<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 23, 1998
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 12, 1998 at 11:30 A.M. (Cleveland
time).
At the meeting, shareholders will act upon the election of Directors 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/ John C. Morley
------------------------------------
John C. Morley
Chairman of the Board
/s/ John S. Brinzo
------------------------------------
JOHN S. BRINZO
President 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 23, 1998
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 12, 1998 at 11:30 A.M. (Cleveland time) for the purpose of considering and
acting upon:
1. A proposal to elect 12 Directors to hold office until the next
Annual Meeting of Shareholders and until their successors are
elected;
2. 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 1998; and
3. 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 16, 1998, 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 Associate 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 23, 1998
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 12, 1998, 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 16, 1998, the record date for the determination of persons
entitled to vote at the Meeting, there were 11,361,732 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 23, 1998.
ELECTION OF DIRECTORS
(PROPOSAL NO. 1)
It is intended that proxies received will be voted, unless contrary
instructions are given, to elect the 12 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 9, 1998 (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>
JOHN S. BRINZO, 56, President and Chief Executive Officer of 1997
the Company since November 10, 1997. Mr. Brinzo served
as the Company's Executive Vice President-Finance and
Planning from July 1, 1997 through November 9, 1997 and
Executive Vice President-Finance and Chief Financial
Officer since before 1993.
RONALD C. CAMBRE, 59, Chairman of the Board of Newmont 1996
Mining Corporation and Newmont Gold Company
(international 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, 56, Partner since February, 1991 of 1991
Colman, Furlong & Co., and since 1996 the founder of
Colman Partners, LLC, both private merchant banking
firms. Mr. Colman is a Director of First Health Group
Corp. and Van Wagoner Funds, Inc.
JAMES D. IRELAND III, 48, Managing Director since January, 1986
1993 of Capital One Partners, Inc., a private merchant
banking firm. Mr. Ireland is also President since
before 1993 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, 69, President and Chief Executive Officer 1994
since November, 1995 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 President and Chief Executive Officer of
the Salt Lake Organizing Committee for the 2002 Olympic
Winter Games.
LESLIE L. KANUK, 68, Professor of Marketing since before 1991
1993 at the Graduate School and University Center of
the City University of New York. Dr. Kanuk is a former
Chairman of the Federal Maritime Commission and, since
before 1993, 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, 55, President and Chief Operating 1996
Officer since January, 1998 of ASARCO Incorporated, an
international nonferrous metals mining company. Mr.
McAllister served as Executive Vice President-Copper
Operations from May, 1993 to January, 1998 and as
Executive Vice President and Chief Financial Officer
from April, 1992 through April, 1993 of ASARCO
Incorporated. Mr. McAllister is a Director of ASARCO
Incorporated 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, 63, Formerly Chairman and Chief Executive 1986
Officer of the Company from May 10, 1988 to November 9,
1997. Mr. Moore is a Director of KeyCorp, Lubrizol
Corporation and The LTV Corporation.
JOHN C. MORLEY, 66, Chairman of the Board of the Company 1995
since November 10, 1997 and Chairman of the
Compensation and Organization Committee. Mr. Morley is
President since August, 1995 of Evergreen Ventures,
Ltd., a private investment firm. Mr. Morley is also
retired as President and Chief Executive Officer and
Director since before 1993 of Reliance Electric
Company, a manufacturer of electrical, mechanical power
transmission and telecommunications products and
systems. Mr. Morley is a Director of AMP Incorporated,
where he is a member of the Compensation and Management
Development Committee, Ferro Corporation and Lamson &
Sessions, Inc.
STEPHEN B. ORESMAN, 65, President since January, 1991 of 1991
Saltash, Ltd., management consultants. Mr. Oresman was
with Booz-Allen & Hamilton, Inc., management
consultants, for 19 years where he was Senior Vice
President and Chairman of Booz-Allen & Hamilton
International, 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, 57, Professor of Law at the Yale Law School 1991
and Professor at the Yale School of Management since
before 1993. Mr. Schwartz was a Professor of Law and
Social Science at the California Institute of
Technology from 1979 through July, 1987.
ALTON W. WHITEHOUSE, 70, Retired. Former Chairman and Chief 1972
Executive Officer since before 1993 of The Standard Oil
Company (Ohio), an integrated petroleum company. Mr.
Whitehouse is a Director of The Timken Company.
</TABLE>
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 twelve 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.
Brinzo. The average age of the nominees is 61, ranging from 48 to 70. The
average service of the nominees is 7 years, ranging from less than one year to
25 years.
