in the court of common pleas cuyahoga county, ohio...
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IN THE COURT OF COMMON PLEAS CUYAHOGA COUNTY, OHIO
ROBERT BLACK, Derivatively on Behalf of CLIFFS NATURAL RESOURCES INC., Plaintiff, v. JOSEPH A. CARRABBA, et al., Defendants, -and- CLIFFS NATURAL RESOURCES INC., Nominal Defendant.
) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) )
Case No. CV-14-827803
Judge Richard J. McMonagle
IN THE COURT OF COMMON PLEAS
CUYAHOGA COUNTY, OHIO GEORGE ASMUSSEN and JEFF ASMUSSEN, Derivatively on Behalf of CLIFFS NATURAL RESOURCES INC., Plaintiffs, v. JOSEPH A. CARRABBA, et al., Defendants, -and- CLIFFS NATURAL RESOURCES INC., Nominal Defendant.
) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) )
Case No. CV-14-829259 Judge Richard J. McMonagle
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IN THE COURT OF COMMON PLEAS CUYAHOGA COUNTY, OHIO
VICKI WILLIAMS and RAPHAEL ALEMAN, Derivatively on Behalf of CLIFFS NATURAL RESOURCES INC.,
Plaintiffs,
v.
JOSEPH A. CARRABBA, et al.,
Defendants, -and- CLIFFS NATURAL RESOURCES INC.,
Nominal Defendant.
) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) )
Case No. CV-14-829499
Judge Richard J. McMonagle
STIPULATION AND AGREEMENT OF SETTLEMENT
This Stipulation of Settlement dated April 20, 2016 is made and entered into by and
among the following Parties1 by and through their counsel: (i) Co-Lead Plaintiffs George
Asmussen and Jeff Asmussen, on behalf of themselves and Plaintiffs Robert Black, Vicki
Williams and Raphael Aleman and derivatively on behalf of Cliffs Natural Resources Inc.; (ii)
the Individual Defendants; and (iii) Nominal Defendant Cliffs. The Stipulation is intended by
the Parties to fully, finally and forever resolve, discharge and settle the Released Claims and
dismiss the Actions with prejudice, upon and subject to the terms and conditions hereof.
1 Where not defined parenthetically, capitalized terms are defined in Part IV(1) below.
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I. INTRODUCTION
A. Factual Background
During the period relevant to the Actions, Cliffs was an international mining and natural
resources company whose business focused on the production and sale of iron ore and coal. Its
business was divided into several segments, one of the most significant of which was “Eastern
Canadian Iron Ore,” principally composed of two mines: Bloom Lake, located in Quebec,
Canada, and Wabush, situated in Newfoundland and Labrador, Canada.
Cliffs obtained a 75% interest in the Bloom Lake mine when it acquired Consolidated
Thompson Iron Mines Limited for approximately $5 billion in May 2011. Consolidated
Thompson’s principal asset was its interest in Bloom Lake. Cliffs planned to substantially
increase production at the Bloom Lake mine through two phases of expansion—Phase 2, which
would double production capacity from 8.0 million metric tons to 16.0 million metric tons per
annum, and an exploratory Phase 3, which would further increase production capacity to 24.0
million metric tons per annum. In March 2012, Cliffs announced a 123% increase in its
quarterly dividend, largely to be supported by anticipated increased production at Bloom Lake.
When it announced the dividend increase, and periodically thereafter, Defendants made
statements to the effect that the increased dividend was sustainable and had been thoroughly
tested before implementation.
Plaintiffs alleged that the Individual Defendants were aware of, but failed to disclose, a
“raft” of systemic and persistent problems with Bloom Lake’s facilities and the expansion
project that caused massive cost overruns and serious production issues. Those issues, according
to the Plaintiffs, were due to the Individual Defendants’ mismanagement, failure of oversight,
and an absence of appropriate internal controls, and prevented Cliffs from producing iron ore
from Bloom Lake at low costs or in the expected volumes. Plaintiffs further alleged that the
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Individual Defendants repeatedly misled investors regarding the sustainability of the Company’s
increased dividend and the adequacy of its testing of that sustainability, and that the dividend
was in fact unsustainable due to the undisclosed problems at Bloom Lake.
In November 2012, the Company announced significant adjustments to its 2013 operating
plan, including suspension of key components of the Phase 2 expansion at Bloom Lake and a
delay of Phase 3. On February 12, 2013, less than a year after increasing its dividend, Cliffs
announced that it would cut its dividend by 76% to $0.15 per share. Cliffs eventually suspended
iron ore production at the Bloom Lake mine in December 2014 and placed its division that
included Bloom Lake into Canadian bankruptcy proceedings in January 2015.
In July and August 2013, arrangements were made under which three senior executives
of the Company -- the Chairman/President/CEO; the Executive Vice President/President of
Global Operations (previously the Chief Financial Officer); and the Senior Vice President, North
American Iron Ore Operations – would leave the Company pursuant to severance agreements
negotiated at the direction of the Board that provided for various payouts and other benefits.
Beginning early in 2014, the Company became the subject of public scrutiny by an
activist hedge fund shareholder that initiated a proxy fight culminating in its successfully
securing control of the Board.
B. Procedural Background
On June 4, 2014, Plaintiff Robert Black filed a shareholder derivative action captioned
Black v. Cliffs Natural Resources Inc., et al., Case No. CV-14-827803 (the “Black Action”), in
the Court of Common Pleas of Cuyahoga County. The Complaint alleged, inter alia, that the
Individual Defendants had breached their fiduciary duties in connection with management and
oversight of the Bloom Lake mine facility and the handling of the Company’s dividend,
(including allegedly false and misleading statements on these subjects during 2012 and 2013),
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and also in connection with pay practices upon the departure of certain executives during that
period. A second shareholder derivative action, Asmussen, et al, v. Cliffs Natural Resources Inc.,
et al., Case No. CV-14-829259 (the “Asmussen Action”), was filed on July 2, 2014, and included
allegations similar to those in the Black Action. A third shareholder derivative action, Williams
v. Cliffs Natural Resources, Inc., et al., Case No. CV-14-829499, (the “Williams Action”), was
filed on July 9, 2014, and asserted allegations similar to those in the Black and the Asmussen
Actions.
Pursuant to Court orders dated August 11, 2014, and September 12, 2014, the Asmussen
Action and the Williams Action were transferred for consolidation with the Black Action.
Pursuant to the Parties’ stipulations and subsequent court orders (the “Stipulated Orders”), the
Parties agreed to stay the Actions pending disposition of a motion to dismiss in one of the then-
pending federal securities law class actions (collectively, the “Securities Actions”): (i) The
Department of the Treasury of the State of New Jersey and its Division of Investment, et al. v.
Cliffs Natural Resources Inc. et al., No. 1:14-cv-01031, United States District Court for the
Northern District of Ohio (Judge Dan Aaron Polster) (the “New Jersey Action”); and (ii) Stuart
Rosenberg, et al. v. Cliffs Natural Resources Inc., et al., No. CV-14-828140, Court of Common
Pleas of Cuyahoga County, Ohio (Judge Shannon M. Gallagher) (the “Rosenberg Action”).
During the stay of the Actions and in accordance with the Stipulated Orders, the Parties
filed several joint status reports with the Court describing the status of the Securities Actions.
The Parties continued the stay of the Actions until the Rosenberg Action reached a settlement in
principle.
On December 17, 2015, the Court entered an order granting the unopposed motion to lift
the stay of the consolidated Actions for the limited purpose of appointing Co-Lead Plaintiffs and
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Co-Lead Plaintiffs’ selection of counsel. Pursuant to that order, Plaintiffs George Asmussen and
Jeff Asmussen were appointed Co-Lead Plaintiffs; The Shuman Law Firm was appointed as
Lead Counsel for Co-Lead Plaintiffs; and Weisman, Kennedy & Barris Co., L.P.A. was
appointed as Liaison Counsel for Co-Lead Plaintiffs.
C. Settlement Negotiations
In August 2015, the Parties began a dialogue regarding the possible resolution of the
Actions. On August 6, 2015, and December 11, 2015, counsel for Plaintiffs in the Black Action
and the Asmussen Action, respectively, sent settlement demands to Defendants’ Counsel. Key
components of the demands included a requirement that Cliffs adopt corporate governance
reforms and that any amounts that might be paid into a settlement fund for the New Jersey
Action be contributed only by non-company sources such as applicable insurance carriers up to
exhaustion of policy limits. The demands took into account Cliffs’ existing governance policies
and procedures and were specifically targeted to address and prevent a recurrence of the alleged
wrongdoing that is the subject of the Actions, and also to limit the financial impact of the New
Jersey Action on the Company.
Over the next several months, the two sides exchanged information and, through their
counsel, had numerous discussions presenting and arguing their respective positions as well as
prospects and terms for a possible settlement. These discussions eventually resulted in the
proposed agreement to settle the Actions on the terms and conditions set forth in this Stipulation.
The lengthy negotiations were conducted in good faith, at arm's-length and were hard-fought by
experienced counsel.
During the period of negotiation, the New Jersey Action was settled in principle, with the
payment into the settlement fund to be delivered solely by insurance carriers.
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As part of the settlement process, Plaintiffs secured discovery to confirm that the
proposed terms of the Settlement are fair, reasonable and adequate. In particular, Cliffs
produced to Plaintiffs substantial sets of documents, many of which were board-level
confidential materials, which were examined by Plaintiffs’ Counsel.
Plaintiffs, Plaintiffs’ Counsel, Cliffs and its counsel believe that the proposed Settlement
is in the best interests of Cliffs and its shareholders.
II. PLAINTIFFS’COUNSEL’S INVESTIGATION AND RESEARCH, PLAINTIFFS’ CLAIMS, AND THE BENEFITS OF THE SETTLEMENT
Plaintiffs’ Counsel conducted an extensive investigation relating to the claims and the
underlying events alleged in the Actions, including, but not limited to: (i) inspecting, reviewing
and analyzing the Company’s public filings with the U.S. Securities and Exchange Commission
(“SEC”), press releases, announcements, transcripts of investor conference calls, and news
articles; (ii) drafting and filing the derivative complaints in the Actions; (iii) researching the
applicable law with respect to the claims asserted in the Actions and the potential defenses
thereto; (iv) evaluating the proceedings and pleadings in the Securities Actions to assess the
nature and magnitude of the Company’s exposure in those actions and its implications for the
efficient management of the Actions; (v) researching and assessing a variety of corporate
governance issues, including in regard to executive severance matters; (vi) examining and
considering pertinent Board and committee materials obtained in discovery; (vii) considering and
assessing financial analysts reports and the Company’s current financial condition; and (viii)
participating in extensive settlement discussions and negotiations.
In addition, Plaintiffs’ Counsel has carefully studied the complaint in Joseph Mansour v.
Joseph Carrabba, et al., No. 1-16-cv-00390-DAP, (N.D.Ohio), filed in federal court on February
19,2016, several days after the announcement of the settlement in principle of the Actions. That
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examination has revealed that all substantive matters and claims set out in Mansour are
encompassed within the allegations of the Actions, and all have been considered in formulating
the approach to, and agreement on, the Settlement.
Plaintiffs’ and Plaintiffs’ Counsel believe that the claims asserted in the Actions have
merit and that their investigation supports the claims asserted. Without conceding the merit of
any of Defendants’ defenses or the lack of merit of any of their own allegations, and solely in
order to avoid the potentially protracted time, expense, and uncertainty associated with continued
litigation, including a potential trial and appeal, Plaintiffs and Plaintiffs’ Counsel concluded that
it is desirable that the Actions be fully and finally settled in the manner and upon the terms and
conditions set forth in this Stipulation. Plaintiffs and Plaintiffs’ Counsel recognize the
significant risk, expense, and length of continued proceedings necessary to prosecute the Actions
against the Individual Defendants through trial and possible appeal. Plaintiffs’ Counsel also
have taken into account the uncertain outcome and the risks of any litigation, especially in a
complex case such as the Actions (which are governed by Ohio law and are subject to the
protections that law provides for activities and judgments of corporate directors and officers), as
well as the difficulties and delays inherent in such complex litigation generally. Plaintiffs and
Plaintiffs’ Counsel are also mindful of the inherent problems of proof and possible defenses to
the claims asserted in the Actions. Plaintiffs and Plaintiffs’ Counsel believe that the Settlement
set forth in the Stipulation confers substantial benefits on the Company. Based on their
evaluation and expertise in the area of complex stockholder litigation, Plaintiffs and Plaintiffs’
Counsel have determined that the Settlement is fair, reasonable, and adequate and is in the best
interests of Cliffs and its shareholders, and have agreed to settle the Actions upon the terms and
subject to the conditions set forth herein.
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III. DEFENDANTS’ DENIAL OF WRONGDOING AND LIABILITY
Defendants have denied, and continue to deny, all allegations of wrongdoing, fault,
liability and/or damage to the Company. Defendants deny that they engaged or aided and
abetted in any wrongdoing or violation of the law; deny that they breached any fiduciary duty,
including the duty of care or duty of loyalty; deny that they engaged in any of the wrongful acts
alleged in the Actions: deny that they acted in bad faith or improperly in any way; and maintain
that they complied with all fiduciary and other legal duties. Defendants believe that all Plaintiffs
have failed to meet their burden of pleading with particularity that demand was excused.
Nonetheless, Defendants are agreeing to the terms and conditions set forth in this Stipulation
solely because they contend and believe the proposed Settlement would eliminate the burden,
risk, and expense of further litigation. Defendants have determined that it is desirable and
beneficial to them that the claims asserted in the Actions be fully and finally settled and
terminated in the manner and upon the terms and conditions set forth in this Stipulation.
Defendants have also taken into account the uncertainty, burden, expense, and risks inherent in
any litigation, especially in complex cases like the Actions, and are entering into this Stipulation
because the Settlement would eliminate the uncertainty, burden, expense and risk of further
litigation, and also, as to Nominal Defendant Cliffs, because the Settlement provides substantial
benefits to, and is in the best interests of, Cliffs and its shareholders.
IV. TERMS OF THE STIPULATION AND AGREEMENT OF SETTLEMENT
Co-Lead Plaintiffs (on behalf of themselves and derivatively on behalf of Cliffs), the
Individual Defendants, and Nominal Defendant Cliffs, by and through their counsel, hereby
stipulate and agree that, subject to the approval of the Court, the Released Claims shall be finally
and fully compromised, settled, and released, and the Actions shall be dismissed with prejudice,
as to all Parties, upon the terms and subject to the conditions set forth herein as follows:
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1. Definitions
As used in the Stipulation the following terms have the meanings specified below:
1.0 “Actions” means the three consolidated shareholder derivative actions
pending in the Court of Common Pleas, Cuyahoga County, Ohio: (i) Black v. Cliffs Natural
Resources, Inc. et al., Case No. CV-14-827803; (ii) Asmussen, et al. v. Cliffs Natural Resources
Inc., et al., Case No. CV-14-829259; and (iii) Williams v. Cliffs Natural Resources Inc., et al.,
Case No. CV-14-829499.
1.1 “Board” means the Cliffs Board of Directors.
1.2 “Cliffs,” the “Company,” or “Nominal Defendant” means Cliffs Natural
Resources Inc. and its predecessors, successors, controlling shareholders, partners, joint ventures,
subsidiaries, affiliates, divisions and assigns.
1.3 “Court” refers to the Court of Common Pleas, Cuyahoga County, Ohio.
