<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] No fee required.
[ ] 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
1100 Superior Avenue - Cleveland, Ohio 44114-2589
March 24, 1997
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 13, 1997 at 11:30 A.M. (Cleveland
time).
At the meeting, shareholders will act upon the election of Directors, a
proposal to approve an amendment and restatement of the Cleveland-Cliffs Inc
1992 Incentive Equity 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
1100 Superior Avenue - Cleveland, Ohio 44114-2589
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
March 24, 1997
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 13, 1997 at 11:30 A.M. (Cleveland time) for the purpose of considering and
acting upon:
1. A proposal to elect 11 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 1992 Incentive
Equity Plan (as Amended and Restated as of May 13, 1997);
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 1997; 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 17, 1997, 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
1100 Superior Avenue - Cleveland, Ohio 44114-2589
------------------------------
PROXY STATEMENT
------------------------------
MARCH 24, 1997
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 13, 1997, 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 17, 1997, the record date for the determination of persons
entitled to vote at the Meeting, there were 11,389,541 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 24, 1997.
ELECTION OF DIRECTORS
(PROPOSAL NO. 1)
It is intended that proxies received will be voted, unless contrary
instructions are given, to elect the 11 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 March 10, 1997 (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, 58, Chairman of the Board of Newmont Mining Corporation and 1996
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, 55, Partner since February, 1991 of Colman, Furlong & Co., and 1991
since 1996 the founder of Colman Partners, LLC, both private merchant
banking firms. Mr. Colman is a Director of HealthCare COMPARE Corp. and Van
Wagoner Funds, Inc.
JAMES D. IRELAND III, 47, Managing Director since January, 1993 of Capital One 1986
Partners, Inc., a private merchant banking firm. Mr. Ireland is also
President since before 1992 of Briseis Capital Corporation, a private
merchant banking firm. Mr. Ireland is Chairman of the Board of Sun Coast
Industries, Inc., a plastics producer.
G. FRANK JOKLIK, 68, 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.
LESLIE L. KANUK, 67, Professor of Marketing since before 1992 at Baruch College, 1991
City University of New York. Dr. Kanuk is a former Chairman of the Federal
Maritime Commission and, since before 1992, 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.
FRANCIS R. MCALLISTER, 54, Executive Vice President-Copper Operations since May, 1996
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.
</TABLE>
2
<PAGE> 6
<TABLE>
<CAPTION>
NAME, AGE AND PRINCIPAL OCCUPATION AND FIRST BECAME
EMPLOYMENT DURING PAST FIVE YEARS DIRECTOR
- ---------------------------------------------------------------------------------------------
<S> <C>
M. THOMAS MOORE, 62, 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 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, 65, President since August, 1995 of Evergreen Ventures, Ltd., a 1995
private investment firm. Retired, President and Chief Executive Officer and
Director since before 1992 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 Lamson & Sessions, Inc.
STEPHEN B. ORESMAN, 64, President since January, 1991 of Saltash, Ltd., 1991
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, and previously held
manufacturing positions at Bausch & Lomb and Acme Steel. Mr. Oresman is a
Director of Angram Inc., Gryphon Pharmaceuticals Inc., Technology Solutions
Company and TriNet Corporate Realty Trust Inc.
ALAN SCHWARTZ, 56, Professor of Law at the Yale Law School and Professor at the 1991
Yale School of Management since before 1992. Mr. Schwartz was a Professor of
Law and Social Science at the California Institute of Technology since
before 1987 through July, 1987.
ALTON W. WHITEHOUSE, 69, Retired. Former Chairman and Chief Executive Officer 1972
since before 1992 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. Jeptha H. Wade,
currently a Director of the Company, is not standing for re-election. In
addition, Mr. E. Bradley Jones, currently a Director of the Company, is not
standing for re-election due to other business commitments.
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. Ten of the eleven nominees have no present or former
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 60, ranging from 47 to 69. The average
service of the nominees is 7 years, ranging from less than one year to 24 years.
3
<PAGE> 7
The Company has a long-standing progressive governance process with formal
governance guidelines. During 1996, eight regularly scheduled meetings of the
Board of Directors were held and twenty-five 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, Corporate Strategy, and Long Range Planning Committees.
All committees regularly report their activities, actions, and recommendations
to the Board. Six Directors attended 100 percent of the meetings of the Board of
Directors and Board Committees of which they were a member; two Directors
attended at least 87 percent of such meetings; two Directors attended at least
83 percent of such meetings; and Mr. Whitehouse attended 74 percent of such
meetings. Absences were generally due to temporary scheduling conflicts or
illness.
The Executive Committee consists of Messrs. Moore (chairman), Colman,
Ireland, Morley, Oresman, Wade and Whitehouse. 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 include the
chairmen of the other standing committees. The Committee held one meeting during
1996.
The Audit Committee, consisting of Messrs. Oresman (chairman), Colman,
McAllister and 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
two meetings during 1996.
The Board Affairs Committee, consisting of Messrs. Wade (chairman),
Ireland, Jones and Whitehouse, administers the Company's compensation 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 three meetings during 1996.
The Compensation and Organization Committee, consisting of Messrs. Morley
(chairman), Cambre, Ireland, Joklik and Wade, 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 six meetings during 1996.
The Finance Committee, consisting of Mr. Whitehouse (chairman), Dr. Kanuk,
and Messrs. McAllister, Morley and Schwartz, 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 three meetings during 1996.
The Corporate Strategy Committee, consisting of Messrs. Ireland (chairman),
Morley and Whitehouse, reviews corporate strategy and related issues and
provides counsel to the Chief Executive Officer and the Board of Directors on
such matters. The Committee held five meetings during 1996.
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 review of business plans and special topics of interest. The
Committee held four meetings during 1996.
The Public Affairs Committee, which was discontinued in May, 1996, held one
meeting during 1996.
4
<PAGE> 8
DIRECTORS' COMPENSATION
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.
During 1996, the Board of Directors of the Company adopted a Nonemployee
Directors' Compensation Plan, which was approved by the Company's shareholders
on May 14, 1996, providing for the award of 1,000 Restricted Shares to
nonemployee Directors first elected to the Board after June 30, 1995. The Plan
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 and other fees in Common
Shares. In addition, the Plan gives nonemployee Directors the opportunity to
defer all or a portion of their annual retainer and other fees, whether payable
in cash or common shares.
The Company's 1992 Incentive Equity Plan, which was approved by the
Company's shareholders on April 14, 1992, provides that 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 nonemployee Director. In
accordance with the Nonemployee Directors' Compensation Plan adopted in 1996, no
new options will be issued after July 1, 1996.
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 was replaced by the
new Nonemployee Directors' Compensation Plan. Only one retiree Director remains
covered by the former plan.
In order to attract and retain qualified Directors, the Company has had a
Retirement Plan for Non-Employee Directors since 1984, which Plan was amended
and restated effective as of July 1, 1995 to provide for a joint and
survivorship benefit. The Plan also provides that 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 nonemployee Directors. In 1995, a Nonemployee Directors' Supplemental
Compensation Plan was established for Directors first elected after June 30,
1995. Under such Supplemental Compensation 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. Under either Plan, 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.
The Company has entered into trust agreements with Key Trust Company of
Ohio, N.A. relating to the Nonemployee Directors' Compensation Plan, the
Nonemployee Directors' Supplemental Compensation Plan, 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.
5
<PAGE> 9
SECURITIES OWNERSHIP OF MANAGEMENT AND CERTAIN OTHER PERSONS
The following table sets forth the amount and percent of Common Shares
which, as of March 10, 1997 (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,
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 M.T. BENEFICIAL ------------------- ------------------- PERCENT OF
MOORE) OWNERSHIP(2) SOLE SHARED SOLE SHARED CLASS(3)
- ---------------------------- ------------ ------- ------- ------- ------- ----------
<S> <C> <C> <C> <C> <C> <C>
Ronald C. Cambre............ 1,755 1,755 -0- 1,755 -0- --
Robert S. Colman............ 2,782 2,782 -0- 2,782 -0- --
James D. Ireland III........ 271,966 5,324 266,642(4) 5,324 266,642(4) 2.39%
G. Frank Joklik............. 2,127 2,127 -0- 2,127 -0- --
E. Bradley Jones............ 3,127 3,127 -0- 3,127 -0- --
Leslie L. Kanuk............. 2,782 2,782 -0- 2,782 -0- --
Francis R. McAllister....... 1,979 1,979 -0- 1,979 -0- --
John C. Morley.............. 4,265 4,265 -0- 4,265 -0- --
Stephen B. Oresman.......... 2,782 2,782 -0- 2,782 -0- --
Alan Schwartz............... 1,282 1,282 -0- 1,282 -0- --
Jeptha H. Wade.............. 7,627 7,627 -0- 7,627 -0- --
Alton W. Whitehouse......... 3,027 3,027 -0- 3,027 -0- --
</TABLE>
<TABLE>
<CAPTION>
NAMED EXECUTIVE OFFICERS
- ----------------------------
<S> <C> <C> <C> <C> <C> <C>
M. Thomas Moore............. 41,973 41,973 -0- 41,973 -0- --
John S. Brinzo.............. 31,225 31,225 -0- 31,225 -0- --
William R. Calfee........... 21,307 21,307 -0- 21,307 -0- --
Thomas J. O'Neil............ 10,720 10,720 -0- 10,720 -0- --
A. Stanley West............. 14,891 14,891 -0- 14,891 -0- --
All Directors and Executive
Officers as a Group
(18 Persons).............. 427,617 160,975 266,642 160,975 266,642 3.76%
</TABLE>
<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>
Glickenhaus & Co. (5)
6 East 43rd Street
New York, NY 10017................ 810,900 810,900 -0- 486,700 -0- 7.13%
Merrill Lynch & Co., Inc. (6)
World Financial Center, North
Tower
250 Vesey Street
New York, NY 10281................ 801,379 -0- 801,379 -0- 801,379 7.05%
Neuberger & Berman, LLC (7)
605 Third Avenue
New York, NY 10158................ 771,400 -0- 771,400 377,200 305,000 6.78%
The State Teachers Retirement
Board of Ohio (8)
275 East Broad Street
Columbus, OH 43215................ 585,000 585,000 -0- 585,000 -0- 5.14%
</TABLE>
6
<PAGE> 10
- ---------------
(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 March 10, 1997. Each of the Directors, except for Mr. Moore, has such
options as follows: Mr. Cambre, 500; Mr. Colman, 2,500; Mr. Ireland, 2,500;
Mr. Joklik, 2,000; Mr. Jones, 2,500; Dr. Kanuk, 2,500; Mr. McAllister, 500;
Mr. Morley, 1,000; Mr. Oresman, 2,500; Mr. Schwartz, 1,000; Mr. Wade, 2,500
and Mr. Whitehouse, 2,500; 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. O'Neil, -0-; and Mr. West, 2,000; and the Directors and
executive officers as a group have 45,875 options. Performance shares earned
for 1996 by Messrs. Moore, 10,336, Brinzo, 4,352, Calfee, 4,352, O'Neil,
2,720 and West, 2,720, the value of which is shown in the LTIP Payouts
column of the "Summary Compensation Table" on page 8, are deliverable
subject to fulfillment of withholding tax requirements and are also included
in the shares shown in the table.
