-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, QAmOocTPxrlW89ibNdsY9F8a0QvRiORv/eEDEFSZNdcLblfOZk6MwpDwIIEUgl5y 7xpswpZCpg1xYHMrLP/nvQ== 0000950152-94-000367.txt : 19940404 0000950152-94-000367.hdr.sgml : 19940404 ACCESSION NUMBER: 0000950152-94-000367 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 25 CONFORMED PERIOD OF REPORT: 19931231 FILED AS OF DATE: 19940331 FILER: COMPANY DATA: COMPANY CONFORMED NAME: NACCO INDUSTRIES INC CENTRAL INDEX KEY: 0000789933 STANDARD INDUSTRIAL CLASSIFICATION: 3537 IRS NUMBER: 341505819 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 34 SEC FILE NUMBER: 001-09172 FILM NUMBER: 94519470 BUSINESS ADDRESS: STREET 1: 5875 LANDERBROOK DR CITY: MAYFIELD HTS STATE: OH ZIP: 44124-4017 BUSINESS PHONE: 2164499600 10-K 1 NACCO 10-K 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K ANNUAL REPORT Pursuant to Section 13 of the Securities Exchange Act of 1934 For the fiscal year ended December 31, 1993 Commission File No. 1-9172 NACCO INDUSTRIES, INC. (Exact name of registrant as specified in its charter) DELAWARE 34-1505819 - --------------------------------------- ------------------------------------- (STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NO.) INCORPORATION OR ORGANIZATION) 5875 Landerbrook Drive Mayfield Heights, Ohio 44124-4017 - --------------------------------------- ------------------------------------- (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
Registrant's telephone number, including area code: (216) 449-9600 SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: NAME OF EACH EXCHANGE TITLE OF EACH CLASS ON WHICH REGISTERED - --------------------------------------- ------------------------------------ Class A Common Stock, New York Stock Exchange Par Value $1.00 Per Share
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: Class B Common Stock, Par Value $1.00 Per Share Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months and (2) has been subject to such filing requirement for the past 90 days. YES X NO ______ Indicate by checkmark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ] Aggregate market value of Class A Common Stock and Class B Common Stock held by non-affiliates as of February 28, 1994: $335,171,382 Number of shares of Class A Common Stock outstanding at February 28, 1994: 7,178,085 Number of shares of Class B Common Stock outstanding at February 28, 1994: 1,762,493 DOCUMENTS INCORPORATED BY REFERENCE (a) The Company's Proxy Statement for its 1994 annual meeting of stockholders, incorporated herein by reference in Part III. 2 PART I ITEM 1. BUSINESS GENERAL NACCO Industries, Inc. ("NACCO" or the "Company") is a holding company which owns four principal operating subsidiaries: (a) NACCO MATERIALS HANDLING GROUP. The Company owns approximately 97% of the outstanding capital stock of Hyster-Yale Materials Handling, Inc. ("Hyster-Yale"), which was the parent company of Hyster Company ("Hyster") and Yale Materials Handling Corporation ("Yale"). On January 1, 1994 Yale was merged into Hyster and Hyster changed its name to NACCO Materials Handling Group, Inc. (For convenience of reference NACCO Materials Handling Group, Inc. and Hyster-Yale hereinafter referred to as "NMHG"). This action was the final step in NMHG's strategy to combine the company's administrative, design, engineering and manufacturing capabilities into a unified group. NMHG will continue to market two full lines of forklift trucks and related service parts under the Hyster(R) and Yale(R) brand names. NMHG accounted for 59% and 42% of NACCO's revenues and operating profits, respectively, in 1993. (b) HAMILTON BEACH/PROCTOR-SILEX. The Company owns 80% of Hamilton Beach/Proctor-Silex, Inc. ("Hamilton Beach/ Proctor-Silex"), one of the nation's leading manufacturers and marketers of small electric appliances. Hamilton Beach/ Proctor-Silex accounted for 23% and 13% of NACCO's revenues and operating profits, respectively, in 1993. (c) NORTH AMERICAN COAL. The Company's wholly owned subsidiary, The North American Coal Corporation, and its affiliated coal companies (collectively, "North American Coal"), mine and market lignite for use primarily as fuel for power generation by electric utilities. North American Coal accounted for 15% and 47% of NACCO's revenues and operating profits, respectively, in 1993. (d) KITCHEN COLLECTION. The Company's wholly owned subsidiary, The Kitchen Collection, Inc. ("Kitchen Collection"), is a national specialty retailer of kitchenware, small electric appliances and related accessories. Kitchen Collection accounted for 3% and 5% of NACCO's revenues and operating profits, respectively, in 1993. Additional information relating to financial and operating data on a segment basis (including NACCO, which reduced operating profits by 7% in 1993) is set forth in Management's Discussion and Analysis of Results of Operations and Financial Condition on pages 27 through 50 contained in Part II hereof and in Note P to the Consolidated Financial Statements on pages F-25 through F-28 contained in Part IV hereof. NACCO was incorporated as a Delaware corporation in 1986 in connection with the formation of a holding company structure for a predecessor corporation organized in 1913. 3 SIGNIFICANT EVENTS In August 1993, NACCO and NMHG's two minority stockholders made a proportional capital contribution of $53.8 million in the form of (a) previously purchased 12-3/8% NMHG subordinated debentures with a face value of $23.7 million and a purchase value by NACCO of $25.5 million, and (b) a cash contribution of $28.3 million. The cash contribution enabled NMHG to call approximately $26.5 million face value of subordinated debentures at a price of 107.5. This, and the capital contribution by NACCO of previously purchased subordinated debentures, allowed NMHG to retire approximately $50.2 million face value of these debentures. As part of this transaction, NMHG amended its existing senior bank credit agreement. This amendment permits equity infusions to be used for cash purchases of debentures and, after August 1994, permits use of internally generated funds to retire up to $75.0 million of additional subordinated debentures if certain debt to capitalization ratios are achieved. In addition, the amendment modifies the bank loan repayment schedules and provides for favorable performance-based interest rate incentives. BUSINESS SEGMENT INFORMATION A. NACCO MATERIALS HANDLING GROUP NMHG is one of the leading worldwide designers, manufacturers and marketers of forklift trucks which comprise the largest segment of the materials handling equipment industry. NMHG accounted for 50% and 41% of NACCO's assets and liabilities, respectively, as of December 31, 1993, while its operations accounted for 59% and 42% of NACCO's revenues and operating profits, respectively, in 1993. THE INDUSTRY Forklift trucks are used in both manufacturing and warehousing environments. The materials handling industry, especially in industrialized nations, is generally a mature industry. In the most recent business cycle the North American market for forklift trucks reached its lowest level in 1991 and increased in both 1992 and 1993 over prior year levels. The European and Japanese markets generally have been in decline since 1990. The forklift truck industry historically has been cyclical. Fluctuations in the rate of orders for forklift trucks reflect the capital investment decisions of the customers, which in turn depend upon the general level of economic activity in the various industries served by such customers. -2- 4 COMPANY OPERATIONS NMHG maintains product differentiation between Hyster(R) and Yale(R) brands of forklift trucks and distributes its products through separate worldwide dealer networks. Nevertheless, opportunities have been identified and addressed to improve the company's results by integrating overlapping operations and taking advantage of economies of scale in design, manufacturing and purchasing. NMHG completed a series of plant and parts depot consolidations with the closure of its Wednesfield, England manufacturing plant in early 1992. NMHG now provides all design, manufacturing and administrative functions. Products are marketed and sold through two separate groups which retain the Hyster and Yale identities. In Japan, NMHG has a 50% owned joint venture with Sumitomo Heavy Industries Ltd. named Sumitomo-Yale Company Limited ("S-Y"). S-Y performs certain design activities and produces lift trucks and components which it markets in Japan and which are exported for sale by NMHG and its affiliates in the U.S. and Europe. PRODUCT LINES NMHG manufactures a wide range of forklift trucks under both the Hyster(R) and Yale(R) brand names. The principal categories of forklift trucks include electric rider, electric narrow-aisle and electric motorized hand forklift trucks primarily for indoor use, and internal combustion engine ("ICE") forklift trucks for indoor or outdoor use. Forklift truck sales accounted for approximately 80%, 79%, and 77% of NMHG's net sales in 1993, 1992 and 1991, respectively. NMHG also derives significant revenues from the sale of service parts for its products. Profit margins on service parts are greater than those on forklift trucks. The large population of Hyster(R) and Yale(R) forklift trucks now in service provides a market for service parts. In addition to parts for its own forklift trucks, NMHG has a program (termed UNISOURCE(TM) in North America and MULTIQUIP(TM) in Europe) designed to supply Hyster dealers with replacement parts for most competing brands of forklift trucks. NMHG has a similar program (termed PREMIER(TM)) for its Yale dealers in the Americas and the United Kingdom. Accordingly, NMHG dealers can offer their mixed fleet customers a "one stop" supply source. Certain of these parts are manufactured by and purchased from third party component makers, NMHG also manufactures some of these parts through reverse-engineering of its competitors' parts. Service parts accounted for approximately 20%, 21%, and 23% of NMHG net sales in 1993, 1992 and 1991, respectively. COMPETITION The forklift truck industry is highly competitive. The worldwide competitive structure of the industry is fragmented by product line and country. The principal methods of competition among forklift truck manufacturers are product performance, price, service and distribution networks. The forklift truck industry -3- 5 competes with alternative methods of materials handling, including conveyor systems, automated guided vehicle systems and hand labor. Global competition is also affected by a number of other factors, including currency fluctuations, variations in labor costs and effective tax rates, and the costs related to compliance with applicable regulations, including export restraints, antidumping provisions and environmental regulations. Although there is no official source for information on the subject, NACCO believes that NMHG is one of the top three manufacturers of forklift trucks in the world. NMHG's position is strongest in North America, where it believes it is the leader in unit sales of electric rider and ICE forklift trucks and has a significant share of unit sales of electric narrow-aisle and electric motorized hand forklift trucks. Although the European market is fragmented and competitive positions vary from country to country, NMHG believes that it has a significant share of unit sales of electric rider and ICE forklift trucks in Western Europe. In Japan, although its share is currently small, NMHG has a distribution system through S-Y. TRADE RESTRICTIONS A. United States Since June 1988, Japanese-built ICE forklift trucks imported into the U.S., with lifting capacities between 2,000 and 15,000 pounds, including finished and unfinished forklift trucks, chassis, frames, and frames assembled with one or more component parts, have been subject to an antidumping duty order. Antidumping duty rates in effect through 1993 range from 4.48% to 56.81% depending on manufacturer or importer. The antidumping duty rate applicable to imports from S-Y is 51.33%, and is likely to continue unchanged for the foreseeable future, unless S-Y and NMHG decide to participate in proceedings to have it reduced. NMHG does not currently import for sale in the United States any forklift trucks or components subject to the antidumping duty order. This antidumping duty order will remain in effect until the Japanese manufacturers and importers satisfy the U.S. Department of Commerce ("Commerce") that they have not individually sold merchandise subject to the order in the United States below foreign market value for at least three consecutive years, or unless Commerce or the U.S. International Trade Commission finds that changed circumstances exist sufficient to warrant the order's revocation. If the U.S. Congress approves legislation implementing the Uruguay round of GATT negotiations, the anti-dumping order will be reviewed for possible revocation in 2000. All of NMHG's major Japanese competitors have either built or acquired manufacturing or assembly facilities in the United States. The company cannot predict with any certainty if there will be any negative effects to the company resulting from the Japanese sourcing of their forklift products in the United States. -4- 6 B. Europe From 1986 through 1993, Japanese forklift truck manufacturers were subject to informal export restraints on Japanese-manufactured electric rider, electric narrow-aisle and ICE forklift trucks shipped to Europe. Discussions are continuing between European Community and Japanese government officials; however, these informal restraints are expected to continue in 1994. Several Japanese manufacturers have announced either that they have established, or intend to establish, manufacturing or assembly facilities within the European Community. The company also cannot predict with any certainty if there will be any negative effects to NMHG resulting from the Japanese sourcing of their forklift products in Europe. C. Australia In 1987 an Australian producer of forklift trucks filed an antidumping action against imports from Japan. Voluntary price undertakings were negotiated with all major Japanese producers including S-Y. The S-Y undertaking expired in 1991. The Australian producer has filed a legal challenge to the validity of the price undertakings. Meanwhile, in 1991 this same producer filed an antidumping action against imports from the United Kingdom. In this action Hyster Europe was found to be dumping and duties have been imposed on imports from the company's Craigavon, Northern Ireland and Irvine, Scotland factories. Hyster Australia challenged this finding and in the interim sourced its product elsewhere. In the summer of 1993 both of these antidumping actions were terminated. PRODUCT DESIGN AND DEVELOPMENT NMHG spent $20.7 million, $21.9 million, and $19.2 million on product design and development activities in 1993, 1992 and 1991, respectively. The Hyster(R) and Yale(R) products are differentiated for the specific needs of their respective customer bases. NMHG continues to pursue opportunities to improve product costs by engineering new Hyster(R) and Yale(R) brand products with component commonality. Certain product design and development activities with respect to ICE forklift trucks and some components are performed in Japan by S-Y. S-Y spent approximately $4.0 million, $3.7 million, and $3.8 million on product design and development in 1993, 1992 and 1991, respectively. BACKLOG As of December 31, 1993, NMHG's backlog of unfilled orders for forklift trucks was approximately 12,100 units, or $206 million. This compares to the backlog as of December 31, 1992 of approximately 12,100 units, or $203 million. Backlog represents unit orders to NMHG's manufacturing plants from independent dealerships, retail customers and contracts with the U.S. Government. Although these orders are believed to be firm, such -5- 7 orders may be subject to cancellation or modification. SOURCES NMHG has adopted a strategy of obtaining its raw materials and principal components on a global basis from competitively priced sources. NMHG is dependent on a limited number of suppliers for certain of its critical components, including diesel and gasoline engines and cast-iron counterweights used on certain forklift trucks. There would be a material adverse effect on NMHG if it were unable to obtain all or a significant part of such components, or if the cost of such components was to increase significantly under circumstances which prevented NMHG from passing on such increases to its customers. DISTRIBUTION The Hyster(R) and Yale(R) brand products are distributed through separate highly developed worldwide dealer networks. The company believes that both dealer networks contribute significantly to its competitive position in the industry and intends to keep the separate networks intact and to continue to market products separately under the Hyster(R) and Yale(R) brand names. Each also sells directly to certain major accounts. In Japan, forklift truck products are distributed by S-Y. In 1991, Yale reached a ten-year agreement with Jungheinrich Aktiengesellschaft AG ("Jungheinrich"), a German manufacturer of forklift trucks, to continue distribution of Yale brand products in Germany and Austria and to provide to Jungheinrich certain ICE and electric-powered products for sale in other major European countries under the Jungheinrich brand name. FINANCING OF SALES Hyster U.S. dealer and direct sales are supported by leasing and financing services provided by Hyster Credit Company, a division of AT&T Commercial Finance Corporation, pursuant to an operating agreement which expires in 2000. NMHG is a minority stockholder of Yale Financial Services, Inc., a subsidiary of General Electric Capital Corporation, which offers Yale U.S. dealers wholesale and retail financing and leasing services for its forklift trucks. Such retail financing and leasing services are also available to Yale national account customers. EMPLOYEES As of February 28, 1994, NMHG had approximately 5,000 employees. Employees in the Danville, Illinois manufacturing and parts depot operations are unionized, as are tool room employees located in Portland, Oregon. A three-year contract for the Danville union employees was signed in 1991, which will expire in June, 1994. A new one-year contract was signed in 1993 with the -6- 8 Portland tool room union which will expire in October 1994. Employees at the facilities in Berea, Kentucky; Sulligent, Alabama; and Greenville and Lenoir, North Carolina are not represented by unions. In Europe, shop employees in the Craigavon, Northern Ireland facility are unionized. Employees in the Irvine, Scotland and Nijmegen, The Netherlands facilities are not represented by unions. The employees in Nijmegen have organized a works council, as required by Dutch law, which performs a consultative role on employment matters. NMHG's management believes its current labor relations with both union and non-union employees are good. GOVERNMENT REGULATION NMHG's manufacturing facilities, in common with others in industry, are subject to numerous laws and regulations designed to protect the environment, particularly with respect to disposal of plant waste. NMHG's products are also subject to various industry and governmental standards. NMHG's management believes that such requirements have not had a material adverse effect on its operations. PATENTS, TRADEMARKS AND LICENSES NMHG is not materially dependent upon patents or patent protection. NMHG is the owner of the Hyster(R) trademark, which is currently registered in approximately 51 countries. The Yale(R) trademark, which is used on a perpetual royalty-free basis by NMHG in connection with the manufacture and sale of forklift trucks and related components, is currently registered in approximately 100 countries. NMHG's management believes that its business is not dependent upon any individual trademark registration or license, but that the Hyster(R) and Yale(R) trademarks are material to its business. B. HAMILTON BEACH/PROCTOR-SILEX GENERAL The Company believes that Hamilton Beach/Proctor-Silex is one of the largest broad line manufacturers and marketers of small electric appliances in North America. Hamilton Beach/Proctor-Silex's products are marketed primarily to retail merchants and wholesale distributors. Hamilton Beach/Proctor-Silex accounted for 18% and 13% of NACCO's assets and liabilities, respectively, as of December 31, 1993, while its operations accounted for 23% and 13% of NACCO's revenues and operating profits, respectively, in 1993. -7- 9 SALES AND MARKETING Hamilton Beach/Proctor-Silex manufactures and markets a wide range of small electric appliances, including motor driven appliances such as blenders, food processors, mixers and electric knives which are primarily marketed under the Hamilton Beach(R) name, and heat generating appliances such as toasters, irons, coffeemakers and toaster ovens which are primarily marketed under the Proctor-Silex(R) name. The company markets its products primarily in North America. Sales are generated by a network of sales employees and outside sales representatives to mass merchandisers, catalog showrooms, warehouse membership clubs, variety store chains, department stores and other retail outlets. Sales are also made through independent dealers and distributors. Principal customers include Wal-Mart, Target, K-Mart, Service Merchandise, Sears, Canadian Tire, and Montgomery Ward. The company also manufactures and sells certain private label brand products to third parties for resale. Sales promotional activities are primarily focused on cooperative advertising. Because of the nature of the markets for small electric appliances, Hamilton Beach/Proctor-Silex's management believes that backlog is not a meaningful indicator of performance nor is it a significant indicator of annual sales. Backlog of orders as of December 31, 1993 was approximately $13.1 million. This compares with the aggregate backlog as of December 31, 1992 of approximately $7.0 million. This backlog represents customer orders; customer orders may be cancelled at any time prior to shipment. Hamilton Beach/Proctor-Silex's warranty program to the consumer consists generally of a limited warranty lasting one or two years, depending on the product, for domestic electric appliances, and two years for all Canadian electric appliances. Under these warranty programs, the company may repair or replace, at its option, those products found to contain manufacturing defects. Revenues and operating profit for Hamilton Beach/ Proctor-Silex are traditionally greater in the second half of the year as sales of small electric appliances increase significantly with the fall holiday selling season. Because of the seasonality of purchases of its products, Hamilton Beach/Proctor-Silex incurs substantial short-term debt to finance inventories and accounts receivable. PRODUCT DESIGN AND DEVELOPMENT Hamilton Beach/Proctor-Silex spent $2.7 million, $2.5 million, and $2.3 million on product design and development activities in 1993, 1992 and 1991, respectively. The principal raw materials used to manufacture and distribute Hamilton Beach/Proctor-Silex's products are steel, aluminum, plastics and packaging materials. The company's management believes that adequate quantities of raw materials are -8- 10 available from various suppliers. COMPETITION The small electric appliance industry is highly competitive. Based on publicly available information about the industry, Hamilton Beach/Proctor-Silex's management believes it is one of the largest producers of such appliances in North America. As retailers generally purchase a limited selection of small electric appliances, Hamilton Beach/Proctor-Silex competes with other suppliers for retail shelf space and focuses its marketing efforts on retailers rather than consumers. The company's management believes that the principal areas of competition with respect to its products are quality, price, product design, product features, merchandising, promotion, and warranty. Hamilton Beach/Proctor-Silex's management believes that it is competitive in all of these areas. GOVERNMENT REGULATION Hamilton Beach/Proctor-Silex, in common with other manufacturers, is subject to numerous Federal and state health, safety and environmental regulations. The company's management believes that the impact of expenditures to comply with such laws will not have a material adverse effect on Hamilton Beach/Proctor-Silex. The company's products are subject to testing or regulation by Underwriters' Laboratories, the Canadian Standards Association, and various entities in foreign countries which review product design. PATENTS, TRADEMARKS, COPYRIGHTS, AND LICENSES Hamilton Beach/Proctor-Silex holds patents and trademarks registered in the United States and foreign countries for various products. The company's management believes that its business is not dependent upon any individual patent, trademark, copyright or license, but that the Hamilton Beach(R) and Proctor-Silex(R) trademarks are material to its business. EMPLOYEES As of February 28, 1994, Hamilton Beach/Proctor-Silex's work force consisted of approximately 4,400 employees, none of which are represented by unions except for approximately 30 hourly employees at the Picton, Ontario facility. The Picton, Ontario employees are represented by an employee association which performs a consultative role. -9- 11 C. NORTH AMERICAN COAL GENERAL North American Coal is engaged in the mining and marketing of lignite for use primarily as fuel for power generation by electric utilities. Substantially all of the sales by North American Coal are made through wholly owned project mining subsidiaries pursuant to long-term, cost plus a profit per ton contracts. The utility customers have arranged and guaranteed the financing of the development and operation of the project mining subsidiaries. There is no recourse to NACCO or North American Coal for the financing of these subsidiary mines. At December 31, 1993 North American Coal's operating mines consisted of mines where the reserves were acquired and developed by North American Coal, except for the South Hallsville No. 1 Mine whose reserves are owned by the customer. North American Coal also earns royalty income from the lease of various coal and gas properties. For further information as to the financing of the project mining subsidiaries, see Note H to the Consolidated Financial Statements on pages F- 16 through F-17 contained in Part IV hereof. Project mining subsidiaries accounted for 25% and 30% of NACCO's assets and liabilities, respectively, as of December 31, 1993, while their operations accounted for 14% and 45% of the Company's revenues and operating profits, respectively, in 1993. SALES AND MARKETS The principal customers of North American Coal are electric utilities and a synfuels plant. In 1993, sales to one customer, which supplies coal to four facilities, accounted for 46% of North American Coal's revenues compared with 44% in 1992 and 1991. The distribution of sales in the last five years has been as follows:
DISTRIBUTION ----------------------- Total Tons Sold Electric Synfuels (Millions) Utilities Plant ---------- --------- -------- 1993 26.5 75% 25% 1992 24.5 74% 26% 1991 21.7 73% 27% 1990 20.8 71% 29% 1989 21.5 72% 28%
The contracts under which the project mining subsidiaries were organized provide that under certain conditions of default the customer(s) involved may elect to acquire the assets (subject to the liabilities) or the capital stock of the subsidiary, for an amount effectively equal to book value. In one case, the customer may elect to acquire the stock of the subsidiary after a specified period of time without reference to default, in exchange for certain payments on coal thereafter mined. -10- 12 The location, customer, sales tonnage and contract expiration date for the mines operated by North American Coal in 1993 were as follows:
1993 Sales Mine and Customer Tonnage Contract Mining Operation Location (Plant) (Millions) Expires - ---------------- -------- -------- ---------- -------- Project Mining Subsidiaries -------------- The Coteau Freedom (1) Dakota Coal 6.5 2007 Properties Mine; Company Company Beulah, (Great Plains North Synfuels Dakota Project) (surface) Dakota Coal 5.5 2007 Company (Antelope Valley Station) Dakota Coal 2.0 2007 Company (Leland Olds Station) Dakota Coal .9 1997 Company (Stanton Station of United Power Association) The Falkirk Falkirk (1) United Power 7.6 2013 Mining Mine; Association/ Company Under- Cooperative wood, Power North Association Dakota (Coal Creek (surface) Station) The Sabine South (1) Southwestern 3.5 2007 Mining Hallsville, Electric Company No. 1 Power Company Mine; (Henry W. Pirkey Halls- Power Plant) ville, Texas (surface) Other ----- Red River Oxbow Mine; Central .5 (2) 2001 Mining Coushatta, Louisiana Company Louisiana Electric (Joint Venture (surface) Company (Dolet with Phillips Hills Power Plant) Coal Company)
- - SEE FOLLOWING PAGE FOR EXPLANATION OF NOTE REFERENCES. -11- 13 Notes to preceding table: __________________________ (1) The contracts for these mines require the customer to cover the cost of the ongoing replacement and upkeep of the plant and equipment of the mine. (2) The amount represents the total (100%) of the 1993 joint venture tonnage. Under terms of a lignite mining agreement entered into in 1985 with Utility Fuels, Inc. ("UFI"), a subsidiary of Houston Industries Incorporated, North American Coal has been retained to design, develop, construct and operate the proposed Trinity Mine in the Malakoff-Cayuga reserves near Malakoff, Texas. The Trinity Mine is expected to produce from 4.5 to 6.5 million tons of lignite annually. The two generating units have been delayed and are now expected to be completed in 2005 and 2007. North American Coal and a subsidiary have received certain management fees, minimum royalties and other payments in connection with the future development of the Trinity Mine project. In December 1992 the lignite lease and sublease agreement under which the minimum royalties were received was amended. The parties agreed that, in light of the delayed development of this mining project, effective January 1, 1993 UFI is no longer obligated to pay minimum royalties to North American Coal. Termination of this obligation reduces North American Coal's annual net income approximately $2.4 million, after tax. Under the original agreement, these minimum royalty payments would have terminated at the end of the year 2005. GOVERNMENT REGULATION North American Coal, in common with other coal producers, continues to be subject to Federal and state health, safety and environmental regulations. The 1994 expenditures which will be required for compliance with the provisions of governmental regulations, including mined land reclamation and other air and water pollution abatement requirements, are estimated at $1.1 million for certain closed mines and are included in Self-Insurance Reserves and Other in NACCO's Consolidated Financial Statements in this Annual Report on Form 10-K. The active operations are required to make certain additional capital expenditures to comply with such governmental regulations, which expenditures will be recovered under the terms of the coal sales agreements with the utility customers. North American Coal's management believes that the Clean Air Act Amendments, which became effective in 1990, will not have a material adverse effect on its current operations, because substantially all of the power generating facilities operated or supplied by North American Coal's customers meet or exceed the requirements of the Clean Air Act. The Federal Energy Regulatory Commission (FERC) issued Order 636, effective in May 1992, which requires gas pipeline companies to separate their gas sales and gas transportation functions. As a result of this Order, the nation's natural gas pipeline companies, including the four which purchase gas produced by the Great Plains Synfuels Plant (Synfuels Plant), which is supplied by -12- 14 the company's Coteau mining subsidiary, have much less need for gas supply under contract and are actively seeking to restructure or terminate many supply contracts. To date, however, the four pipelines' contracts with the Synfuels Plant are unaffected and the FERC has permitted the four pipelines to recover their costs associated with continuing to perform under the contracts. The affected customers of the four pipelines have been unsuccessful to date in court challenges to the arrangements although several challenges are presently pending on rehearing. Based on regulatory and judicial consideration to date, it does not appear the continued operation of the Great Plains Synfuels Plant and Coteau's supply of coal to the Plant will be adversely affected. Coteau sold approximately 6.5 million tons of lignite to the Synfuels Plant in 1993. COMPETITION The coal industry competes with other sources of energy, particularly oil, gas, hydro-electric power and nuclear power. Among the factors that affect competition are the price and availability of oil and natural gas, the time and expenditures required to develop new energy sources, the cost of transportation, the cost of compliance with governmental regulation of operations, and the impact of federal energy policies. The ability of North American Coal to market and develop its reserves will depend upon the interaction of these factors. There is no official source of information on the subject, but company management believes that North American Coal is the eighth largest commercial coal producer in the United States. EMPLOYEES As of February 28, 1994, North American Coal had approximately 850 employees. D. KITCHEN COLLECTION Kitchen Collection is a national specialty retailer of kitchenware, small electric appliances and related accessories which operated 104 retail stores as of February 28, 1994. Stores are located primarily in factory outlet complexes that feature merchandise of highly recognizable name-brand manufacturers. Kitchen Collection's product mix includes a broad line of appliances from leading manufacturers, including Hamilton Beach/ Proctor-Silex appliances. Kitchen Collection accounted for 1% of NACCO's assets and its liabilities as of December 31, 1993, while its operations accounted for 3% and 5% of NACCO's revenues and operating profits, respectively, in 1993. -13- 15 ITEM 2. PROPERTIES A. NMHG The following table summarizes certain information with respect to the principal manufacturing, distribution and office facilities owned or leased by NMHG.
LOCATION OWNED LEASED FUNCTION/PRINCIPAL PRODUCTS Basingstoke, England X Hyster forklift truck marketing and sales operations for Europe, the Middle East and Africa Berea, Kentucky X Manufacture of forklift trucks Craigavon, Northern X Manufacture of forklift trucks Ireland Danville, Illinois X Manufacture of forklift trucks, components and service parts Danville, Illinois X Distribution of service parts for both Hyster and Yale forklift trucks; Hyster forklift truck marketing and sales operations for North America Flemington, X Yale forklift truck marketing New Jersey and sales operations for North America and certain NMHG engineering operations Greenville, North X Manufacture of forklift trucks; Carolina NMHG manufacturing and other staff operations for North America Irvine, Scotland X Manufacture of forklift trucks Lenoir, North X Manufacture of component Carolina parts for forklift trucks Nijmegen, The X Manufacture of forklift Netherlands trucks and component parts; distribution of service parts for forklift trucks
-14- 16
LOCATION OWNED LEASED FUNCTION/PRINCIPAL PRODUCTS Portland, Oregon X Technical center for testing of prototype equipment and component parts Portland, Oregon X NMHG corporate and product development headquarters Portland, Oregon X Manufacture of production tooling and prototype units Sao Paulo, Brazil X Manufacture of forklift trucks; distribution of service parts for forklift trucks Sulligent, Alabama X Manufacture of component parts for forklift trucks Sydney, Australia X Assembly of forklift trucks; distribution of service parts for forklift trucks Wolverhampton, X Yale forklift truck marketing England and sales operations for Europe
NMHG intends to sell its Flemington, New Jersey facility and intends to either lease back a portion of the office space in this facility or to rent suitable office space in the same area. NMHG also intends to sell one of its facilities located in Danville, Illinois which is currently vacant. There is no certainty that any such transactions will occur. Each of NMHG's principal U.S. facilities is encumbered as security for the obligations under NMHG's bank financing. The facilities in Berea, Kentucky and Sulligent, Alabama are leased pursuant to industrial development bond financings which permit NMHG to acquire the properties for nominal amounts upon redemption or repayment of the bonds. B. HAMILTON BEACH/PROCTOR-SILEX The following table summarizes certain information with respect to the principal manufacturing, distribution and office facilities owned or leased by Hamilton Beach/Proctor-Silex.
LOCATION OWNED LEASED FUNCTION/PRINCIPAL PRODUCTS Clinton, North X Warehouse Carolina Collierville, X Distribution center Tennessee
-15- 17
LOCATION OWNED LEASED FUNCTION/PRINCIPAL PRODUCTS El Paso, Texas X Distribution center Glen Allen, Virginia X Corporate headquarters Juarez, Chihuahua, X Two assembly plants; Mexico manufacture of coffeemakers, irons and popcorn pumpers Miami, Florida X Distribution center Mt. Airy, North X Manufacture of toasters and Carolina toaster ovens Mt. Airy, North X Distribution center Carolina Picton, Ontario, X Distribution center Canada Southern Pines, X Manufacture of iron components North Carolina Toronto, Ontario, X Proctor-Silex, Canada sales Canada and administration headquarters Washington, North X Distribution and warranty Carolina repair center; manufacture and assembly of blenders, mixers, food processors, motors and commercial products; plastics molding facility
Sales offices are also leased in several cities in the United States and Canada. In February 1991, Hamilton Beach/Proctor-Silex announced that it was integrating certain facilities, including the Clinton, North Carolina facility, with other manufacturing facilities. The integration of the Clinton facility into the Washington facility was completed in 1993. C. NORTH AMERICAN COAL North American Coal's proven and probable coal reserves and deposits (owned in fee or held under leases which generally remain in effect until exhaustion of the reserves if mining is in progress) are estimated at approximately 2.2 billion tons, approximately 82% of which are lignite deposits in North Dakota. -16- 18 Reserves are estimates of quantities of coal, made by the company's geological and engineering staff, that are considered mineable in the future using existing operating methods. Developed reserves are those which have been allocated to mines which are in operation, all other reserves are classified as undeveloped. The table which follows gives detailed information as to North American Coal's in-place reserves as of December 31, 1993 for the mines listed under Item 1 "North American Coal" on page 11. The reserves of the South Hallsville No. 1 Mine, which is listed on page 11, are owned and controlled by the customer and, therefore, have not been listed in the following table. Additional information concerning North American Coal is set forth in Item 1 "North American Coal". RESERVES (MILLIONS OF TONS)
Average Sulfur Committed Average Content Under BTUs Per Unit Contract Uncommitted per lb. of Weight -------- ----------- ------- --------- Developed - --------- Freedom Mine, North Dakota 542.5 6,767 0.8% Falkirk Mine, 679.1 6,200 0.6% North Dakota Oxbow Mine, Louisiana (1) 3.0 7.0 6,722 0.7% ------- ------ Total Developed 1,224.6 7.0 Undeveloped - ----------- North Dakota 571.2 6,428 0.7% Texas 125.8 125.2 6,208 0.9% Eastern 73.3 72.2 12,070 3.3% ------- ----- Total Undeveloped 199.1 768.6 ------- ----- 1,423.7 775.6 ======= =====
(1) These amounts represent the total (100%) of the joint venture reserves. D. KITCHEN COLLECTION Kitchen Collection owns the building housing its corporate headquarters, a warehouse/distribution facility and a retail store in Chillicothe, Ohio. It leases a warehouse/distribution facility in Chillicothe, Ohio and the remainder of its retail stores. A typical store is approximately 3,200 square feet. ITEM 3. LEGAL PROCEEDINGS Neither the Company nor any of its subsidiaries is a party to any material pending legal proceeding other than ordinary routine litigation incidental to its respective business. -17- 19 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS No matter was submitted during the fourth quarter of the fiscal year covered by this report to a vote of security holders of the Company. ITEM 4A. EXECUTIVE OFFICERS OF THE REGISTRANT The information under this Item is furnished pursuant to Instruction 3 to Items 401(b) and 401(c) of Regulation S-K. The table on the following pages sets forth the name, age, current position and principal occupation and employment during the past five years of the Company's executive officers. -18- 20 OFFICERS OF THE COMPANY
NAME AGE CURRENT POSITION OTHER POSITIONS Ward Smith 63 Chairman of the Board of NACCO (since From prior to 1989 to May 1991, prior to 1989) Chairman and Chief Executive Officer of NACCO. Alfred M. Rankin, Jr. 52 President and Chief Executive Officer From April 1989 to May 1991, of NACCO (since May 1991) President and Chief Operating Officer of NACCO. From prior to 1989 to February 1989, Vice Chairman and Chief Operating Officer of Eaton Corporation (manufacturer of highly engineered products serving automotive, industrial and commercial markets). Frank B. O'Brien 47 Senior Vice President - Corporate From January 1, 1993 to December Development and Chief Financial Officer of 31, 1993, Senior Vice President - NACCO (since January 1994) Corporate Development of NACCO. From prior to 1989 to December 31, 1992, Vice President - Corporate Development of NACCO. Steven M. Billick 37 Vice President and Controller From prior to 1989 to July 1991, of NACCO (since July 1991) Partner, Deloitte & Touche (accounting firm). Charles A. Bittenbender 44 Vice President, General Counsel and From prior to 1989 to June 1990, Secretary of NACCO (since July 1990) Deputy General Counsel, G.D. Searle & Co. (research-based manufacturer and marketer of pharmaceutical products). R. Robertson Hilton 43 Vice President and Treasurer of From January 1991 to October 1992, NACCO (since October 1992) Senior Vice President and Head, International Marketing Department, The First National Bank of Chicago (money center bank). From September 1989 to December 1990, Vice President and Head, International Marketing Department. From prior to 1989 to August 1989, Vice President and Head, Cleveland Regional Office.
-19- 21 PRINCIPAL OFFICERS OF THE COMPANY'S SUBSIDIARIES A. NMHG
NAME AGE CURRENT POSITION OTHER POSITIONS Reginald R. Eklund 53 President and Chief Executive From August 1993 to September 1993, Officer of NMHG (since Vice President of Hyster and September 1992) Yale. From September 1992 to August 1993, President and Chief Executive Officer of Hyster. From June 1989 to September 1992, President and Chief Operating Officer of NMHG. From prior to 1989 to August 1993, President and Chief Executive Officer of Yale. Bergen I. Bull 54 Vice President, General Counsel From November 1990 to December and Secretary of NMHG 1993, Vice President and Assistant (since October 1989) Secretary of Yale. From prior to 1989 to December 1993, Vice President, Corporate Administration, General Counsel and Secretary of Hyster. G. Michael Decker 52 Vice President, Finance and Chief From February 1993 to December Financial Officer of NMHG 1993, Vice President, Finance (since February 1993) and Chief Financial Officer of both Hyster and Yale. From 1991 to 1993, Vice President, Finance, Secretary and Chief Financial Officer for Doehler Jarvis Ltd. Partnership (casting manufacturer). From 1989 to 1990, Senior Vice President Finance Treasurer and Chief Financial Officer, and prior to 1989, Vice President, Finance, Treasurer and Chief Financial Officer of The Manitowoc Company, Inc. (manufacturer serving heavy construction, food service and shipbuilding industries).
-20- 22 PRINCIPAL OFFICERS OF THE COMPANY'S SUBSIDIARIES A. NMHG - Continued
NAME AGE CURRENT POSITION OTHER POSITIONS Roger A. Jensen 54 Controller of NMHG (since From prior to 1989, Controller of March 1990) Hyster. Jeffrey C. Mattern 41 Treasurer of NMHG (since From August 1992, Treasurer of both August 1992) Hyster and Yale. From prior to 1989 to July 1992, Assistant Treasurer for Harnischfeger Industries, Inc. (manufacturer papermaking machinery, mining and materials handling equipment). Frank G. Muller 52 Vice President, President Americas From February 1993 to December for NMHG (since May 1993) 1993 Vice President of Hyster and Yale. From May 1992 to May 1993, Vice President, Manufacturing, Americas for NMHG. From prior to 1989 to May 1992, Vice President, Manufacturing, Yale. David M. Pollock 48 Vice President, Managing Director, From May 1992 to December 1993, NMHG Europe (since May 1992) Vice President of Yale. From October 1989 to May 1992, Vice President, Managing Director, Hyster Europe. From prior to 1989, Vice President and Managing Director, Hyster Europe Limited for Hyster.
-21- 23 PRINCIPAL OFFICERS OF THE COMPANY'S SUBSIDIARIES B. Hamilton Beach/Proctor-Silex
Name Age Current Position Other Positions George C. Nebel 55 President and Chief Executive From January 1991 to December 1991, Officer of Hamilton Beach/Proctor- President and Chief Operating Silex (since January 1992) Officer of Hamilton Beach/Proctor- Silex. From prior to 1989 to December 1990, President and Chief Executive Officer of Roadmaster Corporation (manufacturer of bicycles, fitness equipment and junior riding products). Judith B. McBee 46 Executive Vice President - From January 1990 to October 1990, Marketing/Sales of Hamilton Executive Vice President - Beach/Proctor-Silex (since Marketing/Sales of Proctor-Silex. October 1990) From prior to 1989 to January 1990, Executive Vice President - Marketing of Proctor-Silex Charles B. Hoyt 46 Vice President - Finance and From August 1990 to October 1990, Chief Financial Officer of Vice President and Chief Hamilton Beach/Proctor-Silex Financial Officer of Proctor- (since October 1990) Silex. From prior to 1989 to August 1990, Vice President - Finance and Treasurer of Yale. Ronald C. Eksten 50 Vice President, General Counsel From prior to 1989 to December and Secretary of Hamilton Beach/ 1991, Associate General Counsel, Proctor-Silex (since December 1991) Continental Can Company, Inc. (an international manufacturer of packaging products). Michael J. Morecroft 51 Vice President, Engineering/Product From January 1989 to October 1990, Development of Hamilton Beach/ Vice President, Engineering of Proctor-Silex (since October 1990) Hamilton Beach Inc. Jack J. Pountney 65 Vice President - President, Proctor-Silex From prior to 1989, President, Canada (since June 1993) Proctor-Silex Canada Ronald A. Rosati 41 Vice President - Commercial Products From April 1990 to June 1991, Sales (since July 1991) Operations Manager, Kraft Foodservice (distributor to foodservice industry). From prior to 1989 to March 1990, owner/operator Rocky Rococo Pizza (two restaurants in Gainesville, Florida). James H. Taylor 36 Vice President and Treasurer of From September 1989 to October Hamilton Beach/Proctor-Silex 1990, Vice President and (since October 1990) Treasurer of Proctor-Silex. From prior to 1989 to September 1989, Corporate Treasurer of Proctor-Silex.
-22- 24 PRINCIPAL OFFICERS OF THE COMPANY'S SUBSIDIARIES C. NORTH AMERICAN COAL
NAME AGE CURRENT POSITION OTHER POSITIONS Clifford R. Miercort 54 President of North American Coal (since prior to 1989) and Chief Executive Officer of North American Coal (since April 1989) H. Dean Jacot 51 Executive Vice President and From prior to 1989 to October 1989, Chief Operating Officer of Vice President of North American North American Coal (since Coal. October 1989) Herschell A. Cashion 51 Vice President - Business Development of North American Coal (since prior to 1989) Thomas A. Koza 47 Vice President - Law and From prior to 1989 to July 1990, Administration of North Vice President, General Counsel American Coal (since October and Secretary of NACCO. From prior 1989); Secretary of North to 1989 to October 1989, Vice American Coal (since prior to 1989) President and General Counsel of North American Coal. K. Donald Grischow 46 Controller of North American From prior to 1989 to April 1989, Coal (since prior to 1989); and Assistant Treasurer of North Treasurer of North American Coal American Coal. (since April 1989)
-23- 25 PRINCIPAL OFFICERS OF THE COMPANY'S SUBSIDIARIES D. KITCHEN COLLECTION
NAME AGE CURRENT POSITION OTHER POSITIONS Randall D. Lynch 47 President and Chief Executive Officer of Kitchen From prior to 1989 to June 1991, Collection (since June 1991) President of Kitchen Collection. Randolph J. Gawelek 46 Executive Vice President and Secretary of Kitchen Collection (since prior to 1989)
-24- 26 PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS NACCO Industries, Inc. Class A common stock is traded on the New York Stock Exchange. The ticker symbol is NC. Because of transfer restrictions, no trading market has developed, or is expected to develop, for the Company's Class B common stock. The Class B common stock is convertible into Class A common stock on a one-for-one basis. The high and low market prices for the Class A common stock and dividends per share for both classes of stock for the past two years are presented in the table below:
1993 ------------------------------------- SALES PRICE CASH ------------------- HIGH LOW DIVIDEND ------ ------- -------- First quarter $55.00 - $44.00 16.0c. Second quarter $58.25 - $50.00 16.5c. Third quarter $52.13 - $43.63 16.5c. Fourth quarter $52.00 - $42.00 16.5c.
1992 ------------------------------------ Sales Price Cash -------------------- High Low Dividend ------- ------- -------- First quarter $55.50 - $46.63 15.5c. Second quarter $60.00 - $41.50 16.0c. Third quarter $47.50 - $37.13 16.0c. Fourth quarter $52.25 - $34.25 16.0c.
At December 31, 1993, there were approximately 900 Class A common stockholders of record and 600 Class B common stockholders of record. -25- 27 ITEM 6. SELECTED FINANCIAL DATA NACCO Industries, Inc. and Subsidiaries
Year Ended December 31 -------------------------------------------------------------------------------------------- 1993 1992 1991 1990 1989 -------------- ------------- ------------- ------------- -------------- (In thousands, except per share, percentage and employee data) Total revenues $ 1,549,371 $ 1,483,779 $ 1,369,195 $ 1,384,993 $ 1,187,570 Operating profit $ 93,384 $ 101,280 $ 94,532 $ 106,484 $ 125,363 Income before extraordinary charge $ $11,593 $ 22,868 $ 20,038 $ 28,189 $ 55,820 Extraordinary charge, net-of-tax (3,292) (110,000) ------------- ------------ --------------- ---------------- --------------- Net income (loss) $ 8,301 $ (87,132) $ 20,038 $ 28,189 $ 55,820 Total assets $ 1,642,493 $ 1,684,889 $ 1,629,663 $ 1,767,098 $ 1,724,767 Notes payable $ 357,788 $ 459,906 $ 442,279 $ 533,692 $ 605,874 Stockholders' equity $ 235,626 $ 238,316 $ 350,188 $ 353,293 $ 303,986 Total employees 10,879 10,497 9,858 11,111 10,725 Per share of stock: Income before extraordinary charge $ 1.30 $ 2.57 $ 2.26 $ 3.18 $ 6.29 Extraordinary charge, net-of-tax (0.37) (12.37) -------------- ------------- --------------- --------------- --------------- Net income (loss) $ 0.93 $ (9.80) $ 2.26 $ 3.18 $ 6.29 Cash dividends $ .655 $ .635 $ .615 $ .595 $ .575 Market value $ 51.50 $ 51.75 $ 47.50 $ 30.25 $ 55.50 Stockholders' equity $ 26.35 $ 26.67 $ 39.43 $ 39.79 $ 34.25 Return on stockholders' equity 5%* 7%* 6% 8% 21% Average shares outstanding 8,938 8,891 8,878 8,877 8,874
* Based on net income before extraordinary charge. -26- 28 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FINANCIAL SUMMARY Income before extraordinary charge for 1993 was $11.6 million, or $1.30 per share, compared with income before extraordinary charge of $22.9 million, or $2.57 per share, in 1992. Net income for 1991 was $20.0 million, or $2.26 per share. An extraordinary charge of $3.3 million, or $0.37 per share, was recognized in 1993 resulting in net income of $8.3 million, or $0.93 per share. This extraordinary charge relates to the retirement of NACCO Materials Handling Group's Hyster-Yale 12 3/8% subordinated debentures and is discussed in more detail in Note B to the consolidated financial statements on page F-11 and in this discussion and analysis on page 32. In 1992 an extraordinary charge of $110.0 million, or $12.37 per share, was recognized as a result of the Coal Industry Retiree Health Benefit Act of 1992. The 1992 extraordinary charge is discussed in more detail in Note B to the consolidated financial statements on page F-11 and in this discussion and analysis on page 49. ACCOUNTING CHANGE The Company has adopted Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes" (SFAS 109), effective January 1, 1993, and has elected to retroactively apply its provisions to January 1, 1989, as permitted by this Standard. Accordingly, retained earnings and net goodwill have been adjusted as of January 1, 1991, to reflect the cumulative impact of applying this Standard, and the consolidated financial statements and subsidiary financial data for the years ending December 31, 1992 and 1991, have been restated for the effects of SFAS 109. The adoption of this Standard is discussed in more detail in Notes A and M to the consolidated financial statements on pages F-10 and F-20. SEGMENT INFORMATION NACCO Industries, Inc. ("NACCO," the parent company) has four operating subsidiaries, The North American Coal Corporation ("North American Coal"), NACCO Materials Handling Group, Inc. ("NACCO Materials Handling Group"), Hamilton Beach/Proctor-Silex, Inc. ("Hamilton Beach/Proctor-Silex"), and The Kitchen Collection, Inc. ("Kitchen Collection"). These four subsidiaries operate in distinct business environments, and the results of operations and financial condition are best discussed at the subsidiary level. Results by segment as reported in the financial statements are summarized in Note P to the consolidated financial statements on page F-25. -27- 29 MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION NACCO INDUSTRIES, INC. AND SUBSIDIARIES--Continued NACCO MATERIALS HANDLING GROUP NACCO Materials Handling Group, 97% owned by NACCO, designs, manufactures and markets forklift trucks and related service parts under the Hyster and Yale brand names. FINANCIAL REVIEW The results of operations for NACCO Materials Handling Group were as follows for the year ended December 31:
1993 1992 1991 ------ ------ ------ (In millions) Revenues North America $645.4 $579.0 $499.2 Europe 220.5 251.5 264.1 Asia 42.3 35.4 27.3 ------ ------ ------ $908.2 $865.9 $790.6 ====== ====== ====== Operating profit North America $ 40.3 $ 15.5 $ 2.2 Europe (2.4) 28.7 38.7 Asia 1.7 .8 .5 Eliminations (.7) .1 ------ ------ ------ $ 39.6 $ 44.3 $ 41.5 ====== ====== ====== Net income (loss) before extraordinary charge $ (5.1) $ 1.3 $ 1.1 Extraordinary charge (3.3) ------ ------ ------ Net income (loss) $ (8.4) $ 1.3 $ 1.1 ====== ====== ======
-28- 30 MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION NACCO INDUSTRIES, INC. AND SUBSIDIARIES--Continued NACCO MATERIALS HANDLING GROUP--Continued FINANCIAL REVIEW--Continued 1993 COMPARED WITH 1992 The following schedule details the components of the changes in revenues, operating profit and net income (loss) for 1993 compared with 1992:
Net Operating Income Revenues Profit (Loss) -------- ---------- --------- (In millions) 1992 $865.9 $44.3 $1.3 Increase (Decrease) in 1993 from: Unit volume 49.8 7.1 4.7 Sales mix 15.1 1.2 .8 Average sales price 8.2 8.2 5.4 Service parts 6.4 6.6 4.4 Manufacturing cost (10.8) (7.1) Other operating expense (.7) (.5) Foreign currency translation (37.2) (16.3) (10.8) Other income and expense (1.0) Differences between effective and statutory tax rates (1.8) Change in statutory tax rate (.5) Extraordinary item (3.3) ------ ------ -------- 1993 $908.2 $39.6 $( 8.4) ====== ===== =======
Improved economic conditions in North America, partially offset by continued weakness in most of Europe and Japan, resulted in increased unit volume in 1993. While continued price discounting prevented significant price improvements in 1993 in the forklift industry, pricing in North America and Europe has been favorable when compared with 1992. Although sales mix changes to higher-priced products in both North America and Europe during 1993 had a favorable impact on revenues, the impact on operating profit was not proportionate because mix shifted to lower-margin products. NACCO Materials Handling Group also realized improved global market share in 1993. Service parts business continued to recover in North America, which included higher volumes and sales of higher-margin service parts resulting in a favorable impact on revenues and operating profit. Higher revenues from the North American service parts business were partially offset by weak European markets. Favorable service parts mix, however, reduced the impact of lower European volume on operating profit from the service parts business. -29- 31 MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION NACCO INDUSTRIES, INC. AND SUBSIDIARIES--Continued NACCO MATERIALS HANDLING GROUP--Continued FINANCIAL REVIEW--Continued 1993 COMPARED WITH 1992--Continued Manufacturing costs were higher in 1993 compared with 1992 primarily as a result of start-up costs associated with new product introductions and unfavorable fixed manufacturing cost variances due to the level of production volume in Europe. A weaker British pound sterling in 1993 compared with 1992 resulted in lower translated sales and profits in Europe. In addition, a stronger Japanese yen in 1993 adversely affected operating profit because it increased the cost of products and parts sourced from Japan. 1992 COMPARED WITH 1991 The following schedule details the components of the changes in revenues, operating profit and net income for 1992 compared with 1991:
Operating Net Revenues Profit Income -------- ------------ ------ (In millions) 1991 $790.6 $41.5 $1.1 Increase (Decrease) in 1992 from: Unit volume 86.4 20.0 13.2 Sales mix (29.8) (14.3) (9.4) Average sales price (3.7) (3.7) (2.4) Service parts 11.5 5.3 3.5 Manufacturing cost 5.2 3.4 Reduction in restructuring reserve 1.5 1.0 Other operating expense (12.1) (8.0) Foreign currency translation 10.9 .9 .6 Other income and expense 3.6 Differences between effective and statutory tax rates (5.3) ------ -------- ----- 1992 $865.9 $44.3 $1.3 ====== ===== ====
Increased unit volume in 1992 was the result of economic improvement in North America partially offset by softening markets in Europe and the Far East. In addition, NACCO Materials Handling Group increased market share in North America and Europe in 1992. Price discounting, which continued to be prevalent in the forklift industry, and mix changes to lower margin-products, primarily in Europe, reduced revenues and operating profits. The improvement in results of operations from service parts was primarily due to increased parts volume. Manufacturing costs decreased due to reductions in overhead from continued savings realized from the consolidation of operations and higher overall volume. Operating expenses increased as marketing programs for existing and new products and new product development programs were implemented in 1992. -30- 32 MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION NACCO INDUSTRIES, INC. AND SUBSIDIARIES--Continued NACCO MATERIALS HANDLING GROUP--Continued FINANCIAL REVIEW---Continued OTHER INCOME AND EXPENSE Below is a detail of other income and expense for the year ended December 31:
1993 1992 1991 ------ ------ ------ (In millions) Other income (expense) Interest income $ .8 $ 1.5 $ 4.8 Interest expense (40.4) (44.2) (49.5) Other-net (1.7) 2.9 ( .5) ------ ------ ------ $(41.3) $(39.8) $(45.2) ------ ------ ------ ------ ------ ------ Interest Income
The decrease in interest income in 1993 compared with 1992 is due primarily to lower levels of excess cash available for investment. The substantial reduction in interest income in 1992 compared with 1991 is the result of lower levels of excess cash available for investment, primarily in Europe, and lower interest rates. Interest Expense The debt restructuring and equity infusion in 1993 reduced outstanding debt and lowered overall effective interest rates resulting in reduced interest expense in 1993 (see the "Extraordinary Charge" discussion which follows). The reduction in interest expense in 1992 compared with 1991 is due to lower levels of debt and lower interest rates. Other-Net Other-net for 1993 is expense of $1.7 million compared with income of $2.9 million in 1992 and expense of $0.5 million in 1991. Other-net consists primarily of equity in the earnings of the Sumitomo-Yale 50% owned joint venture (S-Y) and gains and losses on the sale of assets. The increase in the value of the Japanese yen compared with other global currencies and depressed European and Japanese markets resulted in significant losses of approximately $3.9 million at S-Y in 1993. During the second quarter of 1993 NACCO Materials Handling Group sold its former manufacturing site in Wednesfield, England for $3.3 million resulting in a net pretax gain of $2.1 million. During 1992 NACCO Materials Handling Group experienced foreign currency exchange gains due to the decrease in the value of the British pound sterling compared with other currencies. During 1993 these exchange gains were not repeated. In 1993 NACCO Materials Handling Group hedged this exposure. Other-net was also favorably affected in 1992 by reduced losses from retail branch operations classified as net assets held for sale. -31- 33 MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION NACCO INDUSTRIES, INC. AND SUBSIDIARIES--Continued NACCO MATERIALS HANDLING GROUP--Continued FINANCIAL REVIEW--Continued PROVISION FOR INCOME TAXES Below is a detail of income (loss) before income taxes, provisions (benefit) for income taxes and the effective tax rate for the year ended December 31:
1993 1992 1991 ---- ---- ---- (In millions, except percentage data) Income (loss) before income taxes and extraordinary charge $(1.7) $4.5 $(3.7) Provision (benefit) for income taxes $ 3.4 $3.2 $(4.8) Effective tax rate Not meaningful 70.7% (128.5)%
Expenses not deductible for tax purposes, which primarily include amortization of goodwill associated with the acquisition of Hyster Company, were approximately level in 1993, 1992 and 1991. These non-deductible expenses increased the effective tax rate above statutory levels and resulted in a tax provision in 1993 despite a loss before income taxes. In addition, NACCO Materials Handling Group began providing for U.S. taxes in 1993 on foreign earnings taxed at overall lower rates in anticipation of future repatriations. Due to higher levels of pretax income in 1992, the non-deductible expenses had a smaller impact on the effective tax rate in 1992. In addition, the tax benefit reported in 1991 includes a favorable adjustment related to estimated income tax liabilities for prior years of $2.6 million. No such adjustment was required in 1992 or 1993. EXTRAORDINARY CHARGE The extraordinary charge in 1993 of $3.3 million, net of $2.0 million in tax benefits, was recognized in the second quarter of 1993. This charge represents the loss from the write-off of premiums and unamortized debt issuance costs associated with the retirement of approximately $50.2 million face value of NACCO Materials Handling Group's Hyster-Yale 12-3/8% subordinated debentures. NACCO Materials Handling Group retired the debentures as a result of a contribution by NACCO of previously purchased subordinated debentures with a face value of $23.7 million, and an equity infusion of $28.3 million ($26.7 million from NACCO) which enabled NACCO Materials Handling Group to call approximately $26.5 million face value of subordinated debentures at a price of 107.5. Refer to Note G, "Revolving Credit Agreements and Notes Payable," for additional information. BACKLOG NACCO Materials Handling Group's backlog of orders at December 31, 1993, was approximately 12,100 forklift truck units, compared with 12,100 and 10,100 units at December 31, 1992 and 1991, respectively. While retail customer order demand grew in North America during 1993, dealers have remained cautious in placing future factory orders, and factory-to-dealer delivery lead-times have been reduced resulting in level backlog between years. During 1992 backlog increased significantly in North America, while Europe and the Far East continued to experience reduced levels of backlog. The market declines experienced in North America and in most European countries during 1991 resulted in lower 1991 backlog. -32- 34 MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION NACCO INDUSTRIES, INC. AND SUBSIDIARIES--Continued NACCO MATERIALS HANDLING GROUP--Continued 1994 OUTLOOK Historically, the forklift truck industry has been cyclical. Economic conditions in the various markets in which the industry's customers operate affect demand. Current external economic forecasts and recent factory order information indicate continued economic improvement in North America. However, Europe and Japan continue to be plagued by recessionary pressures. While no near-term economic recovery is forecast for these regions, improvements in the North American economy and favorable worldwide interest rates should lead to a global recovery. NACCO Materials Handling Group will continue to introduce new products in 1994. Improved profitability is dependent on continual efforts to reduce costs. LIQUIDITY AND CAPITAL RESOURCES The previously discussed retirement of subordinated debentures, the majority of which were retired during the third quarter of 1993, has been reflected as a reduction in notes payable on the consolidated balance sheet as of December 31, 1993. In connection with the retirement of these subordinated debentures, NACCO Materials Handling Group amended its existing senior bank credit agreement. This amendment permits equity infusions to be used for cash purchases of subordinated debentures. In addition, after August 1994, the amendment permits NACCO Materials Handling Group to use internally generated funds to retire up to $75.0 million of additional subordinated debentures if certain debt-to-capitalization ratios are achieved. The amendment also modifies the bank loan repayment schedules and provides NACCO Materials Handling Group with more favorable performance-based interest rate incentives. The amendment to the bank loan repayment schedule reduced the required payments in 1994 and 1995 by $35.0 million and $16.0 million, respectively. In addition, the original 1996 installment has been increased by $0.7 million, and the amended schedule requires a $50.3 million payment in 1997. NACCO Materials Handling Group had available all of its $100.0 million revolving credit facility at December 31, 1993. Expenditures for property, plant and equipment were $20.2 million in 1993 and $24.3 million in 1992, and are anticipated to be approximately $25.0 million in 1994. The majority of these expenditures are for improvements in manufacturing efficiencies and tooling related to the production of various new products. Capital for these expenditures has been and is expected to be provided primarily by internally generated funds and capital grants from local governments. -33- 35 MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION NACCO INDUSTRIES, INC. AND SUBSIDIARIES--Continued NACCO MATERIALS HANDLING GROUP--Continued LIQUIDITY AND CAPITAL RESOURCES--Continued During 1993 NACCO Materials Handling Group repatriated $18.3 million of unremitted earnings from certain foreign subsidiaries, which were used in operations. Taxes associated with these earnings were previously provided for financial reporting purposes. Future repatriations of foreign earnings may be affected by changes in currency exchange rates and foreign and U.S. tax rates. NACCO Materials Handling Group completed the sales of all of its retail operations during 1992. Sales proceeds in 1992 of approximately $21.3 million, which resulted in net cash received of approximately $18.0 million after the payment of taxes and expenses, were used to reduce bank debt. -34- 36 MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION NACCO INDUSTRIES, INC. AND SUBSIDIARIES--Continued HAMILTON BEACH/PROCTOR-SILEX Hamilton Beach/Proctor-Silex, 80% owned by NACCO, is a leading manufacturer of small electric appliances. The housewares business is seasonal. A majority of revenues and operating profit occurs in the second half of the year when sales of small electric appliances increase significantly for the fall holiday selling season. FINANCIAL REVIEW The results of operations for Hamilton Beach/Proctor-Silex were as follows for the year ended December 31:
1993 1992 1991 ------ ------ ----- (In millions) Revenues $356.3 $358.6 $351.9 Operating profit $ 11.8 $ 19.3 $ 20.3 Net income (loss) $ (1.0) $ 5.4 $ 2.5
1993 COMPARED WITH 1992 The following schedule details the components of the changes in revenues, operating profit and net income (loss) for 1993 compared with 1992:
Net Operating Income Revenues Profit (Loss) -------- ------------ -------- (In millions) 1992 $358.6 $19.3 $5.4 Increase (Decrease) in 1993 from: Unit volume 14.3 3.8 2.4 Sales mix (10.2) (2.6) (1.7) Average sales price (3.5) (3.5) (2.3) Manufacturing cost (1.1) (.7) Other operating expense (1.2) (.8) Foreign currency translation (2.9) (2.9) (1.9) Other income and expense (2.1) Differences between effective and statutory tax rates .5 Change in statutory tax rate .2 ------ ----- ----- 1993 $356.3 $11.8 $(1.0) ====== ===== =====
-35- 37 MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION NACCO INDUSTRIES, INC. AND SUBSIDIARIES--Continued HAMILTON BEACH/PROCTOR-SILEX--Continued FINANCIAL REVIEW--Continued 1993 COMPARED WITH 1992--Continued The higher volume is primarily the result of increased unit sales of coffeemakers, blenders, steam grills, food processors, toaster ovens and commercial roasters. A significant decrease in unit sales of juice extractors has offset the increases in other product lines. The adverse sales mix is the result of the reduced juice extractor sales, which yielded improved margins in 1992, and a shift away from sales of full-size irons. In addition, the increased volume in blenders, food processors, toaster ovens and coffeemakers was primarily in opening price-point models. Foreign currency translation negatively influenced operating results in 1993 due to the drop in the value of the Canadian dollar to the U.S. dollar. The increase in other operating expense in 1993 is primarily the result of higher marketing and selling costs. 1992 COMPARED WITH 1991 The following schedule details the components of the changes in revenues, operating profit and net income for 1992 compared with 1991:
Operating Net Revenues Profit Income -------- ------------ ------ (In millions) 1991 $351.9 $20.3 $2.5 Increase (Decrease) in 1992 from: Unit volume 18.7 5.2 3.5 Sales mix (8.1) (2.2) (1.5) Average sales price (3.9) (3.9) (2.6) Manufacturing cost (1.3) (.8) Other operating expense 1.2 .8 Other income and expense 3.5 ------ ----- ---- 1992 $358.6 $19.3 $5.4 ====== ===== ====
Improved unit volume performance resulted primarily from a significant increase for 1992 in sales of juice extractors and increased sales of toasters and certain other products. The unit volume improvement was tempered somewhat by decreased sales of blenders and close-out products as compared with 1991. Increased sales of opening price-point models, primarily in the coffeemaker, toaster oven, iron and toaster product lines, and continued price competition in the housewares industry have reduced average selling prices. Reductions in other operating expenses resulted primarily from additional efficiencies gained from the merger of Hamilton Beach and Proctor-Silex which reduced selling and administrative expenses. -36- 38 MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION NACCO INDUSTRIES, INC. AND SUBSIDIARIES--Continued HAMILTON BEACH/PROCTOR-SILEX--Continued FINANCIAL REVIEW--Continued OTHER INCOME AND EXPENSE Below is a detail of other income and expense for the year ended December 31:
1993 1992 1991 ------ ------ ------ (In millions) Other income (expense) Interest expense $ (7.7) $ (8.6) $(12.8) Other-net (4.1) (1.1) ------ ------- ------ $(11.8) $ (8.6) $(13.9) ====== ======= ======
Interest Expense The reduction in interest expense in 1993 compared with 1992 is due to lower levels of borrowings. The reduction in interest expense in 1992 compared with 1991 is due to lower interest rates and improved levels of working capital. Hamilton Beach/Proctor-Silex received the maximum reductions available to its interest rates during 1993 when certain ratios were achieved. Other-Net The increase in other-net in 1993 results primarily from the settlement of certain litigation during the year. PROVISION FOR INCOME TAXES Below is a detail of income before income taxes, provisions for income taxes and the effective tax rate for the year ended December 31:
1993 1992 1991 --------- --------- ------- (In millions, except percentage data) Income before income taxes -- $10.7 $6.4 Provision for income taxes $1.0 $ 5.3 $3.9 Effective tax rate Not meaningful 50.0% 60.2%
Expenses not deductible for tax purposes, which include amortization of goodwill and other purchase price adjustments associated with the Hamilton Beach and Proctor-Silex acquisitions, were approximately level in 1993, 1992 and 1991. These non- deductible expenses resulted in a tax provision in 1993 despite breakeven pretax earnings. Due to higher levels of pretax income in 1992 these non-deductible expenses had a smaller impact on the effective tax rate in 1992 compared with 1991. -37- 39 MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION NACCO INDUSTRIES, INC. AND SUBSIDIARIES--Continued HAMILTON BEACH/PROCTOR-SILEX--Continued FINANCIAL REVIEW--Continued 1994 OUTLOOK Hamilton Beach/Proctor-Silex expects 1994 total industry unit shipments to be slightly lower than 1993 levels for most core products. During 1994, Hamilton Beach/Proctor-Silex expects to introduce a number of new and redesigned products to better meet consumer demand and to improve its product placements. Improved profitability is dependent on continual efforts to reduce costs. LIQUIDITY AND CAPITAL RESOURCES The Hamilton Beach/Proctor-Silex credit agreement requires that a portion of annual excess cash flow that is generated, as defined in the agreement, be used to prepay the term note. Accordingly, Hamilton Beach/ Proctor-Silex prepaid $4.7 million of its 1997 installment in February 1993, $5.0 million of the 1997 installment in September 1992 and $4.7 million of the 1997 installment and $2.0 million of the 1993 installment in March 1992. As a result of effective working capital management, the revolving credit facility was reduced to $95.0 million in the second quarter of 1993, the availability of which is determined based on percentages of eligible accounts receivable and inventory. As of December 31, 1993, $26.1 million of the revolving credit facility was available. Expenditures for property, plant and equipment were $12.2 million in 1993 and $10.8 million in 1992, and are anticipated to be approximately $14.0 million in 1994. The primary focus of these expenditures is to increase manufacturing efficiency and to acquire tooling for new and existing products. Capital for these expenditures has been and is expected to be provided primarily by internally generated funds and short-term borrowings. -38- 40 MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION NACCO INDUSTRIES, INC. AND SUBSIDIARIES--Continued NORTH AMERICAN COAL North American Coal mines and markets lignite for use primarily as fuel for power generation by electric utilities and general industry. The lignite is surface mined in North Dakota, Texas and Louisiana. Total coal reserves approximate 2.2 billion tons, with 1.4 billion tons committed to electric utility customers pursuant to long-term contracts. FINANCIAL REVIEW Substantially all of North American Coal's operations are conducted by project mining subsidiaries. These subsidiaries ship coal to utility customers pursuant to long-term contracts, which expire between 2001 and 2013. These long-term contracts provide for the sale of lignite based on actual cost plus a profit per ton. The profit component is adjusted for the effects of inflation as measured by government-published indices. Due to the cost-plus nature of these contracts, revenues and operating profits are impacted by increases and decreases in operating costs as well as sales tons. Net income, however, is not significantly affected by changes in operating costs at these contract mines. The results for "Other mining operations" have been adjusted to exclude the previously combined results of Bellaire Corporation, a non-operating subsidiary of NACCO. Bellaire's results are reviewed on pages 48 and 49 of this discussion and analysis. The results of operations for North American Coal were as follows for the year ended December 31:
1993 1992 1991 ------ ------ ------ (In millions) Tons sold Project mining subsidiaries 26.1 23.9 21.6 Other mining operations .4 .6 .1 ------ ------ ------ 26.5 24.5 21.7 ====== ====== ====== Revenues Project mining subsidiaries $216.4 $191.3 $173.7 Other mining operations 15.9 19.8 8.7 ------ ------ ------ $232.3 $211.1 $182.4 ====== ====== ====== Operating profit Project mining subsidiaries $ 42.0 $ 34.4 $ 34.1 Other mining operations 2.2 6.4 1.1 ------ ------ ------ $ 44.2 $ 40.8 $ 35.2 ====== ====== ====== Net income Project mining subsidiaries $ 15.7 $ 16.1 $ 16.9 Other mining operations .3 3.4 .3 ------ ------ ------ $ 16.0 $ 19.5 $ 17.2 ====== ====== ======
-39- 41 MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION NACCO INDUSTRIES, INC. AND SUBSIDIARIES--Continued NORTH AMERICAN COAL--Continued FINANCIAL REVIEW--Continued 1993 COMPARED WITH 1992 North American Coal sold a record 26.5 million tons of lignite in 1993 compared with 24.5 million tons in 1992. Higher sales tonnage and higher interest expense at the project mines, which is included in the cost of coal passed through to the utility customers, increased revenues and operating profit in 1993 compared with 1992. The decrease in net income from project mining subsidiaries is due to a change in the mix of tons sold to lower-profit-per-ton lignite reserves. The loss of the minimum royalty payments (see "Other" which follows) reduced the revenues and operating profit of other mining operations by approximately $3.6 million in 1993. 1992 COMPARED WITH 1991 North American Coal sold 24.5 million tons of lignite in 1992, compared with 21.7 million tons in 1991. Revenues increased in 1992 to $211.1 million compared with $182.4 million in 1991. Operating profit increased to $40.8 million in 1992 from $35.2 million in 1991, principally due to increased volume. Decreased average selling prices somewhat offset the impact from volume increases. In 1992 other mining operations include a subsidiary which was not consolidated prior to 1992. OTHER INCOME AND EXPENSE Below is a detail of other income and expense for the year ended December 31:
1993 1992 1991 ------ ------ ------ (In millions) Other income (expense) Interest income $ 2.1 $ 2.1 $ 2.1 Interest expense (19.3) (14.2) (16.2) Other-net (1.1) (1.4) 1.1 ------ ------ ------ $(18.3) $(13.5) $(13.0) ====== ====== ======
-40- 42 MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION NACCO INDUSTRIES, INC. AND SUBSIDIARIES--Continued NORTH AMERICAN COAL--Continued FINANCIAL REVIEW--Continued OTHER INCOME AND EXPENSE--Continued Interest Expense Interest expense related to the financing of the project mining subsidiaries is $18.0 million for 1993, $13.2 million for 1992 and $13.6 million for 1991. Such interest expense is included in the cost of coal which is passed through to the utility customers. Other-Net Other-net for 1993 is expense of $1.1 million as compared with expense of $1.4 million in 1992 and income of $1.1 million in 1991. Other-net includes equity earnings of unconsolidated subsidiaries of $1.6 million in 1991 related to a subsidiary which has been consolidated beginning in 1992. PROVISION FOR INCOME TAXES Below is a detail of income before income taxes, provisions for income taxes and the effective tax rate for the year ended December 31:
1993 1992 1991 ---- ---- ---- (In millions, except percentage data) Income before income taxes $25.9 $27.3 $22.2 Provision for income taxes $ 9.9 $ 7.8 $ 5.0 Effective tax rate 38.1% 28.5% 22.5%
The increase in the 1993 effective tax rate compared with 1992 is primarily due to the impact of SFAS 109 on accounting for percentage depletion deductions, the increase in the federal tax rate and miscellaneous state income tax changes. The increase in the 1992 effective tax rate compared with 1991 was primarily due to the effect of SFAS 109 on accounting for percentage depletion. -41- 43 MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION NACCO INDUSTRIES, INC. AND SUBSIDIARIES--Continued NORTH AMERICAN COAL--Continued FINANCIAL REVIEW--Continued OTHER In December 1992 North American Coal Royalty Company ("Royalty Company"), a wholly owned subsidiary of North American Coal, and a public utility company agreed to amend an existing Lignite Lease and Sublease Agreement. The parties have agreed that, in light of the delayed development of the mining project to which such leases were assigned, effective January 1, 1993, the utility is no longer obligated to pay Royalty Company minimum royalties, which amounted to approximately $3.6 million per year. Termination of this minimum royalty obligation reduced North American Coal's net income approximately $2.4 million, after tax, in 1993. Under the original agreement, this royalty obligation would have terminated at the end of 2005. 1994 OUTLOOK North American Coal expects to increase the tons of coal shipped in 1994, and should surpass all previous production records. North American Coal continues to seek opportunities for future growth by acquiring or developing high-quality, low-sulphur western coal. LIQUIDITY AND CAPITAL RESOURCES North American Coal has in place a $50.0 million revolving credit facility. The expiration date of this facility (which currently is September 1996) can be extended one additional year, on an annual basis, upon the mutual consent of North American Coal and the bank group, beginning in 1994. North American Coal had $34.0 million of its revolving credit facility available at December 31, 1993. The financing of the project mining subsidiaries, which is guaranteed by the utility customers, comprises long-term equipment leases, notes payable and non-interest-bearing advances from customers. The obligations of the project mining subsidiaries do not impact the short- or long-term liquidity of the Company and are without recourse to NACCO or North American Coal. These arrangements do not prevent the project mining subsidiaries from paying dividends in amounts equal to their retained earnings. Expenditures for property, plant and equipment by the project mining subsidiaries were $23.0 million in 1993 and $37.4 million in 1992, and are anticipated to be approximately $30.6 million in 1994. These expenditures relate to the development and improvement of the project mining subsidiaries' mines and are financed by the utility customers. -42- 44 MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION NACCO INDUSTRIES, INC. AND SUBSIDIARIES--Continued NORTH AMERICAN COAL--Continued LIQUIDITY AND CAPITAL RESOURCES--Continued The condensed balance sheets for North American Coal's project mining subsidiaries and other mining operations were as follows at December 31:
Project Mining Other Mining Subsidiaries Operations -------------------- ------------------ 1993 1992 1993 1992 ------ ------ ------ ------ (In millions) Net current assets $ 10.5 $ 3.2 $12.8 $14.8 Property, plant and equipment, net 296.0 302.3 21.3 22.0 Net other assets (liabilities) 37.8 35.5 (5.8) (3.9) Obligations of project mining subsidiaries (338.5) (334.1) Long-term debt (.4) (.5) ------- ------- ----- ----- Stockholder's equity $ 5.8 $ 6.9 $27.9 $32.4 ======= ======= ===== =====
-43- 45 MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION NACCO INDUSTRIES, INC. AND SUBSIDIARIES--Continued THE KITCHEN COLLECTION Kitchen Collection is a national specialty retailer of kitchenware, tableware, small electric appliances and related accessories. The specialty retail business is seasonal with the majority of its revenues and operating profit being generated in the fourth quarter during the fall holiday selling season. FINANCIAL REVIEW The results of operations for Kitchen Collection were as follows for the year ended December 31:
1993 1992 1991 -------- -------- --------- (In millions, except number of stores) Number of stores 104 86 72 Revenues $53.7 $45.5 $36.8 Operating profit $ 4.8 $ 4.4 $ 2.8 Net income $ 2.7 $ 2.4 $ 1.5
1993 COMPARED WITH 1992 The following schedule details the components of the changes in revenues, operating profit and net income for 1993 compared with 1992:
Operating Net Revenues Profit Income -------- ------------- ------ (In millions) 1992 $45.5 $4.4 $2.4 Increase (Decrease) in 1993 from: Stores opened in 1993 4.8 .5 .3 Stores opened in 1992 4.4 .6 .4 Comparable stores (1.0) (.4) (.3) Other (.3) (.1) ----- ---- ---- 1993 $53.7 $4.8 $2.7 ----- ---- ---- ----- ---- ----
Kitchen Collection experienced mixed results during 1993. The net addition of 18 new stores during 1993 and a full year's operations of stores opened during 1992 resulted in increases to revenues and operating profits. Results at comparable stores were lower in 1993 compared with 1992 as the economic recovery has not yet impacted specialty retailers. The use of markdowns on selected products to increase customer traffic and competitive pricing pressures on specific product lines have negatively affected operating profit. -44- 46 MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION NACCO INDUSTRIES, INC. AND SUBSIDIARIES--Continued THE KITCHEN COLLECTION--Continued FINANCIAL REVIEW--Continued 1992 COMPARED WITH 1991 The following schedule details the components of the changes in revenues, operating profit and net income for 1992 compared with 1991:
Operating Net Revenues Profit Income -------- ----------- ------ (In millions) 1991 $36.8 $2.8 $1.5 Increase (Decrease) in 1992 from: Stores opened in 1992 3.4 .4 .2 Stores opened in 1991 2.5 .5 .3 Comparable stores 2.8 .9 .6 Other (.2) (.1) Other income and expense .1 Differences between effective and statutory tax rates (.2) ------ ---- ---- 1992 $45.5 $4.4 $2.4 ===== ==== ====
Kitchen Collection's revenues and operating profit increased in 1992 through the addition of new stores and improved results at comparable stores. The improved results at the comparable stores were due to an increase in consumer spending activity. While revenues increased substantially, operating profit increased by a higher amount due to increased volume, a mix shift to higher-margin products and less use of discounts and markdowns. OTHER INCOME AND EXPENSE Interest expense was $0.1 million, $0.2 million and $0.4 million in 1993, 1992 and 1991, respectively. The reduction in interest expense in 1993 compared with 1992 and in 1992 compared with 1991 is due to lower levels of borrowings and lower interest rates. -45- 47 MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION NACCO INDUSTRIES, INC. AND SUBSIDIARIES--Continued THE KITCHEN COLLECTION--Continued FINANCIAL REVIEW--Continued PROVISION FOR INCOME TAXES Below is a detail of income before income taxes, provisions for income taxes and the effective tax rate for the year ended December 31:
1993 1992 1991 ------ ------ ------ (In millions, except percentage data) Income before income taxes $4.7 $4.2 $2.4 Provision for income taxes $2.0 $1.8 $.9 Effective tax rate 40.6% 41.6% 37.8%
LIQUIDITY AND CAPITAL RESOURCES Expenditures for property, plant and equipment were $1.1 million in 1993 and $0.6 million in 1992, and are anticipated to be approximately $1.4 million in 1994. These expenditures are primarily for new store openings and improvements to existing facilities and are funded internally. At December 31, 1993, Kitchen Collection had available all of its $2.5 million line of credit, which expires on May 31, 1994 and is renewable annually at that time. -46- 48 MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION NACCO INDUSTRIES, INC. AND SUBSIDIARIES--Continued NACCO AND OTHER FINANCIAL REVIEW ADMINISTRATIVE AND GENERAL EXPENSES NACCO incurred administrative and general expenses of $7.9 million, $8.2 million and $7.2 million during 1993, 1992 and 1991, respectively. OTHER INCOME AND EXPENSE Below is a detail of other income and expense for the year ended December 31:
1993 1992 1991 ------ ------ ------ (In millions) Other income (expense) Interest income $ 1.9 $ 1.2 Interest expense (2.3) (1.8) $ (2.9) Other-net 1.0 .2 .3 ----- -------- ------- $ .6 $ (.4) $ (2.6) ===== ======== ======
Interest income and expense primarily relate to intercompany items which are eliminated in consolidation. Other-net in 1993 includes a pension curtailment gain of $0.4 million. Refer to Note N, "Retirement Benefit Plans," for additional information. PROVISION FOR INCOME TAXES Below is a detail of loss before income taxes, income tax benefit and the effective tax rate for NACCO for the year ended December 31:
1993 1992 1991 ---- ---- ---- (In millions, except percentage data) Loss before income taxes $(7.3) $(8.6) $(9.8) Income tax benefit $(1.9) $(2.5) $(2.0) Effective tax rate 24.1% 28.9% 20.1%
INTEREST RATE PROTECTION NACCO Materials Handling Group, Hamilton Beach/Proctor-Silex and North American Coal have entered into interest rate swap agreements and/or purchased interest rate caps for portions of their floating rate debt. These interest rate swaps and caps provide protection against significant increases in interest rates. The Company evaluates its exposure to floating rate debt on an ongoing basis. -47- 49 MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION NACCO INDUSTRIES, INC. AND SUBSIDIARIES--Continued NACCO AND OTHER--Continued ENVIRONMENTAL MATTERS The Company's manufacturing operations, like those of other companies engaged in similar businesses, involve the use, disposal and cleanup of substances regulated under environmental protection laws. The Company's North American Coal subsidiary is impacted by the regulations of agencies under which it operates, particularly the federal Office of Surface Mining, the United States Environmental Protection Agency and associated state regulatory authorities. In addition, North American Coal is attentive to any changes which may arise due to proposed legislation concerning the Clean Air Act Amendments of 1990, reauthorization of the Resource Conservation and Recovery Act, the Clean Water Act, the Endangered Species Act and other regulatory actions. Compliance with these increasingly stringent standards results in higher expenditures for both capital improvements and operating costs. The Company's policies stress environmental responsibility and compliance with these regulations. Based on current information, management does not expect compliance with these regulations to have a material adverse effect on its financial condition or results of operations. LIQUIDITY AND CAPITAL RESOURCES Although the subsidiaries have entered into substantial debt agreements, NACCO has not guaranteed the long-term debt or any borrowings of its subsidiaries. The NACCO Materials Handling Group and Hamilton Beach/Proctor-Silex debt agreements include loan covenants which prohibit the payment of dividends to NACCO. The debt agreement at Kitchen Collection allows for the payment of dividends under certain circumstances. There are no such restrictions for North American Coal, and its dividends and advances are the primary source of cash for NACCO. The Company believes it can adequately meet all of its current and long-term commitments and operating needs. This outlook stems from amounts available under revolving credit facilities, the substantial prepayment of scheduled debt payments and the utility customers' funding of the project mining subsidiaries. BELLAIRE CORPORATION Bellaire Corporation ("Bellaire") is a non-operating subsidiary of NACCO. Bellaire's results of operations include royalty payments received on certain coal reserves and, during 1992 and 1991, the activities of the Indian Head Mine. The Indian Head Mine ceased mining operations in April 1992 when its sales contract expired due to the exhaustion of its economically recoverable coal reserves. Bellaire's revenues were $4.0 million, $6.8 million and $13.2 million in 1993, 1992 and 1991, respectively. During 1993 Bellaire had operating profit of $0.9 million compared with $0.7 million in 1992 and $1.9 million in 1991. Bellaire's net income before extraordinary charge was $4.0 million, $1.5 million and $6.0 million in 1993, 1992 and 1991, respectively. In 1993, Bellaire recognized a significant tax benefit due to the effect of the increase in the federal tax rate on its deferred taxes. -48- 50 MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION NACCO INDUSTRIES, INC. AND SUBSIDIARIES--Continued NACCO AND OTHER--Continued BELLAIRE CORPORATION--Continued In October 1992 the Coal Industry Retiree Health Benefit Act of 1992 was passed by Congress and signed into law. This legislation will require Bellaire to incur additional costs for retiree medical expenses of certain United Mine Worker retirees. Based upon information received from various sources and initial actuarial assumptions and analysis, a charge of $110.0 million (net of $56.7 million of tax benefits) was recognized in 1992 to reflect the estimated future payments related to this legislation. Annual payments required by this legislation are expected to be in the range of $2.0 million to $4.0 million per year after tax. These payments will tend to diminish over time, but could continue as long as 40 to 50 years, or as long as there are eligible participants. The tax benefit related to this charge will be realized as these cash payments are made. Management expects domestic taxable earnings to continue to be sufficient to realize the full amount of the deferred tax asset recognized. On January 29, 1993, Bellaire filed a lawsuit challenging the constitutionality of this new law. The condensed balance sheets for Bellaire were as follows at December 31:
1993 1992 ---- ---- (In millions) Net current assets $ 18.2 $ 19.3 Property, plant and equipment, net .5 .5 Deferred taxes and other assets 67.0 66.8 Obligation to United Mine Workers of America Combined Benefit Fund (163.2) (165.8) Other liabilities (21.2) (23.5) ------- ------- Deficit $ (98.7) $(102.7) ======= =======
The assets and liabilities of Bellaire represent the net assets of former mining operations, including Indian Head. The Obligation to United Mine Workers of America Combined Benefit relates to the previously discussed extraordinary charge. The deferred taxes relate to the Obligation to United Mine Workers of America Combined Benefit Fund. The other liabilities are obligations related to other former mining operations. The annual cash payments related to Bellaire's obligations, net of internally generated funds from royalties received, are funded by NACCO. -49- 51 MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION NACCO INDUSTRIES, INC. AND SUBSIDIARIES--Continued NACCO AND OTHER--Continued LIQUIDITY AND CAPITAL RESOURCES--Continued RECENTLY ISSUED ACCOUNTING STANDARDS The Company has not yet adopted SFAS No. 112 "Employers' Accounting for Postemployment Benefits." A discussion of this standard is included in Note O to the consolidated financial statements on page F-25 of this annual report. EFFECTS OF INFLATION The Company believes that inflation has not materially impacted its results of operations in 1993 and does not expect inflation to be a significant item in 1994. -50- 52 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The information required by this Item 8 is set forth at pages F-2 through F-42 of the Financial Statements and Supplementary Data contained in Part IV hereof. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE Not Applicable. -51- 53 PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT Information with respect to Directors of the Company is set forth in the 1994 Proxy Statement under the heading "Business to be Transacted -- 1. Election of Directors," which information is incorporated herein by reference. Information regarding the executive officers of the Company is included as Item 4A of Part I as permitted by Instruction 3 to Item 401(b) of Regulation S-K. ITEM 11. EXECUTIVE COMPENSATION Information with respect to executive compensation is set forth in the 1994 Proxy Statement under the headings "Business to be Transacted -- 1. Election of Directors -- Compensation of Directors," and "Compensation of Executive Officers," which information is incorporated herein by reference. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT Information with respect to security ownership of certain beneficial owners and management is set forth in the 1994 Proxy Statement under the heading "Business to be Transacted -- 1. Election of Directors -- Beneficial Ownership of Class A Common and Class B Common," which information is incorporated herein by reference. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Information with respect to certain relationships and related transactions is set forth in the 1994 Proxy Statement under the heading "Business to be Transacted -- 1. Election of Directors -- Compensation Committee Interlocks and Insider Participation," which information is incorporated herein by reference. -52- 54 PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K (a) (1) and (2) The response to Item 14(a)(1) and (2) is set forth beginning at page F-1 of this Annual Report on Form 10-K. (a) (3) Listing of Exhibits -- See the exhibit index beginning at page X-1 of this Annual Report on Form 10-K. (b) The Company has not filed any current reports on Form 8-K during the fourth quarter of 1993. (c) The response to Item 14(c) is set forth beginning at page X-1 of this Annual Report on Form 10-K. (d) Financial Statement Schedules -- The response to Item 14(d) is set forth beginning at page F-33 of this Annual Report on Form 10-K. -53- 55 SIGNATURES Pursuant to the requirements of Section 13 of the Securities Exchange Act of 1934, the Company has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized. NACCO Industries, Inc. By: Frank B. O'Brien --------------------------------- Frank B. O'Brien Senior Vice President - Corporate Development and Chief Financial Officer (Principal Financial Officer) Date: March 30, 1994 -54- 56 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. *Alfred M. Rankin, Jr. President and March 30, 1994 - ----------------------- Chief Executive Officer Alfred M. Rankin, Jr. (Principal Executive Officer), Director Frank B. O'Brien Senior Vice President - March 30, 1994 - ----------------------- Corporate Development Frank B. O'Brien and Chief Financial Officer (Principal Financial Officer) *Steven M. Billick Vice President and March 30, 1994 - ----------------------- Controller (Principal Steven M. Billick Accounting Officer) *Ward Smith Chairman of the Board March 30, 1994 - ----------------------- and Director Ward Smith *Owsley Brown II Director March 30, 1994 - ----------------------- Owsley Brown II *John J. Dwyer Director March 30, 1994 - ----------------------- John J. Dwyer *Robert M. Gates Director March 30, 1994 - ----------------------- Robert M. Gates *E. Bradley Jones Director March 30, 1994 - ----------------------- E. Bradley Jones *Dennis W. LaBarre Director March 30, 1994 - ----------------------- Dennis W. LaBarre *John C. Sawhill Director March 30, 1994 - ----------------------- John C. Sawhill *Britton T. Taplin Director March 30, 1994 - ----------------------- Britton T. Taplin *Frank E. Taplin, Jr. Director March 30, 1994 - ----------------------- Frank E. Taplin, Jr. *Richard B. Tullis Director March 30, 1994 - ----------------------- Richard B. Tullis
-55- 57 *Frank B. O'Brien, by signing his name hereto, does hereby sign this Annual Report on Form 10-K on behalf of each of the above named and designated officers and directors of the Company pursuant to a Power of Attorney executed by such persons and filed with the Securities and Exchange Commission. Frank B. O'Brien March 30, 1994 - ------------------------------------ Frank B. O'Brien, Attorney-in-Fact -56- 58 ANNUAL REPORT ON FORM 10-K ITEM 8, ITEM 14(a)(1) AND (2), AND ITEM 14(d) FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES FINANCIAL STATEMENTS FINANCIAL STATEMENT SCHEDULES YEAR ENDED DECEMBER 31, 1993 NACCO INDUSTRIES, INC. MAYFIELD HEIGHTS, OHIO F-1 59 Form 10-K ITEM 14(a)(1) AND (2) NACCO INDUSTRIES, INC. AND SUBSIDIARIES LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES The following consolidated financial statements of NACCO Industries, Inc. and Subsidiaries are included in Item 8: Report of Independent Accountants--Year ended December 31, 1993, 1992 and 1991 Statements of consolidated income--Year ended December 31, 1993, 1992 and 1991. Consolidated balance sheets--December 31, 1993 and December 31, 1992. Statements of consolidated cash flows--Year ended December 31, 1993, 1992 and 1991. Statements of consolidated stockholders' equity--Year ended December 31, 1993, 1992 and 1991. Notes to consolidated financial statements--December 31, 1993. NACCO Industries, Inc. Report of Management--Year ended December 31, 1993, 1992 and 1991. The following consolidated financial statement schedules of NACCO Industries, Inc. and Subsidiaries are included in Item 14(d): Schedule III--Condensed Financial Information of the Parent Schedule V--Property, plant and equipment Schedule VI--Accumulated depreciation, depletion and amortization of property, plant and equipment Schedule VIII--Valuation and qualifying accounts Schedule IX--Short-term borrowings Schedule X--Supplementary income statement information All other schedules for which provision is made in the applicable accounting regulation of the Securities and Exchange Commission are not required under the related instructions or are inapplicable, and therefore have been omitted. F-2 60 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Stockholders of NACCO Industries, Inc.: We have audited the accompanying consolidated balance sheets of NACCO Industries, Inc. and Subsidiaries as of December 31, 1993 and 1992, and the related consolidated statements of income, stockholders' equity and cash flows for each of the three years in the period ended December 31, 1993. These financial statements and the schedules referred to below are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and schedules based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of NACCO Industries, Inc. and Subsidiaries as of December 31, 1993 and 1992, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1993, in conformity with generally accepted accounting principles. As explained in Note A to the consolidated financial statements, the Company has given retroactive effect to the change in accounting for income taxes as permitted by Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes." Our audit was made for the purpose of forming an opinion on the basic financial statements taken as a whole. The schedules listed in Item 14(a)(1) and (2) and Item 14(d) of Form 10-K are the responsibility of the Company's management and are presented for purposes of complying with the Securities and Exchange Commission's rules and are not part of the basic financial statements. These schedules have been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, fairly state in all material respects the financial data required to be set forth therein in relation to the basic financial statements taken as a whole. Arthur Andersen & Co. Cleveland, Ohio February 18, 1994 F-3 61 CONSOLIDATED STATEMENTS OF INCOME NACCO INDUSTRIES, INC. AND SUBSIDIARIES
Year Ended December 31 ---------------------------------------------------------------- 1993 1992 1991 ----------- ------------ ------------ (In thousands, except per share data) Net sales $1,538,805 $1,470,005 $1,359,295 Other operating income 10,566 13,774 9,900 ---------- ---------- ---------- TOTAL REVENUES 1,549,371 1,483,779 1,369,195 Cost of sales 1,244,051 1,171,231 1,072,223 ---------- ---------- ---------- GROSS PROFIT 305,320 312,548 296,972 Selling, administrative and general expenses 198,149 197,393 188,682 Amortization of goodwill 13,787 13,875 13,758 ---------- ---------- ---------- OPERATING PROFIT 93,384 101,280 94,532 Other income (expense) Interest income 1,880 3,294 6,725 Interest expense (65,930) (66,032) (77,103) Other - net (4,670) 1,787 1,798 ---------- ---------- ---------- (68,720) (60,951) (68,580) ---------- ---------- ---------- INCOME BEFORE INCOME TAXES, MINORITY INTEREST AND EXTRAORDINARY CHARGE 24,664 40,329 25,952 Provision for income taxes 13,511 16,346 5,366 ---------- ---------- ---------- INCOME BEFORE MINORITY INTEREST AND EXTRAORDINARY CHARGE 11,153 23,983 20,586 Minority interest 440 (1,115) (548) ---------- ---------- ---------- INCOME BEFORE EXTRAORDINARY CHARGE 11,593 22,868 20,038 Extraordinary charge, net-of-tax (3,292) (110,000) ---------- ---------- ---------- NET INCOME (LOSS) $ 8,301 $ (87,132) $ 20,038 ========== ========== ========== PER SHARE: Income Before Extraordinary Charge $ 1.30 $ 2.57 $ 2.26 Extraordinary charge, net-of-tax (.37) (12.37) ---------- ---------- ---------- Net Income (Loss) $ .93 $ (9.80) $ 2.26 ========== ========== ==========
See notes to consolidated financial statements. F-4 62 CONSOLIDATED BALANCE SHEETS NACCO INDUSTRIES, INC. AND SUBSIDIARIES
December 31 -------------------------------- 1993 1992 ------------- ------------- (In thousands) ASSETS CURRENT ASSETS Cash and cash equivalents $ 29,149 $ 33,847 Accounts receivable, net 200,112 181,198 Inventories 238,168 245,739 Prepaid expenses and other 37,373 32,530 ---------- ---------- 504,802 493,314 OTHER ASSETS 45,438 66,547 PROPERTY, PLANT AND EQUIPMENT, NET 496,213 508,590 DEFERRED CHARGES Goodwill, net 487,963 501,748 Deferred costs and other 64,663 63,890 Deferred income taxes 43,414 50,800 ---------- ---------- 596,040 616,438 ---------- ---------- TOTAL ASSETS $1,642,493 $1,684,889 ========== ==========
F-5 63 CONSOLIDATED BALANCE SHEETS NACCO INDUSTRIES, INC. AND SUBSIDIARIES
December 31 ----------------------------- 1993 1992 ---------- ----------- (In thousands) LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable $ 148,397 $ 125,849 Revolving credit agreements 35,178 19,196 Current maturities of long-term obligations 55,016 34,215 Income taxes 27,198 30,734 Accrued payroll 19,750 19,721 Other current liabilities 111,916 109,881 ---------- ---------- 397,455 339,596 NOTES PAYABLE - not guaranteed by the parent company 357,788 459,906 OBLIGATIONS OF PROJECT MINING SUBSIDIARIES - not guaranteed by the parent company or its North American Coal subsidiary 338,504 334,128 OBLIGATION TO UNITED MINE WORKERS OF AMERICA COMBINED BENEFIT FUND 163,217 165,802 SELF-INSURANCE RESERVES AND OTHER 108,648 106,492 MINORITY INTEREST 41,255 40,649 STOCKHOLDERS' EQUITY Common stock: Class A, par value $1 per share, 7,177,075 shares outstanding (1992 -- 7,112,946 shares outstanding) 7,177 7,113 Class B, par value $1 per share, convertible into Class A on a one-for-one basis, 1,763,503 shares outstanding (1992 -- 1,822,423 shares outstanding) 1,764 1,823 Capital in excess of par value 2,548 2,342 Retained income 226,212 223,765 Foreign currency translation adjustment and other (2,075) 3,273 ---------- ---------- 235,626 238,316 ---------- ---------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $1,642,493 $1,684,889 ========== ==========
See notes to consolidated financial statements. F-6 64 CONSOLIDATED STATEMENTS OF CASH FLOWS NACCO INDUSTRIES, INC. AND SUBSIDIARIES
Year Ended December 31 --------------------------------------------- 1993 1992 1991 ---------- ----------- ----------- (In thousands) OPERATING ACTIVITIES Net income (loss) $ 8,301 $ (87,132) $ 20,038 Adjustments to reconcile net income (loss) to net cash provided by operating activities: Extraordinary charge, net-of-tax 2,007 110,000 Depreciation, depletion and amortization 78,063 72,509 71,178 Deferred income taxes 5,176 6,159 5,290 Currency exchange (gain) loss 103 (5,691) (1,517) Other noncash items (8,047) (15,185) (353) Working capital changes: Accounts receivable (22,926) 943 25,660 Inventories 8,505 (19,214) 25,187 Other current assets (2,213) 2,902 20,120 Accounts payable and other liabilities 3,341 (18,323) (14,535) ---------- ----------- ---------- NET CASH PROVIDED BY OPERATING ACTIVITIES 72,310 46,968 151,068 INVESTING ACTIVITIES Expenditures for property, plant and equipment (57,661) (74,354) (54,156) Proceeds from the sale of businesses 21,229 1,058 Proceeds from the sale of other assets 27,600 1,707 2,631 Notes receivable 4,664 1,431 1,518 Net (increase) decrease in assets held for sale (180) 1,338 1,119 ---------- ----------- ---------- NET CASH USED BY INVESTING ACTIVITIES (25,577) (48,649) (47,830) FINANCING ACTIVITIES Additions to long-term obligations and revolving credit 82,890 138,641 109,063 Reductions of long-term obligations and revolving credit (144,616) (169,103) (258,271) Additions to (reductions of) advances from customers (7,208) 26,107 11,182 Financing of other short-term obligations 16,172 Cash dividends paid (5,854) (5,645) (5,461) Capital grants 3,741 2,020 1,848 Other - net 4,926 (5,163) (336) ---------- ----------- ---------- NET CASH USED BY FINANCING ACTIVITIES (49,949) (13,143) (141,975) Effect of exchange rate changes on cash (1,482) (3,615) (9,803) ---------- ----------- ---------- CASH AND CASH EQUIVALENTS Decrease for the year (4,698) (18,439) (48,540) Balance at the beginning of the year 33,847 52,286 100,826 ---------- ----------- ---------- BALANCE AT THE END OF THE YEAR $ 29,149 $ 33,847 $ 52,286 ========== =========== ==========
See notes to consolidated financial statements. F-7 65 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY NACCO INDUSTRIES, INC. AND SUBSIDIARIES
Year Ended December 31 --------------------------------------------- 1993 1992 1991 ------------ ----------- ----------- (In thousands) CLASS A COMMON STOCK Beginning balance $ 7,113 $ 7,040 $ 6,964 Conversion of Class B shares to Class A shares 60 26 75 Sale of treasury shares under stock option and compensation plans 4 56 2 Purchase of treasury shares (9) (1) -------- --------- --------- 7,177 7,113 7,040 CLASS B COMMON STOCK Beginning balance 1,823 1,842 1,914 Conversion of Class B shares to Class A shares (60) (26) (75) Sale of shares under stock option plans 1 7 3 -------- --------- --------- 1,764 1,823 1,842 CAPITAL IN EXCESS OF PAR VALUE Beginning balance 2,342 774 737 Sale of shares under stock option and compensation plans 206 1,912 54 Purchase of treasury shares (344) (17) -------- --------- --------- 2,548 2,342 774 RETAINED INCOME Beginning balance 223,765 316,542 301,563 Cumulative effect of accounting change 402 Net income (loss) 8,301 (87,132) 20,038 Cash dividends on Class A and Class B common stock: 1993 $.655 per share (5,854) 1992 $.635 per share (5,645) 1991 $.615 per share (5,461) -------- --------- --------- 226,212 223,765 316,542 FOREIGN CURRENCY TRANSLATION ADJUSTMENT AND OTHER Beginning balance 3,273 23,990 41,713 Foreign currency translation adjustment and other (5,348) (20,717) (17,723) -------- --------- --------- (2,075) 3,273 23,990 -------- --------- --------- TOTAL STOCKHOLDERS' EQUITY $235,626 $ 238,316 $ 350,188 ======== ========= =========
See notes to consolidated financial statements. F-8 66 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NACCO INDUSTRIES, INC. AND SUBSIDIARIES (TABULAR DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) NOTE A--ACCOUNTING POLICIES PRINCIPLES OF CONSOLIDATION: The consolidated financial statements include the accounts of NACCO Industries, Inc. ("NACCO," the parent company) and its majority owned subsidiaries (NACCO Industries, Inc. and Subsidiaries - the "Company"). Intercompany accounts and transactions are eliminated. CASH AND CASH EQUIVALENTS: Cash and cash equivalents include cash in banks and highly liquid investments with original maturities of three months or less. INVENTORIES: Inventories are stated at the lower of cost or market. Cost is determined under the last-in, first-out method (LIFO) for domestic manufacturing inventories and under the first-in, first-out method (FIFO) with respect to all other inventories. PROPERTY, PLANT AND EQUIPMENT: Property, plant and equipment are recorded at cost. Depreciation, depletion and amortization are provided in amounts sufficient to amortize the cost of the assets (including assets recorded under capital leases) over their estimated useful lives using the straight-line method. The units-of-production method is used to amortize certain coal-related assets based on estimated recoverable tonnages. When property is retired or otherwise disposed of, the cost and related accumulated depreciation are removed from the appropriate accounts. Any gains or losses on property dispositions are included in other - net. Repairs, maintenance and improvements that do not extend the useful life of property are expensed. GOODWILL: Goodwill represents the excess purchase price paid over the fair value of the net assets acquired. Goodwill is amortized on a straight-line basis over a 40-year period and is included in amortization expense on the Company's consolidated statements of income. Management regularly evaluates its accounting for goodwill considering such factors as historical and future profitability and believes that the asset is realizable and the amortization period is still appropriate. DEFERRED FINANCING COSTS: Amortization of the costs related to manufacturing assets is calculated utilizing the interest method over the term of the related indebtedness. The costs incurred related to the coal assets are amortized utilizing the units-of- production method. These costs are included in interest expense on the Company's consolidated statements of income. PRODUCT DEVELOPMENT COSTS: Expenses associated with the development of new products and changes to existing products are charged to expense as incurred. These costs amounted to $23.4 million, $24.4 million and $21.5 million in 1993, 1992 and 1991, respectively. F-9 67 NOTE A--ACCOUNTING POLICIES--Continued COMMON STOCK: The Class A common stock has one vote per share and the Class B common stock has 10 votes per share. The total number of authorized shares of Class A common stock and Class B common stock at December 31, 1993, was 25,000,000 shares and 6,756,176 shares, respectively. Treasury shares of Class A stock totalling 840,564 and 844,873 at December 31, 1993 and 1992, respectively, have been deducted from shares outstanding. FINANCIAL INSTRUMENTS: The fair value of financial instruments, except as otherwise disclosed, approximated their carrying values at December 31, 1993. Fair values have been determined through information obtained from quoted market sources and management estimates. FOREIGN CURRENCY: The financial statements of the Company's foreign operations are translated into U.S. dollars at year-end exchange rates for assets and liabilities and at weighted average exchange rates during the year for revenues and expenses. The effect of changes in foreign exchange rates applied to these foreign financial statements is included as a separate component of stockholders' equity. The Company enters into forward foreign exchange contracts to reduce its exposure to foreign currency fluctuations. These contracts hedge certain foreign currency denominated receivables and payables and foreign currency commitments. Gains and losses in foreign currency denominated receivables and payables are reported currently in income, while gains and losses from commitments are deferred and recognized as part of the cost of the underlying transaction being hedged. INTEREST RATE SWAP AGREEMENTS: The differential between the floating interest rate and the fixed interest rate which is to be paid or received is recognized as interest rates change over the life of the agreement. ACCOUNTING CHANGE: The Company has adopted Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes" (SFAS 109), effective January 1, 1993, and has elected to retroactively apply its provisions to January 1, 1989, as permitted by this Standard. Accordingly, retained earnings and net goodwill have been adjusted as of January 1, 1991, to reflect the cumulative impact of applying this Standard. The adjustment to retained earnings, which is immaterial, consists of the cumulative effect of this change in accounting method at January 1, 1989, and the impact on previously reported net income for the years ended December 31, 1989 and 1990. The adjustment to net goodwill represents the cumulative impact of SFAS 109 on purchase accounting for the acquisitions of Hyster and Hamilton Beach as of January 1, 1991. In addition, certain assets and liabilities acquired in purchase business combinations have been adjusted from their net-of-tax amounts to their gross, pre-tax balances as required by this Standard. The consolidated financial statements for the year ended December 31, 1992 and 1991, included in this annual report, have been restated for the effects of SFAS 109. The resulting impact on net income (loss) is not material. Refer to Note M, "Income Taxes," for additional information. F-10 68 NOTE A--ACCOUNTING POLICIES--Continued EARNINGS PER SHARE: The calculation of net income per share of stock is based on the weighted average number of shares outstanding during each period. RECLASSIFICATIONS: Certain amounts in the prior periods' consolidated financial statements have been reclassified to conform to the current period's presentation. NOTE B--EXTRAORDINARY CHARGE 1993 The extraordinary charge of $3.3 million, net of $2.0 million in tax benefits, was recognized in the second quarter of 1993. This charge represents the loss from the write-off of premiums and unamortized debt issuance costs associated with the retirement of approximately $50.2 million face value of NACCO Materials Handling Group's Hyster-Yale 12-3/8% subordinated debentures. NACCO Materials Handling Group has retired these debentures as a result of a contribution by NACCO of previously purchased subordinated debentures with a face value of $23.7 million, and an equity infusion of $28.3 million ($26.7 million from NACCO) which enabled NACCO Materials Handling Group to call approximately $26.5 million face value of subordinated debentures at a price of 107.5. Refer to Note G, "Revolving Credit Agreements and Notes Payable," for additional information. 1992 In October 1992 the Coal Industry Retiree Health Benefit Act of 1992 was passed by Congress and signed into law. This legislation will require Bellaire Corporation (a wholly owned subsidiary of NACCO) to incur additional costs for retiree medical expenses of certain United Mine Worker retirees. Bellaire is no longer in the business of operating coal mines. Based upon information received from various sources and initial actuarial assumptions and analysis, a charge of $110.0 million (net of $56.7 million of tax benefits) was recognized in 1992 to reflect the estimated future payments related to this legislation. Annual payments required by this legislation are expected to be in the range of $2.0 million to $4.0 million per year after tax. These payments would tend to diminish over time, but could continue as long as 40 to 50 years, or as long as there are eligible participants. The tax benefit related to this charge will be realized as these cash payments are made. Management expects domestic taxable earnings to continue to be sufficient to realize the full amount of the deferred tax asset recognized. On January 29, 1993, Bellaire filed a lawsuit challenging the constitutionality of this new law. F-11 69 NOTE C--ACCOUNTS RECEIVABLE Allowances for doubtful accounts, returns, discounts and adjustments of $11.1 million and $12.4 million at December 31, 1993 and 1992, respectively, were deducted from accounts receivable. NOTE D--INVENTORIES Inventories are summarized as follows:
December 31 ----------------------------- 1993 1992 --------- --------- Manufacturing inventories: Finished goods and service parts $117,578 $120,287 Raw materials and work in process 95,616 109,904 LIFO reserve (10,197) (11,478) -------- -------- Total manufacturing inventories 202,997 218,713 Coal 7,619 6,189 Mining supplies 16,194 12,367 Retail inventories 11,358 8,470 -------- -------- $238,168 $245,739 ======== ========
The cost of manufacturing inventories has been determined by the LIFO method for 69% and 70% of such inventories as of December 31, 1993 and 1992, respectively. NOTE E--PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment includes the following:
December 31 ----------------------------- 1993 1992 ---------- --------- Coal lands and real estate $ 74,973 $ 74,320 Plant and equipment 304,163 306,189 Plant and equipment of project mining subsidiaries 403,029 388,349 -------- -------- 782,165 768,858 Less allowances for depreciation, depletion and amortization 285,952 260,268 -------- -------- $496,213 $508,590 ======== ========
Total depreciation, depletion and amortization expense on property, plant and equipment was $60.1 million, $53.6 million and $52.7 million during 1993, 1992 and 1991, respectively. Proven and probable coal reserves approximated 2.2 billion tons and 2.1 billion tons at December 31, 1993 and 1992, respectively. NOTE F--DEFERRED CHARGES Accumulated amortization of goodwill, patents and trademarks was $66.4 million and $52.1 million at December 31, 1993 and 1992, respectively. Total amortization expense of goodwill, patents and trademarks was $14.3 million, $14.4 million and $14.3 million during 1993, 1992 and 1991, respectively. Total amortization expense of deferred financing costs was $3.7 million during 1993, and $4.0 million during 1992 and 1991. F-12 70 NOTE G--REVOLVING CREDIT AGREEMENTS AND NOTES PAYABLE NACCO has not guaranteed the long-term debt or any borrowings of its subsidiaries. REVOLVING CREDIT AGREEMENTS NACCO MATERIALS HANDLING GROUP NACCO Materials Handling Group's credit agreement, as amended, provides for a term note and a revolving credit facility. The revolving credit facility permits advances and secured letters of credit to NMHG from time to time, up to an aggregate principal amount of $100.0 million. The following summarizes the revolving credit facility: Amount of revolver $100.0 million Amount available at December 31, 1993 $100.0 million Current interest rate Prime plus 0.75% or LIBOR plus 1.875% Average interest rate during 1993 6.05% Commitment fee 0.5% Expiration date 1997
The retirement of subordinated debentures discussed in Note B "Extraordinary Charge," has been reflected as a reduction in notes payable on the consolidated balance sheet as of December 31, 1993. In connection with the retirement of these subordinated debentures, NACCO Materials Handling Group amended its existing senior bank credit agreement. This amendment permits equity infusions to be used for cash purchases of subordinated debentures and, after August 1994, permits NACCO Materials Handling Group to use internally generated funds to retire up to $75.0 million of additional subordinated debentures if certain debt-to-capitalization ratios are achieved. In addition, the amendment modifies the bank loan repayment schedules and provides NACCO Materials Handling Group with more favorable performance-based interest rate incentives. On January 1, 1994, NACCO Materials Handling Group's interest rates were reduced 0.25% based on these incentives. HAMILTON BEACH / PROCTOR-SILEX Hamilton Beach / Proctor-Silex's credit agreement, dated October 11, 1990, provides for a term note and a revolving credit facility. The revolving credit facility permits advances up to $95.0 million, the availability of which is based on percentages of eligible accounts receivable and inventory. The following summarizes the revolving credit facility: Amount of revolver $95.0 million Amount available at December 31, 1993 $26.1 million Current interest rate Prime rate plus 0.25% or LIBOR plus 1.25% Average interest rate during 1993 5.99% Commitment fee 0.375% Expiration date 1995
Total borrowings under the revolving credit facility at December 31, 1993, were $48.3 million. At December 31, 1993, $37.0 million of the total borrowings outstanding is not expected to be repaid during 1994 and is classified as long-term debt on the Company's consolidated balance sheets. The current interest rate for Hamilton Beach/Proctor-Silex above reflects a 1.00% rate reduction that was in place at December 31, 1993 when an interest coverage ratio was achieved. F-13 71 NOTE G--REVOLVING CREDIT AGREEMENTS AND NOTES PAYABLE--Continued REVOLVING CREDIT AGREEMENTS--Continued NORTH AMERICAN COAL North American Coal has in place a revolving credit facility. The following summarizes this facility: Amount of revolver $50.0 million Amount available at December 31, 1993 $34.0 million Current interest rate LIBOR plus 0.4375% Average interest rate during 1993 6.15% Total commitment and facility fee 0.25% Expiration date 1996
The expiration date of this facility can be extended one additional year, on an annual basis, upon the mutual consent of North American Coal and the bank group, beginning in 1994. NOTES PAYABLE Subsidiary notes payable, less current maturities, consist of the following:
December 31 --------------------------- 1993 1992 ----------- ---------- NACCO MATERIALS HANDLING GROUP Term note with interest currently at lender's prime rate plus 0.75% or LIBOR plus 1.875% (average interest rate of 6.51% during 1993) payable 1994 to 1997 and secured by all assets $139,279 $164,341 12.375% senior subordinated debentures payable in 1999 with a mandatory sinking fund payment on August 1, 1998 of $100.0 million 149,752 200,000 Long-term portion of revolving credit facility 25,500 Other 1,312 1,020 HAMILTON BEACH / PROCTOR-SILEX Term note with interest currently at lender's prime rate plus 0.25% or LIBOR plus 1.25% (average interest rate of 7.70% during 1993) payable 1994 to 1997 and secured by all assets 28,145 38,145 Long-term portion of revolving credit facility 37,000 28,000 KITCHEN COLLECTION Term note with interest currently at lender's prime rate or LIBOR plus 1.50% (average interest rate of 5.50% during 1993) payable 1994 to 1997 1,900 2,400 NORTH AMERICAN COAL 400 500 -------- -------- $357,788 $459,906 ======== ========
F-14 72 NOTE G--REVOLVING CREDIT AGREEMENTS AND NOTES PAYABLE--Continued NOTES PAYABLE--Continued The senior subordinated debentures are callable by NACCO Materials Handling Group prior to maturity at redemption prices (expressed as percentages of the principal amount) as follows: during the 12-month period beginning August 1, 1993 - 107.5%; 1994 - 105.0%; 1995 - 102.5%. At December 31, 1993, the fair value of these debentures was $161.0 million. Note maturities for the next five years, including current maturities, are as follows: 1994 $ 39,400 1995 94,542 1996 61,034 1997 52,119 1998 100,341 Thereafter 49,752 --------- $397,188 ========
Interest paid was $48.4 million, $54.4 million and $63.5 million during 1993, 1992 and 1991, respectively. The credit agreements for NACCO Materials Handling Group, Hamilton Beach / Proctor-Silex, North American Coal and Kitchen Collection contain certain covenants and restrictions. Covenants require, among other things, maintenance of certain minimum amounts of net worth and certain specified ratios of working capital, debt to equity, interest coverage and fixed charge coverage. These ratios are calculated at the subsidiary level. Restrictions include limits on capital expenditures and dividends. At December 31, 1993, the subsidiaries were in compliance with all the covenants in the debt agreements. INTEREST RATE PROTECTION NACCO Materials Handling Group, Hamilton Beach / Proctor-Silex and North American Coal have entered into interest rate swap agreements and/or purchased interest rate caps which provide protection against significant increases in interest rates for a portion of their floating rate debt. These agreements are with major commercial banks; therefore, the risk of credit loss from nonperformance by the banks is minimal. The Company evaluates its exposure to floating rate debt on an ongoing basis. F-15 73 NOTE H--OBLIGATIONS OF PROJECT MINING SUBSIDIARIES North American Coal's project mining subsidiaries have entered into long-term contracts with various utility customers to provide lignite at a sales price based on cost plus a profit per ton. The utility customers have arranged and guaranteed the financing for the development and operation of these subsidiary mines. The obligations of these project mining subsidiaries included in the Company's consolidated balance sheets do not impact the short- or long-term liquidity of the Company and are without recourse to NACCO or its North American Coal subsidiary. Obligations of project mining subsidiaries, less current maturities, consist of the following at December 31:
1993 1992 --------- --------- Capitalized lease obligations $145,126 $132,846 Non-interest-bearing advances from customers 133,347 140,555 Promissory notes with interest rates ranging from 3.25% to 10.94% during 1993 60,031 60,727 --------- --------- $338,504 $334,128 ======== ========
The annual maturities of the promissory notes are: 1994 -- $6.2 million; 1995 -- $6.9 million; 1996 -- $2.9 million; 1997 -- $2.5 million; 1998 - -- $2.0 million; thereafter -- $45.7 million. Advances from customers are used to develop, operate and provide for the ongoing working capital needs of certain project mining subsidiaries. Interest paid was $17.5 million, $13.2 million and $13.7 million during 1993, 1992 and 1991 respectively. Interest expense is included as part of the cost of coal which is passed through to the utility customers. The project mining subsidiaries' lease obligations for mining equipment have the following future minimum lease payments at December 31, 1993:
Capital Operating Leases Leases --------- ---------- 1994 $ 20,905 $ 87 1995 19,811 34 1996 18,863 26 1997 17,906 13 1998 17,192 Subsequent to 1998 165,478 -------- ------ Total minimum lease payments 260,155 $160 ==== Amounts representing interest (105,663) -------- Present value of net minimum lease payments 154,492 Current maturities (9,366) --------- $145,126 ========
Interest expense and amortization in excess of annual lease payments are deferred and recognized in years when annual lease payments exceed interest expense and amortization. F-16 74 NOTE H--OBLIGATIONS OF PROJECT MINING SUBSIDIARIES--Continued Project mining assets recorded under capital leases are included with property, plant and equipment and consist of the following at December 31:
1993 1992 -------- -------- Plant and equipment $187,006 $167,718 Accumulated amortization (63,711) (55,631) -------- -------- $123,295 $112,087 ======== ========
During 1993, 1992 and 1991, the project mining subsidiaries incurred capital lease obligations of $22.4 million, $12.0 million and $7.6 million, respectively, in connection with lease agreements to acquire plant and equipment. Rental expense for all of the project mines' operating leases amounted to $0.2 million, $0.2 million and $0.1 million during 1993, 1992 and 1991, respectively. The above obligations are secured by substantially all owned assets of the respective project mining subsidiary and the assignment of all rights under its coal sales agreement. NOTE I--LEASE COMMITMENTS Future minimum operating lease payments, excluding project mining subsidiaries, at December 31, 1993, are as follows: 1994 $11,535 1995 10,168 1996 8,917 1997 7,361 1998 6,213 Subsequent to 1998 14,099 -------- Total minimum operating lease payments $58,293 =======
Rental expense for all operating leases, excluding project mining subsidiaries, amounted to $15.3 million, $13.7 million and $12.2 million during 1993, 1992 and 1991, respectively. F-17 75 NOTE J--CONTINGENCIES NACCO and certain subsidiaries are named as defendants to various legal proceedings and claims, which are incidental to their ordinary course of business. Management believes that it has meritorious defenses and will vigorously defend itself in these actions. Although the ultimate disposition of these proceedings is not presently determinable, management does not believe that such proceedings would have a material adverse effect upon the financial statements of the Company. NACCO Materials Handling Group is subject to recourse or repurchase obligations under various financing arrangements for certain independently owned retail dealerships at December 31, 1993. Also, certain dealer loans are guaranteed by NACCO Materials Handling Group. When NACCO Materials Handling Group is the guarantor of the principal amount financed, a security interest is usually maintained in certain assets of parties for whom NACCO Materials Handling Group is guaranteeing debt. Total amounts subject to recourse or repurchase obligation at December 31, 1993, were $72.4 million. Losses anticipated under the terms of the recourse or repurchase obligations are not significant and have been provided for financial reporting purposes. NACCO Materials Handling Group and Hamilton Beach/Proctor-Silex enter into foreign exchange contracts generally with maturities of 12 months or less. These contracts typically are with major international financial institutions and, accordingly, the risk of loss from nonperformance by these institutions is minimal. F-18 76 eNOTE K--STOCK OPTIONS The 1975 and 1981 stock option plans as amended provide for the granting to officers and other key employees options to purchase Class A and Class B common stock of the Company at a price not less than the market value of such stock at the date of grant. Options become exercisable over a four-year period and expire 10 years from the date of the grant. At December 31, 1993 all stock options outstanding were exercisable. There were options for 80,701 Class A shares at December 31, 1993 and 1992, respectively, and 80,100 Class B shares at December 31, 1993 and 1992, respectively, available for grant under the plans. The following summarizes stock option transactions during 1993, 1992 and 1991:
Outstanding -------------------------- Class A Class B Price Range --------- -------- ------------- January 1, 1991 96,340 12,321 Exercised (2,000) (2,600) $8.46 - $15.92 ------- ------ December 31, 1991 94,340 9,721 Exercised (53,340) (6,121) $8.46 - $32.00 Cancelled (1,500) ------- -------- December 31, 1992 39,500 3,600 Exercised (500) (900) $15.92 ------- ------ December 31, 1993 39,000 2,700 ====== =====
The following summarizes stock options outstanding at December 31, 1993:
Options Outstanding Option ----------------------- Date of Grant Class A Class B Price ----------------- ------- ------- ------- May 2, 1984 5,500 2,700 $15.92 January 12, 1989 8,500 32.00 March 1, 1989 25,000 35.56 ------ ----- 39,000 2,700 ====== =====
NOTE L--OTHER INCOME (EXPENSE) Items included in other-net are as follows:
Year Ended December 31 -------------------------------------------- 1993 1992 1991 --------- --------- --------- Equity in earnings (losses) of unconsolidated subsidiaries $(3,923) $ (571) $ 1,153 Litigation settlement (3,464) Gain on sale of assets 2,303 248 1,304 Net loss from net assets held for sale (159) (2,240) (3,470) Currency transaction gains 121 5,628 1,636 Miscellaneous 452 (1,278) 1,175 ------- ------ ------- $(4,670) $ 1,787 $ 1,798 ======= ======= =======
F-19 77 NOTE L--OTHER INCOME (EXPENSE)--Continued Equity in earnings of unconsolidated subsidiaries includes income of $1.6 million in 1991 related to a subsidiary which was consolidated beginning in 1992. The financial statements for 1991 have not been restated to consolidate this subsidiary because the impact is not material. NOTE M--INCOME TAXES As discussed in Note A, "Accounting Policies," the Company has adopted SFAS 109 effective January 1, 1993, and has retroactively applied its provisions to January 1, 1989. SFAS 109 requires, among other things, the measurement of deferred tax assets or liabilities based on the difference between the financial statement and income tax bases of assets and liabilities using the enacted marginal tax rate. Deferred income tax expense or benefit is based on the changes in the assets and liabilities from period to period. The prior method of accounting for income taxes measured deferred income tax expense or benefit based on timing differences between the recognition of income and expenses for financial reporting purposes and for purposes of filing federal income tax returns at income tax rates in effect when the differences arose. The components of income before income taxes on a legal entity basis are as follows:
Year Ended December 31 ----------------------------------------- 1993 1992 1991 ------- ------- ------- Domestic $18,247 $ 4,935 $(29,237) Foreign 6,417 35,394 55,189 -------- ------- -------- Income before income taxes and extraordinary charge $24,664 $40,329 $25,952 ======= ======= =======
Domestic income before income taxes has been reduced by all interest on acquisition indebtedness and amortization of goodwill and deferred financing fees of approximately $55.1 million, $59.4 million and $70.6 million during 1993, 1992 and 1991, respectively. Provision for income taxes consists of the following:
Year Ended December 31 ------------------------------------------ 1993 1992 1991 ------- ------- ------- Current tax expense (benefit): Federal $ 8,447 $ 3,878 $(14,488) State 2,659 1,340 270 Foreign 4,376 6,772 10,342 ------- -------- -------- Total current 15,482 11,990 (3,876) ------- -------- -------- Deferred tax expense (benefit): Federal 3,572 2,845 7,769 State (1,195) 572 469 Foreign (4,348) 939 1,004 -------- -------- --------- Total deferred (1,971) 4,356 9,242 -------- -------- --------- Provision for income taxes $13,511 $16,346 $ 5,366 ======= ======= =========
F-20 78 NOTE M--INCOME TAXES--Continued The Company made income tax payments of $16.3 million, $30.8 million and $25.5 million during 1993, 1992 and 1991, respectively. During the same period, income tax refunds totaled $5.1 million, $5.3 million and $30.0 million, respectively. At December 31, 1993, the Company had cumulative undistributed earnings at its foreign subsidiaries of $76.1 million. It is the Company's intention to reinvest $45.2 million of these undistributed earnings of its foreign subsidiaries and thereby indefinitely postpone their remittance. There has been no provision made for taxes on the undistributed earnings which are reinvested indefinitely. In addition, it is not practicable to estimate the amount of the deferred tax liability on such earnings. The remaining undistributed earnings of $30.9 million can be remitted without a material charge to earnings. Upon remittance, certain foreign countries impose withholding taxes that are then available, subject to certain limitations, for use as credits against the Company's U.S. tax liability. The amount of withholding tax that would be payable upon remittance of the entire amount of undistributed earnings would approximate $4.8 million. A reconciliation of federal statutory and effective income tax follows:
1993 1992 1991 ------ ------ ------ Income before taxes $24,664 $40,329 $25,952 ======= ======= ======= Statutory taxes at 35% in 1993 and 34% in 1992 and 1991 $ 8,632 $13,712 $ 8,824 Percentage depletion (1,595) (2,451) (2,931) Export benefits (845) (265) (907) Differences between foreign and statutory tax rates 107 (3,594) (3,155) Adjustment of estimated income tax liabilities for prior years 62 15 (3,432) Amortization of excess purchase price 4,824 4,736 4,730 Earnings reported net of taxes 1,054 (131) (409) State income taxes 1,017 1,818 483 Other-net 255 2,506 2,163 ------- ------- ------- Provision for taxes $13,511 $16,346 $ 5,366 ======= ======= ======= Effective rate 54.78% 40.53% 20.68% ======= ======= ======
F-21 79 NOTE M--INCOME TAXES--Continued A summary of the components of the net deferred tax balance in the Company's consolidated balance sheets resulting from differences in the book and tax basis of assets and liabilities follows:
DEFERRED TAX ASSET (LIABILITY) AT DECEMBER 31, 1993 ------------------------------------------------------------ CURRENT NON-CURRENT -------------------------- ------------------------ DOMESTIC FOREIGN DOMESTIC FOREIGN -------- ------- -------- ------- Inventories $ (26,110) $ 1,404 Accrued expenses and reserves 13,807 218 $ 24,641 Employee benefits 1,725 12,438 $ (2,305) Net operating loss carryforwards 2,203 6,121 4,742 Reserve for obligation to United Mine Workers of America Combined Benefit Fund 56,399 Depreciation and depletion (40,350) (5,413) Unrepatriated earnings (4,881) Other 1,949 (414) (9,575) (55) ---------- -------- --------- ---------- $ ( 6,426) $ 7,329 $ 43,414 $ (7,773) ========= ======= ======== ========
Deferred Tax Asset (Liability) at December 31, 1992 ------------------------------------------------------------ Current Non-Current -------------------------- ------------------------ Domestic Foreign Domestic Foreign -------- ------- -------- ------- Inventories $ (27,415) $ 964 Accrued expenses and reserves 16,542 405 $ 25,095 Employee benefits 1,609 9,806 $(2,271) Net operating loss carryforwards 530 5,275 Reserve for obligation to United Mine Workers of America Combined Benefit Fund 56,667 Depreciation and depletion (40,258) (5,304) Minimum tax credits 2,257 Other 736 504 (5,785) ---------- -------- ---------- ---------- $ (5,741) $ 1,873 $ 50,800 $(7,575) ========= ======= ======== =======
The Company and certain of its subsidiaries are currently under examination for federal and various state income tax returns. The Company will vigorously contest any material assessment and believes that any potential adjustment would not materially impact future earnings. F-22 80 NOTE N--RETIREMENT BENEFIT PLANS The Company maintains various pension plans covering its employees. These plans provide benefits based on years of service and average compensation during certain periods. The Company's policy is to make contributions to fund these plans within the range allowed by the applicable regulations. Contributions to the various plans were $5.2 million in 1993 and 1992 and $4.9 million in 1991. Plan assets consist primarily of publicly traded stocks, GICs and government and corporate bonds. The following is a detail of consolidated net periodic pension expense and the assumptions used in accounting for the defined benefit plans for the years ended December 31: UNITED STATES PLANS
1993 1992 1991 ------- ------- ------- Service cost $4,940 $ 4,813 $ 3,828 Interest cost on projected benefit obligation 6,941 6,326 5,035 Actual gain on plan assets (5,720) (4,940) (10,616) Curtailment gain (440) Net amortization and deferral of actuarial (gains) losses 334 (253) 5,614 ------- ------- ------- Net periodic pension expense $6,055 $ 5,946 $ 3,861 ====== ======= ======= Assumptions: Weighted average discount rates 7.50% 8.00-8.25% 8.00-8.25% Rate of increase in compensation levels 4.00-6.00% 4.50-6.75% 5.00-6.75% Expected long-term rate of return on assets 9.00% 9.00% 9.00%
F-23 81 NOTE N--RETIREMENT BENEFIT PLANS--Continued UNITED KINGDOM PLANS
1993 1992 1991 ---- ---- ---- Service cost $1,403 $1,794 $1,241 Interest cost on projected benefit obligation 2,138 2,854 1,651 Actual (gain) loss on plan assets (2,460) 2,808 (5,133) Net amortization and deferral of actuarial (gains) losses (220) (6,111) 3,291 ------ ------ ------ Net periodic pension expense $ 861 $1,345 $1,050 ====== ====== ====== Assumptions: Weighted average discount rates 8.00% 9.50% 9.50% Rate of increase in compensation levels 5.00% 6.50% 7.00% Expected long-term rate of return on assets 8.00% 9.50% 9.50%
The following sets forth the funded status of the plans and amounts recognized in the consolidated balance sheets at December 31:
U.S. Plans U.K. Plans -------------------- ------------------ 1993 1992 1993 1992 ---- ---- ----- ----- Actuarial present value of benefit obligation: Vested accumulated benefit obligation $69,082 $ 55,045 $21,860 $21,727 Nonvested accumulated benefit obligation 5,216 4,435 177 160 -------- -------- ------- ------- Total accumulated benefit obligation 74,298 59,480 22,037 21,887 Value of future salary projections 22,804 22,076 2,223 2,296 -------- -------- ------- ------- Total projected benefit obligation 97,102 81,556 24,260 24,183 Fair value of plan assets 71,893 64,114 28,811 25,699 -------- -------- ------- ------- Plan assets in excess of (less than) projected benefit obligation (25,209) (17,442) 4,551 1,516 Amounts available to (reduce) increase future pension expense: Unamortized balance of the initial transition amount (1,437) (3,249) (614) (826) Unamortized cumulative actuarial loss (gain) 4,118 (1,877) 1,040 6,582 Unamortized prior service cost 3,594 4,360 1,291 Adjustment for minimum pension liability (7,948) (2,626) -------- --------- ------- -------- Pension asset (liability) recognized in consolidated balance sheet $(26,882) $(20,834) $ 6,268 $ 7,272 ======== ======== ======= ========
F-24 82 NOTE N--RETIREMENT BENEFIT PLANS--Continued During the fourth quarter of 1993 the NACCO parent company plan was merged with the plan of one of its subsidiaries' resulting in a curtailment gain of $0.4 million which is included in net periodic pension expense. NACCO and its subsidiaries have defined contribution plans for substantially all employees. For NACCO and certain subsidiaries, employee contributions are matched by the Company based on plan provisions. Other subsidiaries have profit sharing plans whereby the subsidiary's contribution is determined annually based on its operating results. Total contributions to these plans were $5.5 million in 1993 and $4.6 million in 1992 and 1991. NACCO and certain of its subsidiaries have retirement health care and life insurance benefit plans. These plans provide benefits to pensioners and their survivors if they reach certain age and service requirements while working for NACCO or its subsidiaries. The detailed disclosures required by Statement of Financial Accounting Standards No. 106, "Accounting for Postretirement Benefits Other Than Pensions," have not been made because the amounts are not material. NOTE O--POSTEMPLOYMENT BENEFIT PLANS In November 1992 Statement of Financial Accounting Standards No. 112, "Employers' Accounting for Postemployment Benefits," was issued. The Company will be required to adopt this new method of accounting for benefits paid to former or inactive employees after employment but before retirement no later than 1994. This new standard requires, among other things, that the expected cost of these benefits be recognized when they are earned or become payable when certain conditions are met rather than the current method which recognizes these costs when they are paid. The adoption of this standard will not materially impact the Company's financial condition or its results of operations. NOTE P--BUSINESS SEGMENTS The Company has four operating subsidiaries. NACCO Materials Handling Group designs, manufactures and markets forklift trucks and related service parts under the Hyster and Yale brand names. Hamilton Beach/Proctor-Silex is a leading manufacturer of small electric appliances. North American Coal mines and markets lignite for use primarily as fuel in power generation by electric utilities. Kitchen Collection is a national specialty retailer of kitchenware and small electric appliances. Sales between subsidiaries, which are minimal, are eliminated in consolidation. Information relating to the Company's operations at the subsidiary level is presented below. The results for "North American Coal" have been adjusted to exclude the previously combined results of Bellaire Corporation, a non-operating subsidiary of NACCO. F-25 83 NOTE P--BUSINESS SEGMENTS--Continued
1993 1992 1991 ---- ---- ---- (In millions) REVENUES NACCO Materials Handling Group $ 908.2 $ 865.9 $ 790.6 Hamilton Beach/Proctor-Silex 356.3 358.6 351.9 North American Coal 232.3 211.1 182.4 Kitchen Collection 53.7 45.5 36.8 Bellaire 4.0 6.8 13.2 Eliminations (5.1) (4.1) (5.7) -------- -------- -------- $1,549.4 $1,483.8 $1,369.2 ======== ======== ======== AMORTIZATION OF GOODWILL NACCO Materials Handling Group $ 10.8 $ 10.8 $ 10.8 Hamilton Beach/Proctor-Silex 2.9 3.0 2.9 Kitchen Collection .1 .1 .1 ---------- ---------- ----------- $ 13.8 $ 13.9 $ 13.8 ======== ========= ========= OPERATING PROFIT NACCO Materials Handling Group $ 39.6 $ 44.3 $ 41.5 Hamilton Beach/Proctor-Silex 11.8 19.3 20.3 North American Coal 44.2 40.8 35.2 Kitchen Collection 4.8 4.4 2.8 Bellaire .9 .7 1.9 NACCO (7.9) (8.2) (7.2) ---------- ---------- ---------- $ 93.4 $ 101.3 $ 94.5 ======== ========= ========= INTEREST INCOME NACCO Materials Handling Group $ .8 $ 1.5 $ 4.8 North American Coal 2.1 2.1 2.1 Bellaire 1.0 1.5 4.5 NACCO 1.9 1.2 Eliminations (3.9) (3.0) (4.7) ---------- ---------- --------- $ 1.9 $ 3.3 $ 6.7 ======== ========= ========= INTEREST EXPENSE NACCO Materials Handling Group $ (40.4) $ (44.2) $ (49.5) Hamilton Beach/Proctor-Silex (7.7) (8.6) (12.8) North American Coal (19.3) (14.2) (16.2) Kitchen Collection (.1) (.2) (.4) NACCO (2.3) (1.8) (2.9) Eliminations 3.9 3.0 4.7 ---------- ---------- ---------- $ (65.9) $ (66.0) $ (77.1) ======== ========= ========= OTHER-NET, INCOME (EXPENSE) NACCO Materials Handling Group $ (1.7) $ 2.9 $ ( .5) Hamilton Beach/Proctor-Silex (4.1) (1.1) North American Coal (1.1) (1.4) 1.1 Bellaire 1.2 .1 2.0 NACCO 1.0 .2 .3 ---------- ----------- ----------- $ (4.7) $ 1.8 $ 1.8 ======== ========= =========
F-26 84 NOTE P--BUSINESS SEGMENTS--Continued
1993 1992 1991 ---- ---- ---- (In millions) NET INCOME (LOSS) Before Extraordinary Charge NACCO Materials Handling Group $ (5.1) $ 1.3 $ 1.1 Hamilton Beach/Proctor-Silex (1.0) 5.4 2.5 North American Coal 16.0 19.5 17.2 Kitchen Collection 2.7 2.4 1.5 Bellaire 4.0 1.5 6.0 NACCO (5.4) (6.1) (7.8) Minority interest .4 (1.1) (.5) ---------- --------- --------- 11.6 22.9 20.0 Extraordinary charge, net-of-tax (3.3) (110.0) ---------- --------- --------- Net Income (Loss) $ 8.3 $ (87.1) $ 20.0 ========== ========= ========= TOTAL ASSETS NACCO Materials Handling Group $ 833.0 $ 854.3 $ 896.9 Hamilton Beach/Proctor-Silex 300.3 296.8 314.2 North American Coal 41.4 38.5 20.0 Kitchen Collection 23.3 19.9 16.8 Bellaire 97.0 97.5 54.8 NACCO 22.8 34.6 3.7 ---------- --------- --------- 1,317.8 1,341.6 1,306.4 Project mining subsidiaries 416.7 410.7 371.1 ---------- --------- --------- 1,734.5 1,752.3 1,677.5 Consolidating eliminations (92.0) (67.4) (47.8) ---------- --------- --------- $ 1,642.5 $ 1,684.9 $ 1,629.7 ========== ========= ========= DEPRECIATION, DEPLETION AND AMORTIZATION EXPENSE NACCO Materials Handling Group $ 31.7 $ 32.1 $ 32.5 Hamilton Beach/Proctor-Silex 15.3 15.3 15.3 North American Coal 1.5 1.5 .2 Kitchen Collection .8 .8 .7 Bellaire .2 2.0 NACCO .3 .4 .2 ---------- --------- --------- 49.6 50.3 50.9 Project mining subsidiaries 28.5 22.2 20.3 ---------- --------- --------- $ 78.1 $ 72.5 $ 71.2 ========== ========= ========= CAPITAL EXPENDITURES NACCO Materials Handling Group $ 20.2 $ 24.3 $ 17.2 Hamilton Beach/Proctor-Silex 12.2 10.8 4.7 North American Coal 1.0 1.1 .1 Kitchen Collection 1.1 .6 .6 Bellaire .5 NACCO .2 .2 1.2 ---------- --------- --------- 34.7 37.0 24.3 Project mining subsidiaries 23.0 37.4 29.9 ---------- --------- --------- $ 57.7 $ 74.4 $ 54.2 ========== ========= =========
F-27 85 NOTE P--BUSINESS SEGMENTS--Continued DATA BY GEOGRAPHIC AREA
United All States Europe Other Eliminations Consolidated ---------- --------- ------- ------------ ------------ (In millions) 1993 - ---- Sales to unaffiliated customers $1,243.8 $220.5 $ 85.1 $1,549.4 Transfer between geographic areas 55.0 81.2 12.8 $(149.0) -------- ------ ------ ------- -------- Total revenues $1,298.8 $301.7 $ 97.9 $(149.0) $1,549.4 ======== ====== ====== ======= ======== Operating profit $ 91.3 $ (2.4) $ 4.9 $ (.4) $ 93.4 ======== ====== ====== ======= ======== Total assets $1,366.1 $274.8 $ 36.5 $ (34.9) $1,642.5 ======== ====== ====== ======= ======== 1992 - ---- Sales to unaffiliated customers $1,159.2 $251.5 $ 73.1 $1,483.8 Transfer between geographic areas 63.4 89.2 $(152.6) -------- ------ ------ ------- -------- Total revenues $1,222.6 $340.7 $ 73.1 $(152.6) $1,483.8 ======== ====== ====== ======= ======== Operating profit $ 70.4 $ 28.7 $ 2.9 $ (.7) $ 101.3 ======== ====== ====== ======= ======== Total assets $1,367.0 $283.7 $ 37.2 $( 3.0) $1,684.9 ======== ====== ====== ======= ======== 1991 - ---- Sales to unaffiliated customers $1,037.8 $264.1 $ 67.3 $1,369.2 Transfer between geographic areas 51.6 64.3 $(115.9) -------- ------ ------ ------- -------- Total revenues $1,089.4 $328.4 $ 67.3 $(115.9) $1,369.2 ======== ====== ====== ======= ======== Operating profit $ 50.0 $ 38.7 $ 5.3 $ .5 $ 94.5 ======== ====== ====== ======= ======== Total assets $1,237.8 $363.3 $ 31.0 $ (2.4) $1,629.7 ======== ====== ====== ======= ========
NACCO parent company expense reduced U.S. operating profit by $7.9 million, $8.2 million and $7.2 million in 1993, 1992 and 1991, respectively. The all other category above does not include the operating results or assets of NACCO Materials Handling Group's 50% owned Japanese joint venture, Sumitomo-Yale, as it is accounted for using the equity method. F-28 86 NOTE Q--QUARTERLY RESULTS OF OPERATIONS (UNAUDITED) A summary of the unaudited quarterly results of operations for the years ended December 31, 1993 and 1992, is as follows:
First Second Third Fourth Quarter Quarter Quarter Quarter ------- ------- ------- ------- (In millions, except per share data) 1993 - ---- TOTAL REVENUES NACCO Materials Handling Group $214.7 $228.7 $217.5 $247.3 Hamilton Beach/Proctor-Silex 65.8 65.9 107.7 116.9 North American Coal 53.8 53.9 63.1 61.5 Kitchen Collection 9.1 10.1 14.2 20.3 Bellaire 1.2 1.1 1.1 .6 Eliminations (.8) (.9) (1.9) (1.5) ------ ------ ------ ------ 343.8 358.8 401.7 445.1 GROSS PROFIT 67.9 69.2 76.7 91.5 OPERATING PROFIT (1) NACCO Materials Handling Group 9.6 7.9 6.0 16.1 Hamilton Beach/Proctor-Silex (2.7) (1.8) 7.3 9.0 North American Coal 11.0 9.6 11.8 11.8 Kitchen Collection (.1) .2 1.4 3.3 Bellaire .2 .3 .4 NACCO (2.1) (2.2) (2.0) (1.6) ------ ------ ------ ------ 15.9 13.7 24.8 39.0 ------ ------ ------ ------ INCOME BEFORE EXTRAORDINARY CHARGE 0.0 (.2) 2.0 9.8 Extraordinary charge, net-of-tax (3.3) ------ ------ ------ ------ NET INCOME (LOSS) $ 0.0 $ (3.5) $ 2.0 $ 9.8 ====== ====== ====== ====== PER SHARE AMOUNTS: INCOME (LOSS) BEFORE EXTRAORDINARY CHARGE $ .00 $ (.02) $ .23 $ 1.09 Extraordinary charge, net-of-tax (.37) ------ ------ ------ ------ NET INCOME (LOSS) $ .00 $( .39) $ .23 $ 1.09 ====== ====== ====== ======
F-29 87 NOTE Q--QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)--Continued
First Second Third Fourth Quarter Quarter Quarter Quarter ------- ------- ------- (In millions, except per share data) 1992 - ---- TOTAL REVENUES NACCO Materials Handling Group $199.7 $217.7 $215.1 $ 233.4 Hamilton Beach/Proctor-Silex 65.4 73.7 108.2 111.3 North American Coal 45.3 47.4 57.7 60.7 Kitchen Collection 7.6 8.8 12.3 16.8 Bellaire 2.4 2.1 .8 1.5 Eliminations (.7) (1.0) (1.6) (.8) ------ ------ ------ ------- 319.7 348.7 392.5 422.9 GROSS PROFIT 66.8 70.4 84.7 90.6 OPERATING PROFIT (1) NACCO Materials Handling Group 9.7 10.9 11.1 12.6 Hamilton Beach/Proctor-Silex (2.7) .6 10.5 10.9 North American Coal 10.2 9.5 10.7 10.4 Kitchen Collection .1 .4 1.4 2.5 Bellaire .3 .2 .2 NACCO (2.1) (1.9) (2.0) (2.2) ------ ------ ------ ------- 15.5 19.5 31.9 34.4 ------ ------ ------ ------- INCOME BEFORE EXTRAORDINARY CHARGE .7 1.0 9.3 11.9 Extraordinary charge, net-of-tax (110.0) ------ ------ ------ ------- NET INCOME (LOSS) $ .7 $ 1.0 $ 9.3 $ (98.1) ====== ====== ====== ======= PER SHARE AMOUNTS: INCOME BEFORE EXTRAORDINARY CHARGE $ .08 $ .11 $ 1.05 $ 1.35 Extraordinary charge, net-of-tax (12.37) ------ ------ ------ ------- NET INCOME (LOSS) $ .08 $ .11 $ 1.05 $(11.02) ====== ====== ====== ======= (1) In the third quarter of 1993, the Company reclassified amortization of intangibles as an operating expense. The information for the first and second quarters of 1993 and for all quarters in 1992 has been restated from amounts previously reported in the Company's Forms 10-Q to reflect this reclassification.
F-30 88 NOTE R--PARENT COMPANY CONDENSED BALANCE SHEETS The condensed balance sheets of NACCO, the parent company, are as follows:
December 31 ------------------------- 1993 1992 -------- -------- Current assets (including current intercompany amounts) $ 7,745 $ 1,263 Other assets 1,544 2,150 Investment in and advances from subsidiaries, net 248,352 247,230 Property, plant and equipment, net 1,323 1,398 Deferred income taxes 293 --------- --------- Total Assets $ 258,964 $ 252,334 ========= ========= Current liabilities (including current intercompany amounts) $ 12,037 $ 8,730 Deferred income and other 4,719 5,288 Deferred income taxes 6,582 Stockholders' equity 235,626 238,316 --------- --------- Total Liabilities and Stockholders' Equity $ 258,964 $ 252,334 ========= =========
The debt agreements at NACCO Materials Handling Group and Hamilton Beach / Proctor-Silex prohibit the transfer of assets to NACCO. The debt agreement at Kitchen Collection allows the transfer of assets to NACCO under certain circumstances. The amount of restricted net assets at December 31, 1993, total approximately $372.3 million. There are no such restrictions for North American Coal and its dividends and advances are the primary source of cash for NACCO. F-31 89 NACCO INDUSTRIES, INC. REPORT OF MANAGEMENT To the Stockholders of NACCO Industries, Inc.: The management of NACCO Industries, Inc. is responsible for the preparation, content and integrity of the financial statements and related information contained within this report. The accompanying financial statements have been prepared in accordance with generally accepted accounting principles and include amounts that are based on informed judgments and estimates. The Company's code of conduct, communicated throughout the organization, requires adherence to high ethical standards in the conduct of the Company's business. NACCO Industries, Inc. and each of its subsidiaries maintain a system of internal controls designed to provide reasonable assurance as to the protection of assets and the integrity of the financial statements. These systems are augmented by the selection of qualified financial management personnel. In addition, an internal audit function periodically assesses the internal controls. Arthur Andersen & Co., independent certified public accountants, audits NACCO Industries, Inc. and its subsidiaries' financial statements. Its audits are conducted in accordance with generally accepted auditing standards and provide an objective and independent assessment that helps ensure fair presentation of the Company's operating results and financial position. The independent accountants have access to all financial records and related data of the Company, as well as to the minutes of stockholders' and directors' meetings. The Audit Committee of the Board of Directors, composed of independent directors, meets regularly with the independent auditors and internal auditors to review the scope of their audit reports and to discuss any action to be taken. The independent auditors and the internal auditors have free and direct access to the Audit Committee. The Audit Committee also reviews the financial reporting process and accounting policies of NACCO Industries, Inc. and each of its subsidiaries. Alfred M. Rankin, Jr. Frank B. O'Brien Steven M. Billick - ------------------------ ----------------------------- ---------------------------------- Alfred M. Rankin, Jr. Frank B. O'Brien Steven M. Billick President and Senior Vice President- Vice President and Chief Executive Corporate Development Controller Officer and Chief Financial Officer
F-32 90 SCHEDULE III -- CONDENSED FINANCIAL INFORMATION OF THE PARENT NACCO INDUSTRIES, INC. AND SUBSIDIARIES PARENT COMPANY CONDENSED BALANCE SHEETS
December 31 ------------------------------------------- 1993 1992 ----------------- ------------------ (In thousands) Current assets $554 $1,263 Net amounts receivable from subsidiaries 7,191 Other assets 1,544 2,150 Investment in and advances from subsidiaries, net Investments NMHG 257,244 230,445 Hamilton Beach<>Proctor-Silex 111,251 113,805 North American Coal 33,762 39,301 Kitchen Collection 12,625 11,627 Bellaire Corporation (98,737) (102,717) ------------- ---------------- 316,145 292,461 Advances from subsidiaries (67,793) (45,231) ------------- ---------------- 248,352 247,230 Property, plant and equipment, net 1,323 1,398 Deferred income taxes 293 ------------- ---------------- Total Assets $258,964 $252,334 ============= ================ Current liabilities $12,037 $4,167 Net amounts payable to subsidiaries 4,563 Deferred income and other 4,719 5,288 Deferred income taxes 6,582 Stockholders' equity 235,626 238,316 ------------- ---------------- Total Liabilities and Stockholders' Equity $258,964 $252,334 ============= ================
See notes to parent company financial statements. F-33 91 SCHEDULE III--CONDENSED FINANCIAL INFORMATION OF THE PARENT NACCO INDUSTRIES, INC. AND SUBSIDIARIES PARENT COMPANY STATEMENTS OF INCOME
Year Ended December 31 ---------------------------------------------------- 1993 1992 1991 -------------- ---------------- ---------------- (In thousands) Income (expense): Intercompany interest income (including other interest income of $13 in 1991) $1,841 $1,283 $13 Intercompany interest expense (2,076) (1,676) (2,250) Interest expense (25) (594) Other - net 829 60 165 ------------- -------------- --------------- 569 (333) (2,666) Administrative and general expenses 7,831 8,200 7,144 ------------- -------------- --------------- Loss before income taxes (7,262) (8,533) (9,810) Income tax benefit (1,748) (2,456) (1,974) ------------- -------------- --------------- Net loss before equity in earnings of subsidiaries and extraordinary charge (5,514) (6,077) (7,836) Equity in earnings of subsidiaries before extraordinary charge 17,107 28,945 27,874 Extraordinary charge, net-of-tax (3,292) (110,000) ------------- -------------- --------------- Net income (loss) $8,301 ($87,132) $20,038 ============= ============== ===============
See notes to parent company financial statements. F-34 92 SCHEDULE III--CONDENSED FINANCIAL INFORMATION OF THE PARENT NACCO INDUSTRIES, INC. AND SUBSIDIARIES PARENT COMPANY STATEMENTS OF CASH FLOWS
Year Ended December 31 ------------------------------------------- 1993 1992 1991 --------- ---------- -------- (In thousands) Operating activities Net income (loss) $8,301 ($87,132) $20,038 Equity in earnings of subsidiaries (17,107) (28,945) (27,874) Extraordinary charge, net-of-tax 3,292 110,000 --------- ------------ --------- Parent company only net loss (5,514) (6,077) (7,836) Deferred income taxes 6,908 (2,834) (678) Income taxes net of intercompany tax payments (3,954) 1,964 5,890 Working capital changes 775 (1,469) 165 Changes in current intercompany amounts 49 1,106 2,352 Items of income or expense not requiring cash outlays 299 530 327 --------- ------------ --------- Net cash provided (used) by operating activities (1,437) (6,780) 220 Investing Activities Capital contributions to subsidiaries NMHG (52,235) Hamilton Beach<>Proctor-Silex (4,000) Dividends and advances received from subsidiaries 45,883 33,165 23,552 Purchases of Hyster-Yale 12 3/8% debentures (11,832) (22,061) Reduction of investment in Hyster-Yale 12 3/8% debentures 25,529 Expenditures for equipment (147) (246) (1,254) --------- ------------ --------- Net cash provided (used) by investing activities 7,198 10,858 18,298 Financing Activities Repayments of revolving credit agreements (13,825) Cash dividends (5,854) (5,645) (5,461) Treasury stock sales under stock option and directors' compensation plans - net 212 1,622 41 Other - net (75) (55) 730 --------- ------------ --------- Net cash used by financing activities (5,717) (4,078) (18,515) --------- ------------ --------- Cash and cash equivalents Increase for the period 44 0 3 Balance at the beginning of the period 3 3 --------- ------------ --------- Balance at the end of the period $47 $3 $3 ========= ============ =========
See notes to parent company financial statements. F-35 93 SCHEDULE III--CONDENSED FINANCIAL INFORMATION OF THE PARENT NACCO INDUSTRIES, INC. AND SUBSIDIARIES NOTES TO PARENT COMPANY FINANCIAL STATEMENTS For The Year Ended December 31, 1993, 1992 and 1991 The notes to consolidated financial statements, included elsewhere in this Form 10-K, are hereby incorporated by reference into these notes to parent company financial statements. NOTE A - LONG-TERM OBLIGATIONS AND GUARANTEES NACCO Industries, Inc. ("NACCO" the parent company) is a holding company which owns four operating subsidiaries. It is NACCO's policy not to guarantee the debt of such subsidiaries. NOTE B - CASH DIVIDENDS AND ADVANCES TO NACCO Dividends received from the subsidiaries were $23.3 million in 1993 and 1992, and $38.0 million in 1991. NOTE C - CAPITAL CONTRIBUTIONS TO SUBSIDIARIES The capital contribution to NMHG of $52.2 million in 1993 includes the $26.7 million of cash contributed by NACCO to NMHG in 1993. In addition, NACCO contributed previously purchased Hyster-Yale 12 3/8% debentures with a cost to NACCO of $25.5 million (face value of $23.7 million) to NMHG in 1993. NOTE D - UNRESTRICTED CASH The amount of unrestricted cash available to NACCO, included in Investment in and advances from subsidiaries, net, was minimal at December 31, 1993 and 1992. F-36 94 SCHEDULE V--PROPERTY, PLANT AND EQUIPMENT NACCO INDUSTRIES, INC. AND SUBSIDIARIES YEARS ENDED DECEMBER 31, 1993, 1992 and 1991
- ---------------------------------------------------------------------------------------------------------------------------- COL A. COL B. COL C. COL D. COL E. COL F. - ---------------------------------------------------------------------------------------------------------------------------- Other Balance at Changes-- Balance at Beginning of Additions Add (Deduct) End of Classification Period At Cost Retirements --Describe Period - ---------------------------------------------------------------------------------------------------------------------------- (In thousands) 1993 Surface lands and real estate $23,865 $945 $762 $937 (F) $24,985 Coal lands and leaseholds 50,455 420 37 (850) (F) 49,988 -------------- --------------- --------------- --------------- -------------- 74,320 1,365 799 87 74,973 Plants and mine development 196,563 6,007 11,482 (574) (F) 190,514 Equipment 321,058 38,625 22,148 (17,062) (F) 320,473 Leased plant and equipment 176,917 9,296 3,140 13,132 (F) 196,205 -------------- --------------- --------------- --------------- -------------- 694,538 53,928 (C) 36,770 (4,504) 707,192 -------------- --------------- --------------- --------------- -------------- Totals $768,858 $55,293 $37,569 (D) ($4,417) $782,165 ============== =============== =============== =============== ============== (H) 1992 Surface lands and real estate $23,242 $2,406 $275 ($1,508) (F) $23,865 Coal lands and leaseholds 47,973 (A) 223 44 2,303 (E) 50,455 -------------- --------------- --------------- --------------- -------------- 71,215 2,629 (B) 319 795 74,320 Plants and mine development 191,963 8,509 172 3,428 (E) (7,165) (F) 196,563 Equipment 271,314 61,622 13,760 8,295 (E) (6,413) (F) 321,058 Leased plant and equipment 167,255 12,037 2,377 2 (F) 176,917 -------------- --------------- --------------- --------------- -------------- 630,532 82,168 (C) 16,309 (1,853) 694,538 -------------- --------------- --------------- --------------- -------------- Totals $701,747 $84,797 $16,628 (D) ($1,058) $768,858 ============== =============== =============== =============== ============== (H) 1991 Surface lands and real estate $22,921 $701 $290 ($90) (F) $23,242 Coal lands and leaseholds 47,869 3,752 70 105 (G) 51,656 -------------- --------------- --------------- --------------- -------------- 70,790 4,453 (B) 360 15 74,898 Plants and mine development 185,890 7,715 1,386 (256) (F) 191,963 Equipment 235,656 43,821 7,569 (327) (G) (267) (F) 271,314 Leased plant and equipment 165,213 3,893 2,168 317 (G) 167,255 -------------- --------------- --------------- --------------- -------------- 586,759 55,429 (C) 11,123 (533) 630,532 -------------- --------------- --------------- --------------- -------------- Totals $657,549 $59,882 $11,483 (D) ($518) $705,430 ============== =============== =============== =============== ==============
See the following page for explanation of notes. F-37 95 SCHEDULE V--PROPERTY, PLANT AND EQUIPMENT NACCO INDUSTRIES, INC. AND SUBSIDIARIES YEARS ENDED DECEMBER 31, 1993, 1992 and 1991 Note A - The balance at the beginning of the period has been restated to reflect a balance sheet reclassification that was made during 1992. Note B - Additions primarily relate to the purchase of coal lands and coal leases by a project mining subsidiary. Note C - Additions relate to the continuing development of mines of subsidiary companies and the replacement and upgrading of equipment for mines and manufacturing facilities of subsidiary companies. Note D - Retirements in 1993 and 1992 related primarily to the disposal of manufacturing equipment in the ordinary course of business. Retirements in 1991 included $8.1 million relating to mining equipment. Note E - Consolidation of a mining subsidiary's assets which were not consolidated in prior years. Note F - Reclasses between groupings, subsidiary's foreign currency translation adjustments and other. Note G - Mining subsidiary's lease restructuring. Note H - Where appropriate amounts have been restated to reflect the adoption of Statement of Financial Accounting Standards No. 109, Accounting for Income Taxes ("SFAS 109"). The restatement adjustments reflect the SFAS 109 requirement that assets acquired in a purchase business combination be reported at their gross cost and not net-of-tax. Note I - The annual provisions for depreciation have been computed principally in accordance with the following ranges of rates:
1993 1992 1991 ------------ ------------- ------------- Plants and mine development 3% to 25% 3% to 25% 2% to 20% Equipment 3% to 33% 3% to 33% 6% to 33% Leased plant and equipment 4% to 50% 4% to 50% 4% to 20%
F-38 96 SCHEDULE VI--ACCUMULATED DEPRECIATION, DEPLETION AND AMORTIZATION OF PROPERTY, PLANT AND EQUIPMENT NACCO INDUSTRIES, INC. AND SUBSIDIARIES YEARS ENDED DECEMBER 31, 1993, 1992 and 1991
- ---------------------------------------------------------------------------------------------------------------- COL A. COL B. COL C. COL D. COL E. COL F. - ---------------------------------------------------------------------------------------------------------------- Additions Other Balance at Charged to Changes-- Balance at Beginning of Costs and Add (Deduct) End of Classification Period Expenses Retirements --Describe Period - ---------------------------------------------------------------------------------------------------------------- (In thousands) 1993 Coal lands and leaseholds $6,629 $3,487 $11 $133 (C) $10,238 Plants and mine development 64,242 9,448 9,795 (210)(C) 63,685 Equipment 131,472 35,383 20,897 (427)(C) 145,531 Leased plant and equipment 57,925 11,713 3,140 66,498 ---------- --------------- --------------- --------------- --------------- Totals $260,268 $60,031 $33,843 (A) ($504) $285,952 ========== =============== =============== =============== =============== (D) 1992 Coal lands and leaseholds $5,519 $677 $8 $386 (B) 55 (C) $6,629 Plants and mine development 57,237 9,127 65 533 (B) (2,590)(C) 64,242 Equipment 109,486 33,714 10,905 1,652 (B) (2,475)(C) 131,472 Leased plant and equipment 50,269 10,035 2,377 (2)(C) 57,925 ---------- --------------- --------------- --------------- --------------- Totals $222,511 $53,553 $13,355(A) ($2,441) $260,268 ========== =============== =============== =============== =============== (D) 1991 Coal lands and leaseholds $5,250 $304 $29 ($6)(C) $5,519 Plants and mine development 47,911 9,765 465 26 (C) 57,237 Equipment 82,538 32,709 5,523 (238)(C) 109,486 Leased plant and equipment 42,121 9,877 2,168 439 (C) 50,269 ---------- --------------- --------------- --------------- --------------- Totals $177,820 $52,655 $8,185(A) $221 $222,511 ========== =============== =============== =============== =============== Note A - Retirements in 1993 and 1992 related primarily to the disposal of manufacturing equipment in the ordinary course of business. Retirements in 1991 included $6.7 million relating to the mining operations. Note B - Consolidation of a mining subsidiary's assets which were not consolidated in prior years. Note C - Subsidiary's foreign currency translation adjustments, reclasses between groupings and other. Note D - Where appropriate amounts have been restated to reflect the adoption of Statement of Financial Accounting Standards No. 109, Accounting for Income Taxes ("SFAS 109"). The restatement adjustments reflect the SFAS 109 requirement that assets acquired in a purchase business combination be reported at their gross cost and not net-of-tax.
F-39 97 SCHEDULE VIII--VALUATION AND QUALIFYING ACCOUNTS NACCO INDUSTRIES, INC. AND SUBSIDIARIES YEARS ENDED DECEMBER 31, 1993, 1992 and 1991
- ------------------------------------------------------------------------------------------------------------------------- COL A. COL B. COL C. COL D. COL E. - ------------------------------------------------------------------------------------------------------------------------- Additions ------------------------------------- (D) Balance at Charged to Charged to Balance at Beginning of Costs and Other Accounts Deductions End of Description Period Expenses --Describe --Describe Period - ------------------------------------------------------------------------------------------------------------------------- (In thousands) 1993 Reserves deducted from asset accounts: Allowance for doubtful accounts $5,302 $1,056 $595 (A) 32 (C) $5,731 Allowance for discounts, adjustments and returns $7,097 $16,596 $18,296 (B) $5,397 1992 Reserves deducted from asset accounts: Allowance for doubtful accounts $5,307 $845 $789 (A) 61 (C) $5,302 Allowance for discounts, adjustments and returns $6,860 $22,454 $22,217 (B) $7,097 1991 Reserves deducted from asset accounts: Allowance for doubtful accounts $8,894 $2,562 $6,105 (A) 44 (C) $5,307 Allowance for discounts, adjustments and returns $11,231 $21,849 $26,220 (B) $6,860 Note A - Accounts receivable balances written off, net of recoveries. Note B - Payments. Note C - Subsidiary's foreign currency translation adjustments and other. Note D - Balances which are not required to be presented and those which are immaterial have been omitted.
F-40 98 SCHEDULE IX--SHORT-TERM BORROWINGS NACCO INDUSTRIES, INC. AND SUBSIDIARIES YEARS ENDED DECEMBER 31, 1993, 1992 and 1991
- ------------------------------------------------------------------------------------------------------------------------------------ COL A. COL B. COL C. COL D. COL E. COL F. - ------------------------------------------------------------------------------------------------------------------------------------ Maximum Average Weighted Amount Amount Average Balance at Weighted Outstanding Outstanding Interest Rate Category of Aggregate End of Average During the During the During the Short-Term Borrowings Period Interest Rate Period Period (A) Period (B) - ------------------------------------------------------------------------------------------------------------------------------------ (In thousands, except percentage data) 1993 Revolving credit agreements and notes payable to bank $35,178 5.2% $99,292 $46,675 6.2% 1992 Revolving credit agreements and notes payable to bank $19,196 5.4% $83,081 $39,490 7.4% 1991 Revolving credit agreements and notes payable to bank $21,546 7.4% $159,154 $72,746 8.4% Note A - The average amount outstanding during the period was computed by dividing the total daily outstanding principal balances during the period by the number of days in the period. Note B - The weighted average interest rate during the period was computed by dividing the total interest expense for the borrowing by the average amount outstanding during the period.
F-41 99 SCHEDULE X--SUPPLEMENTARY INCOME STATEMENT INFORMATION NACCO INDUSTRIES, INC. AND SUBSIDIARIES YEARS ENDED DECEMBER 31, 1993, 1992 and 1991
- ----------------------------------------------------------------------------------------------------------------------- COL A. COL B. - ----------------------------------------------------------------------------------------------------------------------- Charged to Costs Item and Expenses - ----------------------------------------------------------------------------------------------------------------------- (In thousands) 1993 Maintenance and repairs $42,846 Taxes other than payroll and income taxes: Severance $17,209 Advertising costs $22,578 1992 Maintenance and repairs $38,880 Taxes other than payroll and income taxes: Severance $16,204 Advertising costs $24,578 1991 Maintenance and repairs $31,212 Depreciation and amortization of intangible assets, preoperating costs and similar deferral: Patents, trademarks and goodwill $14,266 Taxes other than payroll and income taxes: Severance $14,792 Advertising costs $21,786 Note - The captions not presented are less than 1% of total revenues.