1.4 “Defendants” means, collectively, the Individual Defendants and Cliffs.
1.5 “Defendants’ Counsel” means: (i) Jones Day, North Point, 901 Lakeside
Avenue, Cleveland, OH 44114; (ii) Baker & Hostetler LLP, PNC Center, 1900 East 9th Street,
Suite 3200, Cleveland, OH 44114; (iii) Wachtell, Lipton, Rosen & Katz, 51 West 52nd Street,
New York, NY 10019; and (iv) Benesch Friedlander Coplan & Aronoff LLP, 200 Public Square,
Suite 2300, Cleveland, OH 44114.
1.6 “Effective Date” means the first date by which all of the events and
conditions specified in ¶6.1 herein have been met or have occurred.
1.7 “Execution Date” means the date this Stipulation has been signed by all
the signatories through their respective counsel.
1.8 “Fee and Expense Amount” means the agreed-upon sum of $775,000,
detailed in ¶5.1, to be paid to Plaintiffs’ Lead Counsel, subject to Court approval, for distribution
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among Plaintiffs’ Counsel in recognition of the substantial benefits conferred upon Cliffs and its
shareholders by the initiation, prosecution and settlement of the Actions.
1.9 “Final” means the time when a Judgment that has not been reversed,
vacated, or modified in any way is no longer subject to appellate review, either because of
disposition on appeal and conclusion of the appellate process or because of passage, without
action, of time for seeking appellate review. More specifically, it is that situation when any
of the following has occurred: (1) no appeal has been filed and the time has passed for any
notice of appeal to be timely filed in the Actions; or (2) the date of final affirmance on an
appeal of the Judgment, the expiration of the time for a petition for or a denial of a writ of
certiorari to review the Judgment and, if certiorari is granted, the date of final affirmance of
the Judgment following review pursuant to that grant; or (3) the date of final dismissal of any
appeal from the Judgment or the final dismissal of any proceeding on certiorari to review the
Judgment
1.10 “Judgment” means the final order and judgment to be rendered by the
Court, substantially in the form attached hereto as Exhibit C.
1.11 “Individual Defendants” means Joseph A. Carrabba, Laurie Brlas,
Terrance M. Paradie, David B. Blake, Gary B. Halverson, James F. Kirsch, Richard K. Riederer,
Susan M. Cunningham, Barry J. Eldridge, Susan M. Green, Janice K. Henry, Andrés R. Gluski,
Timothy W. Sullivan, Mark E. Gaumond, and Stephen M. Johnson.
1.12 “Lead Counsel” or “Plaintiffs’ Lead Counsel” means The Shuman Law
Firm.
1.13 “Co-Lead Plaintiffs” means George Asmussen and Jeff Asmussen.
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1.14 “Notice” means the Notice of Pendency and Proposed Settlement of
Shareholder Derivative Actions, substantially in the form attached hereto as Exhibit 1 to Exhibit
B.
1.15 “Parties” means, collectively, each of the Plaintiffs (on behalf of
themselves and derivatively on behalf of Cliffs), each of the Individual Defendants, and Nominal
Defendant Cliffs.
1.16 “Person” means an individual, corporation, limited liability corporation,
professional corporation, partnership, limited partnership, limited liability partnership,
association, joint stock company, estate, legal representative, trust, unincorporated association,
government or any political subdivision or agency thereof, and any business or legal entity and
their spouses, heirs, agents, executors, attorneys, administrators, predecessors, successors,
representatives, or assignees.
1.17 “Plaintiffs” means, collectively, Robert Black, George Asmussen, Jeff
Asmussen, Vicki Williams and Raphael Aleman.
1.18 “Plaintiffs’ Counsel” means, collectively: (i) Federman & Sherwood,
10205 North Pennsylvania Avenue, Oklahoma City, OK 73120; (ii) The Dickson Firm, LLC,
Enterprise Place, Suite 420, 3401 Enterprise Parkway, Beachwood, OH 44122; (iii) The Shuman
Law Firm, One Montgomery St., Suite 1800, San Francisco, CA 94104; (iv) Weisman, Kennedy
& Berris Co., L.P.A., 1600 Midland Building, 101 Prospect Ave., W., Cleveland, OH 44115; (v)
Koehler Neal LLC, 3330 Erieview Tower, 1301 East 9th Street, Cleveland, OH 44114; (vi) Law
Office of Alfred G. Yates, Jr., P.C., 519 Allegheny Building, 429 Forbes Avenue, Pittsburgh, PA
15219; (vii) and Law Offices of Curtis V. Trinko LLP, 16 West 46th Street, 7th Floor, New York,
NY 10036.
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1.19 “Preliminary Approval Order” means the Order to be entered by the Court,
substantially in the form attached hereto as Exhibit B, preliminarily approving the terms and
conditions of the Settlement as set forth in this Stipulation, directing that Notice be provided to
Cliffs shareholders, and scheduling a Settlement Hearing to consider whether the Settlement and
the Fee and Expense Amount should be granted final approval.
1.20 “Released Claims” means any and all claims for relief, suits, debts
demands, rights, liabilitites, damages, losses, obligations, judgments, fees, expenses, costs,
matters, issues and actions or causes of action of every nature and description whatesoever,
whether known or unknown (including Unknown Claims as defined in ¶1.26 of this Stipulation),
contingent or absolute, suspected or unsuspected, disclosed or undisclosed, matured or
unmatured, discoverable or undiscoverable, whether or not concealed or hidden, for damages,
injunctive relief, or any other remedy that have been, or could or might have been, or in the
future can or might be asserted by Plaintiffs, Cliffs, and/or any Cliffs shareholder derivatively on
behalf of Cliffs against any Released Persons that are based upon, refer to, arise out of, concern,
or are directly or indirectly related to (i) the claims and allegations contained in the Actions, (ii)
any of the facts, transactions, events, occurrences, acts, disclosures, statements, omissions or
failures to act that were alleged or that could have been alleged in the Actions; or (iii) the
settlement of the Actions, including the payment provided for in this Stipulation, and the
reasonable attorneys’ fees, costs, and expenses incurred in defense of the Actions.
Notwithstanding the foregoing, the Released Claims do not include (i) any claims based on any
conduct of the Released Persons after April 13, 2016; or (ii) any direct claims belonging to
Cliff’s shareholders, including without limitation, any claims arising under the federal securities
laws. Notwithstanding the foregoing, Released Claims shall not include claims to enforce the
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terms of this Stipulation or the Settlement. In addition, nothing set forth herein or in the
Judgment shall constitute a release by any Defendant of any insurer, reinsurer, or any other entity
contracted or otherwise obligated to provide insurance or indemnification to any of the Released
Persons of any claim arising out of the rights, remedies, duties or obligations provided for in any
insurance policy or agreement. Nothing set forth herein shall constitute a release by or among
the Company and the Individual Defendants or Released Persons of any rights or obligations
relating to indemnification or advancement of defense costs, whether arising from the
Company’s certificate of incorporation or code of regulations, Ohio law, or any agreement
pertaining to indemnification or advancement of defense costs.
1.21 “Released Persons” means each and all of the Individual Defendants, and
each and all the Individual Defendants’ respective present or former successors, heirs,
executives, employees, agents, insurers, reinsurers, attorneys, advisors, associates,
representatives, executors, personal representatives, estates, administrators, assigns, spouses and
other members of any Individual Defendant’s immediate family, any entity in which any
Individual Defendant or member of any Individual Defendant’s immediate family has or had a
controlling interest (directly or indirectly), and any trust of which any Individual Defendant is
the settlor or which is for the benefit of any Individual Defendant and/or member(s) of his or her
family.
1.22 “Settlement” means the resolution of the Actions as contemplated and
documented in this Stipulation.
1.23 “Settlement Hearing” means the hearing or hearings at which the Court
will review the adequacy, fairness, and reasonableness of the Settlement and whether the
agreement for payment of the Fee and Expense Award should be approved.
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1.24 “Stipulation” means this Stipulation and Agreement of Settlement and the
exhibits attached hereto and incorporated herein by reference.
1.25 “Summary Notice” means the Summary Notice of Pendency and Proposed
Settlement of Shareholder Derivative Actions, substantially in the form attached hereto as
Exhibit 2 to Exhibit B.
1.26 “Unknown Claims” means any or all claims that were alleged or that could
or might have been alleged in the Actions by the Plaintiffs, Cliffs, or any Cliffs shareholder
derivatively on behalf of Cliffs, which any Plaintiff, Cliffs, or Cliffs shareholder does not know
or suspect to exist in his, her, or its favor at the time of the release of the Released Persons,
including claims which, if known by him, her, or it, might have affected his, her or its settlement
with and release of the Released Persons, or might have affected his, her or its decision not to
object to this Settlement. With respect to any and all Released Claims, the Parties stipulate and
agree that, upon the Effective Date, Plaintiffs, Individual Defendants, and Cliffs shall expressly
waive and relinquish, and each of Cliffs’ shareholders shall be deemed to have, and by operation
of the Judgment shall have, expressly waived and relinquished, to the fullest extent permitted by
law, any and all provisions, rights, and benefits conferred by any law of the United States or of
any state or territory of the United States, or principle of common law, which governs or limits a
Person’s release of Unknown Claims, including the provisions, rights and benefits of California
Civil Code §1542, which provides:
A general release does not extend to claims which the creditor does not know or suspect to exist in his or her favor at the time of executing the release, which if known by him or her must have materially affected his or her settlement with the debtor.
and/or by any law of the United States or of any state or territory of the United States, or
principle of common law or of international or foreign law, that is similar, comparable, or
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equivalent in effect to California Civil Code §1542. It is understood that Plaintiffs, Cliffs, or any
of Cliffs’ shareholders may hereafter discover facts in addition to or different from those that he,
she, or it now knows or believes to be true with respect to the subject matter of the Released
Claims (including Unknown Claims), but Plaintiffs and Cliffs shall expressly fully, finally, and
forever discharge, settle, and release with prejudice, and each of Cliffs’ shareholders, upon the
Effective Date, shall be deemed to have, and by operation of the Judgment shall have fully,
finally, and forever discharged, settled and released with prejudice, any and all Released
Claims (including Unknown Claims), known or unknown, suspected or unsuspected,
contingent or noncontingent, whether or not concealed or hidden, that now exist, or heretofore
have existed upon any theory of law or equity now existing or coming into existence in the
future, including, but not limited to, conduct which is negligent, grossly negligent, reckless,
intentional, with or without malice, or a breach of any duty, law or rule, without regard to the
subsequent discovery or existence of such different or additional facts. Plaintiffs and Cliffs
acknowledge, and Cliffs’ shareholders shall be deemed by operation of the Judgment to have
acknowledged, that the foregoing waiver was separately bargained for and is a key element of
the Settlement of which this release is a part.
2. Terms of the Settlement
2.1 Cliffs, through its Board, shall adopt and implement the comprehensive set
of corporate governance measures (the “Reforms”) in substantially the form attached as Exhibit
A to this Stipulation, promptly after, and in any event no later than ninety (90) days after, the
Effective Date, to be maintained for a period of not less than three years from the day they are
implemented, unless (but only to the extent) otherwise required by law. The Board, acting by a
majority of its non-management members, may alter or amend its compliance with any of the
Reforms during the three year period, if it concludes that doing so is required by its fiduciary
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duties or that continued compliance would conflict with applicable law or amendments to the
corporate regulations approved by the shareholders. If such alteration or amendment is made,
the Company shall, within no more than 30 days after the alteration or amendment becomes
effective, advise Lead Plaintiffs’ Counsel thereof in writing, and state the reasons for the
alteration or amendment. Plaintiffs, Plaintiffs’ Counsel and Cliffs agree that the Reforms conferr
a substantial and material benefit on Cliffs and its shareholders, and the Parties acknowledge and
agree that the adoption and implementation of the Reforms is the result of the initiation,
prosecution, and settlement of the Actions. In addition, the nature of the settlement funding of
the New Jersey Action - - exclusively from applicable directors’ and officers’ (“D&O”) policies -
- is consistent with Cliffs’ stated position in the settlement negotiations in these Actions that it
would make all reasonable, good faith efforts to secure funding by applicable insurance carriers
for any such settlement, which in turn had been elicited by Plaintiffs’ demand in these Actions
on the funding issue.
2.2 The Board, exercising its independent business judgment, believes that the
Settlement and the Reforms are in the best interests of Cliffs and its shareholders.
3. Procedures for Implementing the Settlement
3.1 Within five (5) business days after the Execution Date, Co-Lead Plaintiffs
shall submit the Stipulation together with its exhibits to the Court and shall apply for entry of the
Preliminary Approval Order, substantially in the form of Exhibit B attached hereto, requesting,
inter alia: (i) preliminary approval of the Settlement; and (ii) approval of the form and manner of
the proposed notice of the Settlement to Cliffs shareholders; and (iii) a date for the Settlement
Hearing.
3.2 Cliffs shall undertake the administrative responsibility for giving notice to
Cliffs shareholders in the manner set forth in this paragraph and shall be solely responsible for
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paying the costs and expenses related to providing such notice to its shareholders and any other
notice ordered by the Court. Notice shall consist of the Notice and the Summary Notice. Within
ten calendar days after the entry of the Preliminary Approval Order, Cliffs shall cause the
Summary Notice to be published once in Investor’s Business Daily; (ii) The Shuman Law Firm
and Cliffs each shall post copies of the Notice and the Stipulation on their respective websites;
and (iii) Cliffs shall cause a copy of the Notice to be filed with the U.S. Securities and Exchange
Commission via a current report on Form 8-K. The Form 8-K shall also refer shareholders to the
website of Cliffs for more information, including a copy of the Stipulation. The Parties agree
that the content and manner of the Notice, as set forth in this paragraph, constitutes adequate and
reasonable notice to Cliffs shareholders pursuant to applicable law and due process. Prior to the
Settlement Hearing, Lead Counsel and Defendants’ Counsel shall each file with the Court, and
serve, an appropriate affidavit or declaration with respect to their respective obligations
concerning, filing, posting and publishing the Notice and Summary Notice.
3.3 Plaintiffs’ Lead Counsel shall request that no less than forty-five (45) days
after Notice is given, the Court hold the Settlement Hearing to consider and approve the Final
Order and Judgment substantially in the form of Exhibit C attached hereto.
3.4 Pending the Court’s determination as to final approval of the Settlement,
Plaintiffs and Cliffs shareholders shall be barred and enjoined from commencing, prosecuting,
instigating, or in any way participating in the commencement or prosecution of any action
asserting any Released Claim against any of the Released Persons.
3.5 If the Court approves the Settlement at the Settlement Hearing, the Parties
will jointly request entry of the Judgment by the Court: (i) approving finally the Settlement set
forth in the Stipulation as fair, adequate, reasonable, and in the best interests of Cliffs and its
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shareholders, and directing its consummation pursuant to its terms; (ii) finally approving the Fee
and Expense Award and any Service Awards; (iii) dismissing with prejudice the Actions and all
of the Released Claims against the Released Persons; (iv) permanently barring and enjoining the
institution and prosecution by Cliffs or any Cliffs shareholder on behalf of Cliffs of any lawsuit
or other proceeding asserting any of the Released Claims or any claims arising out of, relating to
or in connection with the institution, prosecution, defense, settlement, or resolution of the
Actions; and (v) containing such other and further provisions consistent with the terms of this
Stipulation to which the Parties hereto consent in writing.
