification Agreements were approved by the Company's shareholders at
the Annual Meeting convened on April 29, 1987. Such agreements essentially
provide that to the extent permitted by Ohio law, the Company will indemnify the
indemnitee against all expenses, costs, liabilities and losses (including
attorneys' fees, judgments, fines or settlements) incurred or suffered by the
indemnitee in connection with any suit in which the indemnitee is a party or
otherwise involved as a result of his service as a member of the Board or as an
officer. In connection with the foregoing Indemnification Agreements, the
Company has entered into a trust agreement with Key Trust Company of Ohio, N.A.
pursuant to which the parties to the Indemnification Agreements may be
reimbursed with respect to enforcing their respective rights under the
agreements.
The Company has proposed criteria to the United Steel Workers of America
("USWA") for a joint designee to the Board of Directors of the Company pursuant
to a tentative understanding between the USWA and certain Company subsidiaries.
If agreement is reached on such criteria and a designee, the Company would
expect to add such designee to the Board of Directors after the Annual Meeting.
In subsequent years, such designee would be subject to annual re-nomination by
the Company and election by vote of the shareholders. The understanding expires
on August 1, 1999.
APPROVAL OF NONEMPLOYEE DIRECTORS' COMPENSATION PLAN
(PROPOSAL NO. 2)
GENERAL
The Board of Directors has adopted, subject to approval of the Company's
shareholders, the Cleveland-Cliffs Inc Nonemployee Directors' Compensation Plan
("Plan"). The purpose of the Plan is to further align the interests of Directors
and shareholders in enhancing the value of the Company. The Plan is also
expected to assist in attracting and retaining qualified individuals to serve as
Directors. The Plan provides for the grant of 1,000 Restricted Shares to
nonemployee Directors first elected to the Board after June 30, 1995. The Plan
also provides that nonemployee Directors must take at least 50% of their annual
retainer in Common Shares and may take up to 100% of their retainer in Common
Shares. The Plan gives the nonemployee Directors an opportunity to defer
receipt, and therefore the recognition as income for federal income tax
purposes, of all or a portion of their annual retainer. The maximum number of
Common Shares that may be issued under the Plan is 50,000, which may be shares
of original issuance or treasury shares.
The Plan is one of several changes resulting from the Company's review of
Director compensation during 1995, as described above under "Directors'
Compensation." A copy of the Plan is attached hereto as Appendix A and the
summary description below is qualified in its entirety by reference to such
appendix.
SUMMARY DESCRIPTION
Automatic Award of Restricted Shares
The Plan provides that on July 1, 1996, 1,000 Restricted Shares will be
automatically awarded to each nonemployee Director who is first elected or
appointed to the Board as a Director after June 30, 1995 and before July 1,
1996. There will be three individuals entitled to such an award if all nominees
are elected at the Annual Meeting. In addition, each individual who is first
elected or appointed as a nonemployee Director after
16
<PAGE> 20
July 1, 1996 will automatically be awarded 1,000 Restricted Shares on July 1 of
the following year. The number of Restricted Shares may be changed by the Board
Affairs Committee without further approval of the shareholders if future changes
in Rule 16b-3 under the Securities Exchange Act of 1934 would permit such a
change without causing the participants in the Plan to cease to be disinterested
persons within the meaning of such Rule. The Securities and Exchange Commission
has recently proposed an alternative version of Rule 16b-3 which, if adopted,
would make it possible for the Board Affairs Committee to change the number of
Restricted Shares to be awarded to each Director under the Plan without further
approval of the Company's shareholders. However, the Plan requires further
shareholder approval prior to any change in the aggregate number of shares
available under the Plan.
The Restricted Shares are subject to forfeiture until the earliest of the
following ("Vesting Event"): (1) the fifth anniversary of the date of award, (2)
a Change of Control of the Company (as defined in the Plan) or (3) the death or
permanent disability of the Director. Restricted Shares may not be transferred
prior to a Vesting Event.
All Restricted Shares will be forfeited by a Director who is terminated
before a Vesting Event. However, if service as a Director is terminated owing to
removal of a Director without cause before the fifth anniversary of the date of
the award, a pro-rated portion of the shares covered by such award that then
remain forfeitable will become nonforfeitable and freely transferable.
Required Retainer Shares and Voluntary Shares
Nonemployee Directors currently receive an annual cash retainer of $20,000.
Under the Plan, 50% of a Director's retainer established by the Board from time
to time will be payable in cash and 50% of the retainer will be payable in
Common Shares ("Required Retainer Shares"). In addition, before the start of any
calendar quarter, a Director may elect to have up to 100% of the remainder of
his or her fees for the quarter, in excess of 50% of his retainer for the
quarter, paid in Common Shares in lieu of cash ("Voluntary Shares"). For all of
1995 and the first two quarters of 1996, the retainer will be paid in cash. The
retainer for the last two quarters of 1996 will be paid 50% in cash and 50% in
Required Retainer Shares.
On January 1 of each year beginning with January, 1997, the Company will
issue to each Director (i) a number of Required Retainer Shares equal to 50% of
such Director's retainer for each calendar quarter of the prior year, divided by
the respective fair market value of the Common Shares on the first day of each
such calendar quarter, and (ii) a number of Voluntary Shares equal to the
portion of such Director's fees that such Director has elected to receive as
shares in lieu of cash for each such calendar quarter, divided by the respective
fair market value of the Common Shares on the first day of each such calendar
quarter; less the number of shares in each case that the Director has elected to
defer.
Deferral of Receipt of Fees and Shares
A nonemployee Director may elect to defer receipt of all or a portion of
his or her fees and shares (other than Restricted Shares). Interest will be
credited on deferred fees at a rate equal to Moody's Average Corporate Bond
Yield, or such other rate as may be fixed by the Board Affairs Committee from
time to time. Dividend equivalents equal to any cash dividends paid by the
Company will be credited on deferred shares.
When a Director terminates services as a Director, he or she (or in the
event of his or her death, his or her beneficiary) will be entitled to receive
his or her deferred fees and shares, together with the earnings credited to
date. The Plan also provides that a nonemployee Director may irrevocably elect
to receive a pre-termination distribution of all or part of his or her deferred
fees and shares beginning not earlier than the third plan year following the
plan year such fees and shares would have otherwise been payable. A Director may
elect at any time to receive all or part of his or her deferred fees or deferred
shares within sixty days if the amount subject to the distribution is reduced by
10% and that percentage is forfeited.