F-42 100 EXHIBIT INDEX (3) Articles of Incorporation and By-laws. (i) Restated Certificate of Incorporation of the Company is incorporated by reference to Exhibit 3(i) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1992, Commission File Number 1-9172. (ii) Restated By-laws of the Company are incorporated by reference to Exhibit 3(ii) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1992, Commission File Number 1-9172. (4) Instruments defining the rights of security holders, including indentures. (i) The Company by this filing agrees, upon request, to file with the Securities and Exchange Commission the instruments defining the rights of holders of long-term debt of the Company and its subsidiaries where the total amount of securities authorized thereunder does not exceed 10% of the total assets of the Company and its subsidiaries on a consolidated basis. (ii) The Mortgage and Security Agreement, dated April 8, 1976, between The Falkirk Mining Company (as Mortgagor) and Cooperative Power Association and United Power Association (collectively as Mortgagee) is incorporated by reference to Exhibit 4(ii) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1992, Commission File Number 1-9172. (iii) Indenture, dated as of August 3, 1989, between the Company and United Trust Company of New York, Trustee, with respect to the 12-3/8% Senior Subordinated Debentures due August 1, 1999 (the form of which Debenture is included in such Indenture) is incorporated herein by reference to Exhibit 4(ii) of the Hyster-Yale Materials Handling, Inc. ("Hyster-Yale") Annual Report on Form 10-K for the fiscal year ended December 31, 1989, Commission File Number 33-28812. (iv) Stockholders' Agreement, dated as of March 15, 1990, among the signatories thereto, the Company and Ameritrust Company National Association, as depository, is incorporated herein by reference to Exhibit 2 to the Schedule 13D filed on March 29, 1990 with respect to the Class B Common Stock, par value $1.00 per share, of NACCO Industries, Inc. (v) Amendment to Stockholders' Agreement, dated as of April 6, 1990, among the signatories thereto, the Company and Ameritrust Company National Association, as depository, is incorporated herein by reference to Exhibit 4 to the Amendment No. 1 of the Schedule 13D filed on April 11, 1990 with respect to the Class B Common Stock, par value $1.00 per share, of NACCO Industries, Inc. X-1 101 (vi) Amendment to Stockholders' Agreement, dated as of April 6, 1990, among the signatories thereto, the Company and Ameritrust Company National Association, as depository, is incorporated herein by reference to Exhibit 5 to the Amendment No. 1 of the Schedule 13D filed on April 11, 1990 with respect to the Class B Common Stock, par value $1.00 per share, of NACCO Industries, Inc. (vii) Amendment to Stockholders' Agreement, dated as of November 17, 1990, among the signatories thereto, the Company and Ameritrust Company National Association, as depository, is incorporated herein by reference to Exhibit 7 to the Amendment No. 2 of the Schedule 13D filed on March 18, 1991 with respect to the Class B Common Stock, par value $1.00 per share, of NACCO Industries, Inc. (10) Material contracts. *(i) The NACCO Industries, Inc. 1975 Stock Option Plan (as amended and restated as of July 17, 1986) is incorporated herein by reference to Exhibit 10(i) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1991, Commission File Number 1-9172. *(ii) Form of Incentive Stock Option Agreement for incentive stock options granted before 1987 under The NACCO Industries, Inc. 1975 Stock Option Plan (as amended and restated as of July 17, 1986) is incorporated herein by reference to Exhibit 10(ii) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1991, Commission File Number 1-9172. *(iii) Form of Incentive Stock Option Agreement for incentive stock options granted after 1986 under The NACCO Industries, Inc. 1975 Stock Option Plan (as amended and restated as of July 17, 1986) is incorporated herein by reference to Exhibit 10(iii) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1991, Commission File Number 1-9172. *(iv) Form of Non-Qualified Stock Option Agreement under The NACCO Industries, Inc. 1975 Stock Option Plan (as amended and restated as of July 17, 1986) is incorporated herein by reference to Exhibit 10(iv) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1991, Commission File Number 1-9172. *(v) The NACCO Industries, Inc. 1981 Stock Option Plan (as amended and restated as of July 17, 1986) is incorporated herein by reference to Exhibit 10(v) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1991, Commission File Number 1-9172. *(vi) Form of Non-Qualified Stock Option Agreement under The NACCO Industries, Inc. 1981 Stock Option Plan (as amended and restated as of July 17, 1986) is incorporated herein by reference to Exhibit 10(vi) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1991, Commission File Number 1-9172. *(vii) Form of Incentive Stock Option Agreement for incentive stock options granted before 1987 under The NACCO Industries, Inc. 1981 Stock Option Plan (as amended and restated as of July 17, 1986) is incorporated herein by reference to Exhibit 10(vii) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1991, Commission File Number 1-9172. *(viii) Form of Incentive Stock Option Agreement for incentive stock options granted after 1986 under The NACCO Industries, Inc. 1981 Stock Option Plan (as amended and X-2 102 restated as of July 17, 1986) is incorporated herein by reference to Exhibit 10(viii) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1991, Commission File Number 1-9172. *(ix) Retirement Benefit Plan, dated December 18, 1989, between Ward Smith, Chairman, President and Chief Executive Officer of the Company, and the Company is incorporated herein by reference to Exhibit 10(xi) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1989, Commission File Number 1-9172. *(x) Retirement Benefit Plan, dated December 18, 1989, between Alfred M. Rankin, Jr., President and Chief Operating Officer of the Company, and the Company is incorporated herein by reference to Exhibit 10(xii) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1989, Commission File Number 1-9172. *(xi) The North American Coal Corporation Deferred Compensation Plan for Management Employees (formerly known as the NACCO Industries, Inc. Deferred Compensation Plan for Management Employees) dated December 1, 1989, is incorporated herein by reference to Exhibit 10(xiii) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1989, Commission File Number 1-9172. (xii) Amendment Number 7 to the Credit Agreement, dated as of May 19, 1992, among Citicorp North America, Inc., Hyster-Yale Materials Handling, Inc., Yale Materials Handling Corporation and Hyster Company is incorporated herein by reference to Exhibit 10(lxxiv) of the Hyster-Yale Annual Report on Form 10-K for the fiscal year ended December 31, 1992, Commission File Number 33-28812. (xiii) Amendment Number 8 to the Credit Agreement, dated as of January 14, 1993, among Citicorp North America, Inc., Hyster-Yale Materials Handling, Inc., Yale Materials Handling Corporation and Hyster Company is incorporated herein by reference to Exhibit 10(lxxv) of the Hyster-Yale Annual Report on Form 10-K for the fiscal year ended December 31, 1992, Commission File Number 33-28812. *(xiv) The Yale Materials Handling Corporation Unfunded Deferred Compensation Plan is incorporated herein by reference to Exhibit 10(xliv) of the Hyster-Yale Annual Report on Form 10-K for the fiscal year ended December 31, 1989, Commission File Number 33-28812. (xv) Agreement of Merger, dated as of January 20, 1988, among NACCO Industries, Inc., Housewares Holding Company, WE-PS Merger, Inc. and WearEver-ProctorSilex, Inc., is incorporated herein by reference to pages 8 through 97 of Exhibit 2 to the Company's Current Report on Form 8-K, dated February 1, 1988, Commission File Number 1-9172. (xvi) Shareholders Agreement, dated January 20, 1988, among NACCO Industries, Inc. and the shareholders named therein is incorporated herein by reference to pages 98 through 108 of Exhibit 2 to the Company's Current Report on Form 8-K, dated February 1, 1988, Commission File Number 1-9172. X-3 103 *(xvii) Amendment No. 1 to the NACCO Industries, Inc. Deferred Compensation Plan for Management Employees, dated January 1, 1993, is incorporated by reference to Exhibit 10(xvii) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1992, Commission File Number 1-9172. *(xviii) Termination and Cancellation Agreement, dated as of December 16, 1992, between Yale Materials Handling Corporation and Reginald R. Eklund is incorporated herein by reference to Exhibit 10(lix) of the Hyster-Yale Annual Report on Form 10-K for the fiscal year ended December 31, 1992, Commission File Number 33-28812. (xix) Agreement and Plan of Merger, dated as of April 7, 1989, among NACCO Industries, Inc., Yale Materials Handling Corporation, Acquisition I, Esco Corporation, Hyster Company and Newesco, is incorporated herein by reference to Exhibit 2.1 to Hyster-Yale Materials Handling, Inc.'s Registration Statement on Form S-1 filed May 17, 1989 (Registration Statement Number 33-28812). (xx) Agreement and Plan of Merger, dated as of April 7, 1989, among NACCO Industries, Inc., Yale Materials Handling Corporation, Acquisition II, Hyster Company and Newesco, is incorporated herein by reference to Exhibit 2.2 to Hyster-Yale Materials Handling, Inc.'s Registration Statement on Form S-1 filed May 17, 1989 (Registration Statement Number 33-28812). (xxi) Credit Agreement, dated May 26, 1989, among the Hyster-Yale Materials Handling, Inc., Yale Materials Handling Corporation, Hyster Company, the Lenders party thereto and Citicorp North America, Inc. (individually and as Agent) is incorporated herein by reference to Exhibit 10.11 to Amendment No. 1 filed June 9, 1989 to Hyster-Yale Materials Handling, Inc.'s Registration Statement on Form S-1 (Registration Statement Number 33-28812). (xxii) Exhibits and Schedules to Credit Agreement, dated May 26, 1989, among Hyster-Yale Materials Handling, Inc., Yale Materials Handling Corporation, Hyster Company, the Lenders party thereto and Citicorp North America, Inc. is incorporated herein by reference to Exhibit 10.17 to Amendment No. 3 filed July 18, 1989 to Hyster-Yale Materials Handling, Inc.'s Registration Statement on Form S-1 (Registration Statement Number 33-28812). (xxiii) Security Agreement, dated as of May 26, 1989, by Hyster Company in favor of Citicorp North America, Inc. (as agent for the Lenders party to the Credit Agreement) is incorporated herein by reference to Exhibit 10.18 to Amendment No. 3 filed July 18, 1989 to Hyster-Yale Materials Handling, Inc.'s Registration Statement on Form S-1 (Registration Statement Number 33-28812). (xxiv) Security Agreement, dated as of May 26, 1989, by Yale Materials Handling Corporation in favor of Citicorp North America, Inc. (as agent for the Lenders party to the Credit Agreement) is incorporated herein by reference to Exhibit 10.19 to Amendment No. 3 filed July 18, 1989 to Hyster-Yale Materials Handling, Inc.'s Registration Statement on Form S-1 (Registration Statement Number 33-28812). X-4 104 (xxv) Security Agreement, dated as of May 26, 1989, by Hyster-Yale Materials Handling, Inc. in favor of Citicorp North America, Inc. (as agent for the Lenders party to the Credit Agreement) is incorporated herein by reference to Exhibit 10.20 to Amendment No. 3 filed July 18, 1989 to Hyster-Yale Materials Handling, Inc.'s Registration Statement on Form S-1 (Registration Statement Number 33-28812). (xxvi) Trademark and License Security Agreement, dated as of May 26, 1989, by Hyster Company in favor of Citicorp North America, Inc. (as agent for the Lenders party to the Credit Agreement) is incorporated herein by reference to Exhibit 10.21 to Amendment No. 3 filed July 18, 1989 to Hyster-Yale Materials Handling, Inc.'s Registration Statement on Form S-1 (Registration Statement Number 33-28812). (xxvii) Trademark and License Security Agreement, dated as of May 26, 1989, by Yale Materials Handling Corporation in favor of Citicorp North America, Inc. (as agent for the Lenders party to the Credit Agreement) is incorporated herein by reference to Exhibit 10.22 to Amendment No. 3 filed July 18, 1989 to Hyster-Yale Materials Handling, Inc.'s Registration Statement on Form S-1 (Registration Statement Number 33-28812). (xxviii) Patent and License Security Agreement, dated as of May 26, 1989, by Hyster Company in favor of Citicorp North America, Inc. (as agent for the Lenders party to the Credit Agreement) is incorporated herein by reference to Exhibit 10.23 to Amendment No. 3 filed July 18, 1989 to Hyster-Yale Materials Handling, Inc.'s Registration Statement on Form S-1 (Registration Statement Number 33-28812). (xxix) Patent and License Security Agreement, dated as of May 26, 1989, by Yale Materials Handling Corporation in favor of Citicorp North America, Inc. (as agent for the Lenders party to the Credit Agreement) is incorporated herein by reference to Exhibit 10.24 to Amendment No. 3 filed July 18, 1989 to Hyster-Yale Materials Handling, Inc.'s Registration Statement on Form S-1 (Registration Statement Number 33-28812). (xxx) Aircraft Security Agreement, dated as of May 26, 1989, by Hyster Company in favor of Citicorp North America, Inc. (as agent for the Lenders party to the Credit Agreement) is incorporated herein by reference to Exhibit 10.25 to Amendment No. 3 filed July 18, 1989 to Hyster-Yale Materials Handling, Inc.'s Registration Statement on Form S-1 (Registration Statement Number 33-28812). (xxxi) Hyster Company Pledge Agreement, dated as of May 26, 1989, by Hyster Company in favor of Citicorp North America, Inc. (as agent for the Lenders party to the Credit Agreement) is incorporated herein by reference to Exhibit 10.26 to Amendment No. 3 filed July 18, 1989 to Hyster-Yale Materials Handling, Inc.'s Registration Statement on Form S-1 (Registration Statement Number 33-28812). (xxxii) Instrument of Pledge, dated as of May 26, 1989, by Hyster Company and Hyster, B.V. in favor of Citicorp North America, Inc. (as agent for the Lenders party to the Credit Agreement) is incorporated herein by reference to Exhibit 10.27 to Amendment No. 3 filed July 18, 1989 to Hyster-Yale Materials Handling, Inc.'s Registration Statement on Form S-1 (Registration Statement Number 33-28812). X-5 105 (xxxiii) Deed of Charge, dated as of May 26, 1989, by Hyster Europe Limited and Hyster Company in favor of Citicorp North America, Inc. (as agent for the Lenders party to the Credit Agreement) is incorporated herein by reference to Exhibit 10.28 to Amendment No. 3 filed July 18, 1989 to Hyster-Yale Materials Handling, Inc.'s Registration Statement on Form S-1 (Registration Statement Number 33-28812). (xxxiv) Brazilian Pledge Agreement, dated as of May 26, 1989, by Hyster Company and Hyster Overseas Capital Corporation in favor of Citicorp North America, Inc. (as agent for the Lenders party to the Credit Agreement) is incorporated herein by reference to Exhibit 10.29 to Amendment No. 3 filed July 18, 1989 to Hyster-Yale Materials Handling, Inc.'s Registration Statement on Form S-1 (Registration Statement Number 33-28812). (xxxv) Australian Pledge Agreement, dated as of May 26, 1989, by Hyster Company in favor of Citicorp North America, Inc. (as agent for the Lenders party to the Credit Agreement) is incorporated herein by reference to Exhibit 10.30 to Amendment No. 3 filed July 18, 1989 to Hyster-Yale Materials Handling, Inc.'s Registration Statement on Form S-1 (Registration Statement Number 33-28812). (xxxvi) Pledge Agreement, dated as of May 26, 1989, by Yale Materials Handling Corporation in favor of Citicorp North America, Inc. (as agent for the Lenders party to the Credit Agreement) is incorporated herein by reference to Exhibit 10.31 to Amendment No. 3 filed July 18, 1989 to Hyster-Yale Materials Handling, Inc.'s Registration Statement on Form S-1 (Registration Statement Number 33-28812). (xxxvii) Yale Materials Handling Corporation Pledge Agreement, dated as of May 26, 1989, by Yale Materials Handling Corporation in favor of Citicorp North America, Inc. (as agent for the Lenders party to the Credit Agreement) is incorporated herein by reference to Exhibit 10.32 to Amendment No. 3 filed July 18, 1989 to Hyster-Yale Materials Handling, Inc.'s Registration Statement on Form S-1 (Registration Statement Number 33-28812). (xxxviii) Deed of Charge, dated as of May 26, 1989, by Yale Materials Handling Corporation and Yale Materials Handling Limited in favor of Citicorp North America, Inc. (as agent for the Lenders party to the Credit Agreement) is incorporated herein by reference to Exhibit 10.33 to Amendment No. 3 filed July 18, 1989 to Hyster-Yale Materials Handling, Inc.'s Registration Statement on Form S-1 (Registration Statement Number 33-28812). (xxxix) Holding Pledge Agreement, dated as of May 26, 1989, by Hyster-Yale Materials Handling, Inc. in favor of Citicorp North America, Inc. (as agent for the Lenders party to the Credit Agreement) is incorporated herein by reference to Exhibit 10.34 to Amendment No. 3 filed July 18, 1989 to Hyster-Yale Materials Handling, Inc.'s Registration Statement on Form S-1 (Registration Statement Number 33-28812). (xl) NACCO Industries, Inc. I Pledge Agreement, dated as of May 26, 1989, by Acquisition I in favor of Citicorp North America, Inc. (as agent for the Lenders party to the Credit Agreement) is incorporated herein by reference to Exhibit 10.35 to Amendment No. 3 filed July 18, 1989 to Hyster-Yale Materials Handling, Inc.'s Registration Statement on Form S-1 (Registration Statement Number 33-28812). X-6 106 (xli) Guaranty, dated as of May 26, 1989, by Hyster Company in favor of Citicorp North America, Inc. (as agent for the Lenders party to the Credit Agreement) is incorporated herein by reference to Exhibit 10.36 to Amendment No. 3 filed July 18, 1989 to Hyster-Yale Materials Handling, Inc.'s Registration Statement on Form S-1 (Registration Statement Number 33-28812). (xlii) Guaranty, dated as of May 26, 1989, by Yale Materials Handling Corporation in favor of Citicorp North America, Inc. (as agent for the Lenders party to the Credit Agreement) is incorporated herein by reference to Exhibit 10.37 to Amendment Number 3 filed July 18, 1989 to Hyster-Yale Materials Handling, Inc.'s Registration Statement on Form S-1 (Registration Statement Number 33-28812). (xliii) Guaranty, dated as of May 26, 1989, by Hyster-Yale Materials Handling, Inc. in favor of Citicorp North America, Inc. (as agent for the Lenders party to the Credit Agreement) is incorporated herein by reference to Exhibit 10.38 to Amendment No. 3 filed July 18, 1989 to Hyster-Yale Materials Handling, Inc.'s Registration Statement on Form S-1 (Registration Statement Number 33-28812). (xliv) Guaranty and Security Agreement, dated as of May 26, 1989, by Acquisition I in favor of Citicorp North America, Inc. (as agent for the Lenders party to the Credit Agreement) is incorporated herein by reference to Exhibit 10.39 to Amendment No. 3 filed July 18, 1989 to Hyster-Yale Materials Handling, Inc.'s Registration Statement on Form S-1 (Registration Statement Number 33-28812). (xlv) Amendment No. 1 to the Credit Agreement, dated as of August 21, 1989, among Citicorp North America, Inc., Hyster-Yale Materials Handling, Inc., Yale Materials Handling Corporation and Hyster Company is incorporated herein by reference to Exhibit 10(xli) of the Hyster-Yale Annual Report on Form 10-K for the fiscal year ended December 31, 1989, Commission File Number 33-28812. (xlvi) Amendment No. 2 to the Credit Agreement, dated as of November 7, 1989, among Citicorp North America, Inc., Hyster-Yale Materials Handling, Inc., Yale Materials Handling Corporation and Hyster Company is incorporated herein by reference to Exhibit 10(xlii) of the Hyster-Yale Annual Report on Form 10-K for the fiscal year ended December 31, 1989, Commission File Number 33-28812. (xlvii) Amendment No. 3 to the Credit Agreement, dated as of January 31, 1990, among Citicorp North America, Inc., Hyster-Yale Materials Handling, Inc., Yale Materials Handling Corporation and Hyster Company is incorporated herein by reference to Exhibit 10(xliii) of the Hyster-Yale Annual Report on Form 10-K for the fiscal year ended December 31, 1989, Commission File Number 33-28812. (xlviii) Reorganization and Merger Agreement, dated as of October 11, 1990, among Housewares Holding Company, HB-PS Holding Company, Inc., Proctor-Silex, Inc., Precis [521] Ltd., Glen Electric, Ltd. and Hamilton Beach Inc. is incorporated herein by reference to Exhibit 10(lv) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1990, Commission File Number 1-9172. The Company by this filing agrees, upon request, to file with the Securities and Exchange Commission any of the Exhibits and/or Schedules to the Reorganization and Merger Agreement. X-7 107 (xlix) Shareholders Agreement, dated as of October 11, 1990, among Housewares Holding Company, HB-PS Holding Company, Inc., Precis [521] Ltd. and Hamilton Beach Inc. is incorporated herein by reference to Exhibit 10(lvi) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1990, Commission File Number 1-9172. (l) Indemnity Agreement, dated as of October 11, 1990, among Hamilton Beach Inc., Glen Dimplex, Precis [521] Ltd. and Glen Electric, Ltd. is incorporated herein by reference to Exhibit 10(lvii) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1990, Commission File Number 1-9172. (li) Credit Agreement, dated as of October 11, 1990, among Hamilton Beach/Proctor-Silex, Proctor-Silex Canada Inc. ("Proctor-Silex Canada"), Proctor-Silex S.A. de C.V. ("PSM"), the Lenders party thereto, The Chase Manhattan Bank (National Association), as United States agent for such Lenders (the "United States Agent"), and The Chase Manhattan Bank of Canada, as Canadian agent for such Lenders (the "Canadian Agent") is incorporated herein by reference to Exhibit 10(lviii) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1990, Commission File Number 1-9172. The Company by this filing agrees, upon request, to file with the Securities and Exchange Commission any of the Exhibits and/or Schedules to the Credit Agreement. (lii) First Amendment to the Credit Agreement, dated as of December 31, 1990, among Hamilton Beach/Proctor-Silex, Proctor-Silex Canada, PSM, the Lenders party thereto, the United States Agent, and the Canadian Agent is incorporated herein by reference to Exhibit 10(lvix) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1990, Commission File Number 1-9172. (liii) Second Amendment to the Credit Agreement, dated as of March 1, 1991, among Hamilton Beach/Proctor-Silex, Proctor-Silex Canada, PSM, the Lenders party thereto, the United States Agent and the Canadian Agent is incorporated herein by reference to Exhibit 10(lx) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1990, Commission File Number 1-9172. (liv) Pledge Agreement re: 66% Pledge of PSC Stock, dated as of October 11, 1990, between Hamilton Beach/ Proctor-Silex and The Chase Manhattan Bank (National Association) is incorporated herein by reference to Exhibit 10(lxi) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1990, Commission File Number 1-9172. (lv) Pledge Agreement re: 66% Pledge of PSM Stock, dated as of October 11, 1990, between Hamilton Beach/ Proctor-Silex and The Chase Manhattan Bank (National Association) is incorporated herein by reference to Exhibit 10(lxii) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1990, Commission File Number 1-9172. (lvi) Pledge Agreement re: 34% Pledge of PSC Stock, dated as of October 11, 1990, between Hamilton Beach/ Proctor-Silex and The Chase Manhattan Bank (National Association) is incorporated herein by reference to Exhibit 10(lxiii) to the Company's X-8 108 Annual Report on Form 10-K for the fiscal year ended December 31, 1990, Commission File Number 1-9172. (lvii) Pledge Agreement re: 33.2% Pledge of PSM Stock, dated as of October 11, 1990, between Hamilton Beach Proctor/Silex and The Chase Manhattan Bank (National Association) is incorporated herein by reference to Exhibit 10(lxiv) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1990, Commission File Number 1-9172. (lviii) Pledge Agreement, dated as of October 11, 1990, between Housewares Holding Company and The Chase Manhattan Bank (National Association) is incorporated herein by reference to Exhibit 10(lxv) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1990, Commission File Number 1-9172. (lix) Pledge Agreement, dated as of October 11, 1990, between HB-PS Holding Company, Inc. and The Chase Manhattan Bank (National Association) is incorporated herein by reference to Exhibit 10(lxvi) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1990, Commission File Number 1-9172. (lx) Security Agreement, dated as of October 11, 1990, between Hamilton Beach/Proctor-Silex and The Chase Manhattan Bank (National Association), as the United States agent, is incorporated herein by reference to Exhibit 10(lxvii) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1990, Commission File Number 1-9172. (lxi) Collateral Assignment of Patents and Trademarks and Security Agreement, dated as of October 11, 1990, between Hamilton Beach/Proctor-Silex and The Chase Manhattan Bank (National Association), as the United States agent, is incorporated herein by reference to Exhibit 10(lxviii) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1990, Commission File Number 1-9172. (lxii) NACCO Supplemental Agreement, dated as of October 11, 1990, between NACCO and The Chase Manhattan Bank (National Association), as the United States agent, is incorporated herein by reference to Exhibit 10(lxix) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1990, Commission File Number 1-9172. (lxiii) Housewares Supplemental Agreement, dated as of October 11, 1990, between Housewares Holding Company and The Chase Manhattan Bank (National Association), as the United States agent, is incorporated herein by reference to Exhibit 10(lxx) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1990, Commission File Number 1-9172. (lxiv) Holdings Supplemental Agreement, dated as of October 11, 1990, between HB-PS Holding Company, Inc. and The Chase Manhattan Bank (National Association), as the United States agent, is incorporated herein by reference to Exhibit 10(lxxi) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1990, Commission File Number 1-9172. X-9 109 (lxv) Override Agreement, dated as of October 11, 1990, among the Company, Housewares Holding Company, Glen Dimplex, Precis [521] Ltd., Glen Electric, Ltd and The Chase Manhattan Bank (National Association), as the United States agent, is incorporated herein by reference to Exhibit 10 (lxxii) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1990, Commission File Number 1-9172. (lxvi) General Security Agreement, dated as of October 11, 1990, by Proctor-Silex Canada to and in favor of The Chase Manhattan Bank of Canada, as the Canadian agent, is incorporated herein by reference to Exhibit 10(lxxiii) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1990, Commission File Number 1-9172. *(lxvii) The Hamilton Beach/Proctor-Silex, Inc. Profit Sharing Retirement Plan (as amended and restated effective January 1, 1992) is incorporated by reference to Exhibit 10(lxvii) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1992, Commission File Number 1-9172. *(lxviii) Form of the Hamilton Beach/Proctor-Silex, Inc. Annual Incentive Compensation Plan is attached hereto as Exhibit 10(lxviii). *(lxix) Hamilton Beach/Proctor-Silex, Inc. Long-Term Incentive Compensation Plan, effective January 1, 1993, is incorporated by reference to Exhibit 10(lxix) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1992, Commission File Number 1-9172. (lxx) Amendment to the Third Amended and Restated Operating Agreement, dated as of January 31, 1990, between Hyster Company and AT&T Commercial Finance Corporation is incorporated herein by reference to Exhibit 10(xlvii) to the Hyster-Yale Annual Report on Form 10-K for the fiscal year ended December 31, 1990, Commission File Number 33-28812. *(lxxi) The North American Coal Corporation Value Appreciation Plan is incorporated herein by reference to Exhibit 10(lxxviii) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1990, Commission File Number 1-9172. *(lxxii) The NACCO Industries, Inc. $200,000 Cap Plan is incorporated herein by reference to Exhibit 10(lxxix) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1990, Commission File Number 1-9172. *(lxxiii) The NACCO Industries, Inc. Supplemental Retirement Benefit Plan (As Amended and Restated as of January 1, 1990) is incorporated herein by reference to Exhibit 10(lxxx) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1990, Commission File Number 1-9172. (lxxiv) Short-Term Promissory Note, dated October 19, 1990, between the Company and Citibank, N.A. is incorporated herein by reference to Exhibit 10(lxxxi) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1990, Commission File Number 1-9172. X-10 110 (lxxv) Commitment, dated as of October 1, 1990, between the Company and Morgan Guaranty Trust Company of New York is incorporated herein by reference to Exhibit 10(lxxxii) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1990, Commission File Number 1-9172. (lxxvi) Promissory Grid Note between the Company and Ameritrust Company National Association is incorporated herein by reference to Exhibit 10(lxxxiii) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1990, Commission File Number 1-9172. (lxxvii) First Amendment to the NACCO Supplemental Agreement, dated as of March 1, 1991, between the Company and The Chase Manhattan Bank (National Association), as the United States agent, is incorporated herein by reference to Exhibit 10(lxxxiv) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1990, Commission File Number 1-9172. (lxxviii) First Amendment to the Housewares Supplemental Agreement, dated as of March 1, 1991, between Housewares Holding Company and The Chase Manhattan Bank (National Association), as the United States agent, is incorporated herein by reference to Exhibit 10(lxxxv) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1990, Commission File Number 1-9172. (lxxix) First Amendment to the Holdings Supplemental Agreement, dated as of March 1, 1991, between HB-PS Holding Company and The Chase Manhattan Bank (National Association), as the United States agent, is incorporated herein by reference to Exhibit 10(lxxxvi) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1990, Commission File Number 1-9172. *(lxxx) The Yale Materials Handling Corporation Deferred Incentive Compensation Plan (also known as The Yale Materials Handling Corporation Short-Term Incentive Compensation Deferral Plan), dated March 1, 1984, is incorporated herein by reference to Exhibit 10(lxxi) to the Hyster-Yale Annual Report on Form 10-K for the fiscal year ended December 31, 1992, Commission File Number 33-28812. *(lxxxi) Hyster-Yale Materials Handling, Inc. Annual Incentive Compensation Plan is incorporated herein by reference to Exhibit 10(lxxxviii) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1990, Commission File Number 1-9172. *(lxxxii) Hyster-Yale Materials Handling, Inc. Long-Term Incentive Compensation Plan, dated as of January 1, 1990, is incorporated herein by reference to Exhibit 10(lxxxix) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1990, Commission File Number 1-9172. (lxxxiii) Amendment No. 4 to the Credit Agreement, dated as of June 27, 1990, among Citicorp North America, Inc., Hyster-Yale Materials Handling, Inc., Yale Materials Handling Corporation and Hyster Company is incorporated herein by reference to Exhibit (xc) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1990, Commission File Number 1-9172. X-11 111 (lxxxiv) Amendment No. 5 to the Credit Agreement, dated as of March 27, 1991, among Citicorp North America, Inc., Hyster-Yale Materials Handling, Inc., Yale Materials Handling Corporation and Hyster Company is incorporated herein by reference to Exhibit 10(xlv) to the Hyster-Yale Annual Report on Form 10-K for the fiscal year ended December 31, 1991, Commission File Number 33-28812. (lxxxv) Amendment No. 6 to the Credit Agreement, dated as of October 22, 1991, among Citicorp North America, Inc., Hyster-Yale Materials Handling, Inc., Yale Materials Handling Corporation and Hyster Company is incorporated herein by reference to Exhibit 10(xlvi) to the Hyster-Yale Annual Report on Form 10-K for the fiscal year ended December 31, 1991, Commission File Number 33-28812. (lxxxvi) Amendment to the Third Amended and Restated Operating Agreement, dated as of November 7, 1991, between Hyster Company and AT&T Commercial Finance Corporation is incorporated herein by reference to Exhibit 10(l) to the Hyster-Yale Annual Report on Form 10-K for the fiscal year ended December 31, 1991, Commission File Number 33-28812. *(lxxxvii) Employment Agreement, effective May 8, 1991, between Ward Smith, Chairman of the Board of the Company and the Company is incorporated herein by reference to Exhibit 10(lxxxvii) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1991, Commission File Number 1-9172. *(lxxxviii) Amendment No. 2 to the Retirement Benefit Plan, effective May 8, 1991, between Ward Smith, Chairman of the Board of the Company and the Company is incorporated herein by reference to Exhibit 10(lxxxviii) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1991, Commission File Number 1-9172. *(lxxxix) Form of NACCO Industries, Inc. Annual Incentive Compensation Plan is attached hereto as Exhibit 10(lxxxix). *(xc) Hamilton Beach/Proctor Silex, Inc. Long-Term Incentive Compensation Plan, dated February 12, 1991, is incorporated herein by reference to Exhibit 10(xc) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1991, Commission File Number 1-9172. *(xci) Hyster-Yale Unfunded Benefit Plan, effective February 10, 1993, is incorporated herein by reference to Exhibit 10(lx) of the Hyster-Yale Annual Report on Form 10-K for the fiscal year ended December 31, 1992, Commission File Number 33-28812. (xcii) Credit Agreement, dated as of September 27, 1991, among the North American Coal Corporation, Citibank, N.A., Ameritrust Company National Association and Morgan Guaranty Trust Company of New York, as agent is incorporated herein by reference to Exhibit 10(xcii) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1991, Commission File Number 1-9172. (xciii) Assumption Agreement, made as of December 20, 1991, between the Company and Citicorp North America, Inc., as agent is incorporated herein by reference to Exhibit X-12 112 10(xciii) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1991, Commission File Number 1-9172. (xciv) Subordination Agreement, dated September 27, 1991, among The North American Coal Corporation, the Company and Morgan Guaranty Trust Company of New York, as agent, is incorporated herein by reference to Exhibit 10(xciv) to the Company's Annual Report on Form 10- K for the fiscal year ended December 31, 1991, Commission File Number 1-9172. *(xcv) Amendment No. 8 to The Yale Materials Handling Corporation Employee Profit Sharing and Stock Ownership Plan is incorporated herein by reference to Exhibit 10(lv) to the Hyster-Yale Annual Report on Form 10-K for the fiscal year ended December 31, 1991, Commission File Number 33-28812. *(xcvi) Amendment No. 9 to The Yale Materials Handling Corporation Employee Profit Sharing and Stock Ownership Plan is incorporated herein by reference to Exhibit 10(lvi) to the Hyster-Yale Annual Report on Form 10-K for the fiscal year ended December 31, 1991, Commission File Number 33-28812. (xcvii) Marketing Agreement, dated as of January 1, 1992, by and between, Yale Materials Handling Corporation and Jungheinrich Aktiengellschaft (AG) is incorporated herein by reference to Exhibit 10(lviii) to the Hyster-Yale Annual Report on Form 10-K for the fiscal year ended December 31, 1991, Commission File Number 33-28812. *(xcviii) The North American Coal Corporation Value Appreciation Plan, as amended on March 11, 1992 is incorporated herein by reference to Exhibit 10(xcviii) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1991, Commission File Number 1-9172. *(xcix) Intentionally Left Blank *(c) Amendment No. 3 to the Hamilton Beach/Proctor-Silex, Inc. Employees' Retirement Savings Plan (formerly known as the Hamilton Beach/Proctor-Silex, Inc. Salaried Employees' Retirement Savings Plan) is incorporated by reference to Exhibit 10(c) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1992, Commission File Number 1-9172. *(ci) Tenth Amendment to The Yale Materials Handling Corporation Employee Profit Sharing and Stock Ownership Plan, dated April 1, 1992, is incorporated herein by reference to Exhibit 10(lxviii) of the Hyster-Yale Annual Report on Form 10-K for the fiscal year ended December 31, 1992, Commission File Number 33-28812. *(cii) Eleventh Amendment to The Yale Materials Handling Corporation Profit Sharing Retirement Plan (formerly known as The Yale Materials Handling Corporation Employee Profit Sharing and Stock Ownership Plan), effective as of April 1, 1992, is incorporated herein by reference to Exhibit 10(lxix) of the Hyster-Yale Annual Report on Form 10-K for the fiscal year ended December 31, 1992, Commission File Number 33-28812. X-13 113 *(ciii) Twelfth Amendment to The Yale Materials Handling Corporation Profit Sharing Retirement Plan (formerly known as The Yale Materials Handling Corporation Employee Profit Sharing and Stock Ownership Plan), effective as of November 1, 1992, is attached hereto as Exhibit 10(lxx) of the Hyster-Yale Annual Report on Form 10-K for the fiscal year ended December 31, 1992, Commission File Number 33-28812. *(civ) Amendment No. 1 to the Hamilton Beach/Proctor-Silex, Inc. Salaried Employees' Retirement Savings Plan is attached incorporated by reference to Exhibit 10(civ) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1992, Commission File Number 1-9172. *(cv) Master Trust Agreement between NACCO Industries, Inc. and State Street Bank and Trust Company, dated October 1, 1992, is incorporated by reference to Exhibit 10(cv) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1992, Commission File Number 1-9172. *(cvi) Amendment No. 2 to the Hamilton Beach/Proctor-Silex, Inc. Salaried Employees' Retirement Savings Plan is incorporated by reference to Exhibit 10(cvi) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1992, Commission File Number 1-9172. *(cvii) The North American Coal Corporation Retirement Savings Plan (formerly known as the NACCO Industries, Inc. Savings Plan), effective January 1, 1993, is incorporated by reference to Exhibit 10(cvii) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1992, Commission File Number 1-9172. *(cviii) Instrument of Amendment and Merger of Society National Bank and Trust Agreement into the Master Trust Agreement, effective January 1, 1993, between NACCO Industries, Inc. and State Street Bank and Trust Company, is incorporated by reference to Exhibit 10(cviii) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1992, Commission File Number 1-9172. *(cix) Amendment Following Termination of The North American Coal Corporation Pension Plan for Salaried Employees, dated August 14, 1992, is incorporated by reference to Exhibit 10(cix) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1992, Commission File Number 1-9172. *(cx) NACCO Industries, Inc. Executive Long-Term Incentive Compensation Plan, effective January 1, 1991, is incorporated by reference to Exhibit 10(cx) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1992, Commission File Number 1- 9172. *(cxi) NACCO Industries, Inc. Non-Employee Directors' Equity Compensation Plan, effective January 1, 1992, is incorporated by reference to Exhibit 10(cxi) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1992, Commission File Number 1-9172. *(cxii) Instrument of Merger of Defined Contribution Plans, effective November 1, 1992, is incorporated herein by reference to Exhibit 10(lxiii) of the Hyster-Yale Annual Report X-14 114 on Form 10-K for the fiscal year ended December 31, 1992, Commission File Number 33-28812. *(cxiii) Instrument of Amendment and Merger of the July 1, 1986 Trust Agreement between Bergen Bull, Roger Jensen and Hyster Company into the Master Trust Agreement, dated October 1, 1992, between NACCO Industries, Inc. and State Street Bank and Trust Company is incorporated herein by reference to Exhibit 10(lxvii) of the Hyster-Yale Annual Report on Form 10-K for the fiscal year ended December 31, 1992, Commission File Number 33-28812. *(cxiv) The Hyster-Yale Profit Sharing Plan, amended and restated as of November 11, 1992, is incorporated herein by reference to Exhibit 10(lxii) of the Hyster-Yale Annual Report on Form 10-K for the fiscal year ended December 31, 1992, Commission File Number 33- 28812. *(cxv) Instrument of Merger, Amendment and Termination of The Yale Materials Handling Corporation Profit Sharing Retirement Plan, effective as of November 1, 1992, is incorporated herein by reference to Exhibit 10(lxiv) of the Hyster-Yale Annual Report on Form 10-K for the fiscal year ended December 31, 1992, Commission File Number 33-28812. (cxvi) Amendment to the Third Amended and Restated Operating Agreement, dated as of January 31, 1990, between Hyster Company and PacifiCorp Credit, Inc. is incorporated herein by reference to Exhibit 10(xlvi) to the Hyster-Yale Annual Report on Form 10-K for the fiscal year ended December 31, 1990, Commission File Number 33-28812. *(cxvii) The Hyster-Yale Cash Balance Plan, is incorporated herein by reference to Exhibit 10(lxv) of the Hyster-Yale Annual Report on Form 10-K for the fiscal year ended December 31, 1992, Commission File Number 33-28812. *(cxviii) Release and Settlement Agreement between J. Phillip Frazier and Hyster-Yale Materials Handling, Inc., dated August 31, 1992, is incorporated herein by reference to Exhibit 10(lxxii) of the Hyster-Yale Annual Report on Form 10-K for the fiscal year ended December 31, 1992, Commission File Number 33-28812. *(cxix) Hamilton Beach/Proctor-Silex, Inc. Deferred Compensation Plan for George C. Nebel is incorporated by reference to Exhibit 10(cxix) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1992, Commission File Number 1-9172. *(cxx) Hamilton Beach/Proctor-Silex, Inc. Unfunded Benefit Plan, effective March 10, 1992, is incorporated by reference to Exhibit 10(cxx) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1992, Commission File Number 1-9172. *(cxxi) Hamilton Beach/Proctor-Silex, Inc. Salaried Employees' Retirement Savings Plan is incorporated by reference to Exhibit 10(cxxi) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1992, Commission File Number 1-9172. X-15 115 *(cxxii) The NACCO Industries, Inc. Pension Plan for Salaried Employees, amended and restated as of January 1, 1993, is attached hereto as Exhibit 10(cxxii). *(cxxiii) Instrument of Merger of the NACCO Industries, Inc. Pension Plan for Salaried Employees into The North American Corporation Salaried Employees Pension Plan, effective December 31, 1993, is attached hereto as Exhibit 10(cxxiii). *(cxxiv) Amendment No. 1 to the Hamilton Beach/Proctor-Silex, Inc. Profit Sharing Retirement Plan, as restated effective January 1, 1989, is attached hereto as Exhibit 10(cxxiv). *(cxxv) The Hamilton Beach/Proctor-Silex, Inc. Employees' Retirement Savings Plan, as amended and restated effective January 1, 1994, is attached hereto as Exhibit 10(cxxv). *(cxxvi) Amendment No. 1 to the Hamilton Beach/Proctor-Silex, Inc. Retirement Plan for Salaried Employees (As Restated Effective January 1, 1989) is attached hereto as Exhibit 10(cxxvi). *(cxxvii) Amendment No. 1 to the Retirement Benefit Plan, effective December 31, 1993, between Alfred M. Rankin, Jr., President and Chief Executive Officer of the Company, and the Company is attached hereto as Exhibit 10(cxxvii). *(cxxviii) Amendment No. 3 to the Retirement Benefit Plan, effective December 31, 1993, between Ward Smith, Chairman of the Board of the Company and the Company is attached hereto as Exhibit 10(cxxviii). *(cxxix) Amendment No. 1, dated as of May 13, 1993, to the Hyster-Yale Profit Sharing Plan (now known as the NACCO Materials Handling Group Profit Sharing Plan) is incorporated herein by reference to Exhibit 10 (lxxxv) of the Hyster-Yale Annual Report on Form 10-K for the fiscal year ended December 31, 1993, Commission File Number 33-28812. *(cxxx) Amendment No. 2, dated effective January 1, 1994, to the Hyster-Yale Profit Sharing Plan (now known as the NACCO Materials Handling Group Profit Sharing Plan) is incorporated herein by reference to Exhibit 10 (lxxxv) of the Hyster-Yale Annual Report on Form 10-K for the fiscal year ended December 31, 1993, Commission File Number 33-28812. *(cxxxi) Amendment No. 1 dated as of May 27, 1993 to the Hyster-Yale Cash Balance Plan (now known as the NACCO Materials Handling Group Cash Balance Plan) is incorporated herein by reference to Exhibit 10 (lxxxvi) of the Hyster-Yale Annual Report on Form 10-K for the fiscal year ended December 31, 1993, Commission File Number 33-28812. *(cxxxii) Amendment No. 2 effective as of December 31, 1993 to the Hyster-Yale Cash Balance Plan (now known as the NACCO Materials Handling Group Cash Balance Plan) is incorporated herein by reference to Exhibit 10 (lxxxvii) of the Hyster-Yale Annual Report on Form 10-K for the fiscal year ended December 31, 1993, Commission File Number 33-28812. X-16 116 *(cxxxiii) Amendment No. 2 effective as of December 31, 1993 to the Hyster-Yale Material Handling, Inc. Long-Term Incentive Compensation Plan is incorporated herein by reference to Exhibit 10 (lxxxviii) of the Hyster-Yale Annual Report on Form 10-K for the fiscal year ended December 31, 1993, Commission File Number 33-28812. *(cxxxiv) Amendment No. 1 effective as of January 1, 1994 to The North American Coal Corporation Retirement Saving Plan is attached hereto as Exhibit 10(cxxxiv). *(cxxxv) Amendment No. 2 effective as of January 1, 1994 to The North American Coal Corporation Retirement Savings Plan is attached hereto as Exhibit 10(cxxxv). *(cxxxvi) Amendment No. 1 effective as of January 1, 1994 to the Hyster-Yale Materials Handling, Inc. Annual Incentive Compensation Plan (now known as the NACCO Materials Handling Group, Inc. Annual Incentive Compensation Plan) is incorporated herein by reference to Exhibit 10(lxxxx) to the Hyster-Yale Annual Report on Form 10-K for the fiscal year ended December 31, 1993, Commission File Number 33-28812. *(cxxxvii) Amendment No. 1 effective January 1, 1994 to the Hyster-Yale Unfunded Benefit Plan (now known as the NACCO Materials Handling Group, Inc. Unfunded Benefit Plan) is incorporated herein by reference to Exhibit 10(lxxxix) to the Hyster-Yale Annual Report on Form 10-K for the fiscal year ended December 31, 1993, Commission File Number 33-28812. *(cxxxviii) Master Trust Agreement for Defined Benefit Plan between NACCO Industries, Inc. and State Street Bank and Trust Company, dated Janury 1, 1994 is attached as Exhibit 10(cxxxviii). *(cxxxix) Thirteenth Amendment dated February 15, 1993 to the Yale Materials Handling Corporation Profit Sharing Retiremenmt Plan is incorporated herein by reference to Exhibit 10(lxxxxi) to the Hyster-Yale Annual Report on Form 10-K for the fiscal year ended December 31, 1993, Commission File Number 33-28812. (cxxxx) Amendment No. 4 dated as of June 24, 1993 to the Credit Agreement among Hamilton Beach/Proctor-Silex, Inc., Proctor-Silex Canada, Inc., Proctor-Silex S.A. de C.V., the banks named on the signatory pages and The Chase Manhattan Bank is attached hereto as Exhibit (cxxxx). (cxxxxi) Consent and Authorization with reference made to the Credit Agreement dated October 11, 1990, as amended among Hamilton Beach/Proctor-Silex, Inc., Proctor-Silex Canada, Inc., Proctor-Silex S.A. de C.V., the Banks named on the signatory pages and The Chase Manhattan Bank is attached hereto as Exhibit (cxxxxi). (cxxxxii) Amendment No. 5 to the Credit Agreement dated as of December 23, 1993 among Hamilton Beach/Proctor-Silex, Inc., Proctor-Silex Canada, Inc., Proctor-Silex S.A. de C.V., the banks and financial institutions listed on the signature pages hereto, The Chase Manhattan Bank, as United States Agent, The Chase Manhattan Bank of Canada is attached hereto as Exhibit 10(cxxxxii). (cxxxxiii) Amendment No. 1 to the Credit Agreement dated as of July 28, 1993 among The North American Coal Corporation and the banks listed on the signatory pages and Morgan Trust Company of New York, as Agent is attached hereto as Exhibit 10(cxxxxiii). X-17 117 (cxxxxiv) Amendment No. 1 to the Term Loan Agreement, effective as of February 1993, between The Kitchen Collection, Inc. and Society National Bank is attached hereto as Exhibit 10(cxxxxiv). (cxxxxv) Amended and Restated Credit Agreement dated as of January 14, 1993 among Citicorp North America, Inc., Hyster-Yale Materials Handling, Inc., and Hyster Company is incorporated herein by reference to Exhibit 10(lxxvi) to the Hyster-Yale Quarterly Report on Form 10-Q for the quarter ended June 30, 1993, Commission File Number 33-28812. (cxxxxvi) Reaffirmation Amendment and Acknowledgement Agreement dated July 30, 1993 among Hyster-Yale Materials Handling, Inc., Yale Materials Handling Corporation, Hyster Company, the Company and Citicorp North America, Inc., individually and as Agent for the various Lenders, is incorporated herein by reference to Exhibit 10(lxxx) to the Hyster-Yale Annual Report on Form 10-K for the fiscal year ended December 31, 1993, Commission File Number 33-28812. (cxxxxvii) Amendment No. 1 dated as of December 31, 1993 to the Amended and Restated Credit Agreement dated as of July 30, 1993 among Hyster-Yale Materials Handling, Inc., Yale Materials Handling Corporation, Hyster Company, the Lenders party thereto, and Citicorp North America, Inc., individually and as Agent, is incorporated herein by reference to Exhibit 10(lxxxi) to the Hyster-Yale Annual Report on Form 10-K for the fiscal year ended December 31, 1993, Commission File Number 33-28812. (cxxxxviii) Reaffirmation, Amendment and Acknowledgement Agreement dated as of December 31, 1993 among Hyster-Yale Materials Handling, Inc., Yale Materials Handling Corporation, Hyster Company and Citicorp North America, Inc., as Agent for the Lenders, is incorporated herein by reference to Exhibit 10(lxxxii) to the Hyster-Yale Annual Report on Form 10-K for the fiscal year ended December 31, 1993, Commission File Number 33-28812. (cxxxxix) Reaffirmation, Amendment and Acknowledgement Agreement dated as of January 1, 1994 among Hyster-Yale Materials Handling, Inc., NACCO Materials Handling Group, Inc. and Citicorp North America, Inc. as Agent for the Lenders, is incorporated herein by reference to Exhibit 10(lxxxiii) to the Hyster-Yale Annual Report on Form 10-K for the fiscal year ended December 31, 1993, Commission File Number 33-28812. (11) Statement re computation of per share earnings. The computation of earnings per share is attached hereto as Exhibit 11. (22) Subsidiaries. A list of the subsidiaries of the Company is attached hereto as Exhibit 22. (24) Consents of experts and counsel. (i) The consent of Arthur Andersen & Co., independent accountant, is attached hereto as Exhibit 24(i). (25) Powers of Attorney X-18 118 (i) A manually signed copy of a power of attorney for Owsley Brown II is attached hereto as Exhibit 25(i). (ii) A manually signed copy of a power of attorney for John J. Dwyer is attached hereto as Exhibit 25(ii). (iii) A manually signed copy of a power of attorney for Robert M. Gates is attached as Exhibit 25(iii). (iv) A manually signed copy of a power of attorney for E. Bradley Jones is attached hereto as Exhibit 25(iv). (v) A manually signed copy of a power of attorney for Dennis W. LaBarre is attached hereto as Exhibit 25(v). (vi) A manually signed copy of a power of attorney for Alfred M. Rankin, Jr. is attached hereto as Exhibit 25(vi). (vii) A manually signed copy of a power of attorney for John C. Sawhill is attached hereto as Exhibit 25(vii). (viii) A manually signed copy of a power of attorney for Ward Smith is attached hereto as Exhibit 25(viii). (ix) A manually signed copy of a power of attorney for Britton T. Taplin is attached hereto as Exhibit 25(ix). (x) A manually signed copy of a power of attorney for Frank E. Taplin, Jr. is attached hereto as Exhibit 25(x). (xi) A manually signed copy of a power of attorney for Richard B. Tullis is attached hereto as Exhibit 25(xi). (xii) A manually signed copy of a power of attorney for Steven M. Billick is attached hereto as Exhibit 25(xii). (99) Other exhibits not required to otherwise be filed.** (i) Audited Financial Statements for The North American Coal Corporation for the fiscal year ended December 31, 1993, are attached as Exhibit 99(i). (ii) Audited Financial Statements for Hamilton Beach/Proctor-Silex, Inc. for the fiscal year ended December 31, 1993, are attached as Exhibit 99(ii). (iii) Audited Financial Statements for The Kitchen Collection, Inc. for the fiscal year ended December 31, 1993, are attached as Exhibit 99(iii). (iv) Audited Financial Statements for NACCO Materials Handling Group, Inc. for the fiscal year ended December 31, 1993, are incorporated herein by reference to Item 8, X-19 119 Item 14(A)(1) and (2), and Item 14(D) to the Hyster-Yale Annual Report on Form 10-K for the fiscal year ended December 31, 1993, Commission File Number 33-28812. - ------------------------ * Management contract or compensation plan or arrangement required to be filed as an exhibit pursuant to Item 14(c) of this Annual Report on Form 10-K. ** Audited Financial Statements of subsidiary companies are not required disclosures and are included only for information. These statements do not reflect certain adjustments (including reclassifications and eliminations) that are required by GAAP in the preparation of NACCO Industries, Inc. and subsidiaries consolidated financial statements included in Part IV hereof, and should be read accordingly. X-20 EX-10.68 2 NACCO EXHIBIT 10.LXVIII 1 Exhibit 10 (lxviii) HAMILTON BEACH<>PROCTOR-SILEX, INC. LONG-TERM INCENTIVE COMPENSATION PLAN 1. Purpose of the Plan ------------------- The purpose of the Hamilton Beach/Proctor-Silex, Inc. Long-Term Incentive Compensation Plan (the "Plan") is to further the long-term profits and growth of Hamilton Beach/Proctor-Silex, Inc. (the "Company") by offering long-term incentive to those officers and key management employees of the Company and its Subsidiaries who will be in a position to make significant contributions to such profits or growth. This incentive is in addition to annual compensation and is intended to reflect growth in the value of the Company's stockholders' equity. 2. Definitions ----------- (a) "Award" means an award of Book Value Appreciation Units granted under the provisions of the Plan. (b) "Base Period Price" as to any Book Value Appreciation Unit shall mean an amount determined by the Committee or, if no amount is set by the Committee, the Book Value on the Quarter Date coincident with or immediately preceding the effective date of the Award. (c) "Book Value" as to any Book Value Appreciation Unit shall mean an amount determined by the Committee or, if no amount is set by the Committee, as of any date (i) the stockholders' equity (as determined in accordance with generally accepted accounting principles, applied on a consistent basis) allocable to the Common Stock of the Company, as set forth in the consolidated balance sheet of the Company and its Subsidiaries as of the Quarter Date coincident with or immediately preceding such date, divided by (ii) the number of Notional Shares existing as of such Quarter Date; provided, however, that Book Value and/or the number of Notional Shares may be adjusted to such an extent as may be determined by the Committee to preserve the benefit of the arrangement for holders of Book Value Appreciation Units and the Company, if in the opinion of the Committee, after consultation with the Company's independent public accountants, changes in the Company's accounting policies, acquisitions or other unusual or extraordinary items have materially affected the stockholders' equity allocable to the Notional Shares. 1 2 (d) "Book Value Appreciation Unit" or "Unit" means the right to receive an amount equal to the difference between the Book Value of such Unit and the Base Period Price of such Unit as determined pursuant to the terms and conditions set forth in Section 5.2. (e) "Committee" means the Nominating, Organization and Compensation Committee of the Company's Board of Directors appointed to administer the Plan in accordance with Section 3. (f) "Hay Salary Grade" means the salary grade assigned to a Plan participant by the Company. (g) "Notional Shares" means the number of assumed shares of Common Stock of the Company as determined by the Committee from time to time in order to implement the purposes of this Plan, and shall equal 15 million shares on the effective date hereof. (h) "Quarter Date" shall mean the last day of each fiscal quarter. (i) "Subsidiary" means any corporation, partnership or other entity the majority of the outstanding voting securities of which is owned, directly or indirectly, by the Company. 3. Administration -------------- This Plan shall be administered by the Committee. The Committee shall have complete authority to interpret all provisions of this Plan consistent with law, to prescribe the form of any instrument evidencing any Award granted under this Plan, to adopt, amend and rescind general and special rules and regulations for its administration, and to make all other determinations necessary or advisable for the administration of the Plan. 4. Eligibility ----------- Any salaried employee of the Company or any Subsidiary (including any Subsidiary 2 3 acquired after adoption of this Plan) generally at a Hay salary grade no lower than 1,000, who in the judgment of the Committee occupies an officer or other key management position in which his efforts may significantly contribute to the profits or growth of the Company or a Subsidiary, may be awarded Book Value Appreciation Units. Directors of the Company or any Subsidiary who are not also salaried employees of the Company or any Subsidiary are not eligible to participate in this Plan. 5. Book Value Appreciation Units ----------------------------- 5.1 AWARDS. As to each award of Book Value Appreciation Units, the Committee shall determine and approve (a) the Base Period Price of the Units to be awarded, (b) the target number of Book Value Appreciation Units that may be awarded for each Hay salary grade, (c) the employees to whom Book Value Appreciation Units are to be awarded and (d) the number of Book Value Appreciation Units to be awarded to each individual employee. All Awards under this Plan shall be effective as of the first day of the calendar quarter coincident with or immediately following the time an individual becomes eligible to participate in this Plan as provided in Section 4 hereof. Each Award shall vest and the amount represented thereby shall be payable upon the terms and conditions set forth in Section 5.2. Each individual Award shall be evidenced by a writing in such form as the Committee may determine from time to time, which writing shall not be inconsistent with the terms hereof. 5.2 Vesting; Payment of Book Value Appreciation Units. -------------------------------------------------- (a) An Award vests upon the earlier to occur of (i) ten (10) years from the date of grant (the "Date of Grant"), (ii) the date of a grantee's termination of employment for death, permanent disability or retirement, (iii) the date of a grantee's termination of employment other than for death, disability or retirement, upon a determination by the Committee that extraordinary circumstances exist which warrant such vesting or (iv) the termination of this Plan pursuant to Section 8. (b) In the event that part or all of an Award does not vest pursuant to Section 5.2(a), the Book Value appreciation Units represented thereby shall terminate and be forfeited. (c) As soon as practicable following the vesting of an Award pursuant to this Section 5.2, the Company shall deliver to the grantee or, if applicable, his heirs or designated beneficiaries, a check in full payment of the amount as of the date of vesting represented by such grantee's Book Value Appreciation Units. 3 4 (d) The amount payable upon the vesting of an Award shall be the amount represented by the Book Value Appreciation Units which are the subject of the Award, with the Book Value thereof determined by the Committee with reference to the Quarter Date coincident with or immediately preceding the date of vesting of the Award in accordance with the terms of this Section 5.2. (e) All payments of Book Value Appreciation Units shall be approved by the Committee. There shall be deducted from each payment under the Plan the amount of any tax required by any governmental authority to be withheld and paid over by the Company or Subsidiary to such governmental authority for the account of the person entitled to such payment. (f) At any time following January 1 of the fifth anniversary of the date of any Award which has not vested under this Plan, a grantee may annually request in writing that the Committee permit the grantee to exercise and receive payment of up to (i) 20% of the number of Book Value Appreciation Units originally granted in such Award if such funds are desired for the purchase of a principal residence for the grantee, payment of medical expenses for the grantee, his spouse or his dependents, or payment of expenses for education of the grantee, his spouse or his dependents, or up to (ii) 10% of the number of Book Value Appreciation Units originally granted in such Award if such funds are desired for any other purpose; provided, however, that such grantee will not receive an Award of any replacement Units with respect to the Units exercised for a period of two years from grantee's receipt of payment; and further provided, however, that replacement Units, if any, awarded under this Plan shall equal no more than the same number of Units which were exercised. A grantee may make any number of requests pursuant to this Section 5.2 (f) so long as (x) no more than one request shall be granted in each calendar year, (y) no single request is for less than 5% of the total number of Book Value Appreciation Units originally granted in such Award and (z) the total amount paid over the life of the Award pursuant to this Section 5.2(f) does not exceed the amount represented by 40% of the Units originally granted in such Award. The Book Value of any Units exercised pursuant to this Section 5.2(f) shall be determined by the Committee with reference to the Quarter Date coincident with or immediately preceding the date of the grantee's notice. 5.3 Forfeiture of Book Value Appreciation Units for Cause ----------------------------------------------------- Notwithstanding anything to the contrary contained in this Plan, in the event a grantee shall intentionally commit an act materially adverse to the interests of the Company or a Subsidiary, and the Board of Directors of the Company or the Committee shall so find, his Awards shall be deemed 4 5 to have terminated at the time of such act and his Book Value Appreciation Units shall immediately terminate and be forfeited. 6. Assignability ------------- No Award granted to an employee under this Plan shall be transferable by him for any reason whatsoever; provided, however, that the right to the proceeds of an Award which are payable upon vesting pursuant to Section 5.2 may be transferred by will or the laws of descent and distribution. 7. Adjustment to Awards -------------------- In the event the Company pays a dividend on its Common Stock to its stockholders, or at any other time, the Committee may, in its discretion, (a) declare payable on the Book Value Appreciation Units granted under this Plan a notional dividend up to an amount equal, on a percentage of equity basis, to the dividend payment made to stockholders or (b) make such other equitable adjustment in the number and value of the Book Value Appreciation Units as the Committee may deem appropriate. In the event of a reorganization, merger, consolidation, reclassification, recapitalization, combination or exchange of shares, stock split, stock dividend, rights offering, or other event affecting the Common Stock of the Company, the number of Book Value Appreciation Units which have been awarded to any employee may be equitably adjusted by the Committee to reflect the change. 8. Amendment and Termination ------------------------- The Committee may alter, amend or terminate this Plan from time to time; provided, however, that no modification, or amendment of this Plan shall, without the consent of a grantee, affect the rights in an outstanding Award of such grantee; and further provided, however, that upon a termination of this Plan, all outstanding Awards shall vest immediately thereupon, and shall be paid in accordance with Section 5.2. 9. General Provisions ------------------ Neither the adoption or operation of this Plan, or any document describing or referring to the Plan, or any part thereof, shall confer upon any employee any right to continue in the employ 5 6 of the Company or any Subsidiary, or shall in any way affect the right and power of the Company or any Subsidiary to terminate the employment of any employee at any time with or without assigning a reason therefor to the same extent as the Company or a Subsidiary might have done if this Plan had not been adopted. The provision of the Plan shall be governed by and construed in accordance with the laws of the Commonwealth of Virginia. No trust has been created by the Company or any Subsidiary for the payment of Book Value Appreciation Units granted under this Plan; nor have the grantees of Book Value Appreciation Units been granted any lien on any assets of the Company or any Subsidiary to secure payment of such benefits. This Plan represents only an unfunded, unsecured promise to pay by the Company, and the grantees hereunder are unsecured creditors of the Company. Headings are given to the sections of the Plan solely as a convenience to facilitate reference. Such headings, numbering and paragraphing shall not in any case be deemed in any way material or relevant to the construction of the Plan or any provisions thereof. The use of the masculine gender shall also include within its meaning the feminine. The use of the singular shall also include within its meaning the plural, and vice versa. 10. Effective Date. --------------- The effective date of this Plan is as of January 1, 1993. 6 7 11. 1993 Special Incentive. ----------------------- In the event that the Company shall equal or exceed its 1993 Annual Operating Plan target of net income of $8,383,000 (the "Target") for fiscal year 1993, the Base Period Price shall be $9.77 for purposes of calculating all Book Value Appreciation Units which vest at any time following December 31, 1993 for the seven employees of the Company who were (a) participants in the Company's 1992 Long-Term Incentive Compensation Plan and (b) authorized by the Committee to participate in the Plan as of February 25, 1993. If the Company dos not equal or exceed the Target for 1993, this Section 11 shall have no force or effect. Likewise, this Section 11 shall have no force or effect for Plan participants other than the aforementioned seven participants. 7 EX-10.89 3 NACCO EXHIBIT 10.LXXXIX 1 EXHIBIT 10(lxxxix) NACCO INDUSTRIES, INC. EXECUTIVE LONG-TERM COMPENSATION PLAN GUIDELINES 1. Guidelines ---------- These 1994 Executive Long-Term Incentive Compensation Plan Guidelines ("Guidelines") have been approved by the Committee for the administration of the NACCO Industries, Inc. Executive Long-Term Incentive Compensation Plan (the "Plan") for Awards granted to Participants for the Award Year. 2. Definitions ----------- (a) "Adjusted ROE" means the Company's 1994 adjusted return on equity calculated as follows: Net Income (before extraordinary charges) + Amortization of Goodwill ------------------------------------------------------------------------------ Weighted Average (Stockholders' Equity + Accumulated Amortization of Goodwill) where: (i) NET INCOME BEFORE EXTRAORDINARY ITEMS is defined as income, as defined by general accepted accounting principles ("GAAP"), for the Company and its subsidiaries for the subject year before extraordinary items, but including extraordinary charges for refinancing. (ii) AMORTIZATION OF GOODWILL is defined as the amortization expense related to the intangible asset goodwill for the Company and its subsidiaries for the subject year. (iii) WEIGHTED AVERAGE STOCKHOLDERS' Equity is calculated by adding the stockholders' equity, as defined by GAAP, at the beginning of the subject year and the end of each month of the subject year and dividing by thirteen. (iv) WEIGHTED AVERAGE ACCUMULATED AMORTIZATION OF GOODWILL is calculated by adding accumulated amortization of goodwill, as defined by GAAP, at the beginning of the subject year and the end of each month of the subject year and dividing by thirteen. (b) "Average Award Share Price" means the average of the closing price per share on the New York Stock Exchange on the Friday (or if Friday is not a trading day, the last trading day before such Friday) for each week of the Award Year for Class A Common Stock. 2 (c) "Award" means an award made to a Participant under the Plan for the Award Year. The amount of an Award shall be equal to a Participant's Base Amount, multiplied by the ROE Factor. The amount of an Award shall be allocated between the cash component, to be paid in cash, and the equity component, to be paid in Award Shares. The amount of the cash component is intended to be the approximate amount required by the Participant to pay federal, state and local income taxes on the Award, and shall be calculated assuming a marginal tax rate of 35%. The number of Award Shares constituting the equity component of an Award shall be equal to the number of Award Shares which can be purchased at the Average Award Share Price with an amount equal to the equity component. (d) "Award Shares" means shares of Class A Common Stock which are granted as the equity component of an Award to a Participant pursuant to the Plan and with such restrictions as are imposed by the Committee. (e) "Award Year" means the calendar year 1994. (f) "Base Amount" means for any Participant a dollar amount, which amount shall be equal to the salary midpoint for the Salary Points assigned to the Participant by the Committee multiplied by the long-term compensation target percent for those Salary Points. Attached hereto as EXHIBIT A is a schedule listing the Base Amount for each Participant for the Award year. (g) "Class A Common Stock" means the Company's Class A Common Stock, par value $1.00 per share. (h) "Committee" means the Committee appointed under the terms of the Plan. (i) "Participant" means any salaried employee of the Company generally having at least 950 Salary Points, who in the judgment of the Committee occupies a key executive position in which his efforts may significantly contribute to the profits or growth of the Company. Directors of the Company who are also employees of the Company are eligible to participate in the Plan. Employees of the Company's subsidiaries shall not be eligible to participate in the Plan. Attached hereto as EXHIBIT A is a schedule listing the Participants for the Award Year. (j) "ROE Factor" means a percentage based on Adjusted ROE for the Award Year. 3 Attached hereto as EXHIBIT B is a schedule listing the ROE Factor based on Adjusted ROE for the Award Year. (k) "Salary Points" means the salary points assigned to a Participant by the Committee pursuant to the Hay salary point system, or any other system for determining levels of executive compensation which may be adopted from time to time by the Committee. 3. Awards ------ 3.1 Awards ------ (a) PARTICIPANTS. EXHIBIT A lists the Participants for the Award Year. The Committee shall have the power to add Participants at any later date if individuals subsequently become eligible to participate in the Plan. The Committee shall notify each Participant in writing that he is eligible to receive an Award for such year and the amount of his Base Amount. If a Participant, other than a Participant who is for the Award Year a "covered employee" under Section 162(m) of the Internal Revenue Code of 1986, as amended, receives an increase in Salary Points, such increase and the resulting change in his Salary Midpoint will be reflected on EXHIBIT A. (b) AWARDS. As soon as practicable following the end of the Award Year the Committee shall determine (i) the ROE Factor for such year and (ii) the Average Award Share Price for such year. Based upon the foregoing amounts, the Committee shall determine the amount of the Award, the cash component of such Award and the number of Award Shares to be awarded to each Participant receiving an Award, which shall be determined in the manner set forth herein. Promptly thereafter, the Company shall deliver to each such Participant the cash component of the Award and certificates representing the number of Award Shares authorized by the Committee. Such Award Shares shall be fully paid, nonassessable shares of Class A Common Stock, which shares shall be subject to the restrictions set forth in these Guidelines. The Company shall pay any and all fees and commissions incurred in connection with any purchase by the Company of shares which are to be Award Shares and the transfer to Participants of Award Shares. 3.2 Restrictions on Award Shares ---------------------------- (a) RESTRICTIONS ON TRANSFER. Except as otherwise set forth in this Section 3.2, neither 4 Award Shares shall not be assigned, pledged, hypothecated or otherwise transferred (a "Transfer") by a Participant or any other person, voluntarily or involuntarily, other than a Transfer of Award Shares (i) by will or the laws of descent and distribution, (ii) pursuant to a domestic relations order ("QDRO") in Section 206(d)(3)(B) of the Employee Retirement Income Security Act of 1974, as amended, or (iii) to a trust for the benefit of a Participant or his spouse, children or grandchildren, provided that Award Shares transferred to such a trust shall continue to be Award Shares subject to this Plan. The Company shall not honor, and shall instruct its transfer agent not to honor, any attempted Transfer, and any attempted Transfer shall be invalid. (b) DIVIDENDS, VOTING RIGHTS, EXCHANGES, ETC. Except for the restrictions set forth in this Section 3.2 and any restrictions required by law, a Participant shall have all rights of a stockholder with respect to his Award Shares including the right to vote, to receive dividends as and when declared by the Board of Directors and paid by the Company, and to participate in any of the matters described in clauses (a), (b) or (c) of Section 7 of the Plan (each referred to as an "Extraordinary Event"). All securities received by a Participant with respect to Award Shares in connection with any such Extraordinary Event shall be deemed to be Award Shares and shall be restricted pursuant to the terms of these Guidelines to the same extent and for the same period as if such securities were the original Award Shares with respect to which they were issued. (c) RELEASE OF RESTRICTIONS. The restrictions on Award Shares set forth in this Section 3.2 shall lapse for all purposes and shall be of no further force or effect upon the earliest to occur of (i) the tenth anniversary of the last calendar day of the Award Year, (ii) the date of the Participant's death or permanent disability, (iii) five years (or earlier with the approval of the Committee) after retirement pursuant to the terms of the then existing pension plan applicable to the Participant, (iv) an extraordinary release of restrictions pursuant to Section 3.2(d), (v) the transfer of Award Shares to a person other than the Participant pursuant to a QDRO, but only as to those Award Shares so transferred, or (vi) a lapse of restrictions as provided in the terms of an instrument of termination adopted under the Plan. Following the lapse of restrictions pursuant to this Section 3.2(c) or Section 3.2(d), the shares shall no longer be "Award Shares" and, at the Participant's request, the Company shall take all such action as may be necessary to exchange certificates representing Award Shares for certificates representing an equal number of shares of Class A Common Stock without the legend required by Section 3.2(e), which shares shall be fully paid, nonassessable and unrestricted by the terms of the Plan. (d) EXTRAORDINARY RELEASE OF RESTRICTIONS. At any time following the third anniversary of 5 the last calendar day of the Award Year, a Participant may request in writing that the Committee authorize the lapse of restrictions on transfer of Award Shares granted as an Award for the Award Year if the Participant desires to dispose of such Award Shares for (i) the purchase of a principal residence for the Participant, (ii) payment of medical expenses for the Participant, his spouse or his dependents, (iii) payment of expenses for the education of the Participant, his spouse or his dependents or (iv) any other extraordinary reason which the Committee has previously approved in writing, provided that the restrictions on no more than 20% of the Award Shares granted for the Award Year may be released pursuant to this Section 3.2(d) before the tenth anniversary of the last calendar day of the Award Year. The Committee shall have the sole power to grant or deny any such request. Upon the granting of any such request, the Company shall cause the release of restrictions pursuant to Section 3.2(c) of such number of Award Shares as the Committee shall authorize. (e) LEGEND. The Company shall cause the following legend to be placed on the face or back of each certificate for Award Shares: THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN RESTRICTIONS ON TRANSFER SET FORTH IN THE NACCO INDUSTRIES, INC. EXECUTIVE LONG-TERM INCENTIVE COMPENSATION PLAN ("PLAN"). SUCH RESTRICTIONS ON TRANSFER UNDER THE PLAN SHALL LAPSE FOR ALL PURPOSES AND SHALL BE OF NO FURTHER FORCE OR EFFECT AFTER DECEMBER 31, 2004, OR SUCH EARLIER TIME AS PROVIDED IN THE PLAN. 4. Effect of Guidelines -------------------- Notwithstanding any provision of the Plan to the contrary, the provisions of these Guidelines may not be amended, modified or changed by the Committee during the Award Year. The Committee hereby agrees not to exercise any residual discretion granted to the Committee under the terms of the Plan in a manner that would result in the amendment or modification of these Guidelines during the Award Year. C41067 EX-10.122 4 NACCO EXHIBIT 10.CXXII 1 EXHIBIT 10(cxxii) THE NACCO INDUSTRIES, INC. PENSION PLAN FOR SALARIED EMPLOYEES (As Amended and Restated as of January 1, 1993) 2 60621.1 THE NACCO INDUSTRIES, INC. PENSION PLAN FOR SALARIED EMPLOYEES (As Amended and Restated as of January 1, 1989) ----------------------------------------------- The NACCO Industries, Inc. Pension Plan for Salaried Employees (the "Plan") was adopted effective December 1, 1986 following the termination and reestablishment of The NACCO Industries, Inc. Pension Plan for Salaried Employees (as amended and restated September 1, 1986). ARTICLE I - DEFINITIONS AND CONSTRUCTION - ---------------------------------------- 1.01 DEFINITIONS. The following terms when used herein with initial capital letters shall have the following respective meanings unless the context clearly indicates otherwise. Terms used herein in reference to the Prior Plan or any Other Group Plan shall have the meanings assigned to such terms by such plans. 1.02 ACCRUED BENEFIT: The amount of Pension to which a Participant is entitled under the terms of the Plan on any date (determined without application of any vesting requirements) expressed as a monthly benefit payable in the form of a single life annuity (without ancillary benefits) commencing on the Participant's Normal Retirement Date. Notwithstanding any provision of the Plan to the contrary, a Participant's Accrued Benefit shall be frozen effective December 31, 1993. 1.03 ACTUARIAL EQUIVALENT: A benefit of equivalent actuarial value when computed on the basis of the actuarial factors, assumptions and procedures recommended by the Actuary and adopted for such purpose by the Committee. To the extent not otherwise provided in various Sections of the Plan, such factors and assumptions are set forth in Exhibit A attached to the Plan. 1.04 ACTUARY: An individual actuary who is an enrolled actuary under the provisions of Section 3042 of ERISA or a firm of actuaries, at least one of whose members is 3 such an enrolled actuary, which individual or firm is selected from time to time by the Committee and is, at the time involved, acting as actuary for the Plan. 1.05 ADMINISTRATOR OR PLAN ADMINISTRATOR: The Company. 1.06 AGE: A person's "Age" at any time shall be his age on the then most recent anniversary of his date of birth, except for the purpose of making actuarial calculations and determinations. The anniversary of the date of birth of a person born on February 29 shall, in years other than leap years, be deemed to be February 28. 1.07 APPLICABLE INTEREST RATE: Effective as of January 1, 1987, the interest rate or rates which would be used by the Pension Benefit Guaranty Corporation for purposes of determining the present value of a lump sum distribution on plan termination. 1.08 AUTOMATIC 50% SPOUSE OPTION: The normal form of benefit payment provided in Section 4.09(b). 1.09 BENEFICIARY: The person or persons designated by the Participant as his Beneficiary or Joint Pensioner under the Plan. Such a designation may be made, revoked, or changed (without, except as provided below, the consent of any Beneficiary), only by an instrument (in form acceptable to the Committee) signed by the Participant and filed with the Secretary of the Committee before the Participant's death. A designation by a married Participant of a person other than his Spouse as his Beneficiary shall not take effect unless the Participant's Spouse consents in writing thereto. A Spouse's consent required by this Section shall (a) be signed by the Spouse, (b) acknowledge the effect of such consent, (c) be witnessed by a Plan representative or notary public, (d) be effective only with respect to such Spouse, and (e) designate a Beneficiary which cannot be changed without spousal consent. Such consent is not required if it is established to the satisfaction of a Plan representative that the consent cannot be obtained because there is no Spouse, because the Spouse cannot be located, or because of such other circumstances as the Secretary of the Treasury may prescribe by regulations. In the absence of an effective designation of a Beneficiary, a Participant's Beneficiary shall be his estate. 4 3 A Spouse or any other person receiving or eligible to receive a benefit hereunder shall also be considered a Beneficiary. 1.10 BENEFIT SERVICE: (a) (General Rule for Employment After 1975) A Participant shall receive Benefit Service for the period of his employment as a Covered Employee under this Plan on and after December 1, 1986. Calculation of Benefit Service shall begin with a Participant's most recent date of hire as a Covered Employee under the Plan or as a covered employee under the Prior Plan and shall end with his next following Severance from Service. In addition, a Participant shall receive the Benefit Service he was credited with under the Prior Plan on and after January 1, 1976. (b) (Previous Periods of Employment After 1975) If a Participant's last Severance from Service occurs on or after January 1, 1985, Benefit Service shall also include any prior periods of employment as a Covered Employee under the Prior Plan or as a Covered Employee under the Plan (regardless of whether there has been a break in the Participant's employment by the Controlled Group) that end subsequent to December 31, 1975; provided, however, that Benefit Service for purposes of this Subsection shall not include the period of a Participant's service, if any, before January 1, 1976. (c) (Employment Before 1976) A Participant shall also receive Benefit Service for the period of his continuous service, if any, before the earlier of January 1, 1976 and his Normal Retirement Date, in accordance with the definition of "NACCO Service" in Amendment A to the January 1, 1976 restatement of the Prior Plan. (d) (Employment as Non-Covered Employee) (i) A Participant who was covered under a UMW Negotiated Plan shall also receive Benefit Service equal to any period of his employment by a Controlled Group Member which counts for benefit purposes under the UMW Negotiated Plan and which is subsequent to December 31, 1975 and prior to the commencement 5 4 of the period of employment for which the Participant receives Benefit Service under Subsection (a). (ii) A Participant who was covered under an Other Group Plan shall also receive Benefit Service equal to any period of his employment by a Controlled Group Member which counts as Benefit Service under the Other Group Plan and which is subsequent to November 30, 1986 and prior to the commencement of the period of employment for which the Participant receives Benefit Service under Subsection (a); provided, however, that a Participant shall not receive Benefit Service under this paragraph (ii) for any period of employment for which he receives Benefit Service under Subsection (b) or paragraph (i) of this Subsection. (e) (Disability) A Covered Employee having at least one year of Vesting Service as a salaried Employee who is disabled and receiving benefits under a Disability Income Plan shall also receive Benefit Service for the period for which he receives (or is entitled to receive) such Disability Income Plan benefits. (f) (Additional Restrictions) For purposes of this Section, a Covered Employee shall be considered to be employed and shall, therefore, receive Benefit Service only while he is receiving Compensation or is on approved leave of absence, temporary lay-off or suspension; provided, however, that the period during which a former Employee receives severance pay shall not be credited as Benefit Service. (g) (Military Service) To the extent required by applicable law, an Employee shall receive Benefit Service (and/or Vesting Service) for periods of military service in the armed forces of the United States during which he had re-employment rights under the Vietnam Era Veterans Readjustment Assistance Act of 1974 (or under any prior or subsequent similar law), based on an assumed continuation of his customary employment during such period, provided that he was an Employee at the time he entered such military service and that he returned to employment as an Employee while he retained such re-employment rights. 6 5 (h) (Rounding) When an Employee's Benefit Service or Vesting Service is computed, it shall be computed in full years and full months; the remaining days that are not included in such computation shall be ignored. Where more than one period of employment are to be aggregated in order to determine an Employee's Benefit Service or Vesting Service, his Benefit Service and Vesting Service from all periods shall be aggregated and rounded following such aggregation. For purposes of such computations, a full year shall consist of 365 days and a full month shall consist of 30 days. (i) (Previous Exclusions) For the purposes of this Section, an Employee who becomes a Participant on January 1, 1988 as a result of the elimination of the Plan provision prohibiting participation by persons hired after Age 60 shall be deemed to have been a Participant for that period of his employment with the Employers which would otherwise have been counted as Benefit Service pursuant to the provisions of this Section or which otherwise would have been counted as Benefit Service under the applicable provisions of the Plan prior to this Amendment and Restatement. With respect to a Participant who attained Age 65 prior to January 1, 1988 and who performs an Hour of Service for the Controlled Group on or after January 1, 1988, all of the Participant's periods of employment with the Employers after his attainment of Age 65 during which he was a Covered Employee shall be counted as Benefit Service in accordance with the provisions of this Section. (j) (Non-duplication) Notwithstanding any other provision hereof, no Participant shall receive Benefit Service credit hereunder more than once for the same period of employment. 1.10A CAPPED PARTICIPANT: A Participant whose Accrued Benefit on December 31, 1988 is based upon Compensation in excess of the limit contained in Section 401(a)(17) of the Code as in effect after such date. 1.11 CODE: The Internal Revenue Code of 1986, as amended. 7 6 1.12 COMMITTEE OR PENSION COMMITTEE: The Pension Committee provided for in Article VII hereof. 1.13 COMPANY: NACCO Industries, Inc., a Delaware corporation. 1.14 COMPENSATION: (a) All remuneration paid to an Employee by a Controlled Group Member, or which would have been paid to such Employee had he not signed a compensation deferral agreement which satisfies the requirements of Sections 401(k), 125 or 129 of the Code, which is subject to withholding for federal income tax purposes, or which would have been subject to such withholding if the Employee had not signed such a compensation deferral agreement, excluding, however, relocation allowances, tuition refunds, foreign service premiums, severance payments (including any salary continuation in lieu of severance payments) and other similar fringe benefits or perquisites. (b) Notwithstanding the foregoing, Compensation in excess of the limitation contained in Section 401(a)(17) of the Code shall not be taken into account for any purpose under the Plan. In applying the Code Section 401(a)(17) limit for the 1989 through (and including) 1993 Plan Years, the Code Section 401(a)(17) limit in effect during the Year of calculation shall be applied for all purposes when calculating a Capped Participant's Accrued Benefit. For purposes of calculating the limit contained in Section 401(a)(17) of the Code, in the case of a Highly Compensated Employee who is a 5-percent owner (as defined in Section 416(i)(1) of the Code) or one of the ten most Highly Compensated Employees, (i) such Highly Compensated Employee and his family members (as such term is hereinafter defined) shall be treated as a single Employee and the Compensation of each such family member shall be aggregated with the Compensation of such Highly Compensated Employee, and (ii) the limitation on Compensation shall be allocated among such Highly Compensated Employee and his family members in proportion to each individual's Compensation. For purposes of this Section, the 8 7 term "family members" shall mean an Employee's Spouse and lineal descendants who have not attained age 19 before the close of the year in question. 1.15 CONTROLLED GROUP: The Company and any and all other corporations, trades and/or businesses, the Employees of which together with Employees of the Company are required by Section 414 of the Code to be treated as if they were employed by a single employer. 