4. Releases
4.1 Upon the Effective Date, all Plaintiffs (acting on their own behalf and
derivatively on behalf of Cliffs), Cliffs, and each of Cliffs’ shareholders shall be deemed to have,
and by operation of the Judgment shall have, fully, finally, and forever settled, released,
relinquished, extinguished, dismissed with prejudice, and discharged all Released Claims
(including Unknown Claims) against the Released Persons and shall have covenanted not to sue
the Released Persons with respect to all such Released Claims, and shall be permanently barred
and enjoined from instituting, commencing, or prosecuting the Released Claims against the
Released Persons.
4.2 Upon the Effective Date, each of the Defendants shall be deemed to have,
and by operation of the Judgment shall have, fully, finally, and forever settled, released,
relinquished, extinguished, dismissed with prejudice, and discharged completely each and all of
the Plaintiffs and Plaintiffs' Counsel from all claims (including Unknown Claims) based upon or
arising out of the commencement, prosecution, assertion, settlement or resolution of the Actions
or the Released Claims, provided, however, that such release shall not include claims to enforce
the terms of the Stipulation, the Settlement and/or the Judgment entered pursuant thereto.
NAI-1500918414v7 20
4.3 Nothing herein shall in any way impair or restrict the rights of any Party to
enforce the terms of the Stipulation.
5. Plaintiffs’ Counsel’s Attorneys’ Fees and Expenses
5.1 After conclusion of negotiations for the material substantive terms of the
Settlement, counsel separately negotiated at arm’s length the amount of attorneys’ fees and
expenses to be awarded by the Court to Plaintiffs’ Counsel. In recognition of the substantial
benefits conferred upon Cliffs and Cliffs shareholders as a direct result of the initiation,
prosecution, pendency and settlement of the Actions, and subject to Court approval, the
Individual Defendants’ D&O insurers have agreed to pay Plaintiffs’ Lead Counsel the Fee and
Expense Amount of $775,000, pursuant to the timetable provided herein, to be distributed by
Plaintiffs’ Lead Counsel among Plaintiffs’ Counsel. Defendants shall bear no responsibility for
the allocation or distribution of the Fee and Expenses Amount among Plaintiffs’ Counsel. The
Parties mutually agree that the Fee and Expense Award is fair and reasonable in light of the
substantial benefits conferred upon Cliffs and Cliffs shareholders by this Settlement. Except to
the extent specifically provided in this paragraph, neither Cliffs, nor the Individual Defendants,
nor any of their insurers shall have any obligation to pay or cause to be paid, any fees, costs or
expenses to Plaintiffs or Plaintiffs’ Counsel.
5.2 Co-Lead Plaintiffs may apply for Court-approved service awards in the
amount of $3,500 each (the “Service Awards”). Each Service Award, to the extent that it is
applied for and approved in whole or part, shall be funded entirely and exclusively from the Fee
and Expense Award to Plaintiffs’ Counsel, and shall be paid and disbursed solely by Plaintiffs’
Counsel. Defendants shall take no position on the Service Awards and neither Cliffs, nor the
Individual Defendants, nor any of their insurers shall have any obligation to pay or cause to be
paid any Service Award or any portion thereof.
NAI-1500918414v7 21
5.3 The Fee and Expense Amount shall be paid by the Individual Defendants’
D&O insurers to The Shuman Law Firm within fifteen (15) business days after the latest of (i)
the Court’s entry of the Judgment granting final approval of the Settlement, (ii) the Court’s entry
of an order concerning the Fee and Expense Amount, or (iii) receipt by the D&O insurers of (a) a
copy of the Judgment and the Order concerning the Fee and Expenses Amount as entered by the
Court (which shall be transmitted to them no later than one business day following receipt), (b) a
W-9 for the Shuman Law Firm, and (c) wire or check mailing instructions for The Shuman Law
Firm.
5.4 In the event the Effective Date does not occur, or the Judgment is reversed
or modified, including by way of ruling by an appellate court having jurisdiction over the
Actions, or is subject to successful collateral attack, or the Stipulation is cancelled or terminated
for any other reason, or the Fee and Expense Award and/or Service Awards or any part thereof is
overturned, reduced or substantially modified, then Plaintiffs’ Counsel and their successors shall
have a joint and several obligation to repay the Fee and Expense Award and Service Awards, or
any applicable parts thereof, and shall repay the Fee and Expense Award and Service Awards in
whole or applicable part to the respective D&O insurers within fifteen (15) business days of
receiving notice of such triggering event from Defendants’ Counsel or from the Court.
5.5 The Fee and Expense Amount, or any portion thereof awarded by the
Court, shall constitute full and complete compensation for all of Plaintiffs’ Counsel’s services
and expenses incurred. Payment of the Fee and Expense Amount shall be the obligation of the
Individual Defendants’ D&O insurers only. It is expressly agreed that, in the event of a failure
of the D&O insurers to pay, neither Cliffs nor any of the Individual Defendants shall bear any
personal liability for all or any portion of the Fee and Expense Amount. An award of attorneys
NAI-1500918414v7 22
fees or expenses and any Service Awards are separate and apart from and are not conditions to
the Settlement embodied in this Stipulation or the Judgment. No order or proceeding concerning
any fee and expense application or award or any Service Awards, or any modification or
reversal on appeal of any fee and expense award or Service Awards, shall constitute grounds for
cancellation or termination of the Settlement by any Party or shall otherwise affect the validity
or effectiveness of the Settlement. Upon payment of the Fee and Expense Amount as described
above (or any lesser amount ordered by the Court or any appeals court), the Individual
Defendants’ D&O insurers shall be discharged from any further liability for payment of
Plaintiffs’ Counsel’s fees, costs or expenses in the Actions. Defendants further acknowledge
and warrant that they claim no interest in the Fee and Expense Amount once such funds are paid
to Lead Counsel, subject only to the specific terms of repayment set forth above.
6. Conditions of Settlement, Effect of Disapproval, Cancellation or Termination
6.1 The Effective Date of this Stipulation shall be conditioned on the
occurrence of all of the following events:
a. the Board has approved the Settlement and each of its terms as in
the best interest of Cliffs and its shareholders;
b. the Court has entered the Judgment;
c. the Judgment has become Final.
6.2 If any of the conditions specified in paragraph 6.1 is not met, then this
Stipulation shall be deemed canceled and terminated unless Plaintiffs’ Counsel and Defendants’
Counsel mutually agree in writing to proceed with this Settlement; except that any proceeding,
dispute, appeal, petition, order pertaining to the fee and expenses requested by or awarded to
Plaintiffs’ Counsel or pertaining to any Service Awards shall not operate to terminate, modify, or
NAI-1500918414v7 23
cancel this Stipulation, or affect or delay the Effective Date or the finality of the Judgment
approving this Stipulation and the Settlement of the Actions.
6.3 If for any reason the Effective Date does not occur, or if this Stipulation is
in any way canceled, terminated, or fails to become final in accordance with its terms: (i) the
Parties shall be restored to their respective positions as of the date immediately preceding the full
execution of this Stipulation; and (ii) the Stipulation and all negotiations, proceedings,
documents prepared, and statements made in connection herewith shall be without prejudice to
the Parties, shall not be deemed or construed to be an admission by any Party of any act, matter,
or proposition and shall not be used by anyone in any manner for any purpose in the Actions or
in any other action or proceedings (other than between one or more Defendants and any insurer,
reinsurer or other entity contracted or otherwise obligated to provide insurance or
indemnification to any Released Persons), or entitle any party to recover any costs or expenses
incurred in connection with this Stipulation or the Settlement. In such event, the terms and
provisions of this Stipulation, except ¶¶ 5.4, 6.3, 8.1, and 8.8, shall have no further force or
effect, and any Judgment or other order entered in accordance with the terms of the Stipulation
shall be treated as vacated, nunc pro tunc.
7. Bankruptcy
7.1 In the event any proceedings by or on behalf of Cliffs, whether voluntary
or involuntary, are initiated under any chapter of the U.S. Bankruptcy Code, including any act of
receivership, asset seizure, or similar federal or state law action (“Bankruptcy Proceedings”), the
Parties agree to use their reasonable best efforts to obtain all necessary orders, consents, releases,
and approvals for effectuation of this Stipulation in a timely and expeditious manner.
7.2 In the event of any Bankruptcy Proceedings by or on behalf of Cliffs, the
Parties agree that all dates and deadlines set forth herein will be extended for such periods of
NAI-1500918414v7 24
time as are necessary to obtain appropriate orders, consents, releases and approvals from the
Bankruptcy Court to carry out the terms and conditions of the Stipulation.
8. Miscellaneous Provisions
8.1 The Stipulation shall be null and void and of no force and effect if the
Court does not enter the Judgment. The Stipulation and the Settlement are not and shall not be
construed to be, or offered, attempted to be offered or used in any way by any Party as a
presumption, an admission, or evidence of the validity or invalidity of any claim or defense or of
any fault, liability or wrongdoing whatsoever on the part of the Released Persons. The
Stipulation, the Settlement and any matter relating to them may not be offered or received in
evidence or otherwise referred to in any civil, criminal, or administrative action or proceeding for
any purpose, except to enforce the terms of the Settlement, except that the Released Persons may
file this Stipulation and/or the Judgment in any action that may be brought against them in order
to support a defense or counterclaim based on principles of res judicata, collateral estoppel, full
faith and credit, release, good faith settlement, judgment bar or reduction or any other theory of
claim preclusion or issue preclusion or similar defense or counterclaim.
8.2 All proceedings in the Actions shall be stayed, except as provided in this
Stipulation. Other than seeking approval of the Settlement as provided herein, Plaintiffs and
Plaintiffs’ Counsel agree that they will not take any action, take any discovery, or make any
filings in the Actions other than those contemplated by this Stipulation.
8.3 The exhibits to this Stipulation are material and integral parts hereof and
are fully incorporated herein by this reference.
8.4 In the event there exists a conflict or inconsistency between the terms of
this Stipulation and the terms of any exhibit attached hereto, the terms of the Stipulation shall
prevail.
NAI-1500918414v7 25
8.5 Co-Lead Plaintiffs represent that they own shares of common stock of
Cliffs and have owned shares of Cliffs common stock continuously since the commencement of
the activities that underline the allegations of wrongdoing in the Actions.
8.6 The Parties represent and agree that the terms of the Settlement were
negotiated at arm’s-length and in good faith by the Parties, and reflect a settlement that was
reached voluntarily based upon adequate information and sufficient discovery and after
consultation with experienced legal counsel.
8.7 This Stipulation is being executed by counsel for the Parties, each of
whom represents and warrants that he or she has been granted full and complete authority from
his or her client or clients to enter into this Stipulation, which has full force and effect as a
binding obligation of such clients.
8.8 Nothing in this Stipulation or the negotiations or proceedings related
thereto is intended to or shall be deemed to constitute a waiver of any applicable privilege or
immunity, including, without limitation, attorney-client privilege, joint-defense privilege, or
work product immunity.
8.9 The Stipulation may be executed in any number of actual or electronically
transmitted counterparts and by each of the different Parties thereto on several counterparts, each
of which when so executed and delivered shall be an original. The executed signature page(s)
from each actual or electronically transmitted counterpart may be joined together and attached to
one such original and shall constitute one and the same instrument.
8.10 Each Party severally acknowledges that no promise, inducement or
agreement not expressed herein has been made to it or him or her, that this Stipulation contains
the entire agreement between or among the Parties concerning the matters described in this
NAI-1500918414v7 26
Stipulation, and, except as expressly provided herein, that there are no third-party beneficiaries to
this Stipulation.
8.11 This Stipulation may be modified or amended only by a writing signed by
all of the Parties hereto.
8.12 The waiver by any Party of any breach of this Stipulation by any other
Party shall not be deemed a waiver of any other prior or subsequent breach of this Stipulation.
8.13 This Stipulation shall bind and inure to the benefit of the Parties to the
Stipulation and their respective heirs, predecessors, successors and assigns and to any
corporation or other entity into which or with which any Party to this Stipulation may merge or
consolidate. Notwithstanding the foregoing, the corporate governance reforms referenced above
in paragraph 2.1 and set forth in Exhibit A hereto shall not bind any successor entity in the event
the Company merges with or is acquired by such entity, and the Company is not the surviving
entity post-merger or acquisition.
8.14 This Stipulation and the Settlement contemplated by it shall be governed
by and construed in accordance with the laws of the State of Ohio without regard to choice of
law or conflict of law principles. Any action arising out of or relating to this Stipulation shall be
brought exclusively in the Court.
8.15 To the extent permitted by law, all agreements made and orders entered
into during the course of the Actions relating to the confidentiality of documents or information
shall survive this Stipulation. Plaintiffs’ Counsel agrees to return, permanently delete, and/or
destroy (and certify in writing that they have done so) any documents produced by any
Defendant and any third party to the Actions, including any copies thereof, and any translations
of any such documents, within sixty (60) days of the Effective Date.
NAI-1500918414v7 27
8.16 The Parties acknowledge that it is their intent to consummate this
Stipulation and agree to cooperate fully with one another in seeking the Court’s approval of this
Stipulation and Settlement and to obtain entry of the Judgment.
8.17 Should any part of the Stipulation be rendered or declared invalid by a
court of competent jurisdiction, such invalidation of such part or portion of the Stipulation
should not invalidate the remaining portions thereof, and they shall remain in full force and
effect.
8.18 This Stipulation shall not be construed more strictly against one Party than
another merely because it, or any part of it, may have been prepared by counsel for one of the
Parties, it being recognized that it is the result of arm’s length negotiations between the Parties
and all Parties have contributed substantially and materially to the preparation of this Stipulation.
8.19 Except as expressly provided herein, each of the Parties shall bear his, her,
or its own fees and costs.
8.20 The Court shall retain jurisdiction with respect to the implementation and
enforcement of the terms of the Stipulation, and the Parties submit to the jurisdiction of the Court
for purposes of construing, implementing, enforcing and administering the Settlement embodied
in the Stipulation.
IN WITNESS WHEREOF, the Parties hereto have caused the Stipulation to be executed
by their duly authorized attorneys, dated as of Apri120, 2016.
Kip B. Shum nE-mail: [email protected] E. GlennE-mail: rusty@shumanlaw~rm.comTHE SHUMAN LAW FIRMOne Montgomery St., Suite 1800San Francisco, CA 94104Telephone: (303) 861-3003Facsimile: (303) 536-7849Lead Plaintiffs' Counsel
t 1 .~"~,s
William B. Federman ,~~~ ~ ~ ~ ~'~ ~
E-mail: [email protected] & SHERWOOD10205 North Pennsylvania AvenueOklahoma City, OK 73120Telephone: (405) 235-1560Facsimile: (405) 239-2112
/~ ~~
Alfred G. YateGerald RutledgeLAW OFFICE OF ALFRED G. YATES, JR., P.C.519 Allegheny Building429 Forbes AvenuePittsburgh, PA 15219Telephone: (412) 391-5164Facsimile: (412) 471-1033E-mail: [email protected]
NAI-1500918414v7 2g
Exhibit A
CORPORATE GOVERNANCE REFORMS
I. Corporate Governance Guidelines and Director Policies
1. The Company will agree to maintain the provisions of the Corporate Governance Guidelines which require that when the CEO/President or another executive is designated as Chairman of the Board, the Nominating and Governance Committee recommends to the Board a director who will serve as the Lead Director.