(3) Less than 1%, except as otherwise indicated.
(4) Of the 271,966 shares deemed under the rules of the SEC to be beneficially
owned by Mr. Ireland, he is a beneficial holder of 5,324 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.
(5) Except for Percent of Class, the information shown above was taken from the
Schedule 13G, dated February 15, 1997, as filed by Glickenhaus & Co. with
the SEC.
(6) Except for Percent of Class, the information shown above was taken from the
Amendment No. 4 to Schedule 13G dated February 14, 1997, 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) Except for Percent of Class, the information shown above was taken from the
Amendment No. 4 to Schedule 13G, dated February 10, 1997, as filed by
Neuberger & Berman, LLC with the SEC.
(8) Except for Percent of Class, the information shown above was taken from the
Schedule 13G, dated February 5, 1997, as filed by The State Teachers
Retirement Board of Ohio 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 ("named executive officers"),
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 LTIP
NAME AND SALARY BONUS COMPENSATION(1) AWARDS(2) OPTIONS PAYOUTS(3)
PRINCIPAL POSITION YEAR ($) ($) ($) ($) (#) ($)
- --------------------- ---- -------- -------- --------------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
M. Thomas Moore 1996 $540,000 $375,000 $ -- $ -0- -0- $434,112
Chairman and Chief 1995 440,000 310,000 -- -0- -0- -0-
Executive Officer 1994 431,250 222,000 -- -0- -0- -0-
John S. Brinzo 1996 237,500 145,000 -- -0- -0- 182,784
Executive Vice 1995 225,000 131,500 -- -0- -0- -0-
President-Finance 1994 217,500 105,000 -- -0- -0- -0-
William R. Calfee 1996 250,000 145,000 -- -0- -0- 182,784
Executive Vice 1995 250,000 131,500 -- -0- -0- -0-
President-Commercial 1994 250,000 95,000 -- -0- -0- -0-
Thomas J. O'Neil 1996 200,000 130,000 -- -0- -0- 114,240
Executive Vice 1995 185,000 95,000 -- -0- -0- -0-
President-Operations 1994 158,750 45,000 -- 227,250(5) -0- -0-
A. Stanley West 1996 175,000 87,500 -- -0- -0- 114,240
Senior Vice 1995 175,000 85,000 -- -0- -0- -0-
President-Sales 1994 154,000 55,000 -- -0- -0- -0-
<CAPTION>
ALL OTHER
NAME AND COMPENSATION(4)
PRINCIPAL POSITION ($)
- --------------------- ---------------
<S> <C>
M. Thomas Moore $22,122
Chairman and Chief 18,040
Executive Officer 17,666
John S. Brinzo 9,738
Executive Vice 9,221
President-Finance 8,897
William R. Calfee 10,250
Executive Vice 10,245
President-Commercial 10,245
Thomas J. O'Neil 8,200
Executive Vice 7,585
President-Operations 6,509
A. Stanley West 7,174
Senior Vice 7,167
President-Sales 6,314
</TABLE>
- ---------------
(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, O'Neil and West, as of December 31, 1996 was 470, 330, 205,
6,000 and 94, respectively. The aggregate value of such shares as of
December 31, 1996 was $21,326, $14,974, $9,302, $272,250 and $4,265,
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) This payout was determined in early 1997 for the 1994-1996 performance
period under the Company's performance share program. The Company's closing
stock price on March 10, 1997 of $42.00 per share was used to determine the
value of the payout, which payout is to be made in shares of Common Stock.
(4) Amounts indicated for 1996 include cash contributed by the Company under the
Cliffs Salaried Employees Supplemental Retirement Savings Plan as follows:
$6,650, $6,175, $6,250, $5,950 and $5,800 on behalf of Messrs. Moore,
Brinzo, Calfee, O'Neil and West, respectively; and cash contributed by the
Company under the Voluntary Non-Qualified Deferred Compensation Plan as
follows: $15,472, $3,563, $4,000, $2,250 and $1,374 on behalf of Messrs.
Moore, Brinzo, Calfee, O'Neil and West, respectively.
(5) On November 7, 1994, the Company awarded 6,000 Shares of Restricted Stock to
Mr. O'Neil. One-fifth of such Restricted Stock will vest on each of the
fifth, sixth, seventh, eighth and ninth anniversaries of the date of the
award.
8
<PAGE> 12
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
The following table sets forth information about stock options exercised
during the last fiscal year by the named executive officers, and the number of
Common Shares covered by unexercised options and the aggregate value of options
held at the end of such fiscal year.
<TABLE>
<CAPTION>
SHARES NUMBER OF SECURITIES VALUE OF UNEXERCISED
ACQUIRED UNDERLYING UNEXERCISED "IN-THE-MONEY" OPTIONS
ON VALUE OPTIONS AT FY-END (#) AT FY-END ($)
EXERCISE REALIZED ----------------------------- -----------------------------
NAME (#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- --------------------------- ---------- ------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
M. Thomas Moore -0- $ -0- 10,000 -0- $ 252,575 -0-
John S. Brinzo -0- -0- 7,000 -0- 176,803 -0-
William R. Calfee -0- -0- 4,375 -0- 110,502 -0-
Thomas J. O'Neil -0- -0- -0- -0- -0- -0-
A. Stanley West -0- -0- 2,000 -0- 50,515 -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 named executive officers.
<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 17,000 1/1/96-12/31/98 4,250 17,000 29,750
John S. Brinzo 6,000 1/1/96-12/31/98 1,500 6,000 10,500
William R. Calfee 6,000 1/1/96-12/31/98 1,500 6,000 10,500
Thomas J. O'Neil 6,000 1/1/96-12/31/98 1,500 6,000 10,500
A. Stanley West 3,500 1/1/96-12/31/98 875 3,500 6,125
</TABLE>
- ---------------
(1) Estimated payout if certain performance levels are achieved. No payout
occurs unless threshold performance is achieved.
The above table presents information about performance shares granted
during the year pursuant to the 1992 Incentive Equity Plan. Each performance
share, if 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
relative total shareholder return (share price plus reinvested dividends) and
value added (earnings performance in excess of the cost of capital employed)
over a three-year performance period. Relative total shareholder return is
determined against a predetermined group of mining and metal companies. Actual
value added performance is determined based on the Company's capital employed,
earnings and cost of capital. The performance shares granted represent the
number of Common Shares that would be earned if the average target level of the
objectives is achieved by the Company; maximum payout is 175% of the performance
shares granted and represents the number of Common Shares that would be earned
if a superior level of the objectives is achieved by the Company; and threshold
payout is 25% of the performance shares granted and represents the number of
Common Shares that would be earned if a minimum level of the objectives is
achieved by the Company. Attainment of objectives is measured on a combined
basis. 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 would 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 grant
on the date it was granted. The first payout under the performance share
program, for the 1994-1996 performance period, was made in March, 1997 and is
included in the LTIP Payouts column of the "Summary Compensation Table". The
Compensation and Organization Committee has the discretion to make distributions
in cash in lieu of stock.
9
<PAGE> 13
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
COMPENSATION POLICIES
The Company's continuing objective is to provide superior sustainable value
to its shareholders and other stakeholders. The Company's compensation structure
is designed to serve this objective by providing sufficient total compensation
to attract and retain high-performing employees. The compensation structure
places a portion of compensation at risk with the performance of the Company,
the organizational unit, and the individual. The risk portion increases with
responsibility level of the employee.
Executive compensation consists of salary, annual incentive opportunity,
long-term incentive opportunity, general employee benefits, and certain minor
executive benefits. In determining executive compensation structure, the
Committee considers current Company objectives, industry survey data and
recommendations of consultants and the Chief Executive Officer. In 1994 a
consultant assisted the Committee in designing the 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. A broad group of industrial companies of comparable operations scope
is used for competitive surveys.
The Company has selected the S&P Iron and Steel Group Index and the S&P
Metals Mining Group Index for the comparative stock price performance graphs on
page 15 because no meaningful iron ore peer group index is available. The survey
group for executive compensation comparison is larger than the relevant industry
groups for stock price performance comparison.
Under the regulations implementing federal income tax legislation enacted
in 1993 which limits the deductibility of certain executive compensation in
excess of $1 million, the Company has not had such non-deductible payments and
does not expect such payments for 1997. 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 nondeductible
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 allowed by economic conditions.
Executive officers received no salary increases in 1992 except for certain
promotional increases. On January 1, 1993, executive officers received merit
increases totaling approximately 5 percent and their annual incentive targets
were reduced by approximately offsetting dollar amounts. In 1994, salary and
annual incentive 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 incentive target was reduced by 12.6 percent. Executive officers
received no further salary increases during the subsequent 18 months through
December 31, 1995, except for certain promotions. On January 1, 1996, executive
officers, excluding the Chief Executive Officer, received a total salary
increase of 1.2 percent to bring their total salaries to 103.1 percent of their
salary range midpoint, which is appropriate in view of their average 30 years of
experience in the mining and steel industries. No other increases were awarded
to these officers in 1996.
ANNUAL INCENTIVE OPPORTUNITY
The Company maintains a Management Performance Incentive Plan ("MPI Plan")
which provides an incentive opportunity for management employees of
Cleveland-Cliffs Inc and certain subsidiaries 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, a separate incentive plan was installed for salaried personnel at
operating units and related service units in order to align incentives and
responsibilities.
10
<PAGE> 14
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 actions in 1994 as mentioned above, the target for
executive officers after 1993 ranged from 32 to 55 percent of the officer's
salary range midpoint versus the previous range of 30 to 70 percent, depending
on responsibility level. After 1993, awards can range from zero to 200 percent
of the target amount for a participant. Previously, the range was zero to 150
percent.
Objectives for the Company and executive officers are reviewed by the Board
of Directors at the beginning of each year, and related 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, the current year objectives, and the competitive and
economic environment. The Committee also considers the recommendations of the
Chief Executive Officer in regard to all participants except himself. The
Committee then determines the total bonus pool for the participants and the
award to each elected officer and gives the Chief Executive Officer authority to
determine final awards to non-officer participants within the total pool
allowance.