1.16 CONTROLLED GROUP MEMBER: Each corporation or unincorporated trade or business that is or was a member of the Controlled Group, but only during such period as it is or was a member of the Controlled Group. 1.17 COVERED EMPLOYEE: A salaried Employee of the Company (other than the Highly Compensated Employees identified on Exhibit B hereto) and any salaried Employee of The North American Coal Corporation (a Delaware corporation) who is associated with the Dallas Accounting Division. Notwithstanding the preceding, no Employee who is employed in an Excluded Bargaining Unit or is a leased employee (as defined in Section 1.23) shall be a Covered Employee. 1.18 DEFERRED VESTED PENSION: A Pension payable pursuant to Sections 3.05 and 4.04. 1.19 DISABILITY INCOME PLAN: A written plan or program adopted by a Controlled Group Member which is designed to provide, for salaried Employees who become disabled while covered by such Plan or program, periodic income during periods while they are not at work for a Controlled Group Member due to disability. 1.20 EARLIEST RETIREMENT DATE: The first date on which a Participant is entitled to receive a Pension hereunder, or would be entitled to receive a Pension hereunder if he terminated employment with the Controlled Group or retired on or before such date, assuming, in the case of a deceased Participant, that he had not died. 9 8 1.21 EARLY RETIREMENT DATE: The Early Retirement Date described in Section 3.04. 1.22 EARLY RETIREMENT PENSION: A Pension payable pursuant to Sections 3.04 and 4.03. 1.23 EMPLOYEE: An employee of a Controlled Group Member (including a salaried officer, but not a director as such) and, to the extent required by Section 414(n) of the Code, any person who is a "leased employee" of a Controlled Group Member. A "leased employee" means any person who, pursuant to an agreement between a Controlled Group Member and any other person ("leasing organization"), has performed services for the Controlled Group Member on a substantially full time basis for a period of at least one year, and such services are of a type historically performed by employees in the business field of the Controlled Group Member. Contributions or benefits provided a leased employee by the leasing organization which are attributable to services performed for a Controlled Group Member will be treated as provided by the Controlled Group Member. A leased employee will not be considered an Employee of a Controlled Group Member, however, if (A) leased employees do not constitute more than 20 percent of the Controlled Group Member's nonhighly compensated work force (within the meaning of Section 414(n)(5)(C)(ii) of the Code) and (B) such leased employee is covered by a money purchase pension plan maintained by the leasing organization that provides (i) a nonintegrated employer contribution rate of at least 10 percent of Compensation, but including amount contributed pursuant to a salary reduction agreement which are excludable from the leased employee's gross income under Section 125, Section 402(a)(8), Section 402(h) or Section 403(b) of the Code, (ii) immediate participation and (iii) full and immediate vesting. 1.24 EMPLOYER: Any person which adopts the Plan pursuant to Article XIII hereof. As of January 1, 1989, the Employers are the Company and The North American Coal Corporation (a Delaware corporation). In the case of any person which adopts the Plan and 10 9 which (a) ceases to exist, (b) ceases to be a member of the Controlled Group or (c) withdraws or is eliminated from the Plan, it shall not thereafter be an Employer. 1.25 ERISA: The Employee Retirement Income Security Act of 1974, as amended. 1.26 EXCLUDED BARGAINING UNIT: A collective bargaining unit which includes Employees and which is recognized by a Controlled Group Member or certified by the National Labor Relations Board (or a successor thereto), unless there is a written agreement, between the Employer of the Employees in such collective bargaining unit and the collective bargaining representative for such Employees, that such Employees shall be eligible to participate in the Plan. 1.27 FIDUCIARY: Any person who (a) exercises any discretionary authority or discretionary control respecting management of the Plan or exercises any authority or control respecting management or disposition of its assets, (b) renders investment advice for a fee or other compensation, direct or indirect, with respect to any money or other property of the Plan, or has any authority or responsibility to do so, or (c) has any discretionary authority or discretionary responsibility in the administration of the Plan or the Trust Fund. The term "Fiduciary" shall also include any person to whom a Named Fiduciary delegates any fiduciary responsibilities in accordance with the provisions hereof or of the Trust Agreement as long as such delegation is in effect. 1.28 FINAL AVERAGE MONTHLY PAY: The average rate of monthly pay determined by dividing by 60 the total amount of a Participant's Compensation during the five consecutive calendar years during which his aggregate Compensation was the highest, selected from the ten consecutive calendar years ending with the calendar year in which occurs his Qualifying Termination. However, (a) any calendar year during which the Participant did not have any Compensation for working shall be ignored for all purposes in calculating his Final Average 11 10 Monthly Pay, (b) in case of a Participant whose Qualifying Termination occurs after reaching Age 55, his Final Average Monthly Pay shall not be less than what it would have been if his Qualifying Termination had occurred at any earlier time after reaching Age 55, (c) if in such ten consecutive calendar years the Participant did not have Compensation during any five consecutive calendar years, his Final Average Monthly Pay shall not be less than the amount determined by dividing his Compensation during such ten years by the number of months (rounding to two decimal places any fraction of a month) in which he had Compensation during those ten years, (d) a Participant shall be deemed to have had no Compensation in a calendar year if he received or was entitled to receive Disability Income Plan benefits in such year which were at a rate that was less than his regular salary rate, but only if so deeming him to have received no Compensation will result in a larger Final Average Monthly Pay than will result from counting the Participant's Compensation during such year, and (e) in the case of a Participant who ceases to be a Covered Employee but remains an Employee and is not thereafter re-employed as a Covered Employee, such Participant's Final Average Monthly Pay shall be calculated as if he had a Qualifying Termination on the date he ceased to be a Covered Employee. 1.29 HIGHLY COMPENSATED EMPLOYEE: (a) For a particular Plan Year, unless an Employer elects one of the simplified methods contained in Code Section 414(q)(12) or Revenue Procedure 93-42, any Employee (i) who, during the preceding Plan Year, (A) was at any time a 5-percent owner (as such term is defined in Section 416(i)(1) of the Code), (B) received compensation from the Controlled Group in excess of $75,000 (as such amount may be adjusted for increases in the cost of living pursuant to regulations prescribed by the Secretary of the Treasury), (C) received compensation from the Controlled Group in excess of $50,000 (as such amount may be adjusted for increases in the cost of living pursuant to regulations prescribed by the Secretary of the Treasury) and was in the top-paid group of Employees for such Year, or (D) was at any time an officer (limited to no more than 50 Employees or, if lesser, the greater of 12 11 3 Employees or 10 percent (10%) of the Employees) and received compensation, effective January 1, 1987, greater than 50 percent (50%) of the amount in effect under Section 415(b)(1)(A) of the Code for such Year, or (ii) who during the particular Plan Year (but not the prior Plan Year) (A) was at any time a 5-percent owner (as such term is defined in Section 416(i)(l) of the Code) or (B) was included in the foregoing clauses (B), (C) or (D) and was in the group consisting of the 100 Employees paid the greatest compensation by the Controlled Group during such Plan Year. (b) "Highly Compensated Employee" shall include a former Employee whose employment with the Controlled Group terminated prior to the Plan Year and who was a Highly Compensated Employee for the Plan Year in which his employment terminated or for any Plan Year ending on or after his 55th birthday. (c) For the purposes of this Section, (i) the term "compensation" shall mean the sum of an Employee's compensation as described in Section 11.09(a)(2) (subject to the limitations described in Section 1.14(b)), and the Employee's before-tax contributions (if any) under any qualified retirement plan sponsored by a Controlled Group Member, and (ii) the term "top-paid group of Employees" shall mean that group of Employees of the Controlled Group consisting of the top 20 percent (20%) of such Employees when ranked on the basis of compensation paid by the Controlled Group during the Plan Year. 1.30 HOUR OF SERVICE: An hour for which an Employee is paid, or entitled to payment, by a Controlled Group Member for the performance of duties as an Employee. 1.31 INVESTMENT COMMITTEE: The Investment Committee provided for in Article VIII hereof. 1.32 JOINT PENSIONER: See Section 4.10(a)(1). The term "Joint Pensioner" shall include the Spouse of a Participant whose Pension is payable as provided in Section 4.09(b). 1.33 LATE RETIREMENT DATE. The Late Retirement Date described in Section 3.03. 13 12 1.34 LATE RETIREMENT PENSION. A Pension payable pursuant to Sections 3.03 and 4.02. 1.35 NAMED FIDUCIARIES: See Section 10.02. 1.36 NORMAL RETIREMENT AGE: Age 65; provided that, effective as of January 1, 1988, with respect to a Participant who commences participation in the Plan within 5 years before his attainment of Age 65, "Normal Retirement Age" shall mean the fifth anniversary of the date such Participant commenced participation in the Plan. 1.37 NORMAL RETIREMENT DATE: The first day of the month coinciding with or next following the day the Participant attains his Normal Retirement Age. 1.38 NORMAL RETIREMENT PENSION: A Pension payable pursuant to Sections 3.02 and 4.01. 1.39 OTHER GROUP PLAN: The North American Coal Corporation Salaried Employees Pension Plan and The North American Coal Corporation Pension Plan for Salaried Employees, which was terminated effective December 31, 1989, both of which were spun-off from the Prior Plan effective September 1, 1986. 1.40 OTHER PENSION: A pension, annuity or similar benefit provided under any Other Pension Plan, including the amount of the Participant's vested accrued benefit which has been annuitized, settled or discharged under The North American Coal Corporation Pension Plan for Salaried Employees on December 31, 1989, the termination date of such Plan, expressed as a monthly benefit in the form of a straight-life annuity (with no ancillary benefits) commencing on his Normal Retirement Date. 1.41 OTHER PENSION PLAN: Any UMW Negotiated Plan and any Other Group Plan. 14 13 1.42 PARTICIPANT: A Pensioner or a person who satisfies the participation requirements set forth in Sections 2.01 and 2.02 and continues to be a Participant pursuant to Section 2.03 hereof. 1.43 PENSION: A Normal Retirement Pension, a Late Retirement Pension, an Early Retirement Pension or a Deferred Vested Pension. 1.44 PENSION COMMENCEMENT DATE: Effective as of January 1, 1985, the first day of the first period for which an amount is payable under the Plan as an annuity or in any other form, regardless of whether such amount is in fact paid on such day. An individual whose Pension is suspended pursuant to Section 4.02(b) or Section 5.02 shall be treated as not having reached his Pension Commencement Date, and the Pension Commencement Date for any amount which later becomes payable shall be determined pursuant to the preceding sentence. An individual who commences to receive a Pension pursuant to Section 11.12 shall be treated as having reached his Pension Commencement Date. 1.45 PENSIONER: A former Employee whose employment with the Controlled Group shall have terminated under such conditions that he is eligible for or receiving a Pension under the Plan, even though such Pension has not begun and will not begin until the arrival of the time at which such Pension becomes payable. 1.46 PERIOD OF SEVERANCE: The period of time beginning with a Severance from Service of an Employee and ending on the day on which he next thereafter performs an Hour of Service. 1.47 PLAN: The pension plan known as The NACCO Industries, Inc. Pension Plan for Salaried Employees, as the same may hereafter be amended or restated from time to time. 1.48 PLAN YEAR: A calendar year. 15 14 1.49 PRIOR PLAN: The NACCO Industries, Inc. Pension Plan for Salaried Employees, as in effect from time to time prior to December 1, 1986. The Prior Plan was terminated effective November 30, 1986. 1.50 PUBLIC PENSION: See Section 4.05(b). 1.51 QUALIFYING TERMINATION: The Retirement of a Participant, the termination of a Participant's employment with the Controlled Group that makes him eligible for a Deferred Vested Pension, or the death of a Participant if as a result of his death a benefit is payable hereunder for his Beneficiary. 1.52 RETIREMENT: The termination of a Participant's employment with the Controlled Group which makes him eligible for a Normal, Late or Early Retirement Pension. The term "Retire" when referring to a Participant refers to the fact that his employment with the Controlled Group is being or has been terminated under conditions that constitute Retirement. 1.53 SERVICE TO POTENTIAL SERVICE RATIO: A percentage equal to (a) divided by (b), where: (a) = the number of the Participant's months of Vesting Service as of the date of his Qualifying Termination; and (b) = the number of months determined under (a) plus the number of months (figured to the nearest month) between his said Qualifying Termination and his Normal Retirement Date. 1.54 SEVERANCE FROM SERVICE: An Employee incurs a Severance from Service on the earlier of (a) the day on which he ceases to be an Employee by reason of his resignation, discharge, permanent layoff, Retirement or death or (b) the first annual anniversary of the first day of a period in which he remains absent from service with the Controlled Group (with or without pay) for any reason other than his resignation, permanent layoff, Retirement, discharge or death (such as vacation, holiday, sickness, suspension, disability (other than disability entitling 16 15 the Employee to benefits under a Disability Income Plan), leave of absence or temporary layoff). Notwithstanding the foregoing provisions of this Section, an Employee who is absent from service beyond the first annual anniversary of the first date of absence (i) by reason of the pregnancy of the individual, (ii) by reason of the birth of a child of the individual, (iii) by reason of the placement of a child with the individual in connection with the adoption of such child by such individual, or (iv) for purposes of caring for such child for a period beginning immediately following such birth or placement, shall not have a "Severance from Service" until the second annual anniversary of the first date of such absence. The period between the first and second anniversaries of the first date of absence from work shall not count, however, as Benefit Service, Vesting Service, or a Period of Severance. 1.55 SOCIAL SECURITY BENEFIT: The amount of monthly old age benefit to which the Participant would be entitled under Title II of the federal Social Security Act (or under any successor to the old age benefit provisions of said Title II), as in effect on the earlier of his Qualifying Termination or his Normal Retirement Date, (a) if (pursuant to his application) such benefit were to begin with the month after his Normal Retirement Date, (b) if during and after the calendar year in which he reaches his Normal Retirement Date he does not have any income that is subject to federal old age Social Security taxes, (c) if (in case his Qualifying Termination occurs before the calendar year in which he reaches Age 65) he had income of the type subject to such taxes during each month in the period from his Qualifying Termination to (but not including) the calendar year in which he reaches Age 65 equal to the greater of (1) his rate of salary or wages (computed on a monthly basis) just before his Qualifying Termination or (2) his Final Average Monthly Pay, (d) if after his Qualifying Termination he is not entitled to any 17 16 Social Security benefits which may be payable before Age 65 solely on account of his disability, (e) if, where Section 4.07 or 4.08 is applicable, he had continued to live as long as his surviving Spouse lives and (f) if there were no action or inaction on his part which would reduce such benefit or bar the payment thereof. However, in determining the amount of a Participant's Social Security Benefit, his pre-hire salary history shall be determined assuming that each year before he is hired by the Controlled Group he had income of the type subject to federal old age Social Security taxes in an amount determined by applying the following salary scale, projected backwards, to the amount of Compensation that he had during his first year of employment with the Controlled Group. For this purpose, the salary scale shall be the actual change in the average wages from year to year as determined by the Social Security Administration. Notwithstanding any other provisions of this Section to the contrary, a Participant shall have the right to supply to the Committee, within six months after the later of his Qualifying Termination or the date on which he is notified by the Committee of the pension to which he is entitled, his actual history of income earned prior to his Qualifying Termination as evidenced by records of the Social Security Administration or other records which the Committee deems acceptable. If such history is provided, the amounts obtained therefrom shall be substituted for the pre-hire income estimates otherwise used under this Section in determining the Participant's Social Security Benefit. If payment of a Participant's pension commences prior to the time he furnishes such income history to the Committee, his pension payments shall be increased or reduced, as the case may be, in accordance with such history, provided that any reductions shall be prospective only, and any increases shall be prospective and retroactive, with retroactive increases being paid in the form of a lump sum payment without interest. For the purposes of this Section, an employee described in Section 1.28(e) shall be treated as though he had a Qualifying Termination on the date he ceased to be a Covered Employee. 18 17 1.56 SOCIAL SECURITY RETIREMENT AGE: The age used as the retirement age under Section 216(1) of the Social Security Act, as amended, except that such Section shall be applied (a) without regard to the age increase factor, and (b) as if the early retirement age under Section 216(1)(2) of the Social Security Act were 62. 1.57 SPOUSE: The person to whom an Employee is legally married at the time in question; provided, however, that a former Spouse may be treated as a Spouse or surviving Spouse to the extent required under a "qualified domestic relations order" (as such term is defined by Section 414(p) of the Code). 1.58 TRUST: The Trust created by the Trust Agreement. 1.59 TRUST AGREEMENT: The Trust Agreement between the Company and the Trustee as such Trust Agreement may be amended, supplemented or restated from time to time, or any Trust Agreement superseding the same. The Trust Agreement is hereby incorporated in the Plan by reference. 1.60 TRUST FUND: The assets held in trust under the provisions of the Plan and the Trust Agreement, without distinction as to principal or income. 1.61 TRUSTEE: The trustee or trustees under the Trust Agreement or its or their successor or successors in trust under the Trust Agreement. 1.62 UMW NEGOTIATED PLAN: Any plan or fund, established or maintained pursuant to negotiations with the United Mine Workers of America or a successor thereto or district or local thereof, which provides for pension, annuity or similar benefits, provided a Controlled Group Member makes or has made contributions to provide benefits under such plan or from such fund. 1.63 VESTING SERVICE: An Employee shall receive Vesting Service for the period of his Benefit Service. In addition, an Employee shall receive Vesting Service for (i) periods of time not counted as Benefit Service that would count as Benefit Service except for the fact that 19 18 he is employed (A) by an Employer in a capacity other than as a Covered Employee or (B) by a non-Employer Controlled Group Member, or (ii) any Period of Severance which commences by reason of a quit, discharge, permanent layoff or Retirement and which continues for less than one year; provided, however, that no work, employment or time before an Employee attains Age 18 shall be counted in determining his Vesting Service. 1.64 CONSTRUCTION OF DOCUMENTS: (a) Unless the context clearly otherwise requires, masculine words wherever used herein or in the Trust Agreement shall include feminine and neuter words and the singular shall include the plural wherever appropriate. (b) The words "herein", "hereof", "hereunder" and other words of similar import in the Plan or the Trust Agreement refer to the entire Plan or the Trust Agreement (as the case may be) rather than to the portion of the Plan or the Trust Agreement in which they appear. (c) Present tense verbs herein shall be construed as being both past tense verbs and present tense verbs where it is apparent from the context of the passage involved that as applied to some person the event or situation involved may have occurred in the past. (d) Where headings have been supplied for portions of the Plan or of the Trust Agreement (other than the headings to the defined terms in Sections 1.02 through 1.64) they have been supplied for convenience only and are not to be taken as limiting or extending the meaning of any of such portions of such documents. (e) As used herein, the phrase benefits "with respect to" a Participant, Pensioner or Employee means benefits under the Plan for such person and his Beneficiaries. (f) A number of the provisions hereof and of the Trust Agreement are designed to contain provisions required or contemplated by certain federal laws and/or regulations thereunder. Each such provision herein and in the Trust Agreement is intended to have the meaning required or contemplated by such provision of such law or regulations and shall be construed in accordance with valid regulations and valid published governmental rulings and 20 19 interpretations of such provision. In applying such provisions hereof or of the Trust Agreement, each Fiduciary may rely (and shall be protected in relying) on any determination or ruling made by any agency of the United States Government that has authority to issue regulations, rulings, interpretations or determinations with respect to the federal law thus involved. (g) Except to the extent federal law controls, the Plan shall be governed, construed and administered according to the laws of the State of Ohio. All persons accepting or claiming benefits under the Plan or Trust Agreement shall be bound by and deemed to consent to their provisions. (h) Wherever the word "person" appears in the Plan, it shall refer to both natural and legal persons. (i) This Amendment and Restatement of the Plan shall constitute an amendment, restatement and continuation of the Plan. This Amendment and Restatement is generally effective as of January 1, 1989. During the period from January 1, 1989 until the date of the adoption of this Amendment and Restatement, benefits under the Plan were frozen for all Participants as a result of the adoption of the Model Amendments No. 1, 2 and 3 from IRS Notice 88-131. The adoption of this Amendment and Restatement retroactively extinguishes the freeze on benefit accruals to January 1, 1989. Notwithstanding the foregoing, effective as of December 31, 1993, benefits under the Plan will once again be frozen, permanently, for all Participants. Certain provisions of this Amendment and Restatement of the Plan are effective as of some other date. The provisions of this Amendment and Restatement of the Plan which are effective prior to January 1, 1989 shall be deemed to amend the corresponding provisions of the Plan as in effect before this Amendment and Restatement and all amendments thereto. Events occurring before the applicable effective date of any provision of this Amendment and 21 20 Restatement of the Plan shall be governed by the applicable provision of the Plan in effect on the date of the event. (j) Nothing contained in this Amendment and Restatement of the Plan shall reduce or have the effect of reducing the Accrued Benefit (within the meaning of Section 411(d)(6) of the Code) of any Participant under the terms of the Plan as in effect before this Amendment and Restatement. This Amendment and Restatement of the Plan shall be interpreted and administered accordingly. 22 21 ARTICLE II - BECOMING A PARTICIPANT AND TERMINATION OF PARTICIPATION - -------------------------------------------------------------------- 2.01 COMMENCEMENT OF PARTICIPATION. (a) (Participation as of January 1, 1989). Each Employee who was a Participant in the Plan on January 1, 1989 shall continue to be a Participant in the Plan as hereby restated, if he is a Covered Employee on January 1, 1989. (b) (Participation After January 1, 1989) Any other Employee shall become a Participant in the Plan on the day on which he becomes a Covered Employee. Notwithstanding the foregoing, no Employee shall become a Participant in the Plan on or after January 1, 1994. 2.02 EXCLUSIONS. An Employee may not become a Participant if he works for an Employer primarily outside of the United States and he is not a citizen of the United States. 2.03 TERMINATION OF PARTICIPATION. A Participant who is not a Pensioner shall only cease to be a Participant when he ceases to be an Employee. Such a former Participant shall again become a Participant as soon as he again becomes a Covered Employee or becomes a Pensioner. 23 22 ARTICLE III - ELIGIBILITY FOR PENSIONS - -------------------------------------- 3.01 REQUIREMENTS FOR PENSION. An Employee or former Employee shall not be eligible for a Pension under the Plan as hereby restated unless, in addition to any other requirements set forth in the Plan, the termination of his employment with the Employers occurs on or after January 1, 1989. The benefit, if any, payable with respect to a former Employee whose employment with the Employers terminated before January 1, 1989 (and who is not rehired by an Employer thereafter) shall be determined by and paid in accordance with the terms and provisions of the Plan as in effect at the date of such termination, except to the extent that certain provisions of the Plan, as amended and restated hereby as of January 1, 1989, apply to such individual as a result of applicable law or to the extent that the context clearly requires the application of such provision to such individual. 3.02 NORMAL RETIREMENT. A Participant whose employment with the Controlled Group is terminated on his Normal Retirement Date shall be entitled to a Normal Retirement Pension as provided in Section 4.01. A Participant's right to his Normal Retirement Pension shall be nonforfeitable upon the attainment of his Normal Retirement Age while he is an Employee. 3.03 LATE RETIREMENT. A Participant who postpones his Retirement to a date subsequent to his Normal Retirement Date (his "Late Retirement Date") shall be entitled to a Late Retirement Pension as provided in Section 4.02. 3.04 EARLY RETIREMENT. A Participant having at least ten years of Vesting Service as a salaried Employee whose employment with the Controlled Group is terminated at a date at or after Age 55 but before his Normal Retirement Date and while he is a salaried Employee (his "Early Retirement Date") shall be eligible for an Early Retirement Pension as provided in Section 4.03. 24 23 3.05 DEFERRED VESTED TERMINATIONS. A Participant having at least five years of Vesting Service or who was a Participant and a Covered Employee on December 31, 1993 whose employment with the Controlled Group is terminated before he becomes eligible for any other Pension hereunder shall be eligible for a Deferred Vested Pension as provided in Section 4.04. 3.06 DISABILITY. If a Covered Employee having at least one year of Vesting Service as a salaried Employee becomes disabled and as a result thereof he receives benefits under a Disability Income Plan, (a) he shall be credited with Benefit and Vesting Service for the period provided in Section 1.10(e) and (b) except as provided in Section 3.07, he shall for purposes of the Plan be deemed to be a Covered Employee during the period for which he continues to receive (or to be entitled to receive) such Disability Income Plan benefits. 3.07 SURVIVING SPOUSE PENSION. If a Participant having at least ten years of Vesting Service as a salaried Employee and having attained Age 52 dies before his Pension Commencement Date and while he is a Covered Employee, and if he is survived by his Spouse to whom he has been legally married during the entire year immediately preceding his death, such Spouse shall be eligible for a Surviving Spouse Pension as provided in Section 4.07. However, if such a Participant's death occurs while he is not in fact an Employee but is deemed (pursuant to Section 3.06) to be a Covered Employee due to the receipt of or entitlement to benefits under a Disability Income Plan, such Spouse shall only be entitled to a Surviving Spouse Pension if such Spouse was legally married to the Participant when he became so disabled as to be entitled to such disability benefits. 3.08 PRE-RETIREMENT SPOUSE PENSION. (a) If a Participant having a nonforfeitable right to a Pension hereunder dies before his Pension Commencement Date and after having any service or paid leave after August 22, 1984 that is recognized hereunder, and if he is survived by his Spouse to whom he has been legally married during the entire year immediately preceding his 25 24 death who is not eligible for the Surviving Spouse Pension, such Spouse shall be eligible for a Pre-Retirement Spouse Pension as provided in Section 4.08. (b) Any Participant (1) who had any service after December 31, 1975 that is recognized hereunder, (2) to whom Subsection (a) of this Section would not apply but for this Subsection, (3) who, when he terminated employment with the Controlled Group, had at least ten years of Vesting Service, and (4) who was alive, and whose Pension Commencement Date had not occurred, on July 19, 1985, may elect, during the period beginning on July 19, 1985 and ending on the earlier of the date of the Participant's Pension Commencement Date or the date of his death, to have the rules of Subsection (a) of this Section apply to him. If the Participant makes such an election, the Pension otherwise payable with respect to him shall be reduced, to reflect the increased cost attributable to having the pre-retirement survivor coverage for the period during which it was in effect, on the basis of the actuarial factors, assumptions and procedures set forth in Exhibit A. The Committee shall give participants described in this Subsection notice of its provisions and the reduction described herein shall not apply to the period between July 19, 1985 and the time such notice is given. 26 25 ARTICLE IV - PENSION AND DEATH BENEFITS - --------------------------------------- 4.01 NORMAL RETIREMENT PENSION. (a) IN GENERAL. (1) The Normal Retirement Pension for a Participant entitled to such a Pension shall be a Pension payable, except as otherwise provided in the Plan, for the Participant's lifetime, in a monthly amount equal to the difference between A and B where: A = the sum of (i) 1.7% of the Participant's Final Average Monthly Pay times 1/12th of the number of his months of Benefit Service (not in excess of 360 months) at the time of his Qualifying Termination plus (ii) 0.5% of his Final Average Monthly Pay times 1/12th of the number of months (if any) by which his months of Benefit Service at the time of his Qualifying Termination exceeds 360 months. B = 1.7% of the Participant's Social Security Benefit, multiplied by 1/12th of the number of months of the Participant's Benefit Service (not exceeding 360) at the time of his Qualifying Termination. (2) However, in the case of a Participant whose Qualifying Termination occurs before his Normal Retirement Date, the amount specified in Clause (B) of Paragraph (1) of this Section shall not exceed 83-1/3% of his Social Security Benefit times the Service to Potential Service Ratio. (b) CAPPED PARTICIPANTS. The Normal Retirement Pension of a Capped Participant shall be a monthly amount equal to the greater of (1) the amount determined under Subsection (a) of this Section (based on all of the Capped Employee's months of Benefit Service not in excess of 360) or (2) the sum of A plus B, where: A = the amount determined under Subsection (a) of this Section, taking into account only the Capped Employee's months of Benefit Service earned on or after January 1, 1989; and B = the Capped Employee's Accrued Benefit as of December 31, 1988. The total months of Benefit Service taken into account under Paragraph (2) of this Subsection (b) may not exceed 360. In the event that a Capped Employee has been credited with months of Benefit Service in excess of 360, such excess months of Benefit Service shall be subtracted from 27 26 the portion of the benefit formula described in Clause (A) of Paragraph (2) of this Subsection (b). (c) COMMENCEMENT. Except as otherwise provided herein, the Normal Retirement Pension shall begin on the first day of the month coincident with or next following the Participant's Normal Retirement Date. (d) BENEFIT FREEZE. Notwithstanding the foregoing, effective as of December 31, 1993, benefit accruals under the Plan shall cease for all Participants and consequently the Normal Retirement Pensions hereunder shall be frozen as of such date. 4.02 LATE RETIREMENT PENSION. (a) The Late Retirement Pension for a Participant entitled to such a Pension shall be determined in the same manner as a Normal Retirement Pension but based on the Participant's Benefit Service, Social Security Benefit and Final Average Monthly Pay as of his Late Retirement Date. Except as otherwise provided herein, such Pension shall begin on the first day of the month coincident with or next following the Participant's Late Retirement Date. (b) Notwithstanding Subsection (a) of this Section, a Participant's Late Retirement Pension shall begin as of the first day of any month after his Normal Retirement Date and before his Retirement (1) during which he is credited with less than 40 Hours of Service (including, for this purpose, hours for which he is paid, or entitled to payment, by a Controlled Group Member on account of the period of time during which no duties are performed) or (2) during which he is credited with at least 40 Hours of Service (as so defined) and the Company has not given him the notice required by 29 C.F.R. Section 2530.203-3(b)(4) that payment of his Normal Retirement Pension is being withheld. If a benefit becomes payable to a Participant pursuant to the preceding sentence, the benefit accruals, if any, required by the Plan for the period of payment with respect to such Participant shall, in accordance with 28 27 regulations promulgated by the Secretary of the Treasury, be treated as satisfied to the extent of the Actuarial Equivalent of such benefit payments. 4.03 EARLY RETIREMENT PENSION. (a) The Early Retirement Pension for a Participant entitled to such a Pension shall be determined in the same manner as a Normal Retirement Pension but based on the Participant's Benefit Service, Social Security Benefit and Final Average Monthly Pay as of his Early Retirement Date. (b) The Early Retirement Pension described in Subsection (a) of this Section shall commence on the first day of the month coincident with or next following the Participant's Normal Retirement Date, unless the Participant elects within the 90-day period ending on his Pension Commencement Date (with, if he is married and if he elects a benefit option other than the Automatic 50% Spouse Option or a Joint Pensioner Option under Section 4.10(a)(1) with his Spouse as the Joint Pensioner, the consent of his Spouse), that the Early Retirement Pension commence in a reduced amount on the first day of any earlier month designated by him, which day is subsequent to his Qualifying Termination. Such reduced Early Retirement Pension shall be equal to the amount determined under Subsection (a) of this Section, reduced by 0.33333% for each month that his Early Retirement Pension commences before his Normal Retirement Date. Notwithstanding the foregoing, if the provisions of Section 4.01(b) apply, the reduced Early Retirement Pension shall be the amount determined under Subsection (a) of this Section, reduced by THE DIFFERENCE BETWEEN (1) THE SUM OF (i) 0.55555% for each of the first 60 months his Early Retirement Pension begins before his Normal Retirement Date AND (ii) 0.27778% for each month (if any) in excess of 60 that such Pension begins before his Normal Retirement Date, AND (2) 0.33333% for each month that such Pension begins before his Normal Retirement Date. 4.04 DEFERRED VESTED PENSION. (a) The Deferred Vested Pension for a Participant entitled to such a Pension shall be determined in the same manner as the Normal 29 28 Retirement Pension but based on the Participant's Benefit Service, Social Security Benefit and Final Average Monthly Earnings at the time of his Qualifying Termination. (b) A Participant's Deferred Vested Pension shall commence on the first day of the month coincident with or next following his Normal Retirement Date; provided, however, that a Participant who had at least 10 years of Vesting Service as a salaried Employee on his Qualifying Termination may elect, within the 90-day period ending on his Pension Commencement Date (with, if he is married and if he elects a benefit option other than the Automatic 50% Spouse Option or a Joint Pensioner Option under Section 4.10(a)(1) with his Spouse as the Joint Pensioner, the consent of his Spouse), to have his Deferred Vested Pension commence in a reduced amount on the first day of any earlier month designated by him which day is within the ten-year period prior to his Normal Retirement Date and is subsequent to his Qualifying Termination. Such reduced Deferred Vested Pension shall be the Actuarial Equivalent of the Normal Retirement Pension determined using the actuarial factors specified in Exhibit A, ignoring the death benefit specified in section 4.06. (c) The Accrued Benefit of a Participant who terminates his employment with the Controlled Group at a time when he does not have a nonforfeitable right to any Pension hereunder shall be deemed to have been distributed to the Participant immediately upon such termination of employment, and the Participant's entire Accrued Benefit shall thereupon be forfeited. Such forfeitures shall not be applied to increase the benefits any Employee would otherwise receive under the Plan, but shall be used to reduce the future contributions of the Employers. If the Participant is subsequently re-employed, the deemed distribution described in the first sentence of this Subsection shall be deemed to have been repaid to the Plan upon such re-employment if there were fewer than five consecutive 1-year Periods of Severance during the period between the Participant's original termination of employment with the Controlled Group and his subsequent re-employment with the Controlled Group. 30 29 4.05 REDUCTIONS FOR OTHER PRIVATE AND PUBLIC BENEFITS. (a) If a Pensioner is (or would upon application be) entitled to an Other Pension under any Other Pension Plan and if (in a case where the Other Pension Plan is an Other Group Plan) he was a Covered Employee under the Plan after the last date on which he was a Covered Employee under the Other Group Plan, his monthly Pension hereunder (determined after reductions for early commencement but before adjustments for any optional form of benefit) shall be reduced by the monthly amount, beginning when his Pension hereunder is to begin and payable monthly for his then remaining lifetime and no longer, that is the Actuarial Equivalent of such Other Pension. However, his monthly Pension hereunder shall not be reduced by any portion of such Other Pension that was paid for by his own contributions to such Other Pension Plan and any portion thereof that was not attributable to employment with the Controlled Group. If a Pensioner is entitled to a benefit as a result of the termination of the Prior Plan (the "Prior Plan Termination Benefit"), his monthly Pension hereunder shall be reduced by the monthly amount that is the Actuarial Equivalent of such Prior Plan Termination Benefit. The amount of such Other Pension and such Prior Plan Termination Benefit shall be determined after reductions for early commencement but before adjustments for any optional form of benefit and without regard for any optional election of a contingent annuitant, joint and survivor or period certain option or any similar option. Where all or a part of an Other Pension or a Prior Plan Termination Benefit is or has been discharged or settled by a lump sum payment or a similar payment, the provisions hereof shall be applied to such Other Pension or Prior Plan Termination Benefit the same as if it had not been so discharged or settled. The Pension Committee may, after consultation with an Actuary, equitably adjust a Pensioner's monthly Pension hereunder if the Pensioner's Pension hereunder is suspended in accordance with Section 4.02(b) or 5.02 and the Pensioner's benefit (if any) under the Other Group Plan or the Prior Plan is not suspended. 31 30 (b) The term "Public Pension" shall mean any benefit for disability, old age or retirement (including workers' compensation benefits and black lung benefits, but excluding benefits under the federal Social Security Act or any successor thereto) which is paid from a governmental fund or is provided for or required by statutory law; provided that (1) such benefit is paid (i) by one or more Controlled Group Members, or (ii) pursuant to an insurance policy under which a Controlled Group Member pays or has paid premiums and such benefits are in fact paid from such policy, or (iii) from a fund to which a Controlled Group Member contributes or has contributed by the payment of premiums, taxes or otherwise (other than taxes for the general purposes of a government) and (2) the term "Public Pension" shall not include payment of or reimbursement for medical expenses. Notwithstanding the foregoing, in the event that a Pensioner's black lung benefits are attributable (in whole or in part) to employment with a non-Controlled Group Member, the Pensioner's Pension hereunder shall be offset only by the portion of such benefits attributable to employment with the Controlled Group. The applicable offset will be calculated by multiplying each benefit payment by a fraction, the numerator of which is the Pensioner's years of service with the Controlled Group and the denominator of which is the Pensioner's years of total employment in the coal industry. (c) A Pensioner's Pension hereunder shall be reduced by any Public Pension to which he is (or would upon application be) entitled. This reduction shall be accomplished by reducing the Pensioner's Pension hereunder for each month by the amount of such Public Pension that is payable with respect to such month for the Pensioner, and his Spouse, or dependents if any. No reduction shall be made pursuant to this Subsection (c) with respect to (1) any portion of a Public Pension for a Pensioner that is payable for any period of time that precedes the date his Pension hereunder is to begin, or (2) any Public Pension from which the Pensioner's Pension hereunder is deducted. In the event a Pensioner receives a Public Pension that includes any retroactive payment for any prior month during which he received a Pension 32 31 hereunder, the Committee shall adjust future payments or distributions to such Pensioner or his Beneficiaries to recover any excess payments theretofore made from the Trust Fund to such Pensioner. (d) The Committee shall have full authority to determine under the foregoing provisions of this Section the amount of reductions provided for in this Section and may adopt rules, applying uniformly to all Participants similarly situated, as it may deem advisable to carry out the purpose and provisions of this Section. 4.06 POST-RETIREMENT DEATH BENEFIT. If a Pensioner, other than one entitled to a Deferred Vested Pension, dies while receiving his Pension hereunder (or while he would have been receiving such Pension except for Section 5.06(a)), there shall be payable to his Beneficiary the difference (if any) between (a) $5,000 and (b) the value (as of the date of the Pensioner's death) of any death benefit payable (or payable upon application) with respect to such Pensioner under any group life insurance which had been paid for in whole or in part by a Controlled Group Member; provided, however, that the death benefit provided for in this Section shall not be payable if the Pensioner qualifies for a substantially similar benefit provided by an Other Group Plan (or under the terms of the annuity contracts issued to such person upon the termination of the Prior Plan or upon the termination of The North American Coal Corporation Pension Plan for Salaried Employees on December 31, 1989) and if the Pensioner was a Participant in such Other Group Plan after the last date on which he was a Covered Employee hereunder. 4.07 SURVIVING SPOUSE PENSIONS. (a) The Surviving Spouse Pension for the surviving Spouse of a deceased Participant which Spouse is entitled to such benefit (1) shall be (for Spouses of Participants who die prior to their Normal Retirement Date) a monthly benefit equal to 50% of what would have been such Participant's Normal Retirement Pension (payable in the form of a single life annuity with no reduction for early commencement) if he had reached 33 32 his Normal Retirement Date on the date he died and if (instead of dying) he had continued to live or (in the case of Spouses of Participants who die on or after their Normal Retirement Date) a monthly benefit equal to 50% of what would have been such Participant's Normal or Late Retirement Pension, as applicable, (payable in the form of a single life annuity with no reduction for early commencement) if he would have retired on the date of his death, (2) shall begin on the first day of the month after the Participant's death if such Spouse is living on such day, (3) shall, except as otherwise provided herein, be payable monthly thereafter (on the first of each month) during such Spouse's remaining lifetime and (4) shall cease with the payment due on the first day of the last month in which such Spouse is living. (b) If the surviving Spouse is eligible for a survivorship pension, annuity, or similar benefit under an Other Group Plan or the Prior Plan because of the death of the Participant prior to the date on which such Participant's pension was due to begin under such Other Group Plan or the Prior Plan and if the deceased Participant was a Covered Employee under the Plan after the last date on which he was a Covered Employee under the Other Group Plan or the Prior Plan, the surviving Spouse's monthly benefit hereunder shall be reduced, beginning when such Spouse's benefit under such Other Group Plan or the Prior Plan is to begin, by the monthly amount of the survivorship benefit to which the Spouse is entitled under such Other Group Plan or the Prior Plan. Where all or part of such survivorship benefit under such Other Group Plan or the Prior Plan is or has been discharged or settled by a lump sum payment or a similar payment, the provisions hereof shall be applied to such survivorship benefit the same as if it had not been so discharged or settled. (c) Any death, survivor or similar benefit under a plan or program that provides for a Public Pension, which is (or would upon application be) payable on account of the death of the Participant and because of a disease that is designated by law or governmental regulation as an occupational disease of an industry that includes the coal mining industry or businesses, shall 34 33 be deducted from the Surviving Spouse Pension under this Section until the amount deducted equals the amount of such death, survivor or similar benefit. Such deduction shall be accomplished by reducing the Surviving Spouse Pension determined under Subsection (a) of this Section for each month by the amount of such death, survivor or similar benefit that is payable with respect to such month for the surviving Spouse. The monthly offset provided under the preceding sentence shall be calculated at the time the Surviving Spouse Pension begins or, if later, the date the death, survivor or similar benefit under the plan or program providing for a Public Pension begins, and shall not thereafter be changed or adjusted notwithstanding any change in the amount of the Public Pension. No reduction shall be made pursuant to the preceding three sentences of this Subsection with respect to (1) any portion of a Public Pension for a surviving Spouse that is payable for any period of time that precedes the date his Pension hereunder is to begin, or (2) any Public Pension from which the Surviving Spouse Pension hereunder is deducted. In the event a surviving Spouse receives a Public Pension that includes any retroactive payment for any prior month during which he received a Pension hereunder, the Committee shall adjust future pension payments with respect to such Spouse to recover any excess payments theretofore made from the Trust Fund to such Spouse. 4.08 PRE-RETIREMENT SPOUSE PENSION. (a) Subject to the provisions of Sections 4.07(b) and 4.07(c), the monthly amount of the Pre-Retirement Spouse Pension for the Spouse of a deceased Participant entitled to such benefit shall be the Actuarial Equivalent (as of the date such benefit commences) of that amount which the surviving Spouse would have been entitled to receive (determined by counting only the Participant's Benefit Service as of the date of his death) if: (1) in the case of a Participant who dies after his Earliest Retirement Date, the Participant had retired or otherwise terminated employment with the Controlled Group during the month before his death with his Pension payable under the Automatic 50% Spouse 35 34 Option (or, in the case of a Participant who (i) elected a Joint Pensioner option under Section 4.10(a)(1) with his Spouse as the Joint Pensioner to receive payments after the death of the Participant of 66-2/3%, 75% or 100% of the reduced Pension payable to the Participant under such option and (ii) dies before the Pension Commencement Date, under the option elected by the Participant) commencing on the first day of the month following the month in which he died; or (2) in the case of a Participant who dies on or before his Earliest Retirement Date, (i) the Participant's (in the case only of a Participant who dies while he is an Employee) employment with the Controlled Group had terminated on the date of his death, (ii) the Participant had survived to his Earliest Retirement Date, (iii) the Participant had retired at his Earliest Retirement Date, with a Pension payable immediately under the Automatic 50% Spouse Option (or, in the case of a Participant who (A) elected a Joint Pensioner option under Section 4.10(a)(1) with his Spouse as the Joint Pensioner to receive payments after the death of the Participant of 66-2/3%, 75% or 100% of the reduced Pension payable to the Participant under such option and (B) dies before the Pension Commencement Date, under the option elected by the Participant), and (iv) the Participant died on the day after his Earliest Retirement Date. (b) The Pre-Retirement Spouse Pension described in this Section shall begin on the first day of the month following the month in which occurs the Participant's Earliest Retirement Date or, if the Participant dies after his Earliest Retirement Date, on the first day of the month following the month in which the Participant dies, unless, in the case of a Pre-Retirement Spouse Pension first payable in a month prior to the month following the month in which the Participant would have attained his Normal Retirement Age had he not died, the surviving Spouse elects later commencement on the first day of any subsequent month up to the 36 35 month following the month in which the Participant would have attained his Normal Retirement Age had he not died, but in any case only if the Spouse is living on such date. If the Spouse elects to defer commencement of the Pre-Retirement Spouse Pension, the benefit such Spouse shall receive shall be the Actuarial Equivalent of the benefit such Spouse would have received had there been no deferral. 4.09 NORMAL FORMS OF BENEFITS. (a) Notwithstanding any other provision of the Plan, a Pension payable to a Participant shall be paid in the applicable form described in Subsection (b) or (c) of this Section unless payment in such form is effectively waived pursuant to Subsection (b) or (c) of this Section. (b)(1) A Participant who is married on his Pension Commencement Date shall have his Pension paid in the form of an "Automatic 50% Spouse Option" unless the Participant elects to waive such Option during the 90-day period ending on his Pension Commencement Date, provided that any election to waive such Option shall not take effect unless (i) the Participant's Spouse consents in writing to such election, and the Spouse's consent acknowledges the effect of such election and is witnessed by a Plan representative or a notary public, or (ii) it is established to the satisfaction of a Plan representative that the consent required under (i) cannot be obtained because there is no Spouse, because the Spouse cannot be located, or because of such other circumstances as the Secretary of the Treasury may prescribe by regulations. Effective January 1, 1987, the election to waive the Automatic 50% Spouse Option must designate a Beneficiary (or a form of benefits) that may not be changed without the written consent of the electing Participant's Spouse, unless the written consent of the Spouse expressly permits designations by the Participant without any requirement of further consent by the Spouse. The Automatic 50% Spouse Option shall provide payments as if the Participant had elected a Joint Pensioner Option under Section 4.10(a)(1) with his Spouse as his Joint 37 36 Pensioner and 50% as the percentage of the reduced Pension payable to the Participant to be continued to the Spouse after the death of the Participant, if the Spouse survives the Participant. Any election by the Participant to waive the Automatic 50% Spouse Option may be revoked by the Participant during the 90-day period ending on the Participant's Pension Commencement Date. A Participant's election to waive the Automatic 50% Spouse Option and any revocation of such election may be made solely by an instrument (in form acceptable to the Committee) signed by the Participant and filed with the Secretary of the Committee during such election period. (2) The Committee in accordance with applicable law and regulations shall provide to each Participant, not more than 90 days nor less than 30 days before the Participant's Pension Commencement Date, a written explanation of (i) the terms and conditions of the Automatic 50% Spouse Option, (ii) the Participant's right to make, and the effect of, an election to waive the Automatic 50% Spouse Option, (iii) the rights of the Participant's Spouse hereunder, (iv) the right to make, and the effect of, a revocation of an election to waive the Automatic 50% Spouse Option, and (v) a general description of the eligibility features and relative values of a single life annuity and the other optional forms of benefit described in Section 4.10. (3) Pension payments for the Spouse shall commence on the first day of the month following the month in which the Participant dies, provided the Spouse is living on such day and is otherwise eligible to receive such payments under this Section, and shall continue during the Spouse's remaining lifetime, the last monthly payment being payable on the first day of the month in which the Spouse dies. If a Participant's Spouse predeceases the Participant before the Participant's Pension Commencement Date, the Participant shall be treated as though he had elected to waive the Automatic 50% Spouse 38 37 Option. If a Participant's Spouse dies on or after the Participant's Pension Commencement Date, the Participant's reduced Pension will not be increased thereby. (c) A Participant who is not married on his Pension Commencement Date shall have his Pension paid in the form of a single life annuity, as provided in Section 4.01 hereof, unless such Participant elects, within the 90-day period ending on his Pension Commencement Date, to waive the payment of his benefits in such form. 4.10 OPTIONAL FORMS OF BENEFITS. (a) A Participant who has waived the payment of his Pension in the form provided in Section 4.09 may elect (subject to the provisions of this Section and to such rules as may be adopted by the Committee) any one, or a compatible combination, of the optional forms of benefits specified in the following paragraphs or to have his Pension paid in the form of a single life annuity as specified in Section 4.01 (which form shall be considered an optional form of benefit for purposes of this Section.) Any such optional form of benefit or combination of optional forms of benefits shall be the Actuarial Equivalent of the Pension otherwise payable from the Trust Fund. In determining such Actuarial Equivalent, the death benefit specified in Section 4.06 shall be ignored. (1) (JOINT PENSIONER OPTIONS) A Participant may elect to receive a reduced Pension payable for him during his lifetime on and after his Pension Commencement Date, and after his death to have a Pension payable during the surviving lifetime of and for a natural person (herein called his "Joint Pensioner") designated by the Participant for such purpose at the rate of 50%, 66-2/3%, 75% or 100% of the reduced Pension payable for the Participant. Pension payments for the Joint Pensioner shall begin with the first day of the month after the month in which the Participant dies, provided his death does not void this Option as provided in Subsection (c) of this Section, and provided his Joint Pensioner is living on such day, and the last monthly payment for the Joint Pensioner shall be payable on the first day of the last month in which the Joint Pensioner is living. 39 38 If a Participant's Joint Pensioner dies before the Participant's Pension hereunder is to begin, the election shall be of no effect and the Participant shall be treated the same as though he had not elected a Joint Pensioner Option. If a Participant's Joint Pensioner dies on or after the date the Participant's Pension hereunder is to begin and while the Participant is living, the Joint Pensioner Option elected shall continue in force and the Participant's reduced Pension will not be increased thereby. (2) (10 YEAR CERTAIN) A Participant may elect to receive a reduced Pension payable for him during his lifetime on and after his Pension Commencement Date with the provision that, in the event of his death on or after such date and before 120 monthly Pension payments have been paid for him, monthly Pension payments will be continued (at the same reduced rate) to his Beneficiary until the number of monthly Pension payments made for his Beneficiary, when added to the number of monthly Pension payments made for the Participant, equals a total of 120 (referred to herein as the "10 Year Certain"). (3) (SOCIAL SECURITY OPTION) A Participant whose Pension commences prior to his Social Security Retirement Age may elect to have the amount of monthly pension payable for him increased before his Social Security Retirement Age (or, if requested by the Participant, before an earlier date on which he may elect to have his old age benefits under the Social Security Act begin) and decreased thereafter, to the end that his Pension hereunder, when combined with the old age benefits payable under the Social Security Act (as estimated as of the date his Pension hereunder is to begin), will provide a level amount of retirement income insofar as practicable. (b) (ELECTION OF OPTIONS) An election of an Option or Options under this Section may be made (and may be rescinded), and the Participant's Joint Pensioner and the percentage of the Participant's reduced Pension to be paid after his death to his Joint Pensioner 40 39 may be designated (and such designations may be changed), solely by an instrument (in form acceptable to the Committee) signed by the Participant and filed with the Secretary of the Committee while the Participant is living and within the 90-day period ending on his Pension Commencement Date. A Participant whose Pension has commenced under the Plan may not change the terms of any Option he has elected, may not change his designated Joint Pensioner and may not rescind any Option he has elected. Except for spousal consent required under any other Section hereof, the consent of a Participant's Beneficiary to any rescission or change in an Option or the terms thereof or to a change in the Participant's Joint Pensioner, in any case before the Participant's Pension commences, shall not be required. The Committee shall require proof satisfactory to it of the Participant's good health at the time he makes an election of an Option, before such election is allowed, unless such election is made at least 60 days before his Pension Commencement Date. (c) (OTHER TERMS OF THESE OPTIONS) The time for the commencement of Pension payments for the Participant shall not be affected by the election of a Joint Pensioner Option (which term includes the Automatic 50% Spouse Option) or the 10 Year Certain. If a Participant elects an Option under Subsection (a) of this Section and dies before his Pension Commencement Date, the election shall be void. However, if a Pensioner dies after his Pension Commencement Date, but on or before the date his Pension actually commences, and if no Surviving Spouse Pension or Pre-Retirement Spouse Pension is payable for his surviving Spouse, his Pension shall, for purposes of the Joint Pensioner and 10 Year Certain Options, be deemed to have begun on the first day of the month in which he died. (d) (LIMITATION ON OPTIONS) Notwithstanding any other provision of this Section, a Participant's election of an Option provided for in this Section shall not become effective unless the present value of the payments expected to be made to him under such Option is more than 50% of the present value of the total of the payments expected to be made under such 41 40 Option to him and his Beneficiaries, but this limitation shall not apply to the Joint Pensioner Options (which term includes the Automatic 50% Spouse Option) if the Participant's Spouse is the Participant's Joint Pensioner. Such present values shall be determined as of the date the Participant's Pension hereunder begins (or, if earlier, the date which is one month before the Participant's death), using the actuarial assumptions specified in Exhibit A to the Plan. (e) If a Participant elects an Option under this Section and his Pension is to be reduced in the manner provided by Section 4.05(c) on account of a Public Pension, the monthly amount payable under such Option shall be the Actuarial Equivalent of the amount determined by reducing his Pension by the Public Pension as specified in Section 4.05(c). (f) The Committee rules with respect to optional forms of benefits may be changed by the Committee from time to time, but they shall be uniform in their application to all Participants who are similarly situated. However, except as otherwise permitted by the Code, no such rule or change herein shall result in the elimination or reduction of an "optional form of benefit" (as defined in Treasury Regulation Section 1.411(d)-4; Q&A-1). 42 41 ARTICLE V - VARIOUS PROVISIONS CONCERNING PENSIONS - -------------------------------------------------- 5.01 APPLICATION FOR PENSIONS. (a) A Participant eligible to receive a Pension hereunder and wishing to Retire, and any Pensioner who is eligible for but is not receiving a Pension hereunder, shall obtain a form of application for that purpose from the Company and shall sign and file with the Secretary of the Committee his application on such form, furnishing such information as the Committee may reasonably require, including satisfactory proof of his Age and that of his Spouse (if any) and any authority in writing that the Company may request authorizing it to obtain pertinent information, certificates, transcripts and/or other records from any public office. An application for a Pension may not be filed more than 90 days before such Pension is to begin. (b) Except as provided in Sections 4.02(b), 5.03(b) and 11.12, no Pension shall be payable hereunder for a Participant if he dies before his Pension Commencement Date and before he files an application pursuant to Subsection (a) of this Section and a Pensioner's Pension hereunder shall not begin until the Participant (or surviving Spouse) files an application for such Pension pursuant to Subsection (a) of this Section. Notwithstanding the foregoing, if a proper application is filed by a Participant after his Normal Retirement Date and after his Pension otherwise would have begun pursuant to the Plan, or by his surviving Spouse after the benefit otherwise would have begun pursuant to Sections 4.07 or 4.08, then, subject to Section 5.03(a), a lump-sum retroactive payment shall be made (without interest) on account of the months for which such Pension or benefit would otherwise have been paid pursuant to this Plan. 5.02 DURATION OF PENSIONS. After a Pensioner's Normal Retirement Pension, Late Retirement Pension, Early Retirement Pension or Deferred Vested Pension has begun, it shall, except as otherwise provided in the Plan with respect to optional forms of benefits, continue during his remaining lifetime, the last monthly payment of such Pension being payable on the first day of the month in which he dies, except that no Pension shall be payable for any Pensioner for 43 42 any month on the first day of which he is an Employee and is receiving Compensation for work currently being performed and during which he completes 40 or more Hours of Service (as defined in Section 4.02(b)) provided his Employer has given him notice in accordance with applicable law that his Pension payments are being withheld pursuant to the foregoing provisions. 5.03 PAYMENT OF BENEFITS. (a) Except as otherwise provided in the Plan, any benefit hereunder shall be paid monthly on the first day of each month for which such benefit is payable, but no benefit shall be payable for a Pensioner unless he is living on the Pension Commencement Date and no benefit shall be payable for a Beneficiary unless he is living on the date such benefit becomes payable. (b) If the amount of benefit is less than $30 a month, the benefit shall be paid quarterly, half yearly or yearly in advance as the Participant or Beneficiary directs; provided, however, that if the present value of such benefit, at any time after the Participant's termination of employment or death and prior to the Pension Commencement Date, is $3,500 or less, such benefit shall be paid as soon as administratively practicable following such termination or death in a lump sum that is the Actuarial Equivalent of such benefit. Such $3,500 amount shall be calculated by using an interest rate equal to the Applicable Interest Rate in effect on January 1 of the Plan Year in which the distribution is made. (c) No interest shall be due on any benefit payment by reason of the fact that it is not paid on or before the date it is payable. (d) Notwithstanding any provision of the Plan to the contrary, to the extent required under Section 401(a)(31) of the Code, if a Participant or Beneficiary (provided such Beneficiary is a Spouse) is eligible to receive a distribution from the Plan that constitutes an "eligible rollover distribution" (as defined in Section 402(c)(4) of the Code), the Participant or Beneficiary may elect to directly transfer all or a portion of such distribution from the Plan to an eligible retirement plan (as defined in Section 402(c)(8)(B) of the Code). The Committee shall 44 43 prescribe reasonable procedures for the elections to be made pursuant to this Subsection and shall provide written notice to the Participant or Spouse (within the time period prescribed by Treasury regulations or rulings) describing the rights under this Subsection and such other information required to be provided under Section 402(f) of the Code. 5.04 REHIRE OF PENSIONERS. If after the Qualifying Termination of a Participant he again becomes an Employee, such re-employment shall not have any effect on benefits under the Plan with respect to him which are payable on account of such Qualifying Termination, except as provided in Sections 4.02(b) and 5.02. If on or after such re-employment he again becomes a Participant in the Plan or in any Other Group Plan and later again incurs a Qualifying Termination, any benefits hereunder which become payable with respect to him on account of such subsequent Qualifying Termination (a) shall be calculated (1) in accordance with other Sections hereof after adding to the length of his Benefit Service after his previous Qualifying Termination his length of Benefit Service at the time of his previous Qualifying Termination and taking into account Compensation earned both before and after his previous Qualifying Termination and (2) without regard to the benefits that have been paid and that are or may become payable with respect to him on account of his previous Qualifying Termination and (b) shall be reduced, in accordance with regulations promulgated by the Secretary of the Treasury, by the Actuarial Equivalent of all benefits with respect to him that have been paid and that are or may become payable under the Plan on account of his previous Qualifying Termination (including his election of any optional form of benefit). 5.05 SPENDTHRIFT PROVISIONS. To the extent permitted by law and except as otherwise provided under a qualified domestic relations order pursuant to Section 414(p) of the Code, no right or interest of any kind in the Trust Fund shall be transferable, alienable or assignable by any Participant or Beneficiary, nor, except as otherwise provided or permitted by the 45 44 Plan, shall any such right or interest be subject to anticipation, encumbrance, garnishment, attachment, execution or levy of any kind, voluntary or involuntary. 5.06 FACILITY OF PAYMENT. (a) If the Committee finds that any Participant or Beneficiary to whom a benefit is payable hereunder is unable to care for his affairs because of physical, mental or legal incompetence, the Committee shall cause any payment due to him hereunder for which prior claim has not been made by a duly qualified guardian or other legal representative to be paid to the person deemed by the Committee to be maintaining or responsible for the maintenance of such Participant or Beneficiary; and any such payment shall be deemed a payment for the account of such Participant or Beneficiary and shall constitute a complete discharge of any liability therefor under the Plan. (b) If an individual dies before receiving all the payments to be made to him hereunder or before cashing any or all of the checks representing such payment or payments, such payment(s) shall be made to one of the following persons with preference being given to classes in the order named: (1) his Spouse, (2) his children who are of legal age and/or the guardian of his minor children, (3) his father or mother, or both, (4) his other relatives by blood or marriage, or (5) his estate; and the receipt of such payment(s) shall be a valid and complete discharge for the payment of such benefit. However, if such deceased individual was a Participant and (i) a Joint Pensioner Option (including an Automatic 50% Spouse Option) was in effect for him on his death, such payment(s) so payable (but not paid) to him shall be paid to his Joint Pensioner, if living, or (ii) if a Joint Pensioner Option was not so in effect and the Participant had designated a then living Beneficiary, such payment(s) so payable (but not paid) to him shall be paid to his Beneficiary. 46 45 ARTICLE VI - FINANCING THE PLAN - ------------------------------- 6.01 EMPLOYER CONTRIBUTIONS. (a) The Plan shall be funded through the Trust Fund. Employees shall not be required or permitted to make any contributions hereunder. (b) The Employers shall contribute and pay into the Trust Fund, in cash or in property of any kind (to be administered and disposed of as provided herein and in the Trust Agreement), such amounts and at such times as may be required by applicable law and such additional amounts and at such times as the Board of Directors of the Company may from time to time determine. The value of any property so contributed shall be its fair market value at the time it is so contributed. 6.02 TRUST AGREEMENT. The Company has executed the Trust Agreement to create the Trust Fund. The Trustee in its relation to the Plan shall be entitled to all the rights, privileges, immunities and benefits conferred upon it, and shall be subject to all the duties and responsibilities imposed upon it, under the Plan and Trust Agreement. The Trust Agreement is hereby incorporated into the Plan by reference. Each Employer, by adopting the Plan, approves the Trust Agreement and each amendment or supplement thereto which may be adopted in accordance with the terms of the Trust Agreement. 6.03 TRUST FUND. The Trust Fund shall be held in trust by the Trustee and shall be administered in accordance with the provisions of the Trust Agreement. Neither the Trustee, nor the Actuary, nor the Employers, nor the Pension or Investment Committees nor any member of either of such Committees in any manner guarantees the Trust Fund against loss or depreciation. 6.04 PAYMENT OF BENEFITS. Except as otherwise provided by applicable law, (a) all benefits provided for in the Plan (less deductions provided for in the Plan) shall be paid solely out of the Trust Fund, (b) neither the Actuary, nor any Employer, nor the Trustee (in its individual capacity), nor the Pension or Investment Committees nor their members shall be in any manner 47 46 liable for benefits payable under the Plan and (c) such benefits shall be only such as can be provided by the assets in the Trust Fund. 6.05 EXPENSES OF THE PLAN. The reasonable expenses incident to the management and operation of the Plan, including the compensation of the Actuary, the Trustee, attorneys, auditors, accountants, or investment managers or advisors for the Plan, if any, and such other technical and clerical assistance as may be required, shall be payable out of the Trust Fund; provided, however, that the Employers, in their absolute discretion, may elect at any time to pay part or all thereof directly, but any such election shall not bind the Employers as to their right to elect with respect to the same or other expenses at any other time to have such expenses paid from the Trust Fund. 6.06 FUNDING POLICY. The Investment Committee shall determine, establish and carry out a funding policy and method consistent with the objectives of the Plan and the requirements of Title I of ERISA. Subject to the right to amend and/or terminate the Plan, the Company shall contribute (or cause the Employers to contribute) under the Plan from time to time any minimum amounts that may be required by applicable law or by any other Section of the Plan. 6.07 RETURN OF CONTRIBUTIONS. (a) In the case of a contribution which is made to the Trust Fund by a mistake of fact, such a contribution shall be returned to the contributing Employer to the extent that it shall exceed the amount which would have been contributed had there not occurred a mistake of fact within one year following the date of the payment of the contribution. (b) If a contribution to the Trust Fund is conditioned upon the deductibility of the contribution under Section 404 of the Code, then, to the extent the deduction is disallowed, the contribution shall be returned to the extent disallowed to the contributing Employer within after one year following the disallowance of the deduction. 48 47 (c) If the Internal Revenue Service shall determine that the Plan as applied to an Employer who has adopted the Plan pursuant to Article XIII hereof is not qualified under Section 401(a) of the Code for the initial Plan Year in which such adoption is effective, all contributions made by or on behalf of such Employer shall be returned to such Employer within one year after the denial of qualification; provided that the application for determination was filed within the time prescribed by law for filing the Employer's return for the taxable year in which the Plan was adopted. (d) Earnings attributable to excess contributions made under Subsections (a) or (b) of this Section may not be returned, but losses attributable thereto must reduce the amounts to be so returned. (e) After satisfaction of all liabilities of the Plan as set forth in Section 15.02, any excess assets remaining in the Trust Fund shall revert to the Company. 49 48 ARTICLE VII - PENSION COMMITTEE - ------------------------------- 7.01 MEMBERSHIP. The Pension Committee shall consist of three or more members who may be, but are not required to be, Participants, Employees or directors of an Employer. The President of the Company shall be an ex officio member and the Chairman of the Committee and shall appoint the other members. The number of members of the Committee (not less than three) shall be fixed by the Chairman of the Committee, who may at any time increase, or decrease to not less than three, the number of members. Any member may be removed by the Chairman of the Committee at any time or may resign at any time by delivering his written resignation to the Chairman of the Committee. Upon the existence of any vacancy in the membership of the Committee, a successor shall be appointed by the Chairman of the Committee, unless the number of members is decreased as above provided. 7.02 CERTIFICATION OF MEMBERSHIP. The President of the Company shall certify the number and names of the Committee members to the Trustee. The Trustee may rely on any such certification until it receives written notice from the President of the Company as to a change in the membership of the Committee. 7.03 DUTIES. The members of the Committee shall serve without remuneration for such services unless the Board of Directors of the Company shall provide for remuneration for such services. The Committee shall have such functions and duties with respect to the Plan and only such functions and duties with respect to the Plan as are specifically conferred upon it by the Plan or the Trust Agreement or as may be delegated to it pursuant to Section 10.03. The Committee may also have functions and duties with respect to any Other Group Plan to the extent that such functions and duties are given to the Committee by the President of the Company. A Committee member shall not be disqualified from acting because of any interest, benefit or advantage, inasmuch as members of the Committee may be directors of an Employer, Participants or Employees, but no such member shall vote or act in connection with the Committee's action 50 49 relating solely to himself. Except as may be required by law, no bond or other security need be required of any Committee member in such capacity in any jurisdiction. 7.04 REVOCABILITY OF COMMITTEE ACTION. Any action taken by the Committee with respect to the rights or benefits under the Plan of any Participant or Beneficiary shall be revocable by the Committee as to payments or distributions not theretofore made from the Trust Fund pursuant to such action; and appropriate adjustments may be made in future payments or distributions to a Participant or his Beneficiaries to offset any excess payment or underpayment theretofore made from the Trust Fund to such Participant or his Beneficiaries. 7.05 COMMITTEE PROCEDURES. The Committee may adopt and amend, from time to time, such rules for its government and the conduct of its business as it deems advisable, including a rule authorizing one or more of its members or officers to execute instruments in its behalf evidencing its action and, to the extent not prohibited by applicable law, the Trustee and other persons may rely on any instrument signed by such person or persons so authorized as properly evidencing the action of the Committee. The Committee may from time to time, by resolution adopted by it, delegate to one or more of its members or officers, to an employee or employees, to a subcommittee or subcommittees or to an agent or agents of the Committee, such of the Committee's functions and duties as the Committee deems advisable. The Committee may elect such officers in addition to a Chairman as it deems advisable and such officers need not be members of the Committee. Except as may otherwise be provided by rules or procedures adopted by the Committee, the Committee may act by majority action either at a meeting or in writing without a meeting and an action which purports to be an action of the Committee and which is evidenced by the signatures of a majority of the Committee members shall be deemed to be the action of the Committee. 7.06 COMMITTEE RULES. The Committee may from time to time adopt rules for the administration of the Plan. Such rules may be amended by the Committee from time to time, but 51 50 such rules, as the same may be amended, (a) insofar as they apply to the rights of Participants, shall be uniform in their application to all Participants who are similarly situated and (b) shall not be inconsistent with the terms of the Plan or the Trust Agreement. 7.07 PLAN INTERPRETATION AND FINDINGS OF FACT. The Committee shall have sole and absolute discretion to interpret the provisions of the Plan (including, without limitation, by supplying omissions from, correcting deficiencies in, or resolving inconsistencies or ambiguities in, the language of the Plan), to determine the rights and status under the Plan of Participants and other Persons, to decide disputes arising under the Plan and to make any determinations and findings with respect to the benefits payable thereunder and the Persons entitled thereto as may be required for the purposes of the Plan. In furtherance of, but without limiting, the foregoing, the Committee is hereby granted the following specific authorities, which it shall discharge in its sole and absolute discretion in accordance with the terms of the Plan (as interpreted, to the extent necessary, by the Committee): (a) To resolve all questions arising under the provisions of the Plan as to any individual's entitlement to become a Participant; (b) To determine the amount of benefits, if any, payable to any Person under the Plan; and (c) To conduct the review procedure specified in Section 9.03. All decisions of the Committee as to the facts of any case, as to the interpretation of any provision of the Plan or its application to any case, and as to any other interpretative matter or other determination or question under the Plan shall be final and binding on all parties affected thereby, subject to the provisions of Section 7.04 and Article IX. The Committee shall direct the Trustee relative to benefits to be paid under the Plan and shall furnish the Trustee with any information reasonably required by it for the purpose of paying benefits under the Plan. 52 51 7.08 ACTUARIAL FACTORS. The Committee may adopt, and amend from time to time, such actuarial factors, assumptions and procedures to be used for actuarial valuations and determinations of the normal costs and actuarial requirements of the Plan as may be recommended by the Actuary and as the Committee deems necessary or desirable. 7.09 ASSISTANCE; EXPENSES. The Committee may employ such clerical, legal, actuarial, accounting or other assistance or services as it deems necessary or advisable in connection with the performance of its functions or duties. The reasonable expenses of the Committee shall be paid out of the Trust Fund, unless paid directly by the Employers. 7.10 ABSENCE OF COMMITTEE. If the Committee ceases to exist or if and while, for any other reason, there is no Pension Committee, the Investment Committee, Company or Trustee, in that order, may exercise any or all of the powers and perform any or all of the functions of the Committee. 53 52 ARTICLE VIII - INVESTMENT COMMITTEE - ----------------------------------- 8.01 MEMBERSHIP. (a) Subject to the provisions of Subsection (b) of this Section, the Investment Committee shall consist of three or more members who may be, but are not required to be, Participants, Employees or directors of an Employer. Such members and their successors shall be appointed by the Board of Directors of the Company to serve for such terms as said Board may fix, and future appointees shall signify their acceptance thereof to the President or Secretary of the Company. Any member of the Investment Committee may be removed at any time by the Board of Directors of the Company, which may also increase or decrease the number of members of such Committee. Any member of the Investment Committee may resign at any time by delivering his written resignation to the President or Secretary of the Company. Upon the existence of any vacancy in the membership of such Committee, the President of the Company may appoint a successor to serve until the next meeting of the Board of Directors of the Company. (b) Effective January 1, 1994, NACCO Industries, Inc. established the "NACCO Industries, Inc. Retirement Funds Investment Committee" pursuant to the terms of an Instrument of Creation and Delegation, as such Instrument may be amended from time to time. In addition to the responsibilities specifically given to the Investment Committee under the Plan and Trust Agreement, the Investment Committee shall have such other responsibilities with respect to the Plan (and other defined benefit plans and defined contribution plans of the Controlled Group) as are granted to such Committee in the Instrument. In the absence of an Investment Committee, the Company shall perform the duties allocated to the Investment Committee under the Plan and Trust Agreement. 54 53 ARTICLE IX - CLAIMS AND REVIEW PROCEDURES - ----------------------------------------- 9.01 METHOD OF FILING CLAIM. Any Participant or Beneficiary who believes that he is entitled to have received a benefit under the Plan which he has not received may file with the Secretary of the Pension Committee a written claim specifying the basis for his claim and the facts upon which he relies in making such claim. Such a claim must be signed by the claimant or his authorized representative and shall be deemed filed when delivered to such agent for service of process who shall promptly transmit such written claim to the Pension Committee. 9.02 NOTIFICATION TO CLAIMANT. Unless such claim is allowed in full by the Committee, the Committee shall (within 90 days after such claim was filed, plus an additional period of 90 days if required for processing and if notice of the additional 90 day extension of time indicating the specific circumstances requiring the extension and the date by which a decision shall be rendered is given to the claimant with the first 90-day period) cause written notice to be mailed or delivered to the claimant of the total or partial denial of such claim. Such notice shall be written in a manner calculated to be understood by the claimant and shall include (a) one or more specific reasons for the denial of the claim, (b) specific reference(s) to provisions of the Plan and/or Trust Agreement on which the denial of the claim is based, (c) a description of any additional material or information necessary for the claimant to perfect the claim, (d) an explanation of why such material or information is necessary, and (e) an explanation of the review procedure specified in Section 9.03. 9.03 REVIEW PROCEDURE. Within three months after the mailing or delivery of a notice of denial of a claim, the claimant or his duly authorized representative may appeal such denial by filing with such agent for service of process his written request for a review of said claim. If the claimant does not file such request within such three-month period, the claimant shall be conclusively presumed to have accepted as final and binding the initial decision of the Committee on his claim. If such an appeal is so filed within such three months, the Committee, or a Named 55 54 Fiduciary designated by the Committee, shall conduct a full and fair review of such claim. During such full review, the claimant (or his duly authorized representative) shall be given an opportunity to review documents that are pertinent to his claim and to submit issues and comments in writing and (if he requests a hearing on his claim and the Committee or such Named Fiduciary concludes such a hearing is advisable and schedules such a hearing) to present his case in person or by an authorized representative at such hearing. After the completion of such full review, the reviewer shall mail or deliver to the claimant a written decision on the matter based on the facts and pertinent provisions of the Plan, Trust Agreement and/or applicable law. Such decision shall be mailed or delivered within a period of 60 days after the receipt of the request for review unless special circumstances require an extension of time, in which case such decision shall be rendered not later than 120 days after receipt of such request. If an extension of time for review is required, written notice of the extension shall be furnished to the claimant prior to the commencement of the extension. Such decision (a) shall be written in a manner calculated to be understood by the claimant, (b) shall state one or more specific reasons for the decision, including specific reference(s) to provisions of the Plan and/or Trust Agreement on which the decision is based, and (c) shall, to the extent not prohibited by applicable law, be final and binding on all interested persons. 56 55 ARTICLE X - ADMINISTRATION OF THE PLAN AND FIDUCIARY RESPONSIBILITY - ------------------------------------------------------------------- 10.01 RESPONSIBILITY FOR ADMINISTRATION. Except to the extent that particular responsibilities are assigned or delegated to other Fiduciaries pursuant to the Trust Agreement or some other Section hereof, the Company (as the Plan Administrator) shall be responsible for the administration of the Plan. Each other Fiduciary shall have only such powers, duties, responsibilities and authorities as are specifically conferred upon him or delegated to him pursuant to provisions of the Plan or Trust Agreement. Any person may serve in more than one fiduciary capacity with respect to the Plan or Trust Fund if, pursuant to the Plan and/or Trust Agreement, he is assigned or delegated any multiple fiduciary capacities. 