The Company has a long-standing progressive governance process with formal
governance guidelines. During 1997, ten regularly scheduled meetings of the
Board of Directors were held and nineteen 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 the Chief Executive Officer, and telephone conferences
with the Chairman, the Chief Executive Officer, 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, Strategic Advisory, and Long Range Planning Committees. All committees
regularly report their activities, actions, and recommendations to the Board.
Four Directors attended 100 percent of the meetings of the Board of Directors
and Board Committees of which they were a member; five Directors attended at
least 90 percent of such meetings and three Directors attended at least 80
percent of such meetings. Absences were generally due to temporary scheduling
conflicts or illness.
3
<PAGE> 7
The Executive Committee consists of Messrs. Morley (chairman), Brinzo,
Cambre, Colman, Ireland, Kanuk 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 no meetings during
1997.
The Audit Committee, consisting of Messrs. Colman (chairman), Cambre and
McAllister, 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 1997.
The Board Affairs Committee, consisting of Messrs. Ireland (chairman),
Morley, Schwartz and Whitehouse, administers the Company's compensation plans
for Directors; monitors the Board governance process and provides counsel to the
Board Chairman and the 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 four meetings during 1997.
The Compensation and Organization Committee, consisting of Messrs. Morley
(chairman), Cambre, Ireland and Joklik, 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 nine
meetings during 1997.
The Finance Committee, consisting of Mr. Whitehouse (chairman), Dr. Kanuk,
and Messrs. McAllister, Moore and Oresman, 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 one meeting during 1997.
The Strategic Advisory Committee, consisting of Messrs. Ireland (chairman),
Brinzo, Cambre, Colman, Moore and Morley, 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 one meeting during 1997.
The Long Range Planning Committee, consisting of the full Board of
Directors with Mr. Brinzo serving as chairman, facilitates informed decisions by
the Board through review of business plans and special topics of interest. The
Committee held two meetings during 1997.
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. Brinzo, each receive an annual retainer of $2,500, and Mr. Morley receives,
in addition to his annual retainer, a monthly retainer of $10,000 as
non-executive Chairman of the Board.
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.
4
<PAGE> 8
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
Retirement Plan for Non-Employee Directors and the Nonemployee Directors'
Supplemental Compensation Plan, in order to establish arrangements for the
funding and payment of the Company's obligations to beneficiaries under such
Plans.
SECURITIES OWNERSHIP OF MANAGEMENT AND CERTAIN OTHER PERSONS
The following table sets forth the amount and percent of Common Shares
which, as of March 9, 1998 (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 Officers), by each
nominee for Director, by the Company's five most highly compensated executive
officers and the former Chief Executive Officer, 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 INVESTMENT
(EXCLUDING DIRECTOR AND FORMER CHIEF EXECUTIVE POWER VOTING POWER
OFFICER M.T. MOORE AND DIRECTOR AND BENEFICIAL ----------------- ----------------- PERCENT OF
CHIEF EXECUTIVE OFFICER J.S. BRINZO) OWNERSHIP(2) SOLE SHARED SOLE SHARED CLASS(3)
- ------------------------------------------------ ------------ ---- ------ ---- ------ ----------
<S> <C> <C> <C> <C> <C> <C>
Ronald C. Cambre................................ 2,235 2,235 -0- 2,235 -0- --
Robert S. Colman................................ 3,015 3,015 -0- 3,015 -0- --
James D. Ireland III............................ 272,199 5,557 266,642(4) 5,557 266,642(4) 2.40%
G. Frank Joklik................................. 2,360 2,360 -0- 2,360 -0- --