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
performance may also receive substantial consideration 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 continuing benefit to the Company of the cumulative performance and
experience of the participant may also be considered. All such matters are
evaluated collectively without assignment of weights.
Bonuses for the named executive officers, excluding the Chief Executive
Officer, totaled $507,500 for 1996 (141 percent of total target bonus) versus
$443,000 for 1995 (141 percent of total target bonus) and $300,000 for 1994 (105
percent of total target bonus). In determining the 1996 bonuses for these
officers, the factors described above were considered, including the Company's
second consecutive record earnings before unusual items, the Company's
performance on numerous business objectives and each officer's performance in
regard to his responsibilities and objectives.
LONG-TERM INCENTIVE OPPORTUNITY
Unlike many companies that have multiple long-term incentive plans, the
Company has one regular long-term incentive opportunity for key management.
The 1992 Incentive Equity Plan, as approved by the shareholders, is
intended to align the interests of key management and the shareholders. Under
the Plan, a long-term performance share program ("Performance Share Program")
was installed in 1994 to further align the interests of designated executives
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 or, at the Committee's
discretion, equivalent cash value, based on Company performance against specific
financial objectives.
Starting in 1994, grants of performance shares are made annually to certain
key employees based on responsibility level. Performance for the 1994 grants was
determined for the period, 1994-1996, as described below. Performance for the
1995 and 1996 grants will be determined in early 1998 and 1999 for the
three-year periods, 1995-1997 and 1996-1998, respectively. For the latter
periods, the percentage of performance share earned can range from zero to 175
percent. For 1996, 1995 and 1994, the named executive officers, excluding the
Chief Executive Officer, were granted 21,500, 14,300 and 13,000 performance
shares, respectively. For a detailed description of the 1996 grants, objectives
and estimated future payout opportunities, see "Long-Term Incentive
Plans -- Awards in Last Fiscal Year" on page 9.
The Committee confirmed that for the three-year performance period ending
December 31, 1996, the Company achieved an average performance of 108.8 percent
in respect to the Company's objectives for value added and total shareholder
return. As a result, the Committee approved a payout of 45,293 shares, the value
of which for the named executive officers is shown in the LTIP Payouts column of
the "Summary Compensation Table" on page 8. The Company's actual value added was
slightly above the established target
11
<PAGE> 15
under the Performance Share Program. The Company's average total shareholder
return ranked in the 62nd percentile of its peer group of 35 mining and metal
companies, versus the established Company target of the 55th percentile. Each
performance measure at target level is weighted 50 percent.
No general program of restricted stock awards to executive officers has
existed since 1988; no stock options have been awarded to executive officers
since 1990; and there is no current program of general awards of stock options
or restricted stock to executive officers. However, the Committee periodically
uses such incentives on a selective basis.
The Committee has authorized awards of stock options to certain key
management employees, excluding participants in the Performance Share Program,
with an annual limit of 125,000 shares. The exercise price of all stock options
awarded under the 1992 Incentive Equity Plan has been the market price when
awarded, adjusted for business spin-offs and special distributions to
shareholders. It is the Company's policy not to reprice options for any
"underwater" situations.
The 1992 Incentive Equity Plan enhanced the Company's ability to align
management and shareholder interests and to attract and retain key employees
through appropriate incentives to increase shareholder value. In order to
sustain this ability and make certain refinements, the Board of Directors has
approved the Committee's recommendation that the number of the Company's Common
Shares available under the Plan should be increased, the Company's policy
against repricing of "underwater" options should be formally adopted, the number
of restricted and deferred shares that can be issued should likewise be formally
limited, the Committee should be provided additional flexibility to modify
management objectives relating to performance-based awards if business
circumstances warrant, and various provisions of the Plan should be updated.
Therefore, the Committee and the Board recommend the provisions described under
Proposal No. 2 submitted for shareholder approval.
CHIEF EXECUTIVE OFFICER COMPENSATION
M. Thomas Moore has 37 years of experience in the iron and steel
industries, including 30 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 at his
recommendation by $83,300 (from 70 percent to 50 percent of his salary range
midpoint), and his annual salary was increased by 4.1 percent or $17,500 on July
1, 1994. On January 1, 1996, his salary was increased by 22.7 percent or
$100,000, his salary range midpoint was increased by $68,500, and his target
bonus was increased from 50 to 55 percent of his salary range midpoint in
recognition of current salary survey data, his experience as Chief Executive
Officer and his continuing performance.
The MPI Plan award to Mr. Moore for 1996 was $375,000 (135 percent of his
target bonus) compared to $310,000 (142 percent of his target bonus) for 1995
and $222,000 (104 percent of his target bonus) for 1994. The Committee
determined the 1996 award in view of the Company's and Mr. Moore's performance
in 1996 on the factors described above, including the Company's record earnings
before unusual items, the Company's performance on numerous business objectives,
and his performance in regard to such objectives and his responsibilities. The
Committee considered all matters collectively in accordance with its policy.
Mr. Moore was granted 17,000, 10,900 and 9,500 performance shares for 1996,
1995 and 1994, respectively, under the Performance Share Program. Mr. Moore's
1996 Performance Share Program payout was calculated in the same way as the
payout to all other participants, as discussed under Long-Term Incentive
Opportunity, and the value of the payout earned by Mr. Moore is disclosed under
the LTIP Payouts column of the "Summary Compensation Table" on page 8. No stock
options have been awarded to Mr. Moore since 1990.
The Chief Executive Officer is not present when the Committee reviews his
performance and determines his compensation.
12
<PAGE> 16
COMPANY PERFORMANCE COMPARISONS
In 1987, after the depressed industry conditions of the 1982-1986 period
had severely impacted the Company's performance and financial condition, the
Company initiated a major restructuring program which stabilized and focused the
Company and fostered a renewal of business growth. For the ten-year period,
1987-1996, net income from continuing operations totaled $510 million, or $42.00
per share. The market value of the Company's Common Shares increased from $118
million, or $9.50 per share, on December 31, 1986 to $516 million, or $45.38 per
share on December 31, 1996. In addition, regular and special dividends totaling
$234 million, or $19.48 per share, were paid to common shareholders during the
intervening ten-year period. The contribution to shareholder value was $632
million, consisting of the $398 million increase in the market value of the
Company's Common Shares plus the $234 million of dividends.
The total return from share price appreciation and reinvested dividends on
the Company's Common Shares for the ten-year period, 1987-1996, was 796.5
percent, which substantially exceeded the total returns of the S&P 500 Stock
Index, the S&P Iron and Steel Group Index, and the S&P Metals Mining Group Index
as shown on the accompanying graph. For the same period, personal income on
stock option exercises, restricted stock vesting, and performance share awards
under the Incentive Equity Plans for the Chief Executive Officer and all
participants equaled .6 percent and 3.3 percent, respectively, of the $632
million contribution to shareholder value, which the Committee believes was a
favorable ratio for the shareholders.
For the five-year period, 1992-1996, the total return on the Company's
Common Shares was 59.7 percent which exceeded the two peer group indices as
shown on the accompanying graph but trailed the strong return of the broader
market average. For the year 1996, the total return was 14.1 percent which
exceeded the peer group indices but trailed the strong broader market average.
The foregoing returns on the Company's Common Shares conservatively assume
reinvestment of all dividends and special distributions in the Company's common
stock. Alternative assumptions of reinvestment in the S&P 500 Stock Index or
reinvestment of cash dividends in the S&P 500 Stock Index and retention of
distributed securities would generate higher returns as shown in the following
table:
<TABLE>
<CAPTION>
TOTAL SHAREHOLDER RETURN
----------------------------------
YEAR FIVE YEARS TEN YEARS
1996 1992-1996 1987-1996
----- ---------- ---------
<S> <C> <C> <C>
CLEVELAND-CLIFFS INC
- Assuming reinvestment of all distributions in Company
stock................................................ 14.1% 59.7% 796.5%
- Assuming reinvestment of all distributions in S&P 500
Stock Index.......................................... 18.2 76.9 850.7
- Assuming reinvestment of all cash distributions in
S&P 500 Index and retention by the stockholder of
distributed securities in MLX Corp., Cliffs Drilling
Company, and The LTV Corporation..................... 33.5 91.8 842.3
S&P Iron and Steel Group Index......................... (10.7) 38.6 170.2
S&P Metals Mining Group Index.......................... 2.0 57.4 350.0
S&P 500 Stock Index.................................... 23.0 103.0 314.5
</TABLE>
13
<PAGE> 17
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 shorter-term comparison of executive compensation and stock
prices misleading. The Committee also 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:
J. C. Morley, Chairman
R. C. Cambre
J. D. Ireland III
G. F. Joklik
J. H. Wade
14
<PAGE> 18
SHAREHOLDER RETURN PERFORMANCE
The following graphs show changes over the past five-year and ten-year
periods in the value of $100 invested in: (1) Cliffs' Common Shares; (2) S&P 500
Stock Index; (3) S&P Iron and Steel Group Index; and (4) S&P Metals Mining 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, 1991
<TABLE>
<CAPTION>
MEASUREMENT PERIOD CLIFF'S S&P IRON AND S&P METALS
(FISCAL YEAR COVERED) COMMON S&P 500 STEEL MINING
<S> <C> <C> <C> <C>
1991 100 100 100 100
1992 102 108 131 107
1993 120 118 172 120
1994 122 120 167 139
1995 140 165 155 154
1996 160 203 139 157
</TABLE>
VALUE AT DECEMBER 31
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Cliffs' Common 100 102 120 122 140 160
S&P 500 100 108 118 120 165 203
S&P Iron and Steel Group 100 131 172 167 155 139
S&P Metals Mining Group 100 107 120 139 154 157
</TABLE>
TEN-YEAR CUMULATIVE TOTAL RETURNS
VALUE OF $100 INVESTED AT DECEMBER 31, 1986
<TABLE>
<CAPTION>
MEASUREMENT PERIOD CLIFF'S S&P MISC.