Distribution of deferred fees will be made in one of the following forms as
elected by a Director: (a) by payment in cash in a single lump sum; (b) by
payment in cash in not greater than 10 annual installments or (c) a combination
of both as designated by the Director. If a Director does not elect one of the
three forms, the distribution will be made in cash in a lump sum.
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<PAGE> 21
Distribution of a Director's deferred shares will be made (a) by payment in
shares or in cash in a single distribution, (b) by payment in shares or in cash
in no greater than 10 annual installments or (c) a combination of both as
designated by the Director.
The Company expects to enter into a trust agreement with Key Trust Company
of Ohio, N.A. relating to the Plan in order to establish arrangements for
funding and payment of the Company's obligations under the Plan.
Administration, Amendment and Termination
The Plan is administered by the Board Affairs Committee. The Board may
amend or terminate the Plan from time to time. However, no such action may
affect a nonemployee Director's rights in awards without the Director's consent.
Without approval of shareholders, no such action shall increase the number of
shares available under the Plan or otherwise cause Rule 16b-3 to become
inapplicable to the Plan.
Prior Plans
If the Plan is approved by shareholders, no further options will be issued
to nonemployee Directors on or after July 1, 1996 pursuant to the Company's 1992
Incentive Equity Plan. The 1992 Incentive Equity Plan presently provides for the
automatic award of options for 500 Common Shares each year to nonemployee
Directors. The Company's existing Plan for Deferred Payment of Directors' Fees
will also be discontinued, and any amount credited to an account under that plan
will be transferred to an account under the Plan.
FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of the Federal income tax treatment of the
Restricted Share awards and income deferral actions under the Plan based upon
the current provisions of the Internal Revenue Code of 1986, as amended, and
regulations promulgated thereunder.
Restricted Share Awards. Restricted Shares awarded under the Plan will
constitute taxable income to the recipient, and a deductible expense to the
Company, in the year in which the restrictions lapse unless the Director elects
to recognize income in the year the award is made. Unless such an election is
made, the amount of the taxable income and corresponding deduction will be equal
to the fair market value of the shares on the date the restrictions lapse. The
Company is also allowed a compensation deduction for dividends paid to the
Directors (provided they have not elected to recognize income at the time of the
award) on Restricted Shares while the restrictions remain in force.
Required Retainer Shares and Voluntary Shares. Required Retainer Shares
and Voluntary Shares whose receipt is not deferred at the election of a Director
will constitute taxable income to the individual Director, and a deductible
expense to the Company, in an amount equal to the fair market value of the
shares, in the year in which the shares are issued.
Deferred Income. Fees and shares that a Director elects to defer under the
Plan will become subject to Federal income taxation to the Director only as and
when the cash or shares is actually paid over to the Director. The Company will
become entitled to a compensation expense deduction at the same time. The same
treatment applies to interest and dividends credited to the Director's account
during the period of deferral.
18
<PAGE> 22
PLAN BENEFITS
Set forth in the table below is the dollar value of Common Shares that the
Company anticipates will be awarded during 1996 to the current nonemployee
Directors following shareholder approval at the 1996 Annual Meeting.
<TABLE>
NEW PLAN BENEFITS TABLE
- --------------------------------------------------------------------------------------------------------
CLEVELAND-CLIFFS INC NONEMPLOYEE
DIRECTORS' COMPENSATION PLAN
<CAPTION>
- --------------------------------------------------------------------------------------------------------
DOLLAR NUMBER OF
NAME AND POSITION VALUE($) UNITS (SHARES)
- --------------------------------------------------------------------------------------------------------
<S> <C> <C>
Executive Group......................................................... -0- -0-
Non-Executive Director Group (1)........................................ $95,950 2,086
- --------------------------------------------------------------------------------------------------------
<FN>
- ---------------
(1) The Non-Executive Director Group consists of 10 nonemployee Directors. The
table above reflects the award of 1,000 Restricted Shares to one current
nonemployee Director who joined the Board after June 30, 1995 and the
receipt of Required Retainer Shares by all current nonemployee Directors at
an assumed fair market value of $46.00 per share, the market price of the
Common Shares on March 15, 1996, and based upon the current annual retainer
of $20,000 per year. The table does not reflect 2,000 Restricted Shares that
will be awarded on July 1, 1996 to the two nominees who are not currently
serving as Directors nor does the table reflect the receipt of any Required
Retainer Shares by such nominees.
</TABLE>
REQUIRED VOTE
Approval of the Plan requires the affirmative vote of the holders of a
majority of Common Shares present, or represented, and entitled to vote on the
matter at the Annual Meeting.
THE DIRECTORS RECOMMEND A VOTE FOR THIS PROPOSAL TO APPROVE THE
CLEVELAND-CLIFFS INC NONEMPLOYEE DIRECTORS' COMPENSATION PLAN.
APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
(PROPOSAL NO. 3)
A proposal will be presented at the Meeting to ratify the appointment of
the firm of Ernst & Young LLP as independent public accountants to examine the
books of account and other records of the Company and its consolidated
subsidiaries for the fiscal year ending December 31, 1996. Representatives of
Ernst & Young LLP are expected to be present at the Meeting. Such
representatives will have an opportunity to make a statement if they so desire
and are expected to be available to respond to appropriate questions. Although
such ratification is not required by law, the Board of Directors believes that
shareholders should be given this opportunity to express their views on the
subject. While not binding on the Board of Directors, the failure of the
shareholders to ratify the appointment of Ernst & Young LLP as the Company's
independent public accountants would be considered by the Board in determining
whether or not to continue the engagement of Ernst & Young LLP.
THE DIRECTORS RECOMMEND A VOTE FOR THIS PROPOSAL TO RATIFY THE APPOINTMENT
OF ERNST & YOUNG LLP AS YOUR COMPANY'S INDEPENDENT PUBLIC ACCOUNTANTS.
ANNUAL REPORT
The Company's 1995 Annual Report to Shareholders, including financial
statements, is being distributed to all shareholders of the Company together
with this Proxy Statement, in satisfaction of the requirements of the SEC.
Additional copies of such report are available upon request. To obtain
additional copies of such Annual Report please contact the Company's Investor
Relations Department at (216) 694-5459.