10.02 NAMED FIDUCIARIES. For purposes of the Plan, the Named Fiduciaries shall be the Company, the Pension Committee, the Investment Committee, the President of the Company and the Trustee. The Company may, by an instrument authorized and signed by the President of the Company and delivered to the Committee, designate any other person as a Named Fiduciary to perform functions specified in such instrument (or in a delegation pursuant to Section 10.03) which relate to the administration of the Plan or the Trust Fund, provided such designee accepts such designation. Such a designation may be terminated at any time by written notice from the President of the Company to the designee or by written notice from the designee to the President. 57 56 10.03 DELEGATION OF FIDUCIARY RESPONSIBILITIES. (a) The President of the Company may delegate to any person any one or more powers, functions, duties and/or responsibilities with respect to the Plan or the Trust Fund, other than (1) those assigned to the Investment Committee pursuant to the Trust Agreement or some other Section hereof and (2) trustee responsibilities (as defined in Section 405(c) of ERISA) assigned to the Trustee by the Trust Agreement or some other Section hereof. However, no such power, function, duty or responsibility which is assigned to a Fiduciary (other than to the Company) pursuant to the Trust Agreement or some other Section hereof shall be so delegated without the written consent of such Fiduciary. (b) Any delegation pursuant to Subsection (a) of this Section: (1) shall be signed by the President of the Company, be delivered to and accepted In writing by the delegatee and be delivered to the Secretary of the Committee, (2) shall contain such provisions and conditions relating to such delegation as the President deems appropriate, (3) shall specify the powers, functions, duties and/or responsibilities therein delegated, (4) may be amended from time to time by written agreement signed by the President of the Company and by the delegatee and delivered to the Secretary of the Committee and (5) may be revoked (in whole or in part) at any time by written notice (i) from the President of the Company delivered to the delegatee and the Secretary of the Committee or (ii) from the delegatee delivered to the President of the Company and the Secretary of the Committee. 10.04 IMMUNITIES. Except as otherwise provided in Section 10.05 or by applicable law, (a) no Fiduciary shall have the obligation to discharge any duty, function or responsibility which is specifically assigned to another Fiduciary by the terms of the Plan or Trust Agreement or is delegated to another Fiduciary pursuant to procedures for such delegation provided for herein or in the Trust Agreement; (b) no Fiduciary shall be liable for any action taken or not taken with respect to the Plan or Trust Fund except for his own negligence, bad faith or willful misconduct; 58 57 (c) no Fiduciary shall be personally liable upon any contract or other instrument made or executed by him or in his behalf in the administration of the Plan or Trust Fund; (d) no Fiduciary shall be liable for the neglect, omission or wrongdoing of another Fiduciary; (e) the Company and each Employer and each officer or director thereof, Employees, the Pension Committee and each member thereof, the Investment Committee and each member thereof, and any other person to whom the President of the Company delegates (or any provision hereof or of the Trust Agreement assigns) any duty with respect to the Plan or Trust Fund, may rely and shall be fully protected in acting in good faith (1) upon the advice of counsel acceptable to the Company (who may be counsel for an Employer or another Fiduciary), (2) upon the records of a Controlled Group Member, (3) upon the opinion, certificate, valuation, report, recommendation or determination of the Actuary or the Trustee or of any person acceptable to the Company that is employed by such Fiduciary to render advice with regard to any responsibility such Fiduciary has under the Plan or Trust Agreement and (4) upon any certificate, statement or other representation made by or any information furnished by the Actuary, an Employee, a Participant, a Beneficiary or the Trustee; and (f) the Committee and its members shall not be required to make inquiry into the propriety of any action by the Company, an Employer, the Actuary or the Trustee. 10.05 LIMITATION ON EXCULPATORY PROVISIONS. Notwithstanding any other provision of the Plan or the Trust Agreement, no provision of the Plan or the Trust Agreement shall be construed to relieve (or have the effect of relieving) any Fiduciary from any responsibility or liability for any obligation, responsibility or duty imposed on such Fiduciary by Part 4 of Title I of ERISA. 59 58 ARTICLE XI - MISCELLANEOUS PROVISIONS REQUIRED BY THE CODE - ---------------------------------------------------------- 11.01 GENERAL. Subsequent Sections of this Article are included in the Plan pursuant to requirements of the Code, and shall prevail over any provision of the Plan or the Trust Agreement which is inconsistent therewith. 11.02 PROVISION PURSUANT TO CODE SECTION 401(a)(2). Except as specifically provided in the Plan, it shall be impossible, at any time prior to the satisfaction of all liabilities with respect to Employees and their Beneficiaries under the Trust, for any part of the corpus or income of the Trust Fund to be (within the taxable year or thereafter) used for, or diverted to, purposes other than for the exclusive benefit of the Employees or their Beneficiaries. 11.03 PROVISION PURSUANT TO CODE SECTION 401(a)(8). Forfeitures shall not be applied to increase the benefits any Employee would otherwise receive under the Plan. 11.04 PROVISION PURSUANT TO CODE SECTIONS 401(a)(12) and 414(1). There shall not be any merger or consolidation of this Plan with, or transfer of assets or liabilities of this Plan to, any other plan, unless each Participant in the merged, consolidated or transferee plan would (if that plan then terminated) receive a benefit immediately after the merger, consolidation, or transfer which is equal to or greater than the benefit he would have been entitled to receive immediately before the merger, consolidation or transfer (if this Plan had then terminated). The Company reserves the right to merge or consolidate this Plan with, and to transfer the assets of the Plan to, any other plan, without the consent of any other Employer. 11.05 PROVISION PURSUANT TO CODE SECTION 401(a)(14). Unless the Participant otherwise elects, the payment of benefits under the Plan to the Participant will begin not later than the 60th day after the latest of the close of the Plan Year in which (a) occurs the date on which the Participant attains the earlier of age 65 or his Normal Retirement Age, 60 59 (b) occurs the l0th anniversary of the year in which the Participant commenced participation in the Plan, or (c) the Participant terminates his service with the Controlled Group. 11.06 PROVISION PURSUANT TO CODE SECTION 401(a)(15). In the case of a Participant or Beneficiary who is receiving benefits under the Plan, or in the case of a Participant who has terminated his employment with the Controlled Group and who has nonforfeitable rights to benefits, such benefits shall not be decreased by reason of any increase in the benefit levels payable under Title II of the Social Security Act or any increase in the wage base under such Title II, if such increase takes place after the earlier of the date of first receipt of such benefits or the date of such termination, as the case may be. 11.07 PROVISION PURSUANT TO CODE SECTION 411(a)(10)(B). If any Plan amendment changes any vesting schedule under the Plan, each Participant having not less than three years of Vesting Service whose nonforfeitable percentage under the Plan, as amended, would be less than such percentage determined without regard to such amendment shall be permitted to elect, within a reasonable period after the adoption of such amendment, to have his nonforfeitable percentage computed under the Plan without regard to such amendment. 11.08 PROVISION PURSUANT TO CODE SECTION 411(d)(3). Upon the termination or partial termination of the Plan, the rights of all affected Employees to benefits accrued to the date of such termination or partial termination, to the extent funded as of such date, shall be nonforfeitable to the extent they do not exceed any limitations on such benefits in Article XVI hereof. 11.09 PROVISION PURSUANT TO CODE SECTION 415(b). (a) As used in this Section, (1) the term "annual benefit" means a benefit payable annually in the form (in this Section called "life annuity form") of a straight life annuity (with no ancillary benefits) under a plan to which Employees do not contribute and under which no rollover 61 60 contributions are made and (2) the term "Compensation" means Compensation as defined in Section 1.14 but excluding amounts, if any, which were not paid to an Employee because he signed a Compensation deferral agreement in connection with The North American Coal Corporation Retirement Savings Plan. (b) Except as otherwise provided in this Section, the benefits under the Plan with respect to a Participant for any Plan Year (which shall be the limitation year) shall not exceed, when expressed as an annual benefit, the lesser of: (1) the dollar limitation in effect for such year under Section 415(b) (1)(A) of the Code, or (2) 100 percent of the Participant's average Compensation for the period of three consecutive calendar years during which the Participant both was an active Participant in the Plan and had the greatest aggregate Compensation from the Controlled Group. (c) Notwithstanding the foregoing: (1) if the benefit under the Plan is payable in any form other than the life annuity form, or if the Employees contribute to the Plan or make rollover contributions or plan to plan transfers, for purposes of determining whether the limitations described in Subsection (b) of this Section have been satisfied, such benefit shall be adjusted, in accordance with regulations prescribed by the Secretary of the Treasury or his delegate, so that such benefit is equivalent to an annual benefit, provided that for purposes of this paragraph any ancillary benefit which is not directly related to retirement income benefits shall not be taken into account, and that portion of any joint and survivor annuity which constitutes a qualified joint and survivor annuity (as defined in Section 417(b) of the Code) shall not be taken into account, and (2) if the benefit under the Plan begins before the Social Security Retirement Age, for purposes of determining whether the limitation set forth in paragraph (1) of Subsection (b) has been satisfied, such benefit shall be reduced, in accordance with regulations 62 61 prescribed by the Secretary of the Treasury, so that such limitation (as so reduced) equals an annual benefit (beginning when such benefit under the Plan begins) which is equivalent to an annual benefit equal to the limitation beginning at the Social Security Retirement Age, provided that the reduction under this part shall be made in such manner as the Secretary of the Treasury may prescribe which is consistent with the reduction under the Social Security Act for old age insurance benefits commencing before the Social Security Retirement Age; and (3) if the benefit begins after the Social Security Retirement Age, for purposes of determining whether the limitation set forth in paragraph (1) of Subsection (b) has been satisfied, such limitation shall be increased, in accordance with regulations prescribed by the Secretary of the Treasury, so that such limitation (as so increased) equals an annual benefit (beginning when such benefit begins under the Plan) which is equivalent to an annual benefit equal to the limitation set forth in such paragraph (1) beginning at the Social Security Retirement Age; and (d) Except as provided in Subsection (e) of this Section, the benefits payable with respect to a Participant under any defined benefit plan shall be deemed not to exceed the limitations set forth in Subsection (b) of this Section if: (1) the retirement benefits payable with respect to such Participant under such plan and under all other defined benefit plans of the Controlled Group do not exceed $10,000 for the Plan Year, or for any prior Plan Year, and (2) the Controlled Group has not at any time maintained a defined contribution plan in which the Participant participated. (e) In the case of an Employee who has less than ten years of participation in the Plan, the limitation set forth in paragraph (1) of Subsection (b) of this Section shall be the limitation determined under such paragraph (without regard to this Subsection), multiplied by a fraction, the numerator of which is the number of years (or parts thereof) of the Employee's 63 62 participation in the Plan and the denominator of which is ten, and in the case of an Employee who has less than 10 years of Vesting Service with the Controlled Group, the limitations set forth in paragraph (2) of Subsection (b), and in Subsection (d) of this Section shall be such limitations (determined without regard to this Subsection) multiplied by a fraction, the numerator of which is the number of years (or parts thereof) of Vesting Service which the Employee has with the Controlled Group and the denominator of which is 10. Notwithstanding the foregoing provisions of this Subsection, in no event shall the limitations in Subsections (b) and (d) of this Section be reduced to an amount less than 1/10 of such limitations (determined without regard to this Subsection). To the extent provided in regulations prescribed by the Secretary of the Treasury, this Subsection shall be applied separately with respect to each change in the benefit structure of the Plan. (f) Notwithstanding anything in this Section to the contrary, if the annual benefit of a Participant who has terminated employment with the Controlled Group is limited pursuant to the limitations set forth in paragraphs (1) or (2) of Subsection (b) of this Section, such annual benefit shall be increased in accordance with the cost-of-living adjustments of Section 415(d) of the Code. 11.10 PROVISION PURSUANT TO CODE SECTION 415(e). (a) In any case in which an individual is a Participant in both a defined benefit plan and a defined contribution plan maintained by the Controlled Group, the sum of the defined benefit plan fraction and the defined contribution plan fraction for any Plan Year shall not exceed 1.0. For purposes of the preceding sentence: (1) The defined benefit plan fraction for any year is a fraction, (i) the numerator of which is the projected annual benefit of the Participant under the Plan (determined as of the close of the Plan Year), and (ii) the denominator of which is the lesser of (A) the product of 1.25, multiplied by the dollar limitation in effect under Section 415(b)(1)(A) of 64 63 the Code for the Plan Year or (B) the product of 1.4, multiplied by the amount which may be taken into account under Section 415(b)(1)(B) of the Code with respect to such Participant under the Plan for the Plan Year; and (2) The defined contribution plan fraction for any year is a fraction, (i) the numerator of which is the sum of the annual additions to the Participant's account as of the close of the Plan Year and for all prior Plan Years, and (ii) the denominator of which is the sum of the lesser of the following amounts determined for the Plan Year and for each prior year of service with Controlled Group: (A) The product of 1.25, multiplied by the dollar limitation in effect under Section 415(c)(1)(A) of the Code for the Plan Year, or (B) The product of 1.4, multiplied by the amount which may be taken into account under Section 415(c)(1)(B) of the Code with respect to such Participant under the Plan for the Plan Year. (b) Except as may otherwise be provided in any defined contribution plan which is material to the limitations stated in this Section, such reductions shall be made in benefits hereunder with respect to a Participant in this Plan as is necessary to comply with the limitations of this Section. 11.11 OTHER CODE SECTION 415 PROVISIONS. (a) For purposes of applying the limitations set forth in Sections 11.09 and 11.10, (1) all defined benefit plans (whether or not terminated) of the Controlled Group shall be treated as one defined benefit plan, and (2) all defined contribution plans (whether or not terminated) of the Controlled Group shall be treated as one defined contribution plan. (b) If the Controlled Group has more than one defined benefit plan (1) Section 11.09(b)(2) shall be applied separately to each such plan, but (2) in applying Section 11.09(b)(2) to the aggregate of such defined benefit plans for purposes of this Section, the 65 64 high three years of Compensation taken into account shall be the period of three consecutive calendar years during which the individual had the greatest compensation from the Controlled Group. (c) As used in Sections 11.09, 11.10 and this Section, the phrase "Controlled Group" shall be construed in the light of Sections 414(b) and 414(c) of the Code, as modified by Sections 415(h), 414(m) and 414(n) of the Code; the word "plan" shall include any plan or program required pursuant to Section 415 of the Code to be taken into account in applying to this Plan the limitations of Section 415 of the Code; and the terms "defined contribution plan" and "defined benefit plan" shall have the respective meanings specified in Section 415(k) of the Code. (d) Where a Spouse's benefit hereunder is based on the Pension to which a Participant is otherwise entitled, such Pension shall be calculated without regard to the limitations set forth in Sections 11.09 and 11.10. Such limitations shall then be applied to the Spouse's benefit as so calculated. 11.12 PROVISION PURSUANT TO CODE SECTION 401(a)(9). (a) Notwithstanding any other provision of the Plan, the Accrued Benefit of any Participant who, as of April 1 of the calendar year following the calendar year in which he attains Age 70-1/2 has not commenced to receive distribution of such Accrued Benefit, will commence to be distributed to him as of such date, based on the amount of such Participant's Accrued Benefit as of such date. (b) The Accrued Benefit of a Participant described in Subsection (a) of this Section shall be distributed in the manner described in Article IV hereof, treating the date described in Subsection (a) of this Section as the Participant's Pension Commencement Date. Without limiting the generality of the foregoing, a Participant required to commence receiving his Pension pursuant to Subsection (a) of this Section shall be permitted to elect to receive such 66 65 Pension in any optional form of benefit available hereunder, provided that any applicable spousal consent requirements are satisfied with respect to such election. (c) If a Participant accrues any additional benefits under the Plan after the date described in Subsection (a) of this Section, such additional benefits shall commence to be distributed, in the same form as the Pension then currently being paid to such Participant, beginning with the first monthly payment made in the calendar year following the calendar year in which such additional benefit accrues. Notwithstanding the foregoing, such additional benefit accruals shall be offset (in whole or in part), in accordance with the regulations promulgated by the Secretary of the Treasury, by any benefit payments then being made to the Participant hereunder. (d) Distributions under the Plan shall be made in accordance with Section 401(a)(9) of the Code and Treasury Regulations issued thereunder, including Treas. Reg. Section 1.401(a)(9)-2, provided that such provisions shall override the other distribution provisions of the Plan only to the extent that they are inconsistent with such other Plan provisions. 67 66 ARTICLE XII - MISCELLANEOUS PROVISIONS - -------------------------------------- 12.01 EMPLOYMENT RIGHTS. Nothing herein contained shall constitute or be construed as a contract of employment between any Employer and any Employee or Participant and all Employees shall remain subject to discipline, discharge and layoff to the same extent as if the Plan had never gone into effect. An Employer by adopting the Plan, making payments into the Trust Fund or taking any other action with respect to the Plan does not obligate itself to continue the employment of any Employee or Participant for any period or, except as provided in Sections 6.01 and 13.02, to make any payments into the Trust Fund. 12.02 RIGHTS IN TRUST FUND. No person shall have any rights in or to the Trust Fund or any part thereof except as and to the extent expressly provided in the Plan or the Trust Agreement. 12.03 SEVERABILITY PROVISION. If any provision of the Plan or Trust Agreement or the application thereof to any circumstance or person is declared invalid by a court of competent jurisdiction, the remainder of the Plan or Trust Agreement and the application of such provision to other circumstances or persons shall not be affected thereby. 68 67 ARTICLE XIII - EMPLOYERS - ------------------------ 13.01 EMPLOYERS. As of January 1, 1989, the Employers under the Plan are the Company and The North American Coal Corporation. Any other person who is a Controlled Group Member may, with the consent of the Nominating, Organization and Compensation Committee of the Board of Directors of the Company, adopt the Plan and thereby become an Employer hereunder by (a) executing an instrument evidencing such adoption which shall have been approved by its governing body (if any) and (b) filing a copy of such instrument with the Trustee. Such adoption may be subject to such terms and conditions as the Nominating, Organization and Compensation Committee of the Board of Directors of the Company requires or approves. 13.02 COSTS TO BE SHARED. The costs of the Plan (including Employer contributions pursuant to the Plan and expenses incurred in connection with the Plan or the Trust Fund which are to be paid by the Employers) shall be shared by the Employers on such basis as may be agreeable to the Company and the other Employers and as will permit, to the extent possible, the deduction (for purposes of federal taxes on income) by each Employer of its payments toward such costs. 69 68 ARTICLE XIV - AMENDMENT - ----------------------- 14.01 RIGHT TO AMEND. The Company has reserved, and does hereby reserve, the right to amend at any time and from time to time, by action of the Nominating, Organization and Compensation Committee of its Board of Directors, any or all of the provisions of the Plan without the consent of any Employee, Participant or Beneficiary or other person and without the consent of any other Employer. By adopting the Plan and thereby becoming an Employer hereunder, each Employer shall be deemed to have authorized the Company at any time and from time to time to adopt amendments to the Plan that will be effective with respect to such Employer. The Trust Agreement may be amended in the manner and to the extent provided therein. 14.02 PROCEDURE. Any amendment of the Plan (a) shall be expressed in an instrument executed by the Company on the order of the Nominating, Organization and Compensation Committee of its Board of Directors and filed with the Trustee, (b) shall become part of the Plan and (c) shall become effective as of the date designated in such instrument. If no such effective date is so designated, such amendment shall become effective on the date of the execution of such amendment. 70 69 ARTICLE XV - TERMINATION - ------------------------ 15.01 RIGHT TO TERMINATE OR WITHDRAW. (a) The Company has reserved, and does hereby reserve, the right (by action of the Nominating, Organization and Compensation Committee of its Board of Directors) to terminate the Plan at any time (without the consent of any other Employer or of any Employee, Participant, Beneficiary or other person) either in whole or in part or as to any or all of the Employers or as to any designated group of Employees (including former Employees) and their Beneficiaries. Any such termination (1) shall be expressed in an instrument executed by the Company on the order of the Nominating, Organization and Compensation Committee of its Board of Directors and filed with the Trustee and (2) shall (except as may otherwise be required by applicable law) become effective as of the date designated in such instrument or, if no such effective date is so designated, on the date of the execution of such instrument. (b) Any Employer (other than the Company) may elect separately to withdraw from the Plan, without the consent of any other Employer or of any Employee, Participant, Beneficiary or other person, and such withdrawal shall constitute a termination of the Plan solely as to such Employer. Any such withdrawal and termination (1) shall be expressed in an instrument executed by the terminating Employer on the order of the Nominating, Organization and Compensation Committee of its Board of Directors or other governing body (if any) and filed with the Company and the Trustee and (2) shall (except as may otherwise be required by applicable law) become effective when so filed unless some other effective date is designated in such instrument and approved by the Company. 15.02 APPLICATION OF ASSETS UPON TERMINATION. If the Plan is terminated pursuant to Section 15.01 as to all Employees, Participants and Beneficiaries, the assets remaining in the Trust Fund (available to provide benefits) shall be allocated in accordance with applicable law for the purpose of paying benefits provided for in the Plan. Any assets remaining in the Trust Fund after 71 70 the satisfaction of all liabilities under the Plan to Participants and Beneficiaries shall be distributed to the Company. 72 71 ARTICLE XVI - LIMITATION ON BENEFITS OF CERTAIN PARTICIPANTS - ------------------------------------------------------------ 16.01 RESTRICTION OF BENEFITS ON PLAN TERMINATION. Notwithstanding any other provision of the Plan to the contrary, in the event of a termination of the Plan, the benefit of any highly compensated Employee (and highly compensated former Employee) shall be limited to a benefit that is nondiscriminatory under Section 401(a)(4) of the Code. 16.02 RESTRICTION ON PLAN DISTRIBUTIONS. (a) Notwithstanding any other provision of the Plan or Trust Agreement, the annual payments provided by the Plan with respect to any Participant who is a highly compensated Employee or highly compensated former Employee and who is one of the 25 highest paid Employees of the Controlled Group (a "Restricted Participant") shall be restricted to an amount equal to the payments that would be made on behalf of the Restricted Participant under a single life annuity that is the Actuarial Equivalent of the sum of (1) the Restricted Participant's Accrued Benefit, and (2) the Restricted Participant's other benefits under the Plan. (b) The limitations described in Subsection (a) of this Section shall not apply if (1) after payment to a Restricted Participant of all of his benefits under the Plan, the value of Plan assets equals or exceeds 110 percent of the value of current liabilities, or (2) prior to payment to a Restricted Participant of all of his benefits under the Plan, the value of the Restricted Participant's benefits is less than one (1) percent of the value of the Plan's current liabilities. 16.03 MISCELLANEOUS PROVISIONS. (a) For purposes of this Article, the term "highly compensated employee" shall mean an Employee described in Section 414(q) of the Code; the term "highly compensated former Employee" shall mean a former Employee described in Section 414(q)(9) of the Code; the term "current liabilities" shall mean those liabilities described in Section 412(l)(7) of the Code; and the term "benefit" shall mean the Accrued Benefit of a Restricted Participant, loans in excess of the amount specified in Section 72(p)(2)(A) of the Code, any 73 72 periodic income, any withdrawal values payable to a living Employee, and any death benefits not provided for by insurance on the Employee's life. (b) The provisions of this Article are meant to comply with the requirements of Treasury Regulation Section 1.401(a)(4)-5(b) and shall be interpreted accordingly. 74 73 ARTICLE XVII - TOP-HEAVY PLAN REQUIREMENTS - ------------------------------------------ 17.01 DEFINITIONS. For the purposes of this Article, the following terms, when used with initial capital letters, shall have the following respective meanings: (a) AGGREGATION GROUP: Permissive Aggregation Group or Required Aggregation Group as the context shall require. (b) ANNUAL RETIREMENT BENEFIT: A benefit payable annually in the form of a single life annuity (with no ancillary benefits) beginning at a Participant's Normal Retirement Date. (c) COMPENSATION: Except as specifically provided elsewhere in this Article, "compensation" as defined in Section 11.09(a)(2), subject to the limitations described in Section 1.14(b). (d) DETERMINATION DATE: For any Plan Year, the last day of the immediately preceding Plan Year. (e) EXTRA TOP-HEAVY GROUP: An Aggregation Group if, as of a Determination Date, the aggregate present value of accrued benefits for Key Employees in all plans in the Aggregation Group is more than ninety percent (90%) of the aggregate present value of all accrued benefits for all Employees in such plans. (f) EXTRA TOP-HEAVY PLAN: See Section 17.03. (g) FORMER KEY EMPLOYEE: A Non-Key Employee with respect to a Plan Year who was a Key Employee in a prior Plan Year, and his Beneficiary in the event of his death. (h) KEY EMPLOYEE: An Employee or former Employee who, at any time during the current Plan Year or any of the four preceding Plan Years, is (1) an officer of a Controlled Group Member (as the term "officer" is limited in Section 416(i)(1)(A) of the Code) having an annual Compensation, effective as of January 1, 1987, greater than 50 percent of the amount in effect under Section 415(b)(1)(A) of the Code for any such Plan Year, (2) one of the 10 Employees having annual Compensation from the Controlled Group of more than the limitation in 75 74 effect under Section 415(c)(1)(A) of the Code and owning (or considered as owning within the meaning of Section 318 of the Code) the largest interests in a Controlled Group Member, (3) a 5-percent owner (as such term is defined in Section 416(i)(1)(B)(i) of the Code) of a Controlled Group Member, or (4) a 1-percent owner (as such term is defined in Section 416(i)(1)(B)(ii) of the Code) of a Controlled Group Member having an annual Compensation from the Controlled Group of more than $150,000. For purposes of paragraph (2) of this Subsection, if two Employees have the same interest in a Controlled Group Member, the Employee having greater annual Compensation therefrom shall be treated as having a larger interest. The term "Key Employee" shall also include such Employee's Beneficiary in the event of his death. For purposes of this Subsection, "Compensation" has the meaning given such term by Section 414(q)(7) of the Code. (i) NON-KEY EMPLOYEE: An Employee or former Employee who is not a Key Employee, and his Beneficiary in the event of his death. (j) PERMISSIVE AGGREGATION GROUP: The group of qualified plans of the Controlled Group consisting of: (1) the plans in the Required Aggregation Group; plus (2) one or more plans designated from time to time by the Pension Committee that are not part of the Required Aggregation Group but that satisfy the requirements of Sections 401(a)(4) and 410 of the Code when considered with the Required Aggregation Group. (k) REQUIRED AGGREGATION GROUP: The group of qualified plans of the Controlled Group consisting of, (1) each plan in which a Key Employee participates; and (2) each other plan which enables a plan in which a Key Employee participates to meet the requirements of Section 401(a)(4) or 410 of the Code. 76 75 (l) TOP-HEAVY ACCRUED BENEFIT: A Participant's (including a Participant who has received a total distribution from the Plan) or a Beneficiary's Accrued Benefit under the Plan as of the valuation date coinciding with or immediately preceding the Determination Date, provided, however, that (1) such Accrued Benefit shall include the aggregate distributions made to such Participant or Beneficiary during the five consecutive Plan Years ending with the Plan Year that includes the Determination Date (including distributions under a terminated plan which if it had not been terminated would have been included in a Required Aggregation Group) and (2) if an Employee or former Employee has not performed services for any Employer maintaining the Plan at any time during the five-year period ending on the Determination Date, any Accrued Benefit for such Employee or former Employee (or the Accrued Benefit of his Beneficiary) shall not be taken into account. Effective January 1, 1987, a Participant's Accrued Benefit under this paragraph shall be determined (i) under the method which is used for accrual purposes for all plans of the Employer, or (ii) if there is no such method, as if such benefit accrued not more rapidly than the lowest accrual rate permitted under Section 411(b)(1)(C) of the Code. (m) TOP-HEAVY GROUP: An Aggregation Group if, as of a Determination Date, the aggregate present value of accrued benefits for Key Employees in all plans in the Aggregation Group is more than sixty percent (60%) of the aggregate present value of accrued benefits for all Employees in such plans. (n) TOP-HEAVY PLAN: See Section 17.02. 17.02 DETERMINATION OF TOP-HEAVY STATUS. The Plan shall be a Top-Heavy Plan if, as of a Determination Date, the Plan is not included in a Permissive Aggregation Group which is not a Top-Heavy Group, and: (a) the aggregate present value of Top-Heavy Accrued Benefits for Key Employees is more than sixty percent (60%) of the aggregate present value of Top-Heavy Accrued Benefits of 77 76 all Employees, excluding for this purpose the aggregate Top-Heavy Accrued Benefits of Former Key Employees; or (b) the Plan is included in a Required Aggregation Group which is a Top-Heavy Group. 17.03 DETERMINATION OF EXTRA TOP-HEAVY STATUS. The Plan shall be an Extra Top-Heavy Plan if, as of the Determination Date, the Plan is not included in a Permissive Aggregation Group which is not an Extra Top-Heavy Group, and: (a) the aggregate present value of Top-Heavy Accrued Benefits for Key Employees is more than ninety percent (90%) of the aggregate present value of all Top-Heavy Accrued Benefits of all Employees, excluding for this purpose the aggregate present value of Top-Heavy Accrued Benefits of Former Key Employees; or (b) the Plan is included in a Required Aggregation Group which is an Extra Top-Heavy Group. 17.04 TOP-HEAVY PLAN REQUIREMENTS. Notwithstanding any other provisions of the Plan to the contrary, if the Plan is a Top-Heavy Plan for any Plan Year, the Plan shall then satisfy the following requirements for such Plan Year: (a) MINIMUM VESTING REQUIREMENT. An Employee who has completed at least two years of Vesting Service shall have a nonforfeitable right to a percentage of his Accrued Benefit derived from Employer contributions determined under the following table:
Years of Vesting Nonforfeitable Service Percentage ------------------------------------------------ less than 2............... 0 2......................... 20 3......................... 40 4......................... 60 5......................... 100
(b) Minimum Benefit Requirement. Except as otherwise provided in Subsection (d) of this Section, the Accrued Benefit derived from Employer contributions of each Participant who 78 77 is a Non-Key Employee, when expressed as an Annual Retirement Benefit, shall be not less than the lesser of: (1) two percent (2.0%) of the Participant's average Compensation for years in the testing period times his years of Benefit Service; or (2) twenty percent (20%) of the Participant's average Compensation for years in the testing period. For purposes of this Subsection, years of Benefit Service completed in a Plan Year of the Prior Plan beginning before January 1, 1984 and years of Benefit Service during which a Plan Year ended for which the Plan was not a Top-Heavy Plan shall not be taken into account. The testing period under this Subsection shall be the period of consecutive years (not exceeding five) during which the Participant had the greatest aggregate Compensation from the Controlled Group, provided that years shall not be included (i) which are not included in years of Benefit Service under this Subsection; (ii) which end in a Plan Year of the Prior Plan beginning before January 1, 1984; and (iii) which begin after the close of the last year in which the Plan was a Top-Heavy Plan or an Extra Top-Heavy Plan. (c) ADJUSTMENT TO MAXIMUM BENEFITS AND ALLOCATIONS. If the Plan is a Top-Heavy Plan for any Plan Year, and if the Controlled Group maintains a defined contribution plan which could or does provide benefits to Participants in this Plan: (1) If the Plan is not an Extra Top-Heavy Plan (but is a Top-Heavy Plan), then "three percent (3%)" shall be substituted for "two percent (2%)" in paragraph (1) of Subsection (b) of this Section and "20 percent" in paragraph (2) of Subsection (b) of this Section shall be increased by one percentage point for each year for which such Plan was taken into account under this Subsection. 79 78 (2) If the Plan is an Extra Top-Heavy Plan, then the limitation of Section 11.10 shall be calculated by substituting "1.0" for "1.25" each place such "1.25" figure appears therein. 17.05 COORDINATION WITH OTHER PLANS. (a) In applying this Article, an Employer and all Controlled Group Members shall be treated as a single employer, and the qualified plans maintained by such single employer shall be taken into account. (b) In the event that another defined contribution plan or defined benefit plan maintained by the Controlled Group provides contributions or benefits on behalf of Participants in this Plan, such other plan shall be taken into account in determining whether this Plan satisfies Section 17.04, and the minimum benefit required for a Non-Key Employee in this Plan under Section 17.04(b) will be eliminated if the Controlled Group maintains another qualified plan under which such minimums are required to be provided. 17.06 CONSTRUCTION. The term "present value of accrued benefits" as used in this Article shall in all appropriate cases include account balances of affected Employees. 80 79 Dated as of January 1, 1989, but actually executed on this 14th day of December, 1993. NACCO INDUSTRIES, INC. By /S/ Charles A. Bittenbender ------------------------------- Title: Vice President 81 EXHIBIT A BASIS FOR DETERMINING ACTUARIAL EQUIVALENCE 1. Interest rate: 8% 2. Mortality rates:
Age Rate Age Rate ------------------------- ------------------------- 16 0.000448 54 0.007193 17 0.000460 55 0.007882 18 0.000473 56 0.008558 19 0.000487 57 0.009261 20 0.000502 58 0.010020 21 0.000520 59 0.010922 22 0.000540 60 0.011943 23 0.000560 61 0.013055 24 0.000583 62 0.014224 25 0.000609 63 0.015479 26 0.000638 64 0.016979 27 0.000669 65 0.018759 28 0.000704 66 0.020910 29 0.000742 67 0.023328 30 0.000785 68 0.025942 31 0.000832 69 0.028746 32 0.000883 70 0.031946 33 0.000941 71 0.035399 34 0.001004 72 0.038901 35 0.001074 73 0.042364 36 0.001150 74 0.045938 37 0.001234 75 0.049823 38 0.001328 76 0.054344 39 0.001432 77 0.059738 40 0.001547 78 0.065725 41 0.001688 79 0.071994 42 0.001874 80 0.078765 43 0.002101 81 0.085828 44 0.002369 82 0.093242 45 0.002673 83 0.101204 46 0.003014 84 0.109522 47 0.003395 85 0.118078 48 0.003820 86 0.126967 49 0.004287 87 0.136064 50 0.004794 88 0.145500 51 0.005339 89 0.155369 52 0.005921 90 0.165680 53 0.006540 91 0.176256 92 0.187006 105 0.467925 93 0.198616 106 0.518910 94 0.212105 107 0.580985
82 2
Age Rate Age Rate ------------------------- ------------------------- 95 0.226631 108 0.653535 96 0.241705 109 0.740757 97 0.257915 110 0.867089 98 0.275371 111 0.879256 99 0.294220 112 0.894333 100 0.315161 113 0.912921 101 0.338074 114 0.934796 102 0.362977 115 0.961170 103 0.391756 116 1.000000 104 0.426170
3. Notwithstanding the foregoing, the reduction factors for the Pre-Retirement Spouse Pension shall be based on the Participant's age while covered as follows:
Age Reduction --- --------- Up to age 45 .1% per year covered 45 up to 55 .3% per year covered 55 up to 65 .5% per year covered
83 EXHIBIT B HIGHLY COMPENSATED EMPLOYEES WHO ARE INELIGIBLE TO PARTICIPATE IN THE PLAN Ward Smith (effective December 31, 1987) Alfred M. Rankin, Jr. (effective March 1, 1989) EX-10.123 5 NACCO EXHIBIT 10.CXXIII 1 EXHIBIT 10(cxxiii) INSTRUMENT OF MERGER NACCO Industries, Inc. ("NACCO") and The North American Coal Corporation, its wholly owned subsidiary, ("North American Coal") hereby take the following actions, effective as of December 31, 1993, with respect to The NACCO Industries, Inc. Pension Plan for Salaried Employees ("Plan 006") and The North American Coal Corporation Salaried Employees Pension Plan ("Plan 005") (collectively, the "Plans" and individually, a "Plan"), each as amended through the date hereof, and the trusts related thereto (the "Trusts"). Words and phrases used herein with initial capital letters which are defined in the Plans are used herein as so defined. I. Plan 006 shall be, and hereby is, merged into Plan 005 to form a single plan, within the meaning of Treasury Regulations issued under section 414(1) of the Code (the "Merged Plan"). The last plan year of Plan 006 shall end on December 31, 1993 and the first plan year of the Merged Plan shall commence on January 1, 1994. II. The Trusts shall continue to be maintained pursuant to the instruments currently applicable thereto (the "Trust Agreements"), unless and until such instruments are amended or superseded in accordance with the terms thereof. Notwithstanding the foregoing, all of the assets of the Plans shall be available to pay benefits to all participants and beneficiaries under the Merged Plan, and each of the Trust Agreements shall be deemed to have been amended to the extent necessary to effectuate this sentence. III. VOL402CL Doc: 60475.1 2 2 Each participant in the Merged Plan shall be entitled to receive benefits from the Merged Plan, if it were to terminate immediately after the merger, at least equal to the benefits that the participant would have been entitled to receive from the Plan in which he was a participant prior to the merger, if such Plan had then terminated. In furtherance of the foregoing sentence, if the sum of the assets of the Plans at the time of the merger is less than the sum of the present values of all accrued benefits under the Plans at that time, NACCO and North American Coal shall comply with the requirements of Treas. Reg. Section 1.414(1)-1(e)(2) in accordance with Treas. Reg. Section 1.414(1)- 1(i) or otherwise. IV. The terms and conditions and all other provisions of the Merged Plan shall be those expressed in Plan 005, as amended by Amendment No. 2 thereto, which Amendment is attached hereto as Exhibit 1, with any changes therein as the officer executing such Amendment deems necessary or desirable. VOL402CL Doc: 60475.1 3 3 NACCO INDUSTRIES, INC. Date 12/14/93 By /S/ Charles A. Bittenbender -------- --------------------------- Title: THE NORTH AMERICAN COAL CORPORATION Date 12/15/93 By /S/ Thomas A. Koza -------- ------------------ Title:
VOL402CL Doc: 60475.1 EX-10.124 6 NACCO EXHIBIT 10.CXXIV 1 EXHIBIT 10(cxxiv) AMENDMENT NO. 1 TO THE HAMILTON BEACH/PROCTOR-SILEX, INC. PROFIT SHARING RETIREMENT PLAN (AS AMENDED AND RESTATED EFFECTIVE AS OF JANUARY 1, 1992) Hamilton Beach/Proctor-Silex, Inc. (the "Company") hereby adopts this Amendment No. 1 to the Hamilton Beach/Proctor-Silex, Inc. Profit Sharing Retirement Plan (As Amended and Restated Effective as of January 1, 1992) (the "Plan"). Except as otherwise provided herein, the provisions of this Amendment shall be effective as of January 1, 1994. Words and phrases used herein with initial capital letters which are defined in the Plan are used herein as so defined. SECTION 1 Effective as of January 1, 1992, the last sentence of Section 1.1 of the Plan is hereby amended in its entirety to read as follows: "In no event, however, will the Accrued Benefit of a Participant who was previously covered under a Prior Plan be less than the amount of his Minimum Benefit." SECTION 2 Section 1.29(a) of the Plan is hereby amended by adding the following clause at the beginning thereof: "Unless the Company elects to use one of the simplified methods described in Section 414(q)(12) of the Code or Revenue Procedure 93-42, a Highly Compensated Employee shall mean". SECTION 3 Effective as of January 1, 1992, Section 1.40 of the Plan is hereby amended in its entirety to read as follows: "1.40 MINIMUM BENEFIT: For a Participant who was previously covered by the Prior Plans listed in Section 1.52(c) or 1.52(d) hereof, the Participant's Prior Plan Benefit. For a Participant who was previously covered under the Prior Plans listed in Sections 1.52(a) or 1.52(b) hereof, the Participant's Accrued Benefit on the earlier of his Qualifying Termination or December 31, 1994, expressed as a monthly benefit payable in the form of a Single Life Annuity (without ancillary benefits) commencing on the Participant's Normal Retirement Date." Section 4 VOL402CL Doc: 32008.1 2 2 Effective as of January 1, 1992, Section 1.53 of the Plan is hereby amended by (1) deleting the parenthetical phrase "(including the actuarial factors)" from the fourth line thereof, and (2) adding the following sentences to the end thereof: "However, for purposes of calculating the Prior Plan Benefit of a Participant who was previously covered by the Prior Plan listed in Section 1.52(c) hereof, a Participant's 'credited service' shall be determined as if the rules described in Section 3.1(b) hereof relating to Years of Vesting Service applied in lieu of the credited service rules contained in such Prior Plan, provided that credit shall be given only for periods during which the Participant was an eligible employee under the terms of such Prior Plan. In no event, however, will such a Participant's Prior Plan credited service be less than the credited service determined in accordance with the terms of the Prior Plan as in effect on December 31, 1991." SECTION 5 Effective as of January 1, 1992, Sections 6.3(b)(1)(A), 6.4(b)(1)(A) and 6.5(b)(1)(A) of the Plan are hereby amended by deleting the phrase "the Actuarial Equivalent of his Deferred Cash Balance Annuity" and replacing it with the phrase "his Deferred Cash Balance Annuity." SECTION 6 Effective as of January 1, 1992, Section 7.2(b) of the Plan is hereby amended by adding the following sentences to the end thereof: "In addition, if the present value of the Pension of a Participant who is employed at the Southern Pines, North Carolina plant and who is otherwise described in the following sentence is determined to be more than $3,500, such Pension may be paid to the Participant in a Lump Sum Distribution that is the Actuarial Equivalent of such Pension, provided that the Participant (and the Participant's Spouse) consents to such distribution. A Participant is described in this sentence if (1) he was employed at the Southern Pines, North Carolina plant immediately preceding his Qualifying Termination, (2) his Qualifying Termination occurred between April 30, 1992 and January 31, 1993 as the result of the ongoing reduction in workforce, (3) the date of his Qualifying Termination was extended at the request of an Employer and, if the Qualifying Termination had not been extended, the present value of his Pension would not have exceeded $3,500 and (4) at the time of the Qualifying Termination the Participant was not eligible for a Normal Retirement, Late Retirement or Early Retirement Pension." SECTION 7 A new Section 8.3(c) is hereby added to the Plan, immediately following Section 8.3(b), to read as follows: VOL402CL Doc: 32008.1 3 3 "(c) The Trust Fund may be held and invested as part of a master trust arrangement established and maintained for defined benefit plans by NACCO Industries, Inc. and its affiliates." SECTION 8 Section 9.11 of the Plan is hereby amended in its entirety to read as follows: "9.11 INVESTMENT COMMITTEE: NACCO Industries, Inc. has established a "Retirement Funds Investment Committee" (the "Investment Committee") pursuant to the terms of an Instrument of Creation and Delegation dated October 28, 1992, as such Instrument may be amended from time to time. In addition to the responsibilities specifically given to the Investment Committee under the Plan and Trust Agreement, the Investment Committee (or any successor thereto) shall have such other responsibilities with respect to the Plan (and other defined benefit plans and defined contribution plans maintained by the Controlled Group) as are granted to such Committee in the Instrument (as amended from time to time). In the absence of an Investment Committee, NACCO Industries, Inc. shall perform the duties allocated to such Committee under the Plan and Trust Agreement." Section 9 Sections 15.1, 15.2 and 15.3 of the Plan are hereby amended by deleting the phrase "its Board of Directors" and replacing it with the phrase "the Nominating, Organization and Compensation Committee of the Board of Directors" each time it appears therein. VOL402CL Doc: 32008.1 4 4 SECTION 10 Effective as of January 1, 1992, Exhibit A to the Plan is hereby amended in its entirety to read as follows: "EXHIBIT A - BASIS FOR DETERMINING ACTUARIAL EQUIVALENCE 1. INTEREST RATES: A. CASH BALANCE CONVERSION: For purposes of Sections 1.17 and 1.31 of the Plan, the immediate interest rate that would be used by the Pension Benefit Guaranty Corporation in effect on the first day of the Plan Year for purposes of determining the present value of a lump sum distribution on plan termination. B. LUMP SUM DISTRIBUTIONS: The interest rates, either immediate or deferred, that would be used by the Pension Benefit Guaranty Corporation in effect on the first day of the Plan Year for purposes of determining the present value of a lump sum distribution on plan termination. If such lump sum exceeds $25,000, 120 percent of the interest rates shall be used, except that the resulting lump sum shall not be less than $25,000. C. OTHER OPTIONAL FORMS OF PAYMENT: Seven and One-Half Percent (7.5%), provided that, with respect to benefits which accrued prior to [October 1, 1993], the interest rate shall be Six Percent (6.0%), if use of such rate results in a larger benefit. 2. MORTALITY RATES: A. SOUTHERN PINES LUMP SUM PAYMENTS EXCEEDING $3,500. UP84 Mortality Table, 75% male and 25% female. B. OTHER PAYMENTS. The 1971 Group Annuity Table for Males. Beneficiaries are assumed to be six (6) years younger than the Participant. 3. ASSUMPTIONS APPLICABLE TO MINIMUM BENEFIT: The assumptions provided under the Prior Plan in which the minimum benefit accrued." VOL402CL Doc: 32008.1 5 5 EXECUTED this 21st day of December, 1993. ---- --------- HAMILTON BEACH/PROCTOR-SILEX, INC. By: /S/ G. Nebel ------------------------------- Title: President
VOL402CL Doc: 32008.1 EX-10.125 7 NACCO EXHIBIT 10.CXXV 1 82 EXHIBIT (cxxv) THE HAMILTON BEACH/PROCTOR-SILEX, INC. EMPLOYEES' RETIREMENT SAVINGS PLAN (401(K)) (AS AMENDED AND RESTATED EFFECTIVE JANUARY 1, 1994) 2 HAMILTON BEACH/PROCTOR-SILEX, INC. EMPLOYEES' RETIREMENT SAVINGS PLAN (401(K)) Hamilton Beach/Proctor-Silex, Inc., a Delaware corporation, hereby adopts this amendment and restatement of the profit sharing plan known as the Hamilton Beach/Proctor Silex, Inc. Employees' Retirement Savings Plan (401(k)) (the "Plan"), effective as of January 1, 1994. ARTICLE I. - DEFINITIONS AND CONSTRUCTION 1.1 DEFINITIONS. The following terms when used in the Plan and the Trust Agreement with initial capital letters, unless the context clearly indicates otherwise, shall have the following respective meanings: (1) ACCOUNT AND SUB-ACCOUNT: As defined in Section 5.2. (2) ADMINISTRATIVE COMMITTEE OR COMMITTEE: The Administrative Committee provided for in Article IX hereof. (3) ADMINISTRATOR OR PLAN ADMINISTRATOR: The Administrator of the Plan, as defined in ERISA Section 3(16)(A) and Code Section 414(g), shall be the Company, which may delegate all or any part of its powers, duties and authorities in such capacity (without ceasing to be the Administrator of the Plan) as hereinafter provided. (4) AFTER-TAX CONTRIBUTIONS: The After-Tax Contributions made to the Plan (or a predecessor plan) prior to January 1, 1987. (5) BEFORE-TAX CONTRIBUTIONS: Before-Tax Contributions provided for in Section 3.1. (6) BENEFICIARY: A Participant's Spouse, provided that if the Participant has no Spouse or if his Spouse has consented to the designation of a Beneficiary other than his Spouse in the manner required herein, then the Participant's Beneficiary shall be the person or persons other than, or in 3 2 addition to, his Spouse as may be designated by a Participant as his Beneficiary under the Plan. Any such Beneficiary designation may include multiple, contingent or successive Beneficiaries and may specify the proportionate distribution to each Beneficiary. Such a designation may be made, revoked or changed only by an instrument (in form acceptable to the Committee) signed by the Participant and filed with the Committee before the Participant's death. The consent of any previously designated Beneficiary shall not be required for a Participant to make, revoke or change the designation of a Beneficiary (except as may be otherwise provided in the Plan with respect to the required consent of a Participant's Spouse). A designation by a married Participant of a person other than or in addition to his Spouse as his Beneficiary shall not take effect unless the Participant's Spouse consents in writing thereto. To be effective, a Spouse's consent must (a) be signed by the Spouse, (b) acknowledge the effect of such consent, (c) be witnessed by any person designated as a Plan representative or notary public, (d) shall be effective only with respect to such Spouse, and (e) designate a Beneficiary which cannot be changed without the Spouse's further consent (unless the Spouse's consent indicates that no further consent from the Spouse will be required to change the designation of a non-Spouse Beneficiary). The consent of a Spouse will not be required, however, if it is established to the satisfaction of the Committee that the consent cannot be obtained because there is no Spouse, because the Spouse cannot be located, or because of such other circumstances as the Secretary of the Treasury may prescribe by regulations. In the absence of an effective designation of a Beneficiary, or if all parties designated as a Beneficiary have ceased to exist, a Participant's Beneficiary shall be his Spouse or, if the Participant has no Spouse, then the Participant's Beneficiary shall be his descendants, PER STIRPES or, if none, his estate. (7) CODE: The Internal Revenue Code of 1986, as it has been and may be amended from time to time. (8) COMPANY: Hamilton Beach/Proctor-Silex, Inc., a Delaware corporation, and its predecessors and successors. 4 3 (9) COMPENSATION: (a) An Employee's total base or regular compensation (whether paid in the form of a salary or in hourly wages) and commissions received by or made available to him while a Participant and as an Eligible Employee from an Employer for a Plan Year, plus his overtime payments. (b) Notwithstanding the foregoing provisions of this Subsection, effective as of January 1, 1989, Compensation of an Employee taken into account for any purpose for any Plan Year shall not exceed the limitation in effect for such Year under Code Section 401(a)(17). For purposes of the preceding sentence, in the case of a Highly Compensated Employee who is a 5-percent owner (as such term is defined in Code Section 416(i)(1)) or one of the ten most Highly Compensated Employees, (i) such Highly Compensated Employee and his family members (which for this purpose shall mean an Employee's Spouse and lineal descendants who have not attained age 19 before the close of the Year in question) shall be treated as a single Employee and the Compensation of such family members shall be aggregated with the Compensation of such Highly Compensated Employee, and (ii) the limitation on Compensation shall be allocated among such Highly Compensated Employee and his family members in proportion to each individual's Compensation. (10) CONTROLLED GROUP: The Company and any and all other corporations, trades and/or businesses, the Employees of which, together with Employees of the Company, are required by Code Section 414 to be treated as if they were employed by a single employer. (11) CONTROLLED GROUP MEMBER: Each corporation or unincorporated trade or business that is or was a member of the Controlled Group, but only during such period as it is or was such a member of the Controlled Group. (12) COVERED EMPLOYEE: All regular salaried and hourly Employees of an Employer. Notwithstanding the foregoing, Employees who are nonresident aliens, temporary or seasonal 5 4 Employees, Employees who are covered by a collective bargaining agreement or who serve only as leased employees (within the meaning of Section 1.1(14)) shall not be covered by the Plan or deemed to be Covered Employees hereunder. (13) ELIGIBLE EMPLOYEE: An Employee who is eligible for participation in the Plan in accordance with the provisions of Article II. (14) EMPLOYEE: Any person who is a common law employee of a Controlled Group Member (but excluding any directors as such) and, to the extent required by Code Section 414(n), any person who is a "leased employee" of a Controlled Group Member. For purposes of this Subsection, a "leased employee" means any person who, pursuant to an agreement between a Controlled Group Member and any other person ("leasing organization"), has performed services for the Controlled Group Member on a substantially full-time basis for a period of at least one year, and such services are of a type historically performed by employees in the business field of the Controlled Group Member. Contributions or benefits provided a leased employee by the leasing organization which are attributable to services performed for a Controlled Group Member will be treated as provided by the Controlled Group Member. A leased employee will not be considered an Employee of a Controlled Group Member, however, if (a) leased employees do not constitute more than 20 percent of the Controlled Group Member's nonhighly compensated work force (within the meaning of Code Section 414(n)(5)(C)(ii)) and (b) such leased employee is covered by a money purchase pension plan maintained by the leasing organization that provides (i) a nonintegrated employer contribution rate of at least 10 percent of Compensation, (ii) immediate participation and (iii) full and immediate vesting. (15) EMPLOYER: The Company and any person which adopts the Plan pursuant to Article XIII. However, in the case of any person which adopts the Plan and which thereafter ceases to exist, ceases to be a member of the Controlled Group or withdraws or is eliminated from the Plan, it shall not thereafter be an Employer. As of January 1, 1994, the only Employer under the Plan is the Company. 6 5 (16) EMPLOYER CONTRIBUTIONS: Mandatory Matching Employer Contributions, Additional Matching Employer Contributions and Profit Sharing Contributions made to the Plan prior to January 1, 1992 and the Qualified Nonelective Contributions provided for in Section 3.6. (17) ENTRY DATE: Each January 1. (18) ERISA: The Employee Retirement Income Security Act of 1974, as it has been and may be amended from time to time. (19) FIDUCIARY: Any person who (a) exercises any discretionary authority or discretionary control respecting management of the Plan or exercises any authority or control respecting management or disposition of its assets, (b) renders investment advice for a fee or other compensation, direct or indirect, with respect to any money or other property of the Plan, or has authority or responsibility to do so, or (c) has any discretionary authority or discretionary responsibility in the administration of the Plan or the Trust Fund. The term "Fiduciary" shall also include any person to whom a Named Fiduciary delegates any fiduciary responsibilities in accordance with the provisions hereof or of the Trust Agreement as long as such designation is in effect. (20) HARDSHIP: Immediate and heavy financial need on the part of a Participant for: (a) expenses for medical care described in Code Section 213(d) previously incurred by the Participant, the Participant's Spouse, or any dependents of the Participant (as defined in Code Section 152), or expenses necessary for these persons to obtain such medical care; (b) costs directly related to the purchase (excluding mortgage payments) of a principal residence for the Participant; (c) the payment of tuition and related educational fees for the next twelve months of post-secondary education for the Participant, the Participant's Spouse or the Participant's dependents (as defined in Code Section 152); 7 6 (d) payments necessary to prevent the eviction of the Participant from his principal residence or foreclosure on the mortgage of the Participant's principal residence; (e) any other financial need which the Commissioner of Internal Revenue, through the publication of revenue rulings, notices and other documents of general applicability, may from time to time designate as a deemed immediate and heavy financial need as provided in Treasury Regulations under Code Section 401(k). (21) HIGHLY COMPENSATED EMPLOYEE: (a) For a particular Plan Year, unless the Company elects one of the simplified methods described in Code Section 414(q)(12) or Revenue Procedure 93-42, any Employee (i) who, during the preceding Plan Year, (A) was at any time a 5-percent owner (as such term is defined in Code Section 416(i)(1)), (B) received compensation from the Controlled Group in excess of the amount in effect for such Plan Year under Code Section 414(q)(1)(B), (C) received compensation from the Controlled Group in excess of the amount in effect for such Plan Year under Code Section 414(q)(1)(C), and was in the top-paid group of Employees for such Plan Year, or (D) was at any time an officer (limited to no more than 50 Employees or, if lesser, the greater of 3 Employees or 10 percent (10%) of the Employees) and received compensation greater than 50 percent (50%) of the amount in effect under Code Section 415(b)(1)(A) for such Year, or (ii) who during the particular Plan Year (but not the prior Plan Year) (I) was at any time a 5-percent owner (as such term is defined in Code Section 416(i)(1)) or (II) was included in the foregoing Clauses (B), (C) or (D) of Subparagraph (i) and was in the group consisting of the 100 Employees paid the greatest compensation by the Controlled Group during such Plan Year. (b) "Highly Compensated Employee" shall include a former Employee whose termination of employment occurred prior to the Plan Year and who was a Highly Compensated Employee 8 7 for the Plan Year in which his termination of employment occurred or for any Plan Year ending on or after his 55th birthday. (c) For the purposes of this Subsection, the term "compensation" shall mean the sum of an Employee's compensation under Section 4.5(3) and the Employee's Before-Tax Contributions (subject to the limitations described in Section 1.1(9)(b)) and the term "top-paid group of Employees" shall mean that group of Employees of the Controlled Group consisting of the top 20 percent (20%) of such Employees when ranked on the basis of compensation paid by the Controlled Group during the Plan Year. (22) INVESTMENT COMMITTEE: The Investment Committee provided for in Section 9.10 hereof. (23) INVESTMENT FUND: Any of the Investment Funds provided in Section 5.1. (24) INVESTMENT MANAGER: The person who, with respect to an Investment Fund, has the discretion to determine which assets in such Fund shall be sold (or exchanged) and what investments shall be acquired for such Fund. Such person must (a) be either registered as an investment advisor under the Investment Advisors Act of 1940, a bank as defined thereunder or an insurance company qualified to manage, acquire or dispose of Plan assets under the laws of more than one state, and (b) acknowledge in writing that he or it is a Fiduciary with respect to the Plan. (25) LOAN ACCOUNT: The separate recordkeeping account within a Participant's Account established by the Administrator pursuant to Section 6.11(3). (26) NAMED FIDUCIARIES: The parties designated as Named Fiduciaries in Section 11.2. (27) NORMAL RETIREMENT AGE: Age 55. (28) PARTICIPANT: An Employee or former Employee who has become and continues to be a Participant in the Plan in accordance with the provisions of Article II. 9 8 (29) PARTICIPANT CONTRIBUTIONS: Before-Tax Contributions provided for in Section 3.1 and After-Tax Contributions. (30) PLAN: The Hamilton Beach/Proctor-Silex, Inc. Employees' Retirement Savings Plan (401(k)), the terms and provisions of which are herein set forth, as the same may be amended, supplemented or restated from time to time. The Plan is intended to qualify as a profit sharing plan under the Code. (31) PLAN YEAR: A calendar year. (32) QUALIFIED NONELECTIVE CONTRIBUTIONS: A contribution made by an Employer pursuant to Section 3.6 that (a) Participants eligible to share therein may not elect to receive in cash until distribution from the Plan, (b) are nonforfeitable when made, (c) are distributable only in accordance with the distribution rules applicable to Before-Tax Contributions and (d) are paid to the Trust Fund during the Plan Year for which made or within the time following the close of such Plan Year which is prescribed by law for the filing by an Employer of its federal income tax return (including extensions thereof). (33) ROLLOVER CONTRIBUTIONS: Cash which is transferred to a Covered Employee's Account pursuant to Section 3.5. (34) SALARY REDUCTION AGREEMENT: An arrangement pursuant to which an Employee agrees to reduce, or to forego an increase in, his Compensation and his Employer agrees to contribute to the Trust the amount so reduced or foregone as a Before-Tax Contribution. (35) SPOUSE: The person to whom an Employee is legally married at the time in question; provided, however, that a former Spouse may be treated as a Spouse or surviving Spouse to the extent required under the terms of a "qualified domestic relations order" (as such term is defined in Code Section 414(p)). 10 9 (36) TRUST AGREEMENT: The Trust Agreement between the Company and the Trustee, as such Trust Agreement may be amended or restated from time to time, or any trust agreement superseding the same. The Trust Agreement is hereby incorporated in the Plan by reference. (37) TRUSTEE: The trustee or trustees under the Trust Agreement or its or their successor or successors in trust under such Trust Agreement. (38) TRUST FUND: The assets held in trust under the provisions of the Plan and the Trust Agreement, without distinction as to principal or income. (39) VALUATION DATE: The last day of each calendar month and such other dates as the Administrator may designate. (40) VESTED INTEREST: A Participant shall have a 100% Vested Interest in his entire Account. A Participant's Vested Interest shall be nonforfeitable at all times. 11 10 ARTICLE II. - COVERAGE AND PARTICIPATION 2.1 ELIGIBLE EMPLOYEES. An Employee shall become an Eligible Employee under the Plan on the first Entry Date on which he is both a Covered Employee and has attained age 20- 1/2. 2.2 COMMENCEMENT OF PARTICIPATION. (1) An Eligible Employee shall become a Participant in the Plan on the effective date of his enrollment pursuant to Section 2.3. (2) Notwithstanding the foregoing, a person who was a Participant in the Plan on December 31, 1993 shall continue to be a Participant in this Plan on January 1, 1994. 2.3 ENROLLMENT. Any Employee described in Section 2.1 may enroll as a Participant in the Plan with respect to Participant Contributions on the Entry Date on which he is initially eligible or on any subsequent Entry Date by filing with the Administrator an enrollment form which shall include (1) the effective date on which the Eligible Employee is to become a Participant, (2) his election, commencing on or after such effective date, to have Participant Contributions made by or for him to the Trust, (3) his authorization, if any, to his Employer to withhold from his Compensation for each pay period, commencing on or after such effective date, any designated Participant Contributions and to pay the same to the Trust Fund and (4) his direction that the Participant Contributions made by or for him be invested in the manner described in Section 5.5. 2.4 DURATION OF PARTICIPATION. (1) Once an Eligible Employee becomes a Participant, he shall remain a Participant so long as he continues to be an Employee whether or not he continues to be an Eligible Employee, provided, however, that if a Participant ceases to be an Eligible Employee (while remaining an Employee), Participant Contributions may not be made by or for him pursuant to Section 3.1 until he again becomes an Eligible Employee and he again enrolls as a contributing Participant pursuant to Sections 2.3 and 3.1. If a Participant ceases to be an Employee and later again becomes an Employee, he shall be eligible, subject to the foregoing limitations of this Section, to become a Participant immediately on the date which he again becomes an Eligible Employee. 12 11 (2) If an Account continues to be maintained for a former Employee after his termination of employment, such former Employee shall remain a Participant for all purposes of the Plan, other than for the purposes of making Participant Contributions hereunder. 13 12 ARTICLE III. - CONTRIBUTIONS 3.1 BEFORE-TAX CONTRIBUTIONS. Upon enrollment pursuant to Section 2.3, a Participant shall agree pursuant to a Salary Reduction Agreement to have his Employer make Before-Tax Contributions to the Trust of up to 15% of his Compensation (in 1% increments) through equal pay period payments. If a Participant's Before-Tax Contributions must be reduced to comply with the requirements of Section 4.1 or 4.2 or the requirements of applicable law, his Before-Tax Contributions as so reduced shall be the maximum percentage of his Compensation permitted by such Section or law. 3.2 PAYMENTS TO TRUSTEE. Before-Tax Contributions made by or for a Participant shall be transmitted by his Employer to the Trustee as soon as practicable, but in any event not later than 90 days after the date on which such Contributions are withheld or would otherwise have been paid to the Participant. Before-Tax Contributions shall be allocated to a Participant's Account as of the last day of the pay period for which such Contributions were made. 3.3 CHANGES IN PARTICIPANT CONTRIBUTIONS. The percentage designated by a Participant pursuant to Section 3.1 shall continue in effect, notwithstanding any changes in the Participant's Compensation. A Participant may, however, in accordance with the percentages permitted by Section 3.1, change (but not suspend) the percentage of his Before-Tax Contributions four times each calendar year, effective as of the first day of any payroll period by notifying the Administrator in writing (on a form acceptable to the Administrator) of the change no later than 30 days (or such shorter period as the Administrator may permit on a uniform and nondiscriminatory basis) prior to the date it is to become effective. 3.4 SUSPENSION OF PARTICIPANT CONTRIBUTIONS. A Participant may suspend his Before-Tax Contributions effective as of the first day of any month by notifying the Administrator in writing (on a form acceptable to the Administrator) of the suspension no later than 30 days (or such shorter period as the Administrator may permit on a uniform and nondiscriminatory basis) prior to the date it is to 14 13 become effective. A Participant who has voluntarily suspended his Before-Tax Contributions may resume making such Contributions as of the first day of any payroll period which occurs at least six (6) months after the date of the suspension (12 months in the case of a Participant described in Section 6.8(3)) provided that (1) the Participant is eligible to participate in the Plan under Section 2.1 on such date, and (2) the Participant notifies the Administrator in writing (on a form acceptable to the Administrator) of the resumption no later than 30 days (or such shorter period as the Administrator may permit on a uniform and nondiscriminatory basis) prior to the date it is to become effective. 3.5 ROLLOVER CONTRIBUTIONS. (1) The Trustee shall, at the direction of the Committee, receive and thereafter hold and administer as a part of the Trust Fund for a Covered Employee cash which shall have been distributed to the Covered Employee from a trust held under another plan in which the Covered Employee was a participant, or an individual retirement account described in Code Section 408(d)(3)(A)(ii), in a distribution which constitutes an "eligible rollover distribution" as such term is defined in Code Section 401(a)(31) and Code Section 402(c)(4) (a "Rollover Contribution"). (2) Rollover Contributions transferred to the Trustee pursuant to Subsection (1) of this Section shall be allocated when made to such existing or new Sub-Account(s) as the Trustee shall determine. (3) The Administrator shall adopt, and may amend from time to time, general rules of uniform application which shall govern the administration of Rollover Contributions. 3.6 QUALIFIED NONELECTIVE CONTRIBUTIONS. For any Plan Year, the Employers may make Qualified Nonelective Contributions (1) in such amount, (2) for such Participants who are not Highly Compensated Employees for such Plan Year and (3) in such proportions among such Participants as such Employer shall deem necessary to cause Section 4.2 to be satisfied for such Plan Year. Qualified Nonelective Contributions may be made irrespective of whether the Employer has net earnings or retained earnings, and may be made in cash or other property. Each Employer shall designate to the 15 14 Trustee the Plan Year for which and the Participants for whom any Qualified Nonelective Contribution is made. 3.7 ALLOCATION OF QUALIFIED NONELECTIVE CONTRIBUTIONS. Qualified Nonelective Contributions shall be allocated to the Accounts of Participants who are designated by an Employer as eligible to share therein in such amounts as such Employer directs. 16 15 ARTICLE IV. - LIMITATIONS ON CONTRIBUTIONS 4.1 EXCESS BEFORE-TAX CONTRIBUTIONS. (1) Notwithstanding the provisions of Article III, a Participant's Before-Tax Contributions for any taxable year of such Participant shall not exceed the limitation in effect under Code Section 402(g). Except as otherwise provided in this Section, a Participant's Before-Tax Contributions for purposes of this Section shall include (a) any employer contribution made under any qualified cash or deferred arrangement as defined in Code Section 401(k) to the extent not includible in gross income for the taxable year under Code Section 402(a)(8) (determined without regard to Code Section 402(g)), (b) any employer contribution to the extent not includible in gross income for the taxable year under Code Section 402(h)(1)(B) (determined without regard to section Code Section 402(g)) and (c) any employer contribution to purchase an annuity contract under Code Section 403(b) under a salary reduction agreement within the meaning of Code Section 3121(a)(5)(D). (2) In the event that a Participant's Before-Tax Contributions exceed the amount described in Subsection (1) of this Section (hereinafter called the "excess deferrals"), such excess deferrals (and any income allocable thereto) shall be distributed to the Participant by April 15 following the close of the taxable year in which such excess deferrals occurred if, by April 15 of such taxable year the Participant (a) allocates the amount of such excess deferrals among the plans under which the excess deferrals were made and (b) notifies the Committee of the portion allocated to this Plan. 4.2 ADP TEST. (1) Notwithstanding any provision of the Plan to the contrary: (a) the actual deferral percentage (as defined in Subsection (2) of this Section) for the group of Highly Compensated Eligible Employees for such Plan Year shall not exceed the actual deferral percentage for all other Eligible Employees for such Plan Year multiplied by 1.25, or 17 16 (b) the excess of the actual deferral percentage for the group of Highly Compensated Eligible Employees for such Plan Year over the actual deferral percentage for all other Eligible Employees for such Plan Year shall not exceed 2 percentage points, and the actual deferral percentage for the group of Highly Compensated Eligible Employees for such Plan Year shall not exceed the actual deferral percentage for all other Eligible Employees for such Plan Year multiplied by 2. If two or more plans which include cash or deferred arrangements are considered as one plan for purposes of Code Sections 401(a)(4) or 410(b), such arrangements included in such plans shall be treated as one arrangement for the purposes of this Subsection; and if any Highly Compensated Eligible Employee is a participant under two or more cash or deferred arrangements of the Controlled Group, all such arrangements shall be treated as one cash or deferred arrangement for purposes of determining the deferral percentage with respect to such Highly Compensated Eligible Employee. (2) For the purposes of this Section, the actual deferral percentage for a specified group of Eligible Employees for a Plan Year shall be the average of the ratios (calculated separately for each Eligible Employee in such group) of (a) the amount of Before-Tax Contributions and, at the election of an Employer, any Qualified Nonelective Contributions actually paid to the Trust for each such Eligible Employee for such Plan Year (including any "excess deferrals" described in Section 4.1) to (b) the Eligible Employee's compensation for such Plan Year. For the purposes of this Section, the term "compensation" shall mean the sum of an Eligible Employee's compensation under Section 4.5(3) and his Before-Tax Contributions (subject to the limitations described in Section 1.1(9)(b)). In the case of a Highly Compensated Eligible Employee who is either a 5-percent owner (as defined in Code Section 416(i)(1)) or one of the ten most Highly Compensated Employees, the combined actual deferral ratio for the family group (as such term is hereinafter defined), which shall be treated as one Highly Compensated Eligible Employee, shall be determined by combining the Before-Tax Contributions (and, 18 17 at the election of an Employer, Qualified Nonelective Contributions) and compensation of all members of the family group who are Eligible Employees. For purposes of this Subsection, the term "family group" shall mean any Highly Compensated Eligible Employee described in the preceding sentence and such Employee's Spouse and lineal ascendants or descendants and the spouses of such lineal ascendants or descendants. For the purposes of determining "the actual deferral percentage for all other Eligible Employees" as referred to in Subsection (1) of this Section, the Before-Tax Contributions and compensation of all members of the family group shall be disregarded. (3) For the purposes of this Section, the term "Highly Compensated Eligible Employee" for a particular Plan Year shall mean any Highly Compensated Employee who is an Eligible Employee. (4) In the event that excess contributions (as such term is hereinafter defined) are made to the Trust for any Plan Year, then, prior to March 15 of the following Plan Year, such excess contributions (and any income allocable thereto) shall be distributed to the Highly Compensated Eligible Employees on the basis of the respective portions of the excess contributions attributable to each such Eligible Employee. For the purposes of this Subsection, the term "excess contributions" shall mean, for any Plan Year, the excess of (a) the aggregate amount of Before-Tax Contributions actually paid to the Trust on behalf of Highly Compensated Eligible Employees for such Plan Year over (b) the maximum amount of such Before-Tax Contributions permitted for such Plan Year under Subsection (1) of this Section, determined by reducing Before-Tax Contributions made on behalf of Highly Compensated Eligible Employees in order of the actual deferral percentages (as defined in Subsection (2) of this Section) beginning with the highest of such percentages. Notwithstanding the foregoing provisions of this Subsection, in the case of a Highly Compensated Eligible Employee whose actual deferral ratio is determined under the family aggregation rules set forth in Subsection (2) of this Section, the determination and correction of the amount of excess contributions shall be made by reducing the actual deferral ratio in accordance with the "leveling" method described in Treasury Regulations Section 19 18 1.401(k)-1(f)(2) and allocating the excess contributions for the family group among its members in proportion to the Before-Tax Contributions of each member of the family group that is combined to determine the actual deferral ratio. 4.3 MONITORING PROCEDURES. (1) In order to ensure that at least one of the actual deferral percentages specified in Section 4.2(1) are satisfied for each Plan Year, the Company shall monitor (or cause to be monitored) the amount of Before-Tax Contributions being made to the Plan by or for each Eligible Employee during each Plan Year. In the event that the Company determines that neither of such actual deferral percentages will be satisfied for a Plan Year, and if the Committee in its sole discretion determines that it is necessary or desirable, the Before-Tax Contributions made thereafter by or for each Highly Compensated Eligible Employee (as defined in Section 4.2(3)) may be reduced (pursuant to non-discriminatory rules adopted by the Company) to the extent necessary to decrease the actual deferral percentage for Highly Compensated Eligible Employees for such Plan Year to a level which satisfies either of the actual deferral percentages. (2) In order to ensure that excess deferrals (as such term is defined in Section 4.1(2)) shall not be made to the Plan for any taxable year for any Participant, the Company shall monitor (or cause to be monitored) the amount of Before-Tax Contributions being made to the Plan for each Participant during each taxable year and may take such action (pursuant to non-discriminatory rules adopted by the Company) to prevent Before-Tax Contributions made for any Participant under the Plan for any taxable year from exceeding the maximum amount applicable under Section 4.1(1). (3) The actions permitted by this Section are in addition to, and not in lieu of, any other actions that may be taken pursuant to other Sections of the Plan or that may be permitted by applicable law or regulation in order to ensure that the limitations described in Sections 4.1 and 4.2 are met. 4.4 TESTING PROCEDURES. In applying the limitations set forth in Section 4.2, the Company may, at its option, utilize such testing procedures as may be permitted under Code Sections 401(a)(4), 20 19 401(k), 401(m) or 410(b), including, without limitation, (1) aggregation of the Plan with one or more other qualified plans of the Controlled Group, (2) inclusion of qualified matching contributions, qualified nonelective contributions or elective deferrals described in, and meeting the requirements of, Treasury Regulations under Code Sections 401(k) and 401(m) to any other qualified plan of the Controlled Group in applying the limitations set forth in Section 4.2 or (3) any permissible combination thereof. 4.5 MAXIMUM ADDITIONS. (1) Notwithstanding any provision of the Plan to the contrary, the maximum annual addition (as defined in Subsection (2) of this Section) to a Participant's Account for any Plan Year (which shall be the limitation year) shall in no event exceed the lesser of (a) $30,000 (or, if greater, one-fourth of the dollar limitation in effect under Code Section 415(b)(1)(A)) or (b) 25% of his compensation for such Plan Year. (2) For the purpose of this Section, the term "annual additions" means the sum for any Plan Year of: (a) all contributions (including, without limitation, Before-Tax Contributions made pursuant to Section 3.1) made by the Controlled Group which are allocated to the Participant's account pursuant to a defined contribution plan maintained by a Controlled Group Member, (b) all employee contributions made by the Participant to a defined contribution plan maintained by a Controlled Group Member, (c) all forfeitures allocated to the Participant's account pursuant to a defined contribution plan maintained by a Controlled Group Member, (d) any amount allocated to an individual medical benefit account (as defined in section 415(1)(2) of the Code) of the Participant which is part of a pension or annuity plan, and 21 20 (e) any amount attributable to medical benefits allocated to the Participant's account established under Code Section 419A(d)(1) if the Participant is or was a key-employee (as such term is defined in Code Section 416(i)) during such Plan Year or any preceding Plan Year. (3) For the purposes of this Section, the term "compensation" shall mean those items included as compensation under Treasury Regulation Section 1.415-2(d)(2) but excluding those items specified in Treasury Regulation Section 1.415-2(d)(3). (4) If a Participant's annual additions would exceed the limitations of Subsection (1) of this Section for a Plan Year as a result of the allocation of forfeitures, a reasonable error in estimating the Participant's compensation, or a reasonable error in determining the amount of Before-Tax Contributions that may be made with respect to the Participant under the limitations of this Section (or other facts and circumstances which the Commissioner of Internal Revenue finds justify application of the following rules of this Subsection), Before-Tax Contributions (if any) made by the Participant for such Plan Year (together with any gains attributable thereto) shall be returned to him to the extent necessary. 4.6 MAXIMUM BENEFITS. (1) Except as otherwise provided in Code Section 415(e), in any case in which an individual is a participant in both a defined benefit plan and a defined contribution plan maintained by the Controlled Group, the sum of the defined benefit plan fraction and the defined contribution plan fraction for any Plan Year shall not exceed 1. In the event a reduction is necessary to avoid exceeding the limitation set forth in this Section, the affected Participant's benefits under the defined benefit plan shall be reduced to the extent necessary to avoid exceeding such limitation. For purposes hereof: (a) the defined benefit plan fraction for any Plan Year is a fraction, (i) the numerator of which is the projected annual benefit of the participant under the plan (determined as of the close of the Year), and (ii) the denominator of which is the lesser of (A) the product of 1.25, 22 21 multiplied by the dollar limitation in effect under Code Section 415(b)(1)(A) for such Year or (B) the product of 1.4, multiplied by the amount which may be taken into account under Code Section 415(b)(1)(B) with respect to such participant under the plan for such Year; and (b) the defined contribution plan fraction for any Plan Year is a fraction, (i) the numerator of which is the sum of the annual additions to the participant's account as of the close of the Year and for all prior Years, and (ii) the denominator of which is the sum of the lesser of the following amounts determined for such Year and for each prior year of service with the Controlled Group (regardless of whether a plan was in existence during such Year): (A) the product of 1.25, multiplied by the dollar limitation in effect under Code Section 415(c)(1)(A) for such Year and each such prior year of service, or (B) the product of 1.4, multiplied by the amount which may be taken into account under Code Section 415(c)(1)(B) with respect to such participant under such plan for such Year and each such prior year of service. (2) A Participant's projected annual benefit for purposes of Subsection (1) of this Section is equal to the annual benefit to which he would be entitled under the terms of the defined benefit plan, assuming he will continue employment until reaching normal retirement age as determined under the terms of such plan (or current age, if later), his compensation for the Plan Year under consideration will remain the same until the date he attains such age, and all other relevant factors used to determine benefits under the plan for the Plan Year under consideration will remain constant for all future Plan Years. 4.7 DEFINITIONS. (1) For purposes of applying the limitations set forth in Sections 4.6 and 4.7, all qualified defined benefit plans (whether or not terminated) ever maintained by one or more Controlled Group Members shall be treated as one defined benefit plan, and all qualified defined 23 22 contribution plans (whether or not terminated) ever maintained by one or more Controlled Group Members shall be treated as one defined contribution plan. (2) For purposes of this Section and Sections 4.6 and 4.7, the term "Controlled Group Member" shall be construed in the light of Code Section 415(h). 24 23 ARTICLE V. - INVESTMENTS 5.1 INVESTMENT FUNDS. (1) The Trust Fund (other than the portion of the Trust Fund consisting of the Loan Accounts) shall be divided into such other Investment Funds as the Investment Committee may in its discretion select or establish and Participant Contributions and Employer Contributions shall be invested therein as provided in Section 5.5. Subject to the provisions of the Plan and Trust Agreement relating to the appointment of an Investment Manager and to other applicable provisions of the Plan and Trust Agreement, the Trustee shall hold, manage, administer, value, invest, reinvest, account for and otherwise deal with each Investment Fund separately. The Trustee shall invest and reinvest the principal and income of each such Investment Fund and shall keep each Investment Fund invested, without distinction between principal and income, as required under the terms of the Plan and Trust Agreement. Dividends, interest and other distributions received by the Trustee in respect of each Investment Fund shall be reinvested in the same Investment Fund. (2) The Investment Committee shall adopt, and may amend, from time to time general rules of uniform application which shall provide for the administration of each Investment Fund, including, but not limited to, rules providing for (a) the method of valuing each such Investment Fund and (b) any other matters which the Investment Committee deems necessary or advisable in the administration of any Investment Fund. The Administrative Committee shall adopt, and may amend from time to time, general rules of uniform application which shall provide for the administration of Participants' investments in the Investment Funds, including, but not limited to, rules providing for (i) procedures pursuant to which a Participant may elect to have all or a designated part of his Account invested in any Investment Fund pursuant to Section 5.5, (ii) the method of changing any such election pursuant to Section 5.5 by either the Participant or his Beneficiary and the frequency with which such elections may be made, (iii) the Investment Fund in which a Participant's Account shall be invested in 25 24 the absence of an effective election, and (iv) any other matters which the Administrative Committee deems necessary or advisable in the administration of Participants' investments in any Investment Fund. (3) The Trustee is hereby expressly authorized to invest Plan assets in any collective investment fund or funds which are maintained for the investment of the assets of employee benefit plans qualified under Section 401(a) of the Code whereupon the instruments establishing such funds, as amended, shall be deemed a part of the Plan and incorporated herein by reference. The commingling of the assets of this Plan with the assets of other qualified participating plans in such collective investment funds is specifically authorized. 