(FISCAL YEAR COVERED) COMMON S&P 500 S&P STEEL METALS
<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
1996 896 414 270 450
</TABLE>
VALUE AT DECEMBER 31
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Cliffs' Common 100 157 339 374 359 561 572 672 687 786 896
S&P 500 100 105 123 161 156 204 220 242 245 337 414
S&P Iron and Steel Group 100 160 195 189 159 195 255 336 326 303 270
S&P Metals Mining Group 100 176 232 267 253 286 307 342 399 441 450
</TABLE>
15
<PAGE> 19
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, 1997 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 $ 28,425 $ 36,300 $ 44,175 $ 52,050 $ 59,925 $ 67,800
150,000 40,238 52,050 63,863 75,675 87,488 99,300
200,000 52,050 67,800 83,550 99,300 115,050 130,800
250,000 63,863 83,550 103,238 122,925 142,613 162,300
300,000 75,675 99,300 122,925 146,550 170,175 193,800
350,000 87,488 115,050 142,613 170,175 197,738 225,300
400,000 99,300 130,800 162,300 193,800 225,300 256,800
450,000 111,113 146,550 181,988 217,425 252,863 288,300
500,000 122,925 162,300 201,675 241,050 280,425 319,800
550,000 134,738 178,050 221,363 264,675 307,988 351,300
600,000 146,550 193,800 241,050 288,300 335,550 382,800
650,000 158,363 209,550 260,738 311,925 363,113 414,300
675,000 164,269 217,425 270,581 323,738 376,894 430,050
</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 normal retirement provision,
with at least fifteen years of service, between January 1, 1994 and December 31,
1999, and includes a $400 monthly pension supplement payable for 12 months after
retirement for employees who retire at age 65 with at least ten years of
service, after December 31, 1996 and prior to January 1, 1999. 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 1996 include the amount shown for 1996 in the Salary column of the
Summary Compensation Table on page 8, plus the amount of bonus earned in 1995
and paid in 1996, as shown in the Bonus column of the Summary Compensation Table
for 1995. Pensionable earnings in 1996 for Messrs. Moore, Brinzo, Calfee, O'Neil
and West were $850,000, $369,000, $381,500, $295,000 and $260,000, respectively.
Messrs. Moore, Brinzo, Calfee, O'Neil and West have 30, 27, 24, 5, and 29 years,
respectively, of credited service under the Company's qualified pension plan.
16
<PAGE> 20
AGREEMENTS AND TRANSACTIONS
The Company has agreements ("Agreements") with M. Thomas Moore, Chairman
and Chief Executive Officer, John S. Brinzo, Executive Vice President-Finance
and William R. Calfee, Executive Vice President-Commercial, dated February 1,
1992, and with Thomas J. O'Neil, Executive Vice President-Operations, dated
September 10, 1996, 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.
During 1996, the Board of Directors of the Company approved modification to
the Agreements which, when implemented in 1997, will provide (i) for a minimum 1
year of base pay and incentive compensation, if greater than the amounts
applicable to the remainder of the 3-year period; (ii) for vesting of
performance share grants at target objective levels; and (iii) that the Company
will protect the officer against imposition of the excise tax on excess
parachute payments under the Code by providing additional "gross up" payments to
the officers. Such Agreements, as modified, expire January 31, 2000.
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 20 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
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<PAGE> 21
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 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.
During 1996, the Board of Directors of the Company approved modifications
to the Severance Plan which, when implemented in 1997, will provide (i) for up
to 2 years of base pay, incentive compensation and health and life insurance
protection for certain positions and 1 year of base pay, incentive compensation
and health and life insurance protection for other positions; (ii) for vesting
of performance share grants at target objective levels; and (iii) that the
Company will protect the participant against imposition of the excise tax on
excess parachute payments under the Code by providing additional "gross up"
payments to the participant. Such Severance Plan, as modified, expires December
31, 1999.
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 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.
In order to promote mutual appreciation of management and union interests,
the Company and the United Steel Workers of America ("USWA") have reached
agreement on a process to jointly designate a member of the Board of Directors
of the Company, pursuant to a general understanding between the USWA and certain
Company subsidiaries reached in 1993. The Company expects such designee to be
determined and added to the Board of Directors after the Annual Meeting. In
subsequent years, such designee would be subject to annual nomination by the
Company and election by vote of the shareholders. The designee will be subject
to all laws and Company policies applicable to the Board of Directors. The
agreement expires on August 1, 1999.
APPROVAL OF THE CLEVELAND-CLIFFS INC 1992 INCENTIVE EQUITY PLAN
(AS AMENDED AND RESTATED AS OF MAY 13, 1997)
(PROPOSAL NO. 2)
GENERAL
The Cleveland-Cliffs Inc 1992 Incentive Equity Plan ("Plan"), which was
approved by shareholders at the Company's 1992 Annual Meeting of Shareholders,
serves the Company's objective of providing superior sustainable value to its
shareholders by affording the Compensation and Organization Committee of the
Board
18
<PAGE> 22
of Directors ("Compensation Committee") the ability to provide sufficient
incentive compensation to attract and retain high-performing employees. The
Company's compensation structure places a portion of the total compensation at
risk with the performance of the Company, organizational unit and the
individual. The risk portion increases with responsibility level of the
employee. The Board of Directors adopted the Amended and Restated
Cleveland-Cliffs Inc 1992 Incentive Equity Plan ("Amended Plan") on March 11,
1997, subject to the approval of the Company's shareholders at the 1997 Annual
Meeting in order to further serve the Company's continued objective.
The principal reason for amending and restating the Plan is to increase the
number of shares available under the Plan as described below. In addition,
changes were made to limit the number of Restricted Shares and Deferred Shares
which can be issued under the Plan, to reflect recently adopted changes in Rule
16b-3 under the Securities Exchange Act of 1934 ("Exchange Act"), to confirm the
Company's policy against re-pricing of options, to give the Compensation
Committee additional flexibility to modify Management Objectives relating to
performance-based awards, and generally to update various provisions of the
Plan. The Plan is not intended to comply with rules for deductibility under
Section 162(m) of the Internal Revenue Code ("Code").
A summary of the proposed changes is set forth below, followed by a summary
description of the entire Amended Plan. The full text of the Amended Plan is
annexed to this Proxy Statement as Appendix A, and the following summaries are
qualified in their entirety by response to Appendix A.
SUMMARY OF CHANGES
Available Shares. The Amended Plan increases the number of Common Shares
available by 555,000 Common Shares. The Plan originally authorized the issuance
of 595,000 Common Shares of which as of March 11, 1997, 61,758 Common Shares had
been issued or transferred to participants under the Plan (excluding Restricted
Shares subject to forfeiture), 532,413 Common Shares were subject to outstanding
awards (assuming maximum payout of all outstanding Performance Shares granted)
and 829 Common Shares were available for future awards. A provision was added to
the Amended Plan to provide for the netting out of Common Shares when Common
Shares are transferred or relinquished in payment of any option price or upon
satisfaction of any tax withholding amount.
Limit on Restricted Shares and Deferred Shares. The Amended Plan limits
the number of Common Shares which can be issued as Restricted Shares and
Deferred Shares under the Amended Plan (excluding awards conditioned on
attainment of Management Objectives) to 150,000 Common Shares.
Transferability. Consistent with recent changes in Rule 16b-3, the Amended
Plan provides that the Committee may determine that any Option Rights or other
awards may be transferrable.
Administration and Amendments. Consistent with changes in Rule 16b-3, the
Amended Plan provides that the Board may delegate all or part of its authority
under the Amended Plan to a Committee or subcommittee of the Board comprised
solely of at least three Non-Employee Directors within the meaning of final Rule
16b-3 under the Exchange Act. Currently the Plan is administered by the
Compensation Committee and the Company plans that the Compensation Committee
will continue to administer the Amended Plan. In response to changes in Rule
16b-3, the Amended Plan provides that the Committee may amend the Amended Plan
at any time without shareholder approval except where such approval is required
by applicable laws or the rules of the principal national securities exchange on
which the Common Shares are traded.
Re-pricing of Option Rights. The provision in the Plan allowing for
re-pricing of Option Rights by the Committee has been eliminated. The Amended
Plan provides that the Compensation Committee may not amend any outstanding
Option Right to reduce the option price or cancel and replace Option Rights with
awards having a lower option price without further approval of shareholders.
This amendment only prohibits the re-pricing of "underwater" options and does
not preclude adjustment of the option price under the anti-dilution provisions
of the Amended Plan.
19
<PAGE> 23
Management Objectives. The Amended Plan consolidates various plan
provisions relating to Management Objectives that are used to structure awards
based on performance measures in order to clarify and expand the range of
performance incentives available under the Plan. The Amended Plan also gives the
Committee more flexibility to modify Management Objectives in response to
changes in business, operations, corporate structure or other events or
circumstances rendering the Management Objectives unsuitable.
Elimination of Awards to Nonemployee Directors. The Amended Plan reflects
the elimination of the automatic granting of formula awards of Option Rights to
Nonemployee Directors. This change became effective July 1, 1996. No awards may
be made to Nonemployee Directors under the Amended Plan. Stock-based
compensation for Nonemployee Directors is provided for in the Cleveland-Cliffs
Inc Nonemployee Directors' Compensation Plan which was approved by shareholders
in 1996.
SUMMARY OF AMENDED PLAN
General. Under the Amended Plan, the Compensation Committee is authorized
to make awards of options to purchase Common Shares ("Option Rights"), awards of
restricted shares ("Restricted Shares") or deferred shares ("Deferred Shares")
and awards of performance shares ("Performance Shares") and performance units
("Performance Units"). The terms applicable to awards of the various types,
including those terms that may be established by the Compensation Committee when
making or administering particular awards, are set forth in detail in the
Amended Plan.
Shares Available Under the Amended Plan. Subject to adjustment as provided
in the Amended Plan, the number of Common Shares that may be issued or
transferred (a) upon the exercise of Option Rights, (b) as Restricted Shares,
(c) in payment of Performance Shares or Performance Units that have been earned,
(d) as Deferred Shares, or (e) in payment of dividend equivalents paid with
respect to awards made under the Amended Plan, may not exceed 1,150,000 in the
aggregate (595,000 of which were approved by shareholders in 1992 and 555,000 of
which are being added as of the amendment and restatement). However, the number
of Restricted Shares that are not conditioned on attainment of Management
Objectives, plus the number of Deferred Shares cannot (after taking forfeitures
into account) exceed 150,000. Such Common Shares may be shares of original
issuance or treasury shares or a combination of both. Upon the payment of any
option price by the transfer to the Company of Common Shares or upon
satisfaction of any withholding amount by means of transfer or relinquishment of
Common Shares, there will be deemed to have been issued or transferred under the
Plan only the net number of Common Shares actually issued or transferred by the
Company.
Eligibility. Officers, including officers who are members of the Board of
Directors, and key employees of the Company and its subsidiaries may be selected
by the Compensation Committee to receive benefits under the Amended Plan.
Option Rights. Option Rights may be granted which entitle the optionee to
purchase Common Shares at a price equal to or greater than market value at the
date of grant. The option price is payable in cash at the time of exercise; by
the transfer to the Company of nonforfeitable unrestricted Common Shares owned
by the optionee having a value at the time of exercise equal to the option
price; any other legal consideration the Compensation Committee may deem
appropriate; or a combination of such payment methods. Any grant may provide for
deferred payment of the option price from the proceeds of sale through a bank or
broker on the date of exercise of some or all of the Common Shares to which the
exercise relates. The Compensation Committee has the authority to specify at the
time Option Rights are granted that Common Shares will not be accepted in
payment of the option price until they have been owned by the optionee for a
specified period. However, the Amended Plan does not require any such holding
period and would permit immediate sequential exchanges of Common Shares at the
time of exercise of Option Rights.