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<PAGE> 23
GENERAL INFORMATION
The cost of soliciting proxies will be paid by the Company. In addition to
solicitation by mail, solicitations may also be made by personal interview,
telegram and telephone. Arrangements will be made with brokerage houses and
other custodians, nominees and fiduciaries to send proxies and proxy material to
their principals, and the Company will reimburse them for their expenses in so
doing. Officers and other regular employees of the Company, as yet undesignated,
may also request the return of proxies by telephone, telegram, or in person.
Finally, the Company has retained Georgeson & Company Inc., New York, New York,
to assist in the solicitation of proxies using the means referred to above, at
an anticipated cost of $9,500, plus reasonable expenses.
Pursuant to regulations of the SEC, the material appearing under the
captions "Compensation Committee Report on Executive Compensation" and
"Shareholder Return Performance" are not deemed to be soliciting material or to
be filed with the SEC or subject to Regulation 14A promulgated by the SEC or
Section 18 of the Securities Exchange Act of 1934.
The Common Shares represented by properly executed proxy cards will be
voted as specified. It is intended that the Common Shares represented by proxies
on which no specification has been made will be voted FOR the election of the
nominees for Director named herein or such substitute nominees as the Board of
Directors may designate, FOR approval of the Nonemployee Directors' Compensation
Plan, FOR ratification of Ernst & Young LLP as the firm of independent public
accountants to examine the books of account and other records of the Company and
its consolidated affiliates for the fiscal year 1996 and at the discretion of
the persons named as proxies on all other matters which may properly come before
the Meeting.
At the Meeting, the results of shareholder voting will be tabulated by the
inspector of elections appointed for the Meeting. The Company intends to treat
properly executed proxies that are marked "abstain" or that are held in "street
name" by brokers and are not voted on one or more particular proposals (if
otherwise voted on at least one proposal) as "present" for purposes of
determining whether a quorum has been achieved at the Meeting. The candidates
for Directors receiving a majority of the votes will be elected. Votes withheld
in respect of the election of Directors will not be counted in determining the
outcome of that vote. In respect of the proposal to adopt the Cleveland-Cliffs
Inc Nonemployee Directors' Compensation Plan and the proposal to ratify the
appointment of the independent public accountants, abstentions will be treated
as votes against the proposal, and broker non-votes will be treated as having no
effect on the outcome of the vote.
If notice in writing shall be given by any shareholder to the President, a
Vice President or the Secretary, not less than 48 hours before the time fixed
for the holding of the Meeting, that such shareholder desires that the voting
for the election of Directors shall be cumulative, and if an announcement of the
giving of such notice is made upon the convening of the Meeting by the Chairman
or Secretary or by or on behalf of the shareholder giving such notice, each
shareholder shall have the right to cumulate such voting power as he or she
possesses at such election. Under cumulative voting a shareholder may cast for
any one nominee as many votes as shall equal the number of Directors to be
elected, multiplied by the number of his or her Common Shares. All of such votes
may be cast for a single nominee or may be distributed among any two or more
nominees as he or she may desire. If cumulative voting is invoked, and unless
contrary instructions are given by a shareholder who signs a proxy, all votes
represented by such proxy will be cast in such manner and in accordance with the
discretion of the person acting as proxy as will result in the election of as
many of the Board of Directors' nominees as is possible.
OTHER BUSINESS
It is not anticipated that any other matters will be brought before the
Meeting for action; however, if any such other matters shall properly come
before the Meeting, it is intended that the persons authorized under proxies
may, in the absence of instructions to the contrary, vote or act thereon in
accordance with their best judgment.
20
<PAGE> 24
SHAREHOLDER PROPOSALS
Any proposal by a shareholder intended to be presented at the 1997 Annual
Meeting of Shareholders must be received by your Company on or before November
24, 1996 to be included in the proxy materials of your Company relating to such
meeting.
IMPORTANT
TO ASSURE YOUR REPRESENTATION AND A QUORUM FOR THE TRANSACTION OF BUSINESS AT
THE MEETING, PLEASE SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD PROMPTLY.
21
<PAGE> 25
APPENDIX A
CLEVELAND-CLIFFS INC NONEMPLOYEE
DIRECTORS' COMPENSATION PLAN
The Cleveland-Cliffs Inc Nonemployee Directors' Compensation Plan ("Plan")
is effective as of July 1, 1996, subject to approval of shareholders at the 1996
annual meeting.
ARTICLE I. DEFINITIONS
Whenever the following terms are used in this Plan they shall have the
meanings specified below unless the context clearly indicates to the contrary:
(a) "Account": A Deferred Fee Account and/or a Deferred Share Account,
as the context may require.
(b) "Accounting Date": December 31 of each year and the last day of
each calendar quarter.
(c) "Accounting Period": The quarterly period beginning on the date
immediately following an Accounting Date and ending the next following
Accounting Date.
(d) "Administrator": The Board Affairs Committee of the Board or any
successor committee designated by the Board.
(e) "Beneficiary": The person or persons (natural or otherwise)
designated pursuant to Section 7.7.
(f) "Board": The Board of Directors of the Company.
(g) "Change of Control": The meaning set forth in Section 3.1(b).
(h) "Code": The Internal Revenue Code of 1986, as amended.
(i) "Company": Cleveland-Cliffs Inc or any successor or successors
thereto.
(j) "Declared Rate": The Moody's Corporate Average Bond Yield as
adjusted on the first business day of January, April, July and October or
such other rate as the Administrator shall determine from time to time.
(k) "Deferral Commitment": An agreement made by a Director in a
Participation Agreement to have all or a specified portion of his or her
Fees, Required Retainer Shares and/or Voluntary Shares deferred under the
Plan for a specified period in the future.
(l) "Deferral Period": The Plan Year for which a Director has elected
to defer all or a portion of his or her Fees, Required Retainer Shares
and/or Voluntary Shares.
(m) "Deferred Fees": The Fees credited to a Director's Deferred Fee
Account pursuant to Articles IV and V and payable to a Director pursuant to
Article VII.
(n) "Deferred Fee Account": The account maintained on the books of the
Company for each Director pursuant to Article V.
(o) "Deferred Shares": The Required Retainer Shares and Voluntary
Shares credited to a Director's Deferred Share Account pursuant to Articles
IV and VI and payable to a Director pursuant to Article VII.
(p) "Deferred Share Account": The account maintained on the books of
the Company for each Director pursuant to Article VI.