2. The Corporate Governance Guidelines will be amended to provide that, when a Lead Director is appointed, the Lead Director must meet the independence requirements of, at least, the New York Stock Exchange.
3. The Company will agree to retain the provision in the Corporate Governance Guidelines providing that a “substantial majority” of the members of the Board must meet the independence requirements of, at least, the New York Stock Exchange.
4. The Company shall not allow any Board member to serve as the chair of more than one Board committee.
5. The Company’s General Counsel shall be required to meet with the Board at least quarterly and present a written report on material pending or threatened litigation and material compliance issues known to him or the Company’s legal office.
6. The Company’s General Counsel shall be required to approve all quarterly corporate press releases before issuance.
7. The Corporate Governance Guidelines will be amended to provide that at least one regularly-scheduled Board meeting each year will take place at an operating location of the Company.
8. The Company will agree to provide one in-house director training program per year using a third-party facilitator.
9. The Corporate Governance Guidelines will be amended to state that there is a presumptive 12-year term limit for outside directors. After 12 years, directors may continue as non-voting honorary Board members. The Board, however, shall retain discretion to waive the presumptive limit if, in its judgment, a Board member is performing at a high level and can continue to serve effectively. If the Board exercises its discretion to waive the presumptive term limit for outside
directors, it shall disclose this decision to stockholders in the Company’s Annual Proxy Statement.
10. The Company will agree to maintain the provisions in the Corporate Governance Guidelines prohibiting directors from serving on more than three other public-company boards, and requiring directors to inform the Chief Executive Officer/President and Chair of the Governance and Nominating Committee in advance of accepting an invitation to serve on the board of directors of another public company.
11. The Company will agree to maintain the provisions in the Corporate Governance Guidelines that provide that the Board and each committee will perform an annual self-evaluation of performance.
12. The Company recently amended its Directors & Officers Share Ownership Guidelines to add a restriction providing that an officer may not sell more than 50% of any shares he or she receives via equity awards from the Company until he or she achieves share ownership at 100% of the applicable guideline level. The Company acknowledges that the filing and prosecution of the lawsuit was a significant factor in adopting that amendment.
II. Audit Committee Charter
1. The Audit Committee shall be required to review and discuss with the independent auditors and senior financial executives key matters relating to internal controls, financial reporting and disclosures.
2. The Audit Committee shall be advised of and consider information regarding significant deficiencies or material weaknesses in the design or operation of internal control over financial reporting or fraud involving management or other employees with a significant role in internal controls.
3. The Audit Committee charter will be amended to provide that the committee members will review the Company’s annual operating and capital expenditure plan prior to its submission to the Board for approval.
4. The Audit Committee charter will be amended to provide that the committee will receive quarterly reports from the Chief Financial Officer on the Company’s cash position, capital structure and, if applicable, dividend policy.
5. The Audit Committee charter will be amended to provide that the committee will meet at least quarterly with the head of the Internal Audit department, who will
provide a report on significant internal audit activities during the preceding quarter.
6. The Audit Committee charter will be amended to provide that the Chief Legal Officer will report to the committee on a quarterly basis on alleged violations reported through the Company’s ethics hotline.
7. The Audit Committee charter will be amended to provide that the committee will report to the full Board at each regularly scheduled meeting of the Board.
8. The Audit Committee charter will be amended to provide that the committee will meet no fewer than four times per year.
9. The Audit Committee charter will be amended to provide that, not less than once every three years, the committee will consider whether it is in the Company’s interests to continue to engage its then-current independent auditors, taking into account, among any other factors deemed pertinent by the Committee, independence, quality, cost, and the nature and significance of institutional knowledge.
III. Compensation and Organization Committee
1. The Compensation and Organization Committee charter will be amended to provide that performance targets applicable to Named Executive Officer compensation decisions for a particular fiscal year will be determined during the first quarter of that year, with the assistance of a compensation consultant.
IV. Strategy Committee
1. The Company will adopt the following committee charter for the strategy committee and shall publish it on the Company’s website:
CLIFFS NATURAL RESOURCES INC. STRATEGY COMMITTEE CHARTER
Purpose
The purposes of the Strategy Committee (the “Committee”) of the Board of Directors (the “Board”) of Cliffs Natural Resources Inc. (“Cliffs”) are to (a) oversee Cliffs’ strategic plan and annual management objectives; (b) oversee, advise on and monitor opportunities and risks relating to Cliffs’ strategic plan, including among other things positioning to support realization of strategic opportunities, as well as consideration of risks pertaining to country operations,
minerals and major projects, and operational, safety and environmental risks; and (c) with management, identify and set strategic goals and expectations and review the merits and risks of potential acquisitions, joint ventures and strategic alliances.
Committee Membership
The Committee will consist of at least three members, with the actual number to be determined from time to time by the Board. At least a majority of the Committee members will meet the independence criteria of the New York Stock Exchange, Inc. Preferred qualifications for Committee members include experience in mergers and acquisitions, investment analysis of business opportunities, formulating corporate strategy, and knowledge of the mining and mineral business.
Duties and Responsibilities
The Committee’s responsibilities include:
Review and Oversee Strategic Opportunities and Projects
1. Assist and advise the Board regarding (a) Cliffs’ current strategy, including goals for future years and (b) the evaluation of evolving and emerging opportunities in existing and new markets (both minerals and geographic), including material acquisitions and dispositions, exploration and production activities and new ventures.
2. Review results of major projects and post-deal integration activities in the context of prior estimates.
3. Monitor the progress and implementation of the strategic plan, and present to the Board any significant issues, risks and opportunities facing Cliffs that are not included in the strategic plan.
4. Assist Cliffs’ Chief Executive Officer (“CEO”) and other senior executive officers in determining the resources necessary for implementation and execution of Cliffs’ strategic and financial plans.
Review Risk Exposures Related to the Strategic Plan
1. Review appropriateness of strategies for managing certain exposures to enterprise risks, including financial, economic, reputational or hazard risks, including: (a) hedging strategies relating to foreign currency, interest rate and commodity exposures; (b) existing insurance programs (and the adequacy thereof) for
property, casualty, fiduciary and political risks; and (c) key management systems including capital investment, environmental management, stakeholder engagement and others as appropriate.
2. Periodically assess Cliffs’ overall capital structure and capital allocation priorities, including Cliffs’ long-term cost of capital, debt-to-equity ratios, dividend payout ratios, share buy-backs, debt or equity financings, liquidity levels, credit rating and credit facilities.
3. Periodically assess developments in best practice frameworks and guidance as may be appropriate in the context of Cliffs’ then current mineral resource base, geographic footprint and overall business plans and objectives.
Other Responsibilities
1. Periodically, and in such manner and at such times as the Committee and the Board deem appropriate, report the Committee’s activities, findings and recommendations to the Board.
2. Annually evaluate the Committee’s performance and the Committee’s charter and review the results and any recommended changes with the Board.
Resources and Authority
To assist the Committee in carrying out its purpose, duties and responsibilities, the Committee will have:
1. The sole authority to retain and terminate independent consultants, independent counsel and other independent advisors.
2. Appropriate resources and authority to discharge its responsibilities and duties as required by law, including, without limitation, such funding as the Committee deems necessary to compensate any consultants and advisors retained by the Committee.
3. The authority, at its discretion, to delegate any of its responsibilities to a subcommittee.
[date] _________________________________ Secretary
V. Governance and Nominating Committee
1. The Governance and Nominating Committee charter will be amended to provide that the committee will consider, at least annually, whether the members of the Board need additional education or training not already provided through the Company to carry out their Board duties and, if it determines that additional education or training is needed, it will report that to the Board.
VI. Employee Compliance Policies
1. The Company shall ensure that every salaried employee and director is provided (either electronically via email or intranet access or by paper copy) a copy of the Company’s Code of Business Conduct and Ethics annually, or sooner if material changes are made during the course of the year.
2. The Company will undertake to obtain annual certifications from salaried employees that acknowledge the Company’s Code of Business Conduct and Ethics, and certify the employee’s compliance with the Code.
3. The Company will maintain an electronic or telephonic hotline that provides, through a third-party contractor, an ability for persons inside or outside the Company to report complaints or concerns regarding ethics and compliance matters.
4. The Company’s intranet and website will contain a statement that no employee may be discharged, demoted or retaliated against because of any reports of possible legal or ethical violations made in good faith to the ethics hotline or any member of Company management.
Exhibit B
NAI-1500870479v7
IN THE COURT OF COMMON PLEAS CUYAHOGA COUNTY, OHIO
ROBERT BLACK, Derivatively on Behalf of CLIFFS NATURAL RESOURCES INC., Plaintiff, v. JOSEPH A. CARRABBA, et al., Defendants, -and- CLIFFS NATURAL RESOURCES INC., Nominal Defendant.
) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) )
Case No. CV-14-827803
Judge Richard J. McMonagle
IN THE COURT OF COMMON PLEAS
CUYAHOGA COUNTY, OHIO GEORGE ASMUSSEN and JEFF ASMUSSEN, Derivatively on Behalf of CLIFFS NATURAL RESOURCES INC., Plaintiffs, v. JOSEPH A. CARRABBA, et al., Defendants, -and- CLIFFS NATURAL RESOURCES INC., Nominal Defendant.
) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) )
Case No. CV-14-829259 Judge Richard J. McMonagle
NAI-1500870479v7 2
IN THE COURT OF COMMON PLEAS CUYAHOGA COUNTY, OHIO
VICKI WILLIAMS and RAPHAEL ALEMAN, Derivatively on Behalf of CLIFFS NATURAL RESOURCES INC.,
Plaintiffs,
v.
JOSEPH A. CARRABBA, et al.,
Defendants, -and- CLIFFS NATURAL RESOURCES INC.,
Nominal Defendant.
) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) )
Case No. CV-14-829499
Judge Richard J. McMonagle
[PROPOSED] ORDER GRANTING PRELIMINARY APPROVAL OF SETTLEMENT
The Plaintiffs have presented an unopposed motion (“Motion”) for an order: (i)
preliminarily approving the Settlement1, in accordance with the Stipulation and Agreement of
Settlement (the “Stipulation”) dated April 20, 2016, which, together with the exhibits annexed
thereto, sets forth the terms and conditions for a proposed settlement of the Actions and for
dismissal of the Actions with prejudice and the release of the Released Claims; (ii) approving the
form, content and manner of dissemination of the Notice to be filed by Cliffs with the U.S.
Securities and Exchange Commission (“SEC”), and posted along with the Stipulation on Cliffs’
1 Unless otherwise defined, all capitalized terms herein have the same meaning as set forth in the Stipulation.
NAI-1500870479v7 3
website and on the website of Lead Plaintiffs’ Counsel, and the Summary Notice to be published
once in Investor’s Business Daily.
The Court has read and considered (i) the Stipulation and exhibits annexed thereto; and
(ii) the Unopposed Motion and accompanying memorandum supporting the Motion.
The Court finds, upon a preliminary evaluation, that the proposed Settlement falls within
the range of possible approval criteria, as it provides a beneficial result for Cliffs and its
shareholders and appears to be the product of good faith, informed, and non-collusive
negotiations between experienced and able counsel for the Parties;
The Court also finds, upon a preliminary evaluation, that Cliffs shareholders should be
apprised of the Settlement through the proposed form and manner of notice contained in the
Stipulation, allowed to file objections, if any, thereto, and appear at the Settlement Hearing.
All Parties to the Settlement having agreed to the entry of this Order,
IT IS HEREBY ORDERED:
1. The Court preliminarily approves, subject to further consideration at the
Settlement Hearing described below, the Stipulation and the Settlement set forth therein,
including the terms and conditions for settlement and dismissal with prejudice of the Actions.
2. A hearing (the “Settlement Hearing”) shall be held before the Court on
___________ __, 2016, at ____ _.m. Eastern time before the Honorable Richard J. McMonagle,
Cuyahoga County Court of Common Pleas, Old Courthouse, One W. Lakeside Ave., Courtroom
2A, Third Floor, Cleveland, Ohio 44113, for the purpose of determining: (i) whether the
Settlement of the Actions on the terms and conditions provided for in the Stipulation is fair,
reasonable, and adequate and in the best interests of Cliffs and its shareholders and should be
finally approved by the Court; (ii) whether a Judgment as provided in, and attached as Exhibit C
NAI-1500870479v7 4
to the Stipulation, dismissing the Actions on the merits and with prejudice, granting the releases
described more fully in the Stipulation, and permanently barring and enjoining Plaintiffs (acting
on their own behalf or derivatively on behalf of Cliffs), Cliffs, and each of Cliffs’ shareholders
from instituting, commencing, or prosecuting any of the Released Claims against the Released
Persons should be entered; (iii) whether the Fee and Expense Award and the Service Awards
should be approved; and (iv) such other matters as may be necessary or proper in the
circumstances.
3. The Court approves, as to form and content, the Notice attached hereto as Exhibit
1 and the Summary Notice attached hereto as Exhibit 2, and finds that the distribution of the
Notice and publication of the Summary Notice substantially in the manner and form set forth in
this Order constitutes due, adequate and reasonable notice to Cliffs shareholders pursuant to
applicable law and due process, complies with the rules governing this Court, and is the best
notice practicable under the circumstances to all Cliffs shareholders. Non-material changes to the
Notice and Summary Notice may be made without further approval of the Court.
4. The Court hereby re-captions the consolidated Actions with the following single
caption:
IN THE COURT OF COMMON PLEAS CUYAHOGA COUNTY, OHIO
IN RE CLIFFS NATURAL RESOURCES INC. SHAREHOLDER DERIVATIVE LITIGATION
) ) ) ) ) ) )
Lead Case No. CV-14-827803
(Consolidated with Case No. CV-14-829259 and Case No. CV-14-829499)
Judge Richard J. McMonagle
NAI-1500870479v7 5
5. Within ten calendar days following the entry of this Order: (i) Cliffs shall cause
the Summary Notice to be published once in Investor’s Business Daily; (ii) The Shuman Law
Firm and Cliffs shall each post copies of the Notice and the Stipulation on their respective
websites; and iii) Cliffs shall cause a copy of the Notice to be filed with the U.S. Securities and
Exchange Commission via a current report on Form 8-K, which shall also refer shareholders to
the website of Cliffs for more information, including a copy of the Stipulation.
6. No later than seven calendar days prior to the Settlement Hearing, Lead Counsel
and Defendants’ Counsel shall each file with the Court, and serve, an appropriate affidavit or
declaration with respect to their respective obligations concerning filing, posting and publishing
the Notice and Summary Notice.
7. No later than twenty-one calendar days prior to the Settlement Hearing, Plaintiffs’
Lead Counsel shall file: (i) their motion and memorandum in support of final approval of the
Settlement; and (ii) their application for an award of attorneys’ fees and reimbursement of
expenses to Plaintiffs’ Counsel and for approval of the Service Awards.