The Compensation Committee may, at or after the date of grant of any Option
Rights (other than the grant of Incentive Stock Options), provide for the
payment of dividend equivalents to the optionee on a current, deferred or
contingent basis or may provide that such equivalents be credited against the
option price.
No Option Right may be exercisable more than ten years from the date of
grant. Each grant must specify the period of continuous employment with the
Company or any subsidiary that is necessary before the Option
20
<PAGE> 24
Rights will become exercisable and may provide for the earlier exercise of such
Option Rights in the event of a "change of control" of the Company or other
similar transaction or event. Successive grants may be made to the same optionee
whether or not Option Rights previously granted remain unexercised.
Restricted Shares. An award of Restricted Shares involves the immediate
transfer by the Company to a participant of ownership of a specific number of
Common Shares in consideration of the performance of services. The participant
is entitled immediately to voting, dividend and other ownership rights in such
shares. The transfer may be made without additional consideration or in
consideration of a payment by the participant that is less than current market
value, as the Compensation Committee may determine. The Compensation Committee
may condition the award on the achievement of Management Objectives.
Restricted Shares must be subject to a "substantial risk of forfeiture"
within the meaning of Section 83 of the Code for a period to be determined by
the Compensation Committee. An example would be a provision that the Restricted
Shares would be forfeited if the participant ceased to serve the Company as an
officer or key employee during a specified period of years. In order to enforce
these forfeiture provisions, the transferability of Restricted Shares will be
prohibited or restricted in a manner and to the extent prescribed by the
Compensation Committee for the period during which the forfeiture provisions are
to continue. The Compensation Committee may provide for a shorter period during
which the forfeiture provisions are to apply in the event of a change in control
of the Company or other similar transaction or event.
Deferred Shares. An award of Deferred Shares constitutes an agreement by
the Company to deliver Common Shares to the participant in the future in
consideration of the performance of services, but subject to the fulfillment of
such conditions during the Deferral Period as the Compensation Committee may
specify. During the Deferral Period, the participant has no right to transfer
any rights under his or her award and no right to vote them, but the
Compensation Committee may, at or after the date of award, authorize the payment
of dividend equivalents on such Shares on either a current or deferred or
contingent basis, either in cash or additional Common Shares. Awards of Deferred
Shares may be made without additional consideration or in consideration of a
payment by such participant that is less than the market value per share at the
date of award.
Deferred Shares must be subject to a Deferral Period, as determined by the
Compensation Committee at the date of the award, except that the Compensation
Committee may provide for a shorter Deferral Period in the event of a change in
control of the Company or other similar transaction or event.
Performance Shares and Performance Units. A Performance Share is the
equivalent of one Common Share, and a Performance Unit is the equivalent of
$1.00. A participant may be granted any number of Performance Shares or
Performance Units. Such participant will be given one or more Management
Objectives to meet within a specified performance period. Such performance
period may be subject to earlier termination in the event of a change in control
of the Company or other similar transaction or event. A minimum level of
acceptable achievement may also be established by the Compensation Committee. If
by the end of the performance period the participant has achieved the specified
Management Objectives, he or she will be deemed to have fully earned the
Performance Shares or Performance Units. If the participant has not achieved the
Management Objectives, but has attained or exceeded the predetermined minimum,
he or she will be deemed to have partly earned the Performance Shares and/or
Performance Units (such part to be determined in accordance with a formula). To
the extent earned, the Performance Shares and/or Performance Units will be paid
to the participant at the time and in the manner determined by the Compensation
Committee in cash, Common Shares or in any combination thereof.
Management Objectives. Management Objectives may be described either in
terms of Company-wide objectives or objectives that are related to performance
of the division, subsidiary, department or function within the Company or a
subsidiary in which the participant is employed. If the Compensation Committee
determines that a change in the business, operations, corporate structure or
capital structure of the Company, or the manner in which it conducts its
business, or other events or circumstances render the Management Objectives
unsuitable, the Compensation Committee may modify such Management Objectives or
the related minimum acceptable level of achievement, in whole or in part, as the
Compensation Committee deems appropriate and equitable.
21
<PAGE> 25
Transferability. Except as otherwise determined by the Compensation
Committee, no Option Right or other award under the Amended Plan is transferable
by a participant other than by will or the laws of descent and distribution.
Except as otherwise determined by the Compensation Committee, Option Rights are
exercisable during the optionee's lifetime only by him or her.
The Compensation Committee may specify at the date of grant that part or
all of the Common Shares that are (i) to be issued or transferred by the Company
upon exercise of Option Rights, upon termination of the Deferral Period
applicable to Deferred Shares or upon payment under any grant of Performance
Shares or Performance Units or (ii) no longer subject to the substantial risk of
forfeiture and restrictions on transfer referred to in Section 5 of the Amended
Plan, shall be subject to further restrictions on transfer.
Adjustments. The maximum number of shares that may be issued and delivered
under the Amended Plan, the number of shares covered by outstanding Option
Rights and the prices per share applicable thereto, are subject to adjustment in
the event of stock dividends, stock splits, combinations of shares,
recapitalizations, mergers, consolidations, spin-offs, reorganizations,
liquidations, issuances of rights or warrants, and similar events. In the event
of any such transaction or event, the Compensation Committee, in its discretion,
may provide in substitution for any or all outstanding awards under the Amended
Plan such alternative consideration as it, in good faith, may determine to be
equitable in the circumstances and may require the surrender of all awards so
replaced. The Compensation Committee may also make or provide for such
adjustments in the numbers of shares specified in Section 3 of the Amended Plan
as the Compensation Committee may determine appropriate to reflect any
transaction or event described in Section 10 of the Amended Plan.
Administration and Amendments. The Amended Plan is to be administered by a
committee of the Board (or subcommittee thereof) consisting of not less than
three "Nonemployee Directors" within the meaning of Rule 16b-3 under the
Exchange Act.
The Compensation Committee, which has been appointed by the Board of
Directors to act as the administering committee under the Amended Plan, is
authorized to interpret the Amended Plan and related agreements and other
documents. The Compensation Committee may make awards to employees under any or
a combination of all of the various categories of awards that are authorized
under the Amended Plan, or in its discretion, make no awards. The Amended Plan
may be amended from time to time by the Compensation Committee. However, any
amendment which must be approved by the shareholders of the Company in order to
comply with applicable law or the rules of the principal national securities
exchange upon which the Common Shares are traded or quoted will not be effective
unless and until such approval has been obtained in compliance with such
applicable law or rules. Presentation of the Amended Plan or any amendment
thereof for shareholder approval is not to be construed to limit the Company's
authority to offer similar or dissimilar benefits through plans that are not
subject to shareholder approval.
The Compensation Committee may provide for special terms for awards to
participants who are foreign nationals or who are employed by the Company or any
of its subsidiaries outside of the United States of America as the Compensation
Committee may consider necessary or appropriate to accommodate differences in
local law, tax policy or custom.
The Compensation Committee may not, without the further approval of the
shareholders of the Company, authorize the amendment of any outstanding Option
Right to reduce the option price. Furthermore, no Option Right may be cancelled
and replaced with awards having a lower option price without further approval of
the shareholders of the Company.
If the Amended Plan is not approved, the Plan remains in effect.
General. The closing price of the common stock of the Company on March 10,
1997, as reported in the Wall Street Journal, was $42.00 per share.
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<PAGE> 26
PLAN BENEFITS
It is not possible to determine future awards that will be received by
participants in the Amended Plan. Grants or awards under the Plan during the
fiscal year 1996 and through January 14, 1997 were made to the named executive
officers, other officers, key employees and Directors, as indicated in the table
below.
<TABLE>
<CAPTION>
STOCK
OPTIONS RESTRICTED SHARES PERFORMANCE SHARES
GRANTED AWARDED GRANTED(2)
GRANT/AWARD ------- -------------------- ----------------------
NAME AND POSITION YEAR NUMBER NUMBER VALUE($)(1) NUMBER VALUE($)
- ------------------------------------- ----------- ------- ------ ----------- ------ -----------
<S> <C> <C> <C> <C> <C> <C>
M. Thomas Moore 1996 -0- -0- $ -0- 17,000(3) $ 760,750
Chairman and Chief Executive Officer 1997 -0- -0- -0- 17,000(4) 726,750
John S. Brinzo 1996 -0- -0- -0- 6,000 (3) 268,500
Executive Vice President -- Finance 1997 -0- -0- -0- 6,500 (4) 277,875
William R. Calfee 1996 -0- -0- -0- 6,000 (3) 268,500
Executive Vice 1997 -0- -0- -0- 6,500 (4) 277,875
President -- Commercial
Thomas J. O'Neil 1996 -0- -0- -0- 6,000 (3) 268,500
Executive Vice 1997 -0- -0- -0- 6,500 (4) 277,875
President -- Operations
A. Stanley West 1996 -0- -0- -0- 3,500 (3) 156,625
Senior Vice President -- Sales 1997 -0- -0- -0- 3,750 (4) 160,313
Executive Group 1996 -0- -0- -0- 42,000(3) 1,879,500
1997 -0- -0- -0- 44,000(4) 1,881,000
Non-Executive Director Group 1996 6,000(5) -0- -0- -0- -0-
1997 -0- -0- -0- -0- -0-
Non-Executive Officer Employee Group 1996 83,400 23,000 891,250 14,400(3) 644,400
1997 113,450(6) -0- -0- 15,150(4) 647,663
</TABLE>
- ---------------
(1) Reflects value on date of award.
(2) Assumes achievement at target level of performance and reflects value as of
date of grant.
(3) Reflects awards granted in 1996 for performance period 1996-1998, but not
yet earned.
(4) Reflects awards granted on January 13, 1997 for performance period
1997-1999, but not yet earned.
(5) In addition, 20,500 stock options were granted to the Non-Executive Director
Group from inception of the Plan through 1995.
(6) Reflects grants on January 14, 1997.
FEDERAL INCOME TAX ASPECTS
Following is a brief summary of certain of the Federal income tax
consequences of certain transactions under the Amended Plan based on Federal
income tax laws in effect on January 1, 1997. This summary is not intended to be
exhaustive and does not describe state or local tax consequences.