5.2 ACCOUNT; SUB-ACCOUNT. The Trustee shall establish and maintain, or cause to be maintained, an Account for each Participant, which Account shall reflect, pursuant to Sub-Accounts established and maintained thereunder, the amount, if any, of the Participant's (1) Before-Tax Contributions, (2) After-Tax Contributions, (3) Employer Contributions (as further divided into Matching Contributions and Profit Sharing Contributions), (4) Qualified Nonelective Contributions, and (5) Rollover Contributions. The Trustee shall also maintain, or cause to be maintained, separate records which shall show (a) the portion of each such Sub-Account invested in each Investment Fund and (b) the amount of contributions thereto, payments and withdrawals and loans therefrom and the amount of income, expenses, gains and losses attributable thereto. The interest of each Participant in the Trust Fund at any time shall consist of his Account balance (as determined pursuant to Section 5.4) as of the last preceding Valuation Date plus credits and minus debits to such Account since that Date plus the value of the Participant's Loan Account on the last preceding Valuation Date on which the Administrator valued such Loan Account pursuant to Section 6.11. 5.3 REPORTS. The Administrative Committee shall cause reports to be made at least quarterly to each Participant and to the Beneficiary of each deceased Participant as to the value of his Account and the amount of his Vested Interest. 26 25 5.4 VALUATION OF INVESTMENT FUNDS. (1) As of each Valuation Date, the Trustee shall determine the value of each Investment Fund. The Trustee shall determine, from the change in value of each Investment Fund between the current Valuation Date and the then last preceding Valuation Date, the net gain or loss of such Investment Fund during such period resulting from expenses paid (including the fees and expenses of the Trustee and Investment Manager, if any, which are to be charged to such Investment Fund in accordance with the terms of the Plan and the Trust Agreement) and realized and unrealized earnings, profits and losses of such Investment Fund during such period. The transfer of funds to or from an Investment Fund pursuant to Section 5.5, Participant Contributions allocated to an Investment Fund, and payments, distributions and withdrawals from an Investment Fund to provide benefits under the Plan for Participants or Beneficiaries shall not be deemed to be earnings, profits, expenses or losses of the Investment Fund. (2) On each Valuation Date, the net gain or loss of each Investment Fund determined pursuant to Subsection (1) of this Section shall be allocated as of such Valuation Date by the Trustee to the Accounts of Participants in such Investment Fund in proportion to the amounts of such Accounts invested in such Investment Fund on such Valuation Date, exclusive of amounts to be credited but including amounts (other than the net loss, if any, determined pursuant to Subsection (1) of this Section) to be debited to such Accounts as of such Valuation Date. (3) The reasonable and equitable decision of the Trustee as to the value of each Investment Fund as of each Valuation Date shall be conclusive and binding upon all persons having any interest, direct or indirect, in such Investment Fund. 5.5 INVESTMENT OF CONTRIBUTIONS. (1) Each Participant may, pursuant to rules and procedures adopted by the Administrative Committee, direct that Participant Contributions, Rollover Contributions, repayments of a loan made pursuant to Section 6.11 and Employer Contributions shall be invested in any or all of the Investment Funds. An investment option selected by a Participant shall 27 26 remain in effect and be applicable to all subsequent Contributions and loan repayments made by or for him unless and until an investment change is made by him and becomes effective pursuant to rules and procedures adopted by the Administrative Committee. In the absence of an effective investment direction, Contributions and loan repayments shall be invested in such Investment Fund or Funds, and in such proportions, as is designated by the Administrative Committee from time to time for such purpose. (2) Each Participant and each Beneficiary of a deceased Participant shall have the right from time to time to elect that all or part of his interest in one or more of the Investment Funds be liquidated and the proceeds thereof reinvested in any other Investment Fund. Such transfer election shall be made in accordance with rules and procedures established by the Administrative Committee for this purpose. 5.6 DIRECTIONS TO TRUSTEE. The Administrative Committee shall give appropriate and timely directions to the Trustee in order to permit the Trustee to give effect to the investment choice and investment change elections made under Section 5.5 and to provide funds for distributions and withdrawals pursuant to Article VI. 28 27 ARTICLE VI. - DISTRIBUTIONS, WITHDRAWALS AND LOANS 6.1 DISTRIBUTIONS, IN GENERAL. (1) A Participant's Vested Interest in the Trust Fund shall only be distributable as provided in this and the following Sections of this Article. A Participant or Beneficiary who is eligible to receive a distribution under applicable Sections of this Article shall file an application with the Administrative Committee, furnishing such information as such Committee may reasonably require, including satisfactory proof of his age and that of his Spouse (if applicable) and any authority in writing that the Committee may request authorizing it to obtain pertinent information, certificates, transcripts and/or other records from any public office. (2) The Administrative Committee shall provide the Participant or Beneficiary with the application form (which shall contain a general description of the optional forms of benefit available under the Plan) and such other information required to be provided under Section 402(f) of the Code no less than 30 days and no more than 90 days before a distribution or withdrawal is to be made. Notwithstanding the foregoing, such distribution or withdrawal may commence less than 30 days after such form and information are provided to the Participant or Beneficiary, provided that: (a) the Administrative Committee clearly informs the recipient that he has the right to a period of at least 30 days after receiving the information to consider whether or not to elect a distribution or withdrawal (and, if applicable, a particular form of benefit), and (b) the recipient, after receiving the information, affirmatively elects the distribution or withdrawal. 6.2 DISTRIBUTIONS ON DEATH. (1) If a Participant dies before the payment or commencement of the payment of his Account to him, his entire Account, valued as of the Valuation Date preceding the date on which his Beneficiary files an application with the Administrative Committee pursuant to Section 6.1 shall be paid or commence to be paid to the Participant's Beneficiary under one of the following methods, as elected by the Beneficiary, as soon as practicable after such Valuation Date: 29 28 (a) such amount shall be paid to him in a lump sum by the December 31 of the year in which occurs the fifth anniversary of such Participant's death; or (b) such amount shall be applied to the purchase of a single life annuity for the life of the Beneficiary commencing on the December 31 of the calendar year following the calendar year in which the Participant died or, in the case of a Beneficiary who is the surviving Spouse of a Participant, over the life expectancy of such Spouse commencing not later than the December 31 of the calendar year in which the Participant would have attained age 70-1/2; or (c) a combination of a lump sum payment and a single life annuity for the life of the Beneficiary commencing at the time specified in Clause (b). (2) Notwithstanding the provisions of Subsection (1) of this Section, a Beneficiary's Account which is attributed to a Participant who first became a Participant in the Plan on or after January 1, 1994 shall only be payable in the form described in Clause (a) of Subsection (1) of this Section. (3) If a Participant dies after his Account has been used to purchase an annuity contract under Section 6.3, the benefits payable to his Beneficiary after his death shall be those, if any, provided under the annuity contract. (4) Notwithstanding the foregoing provisions of this Section, if a Beneficiary of a deceased Participant dies before the payment of his entire Account to him (absent any contrary designation by the Participant), the Beneficiary's entire Account, valued as of the Valuation Date preceding the date on which the Beneficiary died, shall be paid to the Beneficiary's estate in the form of a lump sum payment, as soon as practicable after such Valuation Date. (5) Notwithstanding the foregoing provisions of this Section, if the Account of a Participant does not exceed $3,500 on the Valuation Date preceding his death and never exceeded 30 29 $3,500 at the time of any previous withdrawal or distribution, the Account shall be paid to his Beneficiary in a lump sum as soon as practicable after such Valuation Date. 6.3 DISTRIBUTIONS ON TERMINATION OF EMPLOYMENT. (1) Subject to the provisions of Section 6.4, if a Participant's termination of employment with the Controlled Group occurs for any reason other than death (including termination after reaching Normal Retirement Age or on account of disability), his entire Account, valued as of the Valuation Date specified in Subsection (2) of this Section, shall be paid or commence to be paid to him under one of the following methods as the Participant shall elect: (a) such amount shall be paid to him in a lump sum; or (b) such amount shall be applied to the purchase of a single life annuity for the life of the Participant; or (c) such amount shall be applied to the purchase of a joint and survivor annuity for the joint life expectancy of the Participant and his Beneficiary; provided that an election under this Clause (c) shall not become effective unless the present value of payments expected to the made to the Participant under the annuity contract is more than 50% of the total of the payments expected to be made to the Participant and his Beneficiary. (2) Notwithstanding the provisions of Subsection (1) of this Section, the Account of a Participant who first became a Participant in the Plan on or after January 1, 1994 shall only be payable in the form described in Clause (a) of Subsection (1) of this Section. (3) Distributions pursuant to this Section shall be paid or commence to be paid to a Participant as soon as practicable after and shall be valued as of the Valuation Date preceding the later of (a) the date on which the Participant files his application with the Administrative Committee pursuant to Section 6.1 or (b) the date of the Participant's termination of employment. 31 30 (4) Notwithstanding the foregoing provisions of this Section, if the Account of a Participant does not exceed $3,500 on the Valuation Date preceding his termination of employment with the Controlled Group (and never exceeded $3,500 at the time of any previous withdrawal or distribution), the Account shall be paid to him in a lump sum as soon as practicable after such Valuation Date. 6.4 50% JOINT AND SURVIVOR ANNUITY REQUIREMENTS. (1) Notwithstanding any other provision of the Plan, if (A) a Participant is married at the time the distribution of his Account is to be made or to commence to be made to him and (B) the Participant elects to receive the payment of his Account in the form of an annuity, his Account shall be applied to the purchase of a 50% Joint and Survivor Annuity (as defined in Subsection (4) of this Section) unless he effectively elects to waive such 50% Joint and Survivor Annuity during the election period for this purpose specified in Subsection (3) of this Section. (2) The Committee shall provide to each Participant, not more than 90 days nor less than 30 days before distribution of his Account, a written explanation of the following: (i) the terms and conditions of the 50% Joint and Survivor Annuity, (ii) the Participant's right to make, and the effects of, an election under Subsection (3) of this Section, (iii) the rights of the Participant's Spouse under Subsection (3) of this Section, (iv) the right to make, and the effect of, a revocation of an election under Subsection (3) of this Section, and (v) a general description of the eligibility features and relative values of the other optional forms of benefit described in Section 6.3. 32 31 (3) A Participant may elect to waive the 50% Joint and Survivor Annuity (and elect another form of annuity) at any time before the date his Account is distributed or commences to be distributed under Section 6.3. In addition, such an election shall not be effective with respect to distribution of his Account under Section 6.3 unless it is made during the 90-day period ending on the date of such distribution. Such election may be revoked by the Participant at any time during such election period, and once revoked, another election may be made at any time during the election period. No election to waive the 50% Joint and Survivor Annuity shall be effective unless (A) the Participant's Spouse consents in writing to such election and, effective as of January 1, 1987, the election designates the alternative form of benefit in which the Account will be paid and, if applicable, a Beneficiary, other than the Spouse, which designations may not be changed without the consent of the Spouse, and (B) the Spouse's consent acknowledges the effect of such election and is witnessed by a Plan representative or by a notary public. Such consent shall not be required if it is established to the satisfaction of a Plan representative that the consent cannot be obtained because there is no Spouse, because the Spouse cannot be located, or because of such other circumstances as the Secretary of the Treasury may prescribe by regulations. Any election to waive the 50% Joint and Survivor Annuity, and any revocation of such election, may be made solely by an instrument (in form acceptable to the Committee) signed by the Participant and filed with the Committee during the election period described in this Subsection. (4) For purposes of this Section, the term "50% Joint and Survivor Annuity" shall mean a joint and survivor annuity which provides a reduced benefit payable to a Participant during his lifetime and, after his death, a benefit payable to his Spouse during the surviving lifetime of his said Spouse at the rate of 50% of the reduced amount payable to the Participant and which is the actuarial equivalent of the amount that would be payable to the Participant under an annuity for his lifetime only. 6.5 DISTRIBUTIONS PURSUANT TO A QDRO. If a qualified domestic relations order (as defined in Code Section 414(p)) so provides, the portion of a Participant's Account payable to the 33 32 alternate payee(s) may be distributed to the alternate payee(s) at the time specified in such order, regardless of whether the Participant is entitled to a distribution from the Plan at such time. The portion of the Account so payable shall be valued as of the Valuation Date coincident with or preceding the date specified in such order. 6.6 DISTRIBUTION ON SALE OF ASSETS OR DISPOSITION OF BUSINESS. In the event that a Participant's termination of employment is caused by the disposition by an Employer of substantially all of the assets of a trade or business, or its interest in a subsidiary, and (1) such Participant continues employment with the entity acquiring such assets or such subsidiary, (2) such entity does not maintain the Plan following the disposition and (3) the Company does maintain the Plan following the disposition, the Participant, if he so elects, shall be entitled to a distribution of the Vested Interest in his Account valued as of the Valuation Date specified in Section 6.3(2); provided, however, that such Account may only be distributed in the form of a lump sum. 6.7 LATEST TIME OF DISTRIBUTION. (1) Distributions under the Plan shall occur or begin as provided in the preceding Sections of this Article, but in no event later than 60 days after the close of the Plan Year in which the latest of the following events occur: (a) the date on which the Participant attains age 65, (b) the l0th anniversary of the year in which the Participant commenced participation in the Plan, or (c) the Participant's termination of employment with the Controlled Group, provided that, except as provided in Subsection (2) of this Section or Section 6.2(4) or Section 6.3(3), no distribution shall be required to occur or begin until the Participant files his application with the Committee pursuant to Section 6.1. (2) (a) Notwithstanding any other provision of the Plan, to the extent required under Section 401(a)(9) of the Code, effective as of January 1, 1989, the entire Account of each Participant under the Plan (i) shall be distributed to him in a lump sum in cash not later than April 1 of the calendar year following the calendar year in which he attains age 70-1/2 and, with 34 33 respect to Participants who are Employees, on December 31 of such year and each succeeding year, or (ii) shall commence to be distributed not later than the time specified in Clause (i) of this Paragraph (a) in one of the forms specified in Section 6.3(1)(b) or 6.3(1)(c). (b) Notwithstanding the foregoing, distributions under this Subsection shall be made in accordance with the provisions of Code Section 401(a)(9) and Treasury Regulations issued thereunder, which provisions are hereby incorporated herein by reference, provided that such provisions shall override the other distribution provisions of the Plan only to the extent that such other Plan provisions provide for distribution that is less rapid than required under such provisions of the Code and Regulations. Nothing contained in this Subsection shall be construed as providing any optional form of payment that is not available under the other distribution provision provisions of the Plan. 6.8 WITHDRAWAL OF CONTRIBUTIONS. Upon at least 30 days (or such shorter time period as the Administrator may permit on a uniform and nondiscriminatory basis) prior written notice filed with the Administrator, a Participant may withdraw all or a part of his Account as provided below: (1) AFTER-TAX WITHDRAWALS. A Participant who is an Employee may withdraw all or a part of his After-Tax Contributions Sub-Account. (2) AGE 59-1/2 WITHDRAWALS. A Participant who is an Employee who is at least 59-1/2 years old may withdraw all or a part of his Before-Tax Contributions Sub-Account and his Rollover Contributions Sub-Account (including the net earnings thereon). A Participant may only make one withdrawal under this Subsection (2) each Plan Year; provided that withdrawals from more than one Sub-Account made at the same time will count as only one withdrawal. (3) HARDSHIP WITHDRAWALS. A Participant who is an Employee and who has obtained all distributions and withdrawals (other than for Hardship) and all nontaxable loans then available under all plans maintained by the Controlled Group may request a withdrawal on account of Hardship of all or a 35 34 part of his Before-Tax Contributions Sub-Account (excluding any earnings allocated thereto on or after January 1, 1989). Upon making a determination that the Participant is entitled to a withdrawal on account of Hardship, the Committee shall direct the Trustee to distribute to such Participant all or a portion of his Before-Tax Contribution Sub-Account (excluding any net earnings allocable thereto on or after January 1, 1989), provided that the amount of the withdrawal shall not be less than $500 and shall not be in excess of the amount necessary to alleviate such Hardship (including amounts necessary to pay any taxes or penalties reasonably anticipated to result from such withdrawal). If a withdrawal on account of Hardship is made by a Participant pursuant to this Subsection, the following rules shall apply notwithstanding any other provision of the Plan (or any other plan maintained by the Controlled Group) to the contrary: (a) the Participant is prohibited from making Before-Tax Contributions to the Plan (or any comparable contributions to any other qualified or nonqualified plan maintained by the Controlled Group) for a period of 12 months following receipt of the Hardship withdrawal; and (b) the amount of the Participant's Before-Tax Contributions (and any comparable contributions to any other plan maintained by the Controlled Group) for the Participant's taxable year immediately following the taxable year of the Hardship withdrawal shall not be in excess of the applicable limit under Code Section 402(g) for such next taxable year less the amount of such Participant's Before-Tax Contributions (and any comparable contributions to any other plan maintained by the Controlled Group) for the taxable year of the Hardship withdrawal. (4) A Participant shall have the right to receive his withdrawal payment in any of the optional forms of payment designated in Section 6.3, subject to the provisions of Section 6.4. (5) Withdrawals from the Plan may not be repaid. 6.9 ADMINISTRATION OF DISTRIBUTIONS AND WITHDRAWALS. 36 35 (1) The order in which distributions and withdrawals pursuant to this Article are to be made from the applicable portion of a Participant's Account invested in the Investment Funds is on a pro rata basis from each Investment Fund. (2) All distributions and withdrawals hereunder shall be valued as of the Valuation Date preceding the date on which the distribution or withdrawal is requested. 6.10 PROVISION REQUIRED UNDER CODE SECTION 401(A)(31). (1) If a Participant or Spouse is eligible to receive a distribution from the Plan that constitutes an "Eligible Rollover Distribution" (as defined in Subsection (4) of this Section) and the Participant or Spouse elects to have all or a portion of such distribution paid directly to an "eligible retirement plan" (as defined in Subsection (3) of this Section) and specifies the eligible retirement plan to which the distribution is to be paid, such distribution (or portion thereof) shall be made in the form of a direct rollover to the eligible retirement plan so specified. A direct rollover is a payment made by the Plan to the eligible retirement plan so specified for the benefit of the Participant or Spouse. (2) The Administrator shall prescribe reasonable procedures for elections to be made pursuant to this Subsection. Within a reasonable period of time (as prescribed by Treasury regulations or rulings) before the payment of an Eligible Rollover Distribution, the Administrator shall provide a written notice to the Participant or Spouse describing his or her rights under this Section and such other information required to be provided under section 402(f) of the Code. Unless otherwise specifically provided herein, for purposes of this Section, the term "Spouse" shall include a former Spouse who is an alternate payee under a qualified domestic relations order, as defined in section 414(p) of the Code. (3) For purposes of this Section, the term "eligible retirement plan" means an individual retirement account or annuity described in section 408 of the Code, a defined contribution plan that meets the requirements of section 401(a) of the Code and accepts rollovers, an annuity plan described in section 403(a) of the Code, or any other type of plan that is included within the definition of "eligible 37 36 retirement plan" under section 401(a)(31)(D) of the Code; provided, however, that with respect to a Spouse (but not a former Spouse who is an alternate payee) who receives a distribution after a Participant's death, an "eligible retirement plan" shall mean only an individual retirement account or annuity described in section 408 of the Code. (4) For purposes of this Section, the term "Eligible Rollover Distribution" shall mean any distribution of all or any portion of the balance to the credit of the distributee from a qualified trust (as hereinafter defined), except (A) any distribution that is one of a series of substantially equal periodic payments (not less frequently than annually) made for the life (or life expectancy) of the distributee or the joint lives (or joint life expectancies) of the distributee and the distributee's designated beneficiary, or for a specified period of ten years or more, (B) any distribution to the extent the distribution is required under section 401(a)(9) of the Code, (C) the portion of any distribution that is not includible in gross income, and (D) such other amounts specified in Treasury regulations or Internal Revenue Service rulings, notices or announcements issued under section 402(c) of the Code. For purposes of this Section, the term "qualified trust" shall mean an employees' trust described in section 401(a) of the Code which is exempt from tax under section 501(a) of the Code. (5) The provisions of this Section are intended to comply with the provisions of section 401(a)(31) of the Code and shall be interpreted in accordance with such section and Treasury regulations and rulings issued thereunder. The provisions of this Section shall be effective for distributions under the Plan on and after January 1, 1993. 6.11 LOANS TO PARTICIPANTS. (1) A Participant who is either an Employee of an Employer (or a Controlled Group Member) or a "party in interest" within the meaning of ERISA Section 3(14) may apply with the Administrative Committee for a loan from his Account. If the Committee determines that the Participant is not in bankruptcy or similar proceedings and is entitled to a loan in accordance with the following provisions of this Section, the Committee shall direct the Trustee 38 37 to make a loan to the Participant from his Account. Each loan shall be charged against the Participant's Account as follows: first, against the Participant's Before-Tax Contributions Sub-Account; second, to the extent necessary, against the Participant's Qualified Non-Elective Contributions Sub-Account; third, to the extent necessary against the Participant's Matching Contributions Sub-Account; fourth, to the extent necessary, against the Participant's Rollover Contributions Sub-Account; fifth, to the extent necessary against the Participant's After-Tax Contributions Sub-Account; and sixth, against the Participant's Profit Sharing Contributions Sub-Account. (2) A Participant may only have one loan outstanding at a time. Each loan shall be made in $100 increments and will not be made in an amount which is less than $1,000. The maximum loan to any Participant (when added to the outstanding balance of all other loans to the Participant from all qualified employer plans (as defined in Code Section 72(p)(4)) of the Controlled Group) shall be an amount which does not exceed the lesser of: (a) $50,000, reduced by the excess (if any) of (i) the highest outstanding balance of such other loans during the one-year period ending on the day before the date on which such loan is made, over (ii) the outstanding balance of such other loans on the date on which such loan is made, or (b) 50% of the value of such Participant's Account on the date on which such loan is made. (3) For each Participant for whom a loan is authorized pursuant to this Section, the Administrator shall (a) direct the Trustee to liquidate the Participant's interest in the Investment Funds on a pro-rata basis to the extent necessary to provide funds for the loan, (b) direct the Trustee to disburse such funds to the Participant upon the Participant's execution of the promissory note and security agreement referred to in Subsection (4)(d) of this Section, (c) transmit to the Trustee the executed promissory note and security agreement referred to in Subsection (4)(d) of this Section, and (d) 39 38 establish and maintain a separate recordkeeping account within the Participant's Account (the "Loan Account") (i) which initially shall be in the amount of the loan, (ii) to which the funds for the loan shall be deemed to have been allocated and then disbursed to the Participant, (iii) to which the promissory note shall be allocated and (iv) which shall show the unpaid principal of and interest on the promissory note from time to time. All payments of principal and interest by a Participant shall be credited initially to his Loan Account and applied against the Participant's promissory note, and then invested in the Investment Funds pursuant to the Participant's direction under Section 5.5. The Administrator shall value each Participant's Loan Account for purposes of Section 5.2 at such times as the Administrator shall deem appropriate, but not less frequently than quarterly. (4) Loans made pursuant to this Section: (a) shall be made available to all Participants on a reasonable equivalent basis; (b) shall not be made available to Highly Compensated Employees in a percentage amount greater than the percentage amount made available to other Participants; (c) shall be secured by the Participant's Loan Account; and (d) shall be evidenced by a promissory note and security agreement executed by the Participant which provides for: (i) the security referred to in Paragraph (c) of this Subsection; (ii) a rate of interest determined by the Committee in accordance with applicable law; (iii) repayment within a specified period of time, which shall not extend beyond five years except that the term of a principal residence loan may extend to thirty years; (iv) repayment in equal payments over the term of the loan, with payments not less frequently than quarterly; and 40 39 (v) for such other terms and conditions as the Committee shall determine, which shall include provision that: (A) with respect to a Participant who is an Employee, the loan will be repaid pursuant to authorization by the Participant of equal payroll deductions over the repayment period sufficient to amortize fully the loan within the repayment period, provided, however, the Committee may waive the requirement of equal payroll deductions if the Company payroll through which the Participant is paid cannot accommodate such deductions; (B) the loan shall be prepayable in whole at any time without penalty; and (C) the loan shall be in default and become immediately due and payable upon the first to occur of the following events: (I) the Participant's failure to make required payments on the promissory note; (II) in the case of a Participant who is not an Employee, distribution of his Account; or (III) in the case of a Participant who is an Employee, his termination of employment or the revocation of his payroll deduction authorization; or (IV) the death of the Participant; or (V) the filing of a petition, the entry of an order or the appointment of a receiver, liquidator, trustee or other person in a similar capacity, with respect to the Participant, pursuant to any state or federal law relating to bankruptcy, moratorium, reorganization, insolvency or 41 40 liquidation, or any assignment by the Participant for the benefit of his creditors. (5) Notwithstanding any other provision of the Plan, a loan made pursuant to this Section shall be a first lien against the Participant's Loan Account. Any amount of principal or interest due and unpaid on the loan at the time of any default on the loan, and any interest accruing thereafter, shall be satisfied by deduction from the Participant's Loan Account, and shall be deemed to have been distributed to the Participant, as follows: (a) in the case of a Participant who is an Employee and who is not, at the time of the default, eligible (without regard to the required filing of an application pursuant to Section 6.1) to receive distribution of his Account under the provisions of Article VI, other than a Hardship distribution, or by order of a court, at such time as he first becomes eligible (without regard to the required filing of an application pursuant to Section 6.1) to receive distribution of his Account under the provisions of Article VI, other than a Hardship distribution, or by order of a court; or (b) in the case of any other Participant, immediately upon such default. If, as a result of the application of the preceding sentence, an amount of principal or interest on a loan remains outstanding after default, interest at the rate specified in the promissory note executed by the Participant in respect of such loan shall continue to accrue on such outstanding amount until fully satisfied by deduction from the Participant's Loan Account as hereinabove provided or by payment by or on behalf of such Participant. 42 41 ARTICLE VII. - ADMINISTRATION OF THE TRUST FUND 7.1 APPOINTMENT OF TRUSTEE. The Company has authorized the Trustee to act as such under the Plan and has adopted the Trust Agreement with the Trustee. The Investment Committee may, without the consent of any Participant or other person, but with the consent of NACCO Industries, Inc., execute amendments to such Trust Agreement, execute such further agreements as it in its sole discretion may deem necessary or desirable to carry out the Plan, or at any time, in accordance with the terms of the Trust Agreement, remove the Trustee and appoint a successor. 7.2 DUTIES OF TRUSTEE. The Trustee shall invest Participant Contributions and Employer Contributions paid to it and earnings thereon in accordance with the Plan and Trust Agreement. The Trustee shall also establish and maintain separate Accounts and Sub-Accounts for each Participant in accordance with the Plan. The Trustee in its relation to the Plan shall be entitled to all of the rights, privileges, immunities and benefits conferred upon it by the Plan or Trust Agreement and shall be subject to all of the duties imposed upon it by the Plan and Trust Agreement. The Trust Agreement is hereby incorporated in the Plan by reference, and each Employer, by adopting the Plan, approves the Trust Agreement and authorizes the Company to execute any amendment or supplement thereto on its behalf. 7.3 THE TRUST FUND. The Trust Fund shall be held by the Trustee for the exclusive benefit of the Participants and their Beneficiaries and shall be invested by the Trustee upon such terms and in such property as is provided in the Plan and in the Trust Agreement. The Trustee shall, from time to time, make payments, distributions and deliveries from the Trust Fund as provided in the Plan. 7.4 NO GUARANTEE AGAINST LOSS/RESPONSIBILITY FOR INVESTMENTS. (1) Neither the Trustee, any Employer, the Investment Committee, the Administrative Committee nor any Investment Manager in any manner guarantees the Trust Fund or any part thereof against loss or depreciation. All persons 43 42 having any interest in the Trust Fund shall look solely to the Trust Fund for payment with respect to such interest. (2) Neither the Company, the Investment Committee, the Administrative Committee, any Employer, the Trustee, nor any officer or employee of any of them is authorized to advise a Participant as to the manner in which contributions to the Plan and income thereon should be invested and reinvested. The election of the Investment Fund or Funds in which a Participant participates is his sole responsibility, and the fact that designated Investment Funds are available to Participants for investment shall not be construed as a recommendation for the investment of contributions hereunder in all or any of such Funds. (3) Any decision by a Participant to invest in any Investment Fund pursuant to Section 5.5 or to request a loan pursuant to Section 6.11 shall constitute an exercise of control over the assets allocated to his Account by such Participant (to the extent of such exercise of control) within the meaning of ERISA Section 404(c), and each Participant who so exercises such control shall, by such exercise, release and agree, on his behalf and on the behalf of his heirs and beneficiaries, to indemnify and hold harmless the Trustee, each Employer and the Committee, and any officer or employee of any of them, from and against any claim, demand, loss, liability, costs or expense (including reasonable attorney's fees) caused by or arising out of such exercise, including without limitation any diminution in value or losses incurred from such exercise. 7.5 PAYMENT OF BENEFITS. Except as otherwise provided by applicable law, (1) all benefits provided for in the Plan (less deductions provided for in the Plan) shall be paid solely out of the Trust Fund in accordance with instructions given to the Trustee by the Administrative Committee pursuant to the terms of the Plan, (2) neither any Employer, the Administrative Committee, the Investment Committee (or their members) nor the Trustee shall be in any manner liable for benefits payable under the Plan and (3) such benefits shall be only such as can be provided by the assets in the Trust Fund. 44 43 7.6 COMPENSATION AND EXPENSES OF TRUSTEE. The Trustee shall be entitled to receive such reasonable compensation for its services as may be agreed upon by it and the Company. Such compensation and the expenses of the Trustee and other expenses necessary for the proper administration of the Plan and Trust Fund, including without limitation, costs incident to the purchase and sale of securities, such as brokerage fees, commissions and transfer taxes, shall be paid by the Trustee from the Trust Fund; provided, however, that the Company, in its absolute discretion, may elect at any time to have the Employers pay part or all thereof directly, but any such election shall not bind the Company as to its right to elect with respect to the same or other expenses at any other time to have such expenses reimbursed or paid from the Trust Fund. Taxes, if any, on any property held by the Trustee shall be paid out of the Trust Fund and taxes, if any, other than transfer taxes, on distributions to a Participant or Beneficiary of a Participant shall be paid by the Participant or the Beneficiary, respectively. 7.7 NO DIVERSION OF TRUST FUND. Except as specifically provided in other Sections of the Plan, it shall be and it is hereby made impossible, at any time prior to the satisfaction of all liabilities with respect to Employees and their Beneficiaries under the Plan, for any part of the corpus or income of the Trust Fund to be (within the taxable year or thereafter) used for, or diverted to, purposes other than the exclusive benefit of Employees or their Beneficiaries and for defraying the reasonable expenses of administering the Plan. 7.8 FUNDING POLICY. To the extent such has not already been done, the Investment Committee shall (1) determine, establish and carry out a funding policy and method consistent with the objectives of the Plan and the requirements of applicable law, and (2) furnish from time to time to the person responsible for the investment of the assets held in the Trust Fund information the Investment Committee may have relative to the Plan's probable short-term and long-term financial needs, including 45 44 any probable need for short-term liquidity, and such Investment Committee's opinion (if any) with respect thereto. 46 45 7.9 RETURN OF CONTRIBUTIONS. If an Employer Contribution to the Trust Fund is made by an Employer by a mistake of fact, the excess of the amount contributed over the amount that would have been contributed had there not occurred a mistake of fact shall be returned to such Employer within one year after the payment of such Contribution. If an Employer Contribution to the Trust Fund made by an Employer which is conditioned upon the deductibility of the Contribution under Code Section 404 is not fully deductible under such Code Section, such Contribution, to the extent the deduction therefor is disallowed, shall be returned to the Employer within one year after the disallowance of the deduction. Earnings attributable to Employer Contributions returned to an Employer pursuant to this Section may not be returned, but losses attributable thereto shall reduce the amount to be returned; provided, however, that if the withdrawal of the amount attributable to the mistaken or non-deductible contribution would cause the balance of the individual Account of any Participant to be reduced to less than the balance which would have been in such Account had the mistaken or non-deductible amount not have been contributed, the amount to be returned to the Employer pursuant to this Section shall be limited so as to avoid such reduction. All Employer Contributions hereunder for any Plan Year shall in no event exceed the amount that would be deductible by the Employer for such Plan Year for federal income tax purposes and each Employer Contribution to the Trust Fund made by any Employer is hereby specifically conditioned upon such deductibility. 47 46 ARTICLE VIII. - INVESTMENT MANAGER 8.1 DUTIES AND FUNCTIONS. (1) The Investment Committee shall have the exclusive authority and responsibility at any time or from time to time to appoint (and revoke the appointment of) one of more persons (who or which qualifies as an "investment manager" under ERISA Section 3(38) and who or which acknowledges in writing that he is a Fiduciary with respect to the Plan) as an Investment Manager under the Plan with respect to one or more of the Investment Funds. The Investment Committee shall notify the Trustee of any such appointment (or revocation thereof) in writing, and the Trustee may rely upon any such appointment continuing in effect until it receives a written notice from the Investment Committee of its revocation. (2) Any Investment Manager appointed by the Investment Committee shall have such duties and functions as specified by the Investment Committee in its notice of appointment. Unless otherwise specified in such notice of appointment, the Investment Manager shall have control over (but not custody of) all assets in the Investment Fund to which it has been appointed except such amounts of cash and short-term obligations as the Trustee may from time to time deem to be advisable to maintain sufficient liquidity to meet the obligations of the Plan (such as making distributions to Participants), all of which shall remain under the control (as well as the custody) of the Trustee. (3) During the period when the appointment of an Investment Manager is in effect, the Investment Manager (and not the Trustee) shall, with respect to the investments over which the Investment Manager has control and to the extent delegated to such Investment Manager and permitted by law, have the corresponding powers and be subject to the corresponding duties and limitations conferred or imposed upon the Trustee by the Trust Agreement (except as such powers, duties and limitations may be altered by any agreement as to investment management entered into between the Investment Committee and the Investment Manager), but the Trustee shall make and accept such 48 47 deliveries of securities and disburse and receive such funds to or from the Trust Fund as the Investment Manager may direct in writing. (4) In addition to the foregoing powers, the Investment Manager may designate the broker or brokers through which sales and purchases are to be made, provided that no greater brokerage fees are incurred than those chargeable by other brokers in the community for like or comparable services. 8.2 COMPENSATION. The Investment Manager shall receive such reasonable compensation as may be agreed upon by it and the Investment Committee, and upon the receipt by the Trustee of written instructions from the Investment Committee as to any amount so approved, payment thereof shall be made from the Trust Fund. 49 48 ARTICLE IX. - ADMINISTRATIVE COMMITTEE AND INVESTMENT COMMITTEE 9.1 MEMBERS AND OFFICERS. The Administrative Committee shall consist of three or more members who may be, but are not required to be, Participants, Employees or directors or officers of any Controlled Group Member. The members of the Committee shall be appointed by, and serve at the pleasure of, the Nominating, Organization and Compensation Committee of the Board of Directors of the Company. Any vacancy on the Committee due to death, resignation, removal or any other reason shall be filled by the Nominating, Organization and Compensation Committee of the Board of Directors of the Company. The Administrative Committee shall elect a Secretary of the Committee (who shall be a member of the Committee) and such other officers as the Committee shall deem advisable (who do not need to be members of the Committee) to serve until resignation or replacement by the Committee. 9.2 CERTIFICATION OF MEMBERS AND OFFICERS. The Company may certify the number and names of the Administrative Committee members and officers to the Trustee. The Trustee may rely on any such certification until it receives written notice from the Company as to a change in the Committee's members or officers. 9.3 DUTIES. The members of the Administrative Committee shall serve without remuneration for such services unless the Board of Directors of the Company shall provide for remuneration for such services. The Administrative Committee shall have such functions and duties with respect to the Plan, and only such functions and duties with respect to the Plan, as are specifically conferred upon it by the Plan or the Trust Agreement or as may be delegated to it pursuant to Section 11.3. The Committee shall maintain records of all meetings, proceedings and actions held, undertaken or performed by it. An Administrative Committee member shall not be disqualified from acting because of any interest, benefit or advantage, inasmuch as members of the Administrative Committee may be Participants, Employees or directors or officers of any Controlled Group Member, but no such member shall vote or act in connection with the Administrative Committee's action relating 50 49 solely to himself. Except as may be required by law, no bond or other security need be required of any Administrative Committee member in such capacity in any jurisdiction. 9.4 REVOCABILITY OF COMMITTEE ACTION. Any action taken by the Administrative Committee with respect to the rights or benefits under the Plan of any Participant or Beneficiary shall be revocable by the Administrative Committee as to payments or distributions not theretofore made pursuant to such action, and appropriate adjustments may be made in future payments or distributions to a Participant or his Beneficiaries to offset any excess payment or underpayments theretofore made to such Participant or his Beneficiaries. 9.5 RULES AND PROCEDURES. The Administrative Committee may adopt and amend, from time to time, such rules for the administration of the Plan and rules for its government and the conduct of its business as it deems advisable, including a rule authorizing one or more of its members or officers to execute instruments in its behalf evidencing its action, and the Trustee and other persons may rely upon any instrument signed by such person or persons so authorized as properly evidencing the action of the Administrative Committee. The Administrative Committee may from time to time, by resolution adopted by it, delegate to one or more of its members or officers, to an employee or employees of the Administrative Committee, to a subcommittee or subcommittees of the Administrative Committee, or to an agent or agents of the Administrative Committee, such of the Administrative Committee's functions and duties as the Committee deems advisable. Except as may otherwise be provided by rules or procedures adopted by the Administrative Committee, the Administrative Committee may act by majority action either at a meeting or in writing without a meeting and an action evidenced by the signatures of a majority of the members of the Administrative Committee, or by any single person who has been designated to act for the Administrative Committee by an instrument in writing which is signed by all members of the Administrative Committee and filed with the Trustee, shall be deemed to be the action of the Administrative Committee. 51 50 9.6 PLAN INTERPRETATION AND FINDINGS OF FACTS. The Administrative Committee shall have sole and absolute discretion to interpret the provisions of the Plan (including, without limitation, by supplying omissions from, correcting deficiencies in, or resolving inconsistencies or ambiguities in, the language of the Plan), to determine the rights and status under the Plan of Participants and other persons, to decide disputes arising under the Plan and to make any determinations and findings with respect to the benefits payable thereunder and the persons entitled thereto as may be required for the purposes of the Plan. In furtherance of, but without limiting, the foregoing, the Administrative Committee is hereby granted the following specific authorities, which it, shall discharge in its sole and absolute discretion in accordance with the terms of the Plan (as interpreted, to the extent necessary, by the Administrative Committee): (1) to resolve all questions arising under the provisions of the Plan as to any individual's entitlement to become a Participant; (2) to determine the amount of benefits, if any, payable to any person under the Plan; and (3) to conduct the claims review procedure specified in Article X. All decisions of the Committee as to the facts of any case, as to the interpretation of any provision of the Plan or its application to any case, and as to any other interpretative matter or other determination or question under the Plan shall be final and binding on all parties affected thereby, subject to the provisions of Section 9.4 and Article X. 9.7 DIRECTIONS TO TRUSTEE. The Administrative Committee shall direct the Trustee as to the method of payment of, and the time at which, any benefit is to be paid to a Participant or a Beneficiary from the Trust Fund and the particular Investment Fund and Sub-Account from which each such payment is to be made. The Trustee shall be entitled to rely conclusively on any such direction given to it by the Administrative Committee in accordance with the provisions hereof. 52 51 9.8 COSTS AND EXPENSES. (1) The Administrative Committee may hire such employees and retain such agents as it deems necessary or advisable in connection with the performance of its functions or duties. (2) The costs and expenses incurred in connection with the administration of the Plan and Trust Fund (including expenses incurred by the Administrative Committee) shall be paid from the Trust Fund; provided, however, that the Company, in its absolute discretion, may elect at any time to have the Employers pay part or all hereof directly, but any such election shall not bind the Company as to its right to elect with respect to the same or other expenses at any other time to have such expenses reimbursed or paid from the Trust Fund. 9.9 FILING OF DOCUMENTS. Although various provisions of the Plan provide for the filing of various documents or other instruments with the Company or the Administrative Committee, the Company or the Administrative Committee (as applicable) may, by general announcement, (1) specifically designate some other person with whom or which such instruments may be filed, or (2) authorize the use of telephonic or electronic designations and elections in lieu of written documents and instruments. 9.10 INVESTMENT COMMITTEE: NACCO Industries, Inc. has established a "Retirement Funds Investment Committee" (the "Investment Committee") pursuant to the terms of an Instrument of Creation and Delegation dated October 28, 1992. In addition to the responsibilities specifically given to the Investment Committee under the Plan and Trust Agreement, the Investment Committee (or any successor thereto) shall have such other responsibilities with respect to the Plan (and the other defined contributions plans maintained by the Controlled Group) as are granted to such Committee in the Instrument of Creation and Delegation as such Instrument may be amended from time to time. In the absence of an Investment Committee, NACCO Industries, Inc. shall perform the duties allocated to such Committee under the Plan and the Trust Agreement. 53 52 ARTICLE X. - CLAIMS AND REVIEW PROCEDURES 10.1 METHOD OF FILING CLAIM. Any Participant or Beneficiary who believes that he is entitled to receive a benefit under the Plan which he has not received may file with the Committee a written claim specifying the basis for his claim and the facts upon which he relies in making such claim. Such a claim must be signed by the claimant or his authorized representative and shall be deemed filed when delivered to any member of the Administrative Committee or its designee. 10.2 NOTIFICATION TO CLAIMANT. Unless such claim is allowed in full by the Administrative Committee, the Committee shall (within 90 days after such claim was filed, plus an additional period of 90 days if required for processing and if notice of the 90-day extension of time indicating the specific circumstances requiring the extension and the date by which a decision shall be rendered is given to the claimant within the first 90-day period) cause written notice to be mailed to the claimant of the total or partial denial of such claim. Such notice shall be written in a manner calculated to be understood by the claimant and shall state (1) the specific reason(s) for the denial of the claim, (2) specific reference(s) to pertinent provisions of the Plan and/or Trust Agreement on which the denial of the claim was based, (3) a description of any additional material or information necessary for the claimant to perfect the claim and an explanation of why such material or information is necessary, and (4) an explanation of the review procedure specified in Section 10.3. The failure to provide a written approval or denial of a claim to the claimant within the required time shall be deemed to be a denial of the claim. 10.3 REVIEW PROCEDURE. Within 60 days after the denial of his claim, the claimant may appeal such denial by filing with the Administrative Committee his written request for a review of the claim. Such request for review must be signed by the claimant or his authorized representative and shall be deemed filed when delivered to any member of the Administrative Committee or its designee. If the claimant does not file a request for review of his claim within such 60-day period, the claimant shall be conclusively presumed to have accepted as final and binding the initial decision of the Administrative 54 53 Committee on his claim. If such an appeal is so filed within such 60-day period then the Administrative Committee, or a Named Fiduciary designated by the Administrative Committee, shall conduct a full and fair review of such claim. During such full review, the claimant (or his duly authorized representative) shall be given an opportunity to review documents that are pertinent to his claim and to submit issues and comments in writing. After the completion of such full review, the reviewer shall mail or deliver to the claimant a written decision on the matter based on the facts and pertinent provisions of the Plan and/or Trust Agreement and/or applicable law. Such decision shall be mailed or delivered to the claimant within a period of 60 days after the Administrative Committee's receipt of the request for review unless special circumstances require an extension of time, in which case such decision shall be rendered not later than 120 days after receipt of such request. If an extension of time for review is required, written notice of the extension shall be furnished to the claimant prior to the commencement of the extension. Such decision (1) shall be written in a manner calculated to be understood by the claimant, (2) shall state the specific reason(s) for the decision, (3) shall make specific reference(s) to pertinent provisions of the Plan and/or Trust Agreement on which the decision is based and (4) shall, to the extent permitted by applicable law, be final and binding on all interested persons. The failure to provide a written decision to the claimant within the required time shall be deemed to be a denial of the appeal. 55 54 ARTICLE XI. - ADMINISTRATION OF THE PLAN AND FIDUCIARY RESPONSIBILITY 11.1 RESPONSIBILITY FOR ADMINISTRATION. Except to the extent that particular responsibilities are assigned or delegated to other Fiduciaries pursuant to the Trust Agreement or some other Section hereof, the Company (as the Administrator) shall be responsible for the administration of the Plan. Each other Fiduciary shall have only such powers, duties, responsibilities and authorities as are specifically conferred upon him pursuant to provisions of the Plan or Trust Agreement. Any person may serve in more than one fiduciary capacity with respect to the Plan or Trust Fund, if pursuant to the Plan and/or Trust Agreement, he is assigned or delegated any multiple fiduciary capacities. 11.2 NAMED FIDUCIARIES. For the purposes of the Plan, the Named Fiduciaries shall be the Administrative Committee, the Investment Committee and the Company. A Named Fiduciary may, by written instrument, designate any other person as a Named Fiduciary to perform functions specified in such instrument (or in a delegation pursuant to Section 11.3) which relate to the administration of the Plan or the Trust Fund, provided such designee accepts such designation. Such a designation may be terminated at any time by written notice from the Named Fiduciary to the designee or by written notice from the designee to Named Fiduciary. 11.3 DELEGATION OF FIDUCIARY RESPONSIBILITIES. (1) POWER TO DELEGATE. The Administrative Committee, Investment Committee or the Company may delegate to any person any one or more powers, functions, duties and/or responsibilities with respect to the Plan or the Trust Fund (other than Trustee responsibilities, as defined in Section 405(c) of ERISA, assigned to the Trustee by the Trust Agreement or some other Section hereof). However, no such power, function, duty or responsibility which is assigned to a Fiduciary (other than to the Company or the Administrative or Investment Committee) pursuant to the Trust Agreement or some other Section hereof shall be so delegated without the written consent of such Fiduciary. 56 55 (2) WRITTEN DELEGATION. Any delegation pursuant to Subsection (1) of this Section, (a) shall be in writing, signed on behalf of the Named Fiduciary, and be delivered to and accepted in writing by the delegatee and, if the Company or the Investment Committee is the delegator, delivered to the Administrative Committee, (b) shall contain such provisions and conditions relating to such delegation as the Named Fiduciary deems appropriate, (c) shall specify the powers, functions, duties and/or responsibilities therein delegated, (d) may be amended from time to time by written agreement signed on behalf of the Named Fiduciary and by the delegatee and, if the Company or the Investment Committee signs the amendment, delivered to the Administrative Committee and (e) may be revoked (in whole or in part) at any time by written notice from one party to the other. A fully executed copy of any instrument relating to any delegation (or revocation of any delegation) under the Plan shall be filed with each of the Named Fiduciaries. 11.4 IMMUNITIES. Except as otherwise provided in Section 11.5 or by applicable law, (1) no Fiduciary shall have the duty to discharge any duty, function or responsibility which is specifically assigned exclusively to another Fiduciary or Fiduciaries by the terms of the Plan or Trust Agreement or is delegated to another Fiduciary pursuant to procedures for such delegation provided for herein or the Trust Agreement; (2) no Fiduciary shall be liable for any action taken or not taken with respect to the Plan or Trust Fund except for his own negligence or willful misconduct; (3) no Fiduciary shall be personally liable upon any contract or other instrument made or executed by him or on his behalf in the administration of the Plan or Trust Fund; (4) no Fiduciary shall be liable for the neglect, omission or wrongdoing of another Fiduciary; (5) any Fiduciary may rely and shall be fully protected in acting in good faith (a) upon the advice of counsel acceptable to the Company (who may be counsel for another Fiduciary), (b) upon the records of a Controlled Group Member, (c) upon the opinion, certificate, valuation, report, recommendation or determination of the certified public accountants appointed to audit a Controlled Group Member's financial statements or the Trustee or of any person acceptable to 57 56 the Company that is employed by such Fiduciary to render advice with regard to any responsibility such Fiduciary has under the Plan or Trust Agreement, and (d) upon any certificate, statement or other representation made by an Employee, a Participant, a Beneficiary or the Trustee; and (6) the Administrative Committee and its members shall not be required to make inquiry into the propriety of any action by the Company or the Trustee. 11.5 LIMITATION ON EXCULPATORY PROVISIONS. Notwithstanding any other provision of the Plan or Trust Agreement, no provision of the Plan or Trust Agreement shall be construed to relieve (or have the effect of relieving) any Fiduciary from any responsibility or liability for any obligation, responsibility or duty imposed on such Fiduciary by Part 4 of Title 1 of ERISA. 58 57 ARTICLE XII. - MISCELLANEOUS 12.1 MERGER OR TRANSFER OF ASSETS. There shall not be any merger or consolidation of the Plan with, or the transfer of assets or liabilities of the Plan to, any other plan, unless each Participant of the merged, consolidated or transferred plan would (if that plan then terminated) receive a benefit immediately after the merger, consolidation or transfer which is equal to or greater than the benefit he would have been entitled to receive immediately before the merger, consolidation, or transfer (if this Plan had then terminated). The Company reserves the right to merge or consolidate this Plan with, and to transfer the assets of the plan to, any other plan, without the consent of any other Employer. 12.2 PROHIBITION ON DECREASING ACCRUED BENEFITS. No amendment to the Plan (other than an amendment described in Code Section 412(c)(8)) shall have the effect of decreasing the accrued benefit of any Participant. For purposes of the preceding sentence, a Plan amendment which has the effect of (1) eliminating or reducing an early retirement benefit or a retirement-type subsidy (as defined in regulations of the Secretary of the Treasury) or (2) eliminating an optional form of benefit (except as permitted by any such regulations) with respect to benefits attributable to service before the amendment, shall be treated as decreasing accrued benefits, provided, however, that in the case of a retirement-type subsidy this sentence shall apply only with respect to a Participant who satisfies (either before or after the amendment) the pre-amendment conditions for the subsidy. 12.3 AMENDMENT CHANGING VESTING SCHEDULE. (1) If any Plan amendment changes any vesting schedule under the Plan, each Participant having not less than three years of service shall be permitted to elect, during the election period described in Subsection (2) of this Section, to have his nonforfeitable percentage computed under the Plan without regard to such amendment. (2) Such election period shall begin on the date the Plan amendment is adopted and shall end no earlier than the latest of the following dates: (a) the date which is 60 days after the day the 59 58 Plan amendment is adopted, (b) the date which is 60 days after the day the Plan amendment becomes effective, or (c) the date which is 60 days after the day the Participant is issued written notice of the Plan amendment by the Committee or the Company. (3) For purposes of Subsection (1) of this Section, a Participant shall be considered to have completed three years of service if such Participant has completed three years of service, whether or not consecutive, without regard to the exceptions of Code Section 411(a)(4), prior to the expiration of the election period described in Subsection (2) of this Section. 12.4 NONFORFEITABLE AMOUNTS. Notwithstanding any other provision of the Plan, upon the termination or partial termination of the Plan or upon complete discontinuance of contributions under the Plan, the rights of all Employees to benefits accrued to the date of such termination or partial termination or discontinuance, to the extent then funded, or the amounts credited to the Employees' Accounts, shall be nonforfeitable. 12.5 NO ENLARGEMENT OF EMPLOYMENT RIGHTS. Nothing herein contained shall constitute or be construed as a contract of employment between any Employer or any Controlled Group Member and any Employee or Participant and all Employees shall remain subject to discipline, discharge and layoff to the same extent as if the Plan had never gone into effect. An Employer by adopting the Plan, making contributions to the Trust Fund or taking any other action with respect to the Plan does not obligate itself to continue the employment of any Participant or Employee for any period or, except as expressly provided in the Plan, to make any payments into the Trust Fund. 12.6 SEVERABILITY PROVISION. If any provision of the Plan or Trust Agreement or the application thereof to any circumstance or person is invalid by a court of competent jurisdiction, the remainder of the Plan or Trust Agreement and the application of such provision to other circumstances or persons shall not be affected thereby. 60 59 12.7 ACTION BY COMPANY. Wherever the Company is authorized to act under the Plan (including, but not limited to, any delegation of its fiduciary powers and responsibilities under the Plan), such action shall be taken, unless otherwise provided in the Plan, by written instrument executed by an officer of the Company. The Trustee may rely on any instrument so executed as being validly authorized and as properly evidencing the action of the Company. 12.8 SPENDTHRIFT PROVISIONS. To the extent permitted by law and except as otherwise provided under a qualified domestic relations order pursuant to Code Section 414(p), no right or interest of any kind in the Trust Fund shall be transferable, alienable or assignable by any Participant or Beneficiary, nor shall any such right or interest be subject to anticipation, encumbrance, garnishment, attachment, execution or levy of any kind, voluntary or involuntary. The Administrative Committee shall establish procedures to determine the qualified status of domestic relations orders and to administer distributions under such qualified orders in accordance with Code Section 414(p). 12.9 FACILITY OF PAYMENT. (1) If the Administrative Committee finds that any Participant or Beneficiary to whom a benefit is payable hereunder is unable to care for his affairs because of physical, mental or legal incompetence, the Administrative Committee, in its sole discretion, may cause any payment due to him hereunder, for which prior claim has not been made by a duly qualified guardian or other legal representative, to be paid to the person deemed by the Administrative Committee to be maintaining or responsible for the maintenance of such Participant or Beneficiary; and any such payment shall be deemed a payment for the account of such Participant or Beneficiary and shall constitute a complete discharge of any liability therefor under the Plan. (2) If an individual dies before receiving all the payments to be made to him hereunder or before cashing any or all of the checks representing such payment or payments, such payment(s) shall be made to his Beneficiary; and the receipt of such payment(s) by the Beneficiary shall be a valid and complete discharge for the payment of such benefit. 61 60 12.10 RECIPIENTS WHO CANNOT BE LOCATED. In the event that the Administrative Committee is unable to locate a person entitled to payment of a benefit hereunder after sending a registered mail (or equivalent communication) to such person's address last known to his Employer, then such benefits shall be forfeited. Any such forfeitures shall not be applied to increase the benefits which Employees might otherwise receive under the Plan, but shall be used to reduce the future Employer Contributions to (if any), or the administrative expenses of, the Plan. Notwithstanding the foregoing, in the event that any missing person who would have been entitled to receive benefits forfeited under this Section should subsequently make a claim for such benefits, then the forfeited benefits shall be reinstated and payment of the benefits which had previously been forfeited shall be made (without interest) to the party entitled to such benefits as soon as practicable after the missing person makes a claim therefor. 62 61 ARTICLE XIII. - OTHER EMPLOYERS AND DESIGNATION OF GROUPS OF EMPLOYEES 13.1 ADOPTION OF PLAN. Any organization may, with the consent of the Company, adopt the Plan and thereby become an Employer hereunder by executing an instrument (hereinafter referred to as an "Instrument of Adoption") evidencing such adoption and filing a copy thereof with the Company and the Trustee, and said Instrument shall thereupon become incorporated into the Plan by reference. Such adoption may be subject to such terms and conditions as the Company requires or approves. By their adoption of the Plan, Employers other than the Company shall be deemed to consent to actions taken by the Company in entering into the Trust Agreement and any other arrangements for the purpose of providing benefits under the Plan, and to authorize the Company to take any actions within the authority of the Company under the terms of the Plan. 13.2 DESIGNATION OF GROUPS OF EMPLOYEES. The Company may, and an Employer (with the consent of the Company) may, designate a group of its Employees to be covered by the Plan and each such person within such group shall thereafter be deemed to be a Covered Employee. The Company may do so by amending the Plan or by following the procedure described in this Section. Each such designation shall be set forth in the Instrument of Adoption or in an Instrument Designating Employee Group which is executed by the Employer and a copy of which is filed with the Company and the Trustee and such Instrument Designating Employee Group shall thereupon be incorporated in the Plan by reference. 13.3 ADDITIONAL TERMS AND CONDITIONS RELATING TO INSTRUMENTS. Each Instrument of Adoption and Instrument Designating Employee Group executed by an Employer may contain such terms and conditions governing the application of the Plan to its Employees covered by such Instrument as may be specified by such Employer and approved by the Company and, without limiting the generality of the foregoing, shall specify any greater or lesser Participant Contributions, additional eligibility requirements for membership in the Plan and any other provision which such Employer (with the 63 62 approval of the Company) shall consider necessary or appropriate to carry out the provisions of the Plan as to its Employees covered by such Instrument. In the event of inconsistency between the other provisions of the Plan and such terms and conditions set forth in any Instrument, the latter shall control as to the Employees (or former Employees) covered by such Instrument; provided, however, that if such inconsistency results from changes made in provisions of the Plan to comply with applicable law, then such provisions of the Plan shall control as to the Employees (or former Employees) covered by such Instrument. Any reference in any Instrument to provisions of the Plan as in effect at the time such Instrument became effective shall be deemed to refer to the comparable provisions of the Plan as later amended or restated. 13.4 COSTS AND EXPENSES TO BE SHARED. If there is more than one Employer hereunder, the costs and expenses incurred in connection with the Plan and Trust Fund each year shall, to the extent such costs and expenses are not paid out of the Trust Fund pursuant to Section 9.8, be shared by all the Employers hereunder in the proportions agreed upon between them. 64 63 ARTICLE XIV. - AMENDMENT 14.1 RIGHT TO AMEND. The Nominating, Organization and Compensation Committee of the Board of Directors of the Company has reserved, and does hereby reserve, the right to amend at any time and from time to time, any or all of the provisions of the Plan (including any Instrument of Adoption or Instrument Designating Employee Group), without the consent of any Employer or any Employee, Participant or Beneficiary or other person. In addition, each other Employer shall have the right to amend, at any time and from time to time, any or all of the provisions of any Instrument of Adoption executed by it, with the consent of the Nominating, Organization and Compensation Committee of the Board of Directors of the Company but without the consent of any other Employer or any Employee, Participant or Beneficiary or any other person. The Trust Agreement may be amended in the manner and to the extent provided therein. 14.2 PROCEDURE. Any amendment of the Plan (1) shall be expressed in an instrument executed by an appropriate officer of the Company or the Employer, as applicable under Section 14.1, (2) shall become part of the Plan and (3) shall become effective as of the date designated in such instrument. If no effective date of an amendment is designated, such amendment shall become effective on the date of the execution of the amendment. 65 64 ARTICLE XV. - TERMINATION 15.1 RIGHT TO TERMINATE OR WITHDRAW. (1) The Nominating, Organization and Compensation Committee of the Board of Directors of the Company has reserved, and does hereby reserve, the right to terminate the Plan at any time, without the consent of any Employer or any Employee, Participant, Beneficiary or other person, either in whole or in part as to any designated group of Employees (including former Employees) and their Beneficiaries. Any such termination shall be expressed in an instrument executed by an appropriate officer of the Company on the order of the Nominating, Organization and Compensation Committee of the Board of Directors of the Company and filed with the Trustee and shall (except as may otherwise be required by applicable law) become effective as of the date designated in such instrument or, if no such effective date is so designed, on the date of the execution of such instrument. (2) Any Employer other than the Company which adopts the Plan may elect separately to withdraw from the Plan, either in whole or as to any designated group of its Employees (including former Employees) and their Beneficiaries. Such withdrawal shall be expressed in an instrument executed by the withdrawing Employer on the order of its Board of Directors and filed with the Company and the Trustee and shall become effective as of the date designated in such instrument or, if no such effective date is so designated in such instrument, on the later of the date of the execution of such instrument or approval thereof by the Company. No such withdrawal shall decrease the amount of Employer Contributions (if any) to be made by the Employer on account of periods preceding the withdrawal. The interests in the Trust Fund of Participants who are or were Employees of the withdrawing Employer shall be distributed as provided in Article VI. 15.2 APPLICATION OF ASSETS UPON TERMINATION. If the Plan shall be terminated by the Company as to all Employers, Participant Contributions to the Plan shall cease and, unless this provision 66 65 is subsequently amended, the Trustee shall make distribution to each Employee as if the Plan had not been terminated. 67 66 ARTICLE XVI. - TOP-HEAVY PLAN REQUIREMENTS 16.1 DEFINITIONS. For the purposes of this Article, the following terms, when used with initial capital letters, shall have the following respective meanings: (1) AGGREGATION GROUP: Permissive Aggregation Group or Required Aggregation Group, as the context shall require. (2) COMPENSATION: Effective as of January 1, 1989, Compensation as defined in Section 4.5(3) (subject to the limitations described in Section 1.1(9)(b)). (3) DEFINED BENEFIT PLAN: A qualified plan as defined in Code Section 414(j). (4) DEFINED CONTRIBUTION PLAN: A qualified plan as defined in Code Section 414(i). (5) DETERMINATION DATE: For any Plan Year, the last day of the immediately preceding Plan Year, except that in the case of the first Plan Year of the Plan, the Determination Date shall be the last day of such first Plan Year. (6) EXTRA TOP-HEAVY GROUP: An Aggregation Group if, as of a Determination Date, the aggregate present value of accrued benefits for Key Employees in all plans in the Aggregation Group (whether Defined Benefit Plans or Defined Contribution Plans) is more than ninety (90%) of the aggregate present value of all accrued benefits for all employees in such plans. (7) EXTRA TOP-HEAVY PLAN: See Section 16.3. (8) FORMER KEY EMPLOYEE: A Non-Key Employee with respect to a Plan Year who was a Key Employee in a prior Plan Year. Such term shall also include his Beneficiary in the event of his death. (9) KEY EMPLOYEE: An Employee or former Employee who is or was a Participant and who, at any time during the current Plan Year or any of the four preceding Plan Years, is (a) an officer of an Employer (limited to no more than 50 Employees or, if lesser, the greater of 3 Employees or 10 percent of the Employees) having an annual Compensation greater than, effective as of January 1, 1987, 68 67 50% of the dollar amount in effect under Code Section 415(b)(1)(A) for any such Plan Year, (b) one of the 10 Employees owning (or considered as owning within the meaning of Code Section 318) the largest interests in an Employer and having annual Compensation of more than the applicable dollar amount referred to in Section 4.8(1), (c) a 5-percent owner (as such term is defined in Code Section 416(i)(1)(B)(i)) or (d) a 1-percent owner (as such term is defined in Code Section 416(i)(1)(B)(ii)) having an annual Compensation of more than $150,000. For purposes of Paragraph (b) of this Subsection, if two Employees have the same interest in an Employer, the Employee having greater annual Compensation shall be treated as having a larger interest. The term "Key Employee" shall also include such Employee's Beneficiary in the event of his death. For purposes of this Subsection, effective as of January 1, 1989, "Compensation" has the meaning given such term by Code Section 414(q)(7). (10) NON-KEY EMPLOYEE: An Employee or former Employee who is or was a Participant and who is not a Key Employee. Such term shall also include his Beneficiary in the event of his death. (11) PERMISSIVE AGGREGATION GROUP: The group of qualified plans of an Employer consisting of: (a) the plans in the Required Aggregation Group; plus (b) one (1) or more plans designated from time to time by the Committee that are not part of the Required Aggregation Group but that satisfy the requirements of Code Sections 401(a)(4) and 410 when considered with the Required Aggregation Group. (12) REQUIRED AGGREGATION GROUP: The group of qualified plans of an Employer consisting of: (a) each plan in which a Key Employee participates; plus (b) each other plan which enables a plan in which a Key Employee participates to meet the requirements of Code Sections 401(a)(4) or 410. 69 68 (13) TOP-HEAVY ACCOUNT BALANCE: A Participant's (including a Participant who has received a total distribution from this Plan) or a Beneficiary's aggregate balance standing to his account as of the Valuation Date coinciding with or immediately preceding the Determination Date (as adjusted by the amount of any Employer Contributions made or due to be made after such Valuation Date but before the expiration of the extended payment period in Code Section 412(c)(10)), provided, however, that such balance shall include the aggregate distributions made to such Participant or Beneficiary during the five (5) consecutive Plan Years ending with the Plan Year that includes the Determination Date (including distributions under a terminated plan which if it had not been terminated would have been included in a Required Aggregation Group), and provided further that if an Employee or former Employee has not performed services for any Employer maintaining the Plan at any time during the 5-year period ending on the Determination Date, his account (and/or the account of his Beneficiary) shall not be taken into account. (14) TOP-HEAVY GROUP: An Aggregation Group if, as of a Determination Date, the aggregate present value of accrued benefits for Key Employees in all plans in the Aggregation Group (whether Defined Benefit Plans or Defined Contribution Plans) is more than sixty percent (60%) of the aggregate present value of accrued benefits for all employees in such plans. (15) TOP-HEAVY PLAN: See Section 16.2. 16.2 DETERMINATION OF TOP-HEAVY STATUS. (1) Except as provided by Subsections (2) and (3) of this Section, the Plan shall be a Top-Heavy Plan if, as of a Determination Date: (a) the aggregate of Top-Heavy Account Balances for Key Employees is more than sixty percent (60%) of the aggregate of all Top-Heavy Account Balances, excluding for this purpose the aggregate Top-Heavy Account Balances of Former Key Employees; or (b) if the Plan is included in a Required Aggregate Group which is a Top-Heavy Group. 70 69 (2) If the Plan is included in a Required Aggregation Group which is not a Top-Heavy Group, the Plan shall not be a Top-Heavy Plan notwithstanding the fact that the Plan would otherwise be a Top-Heavy Plan under Paragraph (a) of Subsection (1) of this Section. (3) If the Plan is included in a Permissive Aggregation Group which is not a Top-Heavy Group, the Plan shall not be a Top-Heavy Plan notwithstanding the fact that the Plan would otherwise be a Top-Heavy Plan under Subsection (1) of this Section. 16.3 DETERMINATION OF EXTRA TOP-HEAVY STATUS. (1) Except as provided by Subsections (2) and (3) of this Section, the Plan shall be an Extra Top-Heavy Plan if, as of the Determination Date: (a) the aggregate of Top-Heavy Account Balances for Key Employees is more than ninety percent (90%) of the aggregate of all Top-Heavy Account Balances, excluding for this purpose the aggregate Top-Heavy Account Balances of Former Key Employees; or (b) if the Plan is included in a Required Aggregation Group which is an Extra Top-Heavy Group. (2) If the Plan is included in a Required Aggregation Group which is not an Extra Top-Heavy Group, the Plan shall not be an Extra Top-Heavy Plan notwithstanding the fact that the Plan would otherwise be an Extra Top-Heavy Plan under paragraph (a) of Subsection (1) of this Section. (3) If the Plan is included in a Permissive Aggregation Group which is not an Extra Top-Heavy Group, the Plan shall not be an Extra Top-Heavy Plan notwithstanding the fact that the Plan would otherwise be an Extra Top-Heavy Plan under Subsection (1) of this Section. 16.4 TOP-HEAVY PLAN REQUIREMENTS. Notwithstanding any other provisions of the Plan to the contrary, if the Plan is a Top-Heavy Plan for any Plan Year, the Plan shall then satisfy the following requirements for such Plan Year: (1) The minimum contribution requirement as set forth in Section 16.5. (2) The adjustment to minimum benefits and allocations as set forth in Section 16.6. 71 70 16.5 MINIMUM CONTRIBUTION REQUIREMENT. If the Plan is a Top-Heavy Plan for any Plan Year: (1) Each Non-Key Employee who is eligible to share in any Employer Contribution for such Plan Year (or who would have been eligible to share in any such Employer Contribution if a Before-Tax Contribution had been made for him during such Plan Year) shall be entitled to receive an allocation of such Employer Contribution, which is at least equal to three percent (3%) of his Compensation for such Plan Year. (2) The three percent (3%) minimum contribution requirement under Subsection (1) of this Section for a Non-Key Employee shall be increased to four percent (4%) if the Employer maintains a Defined Benefit Plan which does not cover such Non-Key Employee. (3) The percentage minimum contribution requirement set forth in Subsections (1) and (2) of this Section with respect to a Plan Year shall not exceed the percentage at which Employer Contributions are made (or required to be made) under the Plan for such Plan Year for the Key Employee for whom such percentage is the highest for such Year. (4) The percentage minimum contribution requirement set forth in Subsections (2) and (3) of this Section may also be reduced or eliminated in accordance with Section 16.7(2). (5) For the purpose of Subsection (3) of this Section, contributions taken into account shall include like contributions under all other Defined Contribution Plans in the Required Aggregation Group, excluding any such plan in the Required Aggregation Group if that plan enables a Defined Benefit Plan in such Required Aggregation Group to meet the requirements of Code Sections 401(a)(4) or 410. (6) For the purpose of this Section, the term "Employer Contributions" shall include Before-Tax Contributions made for an Employee. 72 71 16.6 ADJUSTMENT TO MINIMUM BENEFITS AND ALLOCATIONS. If the Plan is a Top-Heavy Plan for any Plan Year, and if the Employer maintains a Defined Benefit Plan which could or does provide benefits to Participants in this Plan: (a) If the Plan is not an Extra Top-Heavy Plan (but is a Top-Heavy Plan), then the percentage minimum contribution requirement in Section 16.5(1) shall be seven and one-half percent (7-1/2%) for a Non-Key Employee who is covered by this Plan and the Defined Benefit Plan. (b) If the Plan is an Extra Top-Heavy Plan, then parts (a) and (b) of Section 4.6(1) shall be calculated by substituting "1.0" for "1.25" for each place such "1.25" figure appears, and Code Section 415(e)(6)(B)(I) shall be calculated by substituting "$41,500: for "$51,875" for each place such "$51,875" amount appears. 16.7 COORDINATION WITH OTHER PLANS. (1) In applying this Article, an Employer and all Controlled Group Members shall be treated as a single employer, and the qualified plans maintained by such single employer shall be taken into account. (2) In the event that another Defined Contribution Plan or Defined Benefit Plan maintained by the Controlled Group provides contributions or benefits on behalf of Participants in this Plan, such other plan(s) shall be taken into account in determining whether this Plan satisfies Section 16.4; and the minimum contribution required for a Non-Key Employee in this Plan under Section 16.5 will be reduced or eliminated, in accordance with the requirements of Code Section 416 and the Regulations thereunder, if a minimum contribution or benefit is made or accrued in whole or in part in respect of such other plan(s). (3) Principles similar to those specifically applicable to this Plan under this Article, and in general as provided for in Code Section 416 and the Regulations thereunder, shall be applied to the 73 72 other plan(s) required to be taken into account under this Article in determining whether this Plan and such other plan(s) meet the requirements of such Code Section 416 and the Regulations thereunder. 74 73 ARTICLE XVII. - CONSTRUCTION OF PLAN DOCUMENTS 17.1 Construction of Plan Documents. (1) Unless the context otherwise indicates, the masculine wherever used in the Plan or Trust Agreement shall include the feminine and neuter, the singular shall include the plural and words such as "herein", "hereof", "hereby", "hereunder" and words of similar import refer to the Plan as a whole and not to any particular part thereof. (2) Where headings have been supplied to portions of the Plan and the Trust Agreement (other than the headings to the Subsections in Section 1.1), they have been supplied for convenience only and are not to be taken as limiting or extending the meaning of any of such portions of such documents. (3) Wherever the word "person" appears in the Plan, it shall refer to both natural and legal persons. (4) A number of the provisions hereof and of the Trust Agreement are designed to contain provisions required or contemplated by certain federal laws and/or regulations thereunder. All such provisions herein and in the Trust Agreement are intended to have the meaning required or contemplated by such provisions of such law or regulations and shall be construed in accordance with valid regulations and valid published governmental rulings and interpretations of such provisions. In applying such provisions hereof or of the Trust Agreement, each Fiduciary may rely (and shall be protected in relying) on any determination or ruling made by any agency of the United States Government that has authority to issue regulations, rulings or determinations with respect to the federal law thus involved. (5) Except to the extent federal law controls, the Plan and Trust Agreement shall be governed, construed and administered according to the laws of the State of Ohio. All persons accepting 75 74 or claiming benefits under the Plan or Trust Agreement shall be bound by and deemed to consent to their provisions. 17.2 GENERAL PROVISIONS. (1) This Plan shall constitute an amendment, restatement and continuation of the Plan. This amendment and restatement is generally effective January 1, 1994. However, certain provisions of this amendment and restatement of the Plan are effective as of some other date. The provisions of this amendment and restatement which are effective prior to January 1, 1994 shall be deemed to amend the corresponding provisions of the Plan as in effect before January 1, 1994 and all amendments thereto. Events occurring before the applicable effective date of any provision of this amendment and restatement of the Plan shall be governed by the applicable provision of the Plan in effect on the date of the event. (2) The benefits payable with respect to an Employee or former Employee whose termination of employment occurred before January 1, 1994 (and who is not rehired by a Controlled Group Member thereafter) shall be determined by and paid in accordance with the terms and provisions of the Plan as in effect at the date of such termination of employment, except to the extent that certain provisions of the Plan, as amended and restated as of January 1, 1994, apply to such individual as a result of applicable law or the context clearly requires the application of such provision to such individual. Executed this 8th day of December, 1993. --- -------- HAMILTON BEACH/PROCTOR-SILEX, INC. By /S/ G. Nebel ------------------------------- Title: President & C.E.O.