(q) "Director": An individual duly elected or chosen as a Director of
the Company who is not also an employee of the Company or any of its
subsidiaries.
<PAGE> 26
(r) "Fair Market Value": With respect to a Share, the last reported
closing price for a Share on the New York Stock Exchange (or any
appropriate over-the-counter market if the Shares are no longer listed on
such Exchange) for a day specified herein for which such fair market value
is to be calculated, or if there was no sale of Shares so reported for such
day, on the most recently preceding day on which there was such a sale.
(s) "Fees": The portion of the annual Retainer and other Director
compensation payable in cash.
(t) "Participation Agreement": The agreement submitted by a Director
to the Administrator in which a Director may specify an amount of Voluntary
Shares, or may elect to defer receipt of all or any portion of his or her
Fees, Required Retainer Shares and/or Voluntary Shares for a specified
period in the future.
(u) "Plan": The Plan set forth in this instrument as it may from time
to time be amended.
(v) "Plan Year": The 12-month period beginning January 1 and ending
December 31.
(w) "Prior Plan": The Company's existing Plan for Deferred Payment of
Directors' Fees originally adopted in 1981.
(x) "Restricted Shares": Shares automatically awarded pursuant to
Section 3.1 as to which neither the substantial risk of forfeiture nor the
restrictions on transfer referred to in Section 3.1 hereof have expired.
(y) "Retainer": The portion of a Director's annual compensation that
is payable without regard to number of Board or committee meetings attended
or committee positions.
(z) "Required Retainer Shares": An amount, payable in Shares,
constituting 50% of a Director's Retainer.
(aa) "Rule 16b-3": Rule 16b-3 promulgated under the Securities
Exchange Act of 1934 (or any successor rule to the same effect), as in
effect from time to time.
(bb) "Settlement Date": The date on which a Director terminates as a
Director. Settlement Date shall also include with respect to any Deferral
Period the date prior to the date of termination as a Director selected by
a Director in a Participation Agreement for distribution of all or a
portion of the Fees, Required Retainer Shares and Voluntary Shares deferred
during such Deferral Period as provided in Section 7.3.
(cc) "Shares": The Company's fully paid, non-assessable Common Shares,
par value $1.00 per share. Shares may be shares of original issuance or
treasury shares or a combination of the foregoing.
(dd) "Voluntary Shares": The meaning set forth in Section 3.2(b).
ARTICLE II. PURPOSE
The purpose of this Plan is to provide for the award of Restricted Shares
to Directors and for the payment to Directors of at least one-half of the
Retainer earned by them for services as Directors in Shares in order to further
align the interests of Directors with the shareholders of the Company and
thereby promote the long-term success and growth of the Company. In addition,
the Plan is intended to provide Directors with opportunities to invest
additional amounts of their compensation payable for services as a Director in
Shares and defer receipt of any or all of such compensation, other than
Restricted Shares.
ARTICLE III. RESTRICTED SHARES, REQUIRED RETAINER SHARES
AND VOLUNTARY SHARES
3.1 Automatic Awards of Restricted Shares.
(a) Restricted Shares shall be automatically awarded to Directors as
follows:
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<PAGE> 27
(i) Each individual who is first elected or appointed to the Board as
a Director after June 30, 1995 and before July 1, 1996 shall be awarded
1,000 Restricted Shares on July 1, 1996.
(ii) Each individual who is first elected or appointed to the Board as
a Director on or after July 1, 1996 shall be awarded 1,000 Restricted
Shares on July 1 of the following year.
(b) The Restricted Shares may not be assigned, exchanged, pledged, sold,
transferred or otherwise disposed of by a Director, except to the Company, and
shall be subject to forfeiture as herein provided until the earliest to occur of
the following ("Vesting Event"): (a) the fifth anniversary of the date of award;
(b) a Change of Control (as defined below); or (c) death or permanent
disability. Any purported transfer in violation of the provisions of this
paragraph shall be null and void, and the purported transferee shall obtain no
rights with respect to such Restricted Shares. For purposes of this Section 3.1,
"Change of Control" shall mean the occurrence of any of the following events:
(i) 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;
(ii) The Company shall sell or otherwise transfer all or substantially
all of its assets to any other corporation or other legal person, and
immediately after such sale or transfer less than 70% of the combined
voting power of the outstanding voting securities of such corporation or
person is held in the aggregate by the former shareholders of the Company
as the same shall have existed immediately prior to such sale or transfer;
(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 and Exchange
Act of 1934) of 30% or more of the outstanding voting securities of the
Company (whether directly or indirectly); or
(iv) 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.
(c) All of the Restricted Shares shall be forfeited by a Director who is
terminated before a Vesting Event; provided, however, if service as a Director
is terminated by the Company owing to removal as a Director without cause before
the fifth anniversary of the date of an award, a portion of the Restricted
Shares covered by such award that then remain forfeitable shall become freely
transferable and nonforfeitable as follows: that number of Restricted Shares
shall become freely transferable and nonforfeitable which bears the same ratio
to the total number of Restricted Shares subject to such award that then remain
forfeitable and would have become forfeitable at the Vesting Date as the number
of full months from the date of award to the date of termination of such service
bears to 60, and the balance of the Restricted Shares subject to such award
shall be forfeited to the Company.
(d) Unless otherwise directed by the Administrator, all certificates
representing Restricted Shares shall be held in custody by the Company until the
occurrence of a Vesting Event. As a condition to each award of Restricted
Shares, unless otherwise determined by the Administrator, each Director shall
have delivered to the Company a stock power, endorsed in blank, relating to the
Restricted Shares covered by such award. After the occurrence of a Vesting
Event, assuming no event has occurred that would effect a forfeiture of a
Director's Restricted Shares, a certificate or certificates evidencing
unrestricted ownership of such Shares shall be delivered to the Director.
3
<PAGE> 28
3.2 Required Retainer Shares and Voluntary Shares.
(a) Retainer. Commencing with the Retainer for the third Accounting Period
during 1996, 50% of the Retainer established by the Board from time to time
shall be payable in cash and 50% of such Retainer shall be payable as Required
Retainer Shares payable on January 1 of the following year (unless deferred in
accordance with this Plan).