TAX CONSEQUENCES TO PARTICIPANTS
Non-Qualified Stock Options. In general, (i) no income will be recognized
by an optionee at the time a Non-Qualified Stock Option is granted; (ii) at
exercise, ordinary income will be recognized by the optionee in an amount equal
to the difference between the option price paid for the shares and the fair
market value of the shares, if unrestricted, on the date of exercise; and (iii)
at sale, appreciation (or depreciation) after the date of exercise will be
treated as either short-term or long-term capital gain (or loss) depending on
how long the shares have been held.
Incentive Stock Options. No income generally will be recognized by an
optionee upon the grant or exercise of an Incentive Stock Option. If Common
Shares are issued to the optionee pursuant to the exercise of an Incentive Stock
Option, and if no disqualifying disposition of such shares is made by such
optionee within 2 years after the date of grant or within l year after the
transfer of such shares to the optionee, then upon sale of such shares, any
amount realized in excess of the option price will be taxed to the optionee as a
long-term capital gain and any loss sustained will be a long-term capital loss.
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<PAGE> 27
If Common Shares acquired upon the exercise of an Incentive Stock Option
are disposed of prior to the expiration of either holding period described
above, the optionee generally will recognize ordinary income in the year of
disposition in an amount equal to the excess (if any) of the fair market value
of such shares at the time of exercise (or, if less, the amount realized on the
disposition of such shares if a sale or exchange) over the option price paid for
such shares. Any further gain (or loss) realized by the participant generally
will be taxed as short-term or long-term capital gain (or loss) depending on the
holding period.
Restricted Shares. The recipient of Restricted Shares generally will be
subject to tax at ordinary income rates on the fair market value of the
Restricted Shares reduced by any amount paid by the participant at such time as
the shares are no longer subject to forfeiture or restrictions on transfer for
purposes of Section 83 of the Code ("restrictions"). However, a recipient who so
elects under Section 83(b) of the Code within 30 days of the date of transfer of
the shares will have taxable ordinary income on the date of transfer of the
shares equal to the excess of the fair market value of such shares (determined
without regard to the restrictions) over the purchase price if any, of such
Restricted Shares. If a Section 83(b) election has not been made, any dividends
received with respect to Restricted Shares subject to restrictions generally
will be treated as compensation that is taxable as ordinary income to the
participant.
Deferred Shares. No income generally will be recognized upon the award of
Deferred Shares. The recipient of a Deferred Share award generally will be
subject to tax at ordinary income rates on the fair market value of unrestricted
Common Shares on the date that such shares are transferred to the participant
under the award, reduced by any amount paid by the participant, and the capital
gains/loss holding period for such shares will also commence on such date.
Performance Shares and Performance Units. No income generally will be
recognized upon the grant of Performance Shares or Performance Units. Upon
payment with respect to Performance Shares or Performance Units earned, the
recipient generally will be required to include as taxable ordinary income in
the year of receipt an amount equal to the amount of cash received and the fair
market value of any unrestricted Common Shares received.
Special Rules Applicable to Officers and Directors. In limited
circumstances where the sale of stock received as a result of a grant or award
could subject an officer or director to suit under Section 16(b) of the Exchange
Act, the tax consequences to the officer or director may differ from the tax
consequences described above. In these circumstances, unless a special election
has been made, the principal difference usually will be to postpone valuation
and taxation of the stock received so long as the sale of the stock received
could subject the officer or director to suit under Section 16(b) of the
Exchange Act, but no longer than six months.
TAX CONSEQUENCES TO PARTICIPANTS' EMPLOYERS
To the extent that a participant recognizes ordinary income in the
circumstances described above, the participant's employer will generally be
entitled to a corresponding deduction, provided, among other things, that such
income meets the test of reasonableness, does not along with other income of the
participant exceed the limitation on deductible compensation under Section
162(m) of the Code, is an ordinary and necessary business expense, and is not an
"excess parachute payment," and that any applicable withholding obligations are
satisfied.
ACCOUNTING TREATMENT
Performance Shares and Performance Units will require a charge against
income of the Company periodically representing increases in the value of the
anticipated benefits. In the case of Performance Shares and Performance Units,
such charge is based on the dollar amount expected to be paid at the end of the
Performance Period. Restricted Shares and Deferred Shares will require a charge
against income equal to the fair market value of the awarded shares at the time
of award less the amount, if any, paid or payable by the awardee. Such charge is
spread over the earn-out period for the Restricted or Deferred Shares. Given the
variety of awards that may be made separately or in combination under the
Amended Plan, actual awards may result in periodic charges against income in
certain other circumstances.
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<PAGE> 28
REQUIRED VOTE
Approval of the Amended 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 APPROVAL OF THE CLEVELAND-CLIFFS INC
1992 INCENTIVE EQUITY PLAN (AS AMENDED AND RESTATED AS OF MAY 13, 1997).
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, 1997. 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 1996 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.
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 $10,000, 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 Cleveland-Cliffs Inc 1992 Incentive
Equity Plan (as Amended and Restated as of May 13, 1997), 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
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consolidated affiliates for the fiscal year 1997 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 plurality 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 approve the Cleveland Cliffs
Inc 1992 Incentive Equity Plan (as Amended and Restated as of May 13, 1997) 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.
SHAREHOLDER PROPOSALS
Any proposal by a shareholder intended to be presented at the 1998 Annual
Meeting of Shareholders must be received by the Company on or before November
24, 1997 to be included in the proxy materials of the 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.
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APPENDIX A
CLEVELAND-CLIFFS INC
1992 INCENTIVE EQUITY PLAN
(AS AMENDED AND RESTATED AS OF MAY 13, 1997)
1. PURPOSE. The Cleveland-Cliffs Inc 1992 Incentive Equity Plan (as
Amended and Restated as of May 13, 1997) ("Plan") is intended to encourage key
executives and managerial employees of Cleveland-Cliffs Inc ("Company") and its
Subsidiaries to increase their interest in the Company's long-term success, to
provide incentive equity opportunities which are competitive with other
similarly situated corporations and to stimulate the efforts of such employees
by giving suitable recognition for services which contribute materially to the
Company's success.
2. DEFINITION. For purposes of the Plan the following terms shall be
defined as set forth below:
"BOARD" means the Board of Directors of the Company.
"CODE" means the Internal Revenue Code of 1986, as amended from time
to time.
"COMMITTEE" means the committee (or subcommittee) described in Section
16(a) of this Plan.
"COMMON SHARES" means (i) shares of the common stock of the Company
(par value $1 per share) and (ii) any security into which Common Shares may
be converted by reason of any transaction or event of the type referred to
in Section 10 of this Plan.
"DATE OF GRANT" means the date specified by the Committee on which a
grant of Option Rights, Performance Shares or Performance Units or an award
or sale of Restricted Shares or Deferred Shares shall become effective,
which shall not be earlier than the date on which the Committee takes
action with respect thereto.
"DEFERRAL PERIOD" means the period of time during which Deferred
Shares are subject to deferral limitations under Section 6 of this Plan.
"DEFERRED SHARES" means an award pursuant to Section 6 of this Plan of
the right to receive Common Shares at the end of a specified Deferral
Period.
"EFFECTIVE DATE" means May 13, 1997, the effective date of this
amendment and restatement of the Cleveland-Cliffs Inc 1992 Incentive Equity
Plan.
"INCENTIVE STOCK OPTIONS" means Option Rights that are intended to
qualify as "incentive stock options" under Section 422 of the Code or any
successor provision.
"LESS-THAN-80 PERCENT SUBSIDIARY" means a subsidiary with respect to
which the Company directly or indirectly owns or controls less than 80
percent of the total combined voting or other decision making power.
"MANAGEMENT OBJECTIVES" means any performance objectives established
by the Committee pursuant to Section 8 of this Plan for Participants who
have received grants of Performance Shares or Performance Units or, when so
determined by the Committee, awards of Restricted Shares.
"MARKET VALUE PER SHARE" means the fair market value of the Common
Shares as determined by the Committee from time to time.
"OPTIONEE" means the person so designated in an agreement evidencing
an outstanding Option Right.
"OPTION PRICE" means the purchase price payable upon the exercise of
an Option Right.
"OPTION RIGHT" means the right to purchase Common Shares upon exercise
of an option granted pursuant to Section 4 of this Plan.
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"PARTICIPANT" means a person who is selected by the Committee to
receive benefits under this Plan and (i) is at that time an officer,
including without limitation an officer who may also be a member of the
Board, or other key employee of the Company or any Subsidiary, or (ii) has
agreed to commence serving in any such capacity.
"PERFORMANCE PERIOD" means, in respect of a Performance Share or
Performance Unit, a period of time established pursuant to Section 7 of
this Plan within which the Management Objectives relating to such
Performance Share or Performance Unit are to be achieved.
"PERFORMANCE SHARE" means a bookkeeping entry that records the
equivalent of one Common Share awarded pursuant to Section 7 of this Plan.
"PERFORMANCE UNIT" means a bookkeeping entry that records a unit
equivalent to $1.00 awarded pursuant to Section 7 of this Plan.
"RESTRICTED SHARES" mean Common Shares awarded or sold pursuant to
Section 5 of this Plan as to which neither the substantial risk of
forfeiture nor the restrictions on transfer referred to in Section 5 hereof
has expired.
"RULE 16b-3" means Rule 16b-3 of the Securities and Exchange
Commission promulgated under Section 16 of the Securities Exchange Act of
1934, as amended (or any successor rule to the same effect), as in effect
from time to time.
"SUBSIDIARY" means a corporation, partnership, joint venture,
unincorporated association or other entity in which the Company has a
direct or indirect ownership or other equity interest; provided, however,
for purposes of determining whether any person may be a Participant for
purposes of any grant of Incentive Stock Options, "Subsidiary" means any
corporation in which the Company owns or controls directly or indirectly
more than 50 percent of the total combined voting power represented by all
classes of stock issued by such corporation at the time of such grant.
3. SHARES AVAILABLE UNDER THE PLAN. Subject to adjustment as provided in
Section 10 of this Plan, the number of Common Shares issued or transferred (a)
upon the exercise of Option Rights, (b) as Restricted Shares and released from
substantial risks of forfeiture thereof, (c) in payment of Performance Shares or
Performance Units that shall have been earned, (d) as Deferred Shares, or (e) in
payment of dividend equivalents paid with respect to awards made under this
Plan, shall not in the aggregate exceed 1,150,000 (595,000 of which were
approved in 1992 and 555,000 of which are being added as of the Effective Date);
provided, however, that the number of Restricted Shares that are not conditioned
on the attainment of Management Objectives, plus the number of Deferred Shares
shall not (after taking any forfeitures into account) exceed 150,000, subject to
adjustment pursuant to Section 10 of the Plan. Such shares may be Common Shares
of original issuance or Common Shares held in treasury or a combination thereof.