8. Any Cliffs shareholder may object and/or appear and show cause, if he, she, or it
has any concern, why the Settlement of the Actions should not be approved as fair, reasonable,
and adequate, why the Judgment should not be entered thereon, or why the Fee and Expense
Award or Service Awards should not be approved; provided, however, unless otherwise ordered
by the Court, no Cliffs shareholder shall be heard or entitled to contest the approval of the terms
and conditions of the Settlement, or, if approved, the Judgment to be entered thereon approving
the same, or the Fee and Expense Award or Service Awards unless that shareholder, at least
fourteen calendar days prior to the Settlement Hearing:
NAI-1500870479v7 6
(i) has filed with the Clerk of Courts a written notice of objection to the
Settlement, the Fee and Expense Award and/or the Service Awards setting forth: (a) the
shareholder’s name, address, and telephone number; (b) proof of current ownership of
Cliffs common stock, including the date of purchase; (c) the nature and grounds of the
shareholder’s objections as to any matters before the Court, and any supporting facts and
arguments; (d) all documents or writings the shareholder desires the Court to consider in
connection with the objection; and (e) a list of all cases in which the shareholder and/or
the shareholder’s counsel has filed an objection to a settlement of a shareholder class or
derivative action in the last three years, identifying the name of the case, jurisdiction and
docket number; and
(ii) if, in addition to filing a written objection, the shareholder intends to
appear in person and request to be heard at the Settlement Hearing, in addition to meeting
the requirements of (i) above for an objection, has filed with the Clerk of Courts, a
written statement setting forth: (a) the shareholder’s intention to appear; (b) the basis for
the appearance; and (c) the identities of any witnesses the shareholder intends to call at
the Settlement Hearing and a statement of the subjects of their testimony.
9. Any Cliffs shareholder that files a written objection and/or written notice of intent
to appear must also serve upon counsel for each of the Parties as set forth below (either by hand
delivery or by first class mail) copies of such notice, proof, statement, documentation and other
papers or briefs such shareholder files with the Court, for receipt by counsel at least fourteen
calendar days before the Settlement Hearing:
NAI-1500870479v7 7
Kip B. Shuman E-mail: [email protected] THE SHUMAN LAW FIRM One Montgomery St, Suite 1800 San Francisco, CA 94104 Telephone: (303) 861-3003 Facsimile: (303) 484-4886 Lead Counsel for Plaintiffs
John M. Newman, Jr. E-mail: [email protected] JONES DAY North Point 901 Lakeside Avenue Cleveland, Ohio 44114-2309 Telephone: (216) 586-3939 Facsimile: (216) 579-0212 Attorneys for Defendants Joseph A. Carrabba, Laurie M. Brlas, Terrance M. Paradie and David Blake
Joseph A. Castrodale E-mail: [email protected] BENESCH, FRIEDLANDER, COPLAN, & ARONOFF LLP 200 Public Square, Suite 2300 Cleveland, OH 44114-2378 Telephone: (216) 363-4500 Facsimile: (216) 363-4588 Attorneys for Nominal Defendant Cliffs Natural Resources Inc.
Rachelle Silverberg E-mail: [email protected] WACHTELL, LIPTON, ROSEN & KATZ 51 West 52nd Street New York, NY 10019 Telephone: (212) 403-1000 Facsimile: (212) 403-2000 Attorneys for Defendants Gary B. Halverson, Susan M. Cunningham, Janice K. Henry, Barry J. Eldridge, Mark E. Gaumond, Andres R. Gluski, Susan M. Green, James F. Kirsch, Stephen M. Johnson, Richard K. Riederer, and Timothy W. Sullivan
10. Any Cliffs shareholder who fails to object to the above-prescribed manner and
within the time prescribed to the Settlement and/or the Fee and Expense Awards shall be deemed
to have waived such objection or challenge (including the right to appeal) and shall be forever
barred and foreclosed from making any such objection or request to be heard in this or any other
action of proceeding, including any objection to the fairness, reasonableness, or adequacy of the
proposed Settlement as set forth in the Stipulation, but shall otherwise be bound by the Judgment
to be entered and the releases to be given.
NAI-1500870479v7 8
11. Lead Counsel shall file all objections with the Court. The Parties shall file and
serve their responses to any objections from Cliffs shareholders no later than seven calendar days
prior to the Settlement Hearing.
12. Except as necessarily undertaken in furtherance of the Settlement, all proceedings
in the Actions are hereby stayed and suspended until further order of this Court. Other than
seeking approval of the Settlement as provided herein, Plaintiffs and Plaintiffs’ Counsel agree
that they will not take any action, take any discovery, or make any filings in the Actions other
than those contemplated by the Stipulation.
13. Pending the Court’s determination as to final approval of the Settlement,
Plaintiffs and Cliffs shareholders are barred and enjoined from commencing, prosecuting,
instigating, or in any way participating in the commencement or prosecution of any action
asserting any Released Claim against any of the Released Persons.
14. The Stipulation shall be null and void and of no force and effect if, for any reason,
the Settlement is not approved or the Judgment is not entered. In such event: (i) the Parties shall
be restored to their respective positions as of the date immediately preceding the full execution
of this Stipulation; and (ii) the Stipulation and all negotiations, proceedings, documents prepared,
and statements made in connection herewith shall be without prejudice to the Parties, shall not be
deemed or construed to be an admission by any Party of any act, matter, or proposition, and shall
not be used by anyone in any manner for any purpose in the Actions or in any other action or
proceeding (other than between one or more Defendants and any insurer, reinsurer or other entity
contracted or otherwise obligated to provide insurance or indemnification to any Release
Persons), or entitle any Party to recover any costs or expenses incurred in connection with the
Stipulation or the Settlement. In such event, the terms and provisions of the Stipulation, except
NAI-1500870479v7 9
¶¶ 5.4, 6.3, 8.1 and 8.8, shall have no further force or effect, and any Judgment or other order
entered in accordance with the terms of the Stipulation shall be treated as vacated, nunc pro tunc.
15. The Stipulation is not and shall not be construed to be, or offered, attempted to be
offered or used in any way as, a presumption, an admission, or evidence of the validity or
invalidity of any claim or defense or of any fault, liability or wrongdoing whatsoever on the part
of the Released Persons, and neither the Stipulation nor any matter relating to it may be offered
or received in evidence or otherwise referred to in any civil, criminal, or administrative action or
proceeding for that purpose.
16. The Court reserves the right to approve the Stipulation with further modifications
as may be agreed to by counsel to the Parties to the Stipulation and without further notice to
Cliffs shareholders, and retains jurisdiction to consider all further applications arising out of or
connected with the proposed Settlement. The Court may also adjourn the Settlement Hearing
provided for herein without further notice other than to counsel for the Parties and by posting an
entry on the docket.
SO ORDERED in Cuyahoga County, Ohio on _________________, 2016.
__________________________________________ JUDGE RICHARD J. MCMONAGLE
Exhibit B-1
NAI-1500870526v7
IN THE COURT OF COMMON PLEAS CUYAHOGA COUNTY, OHIO
IN RE CLIFFS NATURAL RESOURCES, INC. SHAREHOLDER DERIVATIVE LITIGATION
) ) ) ) ) ) )
Lead Case No. CV-14-827803
(Consolidated with Case No. CV-14-829259 and Case No. CV-14-829499)
Judge Richard J. McMonagle
NOTICE OF PROPOSED SETTLEMENT OF DERIVATIVE ACTIONS, HEARING THEREON, AND RIGHT TO APPEAR
TO: ALL HOLDERS AND ALL OWNERS, INCLUDING ALL RECORD HOLDERS AND/OR BENEFICIAL OWNERS, THEIR SUCCESSORS IN INTEREST AND TRANSFEREES, IMMEDIATE AND REMOTE, OF CLIFFS NATURAL RESOURCES, INC. (“CLIFFS” OR THE “COMPANY”) COMMON STOCK AS OF APRIL 20, 2016.
THIS NOTICE WAS SENT TO YOU BY ORDER OF THE COURT. PLEASE READ
THIS NOTICE CAREFULLY AND IN ITS ENTIRETY. THIS NOTICE RELATES TO A PROPOSED SETTLEMENT OF THESE DERIVATIVE ACTIONS. YOUR RIGHTS
MAY BE AFFECTED.
IF YOU HELD COMMON STOCK OF CLIFFS AS OF APRIL 20, 2016 FOR THE BENEFIT OF ANOTHER, PLEASE PROMPTLY TRANSMIT THIS DOCUMENT TO
THE BENEFICIAL OWNER.
YOU ARE HEREBY NOTIFIED that the Parties1 to the above-captioned consolidated
shareholder derivative actions (the “Actions”) have entered into a Stipulation and Agreement of
Settlement dated April __, 2016 (the “Stipulation”) to fully, finally, and forever settle the claims
raised in the Actions on behalf of and for the benefit of Cliffs Natural Resources Inc. (“Cliffs” or
the “Company”). If you are a Cliffs shareholder as of April 20, 2016, your rights to
1 Unless otherwise defined, the capitalized terms herein have the same definition as used
in the Stipulation and Agreement of Settlement.
NAI-1500870526v7 2
pursue certain derivative claims on behalf of Cliffs against its current and former directors and
officers and other Released Persons may be affected by the Settlement.
This Notice is not a lawsuit against you. You are not being sued. This Notice is provided
by order of the Court of Common Pleas, Cuyahoga County, Ohio (the “Court”). Please be
advised that pursuant to an Order of the Court, a hearing (the “Settlement Hearing”) will be held
on _____, 2016 at ____ __.m., before the Honorable Richard J. McMonagle, Cuyahoga
County Court of Common Pleas, Old Courthouse, One West Lakeside Ave., Cleveland, Ohio
44113, to determine: (i) whether the Settlement of the Actions on the terms and conditions
provided for in the Stipulation is fair, reasonable, and adequate and in the best interests of Cliffs
and its shareholders and should be finally approved by the Court; (ii) whether a Judgment as
provided in, and attached as Exhibit C to, the Stipulation, dismissing the Actions on the merits
with prejudice should be entered; (iii) whether the Fee and Expense Award and Service Awards
(as described below) should be approved; and (iv) such other matters as may be necessary or
proper in the circumstances.
The Settlement will fully resolve the Actions on the terms set forth in the Stipulation and
summarized in this Notice, including the dismissal of the Actions with prejudice. As detailed
below, the Plaintiffs, Plaintiffs’ Counsel and Cliffs believe that the proposed Settlement provides
substantial benefits to the Company, and is in the best interests of the Company and its
shareholders. For a more detailed statement of the matters involved in the Actions, the
Settlement, and the terms discussed in this Notice, the Stipulation may be viewed on Cliffs’
website via link at http://ir.cliffsnaturalresources.com and on Lead Plaintiffs’ Counsel’s firm
website at www.shumanlawfirm.com. If the Court approves the Settlement, the Parties will ask
the Court at the Settlement Hearing to enter a Judgment dismissing the Actions with prejudice on
NAI-1500870526v7 3
the merits as to all Defendants and releasing claims in accordance with the terms of the
Stipulation.
You may have the right to object to the Settlement, including the amount of attorneys'
fees and unreimbursed expenses that should be awarded to Plaintiffs' Counsel and the proposed
Service Awards, in the manner provided herein. If you fail to object in the manner provided
herein on or before fourteen calendar days before the Settlement Hearing, you will be deemed to
have waived your objections and will be bound by the Judgment to be entered and the release of
claims to be given, unless otherwise ordered by the Court.
The Court has reserved the right to approve the Settlement with such modifications as
may be agreed to by counsel to the Parties and without further notice to Cliffs shareholders.
This Notice is not intended to be and should not be construed as an expression of any
opinion by the Court with respect to the merits of the claims or defenses made in the Actions, but
is merely to advise you of the pendency of Settlement of the Actions and your rights as a Cliffs
shareholder.
Please note that there is no proof of claim form for shareholders to submit in connection
with this Settlement and shareholders are not required to take any action in response to this
Notice.
I. SUMMARY OF THE ACTIONS
On June 4, 2014, Plaintiff Robert Black filed a shareholder derivative action captioned
Black v. Cliffs Natural Resources Inc., et al., Case No. CV-14-827803 (the “Black Action”), in
the Court of Common Pleas of Cuyahoga County, Ohio. The Complaint alleged, among other
things, that the Individual Defendants had breached their fiduciary duties in connection with
management and oversight of the Bloom Lake mine facility and the handling of the Company’s
dividend, (including allegedly false and misleading statements on these subjects during 2012 and
NAI-1500870526v7 4
2013), and also in connection with pay practices upon the departure of certain executives during
that period. A second shareholder derivative action, Asmussen, et al. v. Cliffs Natural Resources
Inc., et al., Case No. CV-14-829259 (the “Asmussen Action”), was filed on July 2, 2014, and
included allegations similar to those in the Black Action. A third shareholder derivative action,
Williams v. Cliffs Natural Resources, Inc., et al., Case No. CV-14-829499, (the “Williams
Action”), was filed on July 9, 2014, and asserted allegations similar to those in the Black and the
Asmussen Actions.
Pursuant to Court orders dated August 11, 2014, and September 12, 2014, the Asmussen
Action and the Williams Action were transferred for consolidation with the Black Action.
Pursuant to the Parties’ stipulations and subsequent court orders (the “Stipulated Orders”), the
Parties agreed to stay the Actions pending disposition of a motion to dismiss in one of the then-
pending federal securities law class actions (collectively, the “Securities Actions”): (i) The
Department of the Treasury of the State of New Jersey and its Division of Investment, et al. v.
Cliffs Natural Resources Inc. et al., No. 1:14-cv-01031, United States District Court for the
Northern District of Ohio (Judge Dan Aaron Polster) (the “New Jersey Action”); and (ii) Stuart
Rosenberg, et al. v. Cliffs Natural Resources Inc., et al., No. CV-14-828140, Court of Common
Pleas of Cuyahoga County, Ohio (Judge Shannon M. Gallagher) (the “Rosenberg Action”).
During the stay of the Actions and in accordance with the Stipulated Orders, the Parties
filed several joint status reports with the Court describing the status of the Securities Actions.
The Parties continued the stay of the Actions until the Rosenberg Action reached a settlement in
principle.
On December 17, 2015, the Court entered an order granting the unopposed motion to lift
the stay of the consolidated Actions for the limited purpose of appointing Co-Lead Plaintiffs and
NAI-1500870526v7 5
Co-Lead Plaintiffs’ selection of counsel. Pursuant to that order, Plaintiffs George Asmussen and
Jeff Asmussen were appointed Co-Lead Plaintiffs; The Shuman Law Firm was appointed Lead
Counsel for Co-Lead Plaintiffs; and Weisman, Kennedy & Barris Co., L.P.A. was appointed
Liaison Counsel for Co-Lead Plaintiffs.
In August 2015, the Parties began a dialogue regarding the possible resolution of the
Actions. On August 6, 2015, and December 11, 2015, counsel for Plaintiffs in the Black Action
and the Asmussen Action, respectively, sent settlement demands to Defendants’ Counsel. Key
components of the demands included a requirement that Cliffs adopt corporate governance
reforms and that any amounts that might be paid into a settlement fund for the New Jersey
Action be contributed only by non-Company sources such as applicable insurance carriers up to
exhaustion of policy limits. The demands took into account Cliffs’ existing governance policies
and procedures and were specifically targeted to address and prevent a recurrence of the alleged
wrongdoing that is the subject of the Actions, and also to limit the financial impact of the New
Jersey Action on the Company.
Over the next several months, the two sides exchanged information and, through their
counsel, had numerous discussions presenting and arguing their respective positions as well as
prospects and terms for a possible settlement. These discussions eventually resulted in the
agreement in principle to resolve, discharge, and settle the Actions, including without limitation
all claims raised in the Actions, on the terms and conditions set forth in the Stipulation. The
lengthy negotiations were conducted in good faith, at arm's-length and were hard-fought by
experienced counsel. During the negotiations, all Parties had a clear view of the strengths and
weaknesses of their respective claims and defenses. Entry into the Stipulation is not an
admission by any Party as to the merit or lack of merit of any claims or defenses.