Leslie L. Kanuk................................. 3,015 3,015 -0- 3,015 -0- --
Francis R. McAllister........................... 2,754 2,754 -0- 2,754 -0- --
John C. Morley.................................. 5,710 5,710 -0- 5,710 -0- --
Stephen B. Oresman.............................. 3,015 3,015 -0- 3,015 -0- --
Alan Schwartz................................... 1,515 1,515 -0- 1,515 -0- --
Alton W. Whitehouse............................. 3,260 3,260 -0- 3,260 -0- --
</TABLE>
<TABLE>
<CAPTION>
NAMED EXECUTIVE OFFICERS
------------------------
<S> <C> <C> <C> <C> <C> <C>
M. Thomas Moore................................. 40,000 40,000 -0- 40,000 -0- --
John S. Brinzo.................................. 37,302 37,302 -0- 37,302 -0- --
William R. Calfee............................... 20,637 20,637 -0- 20,637 -0- --
Thomas J. O'Neil................................ 13,733 13,733 -0- 13,733 -0- --
John W. Sanders................................. 7,000 7,000 -0- 7,000 -0- --
A. Stanley West................................. 15,900 15,900 -0- 15,900 -0- --
All Directors and Executive
Officers as a Group
(17 Persons).................................. 436,135 169,493 266,642 169,493 266,642 3.84%
</TABLE>
5
<PAGE> 9
<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>
Schafer Capital Management, Inc. (5)
101 Carnegie Center
Princeton, NJ 08540.................. 653,320 616,200 37,120 616,200 37,120 5.75%
The State Teachers Retirement
Board of Ohio (6)
275 East Broad Street
Columbus, OH 43215................... 593,500 593,500 -0- 593,500 -0- 5.22%
</TABLE>
- ---------------
(1) Under the rules of the SEC, "beneficial ownership" includes having or
sharing with others the power to vote or direct the investment of
securities. Accordingly, a person having or sharing the power to vote or
direct the investment of securities is deemed to "beneficially own" the
securities even if he or she has no right to receive any part of the
dividends on or the proceeds from the sale of the securities. Also, because
"beneficial ownership" extends to persons, such as co-trustees under a
trust, who share power to vote or control the disposition of the securities,
the very same securities may be deemed "beneficially owned" by two or more
persons shown in the table. Information with respect to "beneficial
ownership" shown in the table above is based upon information supplied by
the Directors, nominees and executive officers of the Company and filings
made with the SEC or furnished to the Company by any shareholder.
(2) Included in the shares shown are Common Shares subject to options granted by
the Company which entitle the holder to acquire said shares within 60 days
from March 9, 1998. Each of the Directors (excluding Mr. Moore and Mr.
Brinzo) has such options as follows: Mr. Cambre, 500; Mr. Colman, 2,500; Mr.
Ireland, 2,500; Mr. Joklik, 2,000; Dr. Kanuk, 2,500; Mr. McAllister, 500;
Mr. Morley, -0-; Mr. Oresman, 2,500; Mr. Schwartz, 1,000 and Mr. Whitehouse,
2,500; each of the named executive officers in the table has such options as
follows: Mr. Moore, 10,000; Mr. Brinzo, 7,000; Mr. Calfee, 4,375; Mr.
O'Neil, -0-; Mr. Sanders, -0- and Mr. West, 2,000; and the Directors and
executive officers as a group have 39,875 options. Performance shares earned
for the performance period 1995 - 1997 by Messrs. Moore, 14,432, Brinzo,
5,958, Calfee, 5,428, O'Neil, 3,972, Sanders, -0- and West, 3,575 (the value
of which is shown in the LTIP Payouts column of the "Summary Compensation
Table" on page 7), less shares relinquished to fulfill withholding tax
requirements, are included in the shares shown in the table.
(3) Less than 1%, except as otherwise indicated.
(4) Of the 272,199 shares deemed under the rules of the SEC to be beneficially
owned by Mr. Ireland, he is a beneficial holder of 5,557 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 13, 1998, as filed by Schafer Capital
Management, Inc., David K. Schafer and Schafer Cullen Capital Management,
Inc. with the SEC.
(6) Except for Percent of Class, the information shown above was taken from the
Schedule 13F, as of December 31, 1997, as filed by The State Teachers
Retirement Board of Ohio with the SEC.