Upon the payment of any Option Price by the transfer to the Company of Common
Shares or upon satisfaction of any withholding amount by means of transfer or
relinquishment of Common Shares, there shall be deemed to have been issued or
transferred under this Plan only the net number of Common Shares actually issued
or transferred by the Company.
4. OPTION RIGHTS. The Committee may from time to time authorize grants to
Participants of options to purchase Common Shares upon such terms and conditions
as the Committee may determine in accordance with the following provisions:
(a) Each grant shall specify the number of Common Shares to which it
pertains.
(b) Each grant shall specify an Option Price per Common Share, which
shall be equal to or greater than the Market Value per Share on the Date of
Grant.
(c) Each grant shall specify the form of consideration to be paid in
satisfaction of the Option Price and the manner of payment of such
consideration, which may include (i) cash in the form of currency or check
or other cash equivalent acceptable to the Company, (ii) nonforfeitable,
unrestricted Common Shares, which are already owned by the Optionee and
have a value at the time of exercise that is equal to the Option Price,
(iii) any other legal consideration that the Committee may deem
appropriate, including
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without limitation any form of consideration authorized under Section 4(d)
below, on such basis as the Committee may determine in accordance with this
Plan and (iv) any combination of the foregoing. For purposes of this
Section 4, constructive delivery of shares shall be deemed equivalent to
actual delivery.
(d) On or after the Date of Grant of any Option Rights other than
Incentive Stock Options, the Committee may determine that payment of the
Option Price may also be made in whole or in part in the form of Restricted
Shares or other Common Shares that are subject to risk of forfeiture or
restrictions on transfer. Unless otherwise determined by the Committee on
or after the Date of Grant, whenever any Option Price is paid in whole or
in part by means of any of the forms of consideration specified in this
Section 4(d), the Common Shares received by the Optionee upon the exercise
of the Option Rights shall be subject to the same risks of forfeiture or
restrictions on transfer as those that applied to the consideration
surrendered by the Optionee; provided, however, that such risks of
forfeiture and restrictions on transfer shall apply only to the same number
of Common Shares received by the Optionee as applied to the forfeitable or
restricted Common Shares surrendered by the Optionee.
(e) Any grant may provide for deferred payment of the Option Price
from the proceeds of sale through a bank or broker of some or all of the
Common Shares to which the exercise relates.
(f) Successive grants may be made to the same Participant regardless
of whether any Option Rights previously granted to such Participant remain
unexercised.
(g) Each grant shall specify the period or periods of continuous
employment of the Optionee by the Company or any Subsidiary that are
necessary before the Option Rights or installments thereof shall become
exercisable, and any grant may provide for the earlier exercise of such
rights in the event of a change in control of the Company or other similar
transaction or event.
(h) Option Rights granted under this Plan may be (i) options that are
intended to qualify under particular provisions of the Code, including
without limitation Incentive Stock Options, (ii) options that are not
intended to so qualify or (iii) combinations of the foregoing.
(i) On or after the Date of Grant of any Option Rights other than
Incentive Stock Options, the Committee may provide for the payment to the
Optionee of dividend equivalents thereon in cash or Common Shares on a
current, deferred or contingent basis, or the Committee may provide that
such equivalents shall be credited against the Option Price.
(j) No Option Right granted under this Plan may be exercised more than
10 years from the Date of Grant.
(k) Each grant shall be evidenced by an agreement. which shall be
executed on behalf of the Company by any officer thereof and delivered to
and accepted by the Optionee and shall contain such terms and provisions as
the Committee may determine consistent with this Plan.
5. RESTRICTED SHARES. The Committee may also authorize awards or sales to
Participants of Restricted Shares upon such terms and conditions as the
Committee may determine in accordance with the following provisions:
(a) Each award or sale shall constitute an immediate transfer of the
ownership of Common Shares to the Participant in consideration of the
performance of services, entitling such Participant to dividend, voting and
other ownership rights, subject to the substantial risk of forfeiture and
restrictions on transfer hereinafter referred to.
(b) Each award or sale may be made without additional consideration
from the Participant or in consideration of a payment by the Participant
that is less than the Market Value per Share on the Date of Grant.
(c) Each award or sale shall provide that the Restricted Shares
covered thereby shall be subject to a "substantial risk of forfeiture"
within the meaning of Section 83 of the Code for a period to be determined
by the Committee on the Date of Grant, and any award or sale may provide
for the earlier termination of such period in the event of a change in
control of the Company or other similar transaction or event.
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(d) Each award or sale shall provide that, during the period for which
such substantial risk of forfeiture is to continue, the transferability of
the Restricted Shares shall be prohibited or restricted in the manner and
to the extent prescribed by the Committee on the Date of Grant. Such
restrictions may include without limitation rights of repurchase or first
refusal in the Company or provisions subjecting the Restricted Shares to a
continuing substantial risk of forfeiture in the hands of any transferee.
(e) Any award or sale may be further conditioned upon the attainment
of Management Objectives which, if achieved, will result in termination or
early termination of the restrictions applicable to such shares and each
grant may specify in respect of the specified Management Objectives a
minimum acceptable level of achievement and shall set forth a formula for
determining the number of Restricted Shares on which restrictions will
terminate if performance is at or above the minimum level, but falls short
of full achievement of the specified Management Objectives.
(f) Any award or sale may require that any or all dividends or other
distributions paid on the Restricted Shares during the period of such
restrictions be automatically sequestered and reinvested on an immediate or
deferred basis in additional Common Shares, which may be subject to the
same restrictions as the underlying award or such other restrictions as the
Committee may determine.
(g) Each award or sale shall be evidenced by an agreement, which shall
be executed on behalf of the Company by any officer thereof and delivered
to and accepted by the Participant and shall contain such terms and
provisions as the Committee may determine consistent with this Plan. Unless
otherwise directed by the Committee, all certificates representing
Restricted Shares, together with a stock power that shall be endorsed in
blank by the Participant with respect to such shares, shall be held in
custody by the Company until all restrictions thereon lapse.
6. DEFERRED SHARES. The Committee may also authorize awards or sales of
Deferred Shares to Participants upon such terms and conditions as the Committee
may determine in accordance with the following provisions:
(a) Each award or sale shall constitute the agreement by the Company
to issue or transfer Common Shares to the Participant in the future in
consideration of the performance of services, subject to the fulfillment
during the Deferral Period of such conditions as the Committee may specify.
(b) Each award or sale may be made without additional consideration
from the Participant or in consideration of a payment by the Participant
that is less than the Market Value per Share on the Date of Grant.
(c) Each award or sale shall provide that the Deferred Shares covered
thereby shall be subject to a Deferral Period, which shall be fixed by the
Committee on the Date of Grant, and any award or sale may provide for the
earlier termination of such period in the event of a change in control of
the Company or other similar transaction or event.
(d) During the Deferral Period, the Participant shall not have any
right to transfer any rights under the subject award, shall not have any
rights of ownership in the Deferred Shares and shall not have any right to
vote such shares, but the Committee may on or after the Date of Grant
authorize the payment of dividend equivalents on such shares in cash or
additional Common Shares on a current, deferred or contingent basis.
(e) Each award or sale shall be evidenced by an agreement, which shall
be executed on behalf of the Company by any officer thereof and delivered
to and accepted by the Participant and shall contain such terms and
provisions as the Committee may determine consistent with this Plan.
7. PERFORMANCE SHARES AND PERFORMANCE UNITS. The Committee may also
authorize grants of Performance Shares and Performance Units, which shall become
payable to the Participant upon the achievement of specified Management
Objectives, upon such terms and conditions as the Committee may determine in
accordance with the following provisions:
(a) Each grant shall specify the number of Performance Shares or
Performance Units to which it pertains, which may be subject to adjustment
to reflect changes in compensation or other factors.
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(b) The Performance Period with respect to each Performance Share or
Performance Unit shall be determined by the Committee on the Date of Grant,
and may be subject to earlier termination in the event of a change in
control of the Company or other similar transaction or event.
(c) Each grant shall specify Management Objectives which, if achieved,
will result in payment or early payment of the award, and each grant may
specify in respect of the specified Management Objectives a minimum
acceptable level of achievement below which no payment will be made and
shall set forth a formula for determining the amount of any payment to be
made if performance is at or above such minimum acceptable level, but falls
short of full achievement of the specified Management Objectives.
(d) Each grant shall specify the time and manner of payment of
Performance Shares or Performance Units that shall have been earned, and
any grant may specify that any such amount may be paid by the Company in
cash, Common Shares or any combination thereof and may either grant to the
Participant or reserve to the Committee the right to elect among those
alternatives.
(e) Any grant of Performance Shares may specify that the amount
payable with respect thereto may not exceed a maximum specified by the
Committee on the Date of Grant. Any grant of Performance Units may specify
that the amount payable, or the number of Common Shares issued, with
respect thereto may not exceed maximums specified by the Committee on the
Date of Grant.
(f) On or after the Date of Grant of Performance Shares, the Committee
may provide for the payment to the Participant of dividend equivalents
thereon in cash or additional Common Shares on a current, deferred or
contingent basis.
(g) Each grant shall be evidenced by an agreement, which shall be
executed on behalf of the Company by any officer thereof and delivered to
and accepted by the Participant and shall state that the Performance Shares
or Performance Units are subject to all of the terms and conditions of this
Plan and such other terms and provisions as the Committee may determine
consistent with this Plan.
8. MANAGEMENT OBJECTIVES. Management Objectives may be described in terms
of Company-wide objectives or objectives that are related to the performance of
the individual Participant or the Subsidiary, division, department or function
within the Company or Subsidiary in which the Participant is employed. If the
Committee determines that a change in the business, operations, corporate
structure or capital structure of the Company, or the manner in which it
conducts its business, or other events or circumstances render the Management
Objectives unsuitable, the Committee may modify such Management Objectives or
the related minimum acceptable level of achievement, in whole or in part, as the
Committee deems appropriate and equitable.
9. TRANSFERABILITY.
(a) Except as otherwise determined by the Committee, no Option Right
or other award granted or awarded under this Plan shall be transferable by
a Participant other than by will or the laws of descent and distribution.
Except as otherwise determined by the Committee, Option Rights shall be
exercisable during a Participant's lifetime only by the Participant or, in
the event of the Participant's legal incapacity, by his guardian or legal
representative acting in a fiduciary capacity on behalf of the Participant
under state law and court supervision.
(b) Any grant or award made under this Plan may provide that all or
any part of the Common Shares that are (i) to be issued or transferred by
the Company upon the exercise of Option Rights or upon the termination of
the Deferral Period applicable to Deferred Shares, or under a grant of
Performance Shares or Performance Units, or (ii) no longer subject to the
substantial risk of forfeiture and restrictions on transfer referred to in
Section 5 of this Plan, shall be subject to further restrictions upon
transfer.