(b) Voluntary Shares. Prior to the commencement of any calendar quarter, a
Director may elect by the filing of a Participation Agreement to have up to 100%
of his or her Fees for such quarter paid by the Company in the form of Voluntary
Shares and in lieu of the cash payment. Such Participation Agreement must be
filed as a one-time election. Such election, unless subsequently terminated,
shall apply to a Director's Fees for the remainder of the current Plan Year and
each subsequent Plan Year. Once an election has been terminated another election
may not be made.
(c) Issuance of Shares. On January 1 of each year beginning with January
1, 1997, the Company shall issue (i) to each Director a number of Required
Retainer Shares equal to 50% of such Director's Retainer for each Accounting
Period during the prior Plan Year divided by the Fair Market Value per Share on
the first day of such Accounting Period and (ii) to each Director who has made
an election under Section 3.2(b) a number of Voluntary Shares for each such
Accounting Period equal to the portion of such Director's Fees in excess of 50%
of such Director's Retainer for such Accounting Period that such Director has
elected to receive as Voluntary Shares for such Accounting Period divided by the
Fair Market Value per Share on the first day of such Accounting Period (less, in
each case, the portion of the Required Retainer Shares and Voluntary Shares the
Director elected to defer under Section 4.3). To the extent that the application
of the foregoing formula would result in the issuance of fractional Shares, no
fractional Shares shall be issued, but instead, the Company shall maintain two
separate non-interest-bearing accounts for each Director, which accounts shall
be credited with the amount of any Required Retainer Shares or Voluntary Shares,
as the case may be, not convertible into whole Shares, which amounts shall be
combined with Required Retainer Shares and Voluntary Shares, respectively, which
are paid for the next following Plan Year. When whole Shares are issued by the
Company to the Director on January 1, the amounts in such accounts shall be
reduced by that amount which (when added to the Required Retainer Shares and
Voluntary Shares for such Director for such quarter) results in the issuance of
the maximum number of Shares to such Director. The Company shall pay any and all
fees and commissions incurred in connection with the payment of Required
Retainer Shares and Voluntary Shares to a Director in Shares.
ARTICLE IV. DEFERRAL OF FEES, REQUIRED RETAINER SHARES
AND VOLUNTARY SHARES
4.1 Deferral of Fees. A Director may elect to defer all or a specified
percentage of his or her Fees, and may change such percentage by filing a
Participation Agreement with the Administrator, which shall be effective as of
the first day of the Plan Year which commences after the date such Participation
Agreement is filed with the Administrator.
4.2 Crediting of Deferred Fees. The portion of a Director's Fees that is
deferred pursuant to a Deferral Commitment shall be credited promptly following
each Plan Year to the Director's Deferred Fee Account as of the date the
corresponding non-deferred portion of his or her Fees would have been paid to
the Director.
4.3 Deferral of Required Retainer Shares and Voluntary Shares. A Director
may elect to defer all or a specified percentage of his or her Required Retainer
Shares and his or her Voluntary Shares, and may change such percentage by filing
a Participation Agreement with the Administrator, which shall be effective as of
the first day of the Plan Year which commences after the date such Participation
Agreement is filed with the Administrator.
4.4 Crediting of Deferred Shares. The portion of a Directors Required
Retainer Shares and Voluntary Shares that is deferred pursuant to a Deferral
Commitment shall be credited promptly following each Plan Year to the Director's
Deferred Share Account as of the date the corresponding non-deferred portion of
his or her Required Retainer Shares and Voluntary Shares would have been issued
to the Director.
4
<PAGE> 29
4.5 Withholding Taxes. If the Company is required to withhold any taxes or
other amounts from a Director's Deferred Fees or Deferred Shares pursuant to any
state, Federal or local law, such amounts shall, to the extent possible, be
deducted from the Director's Fees or Required Retainer Shares or Voluntary
Shares before such amounts are credited as described in Sections 4.2 and 4.4
above. Any additional withholding amount required shall be paid by the Director
to the Company as a condition of crediting his or her Accounts.
ARTICLE V. DEFERRED FEE ACCOUNT
5.1 Determination of Deferred Fee Account. On any particular date, a
Director's Deferred Fee Account shall consist of the aggregate amount credited
thereto pursuant to Section 4.2, plus any interest credited pursuant to Section
5.2, minus the aggregate amount of distributions, if any, made from such
Deferred Fee Account.
5.2 Crediting of Interest. Each Deferred Fee Account to which Fees have
been credited in dollar amounts shall be increased by the amount of interest
earned since the immediately preceding Accounting Date. Interest shall be
credited at the Declared Rate as of each Accounting Date based on the average
daily balance of the Director's Deferred Fee Account since the immediately
preceding Accounting Date, but after the Deferred Fee 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 Accounting Date applicable to
a Deferred Fee Account shall be prorated.
5.3 Adjustments to Deferred Fee Accounts. Each Director's Deferred Fee
Account shall be immediately debited with the amount of any distributions under
the Plan to or on behalf of the Director or, in the event of his or her death,
his or her Beneficiary.
5.4 Statements of Deferred Fee Accounts. As soon as practicable after the
end of each Plan Year, a statement shall be furnished to each Director or, in
the event of his or her death, to his or her Beneficiary showing the status of
his or her Deferred Fee Account as of the end of the Accounting Period, any
changes in such Account since the end of the immediately preceding Accounting
Period, and such other information as the Administrator shall determine.
5.5 Vesting of Deferred Fee Account. A Director shall be 100% vested in
his or her Deferred Fee Account at all times.
ARTICLE VI. DEFERRED SHARE ACCOUNT
6.1 Determination of Deferred Share Account. On any particular date, a
Director's Deferred Share Account shall consist of the aggregate number of
Deferred Shares credited thereto pursuant to Section 4.4, plus any dividend
equivalents credited pursuant to Section 6.2, minus the aggregate amount of
distributions, if any, made from such Deferred Share Account.
6.2 Crediting of Dividend Equivalents. Each Deferred Share Account shall
be credited as of the end of each Accounting Period with additional Deferred
Shares equal in value to the amount of cash dividends paid by the Company during
such Accounting Period on that number of Shares equivalent to the number of
Deferred Shares in such Deferred Share Account during such Accounting Period.
The dividend equivalents shall be valued by dividing the dollar value of such
dividend equivalents by the Fair Market Value on the Accounting Date next
following the dividend payment date. Until a Director or his or her Beneficiary
receives his or her entire Deferred Share Account, the unpaid balance thereof
credited in Deferred Shares shall be credited with dividend equivalents as
provided in this Section 6.2.