6
<PAGE> 10
EXECUTIVE COMPENSATION
The following table sets forth all compensation earned by the Company's
five most highly compensated executive officers and M. Thomas Moore, who was
Chairman and Chief Executive Officer until November 9, 1997 ("named executive
officers"), with respect to the years 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 ALL OTHER
NAME AND SALARY BONUS COMPENSATION(1) AWARDS(2) OPTIONS PAYOUTS(3) COMPENSATION(4)
PRINCIPAL POSITION YEAR ($) ($) ($) ($) (#) ($) ($)
------------------ ---- -------- -------- --------------- ---------- ---------- ---------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
M. Thomas Moore(5) 1997 $540,000 $250,000 $ -- $ 26,025(5) -0- $ 750,464 $26,713(5)
Former Chairman and Chief 1996 540,000 375,000 -- -0- -0- 434,112 22,122
Executive Officer 1995 440,000 310,000 -- -0- -0- -0- 18,040
John S. Brinzo 1997 280,729 112,000 -- -0- -0- 309,816 11,509
President and 1996 237,500 145,000 -- -0- -0- 182,784 9,738
Chief Executive Officer 1995 225,000 131,500 -- -0- -0- -0- 9,221
William R. Calfee 1997 256,250 100,000 -- 45,250(6) -0- 282,256 10,505
Executive Vice 1996 250,000 145,000 -- -0- -0- 182,784 10,250
President-Commercial 1995 250,000 131,500 -- -0- -0- -0- 10,245
Thomas J. O'Neil 1997 231,000 100,000 -- -0- -0- 206,544 9,466
Executive Vice 1996 200,000 130,000 -- -0- -0- 114,240 8,200
President-Operations 1995 185,000 95,000 -- -0- -0- -0- 7,585
John W. Sanders 1997 188,000 64,000 -- 204,688(7) -0- -0- 7,704
Senior Vice President- 1996 175,000 85,000 -- 81,250(7) -0- -0- 7,175
International Development 1995 43,750 15,000 -- -0- -0- -0- 1,794
A. Stanley West 1997 183,750 66,500 -- 25,275(8) -0- 185,900 7,531
Senior Vice 1996 175,000 87,500 -- -0- -0- 114,240 7,174
President-Sales 1995 175,000 85,000 -- -0- -0- -0- 7,167
</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, Sanders and West, as of December 31, 1997 was 1,070,
330, 1,205, 6,000, 6,600 and 694, respectively. The aggregate value of such
shares as of December 31, 1997 was $49,019, $15,118, $55,204, $274,875,
$302,363 and $31,794, 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 1998 for the 1995-1997 performance
period under the Company's performance share program. The Company's closing
stock price on March 9, 1998 of $52.00 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 1997 include cash contributed by the Company under the
Cliffs Salaried Employees Supplemental Retirement Savings Plan as follows:
$6,650, $6,355, $6,287, $6,136, $5,878 and $5,852 on behalf of Messrs.
Moore, Brinzo, Calfee, O'Neil, Sanders and West, respectively; and cash
contributed by the Company under the Voluntary Non-Qualified Deferred
Compensation Plan as follows: $15,487, $5,154, $4,218, $3,330, $1,826 and
$1,679 on behalf of Messrs. Moore, Brinzo, Calfee, O'Neil, Sanders and West,
respectively.
(5) Culminating a succession planning process, Mr. Moore voluntarily
relinquished his position as Chairman and Chief Executive Officer of the
Company on November 9, 1997. At such time, Mr. Moore became an inactive
employee under the Company's disability plans, whereby he will continue to
receive his base salary through June 30, 1998, 75% of his salary through
December 31, 1998 and 65% of his salary to age 65 on October 10, 1999, at
which time he will retire as an inactive employee. Beginning November 10,
1997, Mr. Moore receives regular Board of Directors' fees ($4,576 in 1997),
which are included in "All Other Compensation." The Board of Directors
approved accelerated vesting, effective January 1, 1998, of 600 shares of
Restricted Stock awarded to Mr. Moore on January 14, 1997 and full
participation in the Company's Performance Share Program with respect to his
regular grant of 17,000 performance shares in 1997, which are payable in the
year 2000 to the extent of the Company's performance against specific
financial objectives for the 1997-1999 period. At the request of Mr. Moore,
the Company terminated his change-of-control employment agreement effective
November 10, 1997. The Company retained an obligation to provide him with
retiree medical benefits and protect him against the imposition of excise
tax on "excess parachute" payments, if any, in the event of a
change-of-control. Mr. Moore will continue to receive Company-paid financial
planning and tax service for two years. In accordance with the Company's
policy for retired Chief Executive Officers, Mr. Moore receives
Company-provided office services and business club expense reimbursements.
(6) On January 1, 1997, the Company awarded 1,000 shares of Restricted Stock to
Mr. Calfee. One-third of such award vested on the first anniversary of the
date of the award, and one-third of such award will vest on each of the
second and third anniversaries of the date of the award.
(7) On July 1, 1997, the Company awarded 5,000 shares of Restricted Stock to Mr.
Sanders, of which one-fifth will vest on January 28, 2001 and an additional
one-fifth will vest on each of the first, second, third and fourth
anniversaries of the initial vesting date of the award. On January 1, 1996,
the Company awarded 2,000 shares of Restricted Stock to Mr. Sanders.
One-fifth of such award vested on each of the first and second anniversaries
of the date of the award and one-fifth of such award will vest on each of
the third, fourth and fifth anniversaries of the date of the award.
(8) On April 1, 1997, the Company awarded 600 shares of Restricted Stock to Mr.
West. One-third of such award vested on the first anniversary of the date of
the award, and one-third will vest on each of the second and third
anniversaries of the date of the award.