76 75 And /S/ Ronald Eksten ------------------------------ Title: Vice President, General Counsel Doc. 61666.1
EX-10.126 8 NACCO EXHIBIT 10.CXXVI 1 EXHIBIT 10(cxxvi) AMENDMENT NO. 1 TO THE HAMILTON BEACH, INC. RETIREMENT PLAN FOR SALARIED EMPLOYEES (AS RESTATED EFFECTIVE JANUARY 1, 1989) Hamilton Beach/Proctor-Silex, Inc. hereby adopts and publishes this Amendment No. 1 to the Hamilton Beach, Inc. Retirement Plan for Salaried Employees (As Restated Effective January 1, 1989) (the "Plan"). The provisions of this Amendment shall be effective as of the dates indicated herein and, pursuant to Internal Revenue Service Notice 92-36, the provisions of this Amendment shall be combined with the provisions of all other amendments to the Plan which are effective on or after January 1, 1989 (including Amendment No. 4 which froze benefit accruals under the Plan as of December 31, 1990) and treated as a single amendment for purposes of the nondiscrimination requirements of the Internal Revenue Code. Words used herein with initial capital letters shall have the meanings set forth in the Plan. SECTION 1 Effective as of January 1, 1989, a new Section 1.10A is hereby added to the Plan, immediately following Section 1.10, to read as follows: "1.10A. CAPPED PARTICIPANT: A Participant whose Accrued Benefit on December 31, 1988 is based upon Compensation in excess of the limit contained in Section 401(a)(17) of the Code as in effect on or after such date." Section 2 Effective as of January 1, 1989, the first two sentences of Section 1.13 of the Plan are hereby amended in their entirety to read as follows: "1.13 "COMPENSATION LIMIT": Effective as of January 1, 1989, the limit contained in Section 401(a)(17) of the Code. 1.13(a) In applying the Code Section 401(a)(17) limit for the 1989 through (and including) 1990 Plan Years, the Code Section 401(a)(17) limit in effect during the Year of calculation shall be applied for all purposes when calculating a Capped Participant's Accrued Benefit." VOL402CL Doc: 64148.1 2 2 EXECUTED this 21st day of December, 1993, but to be ---- -------- effective as indicated herein. HAMILTON BEACH/PROCTOR-SILEX, INC. By: /S/ G. Nebel ----------------------- Title: President VOL402CL Doc: 64148.1 EX-10.127 9 NACCO EXHIBIT 10.CXXVII 1 EXHIBIT 10 (cxxvii) AMENDMENT NO. 1 TO THE RETIREMENT BENEFIT PLAN FOR ALFRED M. RANKIN, JR. NACCO Industries, Inc. hereby adopts and publishes this Amendment No. 1 to the Retirement Benefit Plan for Alfred M. Rankin, Jr. (the "Plan"), effective as of December 31, 1993. Words and phrases used herein with initial capital letters which are defined in the Plan are used herein as so defined. SECTION 1 --------- Section 1(e) of the Plan is hereby amended by adding the following sentence to the end thereof: "Notwithstanding any provision of the Plan to the contray, the Supplemental Retirement Benefit payable hereunder shall be frozen effective as of December 31, 1993." SECTION 2 --------- The Plan is hereby amended by deleting the phrase "the Baord of Directors of the Company" and replacing it with the phrase "the Nominating, Organization and Compensation Committee of the Board of Directors of the Company" each time it appears therein. EXECUTED this 21st day of December, 1993, to be effective as of December 31, 1993 ---- -------- NACCO INDUSTRIES, INC. By: /S/ Charles A. Bittenbender ---------------------------- Title: Vice President --------------
VOL402CL Doc: 65476.1 EX-10.128 10 NACCO EXHIBIT 10.CXXVIII 1 EXHIBIT 10 (cxxviii) AMENDMENT NO. 3 TO THE RETIREMENT BENEFIT PLAN FOR WARD SMITH NACCO Industries, Inc. hereby adopts and publishes this Amendment No. 3 to the Retirement Benefit Plan for Ward Smith (the "Plan"), effective as of December 31, 1993. Words and phrases used herein with initial capital letters which are defined in the Plan are used herein as so defined. SECTION 1 --------- The first sentence of Section 1(e) of the Plan is hereby amended by adding the following clause (H) immediately following clause (G) thereof: "and (H) benefit accruals under the Pension Plan had continued in effect for the period from January 1, 1994 until the date of the Participant's termination of employment with the Controlled Group, in accordance with the terms of the Pension Plan as it existed on December 31, 1993, as modified by the foregoing provisions," SECTION 2 --------- The Plan is hereby amended by deleting the phrase "the Baord of Directors of the Company" and replacing it with the phrase "the Nominating, Organization and Compensation Committee of the Board of Directors of the Company" each time it appears therein. EXECUTED this 21st day of December, 1993, to be effective as of December 31, 1993. ---- -------- NACCO INDUSTRIES, INC. By: /S/ Charles A. Bittenbender --------------------------- Title: Vice President --------------
VOL402CL Doc: 65476.1 EX-10.134 11 NACCO EXHIBIT CXXXIV 1 EXHIBIT 10(cxxxiv) AMENDMENT NO. 1 TO THE THE NORTH AMERICAN COAL CORPORATION RETIREMENT SAVINGS PLAN The North American Coal Corporation hereby adopts this Amendment No. 1 to The North American Coal Corporation Retirement Savings Plan (the "Plan"), effective as of the dates indicated herein. Words and phrases used herein with initial capital letters which are defined in the Plan are used herein as so defined. Section 1 --------- Effective January 1, 1989, Section 1.1(21)(a) of the Plan is hereby amended by deleting the phrase "Effective as of January 1, 1987" and replacing it with the phrase "Unless the Company elects one of the simplified methods in Code Section 414(q) or Revenue Procedure 93- 42." Section 2 --------- Effective January 1, 1994, Section 4.6(4) of the Plan is hereby amended by adding the following sentence to the end thereof: "In the event a reduction is necessary to avoid exceeding the limitations set forth in this Section, and the individual is a participant in two defined contribution plans maintained by the Controlled Group, the affected individual's benefits under the other defined contribution plan shall be reduced to the extent necessary to avoid exceeding such limitations." Section 3 --------- Effective January 1, 1994, a new Section 6.1(3) is hereby added to the Plan, immediately following Section 6.1(2), to read as follows: "(3) The Administrative Committee shall provide the Participant or Death Beneficiary with the application form (whichshall contain a general description of the optional forms of benefit available under the Plan) and such other information required to be provided under Section 402(f) of the Code no less than 30 days and no more than 90 days before a distribution or withdrawal is to be made. Notwithstanding the foregoing, such distribution or withdrawal may commence less than 30 days after such form and information are provided to the Participant or Death Beneficiary, provided that: (a) the Administrative Committee clearly informs the recipient that he has a right to a period of at least 30 days after receiving the information to consider whether or not to elect a distribution or withdrawal (and, if applicable, a 2 2 particular form of benefit), and (b) the recipient, after receiving the information, affirmatively elects the distribution or withdrawal." Section 4 --------- Effective as of January 1, 1993, Section 6.8(2) of the Plan is hereby amended in its entirety to read as follows: "(2) Except as provided in Subsection (3) of this Section, all distributions under the Plan shall be made in the form of cash payments made directly to the Participant or Death Beneficiary." Section 5 --------- Effective as of January 1, 1993, a new Section 6.8(3) is hereby added to the Plan, immediately following Section 6.8(2), to read as follows: (3) (a) Notwithstanding any provision of the Plan to the contrary, if a Participant or Death Beneficiary who is a Spouse is eligible to receive a distribution from the Plan that constitutes an "eligible rollover distribution" (as defined in paragraph (d) of this Subsection) and the Participant or Spouse elects to have all or a portion (at least $500) of such distribution paid directly to an "eligible retirement plan" (as defined in paragraph (c) of this Subsection) and specifies the eligible retirement plan to which the distribution is to be paid, such distribution (or portion thereof) shall be made in the form of a direct rollover to the eligible retirement plan so specified. A direct rollover is a payment made by the Plan to the eligible retirement plan so specified for the benefit of the Participant or Spouse. Notwithstanding the foregoing, a direct rollover of an eligible rollover distribution shall not be made if the Participant's or Spouse's eligible rollover distributions for a Plan Year are reasonably expected to total less than $200. Unless otherwise specifically provided herein, for purposes of this Subsection, the terms "Spouse" shall include a former Spousewho is an alternate payee under a qualified domestic relations order. (b) The Administrative Committee shall prescribe reasonable procedures for the elections to be made pursuant to this Subsection. Within a reasonable period of time (as prescribed by Treasury Regulations or rulings) before the payment of an eligible rollover distribution, the Administrative Committee shall provide a written notice to the Participant or Spouse describing the rights under this Section and such other information required to be provided under Section 402(f) of the Code. (c) For purposes of this Subsection, the term "eligible retirement plan" means an individual retirement account or annuity under Section 408 of the Code, a defined contribution plan under Section 401(a) of the Code that accepts rollovers, an annuity plan under Section 403(a) of the Code and any other type of plan that is included within the definition of "eligible retirement plan" under Section 401(a)(31)(D) of the Code; provided, however that with respect to a Spouse (but not a former Spouse who is an alternate payee) who receives a distribution after a Participant's death, an "eligible retirement plan" shall mean only an individual retirement account or annuity under Section 408 of the Code. VOL402CL Doc: 5862.1 3 3 (d) For purposes of this Subsection, the term "eligible rollover distribution" shall mean any distribution of all or any portion of the balance to the credit of the distributee from an employees' trust described in Section 401(a) of the Code which is exempt from tax under Section 501(a) of the Code, except (i) any distribution that is one of a series of substantially equal periodic payments (not less frequently than annually) made for the life (or life expectancy) of the distributee and a designated beneficiary, or for a specified period of 10 years or more, (ii) any distribution to the extent it is required under Section 401(a)(9) of the Code, (iii) the portion of any distribution that is not includible in gross income, and (iv) such other amounts specified in Treasury regulations or rulings, notices or announcements issued under Section 402(c) of the Code. (e) The provisions of this Subsection are intended to comply with the provisions of Section 401(a)(31) of the Code and shall be interpreted in accordance with such Section and Treasury Regulations and rulings thereunder." Section 6 --------- Effective January 1, 1994, the first sentence of Section 6.11(1) of the Plan is hereby amended in its entirety to read as follows: "A Participant who is either an Employee of an Employer or a Controlled Group Member or a "party-in-interest" (as defined in Section 3(14) of ERISA) may apply on a form provided by the Administrative Committee for a loan from his Total Account." Section 7 --------- Effective as of January 1, 1993, Section 6.11(2)(b) of the Plan is hereby amended by adding the paranthetical phrase "(including the Loan Account)" after the phrase "Total Account" therein. Section 8 --------- Effective as of January 1, 1993, Section 6.11(4)(d)(iii) of the Plan is hereby amended by deleting the phrase "used to acquire or refinance a dwelling" and replacing it with the phrase "used to acquire a dwelling". VOL402CL Doc: 5862.1 4 4 Section 9 --------- Effective as of January 1, 1994, Section 6.11(4)(d)(v)(C) of the Plan is hereby amended by deleting the phrase "thirty (30) days" and replacing it with the phrase "sixty (60) days". Section 10 ---------- Effective January 1, 1994, Section 6.11(4)(d)(v)(C)(III) of the Plan is hereby amended by deleting the phrase "his termination of employment with the Controlled Group or" therefrom. Section 11 ---------- Effective as of January 1, 1994, Section 14.1 and 14.2 of the Plan are hereby amended by replacing the word "Company" each time it shall appear in such Section with the phrase "Nominating, Organization and Compensation Committee of the Board of Directors of the Company". EXECUTED this 30th day of December, 1993, to be effective as of the date indicated above. ---- -------- THE NORTH AMERICAN COAL CORPORATION By: /S/ Thomas A. Koza -------------------- Title: Vice President/Law & Administration, Secretary
VOL402CL Doc: 5862.1 EX-10.135 12 NACCO EXHIBIT 10.CXXXV 1 EXHIBIT 10(cxxxv) AMENDMENT NO. 2 TO THE NORTH AMERICAN COAL CORPORATION SALARIED EMPLOYEES PENSION PLAN (As Amended and Restated as of January 1, 1989) The North American Coal Corporation hereby adopts this Amendment No. 2 to The North American Coal Corporation Salaried Employees Pension Plan (As Amended and Restated as of January 1, 1989) (the "Plan"). The provisions of this Amendment shall be effective as of the dates indicated herein and, pursuant to Internal Revenue Service Notice 92-36, shall be combined with the provisions of all other amendments to the Plan which are effective on or after January 1, 1989 and treated as a single amendment for purposes of the nondiscrimination requirements of the Internal Revenue Code. Words and phrases used herein with initial capital letters which are defined in the Plan are used herein as so defined. SECTION 1 --------- Effective December 31, 1993, the following new sentence is hereby added to the end of the Preamble to the Plan: "Effective December 31, 1993, the NACCO Industries, Inc. Pension Plan for Salaried Employees was merged into the Plan." SECTION 2 --------- Effective December 31, 1993, Section 1.10(d)(ii) of the Plan is hereby amended by adding the phrase "or the Merged Plan" after the phrase "an Other Group Plan" each time it appears therein. SECTION 3 --------- Effective as of January 1, 1989, a new Section 1.10A is hereby added to the Plan, immediately following Section 1.10, to read as follows: "1.10A CAPPED PARTICIPANT: A Participant whose Accrued Benefit on December 31, 1988 or December 31, 1993 is based upon Compensation in excess of the limit contained in Section 401(a)(17) of the Code as in effect on or after such date(s)." VOL402CL Doc: 60375.1 2 2 SECTION 4 --------- Effective as of January 1, 1989, the following sentence is hereby added after the first sentence of Section 1.14(b) of the Plan to read as follows: "In applying the Code Section 401(a)(17) limit for the 1989 through (and including) 1993 Plan Years, the Code Section 401(a)(17) limit in effect during the Year of calculation shall be applied for all purposes when calculating a Capped Participant's Accrued Benefit." SECTION 5 --------- Effective as of January 1, 1989, the second sentence of Section 1.14(b) of the Plan is hereby amended by deleting the phrase "For purposes of the preceding sentence" and replacing it with the phrase "For purposes of calculating the limit contained in Section 401(a)(17) of the Code." SECTION 6 --------- Effective January 1, 1994, Section 1.18 of the Plan is hereby amended in its entirety to read as follows: "1.18 COVERED EMPLOYEE: A salaried Employee of The Falkirk Mining Company, The Coteau Properties Company, The Sabine Mining Company, Bellaire Corporation, North American Coal Royalty Company, or The North American Coal Corporation (including, effective January 1, 1994, a salaried Employee associated with the Dallas Accounting Division) or a salaried Employee of any other Employer. Notwithstanding the foregoing, no Employee who is employed in an Excluded Bargaining Unit or who is a leased employee (as defined in Section 1.24) shall be a Covered Employee." SECTION 7 --------- Effective January 1, 1994, Section 1.25 of the Plan is hereby amended in its entirety to read as follows: "1.25 EMPLOYER: Any person which adopts the Plan pursuant to Article XIII hereof. As of January 1, 1994, the Employers under the Plan are The Falkirk Mining Company, The Coteau Properties Company, The Sabine Mining Company, Bellaire Corporation, North American Coal Royalty Company, and The North American Coal Corporation. In the case of any person which adopts the Plan and which (a) ceases to exist, (b) ceases to be a member of the Controlled Group or (c) withdraws or is eliminated from the Plan, it shall not thereafter be an Employer." VOL402CL Doc: 60375.1 3 3 SECTION 8 --------- Effective as of January 1, 1989, Section 1.30(a) of the Plan is hereby amended by deleting the phrase "For a particular Plan Year" in the first line thereof and replacing it with the phrase "For a particular Plan Year, unless an Employer elects one of the simplified methods contained in Code Section 414(q)(12) or Revenue Procedure 93-42,". SECTION 9 --------- Effective December 31, 1993, a new Section 1.35A is hereby added to the Plan, immediately following Section 1.35, to read as follows: "1.35A MERGED PLAN: The NACCO Industries, Inc. Pension Plan for Salaried Employees, as it existed from December 1, 1986 through December 31, 1993. Effective December 31, 1993, the Merged Plan was merged into this Plan." SECTION 10 ---------- Effective December 31, 1993, Section 1.36 of the Plan is hereby amended in its entirety to read as follows: "1.36 MINIMUM BENEFIT: For a Participant who was a Participant in the Plan on December 31, 1988, the Participant's Accrued Benefit as of December 31, 1988 determined in accordance with the benefit formula contained in Exhibit B attached hereto. For a Participant who was a participant in the Merged Plan, the Participant's accrued benefit under such plan. In the event that a Participant is described in both of the preceding sentences, the Participant's Minimum Benefit shall be the greater of the amounts determined under such sentences." SECTION 11 ---------- Effective December 31, 1993, Section 1.41 of the Plan is hereby amended in its entirety to read as follows: "1.41 OTHER GROUP PLAN: The NACCO Industries, Inc. Pension Plan for Salaried Employees that was terminated effective November 30, 1986 and The North American Coal Corporation Pension Plan for Salaried Employees that was terminated effective December 31, 1989." VOL402CL Doc: 60375.1 4 4 SECTION 12 ---------- Effective December 31, 1993, Section 1.49 of the Plan is hereby amended by adding the following sentence at the end thereof: "Effective December 31, 1993, the Merged Plan was merged into the Plan." SECTION 13 ---------- Effective January 1, 1994, Section 1.58 of the Plan is hereby amended in its entirety to read as follows: "1.58 TRUST: The trust created by the Trust Agreement." SECTION 14 ---------- Effective January 1, 1994, Section 1.59 of the Plan is hereby amended in its entirety to read as follows: "1.59 TRUST AGREEMENT: The Trust Agreement between the Company and the Trustee, as such Trust Agreement may be amended or restated from time to time, or any trust agreement superseding the same. The Trust Agreement is hereby incorporated in the Plan by reference." SECTION 15 ---------- Effective January 1, 1994, Section 1.60 of the Plan is hereby amended in its entirety to read as follows: "1.60 TRUST FUND: The assets held in trust under the provisions of the Trust Agreement, without distinction as to principal or income." SECTION 16 ---------- Effective January 1, 1994, Section 1.61 of the Plan is hereby amended in its entirety to read as follows: "1.61 TRUSTEE: The trustee or trustees under the Trust Agreement or its or their successor or successors in trust under such Trust Agreement." SECTION 17 ---------- Effective December 31, 1993, Section 3.01 of the Plan is hereby amended by adding the following sentence to the end thereof: "Notwithstanding the foregoing, the benefit payable as of December 31, 1993 with respect to an Employee who was a participant in the Merged Plan on December 31, 1993 (which VOL402CL Doc: 60375.1 5 5 Plan was frozen as of such date) shall be determined by and paid in accordance with the terms and provisions of the Merged Plan as in effect on such date." SECTION 18 ---------- Effective December 31, 1993, Section 4.01 of the Plan is hereby amended (1) by adding the letter "(a)" to the beginning of the first sentence thereof, and (2) by adding the following new Subsection (b) to the end thereof: "(b) Notwithstanding the foregoing,the provisions of this Subsection (b) shall apply to the calculation of a Participant's Normal Retirement Pension in the event that the amount determined hereunder exceeds the amount determined under the provisions of Section (a) of this Section. The Normal Retirement Pension of a Participant under this Subsection (b) shall be a monthly amount equal to the sum of A plus B, where: A = the amount determined under Subsection (a) of this Section, taking into account only the Participant's years of Benefit Service earned on or after January 1, 1994; and B = the greater of (i) the SUM OF the Participant's Accrued Benefit under the Plan (or the Merged Plan) as of December 31, 1988, taking into account only the Participant's years of Benefit Service earned prior to January 1, 1989, PLUS the sum of the Participants' Accrued Benefits earned under the Plan (or the Merged Plan) during the 1989 through (and including) 1993 Plan Years, OR (ii) the Participant's Accrued Benefit as of December 31, 1993 under the Plan (or the Merged Plan), taking into account only years of Benefit Service earned prior to December 31, 1993. The total years of Benefit Service taken into account under this Subsection (b) may not exceed 30. In the event that a Participant has been credited with years of Benefit Service in excess of 30, such excess years of Benefit Service shall be subtracted from the portion of the benefit formula described in Paragraph (A) of this Subsection (b)." SECTION 19 ---------- Effective as of January 1, 1989, Section 4.07 of the Plan is hereby amended (1) by adding the letter "(b)" before the second sentence of Subsection (a) thereof and (2) by re-lettering Subsection (b) thereof as Subsection (c) thereof. SECTION 20 ---------- Effective as of January 1, 1989, Section 4.08(a) of the Plan is hereby amended by adding the phrase "Subject to the provisions of Sections 4.07(b) and 4.07(c)," at the beginning of the first sentence thereof. SECTION 21 ---------- VOL402CL Doc: 60375.1 6 6 Effective as of January 1, 1989, Section 4.09((b)(2) of the Plan is hereby amended by deleting the phrase "within a reasonable period of time before the Participant's Pension Commencement Date" and replacing it with the phrase "not more than 90 days nor less than 30 days before the Participant's Pension Commencement Date." SECTION 22 ---------- Effective as of January 1, 1993, a new Section 5.03(d) is hereby added to the Plan, immediately following Section 5.03(c), to read as follows: "(d) Notwithstanding any provision of the Plan to the contrary, to the extent required under Section 401(a)(31) of the Code, if a Participant or Beneficiary (provided such Beneficiary is a Spouse) is eligible to receive a distribution from the Plan that constitutes an "eligible rollover distribution" (as defined in Section 402(c)(4) of the Code), the Participant or Beneficiary may elect to directly transfer all or a portion of such distribution from the Plan to an eligible retirement plan (as defined in Section 402(c)(8)(B) of the Code). The Committee shall prescribe reasonable procedures for the elections to be made pursuant to this Subsection and shall provide written notice to the Participant or Spouse (within the time period prescribed by treasury regulations or rulings) describing the rights under this Subsection and such other information required to be provided under Section 402(f) of the Code." SECTION 23 ---------- Effective January 1, 1994, Section 6.06 of the Plan is hereby amended in its entirety to read as follows: "6.06 FUNDING POLICY. The Investment Committee shall determine, establish and carry out a funding policy and method consistent with the objectives of the Plan and the requirements of Title I of ERISA. Subject to the right to amend and/or terminate the Plan, the Company shall contribute (or cause the Employers to contribute) to the Plan from time to time any amounts that may be required by applicable law or by any other Section of the Plan." SECTION 24 ---------- Effective January 1, 1994, Article VIII of the Plan is hereby amended in its entirety to read as follows: "Article VIII - Investment Committee ------------------------------------ 8.01 INVESTMENT COMMITTEE: NACCO Industries, Inc. has established a "Retirement Funds Investment Committee" (the "Investment Committee") pursuant to the terms of an Instrument of Creation and Delegation dated October 28, 1992, as such Instrument may be amended from time to time. In addition to the responsibilities specifically given to the Investment Committee under the Plan and Trust Agreement, the Investment Committee shall have such other responsibilities with respect to the Plan (and other defined benefit plans and defined contribution plans of the Controlled Group) as are granted to such Investment VOL402CL Doc: 60375.1 7 7 Committee in the Instrument. In the absence of an Investment Committee, NACCO Industries, Inc. shall perform the duties allocated to such Committee under the Plan and Trust Agreement." SECTION 25 ---------- Effective January 1, 1994, Sections 13.01, 14.01, 14.02 and 15.01 of the Plan are hereby amended by deleting the phrase "Board of Directors" and replacing it with the phrase "the Nominating, Organization and Compensation Committee of its Board of Directors" each time it appears therein. SECTION 26 ---------- Effective as of January 1, 1989, Section 16.03(b) of the Plan is hereby amended by deleting the phrase "Proposed Treasury Regulation Section 1.401(a)(4)-5(c)" and replacing it with the phrase "Treasury Regulation Section 1.401(a)(4)-5(b)." EXECUTED this 29th day of December, 1993, to be effective as stated herein. ---- -------- THE NORTH AMERICAN COAL CORPORATION By /S/ Thomas A. Koza ------------------ Title: Vice President/Law & Administration, Secretary
VOL402CL Doc: 60375.1 EX-10.138 13 NACCO EXHIBIT 10.CXXXVIII 1 EXHIBIT 10(cxxxviii) MASTER TRUST AGREEMENT Between NACCO INDUSTRIES, INC. and STATE STREET BANK AND TRUST COMPANY FOR DEFINED BENEFIT PENSION PLANS VOL402CL Doc: 87172.1 504810-068-008 2 NACCO INDUSTRIES, INC. MASTER TRUST AGREEMENT Agreement made as of January 1, 1994, by and between NACCO INDUSTRIES, INC. a corporation organized under the laws of the State of Delaware (hereinafter referred to as the "Company") and STATE STREET BANK AND TRUST COMPANY, a trust company organized under the laws of the Commonwealth of Massachusetts (hereinafter referred to as the "Trustee"). WITNESSETH: WHEREAS, the Company maintains a tax-qualified employee benefit plan for the exclusive benefit of certain of its employees and the employees of certain of its wholly owned subsidiaries; WHEREAS, certain wholly owned subsidiaries of the Company (the "Subsidiaries") maintain separate tax-qualified employee benefit plans for certain of their employees and may adopt this trust and Trust Agreement to serve as a funding vehicle for such plans; WHEREAS, the tax-qualified plans of the Company and the Subsidiaries identified on Schedule A hereto are referred to herein individually as a "Plan" and collectively as the "Plans"; WHEREAS, the authority to conduct the general operation and administration of each of the Plans is vested in the Administrative Committee appointed under each such Plan, who shall have the authorities and shall be subject to the duties with respect to the trust specified in the applicable Plan and in this Trust Agreement; VOL402CL Doc: 87172.1 504810-068-008 1 3 WHEREAS, each such Administrative Committee (collectively, the "Administrators") shall only have authority with respect to the Plan under which it has been appointed; WHEREAS, the Company and the Subsidiaries have established several trust agreements to serve as the funding vehicles for the Plans; and WHEREAS, effective January 1, 1994, the Company and the Subsidiaries have appointed the Trustee as successor trustee to the trustees under such trust agreements and the Company and the Subsidiaries and the Trustee desire to amend and restate such trust agreements in their entirety. NOW, THEREFORE, the Company and the Trustee do hereby adopt this Trust Agreement as the funding vehicle for the Plans, upon the terms and conditions hereinafter set forth: 1. TRUST FUND 1.1 RECEIPT OF ASSETS. The Trustee shall receive and accept for the purposes hereof all sums of money and other property paid to it by or at the direction of the Company or any Employer, and pursuant to the terms of this Trust Agreement shall hold, invest, reinvest, manage, administer and distribute such monies and other property and the increments, proceeds, earnings and income thereof for the exclusive benefit of participants in the Plans and their beneficiaries. The Trustee need not inquire into the source of any money or property transferred to it nor into the authority or right of the transferor of such money or property to transfer such money or property to the Trustee. All assets held by the Trustee in the trust pursuant to the provisions of this Trust Agreement VOL402CL Doc: 87172.1 504810-068-008 2 4 (which may be all or part of the assets of a particular Plan) at the time of reference are referred to herein as the "Trust Fund". 1.2 EMPLOYERS. For purposes of this Trust Agreement the term "Employer" means any corporation which is a member of a controlled group of corporations of which the Company is a member as determined under Section 1563(a) of the Internal Revenue Code of 1986, as amended without regard to Section 1563(a)(4) and Section 1563(e)(3)(C) of such Code, and which corporation has adopted this Trust Agreement in accordance with the provisions of Section 15.1. 1.3 PLANS. References in this Trust Agreement to the "Plan" or the "Plans" shall, unless the context indicates to the contrary, mean the Plans identified on Schedule A which have adopted this trust as the funding vehicle for such Plan or Plans as the case may be. The Company shall be responsible for verifying that while any assets of a particular Plan are held in the Trust Fund, that Plan (i) is "qualified" within the meaning of Section 401(a) of the Code; (ii) is permitted by existing or future rulings of the United States Treasury Department to pool its funds in a group trust; and (iii) permits its assets to be commingled for investment purposes with the assets of other such Plans by investing such assets in this Trust Fund whether or not its assets will in fact be held in a separate Investment Fund. 1.4 ACCOUNTING FOR A PLAN'S UNDIVIDED INTEREST IN THE TRUST FUND. All transfers to, withdrawals from, and other transactions regarding the Trust Fund shall be conducted in such a way that the VOL402CL Doc: 87172.1 504810-068-008 3 5 proportionate interest in the Trust Fund of each Plan and the fair market value of that interest may be determined at any time. Whenever the assets of more than one Plan are commingled in the Trust Fund or in any Investment Fund, the undivided interest therein of that Plan shall be debited or credited (as the case may be) (i) for the entire amount of every contribution received on behalf of that Plan, every benefit payment, or other expense attributable solely to that Plan, and every other transaction relating only to that Plan; and (ii) for its proportionate share of every item of collected or accrued income, gain or loss, and general expense; and other transactions attributable to the Trust Fund or that Investment Fund as a whole. As of each date when the fair market value of the investments held in the Trust Fund or an Investment Fund are determined as provided for in Article 10, the Trustee shall adjust the value of each Plan's interest therein to reflect the net increase or decrease in such values since the last such date. For all of the foregoing purposes, fractions of a cent may be disregarded. 1.5 NO TRUSTEE DUTY REGARDING CONTRIBUTIONS. The Trustee shall not be under any duty to require payment of any contributions to the Trust Fund, or to see that any payment made to it is computed in accordance with the provisions of the Plans, or otherwise be responsible for the adequacy of the Trust Fund to meet and discharge any liabilities under the Plans. 2. DISBURSEMENTS FROM THE TRUST FUND. The Trustee shall from time to time on the directions of the Administrators make payments out of the Trust Fund to such VOL402CL Doc: 87172.1 504810-068-008 4 6 persons, including the Administrators, in such manner, in such amounts and for such purposes as may be specified in the directions of the Administrators. The Administrators shall be responsible for insuring that any payment directed under this Article conforms to the provisions of the Plans, this Trust Agreement, and the provisions of the Employee Retirement Income Security Act of 1974, as amended (referred to herein as "ERISA"). Each direction of an Administrator shall be in writing and shall be deemed to include a certification that any payment or other distribution directed thereby is one which such Administrator is authorized to direct, and the Trustee may conclusively rely on such certification without further investigation. Payments by the Trustee may be made by its check to the order of the payee. Payments or other distributions hereunder may be mailed to the payee at the address last furnished to the Trustee by the Administrator or if no such address has been so furnished, to the payee in care of the Administrator. The Trustee shall not incur any liability or other damage on account of any payments or other distributions made by it in accordance with the written directions of an Administrator. 3. RESPONSIBILITIES RELATING TO INVESTMENT FUNDS AND INVESTMENT ACCOUNTS. 3.1 INVESTMENT FUNDS. The Investment Committee appointed by the Company, from time to time and in accordance with provisions of the Plans, may direct the Trustee to establish one or more separate investment accounts within the Trust Fund, each separate VOL402CL Doc: 87172.1 504810-068-008 5 7 account being hereinafter referred to as an "Investment Fund". In the absence of the existence of an Investment Committee, the Investment Committee actions shall be taken by the Company. The Trustee shall transfer to each such Investment Fund such portion of the assets of the Trust Fund as the Investment Committee directs. The Trustee shall be under no duty to question, and shall not incur any liability on account of following, any direction of the Investment Committee or an Administrator. The Trustee shall be under no duty to review the investment guidelines, objectives and restrictions established, or the specific investment directions given, by the Investment Committee for any Investment Fund, or to make suggestions to the Investment Committee in connection therewith. All interest, dividends and other income received with respect to, and any proceeds received from the sale or other disposition of, securities or other property held in an Investment Fund shall be credited to and reinvested in such Investment Fund. All expenses of the Trust Fund which are allocable to a particular Investment Fund shall be so allocated and charged. Subject to the provisions of the Plans, the Investment Committee may direct the Trustee to eliminate an Investment Fund or Funds, and the Trustee shall thereupon dispose of the assets of such Investment Fund and reinvest the proceeds thereof in accordance with the directions of the Investment Committee. If, and to the extent specifically authorized by the Plans, the Investment Committee may direct the Trustee to establish one VOL402CL Doc: 87172.1 504810-068-008 6 8 or more Investment Funds all of the assets of which shall be invested in securities which constitute "qualifying employer securities" or "qualifying employer real property" within the meaning of Section 407 of ERISA. It shall be the duty of the Investment Committee to determine that such investment is not prohibited by Sections 406 or 407 of ERISA. 3.2 INVESTMENT MANAGER APPOINTMENT. The Investment Committee, from time to time and in accordance with the provisions of the Plans, may appoint one or more independent Investment Managers, pursuant to a written investment management agreement describing the powers and duties of the Investment Manager, to direct the investment and reinvestment of all or a portion of the Trust Fund or an Investment Fund (hereinafter referred to as an "Investment Account"). The Investment Committee shall be responsible for ascertaining that while each Investment Manager is acting in that capacity hereunder, the following requirements are satisfied: (a) The Investment Manager is either (i) registered as an investment adviser under the Investment Advisers Act of 1940, as amended, (ii) a bank as defined in that Act or (iii) an insurance company qualified to perform the services described in (b) below under the laws of more than one state. (b) The Investment Manager has the power to manage, acquire or dispose of any assets of the Plans for which it is responsible hereunder. (c) The Investment Manager has acknowledged in writing to the Investment Committee, the Administrator and the Trustee that he or it is a fiduciary with respect to the Plans within the meaning of Section 3(21)(A) of ERISA. The Investment Committee shall furnish the Trustee with written notice of the appointment of each Investment Manager hereunder, and of the termination of any such appointment. Such VOL402CL Doc: 87172.1 504810-068-008 7 9 notice shall specify the assets which shall constitute the Investment Account. The Trustee shall be fully protected in relying upon the effectiveness of such appointment and the Investment Manager's continuing satisfaction of the requirements set forth above until it receives written notice from the Investment Committee to the contrary. The Trustee shall conclusively presume that each Investment Manager, under its investment management agreement, is entitled to act, in directing the investment and reinvestment of the Investment Account for which it is responsible, in its sole and independent discretion and without limitation, except for any limitations which from time to time the Investment Committee and the Trustee agree (in writing) shall modify the scope of such authority. The Trustee shall have no liability (i) for the acts or omissions of any Investment Manager; (ii) for following directions, including investment directions of an Investment Manager, an Administrator or the Investment Committee, which are given in accordance with this Trust Agreement; or (iii) for any loss of any kind which may result by reason of the manner of division of the Trust Fund or Investment Fund into Investment Accounts. An Investment Manager shall certify, at the request of the Trustee, the value of any securities or other property held in any Investment Account managed by such Investment Manager, and such certification shall be regarded as a direction with regard to such VOL402CL Doc: 87172.1 504810-068-008 8 10 valuation. The Trustee shall be entitled to conclusively rely upon such valuation for all purposes under this Trust Agreement. 3.3 DIRECTED INVESTMENT ACCOUNTS. The Trustee shall, if so directed in writing by the Investment Committee, segregate all or a portion of the Trust Fund held by it into one or more separate investment accounts to be known as Directed Accounts, with respect to which the Investment Committee shall have the powers and duties granted to an Investment Manager under this Agreement. The Investment Committee, by written notice to the Trustee, may at any time relinquish its powers under this Section 3.3 and direct that a Directed Account shall no longer be maintained. In addition, during any time when there is no Investment Manager with respect to an Investment Account (such as before an investment management agreement takes effect or after it terminates), the Investment Committee shall direct the investment and reinvestment of such Investment Account. The Investment Committee may direct that the investment in a particular Directed Account be allocated only to a particular Plan or Plans. Whenever the Investment Committee is directing the investment and reinvestment of an Investment Account or a Directed Account, the Investment Committee shall have the powers and duties which an Investment Manager would have under this Trust Agreement if an Investment Manager were then serving and the Trustee shall be protected in relying on the Investment Committee's directions without reviewing investments or making suggestions to the same extent as it would be protected under this Trust Agreement if it had relied on the directions of an Investment Manager. VOL402CL Doc: 87172.1 504810-068-008 9 11 3.4 TRUSTEE DIRECTED INVESTMENT ACCOUNTS. The Trustee shall have no duty or responsibility to direct the investment and reinvestment of the Trust Fund, any Investment Fund or any Investment Account unless expressly agreed to in writing between the Trustee and the Investment Committee. In the event that the Trustee enters into such an agreement, it shall have the powers and duties of an Investment Manager under this Trust Agreement with regard to such Investment Account. 4. POWERS OF THE TRUSTEE. 4.1 INVESTMENT POWERS OF THE TRUSTEE. The Trustee shall have and exercise the following powers and authority (i) over Investment Accounts where it has express investment management discretion as provided in Section 3.4 or (ii) upon direction of the Investment Manager of an Investment Account or (iii) upon direction of the Investment Committee for a Directed Account, for voting and tendering of qualifying employer securities, and for lending to participants in the Plans: (a) To purchase, receive, or subscribe for any securities or other property and to retain in trust such securities or other property. (b) To acquire and hold qualifying employer securities and qualifying employer real property, as such investments are defined in Section 407(d) of ERISA. (c) To sell for cash or on credit, to grant options, convert, redeem, exchange for other securities or other property, to enter into standby agreements for future investment, either with or without a standby fee, or otherwise to dispose of any securities or other property at any time held by it. (d) To settle, compromise or submit to arbitration any claims, debts, or damages, due or owing to or from the trust, to commence or defend suits or legal proceedings and to VOL402CL Doc: 87172.1 504810-068-008 10 12 represent the trust in all suits or legal proceedings in any court of law or before any other body or tribunal. (e) To trade in financial options and futures, including index options and options on futures and to execute in connection therewith such account agreements and other agreements in such form and upon such terms as the Investment Manager or the Investment Committee shall direct. (f) To exercise all voting rights, tender or exchange rights, any conversion privileges, subscription rights and other rights and powers available in connection with any securities or other property at anytime held by it; to oppose or to consent to the reorganization, consolidation, merger, or readjustment of the finances of any corporation, company or association, or to the sale, mortgage, pledge or lease of the property of any corporation, company or association any of the securities which may at any time be held by it and to do any act with reference thereto, including the exercise of options, the making of agreements or subscriptions and the payment of expenses, assessments or subscriptions, which may be deemed necessary or advisable by the Investment Manager or Investment Committee in connection therewith, and to hold and retain any securities or other property which it may so acquire; and to deposit any property with any protective, reorganization or similar committee, and to pay and agree to pay part of the expenses and compensation of any such committee and any assessments levied with respect to property so deposited. (g) To exercise all voting or tender offer rights with respect to all qualifying employer securities held by it except that portion, if any, for which it has received voting or tender offer instructions from participants in the Plans as provided in this paragraph. The Administrator shall inform the Trustee of the voting and tender offer provisions of each Plan. Each participant entitled to do so may direct the Trustee, confidentially, how to vote or whether or not to tender the qualifying employer securities representing his proportionate interest in the assets of the Plans. The Administrator shall furnish the Trustee with the name of each participant and the number of shares held for the participant's account as near as practicable to the record date fixed for the determination of shareholders entitled to vote and shall provide the Trustee with all other information and assistance which the Trustee may reasonably request. Shares for which the Trustee has not received timely voting or tender instructions shall be voted or tendered by the Trustee to the extent permitted by the Plans or required by law in its uncontrolled discretion. (h) To lend to participants in the Plans such amounts and upon such terms and conditions as the Administrator may direct. Any such direction shall be deemed to include a VOL402CL Doc: 87172.1 504810-068-008 11 13 certification by the Administrator that such lending is in accordance with the provisions of ERISA and the Plans. (i) To borrow money in such amounts and upon such terms and conditions as shall be deemed advisable or proper by the Administrator or Investment Manager or Investment Committee to carry out the purposes of the trust and to pledge any securities or other property for the repayment of any such loan. (j) To invest all or a portion of the Trust Fund in contracts issued by insurance companies, including contracts under which the insurance company holds Plan assets in a separate account or commingled separate account managed by the insurance company. The Trustee shall be entitled to rely upon any written directions of the Administrator or the Investment Manager or the Investment Committee under this Section 4.1, and the Trustee shall not be responsible for the terms of any insurance contract that it i& directed to purchase and hold or for the selection of the issuer thereof or for performing any functions under such contract (other than the execution of any documents incidental thereto on the instructions of the Administrator or the Investment Manager) or the Investment Committee. (k) To manage, administer, operate, lease for any number of years, develop, improve, repair, alter, demolish, mortgage, pledge, grant options with respect to, or otherwise deal with any real property or interest therein at any time held by it, and to hold any such real property in its own name or in the name of a nominee, with or without the addition of words indicating that such property is held in a fiduciary capacity, all upon such terms and conditions as may be deemed advisable by the Investment Manager, the Administrator or the Investment Committee. (l) To renew, extend or participate in the renewal or extension of any mortgage, upon such terms as may be deemed advisable by the Investment Manager or Administrator or the Investment Committee, and to agree to a reduction in the rate of interest on any mortgage or of any guarantee pertaining thereto in any manner and to any extent that may be deemed advisable by the Investment Manager or Administrator or the Investment Committee for the protection of the Trust Fund or the preservation of the value of the investment; to waive any default, whether in the performance of any covenant or condition of any mortgage or in the performance of any guarantee, or to enforce any such default in such manner and to such extent as may be deemed advisable by the Investment Manager or Administrator or the Investment Committee; to exercise and enforce any and all rights of foreclosure, to bid on property on foreclosure, to take a deed in lieu of foreclosure with or without paying consideration therefor, and in connection therewith to release the obligation on the VOL402CL Doc: 87172.1 504810-068-008 12 14 bond secured by such mortgage, and to exercise and enforce in any action, suit or proceeding at law or in equity any rights or remedies in respect to any such mortgage or guarantee. (m) To hold uninvested, without liability for interest thereon, such part of the Trust Fund as it shall deem necessary or advisable. (n) To employ suitable agents and counsel and to pay their reasonable and proper expenses and compensation. (o) To purchase and sell foreign exchange and contracts for foreign exchange, including transactions entered into with State Street Bank and Trust Company, its agents or subcustodians. (p) To form corporations and to create trusts to hold title to any securities or other property, all upon such terms and conditions as may be deemed advisable by the Investment Manager or Administrator or the Investment Committee. (q) To register any securities held by it hereunder in its own name or in the name of a nominee with or without the addition of words indicating that such securities are held in a fiduciary capacity and to hold any securities in bearer form and to deposit any securities or other property in a depository or clearing corporation; provided, however, that the Trustee shall be responsible for any loss caused by failure to identify that the securities are held in a fiduciary capacity. (r) To make, execute and deliver, as Trustee, any and all deeds, leases, mortgages, conveyances, waivers, releases, or other instruments in writing necessary or desirable for the accomplishment of any of the foregoing powers. (s) To invest at State Street Bank and Trust Company (i) in any type of interest bearing investments (including, but not limited to savings accounts, money market accounts, certificates of deposit and repurchase agreements) and (ii) in noninterest bearing accounts (including but not limited to checking accounts). (t) To invest in collective investment funds maintained by State Street Bank and Trust Company or by others for the investment of the assets of employee benefit plans qualified under Section 401 of the Code, whereupon the instruments establishing such funds, as amended, shall be deemed a part of each of the Plans and this Trust Agreement and incorporated by reference. Assets placed in any such collective investment fund shall be held and administered by the trustee of such fund strictly in accordance with the terms and under the powers granted in such instrument. The commingling of the assets of this Trust Fund with the assets VOL402CL Doc: 87172.1 504810-068-008 13 15 of all other qualified participating trusts in such collective investment funds is specifically authorized. Except as otherwise provided in this Trust Agreement, the Investment Manager of an Investment Account or the Investment Committee in the case of a Directed Account shall have the power and authority, to be exercised in its sole discretion at any time and from time to time, to issue orders for the purchase or sale of securities directly to a broker. Written notification of the issuance of each such order shall be given promptly to the Trustee by the Investment Manager or the Investment Committee and the confirmation of each such order shall be confirmed to the Trustee by the broker. Unless otherwise directed by the Investment Committee or Investment Manager, such notification shall be authority for the Trustee to pay for securities purchased or to deliver securities sold as the case may be. Upon the direction of the Investment Manager or the Investment Committee, the Trustee will execute and deliver appropriate trading authorizations, but no such authorization shall be deemed to increase the liability or responsibility of the Trustee under this Trust Agreement. The Trustee shall transmit promptly to the Investment Committee or the Investment Manager, as the case may be, all notices of conversion, redemption, tender, exchange, subscription, class action, claim in insolvency proceedings or other rights or powers relating to any of the securities in the Trust Fund, which notices are received by the Trustee from its agents or custodians, from issuers of the securities in question and from the party (or its agents) extending such rights. The Trustee shall have no obligation to determine the existence of any conversion, VOL402CL Doc: 87172.1 504810-068-008 14 16 redemption, tender, exchange, subscription, class action, claim in insolvency proceedings or other right or power relating to any of the securities in the Trust Fund of which notice was given prior to the purchase of such securities by the Trust Fund, and shall have no obligation to exercise any such right or power unless the Trustee is informed of the existence of the right or power. The Trustee shall not be liable for any untimely exercise or assertion of such rights or powers described in the paragraph immediately above in connection with securities or other property of the Trust Fund at any time held by it unless (i) it or its agents or custodians are in actual possession of such securities or property and (ii) it receives directions to exercise any such rights or powers from the Administrator or the Investment Manager or the Investment Committee, as the case may be, and both (i) and (ii) occur at least three business days prior to the date on which such rights or powers are to be exercised. If the Trustee is directed by the Investment Committee or an Investment Manager to purchase securities issued by any foreign government or agency thereof, or by any corporation or other entity domiciled outside of the United States, it shall be the responsibility of the Investment Committee or Investment Manager, as the case may be, to advise the Trustee in writing with respect to any laws or regulations of any foreign countries or any United States territory or possession which shall apply in any manner whatsoever to such securities, including, without limitation, receipt by the Trustee of dividends, interest or other distributions on such securities. VOL402CL Doc: 87172.1 504810-068-008 15 17 4.2 ADMINISTRATIVE POWERS OF THE TRUSTEE. Notwithstanding the appointment of an Investment Manager, the Trustee shall have the following powers and authority, to be exercised in its sole discretion, with respect to the Trust Fund: (a) To employ suitable agents, custodians and counsel and to pay their reasonable expenses and compensation. (b) To appoint ancillary trustees to hold any portion of the assets of the trust and to pay their reasonable expenses and compensation. (c) To register any securities held by it hereunder in its own name or in the name of a nominee with or without the addition of words indicating that such securities are held in a fiduciary capacity and to hold any securities in bearer form and to deposit any securities or other property in a depository or clearing corporation; provided, however, that the Trustee shall be responsible for any loss caused by failure to identify that the securities are held in a fiduciary capacity. (d) To make, execute and deliver, as Trustee, any and all deeds, leases, mortgages, conveyances, waivers, releases or other instruments in writing necessary or desirable for the accomplishment of any of the foregoing powers. (e) Generally to do all ministerial acts, whether or not expressly authorized, which the Trustee may deem necessary or desirable in carrying out its duties under this Trust Agreement. Notwithstanding anything in the Plans or this Trust Agreement to the contrary, the Trustee may not independently and shall not be required by the Company, the Investment Committee or any Investment Manager to engage in any action, nor make any investment which constitutes a prohibited transaction or is otherwise contrary to the provisions of ERISA or which is otherwise contrary to law or to the terms of the Plans or this Trust Agreement. After notice to the Company, the Trustee may consult with VOL402CL Doc: 87172.1 504810-068-008 16 18 legal counsel concerning any question which may arise with reference to this Trust Agreement and its powers and duties hereunder. The written opinion of such counsel shall be full and complete protection of the Trustee in respect to any action taken or suffered by the Trustee hereunder in good faith reliance on said opinion. 5. INDEMNIFICATION. The Company shall indemnify and save harmless the Trustee for and from any loss or expense (including reasonable attorneys' fees) arising (a) out of any matter as to which this Trust Agreement provides that the Trustee is directed, protected, not liable, or not responsible, or (b) by reason of any breach of any statutory or other duty owed to the Plans by the Company, any Employer, the Administrator, the Investment Committee, any Investment Manager or any delegate of any of them (and for the purposes of this sentence the Trustee shall not be considered to be such a delegate), whether or not the Trustee may also be considered liable for that other person's breach under the provisions of Section 405(a) of ERISA. 6. SECURITIES OR OTHER PROPERTY. The words "securities or other property", used in this Trust Agreement, shall be deemed to refer to any property, real or personal, or part interest therein, wherever situated, including, without limitation, governmental, corporate or personal obligations, trust and participation certificates, partnership interests, annuity or investment contracts issued by an insurance company, leaseholds, fee titles, mortgages and other interests in VOL402CL Doc: 87172.1 504810-068-008 17 19 realty, preferred and common stocks, certificates of deposit, financial options and futures or any other form of option, evidences of indebtedness or ownership in foreign corporations or other enterprises or indebtedness of foreign governments, and any other evidences of indebtedness or ownership, including securities or other property of the Company or the Employers, even though the same may not be legal investment for trustees under any law other than ERISA. 7. COMPUTERIZED REPORTING SERVICES. 7.1 PROTECTION OF EQUIPMENT, CONFIDENTIAL OR PROPRIETARY PROGRAMS AND INFORMATION. The Company agrees to use the equipment, computer programs and other information supplied by the Trustee under this Contract solely for its own internal use and benefit and not for resale or other transfer or disposition to, or use by or for the benefit of, any other person or organization without the prior written approval of the Trustee. The Company acknowledges that the data bases, computer programs, screen formats, screen designs, report formats, interactive design techniques, and other information furnished to the Company by the Trustee constitute copyrighted trade secrets or proprietary information of substantial value to the Trustee. Such data bases, programs and other information are collectively referred to below as "Proprietary Information". The Company agrees that it shall treat all Proprietary Information as proprietary to the Trustee and that it shall not divulge any Proprietary Information to any person or organization except as expressly permitted hereunder. Without limiting the foregoing, VOL402CL Doc: 87172.1 504810-068-008 18 20 the Company agrees for itself and its employees and agents: (a) to use such programs and data bases (i) solely on the Trustee's computers, (ii) solely from equipment at Company locations agreed to between the Company and the Trustee and (iii) solely in accordance with the Trustee's applicable user documentation; (b) to use equipment supplied by the Trustee solely with programs supplied by the Trustee and no other programs or software; (c) to refrain from copying or duplicating in any way. (other than in the normal course of performing processing on Trustee's computers) any part of any Proprietary Information; (d) to refrain from obtaining unauthorized access to any programs, data or other information not owned by the Company, and if such access is accidentally obtained, to respect and safeguard the same as Proprietary Information; (e) to refrain from causing or allowing information transmitted from the Trustee's computer to the Company's terminals to be retransmitted to another computer, terminal or other device; (f) that the Company shall have access to only those authorized transactions as agreed to between the Company and the Trustee; (g) to honor reasonable written requests made by the Trustee to protect at the Trustee's expense the rights of the Trustee in Proprietary Information at common law, under the Federal copyright statutes and under other Federal and state statutes. 7.2 COMPANY ACKNOWLEDGMENT. The Company hereby acknowledges that the data and information it will be accessing from Trustee via its on-screen data services is unaudited and may not be accurate due to inaccurate pricing of securities, delays of a day or more in updating the Account and other causes for which Trustee will not be liable to the Company. 8. SECURITY CODES. If the Trustee has issued to the Company, or to any Investment Manager appointed by the company, security codes or VOL402CL Doc: 87172.1 504810-068-008 19 21 passwords in order that the Trustee may verify that certain transmissions of information, including directions or instructions, have been originated by the Company or the Investment Manager, as the case may be, the Trustee shall be kept indemnified by and be without liability to the Company for any action taken or omitted by it in reliance upon receipt by the Trustee of transmissions of information with the proper security code or password, including communications purporting to be directions or instructions, which the Trustee reasonably believes to be from the Company or Investment Manager. 9. TAXES AND TRUSTEE COMPENSATION. The Trustee shall pay out of the Trust Fund all real and personal property taxes, income taxes and other taxes of any and all kinds levied or assessed under existing or future laws against the Trust Fund. Until advised to the contrary by the Administrator, the Trustee shall assume that the Trust is exempt from Federal, State and local income taxes, and shall act in accordance with that assumption. The Administrator shall timely file all Federal, State and local tax and information returns relating to the Plans and Trust. The Trustee shall be paid such reasonable compensation as shall from time to time be agreed upon by the Company and the Trustee. Such compensation and all reasonable and proper expenses of administration of the Trust, including counsel fees, shall be withdrawn by the Trustee out of the Trust Fund unless paid by the Company or the Employers at the direction of the Company, but such compensation and expenses shall be paid by the Company and the VOL402CL Doc: 87172.1 504810-068-008 20 22 Employers if the same cannot by operation of law be withdrawn from the Trust Fund. All payments from the Trust Fund under this Article 9 may be made without approval or direction of the Administrator. 10. ACCOUNTS OF THE TRUSTEE. The Trustee shall maintain or cause to be maintained suitable records, data and information relating to its functions hereunder. The Trustee shall keep accurate and detailed accounts of all investments, receipts, disbursements, and other actions hereunder. Its books and records relating thereto shall be open to inspection and audit at all reasonable times by the Administrator or its duly authorized representatives, the Investment Committee and each Investment Manager. The Trustee shall be entitled to reasonable compensation and reimbursement of its reasonable expenses incurred in connection with such audits or inspections. Within sixty days after the close of each fiscal year of the trust and at more frequent intervals if agreed to by the parties hereto, and within sixty days after the removal or resignation of the Trustee as provided hereunder, the Trustee shall render to the Company a written statement and account showing in reasonable summary the investments, receipts, disbursements, and other transactions engaged in during the preceding fiscal year or period, and setting forth the assets and liabilities of the trust. Unless the Company shall have filed with the Trustee written exceptions or objections to any such statement and account within sixty days after receipt thereof, the Company shall be deemed to have approved such statement and account, and in such case or upon VOL402CL Doc: 87172.1 504810-068-008 21 23 written approval by the Company of any such statement and account, the Trustee shall be released and discharged with respect to all matters and things embraced in such statement and account as though it had been settled by a decree of a court of competent jurisdiction in an action or proceeding in which the Company, all other necessary parties and all persons having any beneficial interest in the Trust Fund were parties, except for any actions resulting from the Trustee's bad faith, fraud, negligence or willful misconduct. The Trustee shall determine the fair market value of assets of the Trust Fund based upon valuations provided by Investment managers, information and financial publications of general circulation, statistical and valuate on services, records of security exchanges, appraisals by qualified persons, transactions and bona fide offers in assets of the type in question and other information customarily used in the valuation of property. The Company or its delegate, each Investment Manager, and the Trustee shall file such descriptions and reports and make such other publications, disclosures, registrations and other filings as are required of them respectively by ERISA. Nothing contained in this Trust Agreement or in the Plans shall deprive the Trustee of the right to have a judicial settlement of its account. In any proceeding for a judicial settlement of the Trustee's accounts or for instructions in connection with the trust, the only necessary party thereto in addition to the Trustee shall be the Company, and no participant or other person having or claiming any interest in the Trust Fund VOL402CL Doc: 87172.1 504810-068-008 22 24 shall be entitled to any notice or service of process (except as required by law). Any judgment, decision or award entered in any such proceeding or action shall be conclusive upon all interested persons. 11. RELIANCE ON COMMUNICATIONS. The Trustee may rely upon a certification of an Administrator (or any individual member thereof) of a Plan with respect to any instruction, direction or approval of such Administrator (or any individual member thereof) with respect to that Plan and may rely upon a certification of the Company as to the membership of each Administrator as it then exists, and may continue to rely upon such certification until a subsequent certification is filed with the Trustee. The Trustee shall be fully protected in acting upon any instrument, certificate, or paper of the Company, its Board of Directors, an Administrator (or any individual member thereof), believed by it to be genuine and to be signed or presented by any authorized person, and the Trustee shall be under no duty to make any investigation or inquiry as to any statement contained in any such writing but may accept the same as fully authorized by the Company, its Board of Directors or an Administrator (or any individual member thereof), as the case may be. The Trustee shall be further protected in relying upon a certification from the Investment Committee or any Investment Manager appointed by the Company as to the person or persons authorized to give instructions or directions on behalf of such Investment Committee or Investment Manager and may continue to VOL402CL Doc: 87172.1 504810-068-008 23 25 rely upon such certification until a subsequent certification is filed with Trustee. 12. RESIGNATION AND REMOVAL OF TRUSTEE. Any Trustee acting hereunder may resign at any time by giving thirty days' prior written notice to the Company, which notice may be waived by the Company. The Company may remove the Trustee at any time upon thirty days' prior written notice to the Trustee, which notice may be waived by the Trustee. In case of the resignation or removal of the Trustee, the Company shall appoint a successor trustee. Any successor trustee shall have the same powers and duties as those conferred upon the Trustee named in this Trust Agreement. The removal of a Trustee and the appointment of a new Trustee shall be by a written instrument delivered to the Trustee. Upon the appointment of a successor trustee and after the final account of the resigning or removed Trustee has been approved or settled, as provided in Article 10, the resigning or removed Trustee shall transfer or deliver the Trust Fund to such successor trustee. Any Trustee so resigning or removed shall make no surrender charge with respect thereto. 13. AMENDMENT. This Trust Agreement may be amended by agreement between the Trustee and the Company at any time or from time to time and in any manner, and the provisions of any such amendment may be applicable to the Trust Fund as constituted at the time of the amendment as well as to the part of the Trust Fund subsequently acquired. Any such amendment shall be expressed in an instrument executed by the Company and the Trustee and shall become effective VOL402CL Doc: 87172.1 504810-068-008 24 26 as of the date designated in such instrument or, if no such date is designated, upon the date of the execution of such instrument. If the Trustee is unable or unwilling to execute any such amendment, it may resign or be removed as above provided. 14. TERMINATION. This Trust Agreement and the trust created hereby may be terminated at any time by the Company, and upon such termination or upon the dissolution or liquidation of the Company, in the event that a successor to the Company by operation of law or by the acquisition of its business interests shall not elect to continue the Plans and the trust, the Trust Fund shall be paid out by the Trustee after the settlement of its final account in accordance with applicable law pursuant to instructions given by the Administrator. Notwithstanding the foregoing, the Trustee shall not be required to pay out any assets of the Trust Fund upon termination of the Trust until the Trustee has received written certification from the Administrator: (i) that all provisions of law with respect to such termination have been complied with; and (ii) (after the Trustee has made a determination of the fair market value of the Plans' assets) that the Plans' assets are sufficient to discharge when due all obligations of the Plans required by law. The Trustee shall rely conclusively on such written certification, and shall be under no obligation to investigate or otherwise determine its propriety. In the event that the Trust Fund is terminated, in whole or in part, before the termination of each of the Plans, the Trustee shall transfer the Trust Fund, or the part thereof to which the termination applied, VOL402CL Doc: 87172.1 504810-068-008 25 27 to another trust or fund for the benefit of some or all of the participants and beneficiaries of the Plans, as the Company may direct, but subject to the limitations of Section 16.2 hereof. 15. PARTICIPATION OF OTHER EMPLOYERS. 15.1 ADOPTION BY OTHER EMPLOYERS; WITHDRAWALS. The Trust is MAINTAINED BY THE COMPANY for use as the funding vehicle for the Plans which it maintains for various groups of employees and for use as the funding vehicle for the Plans of any Employer. (a) Any Employer which has been certified to the Trustee by the Company as being authorized and as having adopted this Trust with the consent of the Company as a funding vehicle for its own Plans may, at any time thereafter, become a party to this Trust Agreement. Such Employer must file with the Trustee a certified copy of a resolution of its Board of Directors evidencing its election so to do; and (b) Any Employer which is a party to this Trust Agreement and which has been certified to the Trustee by the Company as having adopted one or more other Plans and as being authorized to adopt this Trust as the funding medium for such other Plan or Plans may, at any time thereafter, adopt this Trust for the purposes of such other Plan or Plans by filing with the Trustee a certified copy of a resolution of its Board of Directors evidencing its election so to do. Thereafter, the Trustee shall receive and hold as a part of the Trust Fund, subject to the provisions of this Trust Agreement, any deposits made to it under such Plans by or at the direction of such Employer. Should this paragraph become operative: (a) In the event of the withdrawal of a Plan from the trust or in the event of the Company's or an Employer's election to terminate or to fund separately the benefits provided under any of its Plans, the Company shall require the Trustee to value the share of the Trust Fund which is held for the benefit of persons having an interest therein under such Plans. The Trustee shall thereupon segregate and dispose of such share in accordance with the written direction of the Company accompanied by its certification to the Trustee that such segregation and disposition is in accordance with the terms of the Plans and the requirements of the law. VOL402CL Doc: 87172.1 504810-068-008 26 28 (b) If the Company or any Employer receives notice that one or more of the Plans is no longer qualified under the provisions of Section 401 of the Code or the corresponding provisions of any future Federal revenue act, the Company shall immediately require the Trustee to Value the share of the Trust Fund which is held for the benefit of such persons having an interest under such disqualified Plan or Plans. The Trustee shall thereupon segregate, withdraw from the Trust Fund, and dispose of such share as directed by the Company. (c) In the event that any group of employees covered by a Plan is withdrawn from such Plan, the Company shall, if required by the terms of such Plan, require the Trustee to value the share of the Trust Fund which is held for the benefit of such group of employees. The Trustee shall thereupon segregate and dispose of such share in accordance with the direction of the Company accompanied by its certification to the Trustee that such segregation and disposition is in accordance with the terms of such Plan and the requirements of the law. The Trustee shall have no duty to see that the valuation of any share in accordance with the provisions of this Section 15.1 is caused to be made by the Company, nor to segregate and dispose of any such share in the absence of the written direction of the Company to do so. 15.2 POWERS AND AUTHORITIES OF OTHER EMPLOYERS TO BE EXERCISED EXCLUSIVELY BY COMPANY. Each Employer, other than the company, which is or shall become a party to this Trust Agreement, hereby irrevocably gives and grants to the Company full and exclusive power and authority to exercise all of the powers conferred upon it by the terms of this Trust Agreement and to take or refrain from taking any and all action which such Employer might otherwise take or refrain from taking with respect to this Trust Agreement, including the sole and exclusive power to exercise, enforce or waive any rights whatsoever which such Employer might otherwise have with respect to the Trust Fund, and each such Employer, by becoming a party to this Trust Agreement, VOL402CL Doc: 87172.1 504810-068-008 27 29 irrevocably appoints the Company its agent for such purposes. The Trustee shall have no obligation to account to any such Employer or to follow the instructions of or otherwise deal with any such Employer, the intention being that the Trustee shall deal solely with the Company as if the Trustee and the Company were the only parties in this Trust Agreement. 16. MISCELLANEOUS. 16.1 GOVERNING LAW. To the extent not inconsistent with ERISA, as heretofore or hereafter amended, the provisions of this Trust Agreement shall be governed by and construed in accordance with the laws of the Commonwealth of Massachusetts. 16.2 NO REVERSION TO EMPLOYERS. Except as provided herein, no portion of the principal or the income of the Trust Fund shall revert to or be recoverable by the Company or any Employer or ever be used for or diverted to any purpose other than for the exclusive benefit of participants in the Plans and persons claiming under or through them pursuant to the Plans, provided, however, that: (a) if a contribution is conditioned upon the deductibility of the contribution under Section 404 of the Code, then, to the extent the deduction is disallowed, the Trustee shall, upon written request of the affected Employer or the Company, return such amounts as may be permitted by law to such Employer or the Company, as appropriate, within one year after the date the deduction is disallowed; and (b) if a contribution or any portion thereof is made by the Company or an Employer by a mistake of fact, the Trustee shall, upon written request of the Company or such Employer, return such amounts as may be permitted by law to the Company or such Employer, as appropriate, within one year after the date of payment to the Trustee; and (c) if a contribution is conditioned upon the qualification of the Plans and Trust under Section 401 and 501 of the Code, VOL402CL Doc: 87172.1 504810-068-008 28 30 the contributions of the Company or an Employer to the Trust for all Plans Years, with the gains and losses thereon, shall be returned by the Trustee to the Company or such Employer, as appropriate, within one year in the event that the Commissioner of Internal Revenue fails to rule that the Plans and Trust were as of such date qualified and tax-exempt (within the meaning of Sections 401 and 501 of the Code); and (d) in the event that a Plan whose assets are held in the Trust Fund is terminated, assets of such Plan may be returned to the Employer if all liabilities to participants and beneficiaries of such Plan have been satisfied; and (e) assets may be returned to the Employer to the extent that the law permits such transfer. The Trustee shall be under no obligation to return any part of the Trust Fund as provided in this Section 16.2 until the Trustee has received a written certification from the Administrator that such return is in compliance with this Section 16.2, the Plans and the requirements of the law. The Trustee shall rely conclusively on such written certification and shall be under no obligation to investigate or otherwise determine its propriety. 16.3 NON-ALIENATION OF BENEFITS. No benefit to which a participant or his beneficiary is or may become entitled under a Plan shall at any time be subject in any manner to alienation or encumbrance, nor be resorted to, appropriated or seized in any proceeding at law, in equity or otherwise. No participant or other person entitled to receive a benefit under a Plan shall, except as specifically provided in such Plans, have power in any manner to transfer, assign, alienate or in any way encumber such benefit under such Plan, or any part thereof, and any attempt to do so shall be void. 16.4 DURATION OF TRUST. Unless sooner terminated, the trust created under this Trust Agreement shall continue for the maximum VOL402CL Doc: 87172.1 504810-068-008 29 31 period of time which the laws of the Commonwealth of Massachusetts shall permit. 16.5 NO GUARANTEES. Neither the Company, nor any Employer, nor the Trustee guarantees the Trust Fund from loss or depreciation, nor the payment of any amount which may become due to any person under the Plans or this Trust Agreement. 16.6 DUTY TO FURNISH INFORMATION. Both the Company and the Trustee shall furnish to the other any documents, reports, returns, statements, or other information that the other reasonably deems necessary to perform its duties imposed under the Plans or this Trust Agreement or otherwise imposed by law. 16.7 WITHHOLDING. The Trustee shall withhold any tax which by any present or future law is required to be withheld from any payment under the Plans, provided that the Administrator provides all information reasonably requested by the Trustee to enable the Trustee to so withhold. 16.8 PARTIES BOUND. This Trust Agreement shall be binding upon the parties hereto, all participants in the Plans and persons claiming under or through them pursuant to the Plans, and, as the case may be, the heirs, executors, administrators, successors, and assigns of each of them. The provisions of Articles 5, 7 and 8 shall survive termination of the Trust created under this Trust Agreement or resignation or removal of the Trustee for any reason. In the event of the merger or consolidation of the Company or any Employer or other circumstances whereby a successor person, firm or company shall continue to carry on all or a substantial part of its business, and such successor shall elect to carry on VOL402CL Doc: 87172.1 504810-068-008 30 32 the provisions of the Plan or Plans applicable to such business, as therein provided, such successor shall be substituted hereunder for the Company or such Employer, as the case may be, upon the filing in writing of its election so to do with the Trustee. The Trustee may, but need not, rely on the certification of an officer of the Company, and a certified copy of a resolution of the Board of Directors of such successor, reciting the facts, circumstances and consummation of such succession and the election of such successor to continue the said Plan or Plans as conclusive evidence thereof, without requiring any additional evidence. 16.9 NECESSARY PARTIES TO DISPUTES. Necessary parties to any accounting, litigation or other proceedings shall include only the Trustee, the Company and any appropriate Employers and the settlement or judgment in any such case in which the Company, the appropriate Employers and the Trustee are duly served or cited shall be binding upon all participants in the Plans and their beneficiaries and estates, and upon all persons claiming by, through or under them. 16.10 UNCLAIMED BENEFIT PAYMENTS. If any check or share certificate in payment of a benefit hereunder which has been mailed by regular US mail to the last address of the payee furnished the Trustee by the Administrator is returned unclaimed, the Trustee shall notify the Administrator and shall discontinue further payments to such payee until it receives the further instruction of the Company or its Administrator. 16.11 SEVERABILITY. If any provisions of this Trust Agreement shall be held by a court of competent jurisdiction to be VOL402CL Doc: 87172.1 504810-068-008 31 33 invalid or unenforceable, the remaining provisions of this Trust Agreement shall continue to be fully effective. 16.12 REFERENCES. Unless the context clearly indicates to the contrary, a reference to a statute, regulation, document or provision shall be construed as referring to any subsequently enacted, adopted or executed counterpart. 16.13 HEADINGS. Headings and subheadings in this Trust Agreement are inserted for convenience of reference only and are not to be considered in the construction of its provisions. 16.14 NO LIABILITY FOR ACTS OF PREDECESSOR OR SUCCESSOR TRUSTEES AND CO-TRUSTEES. The Trustee shall have no liability for the acts or omissions of any predecessors or successors in office. If there are other trusts under any of the Plans, the Trustee shall have no responsibility or liability for the acts or omissions of any other trustee with respect to such other trusts. 16.15 COUNTERPARTS. This Trust Agreement may be executed in one or more counterparts, each of which shall constitute an original. IN WITNESS WHEREOF, the parties hereto have caused this instrument to be executed by their duly authorized officers as of the day and year first above written. ATTEST: NACCO INDUSTRIES, INC. /S/ Charles A. Bittenbender By: Robert L. Hilton - --------------------------- ----------------- TITLE: Vice President and Treasurer ---------------------------- ATTEST: STATE STREET BANK AND TRUST COMPANY
VOL402CL Doc: 87172.1 504810-068-008 32 34 /S/ Dorothy McNeil By: /S/ Judith Parker - ------------------ ----------------- Vice President VOL402CL Doc: 87172.1 504810-068-008 33 35 Schedule A 1. The Hamilton Beach/Proctor-Silex, Inc. Profit Sharing Retirement Plan. 2. The North American Coal Corporation Salaried Employees Pension Plan (which includes The NACCO Industries, Inc. Pension Plan for Salaried Employees which was merged into the Plan on December 31, 1993). 3. The NACCO Materials Handling Group, Inc. Cash Balance Plan for Salaried Employees. 4. The NACCO Materials Handling Group, Inc. Cash Balance Plan for Berea Shop Employees. 5. The NACCO Materials Handling Group, Inc. Cash Balance Plan for Sulligent Shop Employees. 6. The NACCO Materials Handling Group, Inc. Danville Shop Employees Pension Plan. 7. NACCO Materials Handling Group, Inc. Kewanee Shop Employees Pension Plan. 8. The NACCO Materials Handling Group, Inc. Portland and Branch Store Shop Employees Pension Plan. VOL402CL Doc: 87172.1 504810-068-008 34 EX-10.140 14 NACCO EXHIBIT 10.CXXXX 1 EXHIBIT 10(cxxxx) EXECUTION COUNTERPART FOURTH AMENDMENT FOURTH AMENDMENT dated as of June 24, 1993 among HAMILTON BEACH/PROCTOR-SILEX, INC. (the "COMPANY"), PROCTOR-SILEX CANADA INC. ("PSC"), PROCTOR-SILEX S.A. DE C.V. ("PSM"), the banks and other financial institutions named on the signature pages hereto (the "BANKS"), THE CHASE MANHATTAN BANK (NATIONAL ASSOCIATION), as United States Agent for the Banks (in such capacity, the "U.S. AGENT") and THE CHASE MANHATTAN BANK OF CANADA, as Canadian Agent for the Banks (in such capacity, the "CANADIAN AGENT" and, together with the U.S. Agent, the "AGENTS"). WHEREAS, the Company, PSC, PSM, the Banks and the Agents are party to the Credit Agreement (as heretofore amended, supplemented and otherwise modified, the "CREDIT AGREEMENT"; terms defined in the CREDIT AGREEMENT shall have their defined meanings when used herein) dated as of October 11, 1990, as amended, which initially provided for the making of loans or the issuance of letters of credit in an aggregate principal (or face) amount not to exceed U.S.$185,000,000; WHEREAS, the Company has requested certain modifications to the Credit Agreement; WHEREAS, the Banks are agreeable to such modifications to the Credit Agreement; NOW, THEREFORE, the Company, PSC, PSM, the Banks and the Agents hereby agree as follows: Section I. AMENDMENTS. ----------- 1.01. Section 1.01 of the Credit Agreement is hereby amended by deleting the reference to "50%" in clause (i)(b)(x) of the definition of "Applicable Loan Limit" and inserting in lieu thereof the following: "50% (65% during the months of June 1993, July 1993 and August 1993)". 1.02. Section 1.01 of the Credit Agreement is hereby further amended by (a) deleting clause (iv) of the definition of "Permitted Amount" which is set forth in the definition of "Permitted Capital Expenditures" and (b) deleting the word "and" immediately preceding said clause and inserting in lieu thereof the following: "(iv) U.S.$16,000,000 for the fiscal year of the Company ending December 31, 1993; and (v) for each fiscal year of the Company thereafter, U.S.$13,000,000". 2 1.03. Section 9.21(c) of the Credit Agreement is hereby amended by deleting the reference to "U.S.$10,000,000" and inserting in lieu thereof the following: "U.S.$15,000,000". Section II. CONDITIONS TO EFFECTIVENESS. ---------------------------- 2.01. The provisions of this Fourth Amendment shall become effective as of the date hereof (the "EFFECTIVE DATE") upon receipt by the U.S. Agent of the following items in form and substance satisfactory to the U.S. Agent: a. Counterparts of this Fourth Amendment duly executed by the Company, PSC, PSM, the Majority Banks and the Agents; and b. An Officer's Certificate of the Company to the effect set forth in Sections 3.01 and 3.02 hereof. Section III. REPRESENTATIONS AND WARRANTIES. ------------------------------- The Company hereby represents and warrants that: 3.01. After giving effect to this Fourth Amendment, no Default shall have occurred and be continuing. 3.02. The representations and warranties made by the Obligors in Section 8 of the Credit Agreement and in each Document to which it is a party are true and correct on and as of the date hereof as if made on the date hereof (except that any such representation or warranty stated to relate to a specific earlier date will be true on and correct as of such earlier date) and, in the case of the Credit Agreement, as if each reference to the term "this Agreement" in Sections 8.02, 8.03, 8.04, 8.05, 8.07, 8.12 and 8.14 of the Credit Agreement was deemed to be a reference to "the Fourth Amendment dated as of June 24, 1993 among the Company, PSC, PSM, the Banks and the Agents and the Credit Agreement as amended by said Fourth Amendment." Section IV. MISCELLANEOUS. -------------- 4.01. Except as expressly provided herein, the Credit Agreement shall remain unchanged and in full force and effect. 4.02. THIS FOURTH AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK. 4.03. This Fourth Amendment may be executed in any number of counterparts all of which taken together shall constitute one and the same amendatory instrument and any of the parties may execute this Fourth Amendment by signing any such counterpart. 3 - 3 - IN WITNESS WHEREOF, the parties hereto have caused this Fourth Amendment to be duly executed as of the day and year first above written. OBLIGORS -------- HAMILTON BEACH/PROCTOR-SILEX, INC. By /s/ Charles B. Hoyt ---------------------------- Title: Vice President - Finance, C.F.O. PROCTOR-SILEX CANADA INC. By /s/ G. Nebel ---------------------------- Title: Chairman and Executive Vice President PROCTOR-SILEX S.A. DE C.V. By /s/ G. Nebel ---------------------------- Title: Sole Administrator BANKS ----- THE CHASE MANHATTAN BANK (NATIONAL ASSOCIATION) By /s/ Alex Danzberger, Jr. ---------------------------- Title: Vice President
4 - 4 - THE CHASE MANHATTAN BANK OF CANADA By /s/ Alex Danzberger, Jr. ----------------------------------- Title: Vice President THE FIRST NATIONAL BANK OF CHICAGO By /s/ Marguerite C. Canestraro ----------------------------------- Title: Vice President THE BANK OF NOVA SCOTIA By /s/ FCH Ashby ----------------------------------- Title: Senior Assistant Agent CONTINENTAL BANK N.A. By /s/ Peter G. Thursby ----------------------------------- Title: Vice President CAISSE NATIONALE DE CREDIT AGRICOLE By /s/ D. Bell ----------------------------------- Title: First Vice President
5 - 5 - CRESTAR BANK By /s/ James P. Duvall, Jr. --------------------------------- Title: SOCIETY NATIONAL BANK By /s/ J. Roderick MacDonald --------------------------------- Title: Vice President NATWEST USA CREDIT CORP. By /s/ George R. Rogers --------------------------------- Title: Vice President VAN KAMPEN MERRITT PRIME RATE INCOME TRUST By /s/ Jeff Mallet --------------------------------- Title: UNITED STATES NATIONAL BANK OF OREGON By /s/ Jeffrey W. Jones --------------------------------- Title: Vice President
6 - 6 - BANQUE WORMS By /s/ Felina Marron --------------------------------- Title: AGENTS ------ THE CHASE MANHATTAN BANK (NATIONAL ASSOCIATION), as U.S. Agent By /s/ Alex Danzberger, Jr. --------------------------------- Title: Vice President THE CHASE MANHATTAN BANK OF CANADA, as Canadian Agent By /s/ Alex Danzberger, Jr. --------------------------------- Title: Vice President
EX-10.141 15 NACCO EXHIBIT 10.CXXXXI 1 EXHIBIT 10(cxxxxi) CONSENT AND AUTHORIZATION Re: Hamilton Beach/Proctor-Silex, Inc. Reference is made to the (i) Credit Agreement (as heretofore amended, the "CREDIT AGREEMENT") dated as of October 11, 1990 among Hamilton Beach/Proctor-Silex, Inc., Proctor-Silex Canada Inc., The Chase Manhattan Bank (National Association), as U.S. Agent (in such capacity, the "U.S. AGENT") and The Chase Manhattan Bank of Canada, as Canadian Agent and (ii) the Agreement dated October 11, 1990 between HB - PS Holding Company, Inc. and the U.S. Agent. The undersigned hereby consents to the execution and delivery by the U.S. Agent of a letter in substantially the form of Exhibit A hereto. This Consent and Authorization shall become effective upon execution and delivery of a counterpart hereof by the Majority Banks (as defined in the Credit Agreement). This Consent and Authorization may be executed in multiple counterparts each of which taken together shall constitute a single instrument. This Consent and Authorization shall be governed by and construed in accordance with the law of the State of New York. Dated: As of October 8, 1993 2 THE CHASE MANHATTAN BANK (NATIONAL ASSOCIATION) By /s/ Alex Danzberger, Jr. --------------------------------- Title: Vice President THE CHASE MANHATTAN BANK OF CANADA By /s/ Alex Danzberger, Jr. --------------------------------- Title: Vice President THE FIRST NATIONAL BANK OF CHICAGO By /s/ Thomas M. Fast --------------------------------- Title: Assistant Vice President THE BANK OF NOVA SCOTIA By /s/ A. S. Norsworthy --------------------------------- Title: Assistant Agent CONTINENTAL BANK N.A. By /s/ Peter G. Thursby --------------------------------- Title: Vice President 492190 03/26/94 17:36
3 CAISSE NATIONALE DE CREDIT AGRICOLE By /s/ D. Bell ----------------------------------- Title: First Vice President CRESTAR BANK By ----------------------------------- Title: SOCIETY NATIONAL BANK By /s/ A. Roderick MacDonald ----------------------------------- Title: Vice President NATWEST USA CREDIT CORP. By /s/ George R. Rogers ----------------------------------- Title: Vice President VAN KAMPEN MERRITT PRIME RATE INCOME TRUST By /s/ Jeff Mallet ----------------------------------- Title: 492190 03/26/94 17:36 - 3 -
4 UNITED STATES NATIONAL BANK OF OREGON By /s/ Jeffrey W. Jones ----------------------------------- Title: Vice President BANQUE WORMS By ----------------------------------- Title: 492190 03/26/94 17:36 - 4 -
5 EXHIBIT A HB-PS HOLDING COMPANY, INC. October 26, 1993 To The Chase Manhattan Bank, (National Association), as U.S. agent for the banks and other financial institutions party to the Credit Agreement (as defined in the Holdings Supplemental Agreement referred to below) Ladies and Gentlemen: We refer to the Agreement dated October 11, 1990 (the "HOLDINGS SUPPLEMENTAL AGREEMENT") between the undersigned and you. Capitalized terms used and not defined herein shall have the meanings attributed thereto in the Holdings Supplemental Agreement. We expect to receive a cash equity contribution in the amount of $2,700,000 from Precis in connection with adjustments contemplated by the provisions contained in Section 8 the Reorganization Agreement (the "AFFECTED PAYMENT"). We hereby request that to the extent that the Affected Payment constitutes a cash payment subject to the provisions of Section 3.07 of the Holdings Supplemental Agreement you waive the requirement set forth in said Section 3.07 that we promptly contribute the Affected Payment to the Company as a cash equity contribution. Your agreement to waive our obligation to contribute the Affected Payment to the Company shall not constitute a waiver, amendment or modification of our other obligations under the Holdings Supplemental Agreement, including, without limitation, any obligation to make future cash equity contributions under Section 3.07 thereof. Each of the representations and warranties set forth in the Holdings Supplemental Agreement is true, complete and correct on and as of the date hereof. We are not currently in default of any of our obligations under the Holdings Supplemental Agreement. We agree to reimburse you promptly upon demand for all costs and expenses incurred by you (including, without limitation, counsel's fees) incurred in connection with this waiver request. Please indicate your agreement with this waiver request by signing and returning to us the enclosed copy of this letter. Sincerely yours, 6 - 2 - HB-PS HOLDING COMPANY, INC. By:_________________________ Title: Acknowledged and Agreed to: HAMILTON BEACH/PROCTOR-SILEX, INC. By:____________________________ Title: PROCTOR-SILEX CANADA INC. By:____________________________ Title: PROCTOR-SILEX S.A. DE C.V. By:____________________________ Title: Accepted and agreed: THE CHASE MANHATTAN BANK (NATIONAL ASSOCIATION), as U.S. Agent By:____________________________ Title:
EX-10.142 16 NACCO EXHIBIT 10.CXXXXII 1 EXHIBIT 10(cxxxxii) FIFTH AMENDMENT --------------- FIFTH AMENDMENT dated as of December 23, 1993 among HAMILTON BEACH/PROCTOR-SILEX, INC. (the "COMPANY"), PROCTOR-SILEX CANADA INC. ("PSC"), PROCTOR-SILEX S.A. DE C.V. ("PSM"), the banks and other financial institutions named on the signature pages hereto (the "BANKS"), THE CHASE MANHATTAN BANK (NATIONAL ASSOCIATION), as United States Agent for the Banks (in such capacity, the "U.S. AGENT") and THE CHASE MANHATTAN BANK OF CANADA, as Canadian Agent for the Banks (in such capacity, the "CANADIAN AGENT" and, together with the U.S. Agent, the "AGENTS"). WHEREAS, the Company, PSC, PSM, the Banks and the Agents are party to the Credit Agreement (as heretofore amended, supplemented and otherwise modified, the "CREDIT AGREEMENT"; terms defined in the Credit Agreement shall have their defined meanings when used herein) dated as of October 11, 1990, as amended, which initially provided for the making of loans or the issuance of letters of credit in an aggregate principal (or face) amount not to exceed U.S. $185,000,000; WHEREAS, the Company has requested a certain modification to the Credit Agreement; WHEREAS, the Banks are agreeable to such modification to the Credit Agreement; NOW, THEREFORE, the Company, PSC, PSM, the Banks and the Agents hereby agree as follows: SECTION I. AMENDMENT. --------- 1.01. Section 9.09 of the Credit Agreement is hereby amended in its entirety to read as follows: "9.09 NET WORTH. The Company shall not, at any time during any period set forth below, permit its Net Worth to be less than the amount set forth below opposite such period: Period Net Worth ------ --------- During the last fiscal quarter of the fiscal year of the Company ending in 1990 U.S.$128,000,000 VOL402CL Doc: 88232.1 2 2 During the fiscal year of the Company ending in 1991 a. First fiscal quarter U.S.$125,000,000 b. Second fiscal quarter U.S.$125,000,000 c. Third fiscal quarter U.S.$125,000,000 d. Fourth fiscal quarter U.S.$130,000,000 During the fiscal year of the Company ending in 1992 a. First fiscal quarter U.S.$128,000,000 b. Second fiscal quarter U.S.$128,000,000 c. Third fiscal quarter U.S.$132,500,000 d. Fourth fiscal quarter U.S.$132,500,000 During the fiscal year of the Company ending in 1993 a. First fiscal quarter U.S.$132,500,000 b. Second fiscal quarter U.S.$132,500,000 c. Third fiscal quarter U.S.$135,000,000 d. Fourth fiscal quarter U.S.$135,000,000 During the fiscal year of the Company ending in 1994 a. First fiscal quarter U.S.$132,500,000 b. Second fiscal quarter U.S.$132,500,000 c. Third fiscal quarter U.S.$135,000,000 d. Fourth fiscal quarter U.S.$135,000,000 During each fiscal quarter of the fiscal year of the Company ending in 1995 U.S.$140,000,000 During each fiscal quarter of the fiscal year of the Company ending in 1996 U.S.$145,000,000 During each fiscal quarter of the fiscal year of the Company ending in 1997 U.S.$150,000,000 During each fiscal quarter of each fiscal year of the Company thereafter U.S.$160,000,000." VOL402CL Doc: 88232.1 3 3 SECTION II. CONDITIONS TO EFFECTIVENESS. --------------------------- 2.01. The provisions of this Fifth Amendment shall become effective as of the date hereof (the "EFFECTIVE DATE") upon receipt by the U.S. Agent of the following items in form and substance satisfactory to the U.S. Agent: a. Counterparts of this Fifth Amendment duly executed by the Company, PSC, PSM, the Majority Banks and the Agents; and b. An Officer's Certificate of the Company to the effect set forth in Section 3.01 and 3.02 hereof. SECTION III. REPRESENTATIONS AND WARRANTIES. ------------------------------ The Company hereby represents and warrants that: 3.01. After giving effect to this Fifth Amendment, no Default shall have occurred and be continuing. 3.02. The representations and warranties made by the Obligors in Section 8 of the Credit Agreement and in each Document to which it is a party are true and correct on and as of the date hereof as if made on the date hereof (except that any such representation or warranty stated to relate to a specific earlier date will be true on and correct as of such earlier date) and, in the case of the Credit Agreement, as if each reference to the term "this Agreement" in Sections 8.02, 8.03, 8.04, 8.05, 8.07, 8.12 and 8.14 of the Credit Agreement was deemed to be a reference to "the Fifth Amendment dated as of December 23, 1993 among the Company, PSC, PSM, the Banks and the Agents and the Credit Agreement as amended by said Fifth Amendment." SECTION IV. MISCELLANEOUS. ------------- 4.01. Except as expressly provided herein, the Credit Agreement shall remain unchanged and in full force and effect. 4.02. THIS FIFTH AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK. 4.03. This Fifth Amendment may be executed in any number of counterparts all of which taken together shall constitute one and the same amendatory instrument and any of the parties may execute this Fifth Amendment by signing any such counterpart. VOL402CL Doc: 88232.1 4 4 IN WITNESS WHEREOF, the parties hereto have caused this Fifth Amendment to be duly executed as of the day and year first above written. OBLIGORS -------- HAMILTON BEACH/PROCTOR-SILEX, INC. By /s/ James H. Taylor ---------------------------------- Title: VP - Treasurer PROCTOR-SILEX CANADA INC. By /s/ Charles B. Hoyt ---------------------------------- Title: VP - Finance PROCTOR-SILEX S.A. DE C.V. By /s/ G. Nebel ---------------------------------- Title: Sole Administrator BANKS ----- THE CHASE MANHATTAN BANK (NATIONAL ASSOCIATION) By /s/ Alex Danzberger, Jr. ---------------------------------- Title: Vice President THE CHASE MANHATTAN BANK OF CANADA By /s/ Alex Danzberger, Jr. ---------------------------------- Title: THE FIRST NATIONAL BANK OF CHICAGO By /s/ Marquerit Canestraro ---------------------------------- Title: Vice President VOL402CL Doc: 88232.1 5 5 THE BANK OF NOVA SCOTIA By /s/ FSH Ashby ------------------------------------ Title: CONTINENTAL BANK N.A. By /s/ Peter G. Thursby ------------------------------------ Title CAISSE NATIONALE DE CREDIT AGRICOLE By /s/ D. Bell ------------------------------------ Title: First Vice President CRESTAR BANK By /s/ James P. Duvall, Jr. ------------------------------------ Title: SOCIETY NATIONAL BANK By /s/ J. Roderick MacDonald ------------------------------------ Title: NATWEST USA CREDIT CORP. By /s/ George R. Rogers ------------------------------------ Title: VP VAN KAMPEN MERRITT PRIME RATE INCOME TRUST By /s/ Jeff Mallet ------------------------------------ Title: VOL402CL Doc: 88232.1 6 6 UNITED STATES NATIONAL BANK OF OREGON By /s/ Jeffery W. Jones --------------------------------- Title: Vice President BANQUE WORMS By /s/ Felina Marron --------------------------------- Title: AGENTS ------ THE CHASE MANHATTAN BANK (NATIONAL ASSOCIATION), as U.S. Agent By /s/ Alex Danzberger, Jr. --------------------------------- Title: THE CHASE MANHATTAN BANK OF CANADA, as Canadian Agent By /s/ Alex Danzberger, Jr. --------------------------------- Title: VP VOL402CL Doc: 88232.1 EX-10.143 17 NACCO EXHIBIT 10.CXXXXIII 1 EXHIBIT 10 (cxxxxiii) AMENDMENT NO. 1 TO CREDIT AGREEMENT AMENDMENT dated as of July 28, 1993 among THE NORTH AMERICAN COAL CORPORATION (the "Borrower"), the BANKS listed on the signature pages hereof (the "Banks") and MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Agent (the "Agent"). W I T N E S S E T H : WHEREAS, the parties hereto have heretofore entered into a Credit Agreement dated as of September 27, 1991 (the "Agreement"); and WHEREAS, the parties hereto desire to amend the Agreement (i) to extend the term of the Agreement, (ii) to incorporate an extension mechanism whereby, on an annual basis, the Borrower can request that the Banks extend the Termination Date by one year and (iii) to provide for a variable Base Rate, CD Margin, Euro-Dollar Margin and facility fee based on the Adjusted Cash Flow Ratio; NOW, THEREFORE, the parties hereto agree as follows: Section 1. DEFINITIONS; REFERENCES. Unless otherwise specifically defined herein, each term used herein which is defined in the Agreement shall have the meaning assigned to such term in the Agreement. Each reference to "hereof", "hereunder", "herein" and "hereby" and each other similar reference and each reference to "this Agreement" and each other similar reference contained in the Agreement shall from and after the date hereof refer to the Agreement as amended hereby. Section 2. TERMINATION DATE. The definition of "Termination Date" is amended to read in its entirety as follows: "Termination Date" means September 27, 1996, or such later date, if any, to which the Termination Date may have been extended pursuant to Section 2.14, or, if any such day is not a Euro-Dollar Business Day, the next succeeding Euro-Dollar Business Day unless such Euro-Dollar Business Day falls in another calendar month, in which case the Termination Date shall be the next preceding Euro-Dollar Business Day. 2 Section 3. AMENDMENT OF Section 2.05(A) OF THE AGREEMENT. Section 2.05(a) of the Agreement is amended by replacing the first sentence therein with the following language: Each Base Rate Loan shall bear interest on the outstanding principal amount thereof, for each day from the date such Loan is made until it becomes due, at a rate per annum equal to the Base Rate for such day plus the percentage indicated below opposite the applicable Adjusted Cash Flow Ratio for such day, PROVIDED that for any day which falls during an HLT Classification Period each Base Rate Loan shall bear interest at a rate per annum equal to the sum of 1.5% plus the Base Rate for such day.
Base Rate Adjusted Cash Flow Ratio Percentage ------------------------ ---------- Greater than 0.35 to 1 .0% Less than or equal to 0.35 to 1 .25%
2 3 Section 4. AMENDMENT OF Section 2.05(B) OF THE AGREEMENT. Section 2.05(b) of the Agreement is amended by replacing the definition of "CD Margin" therein with the following definition: "CD Margin" shall be, for any day, the percentage indicated below opposite the applicable Adjusted Cash Flow Ratio for such day, PROVIDED that for any day which falls during an HLT Classification Period the CD Margin shall be 2.625%.
Adjusted Cash Flow Ratio CD Margin ------------------------ --------- Greater than 0.35 to 1 .5625% Less than or equal to 0.35 to 1 .8125%
Section 5. AMENDMENT OF SECTION 2.05(C) OF THE AGREEMENT. Section 2.05(c) of the Agreement is amended by replacing the definition of "Euro-Dollar Margin" therein with the following definition: "Euro-Dollar Margin" shall be, for any day, the percentage indicated below opposite the applicable Adjusted Cash Flow Ratio for such day, PROVIDED that for any day which falls during an HLT Classification Period the Euro-Dollar Margin shall be 2.50%.
Adjusted Cash Flow Ratio Euro-Dollar Margin ------------------------ ------------------ Greater than 0.35 to 1 .4375% Less than or equal to 0.35 to 1 .6875%
3 4 Section 6. AMENDMENT OF Section 2.06(B) OF THE AGREEMENT. Section 2.06(b) is amended by replacing the first sentence therein with the following language: The Borrower shall pay to the Agent, ratably for the account of each Bank, a facility fee for each day, at the rate per annum indicated below opposite the applicable Adjusted Cash Flow Ratio for such day, PROVIDED that for any day which falls during an HLT Classification Period the facility fee shall be at the rate of .50% per annum.
facility fee Adjusted Cash Flow Ratio (per annum) ------------------------ ------------ Greater than 0.35 to 1 .1875% Less than or equal to 0.35 to 1 .3125%
Section 7. ADDITION OF Section 2.14 TO THE AGREEMENT. The Agreement is amended to add the following Section 2.14: Section 2.14 EXTENSION OF TERMINATION DATE. The Termination Date may be extended in the manner set forth in this Section 2.14, on September 27, 1994 and on each anniversary of such date (an "Extension Date") in each case for a period of one year after the Termination Date then in effect. If the Borrower wishes to request an extension of the Termination Date on any Extension Date, it shall give written notice to that effect to the Agent not less than 60 nor more than 90 days prior to such Extension Date, whereupon the Agent shall promptly notify each of the Banks of such notice. Each Bank will respond to such request, whether affirmatively or negatively, as it may elect in its discretion, within 30 days of such notice to the Agent. If all Banks respond affirmatively, then, subject to receipt by the Agent of counterparts of an Extension Agreement in substantially the form of Exhibit F duly completed and signed by all of the parties hereto, the Termination Date shall be extended, effective on such Extension Date, for a period one year to the date stated in such Extension Agreement. 4 5 Section 8. AMENDMENT OF Section 5.08 OF THE AGREEMENT. Section 5.08 of the Agreement is amended to add the following sentence immediately after the first sentence thereof: The Adjusted Cash Flow Ratio to be utilized in the determination of the interest rates and facility fee is the Adjusted Cash Flow Ratio based on the most recent certificate of the Borrower delivered pursuant to Section 5.01(c). Section 9. ADDITION OF EXHIBIT F TO THE AGREEMENT. The Agreement is amended to add as Exhibit F the form of Extension Agreement attached as Exhibit F hereto. Section 10. GOVERNING LAW. This Amendment shall be governed by and construed in accordance with the laws of the State of New York. Section 11. COUNTERPARTS; EFFECTIVENESS. This Amendment may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. This Amendment shall become effective when the Agent shall have received duly executed counterparts hereof signed by the Borrower and the Banks (or, in the case of any party as to which an executed counterpart shall not have been received, the Agent shall have received telegraphic, telex, telecopy or other written confirmation from such party of execution of a counterpart hereof by such party). 5 6 IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed as of the date first above written. THE NORTH AMERICAN COAL CORPORATION By /s/ K. Donald Grischow --------------------------- Title: Controller & Treasurer MORGAN GUARANTY TRUST COMPANY OF NEW YORK By /s/ Timothy S. Broadbent --------------------------- Title: Vice President CITIBANK, N.A. By /s/ Barbara A. Cohen --------------------------- Title: Vice President SOCIETY NATIONAL BANK By /s/ J. Roderick MacDonald --------------------------- Title: Vice President FIRST INTERSTATE BANK OF TEXAS, N.A. By /s/ Connor J. Duffey --------------------------- Title: Vice President
6 7 EXHIBIT F EXTENSION AGREEMENT The North American Coal Corporation 14785 Preston Road Suite 1100 Dallas, Texas 75240 Morgan Guaranty Trust Company of New York, as Agent under the Credit Agreement referred to below 60 Wall Street New york, NY 10260 Gentlemen: The undersigned hereby agree to extend, effective [Extension Date], the Termination Date under the Credit Agreement dated as of September 27, 1991 among The North American Coal Corporation, the Banks listed therein and Morgan Guaranty Trust Company of New York, as Agent (the "Credit Agreement") for one year to [date to which the Termination Date is extended]. Terms defined in the Credit Agreement are used herein as therein defined. This Extension Agreement shall be construed in accordance with and governed by the law of the State of New York. MORGAN GUARANTY TRUST COMPANY OF NEW YORK By ---------------------------- Title: CITIBANK, N.A. By ---------------------------- Title:
8 SOCIETY NATIONAL BANK By_____________________ Title: FIRST INTERSTATE BANK OF TEXAS, N.A. By_____________________ Title: Agreed and accepted: THE NORTH AMERICAN COAL CORPORATION By --------------------------------- Title: MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Agent By --------------------------------- Title:
2 EX-10.144 18 NACCO EXHIBIT 10.CXXXXIV 1 EXHIBIT 10(cxxxxiv) AMENDMENT NO. 1 TO TERM LOAN AGREEMENT THIS AMENDMENT NO. 1 TO TERM LOAN AGREEMENT, effective as of the ___ day of February 1993, between THE KITCHEN COLLECTION, INC., a Delaware corporation ("Borrower"), and SOCIETY NATIONAL BANK, Cleveland, Ohio, successor by merger to Ameritrust Company National Association ("Bank"). W I T N E S S E T H WHEREAS, Borrower and Bank are parties to a Term Loan Agreement (the "Agreement"), effective as of March 12, 1990, providing for a term loan by Bank to Borrower of the principal amount of $3,500,000; and WHEREAS, Borrower may, from time to time, desire to make loans to NACCO Industries, Inc., a Delaware corporation, the indirect parent of Borrower ("NACCO"), or to subsidiaries of NACCO; and WHEREAS, Bank agrees to permit such loans; NOW, THEREFORE, it is mutually agreed as follows: Section 5.11 of the Agreement shall be amended by adding to the end of such section ", or (v) advances or loans made from time to time by Borrower to NACCO Industries, Inc. or to any subsidiary of NACCO Industries, Inc." IN WITNESS WHEREOF, the parties have set their hands as of the date set forth above. Address: 71 East Water Street THE KITCHEN COLLECTION, INC. Chillicothe, Ohio 45601 By /s/ Randall D. Lynch --------------------------------- Randall D. Lynch President By /s/ Randolph J. Gawelek --------------------------------- Randolph J. Gawelek Executive Vice President Address: 900 Euclid Avenue SOCIETY NATIONAL BANK Cleveland, Ohio 44101 By /s/ J. Roderick MacDonald --------------------------------- J. Roderick MacDonald Vice President KCI.1
EX-11 19 NACCO EXHIBIT 11 1 EXHIBIT 11 NACCO INDUSTRIES, INC. AND SUBSIDIARIES COMPUTATION OF EARNINGS PER SHARE
Year Ended December 31 -------------------------------------------------- 1993 1992 1991 ------- ------- ------ (Amounts in thousands except per share data) Income (loss): - ------------- Income before extraordinary charge $ 11,593 $ 22,868 $ 20,038 Extraordinary charge, net-of-tax (3,292) (110,000) ---------- ---------- ---------- Net income (loss) $ 8,301 $ (87,132) $ 20,038 ========== ========== ========== Per share amounts reported to stockholders -- Note 1: - ------------------------- Income before extraordinary charge $ 1.30 $ 2.57 $ 2.26 Extraordinary charge, net-of-tax (.37) (12.37) ---------- ---------- ---------- Net income (loss) $ .93 $ (9.80) $ 2.26 ========== ========== ========== Primary: - ------- Weighted average shares outstanding 8,938 8,891 8,878 Dilutive stock options -- Note 2 15 33 39 ---------- ---------- ---------- Totals 8,953 8,924 8,917 ========== ========== ========== Per share amounts Income before extraordinary charge $ 1.30 $ 2.56 $ 2.25 Extraordinary charge, net-of-tax (.37) (12.32) ---------- ---------- ---------- Net income (loss) $ .93 $ (9.76) $ 2.25 ========== ========== ========== Fully diluted: - ------------- Weighted average shares outstanding 8,938 8,891 8,878 Dilutive stock options -- Note 2 17 37 44 ---------- ---------- ---------- Totals 8,955 8,928 8,922 ========== ========== ========== Per share amounts Income before extraordinary charge $ 1.30 $ 2.56 $ 2.25 Extraordinary charge, net-of-tax (.37) (12.32) ---------- ---------- ---------- Net income (loss) $ .93 $ (9.76) $ 2.25 ========== ========== ========== NOTE 1 -- Per share earnings have been computed and reported to the stockholders pursuant to APB Opinion No. 15, which provides that "any reduction of less than 3% in the aggregate need not be considered as dilution in the computation and presentation of earnings per share data." NOTE 2 -- Dilutive stock options are calculated based on the treasury stock method. For primary per share earnings the average market price is used. For fully diluted per share earnings the year-end market price, if higher than the average market price, is used.