6.3 Adjustments to Deferred Share Accounts. Each Director's Deferred Share
Account shall be immediately debited with the amount of any distributions under
the Plan to or on behalf of the Director or, in the event of his or her death,
his or her Beneficiary.
6.4 Statements of Deferred Share Accounts. As soon as practicable after
the end of each Plan Year, a statement shall be furnished to each Director or,
in the event of his or her death, to his or her Beneficiary showing the status
of his or her Deferred Share Account as of the end of the Accounting Period, any
changes
5
<PAGE> 30
in such Account since the end of the immediately preceding Accounting Period,
and such other information as the Administrator shall determine.
6.5 Vesting of Deferred Share Account. A Director shall be 100% vested in
his or her Deferred Share Account at all times.
ARTICLE VII. DISTRIBUTION OF BENEFITS
7.1 Settlement Date. A Director, or in the event of such Director's death,
his or her Beneficiary shall be entitled to all or a portion of the balance in
such Director's Deferred Fee Account and Deferred Share Account, as provided in
this Article VII, following such Director's Settlement Date or Dates.
7.2 Amount to be Distributed. The amount to which a Director, or in the
event of such Director's death, his or her Beneficiary is entitled in accordance
with the following provisions of this Article VII shall be based on the
Director's adjusted balances in his or her Deferred Fee Account and Deferred
Share Account determined as of the Accounting Date coincident with or next
following his or her Settlement Date or Dates.
7.3 In-Service Distribution. A Director may irrevocably elect to receive a
pre-termination distribution of all or any specified percentage of his or her
Deferred Fees or Deferred Shares for any Plan Year on or commencing not earlier
than the beginning of the third Plan Year following the Plan Year such Fees and
Shares otherwise would have been payable. A Director's election of a
pre-termination distribution shall be made in a Participation Agreement filed
for the Plan Year as provided in Section 4.1 or Section 4.3. A Director shall
elect irrevocably to receive such Deferred Fees and/or Deferred Shares as a
pre-termination distribution under one of the forms provided in Section 7.4 or
Section 7.5.
7.4 Form of Distribution -- Deferred Fees. As soon as practicable after
the end of the Accounting Period in which a Director's Settlement Date occurs,
but in no event later than thirty days following the end of such Accounting
Period, the Company shall distribute or cause to be distributed, to the Director
the balance of the Director's Deferred Fee Account as determined under Section
7.2, under one of the forms provided in this Section 7.4. Notwithstanding the
foregoing, if elected by the Director, the distribution of all or a portion of
the Director's Deferred Fee Account may be made or may commence at the beginning
of the Plan Year next following his or her Settlement Date. In the event of a
Director's death, the balance of his or her Deferred Fee Account shall be
distributed to his or her Beneficiary in a lump sum.
Distribution of a Director's Deferred Fee Account shall be made in one of
the following forms as elected by the Director:
(a) by payment in cash in a single lump sum;
(b) by payment in cash in not greater than ten annual installments; or
(c) a combination of (a) and (b) above. The Director shall designate
the percentage payable under each option.
The Director's election of the form of distribution shall be made by written
notice filed with the Administrator at least one year prior to the Director's
voluntary retirement as a Director. Any such election may be changed by the
Director at any time and from time to time without the consent of any other
person by filing a later signed written election with the Administrator;
provided that any election made less than one year prior to the Director's
voluntary termination as a Director shall not be valid, and in such case payment
shall be made in accordance with the Director's prior election.
The amount of cash to be distributed in each installment shall be equal to
the quotient obtained by dividing the Director's Deferred Fee 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 Director at the time of
calculation.
If a Director fails to make an election in a timely manner as provided in
this Section 7.4, distribution shall be made in cash in a lump sum.
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<PAGE> 31
7.5 Form of Distribution -- Deferred Shares. As soon as practicable after
the end of the Accounting Period in which a Director's Settlement Date occurs,
but in no event later than thirty days following the end of such Accounting
Period, the Company shall distribute or cause to be distributed, to the Director
a number of Shares equal to the number of Deferred Shares in the Director's
Deferred Share Account as determined under Section 7.2, under one of the forms
provided in this Section 7.5. Notwithstanding the foregoing, if elected by the
Director, the distribution of all or a portion of the Director's Deferred Share
Account may be made or may commence at the beginning of the Plan Year next
following his or her Settlement Date. In the event of a Director's death, the
number of Shares equal to the number of Deferred Shares in his or her Deferred
Share Account shall be distributed to his or her Beneficiary in a single
distribution.
Distribution of a Director's Deferred Share Account shall be made in one of
the following forms as elected by the Director:
(a) by payment in Shares or cash in a single distribution;
(b) by payment in Shares or cash in not greater than ten annual
installments; or
(c) a combination of (a) and (b) above. The Director shall designate
the percentage payable under each option.
The Director's election of the form of distribution shall be made by written
notice filed with the Administrator at least one year prior to the Director's
voluntary retirement as a Director. Any such election may be changed by the
Director at any time and from time to time without the consent of any other
person by filing a later signed written election with the Administrator;
provided that any election made less than one year prior to the Director's
voluntary termination as a Director shall not be valid, and in such case payment
shall be made in accordance with the Director's prior election.
The number of Shares to be distributed in each installment shall be equal
to the quotient obtained by dividing the number of Deferred Shares in the
Director's Deferred Share Account as of the date of such installment payment by
the number of installment payments remaining to be made to or in respect of such
Director at the time of calculation. Fractional Shares shall be rounded down to
the nearest whole Share, and such fractional amount shall be re-credited as a
fractional Deferred Share in the Director's Deferred Share Account.
If a Director elects payment in a single distribution in cash, the amount
of the payout shall be equal to the Fair Market Value of the Deferred Shares in
the Director's Deferred Share Account on the Settlement Date. If such Director
elects payout in installments in cash, an amount equal to the Fair Market Value
of the Deferred Shares in the Director's Deferred Share Account on the
Settlement Date shall be transferred to the Director's Deferred Fee Account
pending distribution.
If a Director fails to make an election in a timely manner as provided in
this Section 7.5, distribution of the Director's Deferred Share Account shall be
made in Shares in a single distribution.