7
<PAGE> 11
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>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
SHARES UNDERLYING UNEXERCISED "IN-THE-MONEY" OPTIONS
ACQUIRED VALUE OPTIONS AT FY-END (#) AT FY-END ($)
ON EXERCISE REALIZED --------------------------- ---------------------------
NAME (#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
M. Thomas Moore -0- $ -0- 10,000 -0- 256,950 -0-
John S. Brinzo -0- -0- 7,000 -0- 179,865 -0-
William R. Calfee -0- -0- 4,375 -0- 112,416 -0-
Thomas J. O'Neil -0- -0- -0- -0- -0- -0-
John W. Sanders -0- -0- -0- -0- -0- -0-
A. Stanley West -0- -0- 2,000 -0- 51,390 -0-
</TABLE>
LONG-TERM INCENTIVE PLANS -- AWARDS IN LAST FISCAL YEAR
The following table sets forth information relating to the long-term
incentive awards that were made on January 13, 1997 under the 1992 Incentive
Equity Plan for the named executive officers.
<TABLE>
<CAPTION>
ESTIMATED FUTURE PAYOUTS
NUMBER OF PERFORMANCE UNDER NON-STOCK PRICE-BASED 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 1/1/97-12/31/99 4,250 17,000 29,750
John S. Brinzo 6,500 1/1/97-12/31/99 1,625 6,500 11,375
William R. Calfee 6,500 1/1/97-12/31/99 1,625 6,500 11,375
Thomas J. O'Neil 6,500 1/1/97-12/31/99 1,625 6,500 11,375
John W. Sanders 3,750 1/1/97-12/31/99 938 3,750 6,563
A. Stanley West 3,750 1/1/97-12/31/99 938 3,750 6,563
</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 Committee has the discretion to make
distributions in cash in lieu of stock. The Compensation and Organization
Committee ("Committee") confirmed that for the three-year performance period
ending December 31, 1997, the Company achieved an average performance of 132.4
percent in respect to the Company's objectives for value added and total
shareholder return. As a result, the Committee approved a payout of 57,511
shares, the value of which for the named executive officers is shown in the LTIP
Payouts column of the "Summary Compensation Table" on page 7. The Company's
calculated value added exceeded the established target under the Performance
Share Program by $19.6 million cumulatively for the three-year performance
period. The established target was based on a weighted average cost of capital
of 11.6 percent. The Company's average total shareholder return ranked in the
72nd percentile of its peer group of 41 mining and metal companies, versus the
established Performance Share Program target of the 55th percentile. Each
performance measure at target level is weighted 50 percent.
8
<PAGE> 12
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 portion at risk increases with
responsibility level of the employee.
Executive compensation consists of salary, annual incentive bonus
opportunity, long-term equity incentive opportunity, general employee benefits,
and other minor benefits. In determining executive compensation structure, the
Committee considers current Company objectives, market survey data, and
recommendations of consultants and the Chief Executive Officer. 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 graph on
page 12 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.
Federal income tax legislation enacted in 1993 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 1998. If
non-deductible payments would become likely in a future year, the Committee
would determine appropriate action in light of the Company's circumstances at
that time. Deferral of any non-deductible compensation until retirement is a
potential action in such event.
SALARIES
The Company strives to maintain salary range midpoints at the 50th
percentile of market survey data. Actual salaries reflect responsibility,
performance, and experience. Salary increases are awarded periodically based on
individual performance, when allowed by economic conditions.
The named executive officers, excluding the Chief Executive Officers,
received no salary merit increases in 1995 or 1996. On January 1, 1997, the
named executive officers, excluding the Chief Executive Officers, received an
aggregate salary merit increase of 3.3 percent. On July 1, 1997, the same
executive officers received increases aggregating 8 percent, which reflected a
broad expansion of certain individual responsibilities, and which brought their
total salaries to 99 percent of their aggregate new salary range midpoints.
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. 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.
Under the MPI Plan, each participant has a designated target bonus
reflecting the participant's responsibility level. The target for the named
executive officers ranges from 40 to 55 percent of the officer's salary range
midpoint, depending on responsibility level. Awards can range from zero to 200
percent of the target amount for a participant.
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.
9
<PAGE> 13
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
Officers, totaled $330,500 for 1997 (91 percent of their total target bonus)
versus $447,500 for 1996 (135 percent of their total target bonus) and $326,500
for 1995 (138 percent of their total target bonus). In determining the 1997
bonuses for these officers, the general factors described above were considered,
including the decrease in 1997 earnings compared to 1996. The 1997 bonuses for
this group decreased 26 percent from 1996 while the Company's net income,
excluding special items, decreased 23 percent.