NAI-1500870526v7 6
During the period of negotiation, the New Jersey Action was settled in principle, with the
payment into the settlement fund to be delivered solely by insurance carriers.
As part of the settlement negotiations, Plaintiffs undertook discovery to confirm that the
proposed terms of the Settlement are fair, reasonable and adequate. In particular, Cliffs
produced to Plaintiffs substantial sets of documents, many of which were board-level
confidential materials, which were examined by Plaintiffs’ Counsel.
Plaintiffs, Plaintiffs’ Counsel, Cliffs and its counsel believe that the proposed Settlement
is in the best interests of Cliffs and its shareholders
II. TERMS OF THE SETTLEMENT
The terms and conditions of the proposed Settlement are set forth in the Stipulation. The
following is a summary of its terms. The summary should be read in conjunction with, and is
qualified in its entirely by reference to, the text of the Stipulation, which has been filed with the
Court and is also available for viewing on Cliffs’ website via link at
http://ir.cliffsnaturalresources.com and on the website of Plaintiffs’ Lead Counsel at
www.shumanlawfirm.com.
As part of the Settlement of the Actions, Cliffs has agreed to adopt and implement
corporate certain governance measures (the “Reforms”) substantially as set forth in the
Stipulation within ninety days after the Effective Date of the Settlement, to be maintained for a
period of not less than three years from the day they are implemented, unless (but only to the
extent) otherwise required by law. The Board, acting by a majority of its non-management
members, may alter or amend its compliance with any of the Reforms during the three year
period, if it concludes that doing so is required by its fiduciary duties, or that continued
compliance would conflict with applicable law or amendments to the corporate regulations
approved by the shareholders. If such alteration or amendment is made, the Company must,
NAI-1500870526v7 7
within no more than 30 days after the alteration or amendment becomes effective, advise Lead
Plaintiffs’ Counsel thereof in writing, and state the reasons for the alteration or amendment.
Plaintiffs, Plaintiffs’ Counsel and Cliffs agree that the Reforms confer a substantial and material
benefit on Cliffs and its shareholders, and the Parties acknowledge and agree that the adoption
and implementation of the Reforms is the result of the initiation, prosecution, and settlement of
the Actions. In addition, the nature of the settlement funding of the New Jersey Action - -
exclusively from applicable directors’ and officers’ (“D&O”) policies - - is consistent with Cliffs’
stated position in the settlement negotiations in these Actions that it would make all reasonable,
good faith efforts to secure funding by applicable insurance carriers for any such settlement,
which in turn had been elicited by Plaintiffs’ demand in these Actions on the funding issue.
The Board, exercising its independent business judgment, believes that the Settlement
and the Reforms are in the best interests of Cliffs and its shareholders.
The Reforms are set out in an attachment at the end of this Notice.
III. DISMISSALS AND RELEASES
The Settlement is conditioned, among other things, upon entry of an order by the Court
approving the Settlement and dismissing the Actions on the merits with prejudice.
1. The Stipulation provides that, as of the date when the Court has entered the
Judgment, the Judgment has become Final, and the Cliffs Board has approved the Settlement and
each of its terms as in the best interest of Cliffs and its shareholders (the “Effective Date”), all
Plaintiffs (acting on their own behalf and derivatively on behalf of Cliffs), Cliffs, and each of
Cliffs’ shareholders (solely in their capacity as Cliffs Shareholders) shall be deemed to have, and
by operation of the Judgment shall have, fully, finally, and forever settled, released, relinquished,
extinguished, dismissed with prejudice, and discharged completely each and all of the Individual
Defendants, and each and all the Individual Defendants’ respective present or former successors,
NAI-1500870526v7 8
heirs, executives, employees, agents, insurers, reinsurers, attorneys, advisors, associates,
representatives, executors, personal representatives, estates, administrators, assigns, spouses and
other members of any Individual Defendant’s immediate family, any entity in which any
Individual Defendant or member of any Individual Defendant’s immediate family has or had a
controlling interest (directly or indirectly), and any trust of which any Individual Defendant is
the settlor or which is for the benefit of any Individual Defendant and/or member(s) of his or her
family (“Released Persons”) from any and all claims for relief, suits, debts, demands, rights,
actions or causes of action, liabilities, damages, losses, obligations, judgments, fees, expenses,
costs, matters, and issues and actions or causes of action of every nature and description
whatsoever, whether known or unknown (including Unknown Claims as defined in ¶ 1.26 of the
Stipulation), contingent or absolute, suspected or unsuspected, disclosed or undisclosed, matured
or unmatured, discoverable or undiscoverable, whether or not concealed or hidden, for damages,
injunctive relief, or any other remedy, that have been, or could or might have been, or in the
future can or might be asserted by Plaintiffs, Cliffs, and/or any Cliffs shareholder derivatively on
behalf of Cliffs against any Released Persons that are based upon, refer to, arise out of concern,
or are directly or indirectly related to (i) the claims and allegations contained in the Actions, (ii)
any of the facts, transactions, events, occurrences, acts, disclosures, statements, omissions or
failures to act that were alleged or that could have been alleged in the Actions; or (iii) the
settlement of the Actions, including the payment provided for in this Stipulation, and the
reasonable attorneys’ fees, costs, and expenses incurred in defense of the Actions (Released
Claims”). Notwithstanding the foregoing, the Released Claims do not include (i) any claims
based on any conduct of the Released Persons after April __, 2016 or (ii) and direct claims
belonging to Cliffs shareholders, including without limitation, any claims arising under the
NAI-1500870526v7 9
federal securities laws. Notwithstanding the foregoing, Released Claims shall not include claims
to enforce the terms of the Stipulation or the Settlement. In addition, nothing set forth in the
Stipulation or in the Judgment shall constitute a release by any Defendant of any insurer,
reinsurer, or any other entity contracted or otherwise obligated to provide insurance or
indemnification to any of the Released Persons of any claim arising out of the rights, remedies,
duties or obligations provided for in any insurance policy or agreement. Nothing set forth in the
Stipulation or the Judgment shall constitute a release by or among the Company and the
Individual Defendants or Released Persons of any rights or obligations relating to
indemnification or advancement of defense costs, whether arising from the Company’s
certificate of incorporation or code of regulations, Ohio law, or any agreement pertaining to
indemnification or advancement of defense costs. Co-Lead Plaintiffs (individually and
derivatively on behalf of Cliffs) and each of Cliffs’ shareholders (solely in their capacity as
Cliffs shareholders) shall be deemed to have, and by operation of the Judgment shall have,
covenanted not to sue the Released Persons with respect to the Released Claims, and shall be
permanently barred and enjoined from instituting, commencing, or prosecuting the Released
Claims against the Released Persons.
2. The releases granted shall be effective as a bar to any or all claims that were
alleged or that could or might have been alleged in the Actions by the Plaintiffs, Cliffs, or any
Cliffs shareholder derivatively on behalf of Cliffs, which any Plaintiff, Cliffs, or Cliffs
shareholder does not know or suspect to exist in his, her, or its favor at the time of the release of
the Released Persons, including claims which, if known by him, her, or it, might have affected
his, her or its settlement with and release of the Released Persons, or might have affected his, her
or its decision not to object to this Settlement (the “Unknown Claims”). With respect to any and
NAI-1500870526v7 10
all Released Claims, the Parties stipulate and agree that, upon the Effective Date, Plaintiffs, the
Individual Defendants, and Cliffs shall expressly waive and relinquish, and each of Cliffs’
shareholders shall be deemed to have, and by operation of the Judgment shall have, expressly
waived and relinquished, to the fullest extent permitted by law, any and all provisions, rights,
and benefits conferred by any law of the United States or of any state or territory of the United
States, or principle of common law, which governs or limits a Person’s release of Unknown
Claims, including the provisions, rights and benefits of California Civil Code §1542, which
provides:
A general release does not extend to claims which the creditor does not know or suspect to exist in his or her favor at the time of executing the release, which if known by him or her must have materially affected his or her settlement with the debtor.
and/or conferred by any law of the United States or of any state or territory of the United States,
or principle of common law or of international or foreign law, that is similar, comparable, or
equivalent in effect to California Civil Code §1542. It is understood that Plaintiffs, Cliffs, or any
of Cliffs’ shareholders may hereafter discover facts in addition to or different from those that he,
she, or it now knows or believes to be true with respect to the subject matter of the Released
Claims (including Unknown Claims), but Plaintiffs and Cliffs shall expressly fully, finally, and
forever discharge, settle, and release with prejudice, and each of Cliffs’ shareholders, upon the
Effective Date, shall be deemed to have, and by operation of the Judgment shall have fully,
finally, and forever discharged, settled and released with prejudice, any and all Released Claims
(including Unknown Claims), known or unknown, suspected or unsuspected, contingent or
noncontingent, whether or not concealed or hidden, that now exist, or heretofore have existed
upon any theory of law or equity now existing or coming into existence in the future, including,
but not limited to, conduct which is negligent, grossly negligent, reckless, intentional, with or
NAI-1500870526v7 11
without malice, or a breach of any duty, law or rule, without regard to the subsequent discovery
or existence of such different or additional facts. Plaintiffs and Cliffs acknowledge, and Cliffs’
shareholders shall be deemed by operation of the Judgment to have acknowledged, that the
foregoing waiver was separately bargained for and is a key element of the Settlement of which
this release is a part.
Upon the Effective Date, each of the Defendants shall be deemed to have, and by
operation of the Judgment shall have, fully, finally, and forever settled, released, relinquished,
extinguished, dismissed with prejudice, and discharged completely, individually, and collectively
each and all of the Plaintiffs and Plaintiffs' Counsel from all claims (including Unknown Claims)
based upon or arising out of the prosecution, assertion, settlement or resolution of the Actions or
the Released Claims; provided, however, that such release shall not include claims to enforce the
terms of the Stipulation or the Settlement and/or the Judgment entered pursuant thereto.
By order of the Court (a) all proceedings in the Actions, other than those relating to the
settlement itself, have been stayed and suspended until further order of the Court; and (b)
pending the Court’s determination as to final approval of the Settlement, Plaintiffs and all other
Cliffs shareholders are barred and enjoined from commencing, prosecuting, instigating, or in any
way participating in the commencement or prosecution of any action asserting any Released
Claim against any Released Person.
IV. PLAINTIFFS’ CLAIMS AND BENEFITS OF THE SETTLEMENT
Plaintiffs and Plaintiffs’ Counsel believe that the claims asserted in the Actions have
merit and that their investigation supports the claims asserted. Without conceding the merit of
any of Defendants’ defenses or the lack of merit of any of their own allegations, and solely in
order to avoid the potentially protracted time, expense, and uncertainty associated with continued
litigation, including a potential trial and appeal, Plaintiffs and Plaintiffs’ Counsel concluded that
NAI-1500870526v7 12
it is desirable that the Actions be fully and finally settled in the manner and upon the terms and
conditions set forth in the Stipulation. Plaintiffs and Plaintiffs’ Counsel recognize the significant
risk, expense, and length of continued proceedings necessary to prosecute the Actions against the
Individual Defendants through trial and possible appeal. Plaintiffs’ Counsel also have taken into
account the uncertain outcome and the risks of any litigation, especially in complex cases such as
the Actions (which are governed by Ohio law and are subject to the protections that law provides
for activities and judgments of corporate directors and officers), as well as the difficulties and
delays inherent in such complex litigation generally. Plaintiffs and Plaintiffs’ Counsel are also
mindful of the inherent problems of proof and possible defenses to the claims asserted in the
Actions. Plaintiffs and Plaintiffs’ Counsel believe that the Settlement set forth in the Stipulation
confers substantial benefits on the Company. Based on their evaluation and expertise in the area
of complex stockholder litigation, Plaintiffs and Plaintiffs’ Counsel have determined that the
Settlement is fair, reasonable, and adequate and is in the best interests of Cliffs and its
shareholders, and have agreed to settle the Actions upon the terms and subject to the conditions
set forth in the Stipulation.
V. DEFENDANTS’ DENIAL OF WRONGDOING AND LIABILITY
Defendants have denied, and continue to deny, all allegations of wrongdoing, fault,
liability and/or damage to the Company. Defendants deny that they engaged in or aided and
abetted any wrongdoing or violation of the law; deny that they breached any fiduciary duty,
including the duty of care or duty of loyalty; deny that they engaged in any of the wrongful acts
alleged in the Actions; and deny that they acted in bad faith or improperly in any way.
Defendants maintain that they complied with all fiduciary and other legal duties. Defendants
believe that all Plaintiffs have failed to meet their burden of pleading with particularity that
demand was excused. Nonetheless, Defendants are agreeing to the terms and conditions set forth
NAI-1500870526v7 13
in the Stipulation solely because they contend and believe the proposed Settlement would
eliminate the burden, risk, and expense of further litigation. Defendants have determined that it
is desirable and beneficial to them that the claims asserted in the Actions be fully and finally
settled and terminated in the manner and upon the terms and conditions set forth in the
Stipulation. Defendants have also taken into account the uncertainty, burden, expense, and risks
inherent in any litigation, especially in complex cases like the Actions, and are entering into the
Stipulation because the Settlement would eliminate the uncertainty, burden, expense and risk of
further litigation, and as to Nominal Defendant Cliffs, because the Settlement provides
substantial benefits to, and is in the best interests of, Cliffs and its shareholders.
VI. PLAINTIFFS’ COUNSEL’ S ATTORNEYS’ FEES AND REIMBURSEMENT OF EXPENSES
After completing negotiations of the material, substantive terms of the Settlement,
Counsel undertook arm’s-length negotiations regarding attorneys' fees and reimbursement of
expenses to be paid to Plaintiffs' Counsel for the benefits conferred upon the Company and its
shareholders as a part of the Settlement. As a result of those negotiations, the Individual
Defendants’ D&O insurers have agreed to pay to Plaintiffs’ Lead Counsel (who will, in turn,
allocate it among all Plaintiffs’ Counsel) a fee and expense award in the amount of $775,000,
subject to Court approval (the “Fee and Expense Award”). The Fee and Expense Award
includes fees and expenses incurred by Plaintiffs’ Counsel in connection with the initiation,
prosecution and settlement of the Actions. To date, Plaintiffs’ Counsel have not received any
payments for their efforts on behalf of Cliffs shareholders, nor have Plaintiffs’ Counsel been
reimbursed for their out-of-pocket litigation expenses. The Fee and Expense Award will
compensate Plaintiffs’ Counsel for the substantial benefits achieved in the Actions, and the risks
of undertaking the prosecution of the Actions on a contingent basis. Plaintiffs’ Counsel will also
NAI-1500870526v7 14
seek Court approval for the payment to Co-Lead Plaintiffs of a Service Award in the amount of
$3,500 each. Any Court–approved Service Award and Service Awards will be funded solely
from the Fee and Expense Award.
Any award of attorneys’ fees or expenses and any Service Awards are separate and apart
from and are not conditions to the Settlement embodied in the Stipulation or the Judgment. No
order or proceeding concerning any fee and expense application or award or any Service
Awards, or any modification or reversal on appeal of any fee and expense award or Service
Awards, shall constitute grounds for cancellation or termination of the Settlement by any Party
or shall otherwise affect the validity or effectiveness of the Settlement.