7.6 Special Distributions. Notwithstanding any other provision of this
Article VII, a Director may elect to receive a distribution of part or all of
his or her Deferred Fee Account and/or Deferred Share Account in one or more
distributions if (and only if) the amount in the Director's Deferred Fee Account
and/or the number of the Shares in the Director's Deferred Share Account subject
to such distribution is reduced by 10 percent. Any distribution made pursuant to
such an election shall be made within sixty days of the date such election is
submitted to the Administrator. The remaining 10 percent of the portion of the
electing Director's Deferred Fee Account and/or Deferred Share Account subject
to such distribution shall be forfeited.
7.7 Beneficiary Designation. As used in the Plan the term "Beneficiary"
means:
(a) The person last designated as Beneficiary by the Director in
writing on a form prescribed by the Administrator;
(b) If there is no designated Beneficiary or if the person so
designated shall not survive the Director, such Director's spouse; or
7
<PAGE> 32
(c) If no such designated Beneficiary and no such spouse is living
upon the death of a Director, or if all such persons die prior to the
distribution of the Director's balance in his or her Deferred Fee Account
and Deferred Share Account, then the legal representative of the last
survivor of the Director and such persons, or, if the Administrator shall
not receive notice of the appointment of any such legal representative
within one year after such death, the heirs-at-law of such survivor shall
be the Beneficiaries to whom the then remaining balance of such Accounts
shall be distributed (in the proportions in which they would inherit his or
her intestate personal property).
Any Beneficiary designation may be changed from time to time by the filing of a
new form. No notice given under this Section 7.7 shall be effective unless and
until the Administrator actually receives such notice.
7.8 Facility of Payment. Whenever and as often as any Director or his or
her Beneficiary entitled to payments hereunder shall be under a legal disability
or, in the sole judgment of the Administrator, shall otherwise be unable to
apply such payments to his or her own best interests and advantage, the
Administrator in the exercise of its discretion may direct all or any portion of
such payments to be made in any one or more of the following ways: (i) directly
to him or her; (ii) to his or her legal guardian or conservator; or (iii) to his
or her spouse or to any other person, to be expended for his or her benefit; and
the decision of the Administrator, shall in each case be final and binding upon
all persons in interest.
ARTICLE VIII. ADMINISTRATION, AMENDMENT AND TERMINATION
8.1 Administration. The Plan shall be administered by the Administrator.
The Administrator shall have such powers as may be necessary to discharge its
duties hereunder. The Administrator may, from time to time, employ, appoint or
delegate to an agent or agents (who may be an officer or officers of the
Company) and delegate to them such administrative duties as it sees fit, and may
from time to time consult with legal counsel who may be counsel to the Company.
The Administrator shall have no power to add to, subtract from or modify any of
the terms of the Plan, or to change or add to any benefits provided under the
Plan, or to waive or fail to apply any requirements of eligibility for a benefit
under the Plan. No member of the Administrator shall act in respect of his or
her own Deferred Fee Account or his or her own Deferred Share Account. All
decisions and determinations by the Administrator shall be final and binding on
all parties. No member of the Administrator shall be liable for any such action
taken or determination made in good faith. All decisions of the Administrator
shall be made by the vote of the majority, including actions and writing taken
without a meeting. All elections, notices and directions under the Plan by a
Director shall be made on such forms as the Administrator shall prescribe.
8.2 Amendment and Termination. The Board may alter or amend this Plan from
time to time or may terminate it in its entirety; provided, however, that no
such action shall, without the consent of a Director, affect the rights in any
Shares issued or to be issued to such Director, in any Deferred Shares in a
Director's Deferred Share Account or in any amounts in a Director's Deferred Fee
Account; and further provided, that, without further approval by the
shareholders of the Company no such action shall (a) increase the total number
of Shares available for issuance under this Plan specified in Article X or (b)
otherwise cause Rule 16b-3 to become inapplicable to this Plan.
ARTICLE IX. FINANCING OF BENEFITS
9.1 Financing of Benefits. The Shares and benefits payable in cash under
the Plan to a Director or, in the event of his or her death, to his or her
Beneficiary shall be paid by the Company from its general assets. The right to
receive payment of the Shares and benefits payable in cash represents an
unfunded, unsecured obligation of the Company. No person entitled to payment
under the Plan shall have any claim, right, security interest or other interest
in any fund, trust, account, insurance contract, or asset of the Company which
may be responsible for such payment.
9.2 Security for Benefits. Notwithstanding the provisions of Section 9.1,
nothing in this Plan shall preclude the Company from setting aside Shares or
funds in trust ("Trust") pursuant to one or more trust agreements between a
trustee and the Company. However, no Director or Beneficiary shall have any
secured
8
<PAGE> 33
interest or claim in any assets or property of the Company or the Trust and all
Shares or funds contained in the Trust shall remain subject to the claims of the
Company's general creditors.
ARTICLE X. SHARES SUBJECT TO PLAN
10.1 Shares Subject to Plan. Subject to adjustment as provided in this
Plan, the total number of Shares which may be issued under this Plan shall be
50,000.
10.2 Adjustments. In the event of any change in the outstanding Shares by
reason of (a) any stock dividend, stock split, combination of shares,
recapitalization or any other change in the capital structure of the Company,
(b) any merger, consolidation, spin-off, split-off, spin-out, split-up,
reorganization, partial or complete liquidation or other distribution of assets,
issuance of rights or warrants to purchase securities, or (c) any other
corporate transaction or event having an effect similar to any of the foregoing,
the number and kind of shares specified in Article III, the number or kind of
Shares that may be issued under the Plan as specified in Article X and the
number of Deferred Shares in a Director's Deferred Share Account shall
automatically be adjusted so that the proportionate interest of the Directors
shall be maintained as before the occurrence of such event. Such adjustment
shall be conclusive and binding for all purposes with respect to the Plan.
ARTICLE XI. PRIOR PLANS
11.1 1992 Incentive Equity Plan. No further options shall be issued to the
Directors under Section 8 of the Company's 1992 Incentive Equity Plan on or
after July 1, 1996.
11.2 Plan for Deferred Payment of Director's Fees. Upon the approval of
this Plan by the shareholders of the Company, the Prior Plan shall be
discontinued, except that any amount remaining payable to former Directors in
the Prior Plan shall be paid in accordance with its terms. Participants in the
Prior Plan who are currently Directors shall be covered by this Plan and the
bookkeeping entries representing Shares theretofore credited to the account of
any current Director in the Prior Plan prior to such discontinuance shall be
transferred to a Deferred Share Account for such Director. Any deferral election
by a Director in force under the Prior Plan shall continue in effect in
accordance with its terms.