LONG-TERM INCENTIVE OPPORTUNITY
Unlike many companies that have multiple long-term incentive plans, the
Company has only one regular long-term incentive opportunity for key management.
The 1992 Incentive Equity Plan ("Plan"), as approved by the shareholders,
is intended to align the interests of key management and the shareholders. In
1997, the Plan was amended, as approved by shareholders, to increase the number
of the Company's shares available for issuance by 555,000 shares, limit the
number of the Company's shares which can be issued as Restricted Shares and
Deferred Shares under the Plan to 150,000 shares (excluding awards conditioned
on the attainment of management objectives), provide that stock options may be
transferrable, prohibit the re-pricing of "underwater options", provide the
Committee with additional flexibility to modify management objectives relating
to performance-based awards if business circumstances warrant, and eliminate
automatic granting of formula awards of stock options to Directors.
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 1995 grants was
determined for the period, 1995-1997, as described below. Performance against
specific financial objectives for the 1996 and 1997 grants will be determined in
early 1999 and 2000 for the three-year periods, 1996-1998 and 1997-1999,
respectively. The percentage of performance shares earned can range from zero to
175 percent. For 1997, 1996 and 1995, the named executive officers, excluding
the Chief Executive Officers, were granted 20,500, 19,000 and 9,800 performance
shares, respectively. For a detailed description of the 1997 grants, objectives
and estimated future payout opportunities, see "Long-Term Incentive
Plans--Awards in Last Fiscal Year" on page 8.
The Committee confirmed that for the three-year performance period ending
December 31, 1997, the Company achieved an average performance of 132.4 percent
in respect to the Company's objectives for value added and total shareholder
return. As a result, the Committee approved a payout of 57,511 shares, the value
of which for the named executive officers is shown in the LTIP Payouts column of
the "Summary Compensation Table" on page 7. The Company's calculated value added
exceeded the established target under the Performance Share Program by $19.6
million cumulatively for the three-year performance period. The established
target was based on a weighted average cost of capital of 11.6 percent. The
Company's average total shareholder return ranked in the 72nd percentile of its
peer group of 41 mining and metal companies, versus the established Performance
Share Program target of the 55th percentile. Each performance measure at target
level is weighted 50 percent.
10
<PAGE> 14
No general program of restricted stock awards to executive officers has
existed since 1988, and no stock options have been awarded to executive officers
since 1990. 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.
CHIEF EXECUTIVE OFFICER COMPENSATION
Culminating a succession planning process, Mr. Moore voluntarily
relinquished his position as Chairman and Chief Executive Officer of the Company
on November 9, 1997. Mr. Brinzo was elected President and Chief Executive
Officer of the Company, effective November 10, 1997. He has 28 years with the
Company and has served as a senior officer of the Company since 1987, and more
recently as Executive Vice President-Finance and Planning since July 1, 1997.
On January 1, 1996, Mr. Moore's salary was increased by 22.7 percent or
$100,000 to $540,000, 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 compensation survey data, his experience as
Chief Executive Officer and his continuing performance. On January 1, 1997, Mr.
Brinzo received a salary merit increase of 5.3 percent. On July 1, 1997, his
salary was increased by 10 percent reflecting an expansion of responsibility,
his salary range midpoint was increased by $42,500, and his target bonus
remained at 45 percent of salary range midpoint. As a result of Mr. Brinzo's
election as President and Chief Executive Officer, he received a salary increase
of 45.5 percent or $125,000 to $400,000, effective November 10, 1997, which
brought his salary to 95 percent of his new position salary range midpoint of
$423,000 with a target bonus of 55 percent of midpoint.
The MPI Plan award to Mr. Moore for 1997 was $250,000 (90 percent of his
target bonus) compared to $375,000 (135 percent of his target bonus) for 1996
and $310,000 (142 percent of his target bonus) for 1995, and the MPI Plan award
to Mr. Brinzo for 1997 was $112,000 (91 percent of his target bonus) compared to
$145,000 (145 percent of his target bonus) for 1996 and $131,500 (142 percent of
his target bonus) for 1995. The Committee determined the 1997 awards to Mr.
Moore and Mr. Brinzo based on all matters collectively in accordance with its
policy, including the decline in earnings compared to 1996. Their combined
bonuses were reduced 30 percent from 1996 versus a 23 percent decline in Company
net income, before special items.