VII. THE SETTLEMENT HEARING
On ____ ___ 2016, at ____ __.m., the Court will hold the Settlement Hearing before the
Honorable Richard J. McMonagle, Cuyahoga County Court of Common Pleas, Old Courthouse,
One W. Lakeside Ave., Courtroom 2A, Third Floor, Cleveland, OH 44113. At the Settlement
Hearing, the Court will determine: (i) whether the Settlement of the Actions on the terms and
conditions provided for in the Stipulation is fair, reasonable, and adequate and in the best
interests of Cliffs and its shareholders and should be finally approved by the Court; (ii) whether a
Judgment as provided in, and attached as Exhibit C to, the Stipulation, dismissing the Actions on
the merits and with prejudice, granting the releases described more fully above, and permanently
barring and enjoining Plaintiffs (acting on their own behalf or derivatively on behalf of Cliffs),
Cliffs, and each of Cliffs’ shareholders from instituting, commencing, or prosecuting any of the
Released Claims against the Released Persons should be entered; (iii) whether the Fee and
Expense Award and the Service Awards should be approved; and (iv) such other matters as may
be necessary or proper in the circumstances. In the event that the Court does not enter the
Judgment approving the Settlement for any reason whatsoever, or if that Judgment is modified,
NAI-1500870526v7 15
vacated, or reversed on appeal, then the Settlement shall be null and void. The full and complete
description of the terms and conditions of the Settlement may be found in the Stipulation, which
is on file with the Court.
VIII. RIGHT TO OBJECT TO THE SETTLEMENT AND PROCEDURES FOR DOING SO
You have the right to object to any aspect of the Settlement, the Fee and Expense Award,
and/or the Service Awards. If you wish to object or otherwise contest the Settlement, you must
do so in writing, and you may also request to be heard at the Settlement Hearing. If you choose
to object, then you must file with the Clerk of Courts at least fourteen calendar days before the
Settlement Hearing a written notice of objection to the Settlement, the Fee and Expense Award,
and/or the Service Awards setting forth:
(a) your name, address and telephone number;
(b) proof of current ownership of Cliffs common stock, including the date of
purchase;
(c) the nature and grounds for your objections as to any matters before the
Court and any supporting facts and arguments;
(d) all documents or writings you desire the Court to consider in connection
with the objection; and
(e) a list of all cases in which you and/or your counsel has filed an objection
to a settlement of a shareholder class or derivative action in the last three
years, identifying the name of the case, jurisdiction, and docket number.
IX. RIGHT TO ATTEND THE SETTLEMENT HEARING AND RELATED PROCEDURES
If, in addition to submitting a written objection, you wish to appear in person and be
heard at the Settlement Hearing, you must, in addition to meeting the requirements above for an
NAI-1500870526v7 16
objection, file with the Clerk of Courts, at the same time you file the objection, a written
statement setting forth:
(a) your intention to appear;
(b) the basis for the appearance; and
(c) the identities of any witnesses you intend to call at the Settlement Hearing
and the subjects of their testimony.
If you file a written objection and/or written notice of intent to appear, you must also
serve upon counsel for each of the Parties as set forth below (either by hand delivery or by first
class mail) copies of such notice, proof, statements, documentation and any other papers or briefs
you file with the Court, for receipt by counsel at least fourteen calendar days before the
Settlement Hearing.
The addresses for filing objections and notices of appearance with the Court and service
on counsel are as follows:
Clerk of Courts Court of Common Pleas
The Justice Center 1200 Ontario Street
Cleveland, Ohio 44113
Kip B. Shuman E-mail: [email protected] THE SHUMAN LAW FIRM One Montgomery St., Suite 1800 San Francisco, CA 94104 Telephone: (303) 861-3003 Facsimile: (303) 484-4886 Lead Counsel for Plaintiffs
John M. Newman, Jr. E-mail: [email protected] JONES DAY North Point 901 Lakeside Avenue Cleveland, Ohio 44114-2309 Telephone: (216) 586-3939 Facsimile: (216) 579-0212 Attorneys for Defendants Joseph A. Carrabba, Laurie M. Brlas, Terrance M. Paradie and David Blake
NAI-1500870526v7 17
Joseph A. Castrodale E-mail: [email protected] BENESCH, FRIEDLANDER, COPLAN, & ARONOFF LLP 200 Public Square, Suite 2300 Cleveland, OH 44114-2378 Telephone: (216) 363-4500 Facsimile: (216) 363-4588 Attorneys for Nominal Defendant Cliffs Natural Resources Inc.
Rachelle Silverberg E-mail: [email protected] WACHTELL, LIPTON, ROSEN & KATZ 51 West 52nd Street New York, NY 10019 Telephone: (212) 403-1000 Facsimile: (212) 403-2000 Attorneys for Defendants Gary B. Halverson, Susan M. Cunningham, Janice K. Henry, Barry J. Eldridge, Mark E. Gaumond, Andres R. Gluski, Susan M. Green, James F. Kirsch, Stephen M. Johnson, Richard K. Riederer, and Timothy W. Sullivan
Any Cliffs shareholder who fails to object in the above-prescribed manner and within the
time prescribed to the Settlement and/or Fee and Expense Award and/or Service Awards shall be
deemed to have waived such objection or challenge (including any right to appeal) and shall
forever be foreclosed from making any such objection in this or any other action or proceeding,
including any objection to the fairness, reasonableness, or adequacy of the proposed Settlement
as set forth in the Stipulation, but shall otherwise be bound by the Judgment to be entered and the
releases to be given.
The Court has the right to change the hearing dates or times without further notice other
than to counsel for the Parties and by posting an entry on the docket. Thus, if you are planning
to attend the Settlement Hearing, you should confirm the date and time before going to the Court.
CLIFFS SHAREHOLDERS WHO HAVE NO OBJECTION TO THE SETTLEMENT OR FEE
AND EXPENSE AWARD OR SERVICE AWARDS DO NOT NEED TO APPEAR AT THE
SETTLEMENT HEARING OR TAKE ANY OTHER ACTION.
X. HOW TO OBTAIN ADDITIONAL INFORMATION
This Notice summarizes the Parties’ Stipulation. It is not a comprehensive statement of
the events of the Actions, the pleadings in the Action, the Stipulation, or other papers and
NAI-1500870526v7 18
proceedings. For the full details of the Actions, the claims that have been asserted, and the terms
and conditions of the Settlement, you may refer to the Stipulation and the other papers on file
with the Court in the Actions. You or your attorney may examine the Court’s files during
regular business hours each business day at the office of the Cuyahoga County Clerk of Courts,
1st Floor Justice Center, 1200 Ontario Street, Cleveland, OH 44113. Although the Parties
believe that the descriptions about the Settlement that are contained in this Notice are accurate in
all material respects, in the event of any inconsistencies between the descriptions in this Notice
and the Stipulation, the Stipulation will control. You may view the Stipulation On Cliffs’
website via link at http://ir.cliffsnaturalresources.com and on Lead Plaintiffs’ Counsel’s firm
website at www.shumanlawfirm.com.
PLEASE DO NOT CALL, WRITE, OR OTHERWISE DIRECT QUESTIONS TO
EITHER THE COURT, THE CLERK’S OFFICE, OR DEFENDANTS’ COUNSEL. Any
questions you have about matters in this Notice should be directed by telephone or in writing to
Plaintiffs’ Lead Counsel, Kip Shuman, at the address set forth above.
X. NOTICE TO PERSONS OR ENTITIES HOLDING OWNERSHIP ON BEHALF OF OTHERS
Brokerage firms, banks and/or other persons or entities who held shares of Cliffs
common stock for the benefit of others are requested to immediately send this Notice to all of
their respective beneficial owners. If Cliffs shareholders have questions or comments about
the Settlement, they should follow the procedures listed above.
Dated:
By Order of the Court of Common Pleas Cuyahoga County, Ohio
Exhibit B-2
NAI-1500870530v7
IN THE COURT OF COMMON PLEAS CUYAHOGA COUNTY, OHIO
IN RE CLIFFS NATURAL RESOURCES INC. SHAREHOLDER DERIVATIVE LITIGATION
) ) ) ) ) ) )
Lead Case No. CV-14-827803 (Consolidated with Case No. CV-14-829259 and Case No. CV-14-829499) Judge Richard J. McMonagle
SUMMARY NOTICE OF PENDENCY AND PROPOSED SETTLEMENT OF
SHAREHOLDER DERIVATIVE ACTIONS
TO: ALL OWNERS OF CLIFFS NATURAL RESOURCES, INC. (“CLIFFS” OR THE “COMPANY) COMMON STOCK AS OF APRIL 20, 2016
YOU ARE HEREBY NOTIFIED that the Parties1 to the above-captioned consolidated
shareholder derivative actions (the “Actions”) have entered into a Stipulation and Agreement of
Settlement (the “Stipulation”) dated April 20, 2016 to fully, finally, and forever settle the claims
brought in the Actions on behalf of and for the benefit of Cliffs Natural Resources Inc. (“Cliffs”
or the “Company”). If you are a Cliffs Shareholder as of April __, 2016, your right to pursue
certain derivative claims on behalf of Cliffs against its current and former directors and officers
may be affected by the Settlement.
PLEASE BE FURTHER ADVISED that pursuant to an Order of the Court of Common
Pleas, Cuyahoga County, Ohio (the “Court”), a hearing will be held on ___________, 2016 at
__:__ _.m., Eastern time, before the Honorable Richard J. McMonagle, Cuyahoga County Court
of Common Pleas, Old Courthouse, One W. Lakeside Ave., Courtroom 2A, Third Floor,
Cleveland, Ohio 44113, for the purpose of determining: (i) whether the Settlement of the Actions
1 Unless otherwise defined, all capitalized terms herein have the same meaning as set
forth in the Stipulation.
NAI-1500870530v7 2
on the terms and conditions provided for in the Stipulation is fair, reasonable, and adequate and
in the best interests of Cliffs and its shareholders and should be finally approved by the Court;
(ii) whether a Judgment as provided in, and attached as Exhibit C to, the Stipulation, dismissing
the Actions on the merits with prejudice should be entered; (iii) whether the Fee and Expense
Award and Service Awards (as described below) should be approved; and (iv) such other matters
as may be necessary or proper in the circumstances (the “Settlement Hearing”).
The Actions and Settlement address claims alleging, among other things, that the
Individual Defendants breached their fiduciary duties in connection with management and
oversight of the Bloom Lake mine facility and the handling of the Company’s dividend
(including allegedly false and misleading statements on these subjects during 2012 and 2013),
and also in connection with pay practices upon the departure of certain executives during that
period.
As part of the Settlement, Cliffs has committed to maintain, or has made or agreed to
make changes to, certain corporate governance practices, policies and procedures that include,
among other things: (a) increased oversight responsibilities and other duties for the Audit
Committee, including with respect to the Company’s annual operating and capital expenditure
functions; (b) enhanced reporting responsibilities for both the Company’s Chief Financial
Officer and Chief Legal Officer to the Audit Committee; (c) limits and procedures on non-Cliffs
time commitments for current directors at other public companies; (d) annual director education;
(e) certain annual employee communications regarding the Company’s Code of Business
Conduct and Ethics; (f) presumptive 12-year term limits for “outside” directors; (g) limitations
on the ability of directors to sell Company stock in certain situations; and (h) the drafting,
adoption and website posting of a comprehensive charter for the Board’s Strategy Committee.
NAI-1500870530v7 3
Plaintiffs, Plaintiff’s Counsel and Cliffs acknowledge and agree that the Reforms confer a
substantial and material benefit on Cliffs and its shareholders, and the Parties acknowledge and
agree that the adoption and implementation of the Reforms is the result of the initiation,
prosecution, and settlement of the Actions. In addition, the Board, exercising its independent
business judgment, believes that the Settlement and the Reforms are in the best interests of Cliffs
and its shareholders.
After conclusion of negotiations for the material, substantive terms of the Settlement,
counsel separately negotiated at arm’s length the amount of attorneys’ fees and expenses to be
awarded by the Court to Plaintiffs’ Counsel. In recognition of the substantial benefits conferred
upon Cliffs and its shareholders, and subject to Court approval, the Individual Defendants’
directors’ and officers’ `insurers have agreed to pay to Plaintiffs’ Counsel an agreed-to fee and
expense award of $775,000 (the “Fee and Expense Award”). Lead Plaintiffs’ Counsel will also
apply for Service Awards in the amount of $3,500 to be paid to Co-Lead Plaintiffs out of the Fee
and Expense Award.
A detailed Notice describing in greater detail the Actions, the proposed Settlement, the
Fee and Expense Award and Service Awards and the rights of Cliffs shareholders with regard to
the Settlement, the Fee and Expense Award and the Service Awards has been filed with the
Court and may be viewed along with a copy of the Stipulation on Cliffs’ website via link at
http://ir.cliffsnaturalresources.com and on Lead Plaintiffs’ counsel’s firm website at
www.shumanlawfirm.com. In addition, a copy of the Notice and of the Stipulation has been
filed by Cliffs with the U.S. Securities & Exchange Commission via a Current Report on Form
8-K.
NAI-1500870530v7 4
Any Cliffs shareholder has the right to object to any aspect of the Settlement and/or Fee
and Expense Award and/or Service Awards. If you wish to object, you must do so in writing, and
you may also request to be heard at the Settlement Hearing. If you choose to object, then you
must file with the Clerk of Courts on or before fourteen calendar days before the Settlement
Hearing, a written objection to the Settlement and/or Fee and Expense Award and/or Service
Awards, setting forth:
(a) your name, address and telephone number;
(b) proof of current ownership of Cliffs common stock, including the date of
purchase;
(c) the nature and grounds for your objections as to any matters before the
Court and any supporting facts and arguments;
(d) all documents or writings you desire the Court to consider in connection
with your objection; and
(e) a list of all cases in which you and/or your counsel has filed an objection
to settlement of a shareholder class or derivative action in the last three
years, identifying the name of the case, jurisdiction, and docket number.
If, in addition to submitting a written objection, you wish to appear in person and
be heard at the Settlement Hearing, you must, in addition to meeting the requirements
above for an objection, file with the Clerk of Courts, at the same time you file the
objection, a written statement setting forth:
(a) your intention to appear;
(b) the basis for the appearance; and
NAI-1500870530v7 5
(c) the identities of any witnesses you intend to call at the Settlement Hearing
and the subjects of their testimony.
If you file a written objection and/or written notice of intent to appear, must also serve
upon counsel for each of the Parties (either by hand delivery or by first class mail) copies of such
notice, proof, statement, documentation and any other papers or briefs that you file with the
Court, for receipt by counsel at least fourteen calendar days before the Settlement Hearing.
The addresses for filing objections and notices of appearance with the Court and service
on counsel are as follows:
Clerk of Courts Court of Common Pleas
The Justice Center 1200 Ontario Street
Cleveland, Ohio 44113
Kip B. Shuman E-mail: [email protected] THE SHUMAN LAW FIRM One Montgomery St., Suite 1800 San Francisco, CA 94101 Telephone: (303) 861-3003 Facsimile: (303) 484-4886 Lead Counsel for Plaintiffs
John M. Newman, Jr E-mail: [email protected] JONES DAY North Point 901 Lakeside Avenue Cleveland, Ohio 44114-2309 Telephone: (216) 586-3939 Facsimile: (216) 579-0212 Attorneys for Defendants Joseph A. Carrabba, Laurie M. Brlas, Terrance M. Paradie and David Blake
NAI-1500870530v7 6
Joseph A. Castrodale E-mail: [email protected] BENESCH, FRIEDLANDER, COPLAN, & ARONOFF LLP 200 Public Square, Suite 2300 Cleveland, OH 44114-2378 Telephone: (216) 363-4500 Facsimile: (216) 363-4588 Attorneys for Nominal Defendant Cliffs Natural Resources Inc.