EX-22 20 NACCO EXHIBIT 22 1 Exhibit 22 ---------- SUBSIDIARIES OF NACCO INDUSTRIES, INC. As of the date of the Annual Report on Form 10-K to which this is an Exhibit, the subsidiaries of NACCO Industries, Inc. were as follows: Name Incorporation - ---- ------------- Bellaire Corporation Ohio The Coteau Properties Company Ohio The Falkirk Mining Company Ohio Hamilton Beach/Proctor-Silex, Inc. Delaware(1) HB-PS Holding Company, Inc. Delaware(1) Housewares Holding Company Delaware Hyster Australia Pty. Ltd. Australia Hyster B.V. Netherlands Hyster Europe Limited United Kingdom NACCO Materials Handling Scotland Ltd. United Kingdom NACCO Materials Handling (N.I.) Ltd. Northern Ireland NACCO Materials Handling Group, Ltd. United Kingdom Hyster-Yale Materials Handling, Inc. Delaware(2) The Kitchen Collection, Inc. Delaware NACCO Materials Handling Group, Inc. Delaware The North American Coal Corporation Delaware North American Coal Royalty Company Delaware Powhatan Corporation Delaware Proctor-Silex Canada Inc. Ontario (Canada) Proctor Silex, S.A. de C.V. Mexico The Sabine Mining Company Texas Yale Europe Materials Handling Corporation United Kingdom
The Company has omitted the names of its subsidiaries which, considered in the aggregate as a single subsidiary, would not constitute a "significant subsidiary" within the meaning of Rule 1-02 contained in Regulation S-X. _______________________ 1. NACCO owns 100% of the voting securities of Housewares Holding Company, Housewares Holding Company owns 80% of the voting securities of HB-PS Holding Company, Inc., HB-PS Holding Company, Inc. owns 100% of Hamilton Beach/Proctor-Silex, Inc., and Hamilton Beach/Proctor-Silex Inc. owns 100% of Proctor-Silex Canada Inc. and Proctor Silex, S.A. de C.V. (except for directors' qualifying shares). 2. NACCO Industries, Inc. owns 97% of the voting securities of Hyster-Yale Materials Handling, Inc. EX-24.I 21 NACCO EXHIBIT 24.I 1 EXHIBIT 24(i) CONSENT OF ARTHUR ANDERSEN & CO. To the Board of Directors of NACCO Industries, Inc.: As independent public accountants, we hereby consent to the incorporation of our report included in this Form 10-K, into the Company's previously filed Registration Statement (No. 33-3422) on Form S-4 and Registration Statement (No. 33-52660) on Form S-8. ARTHUR ANDERSEN & CO. Cleveland, Ohio, March 30, 1994. EX-25.I.12 22 NACCO EXHIBIT 25.I.XII 1 Exhibit 25(i)-(xii) POWER OF ATTORNEY ----------------- KNOW ALL MEN BY THESE PRESENTS, that the undersigned Director of NACCO Industries, Inc. hereby constitutes and appoints Frank B. O'Brien, Charles A. Bittenbender and Steven M. Billick, and each of them, as the true and lawful attorney or attorneys-in-fact, with full power of substitution and revocation, for the undersigned and in the name, place and stead of the undersigned, to sign on behalf of the undersigned as Director of NACCO Industries, Inc., a Delaware corporation, an Annual Report pursuant to Section 13 of the Securities Exchange Act of 1934 on Form 10-K for the fiscal year ended December 31, 1993, and to sign any and all amendments to such Annual Report, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting to said attorney or attorneys-in-fact, and each of them, full power and authority to do so and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as the undersigned might or could do in person, hereby ratifying and confirming all that said attorney or attorneys-in-fact or any of them or their substitute or substitutes, may lawfully do or cause to be done by virtue hereof. /S/ Owsley Brown II ------------------ Owsley Brown II Date: March 15, 1994 -------------- C41027 2 POWER OF ATTORNEY ----------------- KNOW ALL MEN BY THESE PRESENTS, that the undersigned Director of NACCO Industries, Inc. hereby constitutes and appoints Frank B. O'Brien, Charles A. Bittenbender and Steven M. Billick, and each of them, as the true and lawful attorney or attorneys-in-fact, with full power of substitution and revocation, for the undersigned and in the name, place and stead of the undersigned, to sign on behalf of the undersigned as Director of NACCO Industries, Inc., a Delaware corporation, an Annual Report pursuant to Section 13 of the Securities Exchange Act of 1934 on Form 10-K for the fiscal year ended December 31, 1993, and to sign any and all amendments to such Annual Report, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting to said attorney or attorneys-in-fact, and each of them, full power and authority to do so and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as the undersigned might or could do in person, hereby ratifying and confirming all that said attorney or attorneys-in-fact or any of them or their substitute or substitutes, may lawfully do or cause to be done by virtue hereof. /S/ John J. Dwyer --------------- John J. Dwyer Date: March 9, 1994 ------------- C41027 3 POWER OF ATTORNEY ----------------- KNOW ALL MEN BY THESE PRESENTS, that the undersigned Director of NACCO Industries, Inc. hereby constitutes and appoints Frank B. O'Brien, Charles A. Bittenbender and Steven M. Billick, and each of them, as the true and lawful attorney or attorneys-in-fact, with full power of substitution and revocation, for the undersigned and in the name, place and stead of the undersigned, to sign on behalf of the undersigned as Director of NACCO Industries, Inc., a Delaware corporation, an Annual Report pursuant to Section 13 of the Securities Exchange Act of 1934 on Form 10-K for the fiscal year ended December 31, 1993, and to sign any and all amendments to such Annual Report, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting to said attorney or attorneys-in-fact, and each of them, full power and authority to do so and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as the undersigned might or could do in person, hereby ratifying and confirming all that said attorney or attorneys-in-fact or any of them or their substitute or substitutes, may lawfully do or cause to be done by virtue hereof. /s/Robert M. Gates -------------------- Robert M. Gates Date: March 9, 1994 ------------- C41027 4 POWER OF ATTORNEY ----------------- KNOW ALL MEN BY THESE PRESENTS, that the undersigned Director of NACCO Industries, Inc. hereby constitutes and appoints Frank B. O'Brien, Charles A. Bittenbender and Steven M. Billick, and each of them, as the true and lawful attorney or attorneys-in-fact, with full power of substitution and revocation, for the undersigned and in the name, place and stead of the undersigned, to sign on behalf of the undersigned as Director of NACCO Industries, Inc., a Delaware corporation, an Annual Report pursuant to Section 13 of the Securities Exchange Act of 1934 on Form 10-K for the fiscal year ended December 31, 1993, and to sign any and all amendments to such Annual Report, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting to said attorney or attorneys-in-fact, and each of them, full power and authority to do so and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as the undersigned might or could do in person, hereby ratifying and confirming all that said attorney or attorneys-in-fact or any of them or their substitute or substitutes, may lawfully do or cause to be done by virtue hereof. /S/ E. Bradley Jones --------------------- E. Bradley Jones Date: March 14, 1994 -------------- C41027 5 POWER OF ATTORNEY ----------------- KNOW ALL MEN BY THESE PRESENTS, that the undersigned Director of NACCO Industries, Inc. hereby constitutes and appoints Frank B. O'Brien, Charles A. Bittenbender and Steven M. Billick, and each of them, as the true and lawful attorney or attorneys-in-fact, with full power of substitution and revocation, for the undersigned and in the name, place and stead of the undersigned, to sign on behalf of the undersigned as Director of NACCO Industries, Inc., a Delaware corporation, an Annual Report pursuant to Section 13 of the Securities Exchange Act of 1934 on Form 10-K for the fiscal year ended December 31, 1993, and to sign any and all amendments to such Annual Report, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting to said attorney or attorneys-in-fact, and each of them, full power and authority to do so and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as the undersigned might or could do in person, hereby ratifying and confirming all that said attorney or attorneys-in-fact or any of them or their substitute or substitutes, may lawfully do or cause to be done by virtue hereof. /S/ Dennis W. LaBarre --------------------- Dennis W. LaBarre Date: March 9, 1994 ------------- C41027 6 POWER OF ATTORNEY ----------------- KNOW ALL MEN BY THESE PRESENTS, that the undersigned President and Chief Executive Officer and Director of NACCO Industries, Inc. hereby constitutes and appoints Frank B. O'Brien, Charles A. Bittenbender and Steven M. Billick, and each of them, as the true and lawful attorney or attorneys-in-fact, with full power of substitution and revocation, for the undersigned and in the name, place and stead of the undersigned, to sign on behalf of the undersigned as President and Chief Executive Officer and Director of NACCO Industries, Inc., a Delaware corporation, an Annual Report pursuant to Section 13 of the Securities Exchange Act of 1934 on Form 10-K for the fiscal year ended December 31, 1993, and to sign any and all amendments to such Annual Report, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting to said attorney or attorneys-in-fact, and each of them, full power and authority to do so and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as the undersigned might or could do in person, hereby ratifying and confirming all that said attorney or attorneys-in-fact or any of them or their substitute or substitutes, may lawfully do or cause to be done by virtue hereof. /S/ Alfred M. Rankin, Jr. --------------------- Alfred M. Rankin, Jr. Date: March 11, 1994 -------------- C41027a 7 POWER OF ATTORNEY ----------------- KNOW ALL MEN BY THESE PRESENTS, that the undersigned Director of NACCO Industries, Inc. hereby constitutes and appoints Frank B. O'Brien, Charles A. Bittenbender and Steven M. Billick, and each of them, as the true and lawful attorney or attorneys-in-fact, with full power of substitution and revocation, for the undersigned and in the name, place and stead of the undersigned, to sign on behalf of the undersigned as Director of NACCO Industries, Inc., a Delaware corporation, an Annual Report pursuant to Section 13 of the Securities Exchange Act of 1934 on Form 10-K for the fiscal year ended December 31, 1993, and to sign any and all amendments to such Annual Report, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting to said attorney or attorneys-in-fact, and each of them, full power and authority to do so and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as the undersigned might or could do in person, hereby ratifying and confirming all that said attorney or attorneys-in-fact or any of them or their substitute or substitutes, may lawfully do or cause to be done by virtue hereof. /S/ John C. Sawhill ----------------------- John C. Sawhill Date: March 9, 1994 ------------- C41027 8 POWER OF ATTORNEY ----------------- KNOW ALL MEN BY THESE PRESENTS, that the undersigned Chairman of the Board and Director of NACCO Industries, Inc. hereby constitutes and appoints Frank B. O'Brien, Charles A. Bittenbender and Steven M. Billick, and each of them, as the true and lawful attorney or attorneys-in- fact, with full power of substitution and revocation, for the undersigned and in the name, place and stead of the undersigned, to sign on behalf of the undersigned as Chairman of the Board and Director of NACCO Industries, Inc., a Delaware corporation, an Annual Report pursuant to Section 13 of the Securities Exchange Act of 1934 on Form 10-K for the fiscal year ended December 31, 1993, and to sign any and all amendments to such Annual Report, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting to said attorney or attorneys-in-fact, and each of them, full power and authority to do so and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as the undersigned might or could do in person, hereby ratifying and confirming all that said attorney or attorneys-in-fact or any of them or their substitute or substitutes, may lawfully do or cause to be done by virtue hereof. /s/ Ward Smith -------------- Ward Smith Date: March 11, 1994 -------------- C41027a 9 POWER OF ATTORNEY ----------------- KNOW ALL MEN BY THESE PRESENTS, that the undersigned Director of NACCO Industries, Inc. hereby constitutes and appoints Frank B. O'Brien, Charles A. Bittenbender and Steven M. Billick, and each of them, as the true and lawful attorney or attorneys-in-fact, with full power of substitution and revocation, for the undersigned and in the name, place and stead of the undersigned, to sign on behalf of the undersigned as Director of NACCO Industries, Inc., a Delaware corporation, an Annual Report pursuant to Section 13 of the Securities Exchange Act of 1934 on Form 10-K for the fiscal year ended December 31, 1993, and to sign any and all amendments to such Annual Report, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting to said attorney or attorneys-in-fact, and each of them, full power and authority to do so and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as the undersigned might or could do in person, hereby ratifying and confirming all that said attorney or attorneys-in-fact or any of them or their substitute or substitutes, may lawfully do or cause to be done by virtue hereof. /S/ Britton T. Taplin ----------------------- Britton T. Taplin Date: March 9, 1994 ------------- C41027 10 POWER OF ATTORNEY ----------------- KNOW ALL MEN BY THESE PRESENTS, that the undersigned Director of NACCO Industries, Inc. hereby constitutes and appoints Frank B. O'Brien, Charles A. Bittenbender and Steven M. Billick, and each of them, as the true and lawful attorney or attorneys-in-fact, with full power of substitution and revocation, for the undersigned and in the name, place and stead of the undersigned, to sign on behalf of the undersigned as Director of NACCO Industries, Inc., a Delaware corporation, an Annual Report pursuant to Section 13 of the Securities Exchange Act of 1934 on Form 10-K for the fiscal year ended December 31, 1993, and to sign any and all amendments to such Annual Report, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting to said attorney or attorneys-in-fact, and each of them, full power and authority to do so and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as the undersigned might or could do in person, hereby ratifying and confirming all that said attorney or attorneys-in-fact or any of them or their substitute or substitutes, may lawfully do or cause to be done by virtue hereof. /S/ Frank E. Taplin, Jr. ------------------------- Frank E. Taplin, Jr. Date: March 9, 1994 ------------- C41027 11 POWER OF ATTORNEY ----------------- KNOW ALL MEN BY THESE PRESENTS, that the undersigned Director of NACCO Industries, Inc. hereby constitutes and appoints Frank B. O'Brien, Charles A. Bittenbender and Steven M. Billick, and each of them, as the true and lawful attorney or attorneys-in-fact, with full power of substitution and revocation, for the undersigned and in the name, place and stead of the undersigned, to sign on behalf of the undersigned as Director of NACCO Industries, Inc., a Delaware corporation, an Annual Report pursuant to Section 13 of the Securities Exchange Act of 1934 on Form 10-K for the fiscal year ended December 31, 1993, and to sign any and all amendments to such Annual Report, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting to said attorney or attorneys-in-fact, and each of them, full power and authority to do so and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as the undersigned might or could do in person, hereby ratifying and confirming all that said attorney or attorneys-in-fact or any of them or their substitute or substitutes, may lawfully do or cause to be done by virtue hereof. /S/ Richard B. Tullis --------------------- Richard B. Tullis Date: March 9, 1994 -------------- C41027 12 POWER OF ATTORNEY ----------------- KNOW ALL MEN BY THESE PRESENTS, that the undersigned Vice President and Controller of NACCO Industries, Inc. hereby constitutes and appoints Frank B. O'Brien and Charles A. Bittenbender, and each of them, as the true and lawful attorney or attorneys-in-fact, with full power of substitution and revocation, for the undersigned and in the name, place and stead of the undersigned, to sign on behalf of the undersigned as Vice President and Controller of NACCO Industries, Inc., a Delaware corporation, an Annual Report pursuant to Section 13 of the Securities Exchange Act of 1934 on Form 10-K for the fiscal year ended December 31, 1993, and to sign any and all amendments to such Annual Report, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting to said attorney or attorneys-in-fact, and each of them, full power and authority to do so and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as the undersigned might or could do in person, hereby ratifying and confirming all that said attorney or attorneys-in-fact or any of them or their substitute or substitutes, may lawfully do or cause to be done by virtue hereof. /S/Steven M. Billick -------------------- Steven M. Billick Date: March 11, 1994 -------------- C41030 EX-99.I 23 NACCO EXHIBIT 99.I 1 EXHIBIT 99(i) Audited Consolidated Financial Statements THE NORTH AMERICAN COAL CORPORATION AND SUBSIDIARIES As of December 31, 1993 and 1992
Report of Independent Public Accountants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Consolidated Balance Sheets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Consolidated Statements of Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Consolidated Statements of Stockholder's Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Consolidated Statements of Cash Flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Board of Directors of The North American Coal Corporation: We have audited the accompanying consolidated balance sheets of The North American Coal Corporation and subsidiaries as of December 31, 1993 and 1992, and the related consolidated statements of income, stockholder's equity and cash flows for the years then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of The North American Coal Corporation and subsidiaries as of December 31, 1993 and 1992, and the results of their operations and their cash flows for the years then ended in conformity with generally accepted accounting principles. As explained in Note B to the financial statements, the Company has given retroactive effect to the change in accounting for income taxes as required by Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes". Arthur Andersen & Co. Dallas, Texas, February 3, 1994 3 THIS PAGE INTENTIONALLY LEFT BLANK 4 THE NORTH AMERICAN COAL CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS As of December 31, 1993 and 1992 (Amounts in Thousands)
As Adjusted (Note B) 1993 1992 ------------ ------------ ASSETS CURRENT ASSETS: Cash and cash equivalents $ 6,157 $ 13,909 Note receivable from parent Company 36,459 17,993 Accounts receivable 21,281 20,585 Inventories 23,813 18,103 Other current assets 3,144 6,214 ------------ ------------ 90,854 76,804 OTHER ASSETS: Notes receivable 4,343 5,755 Costs recoverable under sales contracts 8,435 9,942 Other investments and receivables 12,225 11,511 ------------ ------------ 25,003 27,208 PROPERTY, PLANT AND EQUIPMENT--at cost: Coal lands and real estate 67,889 66,300 Plant and equipment 414,305 366,086 Construction in progress 3,972 37,835 ------------ ------------ 486,166 470,221 Less allowance for depreciation, depletion and amortization (168,827) (145,937) ------------ ------------ 317,339 324,284 DEFERRED CHARGES: Deferred financing costs 7,325 7,900 Prepaid royalties 5,521 5,159 Deferred lease costs 31,198 28,368 Deferred leasehold costs 3,255 - ------------ ------------ 47,299 41,427 ------------ ------------ $ 480,495 $ 469,723 ============ ============ The accompanying notes are an integral part of these statements.
-2- 5
As Adjusted (Note B) 1993 1992 ------------ ------------ LIABILITIES AND STOCKHOLDER'S EQUITY CURRENT LIABILITIES: Accounts payable $ 9,673 $ 12,490 Payable to affiliated companies 1,576 2,208 Accrued liabilities 24,217 22,169 Revolving credit agreements 16,000 6,000 Current maturities of long-term obligations 16,060 16,010 ------------ ------------ 67,526 58,877 NON-CURRENT LIABILITIES: Advances from customers 133,347 140,555 Deferred income taxes 18,092 15,638 Pension compensation and other accrued liabilities 16,112 15,111 ------------ ------------ 167,551 171,304 LONG-TERM OBLIGATIONS: Subsidiaries' liabilities--(not guaranteed by the Company or the parent Company): Notes payable 60,430 61,227 Notes payable to affiliated company 406 506 Capitalized lease obligations 145,126 132,846 ------------ ------------ 205,962 194,579 MINORITY INTEREST 5,694 5,662 STOCKHOLDER'S EQUITY: Common Stock, par value $1 a share: Authorized 750 shares; issued and outstanding 500 shares 1 1 Capital in excess of par value 32,390 32,390 Retained income 1,371 6,910 ------------ ------------ 33,762 39,301 ------------ ------------ $ 480,495 $ 469,723 ============ ============
-3- 6 THE NORTH AMERICAN COAL CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME As of December 31, 1993 and 1992 (Amounts in Thousands)
AS ADJUSTED (NOTE B) 1993 1992 ------------- ------------- TONS OF COAL SOLD 26,538 24,489 ============= ============= INCOME: Net sales $ 225,770 $ 197,578 Royalties, rental and other operating income 6,532 13,542 Interest, gain on sale of assets and miscellaneous income 2,325 3,327 ------------- ------------- 234,627 214,447 COSTS AND EXPENSES: Cost of sales 150,416 139,221 Depreciation, depletion and amortization 29,397 23,637 Selling, administrative and general expenses 8,837 8,478 Interest expense of subsidiaries 18,761 14,234 ------------- ------------- 207,411 185,570 ------------- ------------- Income before income taxes and minority interest 27,216 28,877 INCOME TAXES: Current 7,495 6,791 Deferred 2,363 988 ------------- ------------- 9,858 7,779 Minority interest in income of consolidated subsidiary 1,326 1,621 ------------- ------------- Net Income $ 16,032 $ 19,477 ============= =============
The accompanying notes are an integral part of these statements. -4- 7 THE NORTH AMERICAN COAL CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY For the Years Ended December 31, 1993 and 1992 (Amounts in Thousands)
Capital In Retained Common Excess of Income Stock Par Value (Deficit) Total ----------- ----------- ------------ ----------- Balance at January 1, 1992, as previously reported $ 1 $ 32,390 $ (13,582) $ 18,809 Add adjustment for the cumulative effects on prior years of applying retroactively the new method of accounting for income taxes (Note B) - - 1,015 1,015 ----------- ----------- ------------ ----------- Balance at January 1, 1992, as adjusted $ 1 $ 32,390 $ (12,567) $ 19,824 Net income - - 19,477 19,477 ----------- ----------- ------------ ----------- Balance at December 31, 1992 $ 1 $ 32,390 $ 6,910 $ 39,301 Net Income - - 16,032 16,032 Cash dividends - - (21,571) (21,571) ----------- ----------- ------------ ----------- Balance at December 31, 1993 $ 1 $ 32,390 $ 1,371 $ 33,762 =========== =========== ============ ===========
The accompanying notes are an integral part of these statements. -5- 8 THE NORTH AMERICAN COAL CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS For the Years Ended December 31, 1993 and 1992 (Amounts in Thousands)
As Adjusted (Note B) OPERATING ACTIVITIES: 1993 1992 ------------ ------------ Net income $ 16,032 $ 19,477 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation, depletion and amortization 29,397 23,637 Gain on sale of assets (133) (1,201) Costs recovered under sales contracts 1,507 1,405 Deferred lease costs (2,830) (3,013) Deferred leasehold costs (3,255) - Development revenue receivable 567 457 Deferred income taxes 2,363 988 Pensions and other accruals 542 2,478 Prepaid royalties (371) (300) Deferred financing costs 607 29 ------------ ------------ 44,426 43,957 Working capital changes: (Increase) decrease in accounts receivable and other assets (1,632) 234 (Increase) in inventories (2,927) (250) Increase (decrease) in accounts payable and other liabilities (1,404) 1,954 ------------ ------------ (5,963) 1,938 ------------ ------------ NET CASH PROVIDED BY OPERATING ACTIVITIES 38,463 45,895 INVESTING ACTIVITIES: Expenditures for property, plant and equipment (24,011) (38,428) Proceeds from property disposals 21,640 1,314 Additions to note receivable from parent Company (18,466) (9,556) Reduction in notes receivable 4,664 1,426 Other - net 21 (2,415) ------------ ------------ NET CASH USED BY INVESTING ACTIVITIES (16,152) (47,659) FINANCING ACTIVITIES: Additions to lines of credit, net 7,482 8,930 Additions to (repayment of) advances from customers, net (7,208) 26,107 Additions to long-term obligations 51,517 45,535 Repayment of long-term obligations (60,283) (77,966) Cash dividends (21,571) - ------------ ------------ NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES (30,063) 2,606 ------------ ------------ INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (7,752) 842 CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 13,909 13,067 ------------ ------------ CASH AND CASH EQUIVALENTS AT END OF YEAR $ 6,157 $ 13,909 ============ ============
The accompanying notes are an integral part of these statements. -6- 9 THE NORTH AMERICAN COAL CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 1993 and 1992 NOTE A--ORGANIZATION The Company is a wholly-owned subsidiary of NACCO Industries, Inc. ("parent Company"). The Company is the owner of The Coteau Properties Company ("Coteau"), The Falkirk Mining Company ("Falkirk"), The Sabine Mining Company ("Sabine"), Red River Mining Company, its joint venture, ("Red River Mining"), and North American Coal Royalty Company. Three of the Company's consolidated coal mining subsidiaries (surface mines) were organized to assume sales agreements with public utilities. All of the coal of these subsidiaries is sold to these public utilities pursuant to long-term contracts that extend up to 20 years with extensions at the buyer's option. The sales prices provided by such contracts are based on cost plus a profit per ton. NOTE B--ACCOUNTING POLICIES PRINCIPLES OF CONSOLIDATION: The consolidated financial statements include the accounts of The North American Coal Corporation ("Company"), its wholly-owned subsidiaries and its joint venture. Intercompany accounts have been eliminated. CASH AND CASH EQUIVALENTS: Cash equivalents are investments purchased with an original maturity of three months or less. INVENTORIES: Inventories are stated at the lower of cost or market. COSTS RECOVERABLE UNDER SALES CONTRACTS: The coal sales agreements ("Agreements") of three subsidiaries provided for selling prices which allowed a profit during the defined development period of the mines. Production costs incurred during the development period in excess of the established selling price, as set forth in the Agreements, were deferred and are being recovered as a cost of coal tonnage sold after the development period. Recoveries of these costs amounted to approximately $1,507,000 and $1,405,000 in 1993 and 1992, respectively, and are included in net sales in the accompanying consolidated statements of income. DEPRECIATION, DEPLETION AND AMORTIZATION: Depreciation, depletion and amortization are provided in amounts sufficient to amortize the cost of related assets (including assets recorded under capitalized lease obligations) over their estimated range of useful lives and are calculated by the following methods: equipment and certain mine plant--straight-line method; remaining mine plant, coal lands and related leaseholds--units-of-production method based on estimated recoverable tonnage. RECLAMATION COSTS: Under certain federal and state regulations, the Company's subsidiaries are required to reclaim land disturbed as a result of mining. Reclamation of disturbed land is a continuous process throughout the term of the related Agreements. Current reclamation costs are being recovered as a cost of coal tonnage sold. Costs to complete reclamation after mining has been completed are reimbursed under the Agreements. PRIOR YEAR FINANCIAL STATEMENTS: Certain reclassifications have been made to the 1992 financial statements to conform to the 1993 presentation. -7- 10 THE NORTH AMERICAN COAL CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED DECEMBER 31, 1993 AND 1992 NOTE B--ACCOUNTING POLICIES--continued ACCOUNTING CHANGE: The Company has adopted Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes" (SFAS 109) effective January 1, 1993, and has elected to retroactively apply its provisions to January 1, 1992 as permitted by this standard. Accordingly, retained income has been increased by $1,015,000 as of January 1, 1992 to reflect the cumulative impact of applying this standard. The consolidated financial statements for the year ended December 31, 1992 have been restated for the effect of SFAS 109 resulting in a reduction of net income of $942,000. NOTE C--ACCOUNTS RECEIVABLE Accounts receivable are summarized as follows (in thousands):
December 31, ------------------------------- 1993 1992 ------------- -------------- Accounts receivable $ 15,568 $ 14,002 Accounts receivable from affiliated companies 5,617 6,479 Refundable income taxes 96 104 ------------- -------------- $ 21,281 $ 20,585 ============= ==============
NOTE D--INVENTORIES Inventories are summarized as follows (in thousands):
December 31, ------------------------------- 1993 1992 ------------- -------------- Coal $ 7,619 $ 6,189 Mining supplies 16,194 11,914 ------------- -------------- $ 23,813 $ 18,103 ============= ==============
NOTE E--ADVANCES FROM CUSTOMERS Advances from customers represent amounts advanced to Coteau and Falkirk from public utilities to develop, operate and provide working capital for the mines. These advances are without recourse to the Company and the parent Company. These advances are non-interest bearing and are secured by all owned assets and assignment of all rights under the Agreements of Coteau and Falkirk. -8- 11 THE NORTH AMERICAN COAL CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED DECEMBER 31, 1993 AND 1992 NOTE E--ADVANCES FROM CUSTOMERS--continued Current maturities of advances of $11,259,000 are included in accrued liabilities. Estimated maturities for the next five years, including current maturities, are as follows (in thousands): 1994 $ 11,259 1995 11,259 1996 11,259 1997 11,259 1998 11,259 Thereafter 88,311 ------------- $ 144,606 =============
NOTE F--NOTES PAYABLE The promissory notes represent borrowings which the public utility arranged for Sabine. The note payable at Coteau represents financing for leaseholds on coal lands received from an affiliate of Coteau's buyer. Neither the Company nor the parent Company have guaranteed these borrowings. Notes payable, less current maturities, consist of the following (in thousands):
December 31, -------------------------------- 1993 1992 ------------- ------------- THE SABINE MINING COMPANY Promissory notes with an average interest rate of 3.248% in 1993, guaranteed by a $12.25 million million irrevocable letter of credit issued by a bank pursuant to a credit agreement with banks which expires August 15, 1995. Under the terms of such agreement, substantially all assets of Sabine are pledged and all rights under a mining agreement are assigned. $ 4,550 $ 8,150 Promissory note payable to a bank under an agreement providing for borrowings up to $17 million. Interest is based on the bank's daily cost of funds plus .45% (average interest rate of 3.512% for 1993). 10,365 5,685
-9- 12 THE NORTH AMERICAN COAL CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED DECEMBER 31, 1993 AND 1992 NOTE F--NOTES PAYABLE--continued
December 31, ------------------------------- 1993 1992 ------------- ------------- Secured note payable due June 1, 2001, with a fixed interest rate of 8.65% per annum on the unpaid balance. Under the terms of such agreement, substantially all assets of Sabine are pledged and all rights under a mining agreement are assigned. 6,500 7,500 THE COTEAU PROPERTIES COMPANY Mortgage note to an affiliate of Coteau's buyer with an interest rate of 10.94%. The note requires a minimum payment of $19,700,000 before 1998 and other minimum payments due in various years up to 2013 with final payment by 2019. Payments are based upon coal mined from the lands covered by the mortgage note. 38,466 39,111 Other 549 781 ------------- ------------- $ 60,430 $ 61,227 ============= =============
Note maturities for the next five years, including current maturities, are as follows (in thousands): 1994 $ 6,694 1995 7,034 1996 2,957 1997 2,575 1998 2,158 Thereafter 45,706 ---------------- $ 67,124 ================
Commitment fees paid to banks were approximately $82,000 and $110,000 in 1993 and 1992, respectively, and are included in interest expense in the accompanying consolidated statements of income. -10- 13 QTHE NORTH AMERICAN COAL CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED DECEMBER 31, 1993 AND 1992 NOTE G--REVOLVING CREDIT AGREEMENT During 1993, the Company had a revolving credit agreement which is summarized as follows: Amount of revolving credit agreement $50,000,000 Amount available at December 31, 1993 $34,000,000 Stated interest rate LIBOR + .4375% Average interest rate during 1993 3.74% Commitment and facility fee .25% per annum Expiration date (with annual renewal option) September 27, 1996
The Company has entered into interest rate hedging agreements which provide protection against significant increases in interest rates for a portion of this floating rate debt. These agreements are with major commercial banks; therefore, the risk of credit loss from nonperformance by the banks is minimal. The Company evaluates its exposure to floating rate debt on an ongoing basis. NOTE H--POSTRETIREMENT PLANS The Company and its affiliates, representing the mining operations of the parent Company, sponsor defined benefit pension plans which cover substantially all salaried employees of the Company and its subsidiaries. Benefits under the plans are based on years of service and average compensation during certain periods. The Company's funding policy is to contribute within the range allowed by the applicable regulations. Plan assets are primarily listed stocks and U.S. bonds. The following is a detail of net periodic pension expense for all mining operations of the parent Company (in thousands):
December 31, -------------------------------- 1993 1992 --------------- --------------- Service cost $ 2,132 $ 2,018 Interest cost on projected benefit obligation 2,182 1,893 Actual return on plan assets (1,792) (2,401) Net amortization and deferral (312) 534 --------------- --------------- Net periodic pension expense $ 2,210 $ 2,044 =============== ===============
-11- 14 THE NORTH AMERICAN COAL CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED DECEMBER 31, 1993 AND 1992 NOTE H--POSTRETIREMENT PLANS--continued The following sets forth the funded status of the plans (in thousands): Actuarial present value of benefit obligation:
December 31, ------------------------------ 1993 1992 ------------- ------------ Vested accumulated benefit obligation $ 12,460 $ 8,915 Nonvested accumulated benefit obligation 1,464 1,048 ------------- ------------ Total accumulated benefit obligation 13,924 9,963 Value of future salary projections 16,937 15,570 ------------- ------------ Total projected benefit obligation 30,861 25,533 Fair value of plan assets 23,320 21,680 ------------- ------------ Projected benefit obligation in excess of plan assets (7,541) (3,853) Amounts not recognized: Unrecognized net transition asset (1,173) (1,341) Unrecognized net gain (4,350) (5,727) Prior service cost 822 888 ------------- ------------ Pension obligation recognized $ (12,242) $ (10,033) ============= ============
Assumptions used in accounting for the defined benefit plans:
December 31, ------------------------------- 1993 1992 ------------ ------------ Weighted average discount rates 7.50% 8.00% Rate of increase in compensation levels 6.00% 6.75% Expected long-term rate of return on assets 9.00% 9.00%
The Company and its subsidiaries participate in a defined contribution plan sponsored by the Company which covers substantially all salaried employees. The plan provides for employee contributions to be matched, by the respective company, up to a limit of 5% of the employee's salary. Company contributions to the plan were approximately $2,345,000 and $1,990,000 in 1993 and 1992, respectively. -12- 15 THE NORTH AMERICAN COAL CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED DECEMBER 31, 1993 AND 1992 NOTE I--OTHER RETIREMENT BENEFIT PLANS The Company has adopted Statement of Financial Accounting Standards No. 106 (SFAS 106) "Accounting for Postretirement Benefits Other Than Pensions". In accordance with SFAS 106, the expected cost of retirement benefits other than pensions is charged to expense during the years that the employees render service. Under the provisions of the Agreements of three subsidiaries, costs will be recovered as a cost of coal tonnage sold. These amounts have no material effect on net income. Because the impact of adopting SFAS 106 on the Company's results of operations and financial condition was not material and will not be material, the detailed disclosures required by SFAS 106 have not been presented. The Company established a Voluntary Employees' Beneficiary Association (VEBA) trust in 1993 to provide for such future retirement benefits. The Company made cash contributions of $2,285,000 to the VEBA trust during 1993. The Company has requested, but has not yet received, a determination letter from the Internal Revenue Service (IRS) regarding recognition of the tax-exempt status of the VEBA trust. Contributions made to an IRS approved VEBA trust are irrevocable and must be used for employee benefits. NOTE J--COMMITMENTS Certain mining equipment leased by Coteau, Falkirk, and Sabine and certain office and other equipment leased by the Company are capitalized for financial statement purposes. Under the provisions of the Agreements, the customer is required to pay, as part of the cost of coal purchased, an amount equal to the annual lease payments. For mining equipment, interest expense and amortization in excess of annual lease payments are deferred and are recognized in years when annual lease payments exceed interest expense and amortization. Interest paid on notes and capitalized lease obligations amounted to approximately $18,480,000 and $14,429,000 in 1993 and 1992, respectively. Assets recorded under capitalized lease obligations are included with property, plant and equipment and consist of the following (in thousands):
December 31, -------------------------------- 1993 1992 ------------- ------------- Plant and equipment $ 187,006 $ 166,537 Accumulated amortization (63,711) (54,450) ------------- ------------- $ 123,295 $ 112,087 ============= =============
-13- 16 THE NORTH AMERICAN COAL CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED DECEMBER 31, 1993 AND 1992 NOTE J--COMMITMENTS--continued Capitalized lease obligations are renewable for additional periods at terms based upon fair market value of the leased items at the renewal dates. During 1993 and 1992, subsidiaries of the Company incurred capitalized lease obligations of approximately $22,429,000 and $11,988,000, respectively, in connection with lease agreements to acquire plant and equipment. Future minimum lease payments as of December 31, 1993 for all capitalized lease obligations are as follows (in thousands): 1994 $ 20,905 1995 19,811 1996 18,863 1997 17,906 1998 17,192 Thereafter 165,478 ------------ Total minimum lease payments 260,155 Amounts representing interest (105,663) ------------ Present value of net minimum lease payments 154,492 Current maturities (9,366) ------------ $ 145,126 ============
The Company is committed under non-cancelable operating leases, with minimum lease payments as of December 31, 1993 as follows (in thousands): 1994 $ 1,068 1995 991 1996 833 1997 830 1998 834 Thereafter 470 ------------- $ 5,026 =============
-14- 17 THE NORTH AMERICAN COAL CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED DECEMBER 31, 1993 AND 1992 NOTE J--COMMITMENTS--continued Rental expenses for all operating leases amounted to approximately $1,173,000 and $1,031,000 during 1993 and 1992, respectively. At December 31, 1993, the unexpended portion of capital expenditures authorized by the respective boards of directors, and customers where required, of the Company and its subsidiaries approximated $42,862,000 of which $42,724,000 is being financed under the arrangements with public utilities served by the subsidiaries. NOTE K--INCOME TAXES As discussed in Note B, "Accounting Policies", the Company has adopted SFAS 109 effective January 1, 1993 and has retroactively applied its provisions to January 1, 1992. SFAS 109 requires, among other things, the measurement of deferred tax assets or liabilities based on the difference between the financial statement and income tax bases of assets and liabilities using the enacted marginal tax rate. Deferred income tax expense or benefit is based on the changes in the assets or liabilities from period to period. The prior method of accounting for income taxes measured deferred income tax expense or benefit based on timing differences between the recording of income and expenses for financial reporting purposes and for purposes of filing the federal income tax returns at income tax rates in effect when the differences arose. The Company and its subsidiaries are included in the consolidated federal income tax return filed by the parent Company. The Company and each of its subsidiaries entered into a tax-sharing agreement with the parent Company under which federal income taxes are computed by the Company and each of its subsidiaries on a separate return basis. The current portion of such tax is paid to the parent Company. During 1993 and 1992, the federal and state income taxes paid by the Company were approximately $7,555,000 and $5,480,000, respectively. The Company's effective tax rate differs from the federal statutory rate primarily due to state income taxes and percentage depletion. For state income tax purposes (computed on a separate return basis), certain subsidiaries have operating loss carryforwards amounting to approximately $2,312,000 which expire in 2005 through 2007. On August 10, 1993, the Revenue Reconciliation Act of 1993 became law. This new law increased the top federal statutory income tax rate on corporations from 34% to 35%, effective retroactive to January 1, 1993. Under the provisions of SFAS 109, the cumulative effect of such rate change on deferred income taxes is required to be recognized currently as a component of income tax expense. As a result, the Company incurred an increase in income tax expense and a corresponding increase in deferred tax liability of $1,253,000. -15- 18 THE NORTH AMERICAN COAL CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED DECEMBER 31, 1993 AND 1992 NOTE K--INCOME TAXES--continued Provisions for income taxes consist of the following (in thousands):
Year Ended December 31, -------------------------------- As Adjusted (Note B) 1993 1992 -------------- -------------- Federal $ 6,609 $ 6,030 State 886 761 -------------- -------------- Total current tax expense $ 7,495 6,791 ============== ============== Federal $ 1,758 $ 945 State 605 43 -------------- -------------- Total deferred tax expense $ 2,363 $ 988 ============== ==============
A summary of components of the net deferred tax asset (liability) included in the accompanying consolidated balance sheets resulting from differences in the book and tax basis of assets and liabilities are as follows (in thousands):
December 31, -------------------------------- As Adjusted (Note B) 1993 1992 -------------- -------------- Current portion: Accrued expenses and reserves $ 457 $ 371 Inventory (37) (42) -------------- -------------- Total current $ 420 $ 329 ============== ============== Long-term portion: Depreciation, depletion and amortization $ (16,379) $ (13,393) Pensions 3,037 2,509 Installment sales (3,986) (4,291) Partnership investment (1,330) (1,216) Deferred compensation 602 445 Other (36) 308 -------------- -------------- $ (18,092) $ (15,638) ============== ==============
The current portion of deferred income taxes shown above, a net deferred tax asset, is included in other current assets in the accompanying consolidated balance sheets. -16- 19 THE NORTH AMERICAN COAL CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED DECEMBER 31, 1993 AND 1992 NOTE L--DISCLOSURES ABOUT THE FAIR VALUE OF FINANCIAL INSTRUMENTS Statement of Financial Accounting Standards No. 107, "Disclosures About Fair Value of Financial Instruments", requires disclosure about the fair value of financial instruments. Carrying amounts for cash and cash equivalents, revolving credit agreements and interest rate hedging agreements approximate fair value. The following methods and assumptions were used to estimate the fair value of each class of financial instruments for which the carrying amount differed materially from the fair value: NOTES RECEIVABLE AND PAYABLE: The fair value of these notes is estimated based on the discounted value of the future cash flows using borrowing rates currently available to the Company for bank loans with similar terms and average maturities. The estimated fair value of the Company's financial instruments are as follows (in thousands):
December 31, 1993 ------------------------------ Carrying Fair Amount Value ------------- ------------- Notes receivable $ 4,343 $ 6,112 Notes payable $ 60,430 $ 68,866
NOTE M--TRANSACTIONS WITH AFFILIATED COMPANIES Costs and expenses include net receipts from the parent Company and other subsidiaries of the parent Company. These receipts approximated $2,136,000 in 1993 and $1,152,000 in 1992 for administrative and other services. The note receivable from parent Company of $36,459,000 in 1993 and $17,993,000 in 1992 is a demand note, with interest of 3.64% at December 31, 1993 and 3.79% at December 31, 1992. NOTE N--POSTEMPLOYMENT BENEFIT PLANS In November 1992, Statement of Financial Accounting Standards No. 112 "Employers' Accounting for Postemployment Benefits" was issued. The Company will be required to adopt this new method of accounting for benefits paid to former or inactive employees after employment but before retirement no later than 1994. This new standard requires, among other things, that the expected cost of these benefits be recognized when they are earned or become payable when certain conditions are met rather than the current method which recognizes these costs when they are paid. The adoption of this standard will not materially impact the Company's financial condition or its results of operations. -17- EX-99.II 24 NACCO EXHIBIT 99.II 1 EXHIBIT 99(ii) HAMILTON BEACH/PROCTOR-SILEX, INC., AND SUBSIDIARIES CONSOLIDATED FINANCIAL STATEMENTS AS OF DECEMBER 31, 1993 AND 1992, TOGETHER WITH AUDITORS' REPORT 2 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Board of Directors of Hamilton Beach/Proctor-Silex, Inc.: We have audited the accompanying consolidated balance sheets of Hamilton Beach/Proctor-Silex, Inc. (a Delaware Corporation), and subsidiaries as of December 31, 1993 and 1992, and the related consolidated statements of operations, changes in stockholder's equity and cash flows for the years then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform an audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Hamilton Beach/Proctor-Silex, Inc., and subsidiaries as of December 31, 1993 and 1992, and the results of their operations and their cash flows for the years then ended, in conformity with generally accepted accounting principles. As explained in notes 1 and 9 to the consolidated financial statements, in accordance with the implementation provisions of Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes," the Company has given retroactive effect to the change in accounting for income taxes. Arthur Andersen & Co. Richmond, Virginia, January 27, 1994 3 THIS PAGE LEFT BLANK INTENTIONALLY 4 HAMILTON BEACH/PROCTOR-SILEX, INC., AND SUBSIDIDIARIES CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31, 1993 AND 1992 (Dollars in Thousands) ASSETS
1993 1992 -------- -------- CURRENT ASSETS: Cash and cash equivalents $ 2,673 $ 7,879 Accounts receivable, net 79,247 69,444 Inventories, net 51,781 51,444 Deferred income taxes 1,578 739 Prepaid expenses and other 6,545 6,682 -------- -------- Total current assets 141,824 136,188 PROPERTY, PLANT AND EQUIPMENT, net 52,781 52,036 DEFERRED CHARGES AND INTANGIBLE ASSETS, net 102,599 107,013 DEFERRED INCOME TAXES 3,051 1,490 OTHER ASSETS 36 31 -------- -------- Total assets $300,291 $296,758 ======== ========
5 HAMILTON BEACH/PROCTOR-SILEX, INC., AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31, 1993 AND 1992 (Dollars in Thousands) LIABILITIES AND STOCKHOLDER'S EQUITY
1993 1992 -------- --------- CURRENT LIABILITIES: Revolving credit agreements $ 11,325 $ 7,075 Current maturity of other long-term obligations 10,068 9,736 Accounts payable 35,117 32,769 Other current liabilities 27,272 28,925 -------- --------- Total current liabilities 83,782 78,505 -------- --------- OTHER LIABILITIES 12,179 9,709 -------- --------- LONG-TERM OBLIGATIONS: Revolving credit agreements 37,000 28,000 Notes payable 28,145 38,145 Capital leases 625 643 -------- --------- Total long-term obligations 65,770 66,788 -------- --------- STOCKHOLDER'S EQUITY: Common stock and paid-in capital, 100 shares authorized, issued and outstanding at $0.01 par value 149,268 149,268 Retained deficit (7,085) (6,113) Minimum pension liability (2,265) (437) Cumulative translation adjustment (1,358) (962) -------- --------- Total stockholder's equity 138,560 141,756 -------- --------- Total liabilities and stockholder's equity $300,291 $296,758 ======== ========
The accompanying notes are an integral part of these consolidated balance sheets. 6 HAMILTON BEACH/PROCTOR-SILEX, INC., AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 1993 AND 1992 (Dollars in Thousands)
1993 1992 -------- -------- Net sales $356,332 $358,575 Cost of sales 312,332 308,162 -------- -------- Gross profit 44,000 50,413 Selling, administrative and general expenses 28,899 27,719 -------- -------- Operating profit 15,101 22,694 Other income (expense): Interest (6,570) (6,845) Amortization (4,408) (5,123) Other, net (4,102) 36 -------- -------- Income before income taxes 21 10,762 Provision for income taxes 993 5,377 -------- -------- Net (loss) income $ (972) $ 5,385 ======== ========
The accompanying notes are an integral part of these consolidated statements. 7 HAMILTON BEACH/PROCTOR-SILEX, INC., AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDER'S EQUITY FOR THE YEARS ENDED DECEMBER 31, 1993 AND 1992 (Dollars in Thousands, Other Than Par Value)
Common Common Stock Stock -------------------- and Minimum Cumulative Total Shares Par Paid-in Retained Pension Translation Stockholder's Outstanding Value Capital Deficit Liability Adjustment Equity ----------- ----- ------- ------- --------- ------------ -------------- BALANCES, December 31, 1991 100 $1 $149,268 $(11,498) $ - $ (11) $137,759 Minimum pension liability - - - - (437) - (437) Net income - - - 5,385 - - 5,385 Translation adjustment - - - - - (951) (951) --- -- -------- -------- ------- ---------- -------- BALANCES, December 31, 1992 100 1 149,268 (6,113) (437) (962) 141,756 Minimum pension liability - - - - (1,828) - (1,828) Net loss - - - (972) - - (972) Translation adjustment - - - - - (396) (396) --- -- -------- -------- ------- ---------- -------- BALANCES, December 31, 1993 100 $1 $149,268 $ (7,085) $(2,265) $ (1,358) $138,560 === == ======== ======== ======= ========== ========
The accompanying notes are an integral part of these consolidated statements. 8 HAMILTON BEACH/PROCTOR-SILEX, INC., AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 1993 AND 1992 (Dollars in Thousands)
1993 1992 -------- -------- CASH FLOWS FROM OPERATING ACTIVITIES: Net (loss) income $ (972) $ 5,385 Adjustments to reconcile net (loss) income to net cash provided by operating activities - Depreciation 10,857 10,157 Loss (gain) on disposal of fixed assets 274 (16) Amortization 4,408 5,123 Changes in assets and liabilities - (Increase) decrease in: Deferred income taxes (2,400) 1,749 Accounts receivable, net (9,803) 9,493 Inventories, net (337) (5,128) Prepaid expenses and other 137 2,237 Other assets (5) 138 Increase (decrease) in: Accounts payable 2,348 1,463 Other liabilities (867) (3,784) --------- --------- Net cash provided by operating activities 3,640 26,817 --------- --------- CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures (12,240) (10,771) Proceeds from sale of fixed assets 228 154 Other, net - (101) --------- --------- Net cash used in investing activities (12,012) (10,718) --------- --------- CASH FLOWS FROM FINANCING ACTIVITIES: Reduction of long-term obligations and revolving credit agreements (39,842) (88,095) Borrowings under long-term obligations and revolving credit agreements 43,404 74,381 --------- --------- Net cash provided by (used in) financing activities 3,562 (13,714) --------- --------- Effect of exchange rate changes on cash (396) (951) --------- --------- Net (decrease) increase in cash and cash equivalents (5,206) 1,434 CASH AND CASH EQUIVALENTS, beginning of year 7,879 6,445 --------- --------- CASH AND CASH EQUIVALENTS, end of year $ 2,673 $ 7,879 ========= =========
The accompanying notes are an integral part of these consolidated statements. 9 HAMILTON BEACH/PROCTOR-SILEX, INC., AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 1993 AND 1992 (Dollars in Thousands) 1. SIGNIFICANT ACCOUNTING POLICIES: Organization and Business Hamilton Beach/Proctor-Silex, Inc. (the "Company"), designs, manufactures and sells small consumer electric appliances. The Company is a wholly owned subsidiary of HB/PS Holdings, Inc. HB/PS Holdings, Inc. is owned 80 percent by NACCO Industries, Inc. ("NACCO"), and 20 percent owned by Glen Dimplex. Principles of Consolidation The accompanying consolidated financial statements include the accounts of the Company and its subsidiaries. All intercompany transactions and balances have been eliminated in consolidation. Cash and Cash Equivalents Cash and cash equivalents include cash in banks and highly liquid investments with initial maturities of three months or less. Inventories, net Inventories are stated at the lower of cost or market. Cost has been determined by the last-in, first-out ("LIFO") method for substantially all inventories accounted for in the United States and under the first-in, first-out method for all other inventories. Property, Plant and Equipment Property, plant and equipment is stated at cost. All property, plant and equipment is depreciated on a straight-line basis over estimated useful lives of 40 years for buildings and 4 to 16 years for machinery and equipment. Assets recorded under capital leases and leasehold improvements are amortized over the lesser of their estimated useful lives or remaining lease terms on a straight-line basis. 10 - 2- Goodwill Goodwill is being amortized on a straight-line basis over 40 years. The Company continually evaluates whether events and circumstances have occurred subsequent to its acquisitions that indicate the remaining estimated useful life of goodwill may warrant revision or that the remaining balance of goodwill may not be recoverable. When factors indicate that goodwill should be evaluated for possible impairment, the Company uses an estimate of the Company's undiscounted net income over the remaining life of the goodwill in measuring whether the goodwill is recoverable. Product Development Costs Costs associated with the development of new products and changes to existing products are charged to operations as incurred. These costs amounted to $2,706 and $2,467 for 1993 and 1992, respectively. Foreign Currency Translation Assets and liabilities of the Company's foreign subsidiaries are translated at current exchange rates, while income and expense items are translated at average rates for the period. Translation gains and losses are reported as a component of stockholders' equity. Financial Instruments The fair market value of the Company's financial instruments approximates their carrying values as of December 31, 1993. Fair market values are determined through information obtained from quoted market sources, where available, and management estimates. Accounting Change The Company has adopted Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS 109"), effective January 1, 1993, and has elected to retroactively apply its provisions to January 1, 1989, as permitted by this standard. Accordingly, retained earnings and goodwill have been adjusted as of December 31, 1991, to reflect the cumulative impact of applying this standard. The decrease to December 31, 1991, retained earnings of $1,396 consists of the cumulative effect of this change in accounting method at January 1, 1989, and the impact on previously reported net income for the years ended December 31, 1989, 1990, and 1991. The decrease to December 31, 1991 goodwill of $2,258 represents the cumulative impact of SFAS 109 on purchase accounting for the acquisition of Hamilton Beach, Inc. as of December 31, 1991. In addition, certain other assets and liabilities have been adjusted from their net-of-tax amounts to their gross, pretax balances as required by SFAS 109. 11 - 3 - For the year ended December 31, 1992, adoption of SFAS 109 reduced income before income taxes by $1,035, primarily due to increased depreciation and amortization expense as a result of the requirement, under SFAS 109, to report assets acquired at their pretax amounts. Net income was reduced in total by $267 due primarily to the reversal of acquired state net operating losses as required by SFAS 109. Reclassifications Certain amounts in the 1992 financial statements have been reclassified to conform to the current year's presentation. 2. MERGER: On October 11, 1990, Hamilton Beach, Inc., and Proctor-Silex, Inc., merged to form Hamilton Beach/Proctor-Silex, Inc. (the "Merger"). Hamilton Beach, Inc., remained as the surviving legal entity subsequent to the Merger. For financial reporting purposes, this transaction has been accounted for as a purchase of Hamilton Beach, Inc., by Proctor-Silex, Inc. Accordingly, the purchase price was allocated to the assets and liabilities of Hamilton Beach, Inc., based on their estimated fair value at acquisition date. Such allocations were made based on valuations or other studies. The excess of the consideration paid over the estimated fair value of net assets acquired, in the amount of $50,152, as adjusted (see Note 1), has been recorded as goodwill to be amortized on a straight-line basis over 40 years. Certain of the assets acquired and liabilities assumed are subject to indemnification under the merger agreement. Subsequent to December 31, 1993, all outstanding claims for indemnification under the merger agreement were resolved. The resolution of these matters did not have a material impact on the Company's financial position or results of operations. 3. ACCOUNTS RECEIVABLE, NET: At December 31, accounts receivable consisted of the following.
1993 1992 -------- -------- Accounts receivable $85,451 $77,549 Less - Allowance for returns, discounts and adjustments (5,397) (7,098) Allowance for doubtful accounts (807) (1,007) ------- ------- Accounts receivable, net $79,247 $69,444 ======= =======
12 - 4 - 4. INVENTORIES, NET: At December 31, inventories consist of the following.
1993 1992 -------- -------- Raw materials $11,850 $13,256 Work in process 3,462 6,430 Finished goods 36,029 31,642 ------- ------- 51,341 51,328 LIFO allowance 440 116 ------- ------- Inventories, net $51,781 $51,444 ======= =======
As a result of declining prices and liquidation of certain LIFO inventories, operating profit increased $324 for 1993 and $364 for 1992. The cost of inventories stated under the LIFO method was 90 and 93 percent of the value of total inventories at December 31, 1993 and 1992, respectively. 5. PROPERTY, PLANT AND EQUIPMENT, NET: At December 31, property, plant and equipment (including capital leases) includes the following.
1993 1992 -------- -------- Land, buildings and improvements $16,071 $15,134 Machinery and equipment 76,982 65,709 Construction work in process 1,756 5,228 ------- ------- 94,809 86,071 Less- Accumulated depreciation and amortization (42,028) (34,035) ------- ------- Property, plant and equipment, net $52,781 $52,036 ======= =======
6. DEFERRED CHARGES AND INTANGIBLE ASSETS, NET: Goodwill amounted to $100,082 at December 31, 1993, net of accumulated amortization and is being amortized over 40 years on a straight-line basis. Amortization expense amounted to $2,827 and $2,947 for 1993 and 1992, respectively. Patents, trademarks, and other at December 31, 1993, amounted to $693, net of accumulated amortization, and are being amortized on a straight-line basis over their remaining lives. Total amortization for 1993 and 1992, amounted to $437 and $402, respectively. Deferred financing costs at December 31, 1993, amounted to $1,824, net of accumulated amortization, and are being amortized using the effective interest method over the term of the related indebtedness. Amortization expense related to deferred financing costs for 1993 and 1992 was $1,144 and $1,774, respectively. 13 - 5 - 7. REVOLVING CREDIT AGREEMENTS AND NOTES PAYABLE: The Company has a bank credit facility (the "Agreement"), which includes a revolving credit line and letter-of-credit facility of up to $95,000 through September 1995, the availability of which is determined based on accounts receivable and inventory levels (as defined in the Agreement), and a $65,000 term note. The Agreement allows borrowings to be made at either (i) the lender's prime rate plus 1.25 percent or (ii) LIBOR plus 2.25 percent. Commitment fees are 0.5 percent of the unused portion of the revolving credit line. The borrowing and commitment fee rates are subject to reductions based upon the Company achieving certain predetermined interest coverage ratios. During 1993, the Company received an average reduction in the borrowing rate of 1.23 and 0.125 percent in the commitment fee rate. The Agreement includes certain covenants containing, among other things, maintenance of defined levels of working capital and net worth and restrictions on interest coverage, capital expenditures, incurrence of debt, and dividend payments. The Agreement is secured by substantially all of the Company's assets. At December 31, 1993, the Company was in compliance with all financial covenants of the Agreement. The Company also has in place a master borrowing note, which is secured through and subject to the Agreement and which allows for borrowings of up to $8,000 on a daily basis. During 1993 and 1992, total average borrowings outstanding under the revolving credit agreements and master borrowing note were $56,620 and $47,627 at a weighted-average interest rate of 5.84 and 5.52 percent, respectively. Maximum borrowings under the revolving credit agreements and master borrowing note during 1993 and 1992 were $80,983 and $68,660, respectively. In addition, at December 31, 1993 and 1992, outstanding obligations under letters of credit were $5,450 and $6,631, respectively. At the option of Housewares Holding Company ("Housewares"), a wholly owned subsidiary of NACCO, the Company may, subject to certain terms and conditions of the Agreement, borrow up to $35,000 from Housewares. No borrowings were outstanding during 1993 or 1992. The next installment of $10,000 under the term note is required to be paid by the Company on March 1, 1994. In addition, a portion of annual excess cash flow (as defined in the Agreement) must be used to prepay the term note. Accordingly, the Company prepaid $4,652 of the 1997 installment in the first quarter 1993. No such prepayment is required as of December 31, 1993. In addition, the Company prepaid $4,718 of the 1997 installment and $2,000 of the 1993 installment in March 1992 and $5,000 of the 1997 installment in September 1992, pursuant to this Agreement. 14 - 6 - Notes payable of $38,145 are subject to the same terms, conditions, and interest rates as those in the Agreement. These notes are payable in annual installments as follows: 1994 - $10,000; 1995 - $12,500; 1996 - $15,000; 1997 - - $645. The Company had various interest rate swap agreements in effect during 1993 and 1992. These agreements provided protection against significant increases in interest rates for a significant portion of the Company's floating rate debt. The Company continues to evaluate its exposure related to floating rate debt on an ongoing basis. 8. LEASES: The Company leases certain facilities under noncancelable leases expiring at various dates through 2021. Property under capital leases has been recorded as property, plant and equipment in the balance sheet, and the related amortization is included with depreciation expense. At December 31, property, plant and equipment includes the following amounts relating to capital leases.
1993 1992 -------- -------- Buildings $9,199 $9,199 Less- Accumulated amortization (2,787) (2,294) ------ ------ $6,412 $6,905 ====== ======
Future minimum lease payments for capital leases as of December 31, 1993, are as follows: 1994 - $126; 1995 - $126; 1996 - $114; 1997 - $103; 1998 - $77; and thereafter - $904, and have a net present value of $693. Future minimum lease payments for operating leases are as follows: 1994 - $3,587; 1995 - $2,742; 1996 - $2,279; 1997 - $1,512; 1998 - $1,292; and thereafter - $2,846. Rental expenses for operating leases amounted to $4,526 and $4,145 for 1993 and 1992, respectively. 9. INCOME TAXES: As discussed in Note 1, the Company adopted SFAS 109 in 1993 and has retroactively applied its provisions to January 1, 1989. SFAS 109 requires, among other things, the measurement of deferred tax assets or liabilities based on the difference between the financial statement and income tax bases of assets and liabilities using the enacted marginal income tax rate. Deferred income tax expense or benefit is based on the changes in the assets or liabilities from period to period. The prior method of accounting for income taxes measured deferred income tax expense or benefit based on timing differences between the recording of income and expenses for financial reporting purposes and for purposes of filing Federal income tax returns at income tax rates in effect when the differences arose. 15 - 7 - The Company is included in the consolidated Federal income tax return filed by NACCO. The Company's tax sharing agreement with NACCO provides that Federal income taxes are computed by the Company on a separate return basis, except that net operating loss and tax credit carryovers which benefit the consolidated tax return are advanced to the Company and are repaid as utilized on a separate return basis. To the extent that these loss carryovers are not used on a separate return basis, the Company is required under conditions pursuant to the tax sharing agreement to refund to NACCO the balance of carryovers advanced and not used by the Company. The provision for income taxes consists of the following amounts.
1993 1992 -------- -------- Current: Federal $ 793 $2,375 State 67 64 Foreign 1,034 941 ------- ------ Total current provision 1,894 3,380 ------- ------ Deferred: Federal (912) 1,474 State (27) 637 Foreign 38 (114) ------- ------ Total deferred (benefit) provision (901) 1,997 ------- ------ Total provision for income taxes $ 993 $5,377 ======= ======
A reconciliation of Federal statutory and effective income tax follows.
1993 1992 -------- -------- Statutory taxes at 35% in 1993 and 34% in 1992 $ 8 $3,659 Effect of: State taxes 34 463 Foreign taxes 322 262 Acquisition accounting adjustments 989 997 Change in statutory rates (200) - Other (160) (4) ------- ------ Provision for taxes $ 993 $5,377 ------- ------ Effective rate * 50% ======= ====== * - not meaningful
16 - 8 - A summary of the deferred tax assets and (liabilities) which comprise the net deferred tax balances in the accompanying consolidated balance sheets resulting from differences in the book and tax bases of assets and liabilities are as follows:
1993 1992 -------- -------- Deferred tax liabilities: Advertising, sales, and inventory related reserves $ (3,433) $ (3,100) Accelerated depreciation (6,763) (8,254) ------- ------- Total deferred tax liabilities (10,196) (11,354) ------- ------- Deferred tax assets: Employee benefits 3,270 1,858 Plant restructuring reserve 530 1,153 Environmental reserve 2,467 2,509 Product liability reserve 1,488 1,611 Net operating loss carryover 5,546 5,928 Other 1,524 524 ------- ------- Total deferred tax assets 14,825 13,583 ------- ------- Net deferred tax assets $ 4,629 $ 2,229 ======= =======
The Company has no valuation allowances as of December 31, 1993 and 1992. As of December 31, 1993, the Company had state net operating loss carryovers available for use on future returns of approximately $20,347. The Company also had Federal net operating loss carryovers of approximately $13,249 at December 31, 1993, related to Hamilton Beach, Inc. For Federal tax purposes, the utilization of acquired net operating loss carryovers is limited to $1,953 on an annual basis, with any unused limitation available for carryover to subsequent years. The Company utilized $1,953 of the Federal net operating loss carryovers related to Hamilton Beach, Inc., in 1993. Federal carryovers are scheduled to expire in the years 2000 to 2004, and state carryovers will expire in the years 1994 to 2004. No provision has been made for Federal income taxes on undistributed earnings of foreign subsidiaries of approximately $10,102 as of December 31, 1993, as any future remittances are expected to be substantially tax free. 17 - 9 - 10. RETIREMENT BENEFIT PLANS: The Company sponsors a defined benefit plan, the Hamilton Beach/Proctor-Silex, Inc., Profit Sharing Retirement Plan (the "Plan"). All full-time hourly and salaried U.S. employees are eligible to participate in the Plan. The Plan provides that participants accrue benefits annually based on age and annual earnings. Upon retirement, participants will receive their account balance under the Plan plus all frozen accrued benefits earned under previous benefit plans. Benefits will be paid upon retirement at age 65 or at age 55 if the employee has at least ten years of service. Participants become fully vested after five years of service. The Company's funding policy is to contribute each year an amount which satisfies the minimum required contribution but does not exceed the maximum tax deductible contribution. Also, the Company may make additional contributions to the Plan, dependent upon the Company achieving certain profit and performance objectives. The Company contributed $1,043 to the Plan for the plan year ended December 31, 1993. Assets held by the Plan consist mainly of common stocks, corporate and government bonds, and cash and cash equivalents. The details of the components of net pension expense for the years ended December 31, 1993 and 1992 are as follows.
1993 1992 -------- -------- Service cost $1,167 $1,147 Interest cost on projected benefit obligation 2,208 2,115 Actual return on assets (1,730) (1,984) Net amortization and deferral (500) (171) ------ ------ Net pension expense $1,145 $1,107 ====== ======
Actuarial factors used in accounting for the Plan as of December 31, 1993 and 1992, are as follows.
1993 1992 -------- -------- Weighted-average discount rate 7.50% 8.25% Long-term rate of return on assets 9.00% 9.00% Rates of increase in compensation levels: Salaried 4.75% 5.50% Hourly 4.00% 4.50%
18 - 10 - The funded status of the Plan and amounts recognized in the Company's consolidated balance sheets as of December 31, 1993 and 1992, are as follows.
1993 1992 -------- -------- Actuarial present value of benefit obligation: Vested accumulated benefit obligation $28,175 $24,833 Nonvested accumulated benefit obligation 1,604 1,204 ------- ------- Total accumulated benefit obligation 29,779 26,037 Value of future salary projections 437 271 ------- ------- Total projected benefit obligation 30,216 26,308 Fair value of plan assets 25,570 25,079 ------- ------- Projected benefit obligation in excess of plan assets (4,646) (1,229) Unrecognized net transition asset (8) (9) Unrecognized net loss 3,916 499 Unrecognized prior service cost 66 71 Unrecognized basis change (23) - Additional minimum liability (3,719) (478) ------- ------- Pension liability recognized in balance sheet at December 31, 1993 and 1992 $(4,414) $(1,146) ======= =======
Statement of Financial Accounting Standards No. 87 "Employers' Accounting for Pensions" ("SFAS 87"), requires the Company to recognize a minimum pension liability equal to the unfunded accumulated benefit obligation ("ABO"). At December 31, 1993 and 1992, the cumulative unfunded ABO was $4,414 and $1,146, respectively. The Company recorded an adjustment which recognized an additional minimum liability equal to the unfunded ABO. In accordance with SFAS 87, the portion of the unfunded ABO in excess of unrecognized prior service cost was charged directly to shareholder's equity and is separately presented in the consolidated statements of changes in stockholder's equity. The Company also has a defined contribution retirement savings plan covering substantially all of its full-time employees. Prior to 1992, the Company matched annually a defined percentage of the employee contributions based on the Company's net profits, as defined in the related plan agreement. Effective January 1, 1992, the Company no longer matches employee contributions to this plan. 19 - 11 - The Company provides retirement health care for all retirees who retired prior to October 1, 1992. In addition, the Company provides life insurance benefits to all retirees who retired prior to October 1, 1992, assuming they reached certain age and service requirements while working for the Company. 11. POSTEMPLOYMENT BENEFIT PLANS: In November 1992, Statement of Financial Accounting Standards No. 112, "Employers' Accounting for Postemployment Benefits," was issued. The Company will be required to adopt this new method of accounting for benefits paid to former or inactive employees after employment but before retirement no later than 1994. This new standard requires, among other things, that the expected costs of these benefits be recognized when they are earned or become payable when certain conditions are met rather than the current method which recognizes these costs when they are paid. The Company does not expect this standard to materially impact its financial condition or results of operations when it is adopted. 12. RELATED-PARTY TRANSACTIONS: The Company sells merchandise to The Kitchen Collection, Inc. ("Kitchen Collection"), a wholly owned subsidiary of Housewares. The Company's sales to Kitchen Collection were $5,223 and $4,063, respectively, for 1993 and 1992. Accounts receivable due from Kitchen Collection at December 31, 1993 and 1992, amounted to $1,014 and $212, respectively, and are included in accounts receivable. NACCO incurs certain administrative and other expenses directly related to the operation of the Company. These expenses are reimbursed to NACCO. The Company expensed and paid $763 and $545 of these administrative expenses to NACCO in 1993 and 1992, respectively. The related payable to NACCO was $82 and $57 at December 31, 1993 and 1992, respectively. 13. CONTINGENCIES: In July 1992, an action alleging patent infringement was commenced against the Company. In this action, the plaintiff alleged that the Company had infringed on a U.S. patent. In August 1993, the Company reached an agreement settling this action. The settlement amount has been accrued and recorded in 1993 and is reflected as other expense in the consolidated statements of operations. The Company has been named as a defendant in other actions involving claims of personal injury, damage to property, product liability and various other legal proceedings generally incidental to the Company's business. Management believes the Company has meritorious defenses and will vigorously defend these actions. Although the ultimate disposition of these proceedings is not presently determinable, management does not believe that such proceedings will have a material adverse effect upon the financial condition of the Company. 20 - 12 - 14. INDUSTRY SEGMENT AND FOREIGN OPERATIONS: The Company designs, manufactures and sells small consumer electric appliances. Net sales to one major customer totaled 14.3 percent in 1993 and 12.2 percent in 1992. The following table presents sales, operating profit and other financial information by geographic area for 1993 and 1992.
United States Canada Eliminations Consolidated ------------- ------- ------------ ------------ 1993: Net sales $315,631 $40,701 $ - $356,332 Sales and transfers between geographic areas 36,228 - (36,228) - Operating profit 13,165 2,294 (358) 15,101 Depreciation 10,770 87 - 10,857 Identifiable assets 286,705 15,085 (1,499) 300,291 Capital expenditures 12,224 16 - 12,240 1992: Net sales $320,863 $37,712 $ - $358,575 Sales and transfers between geographic areas 31,224 - (31,224) - Operating profit 20,615 2,149 (70) 22,694 Depreciation 10,031 126 - 10,157 Identifiable assets 279,404 18,926 (1,572) 296,758 Capital expenditures 10,710 61 - 10,771
Products are transferred between geographic areas on a basis intended to reflect as nearly as possible the market value of the products. Identifiable assets are those assets identified with the operations in each geographic area at year-end. All deferred charges and intangible assets are attributed to the United States. Eliminations include amounts for intercompany sales, intercompany profits in inventory, and intercompany investments. 15. SUPPLEMENTAL CASH FLOW INFORMATION: Cash payments (receipts) during 1993 and 1992, included interest of $6,865 and $6,315 and income taxes of $2,360 and $(2,694), respectively. EX-99.III 25 NACCO EXHIBIT 99.III 1 EXHIBIT 99(iii) THE KITCHEN COLLECTION, INC. FINANCIAL STATEMENTS AS OF DECEMBER 31, 1993 AND 1992 TOGETHER WITH AUDITORS' REPORT 2 Report of Independent Public Accountants To the Board of Directors and Stockholder of The Kitchen Collection, Inc.: We have audited the accompanying balance sheets of THE KITCHEN COLLECTION, INC. (a Delaware corporation) as of December 31, 1993 and 1992, and the related statements of income, changes in stockholder's equity and cash flows for the years then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of The Kitchen Collection, Inc. as of December 31, 1993 and 1992, and the results of its operations and its cash flows for the years then ended in conformity with generally accepted accounting principles. Arthur Andersen & Co. Columbus, Ohio, January 28, 1994. 3 THE KITCHEN COLLECTION, INC. BALANCE SHEETS AS OF DECEMBER 31, 1993 AND 1992
ASSETS 1993 1992 ------ ----------- ----------- Current assets: Cash and cash equivalents $ 10,096 $ 4,166,684 Miscellaneous receivables 78,176 52,429 Accounts receivable - affiliate 4,000,000 - Inventories 11,358,350 8,471,125 Prepaid expenses and other 1,207,442 881,241 ----------- ----------- Total current assets 16,654,064 13,571,479 ----------- ----------- Property, plant and equipment: Land 61,300 61,300 Building and leasehold improvements 754,839 685,296 Furniture and fixtures 4,361,992 3,532,217 ----------- ----------- 5,178,131 4,278,813 Less: Accumulated depreciation and amortization (2,660,450) (2,073,530) ----------- ----------- Property, plant and equipment, net 2,517,681 2,205,283 Goodwill, net of accumulated amortization 3,961,760 4,076,872 ----------- ----------- Total assets $23,133,505 $19,853,634 =========== =========== LIABILITIES AND STOCKHOLDER'S EQUITY - ------------------------------------ Current liabilities: Current maturities of long-term debt $ 500,000 $ 500,000 Accounts payable and miscellaneous accrued liabilities 5,176,386 2,965,559 Accounts payable - affiliates 429,621 219,313 Income taxes payable to affiliate 871,540 704,011 Accrued salaries and benefits 918,334 842,426 Other accrued taxes 712,064 595,692 ----------- ----------- Total current liabilities 8,607,945 5,827,001 Long-term debt, less current maturities 1,900,000 2,400,000 ----------- ----------- Total liabilities 10,507,945 8,227,001 ----------- ----------- Stockholder's equity: Common stock; $.01 par value; 100,000 shares authorized; 10,500 shares issued and outstanding 105 105 Additional paid-in capital 4,999,890 4,999,890 Retained earnings 7,625,565 6,626,638 ----------- ----------- Total stockholder's equity 12,625,560 11,626,633 ----------- ----------- Total liabilities and stockholder's equity $23,133,505 $19,853,634 =========== ===========
The accompanying notes to financial statements are an integral part of these balance sheets. 4 THE KITCHEN COLLECTION, INC. STATEMENTS OF INCOME FOR THE YEARS ENDED DECEMBER 31, 1993 AND 1992
1993 1992 ----------- ----------- Net sales $53,748,681 $45,459,504 Cost of sales 30,618,244 25,747,606 ----------- ----------- Gross margin 23,130,437 19,711,898 Selling, general, administrative and other expenses 18,284,419 15,277,476 ----------- ----------- Operating income 4,846,018 4,434,422 Interest expense 102,979 196,919 Goodwill amortization 115,112 115,112 ----------- ----------- Income before provision for income taxes 4,627,927 4,122,391 Provision for income taxes 1,879,000 1,715,000 ----------- ----------- Net income $ 2,748,927 $ 2,407,391 =========== ===========
The accompanying notes to financial statements are an integral part of these statements. 5 THE KITCHEN COLLECTION, INC. STATEMENTS OF CHANGES IN STOCKHOLDER'S EQUITY FOR THE YEARS ENDED DECEMBER 31, 1993 AND 1992
Additional Total Number Common Paid-in Retained Shareholder's of Shares Stock Capital Earnings Equity --------- -------- ------------ ---------- ------------- Balance, December 31, 1991, as restated (Note 2) 10,500 $ 105 $4,999,890 $4,519,247 $ 9,519,242 ------ ------- ---------- ---------- ----------- Dividend to stockholder -- -- -- (300,000) (300,000) Net income, as restated -- -- -- 2,407,391 2,407,391 ------ ------- ---------- ---------- ----------- Balance, December 31, 1992, as restated 10,500 105 4,999,890 6,626,638 11,626,633 Net income -- -- -- 2,748,927 2,748,927 Dividend to stockholder -- -- -- (1,750,000) (1,750,000) ------ ------- ---------- ---------- ----------- Balance, December 31, 1993 10,500 $ 105 $4,999,890 $7,625,565 $12,625,560 ====== ======= ========== ========== ===========
The accompanying notes to financial statements are an integral part of these statements. 6 THE KITCHEN COLLECTION, INC. STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 1993 AND 1992
1993 1992 ---------- ---------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income $2,748,927 $2,407,391 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization 835,356 791,962 Loss on the sale of assets 8,063 5,597 Increase in miscellaneous receivables (25,747) (25,894) Increase in inventories (2,887,225) (1,631,167) Increase in prepaid expenses and other (326,201) (324,123) Increase in accounts payable and miscellaneous accrued liabilities 2,210,827 803,001 Increase in accounts payable - affiliates 210,308 66,511 Increase in income taxes payable to affiliate 167,529 47,481 Increase in accrued salaries and benefits 75,908 208,002 Increase in accrued taxes other than income 116,372 204,687 ---------- ---------- Net cash provided by operating activities 3,134,117 2,553,448 ---------- ---------- CASH FLOWS FROM INVESTING ACTIVITIES: Expenditures for property, plant and equipment (1,049,832) (645,603) Proceeds from sale of assets 9,127 35,205 ---------- ---------- Net cash used in investing activities (1,040,705) (610,398) ---------- ---------- CASH FLOWS FROM FINANCING ACTIVITIES: Payments on long-term debt (500,000) (400,000) Dividend to stockholder (1,750,000) (300,000) Loan to affiliate (4,000,000) - ---------- ---------- Cash used in financing activities (6,250,000) (700,000) ---------- ---------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (4,156,588) 1,243,050 CASH AND CASH EQUIVALENTS, beginning of the year 4,166,684 2,923,634 ---------- ---------- CASH AND CASH EQUIVALENTS, end of the year $ 10,096 $4,166,684 ========== ========== SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid during the year for: Interest $ 138,441 $ 358,292 Income taxes $1,807,711 $1,634,697
The accompanying notes to financial statements are an integral part of these statements. 7 THE KITCHEN COLLECTION, INC. NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1993 AND 1992 (1) ORGANIZATION The Kitchen Collection, Inc. (the Company) is a specialty retailer of kitchenware, tableware, small electrical appliances and related accessories. The Company operates a chain of 104 retail and factory outlet stores selling a complete line of products from Hamilton Beach Proctor Silex, Inc. (HBPS), WearEver and Anchor Hocking Consumer Glassware and Plastics (AH), as well as, a variety of products from other vendors. These products include first quality items, factory seconds and discontinued items. The Company has multi-year purchase and sales agreements with WearEver, HBPS and AH, each of which have renewable options. The Company is a wholly-owned subsidiary of NACCO Industries, Inc. (NII). (2) SIGNIFICANT ACCOUNTING POLICIES CASH EQUIVALENTS The Company considers all highly liquid investments purchased with a maturity of three months or less to be cash equivalents. INVENTORIES Inventories are stated at the lower of cost or market as determined by the retail inventory method. BUILDING, LEASEHOLD IMPROVEMENTS, FURNITURE AND FIXTURES Building, leasehold improvements, furniture and fixtures are stated at cost. Expenditures for maintenance and repairs are charged to operations as incurred. For financial reporting purposes, depreciation and amortization is provided using the straight-line method based upon the estimated useful lives of the related assets, as follows: Building and leasehold improvements 5-20 years Furniture and fixtures 5 years 8 - 2 - GOODWILL Goodwill associated with the purchase of the Company by NII has been capitalized and is being amortized over forty years on a straight-line basis. Accumulated amortization was $642,710 and $527,599 at December 31, 1993 and 1992, respectively, with related amortization expense of $115,112 for the years ended December 31, 1993 and 1992. ACCOUNTING CHANGE FOR INCOME TAXES The Company has adopted Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes" (SFAS 109) effective January 1, 1993, and has elected to retroactively apply its provisions to January 1, 1989, as permitted by this standard. Accordingly, retained earnings has been adjusted as of December 31, 1991 to reflect the cumulative impact of applying this Standard. The $76,000 adjustment to retained earnings consists of the cumulative effect of this change in the accounting method as of December 31, 1991. The financial statements for the year ended December 31, 1992 have been restated for the effects of SFAS 109 resulting in the following impact on net income: Net income as previously reported $2,405,391 Adjustment for the effect of adoption of SFAS 109 2,000 ---------- Net income as restated $2,407,391 ==========
Refer to Note 5 "Income Taxes" for additional information. RECLASSIFICATIONS Reclassifications have been made to the 1992 statements to conform with the 1993 presentation. (3) LINE-OF-CREDIT AGREEMENT In March, 1990, the Company entered into a line-of-credit agreement with a commercial bank for $2,500,000 at .5% over the bank's prime rate or 2% over LIBOR. At May 1, 1992, the rates were reduced to the bank's prime rate or 1.50% over LIBOR due to the Company achieving certain performance tests. 9 - 3 - The line-of-credit is unsecured. The Company had no funds drawn against the available balance at December 31, 1993 or 1992. The credit agreement expires on May 31, 1994. The Company has annually renewed this agreement in the past and expects to again renew it under similar arrangements prior to its expiration. (4) LONG-TERM DEBT Long-term debt consists of the following as of December 31:
1993 1992 ---------- ---------- Note payable to bank at 1.5% over LIBOR (5.0% and 5.5625% at December 31, 1993 and 1992, respectively) $2,400,000 $2,900,000 Less: current maturities (500,000) (500,000) ---------- ---------- $1,900,000 $2,400,000 ========== ==========
The note payable to bank is unsecured. It is payable in annual installments due each January, with interest due as specified until maturity on January 15, 1997. The note contains restrictive covenants regarding maintenance of minimum tangible net worth, cash flow coverage, as well as, limits on dividends and capital expenditures. The Company was in compliance with all covenants as of December 31, 1993 and 1992. Aggregate maturities of the note are as follows: 1994 $ 500,000 1995 500,000 1996 700,000 1997 700,000 ---------- $2,400,000 ==========
10 - 4 - (5) INCOME TAXES As discussed in Note 2, the Company has adopted SFAS 109 effective January 1, 1993 and has retroactively applied its provisions to January 1, 1989. SFAS 109 requires, among other things, the measurement of deferred tax assets or liabilities based on the difference between the financial statement and income tax bases of assets and liabilities using the enacted marginal tax rate. Deferred income tax expense or benefit is based on the changes in the assets or liabilities from period to period. The prior method of accounting for income taxes measured deferred income tax expense or benefit based on timing differences between the recording of income and expenses for financial reporting purposes and for purposes of filing federal income tax returns at income tax rates in effect when the differences arose. The provision for income taxes consists of the following:
1993 1992 ---------- ---------- Currently payable: Federal $1,538,000 $1,447,000 State and local 347,000 316,000 ---------- ---------- 1,885,000 1,763,000 ---------- ---------- Deferred: Federal (1,000) (31,000) State and local (5,000) (17,000) ---------- ---------- (6,000) (48,000) ---------- ---------- Total provision $1,879,000 $1,715,000 ========== ==========
The components of the net deferred income tax benefit are as follows:
1993 1992 -------- -------- Store closing reserve $ 1,600 $ (3,600) Uniform capitalization of inventory (26,000) (12,600) Tax over (under) book depreciation 4,700 (14,000) Vacation pay (14,700) (11,000) State income taxes 19,300 (41,200) Other 9,100 34,400 -------- -------- Total deferred income tax benefit, net $ (6,000) $(48,000) ======== ========
11 - 5 - Reconciliation of the Federal statutory and effective income tax rates follows:
1993 1992 ----- ----- Federal statutory rate 35.0% 34.0% Amortization of goodwill 0.8 0.9 State and local income tax, net of Federal income tax effect 4.8 4.8 Other -- 1.9 ----- ----- Effective tax rate 40.6% 41.6% ===== =====
A summary of the components of the net deferred tax asset balances included in the accompanying balance sheet are as follows: 1993 1992 -------- -------- Inventories $158,000 $ 118,000 Accrued expenses and reserves 35,000 44,000 State income taxes 21,000 40,000 Depreciation (173,000) (166,000) --------- --------- Deferred tax asset, net $ 41,000 $ 36,000 ========= =========
(6) RELATED PARTY TRANSACTIONS Net purchases of inventories from HBPS during the years ended December 31, 1993 and 1992 were $5,005,846 and $4,062,620, respectively. HBPS is 80% owned by NII. At December 31, 1993 and 1992, the Company owed HBPS $408,621 and $212,313, respectively, for these purchases. The Company incurred $26,000 and $32,000 for miscellaneous services provided by NII for the years ended December 31, 1993 and 1992, respectively. The Company had payables for such services at December 31, 1993 and 1992 of $21,000 and $7,000, respectively. The Company paid dividends to NII during 1993 and 1992 of $1,750,000 and $300,000, respectively. As of December 31, 1993, the Company has a $4,000,000 receivable due from NII. The Company recorded related interest income of $8,972 during 1993. 12 - 6 - (7) LEASES The Company leases retail stores, a warehouse and equipment under noncancellable operating leases which expire at various dates through 2003. Future minimum lease payments are as follows: 1994 $ 3,885,000 1995 3,526,000 1996 3,063,000 1997 2,502,000 1998 1,793,000 Thereafter 2,142,000 ----------- Total minimum payments $16,911,000 ===========
The Company has leases with percentage of sales clauses in all but two of its store locations. Percentage of sales rent expense amounted to $395,960 for the year ended December 31, 1993 and $358,373 for the year ended December 31, 1992. The Company's total rent expense for the years ended December 31, 1993 and 1992 was $5,191,258 and $4,113,208, respectively. (8) RETIREMENT INCOME PLAN In 1987, the Company established a defined contribution savings plan for employees who have completed one year of service and are at least 21 years of age. Employees can elect to defer and contribute a portion of their salary, following the guidelines established in the plan. The Company makes matching contributions of 50% of the employee's contribution. In addition, the Company can make an annual profit sharing contribution at its discretion. The matching contribution, limited to 3% of the employee's compensation, and the Company's profit sharing contribution amounted to $291,205 and $223,279 for the years ended December 31, 1993 and 1992, respectively. (9) SUBSEQUENT EVENTS On January 5, 1994, the Company loaned an additional $1,000,000 to NII. As of January 28, 1994, NII has made total repayments of $3,000,000 to the Company. -----END PRIVACY-ENHANCED MESSAGE-----