Mr. Moore was granted 17,000, 17,000 and 10,900 performance shares for
1997, 1996 and 1995, respectively, and Mr. Brinzo was granted 6,500, 6,000 and
4,500 performance shares for 1997, 1996 and 1995, respectively, under the
Performance Share Program. Both Mr. Moore's and Mr. Brinzo's 1997 Performance
Share Program payouts were calculated in the same way as the payout to all other
participants, as discussed under Long-Term Incentive Opportunity, and the value
of the payouts earned by Mr. Moore and Mr. Brinzo is disclosed under the LTIP
Payouts column of the "Summary Compensation Table" on page 7. No stock options
have been awarded to Mr. Moore or Mr. Brinzo since 1990.
The Chief Executive Officer is not present when the Committee reviews his
performance and determines his compensation.
COMPANY PERFORMANCE COMPARISONS
For the five-year period, 1993-1997, the total return on the Company's
Common Shares was 63.1 percent which exceeded the total returns of the S&P Iron
and Steel Group and the S&P Metals Mining Group, but trailed the strong return
of the S&P 500 Stock Index. For the year 1997, the total return was 4.1 percent,
which exceeded the peer group returns, but trailed the strong return for the
broader market.
11
<PAGE> 15
<TABLE>
<CAPTION>
TOTAL SHAREHOLDER RETURN
------------------------
YEAR FIVE YEARS
1997 1993-1997
---- ----------
<S> <C> <C>
Cleveland-Cliffs Inc.................................. 4.1% 63.1%
S&P Iron and Steel Group Index........................ 1.0 7.0
S&P Metals Mining Group Index......................... (32.8) (1.4)
S&P 500 Stock Index................................... 33.4 151.7
</TABLE>
The Committee believes that the long-term and cyclical nature of the
Company's business 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
SHAREHOLDER RETURN PERFORMANCE
The following graph shows changes over the past five-year period 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.
FIVE-YEAR CUMULATIVE TOTAL RETURNS
VALUE OF $100 INVESTED AT DECEMBER 31, 1992
<TABLE>
<CAPTION>
MEASUREMENT PERIOD CLIFFS' S&P IRON AND S&P METALS
(FISCAL YEAR COVERED) COMMON S&P 500 STEEL MINING
<S> <C> <C> <C> <C>
1992 100 100 100 100
1993 117 110 132 111
1994 120 112 128 130
1995 137 153 119 144
1996 157 189 106 147
1997 163 252 107 99
</TABLE>
VALUE AT DECEMBER 31
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Cliffs' Common 100 117 120 137 157 163
S&P 500 100 110 112 153 189 252
S&P Iron and Steel Group 100 132 128 119 106 107
S&P Metals Mining Group 100 111 130 144 147 99
</TABLE>
12
<PAGE> 16
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 of 50% of Social Security benefits through
December 31, 1998 and the equivalent offset thereafter.
<TABLE>
<CAPTION>
AVERAGE ANNUAL
COMPENSATION FOR 60 ANNUAL BENEFITS FOR
HIGHEST CONSECUTIVE YEARS OF SERVICE INDICATED
MONTHS IN LAST 120 ---------------------------------------------------------------------------------------
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
700,000 170,175 225,300 280,425 335,550 390,675 445,800
725,000 176,081 233,175 290,269 347,363 404,456 461,550
</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 1997 include the amount shown for 1997 in the Salary column of the
"Summary Compensation Table" on page 7, plus the amount of bonus earned in 1996
and paid in 1997, as shown in the Bonus column of the Summary Compensation Table
for 1996. Pensionable earnings in 1997 for Messrs. Moore, Brinzo, Calfee,
O'Neil, Sanders and West were $915,000, $425,729, $401,250, $361,000, $273,000
and $271,250, respectively. Messrs. Moore, Brinzo, Calfee, O'Neil, Sanders and
West have 31, 28, 25, 6, 2, and 30 years, respectively, of credited service
under the Company's qualified pension plan.
13
<PAGE> 17
AGREEMENTS AND TRANSACTIONS
The Company has agreements with John S. Brinzo, Director, President and
Chief Executive Officer, William R. Calfee, Executive Vice President-Commercial
and Thomas J. O'Neil, Executive Vice President-Operations, dated June 30, 1997
("Agreements"), 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". The Agreements also provide for vesting of all performance
share grants at target objective levels.