Rachelle Silverberg E-mail: [email protected] WACHTELL, LIPTON, ROSEN & KATZ 51 West 52nd Street New York, NY 10019 Telephone: (212) 403-1000 Facsimile: (212) 403-2000 Attorneys for Defendants Gary B. Halverson, Susan M. Cunningham, Janice K. Henry, Barry J. Eldridge, Mark E. Gaumond, Andres R. Gluski, Susan M. Green, James F. Kirsch, Stephen M. Johnson, Richard K. Riederer, and Timothy W. Sullivan
Any Cliffs shareholder who does not timely submit his, her, or its objection to the
Settlement and/or Fee and Expense Award and/or the Service Awards shall be deemed to have
waived such objection and shall forever be foreclosed from making any objection to the fairness,
reasonableness, or adequacy of the Settlement or any aspect of it, and shall otherwise be bound
by the Judgment to be entered and the releases given.
PLEASE DO NOT TELEPHONE THE COURT, CLIFFS OR ANY DEFENDANT’S COUNSEL REGARDING THIS NOTICE.
Exhibit C
NAI-1500870532v6
IN THE COURT OF COMMON PLEAS CUYAHOGA COUNTY, OHIO
IN RE CLIFFS NATURAL RESOURCES, INC. SHAREHOLDER DERIVATIVE LITIGATION
) ) ) ) ) ) )
Lead Case No. CV-14-827803 (Consolidated with Case No. CV-14-829259 and Case No. CV-14-829499) Judge Richard J. McMonagle
[PROPOSED] FINAL JUDGMENT AND ORDER OF DISMISSAL WITH PREJUDICE
1. Pursuant to the Preliminary Approval Order entered on _______ ___, 2016, this
Court scheduled a Settlement Hearing for _______ ___, 2016, at _____ _.m. to determine, inter
alia: (i) whether the Settlement of the Actions on the terms and conditions provided for in the
Stipulation is fair, reasonable, and adequate and in the best interests of Cliffs and its
shareholders and should be finally approved by the Court; (ii) whether a Judgment as provided
in the Stipulation dismissing the Actions with prejudice should be entered; (iii) whether the Fee
and Expense Award and the Service Awards should be approved; and (iv) such other matters as
may be necessary or proper in the circumstances.
2. The Court has received affidavit(s) and/or declaration(s) attesting to compliance
with the terms of the Preliminary Approval Order, including the Company’s filing of a copy of
the Notice with the U.S. Securities and Exchange Commission via a current report on Form 8-
K and its posting of the Notice and Stipulation to the Company’s website; the Shuman Law
Firm’s posting of the Notice and Stipulation to its website; and the Company’s publishing of
the Summary Notice once in Investor’s Business Daily.
3. Due to adequate notice having been given to Cliffs shareholders as required by
the Preliminary Approval Order, and the Court having held a Settlement Hearing on ____ __,
NAI-1500870532v6 2
2016, and the Court having considered all papers filed and proceedings held in the Actions and
otherwise being fully informed of the matters herein and good cause appearing.
NOW THEREFORE, IT IS HEREBY ORDERED, ADJUDGED, AND
DECREED:
1. The provisions of the Stipulation, including definitions of the terms used
therein, are hereby incorporated by reference as though fully set forth herein. All capitalized
terms used herein have the meanings set forth in the Stipulation.
2. This Court has jurisdiction over the subject matter of the Actions, including all
matters necessary to effectuate the Settlement, and over all parties to the Actions, including
Plaintiffs, Cliffs shareholders, Cliffs and the Individual Defendants.
3. This Court finds that the posting and filing of the Notice and publishing of the
Summary Notice, which was implemented in accordance with the terms of the Stipulation and
the Court’s Preliminary Approval Order:
(a) Constituted the best practicable notice to Cliffs shareholders under the
circumstances of the Actions;
(b) Was reasonably calculated, under the circumstances, to apprise Cliffs
shareholders of: (i) the Settlement of the Actions and the terms of the Settlement; (ii)
the Fee and Expense Award to Plaintiffs’ Counsel; (iii) the Service Awards to Co-Lead
Plaintiffs; (iv) the right of Cliffs shareholders to object and the procedures to object to
any aspect of the Settlement, including the Fee and Expense Award and/or the Service
Awards; (iv) the shareholders’ right to appear at the Settlement Hearing; and (v) the
binding effect of the proceedings, rulings, orders, and judgments in the Actions,
whether favorable or unfavorable; and
NAI-1500870532v6 3
(c) Was reasonable and constituted due, adequate, and sufficient notice to all
persons entitled to be provided with notice and fully satisfied applicable law, and the
requirements of due process and complied with the rules governing this Court,
including Ohio Rule of Civil Procedure 23.1.
4. The terms and provisions of the Stipulation were negotiated by the parties at
arm’s length and were entered into by the Parties in good faith.
5. The Court finds that the Settlement set forth in the Stipulation provides
substantial benefits to Cliffs and is fair, reasonable, adequate, and in the best interests of Cliffs
and its shareholders, taking into account, inter alia, the benefits to Cliffs and Cliffs
shareholders; the complexity, expense, and possible duration of further litigation; the risks of
establishing liability and damages; and the costs of continued litigation. The Settlement set
forth in the Stipulation is hereby finally approved in all respects, in accordance with the terms
and provisions therein, and all Parties are hereby bound by the terms of the Settlement as set
forth in the Stipulation and ordered to carry out its terms.
6. Upon the Effective Date, all Plaintiffs (acting on their own behalf and
derivatively on behalf of Cliffs), Cliffs, and each of Cliffs’ shareholders shall be deemed to
have, and by operation of the Judgment shall have, fully, finally, and forever settled, released,
relinquished, extinguished, dismissed with prejudice, and discharged the Individual
Defendants, and each and all the Individual Defendants’ respective present or former
successors, heirs, executives, employees, agents, insurers, reinsurers, attorneys, advisors,
associates, representatives, executors, personal representatives, estates, administrators, assigns,
spouses and other members of any Individual Defendant’s immediate family, any entity in
which any Individual Defendant or member of any Individual Defendant’s immediate family
NAI-1500870532v6 4
has or had a controlling interest (directly or indirectly), and any trust of which any Individual
Defendant is the settlor or which is for the benefit of any Individual Defendant and/or
member(s) of his or her family (“Released Persons”) from any and all claims for relief, suits,
debts, demands, rights, liabilities, damages, losses, obligations, judgments, fees, expenses,
costs, matters, issues and actions or causes of action of every nature and description
whatsoever, whether known or unknown (including Unknown Claims as defined in ¶ 1.26 of
the Stipulation), contingent or absolute, suspected or unsuspected, disclosed or undisclosed,
matured or unmatured, discoverable or undiscoverable, whether or not concealed or hidden, for
damages, injunctive relief, or any other remedy, that have been, or could or might have been, or
in the future can or might be asserted by Plaintiffs, Cliffs, and/or any Cliffs shareholder
derivatively on behalf of Cliffs against any Released Persons that are based upon, refer to, arise
out of concern, or are directly or indirectly related to (i) the claims and allegations contained in
the Actions, (ii) any of the facts, transactions, events, occurrences, acts, disclosures, statements,
omissions or failures to act that were alleged or that could have been alleged in the Actions; or
(iii) the settlement of the Actions, including the payment provided for in this Stipulation, and
the reasonable attorneys’ fees, costs, and expenses incurred in defense of the Actions
(“Released Claims”) and shall have covenanted not to sue the Released Persons with respect to
any such Released Claims, and shall be permanently barred and enjoined from instituting,
commencing, or prosecuting the Released Claims against the Released Persons.
Notwithstanding the foregoing, the Released Claims do not include (i) any claims based on any
conduct of the Released Persons after April 20, 2016; or (ii) any direct claims belonging to
Cliffs shareholders, including without limitation, any claims arising under the federal securities
laws. Notwithstanding the foregoing, Released Claims shall not include claims to enforce the
NAI-1500870532v6 5
terms of the Stipulation or the Settlement. In addition, nothing set forth herein shall constitute
a release by any Defendant of any insurer, reinsurer, or any other entity contracted or otherwise
obligated to provide insurance or indemnification to any of the Released Persons of any claim
arising out of the rights, remedies, duties or obligations provided for in any insurance policy or
agreement. Nothing set forth herein shall constitute a release by or among the Company and
the Individual Defendants or Released Persons of any rights or obligations relating to
indemnification or advancement of defense costs, whether arising from the Company’s
certificate of incorporation or code of regulations, Ohio law, or any agreement pertaining to
indemnification or advancement of defense costs.
7. The releases granted herein shall be effective as a bar to any or all claims that
were alleged or that could or might have been alleged in the Actions by the Plaintiffs, Cliffs, or
any Cliffs shareholder derivatively on behalf of Cliffs, which any Plaintiff, Cliffs, or Cliffs
shareholder does not know or suspect to exist in his, her, or its favor at the time of the release
of the Released Persons, including claims which, if known by him, her, or it, might have
affected his, her or its settlement with and release of the Released Persons, or might have
affected his, her or its decision not to object to this Settlement. With respect to any and all
Released Claims, the Parties stipulate and agree that, upon the Effective Date, Plaintiffs,
Individual Defendants, and Cliffs shall expressly waive and relinquish, and each of Cliffs’
shareholders shall be deemed to have, and by operation of the Judgment shall have, expressly
waived and relinquished, to the fullest extent permitted by law, any and all provisions, rights,
and benefits conferred by any law of the United States or of any state or territory of the United
States, or principle of common law, which governs or limits a Person’s release of Unknown
Claims, including the provisions, rights and benefits of California Civil Code §1542, which
NAI-1500870532v6 6
provides:
A general release does not extend to claims which the creditor does not know or suspect to exist in his or her favor at the time of executing the release, which if known by him or her must have materially affected his or her settlement with the debtor.
and/or by any law of the United States or of any state or territory of the United States, or
principle of common law or of international or foreign law, that is similar, comparable, or
equivalent in effect to California Civil Code §1542. It is understood that Plaintiffs, Cliffs, or
any of Cliffs’ shareholders may hereafter discover facts in addition to or different from those
that he, she, or it now knows or believes to be true with respect to the subject matter of the
Released Claims (including Unknown Claims), but Plaintiffs and Cliffs shall expressly fully,
finally, and forever discharge, settle, and release with prejudice, and each of Cliffs’
shareholders, upon the Effective Date, shall be deemed to have, and by operation of the
Judgment shall have fully, finally, and forever discharged, settled and released with prejudice,
any and all Released Claims (including Unknown Claims), known or unknown, suspected or
unsuspected, contingent or noncontingent, whether or not concealed or hidden, that now exist,
or heretofore have existed upon any theory of law or equity now existing or coming into
existence in the future, including, but not limited to, conduct which is negligent, grossly
negligent, reckless, intentional, with or without malice, or a breach of any duty, law or rule,
without regard to the subsequent discovery or existence of such different or additional facts.
Plaintiffs and Cliffs acknowledge, and Cliffs’ shareholders shall be deemed by operation of the
Judgment to have acknowledged, that the foregoing waiver was separately bargained for and is
a key element of the Settlement of which this release is a part.
8. Upon the Effective Date, each of the Defendants shall be deemed to have, and
by operation of the Judgment shall have, fully, finally, and forever settled, released,
NAI-1500870532v6 7
relinquished, extinguished, dismissed with prejudice, and discharged each and all of the
Plaintiffs and Plaintiffs' Counsel from all claims (including Unknown Claims) based upon,
arising out of, relating to, or in connection with, the commencement, prosecution, assertion,
settlement or resolution of the Actions or the Released Claims.
9. The Stipulation (including the exhibits attached to it) and the Settlement are not
and shall not be construed to be, or offered, attempted to be offered or used in any way by any
Party as a presumption, an admission, or evidence of the validity or invalidity of any claim or
defense or of any fault, liability or wrongdoing whatsoever on the part of the Released Persons.
The Stipulation, the Settlement and any matter relating to them may not be offered or received
in evidence or otherwise referred to in any civil, criminal, or administrative action or
proceeding for any purpose, except to enforce the terms of the Settlement, and except that the
Released Persons may file this Stipulation and/or the Judgment in any action that may be
brought against them in order to support a defense or counterclaim based on principles of res
judicata, collateral estoppel, full faith and credit, release, good faith settlement, judgment bar or
reduction or any other theory of claim preclusion or issue preclusion or similar defense or
counterclaim.
10. If for any reason the Effective Date does not occur, or if the Stipulation is in any
way canceled, terminated, or fails to become final in accordance with its terms: (i) the Parties
shall be restored to their respective positions as of the date immediately preceding the full
execution of the Stipulation; and (ii) the Stipulation and all negotiations, proceedings,
documents prepared, and statements made in connection herewith shall be without prejudice to
the Parties, shall not be deemed or construed to be an admission by any Party of any act,
matter, or proposition, and shall not be used by anyone in any manner for any purpose in the
NAI-1500870532v6 8
Actions or in any other action or proceeding (other than between one or more Defendants and
any insurer, reinsurer or other entity contracted or otherwise obligated to provide insurance or
indemnification to any Released Persons), or entitle any Party to recover any costs or expenses
incurred in connection with the Stipulation or the Settlement. In such event, the terms and
provisions of the Stipulation, except ¶¶ 5.4, 6.3, 8.1 and 8.8, shall have no further force or
effect, and this Judgment and any other order entered in accordance with the terms of the
Stipulation shall be treated as vacated, nunc pro tunc.
11. The Court finds that during the course of the Actions, all Parties, Plaintiffs’
Counsel, and counsel to the Defendants at all times complied with all rules of professional
conduct.
12. Plaintiffs’ Counsel are awarded attorneys’ fees and reimbursement of expenses
in the amount of $775,000 to be paid by the Individual Defendants’ D&O insurers.
13. Plaintiffs’ Counsel are authorized to pay Co-Lead Plaintiffs Service Awards in
the amount of $3,500 each, as to which neither Defendants nor any of their insurers shall have
any liability or responsibility.
14. The Actions and all Released Claims are dismissed as against all Defendants on
the merits and with prejudice, with no fees or costs assessed against any Party except as
expressly provided in the Stipulation and this Judgment.
NAI-1500870532v6 9
15. Without affecting the finality of this Judgment in any way, this Court hereby
retains continuing jurisdiction over: (i) implementation and enforcement of the Settlement; and
(ii) the Parties for the purpose of construing, implementing, enforcing, and administering the
Stipulation and the Settlement.
16. The provisions of this Judgment constitute a full and complete adjudication of
the matters considered and adjudged herein, and the Court determines that there is no just
reason for delay in the entry of this Judgment. The Clerk is hereby directed to immediately
enter this Judgment.
SO ORDERED in Cuyahoga County, Ohio on _________________, 2016.
__________________________________________
JUDGE RICHARD J. MCMONAGLE