ARTICLE XII. GENERAL PROVISIONS
12.1 Interests Not Transferable; Restrictions on Shares and Rights to
Shares. No rights to Shares or other benefits payable in cash shall be
assigned, pledged, hypothecated or otherwise transferred by a Director or any
other person, voluntarily or involuntarily, other than (i) by will or the laws
of descent and distribution, or (ii) pursuant to a domestic relations order
meeting the definition of a qualified domestic relations order under the Code.
No person shall have any right to commute, encumber, pledge or dispose of any
other interest herein or right to receive payments hereunder, nor shall such
interests or payments be subject to seizure, attachment or garnishment for the
payments of any debts, judgments, alimony or separate maintenance obligations or
be transferable by operation of law in the event of bankruptcy, insolvency or
otherwise, all payments and rights hereunder being expressly declared to be
nonassignable and nontransferable.
12.2 Governing Law. The provisions of this Plan shall be governed by and
construed in accordance with the laws of the State of Ohio.
12.3 Withholding Taxes. To the extent that the Company is required to
withhold Federal, state or local taxes in connection with any component of a
Director's compensation in cash or Shares, and the amounts available to the
Company for such withholding are insufficient, it shall be a condition to the
receipt of any Shares that the Director make arrangements satisfactory to the
Company for the payment of the balance of such taxes required to be withheld,
which arrangement may include relinquishment of the Shares. The Company and a
Director may also make similar arrangements with respect to payment of any other
taxes derived from or related to the payment of Shares with the respect to which
withholding is not required.
12.4 Rule 16b-3. This Plan is intended to comply with Rule 16b-3 as in
effect prior to May 1, 1991. The Administrator may, however, elect at any time
to have some other version of Rule 16b-3 apply if permitted by
9
<PAGE> 34
applicable law. If at any time Rule 16b-3 as promulgated on February 8, 1991 or
at any later date shall become applicable to the Plan, if necessary for
acquisition of Shares under the Plan to continue to be exempt under Rule 16b-3,
no election to have Fees paid in Shares shall become effective pursuant to
Section 3.2(b) hereof until 6 months after such election is made. In addition,
the Board may make such other changes in the terms or operation of the Plan as
may then be necessary or appropriate to comply with such Rule, including,
without limitation, by eliminating any restriction originally included in the
Plan to comply with Rule 16b-3 that may no longer be required. Without limiting
the generality of the foregoing, the Board may change the number of Restricted
Shares to be awarded under Section 3.1 from time to time if such change would
not cause Directors participating in the Plan to cease to be "disinterested
persons" within the meaning of Rule 16b-3, and the Board may provide for annual
election of Voluntary Shares pursuant to Section 3.2 if such election would be
permitted by Rule 16b-3.
12.5 Miscellaneous. Headings are given to the sections of this Plan solely
as a convenience to facilitate reference. Such headings, numbering and
paragraphing shall not in any case be deemed in any way material or relevant to
the construction of this Plan or any provisions thereof. The use of the singular
shall also include within its meaning the plural, and vice versa.
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<PAGE> 35
CLEVELAND-CLIFFS INC
NOTICE OF
ANNUAL MEETING
OF SHAREHOLDERS
TO BE HELD ON
MAY 14, 1996
AND
PROXY STATEMENT
<PAGE> 36
CLEVELAND-CLIFFS INC
PROXY 18TH FLOOR DIAMOND BUILDING - CLEVELAND, OHIO 44114-2589
COMMON
SHARES THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints E. B. Jones, J. H. Wade and A.
W. Whitehouse, as Proxies, each with the power to appoint his
substitute, and hereby authorizes them to represent and to vote
all of Cleveland-Cliffs Inc Common Shares held of record by the
undersigned on March 18, 1996, at the Annual Meeting of
Shareholders to be held on May 14, 1996, or at any adjournment
or adjournments thereof, as follows:
Election of Directors, Nominees:
R. C. Cambre, R. S. Colman, J. D. Ireland III, G. F.
Joklik, E. B. Jones,
L. L. Kanuk, F. R. McAllister, J. C. Morley, M. T.
Moore, S. B. Oresman,
A. Schwartz, J. H. Wade, A. W. Whitehouse.
YOU ARE ENCOURAGED TO SPECIFY YOUR CHOICES BY MARKING THE APPROPRIATE
BOXES, SEE REVERSE SIDE, BUT YOU NEED NOT MARK ANY BOXES IF YOU WISH TO
VOTE IN ACCORDANCE WITH THE BOARD OF DIRECTORS' RECOMMENDATIONS. WHEN
PROPERLY EXECUTED, THIS PROXY WILL BE VOTED IN THE MANNER DIRECTED BY
THE UNDERSIGNED SHAREHOLDER; IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR PROPOSALS 1, 2 AND 3 INCLUSIVE. THE PROXIES CANNOT VOTE YOUR
SHARES UNLESS YOU SIGN AND RETURN THIS CARD.
(TO BE SIGNED AND DATED ON OTHER SIDE)
SEE REVERSE
SIDE
<PAGE> 37
<TABLE>
<C> <S> <C>
X PLEASE MARK YOUR
VOTES AS IN THIS
EXAMPLE.
</TABLE>
[CAPTION]
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1. ELECTION OF 2. APPROVAL OF THE 3. RATIFICATION OF THE
DIRECTORS FOR WITHHELD CLEVELAND-CLIFFS INC APPOINTMENT OF
(see reverse) NONEMPLOYEE FOR AGAINST ABSTAIN ERNST & YOUNG LLP AS FOR AGAINST ABSTAIN
DIRECTORS INDEPENDENT PUBLIC
COMPENSATION PLAN ACCOUNTANTS
For, except vote withheld
from the following
nominee(s):
- ------------------------------ IN THEIR DISCRETION, THE
PROXIES ARE
AUTHORIZED TO VOTE UPON
SUCH OTHER
BUSINESS AS MAY PROPERLY
COME BEFORE THE MEETING.
NOTE: Please sign exactly
as name appears hereon.
When signing as attorney,
executor, administrator,
trustee or guardian,
please give full title as
such and if signing for a
corporation please give
your title. When
shares are in the names of
more than one person, each
should sign.
SIGNATURE(S) DATE , 1996
SIGNATURE(S) DATE , 1996
</TABLE>