Under the Agreements, during the 3-year period following a "change of
control", each officer would be entitled to receive base pay and opportunities
for 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 duties, 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 (a) to lump sum
payments of the then present value of the base pay and incentive compensation
that he would be entitled to receive under the Agreement for the greater of 1
year or the remainder of the 3-year period, (b) to a lump sum payment of the
then present value of the pension benefits that he would be entitled to receive
under the Agreement for the remainder of the 3-year term, and (c) to continue
participation in medical and other welfare benefit plans for the greater of 1
year or the remainder of the 3-year period. The Agreements also entitle the
officers to medical and life insurance benefit continuation for life upon
retirement or following termination, unless the termination was for "cause". In
addition, the Agreements provide that the officers are eligible for
reimbursement of reasonable outplacement expenses. The Company will protect the
officers against any imposition of excise tax on "excess parachute" payments
under the Code by providing "gross up" payments to the officers. Such Agreements
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 officers each reserve 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 1997, the Board of Directors of the Company approved the renewal to
January 1, 2000 of the 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 vesting of all performance share grants
at target objective levels, and to continue participation in health and life
insurance plans for 1 or 2 years or (if earlier) until covered by similar plans
sponsored by a subsequent employer, and are entitled to medical and life
insurance 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
14
<PAGE> 18
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. None of the obligations of the Company described above
exist unless a "change of control" has occurred. The Company will protect the
participant against imposition of any excise tax on "excess parachute" payments
under the Code by providing "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") reached agreement
in 1996 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. Such designee would be subject to annual
nomination by the Company, election by vote of the shareholders, and all laws
and Company policies applicable to the Board of Directors. The agreement expires
on August 1, 1999.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 ("Exchange Act")
requires the Company's Directors and officers and persons who own 10% or more of
a registered class of the Company's equity securities, to file reports of
ownership and changes in ownership on Forms 3, 4 and 5 with the SEC. Directors,
officers and 10% or greater shareholders are required by SEC regulations to
furnish the Company with copies of all Forms 3, 4 and 5 they file.
Based solely on the Company's review of the copies of such forms it has
received, and written representations by such persons, the Company believes that
all of its Directors and officers complied with all filing requirements
applicable to them with respect to transactions in the Company's equity
securities during the fiscal year ended December 31, 1997, except for the
inadvertent omission to report on a Form 4 one sale transaction by Mr. Moore,
which omission was promptly reported on an Amended Form 4 filing within 12 days
of his initial filing of Form 4 for that month.
APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
(PROPOSAL NO. 2)
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, 1998. 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
15
<PAGE> 19
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 1997 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 ratification of Ernst & Young LLP as the firm of
independent public accountants to examine the books of account and other records
of the Company and its consolidated affiliates for the fiscal year 1998 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 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
16
<PAGE> 20
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 1999 Annual
Meeting of Shareholders must be received by the Company on or before November
23, 1998 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.
17
<PAGE> 21
CLEVELAND-CLIFFS INC
NOTICE OF
ANNUAL MEETING
OF SHAREHOLDERS
TO BE HELD ON
MAY 12, 1998
AND
PROXY STATEMENT
<PAGE> 22
COMMON CLEVELAND-CLIFFS INC
SHARES 18th Floor Diamond Building - Cleveland, Ohio 44114-2589
P THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
R
O The undersigned hereby appoints J.D. Ireland III, J. C. Morley,
X A. Schwartz and A. W. Whitehouse, as Proxies, each with the power to
Y 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 16, 1998, at the Annual Meeting of
Shareholders to be held on May 12, 1998, or at any adjournment or
adjournments thereof, as follows:
Election of Directors, Nominees:
J. S. Brinzo, R. C. Cambre, R. S. Colman, J. D. Ireland III,
G. F. Joklik, L. L. Kanuk, F. R. McAllister, M. T. Moore,
J. C. Morley, 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 AND
2 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> 23
<TABLE>
<CAPTION>
<S> <C>
-----
| | Please mark your
| X | votes as in this
| | example.
-----
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
FOR WITHHELD FOR AGAINST ABSTAIN
1. Election of --- --- 2. Ratification of the appointment of --- --- ---
Directors | | | | Ernst & Young LLP as independent | | | | | |
(see reverse) --- --- public accountants --- --- ---
For, except vote withheld from the following nominee(s):
--------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE
UPON SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE
THE MEETING.
Please sign exactly as name appears hereon. Joint owners
should each sign. When signing as attorney, executor,
administrator, trustee or guardian, please give full title
as such.
----------------------------------------------------------
---------------------------------------------------------
SIGNATURE(S) DATE
- -----------------------------------------------------------------------------------------------------------------------------------
FOLD AND DETACH HERE
IMPORTANT
PLEASE COMPLETE AND RETURN YOUR PROXY CARD PROMPTLY
USING THE ENCLOSED ENVELOPE
</TABLE>