10. ADJUSTMENTS. The Committee may make or provide for such adjustments in
the (a) number of Common Shares covered by outstanding Option Rights, Deferred
Shares and Performance Shares granted or awarded hereunder, (b) prices per share
applicable to such Option Rights, and (c) kind of shares covered thereby, as the
Committee in its sole discretion may in good faith determine to be equitably
required in order
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to prevent dilution or enlargement of the rights of Participants that otherwise
would result from (x) any stock dividend, stock split, combination of shares,
recapitalization or other change in the capital structure of the Company, (y)
any merger, consolidation, spin-off, spin-out, split-off, split-up,
reorganization, partial or complete liquidation of the Company or other
distribution of assets, issuance of rights or warrants to purchase securities of
the Company, or (z) any other corporate transaction or event having an effect
similar to any of the foregoing. In the event of any such transaction or event,
the Committee may provide in substitution for any or all outstanding grants or
awards under this Plan such alternative consideration as it may in good faith
determine to be equitable under the circumstances and may require in connection
therewith the surrender of all awards so replaced. Moreover, the Committee may
on or after the Date of Grant provide in the agreement evidencing any grant or
award under this Plan that the holder of the grant or award may elect to receive
an equivalent grant or award in respect of securities of the surviving entity of
any merger, consolidation or other transaction or event having a similar effect,
or the Committee may provide that the holder will automatically be entitled to
receive such an equivalent grant or award. The Committee may also make or
provide for such adjustments in the number of shares specified in Section 3 of
this Plan as the Committee in its sole discretion may in good faith determine to
be appropriate in order to reflect any transaction or event described in this
Section 10. This Section 10 shall not be construed to permit the re-pricing of
any Option Right in the absence of any of the circumstances described above in
contravention of Section 17(b) of this Plan.
11. FRACTIONAL SHARES. The Company shall not be required to issue any
fractional Common Shares pursuant to this Plan. The Committee may provide for
the elimination of fractions or for the settlement thereof in cash.
12. WITHHOLDING TAXES. To the extent that the Company is required to
withhold federal, state, local or foreign taxes in connection with any payment
made or benefit realized by a Participant or other person under this Plan, and
the amounts available to the Company for such withholding are insufficient, it
shall be a condition to the receipt of such payment or the realization of such
benefit that the Participant or such other person make arrangements satisfactory
to the Company for payment of the balance of such taxes required to be withheld.
At the discretion of the Committee, such arrangements may include relinquishment
of a portion of such benefit. The Company and any Participant or such other
person may also make similar arrangements with respect to the payment of any
taxes with respect to which withholding is not required.
13. PARTICIPATION BY EMPLOYEES OF A LESS-THAN-80-PERCENT SUBSIDIARY. As a
condition to the effectiveness of any grant or award to be made hereunder to a
Participant who is an employee of a Less-Than-80-Percent Subsidiary, regardless
whether such Participant is also employed by the Company or another Subsidiary,
the Committee may require the Less-Than-80-Percent Subsidiary to agree to
transfer to the Participant (as, if and when provided for under this Plan and
any applicable agreement entered into between the Participant and the
Less-Than-80-Percent Subsidiary pursuant to this Plan) the Common Shares that
would otherwise be delivered by the Company upon receipt by the
Less-Than-80-Percent Subsidiary of any consideration then otherwise payable by
the Participant to the Company. Any such award may be evidenced by an agreement
between the Participant and the Less-Than-80-Percent Subsidiary, in lieu of the
Company, on terms consistent with this Plan and approved by the Committee and
the Less-Than-80-Percent Subsidiary. All Common Shares so delivered by or to a
Less-Than-80-Percent Subsidiary will be treated as if they had been delivered by
or to the Company for purposes of Section 3 of this Plan, and all references to
the Company in this Plan shall be deemed to refer to the Less-Than-80-Percent
Subsidiary except with respect to the definitions of the Board and the Committee
and in other cases where the context otherwise requires.
14. CERTAIN TERMINATIONS OF EMPLOYMENT, HARDSHIP AND APPROVED LEAVES OF
ABSENCE. Notwithstanding any other provision of this Plan to the contrary, in
the event of termination of employment by reason of death, disability, normal
retirement, early retirement with the consent of the Company, leave of absence
to enter public service with the consent of the Company or other leave of
absence approved by the Company, or in the event of hardship or other special
circumstances, of a Participant who holds an Option Right that is not
immediately and fully exercisable, any Restricted Shares as to which the
substantial risk of forfeiture or the prohibition or restriction on transfer has
not lapsed, any Deferred Shares as to which the Deferral Period is not complete,
any Performance Shares or Performance Units that have not been fully earned, or
any Common Shares that are subject to any transfer restriction pursuant to
Section 9(b) of this Plan, the Committee may in its sole discretion take any
action that it deems to be equitable under the circumstances or in the best
interests
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of the Company, including without limitation waiving or modifying any limitation
or requirement with respect to any award under this Plan.
15. FOREIGN EMPLOYEES. In order to facilitate the making of any grant or
combination of grants under this Plan, the Committee may provide for such
special terms for awards to Participants who are foreign nationals, or who are
employed by the Company or any Subsidiary outside of the United States of
America, as the Committee may consider necessary or appropriate to accommodate
differences in local law, tax policy or custom. Moreover, the Committee may
approve such supplements to, or amendments, restatements or alternative versions
of, this Plan as it may consider necessary or appropriate for such purposes
without thereby affecting the terms of this Plan as in effect for any other
purpose, and the Secretary or other appropriate officer of the Company may
certify any such document as having been approved and adopted in the same manner
as this Plan. No such special terms, supplements, amendments, restatements or
alternative versions shall include any provisions that are inconsistent with the
terms of this Plan, as then in effect, unless this Plan could have been amended
to eliminate such inconsistency without further approval by the shareholders of
the Company.
16. ADMINISTRATION OF THE PLAN.
(a) This Plan shall be administered by a committee of the Board (or a
subcommittee thereof) composed of not less than three members of the Board,
each of whom shall be a "Non-Employee Director" within the meaning of Rule
16b-3. A majority of the Committee shall constitute a quorum, and the acts
of the members of the Committee who are present at any meeting thereof at
which a quorum is present, or acts unanimously approved by the members of
the Committee in writing, shall be the acts of the Committee.
(b) The interpretation and construction by the Committee of any
provision of this Plan or of any agreement, notification or document
evidencing the grant or award of Option Rights, Restricted Shares, Deferred
Shares, Performance Shares or Performance Units, and any determination by
the Committee pursuant to any provision of this Plan or any such agreement,
notification or document, shall be final and conclusive. No member of the
Committee shall be liable for any such action taken or determination made
in good faith.
17. AMENDMENTS AND OTHER MATTERS.
(a) This Plan may be amended from time to time by the Committee;
provided, however, that any amendment that must be approved by the
shareholders of the Company in order to comply with applicable law or the
rules of the principal national securities exchange upon which the Common
Shares are traded or quoted shall not be effective unless and until such
approval has been obtained in compliance with such applicable law or rules.
Presentation of this Plan or any amendment hereof for shareholder approval
shall not be construed to limit the Company's authority to offer similar or
dissimilar benefits through plans that are not subject to shareholder
approval.
(b) The Committee shall not, without the further approval of the
shareholders of the Company, authorize the amendment of any outstanding
Option Right to reduce the Option Price. Furthermore, no Option Right shall
be cancelled and replaced with awards having a lower Option Price without
further approval of the shareholders of the Company. This Section 17(b) is
intended to prohibit the repricing of "underwater" Option Rights and shall
not be construed to prohibit the adjustments provided for in Section 10 of
this Plan.
(c) The Committee may require Participants, or may permit Participants
to elect to defer the issuance of Common Shares or the settlement of awards
in cash under the Plan pursuant to such rules, procedures or programs as it
may establish for purposes of the Plan. The Committee may also provide that
deferred settlements include the payment or crediting of interest on the
deferred amounts, or the payment or crediting of dividend equivalents where
the deferred amounts are denominated in Common Shares.
(d) This Plan shall not confer upon any Participant any right with
respect to continuance of employment or other service with the Company or
any Subsidiary and shall not interfere in any way with
A-7
<PAGE> 37
any right that the Company or any Subsidiary would otherwise have to
terminate any Participant's employment or other service at any time.
(e) To the extent that any provision of this Plan would prevent any
Option Right that was intended to qualify under particular provisions of
the Code from so qualifying, such provision of this Plan shall be null and
void with respect to such Option Right; provided, however, that such
provision shall remain in effect with respect to other Option Rights, and
there shall be no further effect on any provision of this Plan.
(f) The Committee may condition the grant of any award or combination
of awards authorized under this Plan on the surrender or deferral by the
Participant of his or her right to receive a cash bonus or compensation
otherwise payable by the Company or a Subsidiary to the Participant.
A-8
<PAGE> 38
CLEVELAND-CLIFFS INC
NOTICE OF
ANNUAL MEETING
OF SHAREHOLDERS
TO BE HELD ON
MAY 13, 1997
AND
PROXY STATEMENT
<PAGE> 39
CLEVELAND-CLIFFS INC
18TH FLOOR DIAMOND BUILDING - CLEVELAND, OHIO 44114-2589
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
PROXY
The undersigned hereby appoints J. D. Ireland III, E. B. Jones,
COMMON J. H. Wade and A. W. Whitehouse, as Proxies, each with the
SHARES 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 17, 1997, at the
Annual Meeting of Shareholders to be held on May 13, 1997, 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, L. L. Kanuk, F. R. McAllister, J. C. Morley,
M. T. Moore, S. B. Oresman, A. Schwartz, 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
------------
- --------------------------------------------------------------------------------
FOLD AND DETACH HERE
<PAGE> 40
<TABLE>
<CAPTION>
X PLEASE MARK YOUR 0696
VOTES AS IN THIS
EXAMPLE.
<S> <C> <C> <C> <C> <C> <C>
FOR WITHHELD FOR AGAINST ABSTAIN
1. Election of / / / / 2. Approval of the / / / / / /
Directors Cleveland-Cliffs Inc
(see reverse) 1992 Incentive
Equity Plan (as
For, except vote withheld from the following Amended and Restated
nominee(s): as of May 13, 1997)
----------------------------------
</TABLE>
FOR AGAINST ABSTAIN
3. Ratification of the / / / / / /
appointment of
Ernst & Young
LLP as independent
public accountants
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
- --------------------------------------------------------------------------------
FOLD AND DETACH HERE
IMPORTANT
PLEASE COMPLETE AND RETURN YOUR PROXY CARD PROMPTLY
USING THE ENCLOSED ENVELOPE
